<PAGE> 1
As filed with the Securities and Exchange Commission
on July 29, 1996
1933 Act Registration Number 33-85982
1940 Act Registration Number 811-8846
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ x ]
Pre-Effective Amendment [ ]
-----
Post-Effective Amendment No. 5 [ x ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ x ]
Amendment No. 7 [ x ]
__________________________________________
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
ONE FIRST NATIONAL CENTER
OMAHA, NE 68102-1596
(Name and Address of Agent for Service)
__________________________________________
Copies of all communications to:
DONALD F. BURT, ESQ.
CLINE, WILLIAMS, WRIGHT, RANDY M. PAVLICK
JOHNSON & OLDFATHER SUNSTONE FINANCIAL GROUP, INC.
1900 FIRSTIER BANK BUILDING 207 E. BUFFALO, SUITE 400
LINCOLN, NE 68508 MILWAUKEE, WI 53202
Approximate Date of Proposed Public Offering: as soon as practicable after the
Registration Statement becomes effective.
__________________________________________
It is proposed that this filing will become effective on July 29,
1996, pursuant to paragraph (b) of Rule 485.
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.
<PAGE> 2
CROSS REFERENCE SHEET
First Omaha Funds, Inc.
PART A
<TABLE>
<CAPTION>
Form N-1A Part A Item Prospectus Caption
- --------------------- ------------------
<S> <C> <C>
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
</TABLE>
<PAGE> 3
PART B
<TABLE>
<CAPTION>
Location in Statement of Additional
Information
------------------------------------
<S> <C> <C>
10. Cover page . . . . . . . . . . . . . . . . . . . Cover Page
11. Table of Contents . . . . . . . . . . . . . . . Table of Contents
12. General Information and History . . . . . . . . The Company
13. Investment Objective 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
</TABLE>
<PAGE> 4
PART C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to this Registration Statement.
<PAGE> 5
First Omaha Funds Prospectus
<TABLE>
<S> <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.
<PAGE> 6
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C>
Prospectus Summary 1
Fee Table 3
Financial Highlights 5
Performance Information 9
Investment Objectives and Policies 10
Investment Restrictions 17
Valuation of Shares 18
How to Purchase and Redeem Shares 18
Dividends and Taxes 21
Management of the Company 22
General Information 25
</TABLE>
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.
-2-
<PAGE> 7
PROSPECTUS SUMMARY
<TABLE>
<S> <C>
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%
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.
</TABLE>
-3-
<PAGE> 8
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.
-4-
<PAGE> 9
INVESTMENT ADVISER: First National Bank of Omaha (the "Adviser").
ADMINISTRATOR/
DISTRIBUTOR: Sunstone Financial Group, Inc. (the "Administrator"
or the "Distributor," as the context indicates).
-5-
<PAGE> 10
FEE TABLE
<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 0% 0% 0% 0% 0% 0%
(as a percentage of offering price)
Maximum Sales Load Imposed on 0% 0% 0% 0% 0% 0%
Reinvested Dividends
(as a percentage of offering price)
Deferred Sales Load (as a percentage of 0% 0% 0% 0% 0% 0%
original purchase price or redemption
proceeds, as applicable)
Redemption Fees (as a percentage of amount 0% 0% 0% 0% 0% 0%
redeemed, if applicable)
Exchange Fee 0% 0% 0% 0% 0% 0%
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees(1) .85% .75% .70% .55% .45% .25%
12b-1 Fees(2) n/a n/a n/a n/a n/a n/a
Other Expenses After Voluntary Fee .74 .24 .89 .28 .44 .29
Reduction, including administration fees,
administrative servicing fees and other
expenses(1,3)
Total Fund Operating Expenses After 1.59% .99% 1.59% .83% .89% .54%
Voluntary Fee
Reduction
- -------------
</TABLE>
(1) The Adviser and the Administrator, respectively, have agreed with the
Company to reduce voluntarily the amount of the investment advisory,
administration, custodian and administrative servicing fees for the Funds until
further notice. Absent the voluntary investment advisory, administration,
custodian and administrative servicing fee reductions, Management Fees, Other
Expenses and Total Fund Operating Expenses as a percentage of average net
assets for the period ended March 31, 1996 for the Equity Fund would have been
.75%, .32% and 1.07%, respectively. For the Fixed Income Fund they
would have been .60%, .36% and .96%, respectively. For the Short/Intermediate
Fund they would have been .50%, .52%, and 1.02%., respectively. For the Money
Market Fund they would have been .25%, .34% and .59%, respectively. Management
Fees, Other Expenses and Total Fund Operating Expenses for the Small Cap Value
Fund and Balanced Fund, absent the voluntary fee reductions are estimated
to be .85%, .78% and 1.63% for the Small Cap Value Fund and .75%, .93% and 1.68%
for the Balanced Fund. (See "MANAGEMENT OF THE COMPANY-Investment Adviser" and
"Administrative Services Plan.")
(2) 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, however, there
are no Related Agreements under the Rule 12b-l Plan with respect to the Funds
in effect and no fees under the Rule 12b-l Plan are being paid by the Funds.
(3) "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, no administrative servicing fees were being paid by
the Funds.
-6-
<PAGE> 11
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:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C>
Small Cap Value Fund $16 $51 $88 $191
Equity Fund $10 $32 $55 $122
Balanced Fund $16 $51 $88 $191
Fixed Income Fund $ 9 $27 $46 $103
Short/Intermediate
Fund $ 9 $29 $50 $110
Money Market Fund $ 6 $17 $30 $ 68
</TABLE>
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 the Small Cap
Value Fund and Balanced 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.
-7-
<PAGE> 12
FINANCIAL HIGHLIGHTS
The following audited financial highlights 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. As of March 31, 1996, the Small Cap Value Fund and
Balanced Fund had not commenced operations. 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>
EQUITY FUND
------------------------------------------------------------------
APRIL 10, 1995(2) JULY 1, 1994 YEAR ENDED DEC. 13, 1992
TO TO JUNE 30, TO
MARCH 31, 1996 APRIL 9, 1995 1994 JUNE 30, 1993
------------------------------------------------------------------
<S> <C> <C> <C>
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(3) 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(4) 0.99% 1.03% 1.04% 1.01%
Ratio of net investment income to
average net assets(4) 2.32% 2.50% 1.93% 1.90%
Ratio of net expenses to average net assets(4)(5) 1.07% 1.62% 1.54% 1.32%
Ratio of net investment income to
average net assets(4)(5) 2.24% 1.91% 1.43% 1.59%
Portfolio turnover rate(3) 26.60% 14.36% 15.86% 4.94%
</TABLE>
(1) 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.
(2) Commencement of operations
(3) Not annualized
(4) Annualized
(5) During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
-8-
<PAGE> 13
<TABLE>
<CAPTION>
FIXED INCOME FUND
-----------------------------------------------------------------------------------
APRIL 10, 1995(2) JULY 1, 1994 YEAR ENDED DEC. 13, 1992
TO TO JUNE 30, TO
MARCH 31, 1996 APRIL 9, 1995 1994 JUNE 30, 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $9.63 $9.58 $10.49 $10.00
Income From Investment Operations:
Net investment income 0.58 0.51 0.67 0.39
Net realized and unrealized gains
on investments 0.36 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(3) 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(4) 0.83% 0.87% 0.86% 0.79%
Ratio of net investment income to
average net assets(4) 5.80% 6.98% 6.52% 6.89%
Ratio of net expenses to average net assets(4)(5) 0.96% 1.51% 1.41% 1.19%
Ratio of net investment income to
average net assets(4)(5) 5.67% 6.34% 5.97% 6.49%
Portfolio turnover rate(3) 37.35% 7.04% 13.09% 2.62%
</TABLE>
(1) 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.
(2) Commencement of operations
(3) Not annualized
(4) Annualized
(5) During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
-9-
<PAGE> 14
[FIRST OF OMAHA FAMILY OF FUNDS LOGO]
<TABLE>
<CAPTION>
SHORT/INTERMEDIATE FIXED INCOME FUND
------------------------------------------------------------------
APRIL 10, 1995(2) JULY 1, 1994 YEAR ENDED DEC. 13, 1992
TO TO JUNE 30, TO
MARCH 31, 1996 APRIL 9, 1995 1994 JUNE 30, 1993
------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $9.66 $9.62 $10.18 $10.00
Income From Investment Operations:
Net investment income 0.51 0.42 0.55 0.33
Net realized and unrealized gains
on investments 0.18 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(3) 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(4) 0.89% 0.88% 0.83% 0.79%
Ratio of net investment income to
average net assets(4) 5.23% 5.63% 5.44% 5.91%
Ratio of net expenses to average net assets(4)(5) 1.02% 1.51% 1.38% 1.19%
Ratio of net investment income to
average net assets(4)(5) 5.10% 5.00% 4.89% 5.51%
Portfolio turnover rate(3) 41.45% 9.93% 20.52% 15.58%
</TABLE>
(1) 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.
(2) Commencement of operations
(3) Not annualized
(4) Annualized
(5) During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
-10-
<PAGE> 15
<TABLE>
<CAPTION>
U.S. GOVERNMENT OBLIGATIONS FUND
---------------------------------------------------------------------------
APRIL 10, 1995(2) JULY 1, 1994 YEAR ENDED YEAR ENDED DEC. 4, 1991
TO TO JUNE 30, JUNE 30, TO
MARCH 31, 1996 APRIL 9, 1995 1994 1993 JUNE 30, 1992
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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(3) 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(4) 0.54% 0.63% 0.60% 0.61% 0.46%
Ratio of net investment income to
average net assets(4) 5.12% 4.46% 2.68% 2.67% 3.65%
Ratio of net expenses to average net assets(4)(5) 0.59% 1.23% 1.13% 0.96% 0.98%
Ratio of net investment income to
average net assets(4)(5) 5.07% 3.86% 2.15% 2.32% 3.13%
Portfolio turnover rate(3) -- -- -- -- --
</TABLE>
(1) 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.
(2) Commencement of operations
(3) Not annualized
(4) Annualized
(5) During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
-11-
<PAGE> 16
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. 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 June 30, 1996, the yield of the Money Market Fund
was 4.61% and its effective yield was 4.71%.
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
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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 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.
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
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<PAGE> 18
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.
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<PAGE> 19
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.
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<PAGE> 20
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.
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<PAGE> 21
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
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<PAGE> 22
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
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<PAGE> 23
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
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<PAGE> 24
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
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<PAGE> 25
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.
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<PAGE> 26
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,
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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
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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.
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<PAGE> 29
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
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<PAGE> 30
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
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<PAGE> 31
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.
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<PAGE> 32
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.
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<PAGE> 33
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
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<PAGE> 34
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
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<PAGE> 35
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
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<PAGE> 36
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.
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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, 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
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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), acts as
administrator and distributor for each of the Funds. 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
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<PAGE> 39
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
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<PAGE> 40
pre-authorized instructions. In consideration of such services, the Company,
on behalf of each of the Funds, may pay the Adviser a monthly fee, computed at
the annual rate of twenty-five one-hundredths of one percent (.25%) 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. However, the Servicing Agreement with the Adviser provides that no
payments may be made under the Services Plan until such time as the Board of
Directors of the Company authorizes the commencement of such payments. 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.
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 operational on the date of this
Prospectus. 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).
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<PAGE> 41
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.
Immediately after effectiveness, Miriam M. Allison will own 100% of the
outstanding shares of the Balanced Fund. It is anticipated that subsequent to
the date hereof and the commencement of the public offering of the shares of the
Balanced Fund that Ms. Allison's holdings will be reduced to less than 5% of
the total Shares outstanding of the Balanced 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.
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.
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<PAGE> 42
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
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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.
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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
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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
A-1
<PAGE> 46
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.
A-2
<PAGE> 47
Corporate Debt Ratings. A S&P corporate debt rating is a current
assessment of the credit-worthiness 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.
A-3
<PAGE> 48
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,
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<PAGE> 49
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.
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<PAGE> 50
"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.
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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.
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<PAGE> 52
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
July 29, 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.
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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-19
Portfolio Transactions ............................................. B-20
Glass-Steagall Act ................................................. B-21
Administrator/Fund Accountant ...................................... B-22
Expenses ........................................................... B-24
Distributor ........................................................ B-24
Administrative Services Plan ....................................... B-25
Custodian .......................................................... B-27
Transfer Agency Services ........................................... B-27
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-32
Miscellaneous ...................................................... B-33
Financial Statements ............................................... B-34
APPENDIX ............................................................... A-1
FINANCIAL STATEMENTS
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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 singularly referred to as "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)
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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 lowerrated 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
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<PAGE> 56
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
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<PAGE> 57
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.
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<PAGE> 58
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
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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.
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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.
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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 may be considered to be loans by a
Fund under the 1940 Act.
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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 may be 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
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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;
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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, except to the
extent disclosed in the current Prospectuses 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, 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 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
B-13
<PAGE> 65
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
B-14
<PAGE> 66
redemptions of Shares. Portfolio turnover will not be a limiting factor in
making investment decisions.
B-15
<PAGE> 67
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.
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<PAGE> 68
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.
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<PAGE> 69
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:
<TABLE>
<CAPTION>
Position(s) Held Principal Occupation(s)
Name and Address with the Company During Past 5 Years
- ---------------- -------------------- -------------------
<S> <C> <C>
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
M. T. Crummer Director Chief Investment
5115 Lafayette Avenue Officer, Mutual of
Omaha, NE 68132 Omaha Companies
(1982-1987); presently
retired
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)
</TABLE>
- ------------------
* Denotes "interested directors" as defined in the 1940 Act.
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<PAGE> 70
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.
<TABLE>
<CAPTION>
Pension or
Aggregate Retirement Benefits
Compensation Accrued Estimated
Name and to be Paid as Part of Annual Total Compensation
Position by Company Company Expenses Retirement Benefits From Company
- -------- -------------------- -------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
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
M. T. Crummer $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
</TABLE>
As of April 30, 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.
B-19
<PAGE> 71
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.
Unless sooner terminated, the Investment Advisory Agreement for all Funds
except Balanced Fund, will continue in effect until June 30, 1996, 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 Balanced Fund's
Investment Advisory Agreement will continue until June 30, 1997, and from year
to year thereafter, subject to the identical renewal requirements. 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
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<PAGE> 72
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.
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<PAGE> 73
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
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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
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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.
Expenses
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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
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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
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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, may pay
the Adviser a monthly fee, computed at the annual rate of .25% 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. However, the Servicing Agreement with the Adviser provides that no
payments may be made under the Services Plan until such time as the Board of
Directors of the Company authorizes the commencement of such payments.
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.
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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 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.
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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
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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 SAI, no person was known to own of record 5% or
more of the outstanding shares of any Fund, except the Balanced Fund as more
fully explained below. It is anticipated that subsequent to the date hereof
and the commencement of the public offering of the Shares of the Balanced Fund
that Ms. Allison's holdings will be reduced to less than 5% of the total Shares
outstanding of the Balanced 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
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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 June 30, 1996, the yield and effective
yield, respectively, of the Money Market Fund were 4.61% and 4.71%. For the
30-day period ended June 30, 1996, the yield for such Fund was 4.61%. In the
absence of fee waivers, the yields for the period ended June 30, 1996 would
have been 4.60%, 4.70% and 4.60% 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.
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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 June 30, 1996, the yields for the Fixed Income
Fund and the Short/Intermediate Fund were 6.21% and 5.82%, respectively. In
the absence of fee waivers, the yields for the Fixed Income Fund and the
Short/Intermediate Fund would have been 6.12% and 5.73%, respectively.
Calculation of Total Return
As summarized in the Prospectus under the heading "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 or distributed
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.
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For the one-year periods ended June 30, 1996, 1995 and 1994, the Equity
Fund, the Fixed Income Fund, the Short/Intermediate Fund and the Money Market
Fund, including their respective immediate predecessors, had average annual
total returns of 18.98%, 23.35% and 3.34%; 3.15%, 12.96% and (2.29)%; 4.01%,
8.79% and (0.22)% and 5.06%, 4.79% and 2.74%, respectively.
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.
B-33
<PAGE> 85
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 unaudited financial statements are attached hereto:
Money Market, Equity, Short/Intermediate and Fixed Income Funds
1. Statements of Assets and Liabilities as of March 31, 1996
2. Statements of Operations for the period ended March 31, 1996
3. Statements of Changes in Net Assets for the period ended
March 31, 1996
4. Financial Highlights
5. Schedules of Investments as of March 31, 1996
6. Notes to the Financial Statements
B-34
<PAGE> 86
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 operation.
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
B-35
<PAGE> 87
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.
B-36
<PAGE> 88
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.
B-37
<PAGE> 89
FIRST OMAHA SMALL CAP VALUE FUND
Notes to Financial Statement
- ------------------------------------------------------------------------------
(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.
B-38
<PAGE> 90
FIRST OMAHA SMALL CAP VALUE FUND
Notes to Financial Statement
- ------------------------------------------------------------------------------
(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.
B-39
<PAGE> 91
[FIRST OMAHA FAMILY OF FUNDS LOGO]
STATEMENTS OF ASSETS AND LIABILITIES
March 31, 1996 -
<TABLE>
<CAPTION>
U.S. GOVERNMENT SHORT/INTERMEDIATE
OBLIGATIONS FIXED INCOME FIXED INCOME EQUITY
FUND FUND FUND FUND
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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 23,078 84,938 31,943
Undistributed net realized gain (loss)
on investments (16,038) (263,393) (158,421) 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
===== ===== ====== ======
</TABLE>
See notes to financial statements.
B-40
<PAGE> 92
FIRST OMAHA FUNDS - ANNUAL REPORT
SCHEDULE OF PORTFOLIO INVESTMENTS
U.S. GOVERNMENT OBLIGATIONS FUND
March 31, 1996 -
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------
<S> <C>
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
===========
</TABLE>
See notes to financial statements.
B-41
<PAGE> 93
[FIRST OMAHA FAMILY OF FUNDS LOGO]
SCHEDULE OF PORTFOLIO INVESTMENTS
SHORT/INTERMEDIATE FIXED INCOME FUND
March 31, 1996 -
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------
<S> <C>
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
-----------
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
-----------
</TABLE>
B-42
<PAGE> 94
FIRST OMAHA FUNDS - ANNUAL REPORT
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------
<S> <C>
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
-----------
<CAPTION>
NUMBER
OF SHARES
- ---------
<S> <C>
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
===========
</TABLE>
See notes to financial statements.
B-43
<PAGE> 95
[FIRST OMAHA FAMILY OF FUNDS LOGO]
SCHEDULE OF PORTFOLIO INVESTMENTS
FIXED INCOME FUND
March 31, 1996 -
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------
<S> <C>
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
----------
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
----------
</TABLE>
B-44
<PAGE> 96
FIRST OMAHA FUNDS - ANNUAL REPORT
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------
<S> <C>
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
-----------
<CAPTION>
NUMBER
OF SHARES
- ---------
<S> <C>
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
===========
</TABLE>
See notes to financial statements.
B-45
<PAGE> 97
[FIRST OMAHA FAMILY OF FUNDS LOGO]
SCHEDULE OF PORTFOLIO INVESTMENTS
EQUITY FUND
March 31, 1996 -
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
- -----------------------------------------------------------
<S> <C>
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
------------
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
------------
</TABLE>
B-46
<PAGE> 98
FIRST OMAHA FUNDS - ANNUAL REPORT
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------
<S> <C>
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
------------
<CAPTION>
NUMBER
OF SHARES
- ---------
<S> <C>
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
============
</TABLE>
See notes to financial statements.
B-47
<PAGE> 99
[FIRST OMAHA FAMILY OF FUNDS LOGO]
STATEMENTS OF OPERATIONS
For the period from April 10, 1995(1) to March 31, 1996 -
<TABLE>
<CAPTION>
U.S. GOVERNMENT SHORT/INTERMEDIATE
OBLIGATIONS FIXED INCOME FIXED INCOME EQUITY
FUND FUND FUND FUND
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest $4,910,772 $1,332,377 $4,796,262 $1,759,320
Dividends (net of withholding tax of
$0, $0, $0 and $17,556, respectively) -- -- -- 4,584,921
---------- ---------- ---------- -----------
4,910,772 1,332,377 4,796,262 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 1,137,915 4,193,437 4,439,709
---------- ---------- ---------- -----------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on investments -- (84,610) 29,482 14,388,259
Change in unrealized appreciation
(depreciation) on investments -- 527,854 2,450,307 18,465,419
---------- ---------- ---------- -----------
Net Gain on Investments -- 443,244 2,479,789 32,853,678
---------- ---------- ---------- -----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $4,440,340 $1,581,159 $6,673,226 $37,293,387
========== ========== ========== ===========
</TABLE>
(1) Commencement of operations
See notes to financial statements.
B-48
<PAGE> 100
FIRST OMAHA FUNDS - ANNUAL REPORT
STATEMENTS OF CHANGES IN NET ASSETS
For the period from April 10, 1995(1) to March 31, 1996 -
<TABLE>
<CAPTION>
U.S. Government Short/Intermediate
Obligations Fixed Income Fixed Income Equity
Fund Fund Fund Fund
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income $ 4,440,340 $ 1,137,915 $ 4,193,437 $ 4,439,709
Net realized gain (loss) on investments -- (84,610) 29,482 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
============= =========== =========== ============
</TABLE>
(1) Commencement of operations
See notes to financial statements.
B-49
<PAGE> 101
[FIRST OMAHA FAMILY OF FUNDS LOGO]
FINANCIAL HIGHLIGHTS(1)
<TABLE>
<CAPTION>
U.S. GOVERNMENT OBLIGATIONS FUND
---------------------------------------------------------------------------
APRIL 10, 1995(2) JULY 1, 1994 YEAR ENDED YEAR ENDED DEC. 4, 1991
TO TO JUNE 30, JUNE 30, TO
MARCH 31, 1996 APRIL 9, 1995 1994 1993 JUNE 30, 1992
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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(3) 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(4) 0.54% 0.63% 0.60% 0.61% 0.46%
Ratio of net investment income to
average net assets(4) 5.12% 4.46% 2.68% 2.67% 3.65%
Ratio of net expenses to average net assets(4)(5) 0.59% 1.23% 1.13% 0.96% 0.98%
Ratio of net investment income to
average net assets(4)(5) 5.07% 3.86% 2.15% 2.32% 3.13%
Portfolio turnover rate(3) -- -- -- -- --
</TABLE>
(1) 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.
