<PAGE>
As filed with the Securities and Exchange Commission
on April 30, 1999
Registration No. 33-42927; 811-6419
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [_]
Post-Effective Amendment No. 52 [X]
And
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [_]
Amendment No. 53 [X]
(Check appropriate box or boxes)
________________________
STAGECOACH FUNDS, INC.
(Exact Name of Registrant as specified in Charter)
111 Center Street
Little Rock, Arkansas 72201
(Address of Principal Executive Offices, including Zip Code)
__________________________
Registrant's Telephone Number, including Area Code: (800) 643-9691
Richard H. Blank, Jr.
c/o Stephens Inc.
111 Center Street
Little Rock, Arkansas 72201
(Name and Address of Agent for Service)
With a copy to:
Robert M. Kurucza, Esq.
Marco E. Adelfio, Esq.
Morrison & Foerster LLP
2000 Pennsylvania Ave., N.W.
Washington, D.C. 20006
It is proposed that this filing will become effective (check appropriate box):
[_] Immediately upon filing pursuant [_] on _________ pursuant
to Rule 485(b), or to Rule 485(b)
[X] 60 days after filing pursuant [_] on _________ pursuant
to Rule 485(a)(1), or to Rule 485(a)(1)
[_] 75 days after filing pursuant [_] on ___________pursuant
to Rule 485(a)(2), or to Rule 485(a)(2)
If appropriate, check the following box:
[_] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
EXPLANATORY NOTE
----------------
This Post-Effective Amendment No. 52 (the "Amendment") to the Registration
Statement of Stagecoach Funds, Inc. (the "Company") is being filed to add to the
Company's Registration Statement audited financial statements and certain other
financial information for the year ended February 28, 1999, for the Asset
Allocation, Index Allocation and U.S. Government Allocation Funds, and to make
certain other changes to the prospectus and statement of additional
information for these funds.
This Post-Effective Amendment does not affect the Registration Statement
for any of the Company's other funds.
<PAGE>
STAGECOACH FUNDS, INC.
----------------------
Cross Reference Sheet
---------------------
Form N-1A Item Number
- ---------------------
Part A Prospectus Captions
- ------ -------------------
1 Front and Back Cover Pages
2 Objectives and Principal Strategies
Important Risks
3 Summary of Expenses
Example of Expenses
4 Objectives and Principal Strategies
Important Risks
See Individual Fund Summaries
General Investment Risks
5 Not applicable
6 Organization and Management of the Funds
7 Your Account
How to Buy Shares
Selling Shares
Dividends and Distributions
Taxes
8 A Choice of Share Classes
Reduced Sales Charges
Distribution Plan
Exchanges
9 See Individual Fund Summaries
Part B Statement of Additional Information Captions
- ------ --------------------------------------------
10 Cover Page and Table of Contents
11 Historical Fund Information
12 Investment Restrictions
Additional Investment Policies
Risk Factors
13 Management
14 Capital Stock
15 Management
16 Portfolio Transactions
17 Capital Stock
18 Determination of Net Asset Value
Additional Purchase and Redemption Information
19 Federal Income Taxes
20 Management
21 Performance Calculations
22 Financial Information
Part C Other Information
- ------ -----------------
23-30 Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C of this Document.
<PAGE>
June 30, 1999
FRONT COVER
STAGECOACH
ALLOCATION FUNDS
PROSPECTUS
Asset Allocation Fund Please read this prospectus and keep it for future
reference. It is designed to provide you with important
Index Allocation Fund and to help you decide if a Fund's goals to match your
own.
U.S. Government THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
Allocation Fund BY THE SECURITIES AND EXCHANGE COMMISSION ("SEC"), OR
ANY OTHER REGULATORY AUTHORITY, NOR HAS THE SEC PASSED
Class A, Class B UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS
and Class C REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
FUND SHARES ARE NOT DEPOSITS OF WELLS FARGO BANK, N.A.
("WELLS FARGO BANK") OR ANY OF IT AFFILIATES. FUND
SHARES ARE NOT INSURED OR GUARANTEED BY THE U.S.
GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION
("FDIC") OR ANY OTHER GOVERNMENTAL AGENCY. AN
INVESTMENT IN A FUND INVOLVES CERTAIN RISKS, INCLUDING
POSSIBLE LOSS OF PRINCIPAL.
<PAGE>
INSIDE FRONT COVER
TABLE OF CONTENTS
OVERVIEW OBJECTIVES AND PRINCIPAL
STRATEGIES
This section contains IMPORTANT RISKS
important summary PERFORMANCE HISTORY
information about the SUMMARY OF EXPENSES
Funds.
- ------------------------------------------------------------------
THE FUNDS ASSET ALLOCATION FUND
INDEX ALLOCATION FUND
This section contains U.S. GOVERNMENT ALLOCATION
important information FUND
about the individual GENERAL INVESTMENT RISKS
Funds. ORGANIZATION AND MANAGEMENT
OF THE FUNDS
- ------------------------------------------------------------------
YOUR ACCOUNT
Turn to this section for A CHOICE OF SHARE CLASSES
information on how to REDUCED SALES CHARGES
open and maintain EXCHANGES
your account, including YOUR ACCOUNT
how to buy, sell and HOW TO BUY SHARES
exchange Fund shares. SELLING SHARES
ADDITIONAL SERVICES AND
OTHER INFORMATION
IMPORTANT INFORMATION FOR
SHAREHOLDERS
- ------------------------------------------------------------------
GLOSSARY
<PAGE>
STAGECOACH ALLOCATION FUNDS OVERVIEW
<TABLE>
<CAPTION>
FUND OBJECTIVE
- --------------------------------------------------------------------------------
<S> <C>
ASSET ALLOCATION Seeks long-term total return, consistent with
FUND reasonable risk.
- --------------------------------------------------------------------------------
INDEX ALLOCATION Seeks long-term total return, consistent with
FUND reasonable risk.
- -------------------------------------------------------------------------------
U.S. GOVERNMENT Seeks long-term total return, consistent with
ALLOCATION reasonable risk.
- -------------------------------------------------------------------------------
FUND PRINCIPAL STRATEGY
- --------------------------------------------------------------------------------
<S> <C>
ASSET ALLOCATION We allocate and reallocate assets among common stocks,
FUND U.S. Treasury bonds and money market instruments,
operating from a target allocation of 60% stocks and
40% bonds. We invest in asset classes that we believe
are undervalued in order to achieve better long-term,
risk-adjusted returns.
- --------------------------------------------------------------------------------
INDEX ALLOCATION We allocate and reallocate assets among common stocks,
FUND U.S. Treasury bonds and money market instruments,
operating from a target allocation of 100% stocks. We
invest in asset classes that we believe are
undervalued in order to achieve better long-term,
risk-adjusted returns.
- -------------------------------------------------------------------------------
U.S. GOVERNMENT We allocate and reallocate assets among long-term
ALLOCATION U.S. Treasury bonds, intermediate-term U.S. Treasury
notes, and short-term money market instruments. We
invest in asset classes that we believe are
undervalued in order to achieve better long-term,
risk-adjusted returns.
- -------------------------------------------------------------------------------
</TABLE>
<PAGE>
PRINCIPAL STRATEGY
- ------------------------------------------------------------------------------
We allocate and reallocate assets among common stocks, U.S. Treasury bonds and
money market instruments, operating from a target allocation of 60% stocks and
40% bonds. We invest in asset classes that we believe are undervalued in order
to achieve better long-term, risk-adjusted returns.
- ------------------------------------------------------------------------------
We allocate and reallocate assets among common stocks, U.S. Treasury bonds and
money market instruments, operating from a target allocation of 100% stocks. We
invest in asset classes that we believe are undervalued in order to achieve
better long-term, risk-adjusted returns.
- ------------------------------------------------------------------------------
We allocate and reallocate assets among long-term U.S. Treasury bonds,
intermediate-term U.S. Treasury notes, and short-term money market instruments.
We invest in asset classes that we believe are undervalued in order to achieve
better long-term risk-adjusted returns.
- -----------------------------------------------------------------------------
<PAGE>
SUMMARY OF IMPORTANT RISKS
This section summarizes important risks that are common to all of the Funds
described in this Prospectus, and important risks that relate specifically
to particular Funds. Both are important to your investment choice.
Additional information about these and other risks is included in the
individual Fund Descriptions later in this Prospectus and under General
Investment Risks beginning on page __. An investment in a Fund is not a
deposit of Wells Fargo Bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency.
EQUITY SECURITIES. The Asset Allocation and Index Allocation Funds invest in
equity securities, which are subject to equity market risk. This is the risk
that stock prices will fluctuate and can decline and reduce the value of a
Fund's portfolio. Certain types of stock and certain individual stocks selected
for a Fund's portfolio may underperform or decline in value more than the
overall market. As of the date of this Prospectus, the equity markets, as
measured by the S&P 500 Index and other commonly used indexes, are trading at
or close to record levels. There can be no guarantee that these levels will
continue. The Funds that invest in smaller companies, in foreign companies
(including investments made through American Depositary Receipts and similar
instruments), and in emerging markets are subject to additional risks,
including less liquidity and greater price volatility. A Fund's investment in
foreign companies and emerging markets are also subject to special risks
associated with international investing, including currency, political,
regulatory and diplomatic risks.
FIXED-INCOME SECURITIES. The Funds may invest in debt instruments, such as
notes and bonds, which are subject to credit risk and interest rate risk.
Credit risk is the possibility that an issuer of an instrument will be unable
to make interest payments or repay principal. Changes in the financial strength
of an issuer or changes in the credit rating of a security may affect its
value. Interest rate risk is the risk that interest rates may increase, which
will reduce the resale value of instruments in a Fund's portfolio. Debt
instruments with longer maturities are generally more sensitive to interest
rate changes than those with shorter maturities. Changes in market interest
rates do not affect the rate payable on debt instruments held in a Fund, unless
the instrument has adjustable or variable rate features, which can reduce
interest rate risk. Changes in market interest rates may also extend or shorten
the duration of certain types of instruments, such as asset-backed securities,
thereby affecting their value and the return on your investment.
<PAGE>
FUND-SPECIFIC RISKS
ASSET ALLOCATION MODELS. The Funds use investment models that seek undervalued
asset classes. There is no guarantee that the model will make accurate
determinations or that an asset class we believe is undervalued will perform as
expected. We may incur higher than average portfolio turnover resulting from
allocation Shifts recommended by the model. Portfolio turnover increases
transaction costs And may trigger capital gains.
<PAGE>
PERFORMANCE HISTORY
The information on the following pages shows you how each Fund has performed and
illustrates the variability of a Fund's return over time. Each Fund's average
annual returns for one-five and tn year periods are compared to the performance
of an appropriate broad-based index.
The Funds' shares are sold subject to sales load that are not included in the
performance calculations. If these charges were included, performance shown
would be lower.
Please remember that past performance is on guarantee of future results.
ASSET ALLOCATION FUND CLASS A SHARES CALENDAR YEAR RETURNS/1/
[BAR CHART]
Best Qtr: Q4'98 16.09% Worst Qtr: Q3'98 -5.55%
1. Returns do not reflect sales changes. If they did, returns would be lower.
The Asset Allocation Fund's year-to-date performance for the quarter ended March
31, 1999 was 2.60%.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (%)
for the period ended 12/31/98
- --------------------------------------------------------------------
<S> <C> <C> <C>
ASSET ALLOCATION FUND 1 YEAR 5 YEAR 10 YEAR
-----------------------------------
CLASS A (INCEPT.1/13/98) 19.95 15.45 14.01
-----------------------------------
CLASS B (INCEPT.1/1/95) 19.67 15.63 13.92
-----------------------------------
CLASS C (INCEPT.4/1/98) 23.74 15.83 13.93
- --------------------------------------------------------------------
S&P 500, LB GOV/CORP. [ ] [ ] [ ]
- --------------------------------------------------------------------
</TABLE>
1. S&P 500 is a registered trademark of Standard and Poors.
2. Lehman Brothers Government/Corporate Bond Index.
3. Composite Benchmark of the S&P 500 and LB Gov/Corp, Bond Index.
[TABLE]
INDEX ALLOCATION FUND CLASS A SHARES CALENDAR YEAR RETURNS/1/
[BAR CHART]
Best Qtr: Q4'98 20.85% Worst Qtr: Q3'98 -10.12%
1. Returns do not reflect sales changes. If they did, returns would be lower.
The Index Allocation Fund's year-to-date performance for the quarter ended March
31, 1999 was 4.63%
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (%)
for the period ended 12/31/98
- --------------------------------------------------------------------
<S> <C> <C> <C>
INDEX ALLOCATION FUND 1 YEAR 5 YEAR 10 YEAR
------------------------------------
CLASS A (INCEPT.4/7/88) 20.87 18.83 15.10
------------------------------------
CLASS B (INCEPT.12/15/97) 20.57 18.84 14.84
------------------------------------
CLASS C (INCEPT.12/15/97) 24.62 19.06 14.85
- --------------------------------------------------------------------
[BENCHMARK] [ ] [ ] [ ]
- --------------------------------------------------------------------
</TABLE>
<PAGE>
U.S. GOVERNMENT ALLOCATION FUND CLASS A SHARES CALENDAR YEAR RETURNS/1/
[BAR CHART]
Best Qtr: Q2'98 8.00% Worst Qtr: Q1'94 -4.86%
1. Returns do not reflect slaes changes. If they did, returns would be lower.
The US Government Allocation Fund's year-to-date performance for the quarter
ended March 31, 1999 was -0.31%.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (%)
for the period ended 12/31/98
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSET ALLOCATION FUND 1 YEAR 5 YEAR INCEPTION
------------------------------------
CLASS A (INCEPT.3/31/87) 0.88 3.60 7.33
------------------------------------
CLASS B (INCEPT.1/1/95) -0.01 3.67 7.14
------------------------------------
[BENCHMARK] [ ] [ ] [ ]
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
SUMMARY OF EXPENSES
SHAREHOLDER TRANSACTION EXPENSES
These tables describe the fees and expenses that you may pay if you buy and hold
shares of a Fund. These tables do not reflect charges that may be imposed in
connection with an account through which you hold Fund shares. Amounts are
expressed as a percentage of the initial purchase amount.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
All
Funds All Funds All Funds
---------------------------------------------------------------------
Class A Class B Class C
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Minimum sales charge (load)
imposed on purchases (as a percentage of
offering price) 4.50% None None
- --------------------------------------------------------------------------------------------------------------------------
Maximum deferred sales charge (load)
(as a percentage of purchase price) None 5.00% 1.00%
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Asset Allocation Fund Index Allocation Fund U.S. Government
Allocation Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Class Class Class Class Class Class Class Class
A B C A B C A B
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
.50%/first $250 mill., .40%/next $250 .70%/first $500 mill., .60%/over .50%/first $250 mill.,
Management Fee $ 250 mill., 30%/over $500 mill $500 mill. $250 mill., .30%/over
- ------------------------------------------------------------------------------------------------------------------------------------
Distribution (12b-1) Fee .05% .70% .75% .25% .75% .75% .05% .70%
Other Expenses .44% .44% .60% .37% .81% .61% .67% .75%
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL ANNUAL FUND OPERATING
EXPENSES 0.99% 1.64% 1.85% 1.32% 2.26% 2.06% 1.22% 1.95%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/1/ The actual expenses incurred by the Funds will be lower than the contract
amounts shown above as a result of voluntary fee waivers. The Funds' actual
expenses after waivers are currently as follows: (Investment Advisory
Fee/Distribution Fee/Other Expenses/Total): Asset Allocation Fund (Class A:
.50%/.05%/.44%/.99%) (Class B: .50%/.70%/.44%/1.64%) (Class
C:.50%/.75%/.39%/1.64%), Index Allocation Fund (Class A:
.70%/.25%/.37%/1.32%) (Class B: .70%/.75%/.61%/2.06%) (Class C:
.70%/.75%/.61%/2.06%), U.S. Government Allocation Fund (Class A:
.50%/.05%/.64%/1.19%) (Class B: .50%/.70%/.64%/1.84%). Fee waivers are
voluntary and may be discontinued or modified at any time.
<PAGE>
SUMMARY OF EXPENSES (CONT'D)
EXAMPLE OF EXPENSES
These examples are intended to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds. The examples assume a
fixed rate of return and that Fund operating expenses remain the same. Your
actual costs may be higher or lower than those shown.
YOU WOULD PAY THE FOLLOWING EXPENSES ON A $10,000 INVESTMENT ASSUMING A 5%
ANNUAL RETURN AND THAT YOU REDEEM YOUR SHARES AT THE END OF EACH PERIOD:
<TABLE>
<CAPTION>
U.S. Government
Asset Allocation Fund Index Allocation Fund Allocation Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Class Class Class Class Class Class Class Class
A B C A B C A B
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 YEAR $ 546 $ 667 $ 288 $ 578 $ 729 $ 309 $ 569 $ 698
- ------------------------------------------------------------------------------------------------------------------------------------
3 YEARS $ 751 $ 817 $ 582 $ 849 $1006 $ 646 $ 820 $ 912
- ------------------------------------------------------------------------------------------------------------------------------------
5 YEARS $ 972 $1092 $1001 $1141 $1410 $1108 $1090 $1252
- ------------------------------------------------------------------------------------------------------------------------------------
10 YEARS $1608 $1605 $2169 $1969 $2128 $2390 $1861 $1903
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
YOU WOULD PAY THE FOLLOWING EXPENSES ON A $10,000 INVESTMENT ASSUMING A 5%
ANNUAL RETURN AND THAT YOU DO NOT REDEEM YOUR SHARES AT THE END OF THE PERIODS
SHOWN:
<TABLE>
<CAPTION>
U.S. Government
Asset Allocation Fund Index Allocation Fund Allocation Fund
- -----------------------------------------------------------------------------------------------------------------------------------
Class Class Class Class Class Class Class Class
A B C A B C A B
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 YEAR $ 546 $ 167 $ 188 $ 578 $ 229 $ 209 $ 569 $ 198
- -----------------------------------------------------------------------------------------------------------------------------------
3 YEARS $ 751 $ 517 $ 582 $ 849 $ 706 $ 646 $ 820 $ 612
- -----------------------------------------------------------------------------------------------------------------------------------
5 YEARS $ 972 $ 892 $1001 $1141 $1210 $1108 $1090 $1052
- -----------------------------------------------------------------------------------------------------------------------------------
10 YEARS $1608 $1605 $2169 $1969 $2128 $2390 $1861 $1903
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
The summary information on the previous pages is designed to provide you with an
overview of each Fund. The sections that follow provide more detailed
information about the investments and management of each Fund. Words appearing
in italicized print and highlighted in color are defined in the glossary.
Important information you should look for:
INVESTMENT OBJECTIVE AND INVESTMENT POLICIES
What is the Fund trying to achieve? How do we intend to invest your money? What
makes a Fund different from the other Funds offered in this prospectus?
PERMITTED INVESTMENTS
A summary of the Fund's key permitted investments and practices.
IMPORTANT RISK FACTORS
What are key risk factors for the Fund? This will include the factors described
in "General Investment Risks" together with any special risk factors for the
Fund.
FINANCIAL HIGHLIGHTS
Provides important financial information about each class of shares of the Fund.
<PAGE>
ASSET ALLOCATION FUND
INVESTMENT OBJECTIVE
The Asset Allocation Fund seeks long-term total return, consistent with
reasonable risk.
INVESTMENT POLICIES
We allocate and reallocate assets among common stocks, U.S. Treasury Bonds and
money market instruments. This strategy is based on the premise that asset
classes are at times undervalued or overvalued in comparison to one another and
that investing in undervalued asset classes offers better long-term, risk-
adjusted returns.
PERMITTED INVESTMENTS
The asset classes we invest in are:
. Stock Investments -- We invest in common stocks representative of the S&P
500 Index. We do not individually select common stocks on the basis of
traditional investment analysis. Instead, stock investments are made
according to a weighted formula intended to match the total return of the
S&P 500 Index as closely as possible;
. Bond Investments -- We invest in U.S. Treasury Bonds representative of the
Lehman Brothers 20+ Bond Index. Bonds in this Index have remaining
maturities of twenty years or more; and
. Money Market Investments -- We invest this portion of obligations of
foreign and domestic banks, short-term corporate debt instruments and
repurchase agreements.
In addition, under normal market conditions, we may invest:
. In call and put options on stock indexes, stock index futures, options on
stock index futures, and interest rate futures contracts as a substitute
for a comparable market position in stocks or bonds;
. In interest rate and index swaps; and
. Up to 25% of total assets in foreign obligations qualifying as money market
investments.
<PAGE>
We manage the allocation of investments in the Fund's portfolio assuming a
"normal" allocation of 60% stocks and 40% bonds. This is not a "target"
allocation but rather is a design feature that is intended to set a level of
risk tolerance for the Fund.
We are not required to keep a minimum investment in any of the three asset
classes described above, nor are we prohibited from investing substantially all
of our assets in a single class. The allocation may shift at any time. We may
temporarily hold assets in cash or in money market instruments, including U.S.
Government obligations, repurchase agreements and other short-term investments,
to maintain liquidity or when we believe it is in the best interest sof
shareholders to do so. During such periods, the Fund may not achieve it
sobjective of long-term total return. The Fund is a diversified portfolio.
IMPORTANT RISK FACTORS
Foreign obligations may entail additional risks, such as currency, political,
regulatory and diplomatic risks, which are described in more detail in the
General Investment Risks section below. The value of investments in options on
stock indexes and stock index futures is affected by price movements for the
stocks in a particular index, rather than price movements for an individual
security.
You should consider the Common Risks on page __, the General Investment Risks
beginning on page __ and the specific risks listed here. They are all important
to your investment choice.
PORTFOLIO MANAGEMENT
The Fund is managed by a team of advisors who, using the Allocation model,
jointly make investment decisions for the Funds.
ASSET ALLOCATION FUND FINANCIAL HIGHLIGHTS
See "Historical Fund Information" on page __.
This table is intended to help you understand the Fund's financial performance
for the past 5 years (or since inception, if shorter). KPMG LLP audited this
information which along with their report and the Fund's financial statements,
is available upon request in the Fund's annual report.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING
- --------------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES - COMMENCED ON NOVEMBER 13, 1998
--------------------------------------------------------------------------
FOR THE PERIOD ENDED: February 28, March, 31 Mar.31 Sept. 30 Dec,31,
1999/1/ 1998 1997/2/ 1996/3/ 1995
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value beginning of period $ 24.99 $ 20.30 $ 21.24 $ 20.74 $ 16.73
- --------------------------------------------------------------------------------------------------------------------------------
Income from investment operations
Net investment income 0.38 0.69 0.41 0.57 0.74
Net realized and unrealized gain (loss)
on investment 2.92 6.37 0.65 0.50 4.07
- --------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 3.30 7.06 1.06 1.07 4.81
- --------------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.33) (0.69) (0.41) (0.57) (0.74)
Distributions from net realized gain (2.31) (1.68) (1.59) 0.00 (0.06)
- --------------------------------------------------------------------------------------------------------------------------------
Total from distributions (2.64) (2.37) (2.00) (0.57) (0.80)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 25.65 $ 24.99 $ 20.30 $ 21.24 $ 20.74
- --------------------------------------------------------------------------------------------------------------------------------
Total return (not annualized)/6/ 13.69% 36.08% 4.94% 5.14% 29.18%
- --------------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (000's) $1,362,966 $1,305,848 $1,041,622 $1,057,346 $1,077,935
- --------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets (annualized):
Ratio of expenses to average net assets 0.92% 0.95%/4/ 0.92%/4/ 0.90%/4/ 0.84%
- --------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to
average net assets 1.65% 2.99%/4/ 3.91%/4/ 3.53%/4/ 3.81%
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 31% 51%/4/ 5%/4/ 1%/5/ 1%
- --------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets prior to
waived fees and reimbursed expenses N/A N/A N/A N/A N/A
- --------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average
net assets prior to waived fees and reimbursed
expenses N/A N/A N/A N/A N/A
- --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING
- ----------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES -- COMMENCED
ON JANUARY 1, 1995
-------------------------------------------------------------
FOR THE PERIOD ENDED: Dec. 31, February 28, March 31, March 31, Sept. 31,
1994 1999/1/ 1998 1997/2/ 1997/3/
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value beginning of period $ 18.80 $ 15.16 $ 12.29 $ 12.84 $ 12.50
- ----------------------------------------------------------------------------------------------------------------------------------
Income from investment operations
Net investment income 0.77 0.13 0.29 0.19 0.28
Net realized and unrealized gain (loss)
on investment (1.31) 1.77 3.89 0.41 0.34
- ----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (0.54) 1.90 4.18 0.60 0.62
- ----------------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.77) (0.11) (0.29) (0.19) (0.28)
Distributions from net realized gain (0.76) (1.40) (1.02) (0.96) (0.00)
- ----------------------------------------------------------------------------------------------------------------------------------
Total from distributions (1.53) (1.51) (1.31) (1.15) (0.28)
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 16.73 $ 15.55 $ 15.16 $ 12.29 $ 12.84
- ----------------------------------------------------------------------------------------------------------------------------------
Total return (not annualized)/6/ (2.82)% 12.98% 35.16% 4.62% 4.96%
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (000's) $ 896,943 $402,991 $ 267,060 $ 89,252 $63,443
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets (annualized):
Ratio of expenses to average net assets 0.84% 1.62% 1.60%/4/ 1.53%/4/ 1.14%/4/
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to
average net assets 4.30% 0.91% 2.15%/4/ 3.30%/4/ 3.37%/4/
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 49% 31% 51%/4/ 5%/4/ 1%/5/
- -----------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets prior to
waived fees and reimbursed expenses N/A 1.63% N/A 1.58%/4/ 1.56%/4/
- -----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average
net assets prior to waived fees and reimbursed
expenses N/A 0.90 N/A 3.25%/4/ 2.95%/4/
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING
- ----------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES -- COMMENCED
ON APRIL 1, 1998
-------------------------------------------------------
Year Ended
Dec. 31. February 28,
FOR THE PERIOD ENDED: 1995 1999
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value beginning of period $ 10.00 $ 15.16
- ----------------------------------------------------------------------------------------------------------------------------------
Income from investment operations
Net investment income 0.22 0.08
Net realized and unrealized gain (loss)
on investment 2.53 1.82
- ----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 2.75 1.90
- ----------------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.22) (0.07)
Distributions from net realized gain (0.03) (1.40)
- ----------------------------------------------------------------------------------------------------------------------------------
Total from distributions (0.25) (1.47)
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 12.50 $ 15.59
- ----------------------------------------------------------------------------------------------------------------------------------
Total return (not annualized)/6/ 27.72% 12.97%
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (000's) $ 26,271 $ 10,076
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets (annualized):
Ratio of expenses to average net assets 1.53% 1.64%
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to
average net assets 2.71% 0.69%
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 15% 31%
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets prior to
waived fees and reimbursed expenses 1.76% 1.85%
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average
net assets prior to waived fees and reimbursed
expenses 2.48% 0.48%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/1/ The Fund changed its fiscal year-end from March 31 to Feb 28.
/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.
/4/ Ratio includes income and expenses changed to the Master Portfolio prior to
December 15, 1998.
/5/ Represents portfolio activity for the Fund's stand-alone period only. The
portfolio turnover for the period from April 1996 to September 30, 1996 was
28%.
/6/ Total returns do not include any sales charges.
<PAGE>
INDEX ALLOCATION FUND
INVESTMENT OBJECTIVE
The Index Allocation Fund seeks to earn over the long-term a high level of total
return, that is, income and capital appreciation combined, consistent with the
assumption of reasonable risk, by pursuing an "asset allocation" strategy
whereby its investments are allocated, based on changes in market conditions,
among three asset classes-common stocks in the S&P 500 Index, U.S. Treasury
Bonds and money market instruments.
INVESTMENT POLICIES
We allocate and reallocate assets among common stocks, U.S. Treasury bonds and
money market instruments. This strategy is based on the premise that, from time
to time, certain asset classes are more attractive long-term investments than
others and that time shifts based on the relative over or under-valuation of
these classes may produce superior investment returns.
PERMITTED INVESTMENTS
We invest in the following asset classes:
. Stock Investments -- We invest in common stocks representative of the S&P 500
Index. We do not individually select common stock on the basis of traditional
investment analysis. Instead stock investments are made according to a
weighted formula intend to match the S&P 500 Index as closely as possible.
. Bond Investments -- We invest in U.S. Treasury bonds representative of the
Lehman Brothers 20+ Bond Index. Bonds on this Index will have maturities of
20 years or more; and
. Money Market Investments -- We invest this portion of the Fund in high-
quality money market instruments, including U.S. Government obligations,
obligations of foreign and domestic banks, short-term corporate debt
instruments and repurchase agreements.
In addition, under normal market conditions, we invest:
. at least 65% of assets in stocks representative of the S&P 500 Index, the
Lehman Brothers 20+ Bond Index or a combination of both;
. in call and put options on stock indexes, stock index futures, options on
stock index futures, interest rate and Interest Rate Futures contracts as a
substitute for a comparable market position in stocks;
<PAGE>
. in interest rate and index swaps; and
. up to 25% of total assets in obligations of foreign banks qualifying as money
market investments.
We manage the allocation of investments in the Fund's portfolio based on the
assumption that the Fund's "normal" allocation is 100% stocks and no bonds. This
is not a "target" allocation but rather a measure of the level of risk tolerance
for the Fund.
We are not required to keep a minimum investment in any of the three asset
classes, nor are we prohibited from investing substantially all of our assets in
a single class. The asset allocation may shift at any time. In addition, we may
temporarily hold assets in cash or in money market instruments, including U.S.
Government obligations, repurchase agreements and other short-term investments,
to maintain liquidity or when we believe it is the best interest of shareholders
to do so. During such periods, the Fund may not achieve its objective of
long-term total return.
IMPORTANT RISK FACTORS
You should consider both the General Investment Risks beginning on page __ and
the specific risks listed below. They are equally important to your investment
choice.
We may incur a higher than average portfolio turnover ratio due to allocation
shifts recommended by the model. Foreign obligations may entail additional
risks. Investments in general, or price level movements for a particular index,
rather than price movements for an individual issue.
PORTFOLIO MANAGEMENT
The Fund is managed by a team of advisors who, using the Allocation model,
jointly make investment decisions for the Funds.
INDEX ALLOCATION FUND FINANCIAL HIGHLIGHTS
See "Historical Fund Information" on page __.
- --------------------------------------------------------------------------------
This table is intended to help you understand the Fund's financial performance
for the past 5 years for since inception, if shorter). KPMG LLP audited this
information which, along with their report and the Fund's financial statements,
is available upon request in the Fund's annual report.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING
- ----------------------------------------------------------------------------------------------------------------
CLASS A SHARES --
COMMENCED ON APRIL 7, 1998
--------------------------------------------------------------
FEB 28, MARCH 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
FOR THE PERIOD ENDED 1999/1/ 1998/2/ 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $17.55 $ 15.51 $ 13.99 $ 13.76 $ 10.67 $ 11.90
- ----------------------------------------------------------------------------------------------------------------
Income form investment operations:
Net investment income 0.03 0.01 0.28 0.29 0.28 0.31
Net realize and unrealized gain (loss)
on investments 2.14 2.04 3.23 2.02 3.42 (0.39)
- ----------------------------------------------------------------------------------------------------------------
Total form investment operations (loss) 2.17 2.05 3.51 2.31 3.70 (0.08)
- ----------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.03) (0.01) (0.28) (0.29) (0.28) (0.31)
Distributors from net realized gain (0.65) 0.00 (1.71) (1.79) (0.33) (0.84)
- ----------------------------------------------------------------------------------------------------------------
Total from distributions (0.68) (0.01) (1.99) (2.08) (0.61) (1.15)
- ----------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 19.04 17.55 $ 15.51 $ 13.99 $ 13.76 $ 10.67
- ----------------------------------------------------------------------------------------------------------------
Total return/3/ 12.60% 13.23% 25.18% 17.04% 34.71% (0.68)%
- ----------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (000s) $92,655 $92,733 $80,512 $60,353 $52,007 $40,308
- ----------------------------------------------------------------------------------------------------------------
Ratios to average net assets (annualized):
Ratio of expenses to average net assets 1.29% 1.31% 1.26% 1.31% 1.30% 1.30%
Ratio of net investment income to
average net assets 0.19% 0.30% 1.82% 2.06% 2.07% 2.41%
- ----------------------------------------------------------------------------------------------------------------
Portfolio turnover 12% 0% 80% 67% 47% 50%
- ----------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets prior
to waived fees and reimbursed expenses N/A 1.32% 1.29% 1.44% 1.35% 1.38%
- ----------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average
net assets prior to waived fees and
reimbursed expenses N/A 0.29% 1.79% 1.93% 2.02% 2.33%
- ----------------------------------------------------------------------------------------------------------------
<CAPTION>
--------------------------------------------------------------------
CLASS B SHARES -- COMMENCED CLASS C SHARES - COMMENCED
ON DECEMBER 15, 1997 ON JULY 1, 1998
--------------------------------------------------------------------
FEB 28, MARCH 31, DEC. 31, FEB 28, MARCH 31 DEC. 31,
FOR THE PERIOD ENDED 1999/1/ 1998/2/ 1997 1999/1/ 1998/2/ 1997
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 21.81 $19.31 $ 18.99 $ 21.82 $ 19.32 $ 17.42
- ----------------------------------------------------------------------------------------------------------------------
Income form investment operations:
Net investment income (0.07) (0.01) 0.00 (0.10) (0.02) 0.20
Net realize and unrealized gain (loss)
on investments 2.61 2.51 0.32 2.64 2.52 4.00
- ----------------------------------------------------------------------------------------------------------------------
Total form investment operations (loss) 2.54 2.50 0.32 2.54 2.50 4.20
- ----------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.00) 0.00 0.00 0.00 0.00 (0.20)
Distributors from net realized gain (0.80) 0.00 0.00 (0.80) 0.00 (2.10)
- ----------------------------------------------------------------------------------------------------------------------
Total from distributions (0.80) 0.00 0.00 (0.80) 0.00 (2.30)
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 23.55 $21.81 $ 19.31 $ 23.56 $ 21.82 $ 19.32
- ----------------------------------------------------------------------------------------------------------------------
Total return/3/ 11.88% 12.95% 1.69% 11.88% 13.00% 24.07%
- ----------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (000s) $12,568 $3,322 $ 356 $67,364 $56,164 $46,084
- ----------------------------------------------------------------------------------------------------------------------
Ratios to average net assets (annualized):
Ratio of expenses to average net assets 2.04% 2.06% 2.05% 2.05% 2.05% 2.02%
Ratio of net investment income to
average net assets (0.57)% (0.43)% (0.17)% (0.56)% (0.44)% 1.00%
- ----------------------------------------------------------------------------------------------------------------------
Portfolio turnover 12% 0% 80% 12% 0% 80%
- ----------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets prior
to waived fees and reimbursed expenses 2.26% 4.03% 15.17% 2.06% 2.09% 2.05%
- ----------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average
net assets prior to waived fees and
reimbursed expenses (0.79)% (2.40)% (13.29)% (0.57)% (0.48)% 0.97%
- ----------------------------------------------------------------------------------------------------------------------
<CAPTION>
----------------------------------------------
DEC. 31, DEC. 31, DEC. 31, DEC. 31,
FOR THE PERIOD ENDED 1996 1995 1994 1993
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 17.10 $ 13.26 $ 14.75 $ 15.00
- --------------------------------------------------------------------------------------------------
Income form investment operations:
Net investment income 0.22 0.20 0.25 0.07
Net realize and unrealized gain (loss)
on investments 2.54 4.24 (0.45) 0.61
- --------------------------------------------------------------------------------------------------
Total form investment operations (loss) 2.76 4.44 (0.20) 0.68
- --------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.22) (0.20) (0.25) (0.10)
Distributors from net realized gain (2.22) (0.40) (1.04) (0.83)
- --------------------------------------------------------------------------------------------------
Total from distributions (2.44) (0.60) (1.29) (0.93)
- --------------------------------------------------------------------------------------------------
Net asset value, end of period $ 17.42 $ 17.10 $ 13.26 $ 14.75
- --------------------------------------------------------------------------------------------------
Total return/3/ 16.37% 33.72% (1.38)% 4.56%
- --------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (000s) $24,655 $16,075 $ 9,798 $ 8,996
- --------------------------------------------------------------------------------------------------
Ratios to average net assets (annualized):
Ratio of expenses to average net assets 2.05% 2.05% 2.01% 0.96%
Ratio of net investment income to
average net assets 1.35% 1.30% 1.75% 0.53%
- --------------------------------------------------------------------------------------------------
Portfolio turnover 67% 47% 50% 53%
- --------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets prior
to waived fees and reimbursed expenses 2.20% 2.17% 2.20% 1.12%
- --------------------------------------------------------------------------------------------------
Ratio of net investment income to average
net assets prior to waived fees and
reimbursed expenses 1.20% 1.18% 1.56% 0.37%
- --------------------------------------------------------------------------------------------------
</TABLE>
/1/ The Fund charged its fiscal year-end from March 31 to February 28
/2/ The Fund charged its fiscal year-end from December 31 to March 31.
