SUNSTONE FINANCIAL GROUP, INC.
207 East Buffalo Street
Milwaukee, Wisconsin 53202
414-271-5885
December 12, 1996
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Re: First Omaha Funds, Inc.
(33-85982; 811-8846)
Filing Under Rule 497(c) of the Securities Act of 1933
Gentlemen:
On behalf of the above-referenced registered investment company, transmitted
herewith for filing pursuant to Rule 497(c) under the Securities Act of 1933, as
amended, is the Prospectus dated December 10, 1996. Questions regarding this
filing may be directed to the undersigned at (414) 271-5885.
Very truly yours,
/s/ Richard P. Snyder
Richard P. Snyder
Client Services and Accounting Manager
RPS/sl
Encl.
c: Don Burt
FIRST OMAHA FUNDS PROSPECTUS
DECEMBER 10, 1996
<TABLE>
<C> <C> <C>
First Omaha Funds, Inc. First National Bank of Omaha For current yield, purchase,
One First National Center Investment Adviser and redemption information,
Omaha, Nebraska 68102-1596 Custodian and Transfer Agent call (800) OMAHA-03
</TABLE>
First Omaha Funds, Inc. (the "Company") is an open-end management investment
company. The Directors of the Company have divided the Company's common stock
("Shares") into series, each of which relates to a mutual fund with its own
investment objectives and policies. This Prospectus relates to the following
Funds, each of which is a no-load diversified investment Fund. First National
Bank of Omaha, Omaha, Nebraska (the "Adviser"), a subsidiary of First National
of Nebraska, Inc. ("FNN"), acts as the investment adviser to the Funds.
FIRST OMAHA SMALL CAP VALUE FUND (the "Small Cap Value Fund") seeks as its
investment objective long-term capital appreciation.
FIRST OMAHA EQUITY FUND (the "Equity Fund") seeks as its investment objective
long-term growth of capital.
FIRST OMAHA BALANCED FUND (the "Balanced Fund") seeks as its investment
objective capital appreciation and current income.
FIRST OMAHA FIXED INCOME FUND (the "Fixed Income Fund") seeks as its
investment objective, to generate current income consistent with preservation of
capital.
FIRST OMAHA SHORT/INTERMEDIATE FIXED INCOME FUND (the "Short/Intermediate
Fund") seeks as its investment objective, to generate current income consistent
with preservation of capital.
FIRST OMAHA U.S. GOVERNMENT OBLIGATIONS FUND (the "Money Market Fund") seeks
as its investment objective to maximize current income to the extent consistent
with the preservation of capital and maintenance of liquidity. THE MONEY MARKET
FUND SEEKS TO MAINTAIN A CONSTANT NET ASSET VALUE OF $1.00 PER SHARE, BUT THERE
CAN BE NO ASSURANCE THE NET ASSET VALUE WILL NOT VARY. AN INVESTMENT IN THE
MONEY MARKET FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT.
THE SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, THE FIRST NATIONAL BANK OF OMAHA, ITS PARENT, FIRST NATIONAL OF
NEBRASKA, INC. OR ANY OF THEIR AFFILIATES. SUCH SHARES ARE NOT FEDERALLY INSURED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY
OTHER GOVERNMENTAL AGENCY. AN INVESTMENT IN A FUND INVOLVES CERTAIN INVESTMENT
RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
This Prospectus sets forth concisely the information about the Funds that a
prospective investor ought to know before investing. Investors should read this
Prospectus and retain it for future reference. Additional information about the
Funds, contained in a Statement of Additional Information, dated the same date
as the Prospectus, as amended from time to time, has been filed with the
Securities and Exchange Commission and is available upon request without charge
by writing to the Funds at their address or by calling the Funds at the
telephone number shown above. The Statement of Additional Information is
incorporated by reference in its entirety into this Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
TABLE OF CONTENTS
Prospectus Summary 1
Fee Table 3
Financial Highlights 5
Performance Information 11
Investment Objectives and Policies 12
Investment Restrictions 19
Valuation of Shares 19
How to Purchase and Redeem Shares 20
Dividends and Taxes 23
Management of the Company 24
General Information 26
Additional Performance Information 28
No person has been authorized to give any information or to make any
representations not contained in this Prospectus in connection with the offering
made by this Prospectus and, if given or made, such information or
representations must not be relied upon as having been authorized by the Funds
or their Distributor. This Prospectus does not constitute an offering by the
Funds or by the Distributor in any jurisdiction in which such offering may not
lawfully be made.
PROSPECTUS SUMMARY
- ------------------
TYPE OF COMPANY
Each Fund is a no-load, diversified series of an open-end, management investment
company.
INVESTMENT OBJECTIVE
For the Small Cap Value Fund, long-term capital appreciation.
For the Equity Fund, long-term growth of capital.
For the Balanced Fund, capital appreciation and current income.
For the Fixed Income Fund and the Short/Intermediate Fund, generation of current
income and preservation of capital.
For the Money Market Fund, maximization of current income, preservation of
capital and maintenance of liquidity.
INVESTMENT POLICY
Under normal market conditions, the Small Cap Value Fund will invest at least
65% of its total assets in common stocks and securities convertible into common
stocks issued by companies having small market capitalizations, but may also
invest in other equity securities and in fixed income securities.
Under normal market conditions, the Equity Fund will invest at least 65% of its
total assets in common stocks and securities convertible into common stocks but
may also invest up to 35% of its total assets in other equity securities and in
fixed income securities.
Under normal market conditions, the Balanced Fund will invest in common stock,
securities convertible into common stock, investment grade corporate debt, U.S.
Treasury obligations or obligations issued by the U.S. government, its agencies
and instrumentalities and cash equivalents. The assets of the Balanced Fund will
be allocated among these classes of securities based on the Adviser's assessment
of market conditions.
Under normal market conditions, the Fixed Income Fund will invest at least 65%
of its total assets in investment grade fixed income securities.
Under normal market conditions, the Short/Intermediate Fund will invest at least
65% of its total assets in investment grade fixed income securities and will
maintain a dollar- weighted average portfolio maturity of two to five years.
Under normal market conditions, the Money Market Fund will invest exclusively in
short-term (397 days or less) high quality money market instruments, principally
U.S. government obligations, having a dollar-weighted average maturity of 90
days or less and will attempt to maintain a constant net asset value of $1.00
per share.
RISK FACTORS AND SPECIAL CONSIDERATIONS
An investment in the Funds is subject to certain risks, as set forth in detail
under "INVESTMENT OBJECTIVES AND POLICIES." As with other mutual funds, there
can be no assurance that the Funds will achieve their investment objectives.
Some or all of the Funds, to the extent set forth under "INVESTMENT OBJECTIVES
AND POLICIES," may engage in the following practices: the use of repurchase and
reverse repurchase agreements, investing in foreign securities, the lending of
portfolio securities, investing in derivatives and the purchase of securities on
a when-issued or delayed-delivery basis.
OFFERING PRICE
The public offering price of each Fund is equal to its net asset value per
Share.
SHARES OFFERED
Shares of common stock ("Shares") of the Small Cap Value Fund, the Equity
Fund, the Balanced Fund, the Fixed Income Fund, the Short/Intermediate Fund and
the Money Market Fund, each a separate investment portfolio of First Omaha
Funds, Inc., a Nebraska corporation.
MINIMUM PURCHASE
The minimum initial investment is $500 with $50 minimum subsequent investments.
Such minimum initial investment is reduced to $100 for investors using the Auto
Invest Plan described herein, and the minimum subsequent investment may be
waived if purchases are made in connection with an IRA. Both minimum initial and
subsequent investments may be waived if purchases are made pursuant to a payroll
deduction plan.
DIVIDENDS
Dividends from net investment income are declared and paid monthly, except that
the Money Market Fund will declare income dividends daily. Net realized capital
gains are distributed at least annually.
INVESTMENT ADVISER
First National Bank of Omaha (the "Adviser").
ADMINISTRATOR/DISTRIBUTOR
Sunstone Financial Group, Inc. (the "Administrator" or the "Distributor," as
the context indicates).
<TABLE>
FEE TABLE
- ---------
<CAPTION>
SMALL CAP FIXED SHORT/ MONEY
VALUE EQUITY BALANCED INCOME INTERMEDIATE MARKET
FUND FUND FUND FUND FUND FUND
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) 0% 0% 0% 0% 0% 0%
Maximum Sales Load Imposed on
Reinvested Dividends (as a percentage
of offering price) 0% 0% 0% 0% 0% 0%
Deferred Sales Load (as a percentage
of original purchase price or redemption
proceeds, as applicable) 0% 0% 0% 0% 0% 0%
Redemption Fees (as a percentage of
amount redeemed, if applicable) 0% 0% 0% 0% 0% 0%
Exchange Fee 0% 0% 0% 0% 0% 0%
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees<F1> .00% .75% .00% .55% .45% .25%
12b-1 Fees<F2> .01% .01% .01% .01% .01% .01%
Other Expenses After Voluntary Fee
Reduction, including administration fees,
administrative servicing fees and other
expenses<F1><F3> 1.37% .31% 1.35% .36% .54% .32%
Total Fund Operating Expenses After
Voluntary Fee Reduction 1.38% 1.07% 1.36% .92% 1.01% .58%
<F1>The Adviser and the Administrator, respectively, have agreed with the Company to reduce voluntarily the amount of the
investment advisory, administration, transfer agent, custodian and administrative servicing fees for the Funds until further
notice. Absent the voluntary investment advisory, administration, transfer agent, custodian and administrative servicing fee
reductions, Management Fees, Other Expenses and Total Fund Operating Expenses as a percentage of average net assets are
estimated to be .85%, 3.58% and 4.44%, respectively, for the Small Cap Value Fund; .75%, .41% and 1.17%, respectively, for the
Equity Fund; .75%, 3.61% and 4.37%, respectively, for the Balanced Fund; .60%, .46% and 1.07%, respectively, for the Fixed
Income Fund; .50%, .64% and 1.16%, respectively, for the Short/Intermediate Fund; and .25%, .34% and .60%, respectively, for
the Money Market Fund. (See "MANAGEMENT OF THE COMPANY-Investment Adviser" and "Administrative Services Plan."
<F2>The Company has adopted a Rule 12b-1 Plan pursuant to which each of the Funds is authorized to pay a periodic amount,
representing distribution expenses, calculated at an annual rate not to exceed .25% of the average daily net asset value of
such Fund. As of the date of this Prospectus, it is estimated that 12b-1 expenses will be .01% of average daily net assets of
each Fund.
<F3>"Other Expenses" include administration fees and legal, accounting and other miscellaneous expenses to be incurred during the
fiscal year. As of the date of this Prospectus, administrative servicing fees of .05% were being accrued by the Equity, Fixed
Income and Short/Intermediate Funds.
</TABLE>
EXAMPLE:
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Small Cap Value Fund $14 $44 $76 $168
Equity Fund $11 $34 $60 $132
Balanced Fund $14 $44 $75 $165
Fixed Income Fund $ 9 $30 $51 $114
Short/Intermediate Fund $10 $32 $56 $125
Money Market Fund $ 6 $19 $33 $ 73
The purpose of the above tables is to assist a potential purchaser of a Fund's
Shares in understanding the various costs and expenses that an investor in such
Fund will bear directly or indirectly. "Other Expenses" for each Fund have
been estimated. Expenses do not include any fees charged by the Adviser or any
of its affiliates or any Banks or their affiliates to their customer accounts
for automatic investment, cash management and other services. See "How to
Purchase and Redeem Shares - Minimum Investment." See "MANAGEMENT OF THE
COMPANY" and "GENERAL INFORMATION" for a more complete discussion of the
Shareholder transaction expenses and annual operating expenses for each of the
Funds.
FINANCIAL HIGHLIGHTS
- ---------------------
The following financial highlights for periods ended on or prior to March 31,
1996 are audited and should be read in conjunction with the Funds' financial
statements, the related notes thereto and the independent auditors' report of
KPMG Peat Marwick LLP appearing in the Statement of Additional Information.
The information for the period ended October 31, 1996 is unaudited. Further
information about the Funds' performance is contained in the Company's annual
report to shareholders, which may be obtained without charge by calling or
writing the Company at the telephone number or address on the first page of this
Prospectus.
