As filed with the Securities and Exchange Commission
on October, 13, 1995
1933 Act Registration Number 33-78234
1940 Act Registration Number 811-8488
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No.--
Post-Effective Amendment No. 2 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 3 X
KPM FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
10250 Regency Circle
Omaha, NE 68114
(Address of Principal Offices)
Registrant's Telephone Number, including Area Code:
(402) 397-5777
Rodney D. Cerny
10250 Regency Circle
Omaha, NE 68114
(Name and Address of Agent for Service)
Copies of all communications to:
JOHN C. MILES, ESQ.
Cline, Williams, Wright, Johnson & Oldfather
1900 FirsTier Bank Bldg.
Lincoln, NE 68508
Approximate Date of Proposed Public Offering: As soon as practicable after
the Registration Statement becomes effective.
It is proposed that this filing will become effective on October 16, 1995
pursuant to paragraph (b) of Rule 485 under the Securities Act of 1993.
This Registration Statement relates to an indefinite number of shares of the
Registrant pursuant to Rule 24f-2 under the Securities Act of 1933.
The Rule 24f-2 Notice for the fiscal year ended June 30, 1995 was filed on or
about August 25, 1995.
<PAGE>
KPM FUNDS, INC.
Cross-Reference Sheet
Required by Rule 404(a)
N-1A Item No. Location in Prospectus
PART A
1. Cover Page Cover Page
2. Synopsis Summary
3. Condensed Financial Information Financial Highlights
4. General Description of Registrant Investment Objectives
and Policies; General
Information
5. Management of the Fund..................... The Investment Adviser;
General Information
5A. Management's Discussion of the Fund
Performance................................ Not Applicable -
included in the Fund's
Annual Report
6. Capital Stock and Other Securities......... Cover Page; Redemption
of Shares; Dividends
and Taxes; General
Information
7. Purchase of Securities Being Offered....... Purchase of Shares
8. Redemption or Repurchase................... Redemption of Shares
9. Pending Legal Proceedings.................. Not Applicable
PART B
Location in Statement
of Additional
Information
10. Cover Page................................. Cover Page
11. Table of Contents Table of Contents
12. General Information and History Not Applicable
13. Investment Objective and Policies.......... Investment Objectives,
Policies and
Restrictions; Securities
and Other Investment
Policies
14. Management of the Fund..................... Directors and Executive
Officers
15. Control Persons and Principal
Holders of Securities...................... Investment Advisory and
Other Services Control of
the Adviser and the
Distributor; Capital Stock
16. Investment Advisory and Other Services..... Investment Advisory and
Other Services- The
Investment Advisory
Agreement
17. Brokerage Allocation and Other Practices... Portfolio Transactions and
Brokerage Allocations
18. Capital Stock and Other Securities......... Capital Stock
19. Purchase, Redemption and Pricing of
Securities Being Offered................... Determination of Net
Asset Value; Redemption
20. Tax Status................................. Taxation
21. Underwriters............................... Investment Advisory and
Other Services
22. Calculation of Performance Data............ Calculation of
Performance Data
23. Financial Statements....................... Financial Statements
PART C
Information required to be included in Part C is set forth under the appropriate
item, so numbered, in Part C to this Registration Statement.
<PAGE>
Prospectus
- ----------
KPM FUNDS, INC.
KPM EQUITY PORTFOLIO
KPM FIXED INCOME PORTFOLIO
This Prospectus concisely describes information about the Portfolios that you
ought to know before investing. Please read it carefully before investing and
retain it for future reference. A Statement of Additional Information about the
Portfolios dated as of the date of this Prospectus is available free of charge
from Kirkpatrick Pettis, 10250 Regency Circle, Omaha, Nebraska 68114; or
telephone (402) 397-5777 or (800) 776-5777. The Statement of Additional
Information has been filed with the Securities and Exchange Commission and is
incorporated in its entirety by reference in this Prospectus.
KPM FUNDS, Inc. (the "Fund") is a Nebraska corporation offering shares in
series, each series operated as a separate diversified open-end management
investment company. This Prospectus relates to the series designated KPM Equity
Portfolio and KPM Fixed Income Portfolio (individually a "Portfolio" or
collectively the "Portfolios"). The shares of the Portfolios are not deposits or
obligations of, or guaranteed or endorsed by any bank, nor are they federally
insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board,
or any other federal or state agency.
KPM Equity Portfolio
- --------------------
The KPM Equity Portfolio seeks to provide capital appreciation. At least 65% of
the Equity Portfolio's total assets will ordinarily be invested in equity
securities consisting of common stock and other securities convertible into
common stock. In making selections for the Portfolio, the Adviser will utilize
an investment approach based on fundamental analysis employing a value
philosophy. In pursuit of the Portfolio's investment objective, the Adviser
seeks to identify companies that are selling at market prices below what the
Adviser believes to be their intrinsic fundamental value. These companies
generally fall into two categories: well-recognized, large capitalization
companies (market capitalization in excess of $1 billion) that are currently out
of favor with investment professionals evidenced by low price to earnings ratios
compared to similar companies and/or relative to the market as a whole and small
to medium capitalization companies (market capitalization between $100 million
and $1 billion) that lack significant research coverage from major Wall Street
firms.
KPM Fixed Income Portfolio
- --------------------------
The KPM Fixed Income Portfolio seeks to provide total return over a market cycle
of 3 to 5 years consistent with preservation of capital and prudent investment
management.
The Fixed Income Portfolio will invest primarily in fixed-income securities with
an emphasis on income. Capital appreciation, while more difficult to achieve, is
a secondary objective. The Portfolio will invest in investment-grade securities
(rated BBB or better by Standard & Poor's Corporation ("S&P") or Baa or better
by Moody's Investors Services ("Moody's"), corporate debt, preferred stock,
mortgage-backed securities and U.S. Government securities. The Portfolio has no
stated policy on portfolio maturity, but the Investment Adviser anticipates
average dollar weighted portfolio maturity to range between seven and fifteen
years.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is October 13, 1995
<PAGE>
INTRODUCTION
KPM FUNDS, Inc. (the "Fund") is a Nebraska corporation, commonly called a mutual
fund. The Fund, which was organized in February, 1994, has one class of capital
stock that is issued in series, each series referred to as a Portfolio and
operated as a separate diversified open-end management investment company. This
Prospectus only relates to the series designated KPM Equity Portfolio and KPM
Fixed Income Portfolio.
The Investment Adviser and Administrator
- ----------------------------------------
The Portfolios are managed by KPM Investment Management, Inc., Omaha,
Nebraska ("KPM" or the "Adviser"). Lancaster Administrative Services, Inc. acts
as the Fund's transfer agent and administrator ("Administrator"). The Portfolios
pay the Adviser and Administrator monthly fees for advisory services and
administrative services rendered. See "Management -- Investment Adviser and
Administrator" and "Management -- Portfolio Brokerage."
The Distributor
- ----------------
Kirkpatrick, Pettis, Smith, Polian Inc. ("Kirkpatrick Pettis"), a wholly
owned subsidiary of Mutual of Omaha Insurance Company, acts as the distributor
("Distributor") of the Fund's shares. See "Purchase of Shares."
Purchase of Shares
- ------------------
Shares of the Portfolios are offered to the public at the next determined net
asset value after receipt of an order by the Distributor without a sales charge.
See "Valuation of Shares." The minimum aggregate initial investment in the
Portfolios is $25,000 unless waived by the Fund for Mutual of Omaha and
subsidiaries, employees and family members and certain other group purchases.
Subsequent investments can be made in amounts of $1,000 or more. See "Purchase
of Shares."
Certain Risk Factors to Consider
- --------------------------------
An investment in the Portfolios is subject to certain risks, as set forth in
detail under "Investment Objectives and Policies." As with other mutual funds,
there can be no assurance that the Portfolios will achieve their objectives. In
addition, the Portfolios are recently created and, as of the date of this
Prospectus, have no a very limited history of operations.
Redemptions
- -----------
Shares of the Portfolios may be redeemed at any time at their net asset value
next determined after receipt of a redemption request by the Distributor. See
"Redemption of Shares." The Fund reserves the right, upon 30 days' written
notice, to redeem a shareholder's investment in a Portfolio if the net asset
value of the shares held by such shareholder falls below $5,000 as a result of
redemptions or transfers. See "Redemption of Shares - Involuntary Redemption."
Dividends
- ---------
Dividends are declared and paid at least annually (see "Dividends and Taxes"),
but may be declared and paid more frequently and will be automatically
reinvested unless the shareholder elects otherwise.
Page 1
<PAGE>
Expenses
- ----------
The Fund offers shares of the Portfolios without any sales load or contingent
sales loads on purchases, reinvestments of dividends or redemptions and does not
charge any exchange or account maintenance fees. For more complete descriptions
of the various costs and expenses, see "Management--Investment Adviser and
Administrator" and "Management -- Expenses."
Annual Operating Expenses
- -------------------------
The table below provides information regarding expenses for the Portfolios
expressed as annual percentages of average daily net assets. The Adviser has
agreed to reimburse the Portfolios monthly to the extent of the advisory fee
paid if in any year the annual total expenses exceed 1.50% of
the Equity Portfolio's and 1.25% of the Fixed Income Portfolio's average annual
net assets.
KPM Equity KPM Fixed Income
Portfolio Portfolio
---------- ----------------
Management Fees .80% .60%
12b-1 Fees .25% .25%
Other Expenses .45% .40%
Total Portfolio Operating Expenses 1.50% 1.25%
Example
You would pay these expenses on a $1,000 investment assuming (1) 5% annual
return and (2) redemption at the end of each time period.
KPM Equity KPM Fixed Income
Portfolio Portfolio
----------- ----------------
1 year $15 $13
3 years $47 $40
5 years $82 $69
10 years $179 $151
The purpose of the table above is to assist investors in understanding the
various costs and expenses that an investor will bear directly or indirectly as
a result of an investment in the Portfolios. Such expenses do not include any
fees charged by some banks or other financial institutions to customer accounts
which may be invested in shares of the Portfolios. Long term shareholders may,
as a result of the Portfolios' payment of Rule 12b-1 fees, pay more than the
economic equivalent of the maximum front end sales charges permitted by the
National Association of Securities Dealers, Inc. The advisory fee paid by the
KPM Equity Portfolio is higher than that paid by most other investment
companies. See "Management" for a more complete discussion of the shareholder
transaction and annual operating expenses for the Portfolios of the Fund.
Page 2
<PAGE>
Financial Highlights
- --------------------
The following financial information provides audited selected data for
shares of the Pportfolios outstanding throughout the period July 5, 1994 to June
30, 1995. The information has been audited by KPMG Peat Marwick, LLP,
independent certified public accountants, to the extent of their report
appearing in the Fund's Annual Financial Report included with the Statement of
Additional Information and is available upon request without charge. Further
information about the performance of the Portfolios is contained in the annual
report.
<TABLE>
<CAPTION>
KPM KPM
Equity Fixed Income
Portfolio Portfolio
<S> <C> <C>
Net asset value:
Beginning of period $10.00 $10.00
Income from investment operations:
Net investment income 0.10 0.54
Less expense reimbursed by investment adviser 0.01 0.03
Net realized and unrealized gain on investments 2.06 0.47
Total income from investment operations 2.17 1.04
----- ------
Less distributions:
Dividends from net investment income (0.10) (0.57)
Dividends Distributions from capital gains (0.07) (0.00)
------ -------
(0.17) (0.57)
------ --------
End of period $12.00 $10.47
------ --------
Total Return 22.01%* 9.63%*
Ratios/Supplemental datea:
Net assets, end of period $15,360,742 $5,867,926
Ratio of expenses to average net assets 1.50%* 1.25%*
Ratio of expenses to average net assets before
adviser reimbursements #1 1.62%* 1.56%*
Ratio of net income to average net assets 1.04%* 5.59%*
Portfolio turnover rate 27.90% 40.34%
<FN>
#1 KPM Management, Inc. reimbursed a portion of the fund's expenses
*Annualized for periods of less than twelve months in duration
</FN>
</TABLE>
Page 3
<PAGE>
Shareholder Inquiries
- ---------------------
Any questions or communications regarding a shareholder account should be
directed to your Kirkpatrick Pettis investment executive or other broker-dealer.
General inquiries regarding the Portfolios should be directed to the Fund at one
of the telephone numbers set forth on the cover page of this Prospectus.
INVESTMENT OBJECTIVES AND POLICIES
The investment objective of each of the Portfolios listed below cannot be
changed without shareholder approval in the manner described under the caption
"Investment Restrictions," below. In view of the risks inherent in all
investments in securities, there is no assurance that these objectives will be
achieved. The investment policies and techniques employed in pursuit of the
Portfolios' objectives may be changed without shareholder approval, unless
otherwise identified as fundamental policies. See "Special Investment Methods"
for definitions and discussion regarding certain types of securities and the
risks of investing in such securities.
KPM Equity Portfolio
Investment Objective
- --------------------
The KPM Equity Portfolio seeks to provide capital appreciation. At least 65% of
the KPM Equity Portfolio's total assets will ordinarily be invested in equity
securities consisting of common stock and other securities convertible into
common stock.
Investment Policies
- -------------------
In making selections for the Portfolio, the Adviser will utilize an investment
approach based on fundamental analysis employing a value philosophy. The
Adviser's philosophy can be summarized in its mission statement, which is "to
find high quality companies whose securities are selling at prices we believe
are below their long-term fundamental value." The Adviser regards long-term
fundamental value of a company as its economic value as a going concern, taking
into account the nature of its business, its assets, historical earnings and
profitability, projected earnings and profitability and the investment
environment. In terms of "high quality companies," the Adviser seeks companies
with a strong balance sheet, above average historical growth of sales and
earnings, companies with superior profitability as evidenced by a high return on
equity, and strong management as evidenced by a good historical track record.
The Adviser attempts to buy and hold securities over an anticipated four to five
year period and does not anticipate trading securities resulting in Portfolio
turnover of 100% in any given year. As a result, Portfolio turnover is not
expected to exceed 25% in any given year, absent significant adverse market
conditions. In valuing securities, the Adviser uses several methodologies
including, but not limited to, price-to-earnings, price-to-cash flow and
price-to-book value. Generally, the Adviser looks for companies that are selling
at a discount price-to-earnings ratio relative to their peer group and/or
relative to the market as a whole.
There are two areas of the market where the Adviser concentrates its analytical
efforts. First, the Adviser analyzes large capitalization companies that are
well known by the investment community but may be out of favor due to a recent
fundamental problem, such as a temporary decline in earnings. The Adviser
defines "large capitalization" as companies with market capitalizations in
excess of $1 billion. The Adviser attempts to take advantage of the
Page 4
<PAGE>
short-term oriented thinking displayed by many investment professionals by
analyzing companies whose stocks have been sold off dramatically due to a
quarterly earnings report or monthly sales figure that comes up short of the
published estimates. When the Adviser determines that the long-term fundamental
value of a company has not been harmed by such short-term earnings expectations,
whether or not they ultimately prove to be accurate, the Adviser will initiate
purchases at prices it believes provide solid value. Secondly, the Adviser
analyzes small- to medium-sized companies that it believes are not well received
or followed by the research community. These companies range in size from $100
million to $1 billion in market capitalization. The same analysis performed on
the largest companies is followed by the Adviser for these smaller to mid-sized
companies; however, because of the lack of widespread published research on
these companies, the Adviser may more frequently utilize more direct research
techniques, including company visitations and interviews with management.
Investment in smaller capitalization companies may involve greater risk than
investment in other companies. The securities of smaller capitalization
companies may be subject to more abrupt or erratic market movements, and many of
them have limited product lines, markets, financial resources and/or management
capabilities.
KPM Fixed Income Portfolio
Investment Objective
- --------------------
The KPM Fixed Income Portfolio seeks to provide total return over a market cycle
of 3 to 5 years consistent with preservation of capital and prudent investment
management.
Investment Policies
- -------------------
The KPM Fixed Income Portfolio will invest at least 65% of its assets in
fixed-income securities with an emphasis on income. Capital appreciation, while
more difficult to achieve, is a secondary objective. The KPM Fixed Income
Portfolio will invest only in investment-grade (securities rated BBB or better
by Standard & Poor's Corporation ("S&P") or Baa or better by Moody's Investors
Services ("Moody's")) corporate debt, preferred stock, mortgage-backed
securities and U.S. Government securities. Securities rated BBB by S&P or Baa by
Moody's are considered to have speculative characteristics and, as a result, are
more susceptible to fluctuations in market value than higher rated securities.
In the event that the rating of an investment grade security is lowered to below
investment grade, the Adviser will assess the creditworthiness of the issuer,
evaluate the likelihood of the security being upgraded to investment grade or
being further down-graded and may choose to hold or sell the security as
appropriate. The KPM Fixed Income Portfolio does not have a stated policy on
portfolio maturity, but the Adviser anticipates average dollar-weighted
portfolio maturity to range between seven and fifteen years. A longer portfolio
maturity results in greater fluctuation in net asset value in periods of
interest rate volatility.
Portfolio Turnover
- ------------------
While it is not the policy of any either of the Portfolios to trade actively for
short-term (less than six months) profits, each Portfolio will dispose of
securities without regard to the time they have been held when such action
appears advisable to the Adviser, subject to, among other factors, the
constraints imposed on regulated investment companies by Subchapter M of the
Internal Revenue Code. See "Dividends and Taxes." For the period ending June 30,
1995, the portfolio turnover for the KPM Equity and KPM Fixed Inome Portfolios
were 27.90% and 40.30%, respectively. In the case of each Portfolio, frequent
changes will result in increased brokerage and other costs. The Fund does not
expect the turnover rate for the KPM Equity Portfolio to exceed 50% this year
and the KPM Fixed Income Portfolio to exceed 50% this year.
The methods of calculating portfolio turnover rate are set forth in the
Statement of Additional Information under "Investment Policies and
Restrictions--Portfolio Turnover."
Page 5
<PAGE>
Investment Restrictions
- ------------------------
The Fund has adopted certain investment restrictions applicable to the
Portfolios which are fully set forth in the Statement of Additional Information.
Some of these restrictions, which are fundamental and may not be changed without
shareholder approval, include the following: (1) no Portfolio will invest 25% or
more of its total assets in any one industry (this restriction does not apply to
securities of the U.S. Government or its agencies and instrumentalities and
repurchase agreements relating thereto); (2) no security can be purchased by a
Portfolio if, as a result, more than 5% of the value of the total assets of that
Portfolio would then be invested in the securities of a single issuer (other
than U.S. Government obligations); and (3) no security can be purchased by a
Portfolio if, as a result, more than 10% of any class of securities, or more
than 10% of the outstanding voting securities of an issuer, would be held by
that Portfolio. Other restrictions, which are not fundamental policies and may
be changed without Shareholder approval include: (1) no Portfolio shall invest
more than 20% of its total assets in securities of foreign issuers; (2) no
Portfolio shall invest in companies for the purpose of exercising control or
management. Additional investment restrictions are set forth in the Statement of
Additional Information.
If a percentage restriction set forth under "Investment Objectives and Policies"
is adhered to at the time of an investment, a later increase or decrease in
percentage resulting from changes in values or assets will not constitute a
violation of such restriction. The foregoing investment restrictions, as well as
all investment objectives and policies designated by the Fund as fundamental
policies in the Statement of Additional Information, may not be changed without
the approval of a "majority" of a Portfolio's shares outstanding, defined as the
lesser of: (a) 67% of the votes cast at a meeting of shareholders for a
Portfolio at which more than 50% of the shares are represented in person or by
proxy, or (b) a majority of the outstanding voting shares of that Portfolio.
These provisions apply to each Portfolio if the action proposed to be taken
affects that Portfolio. The Adviser may also agree to certain additional
non-fundamental investment policies from time to time in order to qualify the
shares of one or both of the Portfolios in various states.
SPECIAL INVESTMENT METHODS
Both of the Portfolios may invest in U. S. Government Securities, repurchase
agreements, options for hedging purposes and money market instruments.
Additionally, the Portfolios may engage in limited borrowings, may invest for
temporary defensive purposes and may purchase fixed income securities on a
when-issued or delayed-delivery basis. The KPM Fixed Income Portfolio may also
invest in mortgage-backed securities. The KPM Equity Portfolio may invest in
convertible securities. Descriptions of such securities, and the inherent risks
of investing in such securities, are set forth below. Additional information
about special investment methods is set forth in the Statement of Additional
Information.
U.S. Government Securities
- --------------------------
The Portfolios may invest in U.S. Government Securities which are
obligations issued or guaranteed by the U. S. Government, its agencies or
instrumentalities. Obligations issued by the U.S. Treasury include Bills, Notes
and Bonds ("Treasury Securities") which differ from each other mainly in their
interest rates and the length of their maturity at original issue. In this
regard, Treasury Bills have a maturity of one year or less, Treasury Notes have
maturities of one to ten years and Treasury Bonds generally have maturities
greater than ten years. Such Treasury Securities are backed by the full faith
and credit of the U.S. Government.
The obligations of U.S. Government agencies or instrumentalities are
guaranteed or backed in a variety of ways by the U.S. Government, its agencies
or instrumentalities. Some of these obligations, such as Government National
Mortgage Association mortgage-related securities, and obligations of the Farmers
Home Administration, are backed by the full faith and credit of the U. S.
Treasury. Obligations of the Farmers Home Administration are also backed
Page 6
<PAGE>
by the issuer's right to borrow from the U.S. Treasury. Obligations of Federal
Home Loan Banks and the Farmers Home Administration are backed by the
discretionary authority of the U.S. Government to purchase certain obligations
of agencies or instrumentalities. Obligations of Federal Home Loan Banks, the
Farmers Home Administration, Federal Farm Credit Banks, the Federal National
Mortgage Association and the Federal Home Loan Mortgage Corporation are backed
by the credit of the agency or instrumentality issuing the obligations.
As with all fixed income securities, various market forces influence the value
of such securities. There is an inverse relationship between the market value of
such securities and yield. As interest rates rise, the value of the securities
falls; conversely, as interest rates fall, the market value of such securities
rises.
Repurchase Agreements
- ---------------------
The Portfolios may also enter into repurchase agreements on U.S. Government
Securities to invest cash awaiting investment and/or for temporary defensive
purposes. A repurchase agreement involves the purchase by a Portfolio of U.S.
Government Securities with the condition that after a stated period of time
(usually seven days or less) the original seller will buy back the same
securities ("collateral") at a predetermined price or yield. Repurchase
agreements involve certain risks not associated with direct investments in
securities. In the event the original seller defaults on its obligation to
repurchase, as a result of its bankruptcy or otherwise, the Portfolio will seek
to sell the collateral, which action could involve costs or delays. In such
case, the Portfolio's ability to dispose of the collateral to recover such
investment may be restricted or delayed. While collateral will at all times be
maintained in an amount equal to the repurchase price under the agreement
(including accrued interest due thereunder), to the extent proceeds from the
sale of collateral were less than the repurchase price, a Portfolio would suffer
a loss.
Mortgage-Backed Securities
- --------------------------
Mortgage loans made by banks, savings and loan institutions, and other lenders
are often assembled into pools which are issued and guaranteed by an agency or
instrumentality of the U.S. Government, though not necessarily backed by the
full faith and credit of the U.S. Government itself. Pools are also created
directly by banks, savings and loans and other mortgage lenders with mortgage
loans that have been made by these institutions. Interests in such pools are
described as "Mortgage-Backed Securities". These include securities issued by
the Government National Mortgage Association ("GNMA"), Federal Home Loan
Mortgage Corporation ("FHLMC"), and the Federal National Mortgage Association
("FNMA"). The KPM Fixed Income Portfolio may invest in Mortgage-Backed
Securities representing undivided ownership interests in pools of mortgage
loans, including GNMA, FHLMC, and FNMA Ccertificates and loans issued directly
by banks, savings and loans and other mortgage lenders.
The KPM Fixed Income Portfolio may invest a portion of its assets in
Collateralized Mortgage Obligations ("CMOs"), which are debt obligations
collateralized by mortgage loans or mortgage pass-through securities. Typically,
CMOs are collateralized by certificates issued by GNMA, FNMA or FHLMC but also
may be collateralized by whole loans or private mortgage pass-through securities
(such collateral collectively hereinafter referred to as "Mortgage Assets").
The KPM Fixed Income Portfolio may also invest a portion of its assets in
multiclass pass-through securities which are interests in a trust composed of
Mortgage Assets. CMOs (which include multiclass pass-through securities) may be
issued by agencies, authorities or instrumentalities of the U.S. Government or
by private originators or investors in mortgage loans, including savings and
loan associations, mortgage banks, commercial banks, investment banks
Page 7
<PAGE>
and special purpose subsidiaries of the foregoing. Payments of principal and
interest on Mortgage Assets, and any reinvestment income thereon, provide the
funds to pay debt service on the CMOs or make scheduled distributions on the
multiclass pass-through securities. In a CMO, a series of bonds or certificates
is usually issued in multiple classes with different maturities. Each class of
CMOs, often referred to as a "tranche", is issued at a specific fixed or
floating coupon rate and has a stated maturity or final distribution date.
Principal repayments on the Mortgage Assets may cause the CMOs to be retired
substantially earlier than their stated maturities or final distribution dates,
resulting in a loss of all or part of the premium if any has been paid.
The KPM Fixed Income Portfolio may also invest in parallel pay CMOs and Planned
Amortization Class CMOs ("PAC Bonds"). Parallel pay CMOs are structured to
provide payments of principal on each payment date to more than one class. These
simultaneous payments are taken into account in calculating the stated maturity
date or final distribution date of each class, which as with other CMO
structures, must be retired by its stated maturity date but may be retired
earlier. PAC Bonds generally require payments of a specified amount of principal
on each payment date. PAC Bonds are always parallel pay CMOs with the required
principal payment of such securities having the highest priority after interest
has been paid to all classes.
Options Transactions
- --------------------
The KPM Equity Portfolio may purchase put options, solely for hedging purposes,
in order to protect portfolio holdings in an underlying security against a
substantial decline in the market value of such holdings ("protective puts").
Such protection is provided during the life of the put because the Portfolio may
sell the underlying security at the put exercise price, regardless of a decline
in the underlying security's market price. Any loss to the Portfolio is limited
to the premium paid for, and transaction costs paid in connection with, the put
plus the initial excess, if any, of the market price of the underlying security
over the exercise price. However, if the market price of such security
increases, the profit a Portfolio realizes on the sale of the security will be
reduced by the premium paid for the put option less any amount for which the put
is sold.
The KPM Equity Portfolio may also purchase call options solely for the purpose
of hedging against an increase in prices of securities that the Portfolio
ultimately wants to buy. Such protection is provided during the life of the call
option because the Portfolio may buy the underlying security at the call
exercise price regardless of any increase in the underlying security's market
price. In order for a call option to be profitable, the market price of the
underlying security must rise sufficiently above the exercise price to cover the
premium and transaction costs. By using call options in this manner, a Portfolio
will reduce any profit it might have realized had it bought the underlying
security at the time it purchased the call option by the premium paid for the
call option and by transaction costs.
The KPM Equity Portfolio may only purchase exchange traded put and call
options. Exchange-traded options are third party contracts with standardized
strike prices and expiration dates and are purchased from a clearing
corporation. Exchange-traded options have a continuous liquid market while other
options may not. See "Investment Objectives and Policies--Investment
Restrictions."
Use of options in hedging strategies is intended to protect performance but can
result in poorer performance than without hedging with options, if the Adviser
is incorrect in its forecasts of the direction of stock prices. Normally, the
Portfolio will only invest in options to protect existing positions and, as a
result, will normally invest no more than 10% of the Portfolio's assets in
options.
