Cline, Williams, Wright, Johnson & Oldfather Letterhead
1900 FirsTier Bank Building
Lincoln, NE 68508-2095
402-474-6900
December 10, 1996
Securities and Exchange Commission
450 Fifth Street, N.W.
Judiciary Plaza
Washington, D.C. 20549
First Omaha Funds, Inc.
Registration Nos. 33-85982 and 811-8846
Ladies and Gentlemen:
On behalf of First Omaha Funds, Inc. (the "Funds"), we transmit herewith
pursuant to Rules 472 and 485(b) under the Securities Act of 1933 (the "Act")
as amended, Post Effective Amendment No. 6 to the Fund's Registration Statement
on Form N-1A (the "Amendment"). The Registrant proposes that the Amendment be
effective immediately upon filing pursuant to Rule 485(b) under the 1933 Act.
The undersigned is of the opinion that the Amendment does not contain
disclosures which would render it ineligible to become effective under said Rule
485(b).
This filing is being submitted by direct transmittal through the EDGAR system on
behalf of the Funds. Please call the undersigned at (402) 474-6900 should you
have any questions regarding this filing.
Sincerely,
/s/Donald F. Burt
Donald F. Burt
As filed with the Securities and Exchange Commission on December 10, 1996
Securities Act Registration No. 33-85982
Investment Company Act Registration No. 811-8846
---------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 (x)
Post-Effective Amendment No. 6 (x)
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 (x)
Amendment No. 8 (x)
(Check appropriate box or boxes)
FIRST OMAHA FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
ONE FIRST NATIONAL CENTER
OMAHA, NE 68102-1596
(Address of Principal Executive Offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (402) 341-0500
MARC M. DIEHL Copies of all communications to:
FIRST NATIONAL BANK OF OMAHA Donald F. Burt, Esq.
ONE FIRST NATIONAL CENTER Cline, Williams, Wright, Johnson &
OMAHA, NE 68102-1596 Oldfather
(Name and Address of Agent for Service) 1900 FirsTier Bank Building
Omaha, NE 68508
and
Randy M. Pavlick
Sunstone Financial Group, Inc.
207 E. Buffalo Street, Suite 400
Milwaukee, WI 53202
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
Registrant filed its notice pursuant to Rule 24f-2(a)(1) on or about May 25,
1996 for the fiscal year ended March 31, 1996.
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 immediately upon filing
pursuant to paragraph (b).
CROSS REFERENCE SHEET
First Omaha Funds, Inc.
PART A
Form N-12 Part A Item Prospectus Caption
- --------------------- ------------------
1. Cover page Cover Page
2. Synopsis Prospectus Summary; Fee Table
3. Condensed Financial Information Financial Highlights
4. General Description of Registrant The Company; Investment Objectives and
Policies; Investment Restrictions;
General Information - Description of the
Company and Its Shares
5. Management of the Fund Management of the Company; General
Information - Custodian; General
Information - Transfer Agency and Fund
Accounting Services
5A. Management's Discussion of
Fund Performance Not Applicable
6. Capital Stock and Other Securities How to Purchase and Redeem Shares;
Dividends and Taxes; General Information
- Description of the Company and Its
Shares; General Information -
Miscellaneous
7. Purchase of Securities
Being Offered Valuation of Shares; How to Purchase and
Redeem Shares; Management of the company
- Distribution Plan
8. Redemption or Repurchase How to Purchase and Redeem Shares
9. Pending Legal Proceedings Inapplicable
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 The Company
13. Investment Objectives and Policies Investment Objectives and Policies
14. Management of the Fund Management of the Company - Directors
and Officers
15. Control Persons and Principal
Holders of Securities Additional Information - Ownership of
Shares
16. Investment Advisory and
Other Services Management of the Company - Investment
Adviser; Administrator/Fund Accountant;
Administrative Services Plan; Custodian;
Transfer Agency Services
17. Brokerage Allocation and
Other Practices Management of the Company - Portfolio
Transactions
18. Capital Stock and Other Securities Additional Information - Organization
and Capital Structure
19. Purchase, Redemption and Pricing
of Securities Being Offered Net Asset Value; Additional Purchase and
Redemption Information
20. Tax Status Additional Information - Additional Tax
Information
21. Underwriters Management of the Company - Distributor
22. Calculations of Performance Data Additional Information - Yield of the
Money Market Fund; Yield of the Fixed
Income Fund and the Short/Intermediate
Fund; Calculation of Total Return;
Distribution Rates; Performance
Comparisons
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.
PROSPECTUS
DECEMBER 10, 1996
- - First Omaha Small Cap Value Fund(SM)
- - First Omaha Equity Fund(R)
- - First Omaha Balanced Fund(SM)
- - First Omaha Fixed Income Fund(R)
- - First Omaha Short/Intermediate Fixed Income Fund(R)
- - First Omaha U.S. Government Obligations Fund(R)
FIRST OMAHA
FAMILY OF FUNDS (R)
First National Bank of Omaha - Adviser
FIRST OMAHA FUNDS PROSPECTUS
<TABLE>
<C> <C> <C>
First Omaha Funds, Inc. First National Bank of Omaha For current yield, purchase,
One First National Center Investment Adviser and redemption information,
Omaha, Nebraska 68102-1596 Custodian and Transfer Agent call (800) OMAHA-03
</TABLE>
First Omaha Funds, Inc. (the "Company") is an open-end management investment
company. The Directors of the Company have divided the Company's common stock
("Shares") into series, each of which relates to a mutual fund with its own
investment objectives and policies. This Prospectus relates to the following
Funds, each of which is a no-load diversified investment Fund. First National
Bank of Omaha, Omaha, Nebraska (the "Adviser"), a subsidiary of First National
of Nebraska, Inc. ("FNN"), acts as the investment adviser to the Funds.
FIRST OMAHA SMALL CAP VALUE FUND (the "Small Cap Value Fund") seeks as its
investment objective long-term capital appreciation.
FIRST OMAHA EQUITY FUND (the "Equity Fund") seeks as its investment objective
long-term growth of capital.
FIRST OMAHA BALANCED FUND (the "Balanced Fund") seeks as its investment
objective capital appreciation and current income.
FIRST OMAHA FIXED INCOME FUND (the "Fixed Income Fund") seeks as its
investment objective, to generate current income consistent with preservation of
capital.
FIRST OMAHA SHORT/INTERMEDIATE FIXED INCOME FUND (the "Short/Intermediate
Fund") seeks as its investment objective, to generate current income consistent
with preservation of capital.
FIRST OMAHA U.S. GOVERNMENT OBLIGATIONS FUND (the "Money Market Fund") seeks
as its investment objective to maximize current income to the extent consistent
with the preservation of capital and maintenance of liquidity. THE MONEY MARKET
FUND SEEKS TO MAINTAIN A CONSTANT NET ASSET VALUE OF $1.00 PER SHARE, BUT THERE
CAN BE NO ASSURANCE THE NET ASSET VALUE WILL NOT VARY. AN INVESTMENT IN THE
MONEY MARKET FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT.
THE SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, THE FIRST NATIONAL BANK OF OMAHA, ITS PARENT, FIRST NATIONAL OF
NEBRASKA, INC. OR ANY OF THEIR AFFILIATES. SUCH SHARES ARE NOT FEDERALLY INSURED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY
OTHER GOVERNMENTAL AGENCY. AN INVESTMENT IN A FUND INVOLVES CERTAIN INVESTMENT
RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
This Prospectus sets forth concisely the information about the Funds that a
prospective investor ought to know before investing. Investors should read this
Prospectus and retain it for future reference. Additional information about the
Funds, contained in a Statement of Additional Information, dated the same date
as the Prospectus, as amended from time to time, has been filed with the
Securities and Exchange Commission and is available upon request without charge
by writing to the Funds at their address or by calling the Funds at the
telephone number shown above. The Statement of Additional Information is
incorporated by reference in its entirety into this Prospectus.
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.
TABLE OF CONTENTS
Prospectus Summary 1
Fee Table 3
Financial Highlights 5
Performance Information 11
Investment Objectives and Policies 12
Investment Restrictions 19
Valuation of Shares 19
How to Purchase and Redeem Shares 20
Dividends and Taxes 23
Management of the Company 24
General Information 26
Additional Performance Information 28
No person has been authorized to give any information or to make any
representations not contained in this Prospectus in connection with the offering
made by this Prospectus and, if given or made, such information or
representations must not be relied upon as having been authorized by the Funds
or their Distributor. This Prospectus does not constitute an offering by the
Funds or by the Distributor in any jurisdiction in which such offering may not
lawfully be made.
PROSPECTUS SUMMARY
- ------------------
TYPE OF COMPANY
Each Fund is a no-load, diversified series of an open-end, management investment
company.
INVESTMENT OBJECTIVE
For the Small Cap Value Fund, long-term capital appreciation.
For the Equity Fund, long-term growth of capital.
For the Balanced Fund, capital appreciation and current income.
For the Fixed Income Fund and the Short/Intermediate Fund, generation of current
income and preservation of capital.
For the Money Market Fund, maximization of current income, preservation of
capital and maintenance of liquidity.
INVESTMENT POLICY
Under normal market conditions, the Small Cap Value Fund will invest at least
65% of its total assets in common stocks and securities convertible into common
stocks issued by companies having small market capitalizations, but may also
invest in other equity securities and in fixed income securities.
Under normal market conditions, the Equity Fund will invest at least 65% of its
total assets in common stocks and securities convertible into common stocks but
may also invest up to 35% of its total assets in other equity securities and in
fixed income securities.
Under normal market conditions, the Balanced Fund will invest in common stock,
securities convertible into common stock, investment grade corporate debt, U.S.
Treasury obligations or obligations issued by the U.S. government, its agencies
and instrumentalities and cash equivalents. The assets of the Balanced Fund will
be allocated among these classes of securities based on the Adviser's assessment
of market conditions.
Under normal market conditions, the Fixed Income Fund will invest at least 65%
of its total assets in investment grade fixed income securities.
Under normal market conditions, the Short/Intermediate Fund will invest at least
65% of its total assets in investment grade fixed income securities and will
maintain a dollar- weighted average portfolio maturity of two to five years.
Under normal market conditions, the Money Market Fund will invest exclusively in
short-term (397 days or less) high quality money market instruments, principally
U.S. government obligations, having a dollar-weighted average maturity of 90
days or less and will attempt to maintain a constant net asset value of $1.00
per share.
RISK FACTORS AND SPECIAL CONSIDERATIONS
An investment in the Funds 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 Funds will achieve their investment objectives.
Some or all of the Funds, to the extent set forth under "INVESTMENT OBJECTIVES
AND POLICIES," may engage in the following practices: the use of repurchase and
reverse repurchase agreements, investing in foreign securities, the lending of
portfolio securities, investing in derivatives and the purchase of securities on
a when-issued or delayed-delivery basis.
OFFERING PRICE
The public offering price of each Fund is equal to its net asset value per
Share.
SHARES OFFERED
Shares of common stock ("Shares") of the Small Cap Value Fund, the Equity
Fund, the Balanced Fund, the Fixed Income Fund, the Short/Intermediate Fund and
the Money Market Fund, each a separate investment portfolio of First Omaha
Funds, Inc., a Nebraska corporation.
MINIMUM PURCHASE
The minimum initial investment is $500 with $50 minimum subsequent investments.
Such minimum initial investment is reduced to $100 for investors using the Auto
Invest Plan described herein, and the minimum subsequent investment may be
waived if purchases are made in connection with an IRA. Both minimum initial and
subsequent investments may be waived if purchases are made pursuant to a payroll
deduction plan.
DIVIDENDS
Dividends from net investment income are declared and paid monthly, except that
the Money Market Fund will declare income dividends daily. Net realized capital
gains are distributed at least annually.
INVESTMENT ADVISER
First National Bank of Omaha (the "Adviser").
ADMINISTRATOR/DISTRIBUTOR
Sunstone Financial Group, Inc. (the "Administrator" or the "Distributor," as
the context indicates).
<TABLE>
FEE TABLE
- ---------
<CAPTION>
SMALL CAP FIXED SHORT/ MONEY
VALUE EQUITY BALANCED INCOME INTERMEDIATE MARKET
FUND FUND FUND FUND FUND FUND
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) 0% 0% 0% 0% 0% 0%
Maximum Sales Load Imposed on
Reinvested Dividends (as a percentage
of offering price) 0% 0% 0% 0% 0% 0%
Deferred Sales Load (as a percentage
of original purchase price or redemption
proceeds, as applicable) 0% 0% 0% 0% 0% 0%
Redemption Fees (as a percentage of
amount redeemed, if applicable) 0% 0% 0% 0% 0% 0%
Exchange Fee 0% 0% 0% 0% 0% 0%
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees<F1> .00% .75% .00% .55% .45% .25%
12b-1 Fees<F2> .01% .01% .01% .01% .01% .01%
Other Expenses After Voluntary Fee
Reduction, including administration fees,
administrative servicing fees and other
expenses<F1><F3> 1.37% .31% 1.35% .36% .54% .32%
Total Fund Operating Expenses After
Voluntary Fee Reduction 1.38% 1.07% 1.36% .92% 1.01% .58%
<F1>The Adviser and the Administrator, respectively, have agreed with the Company to reduce voluntarily the amount of the
investment advisory, administration, transfer agent, custodian and administrative servicing fees for the Funds until further
notice. Absent the voluntary investment advisory, administration, transfer agent, custodian and administrative servicing fee
reductions, Management Fees, Other Expenses and Total Fund Operating Expenses as a percentage of average net assets are
estimated to be .85%, 3.58% and 4.44%, respectively, for the Small Cap Value Fund; .75%, .41% and 1.17%, respectively, for the
Equity Fund; .75%, 3.61% and 4.37%, respectively, for the Balanced Fund; .60%, .46% and 1.07%, respectively, for the Fixed
Income Fund; .50%, .64% and 1.16%, respectively, for the Short/Intermediate Fund; and .25%, .34% and .60%, respectively, for
the Money Market Fund. (See "MANAGEMENT OF THE COMPANY-Investment Adviser" and "Administrative Services Plan."
<F2>The Company has adopted a Rule 12b-1 Plan pursuant to which each of the Funds is authorized to pay a periodic amount,
representing distribution expenses, calculated at an annual rate not to exceed .25% of the average daily net asset value of
such Fund. As of the date of this Prospectus, it is estimated that 12b-1 expenses will be .01% of average daily net assets of
each Fund.
<F3>"Other Expenses" include administration fees and legal, accounting and other miscellaneous expenses to be incurred during the
fiscal year. As of the date of this Prospectus, administrative servicing fees of .05% were being accrued by the Equity, Fixed
Income and Short/Intermediate Funds.
</TABLE>
EXAMPLE:
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Small Cap Value Fund $14 $44 $76 $168
Equity Fund $11 $34 $60 $132
Balanced Fund $14 $44 $75 $165
Fixed Income Fund $ 9 $30 $51 $114
Short/Intermediate Fund $10 $32 $56 $125
Money Market Fund $ 6 $19 $33 $ 73
The purpose of the above tables is to assist a potential purchaser of a Fund's
Shares in understanding the various costs and expenses that an investor in such
Fund will bear directly or indirectly. "Other Expenses" for each Fund have
been estimated. Expenses do not include any fees charged by the Adviser or any
of its affiliates or any Banks or their affiliates to their customer accounts
for automatic investment, cash management and other services. See "How to
Purchase and Redeem Shares - Minimum Investment." See "MANAGEMENT OF THE
COMPANY" and "GENERAL INFORMATION" for a more complete discussion of the
Shareholder transaction expenses and annual operating expenses for each of the
Funds.
FINANCIAL HIGHLIGHTS
- ---------------------
The following financial highlights for periods ended on or prior to March 31,
1996 are audited and should be read in conjunction with the Funds' financial
statements, the related notes thereto and the independent auditors' report of
KPMG Peat Marwick LLP appearing in the Statement of Additional Information.
The information for the period ended October 31, 1996 is unaudited. Further
information about the Funds' performance is contained in the Company's annual
report to shareholders, which may be obtained without charge by calling or
writing the Company at the telephone number or address on the first page of this
Prospectus.
<TABLE>
<CAPTION>
SMALL CAP VALUE FUND 6/10/96<F4>
to 10/31/96
(unaudited)
-----------
<S> <C>
Net Asset Value, Beginning of Period $10.00
Income from Investment Operations:
Net investment income 0.05
Net realized and unrealized gains on investments 0.03
------
Total from investment operations 0.08
------
Less Distributions to Shareholders:
Dividends from net investment income 0.05
Distributions from capital gains -
------
Total distributions 0.05
------
Net Asset Value, End of Period $10.03
======
Total Return<F5> 0.85%
Supplemental Data and Ratios:
Net assets, end of period (000s) $3,351
Ratio of net expenses to average net
assets<F6> 1.53%
Ratio of net investment income to average
net assets<F6> 1.55%
Ratio of net expenses to average net
assets <F6><F7> 5.03%
Ratio of net investment income to average
net assets<F6><F7> (1.95)%
Portfolio turnover rate<F5> 4.52%
Average commission rate paid on portfolio
transactions $0.0700
<FN>
<F4> Commencement of operations
<F5> Not annualized
<F6> Annualized
<F7> During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the ratios would
have been as indicated.
</TABLE>
<TABLE>
<CAPTION>
4/1/96
EQUITY FUND to 10/31/96 4/10/95<F9> 7/1/94<F8> YEAR ENDED 12/13/92<F8>
(unaudited) to 3/31/96 to 4/9/95 6/30/94<F8> to 6/30/93
----------- ---------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $13.07 $11.39 $10.48 $10.55 $10.00
Income from Investment Operations:
Net investment income 0.18 0.28 0.21 0.20 0.11
Net realized and unrealized gains on investments 0.71 2.13 1.48 0.15 0.54
------ ------ ------ ------ ------
Total from investment operations 0.89 2.41 1.69 0.35 0.65
------ ------ ------ ------ ------
Less Distributions to Shareholders:
Dividends from net investment income 0.18 0.28 0.22 0.20 0.10
Distributions from capital gains - 0.45 0.56 0.22 -
------ ------ ------ ------ ------
Total distributions 0.18 0.73 0.78 0.42 0.10
------ ------ ------ ------ ------
Net Asset Value, End of Period $13.78 $13.07 $11.39 $10.48 $10.55
====== ====== ====== ====== ======
Total Return<F10> 6.90% 21.52% 16.48% 3.34% 6.55%
Supplemental Data and Ratios:
Net assets, end of period (000s) $244,979 $224,169 $161,323 $129,381 $111,059
Ratio of net expenses to average net
assets<F11> 1.01% 0.99% 1.03% 1.04% 1.01%
Ratio of net investment income to average
net assets<F11> 2.33% 2.32% 2.50% 1.93% 1.90%
Ratio of net expenses to average net
assets <F11><F12> 1.06% 1.07% 1.62% 1.54% 1.32%
Ratio of net investment income to average
net assets<F11><F12> 2.28% 2.24% 1.91% 1.43% 1.59%
Portfolio turnover rate<F10> 13.31% 26.60% 14.36% 15.86% 4.94%
Average commission rate paid on portfolio
transactions $0.0700 N/A N/A N/A N/A
<FN>
<F8> Performance data for each Fund prior to April 10, 1995 relates to a corresponding predecessor First Omaha Fund, the assets
of which were acquired on that date.
<F9> Commencement of operations
<F10>Not annualized
<F11>Annualized
<F12>During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the ratios would
have been as indicated.
</TABLE>
<TABLE>
<CAPTION>
BALANCED FUND 8/6/96<F13>
to 10/31/96
(unaudited)
-----------
<S> <C>
Net Asset Value, Beginning of Period $10.00
Income from Investment Operations:
Net investment income 0.07
Net realized and unrealized gains on investments 0.20
------
Total from investment operations 0.27
------
Less Distributions to Shareholders:
Dividends from net investment income 0.07
Distributions from capital gains -
------
Total distributions 0.07
------
Net Asset Value, End of Period $10.20
======
Total Return<F14> 2.73%
Supplemental Data and Ratios:
Net assets, end of period (000s) $2,832
Ratio of net expenses to average net assets<F15> 1.37%
Ratio of net investment income to average net assets<F15> 3.26%
Ratio of net expenses to average net assets <F15><F16> 4.98%
Ratio of net investment income to average net assets<F15><F16> (0.35)%
Portfolio turnover rate<F14> -
Average commission rate paid on portfolio transactions $0.0700
<FN>
<F13>Commencement of operations
<F14>Not annualized
<F15>Annualized
<F16>During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the ratios
would have been as indicated.
</TABLE>
<TABLE>
<CAPTION>
4/1/96
FIXED INCOME FUND to 10/31/96 4/10/95<F18> 7/1/94<F17> YEAR ENDED 12/13/92<F17>
(unaudited) to 3/31/96 to 4/9/95 6/30/94<F17> to 6/30/93
----------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.00 $9.63 $9.58 $10.49 $10.00
Income from Investment Operations:
Net investment income 0.26 0.59 0.51 0.67 0.39
Net realized and unrealized gains on investments 0.10 0.35 0.07 (0.88) 0.47
------ ------ ------ ------ ------
Total from investment operations 0.36 0.94 0.58 (0.21) 0.86
------ ------ ------ ------ ------
Less Distributions to Shareholders:
Dividends from net investment income 0.25 0.57 0.53 0.67 0.37
Distributions from capital gains - - - 0.03 -
------ ------ ------ ------ ------
Total distributions 0.25 0.57 0.53 0.70 0.37
------ ------ ------ ------ ------
Net Asset Value, End of Period $10.11 $10.00 $9.63 $9.58 $10.49
====== ====== ====== ====== ======
Total Return<F19> 3.73% 9.79% 6.35% (2.29)% 8.72%
Supplemental Data and Ratios:
Net assets, end of period (000s) $80,315 $76,342 $66,488 $61,714 $59,178
Ratio of net expenses to average
net assets<F20> 0.87% 0.83% 0.87% 0.86% 0.79%
Ratio of net investment income to average
net assets<F20> 4.15% 5.94% 6.98% 6.52% 6.89%
Ratio of net expenses to average net
assets<F20><F21> 0.96% 0.96% 1.51% 1.41% 1.19%
Ratio of net investment income to average
net assets<F20><F21> 4.06% 5.81% 6.34% 5.97% 6.49%
Portfolio turnover rate<F19> 4.72% 37.35% 7.04% 13.09% 2.62%
Average commission rate paid on portfolio
transactions - N/A N/A N/A N/A
<FN>
<F17>Performance data for each Fund prior to April 10, 1995 relates to a corresponding predecessor First Omaha Fund, the assets of
which were acquired on that date.
<F18>Commencement of operations
<F19>Not annualized
<F20>Annualized
<F21>During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the ratios would
have been as indicated.
</TABLE>
<TABLE>
<CAPTION>
4/1/96
SHORT/INTERMEDIATE FIXED INCOME FUND to 10/31/96 4/10/95<F23> 7/1/94<F22> YEAR ENDED 12/13/92<F22>
(unaudited) to 3/31/96 to 4/9/95 6/30/94<F22> to 6/30/93
----------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $9.85 $9.66 $9.62 $10.18 $10.00
Income from Investment Operations:
Net investment income 0.31 0.52 0.42 0.55 0.33
Net realized and unrealized gains on investments 0.04 0.17 0.05 (0.56) 0.16
------ ------ ------ ------ ------
Total from investment operations 0.35 0.69 0.47 (0.01) 0.49
------ ------ ------ ------ ------
Less Distributions to Shareholders:
Dividends from net investment income 0.30 0.50 0.43 0.55 0.31
Distributions from capital gains - - - - -
------ ------ ------ ------ ------
Total distributions 0.30 0.50 0.43 0.55 0.31
------ ------ ------ ------ ------
Net Asset Value, End of Period $9.90 $9.85 $9.66 $9.62 $10.18
====== ====== ====== ====== ======
Total Return<F24> 3.61% 7.24% 5.05% (0.22)% 5.00%
Supplemental Data and Ratios:
Net assets, end of period (000s) $21,637 $22,056 $22,130 $21,938 $24,581
Ratio of net expenses to average net
assets<F25> 0.95% 0.89% 0.88% 0.83% 0.79%
Ratio of net investment income to average
net assets<F25> 4.95% 5.34% 5.63% 5.44% 5.91%
Ratio of net expenses to average net
assets<F25><F26> 1.04% 1.02% 1.51% 1.38% 1.19%
Ratio of net investment income to average
net assets<F25><F26> 4.86% 5.21% 5.00% 4.89% 5.51%
Portfolio turnover rate<F24> 4.69% 41.45% 9.93% 20.52% 15.58%
Average commission rate paid on portfolio
transactions - N/A N/A N/A N/A
<FN>
<F22>Performance data for each Fund prior to April 10, 1995 relates to a corresponding predecessor First Omaha Fund, the assets of
which were acquired on that date.
<F23>Commencement of operations
<F24>Not annualized
<F25>Annualized
<F26>During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the ratios would
have been as indicated.
</TABLE>
<TABLE>
<CAPTION>
4/1/96
U.S. GOVERNMENT OBLIGATIONS FUND to 10/31/96 4/10/95<F28> 7/1/94<F27> YEAR ENDED YEAR ENDED 12/4/91<F27>
(unaudited) to 3/31/96 to 4/9/95 6/30/94<F27> to 6/30/93<F27> to 6/30/92
----------- ---------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Income from Investment Operations:
Net investment income 0.03 0.05 0.04 0.03 0.03 0.02
Net realized and unrealized gains
on investments - - - - - -
------ ------ ------ ------ ------ ------
Total from investment operations 0.03 0.05 0.04 0.03 0.03 0.02
------ ------ ------ ------ ------ ------
Less Distributions to Shareholders:
Dividends from net investment income 0.03 0.05 0.04 0.03 0.03 0.02
Distributions from capital gains - - - - - -
------ ------ ------ ------ ------ ------
Total distributions 0.03 0.05 0.04 0.03 0.03 0.02
------ ------ ------ ------ ------ ------
Net Asset Value, End of Period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
====== ====== ====== ====== ====== ======
Total Return<F29> 2.76% 5.14% 3.51% 2.74% 2.72% 2.15%
Supplemental Data and Ratios:
Net assets, end of period (000s) $111,297 $87,715 $76,105 $89,195 $91,785 $81,152
Ratio of net expenses to average
net assets<F30> 0.57% 0.54% 0.63% 0.60% 0.61% 0.46%
Ratio of net investment income to
average net assets<F30> 4.66% 5.12% 4.46% 2.68% 2.67% 3.65%
Ratio of net expenses to average
net assets<F30><F31> 0.59% 0.59% 1.23% 1.13% 0.96% 0.98%
Ratio of net investment income to
average net assets<F30><F31> 4.64% 5.07% 3.86% 2.15% 2.32% 3.13%
Portfolio turnover rate<F29> - - - - - -
Average commission rate paid on
portfolio transactions - N/A N/A N/A N/A N/A
<FN>
<F27>Performance data for each Fund prior to April 10, 1995 relates to a corresponding predecessor First Omaha Fund, the assets of
which were acquired on that date.
<F28>Commencement of operations
<F29>Not annualized
<F30>Annualized
<F31>During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the ratios would
have been as indicated.
</TABLE>
PERFORMANCE INFORMATION
- -----------------------
From time to time, performance information for the Small Cap Value, Equity,
Balanced, Fixed Income and Short/Intermediate Funds showing their respective
average annual total return, aggregate total return and/or yield may be
presented in advertisements, sales literature and Shareholder reports. SUCH
PERFORMANCE FIGURES ARE BASED ON HISTORICAL EARNINGS AND ARE NOT INTENDED TO
INDICATE FUTURE PERFORMANCE. Average annual total return will be calculated for
the period since the commencement of operations for such Fund (including its
immediate predecessor). Average annual total return is measured by comparing the
value of an investment in a Fund at the beginning of the relevant period to the
redeemable value of the investment at the end of the period (assuming immediate
reinvestment of any dividends or capital gains distributions), which figure is
then annualized. Aggregate total return is calculated similarly to average
annual total return except that the return figure is aggregated over the
relevant period instead of annualized. The Funds may, when citing performance in
marketing and sales literature, include the performance of investment vehicles
which were predecessors to the Funds. Yield will be computed by dividing a
Fund's net investment income per share (as calculated on a yield to maturity
basis) earned during a recent 30-day period by that Fund's per share maximum
offering price (reduced by any undeclared earned income expected to be paid
shortly as a dividend) on the last day of the period and annualizing the result.
From time to time the Money Market Fund may advertise its "yield," "effective
yield" and "average annual total return." THE YIELD FIGURES AND THE RETURN
FIGURES ARE BASED ON HISTORICAL EARNINGS AND ARE NOT INTENDED TO INDICATE FUTURE
PERFORMANCE. The "yield" of the Money Market Fund refers to the income
generated by an investment therein over a seven-day period (which period will be
stated in the advertisement). This income is then "annualized." That is, the
amount of income generated by the investment during that week is assumed to be
generated each week over a 52-week period and is shown as a percentage of the
investment. The Money Market Fund may also present a 30-day yield which is
calculated similarly but instead refers to a 30-day period rather than a seven-
day period. The "effective yield" is calculated similarly but, when
annualized, the income earned by an investment in the Money Market Fund is
assumed to be reinvested. The "effective yield" is slightly higher than the
"yield" because of the compounding effect of this assumed reinvestment. For
the seven-day period ended October 31, 1996, the yield of the Money Market Fund
was 4.71% and its effective yield was 4.82%.
In addition, from time to time, the Funds may present their distribution rates
in supplemental sales literature and in Shareholder reports both of which must
be accompanied or preceded by a Prospectus. Distribution rates will be computed
by dividing the distributions per share made by a Fund over a 12-month period by
the maximum offering price per share. The calculation of income in the
distribution rate includes both income and capital gain dividends and does not
reflect unrealized gains or losses, although each Fund may also present a
distribution rate excluding the effect of capital gains. The distribution rate
differs from the yield, because it includes capital items which are often non-
recurring in nature, whereas yield does not include such items. Distribution
rate information will be accompanied by the standardized yield and total return
data.
Investors may also judge the performance of each Fund by comparing or
referencing its performance to the performance of other mutual funds with
comparable investment objectives and policies through various mutual fund or
market indices and to data prepared by various services which indices or data
may be published by such services or by other services or publications. For
example, the total return and yield of a Fund's Shares may be compared to data
prepared by Lipper Analytical Services, Inc. In addition, the total return of a
Fund may be compared to the S&P 500 Index, the S&P 400 Index, the S&P 400 Index,
the Nasdaq Composite Index, an index of unmanaged groups of common stocks of
domestic companies that are quoted on the National Association of Securities
Dealers Automated Quotation System, the Dow Jones Industrial Average, a
recognized unmanaged index of common stocks of 30 industrial companies listed
on the New York Stock Exchange, the Lehman Bros. Mutual Fund Short (1-5) U.S.
Gov't Index, or the Lehman Bros. Gov't/Corp. Bond Index. Total Return and yield
data as reported in national financial publications, such as MONEY MAGAZINE,
FORBES, BARRON'S, MORNINGSTAR MUTUAL FUNDS, THE WALL STREET JOURNAL and THE
NEW YORK TIMES, or in publications of a local or regional nature, may also be
used in comparing the performance of the Funds. In addition to performance
information, general information about the Funds that appears in such
publications may be included in advertisements, sales literature and reports
to Shareholders.
Yield and total return are generally functions of market conditions, interest
rates, types of investments held and operating expenses. Consequently, current
yields and total return will fluctuate and are not necessarily representative of
future results. Any fees charged by the Adviser or any of its affiliates with
respect to customer accounts for investing in Shares of any of the Funds will
not be included in performance calculations; such fees, if charged, will reduce
the actual performance from that quoted. In addition, if the Adviser and
Sunstone voluntarily reduce all or part of their respective fees for a Fund, as
discussed below, the yield and total return of that Fund will be higher than it
would otherwise be in the absence of such voluntary fee reductions. For
additional information about the performance of the Funds and their
predecessors, see "Additional Performance Information."
INVESTMENT OBJECTIVES AND POLICIES
- ----------------------------------
IN GENERAL
The investment objective of the Small Cap Value Fund is capital appreciation.
The investment objective of the Equity Fund is long-term growth of capital. The
investment objective of the Balanced Fund is capital appreciation and current
income. The investment objective of each of the Fixed Income Fund and the
Short/Intermediate Fund is generation of current income consistent with the
preservation of capital. The investment objective of the Money Market Fund is
maximum current income to the extent consistent with the preservation of capital
and the maintenance of liquidity. These investment objectives are fundamental
policies and, as such, may not be changed without a vote of the holders of a
majority of the outstanding shares of that Fund (as defined in "GENERAL
INFORMATION-Miscellaneous"). There can be no assurance that the investment
objective of a Fund will be achieved.
THE SMALL CAP VALUE FUND
Under normal market conditions, the Fund will invest at least 65% of its total
assets in common stocks and securities convertible into common stocks (such as
convertible bonds, convertible preferred stocks, warrants, options and rights)
issued by companies having small market capitalization. For these purposes
"small market capitalization" means market capitalization smaller than
approximately the largest one-fourth of companies listed on the New York Stock
Exchange, currently $1.5 billion or less. The Adviser expects that most of such
companies will have market capitalization in the $200 million - $1 billion
range. Although current dividend or interest income will not be a factor in the
selection of investments, the Adviser intends to seek companies whose record of
earnings and/or dividend growth may be indications of capital appreciation
potential. The Adviser will generally seek to invest in companies whose stock is
trading at prices below book value or the Adviser's perception of actual value.
The Fund may also invest up to 35% of the value of its total assets in preferred
stocks, common stocks other than those described above, corporate bonds, notes,
warrants, and short-term obligations (with maturities of 12 months or less)
consisting of domestic and foreign commercial paper (including variable amount
master demand notes), bankers' acceptances, repurchase agreements, and
obligations issued or guaranteed by the U.S. government or its agencies or
instrumentalities. The Fund will only invest in short-term obligations,
including securities of investment companies holding themselves out as "money
market" funds, for purposes of portfolio liquidity to meet redemption
requirements and short-term investment needs. During temporary defensive periods
as determined by the Adviser, the Fund may hold up to 100% of its total assets
in high quality short-term obligations including domestic bank certificates of
deposit, bankers' acceptances and repurchase agreements secured by bank
instruments. However, to the extent that the Fund is so invested in debt
obligations, the Fund may not achieve its investment objective.
Subject to the foregoing limitations, the Fund will invest only in corporate
debt securities (including convertible securities) which are rated at the time
of purchase within the four highest rating groups assigned by one or more
nationally recognized statistical rating organizations ("NRSROs"), e.g.,
Moody's Investors Service, Inc. ("Moody's") and Standard & Poor's Corporation
("S&P"), or, if unrated, which the Adviser deems present attractive
opportunities and are of comparable quality. For a description of the rating
symbols of the NRSROs, see the Appendix to the Statement of Additional
Information. For a discussion of debt securities rated within the fourth highest
rating groups assigned by Moody's and S&P, see "OTHER INVESTMENT POLICIES AND
RISKS - Securities Ratings" herein.
Equity securities such as those in which the Fund may invest are more volatile
and carry more risk than some other investments, including investments in high
grade fixed income securities. Depending upon the performance of the Fund's
investments, the net asset value per share of the Fund may fluctuate. The
emphasis on appreciation and smaller capitalization companies may result in even
greater risk than is inherent in other equity investment alternatives. The Fund
will likely have somewhat greater volatility than the stock market generally, as
measured by the S&P 500 Index.
Under normal market conditions, the Fund will invest primarily in common stocks,
some of which will be traded in the over-the-counter market. In contrast to the
securities exchanges, the over-the-counter market is not a centralized facility
which limits trading activity to securities of companies which initially satisfy
certain defined standards. Any security can be traded in the over-the-counter
market as long as an individual or firm is willing to make a market in the
security. Because there are no minimum requirements for a company's assets or
earnings or the number of its stockholders in order for its stock to be traded
over-the-counter, there is great diversity in the size and profitability of
companies whose stocks trade in this market, ranging from relatively small
little-known companies to well established corporations.
Generally, the volume of trading in an unlisted common stock is less than the
volume of trading in a listed common stock. This means that the degree of market
liquidity of some stocks in which the Fund invests may be relatively limited.
When the Fund disposes of such a stock it may have to offer the shares at a
discount from recent prices or sell the shares in small lots over an extended
period of time.
Some securities issued by companies with a small capitalization present greater
risks and may be subject to large, abrupt or erratic fluctuations in price due,
in part, to such factors as the issuer's dependence upon key personnel, the lack
of internal resources, the inability to obtain funds from external sources, and
dependence on a new product or service for which there is no firmly established
market. Fluctuations in the price of some of the stocks owned by the Fund,
therefore, could cause the net asset value of the Fund to vary significantly.
THE EQUITY FUND
Under normal market conditions, the Equity Fund will invest at least 65% of the
value of its total assets in common stocks and securities convertible into
common stocks (i.e., convertible bonds, convertible preferred stock, warrants,
options and rights) of companies believed by the Adviser to be large
capitalization companies with a record of good earnings and/or dividend growth.
For purposes of the foregoing policy, "large capitalization" means companies
having market capital comparable to the market capitalization of the largest
one-fourth of the companies listed on the New York Stock Exchange. The Equity
Fund may also invest up to 35% of the value of its total assets in preferred
stocks, common stocks other than those described above, corporate bonds, notes,
warrants, and short-term obligations (with maturities of 12 months or less)
consisting of domestic and foreign commercial paper (including variable amount
master demand notes), bankers' acceptances, repurchase agreements, and
obligations issued or guaranteed by the U.S. government or its agencies or
instrumentalities. The Equity Fund will only invest in short-term obligations,
including securities of investment companies holding themselves out as "money
market" funds, for purposes of portfolio liquidity to meet redemption
requirements and short-term investment needs. During temporary defensive periods
as determined by the Adviser, the Equity Fund may hold up to 100% of its total
assets in high quality short-term obligations including obligations issued or
guaranteed by the U.S. government or its agencies or instrumentalities, domestic
bank certificates of deposit, bankers' acceptances and repurchase agreements
secured by bank instruments or U.S. government obligations. However, to the
extent that the Equity Fund is so invested in debt obligations, such Fund may
not achieve its investment objective.
Subject to the foregoing limitations, the Equity Fund will invest only in
corporate debt securities (including convertible securities) which are rated at
the time of purchase within the four highest rating groups assigned by one or
more NRSROs, e.g., Moody's and S&P or, if unrated, which the Adviser deems
present attractive opportunities and are of comparable quality. For a
description of the rating symbols of the NRSROs, see the Appendix to the
Statement of Additional Information. For a discussion of debt securities rated
within the fourth highest rating groups assigned by Moody's and S&P, see "OTHER
INVESTMENT POLICIES AND RISKS - Securities Ratings" herein.
Equity securities such as those in which the Equity Fund may invest are more
volatile and carry more risk than some other investments, including investments
in high grade fixed income funds. Depending upon the performance of the Equity
Fund's investments, the net asset value per share of the Equity Fund may
fluctuate.
THE BALANCED FUND
Under normal market conditions, the Balanced Fund will invest in common stocks
and securities convertible into common stocks (i.e., convertible bonds,
convertible preferred stock, warrants, options and rights). In addition, the
Balanced Fund will invest in corporate debt securities (including convertible
securities) which are rated at the time of purchase within the four highest
rating groups assigned by one or more NRSROs, e.g., Moody's and S&P or, if
unrated, which the Adviser deems to present attractive investment opportunities
and are of comparable quality to the rated securities. For a description of the
rating categories of Moody's and S&P, see the Appendix to the Statement of
Additional Information. For a discussion of the debt securities rated within the
four highest rating groups assigned by Moody's and S&P, see "OTHER INVESTMENT
POLICIES AND RISKS - Securities Ratings" herein. In addition, the Balanced Fund
may invest in U.S. Treasury Obligations and other obligations issued or
guaranteed by the U.S. government, its agencies and instrumentalities.
The Balanced Fund will use a disciplined approach of allocating assets among the
three major asset groups: common stocks, debt securities and cash equivalents.
The allocations among these asset classifications will vary depending upon the
Adviser's assessment of market conditions. Under normal market conditions, the
Balanced Fund is expected to be allocated approximately 65% in stocks and
securities convertible into common stocks and 35% in debt securities.
However, depending upon market conditions, the Balanced Fund may also be
allocated to cash equivalents. The range of allocation to stocks and securities
convertible into common stock is expected to be between 35% and 65%. The
Balanced Fund expects to invest a minimum of 25% of its total assets in
investment grade fixed income securities.
THE FIXED INCOME FUND AND
THE SHORT/INTERMEDIATE FUND
Under normal market conditions, the Fixed Income Fund will invest at least 65%
of the value of its total assets in investment grade fixed income securities
consisting of bonds, debentures, notes, mortgage-related securities, state,
municipal or industrial revenue bonds, obligations issued or guaranteed by the
U.S. government or its agencies or instrumentalities, and fixed income
securities convertible into, or exchangeable for, common stocks. However, up to
35% of the value of its total assets may be invested in preferred stocks. In
addition, a portion of the Fixed Income Fund may, from time to time, be invested
in income participation loans and participation certificates in pools of
mortgages issued or guaranteed by the U.S. government or its agencies or
instrumentalities. Some of the securities in which the Fixed Income Fund invests
may have warrants or options attached.
Under normal market conditions, the Short/Intermediate Fund will invest at least
65% of the value of its total assets in investment grade fixed income securities
consisting of bonds, debentures, notes, mortgage-related securities, state,
municipal or industrial revenue bonds, U.S. Treasury obligations, obligations
issued or guaranteed by the U.S. government or its agencies or
instrumentalities, and fixed income securities convertible into, or exchangeable
for, common stocks. However, up to 35% of the value of its total assets may be
invested in preferred stocks. In addition, a portion of the Short/Intermediate
Fund may, from time to time, be invested in income participation loans and
participation certificates in pools of mortgages issued or guaranteed by the
U.S. government or its agencies or instrumentalities. Some of the securities in
which the Short/Intermediate Fund invests may have warrants or options attached.
Under current market conditions, the Short/Intermediate Fund expects to
maintain a dollar-weighted average portfolio maturity of two to five years. For
purposes of calculating such average maturity, the maturity of each instrument
will be its ultimate maturity date, unless it is probable the issuer will take
advantage of a maturity-shortening device such as a call, refunding or
redemption provision, in which case the probable date of use of such device will
be used.
The Fixed Income Fund and the Short/Intermediate Fund each also expect to invest
in bonds, notes and debentures of a wide range of U.S. corporate issuers. Such
obligations, in the case of debentures, will represent unsecured promises to
pay, and in the case of notes and bonds, may be secured by mortgages on real
property or security interests in personal property and will in most cases
differ in their interest rates, maturities and times of issuance.
The Fixed Income Fund and the Short/Intermediate Fund will invest only in
corporate debt securities which are rated at the time of purchase within the
four highest rating groups for corporate debt securities assigned by one or more
appropriate NRSROs or, if unrated, which the Adviser deems present attractive
opportunities and are of comparable quality. For a description of the ratings of
the NRSROs, see the Appendix to the Statement of Additional Information. For a
discussion of debt securities rated within the fourth highest rating group
assigned by the NRSROs, see "OTHER INVESTMENT POLICIES AND RISKS - Securities
Ratings" herein.
