ANNUAL REPORT
MARCH 31, 1997
(LOGO)
NOTICE TO INVESTORS
Shares of the First Omaha Funds are:
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
The U.S. Government Obligations Fund is not insured or guaranteed by the U.S.
government, nor can there can be any assurance that the Fund will be able to
maintain a stable net asset value of $1.00 per share.
The First Omaha Funds are distributed by Sunstone Distribution Services, LLC.
FIRST OMAHA FUNDS - ANNUAL REPORT
April 1997
Dear SHAREHOLDER:
We are pleased to provide you with the First Omaha Family of Funds' Annual
Report for the period ended March 31, 1997. In it you will be given helpful
information regarding your investment, its performance and its management. Also,
our portfolio managers have given their observations on the stock and bond
markets. Please read this Annual Report carefully and retain it with your
Prospectus for future reference.
Once again, thank you for your investment in the First Omaha Family of Funds.
THE STOCK MARKET OUTLOOK
- ------------------------
The stock market, as measured by the Standard & Poor's Composite 500 ("S&P
500"), rewarded investors with another excellent return in 1996. The total
return for 1996 was 23% which followed a total return of nearly 38% in 1995. The
performance in 1995 was the highest annual return since 1958, and the combined
return of 1995 and 1996 was the second highest two-year return since World War
II. In addition, there has been no correction of 10% or more since 1990.
While the market return was very good in 1996, it was dominated by a few large
cap* stocks. Seven stocks among the 50 largest in the S&P 500 increased in value
by more than 50%. These seven stocks added 3.2% to the market's price return,
and all seven were either technology or bank stocks. The strong performance of
the S&P 500 over the past two years, in conjunction with what appears to be a
narrowing focus, may suggest some speculative excess in the market.
The S&P 500 got off to a strong start in 1997 as well. At its peak, the S&P
500's total return was over 10%. However, in March the S&P 500 gave up much of
its return from January and February, finishing the quarter with a 2.7% total
return. The weakening of the market may have been, in part, a result of Federal
Reserve Board Chairman Greenspan's testimony to Congress on February 26.
Chairman Greenspan seemed to indicate that inflation continues to be under
control but that a preemptive strike against inflation was possible.
* CAP is an abbreviation for capitalization which represents the value of a
company as determined by the stock price multiplied by the number of
outstanding shares.
As we have discussed in previous letters, the strong market performance over the
past several years has resulted in valuations that now surpass historical peaks.
For example, dividend yields are at an all-time low. The price to book value
ratio looks extremely high relative to historical norms. Price/earnings ratios
also are at historically high levels and prospects for lower interest rates
pushing them even higher are somewhat limited. As a result, the quality and
sustainability of corporate profitability will clearly be a significant factor
going forward.
Profit margins are at the highest levels since 1970. There are a number of
reasons why profitability is so high and some are more sustainable than others.
Cost-cutting efforts and benefits from technology will have positive, long-term
benefits. Factors that are suspect include interest rates and a strengthening
dollar. While we do not anticipate material increases in interest rates, the
potential for further declines has clearly diminished. In addition, the dollar
has strengthened some recently which may impact the competitive position of U.S.
corporations worldwide. The dollar is still, on a trade-weighted basis, well
below the levels of the early 1980s. Further strength could impact corporate
profits negatively.
The prospects for the equity markets going forward defy prediction, as is
usually the case. However, we do not put a high probability on corporate
profitability levels increasing materially from current levels. High valuation
levels in conjunction with peaking profitability presents a challenging
environment where the risk/reward trade-off of most stocks is not attractive. In
addition, some market analysts believe that the Fed, based on Chairman
Greenspan's comments, may raise fed fund rates periodically if the equity
markets rise too rapidly. This, in effect, would put a ceiling on near-term
equity market performance. As a result, we believe that a conservative posture
continues to be the prudent approach.
FIRST OMAHA SMALL CAP VALUE FUND
- --------------------------------
The First Omaha Small Cap Value Fund's inception date was June 10, 1996;
therefore, March 31, 1997, the fiscal year-end, represents the Fund's first nine
months of operations. The small cap stocks, as a group, had performed
exceptionally well for several years. Last July, however, the group experienced
a sharp correction, and has since lagged the large cap markets. In fact, we
have seen the development of a two-tiered market as it regards investment
performance. During the latter half of 1996, money literally poured into the
mutual fund industry, and most of these dollars were directed toward large cap
investing. Obviously, because of greater liquidity in the large cap markets,
large caps are easier to buy and sell. As for the small cap markets, however,
it does not take much buying to push a small cap stock's price higher, or much
selling to drop its price significantly. This lack of liquidity adversely
affected any potential price performance or price advantage, consequently
creating a natural market bias against small cap investing. Further compounding
the small cap markets' underperformance against the market as reflected by the
S&P 500 has been the increased focus on large cap indexing.
Nevertheless, the First Omaha Small Cap Value Fund outperformed the S&P MidCap
400 Index and the S&P SmallCap 600 Index. The long-term value orientation of
the Fund has served it well during these more volatile times. The current
average weighted beta* of the Fund is 0.80, which is less than the market's 1.0.
This lower volatility contributed to the Fund's outperformance of the indices
for the nine month period since inception. We seek to position the portfolio to
deliver returns with less volatility than small cap markets in general. The
First Omaha Small Cap Value Fund strictly seeks undervalued, fundamentally sound
companies with solid long-term outlooks. At the current time, we believe
valuations are quite attractive in the small cap markets. We have attempted to
position the portfolio with the very best companies at attractive prices that
represent good long-term value. We believe the market's pricing mechanism
inherently recognizes and appropriately prices assets in the marketplace over
time.
THE PORTFOLIO
The portfolio at the end of March had cash reserves of 11.4%, and cash as it was
coming in was being deployed into 29 positions. There were 27 positions
established at the outset of the Fund and over the last nine months, one
position was eliminated, and three new positions were added. Apogee Enter-
prises, Inc. was sold as a result of price appreciation and a high valuation. We
added West Co., Inc., P. H. Glatfelter Co. and Cerner Corp. (the exact
percentages of the portfolio are listed in the attached Schedule of Portfolio
Investments). West Co., Inc. is in the packaging and container industry and is
the largest manufacturer of specialized packaging components for the
pharmaceutical and hospital supply/medical device industries. P. H. Glatfelter
Co. is in the paper and forest products industry. Cerner Corp. is in the health
care information systems industry. The company provides clinical and management
health information via its software applications, technology and professional
services.
* BETA is a measurement of a stock's volatility in relation to the rest of the
stock market. The S&P 500 Stock Index has a beta of 1.0.
The attractiveness of the portfolio is demonstrated by the weighted average
Valuation Profile and the weighted average Fundamental Profile in the following
tables:
PORTFOLIO VALUATION PROFILE
as of March 31, 1997
WEIGHTED AVERAGE
- ------------------------------------------------------------
Price/Earnings* 13.4x
- ------------------------------------------------------------
Price/Book Value* 2.5x
- ------------------------------------------------------------
Yield 2.7%
- ------------------------------------------------------------
*Based on 1997 estimates
PORTFOLIO FUNDAMENTAL PROFILE
as of March 31, 1997
WEIGHTED AVERAGE
- ------------------------------------------------------------
Payout Ratio* 35.8%
- ------------------------------------------------------------
Debt/Capital* 21.4%
- ------------------------------------------------------------
ROE 18.5%
- ------------------------------------------------------------
*Based on 1997 estimates
PAYOUT RATIO is a ratio used to analyze a company's policy of paying cash
dividends, calculated by dividing the dividends paid on common stock by the net
income available for common stockholders. DEBT/CAPITAL is the ratio of total
debt to total stockholder's equity. ROE (RETURN ON EQUITY) equals earnings
available to common stock divided by common shareholder's equity.
This profile is in line with the Fund's investment philosophy. We believe the
companies in the portfolio have solid balance sheets, are good cash flow
generators and represent long-term intrinsic value.
SMALL CAP VALUE FUND
PORTFOLIO COMPOSITION*
as of March 31, 1997
BASIC INDUSTRIES 39%
CONSUMER STAPLES 16%
CAPITAL GOODS/ TECHNOLOGY 15%
CONSUMER CYCLICALS 14%
FINANCIAL 7%
UTILITIES 5%
TRANSPORTATION 4%
TOP FIVE HOLDINGS**
as of March 31, 1997
% OF NET ASSETS
- ------------------------------------------------------------
CLARCOR, Inc. 4.35%
- ------------------------------------------------------------
Tambrands, Inc. 4.30
- ------------------------------------------------------------
Amcast Industrial Corp. 3.68
- ------------------------------------------------------------
Nash-Finch Co. 3.65
- ------------------------------------------------------------
Lawson Products, Inc. 3.47
- ------------------------------------------------------------
* Sector weightings represent the percentage of the Fund's equity investments
in certain general sectors. These sectors include more than one industry.
** Excluding cash and cash equivalents
Portfolio composition and holdings are subject to change at any time.
The five largest positions at the end of March represented 22% of the equities
in the portfolio, and are listed in the chart above. All of these companies
exemplify the style of investing represented by the Fund. The Fund has good
diversification across all the major sectors. Companies in basic industry
represented about 39% of the portfolio; capital goods/technology represented
about 15%; and about 30% of the portfolio was invested in the consumer sector.
The current average weighted market capitalization is $685 million.
TOTAL RETURN
as of March 31, 1997
CUMULATIVE SINCE
COMMENCEMENT<F1>
- ---------------------------------------------------------------
First Omaha Small Cap Value Fund 7.30%
- ---------------------------------------------------------------
<F1>Commencement date is 6/10/96
RETURN ON A $10,000 INVESTMENT
JUNE 10, MARCH
1996 1997
FIRST OMAHA SMALL CAP VALUE FUND $10,000 $10,730
S&P MIDCAP 400 INDEX $10,000 $10,587
S&P SMALLCAP 600 INDEX $10,000 $9,960
This chart assumes an initial investment of $10,000 made on 6/10/96. Total
Return is based on net change in N.A.V. assuming reinvestment of distributions.
Returns shown on this page include the reinvestment of all dividends and other
distributions. Performance figures reflect fee waivers in effect, represent past
performance, which is no guarantee of future results, and will fluctuate. In the
absence of fee waivers, total return would be reduced. The investment return and
principal value of an investment in the First Omaha Small Cap Value Fund will
fluctuate so that an investor's shares in the Fund, when redeemed, may be worth
more or less than their original cost. This Fund is advised by First National
Bank of Omaha.
The S&P MidCap 400 Index consists of 400 domestic stocks chosen for market size,
liquidity and industry group representation. It is also a market-value weighted
index and was the first benchmark of midcap stock price movement.
The S&P SmallCap 600 Index consists of 600 domestic stocks chosen for market
size, liquidity (bid-asked spread, ownership, share turnover and number of no
trade days) and industry group representation. It too is a market-value weighted
index.
FIRST OMAHA EQUITY FUND
- -----------------------
The First Omaha Equity Fund underperformed the S&P 500 for the year ended March
31, 1997. The defensive posture and cash position maintained in the Fund weighed
on the portfolio's performance in this speculative market. In addition, the
broad sector diversification that we maintain in the portfolio negatively
impacted relative returns in 1996 due to the concentration of high returns in
the technology and bank sectors. Despite our disappointment regarding the
underperformance of the Fund, we continue to follow a deliberate, focused
approach to investing. We continue to invest in companies that have strong
market positions, good balance sheets, above average or improving return on
equity, and managements that have demonstrated an ability to effectively
allocate cash flows to maximize shareholder value. The basis of our philosophy
is to buy companies with these characteristics at a price that is below our
estimate of their long-term intrinsic value. Obviously, an environment such as
the current one makes this task extremely challenging. However, the fidelity to
our philosophy is the key to long-term performance, and we feel confident that
our consistent approach will yield above-market returns over a normal market
cycle.
During the past year, we added four new positions to the equity portfolio -
Bristol-Myers Squibb Co., Cyprus Amax Minerals Co., Harsco Corp. and Parker
Hannifin Corp. We discussed Bristol-Myers Squibb Co. and Cyprus Amax Minerals
Co. in the Semi-Annual Report last October. We continue to view Cyprus Amax
Minerals Co. as a solid long-term holding. Bristol-Myers Squibb Co.'s stock
price increased over 65% from our initial purchase price of $43 (adjusted for a
2-for-1 split). As a result, we reduced our investment in it during the year.