<TABLE>
<CAPTION>
SMALL CAP VALUE FUND 6/10/96<F4>
to 10/31/96
(unaudited)
-----------
<S> <C>
Net Asset Value, Beginning of Period $10.00
Income from Investment Operations:
Net investment income 0.05
Net realized and unrealized gains on investments 0.03
------
Total from investment operations 0.08
------
Less Distributions to Shareholders:
Dividends from net investment income 0.05
Distributions from capital gains -
------
Total distributions 0.05
------
Net Asset Value, End of Period $10.03
======
Total Return<F5> 0.85%
Supplemental Data and Ratios:
Net assets, end of period (000s) $3,351
Ratio of net expenses to average net
assets<F6> 1.53%
Ratio of net investment income to average
net assets<F6> 1.55%
Ratio of net expenses to average net
assets <F6><F7> 5.03%
Ratio of net investment income to average
net assets<F6><F7> (1.95)%
Portfolio turnover rate<F5> 4.52%
Average commission rate paid on portfolio
transactions $0.0700
<FN>
<F4> Commencement of operations
<F5> Not annualized
<F6> Annualized
<F7> During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the ratios would
have been as indicated.
</TABLE>
<TABLE>
<CAPTION>
4/1/96
EQUITY FUND to 10/31/96 4/10/95<F9> 7/1/94<F8> YEAR ENDED 12/13/92<F8>
(unaudited) to 3/31/96 to 4/9/95 6/30/94<F8> to 6/30/93
----------- ---------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $13.07 $11.39 $10.48 $10.55 $10.00
Income from Investment Operations:
Net investment income 0.18 0.28 0.21 0.20 0.11
Net realized and unrealized gains on investments 0.71 2.13 1.48 0.15 0.54
------ ------ ------ ------ ------
Total from investment operations 0.89 2.41 1.69 0.35 0.65
------ ------ ------ ------ ------
Less Distributions to Shareholders:
Dividends from net investment income 0.18 0.28 0.22 0.20 0.10
Distributions from capital gains - 0.45 0.56 0.22 -
------ ------ ------ ------ ------
Total distributions 0.18 0.73 0.78 0.42 0.10
------ ------ ------ ------ ------
Net Asset Value, End of Period $13.78 $13.07 $11.39 $10.48 $10.55
====== ====== ====== ====== ======
Total Return<F10> 6.90% 21.52% 16.48% 3.34% 6.55%
Supplemental Data and Ratios:
Net assets, end of period (000s) $244,979 $224,169 $161,323 $129,381 $111,059
Ratio of net expenses to average net
assets<F11> 1.01% 0.99% 1.03% 1.04% 1.01%
Ratio of net investment income to average
net assets<F11> 2.33% 2.32% 2.50% 1.93% 1.90%
Ratio of net expenses to average net
assets <F11><F12> 1.06% 1.07% 1.62% 1.54% 1.32%
Ratio of net investment income to average
net assets<F11><F12> 2.28% 2.24% 1.91% 1.43% 1.59%
Portfolio turnover rate<F10> 13.31% 26.60% 14.36% 15.86% 4.94%
Average commission rate paid on portfolio
transactions $0.0700 N/A N/A N/A N/A
<FN>
<F8> Performance data for each Fund prior to April 10, 1995 relates to a corresponding predecessor First Omaha Fund, the assets
of which were acquired on that date.
<F9> Commencement of operations
<F10>Not annualized
<F11>Annualized
<F12>During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the ratios would
have been as indicated.
</TABLE>
<TABLE>
<CAPTION>
BALANCED FUND 8/6/96<F13>
to 10/31/96
(unaudited)
-----------
<S> <C>
Net Asset Value, Beginning of Period $10.00
Income from Investment Operations:
Net investment income 0.07
Net realized and unrealized gains on investments 0.20
------
Total from investment operations 0.27
------
Less Distributions to Shareholders:
Dividends from net investment income 0.07
Distributions from capital gains -
------
Total distributions 0.07
------
Net Asset Value, End of Period $10.20
======
Total Return<F14> 2.73%
Supplemental Data and Ratios:
Net assets, end of period (000s) $2,832
Ratio of net expenses to average net assets<F15> 1.37%
Ratio of net investment income to average net assets<F15> 3.26%
Ratio of net expenses to average net assets <F15><F16> 4.98%
Ratio of net investment income to average net assets<F15><F16> (0.35)%
Portfolio turnover rate<F14> -
Average commission rate paid on portfolio transactions $0.0700
<FN>
<F13>Commencement of operations
<F14>Not annualized
<F15>Annualized
<F16>During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the ratios
would have been as indicated.
</TABLE>
<TABLE>
<CAPTION>
4/1/96
FIXED INCOME FUND to 10/31/96 4/10/95<F18> 7/1/94<F17> YEAR ENDED 12/13/92<F17>
(unaudited) to 3/31/96 to 4/9/95 6/30/94<F17> to 6/30/93
----------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.00 $9.63 $9.58 $10.49 $10.00
Income from Investment Operations:
Net investment income 0.26 0.59 0.51 0.67 0.39
Net realized and unrealized gains on investments 0.10 0.35 0.07 (0.88) 0.47
------ ------ ------ ------ ------
Total from investment operations 0.36 0.94 0.58 (0.21) 0.86
------ ------ ------ ------ ------
Less Distributions to Shareholders:
Dividends from net investment income 0.25 0.57 0.53 0.67 0.37
Distributions from capital gains - - - 0.03 -
------ ------ ------ ------ ------
Total distributions 0.25 0.57 0.53 0.70 0.37
------ ------ ------ ------ ------
Net Asset Value, End of Period $10.11 $10.00 $9.63 $9.58 $10.49
====== ====== ====== ====== ======
Total Return<F19> 3.73% 9.79% 6.35% (2.29)% 8.72%
Supplemental Data and Ratios:
Net assets, end of period (000s) $80,315 $76,342 $66,488 $61,714 $59,178
Ratio of net expenses to average
net assets<F20> 0.87% 0.83% 0.87% 0.86% 0.79%
Ratio of net investment income to average
net assets<F20> 4.15% 5.94% 6.98% 6.52% 6.89%
Ratio of net expenses to average net
assets<F20><F21> 0.96% 0.96% 1.51% 1.41% 1.19%
Ratio of net investment income to average
net assets<F20><F21> 4.06% 5.81% 6.34% 5.97% 6.49%
Portfolio turnover rate<F19> 4.72% 37.35% 7.04% 13.09% 2.62%
Average commission rate paid on portfolio
transactions - N/A N/A N/A N/A
<FN>
<F17>Performance data for each Fund prior to April 10, 1995 relates to a corresponding predecessor First Omaha Fund, the assets of
which were acquired on that date.
<F18>Commencement of operations
<F19>Not annualized
<F20>Annualized
<F21>During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the ratios would
have been as indicated.
</TABLE>
<TABLE>
<CAPTION>
4/1/96
SHORT/INTERMEDIATE FIXED INCOME FUND to 10/31/96 4/10/95<F23> 7/1/94<F22> YEAR ENDED 12/13/92<F22>
(unaudited) to 3/31/96 to 4/9/95 6/30/94<F22> to 6/30/93
----------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $9.85 $9.66 $9.62 $10.18 $10.00
Income from Investment Operations:
Net investment income 0.31 0.52 0.42 0.55 0.33
Net realized and unrealized gains on investments 0.04 0.17 0.05 (0.56) 0.16
------ ------ ------ ------ ------
Total from investment operations 0.35 0.69 0.47 (0.01) 0.49
------ ------ ------ ------ ------
Less Distributions to Shareholders:
Dividends from net investment income 0.30 0.50 0.43 0.55 0.31
Distributions from capital gains - - - - -
------ ------ ------ ------ ------
Total distributions 0.30 0.50 0.43 0.55 0.31
------ ------ ------ ------ ------
Net Asset Value, End of Period $9.90 $9.85 $9.66 $9.62 $10.18
====== ====== ====== ====== ======
Total Return<F24> 3.61% 7.24% 5.05% (0.22)% 5.00%
Supplemental Data and Ratios:
Net assets, end of period (000s) $21,637 $22,056 $22,130 $21,938 $24,581
Ratio of net expenses to average net
assets<F25> 0.95% 0.89% 0.88% 0.83% 0.79%
Ratio of net investment income to average
net assets<F25> 4.95% 5.34% 5.63% 5.44% 5.91%
Ratio of net expenses to average net
assets<F25><F26> 1.04% 1.02% 1.51% 1.38% 1.19%
Ratio of net investment income to average
net assets<F25><F26> 4.86% 5.21% 5.00% 4.89% 5.51%
Portfolio turnover rate<F24> 4.69% 41.45% 9.93% 20.52% 15.58%
Average commission rate paid on portfolio
transactions - N/A N/A N/A N/A
<FN>
<F22>Performance data for each Fund prior to April 10, 1995 relates to a corresponding predecessor First Omaha Fund, the assets of
which were acquired on that date.
<F23>Commencement of operations
<F24>Not annualized
<F25>Annualized
<F26>During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the ratios would
have been as indicated.
</TABLE>
<TABLE>
<CAPTION>
4/1/96
U.S. GOVERNMENT OBLIGATIONS FUND to 10/31/96 4/10/95<F28> 7/1/94<F27> YEAR ENDED YEAR ENDED 12/4/91<F27>
(unaudited) to 3/31/96 to 4/9/95 6/30/94<F27> to 6/30/93<F27> to 6/30/92
----------- ---------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Income from Investment Operations:
Net investment income 0.03 0.05 0.04 0.03 0.03 0.02
Net realized and unrealized gains
on investments - - - - - -
------ ------ ------ ------ ------ ------
Total from investment operations 0.03 0.05 0.04 0.03 0.03 0.02
------ ------ ------ ------ ------ ------
Less Distributions to Shareholders:
Dividends from net investment income 0.03 0.05 0.04 0.03 0.03 0.02
Distributions from capital gains - - - - - -
------ ------ ------ ------ ------ ------
Total distributions 0.03 0.05 0.04 0.03 0.03 0.02
------ ------ ------ ------ ------ ------
Net Asset Value, End of Period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
====== ====== ====== ====== ====== ======
Total Return<F29> 2.76% 5.14% 3.51% 2.74% 2.72% 2.15%
Supplemental Data and Ratios:
Net assets, end of period (000s) $111,297 $87,715 $76,105 $89,195 $91,785 $81,152
Ratio of net expenses to average
net assets<F30> 0.57% 0.54% 0.63% 0.60% 0.61% 0.46%
Ratio of net investment income to
average net assets<F30> 4.66% 5.12% 4.46% 2.68% 2.67% 3.65%
Ratio of net expenses to average
net assets<F30><F31> 0.59% 0.59% 1.23% 1.13% 0.96% 0.98%
Ratio of net investment income to
average net assets<F30><F31> 4.64% 5.07% 3.86% 2.15% 2.32% 3.13%
Portfolio turnover rate<F29> - - - - - -
Average commission rate paid on
portfolio transactions - N/A N/A N/A N/A N/A
<FN>
<F27>Performance data for each Fund prior to April 10, 1995 relates to a corresponding predecessor First Omaha Fund, the assets of
which were acquired on that date.
<F28>Commencement of operations
<F29>Not annualized
<F30>Annualized
<F31>During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the ratios would
have been as indicated.
</TABLE>
PERFORMANCE INFORMATION
- -----------------------
From time to time, performance information for the Small Cap Value, Equity,
Balanced, Fixed Income and Short/Intermediate Funds showing their respective
average annual total return, aggregate total return and/or yield may be
presented in advertisements, sales literature and Shareholder reports. SUCH
PERFORMANCE FIGURES ARE BASED ON HISTORICAL EARNINGS AND ARE NOT INTENDED TO
INDICATE FUTURE PERFORMANCE. Average annual total return will be calculated for
the period since the commencement of operations for such Fund (including its
immediate predecessor). Average annual total return is measured by comparing the
value of an investment in a Fund at the beginning of the relevant period to the
redeemable value of the investment at the end of the period (assuming immediate
reinvestment of any dividends or capital gains distributions), which figure is
then annualized. Aggregate total return is calculated similarly to average
annual total return except that the return figure is aggregated over the
relevant period instead of annualized. The Funds may, when citing performance in
marketing and sales literature, include the performance of investment vehicles
which were predecessors to the Funds. Yield will be computed by dividing a
Fund's net investment income per share (as calculated on a yield to maturity
basis) earned during a recent 30-day period by that Fund's per share maximum
offering price (reduced by any undeclared earned income expected to be paid
shortly as a dividend) on the last day of the period and annualizing the result.