Page 8
<PAGE>
Convertible Securities
- ----------------------
The KPM Equity Portfolio may invest in convertible securities which are rated
investment grade, BBB or better by S&P or Baa or better by Moody's. The KPM
Fixed Income Portfolio will not invest in convertible securities. Convertible
securities are securities that may be exchanged or converted into a
predetermined number of the issuer's underlying common shares at the option of
the holder during a specified time period. Convertible securities may take the
form of convertible preferred stock, convertible bonds or debentures, or a
combination of the features of these securities. The investment characteristics
of convertible securities vary widely, allowing convertible securities to be
employed for different investment objectives.
Convertible bonds and convertible preferred stocks are fixed income securities
entitling the holder to receive the fixed income of a bond or the dividend
preference of a preferred stock until the holder elects to exercise the
conversion privilege. They are senior securities, and, therefore, have a claim
to assets of the issuer prior to the common stock in the case of liquidation.
However, convertible securities are generally subordinated to non-convertible
securities of the same company. The interest income and dividends from
convertible bonds and preferred stocks provide a stream of income with generally
higher yields than common stocks, but lower than non-convertible securities of
similar quality.
As with all fixed income securities, various market forces influence the market
value of convertible securities, including changes in the prevailing level of
interest rates. As the level of interest rates increases, the market value of
convertible securities tends to decline and, conversely, as interest rates
decline, the market value of convertible securities tends to increase. The
unique investment characteristic of convertible securities (the right to
exchange for the issuer's common stock) causes the market value of the
convertible securities to increase when the value of the underlying common stock
increases. However, because security prices fluctuate, there cannot be an
assurance of capital appreciation. Most convertible securities will not reflect
as much capital appreciation as their underlying common stocks. When the
underlying common stock is experiencing a decline, the value of the convertible
security tends to decline to a level approximating the yield-to-maturity basis
of straight nonconvertible debt of similar quality, often called "investment
value," and may not experience the same decline as the underlying common stock.
Most convertible securities sell at a premium over their conversion values
(i.e., the number of shares of common stock to be received upon conversion
multiplied by the current market price of the stock). This premium represents
the price investors are willing to pay for the privilege of purchasing a fixed
income security with a possibility of capital appreciation due to the conversion
privilege. If this appreciation potential is not realized, the premium may not
be recovered.
Money Market Instruments
- ------------------------
The Portfolios may invest in money market instruments which include:
(i) U.S. Treasury Bills;
(ii) U.S. Treasury Notes with maturities of 18 months or less;
(iii) U.S. Government Securities subject to repurchase agreements;
Page 9
<PAGE>
(iv) Obligations of domestic branches of U.S. banks (including
certificates of deposit and bankers' acceptances with maturities of
18 months or less) which, at the date of investment, have capital,
surplus, and undivided profits (as of the date of their most recently
published financial statements) in excess of $10,000,000 and
obligations of other banks or savings and loan associations if such
obligations are insured by the Federal Deposit Insurance Corporation
("FDIC") or the Federal Savings and Loan Insurance Corporation
("FSLIC");
(v) Commercial paper which at the date of investment is rated A-1 by
Standard & Poor's ("S&P") or P-1 by Moody's Investors Service
("Moody's") or, if not rated, is issued or guaranteed as to payment
of principal and interest by companies which, at the date of
investment, have an outstanding debt issue rated AA or better by S&P
or Aa or better by Moody's;
(vi) Short-term (maturing in one year or less) corporate obligations
which, at the date of investment, are rated AA or better by S&P or Aa
or better by Moody's; and
(vii) Shares of no-load money market mutual funds (subject to the ownership
restrictions of the Investment Company Act of 1940). See
"Investment Policies and Restrictions" in the Statement of Additional
Information.
Investment by a Portfolio in shares of a money market mutual fund indirectly
results in the investor paying not only the advisory fee and related fees
charged by the Portfolio, but also the advisory fees and related fees charged by
the adviser and other entities providing services to the money market mutual
fund.
Borrowing
- ----------
The Portfolios may borrow money from banks for temporary or emergency
purposes in an amount of up to 10% of the value of a Portfolio's total assets.
Interest paid by a Portfolio on borrowed funds would decrease the net earnings
of that Portfolio. Neither of the Portfolios will purchase portfolio securities
while outstanding borrowings exceed 5% of the value of the Portfolio's total
assets. Each of the Portfolios may mortgage, pledge, or hypothecate its assets
in an amount not exceeding 10% of the value of its total assets to secure
temporary or emergency borrowing. The policies set forth in this paragraph are
fundamental and may not be changed with respect to a Portfolio without the
approval of a majority of that Portfolio's shares.
Temporary Defensive Positions
- -----------------------------
Both Portfolios may deviate from their fundamental and non-fundamental
investment policies during periods of adverse or abnormal market, economic,
political and other circumstances requiring immediate action to protect assets.
In such cases, the Portfolios may invest up to 100% of their assets in U.S.
Government Securities and any Money Market Investment described above.
Page 10
<PAGE>
MANAGEMENT
Board of Directors
- ------------------
As in all corporations, the Fund's Board of Directors has the primary
responsibility for overseeing the overall management of the Fund. The Board of
Directors meets periodically to review the activities of the Portfolios and the
Adviser and to consider policy matters relating to the Portfolios and the Fund.
Investment Adviser and Administrator
- ------------------------------------
KPM has been retained under an Investment Advisory Agreement with the Fund to
act as the Portfolios' Adviser subject to the authority of the Board of
Directors. KPM is a wholly owned subsidiary of Kirkpatrick Pettis, which is a
wholly owned subsidiary of Mutual of Omaha Insurance Company. KPM succeeded to
substantially all of the investment advisory business of KPM Investment
Management, a division of the Distributor in a reorganization of Kirkpatrick
Pettis on June 16, 1994. All of the investment advisory personnel associated
with KPM Investment Management when operated as a division of Kirkpatrick Pettis
continue in substantially the same employment positions with KPM. KPM Investment
Management as a division of Kirkpatrick Pettis managed $525 million in
discretionary advisory accounts, pension profit-sharing plan accounts, bank
trust department accounts and other accounts on the date the reorganization
became effective. KPM will continue to manage such assets. KPM Investment
Management operated as a division of Kirkpatrick Pettis and was registered with
the Securities and Exchange Commission as an investment adviser in 1981.
The Adviser furnishes the Portfolios with investment advice and, in general,
supervises the management and investment programs of the Fund. The Adviser
furnishes at its own expense all necessary administrative services, office
space, equipment, clerical personnel for servicing the investments of the
Portfolios, investment advisory facilities, executive and supervisory personnel
for managing the investments and effecting the securities transactions of the
Portfolios. In addition, the Adviser pays the salaries and fees of all officers
and directors of the Fund who are affiliated persons of the Adviser. Under the
Investment Advisory Agreement, the Adviser receives a monthly fee computed
separately for the Portfolios at an annual rate of .80% for the KPM Equity
Portfolio and .60% for the KPM Fixed Income Portfolio of the daily average net
asset value of the respective Portfolio. The advisory fee paid to the Adviser
for managing the KPM Equity Portfolio is higher than that paid by most other
investment companies.
KPM Equity Portfolio is managed jointly by Rodney D. Cerny, President of the
Fund, Executive Vice President and Chief Investment Officer of the Adviser and
Thomas J. Sudyka, Jr., Vice President of the Fund, Vice President, Analyst and
Portfolio Manager for the Adviser. Mr. Cerny is a Chartered Financial Analyst
with a bachelor of science degree from the University of Nebraska-Lincoln and
has been affiliated with Kirkpatrick Pettis in various capacities since 1986.
Mr. Cerny has been an investment analyst since 1975. Mr. Sudyka is a Chartered
Financial Analyst, has a bachelor of science degree in business administration
from Creighton University and a masters of business administration degree from
the University of Nebraska-Lincoln. Mr. Sudyka has been associated with
Kirkpatrick Pettis since March, 1993. Previous to that time, Mr. Sudyka was a
securities analyst and investment officer with an investment advisory firm
located in Des Moines, Iowa from 1989 to 1992 and was involved in the managing
of mutual fund assets. Previous to that time, Mr. Sudyka was a securities
analyst for an insurance company from 1986 to 1989.
The Fixed Income Portfolio will be managed by Patrick M. Miner, Vice
President of the Adviser. Mr. Miner is a Chartered Financial Analyst and
received his bachelor of science degree from the University of Nebraska-Lincoln
in 1972. Mr. Miner has been affiliated with Mutual of Omaha since 1992. Prior to
that time, Mr. Miner was a portfolio manager for a regional national bank from
1984 through 1992 and was an account executive with two broker-dealer firms from
1978 through 1984.
Page 11
<PAGE>
Lancaster Administrative Services, Inc. has been retained as the Fund's
Administrator under a Transfer Agent and Administrative Services Agreement with
the Fund. The Administrator provides, or contracts with others to provide, all
necessary recordkeeping services and share transfer services for the Fund. The
Administrator receives an administration fee, computed and paid monthly, at an
annual rate of .25% of the daily average net assets of each Portfolio.
Expenses
- --------
The expenses paid by the Portfolios are deducted from total income before
dividends are paid. These expenses include, but are not limited to, the fees
paid to the Adviser and the Administrator, taxes, interest, ordinary and
extraordinary legal and auditing fees, custodial charges, registration and blue
sky fees incurred in registering and qualifying the Portfolio under state and
federal securities laws, association fees, director fees paid to directors who
are not affiliated with the Adviser, and any other fees not expressly assumed by
the Adviser or Administrator. Any general expenses of the Fund that are not
readily identifiable as belonging to a particular Portfolio will be allocated to
the Portfolios on a pro rata basis at the time such expenses are accrued. The
Portfolios pay their own brokerage commissions and related transactions costs.
Portfolio Brokerage
- -------------------
The primary consideration in effecting transactions for the Portfolios is
execution at the most favorable prices. The Adviser has complete freedom as to
the markets in and the broker-dealers through or with which (acting on an agency
basis or as principal) they seek execution at the most favorable prices. The
Adviser may consider a number of factors in determining which broker-dealers to
use for the Portfolios' transactions. These factors, which are also discussed in
the Statement of Additional Information, include research services, the
reasonableness of commissions, the quality of services and execution. Portfolio
transactions for the Portfolios may be effected through the Distributor if the
commissions, fees or other remuneration received by the Distributor are
reasonable and fair compared to the commissions, fees or other remuneration paid
to other brokers in connection with comparable transactions involving similar
securities being purchased or sold on an exchange during a comparable period of
time. In effecting portfolio transactions through the Distributor, the
Portfolios intend to comply with Section 17(e)(1) of the Investment Company Act
of 1940, as amended.
The Adviser may also purchase securities from time to time from broker-dealers
who are participating as underwriters in a firm commitment underwriting of
municipal securities where the Distributor is also a member of the selling
syndicate. The Board of Directors of the Fund has adopted a policy pursuant to
Rule 10f-3 under the 1940 Act governing such purchases. The purchase of such
municipal securities shall only be made pursuant to the requirements of Rule
10f-3 and the policies adopted by the Board of Directors of the Fund.
The Board of Directors of the Fund has also adopted a policy pursuant to Rule
17a-7 under the Investment Company Act of 1940 which allows certain principal
transactions between certain remote affiliates of the Fund and the Fund and
between Portfolios of the Fund. These transactions will only be effected in
accordance with the provisions of Rule 17a-7 under the Investment Company Act of
1940 and are further restricted by the policies adopted by the Board of
Directors pursuant thereto.
Page 12
<PAGE>
Distributor
- -----------
Kirkpatrick Pettis serves as distributor and principal underwriter for the Fund
pursuant to a Distribution Agreement and a Rule 12b-1 Plan. Kirkpatrick Pettis
bears all expenses of providing distribution services pursuant to the
Distribution Agreement. Kirkpatrick Pettis provides for the preparation of
advertising or sales literature and bears the cost of printing and mailing
prospectuses to persons other than shareholders. The Fund bears the cost of
qualifying and maintaining the qualification of Fund shares for sale under the
securities laws of the various states and the expense of registering their
shares with the Securities and Exchange Commission. For its services under the
Distribution Agreement, Kirkpatrick Pettis receives a fee, payable monthly, at
the annual rate of 0.25% of average daily net assets of the shares of each
Portfolio. This fee is accrued daily as an expense of each Portfolio.
Kirkpatrick Pettis may enter into related selling group agreements with various
broker-dealer firms that provide distribution services to investors. Kirkpatrick
Pettis does not currently compensate firms for sales of shares of the Fund but
may elect to pay such compensation solely from its assets. Kirkpatrick Pettis
may, from time to time, pay additional commissions or promotional incentives to
firms that sell shares of the Fund. In some instances, such additional
commissions, fees or other incentives may be offered only to certain firms that
sell or are expected to sell during specified time periods certain minimum
amounts of shares of the Fund, or of other funds distributed by Kirkpatrick
Pettis.
Banks and other financial services firms may provide administrative services to
facilitate transactions in shares of the Fund for their clients, and Kirkpatrick
Pettis may pay them a fee up to the level of the distribution fee allowable as
described above. Banks currently are prohibited under the Glass-Steagall Act
from providing certain underwriting or distribution services. If the
Glass-Steagall Act should prevent banking firms from acting in any capacity or
providing any of the described services, management will consider what action,
if any, is appropriate in order to provide efficient services for the Fund.
Banks or other financial services firms may be subject to various state laws
regarding the services described above and may be required to register as
dealers pursuant to state law. The Fund does not believe that a termination of a
relationship with a bank would result in any material adverse consequence to the
Fund.
Since the Distribution Agreement provides for fees that are used by Kirkpatrick
Pettis to pay for distribution services, the Distribution Agreement along with
the related selling agreements is approved and reviewed in accordance with the
Fund's Rule 12b-1 Plan under the 1940 Act, which regulates the manner in which
an investment company may, directly or indirectly, bear the expenses of
distributing its shares.
PURCHASE OF SHARES
General
- -------
Kirkpatrick Pettis acts as the principal distributor of the Fund's shares. The
Portfolios' shares may be purchased at the net asset value per share from
registered representatives of Kirkpatrick Pettis and from certain other
broker-dealers who have sales agreements with Kirkpatrick Pettis. The address of
Kirkpatrick Pettis is that of the Fund. Shareholders will receive written
confirmation of their purchases. Stock certificates will not be issued.
Kirkpatrick Pettis reserves the right to reject any purchase order. Shares of
the Portfolios are offered to the public without a sales charge at the net asset
value per share next determined following receipt of an order by Kirkpatrick
Pettis. See "Valuation of Shares."
Page 13
<PAGE>
Investors may purchase shares by completing the Purchase Application included in
this Prospectus and submitting it with a check payable to:
KPM FUNDS, Inc.
10250 Regency Circle
Omaha, Nebraska 68114
For subsequent purchases, the name of the account and the account number should
be included with any purchase order to properly identify your account. Payment
for shares may also be made by bank wire. To do so, the investor must direct his
or her bank to wire immediately available funds directly to the Custodian as
indicated below:
1. Telephone the Fund (402) 397-5777 or (800) 776-5777 and furnish the
name, the account number and the telephone number of the investor as
well as the amount being wired and the name of the wiring bank. If a
new account is being opened, additional account information will be
requested and an account number will be provided.
2. Instruct the bank to wire the specific amount of immediately
available funds to the Custodian. The Fund will not be responsible
for the consequences of delays in the bank or Federal Reserve wire
system. The investor's bank must furnish the full name of the
investor's account and the account number.
The wire should be addressed as follows:
FIRST NATIONAL BANK OF OMAHA
Omaha, Nebraska
Fund Department, ABA #104000016
Omaha, Nebraska 68102
For Account #11090200
Final Credit to: KPM Funds, Inc.
3. If this wire transfer represents an initial purchase, complete a
Purchase Application and mail it to the Fund. The completed Purchase
Application must be received by the Fund before subsequent
instructions to redeem Fund shares will be accepted. Banks may impose
a charge for the wire transfer of funds.
Minimum Investments
- -------------------
A minimum initial aggregate investment of $25,000 is required, except in certain
limited situations. All investments must be made through your Kirkpatrick Pettis
investment executive or other broker-dealer.
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<PAGE>
REDEMPTION OF SHARES
Redemption Procedure
- --------------------
Shares of the Portfolios, in any amount, may be redeemed at any time at their
current net asset value next determined after a request in good order is
received by Kirkpatrick Pettis. To redeem shares of the Portfolios, an investor
must make a redemption request through a Kirkpatrick Pettis investment executive
or other broker-dealer. If the redemption request is made to a broker-dealer
other than Kirkpatrick Pettis, such broker-dealer will wire a redemption request
to Kirkpatrick Pettis immediately following the receipt of such a request. A
redemption request will be considered to be in "good order" if made in writing
and accompanied by the following:
1. A letter of instruction or stock assignment specifying the number or
dollar value of shares to be redeemed, signed by all the owners of
the shares in the exact names in which they appear on the account, or
by an authorized officer of a corporate shareholder indicating the
capacity in which such officer is signing;
2. A guarantee of the signature of each owner by an eligible institution
which is a participant in the Securities Transfer Agent of the
Medallion Program, which includes many U.S. commercial banks and
members of recognized securities exchanges; and
3. Other supporting legal documents, if required by applicable law, in
the case of estates, trusts, guardianships, custodianships,
corporations and pension and profit-sharing plans.
Payment of Redemption Proceeds
- ------------------------------
Normally, the Fund will make payment for all shares redeemed within five
business days, but in no event will payment be made more than seven days after
receipt by Kirkpatrick Pettis of a redemption request in good order. However,
payment may be postponed or the right of redemption suspended for more than
seven days under unusual circumstances, such as when trading is not taking place
on the New York Stock Exchange. Payment of redemption proceeds may also be
delayed until the check used to purchase the shares to be redeemed has cleared
the banking system, which may take up to 15 days from the purchase date. A
shareholder may request that the Fund transmit redemption proceeds by Federal
Funds bank wire to a bank account designated by the shareholder, provided such
bank wire redemptions are in the amounts of $500 or more and all requisite
account information is provided to the Fund.
Involuntary Redemption
- ----------------------
The Fund reserves the right to redeem a shareholder's account at any time the
net asset value of the account falls below $5,000 as the result of a redemption
or transfer request. Shareholders will be notified in writing that the value of
their account is less than $5,000 and will be allowed 30 days to make additional
investments before the redemption is processed.
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<PAGE>
Systematic Withdrawal
- ----------------------
Investors who own shares of the Fund with a value of $50,000 or more may elect
to redeem a portion of their shares on a regular periodic (monthly, quarterly or
annual) basis. A withdrawal plan may be established by delivering a completed
withdrawal plan application (available from Kirkpatrick Pettis) to the Fund. The
withdrawal plan may be terminated at any time by written notice to the Fund.
VALUATION OF SHARES
The Portfolios determine their net asset value on each day the New York Stock
Exchange (the "Exchange") is open for business, provided that the net asset
value need not be determined for a Portfolio on days when no Portfolio shares
are tendered for redemption and no order for Portfolio shares is received. The
calculation is made as of the close of business of the Exchange (currently 4:00
p.m., New York time) after the Portfolios have declared any applicable
dividends.
The net asset value per share for each of the Portfolios is determined by
dividing the value of the securities owned by the Portfolio plus any cash and
other assets (including interest accrued and dividends declared but not
collected) less all liabilities by the number of Portfolio shares outstanding.
For the purposes of determining the aggregate net assets of the Portfolios, cash
and receivables will be valued at their face amounts. Interest will be recorded
as accrued and dividends will be recorded on the ex-dividend date. Securities
traded on a national securities exchange are valued at the last reported sale
price that day. Securities traded on a national securities exchange for which
there were no sales on that day, or on the NASDAQ National Market System and
securities traded on other over-the-counter markets for which market quotations
are readily available are valued at closing bid prices. Portfolio securities
underlying actively traded options will be valued at their market price as
determined above. The current market value of any exchange-traded option held by
a Portfolio is its last sales price on the exchange prior to the time when
assets are valued unless the bid price is higher or the asked price is lower, in
which event such bid or asked price is used. Lacking any sales that day, the
options will be valued at the mean between the current closing bid and asked
prices. Securities and other assets for which market prices are not readily
available are valued at fair value as determined in good faith by the Board of
Directors. With the approval of the Board of Directors, the Portfolios may
utilize a pricing service, bank, or broker-dealer experienced in such matters to
perform any of the above-described functions.
DIVIDENDS AND TAXES
Dividends
- ----------
All net investment income dividends and net realized capital gains distributions
with respect to the shares of either Portfolio will be payable in additional
shares of such Portfolio unless the shareholder notifies his or her Kirkpatrick
Pettis investment executive or other broker-dealer of an election to receive
cash. The taxable status of income dividends and/or net capital gains
distributions is not affected by whether they are reinvested or paid in cash.
Each of the Portfolios will pay dividends from net investment income to its
shareholders at least annually or as may be required to remain a regulated
investment company under the Internal Revenue Code (the "Code") and distribute
net realized capital gains, if any, to its shareholders on an annual basis. At
the present time, the Fund anticipates distributing net investment income
quarterly.
Page 16
<PAGE>
Taxes
The Portfolios will each be treated as separate entities for federal income tax
purposes. The Fund intends to qualify the Portfolios as "regulated investment
companies" as defined in the Code. Provided certain distribution requirements
are met, the Portfolios will not be subject to federal income tax on their net
investment income and net capital gains that they distribute to their
shareholders.
Shareholders subject to federal income taxation will receive taxable dividend
income or capital gains, as the case may be, from distributions, whether paid in
cash or received in the form of additional shares. Promptly after the end of
each calendar year, each shareholder will receive a statement of the federal
income tax status of all dividends and distributions paid during the year.
The Fund is subject to the backup withholding provisions of the Code and is
required to withhold income tax from dividends paid to a shareholder at a 20%
rate if such shareholder fails to furnish the Portfolio with a taxpayer
identification number or under certain other circumstances. Accordingly,
shareholders are urged to complete and return Form W-9 when requested to do so
by the Fund.
This discussion is only a summary and relates solely to federal tax matters.
Dividends may also be subject to state and local taxation. Shareholders are
urged to consult with their personal tax advisers.
GENERAL INFORMATION
Capital Stock
- -------------
The Fund is authorized to issue a total of one billion shares of common stock,
with a par value of $.00001 per share. Of these shares, the Fund's Articles of
Incorporation authorize the issuance of 50 million shares in each series
designated KPM Equity Portfolio shares and KPM Fixed Income Portfolio shares.
The Board of Directors is empowered under the Fund's Articles of Incorporation
to issue other shares of the Fund's common stock without shareholder approval or
to designate additional authorized but unissued shares for issuance by one or
more existing Portfolios.
All shares, when issued, will be fully paid and nonassessable and will be
redeemable and freely transferable. All shares have equal voting rights. They
can be issued as full or fractional shares. A fractional share has pro rata the
same rights and privileges as a full share. The shares possess no preemptive or
conversion rights.
As of September 15, 1995, Kirkpatrick Pettis controlled the Fund as a result of
its control of the voting power of 850,236.075 shares of the 2,067,832.519
shares outstanding owned through its 401K Profit Sharing Plan. As a result,
Kirkpatrick Pettis can elect all of the directors if such shares are voted on a
noncumulative basis and three out of the five directors if such shares are voted
on a cumulative basis.
Voting Rights
- --------------
Each share of the Portfolios has one vote (with proportionate voting for
fractional shares) irrespective of the relative net asset value of the Fund's
shares. On some issues, such as the election of directors, all shares of the
Fund, irrespective of series, vote together as one series. Cumulative voting in
the election of directors is authorized. This means that shareholders may
cumulate their shares by multiplying the number of shares they hold by the
number of directors and then allocate the result among one or more directors.
Page 17
<PAGE>
On an issue affecting only one Portfolio, the shares of the Portfolio vote as a
separate series. Examples of such issues would be proposals to (i) change the
Investment Advisory Agreement, (ii) change a fundamental investment restriction
pertaining to only one Portfolio or (iii) change a Portfolio's Distribution
Plan. In voting on the Investment Advisory Agreement or proposals affecting only
one Portfolio, approval of such an agreement or proposal by the shareholders of
one Portfolio would make that agreement effective as to that Portfolio whether
or not the agreement or proposal had been approved by the shareholders of the
Fund's other Portfolios.
Shareholders Meetings
- ---------------------
The Fund does not intend to hold annual or periodically scheduled regular
meetings of shareholders unless it is required to do so. Nebraska corporation
law requires only that the Board of Directors of a mutual fund convene
shareholder meetings when it deems appropriate.
In addition, the 1940 Act requires a shareholder vote for all amendments to
fundamental investment policies and restrictions, for all investment advisory
contracts and amendments thereto, and for all amendments to Rule 12b-l
distribution plans. Finally, the Fund's Articles of Incorporation provide that
shareholders also have the right to remove Directors upon two-thirds vote of the
outstanding shares and may call a meeting to remove a Director upon the
application of 10% or more of the outstanding shares. The Fund is obligated to
facilitate shareholder communications in this situation if certain conditions
are met.
Allocation of Income and Expenses
- ---------------------------------
The assets received by the Fund for the issue or sale of shares of the
Portfolios, and all income, earnings, profits, and proceeds thereof, subject
only to the rights of creditors, are allocated to the Portfolios, and constitute
the underlying assets of the Portfolios. The underlying assets of the Portfolios
are required to be segregated on the books of account, and are to be charged
with the expenses of the Portfolios and with a share of the general expenses of
the Fund. Any general expenses of the Fund not readily identifiable as belonging
to a particular series are allocated among all series based upon the relative
net assets of each series at the time such expenses were accrued.
Transfer Agent, Dividend Disbursing Agent and Custodian
- --------------------------------------------------------
First National Bank of Omaha, Omaha, Nebraska, serves as Custodian for the
Fund's portfolio securities and cash. The Administrator acts as Transfer Agent
and Dividend Disbursing Agent. In its capacity as Transfer Agent and Dividend
Disbursing Agent, the Administrator performs many of the clerical and
administrative functions for the Portfolios.
Reports to Shareholders
- -----------------------
The Fund will issue semi-annual reports, which will include a list of securities
owned by the Fund and financial statements which, in the case of the annual
report, will be examined and reported upon by the Fund's independent auditor.
Page 18
<PAGE>
Legal Opinion
- -------------
The legality of the shares offered hereby will be passed upon and an opinion
will be rendered by Cline, Williams, Wright, Johnson & Oldfather, 1900
FirsTier Bank Building, Lincoln, Nebraska 68508.
Auditors
- ----------
The Fund's auditors are KPMG Peat Marwick, LLP, Omaha, Nebraska, independent
certified public accountants.
Page 19
<PAGE>
TABLE OF CONTENTS
Introduction..............................1
Investment Objectives
and Policies .............................4
KPM Equity Portfolio ..................4
KPM Fixed Income Portfolio.............5
Special Investment Methods ...............6
Management...............................11
Purchase of Shares ......................13
Redemption of Shares ....................15
Valuation of Shares .....................16
Dividends and Taxes .....................16
General Information .....................17
No dealer, sales representative or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus (and/or in the Statement of Additional Information referred to on the
cover page of this Prospectus), and, if given or made, such information or
representations must not be relied upon as having been authorized by KPM FUNDS,
Inc. or Kirkpatrick Pettis This Prospectus does not constitute an offer or
solicitation by anyone in any state in which such offer or solicitation is not
authorized or in which the person making such offer or solicitation is not
qualified to do so, or to any person to whom it is unlawful to make such offer
or solicitation.
