<PAGE>
[Graphic]
STAGECOACH FUNDS-Registered Trademark-
Annual Report
TAX-FREE Funds
Arizona Tax-Free Fund
California Tax-Free Bond Fund
California Tax-Free Income Fund
National Tax-Free Fund
Oregon Tax-Free Fund
Short Term Municipal Income Fund
June 30, 1998
<PAGE>
Tax-Free Funds TABLE OF CONTENTS
- ------------------------------------------------------------------------
LETTER TO SHAREHOLDERS................................1
INVESTMENT ADVISOR COMMENTARY AND PERFORMANCE AT A GLANCE
Arizona Tax-Free Fund.............................4
California Tax-Free Bond Fund....................11
California Tax-Free Income Fund..................18
National Tax-Free Fund...........................25
Oregon Tax-Free Fund.............................32
Short-Term Municipal Income Fund.................39
PORTFOLIOS OF INVESTMENTS
Arizona Tax-Free Fund............................44
California Tax-Free Bond Fund....................47
California Tax-Free Income Fund..................72
National Tax-Free Fund...........................76
Oregon Tax-Free Fund.............................83
Short-Term Municipal Income Fund.................87
TAX-FREE FUNDS
Statements of Assets and Liabilities.............90
Statements of Operations.........................92
Statement of Changes in Net Assets...............96
Financial Highlights............................102
Notes to Financial Statements...................123
Independent Auditors' Report....................140
NOT FDIC INSURED - NO BANK GUARANTEE - MAY LOSE VALUE
i
<PAGE>
THIS PAGE IS INTENTIONALLY LEFT BLANK --
ii
<PAGE>
LETTER TO SHAREHOLDERS Tax-Free Funds
- ------------------------------------------------------------------------
TO OUR SHAREHOLDERS
Thank you for your investment in the Stagecoach Funds.
We are pleased to present this Annual Report to you for the period ended June
30, 1998. The purpose of the Annual Report is to provide important information
and an in-depth review of your investment. Three major topics are highlighted,
including a performance summary, portfolio review, and strategic outlook for
each Fund. Due to a change in the fiscal year-end for the tax-free funds, this
report includes information for both three-month and six-month reporting
periods, where applicable.
For the twelve-month period ended June 30, 1998 there were continued positive
earnings for most domestic long-term investors. Stocks, as measured by the S&P
500 Index,(1) returned 30.17% as a result of strong corporate earnings and low
inflation. Government bonds also performed well, with returns of 19.67% as
measured by the Lehman Brothers Long Government Bond Index.(2)
During the period, the biggest event impacting the financial markets and U.S.
economy was the economic crisis in Asia. The crisis began to unfold in late 1997
as Asian companies and governments could not afford to pay for excessive
borrowing that had accumulated over several years. In addition, Asian currencies
began to lose value, negatively affecting businesses within the region. These
factors combined to create a destabilizing effect on markets throughout Asia.
Lack of confidence in Asian markets prompted Asian investors to take a "flight
to quality" by investing in U.S. Treasury securities, which increased U.S.
Treasury security prices.
The challenges of investing in today's markets make mutual funds one of the
most popular investment vehicles. Investors poured more than $461 billion into
mutual funds for the twelve-month period ended May 31, 1998, according to
Strategic Insight, an industry research firm. We understand that you have a
variety of investment options and appreciate your confidence in selecting us to
manage your money.
1
<PAGE>
Tax-Free Funds LETTER TO SHAREHOLDERS
- ------------------------------------------------------------------------
Over the years, the Stagecoach Funds have built a reputation for innovation,
leadership, and commitment to investors. In addition to our tax-free funds, we
are proud to lead the industry by offering eight innovative asset allocation
funds. Each Fund offers a comprehensive asset allocation strategy that can
provide a solid foundation for any investment portfolio.
As part of our commitment to investor education, we completely redesigned and
restructured our prospectuses to make investing as simple and as informative as
possible. You will find that our marketing materials and shareholder
correspondence are designed to help you better understand your investment.
We encourage you to review this Annual Report. We hope that you will find it
useful and informative. We also recommend that you continually review your
investment portfolio with a financial consultant to determine an appropriate mix
of investments to meet your ongoing needs. Thank you for your continued
investment with the Stagecoach Funds.
Sincerely,
[SIGNATURE]
Michael J. Hogan
Senior Vice President
Wells Fargo Bank,
Mutual Fund Group
[SIGNATURE]
R. Greg Feltus
Chairman and President of
Stagecoach Funds
1 The "S&P 500 Index" is a trademark of Standard and Poor's Corporation. The S&P
500 Index is an unmanaged index of 500 widely held common stocks representing,
among others, industrial, financial, utility and transportation companies
listed or traded on national exchanges or over-the-counter markets.
2 The Lehman Brothers Long Government Bond Index is an unmanaged index composed
of U.S. Treasury bonds with 20-year or longer maturities.
2
<PAGE>
THIS PAGE IS INTENTIONALLY LEFT BLANK --
3
<PAGE>
Arizona Tax-Free Fund INVESTMENT ADVISOR COMMENTARY
- ------------------------------------------------------------------------
ARIZONA TAX-FREE FUND
The Stagecoach Arizona Tax-Free Fund (the "Fund") seeks to provide investors
with a high level of income exempt from federal income tax and Arizona personal
income tax. The Fund invests in high-quality Arizona municipal obligations. The
Fund has the ability to invest in municipal bonds with a wide range of
maturities, allowing for greater investment flexibility within the portfolio and
the potential to maximize income.
Please note that we have changed the Fund's fiscal year-end to June 30 from
March 31. We have made this change to improve our reporting process. This change
will not impact the performance or objective of your investment. Because of the
new year-end, this report is the second annual report we have sent you over the
last three months. Our discussion will focus on the most recent period, although
we may also comment on longer-term performance.
Stephen Galiani and Mary Gail Walton manage the Stagecoach Arizona Tax-Free
Fund. Mr. Galiani has 23 years of security industry experience and has been
managing portfolios since 1981. Ms. Walton's career in securities spans 14 years
with 6 years dedicated to tax-exempt portfolio management. Together, they bring
a disciplined expertise to municipal bond investing.
PERFORMANCE SUMMARY
During the three-month period, the Stagecoach Arizona Tax-Free Fund's Class A
net asset value increased $0.02, from $10.77 on March 31, 1998, to $10.79 on
June 30, 1998. The Fund distributed $0.116 per share in dividend income. Keep in
mind that past distributions are not predictive of future trends as
distributions will vary based on Fund portfolio earnings.
The distribution rate for Class A shares was 4.06%, based on an annualization
of June's monthly dividend of $0.038 per share and the maximum offering price of
$11.30 on June 30, 1998. When measured against a comparable taxable investment,
the Fund's double tax-free yield is generally higher. For example, an investor
would need to earn 7.07% from a taxable investment to
4
<PAGE>
INVESTMENT ADVISOR COMMENTARY Arizona Tax-Free Fund
- ------------------------------------------------------------------------
match the Fund's 4.03% tax-free SEC yield, assuming the maximum combined federal
and Arizona state personal income tax bracket.
PORTFOLIO DATA(1) (as of June 30, 1998)
<TABLE>
<S> <C>
NUMBER OF ISSUES 30
PORTFOLIO TURNOVER RATIO 14%
WEIGHTED AVERAGE COUPON 5.60%
WEIGHTED AVERAGE MATURITY 18.50 years
AMT EXPOSURE 0.00%
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS B
<S> <C> <C>
NAV 10.79 10.40
DISTRIBUTION RATE 4.06% 3.53%
SEC YIELD 4.03% 3.49%
TAX EQUIV. YIELD 7.07% 6.12%
Please refer to important disclosures on page 7.
</TABLE>
For the three-month period ended June 30, 1998, Class A shares of the Fund
posted a 1.27% cumulative total return, exclusive of sales charges, and a 1.19%
return for Institutional Class shares. Compared to the Lehman Brothers Municipal
Bond Index, which returned 1.52%, the Fund held securities with shorter
durations than securities in the index and therefore underperformed this
benchmark. We are currently attempting to capture more income by gradually
extending the average portfolio duration relative to the benchmark. However, a
longer duration has the effect of increasing the Fund's volatility in a changing
interest rate environment.
CREDIT QUALITY(2)
(as of June 30, 1998)
- ----------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
AAA 57%
AA 16%
A 16%
BBB or Below 10%
Cash Equivalents 1%
</TABLE>
PORTFOLIO REVIEW
As of June 30, 1998, the Fund held 57% in bonds rated AAA. Given current
narrow credit rating spreads, we felt comfortable holding higher quality bonds.
However, we plan to increase our exposure to A-rated and BBB-rated bonds,
provided that levels are attractive, to boost the average yield of the Fund. The
Fund currently holds 16% in A-rated bonds and 10% in bonds rated BBB or below.
5
<PAGE>
Arizona Tax-Free Fund INVESTMENT ADVISOR COMMENTARY
- ------------------------------------------------------------------------
The top ten holdings in the Fund represent our focus toward capturing income
without sacrificing quality. For example, Puerto Rico Commonwealth and Puerto
Rico Electric Power, both rated AAA due to bond insurance, offer the potential
for both good yield and high liquidity. Although these bonds are not Arizona
State bonds, they are tax exempt across all states and have the potential to
offer strong tax-free income. An example of an Arizona bond that also has the
potential to provide good income is the Phoenix Arizona Development Authority.
We feel that bonds with these types of characteristics will enable the Fund to
provide high monthly income with less variation in asset value.
As always, we carefully review the investment quality, maturity, sensitivity
to interest rate movements, and duration of the securities to provide a strong
long-term total return.
TOP 10 HOLDINGS (as of June 30, 1998)
<TABLE>
<CAPTION>
NAME/COUPON % OF PORTFOLIO
<S> <C>
MESA AZ, 6.50% 6.6%
PHOENIX AZ, 6.25% 6.5%
PUERTO RICO COMMONWEALTH, 5.50% 5.8%
TUCSON AZ, 5.13% 5.6%
PHOENIX AZ INDL. DEV. AUTH.,
5.65% 5.4%
GREENLEE CNTY. AZ, 5.45% 5.3%
PIMA CNTY. AZ, 5.50% 4.2%
GUAM HSG CORP., 5.75% 4.2%
PHOENIX AZ, CIVIC IMPT. CORP.,
5.00% 4.2%
MARICOPA CNTY. AZ, 5.00% 4.1%
</TABLE>
STRATEGIC OUTLOOK
On a national level, the U.S. economy has remained strong. The Asian crisis
may have further effects such as increasing the strength of the U.S. dollar and
slowing inflation. Our interest rate forecast calls for yields to remain in a
trading range over the intermediate term with a bias toward lower rates. This is
primarily due to the conflicting effects of the diminishing government budget
deficit, low commodity prices, and the Asian crisis versus the tight labor
markets and healthy housing
6
<PAGE>
INVESTMENT ADVISOR COMMENTARY Arizona Tax-Free Fund
- ------------------------------------------------------------------------
conditions. Meanwhile, the state and local economies continue to grow steadily,
enjoying the benefits of strong consumer confidence.
On the state level, Arizona's economy should remain healthy and display solid
growth, particularly in the Greater Phoenix Metropolitan Area. School finance
legislation, passed in an effort to evenly distribute educational funding, will
likely reduce the number of those bonds issued and may adversely affect state
offers. We continue to monitor the effects of state legislation and the impact
on Arizona's municipal bond market.
We anticipate a favorable outlook for the municipal bond market and will
continue to seek bonds offering outstanding value. We intend to focus our
efforts on positioning the Fund to achieve the potential for high current income
consistent with reasonable risk for the long-term investor.
1 The formula used to calculate the SEC yield is described in detail in the
Fund's statement of additional information and is designed to standardize the
yield calculations so that all mutual fund companies with the same or similar
portfolios use a uniform method to obtain yield figures for their non-money
market fund advertisements. SEC yields include the actual amount of interest
earned adjusted by any gain or loss realized due to the return of principal,
less expenses and the maximum offering price calculated on a 30-day month-end
basis.
The distribution rate is based on the actual distributions made by the Fund.
The distribution rate is calculated by annualizing the Fund's most recent
income dividend and dividing that figure by the applicable current public
offering price.
A portion of the Fund's income may be subject to federal, state and/or local
income taxes or the alternative minimum tax (AMT). The Stagecoach Arizona
Tax-Free Fund's taxable equivalent is based on the combined federal and state
income tax rate of 42.98%. Any capital gains distribution may be taxable.
2 The average credit rating is compiled from ratings from Standard & Poor's
and/or Moody's Investors Service (together "rating agencies"). Standard &
Poor's is a trademark of McGraw-Hill, Inc. and has been licensed. The Fund is
not sponsored, endorsed, sold or promoted by these rating agencies and these
rating agencies make no representation regarding the advisability of investing
in the Fund. Past performance is no guarantee of future results.
7
<PAGE>
Arizona Tax-Free Fund PERFORMANCE AT A GLANCE
- ------------------------------------------------------------------------
ARIZONA TAX-FREE FUND
GROWTH OF A $10,000 INVESTMENT
Class A and Institutional Class Shares
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
STAGECOACH ARIZONA LEHMAN BROTHERS STAGECOACH ARIZONA
TAX-FREE FUND MUNICIPAL TAX-FREE FUND
CLASS A SHARES BOND INDEX INSTITUTIONAL CLASS SHARES
<S> <C> <C> <C>
Inception $9,550 $10,000 $10,000
Mar-92 $9,522 $10,004 $9,971
Apr-92 $9,603 $10,093 $10,056
May-92 $9,717 $10,212 $10,175
Jun-92 $9,857 $10,384 $10,322
Jul-92 $9,896 $10,695 $10,362
Aug-92 $10,001 $10,590 $10,472
Sep-92 $10,110 $10,659 $10,586
Oct-92 $9,996 $10,555 $10,467
Nov-92 $10,193 $10,744 $10,673
Dec-92 $10,291 $10,853 $10,776
Jan-93 $10,456 $10,979 $10,949
Feb-93 $10,769 $11,377 $11,276
Mar-93 $10,601 $11,256 $11,100
Apr-93 $10,692 $11,370 $11,196
May-93 $10,737 $11,433 $11,243
Jun-93 $10,902 $11,624 $11,416
Jul-93 $10,869 $11,639 $11,381
Aug-93 $11,095 $11,882 $11,618
Sep-93 $11,253 $12,017 $11,783
Oct-93 $11,274 $12,040 $11,806
Nov-93 $11,195 $11,934 $11,722
Dec-93 $11,377 $12,186 $11,913
Jan-94 $11,507 $12,325 $12,049
Feb-94 $11,208 $12,005 $11,736
Mar-94 $10,954 $11,517 $11,470
Apr-94 $11,016 $11,615 $11,535
May-94 $11,089 $11,716 $11,612
Jun-94 $11,048 $11,644 $11,568
Jul-94 $11,206 $11,857 $11,734
Aug-94 $11,260 $11,899 $11,790
Sep-94 $11,148 $11,724 $11,673
Oct-94 $10,964 $11,515 $11,480
Nov-94 $10,800 $11,307 $11,309
Dec-94 $11,001 $11,556 $11,519
Jan-95 $11,247 $11,886 $11,777
Feb-95 $11,514 $12,231 $12,057
Mar-95 $11,607 $12,372 $12,154
Apr-95 $11,656 $12,387 $12,205
May-95 $11,904 $12,782 $12,465
Jun-95 $11,879 $12,670 $12,439
Jul-95 $11,998 $12,790 $12,563
Aug-95 $12,116 $12,952 $12,686
Sep-95 $12,159 $13,034 $12,732
Oct-95 $12,272 $13,224 $12,854
Nov-95 $12,409 $13,443 $13,000
Dec-95 $12,507 $13,573 $13,106
Jan-96 $12,602 $13,676 $13,208
Feb-96 $12,532 $13,583 $13,137
Mar-96 $12,326 $13,409 $12,923
Apr-96 $12,333 $13,371 $12,921
May-96 $12,284 $13,366 $12,885
Jun-96 $12,399 $13,512 $13,006
Jul-96 $12,553 $13,633 $13,170
Aug-96 $12,507 $13,630 $13,112
Sep-96 $12,610 $13,821 $13,223
Oct-96 $12,745 $13,977 $13,379
Nov-96 $12,988 $14,233 $13,637
Dec-96 $12,937 $14,174 $13,586
Jan-97 $12,978 $14,200 $13,631
Feb-97 $13,060 $14,331 $13,719
Mar-97 $12,885 $14,140 $13,538
Apr-97 $12,983 $14,259 $13,630
May-97 $13,159 $14,475 $13,817
Jun-97 $13,305 $14,629 $13,986
Jul-97 $13,704 $15,035 $14,395
Aug-97 $13,530 $14,893 $14,214
Sep-97 $13,702 $15,071 $14,411
Oct-97 $13,755 $15,167 $14,482
Nov-97 $13,837 $15,257 $14,571
Dec-97 $14,063 $15,479 $14,798
Jan-98 $14,179 $15,639 $14,925
Feb-98 $14,159 $15,643 $14,905
Mar-98 $14,132 $15,657 $14,890
Apr-98 $14,011 $15,587 $14,764
May-98 $14,260 $15,833 $15,027
Jun-98 $14,311 $15,895 $15,066
</TABLE>
THE RETURNS FOR CLASS B SHARES OF THE FUND WILL VARY FROM THE RESULTS SHOWN DUE
TO DIFFERENT EXPENSES AND LOAD STRUCTURES.
The accompanying chart compares the performance of the Stagecoach Arizona
Tax-Free Fund Class A and Institutional Class shares since inception with the
Lehman Brothers Municipal Bond Index. The chart assumes a hypothetical $10,000
initial investment in Class A and Institutional Class shares and reflects all
operating expenses and, for Class A shares, assumes the maximum initial sales
charge of 4.50%. The Lehman Brothers Municipal Bond Index is an unmanaged index
composed of municipal bonds. The Fund is a professionally managed mutual fund.
The Index presented here does not incur expenses and is not available directly
for investment. Had this Index incurred operating expenses, its performance
would have been lower.
8
<PAGE>
PERFORMANCE AT A GLANCE Arizona Tax-Free Fund
- ------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS (as of June 30, 1998)
EXCLUDING SALES CHARGE
<TABLE>
<CAPTION>
SINCE
YEAR-TO- 1- 5- 3/2/92
DATE YEAR YEAR INCEPTION
<S> <C> <C> <C> <C>
CLASS A 1.76 7.56 5.59 6.59
CLASS B 1.29 6.73 4.46 5.47
INSTITUTIONAL
CLASS 1.81 7.73 5.71 6.69
</TABLE>
INCLUDING SALES CHARGE
<TABLE>
<CAPTION>
SINCE
YEAR-TO- 1- 5- 3/2/92
DATE YEAR YEAR INCEPTION
<S> <C> <C> <C> <C>
CLASS A (2.81) 2.74 4.62 5.82
CLASS B (3.69) 1.73 4.13 5.47
INSTITUTIONAL
CLASS N/A N/A N/A N/A
</TABLE>
Performance shown for the Class A, Class B and Institutional Class shares of
certain of the Stagecoach Funds reflects performance of a class of shares of a
predecessor fund. Complete historical information about any Stagecoach Fund can
be found in such Fund's prospectus and statement of additional information.
Average annual returns represent the average annual change in value of an
investment over the indicated periods assuming reinvestment of dividends and
capital gain distributions. Investment return and principal value of an
investment will fluctuate so that an investor's shares, when redeemed, may be
worth more or less than their original cost. Figures quoted represent past
performance, which is no guarantee of future results.
The Fund's manager has voluntarily waived all or a portion of its management
fees or assumed responsibility for other expenses, which reduces operating
expenses and increases total return to shareholders. Without these reductions
the Fund's returns would have been lower. There is no guarantee that such
reductions will continue.
For Class A shares, the maximum front-end sales charge is 4.50%. The maximum
contingent deferred sales charge for Class B shares is 5.00%. Class B share
performance including sales charge assumes maximum contingent deferred sales
charge for the corresponding time period.
9
<PAGE>
THIS PAGE IS INTENTIONALLY LEFT BLANK --
10
<PAGE>
INVESTMENT ADVISOR COMMENTARY California Tax-Free Bond Fund
- ------------------------------------------------------------------------
CALIFORNIA TAX-FREE BOND FUND
The Stagecoach California Tax-Free Bond Fund (the "Fund") seeks to provide
investors with a high level of income exempt from federal income tax and
California personal income tax, while preserving capital by investing in medium-
to long-term investment-grade municipal securities. The Fund is managed with a
total return strategy that balances reasonable risk with competitive income and
capital preservation.
Please note that we have changed the Fund's fiscal year-end to June 30 from
December 31. We have made this change to improve our reporting process. This
change will not impact the performance or objective of your investment. Because
of the new year-end, this report is the second annual report we have sent you
over the last six months. Our discussions will focus on the most recent period,
although we may also comment on longer-term performance.
David Klug is the manager of the California Tax-Free Bond Fund and has been
managing bond portfolios for the tax-exempt fixed income team for the past ten
years. Mr. Klug earned his MBA from the University of Chicago and is a member of
the National and California Federations of Municipal Analysts.
PERFORMANCE SUMMARY
During the six-month reporting period, the Stagecoach California Tax-Free Bond
Fund's Class A net asset value increased from $11.32 on December 31, 1997, to
$11.38 on June 30, 1998. The Fund distributed $0.260 per share in dividend
income. The Fund did not pay any capital gains during the six-month reporting
period. Keep in mind that past distributions are not predictive of future trends
as distributions will vary based on Fund portfolio earnings.
The Fund's distribution rate for Class A shares was 4.29%, based on an
annualization of June's monthly dividend of $0.043 per share and the maximum
offering price of $11.92 on June 30, 1998. When measured against a comparable
taxable investment, the Fund's double tax-free yield is generally higher. For
example, an investor would need to earn a yield of 7.22% from a
tax-
11
<PAGE>
California Tax-Free Bond Fund INVESTMENT ADVISOR COMMENTARY
- ------------------------------------------------------------------------
able investment to match the Fund's 3.88% tax-free SEC yield, assuming the
maximum combined federal and California state personal income tax bracket.
PORTFOLIO DATA(1) (as of June 30, 1998)
<TABLE>
<S> <C>
NUMBER OF ISSUES 357
PORTFOLIO TURNOVER RATIO 15%
WEIGHTED AVERAGE COUPON 5.39%
WEIGHTED AVERAGE MATURITY 15.31 years
AMT EXPOSURE 4.28%
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
NAV 11.38 11.60 11.60
DISTRIBUTION RATE 4.29% 3.79% 3.79%
SEC YIELD 3.88% 3.36% 3.36%
TAX EQUIV. YIELD 7.22% 6.25% 6.25%
Please refer to important disclosures on page 15.
</TABLE>
For the six-month period ended June 30, 1998, the Fund posted a 2.86%
cumulative total return for Class A shares, exclusive of sales charges, and a
2.80% return for Institutional Class shares. The Fund outperformed the Lehman
Brothers Municipal Bond Index, which returned 2.67% for the six-month period.
Three main factors contributed to the Fund outperforming its benchmark. The Fund
had a number of issues that were pre-refunded, meaning that the issuing
municipalities had funds escrowed to pay off their bonds at maturity. This
helped the performance of the Fund as price gains were experienced when the
bonds were pre-refunded and repriced at higher value. The Fund was also longer
in average portfolio duration than the benchmark. In a market where interest
rates declined slightly, having a longer duration helped the Fund's performance
by capturing more potential for capital appreciation. The Fund's performance
also benefitted from better trade executions during the time period. This means
that we received favorable selling prices on shorter callable bonds that were
sold out of the portfolio.
12
<PAGE>
INVESTMENT ADVISOR COMMENTARY California Tax-Free Bond Fund
- ------------------------------------------------------------------------
In addition to the Fund's strong performance for the reporting period, the
Fund has an excellent long-term performance record. The California Tax-Free Bond
Fund has been awarded a four-star ranking by Morningstar, as of June 30, 1998.
The Fund performed in the top 32.5% out of 1,549 Municipal Bond Funds. Please
remember that past performance is no guarantee of future results.
PORTFOLIO REVIEW
The Fund's portfolio manager carefully reviews investment quality, maturity,
duration, and sensitivity to interest rate movements in order to provide strong
long-term total return. Additionally, he looks for bonds that may be slightly
undervalued by the market. Through this strategy, the Fund seeks to achieve a
combination of consistent tax-free income and strong long-term total return.
The solid credit quality of the Fund is reflected by its 74% allocation in
AAA-rated bonds. In addition, most of the Fund's AAA-rated bonds are insured,
enhancing safety and liquidity. Currently, we do not find California BBB-rated
bonds that warrant the added credit risk as the income differential between
A-rated and BBB-rated bonds is minimal.
Many of the Fund's holdings were purchased during the Fund's initial growth
period in 1992 and 1993. We are gradually selling some of these issues as the
bonds are nearing their call dates. At the same time, we are purchasing bonds
that have good call protection, which defines how and when an issuer may recall
a bond. For example, a high-yielding bond may be unattractive if the issuer has
too much latitude in recalling it. This strategy of extending the call
protection is part of our total return strategy, emphasizing both income and
capital appreciation.
CREDIT QUALITY(2)
(as of June 30, 1998)
- ----------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
AAA 74%
AA 11%
A 12%
BBB or Below 2%
Cash Equivalents 1%
</TABLE>
13
<PAGE>
California Tax-Free Bond Fund INVESTMENT ADVISOR COMMENTARY
- ------------------------------------------------------------------------
TOP 10 HOLDINGS (as of June 30, 1998)
<TABLE>
<CAPTION>
NAME/COUPON % OF PORTFOLIO
<S> <C>
LOS ANGELES COUNTY PUB. WORKS, 5.00% 1.7%
SAN DIEGO PUB. FINANCING AUTH., 5.00% 1.2%
CHINO ONTARIO UPLAND, 5.20% 1.1%
SACRAMENTO COUNTY, 5.10% 1.1%
EAST BAY CA MUNI UTIL., 5.00% 1.1%
NORTHERN CALIFORNIA TRANS. AGENCY,
5.50% 1.1%
PROVIDENT INSTIT. CA, 3.21% 1.0%
RIVERSIDE COUNTY CA, 6.38% 0.9%
SOUTH COUNTY REGIONAL, 5.75% 0.9%
SANTA ANA CA, 5.00% 0.9%
</TABLE>
Overall, the Fund holds a wide range of bonds within the California bond
market and invests in a number of geographic areas and government sectors. As of
June 30, 1998, the Fund held 357 securities. Because this is a single state
fund, we hold a relatively large number of securities, which allows us to spread
market risk across many sectors and markets.
As of June 30, 1998, the Fund held 4.28% of the portfolio in bonds subject to
the AMT (Alternative Minimum Tax). Most of the Fund's AMT bonds were purchased
in 1993. During that time, there was a yield advantage offered by bonds subject
to this taxation. Today, most of the AMT bonds in the marketplace are housing
revenue bonds, which have low call protection. As previously stated, we
generally attempt to exclude bonds with low call protection from the portfolio.
STRATEGIC OUTLOOK
Three key factors contributing to the strength of the overall U.S. market
continue to be low inflation, moderate economic growth and low interest rates.
We believe that while the nation's economy continues to be healthy, it may
eventually weaken over time, particularly as a result of lingering effects from
the Asian markets crisis.
14
<PAGE>
INVESTMENT ADVISOR COMMENTARY California Tax-Free Bond Fund
- ------------------------------------------------------------------------
We also feel that interest rates may drift lower and short-term rates will
remain stable without much interference this year from the Federal Reserve
Board.
California's economic environment also has remained healthy and we believe
that this strength will continue as the state economy maintains its solid
stance, unemployment remains at low levels and minimal credit problems are
experienced.
Based on this outlook, we will maintain our current strategy. We will continue
to place an emphasis on high credit quality bonds and will focus on factors such
as call protection that affect long-term performance. Being based in California,
we have extensive experience in the California municipal bond market and are
able to quickly respond to economic conditions and market events in the state.
This allows the Fund to potentially capture a high level of income consistent
with prudent risk.
1 The formula used to calculate the SEC yield is described in detail in the
Fund's statement of additional information and is designed to standardize the
yield calculations so that all mutual fund companies with the same or similar
portfolios use a uniform method to obtain yield figures for their non-money
market advertisements. SEC yields include the actual amount of interest earned
adjusted by any gain or loss realized due to the return of principal, less
expenses and the maximum offering price calculated on a 30-day month-end
basis.
The distribution rate is based on the actual distributions made by the Fund.
The distribution rate is calculated by annualizing the Fund's most recent
income dividend and dividing that figure by the applicable current public
offering price.
A portion of the Fund's income may be subject to federal, state and/or local
income taxes or the alternative minimum tax (AMT). The Stagecoach California
Tax-Free Bond Fund taxable equivalents are based on the combined federal and
state income tax rate of 46.24%. Any capital gains distribution may be
taxable.
2 The average credit rating is compiled from ratings from Standard & Poor's
and/or Moody's Investors Service (together "rating agencies"). Standard &
Poor's is a trademark of McGraw-Hill, Inc. and has been licensed. The Fund is
not sponsored, endorsed, sold or promoted by these rating agencies and these
rating agencies make no representation regarding the advisability of investing
in the Fund. Past performance is no guarantee of future results.
15
<PAGE>
California Tax-Free Bond Fund PERFORMANCE AT A GLANCE
- ------------------------------------------------------------------------
CALIFORNIA TAX-FREE BOND FUND
GROWTH OF A $10,000 INVESTMENT
Class A and Institutional Class Shares
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
STAGECOACH LEHMAN STAGECOACH
CALIFORNIA BROTHERS CALIFORNIA
TAX-FREE BOND FUND MUNICIPAL TAX-FREE BOND FUND
CLASS A SHARES BOND INDEX INSTITUTIONAL CLASS SHARES
<S> <C> <C> <C>
Inception $9,550 $10,000 $10,000
Oct-88 $9,636 $10,176 $10,090
Nov-88 $9,549 $10,082 $9,999
Dec-88 $9,783 $10,185 $10,244
Jan-89 $9,929 $10,396 $10,397
Feb-89 $9,831 $10,278 $10,295
Mar-89 $9,832 $10,253 $10,295
Apr-89 $10,150 $10,496 $10,628
May-89 $10,351 $10,714 $10,838
Jun-89 $10,491 $10,860 $10,986
Jul-89 $10,623 $11,008 $11,123
Aug-89 $10,470 $10,900 $10,964
Sep-89 $10,460 $10,867 $10,953
Oct-89 $10,604 $11,000 $11,104
Nov-89 $10,770 $11,192 $11,277
Dec-89 $10,832 $11,284 $11,342
Jan-90 $10,696 $11,231 $11,200
Feb-90 $10,864 $11,331 $11,376
Mar-90 $10,907 $11,334 $11,421
Apr-90 $10,758 $11,253 $11,265
May-90 $11,025 $11,498 $11,545
Jun-90 $11,133 $11,599 $11,658
Jul-90 $11,328 $11,770 $11,862
Aug-90 $11,001 $11,599 $11,520
Sep-90 $10,990 $11,606 $11,508
Oct-90 $11,178 $11,816 $11,705
Nov-90 $11,444 $12,053 $11,984
Dec-90 $11,534 $12,106 $12,077
Jan-91 $11,725 $12,269 $12,277
Feb-91 $11,792 $12,375 $12,348
Mar-91 $11,815 $12,380 $12,372
Apr-91 $11,998 $12,545 $12,563
May-91 $12,136 $12,657 $12,708
Jun-91 $12,098 $12,644 $12,668
Jul-91 $12,268 $12,798 $12,847
Aug-91 $12,417 $12,967 $13,002
Sep-91 $12,590 $13,136 $13,183
Oct-91 $12,692 $13,254 $13,290
Nov-91 $12,688 $13,291 $13,285
Dec-91 $12,874 $13,577 $13,481
Jan-92 $12,858 $13,608 $13,464
Feb-92 $12,938 $13,612 $13,548
Mar-92 $12,983 $13,618 $13,594
Apr-92 $13,100 $13,739 $13,718
May-92 $13,243 $13,901 $13,867
Jun-92 $13,485 $14,135 $14,120
Jul-92 $13,927 $14,559 $14,583
Aug-92 $13,735 $14,416 $14,383
Sep-92 $13,806 $14,510 $14,457
Oct-92 $13,538 $14,367 $14,176
Nov-92 $13,875 $14,625 $14,528
Dec-92 $14,034 $14,774 $14,695
Jan-93 $14,197 $14,945 $14,866
Feb-93 $14,722 $15,486 $15,416
Mar-93 $14,608 $15,322 $15,297
Apr-93 $14,778 $15,477 $15,474
May-93 $14,883 $15,563 $15,584
Jun-93 $15,163 $15,823 $15,877
Jul-93 $15,154 $15,844 $15,868
Aug-93 $15,530 $16,173 $16,261
Sep-93 $15,747 $16,358 $16,489
Oct-93 $15,778 $16,389 $16,521
Nov-93 $15,620 $16,245 $16,356
Dec-93 $15,856 $16,587 $16,603
Jan-94 $16,054 $16,777 $16,810
Feb-94 $15,739 $16,342 $16,480
Mar-94 $15,213 $15,677 $15,930
Apr-94 $15,189 $15,810 $15,905
May-94 $15,348 $15,948 $16,071
Jun-94 $15,310 $15,850 $16,031
Jul-94 $15,570 $16,140 $16,304
Aug-94 $15,632 $16,197 $16,368
Sep-94 $15,449 $15,959 $16,177
Oct-94 $15,223 $15,675 $15,940
Nov-94 $14,951 $15,391 $15,656
Dec-94 $15,171 $15,730 $15,885
Jan-95 $15,592 $16,180 $16,326
Feb-95 $15,970 $16,650 $16,722
Mar-95 $16,109 $16,842 $16,869
Apr-95 $16,114 $16,862 $16,873
May-95 $16,602 $17,400 $17,384
Jun-95 $16,375 $17,247 $17,147
Jul-95 $16,475 $17,411 $17,252
Aug-95 $16,689 $17,632 $17,475
Sep-95 $16,827 $17,743 $17,619
Oct-95 $17,132 $18,002 $17,940
Nov-95 $17,455 $18,301 $18,277
Dec-95 $17,658 $18,476 $18,490
Jan-96 $17,749 $18,617 $18,585
Feb-96 $17,590 $18,490 $18,418
Mar-96 $17,319 $18,254 $18,135
Apr-96 $17,244 $18,202 $18,056
May-96 $17,257 $18,195 $18,071
Jun-96 $17,459 $18,394 $18,281
Jul-96 $17,651 $18,559 $18,483
Aug-96 $17,664 $18,555 $18,496
Sep-96 $17,935 $18,815 $18,780
Oct-96 $18,129 $19,028 $18,984
Nov-96 $18,480 $19,376 $19,351
Dec-96 $18,371 $19,295 $19,236
Jan-97 $18,401 $19,331 $19,269
Feb-97 $18,579 $19,509 $19,456
Mar-97 $18,317 $19,250 $19,182
Apr-97 $18,482 $19,411 $19,354
May-97 $18,759 $19,704 $19,645
Jun-97 $18,923 $19,915 $19,816
Jul-97 $19,540 $20,467 $20,463
Aug-97 $19,315 $20,275 $20,227
Sep-97 $19,534 $20,516 $20,456
Oct-97 $19,654 $20,647 $20,582
Nov-97 $19,744 $20,769 $20,676
Dec-97 $20,051 $21,072 $20,999
Jan-98 $20,312 $21,289 $21,272
Feb-98 $20,313 $21,296 $21,256
Mar-98 $20,301 $21,315 $21,263
Apr-98 $20,218 $21,219 $21,177
May-98 $20,550 $21,554 $21,506
Jun-98 $20,627 $21,638 $21,587
</TABLE>
THE RETURNS FOR CLASS B AND CLASS C SHARES OF THE CALIFORNIA TAX-FREE BOND FUND
WILL VARY FROM THE RESULTS SHOWN DUE TO DIFFERENT EXPENSES AND LOAD STRUCTURES.
The accompanying chart compares the performance of the Stagecoach California
Tax-Free Bond Fund Class A and Institutional Class shares since inception with
the Lehman Brothers Municipal Bond Index. The chart assumes a hypothetical
$10,000 initial investment in Class A and Institutional Class shares and
reflects all operating expenses and, for Class A shares, assumes the maximum
initial sales charge of 4.50%. The Lehman Brothers Municipal Bond Index is an
unmanaged index composed of municipal bonds. The Fund is a professionally
managed mutual fund. The Index presented here does not incur expenses and is not
available directly for investment. Had this Index incurred operating expenses,
its performance would have been lower.
16
<PAGE>
PERFORMANCE AT A GLANCE California Tax-Free Bond Fund
- ------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS (as of June 30, 1998)
EXCLUDING SALES CHARGE
<TABLE>
<CAPTION>
SINCE
YEAR-TO- 1- 5- 10/6/88
DATE YEAR YEAR INCEPTION
<S> <C> <C> <C> <C>
CLASS A 2.86 8.99 6.35 8.22
CLASS B 2.49 8.04 5.47 7.46
CLASS C 2.49 8.04 5.47 7.46
INSTITUTIONAL
CLASS 2.80 8.94 6.34 8.21
</TABLE>
INCLUDING SALES CHARGE
<TABLE>
<CAPTION>
SINCE
YEAR-TO- 1- 5- 10/6/88
DATE YEAR YEAR INCEPTION
<S> <C> <C> <C> <C>
CLASS A (1.74) 4.06 5.37 7.71
CLASS B (2.51) 3.04 5.16 7.46
CLASS C 1.49 7.04 5.47 7.46
INSTITUTIONAL
CLASS N/A N/A N/A N/A
</TABLE>
Performance shown for the Class A, Class B, Class C and Institutional Class
shares of certain of the Stagecoach Funds reflects performance of a class of
shares of a predecessor fund. Complete historical information about any
Stagecoach Fund can be found in such Fund's prospectus and statement of
additional information.
Average annual returns represent the average annual change in value of an
investment over the indicated periods assuming reinvestment of dividends and
capital gains distributions. Investment return and principal value of an
investment will fluctuate with market condition so that an investor's shares,
when redeemed, may be worth more or less than their original cost. Figures
quoted represent past performance, which is no guarantee of future results.
The Fund's manager has voluntarily waived all or a portion of its management
fees or assumed responsibility for other expenses, which reduces operating
expenses and increases total return to shareholders. Without these reductions
the Fund's returns would have been lower.
For Class A shares, the maximum front-end sales charge is 4.50%. The maximum
contingent deferred sales charge for Class B shares is 5.00%. The maximum
contingent deferred sales charge for Class C shares is 1.00%. Class B and Class
C share performance with sales charges assumes the maximum contingent deferred
sales charge for the corresponding time period.
17
<PAGE>
California Tax-Free Income Fund INVESTMENT ADVISOR COMMENTARY
- ------------------------------------------------------------------------
CALIFORNIA TAX-FREE INCOME FUND
The Stagecoach California Tax-Free Income Fund (the "Fund") seeks to provide
investors with a high level of income exempt from federal income tax and
California personal income tax, while preserving capital. The Fund invests in
short- and intermediate-term investment-grade California municipal securities.
This policy enables the Fund to take advantage of short-term interest rate
fluctuations, providing a consistent level of tax-free income while limiting the
price volatility usually found in a fund with longer duration.
Please note that we have changed the Fund's fiscal year-end to June 30 from
March 31. We have made this change to improve our reporting process. This change
will not impact the performance or objective of your investment. Because of the
new year-end, this report is the second annual report we have sent you over the
last three months. Our discussions will focus on the most recent period,
although we may also comment on longer-term performance.
Laura Milner manages the Stagecoach California Tax-Free Income Fund and is the
senior specialist for all tax-exempt money market and short-term portfolios. Ms.
Milner has 17 years of experience in the investment industry with an expertise
in short- and long-term municipal securities. She is a member of the California
Chapter of the National Federation of Municipal Analysts.
PERFORMANCE SUMMARY
During the three-month reporting period, the Stagecoach California Tax-Free
Income Fund's net asset value for Class A shares remained stable at $10.44 on
March 31, 1998, and $10.44 on June 30, 1998. The Fund distributed $0.097 per
share in dividend income and no capital gains were distributed from the Fund.
Keep in mind that past distributions are not predictive of future trends as
distributions will vary based on Fund portfolio earnings.