From time to time the Money Market Fund may advertise its "yield," "effective
yield" and "average annual total return." THE YIELD FIGURES AND THE RETURN
FIGURES ARE BASED ON HISTORICAL EARNINGS AND ARE NOT INTENDED TO INDICATE FUTURE
PERFORMANCE. The "yield" of the Money Market Fund refers to the income
generated by an investment therein over a seven-day period (which period will be
stated in the advertisement). This income is then "annualized." That is, the
amount of income generated by the investment during that week is assumed to be
generated each week over a 52-week period and is shown as a percentage of the
investment. The Money Market Fund may also present a 30-day yield which is
calculated similarly but instead refers to a 30-day period rather than a seven-
day period. The "effective yield" is calculated similarly but, when
annualized, the income earned by an investment in the Money Market Fund is
assumed to be reinvested. The "effective yield" is slightly higher than the
"yield" because of the compounding effect of this assumed reinvestment. For
the seven-day period ended October 31, 1996, the yield of the Money Market Fund
was 4.71% and its effective yield was 4.82%.
In addition, from time to time, the Funds may present their distribution rates
in supplemental sales literature and in Shareholder reports both of which must
be accompanied or preceded by a Prospectus. Distribution rates will be computed
by dividing the distributions per share made by a Fund over a 12-month period by
the maximum offering price per share. The calculation of income in the
distribution rate includes both income and capital gain dividends and does not
reflect unrealized gains or losses, although each Fund may also present a
distribution rate excluding the effect of capital gains. The distribution rate
differs from the yield, because it includes capital items which are often non-
recurring in nature, whereas yield does not include such items. Distribution
rate information will be accompanied by the standardized yield and total return
data.
Investors may also judge the performance of each Fund by comparing or
referencing its performance to the performance of other mutual funds with
comparable investment objectives and policies through various mutual fund or
market indices and to data prepared by various services which indices or data
may be published by such services or by other services or publications. For
example, the total return and yield of a Fund's Shares may be compared to data
prepared by Lipper Analytical Services, Inc. In addition, the total return of a
Fund may be compared to the S&P 500 Index, the S&P 400 Index, the S&P 400 Index,
the Nasdaq Composite Index, an index of unmanaged groups of common stocks of
domestic companies that are quoted on the National Association of Securities
Dealers Automated Quotation System, the Dow Jones Industrial Average, a
recognized unmanaged index of common stocks of 30 industrial companies listed
on the New York Stock Exchange, the Lehman Bros. Mutual Fund Short (1-5) U.S.
Gov't Index, or the Lehman Bros. Gov't/Corp. Bond Index. Total Return and yield
data as reported in national financial publications, such as MONEY MAGAZINE,
FORBES, BARRON'S, MORNINGSTAR MUTUAL FUNDS, THE WALL STREET JOURNAL and THE
NEW YORK TIMES, or in publications of a local or regional nature, may also be
used in comparing the performance of the Funds. In addition to performance
information, general information about the Funds that appears in such
publications may be included in advertisements, sales literature and reports
to Shareholders.
Yield and total return are generally functions of market conditions, interest
rates, types of investments held and operating expenses. Consequently, current
yields and total return will fluctuate and are not necessarily representative of
future results. Any fees charged by the Adviser or any of its affiliates with
respect to customer accounts for investing in Shares of any of the Funds will
not be included in performance calculations; such fees, if charged, will reduce
the actual performance from that quoted. In addition, if the Adviser and
Sunstone voluntarily reduce all or part of their respective fees for a Fund, as
discussed below, the yield and total return of that Fund will be higher than it
would otherwise be in the absence of such voluntary fee reductions. For
additional information about the performance of the Funds and their
predecessors, see "Additional Performance Information."
INVESTMENT OBJECTIVES AND POLICIES
- ----------------------------------
IN GENERAL
The investment objective of the Small Cap Value Fund is capital appreciation.
The investment objective of the Equity Fund is long-term growth of capital. The
investment objective of the Balanced Fund is capital appreciation and current
income. The investment objective of each of the Fixed Income Fund and the
Short/Intermediate Fund is generation of current income consistent with the
preservation of capital. The investment objective of the Money Market Fund is
maximum current income to the extent consistent with the preservation of capital
and the maintenance of liquidity. These investment objectives are fundamental
policies and, as such, may not be changed without a vote of the holders of a
majority of the outstanding shares of that Fund (as defined in "GENERAL
INFORMATION-Miscellaneous"). There can be no assurance that the investment
objective of a Fund will be achieved.
THE SMALL CAP VALUE FUND
Under normal market conditions, the Fund will invest at least 65% of its total
assets in common stocks and securities convertible into common stocks (such as
convertible bonds, convertible preferred stocks, warrants, options and rights)
issued by companies having small market capitalization. For these purposes
"small market capitalization" means market capitalization smaller than
approximately the largest one-fourth of companies listed on the New York Stock
Exchange, currently $1.5 billion or less. The Adviser expects that most of such
companies will have market capitalization in the $200 million - $1 billion
range. Although current dividend or interest income will not be a factor in the
selection of investments, the Adviser intends to seek companies whose record of
earnings and/or dividend growth may be indications of capital appreciation
potential. The Adviser will generally seek to invest in companies whose stock is
trading at prices below book value or the Adviser's perception of actual value.
The Fund may also invest up to 35% of the value of its total assets in preferred
stocks, common stocks other than those described above, corporate bonds, notes,
warrants, and short-term obligations (with maturities of 12 months or less)
consisting of domestic and foreign commercial paper (including variable amount
master demand notes), bankers' acceptances, repurchase agreements, and
obligations issued or guaranteed by the U.S. government or its agencies or
instrumentalities. The Fund will only invest in short-term obligations,
including securities of investment companies holding themselves out as "money
market" funds, for purposes of portfolio liquidity to meet redemption
requirements and short-term investment needs. During temporary defensive periods
as determined by the Adviser, the Fund may hold up to 100% of its total assets
in high quality short-term obligations including domestic bank certificates of
deposit, bankers' acceptances and repurchase agreements secured by bank
instruments. However, to the extent that the Fund is so invested in debt
obligations, the Fund may not achieve its investment objective.
Subject to the foregoing limitations, the Fund will invest only in corporate
debt securities (including convertible securities) which are rated at the time
of purchase within the four highest rating groups assigned by one or more
nationally recognized statistical rating organizations ("NRSROs"), e.g.,
Moody's Investors Service, Inc. ("Moody's") and Standard & Poor's Corporation
("S&P"), or, if unrated, which the Adviser deems present attractive
opportunities and are of comparable quality. For a description of the rating
symbols of the NRSROs, see the Appendix to the Statement of Additional
Information. For a discussion of debt securities rated within the fourth highest
rating groups assigned by Moody's and S&P, see "OTHER INVESTMENT POLICIES AND
RISKS - Securities Ratings" herein.
Equity securities such as those in which the Fund may invest are more volatile
and carry more risk than some other investments, including investments in high
grade fixed income securities. Depending upon the performance of the Fund's
investments, the net asset value per share of the Fund may fluctuate. The
emphasis on appreciation and smaller capitalization companies may result in even
greater risk than is inherent in other equity investment alternatives. The Fund
will likely have somewhat greater volatility than the stock market generally, as
measured by the S&P 500 Index.
Under normal market conditions, the Fund will invest primarily in common stocks,
some of which will be traded in the over-the-counter market. In contrast to the
securities exchanges, the over-the-counter market is not a centralized facility
which limits trading activity to securities of companies which initially satisfy
certain defined standards. Any security can be traded in the over-the-counter
market as long as an individual or firm is willing to make a market in the
security. Because there are no minimum requirements for a company's assets or
earnings or the number of its stockholders in order for its stock to be traded
over-the-counter, there is great diversity in the size and profitability of
companies whose stocks trade in this market, ranging from relatively small
little-known companies to well established corporations.
Generally, the volume of trading in an unlisted common stock is less than the
volume of trading in a listed common stock. This means that the degree of market
liquidity of some stocks in which the Fund invests may be relatively limited.
When the Fund disposes of such a stock it may have to offer the shares at a
discount from recent prices or sell the shares in small lots over an extended
period of time.
Some securities issued by companies with a small capitalization present greater
risks and may be subject to large, abrupt or erratic fluctuations in price due,
in part, to such factors as the issuer's dependence upon key personnel, the lack
of internal resources, the inability to obtain funds from external sources, and
dependence on a new product or service for which there is no firmly established
market. Fluctuations in the price of some of the stocks owned by the Fund,
therefore, could cause the net asset value of the Fund to vary significantly.
THE EQUITY FUND
Under normal market conditions, the Equity Fund will invest at least 65% of the
value of its total assets in common stocks and securities convertible into
common stocks (i.e., convertible bonds, convertible preferred stock, warrants,
options and rights) of companies believed by the Adviser to be large
capitalization companies with a record of good earnings and/or dividend growth.
For purposes of the foregoing policy, "large capitalization" means companies
having market capital comparable to the market capitalization of the largest
one-fourth of the companies listed on the New York Stock Exchange. The Equity
Fund may also invest up to 35% of the value of its total assets in preferred
stocks, common stocks other than those described above, corporate bonds, notes,
warrants, and short-term obligations (with maturities of 12 months or less)
consisting of domestic and foreign commercial paper (including variable amount
master demand notes), bankers' acceptances, repurchase agreements, and
obligations issued or guaranteed by the U.S. government or its agencies or
instrumentalities. The Equity Fund will only invest in short-term obligations,
including securities of investment companies holding themselves out as "money
market" funds, for purposes of portfolio liquidity to meet redemption
requirements and short-term investment needs. During temporary defensive periods
as determined by the Adviser, the Equity Fund may hold up to 100% of its total
assets in high quality short-term obligations including obligations issued or
guaranteed by the U.S. government or its agencies or instrumentalities, domestic
bank certificates of deposit, bankers' acceptances and repurchase agreements
secured by bank instruments or U.S. government obligations. However, to the
extent that the Equity Fund is so invested in debt obligations, such Fund may
not achieve its investment objective.
Subject to the foregoing limitations, the Equity Fund will invest only in
corporate debt securities (including convertible securities) which are rated at
the time of purchase within the four highest rating groups assigned by one or
more NRSROs, e.g., Moody's and S&P or, if unrated, which the Adviser deems
present attractive opportunities and are of comparable quality. For a
description of the rating symbols of the NRSROs, see the Appendix to the
Statement of Additional Information. For a discussion of debt securities rated
within the fourth highest rating groups assigned by Moody's and S&P, see "OTHER
INVESTMENT POLICIES AND RISKS - Securities Ratings" herein.
Equity securities such as those in which the Equity Fund may invest are more
volatile and carry more risk than some other investments, including investments
in high grade fixed income funds. Depending upon the performance of the Equity
Fund's investments, the net asset value per share of the Equity Fund may
fluctuate.
THE BALANCED FUND
Under normal market conditions, the Balanced Fund will invest in common stocks
and securities convertible into common stocks (i.e., convertible bonds,
convertible preferred stock, warrants, options and rights). In addition, the
Balanced Fund will invest in corporate debt securities (including convertible
securities) which are rated at the time of purchase within the four highest
rating groups assigned by one or more NRSROs, e.g., Moody's and S&P or, if
unrated, which the Adviser deems to present attractive investment opportunities
and are of comparable quality to the rated securities. For a description of the
rating categories of Moody's and S&P, see the Appendix to the Statement of
Additional Information. For a discussion of the debt securities rated within the
four highest rating groups assigned by Moody's and S&P, see "OTHER INVESTMENT
POLICIES AND RISKS - Securities Ratings" herein. In addition, the Balanced Fund
may invest in U.S. Treasury Obligations and other obligations issued or
guaranteed by the U.S. government, its agencies and instrumentalities.
The Balanced Fund will use a disciplined approach of allocating assets among the
three major asset groups: common stocks, debt securities and cash equivalents.
The allocations among these asset classifications will vary depending upon the
Adviser's assessment of market conditions. Under normal market conditions, the
Balanced Fund is expected to be allocated approximately 65% in stocks and
securities convertible into common stocks and 35% in debt securities.
However, depending upon market conditions, the Balanced Fund may also be
allocated to cash equivalents. The range of allocation to stocks and securities
convertible into common stock is expected to be between 35% and 65%. The
Balanced Fund expects to invest a minimum of 25% of its total assets in
investment grade fixed income securities.
THE FIXED INCOME FUND AND
THE SHORT/INTERMEDIATE FUND
Under normal market conditions, the Fixed Income Fund will invest at least 65%
of the value of its total assets in investment grade fixed income securities
consisting of bonds, debentures, notes, mortgage-related securities, state,
municipal or industrial revenue bonds, obligations issued or guaranteed by the
U.S. government or its agencies or instrumentalities, and fixed income
securities convertible into, or exchangeable for, common stocks. However, up to
35% of the value of its total assets may be invested in preferred stocks. In
addition, a portion of the Fixed Income Fund may, from time to time, be invested
in income participation loans and participation certificates in pools of
mortgages issued or guaranteed by the U.S. government or its agencies or
instrumentalities. Some of the securities in which the Fixed Income Fund invests
may have warrants or options attached.
