As filed with the Securities and Exchange Commission on July 22, 1997
Securities Act Registration No. 33-85982
Investment Company Act Registration No. 811-8846
---------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 (x)
Post-Effective Amendment No. 7 (x)
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 (x)
Amendment No. 9 (x)
(Check appropriate box or boxes)
FIRST OMAHA FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
ONE FIRST NATIONAL CENTER
OMAHA, NE 68102-1596
(Address of Principal Executive Offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (402) 341-0500
MARC M. DIEHL Copies of all communications to:
FIRST NATIONAL BANK OF OMAHA Donald F. Burt, Esq.
ONE FIRST NATIONAL CENTER Cline, Williams, Wright, Johnson &
OMAHA, NE 68102-1596 Oldfather
(Name and Address of Agent for Service) 1900 FirsTier Bank Building
Omaha, NE 68508
and
Randy M. Pavlick
Sunstone Financial Group, Inc.
207 E. Buffalo Street, Suite 400
Milwaukee, WI 53202
This Registration Statement relates to an indefinite number of shares of the
Registrant pursuant to Rule 24f-2 under the Securities Act of 1933. The
Registrant filed its notice pursuant to Rule 24f-2(a)(1) on or about May 29,
1997 for the fiscal year ended March 31, 1997.
Approximate Date of Proposed Public offering: as soon as practicable after
the Registration Statement becomes effective.
It is proposed that this filing will become effective immediately upon filing
pursuant to paragraph (b).
CROSS REFERENCE SHEET
First Omaha Funds, Inc.
PART A
Form N-12 Part A Item Prospectus Caption
- --------------------- ------------------
1. Cover page Cover Page
2. Synopsis Prospectus Summary; Fee Table
3. Condensed Financial Information Financial Highlights
4. General Description of Registrant The Company; Investment Objectives and
Policies; Investment Restrictions;
General Information - Description of the
Company and Its Shares
5. Management of the Fund Management of the Company; General
Information - Custodian; General
Information - Transfer Agency and Fund
Accounting Services
5A. Management's Discussion of
Fund Performance Not Applicable
6. Capital Stock and Other Securities How to Purchase and Redeem Shares;
Dividends and Taxes; General Information
- Description of the Company and Its
Shares; General Information -
Miscellaneous
7. Purchase of Securities
Being Offered Valuation of Shares; How to Purchase and
Redeem Shares; Management of the Company
- Distribution Plan
8. Redemption or Repurchase How to Purchase and Redeem Shares
9. Pending Legal Proceedings Inapplicable
PART B
Location in Statement of Additional
Information
----------------------------------
10. Cover page Cover Page
11. Table of Contents Table of Contents
12. General Information and History The Company
13. Investment Objectives and Policies Investment Objectives and Policies
14. Management of the Fund Management of the Company - Directors
and Officers
15. Control Persons and Principal
Holders of Securities Additional Information - Ownership of
Shares
16. Investment Advisory and
Other Services Management of the Company - Investment
Adviser; Administrator/Fund Accountant;
Administrative Services Plan; Custodian;
Transfer Agency Services
17. Brokerage Allocation and
Other Practices Management of the Company - Portfolio
Transactions
18. Capital Stock and Other Securities Additional Information - Organization
and Capital Structure
19. Purchase, Redemption and Pricing
of Securities Being Offered Net Asset Value; Additional Purchase and
Redemption Information
20. Tax Status Additional Information - Additional Tax
Information
21. Underwriters Management of the Company - Distributor
22. Calculations of Performance Data Additional Information - Yield of the
Money Market Fund; Yield of the Fixed
Income Fund and the Short/Intermediate
Fund; Calculation of Total Return;
Distribution Rates; Performance
Comparisons
23. Financial Statements Financial Statements
PART C
Information required to be included in Part C is set forth under the appropriate
item, so numbered, in Part C to this Registration Statement.
PROSPECTUS
JULY 22, 1997
- - FIRST OMAHA SMALL CAP VALUE FUND(SM)
- - FIRST OMAHA EQUITY FUND(R)
- - FIRST OMAHA BALANCED FUND(SM)
- - FIRST OMAHA FIXED INCOME FUND(R)
- - FIRST OMAHA SHORT/INTERMEDIATE FIXED INCOME FUND(R)
- - FIRST OMAHA U.S. GOVERNMENT OBLIGATIONS FUND(R)
(LOGO)
<TABLE>
FIRST OMAHA FUNDS PROSPECTUS
JULY 22, 1997
<C> <C> <C>
First Omaha Funds, Inc. First National Bank of Omaha For current yield, purchase,
One First National Center Investment Adviser and redemption information,
Omaha, Nebraska 68102-1596 Custodian and Transfer Agent call 1-800-OMAHA-03
</TABLE>
First Omaha Funds, Inc. (the "Company") is an open-end management investment
company. The Directors of the Company have divided the Company's common stock
("Shares") into series, each of which relates to a mutual fund with its own
investment objectives and policies. This Prospectus relates to the following
Funds, each of which is a no-load diversified investment Fund. First National
Bank of Omaha, Omaha, Nebraska (the "Adviser"), a subsidiary of First National
of Nebraska, Inc. ("FNN"), acts as the investment adviser to the Funds.
FIRST OMAHA SMALL CAP VALUE FUND (the "Small Cap Value Fund") seeks as its
investment objective long-term capital appreciation.
FIRST OMAHA EQUITY FUND (the "Equity Fund") seeks as its investment objective
long-term growth of capital.
FIRST OMAHA BALANCED FUND (the "Balanced Fund") seeks as its investment
objective capital appreciation and current income.
FIRST OMAHA FIXED INCOME FUND (the "Fixed Income Fund") seeks as its
investment objective to generate current income consistent with preservation of
capital.
FIRST OMAHA SHORT/INTERMEDIATE FIXED INCOME FUND (the "Short/Intermediate
Fund") seeks as its investment objective to generate current income consistent
with preservation of capital.
FIRST OMAHA U.S. GOVERNMENT OBLIGATIONS FUND (the "Money Market Fund") seeks
as its investment objective to maximize current income to the extent consistent
with the preservation of capital and maintenance of liquidity. THE MONEY MARKET
FUND SEEKS TO MAINTAIN A CONSTANT NET ASSET VALUE OF $1.00 PER SHARE, BUT THERE
CAN BE NO ASSURANCE THE NET ASSET VALUE WILL NOT VARY. AN INVESTMENT IN THE
MONEY MARKET FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT.
THE SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, THE FIRST NATIONAL BANK OF OMAHA, ITS PARENT, FIRST NATIONAL OF
NEBRASKA, INC. OR ANY OF THEIR AFFILIATES. SUCH SHARES ARE NOT FEDERALLY INSURED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY
OTHER GOVERNMENTAL AGENCY. AN INVESTMENT IN A FUND INVOLVES CERTAIN INVESTMENT
RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
This Prospectus sets forth concisely the information about the Funds that a
prospective investor ought to know before investing. Investors should read this
Prospectus and retain it for future reference. Additional information about the
Funds, contained in a Statement of Additional Information, dated the same date
as the Prospectus, as amended from time to time, has been filed with the
Securities and Exchange Commission and is available upon request without charge
by writing to the Funds at their address or by calling the Funds at the
telephone number shown above. The Statement of Additional Information is
incorporated by reference in its entirety into this Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
TABLE OF CONTENTS
- -----------------
Prospectus Summary 1
Fee Table 3
Financial Highlights 5
Performance Information 11
Investment Objectives and Policies 12
Investment Restrictions 19
Valuation of Shares 19
How to Purchase and Redeem Shares 20
Dividends and Taxes 23
Management of the Company 24
General Information 26
Additional Performance Information 28
No person has been authorized to give any information or to make any
representations not contained in this Prospectus in connection with the offering
made by this Prospectus and, if given or made, such information or
representations must not be relied upon as having been authorized by the Funds
or their Distributor. This Prospectus does not constitute an offering by the
Funds or by the Distributor in any jurisdiction in which such offering may not
lawfully be made.
PROSPECTUS SUMMARY
- ------------------
TYPE OF COMPANY
Each Fund is a no-load, diversified series of an open-end, management investment
company.
INVESTMENT OBJECTIVE
For the Small Cap Value Fund, long-term capital appreciation.
For the Equity Fund, long-term growth of capital.
For the Balanced Fund, capital appreciation and current income.
For the Fixed Income Fund and the Short/Intermediate Fund, generation of current
income and preservation of capital.
For the Money Market Fund, maximization of current income, preservation of
capital and maintenance of liquidity.
INVESTMENT POLICY
Under normal market conditions, the Small Cap Value Fund will invest at least
65% of its total assets in common stocks and securities convertible into common
stocks issued by companies having small market capitalizations, but may also
invest in other equity securities and in fixed income securities.
Under normal market conditions, the Equity Fund will invest at least 65% of its
total assets in common stocks and securities convertible into common stocks but
may also invest up to 35% of its total assets in other equity securities and in
fixed income securities.
Under normal market conditions, the Balanced Fund will invest in common stock,
securities convertible into common stock, investment grade corporate debt, U.S.
Treasury obligations or obligations issued by the U.S. government, its agencies
and instrumentalities and cash equivalents. The assets of the Balanced Fund will
be allocated among these classes of securities based on the Adviser's assessment
of market conditions.
Under normal market conditions, the Fixed Income Fund will invest at least 65%
of its total assets in investment grade fixed income securities.
Under normal market conditions, the Short/Intermediate Fund will invest at least
65% of its total assets in investment grade fixed income securities and will
maintain a dollar-weighted average portfolio maturity of two to five years.
Under normal market conditions, the Money Market Fund will invest exclusively in
short-term (397 days or less) high quality money market instruments, principally
U.S. government obligations, having a dollar-weighted average maturity of 90
days or less and will attempt to maintain a constant net asset value of $1.00
per share.
RISK FACTORS AND SPECIAL CONSIDERATIONS
An investment in the Funds is subject to certain risks, as set forth in detail
under "INVESTMENT OBJECTIVES AND POLICIES." As with other mutual funds, there
can be no assurance that the Funds will achieve their investment objectives.
Some or all of the Funds, to the extent set forth under "INVESTMENT OBJECTIVES
AND POLICIES," may engage in the following practices: the use of repurchase and
reverse repurchase agreements, investing in foreign securities, the lending of
portfolio securities, investing in derivatives and the purchase of securities on
a when-issued or delayed-delivery basis.
OFFERING PRICE
The public offering price of each Fund is equal to its net asset value per
Share.
SHARES OFFERED
Shares of common stock ("Shares") of the Small Cap Value Fund, the Equity
Fund, the Balanced Fund, the Fixed Income Fund, the Short/Intermediate Fund and
the Money Market Fund, each a separate investment portfolio of First Omaha
Funds, Inc., a Nebraska corporation.
MINIMUM PURCHASE
The minimum initial investment is $500 with $50 minimum subsequent investments.
Such minimum initial investment is reduced to $100 for investors using the Auto
Invest Plan described herein, and the minimum subsequent investment may be
waived if purchases are made in connection with an IRA. Both minimum initial and
subsequent investments may be waived if purchases are made pursuant to a payroll
deduction plan.
DIVIDENDS
Dividends from net investment income are declared and paid monthly, except that
the Money Market Fund will declare income dividends daily. Net realized capital
gains are distributed at least annually.
INVESTMENT ADVISER
First National Bank of Omaha (the "Adviser").
ADMINISTRATOR
Sunstone Financial Group, Inc. (the "Administrator").
DISTRIBUTOR
Sunstone Distribution Services, LLC (the "Distributor").
<TABLE>
FEE TABLE
- ---------
<CAPTION>
SMALL CAP FIXED SHORT/ MONEY
VALUE EQUITY BALANCED INCOME INTERMEDIATE MARKET
FUND<F1> FUND<F2> FUND<F1> FUND<F2> FUND<F2> FUND<F2>
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) 0% 0% 0% 0% 0% 0%
Maximum Sales Load Imposed on
Reinvested Dividends (as a percentage
of offering price) 0% 0% 0% 0% 0% 0%
Deferred Sales Load (as a percentage
of original purchase price or redemption
proceeds, as applicable) 0% 0% 0% 0% 0% 0%
Redemption Fees (as a percentage of
amount redeemed, if applicable) 0% 0% 0% 0% 0% 0%
Exchange Fee 0% 0% 0% 0% 0% 0%
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees .30% .75% .35% .55% .45% .25%
12b-1 Fees<F3> .01% .01% .01% .01% .01% .01%
Other Expenses After Voluntary Fee
Reduction, including administration
fees, administrative servicing fees and
other expenses<F4> 1.00% .29% .65% .34% .52% .33%
Total Fund Operating Expenses After
Voluntary Fee Reduction 1.31% 1.05% 1.01% .90% .98% .59%
<FN>
<F1> The above information reflects estimates of the expenses for the Small Cap Value and Balanced Funds for the fiscal year ended
March 31, 1998 after voluntary fee reductions. Without voluntary fee reductions, waivers and reimbursements, Management Fees,
Other Expenses and Total Fund Operating Expenses are estimated to be .85%, 1.33% and 2.19%, respectively, for the Small Cap
Value Fund; and .75%, .82% and 1.58%, respectively, for the Balanced Fund for the fiscal year ended March 31, 1998. See
"MANAGEMENT OF THE COMPANY."
<F2> The above information reflects the expenses the Equity, Fixed Income, Short/Intermediate and Money Market Funds incurred for
the fiscal year ended March 31, 1997, as restated to reflect voluntary fee reductions (except for 12b-1 Fees, which have been
estimated). Absent the voluntary fee reductions, waivers and reimbursements, Management Fees, Other Expenses and Total Fund
Operating Expenses as a percentage of average net assets were .75%, .35% and 1.11% respectively, for the Equity Fund; .60%,
.40% and 1.01%, respectively, for the Fixed Income Fund; .50%, .58% and 1.09%, respectively, for the Short/Intermediate Fund;
and .25%, .34% and .60%, respectively, for the Money Market Fund for the fiscal year ended March 31,
1997. See "MANAGEMENT OF THE COMPANY."
<F3> The Company has adopted a Rule 12b-1 Plan pursuant to which each of the Funds is authorized to pay a periodic amount,
representing distribution expenses, calculated at an annual rate not to exceed .25% of the average daily net asset value of
such Fund. As of the date of this Prospectus, it is estimated that 12b-1 expenses will be .01% of average daily net assets of
each Fund.
<F4> "Other Expenses" include administration fees and legal, accounting and other miscellaneous expenses to be incurred during
the fiscal year.
</TABLE>
EXAMPLE:
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
Small Cap Value Fund $13 $42 $73 $160
Equity Fund $11 $34 $58 $129
Balanced Fund $10 $32 $56 $125
Fixed Income Fund $ 9 $29 $50 $112
Short/Intermediate Fund $10 $31 $55 $121
Money Market Fund $ 6 $19 $33 $ 74
The purpose of the above tables is to assist a potential purchaser of a Fund's
Shares in understanding the various costs and expenses that an investor in such
Fund will bear directly or indirectly. The above example is based on the expense
information included in the previous fee table. The table and example do not
reflect any fees or charges that may be imposed by the Adviser or any Banks or
their affiliates, or brokers, dealers and other intermediaries, on their
customers. See "How to Purchase and Redeem Shares - Purchase of Shares." See
"MANAGEMENT OF THE COMPANY" and "GENERAL INFORMATION" for a more complete
discussion of the Shareholder transaction expenses and annual operating expenses
for each of the Funds.
FINANCIAL HIGHLIGHTS
- --------------------
The following financial highlights for periods ended on or prior to March 31,
1997 are audited and should be read in conjunction with the Funds' financial
statements, the related notes thereto and the independent auditors' report of
KPMG Peat Marwick LLP appearing in the Statement of Additional Information.
Further information about the Funds' performance is contained in the Company's
annual report to shareholders, which may be obtained without charge by calling
or writing the Company at the telephone number or address on the first page of
this Prospectus.