The Fixed Income Fund and the Short/Intermediate Fund may each also invest in
short-term obligations (with maturities of 12 months or less) consisting of
domestic and foreign commercial paper (including variable amount master demand
notes), bankers' acceptances, certificates of deposit and time deposits of
domestic and foreign branches of U.S. banks and foreign banks, and repurchase
agreements. The Fixed Income Fund and the Short/Intermediate Fund may also each
invest in securities of investment companies holding themselves out as "money
market" funds, subject to the limitations described more fully below.
The Fixed Income Fund and the Short/Intermediate Fund may each invest in
obligations of the Export-Import Bank of the United States, in U.S. dollar
denominated international bonds for which the primary trading market is in the
United States ("Yankee Bonds"), or for which the primary trading market is
abroad ("Eurodollar Bonds"), and in Canadian Bonds and bonds issued by
institutions organized for a specific purpose, such as the World Bank and the
European Economic Community, by two or more sovereign governments
("Supranational Agency Bonds").
Such Funds may invest in mortgage-related securities issued or guaranteed by the
U.S. government or its agencies or instrumentalities or by nongovernmental
entities which are rated, at the time of purchase, within the four highest bond
rating categories assigned by one or more appropriate NRSROs, or, if unrated,
which the Adviser deems are of comparable quality. Under normal market
conditions, a Fund's investment in mortgage-related securities will not exceed
25% of the value of its total assets. Such mortgage-related securities have
mortgage obligations backing such securities, including among others,
conventional thirty year fixed rate mortgage obligations, graduated payment
mortgage obligations, fifteen year mortgage obligations and adjustable rate
mortgage obligations. All of these mortgage obligations can be used to create
pass-through securities. A pass-through security is created when mortgage
obligations are pooled together and undivided interests in the pool or pools are
sold. The cash flow from the mortgage obligations is passed through to the
holders of the securities in the form of periodic payments of interest,
principal and prepayments (net of a service fee). Prepayments occur when the
holder of an individual mortgage obligation prepays the remaining principal
before the mortgage obligation's scheduled maturity date. As a result of the
pass-through of prepayments of principal on the underlying securities, mortgage-
backed securities are often subject to more rapid prepayment of principal than
their stated maturity would indicate. Because the prepayment characteristics of
the underlying mortgage obligations vary, it is not possible to predict
accurately the realized yield or average life of a particular issue of pass-
through certificates. Prepayment rates are important because of their effect on
the yield and price of the securities. Accelerated prepayments have an adverse
impact on yields for pass-throughs purchased at a premium (i.e., a price in
excess of principal amount) and may involve additional risk of loss of principal
because the premium may not have been fully amortized at the time the obligation
is repaid. The opposite is true for pass-throughs purchased at a discount. The
Fixed Income Fund and the Short/Intermediate Fund may each purchase mortgage-
related securities at a premium or a discount. Reinvestment of principal
payments may occur at higher or lower rates than the original yield on such
securities. Due to the prepayment feature and the need to reinvest payments and
prepayments of principal at current rates, mortgage-related securities can be
less effective than typical bonds of similar maturities at maintaining yields
during periods of declining interest rates. Like other fixed income securities,
when interest rates rise the value of a mortgage-related security generally will
decline; however, when rates decline the value of a mortgage-related security
with prepayment features may not increase as much as that of other fixed income
securities, as such securities may be prone to prepayment, which decreases their
life. Accordingly, such securities may be more volatile than other fixed income
securities.
Also included among the mortgage-related securities that such Funds may purchase
are collateralized mortgage obligations ("CMOs") and real estate mortgage
investment conduits ("REMICs"). CMOs may be collateralized by whole mortgage
loans but are more typically collateralized by portfolios of mortgage pass-
through securities guaranteed by the Government National Mortgage Association,
the Federal Home Loan Mortgage Corporation or the Federal National Mortgage
Association, and their income streams. Certain CMOs and REMICs are issued by
private issuers. Such securities may be eligible for purchase by the Fixed
Income Fund and the Short/Intermediate Fund if: (1) the issuer has obtained an
exemptive order from the Commission regarding purchases by investment companies
of equity interests of other investment companies, or (2) such purchase is
within the limitations imposed by Section 12 of the 1940 Act.
The Fixed Income Fund and the Short/Intermediate Fund may also invest in
corporate fixed income securities (including bonds, debentures and notes) and
asset-backed securities such as Certificates of Automobile Receivables
("CARs") and Certificates of Amortized Revolving Debts ("CARDs"), each of
which must be rated at the time of purchase within the four highest rating
groups assigned by one or more appropriate NRSROs. For a description of the
fourth highest rating group, see "OTHER INVESTMENT POLICIES AND RISKS -
Securities Ratings" below.
Certain debt securities such as, but not limited to, mortgage-backed securities,
CMOs, asset-backed securities and securitized loan receivables, as well as
securities subject to prepayment of principal prior to the stated maturity date,
are expected to be repaid prior to their stated maturity dates. As a result, the
effective maturity of these securities is expected to be shorter than the stated
maturity. For purposes of compliance with stated maturity policies and
calculation of the Fixed Income Fund's and the Short/Intermediate Fund's
weighted average maturity, the effective maturity of such securities will be
used.
An increase in interest rates will generally reduce the value of the investments
in the Fixed Income Fund and the Short/Intermediate Fund, and a decline in
interest rates will generally increase the value of those investments. Depending
upon the prevailing market conditions, the Adviser may purchase debt securities
at a discount from face value, which produces a yield greater than the coupon
rate. Conversely, if debt securities are purchased at a premium over face value,
the yield will be lower than the coupon rate. In making investment decisions,
the Adviser will consider many factors other than current yield, including the
preservation of capital, maturity and yield to maturity.
THE MONEY MARKET FUND
The Money Market Fund invests exclusively in United States dollar-denominated
instruments which the Directors of the Company and the Adviser determine present
minimal credit risks and which at the time of acquisition are rated by one or
more appropriate NRSROs in one of the two highest rating categories for short-
term debt obligations or, if not rated, are determined to be of comparable
quality to those instruments so rated. The Fund will not invest more than 5% of
its assets in securities rated in the second highest category. All securities or
instruments in which the Money Market Fund invests have remaining maturities of
397 calendar days or less. The dollar-weighted average maturity of the
securities in the Money Market Fund will not exceed 90 days.
The Money Market Fund may invest in a variety of U.S. Treasury obligations,
differing in their interest rates, maturities, and times of issuance, and other
obligations which are issued or guaranteed by the U.S. government or its
agencies or instrumentalities and which are backed by the full faith and credit
of the U.S. government.
Obligations of the U.S. Treasury include "stripped" U.S. Treasury obligations
such as Treasury Receipts, representing either future interest or principal
payments. Stripped securities are issued at a discount to their "face value"
and may exhibit greater price volatility than ordinary debt securities because
of the manner in which their principal and interest are returned to investors.
Obligations of the agencies and instrumentalities of the U.S. government which
are backed by the full faith and credit of the U.S. government include those of
the Government National Mortgage Association and of the Export-Import Bank of
the United States. See the discussion of U.S. government securities above under
"INVESTMENT OBJECTIVES AND POLICIES - The Fixed Income Fund and the
Short/Intermediate Fund."
OTHER INVESTMENT POLICIES AND RISKS
The Funds may also invest in securities described in the following paragraphs to
the extent indicated.
U.S. GOVERNMENT SECURITIES FUNDS - The Funds may each invest in a variety of
U.S. Treasury obligations, differing in their interest rates, maturities, and
times of issuance, and other obligations issued or guaranteed by the U.S.
government or its agencies or instrumentalities. Obligations of the U.S.
Treasury include "stripped" U.S. Treasury obligations such as Treasury
Receipts, representing either future interest or principal payments. Stripped
securities are issued at a discount to their "face value" and may exhibit
greater price volatility than ordinary debt securities because of the manner in
which their principal and interest are returned to investors. Stripped U.S.
Treasury obligations will include: (1) coupons that have been stripped from U.S.
Treasury bonds, which may be held through the Federal Reserve Bank's book-entry
system called "Separate Trading of Registered Interest and Principal of
Securities" ("STRIPS") or through a program entitled "Coupon Under Book-Entry
Safekeeping" ("CUBES"), or (2) U.S. Treasury securities that are stripped by
investment banks and sold under proprietary names. Securities stripped by
investment banks may not be as liquid as STRIPS and CUBES and are not viewed by
the staff of the Securities and Exchange Commission ("Commission") as U.S.
government securities for purposes of the Investment Company Act of 1940, as
amended (the "1940 Act").
Obligations of certain agencies and instrumentalities of the U.S. government,
such as the Government National Mortgage Association, are supported by the full
faith and credit of the U.S. Treasury; others, such as those of the Federal
National Mortgage Association, are supported by the right of the issuer to
borrow from the Treasury; others, such as those of the Student Loan Marketing
Association and the Federal Home Loan Banks, are supported by the discretionary
authority of the U.S. government to purchase the agency's obligations; still
others, such as those of the Federal Farm Credit Banks or the Federal Home Loan
Mortgage Corporation, are supported only by the credit of the instrumentality.
No assurance can be given that the U.S. government would provide financial
support to U.S. government-sponsored agencies or instrumentalities if it is
not obligated to do so by law. The Fixed Income Fund and the Short/Intermediate
Fund will invest in the obligations of such agencies or instrumentalities only
when the Adviser believes that the credit risk with respect thereto is minimal.
REPURCHASE AGREEMENTS - Securities held by each of the Funds may be subject to
repurchase agreements. Under the terms of a repurchase agreement, a Fund would
acquire securities in exchange for cash from member banks of the Federal Deposit
Insurance Corporation and/or from registered broker-dealers which the Adviser
deems creditworthy under guidelines approved by the Company's Board of
Directors. The seller agrees to repurchase such securities at a mutually agreed-
upon date and price. The repurchase price generally equals the price paid by a
Fund plus interest negotiated on the basis of current short-term rates, which
may be more or less than the rate on the underlying portfolio securities.
Securities subject to repurchase agreements must be of the same type and quality
as those in which a Fund may invest directly. The seller under a repurchase
agreement will be required to maintain at all times the value of collateral held
pursuant to the agreement at not less than the repurchase price (including
accrued interest) plus the transaction costs, including loss of interest, that
such Fund reasonably could expect to incur if the seller defaults. This
requirement will be continually monitored by the Adviser. If the seller were to
default on its repurchase obligation or become insolvent, that Fund would suffer
a loss if the proceeds from a sale of the underlying portfolio securities were
less than the repurchase price under the agreement, or the disposition of such
securities by such Fund were delayed pending court action. Repurchase agreements
are considered to be loans by an investment company under the 1940 Act. For
further information about repurchase agreements, see "INVESTMENT OBJECTIVES AND
POLICIES - Additional Information on Portfolio Instruments-Repurchase
Agreements" in the Statement of Additional Information.
REVERSE REPURCHASE AGREEMENTS - Each of the Funds may borrow funds for temporary
purposes by entering into reverse repurchase agreements in accordance with the
investment restrictions described below. Pursuant to such agreements, a Fund
would sell certain of its securities to financial institutions such as banks and
broker-dealers, and agree to repurchase them at a mutually agreed-upon date and
price. The Funds intend to enter into reverse repurchase agreements only to
avoid otherwise selling securities during unfavorable market conditions to meet
redemptions. At the time a Fund enters into a reverse repurchase agreement, it
will place in a segregated custodial account assets such as U.S. government
securities or other liquid high-grade debt securities consistent with such
Fund's investment restrictions having a value equal to the repurchase price
(including accrued interest), and will continually monitor the account to ensure
that such equivalent value is maintained at all times. Reverse repurchase
agreements involve the risk that the market value of the securities sold by a
Fund may decline below the price at which such Fund is obligated to repurchase
the securities and that the buyer may default on its obligation to sell such
securities back to the Fund. Reverse repurchase agreements are considered
borrowings by an investment company under the 1940 Act. For further information
about reverse repurchase agreements, see "INVESTMENT OBJECTIVES AND POLICIES -
Additional Information on Portfolio Instruments - Reverse Repurchase Agreements"
in the Statement of Additional Information.
Except as otherwise disclosed to the Shareholders of a Fund, the Company will
not execute portfolio transactions through, acquire portfolio securities issued
by, make savings deposits in, or enter into repurchase or reverse repurchase
agreements with the Adviser, Sunstone, or their affiliates, and will not give
preference to the Adviser's correspondents with respect to such transactions,
securities, savings deposits, repurchase agreements and reverse repurchase
agreements.
FOREIGN SECURITIES - Consistent with the foregoing investment policies, each of
the Funds (excluding the Money Market Fund) may invest up to 10% of its assets
in foreign securities, either directly or through the purchase of sponsored and
unsponsored American Depository Receipts ("ADRs"). Unsponsored ADRs may be
less liquid than sponsored ADRs, and there may be less information available
regarding the underlying foreign issuer for unsponsored ADRs. Investment in
foreign securities is subject to special investment risks that differ in some
respects from those related to investments in securities of U.S. domestic
issuers. Such risks include trade balances and imbalances, and related economic
policies, future adverse political, economic and social developments, the
possible imposition of withholding taxes on interest and dividend income,
possible seizure, nationalization, or expropriation of foreign investments or
deposits, currency blockage, less stringent disclosure requirements, the
possible establishment of exchange controls or taxation at the source, or the
adoption of other foreign governmental restrictions. In addition, foreign
branches of U.S. banks, foreign banks and foreign issuers may be subject to less
stringent reserve requirements and to different accounting, auditing, reporting,
and recordkeeping standards than those applicable to domestic branches of U.S.
banks and U.S. domestic issuers, and securities markets in foreign countries may
be structured differently from and may not be as liquid as the U.S. markets.
Where purchases of foreign securities are made in foreign currencies, a Fund may
incur currency conversion costs and may be affected favorably or unfavorably by
changes in the value of foreign currencies against the U.S. dollar.
WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS - Each Fund may purchase
securities on a when-issued or delayed-delivery basis. These transactions are
arrangements in which a Fund purchases securities with payment and delivery
scheduled for a future time. A Fund will engage in when-issued and delayed-
delivery transactions only for the purpose of acquiring portfolio securities
consistent with and in furtherance of its investment objective and policies, not
for investment leverage, although such transactions represent a form of
leveraging. When-issued securities are securities purchased for delivery beyond
the normal settlement date at a stated price and yield and thereby involve a
risk that the yield obtained in the transaction will be less than that available
in the market when delivery takes place. A Fund will generally not pay for such
securities or start earning interest on them until they are received on the
settlement date. When a Fund agrees to purchase such securities, however, the
Custodian will set aside cash or liquid, high grade debt obligations equal to
the amount of the commitment in a separate account. Securities purchased on a
when-issued basis are recorded as an asset and are subject to changes in the
value based upon changes in the general level of interest rates. In when-issued
and delayed-delivery transactions, a Fund relies on the seller to complete the
transaction; the seller's failure to do so may cause such Fund to miss a price
or yield considered to be advantageous. Each Fund's commitments to purchase
when-issued securities will not exceed 25% of the value of its total assets
absent unusual market conditions.
SECURITIES RATINGS - As described above, certain Funds may invest in debt
securities within the fourth highest rating group assigned by one or more
appropriate NRSROs and comparable unrated securities. Although investment grade,
these types of debt securities are considered by Moody's and S&P to have some
speculative characteristics, and are more vulnerable to changes in economic
conditions, higher interest rates or adverse issuer-specific developments which
are more likely to lead to a weaker capacity to make principal and interest
payments than comparable higher rated debt securities.
Should subsequent events cause the rating of a debt security purchased by one of
the Funds to fall below the fourth highest rating category, as the case may be,
the Adviser will consider such an event in determining whether that Fund should
continue to hold that security. The Adviser expects that it would not retain
more than 5% of the assets of any Fund in such downgraded securities. In no
event, however, would that Fund be required to liquidate any such portfolio
security where the Fund would suffer a loss on the sale of such security.
OTHER - In order to generate additional income, each Fund (excluding the Money
Market Fund) may, from time to time, lend its portfolio securities to broker-
dealers, banks, or institutional borrowers of securities. A Fund must receive
100% collateral in the form of cash or U.S. government securities. This
collateral will be valued daily by the Adviser. Should the market value of the
loaned securities increase, the borrower must furnish additional collateral to
that Fund. During the time portfolio securities are on loan, the borrower pays
that Fund any dividends or interest received on such securities. Loans are
subject to termination by such Fund or the borrower at any time. While a Fund
does not have the right to vote securities on loan, each Fund intends to
terminate the loan and regain the right to vote if that is considered important
with respect to the investment. In the event the borrower would default in its
obligations, such Fund bears the risk of delay in recovery of the portfolio
securities and the loss of rights in the collateral. A Fund will enter into loan
agreements only with broker-dealers, banks, or other institutions that the
Adviser has determined are creditworthy under guidelines established by the
Company's Board of Directors.
Consistent with each Fund's investment objective and policies the Small Cap
Value, Equity, Balanced, Fixed Income and the Short/Intermediate Funds each may
also invest up to 10% of the value of its total assets in the securities of
other investment companies, so long as the aggregate value of the shares
acquired from any one such investment company will not exceed 5% of the total
assets of such Fund. A Fund will incur additional expenses due to the
duplication of expenses as a result of investing in mutual funds. In order to
avoid the imposition of additional fees as a result of investing in shares of
the Money Market Fund, the Adviser, the Administrator and their affiliates will
reduce their fees charged to a Fund by an amount equal to the fees charged by
such service providers based on a percentage of that Fund's assets attributable
to such Fund's investment in the Money Market Fund. Additional restrictions on
the Funds' investments in the securities of other mutual funds are contained in
the Statement of Additional Information.
INVESTMENT RESTRICTIONS
- -----------------------
Each Fund is subject to a number of investment restrictions that may be changed
only by a vote of a majority of the outstanding Shares of that Fund (see
"GENERAL INFORMATION-Miscellaneous").
Each of the Funds will not:
1. Purchase securities of any one issuer, other than obligations issued or
guaranteed by the U.S. government or its agencies or instrumentalities, if,
immediately after such purchase: (a) more than 5% of the value of such
Fund's total assets would be invested in such issuer, or (b) such Fund
would hold more than 10% of the outstanding voting securities of such
issuer, except that up to 25% of the value of a Fund's total assets may be
invested without regard to such limitations. There is no limit to the
percentage of assets that may be invested in U.S. Treasury bills, notes, or
other obligations issued or guaranteed by the U.S. government or its
agencies or instrumentalities.
2. Purchase any securities which would cause more than 25% of the value of a
Fund's total assets at the time of purchase to be invested in securities of
one or more issuers conducting their principal business activities in the
same industry, provided that: (a) there is no limitation with respect to
obligations issued or guaranteed by the U.S. government or its agencies or
instrumentalities, and repurchase agreements secured by obligations of the
U.S. government or its agencies or instrumentalities; (b) wholly owned
finance companies will be considered to be in the industries of their
parents if their activities are primarily related to financing the
activities of their parents; and (c) utilities will be divided according to
their services. For example, gas, gas transmission, electric and gas,
electric, and telephone will each be considered a separate industry.
3. Borrow money or issue senior securities, except that each Fund may borrow
from banks or enter into reverse repurchase agreements for temporary
purposes in amounts up to 10% of the value of its total assets at the time
of such borrowing; or mortgage, pledge or hypothecate any assets, except in
connection with any such borrowing and in amounts not in excess of the
lesser of the dollar amounts borrowed or 10% of the value of such Fund's
total assets at the time of its borrowing. A Fund will not purchase
securities while its borrowings (including reverse repurchase agreements)
exceed 5% of its total assets.
4. Make loans, except that each Fund may purchase or hold debt instruments and
lend portfolio securities in accordance with its investment objective and
policies, and may enter into repurchase agreements.
The following additional investment restriction may be changed without the vote
of a majority of the outstanding Shares of a Fund. Each Fund may not purchase or
otherwise acquire any securities if, as a result, more than 5% of that Fund's
net assets would be invested in securities that are illiquid.
In addition to the above investment restrictions, each Fund is subject to
certain other investment restrictions set forth under "INVESTMENT OBJECTIVES
AND POLICIES - Investment Restrictions" in the Funds' Statement of Additional
Information.
Irrespective of fundamental investment restriction number 1 above, and pursuant
to Rule 2a-7 under the 1940 Act, the Money Market Fund will, with respect to
100% of its total assets, limit its investment in the securities of any one
issuer in the manner provided by such Rule, which limitations are referred to
above under the caption "INVESTMENT OBJECTIVES AND POLICIES-In General."
VALUATION OF SHARES
- -------------------
The net asset value of each Fund is determined and its Shares are priced as of
4:00 p.m. (except the Money Market Fund, which is also priced at 11:00 a.m.
Eastern Time) (the "Valuation Time") on each Business Day. A "Business Day"
of a Fund is a day on which the New York Stock Exchange is open for trading and
any other day (other than a day on which no Shares of such Fund are tendered for
redemption and no order to purchase Shares is received) during which there is
sufficient trading in that Fund's portfolio instruments that its net asset value
per Share might be materially affected. The New York Stock Exchange will not be
open in observation of the following holidays: New Year's Day, President's Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. Net asset value per Share for purposes of pricing purchases and
redemptions is calculated by dividing the value of all securities and other
assets belonging to a Fund, less the liabilities charged to that Fund, by the
number of that Fund's outstanding Shares. The net asset value per share of the
Small Cap Value Fund, the Equity Fund, the Balanced Fund, the Fixed Income Fund
and the Short/Intermediate Fund will fluctuate as the value of the investment
portfolio of a Fund changes.
The assets in the Money Market Fund are valued based upon the amortized cost
method which the Directors of the Company believe fairly reflects the market-
based net asset value per Share. Pursuant to the rules and regulations of the
Commission regarding the use of the amortized cost method, the Money Market Fund
will maintain a dollar-weighted average portfolio maturity of 90 days or less.
Although the Company seeks to maintain the Money Market Fund's net asset value
per Share at $1.00, there can be no assurance that net asset value will not
vary.
The securities of each other Fund will be valued at market value. If market
quotations are not available, securities will be valued by a method which the
Board of Directors believes accurately reflects a fair value. For further
information about valuation of investments, see "NET ASSET VALUE" in the
Statement of Additional Information.
HOW TO PURCHASE AND REDEEM SHARES
- ---------------------------------
DISTRIBUTOR - Shares in each Fund are sold on a continuous basis by the
Company's Distributor, Sunstone Financial Group, Inc. The principal office of
the Distributor is 207 East Buffalo Street, Suite 400, Milwaukee, Wisconsin
53202. If you wish to purchase Shares, telephone the Company at (800) OMAHA-03.
PURCHASES OF SHARES - Shares may be purchased directly by investors or through
procedures established by the Distributor in connection with requirements of
qualified accounts maintained by or on behalf of certain persons ("Customers")
by the Adviser or its correspondent or affiliated banks (collectively, the
"Banks"). In the case of the Money Market Fund, these procedures may include
instructions under which a Customer's account is "swept" automatically no less
frequently than weekly and amounts in excess of a minimum amount agreed upon by
the Bank and the Customer are invested by the Distributor in Shares of the Money
Market Fund.
Shares of the Funds sold to the Banks acting in a fiduciary, advisory,
custodial, or other similar capacity on behalf of Customers will normally be
held of record by the Banks. With respect to Shares of the Funds so sold, it is
the responsibility of the particular Bank to transmit purchase or redemption
orders to the Company and to deliver federal funds for purchase on a timely
basis. Beneficial ownership of Shares will be recorded by the Banks and
reflected in the account statements provided by the Banks to Customers. A Bank
will exercise voting authority for those Shares for which it is granted
authority by the Customer.
Investors may also purchase Shares of the Funds by completing and signing a
Purchase Application and mailing it, together with a check (or other negotiable
bank draft or money order) in at least the minimum initial purchase amount,
payable to the appropriate Fund, to: First Omaha Funds, Inc., P.O. Box 419022,
Kansas City, Missouri 64141-6022. Subsequent purchases of Shares of that Fund
may be made at any time by mailing a check (or other negotiable bank draft or
money order) payable to the appropriate Fund, to the above address.
If a Purchase Application has been previously received by the Company, investors
may also purchase Shares by wiring funds to the Funds' Custodian. Prior to
wiring any such funds and in order to ensure that wire orders are invested
promptly, investors must call the Company at (800) OMAHA-03 to obtain
instructions regarding the bank account number into which the funds should be
wired and other pertinent information.
Shares of each of the Funds are purchased at the net asset value per Share (see
"VALUATION OF SHARES") next determined after receipt by the Company of an
order to purchase Shares. Purchases of Shares of a Fund will be effected only on
a Business Day (as defined in "VALUATION OF SHARES") of that Fund. An order
received prior to the Valuation Time on any Business Day will be executed at the
net asset value determined as of the Valuation Time on the date of receipt. An
order received after the Valuation Time on any Business Day will be executed at
the net asset value determined as of the Valuation Time on the next Business Day
of that Fund.
MINIMUM INVESTMENT - Except as otherwise discussed below under "Auto Invest
Plan," the minimum investment is $500 for the initial purchase of Shares of
each Fund and $50 for subsequent purchases. The subsequent purchase minimum may
be waived if purchases are made in connection with an Individual Retirement
Account ("IRA") and both the initial and subsequent minimum investments may be
waived if purchases are made in connection with a payroll deduction plan.
There is no initial sales charge imposed by the Funds in connection with the
purchase of Shares. Depending upon the terms of a particular Customer's account,
the Banks or their affiliates may charge a Customer account fees for automatic
investment and other cash management services provided in connection with
investment in a Fund. Information concerning these services and any charges may
be obtained from the Banks. This Prospectus should be read in conjunction with
any such information received from the Banks.
MISCELLANEOUS - The Funds reserve the right to reject any order for the purchase
of their Shares in whole or in part. Transactions as a result of the automatic
reinvestment of dividends and capital gains distributions, as well as the Funds'
Auto Invest Plan and Auto Withdrawal Plan transactions, will be confirmed
quarterly on the quarterly statements rather than after each transaction.
Shareholders wishing to confirm these transactions before the end of a calendar
quarter may do so by calling the Funds at (800) OMAHA-03 after the date of the
transaction. Dividends are reinvested monthly-generally during the last week of
each month. Auto Invest Plan and Auto Withdrawal Plan transactions occur in
accordance with the Shareholder's instructions when establishing these plans.
Every Shareholder will receive a confirmation of each new transaction in his or
her account, which will also show the total number of Shares owned by the
Shareholder and the number of Shares being held in safekeeping by the Transfer
Agent for the account of the Shareholder. These confirmations will include all
account activity during the current year. Reports of transactions by Banks on
behalf of their Customers will be sent by the Banks to their Customers.
Shareholders may rely on these statements in lieu of certificates. Certificates
representing Shares will not be issued.
AUTO INVEST PLAN - The Company's Auto Invest Plan enables Shareholders to make
regular monthly or quarterly purchases of Shares of a Fund through automatic
deduction from their bank accounts, provided that the Shareholder's bank is a
member of the Federal Reserve and the Automated Clearing House (ACH) system.
With Shareholder authorization the Transfer Agent will deduct the amount
specified (subject to the applicable minimums) from the Shareholder's bank
account which proceeds will automatically be invested in Shares of the
designated Fund at the public offering price on the date of such deduction. The
required minimum initial investment when opening an account using the Auto
Invest Plan is $100; the minimum amount for subsequent investments is $50. To
participate in the Auto Invest Plan, Shareholders should complete the
appropriate section of the Purchase Application which can be acquired by calling
the Company at (800) OMAHA-03. For a Shareholder to change his or her Auto
Invest Plan instructions, the request must be made in writing to the Company at:
P.O. Box 419022, Kansas City, Missouri 64141-6022.
EXCHANGE PRIVILEGE - Shares of a Fund may be exchanged without payment of any
fees for Shares of each of the other First Omaha Funds at respective net asset
values, provided the amount to be exchanged meets the applicable minimum
investment requirements and the exchange is made in states where it is legally
authorized. An exchange is considered a sale of Shares and will result in a
capital gain or loss for federal income tax purposes.
A Shareholder wishing to exchange his or her Shares may do so by contacting the
Company at (800) OMAHA-03 or by providing written instructions to the Company.
Any Shareholder who wishes to make an exchange should review information in the
Company's current Prospectus regarding the First Omaha Fund in which he or she
wishes to invest before making the exchange. For a discussion of risks
associated with unauthorized telephone exchanges, see "Redemption by
Telephone" below.
The Company reserves the right to modify or terminate the expanded exchange
privilege upon 60 days written notice to each Shareholder prior to the
modification or termination taking effect.
REDEMPTION OF SHARES - Shares may ordinarily be redeemed by mail or by
telephone. However, all or part of a Customer's Shares may be redeemed in
accordance with instructions and limitations pertaining to his or her account at
a Bank. For example, if a Customer has agreed with a Bank to maintain a minimum
balance in his or her account with the Bank, and the balance in that account
falls below that minimum, the Customer may be obliged to redeem, or the Bank may
redeem on behalf of the Customer, all or part of the Customer's Shares of a Fund
to the extent necessary to maintain the required minimum balance. The minimum
balance required by any such Bank may be higher than the minimum required by the
Company.
REDEMPTION BY MAIL - A written request for redemption must be received by the
Transfer Agent in order to honor the request. The Transfer Agent's address is:
First Omaha Funds, Inc., P.O. Box 419022, Kansas City, Missouri 64141-6022. The
Transfer Agent will require a signature guarantee by an eligible guarantor
institution. The signature guarantee requirement will be waived if the following
conditions apply: (1) the redemption check is payable to the Shareholder(s) of
record, and (2) the redemption check is mailed to the Shareholder(s) at the
address of record or mailed or wired to a commercial bank account previously
designated on the Purchase Application. There is no charge for having redemption
proceeds mailed to a designated bank account. To change the address to which a
redemption check is to be mailed, a written request therefor must be received by
the Transfer Agent. In connection with such request, the Transfer Agent will
require a signature guarantee by an eligible guarantor institution. For purposes
of this policy, the term "eligible guarantor institution" shall include banks,
brokers, dealers, credit unions, securities exchanges and associations, clearing
agencies and savings associations as those terms are defined in the Securities
Act of 1934. The Transfer Agent reserves the right to reject any signature
guarantee if: (1) it has reason to believe that the signature is not genuine,
(2) it has reason to believe that the transaction would otherwise be improper,
or (3) the guarantor institution is a broker or dealer that is neither a member
of a clearing corporation nor maintains net capital of at least $100,000.
REDEMPTION BY TELEPHONE - If a Shareholder has so designated on the Purchase
Application, a Shareholder may request the redemption of Shares by telephone and
have the payment of redemption requests sent through ACH to a federally insured
depository account previously designated by the Shareholder on the Purchase
Application or mailed directly to the Shareholder at the Shareholder's address
as recorded by the Transfer Agent. If you have payment sent through ACH, please
allow 24 to 48 hours for available funds. There is currently no charge for
having payment of redemption requests mailed or sent through ACH to a designated
bank account. Such ACH redemption requests may be made by the Shareholder by
telephone to the Company. For telephone redemptions, call the Company at (800)
OMAHA-03.
Neither the Funds nor their service providers will be liable for any loss,
damages, expense or cost arising out of any telephone redemption effected in
accordance with the Funds' telephone redemption procedures, acting upon
instructions reasonably believed to be genuine. Each Fund will employ procedures
designed to provide reasonable assurance that instructions by telephone are
genuine; if these procedures are not followed, such Fund or its service
providers may be liable for any losses due to unauthorized or fraudulent
instructions. These procedures include recording all telephone conversations,
sending confirmations to Shareholders within 72 hours of the telephone
transaction, verification of account name and account number or tax
identification number, and sending redemption proceeds only to the address of
record or to a previously authorized bank account. If, due to temporary adverse
conditions, investors are unable to effect telephone transactions, Shareholders
may also mail the redemption request to the Transfer Agent at the address listed
above under "HOW TO PURCHASE AND REDEEM SHARES- Redemption by Mail."
AUTO WITHDRAWAL PLAN - The Auto Withdrawal Plan enables Shareholders of each of
the Funds to make regular monthly or quarterly redemptions of Shares. With
Shareholder authorization, the Transfer Agent will automatically redeem Shares
at the net asset value on the dates of the withdrawal and have a check in the
amount specified mailed to the Shareholder. The required minimum withdrawal is
$100. To participate in the Auto Withdrawal Plan, Shareholders should call (800)
OMAHA-03 for more information. Purchases of additional Shares concurrent with
withdrawals may be disadvantageous to certain Shareholders because of tax
liabilities. For a Shareholder to change his or her Auto Withdrawal Plan
instructions, the request must be made in writing to the Company.
PAYMENTS TO SHAREHOLDERS - Redemption orders are effected at the net asset value
per Share next determined after the Shares are properly tendered for redemption,
as described above. Payment to Shareholders for Shares redeemed will be made
within seven days after receipt by the Distributor of the request for
redemption. However, to the greatest extent possible, a Fund will attempt to
honor requests from Shareholders for next day payments upon redemption of Shares
if the request for redemption is received by the Distributor before 4:00 p.m.
(11:00 a.m. for the Money Market Fund), Eastern Time, on a Business Day or, if
the request for redemption is received after 4:00 p.m. (11:00 a.m. for the Money
Market Fund), Eastern Time, to honor requests for payment on the second Business
Day, unless it would be disadvantageous to that Fund or the Shareholders of that
Fund to sell or liquidate portfolio securities in an amount sufficient to
satisfy requests for payments in that manner.
At various times, the Company may be requested to redeem Shares for which it has
not yet received good payment. In such circumstances, the Company may delay the
forwarding of proceeds for up to 15 days until payment has been collected for
the purchase of such Shares. The Company intends to pay cash for all Shares
redeemed, but under abnormal conditions which make payment in cash unwise, the
Company may make payment wholly or partly in portfolio securities at their then
market value equal to the redemption price, which portfolio securities may or
may not be liquid. In such cases, an investor may incur brokerage costs in
converting such securities to cash.
Due to the relatively high cost of handling small investments, each Fund
reserves the right to redeem, at net asset value, the Shares of that Fund of any
Shareholder if, because of redemptions of Shares by or on behalf of the
Shareholder (but not as a result of a decrease in the market prices of such
Shares or the establishment of an account with less than $500 using the Auto
Invest Plan or pursuant to a payroll deduction plan), the account of such
Shareholder has a value of less than $500. Accordingly, an investor purchasing
Shares of a Fund in only the minimum investment amount may be subject to such
involuntary redemption if he or she thereafter redeems some of his or her
Shares. Before a Fund exercises its right to redeem such Shares and to send the
proceeds to the Shareholder, the Shareholder will be given notice that the value
of the Shares in his or her account is less than the minimum amount and will be
allowed 60 days to make an additional investment in an amount which will
increase the value of the account to at least $500.
See "ADDITIONAL PURCHASE AND REDEMPTION INFORMATION" in the Statement of
Additional Information for examples of when the Company may suspend the right of
redemption in light of the Company's responsibilities under the 1940 Act.
DIVIDENDS AND TAXES
- -------------------
DIVIDENDS - The net investment income of each Fund is declared monthly as a
dividend to Shareholders (except for the Money Market Fund, which declares
income dividends daily). Such dividends are generally declared at the close of
business on the day of declaration and paid monthly. Distributable net realized
capital gains are distributed at least annually. A Shareholder of a Fund will
automatically receive all distributions in additional full and fractional Shares
of that Fund at the net asset value as of the date of payment unless the
Shareholder elects to receive such dividends in cash. Such election, or any
revocation thereof, must be made in writing to the appropriate Fund, addressed
to: First Omaha Funds, Inc., P.O. Box 419022, Kansas City, Missouri 64141-6022,
and will become effective with respect to dividends having record dates after
its receipt by the Transfer Agent. Dividends are paid in cash not later than
seven Business Days after a Shareholder's complete redemption of the Shares in a
Fund.
FEDERAL TAXES - Each of the Funds of the Company is treated as a separate entity
for federal income tax purposes and each intends to qualify as a "regulated
investment company" under the Internal Revenue Code of 1986, as amended (the
"Code"), for so long as such qualification is in the best interest of such
Fund's Shareholders. Qualification as a regulated investment company under the
Code requires, among other things, that the regulated investment company
distribute to its Shareholders at least 90% of its investment company taxable
income. Each Fund contemplates declaring as dividends 100% of that Fund's
investment company taxable income (before deduction of dividends paid). Because
all of the Money Market Fund's net investment income is expected to be derived
from earned interest and short-term capital gains, it is anticipated that no
part of any distribution will be eligible for the dividends-received deduction
for corporations. The Money Market Fund does not expect to realize any long-term
capital gains and, therefore, does not foresee paying any "capital gains
dividends" as described in the Code.
In order to avoid the imposition of an excise tax, each Fund is required to
distribute annually, prior to calendar year end, 98% of taxable ordinary income
on a calendar year basis, 98% of capital gain net income realized in the 12
months preceding October 31, and the balance of undistributed taxable ordinary
income and capital gain net income from the prior calendar year. If
distributions during the calendar year are less than the required amounts, that
Fund would be subject to a nondeductible 4% excise tax on the deficiency.
A Shareholder receiving a distribution of ordinary income and/or an excess of
short-term capital gain over net long-term capital loss would treat it as a
receipt of ordinary income even if paid in additional Shares and not in cash.
Shareholders not subject to federal income tax on their income will not,
however, be required to pay federal income tax on any amounts distributed to
them. The dividends-received deduction for corporations will apply to the
aggregate of such ordinary income distributions in the same proportion as the
aggregate dividends, if any, qualifying for the dividends-received deduction
received by a Fund bear to its gross income.
Distribution by a Fund of the excess of net long-term capital gain over net
short-term capital loss is taxable to Shareholders as long-term capital gain in
the year in which it is received, regardless of how long the Shareholder has
held shares. Such distributions are not eligible for the dividends-received
deduction.
If the net asset value of a Share is reduced below the Shareholder's cost of
that Share by the distribution of income or gain realized on the sale of
securities, the distribution is a return of invested principal, although taxable
as described above.
Prior to purchasing Shares, the impact of dividends or capital gains
distributions which are expected to be declared or have been declared, but have
not been paid, should be carefully considered. Any such dividends or capital
gains distributions paid shortly after a purchase of Shares prior to the record
date will have the effect of reducing the per share net asset value of the
Shares by the amount of the dividends or distributions. All or a portion of such
dividends or distributions, although in effect a return of capital, is subject
to tax.
STATE TAXES - Even though a substantial portion of distributions of net income
by the Money Market Fund to its Shareholders, and lesser amounts of
distributions to other Fund Shareholders, will be attributable to interest on
U.S. Treasury obligations, which may be exempt from state or local tax if
received directly by a Shareholder, Shareholders of a Fund may be subject to
state and local taxes with respect to their ownership of Shares or their receipt
of distributions from such Fund. In addition, to the extent Shareholders receive
distributions of income attributable to investments in repurchase agreements by
a Fund, such distribution may also be subject to state or local taxes.
The foregoing is intended only as a brief summary of some of the important
tax considerations generally affecting each Fund and its Shareholders.
Potential investors in each Fund are urged to consult their tax
advisers concerning the application of federal, state and local taxes as such
laws and regulations affect their own tax situation.
Shareholders will be advised at least annually as to the income tax consequences
of distributions made to them during the year.
MANAGEMENT OF THE COMPANY
- -------------------------
DIRECTORS OF THE COMPANY - Overall responsibility for management of the Company
rests with the Board of Directors, who are elected by the Shareholders of the
Company's Funds. The Company will be managed by the Directors in accordance with
the laws of Nebraska governing corporations. The Directors, in turn, elect the
officers of the Company to supervise the day-to-day operations.
The Directors receive fees and are reimbursed for their expenses in connection
with each meeting of the Board of Directors they attend. The officers of the
Company receive no compensation directly from the Company for performing the
duties of their offices. Sunstone receives fees from each of the Funds for
acting as Administrator and for providing certain fund accounting services.
INVESTMENT ADVISER - First National Bank of Omaha, One First National Center,
Omaha, Nebraska 68102, is the investment adviser of each of the Funds. The
Adviser is a subsidiary of First National of Nebraska, a Nebraska corporation,
with total assets of approximately $6.1 billion as of December 31, 1995. The
Adviser provides a full range of financial and trust services to businesses,
individuals, and government entities and has been providing quality trust and
investment management service for over 65 years. The Adviser serves Nebraska, as
well as other areas of the Midwest. In addition, as of December 31, 1995, the
Adviser's Trust Division had approximately $6.6 billion of assets under
administration, including approximately $2.5 billion under management.
Subject to the general supervision of the Company's Board of Directors and in
accordance with the Funds' investment objectives and restrictions, the Adviser
manages the investments of each Fund, makes decisions with respect to and places
orders for all purchases and sales of each Fund's portfolio securities, and
maintains each Fund's records relating to such purchases and sales. All
investment decisions for each Fund are made by an investment committee, and no
person is primarily responsible for making recommendations to that committee.
For the services provided and expenses assumed pursuant to its investment
advisory agreement with the Company, the Adviser receives a fee from the Small
Cap Value Fund, the Equity Fund, the Balanced Fund, the Fixed Income Fund, the
Short/Intermediate Fund and the Money Market Fund, computed daily and paid
monthly, equal to the lesser of: (1) a fee at the annual rate of eighty-five
one-hundredths of one percent (.85%), seventy-five one-hundredths of one percent
(.75%), seventy-five one-hundredths of one percent (.75%), sixty one-hundredths
of one percent (.60%), fifty one-hundredths of one percent (.50%), and twenty-
five one-hundredths of one percent (.25%), respectively, of that Fund's average
daily net assets, or (2) such other fee as may be agreed upon in writing from
time to time by the Company and the Adviser. Investment advisory fees of
seventy-five one-hundredths of one percent (.75%) and higher are higher than
similar fees charged by most other mutual funds. The Adviser may periodically
voluntarily reduce all or a portion of its advisory fee with respect to a Fund
to increase the net income of that Fund available for distribution as dividends.
The Adviser may not seek reimbursement of such voluntarily reduced fees at a
later date. The reduction of such fee will cause the yield and total return of
that Fund to be higher than it would be in the absence of such reduction.
ADMINISTRATOR AND DISTRIBUTOR - Sunstone Financial Group, Inc. (the
"Administrator" or the "Distributor," as the context indicates), 207 E.
Buffalo Street, Suite 400, Milwaukee, Wisconsin 53202, acts as administrator and
distributor for each of the Funds. Richard Snyder and Randy Pavlick are officers
of the Funds and officers and/or employees of the Distributor. Shares of the
Funds are sold by the Distributor on a continuous basis. As compensation for its
administrative services (which include clerical, compliance, regulatory, fund
accounting and other services) and the assumption of related expenses, the
Administrator is entitled to a fee, computed daily and payable monthly, at an
annual rate of .20% of each Fund's average net assets subject to a minimum fee
of $300,000 for the Equity, Fixed Income, Short/Intermediate and Money Market
Funds in the aggregate and to a minimum fee of $50,000 for each of the Small Cap
Value and Balanced Funds.
The Administrator may periodically voluntarily reduce all or a portion of its
administrative fee with respect to one or more Funds. These waivers may be
terminated at any time at the Administrator's discretion. The Administrator may
not seek reimbursement of such voluntarily reduced fees at a later date. The
reduction of such fee will cause the yield of that Fund to be higher than it
would be in the absence of such reduction. The Distributor receives no
compensation from the Funds under its Distribution Agreement with the Company,
but may receive compensation under the Distribution and Service Plan described
below.