Under normal market conditions, the Short/Intermediate Fund will invest at least
65% of the value of its total assets in investment grade fixed income securities
consisting of bonds, debentures, notes, mortgage-related securities, state,
municipal or industrial revenue bonds, U.S. Treasury obligations, obligations
issued or guaranteed by the U.S. government or its agencies or
instrumentalities, and fixed income securities convertible into, or exchangeable
for, common stocks. However, up to 35% of the value of its total assets may be
invested in preferred stocks. In addition, a portion of the Short/Intermediate
Fund may, from time to time, be invested in income participation loans and
participation certificates in pools of mortgages issued or guaranteed by the
U.S. government or its agencies or instrumentalities. Some of the securities in
which the Short/Intermediate Fund invests may have warrants or options attached.
Under current market conditions, the Short/Intermediate Fund expects to
maintain a dollar-weighted average portfolio maturity of two to five years. For
purposes of calculating such average maturity, the maturity of each instrument
will be its ultimate maturity date, unless it is probable the issuer will take
advantage of a maturity-shortening device such as a call, refunding or
redemption provision, in which case the probable date of use of such device will
be used.
The Fixed Income Fund and the Short/Intermediate Fund each also expect to invest
in bonds, notes and debentures of a wide range of U.S. corporate issuers. Such
obligations, in the case of debentures, will represent unsecured promises to
pay, and in the case of notes and bonds, may be secured by mortgages on real
property or security interests in personal property and will in most cases
differ in their interest rates, maturities and times of issuance.
The Fixed Income Fund and the Short/Intermediate Fund will invest only in
corporate debt securities which are rated at the time of purchase within the
four highest rating groups for corporate debt securities assigned by one or more
appropriate NRSROs or, if unrated, which the Adviser deems present attractive
opportunities and are of comparable quality. For a description of the ratings of
the NRSROs, see the Appendix to the Statement of Additional Information. For a
discussion of debt securities rated within the fourth highest rating group
assigned by the NRSROs, see "OTHER INVESTMENT POLICIES AND RISKS - Securities
Ratings" herein.
The Fixed Income Fund and the Short/Intermediate Fund may each also invest in
short-term obligations (with maturities of 12 months or less) consisting of
domestic and foreign commercial paper (including variable amount master demand
notes), bankers' acceptances, certificates of deposit and time deposits of
domestic and foreign branches of U.S. banks and foreign banks, and repurchase
agreements. The Fixed Income Fund and the Short/Intermediate Fund may also each
invest in securities of investment companies holding themselves out as "money
market" funds, subject to the limitations described more fully below.
The Fixed Income Fund and the Short/Intermediate Fund may each invest in
obligations of the Export-Import Bank of the United States, in U.S. dollar
denominated international bonds for which the primary trading market is in the
United States ("Yankee Bonds"), or for which the primary trading market is
abroad ("Eurodollar Bonds"), and in Canadian Bonds and bonds issued by
institutions organized for a specific purpose, such as the World Bank and the
European Economic Community, by two or more sovereign governments
("Supranational Agency Bonds").
Such Funds may invest in mortgage-related securities issued or guaranteed by the
U.S. government or its agencies or instrumentalities or by nongovernmental
entities which are rated, at the time of purchase, within the four highest bond
rating categories assigned by one or more appropriate NRSROs, or, if unrated,
which the Adviser deems are of comparable quality. Under normal market
conditions, a Fund's investment in mortgage-related securities will not exceed
25% of the value of its total assets. Such mortgage-related securities have
mortgage obligations backing such securities, including among others,
conventional thirty year fixed rate mortgage obligations, graduated payment
mortgage obligations, fifteen year mortgage obligations and adjustable rate
mortgage obligations. All of these mortgage obligations can be used to create
pass-through securities. A pass-through security is created when mortgage
obligations are pooled together and undivided interests in the pool or pools are
sold. The cash flow from the mortgage obligations is passed through to the
holders of the securities in the form of periodic payments of interest,
principal and prepayments (net of a service fee). Prepayments occur when the
holder of an individual mortgage obligation prepays the remaining principal
before the mortgage obligation's scheduled maturity date. As a result of the
pass-through of prepayments of principal on the underlying securities, mortgage-
backed securities are often subject to more rapid prepayment of principal than
their stated maturity would indicate. Because the prepayment characteristics of
the underlying mortgage obligations vary, it is not possible to predict
accurately the realized yield or average life of a particular issue of pass-
through certificates. Prepayment rates are important because of their effect on
the yield and price of the securities. Accelerated prepayments have an adverse
impact on yields for pass-throughs purchased at a premium (i.e., a price in
excess of principal amount) and may involve additional risk of loss of principal
because the premium may not have been fully amortized at the time the obligation
is repaid. The opposite is true for pass-throughs purchased at a discount. The
Fixed Income Fund and the Short/Intermediate Fund may each purchase mortgage-
related securities at a premium or a discount. Reinvestment of principal
payments may occur at higher or lower rates than the original yield on such
securities. Due to the prepayment feature and the need to reinvest payments and
prepayments of principal at current rates, mortgage-related securities can be
less effective than typical bonds of similar maturities at maintaining yields
during periods of declining interest rates. Like other fixed income securities,
when interest rates rise the value of a mortgage-related security generally will
decline; however, when rates decline the value of a mortgage-related security
with prepayment features may not increase as much as that of other fixed income
securities, as such securities may be prone to prepayment, which decreases their
life. Accordingly, such securities may be more volatile than other fixed income
securities.
Also included among the mortgage-related securities that such Funds may purchase
are collateralized mortgage obligations ("CMOs") and real estate mortgage
investment conduits ("REMICs"). CMOs may be collateralized by whole mortgage
loans but are more typically collateralized by portfolios of mortgage pass-
through securities guaranteed by the Government National Mortgage Association,
the Federal Home Loan Mortgage Corporation or the Federal National Mortgage
Association, and their income streams. Certain CMOs and REMICs are issued by
private issuers. Such securities may be eligible for purchase by the Fixed
Income Fund and the Short/Intermediate Fund if: (1) the issuer has obtained an
exemptive order from the Commission regarding purchases by investment companies
of equity interests of other investment companies, or (2) such purchase is
within the limitations imposed by Section 12 of the 1940 Act.
The Fixed Income Fund and the Short/Intermediate Fund may also invest in
corporate fixed income securities (including bonds, debentures and notes) and
asset-backed securities such as Certificates of Automobile Receivables
("CARs") and Certificates of Amortized Revolving Debts ("CARDs"), each of
which must be rated at the time of purchase within the four highest rating
groups assigned by one or more appropriate NRSROs. For a description of the
fourth highest rating group, see "OTHER INVESTMENT POLICIES AND RISKS -
Securities Ratings" below.
Certain debt securities such as, but not limited to, mortgage-backed securities,
CMOs, asset-backed securities and securitized loan receivables, as well as
securities subject to prepayment of principal prior to the stated maturity date,
are expected to be repaid prior to their stated maturity dates. As a result, the
effective maturity of these securities is expected to be shorter than the stated
maturity. For purposes of compliance with stated maturity policies and
calculation of the Fixed Income Fund's and the Short/Intermediate Fund's
weighted average maturity, the effective maturity of such securities will be
used.
An increase in interest rates will generally reduce the value of the investments
in the Fixed Income Fund and the Short/Intermediate Fund, and a decline in
interest rates will generally increase the value of those investments. Depending
upon the prevailing market conditions, the Adviser may purchase debt securities
at a discount from face value, which produces a yield greater than the coupon
rate. Conversely, if debt securities are purchased at a premium over face value,
the yield will be lower than the coupon rate. In making investment decisions,
the Adviser will consider many factors other than current yield, including the
preservation of capital, maturity and yield to maturity.
THE MONEY MARKET FUND
The Money Market Fund invests exclusively in United States dollar-denominated
instruments which the Directors of the Company and the Adviser determine present
minimal credit risks and which at the time of acquisition are rated by one or
more appropriate NRSROs in one of the two highest rating categories for short-
term debt obligations or, if not rated, are determined to be of comparable
quality to those instruments so rated. The Fund will not invest more than 5% of
its assets in securities rated in the second highest category. All securities or
instruments in which the Money Market Fund invests have remaining maturities of
397 calendar days or less. The dollar-weighted average maturity of the
securities in the Money Market Fund will not exceed 90 days.
The Money Market Fund may invest in a variety of U.S. Treasury obligations,
differing in their interest rates, maturities, and times of issuance, and other
obligations which are issued or guaranteed by the U.S. government or its
agencies or instrumentalities and which are backed by the full faith and credit
of the U.S. government.
Obligations of the U.S. Treasury include "stripped" U.S. Treasury obligations
such as Treasury Receipts, representing either future interest or principal
payments. Stripped securities are issued at a discount to their "face value"
and may exhibit greater price volatility than ordinary debt securities because
of the manner in which their principal and interest are returned to investors.
Obligations of the agencies and instrumentalities of the U.S. government which
are backed by the full faith and credit of the U.S. government include those of
the Government National Mortgage Association and of the Export-Import Bank of
the United States. See the discussion of U.S. government securities above under
"INVESTMENT OBJECTIVES AND POLICIES - The Fixed Income Fund and the
Short/Intermediate Fund."
OTHER INVESTMENT POLICIES AND RISKS
The Funds may also invest in securities described in the following paragraphs to
the extent indicated.
U.S. GOVERNMENT SECURITIES FUNDS - The Funds may each invest in a variety of
U.S. Treasury obligations, differing in their interest rates, maturities, and
times of issuance, and other obligations issued or guaranteed by the U.S.
government or its agencies or instrumentalities. Obligations of the U.S.
Treasury include "stripped" U.S. Treasury obligations such as Treasury
Receipts, representing either future interest or principal payments. Stripped
securities are issued at a discount to their "face value" and may exhibit
greater price volatility than ordinary debt securities because of the manner in
which their principal and interest are returned to investors. Stripped U.S.
Treasury obligations will include: (1) coupons that have been stripped from U.S.
Treasury bonds, which may be held through the Federal Reserve Bank's book-entry
system called "Separate Trading of Registered Interest and Principal of
Securities" ("STRIPS") or through a program entitled "Coupon Under Book-Entry
Safekeeping" ("CUBES"), or (2) U.S. Treasury securities that are stripped by
investment banks and sold under proprietary names. Securities stripped by
investment banks may not be as liquid as STRIPS and CUBES and are not viewed by
the staff of the Securities and Exchange Commission ("Commission") as U.S.
government securities for purposes of the Investment Company Act of 1940, as
amended (the "1940 Act").
Obligations of certain agencies and instrumentalities of the U.S. government,
such as the Government National Mortgage Association, are supported by the full
faith and credit of the U.S. Treasury; others, such as those of the Federal
National Mortgage Association, are supported by the right of the issuer to
borrow from the Treasury; others, such as those of the Student Loan Marketing
Association and the Federal Home Loan Banks, are supported by the discretionary
authority of the U.S. government to purchase the agency's obligations; still
others, such as those of the Federal Farm Credit Banks or the Federal Home Loan
Mortgage Corporation, are supported only by the credit of the instrumentality.
No assurance can be given that the U.S. government would provide financial
support to U.S. government-sponsored agencies or instrumentalities if it is
not obligated to do so by law. The Fixed Income Fund and the Short/Intermediate
Fund will invest in the obligations of such agencies or instrumentalities only
when the Adviser believes that the credit risk with respect thereto is minimal.
REPURCHASE AGREEMENTS - Securities held by each of the Funds may be subject to
repurchase agreements. Under the terms of a repurchase agreement, a Fund would
acquire securities in exchange for cash from member banks of the Federal Deposit
Insurance Corporation and/or from registered broker-dealers which the Adviser
deems creditworthy under guidelines approved by the Company's Board of
Directors. The seller agrees to repurchase such securities at a mutually agreed-
upon date and price. The repurchase price generally equals the price paid by a
Fund plus interest negotiated on the basis of current short-term rates, which
may be more or less than the rate on the underlying portfolio securities.
Securities subject to repurchase agreements must be of the same type and quality
as those in which a Fund may invest directly. The seller under a repurchase
agreement will be required to maintain at all times the value of collateral held
pursuant to the agreement at not less than the repurchase price (including
accrued interest) plus the transaction costs, including loss of interest, that
such Fund reasonably could expect to incur if the seller defaults. This
requirement will be continually monitored by the Adviser. If the seller were to
default on its repurchase obligation or become insolvent, that Fund would suffer
a loss if the proceeds from a sale of the underlying portfolio securities were
less than the repurchase price under the agreement, or the disposition of such
securities by such Fund were delayed pending court action. Repurchase agreements
are considered to be loans by an investment company under the 1940 Act. For
further information about repurchase agreements, see "INVESTMENT OBJECTIVES AND
POLICIES - Additional Information on Portfolio Instruments-Repurchase
Agreements" in the Statement of Additional Information.