The Fund's distribution rate for Class A shares was 3.54%, based on an
annualization of June's monthly dividend of $0.032 per share and the maximum
offering price of $10.76 on June 30, 1998. When measured against a comparable
taxable investment, the Fund's double tax-free rate is generally higher. For
example, an
18
<PAGE>
INVESTMENT ADVISOR COMMENTARY California Tax-Free Income Fund
- ------------------------------------------------------------------------
investor would need to earn a yield of 6.42% from a taxable investment to match
the Fund's 3.45% tax-free SEC yield, assuming the maximum combined federal and
California state personal income tax bracket.
PORTFOLIO DATA(1) (as of June 30, 1998)
<TABLE>
<S> <C>
NUMBER OF ISSUES 49
PORTFOLIO TURNOVER RATIO 2%
WEIGHTED AVERAGE COUPON 6.10%
WEIGHTED AVERAGE MATURITY 4.85 years
AMT EXPOSURE 0.00%
</TABLE>
<TABLE>
<CAPTION>
CLASS A
<S> <C>
NAV 10.44
DISTRIBUTION RATE 3.54%
SEC YIELD 3.45%
TAX EQUIV. YIELD 6.42%
Please refer to important disclosures on page 21.
</TABLE>
For the three months ended June 30, 1998, the Fund posted a 0.93% cumulative
total return, exclusive of sales charge, for Class A shares and a 0.94% return
for Institutional Class shares. The Fund's benchmark, the Lehman Brothers 3-Year
Municipal Bond Index, returned 1.13% for the three-month period. The Fund
underperformed its benchmark due to its shorter duration.
PORTFOLIO REVIEW
The Fund is managed with a total return strategy that balances reasonable risk
with competitive income and capital preservation. Investment quality, maturity,
and duration are carefully reviewed as the Fund's manager looks for price
appreciation opportunities. Through extensive analysis the Fund's manager
attempts to deliver high tax-free income and strong long-term performance.
CREDIT QUALITY(2)
(as of June 30, 1998)
- ----------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
AAA 50%
AA 18%
A 27%
Cash Equivalents 5%
</TABLE>
The Fund's solid credit quality allocation is reflected by the 50% allocation
of the portfolio to AAA-rated bonds. With this high credit quality as a
foundation, we were comfortable increasing the A-rated bonds in the
19
<PAGE>
California Tax-Free Income Fund INVESTMENT ADVISOR COMMENTARY
- ------------------------------------------------------------------------
portfolio to 27%. While special efforts were made to find higher yielding
opportunities in A-rated bonds, strong credit quality was always maintained.
The bonds in the top ten holdings represent our efforts to capture a high
level of income consistent with prudent investment risk. For example, we feel
the Southern California Public Power Authority Project bonds were purchased at a
very good yield. As the bonds are due in 2003 and have a two-year call date, we
are able to collect a higher yield for taking some call risk. Overall, our call
protection is high and there are few callable bonds in the Fund's portfolio. In
addition, the Fund holds a wide range of bonds across a number of geographic
areas and government sectors, which may reduce volatility over the long-term.
TOP 10 HOLDINGS (as of June 30, 1998)
<TABLE>
<CAPTION>
NAME/COUPON % OF PORTFOLIO
<S> <C>
ORANGE COUNTY, CA, 5.50% 6.1%
SOUTHERN CA PUBLIC POWER, 6.88% 5.3%
CAL. HLTH. FACS. FIN. AUTH., 5.00% 4.4%
LOS ANGELES HBR. DEPT., 5.00% 4.2%
RANCHO CA WATER DIST., 4.70% 4.2%
LOS ANGELES WASTEWATER, 8.70% 4.0%
SOUTHERN CALIFORNIA, 7.50% 3.6%
CA STATE VETERANS, 4.95% 3.3%
PROVIDENT INSTIT. CA, 3.21% 3.1%
LOS ANGELES DEPT WATER & PWR., 9.00% 2.9%
</TABLE>
STRATEGIC OUTLOOK
Three key factors contributing to the strength of the overall U.S. market
strength continue to be low inflation, moderate economic growth and low interest
rates. We believe that while the nation's economy continues to be healthy, it
may eventually weaken over time, partially as a result of the lingering effects
from the Asian markets crisis. These effects include increasing the strength of
the U.S. dollar and slowing inflation. As a result, we feel that
20
<PAGE>
INVESTMENT ADVISOR COMMENTARY California Tax-Free Income Fund
- ------------------------------------------------------------------------
interest rates may drift lower and short-term rates will remain stable without
much interference this year from the Federal Reserve Board.
California's economic environment has also remained healthy and we believe
that this strength will continue as the state economy maintains its solid
stance, unemployment remains at low levels and minimal credit problems are
experienced.
Given this outlook on both the national and state economic environments, we
will maintain most of our current strategy. Furthermore, we plan to extend the
maturity level and increase the Fund's exposure to A-rated bonds to help capture
the potential for current income consistent with reasonable risk. We will also
continue to place an emphasis on high credit quality bonds and will focus on
factors such as call protection that affect long-term performance. Being based
in California, we will continue to monitor closely the economic events which may
occur in the state, allowing us to quickly respond to economic conditions and
market events. This allows the Fund to potentially capture a high level of
income consistent with prudent risk.
1 The formula used to calculate the SEC yield is described in detail in the
Fund's statement of additional information and is designed to standardize the
yield calculations so that all mutual fund companies with the same or similar
portfolios use a uniform method to obtain yield figures for their non-money
market advertisements. SEC yields include the actual amount of interest earned
adjusted by any gain or loss realized due to the return of principal, less
expenses and the maximum offering price calculated on a 30-day month-end
basis.
The distribution rate is based on the actual distributions made by the Fund.
The distribution rate is calculated by annualizing the Fund's most recent
income dividend and dividing that figure by the applicable current public
offering price.
A portion of the Fund's income may be subject to federal, state and/or local
income taxes or the alternative minimum tax (AMT). The Stagecoach California
Tax-Free Income Funds' taxable equivalents are based on the combined federal
and state income tax rate of 46.24%. Any capital gains distribution may be
taxable.
2 The average credit rating is compiled from ratings from Standard & Poor's
and/or Moody's Investors Service (together "rating agencies"). Standard &
Poor's is a trademark of McGraw-Hill, Inc. and has been licensed. The Fund is
not sponsored, endorsed, sold or promoted by these rating agencies and these
rating agencies make no representation regarding the advisability of investing
in the Fund. Past performance is no guarantee of future results.
21
<PAGE>
California Tax-Free Income Fund PERFORMANCE AT A GLANCE
- ------------------------------------------------------------------------
CALIFORNIA TAX-FREE INCOME FUND
GROWTH OF A $10,000 INVESTMENT
Class A and Institutional Class Shares
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
STAGECOACH LEHMAN STAGECOACH
CALIFORNIA BROTHERS CALIFORNIA
TAX-FREE INCOME FUND 3-YEAR MUNICIPAL TAX-FREE INCOME FUND
CLASS A SHARES BOND INDEX INSTITUTIONAL CLASS SHARES
<S> <C> <C> <C>
Inception $9,700 $10,000 $10,000
Nov-92 $9,708 $10,070 $10,008
Dec-92 $9,782 $10,130 $10,084
Jan-93 $9,871 $10,206 $10,176
Feb-93 $10,077 $10,367 $10,389
Mar-93 $9,994 $10,336 $10,303
Apr-93 $10,047 $10,395 $10,358
May-93 $10,062 $10,424 $10,373
Jun-93 $10,153 $10,490 $10,467
Jul-93 $10,128 $10,496 $10,441
Aug-93 $10,270 $10,593 $10,587
Sep-93 $10,351 $10,640 $10,671
Oct-93 $10,373 $10,662 $10,693
Nov-93 $10,343 $10,648 $10,663
Dec-93 $10,477 $10,760 $10,801
Jan-94 $10,551 $10,847 $10,877
Feb-94 $10,400 $10,746 $10,722
Mar-94 $10,283 $10,616 $10,601
Apr-94 $10,317 $10,679 $10,636
May-94 $10,353 $10,729 $10,674
Jun-94 $10,337 $10,732 $10,657
Jul-94 $10,435 $10,821 $10,758
Aug-94 $10,451 $10,860 $10,774
Sep-94 $10,414 $10,833 $10,736
Oct-94 $10,377 $10,807 $10,698
Nov-94 $10,308 $10,788 $10,626
Dec-94 $10,361 $10,834 $10,681
Jan-95 $10,478 $10,924 $10,802
Feb-95 $10,624 $11,039 $10,953
Mar-95 $10,714 $11,138 $11,045
Apr-95 $10,734 $11,176 $11,066
May-95 $10,886 $11,347 $11,223
Jun-95 $10,889 $11,374 $11,226
Jul-95 $10,984 $11,494 $11,324
Aug-95 $11,062 $11,584 $11,404
Sep-95 $11,107 $11,617 $11,451
Oct-95 $11,173 $11,673 $11,518
Nov-95 $11,251 $11,747 $11,599
Dec-95 $11,308 $11,796 $11,658
Jan-96 $11,399 $11,888 $11,752
Feb-96 $11,389 $11,890 $11,741
Mar-96 $11,315 $11,861 $11,665
Apr-96 $11,318 $11,876 $11,668
May-96 $11,315 $11,886 $11,665
Jun-96 $11,371 $11,957 $11,723
Jul-96 $11,452 $12,023 $11,806
Aug-96 $11,460 $12,042 $11,815
Sep-96 $11,535 $12,115 $11,893
Oct-96 $11,625 $12,200 $11,975
Nov-96 $11,752 $12,314 $12,121
Dec-96 $11,743 $12,321 $12,111
Jan-97 $11,795 $12,375 $12,154
Feb-97 $11,852 $12,435 $12,213
Mar-97 $11,763 $12,371 $12,131
Apr-97 $11,811 $12,424 $12,170
May-97 $11,920 $12,526 $12,296
Jun-97 $11,990 $12,600 $12,369
Jul-97 $12,156 $12,750 $12,531
Aug-97 $12,127 $12,724 $12,500
Sep-97 $12,199 $12,815 $12,575
Oct-97 $12,240 $12,872 $12,619
Nov-97 $12,264 $12,910 $12,644
Dec-97 $12,345 $12,997 $12,728
Jan-98 $12,456 $13,083 $12,846
Feb-98 $12,468 $13,111 $12,858
Mar-98 $12,459 $13,132 $12,848
Apr-98 $12,426 $13,113 $12,813
May-98 $12,537 $13,235 $12,929
Jun-98 $12,575 $13,280 $12,969
</TABLE>
The accompanying chart compares the performance of the Stagecoach California
Tax-Free Income Fund Class A and Institutional Class shares since inception with
the Lehman Brothers 3-Year Municipal Bond Index. The chart assumes a
hypothetical $10,000 initial investment in Class A and Institutional Class
shares and reflects all operating expenses and assumes, for Class A shares, the
maximum initial sales charge of 3.00%. The Lehman Brothers 3-Year Municipal Bond
Index is an unmanaged index composed of municipal bonds with an approximate
maturity of three years. The Fund is a professionally managed mutual fund. The
Index presented here does not incur expenses and is not available directly for
investment. Had this Index incurred operating expenses, its performance would
have been lower.
22
<PAGE>
PERFORMANCE AT A GLANCE California Tax-Free Income Fund
- ------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS (as of June 30, 1998)
EXCLUDING SALES CHARGE
<TABLE>
<CAPTION>
SINCE
YEAR-TO- 1- 5- 11/18/92
DATE YEAR YEAR INCEPTION
<S> <C> <C> <C> <C>
CLASS A 1.86 4.88 4.37 4.72
INSTITUTIONAL
CLASS 1.90 4.85 4.38 4.73
</TABLE>
INCLUDING SALES CHARGE
<TABLE>
<CAPTION>
SINCE
YEAR-TO- 1- 5- 11/18/92
DATE YEAR YEAR INCEPTION
<S> <C> <C> <C> <C>
CLASS A (1.17) 1.74 3.73 4.16
INSTITUTIONAL
CLASS N/A N/A N/A N/A
</TABLE>
Average annual returns represent the average annual change in value of an
investment over the indicated periods assuming reinvestment of dividends and
capital gains distributions. Investment return and principal value of an
investment will fluctuate so that an investor's shares, when redeemed, may be
worth more or less than their original cost. Figures quoted represent past
performance, which is no guarantee of future results. The Fund's manager has
voluntarily waived all or a portion of its management fees or assumed
responsibility for other expenses, which reduces operating expenses and
increases total return to shareholders. Without these reductions the Fund's
returns would have been lower. There is no guarantee that these reductions will
continue.
For Class A shares the maximum front-end sales charge is 3.00%.
23
<PAGE>
THIS PAGE IS INTENTIONALLY LEFT BLANK --
24
<PAGE>
INVESTMENT ADVISOR COMMENTARY National Tax-Free Fund
- ------------------------------------------------------------------------
NATIONAL TAX-FREE FUND
The Stagecoach National Tax-Free Fund (the "Fund") seeks to provide investors
with income exempt from federal income tax, and in some cases, state and local
income taxes. The Fund invests in a broad range of municipal obligations.
Investment quality, maturity, sensitivity to interest rate movements and
duration are carefully reviewed in order to provide competitive tax-free income.
Please note that we have changed the Fund's fiscal year-end to June 30 from
March 31. We have made this change to improve our reporting process. This change
will not impact the performance or objective of your investment. Because of the
new year-end, this report is the second annual report we have sent you over the
last three months. Our discussions will focus on the most recent period,
although we may also comment on longer-term performance.
Stephen Galiani manages the Stagecoach National Tax-Free Fund. Mr. Galiani has
23 years of security industry experience and has been managing portfolios since
1981. His value oriented philosophy brings a unique strategy to the Fund.
PERFORMANCE SUMMARY
During the three-month reporting period, the Stagecoach National Tax-Free
Fund's Class A net asset value increased from $15.92 on March 31, 1998, to
$15.97 on June 30, 1998. The Fund distributed $0.187 per share in dividend
income and no capital gains were distributed by the Fund. Keep in mind that past
distributions are not predictive of future trends as distributions will vary
based on Fund portfolio earnings.
The Fund's distribution rate for Class A shares was 4.41%, based on an
annualization of June's monthly dividend of $.0615 per share and the maximum
offering price of $16.72 on June 30, 1998. When measured against a comparable
taxable investment, the Fund's tax-free yield is generally higher. For example,
an investor would need to earn a yield of 7.12% from a taxable investment to
match the Fund's 4.30% tax-free SEC yield, assuming the maximum federal income
tax bracket.
25
<PAGE>
National Tax-Free Fund INVESTMENT ADVISOR COMMENTARY
- ------------------------------------------------------------------------
PORTFOLIO DATA(1) (as of June 30, 1998)
<TABLE>
<S> <C>
NUMBER OF ISSUES 69
PORTFOLIO TURNOVER RATIO 30%
WEIGHTED AVERAGE COUPON 5.77%
WEIGHTED AVERAGE MATURITY 21.15 years
AMT EXPOSURE 15.62%
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
NAV 15.97 10.54 10.54
DISTRIBUTION RATE 4.41% 4.01% 4.03%
SEC YIELD 4.30% 3.89% 3.90%
TAX EQUIV. YIELD 5.97% 5.40% 5.42%
Please refer to important disclosures on pages 28 and 29.
</TABLE>
For the three-month period ended June 30, 1998, the Fund posted a 1.50%
cumulative total return for Class A shares, excluding sales charges, and a 1.51%
return for Institutional Class shares. The Fund remained competitive to its
benchmark, the Lehman Brothers Municipal Bond Index, which returned 1.52% for
the three-month period. For the first half of 1998, income comprised the bulk of
the return in the municipal bond market. During this period, we took steps to
gradually lengthen the duration and add higher yielding bonds. This allowed us
to achieve competitive returns versus the benchmark.
PORTFOLIO REVIEW
The Fund's manager is value oriented, and searches for investment
opportunities in bonds that may be underpriced or higher yielding. The Fund can
invest in bonds with a wide range of maturities, allowing for greater investment
flexibility.
CREDIT QUALITY(2)
(as of June 30, 1998)
- ----------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
AAA 66%
AA 6%
A 10%
BBB or Below 14%
Cash Equivalents 4%
</TABLE>
The Fund invests two-thirds of the portfolio in AAA-rated bonds. Although a
majority of the Fund's portfolio is found in high credit quality bonds, we may
increase the A-rated and BBB-rated holdings in an attempt to capture higher
yields. For all issues, especially those below a AAA rating, our extensive
credit research includes research of the issuer's income statement rather than
simply the balance sheet and assets. We also determine the factors that
differentiate a BBB-rated bond, for
26
<PAGE>
INVESTMENT ADVISOR COMMENTARY National Tax-Free Fund
- ------------------------------------------------------------------------
example, from an A-rated bond and assess whether it is worth the added risk to
buy the lower credit quality bond.
The Fund seeks to capture monthly income through careful consideration of
bonds that provide competitive yields. For example, the Colorado Health
Facilities Authority Revenue and Mississippi Home Corporation Single Family
Revenue Mortgage bonds are core, higher yielding bonds that help the Fund
maintain its income level. Other bonds, such as Denver Colorado City and County
Airport Revenue and Iowa Finance Authority Revenue (Mercy Health Sys) bonds were
purchased as value opportunities. Overall, the Fund holds a wide range of bonds
across a number of geographic areas and government sectors.
As of June 30, 1998, the Fund held 67 bonds and two short-term instruments in
its portfolio. With over $50 million in assets, this demonstrates the Fund's
solid diversification. Given this number of bonds, we are able to thoroughly
monitor each position. The Fund has the ability to invest in a wide range of
maturities, allowing for greater investment flexibility within the portfolio and
the potential to maximize income.
TOP 10 HOLDINGS (as of June 30, 1998)
<TABLE>
<CAPTION>
% OF
NAME/COUPON PORTFOLIO
<S> <C>
CHICAGO IL, LAKEFRONT, 5.13% 5.1%
DREYFUS GENERAL CA, 3.38% 4.9%
MISSISSIPPI HOME CORP., 5.35% 3.9%
DENVER CO, CITY & COUNTY APT., 5.60% 3.6%
CO HEALTH FACS., 5.75% 3.5%
HOWARD COUNTY IN, 5.25% 3.4%
IOWA FIN. AUTH. REV., 5.25% 3.4%
CA VETERANS BONDS, 5.45% 2.7%
IOWA FIN AUTH., 6.95% 2.6%
FARGO ND HEALTH SYS., 5.38% 2.6%
</TABLE>
27
<PAGE>
National Tax-Free Fund INVESTMENT ADVISOR COMMENTARY
- ------------------------------------------------------------------------
We allocated 15.62% of the portfolio to AMT bonds as they are higher yielding
and help to maintain the income level. The Fund's average portfolio duration is
somewhat longer than the benchmark Index's average duration. As a result, the
Fund did not show more volatility. This positioning, coupled with a slightly
higher average coupon, enabled the Fund to remain competitive within the
interest rate environment.
STRATEGIC OUTLOOK
Three key factors contributing to the strength of the overall U.S. market
continue to be low inflation, moderate economic growth and low interest rates.
We believe that while the nation's economy continues to be healthy, it may
eventually weaken over time, partially as a result of lingering effects of the
Asian market crisis. We also feel that interest rates may drift lower and
short-term rates will remain stable without much interference this year from the
Federal Reserve Board.
Our current management style emphasizes value. In anticipation of continued
low volatility in the municipal bond market, we are placing more emphasis on
income in the portfolio. We intend to add income by gradually lengthening the
duration and increasing the Fund's exposure to bonds rated A and BBB. While
increasing this exposure, we will maintain our strategy of careful research and
credit checks on all potential purchases for the Fund. In addition, we intend to
maintain approximately 25% of the Fund's portfolio in housing revenue bonds.
These bonds offer above average yields. Overall, we anticipate a favorable
outlook for the municipal bond market and will continue to seek good values for
the Fund.
1 The formula used to calculate the SEC yield is described in detail in the
Fund's statement of additional information and is designed to standardize the
yield calculations so that all mutual fund companies with the same or similar
portfolios use a uniform method to obtain yield figures for their non-money
market advertisements. SEC yields include the actual amount of interest earned
adjusted by any gain or loss realized due to the return of principal, less
expenses and the maximum offering price calculated on a 30-day month-end
basis. The distribution rate is based on the actual distributions made by the
Fund. The distribution rate is calculated by annualizing the Fund's most
recent income dividend and dividing that figure by the applicable current
public offering price.
28
<PAGE>
INVESTMENT ADVISOR COMMENTARY National Tax-Free Fund
- ------------------------------------------------------------------------
A portion of the Fund's income may be subject to federal, state and/or local
income taxes or the alternative minimum tax (AMT). The Stagecoach National
Tax-Free Fund's taxable equivalent is based on the federal rate of 39.60%. Any
capital gains distribution may be taxable.
2 The average credit rating is compiled from ratings from Standard & Poor's
and/or Moody's Investors Service (together "rating agencies"). Standard &
Poor's is a trademark of McGraw-Hill, Inc. and has been licensed. The Fund is
not sponsored, endorsed, sold or promoted by these rating agencies and these
rating agencies make no representation regarding the advisability of investing
in the Fund. Past performance is no guarantee of future results.
29
<PAGE>
National Tax-Free Fund PERFORMANCE AT A GLANCE
- ------------------------------------------------------------------------
NATIONAL TAX-FREE FUND
GROWTH OF A $10,000 INVESTMENT
Class A and Institutional Class Shares
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
STAGECOACH LEHMAN STAGECOACH
NATIONAL BROTHERS NATIONAL
TAX-FREE FUND MUNICIPAL TAX-FREE FUND
CLASS A SHARES BOND INDEX INSTITUTIONAL CLASS SHARES
<S> <C> <C> <C>
Inception $9,550 $10,000 $10,000
Feb-93 $9,807 $10,362 $10,269
Mar-93 $9,646 $10,252 $10,101
Apr-93 $9,734 $10,356 $10,193
May-93 $9,753 $10,414 $10,212
Jun-93 $9,922 $10,588 $10,389
Jul-93 $9,887 $10,601 $10,353
Aug-93 $10,089 $10,822 $10,564
Sep-93 $10,235 $10,945 $10,717
Oct-93 $10,224 $10,966 $10,705
Nov-93 $10,168 $10,870 $10,647
Dec-93 $10,342 $11,099 $10,829
Jan-94 $10,464 $11,225 $10,957
Feb-94 $10,195 $10,935 $10,675
Mar-94 $9,909 $10,490 $10,376
Apr-94 $9,967 $10,579 $10,436
May-94 $10,050 $10,671 $10,524
Jun-94 $10,017 $10,606 $10,489
Jul-94 $10,151 $10,800 $10,629
Aug-94 $10,182 $10,838 $10,662
Sep-94 $10,039 $10,678 $10,512
Oct-94 $9,884 $10,488 $10,350
Nov-94 $9,711 $10,298 $10,168
Dec-94 $9,894 $10,525 $10,360
Jan-95 $10,107 $10,826 $10,583
Feb-95 $10,362 $11,141 $10,850
Mar-95 $10,463 $11,269 $10,956
Apr-95 $10,487 $11,282 $10,981
May-95 $10,751 $11,642 $11,257
Jun-95 $10,726 $11,540 $11,231
Jul-95 $10,835 $11,649 $11,346
Aug-95 $10,940 $11,797 $11,456
Sep-95 $10,980 $11,872 $11,498
Oct-95 $11,107 $12,045 $11,623
Nov-95 $11,243 $12,244 $11,773
Dec-95 $11,331 $12,362 $11,865
Jan-96 $11,434 $12,456 $11,965
Feb-96 $11,367 $12,371 $11,895
Mar-96 $11,201 $12,213 $11,729
Apr-96 $11,179 $12,179 $11,706
May-96 $11,152 $12,174 $11,670
Jun-96 $11,219 $12,307 $11,755
Jul-96 $11,361 $12,417 $11,904
Aug-96 $11,324 $12,415 $11,866
Sep-96 $11,434 $12,589 $11,974
Oct-96 $11,554 $12,731 $12,107
Nov-96 $11,776 $12,964 $12,332
Dec-96 $11,702 $12,909 $12,255
Jan-97 $11,730 $12,934 $12,292
Feb-97 $11,842 $13,053 $12,409
Mar-97 $11,658 $12,879 $12,208
Apr-97 $11,746 $12,988 $12,301
May-97 $11,923 $13,184 $12,477
Jun-97 $12,062 $13,325 $12,632
Jul-97 $12,406 $13,694 $12,984
Aug-97 $12,253 $13,565 $12,832
Sep-97 $12,416 $13,727 $12,994
Oct-97 $12,468 $13,814 $13,048
Nov-97 $12,527 $13,896 $13,111
Dec-97 $12,751 $14,099 $13,356
Jan-98 $12,875 $14,244 $13,492
Feb-98 $12,865 $14,248 $13,482
Mar-98 $12,875 $14,261 $13,492
Apr-98 $12,836 $14,197 $13,443
May-98 $13,017 $14,421 $13,634
Jun-98 $13,067 $14,477 $13,695
</TABLE>
THE RETURNS FOR CLASS B AND CLASS C SHARES OF THE FUND WILL VARY FROM THE
RESULTS SHOWN DUE TO DIFFERENT EXPENSES AND LOAD STRUCTURES.
The accompanying chart compares the performance of the Stagecoach National
Tax-Free Fund Class A and Institutional Class shares since inception with the
Lehman Brothers Municipal Bond Index. The chart assumes a hypothetical $10,000
initial investment in Class A and Institutional Class shares and reflects all
operating expenses and, for Class A shares, assumes the maximum initial sales
charge of 4.50%. The Lehman Brothers Municipal Bond Index is an unmanaged index
composed of municipal bonds. The Fund is a professionally managed mutual fund.
The Index presented here does not incur expenses and is not available directly
for investment. Had this Index incurred operating expenses, its performance
would have been lower.
30
<PAGE>
PERFORMANCE AT A GLANCE National Tax-Free Fund
- ------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS (as of June 30, 1998)
EXCLUDING SALES CHARGE
<TABLE>
<CAPTION>
SINCE
YEAR-TO- 1- 5- 1/15/93
DATE YEAR YEAR INCEPTION
<S> <C> <C> <C> <C>
CLASS A 2.48 8.33 5.66 5.96
CLASS B 2.24 7.69 4.57 4.88
CLASS C 2.15 7.55 4.54 4.86
INSTITUTIONAL
CLASS 2.54 8.42 5.68 5.98
</TABLE>
INCLUDING SALES CHARGE
<TABLE>
<CAPTION>
SINCE
YEAR-TO- 1- 5- 1/15/93
DATE YEAR YEAR INCEPTION
<S> <C> <C> <C> <C>
CLASS A (2.12) 3.46 4.70 5.06
CLASS B (2.76) 2.69 4.23 4.73
CLASS C 1.15 6.55 4.54 4.86
INSTITUTIONAL
CLASS N/A N/A N/A N/A
</TABLE>
Performance shown for the Class A, Class B, Class C and Institutional Class
shares of certain of the Stagecoach Funds reflects performance of a class of
shares of a predecessor fund. Complete historical information about any
Stagecoach Fund can be found in such Fund's prospectus and statement of
additional information.
Average annual returns represent the average annual change in value of an
investment over the indicated periods assuming reinvestment of dividends and
capital gains distributions. Investment return and principal value of an
investment will fluctuate so that an investor's shares, when redeemed, may be
worth more or less than their original cost. Figures quoted represent past
performance, which is no guarantee of future results. The Fund's manager has
voluntarily waived all or a portion of its management fees or assumed
responsibility for other expenses, which reduces operating expenses and
increases total return to shareholders. Without these reductions the Fund's
returns would have been lower. There is no guarantee that these reductions will
continue.
For Class A shares, the maximum front-end sales charge is 4.50%. The maximum
contingent deferred sales charge for Class B shares is 5.00%. The maximum
contingent deferred sales charge for Class C shares is 1.00%. Class B and Class
C share performance with sales charges assumes the maximum contingent deferred
sales charge for the corresponding time period.
31
<PAGE>
Oregon Tax-Free Fund INVESTMENT ADVISOR COMMENTARY
- ------------------------------------------------------------------------
OREGON TAX-FREE FUND
The Stagecoach Oregon Tax-Free Fund (the "Fund") seeks to provide investors
with a high level of income exempt from federal income tax and Oregon personal
income tax. The Fund invests in high-quality Oregon municipal obligations. The
Fund has the ability to invest in municipal bonds with a wide range of
maturities, allowing for greater investment flexibility within the portfolio and
the potential to maximize income.
Please note that we have changed the Fund's fiscal year-end to June 30 from
March 31. We have made this change to improve our reporting process. This change
will not impact the performance or objective of your investment. Because of the
new year-end, this report is the second annual report we have sent you over the
last three months. Our discussion will focus on the most recent period, although
we may also comment on longer-term performance.
Stephen Galiani and Mary Gail Walton manage the Stagecoach Oregon Tax-Free
Fund. Mr. Galiani has 23 years of security industry experience and has been
managing portfolios since 1981. Ms. Walton's career in securities spans 14 years
with 6 years dedicated to tax-exempt portfolio management. Together, they bring
a disciplined expertise to municipal bond investing.
PERFORMANCE SUMMARY
During the three-month reporting period, the Stagecoach Oregon Tax-Free Fund's
Class A net asset value increased slightly, from $16.81 on March 31, 1998, to
$16.82 on June 30, 1998. The Fund distributed $0.184 per share in dividend
income. Keep in mind that past distributions are not predictive of future trends
as distributions will vary based on Fund portfolio earnings.
The Fund's distribution rate for Class A shares was 4.16%, based on an
annualization of June's monthly per-share dividend of $0.061 per share and the
maximum offering price of $17.61 on June 30, 1998. When measured against a
comparable taxable investment, the Fund's double tax-free rate is generally
higher. For example, an investor would need to earn 7.21% from a
taxa-
32
<PAGE>
INVESTMENT ADVISOR COMMENTARY Oregon Tax-Free Fund
- ------------------------------------------------------------------------
ble investment to match the Fund's 3.96% tax-free SEC yield, assuming the
maximum combined federal and Oregon state personal income tax bracket.
PORTFOLIO DATA(1) (as of June 30, 1998)
<TABLE>
<S> <C>
NUMBER OF ISSUES 48
PORTFOLIO TURNOVER RATIO 24%
WEIGHTED AVERAGE COUPON 5.70%
WEIGHTED AVERAGE MATURITY 17.50 years
AMT EXPOSURE 0.00%
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS B
<S> <C> <C>
NAV 16.82 10.31
DISTRIBUTION RATE 4.16% 3.51%
SEC YIELD 3.96% 3.29%
TAX EQUIV. YIELD 7.21% 5.99%
Please refer to important disclosures on page 35.
</TABLE>
For the three-month period ended June 30, 1998, the Fund posted a 1.16%
cumulative total return for Class A shares, excluding sales charges, and a 1.18%
return for Institutional Class shares. Compared to the Lehman Brothers Municipal
Bond Index, which returned 1.52% for the three-month period, the Fund was
shorter in duration and therefore underperformed its benchmark. We are currently
taking steps to capture more income by gradually extending the duration relative
to the benchmark and positioning the Fund to achieve strong long-term
performance. Lengthening the duration of the Fund, however, makes it subject to
greater volatility in a changing interest rate environment.
CREDIT QUALITY(2)
(as of June 30, 1998)
- ----------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
AAA 56%
AA 28%
A 8%
BBB or Below 8%
</TABLE>
PORTFOLIO REVIEW
As of June 30, 1998, the Fund held 56% in bonds rated AAA. Based on current
narrow credit rating spreads, we felt comfortable holding higher quality bonds.
However, we plan to increase our exposure to A-rated and BBB-rated bonds,
provided that levels are
33
<PAGE>
Oregon Tax-Free Fund INVESTMENT ADVISOR COMMENTARY
- ------------------------------------------------------------------------
attractive, to boost the average yield of the Fund. The Fund currently holds 8%
in A-rated and 8% in bonds rated BBB or below.
The bonds in the top ten holdings represent our focus toward capturing income
without sacrificing quality. For example, Guam Housing Corporation Single Family
Mortgage Revenue Bonds are backed by Government National Mortgage Association
(GNMA), a AAA-rated government agency. Although not an Oregon state specific
bond, we selected this bond for the following characteristics: it's high
quality, tax exemption in all states, attractive yield, and strong non-callable
structure. Examples of Oregon bonds that have the potential for strong income
are Hillsboro Oregon Hospital and Oregon Housing and Community Services. We feel
that bonds with these qualities generate a high monthly income and exhibit less
variation in stable assets than bonds without these features.
As always, we carefully review the investment quality, maturity, sensitivity
to interest rate movements and duration of the securities we invest in as we
strive to provide a strong long-term total return.
TOP 10 HOLDINGS (as of June 30, 1998)
<TABLE>
<CAPTION>
NAME/COUPON % OF PORTFOLIO
<S> <C>
OR HOUSING & COMMUNITY SVCS., 5.45% 7.4%
EMERALD PEOPLES UTIL. DIST., 7.35% 5.2%
WASHINGTON CNTY. OR, 5.50% 5.1%
OR VETERANS WELFARE, 5.30% 4.9%
PORT ST. HELENS OR, 5.65% 4.3%
OR STATE HEALTH, 4.75% 4.2%
GUAM HSG CORP., 5.75% 3.9%
OR STATE DEPT. ADMIN., 5.60% 3.8%
MEDFORD OR HOSPITAL, 5.25% 3.7%
HILLSBORO OR HOSPITAL, 5.75% 3.6%
</TABLE>
STRATEGIC OUTLOOK
On a national level, the U.S. economy has remained strong. The Asian crisis
may have further effects such as
34
<PAGE>
INVESTMENT ADVISOR COMMENTARY Oregon Tax-Free Fund
- ------------------------------------------------------------------------
increasing the strength of the U.S. dollar and slowing inflation. Our interest
rate forecast calls for yields to remain in a trading range over the
intermediate term with a bias toward lower rates. This is primarily due to the
conflicting effects of the diminishing government budget deficits, low commodity
prices and the Asian crisis versus the tight labor markets and healthy housing
conditions. Meanwhile, the state and local economies continue to steadily grow,
enjoying the benefits of strong consumer confidence.
On the state level, we believe that the growth of Oregon's economy will remain
positive. There are no new tax initiatives or pending legislation that will
affect the municipal governments.
We anticipate a favorable outlook for the municipal bond market and will
continue to seek bonds offering outstanding value. We intend to focus our
efforts on positioning the Fund to achieve the potential for high current income
for the long-term investor.
1 The formula used to calculate the SEC yield is described in detail in the
Fund's statement of additional information and is designed to standardize the
yield calculations so that all mutual fund companies with the same or similar
portfolios use a uniform method to obtain yield figures for their non-money
market advertisements. SEC yields include the actual amount of interest earned
adjusted by any gain or loss realized due to the return of principal, less
expenses and the maximum offering price calculated on a 30-day month-end
basis.
The distribution rate is based on the actual distributions made by the Fund.
The distribution rate is calculated by annualizing the Fund's most recent
income dividend and dividing that figure by the applicable current public
offering price.
A portion of the Fund's income may be subject to federal, state and/or local
income taxes or the alternative minimum tax (AMT). The Stagecoach Oregon
Tax-Free Fund's taxable equivalent is based on the combined federal and state
income tax rate of 45.04%. Any capital gains distribution may be taxable.
2 The average credit rating is compiled from ratings from Standard & Poor's
and/or Moody's Investors Service (together "rating agencies"). Standard &
Poor's is a trademark of McGraw-Hill, Inc. and has been licensed. The Fund is
not sponsored, endorsed, sold or promoted by these rating agencies and these
rating agencies make no representation regarding the advisability of investing
in the Fund.
35
<PAGE>
Oregon Tax-Free Fund PERFORMANCE AT A GLANCE
- ------------------------------------------------------------------------
OREGON TAX-FREE FUND
GROWTH OF A $10,000 INVESTMENT
Class A and Institutional Class Shares
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
STAGECOACH LEHMAN STAGECOACH
OREGON BROTHERS OREGON TAX-FREE
TAX-FREE FUND MUNICIPAL FUND INSTITUTIONAL
CLASS A SHARES BOND INDEX CLASS SHARES
<S> <C> <C> <C>
Inception $9,550 $10,000 $10,000
Jun-88 $9,595 $10,146 $10,047
Jul-88 $9,579 $10,212 $10,030
Aug-88 $9,731 $10,221 $10,189
Sep-88 $9,890 $10,406 $10,356
Oct-88 $9,838 $10,589 $10,301
Nov-88 $9,932 $10,492 $10,400
Dec-88 $10,015 $10,599 $10,487
Jan-89 $10,108 $10,818 $10,584
Feb-89 $10,027 $10,695 $10,499
Mar-89 $10,022 $10,669 $10,494
Apr-89 $10,207 $10,922 $10,688
May-89 $10,366 $11,149 $10,854
Jun-89 $10,531 $11,301 $11,027
Jul-89 $10,625 $11,455 $11,125
Aug-89 $10,588 $11,342 $11,087
Sep-89 $10,519 $11,308 $11,015
Oct-89 $10,660 $11,446 $11,162
Nov-89 $10,830 $11,647 $11,340
Dec-89 $10,842 $11,742 $11,353
Jan-90 $10,756 $11,687 $11,263
Feb-90 $10,877 $11,791 $11,390
Mar-90 $10,836 $11,795 $11,347
Apr-90 $10,749 $11,710 $11,255
May-90 $10,967 $11,965 $11,484
Jun-90 $11,073 $12,070 $11,595
Jul-90 $11,246 $12,248 $11,776
Aug-90 $11,047 $12,070 $11,567
Sep-90 $11,095 $12,077 $11,617
Oct-90 $11,234 $12,296 $11,763
Nov-90 $11,419 $12,543 $11,957
Dec-90 $11,495 $12,598 $12,036
Jan-91 $11,627 $12,767 $12,175
Feb-91 $11,751 $12,878 $12,304
Mar-91 $11,793 $12,883 $12,349
Apr-91 $11,903 $13,055 $12,464
May-91 $12,018 $13,171 $12,584
Jun-91 $11,989 $13,158 $12,554
Jul-91 $12,171 $13,318 $12,745
Aug-91 $12,293 $13,494 $12,872
Sep-91 $12,416 $13,669 $13,001
Oct-91 $12,506 $13,792 $13,096
Nov-91 $12,473 $13,831 $13,061
Dec-91 $12,709 $14,128 $13,308
Jan-92 $12,724 $14,161 $13,323
Feb-92 $12,766 $14,165 $13,367
Mar-92 $12,776 $14,171 $13,378
Apr-92 $12,886 $14,297 $13,493
May-92 $13,033 $14,466 $13,647
Jun-92 $13,230 $14,709 $13,853
Jul-92 $13,658 $15,150 $14,302
Aug-92 $13,478 $15,001 $14,114
Sep-92 $13,504 $15,099 $14,141
Oct-92 $13,299 $14,951 $13,926
Nov-92 $13,589 $15,219 $14,229
Dec-92 $13,730 $15,374 $14,377
Jan-93 $13,843 $15,552 $14,495
Feb-93 $14,281 $16,115 $14,954
Mar-93 $14,116 $15,944 $14,781
Apr-93 $14,271 $16,105 $14,943
May-93 $14,383 $16,195 $15,060
Jun-93 $14,635 $16,466 $15,324
Jul-93 $14,656 $16,487 $15,346
Aug-93 $15,000 $16,830 $15,707
Sep-93 $15,201 $17,022 $15,918
Oct-93 $15,198 $17,054 $15,914
Nov-93 $15,153 $16,904 $15,867
Dec-93 $15,430 $17,261 $16,157
Jan-94 $15,603 $17,458 $16,338
Feb-94 $15,243 $17,006 $15,961
Mar-94 $14,611 $16,314 $15,299
Apr-94 $14,540 $16,452 $15,225
May-94 $14,718 $16,595 $15,411
Jun-94 $14,565 $16,494 $15,251
Jul-94 $14,835 $16,796 $15,534
Aug-94 $14,887 $16,855 $15,588
Sep-94 $14,621 $16,607 $15,310
Oct-94 $14,272 $16,311 $14,944
Nov-94 $13,983 $16,016 $14,642
Dec-94 $14,430 $16,369 $15,109
Jan-95 $14,903 $16,836 $15,605
Feb-95 $15,321 $17,326 $16,043
Mar-95 $15,425 $17,525 $16,152
Apr-95 $15,432 $17,546 $16,159
May-95 $15,884 $18,106 $16,632
Jun-95 $15,723 $17,947 $16,464
Jul-95 $15,822 $18,117 $16,567
Aug-95 $15,963 $18,347 $16,715
Sep-95 $16,076 $18,463 $16,834
Oct-95 $16,298 $18,732 $17,066
Nov-95 $16,569 $19,043 $17,348
Dec-95 $16,715 $19,226 $17,503
Jan-96 $16,763 $19,372 $17,554
Feb-96 $16,677 $19,240 $17,466
Mar-96 $16,455 $18,994 $17,235
Apr-96 $16,389 $18,940 $17,167
May-96 $16,406 $18,933 $17,186
Jun-96 $16,562 $19,139 $17,340
Jul-96 $16,718 $19,312 $17,518
Aug-96 $16,712 $19,308 $17,503
Sep-96 $16,902 $19,578 $17,716
Oct-96 $17,056 $19,799 $17,880
Nov-96 $17,385 $20,162 $18,217
Dec-96 $17,267 $20,077 $18,108
Jan-97 $17,305 $20,115 $18,150
Feb-97 $17,444 $20,300 $18,299
Mar-97 $17,182 $20,030 $18,016
Apr-97 $17,322 $20,198 $18,166
May-97 $17,542 $20,503 $18,400
Jun-97 $17,703 $20,723 $18,572
Jul-97 $18,243 $21,297 $19,153
Aug-97 $18,068 $21,097 $18,961
Sep-97 $18,273 $21,348 $19,190
Oct-97 $18,379 $21,484 $19,294
Nov-97 $18,465 $21,611 $19,398
Dec-97 $18,752 $21,926 $19,704
Jan-98 $18,947 $22,152 $19,902
Feb-98 $18,899 $22,159 $19,852
Mar-98 $18,867 $22,179 $19,831
Apr-98 $18,756 $22,079 $19,703
May-98 $19,029 $22,428 $19,991
Jun-98 $19,087 $22,515 $20,064
</TABLE>
THE RETURNS FOR CLASS B SHARES OF THE FUND WILL VARY FROM THE RESULTS SHOWN DUE
TO DIFFERENT EXPENSES AND LOAD STRUCTURES.