SMALL CAP VALUE FUND
6/10/96<F1>
TO 3/31/97
Net Asset Value, Beginning of Period $10.00
Income from Investment Operations:
Net investment income 0.15
Net realized and unrealized gains on investments 0.58
------
Total from investment operations 0.73
------
Less Distributions to Shareholders:
Dividends from net investment income 0.15
Distributions from capital gains 0.06
------
Total distributions 0.21
------
Net Asset Value, End of Period $10.52
======
Total Return<F2> 7.30%
Supplemental Data and Ratios:
Net assets, end of period (000s) $7,173
Ratio of net expenses to average net assets<F3><F4> 1.34%
Ratio of net investment income to average net assets<F3><F4> 2.15%
Ratio of net expenses to average net assets<F3><F5> 3.76%
Ratio of net investment income to average net assets<F3><F5> (0.27)%
Portfolio turnover rate<F2> 7.45%
Average commission rate paid on portfolio transactions $0.0662
<F1> Commencement of operations
<F2> Not annualized
<F3> Annualized
<F4> Net of waivers and reimbursements
<F5> Before waivers and reimbursements
<TABLE>
EQUITY FUND
<CAPTION>
YEAR ENDED 4/10/95<F2> 7/1/94<F1> YEAR ENDED 12/13/92<F1>
3/31/97 TO 3/31/96 TO 4/9/95 6/30/94<F1> TO 6/30/93
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $13.07 $11.39 $10.48 $10.55 $10.00
Income from Investment Operations:
Net investment income 0.30 0.28 0.21 0.20 0.11
Net realized and unrealized gains on
investments 1.63 2.13 1.48 0.15 0.54
------ ------ ------ ------ ------
Total from investment operations 1.93 2.41 1.69 0.35 0.65
------ ------ ------ ------ ------
Less Distributions to Shareholders:
Dividends from net investment income 0.30 0.28 0.22 0.20 0.10
Distributions from capital gains 0.96 0.45 0.56 0.22 -
------ ------ ------ ------ ------
Total distributions 1.26 0.73 0.78 0.42 0.10
------ ------ ------ ------ ------
Net Asset Value, End of Period $13.74 $13.07 $11.39 $10.48 $10.55
====== ====== ====== ====== ======
Total Return<F3> 14.99% 21.52% 16.48% 3.34% 6.55%
Supplemental Data and Ratios:
Net assets, end of period (000s) $259,200 $224,169 $161,323 $129,381 $111,059
Ratio of net expenses to average net
assets<F4><F5> 1.04% 0.99% 1.03% 1.04% 1.01%
Ratio of net investment income to
average net assets<F4><F5> 2.17% 2.32% 2.50% 1.93% 1.90%
Ratio of net expenses to average net
assets<F4><F6> 1.10% 1.07% 1.62% 1.54% 1.32%
Ratio of net investment income to
average net assets<F4><F6> 2.11% 2.24% 1.91% 1.43% 1.59%
Portfolio turnover rate<F3> 25.66% 26.60% 14.36% 15.86% 4.94%
Average commission rate paid on
portfolio transactions<F7> $0.0677 N/A N/A N/A N/A
<FN>
<F1> Performance data for the 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> Net of waivers and reimbursements
<F6> Before waivers and reimbursements
<F7> Required by regulations first effective for the fiscal year ended March 31, 1997
</TABLE>
BALANCED FUND
8/6/96<F1>
TO 3/31/97
Net Asset Value, Beginning of Period $10.00
Income from Investment Operations:
Net investment income 0.21
Net realized and unrealized gains on investments 0.40
------
Total from investment operations 0.61
------
Less Distributions to Shareholders:
Dividends from net investment income 0.20
Distributions from capital gains -
------
Total distributions 0.20
------
Net Asset Value, End of Period $10.41
======
Total Return<F2> 6.14%
Supplemental Data and Ratios:
Net assets, end of period (000s) $10,895
Ratio of net expenses to average net assets<F3><F4> 1.16%
Ratio of net investment income to average net assets<F3><F4> 3.25%
Ratio of net expenses to average net assets<F3><F5> 3.04%
Ratio of net investment income to average net assets<F3><F5> 1.37%
Portfolio turnover rate<F2> 5.92
Average commission rate paid on portfolio transactions $0.0686
<F1> Commencement of operations
<F2> Not annualized
<F3> Annualized
<F4> Net of waivers and reimbursements
<F5> Before waivers and reimbursements
<TABLE>
FIXED INCOME FUND
<CAPTION>
YEAR ENDED 4/10/95<F2> 7/1/94<F1> YEAR ENDED 12/13/92<F1>
3/31/97 TO 3/31/96 TO 4/9/95 6/30/94<F1> TO 6/30/93
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.00 $ 9.63 $9.58 $10.49 $10.00
Income from Investment Operations:
Net investment income 0.45 0.59 0.51 0.67 0.39
Net realized and unrealized gains
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><F5> 0.89% 0.83% 0.87% 0.86% 0.79%
Ratio of net investment income
to average net assets<F4><F5> 4.48% 5.94% 6.98% 6.52% 6.89%
Ratio of net expenses to average
net assets<F4><F6> 1.00% 0.96% 1.51% 1.41% 1.19%
Ratio of net investment income
to average net assets<F4><F6> 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 transactions<F7> - N/A N/A N/A N/A
<FN>
<F1> Performance data for the 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> Net of waivers and reimbursements
<F6> Before waivers and reimbursements
<F7> Required by regulations first effective for the fiscal year ended March 31, 1997
</TABLE>
<TABLE>
SHORT/INTERMEDIATE FIXED INCOME FUND
YEAR ENDED 4/10/95<F2> 7/1/94<F1> YEAR ENDED 12/13/92<F1>
3/31/97 TO 3/31/96 TO 4/9/95 6/30/94<F1> TO 6/30/93
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $9.85 $9.66 $9.62 $10.18 $10.00
Income from Investment Operations:
Net investment income 0.49 0.52 0.42 0.55 0.33
Net realized and unrealized gains
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> <F5> 0.97% 0.89% 0.88% 0.83% 0.79%
Ratio of net investment income to
average net assets<F4><F5> 5.01% 5.34% 5.63% 5.44% 5.91%
Ratio of net expenses to average
net assets<F4><F6> 1.08% 1.02% 1.51% 1.38% 1.19%
Ratio of net investment income to
average net assets<F4><F6> 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 transactions<F7> - N/A N/A N/A N/A
<FN>
<F1> Performance data for the 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> Net of waivers and reimbursements
<F6> Before waivers and reimbursements
<F7> Required by regulations first effective for the fiscal year ended March 31, 1997
</TABLE>
<TABLE>
U.S. GOVERNMENT OBLIGATIONS FUND
<CAPTION>
YEAR ENDED 4/10/95<F2> 7/1/94<F1> YEAR ENDED YEAR ENDED 12/4/91<F1>
3/31/97 TO 3/31/96 TO 4/9/95 6/30/94<F1> 6/30/93<F1> TO 6/30/92
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Income from Investment Operations:
Net investment income 0.05 0.05 0.04 0.03 0.03 0.02
Net realized and unrealized gains
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><F5> 0.58% 0.54% 0.63% 0.60% 0.61% 0.46%
Ratio of net investment income
to average net assets<F4><F5> 4.66% 5.12% 4.46% 2.68% 2.67% 3.65%
Ratio of net expenses to average
net assets<F4><F6> 0.59% 0.59% 1.23% 1.13% 0.96% 0.98%
Ratio of net investment income to
average net assets<F4><F6> 4.65% 5.07% 3.86% 2.15% 2.32% 3.13%
Portfolio turnover rate<F3> - - - - - -
Average commission rate paid on
portfolio transactions<F7> - N/A N/A N/A N/A N/A
<FN>
<F1> Performance data for the 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> Net of waivers and reimbursements
<F6> Before waivers and reimbursements
<F7> Required by regulations first effective for the fiscal year ended March 31, 1997
</TABLE>
PERFORMANCE INFORMATION
- -----------------------
From time to time, performance information for the Small Cap Value, Equity,
Balanced, Fixed Income and Short/Intermediate Funds showing their respective
average annual total return, aggregate total return and/or yield may be
presented in advertisements, sales literature and Shareholder reports. SUCH
PERFORMANCE FIGURES ARE BASED ON HISTORICAL EARNINGS AND ARE NOT INTENDED TO
INDICATE FUTURE PERFORMANCE. Average annual total return will be calculated for
the period since the commencement of operations for such Fund (including its
immediate predecessor). Average annual total return is measured by comparing the
value of an investment in a Fund at the beginning of the relevant period to the
redeemable value of the investment at the end of the period (assuming immediate
reinvestment of any dividends or capital gains distributions), which figure is
then annualized. Aggregate total return is calculated similarly to average
annual total return except that the return figure is aggregated over the
relevant period instead of annualized. The Funds may, when citing performance in
marketing and sales literature, include the performance of investment vehicles
which were predecessors to the Funds. Yield will be computed by dividing a
Fund's net investment income per share (as calculated on a yield to maturity
basis) earned during a recent 30-day period by that Fund's per share maximum
offering price (reduced by any undeclared earned income expected to be paid
shortly as a dividend) on the last day of the period and annualizing the result.
From time to time the Money Market Fund may advertise its "yield," "effective
yield" and "average annual total return." THE YIELD FIGURES AND THE RETURN
FIGURES ARE BASED ON HISTORICAL EARNINGS AND ARE NOT INTENDED TO INDICATE FUTURE
PERFORMANCE. The "yield" of the Money Market Fund refers to the income
generated by an investment therein over a seven-day period (which period will be
stated in the advertisement). This income is then "annualized." That is, the
amount of income generated by the investment during that week is assumed to be
generated each week over a 52-week period and is shown as a percentage of the
investment. The Money Market Fund may also present a 30-day yield which is
calculated similarly but instead refers to a 30-day period rather than a seven-
day period. The "effective yield" is calculated similarly but, when
annualized, the income earned by an investment in the Money Market Fund is
assumed to be reinvested. The "effective yield" is slightly higher than the
"yield" because of the compounding effect of this assumed reinvestment. For
the seven-day period ended March 31, 1997, the yield of the Money Market Fund
was 4.69% and its effective yield was 4.80%.
In addition, from time to time, the Funds may present their distribution rates
in supplemental sales literature and in Shareholder reports both of which must
be accompanied or preceded by a Prospectus. Distribution rates will be computed
by dividing the distributions per share made by a Fund over a 12-month period by
the maximum offering price per share. The calculation of income in the
distribution rate includes both income and capital gain dividends and does not
reflect unrealized gains or losses, although each Fund may also present a
distribution rate excluding the effect of capital gains. The distribution rate
differs from the yield, because it includes capital items which are often non-
recurring in nature, whereas yield does not include such items. Distribution
rate information will be accompanied by the standardized yield and total return
data.
Investors may also judge the performance of each Fund by comparing or
referencing its performance to the performance of other mutual funds with
comparable investment objectives and policies through various mutual fund or
market indices and to data prepared by various services which indices or data
may be published by such services or by other services or publications. For
example, the total return and yield of a Fund's Shares may be compared to data
prepared by Lipper Analytical Services, Inc. In addition, the total return of a
Fund may be compared to the S&P 500 Index, the S&P 400 Index, the S&P 600 Index,
the Nasdaq Composite Index, an index of unmanaged groups of common stocks of
domestic companies that are quoted on the National Association of Securities
Dealers Automated Quotation System, the Dow Jones Industrial Average, a
recognized unmanaged index of common stocks of 30 industrial companies listed on
the New York Stock Exchange, the Lehman Bros. Mutual Fund Short (1-5) U.S. Gov't
Index, or the Lehman Bros. Gov't/Corp. Bond Index. Total Return and yield data
as reported in national financial publications, such as MONEY MAGAZINE, FORBES,
BARRON'S, MORNINGSTAR MUTUAL FUNDS, THE WALL STREET JOURNAL and the NEW YORK
TIMES, or in publications of a local or regional nature, may also be used in
comparing the performance of the Funds. In addition to performance information,
general information about the Funds that appears in such publications may be
included in advertisements, sales literature and reports to Shareholders.
Yield and total return are generally functions of market conditions, interest
rates, types of investments held and operating expenses. Consequently, current
yields and total return will fluctuate and are not necessarily representative of
future results. Any fees charged by the Adviser or any of its affiliates with
respect to customer accounts for investing in Shares of any of the Funds will
not be included in performance calculations; such fees, if charged, will reduce
the actual performance from that quoted. In addition, if the Adviser and/or the
Administrator voluntarily reduce all or part of their respective fees for a
Fund, as discussed below, the yield and total return of that Fund will be higher
than it would otherwise be in the absence of such voluntary fee reductions. For
additional information about the performance of the Funds and their
predecessors, see "Additional Performance Information."
INVESTMENT OBJECTIVES AND POLICIES
- ----------------------------------
IN GENERAL
The investment objective of the Small Cap Value Fund is capital appreciation.
The investment objective of the Equity Fund is long-term growth of capital. The
investment objective of the Balanced Fund is capital appreciation and current
income. The investment objective of each of the Fixed Income Fund and the
Short/Intermediate Fund is generation of current income consistent with the
preservation of capital. The investment objective of the Money Market Fund is
maximum current income to the extent consistent with the preservation of capital
and the maintenance of liquidity. These investment objectives are fundamental
policies and, as such, may not be changed without a vote of the holders of a
majority of the outstanding shares of that Fund (as defined in "GENERAL
INFORMATION - Miscellaneous"). There can be no assurance that the investment
objective of a Fund will be achieved.
THE SMALL CAP VALUE FUND
Under normal market conditions, the Fund will invest at least 65% of its total
assets in common stocks and securities convertible into common stocks (such as
convertible bonds, convertible preferred stocks, warrants, options and rights)
issued by companies having small market capitalization. For these purposes
"small market capitalization" means market capitalization smaller than
approximately the largest one-fourth of companies listed on the New York Stock
Exchange, currently $1.5 billion or less. The Adviser expects that most of such
companies will have market capitalization in the $200 million - $1 billion
range. Although current dividend or interest income will not be a factor in the
selection of investments, the Adviser intends to seek companies whose record of
earnings and/or dividend growth may be indications of capital appreciation
potential. The Adviser will generally seek to invest in companies whose stock is
trading at prices below book value or the Adviser's perception of actual value.
The Fund may also invest up to 35% of the value of its total assets in preferred
stocks, common stocks other than those described above, corporate bonds, notes,
warrants, and short-term obligations (with maturities of 12 months or less)
consisting of domestic and foreign commercial paper (including variable amount
master demand notes), bankers' acceptances, repurchase agreements, and
obligations issued or guaranteed by the U.S. government or its agencies or
instrumentalities. The Fund will only invest in short-term obligations,
including securities of investment companies holding themselves out as "money
market" funds, for purposes of portfolio liquidity to meet redemption
requirements and short-term investment needs. During temporary defensive periods
as determined by the Adviser, the Fund may hold up to 100% of its total assets
in high quality short-term obligations including domestic bank certificates of
deposit, bankers' acceptances and repurchase agreements secured by bank
instruments. However, to the extent that the Fund is so invested in debt
obligations, the Fund may not achieve its investment objective.
Subject to the foregoing limitations, the Fund will invest only in corporate
debt securities (including convertible securities) which are rated at the time
of purchase within the four highest rating groups assigned by one or more
nationally recognized statistical rating organizations ("NRSROs"), e.g.,
Moody's Investors Service, Inc. ("Moody's") and Standard & Poor's Corporation
("S&P"), or, if unrated, which the Adviser deems to present attractive
opportunities and are of comparable quality to the rated securities. For a
description of the rating symbols of the NRSROs, see the Appendix to the
Statement of Additional Information. For a discussion of debt securities rated
within the fourth highest rating groups assigned by Moody's and S&P, see "OTHER
INVESTMENT POLICIES AND RISKS - Securities Ratings" herein.
Equity securities such as those in which the Fund may invest are more volatile
and carry more risk than some other investments, including investments in high
grade fixed income securities. Depending upon the performance of the Fund's
investments, the net asset value per share of the Fund may fluctuate. The
emphasis on appreciation and smaller capitalization companies may result in even
greater risk than is inherent in other equity investment alternatives. The Fund
will likely have somewhat greater volatility than the stock market generally, as
measured by the S&P 500 Index.
Under normal market conditions, the Fund will invest primarily in common stocks,
some of which will be traded in the over-the-counter market. In contrast to the
securities exchanges, the over-the-counter market is not a centralized facility
which limits trading activity to securities of companies which initially satisfy
certain defined standards. Any security can be traded in the over-the-counter
market as long as an individual or firm is willing to make a market in the
security. Because there are no minimum requirements for a company's assets or
earnings or the number of its stockholders in order for its stock to be traded
over-the-counter, there is great diversity in the size and profitability of
companies whose stocks trade in this market, ranging from relatively small
little-known companies to well-established corporations.
Generally, the volume of trading in an unlisted common stock is less than the
volume of trading in a listed common stock. This means that the degree of market
liquidity of some stocks in which the Fund invests may be relatively limited.
When the Fund disposes of such a stock it may have to offer the shares at a
discount from recent prices or sell the shares in small lots over an extended
period of time.
Some securities issued by companies with a small capitalization present greater
risks and may be subject to large, abrupt or erratic fluctuations in price due,
in part, to such factors as the issuer's dependence upon key personnel, the lack
of internal resources, the inability to obtain funds from external sources, and
dependence on a new product or service for which there is no firmly established
market. Fluctuations in the price of some of the stocks owned by the Fund,
therefore, could cause the net asset value of the Fund to vary significantly.
THE EQUITY FUND
Under normal market conditions, the Equity Fund will invest at least 65% of the
value of its total assets in common stocks and securities convertible into
common stocks (i.e., convertible bonds, convertible preferred stock, warrants,
options and rights) of companies believed by the Adviser to be large
capitalization companies with a record of good earnings and/or dividend growth.
For purposes of the foregoing policy, "large capitalization" means companies
having market capital comparable to the market capitalization of the largest
one-fourth of the companies listed on the New York Stock Exchange. The Equity
Fund may also invest up to 35% of the value of its total assets in preferred
stocks, common stocks other than those described above, corporate bonds, notes,
warrants, and short-term obligations (with maturities of 12 months or less)
consisting of domestic and foreign commercial paper (including variable amount
master demand notes), bankers' acceptances, repurchase agreements, and
obligations issued or guaranteed by the U.S. government or its agencies or
instrumentalities. The Equity Fund will only invest in short-term obligations,
including securities of investment companies holding themselves out as "money
market" funds, for purposes of portfolio liquidity to meet redemption
requirements and short-term investment needs. During temporary defensive periods
as determined by the Adviser, the Equity Fund may hold up to 100% of its total
assets in high quality short-term obligations including obligations issued or
guaranteed by the U.S. government or its agencies or instrumentalities, domestic
bank certificates of deposit, bankers' acceptances and repurchase agreements
secured by bank instruments or U.S. government obligations. However, to the
extent that the Equity Fund is so invested in debt obligations, such Fund may
not achieve its investment objective.