(2) Commencement of operations
(3) Not annualized
(4) Annualized
(5) 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.
B-50
<PAGE> 102
First Omaha Funds - Annual Report
<TABLE>
<CAPTION>
SHORT/INTERMEDIATE FIXED INCOME FUND
------------------------------------------------------------------
APRIL 10, 1995(2) JULY 1, 1994 YEAR ENDED DEC. 13, 1992
TO TO JUNE 30, TO
MARCH 31, 1996 APRIL 9, 1995 1994 JUNE 30, 1993
------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $9.66 $9.62 $10.18 $10.00
Income From Investment Operations:
Net investment income 0.51 0.42 0.55 0.33
Net realized and unrealized gains
on investments 0.18 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(3) 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(4) 0.89% 0.88% 0.83% 0.79%
Ratio of net investment income to
average net assets(4) 5.23% 5.63% 5.44% 5.91%
Ratio of net expenses to average net assets(4)(5) 1.02% 1.51% 1.38% 1.19%
Ratio of net investment income to
average net assets(4)(5) 5.10% 5.00% 4.89% 5.51%
Portfolio turnover rate(3) 41.45% 9.93% 20.52% 15.58%
</TABLE>
(1) 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.
(2) Commencement of operations
(3) Not annualized
(4) Annualized
(5) 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.
B-51
<PAGE> 103
[FIRST OF OMAHA FAMILY OF FUNDS LOGO]
FINANCIAL HIGHLIGHTS (CONT'D.)(1)
<TABLE>
<CAPTION>
FIXED INCOME FUND
-----------------------------------------------------------------------------------
APRIL 10, 1995(2) JULY 1, 1994 YEAR ENDED DEC. 13, 1992
TO TO JUNE 30, TO
MARCH 31, 1996 APRIL 9, 1995 1994 JUNE 30, 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $9.63 $9.58 $10.49 $10.00
Income From Investment Operations:
Net investment income 0.58 0.51 0.67 0.39
Net realized and unrealized gains
on investments 0.36 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(3) 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(4) 0.83% 0.87% 0.86% 0.79%
Ratio of net investment income to
average net assets(4) 5.80% 6.98% 6.52% 6.89%
Ratio of net expenses to average net assets(4)(5) 0.96% 1.51% 1.41% 1.19%
Ratio of net investment income to
average net assets(4)(5) 5.67% 6.34% 5.97% 6.49%
Portfolio turnover rate(3) 37.35% 7.04% 13.09% 2.62%
</TABLE>
(1) 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.
(2) Commencement of operations
(3) Not annualized
(4) Annualized
(5) 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.
B-52
<PAGE> 104
First Omaha Funds - Annual Report
<TABLE>
<CAPTION>
EQUITY FUND
------------------------------------------------------------------
APRIL 10, 1995(2) JULY 1, 1994 YEAR ENDED DEC. 13, 1992
TO TO JUNE 30, TO
MARCH 31, 1996 APRIL 9, 1995 1994 JUNE 30, 1993
------------------------------------------------------------------
<S> <C> <C> <C>
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(3) 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(4) 0.99% 1.03% 1.04% 1.01%
Ratio of net investment income to
average net assets(4) 2.32% 2.50% 1.93% 1.90%
Ratio of net expenses to average net assets(4)(5) 1.07% 1.62% 1.54% 1.32%
Ratio of net investment income to
average net assets(4)(5) 2.24% 1.91% 1.43% 1.59%
Portfolio turnover rate(3) 26.60% 14.36% 15.86% 4.94%
</TABLE>
(1) 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.
(2) Commencement of operations
(3) Not annualized
(4) Annualized
(5) 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.
B-53
<PAGE> 105
[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:
<TABLE>
<CAPTION>
Pre-Exchange Post-Exchange
- ---------------------------------------------------------------------------
<S> <C> <C>
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
</TABLE>
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:
<TABLE>
<CAPTION>
U.S. GOVERNMENT SHORT/INTERMEDIATE
OBLIGATIONS FIXED INCOME FIXED INCOME EQUITY
FUND FUND FUND FUND
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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
</TABLE>
B-54
<PAGE> 106
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:
<TABLE>
<CAPTION>
Before After
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
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
</TABLE>
Each series of The Sessions Group's net assets included the following:
<TABLE>
<CAPTION>
U. S. Government Short/Intermediate
Obligations Fixed Income Fixed Income Equity
Fund Fund Fund Fund
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Undistributed net realized (loss) $(15,950) $(178,976) $ (187,903) --
Net unrealized appreciation (depreciation)
on investments -- (616,601) (2,496,872) $16,255,920
</TABLE>
(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
B-55
<PAGE> 107
[FIRST OMAHA FAMILY OF FUNDS LOGO]
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.
B-56
<PAGE> 108
FIRST OMAHA FUNDS - ANNUAL REPORT
(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
B-57
<PAGE> 109
[FIRST OMAHA FAMILY OF FUNDS LOGO]
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
B-58
<PAGE> 110
FIRST OMAHA FUNDS - ANNUAL REPORT
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:
<TABLE>
<CAPTION>
U.S. GOVERNMENT SHORT/INTERMEDIATE
OBLIGATIONS FIXED INCOME FIXED INCOME EQUITY
FUND FUND FUND FUND
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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
============= ========= ========== ==========
</TABLE>
B-59
<PAGE> 111
[FIRST OMAHA FAMILY OF FUNDS LOGO]
(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:
<TABLE>
<CAPTION>
U.S. GOVERNMENT SHORT/INTERMEDIATE
OBLIGATIONS FIXED INCOME FIXED INCOME EQUITY
FUND FUND FUND FUND
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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:
<CAPTION>
U.S. GOVERNMENT SHORT/INTERMEDIATE
OBLIGATIONS FIXED INCOME FIXED INCOME EQUITY
FUND FUND FUND FUND
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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
========== ========== ========== ===========
</TABLE>
As of March 31, 1996, the cost of investments for federal income tax purposes
is substantially the same as for financial statement purposes.
B-60
<PAGE> 112
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.
(b) Exhibits
Exhibit No. Description
1.1 Articles of Incorporation
1.2 Amendment to Articles of Incorporation,
dated December 19, 1994
1.3 Amendment to Articles of Incorporation,
dated January 31, 1996
2. Bylaws
3. None.
4. None.
5.1 Investment Advisory Agreement,
as amended
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.
7. None.
8.1 Custodian Agreement, as amended
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.
C-1
<PAGE> 113
<TABLE>
<CAPTION>
<S> <C> <C>
9.3 Administrative Services Plan and
Servicing Agreement
9.4 Transfer Agency Agreement, as amended
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
10. Opinion and Consent of Messrs. Cline,
Williams, Wright, Johnson & Oldfather
11. Consent of Independent Certified Public
Accountants
12. None.
13. Subscription Agreement of Miriam M.
Allison
14. None.
15. Distribution and Service Plan
16. Not applicable.
17.1 First Omaha U.S. Gov't Fund
17.2 First Omaha Short Interm. Fund
17.3 First Omaha Fixed Income Fund
17.4 First Omaha Equity Fund
17.5 First Omaha Small Cap Fund
18. None.
</TABLE>
Item 25. Persons Controlled by or under Common Control with Registrant
None.
Item 26. Number of Holders of Securities
<TABLE>
<CAPTION>
Number of
Record Holders
Title of Class As of May 31, 1996
-------------- ------------------
<S> <C>
U.S. Government Obligations
Fund 287
Equity Fund 1,737
Short/Intermediate Fixed
Income Fund 547
Fixed Income Fund 662
Small Cap Value Fund 1
</TABLE>
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)
C-2
<PAGE> 114
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
C-3
<PAGE> 115
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, 1996. 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, 1994, 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:
<TABLE>
<CAPTION>
Positions and Positions and
Name and Principal Offices with Offices with
Business Address Underwriter Registrant
---------------- ----------- ----------
<S> <C> <C>
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
</TABLE>
C-4
<PAGE> 116
<TABLE>
<S> <C> <C>
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.
</TABLE>
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.
C-5
<PAGE> 117
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).
Registrant undertakes to file a post-effective amendment, using
financial statements of the Balanced Fund which need not be certified, within
four to six months from the effective date of this Amendment.
C-6
<PAGE> 118
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 22nd day of July, 1996. No other
material event requiring prospectus disclosure has occurred since the later of
the three dates specified in 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 July 22, 1996.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C> <C>
__
President, Principal |
- ------------------------------- Executive, Financial |
David P. Greer & Accounting Officer |
& Director |
|
|
Director |
- ------------------------------- |
Joseph Caggiano |
|
Director |
- ------------------------------- |
Robert A. Reed | /s/ Marc M Diehl
| ---------------------------------
| by Marc M Diehl, attorney-in-fact
|
|
Director |
- ------------------------------- |
M. T. Crummer |
|
Director |
- ------------------------------- |
Harry A. Koch, Jr. __|
</TABLE>
<PAGE> 119
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
<S> <C> <C>
1.1 Articles of Incorporation
1.2 Articles of Amendment to the Articles of
Incorporation of First Omaha Funds, Inc.
(dated December 19, 1994)
1.3 Articles of Amendment to the Articles of
Incorporation of First Omaha Funds, Inc.
(dated January 31, 1996)
2. Bylaws
3. None.
4. None.
5.1 Investment Advisory Agreement, as amended
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.
7. None.
8.1 Custodian Agreement, as amended
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.
9.3 Administrative Services Plan and
Servicing Agreement
9.4 Transfer Agency Agreement, as amended
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
10. Opinion and Consent of Messrs. Cline,
Williams, Wright, Johnson & Oldfather
11. Consent of Independent Certified
Public Accountants.
12. None.
13. Subscription Agreement of Miriam M.
Allison
14. None.
15. Distribution and Service Plan
16. Not applicable.
17.1 First Omaha U.S. Gov't Fund
17.2 First Omaha Short Interm. Fund
17.3 First Omaha Fixed Income Fund
17.4 First Omaha Equity Fund
17.5 First Omaha Small Cap Fund
18. None.
</TABLE>
<PAGE> 1
EXHIBIT 1.1
ARTICLES OF INCORPORATION
OF
FIRST OMAHA FUNDS, INC.
The undersigned, a natural person of the age of twenty-one years or more,
acting as the incorporator of a corporation under the Nebraska Business
Corporation Act, adopts the following Articles of Incorporation of such
corporation:
ARTICLE I.
The name of this corporation is FIRST OMAHA FUNDS, INC. (hereinafter, the
"Corporation").
ARTICLE II.
The period of the Corporation's duration is perpetual.
ARTICLE III.
The Corporation shall have general business purposes and shall have
unlimited power to engage in and do any lawful act concerning any and all
lawful businesses for which corporations may be organized under the Nebraska
Business Corporation Act. Without limiting the generality of the foregoing,
the Corporation shall have specific power:
A. To conduct, operate and carry on the business of an investment
company registered pursuant to the Investment Company Act of 1940, and
exercise all the powers necessary and appropriate to the conduct of such
operations.
B. To purchase, subscribe for, invest in or otherwise acquire, and
to own, hold, pledge, mortgage, hypothecate, sell, possess, transfer or
otherwise dispose of, realize upon, and generally deal in, all forms of
securities of every kind, nature, character, type and form, and other
financial instruments which may not be deemed to be securities, including
but not limited to futures contracts and options thereon. Such
securities and other financial instruments may include but are not
limited to shares, stocks, bonds, debentures, notes, scrip, participation
certificates, rights to subscribe, warrants, options, certificates of
deposit, bankers' acceptances, repurchase agreements, commercial paper,
choses in action, evidences of indebtedness, certificates of indebtedness
and certificates of interest of any and every kind and nature whatsoever,
secured and unsecured, issued or to be issued, by any corporation,
company, partnership (limited or general), association, trust, entity or
person, public or private, whether organized under the laws of the United
States, or any state, commonwealth, territory or posses-
<PAGE> 2
sion thereof, or organized under the laws of any foreign country, or
any state, province, territory or possession thereof, or issued or to be
issued by the United States government or any agency or instrumentality
thereof, or any state, territory or possession thereof and futures
contracts and options thereon.
C. In the above provisions of this Article III, purposes shall also
be construed as powers and powers shall also be construed as purposes,
and the enumeration of specific purposes or powers shall not be construed
to limit other statements of purposes or to limit purposes or powers
which the Corporation may otherwise have under applicable law, all of the
same being separate and cumulative, and all of the same may be carried
on, promoted and pursued, transacted or exercised in any place
whatsoever.
ARTICLE IV.
The address of the initial registered agent and office of the Corporation
in Nebraska is 1900 FirsTier Bank Building, 233 South 13th Street, Lincoln,
Nebraska and the name of the initial registered agent at such address is Donald
F. Burt.
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
$.000001 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;
and 300,000,000 shares may be issued in the series of common shares hereby
designated First Omaha U.S. Government Obligations Fund shares. The balance of
549,999,990 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.
-2-
<PAGE> 3
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 purposes 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.
ARTICLE VI.
The shareholders of the Corporation shall have no preemptive right to
subscribe to any issue of shares of any class or series of the Corporation now
or hereafter made.
ARTICLE VII.
The shareholders of the series of shares created hereby, and each class
thereof, and all future series and classes of shares authorized by the Board of
Directors shall have the following rights and preferences:
A. On any matter submitted to a vote of shareholders of the
Corporation, all common shares of the Corporation then issued and
outstanding and entitled to vote, irrespective of series, shall be voted
in the aggregate and not by series, except: (1) when otherwise required
by the Nebraska Business Corporation Act in which case shares will be
voted by individual series; (2) when otherwise required by the Investment
Company Act of 1940, as amended, or the rules adopted thereunder, in
which case shares shall be voted by individual series; and (3) when the
matter does not affect the interests of a particular series, in which
case only shareholders of the series affected shall be entitled to vote
thereon and shall vote by individual series.
-3-
<PAGE> 4
B. All consideration received by the Corporation for the issue or
sale of shares of any series, together with all assets, income, earnings,
profits and proceeds derived therefrom (including all proceeds derived
from the sale, exchange or liquidation thereof and, if applicable, any
assets derived from any reinvestment of such proceeds in whatever form
the same may be) shall become part of the assets of the portfolio to
which the shares of that series relate, for all purposes, subject only to
the rights of creditors, and shall be so treated upon the books of
account of the Corporation. Such assets, income, earnings, profits and
proceeds (including any proceeds derived from the sale, exchange or
liquidation thereof and, if applicable, any assets derived from any
reinvestment of such proceeds in whatever form the same may be) are
herein referred to as "assets belonging to" a series of the common shares
of the Corporation.
C. Assets of the Corporation not belonging to any particular series
are referred to herein as "General Assets." General Assets shall be
allocated to each series in proportion to the respective net assets
belonging to such series. The determination of the Board of Directors
shall be conclusive as to the amount of assets, as to the
characterization of assets as those belonging to a series or as General
Assets, and as to the allocation of General Assets.
D. The assets belonging to a particular series of common shares
shall be charged with the liabilities incurred specifically on behalf of
such series of common shares ("Special Liabilities"). Such assets shall
also be charged with a share of the general liabilities of the
Corporation ("General Liabilities") in proportion to the respective net
assets belonging to such series of common shares. The determination of
the Board of Directors shall be conclusive as to the amount of
liabilities, including accrued expenses and reserves, as to the
characterization of any liability as a Special Liability or General
Liability, and as to the allocation of General Liabilities.
E. Expenses related to the distribution of shares of any series
shall be allocated among the classes of shares of such series and borne
solely by the shares of the class to which the expense relates. The
accounting for an allocation of such expenses to shares of the classes of
each series shall be appropriately reflected (in the manner determined by
the Board of Directors) in the net asset value, dividends, distribution
and liquidation rights of the shares of such class and series. Any class
of shares may be subject to a Rule 12b-1 distribution fee as determined
by the Board of Directors from time to time prior to the issuance of such
shares and may also be subject to such additional fees, such as
contingent deferred sales charges, as determined by the Board of
Directors from time to time prior to the issuance of such class of
shares.
F. Unless otherwise expressly provided hereunder, or hereafter in a
resolution of the Board of Directors: (1) the holders of each series and
class of shares of the Corporation shall be entitled to dividends and
distributions in such amounts and at such times as may be determined by
the Board of Directors, to the extent permitted by the Nebraska Business
Corporation Act; (2) dividends and
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<PAGE> 5
distributions paid with respect to the various series or classes of
shares may vary among such series and classes; (3) expenses related to
distribution of, and other identified expenses as should be properly
allocated to, the shares of a particular class or series, may be charged
to and borne solely by such class or series and the bearing of expenses
solely by such class or series may be appropriately reflected (in a
manner determined by the Board of Directors) and cause differences in the
net asset value attributable to, and the dividend, redemption and
liquidation rights of, the shares of such class or series of common
shares; (4) the Corporation, unless prohibited by applicable law, shall
have the right at any time to redeem the shares of any series or class of
common shares owned by any holder thereof: (a) in connection with the
termination of any series or class of the Corporation's common shares;
(b) if the value of such shares in the account maintained by the
Corporation or its transfer agent for any series or class is less than
One Thousand Dollars ($1,000) provided that the Corporation shall provide
a shareholder with written notice at least sixty (60) days prior to
effecting such a redemption of shares as a result of not satisfying such
requirement; (c) to reimburse the Corporation for any loss it has
sustained by reason of the failure of such shareholder to make full
payment for the Corporation's common shares purchased by such
shareholder; (d) to collect any charge relating to a transaction effected
for the benefit of such shareholder which is applicable to the
Corporation's common shares as provided in any prospectus relating to
such shares; or (e) if the net income with respect to any series or class
of common shares should be negative or it should otherwise be appropriate
to carry out the Corporation's responsibilities under the Investment
Company Act of 1940, in each case subject to such further terms and
conditions as the Board of Directors may from time to time establish.
The redemption price of shares of any series or class of the
Corporation's common shares shall, except as otherwise provided in this
section, be the net asset value thereof as determined by the Board of
Directors from time to time in accordance with the provisions of
applicable law and these Articles of Incorporation, less such redemption
fee or other charge, if any, as may be fixed by the Board of Directors.
When the net income of any series or class of common shares with respect
to which the Board of Directors has, in its discretion, established a
policy of maintaining a constant net asset value per share, is negative
or whenever deemed appropriate by the Board of Directors in order to
carry out the Corporation's responsibilities under the Investment Company
Act of 1940, the Corporation may, without payment of compensation but in
consideration of the interests of the Corporation and the holders of
shares of such series or class in maintaining a constant net asset value
per share of such series or class, redeem pro rata from each holder of
record of such series or class on such day, sufficient shares to restore
such net asset value to its appropriate level.
G. Unless otherwise expressly provided for hereunder or in any
resolution of the Board of Directors creating any class or series of
common shares, in the event of any liquidation, dissolution or winding up
of the Corporation, whether voluntary or involuntary, holders of common
shares of the Corporation shall be entitled, after payment
or provision for payment of the debts and the liabilities of the
Corporation (as such liabilities may affect one or more of the
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<PAGE> 6
series or classes of shares of the Corporation), to share ratably in
the assets of the series and class in which they have invested. The
determination of the Board of Directors shall be conclusive as to the
amount of liabilities, including accrued expenses and reserves, as to the
allocation of such liabilities and expenses to a given class or series,
and as to whether the general assets of the Corporation are allocable to
any one or more classes or series.
H. With the approval of a majority of the shareholders of each of
the affected series of common shares, the Board of Directors may transfer
the assets of any portfolio to any other portfolio. Upon such a
transfer, the Corporation shall issue common shares representing
interests in the portfolio to which the assets were transferred in
exchange for all common shares representing interests in the portfolio
from which the assets were transferred. Such shares shall be exchanged
at their respective net asset values.
ARTICLE VIII.
The following additional provisions, when consistent with law, are hereby
established for the management of the business, for the conduct of the affairs
of the Corporation, and for the purpose of describing certain specific powers
of the Corporation and of its Directors and shareholders.
A. In furtherance and not in limitation of the powers conferred by
statute and pursuant to these Articles of Incorporation, the Board of
Directors is expressly authorized to do the following:
(1) to make, adopt, alter, amend and repeal Bylaws of the
corporation unless reserved to the shareholders by the Bylaws or by
the laws of the State of Nebraska, subject to the power of the
shareholders to change or repeal such Bylaws;
(2) to distribute, in its discretion, for any fiscal year (in
the year or in the next fiscal year) as ordinary dividends and as
capital gains distributions, respectively, amounts sufficient to
enable the Corporation to qualify under the Internal Revenue Code
as a regulated investment company to avoid any liability for
federal income tax in respect of such year; and any distribution or
dividend paid to shareholders from any capital source shall be
accompanied by a written statement showing the source or sources of
such payment;
(3) to authorize, subject to such vote, consent, or approval
of shareholders and other conditions, if any, as may be required by
any applicable statute, rule or regulation, the execution and
performance by the Corporation of any agreement or agreements with
any person, corporation, association, company, trust, partnership
(limited or general) or other organization whereby, subject to the
supervision and control of the Board
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<PAGE> 7
of Directors, any such other person, Corporation, association,
company, trust, partnership (limited or general), or other
organization shall render managerial, investment advisory,
distribution, transfer agent, accounting and/or other services to
the Corporation (including, if deemed advisable, the management or
supervision of the investment portfolios of the Corporation) upon
such terms and conditions as may be provided in such agreement or
agreements;
(4) to authorize any agreement of the character described in
subparagraph 3 of this paragraph (a) with any person, corporation,
association, company, trust, partnership (limited or general) or
other organization, although one or more of the members of the
Board of Directors or officers of the Corporation may be the other
party to any such agreement or an officer, director, employee,
shareholder, or member of such other party, and no such agreement
shall be invalidated or rendered voidable by reason of the
existence of any such relationship;
(5) to allot and authorize the issuance of the authorized but
unissued shares of any series of the Corporation;
(6) to accept or reject subscriptions for shares of any series
made after incorporation; and
(7) to fix the terms, conditions and provisions of and
authorize the issuance of options to purchase or subscribe for
shares of any series including the option price or prices at which
shares may be purchased or subscribed for or purchased.