INVESTMENT ADVISER
KPM Investment Management, Inc.
DISTRIBUTOR
Kirkpatrick Pettis
ADMINISTRATOR,
TRANSFER AGENT AND
DIVIDEND PAYING AGENT
SMITH HAYES Portfolio Lancaster Administrative
Management, Inc. Services, Inc.
CUSTODIAN
First National Bank of Omaha
Omaha, Nebraska
<PAGE>
KPM FUNDS, Inc.
[GRAPHIC OMITTED] 10250 Regency Circle, Omaha, NE 68114
1 ACCOUNT REGISTRATION
(Please Print)
In the case of two or more co-owners, the account will be registered "Joint
Tenants with Right of Survivorship" and not as "Tenants-in-common" unless
otherwise specified. For Trust, Corporation or other entity, complete the first
two lines exactly as the registration should appear. Include completed Corporate
Resolution or attach a coy of the Trust Agreement.
o Individual
- ---------------------------------------------------- o Jt. WROS
Name of Shareholder o Corporation
- ---------------------------------------------------- o Trust
Name of Co-Owner (if any) o UTMA
o Other
- ------------------------------------------------------------------------------
Street Address City State Zip Code
- -----------------------------Citizen of o U.S. o Other(specify)
- -------------------------------------------- -------------------------------
(Area Code) Home Telephone (Area Code) Business Telephone
2 INVESTOR INFORMATION
(This Section Must be Completed)
My(Our) investment objective(s) is(are):
o Income o Capital Preservation o Capital Appreciation
o Tax-Free o Other--------
Estimated Income (current tax year in thousands):
o Under $25 o $25-$50 o $50-$100 o $100-$200
o Over $200 Tax Bracket --------%
Approximate Net Worth (in thousands):
o Under $50 o $50-$100 o $100-$500 o $500-$1,000 o Over $1,000
Occupation(s):------------------------------------------------------------
Employer(s) name and address-----------------------------------------------
Source of funds for this purchase------------------------------------------
I am an associate person of an NASD member firm o No o Yes----------
Name and Address of Firm
3 INVESTMENT AND DIVIDEND SELECTION
(One must be checked)
In accordance with the terms and conditions set forth in this form, the current
prospectus, and my instructions below, I wish to establish a Shareholder Account
in the designated portfolio(s) as follows:
KPM FUNDS Investment Dividends & Dividends Dividends
Capital Gains Paid & Capital Gains
Reinvested Paid
o Equity Portfolio $ --------- o o o
o Fixed Income Portfolio $---------- o o o
(Note: Dividends and capital gains will be reinvested if no election is made.)
4 SIGNATURE AND TAX NUMBER CERTIFICATION
I have read this application and have had the opportunity to read the prospectus
and agree to all their terms. In addition, I authorize the instructions in this
application. I have been given the opportunity to ask any questions I have
regarding this investment, and they have been answered to my satisfaction. I
understand the investment objective(s) of the KPM Funds for which I am applying
and believe it is compatible with my investment objective(s). I understand that
exchanges between funds are taxable transactions. I certify under penalties of
perjury (check the appropriate response):
o (1) that the Social Security or taxpayer identification number shown in
Section 1 is correct and that the IRS has never notified me that I am
subject to backup withholding, or has notified me that I am no longer
subject to such backup withholding; or
o (2) I have not been issued a taxpayer identification number but have
applied for such number, or intend to apply for such number in the near
future. I understand that if I do not provide a correct taxpayer
identification number to the Fund within 60 days from the date of this
certification, backup withholding as described in the Fund's prospectus
will commence; or
o (3) I am subject to backup withholding.
Sign below exactly as your name appears in Section 1. For joint registration,
all owners must sign.
X X
----------------------------------- -----------------------------------------
Signature of Shareholder Date Signature of Co-Owner (if any) Date
or Authorized Officer (if corporation)
TO BE COMPLETED BY SELLING FIRM
(We hereby authorize KPM Funds, Inc. as our agent in connection
with transactions under this authorization form. We guarantee
the shareholder's signature.)
- ------------------------------------- -----------------------------------------
Dealer Name (Please Print) Signature of Registered Representative
- ------------------------------------- -----------------------------------------
Home Office Address Address of Office Serving Account
- ------------------------------------- -----------------------------------------
City State Zip Code City State Zip Code
- ------------------------------------- -----------------------------------------
Authorized Signature of Dealer Branch No.Reg.Rep. No. Reg. Rep. Last Name
<PAGE>
KPM FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION
October 16, 1995
Table of Contents
Page
Investment Policies and Restrictions....................................... 1
Directors and Executive Officers........................................... 6
Investment Advisory and Other Services..................................... 7
Distribution Plan.......................................................... 9
Portfolio Transactions and Brokerage Allocations........................... 11
Capital Stock and Control.................................................. 13
Net Asset Value and Public Offering Price.................................. 15
Purchase of Shares......................................................... 15
Redemption................................................................. 15
Tax Status................................................................. 16
Calculations of Performance Data........................................... 16
Financial Statements....................................................... 18
Auditors................................................................... 18
Appendix A - Ratings of Corporate Obligations,
Commercial Paper and Preferred Stock.................................A-1
This Statement of Additional Information is not a prospectus. This
Statement of Additional Information relates to the Prospectus dated October 16,
1995, and should be read in conjunction therewith. A copy of the Prospectus may
be obtained from the Fund or Kirkpatrick, Pettis, Smith, Polian Inc. at 10250
Regency Circle, Omaha, Nebraska 68114.
<PAGE>
INVESTMENT POLICIES AND RESTRICTIONS
The shares of KPM Funds, Inc. (the "Fund") are offered in series. This
Statement of Additional Information relates to the series designated: KPM Equity
Portfolio and KPM Fixed Income Portfolio (sometimes referred to herein as a
"Portfolio" or, collectively, as the "Portfolios"). The investment objectives
and policies of the Portfolios are set forth in the Prospectus. Certain
additional investment information is set forth below.
Investment Restrictions
- -----------------------
In addition to the investment objectives and policies set forth in the
Prospectus, the Fund and each of the Portfolios is subject to certain investment
restrictions, as set forth below, which may not be changed without the vote of a
majority of the Portfolio's outstanding shares. "Majority," as used in the
Prospectus and in this Statement of Additional Information, means the lesser of
(a) 67% of the Portfolio's outstanding shares voting at a meeting of
shareholders at which more than 50% of the outstanding shares are represented in
person or by proxy or (b) a majority of the Portfolio's outstanding shares.
Similar shareholder approval is required to change the investment
objective of each of the Portfolios. The following discussion provides
fundamental investment restrictions for all Portfolios, non-fundamental policies
for all Portfolios, and then, for each Portfolio, a statement of its investment
objective, a description of its investment restrictions that are matters of
fundamental policy specifically for it and a description of any investment
restrictions that may be changed without shareholder approval. For purposes of
the investment restrictions, all percentage and rating limitations apply at the
time of acquisition of a security, and any subsequent change in any applicable
percentage resulting from market fluctuations or in a rating by a rating service
will not require elimination of any security from the Portfolio. Unless
specifically identified as a matter of fundamental policy, each investment
policy discussed in the Prospectus or the Statement of Additional Information is
not fundamental and may be changed by the Portfolio's Board of Directors.
As fundamental policies, unless otherwise specified below, none of the
Portfolios will:
1. Invest more than 5% of the value of their total assets in the
securities of any one issuer (other than securities of the U.S.
Government, its agencies or instrumentalities).
2. Purchase more than 10% of any class of securities of any one issuer
(taking all preferred stock issues of an issuer as a single class
and all debt issues of an issuer as a single class) or acquire more
than 10% of the outstanding voting securities of an issuer. In the
aggregate, the Fund may not own more than 15% of all classes of
securities or more than 10% of the outstanding voting securities of
an issuer.
<PAGE>
3. Invest 25% or more of the value of their total assets in the
securities of issuers conducting their principal business
activities in any one industry. This restriction does not apply
to securities of the U.S. Government or its agencies and
instrumentalities and repurchase agreements relating thereto.
The various types of utilities companies, such as gas, electric
and telephone and telegraph are considered as separate
industries.
4. Issue any senior securities as defined in the Investment Company
Act of 1940, as amended ("1940 Act") except as otherwise excepted
or excluded by Section 18(g) of the 1940 Act or as permitted by
Investment Company Act Release No. 10666.
5. Borrow money except from banks for temporary or emergency
purposes. The amount of such borrowing may not exceed the
lesser of (1) 10% of the value of the Portfolio's total assets
or (2) 5% of the value of the Portfolio's total assets less
liabilities other than such borrowings. None of the Portfolios
will purchase securities while outstanding borrowings exceeds 5%
of the value of the Portfolio's total assets. None of the
Portfolios will borrow money for leverage purposes.
6. Make short sales of securities or maintain a short position, except
that short sales against the box shall not be deemed short sales.
7. Purchase any securities on margin except to obtain such
short-term credits as may be necessary for the clearance of
transactions.
8. Purchase or retain the securities of any issuer if, to the
Portfolio's knowledge, those officers or directors of the Fund or
its affiliates or of its investment adviser who individually own
beneficially more than 0.5% of the outstanding securities of such
issuer, together own more than 5% of such outstanding securities.
9. Purchase or sell commodities or commodity futures contracts, except
that the Portfolios may purchase stock and bond index options,
financial futures contracts and options on such contracts.
10. Purchase or sell real estate or real estate mortgage loans, except
that the Portfolios may invest in securities secured by real estate
or interests therein or issued by companies that invest in real
estate or interests therein.
11. Purchase or sell oil, gas or other mineral leases, rights or
royalty contracts, except that the Portfolios may purchase or sell
securities of companies investing in the foregoing.
12. Participate on a joint or a joint and several basis in any
securities trading account (as prohibited by Section 12(a)2 of the
Investment Company Act of 1940) except as permitted by 16 below.
<PAGE>
13. Underwrite securities of other issuers, except that the Portfolio
may acquire portfolio securities under circumstances where if sold
the Portfolio might be deemed an underwriter for purposes of the
Securities Act of 1933.
14. Invest more than 10% of their net assets in restricted securities
or more than 10% of their net assets in repurchase agreements with
a maturity of more than seven days, and other liquid assets, such
as securities with no readily available market quotation. The value
of any options purchased in the over-the-counter market are deemed
to be illiquid.
15. Invest more than 5% of their total assets at the time of purchase
in rights and/or warrants (other than those that have been acquired
in units or attached to other securities).
16. Make loans, except that the Portfolios may (1) purchase and hold
debt obligations in accordance with their investment objective
and policies, (ii) enter into repurchase agreements, and (iii)
lend portfolio securities without limitation against collateral
(consisting of cash or securities issued or guaranteed by the
United States Government or its agencies or instrumentalities)
equal at all times to not less than 100% of the value of the
securities loaned.
The Fund has also adopted the following restrictions for each of the
Portfolios which are not fundamental policies and may be changed without
shareholder approval. The Portfolios shall not:
(1) Invest in warrants that are not listed on the New York or American
Stock Exchange in excess of 2% of the Portfolio's total assets.
(2) Invest more than 20% of their total assets in securities of
foreign issuers.
(3) Invest more than 5% of their total assets in the purchase of
covered spread options and the purchase of put and call options on
securities, securities indices and financial futures contracts.
Options on financial futures contracts and options on securities
indices will be used solely for hedging purposes; not for
speculation.
(4) Invest more than 5% of their assets in initial margin and premiums
on financial futures contracts and options on such contracts.
(5) Invest in arbitrage transactions.
(6) Invest in real estate limited partnership interests.
(7) Invest in companies for the purpose of exercising control or
management.
(8) Purchase the securities of other investment companies except as
provided by Section 12(d)(1) of the Investment Company Act of 1940.
<PAGE>
(9) Invest more than 5% of the value of their total assets in the
securities of any issuers which, with their predecessors, have a
record of less than three years' continuous operation. (Securities
of such issuers will not be deemed to fall within this limitation
if they are guaranteed by an entity in continuous operation for
more than three years. The value of all securities issued or
guaranteed by such guarantor and owned by a Portfolio shall not
exceed 10% of the value of the total assets of such Portfolio.)
(10) Mortgage, pledge or hypothecate their assets except in an amount
not exceeding 15% of the value of their total assets to secure
temporary or emergency borrowing. For purposes of this policy,
collateral arrangements for margin deposits on futures contracts or
with respect to the writing of options are not deemed to be a
pledge of assets.
(11) Lend Portfolio securities when the value of securities subject to
such transactions and the value of the securities to be loaned
would exceed 5% of the total asset value of the Portfolio.
KPM Equity Portfolio - Investment Objective and Policies
- --------------------------------------------------------
The investment objective of the KPM Equity Portfolio is capital
appreciation. In seeking to achieve this objective, the Adviser's investment
philosophy is to follow a value analysis utilizing fundamental considerations to
identify companies that are either large companies (market capitalizations in
excess of $1 billion) or small to medium capitalization companies (market
capitalizations between $100 million and $1 billion) which are selling at
current prices substantially below what the Adviser believes to be a fair market
price. Determinations of value are not made based upon market movement but are
achieved from the Adviser's analysis of past earnings, future earnings
projections, return on equity, strength and vision of management, price to
earnings ratios and other factors. The Adviser views "long-term fundamental
value" of a company as the value of a company based upon: (1) the level of
earnings and profitability in the employment of the company's assets as
distinguished from currently reported earnings (which may be and frequently are
distorted by transient influences); (2) dividends actually paid or the capacity
to pay such dividends currently and in the future; (3) a realistic expectation
about the company's historical and projected growth of earning power, and; (4)
stability and predictability of these quantitative and qualitative projections
of the future economic value of the company.
In selecting equity securities, KPM Equity Portfolio uses a conservative,
fundamental, value selection process. KPM Equity Portfolio employs a "bottom-up"
approach to stock selection. The Adviser uses computer and manual screens of a
large number of publicly-held securities looking for specific balance sheet,
return on investment and valuation criteria. These lists are further reduced
through more in-depth company and industry analysis as well as contacts with
company management. KPM Equity Portfolio looks for above-average quality
companies as evidenced by a strong balance sheet, current or expected high
return on equity and expected growth in excess of the rate of inflation. The
Adviser considers purchase when these companies are selling for low relative
price/earnings ratios. Other valuation criteria such as price/book value,
price/sales per share, price/cash flow per share and current yield are
considered. Target purchase/sale prices are based on analytical judgements of
objective relative price/earnings ratios
<PAGE>
and current earning power (or normalized earnings) of the company. Since such
target prices are based on relative price/earnings ratios (relative to the
Standard & Poor's 400 average) these target prices are adjusted as the overall
market changes or when estimates of normalized earnings change. The Adviser
considers selling companies as securities achieve their target price or when
there is a fundamental change in the company's business prospects or other
investment criteria.
KPM Fixed Income Portfolio - Investment Objective and Policies
- --------------------------------------------------------------
The investment objective of the KPM Fixed Income Portfolio is to provide a
high level of total return over a market cycle of 3 to 5 years, consistent with
the preservation of capital and prudent investment risk. In seeking to achieve
this objective, the Adviser intends to invest in debt obligations of the U.S.
Government, its agencies and instrumentalities, and corporate bonds rated BBB or
better by Standard & Poor's or Baa or better by Moody's Investors Service. See
Appendix A for a description of ratings. In pursuit of this objective, the
Adviser seeks to identify fixed income securities which provide above-average
relative yield, appreciation potential and safety of principal. Particular
emphasis is placed on credit analysis of corporate issuers to enhance income
return and protect against credit losses. The potential for capital appreciation
is balanced with the need for capital preservation and stability of income.
This Portfolio will invest in marketable, fixed income securities with
investment grade ratings. These include government obligations, corporate debt
and mortgage backed securities such as mortgage pass-through certificates and
collateralized mortgage obligations (CMO's) issued by government sponsored
agencies and mortgage banking companies. Additional investments may also include
dividend paying preferred stocks, non-investment grade corporate debt, municipal
bonds and various money market instruments.
Repurchase Agreements
- ---------------------
Both of the Portfolios may invest in repurchase agreements on U. S.
Government Securities. The Portfolios' Custodian will hold the securities
underlying any repurchase agreement or such securities will be part of the
Federal Reserve Book Entry System. The market value of the collateral underlying
the repurchase agreement will be determined on each business day. If at any time
the market value of the collateral falls below the repurchase price of the
repurchase agreement (including any accrued interest), the respective Portfolio
will promptly receive additional collateral so that the total collateral is an
amount at least equal to the repurchase price plus accrued interest.
Portfolio Turnover
- ------------------
Portfolio turnover is the ratio of the lesser of annual purchases or sales
of portfolio securities to the average monthly value of portfolio securities,
not including short-term securities maturing in less than 12 months. A 100%
portfolio turnover rate would occur, for example, if the lesser of the value of
purchases or sales of portfolio securities for a particular year were equal to
the average monthly value of the portfolio securities owned during such year.
For the period ending June 30, 1995, the portfolio turnover rate for KPM equity
Portfolio and KPM Fixed Income Portfolio was 27.90% and 40.34% respectively. The
Fund does not expect the turnover rate for the KPM Equity Portfolio to exceed
50% and the KPM Fixed Income Portfolio to exceed 50% this year. The turnover
rate will not be a limiting factor when management deems portfolio changes
appropriate.
<PAGE>
Any investment restriction or limitation referred to above or in the
Prospectus, except the borrowing policy, which involves a maximum percentage of
securities or assets, shall not be considered to be violated unless an excess
over the percentage occurs immediately after an acquisition of securities or
utilization of assets and results therefrom.
DIRECTORS AND EXECUTIVE OFFICERS
The names, addresses and principal occupations during the past five years
of the directors and executive officers of the Fund are as follows:
Name, Position with Fund and Address Principal Occupation Last Five Years
- ----------------------------------- -----------------------------------
*Randall D. Greer, Chairman, Director Director, President and Chief
Executive Officer, KPM Investment
Management, Inc., Omaha, Nebraska
(March 1994-present)
Director, President and Chief
Operating Officer, Kirkpatrick,
Pettis, Smith, Polian Inc., Omaha,
Nebraska (December 1988-February
1994)
*Rodney D. Cerny, President and Director Executive Vice President, KPM
Investment Management, Inc., Omaha,
Nebraska (March 1994-present)
First Vice President (1987-1990),
Executive Vice President and Chief
Investment Officer (1990-Present),
Kirkpatrick, Pettis, Smith, Polian
Inc., Omaha, Nebraska
Donald L. Stroh, Director Retired; Superintendent of Schools,
6616 Stratford Circle Millard, Nebraska Public Schools
Omaha, Nebraska 68137 (1955-1989)
William G. Campbell, Director Attorney - private practice (1993-
P.O. Box 51, present); Partner Roger & Wells
3239 Wolf Lake Road (attorneys),New York City, New York
Ely, MN 55731 (1991-1993); Partner Kutak Rock &
Campbell (attorneys), Omaha,
Nebraska (1965-1991)
Herbert H. Davis, Jr., Director Owner, Miracle Hill Golf & Tennis
1401 North 120th Street Center; President - Legacy Golf,
Omaha, NE 68154 Omaha, Nbraska
<PAGE>
Thomas J. Sudyka, Jr., Vice President Vice President, Analyst and
Portfolio Manager, KPM Investment
Management,Inc. Omaha, Nebraska
(March 1994-present)
Vice President, Analyst and
Portfolio Manager, Kirkpatrick,
Pettis, Smith, Polian Inc., Omaha,
Nebraska (1993-present); Investment
Officer (1992-1993)and Securities
Analyst (1989-1992) Invista Capital
Management, Des Moines, Iowa
Scott C. Hoyt, Secretary Executive Vice President, General
Counsel and Secretary, Kirkpatrick,
Pettis, Smith, Polian Inc., Omaha,
Nebraska (January 1995-Present),
General Counsel Financial Services-
Mutual of Omaha, Omaha, Nebraska
(1988-January 1995)
Jeffrey N. Sime, Treasurer Vice President,Treasurer, Accounting
Manager and Internal Controller,
Kirkpatrick, Pettis, Smith, Polian
Inc.,Omaha, Nebraska (1993-present);
Audit Supervisor, Peter Kiewit Sons,
Inc., Omaha, Nebraska (1990-1993);
Controller, The Stuart James
Company, Denver, Colorado(1986-1990)
The addresses of the directors and officers of the Fund are that of the Fund
unless otherwise indicated.
*Interested directors of the Fund by virtue of their affiliation with KPM
Investment Management, Inc.
The following table represents the compensation amounts received for services as
a director of the Fund:
Aggregate Total
Compensation Pension or Compensation
Name & Position from the Fund Retirement* from the Fund
Randall D. Greer, Chairman, $0 $0 $0
Director
Rodney D. Cerny, President, $0 $0 $0
Director
Donald L. Stroh, Director $800 $0 $800
William G. Campbell, Director $800 $0 $800
Herbert H. Davis, Jr., Director $800 $0 $800
* Benefits Accrued as part of the Fund's Expenses
INVESTMENT ADVISORY AND OTHER SERVICES
General
- -------
The investment adviser for the Portfolios is KPM Investment Management,
Inc. (the "Adviser" or "KPM"). Lancaster Administrative Services, Inc. acts
as the administrator ("Administrator") and Kirkpatrick, Pettis, Smith, Polian
Inc. ("KPSP") acts as the Fund's distributor ("Distributor"). The Adviser,
the Administrator and the Distributor will act as such pursuant to written
agreements which will be periodically approved by the directors and/or the
shareholders of the Fund. The Adviser's and the Distributor's address is the
same as the Fund's.
Control of the Adviser and the Distributor
- -----------------------------------------
The Adviser is a wholly owned subsidiary of KPSP, a Nebraska corporation.
KPSP is a wholly owned subsidiary of Mutual of Omaha Insurance Company, a mutual
insurance company organized under Nebraska law and engaged in the business of
providing life, health, accident and related insurance products throughout the
United States.
Investment Advisory Agreements and Administration Agreement
- -----------------------------------------------------------
KPM acts as the investment adviser to the Fund and the Portfolios under an
Investment Advisory Agreement ("Advisory Agreement"). The Advisory Agreement has
been approved by the Board of Directors (including a majority of the directors
who are not parties to the Advisory Agreement, or interested persons of any such
party, other than as directors of the Fund). The Advisory Agreement for all
Portfolios was approved by the shareholders on April 15, 1994. The Advisory
Agreement was last approved by the Board of Directors on July 17, 1995.
The Advisory Agreement terminates automatically in the event of its
assignment. In addition, the Advisory Agreement is terminable at any time with
respect to a Portfolio, without penalty, by the Board of Directors of the Fund,
by vote of a majority of the affected Portfolio's outstanding voting securities
on 60 days' written notice to the Adviser, and by the Adviser on 60 days'
written notice to the Fund. Unless sooner terminated, the Advisory Agreement
shall continue in effect for more than two years after its execution only so
long as such continuance is specifically approved at least annually by either
the Board of Directors or by a vote of a majority of the outstanding voting
securities of the Portfolio, provided that in either event such continuance is
also approved by a vote of a majority of the directors who are not parties to
such agreement, or interested persons of such parties, cast in person at a
meeting called for the purpose of voting on such approval. If a majority of the
outstanding voting securities of any of the Portfolios approves the Advisory
Agreement, the Advisory Agreement shall continue in effect with respect to such
approving Portfolio whether or not the shareholders of any other Portfolio
approve such Advisory Agreement.
<PAGE>
Pursuant to the Advisory Agreement, the Fund pays the Adviser a monthly
advisory fee equal on an annual basis to .80% of the KPM Equity Portfolio's
average daily net assets. The Fund pays the Adviser a monthly advisory fee equal
on an annual basis to .60% of the KPM Fixed Income Portfolio's average daily net
assets. The Advisory Agreement also provides that the Adviser shall reimburse
the Portfolios monthly to the extent of the advisory fee paid, for annual
expenses of the Portfolios exceeding 1.5% of the average daily net assets for
the KPM Equity Portfolio and 1.25% of the average daily net assets for the KPM
Fixed Income Portfolio.
Under the Advisory Agreement, the Adviser provides each Portfolio with
advice and assistance in the selection and disposition of that Portfolio's
investments. All investment decisions are subject to review by the Board of
Directors of the Fund. The Adviser is obligated to pay the salaries and fees of
any affiliates of the Adviser serving as officers or directors of the Fund.
Under the Advisory Agreement, the Adviser has agreed to reimburse the Portfolios
monthly to the extent of the advisory fee paid if annual total expenses exceed
1.50% of the Equity Portfolio's and 1.25% of the Fixed Income Portfolio's
average annual net assets. At June 30, 1995, the Adviser had reimbursed the
Portfolios $10,855 and $8,315, respectively, for expenses.
Pursuant to the Administration Agreement, the Administrator acts as
transfer agent and provides, or contracts with others to provide, to the Fund
all necessary bookkeeping and shareholder recordkeeping services and share
transfer services. Under the Administration Agreement, the Administrator
receives an administration fee, computed separately for each Portfolio and paid
monthly, at an annual rate of .25% of the daily average net assets of the
Portfolios. The Administration Agreement further provides that the annual fee in
any event shall not be less than $10,000 in the aggregate for all Portfolios.
For the period July 5, 1994 to June 30, 1995, the Fund paid to the Adviser
and the Administrator the following amounts for advisory and administrative
services as indicated:
Advisory Fee Administrative Fee
Equity Portfolio $77,104 $24,095
Fixed Income Portfolio 16,101 6,709
The laws of certain states require that if a mutual fund's expenses
(including advisory fees but excluding interest, taxes, brokerage commissions
and extraordinary expenses) exceed certain percentages of average net assets,
the Fund must be reimbursed for such excess expenses. The Fund does not believe
it will be subject to any such restrictions.
<PAGE>
Custodian
- ----------
The Custodian for the Fund and each of the Portfolios is First National
Bank of Omaha ("FNB"), 1620 Dodge Street, Omaha, Nebraska 68102. FNB, as
Custodian, holds all of securities and cash owned by the Portfolios.
DISTRIBUTION PLAN
-----------------
Rule 12b-1(b) under the 1940 Act provides that any payments made by the
Portfolios in connection with financing the distribution of their shares may
only be made pursuant to a written plan describing all aspects of the proposed
financing of distribution, and also requires that all agreements with any person
relating to the implementation of the plan must be in writing. Because some of
the payments described below to be made by the Portfolios are distribution
expenses within the meaning of Rule 12b-1, the Fund has entered into a
Distribution Agreement with the Distributor pursuant to a Distribution Plan
adopted in accordance with such Rule.
In addition, Rule 12b-1(b)(1) requires that such plan be approved by a
majority of a Portfolio's outstanding shares, and Rule 12b-1(b)(2) requires that
such plan, together with any related agreements, be approved by a vote of the
Board of Directors who are not interested persons of the Fund and who have no
direct or indirect interest in the operation of the plan, cast in person at a
meeting for the purpose of voting on such plan or agreement. Rule 12(b)-1(b)(3)
requires that the plan or agreement provide, in substance:
(a) that it shall continue in effect for a period of more than one
year from the date of its execution or adoption only so long as such
continuance is specifically approved at least annually in the manner
described in paragraph (b)(2) of Rule 12b-1;
(b) that any person authorized to direct the disposition of moneys
paid or payable by the Fund pursuant to the plan or any related agreement
shall provide to the Fund's Board of Directors, and the directors shall
review, at least quarterly, a written report of the amounts so expended
and the purposes for which such expenditures were made; and
(c) in the case of a plan, that it may be terminated at any time by
a vote of a majority of the members of the Board of Directors of the Fund
who are not interested persons of the Fund and who have no direct or
indirect financial interest in the operation of the plan or in any
agreements related to the plan or by a vote of a majority of the
outstanding voting securities of a Portfolio.