The accompanying chart compares the performance of the Stagecoach Oregon
Tax-Free Fund Class A and Institutional Class shares since inception with the
Lehman Brothers Municipal Bond Index. The chart assumes a hypothetical $10,000
initial investment in Class A and Institutional Class shares and reflects all
operating expenses and, for Class A shares, assumes the maximum initial sales
charge of 4.50%. The Lehman Brothers Municipal Bond Index is an unmanaged index
composed of municipal bonds. The Fund is a professionally managed mutual fund.
The Index presented here does not incur expenses and is available directly for
investment. Had this Index incurred operating expenses, its performance would
have been lower. Past performance is no guarantee of future results.
36
<PAGE>
PERFORMANCE AT A GLANCE Oregon Tax-Free Fund
- ------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS (as of June 30, 1998)
EXCLUDING SALES CHARGE
<TABLE>
<CAPTION>
YEAR-TO- 1- 5- 10-
DATE YEAR YEAR YEAR
<S> <C> <C> <C> <C>
CLASS A 1.78 7.81 5.46 7.12
CLASS B 1.37 7.05 4.61 6.32
INSTITUTIONAL
CLASS 1.83 8.04 5.54 7.16
</TABLE>
INCLUDING SALES CHARGE
<TABLE>
<CAPTION>
YEAR-TO- 1- 5- 10-
DATE YEAR YEAR YEAR
<S> <C> <C> <C> <C>
CLASS A (2.82) 2.97 4.49 6.63
CLASS B (3.63) 2.04 4.28 6.32
INSTITUTIONAL
CLASS N/A N/A N/A N/A
</TABLE>
Performance shown for the Class A, Class B and Institutional Class shares of
certain of the Stagecoach Funds reflects performance of a class of shares of a
predecessor fund. Complete historical information about any Stagecoach Fund can
be found in such Fund's prospectus and statement of additional information.
Average annual returns represent the average annual change in value of an
investment over the indicated periods assuming reinvestment of dividends and
capital gains distributions. Investment return and principal value of an
investment will fluctuate so that an investor's shares, when redeemed, may be
worth more or less than their original cost. Figures quoted represent past
performance, which is no guarantee of future results. The Fund's manager has
voluntarily waived all or a portion of its management fees or assumed
responsibility for other expenses, which reduces operating expenses and
increases total return to shareholders. Without these reductions the Fund's
returns would have been lower.
For Class A shares, the maximum front-end sales charge is 4.50%. The maximum
contingent deferred sales charge for Class B shares is 5.00%. Class B share
performance including sales charge assumes the maximum contingent deferred sales
charge for the corresponding time period.
37
<PAGE>
THIS PAGE IS INTENTIONALLY LEFT BLANK --
38
<PAGE>
INVESTMENT ADVISOR COMMENTARY Short-Term Municipal Income Fund
- ------------------------------------------------------------------------
SHORT-TERM MUNICIPAL INCOME FUND
The Fund was closed to new investors on May 1, 1998.
The Stagecoach Short-Term Municipal Income Fund (the "Fund") seeks to provide
investors with a high level of income exempt from federal income taxes, while
managing principal volatility. The Fund invests in municipal obligations with
average weighted maturities between 90 days to two years. The Fund's strategy
involves in-depth research of credit quality, maturity, call protection, and
potential value.
Please note that we have changed the Fund's fiscal year to June 30 from
December 31. We have made this change to improve our reporting process. This
change will not impact the performance or objective of your investment. Because
of the new year-end, this report is the second annual report we have sent you
over the last six months. Our discussions will focus on the most recent period,
although we may also comment on longer-term performance.
Laura Milner manages the Stagecoach Short-Term Municipal Income Fund and is
the senior specialist for all tax-exempt money market and short-term portfolios.
She is a member of the California Chapter of the National Federation of
Municipal Analysts. Her 17 years of experience in the industry with a specialty
in short- and long-term municipal securities brings a disciplined expertise to
the Fund.
PERFORMANCE SUMMARY
During the six-month reporting period, the Stagecoach Short-Term Municipal
Income Fund's net asset value decreased from $4.98 on December 31, 1997 to $4.96
on June 30, 1998. The Fund distributed $0.09 per share in dividend income, and
no capital gains were distributed by the Fund. Keep in mind that past
distributions are not predictive of future trends, as distributions will vary
based on Fund portfolio earnings.
The Fund's distribution rate was 3.43%, based on an annualization of June's
dividend of $0.015 per share and the maximum offering price of $5.11. When
measured against a comparable taxable investment, the Fund's tax-free yield is
generally higher. For example, an investor
39
<PAGE>
Short-Term Municipal Income Fund INVESTMENT ADVISOR COMMENTARY
- ------------------------------------------------------------------------
would need to earn 5.51% from a taxable investment to match the Fund's 3.33%
tax-free SEC yield, assuming the maximum federal income tax bracket.
PORTFOLIO DATA(1) (as of June 30, 1998)
<TABLE>
<S> <C>
NUMBER OF ISSUES 20
PORTFOLIO TURNOVER RATIO 28%
WEIGHTED AVERAGE COUPON 4.30%
WEIGHTED AVERAGE MATURITY 0.40 years
AMT EXPOSURE 0.00%
</TABLE>
<TABLE>
<CAPTION>
CLASS A
<S> <C>
NAV 4.96
DISTRIBUTION RATE 3.43%
SEC YIELD 3.33%
TAX EQUIV. YIELD 5.51%
Please refer to important disclosures on page 41.
</TABLE>
For the six-month period ended June 30, 1998, the Fund posted a 1.49%
cumulative total return, excluding sales charges. Compared to the Lehman
Brothers Municipal Bond Index, which returned 2.67% for the six-month period,
the Fund was shorter in duration and therefore, underperformed its benchmark.
PORTFOLIO REVIEW
Our overall strategy is based on capturing income consistent with investment
risk. This is accomplished through a careful consideration of bonds that provide
opportunities for income consistent with reasonable risk.
CREDIT QUALITY(2)
(as of June 30, 1998)
- ----------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
AAA 14%
AA 9%
A 22%
BBB or Below 45%
Cash Equivalents 10%
</TABLE>
The Fund's top ten holdings illustrate our focus on short-term municipal bonds
which contributed to the Fund's performance. For example, we purchased South
Dakota Student Loan Finance Corporation Bonds. Generally, student loan bonds
entail a high call risk due to prepayment. As a result of this high call risk,
they trade inexpensively. After extensive research on these specific
40
<PAGE>
INVESTMENT ADVISOR COMMENTARY Short-Term Municipal Income Fund
- ------------------------------------------------------------------------
issues, we found that their potential value was greater than their potential
risk, and we were better able to maintain a consistent level of tax-free income.
TOP 10 HOLDINGS (as of June 30, 1998)
<TABLE>
<CAPTION>
NAME/COUPON % OF PORTFOLIO
<S> <C>
SOUTH DAKOTA STDNT. LOAN, 5.50% 19.3%
AZ TRANSIT BOARD, 7.00% 14.2%
DREYFUS GENERAL CA, 3.39% 5.1%
NUVEEN INSTITUTE CA, 3.10% 5.1%
NY MORTGAGE AGENCY, 6.00% 4.9%
TX BRAZOS HIGHER EDU., 6.00% 4.7%
PA ALLEGHENY CNTY., 4.00% 3.9%
FARMINGTON NM, 3.80% 3.9%
INDEPENDENCE MO, 4.00% 3.9%
INDIANAPOLIS IN, 4.10% 3.9%
</TABLE>
As the Fund is closed to new purchases, we thank you for your investment in
the Stagecoach Short-Term Municipal Income Fund and hope you have found an
alternative within the Stagecoach Family of Funds. Currently we offer over 30
mutual funds, and we are confident that your financial consultant can assist you
in selecting a Stagecoach Fund to meet your investment needs.
1 The formula used to calculate the SEC yield is described in detail in the
Fund's statement of additional information and is designed to standardize the
yield calculations so that all mutual fund companies with the same or similar
portfolios use a uniform method to obtain yield figures for their non-money
market advertisements. SEC yields include the actual amount of interest earned
adjusted by any gain or loss realized due to the return of principal, less
expenses and the maximum offering price calculated on a 30-day month-end
basis.
The distribution rate is based on the actual distributions made by the Fund.
The distribution rate is calculated by annualizing the Fund's most recent
income dividend and dividing that figure by the applicable current public
offering price.
A portion of the Fund's income may be subject to federal, state and/or local
income taxes or the alternative minimum tax (AMT). The Stagecoach Short-Term
Municipal Income Fund's taxable equivalent is based on the combined federal
tax rate of 39.60%. Any capital gains distribution may be taxable.
2 The average credit rating is compiled from ratings from Standard & Poor's
and/or Moody's Investors Service (together "rating agencies"). Standard &
Poor's is a trademark of McGraw-Hill, Inc. and has been licensed. The Fund is
not sponsored, endorsed, sold or promoted by these rating agencies and these
rating agencies make no representation regarding the advisability of investing
in the Fund.
41
<PAGE>
Short-Term Municipal Income Fund PERFORMANCE AT A GLANCE
- ------------------------------------------------------------------------
SHORT-TERM MUNICIPAL INCOME FUND
GROWTH OF A $10,000 INVESTMENT
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
STAGECOACH LEHMAN
SHORT-TERM BROTHERS
MUNICIPAL MUNICIPAL
INCOME FUND BOND INDEX
<S> <C> <C>
Inception $9,700 $10,000
Jun-94 $9,663 $9,939
Jul-94 $9,726 $10,121
Aug-94 $9,665 $10,156
Sep-94 $9,679 $10,007
Oct-94 $9,688 $9,829
Nov-94 $9,698 $9,651
Dec-94 $9,713 $9,863
Jan-95 $9,790 $10,145
Feb-95 $9,866 $10,440
Mar-95 $9,926 $10,560
Apr-95 $9,962 $10,573
May-95 $10,040 $10,910
Jun-95 $10,079 $10,815
Jul-95 $10,113 $10,917
Aug-95 $10,172 $11,055
Sep-95 $10,188 $11,125
Oct-95 $10,243 $11,287
Nov-95 $10,278 $11,475
Dec-95 $10,306 $11,585
Jan-96 $10,362 $11,673
Feb-96 $10,374 $11,594
Mar-96 $10,367 $11,445
Apr-96 $10,402 $11,413
May-96 $10,417 $11,409
Jun-96 $10,450 $11,533
Jul-96 $10,506 $11,637
Aug-96 $10,540 $11,634
Sep-96 $10,553 $11,797
Oct-96 $10,609 $11,931
Nov-96 $10,665 $12,149
Dec-96 $10,679 $12,098
Jan-97 $10,735 $12,121
Feb-97 $10,767 $12,232
Mar-97 $10,760 $12,070
Apr-97 $10,795 $12,171
May-97 $10,852 $12,355
Jun-97 $10,887 $12,487
Jul-97 $10,944 $12,833
Aug-97 $10,956 $12,712
Sep-97 $11,013 $12,864
Oct-97 $11,048 $12,946
Nov-97 $11,082 $13,022
Dec-97 $11,121 $13,212
Jan-98 $11,180 $13,348
Feb-98 $11,212 $13,352
Mar-98 $11,226 $13,365
Apr-98 $11,238 $13,304
May-98 $11,277 $13,515
Jun-98 $11,287 $13,567
</TABLE>
The accompanying chart compares the performance of the Stagecoach Short-Term
Municipal Income Fund since its inception with the Lehman Brothers Municipal
Bond Index. The chart assumes a hypothetical $10,000 initial investment and
reflects all operating expenses and assumes the maximum initial sales charge of
3.00%. The Lehman Brothers Municipal Bond Index is an unmanaged index composed
of municipal bonds. The Fund is a professionally managed mutual fund. The Index
presented here does not incur expenses and is not available directly for
investment. Had this Index incurred operating expenses, its performance would
have been lower.
Performance shown reflects performance of a predecessor fund. Complete
historical information about any Stagecoach Fund can be found in such Fund's
prospectus and statement of additional information.
42
<PAGE>
PERFORMANCE AT A GLANCE Short-Term Municipal Income Fund
- ------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS (as of June 30, 1998)
EXCLUDING SALES CHARGE
<TABLE>
<CAPTION>
SINCE
YEAR-TO- 1- 3- 6/3/94
DATE YEAR YEAR INCEPTION
<S> <C> <C> <C> <C>
CLASS A 1.49 3.68 3.85 3.78
</TABLE>
INCLUDING SALES CHARGE
<TABLE>
<CAPTION>
SINCE
YEAR-TO- 1- 3- 6/3/94
DATE YEAR YEAR INCEPTION
<S> <C> <C> <C> <C>
CLASS A (1.48) 0.64 2.83 3.03
</TABLE>
Performance shown for the Class A shares of the Short-Term Municipal Income Fund
reflects performance of a predecessor fund. Complete historical information
about any Stagecoach Fund can be found in any such Fund's prospectus and
statement of additional information.
The Fund's manager has voluntarily waived all or a portion of its management
fees or assumed responsibility for other expenses, which reduces operating
expenses and increases total return to shareholders. Without these reductions
the Fund's returns would have been lower. There is no guarantee that these
reductions will continue.
The maximum front-end sales charge is 3.00%.
43
<PAGE>
Arizona Tax-Free Fund PORTFOLIO OF INVESTMENTS - JUNE 30, 1998
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
ARIZONA MUNICIPAL BONDS - 97.90%
ARIZONA - 79.67%
$ 170,000 Bullhead City AZ Special Assessment Parkway
Improvement District 6.10 % 01/01/03 $ 182,325
500,000 Chandler AZ Street & Highway User Revenue 6.00 07/01/11 565,665
110,000 Glendale AZ Improvement District 6.00 01/01/01 114,811
175,000 Glendale AZ Improvement District 6.00 01/01/02 185,231
900,000 Greenlee County AZ IDA Pollution Control
Revenue Refunded 5.45 06/01/09 945,000
750,000 Maricopa County AZ Hospital District AMBAC
Insured 5.00 06/01/21 735,937
570,000 Maricopa County AZ IDA Multifamily Housing
Revenue GNMA Collateralized 5.50 12/20/37 570,724
625,000 Maricopa County AZ USD Phoenix Elementary MBIA
Insured 6.00 07/01/08 699,038
500,000 Maricopa County AZ USD Project Series A AMBAC
Insured 5.00 07/01/09 516,860
1,000,000 Mesa AZ GO FGIC Insured 6.50 07/01/09 1,170,000
500,000 Mohave County AZ IDA Baptist Hospital MBIA
Insured 5.70 09/01/15 532,270
250,000 Navajo County AZ Pollution Control Revenue
Series A 5.88 08/15/28 258,125
750,000 Phoenix AZ Civic Improvement Corporation AMT
Lien 5.00 07/01/14 738,750
1,000,000 Phoenix AZ GO Series A 6.25 07/01/16 1,157,590
900,000 Phoenix AZ IDA Hospital Revenue Refunded Series
B 5.65 12/01/12 963,000
215,000 Phoenix AZ Special Assessment Central Avenue
Improvement District 7.00 01/01/99 217,180
750,000 Pima County AZ IDA Multifamily Housing Revenue
Project 5.50 03/01/28 755,108
310,000 Pinal County AZ Community College AMBAC Insured 5.00 07/01/12 310,908
500,000 Tucson AZ LOC Business Development Finance
Corporation FGIC Insured 4.60 07/01/10 497,090
</TABLE>
44
<PAGE>
PORTFOLIO OF INVESTMENTS - JUNE 30, 1998 Arizona Tax-Free Fund
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
ARIZONA MUNICIPAL BONDS (CONTINUED)
$ 500,000 Tucson AZ Street & Highway Revenue Series C 7.00 % 07/01/11 $ 611,850
500,000 Tucson AZ Street & Highway Revenue Series C 7.00 07/01/12 620,965
1,000,000 Tucson AZ Water Revenue 5.13 07/01/21 1,004,100
500,000 University of Arizona FSA Insured 5.00 06/01/18 491,875
500,000 Yuma AZ IDA Hospital Revenue Refunded Regional
Medical Center MBIA Insured 5.75 08/01/07 545,000
GUAM - 4.12%
$ 700,000 Guam Housing Single Family Mortgage Backed
Series A 5.75 % 09/01/31 $ 744,275
PUERTO RICO - 14.11%
$ 1,000,000 Puerto Rico Commonwealth 5.50 % 07/01/26 $ 1,028,750
500,000 Puerto Rico Electric Power 5.50 07/01/25 508,645
500,000 Puerto Rico Electric Power Authority Revenue
Series DD 5.00 07/01/28 486,485
500,000 Puerto Rico Public Finance Corporation 5.38 06/01/18 525,625
--------------
TOTAL ARIZONA MUNICIPAL BONDS $ 17,683,182
(Cost $17,188,766)
</TABLE>
45
<PAGE>
Arizona Tax-Free Fund PORTFOLIO OF INVESTMENTS - JUNE 30, 1998
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY NAME VALUE
<C> <S> <C> <C> <C> <C>
SHORT-TERM INSTRUMENTS - 0.77%
CALIFORNIA - 0.77%
138,587 AIM Institutional Tax-Free Money Market Fund $ 138,587
(Cost $138,587)
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $17,327,353)* 98.67% $ 17,821,769
(Notes 1 and 3)
Other Assets and Liabilities, Net 1.33 239,712
------ --------------
TOTAL NET ASSETS 100.00% $ 18,061,481
------ --------------
------ --------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
* COST FOR FEDERAL INCOME TAX PURPOSES IS THE SAME AS FOR FINANCIAL
STATEMENT PURPOSES AND NET UNREALIZED APPRECIATION CONSISTS OF:
<TABLE>
<S> <C>
Gross Unrealized Appreciation $ 518,930
Gross Unrealized Depreciation (24,514)
--------------
NET UNREALIZED APPRECIATION $ 494,416
--------------
--------------
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Education 11%
Electric 5%
General Obligation 24%
Hospital 16%
Housing 12%
Public Improvements 15%
Transportation 10%
Water 6%
Other 1%
</TABLE>
Investment Categories Reflect Percentages of Investments in Securities
The accompanying notes are an integral part of these financial statements.
46
<PAGE>
PORTFOLIO OF INVESTMENTS - JUNE 30, 1998 California Tax-Free Bond Fund
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS - 97.99%
$ 2,000,000 ABAG Finance Authority for Nonprofit Corp CA
Stanford University Hospital 5.50 % 11/01/13 $ 2,052,500
1,000,000 ABAG Financing Authority for Nonprofit
Corporations COP 5.13 07/01/13 992,500
1,000,000 Alameda County CA Water District Revenue COP
Water System Project MBIA Insured 6.20 06/01/13 1,075,930
2,000,000 Alameda County CA COP Medical Center Project 5.00 06/01/23 1,939,180
2,500,000 Anaheim CA PFA Tax Allocation Revenue
Redevelopment Project Series A MBIA Insured 5.25 02/01/18 2,525,075
3,620,000 Antioch CA Public FA Water Revenue Water
Treatment Plant Project MBIA Insured 5.63 07/01/14 3,763,497
1,330,000 Arcadia CA USD Capital Appreciation Series A
MBIA Insured (zero coupon) 5.30 F 09/01/06 923,632
1,000,000 Baldwin Park CA PFA Revenue San Gabriel River
Tax Allocation MBIA Insured 5.00 08/01/21 977,270
810,000 Benicia CA USD Refunded Series B FGIC Insured 5.13 08/01/12 829,254
2,545,000 Bonita CA USD COP MBIA Insured 5.63 05/01/10 2,719,943
1,300,000 Burbank Glendale Pasadena Airport Authority CA
Airport Revenue AMBAC Insured 6.40 06/01/10 1,392,235
1,000,000 Calaveras CA USD FSA Insured 5.13 08/01/18 999,880
110,000 California Educational Facilities Authority
Revenue Prerefunded Loyola Marymount
University 6.00 10/01/14 105,190
1,110,000 California Educational Facilities Authority
Revenue Refunded Mills College MBIA Insured 5.00 09/01/12 1,124,663
</TABLE>
47
<PAGE>
California Tax-Free Bond Fund PORTFOLIO OF INVESTMENTS - JUNE 30, 1998
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$ 1,000,000 California Educational Facilities Authority
Revenue Refunded University of San Diego
AMBAC Insured 4.75 % 10/01/15 $ 966,650
240,000 California Educational Facilities Authority
Revenue Unrefunded Balance Loyola Marymount
University 6.00 10/01/14 229,505
1,000,000 California State GO 5.00 10/01/11 1,022,500
1,000,000 California State DWR Central Valley Project
Revenue 4.75 09/01/12 990,550
1,500,000 California State DWR Central Valley Project
Revenue 5.00 12/01/12 1,514,415
1,830,000 California State DWR Central Valley Project
Revenue Series L 5.75 12/01/13 1,925,654
4,550,000 California State DWR Central Valley Project
Revenue Series L 5.75 12/01/14 4,775,862
3,235,000 California State DWR Central Valley Project
Series O 4.75 12/01/17 3,088,487
1,195,000 California State EDFA Revenue Chapman College
Refunding Pending 7.30 01/01/02 1,285,450
1,000,000 California State EDFA Revenue Claremont
Colleges Pooled Facilities 6.38 05/01/22 1,072,420
50,000 California State EDFA Revenue Pomona College 6.13 02/15/08 53,700
1,000,000 California State EDFA Revenue Pomona College GO 5.60 12/01/14 1,032,500
1,350,000 California State EDFA Revenue Pomona College GO 6.00 02/15/17 1,428,057
1,000,000 California State EDFA Revenue University of San
Francisco MBIA Insured 5.60 10/01/10 1,098,330
1,500,000 California State Educational Facility Authority
Revenue Pooled College and University Project
Series C 5.13 03/01/15 1,509,660
</TABLE>
48
<PAGE>
PORTFOLIO OF INVESTMENTS - JUNE 30, 1998 California Tax-Free Bond Fund
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$ 1,000,000 California State GO 4.75 % 09/01/11 $ 1,011,390
1,910,000 California State GO Eagles II Series 6 (zero
coupon) 5.40 F 04/01/10 1,093,494
3,000,000 California State GO MBIA Insured 6.00 10/01/10 3,409,800
375,000 California State HFA Home Mortgage Revenue AMT
Series B Multiple Credit Enhancements 8.00 08/01/29 388,530
955,000 California State HFA Home Mortgage Revenue AMT
Series D Multiple Credit Enhancements 7.75 08/01/10 990,784
260,000 California State HFA Home Mortgage Revenue AMT
Series G Multiple Credit Enhancements 8.15 08/01/19 265,416
1,380,000 California State HFA Home Mortgage Revenue
Series A Multiple Credit Enhancements 7.35 08/01/11 1,451,249
40,000 California State HFA Home Mortgage Revenue
Series B FHA Collateralized 6.90 08/01/16 40,062
180,000 California State HFA Home Mortgage Revenue
Series B MBIA Insured 6.90 08/01/16 180,279
355,000 California State HFA Home Mortgage Revenue
Series B Multiple Credit Enhancements 7.25 08/01/10 373,393
80,000 California State HFA Home Mortgage Revenue
Series F Multiple Credit Enhancements 7.75 08/01/08 81,654
135,000 California State HFA Home Mortgage Revenue
Series G AMT Multiple Credit Enhancements 6.95 08/01/11 143,685
500,000 California State HFA Home Multi Unit Rental
Mortgage Revenue Series B-II 6.70 08/01/15 533,840
500,000 California State HFA Home Multi-Unit Rental
Mortgage Revenue Series C-II AMT 6.85 08/01/15 533,700
140,000 California State HFA Insured Housing Revenue
AMT Series C MBIA Insured 7.00 08/01/23 148,928
</TABLE>
49
<PAGE>
California Tax-Free Bond Fund PORTFOLIO OF INVESTMENTS - JUNE 30, 1998
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$ 2,825,000 California State HFA Multi-Unit Rental Housing
Revenue Series A AMT 5.50 % 08/01/15 $ 2,842,148
1,000,000 California State HFFA Episcopal Homes
Foundation Project State Insured 7.75 07/01/18 1,005,000
400,000 California State HFFA Episcopal Homes
Foundation Project State Insured 7.85 07/01/15 402,000
1,000,000 California State HFFA Gould Medical Foundation
Escrowed to Maturity 7.25 04/01/10 1,070,990
1,250,000 California State HFFA Gould Medical Foundation
Escrowed to Maturity 7.30 04/01/20 1,337,362
2,000,000 California State HFFA Revenue Catholic
Healthcare West AMBAC Insured 5.75 07/01/15 2,122,840
1,000,000 California State HFFA Revenue Insured Health
Facilities Valleycare Series State Insured 6.50 05/01/05 1,080,390
1,500,000 California State HFFA Revenue Kaiser Permanente
Series A 6.25 03/01/21 1,585,680
2,000,000 California State HFFA Revenue Scripps Memorial
Hospital MBIA Insured 6.40 10/01/12 2,185,280
2,000,000 California State HFFA Revenue Scripps Research
Institute 6.63 07/01/14 2,213,340
1,750,000 California State HFFA Revenue Small Insured
Health Facilities Series A 6.75 03/01/20 1,881,985
3,500,000 California State HFFA San Diego Hospital
Association MBIA Insured 6.20 08/01/12 3,785,145
1,795,000 California State HFFA Scripps Memorial Hospital
Series A MBIA Insured 6.25 10/01/13 1,917,868
1,000,000 California State Maritime Infrastructure
Authority Revenue Port of San Diego Project
AMBAC Insured 5.25 11/01/15 1,007,470
2,500,000 California State PCFA Pacific Gas & Electric Co
AMT 6.35 06/01/09 2,714,425
1,445,000 California State PCFA Pacific Gas & Electric Co
AMT 6.63 06/01/09 1,572,016
1,000,000 California State PCFA San Diego Gas & Electric
Co AMT 6.80 06/01/15 1,202,450
</TABLE>
50
<PAGE>
PORTFOLIO OF INVESTMENTS - JUNE 30, 1998 California Tax-Free Bond Fund
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$ 4,190,000 California State Prerefunded 5.75 % 03/01/15 $ 4,595,047
1,500,000 California State Public Works Board Lease
Revenue California State University Project
Series A 5.38 10/01/17 1,532,970
2,000,000 California State Public Works Board Lease
Revenue Community Colleges 6.63 09/01/07 2,161,300
1,000,000 California State Public Works Board Lease
Revenue Department of Corrections AMBAC
Insured 5.25 01/01/21 1,004,270
3,000,000 California State Public Works Board Lease
Revenue Department of Corrections AMBAC
Insured 6.40 11/01/10 3,378,330
4,000,000 California State Public Works Board Lease
Revenue Department of Corrections Series A 5.40 01/01/09 4,270,440
2,000,000 California State Public Works Board Lease
Revenue Department of Corrections Series A
AMBAC Insured 5.50 01/01/15 2,090,740
1,000,000 California State Public Works Board Lease
Revenue University Of California Project
Series A AMBAC Insured 6.00 12/01/12 1,095,900
5,000,000 California State Universities & Colleges
Revenue HSG System FGIC Insured 5.80 11/01/17 5,373,300
165,000 California State Unrefunded Balance 5.75 03/01/15 174,532
5,000,000 California State Water Resource Central Valley
Project Revenue 6.00 12/01/07 5,604,100
1,500,000 California Statewide CDA Lease Revenue Oakland
Convention Centers Project AMBAC Insured 5.50 10/01/14 1,536,075
3,000,000 California Statewide CDA Lease Revenue Oakland
Convention Centers Project AMBAC Insured 6.00 10/01/10 3,235,620
1,000,000 California Statewide CDA Motion Picture and
Television Development AMBAC Insured 5.20 01/01/11 1,029,990
</TABLE>
51
<PAGE>
California Tax-Free Bond Fund PORTFOLIO OF INVESTMENTS - JUNE 30, 1998
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$ 1,750,000 California Statewide CDA Motion Picture and
Television Development AMBAC Insured 5.25 % 01/01/12 $ 1,793,505
1,590,000 California Statewide CDA Motion Picture and
Television Development AMBAC Insured 5.25 01/01/13 1,624,519
1,500,000 California Statewide CDA Motion Picture and
Television Development AMBAC Insured 5.25 01/01/14 1,527,855
500,000 California Statewide CDA Revenue COP Health
Facilities Barton Memorial Hospital LOC -
Banque Nationale de Paris 6.40 12/01/05 538,620
3,310,000 California Statewide CDA Revenue COP Hospital
Cedars Sinai Medical Center 6.50 08/01/12 3,788,527
1,500,000 California Statewide CDA Revenue COP Sutter
Health Obligated Group AMBAC Insured 6.00 08/15/09 1,609,500
1,935,000 California Statewide CDA Water Revenue Series A 6.00 07/01/10 2,089,258
5,000,000 California Statewide Community Development
Authority Revenue 5.00 08/01/18 4,894,250
2,500,000 Calleguas Las Virgines CA PFA FSA Insured 5.00 11/01/23 2,440,500
2,980,000 Calleguas Las Virgines CA PFA Las Virgenes
Municipal Water District FSA Insured 5.00 11/01/17 2,946,922
1,500,000 Campbell CA USD FGIC Insured 5.00 08/01/17 1,483,515
3,100,000 Capistrano CA Unified PFA Special Tax Revenue
AMBAC Insured 5.25 09/01/09 3,282,125
1,000,000 Capistrano CA Unified School District 5.00 09/01/18 978,780
200,000 Capitol Area Development Authority Sacramento
CA Lease Revenue Series A MBIA Insured 6.50 04/01/12 218,578
</TABLE>
52
<PAGE>
PORTFOLIO OF INVESTMENTS - JUNE 30, 1998 California Tax-Free Bond Fund
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$ 3,840,000 Cathedral City CA PFA RevenueTax Allocation
Redevelopment Projects Series A MBIA Insured 5.25 % 08/01/13 $ 3,938,150
1,800,000 Chino Basin CA Regional Financial Authority
Revenue Municipal Water District Sewer
Systems Project AMBAC insured 6.00 08/01/16 1,939,212
7,500,000 Chino CA Electric Water Facility Authority
Certificates Series A 5.20 10/01/15 7,612,125
400,000 Chula Vista CA COP Town Centre II Package
Project RDA 6.00 09/01/07 427,416
735,000 Chula Vista CA COP Town Centre II Package
Project RDA 6.00 09/01/08 783,635
570,000 Chula Vista CA COP Town Centre II Package
Project RDA 6.00 09/01/11 603,163
820,000 Chula Vista CA COP Town Centre II Package
Project Redevelopment Agency 6.00 09/01/10 872,324
2,000,000 Coachella CA Water Revenue COP FSA Insured 6.10 03/01/22 2,125,880
2,500,000 Colton CA PFA Tax Allocation Series A MBIA
Insured 5.00 08/01/18 2,447,125
2,505,000 Contra Costa CA Water Treatment Revenue FGIC
Insured 5.70 10/01/12 2,644,954
270,000 Contra Costa County CA Home Mortgage Revenue
AMT Escrowed to Maturity 7.75 05/01/22 347,687
1,045,000 Contra Costa County CA Public Financing Lease
Revenue Refunded Various Capital Facility
Series A MBIA Insured 5.13 08/01/17 1,047,853
2,755,000 Contra Costa County CA Transportation Authority
Sales Tax Revenue Series A Escrowed to
Maturity 6.50 03/01/09 2,971,956
</TABLE>
53
<PAGE>
California Tax-Free Bond Fund PORTFOLIO OF INVESTMENTS - JUNE 30, 1998
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$ 4,000,000 Contra Costa County CA Transportation Authority
Sales Tax Revenue Series A FGIC Insured 5.50 % 03/01/08 $ 4,234,280
3,655,000 Contra Costa County CA Water District Water
Revenue Series G MBIA Insured 5.75 10/01/14 3,933,694
1,000,000 Contra Costa County CA Water Treatment Revenue
Series A FGIC Insured 5.60 10/01/10 1,055,120
2,635,000 Corona CA Community Facility District Special
Tax Number 90-1-A MBIA Insured 4.40 09/01/11 2,554,659
2,820,000 Corona CA Community Facility District Special
Tax Number 90-1-A MBIA Insured 4.50 09/01/12 2,721,695
1,075,000 Cotati CA Facilities Financing Authority Tax
Allocation Series A 5.60 09/01/12 1,098,983
2,400,000 Covina CA PFA Covina Redevelopment Projects
Series B MBIA Insured 5.25 12/01/18 2,415,312
1,250,000 Cucamonga County CA Water District COP
Refinancing Facilities FGIC Insured 6.30 09/01/12 1,344,362
15,000 Culver City CA RDFA AMBAC Insured 6.75 11/01/15 15,783
1,450,000 Cupertino CA Series B 6.25 07/01/10 1,557,663
1,355,000 Duarte CA COP City of Hope National Medical
Center 6.13 04/01/13 1,424,417
7,480,000 East Bay CA MUD Wastewater Treatment Revenue
FGIC Insured 5.00 06/01/16 7,443,946
1,500,000 East Bay CA MUD Wastewater Treatment System
Revenue AMBAC Insured 6.00 06/01/09 1,616,055
1,500,000 East Bay CA Regional Park District 5.00 09/01/20 1,468,470
2,000,000 East Stockton CA Water District COP Series A
AMBAC Insured 4.75 04/01/17 1,918,180
5,000,000 Elsinore Valley CA Municipal Water District COP
Series A FGIC Insured 5.75 07/01/19 5,196,100
</TABLE>
54
<PAGE>
PORTFOLIO OF INVESTMENTS - JUNE 30, 1998 California Tax-Free Bond Fund
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$ 1,000,000 Elsinore Valley CA Municipal Water District COP
Series A FGIC Insured 6.00 % 07/01/12 $ 1,125,410
4,000,000 Emeryville CA PFA Housing Increment Revenue
Series A 6.35 05/01/10 4,276,320
1,215,000 Emeryville CA Public Financing Authority Lease
Revenue Series A 5.00 05/01/18 1,196,848
1,725,000 Escondido CA PFA Lease Revenue Center for the
Arts AMBAC Insured 5.80 09/01/09 1,883,666
2,000,000 Escondido CA PFA Lease Revenue Center for the
Arts AMBAC Insured 6.00 09/01/18 2,168,420
2,000,000 Escondido CA PFA Lease Revenue Escondido Civic
Center Project Series B AMBAC Insured 6.13 09/01/11 2,236,960
4,330,000 Escondido CA USD Series A FGIC Insured 5.13 09/01/15 4,377,500
1,410,000 Fairfield CA PFA CGIC Insured 5.20 08/01/08 1,458,744
1,000,000 Folsom Cordova CA USD COP 1998 FSA Insured 5.13 03/01/18 999,900
3,000,000 Fontana CA USD Convertible Series C FGIC
Insured 6.15 05/01/20 3,333,090
1,000,000 Foothill CA De Anza Community College Connie
Lee Insured 5.25 09/01/21 1,001,040
1,270,000 Fremont CA USD Alameda County Series E FGIC
Insured 5.90 09/01/15 1,367,726
3,940,000 Fremont CA USD Alameda County Series F MBIA
Insured 5.88 08/01/16 4,243,853
3,800,000 Fresno CA Conference Center 5.00 04/01/13 3,827,056
1,000,000 Fresno CA COP Street Improvement Project 6.63 12/01/11 1,083,480