Subject to the foregoing limitations, the Equity Fund will invest only in
corporate debt securities (including convertible securities) which are rated at
the time of purchase within the four highest rating groups assigned by one or
more NRSROs, e.g., Moody's and S&P or, if unrated, which the Adviser deems to
present attractive opportunities and are of comparable quality to the rated
securities. For a description of the rating symbols of the NRSROs, see the
Appendix to the Statement of Additional Information. For a discussion of debt
securities rated within the fourth highest rating groups assigned by Moody's and
S&P, see "OTHER INVESTMENT POLICIES AND RISKS - Securities Ratings" herein.
Equity securities such as those in which the Equity Fund may invest are more
volatile and carry more risk than some other investments, including investments
in high grade fixed income securities. Depending upon the performance of the
Equity Fund's investments, the net asset value per share of the Equity Fund may
fluctuate.
THE BALANCED FUND
Under normal market conditions, the Balanced Fund will invest in common stocks
and securities convertible into common stocks (i.e., convertible bonds,
convertible preferred stock, warrants, options and rights). In addition, the
Balanced Fund will invest in corporate debt securities (including convertible
securities) which are rated at the time of purchase within the four highest
rating groups assigned by one or more NRSROs, e.g., Moody's and S&P or, if
unrated, which the Adviser deems to present attractive investment opportunities
and are of comparable quality to the rated securities. For a description of the
rating categories of Moody's and S&P, see the Appendix to the Statement of
Additional Information. For a discussion of the debt securities rated within the
four highest rating groups assigned by Moody's and S&P, see "OTHER INVESTMENT
POLICIES AND RISKS - Securities Ratings" herein. In addition, the Balanced Fund
may invest in U.S. Treasury Obligations and other obligations issued or
guaranteed by the U.S. government, its agencies and instrumentalities. The
Balanced Fund may also invest in mortgage-related and asset-backed securities,
state, municipal or industrial revenue bonds, and other fixed income securities
which are permissible investments for the Fixed Income Fund. See "THE FIXED
INCOME FUND AND THE SHORT/INTERMEDIATE FUND" below for additional information
about the fixed income securities in which the Balanced Fund may invest.
The Balanced Fund will use a disciplined approach of allocating assets among the
three major asset groups: common stocks, debt securities and cash equivalents.
The allocations among these asset classifications will vary depending upon the
Adviser's assessment of market conditions. Under normal market conditions, the
Balanced Fund is expected to be allocated approximately 65% in stocks and
securities convertible into common stocks and 35% in debt securities.
However, depending upon market conditions, the Balanced Fund may also be
allocated to cash equivalents. The range of allocation to stocks and securities
convertible into common stock is expected to be between 35% and 65%. The
Balanced Fund expects to invest a minimum of 25% of its total assets in
investment grade fixed income securities.
THE FIXED INCOME FUND AND
THE SHORT/INTERMEDIATE FUND
Under normal market conditions, the Fixed Income Fund will invest at least 65%
of the value of its total assets in investment grade fixed income securities
consisting of bonds, debentures, notes, mortgage-related securities, state,
municipal or industrial revenue bonds, obligations issued or guaranteed by the
U.S. government or its agencies or instrumentalities, and fixed income
securities convertible into, or exchangeable for, common stocks. However, up to
35% of the value of its total assets may be invested in preferred stocks. In
addition, a portion of the Fixed Income Fund may, from time to time, be invested
in income participation loans and participation certificates in pools of
mortgages issued or guaranteed by the U.S. government or its agencies or
instrumentalities. Some of the securities in which the Fixed Income Fund invests
may have warrants or options attached.
Under normal market conditions, the Short/Intermediate Fund will invest at least
65% of the value of its total assets in investment grade fixed income securities
consisting of bonds, debentures, notes, mortgage-related securities, state,
municipal or industrial revenue bonds, U.S. Treasury obligations, obligations
issued or guaranteed by the U.S. government or its agencies or
instrumentalities, and fixed income securities convertible into, or exchangeable
for, common stocks. However, up to 35% of the value of its total assets may be
invested in preferred stocks. In addition, a portion of the Short/Intermediate
Fund may, from time to time, be invested in income participation loans and
participation certificates in pools of mortgages issued or guaranteed by the
U.S. government or its agencies or instrumentalities. Some of the securities in
which the Short/Intermediate Fund invests may have warrants or options attached.
Under current market conditions, the Short/Intermediate Fund expects to
maintain a dollar-weighted average portfolio maturity of two to five years. For
purposes of calculating such average maturity, the maturity of each instrument
will be its ultimate maturity date, unless it is probable the issuer will take
advantage of a maturity-shortening device such as a call, refunding or
redemption provision, in which case the probable date of use of such device will
be used.
The Fixed Income Fund and the Short/Intermediate Fund each also expect to invest
in bonds, notes and debentures of a wide range of U.S. corporate issuers. Such
obligations, in the case of debentures, will represent unsecured promises to
pay, and in the case of notes and bonds, may be secured by mortgages on real
property or security interests in personal property and will in most cases
differ in their interest rates, maturities and times of issuance.
The Fixed Income Fund and the Short/Intermediate Fund will invest only in
corporate debt securities which are rated at the time of purchase within the
four highest rating groups for corporate debt securities assigned by one or more
appropriate NRSROs or, if unrated, which the Adviser deems present attractive
opportunities and are of comparable quality. For a description of the ratings of
the NRSROs, see the Appendix to the Statement of Additional Information. For a
discussion of debt securities rated within the fourth highest rating group
assigned by the NRSROs, see "OTHER INVESTMENT POLICIES AND RISKS - Securities
Ratings" herein.
The Fixed Income Fund and the Short/Intermediate Fund may each also invest in
short-term obligations (with maturities of 12 months or less) consisting of
domestic and foreign commercial paper (including variable amount master demand
notes), bankers' acceptances, certificates of deposit and time deposits of
domestic and foreign branches of U.S. banks and foreign banks, and repurchase
agreements. The Fixed Income Fund and the Short/Intermediate Fund may also each
invest in securities of investment companies holding themselves out as "money
market" funds, subject to the limitations described more fully below.
The Fixed Income Fund and the Short/Intermediate Fund may each invest in
obligations of the Export-Import Bank of the United States, in U.S. dollar-
denominated international bonds for which the primary trading market is in the
United States ("Yankee Bonds"), or for which the primary trading market is
abroad ("Eurodollar Bonds"), and in Canadian Bonds and bonds issued by
institutions organized for a specific purpose, such as the World Bank and the
European Economic Community, by two or more sovereign governments
("Supranational Agency Bonds").
Such Funds may invest in mortgage-related securities issued or guaranteed by the
U.S. government or its agencies or instrumentalities or by nongovernmental
entities which are rated, at the time of purchase, within the four highest bond
rating categories assigned by one or more appropriate NRSROs, or, if unrated,
which the Adviser deems are of comparable quality. Under normal market
conditions, a Fund's investment in mortgage-related securities will not exceed
25% of the value of its total assets. Such mortgage-related securities have
mortgage obligations backing such securities, including among others,
conventional thirty year fixed rate mortgage obligations, graduated payment
mortgage obligations, fifteen year mortgage obligations and adjustable rate
mortgage obligations. All of these mortgage obligations can be used to create
pass-through securities. A pass-through security is created when mortgage
obligations are pooled together and undivided interests in the pool or pools are
sold. The cash flow from the mortgage obligations is passed through to the
holders of the securities in the form of periodic payments of interest,
principal and prepayments (net of a service fee). Prepayments occur when the
holder of an individual mortgage obligation prepays the remaining principal
before the mortgage obligation's scheduled maturity date. As a result of the
pass-through of prepayments of principal on the underlying securities, mortgage-
backed securities are often subject to more rapid prepayment of principal than
their stated maturity would indicate. Because the prepayment characteristics of
the underlying mortgage obligations vary, it is not possible to predict
accurately the realized yield or average life of a particular issue of pass-
through certificates. Prepayment rates are important because of their effect on
the yield and price of the securities. Accelerated prepayments have an adverse
impact on yields for pass-throughs purchased at a premium (i.e., a price in
excess of principal amount) and may involve additional risk of loss of principal
because the premium may not have been fully amortized at the time the obligation
is repaid. The opposite is true for pass-throughs purchased at a discount. The
Fixed Income Fund and the Short/Intermediate Fund may each purchase mortgage-
related securities at a premium or a discount. Reinvestment of principal
payments may occur at higher or lower rates than the original yield on such
securities. Due to the prepayment feature and the need to reinvest payments and
prepayments of principal at current rates, mortgage-related securities can be
less effective than typical bonds of similar maturities at maintaining yields
during periods of declining interest rates. Like other fixed income securities,
when interest rates rise the value of a mortgage-related security generally will
decline; however, when rates decline the value of a mortgage-related security
with prepayment features may not increase as much as that of other fixed income
securities, as such securities may be prone to prepayment, which decreases their
life. Accordingly, such securities may be more volatile than other fixed income
securities.
Also included among the mortgage-related securities that such Funds may purchase
are collateralized mortgage obligations ("CMOs") and real estate mortgage
investment conduits ("REMICs"). CMOs may be collateralized by whole mortgage
loans but are more typically collateralized by portfolios of mortgage pass-
through securities guaranteed by the Government National Mortgage Association,
the Federal Home Loan Mortgage Corporation or the Federal National Mortgage
Association, and their income streams. Certain CMOs and REMICs are issued by
private issuers. Such securities may be eligible for purchase by the Fixed
Income Fund and the Short/Intermediate Fund if: (1) the issuer has obtained an
exemptive order from the Commission regarding purchases by investment companies
of equity interests of other investment companies, or (2) such purchase is
within the limitations imposed by Section 12 of the Investment Company Act of
1940, as amended (the "1940 Act").
The Fixed Income Fund and the Short/Intermediate Fund may also invest in
corporate fixed income securities (including bonds, debentures and notes) and
asset-backed securities such as Certificates of Automobile Receivables
("CARs") and Certificates of Amortized Revolving Debts ("CARDs"), each of
which must be rated at the time of purchase within the four highest rating
groups assigned by one or more appropriate NRSROs. For a description of the
fourth highest rating group, see "OTHER INVESTMENT POLICIES AND RISKS -
Securities Ratings" below.
Certain debt securities such as, but not limited to, mortgage-backed securities,
CMOs, asset-backed securities and securitized loan receivables, as well as
securities subject to prepayment of principal prior to the stated maturity date,
are expected to be repaid prior to their stated maturity dates. As a result, the
effective maturity of these securities is expected to be shorter than the stated
maturity. For purposes of compliance with stated maturity policies and
calculation of the Fixed Income Fund's and the Short/Intermediate Fund's
weighted average maturity, the effective maturity of such securities will be
used.
An increase in interest rates will generally reduce the value of the investments
in the Fixed Income Fund and the Short/Intermediate Fund, and a decline in
interest rates will generally increase the value of those investments. Depending
upon the prevailing market conditions, the Adviser may purchase debt securities
at a discount from face value, which produces a yield greater than the coupon
rate. Conversely, if debt securities are purchased at a premium over face value,
the yield will be lower than the coupon rate. In making investment decisions,
the Adviser will consider many factors other than current yield, including the
preservation of capital, maturity and yield to maturity.
THE MONEY MARKET FUND
The Money Market Fund invests exclusively in United States dollar-denominated
instruments which the Directors of the Company and the Adviser determine present
minimal credit risks and which at the time of acquisition are rated by one or
more appropriate NRSROs in one of the two highest rating categories for short-
term debt obligations or, if not rated, are determined to be of comparable
quality to those instruments so rated. The Fund will not invest more than 5% of
its assets in securities rated in the second highest category. All securities or
instruments in which the Money Market Fund invests have remaining maturities of
397 calendar days or less. The dollar-weighted average maturity of the
securities in the Money Market Fund will not exceed 90 days.
The Money Market Fund may invest in a variety of U.S. Treasury obligations,
differing in their interest rates, maturities, and times of issuance, and other
obligations which are issued or guaranteed by the U.S. government or its
agencies or instrumentalities and which are backed by the full faith and credit
of the U.S. government.
Obligations of the U.S. Treasury include "stripped" U.S. Treasury obligations
such as Treasury Receipts, representing either future interest or principal
payments. Stripped securities are issued at a discount to their "face value"
and may exhibit greater price volatility than ordinary debt securities because
of the manner in which their principal and interest are returned to investors.
Obligations of the agencies and instrumentalities of the U.S. government which
are backed by the full faith and credit of the U.S. government include those of
the Government National Mortgage Association and of the Export-Import Bank of
the United States. See the discussion of U.S. government securities above under
"INVESTMENT OBJECTIVES AND POLICIES - The Fixed Income Fund and the
Short/Intermediate Fund."
OTHER INVESTMENT POLICIES AND RISKS
The Funds may also invest in securities described in the following paragraphs to
the extent indicated.
U.S. GOVERNMENT SECURITIES - The Funds may each invest in a variety of U.S.
Treasury obligations, differing in their interest rates, maturities, and times
of issuance, and other obligations issued or guaranteed by the U.S. government
or its agencies or instrumentalities. Obligations of the U.S. Treasury include
"stripped" U.S. Treasury obligations such as Treasury Receipts, representing
either future interest or principal payments. Stripped securities are issued at
a discount to their "face value" and may exhibit greater price volatility than
ordinary debt securities because of the manner in which their principal and
interest are returned to investors. Stripped U.S. Treasury obligations will
include: (1) coupons that have been stripped from U.S. Treasury bonds, which may
be held through the Federal Reserve Bank's book-entry system called "Separate
Trading of Registered Interest and Principal of Securities" ("STRIPS") or
through a program entitled "Coupon Under Book-Entry Safekeeping" ("CUBES"),
or (2) U.S. Treasury securities that are stripped by investment banks and sold
under proprietary names. Securities stripped by investment banks may not be as
liquid as STRIPS and CUBES and are not viewed by the staff of the Securities and
Exchange Commission ("Commission") as U.S. government securities for purposes
of the 1940 Act.
Obligations of certain agencies and instrumentalities of the U.S. government,
such as the Government National Mortgage Association, are supported by the full
faith and credit of the U.S. Treasury; others, such as those of the Federal
National Mortgage Association, are supported by the right of the issuer to
borrow from the Treasury; others, such as those of the Student Loan Marketing
Association and the Federal Home Loan Banks, are supported by the discretionary
authority of the U.S. government to purchase the agency's obligations; still
others, such as those of the Federal Farm Credit Banks or the Federal Home Loan
Mortgage Corporation, are supported only by the credit of the instrumentality.
No assurance can be given that the U.S. government would provide financial
support to U.S. government-sponsored agencies or instrumentalities if it is not
obligated to do so by law. The Fixed Income Fund, Short/Intermediate Fund and
Balanced Fund will invest in the obligations of such agencies or
instrumentalities only when the Adviser believes that the credit risk with
respect thereto is minimal.
REPURCHASE AGREEMENTS - Securities held by each of the Funds may be subject to
repurchase agreements. Under the terms of a repurchase agreement, a Fund would
acquire securities in exchange for cash from member banks of the Federal Deposit
Insurance Corporation and/or from registered broker-dealers which the Adviser
deems creditworthy under guidelines approved by the Company's Board of
Directors. The seller agrees to repurchase such securities at a mutually agreed-
upon date and price. The repurchase price generally equals the price paid by a
Fund plus interest negotiated on the basis of current short-term rates, which
may be more or less than the rate on the underlying portfolio securities.
Securities subject to repurchase agreements must be of the same type and quality
as those in which a Fund may invest directly. The seller under a repurchase
agreement will be required to maintain at all times the value of collateral held
pursuant to the agreement at not less than the repurchase price (including
accrued interest) plus the transaction costs, including loss of interest, that
such Fund reasonably could expect to incur if the seller defaults. This
requirement will be continually monitored by the Adviser. If the seller were to
default on its repurchase obligation or become insolvent, that Fund would suffer
a loss if the proceeds from a sale of the underlying portfolio securities were
less than the repurchase price under the agreement, or the disposition of such
securities by such Fund were delayed pending court action. Repurchase agreements
are considered to be loans by an investment company under the 1940 Act. For
further information about repurchase agreements, see "INVESTMENT OBJECTIVES AND
POLICIES - Additional Information on Portfolio Instruments-Repurchase
Agreements" in the Statement of Additional Information.
REVERSE REPURCHASE AGREEMENTS - Each of the Funds may borrow funds for temporary
purposes by entering into reverse repurchase agreements in accordance with the
investment restrictions described below. Pursuant to such agreements, a Fund
would sell certain of its securities to financial institutions such as banks and
broker-dealers, and agree to repurchase them at a mutually agreed-upon date and
price. The Funds intend to enter into reverse repurchase agreements only to
avoid otherwise selling securities during unfavorable market conditions to meet
redemptions. At the time a Fund enters into a reverse repurchase agreement, it
will place in a segregated custodial account assets such as U.S. government
securities or other liquid securities consistent with such Fund's investment
restrictions having a value equal to the repurchase price (including accrued
interest), and will continually monitor the account to ensure that such
equivalent value is maintained at all times. Reverse repurchase agreements
involve the risk that the market value of the securities sold by a Fund may
decline below the price at which such Fund is obligated to repurchase the
securities and that the buyer may default on its obligation to sell such
securities back to the Fund. Reverse repurchase agreements are considered
borrowings by an investment company under the 1940 Act. For further information
about reverse repurchase agreements, see "INVESTMENT OBJECTIVES AND POLICIES -
Additional Information on Portfolio Instruments-Reverse Repurchase Agreements"
in the Statement of Additional Information.