EXPENSES - The Adviser and the Administrator each bear all expenses in
connection with the performance of their services as investment adviser and
administrator, respectively, other than the cost of securities (including
brokerage commissions, and issue and transfer taxes, if any) purchased for a
Fund. Each Fund will bear the following expenses relating to its operations:
organizational expenses, taxes, interest, any brokerage fees and commissions,
fees and expenses of the Directors of the Company, Commission fees, state
securities qualification fees, costs of preparing and printing Prospectuses for
regulatory purposes and for distribution to its current Shareholders, outside
auditing and legal expenses, advisory and administration fees, fees and out-of-
pocket expenses of the Administrator, Custodian and Transfer Agent, costs for
independent pricing service, certain insurance premiums, costs of maintenance of
the Company's existence, costs of Shareholders' and Directors' reports and
meetings, distribution expenses incurred pursuant to the Distribution and
Service Plan described below, and any extraordinary expenses incurred in a
Fund's operation.
DISTRIBUTION PLAN - Pursuant to Rule 12b-l under the 1940 Act, the Company has
adopted a Distribution and Service Plan (the "Plan"), under which each Fund is
authorized to pay a periodic amount representing distribution expenses
calculated at an annual rate not to exceed twenty-five one-hundredths of one
percent (.25%) of the average daily net assets of that Fund. Such amount may be
used to pay banks (including the Adviser), broker-dealers and other institutions
(a "Participating Organization") for distribution and/or shareholder service
assistance pursuant to an agreement between the Distributor and the
Participating Organization. Under the Plan, a Participating Organization may
include the Distributor, its subsidiaries and its affiliates.
As of the date of this Prospectus, however, there are no Rule 12b-l Agreements
in effect under the Plan with respect to the Funds, and no fees are being paid
by any Fund under the Plan.
ADMINISTRATIVE SERVICES PLAN - The Company has adopted an Administrative
Services Plan (the "Services Plan") pursuant to which each Fund is authorized
to pay compensation to banks and other financial institutions, which may include
the Adviser, its correspondent and affiliated banks, and Sunstone (each a
"Service Organization"), which agree to provide certain ministerial, record
keeping and/or administrative support services for their customers or account
holders (collectively, "customers") who are the beneficial or record owner of
Shares of that Fund. In consideration for such services, a Service Organization
receives a fee from a Fund, computed daily and paid monthly at an annual rate of
up to twenty-five one-hundredths of one percent (.25%) of the average daily net
asset value of Shares of that Fund owned beneficially or of record by such
Service Organization's customers for whom the Service Organization provides such
services.
The servicing agreements adopted under the Services Plan (the "Servicing
Agreements") require the Service Organizations receiving such compensation to
perform certain ministerial, record keeping and/or administrative support
services with respect to the beneficial or record owners of Shares of the Funds,
such as processing dividend and distribution payments from the Funds on behalf
of customers, providing periodic statements to customers showing their positions
in the Shares of the Funds, providing sub-accounting with respect to Shares
beneficially owned by such customers and providing customers with a service that
invests the assets of their accounts in Shares of the Funds pursuant to specific
or pre-authorized instructions.
As authorized by the Services Plan, the Company has entered into a Servicing
Agreement with the Adviser pursuant to which the Adviser has agreed to provide
certain administrative support services in connection with Shares of the Funds
owned of record or beneficially by its customers. Such administrative support
services may include, but are not limited to: (1) processing dividend and
distribution payments from a Fund on behalf of customers; (2) providing periodic
statements to its customers showing their positions in the Shares; (3) arranging
for bank wires; (4) responding to routine customer inquiries relating to
services performed by the Adviser; (5) providing sub-accounting with respect to
the Shares beneficially owned by the Adviser's customers or the information
necessary for sub-accounting; (6) if required by law, forwarding shareholder
communications from a Fund (such as proxies, shareholder reports, annual and
semi-annual financial statements and dividend, distribution and tax notices) to
its customers; (7) aggregating and processing purchase, exchange and redemption
requests from customers and placing net purchase, exchange and redemption orders
for customers; and (8) providing customers with a service that invests the
assets of their account in the Shares pursuant to specific or pre-authorized
instructions. In consideration of such services, the Company, on behalf of each
of the Funds, except the Money Market Fund, may pay the Adviser a monthly fee,
computed at the annual rate of ten one-hundredths of one percent (.10%) of the
average aggregate net asset value of Shares of that Fund held during the period
by customers for whom the Adviser has provided services under the Servicing
Agreement. The Adviser may periodically voluntarily reduce all or a portion of
its administrative services fee with respect to a Fund to increase the net
income of that Fund available for distribution as dividends. The reduction of
such fee will cause the yield and total return of that Fund to be higher than
they would be in the absence of such reduction. Beginning November 1, 1996, the
Equity, Fixed Income and Short/Intermediate Funds began accruing fees under the
Servicing Agreement with the Adviser.
BANKING LAWS - The Adviser believes that it possesses the legal authority to
perform the services for each Fund contemplated by the Plan adopted by the
Company, its Investment Advisory Agreement and its Custodian Agreement with the
Company and administrative support services contemplated by the Servicing
Agreement with the Company, as described in this Prospectus, without violation
of applicable banking laws and regulations, and has so represented in its
Investment Advisory Agreement, its Servicing Agreement and its Custodian
Agreement with the Company. Future changes in federal or state statutes and
regulations relating to permissible activities of banks or bank holding
companies and their subsidiaries and affiliates as well as further judicial or
administrative decisions or interpretations of present and future statutes and
regulations could change the manner in which the Adviser could continue to
perform such services for the Funds. It is not anticipated, however, that any
change in the Company's method of operations would affect its net asset value
per Share or result in financial losses to any Shareholder. See "MANAGEMENT OF
THE COMPANY-Glass-Steagall Act" in the Statement of Additional Information
for further discussion of applicable law and regulations.
GENERAL INFORMATION
- -------------------
DESCRIPTION OF THE COMPANY AND ITS SHARES - The Company was organized as a
Nebraska corporation on October 12, 1994. The Company and its Equity Fund, Fixed
Income Fund, Short/Intermediate Fund and Money Market Fund were organized to
acquire the assets and continue the business of the corresponding substantially
identical investment portfolios of The Sessions Group, an Ohio business trust.
References herein to the "immediate predecessor" of a Fund refer to the
investment portfolio of The Sessions Group which corresponds to such Fund. On
April 10, 1995 the Company acquired approximately $326.0 million of assets from
The Sessions Group in return for an equivalent dollar amount of Shares of the
Company. The Small Cap Value Fund was added and became effective on March 29,
1996. The Balanced Fund became effective on July 29, 1996. Each
Share of a Fund represents an equal proportionate interest in that Fund with
other Shares of the same Fund, and is entitled to such dividends and
distributions out of the income earned on the assets belonging to that Fund as
are declared at the discretion of the Directors (see "Miscellaneous" below).
The Articles of Incorporation of the Company permit the Company, by resolution
of its Board of Directors, to create new series of common shares relating to new
investment portfolios or to subdivide existing series of Shares into subseries
or classes. Classes could be utilized to create differing expense and fee
structures for investors in the same Fund. Differences could exist, for example,
in the sales load, Rule 12b-1 fees or service plan fees applicable to different
classes of Shares offered by a particular Fund. Such an arrangement could enable
the Company to tailor its marketing efforts to a broader segment of the
investing public with a goal of attracting additional investments in the Funds.
While the Board of Directors of the Company has not created any such subseries
or classes, it could do so in the future without Shareholder approval. However,
any such creation of classes would require compliance with regulations the
Commission has adopted under the 1940 Act.
Shareholders are entitled to one vote for each Share owned and a proportionate
fractional vote for any fraction of a Share owned, and will vote in the
aggregate and not by series or Fund except as otherwise expressly required by
law. For example, Shareholders of each of the Funds will vote in the aggregate
with other Shareholders of the Company with respect to the election of Directors
and ratification of the selection of independent accountants. However,
Shareholders of each of the Funds will vote as a series, and not in the
aggregate with other Shareholders of the Company, for purposes of approval of
such Fund's Investment Advisory Agreement and the Plan. In connection with any
election of Directors, Shareholders are entitled to cumulate their votes by
casting the number of votes equal to the number of directorships being filled
multiplied by the number of Shares held, and to cast all of such votes for one
candidate or to distribute them among several candidates as the Shareholder sees
fit.
The Adviser will possess, in a fiduciary capacity on behalf of its underlying
accounts, voting or investment power with respect to a substantial majority of
the outstanding Shares of each of the Funds and therefore, will be presumed to
control each of the Funds within the meaning of the 1940 Act.
Overall responsibility for the management of each of the Funds is vested in the
Board of Directors of the Company. See "MANAGEMENT OF THE COMPANY-Directors and
Officers." Individual Directors are elected by the Shareholders of the Company
and may be removed by the Board of Directors or Shareholders of the Company in
accordance with the provisions of the Articles of Incorporation and Bylaws of
the Company and Nebraska law. See "ADDITIONAL INFORMATION-Miscellaneous" in
the Statement of Additional Information for further information.
An annual or special meeting of Shareholders to conduct necessary business is
not required by the Articles of Incorporation, the 1940 Act or other authority
except, under certain circumstances, to elect Directors, amend the Articles of
Incorporation, the Investment Advisory Agreement, the Plan or a Fund's
fundamental policies and to satisfy certain other requirements. To the extent
that such a meeting is not required, the Company may elect not to have an annual
or special meeting. However, the Company has undertaken to hold a meeting of
Shareholders to consider the removal of any Director if requested by the holders
of at least 10% of the Company's outstanding Shares.
CUSTODIAN - First National Bank of Omaha (the "Custodian") serves as Custodian
for each of the Funds. Pursuant to the Custodian Agreement with the Company, the
Custodian receives compensation from each of the Funds for such services in an
amount equal to a fee, computed daily and paid monthly, at the annual rate of
three one-hundredths of one percent (.03%) of each Fund's average daily net
assets.
TRANSFER AGENCY SERVICES - First National Bank of Omaha, One First National
Center, Omaha, Nebraska 68102, serves as the Funds' Transfer Agent pursuant to a
Transfer Agency Agreement with the Company. Pursuant to such Agreement, the
Transfer Agent, among other things, provides, or agrees to cause others to
provide, the following services in connection with each Fund's Shareholders of
record: maintenance of shareholder records for each of the Fund's Shareholders
of record; processing shareholder purchase and redemption orders; processing
transfers and exchanges of Shares of each Fund on the shareholder files and
records; processing dividend payments and reinvestments; and assistance in the
mailing of shareholder reports and proxy solicitation materials. For such
services First National Bank of Omaha receives a fee from the Funds based on the
number of Shareholders of record, subject to certain minimum amounts from each
Fund.
DST Systems, Inc., 210 W. 10th Street, Kansas City, Missouri 64105, serves as
sub-transfer agent for the Funds pursuant to a Sub-Transfer Agency Agreement
with First National Bank of Omaha. DST Systems, Inc. performs the principal
services as Transfer Agent for the Funds under such Agreement and receives a
fee from First National Bank of Omaha for such services.
MISCELLANEOUS - Shareholders will receive unaudited semi-annual reports and
annual reports audited by independent public accountants.
As used in this Prospectus and in the Statement of Additional Information,
"assets belonging to a Fund" means the consideration received by a Fund upon
the issuance or sale of Shares in that Fund, together with all income, earnings,
profits, and proceeds derived from the investment thereof, including any
proceeds from the sale, exchange, or liquidation of such investments, and any
funds or amounts derived from any reinvestment of such proceeds, and any general
assets of the Company not readily identified as belonging to a particular Fund
that are allocated to such Fund by the Company's Board of Directors. The Board
of Directors may allocate such general assets in any manner it deems fair and
equitable. Determinations by the Board of Directors of the Company as to the
timing of the allocation of general liabilities and expenses and as to the
timing and allocable portion of any general assets with respect to the Funds are
conclusive.
As used in this Prospectus and in the Statement of Additional Information, a
"vote of a majority of the outstanding Shares" of a Fund means the affirmative
vote, at a meeting of Shareholders duly called, of the lesser of: (1) 67% or
more of the votes of Shareholders of a Fund present at a meeting at which the
holders of more than 50% of the votes attributable to Shareholders of record of
such Fund are represented in person or by proxy, or (2) the holders of more than
50% of the outstanding Shares of a Fund.
ADDITIONAL PERFORMANCE INFORMATION
- ------------------------------------
The following information shows how the Funds have performed. Each of the
Equity, Fixed Income, Short/Intermediate and Money Market Funds acquired all of
the net assets of a predecessor mutual fund on April 9, 1995. Each respective
predecessor mutual fund commenced operations on December 13, 1992, except that
the Money Market Fund's predecessor commenced operations on December 4, 1991.
AVERAGE ANNUAL TOTAL RETURNS OF THE FUNDS
FOR THE PERIODS ENDED OCTOBER 31, 1996
One Three Since
Year Years Commencement
----- ----- ------------
Small Cap Value Fund N/A N/A 0.85%<F32>
Equity Fund 17.85% 15.20% 14.03%<F33>
Balanced Fund N/A N/A 2.73%<F34>
Fixed Income Fund 3.77% 4.45% 6.70%<F33>
Short/Intermediate Fund 4.92% 4.52% 5.31%<F33>
Money Market Fund 4.88% 4.45% 3.88%<F35>
<F32>Total return since June 10, 1996 (commencement of operations).
<F33>The predecessor mutual fund commenced operations on December 13, 1992.
<F34>Total return since August 6, 1996 (commencement of operations).
<F35>The predecessor mutual fund commenced operations on December 4, 1991.
The predecessors to the Equity, Fixed Income and Short/Intermediate Funds were
successors to common trust funds. The following table describes the performance
of these funds and includes the performance of the respective predecessor and
common trust funds. The common trust funds were managed by the Adviser who
manages the respective Funds, and the Adviser has represented that the Funds are
managed in a manner that is in all material respects equivalent to the
management of the common trust funds. However, the following information should
not be viewed as an indication of the future performance of the Funds. The
tables below include information regarding the common trust funds' operations
for periods before the Funds' registration statement became effective, as
adjusted to reflect the higher expenses borne by the Funds. The common trust
funds were not registered under the Investment Company Act of 1940 and therefore
were not subject to certain investment restrictions that are imposed by that
Act. If the common trust funds had been registered, their performance might
have been adversely affected.
AVERAGE ANNUAL TOTAL RETURNS OF THE FUNDS AND RESPECTIVE COMMON TRUST FUNDS
FOR THE PERIODS ENDED OCTOBER 31, 1996
One Three Five Ten Since
Year Years Years Years Commencement
----- ----- ----- ----- ------------
Equity Fund 17.85% 15.20% 13.61% 12.74% 15.36%<F36>
Fixed Income Fund 3.77% 4.45% 7.24% 7.78% 8.89%<F36>
Short/Intermediate Fund 4.92% 4.52% 5.68% N/A 7.36%<F37>
<F36>The predecessor fund commenced operations on January 31, 1975.
<F37>The predecessor fund commenced operations on January 1, 1991.
<TABLE>
<CAPTION>
TOTAL RETURNS FOR THE YEARS ENDED OCTOBER 31,
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equity Fund(1) 17.85% 18.60% 9.38% 12.12% 10.41% 28.01% (3.05)% 18.26% 14.06% 4.76%
Fixed Income Fund<F38> 3.77% 17.40% (6.47)% 13.79% 9.39% 14.03% 5.32% 11.17% 10.25% 1.31%
Short/Intermediate Fund 4.92% 10.40% (1.44)% 7.02% 7.88% 14.82%<F39> - - - -
<FN>
<F38>Results include performance of common trust fund which has been adjusted to reflect the Fund's operating expenses.
<F39>Results include performance of common trust fund which has been adjusted to reflect the Fund's operating expenses. The common
trust fund commenced operations on January 1, 1991.
</TABLE>
Performance quotations of a Fund represent its past performance and
should not be considered as representative of future results. The
investment return and principal value of an investment in a Fund will
fluctuate so that an investor's shares, when redeemed, may be worth
more or less than their original cost.
INVESTMENT ADVISER AND CUSTODIAN
First National Bank of Omaha
Attention: Trust Division
One First National Center
Omaha, Nebraska 68102
ADMINISTRATOR AND DISTRIBUTOR
Sunstone Financial Group, Inc.
207 E. Buffalo St., Suite 400
Milwaukee, Wisconsin 53202
LEGAL COUNSEL
Cline, Williams, Wright, Johnson & Oldfather
13th & M Streets
Lincoln, Nebraska 68508
AUDITORS
KPMG Peat Marwick LLP
Two Central Park Plaza, Suite 1501
Omaha, Nebraska 68102
FOR MORE INFORMATION
call 1-800-OMAHA-03
or write to:
First Omaha Funds
P.O. Box 419022
Kansas City, Missouri 64141-6022
FIRST OMAHA SMALL CAP VALUE FUND
FIRST OMAHA EQUITY FUND
FIRST OMAHA BALANCED FUND
FIRST OMAHA FIXED INCOME FUND
FIRST OMAHA SHORT/INTERMEDIATE FIXED INCOME FUND
FIRST OMAHA U.S. GOVERNMENT OBLIGATIONS FUND
EACH AN INVESTMENT PORTFOLIO OF
FIRST OMAHA FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION
DECEMBER 10, 1996
This Statement of Additional Information is not a Prospectus, but should be read
in conjunction with the Prospectus (the "Prospectus") of First Omaha Small Cap
Value Fund (the "Small Cap Value Fund"), First Omaha Equity Fund (the "Equity
Fund"), First Omaha Balanced Fund (the "Balanced Fund"), First Omaha Fixed
Income Fund (the "Fixed Income Fund"), First Omaha Short/Intermediate Fixed
Income Fund (the "Short/Intermediate Fund"), and First Omaha U.S. government
Obligations Fund (the "Money Market Fund"), the Small Cap Value Fund, the Equity
Fund, the Balanced Fund, the Fixed Income Fund, the Short/Intermediate Fund, and
the Money Market Fund hereinafter collectively referred to as the "Funds" and
singly, a "Fund") dated as of the date hereof. The Funds are each separate
investment portfolios of First Omaha Funds, Inc. (the "Company"). This Statement
of Additional Information is incorporated in its entirety into the Prospectus.
Copies of the Prospectus may be obtained by writing the Company, P.O. Box
419022, Kansas City, Missouri, 64141-6022, or by telephoning toll free (800)
OMAHA-03.
TABLE OF CONTENTS
PAGE
THE COMPANY B-3
INVESTMENT OBJECTIVES AND POLICIES B-3
Additional Information on Portfolio Instruments B-3
Investment Restrictions B-12
Portfolio Turnover B-14
NET ASSET VALUE B-15
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION B-16
MANAGEMENT OF THE COMPANY B-17
Directors and Officers B-17
Investment Adviser B-18
Portfolio Transactions B-20
Glass-Steagall Act B-21
Administrator/Fund Accountant B-22
Expenses B-24
Distributor B-24
Administrative Services Plan B-26
Custodian B-27
Transfer Agency Services B-28
Auditors B-28
Legal Counsel B-28
ADDITIONAL INFORMATION B-28
Organization and Capital Structure B-28
Shareholder Meetings B-29
Ownership of Shares B-29
Vote of a Majority of the Outstanding Shares B-30
Additional Tax Information B-30
Yield of the Money Market Fund B-31
Yield of the Fixed Income Fund and the Short/Intermediate Fund B-31
Calculation of Total Return B-32
Distribution Rates B-32
Performance Comparisons B-33
Miscellaneous B-33
Financial Statements B-34
FINANCIAL STATEMENTS
APPENDIX A-1
STATEMENT OF ADDITIONAL INFORMATION
THE COMPANY
First Omaha Funds, Inc. (the "Company") is an open-end management
investment company which currently offers six diversified investment portfolios:
First Omaha Small Cap Value Fund (the "Small Cap Value Fund"), First Omaha
Equity Fund (the "Equity Fund"), First Omaha Balanced Fund (the "Balanced
Fund"), First Omaha Fixed Income Fund (the "Fixed Income Fund"), First Omaha
Short/Intermediate Fixed Income Fund (the "Short/Intermediate Fund") and First
Omaha U.S. Government Obligations Fund (the "Money Market Fund") (the Small Cap
Value Fund, the Equity Fund, the Balanced Fund, the Fixed Income Fund, the
Short/Intermediate Fund and the Money Market Fund hereinafter collectively
referred to as the "Funds" and singly, a "Fund").
Much of the information contained in this Statement of Additional
Information expands upon subjects discussed in the Prospectus of the Funds.
Capitalized terms not defined herein are defined in the Prospectus. No
investment in Shares of a Fund should be made without first reading such Fund's
Prospectus.
INVESTMENT OBJECTIVES AND POLICIES
ADDITIONAL INFORMATION ON PORTFOLIO INSTRUMENTS
The following policies supplement the investment objective and policies of
each Fund as set forth in the Prospectus for such Fund.
Bank Obligations. Each of the Small Cap Value Fund, the Equity Fund, the
Balanced Fund, the Fixed Income Fund and the Short/Intermediate Fund may invest
in bank obligations such as bankers' acceptances, certificates of deposit, and
demand and time deposits.
Bankers' acceptances are negotiable drafts or bills of exchange typically
drawn by an importer or exporter to pay for specific merchandise, which are
"accepted" by a bank, meaning, in effect, that the bank unconditionally agrees
to pay the face value of the instrument on maturity. Bankers' acceptances
invested in by the Funds will be those guaranteed by domestic and foreign banks
having, at the time of investment, capital, surplus, and undivided profits in
excess of $100,000,000 (as of the date of their most recently published
financial statements).
Certificates of deposit are negotiable certificates issued against funds
deposited in a commercial bank or a savings and loan association for a definite
period of time and earning a specified return. Certificates of deposit and
demand and time deposits will be those of domestic and foreign banks and savings
and loan associations, if (a) at the time of investment the depository
institution has capital, surplus, and undivided profits in excess of
$100,000,000 (as of the date of its most recently published financial
statements), or (b) the principal amount of the instrument is insured in full by
the Federal Deposit Insurance Corporation.
The Small Cap Value Fund, the Equity Fund, the Balanced Fund, the Fixed
Income Fund and the Short/Intermediate Fund may also invest in Eurodollar
Certificates of Deposit, which are U.S. dollar denominated certificates of
deposit issued by offices of foreign and domestic banks located outside the
United States; Yankee Certificates of Deposit, which are certificates of deposit
issued by a U.S. branch of a foreign bank denominated in U.S. dollars and held
in the United States; Eurodollar Time Deposits ("ETDs"), which are U.S. dollar
denominated deposits in a foreign branch of a U. S. bank or a foreign bank; and
Canadian Time Deposits, which are basically the same as ETDs except they are
issued by Canadian offices of major Canadian banks.
Commercial Paper. Commercial paper consists of unsecured promissory notes
issued by corporations. Except as noted below with respect to variable amount
master demand notes, issues of commercial paper normally have maturities of less
than nine months and fixed rates of return.
The Small Cap Value Fund, the Equity Fund, the Balanced Fund, the Fixed
Income Fund and the Short/Intermediate Fund may invest in commercial paper which
must be rated by an NRSRO in one of the top three categories. In general,
investment in lower-rated instruments is more risky than investment in
instruments in higher-rated categories. The Small Cap Value Fund, the Equity
Fund, the Balanced Fund, the Fixed Income Fund and the Short/Intermediate Fund
may also invest in Canadian commercial paper, which is commercial paper issued
by a Canadian corporation or a Canadian counterpart of a U.S. corporation, and
in Europaper, which is U.S. dollar denominated commercial paper of a foreign
issuer.
Variable Amount Master Demand Notes. Variable amount master demand notes,
in which the Small Cap Value Fund, the Equity Fund, the Balanced Fund, the Fixed
Income Fund and the Short/Intermediate Fund may invest, are unsecured demand
notes that permit the indebtedness thereunder to vary and provide for periodic
adjustments in the interest rate according to the terms of the instrument.
Because master demand notes are direct lending arrangements between a Fund and
the issuer, they are not normally traded. Although there is no secondary market
in the notes, a Fund may demand payment of principal and accrued interest at any
time. The Adviser will consider the earning power, cash flow, and other
liquidity ratios of the issuers of such notes and will continuously monitor
their financial status and ability to meet payment on demand. In determining
average weighted portfolio maturity, a variable amount master demand note will
be deemed to have a maturity equal to the longer of the period of time remaining
until the next interest rate adjustment or the period of time remaining until
the principal amount can be recovered from the issuer through demand. Neither
Fund will invest more than 5% of its assets in such securities.
Foreign Investment. Investments in securities issued by foreign branches of
U.S. banks, foreign banks, or other foreign issuers, including ADRs and
securities purchased on foreign securities exchanges, may subject the Funds to
investment risks that differ in some respects from those related to investment
in obligations of U.S. domestic issuers or in U.S. securities markets. Such
risks include future adverse political and economic developments, possible
seizure, nationalization, or expropriation of foreign investments, less
stringent disclosure requirements, the possible establishment of exchange
controls or taxation at the source, or the adoption of other foreign
governmental restrictions. The Equity Fund, the Short/Intermediate Fund and the
Fixed Income Fund will acquire such securities only when the Adviser believes
the risks associated with such investments are minimal.
U.S. Government Obligations. Each of the Funds may invest in obligations
issued or guaranteed by the U.S. government or its agencies or
instrumentalities, including bills, notes and bonds issued by the U.S. Treasury.
The Money Market Fund may also invest in "stripped" U.S. Treasury obligations
such as Treasury Receipts issued by the U.S. Treasury representing either future
interest or principal payments. Stripped securities are issued at a discount to
their "face value" and may exhibit greater price volatility than ordinary debt
securities because of the manner in which their principal and interest are
returned to investors.
Obligations of certain agencies and instrumentalities of the U.S.
government are supported by the full faith and credit of the U.S. government,
such as those of the Government National Mortgage Association and the
Export-Import Bank of the United States; others are supported by the right of
the issuer to borrow from the Treasury; others are supported by the
discretionary authority of the U.S. government to purchase the agency's
obligations; and still others are supported only by the credit of the
instrumentality. No assurance can be given that the U.S. government would
provide financial support to U.S. government-sponsored agencies or
instrumentalities if it is not obligated to do so by law.
When-Issued Securities. As discussed in the Prospectus of the Funds, each
such Fund may purchase securities on a "when-issued" basis (i.e., for delivery
beyond the normal settlement date at a stated price and yield). When a Fund
agrees to purchase securities on a "when-issued" basis, the Custodian will set
aside cash or liquid portfolio securities equal to the amount of the commitment
in a separate account. Normally, the Custodian will set aside portfolio
securities to satisfy the purchase commitment, and in such a case, such Fund may
be required subsequently to place additional assets in the separate account in
order to assure that the value of the account remains equal to the amount of a
Fund's commitment. It may be expected that a Fund's net assets will fluctuate to
a greater degree when it sets aside portfolio securities to cover such purchase
commitments than when it sets aside cash. In addition, because a Fund will set
aside cash or liquid portfolio securities to satisfy its purchase commitments in
the manner described above, a Fund's liquidity and the ability of the Adviser to
manage it might be affected in the event its commitments to purchase
"when-issued" securities ever exceeded 25% of the value of its assets.
When a Fund engages in "when-issued" transactions, it relies on the seller
to consummate the trade. Failure of the seller to do so may result in a Fund
incurring a loss or missing the opportunity to obtain a price considered to be
advantageous. Each of the Funds will engage in "when-issued" delivery
transactions only for the purpose of acquiring portfolio securities consistent
with the Fund's investment objectives and policies and not for investment
leverage.
Mortgage-Related Securities. The Balanced Fund, the Fixed Income Fund and
the Short/Intermediate Fund may, consistent with their respective investment
objective and policies, invest in mortgage-related securities issued or
guaranteed by the U.S. government or its agencies or instrumentalities.
Mortgage-related securities, for purposes of such Funds' Prospectus and
this Statement of Additional Information, represent pools of mortgage loans
assembled for sale to investors by various governmental agencies such as the
Government National Mortgage Association and government-related organizations
such as the Federal National Mortgage Association and the Federal Home Loan
Mortgage Corporation, as well as by non-governmental issuers such as commercial
banks, savings and loan institutions, mortgage bankers and private mortgage
insurance companies. Although certain mortgage-related securities are guaranteed
by a third party or otherwise similarly secured, the market value of the
security, which may fluctuate, is not so secured. If a Fund purchases a
mortgage-related security at a premium, that portion may be lost if there is a
decline in the market value of the security whether resulting from changes in
interest rates or prepayments in the underlying mortgage collateral. As with
other interest-bearing securities, the prices of such securities are inversely
affected by changes in interest rates. However, though the value of a
mortgage-related security may decline when interest rates rise, the converse is
not necessarily true, since in periods of declining interest rates the mortgages
underlying the securities are prone to prepayment, thereby shortening the
average life of the security and shortening the period of time over which income
at the higher rate is received. Conversely, when interest rates are rising, the
rate of prepayment tends to decrease, thereby lengthening the average life of
the security and lengthening the period of time over which income at the lower
rate is received. For these and other reasons, a mortgage-related security's
average maturity may be shortened or lengthened as a result of interest rate
fluctuations and, therefore, it is not possible to predict accurately the
security's return to the Balanced Fund, the Fixed Income Fund and the
Short/Intermediate Fund. In addition, regular payments received in respect of
mortgage-related securities include both interest and principal. No assurance
can be given as to the return the Funds will receive when these amounts are
reinvested.
The Balanced Fund, the Fixed Income Fund and the Short/Intermediate Fund
may also invest in mortgage-related securities which are collateralized mortgage
obligations structured on pools of mortgage pass-through certificates or
mortgage loans. Mortgage-related securities will be purchased only if rated in
the four highest bond rating categories assigned by one or more appropriate
NRSROs, or, if unrated, which the Adviser deems to present attractive
opportunities and are of comparable quality.
There are a number of important differences among the agencies and
instrumentalities of the U.S. government that issue mortgage-related securities
and among the securities that they issue. Mortgage-related securities issued by
the Government National Mortgage Association ("GNMA") include GNMA Mortgage
Pass-Through Certificates (also known as "Ginnie Maes") which are guaranteed as
to the timely payment of principal and interest by GNMA and such guarantee is
backed by the full faith and credit of the U.S. government. GNMA is a
wholly-owned U.S. government corporation within the Department of Housing and
Urban Development. GNMA certificates also are supported by the authority of GNMA
to borrow funds from the U.S. Treasury to make payments under its guarantee.
Mortgage-related securities issued by the Federal National Mortgage Association
("FNMA") include FNMA Guaranteed Mortgage Pass-Through Certificates (also known
as "Fannie Maes") which are solely the obligations of the FNMA and are not
backed by or entitled to the full faith and credit of the U.S. government. The
FNMA is a government-sponsored organization owned entirely by private
stockholders. Fannie Maes are guaranteed as to timely payment of the principal
and interest by FNMA. Mortgage-related securities issued by the Federal Home
Loan Mortgage Corporation ("FHLMC") include FHLMC Mortgage Participation
Certificates (also known as "Freddie Macs" or "PCS"). The FHLMC is a corporate
instrumentality of the U.S. government, created pursuant to an Act of Congress,
which is owned entirely by Federal Home Loan Banks. Freddie Macs are not
guaranteed by the U.S. government or by any Federal Home Loan Banks and do not
constitute a debt or obligation of the U.S. government or of any Federal Home
Loan Bank. Freddie Macs entitle the holder to timely payment of interest, which
is guaranteed by the FHLMC. The FHLMC guarantees either ultimate collection or
timely payment of all principal payments on the underlying mortgage loans. When
the FHLMC does not guarantee timely payment of principal, FHLMC may remit the
amount due on account of its guarantee of ultimate payment of principal at any
time after default on an underlying mortgage, but in no event later than one
year after it becomes payable.
Other Asset-Backed Securities. The Balanced Fund, the Fixed Income Fund and
the Short/Intermediate Fund may also invest in interests in pools of
receivables, such as motor vehicle installment purchase obligations (known as
Certificates of Automobile Receivables or CARs) and credit card receivables
(known as Certificates of Amortizing Revolving Debts or CARDs). Such securities
are generally issued as pass-through certificates, which represent undivided
fractional ownership interests in the underlying pools of assets. Such
securities may also be debt instruments which are also known as collateralized
obligations and are generally issued as the debt of a special purpose entity
organized solely for the purpose of owning such assets and issuing such debt.
Such securities are not issued or guaranteed by the U.S. government or its
agencies or instrumentalities; however, the payment of principal and interest on
such obligations may be guaranteed up to certain amounts and for a certain time
period by a letter of credit issued by a financial institution (such as a bank
or insurance company) unaffiliated with the issuers of such securities.
Non-mortgage-backed securities will be purchased by the Balanced Fund, the
Fixed Income Fund or the Short/Intermediate Fund only when rated in one of the
four highest rating categories for such securities by one or more appropriate
NRSROs at the time of purchase. In addition, such securities generally will have
remaining estimated lives at the time of purchase of seven years or less.
The development of these asset-backed securities is at an early state
compared to mortgage-backed securities. While the market for asset-backed
securities is becoming increasingly liquid, the market for mortgage-backed
securities issued by certain private organizations and non-mortgage-backed
securities is not as well developed. The Adviser will limit purchases of
asset-backed securities to securities that are deemed to be readily marketable
by the Adviser at the time of purchase.
Asset-backed securities held by the Balanced Fund, the Fixed Income Fund or
Short/Intermediate Fund arise through the grouping by governmental,
government-related and private organizations of loans, receivables and other
assets originated by various lenders. Interests in pools of these assets differ
from other forms of debt securities, which normally provide for periodic payment
of interest in fixed amounts with principal paid at maturity or specified call
dates. Instead, asset-backed securities provide periodic payments which
generally consist of both interest and principal payments.
The estimated life of an asset-backed security may vary with the prepayment
experience with respect to the underlying debt instruments. The rate of such
prepayments, and hence the life of an asset-backed security, will be a function
of current market interest rates and other economic and demographic factors.
Since prepayment experience can vary, asset-backed securities may be a less
effective vehicle for locking in high long-term yields. None of these Funds will
invest more than 5% of its assets in such other asset-backed securities.
Medium-Grade Debt Securities. As stated in the Prospectus, the Small Cap
Value Fund, the Equity Fund, the Balanced Fund, the Fixed Income Fund and the
Short/Intermediate Fund may each invest in securities within the four highest
rating groups assigned by one or more appropriate NRSROs, including securities
rated in the fourth highest rating group or, if unrated, judged by the Adviser
to be of comparable quality ("Medium-Grade Securities").
As with other fixed-income securities, Medium-Grade Securities are subject
to credit risk and market risk. Market risk relates to changes in a security's
value as a result of changes in interest rates. Credit risk relates to the
ability of the issuer to make payments of principal and interest. Medium-Grade
Securities are considered by Moody's to have speculative characteristics.
Medium-Grade Securities are generally subject to greater credit risk than
comparable higher-rated securities because issuers are more vulnerable to
economic downturns, higher interest rates or adverse issuer-specific
developments. In addition, the price of Medium-Grade Securities is generally
subject to greater market risk and therefore reacts more sharply to changes in
interest rates. The value and liquidity of Medium-Grade Securities may be
diminished by adverse publicity and investor perceptions.
Because certain Medium-Grade Securities are traded only in markets where
the number of potential purchasers and sellers, if any, is limited, the ability
of the Small Cap Value Fund, the Equity Fund, the Balanced Fund, the Fixed
Income Fund and the Short/Intermediate Fund to sell such securities at their
fair value either to meet redemption requests or to respond to changes in the
financial markets may be limited.
Particular types of Medium-Grade Securities may present special concerns.
Some Medium-Grade Securities in which the Small Cap Value Fund, the Equity
Fund, the Balanced Fund, the Fixed Income Fund and the Short/Intermediate Fund
may invest may be subject to redemption or call provisions that may limit
increases in market value that might otherwise result from lower interest rates
while increasing the risk that such Funds may be required to reinvest redemption
or call proceeds during a period of relatively low interest rates.
The credit ratings issued by NRSROs are subject to various limitations. For
example, while such ratings evaluate credit risk, they ordinarily do not
evaluate the market risk of Medium-Grade Securities. In certain circumstances,
the ratings may not reflect in a timely fashion adverse developments affecting
an issuer. For these reasons, the Adviser conducts its own independent credit
analysis of Medium-Grade Securities.
Securities of Other Investment Companies. Each of the Small Cap Value Fund,
the Equity Fund, the Balanced Fund, the Fixed Income Fund and the
Short/Intermediate Fund may invest in securities issued by other investment
companies, including in Shares of the Money Market Fund. Each of the Small Cap
Value Fund, the Equity Fund, the Balanced Fund, the Fixed Income Fund and the
Short/Intermediate Fund currently intends to limit its investments so that, as
determined immediately after a securities purchase is made: (a) not more than 5%
of the value of its total assets will be invested in the securities of any one
investment company; (b) not more than 10% of the value of its total assets will
be invested in the aggregate in securities of investment companies as a group;
and (c) not more than 3% of the outstanding voting stock of any one investment
company will be owned by any of these Funds. Except as described in the
Prospectus with respect to an investment in the Money Market Fund, as a
shareholder of another investment company, such a Fund would bear, along with
other shareholders, its pro rata portion of that company's expenses, including
advisory fees. These expenses would be in addition to the advisory and other
expenses that that Fund bears directly in connection with its own operations.
Investment companies in which a Fund may invest, other than the Money Market
Fund, may also impose a sales or distribution charge in connection with the
purchase or redemption of their shares and other types of commissions or
charges. Such charges will be payable by that Fund and, therefore, will be borne
directly by shareholders.
Income Participation Loans. The Balanced Fund, the Fixed Income Fund and
the Short/Intermediate Fund may make or acquire participation in privately
negotiated loans to borrowers. Frequently, such loans have variable interest
rates and may be backed by a bank letter of credit; in other cases they may be
unsecured. Such transactions may provide an opportunity to achieve higher
yields than those that may be available from other securities offered and sold
to the general public.
Privately arranged loans, however, will generally not be rated by a credit
rating agency and will normally be liquid, if at all, only through a provision
requiring repayment following demand by the lender. Such loans made by the
Balanced Fund, the Fixed Income Fund and the Short/Intermediate Fund may have a
demand provision permitting such Fund to require repayment within seven days.
Participation in such loans, however, may not have such a demand provision and
may not be otherwise marketable. To the extent these securities are not readily
marketable, they will be subject to the Fund's 5% limitation on investments in
illiquid securities. Recovery of an investment in any such loan that is illiquid
and payable on demand will depend on the ability of the borrower to meet an
obligation for full repayment of principal and payment of accrued interest
within the demand period, normally seven days or less (unless such Fund
determines that a particular loan issue, unlike most such loans, has a readily
available market). As it deems appropriate, the Company's Board of Directors
will establish procedures to monitor the credit standing of each such borrower,
including its ability to honor contractual payment obligations.
The Balanced Fund, the Fixed Income Fund and the Short/Intermediate Fund
will purchase income participation loans only if such instruments are, in the
opinion of the Adviser, of comparable quality to securities rated within the
four highest rating groups assigned by one or more appropriate NRSROs. None of
these Funds will invest more than 5% of its assets in such securities.
Repurchase Agreements. Securities held by each of the Funds may be subject
to repurchase agreements. Under the terms of a repurchase agreement, a Fund
would acquire securities from member banks of the Federal Deposit Insurance
Corporation and registered broker-dealers which the Adviser deems credit-worthy
under guidelines approved by the Company's Board of Directors, subject to the
seller's agreement to repurchase such securities at a mutually agreed-upon date
and price. The repurchase price would generally equal the price paid by a Fund
plus interest negotiated on the basis of current short-term rates, which may be
more or less than the rate on the underlying portfolio securities. Securities
subject to repurchase agreements will be of the same type and quality as those
in which such Fund may invest directly. The seller under a repurchase agreement
will be required to maintain continually the value of collateral held pursuant
to the agreement at not less than the repurchase price (including accrued
interest). If the seller were to default on its repurchase obligation or become
insolvent, a Fund holding such obligation would suffer a loss to the extent that
the proceeds from a sale of the underlying portfolio securities were less than
the repurchase price under the agreement, or to the extent that the disposition
of such securities by such Fund were delayed pending court action. Additionally,
there is no controlling legal precedent confirming that a Fund would be
entitled, as against a claim by such seller or its receiver or trustee in
bankruptcy, to retain the underlying securities, although the Board of Directors
of the Company believes that, under the regular procedures normally in effect
for custody of a Fund's securities subject to repurchase agreements and under
federal laws, a court of competent jurisdiction would rule in favor of the
Company if presented with the question. Securities subject to repurchase
agreements will be held by that Fund's custodian or another qualified custodian
or in the Federal Reserve/Treasury book-entry system. Repurchase agreements are
considered to be loans by a Fund under the 1940 Act.
Reverse Repurchase Agreements. As discussed in the Prospectus, each of the
Funds may borrow funds for temporary purposes by entering into reverse
repurchase agreements in accordance with that Fund's investment restrictions.
Pursuant to such agreements, a Fund would sell portfolio securities to financial
institutions such as banks and broker-dealers, and agree to repurchase the
securities at a mutually agreed-upon date and price. Each Fund intends to enter
into reverse repurchase agreements only to avoid otherwise selling securities
during unfavorable market conditions to meet redemptions. At the time a Fund
enters into a reverse repurchase agreement, it will place in a segregated
custodial account assets such as U.S. government securities or other liquid,
high grade debt securities consistent with such Fund's investment restrictions
having a value equal to the repurchase price (including accrued interest), and
will subsequently continually monitor the account to ensure that such equivalent
value is maintained at all times. Reverse repurchase agreements involve the risk
that the market value of the securities sold by a Fund may decline below the
price at which a Fund is obligated to repurchase the securities. Reverse
repurchase agreements are considered to be borrowings by a Fund under the 1940
Act.
Illiquid Securities. Each Fund may invest up to 5% of its net assets in
illiquid securities (i.e., securities that cannot be disposed of within seven
days in the normal course of business at approximately the amount at which the
Fund has valued the securities). The Board of Directors has the ultimate
authority to determine which securities are liquid or illiquid for purposes of
this limitation. Certain securities ("restricted securities") exempt from
registration or issued in transactions exempt from registration under the
Securities Act of 1933, as amended ("Securities Act") (securities that may be
resold pursuant to Rule 144A or Regulation S under the Securities Act), may be
considered liquid. The Board has delegated to the Adviser the day-to-day
determination of the liquidity of a security, although it has retained oversight
and ultimate responsibility for such determinations. Although no definite
quality criteria are used, the Board of Directors has directed the Adviser to
look to such factors as (a) the nature of the market for a security (including
the institutional private or international resale market), (b) the terms of
these securities or other instruments allowing for the disposition to a third
party or the issuer thereof (e.g., certain repurchase obligations and demand
instruments), (c) the availability of market quotations (e.g., for securities
quoted in PORTAL system), and (d) other permissible relevant factors. Certain
securities, such as repurchase obligations maturing in more than seven days, are
currently considered illiquid.
Restricted securities may be sold only in privately negotiated or other
exempt transactions, qualified non-U.S. transactions, such as under Regulation
S, or in a public offering with respect to which a registration statement is in
effect under the Securities Act of 1933. Where registration is required, a Fund
may be obligated to pay all or part of the registration expenses and a
considerable time may elapse between the decision to sell and
the sale date. If, during such period, adverse market conditions were to
develop, that Fund might obtain a less favorable price than prevailed when it
decided to sell. Restricted securities will be priced at fair value as
determined in good faith by the Board of Directors. If through the appreciation
of illiquid securities or the depreciation of liquid securities, a Fund should
be in a position where more than 5% of the value of its net assets is invested
in illiquid assets, including restricted securities which are not readily
marketable, that Fund will take such steps as it deems advisable, if any, to
reduce the percentage of such securities to 5% or less of the value of its net
assets.