2,000,000 Fresno CA Joint Powers Financing Authority
Street Light Acquisition Project Series A 5.50 08/01/12 2,049,200
1,000,000 Fresno CA Sewer Revenue Series A MBIA Insured 5.00 09/01/15 995,260
2,000,000 Fresno CA USD Series A MBIA Insured 5.70 08/01/15 2,124,140
</TABLE>
55
<PAGE>
California Tax-Free Bond Fund PORTFOLIO OF INVESTMENTS - JUNE 30, 1998
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$ 3,000,000 Fresno CA Water System Revenue FGIC Insured 6.00 % 06/01/16 $ 3,311,310
1,250,000 Fresno County CA Solid Waste Revenue American
Avenue Landfill Project MBIA Insured 5.75 05/15/14 1,330,437
1,500,000 Glendale CA RDFA Tax Allocation Revenue AMBAC
Insured 5.50 12/01/09 1,591,605
1,000,000 Glendale CA RDFA Tax Allocation Revenue AMBAC
Insured 5.50 12/01/11 1,051,420
1,000,000 Glendale CA USD Series A FGIC Insured 5.75 09/01/17 1,072,820
1,650,000 Hayward CA Certificates Participation Civic
Center Project MBIA Insured 5.50 08/01/17 1,715,158
575,000 Huntington Beach CA PFA Revenue Bond 6.55 08/01/01 592,624
2,800,000 Huntington Beach CA PFA Revenue Bond 7.00 08/01/10 2,976,680
1,000,000 Indian Wells CA RDFA Tax Allocation Whitewater
Project MBIA Insured 6.00 12/01/14 1,069,050
1,000,000 Indian Wells CA Redevelopment Agency Tax
Allocation MBIA Insured 5.38 12/01/15 1,028,070
500,000 Industry CA Urban Development Agency 6.70 11/01/03 545,670
1,280,000 Industry CA Urban Development Agency 6.85 11/01/04 1,400,448
500,000 Industry CA Urban Development Agency Project 3 6.60 11/01/02 543,200
1,350,000 Jackson CA COP Water System Acquisition Project 6.80 09/01/23 1,422,387
270,000 Jamul-Dulzura CA USD 6.40 08/01/16 293,566
2,000,000 Kern CA High School District MBIA Insured 5.60 08/01/12 2,151,720
2,000,000 King City CA Joint USD FGIC Insured 5.00 08/01/20 1,968,500
1,400,000 La Quinta CA Redevelopment Agency Tax
Allocation 5.13 09/01/18 1,392,048
1,185,000 La Verne CA COP Capital Improvements Projects 5.70 06/01/15 1,207,207
</TABLE>
56
<PAGE>
PORTFOLIO OF INVESTMENTS - JUNE 30, 1998 California Tax-Free Bond Fund
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$ 1,000,000 Lancaster CA School District COP FSA Insured 4.90 % 04/01/10 $ 1,021,090
1,000,000 Lancaster CA School District COP FSA Insured 5.13 04/01/14 1,011,440
1,425,000 Long Beach CA Civic Center Project Series A
MBIA Insured 5.00 10/01/17 1,409,211
3,000,000 Long Beach CA Finance Authority Revenue 6.00 11/01/08 3,377,430
1,000,000 Long Beach CA Finance Authority Revenue AMBAC
Insured 6.00 11/01/17 1,128,310
1,000,000 Long Beach CA Water Revenue 6.13 05/01/19 1,114,100
2,900,000 Los Angeles CA Airport Revenue Series A FGIC
Insured 5.50 05/15/08 3,095,750
1,000,000 Los Angeles CA Community College District COP
Series A CGIC Insured 5.90 08/15/07 1,073,190
1,000,000 Los Angeles CA Community College District COP
Series A CGIC Insured 6.00 08/15/08 1,076,920
4,695,000 Los Angeles CA DW&P Electric Plant Revenue 5.70 09/01/11 4,985,855
200,000 Los Angeles CA DW&P Electric Plant Revenue 6.38 02/01/20 212,840
2,000,000 Los Angeles CA DW&P Electric Plant Revenue
Second Issue 5.75 08/15/11 2,107,760
3,000,000 Los Angeles CA DW&P Waterworks Revenue 5.70 04/15/09 3,197,670
2,775,000 Los Angeles CA Harbor Revenue Series B AMT 6.50 08/01/13 3,032,881
340,000 Los Angeles CA Municipal Improvement Corp Lease
Revenue Central Library Project Series A 6.30 06/01/16 363,586
85,000 Los Angeles CA SFMR Series A AMT Multiple
Credit Enhancements 7.55 12/01/23 88,582
1,950,000 Los Angeles CA Unified School District
Certificates Participation Multiple
Properties Project Series A FSA Insured 5.50 10/01/16 2,027,941
</TABLE>
57
<PAGE>
California Tax-Free Bond Fund PORTFOLIO OF INVESTMENTS - JUNE 30, 1998
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$ 2,800,000 Los Angeles CA USD Certificates Participation
Multiple Properties Project Series A FSA
Insured 5.40 % 10/01/09 $ 2,989,308
2,200,000 Los Angeles CA USD Certificates Participation
Multiple Properties Project Series A FSA
Insured 5.50 10/01/10 2,347,994
2,070,000 Los Angeles CA Waste Water System Revenue
Refunded Series A MBIA Insured 4.90 12/01/10 2,121,936
3,250,000 Los Angeles CA Waste Water System Revenue
Series A FGIC Insured 5.00 06/01/23 3,173,332
4,000,000 Los Angeles CA Wastewater System Revenue AMBAC
Insured 6.25 06/01/12 4,387,520
1,300,000 Los Angeles CA Wastewater System Revenue Series
A MBIA Insured 5.70 06/01/13 1,367,925
1,000,000 Los Angeles CA Wastewater System Revenue Series
C MBIA Insured 5.50 06/01/13 1,037,630
2,000,000 Los Angeles County CA Metropolitan
Transportation Authority Revenue Series A 5.00 07/01/09 2,077,200
1,975,000 Los Angeles County CA Metropolitan
Transportation Authority Sales Tax Revenue
Series A 5.50 07/01/13 2,036,008
2,500,000 Los Angeles County CA Metropolitan
Transportation Authority Sales Tax Revenue
Series A AMBAC Insured 5.50 07/01/17 2,581,250
2,400,000 Los Angeles County CA Metropolitan
Transportation Authority Series A AMBAC
Insured 5.00 07/01/12 2,431,440
480,000 Los Angeles County CA Transportation Commission
Sales Tax Revenue Series B FGIC Insured 6.50 07/01/15 517,325
1,200,000 Los Angeles Unified School District Series A 6.00 07/01/13 1,353,864
2,000,000 Los Angeles USD COP Dr Francisco Bravo Medical
Hospital 6.60 06/01/05 2,172,540
</TABLE>
58
<PAGE>
PORTFOLIO OF INVESTMENTS - JUNE 30, 1998 California Tax-Free Bond Fund
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$12,200,000 Los Angeles USD Series A FGIC Insured 5.00 % 10/01/19 $ 11,940,750
1,370,000 Madera CA RDFA Tax Allocation Revenue CGIC
Insured 5.75 09/01/11 1,461,406
2,000,000 Menlo Park CA CDA Tax Allocation Revenue MBIA
Insured 5.38 06/01/16 2,042,860
805,000 Merced County CA Certificates Participation
Revenue 6.00 10/01/12 873,256
1,000,000 Metropolitan Water District Southern CA Water
Works Revenue 5.75 07/01/13 1,060,650
2,000,000 Metropolitan Water District Southern CA Water
Works Revenue MBIA Insured 5.75 07/01/15 2,130,340
5,000,000 Metropolitan Water District Southern California
Waterworks Revenue Series A 5.00 07/01/16 4,964,350
1,450,000 Metropolitan Water District Southern California
Waterworks Revenue Series A 5.00 07/01/17 1,439,386
2,000,000 Mid Peninsula CA Regional Open Space District
Promissory Notes 7.00 09/01/14 2,264,940
1,000,000 Modesto CA Irrigation District Financing
Authority Revenue Refunded Domestic Water
Project Series D AMBAC Insured 5.00 09/01/16 995,140
2,780,000 Modesto CA PFA Lease Revenue AMBAC Insured 5.00 09/01/16 2,766,489
3,545,000 Monrovia CA Redevelopment Agency Tax Allocation
Project Area 1B AMBAC Insured 5.13 05/01/17 3,538,158
975,000 Montclair CA RDFA Lease Revenue Series A 5.80 11/01/10 1,006,873
100,000 Montclair CA RDFA Lease Revenue Series A 6.63 11/01/11 103,955
2,835,000 Mountain View CA Shoreline Regional Park
Community Tax Allocation MBIA Insured 5.50 08/01/13 2,969,861
</TABLE>
59
<PAGE>
California Tax-Free Bond Fund PORTFOLIO OF INVESTMENTS - JUNE 30, 1998
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$ 1,230,000 National City CA CDA Tax Allocation Downtown
Redevelopment Project Series B AMT AMBAC
Insured 6.63 % 08/01/12 $ 1,362,692
1,405,000 Natomas CA USD FGIC Insured 5.10 09/01/13 1,431,231
1,945,000 Natomas CA USD FGIC Insured 5.20 09/01/14 1,990,007
2,060,000 Natomas CA USD FGIC Insured 5.25 09/01/15 2,107,524
2,000,000 Natomas CA USD FGIC Insured 5.25 09/01/16 2,037,000
720,000 Natomas CA USD Series A MBIA Insured 5.75 09/01/12 768,730
2,200,000 Nevada County CA Solid Waste Revenue 6.50 10/01/06 2,388,078
1,000,000 North City West CA School Facility Authority
Special Tax Refunded Series B FSA Insured 5.75 09/01/15 1,067,500
1,000,000 Northern California Power Agency Multiple
Capital Facilities Revenue Series A MBIA
Insured 6.50 08/01/12 1,099,620
7,000,000 Northern California Transmission Revenue
Transmission Project A MBIA Insured 5.50 05/01/14 7,260,470
1,035,000 Northridge CA Water District AMBAC Insured 5.40 02/01/11 1,079,360
4,280,000 Northridge CA Water District Revenue AMBAC
Insured 5.25 02/01/14 4,394,404
1,000,000 Nuview CA USD COP 7.25 02/01/16 1,064,060
1,465,000 Oakland CA FGIC Insured 6.00 06/15/12 1,569,191
1,560,000 Olivenhain CA Water District COP FGIC Insured 5.13 06/01/19 1,551,030
1,500,000 Ontario CA RDFA Revenue Project One MBIA
Insured 6.00 08/01/15 1,572,810
4,400,000 Orange County CA LOC TRANS Authority Sales Tax
Revenue MBIA Insured 6.00 02/15/08 4,904,504
800,000 Orange County CA Local Transportation Authority
Sales Tax Revenue First Series Measure M 6.00 02/15/09 895,712
</TABLE>
60
<PAGE>
PORTFOLIO OF INVESTMENTS - JUNE 30, 1998 California Tax-Free Bond Fund
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$ 1,000,000 Orange County CA Water District Series A 5.50 % 08/15/10 $ 1,055,840
1,250,000 Palm Desert CA Financing Authority Tax
Allocation MBIA Insured 5.00 10/01/16 1,243,887
1,145,000 Palm Desert CA Financing Authority Tax
Allocation Revenue Housing MBIA Insured 5.00 10/01/14 1,150,771
1,000,000 Palm Springs CA Certificates Participation
Refunded Multiple Capital Facilities Project
AMBAC Insured 5.75 04/01/17 1,066,380
1,000,000 Palmdate CA Water District Revenue COP FGIC
Insured 5.00 10/01/18 984,890
1,240,000 Parlier CA RDFA Tax Allocation Series A 6.95 08/01/23 1,320,216
4,720,000 Pasadena CA USD Series A 5.00 05/01/20 4,645,896
1,795,000 Pinole CA Redevelopment Agency Tax Allocation
Refunded 5.00 08/01/17 1,775,273
1,000,000 Pittsburg CA Public Financing Authority Revenue 5.25 06/01/17 1,012,790
3,285,000 Pittsburgh CA Redevelopment Agency Tax
Allocation V/R Series A AMBAC Insured 5.00 08/01/13 3,294,329
2,200,000 Placer County CA COP Juvenile Detention
Facility MBIA Insured 5.00 07/01/18 2,153,646
1,000,000 Port of Oakland CA Special Facilities Revenue
Mitsui OSK Lines Limited Series A AMT LOC -
Industrial Bank of Japan Ltd 6.70 01/01/07 1,079,810
3,380,000 Port of Oakland CA Special Facilities Revenue
Mitsui OSK Lines Ltd Series A AMT LOC -
Industrial Bank of Japan Ltd 6.80 01/01/19 3,598,517
4,000,000 Poway CA USD Special Tax Community Facility
MBIA Insured 4.75 10/01/14 3,914,880
1,000,000 Rancho CA Water District Financing Authority
Revenue AMBAC Insured 5.00 08/15/14 1,003,330
</TABLE>
61
<PAGE>
California Tax-Free Bond Fund PORTFOLIO OF INVESTMENTS - JUNE 30, 1998
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$ 1,325,000 Redding CA Joint Powers Financing Authority
Wastewater Revenue Series A FGIC Insured 6.00 % 12/01/11 $ 1,431,941
1,310,000 Rialto CA RDFA Tax Allocation Series A 5.80 09/01/08 1,378,683
1,100,000 Richmond CA Joint Powers Financing Authority
Lease and Gas Tax Revenue Series A 5.25 05/15/13 1,106,963
1,000,000 Riverside CA Electric Revenue AMBAC Insured 5.00 10/01/18 984,890
2,500,000 Riverside CA Electric Revenue Refunded AMBAC
Insured 5.00 10/01/22 2,441,700
1,055,000 Riverside CA Sewer Revenue FGIC Insured 5.00 08/01/10 1,099,352
5,750,000 Riverside County CA Asset Leasing Corp Revenue
Riverside County Hospital Project A 6.38 06/01/09 6,181,250
1,170,000 Riverside County CA COP MBIA Insured 5.00 11/01/12 1,185,643
1,045,000 Riverside County CA PFA Special Tax Revenue
Series A MBIA Insured 5.25 09/01/10 1,093,896
1,000,000 Riverside County CA PFA Special Tax Revenue
Series A MBIA Insured 5.25 09/01/13 1,025,730
225,000 Riverside County CA SFMR Project A AMT GNMA
Collateralized 6.85 10/01/16 247,210
1,000,000 Rocklin CA USD Community Facility District
Special Tax MBIA Insured 5.75 09/01/18 1,057,000
1,000,000 Roseville CA COP AMBAC Insured 5.25 02/01/17 1,013,440
1,335,000 Roseville CA Joint USD Capital Appreciation
Series A (zero coupon) 6.30 F 08/01/06 926,890
1,000,000 Sacramento CA Airport Commission International
Airport Revenue AMBAC Insured 6.00 07/01/16 1,092,660
1,500,000 Sacramento CA Area Flood Control Authority
Special Assessment FGIC Insured 5.38 10/01/15 1,541,430
</TABLE>
62
<PAGE>
PORTFOLIO OF INVESTMENTS - JUNE 30, 1998 California Tax-Free Bond Fund
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$ 5,000 Sacramento CA Financing Authority Revenue
Prerefunded 6.70 % 11/01/11 $ 5,397
2,300,000 Sacramento CA Light Rail Transportation Project 6.00 07/01/12 2,422,406
1,900,000 Sacramento CA Light Rail Transportation Project 6.75 07/01/07 2,054,375
2,500,000 Sacramento CA MUD Electric Revenue MBIA Insured 6.25 08/15/10 2,894,100
2,400,000 Sacramento CA MUD Electric Revenue Series E
MBIA-IBC Insured 5.70 05/15/12 2,556,672
1,000,000 Sacramento CA MUD Electric Revenue Series L 5.00 07/01/12 1,013,100
7,475,000 Sacramento CA MUD Electric Revenue Series L 5.10 07/01/14 7,540,780
50,000 Sacramento CA MUD Electric Revenue Series Z
FGIC Insured 6.45 07/01/10 53,936
200,000 Sacramento CA Municipal Utility District
Revenue Series C FGIC Insured 5.75 11/15/08 214,000
300,000 Sacramento CA Municipal Utility District Series
C FGIC Insured 5.75 11/15/08 330,375
1,000,000 Sacramento CA RDFA Tax Allocation Merged
Downtown Project A MBIA Insured 6.50 11/01/13 1,070,020
2,000,000 Sacramento County CA Airport System Revenue
Series A AMT FGIC Insured 6.00 07/01/12 2,115,340
1,125,000 Sacramento County CA COP Public Facilities
Project AMBAC Insured 5.00 10/01/12 1,139,940
3,000,000 Sacramento County Main Detention Facility MBIA
Insured 5.75 06/01/15 3,165,480
5,000,000 San Bernardino CA Water Department Revenue COP 5.00 02/01/17 4,916,300
380,000 San Bernardino County CA West Valley Detention
Center MBIA Insured 6.50 11/01/12 417,977
</TABLE>
63
<PAGE>
California Tax-Free Bond Fund PORTFOLIO OF INVESTMENTS - JUNE 30, 1998
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$ 200,000 San Bernardino County CA Transportation
Authority Sales Tax Revenue FGIC Insured 6.00 % 03/01/10 $ 214,438
1,775,000 San Bernardino County CA Transportation
Authority Series A FSA Insured 4.88 03/01/10 1,816,322
2,000,000 San Bernardino County Medical Center Project 4.90 08/01/08 2,052,500
4,000,000 San Buenaventura CA COP AMBAC Insured 6.00 01/01/12 4,290,000
8,195,000 San Diego CA PFA Sewer Revenue FGIC Insured 5.00 05/15/15 8,156,483
3,000,000 San Diego CA Public Safety Commission Project
GO 5.50 04/01/08 3,242,700
1,000,000 San Diego CA Public Safety Commission Project
GO 6.50 07/15/07 1,157,800
4,500,000 San Diego County CA Regional Transportation
Community Sales Tax Revenue Series A Escrowed
to Maturity 6.00 04/01/08 4,932,090
3,950,000 San Elijo Joint Powers Authority San Diego
County CA Water Pollution Control Facility
FGIC Insured 5.38 03/01/13 4,054,714
2,250,000 San Francisco CA BART Sales Tax Revenue FGIC
Insured 5.50 07/01/15 2,338,515
200,000 San Francisco CA City & County Public Utilities
Commission Water Revenue Series A 6.50 11/01/09 220,656
700,000 San Francisco CA City & County RDFA Tax
Allocation Capital (zero coupon) 5.65 F 08/01/08 441,931
1,940,000 San Francisco CA City & County Refunded Series
1 FGIC Insured 5.20 06/15/15 1,973,174
1,250,000 San Francisco CA State Building Authority Civic
Center Complex Series A AMBAC Insured 5.25 12/01/21 1,257,337
</TABLE>
64
<PAGE>
PORTFOLIO OF INVESTMENTS - JUNE 30, 1998 California Tax-Free Bond Fund
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$ 6,000,000 San Joaquin Hills CA Transportation Corridor
Agency Toll Road (zero coupon) 4.70 %F 01/15/05 $ 4,492,500
1,345,000 San Joaquin Hills CA Transportation Corridor
Agency Toll Road (zero coupon) 4.90 F 01/15/07 914,856
4,000,000 San Joaquin Hills CA Transportation Corridor
Agency Toll Road (zero coupon) 7.55 F 01/01/10 3,990,000
1,000,000 San Mateo CA Flood Control District COP Colma
Creek Flood Control Zone MBIA Insured 5.25 08/01/17 1,012,960
1,130,000 San Mateo CA Sewer Revenue FSA Insured 5.50 08/01/14 1,192,964
1,935,000 San Mateo County CA Board of Education COP 7.10 05/01/21 2,015,206
1,500,000 San Mateo County CA Joint Powers Authority
Lease Revenue FSA Insured 5.00 07/15/14 1,514,325
1,500,000 San Mateo County CA Joint Powers Series A FSA
Insured 5.00 07/15/18 1,486,845
6,000,000 Santa Ana CA Financing Authority Revenue
Refunded South Harbor Boulevard Series A 5.00 09/01/19 5,869,320
4,010,000 Santa Clara CA RDFA Tax Allocation Bayshore
North Project AMBAC Insured 5.75 07/01/14 4,261,186
4,200,000 Santa Clara County CA COP Multiple Facilities
Project AMBAC Insured 6.00 05/15/12 4,509,750
1,185,000 Santa Clara County CA District Sales Tax
Revenue Series A 5.25 06/01/17 1,198,177
1,000,000 Santa Clara County CA Financing Authority Lease
Revenue Series A AMBAC Insured 4.85 11/15/10 1,020,610
</TABLE>
65
<PAGE>
California Tax-Free Bond Fund PORTFOLIO OF INVESTMENTS - JUNE 30, 1998
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$ 3,000,000 Santa Fe Springs CA Community Development
Common Tax Allocation Series A MBIA Insured 5.00 % 09/01/17 $ 2,966,880
1,575,000 Santa Fe Springs CA Community Development
Common Tax Allocation Series A MBIA Insured 5.13 09/01/16 1,578,890
3,020,000 Santa Fe Springs CA Community Development
Common Tax Allocation Series A MBIA Insured 5.13 09/01/22 2,980,951
1,750,000 Santa Maria CA RDFA Town Center West Side
Parking Facilities FSA Insured 5.25 06/01/11 1,803,900
1,000,000 Santa Monica - Malibu CA USD Facilities
Reconstruction Projects 5.50 08/01/15 1,035,400
1,195,000 Santa Rosa CA High School District FGIC Insured 5.90 05/01/13 1,285,187
2,575,000 Santa Rosa CA Wastewater Revenue FGIC insured 4.90 09/01/11 2,612,827
3,450,000 Santa Rosa CA Wastewater Treatment Plant FGIC
Insured 4.75 09/01/16 3,311,482
1,000,000 Saratoga CA USD Series A FGIC Insured 5.38 09/01/17 1,023,560
1,000,000 Shasta CA Joint Powers Financing Authority
Lease Revenue Courthouse Improvement Project
MBIA Insured 5.00 06/01/18 985,050
1,000,000 Sonoma Valley CA USD FSA Insured 6.00 07/15/21 1,080,540
5,720,000 South County CA Regional Wastewater Authority
Revenue Capital Improvement FGIC Insured 5.75 08/01/10 6,060,226
1,000,000 Southern California Public Power Project
Revenue 6.75 07/01/11 1,185,560
2,000,000 Southern California State Public Power
Authority 5.50 07/01/12 2,090,040
675,000 Southern California State SFMR Series A AMT
GNMA Collateralized 7.63 10/01/22 703,296
</TABLE>
66
<PAGE>
PORTFOLIO OF INVESTMENTS - JUNE 30, 1998 California Tax-Free Bond Fund
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$ 380,000 Southern California State SFMR Series A AMT
GNMA Collateralized 7.63 % 10/01/23 $ 400,106
630,000 Southern California State SFMR Series A AMT
GNMA/FNMA Collateralized 6.75 09/01/22 668,380
695,000 Southern California State SFMR Series A AMT
GNMA/FNMA Collateralized 7.35 09/01/24 728,812
2,000,000 Stanislaus County CA Capital Improvement
Program Series A MBIA Insured 5.25 05/01/14 2,046,680
1,600,000 Stanislaus County CA COP Capital Improvement
Project AMBAC Insured 5.25 05/01/18 1,608,848
2,720,000 Stanislaus County CA COP Capital Improvement
Project Series A MBIA Insured 5.00 05/01/10 2,801,600
20,000 Stockton CA SFMR Government Agency
Collateralized 7.50 02/01/23 22,873
5,690,000 Sulphur Springs CA USD Series A MBIA Insured
(zero coupon) 7.00 F 09/01/13 2,673,219
1,465,000 Sunnyvale CA Elementary School District Series
A 5.70 09/01/20 1,523,190
1,000,000 Sunnyvale CA Financing Authority Utilities
Revenue Solid Waste Materials Series B AMT
MBIA Insured 6.00 10/01/08 1,072,500
1,000,000 Temecula CA Community Services Recreational
Center Project 7.13 10/01/12 1,105,200
1,000,000 Temecula Valley CA USD Series D FGIC Insured 6.00 09/01/14 1,066,430
1,000,000 Three Valleys CA Municipal Water District COP
FGIC Insured 5.00 11/01/14 1,002,930
2,000,000 Three Valleys CA Municipal Water District
Revenue COP FGIC Insured 5.25 11/01/10 2,077,380
1,000,000 Torrance CA COP AMBAC Insured 5.50 04/01/11 1,062,020
1,900,000 Torrance CA COP AMBAC Insured 5.50 04/01/12 2,008,756
</TABLE>
67
<PAGE>
California Tax-Free Bond Fund PORTFOLIO OF INVESTMENTS - JUNE 30, 1998
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$ 2,705,000 Torrance CA COP AMBAC Insured 5.75 % 04/01/16 $ 2,874,198
1,100,000 Travis CA USD COP AMBAC Insured 5.40 09/01/19 1,122,154
1,000,000 Truckee-Donner Public Utility District
Certificates Participation Water System
Improvement Project 5.50 11/15/16 1,044,480
2,000,000 Tulare County CA COP Public Facilities
Corporation Series A MBIA Insured 6.10 11/15/07 2,168,120
2,250,000 Twentynine Palms CA Water District CA COP 7.00 08/01/17 2,413,237
1,000,000 Union City CA Community RDFA Tax Allocation
Revenue Community Redevelopment Project AMBAC
Insured 5.65 10/01/14 1,048,240
1,645,000 University of California Revenue Housing System
Series A AMBAC Insured 5.50 11/01/11 1,728,730
3,400,000 University of California Revenue Multiple
Purpose Project C AMBAC Insured 5.25 09/01/11 3,507,984
1,000,000 University of California Revenue Multiple
Purpose Projects AMBAC Insured 4.75 09/01/15 966,760
1,000,000 University of California Revenue Refunded
Multiple Purpose Projects Series E MBIA
Insured 5.13 09/01/20 994,090
3,200,000 University of California Revenue Seismic Safety
Project MBIA Insured 5.50 11/01/10 3,383,232
990,000 Upland CA HFA Revenue Issue A 7.85 07/01/20 1,024,571
1,000,000 Vacaville CA PFA Tax Allocation Redevelopment
Project MBIA Insured 6.35 09/01/22 1,052,270
3,275,000 Vallejo CA Revenue Water Improvement Project
FSA Insured 5.70 05/01/16 3,504,578
2,000,000 Ventura CA COP Public Facilities 5.75 12/01/06 2,152,580
2,000,000 Ventura CA COP Public Facilities Corporation IV 5.75 12/01/07 2,147,560
</TABLE>
68
<PAGE>
PORTFOLIO OF INVESTMENTS - JUNE 30, 1998 California Tax-Free Bond Fund
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$ 1,305,000 Vista CA Community Redevelopment Project Area B
Tax Allocation 5.10 % 09/01/18 $ 1,293,529
4,250,000 Walnut Creek CA John Muir Medical Center MBIA
Insured 5.00 02/15/16 4,205,163
1,135,000 Walnut Valley CA USD Series C FGIC Insured 5.75 08/01/15 1,195,439
1,130,000 West Hollywood CA COP MBIA Insured 5.10 02/01/16 1,130,497
1,125,000 West Hollywood CA COP MBIA Insured 5.10 02/01/17 1,130,389
1,170,000 West Sacramento CA Financing Authority Revenue
Water System Improvement Project FGIC Insured 5.50 08/01/15 1,203,099
1,200,000 Westminster CA RDFA AMT 6.50 08/01/10 1,265,484
1,000,000 Whittier CA Educational Facilities Revenue
Whittier College Connie Lee Insured 5.40 12/01/18 1,007,180
1,000,000 Yolo County CA HFA Mortgage Revenue AMT FHA
Collateralized 7.20 08/01/33 1,084,260
1,040,000 Yolo County CA Library Special Tax Community
Facilities 6.25 12/01/22 1,105,749
--------------
TOTAL CALIFORNIA MUNICIPAL BONDS $ 676,454,023
(Cost $638,711,080)
</TABLE>
69
<PAGE>
California Tax-Free Bond Fund PORTFOLIO OF INVESTMENTS - JUNE 30, 1998
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
SHORT-TERM INSTRUMENTS - 2.28%
SHORT-TERM CALIFORNIA MUNICIPAL SECURITIES - 1.30%
$ 1,750,000 California HFFA V/R FSA Insured+ 3.25 % 07/01/22 1,750,000
900,000 California State PCFA Shell Oil Co
Project V/R Series A+ 3.25 10/01/10 900,000
1,000,000 California State PCFA Shell Oil
Company Project V/R Series C+ 3.25 10/01/00 1,000,000
1,000,000 California State PCFA Southern California
Edison V/R Series C+ 3.45 02/28/08 1,000,000
700,000 Chula Vista CA Industrial Development Revenue
V/R San Diego Gas & Electric Company+ 3.35 03/01/23 700,000
600,000 Irvine CA Improvement Bond V/R+ 3.30 09/02/22 600,000
3,000,000 Orange County CA Sanitation District
V/R LOC - National Westminster
Bank Plc+ 3.30 08/01/15 3,000,000
--------------
$ 8,950,000
</TABLE>
70
<PAGE>
PORTFOLIO OF INVESTMENTS - JUNE 30, 1998 California Tax-Free Bond Fund
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY NAME VALUE
<C> <S> <C> <C> <C> <C>
MONEY MARKET FUNDS - 0.98%
6,782,000 Provident Institutional CA Municipal Fund $ 6,782,000
--------------
TOTAL SHORT-TERM INSTRUMENTS $ 15,732,000
(Cost $15,732,000)
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $654,443,080)* 100.27% $ 692,186,023
(Notes 1 and 3)
Other Assets and Liabilities, Net (0.27) (1,855,674)
------ --------------
TOTAL NET ASSETS 100.00% $ 690,330,349
------ --------------
------ --------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
F YIELD TO MATURITY AT PURCHASE DATE.
+ THESE VARIABLE RATE SECURITIES ARE SUBJECT TO A DEMAND FEATURE WHICH
REDUCES THE REMAINING MATURITY.
* COST FOR FEDERAL INCOME TAX PURPOSES IS THE SAME AS FOR FINANCIAL
STATEMENT PURPOSES AND NET UNREALIZED APPRECIATION CONSISTS OF:
<TABLE>
<S> <C>
Gross Unrealized Appreciation $ 38,181,651
Gross Unrealized Depreciation (438,708)
--------------
NET UNREALIZED APPRECIATION $ 37,742,943
--------------
--------------
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Airport 1%
Education 15%
Electric 5%
General Obligation 17%
Health 4%
Hospital 3%
Housing 3%
Lease 6%
Public Improvements 4%
Sales Tax 14%
Sewer 6%
Transportation 4%
Water 17%
Other 1%
</TABLE>
Investment Categories Reflect Percentages of Investments in Securities
The accompanying notes are an integral part of these financial statements.
71
<PAGE>
California Tax-Free Income Fund PORTFOLIO OF INVESTMENTS - JUNE 30, 1998
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS - 95.78%
$ 1,100,000 California ABAG Finance Authority For Nonprofit
Corporation 5.00 % 07/01/07 $ 1,116,500
1,250,000 California State AMT Veterans Bonds Series B 4.65 12/01/05 1,256,162
2,000,000 California State AMT Veterans Bonds Series B 4.95 12/01/07 2,014,980
1,540,000 California State DWR Central Valley Revenue
Project Series J-2 6.00 12/01/06 1,715,175
500,000 California State HFFA Revenue Episcopal Homes
Mortgage Insurance 7.20 07/01/99 502,500
2,615,000 California State HFFA Revenue MBIA Insured 5.00 07/01/01 2,680,480
200,000 California State HFFA Revenue Mortgage
Insurance 7.40 12/01/00 206,642
1,000,000 California State Public Revenue CA State
University Projects 6.70 10/01/17 1,120,000
1,000,000 California State Public Works Board Lease
Revenue Series A 6.63 10/01/10 1,117,350
1,000,000 California Statewide CDA Revenue COP United
Western Medical Centers 6.75 12/01/21 1,103,750
500,000 California Statewide CDA Sutter Health Group
V/R AMBAC Insured 3.50 07/01/15 500,000
250,000 Carlsbad CA USD COP Phase III 6.70 11/01/99 259,225
600,000 Encinitas CA USD COP Measure B Capital Projects 4.38 09/01/98 600,654
820,000 Foster City CA PFA 4.70 09/01/98 820,853
685,000 Foster City CA PFA 5.40 09/01/01 706,954
1,000,000 Industry CA Urban Development Agency FSA
Insured 4.70 05/01/04 1,016,010
400,000 Irvine Ranch CA Water District LOC - National
Westminster Bank Plc 3.30 08/01/16 400,000
1,100,000 Irvine Ranch CA Water District V/R LOC -
Sumitomo Bank Ltd 3.30 10/01/00 1,100,000
1,500,000 Los Angeles CA Airport Revenue Series A FGIC
Insured 6.00 05/15/05 1,648,125
</TABLE>
72
<PAGE>
PORTFOLIO OF INVESTMENTS - JUNE 30, 1998 California Tax-Free Income Fund
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$ 1,460,000 Los Angeles CA DW&P Revenue Project 9.00 % 10/15/03 $ 1,784,967
2,500,000 Los Angeles CA Harbor Department Revenue AMT
Series B 5.00 08/01/02 2,566,175
725,000 Los Angeles CA Judgement Obligation Bonds
Series A 4.70 08/01/98 725,548
1,300,000 Los Angeles CA Waste Water System Revenue
Series A MBIA Insured 8.50 06/01/03 1,543,659
2,000,000 Los Angeles CA Waste Water System Revenue
Series D FGIC Insured 8.70 11/01/03 2,422,360
300,000 Los Angeles County CA Transportation Commission
Sales Tax Revenue Series A 6.10 07/01/99 306,906
500,000 Morgan Hill CA RDFA Tax Allocation Ojo De Agua
Community Development Project 5.60 03/01/00 506,020
1,075,000 Mount Diablo CA USD Community Facilities
District Special Tax AMBAC Insured 8.00 08/01/03 1,255,718
3,500,000 Orange County CA PFA Revenue Waste Management
System AMBAC Insured 5.50 12/01/06 3,725,470
2,500,000 Rancho CA Water District Financing Authority
Revenue 4.70 08/15/21 2,541,250
1,500,000 Riverside County CA Transportation Commission
Tax Revenue Series A 6.50 06/01/01 1,605,975
300,000 Sacramento CA Light Rail Transportation Project 6.30 07/01/00 312,171
500,000 Sacramento CA MUD Electric Revenue MBIA Insured 7.50 08/15/99 511,950
990,000 Sacramento CA Workers Compensation Program 5.75 06/01/03 1,029,491
500,000 San Diego CA Transportation Authority COP Bus
Acquisition Project 6.60 12/01/01 515,250
1,000,000 San Diego County CA Regional Transportation
Commission Sales Tax Revenue Series A FGIC
Insured 6.25 04/01/02 1,071,910
</TABLE>
73
<PAGE>
California Tax-Free Income Fund PORTFOLIO OF INVESTMENTS - JUNE 30, 1998
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$ 1,090,000 San Francisco CA City & County International
Airport Revenue MBIA Insured 8.00 % 05/01/05 $ 1,306,877
1,150,000 San Francisco CA City & County International
Revenue AMT MBIA Insured 8.00 05/01/05 1,382,565
1,000,000 San Francisco CA City & County RDFA Lease
Revenue George R Mascone Center AMBAC Insured 6.20 10/01/00 1,050,000
750,000 San Francisco CA Redevelopment Agency Lease
Revenue George Moscone Center Project 7.40 07/01/98 750,062
500,000 Santa Monica CA Wastewater Enterprise Revenue
Hyperion Project AMBAC Insured 12.00 01/01/01 591,150
1,000,000 South Orange County CA PFA Special Tax Revenue
Series C FGIC Insured 5.75 08/15/05 1,086,250
2,000,000 Southern California Rapid Transit District
Certificates Participation MBIA Insured 7.50 07/01/05 2,201,840
1,100,000 Southern California State Public Power
Authority 6.75 07/01/00 1,156,375
3,000,000 Southern California State Public Power
Authority Project 6.88 07/01/03 3,202,500
1,185,000 Southern California State Waterworks Revenue
Series C 6.00 07/01/06 1,314,224
580,000 Turlock CA Irrigation District Revenue Series A
MBIA Insured 5.00 01/01/05 602,034
1,000,000 University of California Multiple Projects
Revenue Series A MBIA Insured 6.00 09/01/02 1,070,560
1,000,000 University of California Research Facility
Series B 6.50 09/01/03 1,096,970
--------------
TOTAL CALIFORNIA MUNICIPAL BONDS $ 59,121,587
(Cost $58,297,542)
</TABLE>
74
<PAGE>
PORTFOLIO OF INVESTMENTS - JUNE 30, 1998 California Tax-Free Income Fund
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY NAME VALUE
<C> <S> <C> <C> <C> <C>
SHORT-TERM INSTRUMENTS - 3.02%
MONEY MARKET FUNDS - 3.02%
1,867,000 Provident Institutional CA Municipal Fund $ 1,867,000
(Cost $1,867,000)
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $60,164,542)* 98.80% $ 60,988,587
(Notes 1 and 3)
Other Assets and Liabilities, Net 1.20 739,804
------ --------------
TOTAL NET ASSETS 100.00% $ 61,728,391
------ --------------
------ --------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
* COST FOR FEDERAL INCOME TAX PURPOSES IS THE SAME AS FOR FINANCIAL
STATEMENT PURPOSES AND NET UNREALIZED APPRECIATION CONSISTS OF:
<TABLE>
<S> <C>
Gross Unrealized Appreciation $ 865,994
Gross Unrealized Depreciation (41,949)
--------------
NET UNREALIZED APPRECIATION $ 824,045
--------------
--------------
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Airport 7%
Education 7%
Electric 1%
General Obligation 14%
Health 3%
Housing 6%
Lease 5%
Public Improvements 7%
Sales Tax 6%
Sewer 14%
Transportation 12%
Water 15%
Other 3%
</TABLE>
Investment Categories Reflect Percentages of Investments in Securities
The accompanying notes are an integral part of these financial statements.