Since October we added Harsco Corp. (1.7% of the Fund's net assets as of March
31, 1997) to the portfolio. Harsco has three primary operating groups. Its metal
reclamation and mill services group provides services to steel mills and
metallurgical industries. The infrastructure and construction group sells
products and services that include: railway maintenance and tie renewal
programs; scaffolding; and shoring and concrete forming products. Harsco's
process industry group's major products are pipe fittings, process equipment,
heat transfer equipment, and gas containment cylinders and tanks. Harsco has
leading market positions in all of the markets it serves. Approximately 50% of
Harsco's sales are derived from service contracts which should provide a
relatively consistent earnings stream compared to other companies in this
sector. The company generates good cash flow and as a result, has the
flexibility to make strategic acquisitions if opportunities arise. We believe
the stock represents a good value at 14x earnings, yielding 2.4%.
Parker Hannifin Corp. (1.6% of the Fund's net assets as of March 31, 1997) also
was added to the Fund in the past six months. The company is a leading worldwide
manufacturer of motion control products, including fluid power systems,
electromechanical controls and related components. Its products are sold to the
industrial and aerospace industries. Parker is strong financially and generates
significant free cash flow. It also has been successful deploying its free cash
flow into acquisitions that complement existing product lines. We anticipate
more acquisitions of this kind which will enhance growth in the future. In
addition, we anticipate margin improvement as acquisitions are consolidated into
Parker's existing businesses. We believe the stock represents an excellent value
at 10.5x 1997 estimated earnings. It provides a current yield of 2%.
Four equity positions were eliminated during the past year. The stocks sold
include General Electric Co., Honeywell, Inc., Eli Lilly & Co. and Schlumberger,
Ltd. Each of these companies is very sound fundamentally but was sold when it
reached our target price. As we have stated before, it is often difficult to
sell exceptional companies, and there is clearly a temptation to ignore sell
targets in this type of market environment. We believe, however, that our long-
term performance is dependent on the consistent application of our discipline,
both buy and sell.
THE PORTFOLIO
The Equity Fund's portfolio is conservatively invested in large, high quality
companies. The weighted average market capitalization of the stocks in the
portfolio was $16.3 billion on March 31, 1997, and the median market cap was
$5.4 billion. These companies, on a weighted average basis, are as strong
fundamentally as the S&P 400 and have lower valuation measures. The charts below
present relevant valuation and fundamental measures.
PORTFOLIO VALUATION PROFILE
as of March 31, 1997
WEIGHTED S&P
AVERAGE 400
- --------------------------------------------------------------------
Price/Earnings* 15.5x 18.7x
- --------------------------------------------------------------------
Price/Book Value* 3.1x 3.8x
- --------------------------------------------------------------------
Yield 2.8% 1.7%
- --------------------------------------------------------------------
*Based on 1997 estimates
PORTFOLIO FUNDAMENTAL PROFILE
as of March 31, 1997
WEIGHTED S&P
AVERAGE 400
- --------------------------------------------------------------------
Payout Ratio* 41% 31%
- --------------------------------------------------------------------
Debt/Capital* 33% 36%
- --------------------------------------------------------------------
ROE 21% 22%
- --------------------------------------------------------------------
*Based on 1997 estimates
See the definitions on page 2 of the terms listed above.
On March 31, 1997, the portfolio was 82% invested in equities with the balance
invested in cash and equivalents. The portfolio contained 31 stocks and remained
well diversified with exposure to all major sectors of the economy. The five
largest holdings in the portfolio are listed in the chart below. These stocks
represented approximately 19% of the Fund's net assets and approximately 23% of
the value of the equities.
EQUITY FUND
PORTFOLIO COMPOSITION*
as of March 31, 1997
CONSUMER STAPLES 25%
CAPITAL GOODS/TECHNOLOGY 18%
CONSUMER CYCLICALS 17%
FINANCIAL 16%
ENERGY 10%
BASIC INDUSTRIES 9%
UTILITIES 5%
TOP FIVE HOLDINGS**
as of March 31, 1997
% OF NET ASSETS
- ------------------------------------------------------------
R.R. Donnelley & Sons Co. 4.13%
- ------------------------------------------------------------
Exxon Corp. 3.98
- ------------------------------------------------------------
Motorola, Inc. 3.90
- ------------------------------------------------------------
Kellwood Co. 3.70
- ------------------------------------------------------------
J.C. Penney Co., Inc. 3.56
- ------------------------------------------------------------
* Sector weightings represent the percentage of the Fund's equity investments
in certain general sectors. These sectors include more than one industry.
** Excluding cash and cash equivalents
Portfolio composition and holdings are subject to change at any time.
TOTAL RETURN
as of March 31, 1997
1 YEAR ENDED AVERAGE ANNUAL SINCE
3/31/97 COMMENCEMENT<F1>
- ----------------------------------------------------------------------
First Omaha Equity Fund<F2> 14.99% 14.53%
- ----------------------------------------------------------------------
<F1> Commencement date is 12/13/92
<F2> Performance data from commencement through April 9, 1995 relates to a
predecessor, First Omaha Equity Fund, the assets of which were acquired by
the Fund on that date.
RETURN ON A $10,000 INVESTMENT
DEC. 13, MARCH MARCH MARCH MARCH MARCH
1992 1993 1994 1995 1996 1997
FIRST OMAHA
EQUITY FUND $10,000 $10,470 $10,805 $12,757 $15,584 $17,921
S&P 500 COMPOSITE $10,000 $10,511 $10,666 $12,326 $16,283 $19,511
This chart assumes an initial investment of $10,000 made on 12/13/92. Total
Return is based on net change in N.A.V. assuming reinvestment of distributions.
Returns shown on this page include the reinvestment of all dividends and other
distributions. Performance figures reflect fee waivers in effect, represent past
performance, which is no guarantee of future results, and will fluctuate. In the
absence of fee waivers, total return would be reduced. The investment return and
principal value of an investment in the First Omaha Equity Fund will fluctuate
so that an investor's shares in the Fund, when redeemed, may be worth more or
less than their original cost. This Fund is advised by First National Bank of
Omaha.
The S&P 500 Composite is an index of unmanaged groups of 500 selected common
stocks, most of which are listed on the New York Stock Exchange. The index is
heavily weighted toward stocks with large market capitalizations and represents
approximately two-thirds of the total market value of all domestic common
stocks. The returns for this index do not reflect any fees or expenses.
FIRST OMAHA BALANCED FUND
- -------------------------
The First Omaha Balanced Fund's inception date was August 6, 1996. Beginning a
fund in a period of peak returns on corporate capital and high valuations adds
an additional challenge to the task of asset management. Following our value
philosophy, we have deployed capital into situations which have provided
satisfactory returns for the risk taken. However, at this point in time, short-
term underperformance is not unexpected. As we've said in the past, our success
in meeting our objective depends on adhering to our philosophy and by executing
it through a deliberate, focused approach to investing. There will inevitably be
up and down cycles to the capital markets. Our focus will not be on trying to
time the market, but instead we will focus on purchasing securities that provide
good value and a reasonable margin of safety. That said, total return for the
First Omaha Balanced Fund since its inception on August 6, 1996 was 6.14%, which
compared favorably with the benchmark indices. As of March 31, 1997, the Fund
was roughly structured with a 50% allocation to equities and a 50% allocation to
fixed income securities and cash. Given this allocation, the Fund seeks
performance somewhere between the respective equity and fixed income benchmarks.
This is a reflection of the dual strategies we are executing in the equity and
fixed income markets. The equity portion of the portfolio shares investment
strategies of the First Omaha Equity Fund along with its fundamental and
investment characteristics. Similarly, the fixed income portion of the portfolio
shares many of the same characteristics of the First Omaha Fixed Income Fund.
The First Omaha Balanced Fund has a primary goal of providing a combination of
current income and capital appreciation while exposing our shareholders to
reduced levels of risk. Our emphasis on the bond and stock selection is based on
our philosophy of buying securities that sell below their intrinsic value and
meet our quantitative and qualitative criteria. Because we have a long-term
investment horizon of 3 to 5 years, we focus on long-term results. Additionally,
by focusing on the individual security's investment merits, and whether or not
we can find attractive prospects at reasonable prices, the asset allocation
decision unfolds quite naturally. Stocks are purchased when more attractive than
bonds over our investment horizon. Bonds are purchased when they appear
attractive. Cash reserves will be a result of our stock and bond selection
processes. If we cannot find attractive candidates, cash will build. Conversely,
if there are numerous prospects that meet our requirements, cash will decrease.
THE PORTFOLIO
The volatility experienced in both the bond and equity markets provides a
challenging environment for security selection. Given the existing environment,
our target asset allocation is anticipated to be 45-50% stocks, 40-45% bonds and
10-15% cash and cash equivalents. Of course, this may change given future market
conditions. In line with our stated target range, the asset mix at the quarter
ending March 31, 1997 consisted of 10% cash, 41% bonds and 49% stocks.
The composition of the bond portion of the portfolio consisted of 29% high-
quality corporate bonds and 71% government and agency notes. The average yield
on the bond portfolio was 6.0% at March 31, 1997, with an average maturity
approaching 7 years. The portfolio boasts an average quality rating of AA1. It
is well diversified across sectors of the economy. The corporate portion of the
portfolio is 30% industrial bonds, 26% electric utility bonds, 22% telephone
utility bonds and 22% gas utility bonds.
The dividend yield on the equity portion of the portfolio was 2.8% at the end of
the quarter, which compares favorably to the S&P 500 yield of 1.9%. It contained
31 positions, with the top five positions at the end of the quarter comprising
approximately 25% of the total capital employed, including Exxon Corp., R.R.
Donnelley & Sons Co., J.C. Penney Co., Inc., Motorola, Inc. and Kellwood Co.
Like the First Omaha Equity Fund, this portfolio is diversified and is
constructed to participate in most major sectors of the economy. These companies
are fundamentally stronger and are above-average financially when compared to
the overall market. These characteristics, combined with an above-average
dividend yield and the favorable valuation of the stock portfolio, should
provide additional downside protection for the portfolio in declining markets.
BALANCED FUND
PORTFOLIO COMPOSITION
as of March 31, 1997
COMMON STOCKS 49%
U.S. GOVERNMENTS 29%
CORPORATE BONDS 12%
CASH EQUIVALENTS 10%
TOP FIVE HOLDINGS*
as of March 31, 1997
% OF NET ASSETS
- ------------------------------------------------------------
Federal National Mortgage Association,
7.27%, 8/24/05 4.52%
- ------------------------------------------------------------
U.S. Treasury Note, 6.75%, 5/31/99 2.77
- ------------------------------------------------------------
U.S. Treasury Note, 7.00%, 7/15/06 2.76
- ------------------------------------------------------------
U.S. Treasury Note, 5.375%, 11/30/97 2.74
- ------------------------------------------------------------
U.S. Treasury Note, 6.625%, 6/30/01 2.74
- ------------------------------------------------------------
*Excluding cash and cash equivalents
Portfolio composition and holdings are subject to change at any time.
TOTAL RETURN
as of March 31, 1997
CUMULATIVE SINCE
COMMENCEMENT<F1>
- ------------------------------------------------------------
First Omaha Balanced Fund 6.14%
- ------------------------------------------------------------
<F1> Commencement date is 8/6/96
RETURN ON A $10,000 INVESTMENT
AUG. 6, MARCH
1996 1997
- ----------------------------------------------------------------
FIRST OMAHA BALANCED FUND $10,000 $10,614
- ----------------------------------------------------------------
S&P 500 COMPOSITE $10,000 $11,603
- ----------------------------------------------------------------
LEHMAN BROS. GOV'T./CORP. BOND INDEX $10,000 $10,378
- ----------------------------------------------------------------
This chart assumes an initial investment of $10,000 made on 8/6/96. Total Return
is based on net change in N.A.V. assuming reinvestment of distributions. Returns
shown on this page include the reinvestment of all dividends and other
distributions. Performance figures reflect fee waivers in effect, represent past
performance, which is no guarantee of future results, and will fluctuate. In the
absence of fee waivers, total return would be reduced. The investment return and
principal value of an investment in the First Omaha Balanced Fund will fluctuate
so that an investor's shares in the Fund, when redeemed, may be worth more or
less than their original cost. This Fund is advised by First National Bank of
Omaha.
The S&P 500 Composite is an index of unmanaged groups of 500 selected common
stocks, most of which are listed on the New York Stock Exchange. The index is
heavily weighted toward stocks with large market capitalizations and represents
approximately two-thirds of the total market value of all domestic common
stocks. The returns for this index do not reflect any fees or expenses.
The Lehman Bros. Gov't./Corp. Bond Index includes all public obligations of the
U.S. Treasury, excluding flower bonds and foreign-targeted issues; all publicly
issued debt of U.S. government agencies and quasi-federal corporations, and
corporate debt guaranteed by the U.S. government; and all publicly issued, fixed
rate, nonconvertible, investment grade, dollar-denominated, SEC-registered
corporate debt (including debt issued or guaranteed by foreign sovereign
governments, municipalities, or governmental agencies, or international
agencies). The returns for this index do not reflect any fees or expenses.