Except as otherwise disclosed to the Shareholders of a Fund, the Company will
not execute portfolio transactions through, acquire portfolio securities issued
by, make savings deposits in, or enter into repurchase or reverse repurchase
agreements with the Adviser, the Administrator, or their affiliates, and will
not give preference to the Adviser's correspondents with respect to such
transactions, securities, savings deposits, repurchase agreements and reverse
repurchase agreements.
FOREIGN SECURITIES - Consistent with the foregoing investment policies, each of
the Funds (excluding the Money Market Fund) may invest up to 10% of its assets
in foreign securities, either directly or through the purchase of sponsored and
unsponsored American Depository Receipts ("ADRs"). Unsponsored ADRs may be
less liquid than sponsored ADRs, and there may be less information available
regarding the underlying foreign issuer for unsponsored ADRs. Investment in
foreign securities is subject to special investment risks that differ in some
respects from those related to investments in securities of U.S. domestic
issuers. Such risks include trade balances and imbalances, and related economic
policies, future adverse political, economic and social developments, the
possible imposition of withholding taxes on interest and dividend income,
possible seizure, nationalization, or expropriation of foreign investments or
deposits, currency blockage, less stringent disclosure requirements, the
possible establishment of exchange controls or taxation at the source, or the
adoption of other foreign governmental restrictions. In addition, foreign
branches of U.S. banks, foreign banks and foreign issuers may be subject to less
stringent reserve requirements and to different accounting, auditing, reporting,
and recordkeeping standards than those applicable to domestic branches of U.S.
banks and U.S. domestic issuers, and securities markets in foreign countries may
be structured differently from and may not be as liquid as the U.S. markets.
Where purchases of foreign securities are made in foreign currencies, a Fund may
incur currency conversion costs and may be affected favorably or unfavorably by
changes in the value of foreign currencies against the U.S. dollar.
WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS - Each Fund may purchase
securities on a when-issued or delayed- delivery basis. These transactions are
arrangements in which a Fund purchases securities with payment and delivery
scheduled for a future time. A Fund will engage in when-issued and delayed-
delivery transactions only for the purpose of acquiring portfolio securities
consistent with and in furtherance of its investment objective and policies, not
for investment leverage, although such transactions represent a form of
leveraging. When-issued securities are securities purchased for delivery beyond
the normal settlement date at a stated price and yield and thereby involve a
risk that the yield obtained in the transaction will be less than that available
in the market when delivery takes place. A Fund will generally not pay for such
securities or start earning interest on them until they are received on the
settlement date. When a Fund agrees to purchase such securities, however, the
Custodian will set aside cash or liquid securities equal to the amount of the
commitment in a separate account. Securities purchased on a when-issued basis
are recorded as an asset and are subject to changes in the value based upon
changes in the general level of interest rates. In when-issued and delayed-
delivery transactions, a Fund relies on the seller to complete the transaction;
the seller's failure to do so may cause such Fund to miss a price or yield
considered to be advantageous. Each Fund's commitments to purchase when-issued
securities will not exceed 25% of the value of its total assets absent unusual
market conditions.
SECURITIES RATINGS - As described above, certain Funds may invest in debt
securities within the fourth highest rating group assigned by one or more
appropriate NRSROs and comparable unrated securities. Although investment grade,
these types of debt securities are considered by Moody's and S&P to have some
speculative characteristics, and are more vulnerable to changes in economic
conditions, higher interest rates or adverse issuer-specific developments which
are more likely to lead to a weaker capacity to make principal and interest
payments than comparable higher rated debt securities.
Should subsequent events cause the rating of a debt security purchased by one of
the Funds to fall below the fourth highest rating category, as the case may be,
the Adviser will consider such an event in determining whether that Fund should
continue to hold that security. The Adviser expects that it would not retain
more than 5% of the assets of any Fund in such downgraded securities. In no
event, however, would that Fund be required to liquidate any such portfolio
security where the Fund would suffer a loss on the sale of such security.
OTHER - In order to generate additional income, each Fund (excluding the Money
Market Fund) may, from time to time, lend its portfolio securities to broker-
dealers, banks, or institutional borrowers of securities. A Fund must receive
100% collateral in the form of cash or U.S. government securities. This
collateral will be valued daily by the Adviser. Should the market value of the
loaned securities increase, the borrower must furnish additional collateral to
that Fund. During the time portfolio securities are on loan, the borrower pays
that Fund any dividends or interest received on such securities. Loans are
subject to termination by such Fund or the borrower at any time. While a Fund
does not have the right to vote securities on loan, each Fund intends to
terminate the loan and regain the right to vote if that is considered important
with respect to the investment. In the event the borrower would default in its
obligations, such Fund bears the risk of delay in recovery of the portfolio
securities and the loss of rights in the collateral. A Fund will enter into loan
agreements only with broker-dealers, banks, or other institutions that the
Adviser has determined are creditworthy under guidelines established by the
Company's Board of Directors.
Consistent with each Fund's investment objective and policies the Small Cap
Value, Equity, Balanced, Fixed Income and the Short/Intermediate Funds each may
also invest up to 10% of the value of its total assets in the securities of
other investment companies, so long as the aggregate value of the shares
acquired from any one such investment company will not exceed 5% of the total
assets of such Fund. A Fund will incur additional expenses due to the
duplication of expenses as a result of investing in mutual funds. In order to
avoid the imposition of additional fees as a result of investing in shares of
the Money Market Fund, the Adviser, the Administrator and their affiliates will
reduce their fees charged to a Fund by an amount equal to the fees charged by
such service providers based on a percentage of that Fund's assets attributable
to such Fund's investment in the Money Market Fund. Additional restrictions on
the Funds' investments in the securities of other mutual funds are contained in
the Statement of Additional Information.
INVESTMENT RESTRICTIONS
- -----------------------
Each Fund is subject to a number of investment restrictions that may be changed
only by a vote of a majority of the outstanding Shares of that Fund (see
"GENERAL INFORMATION - Miscellaneous").
Each of the Funds will not:
1. Purchase securities of any one issuer, other than obligations issued or
guaranteed by the U.S. government or its agencies or instrumentalities, if,
immediately after such purchase: (a) more than 5% of the value of such
Fund's total assets would be invested in such issuer, or (b) such Fund
would hold more than 10% of the outstanding voting securities of such
issuer, except that up to 25% of the value of a Fund's total assets may be
invested without regard to such limitations. There is no limit to the
percentage of assets that may be invested in U.S. Treasury bills, notes, or
other obligations issued or guaranteed by the U.S. government or its
agencies or instrumentalities.
2. Purchase any securities which would cause more than 25% of the value of a
Fund's total assets at the time of purchase to be invested in securities of
one or more issuers conducting their principal business activities in the
same industry, provided that: (a) there is no limitation with respect to
obligations issued or guaranteed by the U.S. government or its agencies or
instrumentalities, and repurchase agreements secured by obligations of the
U.S. government or its agencies or instrumentalities; (b) wholly owned
finance companies will be considered to be in the industries of their
parents if their activities are primarily related to financing the
activities of their parents; and (c) utilities will be divided according to
their services. For example, gas, gas transmission, electric and gas,
electric, and telephone will each be considered a separate industry.
3. Borrow money or issue senior securities, except that each Fund may borrow
from banks or enter into reverse repurchase agreements for temporary
purposes in amounts up to 10% of the value of its total assets at the time
of such borrowing; or mortgage, pledge or hypothecate any assets, except in
connection with any such borrowing and in amounts not in excess of the
lesser of the dollar amounts borrowed or 10% of the value of such Fund's
total assets at the time of its borrowing. A Fund will not purchase
securities while its borrowings (including reverse repurchase agreements)
exceed 5% of its total assets.
4. Make loans, except that each Fund may purchase or hold debt instruments and
lend portfolio securities in accordance with its investment objective and
policies, and may enter into repurchase agreements.
The following additional investment restriction may be changed without the vote
of a majority of the outstanding Shares of a Fund. Each Fund may not purchase or
otherwise acquire any securities if, as a result, more than 5% of that Fund's
net assets would be invested in securities that are illiquid.
In addition to the above investment restrictions, each Fund is subject to
certain other investment restrictions set forth under "INVESTMENT OBJECTIVES
AND POLICIES - Investment Restrictions" in the Funds' Statement of Additional
Information.
Irrespective of fundamental investment restriction number 1 above, and pursuant
to Rule 2a-7 under the 1940 Act, the Money Market Fund will, with respect to
100% of its total assets, limit its investment in the securities of any one
issuer in the manner provided by such Rule, which limitations are referred to
above under the caption "INVESTMENT OBJECTIVES AND POLICIES - In General."
VALUATION OF SHARES
- -------------------
The net asset value of each Fund is determined and its Shares are priced as of
4:00 p.m. Eastern Time (except the Money Market Fund, which is priced at 2:00
p.m. Eastern Time) (the "Valuation Time") on each Business Day. A "Business
Day" of a Fund is a day on which the New York Stock Exchange is open for
trading and any other day (other than a day on which no Shares of such Fund are
tendered for redemption and no order to purchase Shares is received) during
which there is sufficient trading in that Fund's portfolio instruments that its
net asset value per Share might be materially affected. The New York Stock
Exchange will not be open in observation of the following holidays: New Year's
Day, Martin Luther King, Jr. Day, President's Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. Net asset value
per Share for purposes of pricing purchases and redemptions is calculated by
dividing the value of all securities and other assets belonging to a Fund, less
the liabilities charged to that Fund, by the number of that Fund's outstanding
Shares. The net asset value per share of the Small Cap Value Fund, the Equity
Fund, the Balanced Fund, the Fixed Income Fund and the Short/Intermediate Fund
will fluctuate as the value of the investment portfolio of a Fund changes.
The assets in the Money Market Fund are valued based upon the amortized cost
method which the Directors of the Company believe fairly reflects the market-
based net asset value per Share. Pursuant to the rules and regulations of the
Commission regarding the use of the amortized cost method, the Money Market Fund
will maintain a dollar- weighted average portfolio maturity of 90 days or less.
Although the Company seeks to maintain the Money Market Fund's net asset value
per Share at $1.00, there can be no assurance that net asset value will not
vary.
The securities of each other Fund will be valued at market value. If market
quotations are not available, securities will be valued by a method which the
Board of Directors believes accurately reflects a fair value. For further
information about valuation of investments, see "NET ASSET VALUE" in the
Statement of Additional Information.
HOW TO PURCHASE AND REDEEM SHARES
- ---------------------------------
DISTRIBUTOR - Sunstone Distribution Services, LLC serves as the distributor of
the Shares of each Fund. The principal office of the Distributor is 207 East
Buffalo Street, Suite 400, Milwaukee, Wisconsin 53202-5712. If you wish to
purchase Shares, telephone the Company at 1-800-OMAHA-03.
PURCHASE OF SHARES - For the convenience of investors, there are a number of
ways to purchase Shares of the Funds. Shares may be purchased directly by
investors. Investors may purchase Shares of the Funds directly from the Funds by
completing and signing a Purchase Application and mailing it, together with a
check (or other negotiable bank draft or money order) in at least the minimum
initial purchase amount, payable to the appropriate Fund, to: First Omaha Funds,
Inc., P.O. Box 419022, Kansas City, Missouri 64141-6022. Subsequent purchases of
Shares of that Fund may be made at any time by mailing a check (or other
negotiable bank draft or money order) payable to the appropriate Fund, to the
above address.
If a Purchase Application has been previously received by the Company, investors
may also purchase Shares by wiring funds to the Funds' Custodian. Prior to
wiring any such funds and in order to ensure that wire orders are invested
promptly, investors must call the Company at 1-800-OMAHA-03 to obtain
instructions regarding the bank account number into which the funds should be
wired and other pertinent information.
Customers of First National Bank of Omaha or its correspondent or affiliated
banks (collectively, the "Banks") may purchase shares in connection with the
requirements of their qualified accounts maintained at the Banks. In the case of
the Money Market Fund, these procedures may include instructions under which a
customer's account is "swept" automatically no less frequently than weekly and
amounts in excess of a minimum amount agreed upon by the Bank and the customer
are invested in Shares of the Money Market Fund.
Shares of the Funds purchased through the Banks acting in a fiduciary, advisory,
custodial, or other similar capacity on behalf of customers will normally be
held of record by the Banks. With respect to Shares of the Funds so sold, it is
the responsibility of the particular Bank to transmit purchase or redemption
orders to the Company and to deliver federal funds for purchase on a timely
basis. Beneficial ownership of Shares will be recorded by the Banks and
reflected in the account statements provided by the Banks to customers. A Bank
will exercise voting authority for those Shares for which it is granted
authority by the customer.
Shares of the Funds may also be purchased through certain accounts maintained at
certain other institutions (such as a broker, dealer or other institution) in
accordance with the procedures of the institution. To determine whether you may
purchase shares through your institution, contact your institution directly or
call the Funds at 1-800-OMAHA-03.
The Banks and other institutions may impose particular customer account
requirements in connection with investments in the Funds, such as minimum
account size or minimum account thresholds above which excess cash balances may
be invested in Fund Shares. In addition, depending on the terms of the
particular account used to purchase Shares of the Funds, the Banks or other
institutions may impose charges against the account. These charges could include
asset allocation fees, account maintenance fees, sweep fees, compensatory
balance requirements, transaction charges or other charges based upon account
transactions, assets or income. The charges will reduce the net return on an
investment in a Fund. Investors should contact their institutions with respect
to these fees and the particular institution's procedures for purchasing or
redeeming shares. This Prospectus should be read in conjunction with any such
information received from the Banks or the institutions.
Shares of each of the Funds are purchased at the net asset value per Share (see
"VALUATION OF SHARES") next determined after receipt by the Company of an
order to purchase Shares. Purchase of Shares of a Fund will be effected only on
a Business Day (as defined in "VALUATION OF SHARES") of that Fund. An order
received prior to the Valuation Time on any Business Day will be executed at the
net asset value determined as of the Valuation Time on the date of receipt. An
order received after the Valuation Time of any Business Day will be executed at
the net asset value determined as of the Valuation Time on the next Business Day
of that Fund.
MINIMUM INVESTMENT - Except as otherwise discussed below under "Auto Invest
Plan," the minimum investment is $500 for the initial purchase of Shares of
each Fund and $50 for subsequent purchases. The subsequent purchase minimum may
be waived if purchases are made in connection with an Individual Retirement
Account ("IRA") and both the initial and subsequent minimum investments may be
waived if purchases are made in connection with a payroll deduction plan.
MISCELLANEOUS - The Funds reserve the right to reject any order for the
purchase of their Shares in whole or in part. Transactions as a result of the
automatic reinvestment of dividends and capital gains distributions, as well as
the Funds' Auto Invest Plan and Auto Withdrawal Plan transactions, will be
confirmed quarterly on the quarterly statements rather than after each
transaction. Shareholders wishing to confirm these transactions before the end
of the calendar quarter may do so by calling the Funds at 1-800-OMAHA-03 after
the date of the transaction. Dividends are reinvested monthly - generally during
the last week of each month. Auto Invest Plan and Auto Withdrawal Plan
transactions occur in accordance with the Shareholder's instructions when
establishing these plans. Every Shareholder will receive a confirmation of each
new transaction in his or her account, which will also show the total number of
Shares owned by the Shareholder and the number of Shares being held in
safekeeping by the Transfer Agent for the account of the Shareholder. These
confirmations will include all account activity during the current year. Reports
of transactions by Banks or other institutions on behalf of their customers will
be sent by the Banks or other institutions to their customers. Shareholders may
rely on these statements in lieu of certificates. Certificates representing
Shares will not be issued.
AUTO INVEST PLAN - The Company's Auto Invest Plan enables Shareholders to make
regular monthly or quarterly purchases of Shares of a Fund through automatic
deduction from their bank accounts, provided that the Shareholder's bank is a
member of the Federal Reserve and the Automated Clearing House (ACH) system.
With Shareholder authorization the Transfer Agent will deduct the amount
specified (subject to the applicable minimums) from the Shareholder's bank
account which proceeds will automatically be invested in Shares of the
designated Fund at the public offering price on the date of such deduction. The
required minimum initial investment when opening an account using the Auto
Invest Plan is $100; the minimum amount for subsequent investments is $50. To
participate in the Auto Invest Plan, Shareholders should complete the
appropriate section of the Purchase Application which can be acquired by calling
the Company at 1-800-OMAHA-03. For a Shareholder to change his or her Auto
Invest Plan instructions, the request must be made in writing to the Company at:
P.O. Box 419022, Kansas City, Missouri 64141-6022.
EXCHANGE PRIVILEGE - Shares of a Fund may be exchanged without payment of any
fees for Shares of each of the other First Omaha Funds at respective net asset
values, provided the amount to be exchanged meets the applicable minimum
investment requirements and the exchange is made in states where it is legally
authorized. An exchange is considered a sale of Shares and will result in a
capital gain or loss for federal income tax purposes.
A Shareholder wishing to exchange his or her Shares may do so by contacting the
Company at 1-800-OMAHA-03 or by providing written instructions to the Company.