B. The determination as to any of the following matters made by or
pursuant to the direction of the Board of Directors consistent with these
Articles of Incorporation and in the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of duties, shall be final
and conclusive and shall be binding upon the Corporation and every holder
of shares of its capital stocks, namely: the amount of the assets,
obligations, liabilities and expenses of each portfolio of the
Corporation and the allocation thereof to any series or class of shares;
the amount of the net income of each portfolio of the Corporation from
dividends and interest for any period and the amount of assets at any
time legally available for the payment of dividends in each portfolio;
the amount of paid-in surplus, other surplus, annual or other net
profits, or net assets in excess of capital, undivided profits, or excess
of profits over losses on sales of securities of each portfolio; the
amount, purpose, time of creation, increase or decrease, alteration or
cancellation of any reserves or charges and the propriety thereof
(whether or not any obligation or liability for which such reserves or
charges shall have been created shall have been paid or discharged); the
market value, or any sale, bid or asked price to be applied in
determining the market value, of any security owned or held by or in each
portfolio of the Corporation; the fair value of any other asset owned by
or in each portfolio of the Corporation; the number of
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<PAGE> 8
shares of each series or class of the Corporation issued or issuable;
any matter relating to the acquisition, holding and disposition of
securities and other assets by each portfolio of the Corporation; and any
question as to whether any transaction constitutes a purchase of
securities on margin, a short sale of securities, or an underwriting of
the sale of, or participation in any underwriting or selling group in
connection with the public distribution of any securities.
C. The Board of Directors or the shareholders of the Corporation may
adopt, amend, affirm or reject investment policies and restrictions upon
investment or the use of assets of each portfolio of the Corporation and
may designate some such policies as fundamental and not subject to change
other than by a vote of a majority of the outstanding voting securities,
as such phrase is defined in the Investment Company Act of 1940, of the
affected portfolio or portfolios of the Corporation.
D. The Corporation shall indemnify its directors, officers,
employees and agents, and such other persons as it may determine or agree
to indemnify, for such expenses and liabilities, in such manner, under
such circumstances, and to the full extent permitted by the Nebraska
Business Corporation Act, as now enacted or hereafter amended, provided,
however, that no such indemnification may be made if it would be in
violation of Section 17(h) of the Investment Company Act of 1940, as now
enacted or hereafter amended.
E. Any action which might be taken at a meeting of the Board of
Directors, or any duly constituted committee thereof, may be taken
without a meeting if done in writing and signed by a majority of the
Directors or committee members, and any member of the Board of Directors
or any such committee thereof may participate in a meeting of such Board
or committee by means of conference telephone or similar means by which
all participants can hear each other at the same time, unless otherwise
provided, in either case, by the Investment Company Act of 1940 or rules
or regulations promulgated thereunder.
ARTICLE IX.
In the absence of fraud no contract or other transaction between the
Corporation and any other person, corporation, firm, syndicate, association,
partnership, or joint venture shall be wholly or partially invalidated or
otherwise affected by reason of the fact that one or more of the directors of
the Corporation are or become directors or officers of such other corporation,
firm, syndicate or association, or members of such partnership or joint
venture, or are pecuniarily or otherwise interested in such contractual
transaction, provided that the fact that such director or directors of the
Corporation are so situated or so interested or both, shall be disclosed or
shall have been known to the Board of Directors of the Corporation. Any
director or directors of the Corporation who is or are also a director or
officer of such other corporation, firm, syndicate, or association, or a member
of such partnership, or joint venture, or pecuniarily or otherwise interested
in such contract or transaction, may be counted for the purpose of determining
the
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<PAGE> 9
existence of a quorum at any meeting of the Board of Directors of the
Corporation which shall authorize such contract or transaction, with like force
and effect as if he were not a director or officer of such other corporation,
firm, syndicate or association, or a member of such partnership, or joint
venture, or pecuniarily or otherwise interested in such contract or
transaction.
ARTICLE X.
Pursuant to Neb. Rev. Stat. Section 21-2052 as it presently exists or is
hereafter amended, the Corporation shall not be required to hold annual
meetings of shareholders pursuant to Neb. Rev. Stat. Section 21-2027 unless the
holding of an annual meeting of shareholders is otherwise required by these
articles of incorporation or is otherwise required by the Investment Company
Act of 1940 or rules and regulations promulgated thereunder.
ARTICLE XI.
To the fullest extent permitted by Neb. Rev. Stat. Section 21-2035(2), as
the same exists or may hereafter be amended, and to the extent not inconsistent
with the Investment Company Act of 1940 or rules and regulations promulgated
thereunder, directors of the Corporation who are not officers and who do not
control the Corporation shall not be liable to the Corporation or its
shareholders for monetary damages for breach of fiduciary duty.
ARTICLE XII.
The name and address of the incorporator is:
<TABLE>
<S> <C>
Name Address
---- -------
Donald F. Burt 1900 FirsTier Bank Building
Lincoln, NE 68508
</TABLE>
IN WITNESS WHEREOF, the undersigned sole incorporator has executed these
Articles of Incorporation on October 12, 1994.
/s/ Donald F. Burt
-------------------------
Donald F. Burt
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<PAGE> 1
EXHIBIT 1.2
ARTICLES OF AMENDMENT TO THE ARTICLES OF INCORPORATION OF
FIRST OMAHA FUNDS, INC.
The undersigned Incorporator hereby amends the Articles of Incorporation
of First Omaha Funds, Inc. (the "Corporation").
1. The name of the Corporation is First Omaha Funds, Inc.
2. These Articles of Amendment are being filed to correct a typographical
error in the Corporation's Articles of Incorporation filed with the Secretary
of State and Lancaster County Clerk on October 12, 1994. 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;
and 300,000,000 shares may be issued in the series of common shares hereby
designated First Omaha U.S. Government Obligations Fund shares. The balance of
549,999,990 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.
<PAGE> 2
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 purposes 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 Corporation having accepted no subscriptions for stock, the
Incorporator is authorized to file these Articles of Amendment.
4. This amendment increases the amount of stated capital to $10,000.
5. This amendment shall be effective as of the date of incorporation of
the Corporation.
Executed this 19th day of December, 1994.
/s/ Donald F. Burt
------------------------------
Incorporator
<PAGE> 1
EXHIBIT 1.3
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; and 50,000,000
shares may be issued in the series of common shares hereby designated First
Omaha Small Cap Value Fund shares. The balance of 499,999,990 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,
<PAGE> 2
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 purposes 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 December 5, 1995 without shareholder action, such shareholder action not
being required.
Executed this 31st day of January, 1996.
/s/ Richard P. Snyder
--------------------------------------
Richard P. Snyder, Vice President
/s/ Randy M. Pavlick
----------------------------------------
Randy M. Pavlick, Secretary
<PAGE> 1
EXHIBIT 2
BYLAWS
OF
FIRST OMAHA FUNDS, INC.
ARTICLE I
OFFICES, CORPORATE SEAL
Section 1.01. Registered Office. The registered office of the
Corporation in Nebraska shall be that set forth in the Articles of
Incorporation or in the most recent amendment of the Articles of Incorporation
or resolution of the directors filed with the Secretary of State of Nebraska
changing the registered office.
Section 1.02. Other Offices. The Corporation's initial business office
in Nebraska shall be One First National Center, Omaha, Nebraska, and the
Corporation may have such other offices and places of business, within or
without the State of Nebraska, as the directors shall, from time to time,
determine.
Section 1.03. Corporate Seal. The Corporation shall have no seal.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 2.01. Place and Time of Meetings. Meetings of the shareholders
may be held at any place, within or without the State of Nebraska, designated
by the directors and, in the absence of such designation, shall be held at the
registered office of the Corporation in the State of Nebraska. The directors
shall designate the time of day for each meeting and, in the absence of such
designation, every meeting of shareholders shall be held at 10:00 o'clock a.m.
Section 2.02. Regular Meetings. Annual meetings of shareholders will not
be held unless called by the shareholders pursuant to the Nebraska Business
Corporation Act or unless required by the Investment Company Act of 1940 and
the rules and regulations promulgated thereunder.
Section 2.03. Special Meetings. Special meetings of the shareholders may
be held at any time and for any purpose and may be called by the Chairperson of
the Board, by the President, by two or more directors, or by one or more
shareholders holding ten percent (10%) or more of the shares entitled to vote
on the matters presented to the meeting.
Section 2.04. Quorum; Adjourned Meetings. The holders of a majority of
the shares outstanding and entitled to vote at a meeting shall constitute a
quorum for the transaction of business at any shareholders' meeting unless
otherwise required by the Nebraska Business Corporation Act or by the
Investment Company Act of 1940 or rules or regulations promulgated thereunder.
In case a quorum shall not be present at a
<PAGE> 2
meeting, those present in person or by proxy shall adjourn to such day
as they shall, by majority vote, agree upon without further notice other than
by announcement at the meeting at which such adjournment is taken. If a quorum
is present, a meeting may be adjourned from time to time without notice other
than announcement at the meeting. At adjourned meetings at which a quorum is
present, any business may be transacted which might have been transacted at the
meeting as originally noticed. If a quorum is present, the shareholders may
continue to transact business until adjournment notwithstanding the withdrawal
of enough shareholders to leave less than a quorum.
Section 2.05. Voting. At each meeting of the shareholders, every
shareholder shall have the right to vote in person or by proxy. Each
shareholder, unless the Articles of Incorporation or applicable laws provide
otherwise, shall have one vote for each share having voting power registered in
his/her name on the books of the Corporation. Upon the demand of any
shareholder, the vote upon any question before the meeting shall be by written
ballot. Except as otherwise specifically provided by these Bylaws or as
required by provisions of the Investment Company Act of 1940 or other
applicable laws, all questions shall be decided by a majority vote of the
number of shares entitled to vote and represented at the meeting at the time of
the vote. If the matter(s) to be presented at a regular or special meeting
relates only to a particular portfolio or portfolios of the Corporation, then
only the shareholders of the series of stock issued by such portfolio or
portfolios are entitled to vote on such matter(s).
Section 2.06. Voting - Proxies. The right to vote by proxy shall exist
only if the instrument authorizing such proxy to act shall have been executed
in writing by the shareholder himself or by his/her attorney thereunto duly
authorized in writing. No proxy shall be voted after eleven months from its
date unless it provides for a longer period or unless permitted by applicable
law.
Section 2.07. Record Date. The Board of Directors may fix a time, not
more than fifty (50) nor less than ten (10) days preceding the date of any
meeting of shareholders, as a record date for the determination of the
shareholders entitled to notice of, and to vote at, such meeting,
notwithstanding any transfer of shares on the books of the Corporation after
any record date so fixed. If the Board of Directors fails to fix a record date
for determination of the shareholders entitled to notice of, and to vote at,
any meeting of shareholders, the record date shall be the thirtieth (30th) day
preceding the date of such meeting.
Section 2.08. Notice of Meetings. The Secretary or an Assistant
Secretary shall mail to each shareholder, shown by the books of the Corporation
to be a holder of record of voting shares, at his/her address as shown by the
books of the Corporation, a notice setting out the time and date and place of
any shareholders' meeting, which notice shall be mailed at least ten (10) and
not more than fifty (50) days prior thereto. Every notice of any shareholders'
meeting shall state the purpose or purposes for which the meeting has been
called, pursuant to Section 2.03, and the business transacted at all meetings
shall be confined to the purposes stated in the call.
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<PAGE> 3
Section 2.09. Waiver of Notice. Notice of any meeting may be waived
either before, at or after such meeting in writing signed by each shareholder
or representative thereof entitled to vote the shares so represented.
Section 2.10. Written Action. Any action which might be taken at a
meeting of the shareholders may be taken without a meeting if done in writing
and signed by all of the shareholders entitled to vote on that action. If the
action to be taken relates to a particular portfolio or portfolios of the
Corporation, then only shareholders of the series of stock issued by such
portfolio or portfolios are entitled to vote on such action.
ARTICLE III
BOARD OF DIRECTORS
Section 3.01. Number and Tenure of Office. The business of the
Corporation shall be conducted by and its property managed by a Board of
Directors consisting of no less than three (3) nor more than seven (7)
directors, which number may be increased or decreased as provided in Section
3.03 of this Article. Each director shall hold office until the next meeting of
shareholders of the Corporation next succeeding his/her election or until
his/her successor is duly elected and qualified. Directors need not be
stockholders.
The Board of Directors may elect a Chairperson, who shall preside at
meetings and shall have such other responsibilities and duties as may be
requested of or assigned to him by the Board.
Section 3.02. Vacancies. In case of any vacancy in the Board of
Directors through death, resignation or other cause, a majority of the
remaining directors, although such majority is less than a quorum, by an
affirmative vote, may, subject to any limitations contained in the Articles of
Incorporation, or the Investment Company Act of 1940, elect a successor to hold
office until the next annual meeting of the shareholders of the Corporation or
until his/her successor is duly elected and qualified.
Section 3.03. Increase or Decrease in Number of Directors. Subject to
any limitations contained in the Articles of Incorporation, the Board of
Directors, by the vote of a majority of the entire Board, may increase the
number of directors, and any vacancies so created shall be filled by the
shareholders at the next meeting of shareholders called for that purpose.
Subject to the said limitations, the Board of Directors, by the vote of a
majority of the entire Board, may likewise decrease the number of directors to
a number not less than three.
Section 3.04. Election of Entire New Board. If at any time after the
first meeting of shareholders of the corporation more than one-third of the
directors in office shall consist of directors elected by the Board of
Directors, a meeting of the shareholders shall be called forthwith for the
purpose of electing the entire Board of Directors, and the terms of office of
the directors then in office shall terminate upon the election and
qualification of such Board of Directors. This Section 3.04 may be altered,
amended or repealed only upon the affirmative vote of the holders of a majority
of all the shares of the common stock of the Corporation at the time
outstanding and entitled to vote, except that
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<PAGE> 4
this Section 3.04 may be amended by the Board of Directors to reflect
or conform to the provisions of the Investment Company Act of 1940 or rules or
regulations promulgated thereunder, as the same may exist from time to time.
Section 3.05. Place of Meetings, Office and Records. The directors
may hold their meetings, have one or more offices and keep the books of the
Corporation outside the State of Nebraska at any office or offices of the
Corporation or at any other place as they may from time to time by resolution
determine, or, in the case of meetings, as shall be specified or fixed in the
respective notices or waivers of notice thereof.
Section 3.06. Regular Meetings. Regular meetings of the Board of
Directors shall be held quarterly at such time and on such notice as the
directors may from time to time determine.
A meeting of the Board of Directors shall be held immediately after a
meeting of the shareholders called for the election of directors. Said meeting
shall be held at the same place as the shareholders' meeting. No notice of
such meeting of the Board of Directors is required.
Section 3.07. Special Meetings. Special meetings of the Board of
Directors may be held from time to time upon call of the President or of a
majority of the directors by oral or telegraphic or written notice duly served
on or sent or mailed to each director not less than two (2) days before such
meeting. No notice need be given to any director who attends in person or to
any director who, in writing executed and filed with the records of the meeting
either before or after the holding thereof, waives such notice. Such notice or
waiver of notice need not state the purpose or purposes of such meeting.
Section 3.08. Quorum. A majority of the directors shall constitute a
quorum for the transaction of business, provided that a quorum shall in no case
be less than two directors. If at any meeting of the Board there shall be less
than a quorum present, a majority of those present may adjourn the meeting from
time to time until a quorum shall have been obtained. The act of the majority
of the directors present at any meeting at which there is a quorum shall be the
act of the directors, except as otherwise provided in the Articles of
Incorporation or in these Bylaws, or by specific statutory provisions
superseding the restrictions and limitations in the Articles of Incorporation
or in these Bylaws, or any contract or agreement to which the Corporation is a
party.
Section 3.09. Executive Committee. The Board of Directors may, in each
year, by the affirmative vote of a majority of the entire Board, elect from the
directors an Executive Committee to consist of such number of directors (not
less than two) as the Board may from time to time determine. The Chairperson
of the Committee shall be elected by the Board of Directors. The Board of
Directors by affirmative vote shall have power at any time to change the
members of such Committee and may fill vacancies in the Committee by election
from the directors. When the Board of Directors is not in session, the
Executive Committee shall have and may exercise any or all of the powers of the
Board of Directors in the management of the business and affairs of the
Corporation except as provided by law or by any contract or agreement to which
the Corporation
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<PAGE> 5
is a party and except the power to increase or decrease the size of, or
fill vacancies on, the Board, to remove or appoint executive officers or to
dissolve, or change the membership of, the Executive Committee, and the power
to make or amend the Bylaws of the Corporation. The Executive Committee may
fix its own rules for the conduct of its business or such rules may be
established by resolution of the Board of Directors, but in every case the
presence of a majority shall be necessary to constitute a quorum. In the
absence of any member of the Executive Committee, the members thereof present
at any meeting, whether or not they constitute a quorum, may appoint a member
of the Board of Directors to act in the place of such absent member.
Section 3.10. Investment Committee. The Board of Directors may appoint
an Investment Committee, consisting of three or more members, all of whom shall
be members of the Board of Directors. The Board of Directors may remove any
member and may appoint new alternate or additional members of the Investment
Committee, and may request persons who are not directors to serve as ex officio
members. It shall be the function of the Investment Committee to advise the
Board of Directors as to the investment of the assets of the Corporation. The
Investment Committee shall have no power or authority to make any contract or
incur any liability whatever or to take any action binding upon the
Corporation, the officers, the Board of Directors or the shareholders.
Section 3.11. Other Committees. The Board of Directors, by the
affirmative vote of a majority of the entire Board, may appoint other
committees which shall in each case consist of such number of members (not less
than two) who are members of the Board of Directors and shall have and may
exercise such powers as the Board may determine in the resolution appointing
them. A majority of all members of any such committee may determine its action
and fix the time and place of its meeting, unless the Board of Directors shall
otherwise provide. The Board shall have power at any time to change the
members and powers of any such committee, to fill vacancies, and to discharge
any such committee, or to request persons who are not directors to serve as ex
officio members thereof.
Section 3.12. Action by Consent. Unless otherwise provided by the
Articles of Incorporation or Bylaws, or by the Investment Company Act of 1940
or rules or regulations promulgated thereunder, any action required by statute
to be taken at a meeting of the directors, or of any committee, may be taken
without a meeting, if a consent in writing setting forth the action so taken
shall be signed by all of the directors or all of the members of the committee,
as the case may be. Such consent shall have the same effect as a unanimous
vote. The consent may be executed by the directors in counterparts.
Members of the Board of Directors, or any committee designated by the
Board, may participate in a meeting of the Board or such committee by
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and participation in
a meeting pursuant to this provision shall constitute presence in person at
such meeting, unless otherwise provided by the Investment Company Act of 1940
or rules or regulations promulgated thereunder.
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Section 3.13. Compensation of Directors. Directors who are also officers
or employees of the Corporation's investment adviser or principal underwriter,
shall take no compensation and expenses for the attendance at a meeting. Other
directors shall receive such compensation and reimbursement for expenses as
shall be fixed by the Board of Directors.
ARTICLE IV
OFFICERS
Section 4.01. Number. The officers of the corporation shall consist
of a Chairperson of the Board (if one is elected by the Board), the President,
one or more Vice Presidents (if desired by the Board), a Secretary and (if
desired by the Board) one or more Assistant Secretaries, a Treasurer and (if
desired by the Board) one or more Assistant Treasurers, and such other officers
and agents as may, from time to time, be elected by the Board of Directors.
Any two offices except those of Chairperson of the Board, President and Vice
President may be held by one person.
Section 4.02. Election, Term of Office and Qualifications. At least
annually the Board shall elect, from within or without their number, the
President, the Secretary, the Treasurer and such other officers as may be
deemed advisable. Such officers shall hold office until their successors are
duly elected and qualified. The President and all other officers who may be
directors shall continue to hold office until the election and qualification of
their successors, notwithstanding an earlier termination of their directorship.
Section 4.03. Resignation. Any officer may resign his/her office at any
time by delivering a written resignation to the Board of Directors, the
President, the Secretary, or any Assistant Secretary. Unless otherwise
specified therein, such resignation shall take effect upon delivery.
Section 4.04. Removal and Vacancies. Any officer may be removed from
his/her office by a majority of the whole Board of Directors, with or without
cause. Such removal, however, shall be without prejudice to the contract
rights of the person so removed. If there be a vacancy among the officers of
the Corporation by reason by death, resignation or otherwise, such vacancy
shall be filled for the unexpired term by the Board of Directors.
Section 4.05. Chairperson of the Board. The Chairperson of the Board, if
one is elected, shall preside at all meetings of the shareholders and directors
and shall have such other duties as may be prescribed, from time to time, by
the Board of Directors.
Section 4.06. President. The President shall have general active
management of the business of the Corporation. In the absence of the
Chairperson of the Board, he/she shall preside at all meetings of the
shareholders and directors. He/she shall be the chief executive officer of the
Corporation and shall see that all orders and resolutions of the Board of
Directors are carried into effect. He/she shall be ex officio a member of all
standing committees. He/she may execute and deliver, in the name of the
Corporation,
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any deeds, mortgages, bonds, contracts or other instruments
pertaining to the business of the Corporation and, in general, shall perform
all duties usually incident to the office of President. He/she shall have such
other duties as may, from time to time, be prescribed by the Board of
Directors.
Section 4.07. Vice President. Each Vice President shall have such powers
and shall perform such duties as may be specified in the Bylaws or prescribed
by the Board of Directors or by the President. In the event of absence or
disability of the President, Vice Presidents shall succeed to his/her power and
duties in the order designated by the Board of Directors.
Section 4.08. Secretary. The Secretary shall be secretary of, and shall
attend, all meetings of the shareholders and Board of Directors and shall
record all proceedings of such meetings in the minute book of the Corporation.
He/she shall give proper notice of meetings of shareholders and directors.