REVERSE REPURCHASE AGREEMENTS - Each of the Funds may borrow funds for temporary
purposes by entering into reverse repurchase agreements in accordance with the
investment restrictions described below. Pursuant to such agreements, a Fund
would sell certain of its securities to financial institutions such as banks and
broker-dealers, and agree to repurchase them at a mutually agreed-upon date and
price. The Funds intend to enter into reverse repurchase agreements only to
avoid otherwise selling securities during unfavorable market conditions to meet
redemptions. At the time a Fund enters into a reverse repurchase agreement, it
will place in a segregated custodial account assets such as U.S. government
securities or other liquid high-grade debt securities consistent with such
Fund's investment restrictions having a value equal to the repurchase price
(including accrued interest), and will continually monitor the account to ensure
that such equivalent value is maintained at all times. Reverse repurchase
agreements involve the risk that the market value of the securities sold by a
Fund may decline below the price at which such Fund is obligated to repurchase
the securities and that the buyer may default on its obligation to sell such
securities back to the Fund. Reverse repurchase agreements are considered
borrowings by an investment company under the 1940 Act. For further information
about reverse repurchase agreements, see "INVESTMENT OBJECTIVES AND POLICIES -
Additional Information on Portfolio Instruments - Reverse Repurchase Agreements"
in the Statement of Additional Information.
Except as otherwise disclosed to the Shareholders of a Fund, the Company will
not execute portfolio transactions through, acquire portfolio securities issued
by, make savings deposits in, or enter into repurchase or reverse repurchase
agreements with the Adviser, Sunstone, or their affiliates, and will not give
preference to the Adviser's correspondents with respect to such transactions,
securities, savings deposits, repurchase agreements and reverse repurchase
agreements.
FOREIGN SECURITIES - Consistent with the foregoing investment policies, each of
the Funds (excluding the Money Market Fund) may invest up to 10% of its assets
in foreign securities, either directly or through the purchase of sponsored and
unsponsored American Depository Receipts ("ADRs"). Unsponsored ADRs may be
less liquid than sponsored ADRs, and there may be less information available
regarding the underlying foreign issuer for unsponsored ADRs. Investment in
foreign securities is subject to special investment risks that differ in some
respects from those related to investments in securities of U.S. domestic
issuers. Such risks include trade balances and imbalances, and related economic
policies, future adverse political, economic and social developments, the
possible imposition of withholding taxes on interest and dividend income,
possible seizure, nationalization, or expropriation of foreign investments or
deposits, currency blockage, less stringent disclosure requirements, the
possible establishment of exchange controls or taxation at the source, or the
adoption of other foreign governmental restrictions. In addition, foreign
branches of U.S. banks, foreign banks and foreign issuers may be subject to less
stringent reserve requirements and to different accounting, auditing, reporting,
and recordkeeping standards than those applicable to domestic branches of U.S.
banks and U.S. domestic issuers, and securities markets in foreign countries may
be structured differently from and may not be as liquid as the U.S. markets.
Where purchases of foreign securities are made in foreign currencies, a Fund may
incur currency conversion costs and may be affected favorably or unfavorably by
changes in the value of foreign currencies against the U.S. dollar.
WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS - Each Fund may purchase
securities on a when-issued or delayed-delivery basis. These transactions are
arrangements in which a Fund purchases securities with payment and delivery
scheduled for a future time. A Fund will engage in when-issued and delayed-
delivery transactions only for the purpose of acquiring portfolio securities
consistent with and in furtherance of its investment objective and policies, not
for investment leverage, although such transactions represent a form of
leveraging. When-issued securities are securities purchased for delivery beyond
the normal settlement date at a stated price and yield and thereby involve a
risk that the yield obtained in the transaction will be less than that available
in the market when delivery takes place. A Fund will generally not pay for such
securities or start earning interest on them until they are received on the
settlement date. When a Fund agrees to purchase such securities, however, the
Custodian will set aside cash or liquid, high grade debt obligations equal to
the amount of the commitment in a separate account. Securities purchased on a
when-issued basis are recorded as an asset and are subject to changes in the
value based upon changes in the general level of interest rates. In when-issued
and delayed-delivery transactions, a Fund relies on the seller to complete the
transaction; the seller's failure to do so may cause such Fund to miss a price
or yield considered to be advantageous. Each Fund's commitments to purchase
when-issued securities will not exceed 25% of the value of its total assets
absent unusual market conditions.
SECURITIES RATINGS - As described above, certain Funds may invest in debt
securities within the fourth highest rating group assigned by one or more
appropriate NRSROs and comparable unrated securities. Although investment grade,
these types of debt securities are considered by Moody's and S&P to have some
speculative characteristics, and are more vulnerable to changes in economic
conditions, higher interest rates or adverse issuer-specific developments which
are more likely to lead to a weaker capacity to make principal and interest
payments than comparable higher rated debt securities.
Should subsequent events cause the rating of a debt security purchased by one of
the Funds to fall below the fourth highest rating category, as the case may be,
the Adviser will consider such an event in determining whether that Fund should
continue to hold that security. The Adviser expects that it would not retain
more than 5% of the assets of any Fund in such downgraded securities. In no
event, however, would that Fund be required to liquidate any such portfolio
security where the Fund would suffer a loss on the sale of such security.
OTHER - In order to generate additional income, each Fund (excluding the Money
Market Fund) may, from time to time, lend its portfolio securities to broker-
dealers, banks, or institutional borrowers of securities. A Fund must receive
100% collateral in the form of cash or U.S. government securities. This
collateral will be valued daily by the Adviser. Should the market value of the
loaned securities increase, the borrower must furnish additional collateral to
that Fund. During the time portfolio securities are on loan, the borrower pays
that Fund any dividends or interest received on such securities. Loans are
subject to termination by such Fund or the borrower at any time. While a Fund
does not have the right to vote securities on loan, each Fund intends to
terminate the loan and regain the right to vote if that is considered important
with respect to the investment. In the event the borrower would default in its
obligations, such Fund bears the risk of delay in recovery of the portfolio
securities and the loss of rights in the collateral. A Fund will enter into loan
agreements only with broker-dealers, banks, or other institutions that the
Adviser has determined are creditworthy under guidelines established by the
Company's Board of Directors.
Consistent with each Fund's investment objective and policies the Small Cap
Value, Equity, Balanced, Fixed Income and the Short/Intermediate Funds each may
also invest up to 10% of the value of its total assets in the securities of
other investment companies, so long as the aggregate value of the shares
acquired from any one such investment company will not exceed 5% of the total
assets of such Fund. A Fund will incur additional expenses due to the
duplication of expenses as a result of investing in mutual funds. In order to
avoid the imposition of additional fees as a result of investing in shares of
the Money Market Fund, the Adviser, the Administrator and their affiliates will
reduce their fees charged to a Fund by an amount equal to the fees charged by
such service providers based on a percentage of that Fund's assets attributable
to such Fund's investment in the Money Market Fund. Additional restrictions on
the Funds' investments in the securities of other mutual funds are contained in
the Statement of Additional Information.
INVESTMENT RESTRICTIONS
- -----------------------
Each Fund is subject to a number of investment restrictions that may be changed
only by a vote of a majority of the outstanding Shares of that Fund (see
"GENERAL INFORMATION-Miscellaneous").
Each of the Funds will not:
1. Purchase securities of any one issuer, other than obligations issued or
guaranteed by the U.S. government or its agencies or instrumentalities, if,
immediately after such purchase: (a) more than 5% of the value of such
Fund's total assets would be invested in such issuer, or (b) such Fund
would hold more than 10% of the outstanding voting securities of such
issuer, except that up to 25% of the value of a Fund's total assets may be
invested without regard to such limitations. There is no limit to the
percentage of assets that may be invested in U.S. Treasury bills, notes, or
other obligations issued or guaranteed by the U.S. government or its
agencies or instrumentalities.
2. Purchase any securities which would cause more than 25% of the value of a
Fund's total assets at the time of purchase to be invested in securities of
one or more issuers conducting their principal business activities in the
same industry, provided that: (a) there is no limitation with respect to
obligations issued or guaranteed by the U.S. government or its agencies or
instrumentalities, and repurchase agreements secured by obligations of the
U.S. government or its agencies or instrumentalities; (b) wholly owned
finance companies will be considered to be in the industries of their
parents if their activities are primarily related to financing the
activities of their parents; and (c) utilities will be divided according to
their services. For example, gas, gas transmission, electric and gas,
electric, and telephone will each be considered a separate industry.
3. Borrow money or issue senior securities, except that each Fund may borrow
from banks or enter into reverse repurchase agreements for temporary
purposes in amounts up to 10% of the value of its total assets at the time
of such borrowing; or mortgage, pledge or hypothecate any assets, except in
connection with any such borrowing and in amounts not in excess of the
lesser of the dollar amounts borrowed or 10% of the value of such Fund's
total assets at the time of its borrowing. A Fund will not purchase
securities while its borrowings (including reverse repurchase agreements)
exceed 5% of its total assets.
4. Make loans, except that each Fund may purchase or hold debt instruments and
lend portfolio securities in accordance with its investment objective and
policies, and may enter into repurchase agreements.
The following additional investment restriction may be changed without the vote
of a majority of the outstanding Shares of a Fund. Each Fund may not purchase or
otherwise acquire any securities if, as a result, more than 5% of that Fund's
net assets would be invested in securities that are illiquid.
In addition to the above investment restrictions, each Fund is subject to
certain other investment restrictions set forth under "INVESTMENT OBJECTIVES
AND POLICIES - Investment Restrictions" in the Funds' Statement of Additional
Information.
Irrespective of fundamental investment restriction number 1 above, and pursuant
to Rule 2a-7 under the 1940 Act, the Money Market Fund will, with respect to
100% of its total assets, limit its investment in the securities of any one
issuer in the manner provided by such Rule, which limitations are referred to
above under the caption "INVESTMENT OBJECTIVES AND POLICIES-In General."
VALUATION OF SHARES
- -------------------
The net asset value of each Fund is determined and its Shares are priced as of
4:00 p.m. (except the Money Market Fund, which is also priced at 11:00 a.m.
Eastern Time) (the "Valuation Time") on each Business Day. A "Business Day"
of a Fund is a day on which the New York Stock Exchange is open for trading and
any other day (other than a day on which no Shares of such Fund are tendered for
redemption and no order to purchase Shares is received) during which there is
sufficient trading in that Fund's portfolio instruments that its net asset value
per Share might be materially affected. The New York Stock Exchange will not be
open in observation of the following holidays: New Year's Day, President's Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. Net asset value per Share for purposes of pricing purchases and
redemptions is calculated by dividing the value of all securities and other
assets belonging to a Fund, less the liabilities charged to that Fund, by the
number of that Fund's outstanding Shares. The net asset value per share of the
Small Cap Value Fund, the Equity Fund, the Balanced Fund, the Fixed Income Fund
and the Short/Intermediate Fund will fluctuate as the value of the investment
portfolio of a Fund changes.
The assets in the Money Market Fund are valued based upon the amortized cost
method which the Directors of the Company believe fairly reflects the market-
based net asset value per Share. Pursuant to the rules and regulations of the
Commission regarding the use of the amortized cost method, the Money Market Fund
will maintain a dollar-weighted average portfolio maturity of 90 days or less.
Although the Company seeks to maintain the Money Market Fund's net asset value
per Share at $1.00, there can be no assurance that net asset value will not
vary.
The securities of each other Fund will be valued at market value. If market
quotations are not available, securities will be valued by a method which the
Board of Directors believes accurately reflects a fair value. For further
information about valuation of investments, see "NET ASSET VALUE" in the
Statement of Additional Information.
HOW TO PURCHASE AND REDEEM SHARES
- ---------------------------------
DISTRIBUTOR - Shares in each Fund are sold on a continuous basis by the
Company's Distributor, Sunstone Financial Group, Inc. The principal office of
the Distributor is 207 East Buffalo Street, Suite 400, Milwaukee, Wisconsin
53202. If you wish to purchase Shares, telephone the Company at (800) OMAHA-03.
PURCHASES OF SHARES - Shares may be purchased directly by investors or through
procedures established by the Distributor in connection with requirements of
qualified accounts maintained by or on behalf of certain persons ("Customers")
by the Adviser or its correspondent or affiliated banks (collectively, the
"Banks"). In the case of the Money Market Fund, these procedures may include
instructions under which a Customer's account is "swept" automatically no less
frequently than weekly and amounts in excess of a minimum amount agreed upon by
the Bank and the Customer are invested by the Distributor in Shares of the Money
Market Fund.