INVESTMENT RESTRICTIONS
Each Fund's investment objective is a fundamental policy and may not be
changed without a vote of the holders of a majority of such Fund's outstanding
Shares. In addition, the following investment restrictions may be changed with
respect to a particular Fund only by a vote of the majority of the outstanding
Shares of that Fund (as defined under "ADDITIONAL INFORMATION - Vote of a
Majority of the Outstanding Shares").
In addition to the investment restrictions set forth in the Prospectus, the
Money Market Fund may not:
1. Purchase securities on margin, sell securities short, participate on a
joint or joint and several basis in any securities trading account, or
underwrite the securities of other issuers, except to the extent that such Fund
may be deemed to be an underwriter under certain securities laws, in the
disposition of "restricted securities" acquired in accordance with that Fund's
investment objectives and policies;
2. Purchase or sell commodities, commodity contracts (including futures
contracts), oil, gas or mineral exploration or development programs, or real
estate (although investments by such Fund in marketable securities of companies
engaged in such activities are not hereby precluded);
3. Write or purchase put or call options;
4. Invest in any issuer for purposes of exercising control or management;
and
5. Purchase or retain securities of any issuer if the officers or Directors
of the Company or the officers or directors of its investment adviser owning
beneficially more than one-half of 1% of the securities of such issuer together
own beneficially more than 5% of such securities.
In addition, none of the Small Cap Value Fund, the Equity Fund, the
Balanced Fund, the Fixed Income Fund or the Short/Intermediate Fund may:
1. Purchase securities on margin, except for use of short-term credit
necessary for clearance of purchases of portfolio securities;
2. Engage in any short sales;
3. Underwrite the securities issued by other persons, except to the extent
that a Fund may be deemed to be an underwriter under certain securities laws in
the disposition of "restricted securities";
4. Purchase or sell commodities or commodities contracts, unless and until
disclosed in the current Prospectus of the Funds; and
5. Purchase or sell real estate (although investments in marketable
securities of companies engaged in such activities are not prohibited by this
restriction).
The following additional investment restrictions may be changed without the
vote of a majority of the outstanding Shares of a Fund. The Money Market Fund
may not:
1. Invest in securities of other investment companies, except as such
securities may be acquired as part of a merger, consolidation, reorganization,
or acquisition of assets; and
2. Buy common stocks or voting securities.
In addition to the fundamental restrictions listed above, the Small Cap
Value Fund, the Equity Fund, the Balanced Fund, the Fixed Income Fund and the
Short/Intermediate Fund have adopted the following restrictions that may be
changed by the Board of Directors without Shareholder approval:
1. Purchase participations or direct interests in oil, gas or other mineral
exploration or development programs (although investments by such Funds in
marketable securities of companies engaged in such activities are not prohibited
in this restriction);
2. Purchase securities of other investment companies, except (a) in
connection with a merger, consolidation, acquisition or reorganization, and (b)
a Fund may invest in other investment companies if, at the time of purchase (i)
the acquiring Fund will own no more than 3% of the shares of the investment
company selling such shares, (ii) the value of the investment company shares
acquired, when aggregated with the value of other shares of such investment
company held by the acquiring Fund, does not exceed 5% of the total assets of
the acquiring Fund, and (iii) the value of the investment company shares
acquired, when aggregated with the value of any other shares of investment
companies held by the acquiring Fund, does not exceed 10% of the total assets of
the acquiring Fund; and
3. Purchase or retain the securities of an issuer if, to the knowledge of
such Fund's management, the officers or Directors of the Company, and the
officers or directors of the Investment Adviser, who each owns beneficially more
than .5% of the outstanding securities of such issuer, together own beneficially
more than 5% of such securities.
If any percentage restriction described above (and in the Prospectus) is
satisfied at the time of investment, a later increase or decrease in such
percentage resulting from a change in asset value will not constitute a
violation of such restriction. However, should a change in net asset value or
other external events cause a Fund's investment in illiquid securities to exceed
such Fund's limit on its investments in such securities, that Fund will act to
cause the aggregate amount of illiquid securities to come within such limit as
soon as reasonably practicable. In such an event, however, a Fund would not be
required to liquidate any portfolio securities where such Fund would suffer a
loss on the sale of such securities.
The Company, on behalf of the Small Cap Value Fund, the Equity Fund, the
Balanced Fund, the Fixed Income Fund and the Short/Intermediate Fund, has
represented to the Ohio Division of Securities that each of those Funds will (1)
not invest any of its assets in the securities of other investment companies,
except by purchase in the open market where no commission or profit to a sponsor
or dealer results from the purchase other than the customary broker's
commission, or except when the purchase is part of a plan of merger,
consolidation, reorganization, or acquisition; (2) limit its investments to 15%
in securities of any issuer which, together with any predecessors, have a record
of less than three years continuous operation and (3) limit its investments to
5% in securities of issuers which are restricted as to disposition. The Company
intends to comply with these representations with respect to each of the Small
Cap Value Fund, the Equity Fund, the Balanced Fund, the Fixed Income Fund and
the Short/Intermediate Fund for so long as the Shares of such Fund are
registered for sale in the State of Ohio.
In addition, the Company, on behalf of the Small Cap Value Fund, the
Equity Fund, the Balanced Fund, the Fixed Income Fund and the
Short/Intermediate Fund, has represented to the Texas State Securities Board
that each of those Funds will (1) not invest in oil, gas or mineral leases or
purchase or sell real property (including limited partnership interests, but
excluding readily marketable securities of companies which invest in real
estate) and (2) not invest more than 5% of their net assets in warrants valued
at the lower of cost or market, provided, that included within that amount, but
not to exceed 2% of net assets, may be warrants which are not listed on the New
York or American Stock Exchanges. For purposes of restriction (2) above,
warrants acquired in units or attached to securities are deemed to be without
value. The Company intends to comply with these representations with respect to
each of the Small Cap Value Fund, the Equity Fund, the Balanced Fund, the Fixed
Income Fund and the Short/Intermediate Fund for so long as the Shares of such
Fund are registered for sale in the State of Texas.
PORTFOLIO TURNOVER
The portfolio turnover rate for each of the Funds is calculated by dividing
the lesser of a Fund's purchases or sales of portfolio securities for the year
by the monthly average value of the portfolio securities. The Commission
requires that the calculation exclude all securities whose remaining maturities
at the time of acquisition were one year or less.
Because the Money Market Fund intends to invest entirely in securities with
remaining maturities of less than one year and because the Commission requires
such securities to be excluded from the calculation of portfolio turnover rate,
the portfolio turnover with respect to the Money Market Fund is expected to be
zero percent for regulatory purposes. The portfolio turnover rate may vary
greatly from year to year as well as within a particular year, and may also be
affected by cash requirements for redemptions of Shares. Portfolio turnover will
not be a limiting factor in making investment decisions.
NET ASSET VALUE
As indicated in the Prospectus, the net asset value of each Fund is
determined and the Shares of each Fund are priced as of the Valuation Time on
each Business Day of the Company. A "Business Day" is a day on which the New
York Stock Exchange is open for trading and any other day (other than a day on
which no Shares of a Fund are tendered for redemption and no order to purchase
any Shares is received) during which there is sufficient trading in portfolio
instruments that such Fund's net asset value per share might be materially
affected. The New York Stock Exchange will not open in observance of the
following holidays: New Year's Day, President's Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
VALUATION OF THE MONEY MARKET FUND.
The Money Market Fund has elected to use the amortized cost method of
valuation pursuant to Rule 2a-7 under the 1940 Act. This involves valuing an
instrument at its cost initially and thereafter assuming a constant amortization
to maturity of any discount or premium, regardless of the impact of fluctuating
interest rates on the market value of the instrument. This method may result in
periods during which value, as determined by amortized cost, is higher or lower
than the price the Money Market Fund would receive if it sold the instrument.
The value of securities in the Money Market Fund can be expected to vary
inversely with changes in prevailing interest rates.
Pursuant to Rule 2a-7, the Money Market Fund will maintain a
dollar-weighted average portfolio maturity appropriate to the Money Market
Fund's objective of maintaining a stable net asset value per share, provided
that the Money Market Fund will not purchase any security with a remaining
maturity of more than 397 days (13 months) (securities subject to repurchase
agreements may bear longer maturities) nor maintain a dollar-weighted average
portfolio maturity which exceeds 90 days. The Company's Board of Directors has
also undertaken to establish procedures reasonably designed, taking into account
current market conditions and the investment objective of the Money Market Fund,
to stabilize the net asset value per share of the Money Market Fund for purposes
of sales and redemptions at $1.00. These procedures include review by the
Directors, at such intervals as they deem appropriate, to determine the extent,
if any, to which the net asset value per share of the Money Market Fund
calculated by using available market quotations deviates from $1.00 per Share.
In the event such deviation exceeds one-half of one percent, Rule 2a-7 requires
that the Board of Directors promptly consider what action, if any, should be
initiated. If the Directors believe that the extent of any deviation from the
Money Market Fund's $1.00 amortized cost price per Share may result in material
dilution or other unfair results to new or existing investors, they will take
such steps as they consider appropriate to eliminate or reduce, to the extent
reasonably practicable, any such dilution or unfair results. These steps may
include selling portfolio instruments prior to maturity, shortening the average
portfolio maturity, withholding or reducing dividends, reducing the number of
the Money Market Fund's outstanding Shares without monetary consideration, or
utilizing a net asset value per share determined by using available market
quotations.
VALUATION OF THE OTHER FUNDS.
Each security traded on a U.S. national securities exchange or quoted on
the NASDAQ National Market System ordinarily will be valued on the basis of its
last sale price on the date of valuation or, if there are no sales that day, at
the closing bid quotation. Securities traded on exchanges located outside of the
U.S. will be valued on the basis of the price as of the most recent close of
business on the exchange preceding the time of valuation. Securities and other
assets for which quotations are not readily available are valued at their fair
value as determined in good faith under consistently applied procedures
established by and under the general supervision of the Directors of the
Company. Short-term securities are valued at either amortized cost or original
cost plus accrued interest, which approximates current value.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Shares of the Funds are sold on a continuous basis by the Distributor, and
the Distributor has agreed to use appropriate efforts to solicit purchase
orders. In addition to purchasing Shares directly through the Distributor,
Shares may be purchased through procedures established by the Distributor in
connection with the requirements of accounts at the Adviser or the Adviser's
correspondent or affiliated banks. Customers purchasing Shares of the Funds may
include officers, directors, or employees of the Adviser or the Adviser's
correspondent or affiliated banks.
The Company may suspend the right of redemption or postpone the date of
payment for Shares of a Fund during any period when (a) trading on the New York
Stock Exchange is restricted by applicable rules and regulations of the
Commission, (b) the New York Stock Exchange is closed for other than customary
weekend and holiday closings, (c) the Commission has by order permitted such
suspension, or (d) an emergency exists as a result of which (i) disposal by the
Company of securities owned by it is not reasonably practical, or (ii) it is not
reasonably practical for the Company to determine the fair value of its net
assets.
The Company may redeem Shares of the Money Market Fund involuntarily if
redemption appears appropriate in light of the Company's responsibilities under
the 1940 Act. See "NET ASSET VALUE -Valuation of the Money Market Fund" in this
Statement of Additional Information.
MANAGEMENT OF THE COMPANY
DIRECTORS AND OFFICERS
Overall responsibility for management of the Company rests with its Board
of Directors, which is elected by the Shareholders of the Company. The Directors
elect the officers of the Company to supervise actively its day-to-day
operations.
The names of the Directors and officers of the Company, their addresses,
and principal occupations during the past five years are as follows:
POSITION(S) HELD PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS WITH THE COMPANY DURING PAST 5 YEARS
- ---------------- ---------------- ----------------------
David P. Greer* President and Trust Officer, First
3623 South 107th Avenue Director National Bank of Omaha
Omaha, NE 68124 (1987-1994); presently
retired
Randy M. Pavlick Secretary Vice President -
207 East Buffalo Street Director of Legal and
Suite 400 Compliance Services,
Milwaukee, WI 53202 Sunstone Financial
Group, Inc. (1993-
present); previously
in private law practice
with Foley & Lardner
Richard P. Snyder Vice President and Client Services and
207 East Buffalo Street Treasurer Accounting Manager,
Suite 400 Sunstone Financial
Milwaukee, WI 53202 Group, Inc.
(1993-present);
previously Audit
Manager, Sta-Rite
Industries, Inc.
(1990-1993)
Joseph Caggiano Director Vice Chairman
302 South 36th Street (1967-1993), Chief
Omaha, NE 68131 Financial Officer
(1967-1991) and
Vice-Chairman Emeritus
(1993-present) of
Bozell Jacobs
Harry A. Koch, Jr.* Director President and
P.O. Box 6215 Treasurer, The Harry
Omaha, NE 68106 A. Koch Co., insurance
agents and brokers
(1958-present)
Robert A. Reed Director President and Chief
2600 Dodge Street Executive Officer,
Omaha, NE 68131 Physicians Mutual
Insurance Company and
Physicians Life
Insurance Company
(1974-present)
* Denotes "interested directors" as defined in the 1940 Act.
The following table sets forth certain information concerning compensation
to be paid by the Company to its Directors and officers in the fiscal year
ending March 31, 1996.
PENSION OR
RETIREMENT
BENEFITS
AGGREGATE ACCRUED ESTIMATED
COMPENSATION AS PART ANNUAL TOTAL
TO BE PAID OF COMPANY RETIREMENT COMPENSATION
NAME AND POSITION BY COMPANY EXPENSES BENEFITS FROM COMPANY
- ----------------- ------------ ---------- ---------- ------------
David P. Greer $4,000 -0- -0- $4,000
President and
Director
Randy M. Pavlick -0- -0- -0- -0-
Secretary
Richard P. Snyder -0- -0- -0- -0-
Vice President and
Treasurer
Joseph Caggiano $4,000 -0- -0- $4,000
Director
Harry A. Koch, Jr. $4,000 -0- -0- $4,000
Director
Robert A. Reed $4,000 -0- -0- $4,000
Director
As of October 31, 1996, the Company's officers and Directors, as a group,
own less than 1% of each Fund's outstanding Shares.
The officers of the Company receive no compensation directly from the
Company for performing the duties of their offices. Sunstone Financial Group,
Inc. receives fees from each of the Funds for acting as Administrator and may
receive fees from each of the Funds pursuant to the Distribution and Service
Plan and the Administrative Services Plan described below. Messrs. Pavlick and
Snyder are employees of, and are compensated by, the Administrator.
INVESTMENT ADVISER
Investment advisory services are provided to each of the Funds by First
National Bank of Omaha, Omaha, Nebraska, the Adviser, pursuant to the Investment
Advisory Agreement dated as of December 20, 1994 as amended as of December 5,
1995 and June 4, 1996, (the "Investment Advisory Agreement"). The Adviser is a
wholly owned subsidiary of First National of Nebraska, Inc., a Nebraska
corporation.
Under the Investment Advisory Agreement, the Adviser has agreed to provide
investment advisory services as described in the Prospectus of the Funds. For
the services provided and expenses assumed pursuant to the Investment Advisory
Agreement, the Small Cap Value Fund, the Equity Fund, the Balanced Fund, the
Fixed Income Fund, the Short/Intermediate Fund and the Money Market Fund pay the
Adviser a fee equal to the lesser of (a) a fee computed daily and paid monthly,
at an annual rate of eighty-five one-hundredths of one percent (.85%),
seventy-five one-hundredths of one percent (.75%), seventy-five one-hundredths
of one percent (.75%), sixty one-hundredths of one percent (.60%), fifty
one-hundredths of one percent (.50%) and twenty-five one-hundredths of one
percent (.25%), respectively, of the average daily net assets of that Fund, or
(b) such other fee as may be agreed upon from time to time in writing by the
Company and the Adviser. The Adviser may periodically voluntarily reduce all or
a portion of its advisory fee with respect to any Fund, which reduction would
increase the net income of that Fund available for distribution as dividends.
For the fiscal period ended March 31, 1996, the Adviser earned advisory
fees of $1,433,904 for the Equity Fund, $396,808 (net of $36,073 of fee
waivers) for the Fixed Income Fund, $97,823 (net of $10,869 of fee waivers) for
the Short/Intermediate Fund and $216,379 for the Money Market Fund.
For the fiscal period ended October 31, 1996, the Adviser earned advisory
fees of $407 (net of $7,898 of fee waivers) for the Small Cap Value Fund,
$1,029,217 for the Equity Fund, $0 (net of $4,358 of fee waivers) for the
Balanced Fund, $249,044 (net of $22,640 of fee waivers) for the Fixed Income
Fund, $57,144 (net of $6,349 of fee waivers) for the Short/Intermediate Fund
and $142,214 for the Money Market Fund.
Unless sooner terminated, the Investment Advisory Agreement for all Funds
will continue in effect until June 30, 1997, and from year to year thereafter,
if, as to each Fund, such continuance is approved at least annually by the
Company's Board of Directors or by vote of a majority of the outstanding Shares
of that Fund (as defined under "GENERAL INFORMATION - Miscellaneous" in the
Prospectus), and a majority of the Directors who are not parties to the
Investment Advisory Agreement or interested persons (as defined in the 1940 Act)
of any party to the Investment Advisory Agreement by votes cast in person at a
meeting called for such purpose. The Investment Advisory Agreement is terminable
as to a Fund at any time on 60 days written notice without penalty by the
Directors, by vote of a majority of the outstanding Shares of that Fund, or by
the Adviser. The Investment Advisory Agreement also terminates automatically in
the event of any assignment, as defined in the 1940 Act.
The Investment Advisory Agreement provides that the Adviser shall not be
liable for any error of judgment or mistake of law or for any loss suffered by a
Fund in connection with the performance of the Investment Advisory Agreement,
except a loss resulting from a breach of fiduciary duty with respect to the
receipt of compensation for services or a loss resulting from willful
misfeasance, bad faith, or gross negligence on the part of the Adviser in the
performance of its duties, or from reckless disregard by the Adviser of its
duties and obligations thereunder.
The Adviser also serves as the Funds' custodian as more fully discussed
under "Custodian" below.
PORTFOLIO TRANSACTIONS
Pursuant to the Investment Advisory Agreement, the Adviser determines,
subject to the general supervision of the Board of Directors of the Company and
in accordance with each Fund's investment objective and restrictions, which
securities are to be purchased and sold by a Fund, and which brokers are to be
eligible to execute such Fund's portfolio transactions. Purchases and sales of
fixed income debt securities acquired for the Balanced Fund, the Fixed Income
Fund, the Short/Intermediate Fund and the Money Market Fund usually are
principal transactions in which portfolio securities are normally purchased
directly from the issuer or from an underwriter or market maker for the
securities. Purchases from underwriters of other portfolio securities for the
Funds generally include a commission or concession paid by the issuer to the
underwriter, and purchases from dealers serving as market makers may include the
spread between the bid and asked price. Transactions on stock exchanges involve
the payment of negotiated brokerage commissions. Transactions in the
over-the-counter market are generally principal transactions with dealers. With
respect to the over-the-counter market, the Company, where possible, will deal
directly with dealers who make a market in the securities involved except in
those circumstances where better price and execution are available elsewhere.
Allocation of transactions, including their frequency, to various brokers
and dealers is determined by the Adviser in its best judgment and in a manner
deemed fair and reasonable to Shareholders. The primary consideration is prompt
execution of orders in an effective manner at the most favorable price. Subject
to this consideration, brokers and dealers who provide supplemental investment
research to the Adviser may receive orders for transactions on behalf of the
Funds. Information so received is in addition to and not in lieu of services
required to be performed by the Adviser and does not reduce the advisory fees
payable to the Adviser by the Funds. Such information may be useful to the
Adviser in serving a Fund and other clients and, conversely, supplemental
information obtained by the placement of business of other clients may be useful
to the Adviser in carrying out its obligations to each of the Funds. The Adviser
may authorize a Fund to pay a commission in excess of the commission another
broker-dealer would have charged if the Adviser determines in good faith that
such commission is reasonable in relation to the value of the brokerage and
research services provided by such broker-dealer, viewed either in terms of that
particular transaction or the Adviser's overall responsibilities to the accounts
it manages.
While the Adviser generally seeks competitive commissions, the Company may
not necessarily pay the lowest commission available on each brokerage
transaction, for reasons discussed above. For the fiscal period ended March 31,
1996, the Equity Fund paid $132,860 of brokerage commissions on total
transactions of $89,946,945. For the fiscal period ended October 31, 1996, the
Small Cap Value Fund paid $8,022 of brokerage commissions on total transactions
of $2,672,335, the Equity Fund paid $86,073 of brokerage commissions on total
transactions of $58,637,984, and the Balanced Fund paid $2,375 of brokerage
commissions on total transactions of $1,326,030.
Except as otherwise disclosed to the Shareholders of the Funds and as
permitted by applicable laws, rules and regulations, the Company will not, on
behalf of any of the Funds, execute portfolio transactions through, acquire
portfolio securities issued by, make savings deposits in, or enter into
repurchase or reverse repurchase agreements with the Adviser, the Distributor,
or their affiliates, and will not give preference to the Adviser's
correspondents with respect to such transactions, securities, savings deposits,
repurchase agreements, and reverse repurchase agreements.
Investment decisions for each Fund are made independently from those for
the other Funds of the Company, any other investment company or account managed
by the Adviser. Any such other fund, investment company or account may also
invest in the same securities as the Company. When a purchase or sale of the
same security is made at substantially the same time on behalf of a Fund and
another investment company or account, the transaction will be averaged as to
price, and available investments will be allocated as to amount in a manner
which the Adviser believes to be equitable to the Fund and such other investment
company or account. In some instances, this investment procedure may adversely
affect the price paid or received by a Fund or the size of the position obtained
by a Fund. To the extent permitted by law, the Adviser may aggregate the
securities to be sold or purchased for a Fund with those to be sold or purchased
for the other investment companies or accounts in order to obtain best
execution. As provided by the Investment Advisory Agreement, in making
investment recommendations for each of the Funds, the Adviser will not inquire
or take into consideration whether an issuer of securities proposed for purchase
or sale by the Company is a customer of the Adviser, its parent or its
subsidiaries or affiliates and, in dealing with its customers, the Adviser, its
parent, subsidiaries, and affiliates will not inquire or take into consideration
whether securities of such customers are held by the Funds.
GLASS-STEAGALL ACT
In 1971, the United States Supreme Court held in Investment Company
Institute v. Camp that the Federal statutes commonly referred to as the
Glass-Steagall Act prohibit a national bank from operating a mutual fund for the
collective investment of managing agency accounts. Subsequently, the Board of
Governors of the Federal Reserve System (the "Board") issued a regulation and
interpretation to the effect that the Glass-Steagall Act and such decision: (a)
forbid a bank holding company registered under the Federal Bank Holding Company
Act of 1956 (the "Holding Company Act") or any non-bank affiliate thereof from
sponsoring, organizing, or controlling a registered, open-end investment company
continuously engaged in the issuance of its shares, but (b) do not prohibit such
a holding company or affiliate from acting as investment adviser, transfer
agent, and custodian to such an investment company. In 1981, the United States
Supreme Court held in Board of Governors of the Federal Reserve System v.
Investment Company Institute that the Board did not exceed its authority under
the Holding Company Act when it adopted its regulation and interpretation
authorizing bank holding companies and their non-bank affiliates to act as
investment advisers to registered closed-end investment companies. In the Board
of Governors case, the Supreme Court also stated that if a national bank
complied with the restrictions imposed by the Board in its regulation and
interpretation authorizing bank holding companies and their non-bank affiliates
to act as investment advisers to investment companies, a national bank
performing investment advisory services for an investment company would not
violate the Glass-Steagall Act.
The Adviser believes that it possesses the legal authority to perform the
services for each of the Funds contemplated by the Prospectus, this Statement of
Additional Information, the Investment Advisory Agreement, the Custodian
Agreement and the Servicing Agreement without violation of applicable statutes
and regulations. The Adviser has been advised by its counsel that counsel
believes that such laws should not prevent the Adviser from providing the
services required of it under the Investment Advisory Agreement, the Custodian
Agreements, and the Servicing Agreement. Future changes in either Federal or
state statutes and regulations relating to the permissible activities of banks
or bank holding companies and the subsidiaries or affiliates of those entities,
as well as further judicial or administrative decisions or interpretations of
present and future statutes and regulations, could prevent or restrict the
Adviser from continuing to perform such services for the Company. Depending upon
the nature of any changes in the services which could be provided by the
Adviser, the Board of Directors of the Company would review the Company's
relationship with the Adviser and consider taking all action necessary in the
circumstances.
Should future legislative, judicial, or administrative action prohibit or
restrict the proposed activities of the Adviser and its affiliated and
correspondent banks in connection with Customer purchases of Shares of any of
the Funds, those banks might be required to alter materially or discontinue the
services offered by them to Customers. It is not anticipated, however, that any
change in the Company's method of operations would affect its net asset value
per share or result in financial losses to any Customer.
ADMINISTRATOR/FUND ACCOUNTANT
Sunstone Financial Group, Inc. serves as administrator and fund accountant
(the "Administrator") to each of the Funds pursuant to the Administration and
Fund Accounting Agreement dated April 10, 1995 and amended December 5, 1995 and
June 4, 1996 (the "Administration Agreement"). The Administrator assists in
supervising all operations of each Fund (other than those performed by the
Adviser under the Investment Advisory Agreement, the Custodian Agreement and
the Transfer Agency Agreement). The Administrator is a broker-dealer registered
with the Commission, and is a member of the National Association of Securities
Dealers, Inc. The Administrator provides administration, distribution and fund
accounting services to other investment companies.
Under the Administration Agreement, the Administrator has agreed to provide
office space, facilities, equipment and personnel, compile data for and prepare
with respect to the Funds timely Notices to the Commission required pursuant to
Rule 24f-2 under the Act and semi-annual reports on Form N-SAR; prepare and file
all federal income and excise tax returns and state income tax returns (and such
other required tax filings as may be agreed to by the parties) other than those
required to be made by the Funds' custodian or transfer agent; prepare
compliance filings relating to the registration of the securities of the Funds
pursuant to state securities laws with the advice of Funds' counsel; perform
securities valuations; determine the income and expense accruals of the Funds;
calculate daily net asset values and income factors of the Funds; maintain all
general ledger accounts and related subledgers; prepare financial statements for
the Annual and Semi-Annual Reports required pursuant to Section 30(d) under the
Act; review the Registration Statement for the Funds (on Form N-1A or any
replacement therefor) and any amendments thereto, and proxy materials; prepare
and monitor each Fund's expense accruals and cause all appropriate expenses to
be paid from Fund assets on proper authorization from the Funds; assist in the
acquisition of First Omaha Funds' fidelity bond required by the Act, monitor the
amount of the bond and make the necessary Commission filings related thereto;
check each Fund's compliance with the policies and limitations relating to
portfolio investments as set forth in the Prospectus, Statement of Additional
Information and Articles of Incorporation and monitor each Fund's status as a
regulated investment company under Subchapter M of the Internal Revenue Code, as
amended; maintain, and/or coordinate with the other service providers the
maintenance of, the accounts, books and other documents required pursuant to
Rule 31a-1(a) and (b) under the Act; and generally assist in each Fund's
administrative operations.
The Administrator receives a fee from each Fund for its services as
administrator and fund accountant and expenses assumed pursuant to the
Administration Agreement, equal to the lesser of a fee calculated daily and paid
periodically, at the annual rate of twenty one-hundredths of one percent (.20%)
of that Fund's average daily net assets subject to a minimum fee of $300,000 for
the Equity, Fixed Income, Short/Intermediate and Money Market Funds in the
aggregate and to a minimum fee of $50,000 for each of the Small Cap Value and
Balanced Funds, or such other fee as may be agreed upon in writing by the
Company and the Administrator. The Administrator may periodically voluntarily
reduce all or a portion of its fee with respect to a Fund in order to increase
the net income of one or more of the Funds available for distribution as
dividends.
Unless sooner terminated as provided therein, the Administration Agreement
will continue in effect until December 20, 1998. The Administration Agreement
thereafter shall be renewed automatically for successive one-year terms, unless
earlier terminated. The Administration Agreement is terminable with respect to a
particular Fund only upon mutual agreement of the parties to the Administration
Agreement and, after the initial term, on not less than 90 days' notice by the
Company's Board of Directors or by the Administrator.
The Administration Agreement provides that the Administrator shall not be
liable for any error of judgment or mistake of law or any loss suffered by any
of the Funds in connection with the matters to which the Administration
Agreement relates, except a loss resulting from willful misfeasance, bad faith,
or gross negligence in the performance of its duties, or from the reckless
disregard by the Administrator of its obligations and duties thereunder. For the
fiscal period ended March 31, 1996, the Administrator earned $296,944,
$112,054, $33,763, and $134,426 net of fee waivers of $85,431, $32,240, $9,714,
and $38,677 for the Equity, Fixed Income, Short/Intermediate and Money Market
Funds, respectively. For the fiscal period ended October 31, 1996, the
Administrator earned $674, $253,255, $0, $83,546, $23,416 and $105,167 net of
fee waivers of $18,916, $21,203, $11,918, $7,015, $1,981 and $8,604 for the
Small Cap Value, Equity, Balanced, Fixed Income, Short/Intermediate and Money
Market Funds, respectively.
EXPENSES
If total expenses borne by any of the Funds in any fiscal year exceed
expense limitations imposed by applicable state securities regulations, the
Adviser will reimburse that Fund by the amount of such excess in proportion to
its respective fees. As of the date of this Statement of Additional Information,
the most restrictive expense limitation applicable to the Funds limits each
Fund's aggregate annual expenses, including management and advisory fees but
excluding interest, taxes, brokerage commissions, and certain other expenses, to
2 1/2% of the first $30 million of a Fund's average net assets, 2% of the next
$70 million of such Fund's average net assets, and 1-1/2% of such Fund's
remaining average net assets. Any expense reimbursements will be estimated daily
and reconciled and paid on a monthly basis. Fees imposed upon customer accounts
by the Adviser or its affiliated or correspondent banks for cash management
services are not included within Fund expenses for purposes of any such expense
limitation.
DISTRIBUTOR
Sunstone Financial Group, Inc. serves as agent for each of the Funds in the
distribution of its Shares pursuant to a Distribution Agreement dated April 10,
1995 and amended as of December 5, 1995 and June 4, 1996 (the "Distribution
Agreement") . Unless otherwise terminated, the Distribution Agreement remains in
effect from year to year for successive annual periods ending on June 30 if
approved at least annually (a) by the Company's Board of Directors or by the
vote of a majority of the outstanding shares of the Company, and (b) by the vote
of a majority of the Directors of the Company who are not parties to the
Distribution Agreement or interested persons (as defined in the 1940 Act) of any
party to the Distribution Agreement, cast in person at a meeting called for the
purpose of voting on such approval. The Distribution Agreement may be terminated
in the event of any assignment, as defined in the 1940 Act.
The Distributor solicits orders for the sale of Shares, advertises and pays
the costs of advertising, office space and the personnel involved in such
activities. The Distributor receives no compensation under the Distribution
Agreement with the Company, but may receive compensation under the Distribution
and Service Plan described below.
As described in the Prospectus, the Company has adopted a Distribution and
Service Plan (the "Plan") pursuant to Rule 12b-1 under the 1940 Act under which
each Fund is authorized to make payments to banks, including the Adviser, other
institutions and broker-dealers, (with all of the foregoing organizations being
referred to as "Participating Organizations") for providing distribution or
shareholder service assistance. Payments to such Participating Organizations may
be made pursuant to agreements entered into upon the recommendation of the
Distributor. The Plan authorizes each Fund to make payments in an amount not in
excess, on an annual basis, of 0.25% of the average daily net assets of that
Fund. As required by Rule 12b-1, the Plan was approved by the sole shareholder
of each of the Funds and by the Board of Directors, including a majority of the
Directors who are not interested persons of any of the Funds and who have no
direct or indirect financial interest in the operation of the Plan (the
"Independent Directors"). The Plan may be terminated as to a Fund by vote of a
majority of the Independent Directors, or by vote of majority of the outstanding
Shares of that Fund. Any change in the Plan that would materially increase the
distribution cost to a Fund requires Shareholder approval. The Directors review
quarterly a written report of such costs and the purposes for which such costs
have been incurred. The Plan may be amended by vote of the Directors including a
majority of the Independent Directors, cast in person at a meeting called for
that purpose. For so long as the Plan is in effect, selection and nomination of
those Directors who are not interested persons of the Company shall be committed
to the discretion of such disinterested persons. All agreements with any person
relating to the implementation of the Plan may be terminated at any time on 60
days' written notice without payment of any penalty, by vote of a majority of
the Independent Directors or by a vote of the majority of the outstanding Shares
of any of the Funds. The Plan will continue in effect for successive one-year
periods, provided that each such continuance is specifically approved (a) by the
vote of a majority of the Independent Directors, and (b) by a vote of a majority
of the entire Board of Directors cast in person at a meeting called for that
purpose. The Board of Directors has a duty to request and evaluate such
information as may be reasonably necessary for them to make an informed
determination of whether the Plan should be implemented or continued. In
addition, the Directors in approving the Plan must determine that there is a
reasonable likelihood that the Plan will benefit each Fund and its Shareholders.
The Board of Directors of the Company believes that the Plan is in the best
interests of each Fund since it encourages Fund growth. As a Fund grows in size,
certain expenses, and therefore total expenses, per Share, may be reduced and
overall performance per Share may be improved.
As of the date of this Statement of Additional Information, the Company, on
behalf of the Funds, does not have a Rule 12b-l Agreement and does not pay any
fees under the Plan.
ADMINISTRATIVE SERVICES PLAN
As described in the Prospectus, the Company has also adopted an
Administrative Services Plan (the "Services Plan") under which each Fund is
authorized to pay certain financial institutions, including the Adviser, its
correspondent and affiliated banks, and the Distributor (a "Service
Organization"), to provide certain ministerial, record keeping, and
administrative support services to their customers who own of record or
beneficially Shares in a Fund. Payments to such service organizations are made
pursuant to Servicing Agreements between the Company and the Service
Organization. The Services Plan authorizes each Fund to make payments to Service
Organizations in an amount, on an annual basis, of up to 0.25% of the average
daily net assets of that Fund. The Services Plan has been approved by the Board
of Directors of the Company, including a majority of the Directors who are not
interested persons of the Company (as defined in the 1940 Act) and who have no
direct or indirect financial interest in the operation of the Services Plan or
in any Servicing Agreements thereunder (the "Disinterested Directors"). The
Services Plan may be terminated as to a Fund by a vote of a majority of the
Disinterested Directors. The Directors review quarterly a written report of the
amounts expended pursuant to the Services Plan and the purposes for which such
expenditures were made. The Services Plan may be amended by a vote of the
Directors, provided that any material amendments also require the vote of a
majority of the Disinterested Directors. For so long as the Services Plan is in
effect, selection and nomination of those Disinterested Directors shall be
committed to the discretion of the Company's Disinterested Directors. All
Servicing Agreements may be terminated at any time without the payment of any
penalty by a vote of a majority of the Disinterested Directors. The Services
Plan will continue in effect for successive one-year periods, provided that each
such continuance is specifically approved by a majority of the Board of
Directors, including a majority of the Disinterested Directors.
As authorized by the Services Plan, the Company has entered into a
Servicing Agreement with the Adviser pursuant to which the Adviser has agreed to
provide certain administrative support services in connection with Shares of the
Funds owned of record or beneficially by its customers. Such administrative
support services may include, but are not limited to, (a) processing dividend
and distribution payments from a Fund on behalf of customers; (b) providing
periodic statements to its customers showing their positions in the Shares; (c)
arranging for bank wires; (d) responding to routine customer inquiries relating
to services performed by the Adviser; (e) providing sub-accounting with respect
to the Shares beneficially owned by the Adviser's customers or the information
necessary for sub-accounting; (f) if required by law, forwarding shareholder
communications from a Fund (such as proxies, shareholder reports, annual and
semi-annual financial statements and dividend, distribution and tax notices) to
its customers; (g) aggregating and processing purchase, exchange, and redemption
requests from customers and placing net purchase, exchange, and redemption
orders for customers; and (h) providing customers with a service that invests
the assets of their account in the Shares pursuant to specific or preauthorized
instructions. In consideration of such services, the Company, on behalf of each
Fund, except the Money Market Fund, may pay the Adviser a monthly fee, computed
at the annual rate of .10% of the average aggregate net asset value of Shares of
that Fund held during the period by customers for whom the Adviser has provided
services under the Servicing Agreement. Beginning November 1, 1996, the Equity,
Fixed Income and Short/Intermediate Funds began accruing at the annual rate of
.05% (net of .05% of anticipated fee waivers) of the average aggregate net asset
value of Shares of each respective Fund for whom the Adviser is providing
services under the Servicing Agreement. The Adviser is anticipating waiving its
fee for the Small Cap Value and Balanced Funds.
In addition, the Company, on behalf of a Fund, may enter into, from time to
time, other Servicing Agreements with other service organizations pursuant to
which such Service Organizations will provide similar services as those
discussed above.
CUSTODIAN
First National Bank of Omaha, One First National Center, Omaha, Nebraska
68102, in addition to serving as the investment adviser and transfer agent to
the Funds, also serves as custodian (the "Custodian") to each of the Funds
pursuant to the Custodian Agreement dated December 20, 1994 and amended as of
December 5, 1995 and June 4, 1996 (the "Custodian Agreement"). The Custodian's
responsibilities include safeguarding and controlling each Fund's cash and
securities, handling the receipt and delivery of securities, and collecting
interest on each Fund's investments. In consideration of such services, each
Fund pays the Custodian a fee, computed daily and paid monthly, at the annual
rate of .03% of such Fund's average daily net assets.
Unless sooner terminated, the Custodian Agreement will continue in effect
until terminated by either party upon 60 days advance written notice to the
other party. Notwithstanding the foregoing, the Custodian Agreement, with
respect to a Fund, will be approved at least annually by the Company's Board of
Directors or by vote of a majority of the outstanding Shares of that Fund (as
defined under "GENERAL INFORMATION - Miscellaneous" in the Prospectus), and a
majority of the Directors who are not parties to the Custodian Agreement or
interested persons (as defined in the 1940 Act) of any party to the Custodian
Agreement by votes cast in person at a meeting called for such purpose.
In the fiscal period ended March 31, 1996, the Custodian earned custody
fees of $25,965 for the Money Market Fund and earned and waived $49,446,
$21,644 and $6,522 for the Equity, Fixed Income and Short/Intermediate Funds,
respectively. In the fiscal period ended October 31, 1996, the Custodian earned
custody fees of $17,066 for the Money Market Fund and earned and waived $293,
$41,169, $174, $13,584 and $3,810 for the Small Cap Value, Equity, Balanced,
Fixed Income and Short/Intermediate Funds, respectively.
In the opinion of the staff of the Commission, since the custodian is
serving as both the investment adviser and custodian of each of the Funds, each
of the Funds and the Custodian are subject to the requirements of Rule 17f-2
under the 1940 Act, and therefore the Funds and the Custodian will comply with
the requirements of such rule.
TRANSFER AGENCY SERVICES
First National Bank of Omaha serves as Transfer Agent and dividend
disbursing agent (the "Transfer Agent") for the Company pursuant to the Transfer
Agency Agreement dated December 20, 1994 and amended as of December 5, 1995 and
June 4, 1996. Pursuant to such Agreement, the Transfer Agent, among other
things, performs the following services in connection with each Fund's
shareholders of record: maintenance of shareholder records for each of the
Company's shareholders of record; processing shareholder purchase and redemption
orders; processing transfers and exchanges of shares of the Company on the
shareholder files and records; processing dividend payments and reinvestments;
and assistance in the mailing of shareholder reports and proxy solicitation
materials. For such services the Transfer Agent receives a fee based on the
number of shareholders of record. Pursuant to authority in the Transfer Agency
Agreement the Transfer Agent has appointed as sub-transfer agent DST Systems,
Inc., 210 West 10th Street, Kansas City, Missouri 64105.
AUDITORS
The financial statements of each Fund as of March 31, 1996, appearing in
this Statement of Additional Information have been audited by KPMG Peat Marwick
LLP, Two Central Park Plaza, Suite 1501, Omaha, Nebraska 68102, as set forth in
their report appearing elsewhere herein, and are included in reliance upon such
report and on the authority of such firm as experts in auditing and accounting.
LEGAL COUNSEL
Cline, Williams, Wright, Johnson & Oldfather, 1900 FirsTier Bank Building,
Lincoln, Nebraska 68508, is counsel to the Company and will pass upon the
legality of the Shares offered hereby.
ADDITIONAL INFORMATION
ORGANIZATION AND CAPITAL STRUCTURE
The Company is authorized to issue a total of 1,000,000,000 Shares of
common stock in series with a par value of $.00001 per share. Five hundred fifty
million of these Shares have been authorized by the Board of Directors to be
issued in series designated for the existing six Funds. The Board of Directors
may authorize additional Shares in series, or may divide the Shares of any
existing or new series into two or more subseries or classes, all without
shareholder approval.
All Shares, when issued, will be fully paid and non-assessable 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 kind of rights and privileges as a full Share. The Shares possess no
preemptive or conversion rights.
Each Share of a Fund has one vote (with proportionate voting for fractional
shares) irrespective of the relative net asset value of the Shares. On some
issues, such as the election of directors, all Shares of the Fund vote together
as one series. Cumulative voting is authorized. This means that in a vote for
the election of directors, Shareholders may multiply the number of Shares they
own by the number of directorships being filled and then allocate such votes to
one or more directors. On issues affecting only a particular Fund, the Shares of
the affected Fund vote as a separate series. An example of such an issue would
be a fundamental investment restriction pertaining to only one Fund.
SHAREHOLDER MEETINGS
It is possible that the Fund will not hold annual or periodically scheduled
regular meetings of Shareholders. 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. Special meetings of the
Shareholders may be held, however, at any time and for any purpose, if called by
(a) the Chairman of the Board, the President and two or more directors, (b) by
one or more Shareholders holding ten percent or more of the Shares entitled to
vote on matters presented to the meeting, or (c) if the annual meeting is not
held within any thirteen month period, the local district court, upon
application of any Shareholder, may summarily order that such meeting be held.
In addition, the 1940 Act requires a Shareholder vote for all amendments to
fundamental investment policies, investment advisory contracts and amendments
thereto.
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted to the holders of the outstanding voting securities of an investment
company such as the Company shall not be deemed to have been effectively acted
upon unless approved by the holders of a majority of the outstanding shares of
each Fund affected by the matter. For purposes of determining whether the
approval of a majority of the outstanding shares of a Fund will be required in
connection with a matter, a Fund will be deemed to be affected by a matter
unless it is clear that the interests of each Fund in the matter are identical,
or that the matter does not affect any interest of the Fund. Under Rule 18f-2,
the approval of an investment advisory agreement or any change in investment
policy would be effectively acted upon with respect to a Fund only if approved
by a majority of the outstanding shares of such Fund. However, Rule 18f-2 also
provides that the ratification of independent public accountants, the approval
of principal underwriting contracts, and the election of Directors may be
effectively acted upon by Shareholders of the Company voting without regard to
series.
OWNERSHIP OF SHARES
As of the date of this Statement of Additional Information, no person was
known to own of record 5% or more of the outstanding shares of any Fund. The
Adviser will possess, in a fiduciary capacity on behalf of its underlying
accounts, voting or investment power with respect to a substantial majority of
the outstanding Shares of each of the Funds and therefore will be presumed to
control each of the Funds within the meaning of the 1940 Act.