He/she shall perform such other duties as may, from time to time, be prescribed
by the Board of Directors or by the President.
Section 4.09. Treasurer. The Treasurer shall keep accurate accounts of
all moneys of the Corporation received or disbursed. He/she shall deposit all
moneys, drafts and checks in the name of, and to the credit of, the Corporation
in such banks and depositories as a majority of the whole Board of Directors
shall, from time to time designate. He/she shall have power to endorse, for
deposit, all notes, checks and drafts received by the Corporation. He/she
shall disburse the funds of the Corporation, as ordered by the Board of
Directors, making proper vouchers therefor. He/she shall render to the
President and the directors, whenever required, an account of all his/her
transactions as Treasurer and of the financial condition of the Corporation,
and shall perform such other duties as may, from time to time, be prescribed by
the Board of Directors or by the President.
Section 4.10. Assistant Secretaries. At the request of the Secretary, or
in his/her absence or disability, any Assistant Secretary shall have power to
perform all the duties of the Secretary and, when so acting, shall have all the
powers of, and be subject to all restrictions upon, the Secretary. The
Assistant Secretaries shall perform such other duties as from time to time may
be assigned to them by the Board of Directors or the President.
Section 4.11. Assistant Treasurers. At the request of the Treasurer, or
in his/her absence or disability, any Assistant Treasurer shall have power to
perform all the duties of the Treasurer, and when so acting, shall have all the
powers of, and be subject to all the restrictions upon, the Treasurer. The
Assistant Treasurers shall perform such other duties as from time to time may
be assigned to them by the Board of Directors or the President.
Section 4.12. Compensation. The officers of the Corporation shall
receive such compensation for their services as may be determined, from time to
time, by resolution of the Board of Directors.
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Section 4.13. Surety Bonds. The Board of Directors may require any
officer or agent of the Corporation to execute a bond (including, without
limitation, any bond required by the Investment Company Act of 1940 and rules
or regulations promulgated thereunder) to the Corporation in such sum and with
such surety or sureties as the Board of Directors may determine, conditioned
upon the faithful performance of his/her duties to the Corporation, including
responsibility for negligence and for the accounting of any of the
Corporation's property, funds or securities that may come into his/her hands.
In any such case, a new bond of like character shall be given at least every
six years, so that the date of the new bond shall not be more than six years
subsequent to the date of the bond immediately preceding.
ARTICLE V
SHARES AND THEIR TRANSFER AND REDEMPTION
Section 5.01. Certificates for Shares. Shares issued by the corporation
shall be uncertificated.
Section 5.02. Issuance of Shares. The Board of Directors is
authorized to cause to be issued shares of the Corporation up to the full
amount authorized by the Articles of Incorporation in such series and classes
and in such amounts as may be determined by the Board of Directors and as may
be permitted by law. No shares shall be allotted except in consideration of
cash or property, including securities valued in accordance with procedures
adopted by the Board of Directors. At the time of such allotment of shares,
the Board of Directors making such allotments shall state, by resolution, their
determination of the fair value to the Corporation in monetary terms of any
consideration other than cash for which shares are allotted. No shares of stock
issued by the Corporation shall be issued, sold, or exchanged by or on behalf
of the Corporation for any amount less than the net asset value per share of
the shares outstanding as determined pursuant to Article X hereunder.
Section 5.03. Redemption of Shares. Upon the demand of any shareholder
the Corporation shall redeem any share of stock issued by it held and owned by
such shareholder at the net asset value thereof as determined pursuant to
Article X hereunder. The Board of Directors may suspend the right of
redemption or postpone the date of payment during any period when: (a) trading
on the New York Stock Exchange is restricted or such Exchange is closed for
other than weekends or holidays; (b) the Securities and Exchange Commission has
by order permitted such suspension; or (c) an emergency as defined by rules of
the Securities and Exchange Commission exists, making disposal of portfolio
securities or valuation of net assets of the Corporation not reasonably
practicable.
Section 5.04. Transfer of Shares. Transfer of shares on the books of the
Corporation may be authorized only by the shareholder named on the books of the
Corporation in the case of uncertificated shares or in the certificate in the
case of certificated shares, or the shareholder's legal representative, or the
shareholder's duly authorized attorney-in-fact, and, in the case of
certificated shares, upon surrender of the certificate or the certificates for
such shares or a duly executed assignment covering
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shares held in uncertificated form. The Corporation may treat, as the
absolute owner of shares of the Corporation, the person or persons in whose
name shares are registered on the books of the Corporation.
Section 5.05. Registered Shareholders. The Corporation shall be entitled
to treat the holder of record of any share or shares of stock as the holder in
fact thereof and accordingly shall not be bound to recognize any equitable or
other claim to or interest in such share on the part of any other person,
whether or not it shall have express or other notice thereof, except as
otherwise expressly provided by the laws of Nebraska.
Section 5.06. Transfer Agents and Registrars. The Board of Directors may
from time to time appoint or remove transfer agents and/or registrars of
transfers of shares of stock of the Corporation, and it may appoint the same
person as both transfer agent and registrar. Upon any such appointment being
made any certificates representing shares of capital stock thereafter issued
shall be countersigned by one of such transfer agents or by one of such
registrars of transfers or by both and shall not be valid unless so
countersigned. If the same person shall be both transfer agent and registrar,
only one countersignature by such person shall be required.
Section 5.07. Transfer Regulations. The shares of stock of the
Corporation may be freely transferred, and the Board of Directors may from time
to time adopt rules and regulations with reference to the method of transfer of
the shares of stock of the Corporation.
ARTICLE VI
DIVIDENDS
It shall be the policy of the Corporation to distribute to its
shareholders, at least annually, sufficient net investment income and realized
capital gains in order to comply with the provisions of the United States
Internal Revenue Code which relieve regulated investment companies from Federal
Income Tax. The Board of Directors may provide to the shareholders a plan for
reinvesting such net investment income and capital gains under such terms and
conditions as they, in their discretion, shall deem desirable.
ARTICLE VII
BOOKS AND RECORDS, AUDIT, FISCAL YEAR
Section 7.01. Books and Records. The Board of Directors of the
Corporation shall cause to be kept:
(1) a share register, giving the names and addresses
of the shareholders, the number and classes held by each, and
the dates on which the shares were issued;
(2) records of all proceedings of shareholders and
directors; and
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(3) such other records and books of account as shall
be necessary and appropriate to the conduct of the corporate
business.
Section 7.02. Documents Kept at Registered Office. The Board of
Directors shall cause to be kept originals or copies of:
(1) records of all proceedings of the shareholders and
directors;
(2) Bylaws of the corporation and all amendments thereto;
and
(3) reports made to any or all of the shareholders within
the last preceding three (3) years.
Section 7.03. Audit, Accountant.
(a) The Board of Directors shall cause the records and books of account of
the Corporation to be audited at least once in each fiscal year and at such
other times as it may deem necessary or appropriate.
(b) The Corporation shall employ an independent certified public
accountant or firm of independent certified public accountants as its
Accountant to examine the accounts of the Corporation and to sign and certify
financial statements filed by the Corporation. The Accountant's certificates
and reports shall be addressed both to the Board of Directors and to the
shareholders.
(c) The selection of the Accountant, or the filing of any vacancy
occurring due to the death, resignation or other termination of the engagement
of the Accountant, may be done by a majority of the Board of Directors, unless
another method is prescribed in the Investment Company Act of 1940 or rules or
regulations promulgated thereunder.
Section 7.04. Fiscal Year. The corporation shall operate and its
financial statements shall be prepared on a fiscal year as determined from time
to time by the Board of Directors.
ARTICLE VIII
INSPECTION OF BOOKS
Section 8.01. Every shareholder of the Corporation and every holder of a
voting trust certificate shall have a right to examine, in person or by agent
or attorney, at any reasonable time or times, for any proper purpose, and at
the place or places where usually kept, the share register, books of account
and records of the proceedings of the shareholders and directors and to make
extracts therefrom.
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ARTICLE IX
VOTING OF STOCK HELD
Section 9.01. Unless otherwise provided by resolution of the Board of
Directors, the President, any Vice President, the Secretary or the Treasurer,
may from time to time appoint an attorney or attorneys or agent or agents of
the Corporation, in the name and on behalf of the Corporation, to cast the
votes which the Corporation may be entitled to cast as a stockholder or
otherwise in any other corporation or association, any of whose stock or
securities may be held by the Corporation, at meetings of the holders of the
stock or other securities of any such other corporation or association, or to
consent in writing to any action by any such other corporation or association,
and may instruct the person or persons so appointed as to the manner of casting
such votes or giving such consent, and may execute or cause to be executed on
behalf of the Corporation such written proxies, consents, waivers, or other
instruments as it may deem necessary or proper in the circumstances; or any of
such officers may themselves attend any meeting of the holders of stock or
other securities of any such corporation or association and thereat vote or
exercise any or all other powers of the Corporation as the holder of such stock
or other securities of such other corporation or association, or consent in
writing to any action by any such other corporation or association.
ARTICLE X
DETERMINATION OF NET ASSET VALUE
Section 10.01. The net asset value per share of each series or class of
stock issued by the portfolios of the Corporation shall be determined in good
faith by or under supervision of the officers of the Corporation as authorized
by the Board of Directors as often and on such days and at such time(s) at the
Board of Directors shall determine. Provisions in the currently effective
Prospectus of the Corporation regarding determination of net asset value shall
be controlling.
Section 10.02. For purposes of the computation of net asset value of the
corporation's shares, the following shall apply:
(a) The Board of Directors, or its authorized officer or other
representative, shall compute the net asset value of shares of common stock at
such times and by such methods as may be required by the Investment Company Act
of 1940 or rules or regulations promulgated thereunder. In the absence of any
such requirements, such computation shall be made at least once each day on
which the New York Stock Exchange is open for unrestricted trading. Such
computation shall be as of the close of the New York Stock Exchange.
The Board of Directors may cause the net asset value to be computed at
other times and may vary or terminate the effective periods, to the extent
permitted by applicable law.
(b) The net asset value in effect for the purpose of the issue of common
stock to the public shall be the net asset value next determined after receipt
of a purchase order
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in proper form at the principal office of the Corporation or its agent
or in accordance with any provision of the Investment Company Act of 1940 and
any rule or regulation thereunder, or any rule or regulation made or adopted by
any Securities Association registered under the Securities Exchange Act of
1934.
(c) The net asset value applicable to each share of common stock of the
corporation surrendered to the Corporation for redemption, pursuant to the
provisions of Article V, Section 5.03 hereof, shall be that value next
determined after the request for redemption is properly received by the
Corporation or its agent at either of their principal offices, or in accordance
with such other requirements as may be determined by the directors for
expediting redemptions.
(d) The net asset value of each share of common stock of the Corporation
shall be the quotient obtained by dividing the value of the net assets of the
respective series of shares of the Corporation (the value of the assets less
its liabilities exclusive of common stock and surplus) by the total number of
shares of common stock outstanding of the series at such close all determined
and computed as follows:
(1) The assets shall be deemed to include:
(i) All cash on hand, on deposit or on call;
(ii) All bills and notes and accounts receivable;
(iii) All shares of stock and subscription rights and
other securities owned or contracted for by the Corporation,
other than its own stock;
(iv) All stock and cash dividends and cash distributions to
be received by the Corporation and not yet received by it,
but declared to shareholders of record on a date on or
before the date as of which the net asset value is being
determined;
(v) All interest accrued on any interest bearing securities
owned by the Corporation; and
(vi) All other property of any kind and nature
including prepaid expenses, the value of such assets to be
determined by the Board of Directors according to a method as
they shall in good faith determine to reflect fair market
value.
In determining the value of the assets of the Corporation
for the purpose of obtaining the net asset value, securities
with maturities of sixty days or less will be valued at cost
and interest will be accrued daily. All other assets of the
Corporation shall be valued by such method as the Board of
Directors in good faith shall deem to reflect their fair
market value.
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(2) The liabilities of the Corporation shall be deemed to include:
(i) All bills and notes and accounts payable:
(ii) All administrative expenses payable and/or
accrued (including management fees);
(iii) All contractual obligations for the payment of
money or property, including the amount of any unpaid
dividend declared upon the Corporation's stock and payable to
shareholders of record on or before the day as of which the
value of the Corporation's stock is being determined;
(iv) All reserves, if any, authorized or approved by
the Board of Directors for taxes; and
(v) All other liabilities of the Corporation of
whatsoever kind and nature, except liabilities represented by
outstanding common stock and surplus of the Corporation.
(3) For the purpose hereof:
(i) Common stock subscribed for shall be deemed
to be outstanding as of the time of acceptance of any
subscription and the entry thereof on the books of the
Corporation and the net price thereof shall be deemed to be
an asset of the corporation; and
(ii) Common stock surrendered for redemption to the
Corporation pursuant to the provisions of Section 5.03 hereof
shall be deemed to be outstanding until the close of business
on the date surrendered and, thereupon, and until paid, the
redemption price thereof shall be deemed to be a liability of
the Corporation.
ARTICLE XI
CUSTODY OF ASSETS
Section 11.01. All securities and cash owned by the Corporation shall, as
hereinafter provided, be held by or deposited with a bank or trust company
having (according to its last published report) not less than fifty million
dollars ($50,000,000) aggregate capital, surplus and undivided profits (the
"Custodian").
The Corporation shall enter into a written contract with the Custodian
regarding the powers, duties and compensation of the Custodian with respect to
the cash and securities of the Corporation held by the Custodian. Said
contract and all amendments thereto shall be approved by the Board of Directors
of the Corporation. In the event of the Custodian's resignation or
termination, the Corporation shall use its best efforts promptly to obtain a
successor Custodian and shall require that the cash and
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securities owned by the Corporation held by the Custodian be delivered
directly to such successor Custodian.
ARTICLE XII
AMENDMENTS; DEFINITIONS
Section 12.01. Except as otherwise provided herein, in the Articles of
Incorporation, or in applicable laws or regulations, these Bylaws may be
amended or altered by a vote of the majority of the whole Board of Directors at
any meeting provided that notice of such proposed amendment shall have been
given in the notice given to the directors of such meeting. Such authority in
the Board of Directors is subject to the power of the shareholders to change or
repeal such Bylaws by a majority vote of the shareholders present or
represented at any meeting of shareholders called for such purpose. The Board
of Directors shall not make or alter any Bylaws fixing their qualifications,
classifications, term of office, or number, except that the Board of Directors
may make or alter any Bylaw to increase their number.
Section 12.02. Except as otherwise provided herein, terms used in these
Bylaws shall have the same definitions as comparable terms used in the Articles
of Incorporation.
Section 12.03. The provisions of these Bylaws shall, in all respects, be
subject to the Investment Company Act of 1940 and rules and regulations
promulgated thereunder, the provisions of which shall be controlling as to
subjects addressed herein; and any ambiguity herein or interpretation of the
provisions hereof shall be resolved in a manner which effectuates the
provisions of such Act and such rules and regulations.
ARTICLE XIII
INDEMNIFICATION
No indemnification shall be made by this corporation that is
inconsistent with the guidelines set forth in Investment Company Act Releases
No. 7221 (June 9, 1972) and No. 11330 (September 2, 1980) or, if such releases
are modified, superseded or rescinded, the guidelines set forth in any
successor releases regarding indemnification under Section 17(h) of the
Investment Company Act of 1940.
This copy of the Bylaws is a true and accurate copy of the Bylaws approved
and adopted by the Board of Directors on October 17, 1994.
/s/ Randy Pavlick
----------------------------
Randy Pavlick, Secretary
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EXHIBIT 5
INVESTMENT ADVISORY AGREEMENT
AGREEMENT executed as of December 20, 1994, and effective as of the
commencement of operations of the hereinafter defined Company, between FIRST
OMAHA FUNDS, INC., a Nebraska corporation (herein called the "Company"), and
FIRST NATIONAL BANK OF OMAHA, a national banking association (herein called the
"Investment Adviser").
WHEREAS, the Company is registered as an open-end, diversified, management
investment company under the Investment Company Act of 1940, as amended ("1940
Act"); and
WHEREAS, the Company desires to retain the Investment Adviser to furnish
investment advisory and administrative services to four newly created
investment portfolios of the Company, and may retain the Investment Adviser to
serve in such capacity to certain additional investment portfolios of the
Company, all as now or hereafter may be identified in Schedule A hereto (such
initial investment portfolios and any such additional investment portfolios
together called the "Funds"), and the Investment Adviser represents that it is
willing and possesses legal authority to so furnish such services without
violation of applicable laws and regulations;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Company hereby appoints the Investment Adviser to act
as investment adviser to the Funds for the period and on the terms set forth in
this Agreement. The Investment Adviser accepts such appointment and agrees to
furnish the services herein set forth for the compensation herein provided.
Additional investment portfolios may from time to time be added to those
covered by this Agreement by the parties executing a new Schedule A which shall
become effective upon its execution and shall supersede any Schedule A having
an earlier date.
2. Delivery of Documents. The Company has furnished the Investment
Adviser with copies properly certified or authenticated of each of the
following:
a. the Company's Articles of Incorporation, executed as of October
12, 1994, and as filed with the Secretary of State of Nebraska on October
12, 1994, and any and all amendments thereto or restatements thereof
(such document as presently in effect and as it shall from time to time
be amended or restated, is herein called the "Articles");
b. the Company's By-Laws and any amendments thereto;
c. resolutions of the Company's Board of Directors authorizing the
appointment of the Investment Adviser and approving this Agreement;
<PAGE> 2
d. the Company's Notification of Registration on Form N-8A under the
1940 Act as filed with the Securities and Exchange Commission ("SEC") on
November 1, 1994, and all amendments thereto;
e. the Company's Registration Statement on Form N-1A under the
Securities Act of 1933, as amended ("1933 Act"), (File No. 33-85982), and
under the 1940 Act as filed with the SEC and all amendments thereto; and
f. the most recent Prospectus and Statement of Additional
Information of each of the Funds (such Prospectus and Statement of
Additional Information, as presently in effect, and all amendments and
supplements thereto, are herein collectively called the "Prospectus").
The Company will furnish the Investment Adviser from time to time with
copies of all amendments of or supplements to the foregoing.
3. Management. Subject to the supervision of the Company's Board of
Directors, the Investment Adviser will provide a continuous investment program
for the Funds, including investment research and management with respect to all
securities and investments and cash equivalents in the Funds. The Investment
Adviser will determine from time to time what securities and other investments
will be purchased, retained or sold by the Company, with respect to the Funds.
The Investment Adviser will provide the services under this Agreement in
accordance with each of the Fund's investment objectives, policies, and
restrictions as stated in the Prospectus and resolutions of the Company's Board
of Directors. With the approval of the Company's Board of Directors, and
subject to applicable provisions of the 1940 Act, the Investment Adviser may
appoint sub-advisers to assist it in the performance of its duties hereunder.
The Investment Adviser further agrees that it:
a. will use the same skill and care in providing such services as it
uses in providing services to fiduciary accounts for which it has
investment responsibilities;
b. will conform with all applicable Rules and Regulations of the
SEC, including but not limited to, Rules 17f-2 and 17f-4 of the 1940 Act
and in addition will conduct its activities under this Agreement in
accordance with any applicable regulations of any governmental authority
pertaining to the investment advisory activities of the Investment
Adviser;
c. will not make loans to any person to purchase or carry shares of
the Company or make loans to the Company;
d. will place orders pursuant to its investment determinations for
the Funds either directly with the issuer or with any broker or dealer.
In placing orders with brokers and dealers, the Investment Adviser will
attempt to obtain prompt execution of orders in an effective manner at
the most favorable price.
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Consistent with this obligation and to the extent permitted by the 1940
Act, the Investment Adviser may, in its discretion, purchase and sell
portfolio securities to and from brokers and dealers who provide the
Investment Adviser with research advice and other services. The
Investment Adviser may authorize the Fund to pay a commission in excess
of the commission another broker-dealer would have charged if the
Investment 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 Investment Adviser's overall
responsibilities to the accounts it manages. In no instance will
portfolio securities be purchased from or sold to Sunstone Financial
Group, Inc. ("Sunstone"), the Investment Adviser, or any affiliated
person of the Company, Sunstone or the Investment Adviser acting as
principal; in no instance will portfolio securities be sold or purchased
through Sunstone, the Investment Adviser or any affiliated person of the
Company except in strict compliance with Rule 17e-1 under the 1940 Act;
in no instance will the Company purchase securities of which the
Investment Adviser or any affiliated person of the Company is an
underwriter except in strict compliance with Rule 10f-3 under the 1940
Act; in no instance will any Fund purchase securities from, or sell
securities to another Fund in a principal transaction except in strict
compliance with Rule 17a-7 under the 1940 Act; and in no instance will
any Fund engage in any joint or joint and several participation in any
transaction with any other Fund in violation of Section 17(d) of the 1940
Act.
e. will maintain all books and records with respect to the
securities transactions of the Funds and will furnish the Company's Board
of Directors such periodic and special reports as the Board may request;
f. will treat confidentially and as proprietary information of the
Company all records and other information relative to the Company and the
Funds and prior, present, or potential shareholders, will not use such
records and information for any purpose other than performance of its
responsibilities and duties hereunder, except after prior notification to
and approval in writing by the Company, which approval shall not be
unreasonably withheld and may not be withheld where the Investment
Adviser may be exposed to civil or criminal contempt proceedings for
failure to comply, when requested to divulge such information by duly
constituted authorities, or when so requested by the Company; and
g. will maintain its policy and practice of conducting its fiduciary
functions independently. In making investment recommendations for the
Funds, the Investment Adviser's personnel will not inquire or take into
consideration whether the issuers of securities proposed for purchase or
sale for the Company's account are customers of the Investment Adviser or
of its parent or its subsidiaries or affiliates. In dealing with such
customers, the Investment Adviser and its parent, subsidiaries, and
affiliates will not inquire or take into consideration whether securities
of those customers are held by the Company.
-3-
<PAGE> 4
4. Services Not Exclusive. The investment management services furnished
by the Investment Adviser hereunder are not to be deemed exclusive, and the
Investment Adviser shall be free to furnish similar services to others so long
as its services under this Agreement are not impaired thereby.