THE BOND MARKET OUTLOOK
- -----------------------
Through the first quarter of 1997, bond yields continued their journey higher,
with long rates ending over 7%. Rates actually began to move up in early
December 1996 when Federal Reserve Board Chairman Alan Greenspan made the
comment about the "irrational exuberance" of asset prices. During Chairman
Greenspan's Humphrey-Hawkins testimony in February, he again reiterated his
"irrational exuberance" statement followed by stating that the Fed "cannot rule
out a situation in which a preemptive policy tightening may become appropriate
before any sign of actual higher inflation becomes evident." On March 25 at
their Federal Open Market Committee meeting, the Fed chose to raise the fed
funds rate by 25 basis points (one basis point is equal to .01%) to 5.50% from
5.25%; it left the discount rate unchanged at 5%. This action pushed bond yields
over 7% on the 30-year Treasury bond.
From an economic viewpoint, it is somewhat difficult to see any strong signs of
imminent inflation on the horizon. Both at the consumer and producer levels,
inflationary pressures remain low. According to Chairman Greenspan, the
indicators of the good inflation performance of recent years are due to
temporary factors. The longevity of these factors such as job security concerns,
stable benefit costs, intensifying global competition, and the appreciation of
the dollar is uncertain. For 1997, the Fed expects inflation to remain under
control, with the Consumer Price Index to show between a 2.75-3% inflation rate.
Economic growth is expected to slow to around 2% or 2.25% this year.
While monetary policy maintains its bias toward tightening, fiscal policy's
direction is less certain. After the November elections, the market anticipated
positive news from Washington regarding such items as a balanced budget
amendment and a plan to reduce the federal deficit. But the market is still
waiting for a credible deficit reduction plan and it is unlikely that we will
see one until later this year.
Continuation of high consumer debt levels and tighter lending conditions versus
stronger consumption and increased income levels puts the consumer at the
forefront of continued economic expansion. Over the next few months we will see
whether the Fed will raise short rates again, given the prospect of stronger
than expected growth, strong labor markets and wage inflation pressures.
FIRST OMAHA FIXED INCOME FUND
- -----------------------------
The portfolio invests at least 65% of its total assets in investment grade fixed
income securities. The portfolio is anticipated to be constructed primarily
through the laddering of bonds of 1 to 20 years in maturity. Our goal is to
reduce credit and reinvestment rate risk over the long term.
As of March 31, 1997, the First Omaha Fixed Income Fund was conservatively
positioned with a diversified portfolio. The portfolio's composition was
allocated to 27% government securities and 71% corporate bonds. Within the
corporate portion of the portfolio, the majority of the securities were high-
grade industrial and utility bonds. Credit quality remains a primary investment
consideration as we try to achieve better-than-benchmark returns while exposing
invested capital to less interest rate and credit risk.
The Fund underperformed the Lehman Brothers Government/Corporate Bond Index for
the year ended March 31, 1997. The Fund's longer duration* versus the comparable
benchmark (5.6 years for the Fund; 5.3 years for the Lehman Bros. Gov't./Corp.
Bond Index as of March 31, 1997), coupled with the rising interest rate
environment, was the primary cause for the Fund's underperformance in 1996.
Overall weighted average credit quality of the portfolio remains the same at
AA/Aa. The weighted average maturity of the portfolio moved to 7.9 years from
8.5 years reported last October. We reallocated a few longer duration securities
within the portfolio, while maintaining our overall laddered maturity approach.
FIXED INCOME FUND
PORTFOLIO COMPOSITION
as of March 31, 1997
CORPORATE BONDS 71%
U.S. GOVERNMENTS 17%
U.S. GOVERNMENT AGENCIES 10%
CASH EQUIVALENTS 2%
* DURATION measures the sensitivity of the value of bond investments to changes
in interest rates. Generally, if interest rates change one percentage point,
the value will change in the opposite direction by a percentage equal to the
duration.
TOP FIVE HOLDINGS**
as of March 31, 1997
% OF NET ASSETS
- ------------------------------------------------------------
U.S. Treasury STRIP, 2/15/07 4.33%
- ------------------------------------------------------------
Federal Home Loan Mortgage Corp.,
6.78%, 3/15/04 3.84
- ------------------------------------------------------------
AT&T Corp., 7.75%, 3/1/07 3.38
- ------------------------------------------------------------
Citizens Utilities Co., 7.60%, 6/1/06 3.36
- ------------------------------------------------------------
Indiana Gas Co., 6.625%, 12/1/97 3.32
- ------------------------------------------------------------
** Excluding cash and cash equivalents
Portfolio composition and holdings are subject to change at any time.
TOTAL RETURN
as of March 31, 1997
1 YEAR ENDED AVERAGE ANNUAL SINCE
3/31/97 COMMENCEMENT<F1>
- ------------------------------------------------------------
First Omaha Fixed
Income Fund<F2> 3.06% 5.88%
- ------------------------------------------------------------
<F1> Commencement date is 12/13/92
<F2> Performance data from commencement through April 9, 1995 relates to a
predecessor, First Omaha Fixed Income Fund, the assets of which were
acquired by the Fund on that date.
RETURN ON A $10,000 INVESTMENT
DEC. 13, MARCH MARCH MARCH MARCH MARCH
1992 1993 1994 1995 1996 1997
FIRST OMAHA FIXED
INCOME FUND $10,000 $10,547 $10,852 $11,221 $12,404 $12,784
LEHMAN BROS. GOV'T./
CORP. BOND INDEX $10,000 $10,576 $10,870 $11,368 $12,610 $13,172
This chart assumes an initial investment of $10,000 made on 12/13/92. Total
Return is based on net change in N.A.V. assuming reinvestment of distributions.
Returns shown on this page include the reinvestment of all dividends and other
distributions. Performance figures reflect fee waivers in effect, represent past
performance, which is no guarantee of future results, and will fluctuate. In the
absence of fee waivers, total return would be reduced. The investment return and
principal value of an investment in the First Omaha Fixed Income Fund will
fluctuate so that an investor's shares in the Fund, when redeemed, may be worth
more or less than their original cost. This Fund is advised by First National
Bank of Omaha.
The Lehman Bros. Gov't./Corp. Bond Index includes all public obligations of the
U.S. Treasury, excluding flower bonds and foreign-targeted issues; all publicly
issued debt of U.S. government agencies and quasi-federal corporations, and
corporate debt guaranteed by the U.S. government; and all publicly issued, fixed
rate, nonconvertible, investment grade, dollar-denominated, SEC-registered
corporate debt (including debt issued or guaranteed by foreign sovereign
governments, municipalities, or governmental agencies, or international
agencies). The returns for this index do not reflect any fees or expenses.
FIRST OMAHA SHORT/INTERMEDIATE FIXED INCOME FUND
- ------------------------------------------------
The portfolio invests at least 65% of its total assets in investment grade fixed
income securities. The portfolio expects to maintain a dollar-weighted average
maturity of 2 to 5 years. The Fund's longer duration versus the comparable
benchmark (3.0 years for the Fund; 2.3 years for the Lehman Bros. Mutual Fund
Short (1-5) U.S. Gov't. Index, as of March 31, 1997), coupled with the rising
interest rate environment, was the primary cause for the Fund's underperformance
in 1996.
As of March 31, 1997 the portfolio's composition was allocated with 20%
government securities and 76% corporate bonds. The overall weighted average
credit quality remains AA/Aa for the portfolio, while the weighted average
maturity is 3.6 years. We anticipate continuing to preserve the overall high
credit quality and maintain the laddered bond maturities within the portfolio
given current market conditions.
SHORT/INTERMEDIATE FIXED INCOME FUND
PORTFOLIO COMPOSITION
as of March 31, 1997
CORPORATE BONDS 76%
U.S. GOVERNMENTS 20%
CASH EQUIVALENTS 4%
TOP FIVE HOLDINGS*
as of March 31, 1997
% OF NET ASSETS
- ------------------------------------------------------------
Eli Lilly & Co., 8.125%, 12/1/01 4.95%
- ------------------------------------------------------------
GTE California, Inc., 6.25%, 1/15/98 4.75
- ------------------------------------------------------------
Alabama Power Co., 5.50%, 2/1/98 4.72
- ------------------------------------------------------------
Chesapeake & Potomac Telephone Co.
of Maryland, 5.875%, 9/15/99 4.67
- ------------------------------------------------------------
Wisconsin Electric Power Co.,
5.125%, 9/15/98 4.66
- ------------------------------------------------------------
* Excluding cash and cash equivalents
Portfolio composition and holdings are subject to change at any time.
TOTAL RETURN
as of March 31, 1997
1 YEAR ENDED AVERAGE ANNUAL SINCE
3/31/97 COMMENCEMENT<F1>
- ----------------------------------------------------------------------
First Omaha Short/Intermediate
Fixed Income Fund<F2> 4.00% 4.88%
- ----------------------------------------------------------------------
<F1> Commencement date is 12/13/92
<F2> Performance data from commencement through April 9, 1995 relates to a
predecessor, First Omaha Short/Intermediate Fixed Income Fund, the assets
of which were acquired by the Fund on that date.
RETURN ON A $10,000 INVESTMENT
DEC. 13, MARCH MARCH MARCH MARCH MARCH
1992 1993 1994 1995 1996 1997
FIRST OMAHA
SHORT/INTERMEDIATE
FIXED INCOME FUND $10,000 $10,340 $10,561 $10,951 $11,803 $12,275
LEHMAN BROS. MUTUAL
FUND SHORT (1-5) U.S.
GOV'T. INDEX $10,000 $10,377 $10,631 $11,080 $12,016 $12,622
This chart assumes an initial investment of $10,000 made on 12/13/92. Total
Return is based on net change in N.A.V. assuming reinvestment of distributions.
Returns shown on this page include the reinvestment of all dividends and other
distributions. Performance figures reflect fee waivers in effect, represent past
performance, which is no guarantee of future results, and will fluctuate. In the
absence of fee waivers, total return would be reduced. The investment return and
principal value of an investment in the First Omaha Short/Intermediate Fixed
Income Fund will fluctuate so that an investor's shares in the Fund, when
redeemed, may be worth more or less than their original cost. This Fund is
advised by First National Bank of Omaha.
The Lehman Bros. Mutual Fund Short (1-5) U.S. Government Index is an index made
up of the Treasury Bond Index (all public obligations of the U.S. Treasury,
excluding flower bonds and foreign-targeted issues) and the Agency Bond Index
(all publicly issued debt of U.S. government agencies and quasi-federal
corporations, and corporate debt guaranteed by the U.S. government). It includes
only those bonds with maturities of up to five years. The returns for this index
do not reflect any fees or expenses.
SCHEDULE OF PORTFOLIO INVESTMENTS
March 31, 1997
SMALL CAP VALUE FUND
NUMBER
OF SHARES VALUE
--------- -----
COMMON STOCKS 89.99%
BUSINESS SERVICES 2.44%
8,300 Franklin Quest Co.<F1> $175,337
----------
CHEMICALS 8.83%
7,400 Dexter Corp. 222,925
12,000 Oil-Dri Corp. of America 196,500
4,200 WD-40 Co. 214,200
----------
633,625
----------
CONSUMER PRODUCTS 2.77%
8,100 First Brands Corp. 198,450
----------
COSMETICS 4.30%
7,200 Tambrands, Inc. 308,700
----------
ELECTRONICS 2.43%
3,300 Teleflex, Inc. 174,487
----------
ENVIRONMENTAL CONTROL 4.50%
16,000 Calgon Carbon Corp. 176,000
18,300 Isco, Inc. 146,400
----------
322,400
----------
FOOD 6.74%
6,400 Dean Foods Co. 221,600
13,700 Nash-Finch Co. 262,013
----------
483,613
----------
HOME FURNISHINGS 3.10%
6,200 National Presto Industries, Inc. 222,425
----------
INSURANCE 6.51%
6,300 American Financial Group, Inc. 229,950
12,400 Guarantee Life Companies, Inc. 237,150
----------
467,100
----------
MACHINERY & EQUIPMENT 8.25%
11,200 Lawson Products, Inc. 249,200
7,000 Modine Manufacturing Co. 171,500
3,000 Tecumseh Products Co., Class A 171,000
----------
591,700
----------
MANUFACTURING 2.86%
7,400 Tennant Co. 205,350
----------
NUMBER
OF SHARES VALUE
--------- -----
METAL PRODUCTS 3.68%
11,300 Amcast Industrial Corp. $ 264,138
----------
MINING 3.36%
5,700 Cleveland-Cliffs, Inc. 240,825
----------
MOTOR VEHICLE PARTS & ACCESSORIES 4.35%
13,500 CLARCOR, Inc. 312,187
----------
PACKAGING & CONTAINERS 2.95%
7,800 West Co., Inc. 211,575
----------
PAPER PRODUCTS 2.97%
12,900 P. H. Glatfelter Co. 212,850
----------
TECHNOLOGY - SOFTWARE 3.35%
18,300 Cerner Corp.<F1> 240,188
----------
TEXTILE MANUFACTURING 3.07%
8,800 Kellwood Co. 220,000
----------
TIRE & RUBBER 3.02%
4,300 Bandag, Inc. 216,613
----------
TOBACCO 2.94%
7,300 Universal Corp. 210,788
----------
TRUCKING LEASING 3.09%
11,800 Werner Enterprises, Inc. 221,250
----------
UTILITIES - ELECTRIC SERVICES 1.58%
4,700 DPL, Inc. 113,387
----------
UTILITIES - TELECOMMUNICATIONS 2.90%
12,600 Aliant Communications, Inc. 207,900
----------
Total Common Stocks (cost $6,330,489) 6,454,888
----------
PRINCIPAL
AMOUNT
- ---------
U.S. TREASURY BILLS 9.74%
$700,000 4/17/97 698,205
----------
Total U.S. Treasury Bills (cost $698,413) 698,205
----------
NUMBER
OF SHARES VALUE
--------- -----
INVESTMENT COMPANIES 1.71%
122,804 Goldman Sachs ILA Treasury
Obligations Portfolio $ 122,804
----------
Total Investment Companies (cost $122,804) 122,804
----------
Total Investments (cost $7,151,706) 101.44% 7,275,897
Liabilities, less Other Assets (1.44)% (103,107)
----------
NET ASSETS 100.00% $7,172,790
==========
<F1> Non-income producing security
See notes to financial statements.