VOTE OF A MAJORITY OF THE OUTSTANDING SHARES
As used in the Prospectus and this Statement of Additional Information, a
"vote of a majority of the outstanding Shares" of a Fund means the affirmative
vote, at a meeting of Shareholders duly called, of the lesser of (a) 67% or more
of the votes of Shareholders of such Fund present at a meeting at which the
holders of more than 50% of the votes attributable to Shareholders of record of
that Fund are represented in person or by proxy, or (b) the holders of more than
50% of the outstanding Shares of that Fund.
ADDITIONAL TAX INFORMATION
Although each Fund expects to qualify as a "regulated investment company"
and to be relieved of all or substantially all federal income taxes, depending
upon the extent of its activities in states and localities in which its offices
are maintained, in which its agents or independent contractors are located, or
in which it is otherwise deemed to be conducting business, a Fund may be subject
to the tax laws of such states or localities. In addition, if for any taxable
year that Fund does not qualify for the special tax treatment afforded regulated
investment companies, all of its taxable income will be subject to federal tax
at regular corporate rates (without any deduction for distributions to its
Shareholders). In such event, dividend distributions would be taxable to
Shareholders to the extent of earnings and profits, and would be eligible for
the dividends received deduction for corporations.
Foreign taxes may be imposed on a Fund by foreign countries with respect to
its income from foreign securities. Since less than 50% in value of a Fund's
total assets at the end of its fiscal year are expected to be invested in stocks
or securities of foreign corporations, such Fund will not be entitled under the
Code to pass through to its Shareholders their pro rata share of the foreign
taxes paid by the Fund. These taxes will be taken as a deduction by such Fund.
Each Fund will be required in certain cases to withhold and remit to the
United States Treasury 31% of taxable dividends paid to any Shareholder who has
provided either an incorrect tax identification number or no number at all, or
who is subject to withholding by the Internal Revenue Service for failure
properly to include on their return payments of interest or dividends.
Information set forth in the Prospectus and this Statement of Additional
Information which relates to federal taxation is only a summary of some of the
important federal tax considerations generally affecting purchasers of Shares of
a Fund. No attempt has been made to present a detailed explanation of the
federal income tax treatment of a Fund or its Shareholders and this discussion
is not intended as a substitute for careful tax planning. Accordingly, potential
purchasers of Shares of a Fund are urged to consult their tax advisers with
specific reference to their own tax situation. In addition, the tax discussion
in the Prospectus and this Statement of Additional Information is based on tax
laws and regulations which are in effect on the date of the Prospectus and this
Statement of Additional Information; such laws and regulations may be changed by
legislative or administrative action.
YIELD OF THE MONEY MARKET FUND
For the seven-day period ended October 31, 1996, the yield and effective
yield, respectively, of the Money Market Fund were 4.71% and 4.82%. For the
30-day period ended October 31, 1996, the yield for such Fund was 4.70%. In the
absence of fee waivers, the yields for the period ended October 31, 1996 would
have been 4.70%, 4.81% and 4.69% respectively. The standardized seven-day yield
for the Money Market Fund is computed by determining the net change, exclusive
of capital changes, in the value of a hypothetical pre-existing account in the
Money Market Fund having a balance of one Share at the beginning of the period,
subtracting a hypothetical charge reflecting deductions from Shareholder
accounts, and dividing the difference by the value of the account at the
beginning of the base period to obtain the base period return, and then
multiplying the base period return by (365/7). The net change in the account
value of the Money Market Fund includes the value of additional Shares purchased
with dividends from the original Share, dividends declared on both the original
Share and any such additional Shares, and all fees, other than non-recurring
account or sales charges, that are charged to all Shareholder accounts in
proportion to the length of the base period and assuming the Money Market Fund's
average account size. The capital changes to be excluded from the calculation of
the net change in account value are realized gains and losses from the sale of
securities and unrealized appreciation and depreciation. The 30-day yield and
effective yield are calculated as described above except that the base period is
30 days rather than seven days.
The effective yield for the Money Market Fund is computed by compounding
the base period return, as calculated above, by adding 1 to the base period
return raising the sum to a power equal to 365 divided by seven and subtracting
1 from the result.
YIELD OF THE FIXED INCOME FUND AND THE SHORT/INTERMEDIATE FUND
As summarized in the Prospectus under the heading "PERFORMANCE
INFORMATION," yield of each of the Fixed Income Fund and the Short/Intermediate
Fund will be computed by annualizing net investment income per share for a
recent 30-day period and dividing that amount by such Share's net asset value
per share (reduced by any undeclared earned income expected to be paid shortly
as a dividend) on the last trading day of that period. Net investment income
will reflect amortization of any market value, premium or discount of fixed
income securities (except for obligations backed by mortgages or other assets)
and may include recognition of a pro rata portion of the stated dividend rate of
dividend paying portfolio securities. The yield of each of the Fixed Income Fund
and the Short/Intermediate Fund will vary from time to time depending upon
market conditions, the composition of such Fund's portfolio and operating
expenses of the Company allocated to such Fund. These factors and possible
differences in the methods used in calculating yield, should be considered when
comparing a Fund's yield to yields published for other investment companies and
other investment vehicles. Yield should also be considered relative to changes
in the value of a Fund's shares and to the relative risks associated with the
investment objective and policies of each Fund.
For the 30-day period ended October 31, 1996, the yields for the Fixed
Income Fund and the Short/Intermediate Fund were 5.96% and 5.55%, respectively.
In the absence of fee waivers, the yields for the Fixed Income Fund and the
Short/Intermediate Fund would have been 5.87% and 5.46%, respectively.
CALCULATION OF TOTAL RETURN
As summarized in the Prospectus under the headings "PERFORMANCE
INFORMATION" and "ADDITIONAL PERFORMANCE INFORMATION," average annual total
return is a measure of the change in value of an investment in a Fund over
the period covered, which assumes any dividends or capital gains distributions
are reinvested in such Fund immediately rather than paid to the investor
in cash. Average annual total return will be calculated by:
(a) adding to the total number of Shares purchased by a hypothetical $10,000
investment in that Fund all additional Shares which would have been purchased if
all dividends and distributions paid during the period had been
immediately reinvested; (b) calculating the value of the hypothetical initial
investment of $10,000 as of the end of the period by multiplying the total
number of Shares owned at the end of the period by the net asset value per share
on the last trading day of the period; (c) assuming redemption at the end of the
period; and (d) dividing this account value for the hypothetical investor by the
initial $10,000 investment. Aggregate total return is a measure of change in
value of an investment in a Fund over the relevant period and is similarly to
average annual total return except that the result is not annualized.
DISTRIBUTION RATES
The Small Cap Value Fund, the Equity Fund, the Balanced Fund, the Fixed
Income Fund and the Short/Intermediate Fund may from time to time advertise
current distribution rates which are calculated in accordance with the method
discussed in such Funds' Prospectus.
PERFORMANCE COMPARISONS
Investors may judge the performance of each of the Funds by comparing them
to the performance of other mutual funds with comparable investment objectives
and policies through various mutual fund or market indices such as those
prepared by Dow Jones & Co., Inc. and Standard & Poor's Corporation and to data
prepared by Lipper Analytical Services, Inc., a widely recognized independent
service which monitors the performance of mutual funds. Comparisons may also be
made to indices or data published in Donoghue's MONEY MARKET REPORT, a
nationally recognized money market fund reporting service, Money Magazine,
Forbes, Barron's, The Wall Street Journal, Morningstar, Inc., Ibbotson
Associates, CDA/Wiesenberger, The New York Times, Business Week, U.S.A. Today
and local periodicals. In addition to performance information, general
information about each of the Funds that appears in a publication such as those
mentioned above may be included in advertisements, in sales literature and in
reports to Shareholders.
From time to time, each of the Funds may include general comparative
information, such as statistical data regarding inflation, securities indices or
the features or performance of alternative investments, in advertisements, sales
literature and reports to Shareholders. A Fund may also include calculations,
such as hypothetical compounding examples, which describe hypothetical
investment results in such communications. Such performance examples will be
based on an express set of assumptions and are not indicative of performance of
any of the Funds.
Current yields or total return will fluctuate from time to time and are not
necessarily representative of future results. Accordingly, a Fund's yield or
total return may not provide for comparison with bank deposits or other
investments that pay a fixed return for a stated period of time. Yield and total
return are functions of a Fund's quality, composition and maturity, as well as
expenses allocated to such Fund. Fees imposed upon Customer accounts by the
Adviser or its affiliated or correspondent banks for cash management services
will reduce a Fund's effective yield and total return to Customers.
MISCELLANEOUS
The Prospectus and this Statement of Additional Information omit certain of
the information contained in the Registration Statement filed with the
Commission. Copies of such information may be obtained from the commission upon
payment of the prescribed fee.
The Prospectus and this Statement of Additional Information are not an
offering of the securities herein described in any state in which such offering
may not lawfully be made. No salesman, dealer, or other person is authorized to
give any information or make any representation other than those contained in
the Prospectus and this Statement of Additional Information.
FINANCIAL STATEMENTS
The following audited financial statements are attached hereto:
Small Cap Value Fund
1. Independent Auditors' Report
2. Statement of Assets and Liabilities as of March 31, 1996
3. Notes to Financial Statement
The following audited financial statements are attached hereto:
Money Market, Short/Intermediate, Fixed Income and Equity Funds
1. Independent Auditors' Report
2. Statements of Assets and Liabilities as of March 31, 1996
3. Statements of Operations for the period ended March 31, 1996
4. Statements of Changes in Net Assets for the period ended March 31,
1996
5. Financial Highlights
6. Schedules of Investments as of March 31, 1996
7. Notes to the Financial Statements
The following unaudited financial statements are attached hereto:
Small Cap Value, Equity, Balanced, Fixed Income, Short/Intermediate and
Money Market Funds
1. Statements of Assets and Liabilities as of October 31, 1996
2. Statements of Operations for the period ended October 31, 1996
3. Statements of Changes in Net Assets for the period ended October 31,
1996
4. Financial Highlights
5. Schedules of Investments as of October 31, 1996
6. Notes to the Financial Statements
FIRST OMAHA FUNDS - ANNUAL REPORT
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Sole Shareholder
of the First Omaha Small Cap Value Fund
We have audited the accompanying statement of assets and liabilities of the
First Omaha Small Cap Value Fund as of March 31, 1996. This statement of assets
and liabilities is the responsibility of the Fund's management. Our
responsibility is to express an opinion on this statement of assets and
liabilities based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the statement of assets and liabilities referred to above
presents fairly, in all material respects, the financial position of the First
Omaha Small Cap Value Fund as of March 31, 1996, in conformity with generally
accepted accounting principles.
KPMG Peat Marwick LLP
April 12, 1996
Omaha, Nebraska
FIRST OMAHA SMALL CAP VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1996
ASSETS:
Unamortized organization costs $ 5,146
Prepaid initial registration expense 1,000
Cash 500
-------
Total assets 6,646
-------
Liabilities:
Organization fees payable 5,146
Payable to Administrator 1,000
-------
Total liabilities 6,146
-------
Net assets $ 500
-------
Represented by:
Capital stock, $0.00001 par value;
50,000,000 shares authorized 50 shares outstanding (note 8) $ -
Paid-in capital 500
-------
$ 500
-------
Offering price, redemption price and net asset
value per share (based
on shares of capital stock issued and outstanding) $ 10.00
-------
See accompanying notes to financial statement.
FIRST OMAHA SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENT
MARCH 31, 1996
(1) ORGANIZATION
First Omaha Funds, Inc. (the "Company") was organized in October 1994 as a
Nebraska corporation and is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end management investment
company issuing its shares in series, each series representing a distinct
portfolio with its own investment objectives and policies. At March 31,
1996, the only series presently authorized are the U.S. Government
Obligations Fund, the Short/Intermediate Fixed Income Fund, the Fixed
Income Fund, the Equity Fund, and the Small Cap Value Fund. This financial
statement presents the financial position of only the Small Cap Value Fund
(the "Fund"), which has had no operations other than the sale of the shares
to capitalize the Fund which were sold to Miriam M. Allison (president of
the Administrator and Distributor) on March 31, 1996 for cash in the amount
of $500.
(2) SIGNIFICANT ACCOUNTING POLICIES
(a) Federal Income Taxes
The Fund intends to comply with the requirements of the Internal
Revenue Code necessary to qualify as a regulated investment company
and to make the requisite distributions of the income to its
shareholders which will be sufficient to relieve it from all or
substantially all federal income taxes.
(b) Organization Costs
Costs incurred by the Fund in connection with its organization,
registration and the initial public offering of shares have been
deferred and will be amortized on a straight-line basis over a period
of five years from the date upon which the Fund commences its
investment activities. If any of the original shares of the Fund
purchased by Miriam M. Allison are redeemed by any holder thereof
prior to the end of the amortization period, the redemption proceeds
will be reduced by the pro rata share of the unamortized expenses as
of the date of redemption. The pro rata share by which the proceeds
are reduced will be derived by dividing the number of original shares
of the Fund by the total number of original shares outstanding at the
time of redemption.
(3) INVESTMENT ADVISER
The Fund has an agreement with First National Bank of Omaha ("FNBO") to
furnish investment advisory services to the Fund. Under the terms of this
agreement, the Fund will pay FNBO a monthly fee at the annual rate of 0.85
percent of the Fund's average daily net assets.
FNBO also serves as custodian for the Fund. FNBO receives compensation from
the Fund for such services in an amount equal to a fee, computed daily and
paid monthly, at the annual rate of 0.03 percent of the Fund's average
daily net assets.
(4) ADMINISTRATOR AND DISTRIBUTOR
Sunstone Financial Group, Inc. (the "Administrator" or the "Distributor")
acts as administrator and distributor for the Fund. As compensation for its
administrative services and the assumption of certain administrative
expenses, the Administrator is entitled to a fee, computed daily and
payable monthly, at an annual rate of 0.20 percent of the Fund's average
net assets, subject to a minimum fee of $50,000.
The Administrator may periodically volunteer to reduce all or a portion of
its administrative fee with respect to the Fund. These waivers may be
terminated at any time at the Administrator's discretion. The Administrator
may not seek reimbursement of such voluntarily reduced fees at a later
date. The reduction of such fee will cause the yield of the Fund to be
higher than it would be in the absence of such reduction. The Distributor
receives no compensation from the Fund under its Distribution Agreement
with the Company, but may receive compensation under the Distribution and
Shareholder Service Plan.
(5) DISTRIBUTION PLAN
Pursuant to Rule 12b-1 under the 1940 Act, the Company has adopted a
Distribution and Shareholder Service Plan (the "Plan"), under which the
Fund is authorized to pay a periodic amount representing distribution
expenses calculated at an annual rate not to exceed 0.25 percent of the
Fund's average daily net assets. Such amount may be used to pay banks
(including FNBO), broker-dealers and other institutions (a "Participating
Organization") for distribution and/or shareholder service assistance
pursuant to an agreement between the Distributor and the Participating
Organization. Under the Plan, a Participating Organization may include the
Distributor, its subsidiaries and its affiliates. As of the date of this
financial statement, there are no 12b-1 Agreements with any Participating
Organization.
(6) ADMINISTRATIVE SERVICES PLAN
The Company has adopted an Administrative Services Plan pursuant to which
the Fund is authorized to pay compensation to banks and other financial
institutions, which may include FNBO, its correspondent and affiliated
banks and the Distributor (each a "Service Organization"). Such Service
Organizations agree to provide certain ministerial, record keeping and/or
administrative support services for their customers or account holders who
are the beneficial or record owner of shares of the Fund. In consideration
for such services, a Service Organization receives a fee from the Fund,
computed daily and paid monthly at an annual rate of up to 0.25 percent of
the average daily net asset value of shares of the Fund owned beneficially
or of record by such Service Organization's customers for whom the Service
Organization provides such services. As of the date of this financial
statement, the Board of Directors has not authorized payments under the
Administrative Services Plan.
(7) RELATED PARTY INFORMATION
At the date of the Fund's capitalization, Miriam M. Allison, president of
the Administrator and Distributor, owns all of the outstanding shares of
the Fund.
(8) CAPITAL STOCK
The Funds are authorized to issue a total of 1,000,000,000 shares of common
stock in series with a par value of $0.00001 per share. The Board of
Directors has authorized 500,000,000 of these shares to be issued in total
for the series designated Small Cap Value Fund, Equity Fund,
Short/Intermediate Fixed Income Fund, Fixed Income Fund and U.S. Government
Obligations Fund Shares. The Board of Directors is empowered to issue other
series of the Funds' shares without shareholder approval.
Each share of stock will have a pro rata interest in the assets of the Fund
to which the stock of that series relates and will have no interest in the
assets of any other Fund.
FIRST OMAHA FUNDS - ANNUAL REPORT
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors
of First Omaha Funds, Inc.
We have audited the accompanying statements of assets and liabilities of First
Omaha Funds, Inc., (comprised, respectively, of the U.S. Government Obligations
Fund, Short/Intermediate Fixed Income Fund, Fixed Income Fund and Equity Fund)
(collectively the Funds), including the schedules of portfolio investments, as
of March 31, 1996, and the related statements of operations, statements of
changes in net assets and the financial highlights for each of the periods
indicated herein. These financial statements and financial highlights are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements and
financial highlights. Our procedures included confirmation of securities owned
as of March 31, 1996, by correspondence with the custodian. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Funds as of March 31, 1996, the results of their operations, changes in their
net assets and the financial highlights for each of the periods herein, in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
April 12, 1996
Omaha, Nebraska
[FIRST OMAHA FAMILY OF FUNDS LOGO]
STATEMENTS OF ASSETS AND LIABILITIES
MARCH 31, 1996 -
SHORT/
INTERMEDIATE
U.S. GOVERNMENT FIXED
OBLIGATIONS INCOME FIXED INCOME EQUITY
FUND FUND FUND FUND
--------------- ----------- ------------ ------
ASSETS:
Investments, at market value
(cost $69,459,524,
$21,764,795, $75,280,955
and $189,234,895,
respectively) $69,459,524 $21,676,048 $75,234,390 $223,956,234
Repurchase agreements, at
market value (cost
$18,582,550, $0, $0 and
$0, respectively) 18,582,550 -- -- --
Interest and dividends
receivable 37,923 358,236 1,102,869 265,488
Organizational expenses,
net of accumulated
amortization 27,977 27,977 27,977 27,977
Other assets 36,741 17,640 34,056 72,398
---------- ---------- ---------- -----------
Total Assets 88,144,715 22,079,901 76,399,292 224,322,097
========== ========== ========== ===========
LIABILITIES:
Dividend payable 346,027 -- -- --
Accrued expenses and other
liabilities 65,492 22,201 49,546 120,884
Accrued investment
advisory fee 18,463 1,888 7,827 32,400
---------- ----------- ----------- ------------
Total Liabilities 429,982 24,089 57,373 153,284
---------- ----------- ----------- ------------
NET ASSETS $87,714,733 $22,055,812 $76,341,919 $224,168,813
========== =========== =========== ============
NET ASSETS CONSIST OF:
Capital stock 877 22 76 171
Paid-in-capital in excess
of par 87,727,924 22,384,852 76,461,891 182,273,939
Undistributed net investment
income 1,970 47,662 189,494 31,943
Undistributed net realized
gain (loss) on investments (16,038) (287,977) (262,977) 7,141,421
Net unrealized appreciation
(depreciation) on
investments -- (88,747) (46,565) 34,721,339
---------- ----------- ----------- ------------
Net Assets $87,714,733 $22,055,812 $76,341,919 $224,168,813
========== =========== =========== ============
CAPITAL STOCK, $0.00001 par
value
Authorized 300,000,000 50,000,000 50,000,000 50,000,000
Issued and outstanding 87,730,683 2,238,496 7,633,734 17,149,232
NET ASSET VALUE, REDEMPTION
PRICE, AND OFFERING PRICE
PER SHARE (NET ASSETS/
SHARES OUTSTANDING) $1.00 $9.85 $10.00 $13.07
===== ===== ====== ======
See notes to financial statements.
[FIRST OMAHA FAMILY OF FUNDS LOGO]
STATEMENTS OF OPERATIONS
FOR THE PERIOD FROM APRIL 10, 1995<F40> TO MARCH 31, 1996 -
SHORT/
INTERMEDIATE
U.S. GOVERNMENT FIXED
OBLIGATIONS INCOME FIXED INCOME EQUITY
FUND FUND FUND FUND
--------------- ------------ ------------ ------
INVESTMENT INCOME:
Interest $4,910,772 $1,356,961 $4,900,818 $ 1,759,320
Dividends (net of
withholding tax of $0,
$0, $0 and $17,556,
respectively) -- -- -- 4,584,921
--------- --------- --------- ---------
4,910,772 1,356,961 4,900,818 6,344,241
--------- --------- --------- ---------
EXPENSES:
Investment advisory fees 216,379 108,692 432,881 1,433,904
Fund administration and
accounting fees 173,103 43,477 144,294 382,375
Shareholder servicing fees 35,174 27,326 31,953 49,446
Custody fees 25,965 6,522 21,644 57,355
Federal and state
registration fees 21,699 6,810 12,193 30,608
Professional fees 9,334 10,674 13,352 29,221
Reports to shareholders 7,160 3,737 9,784 26,546
Amortization of organization
expenses 6,794 6,794 6,794 6,794
Directors' fees 4,957 1,664 5,289 13,521
Insurance 4,742 1,373 4,139 10,110
Pricing fees 247 2,963 5,068 1,773
Other expenses 3,555 1,535 5,391 5,665
--------- --------- --------- ---------
Total expenses before waiver 509,109 221,567 692,782 2,047,318
Less: Waiver of expenses (38,677) (27,105) (89,957) (142,786)
--------- --------- --------- ---------
Net Expenses 470,432 194,462 602,825 1,904,532
--------- --------- --------- ---------
NET INVESTMENT INCOME 4,440,340 1,162,499 4,297,993 4,439,709
--------- --------- --------- ---------
REALIZED AND UNREALIZED
GAIN (LOSS):
Net realized gain (loss) on
investments -- (109,194) (75,074) 14,388,259
Change in unrealized
appreciation (depreciation)
on investments -- 527,854 2,450,307 18,465,419
--------- --------- --------- ---------
Net Gain on Investments -- 418,660 2,375,233 32,853,678
--------- --------- --------- ---------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $4,440,340 $1,581,159 $6,673,226 $37,293,387
========= ========= ========= ==========
<F40>Commencement of operations
See notes to financial statements.
FIRST OMAHA FUNDS - ANNUAL REPORT
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD FROM APRIL 10, 1995<F41> TO MARCH 31, 1996 -
SHORT/
INTERMEDIATE
U.S. GOVERNMENT FIXED
OBLIGATIONS INCOME FIXED INCOME EQUITY
FUND FUND FUND FUND
--------------- ------------ ------------ ------
OPERATIONS:
Net investment income $ 4,440,340 $ 1,162,499 $ 4,297,993 $ 4,439,709
Net realized gain (loss)
on investments -- (109,194) (75,074) 14,388,259
Change in unrealized
appreciation
(depreciation) on
investments -- 527,854 2,450,307 18,465,419
--------- --------- --------- ---------
Net increase in net assets
resulting from
operations 4,440,340 1,581,159 6,673,226 37,293,387
--------- --------- --------- ---------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income (4,440,340) (1,116,807) (4,110,469) (4,409,736)
Net capital gains -- -- -- (7,246,838)
--------- --------- --------- ---------
Total Distributions (4,440,340) (1,116,807) (4,110,469) (11,656,574)
--------- --------- --------- ---------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sale
of shares 388,060,722 5,409,677 15,431,739 48,686,735
Net assets resulting from
conversion 76,094,844 22,125,516 66,377,812 161,426,537
Proceeds from reinvestment
of dividends 1,141,735 1,111,654 4,090,974 11,645,208
Redemption of shares (377,600,568) (7,056,387) (12,122,363) (23,306,480)
----------- --------- ---------- ----------
Net increase from share
transactions 87,696,733 21,590,460 73,778,162 198,452,000
---------- ---------- ---------- -----------
TOTAL INCREASE IN
NET ASSETS 87,696,733 22,054,812 76,340,919 224,088,813
NET ASSETS:
Beginning of period 18,000 1,000 1,000 80,000
---------- ---------- ---------- -----------
End of period $ 87,714,733 $22,055,812 $76,341,919 $224,168,813
=========== ========== ========== ===========
Undistributed net investment
income, end of
period $ 1,970 $ 23,078 $ 84,938 $ 31,943
========== ========== ========== ===========
<F41>Commencement of operations
See notes to financial statements.
[FIRST OMAHA FAMILY OF FUNDS LOGO]
FINANCIAL HIGHLIGHTS<F42>
U.S. GOVERNMENT OBLIGATIONS FUND
----------------------------------------------------
APRIL 10, JULY 1, DEC. 4,
1995<F43> 1994 YEAR YEAR 1991
TO TO ENDED ENDED TO
MARCH 31, APRIL 9, JUNE 30, JUNE 30, JUNE 30,
1996 1995 1994 1993 1992
-------- ------- ------- ------- -------
Net Asset Value, Beginning
of Period $1.00 $1.00 $1.00 $1.00 $1.00
Income From Investment
Operations:
Net investment income 0.05 0.04 0.03 0.03 0.02
Net realized and
unrealized gains on
investments -- -- -- -- --
----- ----- ----- ----- -----
Total from investment
operations 0.05 0.04 0.03 0.03 0.02
----- ----- ----- ----- -----
Less Distributions to
Shareholders:
Dividends from net
investment income 0.05 0.04 0.03 0.03 0.02
Distributions from
capital gains -- -- -- -- --
----- ----- ----- ----- -----
Total distributions 0.05 0.04 0.03 0.03 0.02
----- ----- ----- ----- -----
Net Asset Value, End
of Period $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== =====
Total return<F44> 5.14% 3.51% 2.74% 2.72% 2.15%
Supplemental Data and Ratios:
Net assets, end of period
(000s) $87,715 $76,105 $89,195 $91,785 $81,152
Ratio of net expenses to
average net
assets<F45> 0.54% 0.63% 0.60% 0.61% 0.46%
Ratio of net investment
income to average net
assets<F45> 5.12% 4.46% 2.68% 2.67% 3.65%
Ratio of net expenses to
average net
assets<F45><F46> 0.59% 1.23% 1.13% 0.96% 0.98%
Ratio of net investment
income to average net
assets<F45><F46> 5.07% 3.86% 2.15% 2.32% 3.13%
Portfolio turnover
rate<F44> -- -- -- -- --
<F42>Performance data for each Fund prior to April 10, 1995 relates to a
corresponding predecessor First Omaha Fund, the assets of which were
acquired on that date.
<F43>Commencement of operations
<F44>Not annualized
<F45>Annualized
<F46>During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
See notes to financial statements.
FIRST OMAHA FUNDS - ANNUAL REPORT
SHORT/INTERMEDIATE FIXED INCOME FUND
-----------------------------------------
APRIL 10, JULY 1, DEC. 13,
1995<F48> 1994 YEAR 1992
TO TO ENDED TO
MARCH 31, APRIL 9, JUNE 30, JUNE 30,
1996 1995 1994 1993
-------- ------- ------- -------
Net Asset Value, Beginning of Period $9.66 $9.62 $10.18 $10.00
Income From Investment Operations:
Net investment income 0.52 0.42 0.55 0.33
Net realized and unrealized gains
on investments 0.17 0.05 (0.56) 0.16
----- ----- ----- -----
Total from investment operations 0.69 0.47 (0.01) 0.49
----- ----- ----- -----
Less Distributions to Shareholders:
Dividends from net investment income 0.50 0.43 0.55 0.31
Distributions from capital gains -- -- -- --
----- ----- ----- -----
Total distributions 0.50 0.43 0.55 0.31
----- ----- ----- -----
Net Asset Value, End of Period $9.85 $9.66 $ 9.62 $10.18
===== ===== ===== =====
Total return<F49> 7.24% 5.05% (0.22)% 5.00%
Supplemental Data and Ratios:
Net assets, end of period (000s) $22,056 $22,130 $21,938 $24,581
Ratio of net expenses to average
net assets<F50> 0.89% 0.88% 0.83% 0.79%
Ratio of net investment income to
average net assets<F50> 5.23% 5.63% 5.44% 5.91%
Ratio of net expenses to average
net assets<F50><F51> 1.02% 1.51% 1.38% 1.19%
Ratio of net investment income to
average net assets<F50><F51> 5.10% 5.00% 4.89% 5.51%
Portfolio turnover rate<F49> 41.45% 9.93% 20.52% 15.58%
<F47>Performance data for each Fund prior to April 10, 1995 relates to a
corresponding predecessor First Omaha Fund, the assets of which were
acquired on that date.
<F48>Commencement of operations
<F49>Not annualized
<F50>Annualized
<F51>During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
See notes to financial statements.
[FIRST OF OMAHA FAMILY OF FUNDS LOGO]
FINANCIAL HIGHLIGHTS (CONT'D.)<F52>
FIXED INCOME FUND
-------------------------------------------
APRIL 10, JULY 1, DEC. 13,
1995<F53> 1994 YEAR 1992
TO TO ENDED TO
MARCH 31, APRIL 9, JUNE 30, JUNE 30,
1996 1995 1994 1993
-------- ------- ------- -------
Net Asset Value, Beginning of Period $9.63 $9.58 $10.49 $10.00
Income From Investment Operations:
Net investment income 0.59 0.51 0.67 0.39
Net realized and unrealized gains
on investments 0.35 0.07 (0.88) 0.47
----- ----- ----- -----
Total from investment operations 0.94 0.58 (0.21) 0.86
----- ----- ----- -----
Less Distributions to Shareholders:
Dividends from net investment income 0.57 0.53 0.67 0.37
Distributions from capital gains -- -- 0.03 --
----- ----- ----- -----
Total distributions 0.57 0.53 0.70 0.37
----- ----- ----- -----
Net Asset Value, End of Period $10.00 $9.63 $9.58 $10.49
===== ===== ===== =====
Total return<F54> 9.79% 6.35% (2.29)% 8.72%
Supplemental Data and Ratios:
Net assets, end of period (000s) $76,342 $66,488 $61,714 $59,178
Ratio of net expenses to average
net assets<F55> 0.83% 0.87% 0.86% 0.79%
Ratio of net investment income to
average net assets<F55> 5.80% 6.98% 6.52% 6.89%
Ratio of net expenses to average
net assets<F55><F56> 0.96% 1.51% 1.41% 1.19%
Ratio of net investment income to
average net assets<F55><F56> 5.67% 6.34% 5.97% 6.49%
Portfolio turnover rate<F54> 37.35% 7.04% 13.09% 2.62%
<F52>Performance data for each Fund prior to April 10, 1995 relates to a
corresponding predecessor First Omaha Fund, the assets of which were
acquired on that date.
<F53>Commencement of operations
<F54>Not annualized
<F55>Annualized
<F56>During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
See notes to financial statements.
FIRST OMAHA FUNDS - ANNUAL REPORT
EQUITY FUND
-------------------------------------------
APRIL 10, JULY 1, DEC. 13,
1995<F58> 1994 YEAR 1992
TO TO ENDED TO
MARCH 31, APRIL 9, JUNE 30, JUNE 30,
1996 1995 1994 1993
-------- ------- ------- -------
Net Asset Value, Beginning of Period $11.39 $10.48 $10.55 $10.00
Income From Investment Operations:
Net investment income 0.28 0.21 0.20 0.11
Net realized and unrealized gains
on investments 2.13 1.48 0.15 0.54
----- ----- ----- -----
Total from investment operations 2.41 1.69 0.35 0.65
----- ----- ----- -----
Less Distributions to Shareholders:
Dividends from net investment income 0.28 0.22 0.20 0.10
Distributions from capital gains 0.45 0.56 0.22 --
----- ----- ----- -----
Total distributions 0.73 0.78 0.42 0.10
----- ----- ----- -----
Net Asset Value, End of Period $13.07 $11.39 $10.48 $10.55
===== ===== ===== =====
Total return<F59> 21.52% 16.48% 3.34% 6.55%
Supplemental Data and Ratios:
Net assets, end of period (000s) $224,169 $161,323 $129,381 $111,059
Ratio of net expenses to average
net assets<F60> 0.99% 1.03% 1.04% 1.01%
Ratio of net investment income to
average net assets<F60> 2.32% 2.50% 1.93% 1.90%
Ratio of net expenses to average
net assets<F60><F61> 1.07% 1.62% 1.54% 1.32%
Ratio of net investment income to
average net assets<F60><F61> 2.24% 1.91% 1.43% 1.59%
Portfolio turnover rate<F59> 26.60% 14.36% 15.86% 4.94%
<F57>Performance data for each Fund prior to April 10, 1995 relates to a
corresponding predecessor First Omaha Fund, the assets of which were
acquired on that date.
<F58>Commencement of operations
<F59>Not annualized
<F60>Annualized
<F61>During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
See notes to financial statements.
FIRST OMAHA FUNDS - ANNUAL REPORT
SCHEDULE OF PORTFOLIO INVESTMENTS
U.S. GOVERNMENT OBLIGATIONS FUND
MARCH 31, 1996 -
PRINCIPAL
AMOUNT VALUE
- --------- ---------
U.S. TREASURY BILLS 73.52%
$15,000,000 4/18/96 $14,963,314
5,000,000 4/25/96 4,982,303
10,000,000 5/2/96 9,957,120
5,000,000 5/16/96 4,970,128
10,000,000 5/30/96 9,916,177
10,000,000 6/20/96 9,885,670
5,000,000 8/8/96 4,914,899
5,000,000 8/29/96 4,900,003
----------
Total U.S. Treasury Bills (cost $64,489,614) 64,489,614
----------
U.S. TREASURY NOTE 5.66%
5,000,000 8.25%, 2/15/97 4,969,910
----------
Total U.S. Treasury Notes (cost $4,969,910) 4,969,910
----------
REPURCHASE AGREEMENTS 21.19%
10,582,550 G.X. Clarke & Co., 5.00%, dated 3/29/96,
repurchase price $10,586,959, maturing 4/1/96
(collateralized by U.S. Treasury Bills, 7/25/96) 10,582,550
8,000,000 HSBC Securities, Inc., 5.25%, dated 3/29/96,
repurchase price $8,003,500, maturing 4/1/96
(collateralized by U.S. Treasury
Notes, 6.875%, 3/31/97) 8,000,000
----------
Total Repurchase Agreements (cost $18,582,550) 18,582,550
----------
Total Investments 100.37% (cost $88,042,074) $88,042,074
Liabilities, less Other Assets (0.37)% (327,341)
----------
NET ASSETS 100.00% $87,714,733
==========
See notes to financial statements.
[FIRST OMAHA FAMILY OF FUNDS LOGO]
SCHEDULE OF PORTFOLIO INVESTMENTS
SHORT/INTERMEDIATE FIXED INCOME FUND
MARCH 31, 1996 -
PRINCIPAL
AMOUNT VALUE
- -------- -----
CORPORATE BONDS 73.82%
CONSUMER GOODS & SERVICES 2.77%
$ 605,000 World Book Finance, Inc.,
8.125%, 9/1/96 $ 611,431
----------
ELECTRICAL EQUIPMENT 3.52%
775,000 General Electric Co.,
7.875%, 5/1/96 775,969
----------
FINANCIAL SERVICES 6.92%
750,000 General Electric Capital Corp.,
6.875%, 4/15/00 764,063
750,000 John Deere Capital Corp.,
7.20%, 5/15/97 762,667
----------
1,526,730
----------
FOOD PRODUCTS 4.57%
1,000,000 Anheuser-Busch Cos., Inc.,
6.90%, 10/1/02 1,008,750
----------
PHARMACEUTICALS 13.75%
1,000,000 Eli Lilly & Co.,
8.125%, 12/1/01 1,080,000
1,000,000 SmithKline Beecham Corp.,
6.625%, 10/1/05 973,750
1,000,000 Upjohn Co.,
5.875%, 4/15/00 978,750
----------
3,032,500
----------
RETAIL 4.49%
1,000,000 Wal-Mart Stores, Inc.,
6.50%, 6/1/03 990,000
----------
UTILITIES - ELECTRIC SERVICES 16.70%
1,000,000 Alabama Power Co.,
5.50%, 2/1/98 987,500
1,000,000 Florida Power & Light Co.,
5.50%, 7/1/99 977,500
750,000 Gulf Power Co.,
5.875%, 8/1/97 748,125
$1,000,000 Monongahela Power Co.,
5.625%, 4/1/00 $ 971,250
----------
3,684,375
----------
UTILITIES - ELECTRIC & OTHER SERVICES COMBINED 8.71%
1,000,000 Northern States Power Co.,
5.75%, 10/1/03 945,000
1,000,000 Wisconsin Electric Power Co.,
5.125%, 9/15/98 975,000
----------
1,920,000
----------
PRINCIPAL
AMOUNT VALUE
- -------- -----
UTILITIES - NATURAL GAS 3.38%
750,000 Northern Illinois Gas Co.,
6.25%, 2/1/99 746,250
----------
UTILITIES - TELECOMMUNICATIONS 9.01%
1,000,000 Chesapeake & Potomac
Telephone Co. of Maryland,
5.875%, 9/15/99 987,500
1,000,000 GTE California, Inc.,
6.25%, 1/15/98 998,750
----------
1,986,250
----------
Total Corporate Bonds
(cost $16,302,214) 16,282,255
----------
FIRST OMAHA FUNDS - ANNUAL REPORT
PRINCIPAL
AMOUNT VALUE
- -------- -----
U.S. TREASURY BILLS 2.26%
$ 500,000 4/18/96 $ 498,836
----------
Total U.S. Treasury Bills
(cost $498,836) 498,836
----------
U.S. TREASURY NOTES 7.76%
1,000,000 5.875%, 2/15/04 969,600
750,000 5.125%, 3/31/98 740,842
Total U.S. Treasury Notes
(cost $1,718,636) 1,710,442
----------
U.S. TREASURY STRIPS 13.75%
1,085,000 2/15/99 918,366
1,520,000 8/15/00 1,173,774
1,345,000 2/15/02 939,724
----------
Total U.S. Treasury Strips
(cost $3,092,458) 3,031,864
----------
NUMBER
OF SHARES
- ---------
INVESTMENT COMPANIES 0.69%
152,651 Goldman Sachs ILA Treasury
Obligations Portfolio 152,651
----------
Total Investment Companies
(cost $152,651) 152,651
----------
Total Investments 98.28%
(cost $21,764,795) 21,676,048
Other Assets,
less Liabilities 1.72% 379,764
----------
NET ASSETS 100.00% $22,055,812
==========
See notes to financial statements.
[FIRST OMAHA FAMILY OF FUNDS LOGO]
SCHEDULE OF PORTFOLIO INVESTMENTS
FIXED INCOME FUND
MARCH 31, 1996 -
PRINCIPAL
AMOUNT VALUE
- --------- -----
CORPORATE BONDS 66.26%
COMMUNICATIONS EQUIPMENT 3.20%
$2,500,000 Motorola, Inc.,
6.50%, 3/1/08 $2,443,750
----------
ELECTRICAL EQUIPMENT 3.10%
2,500,000 General Electric Co.,
5.50%, 11/1/01 2,368,750
----------
FOOD PRODUCTS 3.24%
2,500,000 Anheuser-Busch Cos., Inc.,
7.25%, 9/15/15 2,471,875
----------
FOREST PRODUCTS 6.34%
2,500,000 Kimberly-Clark Corp.,
6.875%, 2/15/14 2,350,000
2,500,000 Weyerhaeuser Co.,
7.25%, 7/1/13 2,490,625
----------
4,840,625
----------
GOVERNMENTS - FOREIGN 2.61%
2,000,000 Ontario Hydro,
5.80%, 3/31/98 1,992,500
----------
INDUSTRIAL GOODS & SERVICES 5.12%
2,000,000 Air Products & Chemicals, Inc.,
6.25%, 6/15/03 1,935,000
2,000,000 Monsanto Co.,
6.00%, 7/1/00 1,970,000
----------
3,905,000
----------
OIL & GAS EXPLORATION &
PRODUCTION 3.99%
2,000,000 Amoco Canada Petroleum
Co. Ltd., 6.75%, 2/15/05 2,005,000
1,000,000 BP America, Inc.,
8.875%, 12/1/97 1,042,500
----------
3,047,500
----------
PHARMACEUTICALS 2.57%
2,000,000 Eli Lilly & Co.,
6.25%, 3/15/03 1,962,500
----------
RAILROADS 0.69%
$ 500,000 Southern Railway Co.,
7.75%, 8/1/99 $ 524,375
----------
PRINCIPAL
AMOUNT VALUE
- -------- -----
RETAIL 5.50%
2,000,000 J.C. Penney Co., Inc.,
6.00%, 5/1/06 1,867,500
2,500,000 Wal-Mart Stores, Inc.,
5.875%, 10/15/05 2,334,375
----------
4,201,875
----------
SOAPS & CLEANING AGENTS 1.99%
1,500,000 Colgate-Palmolive Co.,
6.85%, 11/24/99 1,520,625
----------
UTILITIES - ELECTRIC SERVICES 2.58%
2,000,000 Union Electric Co.,
6.75%, 5/1/08 1,972,500
----------
UTILITIES - ELECTRIC & OTHER SERVICES
COMBINED 6.80%
2,500,000 Citizens Utilities Co.,
7.60%, 6/1/06 2,643,750
1,500,000 Iowa Southern Utilities Co.,
7.375%, 2/1/03 1,524,375
1,000,000 Louisville Gas & Electric Co.,
7.50%, 7/1/02 1,018,750
----------
5,186,875
----------
UTILITIES - NATURAL GAS 9.73%
1,000,000 Consolidated Natural Gas Co.,
9.375%, 2/1/97 1,027,500
2,500,000 Indiana Gas Co.,
6.625%, 12/1/97 2,518,750
2,500,000 Laclede Gas Co.,
6.50%, 11/15/10 2,390,625
1,500,000 Northern Illinois Gas Co.,
6.25%, 2/1/99 1,492,500
----------
7,429,375
----------
FIRST OMAHA FUNDS - ANNUAL REPORT
PRINCIPAL
AMOUNT VALUE
- --------- -----
UTILITIES - TELECOMMUNICATIONS 8.80%
$ 2,000,000 AT&T CORP.,
7.75%, 3/1/07 $ 2,140,000
2,500,000 Chesapeake & Potomac
Telephone Co. of Maryland,
5.25%, 5/1/05 2,262,500
1,000,000 Southern Bell Telephone &
Telegraph Co., 4.75%,
9/1/00 922,500
1,500,000 Southern Bell Telephone &
Telegraph Co., 6.00%,
10/1/04 1,395,000
----------
6,720,000
----------
Total Corporate Bonds
(cost $50,843,417) 50,588,125
----------
U.S. GOVERNMENT AGENCIES 2.79%
2,000,000 Federal National Mortgage
Association, 8.625%,
11/10/04 2,129,240
----------
Total U.S. Government Agencies
(cost $1,999,690) 2,129,240
----------
U.S. TREASURY BILLS 1.96%
1,500,000 4/18/96 1,496,327
----------
Total U.S. Treasury Bills
(cost $1,496,327) 1,496,327
----------
U.S. TREASURY NOTES 2.77%
1,000,000 8.125%, 2/15/98 1,040,580
1,000,000 8.875%, 2/15/99 1,076,340
----------
Total U.S. Treasury Notes
(cost $2,207,500) 2,116,920
----------
U.S. TREASURY STRIPS 16.83%
$ 1,785,000 8/15/01 $ 1,290,519
2,122,000 5/15/02 1,455,819
4,983,000 2/15/05 2,817,686
6,513,000 2/15/07 3,191,370
12,114,000 2/15/12 4,089,564
----------
Total U.S. Treasury Strips
(cost $12,734,536) 12,844,958
----------
U.S. TREASURY BONDS 4.43%
1,000,000 7.875%, 11/15/07 1,082,350
1,000,000 8.75%, 11/15/08 1,134,740
1,000,000 9.125%, 5/15/09 1,162,870
----------
Total U.S. Treasury Bonds
(cost $3,320,625) 3,379,960
----------
NUMBER
OF SHARES
- ---------
INVESTMENT COMPANIES 3.51%
2,678,860 Goldman Sachs ILA Treasury
Obligations Portfolio 2,678,860
----------
Total Investment Companies
(cost $2,678,860) 2,678,860
----------
Total Investments 98.55%
(cost $75,280,955) 75,234,390
----------
Other Assets,
less Liabilities 1.45% 1,107,529
----------
NET ASSETS 100.00% $76,341,919
==========
See notes to financial statements.