Rule 12b-1(b)(4) requires that such a plan may not be amended to increase
materially the amount to be spent for distribution without shareholder approval
and that all material amendments to the plan must be approved in the manner
described in paragraph (b)(2) of Rule 12b-1.
Rule 12b-1(c) provides that the Fund may rely upon Rule 12b-1(b) only if
the selection and nomination of the Fund's disinterested directors are committed
to the discretion of such disinterested directors. Rule 12b-1(e) provides that
the Fund may implement or continue a plan pursuant to Rule 12b-1(b) only if the
directors who vote to approve such implementation or continuation conclude, in
the exercise of reasonable business judgment and in light of their fiduciary
duties under state law, and under Sections 36(a) and (b) of the 1940 Act, that
there is a reasonable likelihood that the plan will benefit the Fund and its
shareholders. The Fund has complied with the provisions of Rule 12b-1 and the
Board of Directors has concluded that there is a reasonable likelihood that the
Distribution Plan will benefit the Fund and its shareholders.
Pursuant to the provisions of the Distribution Plan, each of the
Portfolios pays a fee to the Distributor computed and paid monthly at an annual
rate of up to .25% of such Portfolio's average daily net assets in order to
reimburse the Distributor for its actual expenses incurred in the distribution
and promotion of such Portfolio's shares.
Expenses for which the Distributor will be reimbursed under the
Distribution Plan include, but are not limited to, compensation paid to
registered representatives of the Distributor and to broker-dealers which have
entered into sales agreements with the Distributor; expenses incurred in the
printing of prospectuses, statements of additional information and reports used
for sales purposes; expenses of preparation and printing of sales literature;
advertisement, promotion, marketing and sales expenses; and other
distribution-related expenses. Compensation will be paid out of such amounts to
investment executives of the Distributor and to broker-dealers which have
entered into sales agreements with the Distributor as follows. If shares of the
Portfolios are sold by a representative of a broker-dealer other than the
Distributor, that portion of the reimbursement which is attributable to shares
sold by such representative is paid to such broker-dealer. If shares of the
Portfolios are sold by an investment executive of the Distributor, compensation
will be paid to the investment executive by the Distributor in an amount not to
exceed that portion of .25% of the average daily net assets of the Portfolios
which is attributable to shares sold by such investment executive.
Under the Distribution Plan, the Fund paid the Distributor a total of
$30,816 for the period July 5, 1994 to June 30, 1995, allocated as follows:
Equity Portfolio $24,104
Fixed Income Portfolio 6,712
For the year ending June 30, 1995, KPSP has paid for the following:
Advertising $1,038.00
Printing & Mailing of Prospectuses 0.00
to new shareholders**
Compensation to Dealers 0.00
Compensation to Sales Personnel 29,889.81
Other Finance Charges 0.00
Other Fees 0.00
---------
TOTAL $30,927.81
** This expense has been paid by the Adviser to date.
<PAGE>
Under the Distribution Agreement, KPSP is the principal underwriter of the
Fund's shares and continuously distributes the shares on an agency best efforts
basis. In so doing, the Distributor may pay its representatives or others
additional amounts over the amounts paid under the Distribution Plan in
furtherance of distribution of the Fund's shares.
PORTFOLIO TRANSACTIONS AND BROKERAGE ALLOCATIONS
-----------------------------------------------
The Adviser is responsible for decisions to buy and sell securities for
the Portfolios, the selection of broker-dealers to effect the transactions and
the negotiation of brokerage commissions, if any. In placing orders for
securities transactions, the primary criterion for the selection of a
broker-dealer is the ability of the broker-dealer, in the opinion of the
Adviser, to secure prompt execution of the transactions on favorable terms,
including the reasonableness of the commission (if any) and considering the
state of the market at the time.
When consistent with these objectives, business may be placed with
broker-dealers, including the Distributor, who furnish investment research
and/or services to the Adviser. Such research or services include advice, both
directly and in writing, as to the value of securities; the advisability of
investing in, purchasing or selling securities; and the availability of
securities, or purchasers or sellers of securities; as well as analyses and
reports concerning issues, industries, securities, economic factors and trends,
portfolio strategy and the performance of accounts. This allows the Adviser to
supplement its own investment research activities and enables the Adviser to
obtain the views and information of individuals and research staffs of many
different securities firms prior to making investment decisions for the
Portfolios. To the extent portfolio transactions are effected with
broker-dealers who furnish research services to the Adviser, the Adviser may
receive a benefit, not capable of evaluation in dollar amounts, without
providing any direct monetary benefit to the Portfolios from these transactions.
The Adviser believes that most research services obtained by it generally
benefit several or all of the accounts which it manages, as opposed to solely
benefiting one specific managed fund or account. Normally, research services
obtained through managed funds or accounts investing in common stocks would
primarily benefit the managed funds or accounts which invest in common stock;
similarly, services obtained from transactions in fixed-income securities would
normally be of greater benefit to the managed funds or accounts which invest in
debt securities.
The Adviser has not entered into any formal or informal agreements with
any broker-dealers, nor does it maintain any "formula" which must be followed in
connection with the placement of any Portfolio's transactions in exchange for
research services provided the Adviser except as noted below. However, from time
to time the Adviser may elect to use certain brokers to execute transactions in
order to encourage them to provide the Adviser with research services which the
Adviser anticipates will be useful to it. The Adviser will authorize the
Portfolio to pay an amount of commission for effecting a securities transaction
in excess of the amount of commission another broker-dealer would have charged
only if the Adviser doing so determines in good faith that such amount of
commission is reasonable in relation to the value of the brokerage and research
services provided by such broker-dealer, viewed in terms of either that
particular transaction or the Adviser's overall responsibilities with respect to
the accounts as to which it exercises investment discretion.
<PAGE>
Agency transactions for the Portfolios may be effected through the
Distributor, as discussed in the Prospectus under "Management-Portfolio
Brokerage." In determining the commissions to be paid to the Distributor, it is
the policy of the Fund that such commissions, will, in the judgment of the
Adviser, subject to review by the Board of Directors, be both (a) at least as
favorable as those which would be charged by other qualified brokers in
connection with comparable transactions involving similar securities being
purchased or sold on a securities exchange during a comparable period of time,
(b) at least as favorable as commissions contemporaneously charged by the
Distributor on comparable transactions for its most favored comparable
unaffiliated customers, and (c) conform to the requirements of Rule 17e-1 under
the 1940 Act. While the Adviser does not deem it practicable and in the best
interest of the Portfolios to solicit competitive bids for commission rates on
each transaction, consideration will regularly be given to posted commission
rates as well as to other information concerning the level of commissions
charged on comparable transactions by other qualified brokers.
In certain instances, there may be securities which are suitable for the
Fund as well as for that of one or more of the advisory clients of the Adviser.
Investment decisions for the Portfolios and for such advisory clients are made
by the Adviser with a view to achieving their respective investment objectives.
It may develop that a particular security is bought or sold for only one client
of the Adviser even though it might be held by, or bought or sold for, other
clients. Likewise, a particular security may be bought for one or more clients
of one of the Adviser when one or more other clients are selling that same
security. Some simultaneous transactions are inevitable when several clients
receive investment advice from the same investment adviser, particularly when
the same security is suitable for the investment objectives of more than one
client. When two or more clients of the Adviser are simultaneously engaged in
the purchase or sale of the same security, the securities are allocated among
clients in a manner believed by the Adviser to be equitable to each (and may
result, in the case of purchases, in allocation of that security only to some of
those clients and the purchase of another security for other clients regarded by
the Adviser as a satisfactory substitute). It is recognized that in some cases
this system could have a detrimental effect on the price or volume of the
security as far as the Portfolio involved is concerned. At the same time,
however, it is believed that the ability of the Portfolio to participate in
volume transactions will sometimes produce better execution prices.
For the period ending June 30, 1995, the Fund paid $26,538 in brokerage
commissions, some of which was paid to the Fund's Distributor, allocated among
the Portfolios as follows:
7/5/94 - 6/30/95
-----------------
Equity $10,736
Fixed Income 260
During the period July 5, 1994 to June 30, 1995, $10,996, or 41%, was paid to
Kirkpatrick, Pettis, Smith, Polian Inc. the Fund's Distributor, which is an
affiliate of the Fund's adviser and the remaining brokerage commissions were
paid to 3 unaffiliated broker dealers. Of the aggregate dollar amount of
transactions involving payment of commissions, 60% were effected through the
Distributor during the period. It is the Fund's intent that brokerage
transactions executed through Kirkpatrick, Pettis, Smith, Polian Inc. be
effected pursuant to the Fund's Guidelines Regarding Payment of Brokerage
Commissions to Affiliated Persons adopted by the
<PAGE>
Board of Directors, including a majority of the non-interested directors
pursuant to Rule 17(e)-1 under the Investment Company Act of 1940.
Option Trading Limits
- ---------------------
The writing by the Portfolios of options on securities is subject to
limitations established by each of the registered securities exchanges on which
such options are traded. Such limitations govern the maximum number of options
in each class which may be written by a single investor or group of investors
acting in concert, regardless of whether the options are written on the same or
different securities exchanges or are held or written in one or more accounts or
through one or more brokers. Thus, the number of options which one Portfolio may
write may be affected by options written by the other Portfolios and by other
investment advisory clients of the Adviser. An exchange may order the
liquidation of positions found to be in excess of these limits, and it may
impose certain other sanctions. The Adviser believes it is unlikely that the
level of option trading by the Fund will exceed applicable limitations.
CAPITAL STOCK AND CONTROL
-------------------------
A complete description of the rights and characteristics of the Fund's
capital stock is included in the Prospectus.
The following table provides the name and address of any person who owns
of record or beneficially 5% or more of the outstanding shares of each Portfolio
as of September 15, 1995:
PORTFOLIO NAME AND ADDRESS SHARES % OWNERSHIP
- ---------- --------------------------------------- ----------- -----------
Equity Kirkpatrick, Pettis, Smith, Polian Inc. 766,237.260 54.38%
Portfolio 401k Profit Sharing Plan
10250 Regency Circle
Omaha, NE 68114
Kirkpatrick, Pettis Trust Company 270,315.706 19.18%
ELAD & Co. - Discretionary
10250 Regency Circle, 5th Flr.
Omaha, NE 68114
<PAGE>
Fixed Income Kirkpatrick, Pettis, Smith, Polian Inc. 83,998.815 12.75%
401k Profit Sharing Plan
10250 Regency Circle
Omaha, NE 68114
Kirkpatrick, Pettis Trust Company 221,589.970 33.63%
ELAD & Co. - Discretionary
10250 Regency Circle, 5th Flr.
Omaha, NE 68114
Southern California Water 52,513.593 7.97%
401k Plan
630 E. Foothill Blvd.
San Dimas, CA 91773
As of September 15, 1995, KPSP controlled the Fund as a result of its
control of the voting power of 850,236.075 shares of the 2,067,832.519 shares
outstanding owned through its 401k Profit Sharing Plan. As a result, KPSP can
elect all of the directors if such shares are voted on a noncumulative basis and
three out of the five directors if such shares are voted on a cumulative basis.
In addition, KPSP could ratify the selection of the Fund's accountants. On
matters affecting the Portfolios, KPSP could control the outcome or all matters
presented to the Equity Portfolio and the Fixed Income Portfolio.
The Director and officers of the Fund beneficially owned 95,967.984 shares
or 6.18% of the Equity Portfolio. Directors and officers owned 4.64% of the
shares outstanding in all Portfolios.
NET ASSET VALUE AND PUBLIC OFFERING PRICE
-----------------------------------------
The method for determining the public offering price of Portfolio shares
is summarized in the Prospectus in the text following the headings "Purchase of
Shares" and "Valuation of Shares." The net asset value of each Portfolio's
shares is determined on each day on which the New York Stock Exchange is open,
provided that the net asset value need not be determined on days when no
Portfolio shares are tendered for redemption and no order for Portfolio shares
is received. The New York Stock Exchange is not open for business on the
following holidays (or on the nearest Monday or Friday if the holiday falls on a
weekend): New Year's Day, Presidents' Day, Good Friday, Memorial Day, July 4th,
Labor Day, Thanksgiving and Christmas.
The portfolio securities in which each Portfolio invests fluctuate in
value, and hence the net asset value per share of each Portfolio also
fluctuates. An example of how the net asset value per share for all Portfolios
is calculated is as follows:
Net Assets ($100,000) = Net Asset Value
Shares Outstanding (10,000) per Share ($10)
<PAGE>
PURCHASE OF SHARES
------------------
The manner in which the shares of the Portfolios are offered to the public
is described in the Prospectus under the headings "Purchase of Shares" and
"Valuation of Shares". Shares of the Portfolios may be purchased initially
subject to the minimums set forth in the Prospectus, unless the purchaser is an
employee of the Distributor, Adviser or Mutual of Omaha Insurance Company, or is
a family member of such employee. The term family member shall include parents,
mother-in-law or father-in-law, husband or wife, brother or sister,
brother-in-law or sister-in-law, son or daughter, son-in-law or daughter-in-law,
and their respective children. In addition, the term shall include any person
who is supported directly or indirectly, to a material extent, by the employee
or other family member. The minimum initial investment for accounts established
by money purchase/profit-sharing plans, 401(k) plans, IRA/SEP, 403(b) plans or
457 (state deferred compensation plans) is $2,000. Finally, investments made by
an individual, or by an individual's spouse and/or children under the age of 21,
purchasing shares for their own account, or by a trustee, or other fiduciary
purchasing for a single trust estate, or single fiduciary account will be
treated as investments made by a single investor for purposes of meeting initial
purchase requirements.
REDEMPTION
----------
Redemption of shares, or payment, may be suspended at times (a) when the
New York Stock Exchange is closed for other than customary weekend or holiday
closings, (b) when trading on said exchange is restricted, (c) when an emergency
exists, as a result of which disposal by the Portfolios of securities owned by
them is not reasonably practicable, or it is not reasonably practicable for the
Portfolios fairly to determine the value of their net assets, or (d) during any
other period when the Securities and Exchange Commission, by order, so permits,
provided that applicable rules and regulations of the Securities and Exchange
Commission shall govern as to whether the conditions prescribed in (b) or (c)
exist.
TAX STATUS
----------
The Fund will qualify and intends to continue to qualify its Portfolios as
"regulated investment companies" under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code"), so as to be relieved of federal income tax on
its capital gains and net investment income distributed to shareholders. To
qualify as a regulated investment company, a Portfolio must, among other things,
receive at least 90% of its gross income each year from dividends, interest,
gains from the sale or other disposition of securities and certain other types
of income including, with certain exceptions, income from options and futures
contracts. However, gains from the sale or other disposition of stock or
securities held for less than three months must constitute less than 30% of each
Portfolio's gross income. This restriction may limit the extent to which a
Portfolio may effect sales of securities held for less than three months or
transactions in futures contracts and options even when the Adviser otherwise
would deem such transaction to be in the best interest of a Portfolio. The Code
also requires a regulated investment company to diversify its holdings. The
Internal Revenue Service has not made its position clear regarding the treatment
of futures contracts and options for purposes of the diversification test, and
the extent to which a Portfolio could buy or sell futures contracts and options
may be limited by this requirement.
The Code requires that all regulated investment companies pay a
nondeductible 4% excise tax to the extent the regulated investment company does
not distribute 98% of its ordinary income, determined on a calendar year basis,
and 98% of its capital gains, determined, in general, on an October 31 year end.
The required distributions are based only on the taxable income of a regulated
investment company.
Ordinarily, distributions and redemption proceeds earned by a Portfolio
shareholder are not subject to withholding of federal income tax. However, if a
shareholder fails to furnish a tax identification number or social security
number, or certify under penalties of perjury that such number is correct, the
Fund may be required to withhold federal income tax ("backup withholding") from
all dividend, capital gain and/or redemption payments to such shareholder.
Dividends and capital gain distributions may also be subject to backup
withholding if a shareholder fails to certify under penalties of perjury that
such shareholder is not subject to backup withholding due to the underreporting
of certain income. These certifications are contained in the purchase
application enclosed with the Prospectus.
CALCULATIONS OF PERFORMANCE DATA
--------------------------------
From time to time the Fund may quote the yield for the Portfolios in
advertisements or in reports and other communications to shareholders. For this
purpose, yield is calculated by dividing a Portfolios's net investment income
per share for the base period, which is 30 days or one month, by the Portfolio's
maximum offering purchase price on the last day of the period and annualizing
the result. The Portfolio's net investment income changes in response to
fluctuations in interest rates and in the expenses of the Portfolio.
Consequently, any given quotation should not be considered as representative of
what the Portfolio's yield may be for any specified period in the future.
Yield information may be useful in reviewing a Portfolio's performance and
for providing a basis for comparison with other investment alternatives.
However, a Portfolio's yield will fluctuate, unlike other investments which pay
a fixed yield for a stated period of time. Current yield should be considered
together with fluctuations in the Portfolio's net asset value over the period
for which yield has been calculated, which, when combined, will indicate a
Portfolio's total return to shareholders for that period. Other investment
companies may calculate yields on a different basis. In addition, investors
should give consideration to the quality and maturity of the portfolio
securities of the respective investment companies when comparing investment
alternatives.
Investors should recognize that in periods of declining interest rates a
bond portfolio's yield will tend to be somewhat higher than prevailing market
rates, and in periods of rising interest rates, such portfolio's yield will tend
to be somewhat lower. Also, when interest rates are falling, the inflow of net
new money to a bond portfolio from the continuous sale of its shares will likely
be invested in instruments producing lower yields than the balance of such
portfolio's holdings, thereby reducing the current yield of such portfolio. In
periods of rising interest rates, the opposite can be expected to occur.
The Fund may also quote the indices of bond prices and yields prepared by
Lehman Bros, Inc., Salomon Bros., Inc., Merrill Lynch or other leading
broker-dealer firms. These indices are not managed for any investment goal and
their composition may be changed from time to time.
The Fixed Income Portfolio may quote the yield or total return on Ginnie
Maes, Fannie Maes, Freddie Macs, corporate bonds and Treasury bonds and notes,
either as compared to each other or as compared to the Portfolio's performance.
In considering such yields or total returns, investors should recognize that the
performance of securities in which the Portfolio may invest does not reflect the
Portfolio's performance, and does not take into account either the effects of
portfolio management or of management fees or other expenses; and that the
issuers of such securities guarantee that interest will be paid when due and
that principal will be fully repaid if the securities are held to maturity,
while there are no such guarantees with respect to shares of the Portfolio.
Investors should also be aware that the mortgages underlying mortgage-related
securities may be prepaid at any time. Prepayment is particularly likely in the
event of an interest rate decline, as the holders of the underlying mortgages
seek to pay off high-rate mortgages or renegotiate them at potentially lower
current rates. Because the underlying mortgages are more likely to be prepaid at
their par value when interest rates decline, the value of certain high-yielding
mortgage-related securities may have less potential for capital appreciation
than conventional debt securities (such as U. S. Treasury bonds and notes) in
such markets. At the same time, such mortgage-related securities may have less
potential for capital appreciation when interest rates rise.
In connection with the quotations of yields in advertisements described
above, the Fund will also provide average annual total returns from the date of
inception for one, five and ten-year periods if applicable. Total return is a
calculation which equates an initial amount invested to the ending redeemable
value at a specified time. It assumes the reinvestment of all dividends and
capital gains distributions. Average total return will be the average of the
total returns for each year in the period. The Portfolios may also provide a
total return figure for the most recent calendar quarter prior to the
publication of the advertisement. The yield of the Fixed Income Portfolio for
the 30-day period ending June 30, 1995 was 5.25%.
The average annual total returns of the Portfolios from inception to date
ending June 30, 1995 are as follows:
Annualized
Total Return
(Inception) 7/5/95 - 6/30/95
---------------------------
Equity Portfolio 22.01%
Fixed Income Portfolio 9.63%
FINANCIAL STATEMENTS
Attached hereto is the Fund's Annual Financial Report dated June 30, 1995.
AUDITORS
The Board of Directors, including all disinterested directors, unanimously
approved the appointment of KPMG Peat Marwick LLP, Two Central Park Plaza, Suite
1501, Omaha, Nebraska 68102 as the Fund's accountants.
<PAGE>
APPENDIX A
RATINGS OF CORPORATE OBLIGATIONS,
COMMERCIAL PAPER, AND PREFERRED STOCK
Ratings of Corporate Obligations
Moody's Investors Service, Inc.
- -------------------------------
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa: Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. 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.
Ba: Bonds rated Ba are judged to have speculative elements; their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class.
B: Bonds rated B generally lack characteristics of desirable investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small.
Caa: Bonds rated Caa are of poor standing. Such bonds may be in
default or there may be present elements of danger with respect to principal
and interest.
Ca: Bonds rated Ca represent obligations which are speculative in a
high degree. Such bonds are often in default or have other marked
shortcomings.
<PAGE>
Those securities in the A and Baa groups which Moody's believes possess
the strongest investment attributes are designated by the symbols A-1 and Baa-1.
Other A and Baa securities comprise the balance of their respective groups.
These rankings (1) designate the securities which offer the maximum in security
within their quality groups, (2) designate securities which can be bought for
possible upgrading in quality, and (3) additionally afford the investor an
opportunity to gauge more precisely the relative attractiveness of offerings in
the marketplace.
Standard & Poor's Corporation
- -----------------------------
AAA: Bonds rated AAA have the highest rating assigned by Standard &
Poor's to a debt obligation. Capacity to pay interest and repay principal is
extremely strong.
AA: Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in a small degree.
A: Bonds rated A have a strong capacity to pay interest and repay
principal, although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in higher rated
categories.
BBB: Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Although they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than for bonds in higher rated categories. Bonds rated
BBB are regarded as having speculation characteristics.
BB--B--CCC-CC: Bonds rated BB, B, CCC, and CC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB indicates
the lowest degree of speculation among such bonds and CC the highest degree of
speculation. Although such bonds will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
Commercial Paper Ratings
-------------------------
Standard & Poor's Corporation
- -----------------------------
Commercial paper ratings are graded into four categories, ranging from "A"
for the highest quality obligations to "D" for the lowest. Issues assigned the A
rating are regarded as having the greatest capacity for timely payment. Issues
in this category are further refined with the designation 1, 2 and 3 to indicate
the relative degree of safety. The "A-1" designation indicates that the degree
of safety regarding timely payment is very strong. Those issues determined to
possess overwhelming safety characteristics will be denoted with a plus sign
designation.
<PAGE>
Moody's Investors Service, Inc.
- -------------------------------
Moody's commercial paper ratings are opinions of the ability of the
issuers to repay punctually promissory obligations not having an original
maturity in excess of nine months. Moody's makes no representation that such
obligations are exempt from registration under the Securities Act of 1933, nor
does it represent that any specific note is a valid obligation of a rated issuer
or issued in conformity with any applicable law. Moody's employs the following
three designations, all judged to be investment grade, to indicate the relative
repayment capacity of rated issuers:
Prime-1 Superior capacity for repayment
Prime-2 Strong capacity for repayment
Prime-3 Acceptable capacity for repayment
Ratings of Preferred Stock
--------------------------
Standard & Poor's Corporation
- -----------------------------
Standard & Poor's preferred stock rating is an assessment of the capacity
and willingness of an issuer to pay preferred stock dividends and any applicable
sinking fund obligations. A preferred stock rating differs from a bond rating
inasmuch as it is assigned to an equity issue, which issue is intrinsically
different from, and subordinated to, a debt issue. Therefore, to reflect this
difference, the preferred stock rating symbol will normally not be higher than
the bond rating symbol assigned to, or that would be assigned to, the senior
debt of the same issuer.
The preferred stock ratings are based on the following considerations:
1. Likelihood of payment--capacity and willingness of the issuer to
meet the timely payment of preferred stock dividends and any
applicable sinking fund requirements in accordance with the terms of
the obligation.
2. Nature of and provisions of the issue.
3. Relative position of the issue in the event of bankruptcy,
reorganization, or other arrangements affecting creditors' rights.
AAA: This is the highest rating that may be assigned by Standard & Poor's
to a preferred stock issue and indicates an extremely strong capacity to pay the
preferred stock obligations.
AA: A preferred stock issue rated AA also qualifies as a high-quality
fixed income security. The capacity to pay preferred stock obligations is very
strong, although not as overwhelming as for issues rated AAA.
A: An issue rated A is backed by a sound capacity to pay the preferred
stock obligations, although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions.
<PAGE>
BBB: An issue rated BBB is regarded as backed by an adequate capacity to
pay the preferred stock obligations. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to make payments for a preferred
stock in this category than for issues in the A category.
BB, B, CCC: Preferred stock issues rated BB, B, and CCC are regarded, on
balance, as predominantly speculative with respect to the issuer's capacity to
pay preferred stock obligations. BB indicates the lowest degree of speculation
and CCC the highest degree of speculation. While such issues will likely have
some quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
CC: The rating CC is reserved for a preferred stock issue in arrears
on dividends or sinking fund payments but that is currently paying.
C: A preferred stock rated C is a nonpaying issue.
D: A preferred stock rated D is a nonpaying issue with the issuer in
default on debt instruments.
NR indicates that no rating has been requested, that there is
insufficient information on which to base a rating, or that S & P does not rate
a particular type of obligation as a matter of policy.
Plus (+) or Minus (-): To provide more detailed indications of preferred
stock quality, the ratings from AA to CCC may be modified by the addition of a
plus or minus sign to show relative standing within the major rating categories.
Moody's Investors Service, Inc.
aaa: An issue which is rated aaa is considered to be a top-quality
preferred stock. This rating indicates good asset protection and the least risk
of dividend impairment within the universe of preferred stocks.
aa: An issue which is rated aa is considered a high-grade preferred
stock. This rating indicates that there is reasonable assurance that earnings
and asset protection will remain relatively well maintained in the foreseeable
future.
a: An issue which is rated a is considered to be an upper-medium grade
preferred stock. While risks are judged to be somewhat greater than in the aaa
and aa classifications, earnings and asset protection are, nevertheless,
expected to be maintained at adequate levels.
baa: An issue which is rated baa is considered to be medium grade,
neither highly protected nor poorly secured. Earnings and asset protection
appear adequate at present but may be questionable over any great length of
time.
<PAGE>
ba: An issue which is rated ba is considered to have speculative elements
and its future cannot be considered well assured. Earnings and asset protection
may be very moderate and not well safeguarded during adverse periods.
Uncertainty of position characterizes preferred stocks in this class.
b: An issue which is rated b generally lacks the characteristics of a
desirable investment. Assurance of dividend payments and maintenance of other
terms of the issue over any long period of time may be small.
caa: An issue which is rated caa is likely to be in arrears on dividend
payments. This rating designation does not purport to indicate the future status
of payments.
ca: An issue which is rated ca is speculative in a high degree and is
likely to be in arrears on dividends with little likelihood of eventual payment.
c: This is the lowest rated class of preferred or preference stock.
Issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
<PAGE>
Annual Report dated June 30, 1995 and Independent Auditor's Report thereon
incorporated by reference herein to Registrant's filing thereof pursuant to
Regulation S-T and Rule 30d-1 on August 28, 1995. The Registrant will without
change provide a copy of such report upon request to the address indicated in
the Prospectus.