SCHEDULE OF PORTFOLIO INVESTMENTS
March 31, 1997
EQUITY FUND
NUMBER
OF SHARES VALUE
--------- -----
COMMON STOCKS 82.09%
COMMUNICATIONS EQUIPMENT 3.90%
167,600 Motorola, Inc. $10,118,850
----------
COMPUTERS & PERIPHERALS 2.10%
39,600 International Business Machines Corp. 5,440,050
----------
COSMETICS 4.68%
100,500 International Flavors & Fragrances, Inc. 4,396,875
180,600 Tambrands, Inc. 7,743,225
----------
12,140,100
----------
ELECTRICAL EQUIPMENT 3.68%
117,400 Emerson Electric Co. 5,283,000
99,500 Parker Hannifin Corp. 4,253,625
----------
9,536,625
----------
ENVIRONMENTAL CONTROL 0.72%
169,200 Calgon Carbon Corp. 1,861,200
----------
FOOD PROCESSING & PACKAGING 3.01%
95,100 CPC International, Inc. 7,798,200
----------
HEAVY MACHINERY 3.21%
191,000 Ingersoll-Rand Co. 8,332,375
----------
INSURANCE 12.66%
243,900 American Financial Group, Inc. 8,902,350
221,300 American General Corp. 9,017,975
62,600 Marsh & McLennan Cos., Inc. 7,089,450
195,100 SAFECO Corp. 7,804,000
----------
32,813,775
----------
MANUFACTURING 1.69%
120,800 Harsco Corp. 4,394,100
----------
MEDICAL SUPPLIES 2.17%
124,900 Becton, Dickinson & Co. 5,620,500
----------
MINING 3.06%
334,200 Cyprus Amax Minerals Co. 7,937,250
----------
MOTOR VEHICLE PARTS & ACCESSORIES 1.51%
169,200 CLARCOR, Inc. 3,912,750
----------
NUMBER
OF SHARES VALUE
--------- -----
OIL 8.25%
95,700 Exxon Corp. $ 10,311,675
43,400 Texaco Inc. 4,752,300
165,500 Unocal Corp. 6,309,688
----------
21,373,663
----------
PACKAGING & CONTAINERS 2.45%
234,800 Sonoco Products Co. 6,339,600
----------
PHARMACEUTICALS 1.36%
59,600 Bristol-Myers Squibb Co. 3,516,400
----------
PHOTOGRAPHY 2.75%
93,900 Eastman Kodak Co. 7,124,662
----------
PUBLISHING 4.13%
307,100 R.R. Donnelley & Sons Co. 10,710,113
----------
RETAIL 6.42%
193,800 J.C. Penney Co., Inc. 9,229,725
176,200 Rite Aid Corp. 7,400,400
----------
16,630,125
----------
SOAPS & CLEANING AGENTS 2.73%
71,100 Colgate-Palmolive Co. 7,083,337
----------
TEXTILE MANUFACTURING 3.70%
383,300 Kellwood Co. 9,582,500
----------
TOBACCO 3.49%
313,400 Universal Corp. 9,049,425
----------
UTILITIES - ELECTRIC SERVICES 4.42%
258,300 DPL, Inc. 6,231,488
153,000 Texas Utilities Co. 5,240,250
----------
11,471,738
----------
Total Common Stocks (cost $169,751,821) 212,787,338
-----------
PRINCIPAL
AMOUNT
- ---------
U.S. TREASURY BILLS 17.05%
$5,000,000 5/29/97 4,957,225
5,000,000 7/3/97 4,931,588
8,000,000 7/24/97 7,865,578
PRINCIPAL
AMOUNT VALUE
- --------- -----
U.S. TREASURY BILLS 17.05% (CONT'D.)
$5,000,000 7/31/97 $ 4,912,735
6,000,000 8/7/97 5,887,555
9,000,000 8/21/97 8,808,022
7,000,000 9/18/97 6,821,448
----------
Total U.S. Treasury Bills (cost $44,223,480) 44,184,151
----------
NUMBER
OF SHARES
---------
INVESTMENT COMPANIES 0.80%
2,063,071 Goldman Sachs ILA Treasury
Obligations Portfolio 2,063,071
----------
Total Investment Companies (cost $2,063,071) 2,063,071
----------
Total Investments (cost $216,038,372) 99.94% 259,034,560
Other Assets, less Liabilities 0.06% 165,246
------------
NET ASSETS 100.00% $259,199,806
============
See notes to financial statements.
SCHEDULE OF PORTFOLIO INVESTMENTS
March 31, 1997
BALANCED FUND
NUMBER
OF SHARES VALUE
--------- -----
COMMON STOCKS 48.67%
COMMUNICATIONS EQUIPMENT 2.33%
4,200 Motorola, Inc. $253,575
----------
COMPUTERS & PERIPHERALS 1.13%
900 International Business Machines Corp. 123,637
----------
COSMETICS 2.77%
2,500 International Flavors & Fragrances, Inc. 109,375
4,500 Tambrands, Inc. 192,938
----------
302,313
----------
ELECTRICAL EQUIPMENT 2.10%
2,800 Emerson Electric Co. 126,000
2,400 Parker Hannifin Corp. 102,600
----------
228,600
----------
ENVIRONMENTAL CONTROL 0.41%
4,100 Calgon Carbon Corp. 45,100
----------
FOOD PROCESSING & PACKAGING 1.73%
2,300 CPC International, Inc. 188,600
----------
HEAVY MACHINERY 1.92%
4,800 Ingersoll-Rand Co. 209,400
----------
INSURANCE 7.49%
6,000 American Financial Group, Inc. 219,000
5,500 American General Corp. 224,125
1,600 Marsh & McLennan Cos., Inc. 181,200
4,800 SAFECO Corp. 192,000
----------
816,325
----------
MANUFACTURING 0.97%
2,900 Harsco Corp. 105,487
----------
MEDICAL SUPPLIES 1.24%
3,000 Becton, Dickinson & Co. 135,000
----------
MINING 1.81%
8,300 Cyprus Amax Minerals Co. 197,125
----------
MOTOR VEHICLE PARTS & ACCESSORIES 1.19%
5,600 CLARCOR, Inc. 129,500
----------
NUMBER
OF SHARES VALUE
--------- -----
OIL 5.01%
2,700 Exxon Corp. $ 290,925
1,000 Texaco Inc. 109,500
3,800 Unocal Corp. 144,875
----------
545,300
----------
PACKAGING & CONTAINERS 1.44%
5,800 Sonoco Products Co. 156,600
----------
PHARMACEUTICALS 0.81%
1,500 Bristol-Myers Squibb Co. 88,500
----------
PHOTOGRAPHY 1.60%
2,300 Eastman Kodak Co. 174,513
----------
PUBLISHING 2.53%
7,900 R.R. Donnelley & Sons Co. 275,512
----------
RETAIL 4.06%
5,500 J.C. Penney Co., Inc. 261,938
4,300 Rite Aid Corp. 180,600
----------
442,538
----------
SOAPS & CLEANING AGENTS 1.55%
1,700 Colgate-Palmolive Co. 169,363
----------
TEXTILE MANUFACTURING 2.18%
9,500 Kellwood Co. 237,500
----------
TOBACCO 1.86%
7,000 Universal Corp. 202,125
----------
UTILITIES - ELECTRIC SERVICES 2.54%
6,200 DPL, Inc. 149,575
3,700 Texas Utilities Co. 126,725
----------
276,300
----------
Total Common Stocks (cost $5,199,261) 5,302,913
----------
PRINCIPAL
AMOUNT VALUE
--------- -----
CORPORATE BONDS 11.91%
FOOD PRODUCTS 2.24%
$250,000 Anheuser-Busch Cos., Inc.,
6.75%, 8/1/03 $ 244,063
----------
RETAIL 1.36%
150,000 Wal-Mart Stores, Inc.,
6.75%, 5/15/02 148,125
----------
UTILITIES - ELECTRIC SERVICES 3.14%
100,000 Indianapolis Power & Light Co.,
7.375%, 8/1/07 99,875
250,000 Tampa Electric Co.,
5.75%, 5/1/00 242,187
----------
342,062
----------
UTILITIES - NATURAL GAS 2.58%
300,000 Consolidated Natural Gas Co.,
6.625%, 12/1/08 281,250
----------
UTILITIES - TELECOMMUNICATIONS 2.59%
215,000 BellSouth Telecommunications, Inc.,
5.875%, 1/15/09 190,006
100,000 Illinois Bell Telephone Co.,
5.80%, 2/1/04 92,000
----------
282,006
----------
Total Corporate Bonds (cost $1,333,972) 1,297,506
----------
U.S. GOVERNMENT AGENCIES 4.52%
500,000 Federal National Mortgage Association,
7.27%, 8/24/05 492,550
----------
Total U.S. Government Agencies (cost $510,881) 492,550
----------
U.S. TREASURY BILLS 4.51%
250,000 5/15/97 248,366
250,000 9/18/97 243,623
----------
Total U.S. Treasury Bills (cost $492,420) 491,989
----------
PRINCIPAL
AMOUNT VALUE
--------- -----
U.S. TREASURY NOTES 21.76%
$300,000 5.375%, 11/30/97 $ 298,980
300,000 5.125%, 4/30/98 296,877
300,000 5.875%, 8/15/98 298,320
300,000 6.75%, 5/31/99 301,515
300,000 6.625%, 6/30/01 298,623
300,000 5.875%, 2/15/04 283,803
300,000 6.50%, 8/15/05 291,687
300,000 7.00%, 7/15/06 300,783
----------
Total U.S. Treasury Notes (cost $2,411,004) 2,370,588
----------
U.S. TREASURY STRIPS 2.67%
850,000 2/15/12 290,530
----------
Total U.S. Treasury Strips (cost $311,371) 290,530
----------
NUMBER
OF SHARES
---------
INVESTMENT COMPANIES 5.41%
100,000 Federated Treasury Obligations Fund 100,000
488,958 Goldman Sachs ILA Treasury
Obligations Portfolio 488,958
----------
Total Investment Companies (cost $588,958) 588,958
----------
Total Investments (cost $10,847,867) 99.45% 10,835,034
Other Assets, less Liabilities 0.55% 59,690
-----------
NET ASSETS 100.00% $10,894,724
===========
See notes to financial statements.