[FIRST OMAHA FAMILY OF FUNDS LOGO]
SCHEDULE OF PORTFOLIO INVESTMENTS
EQUITY FUND
MARCH 31, 1996 -
NUMBER
OF SHARES VALUE
- --------- -----
COMMON STOCKS 81.67%
COMMUNICATIONS EQUIPMENT 2.93%
124,100 Motorola, Inc. $ 6,577,300
----------
COMPUTERS & PERIPHERALS 2.39%
48,200 International Business
Machines Corp. 5,356,225
----------
COSMETICS 4.32%
35,400 International Flavors &
Fragrances, Inc. 1,694,775
170,700 Tambrands, Inc. 7,980,225
----------
9,675,000
----------
ELECTRICAL EQUIPMENT 8.10%
55,600 Emerson Electric Co. 4,489,700
58,900 General Electric Co. 4,586,838
164,200 Honeywell, Inc. 9,072,050
----------
18,148,588
----------
ENVIRONMENTAL CONTROL 0.90%
165,600 Calgon Carbon Corp. 2,007,900
----------
FOOD PROCESSING & PACKAGING 2.81%
90,700 CPC International, Inc. 6,292,313
----------
HEAVY MACHINERY 3.28%
180,200 Ingersoll-Rand Co. 7,343,150
----------
INSURANCE 10.23%
230,300 American Financial Group, Inc. 6,966,575
141,800 American General Corp. 4,892,100
60,900 Marsh & McLennan
Cos., Inc. 5,656,087
161,600 SAFECO Corp. 5,413,600
----------
22,928,362
----------
MEDICAL SUPPLIES 2.15%
59,000 Becton, Dickinson & Co. 4,830,625
----------
MOTOR VEHICLE PARTS & ACCESSORIES 1.53%
158,200 CLARCOR, Inc. 3,440,850
----------
OIL 8.34%
70,000 Exxon Corp. $ 5,713,750
80,100 Texaco, Inc. 6,888,600
182,600 Unocal Corp. 6,094,275
----------
18,696,625
----------
NUMBER
OF SHARES VALUE
- --------- -----
OILFIELD EQUIPMENT & SERVICES 2.53%
71,600 Schlumberger, Ltd. 5,665,350
----------
PACKAGING & CONTAINERS 2.70%
222,400 Sonoco Products Co. 6,060,400
----------
PHARMACEUTICALS 3.33%
115,000 Eli Lilly & Co. 7,475,000
----------
PHOTOGRAPHY 2.77%
87,600 Eastman Kodak Co. 6,219,600
----------
PUBLISHING 2.84%
184,900 R.R. Donnelley & Sons Co. 6,379,050
----------
RETAIL 7.23%
150,000 J.C. Penney Co., Inc. 7,462,500
283,000 Rite Aid Corp. 8,737,625
----------
16,200,125
----------
SOAPS & CLEANING AGENTS 2.37%
68,100 Colgate-Palmolive Co. 5,303,287
----------
TEXTILE MANUFACTURING 2.57%
371,300 Kellwood Co. 5,755,150
----------
TOBACCO 3.04%
270,900 Universal Corp. 6,806,363
----------
UTILITIES - ELECTRIC SERVICES 5.31%
244,200 DPL, Inc. 5,830,275
147,000 Texas Utilities Co. 6,082,125
----------
11,912,400
----------
Total Common Stocks
(cost $148,319,724) 183,073,663
----------
FIRST OMAHA FUNDS - ANNUAL REPORT
PRINCIPAL
AMOUNT VALUE
- --------- -----
U.S. TREASURY BILLS 14.90%
$5,000,000 6/6/96 $ 4,951,795
5,000,000 7/5/96 4,931,807
6,000,000 7/25/96 5,900,683
5,000,000 8/1/96 4,912,326
5,000,000 8/15/96 4,902,507
8,000,000 9/19/96 7,805,120
----------
Total U.S. Treasury Bills
(cost $33,436,838) 33,404,238
----------
NUMBER
OF SHARES
- ---------
INVESTMENT COMPANIES 3.34%
7,478,333 Goldman Sachs ILA Treasury
Obligations Portfolio 7,478,333
----------
Total Investment Companies
(cost $7,478,333) 7,478,333
----------
Total Investments 99.91%
(cost $189,234,895) 223,956,234
Other Assets,
less Liabilities 0.09% 212,579
----------
NET ASSETS 100.00% $224,168,813
===========
See notes to financial statements.
[FIRST OMAHA FAMILY OF FUNDS LOGO]
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
(1) ORGANIZATION
First Omaha Funds, Inc. (the "Company") was organized in October, 1994 as a
Nebraska corporation and is registered under the Investment Company Act of 1940,
as amended (the "1940 Act"), as an open-end management investment company
issuing its shares in series, each series representing a distinct portfolio with
its own investment objectives and policies. At March 31, 1996, the only series
presently authorized are the U.S. Government Obligations Fund, the
Short/Intermediate Fixed Income Fund, the Fixed Income Fund, the Equity Fund
(the "Funds"), and the Small Cap Value Fund. These financial statements only
present the financial position of the Funds.
On April 9, 1995, each of the Short/Intermediate Fixed Income Fund, the Fixed
Income Fund and the Equity Fund completed an exchange of all their outstanding
shares as follows:
PRE- POST-
EXCHANGE EXCHANGE
-------- --------
Short/Intermediate Fixed Income Fund
Shares Outstanding 100 104
NAV per share $10.00 $9.66
Fixed Income Fund
Shares Outstanding 100 104
NAV per share $10.00 $9.63
Equity Fund
Shares Outstanding 8,000 7,024
NAV per share $10.00 $11.39
On April 10, 1995, each series of the Company acquired all of the net assets of
the respective series of The Sessions Group, pursuant to a plan of
reorganization approved by each series of The Sessions Group's shareholders on
April 5, 1995. The acquisition was accomplished by a tax-free exchange of shares
on a 1 for 1 basis, as follows:
SHORT/
INTERMEDIATE
U.S. GOVERNMENT FIXED
OBLIGATIONS INCOME FIXED INCOME EQUITY
FUND FUND FUND FUND
--------------- ------------ ------------ ------
Shares exchanged 76,107,938 2,290,324 6,894,181 14,178,204
Value of shares exchanged $76,094,844 $22,125,516 $66,377,812 $161,426,537
Each series of The Sessions Group's net assets at that date was combined with
those of each series of the Company. The aggregate net assets of each series
immediately before and after the acquisition were as follows:
BEFORE AFTER
------ -----
The Sessions Group First Omaha U.S. Government
Obligations Fund $76,094,844 --
First Omaha Funds, Inc. - First Omaha U.S. Government
Obligations Fund 18,000 $76,112,844
The Sessions Group First Omaha Short/Intermediate Fixed
Income Fund 22,125,516 --
First Omaha Funds, Inc. - First Omaha Short/Intermediate
Fixed Income Fund 1,000 22,126,516
The Sessions Group First Omaha Fixed Income Fund 66,377,812 --
First Omaha Funds, Inc. - First Omaha Fixed Income Fund 1,000 66,378,812
The Sessions Group First Omaha Equity Fund 161,426,537 --
First Omaha Funds, Inc. - First Omaha Equity Fund 80,000 161,506,537
Each series of The Sessions Group's net assets included the following:
SHORT/
INTERMEDIATE
U.S. GOVERNMENT FIXED
OBLIGATIONS INCOME FIXED INCOME EQUITY
FUND FUND FUND FUND
--------------- ------------ ------------ ------
Undistributed net realized
(loss) $(15,950) $(178,976) $ (187,903) --
Net unrealized appreciation
(depreciation) on
investments -- (616,601) (2,496,872) $16,255,920
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their financial statements. These
policies are in conformity with generally accepted accounting principles.
(a) Investment Valuation
Securities traded over-the-counter or on a national securities
exchange are valued on the basis of market value in their principal
and most representative market. Securities where the principal and
most representative market is a national securities exchange are
valued at the latest reported sale price on such exchange.
Exchange-traded securities for which there were no transactions are
valued at the latest reported bid price.
Securities traded on only over-the-counter markets are valued at the
latest bid price. Debt securities (other than short-term instruments)
are valued at prices furnished by a pricing service, subject to review
by the Funds' investment adviser, First National Bank of Omaha (the
"Adviser"), and determination of the appropriate price whenever a
furnished price is significantly different from the previous day's
furnished price. Short-term obligations (maturing within 60 days) are
valued on an amortized cost basis. Securities for which quotations are
not readily available and other assets are valued at fair value as
determined in good faith by the Adviser under the supervision of the
Board of Directors.
Pursuant to Rule 2a-7 of the 1940 Act, investments of the U.S.
Government Obligations Fund are valued at either amortized cost, which
approximates market value, or at original cost, which combined with
accrued interest, approximates market value. Under the amortized cost
valuation method, discount or premium is amortized on a constant basis
to the maturity of the security. In addition, the Fund may not (i)
purchase any instrument with a remaining maturity greater than 13
months unless such investment is subject to a demand feature, or (ii)
maintain a dollar-weighted average portfolio maturity which exceeds 90
days.
(b) Repurchase Agreements
The Funds may acquire repurchase agreements from financial
institutions such as banks and broker/dealers which the Adviser deems
creditworthy under guidelines approved by the Board of Directors,
subject to the seller's agreement to repurchase such securities at a
mutually agreed-upon date and price. The repurchase price generally
equals the price paid by each Fund plus interest negotiated on the
basis of current short-term rates, which may be more or less than the
rate on the underlying portfolio securities. The seller, under a
repurchase agreement, is required to maintain the value of collateral
held pursuant to the agreement at not less than the repurchase price
(including accrued interest). Securities subject to repurchase
agreements are held by the Funds' custodian or another qualified
custodian or in the Federal Reserve/Treasury book-entry system.
Repurchase agreements are considered to be loans by the Funds under
the 1940 Act.
(c) Organization Costs
Costs incurred by the Funds in connection with their organization,
registration and the initial public offering of shares have been
deferred and will be amortized on a straight-line basis over a period
of five years from the date upon which the Funds commence their
investment activities. Organization costs have been allocated equally
among the respective Funds or by specific identification, as
applicable. If any of the original shares of a Fund are redeemed by
any holder thereof prior to the end of the amortization period, the
redemption proceeds will be reduced by the pro rata share of the
unamortized expenses as of the date of redemption. The pro rata share
by which the proceeds are reduced will be derived by dividing the
number of original shares of the Fund being redeemed by the total
number of original shares outstanding at the time of redemption.
(d) Expenses
The Funds are charged for those expenses that are directly
attributable to each portfolio, such as advisory and custodian fees.
Expenses that are not directly attributable to a portfolio are
typically allocated among the portfolios in proportion to their
respective net assets.
(e) Distributions to Shareholders
The U.S. Government Obligations Fund declares dividends of net
investment income daily. The remaining Funds declare dividends
monthly; all of the Funds pay dividends of net investment income
monthly. Distributions of net realized capital gains, if any, will be
declared at least annually. Distributions to shareholders are recorded
on the ex-dividend date.
The character of distributions made during the year from net
investment income or net realized gains may differ from the
characterization for federal income tax purposes due to differences in
the recognition of income, expense or gain items for financial
statement and tax purposes. Where appropriate, reclassifications
between net asset accounts are made for such differences that are
permanent in nature. Accordingly, at March 31, 1996, reclassifications
were recorded to increase undistributed net investment income by
$1,970 for each Fund; increase (decrease) accumulated net realized
loss on investments by $88 and $(193) for the U.S. Government
Obligations and Short/Intermediate Fixed Income Funds, respectively;
and decrease paid-in-capital in excess of par by $1,882, $2,163,
$1,970 and $1,970 for the U.S. Government Obligations,
Short/Intermediate Fixed Income, Fixed Income and Equity Funds,
respectively.
For the year ended March 31, 1996, 0%, 0%, 0% and 100% of dividends
paid from net investment income, excluding short-term capital gains,
qualifies for the dividends received deduction available to corporate
shareholders of the U.S. Government Obligations, Short/Intermediate
Fixed Income, Fixed Income and Equity Funds, respectively.
(f) Federal Income Taxes
Each Fund intends to comply with the requirements of the Internal
Revenue Code necessary to qualify as a regulated investment company
and to make the requisite distributions of the income to its
shareholders which will be sufficient to relieve it from all or
substantially all federal income taxes.
As of March 31, 1996, each of the U.S. Government Obligations,
Short/Intermediate Fixed Income and Fixed Income Funds had a federal
income tax capital loss carryforward of $16,038, $263,393 and
$158,421, respectively. The entire federal income tax loss
carryforward for the U.S. Government Obligations and Fixed Income
Funds expire in 2003. The $263,393 federal income tax loss
carryforward for the Short/Intermediate Fixed Income Fund expires as
follows: $31,092 in 2002, $147,691 in 2003 and $84,610 in 2004. The
Fixed Income Fund utilized $29,482 of previous federal income tax loss
carryforwards.
(g) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
changes in net assets during the reporting period. Actual results
could differ from those estimates.
(h) Other
Investment transactions are accounted for on the trade date plus one.
The Funds determine the gain or loss realized from investment
transactions by comparing the original cost of the security lot sold
with the net sale proceeds. Dividend income is recognized on the
ex-dividend date and interest income is recognized on an accrual
basis.
(3) INVESTMENT ADVISORY AND OTHER AGREEMENTS
The Funds have an agreement with the Adviser to furnish investment advisory
services to the Funds. Under the terms of this agreement, the Funds will pay the
Adviser a monthly fee at the annual rate of the following percentages on average
daily net assets: 0.25% for the U.S. Government Obligations Fund, 0.50% for the
Short/Intermediate Fixed Income Fund, 0.60% for the Fixed Income Fund, and 0.75%
for the Equity Fund. Advisory fees of $10,869 and $36,073 were waived in the
Short/Intermediate Fixed Income Fund and the Fixed Income Fund, respectively.
First National Bank of Omaha also serves as custodian for each of the Funds. The
custodian receives compensation from each of the Funds for such services in an
amount equal to a fee, computed daily and paid monthly at the annual rate of
0.03% of each Fund's average daily net assets. Custody fees of $6,522, $21,644
and $57,355 were waived in the Short/Intermediate Fixed Income Fund, the Fixed
Income Fund and the Equity Fund, respectively.
Sunstone Financial Group, Inc. (the "Administrator" or the "Distributor") acts
as Administrator and Distributor for each of the Funds. As compensation for its
administrative services and the assumption of certain administrative expenses,
the Administrator is entitled to a fee, computed daily and payable monthly, at
an annual rate of 0.20% of each Fund's average net assets, subject to a minimum
fee of $300,000 in the aggregate for all Funds. Administrative fees of $38,677,
$9,714, $32,240 and $85,431 were waived in the U.S. Government Obligations Fund,
the Short/Intermediate Fixed Income Fund, the Fixed Income Fund and the Equity
Fund, respectively.
The Administrator may periodically volunteer to reduce all or a portion of its
administrative fee with respect to one or more Funds. These waivers may be
terminated at any time at the Administrator's discretion. The Administrator may
not seek reimbursement of such voluntarily reduced fees at a later date. The
reduction of such fee will cause the yield of that Fund to be higher than it
would be in the absence of such reduction. The Distributor receives no
compensation from the Funds under its Distribution Agreement with the Company,
but may receive compensation under the Distribution and Service Plan.
(4) DISTRIBUTION AND SERVICE PLAN
Pursuant to Rule 12b-1 under the 1940 Act, the Company has adopted a
Distribution and Service Plan (the "Plan"), under which each Fund is authorized
to pay a periodic amount representing distribution expenses calculated at an
annual rate not to exceed 0.25% of the average daily net assets of that Fund.
Such amount may be used to pay banks, broker/dealers and other institutions
which may include the Adviser, its correspondent and affiliated banks and the
Administrator (each a "Participating Organization") for distribution and/or
shareholder service assistance pursuant to an agreement between the Distributor
and the Participating Organization. As of the date of these financial
statements, there are no 12b-1 Agreements with any Participating Organizations.
(5) ADMINISTRATIVE SERVICES PLAN
The Company has adopted an Administrative Services Plan pursuant to which each
Fund is authorized to pay compensation to banks and other financial
institutions, which may include the Adviser, its correspondent and affiliated
banks and the Administrator (each a "Service Organization"). Such Service
Organizations agree to provide certain ministerial, record keeping and/or
administrative support services for their customers or account holders who are
the beneficial or record owner of shares of that Fund. In consideration for such
services, a Service Organization receives a fee from a Fund, computed daily and
paid monthly at an annual rate of up to 0.25% of the average daily net asset
value of shares of that Fund owned beneficially or of record by such Service
Organization's customers for whom the Service Organization provides such
services. Currently, the Board of Directors has not authorized payments under
the Administrative Services Plan.
(6) CAPITAL STOCK
The Funds are authorized to issue a total of 1,000,000,000 shares of common
stock in series with a par value of $0.00001 per share. The Board of Directors
is empowered to issue other series of the Company's shares without shareholder
approval.
Each share of stock will have a pro rata interest in the assets of the Fund to
which the stock of that series relates and will have no interest in the assets
of any other Fund.
Transactions in shares of the Funds for the period from April 10, 1995 to March
31, 1996 were as follows:
SHORT/
INTERMEDIATE
U.S. GOVERNMENT FIXED
OBLIGATIONS INCOME FIXED INCOME EQUITY
FUND FUND FUND FUND
--------------- ----------- ------------ ------
Shares sold 388,063,353 544,882 1,516,636 3,883,570
Shares issued in
conversion 76,107,938 2,290,324 6,894,181 14,178,204
Shares issued to holders
in reinvestment of
dividends 1,141,960 112,230 403,885 919,982
Shares redeemed (377,600,568) (709,044) (1,181,072) (1,839,548)
Net increase 87,712,683 2,238,392 7,633,630 17,142,208
(7) INVESTMENT TRANSACTIONS
The aggregate purchases and sales of securities, excluding short-term
investments, for the Funds for the period from April 10, 1995 to March 31, 1996
were as follows:
SHORT/
INTERMEDIATE
U.S. GOVERNMENT FIXED
OBLIGATIONS INCOME FIXED INCOME EQUITY
FUND FUND FUND FUND
--------------- ----------- ------------ -------
Purchases
U.S. Government -- $4,856,628 $11,933,340 --
Other -- 3,941,500 20,392,969 $51,871,280
Sales
U.S. Government -- 4,142,326 16,259,362 --
Other -- 4,795,933 10,068,520 43,329,502
At March 31, 1996, gross unrealized appreciation and depreciation of investments
were as follows:
SHORT/
INTERMEDIATE
U.S. GOVERNMENT FIXED
OBLIGATIONS INCOME FIXED INCOME EQUITY
FUND FUND FUND FUND
--------------- ------------ ------------ -------
Appreciation -- $ 184,929 $ 1,055,866 $38,198,786
(Depreciation) -- (273,676) (1,102,431) (3,477,447)
----- -------- --------- ----------
Net appreciation
(depreciation)
on investments -- $ (88,747) $ (46,565) $34,721,339
===== ======== ========= ==========
As of March 31, 1996, the cost of investments for federal income tax purposes is
substantially the same as for financial statement purposes.
<TABLE>
FIRST OMAHA FUNDS, INC.
STATEMENTS OF ASSETS AND LIABILITIES
OCTOBER 31, 1996
(Unaudited)
<CAPTION>
Short/ U.S.
Intermediate Government
Small Cap Equity Balanced Fixed Income Fixed Income Obligations
Value Fund Fund Fund Fund Fund Fund
---------- ------ -------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments, at market value (cost
$3,114,174, $207,376,016, $2,744,518,
$77,686,802, $21,287,995, and
$79,140,757, respectively) $3,139,485 $244,553,867 $2,797,524 $78,993,640 $21,387,754 $79,140,757
Repurchase agreements, at market value
(cost $450,000, $0, $0, $0, $0, and
$32,540,220, respectively) 450,000 - - - - 32,540,220
Interest and dividends receivable 1,615 423,645 25,129 1,305,596 233,754 55,321
Organizational expenses, net of
accumulated amortization 8,852 23,904 4,449 23,904 23,904 23,904
Other assets 9,365 55,029 9,752 24,006 11,532 28,161
---------- ------------ ---------- ---------- ---------- -----------
Total Assets 3,609,317 245,056,445 2,836,854 80,347,146 21,656,944 111,788,363
---------- ------------ ---------- ---------- ---------- -----------
LIABILITIES:
Payable for securities purchased 250,135 - - - - -
Dividend payable - - - - - 433,054
Accrued expenses and other liabilities 8,335 42,166 4,458 23,771 17,837 35,426
Accrued investment advisory fee - 35,034 0 8,386 1,850 22,969
---------- ------------ ---------- ---------- ---------- -----------
Total Liabilities 258,470 77,200 4,458 32,157 19,687 491,449
---------- ------------ ---------- ---------- ---------- -----------
NET ASSETS $3,350,847 $244,979,245 $2,832,396 $80,314,989 $21,637,257 $111,296,914
========== ============ ========== ========== ========== ===========
NET ASSETS CONSIST OF:
Capital stock 3 178 3 80 22 1,113
Paid-in-capital in excess of par 3,304,195 190,649,451 2,778,441 79,233,966 21,859,652 111,308,688
Undistributed net investment income 815 (5,324) 946 83,901 21,803 3,151
Undistributed net realized gain
(loss) on investments 20,523 17,157,089 - (309,796) (343,979) (16,038)
Net unrealized appreciation
(depreciation) on investments 25,311 37,177,851 53,006 1,306,838 99,759 -
---------- ------------ ---------- ---------- ---------- -----------
Net Assets $3,350,847 $244,979,245 $2,832,396 $80,314,989 $21,637,257 $111,296,914
========== ============ ========== ========== ========== ===========
CAPITAL STOCK, $0.00001 PAR VALUE
Authorized 50,000,000 50,000,000 50,000,000 50,000,000 50,000,000 300,000,000
Issued and outstanding 334,092 17,779,873 277,731 7,946,766 2,184,992 111,312,865
NET ASSET VALUE, REDEMPTION
PRICE, AND OFFERING PRICE
PER SHARE $10.03 $13.78 $10.20 $10.11 $9.90 $1.00
========== ============ ========== ========== ========== ===========
See notes to financial statements.
</TABLE>
<TABLE>
FIRST OMAHA FUNDS, INC.
STATEMENTS OF OPERATIONS
FOR THE PERIOD FROM APRIL 1, 1996 TO OCTOBER 31, 1996
(Unaudited)
<CAPTION>
Short/ U.S.
Intermediate Government
Small Cap Equity Balanced Fixed Income Fixed Income Obligations
Value Fund<F62> Fund Fund<F63> Fund Fund Fund
---------------- ------ -------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest $10,108 $1,356,208 $19,493 $2,270,833 $748,691 $2,976,525
Dividends (net of withholding tax of $0,
$0, $0, $0, $0, and $0, respectively) 20,080 3,232,201 7,502 - - -
---------- ------------ ---------- ---------- ---------- -----------
30,188 4,588,409 26,995 2,270,833 748,691 2,976,525
---------- ------------ ---------- ---------- ---------- -----------
EXPENSES:
Fund administration and accounting fees 19,590 274,458 11,918 90,561 25,397 113,771
Investment advisory fees 8,305 1,029,217 4,358 271,684 63,493 142,214
Shareholder servicing fees 7,284 38,141 4,590 20,665 15,989 21,758
Federal and state registration fees 6,473 20,128 2,771 10,619 6,851 12,685
Professional fees 5,560 18,298 3,973 10,592 7,806 10,876
Amortization of organization expenses 759 4,072 225 4,072 4,072 4,072
Reports to shareholders 508 14,982 350 5,127 1,472 5,869
Pricing fees 447 1,151 605 3,098 1,935 151
Custody fees 293 41,169 174 13,584 3,810 17,066
Director's fees 29 6,195 11 2,117 604 2,387
Insurance - 5,946 - 2,014 597 2,364
Other expenses 4 1,410 4 702 160 520
---------- ------------ ---------- ---------- ---------- -----------
Total expenses before waiver 49,252 1,455,167 28,979 434,835 132,186 333,733
Less: Waiver of expenses (34,257) (62,372) (20,975) (43,240) (12,140) (8,604)
---------- ------------ ---------- ---------- ---------- -----------
Net Expenses 14,995 1,392,795 8,004 391,595 120,046 325,129
---------- ------------ ---------- ---------- ---------- -----------
NET INVESTMENT INCOME 15,193 3,195,614 18,991 1,879,238 628,645 2,651,396
---------- ------------ ---------- ---------- ---------- -----------
REALIZED AND UNREALIZED
GAIN (LOSS):
Net realized gain (loss) on investments 20,523 10,015,668 - (46,819) (56,002) -
Change in unrealized appreciation
(depreciation) on investments 25,311 2,456,513 53,006 1,353,403 188,506 -
---------- ------------ ---------- ---------- ---------- -----------
Net Gain on Investments 45,834 12,472,181 53,006 1,306,584 132,504 -
---------- ------------ ---------- ---------- ---------- -----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $61,027 $15,667,795 $71,997 $3,185,822 $761,149 $2,651,396
========== ============ ========== ========== ========== ===========
<FN>
<F62>Commenced operations on June 10, 1996.
<F63>Commenced operations on August 6, 1996.
See notes to financial statements.
</TABLE>
<TABLE>
FIRST OMAHA FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
Small Cap Balanced Fixed Income
Value Fund Equity Fund Fund Fund
------------------ ------------------------------------- ---------------- --------------
June 10, 1996<F64> April 1, 1996 April 10, 1995<F64> Aug. 6, 1996<F64> April 1, 1996
to to to to to
Oct. 31, 1996 Oct. 31, 1996 March 31, 1996 Oct. 31, 1996 Oct. 31, 1996
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
------------------ ------------- ------------------- ----------------- -------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income $15,193 $3,195,614 $4,439,709 $18,991 $1,879,238
Net realized gain (loss) on investments 20,523 10,015,668 14,388,259 - (46,819)
Change in unrealized appreciation
(depreciation) on investments 25,311 2,456,513 18,465,419 53,006 1,353,403
----------- ----------- ----------- ------------ -----------
Net increase in net assets resulting
from operations 61,027 15,667,795 37,293,387 71,997 3,185,822
----------- ----------- ----------- ------------ -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income (15,137) (3,234,063) (4,409,736) (18,270) (1,986,009)
Capital gains - - (7,246,838) - -
----------- ----------- ----------- ------------ -----------
Total Distributions (15,137) (3,234,063) (11,656,574) (18,270) (1,986,009)
----------- ----------- ----------- ------------ -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares 3,320,133 20,534,963 48,686,735 2,799,477 6,450,809
Net assets resulting from conversion - - 161,426,537 - -
Proceeds from reinvestment
of dividends 15,134 3,226,438 11,645,208 18,265 1,977,326
Redemption of shares (30,310) (15,384,701) (23,306,480) (39,073) (5,654,878)
----------- ----------- ----------- ------------ -----------
Net increase (decrease) from
share transactions 3,304,957 8,376,700 198,452,000 2,778,669 2,773,257
----------- ----------- ----------- ------------ -----------
TOTAL INCREASE (DECREASE)
IN NET ASSETS 3,350,847 20,810,432 224,088,813 2,832,396 3,973,070
NET ASSETS
Beginning of period - 224,168,813 80,000 - 76,341,919
----------- ----------- ----------- ------------ -----------
End of period $3,350,847 $244,979,245 $224,168,813 $2,832,396 $80,314,989
=========== =========== =========== ============ ===========
Undistributed net investment income,
end of period $815 $(5,324) $31,943 $946 $83,901
=========== =========== =========== ============ ===========
<FN>
<F64>Commencement of operations.
See notes to financial statements.
</TABLE>
<TABLE>
FIRST OMAHA FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<CAPTION>
Fixed Income Short/Intermediate
Fund (cont'd.) Fixed Income Fund U.S. Government Obligations Fund
------------------- ---------------------------------- ---------------------------------
April 10, 1995<F65> April 1, 1996 April 10, 1995<F65> April 1, 1996 April 10, 1995<F65>
to to to to to
March 31, 1996 Oct. 31, 1996 March 31, 1996 Oct. 31, 1996 March 31, 1996
(Unaudited) (Unaudited)
------------------- ------------- ------------------ -------------- ------------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income $4,297,993 $628,645 $1,162,499 $2,651,396 $4,440,340
Net realized gain (loss) on investments (75,074) (56,002) (109,194) - -
Change in unrealized appreciation
(depreciation) on investments 2,450,307 188,506 527,854 - -
----------- ----------- ----------- ----------- -----------
Net increase in net assets resulting
from operations 6,673,226 761,149 1,581,159 2,651,396 4,440,340
----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income (4,110,469) (655,685) (1,116,807) (2,651,397) (4,440,340)
Capital gains - - - - -
----------- ----------- ----------- ----------- -----------
Total Distributions (4,110,469) (655,685) (1,116,807) (2,651,397) (4,440,340)
----------- ----------- ----------- ----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares 15,431,739 2,250,477 5,409,677 220,313,492 388,060,722
Net assets resulting from conversion 66,377,812 - 22,125,516 - 76,094,844
Proceeds from reinvestment
of dividends 4,090,974 649,458 1,111,654 415,118 1,141,735
Redemption of shares (12,122,363) (3,423,954) (7,056,387) (197,146,428) (377,600,568)
----------- ----------- ----------- ----------- -----------
Net increase (decrease) from
share transactions 73,778,162 (524,019) 21,590,460 23,582,182 87,696,733
----------- ----------- ----------- ----------- -----------
TOTAL INCREASE (DECREASE)
IN NET ASSETS 76,340,919 (418,555) 22,054,812 23,582,181 87,696,733
NET ASSETS
Beginning of period 1,000 22,055,812 1,000 87,714,733 18,000
----------- ----------- ----------- ----------- -----------
End of period $76,341,919 $21,637,257 $22,055,812 $111,296,914 $87,714,733
=========== =========== =========== =========== ===========
Undistributed net investment income,
end of period $189,494 $21,803 $47,662 $3,151 $1,970
=========== =========== =========== =========== ===========
<FN>
<F65>Commencement of operations.
See notes to financial statements.
</TABLE>
<TABLE>
FIRST OMAHA FUNDS, INC.
FINANCIAL HIGHLIGHTS<F66>
<CAPTION>
Small Cap
Value Fund Equity Fund
--------------- -----------------------------------------------------------------------------
June 10, 1996<F67> April 1, 1996 April 10, 1995<F67> July 1, 1994 Year Ended Dec. 13, 1992
to to to to June 30, to
Oct. 31, 1996 Oct. 31, 1996 March 31, 1996 April 9, 1995 1994 June 30, 1993
(Unaudited) (Unaudited)
---------------- ------------- -------------- ------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.00 $ 13.07 $ 11.39 $ 10.48 $ 10.55 $ 10.00
Income from investment operations:
Net investment income 0.05 0.18 0.28 0.21 0.20 0.11
Net realized and unrealized gains
(losses) on investments 0.03 0.71 2.13 1.48 0.15 0.54
--------- --------- --------- --------- --------- ---------
Total from investment operations 0.08 0.89 2.41 1.69 0.35 0.65
Less distributions:
Dividends from net investment income 0.05 0.18 0.28 0.22 0.20 0.10
Distributions from capital gains - - 0.45 0.56 0.22 -
--------- --------- --------- --------- --------- ---------
Total distributions 0.05 0.18 0.73 0.78 0.42 0.10
--------- --------- --------- --------- --------- ---------
Net asset value, end of period $ 10.03 $ 13.78 $ 13.07 $ 11.39 $ 10.48 $ 10.55
========= ========= ========= ========= ========= =========
Total return<F68> 0.85% 6.90% 21.52% 16.48% 3.34% 6.55%
Supplemental data and ratios:
Net assets, end of period (000s) $ 3,351 $ 244,979 $ 224,169 $ 161,323 $ 129,381 $ 111,059
Ratio of net expenses to average
net assets<F69> 1.53% 1.01% 0.99% 1.03% 1.04% 1.01%
Ratio of net investment income to
average net assets<F69> 1.55% 2.33% 2.32% 2.50% 1.93% 1.90%
Ratio of net expenses to average
net assets<F69><F70> 5.03% 1.06% 1.07% 1.62% 1.54% 1.32%
Ratio of net investment income to
average net assets<F69><F70> (1.95)% 2.28% 2.24% 1.91% 1.43% 1.59%
Portfolio turnover rate<F68> 4.52% 13.31% 26.60% 14.36% 15.86% 4.94%
Average commission rate paid on
portfolio transactions $ 0.0700 $ 0.0700 N/A N/A N/A N/A
<FN>
<F66>Performance data for each Fund prior to April 10, 1995 relates to a corresponding predecessor First Omaha Fund, the assets of
which were acquired on that date.
<F67>Commencement of operations.
<F68>Not annualized.
<F69>Annualized.
<F70>During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the ratios would
have been as indicated.
See notes to financial statements.
</TABLE>
<TABLE>
FIRST OMAHA FUNDS, INC.
FINANCIAL HIGHLIGHTS (continued)<F71>
<CAPTION>
Balanced
Fund Fixed Income Fund
--------------- ------------------------------------------------------------------------------
Aug. 6, 1996<F72> April 1, 1996 April 10, 1995<F72> July 1, 1994 Year Ended Dec. 13, 1992
to to to to June 30, to
Oct. 31, 1996 Oct. 31, 1996 March 31, 1996 April 9, 1995 1994 June 30, 1993
(Unaudited) (Unaudited)
---------------- ------------- -------------- ------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.00 $ 10.00 $ 9.63 $ 9.58 $ 10.49 $ 10.00
Income from investment operations:
Net investment income 0.07 0.26 0.59 0.51 0.67 0.39
Net realized and unrealized gains
(losses) on investments 0.20 0.10 0.35 0.07 (0.88) 0.47
--------- --------- --------- --------- --------- ---------
Total from investment operations 0.27 0.36 0.94 0.58 (0.21) 0.86
Less distributions:
Dividends from net investment income 0.07 0.25 0.57 0.53 0.67 0.37
Distributions from capital gains - - - - 0.03 -
--------- --------- --------- --------- --------- ---------
Total distributions 0.07 0.25 0.57 0.53 0.70 0.37
--------- --------- --------- --------- --------- ---------
Net asset value, end of period $ 10.20 $ 10.11 $ 10.00 $ 9.63 $ 9.58 $ 10.49
========= ========= ========= ========= ========= =========
Total return<F73> 2.73% 3.73% 9.79% 6.35% (2.29)% 8.72%
Supplemental data and ratios:
Net assets, end of period (000s) $ 2,832 $ 80,315 $ 76,342 $ 66,488 $ 61,714 $ 59,178
Ratio of net expenses to average
net assets<F74> 1.37% 0.87% 0.83% 0.87% 0.86% 0.79%
Ratio of net investment income to
average net assets<F74> 3.26% 4.15% 5.94% 6.98% 6.52% 6.89%
Ratio of net expenses to average
net assets<F74><F75> 4.98% 0.96% 0.96% 1.51% 1.41% 1.19%
Ratio of net investment income to
average net assets<F74><F75> (0.35)% 4.06% 5.81% 6.34% 5.97% 6.49%
Portfolio turnover rate<F73> - 4.72% 37.35% 7.04% 13.09% 2.62%
Average commission rate paid on
portfolio transactions $ 0.0700 - N/A N/A N/A N/A
<FN>
<F71>Performance data for each Fund prior to April 10, 1995 relates to a corresponding predecessor First Omaha Fund, the assets of
which were acquired on that date.
<F72>Commencement of operations.
<F73>Not annualized.
<F74>Annualized.
<F75>During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the
ratios would have been as indicated.
See notes to financial statements.
</TABLE>
<TABLE>
FIRST OMAHA FUNDS, INC.
FINANCIAL HIGHLIGHTS (continued)<F76>
<CAPTION>
Short/Intermediate Fixed Income Fund
---------------------------------------------------------------------------------
April 1, 1996 April 10, 1995<F77> July 1, 1994 Year Ended Dec. 13, 1992
to to to June 30, to
Oct. 31, 1996 March 31, 1996 April 9, 1995 1994 June 30, 1993
(Unaudited)
------------- ----------------- ------------- --------- -------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.85 $ 9.66 $ 9.62 $ 10.18 $ 10.00
Income from investment operations:
Net investment income 0.31 0.52 0.42 0.55 0.33
Net realized and unrealized gains
(losses) on investments 0.04 0.17 0.05 (0.56) 0.16
--------- --------- --------- --------- ---------
Total from investment operations 0.35 0.69 0.47 (0.01) 0.49
Less distributions:
Dividends from net investment income 0.30 0.50 0.43 0.55 0.31
Distributions from capital gains - - - - -
--------- --------- --------- --------- ---------
Total distributions 0.30 0.50 0.43 0.55 0.31
--------- --------- --------- --------- ---------
Net asset value, end of period $ 9.90 $ 9.85 $ 9.66 $ 9.62 $ 10.18
========= ========= ========= ========= =========
Total return<F78> 3.61% 7.24% 5.05% (0.22)% 5.00%
Supplemental data and ratios:
Net assets, end of period (000s) $ 21,637 $ 22,056 $ 22,130 $ 21,938 $ 24,581
Ratio of net expenses to average
net assets<F79> 0.95% 0.89% 0.88% 0.83% 0.79%
Ratio of net investment income to
average net assets<F79> 4.95% 5.34% 5.63% 5.44% 5.91%
Ratio of net expenses to average
net assets<F79><F80> 1.04% 1.02% 1.51% 1.38% 1.19%
Ratio of net investment income to
average net assets<F79><F80> 4.86% 5.21% 5.00% 4.89% 5.51%
Portfolio turnover rate<F78> 4.69% 41.45% 9.93% 20.52% 15.58%
Average commission rate paid on
portfolio transactions - N/A N/A N/A N/A
<FN>
<F76>Performance data for each Fund prior to April 10, 1995 relates to a corresponding predecessor First Omaha Fund, the assets of
which were acquired on that date.
<F77>Commencement of operations.
<F78>Not annualized.
<F79>Annualized.
<F80>During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the ratios would
have been as indicated.
See notes to financial statements.
</TABLE>
<TABLE>
FIRST OMAHA FUNDS, INC.
FINANCIAL HIGHLIGHTS (continued)<F81>
<CAPTION>
U.S. Government Obligations Fund
-----------------------------------------------------------------------------------------------
April 1, 1996 April 10, 1995<F82> July 1, 1994 Year Ended Year Ended Dec. 4, 1991
to to to June 30, June 30, to
Oct. 31, 1996 March 31, 1996 April 9, 1995 1994 1993 June 30, 1992
(Unaudited)
------------- ----------------- ------------- --------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment operations:
Net investment income 0.03 0.05 0.04 0.03 0.03 0.02
Net realized and unrealized gains
(losses) on investments - - - - - -
--------- --------- --------- --------- --------- ---------
Total from investment operations 0.03 0.05 0.04 0.03 0.03 0.02
Less distributions:
Dividends from net investment income 0.03 0.05 0.04 0.03 0.03 0.02
Distributions from capital gains - - - - - -
--------- --------- --------- --------- --------- ---------
Total distributions 0.03 0.05 0.04 0.03 0.03 0.02
--------- --------- --------- --------- --------- ---------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= ========= ========= =========
Total return<F83> 2.76% 5.14% 3.51% 2.74% 2.72% 2.15%
Supplemental data and ratios:
Net assets, end of period (000s) $ 111,297 $ 87,715 $ 76,105 $ 89,195 $ 91,785 $ 81,152
Ratio of net expenses to average
net assets<F84> 0.57% 0.54% 0.63% 0.60% 0.61% 0.46%
Ratio of net investment income to
average net assets<F84> 4.66% 5.12% 4.46% 2.68% 2.67% 3.65%
Ratio of net expenses to average
net assets<F84><F85> 0.59% 0.59% 1.23% 1.13% 0.96% 0.98%
Ratio of net investment income to
average net assets<F84><F85> 4.64% 5.07% 3.86% 2.15% 2.32% 3.13%
Portfolio turnover rate<F83> - - - - - -
Average commission rate paid on
portfolio transactions - N/A N/A N/A N/A N/A
<FN>
<F81>Performance data for each Fund prior to April 10, 1995 relates to a corresponding predecessor First Omaha Fund, the assets of
which were acquired on that date.
<F82>Commencement of operations.
<F83>Not annualized.
<F84>Annualized.
<F85>During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the ratios would
have been as indicated.
See notes to financial statements.
</TABLE>
FIRST OMAHA SMALL CAP VALUE FUND
SCHEDULE OF INVESTMENTS
OCTOBER 31, 1996
(Unaudited)
Number
of Shares Value
--------- -----
COMMON STOCKS - 79.14%
BUSINESS SERVICES - 2.24%
3,700 Franklin Quest Co. <F86> $74,925
----------
CHEMICALS - 8.57%
2,900 Dexter Corp. 89,900
7,200 Oil-Dri Corp. of America 97,200
2,000 WD-40 Co. 100,000
----------
287,100
----------
COSMETICS - 4.58%
3,600 Tambrands, Inc. 153,450
----------
ELECTRONICS - 2.44%
1,700 Teleflex, Inc. 81,812
----------
ENVIRONMENTAL CONTROL - 5.01%
8,500 Calgon Carbon Corp. 85,000
8,500 Isco, Inc. 82,875
----------
167,875
----------
FOOD - 7.39%
4,500 Dean Foods Co. 130,500
7,200 Nash-Finch Co. 117,000
----------
247,500
----------
HOME FURNISHINGS - 3.02%
2,700 National Presto Industries, Inc. 101,250
----------
INSURANCE - 6.91%
3,300 American Financial Group, Inc. 118,388
5,800 Guarantee Life Companies, Inc. 113,100
----------
231,488
----------
MACHINERY & EQUIPMENT - 8.21%
5,400 Lawson Products, Inc. 114,750
3,300 Modine Manufacturing Co. 81,675
1,400 Tecumseh Products Co., Class A 78,750
----------
275,175
----------
MANUFACTURING - 3.13%
4,400 Tennant Co. 105,050
----------
METAL PRODUCTS - 3.16%
5,200 Amcast Industrial Corp. 105,950
----------
MINING - 3.18%
2,600 Cleveland-Cliffs, Inc. 106,600
----------
FIRST OMAHA SMALL CAP VALUE FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1996
(Unaudited)
Number
of Shares Value
--------- -----
MOTOR VEHICLE PARTS & ACCESSORIES - 4.48%
6,900 CLARCOR, Inc. $150,075
----------
TEXTILE MANUFACTURING - 3.55%
6,600 Kellwood Co. 118,800
----------
TIRE & RUBBER - 2.41%
1,700 Bandag, Inc. 80,750
----------
TOBACCO - 2.52%
3,100 Universal Corp. 84,475
----------
TRUCKING LEASING - 3.05%
5,850 Werner Enterprises, Inc. 102,375
----------
UTILITIES - ELECTRIC SERVICES - 2.28%
3,200 DPL, Inc. 76,400
----------
UTILITIES - TELECOMMUNICATIONS - 3.01%
6,200 Aliant Communications, Inc. 100,750
----------
Total Common Stocks (cost $2,626,607) 2,651,800
----------
Principal
Amount
---------
U.S. TREASURY BILLS - 8.85%
$300,000 1/23/97 296,486
----------
Total U.S. Treasury Bills (cost $296,368) 296,486
----------
Number
of Shares
- ----------
INVESTMENT COMPANIES - 5.70%
100,000 Federated Treasury Obligations Fund 100,000
91,199 Goldman Sachs ILA Treasury Obligations Portfolio 91,199
----------
Total Investment Companies (cost $191,199) 191,199
----------
FIRST OMAHA SMALL CAP VALUE FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1996
(Unaudited)
Principal
Amount Value
---------- -----
REPURCHASE AGREEMENTS - 13.43%
$450,000 G. X. Clarke & Co., 5.25%, dated 10/31/96, repurchase
price $450,066, maturing 11/1/96 (collateralized by
U.S. Treasury Notes, 6.75%, 5/31/99 $450,000
----------
Total Repurchase Agreements
(cost $450,000) 450,000
----------
Total Investments - 107.12%
(cost $3,564,174) 3,589,485
Liabilities, less Other Assets - -7.12% (238,638)
----------
NET ASSETS - 100.00% $3,350,847
==========
<F86> Non-income producing security
See notes to financial statements.