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
(1) Financial Highlights
(2) Included in Part B:
A. Annual Report dated June 30, 1995.
- Schedule of Investments - KPM Equity Portfolio
- Schedule of Investments - KPM Fix Income Portfolio
- Statements of assets and Liabilities
- Statements of Operations
- Statements of Changes in Net Assets
- Financial Highlights
- Notes to Financial Statements
- Independent Auditor's Report
(3) Included in Part C:
Consent of KPMG Peat Marwick LLP
(b) Exhibits
Exhibit No. Description
1. Articles of Incorporation
2. Bylaws
5. Amended Management and Investment Advisory
Agreement
6. Distribution Agreement
* 8. Custodian Agreement
9. Administration Agreement
10. Opinion and Consent of Messrs. Cline, Williams,
Wright, Johnson & Oldfather
11. Consent of KPMG Peat Marwick LLP
* 13. Subscription Agreement of KPM Investment
Management, Inc.
** 14. Prototype Retirement Plan Documents
15. Rule 12b-1 Plan
16. Schedule of Computations for Performance Quotations
* Filed in initial registration statement on April 27, 1994.
** Filed in Pre-effective Amendment No. 1 on June 24, 1994.
Item 25. Persons Controlled by or under Common Control with Registrant
-------------------------------------------------------------
Kirkpatrick, Pettis, Smith, Polian Inc., a Nebraska corporation ("KPSP"),
which serves as the distributor of the Registrant, is deemed to be in control of
the Registrant as a result of the ownership of shares of the Registrant's
Portfolios in KPSP's 401K Profit Sharing Plan. KPSP is a wholly owned subsidiary
of Mutual of Omaha Insurance Company, a mutual insurance company organized under
Nebraska law.
Item 26. Number of Holders of Securities
--------------------------------
Title of Class Number of Record Holders
------------- -------------------------
KPM Equity Portfolio 77 as of September 15, 1995
KPM Fixed Income Portfolio 49 as of September 15, 1995
Item 27. Indemnification
---------------
Section 21-2004(15) of the Nebraska Business Corporation Act allows
indemnification of officers and directors of the Registrant under circumstances
set forth therein. The Registrant has made such indemnification mandatory.
Reference is made to Article 8.d. of the Articles of Incorporation (Exhibit 1)
and Article XIII of the Bylaws of Registrant (Exhibit 2).
The general effect of such provisions is to require indemnification of
persons who are in an official capacity with the corporation against judgments,
penalties, fines and reasonable expenses, including attorneys' fees incurred by
said person if: (1) the person has not been indemnified by another organization
for the same judgments, penalties, fines and expenses for the same acts or
omissions; (2) the person acted in good faith; (3) the person received no
improper personal benefit; (4) in the case of a criminal proceeding, the person
had no reasonable cause to believe the conduct was unlawful; and (5) in the case
of directors, officers and employees of the corporation, such persons reasonably
believed that the conduct was in the best interests of the corporation, or in
the case of directors, officers, or employees serving at the request of the
corporation for another organization, such person reasonably believed that the
conduct was not opposed to the best interests of the corporation. A corporation
is permitted to maintain insurance on behalf of any officer, director, employee
or agent of the corporation, or any person serving as such at the request of the
corporation, against any liability of such person.
Nevertheless, Article 8.d. of the Articles of Incorporation prohibits any
indemnification which would be in violation of Section 17(h) of the Investment
Company Act of 1940, as now enacted or hereafter amended, and Article XIII of
the Fund's Bylaws prohibits any indemnification inconsistent with the guidelines
set forth in Investment Company Act Releases No. 7221 (June 9, 1972) and No.
11330 (September 2, 1980). Such Releases prohibit indemnification in cases
involving willful misfeasance, bad faith, gross negligence and reckless
disregard of duty and establish procedures for the determination of entitlement
to indemnification and expense advances.
<PAGE>
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions or otherwise, the Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification by the Registrant is against public policy as expressed in the
Act and, therefore, may be unenforceable. In the event that a claim for such
indemnification (except insofar as it provides for the payment by the Registrant
of expenses incurred or paid by a director, officer or controlling person in the
successful defense of any action, suit or proceeding) is asserted against the
Registrant by such director, officer or controlling person and the Securities
and Exchange Commission is still of the same opinion, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
or not such indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
In addition to the indemnification provisions contained in the
Registrant's Articles and Bylaws, there are also indemnification and hold
harmless provisions contained in the Investment Advisory Agreement, Distribution
Agreement, Administration Agreement and Custodian Agreement. Finally, the
Registrant has also included in its Articles of Incorporation (See Article X of
the Articles of Incorporation (Exhibit 1)) a provision which eliminates the
liability of outside directors to monetary damages for breach of fiduciary duty
of such directors. Pursuant to Neb. Rev. Stat. ss. 21-2035(2), such limitation
of liability does not eliminate or limit liability of such directors for any act
or omission not in good faith which involves intentional misconduct or a knowing
violation of law, any transaction from which such director derived an improper
direct or indirect financial benefit, for paying a divided or approving a stock
repurchase which was in violation of the Nebraska Business Corporation Act and
for any act or omission which violates a declaratory or injunctive order
obtained by the Registrant or its shareholders.
Item 28. Business and Other Connections of Investment Adviser
----------------------------------------------------
Name Position with Principal Occupations
Adviser (Present and for
past two years
Randall D. Greer Director, President and CEO *
Rodney D. Cerny Executive Vice President *
Lamar S. Jones, Jr. Secretary *
Jeffrey N. Sime Treasurer *
Thomas J. Sudyka, Jr. Vice President *
* See caption "Directors and Executive Officers" in the Statement of
Additional Information
forming a part of this Registration Statement
<PAGE>
Principal Occupations
Position with (Present and for
Name Adviser past two years
John W. Weekly Director President & Chief Operating
Officer, Mutual of Omaha
Insurance Company and United
of Omaha Insurance Company;
Director of Companion Life
Insurance Company;
Kirkpatrick, Pettis, Smith,
Polian Inc.; Tele-Trip
Company, Inc.; Omaha
Financial Life Insurance
Company; Omaha Property and
Casualty Insurance Company;
United World Life Insurance
Company; Mutual Asset
Management Company; Norwest
Bank Nebraska, N.A.; Health
Insurance Association of
America; Omaha Airport
Authority; Bellevue College;
and Mutual of Omaha Fund
Management Company until
November 1993.
John A. Sturgeon Director Senior Executive Vice
President & General
Comptroller, Mutual of Omaha
Insurance Company and United
of Omaha Insurance Company;
Director of Kirkpatrick,
Pettis, Smith, Polian Inc.;
Mutual of Omaha Marketing
Corporation; Omaha Property
and Casualty Insurance
Company; Tele-Trip Company,
Inc.; Companion Life
Insurance Company; United
World Life Insurance Company;
The Omaha Indemnity Company;
Mutual of Omaha Investor
Services, Inc.; Midland
Lutheran College; and Mutual
of Omaha Fund Management
Company, February 1993 -
November 1993.
<PAGE>
Principal Occupations
Position with (Present and for
Name Adviser past two years
Leroy C. Petersen Director Chairman of the Board and
Chief Executive Officer,
Kirkpatrick, Pettis, Smith,
Polian, Inc.
Item 29. Principal Underwriters
-----------------------
(a) Not applicable.
(b)
Name and Principal Positions and Offices with Positions and Offices
Business Address Underwriter with Registrant
- ----------------- --------------------------- ----------------------
Leroy C. Petersen* Director, None
Chairman of the Board &
Chief Executive Officer
Peter Lahti* Director, President & None
Chief Operating Officer
Randall D. Greer* Director Director and
Chairman of the Board
John A. Maginn* Director None
John A. Sturgeon* Director None
John W. Weekly* Director None
Donald S. Adam, Jr.* First Vice President None
Corporate Bond Trading
John J. Bell, Jr.** First Vice President None
Institutional Sales - Colorado
* 10250 Regency Circle
Omaha, Nebraska 68114
** One United Bank Center, Suite 2200
1700 Lincoln Street
Denver, Colorado 80203
Name and Principal Positions and Offices with Positions and Offices
Business Address Underwriter with Registrant
J. Philip Boesel, Jr.*** First Vice President None
Investment Banking - Des Moines
Robert E. Brady* Executive Vice President None
Director of Sales & Marketing
Donald E. Brown* Senior Vice President None
Retail Sales - Omaha
Rodney D. Cerny* Executive Vice President Director and
Chief Investment Officer - Omaha President
Theodore S. Cleveland, Jr.* First Vice President None
Corporate Trading - Omaha
Craig M. Davis** First Vice President None
Institutional Sales - Colorado
Keith C. Douglass** First Vice President None
Colorado Public Finance
Samuel C. Doyle** First Vice President None
Municipal Trading - Colorado
Lauren G. Faist* Senior Vice President None
Retail Sales - Omaha
John J. Frenking* Executive Vice President & Director None
Institutional Markets - Omaha
Richard Fulmer** First Vice President None
Taxable Trading - Colorado
* 10250 Regency Circle
Omaha, Nebraska 68114
** One United Bank Center, Suite 2200
1700 Lincoln Street
Denver, Colorado 80203
*** 1501 50th Street, Suite 350
Des Moines, Iowa 50265
<PAGE>
Name and Principal Positions and Offices with Positions and Offices
Business Address Underwriter with Registrant
- ------------------ --------------------------- ----------------------
John H. Garlock* First Vice President & Retail None
Sales Director
Marvin E. Giannangelo* Sr. Vice President None
Account Executive - Sales - Omaha
Robert M. Gioia** First Vice President None
Regional Manager - Des Moines Branch
Darrel H. Gottsch* Sr. Vice President None
Retail Sales - Omaha
Joseph E. Haller* Executive Vice President None
& Director SID - Omaha
Gary S. Hamilton** First Vice President None
Manager Colorado Retail Sales - Denver
Richard S. Healy* First Vice President None
Municipal Trading - Omaha
Mary H. Jochim* Senior Vice President None
Sales - Omaha
Lamar S. Jones, Jr.* Senior Vice President, Secretary & Secretary
Chief Financial Officer - Omaha
Andrew B. Kane** First Vice President None
Colorado Public Finance
Robert F. Kathol* Executive Vice President None
Director Investment Banking - Omaha
Charles M. Kelly* First Vice President None
Public Finance - Omaha
* 10250 Regency Circle
Omaha, Nebraska 68114
** One United Bank Center, Suite 2200
1700 Lincoln Street
Denver, Colorado 80203
<PAGE>
Name and Principal Positions and Offices with Positions and Offices
Business Address Underwriter with Registrant
- -------------------- ---------------------------- ----------------------
Bradley L. Knuth* First Vice President None
Retail Sales - Omaha
John E. Kuehl* First Vice President None
SID Underwriting - Omaha
Milton E. Lackey, Jr.* Vice President None
KPM Marketing Director
Stephen J. Lococo* First Vice President None
Retail Sales - Omaha
Philip A. Lorenzen* First Vice President None
SID Underwriting - Omaha
Wayne G. Nielsen* Senior Vice President & Manager None
Denver Office
Leroy C. Petersen* Chairman of the Board & None
Chief Executive Officer
Darwin L. Reider* First Vice President None
Public Finance - Omaha
Owen L. Saddler, Jr.* Executive Vice President - Director None
Trading and Compliance - Omaha
Jeffrey N. Sime* Vice President - Treasurer, Manager Treasurer
Accounting & Internal Control
John P. Smigelsky* Senior Vice President None
Retail Sales - Omaha
Daniel J. Smith* First Vice President None
Public Finance - Omaha
* 10250 Regency Circle
Omaha, Nebraska 68114
<PAGE>
Name and Principal Positions and Offices with Positions and Offices
Business Address Underwriter with Registrant
- ------------------- -------------------------- --------------------
Frederick B. Taylor** First Vice President None
Institutional Sales - Colorado
Theodore T. Thull* Senior Vice President None
Retail Sales - Omaha
Michael M. Van Horne* Senior Vice President None
Institutional Sales - Omaha
Paul R. Wertz* Senior Vice President None
Retail Sales - Omaha
* 10250 Regency Circle
Omaha, Nebraska 68114
** One United Bank Center, Suite 2200
1700 Lincoln Street
Denver, Colorado 80203
*** 1501 50th Street, Suite 350
Des Moines, Iowa 50265
(c) Not applicable.
Item 30. Location of Accounts and Records
--------------------------------
All required accounts, books and records will be maintained by KPM
Investment Management, Inc. and Kirkpatrick Pettis Smith Polian Inc., 10250
Regency Circle, Omaha, Nebraska 68114-5777.
Item 31. Management Services
-------------------
Not applicable.
Item 32. Undertakings
------------
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned Registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
The Registrant hereby undertakes to call a meeting of shareholders for the
purpose of voting upon the question or removal of a director, if requested to do
so by the holders of at least 10% of the Registrant's outstanding shares and to
assist in communications with other shareholders as required by Section 16(c) of
the 1940 Act.
<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
Post-Effective Amendment to its Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Omaha,
State of Nebraska, on the 13th day of October, 1995. The undersigned hereby
certifies that this Post-Effective Amendment meets all the requirements for
effectiveness pursuant to Rule 485(b).
KPM FUNDS, INC.
By: /s/ Rodney D. Cerny
----------------------------------
Rodney D. Cerny, President and
Principal Executive Officer
Pursuant to the requirements of the Securities Act of 1933, the
Registration Statement has been signed below by the following persons in the
capacities indicated on October 13, 1995:
Signatures
/s/ Rodney D. Cerny
- --------------------------------
Rodney D. Cerny, President, Director
and Principal Executive Officer
/s/ Randall D. Greer
- --------------------------------
Randall D. Greer, Chairman and Director
/s/ Jeffrey N. Sime
- ---------------------------------
Jeffrey N. Sime, Treasurer and
Principal Financial Officer
/s/ Donald L. Stroh /s/ Rodney D. Cerny
- -------------------------------------------------- ---------------------
Donald L. Stroh, Director Rodney D. Cerny,
Attorney-in-Fact
/s/ William G. Campbell
- ---------------------------------
William G. Campbell, Director
/s/ Herbert H. Davis, Jr.
- ---------------------------------
Herbert H. Davis, Jr., Director
KPMG PEAT MARWICK
TWO CENTRAL PARK PLAZA
OMAHA, NE 68102
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Shareholders
KPM FUNDS, INC.
We consent to the use of our report dated July 13, 1995, included herein
and to the reference to our firm under the captions "Financial Highlights" and
"Auditors" in this post-effective amendment #2 of Form N-1(a) Registration
Statement of KPM Funds, Inc.
KPMG PEAT MARWICK LLP
Omaha, Nebraska
October 13, 1995
EXHIBITS
TO
POST-EFFECTIVE AMENDMENT
NO. 2
TO
FORM N-1A REGISTRATION STATEMENT
FOR
KPM FUNDS, INC.
<PAGE>
EXHIBITS
TO
KPM FUNDS, INC.
POST-EFFECTIVE AMENDMENT NO. 2
FORM N-1A REGISTRATION STATEMENT
Exhibit No. Description
----------- -----------
16 Schedule of Computation for
Performance Quotations
<PAGE>
EXHIBIT (16)
SCHEDULE OF COMPUTATIONS OF PERFORMANCE
FIXED INCOME PORTFOLIO
The Total Return information shown on page 18 of the Statement of
Additional Information for the Fixed Income Portfolio was calculated as follows:
TOTAL RETURN:
P(1 + T)n=ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual return
n = number of years
ERV = ending redeemable value of a hypothetical
$1,000 payment made at the beginning of a
period, at the end of the period
The computation of average annual return assumes dividends and
distributions are reinvested at net asset value (as stated in the prospectus) on
the reinvestment dates during the period.
The ending redeemable value assumes a complete redemption at the end of
the period.
Total Return from Inception (July 5, 1994) to June 30, 1995:
P = $1,000 (initial value)
n = 360 days
ERV = 1,095 (ending redeemable value)
Solve for T:
$1,000 (1 + T).9863 = 1,095
T = .0963 or 9.63%
The yield quotation for the Fixed Income Portfolio described on page 18
of the Statement of Additional Information was calculated according to the
following formula for the 30 day period ending June 30, 1995.
YIELD = 2[( a = 1)6 - 1]
cd
a = dividends and interest earned during period net for accrued
expenses (net of reimbursements) or $23,886.
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends or 526,844.751.
d = the maximum offering price per share on the last day of the
period or $10.47.
<PAGE>
EQUITY PORTFOLIO
The Total Return information shown on page 18 of the Statement of
Additional Information for the Equity Portfolio was calculated as follows:
TOTAL RETURN:
P(1 + T)n=ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual return
n = number of years
ERV = ending redeemable value of a hypothetical
$1,000 payment made at the beginning of a
period, at the end of the period
The computation of average annual return assumes dividends and
distributions are reinvested at net asset value (as stated in the prospectus) on
the reinvestment dates during the period.
The ending redeemable value assumes a complete redemption at the end of
the period.
Total Return from Inception (July 5, 1994) to June 30, 1995:
P = $1,000 (initial value)
n = 360 days
ERV =1,217 (ending redeemable value)
Solve for T:
$1,000 (1 + T).98633=1,217
T = .2201 or 22.01%
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
Pursuant to Item 601 (c) (2) (i) of Regulations S-K and S-B.
</LEGEND>
<CIK> 0000922379
<NAME> KPM FUND, INC.
<SERIES>
<NUMBER> 1
<NAME> EQUITY PORTFOLIO
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 13676036
<INVESTMENTS-AT-VALUE> 15454791
<RECEIVABLES> 55835
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 15510626
<PAYABLE-FOR-SECURITIES> 133190
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 166694
<TOTAL-LIABILITIES> 149884
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 13438528
<SHARES-COMMON-STOCK> 1280007
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 7065
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 136394
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1778755
<NET-ASSETS> 15360742
<DIVIDEND-INCOME> 223849
<INTEREST-INCOME> 24590
<OTHER-INCOME> 10855
<EXPENSES-NET> 146917
<NET-INVESTMENT-INCOME> 101522
<REALIZED-GAINS-CURRENT> 202563
<APPREC-INCREASE-CURRENT> 1778755
<NET-CHANGE-FROM-OPS> 2082840
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 94457
<DISTRIBUTIONS-OF-GAINS> 66169
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1322062
<NUMBER-OF-SHARES-REDEEMED> (56989)
<SHARES-REINVESTED> 14933
<NET-CHANGE-IN-ASSETS> 1280007
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 77104
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 15772
<AVERAGE-NET-ASSETS> 9765169
<PER-SHARE-NAV-BEGIN> 10.
<PER-SHARE-NII> .11
<PER-SHARE-GAIN-APPREC> 2.06
<PER-SHARE-DIVIDEND> (.10)
<PER-SHARE-DISTRIBUTIONS> (.07)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.
<EXPENSE-RATIO> 1.5
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
Pursuant to Item 601 ((c) (2) (i) of Regulations S-K and S-B.
</LEGEND>
<CIK> 0000922379
<NAME> KPM FUNDS, INC.
<SERIES>
<NUMBER> 2
<NAME> KPM FIXED INCOME PORTFOLIO
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 6087654
<INVESTMENTS-AT-VALUE> 6232120
<RECEIVABLES> 122249
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 6354369
<PAYABLE-FOR-SECURITIES> 469613
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 16830
<TOTAL-LIABILITIES> 486443
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 5727259
<SHARES-COMMON-STOCK> 560664
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 457
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 3342
<ACCUM-APPREC-OR-DEPREC> 144466
<NET-ASSETS> 5867926
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 187549
<OTHER-INCOME> 8315
<EXPENSES-NET> 34356
<NET-INVESTMENT-INCOME> 153193
<REALIZED-GAINS-CURRENT> (2799)
<APPREC-INCREASE-CURRENT> 144466
<NET-CHANGE-FROM-OPS> 294860
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 153650
<DISTRIBUTIONS-OF-GAINS> 543
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 588206
<NUMBER-OF-SHARES-REDEEMED> (41536)
<SHARES-REINVESTED> 13993
<NET-CHANGE-IN-ASSETS> 560664
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 16101
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 42671
<AVERAGE-NET-ASSETS> 2740388
<PER-SHARE-NAV-BEGIN> 10.
<PER-SHARE-NII> .57
<PER-SHARE-GAIN-APPREC> .47
<PER-SHARE-DIVIDEND> (.57)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.47
<EXPENSE-RATIO> 1.25
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
ARTICLES OF INCORPORATION
OF
KPM Funds, Inc.
The undersigned, a natural person of the age of twenty-one years or
more, acting as the incorporator of a corporation under the Nebraska Business
Corporation Act, adopts the following Articles of Incorporation of such
corporation:
ARTICLE I.
The name of this corporation is KPM Funds, Inc.
ARTICLE II.
The period of the corporation's duration is perpetual.
ARTICLE III.
This corporation shall have general business purposes and shall have
unlimited power to engage in and do any lawful act concerning any and all lawful
businesses for which corporations may be organized under the Nebraska Business
Corporation Act. Without limiting the generality of the foregoing, this
corporation shall have specific power:
(a) To conduct, operate and carry on the business of an
"open-end" management investment company registered pursuant to the
Investment Company Act of 1940, and exercise all the powers necessary
and appropriate to the conduct of such operations.
(b) To purchase, subscribe for, invest in or otherwise
acquire, and to own, hold, pledge, mortgage, hypothecate, sell,
possess, transfer or otherwise dispose of, or turn to account or
realize upon, and generally deal in, all forms of securities of every
kind, nature, character, type and form, and other financial instruments
which may not be deemed to be securities, including but not limited to
futures contracts and options thereon. Such securities and other
financial instruments may include but are not limited to shares,
stocks, bonds, debentures, notes, scrip, participation certificates,
rights to subscribe, warrants, options, certificates of deposit,
bankers' acceptances, repurchase agreements, commercial paper, choses
in action, evidences of indebtedness, certificates of indebtedness and
certificates of interest of any and every kind and nature whatsoever,
secured and unsecured, issued or to be issued, by any corporation,
company, partnership (limited or general), association, trust, entity
or person, public or private, whether organized under the laws of the
United States, or any state, commonwealth, territory or possession
thereof, or organized under the laws of any foreign country, or any
state, province, territory or possession thereof, or issued or to be
issued by the United States government or any agency or instrumentality
thereof, and futures contracts and options thereon.
<PAGE>
(c) In the above provisions of this Article III, purposes
shall also be construed as powers and powers shall also be construed as
purposes, and the enumeration of specific purposes or powers shall not
be construed to limit other statements of purposes or to limit purposes
or powers which the corporation may otherwise have under applicable
law, all of the same being separate and cumulative, and all of the same
may be carried on, promoted and pursued, transacted or exercised in any
place whatsoever.
ARTICLE IV.
The address of the initial registered agent and office of the
corporation in Nebraska is 1900 FirsTier Bank Building, 233 South 13th Street,
Lincoln, Nebraska and the name of the initial registered agent at such address
is John C. Miles.
ARTICLE V.
The total number of authorized shares of this corporation is
1,000,000,000, all of which shall be common shares of the par value of $.00001
each. Of said common shares, 50,000,000 shares may be issued in the series of
common shares hereby designated KPM Equity Portfolio shares and 50,000,000
shares may be issued in the series of common shares hereby designated KPM Fixed
Income Portfolio shares. The balance of 900,000,000 shares may be issued in such
series with such designations, preferences and relative, participating, optional
or other special rights, or qualifications, limitations or restrictions thereof,
or may be authorized for issuance as additional shares of any existing series or
portfolio as and to the extent stated or expressed in a resolution or
resolutions providing for the issue of any such series or shares of common
shares adopted from time to time by the Board of Directors of this corporation
pursuant to the authority hereby vested in said Board of Directors. The
corporation may issue and sell any of its shares in fractional denominations to
the same extent as its whole shares, and shares and fractional denominations
shall have, in proportion to the relative fractions represented thereby, all the
rights of whole shares, including, without limitation, the right to vote, the
right to receive dividends and distributions, and the right to participate upon
liquidation of the corporation. The KPM Equity Portfolio shares, KPM Fixed
Income Portfolio shares and each other series of common shares which the Board
of Directors may establish, as provided herein, evidence an interest in a
separate and distinct portion of the corporation's assets, which shall take the
form of a separate portfolio of investment securities, cash and other assets.
Authority to establish such additional series representing separate portfolios
is hereby vested in the Board of Directors of this corporation, and such
separate portfolios may be established by the Board of Directors without the
authorization or approval of the holders of any other series of shares of this
corporation.
<PAGE>
ARTICLE VI.
The shareholders of each series of common shares of this corporation
shall have no preemptive right to subscribe to any issue of shares of any class
or series of this corporation now or hereafter made.
ARTICLE VII.
The shareholders of the KPM Equity Portfolio shares, KPM Fixed Income
Portfolio shares and all future series of shares authorized by the Board of
Directors which evidence a separate portfolio of investment securities shall
have the following rights and preferences:
(a) On any matter submitted to a vote of shareholders of this
corporation, all common shares of this corporation then issued and
outstanding and entitled to vote, irrespective of series, shall be
voted in the aggregate and not by series, except: (i) when otherwise
required by the Nebraska Business Corporation Act in which case shares
will be voted by individual series; (ii) when otherwise required by the
Investment Company Act of 1940, as amended, or the rules adopted
thereunder, in which case shares shall be voted by individual series;
and (iii) when the matter does not affect the interests of a particular
series, in which case only shareholders of the series affected shall be
entitled to vote thereon and shall vote by individual series.
(b) All consideration received by this corporation for the
issue or sale of shares of any series, together with all assets,
income, earnings, profits and proceeds derived therefrom (including all
proceeds derived from the sale, exchange or liquidation thereof and, if
applicable, any assets derived from any reinvestment of such proceeds
in whatever form the same may be) shall become part of the assets of
the portfolio to which the shares of that series relate, for all
purposes, subject only to the rights of creditors, and shall be so
treated upon the books of account of this corporation. Such assets,
income, earnings, profits and proceeds (including any proceeds derived
from the sale, exchange or liquidation thereof and, if applicable, any
assets derived from any reinvestment of such proceeds in whatever form
the same may be) are herein referred to as "assets belonging to" a
series of the common shares of this corporation.
(c) Assets of this corporation not belonging to any particular
series are referred to herein as "General Assets." General Assets shall
be allocated to each series in proportion to the respective net assets
belonging to such series. The determination of the Board of Directors
shall be conclusive as to the amount of assets, as to the
characterization of assets as those belonging to a series or as General
Assets, and as to the allocation of General Assets.
(d) The assets belonging to a particular series of common
shares shall be charged with the liabilities incurred specifically on
behalf of such series of common shares ("Special Liabilities"). Such
assets shall also be charged with a share of the general liabilities of
this corporation ("General Liabilities") in proportion to the
respective net assets belonging to such series of common shares. The
determination of the Board of Directors shall be
<PAGE>
conclusive as to the amount of liabilities, including accrued expenses
and reserves, as to the characterization of any liability as a Special
Liability or General Liability, and as to the allocation of General
Liabilities.
(e) The Board of Directors may, to the extent permitted by the
Nebraska Business Corporation Act and in the manner provided herein,
declare and pay dividends or distributions in shares or cash on any or
all series of common shares, the amount of such dividends and the
payment thereof being wholly in the discretion of the Board of
Directors. Dividends or distributions on shares of any series of common
shares shall be paid only out of the earnings, surplus, or other
lawfully available assets belonging to such series (including, for this
purpose, any General Assets allocated to such series).