SCHEDULE OF PORTFOLIO INVESTMENTS
March 31, 1997
FIXED INCOME FUND
PRINCIPAL
AMOUNT VALUE
--------- -----
CORPORATE BONDS 69.71%
COMMUNICATIONS EQUIPMENT 3.11%
$2,500,000 Motorola, Inc., 6.50%, 3/1/08 $2,353,125
----------
ELECTRICAL EQUIPMENT 3.09%
2,500,000 General Electric Co., 5.50%, 11/1/01 2,337,500
----------
FOOD PRODUCTS 3.14%
2,500,000 Anheuser-Busch Cos., Inc., 7.25%, 9/15/15 2,368,750
----------
FOREST PRODUCTS 3.02%
2,500,000 Kimberly-Clark Corp., 6.875%, 2/15/14 2,278,125
----------
GOVERNMENTS - FOREIGN 2.64%
2,000,000 Ontario Hydro, 5.80%, 3/31/98 1,992,500
----------
INDUSTRIAL GOODS & SERVICES 8.78%
2,000,000 Air Products & Chemicals, Inc.,
6.25%, 6/15/03 1,900,000
2,385,000 Monsanto Co., 6.00%, 7/1/00 2,316,431
2,500,000 PPG Industries, Inc., 7.375%, 6/1/16 2,412,500
----------
6,628,931
----------
OIL & GAS EXPLORATION & PRODUCTION 4.56%
2,500,000 Amoco Canada Petroleum Co. Ltd.,
6.75%, 2/15/05 2,428,125
1,000,000 BP America, Inc., 8.875%, 12/1/97 1,017,500
----------
3,445,625
----------
PHARMACEUTICALS 2.54%
2,000,000 Eli Lilly & Co., 6.25%, 3/15/03 1,922,500
----------
RAILROADS 0.68%
500,000 Southern Railway Co., 7.75%, 8/1/99 510,625
----------
PRINCIPAL
AMOUNT VALUE
--------- -----
RETAIL 5.37%
$2,000,000 J.C. Penney Co., Inc., 6.00%, 5/1/06 $1,787,500
2,500,000 Wal-Mart Stores, Inc., 5.875%, 10/15/05 2,268,750
----------
4,056,250
----------
SOAPS & CLEANING AGENTS 1.99%
1,500,000 Colgate-Palmolive Co., 6.85%, 11/24/99 1,501,875
----------
UTILITIES - ELECTRIC SERVICES 6.38%
2,500,000 National Rural Utility Co., 6.50%, 9/15/02 2,428,125
2,500,000 Union Electric Co., 6.75%, 5/1/08 2,387,500
----------
4,815,625
----------
UTILITIES - ELECTRIC & OTHER SERVICES
COMBINED 6.71%
2,500,000 Citizens Utilities Co., 7.60%, 6/1/06 2,537,500
1,500,000 Iowa Southern Utilities Co., 7.375%, 2/1/03 1,518,750
1,000,000 Louisville Gas & Electric Co., 7.50%, 7/1/02 1,012,500
----------
5,068,750
----------
UTILITIES - NATURAL GAS 8.34%
2,500,000 Indiana Gas Co., 6.625%, 12/1/97 2,509,375
2,500,000 Laclede Gas Co., 6.50%, 11/15/10 2,303,125
1,500,000 Northern Illinois Gas Co., 6.25%, 2/1/99 1,483,125
----------
6,295,625
----------
UTILITIES - TELECOMMUNICATIONS 9.36%
2,500,000 AT&T Corp., 7.75%, 3/1/07 2,556,250
2,500,000 Chesapeake & Potomac Telephone Co.
of Maryland, 5.25%, 5/1/05 2,187,500
1,000,000 Southern Bell Telephone & Telegraph Co.,
4.75%, 9/1/00 938,750
PRINCIPAL
AMOUNT VALUE
--------- -----
UTILITIES - TELECOMMUNICATIONS 9.36% (CONT'D.)
$1,500,000 Southern Bell Telephone & Telegraph Co.,
6.00%, 10/1/04 $ 1,387,500
----------
7,070,000
----------
Total Corporate Bonds (cost $54,149,035) 52,645,806
----------
U.S. GOVERNMENT AGENCIES 9.79%
3,000,000 Federal Home Loan Mortgage Corp.,
6.78%, 3/15/04 2,899,530
2,000,000 Federal National Mortgage Association,
8.625%, 11/10/04 2,062,120
2,500,000 Federal National Mortgage Association,
7.15%, 10/11/06 2,434,650
----------
Total U.S. Government Agencies (cost $7,430,253) 7,396,300
----------
U.S. TREASURY BONDS 2.92%
1,000,000 8.75%, 11/15/08 1,091,270
1,000,000 9.125%, 5/15/09 1,116,830
----------
Total U.S. Treasury Bonds (cost $2,268,750) 2,208,100
----------
U.S. TREASURY NOTES 2.73%
1,000,000 8.125%, 2/15/98 1,017,340
1,000,000 8.875%, 2/15/99 1,042,530
----------
Total U.S. Treasury Notes (cost $2,207,500) 2,059,870
----------
U.S. TREASURY STRIPS 11.00%
1,785,000 8/15/01 1,339,821
2,122,000 5/15/02 1,513,304
6,513,000 2/15/07 3,267,637
6,400,000 2/15/12 2,187,519
----------
Total U.S. Treasury Strips (cost $7,894,532) 8,308,281
----------
NUMBER
OF SHARES VALUE
--------- -----
INVESTMENT COMPANIES 2.35%
1,774,120 Goldman Sachs ILA Treasury
Obligations Portfolio $ 1,774,120
----------
Total Investment Companies (cost $1,774,120) 1,774,120
----------
Total Investments (cost $75,724,190) 98.50% 74,392,477
Other Assets, less Liabilities 1.50% 1,131,833
-----------
NET ASSETS 100.00% $75,524,310
===========
See notes to financial statements.
SCHEDULE OF PORTFOLIO INVESTMENTS
March 31, 1997
SHORT/INTERMEDIATE FIXED INCOME FUND
PRINCIPAL
AMOUNT VALUE
--------- -----
CORPORATE BONDS 74.56%
FINANCIAL SERVICES 7.13%
$ 750,000 General Electric Capital Corp.,
6.875%, 4/15/00 $ 749,063
750,000 John Deere Capital Corp.,
7.20%, 5/15/97 751,117
----------
1,500,180
----------
FOOD PRODUCTS 4.66%
1,000,000 Anheuser-Busch Cos., Inc.,
6.90%, 10/1/02 981,250
----------
PHARMACEUTICALS 14.03%
1,000,000 Eli Lilly & Co.,
8.125%, 12/1/01 1,041,250
1,000,000 SmithKline Beecham Corp.,
6.625%, 10/1/05 940,000
1,000,000 Upjohn Co.,
5.875%, 4/15/00 971,250
----------
2,952,500
----------
RETAIL 4.60%
1,000,000 Wal-Mart Stores, Inc.,
6.50%, 6/1/03 968,750
----------
UTILITIES - ELECTRIC SERVICES 22.14%
1,000,000 Alabama Power Co.,
5.50%, 2/1/98 993,750
1,000,000 Florida Power & Light Co.,
5.50%, 7/1/99 976,250
750,000 Gulf Power Co.,
5.875%, 8/1/97 749,063
1,000,000 Monongahela Power Co.,
5.625%, 4/1/00 966,250
1,000,000 Union Electric Co.,
6.875%, 8/1/04 973,750
----------
4,659,063
----------
UTILITIES - ELECTRIC & OTHER SERVICES
COMBINED 9.05%
1,000,000 Northern States Power Co.,
5.75%, 10/1/03 923,750
1,000,000 Wisconsin Electric Power Co.,
5.125%, 9/15/98 981,250
----------
1,905,000
----------
PRINCIPAL
AMOUNT VALUE
--------- -----
UTILITIES - NATURAL GAS 3.53%
$ 750,000 Northern Illinois Gas Co.,
6.25%, 2/1/99 $ 741,562
----------
UTILITIES - TELECOMMUNICATIONS 9.42%
1,000,000 Chesapeake & Potomac Telephone Co.
of Maryland, 5.875%, 9/15/99 982,500
1,000,000 GTE California, Inc.,
6.25%, 1/15/98 998,750
----------
1,981,250
----------
Total Corporate Bonds (cost $15,839,589) 15,689,555
----------
U.S. TREASURY NOTES 7.56%
650,000 5.125%, 3/31/98 644,247
1,000,000 5.875%, 2/15/04 946,010
----------
Total U.S. Treasury Notes (cost $1,618,340) 1,590,257
----------
U.S. TREASURY STRIPS 12.64%
1,085,000 2/15/99 964,630
896,000 8/15/00 719,793
1,345,000 2/15/02 975,596
----------
Total U.S. Treasury Strips (cost $2,734,781) 2,660,019
----------
NUMBER
OF SHARES
---------
INVESTMENT COMPANIES 3.66%
770,419 Goldman Sachs ILA Treasury
Obligations Portfolio 770,419
----------
Total Investment Companies (cost $770,419) 770,419
----------
Total Investments (cost $20,963,129) 98.42% 20,710,250
Other Assets, less Liabilities 1.58% 331,981
-----------
NET ASSETS 100.00% $21,042,231
===========
See notes to financial statements.
SCHEDULE OF PORTFOLIO INVESTMENTS
March 31, 1997
U.S. GOVERNMENT OBLIGATIONS FUND
PRINCIPAL
AMOUNT VALUE
--------- -----
U.S. TREASURY BILLS 59.17%
$5,000,000 4/3/97 $ 4,998,573
5,000,000 4/17/97 4,988,614
5,000,000 5/1/97 4,979,274
10,000,000 5/15/97 9,938,097
10,000,000 6/5/97 9,907,923
5,000,000 6/12/97 4,950,253
10,000,000 6/19/97 9,889,403
5,000,000 7/17/97 4,924,880
5,000,000 7/24/97 4,919,411
10,000,000 8/14/97 9,810,253
5,000,000 8/21/97 4,900,997
----------
Total U.S. Treasury Bills (cost $74,207,678) 74,207,678
----------
U.S. TREASURY NOTES 11.96%
10,000,000 5.50%, 9/30/97 9,994,534
5,000,000 5.375%, 11/30/97 4,997,660
----------
Total U.S. Treasury Notes (cost $14,992,194) 14,992,194
----------
REPURCHASE AGREEMENTS 29.20%
16,622,990 G. X. Clarke & Co., 5.40%, dated 3/31/97,
repurchase price $16,625,761, maturing
4/1/97 (collateralized by
U.S. Treasury Bills, 1/8/98) 16,622,990
20,000,000 HSBC Securities, Inc., 5.58%, dated 3/31/97,
repurchase price $20,003,333, maturing
4/1/97 (collateralized by U.S. Treasury
Notes, 8.875%, 11/15/97) 20,000,000
----------
Total Repurchase Agreements (cost $36,622,990) 36,622,990
----------
Total Investments (cost $125,822,862) 100.33% 125,822,862
Liabilities, less Other Assets (0.33)% (409,753)
------------
NET ASSETS 100.00% $125,413,109
============
See notes to financial statements.
<TABLE>
STATEMENTS OF ASSETS AND LIABILITIES
March 31, 1997
<CAPTION>
SHORT/ U.S.
SMALL CAP FIXED INTERMEDIATE GOVERNMENT
VALUE EQUITY BALANCED INCOME FIXED INCOME OBLIGATIONS
FUND FUND FUND FUND FUND FUND
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments, at value (cost
$7,151,706, $216,038,372,
$10,847,867, $75,724,190,
$20,963,129 and $89,199,872,
respectively) $7,275,897 $259,034,560 $10,835,034 $74,392,477 $20,710,250 $89,199,872
- ----------------------------------
Repurchase agreements, at
value (cost $0, $0, $0, $0, $0 and
$36,622,990, respectively) _ _ _ _ _ 36,622,990
- ----------------------------------
Receivable for securities sold 129,838 _ _ _ _ _
- ----------------------------------
Interest and dividends receivable 9,058 247,215 69,611 1,138,862 322,580 97,682
- ----------------------------------
Organizational expenses, net of
accumulated amortization 8,056 21,031 4,062 21,031 21,031 21,031
- ----------------------------------
Other assets 20,545 58,710 9,308 24,847 11,524 31,269
- ---------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Total Assets 7,443,394 259,361,516 10,918,015 75,577,217 21,065,385 125,972,844
- ---------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
LIABILITIES:
Payable for securities purchased 237,833 _ _ _ _ _
- ----------------------------------
Dividend payable _ _ _ _ _ 483,704
- ----------------------------------
Accrued expenses and other
liabilities 32,771 119,539 23,291 45,150 21,339 49,510
- ----------------------------------
Accrued investment advisory fee _ 42,171 _ 7,757 1,815 26,521
- ---------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Total Liabilities 270,604 161,710 23,291 52,907 23,154 559,735
- ---------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
NET ASSETS $7,172,790 $259,199,806 $10,894,724 $75,524,310 $21,042,231 $125,413,109
- ---------------------------------- =========== =========== =========== =========== =========== ===========
NET ASSETS CONSIST OF:
Capital stock 7 189 10 77 22 1,254
- ----------------------------------
Paid-in-capital in excess of par 7,007,116 205,553,389 10,858,349 76,801,229 21,625,775 125,427,151
- ----------------------------------
Undistributed net investment
income 2,276 28,615 6,107 86,367 22,273 3,984
- ----------------------------------
Undistributed net realized gain
(loss) on investments 39,200 10,621,425 43,091 (31,650) (352,960) (19,280)
- ----------------------------------
Net unrealized appreciation
(depreciation) on investments 124,191 42,996,188 (12,833) (1,331,713) (252,879) _
- ---------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Net Assets $7,172,790 $259,199,806 $10,894,724 $75,524,310 $21,042,231 $125,413,109
- ---------------------------------- =========== =========== =========== =========== =========== ===========
CAPITAL STOCK, $0.00001 PAR VALUE
Authorized 50,000,000 50,000,000 50,000,000 50,000,000 50,000,000 300,000,000
- ----------------------------------
Issued and outstanding 681,832 18,866,786 1,046,656 7,673,493 2,161,688 125,432,301
- ----------------------------------
NET ASSET VALUE, REDEMPTION PRICE,
AND OFFERING PRICE PER SHARE
(NET ASSETS/SHARES OUTSTANDING) $10.52 $13.74 $10.41 $9.84 $9.73 $1.00
====== ====== ====== ====== ====== ======
- ----------------------------------------------------------------------------------------------------------------------------------
See notes to financial statements.