FIRST OMAHA EQUITY FUND
SCHEDULE OF INVESTMENTS
OCTOBER 31, 1996
(Unaudited)
Number
of Shares Value
--------- -----
COMMON STOCKS - 83.37%
COMMUNICATIONS EQUIPMENT - 3.12%
166,100 Motorola, Inc. $7,640,600
----------
COMPUTERS & PERIPHERALS - 2.66%
50,600 International Business Machines Corp. 6,527,400
----------
COSMETICS - 4.87%
100,200 International Flavors & Fragrances, Inc. 4,145,775
182,500 Tambrands, Inc. 7,779,063
----------
11,924,838
----------
ELECTRICAL EQUIPMENT - 5.70%
60,700 Emerson Electric Co. 5,402,300
137,800 Honeywell, Inc. 8,560,825
----------
13,963,125
----------
ENVIRONMENTAL CONTROL - 0.68%
165,600 Calgon Carbon Corp. 1,656,000
----------
FOOD PROCESSING & PACKAGING - 3.04%
94,400 CPC International, Inc. 7,445,800
----------
HEAVY MACHINERY - 3.25%
191,500 Ingersoll-Rand Co. 7,971,187
----------
INSURANCE - 11.84%
241,600 American Financial Group, Inc. 8,667,400
196,900 American General Corp. 7,334,525
62,600 Marsh & McLennan Cos., Inc. 6,518,225
172,000 SAFECO Corp. 6,493,000
----------
29,013,150
----------
MEDICAL SUPPLIES - 2.23%
125,800 Becton, Dickinson & Co. 5,472,300
----------
MINING - 3.05%
330,000 Cyprus Amax Minerals Co. 7,466,250
----------
MOTOR VEHICLE PARTS & ACCESSORIES - 1.49%
168,200 CLARCOR, Inc. 3,658,350
----------
OIL - 7.71%
94,900 Exxon Corp. 8,410,512
43,000 Texaco, Inc. 4,369,875
166,400 Unocal Corp. 6,094,400
----------
18,874,787
----------
FIRST OMAHA EQUITY FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1996
(Unaudited)
Number
of Shares Value
--------- -----
PACKAGING & CONTAINERS - 2.58%
237,300 Sonoco Products Co. $6,318,113
----------
PHARMACEUTICALS - 3.39%
78,500 Bristol-Myers Squibb Co. 8,301,375
----------
PHOTOGRAPHY - 3.04%
93,500 Eastman Kodak Co. 7,456,625
----------
PUBLISHING - 3.09%
248,800 R.R. Donnelley & Sons Co. 7,557,300
----------
RETAIL - 7.65%
160,600 J.C. Penney Co., Inc. 8,431,500
303,000 Rite Aid Corp. 10,302,000
----------
18,733,500
----------
SOAPS & CLEANING AGENTS - 2.61%
69,600 Colgate-Palmolive Co. 6,403,200
----------
TEXTILE MANUFACTURING - 2.89%
393,300 Kellwood Co. 7,079,400
----------
TOBACCO - 3.42%
307,418 Universal Corp. 8,377,140
----------
UTILITIES - ELECTRIC SERVICES - 5.06%
256,900 DPL, Inc. 6,133,488
154,500 Texas Utilities Co. 6,257,250
----------
12,390,738
----------
Total Common Stocks (cost $167,066,205) 204,231,178
-----------
Principal
Amount
---------
U.S. TREASURY BILLS - 15.73%
$3,000,000 11/29/96 2,988,230
2,000,000 12/5/96 1,990,297
8,000,000 1/2/97 7,930,979
5,000,000 1/16/97 4,946,527
8,000,000 1/23/97 7,906,293
5,000,000 1/30/97 4,936,553
8,000,000 3/20/97 7,842,888
----------
Total U.S. Treasury Bills (cost $38,528,889) 38,541,767
----------
FIRST OMAHA EQUITY FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1996
(Unaudited)
Number
of Shares Value
--------- -----
INVESTMENT COMPANIES - 0.73%
1,780,922 Goldman Sachs ILA Treasury Obligations Portfolio $1,780,922
----------
Total Investment Companies (cost $1,780,922) 1,780,922
----------
Total Investments (cost $207,376,016)- 99.83% 244,553,867
Other Assets, less Liabilities - 0.17% 425,378
----------
NET ASSETS 100.00% $244,979,245
===========
See notes to financial statements.
FIRST OMAHA BALANCED FUND
SCHEDULE OF INVESTMENTS
OCTOBER 31, 1996
(Unaudited)
Number
of Shares Value
--------- -----
COMMON STOCKS - 48.51%
COMMUNICATIONS EQUIPMENT - 2.11%
1,300 Motorola, Inc. $59,800
----------
COMPUTERS & PERIPHERALS - 1.37%
300 International Business Machines Corp. 38,700
----------
COSMETICS - 3.58%
800 International Flavors & Fragrances, Inc. 33,100
1,600 Tambrands, Inc. 68,200
----------
101,300
----------
ELECTRICAL EQUIPMENT - 2.79%
400 Emerson Electric Co. 35,600
700 Honeywell, Inc. 43,488
----------
79,088
----------
ENVIRONMENTAL CONTROL - 0.53%
1,500 Calgon Carbon Corp. 15,000
----------
FOOD PROCESSING & PACKAGING - 1.67%
600 CPC International, Inc. 47,325
----------
HEAVY MACHINERY - 1.76%
1,200 Ingersoll-Rand Co. 49,950
----------
INSURANCE - 7.06%
1,700 American Financial Group, Inc. 60,988
1,500 American General Corp. 55,875
400 Marsh & McLennan Cos., Inc. 41,650
1,100 SAFECO Corp. 41,525
----------
200,038
----------
MEDICAL SUPPLIES - 0.92%
600 Becton, Dickinson & Co. 26,100
----------
MINING - 1.84%
2,300 Cyprus Amax Minerals Co. 52,037
----------
MOTOR VEHICLE PARTS & ACCESSORIES - 1.00%
1,300 CLARCOR, Inc. 28,275
----------
OIL - 5.18%
700 Exxon Corp. 62,038
400 Texaco, Inc. 40,650
1,200 Unocal Corp. 43,950
----------
146,638
----------
FIRST OMAHA BALANCED FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1996
(Unaudited)
Number
of Shares Value
--------- -----
PACKAGING & CONTAINERS - 1.41%
1,500 Sonoco Products Co. $39,937
----------
PHARMACEUTICALS - 1.87%
500 Bristol-Myers Squibb Co. 52,875
----------
PHOTOGRAPHY - 1.41%
500 Eastman Kodak Co. 39,875
----------
PUBLISHING - 2.04%
1,900 R.R. Donnelley & Sons Co. 57,712
----------
RETAIL - 3.84%
1,100 J.C. Penney Co., Inc. 57,750
1,500 Rite Aid Corp. 51,000
----------
108,750
----------
SOAPS & CLEANING AGENTS - 1.62%
500 Colgate-Palmolive Co. 46,000
----------
TEXTILE MANUFACTURING - 1.53%
2,400 Kellwood Co. 43,200
----------
TOBACCO - 1.95%
2,032 Universal Corp. 55,372
----------
UTILITIES - ELECTRIC SERVICES - 3.03%
1,900 DPL, Inc. 45,362
1,000 Texas Utilities Co. 40,500
----------
85,862
----------
Total Common Stocks (cost $1,332,755) 1,373,834
----------
Principal
Amount
--------
CORPORATE BONDS - 17.89%
FOOD PRODUCTS - 3.57%
$100,000 Anheuser-Busch Cos., Inc.,
6.75%, 8/1/03 101,125
----------
RETAIL - 3.58%
100,000 Wal-Mart Stores, Inc.,
6.75%, 5/15/02 101,375
----------
FIRST OMAHA BALANCED FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1996
(Unaudited)
Principal
Amount Value
--------- -----
UTILITIES - ELECTRIC SERVICES - 7.47%
$100,000 Indianapolis Power & Light Co.,
7.375%, 8/1/07 $104,125
110,000 Tampa Electric Co.,
5.75%, 5/1/00 107,525
----------
211,650
----------
UTILITIES - TELECOMMUNICATIONS - 3.27%
100,000 BellSouth Telecommunications, Inc.,
5.875%, 1/15/09 92,750
----------
Total Corporate Bonds (cost $499,076) 506,900
----------
U.S. TREASURY BILLS - 8.63%
245,000 11/14/96 244,543
----------
Total U.S. Treasury Bills (cost $244,558) 244,543
----------
U.S. TREASURY NOTES - 17.99%
100,000 5.375%, 11/30/97 99,803
100,000 6.75%, 5/31/99 102,074
100,000 6.625%, 6/30/01 102,110
100,000 6.50%, 8/15/05 101,058
100,000 7.00%, 7/15/06 104,433
----------
Total U.S. Treasury Notes (cost $506,374) 509,478
----------
U.S. TREASURY STRIPS - 3.61%
285,000 2/15/12 102,224
----------
Total U.S. Treasury Strips (cost $101,210) 102,224
----------
Number
of Shares Value
--------- -----
INVESTMENT COMPANIES - 2.14%
60,545 Goldman Sachs ILA Treasury Obligations Portfolio 60,545
----------
Total Investment Companies (cost $60,545) 60,545
----------
Total Investments (cost $2,744,518)- 98.77% 2,797,524
Other Assets, less Liabilities - 1.23% 34,872
----------
NET ASSETS - 100.00% $2,832,396
==========
See notes to financial statements.
FIRST OMAHA FIXED INCOME FUND
SCHEDULE OF INVESTMENTS
OCTOBER 31, 1996
(Unaudited)
Principal
Amount Value
--------- -----
CORPORATE BONDS - 67.91%
COMMUNICATIONS EQUIPMENT - 3.05%
$2,500,000 Motorola, Inc.,
6.50%, 3/1/08 $2,446,875
----------
ELECTRICAL EQUIPMENT - 2.97%
2,500,000 General Electric Co.,
5.50%, 11/1/01 2,390,625
----------
FOOD PRODUCTS - 3.10%
2,500,000 Anheuser-Busch Cos., Inc.,
7.25%, 9/15/15 2,487,500
----------
FOREST PRODUCTS - 2.94%
2,500,000 Kimberly-Clark Corp.,
6.875%, 2/15/14 2,365,625
----------
GOVERNMENTS - FOREIGN - 2.49%
2,000,000 Ontario Hydro,
5.80%, 3/31/98 2,002,500
----------
INDUSTRIAL GOODS & SERVICES - 8.46%
2,000,000 Air Products & Chemicals, Inc.,
6.25%, 6/15/03 1,952,500
2,335,000 Monsanto Co.,
6.00%, 7/1/00 2,305,812
2,500,000 PPG Industries, Inc.,
7.375%, 6/1/16 2,537,500
----------
6,795,812
----------
OIL & GAS EXPLORATION & PRODUCTION - 3.78%
2,000,000 Amoco Canada Petroleum Co. Ltd.,
6.75%, 2/15/05 2,005,000
1,000,000 BP America, Inc.,
8.875%, 12/1/97 1,030,920
----------
3,035,920
----------
PHARMACEUTICALS - 2.44%
2,000,000 Eli Lilly & Co.,
6.25%, 3/15/03 1,957,500
----------
RAILROADS - 0.65%
500,000 Southern Railway Co.,
7.75%, 8/1/99 521,250
----------
FIRST OMAHA FIXED INCOME FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1996
(Unaudited)
Principal
Amount Value
--------- -----
RETAIL - 5.24%
$2,000,000 J.C. Penney Co., Inc.,
6.00%, 5/1/06 $1,860,000
2,500,000 Wal-Mart Stores, Inc.,
5.875%, 10/15/05 2,346,875
----------
4,206,875
----------
SOAPS & CLEANING AGENTS - 1.90%
1,500,000 Colgate-Palmolive Co.,
6.85%, 11/24/99 1,524,375
----------
UTILITIES - ELECTRIC SERVICES - 6.18%
2,500,000 National Rural Utility Co.
6.50%, 9/15/02 2,503,125
2,500,000 Union Electric Co.,
6.75%, 5/1/08 2,459,375
----------
4,962,500
----------
UTILITIES - ELECTRIC & OTHER
SERVICES COMBINED - 6.44%
2,500,000 Citizens Utilities Co.,
7.60%, 6/1/06 2,631,250
1,500,000 Iowa Southern Utilities Co.,
7.375%, 2/1/03 1,524,375
1,000,000 Louisville Gas & Electric Co.,
7.50%, 7/1/02 1,018,750
----------
5,174,375
----------
UTILITIES - NATURAL GAS - 9.26%
1,000,000 Consolidated Natural Gas Co.,
9.375%, 2/1/97 1,008,750
2,500,000 Indiana Gas Co.,
6.625%, 12/1/97 2,521,875
2,500,000 Laclede Gas Co.,
6.50%, 11/15/10 2,409,375
1,500,000 Northern Illinois Gas Co.,
6.25%, 2/1/99 1,496,250
----------
7,436,250
----------
UTILITIES - TELECOMMUNICATIONS - 9.01%
2,500,000 AT&T Corp.,
7.75%, 3/1/07 2,650,000
2,500,000 Chesapeake & Potomac Telephone Co. of Maryland,
5.25%, 5/1/05 2,256,250
1,000,000 Southern Bell Telephone & Telegraph Co.,
4.75%, 9/1/00 933,750
1,500,000 Southern Bell Telephone & Telegraph Co.,
6.00%, 10/1/04 1,396,875
----------
7,236,875
----------
Total Corporate Bonds (cost $54,674,186) 54,544,857
----------
FIRST OMAHA FIXED INCOME FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1996
(Unaudited)
Principal
Amount Value
--------- -----
U.S. GOVERNMENT AGENCIES - 5.75%
$2,000,000 Federal National Mortgage Association,
8.625%, 11/10/04 $2,097,120
2,500,000 Federal National Mortgage Association,
7.150%, 10/11/06 2,521,475
----------
Total U.S. Goverment Agencies ($4,492,594) 4,618,595
----------
U.S. TREASURY NOTES - 2.61%
1,000,000 8.125%, 2/15/98 1,030,340
1,000,000 8.875%, 2/15/99 1,064,430
----------
Total U.S. Treasury Notes (cost $2,207,500) 2,094,770
----------
U.S. TREASURY STRIPS - 16.82%
1,785,000 8/15/01 1,341,749
2,122,000 5/15/02 1,517,972
4,983,000 2/15/05 2,948,889
6,513,000 2/15/07 3,352,370
12,114,000 2/15/12 4,345,050
----------
Total U.S. Treasury Strips (cost $12,106,774) 13,506,030
----------
U.S. TREASURY BONDS - 2.85%
1,000,000 8.75%, 11/15/08 1,131,440
1,000,000 9.125%, 5/15/09 1,160,950
----------
Total U.S. Treasury Bonds (cost $2,268,750) 2,292,390
----------
Number
of Shares
---------
INVESTMENT COMPANIES - 2.41%
1,936,998 Goldman Sachs ILA Treasury Obligations Portfolio 1,936,998
----------
Total Investment Companies (cost $1,936,998) 1,936,998
----------
Total Investments (cost $77,686,802) - 98.35% 78,993,640
Other Assets, less Liabilities - 1.65% 1,321,349
----------
NET ASSETS - 100.00% $80,314,989
===========
See notes to financial statements.
FIRST OMAHA SHORT/INTERMEDIATE FIXED INCOME FUND
SCHEDULE OF INVESTMENTS
OCTOBER 31, 1996
(Unaudited)
Principal
Amount Value
--------- -----
CORPORATE BONDS - 73.77%
FINANCIAL SERVICES - 7.02%
$750,000 General Electric Capital Corp.,
6.875%, 4/15/00 $763,125
750,000 John Deere Capital Corp.,
7.20%, 5/15/97 755,708
----------
1,518,833
----------
FOOD PRODUCTS - 4.66%
1,000,000 Anheuser-Busch Cos., Inc.,
6.90%, 10/1/02 1,007,500
----------
PHARMACEUTICALS - 14.01%
1,000,000 Eli Lilly & Co.,
8.125%, 12/1/01 1,072,500
1,000,000 SmithKline Beecham Corp.,
6.625%, 10/01/05 975,000
1,000,000 Upjohn Co.,
5.875%, 4/15/00 985,000
----------
3,032,500
----------
RETAIL - 4.63%
1,000,000 Wal-Mart Stores, Inc.,
6.50%, 6/1/03 1,001,250
----------
UTILITIES - ELECTRIC SERVICES - 21.79%
1,000,000 Alabama Power Co.,
5.50%, 2/1/98 995,000
1,000,000 Florida Power & Light Co.,
5.50%, 7/1/99 980,000
750,000 Gulf Power Co.,
5.875%, 8/1/97 750,937
1,000,000 Monongahela Power Co.,
5.625%, 4/1/00 978,750
1,000,000 Union Electric Co.,
6.875%, 8/1/04 1,010,000
----------
4,714,687
----------
UTILITIES - ELECTRIC & OTHER
SERVICES COMBINED - 8.97%
1,000,000 Northern States Power Co.,
5.75%, 10/1/03 955,000
1,000,000 Wisconsin Electric Power Co.,
5.125%, 9/15/98 985,000
----------
1,940,000
----------
UTILITIES - NATURAL GAS - 3.46%
750,000 Northern Illinois Gas Co.,
6.25%, 2/1/99 748,125
----------
FIRST OMAHA SHORT/INTERMEDIATE FIXED INCOME FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1996
(Unaudited)
Principal
Amount Value
--------- -----
UTILITIES - TELECOMMUNICATIONS - 9.23%
$1,000,000 Chesapeake & Potomac Telephone Co. of Maryland,
5.875%, 9/15/99 $993,750
1,000,000 GTE California, Inc.,
6.25%, 1/15/98 1,003,750
----------
1,997,500
----------
Total Corporate Bonds (cost $15,839,589) 15,960,395
----------
U.S. TREASURY NOTES - 7.50%
650,000 5.125%, 3/31/98 645,638
1,000,000 5.875%, 2/15/04 977,570
----------
Total U.S. Treasury Notes (cost $1,618,339) 1,623,208
----------
U.S. TREASURY STRIPS - 14.54%
1,085,000 2/15/99 951,903
1,520,000 8/15/00 1,215,407
1,345,000 2/15/02 979,322
----------
Total U.S. Treasury Strips (cost $3,172,548) 3,146,632
----------
Number
of Shares
---------
INVESTMENT COMPANIES - 3.04%
657,519 Goldman Sachs ILA Treasury Obligations Portfolio 657,519
----------
Total Investment Companies (cost $657,519) 657,519
----------
Total Investments (cost $21,287,995) - 98.85% 21,387,754
Other Assets, less Liabilities - 1.15% 249,503
----------
NET ASSETS - 100.00% $21,637,257
===========
See notes to financial statements.
FIRST OMAHA U.S. GOVERNMENT OBLIGATIONS FUND
SCHEDULE OF INVESTMENTS
OCTOBER 31, 1996
(Unaudited)
Principal
Amount Value
--------- -----
U.S. TREASURY BILLS - 57.66%
$10,000,000 11/14/96 $9,981,580
10,000,000 12/19/96 9,930,939
5,000,000 12/26/96 4,960,204
5,000,000 1/16/97 4,945,958
5,000,000 1/23/97 4,941,154
5,000,000 2/6/97 4,931,295
5,000,000 2/27/97 4,915,600
5,000,000 3/20/97 4,899,131
5,000,000 3/27/97 4,892,734
5,000,000 4/3/97 4,890,566
5,000,000 4/17/97 4,881,131
----------
Total U.S. Treasury Bills (cost $64,170,292) 64,170,292
----------
U.S. TREASURY NOTES - 4.48%
5,000,000 4.75%, 2/15/97 4,990,035
----------
Total U.S. Treasury Notes (cost $4,990,035) 4,990,035
----------
U.S. TREASURY STRIPS - 8.97%
10,000,000 11/15/96 9,980,430
----------
Total U.S. Treasury Strips (cost $9,980,430) 9,980,430
----------
REPURCHASE AGREEMENTS - 29.24%
12,540,220 G. X. Clarke & Co., 5.40%, dated 10/31/96,
repurchase price $12,542,101, maturing 11/1/96
(collateralized by U.S. Treasury Bills,
1/2/97 and 1/23/97) 12,540,220
20,000,000 HSBC Securities, Inc., 5.58%, dated 10/31/96,
repurchase price $20,003,100, maturing 11/1/96
(collateralized by U.S. Treasury Notes, 6.50%,
4/30/97) 20,000,000
----------
Total Repurchase Agreements (cost $32,540,220) 32,540,220
----------
Total Investments (cost $111,680,977) - 100.35% 111,680,977
Liabilities, less Other Assets - -0.35% (384,063)
----------
NET ASSETS - 100.00% $111,296,914
===========
See notes to financial statements.
FIRST OMAHA FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1996
(Unaudited)
1. ORGANIZATION
First Omaha Funds, Inc. (the "Company") was organized in October, 1994 as a
Nebraska corporation and is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end management investment
company issuing its shares in series, each series representing a distinct
portfolio with its own investment objectives and policies. At October 31,
1996, the only series presently authorized are the Small Cap Value Fund, the
Equity Fund, the Balanced Fund, the Fixed Income Fund, the Short/Intermediate
Fixed Income Fund and the U.S. Government Obligations Fund (individually
referred to as a "Fund" and collectively as the "Funds").
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their financial statements.
These policies are in conformity with generally accepted accounting
principles.
(a) Investment Valuation
Securities traded over-the-counter or on a national securities exchange are
valued on the basis of market value in their principal and most
representative market. Securities where the principal and most
representative market is a national securities exchange are valued at the
latest reported sale price on such exchange. Exchange-traded securities for
which there were no transactions are valued at the latest reported bid price.
Securities traded on only over-the-counter markets are valued at the latest
bid price. Debt securities (other than short-term instruments) are valued at
prices furnished by a pricing service, subject to review by the Funds'
investment adviser, First National Bank of Omaha (the "Adviser"), and
determination of the appropriate price whenever a furnished price is
significantly different from the previous day's furnished price. Short-term
obligations (maturing within 60 days) are valued on an amortized cost basis.
Securities for which quotations are not readily available and other assets
are valued at fair value as determined in good faith by the Adviser under the
supervision of the Board of Directors.
Pursuant to Rule 2a-7 of the 1940 Act, investments of the U.S. Government
Obligations Fund are valued at either amortized cost, which approximates
market value, or at original cost, which combined with accrued interest,
approximates market value. Under the amortized cost valuation method,
discount or premium is amortized on a constant basis to the maturity of the
security. In addition, the Fund may not (i) purchase any instrument with a
remaining maturity greater than 13 months unless such investment is subject
to a demand feature, or (ii) maintain a dollar-weighted average portfolio
maturity which exceeds 90 days.
(b) Repurchase Agreements
The Funds may acquire repurchase agreements from financial institutions such
as banks and broker/dealers which the Adviser deems creditworthy under
guidelines approved by the Board of Directors, subject to the seller's
agreement to repurchase such securities at a mutually agreed-upon date and
price. The repurchase price generally equals the price paid by each Fund
plus interest negotiated on the basis of current short-term rates, which may
be more or less than the rate on the underlying portfolio securities. The
seller, under a repurchase agreement, is required to maintain the value of
collateral held pursuant to the agreement at not less than the repurchase
price (including accrued interest). Securities subject to repurchase
agreements are held by the Funds' custodian or another qualified custodian or
in the Federal Reserve/Treasury book-entry system. Repurchase agreements are
considered to be loans by the Funds under the 1940 Act.
(c) Organization Costs
Costs incurred by the Funds in connection with their organization,
registration and the initial public offering of shares have been deferred and
will be amortized on a straight-line basis over a period of five years from
the date upon which the Funds commenced their investment activities.
Organization costs have been allocated equally among the respective Funds or
by specific identification, as applicable. If any of the original shares of
a Fund are redeemed by any holder thereof prior to the end of the
amortization period, the redemption proceeds will be reduced by the pro rata
share of the unamortized expenses as of the date of redemption. The pro rata
share by which the proceeds are reduced will be derived by dividing the
number of original shares of the Fund being redeemed by the total number of
original shares outstanding at the time of redemption.
(d) Expenses
The Funds are charged for those expenses that are directly attributable to
each portfolio, such as advisory and custodian fees. Expenses that are not
directly attributable to a portfolio are typically allocated among the
portfolios in proportion to their respective net assets.
(e) Distributions to Shareholders
The U.S. Government Obligations Fund declares dividends of net investment
income daily. The remaining Funds declare dividends monthly; all of the
Funds pay dividends of net investment income monthly. Distributions of net
realized capital gains, if any, will be declared at least annually.
Distributions to shareholders are recorded on the ex-dividend date.
The character of distributions made during the year from net investment
income or net realized gains may differ from the characterization for federal
income tax purposes due to differences in the recognition of income, expense
or gain items for financial statement and tax purposes. Where appropriate,
reclassifications between net asset accounts are made for such differences
that are permanent in nature. Accordingly, at October 31, 1996,
reclassifications were recorded to increase undistributed net investment
income and decrease paid-in capital in excess of par by $759, $1,181, $225,
$1,181, $1,181 and $1,181 for the Small Cap Value Fund, the Equity Fund, the
Balanced Fund, the Fixed Income Fund, the Short/Intermediate Fixed Income
Fund and the U.S. Government Obligations Fund, respectively.
(f) Federal Income Taxes
Each Fund intends to comply with the requirements of the Internal Revenue
Code necessary to qualify as a regulated investment company and to make the
requisite distributions of the income to its shareholders which will be
sufficient to relieve it from all or substantially all federal income taxes.
As of March 31, 1996, each of the U.S. Government Obligations,
Short/Intermediate Fixed Income and Fixed Income Funds had a federal income
tax capital loss carryforward of $16,038, $287,977 and $262,977,
respectively. The entire federal income tax loss carryforward for the U.S.
Government Obligations Fund expires in 2003. The $287,977 federal income tax
loss carryforward for the Short/Intermediate Fixed Income Fund expires as
follows: $31,092 in 2002, $147,691 in 2003 and $109,194 in 2004. The
$262,977 federal income tax loss carryforward for the Fixed Income Fund
expires as follows: $187,903 in 2003 and $75,074 in 2004.
(g) Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported changes in net assets during the
reporting period. Actual results could differ from those estimates.
(h) Other
Investment transactions are accounted for on the trade date plus one. The
Funds determine the gain or loss realized from investment transactions by
comparing the original cost of the security lot sold with the net sale
proceeds. Dividend income is recognized on the ex-dividend date and interest
income is recognized on an accrual basis.
3. INVESTMENT ADVISORY AND OTHER AGREEMENTS
The Funds have an agreement with the Adviser to furnish investment advisory
services to the Funds. Under the terms of this agreement, the Funds will pay
the Adviser a monthly fee at the annual rate of the following percentages on
average daily net assets: 0.85% for the Small Cap Value Fund, 0.75% for the
Equity Fund, 0.75% for the Balanced Fund, 0.60% for the Fixed Income Fund,
0.50% for the Short/Intermediate Fixed Income Fund and 0.25% for the U.S.
Government Obligations Fund. Advisory fees of $7,898, $4,358, $22,641 and
$6,349 were waived in the Small Cap Value Fund, the Balanced Fund, the Fixed
Income Fund and the Short/Intermediate Fixed Income Fund, respectively.
First National Bank of Omaha also serves as custodian and transfer agent for
each of the Funds. The custodian receives compensation from each of the
Funds for such services in an amount equal to a fee, computed daily and
payable monthly, at an annual rate of 0.03% of each Fund's average daily net
assets. Custody fees of $293, $41,169, $174, $13,584 and $3,810 were waived
in the Small Cap Value Fund, the Equity Fund, the Balanced Fund, the Fixed
Income Fund and the Short/Intermediate Fixed Income Fund, respectively. The
transfer agent also receives compensation from each of the Funds for such
services. Transfer agent fees of $7,150 and $4,525 were waived in the Small
Cap Value Fund and the Balanced Fund, respectively.
Sunstone Financial Group, Inc. (the "Administrator" or the "Distributor")
acts as Administrator and Distributor for each of the Funds. As compensation
for its administrative services and the assumption of certain administrative
expenses, the Administrator is entitled to a fee, computed daily and payable
monthly, at an annual rate of 0.20% of each Fund's average daily net assets.
The Small Cap Value Fund and the Balanced Fund are each subject to a $50,000
minimum annual fee. Administrative fees of $18,916, $21,203, $11,918,
$7,015, $1,981 and $8,604 were waived in the Small Cap Value Fund, the Equity
Fund, the Balanced Fund, the Fixed Income Fund, the Short/Intermediate Fixed
Income Fund and the U.S. Government Obligations Fund, respectively.
The Administrator may periodically volunteer to reduce all or a portion of
its administrative fee with respect to one or more Funds. These waivers may
be terminated at any time at the Administrator's discretion. The
Administrator may not seek reimbursement of such voluntarily reduced fees at
a later date. The reduction of such fee will cause the yield of that Fund to
be higher than it would be in the absence of such reduction. The Distributor
receives no compensation from the Funds under its Distribution Agreement with
the Company, but may receive compensation under the Distribution and Service
Plan.
4. DISTRIBUTION AND SERVICE PLAN
Pursuant to Rule 12b-1 under the 1940 Act, the Company has adopted a
Distribution and Service Plan (the "Plan"), under which each Fund is
authorized to pay a periodic amount representing distribution expenses
calculated at an annual rate not to exceed 0.25% of the average daily net
assets of that Fund. Such amount may be used to pay banks, broker/dealers
and other institutions, which may include the Adviser, its correspondent and
affiliated banks and the Administrator (each a "Participating Organization")
for distribution and/or shareholder service assistance pursuant to an
agreement between the Distributor and the Participating Organization. As of
October 31, 1996, there are no 12b-1 Agreements with any Participating
Organizations.
5. ADMINISTRATIVE SERVICES PLAN
The Company has adopted an Administrative Services Plan pursuant to which
each Fund is authorized to pay compensation to banks and other financial
institutions, which may include the Adviser, its correspondent and affiliated
banks and the Administrator (each a "Service Organization"). Such Service
Organizations agree to provide certain ministerial, record keeping and/or
administrative support services for their customers or account holders who
are the beneficial or record owner of shares of that Fund. In consideration
for such services, a Service Organization receives a fee from a Fund,
computed daily and paid monthly at an annual rate of up to 0.25% of the
average daily net asset value of shares of that Fund owned beneficially or of
record by such Service Organization's customers for whom the Service
Organization provides such services. As of October 31, 1996, no fees have
been incurred under the Administrative Services Plan.
6. CAPITAL STOCK
The Funds are authorized to issue a total of 1,000,000,000 shares of common
stock in series with a par value of $0.00001 per share. The Board of
Directors is empowered to issue other series of the Company's shares without
shareholder approval.
Each share of stock will have a pro rata interest in the assets of the Fund
to which the stock of that series relates and will have no interest in the
assets of any other Fund.
Transactions in shares of the Funds for the period ended October 31, 1996
were as follows:
<TABLE>
<CAPTION>
Short/
Intermediate U.S. Government
Small Cap Equity Balanced Fixed Income Fixed Income Obligations
Value Fund Fund Fund Fund Fund Fund
---------- --------- -------- ------------ -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 335,590 1,543,555 279,801 685,168 229,830 220,313,492
Shares issued to
holders in
reinvestment of
dividends 1,548 242,334 1,810 200,702 66,510 415,118
Shares redeemed (3,046) (1,155,248) (3,880) (572,838) (349,844) (197,146,428)
------- --------- ------- ------- -------- -----------
Net increase (decrease) 334,092 630,641 277,731 313,032 (53,504) 23,582,182
======= ========= ======= ======= ======== ===========
</TABLE>
<TABLE>
Transactions in shares of the Funds for the period from April 10, 1995 to March 31, 1996 were as follows:
<CAPTION>
Short/
Intermediate U.S. Government
Small Cap Equity Balanced Fixed Income Fixed Income Obligations
Value Fund Fund Fund Fund Fund Fund
---------- --------- -------- ------------ -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold - 3,883,570 - 1,516,636 544,882 388,063,353
Shares issued in
conversion - 14,178,204 - 6,894,181 2,290,324 76,107,938
Shares issued to
holders in
reinvestment of
dividends - 919,982 - 403,885 112,230 1,141,960
Shares redeemed - (1,839,548) - (1,181,072) (709,044) (377,600,568)
------- --------- ------- --------- --------- -----------
Net increase (decrease) - 17,142,208 - 7,633,630 2,238,392 87,712,683
======= ========= ======= ========= ========= ===========
</TABLE>
<TABLE>
7. INVESTMENT TRANSACTIONS
The aggregate purchases and sales of securities, excluding short-term investments, for the Funds for the period ended October 31,
1996 were as follows:
<CAPTION>
Short/
Intermediate U.S. Government
Small Cap Equity Balanced Fixed Income Fixed Income Obligations
Value Fund Fund Fund Fund Fund Fund
---------- --------- -------- ------------ -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Purchases:
U.S. Government - - $ 605,982 $2,492,903 - -
Other $2,700,910 $33,859,420 1,831,831 6,252,456 $ 997,540 -
Sales:
U.S. Government - - - 1,067,507 98,685 -
Other 94,825 25,126,288 - 2,398,150 1,380,000 -
</TABLE>
<TABLE>
As of October 31, 1996, gross unrealized appreciation and depreciation of investments were as follows:
<CAPTION>
Short/
Intermediate U.S. Government
Small Cap Equity Balanced Fixed Income Fixed Income Obligations
Value Fund Fund Fund Fund Fund Fund
---------- --------- -------- ------------ -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Appreciation $102,356 $41,474,253 $85,935 $2,327,914 $255,077 -
Depreciation (77,045) (4,296,401) (32,929) (1,021,076) (155,318) -
------- ---------- ------ --------- ------- -------
Net appreciation on
investments $ 25,311 $37,177,852 $53,006 $1,306,838 $ 99,759 -
======= ========== ====== ========= ======== =======
As of October 31, 1996, the cost of investments for federal income tax purposes is substantially the same as for financial
statement purposes.
APPENDIX
COMMERCIAL PAPER RATINGS. Commercial paper ratings of Standard & Poor's
Corporation ("S&P") are current assessments of the likelihood of timely payment
of debt considered short-term in the relevant market. Commercial paper rated
A-1 by S&P indicates that the degree of safety regarding timely payment is
strong. Those issues determined to possess extremely strong safety
characteristics are denoted A-l+. Commercial paper rated A-2 by S&P indicates
that capacity for timely payment on issues is satisfactory. However, the
relative degree of safety is not as high as for issues designated A-1.
Commercial paper rated A-3 by S&P indicates adequate capacity for timely
payment. Such paper is, however, more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher designations.
Commercial paper rated B by S&P is regarded as having only speculative capacity
for timely payment. Commercial paper rated C by S&P is regarded as short-term
obligations with a doubtful capacity for payment. Commercial paper rated D by
S&P is in payment default. The D rating category is used when interest payments
or principal payments are not made on the date due, even if the applicable grace
period has not expired, unless S&P believes that such payments will be made
during such grace period.
Moody's Investors Service, Inc.'s ("Moody's") commercial paper rating are
opinions of the ability of issuers to repay punctually senior debt obligations
which have an original maturity not exceeding one year. The rating Prime-1 is
the highest commercial paper rating assigned by Moody's. Issuers rated Prime-1
(or supporting institutions) are considered to have a superior capacity for
repayment of senior short-term debt obligations. Prime-1 repayment ability will
often be evidenced by many of the following characteristics: leading market
positions in well established industries; high rates of return on funds
employed; conservative capitalization structure with moderate reliance on debt
and ample asset protection; broad margins in earnings coverage of fixed
financial charges and high internal cash generation; and well-established access
to a range of financial markets and assured sources of alternate liquidity.
Issuers rated Prime-2 (or supporting institutions) have a strong ability for
repayment of senior short-term debt obligations. This will normally be
evidenced by many of the characteristics of Prime-1 rated issuers, but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variations. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternative liquidity is
maintained. Issuers rated Prime-3 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. The effects of
industry characteristics and market composition may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and the requirement for relatively high financial
leverage. Adequate alternate liquidity is maintained. Issuers rated Not Prime
do not fall within any of the Prime rating categories.
Commercial paper rated F-l+ by Fitch Investors Service ("Fitch") is
regarded as having the strongest degree of assurance for timely payments.
Commercial paper rated F-1 by Fitch is regarded as having an assurance of timely
payment only slightly less than the strongest rating, i.e., F-l+. Commercial
paper rated F-2 by Fitch is regarded as having a satisfactory degree of
assurance of timely payment, but the margin of safety is not as great as for
issues assigned F-l+ or F-1 ratings. Commercial paper rated F-3 by Fitch is
regarded as having characteristics suggesting that the degree of assurance for
timely payment is adequate, however, near-term adverse changes could cause these
securities to be rated below investment grade. Commercial paper rated F-S by
Fitch is regarded as having characteristics suggesting a minimal degree of
assurance for timely payment and is vulnerable to near term adverse changes in
financial and economic conditions. Commercial paper rated D by Fitch is in
actual or imminent payment default.
The description of the three highest short-term debt ratings by Duff &
Phelps, Inc. ("Duff") (Duff incorporates gradations of "1+" (one plus) and "1-"
(one minus) to assist investors in recognizing quality differences within the
highest rating category) are as follows. Duff 1+ is regarded as having the
highest certainty of timely payment. Short-term liquidity, including internal
operating factors and/or access to alternative sources of funds, is outstanding,
and safety is just below risk-free U.S. Treasury short-term obligations. Duff 1
is regarded as having a very high certainty of timely payment. Liquidity
factors are excellent and supported by good fundamental protection factors.
Risk factors are minor. Duff 1- is regarded as having a high certainty of timely
payment. Liquidity factors are strong and supported by good fundamental
protection factors. Risk factors are minor. Duff 2 is regarded as having a good
certainty of timely payment. Liquidity factors and company fundamentals are
sound. Although ongoing funding needs may enlarge total financing requirements,
access to capital markets is good. Risk factors are small. Duff 3 is regarded
as having a satisfactory liquidity and other protection factors qualify issue as
to investment grade. Risk factors are larger and subject to more variation.
Nevertheless, timely payment is expected. Duff 4 is considered as having
speculative investment characteristics. Liquidity is not sufficient to insure
against disruption in debt service. Operating factors and market access may be
subject to a high degree of variation. Duff 5 indicates that the issuer has
failed to meet scheduled principal and/or interest payments.
Commercial paper rated A1 by IBCA Limited and its affiliate, IBCA Inc.
(collectively "IBCA") is regarded by IBCA as obligations supported by the
highest capacity for timely repayment. Where issues possess a particularly
strong credit feature, a rating of Al+ is assigned. Obligations rated A2 are
supported by a good capacity for timely repayment. Obligations rated A3 are
supported by a satisfactory capacity for timely repayment. Obligations rated B
are those for which there is an uncertainty as to the capacity to ensure timely
repayment. Obligations rated C are those for which there is a high risk of
default or which are currently in default.
The following summarizes the description of the three highest short-term
ratings of Thomson BankWatch, Inc. ("Thomson"). TBW-1 is the highest category
and indicates a very high likelihood that principal and interest will be paid on
a timely basis. TBW-2 is the second highest category indicating that while the
degree of safety regarding timely repayment of principal and interest is strong,
the relative degree of safety is not as high as for issues rated "TBW-1." TBW-3
is the lowest investment grade category and indicates that while more
susceptible to adverse developments (both internal and external) than
obligations with higher ratings, capacity to service principal and interest in a
timely fashion is considered adequate. TBW-4 is the lowest rating category and
is regarded as non-investment grade and therefore speculative.
The plus (+) sign is used after a rating symbol to designate the relative
position of an issuer within the rating category.
CORPORATE DEBT RATINGS. A S&P corporate debt rating is a current
assessment of the creditworthiness of an obligor with respect to a specific
obligation. Debt rated AAA has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong. Debt rated AA has a very
strong capacity to pay interest and to repay principal and differs from the
highest rated issues only in small degree. Debt rated A has a strong capacity
to pay interest and repay principal although it is somewhat more susceptible to
adverse effects of changes in circumstances and economic conditions than debt in
higher rated categories. Debt rated BBB is regarded as having an adequate
capacity to pay interest and repay principal. Whereas it normally exhibits
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 debt in this category than in higher rated categories.
The following summarizes the four highest ratings used by Moody's for
corporate debt. Bonds that are rated Aaa by Moody's are judged to be of the
best quality. They carry the smallest degree of investment risk and are
generally referred to as "gilt edged." 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. Bonds that 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. Bonds that are rated A by Moody's 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 some time in the
future. Bonds that are rated Baa by Moody's 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.
Moody's applies numerical modifiers (1, 2, and 3) with respect to bonds
rated Aa through Baa. The modifier 1 indicates that the bond being rated ranks
in the higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates that the bond ranks in the lower
end of its generic rating category.
The following summarizes the four highest long-term debt ratings by Duff.
Debt rated AAA has the highest credit quality. The risk factors are negligible
being only slightly more than for risk-free U.S. Treasury debt. Debt rated AA
has a high credit quality and protection factors are strong. Risk is modest but
may vary slightly from time to time because of economic conditions. Debt rated
A has protection factors that are average but adequate. However, risk factors
are more variable and greater in periods of economic stress. Debt rated BBB has
below average protection factors but is still considered sufficient for prudent
investment. However, there is considerable variability in risk during economic
cycles.
To provide more detailed indications of credit quality, the ratings from AA
to BBB may be modified by the addition of a plus or minus sign to show relative
standing within this major rating category.