/3/ Total returns do not include any sales charges. Total returns for periods
less than one year are not annualized.
<PAGE>
U.S. GOVERNMENT ALLOCATION FUND
INVESTMENT OBJECTIVE
The U.S. Government Allocation Fund seeks long-term total return, consistent
with reasonable risk.
INVESTMENT POLICIES
We allocate and reallocate assets among long-term U.S. Treasury bonds,
intermediate-term U.S. Treasury notes, and short-term money market instruments.
This strategy is based on the premise that asset classes are at times
undervalued or overvalued in comparison to one another and that investing in
undervalued asset classes offers better long-term, risk-adjusted returns.
PERMITTER INVESTMENTS
The assets classes we may invest in are composed as follows:
. Long Term Investments -- We invest in U.S. Treasury bonds representative of
the Lehman Brothers 20+ Bond Index. Bonds on this Index have maturities of
twenty years or more.
. Intermediate-Term Investments -- We invest in U.S. Treasury securities
representative of the Lehman Brothers U.S. Government Intermediate Bond
Index. Bonds on this Index have maturities of one to twenty years.
. Short-Term Investments -- We invest in high-quality money market
instruments, including U.S. Government obligations, obligations of foreign
of foreign and domestic banks, short-term corporate debt instruments and
repurchase agreements.
Under normal market conditions, we invest:
. at least 65% of total assets in U.S. Government obligations; and
. up to 25% of total assets in foreign obligations qualifying as money market
investments.
As long as we keep 65% of assets in U.S. Government obligations, we are not
required to keep a minimum investment in any of the three asset classes, nor are
we prohibited from investing substantially all of our assets in a single asset
class. The allocation may shift any time.
<PAGE>
IMPORTANT RISK FACTORS
We may incur a higher than average portfolio turnover ratio due to allocation
shifts recommended by the model. Foreign obligations may entail additional
risks.
You should consider the Common Risks on page ___, the General Investment Risks
beginning on page ___, and the specific risks listed above. They are all
important to your investment choice.
PORTFOLIO MANAGEMENT
The Fund is managed by a team of advisors who, using the Allocation model,
jointly make investment decisions for the Funds.
U.S. GOVERNMENT ALLOCATION FUND FINANCIAL HIGHLIGHTS
See "Historical Fund Information" on page __.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING
- ----------------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES -- COMMENCED
ON MARCH 31, 1997
-------------------------------------------------------------------
Ended
February 28, March 31, March 31, Sept 30, Dec. 31,
FOR THE PERIOD ENDED: 1999/1/ 1998 1997/2/ 1996/3/ 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 14.87 $ 14.32 $ 14.48 $ 14.98 $ 13.76
- -----------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.57 0.77 0.42 0.59 0.79
Net realized and unrealized gain (loss)
on investments (0.01) 0.55 (0.16) (0.50) 1.22
- -----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.56 1.32 0.26 0.09 2.01
- -----------------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.57) (0.77) (0.42) (0.59) (0.79)
Distributors from net realized gain 0.00 0.00 0.00 0.00 0.00
- -----------------------------------------------------------------------------------------------------------------------------------
Total from distributions (0.57) (0.77) (0.42) (0.59) (0.79)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 14.86 $ 14.87 $ 14.32 $ 14.48 $ 14.98
- -----------------------------------------------------------------------------------------------------------------------------------
Total return (not annualized)/6/ 3.78% 9.36% 1.75% 0.69% 14.91%
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (000s) $ 74,728 $ 82,958 $ 86,930 $ 98,741 $135,577
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets (annualized):
Ratio of expenses to average net assets 1.17% 1.16% /4/ 1.00% /4/ 1.12% /4/ 1.04%
Ratio of net investment income to
average net assets 4.15% 5.21% /4/ 5.70% /4/ 5.45% /4/ 5.41%
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 152% 62% /4/ 113% /4/ 31% /5/ 292%
- -----------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets prior to
waived fees and reimbursed expenses 1.22% 1.26% /4/ 1.31% /4/ 1.20% /4/ 1.07%
- -----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average
net assets prior to waived fees and reimbursed
expenses 4.10% 5.11% /4/ 5.39% /4/ 5.37% /4/ 5.38%
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES -- COMMENCED
ON JANUARY 1, 1995
----------------------------------------------------------------
Months
Dec. 31, February 28, March 31, March 31, Sept. 30, Dec. 31,
FOR THE PERIOD ENDED: 1994 1999/1/ 1998 1997/2/ 1996/3/ 1995/4/
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 15.71 $ 10.82 $ 10.42 $ 10.54 $ 10.91 $ 10.00
- -----------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.87 0.34 0.49 0.27 0.36 0.49
Net realized and unrealized gain (loss)
on investments (1.95) (0.01) 0.40 (0.12) (0.37) 0.91
- -----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (1.08) 0.33 0.89 0.15 (0.01) 1.40
- -----------------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.87) (0.34) (0.49) (0.27) (0.36) (0.49)
Distributors from net realized gain 0.00 0.00 0.00 0.00 0.00 0.00
- -----------------------------------------------------------------------------------------------------------------------------------
Total from distributions (0.87) (0.34) (0.49) (0.27) (0.36) (0.49)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 13.76 $ 10.81 $ 10.82 $ 10.42 $ 10.54 $ 10.91
- -----------------------------------------------------------------------------------------------------------------------------------
Total return (not annualized) (6.99)% 3.12% 8.64% 1.42% 0.11% 14.11%
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (000s) $140,066 $ 18,654 $ 14,144 $ 7,221 $ 6,406 $ 4,077
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets (annualized):
Ratio of expenses to average net assets 1.01% 1.84% 1.82%/4/ 1.61%/4/ 1.92%/4/ 1.65%
Ratio of net investment income to
average net assets 5.94% 3.41% 4.40%/4/ 5.12%/4/ 4.60%/4/ 4.31%
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 112% 152% 62%/4/ 113%/4/ 31%/5/ 292%
- -----------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets prior to
waived fees and reimbursed expenses 1.08% 1.95% 2.08%/4/ 2.28%/4/ 2.21%/4/ 2.36%
- -----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average
net assets prior to waived fees and reimbursed
expenses 5.87% 3.30% 4.14%/4/ 4.45%/4/ 4.31%/4/ 3.60%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/1/ The Fund changed its fiscal year-end from March 31 to February 28, 1999.
/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.
/4/ Ratio includes income and expenses charged to the Master Portfolio.
/5/ Represents portfolio activity for the Fund's stand-alone period only. The
portfolio turnover for the period from April 28, 1996 to September 30, 1996
was 87%.
/6/ Total returns don't include any sales charges.
<PAGE>
GENERAL INVESTMENT RISKS
Understanding the risks involved in mutual fund investing will help you make an
informed decision that takes into account your risk tolerance and preferences.
You should carefully consider the risks common to investing in all mutual funds,
including the Stagecoach Funds. Certain common risks are identified in the
Summary of Important Risks on page ___. Other risks of mutual fund investing
include the following:
. Unlike bank deposits such as CDs or savings accounts, mutual funds are not
insured by the FDIC.
. We cannot guarantee that we will meet our investment objectives.
. We do not guarantee the performance of a Fund, nor can we assure you that
the market value of your investment will not decline. We will not "make
good" any investment loss you may suffer, nor can anyone we contract with
to provide certain services, such as selling agents or investment advisors,
offer or promise to make good any such losses.
. Share prices -- and therefore the value of your investment -- will increase
and decrease with changes in the value of the underlying securities and
other investments. This is referred to as price volatility.
. Investing in any mutual fund, including those deemed conservative, involves
risk, including the possible loss of any money you invest.
. An investment in a single Fund, by itself, does not constitute a complete
investment plan.
. The Asset Allocation and Index Allocation Funds that invest in smaller
companies, foreign companies (including investments made through American
Depositary Receipts and similar instruments), and in emerging markets are
subject to additional risks, including less liquidity and greater price
volatility. A Fund's investment in foreign and emerging markets may also be
subject to special risks associated with international trade, including
currency, political, regulatory and diplomatic risk.
. The Funds may invest a portion of their assets in U.S. Government
obligations. It is important to recognize that the U.S. Government does not
guarantee the market value or current yield of those obligations. Not all
U.S. Government obligations are backed by the full faith and credit of the
U.S. Treasury, and the U.S. Government's guarantee does not extend to the
Funds themselves.
. The Funds may also use certain derivative instruments, such as options or
futures contracts. The term "derivatives" covers a wide number of
investments, but in general it refers to any financial instrument whose
value is derived, at least in part, from the price of another security or a
specified index, asset or rate. Some derivatives may be more sensitive to
interest rate changes or market moves, and some may be susceptible to
changes in yields or values due to their structure or contract terms.
<PAGE>
What follows is a general list of the types of risks (some of which are
described above) that may apply to a given Fund and a table showing some of the
additional investment practices that each Fund may use and the risks associated
with them. Additional information about these practices is available in the
Statement of Additional Information.
COUNTER-PARTY RISK -- The risk that the other party in a repurchase agreement or
other transaction will not fulfill its contract obligation.
CREDIT RISK -- The risk that the issuer of a debt security will be unable to
make interest payments or repay principal on schedule. If an issuer does
default, the affected security could lose all of its value, or be renegotiated
at a lower interest rate or principal amount. Affected securities might also
lose liquidity. Credit risk also includes the risk that a party in a transaction
may not be able to complete the transaction as agreed.
CURRENCY RISK-- The risk that a change in the exchange rate between U.S. dollars
and a foreign currency may reduce the value of an investment made in a security
denominated in that foreign currency.
DIPLOMATIC RISK--The risk that an adverse change in the diplomatic relations
between the United States and another country might reduce the value of
liquidity of investments in either country.
EMERGING MARKET RISK--The risk that the emerging market, as defined in the
glossary, may be more sensitive to certain economic changes. For example,
emerging market countries are often dependent on international trade and are
therefore often vulnerable to recessions in other countries. They may have
obsolete financial systems, have volatile currencies and may be more sensitive
than more mature markets to a variety of economic factors. Emerging market
securities may also be less liquid than securities of more developed countries
and could be difficult to sell, particularly during a market downturn.
EXPERIENCE RISK--The risk presented by a new or innovative security. The risk is
that insufficient experience exists to forecast how the security's value might
be affected by various economic conditions:
INFORMATION RISK--The risk that information about a security is either
unavailable, incomplete or is inaccurate.
<PAGE>
GENERAL INVESTMENT RISKS (CONT'D)
INTEREST RATE RISK--The risk that changes in interest rates can reduce the value
of an existing security. Generally, when interest rates increase, the value of a
debt security decreases. The effect is usually more pronounced for securities
with longer dates to maturity.
LEVERAGE RISK--The risk that a practice may increase a Fund's exposure to market
risk, interest rate risk or other risks by, in effect, increasing assets
available for investment.
LIQUIDITY RISK--The risk that a security cannot be sold, or cannot be sold
without adversely affecting the price.
MARKET RISK--The risk that the value of a stock, bond or other security will be
reduced by market activity. This is a basic risk associated with all securities.
POLITICAL RISK--The risk that political actions, events or instability may be
unfavorable for investments made in a particular nation's or region's industry,
government or markets.
Regulatory Risk--The risk that changes in government regulations will adversely
affect the value of a security. Also the risk that an insufficiently regulated
market might permit inappropriate trading practices.
YEAR 2000 RISK--The Funds' principal service providers have advised the Funds
that they are working on the necessary changes to their computer systems to
avoid any system failure based on an inability to distinguish the year 2000 from
the year 1900, and that they expect their systems to be adapted in time. There
can, of course, be no assurance of success. In addition, the companies or
entities in which the Funds invest also could be adversely impacted by the Year
2000 issue. The extent of such impact cannot be predicted.
INVESTMENT PRACTICE/RISK
The following table lists some of the additional investment practices of the
Funds, including some not disclosed in the Investment Objective and Investment
Policies sections of the Prospectus. The risks indicated after the description
of the practice are NOT the only potential risks associated with that practice,
but are among the more prominent. Market risk is assumed for each. See the
Investment Objective and Investment Policies for each Fund or the Statement of
Additional Information for more information on these practices.
<PAGE>
Investment practices and risk levels are carefully monitored. We attempt to
ensure that the risk exposure for each Fund remains within the parameters of its
objective.
Remember, each Fund is designed to meet different investment needs and
objectives.
In addition to the general risks discussed above, you should carefully consider
and evaluate any special risks that may apply to investing in a particular Fund.
See the "Important Risk Factors" in the summary for each Fund. You should also
see the Statement of Additional Information for additional information about the
investment practices and risks particular to each Fund.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
ASSET ALLOCATION INDEX ALLOCATION U.S. GOVERNMENT ALLOCATION
INVESTMENT PRACTICE RISK
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FLOATING AND VARIABLE RATE DEBT
Instruments with interest rates Interest Rate and . . .
that are ajusted either Credit Risk
on a schedule or when an index or
benchmar changes.
- ------------------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS
A transaction in which the seller Credit and . . .
of a security agrees to buy back Counter-Party Risk
a security at an agreed upon time
and price, usually with interest.
- ------------------------------------------------------------------------------------------------------------------------------------
OTHER MUTUAL FUNDS
The temporary investment in shares Market Risk . . .
of another mutual fund. A pro rata
portion of the other fund's
expenses, in addition to the
expenses paid by the Funds, will
be borne by Funds shareholders.
- ------------------------------------------------------------------------------------------------------------------------------------
FOREIGN SECURITIES
Securities in a dollar-denominated Information, Political . . .
debt of non-U.S. companies or Regulatory, Liquidity,
foreign governments. Diplomatic and
Currency Risk
- ------------------------------------------------------------------------------------------------------------------------------------
OPTIONS
The right or obligation to receive Credit Information
or deliver a security or cash and Liquidity Risk
payment depending on the security's
price or the performance of an index
or benchmark.
- ------------------------------------------------------------------------------------------------------------------------------------
Stock Index Futures . .
Options on Stock Index Futures . .
Index Swaps . . .
Interest Rate Futures . . .
Interest Rate Futures Options . . .
Interest Rate Swaps . . .
- ------------------------------------------------------------------------------------------------------------------------------------
LOANS OF PORFOLIO SECURITIES
The practice of loaning securities Credit . . .
to brokers, dealers and financial Counter-Party
institutions to increase return on and
those securities. Loans may be made Leverage Risk
in accordance with existing
investment policies
- ------------------------------------------------------------------------------------------------------------------------------------
BORROWING POLICIES
The ability to borrow an equivalent Leverage Risk . . .
of 20% (10% for Index Allocation) of
assets from banks for temporary
purposes to meet shareholder redemptions.
- ------------------------------------------------------------------------------------------------------------------------------------
LIQUID SECURITIES
A security that cannot be readily sold, Liquidity Risk . . .
or cannot be readily sold without
negatively affecting its fair price.
Limited to 15% of assets for Asset
Allocation and US. Government Allocation
Funds 10% of assets for index Allocation
Fund.
- ------------------------------------------------------------------------------------------------------------------------------------
PRIVATELY ISSUED SECURITIES
Securities that are not publicly traded Liquidity Risk . . .
but which may be resold in accordance
with Rule 144A of the Securities Act 1933.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
ORGANIZATION AND MANAGEMENT OF THE FUNDS
A number of different entities provide services to the Funds. This section shows
how the Funds are organized, the entities that perform different services, and
how they are compensated. Further information is available in the statement of
additional information for the Funds.
ABOUT STAGECOACH
Each Fund is one of over 30 Funds of Stagecoach Funds, an open-end management
investment company. Stagecoach was organized on September 9, 1991, as a Maryland
Corporation.
The Board of Directors of Stagecoach supervises the Funds' activities and
approves the selection of various companies hired to manage the Funds'
operation. The major service providers are described in the diagram below.
Except for the advisers, which require shareholder vote to change, if the Board
believes that it is in the best interests of the shareholders it may make a
change in one of these companies.
<PAGE>
- --------------------------------------------------------------------------------
BOARD OF DIRECTORS
- --------------------------------------------------------------------------------
Supervises the Funds' activities
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INVESTMENT ADVISOR CUSTODIAN
- --------------------------------------------------------------------------------
Wells Fargo Bank, N.A. Barclays Global Investors, N.A.
525 Market St., San Francisco, CA 45 Fremont St., San Francisco, CA
Manages the Funds' investment Provides safekeeping for the
activities Funds' assets
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INVESTMENT SUB-ADVISOR
- --------------------------------------------------------------------------------
Barclays Global
Fund Advisors
45 Fremont Street
San Francisco, CA
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHAREHOLDER
TRANSFER SERVICING
DISTRIBUTOR ADMINISTRATOR AGENT AGENTS
- --------------------------------------------------------------------------------
Stephens Inc. Wells Fargo Bank, Wells Fargo Bank, Various Agents
N.A. N.A.
111 Center St. 525 Market St. 525 Market St.
Little Rock, AR San Francisco, CA San Francisco, CA
Markets the Funds Manages the Maintains records Provide
and distributes Funds' business of shares and services to
Fund shares activities supervises the customers
paying of dividends
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FINANCIAL SERVICES FIRMS AND SELLING AGENTS
- --------------------------------------------------------------------------------
Advise current and prospective shareholders on their Fund investments
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHAREHOLDERS
- --------------------------------------------------------------------------------
<PAGE>
ORGANIZATION AND MANAGEMENT OF THE FUNDS (CONT'D)
In the following sections, the percentages shown are the percentages of the
average daily net assets of each Fund class paid on an annual basis for the
services described.
THE INVESTMENT ADVISOR
Wells Fargo Bank provides portfolio management and fundamental security analysis
services as the advisor for each of the Funds. Wells Fargo Bank, founded in
1852, is the oldest bank in the western United States and is one of the largest
banks in the United States. Wells Fargo Bank is a wholly owned subsidiary of
Wells Fargo & Company, a national bank holding company. As of December 31, 1998,
Wells Fargo Bank and its affiliates managed over $121 billion in assets. The
Funds pay Wells Fargo Bank for advisory services as shown as management fee in
the Summary of Expenses section of this prospectus.
THE SUB-ADVISOR
Barclays Global Fund Advisors ("BGFA"), a wholly owned subsidiary of Barclays
Global Investors and an indirect subsidiary of Barclays Bank PLC, is the sub-
advisor for the Funds. BGFA was created from the reorganization of Wells Fargo
Nikko Investment Advisors, a former affiliate of Wells Fargo Bank, and is one of
the largest providers of index portfolio management services. As of January 31,
1999 BGFA managed or provided investment advice for assets aggregating in excess
of $27 billion.
THE ADMINISTRATOR
Wells Fargo Bank provides the Funds with administration services, including
general supervision of each Fund's operation, coordination of the other services
provided to each Fund, compilation of information for reports to the SEC and the
state securities commissions, preparation of proxy statements and shareholder
reports, and general supervision of data compilation in connection with
preparing periodic reports to the Company's Directors and officers. Wells Fargo
Bank also furnishes office space and certain facilities to conduct each Fund's
business, and compensates the Company's Directors.
<PAGE>
SHAREHOLDER SERVICING PLAN
We have a shareholder servicing plan for each Fund class. We have agreements
with various shareholder servicing agents to process purchase and redemption
requests, to service shareholder accounts, and to provide other related
services.
For the Class A shares of the Index Allocation Fund, the Fund has a Shareholder
Administrative Servicing Plan. Where fees are paid pursuant to this Plan, no
fees are paid pursuant to any Distribution Plan applicable to these shares.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Class A Class B Class C
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Asset Allocation Fund .25% .25% .25%
- ------------------------------------------------------------------------------------------------------------
Index Allocation Fund .25% .25% .25%
- ------------------------------------------------------------------------------------------------------------
U.S. Government Allocation Fund .25% .25% N/A
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
A CHOICE OF SHARE CLASSES
After choosing a Fund, your next most important choice is which share class to
buy. The following classes of shares are available through this Prospectus:
. CLASS A SHARES - with a front-end sales charge, volume reductions and lower
on-going expenses than Class B and Class C shares.
. CLASS B SHARES - with a contingent deferred sales charge ("CDSC") payable
upon redemption that diminishes over time, and higher on-going expenses than
Class A shares.
. CLASS C SHARES - with a 1.00% CDSC on redemptions made within one year of
purchase, and higher on-going expenses than Class A shares.
The choice among share classes is largely a matter of preference. You should
consider, among other things, the different fees and sales loads assessed on
each share class and the length of time you anticipate holding your investment.
If you prefer to pay sales charges up front, wish to avoid higher on-going
expenses, or, more importantly, you think you may qualify for volume discounts
based on the amount of your investment, then Class A shares may be the choice
for you.
You may prefer to see "every dollar working" from the moment you invest. If so,
then consider Class B or Class C shares. Please note that Class B shares convert
to Class A shares after seven years to avoid the higher on-going expenses
assessed against Class B shares.
Class C shares are available for the Asset Allocation and Index Allocation Funds
only. They are similar to Class B shares, with some important differences.
Unlike Class B hares, Class C shares do not convert to Class A shares. The
higher on-going expenses will be assessed as long as you hold the shares. The
choice between Class B and Class C shares may depend on how long you intend to
hold Fund shares before redeeming them.
Please see the expenses listed for each Fund and the following sales charge
schedules before making your decision. You should also review the "Reduced Sales
Charges" section of the Prospectus. You may wish to discuss this choice with
your financial consultant.
CLASS A SHARE SALES CHARGE SCHEDULE
If you choose to buy Class A shares, you will pay the Public Offering Price
(POP) which is the Net Asset Value (NAV) plus the applicable sales charge. The
money market funds listed in this prospectus do not impose sales charges on the
purchase of Class A shares. Since sales charges are reduced for Class A share
purchases above certain dollar amounts, known as "breakpoint levels", the POP is
lower for these purchases.
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
CLASS A SHARES LISTED IN THIS PROSPECTUS
HAVE THE FOLLOWING SALES CHARGE SCHEDULE:
- ------------------------------------------------------------------------------------------------
FRONT-END SALES FRONT-END SALES DEALER
CHARGE AS % CHARGE AS % ALLOWANCE
AMOUNT OF PUBLIC OF NET AMOUNT AS % OF PUBLIC
OF PURCHASE OFFERING PRICE INVESTED OFFERING PRICE
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------
Less than $50,000 4.50% 4.71% 4.00%
- --------------------------------------------------------------------------------------------------------
$50,000 to $99,999 4.00% 4.17% 3.50%
- --------------------------------------------------------------------------------------------------------
$100,000 to $249,999 3.50% 3.63% 3.00%
- --------------------------------------------------------------------------------------------------------
$250,000 to $499,999 2.50% 2.56% 2.25%
- --------------------------------------------------------------------------------------------------------
$500,000 to $999,999 2.00% 2.04% 1.75%
- --------------------------------------------------------------------------------------------------------
$1,000,000 and over/1/ 0.00% 0.00% 1.00%
- --------------------------------------------------------------------------------------------------------
</TABLE>
/1/ We will assess Class A shares purchases of $1,000,000 or more a 1.00% CDSC
if they are redeemed within one year from the date of purchase. Charges are
based on the lower of the NAV on the date of purchase or the date of redemption.
CLASS B SHARE CDSC SCHEDULE
If you choose Class B shares, you buy them at NAV and agree that if you redeem
your shares within six years of the purchase date, you will pay a CDSC based on
how long you have held your shares. Certain exceptions apply (see "Class B and
Class C Share CDSC Reductions" and "Waivers for Certain Parties"). The CDSC
schedule is as follows:
<PAGE>
A CHOICE OF SHARE CLASSES (CONT'D)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES LISTED IN THIS PROSPECTUS HAVE
THE FOLLOWING SALES CHARGE SCHEDULE:
REDEMPTION WITHIN 1 YEAR 2 YEARS 3 YEARS 4 YEARS 5 YEARS 6 YEARS 7 YEARS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
5.00% 4.00% 3.00% 3.00% 2.00% 1.00% A Shares
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The CDSC percentage you pay is based on the lower of the NAV of the shares on
the date of the original purchase, or the NAV of the shares on the date of
redemption.
We always process partial redemptions so that the least expensive shares are
redeemed first in order to reduce your sales charges. After shares are held for
six years, the CDSC expires and the Class B shares are converted to Class A
shares to reduce your future on-going expenses.
After July 17, 1999, purchases of Class B shares are subject to the following
sales charge schedule:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES LISTED IN THIS PROSPECTUS HAVE
THE FOLLOWING SALES CHARGE SCHEDULE:
REDEMPTION WITHIN 1 YEAR 2 YEARS 3 YEARS 4 YEARS 5 YEARS 6 YEARS 7 YEARS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CDSC 5.00% 4.00% 3.00% 3.00% 2.00% 1.00% 0.00%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The CDSC percentage you pay is based on the lower of the NAV of the shares on
the date of the original purchase, or the NAV of the shares on the date of
redemption.
We always process partial redemptions so that the least expensive shares are
redeemed first in order to reduce your sales charges. After shares are held for
six years, the CDSC expires. After shares are held for seven years, the Class B
shares are converted to Class A shares to reduce your future on-going expenses.
CLASS C SHARE CDSC SCHEDULE
If you choose Class C shares, you buy them at NAV and agree that if you redeem
your shares within one year of the purchase date, you will pay a CDSC of 1.00%.
The CDSC percentage you pay is based on the lower of the NAV on the date of the
original purchase, or the NAV on the date of redemption. The distributor pays
sales commissions of up to 1.00% of the purchase price of Class C shares to
selling agents at the time of the sale, and up to 1.00% annually thereafter.
We always process partial redemptions so that the least expensive shares are
redeemed first in order to reduce your sales charges. Class C shares do not
convert to Class A shares, and therefore continue to pay the higher on-going
expenses.
<PAGE>
REDUCED SALES CHARGES
Generally, we offer more sales charge reductions for Class A shares than for
Class B and Class C shares, particularly if you intend to invest greater
amounts. You should consider whether you are eligible for any of the potential
reductions when you are deciding which share class to buy.
CLASS A SHARE REDUCTIONS:
. You pay no sales charges on Fund shares you buy with REINVESTED
distributions.
. You pay a lower sales charge if you are investing an amount over a
BREAKPOINT LEVEL. See the "Class A Share Sales Charge Schedule" above.
. By signing a LETTER OF INTENT (LOI), you pay a lower sales charge now in
exchange for promising to invest an amount over a specified breakpoint
within the next 13 months. We will hold in escrow shares equal to
approximately 5% of the amount you intend to buy. If you do not invest the
amount specified in the LOI before the expiration date, we will redeem enough
escrowed shares to pay the difference between the reduced sales load you paid
and the sales load you should have paid. Otherwise, we will release the
escrowed shares when you have invested the agreed amount.
. RIGHTS OF ACCUMULATION (ROA) allow you to combine the amount you invest
with the total NAV of shares you own in other Stagecoach or Norwest Advantage
front-end load Funds in order to reach breakpoint levels for a reduced load.
We give you a discount on the entire amount of the investment that puts you
over the breakpoint level.
. If you are REINVESTING THE PROCEEDS OF A STAGECOACH FUND REDEMPTION for
shares on which you have already paid a front-end sales charge, you have 120
days to reinvest the proceeds of that redemption with no sales charge into a
Fund that charges the same or a lower front-end sales charge. If you use such
a redemption to purchase shares of a Fund with a higher front-end sales
charge, you will have to pay the difference between the lower and higher
charge.
. You may reinvest into a Stagecoach Fund with no sales charge a REQUIRED
distribution from a pension, retirement, benefits, or similar plan for which
Wells Fargo Bank acts as trustee provided the distribution occurred within
the 30 days prior to your reinvestment.
If you believe you are eligible for any of these reductions, it is up to you to
ask the selling agent or the shareholder servicing agent for the reduction and
to provide appropriate proof of eligibility.
<PAGE>
You, or your fiduciary or trustee, may also tell us to extend volume discounts,
including the reductions offered for rights of accumulation and letters of
intent, to include purchases made by:
. a family unit, consisting of a husband and wife and children under the age
of twenty-one or single trust estate;
. a trustee or fiduciary purchasing for a single fiduciary relationship; or
. the members of a "qualified group" which consists of a "company" (as defined
in the Investment Company Act of 1940 ("1940 Act")), and related parties of
such a "Company," which has been in existence for at least six months and
which has a primary purpose other than acquiring Fund shares at a discount.
HOW A LETTER OF INTENT CAN SAVE YOU MONEY!
If you plan to invest, for example, $100,000 in a Stagecoach or Norwest
Advantage Fund in installments over the next year, by signing a letter of intent
you would pay only 3.50% sales load on the entire purchase. Otherwise, you might
pay 4.50% on the first $50,000, then 4.00% on the next $49,999!
CLASS B AND CLASS C SHARE CDSC REDUCTIONS:
. You pay no CDSC on Funds shares you purchase with REINVESTED distributions.
. We waive the CDSC for all redemptions made because of SCHEDULED OR MANDATORY
distributions for certain retirement plans. (See your retirement plan
disclosure for details.)
. We waive the CDSC for redemptions made in the event of the SHAREHOLDER'S
DEATH OR FOR A DISABILITY SUFFERED AFTER PURCHASING SHARES. ("Disability" is
defined by the Internal Revenue Code of 1986.)
. We waive the CDSC for redemptions made at the DIRECTION of Wells Fargo in
order to, for example, complete a merger or close an account whose value has
fallen below the minimum balance.
. We waive Class C share CDSC for certain types of accounts.
<PAGE>
REDUCED SALES CHARGES (CONT'D)
For Class B shares purchased outside of an IRA or other qualified plan after
July 17, 1999, no CDSC is imposed on withdrawals that occur under the following
circumstances:
. Withdrawals are made by participating in the Systematic Withdrawal Plan;
. Withdrawals may not exceed 10% of your fund assets annually based on your
anniversary date in the Systematic Withdrawal Plan; and
. you must participate in the dividend and capital gain reinvestment program.
WAIVER FOR CERTAIN PARTIES
If you are eligible for certain waivers, we will sell you Class A shares so
you can avoid higher on-going expenses. The following people can buy Class A
shares at NAV:
. Current and retired employees, directors and officers of:
. Stagecoach Funds and its affiliates;
. Wells Fargo Bank, Norwest Bank and their affiliates;
. Stephens and its affiliates; and
. Broker-Dealers who act as selling agents.
. The spouses of any of the above, as well as the grandparents, parents,
siblings, children, grandchildren, aunts, uncles, nieces, nephews, fathers-
in-law, mothers-in-law, brothers-in-law and sisters-in-law of either the
spouse or the current or retired employee, director of officer.
You may also buy Class A Fund shares at NAV if they are to be included in
certain retirement, benefits, pension or investment "wrap accounts" with whom
Stagecoach Funds has reached an agreement, or through an omnibus account
maintained with a Fund by a broker/dealer.
We reserve the right to enter into agreements that reduce or eliminate sales
charges for groups or classes of shareholders, or for Fund shares included in
other investment plans such as "wrap accounts." If you own Fund shares as part
of another account or package such as an IRA or a sweep account, you must read
the directions for that account. These directions may supersede the terms and
conditions discussed here.