Shares of the Funds sold to the Banks acting in a fiduciary, advisory,
custodial, or other similar capacity on behalf of Customers will normally be
held of record by the Banks. With respect to Shares of the Funds so sold, it is
the responsibility of the particular Bank to transmit purchase or redemption
orders to the Company and to deliver federal funds for purchase on a timely
basis. Beneficial ownership of Shares will be recorded by the Banks and
reflected in the account statements provided by the Banks to Customers. A Bank
will exercise voting authority for those Shares for which it is granted
authority by the Customer.
Investors may also purchase Shares of the Funds by completing and signing a
Purchase Application and mailing it, together with a check (or other negotiable
bank draft or money order) in at least the minimum initial purchase amount,
payable to the appropriate Fund, to: First Omaha Funds, Inc., P.O. Box 419022,
Kansas City, Missouri 64141-6022. Subsequent purchases of Shares of that Fund
may be made at any time by mailing a check (or other negotiable bank draft or
money order) payable to the appropriate Fund, to the above address.
If a Purchase Application has been previously received by the Company, investors
may also purchase Shares by wiring funds to the Funds' Custodian. Prior to
wiring any such funds and in order to ensure that wire orders are invested
promptly, investors must call the Company at (800) OMAHA-03 to obtain
instructions regarding the bank account number into which the funds should be
wired and other pertinent information.
Shares of each of the Funds are purchased at the net asset value per Share (see
"VALUATION OF SHARES") next determined after receipt by the Company of an
order to purchase Shares. Purchases of Shares of a Fund will be effected only on
a Business Day (as defined in "VALUATION OF SHARES") of that Fund. An order
received prior to the Valuation Time on any Business Day will be executed at the
net asset value determined as of the Valuation Time on the date of receipt. An
order received after the Valuation Time on any Business Day will be executed at
the net asset value determined as of the Valuation Time on the next Business Day
of that Fund.
MINIMUM INVESTMENT - Except as otherwise discussed below under "Auto Invest
Plan," the minimum investment is $500 for the initial purchase of Shares of
each Fund and $50 for subsequent purchases. The subsequent purchase minimum may
be waived if purchases are made in connection with an Individual Retirement
Account ("IRA") and both the initial and subsequent minimum investments may be
waived if purchases are made in connection with a payroll deduction plan.
There is no initial sales charge imposed by the Funds in connection with the
purchase of Shares. Depending upon the terms of a particular Customer's account,
the Banks or their affiliates may charge a Customer account fees for automatic
investment and other cash management services provided in connection with
investment in a Fund. Information concerning these services and any charges may
be obtained from the Banks. This Prospectus should be read in conjunction with
any such information received from the Banks.
MISCELLANEOUS - The Funds reserve the right to reject any order for the purchase
of their Shares in whole or in part. Transactions as a result of the automatic
reinvestment of dividends and capital gains distributions, as well as the Funds'
Auto Invest Plan and Auto Withdrawal Plan transactions, will be confirmed
quarterly on the quarterly statements rather than after each transaction.
Shareholders wishing to confirm these transactions before the end of a calendar
quarter may do so by calling the Funds at (800) OMAHA-03 after the date of the
transaction. Dividends are reinvested monthly-generally during the last week of
each month. Auto Invest Plan and Auto Withdrawal Plan transactions occur in
accordance with the Shareholder's instructions when establishing these plans.
Every Shareholder will receive a confirmation of each new transaction in his or
her account, which will also show the total number of Shares owned by the
Shareholder and the number of Shares being held in safekeeping by the Transfer
Agent for the account of the Shareholder. These confirmations will include all
account activity during the current year. Reports of transactions by Banks on
behalf of their Customers will be sent by the Banks to their Customers.
Shareholders may rely on these statements in lieu of certificates. Certificates
representing Shares will not be issued.
AUTO INVEST PLAN - The Company's Auto Invest Plan enables Shareholders to make
regular monthly or quarterly purchases of Shares of a Fund through automatic
deduction from their bank accounts, provided that the Shareholder's bank is a
member of the Federal Reserve and the Automated Clearing House (ACH) system.
With Shareholder authorization the Transfer Agent will deduct the amount
specified (subject to the applicable minimums) from the Shareholder's bank
account which proceeds will automatically be invested in Shares of the
designated Fund at the public offering price on the date of such deduction. The
required minimum initial investment when opening an account using the Auto
Invest Plan is $100; the minimum amount for subsequent investments is $50. To
participate in the Auto Invest Plan, Shareholders should complete the
appropriate section of the Purchase Application which can be acquired by calling
the Company at (800) OMAHA-03. For a Shareholder to change his or her Auto
Invest Plan instructions, the request must be made in writing to the Company at:
P.O. Box 419022, Kansas City, Missouri 64141-6022.
EXCHANGE PRIVILEGE - Shares of a Fund may be exchanged without payment of any
fees for Shares of each of the other First Omaha Funds at respective net asset
values, provided the amount to be exchanged meets the applicable minimum
investment requirements and the exchange is made in states where it is legally
authorized. An exchange is considered a sale of Shares and will result in a
capital gain or loss for federal income tax purposes.
A Shareholder wishing to exchange his or her Shares may do so by contacting the
Company at (800) OMAHA-03 or by providing written instructions to the Company.
Any Shareholder who wishes to make an exchange should review information in the
Company's current Prospectus regarding the First Omaha Fund in which he or she
wishes to invest before making the exchange. For a discussion of risks
associated with unauthorized telephone exchanges, see "Redemption by
Telephone" below.
The Company reserves the right to modify or terminate the expanded exchange
privilege upon 60 days written notice to each Shareholder prior to the
modification or termination taking effect.
REDEMPTION OF SHARES - Shares may ordinarily be redeemed by mail or by
telephone. However, all or part of a Customer's Shares may be redeemed in
accordance with instructions and limitations pertaining to his or her account at
a Bank. For example, if a Customer has agreed with a Bank to maintain a minimum
balance in his or her account with the Bank, and the balance in that account
falls below that minimum, the Customer may be obliged to redeem, or the Bank may
redeem on behalf of the Customer, all or part of the Customer's Shares of a Fund
to the extent necessary to maintain the required minimum balance. The minimum
balance required by any such Bank may be higher than the minimum required by the
Company.
REDEMPTION BY MAIL - A written request for redemption must be received by the
Transfer Agent in order to honor the request. The Transfer Agent's address is:
First Omaha Funds, Inc., P.O. Box 419022, Kansas City, Missouri 64141-6022. The
Transfer Agent will require a signature guarantee by an eligible guarantor
institution. The signature guarantee requirement will be waived if the following
conditions apply: (1) the redemption check is payable to the Shareholder(s) of
record, and (2) the redemption check is mailed to the Shareholder(s) at the
address of record or mailed or wired to a commercial bank account previously
designated on the Purchase Application. There is no charge for having redemption
proceeds mailed to a designated bank account. To change the address to which a
redemption check is to be mailed, a written request therefor must be received by
the Transfer Agent. In connection with such request, the Transfer Agent will
require a signature guarantee by an eligible guarantor institution. For purposes
of this policy, the term "eligible guarantor institution" shall include banks,
brokers, dealers, credit unions, securities exchanges and associations, clearing
agencies and savings associations as those terms are defined in the Securities
Act of 1934. The Transfer Agent reserves the right to reject any signature
guarantee if: (1) it has reason to believe that the signature is not genuine,
(2) it has reason to believe that the transaction would otherwise be improper,
or (3) the guarantor institution is a broker or dealer that is neither a member
of a clearing corporation nor maintains net capital of at least $100,000.
REDEMPTION BY TELEPHONE - If a Shareholder has so designated on the Purchase
Application, a Shareholder may request the redemption of Shares by telephone and
have the payment of redemption requests sent through ACH to a federally insured
depository account previously designated by the Shareholder on the Purchase
Application or mailed directly to the Shareholder at the Shareholder's address
as recorded by the Transfer Agent. If you have payment sent through ACH, please
allow 24 to 48 hours for available funds. There is currently no charge for
having payment of redemption requests mailed or sent through ACH to a designated
bank account. Such ACH redemption requests may be made by the Shareholder by
telephone to the Company. For telephone redemptions, call the Company at (800)
OMAHA-03.
Neither the Funds nor their service providers will be liable for any loss,
damages, expense or cost arising out of any telephone redemption effected in
accordance with the Funds' telephone redemption procedures, acting upon
instructions reasonably believed to be genuine. Each Fund will employ procedures
designed to provide reasonable assurance that instructions by telephone are
genuine; if these procedures are not followed, such Fund or its service
providers may be liable for any losses due to unauthorized or fraudulent
instructions. These procedures include recording all telephone conversations,
sending confirmations to Shareholders within 72 hours of the telephone
transaction, verification of account name and account number or tax
identification number, and sending redemption proceeds only to the address of
record or to a previously authorized bank account. If, due to temporary adverse
conditions, investors are unable to effect telephone transactions, Shareholders
may also mail the redemption request to the Transfer Agent at the address listed
above under "HOW TO PURCHASE AND REDEEM SHARES- Redemption by Mail."
AUTO WITHDRAWAL PLAN - The Auto Withdrawal Plan enables Shareholders of each of
the Funds to make regular monthly or quarterly redemptions of Shares. With
Shareholder authorization, the Transfer Agent will automatically redeem Shares
at the net asset value on the dates of the withdrawal and have a check in the
amount specified mailed to the Shareholder. The required minimum withdrawal is
$100. To participate in the Auto Withdrawal Plan, Shareholders should call (800)
OMAHA-03 for more information. Purchases of additional Shares concurrent with
withdrawals may be disadvantageous to certain Shareholders because of tax
liabilities. For a Shareholder to change his or her Auto Withdrawal Plan
instructions, the request must be made in writing to the Company.
PAYMENTS TO SHAREHOLDERS - Redemption orders are effected at the net asset value
per Share next determined after the Shares are properly tendered for redemption,
as described above. Payment to Shareholders for Shares redeemed will be made
within seven days after receipt by the Distributor of the request for
redemption. However, to the greatest extent possible, a Fund will attempt to
honor requests from Shareholders for next day payments upon redemption of Shares
if the request for redemption is received by the Distributor before 4:00 p.m.
(11:00 a.m. for the Money Market Fund), Eastern Time, on a Business Day or, if
the request for redemption is received after 4:00 p.m. (11:00 a.m. for the Money
Market Fund), Eastern Time, to honor requests for payment on the second Business
Day, unless it would be disadvantageous to that Fund or the Shareholders of that
Fund to sell or liquidate portfolio securities in an amount sufficient to
satisfy requests for payments in that manner.
At various times, the Company may be requested to redeem Shares for which it has
not yet received good payment. In such circumstances, the Company may delay the
forwarding of proceeds for up to 15 days until payment has been collected for
the purchase of such Shares. The Company intends to pay cash for all Shares
redeemed, but under abnormal conditions which make payment in cash unwise, the
Company may make payment wholly or partly in portfolio securities at their then
market value equal to the redemption price, which portfolio securities may or
may not be liquid. In such cases, an investor may incur brokerage costs in
converting such securities to cash.
Due to the relatively high cost of handling small investments, each Fund
reserves the right to redeem, at net asset value, the Shares of that Fund of any
Shareholder if, because of redemptions of Shares by or on behalf of the
Shareholder (but not as a result of a decrease in the market prices of such
Shares or the establishment of an account with less than $500 using the Auto
Invest Plan or pursuant to a payroll deduction plan), the account of such
Shareholder has a value of less than $500. Accordingly, an investor purchasing
Shares of a Fund in only the minimum investment amount may be subject to such
involuntary redemption if he or she thereafter redeems some of his or her
Shares. Before a Fund exercises its right to redeem such Shares and to send the
proceeds to the Shareholder, the Shareholder will be given notice that the value
of the Shares in his or her account is less than the minimum amount and will be
allowed 60 days to make an additional investment in an amount which will
increase the value of the account to at least $500.
See "ADDITIONAL PURCHASE AND REDEMPTION INFORMATION" in the Statement of
Additional Information for examples of when the Company may suspend the right of
redemption in light of the Company's responsibilities under the 1940 Act.