</TABLE>
<TABLE>
STATEMENTS OF OPERATIONS
For the period from April 1, 1996 to March 31, 1997
<CAPTION>
SHORT/ U.S.
SMALL CAP FIXED INTERMEDIATE GOVERNMENT
VALUE EQUITY BALANCED INCOME FIXED INCOME OBLIGATIONS
FUND<F1> FUND FUND<F2> FUND FUND FUND
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 29,795 $ 2,327,953 $107,549 $4,189,361 $1,286,898 $5,549,958
Dividends 77,088 5,533,208 41,032 _ _ _
- ---------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
106,883 7,861,161 148,581 4,189,361 1,286,898 5,549,958
----------- ----------- ----------- ----------- ----------- -----------
EXPENSES:
Fund administration and
accounting fees 40,275 490,160 32,604 156,101 43,047 211,701
- ----------------------------------
Investment advisory fees 26,054 1,838,101 25,234 468,303 107,617 264,627
- ----------------------------------
Shareholder servicing fees 15,821 61,069 11,079 34,627 27,063 37,259
- ----------------------------------
Federal and state registration fees 15,141 36,667 14,964 17,536 11,772 24,190
- ----------------------------------
Professional fees 11,607 32,494 11,601 17,598 12,169 18,892
- ----------------------------------
Administrative services plan fees 1,863 88,829 2,354 28,253 7,276 _
- ----------------------------------
Amortization of organization expenses 1,555 6,946 612 6,946 6,946 6,946
- ----------------------------------
Custody fees 915 73,360 998 23,428 6,457 31,694
- ----------------------------------
Pricing fees 912 1,997 1,866 4,949 2,856 310
- ----------------------------------
Reports to shareholders 834 48,143 694 15,921 4,562 19,372
- ----------------------------------
Directors' fees 61 9,796 79 3,243 917 3,914
- ----------------------------------
Insurance _ 10,357 1 3,466 1,024 4,094
- ----------------------------------
Other expenses 339 4,174 344 2,044 969 2,078
- ---------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Total expenses before waiver 115,377 2,702,093 102,430 782,415 232,675 625,077
- ----------------------------------
Waiver of expenses (74,312) (149,369) (63,317) (86,613) (23,676) (15,497)
- ---------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Net Expenses 41,065 2,552,724 39,113 695,802 208,999 609,580
- ---------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
NET INVESTMENT INCOME 65,818 5,308,437 109,468 3,493,559 1,077,899 4,940,378
- ---------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on
investments 59,722 20,637,056 43,091 231,327 (64,983) (3,242)
- ----------------------------------
Change in unrealized appreciation
(depreciation) on investments 124,191 8,274,849 (12,833) (1,285,148) (164,132) _
- ---------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Net Gain (Loss) on Investments 183,913 28,911,905 30,258 (1,053,821) (229,115) (3,242)
- ---------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $249,731 $34,220,342 $139,726 $2,439,738 $ 848,784 $4,937,136
=========== =========== =========== =========== =========== ===========
- ----------------------------------------------------------------------------------------------------------------------------------
<F1> Commenced operations on June 10, 1996
<F2> Commenced operations on August 6, 1996
See notes to financial statements.
</TABLE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
SMALL CAP BALANCED
VALUE FUND EQUITY FUND FUND
---------- ---------------------------------- --------
JUNE 10, 1996<F1> YEAR ENDED APRIL 10, 1995<F1> AUGUST 6, 1996<F1>
TO MARCH 31, TO TO
MARCH 31, 1997 1997 MARCH 31, 1996 MARCH 31, 1997
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income $ 65,818 $ 5,308,437 $ 4,439,709 $ 109,468
- -----------------------------------------
Net realized gain (loss) on investments 59,722 20,637,056 14,388,259 43,091
- -----------------------------------------
Change in unrealized appreciation
(depreciation) on investments 124,191 8,274,849 18,465,419 (12,833)
- ----------------------------------------- ----------- ----------- ----------- -----------
Net increase in net assets resulting
from operations 249,731 34,220,342 37,293,387 139,726
- ----------------------------------------- ----------- ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income (65,097) (5,313,779) (4,409,736) (103,973)
- -----------------------------------------
Net capital gains (20,522) (17,157,052) (7,246,838) _
- ----------------------------------------- ----------- ----------- ----------- -----------
Total distributions (85,619) (22,470,831) (11,656,574) (103,973)
- ----------------------------------------- ----------- ----------- ----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares 7,322,097 39,307,623 48,686,735 11,063,418
- -----------------------------------------
Net assets resulting from conversion _ _ 161,426,537 _
- -----------------------------------------
Proceeds from reinvestment of dividends 85,592 22,427,121 11,645,208 103,947
- -----------------------------------------
Redemption of shares (399,511) (38,453,262) (23,306,480) (308,394)
- ----------------------------------------- ----------- ----------- ----------- -----------
Net increase (decrease) from share transactions 7,008,178 23,281,482 198,452,000 10,858,971
- ----------------------------------------- ----------- ----------- ----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS 7,172,290 35,030,993 224,088,813 10,894,724
- -----------------------------------------
NET ASSETS:
Beginning of period 500 224,168,813 80,000 _
- ----------------------------------------- ----------- ----------- ----------- -----------
End of period $7,172,790 $259,199,806 $224,168,813 $10,894,724
- ----------------------------------------- =========== =========== =========== ===========
Undistributed net investment income,
end of period $ 2,276 $ 28,615 $ 31,943 $ 6,107
=========== =========== =========== ===========
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FIXED INCOME FUND SHORT/INTERMEDIATE FIXED INCOME FUND
--------------------------------- ------------------------------------
YEAR ENDED APRIL 10, 1995<F1> YEAR ENDED APRIL 10, 1995<F1>
MARCH 31, TO MARCH 31, TO
1997 MARCH 31, 1996 1997 MARCH 31, 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income $ 3,493,559 $ 4,297,993 $ 1,077,899 $ 1,162,499
- -----------------------------------------
Net realized gain (loss) on investments 231,327 (75,074) (64,983) (109,194)
- -----------------------------------------
Change in unrealized appreciation
(depreciation) on investments (1,285,148) 2,450,307 (164,132) 527,854
- ----------------------------------------- ----------- ----------- ----------- -----------
Net increase in net assets resulting
from operations 2,439,738 6,673,226 848,784 1,581,159
- ----------------------------------------- ----------- ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income (3,598,700) (4,110,469) (1,105,302) (1,116,807)
- -----------------------------------------
Net capital gains _ _ _ _
- ----------------------------------------- ----------- ----------- ----------- -----------
Total distributions (3,598,700) (4,110,469) (1,105,302) (1,116,807)
- ----------------------------------------- ----------- ----------- ----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares 12,299,589 15,431,739 4,544,931 5,409,677
- -----------------------------------------
Net assets resulting from conversion _ 66,377,812 _ 22,125,516
- -----------------------------------------
Proceeds from reinvestment of dividends 3,579,341 4,090,974 1,088,509 1,111,654
- -----------------------------------------
Redemption of shares (15,537,577) (12,122,363) (6,390,503) (7,056,387)
- ----------------------------------------- ----------- ----------- ----------- -----------
Net increase (decrease) from share
transactions 341,353 73,778,162 (757,063) 21,590,460
- ----------------------------------------- ----------- ----------- ----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS (817,609) 76,340,919 (1,013,581) 22,054,812
- -----------------------------------------
NET ASSETS:
Beginning of period 76,341,919 1,000 22,055,812 1,000
- ----------------------------------------- ----------- ----------- ----------- -----------
End of period $75,524,310 $76,341,919 $21,042,231 $22,055,812
- ----------------------------------------- =========== =========== =========== ===========
Undistributed net investment income,
end of period $ 86,367 $ 189,494 $ 22,273 $ 47,662
=========== =========== =========== ===========
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
U.S. GOVERNMENT OBLIGATIONS FUND
---------------------------------
YEAR ENDED APRIL 10, 1995<F1>
MARCH 31, TO
1997 MARCH 31, 1996
- --------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 4,940,378 $ 4,440,340
- -------------------------------------
Net realized gain (loss)
on investments (3,242) _
- -------------------------------------
Change in unrealized appreciation
(depreciation) on investments _ _
- ------------------------------------- ----------- -----------
Net increase in net assets resulting
from operations 4,937,136 4,440,340
- ------------------------------------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income (4,940,378) (4,440,340)
- -------------------------------------
Net capital gains _ _
- -------------------------------------
Total distributions (4,940,378) (4,440,340)
- -------------------------------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares 392,817,505 388,060,722
- -------------------------------------
Net assets resulting from conversion _ 76,094,844
- -------------------------------------
Proceeds from reinvestment
of dividends 443,533 1,141,735
- -------------------------------------
Redemption of shares (355,559,420) (377,600,568)
- ------------------------------------- ------------ ------------
Net increase (decrease) from
share transactions 37,701,618 87,696,733
- ------------------------------------- ------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 37,698,376 87,696,733
- -------------------------------------
NET ASSETS:
Beginning of period 87,714,733 18,000
- ------------------------------------- ------------ ------------
End of period $125,413,109 $ 87,714,733
- ------------------------------------- ============ ============
Undistributed net investment
income, end of period $ 3,984 $ 1,970
=========== ===========
- -------------------------------------------------------------------------------
<F1> Commencement of operations
See notes to financial statements.