5. Books and Records. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Investment Adviser hereby agrees that all records which
it maintains for the Funds are the property of the Company and further agrees
to surrender promptly to the Company any of such records upon the Company's
request. The Investment Adviser further agrees to preserve for the periods
prescribed by Rule 31a-2 under the 1940 Act the records required to be
maintained by Rule 31a-1 under the 1940 Act.
6. Expenses. During the term of this Agreement, the Investment Adviser
will pay all expenses incurred by it in connection with its activities under
this Agreement, including but not limited to, expenses related to all office
space, facilities, equipment and clerical personnel necessary for the
Investment Adviser to carry out its duties and obligations under this
Agreement, but excluding the cost of securities (including brokerage
commission, issue and transfer taxes, if any) purchased for the Funds. Each of
the Funds shall bear the following expenses relating to its operations:
organizational expenses, taxes, interest, any brokerage fees and commissions,
fees of the Directors of the Company, Securities and Exchange Commission fees,
state securities registration fees and expenses, costs of preparing and
printing prospectuses for regulatory purposes and for distribution to a Fund's
current Shareholders, outside auditing and legal expenses, advisory and
administration fees, fees and out-of-pocket expenses of the custodian and
transfer agent, costs of Fund accounting services, 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
Company's Distribution and Shareholder Service Plan, any extraordinary expenses
incurred in the Fund's operation and other operating expenses not assumed by a
Company's service providers.
7. Compensation. For the services provided and the expenses assumed
pursuant to this Agreement, each of the Funds will pay the Investment Adviser
and the Investment Adviser will accept as full compensation therefor a fee,
computed daily and paid monthly in arrears, equal to the lesser of (a) the fee
set forth on Schedule A hereto or (b) such other fee as may from time to time
be agreed upon in writing by the Company and the Investment Adviser. The
obligations of the Funds to pay the above-described fee to the Investment
Adviser will begin as of the respective dates of the initial public sale of
shares in the Funds.
If in any fiscal year the aggregate expenses of any of the Funds (as
defined under the securities regulations of any state having jurisdiction over
the Company) exceed the expense limitations of any such state, the Investment
Adviser will reimburse the Fund for such excess expenses, provided that the
obligation of the Investment Adviser to reimburse the Funds hereunder is
limited in any fiscal year to the amount of its fee hereunder for such fiscal
year; provided further, however, that notwithstanding the
-4-
<PAGE> 5
foregoing, the Investment Adviser shall reimburse the Funds for such
excess expenses regardless of the amount of fees paid to it during such fiscal
year to the extent that the securities regulations of any state having
jurisdiction over the Company so require. Such expense reimbursement, if any,
will be estimated daily and reconciled and paid on a monthly basis.
8. Notices of Meetings. The Company agrees that notice of each regular
meeting of the Board of Directors of the Company will be sent or otherwise
given to the Investment Adviser. To the extent that the directors of the
Company invite any person or persons employed by the Investment Adviser to
attend any such meeting, the Company agrees that it will make the appropriate
arrangements, at the expense of the Investment Adviser, for the attendance by
such person or persons or by such other person or persons as the Investment
Adviser may designate.
9. Limitation of Liability. The Investment Adviser shall not be liable
for any error of judgment or mistake of law or for any loss suffered by the
Funds in connection with the performance of this 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 Investment Adviser in the
performance of its duties or from reckless disregard by it of its obligations
and duties under this Agreement.
10. Duration and Termination. This Agreement will become effective as of
the date first written above (or, if a particular Fund is not in existence on
that date, on the date a registration statement relating to that Fund becomes
effective with the SEC), provided that it shall have been approved by a vote of
a majority of the outstanding voting securities of such Fund, in accordance
with the requirements under the 1940 Act, and, unless sooner terminated as
provided herein, shall continue in effect until June 30, 1996.
Thereafter, if not terminated, this Agreement shall continue in effect as
to a particular Fund for successive periods of twelve months each ending on
June 30 of each year, provided such continuance is specifically approved at
least annually (a) by the vote of a majority of those members of the Company's
Board of Directors who are not parties to this Agreement or interested persons
of any party to this Agreement, cast in person at a meeting called for the
purpose of voting on such approval, and (b) by the vote of a majority of the
Company's Board of Directors or by the vote of a majority of all votes
attributable to the outstanding Shares of such Fund. Notwithstanding the
foregoing, this Agreement may be terminated as to a particular Fund at any time
on sixty days' written notice, without the payment of any penalty, by the
Company (by vote of the Company's Board of Directors or by vote of a majority
of the outstanding voting securities of such Fund) or by the Investment
Adviser. This Agreement will immediately terminate in the event of its
assignment. (As used in this Agreement, the terms "majority of the outstanding
voting securities," "interested persons" and "assignment" shall have the same
meanings as ascribed to such terms in the 1940 Act.)
-5-
<PAGE> 6
11. Investment Adviser's Representations. The Investment Adviser hereby
represents and warrants that it is willing and possesses all requisite legal
authority to provide the services contemplated by this Agreement without
violation of applicable laws and regulations, including but not limited to the
Glass-Steagall Act, and the regulations promulgated thereunder.
12. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated except by an instrument in writing
signed by the party against which enforcement of the change, waiver, discharge
or termination is sought.
13. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and shall be
governed by the law of the State of Nebraska. The provisions of the 1940 Act
and rules and regulations promulgated thereunder shall supercede the terms and
provisions hereof and any ambiguity or matter of interpretation hereunder shall
be resolved in a manner which effectuates the 1940 Act and such rules and
regulations.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
FIRST OMAHA FUNDS, INC.
By: /s/ David P. Greer
--------------------
Name: David P. Greer
Title: President
FIRST NATIONAL BANK OF OMAHA
By: /s/ Marc M Diehl
----------------------
Name: Marc M Diehl
Title: Trust Division Head
-6-
<PAGE> 7
Dated December 20, 1994
Schedule A
to the
Investment Advisory Agreement
Between First Omaha Funds, Inc. and
First National Bank of Omaha
dated as of December 20, 1994
<TABLE>
<CAPTION>
Name of Company Compensation* Date
--------------- ------------- ----
<S> <C> <C>
First Omaha Equity Annual rate of seventy-five December 20, 1994
Company one-hundredths of one percent
(.75%) of the average daily
net assets of such Company
First Omaha Short/ Annual rate of fifty December 20, 1994
Intermediate Fixed one-hundredths of
Income Company one percent (.50%) of the
average daily net assets
of such Company
First Omaha Fixed Annual rate of sixty December 20, 1994
Income Company one-hundredths of one
percent (.60%) of the
average daily net assets
of such Company
First Omaha Govern- Annual rate of twenty-five December 20, 1994
ment Obligations one-hundredths of one
Company percent (.25%) of the
average daily net assets
of such Company
</TABLE>
- -----------
* All fees are computed daily and paid monthly
-7-
<PAGE> 8
<TABLE>
<S> <C> <C>
First Omaha Small Cap Annual rate of eighty-five December 5, 1995
Value Fund one-hundredths of one percent
(.85%) of the average daily
net assets of such Company.
First Omaha Balanced Annual rate of seventy-five June 4, 1996
Fund one-hundredths of one percent
(.75%) of the average
daily net assets of such
Company.
</TABLE>
FIRST OMAHA FUNDS, INC.
By: /s/ David P. Greer
----------------------
Name: David P. Greer
Title: President
FIRST NATIONAL BANK OF OMAHA
By: /s/ Marc M Diehl
----------------------
Name: Marc M Diehl
Title: Trust Division Head
- -----------
* All fees are computed daily and paid monthly
-8-
<PAGE> 1
Exhibit 6.2
SCHEDULE A
TO THE
DISTRIBUTION AGREEMENT
BY AND BETWEEN
FIRST OMAHA FUNDS, INC.
AND
SUNSTONE FINANCIAL GROUP, INC.
<TABLE>
<CAPTION>
Name of Fund Effective Date
------------ --------------
<S> <C>
U.S. Government Obligations Fund April 10, 1995
Equity Fund April 10, 1995
Short/Intermediate Fixed Income Fund April 10, 1995
Fixed Income Fund April 10, 1995
Small Cap Value Fund December 5, 1995
Balanced Fund June 4, 1996
</TABLE>
Dated: April 10, 1995
Revised: December 5, 1995 and June 4, 1996
FIRST OMAHA FUNDS, INC. SUNSTONE FINANCIAL GROUP, INC.
By: /s/ David P. Greer By: /s/ Miriam M. Allison
--------------------- ----------------------
David P. Greer Miriam M. Allison
President President
<PAGE> 1
EXHIBIT 8
CUSTODIAN AGREEMENT
AGREEMENT executed as of this 20th day of December, 1994, and effective as
of the commencement of operations of the hereinafter described Fund, between
FIRST OMAHA FUNDS, INC., a Nebraska corporation, having its principal place of
business at One First National Center, Omaha, Nebraska 68102 (hereinafter
called the "Fund") , and FIRST NATIONAL BANK OF OMAHA, a national banking
association, having its principal place of business at One First National
Center, Omaha, Nebraska 68102 (hereinafter called the "Bank").
WITNESSETH THAT
In consideration of the mutual agreements herein contained, the Fund and
the Bank, intending to be legally bound hereby, agree as follows:
I. DEPOSITORY
1. The Fund agrees to and does hereby appoint the Bank its depository
subject to the provisions hereof, and likewise agrees to deliver to the Bank
certified or authenticated copies of its Articles of Incorporation and By-Laws,
all amendments thereto, a certified copy of the resolution of the Board of
Directors appointing the Bank to act in the capacities covered by this
Agreement and authorizing the signing of this Agreement and copies of such
resolutions of its Board of Directors, contracts and other documents as may be
required by the Bank in the performance of its duties hereunder.
2. The Fund agrees, upon receipt by the Fund, to provide the Bank with a
copy of the letter from the Securities and Exchange Commission declaring
effective the Fund's status as a registered investment company pursuant to
Section 8 of the Investment Company Act of 1940 (the "1940 Act").
<PAGE> 2
3. The Fund will also provide the Bank a copy of the Fidelity Bond in the
amount and type of coverage as required by Rule 17g-l promulgated under Section
17 of the 1940 Act.
II. CUSTODIAN
1. Subject to the provisions hereof, the Fund agrees to and does hereby
appoint the Bank as Custodian for First Omaha Equity Fund, First Omaha
Short/Intermediate Fixed Income Fund, First Omaha Fixed Income Fund, First
Omaha U.S. Government Obligations Fund and such other series of the Fund as the
parties subsequently shall agree in writing (First Omaha Equity Fund, First
Omaha Short/Intermediate Fixed Income Fund, First Omaha Fixed Income Fund,
First Omaha U.S. Government Obligations Fund and any such series hereinafter
together called "series"), and agrees that the Bank shall receive and maintain
all securities, similar investments, and cash now owned or hereafter acquired
by the Fund with respect to such series, and the Fund also agrees to deliver
and pay or cause to be delivered and paid to the Bank as Custodian, all
securities, similar investments, and cash hereafter acquired by the Fund with
respect to such series.
2. All securities delivered to the Bank (other than bearer securities)
shall be properly endorsed and in form for transfer or in the name of the Bank
or of a nominee of the Bank or in the name of the Fund or of a nominee of the
Fund.
3. As Custodian, the Bank shall have and perform the following powers and
duties:
A. Safekeeping. To keep safely in a separate account the securities
of the Fund and on behalf of the Fund, from time to time to receive
delivery of
-2-
<PAGE> 3
certificates for safekeeping and to keep such certificates physically
segregated at all times from those of any other person. The Bank shall
maintain records of all receipts, deliveries and locations of such
securities, together with a current inventory thereof. The Bank shall
conduct periodic physical inspections (including sampling counts and four
quarterly complete physical counts per year to be conducted and certified
to the Fund by the Chief Internal Audit officer of the Bank) or surveys
and maintain controls of bonds and other securities entrusted to it under
this Agreement in such manner as the Bank shall determine from time to
time to be advisable in order to verify the accuracy of such inventory,
provided, however, that the Bank may deposit the securities of the Fund
in a clearing agency which acts as a securities depository or the
book-entry system, or both, under an arrangement which complies with the
provisions of Rule 17f-4 promulgated under the 1940 Act. With respect to
securities held by any agent appointed pursuant to Paragraph 6-B of
Section II hereof, and with respect to securities or cash held by any
Sub-Custodian appointed pursuant to Paragraph 6-C of Section II hereof,
the Bank may rely upon certificates from such agent as to the holdings of
such agent and from such Sub-Custodian as to title holdings of such
Sub-Custodian, it being understood that such reliance in no way relieves
the Bank of its responsibilities under this Agreement. The Bank will
promptly report to the Fund the results of its inspections, indicating
any shortages or discrepancies uncovered thereby, and take appropriate
action to remedy any such shortages or discrepancies. In addition, the
Bank will comply and will assist the Fund to comply with all applicable
provisions of Rule 17f-2 of the 1940 Act and will
-3-
<PAGE> 4
maintain such segregated accounts as are necessary to comply with
Section 18(f) of the 1940 Act.
B. Registered Name. Nominee. To register securities of the Fund
held by the Bank in the name of the Fund or of any nominee of the Fund or
in the name of the Bank or of any nominee of the Bank or in the name of
any agent or any nominee of such agent pursuant to paragraph 6-B of
Section II hereof or in the name of any Sub-Custodian or any nominee of
any such Sub-Custodian appointed pursuant to paragraph 6-C of Section II
hereof.
C. Purchases. Upon receipt of proper instructions, and insofar as
cash is available for the purpose, to pay for and receive all securities
purchased for the account of the Fund, when registered as provided in
paragraph 3-B of Section II hereof or in form for transfer satisfactory
to the Bank. All securities accepted by the Bank shall be accompanied by
payment of, or a "due bill" for, any dividends, interest or other
distributions of the issuer, due the purchaser. In any and every case of
a purchase of securities for the account of the Fund where payment is
made by the Bank in advance of receipt of the securities purchased, the
Bank shall be absolutely liable to the Fund for such securities to the
same extent as if the securities had been received by the Bank.
D. Exchange. Upon receipt of proper instructions, to exchange
securities or interim receipts or temporary securities held by it or by
any agent appointed by it pursuant to paragraph 6-B of Section II hereof
or any Sub-Custodian appointed pursuant to paragraph 6-C of Section II
hereof for the account of the Fund for other securities alone or for
other securities and cash, and
-4-
<PAGE> 5
to expend cash insofar as cash is available, in connection with any
merger, consolidation, reorganization, recapitalization, split-up of
shares, changes of par value, conversion or in connection with the
exercise of warrants, subscription or purchase rights, or otherwise; to
deposit any such securities or securities and cash in accordance with the
terms of any reorganization or protective plan or otherwise, and to
deliver securities to the designated depository or other receiving agent
in response to tender offers or similar offers to purchase received in
writing. Except as instructed by proper instructions received in timely
enough fashion for the Bank to act thereon prior to any expiration date
(which shall be presumed to be three business days prior to such date
unless the Bank has advised the Fund of a different period) and giving
full details of the time and method of submitting securities in response
to any tender or similar offer, exercising any subscription or purchase
right or making any exchange pursuant to this paragraph and subject to
the Bank having fulfilled its obligations under paragraph 6-F of Section
II hereof pertaining to notices or announcements, the Bank shall be under
no obligation regarding any tender or similar offer, subscription or
purchase right or exchange except to exercise its best efforts. When
such securities are in the possession of an agent appointed by the Bank
pursuant to paragraph 6-B of Section II hereof, or when the securities
are in the possession of a Sub-Custodian appointed pursuant to paragraph
6-C of Section II hereof, the proper instructions referred to in the
preceding sentence must be received by the Bank in timely fashion for the
Bank to notify the agent or Sub-Custodian in sufficient time to permit it
to act prior to any expiration date.
-5-
<PAGE> 6
E. Sales. Upon receipt of proper instructions, to make delivery
against payment of securities which have been sold for the account of the
Fund. All such payments are to be made in cash, by a certified check
upon a treasurer's or cashier's check of a bank, by effective bank wire
transfer through the Federal Reserve Wire System, or, if appropriate,
outside of the Federal Reserve Wire System and subsequent credit to the
Fund's Custodian account, or, in case of delivery through a stock
clearing company, by book entry credit by the stock clearing company in
accordance with the then current "street delivery" custom.
F. Purchases by Issuer. Upon receipt of proper instructions, to
release and deliver securities owned by the Fund to the Issuer thereof or
its agent when such securities are called, redeemed, retired or otherwise
become payable; provided that, in any such case, the cash or other
consideration is to be delivered to the Bank.
G. Changes of Name and Denomination. Upon receipt of proper
instructions, to release and deliver securities owned by the Fund to the
Issuer thereof or its agent for transfer into the name of the Fund or the
Bank or a nominee of either, or for exchange for a different number of
bonds, certificates or other evidence representing the same aggregate
face amount or number of units bearing the same interest rate, maturity
date and call provisions, if any; provided that, in any such case, the
new securities are to be delivered to the Bank.
H. Street Delivery. Upon receipt of proper instructions, which in
the case of registered securities may be standing instructions, to
release and deliver
-6-
<PAGE> 7
securities owned by the Fund to the broker selling the same for
examination in accordance with the then current "street delivery" custom.
I. Release of Securities for Use as Collateral. Upon receipt of
proper instructions, to release securities belonging to the Fund to any
bank or trust company for the purpose of pledge or hypothecation to
secure any loan incurred by the Fund; provided, however, that securities
shall be released only upon payment to the Bank of the monies borrowed,
except that in cases where additional collateral is required to secure a
borrowing already made, subject to proper prior authorization, further
securities may be released for that purpose. Upon receipt of proper
instructions, to pay such loan upon redelivery to it of the securities
pledged or hypothecated therefor and upon surrender of the note or notes
evidencing the loan.
J. Release or Delivery of Securities for Other Purposes. Upon
receipt of proper instructions, to release or deliver any securities held
by it for the account of the Fund for any other purpose (in addition to
those specified in paragraphs 3-D, 3-E, 3-F, 3-G, 3-H, and 3-I of Section
II hereof) which the Fund declares is a proper trust purpose pursuant to
the proper instructions described in paragraph 5-A of Section II hereof.
The Bank shall have no responsibility to determine whether said
activities are a proper trust purpose of the Fund.
K. Miscellaneous. In general, to attend to all nondiscretionary
details in connection with the sale, exchange, substitution, purchase,
transfer or other dealing with such securities or property of the Fund
except as otherwise from time to time directed by proper instructions.
The Bank shall render to the Fund an
-7-
<PAGE> 8
itemized statement of the securities for which it is accountable to
the Fund under this Agreement as of the end of each month, as well as a
list of all security transactions that remain unsettled at such time and
notification of any security transactions that fail to settle on
contracted settlement dates.
4. As Custodian, the Bank shall have and perform the following additional
powers and duties:
A. Bank Account. To retain all cash of the Fund in the banking
department of the Bank subject only to draft or order by the Bank acting
pursuant to the terms of this Agreement. If and when authorized by
proper instructions in accordance with a vote of the majority of the
Board of Directors of the Fund, the Bank may open and maintain an
additional account or accounts in such other bank or trust companies as
may be designated by such instructions, such account or accounts,
however, to be in the name of the Bank in its capacity as Custodian, and
subject only to its draft or other in accordance with the terms of this
Agreement. If requested by the Fund, the Bank shall furnish the Fund,
not later than twenty (20) calendar days after the last business day of
each month, a statement reflecting the current status of its internal
reconciliation of the closing balance as of the date in all accounts
described in this paragraph to the balance shown on the daily cash report
for that day rendered to the Fund.
B. Collections. Unless otherwise instructed by receipt of proper
instructions, to collect, receive and deposit in the bank account or
accounts maintained pursuant to paragraph 4-A of Section II hereof all
income and other payments with respect to the securities held hereunder,
and to execute ownership
-8-
<PAGE> 9
and other certificates and affidavits for all Federal and State tax
purposes in connection with the collection of bond and note
coupons, and to do all other things necessary or proper in connection
with the collection of such income, and without waiving the generality of
the foregoing, to:
(1) present for payment on the date of payment all coupons and
other income items requiring presentation;
(2) present for payment all securities which may mature or be
called, redeemed, retired or otherwise become payable on the date
such securities become payable;
(3) endorse and deposit for collection, in the name of the
Fund, checks, drafts or other negotiable instruments on the same
day as received.
In any case in which the Bank does not receive any such due and unpaid
income within a reasonable time after it has made proper demands for the
same (which shall be presumed to consist of at least three demand letters
and at least one telephonic demand), it shall so notify the Fund in
writing, including copies of all demand letters, any written responses
thereto, and memoranda of all oral responses thereto and to telephonic
demands, and await proper instructions; the Bank shall not be obliged to
take legal action for collection unless and until reasonably indemnified
to its satisfaction. It shall also notify the Fund as soon as reasonably
practicable whenever income due on securities is not collected in due
course.
C. Sale of Shares of the Fund. To make such arrangements with the
Transfer Agent (which shall also include any sub-transfer agent) of the
Fund as
-9-
<PAGE> 10
will enable the Bank to make certain it receives the cash consideration
due to the Fund for such new or treasury shares of the Fund as may be
issued or sold from time to time by the Fund, all in accordance with the
Fund's Articles of Incorporation or other Fund documents or agreements.
In connection with such issuance of new or treasury shares of the Fund,
the Bank shall make such arrangements with the Transfer Agent and as
shall insure the timely notification to the Transfer Agent and to the
Fund of the receipt of Federal funds by the Bank by means of the Federal
Reserve Wire System or of the receipt of funds by other bank wire
transfers in payment for the issuance of such shares or of the receipt of
funds through customary bank collection methods. For purposes of this
paragraph, the Fund hereby instructs the Bank to consider checks not
drawn on Federal funds as Federal funds according to the schedule
promulgated by the Federal Reserve Bank of Kansas City for the
determination of Federal funds credit to a member bank. Wires received
prior to the close of the New York Stock Exchange shall be deemed Federal
funds on that business day; wires received on or after the close of the
New York Stock Exchange shall be deemed Federal funds on the next
business day.