(f) In the event of the liquidation or dissolution of this
corporation, holders of the shares of any series shall have priority
over the holders of any other series with respect to, and shall be
entitled to receive, out of the assets of this corporation available
for distribution to holders of shares, the assets belonging to such
series of common shares and the General Assets allocated to such series
of common shares, and the assets so distributable to the holders of the
shares of any series shall be distributed among such holders in
proportion to the number of shares of such series held by them and
recorded on the books of this corporation.
(g) With the approval of a majority of the shareholders of
each of the affected series of common shares, the Board of Directors
may transfer the assets of any portfolio to any other portfolio. Upon
such a transfer, the corporation shall issue common shares representing
interests in the portfolio to which the assets were transferred in
exchange for all common shares representing interests in the portfolio
from which the assets were transferred. Such shares shall be exchanged
at their respective net asset values.
ARTICLE VIII.
The following additional provisions, when consistent with law, are
hereby established for the management of the business, for the conduct
of the affairs of the corporation, and for the purpose of describing
certain specific powers of the corporation and of its Directors and
shareholders.
(a) In furtherance and not in limitation of the powers
conferred by statute and pursuant to these Articles of Incorporation,
the Board of Directors is expressly authorized to do the following:
<PAGE>
(1) to make, adopt, alter, amend and repeal Bylaws of
the corporation unless reserved to the shareholders by the
Bylaws or by the laws of the State of Nebraska, subject to the
power of the shareholders to change or repeal such Bylaws;
(2) to distribute, in its discretion, for any fiscal
year (in the year or in the next fiscal year) as ordinary
dividends and as capital gains distributions, respectively,
amounts sufficient to enable the corporation to qualify under
the Internal Revenue Code as a regulated investment company to
avoid any liability for federal income tax in respect of such
year. Any distribution or dividend paid to shareholders from
any capital source shall be accompanied by a written statement
showing the source or sources of such payment;
(3) to authorize, subject to such vote, consent, or
approval of shareholders and other conditions, if any, as may
be required by any applicable statute, rule or regulation, the
execution and performance by the corporation of any agreement
or agreements with any person, corporation, association,
company, trust, partnership (limited or general) or other
organization whereby, subject to the supervision and control
of the Board of Directors, any such other person, corporation,
association, company, trust, partnership (limited or general),
or other organization shall render managerial, investment
advisory, distribution, transfer agent, accounting and/or
other services to the corporation (including, if deemed
advisable, the management or supervision of the investment
portfolios of the corporation) upon such terms and conditions
as may be provided in such agreement or agreements;
(4) to authorize any agreement of the character
described in subparagraph (3) of this paragraph (a) with any
person, corporation, association, company, trust, partnership
(limited or general) or other organization, although one or
more of the members of the Board of Directors or officers of
the corporation may be the other party to any such agreement
or an officer, director, employee, shareholder, or member of
such other party, and no such agreement shall be invalidated
or rendered voidable by reason of the existence of any such
relationship;
(5) to allot and authorize the issuance of the
authorized but unissued shares of any class or series of this
corporation;
(6) to accept or reject subscriptions for shares
of any series made after incorporation; and
(b) The determination as to any of the following matters made
by or pursuant to the direction of the Board of Directors consistent
with these Articles of Incorporation and in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of
duties, shall be final and conclusive and shall be binding upon the
corporation and every
<PAGE>
holder of shares of its capital stock; namely, the amount of the assets,
obligations, liabilities and expenses of each portfolio of the
corporation; the amount of the net income of each portfolio of the
corporation from dividends and interest for any period and the amount
of assets at any time legally available for the payment of dividends in
each portfolio; the amount of paid-in surplus, other surplus, annual or
other net profits, or net assets in excess of capital, undivided
profits, or excess of profits over losses on sales of securities of
each portfolio; the amount, purpose, time of creation, increase or
decrease, alteration or cancellation of any reserves or charges and the
propriety thereof (whether or not any obligation or liability for which
such reserves or charges shall have been created shall have been paid
or discharged); the market value, or any sale, bid or asked price to be
applied in determining the market value, of any security owned or held
by or in each portfolio of the corporation; the fair value of any other
asset owned by or in each portfolio of the corporation; the number of
shares of each series of the corporation issued or issuable; any matter
relating to the acquisition, holding and disposition of securities and
other assets by each portfolio of the corporation; and any question as
to whether any transaction constitutes a purchase of securities on
margin, a short sale of securities, or an underwriting of the sale of,
or participation in any underwriting or selling group in connection
with the public distribution of, any securities.
(c) The Board of Directors or the shareholders of the
corporation may adopt, amend, affirm or reject investment policies and
restrictions upon investment or the use of assets of each portfolio of
the corporation and may designate some such policies as fundamental and
not subject to change other than by a vote of a majority of the
outstanding voting securities, as such phrase is defined in the
Investment Company Act of 1940, of the affected portfolio or portfolios
of the corporation.
(d) The corporation shall indemnify such persons for such
expenses and liabilities, in such manner, under such circumstances, and
to the full extent permitted by the Nebraska Business Corporation Act,
as now enacted or hereafter amended, provided, however, that no such
indemnification may be made if it would be in violation of Section
17(h) of the Investment Company Act of 1940, as now enacted or
hereafter amended.
(e) Any action which might be taken at a meeting of the Board
of Directors, or any duly constituted committee thereof, may be taken
without a meeting if done in writing and signed by a majority of the
Directors or committee members, unless otherwise provided by the
Investment Company Act of 1940 or regulations thereunder.
<PAGE>
ARTICLE IX.
In the absence of fraud, no contract or other transaction between the
corporation and any other person, corporation, firm, syndicate, association,
partnership, or joint venture shall be wholly or partially invalidated or
otherwise affected by reason of the fact that one or more of the directors of
the corporation are or become directors or officers of such other corporation,
firm, syndicate or association, or members of such partnership or joint venture,
or are pecuniarily or otherwise interested in such contractual transaction,
provided that the fact that such director or directors of the corporation are so
situated or so interested or both, shall be disclosed or shall have been known
to the Board of Directors of the corporation. Any director or directors of the
corporation who is or are also a director or officer of such other corporation,
firm, syndicate, or association, or a member of such partnership or joint
venture, or pecuniarily or otherwise interested in such contract or transaction,
may be counted for the purpose of determining the existence of a quorum at any
meeting of the Board of Directors of the corporation which shall authorize such
contract or transaction, with like force and effect as if he were not a director
or officer of such other corporation, firm, syndicate or association, or a
member of such partnership or joint venture, or pecuniarily or otherwise
interested in such contract or transaction.
ARTICLE X
Pursuant to Neb. Rev. Stat. ss.21-2052 as it presently exists or is
hereafter amended, the corporation shall not be required to hold annual meetings
of shareholders pursuant to Neb. Rev. Stat. ss.21-2027 unless the holding of an
annual meeting of shareholders is otherwise required by these articles of
incorporation or is otherwise required by the Investment Company Act of 1940 and
the rules and regulations thereunder.
ARTICLE XI.
To the fullest extent permitted by Neb. Rev. Stat. ss. 21-2035(2), as
the same exists or may hereafter be amended, and to the extent not inconsistent
with the Investment Company Act of 1940 and regulations thereunder, directors of
this corporation who are not officers and who do not control the corporation
shall not be liable to this corporation or its shareholders for monetary damages
for breach of fiduciary duty.
ARTICLE XII.
The name and address of the incorporator is:
Name Address
John C. Miles 1900 FirsTier Bank Building
Lincoln, NE 68508
<PAGE>
IN WITNESS WHEREOF, the undersigned sole incorporator has executed
these Articles of Incorporation on February 17, 1994.
/s/ John C. Miles
-------------------------------
John C. Miles
BYLAWS
OF
KPM FUNDS, INC.
ARTICLE I
OFFICERS, CORPORATE SEAL
Section 1.01. Name. The name of the corporation is KPM FUNDS INC.
Section 1.02. Registered Office. The registered office of the
corporation in Nebraska shall be that set forth in the Articles of Incorporation
or in the most recent amendment of the Articles of Incorporation or resolution
of the directors filed with the Secretary of State of Nebraska changing the
registered office.
Section 1.03. Other Offices. The corporation's office in Nebraska shall
be 10250 Regency Circle, Omaha, Nebraska 68114-5702, and the corporation may
have such other offices and places of business, within or without the State of
Nebraska, as the directors shall, from time to time, determine.
Section 1.04. Corporate Seal. The corporation shall have no seal.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 2.01. Place and Time of Meetings. Meetings of the shareholders
may be held at any place, within or without the State of Nebraska, designated by
the directors and, in the absence of such designation, shall be held at the
registered office of the corporation in the State of Nebraska. The directors
shall designate the time of day for each meeting and, in the absence of such
designation, every meeting of shareholders shall be held at 10:00 o'clock a.m.
Section 2.02. Regular Meetings. Annual meetings of shareholders will
not be held unless called by the shareholders pursuant to the Nebraska Business
Corporation Act or unless required by the Investment Company Act of 1940 and the
rules and regulations promulgated thereunder.
Section 2.03. Special Meetings. Special meetings of the shareholders
may be held at any time and for any purpose and may be called by the Chairperson
of the Board, the President, and two or more directors, or by one or more
shareholders holding ten percent (10%) or more of the shares entitled to vote on
the matters presented to the meeting.
Section 2.04. Quorum; Adjourned Meetings. The holders of a majority of
the shares outstanding and entitled to vote at a meeting shall constitute a
quorum for the transaction of business at any shareholders' meeting unless
otherwise required by the Nebraska Business Corporation Act or by the Investment
Company Act of 1940. In case a quorum shall not be present at a meeting, those
<PAGE>
present in person or by proxy shall adjourn to such day as they shall, by
majority vote, agree upon, without further notice other than by announcement at
the meeting at which such adjournment is taken. If a quorum is present, a
meeting may be adjourned from time to time without notice other than
announcement at the meeting. At adjourned meetings at which a quorum is present,
any business may be transacted which might have been transacted at the meeting
as originally noticed. If a quorum is present, the shareholders may continue to
transact business until adjournment notwithstanding the withdrawal of enough
shareholders to leave less than a quorum.
Section 2.05. Voting. At each meeting of the shareholders, every
shareholder shall have the right to vote in person or by proxy. Each
shareholder, unless the Articles of Incorporation or applicable laws provide
otherwise, shall have one vote for each share having voting power registered in
his/her name on the books of the corporation. Upon the demand of any
shareholder, the vote upon any question before the meeting shall be by written
ballot. Except as otherwise specifically provided by these Bylaws or as required
by provisions of the Investment Company Act of 1940 or other applicable laws,
all questions shall be decided by a majority vote of the number of shares
entitled to vote and represented at the meeting at the time of the vote. If the
matter(s) to be presented at a regular or special meeting relates only to a
particular portfolio or portfolios of the corporation, then only the
shareholders of the series of stock issued by such portfolio or portfolios are
entitled to vote on such matter(s).
Section 2.06. Voting - Proxies. The right to vote by proxy shall exist
only if the instrument authorizing such proxy to act shall have been executed in
writing by the shareholder himself or by his/her attorney thereunto duly
authorized in writing.
Section 2.07. Closing of Books. The Board of Directors may fix a time,
not exceeding seventy (70) days preceding the date of any meeting of
shareholders, as a record date for the determination of the shareholders
entitled to notice of, and to vote at, such meeting, notwithstanding any
transfer of shares on the books of the corporation after any record date so
fixed. If the Board of Directors fails to fix a record date for determination of
the shareholders entitled to notice of, and to vote at, any meeting of
shareholders, the record date shall be the thirtieth (30th) day preceding the
date of such meeting.
Section 2.08. Notice of Meetings. The Secretary or an Assistant
Secretary shall mail to each shareholder, shown by the books of the corporation
to be a holder of record of voting shares, at his/her address as shown by the
books of the corporation, a notice setting out the time and date and place of
any shareholders' meeting, which notice shall be mailed at least ten (10) and
not more than sixty (60) days prior thereto. Every notice of any shareholders'
meeting shall state the purpose or purposes for which the meeting has been
called, pursuant to Section 2.03, and the business transacted at all meetings
shall be confined to the purpose stated in the call.
<PAGE>
Section 2.09. Waiver of Notice. Notice of any meeting may be waived
either before, at or after such meeting in writing signed by each shareholder or
representative thereof entitled to vote the shares so represented.
Section 2.10. Written Action. Any action which might be taken at a
meeting of the shareholders may be taken without a meeting if done in writing
and signed by all of the shareholders entitled to vote on that action. If the
action to be taken relates to a particular portfolio or portfolios of the
corporation, then only shareholders of the series of stock issued by such
portfolio or portfolios are entitled to vote on such action.
ARTICLE III
BOARD OF DIRECTORS
Section 3.01. Number and Tenure of Office. The business of the
corporation shall be conducted by and its property managed by a Board of
Directors consisting of no less than three (3) nor more than seven (7)
directors, which number may be increased or decreased as provided in Section
3.03 of this Article. The initial Board of Directors shall consist of five (5)
directors. Each director shall hold office until the next meeting of
stockholders of the corporation next succeeding his/her election or until
his/her successor is duly elected and qualified. Directors need not be
stockholders.
The Board of Directors may elect a Chairperson, who shall preside at
meetings and shall have such other responsibilities and duties as may be
requested of or assigned to him by the Board.
Section 3.02. Vacancies. In case of any vacancy in the Board of
Directors through death, resignation or other cause, a majority of the remaining
directors, although such majority is less than a quorum, by an affirmative vote,
may, subject to any limitations contained in the Articles of Incorporation, or
the Investment Company Act of 1940, elect a successor to hold office until the
next annual meeting of the stockholders of the corporation or until his/her
successor is duly elected and qualified.
Section 3.03. Increase or Decrease in Number of Directors. Subject to
any limitations contained in the Articles of Incorporation, the Board of
Directors, by the vote of a majority of the entire Board, may increase the
number of directors, and any vacancies so created shall be filled by the
stockholders at the next meeting of stockholders called for that purpose.
Subject to the said limitations, the Board of Directors, by the vote of a
majority of the entire Board, may likewise decrease the number of directors to a
number not less than three.
Section 3.04. Election of Entire New Board. If at any time after the
first meeting of stockholders of the corporation more than one-third of the
directors in office shall consist of directors elected by the Board of
Directors, a meeting of the stockholders shall be called forthwith for the
purpose of electing the entire Board of Directors, and the terms of office of
the directors then in office shall terminate upon the election and qualification
of such Board of Directors. This Section 3.04 may be altered, amended or
repealed only upon the affirmative vote of the holders of a majority of all the
shares of the common stock of the corporation at the time outstanding and
entitled to vote.
<PAGE>
Section 3.05. Place of Meetings, Office and Records. The directors may
hold their meetings, have one or more offices and keep the books of the
corporation outside the State of Nebraska at any office or offices of the
corporation or at any other place as they may from time to time by resolution
determine, or, in the case of meetings, as shall be specified or fixed in the
respective notices or waivers of notice thereof.
Section 3.06. Regular Meetings. Regular meetings of the Board of Directors
shall be held quarterly at such time and on such notice as the directors may
from time to time determine.
A meeting of the Board of Directors shall be held immediately after a
meeting of the stockholders called for the election of directors. Said meeting
shall be held at the same place as the stockholders' meeting. No notice of such
meeting of the Board of Directors is required.
Section 3.07. Special Meetings. Special meetings of the Board of
Directors may be held from time to time upon call of the President or of a
majority of the directors by oral or telegraphic or written notice duly served
on or sent or mailed to each director not less than two (2) days before such
meeting. No notice need be given to any director who attends in person or to any
director who, in writing executed and filed with the records of the meeting
either before or after the holding thereof, waives such notice. Such notice or
waiver of notice need not state the purpose or purposes of such meeting.
Section 3.08. Quorum. A majority of the directors shall constitute a
quorum for the transaction of business, provided that a quorum shall in no case
be less than two directors. If at any meeting of the Board there shall be less
than a quorum present, a majority of those present may adjourn the meeting from
time to time until a quorum shall have been obtained. The act of the majority of
the directors present at any meeting at which there is a quorum shall be the act
of the directors, except as otherwise provided in the Articles of Incorporation
or in these Bylaws, or by specific statutory provisions superseding the
restrictions and limitations in the Articles of Incorporation or in these
Bylaws, or any contract or agreement to which the corporation is a party.
Section 3.09. Executive Committee. The Board of Directors may, in each
year, by the affirmative vote of a majority of the entire Board, elect from the
directors an Executive Committee to consist of such number of directors (not
less than two) as the Board may from time to time determine. The Chairperson of
the Committee shall be elected by the Board of Directors. The Board of Directors
by affirmative vote shall have power at any time to change the members of such
Committee and may fill vacancies in the Committee by election from the
directors. When the Board of Directors is not in session, the Executive
Committee shall have and may exercise any or all of the powers of the Board of
Directors in the management of the business and affairs of the corporation
except as provided by law or by any contract or agreement to which the
corporation is a party and
<PAGE>
except the power to increase or decrease the size of, or fill vacancies on, the
Board, to remove or appoint executive officers or to dissolve, or change the
membership of, the Executive Committee, and the power to make or amend the
Bylaws of the corporation. The Executive Committee may fix its own rules for the
conduct of its business or such rules may be established by resolution of the
Board of Directors, but in every case the presence of a majority shall be
necessary to constitute a quorum. In the absence of any member of the Executive
Committee, the members thereof present at any meeting, whether or not they
constitute a quorum, may appoint a member of the Board of Directors to act in
the place of such absent member.
Section 3.10. Investment Committee. The Board of Directors may appoint
an Investment Committee, consisting of three or more members, all of whom shall
be members of the Board of Directors. The Board of Directors may remove any
member and may appoint new alternate or additional members of the Investment
Committee, and may request persons who are not directors to serve as ex officio
members. It shall be the function of the Investment Committee to advise the
Board of Directors as to the investment of the assets of the corporation. The
Investment Committee shall have no power or authority to make any contract or
incur any liability whatever or to take any action binding upon the corporation,
the officers, the Board of Directors or the stockholders.
Section 3.11. Other Committees. The Board of Directors, by the
affirmative vote of a majority of the entire Board, may appoint other committees
which shall in each case consist of such number of members (not less than two)
who are members of the Board of Directors and shall have and may exercise such
powers as the Board may determine in the resolution appointing them. A majority
of all members of any such committee may determine its action and fix the time
and place of its meeting, unless the Board of Directors shall otherwise provide.
The Board shall have power at any time to change the members and powers of any
such committee, to fill vacancies, and to discharge any such committee, or to
request persons who are not directors to serve as ex officio members thereof.
Section 3.12. Action by Consent. Unless otherwise provided by the
Articles of Incorporation or Bylaws, or by the Investment Company Act of 1940 or
rules or regulations promulgated thereunder, any action required by statute to
be taken at a meeting of the directors, or of any committee, may be taken
without a meeting, if a consent in writing setting forth the action so taken
shall be signed by all of the directors or all of the members of the committee,
as the case may be. Such consent shall have the same effect as a unanimous vote.
The consent may be executed by the directors in counterparts.
Members of the Board of Directors, or any committee designated by the
Board, may participate in a meeting of the Board or such committee by conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
pursuant to this provision shall constitute presence in person at such meeting.
<PAGE>
Section 3.13. Compensation of Directors. Directors who are also
officers or employees of the corporation's investment adviser or principal
underwriter, shall take no compensation and expenses for the attendance at a
meeting. Other directors shall initially receive an annual retainer of $1,000,
$200 per meeting attended in person or by telephonic conference, reimbursement
for expenses or such other compensation as shall be fixed by the Board of
Directors.
ARTICLE IV
OFFICERS
Section 4.01. Number. The officers of the corporation shall consist of
a Chairperson of the Board (if one is elected by the Board), the President, one
or more Vice Presidents (if desired by the Board), a Secretary and one or more
Assistant Secretaries, a Treasurer and one or more Assistant Treasurers, and
such other officers and agents as may, from time to time, be elected by the
Board of Directors. Any two officers except those of Chairperson of the Board,
President and Vice President may be held by one person.
Section 4.02. Election, Term of Office and Qualifications. At each
annual meeting of the Board of Directors, the Board shall elect, from within or
without their number, the President, the Secretary, the Treasurer and such other
officers as may be deemed advisable. Such officers shall hold office until the
next annual meeting of the directors or until their successors are elected and
qualify. The President and all other officers who may be directors shall
continue to hold office until the election and qualification of their
successors, notwithstanding an earlier termination of their directorship.
Section 4.03. Resignation. Any officer may resign his/her office at any
time by delivering a written resignation to the Board of Directors, the
President, the Secretary, or any Assistant Secretary. Unless otherwise specified
therein, such resignation shall take effect upon delivery.
Section 4.04. Removal and Vacancies. Any officer may be removed from
his/her office by a majority of the whole Board of Directors, with or without
cause. Such removal, however, shall be without prejudice to the contract rights
of the person so removed. If there be a vacancy among the officers of the
corporation by reason by death, resignation or otherwise, such vacancy shall be
filled for the unexpired term by the Board of Directors.
Section 4.05. Chairperson of the Board. The Chairperson of the Board,
if one is elected, shall preside at all meetings of the shareholders and
directors and shall have such other duties as may be prescribed, from time to
time, by the Board of Directors.
Section 4.06. President. The President shall have general active management
of the business of the corporation. In the absence of the Chairperson of the
Board, he/she shall preside at all meetings of the shareholders and directors.
He/she shall be the chief executive officer of the corporation and shall see
that all orders and resolutions of the Board of Directors are carried into
effect. He/she shall be ex officio a member of all standing committees. He/she
may execute and
<PAGE>
deliver, in the name of the corporation, any deeds, mortgages, bonds, contracts
or other instruments pertaining to the business of the corporation and, in
general, shall perform all duties usually incident to the office of President.
He/she shall have such other duties as may, from time to time, be prescribed by
the Board of Directors.
Section 4.07. Vice President. Each Vice President shall have such
powers and shall perform such duties as may be specified in the Bylaws or
prescribed by the Board of Directors or by the President. In the event of
absence or disability of the President, Vice Presidents shall succeed to his/her
power and duties in the order designated by the Board of Directors.
Section 4.08. Secretary. The Secretary shall be secretary of, and shall
attend all, meetings of the shareholders and Board of Directors and shall record
all proceedings of such meetings in the minute book of the corporation. He/she
shall give proper notice of meetings of shareholders and directors. He/she shall
perform such other duties as may, from time to time, be prescribed by the Board
of Directors or by the President.
Section 4.09. Treasurer. The Treasurer shall keep accurate accounts of
all moneys of the corporation received or disbursed. He/she shall deposit all
moneys, drafts and checks in the name of, and to the credit of, the corporation
in such banks and depositories as a majority of the whole Board of Directors
shall, from time to time designate. He/she shall have power to endorse, for
deposit, all notes, checks and drafts received by the corporation. He/she shall
disburse the funds of the corporation, as ordered by the Board of Directors,
making proper vouchers therefor. He/she shall render to the President and the
directors, whenever required, an account of all his/her transactions as
Treasurer and of the financial condition of the corporation, and shall perform
such other duties as may, from time to time, be prescribed by the Board of
Directors or by the President.
Section 4.10. Assistant Secretaries. At the request of the Secretary,
or in his/her absence or disability, any Assistant Secretary shall have power to
perform all the duties of the Secretary and, when so acting, shall have all the
powers of, and be subject to all restrictions upon, the Secretary. The Assistant
Secretaries shall perform such other duties as from time to time may be assigned
to them by the Board of Directors or the President.
Section 4.11. Assistant Treasurers. At the request of the Treasurer, or
in his/her absence or disability, any Assistant Treasurer shall have power to
perform all the duties of the Treasurer, and when so acting, shall have all the
powers of, and be subject to all the restrictions upon, the Treasurer. The
Assistant Treasurers shall perform such other duties as from time to time may be
assigned to them by the Board of Directors or the President.
Section 4.12. Compensation. The officers of this corporation who are
not also officers or employees of the investment advisors or principal
underwriters of the Fund shall receive such compensation for their services as
may be determined, from time to time, by resolution of the Board of Directors.
<PAGE>
Section 4.13. Surety Bonds. The Board of Directors may require any
officer or agent of the corporation to execute a bond (including, without
limitation, any bond required by the Investment Company Act of 1940 and the
rules and regulations of the Securities and Exchange Commission) to the
corporation in such sum and with such surety or sureties as the Board of
Directors may determine, conditioned upon the faithful performance of his/her
duties to the corporation, including responsibility for negligence and for the
accounting of any of the corporation's property, funds or securities that may
come into his/her hands. In any such case, a new bond of like character shall be
given at least every six years, so that the date of the new bond shall not be
more than six years subsequent to the date of the bond immediately preceding.
ARTICLE V
SHARES AND THEIR TRANSFER AND REDEMPTION
Section 5.01. Certificates for Shares. Shares issued by the corporation
shall be uncertificated.
Section 5.02. Issuance of Shares. The Board of Directors is authorized
to cause to be issued shares of the corporation up to the full amount authorized
by the Articles of Incorporation in such series and in such amounts as may be
determined by the Board of Directors and as may be permitted by law. No shares
shall be allotted except in consideration of cash or property, including
securities valued in accordance with procedures adopted by the Board of
Directors. At the time of such allotment of shares, the Board of Directors
making such allotments shall state, by resolution, their determination of the
fair value to the corporation in monetary terms of any consideration other than
cash for which shares are allotted. No shares of stock issued by the corporation
shall be issued, sold, or exchanged by or on behalf of the corporation for any
amount less than the net asset value per share of the shares outstanding as
determined pursuant to Article X hereunder.
Section 5.03. Redemption of Shares. Upon the demand of any shareholder
this corporation shall redeem any share of stock issued by it held and owned by
such shareholder at the net asset value thereof as determined pursuant to
Article X hereunder. The Board of Directors may suspend the right of redemption
or postpone the date of payment during any period when: (a) trading on the New
York Stock Exchange is restricted or such Exchange is closed for other than
weekends or holidays; (b) the Securities and Exchange Commission has by order
permitted such suspension; or (c) an emergency as defined by rules of the
Securities and Exchange Commission exists, making disposal of portfolio
securities or valuation of net assets of the corporation not reasonably
practicable.
<PAGE>
Section 5.04. Transfer of Shares. Transfer of shares on the books of
the corporation may be authorized only by the shareholder named on the books of
the corporation in the case of uncertificated shares or in the certificate in
the case of certificated shares, or the shareholder's legal representative, or
the shareholder's duly authorized attorney-in-fact, and, in the case of
certificated shares, upon surrender of the certificate or the certificates for
such shares or a duly executed assignment covering shares held in uncertificated
form. The corporation may treat, as the absolute owner of shares of the
corporation, the person or persons in whose name shares are registered on the
books of the corporation.
Section 5.05. Registered Shareholders. The corporation shall be
entitled to treat the holder of record of any share or shares of stock as the
holder in fact thereof and accordingly shall not be bound to recognize any
equitable or other claim to or interest in such share on the part of any other
person, whether or not it shall have express or other notice thereof, except as
otherwise expressly provided by the laws of Nebraska.
Section 5.06. Transfer Agents and Registrars. The Board of Directors
may from time to time appoint or remove transfer agents and/or registrars of
transfers of shares of stock of the corporation, and it may appoint the same
person as both transfer agent and registrar. Upon any such appointment being
made all certificates representing shares of capital stock thereafter issued
shall be countersigned by one of such transfer agents or by one of such
registrars of transfers or by both and shall not be valid unless so
countersigned. If the same person shall be both transfer agent and registrar,
only one countersignature by such person shall be required.