<PAGE>
REDUCED SALES CHARGES (CONT'D)
DISTRIBUTION PLAN
We have adopted Distribution Plans for the Class A, Class B and Class C shares
of the Funds. The plans authorize the payment of all or part of the cost of
preparing and distributing prospectuses and distribution-related services
including ongoing compensation to selling agents. The fees paid under these
plans are as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
FUND Class A Class B Class C
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Asset Allocation Fund .05% .70% .75%
- ------------------------------------------------------------------------------------------
Index Allocation Fund .25% .75% .75%
- ------------------------------------------------------------------------------------------
U.S. Government Allocation Fund .05% .75% N/A
- ------------------------------------------------------------------------------------------
</TABLE>
These fees are paid out of the Funds' assets on an on-going basis. Overtime,
these fees will increase the cost of your investment and may cost you more than
paying other types of sales charges.
<PAGE>
EXCHANGES
Exchanges between Stagecoach Funds are two transactions: a sale of shares of one
Fund and the purchase of shares of another. In general, the same rules and
procedures that apply to sales and purchases apply to exchanges. There are,
however, additional factors you should keep in mind while making or considering
an exchange:
. You should carefully read the Prospectus for the Fund into which you wish
to exchange.
. Every exchange involves selling Fund shares and that sale may produce a
capital gain or loss for federal income tax purposes.
. If you are making an initial investment into a new Fund through an
exchange, you must exchange at least the minimum first purchase amount of the
Fund you are redeeming, unless your balance has fallen below that amount due
to market conditions.
. Any exchange between Funds you already own must meet the minimum redemption
and subsequent purchase amounts for the Funds involved.
. If you exchange between Class A shares, you will have to pay any difference
between a load you have already paid and the load you are subject to in the
new Fund (less the difference between any load already paid under the maximum
3% load schedule and the maximum 4.5% schedule).
. Exchanges between Class B shares, between Class C shares or between either
Class B or Class C shares and a Wells Fargo money market fund will not
trigger the CDSC. The new shares will continue to age according to their
original schedule while in the new Fund and will be charged the CDSC
applicable to the original shares upon redemption.
. Exchanges from any share class to a money market fund can only be re-
exchanged for the original share class.
. In order to discourage excessive Fund transaction expenses that must be borne
by other shareholders, we reserve the right to limit or reject exchange
orders. Generally, we will notify you 60 days in advance of any changes in
your exchange privileges.
. You may make exchanges between like share classes. You may also exchange from
Class A, Class B or Class C shares and non-institutional class shares to a
non-institutional money market fund.
<PAGE>
YOUR ACCOUNT
This section tells you how Fund shares are priced, how to open an account and
how to buy and sell Fund shares once your account is open.
PRICING FUND SHARES:
. As with all mutual fund investments, the price you pay to purchase shares or
the price you receive when you redeem shares is not determined until after a
request has been received in proper form.
. We determine the Net Asset Value ("NAV") of each class of the Funds' shares
each business day as of the close of regular trading on the NYSE. We
determine the NAV by subtracting the Fund class's liabilities from its total
assets, and then dividing the result by the total number of outstanding
shares of that class. Each Fund's assets are generally valued at current
market prices. See the Statement of Additional Information for further
disclosure.
. We process requests to buy or sell shares of the funds each business day as
of the close of regular trading on the New York Stock Exchange ("NYSE"),
which is usually 1:00 p.m. (Pacific time)/3:00 p.m. (Central time). If the
markets close early, the Funds may close early and may value their shares at
earlier times under these circumstances. Any request we receive in proper
form before these times is processed the same day. Requests we receive after
the cutoff times are processed the next business day.
. The funds are open for business on each day the NYSE is open for business.
NYSE holidays include New Year's Day, Martin Luther King, Jr. Day,
President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. When any holiday falls on a weekend, the
NYSE typically is closed on the weekday immediately before or after such
holiday.
YOU CAN BUY FUND SHARES:
. By opening an account directly with the Fund (simply complete and return a
Stagecoach Funds application with proper payment);
. Through a brokerage account with an approved selling agent; or
. Through certain retirement, benefits and pension plans, or through certain
packaged investment products (please see the providers of the plan for
instructions).
<PAGE>
MINIMUM INVESTMENTS:
. $1,000 per Fund minimum initial investment;/1/ or
. $100 per Fund if you use the Systematic Purchase Program; and
. $100 per Fund for all investments after your first.
/1/ Purchases of Class B shares in amounts of $250,000 or more require the prior
approval of your selling agent.
We may waive the minimum for Funds you purchase through certain retirement,
benefit and pension plans, through certain packaged investment products, or for
certain classes of shareholders as permitted by the SEC. Check the specific
disclosure statements and applications for the program through which you intend
to invest.
<PAGE>
YOUR ACCOUNT (CONT'D)
IMPORTANT SHAREHOLDER INFORMATION
The instructions below describe how to by and sell shares through the period
Ended July 17, 1999. After that date, please refer to the instructions on page
___ to ____.
HOW TO BUY SHARES
The following section explains how you can buy shares directly from Stagecoach
Funds. For Funds held through brokerage and other types of accounts, please
consult your Selling Agent.
<TABLE>
- ----------------------------------------------------------------------------------------------
BY MAIL
- ----------------------------------------------------------------------------------------------
IF YOU ARE BUYING SHARES FOR THE FIRST TIME:
- ----------------------------------------------------------------------------------------------
<S> <C>
Complete a Stagecoach Funds application. Be sure to indicate
the Fund name and the share class into which you intend to
invest. Failure to complete an application properly may result
in a delay in processing your request. MAIL TO:
----------------------------------------------------------------
Stagecoach Funds
Enclose a check for at least $1,000 made out in the full name PO Box 7066
and share class of the Fund. For example, "Asset Allocation San Francisco, CA
Fund, Class B." 94120-9201
-----------------------------------------------------------------
You may start your account with $100 if you elect the Systematic
Purchase plan option on the application.
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
IF YOU ARE BUYING ADDITIONAL SHARES:
- ----------------------------------------------------------------------------------------------
Make a check payable to the full name and share class of your MAIL TO:
Fund for at least $100. Be sure to write your account number Stagecoach Funds
on the check as well. PO Box 7066
San Francisco, CA
94120-9201
- -----------------------------------------------------------------
Enclose the payment stub/card from your statement if available.
- ----------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
YOUR ACCOUNT (CONT'D)
- ---------------------------------------------------------------------------------------------------
BY WIRE
- ---------------------------------------------------------------------------------------------------
IF YOU ARE BUYING SHARES FOR THE FIRST TIME:
- ---------------------------------------------------------------------------------------------------
<S> <C>
IF YOU DO NOT CURRENTLY HAVE AN ACCOUNT, COMPLETE A STAGECOACH MAIL TO:
FUNDS APPLICATION. YOU MUST WIRE AT LEAST $1,000. BE SURE TO Stagecoach Funds
INDICATE THE FUND NAME AND THE SHARE CLASS INTO WHICH YOU PO Box 7066
INTEND TO INVEST. San Francisco, CA
94120-9201
- -----------------------------------------------------------------
Mail the completed application. FAX TO:
- -----------------------------------------------------------------
1-415-546-0280
You may also fax the completed application (with original to
follow).
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
IF YOU ARE BUYING ADDITIONAL SHARES:
- ---------------------------------------------------------------------------------------------------
INSTRUCT YOUR WIRING BANK TO TRANSMIT AT LEAST $100 ACCORDING TO WIRE TO:
THE INSTRUCTIONS GIVEN TO THE RIGHT. BE SURE TO HAVE THE Stagecoach Funds
WIRING BANK INCLUDE YOUR CURRENT ACCOUNT NUMBER AND THE NAME PO Box 7066
YOUR ACCOUNT IS REGISTERED IN. San Francisco, CA
94120-9201
- -----------------------------------------------------------------
Bank Routing Number:
121000248
Wire Purchase Account Number:
4068-000587
Attention:
Stagecoach Funds (Name
of Fund and Share Class)
Account Name:
(Registration Name Indicated
on Application)
--------------------------------
</TABLE>
<PAGE>
<TABLE>
YOUR ACCOUNT (CONT'D)
- -------------------------------------------------------------------------------------------------
BY PHONE
- -------------------------------------------------------------------------------------------------
IF YOU ARE BUYING SHARES FOR THE FIRST TIME:
- -------------------------------------------------------------------------------------------------
You can only make your first purchase of a Fund by phone if you
already have an existing Stagecoach Funds Trust Account.
CALL:
<S> <C>
- -----------------------------------------------------------------
Call Investor Services and instruct the representative to either: 1-800-222-8222
. transfer at least $1,000 from a linked settlement account, or
. exchange at least $1,000 worth of shares from an existing
Stagecoach Fund. Please see "Exchanges" for special rules.
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
IF YOU ARE BUYING ADDITIONAL SHARES:
- -------------------------------------------------------------------------------------------------
Call Investor Services and instruct the representative to either: CALL:
. transfer at least $100 from a linked settlement account, or 1-800-222-8222
. exchange at least $100 worth of shares from another
Stagecoach Fund.
- -------------------------------------------------------------------------------------------------
SELLING SHARES:
The following section explains how you can sell shares held directly through an
account with Stagecoach Funds by mail or telephone. For Fund shares held through
brokerage and other types of accounts, please consult your Selling Agent.
- -------------------------------------------------------------------------------------------------
BY MAIL
- -------------------------------------------------------------------------------------------------
IF YOU ARE SELLING SHARES FOR THE FIRST TIME:
- -------------------------------------------------------------------------------------------------
Write a letter stating your account registration, your account
number, the Fund you wish to redeem and the dollar amount ($100
or more) of the redemption you wish to receive (or write "Full
Redemption").
- -----------------------------------------------------------------
Make sure all the account owners sign the request.
- -----------------------------------------------------------------
You may request that redemption proceeds be sent to you by MAIL TO:
check, by ACH transfer into a bank account, or by wire. Please Stagecoach Funds
call Investor Services regarding requirements for linking bank PO Box 7066
accounts or for wiring funds. We reserve the right to charge a San Francisco, CA
fee for wiring funds although it is not currently our practice 94120-9201
to do so.
- -----------------------------------------------------------------
Signature Guarantees are required for mailed redemption requests
over $5,000. You can get a signature guarantee at financial
institutions such as a bank or brokerage house. We do not
accept notarized signatures.
- -------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
YOUR ACCOUNT
- ---------------------------------------------------------------
FOR TRANSACTIONS AFTER JULY 17, 1999
HOW TO BUY SHARES
The following section explains how you can buy shares directly from stagecoach
Funds. For Funds held through brokerage and other types of accounts, please
consult your selling Agent.
<TABLE>
BY MAIL
<S> <C>
- --------------------------------------------------------------------------------------------------------------
IF YOU ARE BUYING SHARES FOR THE FIRST TIME:
- --------------------------------------------------------------------------------------------------------------
Complete a Stagecoach Fund application. Be sure to indicate the Fund name and the
share class into which you intend to invest. Failure to complete an application
properly may result in a delay in processing your request. MAIL TO:
- ----------------------------------------------------------------------------------
Enclose a check for a least $1,000 made out in the full name and share class Stagecoach Funds, Inc.
of the Fund. For example "Growth Fund Class ?" PO box 8266
Boston, MA
02266-8266
- ----------------------------------------------------------------------------------
You may start your account with $100 if you elect the systematic Purchase Plan
option on the application.
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
IF YOU ARE BUYING ADDITIONAL SHARES:
- --------------------------------------------------------------------------------------------------------------
MAIL TO:
Make a check payable to the full name and share of your class of your Fund Stagecoach Funds, Inc.
for at least $100. Be sure to write your account number on the check as well. PO Box 8266
Boston, MA
02266--8266
- --------------------------------------------------------------------------------------------------------------
Enclose the payment stub/card from your statement if available.
- --------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
BY WIRE
IF YOU ARE BUYING SHARES FOR THE FIRST TIME:
- --------------------------------------------------------------------------------------------------------------
<S> <C>
If you do not currently have an account, complete a Stagecoach Funds MAIL TO:
application. You must write as least $1,000. Be sure to indicate the Fund Stagecoach Funds, Inc.
name and the share class into which you intend to invest. PO Box 8266
- -----------------------------------------------------------------------------
Boston, MA
Mail the completed application. 02266-8266
You may also fax the completed application (with original to follow). FAX TO:
You must first call BFDS at 1-800-222-8222 to notify them of an 1-(617) 483-5765
incoming wire trade.
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
IF YOU ARE BUYING ADDITIONAL SHARES:
- --------------------------------------------------------------------------------------------------------------
Instruct your wiring bank to transmit at least WIRE TO:
$100 according to the instructions given to Stagecoach Funds, Inc.
the right. Be sure to have the wiring bank c/o Stage Street Bank & Trust
include your current account number and the Boston, MA
name your account is registered in. Bank Routing Number
-----------------------------------------------
ABA 011000028
Wire Purchase Account Number:
9905-437-1
Attention:
Stagecoach Funds (Name of Fund and share Class)
Account Name:
(Registration Name Indicated on Application)
-------------------------------------------------------------
</TABLE>
<TABLE>
YOUR ACCOUNT
- --------------------------------------------------------------------------------------------------------------
BY PHONE
<S> <C>
IF YOU ARE BUYING SHARES FOR THE FIRST TIME:
- ------------------------------------------------------------------------
You can only make you first purchase of a Fund by phone if you already
have an existing Stagecoach Funds Account. CALL:
- ------------------------------------------------------------------------
Call investor Services and instruct the representative to either: 1-800-222-8222
. transfer at least $1,000 from a linked settlement account, or
. exchange at least $1,000 worth of shares from an existing Wells
Fargo Fund, Please see "Exchanges" for special rules.
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
IF YOU ARE BUYING ADDITIONAL SHARES:
- ------------------------------------------------------------------------
Call Investor Services and instruct the representative to either: CALL:
. transfer at least $100 from a linked settlement account, or 1-800-222-8222
. exchange at least $100 worth of shares from another Wells Fargo
Fund.
- --------------------------------------------------------------------------------------------------------------
SELLING SHARES:
The following section explains how you can sell shares held directly through an
account with Stagecoach funds by mail or telephone. For Fund shares held through
brokerage and other types of accounts, please consult your Selling Agent
BY MAIL
IF YOU ARE SELLING SHARES FOR THE FIRST TIME:
- ---------------------------------------------------------------------------------------------------------------
Write a letter stating your account registration, you account number, the Fund
you wish to redeem and the dollar amount ($100 or more) of the redemption you
wish to receive (or write "Full Redemption")
- --------------------------------------------------------------------------------
Make sure all the account owners sign the request. MAIL TO:
- --------------------------------------------------------------------------------
You may request that redemption proceeds be sent to you by check Stagecoach Funds, Inc.
by ACH transfer into a bank account, or by wire. Please call investor PO Box 8266
services regarding requirements for linking bank accounts or for wiring Boston, MA
funds. We reserve the right to charge fee for wiring funds although its 02266-8266
is not currently our practice to do so.
</TABLE>
- --------------------------------------------------------------------------------
??????? ????????? fare required for mailed redemption requests over $5,000. You
can get a signature guarantee at financial institutions such as a bank or
brokerage house. We do not accept notarized signatures.
- --------------------------------------------------------------------------------
YOUR ACCOUNT (CONT'D)
- --------------------------------------------------------------------------------
BY PHONE
- --------------------------------------------------------------------------------
Call Investor Services to request a redemption of at least $100.
Be prepared to provide your account number and Taxpayer
Identification Number.
- -----------------------------------------------------------------------------
Unless you have instructed us otherwise only one account
owner needs to call in redemption requests.
- -----------------------------------------------------------------------------
You may request that redemption proceeds be sent to you by
check, by transfer into an ACH-linked bank account, or by wire.
Please call Investor Services regarding requirements for linking
bank accounts or for wiring funds. We reserve the right to
charge a fee for wiring funds although its not currently our CALL:
practice to do so. 1-800-222-8222
- -----------------------------------------------------------------------------
telephone privileges are automatically made available to you
unless you specifically decline them on your application or
subsequently in writing.
- -----------------------------------------------------------------------------
Phone privileges allow us to accept transaction instructions by
anyone representing themselves as the shareholder and who
provides reasonable confirmation of their identity, such as
providing the Taxpayer identification Number on the account.
We will not be liable for any losses incurred if we follow
telephone instructions we reasonably believe to be genuine.
- -----------------------------------------------------------------------------
Telephone requests are not accepted if the address on your
account was changed by phone in the last 15 days.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
GENERAL NOTES FOR SELLING SHARES
- -------------------------------------------------------------------------------
We determine the NAV of the funds each day as of the close of regular trading on
the NYSE, which is generally 1:00 PM (Pacific time) /3:00 P.M. (Central time).
- -------------------------------------------------------------------------------
Your redemptions are not net of any applicable CDSC
- -------------------------------------------------------------------------------
We will process requests to sell shares at the first NAV calculated after a
request in proper form is received. Requests received before the cutoff times
are processed on the same business day.
- -------------------------------------------------------------------------------
If you purchased shares through a packaged investment product or retirement
plan, read the directions for selling shares provided by the product or plan.
There may be special requirements that supersede the directions in this
Prospectus.
- -------------------------------------------------------------------------------
We reserve the right to delay payment of a redemption so that we may reasonably
certain that investments made by check or Systematic Purchase Plan have been
collected. Payments of redemptions also may be delayed under extraordinary
circumstances or as permitted by the SEC in order to protect remaining
shareholders.
- -------------------------------------------------------------------------------
Generally. We pay redemption requests in cash unless the redemption request is
for more than $250.000 or 1% of the net assets of the Fund by a single
shareholder over any ninety-day period. If a request for a redemption is over
these limits, it may be to the detriment of existing shareholders to pay such
redemption in cash. Therefore we may pay all or part of the redemption in
securities of equal value.
- --------------------------------------------------------------------------------
<PAGE>
ADDITIONAL SERVICES AND OTHER INFORMATION
AUTOMATIC PROGRAMS:
These programs help you conveniently purchase and/or redeem shares each month.
Call Investor Services 1-800-222-8222 for more information.
. SYSTEMATIC PURCHASE PLAN - With this program, you can regularly purchase
shares of a Wells Fargo Fund with money automatically transferred from a
linked bank account. Simply select the Fund you would like to purchase,
specify an amount of at least $100, and tell us the day of the month you
would like the money invested. If you do not specify a date, we will transfer
the money and invest in shares of the Fund you select on or about the 25th
day of the month.
. SYSTEMATIC EXCHANGE PLAN - With this program, you can regularly exchange
shares of a Wells Fargo Fund you own for shares of another Wells Fargo Fund.
The exchange amount must be at least $100, and the exchange will take place
on or about the 25th of each month. See the "Exchanges" section of this
prospectus for the conditions that apply to your shares. This feature may not
be available for certain types of accounts.
. SYSTEMATIC WITHDRAWAL PLAN - With this program, you can regularly redeem
shares and receive the proceeds by check or by transfer to a linked bank
account. Simply specify an amount of at least $100 and we will sell your
shares equal to that amount on or about the 25th of each month. To
participate in this program, you:
. must have a Fund account value at $10,000 or more;
. must have your distributions reinvested; and
. may not simultaneously participate in the Systematic Purchase Plan.
It generally takes about ten days to establish a plan once we have received your
instructions. It generally takes about five days to change or cancel
participation in a plan. We automatically cancel your program if the linked bank
account your specified is closed.
DIVIDEND AND CAPITAL GAIN DISTRIBUTIONS OPTIONS
The Funds in this Prospectus pay dividends periodically and make capital gains
distributions annually. The equity funds, except the Small Cap Fund, pay any
dividends quarterly. The Small Cap Fund pays any dividends annually. The income
and money market funds pay any dividends monthly.
<PAGE>
We offer the following distribution options:
. AUTOMATIC REINVESTMENT OPTION - Lets you buy new shares of the same class of
the Fund that generated the distributions. The new shares are purchased at
NAV generally on the day the income is paid. This option is automatically
assigned to your account unless you specify another plan.
. CHECK PAYMENT OPTION - Allows you to receive checks for distributions
mailed to your address of record or to another name and address which you
have specified in written, signature guaranteed instructions. If checks
remain uncashed for six months or are undeliverable by the Post Office, we
will reinvest the distributions at the earliest date possible.
TWO THINGS TO KEEP IN MIND ABOUT DISTRIBUTIONS
Remember, distributions have the effect of reducing the NAV per share by the
amount distributed. Also, distributions on new shares shortly after purchase
would be in effect a return of capital, although the distribution may still be
taxable to you.
TAXES
The following discussion regarding taxes is based on laws that were in effect as
of the date of this Prospectus. The discussion summarizes only some of the
important tax considerations that affect the Funds and you as a shareholder. It
is not intended as a substitute for careful tax planning. You should consult
your tax advisor about your specific tax situation. Federal income tax
considerations are discussed further in the Statement of Additional Information.
Dividends distributed from the Tax-Free Income Fund and Municipal Money Market
Fund attributable to their net interest income from tax-exempt securities will
not be subject to federal income tax. Dividends distributed from these and the
other Funds attributable to their income from other investments and net short-
term capital gain (generally, the excess of net short-term capital gains over
net long-term capital losses) will be taxable to you as ordinary income.
Corporate shareholders may be able to deduct a portion of their dividends when
determining their taxable income.
We will pass on to you any net capital gain (generally the excess of net long-
term capital gains over net short-term capital losses) earned by a Fund as a
capital gain distribution. In general, these distributions will be taxable to
you as long-term capital gains which may qualify for taxation at preferential
rates in the hands of non-corporate shareholders. Any distribution that is not
from net investment income, short term capital gains, or net capital gain may be
characterized as a return of capital to shareholders.
IMPORTANT INFORMATION FOR SHAREHOLDERS
On March 25, 1999, the Board of Directors of Stagecoach Funds Inc (the
"Company") approved the reorganization of the Company's Funds into new
portfolios of Wells Fargo funds Trust ("Funds Trust"). The reorganization is
part of a larger plan to consolidate the Wells Fargo Bank-advised fund family
with the Norwest Advantage fund family following last November's merger of Wells
Fargo & Company an Norwest Corporation. The Company will present the
reorganization to Fund shareholders for their approval at a special shareholders
meeting that is planned for August 1999.
If the reorganization is approved by shareholders the U.S. Government Allocation
Fund will be reorganized into the Funds Trust Intermediate Government Income
Fund. Although, respectively, the investment objectives are substantially
similar, the principal investment strategies may differ somewhat.
All of the other Funds of the Company will, if approved by shareholders, be
reorganized into new portfolios of Funds Trust that have Investment objectives
and strategies that are substantially identical to the corresponding Funds, in
most cases, these substantially identical Funds Trust portfolios will not absorb
other funds.
The Funds Trust portfolios are not yet available for purchase but corresponding
portfolios within either the Stagecoach fund family or the Norwest Advantage
fund family are currently available. No shareholder action is necessary at this
time. The Company's proxy materials, which are expected to be mailed in June to
all persons who are shareholders on May 6, 1999, will describe the
reorganization in detail, including any effect on expense ratios. If you buy
your shares after that date you will not be entitled to vote on the
reorganization, but you may request a copy of the proxy materials.
Investors should be aware that for certain share classes of certain Funds,
expense ratio increases of up to 0.14% are contemplated. In other cases, expense
ratios are expected to remain unchanged or decline. For the allocation
portfolios the reorganization is expected to be a tax-free transaction. The
reorganization will not trigger any sales charges.
If you have any questions or, after early June, if you would like to request a
copy of the proxy materials, you should call 1-800-222-8222.
<PAGE>
GLOSSARY
We provide the following definitions to assist you in reading this prospectus.
For a more complete understanding of these terms you should consult your
financial adviser.
ACH
Refers to the "Automated Clearing House" system maintained by the Federal
Reserve Bank which allows banks to process checks, transfer funds and perform
other tasks.
AMERICAN DEPOSITARY RECEIPTS ("ADRS")
Receipts for non-U.S. company stocks. The stocks underlying ADRs are typically
held in bank vaults. The ADR's owner is entitled to any capital gains or
dividends. ADRs are one way of owning an equity interest in foreign companies.
ANNUAL AND SEMI-ANNUAL REPORT
A document that provides certain financial and other important information for
the most recent reporting period and each Fund's portfolio of investments.
ASSET-BACKED SECURITIES
Securities consisting of an undivided fractional interest in pools of consumer
loans, such as car loans or credit card debt, or receivables held in trust.
BELOW INVESTMENT-GRADE
Securities rated BBB or lower by S&P or Baa or lower by Moody's Investor
Services, or that may be unrated securities or securities considered to be "high
risk."
BUSINESS DAY
Any day the New York Stock Exchange is open is a business day for the Funds.
CAPITAL APPRECIATION, CAPITAL GROWTH
The increase in the value of a security. See also "total return."
CAPITALIZATION
When referring to the size of a company, capitalization means the total number
of a company's outstanding shares of stock multiplied by the price per share.
This is an accepted method of determining a company's size and is sometimes
referred to as "market capitalization."
CAPITAL STRUCTURE
Refers to how a company has raised money to operate. Can include, for example,
borrowing or selling stock.
<PAGE>
COMMERCIAL PAPER
Debt instruments issued by banks, corporations and other issuers to finance
short-term credit needs. Commercial paper typically is of high credit quality
and offers below market interest rates.
CONVERTIBLE DEBT SECURITIES
Bonds or notes that are exchangeable for equity securities at a set price on a
set date or at the election of the holder.
CURRENT INCOME
Earnings in the form of dividends or interest as opposed to capital growth. See
also "total return."
DEBT SECURITIES
Generally, a promise to pay interest and repay principal by an individual or
group of individuals sold as a security. The owner of the security is entitled
to receive any such payments. Examples include bonds and mortgage- and other
asset-backed securities and can include securities in which the right to receive
interest and principal repayment have been sold separately.
DERIVATIVES
Securities whose values are derived in part from the value of another security
or index. An example is a stock option.
DISTRIBUTIONS
Dividends and/or capital gains paid by a Fund on its shares.
DIVERSIFIED
A diversified fund, as defined by the Investment Company Act of 1940, is one
that invests in cash, Government securities, other investment companies and no
more than 5% of its total assets in a single issuer. These policies must apply
to 75% of the Funds' total assets.
DOLLAR-DENOMINATED
Securities issued by foreign banks, companies or governments in U.S. dollars.
DOLLAR ROLLS
Similar to a reverse Repurchase Agreement, dollar rolls are simultaneous
agreements to sell a security held in a portfolio and to purchase a similar
security at a future date at an agreed-upon price.
<PAGE>
GLOSSARY (CONT'D)
DURATION
A measure of a security's or portfolio's sensitivity to changes in interest
rates. Duration is usually expressed in years, with longer durations typically
more sensitive to interest rate changes than shorter durations.
FDIC
The Federal Deposit Insurance Corporation. This is the company that provides
federally sponsored insurance covering bank deposits such as savings accounts
and CDs. Mutual funds are not FDIC insured.
FHLMC
FHLMC securities are commonly known as "Freddie Mac" and are issued by the
Federal Home Loan Mortgage Corporation.
FNMA
FNMA securities are known as "Fannie Maes" are issued by the Federal National
Mortgage Association, and FHLMC securities as "Freddie Mac" and are issued by
the Federal Home Loan Mortgage Corporation.
GNMA
GNMA securities are commonly known as "Ginnie Maes" and are issued by the
Government National Mortgage Association.
HEDGE
Strategy used to offset investment risk. A perfect hedge is one eliminating the
possibility of future gain or loss.
ILLIQUID SECURITY
A security which cannot be readily sold, or cannot be readily sold without
negatively affecting its fair price.
INITIAL PUBLIC OFFERING
The first time a company's stock is offered for sale to the public.
INVESTMENT-GRADE DEBT
A type of bond rated in the top four investment categories by a nationally
recognized ratings organization. Generally these are bonds whose issuers are
considered to have a strong ability to pay interest and repay principal,
although some investment-grade bonds may have some speculative characteristics.
<PAGE>
LIQUIDITY
The ability to readily sell a security at a fair price.
MONEY MARKET INSTRUMENTS
High-quality short-term instruments meeting the requirements of Rule 2a-7 of the
1940 Act, such as bankers' acceptances, commercial paper, repurchase agreements
and government obligations. In a money market fund, average portfolio maturity
does not exceed 90 days, and all investments have maturities of 397 days or less
at the time of purchase.
MOODY'S
A nationally recognized ratings organization.
NATIONALLY RECOGNIZED RATING ORGANIZATION (NRRO)
A company that examines the ability of a bond issuer to meet its obligations and
which rates the bonds accordingly.
NET ASSET VALUE (NAV)
The value of a single fund share. It is determined by adding together all of a
Fund's assets, subtracting accrued expenses and other liabilities, then dividing
by the total number of shares. The NAV is calculated separately for each class
of the Fund, and is determined as of the close of regular trading on each
business day the NYSE is open, typically 1:00 P.M. (Pacific time).
OPTIONS
An option is the right to buy or sell a security based on an agreed upon price
for at a specified time. For example, an option may give the holder of a stock
the right to sell the stock to another party, allowing the seller to profit if
the price has fallen below the agreed price. Options may also be based on the
movement of an index such as the S&P 500.
PRESERVATION OF CAPITAL
The attempt by a fund's manager to reduce drops in the net asset value of fund
shares in order to preserve the initial investment.
PRINCIPAL STABILITY
The degree to which share prices for a fund remain steady. Money market funds
attempt to achieve the highest degree of principal stability by maintaining a
$1.00 per share net asset value. More aggressive funds may not consider
principal stability an objective.
<PAGE>
GLOSSARY (CONT'D)
PUBLIC OFFERING PRICE (POP)
The NAV with the sales load added.
PRICE-TO-EARNINGS RATIO
The ratio between a stock's price and its historical, current or anticipated
earnings. Low ratios typically indicate a high yield. High ratios are
characteristic of growth stocks which generally have low current yields.
REPURCHASE AGREEMENT
An agreement between a buyer and seller of a security in which the seller agrees
to repurchase the security at an agreed upon price and time.
RUSSELL 1000 INDEX
An index comprised of 1000 largest firms listed on the Russell 3000 Index. The
Russell 3000 Index is a listing of 3000 corporations by the Frank Russell
Company that is intended to be representative of the U.S. economy. The Russell
1000 is considered a "large cap" index.
RUSSELL 2000 INDEX
An index comprised of the 2000 smallest firms listed on the Russell 3000 Index.
The Russell 3000 Index is a listing of 3000 corporations by the Frank Russell
Company that is intended to be representative of the U.S. economy. The Russell
2000 is considered a "small cap" index.
SELLING AGENT
A person who has an agreement with the Funds' distributors that allows them to
sell a Fund's shares.
SHAREHOLDER SERVICING AGENT
Anyone appointed by the Fund to maintain shareholder accounts and records,
assist and provide information to shareholders or perform similar functions.
SIGNATURE GUARANTEE
A guarantee given by a financial institution that has verified the identity of
the maker of the signature.
S&P, S&P 500 INDEX
Standard and Poors, a nationally recognized ratings organization. S&P's also
publishes various indexes or lists of companies representative of sectors of the
U.S. economy.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
A document that supplements the disclosure made in the Prospectus.
STRIPPED TREASURY SECURITIES
Debt obligations in which the interest payments and the repayment of principal
are separated and sold as securities.
TAXPAYER IDENTIFICATION NUMBER
Usually the social security number for an individual or the Employer
Identification Number for a corporation.
TOTAL RETURN
The total value of capital growth and the value of all distributions, assuming
that distributions were used to purchase additional shares of the Funds.
TURNOVER RATIO
The percentage of the securities held in a Fund's portfolio, other than short-
term securities, that were bought or sold within a year.
UNDERVALUED
Describes a stock that is believed to be worth more than its current price.
U.S. GOVERNMENT OBLIGATIONS
Obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.
VALUE STRATEGY
A strategy of investing which tries to identify and buy undervalued stocks under
the assumption that the stock will eventually rise to its "fair market" value.
WARRANTS
The right to buy a stock at a set price for a set time.
WEIGHTED-AVERAGE MATURITY
The average maturity for the debt securities in a portfolio on a dollar-for-
dollar basis.
ZERO COUPON BONDS
Bonds that make no periodic interest payments and which are usually sold at a
discount of their face value. Zero coupon bonds are subject to interest rate and
credit risk.
<PAGE>
BACK COVER
STAGECOACH FUNDS
You may wish to review the following documents:
STATEMENT OF ADDITIONAL INFORMATION
supplements the disclosures made by this Prospectus. The Statement of Additional
Information has been filed with the SEC and is incorporated by reference into
this Prospectus and is legally part of this Prospectus.
ANNUAL/SEMI-ANNUAL REPORT
provides certain financial and other important information,
including a discussion of the market conditions and investment
strategies that significantly affected Fund performance, for the
most recent reporting period.
These documents are available free of charge:
Call 1-800-222-8222, or
Write to:
PO Box 7066
San Francisco, CA 94120-7066
Visit the SEC's web site:
http://www.sec.gov, or
Request copies for a fee by writing to:
SEC Public Reference Room, Washington, DC 20549-6009
(call: 1-800-SEC-0330 for details)
=====================================================
NOT FDIC INSURED - NO BANK GUARANTEE - MAY LOSE VALUE
=====================================================
ICA Reg. No. 811-6419 SC AA P (6/99)
<PAGE>
STAGECOACH FUNDS, INC.
Telephone: 1-800-222-8222
STATEMENT OF ADDITIONAL INFORMATION
Dated June 30, 1999
ASSET ALLOCATION FUND
INDEX ALLOCATION FUND
U.S. GOVERNMENT ALLOCATION FUND
CLASS A, CLASS B AND CLASS C
Stagecoach Funds, Inc. (the "Company") is an open-end, management
investment company. This Statement of Additional Information ("SAI") contains
additional information about three funds in the Stagecoach Family of Funds
(each, a "Fund" and collectively, the "Funds") -- the ASSET ALLOCATION, INDEX
ALLOCATION and U.S. GOVERNMENT ALLOCATION FUNDS. Each Fund offers Class A
shares and Class B shares. The Asset Allocation and Index Allocation Funds also
offer Class C shares. This SAI relates to all such classes of shares.
This SAI is not a prospectus and should be read in conjunction with the
Funds' Prospectus, dated June 30, 1999. All terms used in this SAI that are
defined in the Prospectus have the meaning assigned in the Prospectus. A copy
of the Prospectus may be obtained without charge by calling 1-800-222-8222 or
writing to Stagecoach Funds, P.O. Box 7066, San Francisco, CA 94120-7066.