D. Dividends and Distributions. Upon receipt of proper
instructions, which may be continuing instructions when deemed
appropriate by the parties, to release or otherwise apply cash insofar as
available, for the payment of dividends or other distributions to
shareholders of the Fund and the reinvestment of dividends in additional
Fund shares for the account of shareholders of the Fund,
-10-
<PAGE> 11
all in accordance with the Fund's Articles of Incorporation or other
Fund documents or agreements.
E . Redemption of Shares of the Fund. From such funds as may be
available for the purpose but subject to the Fund's Articles of
Incorporation and other Fund documents or agreements, and applicable
resolutions of the Board of Directors of the Fund pursuant thereto, to
make funds available for payment to shareholders who have delivered to
the Transfer Agent or the Fund a request for redemption of their shares.
In connection with the redemption of shares of the Fund, the Bank is
authorized and directed upon receipt of instructions from the Transfer
Agent for the Fund or the Fund to make funds available for transfer by
check prepared either by the Bank or by an appointed sub-custodian and
delivered to the Fund for transmittal to the shareholder. The check
shall be payable to the shareholder and shall contain the address of the
shareholder.
F. Payments of Disbursements and Liabilities. Upon receipt of
proper instructions, to make or cause to be made, insofar as cash is
available for the purpose, disbursements for the payment on behalf of the
Fund of interest, taxes, management or supervisory fees and operating
expenses, including registration and qualification costs and other
expenses of issuing and selling shares or changing its capital structure,
whether or not such expenses shall be in whole or in part capitalized or
treated as deferred expenses.
G. Other Proper Corporate Purposes. Upon receipt of proper
instructions, to make or cause to be made, insofar as cash is available,
-11-
<PAGE> 12
disbursements for any other purpose (in addition to the purposes
specified in paragraphs 3-C, 3-D, 4-D, 4-E, and 4-F of Section II hereof)
which the Fund declares is a proper corporate purpose pursuant to the
proper instructions described in paragraph 5-A of Section II hereof. The
Bank shall have no responsibility to determine whether such disbursements
are for proper corporate purposes.
H. Records. To create, maintain and retain all records, except as
provided herein, relating to its activities and obligations under this
Agreement in such manner as will meet the obligations of the Fund under
the 1940 Act, particularly Section 31 thereof and rules 3la-1 and 3la-2
thereunder, applicable federal and state tax laws and any other law or
administrative rules or procedures which may be applicable to the Fund.
The Fund will use its best efforts to keep the Bank informed of any
changes made or proposed to be made by the Securities and Exchange
Commission in the bookkeeping and custodial requirements. The Bank
shall, no less frequently than monthly, verify and reconcile such records
to the Fund's other books of account and other records and shall report
to the Fund no less frequently than monthly, on the results of such
verification and reconciliation. All records maintained by the Bank in
connection with the performance of its duties under this Agreement will
remain the property of the Fund, and the Bank will make such records
available upon request of the Fund and will retain such records as are
required to maintained by Rule 3la-1. In the event of termination of
this Agreement, the records will be delivered in accordance with the
terms of paragraph 8 below.
-12-
<PAGE> 13
I. Accounts. To keep books and other documents and render
statements, including interim monthly and complete quarterly financial
statements, or copies thereof, from time to time as requested by the
Treasurer or any executive officer of the Fund, including at least the
following: (1) a schedule of purchases and sales of securities, (2)
investment ledgers, (3) security ledgers, (4) schedule of securities and
monies borrowed or loaned and collateral therefor.
J. Reports. To provide the following daily and periodic reports to
the Fund, and such other reports as are required by regulation for the
Fund to maintain, and as requested by the Fund and agreed upon by the
Bank:
1. Daily Reports
a. Daily cash available sheet
b. Daily interest and
accrued dividend calculations
c. Daily portfolio list with
comparison to previous day
2. Monthly Reports
a. Schedule of purchases and
sales of securities
b. Brokerage commission
schedule for the month and year to date
c. Security ledger
d. Interest and dividend
evaluation
e. Investment ledger
f. Securities and monies
borrowed or loaned and collateral therefor
K. Receipt of Funds and Returned Checks. Upon receipt of any check
or other instrument drawn or endorsed to it as agent for, or identified
as being for
-13-
<PAGE> 14
the account of, the Fund, the Bank shall stamp the check with the date
of receipt, shall forthwith process the same for collection and upon
receipt of Federal funds, shall credit Federal funds to the Fund, shall
deposit the net amount due the Fund to the Custodial Account of the Fund
and shall notify the Fund, at the close of each business day, in writing
of the amounts of said credits and deposits. Upon receipt of funds
through the Federal Reserve Wire System or conversion into Federal funds
of funds transmitted by other bank wire transfer systems, the Bank shall
notify the Fund of such deposits, such notification to be given on a
daily basis, of the total amount deposited to said accounts during such
day.
In the event that any check or other order for the payment of money
is returned unpaid for any reason, the Bank will give prompt notification
to the Fund of the non-payment of said check and shall transmit the
returned check to the Fund.
L. Miscellaneous. To assist generally in the preparation of routine
reports to holders of shares of the Fund to the Securities and Exchange
Commission, including Forms N-SAR, to State "Blue Sky" authorities and to
others, in the auditing of accounts, and in other matters of like nature.
5. Other Matters.
A. Proper Instructions. The Bank shall be deemed to have received
proper instructions upon receipt of (1) written instructions signed by
(a) a majority of the Directors of the Fund, (b) one or more persons as
the Board of Directors shall have from time to time authorized to give
instructions in connection with the purchase and sale of portfolio
securities on behalf of a particular series, or (c) two
-14-
<PAGE> 15
or more persons as the Board of Directors shall have from time to time
authorized to give any other particular class of instructions; (2)
telephonic instructions confirmed in writing within 24 hours of such
instructions as provided in (1) above; or (3) telex, telecopy or wire
instructions confirmed in writing within 24 hours of such instructions as
provided in (1) above. Different persons may be authorized to give
instructions for different purposes. A certified copy of a resolution or
action of the Board of Directors of the Fund may be received and accepted
by the Bank as conclusive evidence of the authority of any persons to act
and may be considered as in full force and effect until receipt of
written notice to the contrary. Such instructions may be general or
specific in terms.
B. Investments; Limitations. In performing its duties generally,
and more particularly in connection with the purchase, sale and exchange
of securities made by or for the Fund, the Bank may take cognizance of
the provisions of the Articles of Incorporation and By-Laws as from time
to time amended; however, except as otherwise expressly provided herein,
it may assume unless and until notified in writing to the contrary that
instructions purporting to be proper instructions received by it are not
in conflict with or in any way contrary to any provision of the Articles
of Incorporation and By-Laws of the Fund as amended, or resolutions or
proceedings of the Directors of the Fund.
6. The Bank and the Fund further agree as follows:
A. Expense Reimbursement. The Bank shall be entitled to receive
from the Fund on demand reimbursement for its cash disbursements,
expenses and
-15-
<PAGE> 16
charges in connection with its duties as Depository and
Custodian as aforesaid, but excluding salaries and usual overhead
expenses.
B. Appointment of Agents. The Bank, as Custodian, may at any time
or times appoint (and may at any time remove) any other bank, trust
company or responsible commercial agent as its agent to carry out such of
the provisions of this Agreement as the Bank may from time to time
direct, provided, however, that the appointment of such agent shall not
relieve the Bank of any of its responsibilities under this Agreement.
C. Appointment of Sub-Custodians. The Bank as the Custodian, may
from time to time employ one or more Sub-Custodians.
D. Reliance on Documents. So long as and to the extent that it is
in the exercise of reasonable care, the Bank, as Depository and
Custodian, shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received by it
or delivered by it pursuant to this Agreement, and shall be protected in
acting upon any instructions, notice, request, consent, certificate or
other instrument or paper reasonably believed by it to be genuine and to
have been properly executed in accordance with paragraph 5-A of Section
II hereof and shall, except as otherwise specifically provided
in this Agreement, be entitled to receive as conclusive proof of any fact
or matter required to be ascertained by it hereunder a certificate signed
by any Director or the Secretary of the Fund or any other person
authorized by the Directors.
E. Access to Records. Subject to security requirements of the Bank
applicable to its own employees having access to similar records within
the Bank
-16-
<PAGE> 17
and such regulations as to the conduct of such matters as may be
reasonably imposed by the Bank after prior consultation with an officer
of the Fund, the books and records of the Bank pertaining to its actions
under this Agreement shall be open to inspection and audit at reasonable
times by officers of, attorneys for, and auditors employed by, the Fund.
F. Voting and Other Action. Neither the Bank nor any nominee of the
Bank shall vote any of the securities held hereunder by or for the
account of the Fund, except in accordance with the instructions contained
in an officer's certificate. The Bank shall promptly deliver, or cause
to be executed and delivered, to the Fund all notices, proxies and proxy
soliciting materials with respect to such securities, such proxies to be
executed by the registered holder of such securities (if registered
otherwise than in the name of the Fund), but without indicating the
manner in which such proxies are to be voted.
The Bank shall transmit promptly to the Fund all written information
(including, without limitation, pendency of calls and maturities of
securities and expirations of rights in connection therewith) received by
the Bank from issuers of the securities being held for the Fund. With
respect to tender or exchange offers, the Bank shall transmit promptly to
the Fund all written information received by the Bank from issuers of the
securities whose tender or exchange is sought and from the party (or his
agents) making the tender or exchange offer.
G. Limitation of Liability. The Bank shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Fund
in connection with the performance of this Agreement, except a loss
resulting from a breach of
-17-
<PAGE> 18
fiduciary duty with respect to the receipt of compensation for
services or a loss resulting from willful misfeasance, bad faith or
negligence on the part of the Bank in the performance of its duties or
from negligent disregard by it of its obligations and duties under this
Agreement.
7. Compensation. The Fund shall pay to the Bank as Depository and
Custodian a fee as set forth on Schedule A hereto as may be amended from time
to time by the Custodian and the Fund; provided, however, that any such fee and
the other terms of this Agreement shall have been approved by a vote of a
majority of the outstanding voting securities of each series as may be required
under the 1940 Act.
8. The Bank and the Fund further agree as follows:
A. Effective Period, Termination and Amendment and Interpretive and
Additional Provisions. This Agreement shall become effective as of the
date of its execution, shall continue in full force and effect until
terminated as hereinafter provided, may be amended at any time by mutual
agreement of the parties hereto and may be terminated by either party by
an instrument in writing delivered or mailed, postage prepaid, to the
other party, such termination to take effect not sooner than sixty (60)
days after the date of such delivery or mailing; provided, however, that
the Fund shall not amend or terminate this Agreement in contravention of
any applicable federal or state laws or regulations, or any provision of
the Fund's Articles of Incorporation, or By-Laws as the same may from
time to time, be amended, and further provided, that the Fund may at any
time by action of its Board of Directors substitute another bank or trust
company for the Bank by giving notice as above to the Bank.
-18-
<PAGE> 19
In connection with the operation of this Agreement, the Bank and the
Fund may agree from time to time on such provisions interpretive of or in
addition to the provisions of this Agreement as may in their joint
opinion be consistent with the general tenor of this Agreement, any such
interpretive or additional provisions to be signed by both parties and
annexed hereto, provided that no such interpretive or additional
provisions shall contravene any applicable federal or state laws or
regulations, or any provision of the Fund's Articles of Incorporation or
By-Laws as the same may from time to time be amended. No interpretive or
additional provisions made as provided in the preceding sentence shall be
deemed to be an amendment of this Agreement.
B. Successor Custodian. Upon termination hereof, the Fund shall pay
to the Bank such compensation as may be due as of the date of such
termination and shall likewise reimburse the Bank for its costs, expenses
and disbursements incurred prior to such termination in accordance with
paragraph 6-A of Section II hereof and such reasonable costs, expenses
and disbursements as may be incurred by the Bank in connection with such
termination.
If a successor custodian is appointed by the Board of Directors of
the Fund in accordance with its Articles of Incorporation or By-Laws, the
Bank shall upon termination, deliver to such successor custodian at the
office of the Bank, duly endorsed and in form for transfer, all
securities then held hereunder and all funds or other properties of the
Fund deposited with or held by it hereunder.
In the event that no written order designating a successor custodian
or certified copy of a resolution of the shareholders shall have been
delivered to the
-19-
<PAGE> 20
Bank on or before the date when such termination shall become
effective, then the Bank shall have the right to deliver to a bank or
trust company doing business in Omaha, Nebraska of its own selection,
having an aggregate capital, surplus, and undivided-profits, as shown by
its last published report of not less than $50,000,000, all securities,
funds and other properties held by the Bank and all instruments held by
it relative thereto and all other property held by it under this
Agreement. Thereafter, such bank or trust company shall be the successor
of the Bank under this Agreement.
In the event that securities, funds, and other properties remain in
the possession of the Bank after the date of termination hereof owing to
failure of the Fund to procure the certified copy above referred to, or
of the Board of Directors to appoint a successor custodian, the Bank
shall be entitled to fair compensation for its services during such
period and the provisions of this Agreement relating to the duties and
obligations of the Bank shall remain in full force and effect.
9. The Bank shall cooperate with the Fund's independent public accountants
in connection with the annual and other audits of the books and records of the
Fund and shall take all necessary action within reasonable possibility for the
Fund to obtain from year to year unqualified opinions from the Fund's
independent public accountants with respect to the Bank's activities hereunder
in connection with the preparation of the Fund's Form N-SAR semiannual reports
to the Securities and Exchange Commission and with respect to any other
requirements of such Commission. In addition, the Bank shall cooperate with
the Fund's independent public accountants in connection with compliance with
the applicable provisions of Rule 17f-2 of the 1940 Act.
-20-
<PAGE> 21
10. The Bank hereby represents and warrants to the Fund that it is willing
and possesses all requisite legal authority to provide the services
contemplated by this Agreement without violation of applicable laws and
regulations, including but not limited to the Glass-Steagall Act and the
regulations promulgated thereunder.
11. The Fund shall not circulate any printed matter which contains any
reference to the Bank without the prior approval of the Bank, excepting solely
such printed matter as merely identifies the Bank as Custodian. The Fund will
submit printed matter requiring approval to the Bank in draft form, allowing
sufficient time for review by the Bank and its counsel prior to any deadline
for printing.
12. This instrument is executed and delivered in the State of Nebraska and
shall be subject to and be construed according to the laws of said State.
13. Notices and other writings delivered or mailed postage prepaid to
the Fund c/o Sunstone Financial Group, Inc., 207 E. Buffalo Street, Suite 400,
Milwaukee, Wisconsin 53202, Attn: Randy M. Pavlick or to the Bank at One First
National Center, Omaha, Nebraska 68102, Attn: Marc M Diehl, or to such other
address as the Fund or the Bank may hereafter specify, shall be deemed to have
been properly delivered or given hereunder to the respective address.
14. This Agreement shall be binding on and shall inure to the benefit of
the Fund and the Bank and their respective successors.
15. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original.
-21-
<PAGE> 22
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed in its name and on its behalf by a duly authorized officer as of
the date and year first above written.
<TABLE>
<S> <C>
ATTEST: FIRST OMAHA FUNDS, INC.
By: /s/ Randy Pavlick By: /s/ David P. Greer
-------------------------- ------------------------------------
Secretary David P. Greer, President
ATTEST: FIRST NATIONAL BANK OF OMAHA
By: /s/ Alan Schulz By: /s/ Marc M Diehl
-------------------------- ------------------------------------
Marc M Diehl, Trust Division Head
</TABLE>
-22-
<PAGE> 23
Schedule A
to the
Custodian Agreement
between First Omaha Funds, Inc. and
First National Bank of Omaha
Dated as of December 20, 1994
<TABLE>
<CAPTION>
Name of Fund Compensation* Date
------------ ------------- ----
<S> <C> <C>
First Omaha Equity Fund Annual rate of three December 20, 1994
one-hundredths of
one percent (.03%) of
the average daily net
assets of such Fund
First Omaha Short/ Annual rate of three December 20, 1994
Intermediate Fixed one-hundredths of one
Income Fund percent (.03%) of the
average daily net assets
of such Fund
First Omaha Fixed Annual rate of three December 20, 1994
Income Fund one-hundredths of one
percent (.03%) of the average
daily net assets of such Fund
First Omaha U.S. Annual rate of three one- December 20, 1994
Government Obligations hundredths of one percent
Fund (.03%) of the average daily
net assets of such Fund
First Omaha Small Cap Annual rate of three December 5, 1995
Value Fund one-hundredths of one
percent (.03%) of the
average daily net assets
of such Fund
First Omaha Annual rate of three June 4, 1996
Balanced Fund one-hundredths of one
percent (.03%) of the
average daily net assets
of such Fund
</TABLE>
FIRST OMAHA FUNDS, INC.
By /s/ David P. Greer
-------------------------------
David P. Greer, President
FIRST NATIONAL BANK OF OMAHA
By /s/ Marc M. Diehl
-------------------------------
Marc M. Diehl, Trust Division Head
- --------------------------
*All fees, are computed daily and paid monthly.
-23-
<PAGE> 1
Exhibit 9.2
AMENDED AND RESTATED
SCHEDULE A
TO THE
ADMINISTRATION AND FUND ACCOUNTING AGREEMENT
BY AND BETWEEN
FIRST OMAHA FUNDS, INC.
AND
SUNSTONE FINANCIAL GROUP, INC.
Intending to be legally bound, the undersigned hereby amend and
restate Schedule A to the aforesaid Agreement to include the following fees for
the following investment portfolios effective as of the date hereof:
<TABLE>
<CAPTION>
Name of Fund Effective Date
------------ --------------
<S> <C>
U.S. Government Obligations Fund April 10, 1995
Equity Fund April 10, 1995
Short/Intermediate Fixed Income Fund April 10, 1995
Fixed Income Fund April 10, 1995
Small Cap Value Fund December 5, 1995
Balanced Fund July 29, 1996
</TABLE>
This amended Schedule A is dated and effective as of this
29th day of July, 1996.
FIRST OMAHA FUNDS, INC. SUNSTONE FINANCIAL GROUP, INC.
By: By:
------------------------------ --------------------------
David P. Greer Miriam M. Allison
President President
<PAGE> 1
EXHIBIT 9.3
FIRST OMAHA FUNDS, INC.
Administrative Services Plan
Section 1. Upon the recommendation of the administrator of First Omaha
Funds, Inc. (the "Company"), any officer of the Company is authorized to
execute and deliver, in the name and on behalf of the Company, written
agreements in substantially the form attached hereto as Appendix A or in any
other form duly approved by the Board of Directors ("Servicing Agreements")
with financial institutions which are shareholders of record or which have a
servicing relationship ("Service Organizations") with the beneficial owners of
a class of the Company's shares of stock ("Shares") of one or more of the
Company's investment portfolios (such portfolios hereinafter individually
called a "Fund" and collectively the "Funds"). Such Servicing Agreements shall
require the Service Organizations to provide administrative support services as
set forth therein and as described in the Company's Prospectus to their
customers who own of record or beneficially Shares in consideration for a fee,
computed daily and paid monthly in the manner set forth in the Servicing
Agreements, at the annual rate of up to .25% of the average daily net asset
value of Shares owned of record or beneficially by such customers. Any bank,
trust company, thrift institution, broker-dealer or other financial institution
is eligible to become a Service Organization and to receive fees under this
Plan. All expenses incurred by the Company with respect to Shares of a
particular Fund in connection with the Servicing Agreements and the
implementation of this Plan shall be borne entirely by the holders of Shares of
the Fund.
Section 2. So long as this plan is in effect, the administrator shall
provide to the Company's Board of Directors, and the Directors shall review, at
least quarterly, a written report of the amounts expended pursuant to this Plan
and the purposes for which such expenditures were made.
Section 3. The Plan shall not take effect with respect to the Shares of
a Fund until it has been approved, together with the form of the Servicing
Agreements, by a vote of a majority of the Directors who are not "interested
persons" of the Company (as defined in the Investment Company Act of 1940) and
who have no direct or indirect financial interest in the operation of this Plan
or in any agreements related to this Plan (the "Disinterested Directors"), cast
in person at a meeting called for the purpose of voting on the Plan or such
Servicing Agreement, provided, however, that the Plan shall not be implemented
for a particular Fund prior to the effective date of the post-effective
amendment to the Company's registration statement describing the Plan and its
implementation with respect to that Fund.
Section 4. Unless sooner terminated, this Plan shall continue until June
30, 1996, and thereafter, shall continue automatically for successive annual
periods provided such continuance is approved at least annually by a majority
of the Board of Directors, including a majority of the Disinterested Directors.
Section 5. This Plan may be amended at any time with respect to any Fund
by the Board of Directors, provided that any material amendments of the terms
of this Plan shall become effective only upon the approvals set forth in
Section 4.
<PAGE> 2
Section 6. This Plan is terminable at any time with respect to any Fund by
vote of a majority of the Disinterested Directors.
Section 7. While this Plan is in effect, the selection and nomination of
those Disinterested Directors shall be committed to the discretion of the
Company's Disinterested Directors.
Section 8. This Plan has been adopted as of March 14, 1995 and was
effective April 10, 1995.
<PAGE> 3
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 related 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;
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
<PAGE> 4
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 benefically 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 commutation of the net asset value of a
Fund's Shares for purposes of purchases, exchanges, and redemption's. 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). Notwithstanding the foregoing, you shall not be entitled to any
fees until such time as the Board expressly authorizes payment of such fees by
the Company.
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 or 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.
<PAGE> 5
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 sale 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 anent for, upon the order of, and for the account of, your customers.
Section 9. This 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 a 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 this 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: /s/ David P. Greer
-------------------
Authorized Officer
Date: April 10, 1995
---------------
<PAGE> 6
Accepted and Agreed to:
By: /s/ Marc M Diehl
-------------------------
Authorized Officer
Date: April 10, 1995
--------------
47-6023978
- ------------------------------
Taxpayer Identification Number
<PAGE> 7
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 Small Cap Value Fund
First Omaha Balanced Fund
Signed: Marc M Diehl
--------------------------
(Title)
Dated: June 4, 1996
---------------------------
<PAGE> 1
EXHIBIT 9.4
TRANSFER AGENCY AGREEMENT
AGREEMENT made as of the 20th day of December, 1994, between FIRST
OMAHA FUNDS, INC. (the "Company"), a Nebraska corporation having its principal
place of business at One First National Center, Omaha, Nebraska 68102, and
FIRST NATIONAL BANK OF OMAHA ("FNBO"), a national banking association having
its principal place of business at One First National Center, Omaha, Nebraska
68102.