Any Shareholder who wishes to make an exchange should review information in the
Company's current Prospectus regarding the First Omaha Fund in which he or she
wishes to invest before making the exchange. For a discussion of risks
associated with unauthorized telephone exchanges, see "REDEMPTION BY
TELEPHONE" below.
The Company reserves the right to modify or terminate the expanded exchange
privilege upon 60 days written notice to each Shareholder prior to the
modification or termination taking effect. If Shares are purchased through a
Bank or other institution, the Shares may be exchanged only in accordance with
the instructions and procedures pertaining to that account.
REDEMPTION OF SHARES - The procedures for redeeming Shares differ depending on
whether the Shares were purchased directly from the Funds or through Banks or
other institutions. When Shares are purchased directly from the Funds, the
Shares may be redeemed by any of the methods described below. If Shares were
purchased through an account at a Bank or other institution, the Shares must be
redeemed in accordance with the instructions and procedures pertaining to that
account. For example, if a customer has agreed with a Bank to maintain a minimum
balance in his or her account with the Bank, and the balance in that account
falls below that minimum, the customer may be obliged to redeem, or the Bank may
redeem on behalf of the customer, all or part of the customer's Shares of a Fund
to the extent necessary to maintain the required minimum balance. The minimum
balance required by any such Bank or other institution may be higher than the
minimum required by the Company.
REDEMPTION BY MAIL - A written request for redemption must be received by the
Transfer Agent in order to honor the request. The Transfer Agent's address is:
First Omaha Funds, Inc., P.O. Box 419022, Kansas City, Missouri 64141-6022. The
Transfer Agent will require a signature guarantee by an eligible guarantor
institution. The signature guarantee requirement will be waived if the following
conditions apply: (1) the redemption check is payable to the Shareholder(s) of
record, and (2) the redemption check is mailed to the Shareholder(s) at the
address of record or mailed or wired to a commercial bank account previously
designated on the Purchase Application. There is no charge for having redemption
proceeds mailed to a designated bank account. To change the address to which a
redemption check is to be mailed, a written request therefor must be received by
the Transfer Agent. In connection with such request, the Transfer Agent will
require a signature guarantee by an eligible guarantor institution. For purposes
of this policy, the term "eligible guarantor institution" shall include banks,
brokers, dealers, credit unions, securities exchanges and associations, clearing
agencies and savings associations as those terms are defined in the Securities
Act of 1934. The Transfer Agent reserves the right to reject any signature
guarantee if: (1) it has reason to believe that the signature is not genuine,
(2) it has reason to believe that the transaction would otherwise be improper,
or (3) the guarantor institution is a broker or dealer that is neither a member
of a clearing corporation nor maintains net capital of at least $100,000.
REDEMPTION BY TELEPHONE - If a Shareholder has so designated on the Purchase
Application, a Shareholder may request the redemption of Shares by telephone and
have the payment of redemption requests sent through ACH to a federally insured
depository account previously designated by the Shareholder on the Purchase
Application or mailed directly to the Shareholder at the Shareholder's address
as recorded by the Transfer Agent. If a shareholder has payment sent through
ACH, please allow 24 to 48 hours for available funds. There is currently no
charge for having payment of redemption requests mailed or sent through ACH to a
designated bank account. Such ACH redemption requests may be made by the
Shareholder by telephone to the Company. For telephone redemptions, call the
Company at 1-800-OMAHA-03. Neither the Funds nor their service providers will be
liable for any loss, damages, expense or cost arising out of any telephone
redemption effected in accordance with the Funds' telephone redemption
procedures, acting upon instructions reasonably believed to be genuine. Each
Fund will employ procedures designed to provide reasonable assurance that
instructions by telephone are genuine; if these procedures are not followed,
such Fund or its service providers may be liable for any losses due to
unauthorized or fraudulent instructions. These procedures include recording all
telephone conversations, sending confirmations to Shareholders within 72 hours
of the telephone transaction, verification of account name and account number or
taxpayer identification number, and sending redemption proceeds only to the
address of record or to a previously authorized bank account. If, due to
temporary adverse conditions, investors are unable to effect telephone
transactions, Shareholders may also mail the redemption request to the Transfer
Agent at the address listed above under "HOW TO PURCHASE AND REDEEM SHARES-
Redemption by Mail."
AUTO WITHDRAWAL PLAN - The Auto Withdrawal Plan enables Shareholders of each of
the Funds to make regular monthly or quarterly redemptions of Shares. With
Shareholder authorization, the Transfer Agent will automatically redeem Shares
at the net asset value on the dates of the withdrawal and have a check in the
amount specified mailed to the Shareholder. The required minimum withdrawal is
$100. To participate in the Auto Withdrawal Plan, Shareholders should call 1-
800-OMAHA-03 for more information. Purchases of additional Shares concurrent
with withdrawals may be disadvantageous to certain Shareholders because of tax
liabilities. For a Shareholder to change his or her Auto Withdrawal Plan
instructions, the request must be made in writing to the Company.
PAYMENTS TO SHAREHOLDERS - Redemption orders are effected at the net asset value
per Share next determined after the Shares are properly tendered for redemption,
as described above. Payment to Shareholders for Shares redeemed will be made
within seven days after receipt by the Transfer Agent of the request for
redemption. However, to the greatest extent possible, a Fund will attempt to
honor requests from Shareholders for next day payments upon redemption of Shares
if the request for redemption is received by the Transfer Agent before 4:00 p.m.
(2:00 p.m. for the Money Market Fund) Eastern Time, on a Business Day or, if the
request for redemption is received after 4:00 p.m. (2:00 p.m. for the Money
Market Fund) Eastern Time, to honor requests for payment on the second Business
Day, unless it would be disadvantageous to that Fund or the Shareholders of that
Fund to sell or liquidate portfolio securities in an amount sufficient to
satisfy requests for payments in that manner.
The Company may be requested to redeem Shares for which it has not yet received
good payment. In such circumstances, the Company may delay the forwarding of
proceeds for up to 15 days until payment has been collected for the purchase of
such Shares. The Company intends to pay cash for all Shares redeemed, but under
abnormal conditions which make payment in cash unwise, the Company may make
payment wholly or partly in portfolio securities at their then market value
equal to the redemption price, which portfolio securities may or may not be
liquid. In such cases, an investor may incur brokerage costs in converting such
securities to cash.
Due to the relatively high cost of handling small investments, each Fund
reserves the right to redeem, at net asset value, the Shares of that Fund of any
Shareholder if, because of redemptions of Shares by or on behalf of the
Shareholder (but not as a result of a decrease in the market prices of such
Shares or the establishment of an account with less than $500 using the Auto
Invest Plan or pursuant to a payroll deduction plan), the account of such
Shareholder has a value of less than $500. Accordingly, an investor purchasing
Shares of a Fund in only the minimum investment amount may be subject to such
involuntary redemption if he or she thereafter redeems some of his or her
Shares. Before a Fund exercises its right to redeem such Shares and to send the
proceeds to the Shareholder, the Shareholder will be given notice that the value
of the Shares in his or her account is less than the minimum amount and will be
allowed 60 days to make an additional investment in an amount which will
increase the value of the account to at least $500.
See "ADDITIONAL PURCHASE AND REDEMPTION INFORMATION" in the Statement of
Additional Information for examples of when the Company may suspend the right of
redemption in light of the Company's responsibilities under the 1940 Act.
DIVIDENDS AND TAXES
- -------------------
DIVIDENDS - The net investment income of each Fund (except the Money Market
Fund) is declared monthly as a dividend to Shareholders. Such dividends are
generally declared at the close of business on the day of declaration and paid
monthly. The Money Market Fund declares income dividends daily. Shares of the
Money Market Fund purchased prior to 2:00 p.m. Eastern Time will accrue interest
on the date of purchase. Such dividends are paid monthly. Distributable net
realized capital gains are distributed at least annually. A Shareholder of a
Fund will automatically receive all distributions in additional full and
fractional Shares of that Fund at the net asset value as of the date of payment
unless the Shareholder elects to receive such dividends in cash. Such election,
or any revocation thereof, must be made in writing to the appropriate Fund,
addressed to: First Omaha Funds, Inc., P.O. Box 419022, Kansas City, Missouri
64141-6022, and will become effective with respect to dividends having record
dates after its receipt by the Transfer Agent. Dividends are paid in cash not
later than seven Business Days after a Shareholder's complete redemption of the
Shares in a Fund.
FEDERAL TAXES - Each of the Funds of the Company is treated as a separate entity
for federal income tax purposes and each intends to qualify as a "regulated
investment company" under the Internal Revenue Code of 1986, as amended (the
"Code"), for so long as such qualification is in the best interest of such
Fund's Shareholders. Qualification as a regulated investment company under the
Code requires, among other things, that the regulated investment company
distribute to its Shareholders at least 90% of its investment company taxable
income. Each Fund contemplates declaring as dividends 100% of that Fund's
investment company taxable income (before deduction of dividends paid). Because
all of the Money Market Fund's net investment income is expected to be derived
from earned interest and short-term capital gains, it is anticipated that no
part of any distribution will be eligible for the dividends-received deduction
for corporations. The Money Market Fund does not expect to realize any long-term
capital gains and, therefore, does not foresee paying any "capital gains
dividends" as described in the Code.
In order to avoid the imposition of an excise tax, each Fund is required to
distribute annually, prior to calendar year end, 98% of taxable ordinary income
on a calendar year basis, 98% of capital gain net income realized in the 12
months preceding October 31, and the balance of undistributed taxable ordinary
income and capital gain net income from the prior calendar year. If
distributions during the calendar year are less than the required amounts, that
Fund would be subject to a nondeductible 4% excise tax on the deficiency.
A Shareholder receiving a distribution of ordinary income and/or an excess of
short-term capital gain over net long-term capital loss would treat it as a
receipt of ordinary income even if paid in additional Shares and not in cash.
Shareholders not subject to federal income tax on their income will not,
however, be required to pay federal income tax on any amounts distributed to
them. The dividends-received deduction for corporations will apply to the
aggregate of such ordinary income distributions in the same proportion as the
aggregate dividends, if any, qualifying for the dividends-received deduction
received by a Fund bear to its gross income.
Distribution by a Fund of the excess of net long-term capital gain over net
short-term capital loss is taxable to Shareholders as long-term capital gain in
the year in which it is received, regardless of how long the Shareholder has
held shares. Such distributions are not eligible for the dividends-received
deduction.
If the net asset value of a Share is reduced below the Shareholder's cost of
that Share by the distribution of income or gain realized on the sale of
securities, the distribution is a return of invested principal, although taxable
as described above.
Prior to purchasing Shares, the impact of dividends or capital gains
distributions which are expected to be declared or have been declared, but have
not been paid, should be carefully considered. Any such dividends or capital
gains distributions paid shortly after a purchase of Shares prior to the record
date will have the effect of reducing the per share net asset value of the
Shares by the amount of the dividends or distributions. All or a portion of such
dividends or distributions, although in effect a return of capital, is subject
to tax.
STATE TAXES - Even though a substantial portion of distributions of net income
by the Money Market Fund to its Shareholders, and lesser amounts of
distributions to other Fund Shareholders, will be attributable to interest on
U.S. Treasury obligations, which may be exempt from state or local tax if
received directly by a Shareholder, Shareholders of a Fund may be subject to
state and local taxes with respect to their ownership of Shares or their receipt
of distributions from such Fund. In addition, to the extent Shareholders receive
distributions of income attributable to investments in repurchase agreements by
a Fund, such distribution may also be subject to state or local taxes.
The foregoing is intended only as a brief summary of some of the important tax
considerations generally affecting each Fund and its Shareholders. Potential
investors in each Fund are urged to consult their tax advisers concerning the
application of federal, state and local taxes as such laws and regulations
affect their own tax situation.
Shareholders will be advised at least annually as to the income tax consequences
of distributions made to them during the year.
MANAGEMENT OF THE COMPANY
- -------------------------
DIRECTORS OF THE COMPANY - Overall responsibility for management of the Company
rests with the Board of Directors, who are elected by the Shareholders of the
Company's Funds. The Company will be managed by the Directors in accordance with
the laws of Nebraska governing corporations. The Directors, in turn, elect the
officers of the Company to supervise the day-to-day operations.
The Directors receive fees and are reimbursed for their expenses in connection
with each meeting of the Board of Directors they attend. The officers of the
Company receive no compensation directly from the Company for performing the
duties of their offices.
INVESTMENT ADVISER - First National Bank of Omaha, One First National Center,
Omaha, Nebraska 68102-1596, is the investment adviser of each of the Funds. The
Adviser is a subsidiary of First National of Nebraska, a Nebraska corporation,
with total assets of approximately $6.9 billion as of December 31, 1996. The
Adviser provides a full range of financial and trust services to businesses,
individuals, and government entities and has been providing quality trust and
investment management service for over 65 years. The Adviser serves Nebraska, as
well as other areas of the Midwest. In addition, as of December 31, 1996, the
Adviser's Trust Division had approximately $7.5 billion of assets under
administration, including approximately $2.9 billion under management.
Subject to the general supervision of the Company's Board of Directors and in
accordance with the Funds' investment objectives and restrictions, the Adviser
manages the investments of each Fund, makes decisions with respect to and places
orders for, all purchases and sales of each Fund's portfolio securities, and
maintains each Fund's records relating to such purchases and sales. All
investment decisions for each Fund are made by an investment committee, and no
person is primarily responsible for making recommendations to that committee.
For the services provided and expenses assumed pursuant to its investment
advisory agreement with the Company, the Adviser receives a fee from the Small
Cap Value Fund, the Equity Fund, the Balanced Fund, the Fixed Income Fund, the
Short/Intermediate Fund and the Money Market Fund, computed daily and paid
monthly, equal to the lesser of: (1) a fee at the annual rate of eighty-five
one-hundredths of one percent (.85%), seventy-five one-hundredths of one percent
(.75%), seventy-five one-hundredths of one percent (.75%), sixty one-hundredths
of one percent (.60%), fifty one-hundredths of one percent (.50%), and twenty-
five one-hundredths of one percent (.25%), respectively, of that Fund's average
daily net assets, or (2) such other fee as may be agreed upon in writing from
time to time by the Company and the Adviser. Investment advisory fees of
seventy-five one-hundredths of one percent (.75%) and higher are higher than
similar fees charged by most other mutual funds. The Adviser may periodically
voluntarily waive all or a portion of its advisory fee with respect to a Fund.
These waivers may be terminated at any time at the Adviser's discretion. The
Adviser may not seek reimbursement of such voluntarily reduced fees at a later
date. The reduction of such fee will cause the yield and total return of that
Fund to be higher than it would be in the absence of such reduction.
ADMINISTRATOR AND DISTRIBUTOR - Sunstone Financial Group, Inc., 207 East Buffalo
Street, Suite 400, Milwaukee, Wisconsin 53202-5712, acts as administrator for
each of the Funds. Richard Snyder and Randy Pavlick are officers of the Company
and officers and/or employees of the Administrator. As compensation for its
administrative services (which include clerical, compliance, regulatory, fund
accounting and other services) and the assumption of related expenses, the
Administrator is entitled to a fee, computed daily and payable monthly, at an
annual rate of twenty one-hundredths of one percent (.20%) of each Fund's
average net assets subject to a minimum fee of $300,000 for the Equity, Fixed
Income, Short/Intermediate and Money Market Funds in the aggregate and to a
minimum fee of $50,000 for each of the Small Cap Value and Balanced Funds. The
Administrator may periodically voluntarily waive 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, an affiliate of the Administrator, 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 described below.
EXPENSES - The Adviser and the Administrator each bear all expenses in
connection with the performance of their services as investment adviser and
administrator, respectively, other than the cost of securities (including
brokerage commissions, and issue and transfer taxes, if any) purchased for a
Fund. Each Fund will bear the following expenses relating to its operations:
organizational expenses; taxes; interest; any brokerage fees and commissions;
fees and expenses of the Directors of the Company; Commission fees; state
securities qualification fees; costs of preparing and printing Prospectuses for
regulatory purposes and for distribution to its current Shareholders; outside
auditing and legal expenses; advisory and administration fees; fees and out-of-
pocket expenses of the Administrator, Custodian and Transfer Agent; costs for
independent pricing service; certain insurance premiums; costs of maintenance of
the Company's existence; costs of Shareholders' and Directors' reports and
meetings; distribution expenses incurred pursuant to the Distribution and
Service Plan described below; and any extraordinary expenses incurred in a
Fund's operation.
DISTRIBUTION PLAN - Pursuant to Rule 12b-l under the 1940 Act, the Company has
adopted a Distribution and Service Plan (the "Plan"), under which each Fund is
authorized to pay a periodic amount representing distribution expenses
calculated at an annual rate not to exceed twenty-five one-hundredths of one
percent (.25%) of the average daily net assets of that Fund. Such amount may be
used to pay banks (including the Adviser), broker-dealers and other institutions
(a "Participating Organization") for distribution and/or shareholder service
assistance pursuant to an agreement between the Distributor or the Funds and the
Participating Organization. Under the Plan, a Participating Organization may
include the Distributor, its subsidiaries and its affiliates.
ADMINISTRATIVE SERVICES PLAN - The Company has adopted an Administrative
Services Plan (the "Services Plan") pursuant to which each Fund is authorized
to pay compensation to banks and other financial institutions, which may include
the Adviser, its correspondent and affiliated banks, and the Administrator and
its affiliates (each a "Service Organization"), which agree to provide certain
ministerial, record keeping and/or administrative support services for their
customers or account holders (collectively, "customers") who are the
beneficial or record owner of Shares of that Fund. In consideration for such
services, a Service Organization receives a fee from a Fund, computed daily and
paid monthly at an annual rate of up to twenty-five one-hundredths of one
percent (.25%) of the average daily net asset value of Shares of that Fund owned
beneficially or of record by such Service Organization's customers for whom the
Service Organization provides such services.