<PAGE>
TABLE OF CONTENTS
<TABLE>
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Page
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<S> <C>
Historical Fund Information........................................................... 1
Investment Restrictions............................................................... 1
Investment Models..................................................................... 5
Additional Permitted Investment Activities............................................ 9
Risk Factors.......................................................................... 20
Management............................................................................ 22
Performance Calculations.............................................................. 37
Determination of Net Asset Value...................................................... 45
Additional Purchase and Redemption Information........................................ 45
Portfolio Transactions................................................................ 46
Fund Expenses......................................................................... 48
Federal Income Taxes.................................................................. 49
Capital Stock......................................................................... 55
Other................................................................................. 58
Counsel............................................................................... 58
Independent Auditors.................................................................. 58
Financial Information................................................................. 58
Appendix.............................................................................. A-1
</TABLE>
<PAGE>
HISTORICAL FUND INFORMATION
The Company's Asset Allocation Fund commenced operations on January 2,
1992, as successor to the Asset Allocation Fund of the Wells Fargo Investment
Trust for Retirement Programs. The predecessor fund's commencement of
operations was November 13, 1986. The Class B shares commenced operations on
January 1, 1995, and the Class C shares commenced operations on April 1, 1998.
The Company's Index Allocation Fund was originally organized on April 7,
1988 as the Asset Allocation Fund of Overland Express Funds, Inc. ("Overland"),
another open-end management investment company advised by Wells Fargo Bank. The
Overland Asset Allocation Fund changed its name to the Index Allocation Fund on
February 14, 1997. On July 23, 1997, the Boards of the Directors of the Company
and Overland approved an Agreement and Plan of Consolidation providing for,
among other things, the transfer of the assets and stated liabilities of the
predecessor Overland portfolio to the Fund. Prior to December 12, 1997, the
effective date of the consolidation of the Company and Overland (the
"Consolidation"), the Fund had only nominal assets. As a result of the
Consolidation, the Overland Index Allocation Fund was reorganized as the
Company's Index Allocation Fund on December 12, 1997, and shareholders of the
Overland Index Allocation Fund's Class A and Class D shares became Class A and
Class C shareholders, respectively, of the Company's Index Allocation Fund.
The Company's U.S. Government Allocation Fund commenced operations on
January 2, 1992 as successor to the Fixed-Income Strategy Fund of the Wells
Fargo Investment Trust for Retirement Programs. The predecessor fund's
commencement of operations was March 31, 1987. The Class B shares commenced
operations on January 1, 1995, and the Class C shares commenced operations on
April 1, 1998.
INVESTMENT RESTRICTIONS
Fundamental Investment Policies
-------------------------------
Each Fund has adopted the following investment restrictions, all of which
are fundamental policies; that is, they may not be changed without approval by
the vote of the holders of a majority (as defined in the Investment Company Act
of 1940, as amended (the "1940 Act")) of the outstanding voting securities of
such Fund.
The Asset Allocation Fund and U.S. Government Allocation Fund may not:
(1) purchase the securities of issuers conducting their principal business
activity in the same industry if, immediately after the purchase and as a result
thereof, the value of any Fund's investments in that industry would be 25% or
more of the current value of its total assets, provided that there is no
limitation with respect to investments in (i) obligations of the United States
Government, its agencies or instrumentalities, (ii) in the case of the Asset
Allocation Fund, any industry in which the S&P 500 Index becomes
1
<PAGE>
concentrated to the same degree during the same period, and (iii) in the case of
the Asset Allocation Fund, money market instruments invested in the banking
industry and in obligations of the U.S. Government, its agencies or
instrumentalities (but the Fund will not do so unless the U.S. Securities and
Exchange Commission ("SEC") staff confirms that it does not object to the Fund
reserving freedom of action to concentrate investments in the banking industry);
and provided further, that each Fund may invest all of its assets in a
diversified, open-end management investment company, or a series thereof, with
substantially the same investment objective, policies and restrictions as such
Fund, without regard to the limitations set forth in this paragraph (1);
(2) purchase or sell real estate or real estate limited partnerships
(other than securities secured by real estate or interests therein or securities
issued by companies that invest in real estate or interests therein);
(3) purchase or sell commodities or commodity contracts; except that each
Fund may purchase and sell (i.e., write) options, forward contracts, futures
contracts, including those relating to indices, and options on futures contracts
or indices, and may participate in interest rate and index swaps;
(4) purchase interests, leases, or limited partnership interests in oil,
gas, or other mineral exploration or development programs;
(5) purchase securities on margin (except for short-term credits necessary
for the clearance of transactions and except for margin payments in connection
with transactions in options, forward contracts, futures contracts, including
those relating to indices, and options on futures contracts or indices) or make
short sales of securities;
(6) underwrite securities of other issuers, except to the extent that the
purchase of permitted investments directly from the issuer thereof or from an
underwriter for an issuer and the later disposition of such securities in
accordance with a Fund's investment program may be deemed to be an underwriting;
and provided further, that the purchase by a Fund of securities issued by a
diversified, open-end management investment company, or a series thereof, with
substantially the same investment objective, policies and restrictions as such
Fund shall not constitute an underwriting for purposes of this paragraph (6);
(7) make investments for the purpose of exercising control or management;
(8) issue senior securities, except to the extent the activities permitted
in Investment Restrictions Nos. 3 and 5 may be deemed to give rise to a senior
security but do not violate the provisions of section 18 of the 1940 Act, and
except that each Fund may borrow from banks up to 20% of the current value of
each such Fund's net assets for temporary purposes only in order to meet
redemptions, and these borrowings may be secured by the pledge of up to 20% of
the current value of each such Fund's net assets
2
<PAGE>
(but investments may not be purchased by such Funds while any such outstanding
borrowings exceed 5% of the respective Fund's net assets);
(9) write, purchase or sell puts, calls, straddles, spreads, warrants,
options or any combination thereof, except that each Fund may engage in options
transactions to the extent permitted in Investment Restrictions Nos. 3 and 5,
and except that each Fund may purchase securities with put rights in order to
maintain liquidity; nor
(10) purchase securities of any issuer (except securities issued or
guaranteed by the U.S. Government, its agencies and instrumentalities) if, as a
result, more than 5% of the value of a Fund's total assets would be invested in
the securities of any one issuer or such Fund's ownership would be more than 10%
of the outstanding voting securities of such issuer, provided that a Fund may
invest all its assets in a diversified, open-end management investment company,
or a series thereof, with substantially the same investment objective, policies
and restrictions as such Fund, without regard to the limitations set forth in
this paragraph (10).
Each of the Asset Allocation and U.S. Government Allocation Funds may make
loans in accordance with its investment policies.
As a fundamental policy, each of the Asset Allocation and U.S. Government
Allocation Funds may invest, notwithstanding any other investment restrictions
(whether or not fundamental), all of its assets in the securities of a single
open-end, management investment company with substantially the same fundamental
investment objectives, policies and restrictions as such Fund. A decision to so
invest all of its assets may, depending on the circumstances applicable at the
time, require approval of shareholders.
The Index Allocation Fund may not:
(1) purchase the securities of issuers conducting their principal business
activity in the same industry if, immediately after the purchase and as a result
thereof, the value of the Fund's investments in that industry would exceed 25%
of the current value of its total assets, provided that there is no limitation
with respect to investments in (i) municipal securities (for the purpose of this
restriction, private activity bonds and notes shall not be deemed municipal
securities if the payments of principal and interest on such bonds or notes is
the ultimate responsibility of non-governmental issuers); (ii) obligations of
the United States Government, its agencies or instrumentalities; (iii) any
industry in which the S&P Index becomes concentrated to the same degree during
the same period; and (iv) the obligations of domestic banks;
(2) purchase or sell real estate (other than municipal obligations or
other securities secured by real estate or interests therein or securities
issued by companies that invest in real estate or interests therein),
commodities or commodity contracts; except that the Fund may purchase and sell
(i.e., write) options, forward contracts, futures contracts, including those
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<PAGE>
relating to indices, and options on futures contracts or indices, and may
participate in interest rate swaps and index swaps;
(3) purchase securities on margin or make short sales of securities
(except for short-term credits necessary for the clearance of transactions and
except that the Fund may make margin payments in connection with transactions in
options, forward contracts, futures contracts, including those relating to
indices, and options on futures contracts or indices);
(4) underwrite securities of other issuers, except to the extent that the
purchase of municipal securities or other permitted investments directly from
the issuer thereof or from an underwriter for an issuer and the later
disposition of such securities in accordance with the Fund's investment program
may be deemed to be an underwriting;
(5) invest more than 10% of the current value of its net assets in
repurchase agreements maturing in more than seven days, restricted securities,
which are securities that must be registered under the Securities Act of 1933
before they may be offered or sold to the public, and illiquid securities;
(6) make investments for the purpose of exercising control or management;
(7) issue senior securities, except to the extent the activities of the
Fund permitted in Investment Restrictions Nos. 2 and 3 may be deemed to give
rise to a senior security but do not violate the provisions of section 18 of the
1940 Act, and except that the Fund may borrow from banks up to 10% of the
current value of its net assets for temporary purposes only in order to meet
redemptions, and these borrowings may be secured by the pledge of up to 10% of
the current value of its net assets (but investments may not be purchased while
any such borrowing exists); nor
(8) invest more than 10% of the current value of its net assets in fixed
time deposits that are subject to withdrawal penalties and that have maturities
of more than seven days.
In addition, the Fund may not write, purchase or sell puts, calls, warrants
or options or any combination thereof, except that the Fund may purchase
securities with put rights in order to maintain liquidity, and except that the
Fund may engage in options transactions to the extent permitted in Investment
Restrictions Nos. 2 and 3.
The Fund may not, as to 75% of its total assets, purchase securities of any
issuer (except securities issued or guaranteed by the U.S. Government, its
agencies and instrumentalities) if, as a result, more than 5% of the value of
its total assets would be invested in the securities of any one issuer or, with
respect to 100% of its assets, the Fund's ownership would be more than 10% of
the outstanding voting securities of such issuer.
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<PAGE>
Non-Fundamental Investment Policies
-----------------------------------
Each Fund has adopted the following non-fundamental policies which may be
changed by a majority vote of the Board of Directors of the Company at any time
and without approval of such Fund's shareholders.
(1) Each Fund may invest in shares of other open-end management investment
companies, subject to the limitations of Section 12(d)(1) of the 1940 Act.
Under the 1940 Act, a Fund's investment in such securities currently is limited
to , subject to certain exceptions, (i) 3% of the total voting stock of any one
investment company, (ii) 5% of such Fund's net assets with respect to any one
investment company, and (iii) 10% of such Fund's net assets in the aggregate.
Other investment companies in which the Funds invest can be expected to charge
fees for operating expenses, such as investment advisory and administration
fees, that would be in addition to those charged by a Fund.
(2) Each Fund may not invest or hold more than 15% of its net assets in
illiquid securities. For this purpose, illiquid securities include, among
others, (a) securities that are illiquid by virtue of the absence of a readily
available market or legal or contractual restrictions on resale, (b) fixed time
deposits that are subject to withdrawal penalties and that have maturities of
more than seven days, and (c) repurchase agreements not terminable within seven
days.
(3) Each Fund may invest up to 25% of its net assets in securities of
foreign governmental and foreign private issuers that are denominated in and pay
interest in U.S. dollars.
(4) Each Fund may lend securities from its portfolio to brokers, dealers
and financial institutions, in amounts not to exceed (in the aggregate) one-
third of a Fund's total assets. Any such loans of portfolio securities will be
fully collateralized based on values that are marked to market daily. The Funds
will not enter into any portfolio security lending arrangement having a duration
of longer than one year.
INVESTMENT MODELS
This section contains supplemental information about the proprietary
investment model used by Barclays Global Fund Advisors ("BGFA") to manage each
Fund's portfolio.
Asset Allocation Model. BGFA compares the Asset Allocation Fund's
----------------------
investments daily to the Asset Allocation Model's recommended allocation. The
investment model recommends allocations among each asset class in 5% increments
only. Any recommended reallocation will be implemented in accordance with
trading policies that have been designed to take advantage of market
opportunities and to reduce transaction costs. Under current trading policies
employed by BGFA, recommended reallocations may be implemented promptly upon
receipt of recommendations or may not
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<PAGE>
be acted upon for as long as two or three months thereafter depending on factors
such as the percentage change from previous recommendations and the consistency
of recommended reallocations over a period of time. In addition, the Asset
Allocation Fund generally will invest the net proceeds from the sale of shares
of the Fund and will liquidate existing Fund investments to meet net redemption
requirements in a manner that best allows the Fund's existing asset allocation
to follow that recommended by the Model. Notwithstanding any recommendation of
the Model to the contrary, the Asset Allocation Fund will generally maintain at
least that portion of its assets in money market instruments reasonably
considered necessary to meet redemption requirements. In general, cash
maintained for short-term liquidity needs is only invested in U.S. Treasury
bills, shares of other mutual funds and repurchase agreements. There is no
requirement that the Fund maintain positions in any particular asset class or
classes.
Wells Fargo Bank and BGFA manage other portfolios which also invest in
accordance with the Asset Allocation Model. The performance of each of those
other portfolios is likely to vary among themselves and from the performance of
the Fund. Such variation in performance is primarily due to different
equilibrium asset mix assumptions used for the various portfolios, timing
differences in the implementation of the model's recommendations and differences
in expenses and liquidity requirements.
There are 500 common stocks, including Wells Fargo & Company stock, which
make up the S&P 500 Index. Standard & Poor's Ratings Group ("S&P") occasionally
makes changes in the S&P 500 Index based on its criteria for inclusion of stocks
in the S&P 500 Index. The S&P 500 Index is market-capitalization-weighted so
that each stock in the S&P 500 Index represents its proportion of the total
market value of all stocks in the S&P 500 Index. In making its stock
investments, the policy of the Asset Allocation Fund is to invest its assets in
substantially the same stocks, and in substantially the same percentages, as the
S&P 500 Index, including Wells Fargo & Company stock.
A key component of the Asset Allocation Model is a set of assumptions
concerning expected risk and return and investor attitudes toward risk which are
incorporated into the asset allocation decision. The principal inputs of
financial data to the Asset Allocation Model currently are (i) consensus
estimates of the earnings, dividends and payout ratios on a broad cross-section
of common stocks as reported by independent financial reporting services which
survey a broad cross-section of Wall Street analysts, (ii) the estimated current
yield to maturity on new long-term corporate bonds rated "AA" by S&P, (iii) the
present yield on money market instruments, (iv) the historical statistical
standard deviation in investment return for each class of asset, and (v) the
historical statistical correlation of investment returns among the various asset
classes in which the Asset Allocation Fund invests. Using these data, the Asset
Allocation Model is run daily to determine the recommended asset allocation.
The model's recommendations are presently made in 5% increments.
Although BGFA intends to use the Model as bases for its investment
decisions, BGFA may change from time to time the criteria and methods it uses to
implement the
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<PAGE>
Model's recommendations if it believes such a change is desirable for the Fund.
Nevertheless, Wells Fargo Bank has continuing and exclusive authority over the
management of the Fund, the conduct of its affairs and the disposition of the
Funds' assets, and Wells Fargo Bank has the right to reject BGFA's investment
decisions for the Fund if Wells Fargo Bank determines that any such decision is
not consistent with the best interests of the Fund.
Index Allocation Model. BGFA compares the Index Allocation Fund's
----------------------
investments daily to the Index Allocation Model's recommended allocation. The
investment model recommends allocations among each asset class in 5% increments
only. Any recommended reallocation will be implemented in accordance with
trading policies that have been designed to take advantage of market
opportunities and to reduce transaction costs. Under current trading policies
employed by BGFA, recommended reallocations may be implemented promptly upon
receipt of recommendations or may not be acted upon for as long as two or three
months thereafter depending on factors such as the percentage change from
previous recommendations and the consistency of recommended reallocations over a
period of time. In addition, the Index Allocation Fund generally will invest
the net proceeds from the sale of shares of the Fund and will liquidate existing
Fund investments to meet net redemption requirements in a manner that best
allows the Fund's existing asset allocation to follow that recommended by the
Model. Notwithstanding any recommendation of the Model to the contrary, the
Index Allocation Fund will generally maintain at least that portion of its
assets in money market instruments reasonably considered necessary to meet
redemption requirements. In general, cash maintained for short-term liquidity
needs is only invested in U.S. Treasury bills, shares of other mutual funds and
repurchase agreements. There is no requirement that the Fund maintain positions
in any particular asset class or classes.
Wells Fargo Bank and BGFA manage other portfolios which also invest in
accordance with the Index Allocation Model. The performance of each of those
other portfolios is likely to vary among themselves and from the performance of
the Fund. Such variation in performance is primarily due to different
equilibrium asset mix assumptions used for the various portfolios, timing
differences in the implementation of the model's recommendations and differences
in expenses and liquidity requirements.
There are 500 common stocks, including Wells Fargo & Company stock, which
make up the S&P 500 Index. S&P occasionally makes changes in the S&P 500 Index
based on its criteria for inclusion of stocks in the S&P 500 Index. The S&P 500
Index is market-capitalization-weighted so that each stock in the S&P 500 Index
represents its proportion of the total market value of all stocks in the S&P 500
Index. In making its stock investments, the policy of the Index Allocation Fund
is to invest its assets in substantially the same stocks, and in substantially
the same percentages, as the S&P 500 Index, including Wells Fargo & Company
stock. The Lehman Brothers 20+ Treasury Bond Index (the "LBT Bond Index") is an
unmanaged index comprised of U.S. Treasury Securities with remaining maturities
of twenty years or more. The portion of the Fund's
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<PAGE>
portfolio allocated to bonds is invested so as to replicate the performance
characteristics of the LBT Bond Index.
A key component of the Index Allocation Model is a set of assumptions
concerning expected risk and return and investor attitudes toward risk which are
incorporated into the index allocation decision. The principal inputs of
financial data to the Index Allocation Model currently are (i) consensus
estimates of the earnings, dividends and payout ratios on a broad cross-section
of common stocks as reported by independent financial reporting services which
survey a broad cross-section of Wall Street analysts, (ii) the estimated current
yield to maturity on new long-term corporate bonds rated "AA" by S&P, (iii) the
present yield on money market instruments, (iv) the historical statistical
standard deviation in investment return for each class of asset, and (v) the
historical statistical correlation of investment returns among the various asset
classes in which the Index Allocation Fund invests. Using these data, the Index
Allocation Model is run daily to determine the recommended asset allocation.
Although BGFA intends to use the Model as bases for its investment
decisions, BGFA may change from time to time the criteria and methods it uses to
implement the Model's recommendations if it believes such a change is desirable
for the Fund. Nevertheless, Wells Fargo Bank has continuing and exclusive
authority over the management of the Fund, the conduct of its affairs and the
disposition of the Funds' assets, and Wells Fargo Bank has the right to reject
BGFA's investment decisions for the Fund if Wells Fargo Bank determines that any
such decision is not consistent with the best interests of the Fund.
U.S. Government Allocation Model. BGFA compares the U.S. Government
--------------------------------
Allocation Fund's investments daily to the U.S. Government Allocation Model's
recommended allocation. The investment model recommends allocations among each
asset class in 5% increments only. Any recommended reallocation will be
implemented in accordance with trading policies that have been designed to take
advantage of market opportunities and to reduce transaction costs. Under current
trading policies employed by BGFA, recommended reallocations may be implemented
promptly upon receipt of recommendations or may not be acted upon for as long as
two to three months thereafter depending on factors such as the percentage
change from previous recommendations and the consistency of recommended
reallocations over a period of time. In addition, the U.S. Government Allocation
Fund generally will invest the net proceeds from the sale of shares of the Fund
and will liquidate existing Fund investments to meet net redemption requirements
in a manner that best allows the Fund's existing asset allocation to follow the
allocation recommended by the computer Model. Notwithstanding any recommendation
of the computer model to the contrary, the Fund will generally maintain at least
that portion of its assets in money market instruments reasonably considered
necessary to meet redemption requirements. In general, cash maintained for
short-term liquidity needs is only invested in U.S. Treasury bills, shares other
mutual funds and repurchase agreements. There is no requirement that the Fund
maintain positions in any particular asset class or classes.
8
<PAGE>
BGFA manages other funds which invest in accordance with a substantially
similar version of the Model. The performance of each of those other funds is
likely to vary among themselves and from the performance of the U.S. Government
Allocation Fund. Such variation in performance is primarily due to timing
differences in the implementation of the Model's recommendations, differences in
expenses and liquidity requirements, and the ability of other funds to invest a
higher portion of their assets in short-term investments that may generate a
higher yield, but are not issued or guaranteed by the U.S. Government, its
agencies or instrumentalities.
A key component of the U.S. Government Allocation Model is a set of
assumptions concerning expected risk and return and investor attitudes toward
risk, which are incorporated into the allocation decision. The principal inputs
of financial data to the model currently are: (i) yields on 90-day U.S. Treasury
bills, 5-year U.S. Treasury notes and 30-year U.S. Treasury bonds; (ii) the
expected statistical standard deviation in investment returns for each class of
fixed income instrument; and (iii) the expected statistical correlation of
investment return among the various classes of fixed income instruments. Using
these and other data, the Model is run daily to determine the recommended
allocation. The Model's recommendations are presently implemented in 10%
increments. Because the Fund may shift its investment allocations significantly
from time to time, its performance may differ from funds which invest in one
asset class or from funds with a constant mix of assets.
Although BGFA intends to use the Model as bases for its investment
decisions, BGFA may change from time to time the criteria and methods it uses to
implement the Model's recommendations if it believes such a change is desirable
for the Fund. Nevertheless, Wells Fargo Bank has continuing and exclusive
authority over the management of the Fund, the conduct of its affairs and the
disposition of the Funds' assets, and Wells Fargo Bank has the right to reject
BGFA's investment decisions for the Fund if Wells Fargo Bank determines that any
such decision is not consistent with the best interests of the Fund.
ADDITIONAL PERMITTED INVESTMENT ACTIVITIES
Set forth below are descriptions of certain investments and additional
investment policies for the Funds.
Bonds
-----
The Funds may purchase U.S. Treasury bonds with maturities greater than 20
years. The bond portion of the portfolio of the Funds is generally managed to
attain an average maturity of between 22 and 28 years for the U.S. Treasury
bonds held. This form of debt instrument has been selected by BGFA because of
the relatively low transaction costs of buying and selling U.S. Treasury bonds
and because of the low default risk associated with such instruments.
9
<PAGE>
Derivative Securities
---------------------
Some of the permissible investments described herein are considered
"derivative" securities because their value is derived, at least in part, from
the price of another security or a specified asset, index or rate. For example,
the futures contracts and options on futures contracts that the Funds may
purchase are considered derivatives. The Funds may only purchase or sell these
contracts or options as substitutes for comparable market positions in the
underlying securities. Also, asset-backed securities issued or guaranteed by
U.S. Government agencies or instrumentalities and certain floating- and
variable-rate instruments can be considered derivatives. Some derivatives may
be more sensitive than direct securities to changes in interest rates or sudden
market moves. Some derivatives also may be susceptible to fluctuations in yield
or value due to their structure or contract terms. Wells Fargo Bank and BGFA
use a variety of internal risk management procedures to ensure that derivatives
use is consistent with a Fund's investment objective, does not expose the Fund
to undue risk and is closely monitored. These procedures include providing
periodic reports to the Board of Directors concerning the use of derivatives.
Also, cash maintained by the Index Allocation Fund for short-term liquidity
needs (e.g., to meet anticipated redemption requests) will, as a general matter,
only be invested in U.S. Treasury bills, shares of other mutual funds and
repurchase agreements. The use of derivatives by the Asset Allocation, Index
Allocation and U.S. Government Allocation Funds also is subject to broadly
applicable investment policies. For example, a Fund may not invest more than a
specified percentage of its assets in "illiquid securities," including those
derivatives that do not have active secondary markets. Nor may a Fund use
certain derivatives without establishing adequate "cover" in compliance with SEC
rules limiting the use of leverage.
Floating- and Variable-Rate Instruments
---------------------------------------
Certain of the debt instruments in which the Funds may invest bear interest
rates that are periodically adjusted at specified intervals or whenever a
benchmark rate or index change. These adjustments generally limit the increase
or decrease in the amount of interest received on debt instruments. The Funds
may purchase certificates of participation in pools of floating- and variable-
rate instruments from banks and other financial institutions. Wells Fargo Bank,
as investment advisor, monitors on an ongoing basis the ability of an issuer of
a demand instrument to pay principal and interest on demand. Events occurring
between the date a Fund elects to demand payment on a floating- or variable-rate
instrument and the date payment is due may affect the ability of the issuer of
the instrument to make payment when due, and unless such demand instrument
permits same-day settlement, such events may affect a Fund's ability to obtain
payment at par. Demand instruments whose demand feature is not exercisable
within seven days may be treated as liquid, provided that an active secondary
market exists.
Foreign Obligations
-------------------
Each Fund may invest up to 25% of its assets in high-quality, short-term
debt obligations of foreign branches of U.S. banks or U.S. branches of foreign
banks that are
10
<PAGE>
denominated in and pay interest in U.S. dollars. Investments by the Funds in
foreign obligations involve certain considerations that are not typically
associated with investing in domestic obligations. There may be less publicly
available information about a foreign issuer than about a domestic issuer.
Foreign issuers also are not generally subject to uniform accounting, auditing
and financial reporting standards or governmental supervision comparable to
those applicable to domestic issuers. In addition, with respect to certain
foreign countries, taxes may be withheld at the source under foreign income tax
laws, and there is a possibility of expropriation or confiscatory taxation,
political or social instability or diplomatic developments that could adversely
affect investments in, the liquidity of, and the ability to enforce contractual
obligations with respect to, securities of issuers located in those countries.
Forward Commitments, When-Issued Purchases and Delayed-Delivery
---------------------------------------------------------------
Transactions
- ------------
The Funds may purchase or sell securities on a when-issued or delayed-
delivery basis and make contracts to purchase or sell securities for a fixed
price at a future date beyond customary settlement time. Securities purchased or
sold on a when-issued, delayed-delivery or forward commitment basis involve a
risk of loss if the value of the security to be purchased declines, or the value
of the security to be sold increases, before the settlement date. Although the
Funds will generally purchase securities with the intention of acquiring them,
the Funds may dispose of securities purchased on a when-issued, delayed-delivery
or a forward commitment basis before settlement when deemed appropriate by the
advisor. Securities purchased on a when-issued or forward commitment basis may
expose the relevant Fund to risk because they may experience price fluctuations
prior to their actual delivery. Purchasing securities on a when-issued or
forward commitment basis can involve the additional risk that the yield
available in the market when the delivery takes place actually may be higher
than that obtained in the transaction itself.
The Funds will segregate cash, U.S. Government obligations or other high-
quality debt instruments in an amount at least equal in value to the Fund's
commitments to purchase when-issued securities. If the value of these assets
declines, the Funds will segregate additional liquid assets on a daily basis so
that the value of the segregated assets is equal to the amount of such
commitments.
Futures Contracts and Options Transactions
------------------------------------------
In General. The Funds may enter into and engage in futures contracts and
options transactions as discussed below. A futures transaction involves a firm
agreement to buy or sell a commodity or financial instrument at a particular
price on a specified future date, while an option transaction generally involves
a right, which may or may not be exercised, to buy or sell a commodity or
financial instrument at a particular price on a specified future date. Futures
contracts and options are standardized and exchange-traded, where the exchange
serves as the ultimate counterparty for all contracts. Consequently, the
primary credit risk on futures contracts is the creditworthiness of the
exchange. Futures contracts, however, are subject to market risk (i.e.,
exposure to adverse price changes).
11
<PAGE>
Although the Funds intend to purchase or sell futures contracts only if
there is an active market for such contracts, no assurance can be given that a
liquid market will exist for any particular contract at any particular time.
Many futures exchanges and boards of trade limit the amount of fluctuation
permitted in futures contract prices during a single trading day. Once the
daily limit has been reached in a particular contract, no trades may be made
that day at a price beyond that limit or trading may be suspended for specified
periods during the trading day. Futures contract prices could move to the limit
for several consecutive trading days with little or no trading, thereby
preventing prompt liquidation of futures positions and potentially subjecting a
Fund to substantial losses. If it is not possible, or a Fund determines not to
close a futures position in anticipation of adverse price movements, the Fund
will be required to make daily cash payments of variation margin.
An option on a futures contract gives the purchaser the right, in return
for the premium paid, to assume a position in a futures contract (a long
position if the option is a call and a short position if the option is a put) at
a specified exercise price at any time during the option exercise period. The
writer (i.e., seller) of the option is required upon exercise to assume an
offsetting futures position (a short position if the option is a call and a long
position if the option is a put). Upon exercise of the option, the assumption
of offsetting futures positions by both the writer and the holder of the option
will be accompanied by delivery of the accumulated cash balance in the writer's
futures margin account in the amount by which the market price of the futures
contract, at exercise, exceeds (in the case of a call) or is less than (in the
case of a put) the exercise price of the option on the futures contract. The
potential loss related to the purchase of options on futures contracts is
limited to the premium paid for the option (plus transaction costs). Because
the value of the option is fixed at the time of sale, there are no daily cash
payments to reflect changes in the value of the underlying contract; however,
the value of the option may change daily, and that change would be reflected in
the net asset value of the relevant Fund.
The Funds may trade futures contracts and options on futures contracts in
U.S. domestic markets, such as the Chicago Board of Trade and the International
Monetary Market of the Chicago Mercantile Exchange. The Funds' futures
transactions must constitute permissible transactions pursuant to regulations
promulgated by the Commodity Futures Trading Commission ("CFTC"). In addition,
the Funds may not engage in futures transactions if the sum of the amount of
initial margin deposits and premiums paid for unexpired options on futures
contracts, other than those contracts entered into for bona fide hedging
purposes, would exceed 5% of the liquidation value of a Fund's assets, after
taking into account unrealized profits and unrealized losses on such contracts;
provided, however, that in the case of an option on a futures contract that is
in-the money at the time of purchase, the in-the money amount may be excluded in
calculating the 5% liquidation amount. Pursuant to regulations and/or published
positions of the SEC, a Fund may be required to segregate cash or high-quality
money-market instruments in connection with its futures transactions in an
amount generally equal to the entire value of the underlying security.
12
<PAGE>
Initially, when purchasing or selling futures contracts a Fund will be
required to deposit with its custodian in the broker's name an amount of cash or
cash equivalents up to approximately 10% of the contract amount. This amount is
subject to change by the exchange or board of trade on which the contract is
traded, and members of such exchange or board of trade may impose their own
higher requirements. This amount is known as "initial margin" and is in the
nature of a performance bond or good faith deposit on the contract that is
returned to the Fund upon termination of the futures position, assuming all
contractual obligations have been satisfied. Subsequent payments, known as
"variation margin", to and from the broker will be made daily as the price of
the index or securities underlying the futures contract fluctuates, making the
long and short positions in the futures contract more or less valuable. At any
time prior to the expiration of a futures contract, a Fund may elect to close
the position by taking an opposite position, at the then prevailing price,
thereby terminating its existing position in the contract.
The Funds may engage in futures contracts sales to maintain the income
advantage from continued holding of a long-term security while endeavoring to
avoid part or all of the loss in market value that would otherwise accompany a
decline in long-term security prices. If, however, securities prices rise, a
Fund would realize a loss in closing out its futures contract sales that would
offset any increases in prices of the long-term securities they hold.
Another risk in employing futures contracts and options thereon to protect
against cash market price volatility is the possibility that futures prices will
correlate imperfectly with the behavior of the prices of the securities in such
portfolio (the portfolio securities will not be identical to the debt
instruments underlying the futures contracts).
Stock Index Options. The Funds may purchase and write (i.e., sell) put and
call options on stock indices only as a substitute for comparable market
positions in the underlying securities. The aggregate premiums paid on all
options purchased by a Fund may not exceed 20% of the Fund's total assets and
the value of the options written may not exceed 10% of the value of the Fund's
total assets.
A stock index fluctuates with changes of the market values of the stocks
included in the index. The effectiveness of purchasing or writing stock index
options will depend upon the extent to which price movements of the securities
in a Fund's portfolio correlate with price movements of the stock index
selected. Because the value of an index option depends upon movements in the
level of the index rather than the price of a particular stock, whether a Fund
will realize a gain or loss from purchasing or writing stock index options
depends upon movements in the level of stock prices in the stock market
generally or, in the case of certain indices, in an industry or market segment,
rather than movements in the price of particular stock. When a Fund writes an
option on a stock index, such Fund will place in a segregated account with the
Fund's custodian cash or liquid securities in an amount at least equal to the
market value of the underlying stock index and will maintain the account while
the option is open or otherwise will cover the transaction.
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<PAGE>
Stock Index Futures and Options on Stock Index Futures. The Funds may
invest in stock index futures and options on stock index futures only as a
substitute for a comparable market position in the underlying securities. A
stock index future obligates the seller to deliver (and the purchaser to take),
effectively, an amount of cash equal to a specific dollar amount times the
difference between the value of a specific stock index at the close of the last
trading day of the contract and the price at which the agreement is made. No
physical delivery of the underlying stocks in the index is made. With respect
to stock indices that are permitted investments, each Fund intends to purchase
and sell futures contracts on the stock index for which it can obtain the best
price with consideration also given to liquidity.
Interest-Rate Futures Contracts and Options on Interest-Rate Futures
Contracts. The Funds may invest in interest-rate futures contracts and options
on interest-rate futures contracts as a substitute for a comparable market
position in the underlying securities. The Funds may also sell options on
interest-rate futures contracts as part of closing purchase transactions to
terminate its options positions. No assurance can be given that such closing
transactions can be effected or as to the degree of correlation between price
movements in the options on interest-rate futures and price movements in the
Funds' portfolio securities which are the subject of the transaction.
The Index Allocation Fund will not enter into interest rate futures
contracts and options thereon, for which the aggregate initial margin and
premiums exceed 5% of the fair market value of its assets, after taking into
account unrealized profits and unrealized losses on any such contracts into
which they have entered; provided, however, that the "in-the-money" amount of an
option that was in-the-money at the time of purchase will be excluded in
computing such 5%.