75
<PAGE>
National Tax-Free Fund PORTFOLIO OF INVESTMENTS - JUNE 30, 1998
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
MUNICIPAL BONDS - 95.68%
ALASKA - 2.58%
$ 1,250,000 Alaska State Housing Finance Corporation Series
A 5.50 % 12/01/17 $ 1,274,437
100,000 Anchorage AK GO MBIA Insured 6.75 07/01/05 107,521
100,000 Valdez AK Marine Term Revenue Pipelines Inc
Series A 5.85 08/01/25 103,000
CALIFORNIA - 4.35%
$ 20,000 California State GO 6.00 % 02/01/01 $ 20,942
1,540,000 California State Veterans Bonds Series BN 5.45 12/01/28 1,540,169
1,000,000 California Student Education Loan Marketing
Corporation 5.88 01/01/18 948,190
COLARADO - 0.53%
$ 270,000 El Paso County CO USD 6.15 % 12/15/08 $ 307,800
COLORADO - 7.12%
$ 2,000,000 Colorado Health Facility Authority Revenue 5.75 % 09/15/22 $ 2,034,500
2,000,000 Denver CO City & County Airport Revenue Series
A MBIA Insured 5.60 11/15/20 2,072,540
CONNECTICUT - 1.59%
$ 880,000 Connecticut State HFA Series B4 7.30 % 11/15/03 $ 919,151
FLORIDA - 0.31%
$ 170,000 Brevard County FL HFA SFMR Refunded Series B
FSA Insured 7.00 % 03/01/13 $ 181,050
IDAHO - 1.84%
$ 1,000,000 Idaho State HFA SFMR Series C-2 AMT 6.35 % 07/01/15 $ 1,060,780
</TABLE>
76
<PAGE>
PORTFOLIO OF INVESTMENTS - JUNE 30, 1998 National Tax-Free Fund
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
MUNICIPAL BONDS (CONTINUED)
ILLINOIS - 15.42%
$ 3,000,000 Chicago IL Lakefront Millenium Packaging
Facility 5.13 % 01/01/28 $ 2,947,500
200,000 Chicago IL O'Hare International Airport Revenue
Series A 6.75 01/01/06 228,626
500,000 Chicago IL O'Hare International Airport Special
Facilities Revenue AMT LOC - Bayerische
Landesbank 7.13 05/01/18 540,000
1,500,000 Chicago IL Park District AMBAC Insured 5.38 01/01/25 1,516,440
1,000,000 Illinois Development FHA Revenue Series A MBIA
Insured 5.75 07/01/18 1,015,420
1,000,000 Illinois Development Finance Authority Revenue
Community Rehabilitation Providers Series A 5.70 07/01/19 1,005,170
600,000 Illinois Development Finance Authority Revenue
Community Rehabilitation Providers Series C 5.65 07/01/19 597,048
1,000,000 Illinois Health Facility Authority Revenue
Edward Hospital Series A 5.75 02/15/09 1,039,250
INDIANA - 5.20%
$ 1,940,000 Howard County IN Jail & Juvenile Detention
Center AMBAC Insured 5.25 % 01/15/12 $ 1,990,867
1,000,000 Indiana State Educational Facility Authority
Revenue Butler University Project MBIA
Insured 5.30 01/01/27 1,009,160
IOWA - 6.61%
$ 2,000,000 Iowa Finance Authority Revenue Mercy Health
Systems Series V 5.25 % 08/15/27 $ 1,979,680
1,435,000 Iowa State HFA SFMR Series B AMT GNMA/FNMA
Collateralized 6.95 07/01/24 1,534,331
280,000 Iowa State HFA SFMR Series B AMT GNMA/FNMA
Collateralized 7.45 07/01/23 299,846
KENTUCKY - 0.26%
$ 140,000 Kentucky State Housing Corporation Revenue FHA
Insured 6.50 % 07/01/17 $ 150,675
</TABLE>
77
<PAGE>
National Tax-Free Fund PORTFOLIO OF INVESTMENTS - JUNE 30, 1998
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
MUNICIPAL BONDS (CONTINUED)
LOUISIANA - 0.66%
$ 355,000 Louisiana State Public Facilities Authority
Student Loan Revenue AMT FSA Insured 6.85 % 01/01/09 $ 378,803
MASSACHUSETTS - 1.84%
$ 1,000,000 Massachusetts State HFA Residential Development
FNMA Collateralized 6.90 % 11/15/21 $ 1,060,260
MICHIGAN - 2.60%
$ 1,435,000 Armada MI Area School District FSA Insured 5.63 % 05/01/17 $ 1,501,627
MINNESOTA - 1.16%
$ 250,000 Minneapolis MN Community Development Agency
Series 7-A 5.50 % 06/01/12 $ 256,560
390,000 Minneapolis-St Paul MN Housing Finance Board
Revenue SFMR Phase IX AMT GNMA Collateralized 7.30 08/01/31 413,431
MISSISSIPPI - 6.59%
$ 500,000 Jones County MS Hospital Revenue South Central
Regional Medical Center 4.90 % 12/01/04 $ 502,900
1,050,000 Jones County MS Hospital Revenue South Central
Regional Medical Center 5.00 12/01/06 1,050,777
2,230,000 Mississippi Home Corporation Single Family
Revenue Series H GNMA/ FNMA Collateralized 5.35 06/01/26 2,244,384
MONTANA - 1.76%
$ 1,000,000 Lewis & Clark County Environmental Revenue 5.60 % 01/01/27 $ 1,017,400
</TABLE>
78
<PAGE>
PORTFOLIO OF INVESTMENTS - JUNE 30, 1998 National Tax-Free Fund
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
MUNICIPAL BONDS (CONTINUED)
NEBRASKA - 1.79%
$ 1,000,000 Nebraska Finance Authority Single Family
Housing Series B GNMA/ FNMA/FHLMC
Collateralized 5.85 % 09/01/28 $ 1,033,750
NEVADA - 1.86%
$ 500,000 Clark County NV Las Vegas Convention & Visitors
Authority FSA Insured 6.00 % 07/01/26 $ 558,700
500,000 Reno NV Hospital Revenue 5.63 05/15/23 512,625
NEW JERSEY - 2.35%
$ 1,250,000 New Jersey State MFHR FHA Collateralized 7.00 % 05/01/30 $ 1,351,888
NEW YORK - 2.82%
$ 250,000 New York NY FGIC Series E 6.00 % 08/01/12 $ 273,340
1,300,000 New York State Dormitory Authority Revenue
Mental Health Services Series B 5.63 02/15/21 1,351,519
NORTH DAKOTA - 2.64%
$ 1,500,000 Fargo ND Health Systems Revenue Series A MBIA
Insured 5.38 % 06/01/27 $ 1,520,925
OKLAHOMA - 2.28%
$ 200,000 Pryor Creek OK Economic Development Authority
Mortgage Revenue Series A FNMA Collateralized 7.13 % 07/01/21 $ 209,844
540,000 Tulsa County OK HFA Mortgage Revenue Series B
Remarket AMT GNMA Collateralized 7.10 06/01/22 575,764
500,000 Tulsa County OK HFA Mortgage Revenue Series B
Remarket AMT GNMA Collateralized 7.55 05/01/23 527,655
</TABLE>
79
<PAGE>
National Tax-Free Fund PORTFOLIO OF INVESTMENTS - JUNE 30, 1998
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
MUNICIPAL BONDS (CONTINUED)
PENNSYLVANIA - 0.92%
$ 500,000 Pennsylvania State Higher EDFA Student Loan
Revenue Series D AMT AMBAC Insured 7.05 % 10/01/16 $ 530,000
TENNESSEE - 1.80%
$ 1,000,000 Shelby County TN Health Educational & Housing
Facility Series A 6.00 % 07/01/28 $ 1,038,310
TEXAS - 3.63%
$ 250,000 Decatur TX Indeptness School District 6.13 % 08/01/25 $ 267,480
250,000 El Paso TX GO 7.00 08/15/06 292,295
125,000 Port Authur TX MBIA Insured 8.50 02/15/03 146,628
380,000 Travis County TX HFC Residential Mortgage
Revenue Series A GNMA/ FNMA Collateralized 7.00 12/01/11 409,385
1,000,000 Webb County TX COP Series A 5.25 10/01/22 979,840
UTAH - 4.30%
$ 250,000 Salt Lake City UT RDA Neighborhood Tax Revenue 6.50 % 10/01/01 $ 267,755
500,000 Utah State Board of Regents Student Loan
Revenue Series F AMT AMBAC Insured 7.45 11/01/08 534,240
1,100,000 Utah State Board of Regents Student Loan
Revenue Series H AMT AMBAC Insured 6.70 11/01/15 1,165,615
250,000 Utah State Building Ownership Authority Lease
Series A 6.00 05/15/09 266,645
5,000 Utah State HFA SFMR Series D-2 AMT FHA
Collateralized 6.45 01/01/11 5,431
225,000 Washington County UT USD St Georges FGIC
Insured 6.00 03/01/03 241,659
VERMONT - 1.00%
$ 500,000 Burlington VT Electricity Revenue Series A MBIA
Insured 6.38 % 07/01/10 $ 575,950
</TABLE>
80
<PAGE>
PORTFOLIO OF INVESTMENTS - JUNE 30, 1998 National Tax-Free Fund
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
MUNICIPAL BONDS (CONTINUED)
VIRGINIA - 1.72%
$ 1,000,000 Pocahontas VA Parkway Associate 5.50 % 08/15/28 $ 990,160
WASHINGTON - 8.15%
$ 500,000 Clark County WA Sewer Revenue 6.00 % 12/01/06 $ 552,080
100,000 Island County WA USD South Whidbey 6.75 12/01/07 117,049
100,000 South Columbian Basin WA Improvement District
Revenue 6.00 12/01/02 107,203
350,000 Tacoma WA Solid Waste Utility Revenue Series B
AMBAC Insured 6.00 12/01/09 392,315
1,000,000 Washington State Health Care Facility Authority
Revenue Swedish Health System AMBAC Insured 5.50 11/15/28 1,016,640
1,000,000 Washington State Public Power Supply System
Nuclear Project Number 1 Series B 5.13 % 07/01/13 1,001,250
1,440,000 Washington State SFMR Series D AMT GNMA/FNMA
Collateralized 7.10 07/01/22 1,515,946
--------------
TOTAL MUNICIPAL BONDS $ 55,180,121
(Cost $53,655,255)
</TABLE>
81
<PAGE>
National Tax-Free Fund PORTFOLIO OF INVESTMENTS - JUNE 30, 1998
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY NAME VALUE
<C> <S> <C> <C> <C> <C>
SHORT-TERM INSTRUMENTS - 5.16%
CALIFORNIA - 5.16%
2,822,000 Dreyfus General CA Municipal Money Market Fund $ 2,822,000
151,000 Nuveen Institutional CA Tax-Exempt Fund 151,000
--------------
TOTAL SHORT-TERM INSTRUMENTS $ 2,973,000
(Cost $2,973,000)
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $56,628,255)* 100.84% $ 58,153,121
(Notes 1 and 3)
Other Assets and Liabilities, Net (0.84) (483,385)
------ --------------
TOTAL NET ASSETS 100.00% $ 57,669,736
------ --------------
------ --------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
* COST FOR FEDERAL INCOME TAX PURPOSES IS THE SAME AS FOR FINANCIAL
STATEMENT PURPOSES AND NET UNREALIZED APPRECIATION CONSISTS OF:
<TABLE>
<S> <C>
Gross Unrealized Appreciation $ 1,549,482
Gross Unrealized Depreciation (24,616)
--------------
NET UNREALIZED APPRECIATION $ 1,524,866
--------------
--------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
82
<PAGE>
PORTFOLIO OF INVESTMENTS - JUNE 30, 1998 Oregon Tax-Free Fund
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
MUNICIPAL BONDS - 100.31%
GUAM - 3.90%
$ 1,500,000 Guam Housing Single Family Mortgage Backed
Series A 5.75 % 09/01/31 $ 1,594,875
OREGON - 88.86%
$ 1,100,000 Chemeketa OR Community College District FGIC
Insured 6.00 % 06/01/06 $ 1,221,957
1,000,000 Chemeketa OR Community College District Series
B 5.60 06/01/14 1,065,000
250,000 Chemeketa OR Community College MBIA Insured 6.50 07/01/07 281,127
495,000 Clackamas County OR HFFA Jennings Lodge Project
GNMA FHA credit support 7.50 10/20/31 528,898
300,000 Clackamas County OR HFFA Sisters of Providence
Series A 6.38 10/01/05 325,716
1,750,000 Emerald Peoples OR Utility District 7.35 11/01/07 2,129,855
845,000 Eugene OR Public Safety Facilities 6.00 06/01/06 937,494
1,445,000 Hillsboro OR Hospital Facility Authority
Tuality Healthcare 5.75 10/01/12 1,499,187
500,000 Josephine County OR USD FGIC Insured 5.75 06/01/07 548,630
1,000,000 Linn & Benton OR School District No. 8J AMBAC
Insured 5.35 06/01/08 1,070,980
100,000 Marion & Polk Counties OR USD Salem GO 5.90 10/01/07 107,248
1,500,000 Medford OR Hospital Facilities Authority
Revenue Asante Health Services Series A MBIA
Insured 5.25 08/15/13 1,531,875
500,000 Multnomah County OR COP MBIA Insured 4.70 08/01/12 496,875
500,000 North Clackamas Park & Recreation District
Revenue 5.40 04/01/05 529,410
750,000 Oregon State Board of Higher Education GO
Series C 5.95 08/01/26 806,707
</TABLE>
83
<PAGE>
Oregon Tax-Free Fund PORTFOLIO OF INVESTMENTS - JUNE 30, 1998
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
MUNICIPAL BONDS (CONTINUED)
$ 500,000 Oregon State Department Administration Services
COP Series A AMBAC Insured 5.20 % 05/01/06 $ 525,225
500,000 Oregon State Department Administrative Services
COP Series A 5.80 05/01/24 532,500
1,500,000 Oregon State Department Administrative Services
COP Series B MBIA Insured 5.60 11/01/16 1,578,105
480,000 Oregon State GO 7.25 07/01/07 580,032
175,000 Oregon State GO 9.00 10/01/05 225,066
1,715,000 Oregon State Health Housing Educational &
Cultural Facilities Cedarwest Housing Project
Series A 4.75 12/01/30 1,725,719
3,000,000 Oregon State Housing & Community Services
Revenue Series B 5.45 07/01/29 3,039,720
575,000 Oregon State Housing Educational & Cultural
Facilities Authority Revenue Reed College
Project 6.75 07/01/21 629,303
5,000 Oregon State SFMR Program FHA/VA Insured 7.05 07/01/09 5,000
2,000,000 Oregon State Veterans Welfare Series 77 5.30 10/01/29 2,012,500
1,750,000 Port Saint Helens OR Pollution Control 5.65 12/01/27 1,789,077
1,000,000 Port St Helens OR Pollution Control Revenue
Project Portland General Electric Company
Series A 5.25 08/01/14 1,000,000
485,000 Portland OR Arena Gas Tax Revenue Series A 5.35 06/01/07 514,512
1,000,000 Portland OR International Airport Revenue
Series 11 FGIC Insured 5.63 07/01/13 1,057,500
300,000 Portland OR PCR Harbor Authority V/R 4.00 12/01/09 300,000
1,000,000 Portland OR Series A 4.88 06/01/18 977,500
1,000,000 South Fork OR Water Board Revenue Series B FSA
Insured 6.00 02/01/14 1,099,070
40,000 Tri-County Metropolitan OR Transportation
District Revenue Series A 5.70 08/01/13 41,424
</TABLE>
84
<PAGE>
PORTFOLIO OF INVESTMENTS - JUNE 30, 1998 Oregon Tax-Free Fund
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
MUNICIPAL BONDS (CONTINUED)
$ 1,000,000 Washington County OR School District Number 015
Forest Grove FSA Insured 5.25 % 06/01/10 $ 1,057,500
1,000,000 Washington County OR Sewer Agency Revenue FGIC
Insured 5.75 10/01/11 1,110,000
2,000,000 Washington County OR Unified Sewer Agency
Revenue FGIC Insured 5.50 10/01/13 2,114,980
725,000 Washington County School District No. 088 J
Sherwood FSA Insured 6.10 06/01/12 789,982
550,000 Western Lane OR HFFA Revenue Sisters of St.
Joseph Peace Services MBIA Insured 5.63 08/01/07 589,925
--------------
$ 37,970,474
PUERTO RICO - 7.55%
$ 40,000 Commonwealth of Puerto Rico Aqueduct & Sewer
Revenue 10.25 % 07/01/09 $ 54,746
1,000,000 Commonwealth of Puerto Rico Public Financing
Corporation Series A 5.38 06/01/15 1,054,040
1,000,000 Puerto Rico Commonwealth 5.00 07/01/27 965,000
295,000 Puerto Rico Housing Financial Corporation
Revenue MFHR Portfolio A-I LOC - Government
Development Bank of Puerto Rico 7.50 04/01/22 309,021
250,000 Puerto Rico Housing Financial Corporation SFMR
Series B GNMA Insured 7.50 % 10/15/12 263,750
425,000 Puerto Rico Industrial Medical and
Environmental PCR Facilities Financing
Authority Upjohn Co Project 7.50 12/01/23 444,155
--------------
TOTAL MUNICIPAL BONDS $ 41,061,186
(Cost $39,823,616)
</TABLE>
85
<PAGE>
Oregon Tax-Free Fund PORTFOLIO OF INVESTMENTS - JUNE 30, 1998
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY NAME VALUE
<C> <S> <C> <C> <C> <C>
SHORT-TERM INSTRUMENTS - 0.50%
MONEY MARKET FUNDS - 0.50%
207,018 Aim Institutional Tax-Free Money Market Fund $ 207,018
(Cost $207,018)
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $40,030,634)* 100.81% $ 41,268,204
(Notes 1 and 3)
Other Assets and Liabilities, Net (0.81) (333,513)
------ --------------
TOTAL NET ASSETS 100.00% $ 40,934,691
------ --------------
------ --------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
* COST FOR FEDERAL INCOME TAX PURPOSES IS THE SAME AS FOR FINANCIAL
STATEMENT PURPOSES AND NET UNREALIZED APPRECIATION CONSISTS OF:
<TABLE>
<S> <C>
Gross Unrealized Appreciation $ 1,270,424
Gross Unrealized Depreciation (32,854)
--------------
NET UNREALIZED APPRECIATION $ 1,237,570
--------------
--------------
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Airport 3%
Education 17%
Electric 5%
General Obligation 23%
Health 1%
Hospital 9%
Housing 19%
Public Improvements 10%
Sales Tax 1%
Sewer 8%
Transportation 1%
Water 3%
</TABLE>
Investment Categories Reflect Percentages of Investments in Securities
The accompanying notes are an integral part of these financial statements.
86
<PAGE>
PORTFOLIO OF INVESTMENTS - JUNE 30, 1998 Short-Term Municipal Income Fund
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
MUNICIPAL BONDS - 87.22%
ARIZONA - 13.76%
$ 700,000 Arizona State Transit Board Excise Tax Revenue 7.00 % 07/01/00 $ 734,118
CALIFORNIA - 1.87%
$ 100,000 California Higher Education Loan Authority
Revenue Series E-1 GTD STD LN Insured + 3.50 % 12/01/22 $ 100,000
COLORADO - 2.26%
$ 120,000 Colorado State Student Obligation Bond
Authority Series C 4.35 % 09/01/99 $ 120,314
ILLINOIS - 3.75%
$ 200,000 Joliet IL Regional Port District Industrial
Building Revenue 4.10 % 07/15/03 $ 200,000
INDIANA - 3.75%
$ 200,000 Indianapolis IN Resource Recovery Revenue + 4.10 % 12/01/16 $ 200,000
MISSISSIPPI - 1.87%
$ 100,000 Jackson County MS PCR Chevron Project + 3.75 % 06/01/23 $ 100,000
MISSOURI - 9.37%
$ 200,000 Independence MO Industrial Development
Authority + 4.00 % 11/01/27 $ 200,000
100,000 Kansas City MO IDA Hospital Revenue V/R MBIA
Insured + 3.80 10/15/15 100,000
200,000 Missouri State Health & Educational Facility
Authority Drury College Series A + 4.05 08/15/21 200,000
</TABLE>
87
<PAGE>
Short-Term Municipal Income Fund PORTFOLIO OF INVESTMENTS - JUNE 30, 1998
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
MUNICIPAL BONDS (CONTINUED)
NEW MEXICO - 3.75%
$ 200,000 Farmington NM PCR V/R Arizona Public Services
Co. Series B + 3.80 % 09/01/24 $ 200,000
NEW YORK - 4.73%
$ 250,000 New York State Mortgage Agency Revenue
Homeowner Mortgage Series 44 AMT FHA
Collateralized 6.00 % 04/01/99 $ 252,628
PENNSYLVANIA - 3.75%
$ 200,000 Allegheny County PA Industrial Development
Authority Revenue + 4.00 % 07/01/27 $ 200,000
SOUTH DAKOTA - 18.77%
$ 1,000,000 South Dakota Student Loan Finance Corp Student
Loan Revenue Series A - GTD STD LN Insured 5.50 % 08/01/98 $ 1,001,285
TEXAS - 12.09%
$ 240,000 Brazos TX Higher Education Authority AMT Series
C-1 6.00 % 11/01/99 $ 245,098
200,000 Lubbock TX Health Facility Development
Corporation Revenue V/R St. Joseph's Health
Services + 3.80 07/01/13 200,000
200,000 Port of Texas Naval District Industrial
Authority American Petrofina Incorporated 4.10 05/01/03 200,000
WISCONSIN - 3.75%
$ 200,000 La Crosse WI Pollution Control Revenue
Dairyland Power Coop Series B + 4.05 % 02/01/15 $ 200,000
</TABLE>
88
<PAGE>
PORTFOLIO OF INVESTMENTS - JUNE 30, 1998 Short-Term Municipal Income Fund
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
MUNICIPAL BONDS (CONTINUED)
WYOMING - 3.75%
$ 200,000 Uinta County WY PCR Chevron USA Inc Project V/R
+ 3.75 % 08/15/20 $ 200,000
--------------
TOTAL MUNICIPAL BONDS $ 4,653,443
(Cost $4,642,925)
SHORT-TERM INSTRUMENTS - 9.97%
CALIFORNIA - 9.97%
266,001 Dreyfus General CA Municipal Money Market Fund $ 266,001
266,000 Nuveen Institutional CA Tax-Exempt Fund 266,000
--------------
TOTAL SHORT-TERM INSTRUMENTS $ 532,001
(Cost $532,002)
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $5,174,927)* 97.19% $ 5,185,444
(Notes 1 and 3)
Other Assets and Liabilities, Net 2.81 149,928
------ --------------
TOTAL NET ASSETS 100.00% $ 5,335,372
------ --------------
------ --------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
+ THESE VARIABLE RATE SECURITIES ARE SUBJECT TO A DEMAND FEATURE WHICH
REDUCES THE REMAINING MATURITY.
* COST FOR FEDERAL INCOME TAX PURPOSES IS THE SAME AS FOR FINANCIAL
STATEMENT PURPOSES AND NET UNREALIZED APPRECIATION CONSISTS OF:
<TABLE>
<S> <C>
Gross Unrealized Appreciation $ 10,517
Gross Unrealized Depreciation 0
--------------
NET UNREALIZED APPRECIATION $ 10,517
--------------
--------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
89
<PAGE>
Tax-Free Funds STATEMENT OF ASSETS AND LIABILITIES - JUNE 30, 1998
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
ARIZONA CALIFORNIA
TAX-FREE TAX-FREE
FUND BOND FUND
<S> <C> <C>
ASSETS
INVESTMENTS:
In securities, at market value (see
cost below) $17,821,769 $692,186,023
Cash 1,331 1,480
RECEIVABLES:
Interest 357,728 10,103,298
Fund shares sold 0 57,027
Investment securities sold 0 324,300
Organization expenses, net of
amortization 0 0
Prepaid expenses 11,326 208
TOTAL ASSETS 18,192,154 702,672,336
LIABILITIES
Payables:
Investment securities purchased 0 8,558,523
Distribution to shareholders 64,629 2,504,317
Fund shares redeemed 370,458
Due to sponsor and distributor (Note
2) 4,664 441,706
Due to adviser (Note 2) 421 355,733
Other 60,959 111,250
TOTAL LIABILITIES 130,673 12,341,987
TOTAL NET ASSETS
$18,061,481 $690,330,349
NET ASSETS CONSIST OF:
Paid-in capital $17,256,905 $644,451,142
Undistributed net realized gain(loss)
on investments 310,160 8,136,264
Net unrealized appreciation of
investments 494,416 37,742,943
TOTAL NET ASSETS $18,061,481 $690,330,349
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE PER SHARE
Net assets - Class A(1) $ 5,383,424 $499,720,151
Shares outstanding - Class A(1) 499,083 43,927,094
Net asset value per share - Class A(1) $ 10.79 $ 11.38
Maximum offering price per share - Class
A(1) $ 11.30(2) $ 11.92(2)
Net assets - Class B $ 1,683,103 $ 99,783,917
Shares outstanding - Class B 161,761 8,605,376
Net asset value and offering price per
share - Class B $ 10.40 $ 11.60
Net assets - Class C N/A $ 8,249,277
Shares outstanding - Class C N/A 711,321
Net asset value and offering price per
share - Class C N/A $ 11.60
Net assets - Institutional Class $10,994,954 $ 82,577,004
Shares outstanding - Institutional Class 1,018,837 7,241,185
Net asset value and offering price per
share - Institutional Class $ 10.79 $ 11.40
INVESTMENT AT COST (NOTE 3) $17,327,353 $654,443,080
- -------------------------------------------------------------------------
</TABLE>
(1) INCLUDES FUNDS WITH A SINGLE CLASS
(2) MAXIMUM OFFERING PRICE IS COMPUTED AS 100/95.5 OF NET ASSET VALUE. ON
INVESTMENTS OF $50,000 OR MORE THE OFFERING PRICE IS REDUCED.
(3) MAXIMUM OFFERING PRICE IS COMPUTED AS 100/97 OF NET ASSET VALUE. ON
INVESTMENTS OF $100,000 OR MORE THE OFFERING PRICE IS REDUCED.
The accompanying notes are an integral part of these financial statements.
90
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES - JUNE 30, 1998 Tax-Free Funds
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHORT-TERM
CALIFORNIA NATIONAL OREGON MUNICIPAL
TAX-FREE TAX-FREE TAX-FREE INCOME
INCOME FUND FUND FUND FUND
<S> <C> <C> <C> <C>
ASSETS
INVESTMENTS:
In securities, at market value (see
cost below) $60,988,587 $58,153,121 $41,268,204 $5,185,444
Cash 1,165 1,440 1,879 178,596
RECEIVABLES:
Interest 937,347 925,287 503,230 62,830
Fund shares sold 0 0 40,000 0
Investment securities sold 0 0 319,842 0
Organization expenses, net of
amortization 0 0 8,043 26,728
Prepaid expenses 36,414 12,893 13,075 0
TOTAL ASSETS 61,963,513 59,092,741 42,154,273 5,453,598
LIABILITIES
Payables:
Investment securities purchased 0 992,660 1,000,000 0
Distribution to shareholders 186,810 216,828 143,464 15,838
Fund shares redeemed 0 4,933 0 0
Due to sponsor and distributor (Note
2) 14,106 8,694 28,709 21,509
Due to adviser (Note 2) 2,362 19,947 14,989 2,821
Other 31,844 179,943 32,420 78,058
TOTAL LIABILITIES 235,122 1,423,005 1,219,582 118,226
TOTAL NET ASSETS
$61,728,391 $57,669,736 $40,934,691 $5,335,372
NET ASSETS CONSIST OF:
Paid-in capital $60,575,803 $56,846,063 $39,207,444 $5,297,275
Undistributed net realized gain(loss)
on investments 328,543 (701,193) 489,677 27,580
Net unrealized appreciation of
investments 824,045 1,524,866 1,237,570 10,517
TOTAL NET ASSETS $61,728,391 $57,669,736 $40,934,691 $5,335,372
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE PER SHARE
Net assets - Class A(1) $54,168,990 $40,820,256 $27,664,628 $5,335,372
Shares outstanding - Class A(1) 5,190,675 2,555,426 1,644,298 1,074,923
Net asset value per share - Class A(1) $ 10.44 $ 15.97 $ 16.82 $ 4.96
Maximum offering price per share - Class
A(1) $ 10.76(3) $ 16.72(2) $ 17.61(2) $ 5.11(3)
Net assets - Class B N/A $ 1,841,285 $ 5,955,866 N/A
Shares outstanding - Class B N/A 174,757 577,878 N/A
Net asset value and offering price per
share - Class B N/A $ 10.54 $ 10.31 N/A
Net assets - Class C N/A $ 7,311,873 N/A N/A
Shares outstanding - Class C N/A 693,719 N/A N/A
Net asset value and offering price per
share - Class C N/A $ 10.54 N/A N/A
Net assets - Institutional Class $ 7,559,401 $ 7,696,322 $ 7,314,197 N/A
Shares outstanding - Institutional Class 736,195 481,970 434,849 N/A
Net asset value and offering price per
share - Institutional Class $ 10.27 $ 15.97 $ 16.82 N/A
INVESTMENT AT COST (NOTE 3) $60,164,542 $56,628,255 $40,030,634 $5,174,927
- -------------------------------------------------------------------------------------------------------
</TABLE>
(1) INCLUDES FUNDS WITH A SINGLE CLASS
(2) MAXIMUM OFFERING PRICE IS COMPUTED AS 100/95.5 OF NET ASSET VALUE. ON
INVESTMENTS OF $50,000 OR MORE THE OFFERING PRICE IS REDUCED.
(3) MAXIMUM OFFERING PRICE IS COMPUTED AS 100/97 OF NET ASSET VALUE. ON
INVESTMENTS OF $100,000 OR MORE THE OFFERING PRICE IS REDUCED.
The accompanying notes are an integral part of these financial statements.
91
<PAGE>
Tax-Free Funds STATEMENTS OF OPERATIONS - JUNE 30, 1998
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
ARIZONA TAX-FREE FUND CALIFORNIA TAX-FREE BOND
----------------------- FUND
FOR THE ---------------------------
THREE FOR THE SIX
MONTHS FOR THE MONTHS FOR THE
ENDED YEAR ENDED ENDED YEAR ENDED
JUNE 30, MARCH 31, JUNE 30, DEC. 31,
1998 1998 1998 1997
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Interest $233,890 $ 969,781 $18,333,753 $14,339,791
TOTAL INVESTMENT INCOME 233,890 969,781 18,333,753 14,339,791
EXPENSES (NOTE 2)
Advisory fees 22,703 95,284 1,695,639 1,259,094
Administration fees 3,251 12,043 232,768 217,623
Custody fees 776 3,269 58,668 45,020
Shareholder servicing fees 11,609 48,964 1,002,190 107,591
Portfolio accounting fees 9,234 36,480 98,767 112,355
Transfer agency fees 4,180 16,891 445,891 344,373
Distribution fees 3,117 9,115 421,479 175,834
Organization costs 0 19,631 0 1,567
Legal and audit fees 10,126 27,857 26,719 25,890
Registration fees 4,737 16,338 46,518 5,121
Directors' fees 1,115 4,892 2,217 4,145
Shareholder reports 4,239 20,437 27,472 29,255
Other 2,693 18,992 24,925 29,201
TOTAL EXPENSES 77,780 330,193 4,083,253 2,357,069
Less:
Waived fees and reimbursed expenses (42,547) (224,807) (1,215,602) (396,060)
Net Expenses 35,233 105,386 2,867,651 1,961,009
NET INVESTMENT INCOME (LOSS) 198,657 864,395 15,466,102 12,378,782
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on sale of
investments 127,076 425,355 7,346,974 1,877,019
Net change in unrealized appreciation
(depreciation) of investments (107,342) 543,222 (4,290,607) 34,032,101
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS 19,734 968,577 3,056,367 35,909,120
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $218,391 $1,832,972 $18,522,469 $48,287,902
- ----------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
92
<PAGE>
STATEMENTS OF OPERATIONS - JUNE 30, 1998 Tax-Free Funds
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
CALIFORNIA TAX-FREE
INCOME FUND NATIONAL TAX-FREE FUND OREGON TAX-FREE FUND
----------------------- ----------------------- -----------------------
FOR THE FOR THE FOR THE
THREE THREE THREE
MONTHS FOR THE MONTHS FOR THE MONTHS FOR THE
ENDED YEAR ENDED ENDED YEAR ENDED ENDED YEAR ENDED
JUNE 30, MARCH 31, JUNE 30, MARCH 31, JUNE 30, MARCH 31,
1998 1998 1998 1998 1998 1998
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Interest $704,862 $3,177,905 $801,625 $1,408,272 $506,134 $1,959,677
TOTAL INVESTMENT INCOME 704,862 3,177,905 801,625 1,408,272 506,134 1,959,677
EXPENSES (NOTE 2)
Advisory fees 78,360 348,186 71,331 128,786 49,121 187,554
Administration fees 11,046 43,808 10,157 16,707 6,989 23,433
Custody fees 2,885 12,903 2,422 4,390 1,667 6,351
Shareholder servicing fees 46,467 210,537 36,276 65,727 24,963 95,071
Portfolio accounting fees 16,202 68,595 15,629 41,260 12,973 50,712
Transfer agency fees 20,689 94,424 18,819 30,851 12,488 46,900
Distribution fees 1,821 32,268 22,206 29,769 10,029 23,543
Organization costs 0 13,536 0 59,829 632 4,003
Legal and audit fees 21,683 24,106 10,342 31,377 6,453 24,603
Registration fees 4,987 19,142 14,860 31,476 4,612 14,692
Directors' fees 1,115 4,858 1,115 4,753 1,115 4,766
Shareholder reports 16,317 27,684 7,978 26,837 5,734 22,616
Other 5,262 11,774 6,525 15,648 1,121 17,514
TOTAL EXPENSES 226,834 911,821 217,660 487,410 137,897 521,758
Less:
Waived fees and reimbursed expenses (109,471) (434,096) (87,410) (302,873) (61,573) (291,269)
Net Expenses 117,363 477,725 130,250 184,537 76,324 230,489
NET INVESTMENT INCOME (LOSS) 587,499 2,700,180 671,375 1,223,735 429,810 1,729,188
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on sale of
investments 18,369 525,212 (63,205) (633,882) 100,122 600,687
Net change in unrealized appreciation
(depreciation) of investments (42,012) 896,098 244,959 1,310,218 (61,124) 1,227,645
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (23,643) 1,421,310 181,754 676,336 38,998 1,828,332
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $563,856 $4,121,490 $853,129 $1,900,071 $468,808 $3,557,520
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
93
<PAGE>
Tax-Free Funds STATEMENTS OF OPERATIONS - JUNE 30, 1998
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHORT-TERM MUNICIPAL
INCOME FUND
---------------------
FOR THE
SIX FOR THE
MONTHS YEAR
ENDED ENDED
JUNE 30, DEC. 31,
1998 1997 (1)
<S> <C> <C>
INVESTMENT INCOME
Interest $286,563 $977,367
TOTAL INVESTMENT INCOME 286,563 977,367
EXPENSES (NOTE 2)
Advisory fees 33,197 115,283
Administration fees 4,553 21,791
Custody fees 1,143 3,857
Shareholder servicing fees 0 0
Portfolio accounting fees 16,692 25,044
Transfer agency fees 9,582 28,433
Distribution fees 14,637 57,493
Organization costs 7,479 16,274
Legal and audit fees 8,164 39,811
Registration fees 1,557 13,028
Directors' fees 2,217 4,975
Shareholder reports 6,278 13,047
Other 5,073 10,958
TOTAL EXPENSES 110,572 349,994
Less:
Waived fees and reimbursed expenses (82,792) (258,681)
Net Expenses 27,780 91,313
NET INVESTMENT INCOME (LOSS) 258,783 886,054
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on sale of
investments 22,815 4,765
Net change in unrealized appreciation
(depreciation) of investments (66,211) 27,556
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (43,396) 32,321
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $215,387 $918,375
- ------------------------------------------------------------------
</TABLE>
(1) INCLUDES AMOUNTS ALLOCATED FROM THE MASTER PORTFOLIO PRIOR TO DECEMBER 15,
1997. SEE NOTE 1.
The accompanying notes are an integral part of these financial statements.
94
<PAGE>
THIS PAGE IS INTENTIONALLY LEFT BLANK --
95
<PAGE>
Tax-Free Funds STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
ARIZONA TAX-FREE FUND
---------------------------
FOR THE
THREE
MONTHS FOR THE
ENDED YEAR ENDED
JUNE 30, MARCH 31,
1998 1998
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income (loss) $ 198,657 $ 864,395
Net realized gain (loss) on sale of
investments 127,076 425,355
Net change in unrealized appreciation
(depreciation) of investments (107,342) 543,222
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 218,391 1,832,972
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
CLASS A(1) (58,125) (241,375)
CLASS B (14,122) (29,604)
CLASS C N/A N/A
INSTITUTIONAL CLASS (126,410) (593,416)
From net realized gain on sale of
investments
CLASS A(1) 0 (99,458)
CLASS B 0 (21,224)
CLASS C N/A N/A
INSTITUTIONAL CLASS 0 (238,712)
In excess of net realized gain
CLASS A(1) 0 0
CLASS B 0 0
CLASS C N/A N/A
INSTITUTIONAL CLASS 0 0
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold - Class A(1) 153,082 473,873
Reinvestment of dividends - Class A(1) 46,249 265,218
Cost of shares redeemed - Class A(1) (290,952) (1,192,150)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS A(1) (91,621) (453,059)
Proceeds from shares sold - Class B 268,310 1,453,702
Reinvestment of dividends - Class B 9,208 39,432
Cost of shares redeemed - Class B (142,881) (127,727)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS B 134,637 1,365,407
Proceeds from shares sold - Class C N/A N/A
Reinvestment of dividends - Class C N/A N/A
Cost of shares redeemed - Class C N/A N/A
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS C N/A N/A
Proceeds from shares sold -
Institutional Class 162,455 1,272,595
Reinvestment of dividends -
Institutional Class 1,396 10,674
Cost of shares redeemed -
Institutional Class (1,206,926) (4,037,264)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - INSTITUTIONAL CLASS (1,043,075) (2,753,995)
INCREASE (DECREASE) IN NET ASSETS (980,325) (1,232,464)
NET ASSETS:
Beginning net assets 19,041,806 20,274,270
ENDING NET ASSETS $18,061,481 $19,041,806
- ------------------------------------------------------------------------
</TABLE>
(1) INCLUDES FUNDS WITH A SINGLE CLASS.
(2) PROCEEDS FROM SHARES SOLD INCLUDES $275,906,280 FOR CLASS A SHARES,
$72,298,980 FOR CLASS B SHARES AND $80,613,090 FOR INSTITUTIONAL CLASS
SHARES AS A RESULT OF THE CONSOLIDATION OF THE OVERLAND EXPRESS CALIFORNIA
TAX-FREE BOND FUND. SEE NOTE 1.
(3) THIS CLASS OF SHARES COMMENCED OPERATIONS ON DECEMBER 15, 1997.
The accompanying notes are an integral part of these financial statements.
96
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS Tax-Free Funds
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
ARIZONA TAX-FREE FUND
--------------------------- CALIFORNIA TAX-FREE BOND FUND
FOR THE SIX ----------------------------------------------
MONTHS FOR THE FOR THE SIX FOR THE FOR THE
ENDED YEAR ENDED MONTHS ENDED YEAR ENDED YEAR ENDED
MARCH 31, SEPT. 30, JUNE 30, DEC. 31, DEC. 31,
1997 1996 1998 1997 (2) 1996
<S> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income (loss) $ 503,920 $ 1,120,096 $ 15,466,102 $ 12,378,782 $ 13,008,723
Net realized gain (loss) on sale of
investments 117,123 336,608 7,346,974 1,877,019 3,630,526
Net change in unrealized appreciation
(depreciation) of investments (97,594) (564,971) (4,290,607) 34,032,101 (6,951,220)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 523,449 891,733 18,522,469 48,287,902 9,688,029
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
CLASS A(1) (143,470) (370,176) (11,682,363) (11,799,980) (12,719,724)
CLASS B (1,534) (11) (1,761,231) (141,890)(3) N/A
CLASS C N/A N/A (140,621) (247,997) (288,999)
INSTITUTIONAL CLASS (358,916) (749,909) (1,881,887) (188,915)(3) N/A
From net realized gain on sale of
investments
CLASS A(1) 0 (109,463) 0 (1,345,647) (3,536,604)
CLASS B 0 0 0 0(3) N/A
CLASS C N/A N/A 0 (36,342) (93,922)
INSTITUTIONAL CLASS 0 (227,136) 0 0(3) N/A
In excess of net realized gain
CLASS A(1) 0 (12,756) 0 0 (1,650,016)
CLASS B 0 0 0 0(3) N/A
CLASS C N/A N/A 0 0 (50,270)
INSTITUTIONAL CLASS 0 (24,754) 0 0(3) N/A
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold - Class A(1) 88,082 1,232,906 30,091,476 286,472,490 11,398,703
Reinvestment of dividends - Class A(1) 107,419 329,709 6,863,798 6,671,789 9,865,419
Cost of shares redeemed - Class A(1) (1,794,342) (18,720,996) (49,367,498) (49,748,321) (41,495,204)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS A(1) (1,598,841) (17,158,381) (12,412,224) 243,395,958 (20,231,082)
Proceeds from shares sold - Class B 183,000 20,025 26,245,794 75,031,948(3) N/A
Reinvestment of dividends - Class B 900 0 1,294,047 1,436(3) N/A
Cost of shares redeemed - Class B (20,119) 0 (5,915,208) (468,649)(3) N/A
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS B 163,781 20,025 21,624,633 74,564,735(3) N/A
Proceeds from shares sold - Class C N/A N/A 2,905,277 1,299,532 1,595,401
Reinvestment of dividends - Class C N/A N/A 65,436 133,685 209,559
Cost of shares redeemed - Class C N/A N/A (612,517) (2,250,658) (2,127,643)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS C N/A N/A 2,358,196 (817,441) (322,683)
Proceeds from shares sold -
Institutional Class 795,737 19,525,762 11,031,568 80,818,091(3) N/A
Reinvestment of dividends -
Institutional Class 1,171 6,149 188,998 611(3) N/A
Cost of shares redeemed -
Institutional Class (2,034,842) (3,485,066) (13,124,832) (1,090,971)(3) N/A
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - INSTITUTIONAL CLASS (1,237,934) 16,046,845 (1,904,266) 79,727,731(3) N/A
INCREASE (DECREASE) IN NET ASSETS (2,653,465) (1,693,983) 12,722,706 431,398,114 (29,205,271)
NET ASSETS:
Beginning net assets 22,927,735 24,621,718 677,607,643 246,209,529 275,414,800
ENDING NET ASSETS $20,274,270 $22,927,735 $690,330,349 $677,607,643 $246,209,529
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) INCLUDES FUNDS WITH A SINGLE CLASS.
(2) PROCEEDS FROM SHARES SOLD INCLUDES $275,906,280 FOR CLASS A SHARES,
$72,298,980 FOR CLASS B SHARES AND $80,613,090 FOR INSTITUTIONAL CLASS
SHARES AS A RESULT OF THE CONSOLIDATION OF THE OVERLAND EXPRESS CALIFORNIA
TAX-FREE BOND FUND. SEE NOTE 1.
(3) THIS CLASS OF SHARES COMMENCED OPERATIONS ON DECEMBER 15, 1997.
The accompanying notes are an integral part of these financial statements.
97
<PAGE>
Tax-Free Funds STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
CALIFORNIA TAX-FREE INCOME
FUND
---------------------------
FOR THE
THREE
MONTHS FOR THE
ENDED YEAR ENDED
JUNE 30, MARCH 31,
1998 1998
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income (loss) $ 587,499 $ 2,700,180
Net realized gain (loss) on sale of
investments 18,369 525,212
Net change in unrealized appreciation
(depreciation) of investments (42,012) 896,098
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 563,856 4,121,490
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
CLASS A(1) (521,049) (2,439,178)
CLASS B N/A N/A
CLASS C N/A N/A
INSTITUTIONAL CLASS (66,450) (261,002)
From net realized gain on sale of
investments
CLASS A(1) 0 (226,771)
CLASS B N/A N/A
CLASS C N/A N/A
INSTITUTIONAL CLASS 0 (23,115)
In excess of net realized gain
CLASS A(1) 0 0
CLASS B N/A N/A
CLASS C N/A N/A
INSTITUTIONAL CLASS 0 0
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold - Class A(1) 2,175,218 19,705,630
Reinvestment of dividends - Class A(1) 464,836 2,375,541
Cost of shares redeemed - Class A(1) (7,462,370) (31,777,362)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS A(1) (4,822,316) (9,696,191)
Proceeds from shares sold - Class B N/A N/A
Reinvestment of dividends - Class B N/A N/A
Cost of shares redeemed - Class B N/A N/A
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS B N/A N/A
Proceeds from shares sold - Class C N/A N/A
Reinvestment of dividends - Class C N/A N/A
Cost of shares redeemed - Class C N/A N/A
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS C N/A N/A
Proceeds from shares sold -
Institutional Class 875,011 1,040,195
Reinvestment of dividends -
Institutional Class 18,829 87,332
Cost of shares redeemed -
Institutional Class (399,668) (1,230,497)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - INSTITUTIONAL CLASS 494,172 (102,970)
INCREASE (DECREASE) IN NET ASSETS (4,351,787) (8,627,737)
NET ASSETS:
Beginning net assets 66,080,178 74,707,915
ENDING NET ASSETS $61,728,391 $66,080,178
- ------------------------------------------------------------------------
</TABLE>
(1) INCLUDES FUNDS WITH A SINGLE CLASS.
(2) PROCEEDS FROM SHARES SOLD INCLUDES $4,994,478 FOR CLASS A AND $9,693,700
FOR THE INSTITUTIONAL CLASS, AS A RESULT OF THE MERGER OF THE PACIFICA
SHORT-TERM CALIFORNIA TAX-EXEMPT FUND. SEE NOTE 1.