The servicing agreements adopted under the Services Plan (the "Servicing
Agreements") require the Service Organizations receiving such compensation to
perform certain ministerial, record keeping and/or administrative support
services with respect to the beneficial or record owners of Shares of the Funds,
such as processing dividend and distribution payments from the Funds on behalf
of customers, providing periodic statements to customers showing their positions
in the Shares of the Funds, providing sub-accounting with respect to Shares
beneficially owned by such customers and providing customers with a service that
invests the assets of their accounts in Shares of the Funds pursuant to specific
or pre-authorized instructions.
As authorized by the Services Plan, the Company has entered into a Servicing
Agreement with the Adviser pursuant to which the Adviser has agreed to provide
certain administrative support services in connection with Shares of the Funds
owned of record or beneficially by its customers. Such administrative support
services may include, but are not limited to: (1) processing dividend and
distribution payments from a Fund on behalf of customers; (2) providing periodic
statements to its customers showing their positions in the Shares; (3) arranging
for bank wires; (4) responding to routine customer inquiries relating to
services performed by the Adviser; (5) providing sub-accounting with respect to
the Shares beneficially owned by the Adviser's customers or the information
necessary for sub-accounting; (6) if required by law, forwarding shareholder
communications from a Fund (such as proxies, shareholder reports, annual and
semi-annual financial statements and dividend, distribution and tax notices) to
its customers; (7) aggregating and processing purchase, exchange and redemption
requests from customers and placing net purchase, exchange and redemption orders
for customers; and (8) providing customers with a service that invests the
assets of their account in the Shares pursuant to specific or pre-authorized
instructions. In consideration of such services, the Company, on behalf of each
of the Funds, except the Money Market Fund, may pay the Adviser a monthly fee,
computed at the annual rate of ten one-hundredths of one percent (.10%) of the
average aggregate net asset value of Shares of that Fund held during the period
by customers for whom the Adviser has provided services under the Servicing
Agreement. The Adviser may periodically voluntarily reduce all or a portion of
its administrative services fee with respect to a Fund. The reduction of such
fee will cause the yield and total return of that Fund to be higher than they
would be in the absence of such reduction.
BANKING LAWS - The Adviser believes that it possesses the legal authority to
perform the services for each Fund contemplated by the Plan adopted by the
Company, its Investment Advisory Agreement and its Custodian Agreement with the
Company and administrative support services contemplated by the Servicing
Agreement with the Company, as described in this Prospectus, without violation
of applicable banking laws and regulations, and has so represented in its
Investment Advisory Agreement, its Servicing Agreement and its Custodian
Agreement with the Company. Future changes in federal or state statutes and
regulations relating to permissible activities of banks or bank holding
companies and their subsidiaries and affiliates as well as further judicial or
administrative decisions or interpretations of present and future statutes and
regulations could change the manner in which the Adviser could continue to
perform such services for the Funds. It is not anticipated, however, that any
change in the Company's method of operations would affect its net asset value
per Share or result in financial losses to any Shareholder. See "MANAGEMENT OF
THE COMPANY - Glass-Steagall Act" in the Statement of Additional Information
for further discussion of applicable law and regulations.
GENERAL INFORMATION
- -------------------
DESCRIPTION OF THE COMPANY AND ITS SHARES - The Company was organized as a
Nebraska corporation on October 12, 1994. The Company and its Equity Fund, Fixed
Income Fund, Short/Intermediate Fund and Money Market Fund were organized to
acquire the assets and continue the business of the corresponding substantially
identical investment portfolios of The Sessions Group, an Ohio business trust.
References herein to the "immediate predecessor" of a Fund refer to the
investment portfolio of The Sessions Group which corresponds to such Fund. On
April 10, 1995 the Company acquired approximately $326.0 million of assets from
The Sessions Group in return for an equivalent dollar amount of Shares of the
Company. The Small Cap Value Fund was added and became effective on March 29,
1996. The Balanced Fund became effective on July 29, 1996. Each Share of a Fund
represents an equal proportionate interest in that Fund with other Shares of the
same Fund, and is entitled to such dividends and distributions out of the income
earned on the assets belonging to that Fund as are declared at the discretion of
the Directors (see "Miscellaneous" below).
The Articles of Incorporation of the Company permit the Company, by resolution
of its Board of Directors, to create new series of common shares relating to new
investment portfolios or to subdivide existing series of Shares into subseries
or classes. Classes could be utilized to create differing expense and fee
structures for investors in the same Fund. Differences could exist, for example,
in the sales load, Rule 12b-1 fees or service plan fees applicable to different
classes of Shares offered by a particular Fund. Such an arrangement could enable
the Company to tailor its marketing efforts to a broader segment of the
investing public with a goal of attracting additional investments in the Funds.
While the Board of Directors of the Company has not created any such subseries
or classes, it could do so in the future without Shareholder approval. However,
any such creation of classes would require compliance with regulations the
Commission has adopted under the 1940 Act.
Shareholders are entitled to one vote for each Share owned and a proportionate
fractional vote for any fraction of a Share owned, and will vote in the
aggregate and not by series or Fund except as otherwise expressly required by
law. For example, Shareholders of each of the Funds will vote in the aggregate
with other Shareholders of the Company with respect to the election of Directors
and ratification of the selection of independent accountants. However,
Shareholders of each of the Funds will vote as a series, and not in the
aggregate with other Shareholders of the Company, for purposes of approval of
such Fund's Investment Advisory Agreement and the Plan. In connection with any
election of Directors, Shareholders are entitled to cumulate their votes by
casting the number of votes equal to the number of directorships being filled
multiplied by the number of Shares held, and to cast all of such votes for one
candidate or to distribute them among several candidates as the Shareholder sees
fit.
The Adviser will possess, in a fiduciary capacity on behalf of its underlying
accounts, voting or investment power with respect to a substantial majority of
the outstanding Shares of each of the Funds and therefore, will be presumed to
control each of the Funds within the meaning of the 1940 Act.
Overall responsibility for the management of each of the Funds is vested in the
Board of Directors of the Company. See "MANAGEMENT OF THE COMPANY - Directors
and Officers." Individual Directors are elected by the Shareholders of the
Company and may be removed by the Board of Directors or Shareholders of the
Company in accordance with the provisions of the Articles of Incorporation and
Bylaws of the Company and Nebraska law. See "ADDITIONAL INFORMATION -
Miscellaneous" in the Statement of Additional Information for further
information.
An annual or special meeting of Shareholders to conduct necessary business is
not required by the Articles of Incorporation, the 1940 Act or other authority
except, under certain circumstances, to elect Directors, amend the Articles of
Incorporation, the Investment Advisory Agreement, the Plan or a Fund's
fundamental policies and to satisfy certain other requirements. To the extent
that such a meeting is not required, the Company may elect not to have an annual
or special meeting. However, the Company has undertaken to hold a meeting of
Shareholders to consider the removal of any Director if requested by the holders
of at least 10% of the Company's outstanding Shares.
CUSTODIAN - First National Bank of Omaha (the "Custodian") serves as custodian
for each of the Funds. Pursuant to the Custodian Agreement with the Company, the
Custodian receives compensation from each of the Funds for such services in an
amount equal to a fee, computed daily and paid monthly, at the annual rate of
three one-hundredths of one percent (.03%) of each Fund's average daily net
assets. The Custodian may periodically waive all or a portion of its custody
fees with respect to a Fund. These waivers may be terminated at any time at the
Custodian's discretion.
TRANSFER AGENCY SERVICES - First National Bank of Omaha (the "Transfer Agent")
serves as the Funds' transfer agent pursuant to a Transfer Agency Agreement with
the Company. Pursuant to such Agreement, the Transfer Agent, among other things,
provides, or agrees to cause others to provide, the following services in
connection with each Fund's Shareholders of record: maintenance of shareholder
records for each of the Fund's Shareholders of record; processing shareholder
purchase and redemption orders; processing transfers and exchanges of Shares of
each Fund on the shareholder files and records; processing dividend payments and
reinvestments; and assistance in the mailing of shareholder reports and proxy
solicitation materials. For such services the Transfer Agent receives a fee from
the Funds based on the number of Shareholders of record, subject to certain
minimum amounts from each Fund.
DST Systems, Inc., 210 W. 10th Street, Kansas City, Missouri 64105-1614, serves
as sub-transfer agent for the Funds pursuant to a Sub-Transfer Agency Agreement
with First National Bank of Omaha. DST Systems, Inc. performs the principal
services as transfer agent for the Funds under such Agreement and receives a fee
from First National Bank of Omaha for such services.
MISCELLANEOUS - Shareholders will receive unaudited semi-annual reports and
annual reports audited by independent public accountants.
As used in this Prospectus and in the Statement of Additional Information,
"assets belonging to a Fund" means the consideration received by a Fund upon
the issuance or sale of Shares in that Fund, together with all income, earnings,
profits, and proceeds derived from the investment thereof, including any
proceeds from the sale, exchange, or liquidation of such investments, and any
funds or amounts derived from any reinvestment of such proceeds, and any general
assets of the Company not readily identified as belonging to a particular Fund
that are allocated to such Fund by the Company's Board of Directors. The Board
of Directors may allocate such general assets in any manner it deems fair and
equitable. Determinations by the Board of Directors of the Company as to the
timing of the allocation of general liabilities and expenses and as to the
timing and allocable portion of any general assets with respect to the Funds are
conclusive.
As used in this Prospectus and in the Statement of Additional Information, a
"vote of a majority of the outstanding Shares" of a Fund means the affirmative
vote, at a meeting of Shareholders duly called, of the lesser of: (1) 67% or
more of the votes of Shareholders of a Fund present at a meeting at which the
holders of more than 50% of the votes attributable to Shareholders of record of
such Fund are represented in person or by proxy, or (2) the holders of more than
50% of the outstanding Shares of a Fund.
ADDITIONAL PERFORMANCE INFORMATION
- ----------------------------------
The following is performance information for each of the Funds. Each of the
Equity, Fixed Income, Short/Intermediate and Money Market Funds acquired all of
the net assets of a predecessor mutual fund on April 9, 1995. Each respective
predecessor mutual fund commenced operations on December 13, 1992, except that
the Money Market Fund's predecessor commenced operations on December 4, 1991.
AVERAGE ANNUAL TOTAL RETURNS OF THE FUNDS
FOR THE PERIODS ENDED MARCH 31, 1997
SINCE
ONE YEAR THREE YEARS FIVE YEARS COMMENCEMENT
Small Cap Value Fund N/A N/A N/A 7.30%<F1>
Equity Fund 14.99% 18.37%<F2> N/A 14.53%<F2>
Balanced Fund N/A N/A N/A 6.14%<F3>
Fixed Income Fund 3.06% 5.61%<F2> N/A 5.88%<F2>
Short/Intermediate Fund 4.00% 5.14%<F2> N/A 4.88%<F2>
Money Market Fund 4.76% 4.74%<F4> 3.94%<F4> 3.95%<F4>
<F1> Total return since June 10, 1996 (commencement of operations).
<F2> The predecessor mutual fund commenced operations on December 13, 1992.
<F3> Total return since August 6, 1996 (commencement of operations).
<F4> The predecessor mutual fund commenced operations on December 4, 1991.
The predecessors to the Equity, Fixed Income and Short/Intermediate Funds were
successors to common trust funds. The following table describes the performance
of these funds and includes the performance of the respective predecessor and
common trust funds. The common trust funds were managed by the Adviser who
manages the respective Funds, and the Adviser has represented that the Funds are
managed in a manner that is in all material respects equivalent to the
management of the common trust funds. However, the following information should
not be viewed as an indication of the future performance of the Funds. The
tables below include information regarding the common trust funds' operations
for periods before the Funds' registration statement became effective, as
adjusted to reflect the higher expenses borne by the Funds. The common trust
funds were not registered under the 1940 Act and therefore were not subject to
certain investment restrictions that are imposed by that Act. If the common
trust funds had been registered, their performance might have been adversely
affected.
AVERAGE ANNUAL TOTAL RETURNS OF THE FUNDS AND RESPECTIVE COMMON TRUST FUNDS
FOR THE PERIODS ENDED MARCH 31, 1997
SINCE
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS COMMENCEMENT
Equity Fund 14.99% 18.37% 14.05%<F1> 12.08%<F1> 15.43%<F1>
Fixed Income Fund 3.06% 5.61% 6.63%<F1> 7.31%<F1> 8.69%<F1>
Short/Intermediate
Fund 4.00% 5.14% 5.24%<F2> N/A 6.92%<F2>
<F1> The predecessor common trust fund commenced operations on January 31, 1975.
<F2> The predecessor common trust fund commenced operations on January 1, 1991.
<TABLE>
TOTAL RETURNS FOR THE YEARS ENDED MARCH 31,
<CAPTION>
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equity Fund<F1> 14.99% 22.16% 18.07% 3.20% 12.76% 14.47% 10.06% 16.69% 12.86% (2.27)%
Fixed Income Fund<F1> 3.06% 10.54% 3.40% 2.89% 13.74% 10.10% 11.69% 11.23% 3.84% 3.40%
Short/Intermediate Fund<F2> 4.00% 7.78% 3.69% 2.14% 8.75% 8.57% 8.38%<F3> - - -
<FN>
<F1> Results include performance of common trust fund which has been adjusted to reflect the Fund's operating expenses.
<F2> Results include performance of common trust fund which has been adjusted to reflect the Fund's operating expenses. The common
trust fund commenced operations on January 1, 1991.
<F3> Total return from January 1, 1991 through March 31, 1991 (not annualized)
</TABLE>
Performance quotations of a Fund represent its past performance and should not
be considered as representative of future results. The investment return and
principal value of an investment in a Fund will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
INVESTMENT ADVISER AND CUSTODIAN
First National Bank of Omaha
Attention: Trust Division
One First National Center
Omaha, Nebraska 68102-1596
ADMINISTRATOR
Sunstone Financial Group, Inc.
207 E. Buffalo Street, Suite 400
Milwaukee, Wisconsin 53202-5712
DISTRIBUTOR
Sunstone Distribution Services, LLC
207 E. Buffalo Street, Suite 400
Milwaukee, Wisconsin 53202-5712
LEGAL COUNSEL
Cline, Williams, Wright, Johnson & Oldfather
One Pacific Place
1125 S. 103rd Street, Suite 720
Omaha, Nebraska 68124-1071
AUDITORS
KPMG Peat Marwick LLP
Two Central Park Plaza, Suite 1501
Omaha, Nebraska 68102-1636
For more INFORMATION
call 1-800-OMAHA-03
or write to:
First Omaha Funds
P.O. Box 419022
Kansas City, Missouri 64141-6022
First Omaha Small Cap Value Fund
First Omaha Equity Fund
First Omaha Balanced Fund
First Omaha Fixed Income Fund
First Omaha Short/Intermediate Fixed Income Fund
First Omaha U.S. Government Obligations Fund
Each an Investment Portfolio of
FIRST OMAHA FUNDS, INC.
Statement of Additional Information
July 22, 1997
This Statement of Additional Information is not a Prospectus, but should be read
in conjunction with the Prospectus (the "Prospectus") of First Omaha Small Cap
Value Fund (the "Small Cap Value Fund"), First Omaha Equity Fund (the "Equity
Fund"), First Omaha Balanced Fund (the "Balanced Fund"), First Omaha Fixed
Income Fund (the "Fixed Income Fund"), First Omaha Short/Intermediate Fixed
Income Fund (the "Short/Intermediate Fund"), and First Omaha U.S. Government
Obligations Fund (the "Money Market Fund"), (the Small Cap Value Fund, the
Equity Fund, the Balanced Fund, the Fixed Income Fund, the Short/Intermediate
Fund and the Money Market Fund, hereinafter collectively referred to as the
"Funds" and singly, a "Fund") dated as of the date hereof. The Funds are each
separate investment portfolios of First Omaha Funds, Inc. (the "Company"). This
Statement of Additional Information is incorporated in its entirety into the
Prospectus. Copies of the Prospectus may be obtained by writing the Company,
P.O. Box 419022, Kansas City, Missouri, 64141-6022, or by telephoning toll free
(800) OMAHA-03.