WHEREAS, the Company desires that FNBO perform certain services for the
Company, and for certain of its investment portfolios as listed on Schedule A
hereto and any additional investment portfolios the Company and FNBO may agree
upon and include on Schedule A as such Schedule may be amended from time to
time (such investment portfolios are individually referred to as a "Fund" and
collectively the "Funds");
WHEREAS, FNBO is willing to perform such services for the Funds on the
terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. SERVICES. The services to be performed hereunder shall be as
follows:
A. FNBO shall perform for the Company, but solely with respect to
the Funds, the services set forth in Schedule B hereto,
including services as Transfer Agent.
B. FNBO also agrees to perform for the Company, but solely with
respect to the Funds, such special services incidental to the
performance of the services enumerated herein as agreed to by
the parties from time to time. FNBO shall perform such
additional services as will be provided on an amendment to
Schedule B hereof, in consideration of such fees as the parties
hereto may agree.
C. FNBO may, in its discretion, appoint in writing other parties
qualified to perform transfer agency and shareholder services
reasonably acceptable to the Company (individually, a "Sub-
transfer Agent") to carry out some or all of its
responsibilities under this Agreement with respect to a Fund;
provided, however, that unless the Company shall enter into a
written agreement with such Sub-transfer Agent, the
Sub-transfer Agent shall be the agent of FNBO and not the agent
of the Company or such Fund; and, in any event, FNBO shall be
fully responsible for the acts or omissions of such
Sub-transfer Agent and shall not be relieved of any of its
responsibilities hereunder by the appointment of such Sub-
transfer Agent.
<PAGE> 2
2. FEES. The Company shall pay FNBO for the services to be
provided by FNBO under this Agreement in accordance with, and in the manner set
forth in, Schedule C hereto. Fees for any additional services to be provided
by FNBO pursuant to an amendment to Schedule C hereto shall be subject to
mutual agreement at the time such amendment to Schedule C is proposed.
3. REIMBURSEMENT OF EXPENSES. In addition to paying FNBO the fees
described in Section 2 hereof, the Company agrees to reimburse FNBO for FNBO's
out-of-pocket expenses in providing services hereunder, including without
limitation the following:
A. All freight and other delivery and bonding charges
incurred by FNBO in delivering materials to and from the
Company and in delivering all materials to Fund
shareholders;
B. All direct telephone, telephone transmission and
telecopy or other electronic transmission expenses
incurred by FNBO in communication with the Company, any
of the Funds' investment advisers or custodians,
dealers, shareholders, or other person as required for
FNBO to perform the services to be provided hereunder;
C. Costs of postage, couriers, stock computer paper,
statements, labels, envelopes, checks, reports, letters,
tax forms, proxies, notices or other form of printed
material which shall be required by FNBO for the
performance of the services to be provided hereunder;
D. The cost of microfilm or microfiche of records or other
materials;
E. Any expenses FNBO shall incur at the written direction
of an officer of the Company thereunto duly authorized;
and
F. Any expense reimbursed by FNBO to any Sub-transfer Agent
which, if directly incurred by FNBO, would be
reimbursable to FNBO by the Company under this Section
2.
4. EFFECTIVE DATE. This Agreement shall become effective as of
the date first written above (the "Effective Date").
5. TERM. This Agreement shall continue in effect, unless earlier
terminated by either party hereto as provided hereunder, for an initial term of
one year from the Effective Date (the "Initial Term"). Thereafter, this
Agreement shall continue in effect unless either party hereto terminates this
Agreement by giving 60 days' written notice to the other party, whereupon this
Agreement shall terminate automatically upon the expiration of said 60 days;
provided, however, that after such termination, for so long as FNBO, with the
written consent of the Company, in fact continues to perform any one or more of
the services contemplated by this Agreement or any Schedule or exhibit hereto,
the provisions of this Agreement, including without limitation the provisions
-2-
<PAGE> 3
dealing with indemnification, shall continue in full force and effect. Fees
and out-of-pocket expenses incurred by FNBO, but unpaid by the Company upon
such termination shall be immediately due and payable upon and notwithstanding
such termination. FNBO shall be entitled to collect from the Company, in
addition to the fees and disbursements provided by Sections 2 and 3 hereof,
the amount of all of FNBO's cash disbursements and a reasonable fee (which fee
shall be not less than one hundred two percent (102%) of the sum of the actual
costs incurred by FNBO in performing such service) for services in connection
with FNBO's activities in effecting such termination, including without
limitation, the delivery to the Company and/or its distributors or investment
advisers and/or other parties, of the Company's property, records, instruments
and documents, or any copies thereof. Subsequent to such termination, FNBO, for
a reasonable fee, will provide the Company with reasonable access to any
Company documents or records remaining in its possession. Further, this
Agreement is terminable with respect to a particular Fund only upon mutual
agreement of the parties hereto or for "cause" (as defined below) by the
party alleging "cause," in either case on not less than 60 days' notice by the
Company's Board of Directors or by FNBO.
For purposes of this Agreement, "cause" shall mean (a) willful
misfeasance, bad faith, gross negligence, or reckless disregard on the part of
the party to be terminated with respect to its obligations and duties set forth
herein; (b) a final, unappealable judicial, regulatory or administrative ruling
or order in which the party to be terminated has been found guilty of criminal
or unethical behavior in the conduct of its business; (c) financial
difficulties on the part of the party to be terminated which are evidenced by
the authorization or commencement of, or involvement by way of pleading,
answer, consent, or acquiescence in, a voluntary or involuntary case under Title
11 of the United States Code, as from time to time is in effect, or any
applicable law, other than said Title 11, of any jurisdiction relating to the
liquidation or reorganization of debtors or to the modification or alteration
of the rights of creditors; or (d) any circumstances which substantially
impairs the performance of the obligations and duties as contemplated herein of
the party to be terminated.
6. UNCONTROLLABLE EVENTS. FNBO assumes no responsibility hereunder,
and shall not be liable, for any damage, loss of data, delay or any other loss
whatsoever caused by events beyond its reasonable control.
7. LEGAL ADVICE. FNBO shall notify the Company at any time FNBO
believes that it is in need of the advice of counsel (other than counsel in the
regular employ of FNBO or any affiliated companies) with regard to FNBO's
responsibilities and duties pursuant to this Agreement; and after so notifying
the Company, FNBO, at its discretion, shall be entitled to seek, receive and
act upon advice of legal counsel of its choosing, such advice to be at the
expense of the Company or Funds unless relating to a matter involving FNBO's
willful misfeasance or gross negligence with respect to FNBO's responsibilities
and duties hereunder and shall in no event be liable to the Company or any Fund
or any shareholder or beneficial owner of the Company for any action reasonably
taken pursuant to such advice.
-3-
<PAGE> 4
8. INSTRUCTIONS. Whenever FNBO is requested or authorized to take
action hereunder pursuant to instructions from a shareholder or a properly
authorized agent of a shareholder ("shareholder's agent") concerning an account
in a Fund, FNBO shall be entitled to rely upon any certificate, letter or other
instrument or communication, whether in writing, by electronic or telephone
transmission, believed by FNBO to be genuine and to have been properly made,
signed or authorized by an officer or other authorized agent of the Company or
by the shareholder or shareholder's agent, as the case may be, and shall be
entitled to receive as conclusive proof of any fact or matter required to be
ascertained by it hereunder a certificate signed by an officer of the Company
or any other person authorized by the Company's Board of Directors or by the
shareholder or shareholder's agent, as the case may be.
As to the services to be provided hereunder, FNBO may rely conclusively
upon the terms of the Prospectuses and Statements of Additional Information of
the Company relating to the Funds to the extent that such services are described
therein unless FNBO receives written instructions to the contrary in a timely
manner from the Company.
9. STANDARD OF CARE; RELIANCE ON RECORDS AND INSTRUCTIONS;
INDEMNIFICATION. FNBO shall use its best efforts to ensure the accuracy of all
services performed under this Agreement, but shall not be liable to the Company
for any action taken or omitted by FNBO in the absence of bad faith, willful
misfeance or gross negligence. The Company agrees to indemnify and hold
harmless FNBO, its employees, agents, directors, officers and nominees from and
against any and all claims, demands, actions and suits, whether groundless or
otherwise, and from and against any and all judgments, liabilities, losses,
damages, costs, charges, counsel fees and other expenses of every nature and
character arising out of or in any way relating to FNBO's actions taken or
nonactions with respect to the performance of services under this Agreement or
based, if applicable, upon reasonable reliance on information, records,
instructions or requests given or made to FNBO by the Company, the investment
adviser and on any records provided by any Fund accountant or custodian
thereof; provided that this indemnification shall not apply to actions or
omissions of FNBO in cases of its own willful misfeance or gross negligence,
and further provided that prior to confessing any claim against it which may be
the subject of this indemnification, FNBO shall give the Company written
notice of and reasonable opportunity to defend against said claim in its own
name or in the name of FNBO.
10. RECORD RETENTION AND CONFIDENTIALITY. FNBO shall keep and
maintain on behalf of the Company all books and records which the Company or
FNBO is, or may be, required to keep and maintain pursuant to any applicable
statutes, rules and regulations, including without limitation Rules 31a-1 and
31a-2 under the Investment Company Act of 1940, relating to the maintenance of
books and records in connection with the services to be provided hereunder.
FNBO further agrees that all such books and records shall be the property of
the Company and to make such records available for inspection by the Company or
by the Securities and Exchange Commission at reasonable times and otherwise to
keep confidential all books and records and other information relative to the
Company and its shareholders except when requested to
-4-
<PAGE> 5
divulge such information by duly-constituted authorities or court process, or
requested by a shareholder with respect to information concerning an account
as to which such shareholder has either a legal or beneficial interest or
when requested by the Company, the shareholder, or the dealer of record as to
such account.
11. REPORTS. FNBO will furnish to the Company and to its
properly-authorized auditors, investment advisers, examiners, distributors,
dealers, underwriters, salesmen, insurance companies and others designated by
the Company in writing, such reports at such times as are prescribed in
Schedule D attached hereto, or as subsequently agreed upon by the parties
pursuant to an amendment to Schedule D. The Company agrees to examine each
such report or copy promptly and will report or cause to be reported any errors
or discrepancies therein no later than three business days from the receipt
thereof. In the event that errors or discrepancies, except such errors and
discrepancies as may not reasonably be expected to be discovered by the
recipient within three days after conducting a diligent examination, are not so
reported within the aforesaid period of time, a report will for all purposes be
accepted by and binding upon the Company and any other recipient, and FNBO
shall have no liability for errors or discrepancies therein and shall have no
further responsibility with respect to such report except to perform reasonable
corrections of such errors and discrepancies within a reasonable time after
requested to do so by the Company.
12. RIGHTS OF OWNERSHIP. All computer programs and procedures
developed to perform services required to be provided by FNBO under this
Agreement are the property of FNBO. All records and other data except such
computer programs and procedures are the exclusive property of the Company and
all such other records and data will be furnished to the Company in
appropriate form as soon as practicable after termination of this Agreement for
any reason.
13. RETURN OF RECORDS. FNBO may at its option at any time, and
shall promptly upon the Company's demand, turn over to the Company and cease to
retain FNBO's files, records and documents created and maintained by FNBO
pursuant to this Agreement which are no longer needed by FNBO in the
performance of its services or for its legal protection. If not so turned over
to the Company, such documents and records will be retained by FNBO for six
years from the year of creation. At the end of such six-year period, such
records and documents will be turned over to the Company unless the Company
authorizes in writing the destruction of such records and documents.
14. BANK ACCOUNTS. The Company and the Funds shall establish and
maintain such bank accounts with such bank or banks as are selected by the
Company, as are necessary in order that FNBO may perform the services required
to be performed hereunder. To the extent that the performance of such services
shall require FNBO directly to disburse amounts for payment of dividends,
redemption proceeds or other purposes, the Company and Funds shall provide such
bank or banks with all instructions and authorizations necessary for FNBO to
effect such disbursements.
15. REPRESENTATIONS OF THE COMPANY. The Company certifies to FNBO
that: (A) as of the close of business on the Effective Date, each Fund which is
in
-5-
<PAGE> 6
existence as of the Effective Date has authorized unlimited shares, and (B) by
virtue of its Declaration of Company, shares of each Fund which are redeemed by
the Company may be sold by the Company from its treasury, and (C) this
agreement has been duly authorized by the Company and, when executed and
delivered by the Company, will constitute a legal, valid and binding obligation
of the Company, enforceable against the Company in accordance with its terms,
subject to bankruptcy, insolvency, reorganization, moratorium and other laws of
general application affecting the rights and remedies of creditors and secured
parties and except for certain rights to indemnification for counsel fees,
enforcement of which may be limited under Nebraska law.
16. REPRESENTATIONS OF FNBO. FNBO represents and warrants that: (A)
FNBO has been in, and shall continue to be in, substantial compliance with all
provisions of law, including Section 17A(c) of the Securities Exchange Act of
1934, as amended (or applicable banking statutes and regulations), required in
connection with the performance of its duties under this Agreement; and (B) the
various procedures and systems which FNBO has implemented with regard to
safeguarding from loss or damage attributable to fire, theft, or any other cause
of the blank checks, records, and other data of the Company and FNBO's records,
data, equipment facilities and other property used in the performance of its
obligations hereunder are adequate and that it will make such changes therein
from time to time as are required for the secure performance of its obligations
hereunder.
17. INSURANCE. FNBO shall notify the Company should its insurance
coverage with respect to professional liability or errors and omissions
coverage be changed for any reason. Such notification shall include the date
of change and the reasons therefor. FNBO shall notify the Company of any
material claims against it with respect to services performed under this
Agreement, whether or not they may be covered by insurance, and shall notify
the Company from time to time as may be appropriate of the total outstanding
claims made by FNBO under its insurance coverage.
18.
INFORMATION TO BE FURNISHED BY THE COMPANY AND FUNDS. The Company has furnished
to FNBO the following:
A. Copies of the Articles of Incorporation of the Company
and of any amendments thereto, certified by the
Secretary of State of the State of Nebraska.
B. Copies of the following documents:
1. The Company's By-Laws and any amendments
thereto;
2. Certified copies of resolutions of the Board
of Directors covering the following matters:
-6-
<PAGE> 7
a. Approval of this Agreement and
authorization of a specified officer of
the Company to execute and deliver this
Agreement; and
b. Authorization of FNBO to act as
Transfer Agent for the Company on
behalf of the Funds.
C. Two copies of the following (if such documents are
employed by the Company):
1. Prospectuses and Statements of Additional
Information for each Fund;
2. Distribution Agreements; and
3. All other forms commonly used by the Company or
its Distributor with regard to their
relationship and transactions with shareholders
of the Funds.
19. INFORMATION FURNISHED BY FNBO. FNBO has furnished to the
Company the following:
A. FNBO's Articles of Incorporation.
B. FNBO's By-Laws and any amendments thereto.
C. Certified copies of actions of FNBO covering the
following matters:
1. Approval of this Agreement, and authorization
of a specified officer of FNBO to execute and
deliver this Agreement;
2. Authorization of FNBO to act as Transfer Agent
for the Company in connection with the Funds.
D. A copy of the most recent independent accountants'
report relating to internal accounting control systems
as filed with the Comptroller of the Currency pursuant
to Rule 17Ad-13(a) of the Securities Exchange Act of
1934, as amended or, if applicable, a copy of any
report of similar scope prepared in reliance upon the
exemption provided by Rule 17Ad-13(d)(3).
20. AMENDMENTS TO DOCUMENTS. The Company shall furnish FNBO
written copies of any amendments to, or changes in, any of the items referred
to in Section 18 hereof forthwith upon such amendments or changes becoming
effective. In addition, the Company agrees that no amendments will be made to
the Prospectuses or Statements of Additional Information of the Company which
might have the effect of changing the procedures employed by FNBO in providing
the services agreed to
-7-
<PAGE> 8
hereunder or which amendment might affect the duties of FNBO hereunder unless
the Company first obtains FNBO's approval of such amendments or changes.
21. RELIANCE ON AMENDMENTS. FNBO may rely on any amendments to or
changes in any of the documents and other items to be provided by the Company
pursuant to Sections 18 and 20 of this Agreement and the Company hereby
indemnifies and holds harmless FNBO from and against any and all claims,
demands, actions, suits, judgments, liabilities, losses, damages, costs,
charges, counsel fees and other expenses of every nature and character which
may result from actions or omissions on the part of FNBO in reasonable reliance
upon such amendments and/or changes. Although FNBO is authorized to rely on
the above-mentioned amendments to and changes in the documents and other items
to be provided pursuant to Sections 18 and 20 hereof, FNBO shall be under no
duty to comply with or take any action as a result of any of such amendments
or changes unless the Company first obtains FNBO's written consent to and
approval of such amendments or changes.
22. COMPLIANCE WITH LAW. Except for the obligations of FNBO set
forth in Section 10 hereof, the Company assumes full responsibility for the
preparation, contents and distribution of each prospectus of the Company, as to
compliance with all applicable requirements of the Securities Act of 1933, as
amended, the Investment Company Act of 1940, as amended, and any other laws,
rules and regulations of governmental authorities having jurisdiction. FNBO
shall have no obligation to take cognizance of any laws relating to the sale of
the Company's shares. The Company represents and warrants that no shares of
the Company will be offered to the public until the Company's registration
statement under the Securities act of 1933 and the Investment Company Act of
1940 has been declared or becomes effective.
23. NOTICES. Any notice provided hereunder shall be sufficiently
given when sent by registered or certified mail to the party required to be
served with such notice, at the following address: if to the Company, to 207
E. Buffalo Street, Suite 400, Milwaukee, Wisconsin 53202; if to FNBO, to 16th &
Dodge Streets, Omaha, Nebraska 68103, or at such other address as such party
may from time to time specify in writing to the other party pursuant to this
Section.
24. HEADINGS. Paragraph headings in this Agreement are included
for convenience only and are not to be used to construe or interpret this
Agreement.
25. ASSIGNMENT. This Agreement and the rights and duties hereunder
shall not be assignable by either of the parties hereto except by the specific
written consent of the other party. This Section 25 shall not limit or in any
way affect FNBO's right to appoint a Sub-transfer Agent pursuant to Section 1
hereof.
26. GOVERNING LAW. This Agreement shall be governed by and
provisions shall be construed in accordance with the laws of the State of
Nebraska.
-8-
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
FIRST OMAHA FUNDS, INC.
By D. P. Greer
---------------------
David P. Greer, President
FIRST NATIONAL BANK OF OMAHA
By Marc M. Diehl
------------------------
Marc M. Diehl
Trust Division Head
-9-
<PAGE> 10
SCHEDULE A
TO THE
TRANSFER AGENCY AGREEMENT
BY AND BETWEEN
FIRST OMAHA FUNDS, INC.
AND
FIRST NATIONAL BANK OF OMAHA
Name of Fund Effective Date
------------ --------------
U.S. Government Obligations Fund December 20, 1994
Equity Fund December 20, 1994
Short/Intermediate Fixed Income Fund December 20, 1994
Fixed Income Fund December 20, 1994
Small Cap Value Fund December 5, 1995
Dated December 20, 1994 Revised December 5, 1995
FIRST OMAHA FUNDS, INC. FIRST NATIONAL BANK OF OMAHA
By: /s/ David P. Greer By: /s/ Marc M. Diehl
--------------------- --------------------------
David P. Greer Marc M. Diehl
President Trust Division Head
-10-
<PAGE> 11
SCHEDULE B
TRANSFER AGENCY SERVICES
1. Shareholder Transactions
a. Process shareholder purchase and redemption orders.
b. Set up account information, including address, dividend option,
taxpayer identifications number and wire instructions.
c. Issue confirmation for every transaction.
d. Issue periodic statements for shareholders.
e. Process transfers and exchanges.
f. Process dividend payments, including the purchasing of new
shares through dividend reinvestment.
2. Shareholder Information Services.
a. Make information available to shareholder servicing unit and
other remote access units regarding trade date, share price,
current holdings, yields, and dividend information.
b. Produce detail history of transactions through duplicate or
special order statements upon request.
c. Provide mailing labels for distribution of financial reports,
prospectuses, proxy statements, or marketing material to current
shareholders.
3. Compliance Reporting.
a. Provide reports to the Securities and Exchange Commission, the
NASD and the States in which the Fund is registered.
b. Prepare and distribute appropriate Internal Revenue Service
forms for corresponding Fund and shareholder income and capital
gains.
c. Issue tax withholding reports to the Internal Revenue Service.
4. Dealer/Load Processing (if applicable)
a. Provide reports for tracking rights of accumulation of
purchases made under a Letter of Intent.
-11-
<PAGE> 12
b. Account for separation of shareholder investments from
transaction sale charges for purchases of Fund shares.
c. Calculate fees due under 12b-1 plans for distribution and
marketing expenses.
d. Track sales and commission statistics by dealer and provide for
payment of commissions on direct shareholder purchases in a
load Fund.
e. Calculate fees due under Administrative Services Plans.
5. Shareholder Account Maintenance.
a. Maintain all shareholder records for each account in the
Company.
b. Issue customer statements on scheduled cycle, providing
duplicate second and third party copies if required.
c. Record shareholder account information changes.
d. Maintain account documentation files for each shareholder.
-12-
<PAGE> 13
Dated December 20, 1994
SCHEDULE C
Fees
First National Bank of Omaha
Transfer Agent Fee
First Omaha Proprietary Funds
Open Accounts (per Account/per Year)
Money Market Funds..............................................$26.00
Fixed Income Funds..............................................$22.00
Equity Funds....................................................$19.00
Zero Balance Accounts (per Account/per Year)......................... $6.00
Closed Accounts (per Account/per Year)............................... $6.00
Minimum Charge (per Fund/Portfolio/Month)
Months 1-6...................................................$1,500.00
Months 6-12..................................................$1,800.00
Years 2-3....................................................$2,000.00
Institutional Interface
User Charge..............................$250.00 per Month per/User ID
Transactions Charge..............................$1.50 per Transaction
Automated Interface Transmissions.........................$500.00 per Month
In addition to the above, out-of-pocket expenses and any specialized interfaces
and/or enhancements to the existing processing routines will be billed as
incurred.