(3) PROCEEDS FROM SHARES SOLD INCLUDES $37,681,717 FOR CLASS A SHARES AND
$8,939,165 FOR CLASS C SHARES AS A RESULT OF THE CONSOLIDATION OF THE
OVERLAND MUNICIPAL INCOME FUND. SEE NOTE 1.
(4) THIS CLASS OF SHARES COMMENCED OPERATIONS ON DECEMBER 15, 1997.
The accompanying notes are an integral part of these financial statements.
98
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS Tax-Free Funds
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
CALIFORNIA TAX-FREE INCOME
FUND NATIONAL TAX-FREE FUND
--------------------------- -------------------------------------------
FOR THE FOR THE
FOR THE SIX NINE THREE FOR THE SIX
MONTHS MONTHS MONTHS FOR THE MONTHS
ENDED ENDED ENDED YEAR ENDED ENDED
MARCH 31, SEPT. 30, JUNE 30, MARCH 31, MARCH 31,
1997 1996 (2) 1998 1998 (3) 1997
<S> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income (loss) $ 1,580,769 $ 2,349,987 $ 671,375 $ 1,223,735 $ 291,522
Net realized gain (loss) on sale of
investments 248,774 2,344 (63,205) (633,882) 28,242
Net change in unrealized appreciation
(depreciation) of investments (98,200) (677,786) 244,959 1,310,218 (87,198)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 1,731,343 1,674,545 853,129 1,900,071 232,566
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
CLASS A(1) (1,432,926) (2,330,216) (489,020) (746,374) (112,378)
CLASS B N/A N/A (16,592) (23,330) (654)
CLASS C N/A N/A (76,695) (95,551)(4) N/A
INSTITUTIONAL CLASS (147,843) (19,771) (89,068) (358,480) (178,490)
From net realized gain on sale of
investments
CLASS A(1) 0 0 0 (18,814) 0
CLASS B N/A N/A 0 (3,377) 0
CLASS C N/A N/A 0 0(4) N/A
INSTITUTIONAL CLASS 0 0 0 (30,309) 0
In excess of net realized gain
CLASS A(1) 0 0 0 0 0
CLASS B N/A N/A 0 0 0
CLASS C N/A N/A 0 0(4) N/A
INSTITUTIONAL CLASS 0 0 0 0 0
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold - Class A(1) 11,076,589 44,078,871 243,714 39,883,662 163,757
Reinvestment of dividends - Class A(1) 1,252,455 2,046,401 242,152 375,942 83,037
Cost of shares redeemed - Class A(1) (27,177,264) (41,016,574) (2,111,170) (3,464,028) (558,651)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS A(1) (14,848,220) 5,108,698 (1,625,304) 36,795,576 (311,857)
Proceeds from shares sold - Class B N/A N/A 592,961 1,173,456 151,670
Reinvestment of dividends - Class B N/A N/A 10,434 20,658 163
Cost of shares redeemed - Class B N/A N/A (98,879) (613) (29,618)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS B N/A N/A 504,516 1,193,501 122,215
Proceeds from shares sold - Class C N/A N/A 4,329 8,974,820(4) N/A
Reinvestment of dividends - Class C N/A N/A 27,703 28,180(4) N/A
Cost of shares redeemed - Class C N/A N/A (350,171) (647,934)(4) N/A
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS C N/A N/A (318,139) 8,355,066(4) N/A
Proceeds from shares sold -
Institutional Class 467,025 10,078,900 439,548 2,720,368 1,266,444
Reinvestment of dividends -
Institutional Class 26,714 0 37,915 133,806 60,571
Cost of shares redeemed -
Institutional Class (3,513,007) (52,763) (458,684) (2,912,585) (1,038,276)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - INSTITUTIONAL CLASS (3,019,268) 10,026,137 18,779 (58,411) 288,739
INCREASE (DECREASE) IN NET ASSETS (17,716,914) 14,459,393 (1,238,394) 46,909,568 40,141
NET ASSETS:
Beginning net assets 92,424,829 77,965,436 58,908,130 11,998,562 11,958,421
ENDING NET ASSETS $74,707,915 $92,424,829 $57,669,736 $58,908,130 $11,998,562
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
FOR THE
YEAR ENDED
SEPT. 30,
1996
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income (loss) $ 636,397
Net realized gain (loss) on sale of
investments 12,999
Net change in unrealized appreciation
(depreciation) of investments (92,672)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 556,724
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
CLASS A(1) (298,145)
CLASS B 0
CLASS C N/A
INSTITUTIONAL CLASS (338,252)
From net realized gain on sale of
investments
CLASS A(1) 0
CLASS B 0
CLASS C N/A
INSTITUTIONAL CLASS 0
In excess of net realized gain
CLASS A(1) 0
CLASS B 0
CLASS C N/A
INSTITUTIONAL CLASS 0
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold - Class A(1) 252,284
Reinvestment of dividends - Class A(1) 186,973
Cost of shares redeemed - Class A(1) (9,944,744)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS A(1) (9,505,487)
Proceeds from shares sold - Class B 25
Reinvestment of dividends - Class B 0
Cost of shares redeemed - Class B 0
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS B 25
Proceeds from shares sold - Class C N/A
Reinvestment of dividends - Class C N/A
Cost of shares redeemed - Class C N/A
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS C N/A
Proceeds from shares sold -
Institutional Class 9,318,896
Reinvestment of dividends -
Institutional Class 104,965
Cost of shares redeemed -
Institutional Class (2,185,445)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - INSTITUTIONAL CLASS 7,238,416
INCREASE (DECREASE) IN NET ASSETS (2,346,719)
NET ASSETS:
Beginning net assets 14,305,140
ENDING NET ASSETS $11,958,421
- -------------------------------------------------------------------
</TABLE>
(1) INCLUDES FUNDS WITH A SINGLE CLASS.
(2) PROCEEDS FROM SHARES SOLD INCLUDES $4,994,478 FOR CLASS A AND $9,693,700
FOR THE INSTITUTIONAL CLASS, AS A RESULT OF THE MERGER OF THE PACIFICA
SHORT-TERM CALIFORNIA TAX-EXEMPT FUND. SEE NOTE 1.
(3) PROCEEDS FROM SHARES SOLD INCLUDES $37,681,717 FOR CLASS A SHARES AND
$8,939,165 FOR CLASS C SHARES AS A RESULT OF THE CONSOLIDATION OF THE
OVERLAND MUNICIPAL INCOME FUND. SEE NOTE 1.
(4) THIS CLASS OF SHARES COMMENCED OPERATIONS ON DECEMBER 15, 1997.
The accompanying notes are an integral part of these financial statements.
99
<PAGE>
Tax-Free Funds STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
OREGON TAX-FREE FUND
---------------------------
FOR THE
THREE
MONTHS FOR THE
ENDED YEAR ENDED
JUNE 30, MARCH 31,
1998 1998
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income (loss) $ 429,810 $ 1,729,188
Net realized gain (loss) on sale of
investments 100,122 600,687
Net change in unrealized appreciation
(depreciation) of investments (61,124) 1,227,645
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 468,808 3,557,520
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
CLASS A(1) (303,983) (1,311,235)
CLASS B (42,790) (43,691)
CLASS C N/A N/A
INSTITUTIONAL CLASS (83,037) (374,262)
From net realized gain on sale of
investments
CLASS A(1) 0 (475,455)
CLASS B 0 (29,182)
CLASS C N/A N/A
INSTITUTIONAL CLASS 0 (128,424)
In excess of net realized gain
CLASS A(1) 0 0
CLASS B 0 0
CLASS C N/A N/A
INSTITUTIONAL CLASS 0 0
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold - Class A(1) 948,349 2,372,220
Reinvestment of dividends - Class A(1) 218,677 1,381,033
Cost of shares redeemed - Class A(1) (1,356,107) (7,505,296)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS A(1) (189,081) (3,752,043)
Proceeds from shares sold - Class B 2,271,463 3,439,482
Reinvestment of dividends - Class B 26,167 54,270
Cost of shares redeemed - Class B (121,481) (6,373)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS B 2,176,149 3,487,379
Proceeds from shares sold - Class C N/A N/A
Reinvestment of dividends - Class C N/A N/A
Cost of shares redeemed - Class C N/A N/A
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS C N/A N/A
Proceeds from shares sold -
Institutional Class 339,055 895,262
Reinvestment of dividends -
Institutional Class 23,882 119,243
Cost of shares redeemed -
Institutional Class (688,847) (1,808,127)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - INSTITUTIONAL CLASS (325,910) (793,622)
INCREASE (DECREASE) IN NET ASSETS 1,700,156 136,985
NET ASSETS:
Beginning net assets 39,234,535 39,097,550
ENDING NET ASSETS $40,934,691 $39,234,535
- ------------------------------------------------------------------------
</TABLE>
(1) INCLUDES FUNDS WITH A SINGLE CLASS.
The accompanying notes are an integral part of these financial statements.
100
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS Tax-Free Funds
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
OREGON TAX-FREE FUND SHORT-TERM MUNICIPAL INCOME FUND
--------------------------- -------------------------------------------
FOR THE SIX FOR THE SIX
MONTHS FOR THE MONTHS FOR THE FOR THE
ENDED YEAR ENDED ENDED YEAR ENDED YEAR ENDED
MARCH 31, SEPT. 30, JUNE 30, DEC. 31, DEC. 31,
1997 1996 1998 1997 1996
<S> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income (loss) $ 936,894 $ 2,213,042 $ 258,783 $ 886,054 $ 859,434
Net realized gain (loss) on sale of
investments 503,644 226,397 22,815 4,765 4,708
Net change in unrealized appreciation
(depreciation) of investments (719,337) (105,222) (66,211) 27,556 (81,904)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 721,201 2,334,217 215,387 918,375 782,238
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
CLASS A(1) (738,895) (1,836,397) (258,783) (886,054) (859,434)
CLASS B (1,673) 0 N/A N/A N/A
CLASS C N/A N/A N/A N/A N/A
INSTITUTIONAL CLASS (196,326) (376,645) N/A N/A N/A
From net realized gain on sale of
investments
CLASS A(1) (64,075) 0 0 (4,513) 0
CLASS B (68) 0 N/A N/A N/A
CLASS C N/A N/A N/A N/A N/A
INSTITUTIONAL CLASS (16,029) 0 N/A N/A N/A
In excess of net realized gain
CLASS A(1) 0 0 0 0 0
CLASS B 0 0 N/A N/A N/A
CLASS C N/A N/A N/A N/A N/A
INSTITUTIONAL CLASS 0 0 N/A N/A N/A
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold - Class A(1) 705,873 1,339,221 2,971,600 15,478,588 20,946,410
Reinvestment of dividends - Class A(1) 603,836 1,177,977 264,884 901,426 780,444
Cost of shares redeemed - Class A(1) (4,118,599) (19,138,811) (17,485,831) (23,493,210) (11,422,620)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS A(1) (2,808,890) (16,621,613) (14,249,347) (7,113,196) 10,304,234
Proceeds from shares sold - Class B 290,001 25 N/A N/A N/A
Reinvestment of dividends - Class B 1,006 0 N/A N/A N/A
Cost of shares redeemed - Class B 0 0 N/A N/A N/A
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS B 291,007 25 N/A N/A N/A
Proceeds from shares sold - Class C N/A N/A N/A N/A N/A
Reinvestment of dividends - Class C N/A N/A N/A N/A N/A
Cost of shares redeemed - Class C N/A N/A N/A N/A N/A
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS C N/A N/A N/A N/A N/A
Proceeds from shares sold -
Institutional Class 737,208 10,508,693 N/A N/A N/A
Reinvestment of dividends -
Institutional Class 46,958 74,828 N/A N/A N/A
Cost of shares redeemed -
Institutional Class (1,060,607) (1,972,408) N/A N/A N/A
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - INSTITUTIONAL CLASS (276,441) 8,611,113 N/A N/A N/A
INCREASE (DECREASE) IN NET ASSETS (3,090,189) (7,889,300) (14,292,743) (7,085,388) 10,227,038
NET ASSETS:
Beginning net assets 42,187,739 50,077,039 19,628,115 26,713,503 16,486,465
ENDING NET ASSETS $39,097,550 $42,187,739 $ 5,335,372 $19,628,115 $26,713,503
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) INCLUDES FUNDS WITH A SINGLE CLASS.
The accompanying notes are an integral part of these financial statements.
101
<PAGE>
Tax-Free Funds FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
ARIZONA TAX-FREE FUND (1)
CLASS A
----------------------------------
THREE
MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED
JUNE 30, MARCH 31, MARCH 31,
1998 (2) 1998 1997 (3)
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $10.77 $10.44 $10.45
---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.12 0.46 0.24
Net realized and unrealized gain (loss) on investments 0.02 0.53 (0.01)
---------- ---------- ----------
TOTAL FROM INVESTMENT OPERATIONS 0.14 0.99 0.23
LESS DISTRIBUTIONS:
Dividends from net investment income (0.12) (0.46) (0.24)
Distributions from net realized gain 0.00 (0.20) 0.00
---------- ---------- ----------
TOTAL FROM DISTRIBUTIONS (0.12) (0.66) (0.24)
---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $10.79 $10.77 $10.44
---------- ---------- ----------
---------- ---------- ----------
TOTAL RETURN (NOT ANNUALIZED)* 1.27% 9.67% 2.18%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s) $5,383 $5,467 $5,744
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Ratio of expenses to average net assets 0.73% 0.64% 0.60%
Ratio of net investment income to average net assets 4.31% 4.32% 4.54%
Portfolio turnover 14% 127% 77%
- -----------------------------------------------------------------------------------------------
Ratio of expenses to average net assets prior to waived
fees and reimbursed expenses 1.68% 1.77% 1.58%
Ratio of net investment income (loss) to average net assets
prior to waived fees and reimbursed expenses 3.36% 3.19% 3.56%
- -----------------------------------------------------------------------------------------------
</TABLE>
* TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES
** ANNUALIZED
(1) THE FUND OPERATED AS THE ARIZONA INTERMEDIATE TAX-FREE FUND OF
WESTCORE TRUST AND WAS ADVISED BY FIRST INTERSTATE BANK OF OREGON,
N.A. FROM ITS COMMENCEMENT OF OPERATIONS ON MARCH 2, 1992 UNTIL IT WAS
REORGANIZED AS A SERIES OF PACIFICA FUNDS TRUST ON OCTOBER 1, 1995,
WHEN FIRST INTERSTATE CAPITAL MANAGEMENT, INC. (FICM) ASSUMED
INVESTMENT ADVISORY RESPONSIBILITIES. IN CONNECTION WITH THE MERGER OF
FIRST INTERSTATE BANCORP INTO WELLS FARGO & CO. ON APRIL 1, 1996, FICM
WAS RENAMED AS WELLS FARGO INVESTMENT MANAGEMENT, INC. THE FUND
OPERATED AS A SERIES OF PACIFICA FUNDS TRUST UNTIL IT WAS REORGANIZED
AS A SERIES OF STAGECOACH FUNDS, INC. ON SEPTEMBER 6, 1996. IN
CONJUNCTION WITH THE SEPTEMBER 6, 1996 REORGANIZATION, EXISTING
INVESTOR SHARES WERE CONVERTED INTO CLASS A SHARES OF THE FUND AND WFB
ASSUMED INVESTMENT ADVISORY RESPONSIBILITIES.
(2) THE FUND CHANGED ITS FISCAL YEAR-END FROM MARCH 31 TO JUNE 30.
(3) THE FUND CHANGED ITS FISCAL YEAR-END FROM SEPTEMBER 30 TO MARCH 31.
(4) THE FUND CHANGED ITS FISCAL YEAR-END FROM MAY 31 TO SEPTEMBER 30.
The accompanying notes are an integral part of these financial statements.
102
<PAGE>
FINANCIAL HIGHLIGHTS Tax-Free Funds
- ------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
ARIZONA TAX-FREE FUND (1) (CONT.)
CLASS A (CONT.)
----------------------------------------------
FOUR
MONTHS
YEAR ENDED ENDED YEAR ENDED YEAR ENDED
SEPT. 30, SEPT. 30, MAY 31, MAY 31,
1996 1995 (4) 1995 1994
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING
OF PERIOD $10.71 $10.68 $10.48 $10.64
---------- ---------- ---------- ----------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.48 0.17 0.51 0.50
Net realized and
unrealized gain (loss)
on investments (0.09) 0.06 0.23 (0.15)
---------- ---------- ---------- ----------
TOTAL FROM INVESTMENT
OPERATIONS 0.39 0.23 0.74 0.35
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.48) (0.20) (0.53) (0.50)
Distributions from net
realized gain (0.17) 0.00 (0.01) (0.01)
---------- ---------- ---------- ----------
TOTAL FROM DISTRIBUTIONS (0.65) (0.20) (0.54) (0.51)
---------- ---------- ---------- ----------
NET ASSET VALUE, END OF
PERIOD $10.45 $10.71 $10.68 $10.48
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
TOTAL RETURN (NOT
ANNUALIZED)* 3.60% 6.55%** 7.35% 3.28%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000s) $7,331 $24,622 $24,581 $25,153
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets 0.78% 0.45% 0.40% 0.31%
Ratio of net investment
income to average net
assets 4.45% 4.73% 4.89% 4.72%
Portfolio turnover 42% 62% 14% 28%
- ----------------------------------------------------------------------------
Ratio of expenses to average
net assets prior to waived
fees and reimbursed
expenses 1.46% 1.35% 1.13% 1.00%
Ratio of net investment
income (loss) to average
net assets prior to waived
fees and reimbursed
expenses 3.77% 3.83% 4.16% 4.03%
- ----------------------------------------------------------------------------
</TABLE>
* TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES
** ANNUALIZED
(1) THE FUND OPERATED AS THE ARIZONA INTERMEDIATE TAX-FREE FUND OF
WESTCORE TRUST AND WAS ADVISED BY FIRST INTERSTATE BANK OF OREGON,
N.A. FROM ITS COMMENCEMENT OF OPERATIONS ON MARCH 2, 1992 UNTIL IT WAS
REORGANIZED AS A SERIES OF PACIFICA FUNDS TRUST ON OCTOBER 1, 1995,
WHEN FIRST INTERSTATE CAPITAL MANAGEMENT, INC. (FICM) ASSUMED
INVESTMENT ADVISORY RESPONSIBILITIES. IN CONNECTION WITH THE MERGER OF
FIRST INTERSTATE BANCORP INTO WELLS FARGO & CO. ON APRIL 1, 1996, FICM
WAS RENAMED AS WELLS FARGO INVESTMENT MANAGEMENT, INC. THE FUND
OPERATED AS A SERIES OF PACIFICA FUNDS TRUST UNTIL IT WAS REORGANIZED
AS A SERIES OF STAGECOACH FUNDS, INC. ON SEPTEMBER 6, 1996. IN
CONJUNCTION WITH THE SEPTEMBER 6, 1996 REORGANIZATION, EXISTING
INVESTOR SHARES WERE CONVERTED INTO CLASS A SHARES OF THE FUND AND WFB
ASSUMED INVESTMENT ADVISORY RESPONSIBILITIES.
(2) THE FUND CHANGED ITS FISCAL YEAR-END FROM MARCH 31 TO JUNE 30.
(3) THE FUND CHANGED ITS FISCAL YEAR-END FROM SEPTEMBER 30 TO MARCH 31.
(4) THE FUND CHANGED ITS FISCAL YEAR-END FROM MAY 31 TO SEPTEMBER 30.
The accompanying notes are an integral part of these financial statements.
103
<PAGE>
Tax-Free Funds FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
ARIZONA TAX-FREE FUND (1) (CONT.)
CLASS B
----------------------------------
THREE
MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED
JUNE 30, MARCH 31, MARCH 31,
1998 (2) 1998 1997 (3)
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $10.39 $10.07 $10.07
---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.09 0.37 0.11
Net realized and unrealized gain (loss) on investments 0.01 0.51 (0.00)
---------- ---------- ----------
TOTAL FROM INVESTMENT OPERATIONS 0.10 0.88 0.11
LESS DISTRIBUTIONS:
Dividends from net investment income (0.09) (0.37) (0.11)
Distributions from net realized gain 0.00 (0.19) 0.00
---------- ---------- ----------
TOTAL FROM DISTRIBUTIONS (0.09) (0.56) (0.11)
---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $10.40 $10.39 $10.07
---------- ---------- ----------
---------- ---------- ----------
TOTAL RETURN (NOT ANNUALIZED)* 1.00% 8.90% 1.90%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s) $1,683 $1,546 $182
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Ratio of expenses to average net assets 1.45% 1.37% 1.30%
Ratio of net investment income to average net assets 3.59% 3.49% 3.83%
Portfolio turnover 14% 127% 77%
- -----------------------------------------------------------------------------------------------
Ratio of expenses to average net assets prior to waived
fees and reimbursed expenses 2.62% 3.26% 2.96%
Ratio of net investment income (loss) to average net assets
prior to waived fees and reimbursed expenses 2.42% 1.60% 2.17%
- -----------------------------------------------------------------------------------------------
</TABLE>
* TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES
(1) THE FUND OPERATED AS THE ARIZONA INTERMEDIATE TAX-FREE FUND OF
WESTCORE TRUST AND WAS ADVISED BY FIRST INTERSTATE BANK OF OREGON,
N.A. FROM ITS COMMENCEMENT OF OPERATIONS ON MARCH 2, 1992 UNTIL IT WAS
REORGANIZED AS A SERIES OF PACIFICA FUNDS TRUST ON OCTOBER 1, 1995,
WHEN FIRST INTERSTATE CAPITAL MANAGEMENT, INC. (FICM) ASSUMED
INVESTMENT ADVISORY RESPONSIBILITIES. IN CONNECTION WITH THE MERGER OF
FIRST INTERSTATE BANCORP INTO WELLS FARGO & CO. ON APRIL 1, 1996, FICM
WAS RENAMED AS WELLS FARGO INVESTMENT MANAGEMENT, INC. THE FUND
OPERATED AS A SERIES OF PACIFICA FUNDS TRUST UNTIL IT WAS REORGANIZED
AS A SERIES OF STAGECOACH FUNDS, INC. ON SEPTEMBER 6, 1996. IN
CONJUNCTION WITH THE SEPTEMBER 6, 1996 REORGANIZATION, EXISTING
INVESTOR SHARES WERE CONVERTED INTO CLASS A SHARES OF THE FUND AND WFB
ASSUMED INVESTMENT ADVISORY RESPONSIBILITIES.
(2) THE FUND CHANGED ITS FISCAL YEAR-END FROM MARCH 31 TO JUNE 30.
(3) THE FUND CHANGED ITS FISCAL YEAR-END FROM SEPTEMBER 30 TO MARCH 31.
(4) THIS CLASS OF SHARES COMMENCED OPERATIONS ON SEPTEMBER 6, 1996.
(5) THIS CLASS OF SHARES COMMENCED OPERATIONS ON OCTOBER 1, 1995.
The accompanying notes are an integral part of these financial statements.
104
<PAGE>
FINANCIAL HIGHLIGHTS Tax-Free Funds
- ------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
ARIZONA TAX-FREE FUND (1) (CONT.)
CLASS B INSTITUTIONAL CLASS
(CONT.) ----------------------------------------------
---------- THREE
PERIOD MONTHS SIX MONTHS
ENDED ENDED YEAR ENDED ENDED YEAR ENDED
SEPT. 30, JUNE 30, MARCH 31, MARCH 31, SEPT. 30,
1996 (4) 1998 (2) 1998 1997 (3) 1996 (5)
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING
OF PERIOD $10.00 $10.78 $10.44 $10.44 $10.71
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.01 0.12 0.49 0.25 0.49
Net realized and
unrealized gain (loss)
on investments 0.07 0.01 0.54 0.00 (0.10)
---------- ---------- ---------- ---------- ----------
TOTAL FROM INVESTMENT
OPERATIONS 0.08 0.13 1.03 0.25 0.39
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.01) (0.12) (0.49) (0.25) (0.49)
Distributions from net
realized gain 0.00 0.00 (0.20) 0.00 (0.17)
---------- ---------- ---------- ---------- ----------
TOTAL FROM DISTRIBUTIONS (0.01) (0.12) (0.69) (0.25) (0.66)
---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF
PERIOD $10.07 $10.79 $10.78 $10.44 $10.44
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
TOTAL RETURN (NOT
ANNUALIZED)* 0.76% 1.19% 9.99% 2.38% 3.74%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000s) $20 $10,995 $12,029 $14,349 $15,577
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets 1.16% 0.68% 0.44% 0.40% 0.48%
Ratio of net investment
income to average net
assets 3.59% 4.36% 4.52% 4.73% 4.63%
Portfolio turnover 42% 14% 127% 77% 42%
- ----------------------------------------------------------------------------------------
Ratio of expenses to average
net assets prior to waived
fees and reimbursed
expenses 1.81% 1.55% 1.55% 1.50% 1.20%
Ratio of net investment
income (loss) to average
net assets prior to waived
fees and reimbursed
expenses 2.94% 3.49% 3.41% 3.63% 3.91%
- ----------------------------------------------------------------------------------------
</TABLE>
* TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES
(1) THE FUND OPERATED AS THE ARIZONA INTERMEDIATE TAX-FREE FUND OF
WESTCORE TRUST AND WAS ADVISED BY FIRST INTERSTATE BANK OF OREGON,
N.A. FROM ITS COMMENCEMENT OF OPERATIONS ON MARCH 2, 1992 UNTIL IT WAS
REORGANIZED AS A SERIES OF PACIFICA FUNDS TRUST ON OCTOBER 1, 1995,
WHEN FIRST INTERSTATE CAPITAL MANAGEMENT, INC. (FICM) ASSUMED
INVESTMENT ADVISORY RESPONSIBILITIES. IN CONNECTION WITH THE MERGER OF
FIRST INTERSTATE BANCORP INTO WELLS FARGO & CO. ON APRIL 1, 1996, FICM
WAS RENAMED AS WELLS FARGO INVESTMENT MANAGEMENT, INC. THE FUND
OPERATED AS A SERIES OF PACIFICA FUNDS TRUST UNTIL IT WAS REORGANIZED
AS A SERIES OF STAGECOACH FUNDS, INC. ON SEPTEMBER 6, 1996. IN
CONJUNCTION WITH THE SEPTEMBER 6, 1996 REORGANIZATION, EXISTING
INVESTOR SHARES WERE CONVERTED INTO CLASS A SHARES OF THE FUND AND WFB
ASSUMED INVESTMENT ADVISORY RESPONSIBILITIES.
(2) THE FUND CHANGED ITS FISCAL YEAR-END FROM MARCH 31 TO JUNE 30.
(3) THE FUND CHANGED ITS FISCAL YEAR-END FROM SEPTEMBER 30 TO MARCH 31.
(4) THIS CLASS OF SHARES COMMENCED OPERATIONS ON SEPTEMBER 6, 1996.
(5) THIS CLASS OF SHARES COMMENCED OPERATIONS ON OCTOBER 1, 1995.
The accompanying notes are an integral part of these financial statements.
105
<PAGE>
Tax-Free Funds FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
CALIFORNIA TAX-FREE BOND FUND (1)
CLASS A
----------------------------------
SIX MONTHS
ENDED YEAR ENDED YEAR ENDED
JUNE 30, DEC. 31, DEC. 31,
1998 (2) 1997 1996
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $11.32 $10.97 $11.34
---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.26 0.54 0.57
Net realized and unrealized gain (loss) on investments 0.06 0.42 (0.13)
---------- ---------- ----------
TOTAL FROM INVESTMENT OPERATIONS 0.32 0.96 0.44
LESS DISTRIBUTIONS:
Dividends from net investment income (0.26) (0.54) (0.57)
Distributions from net realized gain 0.00 (0.07) (0.24)
---------- ---------- ----------
TOTAL FROM DISTRIBUTIONS (0.26) (0.61) (0.81)
---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $11.38 $11.32 $10.97
---------- ---------- ----------
---------- ---------- ----------
TOTAL RETURN (NOT ANNUALIZED)* 2.86% 9.16% 4.03%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s) $499,720 $509,844 $239,703
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Ratio of expenses to average net assets 0.75% 0.74% 0.71%
Ratio of net investment income to average net assets 4.63% 4.84% 5.08%
Portfolio turnover 15% 12% 19%
- -----------------------------------------------------------------------------------------------
Ratio of expenses to average net assets prior to waived
fees and reimbursed expenses 1.11% 0.89% 0.82%
Ratio of net investment income (loss) to average net assets
prior to waived fees and reimbursed expenses 4.27% 4.69% 4.97%
- -----------------------------------------------------------------------------------------------
</TABLE>
* TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES
(1) PERIODS PRIOR TO DECEMBER 31, 1997 HAVE BEEN RESTATED TO GIVE EFFECT
TO THE CONVERSION RATIOS APPLIED IN THE CONSOLIDATION OF OVERLAND
EXPRESS FUNDS, INC. AND STAGECOACH FUNDS, INC. SEE NOTE 1.
(2) THE FUND CHANGED ITS FISCAL YEAR-END FROM DECEMBER 31 TO JUNE 30.
(3) THIS CLASS OF SHARES COMMENCED OPERATIONS ON DECEMBER 15, 1997.
The accompanying notes are an integral part of these financial statements.
106
<PAGE>
FINANCIAL HIGHLIGHTS Tax-Free Funds
- ------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
CALIFORNIA TAX-FREE BOND FUND (1) (CONT.)
CLASS B
CLASS A (CONT.) ----------------------
---------------------------------- SIX MONTHS PERIOD
YEAR ENDED YEAR ENDED YEAR ENDED ENDED ENDED
DEC. 31, DEC. 31, DEC. 31, JUNE 30, DEC. 31,
1995 1994 1993 1998 (2) 1997 (3)
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING
OF PERIOD $10.67 $12.00 $11.43 $11.54 $11.51
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.63 0.67 0.66 0.23 0.02
Net realized and
unrealized gain (loss)
on investments 1.08 (1.18) 0.78 0.06 0.03
---------- ---------- ---------- ---------- ----------
TOTAL FROM INVESTMENT
OPERATIONS 1.71 (0.51) 1.44 0.29 0.05
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.63) (0.67) (0.66) (0.23) (0.02)
Distributions from net
realized gain (0.41) (0.15) (0.21) 0.00 0.00
---------- ---------- ---------- ---------- ----------
TOTAL FROM DISTRIBUTIONS (1.04) (0.82) (0.87) (0.23) (0.02)
---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF
PERIOD $11.34 $10.67 $12.00 $11.60 $11.54
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
TOTAL RETURN (NOT
ANNUALIZED)* 16.38% (4.32)% 12.98% 2.49% 0.45%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000s) $268,352 $273,105 $361,779 $99,784 $77,792
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets 0.58% 0.50% 0.69% 1.45% 1.44%
Ratio of net investment
income to average net
assets 5.59% 5.87% 5.54% 3.90% 3.95%
Portfolio turnover 38% 4% 10% 15% 12%
- ----------------------------------------------------------------------------------------
Ratio of expenses to average
net assets prior to waived
fees and reimbursed
expenses 0.78% 0.95% 0.85% 1.82% 1.76%
Ratio of net investment
income (loss) to average
net assets prior to waived
fees and reimbursed
expenses 5.39% 5.42% 5.38% 3.53% 3.63%
- ----------------------------------------------------------------------------------------
</TABLE>
* TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES
(1) PERIODS PRIOR TO DECEMBER 31, 1997 HAVE BEEN RESTATED TO GIVE EFFECT
TO THE CONVERSION RATIOS APPLIED IN THE CONSOLIDATION OF OVERLAND
EXPRESS FUNDS, INC. AND STAGECOACH FUNDS, INC. SEE NOTE 1.
(2) THE FUND CHANGED ITS FISCAL YEAR-END FROM DECEMBER 31 TO JUNE 30.
(3) THIS CLASS OF SHARES COMMENCED OPERATIONS ON DECEMBER 15, 1997.
The accompanying notes are an integral part of these financial statements.
107
<PAGE>
Tax-Free Funds FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
CALIFORNIA TAX-FREE BOND FUND (1)
(CONT.)
CLASS C (2)
----------------------------------
SIX MONTHS
ENDED YEAR ENDED YEAR ENDED
JUNE 30, DEC. 31, DEC. 31,
1998 (3) 1997 1996
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $11.54 $11.19 $11.57
---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.23 0.47 0.49
Net realized and unrealized gain (loss) on investments 0.06 0.42 (0.13)
---------- ---------- ----------
TOTAL FROM INVESTMENT OPERATIONS 0.29 0.89 0.36
LESS DISTRIBUTIONS:
Dividends from net investment income (0.23) (0.47) (0.49)
Distributions from net realized gain 0.00 (0.07) (0.25)
---------- ---------- ----------
TOTAL FROM DISTRIBUTIONS (0.23) (0.54) (0.74)
---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $11.60 $11.54 $11.19
---------- ---------- ----------
---------- ---------- ----------
TOTAL RETURN (NOT ANNUALIZED)* 2.49% 8.11% 3.24%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s) $8,249 $5,860 $6,506
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Ratio of expenses to average net assets 1.45% 1.48% 1.46%
Ratio of net investment income to average net assets 3.90% 4.19% 4.33%
Portfolio turnover 15% 12% 19%
- -----------------------------------------------------------------------------------------------
Ratio of expenses to average net assets prior to waived
fees and reimbursed expenses 1.78% 1.63% 1.59%
Ratio of net investment income (loss) to average net assets
prior to waived fees and reimbursed expenses 3.57% 4.04% 4.20%
- -----------------------------------------------------------------------------------------------
</TABLE>
* TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES
(1) PERIODS PRIOR TO DECEMBER 31, 1997 HAVE BEEN RESTATED TO GIVE EFFECT
TO THE CONVERSION RATIOS APPLIED IN THE CONSOLIDATION OF OVERLAND
EXPRESS FUNDS, INC. AND STAGECOACH FUNDS, INC. SEE NOTE 1.
(2) THIS CLASS OF SHARES COMMENCED OPERATIONS AS CLASS D SHARES ON JULY 1,
1993. THESE SHARES WERE RENAMED AS CLASS C SHARES IN CONJUNCTION WITH
THE CONSOLIDATION OF OVERLAND EXPRESS FUNDS, INC. AND STAGECOACH
FUNDS, INC. SEE NOTE 1.
(3) THE FUND CHANGED ITS FISCAL YEAR-END FROM DECEMBER 31 TO JUNE 30.
(4) THIS CLASS OF SHARES COMMENCED OPERATIONS ON DECEMBER 15, 1997.
The accompanying notes are an integral part of these financial statements.
108
<PAGE>
FINANCIAL HIGHLIGHTS Tax-Free Funds
- ------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
CALIFORNIA TAX-FREE BOND FUND (1) (CONT.)
INSTITUTIONAL CLASS
CLASS C (2) (CONT.) ----------------------
---------------------------------- PERIOD
SIX MONTHS SIX MONTHS PERIOD
YEAR ENDED YEAR ENDED ENDED ENDED ENDED
DEC. 31, DEC. 31, DEC. 31, JUNE 30, DEC. 31,
1995 1994 1993 1998 (3) 1997 (4)
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING
OF PERIOD $10.88 $12.24 $12.25 $11.35 $11.32
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.56 0.60 0.28 0.26 0.03
Net realized and
unrealized gain (loss)
on investments 1.10 (1.20) 0.20 0.05 0.03
---------- ---------- ---------- ---------- ----------
TOTAL FROM INVESTMENT
OPERATIONS 1.66 (0.60) 0.48 0.31 0.06
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.56) (0.60) (0.28) (0.26) (0.03)
Distributions from net
realized gain (0.41) (0.16) (0.21) 0.00 0.00
---------- ---------- ---------- ---------- ----------
TOTAL FROM DISTRIBUTIONS (0.97) (0.76) (0.49) (0.26) (0.03)
---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF
PERIOD $11.57 $10.88 $12.24 $11.40 $11.35
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
TOTAL RETURN (NOT
ANNUALIZED)* 15.58% (5.00)% 3.92% 2.80% 0.49%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000s) $7,063 $7,346 $7,641 $82,577 $84,113
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets 1.30% 1.20% 1.32% 0.69% 0.63%
Ratio of net investment
income to average net
assets 4.87% 5.15% 4.50% 4.69% 4.79%
Portfolio turnover 38% 4% 10% 15% 12%
- ----------------------------------------------------------------------------------------
Ratio of expenses to average
net assets prior to waived
fees and reimbursed
expenses 1.57% 1.82% 1.61% 0.98% 0.92%
Ratio of net investment
income (loss) to average
net assets prior to waived
fees and reimbursed
expenses 4.60% 4.53% 4.21% 4.40% 4.50%
- ----------------------------------------------------------------------------------------
</TABLE>
* TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES
(1) PERIODS PRIOR TO DECEMBER 31, 1997 HAVE BEEN RESTATED TO GIVE EFFECT
TO THE CONVERSION RATIOS APPLIED IN THE CONSOLIDATION OF OVERLAND
EXPRESS FUNDS, INC. AND STAGECOACH FUNDS, INC. SEE NOTE 1.
(2) THIS CLASS OF SHARES COMMENCED OPERATIONS AS CLASS D SHARES ON JULY 1,
1993. THESE SHARES WERE RENAMED AS CLASS C SHARES IN CONJUNCTION WITH
THE CONSOLIDATION OF OVERLAND EXPRESS FUNDS, INC. AND STAGECOACH
FUNDS, INC. SEE NOTE 1.
(3) THE FUND CHANGED ITS FISCAL YEAR-END FROM DECEMBER 31 TO JUNE 30.
(4) THIS CLASS OF SHARES COMMENCED OPERATIONS ON DECEMBER 15, 1997.
The accompanying notes are an integral part of these financial statements.
109
<PAGE>
Tax-Free Funds FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
CALIFORNIA TAX-FREE INCOME FUND
CLASS A
----------------------------------
THREE
MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED
JUNE 30, MARCH 31, MARCH 31,
1998 (1) 1998 1997 (2)
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $10.44 $10.27 $10.26
---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.10 0.39 0.19
Net realized and unrealized gain (loss) on investments 0.00 0.20 0.01
---------- ---------- ----------
TOTAL FROM INVESTMENT OPERATIONS 0.10 0.59 0.20
LESS DISTRIBUTIONS:
Dividends from net investment income (0.10) (0.39) (0.19)
Distributions from net realized gain 0.00 (0.03) 0.00
---------- ---------- ----------
TOTAL FROM DISTRIBUTIONS (0.10) (0.42) (0.19)
---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $10.44 $10.44 $10.27
---------- ---------- ----------
---------- ---------- ----------
TOTAL RETURN (NOT ANNUALIZED)* 0.93% 5.92% 1.97%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s) $54,169 $59,011 $67,647
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Ratio of expenses to average net assets 0.75% 0.68% 0.65%
Ratio of net investment income to average net assets 3.72% 3.78% 3.73%
Portfolio turnover 2% 88% 14%
- -----------------------------------------------------------------------------------------------
Ratio of expenses to average net assets prior to waived
fees and reimbursed expenses 1.44% 1.29% 1.18%
Ratio of net investment income (loss) to average net assets
prior to waived fees and reimbursed expenses 3.03% 3.17% 3.20%
- -----------------------------------------------------------------------------------------------
</TABLE>
* TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES
(1) THE FUND CHANGED ITS FISCAL YEAR-END FROM MARCH 31 TO JUNE 30.
(2) THE FUND CHANGED ITS FISCAL YEAR-END FROM SEPTEMBER 30 TO MARCH 31.
(3) THE FUND CHANGED ITS FISCAL YEAR-END FROM DECEMBER 31 TO SEPTEMBER 30.
The accompanying notes are an integral part of these financial statements.
110
<PAGE>
FINANCIAL HIGHLIGHTS Tax-Free Funds
- ------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
CALIFORNIA TAX-FREE INCOME FUND (CONT.)