<TABLE>
FINANCIAL HIGHLIGHTS<F1>
<CAPTION>
SMALL CAP
VALUE FUND EQUITY FUND
---------------- ----------------------------------------------------
JUNE 10, 1996<F2> YEAR ENDED APRIL 10, 1995<F2> JULY 1, 1994
TO MARCH 31, TO TO
MARCH 31, 1997 1997 MARCH 31, 1996 APRIL 9, 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00 $13.07 $11.39 $10.48
- -------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.15 0.30 0.28 0.21
- -------------------------------------
Net realized and unrealized gains
(losses) on investments 0.58 1.63 2.13 1.48
- ------------------------------------- ----- ----- ----- -----
Total from investment operations 0.73 1.93 2.41 1.69
- ------------------------------------- ----- ----- ----- -----
LESS DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income 0.15 0.30 0.28 0.22
- -------------------------------------
Distributions from capital gains 0.06 0.96 0.45 0.56
- ------------------------------------- ----- ----- ----- -----
Total distributions 0.21 1.26 0.73 0.78
- ------------------------------------- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $10.52 $13.74 $13.07 $11.39
====== ====== ====== ======
TOTAL RETURN<F3> 7.30% 14.99% 21.52% 16.48%
- -------------------------------------
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (000s) $7,173 $259,200 $224,169 $161,323
- -------------------------------------
Ratio of net expenses to average
net assets<F4> 1.34% 1.04% 0.99% 1.03%
- -------------------------------------
Ratio of net investment income to
average net assets<F4> 2.15% 2.17% 2.32% 2.50%
- -------------------------------------
Ratio of net expenses to average
net assets<F4><F5> 3.76% 1.10% 1.07% 1.62%
- -------------------------------------
Ratio of net investment income to
average net assets<F4><F5> (0.27)% 2.11% 2.24% 1.91%
- -------------------------------------
Portfolio turnover rate<F3> 7.45% 25.66% 26.60% 14.36%
- -------------------------------------
Average commission rate paid on
portfolio investment transactions<F6> $0.0662 $0.0677 N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
BALANCED
EQUITY FUND (CONT'D.) FUND
--------------------------------- -----------------
YEAR ENDED DEC. 13, 1992 AUGUST 6, 1996<F2>
JUNE 30, TO TO
1994 JUNE 30, 1993 MARCH 31, 1997
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.55 $10.00 $10.00
- ------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.20 0.11 0.21
- ------------------------------------
Net realized and unrealized gains
(losses) on investments 0.15 0.54 0.40
- ------------------------------------ ------- ------- -------
Total from investment operations 0.35 0.65 0.61
- ------------------------------------ ------- ------- -------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income 0.20 0.10 0.20
- ------------------------------------
Distributions from capital gains 0.22 _ _
- ------------------------------------ ------- ------- -------
Total distributions 0.42 0.10 0.20
- ------------------------------------ ------- ------- -------
NET ASSET VALUE, END OF PERIOD $10.48 $10.55 $10.41
======= ======= =======
TOTAL RETURN<F3> 3.34% 6.55% 6.14%
- ------------------------------------
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (000s) $129,381 $111,059 $10,895
- ------------------------------------
Ratio of net expenses to average
net assets<F4> 1.04% 1.01% 1.16%
- ------------------------------------
Ratio of net investment income to
average net assets<F4> 1.93% 1.90% 3.25%
- ------------------------------------
Ratio of net expenses to average
net assets<F4><F5> 1.54% 1.32% 3.04%
- ------------------------------------
Ratio of net investment income to
average net assets<F4><F5> 1.43% 1.59% 1.37%
- ------------------------------------
Portfolio turnover rate<F3> 15.86% 4.94% 5.92%
- ------------------------------------
Average commission rate paid on
portfolio investment transactions<F6> N/A N/A $0.0686
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FIXED INCOME FUND
----------------------------------------------------------------------------------
YEAR ENDED APRIL 10, 1995<F2> JULY 1, 1994 YEAR ENDED DEC. 13, 1992
MARCH 31, TO TO JUNE 30, TO
1997 MARCH 31, 1996 APRIL 9, 1995 1994 JUNE 30, 1993
- ----------------------------------------------------------------------------------------------------------------------------------
<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 0.45 0.59 0.51 0.67 0.39
- ------------------------------------
Net realized and unrealized gains
(losses) on investments (0.15) 0.35 0.07 (0.88) 0.47
- ------------------------------------ ------ ------ ------ ------ ------
Total from investment operations 0.30 0.94 0.58 (0.21) 0.86
- ------------------------------------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income 0.46 0.57 0.53 0.67 0.37
- ------------------------------------
Distributions from capital gains _ _ _ 0.03 _
- ------------------------------------ ------ ------ ------ ------ ------
Total distributions 0.46 0.57 0.53 0.70 0.37
- ------------------------------------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $ 9.84 $10.00 $9.63 $ 9.58 $10.49
====== ====== ====== ====== ======
TOTAL RETURN<F3> 3.06% 9.79% 6.35% (2.29)% 8.72%
- ------------------------------------
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (000s) $75,524 $76,342 $66,488 $61,714 $59,178
- ------------------------------------
Ratio of net expenses to average
net assets<F4> 0.89% 0.83% 0.87% 0.86% 0.79%
- ------------------------------------
Ratio of net investment income to
average net assets<F4> 4.48% 5.94% 6.98% 6.52% 6.89%
- ------------------------------------
Ratio of net expenses to average
net assets<F4><F5> 1.00% 0.96% 1.51% 1.41% 1.19%
- ------------------------------------
Ratio of net investment income to
average net assets<F4><F5> 4.37% 5.81% 6.34% 5.97% 6.49%
- ------------------------------------
Portfolio turnover rate<F3> 12.66% 37.35% 7.04% 13.09% 2.62%
- ------------------------------------
Average commission rate paid on
portfolio investment transactions<F6> _ N/A N/A N/A N/A
- ----------------------------------------------------------------------------------------------------------------------------------
<FN>
<F1> 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.
<F2> Commencement of operations
<F3> Not annualized
<F4> Annualized
<F5> During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the ratios
would have been as indicated.
<F6> Required by regulations first effective for the fiscal year ended March 31, 1997
See notes to financial statements.
</TABLE>
<TABLE>
FINANCIAL HIGHLIGHTS<F1> (CONTINUED)
<CAPTION>
SHORT/INTERMEDIATE FIXED INCOME FUND
----------------------------------------------------------------------------------
YEAR ENDED APRIL 10, 1995<F2> JULY 1, 1994 YEAR ENDED DEC. 13, 1992
MARCH 31, TO TO JUNE 30 TO
1997 MARCH 31, 1996 APRIL 9, 1995 1994 JUNE 30, 1993
- ---------------------------------------------------------------------------------------------------------------------------------
<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 0.49 0.52 0.42 0.55 0.33
- ------------------------------------
Net realized and unrealized gains
(losses) on investments (0.10) 0.17 0.05 (0.56) 0.16
- ------------------------------------ ------ ------ ------ ------ ------
Total from investment operations 0.39 0.69 0.47 (0.01) 0.49
- ------------------------------------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income 0.51 0.50 0.43 0.55 0.31
- ------------------------------------
Distributions from capital gains _ _ _ _ _
- ------------------------------------ ------ ------ ------ ------ ------
Total distributions 0.51 0.50 0.43 0.55 0.31
- ------------------------------------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $9.73 $9.85 $9.66 $ 9.62 $10.18
====== ====== ====== ====== ======
TOTAL RETURN<F3> 4.00% 7.24% 5.05% (0.22)% 5.00%
- ------------------------------------
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (000s) $21,042 $22,056 $22,130 $21,938 $24,581
- ------------------------------------
Ratio of net expenses to average
net assets<F4> 0.97% 0.89% 0.88% 0.83% 0.79%
- ------------------------------------
Ratio of net investment income to
average net assets<F4> 5.01% 5.34% 5.63% 5.44% 5.91%
- ------------------------------------
Ratio of net expenses to average
net assets<F4><F5> 1.08% 1.02% 1.51% 1.38% 1.19%
- ------------------------------------
Ratio of net investment income to
average net assets<F4><F5> 4.90% 5.21% 5.00% 4.89% 5.51%
- ------------------------------------
Portfolio turnover rate<F3> 4.73% 41.45% 9.93% 20.52% 15.58%
------------------------------------
Average commission rate paid on
portfolio investment transactions<F6> _ N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
U.S. GOVERNMENT OBLIGATIONS FUND
-------------------------------------------------------------------------------------------
YEAR ENDED APRIL 10, 1995<F2> JULY 1, 1994 YEAR ENDED YEAR ENDED DEC. 4, 1991
MARCH 31, TO TO JUNE 30, JUNE 30, TO
1997 MARCH 31, 1996 APRIL 9, 1995 1994 1993 JUNE 30, 1992
- ---------------------------------------------------------------------------------------------------------------------------------
<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 0.05 0.05 0.04 0.03 0.03 0.02
- -------------------------------------
Net realized and unrealized gains
(losses) on investments _ _ _ _ _ _
- ------------------------------------- ------ ------ ------ ------ ------ ------
Total from investment operations 0.05 0.05 0.04 0.03 0.03 0.02
- ------------------------------------- ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment
income 0.05 0.05 0.04 0.03 0.03 0.02
- -------------------------------------
Distributions from capital gains _ _ _ _ _ _
- ------------------------------------- ------ ------ ------ ------ ------ ------
Total distributions 0.05 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<F3> 4.76% 5.14% 3.51% 2.74% 2.72% 2.15%
- -------------------------------------
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (000s) $125,413 $87,715 $76,105 $89,195 $91,785 $81,152
- -------------------------------------
Ratio of net expenses to
average net assets<F4> 0.58% 0.54% 0.63% 0.60% 0.61% 0.46%
- -------------------------------------
Ratio of net investment income
to average net assets<F4> 4.66% 5.12% 4.46% 2.68% 2.67% 3.65%
- -------------------------------------
Ratio of net expenses to
average net assets<F4><F5> 0.59% 0.59% 1.23% 1.13% 0.96% 0.98%
- -------------------------------------
Ratio of net investment income
to average net assets<F4><F5> 4.65% 5.07% 3.86% 2.15% 2.32% 3.13%
- -------------------------------------
Portfolio turnover rate<F3> _ _ _ _ _ _
- -------------------------------------
Average commission rate paid on
portfolio investment
transactions<F6> _ N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------------
<FN>
<F1> 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.
<F2> Commencement of operations
<F3> Not annualized
<F4> Annualized
<F5> During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the ratios
would have been as indicated.
<F6> Required by regulations first effective for the fiscal year ended March 31, 1997
See notes to financial statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
March 31, 1997
1. ORGANIZATION
First Omaha Funds, Inc. (the "Company") was organized in October, 1994 as a
Nebraska corporation and is registered under the Investment Company Act of 1940,
as amended (the "1940 Act"), as an open-end management investment company
issuing its shares in series, each series representing a distinct portfolio with
its own investment objectives and policies. At March 31, 1997, the only series
presently authorized are the Small Cap Value Fund, the Equity Fund, the Balanced
Fund, the Fixed Income Fund, the Short/Intermediate Fixed Income Fund and the
U.S. Government Obligations Fund (individually referred to as a "Fund" and
collectively as the "Funds").
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their financial statements. These
policies are in conformity with generally accepted accounting principles.
(A) INVESTMENT VALUATION
Securities traded over-the-counter or on a national securities exchange are
valued on the basis of market value in their principal and most representative
market. Securities where the principal and most representative market is a
national securities exchange are valued at the latest reported sale price on
such exchange. Exchange-traded securities for which there were no transactions
are valued at the latest reported bid price.
Securities traded on only over-the-counter markets are valued at the latest bid
price. Debt securities (other than short-term instruments) are valued at prices
furnished by a pricing service, subject to review by the Funds' investment
adviser, First National Bank of Omaha (the "Adviser"), and determination of the
appropriate price whenever a furnished price is significantly different from the
previous day's furnished price. Short-term obligations (maturing within 60
days) are valued on an amortized cost basis. Securities for which quotations
are not readily available and other assets are valued at fair value as
determined in good faith by the Adviser under the supervision of the Board of
Directors.
Pursuant to Rule 2a-7 of the 1940 Act, investments of the U.S. Government
Obligations Fund are valued at either amortized cost, which approximates market
value, or at original cost, which combined with accrued interest, approximates
market value. Under the amortized cost valuation method, discount or premium is
amortized on a constant basis to the maturity of the security. In addition, the
Fund may not (i) purchase any instrument with a remaining maturity greater than
13 months unless such investment is subject to a demand feature, or (ii)
maintain a dollar-weighted average portfolio maturity which exceeds 90 days.
(B) REPURCHASE AGREEMENTS
The Funds may acquire repurchase agreements from financial institutions such as
banks and broker/dealers which the Adviser deems creditworthy under guidelines
approved by the Board of Directors, subject to the seller's agreement to
repurchase such securities at a mutually agreed-upon date and price. The
repurchase price generally equals the price paid by each Fund plus interest
negotiated on the basis of current short-term rates, which may be more or less
than the rate on the underlying portfolio securities. The seller, under a
repurchase agreement, is required to maintain the value of collateral held
pursuant to the agreement at not less than the repurchase price (including
accrued interest). Securities subject to repurchase agreements are held by the
Funds' custodian or another qualified custodian or in the Federal
Reserve/Treasury book-entry system. Repurchase agreements are considered to be
loans by the Funds under the 1940 Act.
(C) ORGANIZATION COSTS
Costs incurred by the Funds in connection with their organization, registration
and the initial public offering of shares have been deferred and will be
amortized on a straight-line basis over a period of five years from the date
upon which the Funds commenced their investment activities. Organization costs
have been allocated equally among the respective Funds or by specific
identification, as applicable. If any of the original shares of a Fund are
redeemed by any holder thereof prior to the end of the amortization period, the
redemption proceeds will be reduced by the pro rata share of the unamortized
expenses as of the date of redemption. The pro rata share by which the proceeds
are reduced will be derived by dividing the number of original shares of the
Fund being redeemed by the total number of original shares outstanding at the
time of redemption.
(D) EXPENSES
The Funds are charged for those expenses that are directly attributable to each
portfolio, such as advisory and custodian fees. Expenses that are not directly
attributable to a portfolio are typically allocated among the portfolios in
proportion to their respective net assets.
(E) DISTRIBUTIONS TO SHAREHOLDERS
The U.S. Government Obligations Fund declares dividends of net investment income
daily. The remaining Funds declare dividends monthly; all of the Funds pay
dividends of net investment income monthly. Distributions of net realized
capital gains, if any, will be declared at least annually. Distributions to
shareholders are recorded on the ex-dividend date.