DIVIDENDS AND TAXES
- -------------------
DIVIDENDS - The net investment income of each Fund is declared monthly as a
dividend to Shareholders (except for the Money Market Fund, which declares
income dividends daily). Such dividends are generally declared at the close of
business on the day of declaration and paid monthly. Distributable net realized
capital gains are distributed at least annually. A Shareholder of a Fund will
automatically receive all distributions in additional full and fractional Shares
of that Fund at the net asset value as of the date of payment unless the
Shareholder elects to receive such dividends in cash. Such election, or any
revocation thereof, must be made in writing to the appropriate Fund, addressed
to: First Omaha Funds, Inc., P.O. Box 419022, Kansas City, Missouri 64141-6022,
and will become effective with respect to dividends having record dates after
its receipt by the Transfer Agent. Dividends are paid in cash not later than
seven Business Days after a Shareholder's complete redemption of the Shares in a
Fund.
FEDERAL TAXES - Each of the Funds of the Company is treated as a separate entity
for federal income tax purposes and each intends to qualify as a "regulated
investment company" under the Internal Revenue Code of 1986, as amended (the
"Code"), for so long as such qualification is in the best interest of such
Fund's Shareholders. Qualification as a regulated investment company under the
Code requires, among other things, that the regulated investment company
distribute to its Shareholders at least 90% of its investment company taxable
income. Each Fund contemplates declaring as dividends 100% of that Fund's
investment company taxable income (before deduction of dividends paid). Because
all of the Money Market Fund's net investment income is expected to be derived
from earned interest and short-term capital gains, it is anticipated that no
part of any distribution will be eligible for the dividends-received deduction
for corporations. The Money Market Fund does not expect to realize any long-term
capital gains and, therefore, does not foresee paying any "capital gains
dividends" as described in the Code.
In order to avoid the imposition of an excise tax, each Fund is required to
distribute annually, prior to calendar year end, 98% of taxable ordinary income
on a calendar year basis, 98% of capital gain net income realized in the 12
months preceding October 31, and the balance of undistributed taxable ordinary
income and capital gain net income from the prior calendar year. If
distributions during the calendar year are less than the required amounts, that
Fund would be subject to a nondeductible 4% excise tax on the deficiency.
A Shareholder receiving a distribution of ordinary income and/or an excess of
short-term capital gain over net long-term capital loss would treat it as a
receipt of ordinary income even if paid in additional Shares and not in cash.
Shareholders not subject to federal income tax on their income will not,
however, be required to pay federal income tax on any amounts distributed to
them. The dividends-received deduction for corporations will apply to the
aggregate of such ordinary income distributions in the same proportion as the
aggregate dividends, if any, qualifying for the dividends-received deduction
received by a Fund bear to its gross income.
Distribution by a Fund of the excess of net long-term capital gain over net
short-term capital loss is taxable to Shareholders as long-term capital gain in
the year in which it is received, regardless of how long the Shareholder has
held shares. Such distributions are not eligible for the dividends-received
deduction.
If the net asset value of a Share is reduced below the Shareholder's cost of
that Share by the distribution of income or gain realized on the sale of
securities, the distribution is a return of invested principal, although taxable
as described above.
Prior to purchasing Shares, the impact of dividends or capital gains
distributions which are expected to be declared or have been declared, but have
not been paid, should be carefully considered. Any such dividends or capital
gains distributions paid shortly after a purchase of Shares prior to the record
date will have the effect of reducing the per share net asset value of the
Shares by the amount of the dividends or distributions. All or a portion of such
dividends or distributions, although in effect a return of capital, is subject
to tax.
STATE TAXES - Even though a substantial portion of distributions of net income
by the Money Market Fund to its Shareholders, and lesser amounts of
distributions to other Fund Shareholders, will be attributable to interest on
U.S. Treasury obligations, which may be exempt from state or local tax if
received directly by a Shareholder, Shareholders of a Fund may be subject to
state and local taxes with respect to their ownership of Shares or their receipt
of distributions from such Fund. In addition, to the extent Shareholders receive
distributions of income attributable to investments in repurchase agreements by
a Fund, such distribution may also be subject to state or local taxes.
The foregoing is intended only as a brief summary of some of the important
tax considerations generally affecting each Fund and its Shareholders.
Potential investors in each Fund are urged to consult their tax
advisers concerning the application of federal, state and local taxes as such
laws and regulations affect their own tax situation.
Shareholders will be advised at least annually as to the income tax consequences
of distributions made to them during the year.
MANAGEMENT OF THE COMPANY
- -------------------------
DIRECTORS OF THE COMPANY - Overall responsibility for management of the Company
rests with the Board of Directors, who are elected by the Shareholders of the
Company's Funds. The Company will be managed by the Directors in accordance with
the laws of Nebraska governing corporations. The Directors, in turn, elect the
officers of the Company to supervise the day-to-day operations.
The Directors receive fees and are reimbursed for their expenses in connection
with each meeting of the Board of Directors they attend. The officers of the
Company receive no compensation directly from the Company for performing the
duties of their offices. Sunstone receives fees from each of the Funds for
acting as Administrator and for providing certain fund accounting services.
INVESTMENT ADVISER - First National Bank of Omaha, One First National Center,
Omaha, Nebraska 68102, is the investment adviser of each of the Funds. The
Adviser is a subsidiary of First National of Nebraska, a Nebraska corporation,
with total assets of approximately $6.1 billion as of December 31, 1995. The
Adviser provides a full range of financial and trust services to businesses,
individuals, and government entities and has been providing quality trust and
investment management service for over 65 years. The Adviser serves Nebraska, as
well as other areas of the Midwest. In addition, as of December 31, 1995, the
Adviser's Trust Division had approximately $6.6 billion of assets under
administration, including approximately $2.5 billion under management.
Subject to the general supervision of the Company's Board of Directors and in
accordance with the Funds' investment objectives and restrictions, the Adviser
manages the investments of each Fund, makes decisions with respect to and places
orders for all purchases and sales of each Fund's portfolio securities, and
maintains each Fund's records relating to such purchases and sales. All
investment decisions for each Fund are made by an investment committee, and no
person is primarily responsible for making recommendations to that committee.
For the services provided and expenses assumed pursuant to its investment
advisory agreement with the Company, the Adviser receives a fee from the Small
Cap Value Fund, the Equity Fund, the Balanced Fund, the Fixed Income Fund, the
Short/Intermediate Fund and the Money Market Fund, computed daily and paid
monthly, equal to the lesser of: (1) a fee at the annual rate of eighty-five
one-hundredths of one percent (.85%), seventy-five one-hundredths of one percent
(.75%), seventy-five one-hundredths of one percent (.75%), sixty one-hundredths
of one percent (.60%), fifty one-hundredths of one percent (.50%), and twenty-
five one-hundredths of one percent (.25%), respectively, of that Fund's average
daily net assets, or (2) such other fee as may be agreed upon in writing from
time to time by the Company and the Adviser. Investment advisory fees of
seventy-five one-hundredths of one percent (.75%) and higher are higher than
similar fees charged by most other mutual funds. The Adviser may periodically
voluntarily reduce all or a portion of its advisory fee with respect to a Fund
to increase the net income of that Fund available for distribution as dividends.
The Adviser may not seek reimbursement of such voluntarily reduced fees at a
later date. The reduction of such fee will cause the yield and total return of
that Fund to be higher than it would be in the absence of such reduction.
ADMINISTRATOR AND DISTRIBUTOR - Sunstone Financial Group, Inc. (the
"Administrator" or the "Distributor," as the context indicates), 207 E.
Buffalo Street, Suite 400, Milwaukee, Wisconsin 53202, acts as administrator and
distributor for each of the Funds. Richard Snyder and Randy Pavlick are officers
of the Funds and officers and/or employees of the Distributor. Shares of the
Funds are sold by the Distributor on a continuous basis. As compensation for its
administrative services (which include clerical, compliance, regulatory, fund
accounting and other services) and the assumption of related expenses, the
Administrator is entitled to a fee, computed daily and payable monthly, at an
annual rate of .20% of each Fund's average net assets subject to a minimum fee
of $300,000 for the Equity, Fixed Income, Short/Intermediate and Money Market
Funds in the aggregate and to a minimum fee of $50,000 for each of the Small Cap
Value and Balanced Funds.
The Administrator may periodically voluntarily reduce all or a portion of its
administrative fee with respect to one or more Funds. These waivers may be
terminated at any time at the Administrator's discretion. The Administrator may
not seek reimbursement of such voluntarily reduced fees at a later date. The
reduction of such fee will cause the yield of that Fund to be higher than it
would be in the absence of such reduction. The Distributor receives no
compensation from the Funds under its Distribution Agreement with the Company,
but may receive compensation under the Distribution and Service Plan described
below.
EXPENSES - The Adviser and the Administrator each bear all expenses in
connection with the performance of their services as investment adviser and
administrator, respectively, other than the cost of securities (including
brokerage commissions, and issue and transfer taxes, if any) purchased for a
Fund. Each Fund will bear the following expenses relating to its operations:
organizational expenses, taxes, interest, any brokerage fees and commissions,
fees and expenses of the Directors of the Company, Commission fees, state
securities qualification fees, costs of preparing and printing Prospectuses for
regulatory purposes and for distribution to its current Shareholders, outside
auditing and legal expenses, advisory and administration fees, fees and out-of-
pocket expenses of the Administrator, Custodian and Transfer Agent, costs for
independent pricing service, certain insurance premiums, costs of maintenance of
the Company's existence, costs of Shareholders' and Directors' reports and
meetings, distribution expenses incurred pursuant to the Distribution and
Service Plan described below, and any extraordinary expenses incurred in a
Fund's operation.
DISTRIBUTION PLAN - Pursuant to Rule 12b-l under the 1940 Act, the Company has
adopted a Distribution and Service Plan (the "Plan"), under which each Fund is
authorized to pay a periodic amount representing distribution expenses
calculated at an annual rate not to exceed twenty-five one-hundredths of one
percent (.25%) of the average daily net assets of that Fund. Such amount may be
used to pay banks (including the Adviser), broker-dealers and other institutions
(a "Participating Organization") for distribution and/or shareholder service
assistance pursuant to an agreement between the Distributor and the
Participating Organization. Under the Plan, a Participating Organization may
include the Distributor, its subsidiaries and its affiliates.
As of the date of this Prospectus, however, there are no Rule 12b-l Agreements
in effect under the Plan with respect to the Funds, and no fees are being paid
by any Fund under the Plan.
ADMINISTRATIVE SERVICES PLAN - The Company has adopted an Administrative
Services Plan (the "Services Plan") pursuant to which each Fund is authorized
to pay compensation to banks and other financial institutions, which may include
the Adviser, its correspondent and affiliated banks, and Sunstone (each a
"Service Organization"), which agree to provide certain ministerial, record
keeping and/or administrative support services for their customers or account
holders (collectively, "customers") who are the beneficial or record owner of
Shares of that Fund. In consideration for such services, a Service Organization
receives a fee from a Fund, computed daily and paid monthly at an annual rate of
up to twenty-five one-hundredths of one percent (.25%) of the average daily net
asset value of Shares of that Fund owned beneficially or of record by such
Service Organization's customers for whom the Service Organization provides such
services.
The servicing agreements adopted under the Services Plan (the "Servicing
Agreements") require the Service Organizations receiving such compensation to
perform certain ministerial, record keeping and/or administrative support
services with respect to the beneficial or record owners of Shares of the Funds,
such as processing dividend and distribution payments from the Funds on behalf
of customers, providing periodic statements to customers showing their positions
in the Shares of the Funds, providing sub-accounting with respect to Shares
beneficially owned by such customers and providing customers with a service that
invests the assets of their accounts in Shares of the Funds pursuant to specific
or pre-authorized instructions.
As authorized by the Services Plan, the Company has entered into a Servicing
Agreement with the Adviser pursuant to which the Adviser has agreed to provide
certain administrative support services in connection with Shares of the Funds
owned of record or beneficially by its customers. Such administrative support
services may include, but are not limited to: (1) processing dividend and
distribution payments from a Fund on behalf of customers; (2) providing periodic
statements to its customers showing their positions in the Shares; (3) arranging
for bank wires; (4) responding to routine customer inquiries relating to
services performed by the Adviser; (5) providing sub-accounting with respect to
the Shares beneficially owned by the Adviser's customers or the information
necessary for sub-accounting; (6) if required by law, forwarding shareholder
communications from a Fund (such as proxies, shareholder reports, annual and
semi-annual financial statements and dividend, distribution and tax notices) to
its customers; (7) aggregating and processing purchase, exchange and redemption
requests from customers and placing net purchase, exchange and redemption orders
for customers; and (8) providing customers with a service that invests the
assets of their account in the Shares pursuant to specific or pre-authorized
instructions. In consideration of such services, the Company, on behalf of each
of the Funds, except the Money Market Fund, may pay the Adviser a monthly fee,
computed at the annual rate of ten one-hundredths of one percent (.10%) of the
average aggregate net asset value of Shares of that Fund held during the period
by customers for whom the Adviser has provided services under the Servicing
Agreement. The Adviser may periodically voluntarily reduce all or a portion of
its administrative services fee with respect to a Fund to increase the net
income of that Fund available for distribution as dividends. The reduction of
such fee will cause the yield and total return of that Fund to be higher than
they would be in the absence of such reduction. Beginning November 1, 1996, the
Equity, Fixed Income and Short/Intermediate Funds began accruing fees under the
Servicing Agreement with the Adviser.