The Asset Allocation, Index Allocation and U.S. Government Allocation Funds
may take advantage of opportunities in the areas of options and futures
contracts and options on futures contracts and any other derivative investments
which are not presently contemplated for use by the Fund or which are not
currently available but which may be developed, to the extent such opportunities
are both consistent with each Fund's investment objective and legally
permissible for the Fund. Before entering into such transactions or making any
such investment, the Fund would provide appropriate disclosure in its Prospectus
or this SAI.
Interest-Rate and Index Swaps. The Funds may enter into interest-rate and
index swaps in pursuit of its investment objectives. Interest-rate swaps
involve the exchange by a Fund with another party of their commitments to pay or
receive interest (for example, an exchange of floating-rate payments for fixed-
rate payments). Index swaps involve the exchange by the Fund with another party
of cash flows based upon the performance of an index of securities or a portion
of an index of securities that usually include dividends or income. In each
case, the exchange commitments can involve payments to be made in the same
currency or in different currencies. A Fund will usually enter into swaps on a
net basis. In so doing, the two payment streams are netted out, with the Fund
receiving or paying, as the case may be, only the net amount of the two
payments. If the Fund enters into a swap, it will maintain a segregated account
on a gross basis, unless the contract
14
<PAGE>
provides for a segregated account on a net basis. If there is a default by the
other party to such a transaction, the Fund will have contractual remedies
pursuant to the agreements related to the transaction.
The use of interest-rate and index swaps is a highly specialized activity
which involves investment techniques and risks different from those associated
with ordinary portfolio security transactions. There is no limit, except as
provided below, on the amount of swap transactions that may be entered into by
the Funds. These transactions generally do not involve the delivery of
securities or other underlying assets or principal. Accordingly, the risk of
loss with respect to swaps generally is limited to the net amount of payments
that the Fund is contractually obligated to make. There is also a risk of a
default by the other party to a swap, in which case a Fund may not receive net
amount of payments that such Fund contractually is entitled to receive. The
Funds may invest up to 10% of their net assets in interest-rate and index swaps.
Foreign Currency Transactions. The Asset Allocation and U.S. Government
Allocation Funds may enter into foreign currency transactions. When a Fund
enters into a foreign currency transaction or forward contract, such Fund
deposits, if required by applicable regulations, with the Fund's custodian cash
or high-grade debt securities in a segregated account an amount at least equal
to the value of the Fund's total assets committed to the consummation of the
forward contract. If the value of the securities placed in the segregated
account declines, additional cash or securities are placed in the account so
that the value of the account equals the amount of the Fund's commitment with
respect to the contract.
At or before the maturity of a forward contract, a Fund either may sell a
portfolio security and make delivery of the currency, or may retain the security
and offset its contractual obligation to deliver the currency by purchasing a
second contract pursuant to which such Fund obtains, on the same maturity date,
the same amount of the currency which it is obligated to deliver. If the Fund
retains the portfolio security and engages in an offsetting transaction, such
Fund, at the time of execution of the offsetting transaction, incurs a gain or a
loss to the extent that movement has occurred in forward contract prices.
Should forward prices decline during the period between the Fund's entering into
a forward contract for the sale of a currency and the date it enters into an
offsetting contract for the purchase of the currency, the Fund will realize a
gain to the extent the price of the currency it has agreed to sell exceeds the
price of the currency it has agreed to purchase. Should forward prices
increase, the Fund will suffer a loss to the extent the price of the currency it
has agreed to purchase exceeds the price of the currency it has agreed to sell.
The cost to a Fund of engaging in currency transactions varies with factors
such as the currency involved, the length of the contract period and the market
conditions then prevailing. Because transactions in currency exchange usually
are conducted on a principal basis, no fees or commissions are involved. Wells
Fargo Bank or BGFA, as appropriate, considers on an ongoing basis the
creditworthiness of the institutions with
15
<PAGE>
which a Fund enters into foreign currency transactions. The use of forward
currency exchange contracts does not eliminate fluctuations in the underlying
prices of the securities, but it does establish a rate of exchange that can be
achieved in the future. If a devaluation generally is anticipated, the Fund may
not be able to contract to sell the currency at a price above the devaluation
level it anticipates.
The purchase of options on currency futures allows a Fund, for the price of
the premium it must pay for the option, to decide whether or not to buy (in the
case of a call option) or to sell (in the case of a put option) a futures
contract at a specified price at any time during the period before the option
expires.
Illiquid Securities
-------------------
The Funds may invest in securities not registered under the 1933 Act and
other securities subject to legal or other restrictions on resale. Because such
securities may be less liquid than other investments, they may be difficult to
sell promptly at an acceptable price. Delay or difficulty in selling securities
may result in a loss or be costly to a Fund. Each Fund may invest up to 15% of
its net assets in illiquid securities.
Loans of Portfolio Securities
-----------------------------
The Funds may lend securities from their portfolios to brokers, dealers and
financial institutions (but not individuals) if cash, U.S. Government
obligations or other high-quality debt instruments equal to at least 100% of the
current market value of the securities loan (including accrued interest thereon)
plus the interest payable to such Fund with respect to the loan is maintained
with the Fund. In determining whether to lend a security to a particular
broker, dealer or financial institution, Wells Fargo Bank or BGFA will consider
all relevant facts and circumstances, including the creditworthiness of the
broker, dealer, or financial institution. Any loans of portfolio securities
will be fully collateralized based on values that are marked to market daily.
The Funds will not enter into any portfolio security lending arrangement having
a duration of longer than one year. The principal risk of portfolio lending is
potential default or insolvency of the borrower. In either of these cases, a
Fund could experience delays in recovering securities or collateral or could
lose all or part of the value of the loaned securities. Any securities that a
Fund may receive as collateral will not become part of the Fund's portfolio at
the time of the loan and, in the event of a default by the borrower, the Fund
will, if permitted by law, dispose of such collateral except for such part
thereof that is a security in which the Fund is permitted to invest. During the
time securities are on loan, the borrower will pay such Fund any accrued income
on those securities, and the Fund may invest the cash collateral and earn
additional income or receive an agreed-upon fee from a borrower that has
delivered cash-equivalent collateral. None of the Funds will lend securities
having a value that exceeds one-third of the current value of its total assets.
Loans of securities by any of the Funds will be subject to termination at the
Fund's or the borrower's option. The Funds may pay reasonable administrative
and custodial fees in connection with a securities loan and may pay a negotiated
portion of the interest or fee earned with respect
16
<PAGE>
to the collateral to the borrower or the placing broker. Borrowers and placing
brokers may not be affiliated, directly or indirectly, with the Company, its
Advisor, or its Distributor.
Money Market Instruments and Temporary Investments
--------------------------------------------------
Each Fund may invest varying percentages of their assets in money market
instruments. In addition, the Funds may invest temporary cash balances in the
following high-quality money market instruments: (i) obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities, including
government-sponsored enterprises ("U.S. Government obligations"); (ii)
negotiable certificates of deposit, bankers' acceptances and fixed time deposits
and other obligations of domestic banks (including foreign branches) that have
more than $ 1 billion in total assets at the time of investment and are members
of the Federal Reserve System or are examined by the Comptroller of the Currency
or whose deposits are insured by the Federal Deposit Insurance Corporation
("FDIC"); (iii) commercial paper rated at the date of purchase "P-1" by Moody's
Investors Service, Inc. ("Moody's") or "A-1+" or "A-1" by S&P, or, if unrated,
of comparable quality as determined by Wells Fargo Bank, as investment advisor;
(iv) nonconvertible corporate debt securities (e.g., bonds and debentures) with
remaining maturities at the date of purchase of no more than one year that are
rated at least "Aa" by Moody's or "AA" by S&P; (v) repurchase agreements; and
(vi) short-term, U.S. dollar-denominated obligations of foreign banks (including
U.S. branches) that at the time of investment have more than $10 billion, or the
equivalent in other currencies, in total assets and in the opinion of Wells
Fargo Bank, as investment advisor, are of comparable quality to obligations of
U.S. banks which may be purchased by a Fund.
Letters of Credit. Certain of the debt obligations (including municipal
securities, certificates of participation, commercial paper and other short-term
obligations) which the Funds may purchase may be backed by an unconditional and
irrevocable letter of credit of a bank, savings and loan association or
insurance company which assumes the obligation for payment of principal and
interest in the event of default by the issuer. Only banks, savings and loan
associations and insurance companies which, in the opinion of Wells Fargo Bank
or BGFA, are of comparable quality to issuers of other permitted investments of
such Fund may be used for letter of credit-backed investments.
Repurchase Agreements. Each Fund may enter into repurchase agreements,
wherein the seller of a security to the Fund agrees to repurchase that security
from the Fund at a mutually agreed upon time and price. A Fund may enter into
repurchase agreements only with respect to securities that could otherwise be
purchased by the Fund. All repurchase agreements will be fully collateralized
at 102% based on values that are marked to market daily. The maturities of the
underlying securities in a repurchase agreement transaction may be greater than
twelve months, although the maximum term of a repurchase agreement will always
be less than twelve months. If the seller defaults and the value of the
underlying securities has declined, a Fund may incur a loss. In addition, if
bankruptcy proceedings are
17
<PAGE>
commenced with respect to the seller of the security, the Fund's disposition of
the security may be delayed or limited.
Each Fund may not enter into a repurchase agreement with a maturity of more
than seven days, if, as a result, more than 15% of the market value of such
Fund's total net assets would be invested in repurchase agreements with
maturities of more than seven days, restricted securities and illiquid
securities. A Fund will only enter into repurchase agreements with primary
broker/dealers and commercial banks that meet guidelines established by the
Board of Directors and that are not affiliated with the investment advisor. The
Funds may participate in pooled repurchase agreement transactions with other
funds advised by Wells Fargo Bank.
Other Investment Companies
--------------------------
The Funds may invest in shares of other open-end management investment
companies, up to the limits prescribed in Section 12(d) of the 1940 Act. Under
the 1940 Act, a Fund's investment in such securities currently is limited to,
subject to certain exceptions, (i) 3% of the total voting stock of any one
investment company, (ii) 5% of such Fund's net assets with respect to any one
investment company and (iii) 10% of such Fund's net assets in aggregate. Other
investment companies in which the Funds invest can be expected to charge fees
for operating expenses such as investment advisory and administration fees, that
would be in addition to those charged by the Funds.
Pass-Through Obligations
------------------------
The Funds may invest in pass-through obligations that are supported by the
full faith and credit of the U.S. Government (such as those issued by the
Government National Mortgage Association ("GNMA")) or those that are guaranteed
by an agency or instrumentality of the U.S. Government or government-sponsored
enterprise (such as the Federal National Mortgage Association ("FNMA") or the
Federal Home Loan Mortgage Corporation ("FHLMC")) or bonds collateralized by any
of the foregoing.
Short-Term Corporate Debt Instruments
-------------------------------------
Each Fund may invest in commercial paper (including variable amount master
demand notes), which refers to short-term, unsecured promissory notes issued by
corporations to finance short-term credit needs. Commercial paper is usually
sold on a discount basis and has a maturity at the time of issuance not
exceeding nine months. Variable amount master demand notes are demand
obligations that permit the investment of fluctuating amounts at varying market
rates of interest pursuant to arrangements between the issuer and a commercial
bank acting as agent for the payee of such notes whereby both parties have the
right to vary the amount of the outstanding indebtedness on the notes.
The Funds also may invest in nonconvertible corporate debt securities
(e.g., bonds and debentures) with no more than one year remaining to maturity at
the date of settlement.
18
<PAGE>
The Funds will invest only in such corporate bonds and debentures that are rated
at the time of purchase at least "Aa" by Moody's or "AA" by S&P.
Unrated Investments
-------------------
The Funds, may purchase instruments that are not rated if, in the opinion
of Wells Fargo Bank, such obligations are of investment quality comparable to
other rated investments that are permitted to be purchased by such Fund. After
purchase by a Fund, a security may cease to be rated or its rating may be
reduced below the minimum required for purchase by such Fund. Neither event
will require a sale of such security by such Fund. To the extent the ratings
given by Moody's or S&P may change as a result of changes in such organizations
or their rating systems, each Fund will attempt to use comparable ratings as
standards for investments in accordance with the investment policies contained
in its Prospectus and in this SAI. The ratings of Moody's and S&P are more
fully described in the Appendix.
U.S. Government Obligations
---------------------------
The Funds may invest in obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities ("U.S. Government Obligations").
Payment of principal and interest on U.S. Government Obligations (i) may be
backed by the full faith and credit of the United States (as with U.S. Treasury
bills and GNMA certificates) or (ii) may be backed solely by the issuing or
guaranteeing agency or instrumentality itself (as with FNMA notes). In the
latter case investors must look principally to the agency or instrumentality
issuing or guaranteeing the obligation for ultimate repayment, which agency or
instrumentality may be privately owned. There can be no assurance that the
U.S. Government will provide financial support to its agencies or
instrumentalities where it is not obligated to do so. In addition, U.S.
Government Obligations are subject to fluctuations in market value due to
fluctuations in market interest rates. As a general matter, the value of debt
instruments, including U.S. Government Obligations, declines when market
interest rates increase and rises when market interest rates decrease. Certain
types of U.S. Government Obligations are subject to fluctuations in yield or
value due to their structure or contract terms.
Warrants
--------
The Funds each may invest in warrants (other than those that have been
acquired in units or attached to other securities). Warrants represent rights
to purchase securities at a specific price valid for a specific period of time.
The price of warrants do not necessarily correlate with the prices of the
underlying securities.
19
<PAGE>
When-Issued Securities
----------------------
The Funds may purchase or sell securities on a when-issued or delayed-
delivery basis and make contracts to purchase or sell securities for a fixed
price at a future date beyond customary settlement time. Delivery and payment
on such transactions normally take place within 120 days after the date of the
commitment to purchase. Securities purchased or sold on a when-issued, delayed-
delivery or forward commitment basis involve a risk of loss if the value of the
security to be purchased declines, or the value of the security to be sold
increases, before the settlement date. Although each Fund will generally
purchase securities with the intention of acquiring them, a Fund may dispose of
securities purchased on a when-issued, delayed-delivery or a forward commitment
basis before settlement when deemed appropriate by the advisor.
Each Fund will segregate cash, U.S. Government obligations or other high-
quality debt instruments in an amount at least equal in value to such Fund's
commitments to purchase when-issued securities. If the value of these assets
declines, the Fund will segregate additional liquid assets on a daily basis so
that the value of the segregated assets is equal to the amount of such
commitments.
RISK FACTORS
Investments in a Fund are not bank deposits or obligations of Wells Fargo
Bank, are not insured by the FDIC and are not insured against loss of principal.
When the value of the securities that a Fund owns declines, so does the value of
your Fund shares. You should be prepared to accept some risk with the money you
invest in a Fund.
The portfolio equity securities of each Fund are subject to equity market
risk. Equity market risk is the risk that stock prices will fluctuate or
decline over short or even extended periods. Throughout most of 1998, the stock
market, as measured by the S&P 500 Index and other commonly used indices, was
trading at or close to record levels. There can be no guarantee that these
performance levels will continue. The portfolio debt instruments of a Fund are
subject to credit and interest-rate risk. Credit risk is the risk that issuers
of the debt instruments in which a Fund invests may default on the payment of
principal and/or interest. Interest-rate risk is the risk that increases in
market interest rates may adversely affect the value of the debt instruments in
which a Fund invests and hence the value of your investment in a Fund.
The market value of a Fund's investment in fixed-income securities will
change in response to various factors, such as changes in interest rates and the
relative financial strength of an issuer. During periods of falling interest
rates, the value of fixed-income securities generally rises. Conversely, during
periods of rising interest rates, the value of such securities generally
declines. Debt securities with longer maturities, which tend to produce higher
yields, are subject to potentially greater price fluctuation than obligations
with shorter maturities. Fluctuations in the market value of fixed income
securities can be reduced, but not eliminated, by variable and floating rate
features.
20
<PAGE>
Securities rated in the fourth highest rating category are regarded by S&P
as having an adequate capacity to pay interest and repay principal, but changes
in economic conditions or other circumstances are more likely to lead to a
weakened capacity to make such repayments. Moody's considers such securities as
having speculative characteristics. Subsequent to its purchase by a Fund, an
issue of securities may cease to be rated or its rating may be reduced below the
minimum rating required for purchase by a Fund. Securities rated below the
fourth highest rating category (sometimes called "junk bonds") are often
considered to be speculative and involve greater risk of default or price
changes due to changes in the issuer's credit-worthiness. The market prices of
these securities may fluctuate more than higher quality securities and may
decline significantly in periods of general economic difficulty.
Illiquid securities, which may include certain restricted securities, may
be difficult to sell promptly at an acceptable price. Certain restricted
securities may be subject to legal restrictions on resale. Delay or difficulty
in selling securities may result in a loss or be costly to the Fund.
The advisor may use certain derivative investments or techniques, such as
buying and selling options and futures contracts and entering into currency
exchange contracts or swap agreements, to adjust the risk and return
characteristics of the Fund's investments. Derivatives are financial
instruments whose value is derived, at least in part, from the price of another
security or a specified asset, index or rate. Some derivatives may be more
sensitive than direct securities to changes in interest rates or sudden market
moves. Some derivatives also may be susceptible to fluctuations in yield,
duration or value due to their structure or contract terms. If the advisor
judges market conditions incorrectly, the use of certain derivatives could
result in a loss, regardless of the advisor's intent in using the derivatives.
There is, of course, no assurance that a Fund will achieve its investment
objective or be successful in preventing or minimizing the risk of loss that is
inherent in investing in particular types of investment products.
MANAGEMENT
The following information supplements, and should be read in conjunction
with, the section in the Prospectus entitled "Organization and Management of the
Funds." The principal occupations during the past five years of the Directors
and principal executive Officer of the Company are listed below. The address of
each, unless otherwise indicated, is 111 Center Street, Little Rock, Arkansas
72201. Directors deemed to be "interested persons" of the Company for purposes
of the 1940 Act are indicated by an asterisk.
Principal Occupations
Name, Age and Address Position During Past 5 Years
- --------------------- -------- -------------------
21
<PAGE>
<TABLE>
<S> <C> <C>
Jack S. Euphrat, 75 Director Private Investor.
415 Walsh Road
Atherton, CA 94027
*R. Greg Feltus, 46 Director, Executive Vice President of Stephens Inc.;
Chairman and President of Stephens Insurance Services Inc.;
President Senior Vice President of Stephens Sports
Management Inc.; and President of Investor
Brokerage Insurance Inc.
Thomas S. Goho, 55 Director Associate Professor of Finance of the School
321 Beechcliff Court of Business and Accounting at Wake Forest
Winston-Salem, NC 27104 University since 1982.
Peter G. Gordon, 54 Director Chairman and Co-Founder of Crystal Geyser
Crystal Geyser Water Co. Water Company and President of Crystal Geyser
55 Francisco St. Roxane Water Company since 1977.
San Francisco, CA 94133
Joseph N. Hankin, 57 Director President of Westchester Community College
75 Grasslands Road since 1971; Adjunct Professor of Columbia
Valhalla, NY 10595 University Teachers College since 1976.
*W. Rodney Hughes, 71 Director Private Investor.
31 Dellwood Court
San Rafael, CA 94901
*J. Tucker Morse, 53 Director Private Investor; Chairman of Home Account
4 Beaufain Street Network, Inc. Real Estate Developer; Chairman
Charleston, SC 29401 of Renaissance Properties Ltd.; President of
Morse Investment Corporation; and Co-Managing
Partner of Main Street Ventures.
Richard H. Blank, Jr., 41 Chief Operating Vice President of Stephens Inc.; Director of
Officer, Stephens Sports Management Inc.; and Director
Secretary and of Capo Inc.
Treasurer
</TABLE>
22
<PAGE>
Compensation Table
Period ended February 28, 1999
------------------------------
<TABLE>
<CAPTION>
Total Compensation
Aggregate Compensation from Registrant and
Name and Position from Registrant Wells Fargo Fund Complex
- ----------------- --------------- ------------------------
<S> <C> <C>
Jack S. Euphrat $25,750 $34,500
Director
R. Greg Feltus $ 0 $ 0
Director
Thomas S. Goho $25,750 $34,500
Director
Peter G. Gordon $24,250 $30,500
Director
Joseph N. Hankin $25,750 $34,500
Director
W. Rodney Hughes $25,250 $33,000
Director
Robert M. Joses $ 1,500 $ 4,000
Director
J. Tucker Morse $25,250 $33,000
Director
</TABLE>
As of January 1, 1998, Peter G. Gordon replaced Robert M. Joses on the
Board of Directors of the Wells Fargo Fund Complex.
Directors of the Company are compensated annually by the Company and by all
the registrants in each fund complex they serve as indicated above and also are
reimbursed for all out-of-pocket expenses relating to attendance at board
meetings. The Company, Stagecoach Trust and Life & Annuity Trust are considered
to be members of the same fund complexes as such term is defined in Form N-1A
under the 1940 Act (the "Wells Fargo Fund Complex"). Overland Express Funds,
Inc. and Master Investment Trust, two investment companies previously advised by
Wells Fargo Bank, were part of the Wells Fargo Fund Complex prior to December
12, 1997. These companies are no longer part of the Wells Fargo Fund Complex.
MasterWorks Funds Inc., Master Investment Portfolio, and Managed Series
Investment Trust together form a separate fund complex (the "BGFA Fund
Complex"). Each of the Directors and Officers of the Company serves in the
identical capacity as directors and officers or as trustees and/or officers of
each registered open-end
23
<PAGE>
management investment company in both the Wells Fargo and BGFA Fund Complexes,
except for Joseph N. Hankin and Peter G. Gordon, who only serve the
aforementioned members of the Wells Fargo Fund Complex. The Directors are
compensated by other companies and trusts within a fund complex for their
services as directors/trustees to such companies and trusts. Currently the
Directors do not receive any retirement benefits or deferred compensation from
the Company or any other member of each fund complex.
As of the date of this SAI, Directors and Officers of the Company as a
group beneficially owned less than 1% of the outstanding shares of the Company.
INVESTMENT ADVISOR. Wells Fargo Bank provides investment advisory services
------------------
to the Funds. As Investment Advisor, Wells Fargo Bank furnishes investment
guidance and policy direction in connection with the daily portfolio management
of the Funds. Wells Fargo Bank furnishes to the Company's Board of Directors
periodic reports on the investment strategy and performance of each Fund. Wells
Fargo Bank provides the Funds with, among other things, money market security
and fixed-income research, analysis and statistical and economic data and
information concerning interest rate and securities markets trends, portfolio
composition, and credit conditions.
As compensation for its advisory services, Wells Fargo Bank is entitled to
receive a monthly fee at the annual rate, indicated below, of each Fund's
average daily net assets:
Annual Rate
Fund (as percentage of net assets)
---- ----------------------------
Asset Allocation 0.50% up to $250 million
0.40% next $250 million
0.30% over $500 million
U.S. Government Allocation 0.50% up to $250 million
0.40% next $250 million
0.30% over $500 million
Index Allocation 0.70% up to $500 million
0.60% over $500 million
Asset Allocation and U.S. Government Allocation Funds. Prior to April 29,
-----------------------------------------------------
1996, the Funds each invested directly in a portfolio of securities and Wells
Fargo Bank provided investment advisory services directly to the Funds. On
April 29, 1996, the Funds were converted to a "master/feeder structure" and
began to invest all of their respective assets in a corresponding Master
Portfolio, with an identical investment objective, of Master Investment Trust,
another open-end investment company. The Master Portfolios were advised by
Wells Fargo Bank and Wells Fargo Bank was entitled to receive the same level of
advisory fees from the Master Portfolios as it receives from the Funds. These
Funds
24
<PAGE>
operated as part of a master/feeder structure from April 29, 1996 to December
12, 1997, at which time the master/feeder structure was dissolved.
Index Allocation Fund. Prior to the Consolidation, Wells Fargo Bank served
---------------------
as Investment Advisor to the Overland Index Allocation predecessor portfolio and
was entitled to receive the same level of advisory fees from the predecessor
portfolio as it now receives from the Index Allocation Fund.
For the periods indicated below, the Funds paid to Wells Fargo Bank the
following advisory fees and Wells Fargo Bank waived the indicated amounts:
<TABLE>
Eleven Months Ended Year Ended
2/28/99 3/31/98
---------- ----------
Fees Paid Fees Waived Fees Paid Fees Waived
-------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Asset Allocation $5,217,515 $ 0 $4,747,339 $ 7,060
U.S. Government Allocation $ 434,501 $43,152 $ 359,100 $108,848
Index Allocation $1,008,438 $ 846 $ 226,717 $ 9,389
</TABLE>
For the periods indicated below, the Funds paid to Wells Fargo Bank the
following advisory fees. Wells Fargo Bank has not waived any advisory fees paid
by the Asset Allocation or U.S. Government Allocation Funds, the predecessor
portfolio or the Master Portfolios.
<TABLE>
Six-Month Nine-Month
Year Ended Period Ended Period Ended
Fund 3/31/98 3/31/97 9/30/96/1/
- ---- ------- ------- ----------
<S> <C> <C> <C>
Asset Allocation/1/ $4,754,399 $2,132,577 $ 3,117,722
U.S. Government
Allocation $ 467,948 $ 254,002 $ 539,657
</TABLE>
______________________
/1/ For the Asset Allocation and U.S. Government Allocation Funds, these
amounts include both amounts paid by the Fund for the period from 1/1/96 to
4/28/96 and amounts paid by the corresponding Master Portfolio for the
period from 4/29/96 to 9/30/96.
For the periods indicated below, Wells Fargo Bank paid the following
advisory fees. Wells Fargo Bank has not waived any advisory fees paid by the
Index Allocation Fund or the predecessor portfolio, except during 1996 it waived
$1,324 in advisory fees payable by the Fund's predecessor portfolio.
25
<PAGE>
<TABLE>
Three-Month
Period Ended Year Ended Year Ended
Fund 3/31/98 12/31/97 12/31/96
- ---- -------- -------- --------
<S> <C> <C> <C>
Index Allocation/2/ $236,106 $742,203 $525,093
</TABLE>
__________________
/2/ These amounts reflect amounts paid by the Overland predecessor portfolio.
General. Each Fund's Advisory Contract will continue in effect for more
-------
than two years from the effective date provided the continuance is approved
annually (i) by the holders of a majority of the respective Fund's outstanding
voting securities or by the Company's Board of Directors and (ii) by a majority
of the Directors of the Company who are not parties to the Advisory Contract or
"interested persons" (as defined in the 1940 Act) of any such party. A Fund's
Advisory Contract may be terminated on 60 days' written notice by either party
and will terminate automatically if assigned.
INVESTMENT SUB-ADVISOR. Wells Fargo Bank has engaged BGFA to serve as
----------------------
Investment Sub-Advisor to each Fund. Subject to the direction of the Company's
Board of Directors and the overall supervision and control of Wells Fargo Bank
and the Company, BGFA makes recommendations regarding the investment and
reinvestment of the Funds' assets. BGFA is responsible for implementing and
monitors the performance of the proprietary investment models employed with
respect to a Fund. BGFA furnishes to Wells Fargo Bank periodic reports on the
investment activity and performance of the Funds. BGFA and also furnishes such
additional reports and information as Wells Fargo Bank and the Company's Board
of Directors and officers may reasonably request.
As compensation for its sub-advisory services, BGFA is entitled to receive
a monthly fee equal to an annual rate of 0.20% of the first $500 million of the
Asset Allocation and Index Allocation Funds' average daily net assets, 0.15% of
the next $500 million of the Funds' net assets, and 0.10% of net assets over $1
billion. As compensation for sub-advisory services for the U.S. Government
Allocation Fund, BGFA is entitled to receive a monthly fee equal to an annual
rate of 0.05% of the first $100 million of the U.S. Government Allocation Fund's
average daily net assets, 0.04% of the next $50 million of the Fund's net
assets, and 0.03% of net assets over $150 million. These fees may be paid by
Wells Fargo Bank or directly by the Fund. If the sub-advisory fee is paid
directly by the Fund, the compensation paid to Wells Fargo Bank for advisory
fees will be reduced accordingly.
The predecessor Master Portfolios were also sub-advised by BGFA, and from
October 30, 1997 to December 12, 1997, BGFA was entitled to receive the fees
described above. Prior to October 30, 1997, BGFA was entitled to receive a
monthly fee equal to an annual rate of 0.20% of the Asset Allocation and Index
Allocation Funds' average daily net assets, and 0.15% of the U.S. Government
Allocation Fund's average daily net assets plus an annual payment of $40,000.
26
<PAGE>
BGFA was created by the reorganization of Wells Fargo Nikko Investment
Advisors ("WFNIA"), a former affiliate of Wells Fargo Bank, with and into an
affiliate of Wells Fargo Institutional Trust Company, N.A. Prior to January 1,
1996, WFNIA served as sub-advisor to the Funds and the predecessor portfolios
under substantially similar terms as are currently in effect.
For the period indicated below, the Funds paid to BGFA the following sub-
advisory fees, without waivers:
<TABLE>
Eleven Six-Month
Months Ended Year Ended Period Ended
Fund 2/28/99 3/31/98 3/31/97
----- -------- ---------- --------
<S> <C> <C> <C>
Asset Allocation/1/ $ $2,262,864 $ 52,443
U.S. Government Allocation/1/ $ $ 123,818 $ 9,971
Index Allocation/2/ $ $ 209,220 $201,715
</TABLE>
________________
/1/ For the Asset Allocation and U.S. Government Allocation Funds, these
amounts reflect amounts paid by the corresponding Master Portfolio.
/2/ Prior to December 12, 1997, this amount reflects fees paid by the Overland
predecessor portfolio.
For the periods indicated below Wells Fargo Bank paid to BGFA/WFNIA the
sub-advisory fees indicated. No sub-advisory fees were waived during these
periods.
<TABLE>
Nine-Month
Period Ended
Fund 9/30/96/1/
----- -----------
<S> <C>
Asset Allocation $ 1,714,245
U.S. Government Allocation $ 192,067
</TABLE>
____________________
/1/ These amounts include both amounts paid by the Fund for the period from
1/1/96 to 4/28/96 and amounts paid by the corresponding Master Portfolio
for the period from 4/29/96 to 9/30/96.
For the periods indicated below Wells Fargo Bank to BGFA/WFNIA the
sub-advisory fee indicated. No sub-advisory fees were waived during these
periods.
<TABLE>
Year Ended
Fund 12/31/96
---- --------
<S> <C>
Index Allocation/1/ $ 210,226
</TABLE>
____________________
/1/ These amounts reflect amounts paid by the Overland predecessor portfolio.
General. Each Fund's Sub-Advisory Contract will continue in effect for
-------
more than two years from the effective date provided the continuance is approved
annually
27
<PAGE>
(i) by the holders of a majority of the respective Fund's outstanding
voting securities or (ii) by the Company's Board of Directors, including a
majority of the Directors of the Company who are not parties to the Sub-Advisory
Contract or "interested persons" (as defined in the 1940 Act) of any such party.
A Fund's Sub-Advisory Contract may be terminated on 60 days written notice by
either party and will terminate automatically if assigned.
ADMINISTRATOR AND CO-ADMINISTRATOR. The Company has retained Wells Fargo
----------------------------------
Bank as Administrator and Stephens Inc. ("Stephens") as Co-Administrator on
behalf of each Fund. Under the respective Administration and Co-Administration
Agreements among Wells Fargo Bank, Stephens and the Company, Wells Fargo Bank
and Stephens shall provide as administration services, among other things: (i)
general supervision of the Funds' operations, including coordination of the
services performed by each Fund's investment advisor, transfer agent, custodian,
shareholder servicing agent(s), independent auditors and legal counsel,
regulatory compliance, including the compilation of information for documents
such as reports to, and filings with, the SEC and state securities commissions;
and preparation of proxy statements and shareholder reports for each Fund; and
(ii) general supervision relative to the compilation of data required for the
preparation of periodic reports distributed to the Company's officers and Board
of Directors. Wells Fargo Bank and Stephens also furnish office space and
certain facilities required for conducting the Funds' business together with
ordinary clerical and bookkeeping services. Stephens pays the compensation of
the Company's Directors, officers and employees who are affiliated with
Stephens. The Administrator and Co-Administrator are entitled to receive a
monthly fee of 0.03% and 0.04%, respectively, of the average daily net assets of
each Fund. Prior to February 1, 1998, the Administrator and Co-Administrator
were entitled to receive a monthly fee of 0.04% and 0.02%, respectively, of the
average daily net assets of each Fund. In connection with the change in fees,
the responsibility for performing various administration services was shifted to
the Co-Administrator.
Prior to February 1, 1997, Stephens served as sole Administrator to the
Funds. Stephens performed substantially the same services now provided by
Stephens and Wells Fargo Bank and was entitled to receive for its services a fee
of 0.05% of the Asset Allocation and U.S. Government Allocation Funds' average
daily net assets. Stephens was entitled to receive a monthly fee from the Index
Allocation predecessor portfolio at the annual rate of 0.10% of its average
daily net assets up to $200 million and 0.05% in excess of $200 million.
For the periods indicated below, the Funds paid to Wells Fargo Bank and
Stephens the following dollar amounts for administration and co-administration
fees:
28
<PAGE>
<TABLE>
<CAPTION>
Eleven Months
Ended
2/28/99
--------
Fund Total Wells Fargo Stephens
---- ----- ------------- ---------
<S> <C> <C> <C>
Asset Allocation $1,057,283 $454,632 $602,651
U.S. Government Allocation $ 60,830 $ 26,157 $ 34,673
Index Allocation/1/ $ 100,844 $ 43,363 $ 57,481
</TABLE>
<TABLE>
<CAPTION>
Year-Ended
3/31/98
--------
Fund Total Wells Fargo Stephens
---- ----- ------------- ----------
<S> <C> <C> <C>
Asset Allocation $826,553 $553,791 $272,762
U.S. Government Allocation $ 56,777 $ 38,041 $ 18,736
Index Allocation/1/ $ 22,279 $ 14,927 $ 7,352
</TABLE>
_________________
/1/ This amount is for the three-month period ended 3/31/98.