TABLE OF CONTENTS
Page
THE COMPANY B- 3
INVESTMENT OBJECTIVES AND POLICIES B- 3
Additional Information on Portfolio Instruments B- 3
Investment Restrictions B-12
Portfolio Turnover B-14
NET ASSET VALUE B-14
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION B-15
MANAGEMENT OF THE COMPANY B-16
Directors and Officers B-16
Investment Adviser B-18
Portfolio Transactions B-20
Glass-Steagall Act B-21
Administrator/Fund Accountant B-22
Expenses B-24
Distributor B-24
Administrative Services Plan B-25
Custodian B-26
Transfer Agency Services B-27
Auditors B-28
Legal Counsel B-28
ADDITIONAL INFORMATION B-28
Organization and Capital Structure B-28
Shareholder Meetings B-28
Ownership of Shares B-29
Vote of a Majority of the Outstanding Shares B-29
Additional Tax Information B-30
Yield of the Money Market Fund B-30
Yield of the Fixed Income Fund
and the Short/Intermediate Fund B-31
Calculation of Total Return B-32
Distribution Rates B-32
Performance Comparisons B-32
Miscellaneous B-33
Financial Statements B-33
FINANCIAL STATEMENTS
APPENDIX A-1
STATEMENT OF ADDITIONAL INFORMATION
THE COMPANY
First Omaha Funds, Inc. (the "Company") is an open-end management
investment company which currently offers six diversified investment portfolios:
First Omaha Small Cap Value Fund (the "Small Cap Value Fund"), First Omaha
Equity Fund (the "Equity Fund"), First Omaha Balanced Fund (the "Balanced
Fund"), First Omaha Fixed Income Fund (the "Fixed Income Fund"), First Omaha
Short/Intermediate Fixed Income Fund (the "Short/Intermediate Fund"), and First
Omaha U.S. Government Obligations Fund (the "Money Market Fund"), (the Small Cap
Value Fund, the Equity Fund, the Balanced Fund, the Fixed Income Fund, the
Short/Intermediate Fund and the Money Market Fund, hereinafter collectively
referred to as the "Funds" and singly, a "Fund").
Much of the information contained in this Statement of Additional
Information expands upon subjects discussed in the Prospectus of the Funds.
Capitalized terms not defined herein are defined in the Prospectus. No
investment in Shares of a Fund should be made without first reading such Fund's
Prospectus.
INVESTMENT OBJECTIVES AND POLICIES
Additional Information on Portfolio Instruments
The following policies supplement the investment objective and policies of
each Fund as set forth in the Prospectus for such Fund.
Bank Obligations. Each of the Small Cap Value Fund, the Equity Fund, the
Balanced Fund, the Fixed Income Fund and the Short/Intermediate Fund may invest
in bank obligations such as bankers' acceptances, certificates of deposit, and
demand and time deposits.
Bankers' acceptances are negotiable drafts or bills of exchange typically
drawn by an importer or exporter to pay for specific merchandise, which are
"accepted" by a bank, meaning, in effect, that the bank unconditionally agrees
to pay the face value of the instrument on maturity. Bankers' acceptances
invested in by the Funds will be those guaranteed by domestic and foreign banks
having, at the time of investment, capital, surplus, and undivided profits in
excess of $100,000,000 (as of the date of their most recently published
financial statements).
Certificates of deposit are negotiable certificates issued against funds
deposited in a commercial bank or a savings and loan association for a definite
period of time and earning a specified return. Certificates of deposit and
demand and time deposits will be those of domestic and foreign banks and savings
and loan associations, if (a) at the time of investment the depository
institution has capital, surplus, and undivided profits in excess of
$100,000,000 (as of the date of its most recently published financial
statements), or (b) the principal amount of the instrument is insured in full by
the Federal Deposit Insurance Corporation.
The Small Cap Value Fund, the Equity Fund, the Balanced Fund, the Fixed
Income Fund and the Short/Intermediate Fund may also invest in Eurodollar
Certificates of Deposit, which are U.S. dollar denominated certificates of
deposit issued by offices of foreign and domestic banks located outside the
United States; Yankee Certificates of Deposit, which are certificates of deposit
issued by a U.S. branch of a foreign bank denominated in U.S. dollars and held
in the United States; Eurodollar Time Deposits ("ETDs"), which are U.S. dollar
denominated deposits in a foreign branch of a U. S. bank or a foreign bank; and
Canadian Time Deposits, which are basically the same as ETDs except they are
issued by Canadian offices of major Canadian banks.
Commercial Paper. Commercial paper consists of unsecured promissory notes
issued by corporations. Except as noted below with respect to variable amount
master demand notes, issues of commercial paper normally have maturities of less
than nine months and fixed rates of return.
The Small Cap Value Fund, the Equity Fund, the Balanced Fund, the Fixed
Income Fund and the Short/Intermediate Fund may invest in commercial paper which
must be rated by an NRSRO in one of the top three categories. In general,
investment in lower-rated instruments is more risky than investment in
instruments in higher-rated categories. The Small Cap Value Fund, the Equity
Fund, the Balanced Fund, the Fixed Income Fund and the Short/Intermediate Fund
may also invest in Canadian commercial paper, which is commercial paper issued
by a Canadian corporation or a Canadian counterpart of a U.S. corporation, and
in Europaper, which is U.S. dollar denominated commercial paper of a foreign
issuer.
Variable Amount Master Demand Notes. Variable amount master demand notes,
in which the Small Cap Value Fund, the Equity Fund, the Balanced Fund, the Fixed
Income Fund and the Short/Intermediate Fund may invest, are unsecured demand
notes that permit the indebtedness thereunder to vary and provide for periodic
adjustments in the interest rate according to the terms of the instrument.
Because master demand notes are direct lending arrangements between a Fund and
the issuer, they are not normally traded. Although there is no secondary market
in the notes, a Fund may demand payment of principal and accrued interest at any
time. The Adviser will consider the earning power, cash flow, and other
liquidity ratios of the issuers of such notes and will continuously monitor
their financial status and ability to meet payment on demand. In determining
average weighted portfolio maturity, a variable amount master demand note will
be deemed to have a maturity equal to the longer of the period of time remaining
until the next interest rate adjustment or the period of time remaining until
the principal amount can be recovered from the issuer through demand. Neither
Fund will invest more than 5% of its assets in such securities.
Foreign Investment. Investments in securities issued by foreign branches
of U.S. banks, foreign banks, or other foreign issuers, including ADRs and
securities purchased on foreign securities exchanges, may subject the Funds to
investment risks that differ in some respects from those related to investment
in obligations of U.S. domestic issuers or in U.S. securities markets. Such
risks include future adverse political and economic developments, possible
seizure, nationalization, or expropriation of foreign investments, less
stringent disclosure requirements, the possible establishment of exchange
controls or taxation at the source, or the adoption of other foreign
governmental restrictions. The Equity Fund, the Short/Intermediate Fund and the
Fixed Income Fund will acquire such securities only when the Adviser believes
the risks associated with such investments are minimal.
U.S. Government Obligations. Each of the Funds may invest in obligations
issued or guaranteed by the U.S. government or its agencies or
instrumentalities, including bills, notes and bonds issued by the U.S. Treasury.
The Money Market Fund may also invest in "stripped" U.S. Treasury obligations
such as Treasury Receipts issued by the U.S. Treasury representing either future
interest or principal payments. Stripped securities are issued at a discount to
their "face value" and may exhibit greater price volatility than ordinary debt
securities because of the manner in which their principal and interest are
returned to investors.
Obligations of certain agencies and instrumentalities of the U.S.
government are supported by the full faith and credit of the U.S. government,
such as those of the Government National Mortgage Association and the
Export-Import Bank of the United States; others are supported by the right of
the issuer to borrow from the Treasury; others are supported by the
discretionary authority of the U.S. government to purchase the agency's
obligations; and still others are supported only by the credit of the
instrumentality. No assurance can be given that the U.S. government would
provide financial support to U.S. government-sponsored agencies or
instrumentalities if it is not obligated to do so by law.
When-Issued Securities. As discussed in the Prospectus of the Funds, each
such Fund may purchase securities on a "when-issued" basis (i.e., for delivery
beyond the normal settlement date at a stated price and yield). When a Fund
agrees to purchase securities on a "when-issued" basis, the Custodian will set
aside cash or liquid portfolio securities equal to the amount of the commitment
in a separate account. Normally, the Custodian will set aside portfolio
securities to satisfy the purchase commitment, and in such a case, such Fund may
be required subsequently to place additional assets in the separate account in
order to assure that the value of the account remains equal to the amount of a
Fund's commitment. It may be expected that a Fund's net assets will fluctuate
to a greater degree when it sets aside portfolio securities to cover such
purchase commitments than when it sets aside cash. In addition, because a Fund
will set aside cash or liquid portfolio securities to satisfy its purchase
commitments in the manner described above, a Fund's liquidity and the ability of
the Adviser to manage it might be affected in the event its commitments to
purchase "when-issued" securities ever exceeded 25% of the value of its assets.
When a Fund engages in "when-issued" transactions, it relies on the seller
to consummate the trade. Failure of the seller to do so may result in a Fund
incurring a loss or missing the opportunity to obtain a price considered to be
advantageous. Each of the Funds will engage in "when-issued" delivery
transactions only for the purpose of acquiring portfolio securities consistent
with the Fund's investment objectives and policies and not for investment
leverage.
Mortgage-Related Securities. The Balanced Fund, the Short/Intermediate
Fund and the Fixed Income Fund may, consistent with their respective investment
objective and policies, invest in mortgage-related securities issued or
guaranteed by the U.S. government or its agencies or instrumentalities.
Mortgage-related securities, for purposes of such Funds' Prospectus and
this Statement of Additional Information, represent pools of mortgage loans
assembled for sale to investors by various governmental agencies such as the
Government National Mortgage Association and government-related organizations
such as the Federal National Mortgage Association and the Federal Home Loan
Mortgage Corporation, as well as by non-governmental issuers such as commercial
banks, savings and loan institutions, mortgage bankers and private mortgage
insurance companies. Although certain mortgage-related securities are
guaranteed by a third party or otherwise similarly secured, the market value of
the security, which may fluctuate, is not so secured. If a Fund purchases a
mortgage-related security at a premium, that portion may be lost if there is a
decline in the market value of the security whether resulting from changes in
interest rates or prepayments in the underlying mortgage collateral. As with
other interest-bearing securities, the prices of such securities are inversely
affected by changes in interest rates. However, though the value of a
mortgage-related security may decline when interest rates rise, the converse is
not necessarily true, since in periods of declining interest rates the mortgages
underlying the securities are prone to prepayment, thereby shortening the
average life of the security and shortening the period of time over which income
at the higher rate is received. Conversely, when interest rates are rising, the
rate of prepayment tends to decrease, thereby lengthening the average life of
the security and lengthening the period of time over which income at the lower
rate is received. For these and other reasons, a mortgage-related security's
average maturity may be shortened or lengthened as a result of interest rate
fluctuations and, therefore, it is not possible to predict accurately the
security's return to the Balanced Fund, the Fixed Income Fund and the
Short/Intermediate Fund. In addition, regular payments received in respect of
mortgage-related securities include both interest and principal. No assurance
can be given as to the return the Funds will receive when these amounts are
reinvested.
The Balanced Fund, the Fixed Income Fund and the Short/Intermediate Fund
may also invest in mortgage-related securities which are collateralized mortgage
obligations structured on pools of mortgage pass-through certificates or
mortgage loans. Mortgage-related securities will be purchased only if rated in
the four highest bond rating categories assigned by one or more appropriate
NRSROs, or, if unrated, which the Adviser deems to present attractive
opportunities and are of comparable quality.
There are a number of important differences among the agencies and
instrumentalities of the U.S. government that issue mortgage-related securities
and among the securities that they issue. Mortgage-related securities issued by
the Government National Mortgage Association ("GNMA") include GNMA Mortgage
Pass-Through Certificates (also known as "Ginnie Maes") which are guaranteed as
to the timely payment of principal and interest by GNMA and such guarantee is
backed by the full faith and credit of the U.S. government. GNMA is a
wholly-owned U.S. government corporation within the Department of Housing and
Urban Development. GNMA certificates also are supported by the authority of
GNMA to borrow funds from the U.S. Treasury to make payments under its
guarantee. Mortgage-related securities issued by the Federal National Mortgage
Association ("FNMA") include FNMA Guaranteed Mortgage Pass-Through Certificates
(also known as "Fannie Maes") which are solely the obligations of the FNMA and
are not backed by or entitled to the full faith and credit of the U.S.
government. The FNMA is a government-sponsored organization owned entirely by
private stockholders. Fannie Maes are guaranteed as to timely payment of the
principal and interest by FNMA. Mortgage-related securities issued by the
Federal Home Loan Mortgage Corporation ("FHLMC") include FHLMC Mortgage
Participation Certificates (also known as "Freddie Macs" or "PCS"). The FHLMC is
a corporate instrumentality of the U.S. government, created pursuant to an Act
of Congress, which is owned entirely by Federal Home Loan Banks. Freddie Macs
are not guaranteed by the U.S. government or by any Federal Home Loan Banks and
do not constitute a debt or obligation of the U.S. government or of any Federal
Home Loan Bank. Freddie Macs entitle the holder to timely payment of interest,
which is guaranteed by the FHLMC. The FHLMC guarantees either ultimate
collection or timely payment of all principal payments on the underlying
mortgage loans. When the FHLMC does not guarantee timely payment of principal,
FHLMC may remit the amount due on account of its guarantee of ultimate payment
of principal at any time after default on an underlying mortgage, but in no
event later than one year after it becomes payable.
Other Asset-Backed Securities. The Balanced Fund, the Fixed Income Fund
and the Short/Intermediate Fund may also invest in interests in pools of
receivables, such as motor vehicle installment purchase obligations (known as
Certificates of Automobile Receivables or CARs) and credit card receivables
(known as Certificates of Amortizing Revolving Debts or CARDs). Such securities
are generally issued as pass-through certificates, which represent undivided
fractional ownership interests in the underlying pools of assets. Such
securities may also be debt instruments which are also known as collateralized
obligations and are generally issued as the debt of a special purpose entity
organized solely for the purpose of owning such assets and issuing such debt.
Such securities are not issued or guaranteed by the U.S. government or its
agencies or instrumentalities; however, the payment of principal and interest on
such obligations may be guaranteed up to certain amounts and for a certain time
period by a letter of credit issued by a financial institution (such as a bank
or insurance company) unaffiliated with the issuers of such securities. Non-
mortgage-backed securities will be purchased by the Balanced Fund, the Fixed
Income Fund or the Short/Intermediate Fund only when rated in one of the four
highest rating categories for such securities by one or more appropriate NRSROs
at the time of purchase. In addition, such securities generally will have
remaining estimated lives at the time of purchase of seven years or less.
The development of these asset-backed securities is at an early state
compared to mortgage-backed securities. While the market for asset-backed
securities is becoming increasingly liquid, the market for mortgage-backed
securities issued by certain private organizations and non-mortgage-backed
securities is not as well developed. The Adviser will limit purchases of
asset-backed securities to securities that are deemed to be readily marketable
by the Adviser at the time of purchase.
Asset-backed securities held by the Balanced Fund, Fixed Income Fund or the
Short/Intermediate Fund arise through the grouping by governmental,
government-related and private organizations of loans, receivables and other
assets originated by various lenders. Interests in pools of these assets differ
from other forms of debt securities, which normally provide for periodic payment
of interest in fixed amounts with principal paid at maturity or specified call
dates. Instead, asset-backed securities provide periodic payments which
generally consist of both interest and principal payments.
The estimated life of an asset-backed security may vary with the prepayment
experience with respect to the underlying debt instruments. The rate of such
prepayments, and hence the life of an asset-backed security, will be a function
of current market interest rates and other economic and demographic factors.
Since prepayment experience can vary, asset-backed securities may be a less
effective vehicle for locking in high long-term yields. None of these Funds
will invest more than 5% of its assets in such other asset-backed securities.
Medium-Grade Debt Securities. As stated in the Prospectus, the Small Cap
Value Fund, the Equity Fund, the Balanced Fund, the Fixed Income Fund and the
Short/Intermediate Fund may each invest in securities within the four highest
rating groups assigned by one or more appropriate NRSROs, including securities
rated in the fourth highest rating group or, if unrated, judged by the Adviser
to be of comparable quality ("Medium-Grade Securities").
As with other fixed-income securities, Medium-Grade Securities are subject
to credit risk and market risk. Market risk relates to changes in a security's
value as a result of changes in interest rates. Credit risk relates to the
ability of the issuer to make payments of principal and interest. Medium-Grade
Securities are considered by Moody's to have speculative characteristics.
Medium-Grade Securities are generally subject to greater credit risk than
comparable higher-rated securities because issuers are more vulnerable to
economic downturns, higher interest rates or adverse issuer-specific
developments. In addition, the price of Medium-Grade Securities is generally
subject to greater market risk and therefore reacts more sharply to changes in
interest rates. The value and liquidity of Medium-Grade Securities may be
diminished by adverse publicity and investor perceptions.
Because certain Medium-Grade Securities are traded only in markets where
the number of potential purchasers and sellers, if any, is limited, the ability
of the Small Cap Value Fund, the Equity Fund, the Balanced Fund, the Fixed
Income Fund and the Short/Intermediate Fund to sell such securities at their
fair value either to meet redemption requests or to respond to changes in the
financial markets may be limited.
Particular types of Medium-Grade Securities may present special concerns.
Some Medium-Grade Securities in which the Small Cap Value Fund, the Equity Fund,
the Balanced Fund, the Fixed Income Fund and the Short/Intermediate Fund may
invest may be subject to redemption or call provisions that may limit increases
in market value that might otherwise result from lower interest rates while
increasing the risk that such Funds may be required to reinvest redemption or
call proceeds during a period of relatively low interest rates.
The credit ratings issued by NRSROs are subject to various limitations.
For example, while such ratings evaluate credit risk, they ordinarily do not
evaluate the market risk of Medium-Grade Securities. In certain circumstances,
the ratings may not reflect in a timely fashion adverse developments affecting
an issuer. For these reasons, the Adviser conducts its own independent credit
analysis of Medium-Grade Securities.