CLASS A (CONT.) INSTITUTIONAL CLASS
---------------------------------------------- ----------------------
NINE THREE
MONTHS MONTHS
ENDED YEAR ENDED YEAR ENDED YEAR ENDED ENDED YEAR ENDED
SEPT. 30, DEC. 31, DEC. 31, DEC. 31, JUNE 30, MARCH 31,
1996 (3) 1995 1994 1993 1998 (1) 1998
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING
OF PERIOD $10.35 $9.84 $10.36 $10.05 $10.27 $10.11
---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.29 0.38 0.40 0.39 0.10 0.39
Net realized and
unrealized gain (loss)
on investments (0.09) 0.51 (0.52) 0.31 0.00 0.19
---------- ---------- ---------- ---------- ---------- ----------
TOTAL FROM INVESTMENT
OPERATIONS 0.20 0.89 (0.12) 0.70 0.10 0.58
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.29) (0.38) (0.40) (0.39) (0.10) (0.39)
Distributions from net
realized gain 0.00 0.00 0.00 0.00 0.00 (0.03)
---------- ---------- ---------- ---------- ---------- ----------
TOTAL FROM DISTRIBUTIONS (0.29) (0.38) (0.40) (0.39) (0.10) (0.42)
---------- ---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF
PERIOD $10.26 $10.35 $9.84 $10.36 $10.27 $10.27
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
TOTAL RETURN (NOT
ANNUALIZED)* 2.01% 9.14% (1.10)% 7.10% 0.94% 5.91%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000s) $82,359 $77,965 $48,998 $52,873 $7,559 $7,069
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets 0.65% 0.65% 0.16% 0.34% 0.70% 0.62%
Ratio of net investment
income to average net
assets 3.83% 3.70% 4.03% 3.74% 3.77% 3.84%
Portfolio turnover 48% 31% 33% 11% 2% 88%
- ----------------------------------------------------------------------------------------------------
Ratio of expenses to average
net assets prior to waived
fees and reimbursed
expenses 1.14% 1.22% 1.21% 1.23% 1.40% 1.17%
Ratio of net investment
income (loss) to average
net assets prior to waived
fees and reimbursed
expenses 3.34% 3.13% 2.98% 2.85% 3.07% 3.29%
- ----------------------------------------------------------------------------------------------------
</TABLE>
* TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES
(1) THE FUND CHANGED ITS FISCAL YEAR-END FROM MARCH 31 TO JUNE 30.
(2) THE FUND CHANGED ITS FISCAL YEAR-END FROM SEPTEMBER 30 TO MARCH 31.
(3) THE FUND CHANGED ITS FISCAL YEAR-END FROM DECEMBER 31 TO SEPTEMBER 30.
The accompanying notes are an integral part of these financial statements.
111
<PAGE>
Tax-Free Funds FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
CALIFORNIA TAX-FREE
INCOME FUND (CONT.)
INSTITUTIONAL CLASS
(CONT.)
----------------------
SIX MONTHS PERIOD
ENDED ENDED
MARCH 31, SEPT. 30,
1997 (2) 1996 (3)
<S> <C> <C>
- -----------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $10.10 $10.06
---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.19 0.02
Net realized and unrealized gain (loss) on investments 0.01 0.04
---------- ----------
TOTAL FROM INVESTMENT OPERATIONS 0.20 0.06
LESS DISTRIBUTIONS:
Dividends from net investment income (0.19) (0.02)
Distributions from net realized gain 0.00 0.00
---------- ----------
TOTAL FROM DISTRIBUTIONS (0.19) (0.02)
---------- ----------
NET ASSET VALUE, END OF PERIOD $10.11 $10.10
---------- ----------
---------- ----------
TOTAL RETURN (NOT ANNUALIZED)* 2.00% 0.60%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s) $7,061 $10,066
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Ratio of expenses to average net assets 0.60% 0.55%
Ratio of net investment income to average net assets 3.73% 3.06%
Portfolio turnover 14% 48%
- -----------------------------------------------------------------------------------------------
Ratio of expenses to average net assets prior to waived fees and
reimbursed expenses 1.05% 0.92%
Ratio of net investment income (loss) to average net assets prior to
waived fees and reimbursed expenses 3.28% 2.69%
- -----------------------------------------------------------------------------------------------
</TABLE>
* TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES
** ANNUALIZED
(1) THE FUND OPERATED AS THE QUALITY TAX-EXEMPT INCOME FUND OF WESTCORE
TRUST AND WAS ADVISED BY FIRST INTERSTATE BANK OF OREGON, N.A. FROM
ITS COMMENCEMENT OF OPERATIONS ON JANUARY 15, 1993 UNTIL IT WAS
REORGANIZED AS A SERIES OF PACIFICA FUNDS TRUST ON OCTOBER 1, 1995,
WHEN FIRST INTERSTATE CAPITAL MANAGEMENT, INC. (FICM) ASSUMED
INVESTMENT ADVISORY RESPONSIBILITIES. IN CONNECTION WITH THE MERGER OF
FIRST INTERSTATE BANCORP INTO WELLS FARGO & CO. ON APRIL 1, 1996, FICM
WAS RENAMED AS WELLS FARGO INVESTMENT MANAGEMENT, INC. THE FUND
OPERATED AS A SERIES OF PACIFICA FUNDS TRUST UNTIL IT WAS REORGANIZED
AS A SERIES OF STAGECOACH FUNDS, INC. ON SEPTEMBER 6, 1996. IN
CONJUNCTION WITH THE SEPTEMBER 6, 1996 REORGANIZATION, EXISTING
INVESTOR SHARES WERE CONVERTED INTO CLASS A SHARES OF THE FUND AND WFB
ASSUMED INVESTMENT ADVISORY RESPONSIBILITIES.
(2) THE FUND CHANGED ITS FISCAL YEAR-END FROM SEPTEMBER 30 TO MARCH 31.
(3) THIS CLASS OF SHARES COMMENCED OPERATIONS ON SEPTEMBER 6, 1996.
(4) THE FUND CHANGED ITS FISCAL YEAR-END FROM MARCH 31 TO JUNE 30.
(5) THE FUND CHANGED ITS FISCAL YEAR-END FROM MAY 31 TO SEPTEMBER 30.
The accompanying notes are an integral part of these financial statements.
112
<PAGE>
FINANCIAL HIGHLIGHTS Tax-Free Funds
- ------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
NATIONAL TAX-FREE FUND (1)
CLASS A
----------------------------------------------------------------------------------
THREE FOUR
MONTHS SIX MONTHS MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED ENDED YEAR ENDED YEAR ENDED
JUNE 30, MARCH 31, MARCH 31, SEPT. 30, SEPT. 30, MAY 31, MAY 31,
1998 (4) 1998 1997 (2) 1996 1995 (5) 1995 1994
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING
OF PERIOD $15.92 $15.17 $15.24 $15.34 $15.28 $14.98 $15.17
---------- ---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.19 0.75 0.37 0.72 0.24 0.68 0.64
Net realized and
unrealized gain (loss)
on investments 0.05 0.81 (0.07) (0.10) 0.08 0.32 (0.17)
---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL FROM INVESTMENT
OPERATIONS 0.24 1.56 0.30 0.62 0.32 1.00 0.47
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.19) (0.75) (0.37) (0.72) (0.26) (0.70) (0.64)
Distributions from net
realized gain 0.00 (0.06) 0.00 0.00 0.00 0.00 (0.02)
---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL FROM DISTRIBUTIONS (0.19) (0.81) (0.37) (0.72) (0.26) (0.70) (0.66)
---------- ---------- ---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF
PERIOD $15.97 $15.92 $15.17 $15.24 $15.34 $15.28 $14.98
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL RETURN (NOT
ANNUALIZED)* 1.50% 10.44% 1.95% 4.03% 6.53%** 6.97% 3.07%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000s) $40,820 $42,316 $4,526 $4,827 $14,305 $14,458 $13,600
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets 0.81% 0.71% 0.35% 0.42% 0.35% 0.35% 0.27%
Ratio of net investment
income to average net
assets 4.72% 4.69% 4.81% 4.69% 4.65% 4.59% 4.29%
Portfolio turnover 30% 78% 86% 73% 86% 23% 19%
- ----------------------------------------------------------------------------------------------------------------
Ratio of expenses to average
net assets prior to waived
fees and reimbursed
expenses 1.37% 1.61% 2.11% 1.42% 1.85% 1.51% 1.58%
Ratio of net investment
income (loss) to average
net assets prior to waived
fees and reimbursed
expenses 4.16% 3.79% 3.05% 3.69% 3.15% 3.43% 2.99%
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
* TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES
** ANNUALIZED
(1) THE FUND OPERATED AS THE QUALITY TAX-EXEMPT INCOME FUND OF WESTCORE
TRUST AND WAS ADVISED BY FIRST INTERSTATE BANK OF OREGON, N.A. FROM
ITS COMMENCEMENT OF OPERATIONS ON JANUARY 15, 1993 UNTIL IT WAS
REORGANIZED AS A SERIES OF PACIFICA FUNDS TRUST ON OCTOBER 1, 1995,
WHEN FIRST INTERSTATE CAPITAL MANAGEMENT, INC. (FICM) ASSUMED
INVESTMENT ADVISORY RESPONSIBILITIES. IN CONNECTION WITH THE MERGER OF
FIRST INTERSTATE BANCORP INTO WELLS FARGO & CO. ON APRIL 1, 1996, FICM
WAS RENAMED AS WELLS FARGO INVESTMENT MANAGEMENT, INC. THE FUND
OPERATED AS A SERIES OF PACIFICA FUNDS TRUST UNTIL IT WAS REORGANIZED
AS A SERIES OF STAGECOACH FUNDS, INC. ON SEPTEMBER 6, 1996. IN
CONJUNCTION WITH THE SEPTEMBER 6, 1996 REORGANIZATION, EXISTING
INVESTOR SHARES WERE CONVERTED INTO CLASS A SHARES OF THE FUND AND WFB
ASSUMED INVESTMENT ADVISORY RESPONSIBILITIES.
(2) THE FUND CHANGED ITS FISCAL YEAR-END FROM SEPTEMBER 30 TO MARCH 31.
(3) THIS CLASS OF SHARES COMMENCED OPERATIONS ON SEPTEMBER 6, 1996.
(4) THE FUND CHANGED ITS FISCAL YEAR-END FROM MARCH 31 TO JUNE 30.
(5) THE FUND CHANGED ITS FISCAL YEAR-END FROM MAY 31 TO SEPTEMBER 30.
The accompanying notes are an integral part of these financial statements.
113
<PAGE>
Tax-Free Funds FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
NATIONAL TAX-FREE FUND (1) (CONT.)
CLASS B
----------------------------------
THREE
MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED
JUNE 30, MARCH 31, MARCH 31,
1998 (2) 1998 1997 (3)
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $10.50 $10.01 $10.06
---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.11 0.42 0.06
Net realized and unrealized gain (loss) on investments 0.04 0.53 (0.05)
---------- ---------- ----------
TOTAL FROM INVESTMENT OPERATIONS 0.15 0.95 0.01
LESS DISTRIBUTIONS:
Dividends from net investment income (0.11) (0.42) (0.06)
Distributions from net realized gain 0.00 (0.04) 0.00
---------- ---------- ----------
TOTAL FROM DISTRIBUTIONS (0.11) (0.46) (0.06)
---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $10.54 $10.50 $10.01
---------- ---------- ----------
---------- ---------- ----------
TOTAL RETURN (NOT ANNUALIZED)* 1.41% 9.58% 0.10%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s) $1,841 $1,330 $119
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Ratio of expenses to average net assets 1.41% 1.26% 1.10%
Ratio of net investment income to average net assets 4.05% 3.88% 3.80%
Portfolio turnover 30% 78% 86%
- -----------------------------------------------------------------------------------------------
Ratio of expenses to average net assets prior to waived
fees and reimbursed expenses 2.71% 5.74% 13.74%
Ratio of net investment income (loss) to average net assets
prior to waived fees and reimbursed expenses 2.75% (0.60)% (8.84)%
- -----------------------------------------------------------------------------------------------
</TABLE>
* TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES
(1) THE FUND OPERATED AS THE QUALITY TAX-EXEMPT INCOME FUND OF WESTCORE
TRUST AND WAS ADVISED BY FIRST INTERSTATE BANK OF OREGON, N.A. FROM
ITS COMMENCEMENT OF OPERATIONS ON JANUARY 15, 1993 UNTIL IT WAS
REORGANIZED AS A SERIES OF PACIFICA FUNDS TRUST ON OCTOBER 1, 1995,
WHEN FIRST INTERSTATE CAPITAL MANAGEMENT, INC. (FICM) ASSUMED
INVESTMENT ADVISORY RESPONSIBILITIES. IN CONNECTION WITH THE MERGER OF
FIRST INTERSTATE BANCORP INTO WELLS FARGO & CO. ON APRIL 1, 1996, FICM
WAS RENAMED AS WELLS FARGO INVESTMENT MANAGEMENT, INC. THE FUND
OPERATED AS A SERIES OF PACIFICA FUNDS TRUST UNTIL IT WAS REORGANIZED
AS A SERIES OF STAGECOACH FUNDS, INC. ON SEPTEMBER 6, 1996. IN
CONJUNCTION WITH THE SEPTEMBER 6, 1996 REORGANIZATION, EXISTING
INVESTOR SHARES WERE CONVERTED INTO CLASS A SHARES OF THE FUND AND WFB
ASSUMED INVESTMENT ADVISORY RESPONSIBILITIES.
(2) THE FUND CHANGED ITS FISCAL YEAR-END FROM MARCH 31 TO JUNE 30.
(3) THE FUND CHANGED ITS FISCAL YEAR-END FROM SEPTEMBER 30 TO MARCH 31.
(4) THIS CLASS OF SHARES COMMENCED OPERATIONS ON SEPTEMBER 6, 1996.
(5) THIS CLASS OF SHARES COMMENCED OPERATIONS ON DECEMBER 15, 1997.
(6) THIS CLASS OF SHARES COMMENCED OPERATIONS ON OCTOBER 1, 1995.
The accompanying notes are an integral part of these financial statements.
114
<PAGE>
FINANCIAL HIGHLIGHTS Tax-Free Funds
- ------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
NATIONAL TAX-FREE FUND (1) (CONT.)
CLASS B CLASS C INSTITUTIONAL CLASS
(CONT.) ---------------------- ----------------------------------------------
---------- THREE THREE
PERIOD MONTHS PERIOD MONTHS SIX MONTHS
ENDED ENDED ENDED ENDED YEAR ENDED ENDED YEAR ENDED
SEPT. 30, JUNE 30, MARCH 31, JUNE 30, MARCH 31, MARCH 31, SEPT. 30,
1996 (4) 1998 (2) 1998 (5) 1998 (2) 1998 1997 (3) 1996 (6)
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING
OF PERIOD $10.00 $10.51 $10.48 $15.92 $15.17 $15.24 $15.34
---------- ---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.00 0.11 0.13 0.19 0.76 0.37 0.71
Net realized and
unrealized gain (loss)
on investments 0.06 0.03 0.03 0.05 0.81 (0.07) (0.10)
---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL FROM INVESTMENT
OPERATIONS 0.06 0.14 0.16 0.24 1.57 0.30 0.61
LESS DISTRIBUTIONS:
Dividends from net
investment income 0.00 (0.11) (0.13) (0.19) (0.76) (0.37) (0.71)
Distributions from net
realized gain 0.00 0.00 0.00 0.00 (0.06) 0.00 0.00
---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL FROM DISTRIBUTIONS 0.00 (0.11) (0.13) (0.19) (0.82) (0.37) (0.71)
---------- ---------- ---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF
PERIOD $10.06 $10.54 $10.51 $15.97 $15.92 $15.17 $15.24
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL RETURN (NOT
ANNUALIZED)* 0.60% 1.32% 1.49% 1.51% 10.51% 1.95% 4.04%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000s) $0 $7,312 $7,608 $7,696 $7,654 $7,354 $7,132
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets 0.00% 1.41% 1.40% 0.76% 0.42% 0.35% 0.36%
Ratio of net investment
income to average net
assets 1.83% 4.12% 4.09% 4.76% 4.82% 4.82% 4.66%
Portfolio turnover 73% 30% 78% 30% 78% 86% 73%
- ----------------------------------------------------------------------------------------------------------------
Ratio of expenses to average
net assets prior to waived
fees and reimbursed
expenses 0.00% 2.10% 2.28% 1.35% 1.92% 2.03% 1.45%
Ratio of net investment
income (loss) to average
net assets prior to waived
fees and reimbursed
expenses 1.83% 3.43% 3.21% 4.17% 3.32% 3.14% 3.57%
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
* TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES
(1) THE FUND OPERATED AS THE QUALITY TAX-EXEMPT INCOME FUND OF WESTCORE
TRUST AND WAS ADVISED BY FIRST INTERSTATE BANK OF OREGON, N.A. FROM
ITS COMMENCEMENT OF OPERATIONS ON JANUARY 15, 1993 UNTIL IT WAS
REORGANIZED AS A SERIES OF PACIFICA FUNDS TRUST ON OCTOBER 1, 1995,
WHEN FIRST INTERSTATE CAPITAL MANAGEMENT, INC. (FICM) ASSUMED
INVESTMENT ADVISORY RESPONSIBILITIES. IN CONNECTION WITH THE MERGER OF
FIRST INTERSTATE BANCORP INTO WELLS FARGO & CO. ON APRIL 1, 1996, FICM
WAS RENAMED AS WELLS FARGO INVESTMENT MANAGEMENT, INC. THE FUND
OPERATED AS A SERIES OF PACIFICA FUNDS TRUST UNTIL IT WAS REORGANIZED
AS A SERIES OF STAGECOACH FUNDS, INC. ON SEPTEMBER 6, 1996. IN
CONJUNCTION WITH THE SEPTEMBER 6, 1996 REORGANIZATION, EXISTING
INVESTOR SHARES WERE CONVERTED INTO CLASS A SHARES OF THE FUND AND WFB
ASSUMED INVESTMENT ADVISORY RESPONSIBILITIES.
(2) THE FUND CHANGED ITS FISCAL YEAR-END FROM MARCH 31 TO JUNE 30.
(3) THE FUND CHANGED ITS FISCAL YEAR-END FROM SEPTEMBER 30 TO MARCH 31.
(4) THIS CLASS OF SHARES COMMENCED OPERATIONS ON SEPTEMBER 6, 1996.
(5) THIS CLASS OF SHARES COMMENCED OPERATIONS ON DECEMBER 15, 1997.
(6) THIS CLASS OF SHARES COMMENCED OPERATIONS ON OCTOBER 1, 1995.
The accompanying notes are an integral part of these financial statements.
115
<PAGE>
Tax-Free Funds FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
OREGON TAX-FREE FUND (1)
CLASS A
----------------------------------
THREE
MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED
JUNE 30, MARCH 31, MARCH 31,
1998 (2) 1998 1997 (3)
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $16.81 $16.29 $16.42
---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.18 0.76 0.37
Net realized and unrealized gain (loss) on investments 0.01 0.81 (0.10)
---------- ---------- ----------
TOTAL FROM INVESTMENT OPERATIONS 0.19 1.57 0.27
LESS DISTRIBUTIONS:
Dividends from net investment income (0.18) (0.76) (0.37)
Distributions from net realized gain 0.00 (0.29) (0.03)
---------- ---------- ----------
TOTAL FROM DISTRIBUTIONS (0.18) (1.05) (0.40)
---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $16.82 $16.81 $16.29
---------- ---------- ----------
---------- ---------- ----------
TOTAL RETURN (NOT ANNUALIZED)* 1.16% 9.81% 1.65%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s) $27,665 $27,837 $30,635
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Ratio of expenses to average net assets 0.67% 0.62% 0.60%
Ratio of net investment income to average net assets 4.41% 4.54% 4.52%
Portfolio turnover 24% 82% 90%
- -----------------------------------------------------------------------------------------------
Ratio of expenses to average net assets prior to waived
fees and reimbursed expenses 1.29% 1.36% 1.31%
Ratio of net investment income (loss) to average net assets
prior to waived fees and reimbursed expenses 3.79% 3.80% 3.81%
- -----------------------------------------------------------------------------------------------
</TABLE>
* TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES
** ANNUALIZED
(1) THE FUND OPERATED AS THE OREGON TAX-EXEMPT FUND OF WESTCORE TRUST AND
WAS ADVISED BY FIRST INTERSTATE BANK OF OREGON, N.A. FROM ITS
COMMENCEMENT OF OPERATIONS UNTIL IT WAS REORGANIZED AS A SERIES OF
PACIFICA FUNDS TRUST ON OCTOBER 1, 1995, WHEN FIRST INTERSTATE CAPITAL
MANAGEMENT, INC. (FICM) ASSUMED INVESTMENT ADVISORY RESPONSIBILITIES.
IN CONNECTION WITH THE MERGER OF FIRST INTERSTATE BANCORP INTO WELLS
FARGO & CO. ON APRIL 1, 1996, FICM WAS RENAMED AS WELLS FARGO
INVESTMENT MANAGEMENT, INC. THE FUND OPERATED AS A SERIES OF PACIFICA
FUNDS TRUST UNTIL IT WAS REORGANIZED AS A SERIES OF STAGECOACH FUNDS,
INC. ON SEPTEMBER 6, 1996. IN CONJUNCTION WITH THE SEPTEMBER 6, 1996
REORGANIZATION, EXISTING INVESTOR SHARES WERE CONVERTED INTO CLASS A
SHARES OF THE FUND AND WFB ASSUMED INVESTMENT ADVISORY
RESPONSIBILITIES.
(2) THE FUND CHANGED ITS FISCAL YEAR-END FROM MARCH 31 TO JUNE 30.
(3) THE FUND CHANGED ITS FISCAL YEAR-END FROM SEPTEMBER 30 TO MARCH 31.
(4) THE FUND CHANGED ITS FISCAL YEAR-END FROM MAY 31 TO SEPTEMBER 30.
The accompanying notes are an integral part of these financial statements.
116
<PAGE>
FINANCIAL HIGHLIGHTS Tax-Free Funds
- ------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
OREGON TAX-FREE FUND (1) (CONT.)
CLASS A (CONT.) CLASS B
---------------------------------------------- ----------------------
FOUR THREE
MONTHS MONTHS
YEAR ENDED ENDED YEAR ENDED YEAR ENDED ENDED YEAR ENDED
SEPT. 30, SEPT. 30, MAY 31, MAY 31, JUNE 30, MARCH 31,
1996 1995 (4) 1995 1994 1998 (3) 1998
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING
OF PERIOD $16.38 $16.47 $16.17 $16.79 $10.30 $10.00
---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.79 0.28 0.82 0.84 0.09 0.39
Net realized and
unrealized gain (loss)
on investments 0.04 (0.08) 0.39 (0.43) 0.01 0.47
---------- ---------- ---------- ---------- ---------- ----------
TOTAL FROM INVESTMENT
OPERATIONS 0.83 0.20 1.21 0.41 0.10 0.86
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.79) (0.29) (0.87) (0.82) (0.09) (0.39)
Distributions from net
realized gain 0.00 0.00 (0.04) (0.21) 0.00 (0.17)
---------- ---------- ---------- ---------- ---------- ----------
TOTAL FROM DISTRIBUTIONS (0.79) (0.29) (0.91) (1.03) (0.09) (0.56)
---------- ---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF
PERIOD $16.42 $16.38 $16.47 $16.17 $10.31 $10.30
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
TOTAL RETURN (NOT
ANNUALIZED)* 5.03% 3.67%** 7.92% 2.33% 0.98% 8.77%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000s) $33,676 $50,077 $52,245 $53,846 $5,956 $3,762
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets 0.85% 0.70% 0.70% 0.62% 1.51% 1.43%
Ratio of net investment
income to average net
assets 4.87% 5.01% 5.19% 4.90% 3.48% 3.56%
Portfolio turnover 27% 57% 15% 22% 24% 82%
- ----------------------------------------------------------------------------------------------------
Ratio of expenses to average
net assets prior to waived
fees and reimbursed
expenses 1.15% 1.01% 0.90% 0.84% 2.10% 2.39%
Ratio of net investment
income (loss) to average
net assets prior to waived
fees and reimbursed
expenses 4.57% 4.70% 4.99% 4.68% 2.89% 2.60%
- ----------------------------------------------------------------------------------------------------
</TABLE>
* TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES
** ANNUALIZED
(1) THE FUND OPERATED AS THE OREGON TAX-EXEMPT FUND OF WESTCORE TRUST AND
WAS ADVISED BY FIRST INTERSTATE BANK OF OREGON, N.A. FROM ITS
COMMENCEMENT OF OPERATIONS UNTIL IT WAS REORGANIZED AS A SERIES OF
PACIFICA FUNDS TRUST ON OCTOBER 1, 1995, WHEN FIRST INTERSTATE CAPITAL
MANAGEMENT, INC. (FICM) ASSUMED INVESTMENT ADVISORY RESPONSIBILITIES.
IN CONNECTION WITH THE MERGER OF FIRST INTERSTATE BANCORP INTO WELLS
FARGO & CO. ON APRIL 1, 1996, FICM WAS RENAMED AS WELLS FARGO
INVESTMENT MANAGEMENT, INC. THE FUND OPERATED AS A SERIES OF PACIFICA
FUNDS TRUST UNTIL IT WAS REORGANIZED AS A SERIES OF STAGECOACH FUNDS,
INC. ON SEPTEMBER 6, 1996. IN CONJUNCTION WITH THE SEPTEMBER 6, 1996
REORGANIZATION, EXISTING INVESTOR SHARES WERE CONVERTED INTO CLASS A
SHARES OF THE FUND AND WFB ASSUMED INVESTMENT ADVISORY
RESPONSIBILITIES.
(2) THE FUND CHANGED ITS FISCAL YEAR-END FROM MARCH 31 TO JUNE 30.
(3) THE FUND CHANGED ITS FISCAL YEAR-END FROM SEPTEMBER 30 TO MARCH 31.
(4) THE FUND CHANGED ITS FISCAL YEAR-END FROM MAY 31 TO SEPTEMBER 30.
The accompanying notes are an integral part of these financial statements.
117
<PAGE>
Tax-Free Funds FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
OREGON TAX-FREE
FUND (1) (CONT.)
CLASS B (CONT.)
----------------------
SIX MONTHS PERIOD
ENDED ENDED
MARCH 31, SEPT. 30,
1997 (2) 1996 (3)
<S> <C> <C>
- -----------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $10.07 $10.00
---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.17 0.00
Net realized and unrealized gain (loss) on investments (0.05) 0.07
---------- ----------
TOTAL FROM INVESTMENT OPERATIONS 0.12 0.07
LESS DISTRIBUTIONS:
Dividends from net investment income (0.17) 0.00
Distributions from net realized gain (0.02) 0.00
---------- ----------
TOTAL FROM DISTRIBUTIONS (0.19) 0.00
---------- ----------
NET ASSET VALUE, END OF PERIOD $10.00 $10.07
---------- ----------
---------- ----------
TOTAL RETURN (NOT ANNUALIZED)* 1.17% 0.70%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s) $287 $0
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Ratio of expenses to average net assets 1.30% 0.00%
Ratio of net investment income to average net assets 3.23% 1.83%
Portfolio turnover 90% 27%
- -----------------------------------------------------------------------------------------------
Ratio of expenses to average net assets prior to waived fees and
reimbursed expenses 2.15% 0.00%
Ratio of net investment income (loss) to average net assets prior to
waived fees and reimbursed expenses 2.38% 1.83%
- -----------------------------------------------------------------------------------------------
</TABLE>
* TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES
(1) THE FUND OPERATED AS THE OREGON TAX-EXEMPT FUND OF WESTCORE TRUST AND
WAS ADVISED BY FIRST INTERSTATE BANK OF OREGON, N.A. FROM ITS
COMMENCEMENT OF OPERATIONS UNTIL IT WAS REORGANIZED AS A SERIES OF
PACIFICA FUNDS TRUST ON OCTOBER 1, 1995, WHEN FIRST INTERSTATE CAPITAL
MANAGEMENT, INC. (FICM) ASSUMED INVESTMENT ADVISORY RESPONSIBILITIES.
IN CONNECTION WITH THE MERGER OF FIRST INTERSTATE BANCORP INTO WELLS
FARGO & CO. ON APRIL 1, 1996, FICM WAS RENAMED AS WELLS FARGO
INVESTMENT MANAGEMENT, INC. THE FUND OPERATED AS A SERIES OF PACIFICA
FUNDS TRUST UNTIL IT WAS REORGANIZED AS A SERIES OF STAGECOACH FUNDS,
INC. ON SEPTEMBER 6, 1996. IN CONJUNCTION WITH THE SEPTEMBER 6, 1996
REORGANIZATION, EXISTING INVESTOR SHARES WERE CONVERTED INTO CLASS A
SHARES OF THE FUND AND WFB ASSUMED INVESTMENT ADVISORY
RESPONSIBILITIES.
(2) THE FUND CHANGED ITS FISCAL YEAR-END FROM SEPTEMBER 30 TO MARCH 31.
(3) THIS CLASS OF SHARES COMMENCED OPERATIONS ON SEPTEMBER 6, 1996.
(4) THE FUND CHANGED ITS FISCAL YEAR-END FROM MARCH 31 TO JUNE 30.
(5) THIS CLASS OF SHARES COMMENCED OPERATIONS ON OCTOBER 1, 1995.
The accompanying notes are an integral part of these financial statements.
118
<PAGE>
FINANCIAL HIGHLIGHTS Tax-Free Funds
- ------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
OREGON TAX-FREE FUND (1) (CONT.)
INSTITUTIONAL CLASS
----------------------------------------------
THREE
MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
JUNE 30, MARCH 31, MARCH 31, SEPT. 30,
1998 (4) 1998 1997 (2) 1996 (5)
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING
OF PERIOD $16.81 $16.28 $16.42 $16.38
---------- ---------- ---------- ----------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.19 0.79 0.39 0.72
Net realized and
unrealized gain (loss)
on investments 0.01 0.82 (0.11) 0.04
---------- ---------- ---------- ----------
TOTAL FROM INVESTMENT
OPERATIONS 0.20 1.61 0.28 0.76
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.19) (0.79) (0.39) (0.72)
Distributions from net
realized gain 0.00 (0.29) (0.03) 0.00
---------- ---------- ---------- ----------
TOTAL FROM DISTRIBUTIONS (0.19) (1.08) (0.42) (0.72)
---------- ---------- ---------- ----------
NET ASSET VALUE, END OF
PERIOD $16.82 $16.81 $16.28 $16.42
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
TOTAL RETURN (NOT
ANNUALIZED)* 1.18% 10.08% 1.69% 5.13%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000s) $7,314 $7,635 $8,175 $8,512
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets 0.62% 0.43% 0.40% 0.63%
Ratio of net investment
income to average net
assets 4.46% 4.72% 4.72% 4.41%
Portfolio turnover 24% 82% 90% 27%
- ----------------------------------------------------------------------------
Ratio of expenses to average
net assets prior to waived
fees and reimbursed
expenses 1.26% 1.27% 1.24% 0.93%
Ratio of net investment
income (loss) to average
net assets prior to waived
fees and reimbursed
expenses 3.82% 3.88% 3.88% 4.11%
- ----------------------------------------------------------------------------
</TABLE>
* TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES
(1) THE FUND OPERATED AS THE OREGON TAX-EXEMPT FUND OF WESTCORE TRUST AND
WAS ADVISED BY FIRST INTERSTATE BANK OF OREGON, N.A. FROM ITS
COMMENCEMENT OF OPERATIONS UNTIL IT WAS REORGANIZED AS A SERIES OF
PACIFICA FUNDS TRUST ON OCTOBER 1, 1995, WHEN FIRST INTERSTATE CAPITAL
MANAGEMENT, INC. (FICM) ASSUMED INVESTMENT ADVISORY RESPONSIBILITIES.
IN CONNECTION WITH THE MERGER OF FIRST INTERSTATE BANCORP INTO WELLS
FARGO & CO. ON APRIL 1, 1996, FICM WAS RENAMED AS WELLS FARGO
INVESTMENT MANAGEMENT, INC. THE FUND OPERATED AS A SERIES OF PACIFICA
FUNDS TRUST UNTIL IT WAS REORGANIZED AS A SERIES OF STAGECOACH FUNDS,
INC. ON SEPTEMBER 6, 1996. IN CONJUNCTION WITH THE SEPTEMBER 6, 1996
REORGANIZATION, EXISTING INVESTOR SHARES WERE CONVERTED INTO CLASS A
SHARES OF THE FUND AND WFB ASSUMED INVESTMENT ADVISORY
RESPONSIBILITIES.
(2) THE FUND CHANGED ITS FISCAL YEAR-END FROM SEPTEMBER 30 TO MARCH 31.
(3) THIS CLASS OF SHARES COMMENCED OPERATIONS ON SEPTEMBER 6, 1996.
(4) THE FUND CHANGED ITS FISCAL YEAR-END FROM MARCH 31 TO JUNE 30.
(5) THIS CLASS OF SHARES COMMENCED OPERATIONS ON OCTOBER 1, 1995.
The accompanying notes are an integral part of these financial statements.
119
<PAGE>
Tax-Free Funds FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
SHORT-TERM MUNICIPAL
INCOME FUND
----------------------
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DEC. 31,
1998 (1) 1997
<S> <C> <C>
- -----------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $4.98 $4.97
---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.09 0.19
Net realized and unrealized gain (loss) on investments (0.02) 0.01
---------- ----------
TOTAL FROM INVESTMENT OPERATIONS 0.07 0.20
LESS DISTRIBUTIONS:
Dividends from net investment income (0.09) (0.19)
Distributions from net realized gain 0.00 0.00
---------- ----------
TOTAL FROM DISTRIBUTIONS (0.09) (0.19)
---------- ----------
NET ASSET VALUE, END OF PERIOD $4.96 $4.98
---------- ----------
---------- ----------
TOTAL RETURN (NOT ANNUALIZED)* 1.49% 4.14%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s) $5,335 $19,628
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Ratio of expenses to average net assets 0.41% 0.40%(3)
Ratio of net investment income to average net assets 3.80% 3.84%(3)
Portfolio turnover 28% 67%(3)
- -----------------------------------------------------------------------------------------------
Ratio of expenses to average net assets prior to waived fees and
reimbursed expenses 1.62% 1.52%(3)
Ratio of net investment income (loss) to average net assets prior to
waived fees and reimbursed expenses 2.59% 2.72%(3)
- -----------------------------------------------------------------------------------------------
</TABLE>
* TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES
(1) THE FUND CHANGED ITS FISCAL YEAR-END FROM DECEMBER 31 TO JUNE 30.
(2) THE FUND COMMENCED OPERATIONS ON JUNE 3, 1994.
(3) THIS RATIO INCLUDES ACTIVITY OF THE MASTER PORTFOLIO PRIOR TO DECEMBER
15, 1997. SEE NOTE 1.
The accompanying notes are an integral part of these financial statements.
120
<PAGE>
FINANCIAL HIGHLIGHTS Tax-Free Funds
- ------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
SHORT-TERM MUNICIPAL INCOME FUND
----------------------------------
PERIOD
YEAR ENDED YEAR ENDED ENDED
DEC. 31, DEC. 31, DEC. 31,
1996 1995 1994 (2)
<S> <C> <C> <C>
- ----------------------------------------------------------------
NET ASSET VALUE, BEGINNING
OF PERIOD $4.99 $4.92 $5.00
---------- ---------- ----------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.20 0.22 0.09
Net realized and
unrealized gain (loss)
on investments (0.02) 0.07 (0.08)
---------- ---------- ----------
TOTAL FROM INVESTMENT
OPERATIONS 0.18 0.29 0.01
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.20) (0.22) (0.09)
Distributions from net
realized gain 0.00 0.00 0.00
---------- ---------- ----------
TOTAL FROM DISTRIBUTIONS (0.20) (0.22) (0.09)
---------- ---------- ----------
NET ASSET VALUE, END OF
PERIOD $4.97 $4.99 $4.92
---------- ---------- ----------
---------- ---------- ----------
TOTAL RETURN (NOT
ANNUALIZED)* 3.62% 6.10% 0.13%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000s) $26,714 $16,486 $11,778
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets 0.40%(3) 0.38%(3) 0.27%(3)
Ratio of net investment
income to average net
assets 3.95%(3) 4.39%(3) 3.67%(3)
Portfolio turnover 47%(3) 46%(3) 8%(3)
- ----------------------------------------------------------------
Ratio of expenses to average
net assets prior to waived
fees and reimbursed
expenses 1.43%(3) 1.97%(3) 1.98%(3)
Ratio of net investment
income (loss) to average
net assets prior to waived
fees and reimbursed
expenses 2.92%(3) 2.80%(3) 1.96%(3)
- ----------------------------------------------------------------
</TABLE>
* TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES
(1) THE FUND CHANGED ITS FISCAL YEAR-END FROM DECEMBER 31 TO JUNE 30.
(2) THE FUND COMMENCED OPERATIONS ON JUNE 3, 1994.
(3) THIS RATIO INCLUDES ACTIVITY OF THE MASTER PORTFOLIO PRIOR TO DECEMBER
15, 1997. SEE NOTE 1.
The accompanying notes are an integral part of these financial statements.
121
<PAGE>
THIS PAGE IS INTENTIONALLY LEFT BLANK --
122
<PAGE>
NOTES TO FINANCIAL STATEMENTS Tax-Free Funds
- ------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Stagecoach Funds, Inc. (the "Company") is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end series
management investment company. The Company commenced operations on January 1,
1992, and currently offers thirty-two separate series. These financial
statements represent the Arizona Tax-Free, California Tax-Free Bond, California
Tax-Free Income, National Tax-Free, Oregon Tax-Free and Short-Term Municipal
Income Funds (each, a "Fund", collectively, the "Funds"), each, with the
exception of the National Tax-Free and Short-Term Municipal Income Funds, a
non-diversified series of the Company. The National Tax-Free and Short-Term
Municipal Income Funds are diversified series of the Company.
At a meeting held on July 23, 1997, the Boards of Directors of Overland
Express Funds, Inc. ("Overland") and the Company approved a consolidation
agreement providing for the transfer of the assets and liabilities of each
Overland fund to a corresponding fund of the Company in exchange for shares of
designated classes of the corresponding Stagecoach fund (the "Consolidation").
The Consolidation was subsequently approved by Overland shareholders. As a
result of this Consolidation, effective at the close of business on December 12,
1997, the Stagecoach National Tax-Free Fund acquired all of the assets and
assumed all of the liabilities of the Overland Municipal Income Fund. The
acquisition was accomplished in a tax-free exchange for shares of the Stagecoach
National Tax-Free Fund. The Stagecoach California Tax-Free Bond Fund acquired
all of the assets and assumed all of the liabilities of the Overland California
Tax-Free Bond Fund. This Fund retained Overland accounting and performance
history. Historical share data was restated to give effect to the conversion
ratios of 0.95571302 for Class A shares and 1.22415291 for Class D shares which
were renamed Class C shares in conjunction with the Consolidation.
Additionally, the Stagecoach Short-Term Municipal Income Fund was established
to acquire all of the assets and assume all of the liabilities of the Overland
Short-Term Municipal Income Fund. At the time of the Consolidation, the
Short-Term Municipal Income Fund, structured as a "feeder" Fund in a
"master-feeder" structure, was restructured to invest directly in a portfolio of
securities, rather than to invest in portfolio securities through a "master"
123
<PAGE>
Tax-Free Funds NOTES TO FINANCIAL STATEMENTS
- ------------------------------------------------------------------------
portfolio (the "Master Portfolio"). The Master Portfolio distributed all of its
assets and liabilities in-kind to its interest holders and wound up its affairs
(the "Dissolution"). The Dissolution occurred at the close of business on
December 12, 1997.
At a special shareholders meeting on July 16, 1996, the Shareholders of
Pacifica Funds Trust ("Pacifica") approved a plan of reorganization providing
for the transfer of the assets and liabilities of each Pacifica portfolio to a
corresponding fund of the Company in exchange for shares of designated classes
of the corresponding Stagecoach fund. As a result of this reorganization,
effective September 6, 1996, the Stagecoach Arizona Tax-Free, National Tax-Free,
and Oregon Tax-Free Funds were established to acquire all of the assets and
assume all of the liabilities of the Pacifica Arizona Tax-Exempt, National
Tax-Exempt, and Oregon Tax-Exempt Funds (previously, the Arizona Intermediate
Tax-Free, Quality Tax-Exempt Income, and Oregon Tax-Exempt Funds of Westcore
Trust), respectively (collectively, the "Predecessor Funds"). Additionally, the
Stagecoach California Tax-Free Income Fund acquired all of the assets and
assumed all of the liabilities of the Pacifica California Short-Term Tax-Exempt
Fund. These acquisitions were accomplished in separate tax-free exchanges for
shares of the respective Fund. All performance and financial data for the
Arizona Tax-Free, National Tax-Free, and Oregon Tax-Free Funds for periods prior
to September 6, 1996 refers to the Predecessor Funds.
The Arizona Tax-Free and Oregon Tax-Free Funds offer Class A, Class B, and
Institutional Class shares. The California Tax-Free Bond and National Tax-Free
Funds offer Class A, Class B, Class C and Institutional Class shares. The
California Tax-Free Income Fund offers Class A and Institutional Class shares.