For the periods indicated below, the Asset Allocation and U.S. Government
Allocation Funds and the predecessor portfolio paid to Stephens the following
dollar amounts for administration fees:
<TABLE>
<CAPTION>
Six-Month Nine-Month
Period Ended Period Ended
Fund 3/31/97 9/30/96
---- -------- --------
<S> <C> <C>
Asset Allocation $186,005 $257,419
U.S. Government Allocation $ 15,092 $ 32,354
</TABLE>
For the periods indicated below, the Index Allocation Fund paid to Stephens
the following dollar amounts for administration fees:
<TABLE>
<CAPTION>
Year Ended Year Ended
Fund 12/31/97 12/31/96
---- --------- ---------
<S> <C> <C>
Index Allocation/1/ $ 61,260 $ 75,203
</TABLE>
____________________
/*/ These amounts reflect amounts paid by the Overland predecessor portfolio.
For 1996, this amount is for the year ended December 31, 1996.
DISTRIBUTOR. Stephens (the "Distributor"), located at 111 Center Street,
-----------
Little Rock, Arkansas 72201, serves as Distributor for the Funds. Each Fund has
adopted a distribution plan (a "Plan") under Section 12(b) of the 1940 Act and
Rule 12b-1
29
<PAGE>
thereunder (the "Rule") for its shares. The Plans were adopted by the Company's
Board of Directors, including a majority of the Directors who were not
"interested persons" (as defined in the 1940 Act) of the Funds and who had no
direct or indirect financial interest in the operation of the Plans or in any
agreement related to the Plans (the "Non-Interested Directors").
Under the Plans, and pursuant to the related Distribution Agreement, the
Funds may pay Stephens the amounts below as compensation for distribution-
related services or as reimbursement for distribution-related expenses. The
fees are expressed as a percentage of the average daily net assets attributable
to each Class.
<TABLE>
<CAPTION>
Fund Fee
---- ---
<S> <C>
Asset Allocation
Class B 0.70%
Class C 0.75%
U.S. Government Allocation
Class B 0.70%
Index Allocation
Class A 0.25%
Class B 0.75%
Class C 0.75%
</TABLE>
The actual fee payable to the Distributor by the above-indicated Classes is
determined, within such limits, from time to time by mutual agreement between
the Company and the Distributor and will not exceed the maximum sales charges
payable by mutual funds sold by members of the National Association of
Securities Dealers, Inc. ("NASD") under the Conduct Rules of the NASD. The
Distributor may enter into selling agreements with one or more selling agents
(which may include Wells Fargo Bank and its affiliates), under which such agents
may receive compensation for distribution-related services from the Distributor,
including, but not limited to, commissions or other payments to such agents
based on the average daily net assets of Fund shares attributable to their
customers. The Distributor may retain any portion of the total distribution fee
payable thereunder to compensate it for distribution-related services provided
by it or to reimburse it for other distribution-related expenses.
Under the Plans in effect for the Class A shares of the Asset Allocation
and U.S. Government Allocation Funds, each Fund may defray all or part of the
cost of preparing and printing prospectuses and other promotional materials and
of delivering prospectuses and promotional materials to prospective shareholders
by paying on an annual basis up to 0.05% of the respective Fund's average daily
net assets attributable to Class A shares. The Plans for the Class A shares of
these Funds provide only for the reimbursement of actual expenses.
30
<PAGE>
For the period ended February 28, 1999, the Funds' Distributor received the
following fees for distribution-related services, as set forth below under each
such Fund's Plan:
Printing &
Mailing Marketing Compensation
Fund Total Prospectus Brochures to Dealers
---- ----- ---------- --------- ----------
Asset Allocation
Class A $ $ $ N/A
Class B $ N/A N/A $
Class C N/A N/A N/A N/A
U.S. Government Allocation
Class A $ $ $ N/A
Class B $ N/A N/A $
Index Allocation
Class A $ N/A N/A $
Class B $ N/A N/A $
Class C $ N/A N/A $
For the periods indicated above, Wells Fargo Securities Inc. ("WFSI"), an
affiliated broker-dealer of the Company, and its registered representatives
received no compensation under the Distribution Plans.
General. Each Plan will continue in effect from year to year if such
-------
continuance is approved by a majority vote of both the Directors of the Company
and the Non-Interested Directors. Any Distribution Agreement related to the
Plans also must be approved by such vote of the Directors and the Non-Interested
Directors. Such Agreement will terminate automatically if assigned, and may be
terminated at any time, without payment of any penalty, by a vote of a majority
of outstanding voting securities of the relevant class of the Fund or by vote of
a majority of the Non-Interested Directors on not more than 60 days' written
notice. The Plans may not be amended to increase materially the amounts payable
thereunder without the approval of a majority of the outstanding voting
securities of the Funds, and no material amendment to the Plans may be made
except by a majority of both the Directors of the Company and the Non-Interested
Directors.
The Plans require that the Treasurer of the Company shall provide to the
Directors, and the Directors shall review, at least quarterly, a written report
of the amounts expended (and purposes therefor) under the Plans. The Rule also
requires that the selection and nomination of Directors who are not "interested
persons" of the Company be made by such disinterested Directors.
31
<PAGE>
Wells Fargo Bank, an interested person (as that term is defined in Section
2(a)(19) of the 1940 Act) of the Company, acts as a selling agent for the Funds'
shares pursuant to selling agreements with Stephens authorized under the Plans.
As a selling agent, Wells Fargo Bank has an indirect financial interest in the
operation of the Plans. The Board of Directors has concluded that the Plans are
reasonably likely to benefit the Funds and their shareholders because the Plans
authorize the relationships with selling agents, including Wells Fargo Bank,
that have previously developed distribution channels and relationships with the
retail customers that the Funds are designed to serve. These relationships and
distribution channels are believed by the Board to provide potential for
increased Fund assets and ultimately corresponding economic efficiencies (i.e.,
lower per-share transaction costs and fixed expenses) that are generated by
increased assets under management.
ADMINISTRATIVE SERVICING AGENT. The Index Allocation Fund has adopted a
------------------------------
Shareholder Administrative Servicing Plan (the "Administrative Servicing Plan")
on behalf of its Class A shares. Pursuant to the Administrative Servicing Plan,
the Fund may enter into Administrative Servicing Agreements with administrative
servicing agents (broker/dealers, banks and other financial institutions, which
may include Wells Fargo Bank and its affiliates) who are dealers/holders of
record, or that otherwise have a servicing relationship with the beneficial
owners, of the Fund's Class A shares. Administrative servicing agents agree to
perform shareholder administrative and liaison services which may include, among
other things, maintaining an omnibus account with the Fund, aggregating and
transmitting purchase, exchange and redemption orders from its customers,
answering customer inquiries regarding a shareholder's accounts in the Fund, and
providing such other services as the Company or a customer may reasonably
request. Administrative servicing agents are entitled to a fee which will not
exceed 0.25%, on an annualized basis, of the average daily net assets of the
Class A shares represented by the shares owned of record or beneficially by the
customers of the administrative servicing agent during the period for which
payment is being made. In no case shall shares be sold pursuant to the Class A
distribution plan while being sold pursuant to its Administrative Servicing
Plan.
For the year ended March 31, 1998, the Index Allocation Fund paid to Wells
Fargo Bank or its affiliates $7,352 in administrative servicing fees, after
waivers. Prior to December 12, 1997, this amount reflects fees paid by the
Overland predecessor portfolio.
The Administrative Servicing Plan will continue in effect from year to year
if such continuance is approved from year to year if such continuance is
approved by a majority vote of the Directors of the Company. Any form of
Servicing Agreement related to the plans also must be approved by such vote of
the Directors. Servicing Agreements will terminate automatically if assigned,
and may be terminated at any time, without payment of any penalty, by a vote of
a majority of the outstanding shares of the Class A shares of the fund. The
Administrative Servicing Plans may not be amended to increase materially the
amount payable thereunder without the approval of a majority of the outstanding
shares of the Class A shares of the Fund, and no other material amendment to the
Plan or related Administrative Servicing Agreements may be made except by a
majority of the Directors.
32
<PAGE>
The Administrative Servicing Plan requires that the Administrator shall
provide to the Directors, and the Directors shall review, at least quarterly, a
written report of the amounts expended (and purposes therefor) under the Plan.
SHAREHOLDER SERVICING AGENT. The Funds have approved a Shareholder
---------------------------
Servicing Plan and have entered into related shareholder servicing agreements
with financial institutions, including Wells Fargo Bank on behalf of each class
of shares, with the exception of Class A of the Index Allocation Fund which has
an Administrative Servicing Plan and Agreement. Under the agreements,
Shareholder Servicing Agents (including Wells Fargo Bank) agree to perform, as
agents for their customers, administrative services, with respect to Fund
shares, which include aggregating and transmitting shareholder orders for
purchases, exchanges and redemptions; maintaining shareholder accounts and
records; and providing such other related services as the Company to a
shareholder may reasonably request. For providing shareholder services, a
Servicing Agent is entitled to a fee from the applicable Fund, on an annualized
basis, of the average daily net assets of the class of shares owned of record or
beneficially by the customers of the Servicing Agent during the period for which
payment is being made. The amounts payable under the Shareholder Servicing Plan
are shown below. The Servicing Plans and related forms of shareholder servicing
agreement were approved by the Company's Board of Directors and provide that a
Fund shall not be obligated to make any payments under such Plan or related
Agreements that exceed the maximum amounts payable under the Conduct Rules of
the NASD.
Fund Fee
---- ---
Asset Allocation
Class A 0.30%
Class B 0.30%
Class C 0.25%
U.S. Government Allocation
Class A 0.30%
Class B 0.30%
Index Allocation
Class B 0.25%
Class C 0.25%
For the period indicated below, the dollar amounts of shareholder servicing
fees (after waivers) paid by the Funds to Wells Fargo Bank or its affiliates
were as follows:
33
<PAGE>
<TABLE>
<CAPTION>
Eleven Six-Month Nine-Month
Months Ended Year Ended Period Ended Period Ended
Fund 2/28/99 3/31/98 3/31/97 9/30/96
---- ------- ------- ------- -------
<S> <C> <C> <C> <C>
Asset Allocation - Class A $3,612,860 $3,523,348 $1,648,234 $2,464,701
Asset Allocation - Class B $ 908,653 $ 492,801 $ 118,374 $ 109,487
Asset Allocation - Class C $ 8,082 N/A N/A N/A
U.S. Government Allocation - Class A $ 214,449 $ 252,309 $ 76,579 $ 310,872
U.S. Government Allocation - Class B $ 46,251 $ 28,412 $ 5,608 $ 12,608
Index Allocation - Class C/1/ $ 135,122 $ 30,615 $ 86,268 N/A
Index Allocation - Class A $ 0 $ 0 N/A N/A
Index Allocation - Class B $ 17,207 $ 0 $ 22/2/ N/A
</TABLE>
____________________
/1/ Prior to December 12, 1997, these amounts reflect fees paid by the Class D
shares of the Overland predecessor portfolio.
/2/ This reflects the amount paid 12/14/97-12/31/97.
General. The Servicing Plan will continue in effect from year to year if
-------
such continuance is approved by a majority vote of the Directors of the Company,
including a majority of the Directors who are not "interested persons" (as
defined in the 1940 Act) of the Funds ("Non-Interested Directors"). Any form of
Servicing Agreement related to the Servicing Plan also must be approved by such
vote of the Directors and Non-Interested Directors. Servicing Agreements may be
terminated at any time, without payment of any penalty, by vote of a majority of
the Board of Directors, including a majority of the Non-Interested Directors.
No material amendment to the Servicing Plan or related Servicing Agreements may
be made except by a majority of both the Directors of the Company and the Non-
Interested Directors.
The Servicing Plan requires that the Administrator shall provide to the
Directors, and the Directors shall review, at least quarterly, a written report
of the amounts expended (and purposes therefor) under the Servicing Plan.
CUSTODIAN. Barclays Global Investors, N.A. ("BGI") acts as Custodian for
---------
each Fund. The Custodian, among other things, maintains a custody account or
accounts in the name of each Fund; receives and delivers all assets for each
Fund upon purchase and upon sale or maturity; collects and receives all income
and other payments and distributions on account of the assets of each Fund and
pays all expenses of each Fund. For its services as Custodian, BGI is not
entitled to receive compensation so long as its subsidiary, BGFA, is entitled to
receive fees for providing investment advisory services to the Fund. Prior to
the Consolidation, Wells Fargo Bank served as Custodian to the predecessor
portfolio.
For the period ended February 28, 1999, the Funds did not pay any custody
fees.
34
<PAGE>
FUND ACCOUNTANT. Wells Fargo Bank acts as Fund Accountant for each Fund.
---------------
The Fund Accountant, among other things, computes net asset values on a daily
basis, and performance calculations on a regular basis and as requested by the
Funds. For providing such services, Wells Fargo Bank will be entitled to
receive from each Fund a monthly base fee of $2,000, plus a fee equal to an
annual rate of 0.070% of the first $50,000,000 of the Fund's average daily net
assets, 0.045% of the next $50,000,000, and 0.020% of the average daily net
assets in excess of $100,000,000.
For the periods indicated below, the Funds paid Wells Fargo Bank the
following dollar amounts:
<TABLE>
<CAPTION>
Eleven
Months Ended Year-Ended
Fund 2/28/99 3/31/98
---- ------- -------
<S> <C> <C>
Asset Allocation Fund $358,355 $103,995
U.S. Government Allocation Fund $ 72,504 $ 23,326
Index Allocation Fund $ 85,027 $ 21,627
</TABLE>
TRANSFER AND DIVIDEND DISBURSING AGENT. Wells Fargo Bank acts as Transfer
--------------------------------------
and Dividend Disbursing Agent for the Funds. For providing such services, Wells
Fargo Bank is entitled to receive monthly payments at the annual rate of 0.14%
of each Fund's average daily net assets of each Class of shares. Under the
prior transfer agency agreement, Wells Fargo Bank was entitled to receive a per
account fee plus transaction fees and out-of-pocket related costs with a minimum
of $3,000 per month per Fund, unless net assets of a Fund were under $20
million. For as long as a Fund's assets remained under $20 million, the Fund
was not charged any transfer agency fees.
For the periods indicated below, the Asset Allocation and U.S. Government
Allocation Funds paid to Wells Fargo Bank the following dollar amounts in
transfer and dividend disbursing agency fees, after waivers:
<TABLE>
<CAPTION>
Eleven
Months Ended Year-Ended
Fund 2/28/99 3/31/98
---- ------- -------
<S> <C> <C>
Asset Allocation Fund $2,114,566 $1,874,203
U.S. Government Allocation Fund $ 121,661 $ 280,721
</TABLE>
For the periods indicated below, the Index Allocation paid the following
dollar amounts in transfer and dividend disbursing agency fees, after waivers:
<TABLE>
<CAPTION>
Eleven Three-Month
Months Ended Period Ended Year-Ended
Fund 2/28/99 3/31/98 12/31/97
---- ------- ------- --------
<S> <C> <C> <C>
Index Allocation Fund/1/ $201,687 $ 30,615 $ 115,747
</TABLE>
35
<PAGE>
____________________
/1/ Prior to December 12, 1997, these amounts reflect fees paid by the Overland
predecessor portfolio.
UNDERWRITING COMMISSIONS. For the year ended March 31, 1998, the aggregate
------------------------
dollar amount of underwriting commissions paid to Stephens on sales/redemptions
of the Company's shares was $7,671,295. Stephens retained $939,892 of such
commissions. WFSI, an affiliated broker-dealer of the Company retained
$5,348,626.
For the six-month period ended March 31, 1997, the aggregate dollar amount
of underwriting commissions paid to Stephens on sales/redemptions of the
Company's shares was $2,296,243. Stephens retained $241,806 of such
commissions. WFSI and its registered representatives received $1,719,000 and
$335,437, respectively, of such commissions.
For the nine-month period ended September 30, 1996, the aggregate amount of
underwriting commissions paid to Stephens on sales/redemptions of the Company's
shares was $2,917,738. Stephens retained $198,664 of such commissions. WFSI
and its registered representatives received $2,583,027 and $136,047,
respectively, of such commissions.
For the year ended December 31, 1995, the aggregate amount of underwriting
commissions paid to Stephens on sales/redemptions of the Company's shares was
$1,251,311. Stephens retained $162,660 of such commissions. WFSI and its
registered representatives received $399,809 of such commissions.
PERFORMANCE CALCULATIONS
The Funds may advertise certain yield and total return information.
Quotations of yield and total return reflect only the performance of a
hypothetical investment in a Fund or class of shares during the particular time
period shown. Yield and total return vary based on changes in the market
conditions and the level of a Fund's expenses, and no reported performance
figure should be considered an indication of performance which may be expected
in the future.
In connection with communicating its performance to current or prospective
shareholders, these figures may also be compared to the performance of other
mutual funds tracked by mutual fund rating services or to unmanaged indices
which may assume reinvestment of dividends but generally do not reflect
deductions for administrative and management costs.
Performance information for a Fund or Class of shares in a Fund may be
useful in reviewing the performance of such Fund or Class of shares and for
providing a basis for comparison with investment alternatives. The yield of a
Fund and the yield of a Class of shares in a Fund, however, may not be
comparable to the yields from investment
36
<PAGE>
alternatives because of differences in the foregoing variables and differences
in the methods used to value portfolio securities, compute expenses and
calculate yield.
Performance information may be advertised for non-standardized periods,
including year-to-date and other periods less than a year.
Performance shown or advertised for Class A shares of the Stagecoach Asset
Allocation Fund for periods prior to January 2, 1992, reflects performance of
the shares of the Asset Allocation Fund for the Wells Fargo Investment Trust for
Retirement Programs, a predecessor portfolio with the same investment objective
and policies as the Stagecoach Asset Allocation Fund. Performance shown or
advertised for Class B shares of the Stagecoach Fund for the period from January
2, 1992 to January 1, 1995, reflects performance of the Class A shares of the
Stagecoach Fund, adjusted to reflect Class B expenses and sales charges. For
periods prior to January 2, 1992, Class B share performance reflects performance
of the predecessor portfolio, adjusted to reflect Class B expenses and sales
charges. Performance shown or advertised for Class C shares of the Fund for the
period prior to April 1, 1998, reflects performance of the Class A shares of the
Fund, adjusted to reflect Class C expenses and sales charges. For periods prior
to January 2, 1992, Class C share performance reflects performance of the
predecessor portfolio, adjusted to reflect Class C expenses and sales charges.
Performance shown or advertised for the Class A shares of the Stagecoach
Index Allocation Fund, reflects performance of the Class A shares of the
Overland Express Index Allocation Fund (the accounting survivor of a merger of
the Funds on December 12, 1997). Performance shown or advertised for the Class
C shares of the Stagecoach Fund reflects performance of the Class D shares of
the Overland Fund; for periods prior to July 1, 1993, Class C share performance
of the Stagecoach Fund reflects performance of the Class A shares of the
Overland Fund adjusted to reflect the sales charges and expenses of the Class C
shares. Performance shown or advertised for the Class B shares of the
Stagecoach Fund reflects performance of the Class D shares of the Overland Fund;
for periods prior to July 1, 1993, Class B share performance of the Stagecoach
Fund reflects performance of the Class A shares of the Overland Fund adjusted to
reflect sales charges and expenses of the Class B shares.
Performance shown or advertised for the Class A shares of the Stagecoach
U.S. Government Allocation Fund for periods prior to January 2, 1992, reflects
performance of the shares of the Fixed Income Strategy Fund of the Wells Fargo
Investment Trust for Retirement Programs, a predecessor portfolio with the same
investment objective and policies as the Stagecoach Fund. Performance shown or
advertised for Class B shares of the Stagecoach Fund for the period from January
2, 1992 to January 1, 1995, reflects performance of the Class A shares of the
Stagecoach Fund, adjusted to reflect Class B expenses and sales charges. For
periods prior to January 2, 1992, performance shown or advertised for Class B
shares of the Stagecoach Fund, reflects performance of the predecessor
portfolio, adjusted to reflect Class B expenses and sales charges.
37
<PAGE>
AVERAGE ANNUAL TOTAL RETURN: Each Fund may advertise certain total return
----------------------------
information. As and to the extent required by the SEC, an average annual
compound rate of return ("T") will be computed by using the redeemable value at
the end of a specified period ("ERV") of a hypothetical initial investment in
shares of the Fund ("P") over a period of years ("n") according to the following
formula: P(1+T)/n/= ERV.
Average Annual Total Return for the Applicable Period Ended February 28,
------------------------------------------------------------------------
1999/1/
--------
<TABLE>
<CAPTION>
Ten Ten Five Five Three Three One One
Inception/1/ Inception Year Year Year Year Year Year Year Year
With No With No With No With No With No
Sales Sales Sales Sales Sales Sales Sales Sales Sales Sales
Fund Charge/2/ Charge Charge Charge Charge Charge Charge Charge Charge Charge
---- --------- ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Asset Allocation
Class A 12.90% 13.32% 13.82% 14.34% 15.47% 15.64% 17.20% 19.01% 12.54% 17.84%
Class B 12.66% 12.66% 13.73% 13.73% 15.66% 15.85% 17.61% 18.33% 11.99% 16.99%
Class C 12.66% 12.66% 13.73% 13.73% 15.85% 15.85% 18.33% 18.33% 15.98% 16.98%
Index Allocation
Class A 14.30% 14.78% 15.02% 15.55% 18.93% 20.02% 19.77% 21.62% 12.74% 18.06%
Class B 13.99% 13.99% 14.76% 14.76% 18.93% 19.13% 19.93% 20.63% 12.26% 17.26%
Class C 13.99% 13.99% 14.77% 14.77% 19.14% 19.14% 20.66% 20.66% 16.25% 17.25%
U.S. Government
Allocation
Class A 7.17% 7.58% 7.49% 7.98% 3.88% 4.84% 3.80% 5.41% -0.63% 4.04%
Class B 6.97% 6.97% 7.38% 7.38% 3.93% 4.18% 3.76% 4.68% -1.72% 3.27%
</TABLE>
____________________
/1/ Return calculations reflect the inclusion of front-end sales charges
for Class A shares and the maximum applicable contingent deferred
sales charge for Class B and Class C shares.
/2/ For purposes of showing performance information, the inception date of
each Fund is as follows: Asset Allocation - 11/13/86; U.S. Government
Allocation -3/31/87; Index Allocation - 4/7/88.
CUMULATIVE TOTAL RETURN: In addition to the above performance information, the
- ------------------------
Funds may advertise the cumulative total return for one-month, three-month, six-
month and year-to-date periods. The cumulative total return for such periods is
based on the overall percentage change in value of a hypothetical investment in
the Fund, assuming all Fund dividends and capital gain distributions are
reinvested, without reflecting the effect of any sales charge that would be paid
by an investor, and is not annualized.
38
<PAGE>
<TABLE>
<CAPTION>
Cumulative Total Return for the Applicable Period Ended February 28, 1999/1/
----------------------------------------------------------------------------
Inception Inception Ten Year Ten Year Five Year Five Year Three Year Three Year
With No With No With No With No
Sales Sales Sales Sales Sales Sales Sales Sales
Fund Charge/2/ Charge Charge Charge Charge Charge Charge Charge
---- --------- ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Asset
Allocation
Class A 344.25% 365.13% 264.81% 281.88% 105.31% 114.95% 60.98% 68.57%
Class B 334.89% 334.89% 262.11% 262.11% 106.94% 108.67% 62.69% 65.69%
Class C 334.84% 334.84% 262.07% 262.07% 108.65% 108.65% 65.67% 65.67%
Index
Allocation
Class A 330.04% 350.25% 305.21% 324.47% 137.92% 149.08% 71.82% 79.88%
Class B 317.43% 317.43% 296.22% 296.22% 138.89% 139.89% 72.51% 75.51%
Class C 317.76% 317.76% 296.53% 296.53% 140.08% 140.08% 75.65% 75.65%
U.S.
Government
Allocation
Class A 128.25% 138.98% 105.84% 115.49% 20.95% 26.66% 11.83% 17.14%
Class B 123.27% 123.27% 103.90% 103.90% 21.23% 22.72% 11.70% 14.70%
</TABLE>
____________________
/1/ Return calculations reflect the inclusion of front-end sales charges for
Class A shares and the maximum applicable contingent deferred sales charge
for Class B and Class C shares.
/2/ For purposes of showing performance information, the inception date of each
Fund is as follows: Asset Allocation - 11/13/86; U.S. Government
Allocation -3/31/87; Index Allocation - 4/7/88.
YIELD CALCULATIONS: The Funds may, from time to time, include their yields
------------------
and effective yields in advertisements or reports to shareholders or prospective
investors. Quotations of yield for the Funds are based on the investment income
per share earned during a particular seven-day or thirty-day period, less
expenses accrued during a period ("net investment income") and are computed by
dividing net investment income by the offering price per share on the last date
of the period, according to the following formula:
YIELD = 2[(a - b + 1)/6/ -1]
-----
Cd
where a = dividends and interest earned during the period, b = expenses
accrued for the period (net of any reimbursements), c = the average daily number
of shares outstanding during the period that were entitled to receive dividends,
and d = the maximum offering price per share on the last day of the period.
EFFECTIVE YIELD: Effective yields for the Funds are based on the change in
---------------
the value of a hypothetical investment (exclusive of capital changes) over a
particular thirty-
39
<PAGE>
day period, less a pro-rata share of each Fund's expenses accrued over that
period (the "base period"), and stated as a percentage of the investment at the
start of the base period (the "base period return"). The base period return is
then annualized multiplying by 365/30, with the resulting yield figure carried
to at least the nearest hundredth of one percent. "Effective yield" for the
Funds assumes that all dividends received during the period have been
reinvested. Calculation of "effective yield" begins with the same "base period
return" used in the calculation of yield, which is then annualized to reflect
weekly compounding pursuant to the following formula:
Effective Thirty-Day Yield = [(Base Period Return +1)365/30]-1
Yield for the period ended February 28, 1999/1/
-----------------------------------------------
Fund Thirty Day Yield
---- ----------------
Asset Allocation 0.17%
Class A N/A
Class B N/A
Class C
Index Allocation
Class A 0
Class B 0
Class C N/A
U.S. Government Allocation
Class A 3.38%
Class B 2.82%
______________________
/1/ This figure reflects the maximum front-end sales load of 4.50% and the
maximum applicable Contingent Deferred Sales Charge ("CDSC").
The yield on each Class of the U.S. Government Allocation Fund will
fluctuate from time to time, unlike bank deposits or other investments that pay
a fixed yield for a stated period of time, and does not provide a basis for
determining future yields since it is based on historical data. Yield is a
function of portfolio quality, composition, maturity and market conditions as
well as the expenses allocated to the Fund.
In addition, investors should recognize that changes in the net asset
values of shares of each Class of the U.S. Government Allocation Fund will
affect the yield of each such Class for any specified period, and such changes
should be considered together with the yield of each Class in ascertaining the
total return for the period to shareholders of each Fund. Yield information for
the Fund or each Class of shares of the Fund, as the case may be, may be useful
in reviewing the performance of such Fund and for providing a basis for
comparison with investment alternatives. The yield of the Fund or each Class
40
<PAGE>
of a Fund, however, may not be comparable to the yields from investment
alternatives because of differences in the foregoing variables and differences
in the methods used to value portfolio securities, compute expenses and
calculate yield.
From time to time and only to the extent the comparison is appropriate for
a Fund or Class of shares, the Company may quote the performance or price-
earning ratio of a Fund or Class in advertising and other types of literature as
compared to the performance of the S&P Index, the Dow Jones Industrial Average,
the Lehman Brothers 20+ Treasury Index, the Lehman Brothers 5-7 Year Treasury
Index, Donoghue's Money Fund Averages, Real Estate Investment Averages (as
reported by the National Association of Real Estate Investment Trusts), Gold
Investment Averages (provided by the World Gold Council), Bank Averages (which
is calculated from figures supplied by the U.S. League of Savings Institutions
based on effective annual rates of interest on both passbook and certificate
accounts), average annualized certificate of deposit rates (from the Federal
Reserve G-13 Statistical Releases or the Bank Rate Monitor), the Salomon One
Year Treasury Benchmark Index, the Consumer Price Index (as published by the
U.S. Bureau of Labor Statistics), other managed or unmanaged indices or
performance data of bonds, municipal securities, stocks or government securities
(including data provided by Ibbotson Associates), or by other services,
companies, publications or persons who monitor mutual funds on overall
performance or other criteria. The S&P Index and the Dow Jones Industrial
Average are unmanaged indices of selected common stock prices. The performance
of a Fund or Class of shares, as appropriate, also may be compared to those of
other mutual funds having similar objectives. This comparative performance
could be expressed as a ranking prepared by Lipper Analytical Services, Inc.,
CDA Investment Technologies, Inc., Bloomberg Financial Markets or Morningstar,
Inc., independent services which monitor the performance of mutual funds. The
Funds' performance will be calculated by relating net asset value per share at
the beginning of a stated period to the net asset value of the investment,
assuming reinvestment of all gains, distributions and dividends paid, at the end
of the period. The Funds' comparative performance will be based on a comparison
of yields, as described above, or total return, as reported by Lipper, Survey
Publications, Donoghue or Morningstar, Inc.
Any such comparisons may be useful to investors who wish to compare the
past performance of a Fund or Class of shares with that of its competitors. Of
course, past performance cannot be a guarantee of future results. The Company
also may include, from time to time, a reference to certain marketing approaches
of the Distributor, including, for example, a reference to a potential
shareholder being contacted by a selected broker or dealer. General mutual fund
statistics provided by the Investment Company Institute may also be used.
The Company also may use the following information in advertisements and
other types of literature, only to the extent the information is appropriate for
a Fund: (i) the Consumer Price Index may be used to assess the real rate of
return from an investment in a Fund; (ii) other government statistics,
including, but not limited to, The Survey of Current Business, may be used to
illustrate investment attributes of a Fund or the general
41
<PAGE>
economic, business, investment, or financial environment in which a Fund
operates; (iii) the effect of tax-deferred compounding on the investment returns
of a Fund or a Class of shares, or on returns in general, may be illustrated by
graphs, charts, etc., where such graphs or charts would compare, at various
points in time, the return from an investment in a Fund or Class of shares (or
returns in general) on a tax-deferred basis (assuming reinvestment of capital
gains and dividends and assuming one or more tax rates) with the return on a
taxable basis; and (iv) the sectors or industries in which a Fund invests may be
compared to relevant indices of stocks or surveys (e.g., S&P Industry Surveys)
to evaluate a Fund's historical performance or current or potential value with
respect to the particular industry or sector.
The Company also may use, in advertisements and other types of literature,
information and statements: (1) showing that bank savings accounts offer a
guaranteed return of principal and a fixed rate of interest, but no opportunity
for capital growth; and (2) describing Wells Fargo Bank, and its affiliates and
predecessors, as one of the first investment managers to advise investment
accounts using asset allocation and index strategies. The Company also may
include in advertising and other types of literature information and other data
from reports and studies prepared by the Tax Foundation, including information
regarding federal and state tax levels and the related "Tax Freedom Day."
From time to time, the Company also may include in advertisements or other
marketing materials a discussion of certain of the objectives of the investment
strategy of the Funds and a comparison of this strategy with other investment
strategies. In particular, the responsiveness of these Funds as to changing
market conditions may be discussed. For example, the Company may describe the
benefits derived by having Wells Fargo Bank monitor and reallocate investments
among the asset categories described in the Prospectus of each Fund and Fund.
The Company's advertising or other marketing material also might set forth
illustrations depicting examples of recommended allocations in different market
conditions. It may state, for example, that when the model indicates that stocks
represent a better value than bonds or money market instruments, the Asset
Allocation Fund or Index Allocation Fund might consist of 70% stocks, 25% bonds
and 5% money market instruments and that when the model indicates that bonds
represent a better value than stocks or money market instruments, the balance of
assets might shift to 60% bonds, 20% stocks and 20% money market instruments.
The Company also may discuss in advertising and other types of literature
that a Fund has been assigned a rating by a Nationally Recognized Statistical
Ratings Organization ("NRSRO"), such as Standard & Poor's Corporation. Such
rating would assess the creditworthiness of the investments held by the Fund.
The assigned rating would not be a recommendation to purchase, sell or hold the
Fund's shares since the rating would not comment on the market price of the
Fund's shares or the suitability of the Fund for a particular investor. In
addition, the assigned rating would be subject to change, suspension or
withdrawal as a result of changes in, or unavailability of, information relating
to the Fund or its investments. The Company may compare a Fund's
42
<PAGE>
performance with other investments which are assigned ratings by NRSROs. Any
such comparisons may be useful to investors who wish to compare the Fund's past
performance with other rated investments.
From time to time, the Funds may use the following statements, or
variations thereof, in advertisements and other promotional materials: "Wells
Fargo Bank, as a Shareholder Servicing Agent for the Stagecoach Funds, provides
various services to its customers that are also shareholders of the Funds.
These services may include access to Stagecoach Funds' account information
through Automated Teller Machines ("ATMs"), the placement of purchase and
redemption requests for shares of the Funds through ATMs and the availability of
combined Wells Fargo Bank and Stagecoach Funds account statements."
The Company also may disclose, in advertising and other types of
literature, information and statements that Wells Capital Management (formerly
Wells Fargo Investment Management), a division of Wells Fargo Bank, is listed in
the top 100 by Institutional Investor magazine in its July 1997 survey
"America's Top 300 Money Managers." This survey ranks money managers in several
asset categories. The Company may also disclose in advertising and other types
of sales literature the assets and categories of assets under management by its
investment advisor or sub-advisor and the total amount of assets and mutual fund
assets managed by Wells Fargo Bank. As of December 31, 1997, Wells Fargo Bank
and its affiliates provided investment advisory services for approximately $62
billion of assets of individuals, trusts, estates and institutions and $23
billion of mutual fund assets.
The Company also may disclose in sales literature the distribution rate on
the shares of each class of the Asset Allocation or U.S. Government Allocation
Funds. The distribution rate, which may be annualized, is the amount determined
by dividing the dollar amount per share of the most recent dividend by the most
recent net asset value ("NAV") or maximum offering price per share as of a date
specified in the sales literature. The distribution rate will be accompanied by
the standard 30-day yield as required by the SEC.