Section 5.07. Transfer Regulations. The shares of stock of the
corporation may be freely transferred, and the Board of Directors may from time
to time adopt rules and regulations with reference to the method of transfer of
the shares of stock of the corporation.
ARTICLE VI
DIVIDENDS
It shall be the policy of the corporation to distribute to its
shareholders, at least annually, sufficient net investment income and realized
capital gains in order to comply with the provisions of the United States
Internal Revenue Code which relieve investment companies from Federal Income
Tax. The Board of Directors may provide to the shareholders a plan for
reinvesting such net investment income and capital gains under such terms and
conditions as they, in their discretion, shall deem desirable.
ARTICLE VII
BOOKS AND RECORDS, AUDIT, FISCAL YEAR
Section 7.01. Books and Records. The Board of Directors of the corporation
shall cause to be kept:
<PAGE>
(1) a share register, giving the names and addresses of the
shareholders, the number and classes held by each, and the
dates on which the shares were issued;
(2) records of all proceedings of shareholders and directors;
and
(3) such other records and books of account as shall be necessary
and appropriate to the conduct of the corporate business.
Section 7.02. Documents Kept at Registered Office. The Board of Directors
shall cause to be kept originals or copies of:
(1) records of all proceedings of the shareholders and directors;
(2) Bylaws of the corporation and all amendments thereto; and
(3) reports made to any or all of the shareholders within the
last preceding three (3) years.
Section 7.03. Audit, Accountant.
(a) The Board of Directors shall cause the records and books of account
of the corporation to be audited at least once in each fiscal year and at such
other times as it may deem necessary or appropriate.
(b) The corporation shall employ an independent certified public
accountant or firm of independent certified public accountants as its Accountant
to examine the accounts of the corporation and to sign and certify financial
statements filed by the corporation. The Accountant's certificates and reports
shall be addressed both to the Board of Directors and to the shareholders.
(c) A majority of the members of the Board of Directors shall select the
Accountant at any meeting held before the first regular meeting of shareholders,
and thereafter shall select the Accountant annually at a meeting held within
thirty (30) days before or after the beginning of the fiscal year of the
corporation. Such selection shall be submitted for ratification or rejection at
the next succeeding shareholders' meeting. If such meeting shall reject such
selection, the Accountant shall be selected by majority vote, either at the
meeting at which the rejection occurred or at a subsequent meeting of
shareholders called for the purpose.
(d) Any vacancy occurring between regular meetings, due to the death,
resignation or otherwise of the Accountant, may be filled by the Board of
Directors.
Section 7.04. Fiscal Year. The corporation shall operate and its financial
statements shall be prepared on a fiscal year ending on the last day of the
month preceding the month in which the
<PAGE>
Corporation's Registration Statement on Form N1-A and filed with the Securities
& Exchange Commission is declared effective..
ARTICLE VIII
INSPECTION OF BOOKS
Section 8.01. Every shareholder of the corporation shall have a right to
examine, in person or by agent or attorney, at any reasonable time or times, for
any proper purpose, and at the place or places where usually kept, the share
register, books of account and records of the proceedings of the shareholders
and directors and to make extracts therefrom.
ARTICLE IX
VOTING OF STOCK HELD
Section 9.01. Unless otherwise provided by resolution of the Board of
Directors, the President, any Vice President, the Secretary or the Treasurer,
may from time to time appoint an attorney or attorneys or agent or agents of the
corporation, in the name and on behalf of the corporation, to cast the votes
which the corporation may be entitled to cast as a stockholder or otherwise in
any other corporation or association, any of whose stock or securities may be
held by the corporation, at meetings of the holders of the stock or other
securities of any such other corporation or association, or to consent in
writing to any action by any such other corporation or association, and may
instruct the person or persons so appointed as to the manner of casting such
votes or giving such consent, and may execute or cause to be executed on behalf
of the corporation and under its corporate seal, or otherwise, such written
proxies, consents, waivers, or other instruments as it may deem necessary or
proper in the circumstances; or any of such officers may themselves attend any
meeting of the holders of stock or other securities of any such corporation or
association and thereat vote or exercise any or all other powers of the
corporation as the holder of such stock or other securities of such other
corporation or association, or consent in writing to any action by any such
other corporation or association.
ARTICLE X
DETERMINATION OF NET ASSET VALUE
Section 10.01. The net asset value per share of each series of stock
issued by the portfolios of the corporation shall be determined in good faith by
or under supervision of the officers of the corporation as authorized by the
Board of Directors as often and on such days and at such time(s) at the Board of
Directors shall determine. Provisions in the currently effective Prospectus of
the corporation regarding determination of net asset value shall be controlling.
Section 10.02. For purposes of the computation of net asset value of the
corporation's shares, the following shall apply:
<PAGE>
(a) The Board of Directors, or its authorized officer or other
representative, shall compute the net asset value of shares of common stock at
such times and by such methods as may be required by the Investment Company Act
of 1940 or rules or regulations thereunder. In the absence of any such
requirements, such computation shall be made at least once each day on which the
New York Stock Exchange is open for unrestricted trading. Such computation shall
be as of the close of the New York Stock Exchange.
The Board of Directors may cause the net asset value to be computed at
other times and may vary or terminate the effective periods, to the extent
permitted by applicable law.
(b) The net asset value in effect for the purpose of the issue of common
stock to the public shall be the net asset value next determined after receipt
of a purchase order at the principal office of the corporation or its agent or
in accordance with any provision of the Investment Company Act of 1940 and any
rule or regulation thereunder, or any rule or regulation made or adopted by any
Securities Association registered under the Securities Exchange Act of 1934.
(c) The net asset value applicable to each share of common stock of the
corporation surrendered to the corporation for redemption, pursuant to the
provisions of Article V, Section 5.03 hereof, shall be that value next
determined after the request for redemption is properly received by the
corporation or its agent at either of their principal offices, or in accordance
with such other requirements as may be determined by the directors for
expediting redemptions.
(d) The net asset value of each share of common stock of the corporation
shall be the quotient obtained by dividing the value of the net assets of the
respective series of shares of the corporation (the value of the assets less its
liabilities exclusive of common stock and surplus) by the total number of shares
of common stock outstanding of the series at such close all determined and
computed as follows:
(1) The assets shall be deemed to include:
(i) All cash on hand, on deposit or on call;
(ii) All bills and notes and accounts receivable;
(iii) All shares of stock and subscription rights and
other securities owned or contracted for by the
corporation, other than its own stock;
(iv) All stock and cash dividends and cash distributions
to be received by the corporation and not yet
received by it, but declared to stockholders of
record on a date on or before the date as of which
the net asset value is being determined;
<PAGE>
(v) All interest accrued on any interest bearing
securities owned by the corporation; and
(vi) All other property of any kind and nature including
prepaid expenses, the value of such assets to be
determined by the Board of Directors according to a
method as they shall in good faith determine to
reflect fair market value.
In determining the value of the assets of the
corporation for the purpose of obtaining the net
asset value, securities with maturities of sixty
days or less will be valued at cost and interest
will be accrued daily. All other assets of the
corporation shall be valued by such method as the
Board of Directors in good faith shall deem to
reflect their fair market value.
(2) The liabilities of the corporation shall be deemed to include:
(i) All bills and notes and accounts payable:
(ii) All administrative expenses payable and/or accrued
(including management fees);
(iii) All contractual obligations for the payment of money
or property, including the amount of any unpaid
dividend declared upon the corporation's stock and
payable to stockholders of record on or before the
day as of which the value of the corporation's stock
is being determined;
(iv) All reserves, if any, authorized or approved by the
Board of Directors for taxes; and
(v) All other liabilities of the corporation of
whatsoever kind and nature, except liabilities
represented by outstanding common stock and surplus
of the corporation.
(3) For the purpose hereof:
(i) Common stock subscribed for shall be deemed to be
outstanding as of the time of acceptance of any
subscription and the entry thereof on the books of
the corporation and the net price thereof shall be
deemed to be an asset of the corporation; and
(ii) Common stock surrendered for redemption to the
corporation pursuant to the provisions of Article V,
Section 5.03 hereof shall be deemed to be
outstanding until the close of business on the date
surrendered and, thereupon, and until paid, the
redemption price thereof shall be deemed to be a
liability of the corporation.
<PAGE>
ARTICLE XI
CUSTODY OF ASSETS
Section 11.01. All securities and cash owned by this corporation
shall, as hereinafter provided, be held by or deposited with a bank or trust
company having (according to its last published report) not less than two
million dollars ($2,000,000) aggregate capital, surplus and undivided profits
(the "Custodian").
This corporation shall enter into a written contract with the
Custodian regarding the powers, duties and compensation of the Custodian with
respect to the cash and securities of this corporation held by the Custodian.
Said contract and all amendments thereto shall be approved by the Board of
Directors of this corporation. In the event of the Custodian's resignation or
termination, the corporation shall use its best efforts promptly to obtain a
successor Custodian and shall require that the cash and securities owned by this
corporation held by the Custodian be delivered directly to such successor
Custodian.
ARTICLE XII
AMENDMENTS
Section 12.01. These Bylaws may be amended or altered by a vote
of the majority of the whole Board of Directors at any meeting provided that
notice of such proposed amendment shall have been given in the notice given to
the directors of such meeting. Such authority in the Board of Directors is
subject to the power of the shareholders to change or repeal such Bylaws by a
majority vote of the shareholders present or represented at any meeting of
shareholders called for such purpose. The Board of Directors shall not make or
alter any Bylaws fixing their qualifications, classifications, term of office,
or number, except that the Board of Directors may make or alter any Bylaw to
increase their number.
ARTICLE XIII
INDEMNIFICATION
No indemnification shall be made by this corporation that is
inconsistent with the guidelines set forth in Investment Company Act Releases
No. 7221 (June 9, 1972) and No. 11330 (September 2, 1980) or, if such releases
are modified, superseded or rescinded, the guidelines set forth in any successor
releases regarding indemnification under Section 17(h) of the Investment Company
Act of 1940.
This copy of the Bylaws is a true and accurate copy of the Bylaws
approved and adopted by the Board of Directors on February 18, 1994.
-------------------------
Lamar S. Jones, Secretary
AMENDED MANAGEMENT AND INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this -------day of -----------, 1994, by and between KPM
FUNDS, INC., a Nebraska corporation (hereinafter called "Fund") and KPM
INVESTMENT MANAGEMENT, INC., a Nebraska corporation (hereinafter called
"Adviser");
In consideration of the mutual covenants herein contained, the parties
hereto agree as follows:
1. Appointment of Investment Adviser
-------------------------------------
The Fund hereby appoints the Adviser to manage the investment and
reinvestment of assets of the KPM Equity Portfolio, KPM Fixed Income Portfolio
and any other Portfolio of the Fund which may be hereafter designated as a
separate series, subject to the supervision of the Board of Directors of the
Fund for the period and on the terms set forth herein. The Adviser hereby
accepts such appointment and agrees during such period, at its own expense, to
render the services and to assume the obligations herein set forth, for the
compensation herein provided. The Adviser shall not be liable to the Fund for
any act or omission by the Adviser or for any losses sustained by the Fund or
its shareholders except in the case of willful misfeasance, bad faith, gross
negligence or reckless disregard of duty.
2. Duties and Expenses of Adviser and Fund
-------------------------------------------
(a) The Fund shall, at all times, inform Adviser as to the securities held
by it, the funds available or to become available for investment by it, and
otherwise as to the condition of its affairs.
(b) Adviser shall furnish to the Fund, at the regular executive offices of
the Fund, advice and recommendations with respect to the purchase and sale of
securities and investments and the making of commitments and shall place at the
disposal of the Fund such statistical, research,
<PAGE>
analytical and technical services, information and reports as may reasonably be
required. The Adviser shall also pay or reimburse the Fund for the compensation,
if any, of the officers of the Fund that are also officers or employees of the
Adviser.
The officers of the Fund or the Adviser shall use their best efforts to
obtain the most favorable execution available from brokers or dealers in
purchasing and selling securities. In so doing, such officers may consider such
factors which they may deem relevant to the Fund's best interest, such as price,
the size of the transaction, the nature of the market for the security, the
amount of commission, the timing of the transaction taking into account market
prices and trends, the reputation, experience and financial stability of the
broker-dealer involved and the quality of service rendered by the broker-dealer
in other transactions. Subject to the foregoing considerations, at the Fund's
expense, such officers may place orders for the purchase or sale of portfolio
securities with brokers or dealers who have provided research, statistical or
other financial information and services to the Fund or the Adviser. Such
officers shall have discretionary authority to utilize broker-dealers who have
provided brokerage and research information of the type or nature referred to in
Section 28(e) of the Securities Exchange Act of 1934 to the Fund or the Adviser
even though it may result in the payment by the Fund of an amount of commission
for effecting a securities transaction in excess of the amount of commission
another broker-dealer would have charged for effecting that transaction,
providing, however, that the Fund officers have determined in good faith that
such amount of commission was reasonable in relation to the value of the
brokerage and research services provided by the broker-dealer effecting the
transactions, viewed in terms of either that particular transaction or their
responsibilities with respect to the accounts for which said officers exercise
investment discretion.
<PAGE>
(c) Except as otherwise expressly provided herein, the Fund shall pay the
following items:
(1) the charges and expenses of any custodian or depository appointed by
the Fund for the safekeeping of its cash, securities and other
property;
(2) the charges and expenses of auditors for the Fund:
(3) the charges and expenses of any transfer agents and registrars
appointed by the Fund:
(4) broker's commissions and issue and transfer taxes chargeable to the
Fund in connection with securities transactions to which the Fund is
a party:
(5) all taxes and corporate fees payable by the Fund to federal,
state or other governmental agencies:
(6) compensation of the disinterested directors of the Fund, as such, and
all expenses of Fund shareholders' and directors' meetings and of
preparing, printing and mailing reports to shareholders of the Fund:
(7) charges and expenses of legal counsel for the Fund in connection
with legal matters relating to the Fund, including without limitation,
legal services rendered in connection with the Fund's corporate
existence, corporate and financial structure, relations with its
stockholders, and the issuance of securities: and
(8) all other bookkeeping, administrative and operational costs, charges
and expenses of the Fund, without limitation.
3. Fees of Adviser
--------------------
For the services to be furnished by the Adviser hereunder, the Fund shall,
commencing with the effective date of the first public offering of shares of the
Portfolios, pay Adviser an annual fee as set forth on Appendix A equal to a
percentage of the average net asset value of the
<PAGE>
Portfolios as ascertained on each business day and paid monthly to the extent
that additional series of the Fund are added in the future, the Fund will pay
the fee as approved by the Board of Directors of the Fund which such fee shall
be described on an Appendix A to this Agreement.
The compensation for the period from the effective date hereof to the
next succeeding last day of the month shall be prorated according to the
proportion which such period bears to the full month ending on such date, and
provided further that, upon any termination of this Agreement before the end of
any month, such compensation for the period from the end of the last month
ending prior to such termination to the date of termination, shall be prorated
according to the proportion which such period bears to a full month, and shall
be payable upon the date of termination. For the purpose of the Adviser's
compensation, the value of the Fund's net assets shall be computed in the manner
specified in its Articles of Incorporation or By-Laws in connection with the
determination of the net asset value of its shares.
4. Independent Contractor
--------------------------------
Adviser shall, for all purposes herein, be an independent contractor
and shall have no authority to act for or represent the Fund in its investment
commitments unless otherwise provided. No agreement, bid, offer, commitment,
contract or other engagement entered into by Adviser whether on behalf of
Adviser or whether purported to have been entered into on behalf of the Fund
shall be binding upon the Fund, and all acts authorized to be done by Adviser
under this Agreement shall be done by it as an independent contractor and not as
agent.
5. Non-Exclusive Services of Adviser
-------------------------------------
Except to the extent necessary for performance of Adviser's obligations
hereunder, nothing shall restrict the right of Adviser or any of its directors,
officers, or employees who may be directors, officers or employees of the Fund
to engage in any other business or to devote time
<PAGE>
and attention to the management or other aspects of any other business whether
of a similar or dissimilar nature or to render services of any kind to any other
corporation, firm, individual or association. The services of the Adviser to the
Fund hereunder are not to be deemed exclusive, and the Adviser shall be free to
render similar services to others so long as its services hereunder be not
impaired thereby.
6. Effective Period and Termination of this Agreement This Agreement
shall become effective on the effective date of the first public offering of the
Fund's shares, and shall continue in effect unless sooner terminated as herein
provided until the last day of the second fiscal year ending after the Effective
Date, and thereafter shall continue in effect only if approved at least
annually: (a) by the Board of Directors of the Fund: or (b) by the vote of a
majority of the outstanding shares of the Fund (as defined in the Investment
Company Act of 1940) and, in addition, (c) by the vote of a majority of the
directors of the Fund who are not parties hereto nor interested persons of any
party, as required by the Investment Company Act of 1940, provided that the
first such approval by directors under (a) or (c) shall take place within thirty
days prior to or after the last day of the second fiscal year after the
Effective Date, and each subsequent annual approval shall take place within
thirty days prior to or after the last day of the fiscal year in each year
thereafter, and if approval made by the vote of shareholders, such approval
shall be made at a meeting held at any time in any calendar year, and each such
approval whether under (a) and (c) or under (b) and (c) shall be effective to
continue such contract for a period ending on the corresponding day of approval
of the next succeeding year.
This Agreement may be terminated at any time, without payment of any
penalty, by the Board of Directors of the Fund, or by a vote of a majority of
the outstanding voting securities of
<PAGE>
the Fund, in either case upon not less than sixty (60) days' written notice to
Adviser, and it may be terminated by Adviser upon sixty (60) days' written
notice to the Fund.
7. Assignment of Agreement Prohibited
--------------------------------------------
This Agreement will automatically be terminated in the event of its
assignment. It may not be transferred, assigned, sold, or in any manner
hypothecated or pledged: nor may any new agreement become effective without the
affirmative vote of a majority of those directors of the Fund who are not
parties to such Agreement or interested persons of any such party, and ratified
by a vote of the majority of the outstanding voting securities of the Fund,
provided that this limitation shall not prevent any minor amendments to the
Agreement which may be required by federal or state regulatory bodies.
8. Interested Persons
---------------------------
It is understood that directors, officers, agents and stockholders of
the Fund are or may be interested in the Adviser (or any successor thereof) as
directors, officers, agents, stockholders or otherwise; that directors,
officers, agents, and stockholders of the Adviser are or may be interested in
the Fund as directors, officers, agents, stockholders or otherwise: and that the
Adviser (or any such successor) is or may be interested in the Fund as
stockholder or otherwise.
9. Definitions
---------------------
For the purpose of the Agreement, the terms "vote of a majority of the
outstanding voting securities," "assignment," "affiliated person" and
"interested person" shall have the respective meanings specified in the
Investment Company Act of 1940 as now or hereafter in effect.
10. Proprietary Interest of Adviser
----------------------------------------
The parties hereto acknowledge and agree that the letters "KPM" are
proprietary to and the sole and exclusive property of the Adviser. Adviser
hereby licenses the use of the letters
<PAGE>
"KPM" to the Fund for a term concurrent with the term of this Agreement. From
and after a date which is one hundred eighty (180) days after the termination of
this Agreement, Fund shall not do business under any name containing the letters
"KPM" without the prior written consent of Adviser.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their proper officers and their corporate seals to be hereunto
affixed, all as of the day and year first above written.
KPM FUNDS, INC.
By --------------------------------
President
Attest --------------------------
Secretary
KPM INVESTMENT MANAGEMENT, INC.
By ------------------------------
President
Attest--------------------------
Secretary
<PAGE>
APPENDIX A
FEES
KPM Equity Portfolio .75%
KPM Fixed Income Portfolio .60%
The Adviser further agrees until further notice to voluntarily
reimburse the Portfolios monthly, to the extent of the advisory fee paid, in an
amount necessary to limit the Portfolios total expenses, other than
extraordinary expenses, to an amount not exceeding an annual rate of 1.50% for
the KPM Equity Portfolio and 1.25% for the KPM Fixed Income Portfolio.
DISTRIBUTION AGREEMENT
AGREEMENT, made the --------day of-------- , 1994, between KPM FUNDS, INC.,
a Nebraska corporation (hereinafter called the "Fund"), and KIRKPATRICK, PETTIS,
SMITH, POLIAN, INC., a Nebraska corporation (hereinafter called the
"Distributor"):
W I T N E S S E T H:
In consideration of the mutual covenants herein contained it is agreed
as follows:
1. Appointment of Fund Distributor. The Fund hereby appoints the
Distributor as its exclusive agent to sell shares of common stock of the Fund
("Shares") during the term of this Agreement. The Distributor hereby accepts the
appointment and agrees to use its best efforts to find investors to purchase
Shares through the Distributor. The Distributor does not undertake to sell any
specific number of Shares.
2. Sale of Shares through Distributor. The Fund hereby agrees to offer
and sell through the Distributor as its agent, Shares of the Fund at the
applicable public offering price consisting of the net asset value per share.
The Fund reserves the right to reject any offer to purchase its Shares.
3. Fund to Supply Net Asset Value. The Fund shall determine in the
manner provided in the Fund's By-Laws, and promptly furnish to the Distributor,
a statement of the net asset value per Share as often and at such times as the
Fund shall determine, but not less than daily as of the close of business of the
New York Stock Exchange on any business day on which the New York Stock Exchange
is open for unrestricted trading. The net asset value shall become effective at
such time and shall remain in effect during such period as may be stated in a
statement thereof furnished to the Distributor by the Fund.
<PAGE>
4. Delivery of Shares. Upon receipt by the Fund at its principal place of
business of a written order or confirmation from the Distributor, the Fund will,
if it elects to accept such order, as promptly as practicable, shall cause an
entry to be made in the records maintained by or on behalf of the Fund crediting
such Shares to the account of the purchaser thereof, in either event against
payment therefor in such manner as may be acceptable to the Fund.
5. Distributor Not Agent of Fund in Certain Circumstances. In making
agreements with its salesmen or with dealers, the Distributor shall act only in
its own behalf as principal and not as agent for the Fund. Distributor shall be
agent for the Fund only in respect of sales of the Fund's Shares.
6. Issue of Shares by Fund to Shareholders as Dividend. Nothing herein
shall prevent the Fund from issuing, distributing, or transferring Shares, at
any time to its stockholders as stock dividends, for not less than the net asset
value of such Shares.
7. Information Furnished by Fund to Distributor. The Fund shall furnish the
Distributor from time to time for use under Federal and state laws in the filing
of registration statements, copies of corporate documents, agreements and any
other related documents; provided that the Fund shall pay all legal, accounting,
registration and filing fees incident to such registrations and filings.
8. Sales Literature. The Distributor shall pay the initial and continuing
expenses of preparing, printing and distributing all advertising and sales
literature.
9. Compensation. The Distributor shall be entitled to receive the
compensation as set forth in the Fund's Plan of Distribution attached hereto and
incorporated by reference herein, as such Plan may be amended from time to time
and approved by the Board of Directors of the Fund.
<PAGE>
10. Indemnities.
(a) The Fund agrees to indemnify, defend and hold Distributor, its
officers and directors and any person who controls Distributor within the
meaning of Section 15 of the Securities Act of 1933, free and harmless from and
against any and all claims, demands, liabilities and expenses (including the
cost of investigating or defending such claims, demands or liabilities and any
counsel fees incurred in connection therewith) which Distributor, its officers
and directors or any such controlling person may incur under the Securities Act
of 1933, or under the common law or otherwise, arising out of or based upon any
alleged untrue statement of a material fact contained in the Fund's Registration
Statement or Prospectus or arising out of or based upon any alleged omission to
state a material fact required to be stated in either thereof or necessary to
make the statements in either thereof not misleading; providing, however, that
this indemnity, to the extent that it might require indemnity of any person who
is an officer or director or controlling person of Distributor and who is also a
director or officer of the Fund, shall not inure to the benefit of such officer
or director or controlling person unless a court of competent jurisdiction shall
determine, or it shall have been determined by controlling precedent, that such
result would not be against public policy as expressed in the Securities Act of
1933; and further provided, that in no event shall anything herein contained be
so construed as to protect Distributor (or its officers and directors or any
controlling persons) against any liability to the Fund or its security holders
to which Distributor would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence, in the performance of its duties or
by reason of its reckless disregard of its obligations and duties under this
Agreement. The Fund's agreement to indemnify Distributor, its officers and
directors and any such controlling person as aforesaid is expressly conditioned
upon its being notified of any action brought against Distributor, its officers
and directors or any such controlling person, such notification to be given by
<PAGE>
letter or telegram addressed to the Fund at its principal office in Omaha,
Nebraska, and sent to it by the person against whom such action is brought,
within ten (10) days after the summons or other legal process shall have been
served. The failure to so notify the Fund of any such action shall not relieve
it from any liability which it may have to the person against whom such action
is brought by reason of any such alleged untrue statement or omission otherwise
than on account of the indemnity contained in this paragraph. The Fund will be
entitled, at its election, to assume the defense of any suit brought to enforce
any such claim, demand or liability, but, in such case, such defense shall be
conducted by counsel of good standing chosen by the Fund and approved by
Distributor. In the event the Fund does elect to assume the defense of any such
suit and retain counsel of good standing approved by the Distributor, the
defendant or defendants in such suit shall bear the fees and expenses of any
additional counsel retained by any of them; but in case the Fund does not elect
to assume the defense of any such suit, or in case Distributor does not approve
of counsel chosen by the Fund, the Fund will reimburse Distributor, its officers
and directors, or the controlling person named as defendant or defendants in
such suit, for the reasonable fees and expenses of any counsel retained by
Distributor or them. This indemnity will inure exclusively to Distributor's
benefit, to the benefit of its successors, to the benefit of its officers and
directors and their respective estates, and to the benefit of any controlling
person and its successors. The Fund agrees to notify the Distributor promptly of
the commencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issue and sale of any of its
Shares.
<PAGE>
(b) Distributor agrees to indemnify, defend and hold the Fund, its
several officers and directors, and any person who controls the Fund within the
meaning of Section 15 of the Securities Act of 1933, free and harmless from and
against any and all claims, demands, liabilities and expenses (including the
cost of investigating or defending such claims, demands or liabilities and any
counsel fees incurred in connection therewith) which the Fund, its officers or
directors, or any such controlling person may incur under the Securities Act of
1933 or under the common law or otherwise: but only to the extent that such
liability or expense incurred by the Fund, its officers or directors, or such
controlling person resulting from such claims or demands shall arise out of or
be based upon any alleged untrue statement of a material fact contained in
information furnished in writing by Distributor to the Fund for use in the
Fund's Registration Statement or Prospectus or shall arise out of or be based
upon any alleged omission to state a material fact in connection with such
information required to be stated in the Registration Statement or Prospectus or
necessary to make such information not misleading. Distributor's agreement to
indemnify the Fund, its officers and directors, and any such controlling person
is expressly conditioned upon its being notified of any action brought against
the Fund, its officers and directors and any such controlling person, such
notification to be given by letter or telegram addressed to Distributor at its
principal office in Omaha, Nebraska, and sent to it by the person against whom
such action is brought, within ten (10) days after the summons or other first
legal process shall have been served. Distributor shall have a right to control
the defense of such action, with counsel of its own choosing, satisfactory to
the Fund, if such action is based solely upon such alleged misstatement or
omission on its part, and in any other event Distributor or such controlling
person shall each have the right to participate in the defense or
<PAGE>
preparation of the defense of any such action. The failure to so notify
Distributor of any such action shall not relieve Distributor from any liability
which Distributor may have to the Fund, its officers or directors, or to such
controlling person by reason of any such untrue statement or omission on
Distributor's part otherwise than on account of its indemnity contained in this
paragraph.