BANKING LAWS - The Adviser believes that it possesses the legal authority to
perform the services for each Fund contemplated by the Plan adopted by the
Company, its Investment Advisory Agreement and its Custodian Agreement with the
Company and administrative support services contemplated by the Servicing
Agreement with the Company, as described in this Prospectus, without violation
of applicable banking laws and regulations, and has so represented in its
Investment Advisory Agreement, its Servicing Agreement and its Custodian
Agreement with the Company. Future changes in federal or state statutes and
regulations relating to permissible activities of banks or bank holding
companies and their subsidiaries and affiliates as well as further judicial or
administrative decisions or interpretations of present and future statutes and
regulations could change the manner in which the Adviser could continue to
perform such services for the Funds. It is not anticipated, however, that any
change in the Company's method of operations would affect its net asset value
per Share or result in financial losses to any Shareholder. See "MANAGEMENT OF
THE COMPANY-Glass-Steagall Act" in the Statement of Additional Information
for further discussion of applicable law and regulations.
GENERAL INFORMATION
- -------------------
DESCRIPTION OF THE COMPANY AND ITS SHARES - The Company was organized as a
Nebraska corporation on October 12, 1994. The Company and its Equity Fund, Fixed
Income Fund, Short/Intermediate Fund and Money Market Fund were organized to
acquire the assets and continue the business of the corresponding substantially
identical investment portfolios of The Sessions Group, an Ohio business trust.
References herein to the "immediate predecessor" of a Fund refer to the
investment portfolio of The Sessions Group which corresponds to such Fund. On
April 10, 1995 the Company acquired approximately $326.0 million of assets from
The Sessions Group in return for an equivalent dollar amount of Shares of the
Company. The Small Cap Value Fund was added and became effective on March 29,
1996. The Balanced Fund became effective on July 29, 1996. Each
Share of a Fund represents an equal proportionate interest in that Fund with
other Shares of the same Fund, and is entitled to such dividends and
distributions out of the income earned on the assets belonging to that Fund as
are declared at the discretion of the Directors (see "Miscellaneous" below).
The Articles of Incorporation of the Company permit the Company, by resolution
of its Board of Directors, to create new series of common shares relating to new
investment portfolios or to subdivide existing series of Shares into subseries
or classes. Classes could be utilized to create differing expense and fee
structures for investors in the same Fund. Differences could exist, for example,
in the sales load, Rule 12b-1 fees or service plan fees applicable to different
classes of Shares offered by a particular Fund. Such an arrangement could enable
the Company to tailor its marketing efforts to a broader segment of the
investing public with a goal of attracting additional investments in the Funds.
While the Board of Directors of the Company has not created any such subseries
or classes, it could do so in the future without Shareholder approval. However,
any such creation of classes would require compliance with regulations the
Commission has adopted under the 1940 Act.
Shareholders are entitled to one vote for each Share owned and a proportionate
fractional vote for any fraction of a Share owned, and will vote in the
aggregate and not by series or Fund except as otherwise expressly required by
law. For example, Shareholders of each of the Funds will vote in the aggregate
with other Shareholders of the Company with respect to the election of Directors
and ratification of the selection of independent accountants. However,
Shareholders of each of the Funds will vote as a series, and not in the
aggregate with other Shareholders of the Company, for purposes of approval of
such Fund's Investment Advisory Agreement and the Plan. In connection with any
election of Directors, Shareholders are entitled to cumulate their votes by
casting the number of votes equal to the number of directorships being filled
multiplied by the number of Shares held, and to cast all of such votes for one
candidate or to distribute them among several candidates as the Shareholder sees
fit.
The Adviser will possess, in a fiduciary capacity on behalf of its underlying
accounts, voting or investment power with respect to a substantial majority of
the outstanding Shares of each of the Funds and therefore, will be presumed to
control each of the Funds within the meaning of the 1940 Act.
Overall responsibility for the management of each of the Funds is vested in the
Board of Directors of the Company. See "MANAGEMENT OF THE COMPANY-Directors and
Officers." Individual Directors are elected by the Shareholders of the Company
and may be removed by the Board of Directors or Shareholders of the Company in
accordance with the provisions of the Articles of Incorporation and Bylaws of
the Company and Nebraska law. See "ADDITIONAL INFORMATION-Miscellaneous" in
the Statement of Additional Information for further information.
An annual or special meeting of Shareholders to conduct necessary business is
not required by the Articles of Incorporation, the 1940 Act or other authority
except, under certain circumstances, to elect Directors, amend the Articles of
Incorporation, the Investment Advisory Agreement, the Plan or a Fund's
fundamental policies and to satisfy certain other requirements. To the extent
that such a meeting is not required, the Company may elect not to have an annual
or special meeting. However, the Company has undertaken to hold a meeting of
Shareholders to consider the removal of any Director if requested by the holders
of at least 10% of the Company's outstanding Shares.
CUSTODIAN - First National Bank of Omaha (the "Custodian") serves as Custodian
for each of the Funds. Pursuant to the Custodian Agreement with the Company, the
Custodian receives compensation from each of the Funds for such services in an
amount equal to a fee, computed daily and paid monthly, at the annual rate of
three one-hundredths of one percent (.03%) of each Fund's average daily net
assets.
TRANSFER AGENCY SERVICES - First National Bank of Omaha, One First National
Center, Omaha, Nebraska 68102, serves as the Funds' Transfer Agent pursuant to a
Transfer Agency Agreement with the Company. Pursuant to such Agreement, the
Transfer Agent, among other things, provides, or agrees to cause others to
provide, the following services in connection with each Fund's Shareholders of
record: maintenance of shareholder records for each of the Fund's Shareholders
of record; processing shareholder purchase and redemption orders; processing
transfers and exchanges of Shares of each Fund on the shareholder files and
records; processing dividend payments and reinvestments; and assistance in the
mailing of shareholder reports and proxy solicitation materials. For such
services First National Bank of Omaha receives a fee from the Funds based on the
number of Shareholders of record, subject to certain minimum amounts from each
Fund.
DST Systems, Inc., 210 W. 10th Street, Kansas City, Missouri 64105, serves as
sub-transfer agent for the Funds pursuant to a Sub-Transfer Agency Agreement
with First National Bank of Omaha. DST Systems, Inc. performs the principal
services as Transfer Agent for the Funds under such Agreement and receives a
fee from First National Bank of Omaha for such services.
MISCELLANEOUS - Shareholders will receive unaudited semi-annual reports and
annual reports audited by independent public accountants.
As used in this Prospectus and in the Statement of Additional Information,
"assets belonging to a Fund" means the consideration received by a Fund upon
the issuance or sale of Shares in that Fund, together with all income, earnings,
profits, and proceeds derived from the investment thereof, including any
proceeds from the sale, exchange, or liquidation of such investments, and any
funds or amounts derived from any reinvestment of such proceeds, and any general
assets of the Company not readily identified as belonging to a particular Fund
that are allocated to such Fund by the Company's Board of Directors. The Board
of Directors may allocate such general assets in any manner it deems fair and
equitable. Determinations by the Board of Directors of the Company as to the
timing of the allocation of general liabilities and expenses and as to the
timing and allocable portion of any general assets with respect to the Funds are
conclusive.
As used in this Prospectus and in the Statement of Additional Information, a
"vote of a majority of the outstanding Shares" of a Fund means the affirmative
vote, at a meeting of Shareholders duly called, of the lesser of: (1) 67% or
more of the votes of Shareholders of a Fund present at a meeting at which the
holders of more than 50% of the votes attributable to Shareholders of record of
such Fund are represented in person or by proxy, or (2) the holders of more than
50% of the outstanding Shares of a Fund.
ADDITIONAL PERFORMANCE INFORMATION
- ------------------------------------
The following information shows how the Funds have performed. Each of the
Equity, Fixed Income, Short/Intermediate and Money Market Funds acquired all of
the net assets of a predecessor mutual fund on April 9, 1995. Each respective
predecessor mutual fund commenced operations on December 13, 1992, except that
the Money Market Fund's predecessor commenced operations on December 4, 1991.
AVERAGE ANNUAL TOTAL RETURNS OF THE FUNDS
FOR THE PERIODS ENDED OCTOBER 31, 1996
One Three Since
Year Years Commencement
----- ----- ------------
Small Cap Value Fund N/A N/A 0.85%<F32>
Equity Fund 17.85% 15.20% 14.03%<F33>
Balanced Fund N/A N/A 2.73%<F34>
Fixed Income Fund 3.77% 4.45% 6.70%<F33>
Short/Intermediate Fund 4.92% 4.52% 5.31%<F33>
Money Market Fund 4.88% 4.45% 3.88%<F35>
<F32>Total return since June 10, 1996 (commencement of operations).
<F33>The predecessor mutual fund commenced operations on December 13, 1992.
<F34>Total return since August 6, 1996 (commencement of operations).
<F35>The predecessor mutual fund commenced operations on December 4, 1991.
The predecessors to the Equity, Fixed Income and Short/Intermediate Funds were
successors to common trust funds. The following table describes the performance
of these funds and includes the performance of the respective predecessor and
common trust funds. The common trust funds were managed by the Adviser who
manages the respective Funds, and the Adviser has represented that the Funds are
managed in a manner that is in all material respects equivalent to the
management of the common trust funds. However, the following information should
not be viewed as an indication of the future performance of the Funds. The
tables below include information regarding the common trust funds' operations
for periods before the Funds' registration statement became effective, as
adjusted to reflect the higher expenses borne by the Funds. The common trust
funds were not registered under the Investment Company Act of 1940 and therefore
were not subject to certain investment restrictions that are imposed by that
Act. If the common trust funds had been registered, their performance might
have been adversely affected.
AVERAGE ANNUAL TOTAL RETURNS OF THE FUNDS AND RESPECTIVE COMMON TRUST FUNDS
FOR THE PERIODS ENDED OCTOBER 31, 1996
One Three Five Ten Since
Year Years Years Years Commencement
----- ----- ----- ----- ------------
Equity Fund 17.85% 15.20% 13.61% 12.74% 15.36%<F36>
Fixed Income Fund 3.77% 4.45% 7.24% 7.78% 8.89%<F36>
Short/Intermediate Fund 4.92% 4.52% 5.68% N/A 7.36%<F37>
<F36>The predecessor fund commenced operations on January 31, 1975.
<F37>The predecessor fund commenced operations on January 1, 1991.
<TABLE>
<CAPTION>
TOTAL RETURNS FOR THE YEARS ENDED OCTOBER 31,
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equity Fund<F38> 17.85% 18.60% 9.38% 12.12% 10.41% 28.01% (3.05)% 18.26% 14.06% 4.76%
Fixed Income Fund<F38> 3.77% 17.40% (6.47)% 13.79% 9.39% 14.03% 5.32% 11.17% 10.25% 1.31%
Short/Intermediate Fund 4.92% 10.40% (1.44)% 7.02% 7.88% 14.82%<F39> - - - -
<FN>
<F38>Results include performance of common trust fund which has been adjusted to reflect the Fund's operating expenses.
<F39>Results include performance of common trust fund which has been adjusted to reflect the Fund's operating expenses. The common
trust fund commenced operations on January 1, 1991.
</TABLE>
Performance quotations of a Fund represent its past performance and
should not be considered as representative of future results. The
investment return and principal value of an investment in a Fund will
fluctuate so that an investor's shares, when redeemed, may be worth
more or less than their original cost.
INVESTMENT ADVISER AND CUSTODIAN
First National Bank of Omaha
Attention: Trust Division
One First National Center
Omaha, Nebraska 68102
ADMINISTRATOR AND DISTRIBUTOR
Sunstone Financial Group, Inc.
207 E. Buffalo St., Suite 400
Milwaukee, Wisconsin 53202
LEGAL COUNSEL
Cline, Williams, Wright, Johnson & Oldfather
13th & M Streets
Lincoln, Nebraska 68508
AUDITORS
KPMG Peat Marwick LLP
Two Central Park Plaza, Suite 1501
Omaha, Nebraska 68102
FOR MORE INFORMATION
call 1-800-OMAHA-03
or write to:
First Omaha Funds
P.O. Box 419022
Kansas City, Missouri 64141-6022