The Company also may discuss in advertising and other types of literature
the features, terms and conditions of Wells Fargo Bank accounts through which
investments in the Funds may be made via a "sweep" arrangement, including,
without limitation, the Managed Sweep Account, Money Market Checking Account,
California Tax-Free Money Market Checking Account, Money Market Access Account
and California Tax-Free Money Market Access Account (collectively, the "Sweep
Accounts"). Such advertisements and other literature may include, without
limitation, discussions of such terms and conditions as the minimum deposit
required to open a Sweep Account, a description of the yield earned on shares of
the Funds through a Sweep Account, a description of any monthly or other service
charge on a Sweep Account and any minimum required balance to waive such service
charges, any overdraft protection plan offered in connection with a Sweep
Account, a description of any ATM or check
43
<PAGE>
privileges offered in connection with a Sweep Account and any other terms,
conditions, features or plans offered in connection with a Sweep Account. Such
advertising or other literature may also include a discussion of the advantages
of establishing and maintaining a Sweep Account, and may include statements from
customers as to the reasons why such customers have established and maintained a
Sweep Account.
The Company may disclose in advertising and other types of literature that
investors can open and maintain Sweep Accounts over the Internet or through
other electronic channels (collectively, "Electronic Channels"). Such
advertising and other literature may discuss the investment options available to
investors, including the types of accounts and any applicable fees. Such
advertising and other literature may disclose that Wells Fargo Bank is the first
major bank to offer an on-line application for a mutual fund account that can be
filled out completely through Electronic Channels. Advertising and other
literature may disclose that Wells Fargo Bank may maintain Web sites, pages or
other information sites accessible through Electronic Channels (an "Information
Site") and may describe the contents and features of the Information Site and
instruct investors on how to access the Information Site and open a Sweep
Account. Advertising and other literature may also disclose the procedures
employed by Wells Fargo Bank to secure information provided by investors,
including disclosure and discussion of the tools and services for accessing
Electronic Channels. Such advertising or other literature may include
discussions of the advantages of establishing and maintaining a Sweep Account
through Electronic Channels and testimonials from Wells Fargo Bank customers or
employees and may also include descriptions of locations where product
demonstrations may occur. The Company may also disclose the ranking of Wells
Fargo Bank as one of the largest money managers in the United States.
DETERMINATION OF NET ASSET VALUE
Net asset value per share for each class of the Funds is determined as of
the close of regular trading (currently 1:00 p.m., Pacific time) on each day the
New York Stock Exchange ("NYSE") is open for business. Expenses and fees,
including advisory fees, are accrued daily and are taken into account for the
purpose of determining the net asset value of the Funds' shares.
Securities of a Fund for which market quotations are available are valued
at latest prices. Any security for which the primary market is an exchange is
valued at the last sale price on such exchange on the day of valuation or, if
there was no sale on such day, the latest bid price quoted on such day. In the
case of other securities, including U.S. Government securities but excluding
money market instruments maturing in 60 days or less, the valuations are based
on latest quoted bid prices. Money market instruments and debt securities
maturing in 60 days or less are valued at amortized cost. The assets of a Fund,
other than money market instruments or debt securities maturing in 60 days or
less, are valued at latest quoted bid prices. Futures contracts will be marked
to market daily at their respective settlement prices determined by the relevant
exchange. Prices may be furnished
44
<PAGE>
by a reputable independent pricing service approved by the Company's Board of
Directors. Prices provided by an independent pricing service may be determined
without exclusive reliance on quoted prices and may take into account
appropriate factors such as institutional-size trading in similar groups of
securities, yield, quality, coupon rate, maturity, type of issue, trading
characteristics and other market data. All other securities and other assets of
a Fund for which current market quotations are not readily available are valued
at fair value as determined in good faith by the Company's Board of Directors
and in accordance with procedures adopted by the Directors.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Shares of the Funds may be purchased on any day the Funds are open for
business. The Funds are open for business each day the NYSE is open for trading
(a "Business Day"). Currently, the NYSE is closed on New Year's Day, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day (each a "Holiday"). When any
Holiday falls on a weekend, the NYSE typically is closed on the weekday
immediately before or after such Holiday.
Payment for shares may, in the discretion of the advisor, be made in the
form of securities that are permissible investments for the Funds. For further
information about this form of payment please contact Stephens. In connection
with an in-kind securities payment, the Funds will require, among other things,
that the securities be valued on the day of purchase in accordance with the
pricing methods used by a Fund and that such Fund receives satisfactory
assurances that (i) it will have good and marketable title to the securities
received by it; (ii) that the securities are in proper form for transfer to the
Fund; and (iii) adequate information will be provided concerning the basis and
other matters relating to the securities.
Under the 1940 Act, the Funds may suspend the right of redemption or
postpone the date of payment upon redemption for any period during which the
NYSE is closed (other than customary weekend and holiday closings, or during
which trading is restricted, or during which as determined by the SEC by rule or
regulation) an emergency exists as a result of which disposal or valuation of
portfolio securities is not reasonably practicable, or for such periods as the
SEC may permit. The Company may also redeem shares involuntarily or make
payment for redemption in securities or other property if it appears appropriate
to do so in light of the Company's responsibilities under the 1940 Act. In
addition, the Company may redeem shares involuntarily to reimburse the Fund for
any losses sustained by reason of the failure of a shareholder to make full
payment for shares purchased or to collect any charge relating to a transaction
effected for the benefit of a shareholder which is applicable to shares of the
Fund as provided from time to time in the Prospectus.
Investors in Norwest Advantage Funds. Class A shareholders of the Norwest
------------------------------------
Advantage Funds who redeem shares at net asset value may use the redemption
proceeds
45
<PAGE>
to purchase Class A shares of the Stagecoach Funds at net asset value (without a
sales charge). A reciprocal sales load waiver is available to the Class A
shareholders of Stagecoach Funds, who may use redemption proceeds to purchase
Class A shares of the Norwest Advantage Funds at net asset value.
PORTFOLIO TRANSACTIONS
The Company has no obligation to deal with any dealer or group of dealers
in the execution of transactions in portfolio securities. Subject to policies
established by the Company's Board of Directors, Wells Fargo Bank is responsible
for each Fund's portfolio decisions and the placing of portfolio transactions.
In placing orders, it is the policy of the Company to obtain the best results
taking into account the dealer's general execution and operational facilities,
the type of transaction involved and other factors such as the dealer's risk in
positioning the securities involved. While Wells Fargo Bank generally seeks
reasonably competitive spreads or commissions, the Funds will not necessarily be
paying the lowest spread or commission available.
Purchases and sales of non-equity securities usually will be principal
transactions. Portfolio securities normally will be purchased or sold from or
to dealers serving as market makers for the securities at a net price. Each of
the Funds also will purchase portfolio securities in underwritten offerings and
may purchase securities directly from the issuer. Generally, municipal
obligations and taxable money market securities are traded on a net basis and do
not involve brokerage commissions. The cost of executing a Fund's portfolio
securities transactions will consist primarily of dealer spreads and
underwriting commissions. Under the Act, persons affiliated with the Company
are prohibited from dealing with the Company as a principal in the purchase and
sale of securities unless an exemptive order allowing such transactions is
obtained from the SEC or an exemption is otherwise available. The Funds may
purchase securities from underwriting syndicates of which Stephens or Wells
Fargo Bank is a member under certain conditions in accordance with the
provisions of a rule adopted under the Act and in compliance with procedures
adopted by the Board of Directors.
Wells Fargo Bank, as Investment Advisor to each of the Funds, may, in
circumstances in which two or more dealers are in a position to offer comparable
results for a Fund portfolio transaction, give preference to a dealer that has
provided statistical or other research services to Wells Fargo Bank. By
allocating transactions in this manner, Wells Fargo Bank is able to supplement
its research and analysis with the views and information of securities firms.
Information so received will be in addition to, and not in lieu of, the services
required to be performed by Wells Fargo Bank under the Advisory Contracts, and
the expenses of Wells Fargo Bank will not necessarily be reduced as a result of
the receipt of this supplemental research information. Furthermore, research
services furnished by dealers through which Wells Fargo Bank places securities
transactions for a Fund may be used by Wells Fargo Bank in servicing its other
accounts,
46
<PAGE>
and not all of these services may be used by Wells Fargo Bank in connection with
advising the Funds.
For the fiscal year ended March 31, 1998, the Company paid $6,871,000 in
commissions to various broker/dealers in connection with such allocated
transactions.
Asset Allocation and Index Allocation Funds. Purchases and sales of equity
-------------------------------------------
securities on a securities exchange are effected through brokers who charge a
negotiated commission for their services. Orders may be directed to any broker
including, to the extent and in the manner permitted by applicable law, Stephens
or Wells Fargo Securities Inc. In the over-the-counter market, securities are
generally traded on a "net" basis with dealers acting as principal for their own
accounts without a stated commission, although the price of the security usually
includes a profit to the dealer. In underwritten offerings, securities are
purchased at a fixed price that includes an amount of compensation to the
underwriter, generally referred to as the underwriter's concession or discount.
The Asset Allocation Fund will not deal with Stephens, Wells Fargo Bank or their
affiliates in any transaction in which any of them acts as principal without an
exemptive order from the Commission.
Brokerage Commissions. For the periods indicated below, the Funds paid the
---------------------
following amounts as brokerage commissions, none of which were paid to
affiliated brokers.
<TABLE>
<CAPTION>
Six-Month Nine-Month
Year-Ended Period Ended Year Ended Period Ended Year Ended
Fund 3/31/98 3/31/97 12/31/96 9/30/96 12/31/95
- ---- -------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
Asset Allocation $ 17,322 $ 0 N/A $6,561 $ 34,488
Index Allocation/*/ $ 955 $ 1,976 $ 2,317 N/A $ 0
U.S. Government N/A $ 0 N/A $ 0 $ 0
Allocation
</TABLE>
____________________
/*/ Prior to December 12, 1997, these amounts reflect fees paid by the Overland
predecessor portfolio.
Securities of Regular Broker/Dealers. As of March 31, 1998, neither the
------------------------------------
Asset Allocation Fund nor the U.S. Government Allocation Fund owned securities
of their "regular brokers or dealers" or their parents, as defined in the 1940
Act. For the Index Allocation Fund, as of March 31, 1998, the Fund owned
securities of its "regular brokers or dealers" or its parents as follows:
JP Morgan $415,697
Portfolio Turnover. The portfolio turnover rate is not a limiting factor
------------------
when Wells Fargo Bank deems portfolio changes appropriate. Changes may be made
in the portfolios consistent with the investment objectives and policies of the
Funds whenever such changes
47
<PAGE>
are believed to be in the best interests of the Funds and their shareholders.
The portfolio turnover rate is calculated by dividing the lesser of purchases or
sales of portfolio securities by the average monthly value of the Fund's
portfolio securities. For purposes of this calculation, portfolio securities
exclude all securities having a maturity when purchased of one year or less.
Portfolio turnover generally involves some expenses to the Funds, including
brokerage commissions or dealer mark-ups and other transaction costs on the sale
of securities and the reinvestment in other securities. Portfolio turnover also
can generate short-term capital gain tax consequences. Portfolio turnover rate
is not a limiting factor when Wells Fargo Bank deems portfolio changes
appropriate.
FUND EXPENSES
From time to time, Wells Fargo Bank and Stephens may waive fees from the
Funds in whole or in part. Any such waiver will reduce expenses and,
accordingly, have a favorable impact on a Fund's performance.
Except for the expenses borne by Wells Fargo Bank and Stephens, the Company
bears all costs of its operations, including the compensation of its Directors
who are not affiliated with Stephens or Wells Fargo Bank or any of their
affiliates; advisory, shareholder servicing and administration fees; payments
pursuant to any Plan; interest charges; taxes; fees and expenses of its
independent accountants, legal counsel, transfer agent and dividend disbursing
agent; expenses of redeeming shares; expenses of preparing and printing
Prospectuses (except the expense of printing and mailing prospectuses used for
promotional purposes, unless otherwise payable pursuant to a Plan),
shareholders' reports, notices, proxy statements and reports to regulatory
agencies; insurance premiums and certain expenses relating to insurance
coverage; trade association membership dues; brokerage and other expenses
connected with the execution of portfolio transactions; fees and expenses of its
custodian, including those for keeping books and accounts and calculating the
NAV per share of a Fund; expenses of shareholders' meetings; expenses relating
to the issuance, registration and qualification of Fund shares; pricing
services, and any extraordinary expenses. Expenses attributable to a Fund are
charged against a Fund's assets. General expenses of the Company are allocated
among all of the funds of the Company, including a Fund, in a manner
proportionate to the net assets of each Fund, on a transactional basis, or on
such other basis as the Company's Board of Directors deems equitable.
FEDERAL INCOME TAXES
The following information supplements and should be read in conjunction
with the Prospectus section entitled "Taxes." The Prospectuses of each Fund
describe generally the tax treatment of distributions by the Funds. This
section of the SAI includes additional information concerning federal income
taxes.
48
<PAGE>
General. The Company intends to qualify each Fund as a regulated
-------
investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"), as long as such qualification is in the best interest of
the Fund's shareholders. Each Fund will be treated as a separate entity for
federal income tax purposes. Thus, the provisions of the Code applicable to
regulated investment companies generally will be applied to each Fund, rather
than to the Company as a whole. In addition, net capital gains, net investment
income, and operating expenses will be determined separately for each Fund. As
a regulated investment company, each Fund will not be taxed on its net
investment income and capital gains distributed to its shareholders.
Qualification as a regulated investment company under the Code requires,
among other things, that each Fund (a) derive at least 90% of its annual gross
income from dividends, interest, certain payments with respect to securities
loans, gains from the sale or other disposition of stock or securities or
foreign currencies (to the extent such currency gains are directly related to
the regulated investment company's principal business of investing in stock or
securities) and other income (including, but not limited to, gains from options,
futures or forward contracts) derived with respect to its business of investing
in such stock, securities or currencies; and (b) diversify its holdings so that,
at the end of each quarter of the taxable year, (i) at least 50% of the market
value of the Fund's assets is represented by cash, government securities and
other securities limited with respect to any one issuer to an amount not greater
than 5% of the Fund's assets and 10% of the outstanding voting securities of
such issuer, and (ii) not more than 25% of the value of its assets is invested
in the securities of any one issuer (other than U.S. Government obligations and
the securities of other regulated investment companies), or in two or more
issuers which the Fund controls and which are determined to be engaged in the
same or similar trades or businesses.
The Funds also must distribute or be deemed to distribute to their
shareholders at least 90% of their net investment income (which, for this
purpose, includes net short-term capital gains) earned in each taxable year. In
general, these distributions must actually or be deemed to be made in the
taxable year. However, in certain circumstances, such distributions may be made
in the 12 months following the taxable year. Furthermore, distributions
declared in October, November or December of one taxable year and paid by
January 31 of the following taxable year will be treated as paid by December 31
of the first taxable year. The Funds intend to pay out substantially all of
their net investment income and net realized capital gains (if any) for each
year.
In addition, a regulated investment company must, in general, derive less
than 30% of its gross income from the sale or other disposition of securities or
options thereon held for less than three months. However, this restriction has
been repealed with respect to a regulated investment company's taxable years
beginning after August 5, 1997.
Excise Tax. A 4% nondeductible excise tax will be imposed on each Fund
----------
(other than to the extent of its tax-exempt interest income) to the extent it
does not meet certain minimum distribution requirements by the end of each
calendar year. Each Fund intends
49
<PAGE>
to actually or be deemed to distribute substantially all of its net investment
income and net capital gains by the end of each calendar year and, thus, expects
not to be subject to the excise tax.
Taxation of Fund Investments. Except as provided herein, gains and losses
----------------------------
on the sale of portfolio securities by a Fund will generally be capital gains
and losses. Such gains and losses will ordinarily be long-term capital gains
and losses if the securities have been held by the Fund for more than one year
at the time of disposition of the securities.
Gains recognized on the disposition of a debt obligation (including tax-
exempt obligations purchased after April 30, 1993) purchased by a Fund at a
market discount (generally at a price less than its principal amount) will be
treated as ordinary income to the extent of the portion of market discount which
accrued, but was not previously recognized pursuant to an available election,
during the term the Fund held the debt obligation.
If an option granted by a Fund lapses or is terminated through a closing
transaction, such as a repurchase by the Fund of the option from its holder, the
Fund will realize a short-term capital gain or loss, depending on whether the
premium income is greater or less than the amount paid by the Fund in the
closing transaction. Some realized capital losses may be deferred if they
result from a position which is part of a "straddle," discussed below. If
securities are sold by the Fund pursuant to the exercise of a call option
written by it, the Fund will add the premium received to the sale price of the
securities delivered in determining the amount of gain or loss on the sale. If
securities are purchased by a Fund pursuant to the exercise of a put option
written by it, such Fund will subtract the premium received from its cost basis
in the securities purchased.
The amount of any gain or loss realized by a Fund on closing out a
regulated futures contract will generally result in a realized capital gain or
loss for federal income tax purposes. Regulated futures contracts held at the
end of each fiscal year will be required to be "marked to market" for federal
income tax purposes pursuant to Section 1256 of the Code. In this regard, they
will be deemed to have been sold at market value. Sixty percent (60%) of any net
gain or loss recognized on these deemed sales, and sixty percent (60%) of any
net realized gain or loss from any actual sales, will generally be treated as
long-term capital gain or loss, and the remainder will be treated as short-term
capital gain or loss. Transactions that qualify as designated hedges are
excepted from the "mark-to-market" rule and the "60%/40%" rule.
Under Section 988 of the Code, a Fund generally will recognize ordinary
income or loss to the extent that gain or loss realized on the disposition of
portfolio securities is attributable to changes in foreign currency exchange
rates. In addition, gain or loss realized on the disposition of a foreign
currency forward contract, futures contract, option or similar financial
instrument, or of foreign currency itself, will generally be treated as ordinary
income or loss. The Funds will attempt to monitor Section 988 transactions,
where applicable, to avoid adverse federal income tax impact.
50
<PAGE>
Offsetting positions held by a Fund involving certain financial forward,
futures or options contracts may be considered, for tax purposes, to constitute
"straddles." "Straddles" are defined to include "offsetting positions" in
actively traded personal property. The tax treatment of "straddles" is governed
by Section 1092 of the Code which, in certain circumstances, overrides or
modifies the provisions of Section 1256. If a Fund were treated as entering
into "straddles" by engaging in certain financial forward, futures or option
contracts, such straddles could be characterized as "mixed straddles" if the
futures, forwards, or options comprising a part of such straddles were governed
by Section 1256 of the Code. The Fund may make one or more elections with
respect to "mixed straddles." Depending upon which election is made, if any,
the results with respect to the Fund may differ. Generally, to the extent the
straddle rules apply to positions established by the Fund, losses realized by
the Fund may be deferred to the extent of unrealized gain in any offsetting
positions. Moreover, as a result of the straddle and the conversion transaction
rules, short-term capital loss on straddle positions may be recharacterized as
long-term capital loss, and long-term capital gain may be characterized as
short-term capital gain or ordinary income.
If a Fund enters into a "constructive sale" of any appreciated position in
stock, a partnership interest, or certain debt instruments, the Fund must
recognize gain (but not loss) with respect to that position. For this purpose,
a constructive sale occurs when the Fund enters into one of the following
transactions with respect to the same or substantially identical property: (i) a
short sale; (ii) an offsetting notional principal contract; or (iii) a futures
or forward contract.
If a Fund purchases shares in a "passive foreign investment company"
("PFIC"), the Fund may be subject to federal income tax and an interest charge
imposed by the IRS upon certain distributions from the PFIC or the Fund's
disposition of its PFIC shares. If a Fund invests in a PFIC, the Fund intends
to make an available election to mark-to-market its interest in PFIC shares.
Under the election, the Fund will be treated as recognizing at the end of each
taxable year the difference, if any, between the fair market value of its
interest in the PFIC shares and its basis in such shares. In some
circumstances, the recognition of loss may be suspended. The Fund will adjust
its basis in the PFIC shares by the amount of income (or loss) recognized.
Although such income (or loss) will be taxable to the Fund as ordinary income
(or loss) notwithstanding any distributions by the PFIC, the Fund will not be
subject to federal income tax or the interest charge with respect to its
interest in the PFIC under the election.
Income and dividends received by the Funds from sources within foreign
countries may be subject to withholding and other taxes imposed by such
countries.
Capital Gain Distributions. Distributions which are designated by a Fund
--------------------------
as capital gain distributions will be taxed to shareholders as long-term term
capital gain (to the extent such dividends do exceed the Fund's actual net
capital gains for the taxable year), regardless of how long a shareholder has
held Fund shares. Such distributions will
51
<PAGE>
be designated as capital gain distributions in a written notice mailed by the
Fund to its shareholders not later than 60 days after the close of the Fund's
taxable year.
Disposition of Fund Shares. A disposition of Fund shares pursuant to a
--------------------------
redemption (including a redemption in-kind) or an exchange will ordinarily
result in a taxable capital gain or loss, depending on the amount received for
the shares (or are deemed to be received in the case of an exchange) and the
cost of the shares.
If a shareholder exchanges or otherwise disposes of Fund shares within 90
days of having acquired such shares and if, as a result of having acquired those
shares, the shareholder subsequently pays a reduced sales charge on a new
purchase of shares of the Fund or a different regulated investment company, the
sales charge previously incurred in acquiring the Fund's shares shall not be
taken into account (to the extent such previous sales charges do not exceed the
reduction in sales charges on the new purchase) for the purpose of determining
the amount of gain or loss on the disposition, but will be treated as having
been incurred in the acquisition of such other shares. Also, any loss realized
on a redemption or exchange of shares of the Fund will be disallowed to the
extent that substantially identical shares are acquired within the 61-day period
beginning 30 days before and ending 30 days after the shares are disposed of.
If a shareholder receives a designated capital gain distribution (to be
treated by the shareholder as a long-term capital gain) with respect to any Fund
share and such Fund share is held for six months or less, then (unless otherwise
disallowed) any loss on the sale or exchange of that Fund share will be treated
as a long-term capital loss to the extent of the designated capital gain
distribution. In addition, if a shareholder holds Fund shares for six months or
less, any loss on the sale or exchange of those shares will be disallowed to the
extent of the amount of exempt-interest dividends received with respect to the
shares. The Treasury Department is authorized to issue regulations reducing the
six months holding requirement to a period of not less than the greater of 31
days or the period between regular dividend distributions where a Fund regularly
distributes at least 90% of its net tax-exempt interest, if any. No such
regulations have been issued as of the date of this SAI. The loss disallowance
rules described in this paragraph do not apply to losses realized under a
periodic redemption plan.
Federal Income Tax Rates. As of the printing of this SAI, the maximum
------------------------
individual tax rate applicable to ordinary income is 39.6% (marginal tax rates
may be higher for some individuals to reduce or eliminate the benefit of
exemptions and deductions); the maximum individual marginal tax rate applicable
to net capital gain is 20%; and the maximum corporate tax rate applicable to
ordinary income and net capital gain is 35% (marginal tax rates may be higher
for some corporations to reduce or eliminate the benefit of lower marginal
income tax rates). Naturally, the amount of tax payable by an individual or
corporation will be affected by a combination of tax laws covering, for example,
deductions, credits, deferrals, exemptions, sources of income and other matters.
52
<PAGE>
Backup Withholding. The Company may be required to withhold, subject to
------------------
certain exemptions, at a rate of 31% ("backup withholding") on dividends,
capital gain distributions, and redemption proceeds (including proceeds from
exchanges and redemptions in-kind) paid or credited to an individual Fund
shareholder, if the shareholder fails to certify that the Taxpayer
Identification Number ("TIN") provided is correct and that the shareholder is
not subject to backup withholding, or if the IRS notifies the Company that the
shareholder's TIN is incorrect or that the shareholder is subject to backup
withholding. Such tax withheld does not constitute any additional tax imposed
on the shareholder, and may be claimed as a tax payment on the shareholder's
federal income tax return. An investor must provide a valid TIN upon opening or
reopening an account. Failure to furnish a valid TIN to the Company could also
subject the investor to penalties imposed by the IRS.
Corporate Shareholders. Corporate shareholders of the Funds may be
----------------------
eligible for the dividends-received deduction on dividends distributed out of a
Fund's net investment income attributable to dividends received from domestic
corporations, which, if received directly by the corporate shareholder, would
qualify for such deduction. A distribution by a Fund attributable to dividends
of a domestic corporation will only qualify for the dividends-received deduction
if (i) the corporate shareholder generally holds the Fund shares upon which the
distribution is made for at least 46 days during the 90 day period beginning 45
days prior to the date upon which the shareholder becomes entitled to the
distribution; and (ii) the Fund generally holds the shares of the domestic
corporation producing the dividend income for at least 46 days during the 90 day
period beginning 45 days prior to the date upon which the Fund becomes entitled
to such dividend income.
Foreign Shareholders. Under the Code, distributions of net investment
--------------------
income by the Funds to a nonresident alien individual, foreign trust (i.e.,
trust which a U.S. court is able to exercise primary supervision over
administration of that trust and one or more U.S. persons have authority to
control substantial decisions of that trust), foreign estate (i.e., the income
of which is not subject to U.S. tax regardless of source), foreign corporation,
or foreign partnership (a "foreign shareholder") will be subject to U.S.
withholding tax (at a rate of 30% or a lower treaty rate, if applicable).
Withholding will not apply if a dividend paid by the Fund to a foreign
shareholder is "effectively connected" with a U.S. trade or business (or, if an
income tax treaty applies, is attributable to a U.S. permanent establishment of
the foreign shareholder), in which case the reporting and withholding
requirements applicable to U.S. persons will apply. Distributions of capital
gains are generally not subject to tax withholding.
New Regulations. On October 6, 1997, the Treasury Department issued new
---------------
regulations (the "New Regulations") which make certain modifications to the
backup withholding, U.S. income tax withholding and information reporting rules
applicable to foreign shareholders. The New Regulations will generally be
effective for payments made after December 31, 1999, subject to certain
transition rules. Among other things, the New Regulations will permit the Funds
to estimate the portion of their distributions qualifying as capital gain
distributions for purposes of determining the portion of such
53
<PAGE>
distributions paid to foreign shareholders that will be subject to U.S. income
tax withholding. Prospective investors are urged to consult their own tax
advisors regarding the New Regulations.
Tax-Deferred Plans. The shares of the Funds are available for a variety of
------------------
tax-deferred retirement and other plans, including Individual Retirement
Accounts ("IRA"), Simplified Employee Pension Plans ("SEP-IRA"), Savings
Incentive Match Plans for Employees ("SIMPLE plans"), Roth IRAs, and Education
IRAs, which permit investors to defer some of their income from taxes.
Investors should contact their selling agents for details concerning retirement
plans.
Other Matters. Investors should be aware that the investments to be made
-------------
by the Funds may involve sophisticated tax rules that may result in income or
gain recognition by the Funds without corresponding current cash receipts.
Although the Funds will seek to avoid significant noncash income, such noncash
income could be recognized by the Funds, in which case the Funds may distribute
cash derived from other sources in order to meet the minimum distribution
requirements described above.
The foregoing discussion and the discussions in the Prospectus applicable
to each shareholder address only some of the federal tax considerations
generally affecting investments in the Funds. Each investor is urged to consult
his or her tax advisor regarding specific questions as to federal, state, local
or foreign taxes.
CAPITAL STOCK
The Funds are three of the funds in the Stagecoach Family of Funds. The
Company was organized as a Maryland corporation on September 9, 1991, and
currently offers shares of over thirty funds.
Most of the Company's funds are authorized to issue multiple classes of
shares, one class generally subject to a front-end sales charge and, in some
cases, classes subject to a contingent-deferred sales charge, that are offered
to retail investors. Certain of the Company's funds also are authorized to
issue other classes of shares, which are sold primarily to institutional
investors. Each class of shares in a fund represents an equal, proportionate
interest in a fund with other shares of the same class. Shareholders of each
class bear their pro rata portion of the fund's operating expenses, except for
certain class-specific expenses (e.g., any state securities registration fees,
shareholder servicing fees or distribution fees that may be paid under Rule 12b-
1) that are allocated to a particular class. Please contact Investor Services
at 1-800-222-8222 if you would like additional information about other funds or
classes of shares offered.
With respect to matters affecting one class but not another, shareholders
vote as a class; for example, the approval of a Plan. Subject to the foregoing,
all shares of a Fund have equal voting rights and will be voted in the
aggregate, and not by series, except where voting by a series is required by law
or where the matter involved only affects one
54
<PAGE>
series. For example, a change in a Fund's fundamental investment policy affects
only one series and would be voted upon only by shareholders of the Fund
involved. Additionally, approval of an advisory contract, since it affects only
one Fund, is a matter to be determined separately by series. Approval by the
shareholders of one Series is effective as to that Series whether or not
sufficient votes are received from the shareholders of the other Series to
approve the proposal as to those series.
As used in the Prospectus and in this SAI, the term "majority," when
referring to approvals to be obtained from shareholders of a Class of shares of
a Fund, means the vote of the lesser of (i) 67% of the shares of such class
represented at a meeting if the holders of more than 50% of the outstanding
shares of the class are present in person or by proxy, or (ii) more than 50% of
the outstanding shares of the class of the Fund. The term "majority," when
referring to approvals to be obtained from shareholders of the Fund, means the
vote of the lesser of (i) 67% of the shares of the Fund represented at a meeting
if the holders of more than 50% of the outstanding shares of the Fund are
present in person or by proxy, or (ii) more than 50% of the outstanding shares
of the Fund. The term "majority," when referring to the approvals to be
obtained from shareholders of the Company as a whole, means the vote of the
lesser of (i) 67% of the Company's shares represented at a meeting if the
holders of more than 50% of the Company's outstanding shares are present in
person or by proxy, or (ii) more than 50% of the Company's outstanding shares.
Shareholders are not entitled to any preemptive rights or subscription.
All shares, when issued, will be fully paid and non-assessable by the Company
for the consideration described in the Prospectus.
The Company may dispense with an annual meeting of shareholders in any year
in which it is not required to elect Directors under the 1940 Act.
Each share of a class of a Fund represents an equal proportional interest
in the Fund with each other share of the same class and is entitled to such
dividends and distributions out of the income earned on the assets belonging to
the Fund as are declared in the discretion of the Directors. In the event of
the liquidation or dissolution of the Company, shareholders of a Fund are
entitled to receive the assets attributable to that Fund that are available for
distribution, and a distribution of any general assets not attributable to a
particular investment portfolio that are available for distribution in such
manner and on such basis as the Directors in their sole discretion may
determine.
Set forth below as of June 30, 1998 is the name, address and share
ownership of each person known by the Company to have beneficial or record
ownership of 5% or more of a class of a Fund or 5% or more of the voting
securities of a Fund as a whole. The term "N/A" is used where a shareholder
holds 5% or more of a class, but less than 5% of a Fund as a whole.
5% OWNERSHIP AS OF MAY 28, 1999
-------------------------------
55
<PAGE>
<TABLE>
<CAPTION>
NAME AND CLASS; TYPE PERCENTAGE PERCENTAGE
FUND ADDRESS OF OWNERSHIP OF CLASS OF FUND
---- ------- ------------ -------- -------
<S> <C> <C> <C> <C>
ASSET Wells Fargo Bank Class A
ALLOCATION P.O. Box 63015 Beneficially Owned
San Francisco, CA
94163
Dean Witter for the Benefit of Class C
Christine Griffith Beneficially Owned
150 La Vereda Road
P.O. Box 250 Church
Street Station
New York, NY 10008-0250
Dean Witter for the Benefit of Class C
Robert K. Halliday Beneficially Owned
150 La Vereda Road
P.O. Box 250 Church
Street Station
New York, NY 10008-0250
Dean Witter for the Benefit of Class C
Mario A. Chavez Beneficially Owned
150 La Vereda Road
P.O. Box 250 Church
Street Station
New York, NY 10008-0250
Dean Witter for the Benefit of Class C
Paul Kranz Beneficially Owned
150 La Vereda Road
P.O. Box 250 Church
Street Station
New York, NY 10008-0250
Dean Witter for the Benefit of Class C
Steve F. Tognoli Beneficially Owned
150 La Vereda Road
P.O. Box 250 Church
Street Station
New York, NY 10008-0250
INDEX Merrill Lynch Pierce Class A
ALLOCATION Fenner & Smith, Inc. Record Holder
Record Holder for
Exclusive Benefit of
its Customers
Attn: Fund Administration
4800 Deer Lake East,
3rd Floor
Jacksonville, FL 32246
Merrill Lynch Pierce Class C
Fenner & Smith, Inc. Record Holder
for Exclusive
Benefit of Customers
Attn: Fund Admin.
4800 Deer Lake East,
3rd Floor
Jacksonville, FL 32246
U.S. Wells Fargo Bank Class A
GOVERNMENT P.O. Box 63015 Beneficially Owned
ALLOCATION San Francisco, CA 94163
</TABLE>
56
<PAGE>
For purposes of the 1940 Act, any person who owns directly or through one
or more controlled companies more than 25% of the voting securities of a company
is presumed to "control" such company. Accordingly, to the extent that a
shareholder identified in the foregoing table is identified as the beneficial
holder of more than 25% of a class (or Fund), or is identified as the holder of
record of more than 25% of a class (or Fund) and has voting and/or investment
powers, it may be presumed to control such class (or Fund).
OTHER
The Company's Registration Statement, including the Prospectus and SAI for
the Funds and the exhibits filed therewith, may be examined at the office of the
U.S. Securities and Exchange Commission in Washington, D.C. Statements
contained in the Prospectus or the SAI as to the contents of any contract or
other document referred to herein or in the Prospectus are not necessarily
complete, and, in each instance, reference is made to the copy of such contract
or other document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference.
COUNSEL
Morrison & Forester LLP, 2000 Pennsylvania Avenue, N.W., Suite 5500,
Washington, D.C. 20006, as counsel for the Company, has rendered its opinion as
to certain legal matters regarding the due authorization and valid issuance of
the shares of beneficial interest being sold pursuant to the Funds' Prospectus.
INDEPENDENT AUDITORS
KPMG LLP serves as the independent auditors for the Company. KPMG LLP
provides audit services, tax return preparation and assistance and consultation
in connection with review of certain SEC filings. KPMG LLP's address is Three
Embarcadero Center, San Francisco, California 94111.