11. Registration and Qualification of Distributor and Salesmen.
(a) Distributor shall be registered and qualified to act as a
broker-dealer with the U.S. Securities and Exchange Commission, the National
Association of Securities Dealers, Inc. and the securities commissions of the
states where the Shares of the Fund will be offered. Distributor will comply
with all Federal and state securities laws applicable to the offer and sale of
securities and to the operation and conduct of the business of a broker-dealer.
(b) Distributor, at its sole expense, shall employ, train, register and
qualify such securities salesmen in such states as shall be agreed upon by the
Distributor and the Fund. Thereafter, Distributor shall supervise the activities
of such salesmen to assure their continuing compliance with the applicable
securities laws.
12. Assignment Terminates this Agreement; Amendment of this Agreement.
This Agreement shall automatically terminate in the event of its assignment; and
this Agreement may be amended only if the terms of the amendment are approved
either (a) by action of a majority of the Fund's directors and by a majority of
those directors of the Fund who are not interested or affiliated persons of the
Distributor or officers or employees of the Fund or (b) by affirmative vote of
the holders of a majority of the outstanding voting securities of the Fund.
<PAGE>
13. Effective Period and Termination of this Agreement.
(a) This Agreement shall become effective as of the date first set
forth above and shall continue in force for an indefinite period, subject to
prior termination as provided herein, but only so long as its continuance shall
be specifically approved at least annually by a vote of a majority of the Board
of Directors of the Fund or by a vote of the majority of the outstanding voting
securities of the Fund. In any event, this Agreement shall not be renewed or
performed unless it has been approved annually by a majority vote of those
directors of the Fund who are not parties to such agreement or interested or
affiliated persons of any such party, cast in person at a meeting called for the
purpose of voting on such approval.
(b) This Agreement may be terminated at any time, without payment of
any penalty, by the Board of Directors of the Fund, or by vote of a majority of
the outstanding voting securities of the Fund, in either case upon sixty (60)
days' written notice to the Distributor, and it may be terminated by the
Distributor upon sixty (60) days' written notice to the Fund.
14. Definitions. For the purpose of this Agreement, the terms "vote of a
majority of the outstanding securities", "assignment", "affiliated person" and
"interested person" shall have the respective meanings specified in the
Investment Company Act of 1940 as now or hereafter in effect.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their proper officers and their corporate seals to be hereunto
affixed, all as of the day and year first above written.
KPM FUNDS, INC.
By ------------------------
President
Attest:
- ---------------------------------
Secretary
KIRKPATRICK, PETTIS, SMITH,
POLIAN, INC.
By -------------------------
President
Attest:
- ---------------------------------
Secretary
ADMINISTRATION AGREEMENT
AGREEMENT made as of the 1st day of July, 1994, by and between KPM
Funds, Inc., a Nebraska corporation, having its principal office and place of
business at Omaha, Nebraska (the "Fund"), and SMITH HAYES Portfolio Management,
Inc., a Nebraska corporation, having its principal office and place of business
at Lincoln, Nebraska (the "Administrator"),
WHEREAS, the Fund desires to engage the Administrator to provide
transfer agent, dividend disbursing agent, fund accounting and related fund
administration services.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
Section 1. Terms of Appointment.
1.01 Subject to the conditions set forth in this Agreement, the Fund
hereby employs and appoints Administrator as the Fund's Administrator, Transfer
Agent and Dividend Disbursing Agent for all portfolios ("Portfolios") of the
Fund now existing or hereafter created and registered under the Investment
Company Act of 1940 ("1940 Act").
1.02 Administrator hereby accepts such employment and appointment and
agrees to act as the Fund's Administrator, Transfer Agent and Dividend
Disbursing Agent. Administrator agrees that it will also act as agent in
connection with any periodic investment plan, periodic withdrawal program or
other accumulation, open-account or similar plans provided to the Fund's
shareholders and set out in the Fund's prospectus.
<PAGE>
1.03 Administrator agrees to provide the necessary facilities,
equipment and personnel to perform its duties and obligations hereunder in
accordance with industry practice.
1.04 Administrator agrees that it will perform all of the usual and
ordinary services as Transfer Administrator and Dividend Disbursing
Administrator and as agent for the various shareholder accounts including but
not limited to: recording the issuance, transfer and redemption of shares,
maintaining all shareholder accounts, preparing annual shareholder meeting
lists, mailing proxies, receiving and tabulating proxies, mailing shareholder
reports and prospectuses, withholding taxes on non-resident alien accounts,
disbursing income dividends and capital gains distributions, recording
reinvestment of dividends and distributions in Fund shares, causing liquidation
of shares and causing disbursements to be made to withdrawal plan holders.
1.05 Administrator agrees that it will furnish the Fund with office
facilities, including such space, furniture, equipment and supplies as well as
personnel sufficient to carry out the necessary administrative, clerical, fund
accounting and bookkeeping functions of the Fund. In connection therewith, the
Administrator shall maintain all records required to be maintained for the Fund
under the Investment Company Act of 1940. Additionally, the Administrator shall
provide the following services to the Fund:
i. Daily pricing;
ii. Computation of daily net asset value and reporting to Fund
management, and others as requested;
iii. Prepare daily cash availability reports for Portfolio managers;
iv. Post daily all fund activity and prepare all applicable daily
reports;
v. Accrue expenses daily;
<PAGE>
vi. Calculate daily reconciliations of cash, receivables, payable
accounts and shares outstanding;
vii. Compute daily dividend rate for appropriate funds;
viii. Compute yields pursuant to S.E.C. formulas;
ix. Provide monthly analysis and reconciliation of all general
ledger accounts;
x. Generate and maintain monthly broker ledgers, commission
ledgers and net trade reports;
xi. Verify accuracy and propriety of bills and invoices, maintain
expenses files and coordinate payment of bills and invoices in
a timely manner;
xii. Prepare reports on expense limitations as needed;
xiii. Maintain and verify Portfolio trade tickets with broker
confirmation;
xiv. Determine income availability for monthly, quarterly and/or
annual dividend/distributions;
xv. Maintain historical record of all Fund net asset values and
dividend/distributions;
xvi. Coordinate audit examination of outside auditors, including
preparation of audit work paper package if required; and
xvii. Produce documents and respond to inquiries during S.E.C.
audits.
Section 2. Fees and Expenses.
2.01 For the services to be rendered by Administrator pursuant to
paragraph 1.04 and 1.05 the Fund agrees to pay Administrator a monthly fee
calculated at the annual rate of each Portfolio's average daily net assets set
forth on Appendix A, attached hereto and incorporated by reference herein.
<PAGE>
2.02 The Fund also agrees promptly to reimburse Administrator for all
reasonable out-of-pocket expenses or advances incurred by Administrator in
connection with the performance of services under this Agreement including, but
not limited to, expenditures for counsel fees, postage, envelopes, checks,
drafts, continuous forms, reports and statements, telephone, telegraph,
stationery, supplies, costs of outside mailing firms, record storage costs and
media for storage of records (e.g. microfilm, computer tapes or disks). In
addition, any other expenses incurred by Administrator at the request or with
the consent of the Fund will be promptly reimbursed by the Fund.
Section 3. Representations and Warranties of Administrator.
Administrator represents and warrants to the Fund that:
3.01 It is a corporation duly organized and existing and in good standing
under the laws of the State of Nebraska:
3.02 It is empowered under applicable laws and by its Articles of
Incorporation and By-laws to enter into and perform the services contemplated in
this Agreement:
3.03 All requisite corporate proceedings have been taken to authorized it
to enter into and perform this Agreement; and
3.04 It has and will continue to have and maintain the necessary
facilities, equipment and personnel to perform its duties and obligations under
this Agreement.
Section 4. Representations and Warranties of the Fund. The Fund represents
and warrants to Administrator that:
4.01 It is a corporation duly organized and existing and in good standing
under the laws of the State of Nebraska;
<PAGE>
4.02 It is an open-end, diversified management investment
company registered under the Investment Company Act of 1940;
4.03 A registration statement under the Securities Act of 1933 is
currently effective and will remain effective, and appropriate state securities
laws filings have been and will continue to be made, with respect to all shares
of the Fund being offered for sale;
4.04 The Fund is empowered under applicable laws and regulations and by
its charter and By-laws to enter into and perform this Agreement; and all
requisite corporate proceedings have been taken to authorize it to enter into
and perform under this Agreement.
Section 5. Indemnification.
5.01 Administrator shall not be responsible and the Fund shall
indemnify and hold Administrator harmless from and against any and all losses,
damages, costs, charges, counsel fees, payments, expenses and liability which
may be asserted against Administrator or for which it may be held to be liable,
arising out of or in any way attributable to:
(a) All actions of Administrator required to be taken by
Administrator pursuant to this Agreement provided that Administrator
has acted in good faith and with due diligence.
(b) The Fund's refusal or failure to comply with the terms of
this Agreement, or which arise out of the Fund's negligence or willful
misconduct or which arise out of the breach of any representation or
warranty of the Fund hereunder.
<PAGE>
(c) The reliance on, or the carrying out of, any instructions
or requests of the Fund.
(d) Defaults by dealers with respect to payment for share
orders previously entered.
(e) The reliance on, or the carrying out of, any instructions
or requests of the Fund.
(f) The offer or sale of the Fund's shares in violation of
any requirement under federal securities laws or regulations or the
securities laws or regulations of any state or in violation of any stop
order or other determination or ruling by any federal agency or state
with respect to the offer or sale of such shares in such state (unless
such violation results from Administrator's failure to comply with
written instructions of the Fund or of any officer of the Fund that no
offers or sales be made in or to residents of such state).
5.02 Administrator shall indemnify and hold the Fund harmless from and
against any and all losses, damages, costs, charges, counsel fees, payments,
expenses and liability arising out of Administrator's willful failure to comply
with the terms of this Agreement or which arise out of Administrator's gross
negligence or willful misconduct.
5.03 At any time Administrator may apply to any officer of the Fund for
instructions, and may consult with legal counsel for the Fund or its own legal
counsel, at the expense of the Fund, with respect to any matter arising in
connection with the services to be performed by Administrator under this
Agreement and Administrator shall not be liable and shall be indemnified by the
Fund for
<PAGE>
any action taken or omitted by it in good faith in reliance upon such
instructions or upon the opinion of such counsel. Administrator shall be
protected and indemnified in acting upon any paper or document believed by it to
be genuine and to have been signed by the proper person or persons and shall not
be held to have notice of any change of authority of any person, until receipt
of written notice thereof from the Fund.
5.04 In the event either party is unable to perform its obligations
under the terms of this Agreement because of acts of God, equipment or
transmission failure or damage, or other causes reasonably beyond its control,
such party shall not be liable for damages to the other for any damages
resulting from such failure to perform or otherwise from such causes.
5.05 In no event and under no circumstances shall either party to this
Agreement be liable to the other party for consequential damages under any
provision of this Agreement or for any act or failure to act hereunder.
Section 6. Covenants of Administrator and the Fund.
6.01 The Fund shall promptly furnish to Administrator, if requested
the following items:
(a) A certified copy of the resolution of the Board of Directors
of the Fund authorizing the appointment of Administrator and the
execution and delivery of this Agreement.
(b) Certified copy of the Articles of Incorporation and By-laws
of the Fund and all amendments thereto.
6.02 Administrator hereby agrees to establish and maintain facilities and
procedures reasonably acceptable to the Fund for recording share ownership,
check forms, and facsimile signature imprinting devices, if any; and for the
preparation or use, and for keeping account of such shares, forms and devices.
<PAGE>
6.03 To the extent required by Section 31 of the Investment Company Act
of 1940 and Rules thereunder, Administrator agrees that all records maintained
by Administrator relating to the services to be performed by Administrator under
this Agreement are the property of the Fund and will be preserved and will be
surrendered promptly to the Fund on request.
6.04 Administrator and the Fund agree that all books, records,
information and data pertaining to the business of the other party which are
exchanged or received pursuant to the negotiation of and the carrying out of
this Agreement shall remain confidential, and shall not be voluntarily disclosed
to any other person.
Section 7. Termination of Agreement.
7.01 This Agreement may be terminated by either party by 90 days
written notice.
Section 8. Miscellaneous.
8.01 Neither this Agreement nor any rights or obligations hereunder
may be assigned by either party without the written consent of the other.
8.02 This Agreement shall inure to the benefit of and be binding upon
the parties and their respective successors and assigns.
8.03 This Agreement constitutes the entire agreement between the
parties hereto and supersedes any prior agreement with respect to the subject
matter hereof, whether oral or written, and this Agreement may not be modified
except by written instrument executed by both parties.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by and through their duly authorized officers, as of the day and year
first above written.
KPM FUNDS, INC.
/s/ Rodney D. Cerny
ATTEST: By----------------------------
/s/ Scott C. Hoyt
Secretary -----------------------
SMITH HAYES PORTFOLIO MANAGEMENT, INC.
/s/ Jean B. Norris
By-----------------------------
ATTEST:
/s/ Sharon A. Shelley
Secretary ------------------------
<PAGE>
APPENDIX A
FEES
The fee for services rendered by Administrator shall be calculated at the annual
rate of .25% of the average daily net asset value of Fund. Notwithstanding the
calculation of the fee, the minimum fee payable in any one year shall not be
less than $10,000. Fees shall be billed monthly by Administrator and shall be
paid monthly by Fund within fifteen (15) days of the end of each month.
LAW OFFICES OF
CLINE, WILLIAMS, WRIGHT, JOHNSON & OLDFATHER
1900 FIRSTIER BANK BUILDING
LINCOLN, NEBRASKA 68508
(402) 474-6900
June 22, 1994
Board of Directors
KPM Funds, Inc.
10250 Regency Circle
Suite 200
Omaha, NE 68114
RE: FORM N-1A REGISTRATION STATEMENT
Ladies and Gentlemen:
Our opinion has been requested with respect to the shares of common
stock designated KPM Equity Portfolio and KPM Fixed Income Portfolio shares,
$.00001 par value per share (the "shares"), of the KPM Funds, Inc. (the "Fund"),
which are being registered with the Securities and Exchange Commission under the
Securities Act of 1933, as amended, by Form N-1A Registration Statement.
We have examined the Fund's Articles of Incorporation and Bylaws,
reviewed certain minutes of corporate proceedings, and have made such additional
factual and legal inquiry as we deemed necessary under the circumstances. Based
upon the foregoing, it is our opinion that:
1. The Fund is a duly and validly organized corporation presently
existing in good standing under the laws of the state of
Nebraska.
2. The issuance and sale of the shares have been duly and validly
authorized by the necessary corporate action; and said shares
will, upon delivery against payment, be duly authorized,
validly issued and outstanding, fully paid, and nonassessable
shares of common stock of the Fund.
<PAGE>
We consent to the use of this opinion as an exhibit to the Fund's Form
N-1A Registration Statement and further consent to the reference of our firm
under the heading "Legal Opinions" in the Prospectus forming a part thereof.
Very truly yours,
JOHN C. MILES
For the Firm
KPM FUNDS, INC.
PLAN OF DISTRIBUTION
WHEREAS, Rule 12b-1 under the Investment Company Act of 1940 ("Rule
12b-1") provides that, except as provided in Rule 12b-1, it shall be unlawful
for any registered open-end management investment company (other than such
company complying with the provisions of Section 10(d) under the Investment
Company Act of 1940 (the "1940 Act")) to act as distributor of securities of
which such company is the issuer, except through an underwriter;
WHEREAS, Rule 12b-1 provides that a registered open-end management
investment company will be deemed to be acting as a distributor of securities of
which it is the issuer, other than through an underwriter, if it engages
directly or indirectly in financing any activity which is primarily intended to
result in the sale of shares issued by such company, including, but not
necessarily limited to, advertising, compensation of underwriters, dealers and
sales personnel, the printing and mailing of prospectuses to other than current
shareholders, and the printing and mailing of sales literature;
WHEREAS, KPM Funds, Inc., a Nebraska corporation (the "Company"), has
appointed Kirkpatrick, Pettis, Smith, Polian, Inc., a Nebraska corporation (the
"Distributor"), the Distributor of the Company pursuant to a Distribution
Agreement, under which the Distributor agrees to distribute and pay the costs of
distributing shares of the Company, which shares shall be issued in series
corresponding to the portfolios of the Company (referred to herein as the
"Portfolio" or "Portfolios"), in consideration of which the Distributor shall
receive fees and reimbursements from the Company as provided in the Distribution
Agreement;
WHEREAS, Rule 12b-1 provides that a registered, open-end management
company may act as a distributor of securities of which it is the issuer,
provided that any payments made by such company in connection with such
distribution are made pursuant to a written plan describing all material aspects
of the proposed financing of distribution and that all agreements with any
person relating to implementation of the plan are in writing, and provided
further that certain additional conditions are met;
NOW, THEREFORE, the following shall constitute the Plan of
Distribution (the "Plan"), pursuant to which distribution of the Company's
shares of the Portfolios (the "Shares"), shall be made.
Section 1. Allocation of Responsibilities.
(a) The Company shall be solely responsible for all actions
required to be taken in connection with the offer, sale and distribution of the
Shares, other than such actions as are expressly assumed by the Distributor
pursuant to (1) the terms of this Plan and (2) the Distribution Agreement, which
complies with the provisions of Sections 6 and 7 of this Plan.
<PAGE>
(b) The Distributor shall be solely responsible for (1) the
distribution of and payment of the costs of distributing the Shares, which costs
shall include, by way of example, but not by way of limitation, compensation
paid to registered representatives of the Distributor and to broker/dealers that
have entered into sales agreements with the Distributor, the costs of printing
and distributing prospectuses, statements of additional information and
shareholder reports to those who are not, at the time of such distribution,
Company shareholders, the costs of preparing, printing and distributing sales
literature, the costs of preparing and running advertisements on radio,
television, newspapers or magazines, and costs connected with the use of a
"toll-free" telephone number for the Company and other distribution-related
expenses, but excluding fees and expenses of registering and qualifying the
Company and the Shares for distribution under federal and state securities laws;
(2) such other responsibilities assumed by the Distributor pursuant to the
Distribution Agreement; and (3) any other responsibilities in connection with
the distribution of the Shares assumed by the Distributor pursuant to a written
agreement which complies with Sections 6 and 7 of this Plan.
Section 2. Payment of Costs of Distribution.
(a) As long as the Distribution Agreement, or any amendment
thereto complying with Sections 6 and 7 of this Plan, shall remain in effect,
the Company shall compensate the Distributor as provided therein for its costs
of distribution of Shares incurred with respect to each of the Company's
Portfolios, with compensation computed separately for each Portfolio based on
the costs of distribution incurred with respect to each Portfolio, and such
reimbursements shall not exceed the percentages indicated on Exhibit 1 attached
hereto and incorporated by reference herein. Average daily net assets shall be
computed in accordance with the currently effective Prospectus of the Company.
Such compensation shall be made by the Company for the following
expenses:
(1) if Shares of any or all of the Company's Portfolios are
sold by registered representatives of the Distributor or
by broker/dealers that have entered into sales agreements
with the Distributor, compensation paid to such
registered representatives and broker/dealers in such
proportions as may be determined from time to time as set
forth in written agreements;
(2) all other costs of distributing the Shares, as set forth
in Section 1(b)(1) of this Plan;
(3) the total amount spent on all distribution activities
shall be in the sole discretion of the Distributor;
provided, however, that in the event the costs of
distribution of the Shares exceed the maximum amount
reimbursable pursuant
<PAGE>
to this Plan and the Distribution Agreement for any or all
of the Company's Portfolios, the Distributor shall be
solely responsible for the payment of any such excess
with respect to any or all of the Portfolios and the
Company and its Portfolios shall have no responsibility
therefor.
(b) In the event the Distribution Agreement shall for any reason
be terminated and neither the Distributor, the Investment Adviser to the
Company, nor any other person shall have entered into a written
agreement complying with Sections 6 and 7 of this Plan which, by its
terms, provides for the payment of the costs of distributing the Shares
by the Distributor, the Investment Adviser to the Company or such other
person, as the case may be, then, in such event, the Company shall
directly pay all costs of distribution referred to in Section 1(b)(1) of
this Plan; provided that, subject to Section 7 of this Plan, the amount
paid by the Company for distributing the Shares shall not exceed the
percentage of average daily net assets set forth in Section 2(a) and (b)
of this Plan.
Section 3. Portfolio Approvals.
(a) The Company represents that this Plan, together with the
Distribution Agreement, has been approved by a vote of the Board of
Directors of the Company and of the directors of the Company who are not
interested persons of the Company, as defined in Section 2(a)(19) of the
1940 Act and the rules, regulations and releases relating thereto, and
have no direct or indirect financial interest in the operation of the
Plan, or in the Distribution Agreement, or any other agreement related
to the Plan ("Interested Persons"), cast in person at a meeting called
for the purpose of voting on the Plan and the Distribution Agreement.
(b) In approving the Plan and the Distribution Agreement,
the directors of the Company have undertaken the
following:
(1) The Directors have concluded, in the exercise of
reasonable business judgment and in light of their
fiduciary duties under state law and Sections 36(a) and
36(b) of the 1940 Act, that the Plan will benefit the
Company and its shareholders.
(2) The Directors have requested and evaluated such
information as was reasonably necessary to an informed
determination of whether the Plan should be implemented,
and, in connection therewith, officials of the
Distributor, as a party to agreements related to the
Plan, have furnished such information reasonably
necessary for the foregoing purposes.
<PAGE>
(3) The directors have considered and given appropriate
weight to all pertinent factors, including, without
limitation, the following:
(A) the need for independent counsel or experts to
assist the directors in reaching a
determination;
(B) the nature of the problems or circumstances
which purportedly make implementation of the
Plan necessary or appropriate;
(C) the causes of such problems or circumstances;
(D) the way in which the Plan would address these
problems or circumstances and how it would be
expected to resolve or alleviate them, including
the nature and approximate amount of the
expenditures to the overall cost structure of
the Company, the nature of the anticipated
benefits and the time it would take for those
benefits to be achieved;
(E) the merits of possible alternative plans;
(F) the interrelationship between the Plan and the
activities of any other person who finances or
has financed distribution of the Shares,
including whether any payments by the Company to
such other person are made in such a manner as
to constitute the indirect financing of
distribution by the Company; and
(G) the possible benefits of the Plan to any other
person relative to those expected to inure to
the Company.
Section 4. Reports to and Review by the Board of Directors of the Company.
(a) Any person authorized to direct the disposition of monies
paid or payable by the Company pursuant to the Plan, the Distribution
Agreement or any other agreement related to the Plan shall provide the
Board of Directors of the Company, and the Board of Directors of the
Company shall review, at least quarterly, a written report of the
specific purposes for which such expenditures were made.
(b) The Distribution Agreement and any other agreement related to
the Plan shall, by their respective terms, provide that appropriate
officers of the Distributor, or any party to such other
<PAGE>
agreement, shall provide the directors of the Company with such
information as may be reasonably necessary to the directors of the
Company for the purposes required by Sections 3(a), 3(b) and 8(d) of
this Plan.
Section 5. Selection of Directors. In connection with the
implementation and continuation of the Plan, the Company hereby
undertakes to commit the selection and nomination of directors of the
Company who are not Interested Persons to a committee comprised of such
directors who are not such Interested Persons.
Section 6. Concerning the Distribution Agreement and Other
Agreements Related to the Plan. In addition to the requirements
contained in Sections 4(b) and 8 of the Plan, the Distribution Agreement
and any other agreement related to the Plan shall be in writing and
shall provide in substance that such agreement shall be terminated:
(a) at any time, without the payment of any penalty, by vote of a
majority of the members of the Board of Directors of a Portfolio who are
not Interested Persons or by vote of a majority of the outstanding
Shares of the Company on not more than sixty (60) days' written notice
to the other party thereto; provided that if a majority of the
outstanding Shares of any Portfolio votes to terminate this Plan, such
termination shall be effective with respect to such Portfolio, whether
or not the shareholders of any other Portfolio have voted to terminate
this Plan; and
(b) automatically, in the event of its assignment.
Section 7. Amendments and Modifications. The Plan, the
Distribution Agreement and any other agreement related to the Plan shall
not be amended, modified or superseded except by an agreement in
writing, and, in addition:
(a) may not be amended to increase materially the amount to be
spent for costs of distribution of any Portfolio of the Company, as
provided in Section 2 of this Plan, without the approval of a majority
of the outstanding Shares of such Portfolio subject to such increase;
and
(b) may not be amended in any material manner unless such
amendment has been approved in the manner provided in, and consistent
with the procedures specified by, Sections 3(a), 3(b) and 8(d) of this
Plan.
(c) If a majority of the outstanding Shares of any Portfolio of
the Company votes to amend this Plan, such amendment shall be effective
with respect to such Portfolio, whether or not the Shareholders of any
other Portfolio vote to adopt such amendment.
<PAGE>
Section 8. Continuation and Termination.
(a) The Plan shall terminate automatically in the event the
shareholder approval required pursuant to Section 10 is not received.
(b) The Plan, the Distribution Agreement and any other agreement
related to the Plan shall continue in effect for a period of more than
one (1) year from May 1, 1995, only as long as the continuance is
specifically approved in the manner described in subsection (d) of this
Section 8.
(c) The Plan may be terminated at any time by a majority of the
members of the Board of Directors of the Company who are not Interested
Persons or by vote of a majority of the outstanding Shares of the
Company.
(d) In determining whether the Plan shall be continued or
terminated as provided in Section 8, the directors of the Company shall
make such determination in the manner provided in, and consistent with
the procedures specified by, Sections 3(a) and 3(b) of this Plan;
provided that, in addition to the factors specified in Section 3(b)(3),
the directors of the Company shall also consider and give appropriate
weight to the following factors:
(1) the effect of the Plan on existing shareholders; and
(2) whether the Plan has, in fact, produced the anticipated
benefits for the Company and its shareholders.
Section 9. Preservation of Information.
(a) The Company shall, for a period of not less than six
(6) years, preserve the following information and
documentation:
(1) the Plan;
(2) the Distribution Agreement;
(3) any other agreement related to the Plan;
(4) any report made pursuant to Section 4 of the Plan; and
(5) all minutes which are recorded as a result of the
requirements of Sections 3, 7 or 8 of the Plan and which
relate to the approval, amendment or continuation of the
Plan, the Distribution Agreement or any other agreement
related to the Plan.
<PAGE>
(b) With respect to the information and documentation required to
be preserved pursuant to subsection (a) of this Section 9, such
information and documentation shall be preserved in an easily accessible
place for a period of not less than two (2) years.
Section 10. Shareholder Approval and Effective Date. The
effective date of this Plan shall be the date upon which the Company and
its Portfolios commence a public offering of shares pursuant to a
currently effective Registration Statement on Form N-1A and filed with
the Securities and Exchange Commission. Wherever referred to in this
Plan, the vote or approval of the holders of a majority of the
outstanding Shares of the Company or any Portfolio of the Company shall
mean the vote of (a) sixty-seven percent (67%) of such outstanding
Shares present at a meeting if the holders of more than fifty percent
(50%) of such outstanding Shares are present in person or by proxy or
(b) more than fifty percent (50%) of such outstanding shares, whichever
is lesser.
<PAGE>
EXHIBIT 1
Section 2(a) Payments
Portfolio % Limitation
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KPM Equity Portfolio .25
KPM Fixed Income Portfolio .25