FIRST OMAHA FUNDS, INC.
By /s/ David P. Greer
----------------------------------
David P. Greer, President
FIRST NATIONAL BANK OF OMAHA
By /s/ Marc M. Diehl
----------------------------------
Marc M. Diehl, Trust Division Head
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<PAGE> 14
Dated December 20, 1994
SCHEDULE D
REPORTS
I. Daily Shareholder Activity Journal
II. Daily Fund Activity Summary Report
A. Beginning Balance
B. Dealer Transactions
C. Shareholder Transactions
D. Reinvested Dividends
E. Exchanges
F. Adjustments
G. Ending Balance
III. Daily Wire and Check Registers
IV. Monthly Dealer Processing Reports
V. Monthly Dividend Reports
VI. Sales Data Reports for Blue Sky Registration
VII. Annual report by independent public accountants concerning FNBO's
shareholder system and internal accounting control systems to be filed
with the Comptroller of the Currency pursuant to Rule 17Ad-13 of the
Securities Exchange Act of 1934, as amended.
-14-
<PAGE> 1
EXHIBIT 9.5
AMENDED AND RESTATED
SCHEDULE A
TO THE
TRANSFER AGENCY AGREEMENT
BY AND BETWEEN
FIRST OMAHA FUNDS, INC.
AND
FIRST NATIONAL BANK OF OMAHA
Intending to be legally bound, the undersigned hereby amend and restate
Schedule A to the aforesaid Agreement to include the following fees for the
following investment portfolios effective as of the Date hereof:
Name of Fund Effective Date
------------ --------------
U.S. Government Obligations Fund December 20, 1994
Equity Fund December 20, 1994
Short/Intermediate Fixed Income Fund December 20, 1994
Fixed Income Fund December 20, 1994
Small Cap Value Fund December 5, 1995
Balanced Fund July 29, 1996
The amended Schedule A is dated and effective as of this 29th day of
July, 1996.
FIRST OMAHA FUNDS, INC. FIRST NATIONAL BANK OF OMAHA
By: By:
--------------------- --------------------------
David P. Greer Marc M. Diehl
President Trust Division Head
<PAGE> 1
EXHIBIT 10
[CLINE, WILLIAMS, WRIGHT, JOHNSON & OLDFATHER LETTERHEAD]
February 10, 1995
Board of Directors
First Omaha Funds, Inc.
One First National Center
Omaha, NE 68102
RE: FORM N-1A REGISTRATION STATEMENT
Gentlemen:
Our opinion has been requested with respect to the shares of common stock
designated First Omaha Equity Fund, First Omaha Short/Intermediate Fixed Income
Fund, First Omaha Fixed Income Fund and First Omaha U.S. Government Obligations
Fund shares, $.00001 par value per share (the "shares"), of First Omaha Funds,
Inc. (the "Fund"), which are being registered with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, by Form N-1A
Registration Statement.
We have examined the Fund's Articles of Incorporation and Bylaws, reviewed
certain minutes of corporate proceedings, and have made such additional factual
and legal inquiry as we deemed necessary under the circumstances. Based upon
the foregoing, it is our opinion that:
1. The Fund is a duly and validly organized corporation presently
existing in good standing under the laws of the state of Nebraska.
2. The issuance and sale of the shares have been duly and validly
authorized by the necessary corporate action; and said shares will,
upon delivery against payment, be duly authorized, validly issued and
outstanding, fully paid, and nonassessable shares of common stock of
the Fund.
We consent to the use of this opinion as an exhibit to the Fund's Form N-1A
Registration Statement and further consent to the reference of our firm in the
Prospectus and Statement of Additional Information forming a part thereof.
Very truly yours,
Donald F. Burt
DONALD F. BURT
For the Firm
<PAGE> 1
[PEAT MARWICK LLP LETTERHEAD]
Exhibit 11
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Shareholders and Board of Directors
of First Omaha Funds, Inc.:
We consent to the use of our report 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 #4 of Form N-1(a)
Registration Statement of First Omaha Funds, Inc.
KPMG PEAT MARWICK LLP
KPMG PEAT MARWICK LLP
Omaha, Nebraska
May 15, 1996
<PAGE> 1
EXHIBIT 13
[Sunstone Financial Group, Inc. Letterhead]
December 20, 1994
First Omaha Funds, Inc.
Attn: Board of Directors
Gentlemen:
The undersigned (the "Subscriber") hereby subscribes for shares of common stock
to be issued by First Omaha Funds, Inc. (the "Fund") as described below in
consideration of an aggregate purchase price of $100,000.00 to be paid upon
demand at such time as the Board of Directors in its discretion shall determine.
I understand the subscription is being made in anticipation of registering the
Fund as an investment company under the Investment Company Act of 1940 and as
such, is unconditional. My subscription is for the following shares of the
referenced portfolios at the indicated prices:
<TABLE>
<CAPTION>
FUND SHARES PRICE PER SHARE
---- ------ ---------------
<S> <C> <C>
U.S. Government Obligations
Fund 18,000 $ 1.00
Equity Fund 8,000 $10.00
Fixed Income Fund 100 $10.00
Short/Intermediate Fixed
Income Fund 100 $10.00
</TABLE>
I have previously subscribed for 10 shares of stock of the Fund, which
subscription shall be credited against my commitment hereunder to purchase
shares of the U.S. Government Obligations Fund. I am purchasing the shares for
investment purposes only without any present intention of redeeming or
reselling such shares.
Executed as of the 20th day of December, 1994.
/s/ Miriam M. Allison
-----------------------------
Miriam M. Allison
<PAGE> 1
EXHIBIT 15
FIRST OMAHA FUNDS, INC.
DISTRIBUTION AND SERVICE PLAN
This Distribution and Service Plan (the "Plan") has been adopted by the
Board of Directors of First Omaha Funds, Inc, ("Omaha Funds") in accordance
with Rule 12b-1 under the Investment Company Act of 1940 (the "Act").
Section 1. Upon the recommendation of Sunstone Financial Group, Inc.
("Sunstone"), the distributor and administrator of Omaha Funds, any officer of
Omaha Funds is authorized to execute and deliver, in the name and on behalf of
Omaha Funds, written agreements based on the form attached hereto as Appendix A
or any other form duly approved by the Board of Directors ("Agreements") with
securities dealers, financial institutions and other industry professionals
that are shareholders of, or dealers of record of, or which have a servicing
relationship with the beneficial owners of, Shares of Omaha Funds ("Shareholder
Organizations"). Pursuant to such Agreements, Shareholder Organizations shall
provide distribution and support services as set forth therein to their clients
who acquire and beneficially own Shares of any Fund offered by Omaha Funds in
consideration of a fee, computed monthly in the manner set forth in the
Agreements, at an annual rate of up to .25% of the average daily net asset
value of the Shares beneficially owned by such clients. First National Bank of
Omaha and its affiliates are eligible to become Shareholder Organizations and
to receive fees under this Plan.
Section 2. Sunstone shall monitor the arrangements pertaining to Omaha
Funds' Agreements with Shareholder Organizations in accordance with the terms
of Sunstone's administration agreement with Omaha Funds. Sunstone shall not,
however, be obliged by this Plan to recommend, and Omaha Funds shall not be
obliged to execute any Agreement with any qualifying Shareholder Organization.
Section 3. So long as this Plan is in effect, Sunstone shall provide to
Omaha Funds' Board of Directors, and the Directors shall review, at least
quarterly, a written report of the amounts expended pursuant to thus Plan and
the purposes for which such expenditures were made.
Section 4. This Plan shall become effective on June 30, 1995 with respect
to each particular Fund, assuming upon the approval of the Plan (and the form
of Agreement attached hereto) by (a) a majority of the Board of Directors,
including a majority of the Directors who are not "interested persons," as
defined in the Act, of Omaha Funds and have no direct or indirect financial
interest in the operation of this Plan or in any Agreement related to this Plan
(the "Disinterested Directors"), pursuant to a vote cast in person at a meeting
called for the purpose of voting on the approval of this Plan (and form of
Agreement), and (b) a majority (as defined in the Act) of the outstanding
Shares of such Fund.
<PAGE> 2
Section 5. Unless sooner terminated, this Plan shall continue until June
30, 1996 and thereafter shall continue automatically for successive annual
periods provided such continuance is approved at least annually in the manner
set forth in Section 4(a).
Section 6. This Plan may be amended at any time with respect to any Fund
by the Board of Directors, provided that (a) any amendment to increase
materially the costs (whether for distribution or any other purpose) which such
Fund may bear pursuant to this Plan shall be effective only upon the favorable
vote of a majority (as defined in the Act) of the outstanding Shares of such
Fund, and (b) any material amendment of the terms of this Plan shall become
effective only upon the approvals set forth in Section 4(a).
Section 7. This Plan is terminable at any time with respect to any Fund
by (a) vote of a majority of the Disinterested Directors, or (b) vote of a
majority (as defined in the Act) of the Shares of such Fund.
Section 8. The selection and nomination of those Directors who are not
"interested persons" (as defined in the Act) of Omaha Funds shall be committed
to the discretion of such non-interested Directors.
Section 9. All expenses incurred by Omaha Funds with respect to the
Shares of a particular Fund in connection with Agreements and the
implementation of this Plan shall be borne entirely by such Fund.
Section 10. This Plan was originally adopted by Omaha Funds as of April
10, 1995 and last re-adopted as of _____________________, 19__.
-2-
<PAGE> 3
Appendix A
DISTRIBUTION AND SERVICING AGREEMENT
We wish to enter into this Distribution and Servicing Agreement
("Agreement") with you concerning the provision of distribution services (and,
to the extent provided below, support services) to your clients ("Clients") who
may from time to time acquire and beneficially own shares of Common Stock of
one or more Funds ("Shares") offered by First Omaha Funds, Inc.
The terms and conditions of this Agreement are as follows:
Section 1. You will provide reasonable assistance in connection with the
distribution of Shares to Clients as requested from time to time by our
distributor, which assistance may include forwarding sales literature and
advertising provided by our distributor for Clients. In addition, you agree to
provide the following support services to Clients who may from time to time
acquire and beneficially own Shares*: (i) processing dividend and distribution
payments from us on behalf of Clients; (ii) providing information periodically
to Clients showing their positions in Shares; (iii) arranging for bank wires;
(iv) responding to Client inquiries relating to the services performed by you;
(v) providing subaccounting with respect to Shares beneficially owned by
Clients or the information to us necessary for subaccounting; (vi) if required
by law, forwarding shareholder communications from us (such as proxies,
shareholder reports, annual and semiannual financial statements and dividend,
distribution and tax notices) to Clients; (vii) assisting in processing
purchase, exchange and redemption requests from Clients and in placing such
orders with our service contractors; (viii) assisting Clients in changing
dividend options, account designations and addresses; and (ix) providing such
other similar services as we may reasonably request to the extent you are
permitted to do so under applicable statutes, rules and regulations.
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 assistance and services to Clients.
Section 3. Neither of you nor any of your officers, employees or agents
are authorized to make any representations concerning us or the Shares except
those contained in our then current prospectuses and statements of additional
information for Shares, copies of which will be supplied by us to you, or in
such supplemental literature or advertising as may be authorized by us in
writing.
- -------------------
*Services may be modified or omitted in the particular case and items
renumbered.
A-1
<PAGE> 4
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 us
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 Shares (or orders relating to the same) by or on
behalf of Clients. You and your employees will, upon request, be available
during normal business hours to consult with us or our designees concerning the
performance of your responsibilities under this Agreement.
Section 5. In consideration of the services and facilities provided by
you hereunder, we will pay to you, and you will accept as full payment
therefor, a fee at the annual rate of .25% of the average daily net asset value
of the Shares beneficially owned by your Clients for whom you are the dealer of
record or holder of record or with whom you have a servicing relationship (the
"Clients' Shares"), 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 Clients' Shares will be computed in the manner
specified in our Registration Statement (as the same is in effect from time to
time) in connection with the computation of the net asset value of Shares for
purposes of purchases and redemptions. The fee rate stated above may be
prospectively increased or decreased by us, in our sole discretion, at any time
upon notice to you. Further, we may, in our discretion and without notice,
suspend or withdraw the sale of Shares, including the sale of Shares to you for
the account of any Client or Clients. All fees payable by First Omaha Funds
under this Agreement with respect to the Shares of a particular Fund shall be
borne by and be payable entirely out of the assets allocable to, said Shares;
and no other class of Shares of any other Fund offered by First Omaha Funds
shall be responsible for such fees.
Section 6. Any person authorized to direct the disposition of monies paid
or payable by us pursuant to this Agreement will provide to our Board of
Directors, and our 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 us or our designees with such information
as we or they may reasonably request (including, without limitation, periodic
certifications confirming the provisions to Clients of the services described
herein), and will otherwise cooperate with us and our designees (including,
without limitation, any auditors designated by us), in connection with the
preparation of reports to our Board of Directors concerning this Agreement and
the monies paid or payable by us pursuant hereto, as well as any other reports
or filings that may be required by law.
Section 7. We may enter into other similar 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) the compensation payable to you hereunder,
together with any other compensation you receive from Clients for services
contemplated by this Agreement, will
A-2
<PAGE> 5
not be excessive or unreasonable under the laws and instruments
governing your relationships with Clients; and (ii) you will provide to Clients
a schedule of any fees that you may charge to them relating to the investment
of their assets in Shares. In addition, you understand that this Agreement has
been entered into pursuant to Rule 12b-1 under the Investment Company Act of
1940 (the "Act"), and is subject to the provisions of said Rule, as well as any
other applicable rules or regulations promulgated by the Securities and
Exchange Commission.
Section 9. This Agreement will become effective on the date a fully
executed copy of this Agreement is received by us or our designee. Unless
sooner terminated, this Agreement will continue until _____________, 199__, and
thereafter will continue automatically for successive annual periods, provided
such continuance is specifically approved at least annually by us in the manner
described in Section 12. This Agreement is terminable with respect to the
Shares of any Fund, without penalty, at any time by us (which termination may
be by a vote of a majority of the Disinterested Directors as defined in Section
12 or by vote of a majority of the Disinterested Directors as defined in
Section 12 or by vote of the holders of a majority of the outstanding shares of
such Fund) or by you upon notice to the other party hereto. This Agreement
will also terminate automatically in the event of its assignment (as defined in
the Act).
Section 10. All notice and other communications to either you or us will
be duly given if mailed, telegraphed, telexed, or transmitted by similar
telecommunications device to the appropriate address stated herein.
Section 11. This Agreement will be construed in accordance with the laws
of the State of Wisconsin.
Section 12. This Agreement has been approved by vote of a majority of (i)
our Board of Directors and (ii) those Directors who are not "interested
persons" (as defined in the Investment Company Act of 1940) of us and have no
direct or indirect financial interest in the operation of the Distribution and
Service Plan adopted by us or in any agreement related thereto case in person
at a meeting called for the purpose of voting on such approval ("Disinterested
Directors").
If you agree to be legally bound by the provisions of this Agreement,
please sign a copy of this letter where indicated below and promptly return it
to us, c/o Sunstone Financial Group, Inc., 207 East Buffalo Street, Suite 400,
Milwaukee, Wisconsin 53202.
Very truly yours,
FIRST OMAHA FUNDS, INC.
By:
------------------------- --------------------
(Authorized Officer) Date
A-3
<PAGE> 6
Accepted and Agreed to:
By:________________________________ ______________________
(Authorized Officer) Date
A-4
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<CIK> 0000932381
<NAME> FIRST OMAHA FUNDS, INC.
<SERIES>
<NUMBER> 1
<NAME> FIRST OMAHA U.S. GOVERNMENT OBLIGATIONS FUND
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<PERIOD-TYPE> YEAR
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<PERIOD-END> MAR-31-1996
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<INVESTMENTS-AT-VALUE> 88,042,074
<RECEIVABLES> 37,923
<ASSETS-OTHER> 64,718
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<TOTAL-ASSETS> 88,144,715
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 429,982
<TOTAL-LIABILITIES> 429,982
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 87,728,801
<SHARES-COMMON-STOCK> 87,730,683
<SHARES-COMMON-PRIOR> 18,000
<ACCUMULATED-NII-CURRENT> 1,970
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (16,038)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 87,714,733
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4,910,772
<OTHER-INCOME> 0
<EXPENSES-NET> (470,432)
<NET-INVESTMENT-INCOME> 4,440,340
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 4,440,340
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (4,440,340)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 464,171,291
<NUMBER-OF-SHARES-REDEEMED> 377,600,568
<SHARES-REINVESTED> 1,141,960
<NET-CHANGE-IN-ASSETS> 87,696,733
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (15,950)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 216,379
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 509,109
<AVERAGE-NET-ASSETS> 88,752,198
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> (0.05)
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<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.54
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000932381
<NAME> FIRST OMAHA FUNDS, INC.
<SERIES>
<NUMBER> 4
<NAME> FIRST OMAHA EQUITY FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-10-1995
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 189,234,895
<INVESTMENTS-AT-VALUE> 223,956,234
<RECEIVABLES> 265,488
<ASSETS-OTHER> 100,375
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 224,322,097
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 153,284
<TOTAL-LIABILITIES> 153,284
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 182,274,110
<SHARES-COMMON-STOCK> 17,149,232
<SHARES-COMMON-PRIOR> 7,024
<ACCUMULATED-NII-CURRENT> 31,943
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 7,141,421
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 34,721,339
<NET-ASSETS> 224,168,813
<DIVIDEND-INCOME> 4,584,921
<INTEREST-INCOME> 1,759,320
<OTHER-INCOME> 0
<EXPENSES-NET> (1,904,532)
<NET-INVESTMENT-INCOME> 4,439,709
<REALIZED-GAINS-CURRENT> 14,388,259
<APPREC-INCREASE-CURRENT> 18,465,419
<NET-CHANGE-FROM-OPS> 37,293,387
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (4,409,736)
<DISTRIBUTIONS-OF-GAINS> (7,246,838)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 18,061,774
<NUMBER-OF-SHARES-REDEEMED> 1,839,548
<SHARES-REINVESTED> 919,982
<NET-CHANGE-IN-ASSETS> 224,088,813
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,433,904
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,047,318
<AVERAGE-NET-ASSETS> 181,806,845
<PER-SHARE-NAV-BEGIN> 11.39
<PER-SHARE-NII> 0.28
<PER-SHARE-GAIN-APPREC> 2.13
<PER-SHARE-DIVIDEND> (0.28)
<PER-SHARE-DISTRIBUTIONS> (0.45)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 13.07
<EXPENSE-RATIO> 0.99
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000932381
<NAME> FIRST OMAHA FUNDS, INC.
<SERIES>
<NUMBER> 3
<NAME> FIRST OMAHA FIXED INCOME FUND
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<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-10-1995
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 75,280,955
<INVESTMENTS-AT-VALUE> 75,234,390
<RECEIVABLES> 1,102,869
<ASSETS-OTHER> 62,033
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<TOTAL-ASSETS> 76,399,292
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<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 57,373
<TOTAL-LIABILITIES> 57,373
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 76,461,967
<SHARES-COMMON-STOCK> 7,633,734
<SHARES-COMMON-PRIOR> 104
<ACCUMULATED-NII-CURRENT> 84,938
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (158,421)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (46,565)
<NET-ASSETS> 76,341,919
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4,796,262
<OTHER-INCOME> 0
<EXPENSES-NET> (602,825)
<NET-INVESTMENT-INCOME> 4,193,437
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<DISTRIBUTIONS-OF-GAINS> 0
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<NUMBER-OF-SHARES-SOLD> 8,410,817
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000932381
<NAME> FIRST OMAHA FUNDS, INC.
<SERIES>
<NUMBER> 5
<NAME> FIRST OMAHA SMALL CAP VALUE FUND
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<PERIOD-TYPE> OTHER
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<PERIOD-START> MAR-29-1996
<PERIOD-END> MAR-31-1996
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<SHARES-COMMON-STOCK> 50
<SHARES-COMMON-PRIOR> 0
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<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 500
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 50
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 500
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 500
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.00
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
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<PER-SHARE-NAV-END> 10.00
<EXPENSE-RATIO> 0.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000932381
<NAME> FIRST OMAHA FUNDS, INC.
<SERIES>
<NUMBER> 2
<NAME> FIRST OMAHA SHORT/INTERMED. FIXED INCOME FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-10-1995
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 21,764,795
<INVESTMENTS-AT-VALUE> 21,676,048
<RECEIVABLES> 358,236
<ASSETS-OTHER> 45,617
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 22,079,901
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 24,089
<TOTAL-LIABILITIES> 24,089
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 22,384,874
<SHARES-COMMON-STOCK> 2,238,496
<SHARES-COMMON-PRIOR> 104
<ACCUMULATED-NII-CURRENT> 23,078
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (263,393)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (88,747)
<NET-ASSETS> 22,055,812
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,332,377
<OTHER-INCOME> 0
<EXPENSES-NET> (194,462)
<NET-INVESTMENT-INCOME> 1,137,915
<REALIZED-GAINS-CURRENT> (84,610)
<APPREC-INCREASE-CURRENT> 527,854
<NET-CHANGE-FROM-OPS> 1,581,159
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,116,807)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,835,206
<NUMBER-OF-SHARES-REDEEMED> 709,044
<SHARES-REINVESTED> 112,230
<NET-CHANGE-IN-ASSETS> 22,054,812
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (178,976)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 108,692
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 221,567
<AVERAGE-NET-ASSETS> 20,574,457
<PER-SHARE-NAV-BEGIN> 9.66
<PER-SHARE-NII> 0.51
<PER-SHARE-GAIN-APPREC> 0.18
<PER-SHARE-DIVIDEND> (0.50)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.85
<EXPENSE-RATIO> 0.89
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