The character of distributions made during the year from net investment income
or net realized gains may differ from the characterization for federal income
tax purposes due to differences in the recognition of income, expense or gain
items for financial statement and tax purposes. Where appropriate,
reclassifications between net asset accounts are made for such differences that
are permanent in nature. Accordingly, at March 31, 1997, reclassifications were
recorded to increase undistributed net investment income and decrease paid-in
capital in excess of par by $1,555, $2,014, $612, $2,014, $2,014 and $2,014 for
the Small Cap Value Fund, the Equity Fund, the Balanced Fund, the Fixed Income
Fund, the Short/Intermediate Fixed Income Fund and the U.S. Government
Obligations Fund, respectively.
(F) FEDERAL INCOME TAXES
Each Fund intends to comply with the requirements of the Internal Revenue Code
necessary to qualify as a regulated investment company and to make the requisite
distributions of the income to its shareholders which will be sufficient to
relieve it from all or substantially all federal income taxes.
As of March 31, 1997, each of the Fixed Income Fund, Short/Intermediate Fixed
Income Fund and U.S. Government Obligations Fund had a federal income tax
capital loss carryforward of $31,650, $343,978 and $16,038, respectively. The
entire federal income tax loss carryforward for the Fixed Income Fund expires in
2004. The $343,978 federal income tax loss carryforward for the
Short/Intermediate Fixed Income Fund expires as follows: $31,092 in 2002,
$147,691 in 2003, $109,194 in 2004 and $56,001 in 2005. The entire federal
income tax loss carryforward for the U.S. Government Obligations Fund expires in
2003. It is management's intention to make no distribution of any future
realized capital gains until the federal income tax loss carryforwards are
exhausted.
(G) USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported changes in net assets during the reporting
period. Actual results could differ from those estimates.
(H) OTHER
Investment transactions are accounted for on the trade date plus one. The Funds
determine the gain or loss realized from investment transactions by comparing
the original cost of the security lot sold with the net sale proceeds. Dividend
income is recognized on the ex-dividend date and interest income is recognized
on an accrual basis. Original issue discount is amortized over the expected
life of each applicable security.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
March 31, 1997
3. INVESTMENT ADVISORY AND OTHER AGREEMENTS
The Funds have an agreement with the Adviser to furnish investment advisory
services to the Funds. Under the terms of this agreement, the Funds will pay
the Adviser a monthly fee at the annual rate of the following percentages on
average daily net assets: 0.85% for the Small Cap Value Fund, 0.75% for the
Equity Fund, 0.75% for the Balanced Fund, 0.60% for the Fixed Income Fund, 0.50%
for the Short/Intermediate Fixed Income Fund and 0.25% for the U.S. Government
Obligations Fund. Advisory fees of $25,647, $25,234, $39,046 and $10,762 were
waived in the Small Cap Value Fund, the Balanced Fund, the Fixed Income Fund and
the Short/Intermediate Fixed Income Fund, respectively.
First National Bank of Omaha also serves as custodian and transfer agent for
each of the Funds. The custodian receives compensation from each of the Funds
for such services in an amount equal to a fee, computed daily and payable
monthly, at an annual rate of 0.03% of each Fund's average daily net assets.
Custody fees of $915, $73,360, $998, $23,428 and $6,457 were waived in the Small
Cap Value Fund, the Equity Fund, the Balanced Fund, the Fixed Income Fund and
the Short/Intermediate Fixed Income Fund, respectively. The transfer agent also
receives compensation from each of the Funds for such services. Transfer agent
fees of $10,125 and $6,000 were waived in the Small Cap Value Fund and the
Balanced Fund, respectively.
Sunstone Financial Group, Inc. (the "Administrator") acts as Administrator for
each of the Funds. As compensation for its administrative and fund accounting
services and the assumption of certain administrative expenses, the
Administrator is entitled to a fee, computed daily and payable monthly, at an
annual rate of 0.20% of each Fund's average daily net assets. The Small Cap
Value Fund and the Balanced Fund are each subject to a $50,000 minimum annual
fee. Administrative fees of $35,762, $36,394, $28,731, $11,626, $3,226 and
$15,497 were waived in the Small Cap Value Fund, the Equity Fund, the Balanced
Fund, the Fixed Income Fund, the Short/Intermediate Fixed Income Fund and the
U.S. Government Obligations Fund, respectively.
The Administrator may periodically volunteer to reduce all or a portion of its
administrative fee with respect to one or more Funds. These waivers may be
terminated at any time at the Administrator's discretion. The Administrator may
not seek reimbursement of such voluntarily reduced fees at a later date. The
reduction of such fee will cause the yield of that Fund to be higher than it
would be in the absence of such reduction.
Sunstone Distribution Services, LLC (the "Distributor") acts as Distributor for
each of the Funds. The Distributor receives no compensation from the Funds
under its Distribution Agreement with the Company, but may receive compensation
under the Distribution and Service Plan.
4. DISTRIBUTION AND SERVICE PLAN
Pursuant to Rule 12b-1 under the 1940 Act, the Company has adopted a
Distribution and Service Plan (the "Plan"), under which each Fund is authorized
to pay a periodic amount representing distribution expenses calculated at an
annual rate not to exceed 0.25% of the average daily net assets of that Fund.
Such amount may be used to pay banks, broker/dealers and other institutions,
which may include the Adviser, its correspondent and affiliated banks and the
Distributor (each a "Participating Organization") for distribution and/or
shareholder service assistance pursuant to an agreement between the Distributor
and the Participating Organization. As of March 31, 1997, there are no 12b-1
Agreements with any Participating Organizations.
5. ADMINISTRATIVE SERVICES PLAN
The Company has adopted an Administrative Services Plan pursuant to which each
Fund is authorized to pay compensation to banks and other financial
institutions, which may include the Adviser, its correspondent and affiliated
banks and the Administrator (each a "Service Organization"). Such Service
Organizations agree to provide certain ministerial, record keeping and/or
administrative support services for their customers or account holders who are
the beneficial or record owner of shares of that Fund. In consideration for
such services, a Service Organization receives a fee from a Fund, computed daily
and paid monthly at an annual rate of up to 0.25% of the average daily net asset
value of shares of that Fund owned beneficially or of record by such Service
Organization's customers for whom the Service Organization provides such
services. Effective November 1, 1996, the Company entered into an agreement
under the Plan with the Adviser at an annual rate of 0.10% of the average daily
net assets serviced for each of the Small Cap Value Fund, the Equity Fund, the
Balanced Fund, the Fixed Income Fund and the Short/Intermediate Fixed Income
Fund. For the period ended March 31, 1997, fees of $1,863, $88,829, $2,354,
$28,253 and $7,276 were accrued under this agreement, respectively. Fees of
$1,863, $39,615, $2,354, $12,513 and $3,231 were waived by the Adviser,
respectively.
6. CAPITAL STOCK
The Funds are authorized to issue a total of 1,000,000,000 shares of common
stock in series with a par value of $0.00001 per share. The Board of Directors
is empowered to issue other series of the Company's shares without shareholder
approval.
Each share of stock will have a pro rata interest in the assets of the Fund to
which the stock of that series relates and will have no interest in the assets
of any other Fund.
Transactions in shares of the Funds for the period ended March 31, 1997 were as
follows:
<TABLE>
<CAPTION>
SHORT/ U.S.
SMALL CAP FIXED INTERMEDIATE GOVERNMENT
VALUE EQUITY BALANCED INCOME FIXED INCOME OBLIGATIONS
FUND FUND FUND FUND FUND FUND
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 711,381 2,887,017 1,065,983 1,233,635 462,034 392,817,505
- --------------------------------
Shares issued to holders
in reinvestment of dividends 8,181 1,648,351 9,941 360,215 111,068 443,533
- --------------------------------
Shares redeemed (37,780) (2,817,814) (29,268) (1,554,091) (649,910) (355,559,420)
- -------------------------------- -------- ----------- --------- ----------- --------- -------------
Net increase (decrease) 681,782 1,717,554 1,046,656 39,759 (76,808) 37,701,618
======== =========== ========= =========== ========= =============
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
Transactions in shares of the Funds for the period from April
10, 1995 to March 31, 1996 were as follows:
<CAPTION>
SHORT/ U.S.
SMALL CAP FIXED INTERMEDIATE GOVERNMENT
VALUE EQUITY BALANCED INCOME FIXED INCOME OBLIGATIONS
FUND FUND FUND FUND FUND FUND
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 50 3,883,570 _ 1,516,636 544,882 388,063,353
- --------------------------------
Shares issued in conversion _ 14,178,204 _ 6,894,181 2,290,324 76,107,938
- --------------------------------
Shares issued to holders
in reinvestment of dividends _ 919,982 _ 403,885 112,230 1,141,960
- --------------------------------
Shares redeemed _ (1,839,548) _ (1,181,072) (709,044) (377,600,568)
- -------------------------------- --- ----------- --- ----------- ---------- -------------
Net increase 50 17,142,208 _ 7,633,630 2,238,392 87,712,683
=== =========== === =========== ========== =============
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
March 31, 1997
7. INVESTMENT TRANSACTIONS
The aggregate purchases and sales of securities, excluding short-term
investments, for the Funds for the period
ended March 31, 1997 were as follows:
<TABLE>
<CAPTION>
SHORT/ U.S.
SMALL CAP FIXED INTERMEDIATE GOVERNMENT
VALUE EQUITY BALANCED INCOME FIXED INCOME OBLIGATIONS
FUND FUND FUND FUND FUND FUND
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Purchases
U.S. Government _ _ $2,715,793 _ _ _
Other $6,495,429 $51,808,417 7,249,060 $12,242,468 $ 977,540 _
- ---------------------------------
Sales
U.S. Government _ _ _ 6,011,321 598,961 _
Other 224,663 51,011,056 248,022 3,398,150 1,380,000 _
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
As of March 31, 1997, gross unrealized appreciation and
depreciation of investments were as follows:
<CAPTION>
SHORT/ U.S.
SMALL CAP FIXED INTERMEDIATE GOVERNMENT
VALUE EQUITY BALANCED INCOME FIXED INCOME OBLIGATIONS
FUND FUND FUND FUND FUND FUND
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Appreciation $ 306,539 $45,524,476 $ 257,169 $ 772,393 $ 113,504 _
- -----------------------------------
(Depreciation) (182,348) (2,528,288) (270,002) (2,104,106) (366,383) _
- ----------------------------------- --------- ----------- --------- ----------- ---------- -----
Net appreciation
(depreciation) on investments $ 124,191 $42,996,188 $(12,833) $(1,331,713) $(252,879) _
========= =========== ========= =========== ========== =====
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
As of March 31, 1997, the cost of investments for federal income tax purposes
is substantially the same as for financial statement purposes.
For the period ended March 31, 1997, 100%, 100% and 37% of dividends paid from
net investment income, excluding short-term capital gains, qualifies for the
dividends received deduction available to corporate shareholders of the Small
Cap Value Fund, the Equity Fund and the Balanced Fund, respectively.
INDEPENDENT AUDITORS' REPORT
To the Shareholders and
Board of Directors of
First Omaha Funds, Inc.
We have audited the accompanying statements of assets and liabilities of First
Omaha Funds, Inc. (comprised, respectively, of the Small Cap Value Fund, the
Equity Fund, the Balanced Fund, the Fixed Income Fund, the Short/Intermediate
Fixed Income Fund and the U.S. Government Obligations Fund; collectively, the
"Funds"), including the schedules of portfolio investments as of March 31, 1997,
and the related statements of operations and changes in net assets and the
financial highlights for each of the periods indicated herein. These financial
statements and financial highlights are the responsibility of the Funds'
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements and
financial highlights. Our procedures included confirmation of securities owned
as of March 31, 1997, by correspondence with the custodian and brokers. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Funds as of March 31, 1997, the results of their operations, changes in their
net assets and the financial highlights for each of the periods indicated
herein, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Omaha, Nebraska
April 11, 1997
INVESTMENT ADVISER AND CUSTODIAN
First National Bank of Omaha
Attention: Trust Division
One First National Center
Omaha, Nebraska 68102
ADMINISTRATOR
Sunstone Financial Group, Inc.
207 E. Buffalo St., Suite 400
Milwaukee, Wisconsin 53202
DISTRIBUTOR
Sunstone Distribution Services, LLC
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
This report has been prepared for the general information of First Omaha Funds
shareholders. It is not authorized for distribution to prospective investors
unless accompanied or preceded by an effective First Omaha prospectus. The
prospectus contains more complete information about First Omaha Funds'
investment objectives, management fees and expenses, risks and operating
policies. Please read the prospectus carefully before investing or sending
money.
For more INFORMATION
call 1-800-OMAHA-03
or write to:
First Omaha Funds
P.O. Box 419022
Kansas City, Missouri 64141-6022