The Short-Term Municipal Income Fund offers a single class of shares. The
separate classes of shares differ principally in the applicable sales charges
(if any), distribution fees, shareholder servicing fees and transfer agency
fees. Shareholders of each class also bear certain expenses that pertain to that
particular class. All shareholders bear the common expenses of the Fund and earn
income from the portfolio pro rata based on the average daily net assets of each
class, without distinction between share classes. Dividends are determined
separately for each class based on income and expenses allocable to each class.
Realized gains are allocated to each class pro rata based on the net assets of
each class on the date of distribution. No class has preferential dividend
rights. Differences in per share dividend rates generally result from the
relative
124
<PAGE>
NOTES TO FINANCIAL STATEMENTS Tax-Free Funds
- ------------------------------------------------------------------------
weightings of pro rata income and realized gain allocations and from differences
in separate class expenses, including distribution, shareholder servicing and
transfer agency fees.
The following significant accounting policies are consistently followed by the
Company in the preparation of its financial statements, and such policies are in
conformity with generally accepted accounting principles ("GAAP") for investment
companies.
The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
SECURITY VALUATION
All securities are valued at the close of each business day. Securities for
which the primary market is a nationally recognized securities or commodities
exchange or the National Association of Securities Dealers Automated Quotation
("Nasdaq") Nasdaq National Market are valued at the last reported sales price on
the day of valuation. Debt securities are generally traded in the
over-the-counter market and are valued at a price deemed best to reflect fair
value as quoted by dealers who make markets in those securities or by an
independent pricing source. U.S. Government obligations are valued at the last
reported bid price. In the absence of any sale of such securities on the
valuation date and in the case of other securities, excluding money market
instruments maturing in 60 days or less, the valuations are based on latest
quoted bid prices. Debt securities maturing in 60 days or less are valued at
amortized cost. The amortized cost method involves valuing a security at its
cost, plus accretion of discount or minus amortization of premium over the
period until maturity, which approximates market value. Securities for which
quotations are not readily available are valued at fair value as determined by
policies set by the Company's Board of Directors.
SECURITY TRANSACTIONS AND INCOME RECOGNITION
Securities transactions are recorded on a trade date basis. Interest income is
accrued daily. Realized gains or losses are reported on the basis of identified
cost
125
<PAGE>
Tax-Free Funds NOTES TO FINANCIAL STATEMENTS
- ------------------------------------------------------------------------
of securities delivered. Bond discounts are accreted and premiums are amortized
under provisions of the Internal Revenue Code of 1986, as amended (the "Code").
DISTRIBUTIONS TO SHAREHOLDERS
Dividends to shareholders from net investment income, if any, are declared
daily and distributed monthly. Any distributions to shareholders from net
realized capital gains are declared and distributed annually.
FEDERAL INCOME TAXES
Each Fund is treated as a separate entity for federal income tax purposes. It
is the policy of each Fund of the Company to continue to qualify as a regulated
investment company by complying with the provisions applicable to regulated
investment companies, as defined in the Code, and to make distributions of
substantially all of its investment company taxable income and any net realized
capital gains (after reduction for capital loss carryforwards) sufficient to
relieve it from all, or substantially all, federal income taxes. Accordingly, no
provision for federal income taxes was required at June 30, 1998. The National
Tax-Free Fund had net capital loss carryforwards at June 30, 1998 as follows:
<TABLE>
<CAPTION>
YEAR CAPITAL LOSS
FUND EXPIRES CARRYFORWARDS
- ------------------------------------------------------
<S> <C> <C>
National Tax-Free Fund 2001 $286,699
2002 169,257
2003 245,237
</TABLE>
Any loss carryforwards from Pacifica and Overland are included in the Fund's
carryforwards as shown above. The Company's Board of Directors intends to offset
net capital gains with each capital loss carryforward, and no capital gain
distribution shall be made until each carryforward has been fully utilized or
expires.
Due to the timing of dividend distributions and the differences in accounting
for income and realized gains (losses) for financial statement and federal
income tax purposes, the fiscal year in which amounts are distributed may differ
from the year in which the income and realized gains (losses) were recorded by a
Fund. The differences between the income or gains distributed on a book versus
tax basis are shown as excess distributions of net investment income and net
realized gain on sales of investments in the accompanying Statements of Changes
in Net
126
<PAGE>
NOTES TO FINANCIAL STATEMENTS Tax-Free Funds
- ------------------------------------------------------------------------
Assets. The amount of distributions from net investment income and net realized
capital gains are determined in accordance with federal income tax regulations,
which may differ from GAAP. These "book/tax" differences are either considered
temporary or permanent in nature. To the extent that these differences are
permanent in nature, such amounts are reclassified within the capital accounts
based on their federal tax-basis treatment; temporary differences do not require
reclassifications.
DEFERRED ORGANIZATION COSTS
Certain costs incurred in connection with the organization of the Funds and
their initial registration with the Securities and Exchange Commission and with
the various states are amortized on a straight-line basis over 60 months from
the date each Fund commenced operations.
2. AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
The Company entered into separate advisory contracts on behalf of the Funds
with Wells Fargo Bank, N.A. ("WFB"). Pursuant to the contracts, WFB has agreed
to provide the Funds with daily portfolio management. Under the contracts, WFB
is entitled to be paid a monthly advisory fee at an annual rate of 0.50% of the
average daily net assets of each Fund. Prior to December 15, 1997, the
Short-Term Municipal Income Fund did not directly retain an investment advisor
because it invested all of its assets in a separate Master Portfolio which, in
turn, retained WFB as investment advisor and was charged at the same rate listed
above.
The Company entered into contracts on behalf of each Fund with WFB, whereby
WFB is responsible for providing custody and portfolio accounting services for
the Funds. Pursuant to the contracts, WFB is entitled to certain transaction
charges plus a monthly fee for custody services at an annual rate of 0.0167% of
the average daily net assets of each Fund. For portfolio accounting services,
WFB is entitled to a monthly base fee from each Fund of $2,000 plus an annual
fee of 0.07% of the first $50 million of each Fund's average daily net assets,
0.045% of the next $50 million, and 0.02% of each Fund's average daily net
assets in excess of $100 million. Prior to December 15, 1997, WFB was entitled
to compensation for its custodial and portfolio accounting services to the
Short-Term Municipal Income Master Portfolio at the same rates listed above.
127
<PAGE>
Tax-Free Funds NOTES TO FINANCIAL STATEMENTS
- ------------------------------------------------------------------------
The Company entered into a contract on behalf of the Funds with WFB, whereby
WFB provides transfer agency services for the Funds. Under the transfer agency
contract, WFB is entitled to receive transfer agency fees at the following
annual rates:
<TABLE>
<CAPTION>
% OF AVERAGE
DAILY NET
ASSETS
INSTITUTIONAL
FUND CLASS A* CLASS B CLASS C CLASS
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Arizona Tax-Free Fund 0.14 0.14 N/A 0.06
California Tax-Free Bond Fund 0.14 0.14 0.14 0.06
California Tax-Free Income
Fund 0.14 N/A N/A 0.06
National Tax-Free Fund 0.14 0.14 0.14 0.06
Oregon Tax-Free Fund 0.14 0.14 N/A 0.06
Short-Term Municipal Income
Fund 0.14 N/A N/A N/A
</TABLE>
* INCLUDES FUNDS WITH A SINGLE CLASS.
Prior to February 1, 1997, under the contracts with the California Tax-Free
Bond and Short-Term Municipal Income Funds, WFB was entitled to be paid a per
account fee plus other related costs with a minimum monthly fee of $3,000 per
Fund, unless net assets of the respective Fund were less than $20 million. For
as long as the assets remained less than $20 million, the Fund would not be
charged any transfer agency fees by WFB.
The transfer agency fees paid on behalf of the Funds for the three months
ended June 30, 1998 were as follows:
<TABLE>
<CAPTION>
INSTITUTIONAL
FUND CLASS A CLASS B CLASS C CLASS
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Arizona Tax-Free Fund $ 1,888 $ 550 N/A $ 1,742
California Tax-Free Bond Fund* 353,628 63,139 $ 5,034 24,090
California Tax-Free Income Fund 19,634 N/A N/A 1,055
National Tax-Free Fund 14,520 569 2,608 1,122
Oregon Tax-Free Fund 9,661 1,708 N/A 1,119
</TABLE>
* REPRESENTS SIX MONTHS ENDED JUNE 30, 1998.
128
<PAGE>
NOTES TO FINANCIAL STATEMENTS Tax-Free Funds
- ------------------------------------------------------------------------
The transfer agency fees paid on behalf of the Funds for the year ended March
31, 1998 were as follows:
<TABLE>
<CAPTION>
INSTITUTIONAL
FUND CLASS A CLASS B CLASS C CLASS
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Arizona Tax-Free Fund $ 7,823 $ 1,180 N/A $ 7,888
California Tax-Free Bond Fund* 328,908 5,022** $ 8,077 2,366 **
California Tax-Free Income Fund 90,350 N/A N/A 4,074
National Tax-Free Fund 22,294 816 3,278*** 4,463
Oregon Tax-Free Fund 40,448 1,698 N/A 4,754
</TABLE>
* REPRESENTS THE YEAR ENDED DECEMBER 31, 1997.
** REPRESENTS THE PERIOD FROM DECEMBER 15, 1997 TO DECEMBER 31, 1997.
*** REPRESENTS THE PERIOD FROM DECEMBER 15, 1997 TO MARCH 31, 1998.
Transfer agency fees paid on behalf of the Short-Term Municipal Income Fund
for the six months ended June 30, 1998 and the year ended December 31, 1997 are
disclosed in the Statement of Operations.
The Company entered into contracts on behalf of the Funds with WFB, whereby
WFB has agreed to provide shareholder services for the Funds. Pursuant to the
contracts, WFB is entitled to receive shareholder servicing fees at the
following annual rates:
<TABLE>
<CAPTION>
% OF AVERAGE
DAILY NET
ASSETS
INSTITUTIONAL
FUND CLASS A CLASS B CLASS C CLASS
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Arizona Tax-Free Fund 0.25 0.25 N/A 0.25
California Tax-Free Bond Fund 0.30 0.30 0.25 0.25
California Tax-Free Income Fund 0.30 N/A N/A 0.25
National Tax-Free Fund 0.25 0.25 0.25 0.25
Oregon Tax-Free Fund 0.25 0.25 N/A 0.25
</TABLE>
The shareholder servicing fees paid on behalf of the Funds for the three
months ended June 30, 1998 were as follows:
<TABLE>
<CAPTION>
INSTITUTIONAL
FUND CLASS A CLASS B CLASS C CLASS
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Arizona Tax-Free Fund $ 3,371 $ 981 N/A $ 7,257
California Tax-Free Bond Fund* 757,775 135,051 $ 8,989 100,375
California Tax-Free Income Fund 42,073 N/A N/A 4,394
National Tax-Free Fund 25,929 1,016 4,657 4,674
Oregon Tax-Free Fund 17,251 3,050 N/A 4,662
</TABLE>
* REPRESENTS SIX MONTHS ENDED JUNE 30, 1998.
129
<PAGE>
Tax-Free Funds NOTES TO FINANCIAL STATEMENTS
- ------------------------------------------------------------------------
The shareholder servicing fees paid on behalf of the Funds for the year ended
March 31, 1998 were as follows:
<TABLE>
<CAPTION>
INSTITUTIONAL
FUND CLASS A CLASS B CLASS C CLASS
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Arizona Tax-Free Fund $ 13,993 $ 2,106 N/A $ 32,865
California Tax-Free Bond Fund* 72,181 10,736** $ 14,814 9,860**
California Tax-Free Income Fund 193,608 N/A N/A 16,929
National Tax-Free Fund 39,810 1,476 5,852*** 18,589
Oregon Tax-Free Fund 72,229 3,033 N/A 19,809
</TABLE>
* REPRESENTS THE YEAR ENDED DECEMBER 31, 1997.
** REPRESENTS THE PERIOD FROM DECEMBER 15, 1997 TO DECEMBER 31, 1997
*** REPRESENTS THE PERIOD FROM DECEMBER 15, 1997 TO MARCH 31, 1998.
The Company adopted a Shareholder Administrative Servicing Plan (the
"Administrative Servicing Plan") on behalf of the single class shares of the
Short-Term Municipal Income Fund. Pursuant to the Administrative Servicing Plan,
the Fund may enter into administrative servicing agreements with administrative
servicing agents who are dealers/holders of record, or that otherwise have a
servicing relationship with the beneficial owners of the Funds' shares.
Administrative servicing agents are entitled to receive a fee which will not
exceed 0.25%, on an annualized basis, of the average daily net assets of the
Short-Term Municipal Income Fund. In no case will the Fund be charged both
Distribution and Administrative Servicing fees.
The Company entered into administration agreements on behalf of the Funds
whereby WFB as administrator and Stephens Inc. ("Stephens") as co-administrator
provide each Fund with administration services. For these services, WFB and
Stephens are entitled to receive monthly fees at the annual rates of 0.03% and
0.04%, respectively, of each Fund's average daily net assets. Prior to February
1, 1998, WFB and Stephens were entitled to receive monthly fees at the annual
rates of 0.04% and 0.02%, respectively, of each Fund's average daily net assets.
Prior to May 1, 1997, Stephens provided substantially the same services as sole
administrator to the California Tax-Free Bond and Short-Term Municipal Income
Funds which each agreed to pay Stephens a monthly fee at an annual rate of 0.15%
of each Fund's average daily net assets up to $200 million and 0.10% of the
average daily net assets in excess of $200 million.
130
<PAGE>
NOTES TO FINANCIAL STATEMENTS Tax-Free Funds
- ------------------------------------------------------------------------
The Company adopted separate Distribution Plans for the single class shares of
the Short-Term Municipal Income Fund and the Class A, Class B, and Class C
shares of the other Funds pursuant to Rule 12b-1 under the 1940 Act (each, a
"Plan"). The Plan for the Class A shares of the Arizona Tax-Free, National Tax-
Free and Oregon Tax-Free Funds provides that each such Fund may pay to Stephens,
as compensation for distribution-related services or as reimbursement for
distribution-related expenses, up to 0.05% of the average daily net assets
attributable to its Class A shares. The Plan for Class A shares of the
California Tax-Free Income and California Tax-Free Bond Funds provides that the
Funds may defray all or part of the cost of preparing, printing and distributing
prospectuses and other promotional materials by paying for costs incurred on an
annual basis of up to 0.05% of the average daily net assets attributable to the
California Tax-Free Income's Class A shares and up to the greater of $100,000 or
0.05% of the California Tax-Free Bond's Class A shares.
The Plan for the single class shares of the Short-Term Municipal Income Fund
provides that it may pay to Stephens up to 0.25% of its average daily net assets
as compensation for distribution-related services or as reimbursement for
distribution-related expenses.
The Plans for the Class B shares of the Arizona Tax-Free, National Tax-Free
and Oregon Tax-Free Funds provide that each such Fund may pay to Stephens, as
compensation for distribution-related services or as reimbursement for
distribution-related expenses, up to 0.75% of the average daily net assets
attributable to the Class B shares. The Plan for Class B shares of California
Tax-Free Bond Fund provides that the Fund may pay to Stephens, as compensation
for distribution-related services or as reimbursement for distribution-related
expenses, up to 0.70% of the average daily net assets attributable to the Class
B shares.
The Plans for Class C shares of the California Tax-Free Bond and National
Tax-Free Funds provide that the Funds may pay to Stephens, as compensation for
distribution-related services or as reimbursement for distribution-related
expenses, up to 0.75% of the average daily net assets attributable to the Class
C shares. Prior to December 15, 1997, the Plan for the California Tax-Free Bond
Fund provided that it pay to Stephens up to 0.50% of the average daily net
assets attributable to the Class D shares as compensation for distribution
related services. The Class D shares were renamed as Class C shares in
conjunction with the Consolidation.
131
<PAGE>
Tax-Free Funds NOTES TO FINANCIAL STATEMENTS
- ------------------------------------------------------------------------
Each Fund may participate in joint distribution activities with other Funds,
in which event, expenses reimbursed out of the assets of one of the Funds may be
attributable, in part, to the distribution-related activities of another Fund.
Generally, the expenses of joint distribution activities are allocated among the
Funds in proportion to their relative net asset sizes.
The distribution fees paid on behalf of the Funds for the three months ended
June 30, 1998 were as follows:
<TABLE>
<CAPTION>
FUND CLASS A CLASS B CLASS C
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Arizona Tax-Free Fund $ 172 $ 2,945 N/A
California Tax-Free Bond Fund* 79,393 315,118 $ 26,968
National Tax-Free Fund 5,186 3,049 13,971
Oregon Tax-Free Fund 879 9,150 N/A
</TABLE>
* REPRESENTS SIX MONTHS ENDED JUNE 30, 1998.
The distribution fees paid on behalf of the Funds for the year ended March 31,
1998 were as follows:
<TABLE>
<CAPTION>
FUND CLASS A CLASS B CLASS C
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Arizona Tax-Free Fund $ 2,793 $ 6,322 N/A
California Tax-Free Bond Fund* 120,470 25,051** $ 30,313
National Tax-Free Fund 7,784 4,428 17,557***
Oregon Tax-Free Fund 14,445 9,098 N/A
</TABLE>
* REPRESENTS THE YEAR ENDED DECEMBER 31, 1997.
** REPRESENTS THE PERIOD FROM DECEMBER 15, 1997 TO DECEMBER 31, 1997.
*** REPRESENTS THE PERIOD FROM DECEMBER 15, 1997 TO MARCH 31, 1998.
Distribution fees paid on behalf of the Class A shares of the California Tax-
Free Income Fund for the three months ended June 30, 1998 and the year ended
March 31, 1998 and the single class shares of the Short-Term Municipal Income
Fund for the six months ended June 30, 1998 and the year ended December 31, 1997
are disclosed in the Statement of Operations.
132
<PAGE>
NOTES TO FINANCIAL STATEMENTS Tax-Free Funds
- ------------------------------------------------------------------------
The registration fees paid on behalf of the Funds for the three months ended
June 30, 1998 were as follows:
<TABLE>
<CAPTION>
INSTITUTIONAL
FUND CLASS A CLASS B CLASS C CLASS
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Arizona Tax-Free Fund $ 1,496 $ 1,246 N/A $ 1,995
California Tax-Free Bond Fund* 9,620 24,317 $ 248 12,333
California Tax-Free Income Fund 2,992 N/A N/A 1,995
National Tax-Free Fund 6,383 2,493 2,244 3,740
Oregon Tax-Free Fund 1,745 1,371 N/A 1,496
</TABLE>
* REPRESENTS SIX MONTHS ENDED JUNE 30, 1998.
The registration fees paid on behalf of the Funds for the year ended March 31,
1998 were as follows:
<TABLE>
<CAPTION>
INSTITUTIONAL
FUND CLASS A CLASS B CLASS C CLASS
--------------------------------------------------------------
<S> <C> <C> <C> <C>
Arizona
Tax-Free
Fund $ 5,334 $ 3,312 N/A $ 7,692
California
Tax-Free
Bond
Fund* 3,904 140** $ 797 280**
California
Tax-Free
Income
Fund 12,637 N/A N/A 6,505
National
Tax-Free
Fund 10,149 6,465 2,639*** 12,223
Oregon
Tax-Free
Fund 6,416 3,703 N/A 4,573
</TABLE>
* REPRESENTS THE YEAR ENDED DECEMBER 31, 1997.
** REPRESENTS THE PERIOD FROM DECEMBER 15, 1997 TO DECEMBER 31, 1997.
*** REPRESENTS THE PERIOD FROM DECEMBER 15, 1997 TO MARCH 31, 1998.
Registration fees paid on behalf of the Short-Term Municipal Income Fund for
the six months ended June 30, 1998 and the year ended December 31, 1997 are
disclosed in the Statement of Operations.
133
<PAGE>
Tax-Free Funds NOTES TO FINANCIAL STATEMENTS
- ------------------------------------------------------------------------
WAIVED FEES AND REIMBURSED EXPENSES
The following amounts of fees and expenses were waived or reimbursed for the
three months ended June 30, 1998:
<TABLE>
<CAPTION>
EXPENSES FEES
REIMBURSED WAIVED
FUND BY STEPHENS BY WFB
- -------------------------------------------------------------------------
<S> <C> <C>
Arizona Tax-Free Fund $0 $ 42,547
California Tax-Free Bond Fund* 0 1,215,602
California Tax-Free Income Fund 0 109,471
National Tax-Free Fund 0 87,410
Oregon Tax-Free Fund 0 61,573
Short-Term Municipal Income Fund* 28,701 54,091
</TABLE>
* REPRESENTS SIX MONTHS ENDED JUNE 30, 1998.
The following amounts of fees and expenses were waived or reimbursed for the
year ended March 31, 1998:
<TABLE>
<CAPTION>
EXPENSES FEES
REIMBURSED WAIVED
FUND BY STEPHENS BY WFB
- -------------------------------------------------------------------------
<S> <C> <C>
Arizona Tax-Free Fund $ 25,793 $ 199,014
California Tax-Free Bond Fund* 0 396,060
California Tax-Free Income Fund 0 434,096
National Tax-Free Fund 88,767 214,106
Oregon Tax-Free Fund 0 291,269
Short-Term Municipal Income Fund* 0 258,681
</TABLE>
* REPRESENTS THE YEAR ENDED DECEMBER 31, 1997.
Waived fees and reimbursed expenses continue at the discretion of WFB and
Stephens.
Certain officers and one director of the Company are also officers of
Stephens. As of June 30, 1998, Stephens owned 8 shares of the Arizona Tax-Free
Fund, 9,088 shares of the California Tax-Free Bond Fund, 12,420 shares of the
California Tax-Free Income Fund, 10,373 shares of the National Tax-Free Fund, 6
shares of the Oregon Tax-Free Fund and 2,361 shares of the Short-Term Municipal
Income Fund.
Stephens has retained $5,647,291 as sales charges from the proceeds of Class A
shares sold, $1,473,156 as proceeds from Class B shares redeemed by the Company
and $29,526 as proceeds from Class C shares redeemed by the Company for the
period ended June 30, 1998. Wells Fargo Securities Inc., a subsidiary of WFB,
received $4,712,432 as sales charges from the proceeds of
134
<PAGE>
NOTES TO FINANCIAL STATEMENTS Tax-Free Funds
- ------------------------------------------------------------------------
Class A shares sold, $854,265 as proceeds from Class B shares redeemed by the
Company and $0 as proceeds from Class C shares redeemed by the Company for the
period ended June 30, 1998.
3. INVESTMENT PORTFOLIO TRANSACTIONS
Purchases and sales of investments, exclusive of short-term securities
(securities with maturities of one year or less at purchase date), for each Fund
for the three months ended June 30, 1998 were as follows:
AGGREGATE PURCHASES
AND SALES
<TABLE>
<CAPTION>
PURCHASES AT SALES
FUND COST PROCEEDS
- -------------------------------------------------------------------------
<S> <C> <C>
Arizona Tax-Free Fund $ 2,583,655 $ 5,241,345
California Tax-Free Bond Fund* 109,138,942 100,183,458
California Tax-Free Income Fund 1,120,042 9,182,161
National Tax-Free Fund 17,030,327 19,895,293
Oregon Tax-Free Fund 10,620,677 9,253,380
Short-Term Municipal Income Fund* 3,294,441 19,929,637
</TABLE>
* REPRESENTS SIX MONTHS ENDED JUNE 30, 1998.
Purchases and sales of investments, exclusive of short-term securities
(securities with maturities of one year or less at purchase date), for each Fund
for the year ended March 31, 1998 were as follows:
AGGREGATE PURCHASES
AND SALES
<TABLE>
<CAPTION>
PURCHASES SALES
FUND AT COST PROCEEDS
- ------------------------------------------------------------------------
<S> <C> <C>
Arizona Tax-Free Fund $23,994,599 $24,305,761
California Tax-Free Bond Fund* 30,310,601 56,906,907
California Tax-Free Income Fund 59,839,968 66,553,766
National Tax-Free Fund 22,599,890 20,417,641
Oregon Tax-Free Fund 30,608,250 30,649,963
Short-Term Municipal Income Fund** 13,186,594 14,926,637
</TABLE>
* REPRESENTS THE YEAR ENDED DECEMBER 31, 1997.
** REPRESENTS THE YEAR ENDED DECEMBER 31, 1997 AND INCLUDES ACTIVITY OF THE
MASTER PORTFOLIO PRIOR TO DECEMBER 15, 1997.
4. CAPITAL SHARE TRANSACTIONS
As of June 30, 1998, there were over 108 billion shares of $0.001 par value
capital stock authorized by the Company. As of June 30, 1998, each Fund, with
135
<PAGE>
Tax-Free Funds NOTES TO FINANCIAL STATEMENTS
- ------------------------------------------------------------------------
the exception of the Short-Term Municipal Income Fund, was authorized to issue
100 million shares of $0.001 par value capital stock for each class of shares.
As of June 30, 1998, the Short-Term Municipal Income Fund was authorized to
issue 300 million shares of $0.001 par value capital stock for each class of
shares.
Capital share transactions for the Funds were as follows:
<TABLE>
<CAPTION>
ARIZONA TAX-FREE FUND
--------------------------------------------
FOR THE FOR THE
THREE SIX FOR THE
MONTHS FOR THE MONTHS YEAR
ENDED YEAR ENDED ENDED ENDED
JUNE 30, MARCH 31, MARCH 31, SEPT. 30,
1998 1998 1997 1996
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHARES ISSUED AND REDEEMED:
Shares sold -- Class A 14,261 43,843 8,351 115,400
Shares issued in reinvestment
of dividends -- Class A 4,309 24,687 10,155 31,157
Shares redeemed -- Class A (27,105) (110,898) (170,242) (1,743,227)
NET INCREASE (DECREASE) IN
SHARES OUTSTANDING -- CLASS A (8,535) (42,368) (151,736) (1,596,670)
Shares sold -- Class B 25,915 139,190 17,936 1,999
Shares issued in reinvestment
of dividends -- Class B 889 3,792 88 0
Shares redeemed -- Class B (13,840) (12,211) (1,997) 0
NET INCREASE (DECREASE) IN
SHARES OUTSTANDING -- CLASS B 12,964 130,771 16,027 1,999
Shares sold -- Institutional
Class 15,084 116,767 75,496 1,818,383
Shares issued in reinvestment
of dividends --
Institutional Class 130 991 111 584
Shares redeemed --
Institutional Class (112,704) (375,960) (192,725) (327,320)
NET INCREASE (DECREASE) IN
SHARES OUTSTANDING --
INSTITUTIONAL CLASS (97,490) (258,202) (117,118) 1,491,647
</TABLE>
136
<PAGE>
NOTES TO FINANCIAL STATEMENTS Tax-Free Funds
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
CALIFORNIA TAX-FREE BOND FUND
----------------------------------
FOR THE
SIX
MONTHS FOR THE FOR THE
ENDED YEAR ENDED YEAR ENDED
JUNE 30, DEC. 31, DEC. 31,
1998 1997 1996 *
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
SHARES ISSUED AND REDEEMED:
Shares sold -- Class A 2,646,915 27,081,868(1) 1,035,266
Shares issued in reinvestment of
dividends -- Class A 604,957 601,099 894,075
Shares redeemed -- Class A (4,347,657) (4,493,270) (3,749,696)
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING -- CLASS A (1,095,785) 23,189,697 (1,820,355)
Shares sold -- Class B(2) 2,264,459 6,780,297(1) N/A
Shares issued in reinvestment of
dividends -- Class B(2) 111,908 125 N/A
Shares redeemed -- Class B(2) (510,735) (40,678) N/A
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING -- CLASS B(2) 1,865,632 6,739,744 N/A
Shares sold -- Class C 250,882 114,726 141,462
Shares issued in reinvestment of
dividends -- Class C 5,659 11,817 18,629
Shares redeemed -- Class C (52,825) (200,314) (189,483)
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING -- CLASS C 203,716 (73,771) (29,392)
Shares sold -- Institutional Class (2) 968,464 7,506,033(1) N/A
Shares issued in reinvestment of
dividends -- Institutional Class(2) 16,617 54 N/A
Shares redeemed -- Institutional
Class(2) (1,153,845) (96,138) N/A
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING -- INSTITUTIONAL CLASS(2) (168,764) 7,409,949 N/A
</TABLE>
* FIGURES HAVE BEEN RESTATED TO GIVE EFFECT TO THE CONVERSION RATIOS APPLIED IN
THE CONSOLIDATION. SEE NOTE 1.
(1) "SHARES SOLD" INCLUDES 26,130,006 FOR CLASS A SHARES, 6,543,148 FOR CLASS B
SHARES AND 7,487,949 FOR INSTITUTIONAL CLASS SHARES AS A RESULT OF THE
CONSOLIDATION OF THE OVERLAND EXPRESS CALIFORNIA TAX-FREE BOND FUND. SEE
NOTE 1.
(2) THIS CLASS OF SHARES COMMENCED OPERATIONS ON DECEMBER 15, 1997.
137
<PAGE>
Tax-Free Funds NOTES TO FINANCIAL STATEMENTS
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
CALIFORNIA TAX-FREE INCOME FUND
---------------------------------------------------
FOR THE
THREE FOR THE SIX
MONTHS FOR THE MONTHS FOR THE NINE
ENDED YEAR ENDED ENDED MONTHS ENDED
JUNE 30, MARCH 31, MARCH 31, SEPT. 30,
1998 1998 1997 1996 (1)
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHARES ISSUED AND REDEEMED:
Shares sold -- Class A 208,631 1,890,485 1,071,029 4,281,601
Shares issued in reinvestment
of dividends -- Class A 44,610 228,242 121,088 199,260
Shares redeemed -- Class A (715,645) (3,052,403) (2,630,399) (3,992,269)
NET INCREASE (DECREASE) IN
SHARES OUTSTANDING -- CLASS A (462,404) (933,676) (1,438,282) 488,592
Shares sold -- Institutional
Class 85,189 101,348 45,913 1,002,052
Shares issued in reinvestment
of dividends --
Institutional Class 1,837 8,519 2,624 0
Shares redeemed --
Institutional Class (39,041) (120,343) (346,660) (5,243)
NET INCREASE (DECREASE) IN
SHARES OUTSTANDING --
INSTITUTIONAL CLASS 47,985 (10,476) (298,123) 996,809
</TABLE>
(1) "SHARES SOLD" INCLUDES 488,921 FOR CLASS A AND 963,872 FOR THE
INSTITUTIONAL CLASS, AS A RESULT OF THE MERGER OF THE PACIFICA SHORT-TERM
CALIFORNIA TAX-EXEMPT FUND.
<TABLE>
<CAPTION>
NATIONAL TAX-FREE FUND
-------------------------------------------------
FOR THE
THREE FOR THE SIX
MONTHS FOR THE MONTHS FOR THE
ENDED YEAR ENDED ENDED YEAR ENDED
JUNE 30, MARCH 31, MARCH 31, SEPT. 30,
1998 1998 1997 1996
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHARES ISSUED AND REDEEMED:
Shares sold -- Class A 15,392 2,553,367(1) 12,514 16,315
Shares issued in reinvestment
of dividends -- Class A 15,229 23,740 5,388 12,154
Shares redeemed -- Class A (132,609) (218,009) (36,331) (644,452)
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING -- CLASS A (101,988) 2,359,098 (18,429) (615,983)
Shares sold -- Class B 56,596 112,758 14,844 3
Shares issued in reinvestment
of dividends -- Class B 995 1,979 16 0
Shares redeemed -- Class B (9,437) (59) (2,938) 0
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING -- CLASS B 48,154 114,678 11,922 3
Shares sold -- Class C(2) 412 782,874(1) N/A N/A
Shares issued in reinvestment
of dividends -- Class C(2) 2,640 2,672 N/A N/A
Shares redeemed -- Class C(2) (33,407) (61,472) N/A N/A
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING -- CLASS C(2) (30,355) 724,074 N/A N/A
Shares sold -- Institutional
Class 27,553 172,762 80,275 603,337
Shares issued in reinvestment
of dividends -- Institutional
Class 2,385 8,516 3,930 6,841
Shares redeemed --
Institutional Class (28,822) (185,287) (67,239) (142,281)
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING -- INSTITUTIONAL
CLASS 1,116 (4,009) 16,966 467,897
</TABLE>
(1) "SHARES SOLD" INCLUDES 2,415,150 FOR CLASS A SHARES AND 779,496 FOR CLASS C
SHARES AS A RESULT OF THE CONSOLIDATION OF THE OVERLAND MUNICIPAL INCOME
FUND. SEE NOTE 1.
(2) THIS CLASS OF SHARES COMMENCED OPERATIONS ON DECEMBER 15, 1997.
138
<PAGE>
NOTES TO FINANCIAL STATEMENTS Tax-Free Funds
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
OREGON TAX-FREE FUND
-------------------------------------------------
FOR THE
THREE FOR THE SIX
MONTHS FOR THE MONTHS FOR THE
ENDED YEAR ENDED ENDED YEAR ENDED
JUNE 30, MARCH 31, MARCH 31, SEPT. 30,
1998 1998 1997 1996
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHARES ISSUED AND REDEEMED:
Shares sold -- Class A 56,463 140,558 42,353 80,771
Shares issued in reinvestment of
dividends -- Class A 13,045 82,429 36,482 71,455
Shares redeemed -- Class A (80,855) (448,209) (248,818) (1,158,830)
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING -- CLASS A (11,347) (225,222) (169,983) (1,006,604)
Shares sold -- Class B 221,819 331,842 28,610 3
Shares issued in reinvestment of
dividends -- Class B 2,548 5,330 99 0
Shares redeemed -- Class B (11,758) (615) 0 0
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING -- CLASS B 212,609 336,557 28,709 3
Shares sold -- Institutional
Class 20,167 53,185 44,591 633,826
Shares issued in reinvestment of
dividends -- Institutional
Class 1,426 7,122 2,838 4,545
Shares redeemed -- Institutional
Class (40,976) (108,163) (63,838) (119,874)
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING -- INSTITUTIONAL
CLASS (19,383) (47,856) (16,409) 518,497
</TABLE>
<TABLE>
<CAPTION>
SHORT-TERM MUNICIPAL INCOME FUND
--------------------------------
FOR THE
SIX FOR THE FOR THE
MONTHS YEAR YEAR
ENDED ENDED ENDED
JUNE 30, DEC. 31, DEC. 31,
1998 1997 1996
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
SHARES ISSUED AND REDEEMED:
Shares sold 596,518 3,113,993 4,213,144
Shares issued in reinvestment of
dividend 53,177 181,253 156,919
Shares redeemed (3,514,206) (4,728,462) (2,299,217)
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING (2,864,511) (1,433,216) 2,070,846
</TABLE>
5. SUBSEQUENT EVENTS
Effective May 1, 1998, the Short-Term Municipal Income Fund was closed to new
purchases and is in the process of being liquidated.
On August 1, 1998, Wells Capital Management Incorporated ("WCM"), a
wholly-owned subsidiary of WFB, began acting as investment sub-advisor to the
Funds. WCM is entitled to receive from WFB, as compensation for its sub-advisory
services, a monthly fee at the annual rate of 0.15% of the Funds' average daily
net assets up to $400 million, 0.125% for the next $400 million and 0.10% of the
Funds' average daily net assets in excess of $800 million. WCM's minimum annual
fee is $120,000 for each Fund. This minimum annual fee does not increase the
advisory fees paid by the Funds to WFB.
139
<PAGE>
Tax-Free Funds INDEPENDENT AUDITORS' REPORT
- ------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
To The Shareholders and Board of Directors
Stagecoach Funds, Inc.:
We have audited the accompanying statements of assets and liabilities,
including the portfolios of investments, of the Arizona Tax-Free Fund,
California Tax-Free Bond Fund, California Tax-Free Income Fund, National
Tax-Free Fund, Oregon Tax-Free Fund, and Short-Term Municipal Income Fund (six
of the funds comprising Stagecoach Funds, Inc.) as of June 30, 1998, and the
related statements of operations for the three-months ended June 30, 1998, and
the year ended March 31, 1998, for all funds except the California Tax-Free Bond
Fund and Short-Term Municipal Income Fund which are for the six months ended
June 30, 1998, and the year ended December 31, 1997, the statements of changes
in net assets of the Arizona Tax-Free Fund, National Tax-Free Fund and Oregon
Tax Free Fund for the three months ended June 30, 1998, the year ended March 31,
1998, the six months ended March 31, 1997, and the year ended September 30,
1996, the California Tax-Free Bond Fund and Short-Term Municipal Income Fund for
the six months ended June 30, 1998, and the years ended December 31, 1997 and
1996, and the California Tax-Free Income Fund for the three months ended June
30, 1998, the year ended March 31, 1998, the six months ended March 31, 1997,
and the nine months ended September 30, 1996, and financial highlights for the
periods indicated herein. These financial statements and financial highlights
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits. For the Arizona Tax-Free Fund, National Tax-Free Fund and Oregon
Tax-Free Fund, all years or periods indicated in the accompanying financial
highlights ending prior to October 1, 1995, were audited by other auditors whose
report dated November 3, 1995, expressed an unqualified opinion on this
information.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1998, by correspondence with the custodian and other appropriate audit
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the aforementioned funds of Stagecoach Funds, Inc. as of June 30, 1998, the
results of their operations, the changes in their net assets and their financial
highlights for the periods indicated herein, except as noted above, in
conformity with generally accepted accounting principles.
[KPMG PEAT MARWICK LLP SIGNATURE]
San Francisco, California
August 5, 1998
140
<PAGE>
THIS PAGE IS INTENTIONALLY LEFT BLANK --
<PAGE>
LIST OF ABBREVIATIONS
- ------------------------------------------------------------------------
The following is a list of common abbreviations for terms and entities which
may have appeared in this report.
<TABLE>
<S> <C> <C>
ABAG -- Association of Bay Area Governments
ADR -- American Depository Receipts
AMBAC -- American Municipal Bond Assurance Corporation
AMT -- Alternative Minimum Tax
ARM -- Adjustable Rate Mortgages
BART -- Bay Area Rapid Transit
CDA -- Community Development Authority
CDSC -- Contingent Deferred Sales Charge
CGIC -- Capital Guaranty Insurance Company
CGY -- Capital Guaranty Corporation
CMT -- Constant Maturity Treasury
COFI -- Cost of Funds Index
CONNIE LEE -- Connie Lee Insurance Company
COP -- Certificate of Participation
CP -- Commercial Paper
DW&P -- Department of Water & Power
DWR -- Department of Water Resources
EDFA -- Education Finance Authority
FGIC -- Financial Guaranty Insurance Corporation
FHA -- Federal Housing Authority
FHLMC -- Federal Home Loan Mortgage Corporation
FNMA -- Federal National Mortgage Association
FSA -- Financial Security Assurance, Inc
GNMA -- Government National Mortgage Association
GO -- General Obligation
HFA -- Housing Finance Authority
HFFA -- Health Facilities Financing Authority
IDA -- Industrial Development Authority
LIBOR -- London Interbank Offered Rate
LOC -- Letter of Credit
MBIA -- Municipal Bond Insurance Association
MFHR -- Multi-Family Housing Revenue
MUD -- Municipal Utility District
PCFA -- Pollution Control Finance Authority
PCR -- Pollution Control Revenue
PFA -- Public Finance Authority
PSFG -- Public School Fund Guaranty
RAW -- Revenue Anticipation Warrants
RDA -- Redevelopment Authority
RDFA -- Redevelopment Finance Authority
R&D -- Research & Development
SFMR -- Single Family Mortgage Revenue
TBA -- To Be Announced
TRAN -- Tax Revenue Anticipation Notes
USD -- Unified School District
V/R -- Variable Rate
</TABLE>
<PAGE>
Wells Fargo provides investment advisory services, shareholder services, and
certain other services for Stagecoach Funds. The Funds are sponsored and
distributed by STEPHENS INC., Member NYSE/SIPC. Wells Fargo is not affiliated
with Stephens Inc.
This report and the financial statements contained herein are submitted for
the general information of the shareholders of the Stagecoach Funds. If this
report is used for promotional purposes, distribution of the report must be
accompanied or preceded by a current prospectus. For a prospectus containing
more complete information, including charges and expenses, call
1-800-222-8222. Read the prospectus carefully before you invest or send money.
- -C- Stagecoach Funds
STAGECOACH FUNDS-Registered Trademark-
P.O. Box 7066
San Francisco, CA 94120-7066
DATED MATERIAL
PLEASE EXPEDITE
- -Recycle Logo- SC TF R (9/98)