FINANCIAL INFORMATION
The portfolios of investments and audited financial statements for the
Funds for the period ended February 28, 1999, are hereby incorporated by
reference to the Company's Annual Report as filed with the SEC on April [25],
1999
Annual and Semi-Annual Reports may be obtained by calling 1-800-222-8222.
57
<PAGE>
APPENDIX
The following is a description of the ratings given by Moody's and S&P to
corporate bonds and commercial paper.
Corporate and Municipal Bonds
- -----------------------------
Moody's: The four highest ratings for corporate and municipal bonds are
"Aaa," "Aa," "A" and "Baa." Bonds rated "Aaa" are judged to be of the "best
quality" and carry the smallest amount of investment risk. Bonds rated "Aa" are
of "high quality by all standards," but margins of protection or other elements
make long-term risks appear somewhat greater than "Aaa" rated bonds. Bonds rated
"A" possess many favorable investment attributes and are considered to be upper
medium grade obligations. Bonds rated "Baa" are considered to be medium grade
obligations; interest payments and principal security appear adequate for the
present, but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have speculative
characteristics as well. Moody's applies numerical modifiers in its rating
system: 1, 2 and 3 in each rating category from "Aa" through "Baa" in its rating
system. The modifier 1 indicates that the security ranks in the higher end of
its category; the modifier 2 indicates a mid-range ranking; and the modifier 3
indicates that the issue ranks in the lower end.
S&P: The four highest ratings for corporate and municipal bonds are "AAA,"
"AA," "A" and "BBB." Bonds rated "AAA" have the "highest rating" assigned by S&P
and have "an extremely strong capacity" to pay interest and repay principal.
Bonds rated "AA" have a "very strong capacity" to pay interest and repay
principal and "differ from the highest rated obligations only in small degree."
Bonds rated "A" have a "strong capacity" to pay interest and repay principal,
but are "somewhat more susceptible" to adverse effects of changes in economic
conditions or other circumstances than bonds in higher rated categories. Bonds
rated "BBB" are regarded as having "adequate protection parameters" to pay
interest and repay principal, but changes in economic conditions or other
circumstances are more likely to lead to a "weakened capacity" to make such
repayments. The ratings from "AA" to "BBB" may be modified by the addition of a
plus or minus sign to show relative standing within the category.
Corporate and Municipal Notes
- -----------------------------
Moody's: The highest rating for state and municipal short-term obligations
are "MIG 1," "MIG 2," and "MIG 3" (or "VMIG 1," "VMIG 2" and "VMIG 3" in the
case of an issue having a variable rate demand feature). Notes rated "MIG 1" or
"VMIG 1" are judged to be of the "best quality." Notes rated "MIG 2" or "VMIG 2"
are of "high quality," with margins of protections "ample although not as large
as in the preceding group." Notes
A-1
<PAGE>
rated "MIG 3" or "VMIG 3" are of "favorable quality," with all security elements
accounted for, but lacking the strength of the preceding grades.
S&P: The two highest ratings for corporate, state and municipal notes are
"SP-1" and "SP-2." The "SP-1" rating reflects a "very strong or strong capacity
to pay principal and interest." Notes issued with "overwhelming safety
characteristics" will be rated "SP-1+." The "SP-2" rating reflects a
"satisfactory capacity" to pay principal and interest.
Corporate and Municipal Commercial Paper
- ----------------------------------------
Moody's: The highest rating for corporate, state and municipal commercial
paper is "P-1" (Prime-1). Issuers rated "P-1" have a "superior ability for
repayment of senior short-term debt obligations." Issuers rated "P-2" (Prime-2)
"have a strong capacity for repayment of senior short-term debt obligations,"
but earnings trends, while sound, will be subject to more variation.
S&P: The "A-1" rating for corporate, state and municipal commercial paper
is rated "in the highest category" by S&P and "the obligor's capacity to meet
its financial commitment on the obligation is strong." The "A-1+" rating
indicates that said capacity is "extremely strong." The A-2 rating indicates
that said capacity is "satisfactory," but that corporate and municipal
commercial paper rated "A-2" is "more susceptible" to the adverse effects of
changes in economic conditions or other circumstances than commercial paper
rated in higher rating categories.
A-2
<PAGE>
STAGECOACH FUNDS, INC.
SEC REGISTRATION NOS. 33-42927; 811-6419
PART C
OTHER INFORMATION
Item 23. Exhibits
--------
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
1(a) - Amended and Restated Articles of Incorporation dated November 22, 1995,
incorporated by reference to Post-Effective Amendment No. 17 to the Registration
Statement, filed November 29, 1995.
1(b) - Articles Supplementary, incorporated by reference to Post-Effective Amendment No. 43 to the
Registration Statement filed March 30, 1998.
2 - By-Laws, incorporated by reference to Post-Effective Amendment No. 31 to the
Registration Statement, filed May 15, 1997.
3 - Not Applicable
4 - Not Applicable
5(a)(i) - Advisory Contract with Wells Fargo Bank, N.A. on behalf of the Funds,
incorporated by reference to Post-Effective Amendment No. 51 to the Registration
Statement filed March 1, 1999.
5(a)(ii) - Sub-Advisory Contract with Wells Capital Management on behalf of various Funds,
incorporated by reference to Post-Effective Amendment No. 48 to the Registration
Statement, filed July 31, 1998.
5(a)(iii) - Sub-Advisory Contract with Barclays Global Fund Advisors on behalf of the Asset
Allocation, Equity Index, Index Allocation, and U.S. Government Allocation
Funds, incorporated by reference to Post-Effective Amendment No. 48, filed
July 31, 1998.
6(a) - Amended Distribution Agreement with Stephens Inc., incorporated by reference to
Post-Effective Amendment No. 50, filed November 30, 1998.
6(b) - Selling Agreement with Wells Fargo Bank, N.A. on behalf of the Funds,
incorporated by reference to Post-Effective Amendment No. 2 to the Registration
Statement, filed April 17, 1992.
7 - Not Applicable
8(a) - Custody Agreement with Wells Fargo Institutional Trust Company, N.A. on behalf
of the Asset Allocation Fund, incorporated by reference to Post-Effective
Amendment No. 2 to the Registration Statement, filed April 17, 1992.
8(a)(i) - Addendum No. 1 to the Custody Agreement with Wells Fargo Institutional Trust
Company, N.A. on behalf of the Asset Allocation Fund, incorporated by reference
to Post-Effective Amendment No. 48 to the Registration Statement, filed July 31,
1998.
8(b) - Custody Agreement with Wells Fargo Institutional Trust Company, N.A. on behalf
of the U.S. Government Allocation Fund, incorporated by reference to
Post-Effective Amendment No. 2 to the Registration Statement, filed April 17,
1992.
8(b)(i) - Addendum No. 1 to the Custody Agreement with Wells Fargo Institutional Trust
Company, N.A. on behalf of the U.S. Government Allocation Fund, incorporated by
reference to Post-Effective Amendment No. 48 to the Registration Statement,
filed July 31, 1998.
8(c) - Custody Agreement with Wells Fargo Institutional Trust Company, N.A. on behalf
of the Equity Index, (formerly, Corporate Stock) Fund, incorporated by reference
to Post-Effective Amendment No. 2 to the Registration Statement, filed April 17,
1992.
</TABLE>
C-1
<PAGE>
<TABLE>
<S> <C>
8(c)(i) - Addendum No. 1 to the Custody Agreement with Wells Fargo Institutional Trust
Company, N.A. on behalf of the Equity Index (formerly, Corporate Stock) Fund,
incorporated by reference to Post-Effective Amendment No. 48 to the Registration
Statement, filed July 31, 1998.
8(d) - Custody Agreement with Wells Fargo Bank, N.A. on behalf of the California
Tax-Free Money Market Mutual Fund, incorporated by reference to Post-Effective
Amendment No. 2 to the Registration Statement, filed April 17, 1992.
8(d)(i) - Amendment No. 2 to the Custody Agreement with Wells Fargo Institutional Trust
Company, N.A. on behalf of the California Tax-Free Money Market Mutual Fund,
incorporated by reference to Post-Effective Amendment No. 48 to the Registration
Statement, filed July 31, 1998.
8(e) - Custody Agreement with Wells Fargo Bank, N.A. on behalf of the California
Tax-Free Bond Fund, incorporated by reference to Post-Effective Amendment No. 2
to the Registration Statement, filed April 17, 1992.
8(e)(i) - Amendment No. 2 to the Custody Agreement with Wells Fargo Bank, N.A. on behalf
of the California Tax-Free Bond Fund, incorporated by reference to
Post-Effective Amendment No. 48 to the Registration Statement, filed July 31,
1998.
8(f) - Custody Agreement with Wells Fargo Bank, N.A. on behalf of the Growth (formerly,
Growth and Income) Fund, incorporated by reference to Post-Effective Amendment
No. 2 to the Registration Statement, filed April 17, 1992.
8(f)(i) - Amendment No. 2 to the Custody Agreement with Wells Fargo Bank, N.A. on behalf
of the Growth (formerly, Growth and Income) Fund, incorporated by reference to
Post-Effective Amendment No. 48 to the Registration Statement, filed July 31,
1998.
</TABLE>
C-2
<PAGE>
<TABLE>
<S> <C>
8(g) - Custody Agreement with Wells Fargo Bank, N.A. on behalf of the U.S. Government
Income (formerly, Ginnie Mae) Fund, incorporated by reference to Post-Effective
Amendment No. 2 to the Registration Statement, filed April 17, 1992.
8(g)(i) - Amendment No. 2 to the Custody Agreement with Wells Fargo Bank, N.A. on behalf
of the U.S. Government Income (formerly, Ginnie Mae) Fund, incorporated by
reference to Post-Effective Amendment No. 48 to the Registration Statement,
filed July 31, 1998.
8(h) - Custody Agreement with Wells Fargo Bank, N.A. on behalf of the Money Market
Fund, incorporated by reference to Post-Effective Amendment No. 3 to the
Registration Statement, filed May 1, 1992.
8(h)(i) - Amendment No. 1 to the Custody Agreement with Wells Fargo Bank, N.A. on behalf
of the Money Market Fund, incorporated by reference to Post-Effective Amendment
No. 48 to the Registration Statement, filed July 31, 1998.
8(h)(ii) - Amendment No. 2 to the Custody Agreement with Wells Fargo Bank, N.A. on behalf
of the Money Market Mutual Fund (formerly, the Money Market Fund), incorporated
by reference to Post-Effective Amendment No. 48 to the Registration Statement,
filed July 31, 1998.
8(i) - Custody Agreement with Wells Fargo Bank, N.A. on behalf of the California
Tax-Free Income Fund, incorporated by reference to Post-Effective Amendment No.
17 to the Registration Statement, filed November 29, 1995.
8(j) - Custody Agreement with Wells Fargo Bank, N.A. on behalf of the Diversified
Equity (formerly, Diversified Income) Fund, incorporated by reference to
Post-Effective Amendment No. 17 to the Registration Statement, filed
November 29, 1995.
8(k) - Custody Agreement with Wells Fargo Bank, N.A. on behalf of the
Short-Intermediate U.S. Government Income Fund, incorporated by reference to
Post-Effective Amendment No. 8 to the Registration Statement, filed February 10,
1994.
8(k)(i) - Amendment No. 1 to the Custody Agreement with Wells Fargo Bank, N.A. on behalf
of the Short-Intermediate U.S. Government Income Fund, incorporated by reference
to Post-Effective Amendment No. 48 to the Registration Statement, filed July 31,
1998.
8(l) - Custody Agreement with Wells Fargo Bank, N.A. on behalf of the National Tax-Free
Money Market Mutual Fund, incorporated by reference to Post-Effective Amendment
No. 24 to the Registration Statement, filed April 29, 1996.
8(m) - Custody Agreement with Wells Fargo Bank, N.A. on behalf of the Aggressive Growth
Fund, incorporated by reference to Post-Effective Amendment No. 20 to the
Registration Statement, filed February 28, 1996.
</TABLE>
C-3
<PAGE>
<TABLE>
<S> <C>
8(n) - Custody Agreement with Wells Fargo Bank on behalf of the Arizona Tax-Free,
Balanced, Equity Value, Government Money Market Mutual, Index Allocation,
Intermediate Bond, Money Market Trust, National Tax-Free, Oregon Tax-Free,
Overland Express Sweep, Prime Money Market Mutual, Short-Term
Government-Corporate Income, Short-Term Municipal Income, Treasury Money Market
Mutual and Variable Rate Government Funds, filed September 25, 1997.
8(o) - Form of Custody Agreement with Wells Fargo Bank, N.A. on behalf of the 100%
Treasury Money Market Fund, incorporated by reference to Post-Effective
Amendment No. 48 to the Registration Statement, filed July 31, 1998.
9(a)(i) - Administration Agreement with Wells Fargo Bank, N.A. on behalf of the Funds,
incorporated by reference to Post-Effective Amendment No. 48 to the Registration
Statement, filed July 31, 1998.
9(a)(ii) - Co-Administration Agreement with Wells Fargo Bank, N.A. and Stephens Inc. on
behalf of the Funds, incorporated by reference to Post-Effective Amendment
No. 50 to the Registration Statement, filed November 30, 1998.
9(b) - Agency Agreement with Wells Fargo Bank, N.A. on behalf of the Funds,
incorporated by reference to Post-Effective Amendment No. 50 to the Registration
Statement, filed November 30, 1998.
9(c) - Form of Shareholder Servicing Agreement with Wells Fargo Bank, N.A. on behalf of
the Funds, incorporated by reference to Post-Effective Amendment No. 50 to the
Registration Statement, filed November 30, 1998.
9(d) - Servicing Plan as consolidated to include all classes of the Funds, incorporate
by reference to Post-effective Amendment No. 50 to the Registration Statement,
filed November 30, 1998.
10 - Opinion and Consent of Counsel, filed herewith.
11 - Not Applicable.
12 - Not Applicable.
13 - Investment letter, incorporated by reference to Item 24(b) of Pre-Effective
Amendment No. 1 to the Registration Statement, filed November 29, 1991.
14 - Not Applicable.
15(a) - Distribution Plan on behalf of various classes and Funds, incorporated by
reference to Post-Effective Amendment No. 48 to the Registration Statement,
filed July 31, 1998.
15(b) - Distribution Plan on behalf of the Asset Allocation Fund, California Tax-Free
Bond Fund, California Tax-Free Income Fund, California Tax-Free Money Market
Mutual Fund, Diversified Equity Income Fund, Growth Fund, Money Market Mutual
Fund, Short-Intermediate U.S. Government Income Fund, U.S. Government Allocation
Fund and U.S. Government Income Fund, incorporated by reference to
Post-Effective Amendment No. 48 to the Registration Statement, filed July 31,
1998.
</TABLE>
C-4
<PAGE>
<TABLE>
<S> <C>
15(c) - Distribution Plan on behalf of the California Tax-Free Money Market Trust and
National Tax-Free Money Market Trust, incorporated by reference to
Post-Effective Amendment No. 48 to the Registration Statement, filed July 31,
1998.
16 - Schedules for Computation of Performance Data, incorporated by reference to
Post-Effective Amendment No. 15, filed May 1, 1995.
17 - Financial Data Schedules for the fiscal period ended February 28, 1999, for the
Allocation Funds is incorporated by reference to the Form N-SAR, filed April __,
1999.
18 - Rule 18f-3 Multi-Class Plan, as amended, incorporated by reference to
Post-Effective Amendment No. 50 to the Registration Statement, filed November 30,
1998.
19 - Powers of Attorney for R. Greg Feltus, Jack S. Euphrat, Thomas S. Goho, Joseph
N. Hankin, W. Rodney Hughes, Robert M. Joses and J. Tucker Morse, incorporated by
reference to Post-Effective Amendment No. 32, filed May 30, 1997; Power of
Attorney for Peter G. Gordon, incorporated by reference to Post-Effective
Amendment No. 41, filed January 30, 1998.
</TABLE>
C-5
<PAGE>
Item 24. Persons Controlled by or under Common Control with Registrant
-------------------------------------------------------------
As of March 1, 1999 the Registrant did not directly or indirectly
control, and were not under common control with, any other person or entity.
Item 25. Indemnification
---------------
The following paragraphs of Article VIII of the Registrant's
Articles of Incorporation provide:
(h) The Corporation shall indemnify (1) its Directors and
Officers, whether serving the Corporation or at its request any other
entity, to the full extent required or permitted by the General Laws of
the State of Maryland now or hereafter in force, including the advance of
expenses under the procedures and to the full extent permitted by law,
and (2) its other employees and agents to such extent as shall be
authorized by the Board of Directors or the Corporation's By-Laws and be
permitted by law. The foregoing rights of indemnification shall not be
exclusive of any other rights to which those seeking indemnification may
be entitled. The Board of Directors may take such action as is necessary
to carry out these indemnification provisions and is expressly empowered
to adopt, approve and amend from time to time such By-Laws, resolutions
or contracts implementing such provisions or such further indemnification
arrangements as may be permitted by law. No amendment of these Articles
of Incorporation of the Corporation shall limit or eliminate the right to
indemnification provided hereunder with respect to acts or omissions
occurring prior to such amendment or repeal. Nothing contained herein
shall be construed to authorize the Corporation to indemnify any Director
or officer of the Corporation against any liability to the Corporation or
to any holders of securities of the Corporation to which he is subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his office. Any
indemnification by the Corporation shall be consistent with the
requirements of law, including the 1940 Act.
(i) To the fullest extent permitted by Maryland statutory and
decisional law and the 1940 Act, as amended or interpreted, no Director
or officer of the Corporation shall be personally liable to the
Corporation or its stockholders for money damages; provided, however,
that nothing herein shall be construed to protect any Director or officer
of the Corporation against any liability to which such Director or
officer would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties involved in
the conduct of his office. No amendment, modification or repeal of this
Article VIII shall adversely affect any right or protection of a Director
or officer that exists at the time of such amendment, modification or
repeal.
Item 26. Business and Other Connections of Investment Advisor.
----------------------------------------------------
Wells Fargo Bank, N.A. ("Wells Fargo Bank"), a wholly owned
subsidiary of Wells Fargo & Company, currently serves as investment advisor to
several of the Registrant's investment portfolios and to certain other
registered open-end management investment
C-6
<PAGE>
companies. Wells Fargo Bank's business is that of a national banking association
with respect to which it conducts a variety of commercial banking and trust
activities.
To the knowledge of Registrant, none of the directors or
executive officers of Wells Fargo Bank, except those set forth below, is or has
been at any time during the past two fiscal years engaged in any other business,
profession, vocation or employment of a substantial nature, except that certain
executive officers also hold various positions with and engage in business for
Wells Fargo & Company. Set forth below are the names and principal businesses of
the directors and executive officers of Wells Fargo Bank who are or during the
past two fiscal years have been engaged in any other business, profession,
vocation or employment of a substantial nature for their own account or in the
capacity of director, officer, employee, partner or trustee. All the directors
of Wells Fargo Bank also serve as directors of Wells Fargo & Company.
<TABLE>
<CAPTION>
Name and Position Principal Business(es) and Address(es)
at Wells Fargo Bank During at Least the Last Two Fiscal Years
- ------------------- -----------------------------------------
<S> <C>
H. Jesse Arnelle Senior Partner of Arnelle, Hastie, McGee, Willis & Greene
Director 455 Market Street
San Francisco, CA 94105
Director of Armstrong World Industries, Inc.
5037 Patata Street
South Gate, CA 90280
Director of Eastman Chemical Corporation
12805 Busch Place
Santa Fe Springs, CA 90670
Director of FPL Group, Inc.
700 Universe Blvd.
P.O. Box 14000
North Palm Beach, FL 33408
Michael R. Bowlin Chairman of the Board of Directors, Chief Executive Officer,
Director Chief Operating Officer and President of
Atlantic Richfield Co. (ARCO)
Highway 150
Santa Paula, CA 93060
</TABLE>
C-7
<PAGE>
<TABLE>
<S> <C>
Edward Carson Chairman of the Board and Chief Executive Officer of
Director First Interstate Bancorp
633 West Fifth Street
Los Angeles, CA 90071
Director of Aztar Corporation
2390 East Camelback Road Suite 400
Phoenix, AZ 85016
Director of Castle & Cook, Inc.
10900 Wilshire Blvd.
Los Angeles, CA 90024
Director of Terra Industries, Inc.
1321 Mount Pisgah Road
Walnut Creek, CA 94596
William S. Davilla President (Emeritus) and a Director of
Director The Vons Companies, Inc.
618 Michillinda Ave.
Arcadia, CA 91007
Director of Pacific Gas & Electric Company
788 Taylorville Road
Grass Valley, CA 95949
Rayburn S. Dezember Director of CalMat Co.
Director 3200 San Fernando Road
Los Angeles, CA 90065
Director of Tejon Ranch Company
P.O. Box 1000
Lebec, CA 93243
Director of The Bakersfield Californian
1707 I Street
P.O. Box 440
Bakersfield, CA 93302
Trustee of Whittier College
13406 East Philadelphia Ave.
P.O. Box 634
Whittier, CA 90608
Paul Hazen Chairman of the Board of Directors of
Chairman of the Board of Wells Fargo & Company
Directors 420 Montgomery Street
San Francisco, CA 94105
</TABLE>
C-8
<PAGE>
<TABLE>
<S> <C>
Director of Phelps Dodge Corporation
2600 North Central Ave.
Phoenix, AZ 85004
Director of Safeway, Inc.
4th and Jackson Streets
Oakland, CA 94660
Robert K. Jaedicke Professor (Emeritus) of Accounting
Director Graduate School of Business at Stanford University
MBA Admissions Office
Stanford, CA 94305
Director of Bailard Biehl & Kaiser
Real Estate Investment Trust, Inc.
2755 Campus Dr.
San Mateo, CA 94403
Director of Boise Cascade Corporation
1111 West Jefferson Street
P.O. Box 50
Boise, ID 83728
Director of California Water Service Company
1720 North First Street
San Jose, CA 95112
Director of Enron Corporation
1400 Smith Street
Houston, TX 77002
Director of GenCorp, Inc.
175 Ghent Road
Fairlawn, OH 44333
Director of Homestake Mining Company
650 California Street
San Francisco, CA 94108
Thomas L. Lee Chairman and Chief Executive Officer of
Director The Newhall Land and Farming Company
10302 Avenue 7 1-2
Firebaugh, CA 93622
Director of Calmat Co.
501 El Charro Road
Pleasanton, CA 94588
</TABLE>
C-9
<PAGE>
<TABLE>
<S> <C>
Director of First Interstate Bancorp
633 West Fifth Street
Los Angeles, CA 90071
Ellen Newman President of Ellen Newman Associates
Director 323 Geary Street
Suite 507
San Francisco, CA 94102
Chair (Emeritus) of the Board of Trustees
University of California at San Francisco Foundation
250 Executive Park Blvd.
Suite 2000
San Francisco, CA 94143
Director of the California Chamber of Commerce
1201 K Street
12th Floor
Sacremento, CA 95814
Philip J. Quigley Chairman, President and Chief Executive Officer of
Director Pacific Telesis Group
130 Kearney Street Rm. 3700
San Francisco, CA 94108
Carl E. Reichardt Director of Columbia/HCA Healthcare Corporation
Director One Park Plaza
Nashville, TN 37203
Director of Ford Motor Company
The American Road
Dearborn, MI 48121
Director of Newhall Management Corporation
23823 Valencia Blvd.
Valencia, CA 91355
Director of Pacific Gas and Electric Company
77 Beale Street
San Francisco, CA 94105
Retired Chairman of the Board of Directors
and Chief Executive Officer of Wells Fargo & Company
420 Montgomery Street
San Francisco, CA 94105
</TABLE>
C-10
<PAGE>
<TABLE>
<S> <C>
Donald B. Rice President and Chief Executive Officer of Teledyne, Inc.
Director 2049 Century Park East
Los Angeles, CA 90067
Retired Secretary of the Air Force
Director of Vulcan Materials Company
One MetroPlex Drive
Birmingham, AL 35209
Richard J. Stegemeier Chairman (Emeritus) of Unocal Corp
Director 44141 Yucca Avenue
Lancaster, CA 93534
Director of Foundation Health Corporation
166 4th
Fort Irwin, CA 92310
Director of Halliburton Company
3600 Lincoln Plaza
500 North Alcard Street
Dallas, TX 75201
Director of Northrop Grumman Corp.
1840 Century Park East
Los Angeles, CA 90067
Director of Outboard Marine Corporation
100 SeaHorse Drive
Waukegan, IL 60085
Director of Pacific Enterprises
555 West Fifth Street
Suite 2900
Los Angeles, CA 90031
Director of First Interstate Bancorp
633 West Fifth Street
Los Angeles, CA 90071
Susan G. Swenson President and Chief Executive Officer of Cellular One
Director 651 Gateway Blvd.
San Francisco, CA 94080
David M. Tellep Retired Chairman of the Board and Chief Executive Officer of
Director Martin Lockheed Corp
6801 Rockledge Drive
Bethesda, MD 20817
</TABLE>
C-11
<PAGE>
<TABLE>
<S> <C>
Director of Edison International
and Southern California Edison Company
2244 Walnut Grove Ave.
Rosemead, CA 91770
Director of First Interstate
633 West Fifth Street
Los Angeles, CA 90071
Chang-Lin Tien Chancellor of the University of California at Berkeley
Director
Director of Raychem Corporation
300 Constitution Drive
Menlo Park, CA 94025
John A. Young President, Chief Executive Officer and Director
Director of Hewlett-Packard Company
3000 Hanover Street
Palo Alto, CA 9434
Director of Chevron Corporation
225 Bush Street
San Francisco, CA 94104
Director of Lucent Technologies
25 John Glenn Drive
Amherst, NY 14228
Director of Novell, Inc.
11300 West Olympic Blvd.
Los Angeles, CA 90064
Director of Shaman Pharmaceuticals Inc.
213 East Grand Ave. South
San Francisco, CA 94080
William F. Zuendt President of Wells Fargo & Company
President 420 Montgomery Street
San Francisco, CA 94105
Director of 3Com Corporation
5400 Bayfront Plaza, P.O. Box 58145
Santa Clara, CA 95052
Director of the California Chamber of Commerce
</TABLE>
C-12
<PAGE>
Prior to May 1, 1996, Barclays Global Fund Advisors ("BGFA"), a
wholly-owned subsidiary of Barclays Global Investors, N.A. ("BGI", formerly,
Wells Fargo Institutional Trust Company), served as sub-advisor to the Asset
Allocation, Corporate Stock and U.S. Government Allocation Funds of the Company
and to certain other open-end management investment companies. From May 1, 1996
to December 15, 1997 BGFA served as sub-advisor to the corresponding Asset
Allocation, U.S. Government Allocation and Corporate Stock Master Portfolios of
Master Investment Trust, in which such funds invested substantially all of their
assets. These Funds currently invest directly in a portfolio of securities and
no longer invest in the Master Portfolios. BGFA currently serves as sub-advisor
to these Funds.
The directors and officers of BGFA consist primarily of persons
who during the past two years have been active in the investment management
business of the former sub-advisor to the Registrant, Wells Fargo Nikko
Investment Advisors ("WFNIA") and, in some cases, the service business of BGI.
To the knowledge of the Registrant, except as set forth below, none of the
directors or executive officers of BGFA is or has been at any time during the
past two fiscal years engaged in any other business, profession, vocation or
employment of a substantial nature.
<TABLE>
<CAPTION>
<S> <C>
Name and Position Principal Business(es) During at
at BGFA Least the Last Two Fiscal Years
- ------- -------------------------------
<S> <C>
Frederick L.A. Grauer Director of BGFA and Co-Chairman and Director of BGI
Director 45 Fremont, San Francisco, CA 94105
Patricia Dunn Director of BGFA and C-Chairman and Director of BGI
Director 45 Fremont, San Francisco, CA 94105
Lawrence G. Tint Chairman of the Board of Directors of BGFA
Chairman and Director and Chief Executive Officer of BGI
45 Fremont, San Francisco, CA 94105
Geoffrey Fletcher Chief Financial Officer of BGFA and BGI since May 1997
Chief Financial Officer 45 Fremont, San Francisco, CA 94105
Managing Director and Principal Accounting Officer at
Bankers Trust Company from 1988 - 1997
505 Market Street, San Francisco, CA 94105
</TABLE>
Prior to January 1, 1996 WFNIA served as sub-advisor to the Asset
Allocation, Corporate Stock and U.S. Government Allocation Funds of the Company
and as advisor or sub-advisor to various other open-end management investment
companies.
For additional information, "Organization and Management of the
Fund(s)" in the Prospectuses for the Funds as well as "Management" in the
Statements of Additional Information of such Funds. For information as to the
business, profession, vocation or employment of a substantial nature of each of
the officers and management committees of WFNIA, reference is
C-13
<PAGE>
made to WFNIA's Form ADV and Schedules A and D filed under the Investment
Advisors Act of 1940, File No. 801-36479, incorporated herein by reference.
Item 27. Principal Underwriters.
----------------------
(a) Stephens Inc., distributor for the Registrant, does not
presently act as investment advisor for any other registered investment
companies, but does act as principal underwriter for Life & Annuity Trust,
MasterWorks Funds, Inc. Stagecoach Trust, Nations Fund, Inc., Nations Fund
Trust, Nations Fund Portfolios, Inc., Nations LifeGoal Funds, Inc. and Nations
Institutional Reserves, and is the exclusive placement agent for Managed Series
Investment Trust and Master Investment Portfolio, all of which are registered
open-end management investment companies.
(b) Information with respect to each director and officer of the
principal underwriter is incorporated by reference to Form ADV and Schedules A
and D filed by Stephens Inc. with the Securities and Exchange Commission
pursuant to the Investment Advisors Act of 1940 (file No. 501-15510).
(c) Not applicable.
Item 28. Location of Accounts and Records.
--------------------------------
(a) The Registrant maintains accounts, books and other documents
required by Section 31(a) of the Investment Company Act of 1940 and the rules
thereunder (collectively, "Records") at the offices of Stephens Inc., 111 Center
Street, Little Rock, Arkansas 72201.
(b) Wells Fargo Bank maintains all Records relating to its
services as investment advisor, administrator and custodian and transfer and
dividend disbursing agent at 525 Market Street, San Francisco, California 94105.
(c) WFNIA and Wells Fargo Institutional Trust Company, N.A.
maintain all Records relating to their services as sub-advisor and custodian,
respectively, for the period prior to January 1, 1996, at 45 Fremont Street, San
Francisco, California 94105.
(d) BGFA and BGI maintain all Records relating to their services
as sub-advisor and custodian, respectively, for the period beginning January 1,
1996 at 45 Fremont Street, San Francisco, California 94105.
(e) Stephens maintains all Records relating to its services as
sponsor, co-administrator and distributor at 111 Center Street, Little Rock,
Arkansas 72201.
Item 29. Management Services.
-------------------
Other than as set forth under the captions "Organization and
Management of the Fund(s)" in the Prospectuses for the Funds as well as
"Management" in the Statements of
C-14
<PAGE>
Additional Information of such Funds, the Registrant is not a party to any
management-related service contract.
Item 30. Undertakings.
------------
Not applicable.
C-15
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Amendment to its
Registration Statement on Form N-1A to be signed on its behalf by the
undersigned, thereto duly authorized in the City of Little Rock, State of
Arkansas on the 30th day of April, 1999.
STAGECOACH FUNDS, INC.
By /s/ Richard H. Blank, Jr.
--------------------------------
Richard H. Blank, Jr.
Secretary and Treasurer
(Principal Financial Officer)
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to its Registration Statement on Form N-1A has been signed below by
the following persons in the capacities and on the date indicated:
Signature Title Date
--------- ----- ----
* Director, Chairman and President
---------------------------
(R. Greg Feltus) (Principal Executive Officer)
/s/ Richard H. Blank, Jr. Secretary and Treasurer 4/30/99
---------------------------
(Richard H. Blank, Jr.) (Principal Financial Officer)
* Director
---------------------------
(Jack S. Euphrat)
* Director
---------------------------
(Thomas S. Goho)
* Director
---------------------------
(Peter G. Gordon)
* Director
---------------------------
(Joseph N. Hankin)
* Director
---------------------------
(W. Rodney Hughes)
* Director
---------------------------
(Tucker Morse)
*By /s/ Richard H. Blank, Jr.
---------------------------
Richard H. Blank, Jr.
As Attorney-in-Fact
April 30, 1999
<PAGE>
STAGECOACH FUNDS, INC.
FILE NOS. 33-42927; 811-6419
EXHIBIT INDEX
Exhibit Number DESCRIPTION
EX-99.B10 Opinion and Consent of Counsel
1
<PAGE>
[MORRISON & FOERSTER LLP LETTERHEAD]
April 30, 1999
Stagecoach Funds, Inc.
111 Center Street
Little Rock, Arkansas 72201
Re: Shares of Common Stock of
Stagecoach Funds, Inc.
-------------------------
Ladies/Gentlemen:
We refer to Post-Effective Amendment No. 52 and Amendment No. 53 to the
Registration Statement on Form N-1A (SEC File Nos. 33-42927 and 811-6419) (the
"Registration Statement") of Stagecoach Funds, Inc. (the "Company") relating to
the Equity Funds of the Company.
We have been requested by the Company to furnish this opinion as Exhibit
10 to the Registration Statement.
We have examined documents relating to the organization of the Company
and its series and the authorization and issuance of shares of its Allocation
Funds. We have also verified with the Company's transfer agent the maximum
number of shares issued by the Company through February 1, 1999.
Based upon and subject to the foregoing, we are of the opinion that:
The issuance and sale of the Shares by the Company, upon completion of
such corporate action as is deemed necessary or appropriate, will be duly and
validly authorized by such corporate action and assuming delivery by sale or in
accord with the Company's dividend reinvestment plan in accordance with the
description set forth in the Fund's current prospectus under the Securities Act
of 1933, as amended, the Shares will be legally issued, fully paid and
nonassessable by the Company.
<PAGE>
We consent to the inclusion of this opinion as an exhibit to the
Registration Statement.
In addition, we hereby consent to the use of our name and to the
reference to the description of advice rendered by our firm under the heading
"Counsel" in the Statement of Additional Information, which is included as part
of the Registration Statement.
Very truly yours,
/s/ MORRISON & FOERSTER LLP
MORRISON & FOERSTER LLP