The following summarizes the four highest long-term debt ratings by Fitch
(except for AAA ratings, plus or minus signs are used with a rating symbol to
indicate the relative position of the credit within the rating category). Bonds
rated AAA are considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events. Bonds rated AA are considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated "AAA." Because bonds
rated in the "AAA" and "AA" categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issues is generally
rated "F-1+". Bonds rated as A are considered to be investment grade and of
high credit quality. The obligor's ability to pay interest and repay principal
is considered to be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings. Bonds
rated BBB are considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these bonds,
and therefore, impair timely payment. The likelihood that the ratings for these
bonds will fall below investment grade is higher than for bonds with higher
ratings.
The following summarizes IBCA's four highest long-term debt ratings.
Obligations rated AAA are those for which there is the lowest expectation of
investment risk. Capacity for timely repayment of principal and interest is
substantial, such that adverse changes in business, economic or financial
conditions are unlikely to increase investment risk significantly. Obligations
rated AA are those for which there is a very low expectation of investment risk.
Capacity for timely repayment of principal and interest is substantial. Adverse
changes in business, economic, or financial conditions may increase investment
risk albeit not very significantly. Obligations rated A are those for which
there is a low expectation of investment risk. Capacity for timely repayment of
principal and interest is strong, although adverse changes in business, economic
or financial conditions may lead to increased investment risk. Obligations
rated BBB are those for which there is currently a low expectation of investment
risk. Capacity for timely repayment of principal and interest is adequate,
although adverse changes in business, economic, or financial conditions are more
likely to lead to increased investment risk than for obligations in other
categories.
The following summarizes Thomson's description of its four highest
long-term debt ratings (Thomson may include a plus (+) or minus (-) designation
to indicate where within the respective category the issue is placed). AAA is
the highest category and indicates that the ability to repay principal and
interest on a timely basis is very high. AA is the second highest category and
indicates a superior ability to repay principal and interest on a timely basis
with limited incremental risk versus issues rated in the highest category. A is
the third highest category and indicates the ability to repay principal and
interest is strong. Issues rated "A" could be more vulnerable to adverse
developments (both internal and external) than obligations with higher ratings.
BBB is the lowest investment grade category and indicates an acceptable capacity
to repay principal and interest. Issues rated BBB are, however, more vulnerable
to adverse developments (both internal and external) than obligations with
higher ratings.
MUNICIPAL OBLIGATIONS RATINGS
- -----------------------------
The following summarizes the three highest ratings used by Moody's for
state and municipal short-term obligations. Obligations bearing MIG-1 or VMIG-1
designations are of the best quality, enjoying strong protection by established
cash flows, superior liquidity support or demonstrated broad-based access to the
market for refinancing. Obligations rated MIG-2 or VMIG-2 denote high quality
with ample margins of protection although not so large as in the preceding
rating group. Obligations bearing MIG-3 or VMIG-3 denote favorable quality.
All security elements are accounted for but there is lacking the undeniable
strength of the preceding grades. Liquidity and cash flow protection may be
narrow and market access for refinancing is likely to be less well established.
S&P SP-1, SP-2, and SP-3 municipal note ratings (the three highest ratings
assigned) are described as follows:
"SP-1": Very strong or strong capacity to pay principal and interest.
Those issues determined to possess overwhelming safety characteristics
will be given a plus (+) designation.
"SP-2": Satisfactory capacity to pay principal and interest.
"SP-3": Speculative capacity to pay principal and interest.
The following summarizes the four highest ratings used by Moody's for state
and municipal bonds:
"Aaa": Bonds 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 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 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 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.
The following summarizes the four highest ratings used by S&P for state and
municipal bonds:
"AAA": Debt which has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
"AA": Debt which has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small
degree.
"A": Debt which has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt
in higher rated categories.
"BBB": Debt which has adequate capacity to pay interest and repay
principal. Whereas it normally exhibits 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 debt in this category than in higher rated categories.
DEFINITIONS OF CERTAIN MONEY MARKET INSTRUMENTS
- -----------------------------------------------
Commercial Paper
Commercial paper consists of unsecured promissory notes issued by
corporations. Issues of commercial paper normally have maturities of less than
nine months and fixed rates of return.
Certificates of Deposit
Certificates of Deposit are negotiable certificates issued against funds
deposited in a commercial bank or a savings and loan association for a definite
period of time and earning a specified return.
Bankers' Acceptances
Bankers' acceptances are negotiable drafts or bills of exchange, normally
drawn by an importer or exporter to pay for specific merchandise, which are
"accepted" by a bank, meaning, in effect, that the bank unconditionally agrees
to pay the face value of the instrument on maturity.
U.S. Treasury Obligations
U.S. Treasury Obligations are obligations issued or guaranteed as to
payment of principal and interest by the full faith and credit of the U.S.
government. These obligations may include Treasury bills, notes and bonds, and
issues of agencies and instrumentalities of the U.S. government, provided such
obligations are guaranteed as to payment of principal and interest by the full
faith and credit of the U.S. government.
U.S. Government Agency and Instrumentality Obligations
Obligations of the U.S. government include Treasury bills, certificates of
indebtedness, notes and bonds, and issues of agencies and instrumentalities of
the U.S. government, such as the Government National Mortgage Association, the
Tennessee Valley Authority, the Farmers Home Administration, the Federal Home
Loan Banks, the Federal Intermediate Credit Banks, the Federal Farm Credit
Banks, the Federal Land Banks, the Federal Housing Administration, the Federal
National Mortgage Association, the Federal Home Loan Mortgage Corporation, and
the Student Loan Marketing Association. Some of these obligations, such as
those of the Government National Mortgage Association, are supported by the full
faith and credit of the U.S. Treasury; others, such as those of the Federal
National Mortgage Association, are supported by the right of the issuer to
borrow from the Treasury; others, such as those of the Student Loan Marketing
Association, are supported by the discretionary authority of the U.S. government
to purchase the agency's obligations; still others, such as those of the Federal
Farm Credit Banks, are supported only by the credit of the instrumentality. No
assurance can be given that the U. S. government would provide financial support
to U.S. government-sponsored instrumentalities if it is not obligated to do so
by law.
PART C
------
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
(1) Not applicable.
(2) Included in Part B:
A. Small Cap Value Fund Accountants' Report dated April 12,
1996. Statements of Assets and Liabilities as of March 31,
1996. Notes to Financial Statements dated March 31, 1996.
B. Remaining Funds Statements of Assets and Liabilities as of
March 31, 1996. Statements of Operations for the period
ended March 31, 1996. Statements of Changes in Net Assets
for the period ended March 31, 1996. Financial Highlights.
Notes to Financial Statements. Schedules of Investments.
C. First Omaha Funds, Inc.'s Statements of Assets and
Liabilities as of October 31, 1996. Statements of
Operations for the period ended October 31, 1996. Statements
of Changes in Net Assets for the period ended October 31,
1996. Financial Highlights. Notes to Financial Statements.
Schedules of Investments.
(b) Exhibits
EXHIBIT
NO. DESCRIPTION
- ------- -----------
1.1 Articles of Incorporation (incorporated by reference to exhibit 1.1 to
PEA No. 7 on Form N-1A Registration Statement filed July 23, 1996)
1.2 Amendment to Articles of Incorporation, dated December 19, 1994
(incorporated by reference to exhibit 1.2 to PEA No. 7 on Form N-1A
Registration Statement filed July 23, 1996)
1.3 Amendment to Articles of Incorporation, dated January 31, 1996
(incorporated by reference to exhibit 1.3 to PEA No. 7 on Form N-1A
Registration Statement filed July 23, 1996)
1.4 Amendment to Articles of Incorporation, dated July 29, 1996
2. Bylaws (incorporated by reference to exhibit 2 to PEA No. 7 on Form N-
1A Registration Statement filed July 23, 1996)
3. None.
4. None.
5.1 Investment Advisory Agreement, as amended (incorporated by reference
to exhibit 5.1 to PEA No. 7 on Form N-1A Registration Statement filed
July 23, 1996)
EXHIBIT
NO. DESCRIPTION
- ------- -----------
6.1 Distribution Agreement (incorporated by reference to exhibit 6 to
original Form N-1A Registration Statement filed November 1, 1994).
6.2 Amended Schedule A to the Distribution Agreement by and between First
Omaha Funds, Inc. and Sunstone Financial Group, Inc. (incorporated by
reference to exhibit 6.2 to PEA No. 7 on Form N-1A Registration
Statement filed July 23, 1996)
7. None.
8.1 Custodian Agreement, as amended (incorporated by reference to exhibit
8.1 to PEA No. 7 on Form N-1A Registration Statement filed July 23,
1996)
9.1 Administration and Fund Accounting Agreement (incorporated by
reference to exhibit 9 to original Form N-1A Registration Statement
filed November 1, 1994).
9.2 Form of Amended and Restated Schedule A to the Administration and Fund
Accounting Agreement by and between First Omaha Funds, Inc. and
Sunstone Financial Group, Inc. (incorporated by reference to exhibit
9.2 to PEA No. 7 on Form N-1A Registration Statement filed July 23,
1996)
9.3 Administrative Services Plan and Servicing Agreement (incorporated by
reference to exhibit 9.3 to PEA No. 7 on Form N-1A Registration
Statement filed July 23, 1996)
9.4 Transfer Agency Agreement, as amended (incorporated by reference to
exhibit 9.4 to PEA No. 7 on Form N-1A Registration Statement filed
July 23, 1996)
9.5 Form of Amended and Restated Schedule A to the Transfer Agency
Agreement By and Between First Omaha Funds, Inc. and First National
Bank of Omaha (incorporated by reference to exhibit 9.5 to PEA No. 7
on Form N-1A Registration Statement filed July 23, 1996)
9.6 Form of Amended and Restated Servicing Agreement to Administrative
Services Plan.
10. Opinion and Consent of Messrs. Cline, Williams, Wright, Johnson &
Oldfather (incorporated by reference to exhibit 10. to PEA No. 7 on
Form N-1A Registration Statement filed July 23, 1996)
11. Consent of Independent Certified Public Accountants
12. None.
13. Subscription Agreement of Miriam M. Allison (incorporated by reference
to exhibit 13. to PEA No. 7 on Form N-1A Registration Statement filed
July 23, 1996)
14. None.
15. Distribution and Service Plan (incorporated by reference to exhibit
15. to PEA No. 7 on Form N-1A Registration Statement filed July 23,
1996)
16. Not applicable.
17.1 First Omaha U.S. Gov't Fund (incorporated by reference to exhibit 17.1
to PEA No. 7 on Form N-1A Registration Statement filed July 23, 1996)
EXHIBIT
NO. DESCRIPTION
- ------- -----------
17.2 First Omaha Short Interm. Fund (incorporated by reference to exhibit
17.2 to PEA No. 7 on Form N-1A Registration Statement filed July 23,
1996)
17.3 First Omaha Fixed Income Fund (incorporated by reference to exhibit
17.3 to PEA No. 7 on Form N-1A Registration Statement filed July 23,
1996)
17.4 First Omaha Equity Fund (incorporated by reference to exhibit 17.3 to
PEA No. 7 on Form N-1A Registration Statement filed July 23, 1996)
17.5 First Omaha Small Cap Fund (incorporated by reference to exhibit 17.3
to PEA No. 7 on Form N-1A Registration Statement filed July 23, 1996)
17.6 First Omaha U.S. Gov't Fund
17.7 First Omaha Short Interm. Fund
17.8 First Omaha Fixed Income Fund
17.9 First Omaha Equity Fund
17.10 First Omaha Small Cap Fund
17.11 First Omaha Balanced Fund
18. None.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
NUMBER OF
RECORD HOLDERS
TITLE OF CLASS AS OF SEPTEMBER 30, 1996
- -------------- ------------------------
U.S. Government Obligations Fund 84
Equity Fund 1,254
Short/Intermediate Fixed Income Fund 190
Fixed Income Fund 278
Small Cap Value Fund 35
Balanced Fund 6
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),
Article XIII of the Bylaws of Registrant (Exhibit 2).
The general effect of such provision 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.
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 and Fund Accounting 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
by such directors. Pursuant to Neb. Rev. Stat. Section 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
First National Bank of Omaha (the "Adviser") is the investment adviser for
First Omaha Small Cap Value Fund, First Omaha Equity Fund, the Balanced Fund,
First Omaha Fixed Income Fund, First Omaha Short/Intermediate Fixed Income Fund
and First Omaha U.S. Government Obligations Fund. The Adviser is a subsidiary
of First National of Nebraska, Inc., a Nebraska corporation with total assets
of approximately $6.1 billion as of December 31, 1995. The Adviser provides a
full range of financial and trust services to businesses, individuals, and
government entities. The Adviser serves Nebraska, as well as other areas of the
Midwest. As of December 31, 1995, the Adviser's Trust Division had
approximately $6.6 billion of assets under administration, including
approximately $2.5 billion under management.
To the knowledge of Registrant, none of the directors or officers of the
Adviser is or has been at any time during the past two fiscal years engaged in
any other business, profession, vocation or employment of a substantial nature,
except that certain officers and directors of the Adviser also hold positions
with the Adviser's parent, First National of Nebraska, Inc., or its subsidiaries
or affiliates.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Sunstone Financial Group, Inc. currently serves as administrator and
distributor of the shares of Haven Capital Management Trust, Van
Wagoner Funds, Inc. and Northern Funds Trust.
(b) To the best of Registrant's knowledge, the directors and executive
officers of Sunstone Financial Group, Inc., distributor for
Registrant, are as follows:
POSITIONS AND POSITIONS AND
NAME AND PRINCIPAL OFFICES WITH OFFICES WITH
BUSINESS ADDRESS UNDERWRITER REGISTRANT
- ------------------ ------------- ----------
Miriam M. Allison President and None
207 E. Buffalo Street Director
Suite 400
Milwaukee, WI 53202
Daniel S. Allison Secretary and None
1241 N. Franklin Place Director
Milwaukee, WI 53202
Theresa A. Ladwig Vice President None
207 E. Buffalo Street
Suite 400
Milwaukee, WI 53202
Mary M. Tenwinkel Vice President None
207 E. Buffalo Street
Suite 400
Milwaukee, WI 53202
Randy M. Pavlick Vice President Secretary
207 E. Buffalo Street
Suite 400
Milwaukee, WI 53202
Anita M. Zagrodnik Vice President None
207 E. Buffalo Street
Suite 400
Milwaukee, WI 53202
Fayez N. Akhras Vice President None
207 E. Buffalo Street
Suite 400
Milwaukee, WI 53202
(c) None.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
Records relating to Sunstone Financial Group, Inc.'s functions as
distributor, fund accountant and administrator for the Registrant are located at
207 E. Buffalo Street, Suite 400, Milwaukee, Wisconsin 53202. All other
accounts, books and other documents required to be maintained under Section
31(a) of the Investment Company Act of 1940 and the Rules promulgated thereunder
are in the physical possession of the Adviser, One First National Center, Omaha,
Nebraska 68102 or DST Systems, Inc., 210 W. 10th Street, Kansas City, Missouri
64105.
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 undertakes to provide a copy of its Annual Report to
Shareholders upon request and without charge to each person to whom the
Prospectus of the Funds has been delivered.
The Registrant undertakes, if requested to do so by the holders of at least
10% of Registrant's outstanding shares, to call a meeting of shareholders for
the purpose of voting upon the question of removal of any director and to assist
in communications with other shareholders as required by Section 16(c).
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets the requirements for
effectiveness of this amendment to its Registration Statement under Rule 485(b)
under the Securities Act of 1933 and has duly caused this Post-Effective
Amendment to the Registration Statement on Form N-1A to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Omaha and the
State of Nebraska, on the 3rd day of December, 1996. No other material event
requiring prospectus disclosure has occurred since the later of the three dates
specified by Rule 485(b)(2).
FIRST OMAHA FUNDS, INC.
By: /s/Marc M. Diehl
-------------------------
David P. Greer, President
by Marc M. Diehl, Attorney-in-Fact
Pursuant to the requirements of the Securities Act of 1933, this amendment to
the Registration Statement has been signed below by the following persons in the
capacities indicated on
December 3, 1996.
Signature Title
--------- -----
- ----------------------- President, Principal
David P. Greer Executive, Financial
& Accounting Officer
& Director
- ----------------------- Director
Joseph Caggiano /s/Marc M. Diehl
----------------------------------
- ----------------------- Director by Marc M. Diehl, attorney-in-fact
Robert A. Reed
- ---------------------- Director
Harry A. Koch, Jr.
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
- ------- -----------
1.1 Articles of Incorporation (incorporated by reference to exhibit 1.1 to
PEA No. 7 on Form N-1A Registration Statement filed July 23, 1996)
1.2 Amendment to Articles of Incorporation, dated December 19, 1994
(incorporated by reference to exhibit 1.2 to PEA No. 7 on Form N-1A
Registration Statement filed July 23, 1996)
1.3 Amendment to Articles of Incorporation, dated January 31, 1996
(incorporated by reference to exhibit 1.3 to PEA No. 7 on Form N-1A
Registration Statement filed July 23, 1996)
1.4 Amendment to Articles of Incorporation, dated July 29, 1996
2. Bylaws (incorporated by reference to exhibit 2 to PEA No. 7 on Form N-
1A Registration Statement filed July 23, 1996)
3. None.
4. None.
5.1 Investment Advisory Agreement, as amended (incorporated by reference
to exhibit 5.1 to PEA No. 7 on Form N-1A Registration Statement filed
July 23, 1996)
EXHIBIT
NO. DESCRIPTION
- ------- -----------
6.1 Distribution Agreement (incorporated by reference to exhibit 6 to
original Form N-1A Registration Statement filed November 1, 1994).
6.2 Amended Schedule A to the Distribution Agreement by and between First
Omaha Funds, Inc. and Sunstone Financial Group, Inc. (incorporated by
reference to exhibit 6.2 to PEA No. 7 on Form N-1A Registration
Statement filed July 23, 1996)
7. None.
8.1 Custodian Agreement, as amended (incorporated by reference to exhibit
8.1 to PEA No. 7 on Form N-1A Registration Statement filed July 23,
1996)
9.1 Administration and Fund Accounting Agreement (incorporated by
reference to exhibit 9 to original Form N-1A Registration Statement
filed November 1, 1994).
9.2 Form of Amended and Restated Schedule A to the Administration and Fund
Accounting Agreement by and between First Omaha Funds, Inc. and
Sunstone Financial Group, Inc. (incorporated by reference to exhibit
9.2 to PEA No. 7 on Form N-1A Registration Statement filed July 23,
1996)
9.3 Administrative Services Plan and Servicing Agreement (incorporated by
reference to exhibit 9.3 to PEA No. 7 on Form N-1A Registration
Statement filed July 23, 1996)
9.4 Transfer Agency Agreement, as amended (incorporated by reference to
exhibit 9.4 to PEA No. 7 on Form N-1A Registration Statement filed
July 23, 1996)
9.5 Form of Amended and Restated Schedule A to the Transfer Agency
Agreement By and Between First Omaha Funds, Inc. and First National
Bank of Omaha (incorporated by reference to exhibit 9.5 to PEA No. 7
on Form N-1A Registration Statement filed July 23, 1996)
9.6 Form Of Amended and Restated Servicing Agreement to Administrative
Services Plan.
10. Opinion and Consent of Messrs. Cline, Williams, Wright, Johnson &
Oldfather (incorporated by reference to exhibit 10. to PEA No. 7 on
Form N-1A Registration Statement filed July 23, 1996)
11. Consent of Independent Certified Public Accountants
12. None.
13. Subscription Agreement of Miriam M. Allison (incorporated by reference
to exhibit 13. to PEA No. 7 on Form N-1A Registration Statement filed
July 23, 1996)
14. None.
15. Distribution and Service Plan (incorporated by reference to exhibit
15. to PEA No. 7 on Form N-1A Registration Statement filed July 23,
1996)
16. Not applicable.
17.1 First Omaha U.S. Gov't Fund (incorporated by reference to exhibit 17.1
to PEA No. 7 on Form N-1A Registration Statement filed July 23, 1996)
EXHIBIT
NO. DESCRIPTION
- ------- -----------
17.2 First Omaha Short Interm. Fund (incorporated by reference to exhibit
17.2 to PEA No. 7 on Form N-1A Registration Statement filed July 23,
1996)
17.3 First Omaha Fixed Income Fund (incorporated by reference to exhibit
17.3 to PEA No. 7 on Form N-1A Registration Statement filed July 23,
1996)
17.4 First Omaha Equity Fund (incorporated by reference to exhibit 17.3 to
PEA No. 7 on Form N-1A Registration Statement filed July 23, 1996)
17.5 First Omaha Small Cap Fund (incorporated by reference to exhibit 17.3
to PEA No. 7 on Form N-1A Registration Statement filed July 23, 1996)
17.6 First Omaha U.S. Gov't Fund
17.7 First Omaha Short Interm. Fund
17.8 First Omaha Fixed Income Fund
17.9 First Omaha Equity Fund
17.10 First Omaha Small Cap Fund
17.11 First Omaha Balanced Fund
18. None.
ARTICLES OF AMENDMENT TO THE ARTICLES OF INCORPORATION
OF FIRST OMAHA FUNDS, INC.
The undersigned Vice President and Secretary hereby amend the Articles of
Incorporation of First Omaha Funds, Inc. (the "Corporation").
1. The name of the Corporation is First Omaha Funds, Inc.
2. Article V of the Articles of Incorporation of the Corporation is
hereby amended and restated as follows:
"ARTICLE V
A. The total number of authorized shares of the Corporation is
1,000,000,000, ten (10) of which shall be Capital Shares of the par value of
$.00001 each, none of which may be issued so long as the Corporation is a
registered investment company; and all the rest of which shall be Special Common
Shares ("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 First Omaha Equity Fund shares; 50,000,000 shares may be issued in
the series of common shares hereby designated First Omaha Short/Intermediate
Fixed Income Fund shares; 50,000,000 shares may be issued in the series of
common shares hereby designated First Omaha Fixed Income Fund shares;
300,000,000 shares may be issued in the series of common shares hereby
designated First Omaha U.S. Government Obligations Fund shares; 50,000,000
shares may be issued in the series of common shares hereby designated First
Omaha Small Cap Value Fund shares; and 50,000,000 shares may be issued in the
series of common shares hereby designated First Omaha Balanced Fund shares. The
balance of 449,999,990 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 the Corporation pursuant to the
authority hereby vested in said Board of Directors.
B. Shares of each series may be further divided into one or more sub-
series (hereinafter referred to for convenience as a "class", but without any
intention to denote any such sub-series as a class for purposes of the Nebraska
Business Corporation Act). Each such class shall be clearly identified and
distinguished from each other class by such names as the Board of Directors may
determine from time to time as a convenient and proper method for identifying
such shares in a Registration Statement filed with the Securities and Exchange
Commission covering the offer and sale of such shares to public. The Board of
Directors of the Corporation shall have the power and authority to designate or
redesignate any unissued shares of any class or any series from time to time by
setting or changing the preferences, conversion rights, voting powers,
restrictions, limitations as to dividends, qualifications or terms or conditions
of redemption of such unissued shares to the extent expressed in a resolution or
resolutions providing for such action. Upon the creation of any further series
or classes, the Board of Directors shall, for purpose of identification, also
have the power and authority to designate a name for the new series or class.
C. 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. Each series of common
shares which the Board of Directors may establish, as provided herein, evidences
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 the
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 the Corporation."
3. The foregoing amendment was adopted by the Directors of the
Corporation on June 4, 1996 without shareholder action, such shareholder action
not being required.
Executed this 29th day of July, 1996.
/s/ Richard P. Snyder
---------------------
Richard P. Snyder, Vice President
/s/ Randy M. Pavlick
--------------------
Randy M. Pavlick, Secretary
FIRST OMAHA FUNDS, INC.
(the "Company")
One First National Center
Omaha, Nebraska 68102
SERVICING AGREEMENT
to
ADMINISTRATIVE SERVICES PLAN
Ladies and Gentlemen:
We wish to enter into this Servicing Agreement with you concerning the
provision of administrative support services to your customers who may
from time to time be the record or beneficial owners of shares (such
shares referred to herein as the "Shares") of one or more of the
Company's investment portfolios (individually, a "Fund" and collectively,
the "Funds"), which are listed on Appendix A.
The terms and conditions of this Servicing Agreement are as follows:
Section 1. You agree to provide administrative support services to your
customers who may from time to time own of record or beneficially a Fund's
Shares. Services provided may include some or all of the following: (i)
processing dividend and distribution payments from a Fund on behalf of
customers; (ii) providing periodic statements to your customers showing
their positions in the Shares; (iii) arranging for bank wires; (iv)
responding to routine customer inquiries relating to services performed by
you; (v) providing sub-accounting with respect to the Shares beneficially
owned by your customers or the information necessary for sub-accounting;
(vi) if required by law, forwarding shareholder communications from a
Fund (such as proxies, shareholder reports, annual and semi-annual financial
statements and dividend, distribution and tax notices) to your customers;
(vii) forwarding to customers proxy statements and proxies containing any
proposals regarding this Agreement or the Administrative Services Plan
relating hereto; (viii) aggregating and processing purchase, exchange, and
redemption requests from customers and placing net purchase, exchange, and
redemption orders for your customers; (ix) providing customers with a service
that invests the assets of their accounts in the Shares pursuant to specific
or preauthorized instructions; (x) establishing and maintaining accounts and
records relating to transactions in the Shares; (xi) assisting customers in
changing dividend or distribution options, account designations and addresses;
or (xii) other similar services if requested by the Company.
Section 2. You will provide such office space and equipment, telephone
facilities and personnel (which may be any part of the space, equipment, and
facilities currently used in your business, or any personnel employed by you)
as may be reasonably necessary or beneficial in order to provide the
aforementioned services to customers.
Section 3. Neither you nor any of your officers, employees or agents are
authorized to make any representations concerning the Company, a Fund or its
Shares except those contained in our then current prospectus for such shares,
copies of which will be supplied by Sunstone Financial Group, Inc.
("Sunstone"), the Company's distributor and administrator, to you, or in such
supplemental literature or advertising as may be authorized by the Company in
writing.
Section 4. For all purposes of this Agreement you will be deemed to be an
independent contractor, and will have no authority to act as agent for the
Company in any matter or in any respect. By your written acceptance of this
Agreement, you agree to and do release, indemnify and hold us harmless from
and against any and all direct or indirect liabilities or losses resulting
from requests, directions, actions or inactions of or by you or your officers,
employees or agents regarding your responsibilities hereunder or the purchase,
redemption, transfer or registration of the Shares by or on behalf of
customers. You and your employees will, upon request, be available during
normal business hours to consult with the Company or its designees concerning
the performance of your responsibilities under this Agreement.
Section 5. In consideration for the services and facilities provided by you
hereunder, the Company will pay to you, and you will accept as full payment
therefor, a fee at the annual rate of up to .25% of the average daily net
assets of a Fund's Shares owned of record or beneficially by your customers
from time to time for which you provide service's hereunder, which fee will be
computed daily and payable monthly. For purposes of determining the fees
payable under this Section 5, the average daily net asset value of the
customers' Shares will be computed in the manner specified in our then current
Prospectus in connection with the computation of the net asset value of a
Fund's Shares for purposes of purchases, exchanges, and redemptions. The fee
rate stated above may be prospectively increased or decreased by the Company,
in its sole discretion, at any time upon notice to you. Further, the Company
may, in its discretion and without notice, suspend or withdraw the sale of
such Shares, including the sale of such shares to you for the account of any
customer(s).
Section 6. Any person authorized to direct the disposition of monies paid or
payable by the Company pursuant to this Agreement will provide to the
Company's Board of Directors, and the Directors will review, at least
quarterly, a written report of the amounts so expended and the purposes for
which such expenditures were made. In addition, you will furnish the
Company or its designees with such information as the Company or its designees
may reasonably request (including, without limitation, periodic certifications
confirming the provision to customers of some of all of the services described
herein), and will otherwise cooperate with the Company and its designees
(including without limitation, any auditors designated by the Company), in
connection with the preparation of reports to the Company's Board of Directors
concerning this Agreement and the monies paid or payable by the Company
pursuant hereto, as well as any other reports or filings that may be required
by law.
Section 7. We may enter into other similar Servicing Agreements with any other
person or persons without your consent.
Section 8. By your written acceptance of this Agreement, you represent,
warrant and agree that: (i) in no event will any of the services provided by
you hereunder be primarily intended to result in the sales of any shares
issued by the Company; (ii) the compensation payable to you hereunder,
together with any other compensation you receive from customers for services
contemplated by this Agreement, will be fully disclosed to your customers, and
will not be excessive or unreasonable under the laws and instruments
governing your relationships with your customers; and (iii) if you are
subject to the provisions of the Glass-Steagall Act and other laws governing,
among other things, the conduct of activities by federally chartered and
supervised banking and other affiliated banking organizations, you will
perform only those activities which are consistent with your statutory and
regulatory obligations and will act solely as agent for, upon the order of,
and for the account of, your customers.
Section 9. The Agreement will become effective on the date a fully executed
copy of this Agreement is received by the Company or its designee. This
Agreement may be terminated at any time, without the payment of any penalty
by the vote of a majority of the members of the Board of Directors of the
Company and who have no direct or indirect financial interest in the
operation of the Administrative Servicing Plan or in any related agreements
to the Administrative Servicing Plan ("Disinterested Directors") or by
majority of the outstanding voting securities of the Company on not more
than sixty (60) days written notice to the parties to this Agreement.
Section 10. All notices and other communications to either you or the
Company will be duly given if mailed, telegraphed, telexed, or transmitted
by similar telecommunications device to the appropriate address shown above.
Section 11. This Agreement will be construed in accordance with the laws of
the State of Nebraska and is non-assignable by the parties hereto.
Section 12. This Agreement has been approved by vote of a majority of (i)
the Company's Board of Directors and (ii) the Disinterested Directors, cast
in person at a meeting called for the purpose of voting on such approval.
If you agree to be legally bound by the provisions of the Agreement,
please sign a copy of this letter where indicated below and promptly
return it to the Company's designee, Sunstone Financial Group, Inc.,207 E.
Buffalo Street, Suite 400, Milwaukee, Wisconsin, 53202.
Very truly yours,
FIRST OMAHA FUNDS, INC.
By:
-------------------------
Authorized Officer
Date:
-----------------------
Accepted and Agreed to:
By:
-------------------------
Authorized Officer
Date:
-----------------------
------------------------------
Taxpayer Idenification Number
APPENDIX A
----------
TO SERVICING AGREEMENT FOR ADMINISTRATIVE SERVICING PLAN
FOR FIRST OMAHA FUNDS, INC.
First Omaha U.S. Government Obligations Fund
First Omaha Equity Fund
First Omaha Short/Intermediate Fixed Income Fund
First Omaha Fixed Income Fund
First Omaha Samll Cap Value Fund
First Omaha Balanced Fund
Signed:
(Title) ---------------------
Dated:
---------------------
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Shareholders and Board of Directors
of First Omaha Funds, Inc.:
We consent to the use of our reports dated April 12, 1996 included herein and to
the reference to our firm under the Captions "Financial Highlights" and
"Auditors" in this post-effective amendment #6 of Form N-1(a) Registration
Statement of First Omaha Funds, Inc.
Omaha, Nebraska
December 10, 1996
[ARTICLE] 6
[CIK] 0000932381
[NAME] FIRST OMAHA FUNDS INC
[SERIES]
[NUMBER] 5
[NAME] FIRST OMAHA SMALL CAP VALUE FUND
</TABLE>
<TABLE>
<S> <C>
[PERIOD-TYPE] 7-MOS
[FISCAL-YEAR-END] MAR-31-1997
[PERIOD-START] APR-01-1996
[PERIOD-END] OCT-31-1996
[INVESTMENTS-AT-COST] 3,114,174
[INVESTMENTS-AT-VALUE] 3,139,485
[RECEIVABLES] 1,615
[ASSETS-OTHER] 18,217
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 3,609,317
[PAYABLE-FOR-SECURITIES] 250,135
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 8,335
[TOTAL-LIABILITIES] 258,470
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 3,304,198
[SHARES-COMMON-STOCK] 334,092
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 815
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 20,523
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 25,311
[NET-ASSETS] 3,350,847
[DIVIDEND-INCOME] 20,080
[INTEREST-INCOME] 10,108
[OTHER-INCOME] 0
[EXPENSES-NET] (14,995)
[NET-INVESTMENT-INCOME] 15,193
[REALIZED-GAINS-CURRENT] 20,523
[APPREC-INCREASE-CURRENT] 25,311
[NET-CHANGE-FROM-OPS] 61,027
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (15,137)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 335,590
[NUMBER-OF-SHARES-REDEEMED] 3,046
[SHARES-REINVESTED] 1,548
[NET-CHANGE-IN-ASSETS] 3,350,847
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 8,305
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 49,252
[AVERAGE-NET-ASSETS] 2,608,837
[PER-SHARE-NAV-BEGIN] 10.00
[PER-SHARE-NII] 0.05
[PER-SHARE-GAIN-APPREC] 0.03
[PER-SHARE-DIVIDEND] (0.05)
[PER-SHARE-DISTRIBUTIONS] 0.00
[RETURNS-OF-CAPITAL] 0.00
[PER-SHARE-NAV-END] 10.03
[EXPENSE-RATIO] 1.53
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0.00
</TABLE>
[ARTICLE] 6
[CIK] 0000932381
[NAME] FIRST OMAHA FUNDS, INC.
[SERIES]
[NUMBER] 4
[NAME] FIRST OMAHA EQUITY FUND
<TABLE>
<S> <C>
[PERIOD-TYPE] 7-MOS
[FISCAL-YEAR-END] MAR-31-1997
[PERIOD-START] APR-01-1996
[PERIOD-END] OCT-31-1996
[INVESTMENTS-AT-COST] 207,376,016
[INVESTMENTS-AT-VALUE] 244,553,867
[RECEIVABLES] 423,645
[ASSETS-OTHER] 78,933
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 245,056,445
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 77,200
[TOTAL-LIABILITIES] 77,200
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 190,649,629
[SHARES-COMMON-STOCK] 17,779,873
[SHARES-COMMON-PRIOR] 17,149,232
[ACCUMULATED-NII-CURRENT] (5,324)
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 17,157,089
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 37,177,851
[NET-ASSETS] 244,979,245
[DIVIDEND-INCOME] 3,232,201
[INTEREST-INCOME] 1,356,208
[OTHER-INCOME] 0
[EXPENSES-NET] (1,392,795)
[NET-INVESTMENT-INCOME] 3,195,614
[REALIZED-GAINS-CURRENT] 10,015,668
[APPREC-INCREASE-CURRENT] 2,456,513
[NET-CHANGE-FROM-OPS] 15,667,795
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (3,234,063)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 1,543,555
[NUMBER-OF-SHARES-REDEEMED] 1,155,248
[SHARES-REINVESTED] 242,334
[NET-CHANGE-IN-ASSETS] 20,810,432
[ACCUMULATED-NII-PRIOR] 31,943
[ACCUMULATED-GAINS-PRIOR] 7,141,421
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 1,029,217
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 1,455,167
[AVERAGE-NET-ASSETS] 233,585,520
[PER-SHARE-NAV-BEGIN] 13.07
[PER-SHARE-NII] 0.18
[PER-SHARE-GAIN-APPREC] 0.71
[PER-SHARE-DIVIDEND] (0.18)
[PER-SHARE-DISTRIBUTIONS] 0.00
[RETURNS-OF-CAPITAL] 0.00
[PER-SHARE-NAV-END] 13.78
[EXPENSE-RATIO] 1.01
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0.00
</TABLE>
[ARTICLE] 6
[CIK] 0000932381
[NAME] FIRST OMAHA FUNDS INC
[SERIES]
[NUMBER] 6
[NAME] FIRST OMAHA BALANCED FUND
<TABLE>
<S> <C>
[PERIOD-TYPE] 4-MOS
[FISCAL-YEAR-END] MAR-31-1997
[PERIOD-START] JUL-29-1996
[PERIOD-END] OCT-31-1996
[INVESTMENTS-AT-COST] 2,744,518
[INVESTMENTS-AT-VALUE] 2,797,524
[RECEIVABLES] 25,129
[ASSETS-OTHER] 14,201
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 2,836,854
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 4,458
[TOTAL-LIABILITIES] 4,458
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 2,778,441
[SHARES-COMMON-STOCK] 277,731
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 946
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 53,006
[NET-ASSETS] 2,832,396
[DIVIDEND-INCOME] 7,502
[INTEREST-INCOME] 19,493
[OTHER-INCOME] 0
[EXPENSES-NET] (8,004)
[NET-INVESTMENT-INCOME] 18,991
[REALIZED-GAINS-CURRENT] 0
[APPREC-INCREASE-CURRENT] 53,006
[NET-CHANGE-FROM-OPS] 71,997
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (18,270)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 279,801
[NUMBER-OF-SHARES-REDEEMED] 3,880
[SHARES-REINVESTED] 1,810
[NET-CHANGE-IN-ASSETS] 2,832,396
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 4,358
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 28,979
[AVERAGE-NET-ASSETS] 2,508,723
[PER-SHARE-NAV-BEGIN] 10.00
[PER-SHARE-NII] 0.07
[PER-SHARE-GAIN-APPREC] 0.20
[PER-SHARE-DIVIDEND] (0.07)
[PER-SHARE-DISTRIBUTIONS] 0.00
[RETURNS-OF-CAPITAL] 0.00
[PER-SHARE-NAV-END] 10.20
[EXPENSE-RATIO] 1.37
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0.00
</TABLE>
[ARTICLE] 6
[CIK] 0000932381
[NAME] FIRST OMAHA FUNDS, INC.
[SERIES]
[NUMBER] 3
[NAME] FIRST OMAHA FIXED INCOME FUND
<TABLE>
<S> <C>
[PERIOD-TYPE] 7-MOS
[FISCAL-YEAR-END] MAR-31-1997
[PERIOD-START] APR-01-1996
[PERIOD-END] OCT-31-1996
[INVESTMENTS-AT-COST] 77,686,802
[INVESTMENTS-AT-VALUE] 78,993,640
[RECEIVABLES] 1,305,596
[ASSETS-OTHER] 47,910
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 80,347,146
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 32,157
[TOTAL-LIABILITIES] 32,157
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 79,234,046
[SHARES-COMMON-STOCK] 7,946,766
[SHARES-COMMON-PRIOR] 7,633,734
[ACCUMULATED-NII-CURRENT] 83,901
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (309,796)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 1,306,838
[NET-ASSETS] 80,314,989
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 2,270,833
[OTHER-INCOME] 0
[EXPENSES-NET] (391,595)
[NET-INVESTMENT-INCOME] 1,879,238
[REALIZED-GAINS-CURRENT] (46,819)
[APPREC-INCREASE-CURRENT] 1,353,403
[NET-CHANGE-FROM-OPS] 3,185,822
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (1,986,009)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 685,168
[NUMBER-OF-SHARES-REDEEMED] 572,838
[SHARES-REINVESTED] 200,702
[NET-CHANGE-IN-ASSETS] 3,973,070
[ACCUMULATED-NII-PRIOR] 189,494
[ACCUMULATED-GAINS-PRIOR] (262,977)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 271,684
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 434,835
[AVERAGE-NET-ASSETS] 77,386,580
[PER-SHARE-NAV-BEGIN] 10.00
[PER-SHARE-NII] 0.26
[PER-SHARE-GAIN-APPREC] 0.10
[PER-SHARE-DIVIDEND] (0.25)
[PER-SHARE-DISTRIBUTIONS] 0.00
[RETURNS-OF-CAPITAL] 0.00
[PER-SHARE-NAV-END] 10.11
[EXPENSE-RATIO] 0.87
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0.00
</TABLE>
[ARTICLE] 6
[CIK] 0000932381
[NAME] FIRST OMAHA FUNDS, INC.
[SERIES]
[NUMBER] 2
[NAME] FIRST OMAHA SHORT/INTERMED. FIXED INCOME FUND
<TABLE>
<S> <C>
[PERIOD-TYPE] 7-MOS
[FISCAL-YEAR-END] MAR-31-1997
[PERIOD-START] APR-01-1996
[PERIOD-END] OCT-31-1996
[INVESTMENTS-AT-COST] 21,287,995
[INVESTMENTS-AT-VALUE] 21,387,754
[RECEIVABLES] 233,754
[ASSETS-OTHER] 35,436
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 21,656,944
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 19,687
[TOTAL-LIABILITIES] 19,687
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 21,859,674
[SHARES-COMMON-STOCK] 2,184,992
[SHARES-COMMON-PRIOR] 2,238,496
[ACCUMULATED-NII-CURRENT] 21,803
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (343,979)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 99,759
[NET-ASSETS] 21,637,257
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 748,691
[OTHER-INCOME] 0
[EXPENSES-NET] (120,046)
[NET-INVESTMENT-INCOME] 628,645
[REALIZED-GAINS-CURRENT] (56,002)
[APPREC-INCREASE-CURRENT] 188,506
[NET-CHANGE-FROM-OPS] 761,149
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (655,685)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 229,830
[NUMBER-OF-SHARES-REDEEMED] 349,844
[SHARES-REINVESTED] 66,510
[NET-CHANGE-IN-ASSETS] (418,555)
[ACCUMULATED-NII-PRIOR] 47,662
[ACCUMULATED-GAINS-PRIOR] (287,977)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 63,493
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 132,186
[AVERAGE-NET-ASSETS] 21,705,650
[PER-SHARE-NAV-BEGIN] 9.85
[PER-SHARE-NII] 0.31
[PER-SHARE-GAIN-APPREC] 0.04
[PER-SHARE-DIVIDEND] (0.30)
[PER-SHARE-DISTRIBUTIONS] 0.00
[RETURNS-OF-CAPITAL] 0.00
[PER-SHARE-NAV-END] 9.90
[EXPENSE-RATIO] 0.95
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0.00
</TABLE>
[ARTICLE] 6
[CIK] 0000932381
[NAME] FIRST OMAHA FUNDS, INC.
[SERIES]
[NUMBER] 1
[NAME] FIRST OMAHA U.S. GOVERNMENT OBLIGATIONS FUND
<TABLE>
<S> <C>
[PERIOD-TYPE] 7-MOS
[FISCAL-YEAR-END] MAR-31-1997
[PERIOD-START] APR-01-1996
[PERIOD-END] OCT-31-1996
[INVESTMENTS-AT-COST] 111,680,977
[INVESTMENTS-AT-VALUE] 111,680,977
[RECEIVABLES] 55,321
[ASSETS-OTHER] 52,065
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 111,788,363
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 491,449
[TOTAL-LIABILITIES] 491,449
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 111,309,801
[SHARES-COMMON-STOCK] 111,312,865
[SHARES-COMMON-PRIOR] 87,730,683
[ACCUMULATED-NII-CURRENT] 3,151
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (16,038)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 111,296,914
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 2,976,525
[OTHER-INCOME] 0
[EXPENSES-NET] (325,129)
[NET-INVESTMENT-INCOME] 2,651,396
[REALIZED-GAINS-CURRENT] 0
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 2,651,396
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (2,651,397)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 220,313,492
[NUMBER-OF-SHARES-REDEEMED] 197,146,428
[SHARES-REINVESTED] 415,118
[NET-CHANGE-IN-ASSETS] 23,582,181
[ACCUMULATED-NII-PRIOR] 1,970
[ACCUMULATED-GAINS-PRIOR] (16,038)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 142,214
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 333,733
[AVERAGE-NET-ASSETS] 97,074,751
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] 0.03
[PER-SHARE-GAIN-APPREC] 0.00
[PER-SHARE-DIVIDEND] (0.03)
[PER-SHARE-DISTRIBUTIONS] 0.00
[RETURNS-OF-CAPITAL] 0.00
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] 0.57
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0.00
</TABLE>