Securities of Other Investment Companies. Each of the Small Cap Value
Fund, the Equity Fund, the Balanced Fund, the Fixed Income Fund and the
Short/Intermediate Fund may invest in securities issued by other investment
companies, including in Shares of the Money Market Fund. Each of the Small Cap
Value Fund, the Equity Fund, the Balanced Fund, the Fixed Income Fund and the
Short/Intermediate Fund currently intends to limit its investments so that, as
determined immediately after a securities purchase is made: (a) not more than 5%
of the value of its total assets will be invested in the securities of any one
investment company; (b) not more than 10% of the value of its total assets will
be invested in the aggregate in securities of investment companies as a group;
and (c) not more than 3% of the outstanding voting stock of any one investment
company will be owned by any of these Funds. Except as described in the
Prospectus with respect to an investment in the Money Market Fund, as a
shareholder of another investment company, such a Fund would bear, along with
other shareholders, its pro rata portion of that company's expenses, including
advisory fees. These expenses would be in addition to the advisory and other
expenses that that Fund bears directly in connection with its own operations.
Investment companies in which a Fund may invest, other than the Money Market
Fund, may also impose a sales or distribution charge in connection with the
purchase or redemption of their shares and other types of commissions or
charges. Such charges will be payable by that Fund and, therefore, will be
borne directly by shareholders.
Income Participation Loans. The Balanced Fund, the Fixed Income Fund and
the Short/Intermediate Fund may make or acquire participation in privately
negotiated loans to borrowers. Frequently, such loans have variable interest
rates and may be backed by a bank letter of credit; in other cases they may be
unsecured. Such transactions may provide an opportunity to achieve higher
yields than those that may be available from other securities offered and sold
to the general public.
Privately arranged loans, however, will generally not be rated by a credit
rating agency and will normally be liquid, if at all, only through a provision
requiring repayment following demand by the lender. Such loans made by the
Balanced Fund, the Fixed Income Fund and the Short/Intermediate Fund may have a
demand provision permitting such Fund to require repayment within seven days.
Participation in such loans, however, may not have such a demand provision and
may not be otherwise marketable. To the extent these securities are not readily
marketable, they will be subject to the Fund's 5% limitation on investments in
illiquid securities. Recovery of an investment in any such loan that is
illiquid and payable on demand will depend on the ability of the borrower to
meet an obligation for full repayment of principal and payment of accrued
interest within the demand period, normally seven days or less (unless such Fund
determines that a particular loan issue, unlike most such loans, has a readily
available market). As it deems appropriate, the Company's Board of Directors
will establish procedures to monitor the credit standing of each such borrower,
including its ability to honor contractual payment obligations.
The Balanced Fund, the Fixed Income Fund and the Short/Intermediate Fund
will purchase income participation loans only if such instruments are, in the
opinion of the Adviser, of comparable quality to securities rated within the
four highest rating groups assigned by one or more appropriate NRSROs. None of
these Funds will invest more than 5% of its assets in such securities.
Repurchase Agreements. Securities held by each of the Funds may be subject
to repurchase agreements. Under the terms of a repurchase agreement, a Fund
would acquire securities from member banks of the Federal Deposit Insurance
Corporation and registered broker-dealers which the Adviser deems creditworthy
under guidelines approved by the Company's Board of Directors, subject to the
seller's agreement to repurchase such securities at a mutually agreed-upon date
and price. The repurchase price would generally equal the price paid by a Fund
plus interest negotiated on the basis of current short-term rates, which may be
more or less than the rate on the underlying portfolio securities. Securities
subject to repurchase agreements will be of the same type and quality as those
in which such Fund may invest directly. The seller under a repurchase agreement
will be required to maintain continually the value of collateral held pursuant
to the agreement at not less than the repurchase price (including accrued
interest). If the seller were to default on its repurchase obligation or become
insolvent, a Fund holding such obligation would suffer a loss to the extent that
the proceeds from a sale of the underlying portfolio securities were less than
the repurchase price under the agreement, or to the extent that the disposition
of such securities by such Fund were delayed pending court action.
Additionally, there is no controlling legal precedent confirming that a Fund
would be entitled, as against a claim by such seller or its receiver or trustee
in bankruptcy, to retain the underlying securities, although the Board of
Directors of the Company believes that, under the regular procedures normally in
effect for custody of a Fund's securities subject to repurchase agreements and
under federal laws, a court of competent jurisdiction would rule in favor of the
Company if presented with the question. Securities subject to repurchase
agreements will be held by that Fund's custodian or another qualified custodian
or in the Federal Reserve/Treasury book-entry system. Repurchase agreements are
considered to be loans by a Fund under the 1940 Act.
Reverse Repurchase Agreements. As discussed in the Prospectus, each of the
Funds may borrow funds for temporary purposes by entering into reverse
repurchase agreements in accordance with that Fund's investment restrictions.
Pursuant to such agreements, a Fund would sell portfolio securities to financial
institutions such as banks and broker-dealers, and agree to repurchase the
securities at a mutually agreed-upon date and price. Each Fund intends to enter
into reverse repurchase agreements only to avoid otherwise selling securities
during unfavorable market conditions to meet redemptions. At the time a Fund
enters into a reverse repurchase agreement, it will place in a segregated
custodial account assets such as U.S. government securities or other liquid,
high grade debt securities consistent with such Fund's investment restrictions
having a value equal to the repurchase price (including accrued interest), and
will subsequently continually monitor the account to ensure that such equivalent
value is maintained at all times. Reverse repurchase agreements involve the
risk that the market value of the securities sold by a Fund may decline below
the price at which a Fund is obligated to repurchase the securities. Reverse
repurchase agreements are considered to be borrowings by a Fund under the 1940
Act.
Illiquid Securities. Each Fund may invest up to 5% of its net assets in
illiquid securities (i.e., securities that cannot be disposed of within seven
days in the normal course of business at approximately the amount at which the
Fund has valued the securities). The Board of Directors has the ultimate
authority to determine which securities are liquid or illiquid for purposes of
this limitation. Certain securities ("restricted securities") exempt from
registration or issued in transactions exempt from registration under the
Securities Act of 1933, as amended ("Securities Act") (securities that may be
resold pursuant to Rule 144A or Regulation S under the Securities Act), may be
considered liquid. The Board has delegated to the Adviser the day-to-day
determination of the liquidity of a security, although it has retained oversight
and ultimate responsibility for such determinations. Although no definite
quality criteria are used, the Board of Directors has directed the Adviser to
look to such factors as (a) the nature of the market for a security (including
the institutional private or international resale market), (b) the terms of
these securities or other instruments allowing for the disposition to a third
party or the issuer thereof (e.g., certain repurchase obligations and demand
instruments), (c) the availability of market quotations (e.g., for securities
quoted in PORTAL system), and (d) other permissible relevant factors. Certain
securities, such as repurchase obligations maturing in more than seven days, are
currently considered illiquid.
Restricted securities may be sold only in privately negotiated or other
exempt transactions, qualified non-U.S. transactions, such as under Regulation
S, or in a public offering with respect to which a registration statement is in
effect under the Securities Act of 1933. Where registration is required, a Fund
may be obligated to pay all or part of the registration expenses and a
considerable time may elapse between the decision to sell and the sale date.
If, during such period, adverse market conditions were to develop, that Fund
might obtain a less favorable price than prevailed when it decided to sell.
Restricted securities will be priced at fair value as determined in good faith
by the Board of Directors. If through the appreciation of illiquid securities
or the depreciation of liquid securities, a Fund should be in a position where
more than 5% of the value of its net assets is invested in illiquid assets,
including restricted securities which are not readily marketable, that Fund will
take such steps as it deems advisable, if any, to reduce the percentage of such
securities to 5% or less of the value of its net assets.
Investment Restrictions
Each Fund's investment objective is a fundamental policy and may not be
changed without a vote of the holders of a majority of such Fund's outstanding
Shares. In addition, the following investment restrictions may be changed with
respect to a particular Fund only by a vote of the majority of the outstanding
Shares of that Fund (as defined under "ADDITIONAL INFORMATION - Vote of a
Majority of the Outstanding Shares").
In addition to the investment restrictions set forth in the Prospectus, the
Money Market Fund may not:
1. Purchase securities on margin, sell securities short, participate on a
joint or joint and several basis in any securities trading account, or
underwrite the securities of other issuers, except to the extent that such Fund
may be deemed to be an underwriter under certain securities laws, in the
disposition of "restricted securities" acquired in accordance with that Fund's
investment objectives and policies;
2. Purchase or sell commodities, commodity contracts (including futures
contracts), oil, gas or mineral exploration or development programs, or real
estate (although investments by such Fund in marketable securities of companies
engaged in such activities are not hereby precluded);
3. Write or purchase put or call options;
4. Invest in any issuer for purposes of exercising control or management;
and
5. Purchase or retain securities of any issuer if the officers or
Directors of the Company or the officers or directors of its investment adviser
owning beneficially more than one-half of 1% of the securities of such issuer
together own beneficially more than 5% of such securities.
In addition, none of the Small Cap Value Fund, the Equity Fund, the
Balanced Fund, the Fixed Income Fund and the Short/Intermediate Fund may:
1. Purchase securities on margin, except for use of short-term credit
necessary for clearance of purchases of portfolio securities;
2. Engage in any short sales;
3. Underwrite the securities issued by other persons, except to the
extent that a Fund may be deemed to be an underwriter under certain securities
laws in the disposition of "restricted securities";
4. Purchase or sell commodities or commodities contracts, unless and
until disclosed in the current Prospectus of the Funds; and
5. Purchase or sell real estate (although investments in marketable
securities of companies engaged in such activities are not prohibited by this
restriction).
The following additional investment restrictions may be changed without the
vote of a majority of the outstanding Shares of a Fund. The Money Market Fund
may not:
1. Invest in securities of other investment companies, except as such
securities may be acquired as part of a merger, consolidation, reorganization,
or acquisition of assets; and
2. Buy common stocks or voting securities.
In addition to the fundamental restrictions listed above, the Small Cap
Value Fund, the Equity Fund, the Balanced Fund, the Fixed Income Fund and the
Short/Intermediate Fund have adopted the following restrictions that may be
changed by the Board of Directors without Shareholder approval:
1. Purchase participations or direct interests in oil, gas or other
mineral exploration or development programs (although investments by such Funds
in marketable securities of companies engaged in such activities are not
prohibited in this restriction);
2. Purchase securities of other investment companies, except (a) in
connection with a merger, consolidation, acquisition or reorganization, and (b)
a Fund may invest in other investment companies if, at the time of purchase (i)
the acquiring Fund will own no more than 3% of the shares of the investment
company selling such shares, (ii) the value of the investment company shares
acquired, when aggregated with the value of other shares of such investment
company held by the acquiring Fund, does not exceed 5% of the total assets of
the acquiring Fund, and (iii) the value of the investment company shares
acquired, when aggregated with the value of any other shares of investment
companies held by the acquiring Fund, does not exceed 10% of the total assets of
the acquiring Fund; and
3. Purchase or retain the securities of an issuer if, to the knowledge of
such Fund's management, the officers or Directors of the Company, and the
officers or directors of the Investment Adviser, who each owns beneficially more
than .5% of the outstanding securities of such issuer, together own beneficially
more than 5% of such securities.
If any percentage restriction described above (and in the Prospectus) is
satisfied at the time of investment, a later increase or decrease in such
percentage resulting from a change in asset value will not constitute a
violation of such restriction. However, should a change in net asset value or
other external events cause a Fund's investment in illiquid securities to exceed
such Fund's limit on its investments in such securities, that Fund will act to
cause the aggregate amount of illiquid securities to come within such limit as
soon as reasonably practicable. In such an event, however, a Fund would not be
required to liquidate any portfolio securities where such Fund would suffer a
loss on the sale of such securities.
Portfolio Turnover
The portfolio turnover rate for each of the Funds is calculated by dividing
the lesser of a Fund's purchases or sales of portfolio securities for the year
by the monthly average value of the portfolio securities. The Commission
requires that the calculation exclude all securities whose remaining maturities
at the time of acquisition were one year or less.
Because the Money Market Fund intends to invest entirely in securities with
remaining maturities of less than one year and because the Commission requires
such securities to be excluded from the calculation of portfolio turnover rate,
the portfolio turnover with respect to the Money Market Fund is expected to be
zero percent for regulatory purposes. The portfolio turnover rate may vary
greatly from year to year as well as within a particular year, and may also be
affected by cash requirements for redemptions of Shares. Portfolio turnover
will not be a limiting factor in making investment decisions.
NET ASSET VALUE
As indicated in the Prospectus, the net asset value of each Fund is
determined and the Shares of each Fund are priced as of the Valuation Time on
each Business Day of the Company. A "Business Day" is a day on which the New
York Stock Exchange is open for trading and any other day (other than a day on
which no Shares of a Fund are tendered for redemption and no order to purchase
any Shares is received) during which there is sufficient trading in portfolio
instruments that such Fund's net asset value per share might be materially
affected. The New York Stock Exchange will not open in observance of the
following holidays: New Year's Day, Martin Luther King, Jr. Day, President's
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day,
and Christmas Day.
Valuation of the Money Market Fund.
The Money Market Fund has elected to use the amortized cost method of
valuation pursuant to Rule 2a-7 under the 1940 Act. This involves valuing an
instrument at its cost initially and thereafter assuming a constant amortization
to maturity of any discount or premium, regardless of the impact of fluctuating
interest rates on the market value of the instrument. This method may result in
periods during which value, as determined by amortized cost, is higher or lower
than the price the Money Market Fund would receive if it sold the instrument.
The value of securities in the Money Market Fund can be expected to vary
inversely with changes in prevailing interest rates.
Pursuant to Rule 2a-7, the Money Market Fund will maintain a
dollar-weighted average portfolio maturity appropriate to the Money Market
Fund's objective of maintaining a stable net asset value per share, provided
that the Money Market Fund will not purchase any security with a remaining
maturity of more than 397 days (13 months) (securities subject to repurchase
agreements may bear longer maturities) nor maintain a dollar-weighted average
portfolio maturity which exceeds 90 days. The Company's Board of Directors has
also undertaken to establish procedures reasonably designed, taking into account
current market conditions and the investment objective of the Money Market Fund,
to stabilize the net asset value per share of the Money Market Fund for purposes
of sales and redemptions at $1.00. These procedures include review by the
Directors, at such intervals as they deem appropriate, to determine the extent,
if any, to which the net asset value per share of the Money Market Fund
calculated by using available market quotations deviates from $1.00 per Share.
In the event such deviation exceeds one-half of one percent, Rule 2a-7 requires
that the Board of Directors promptly consider what action, if any, should be
initiated. If the Directors believe that the extent of any deviation from the
Money Market Fund's $1.00 amortized cost price per Share may result in material
dilution or other unfair results to new or existing investors, they will take
such steps as they consider appropriate to eliminate or reduce, to the extent
reasonably practicable, any such dilution or unfair results. These steps may
include selling portfolio instruments prior to maturity, shortening the average
portfolio maturity, withholding or reducing dividends, reducing the number of
the Money Market Fund's outstanding Shares without monetary consideration, or
utilizing a net asset value per share determined by using available market
quotations.
Valuation of the Other Funds.
Each security traded on a U.S. national securities exchange or quoted on
the NASDAQ National Market System ordinarily will be valued on the basis of its
last sale price on the date of valuation or, if there are no sales that day, at
the closing bid quotation. Securities traded on exchanges located outside of
the U.S. will be valued on the basis of the price as of the most recent close of
business on the exchange preceding the time of valuation. Securities and other
assets for which quotations are not readily available are valued at their fair
value as determined in good faith under consistently applied procedures
established by and under the general supervision of the Directors of the
Company. Short-term securities are valued at either amortized cost or original
cost plus accrued interest, which approximates current value.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Shares of the Funds are sold on a continuous basis by the Distributor, and
the Shares may be purchased either directly from the Funds or through Banks or
certain other institutions. Investors purchasing Shares of the Funds may
include officers, directors, or employees of the Adviser or the Adviser's
correspondent or affiliated banks.
The Company may suspend the right of redemption or postpone the date of
payment for Shares of a Fund during any period when (a) trading on the New York
Stock Exchange is restricted by applicable rules and regulations of the
Commission, (b) the New York Stock Exchange is closed for other than customary
weekend and holiday closings, (c) the Commission has by order permitted such
suspension, or (d) an emergency exists as a result of which (i) disposal by the
Company of securities owned by it is not reasonably practical, or (ii) it is not
reasonably practical for the Company to determine the fair value of its net
assets.
The Company may redeem Shares of the Money Market Fund involuntarily if
redemption appears appropriate in light of the Company's responsibilities under
the 1940 Act. See "NET ASSET VALUE -Valuation of the Money Market Fund" in this
Statement of Additional Information.
MANAGEMENT OF THE COMPANY
Directors and Officers
Overall responsibility for management of the Company rests with its Board
of Directors, which is elected by the Shareholders of the Company. The
Directors elect the officers of the Company to supervise actively its day-to-day
operations.
The names of the Directors and officers of the Company, their addresses,
and principal occupations during the past five years are as follows:
Principal
Position(s) Held Occupation(s)
Name and Address with the Company During Past 5 Years
David P. Greer* President and Director Trust Officer, First
3623 South 107th Avenue National Bank of Omaha
Omaha, NE 68124 (1987-1994);presently
retired
Randy M. Pavlick Secretary Vice President - Legal and
207 East Buffalo Street Compliance Services, Sunstone
Suite 400 Financial Group, Inc.
Milwaukee, WI 53202 (1993-present); previously
in private law practice
with Foley & Lardner, a law
firm
Richard P. Snyder Vice President and Administration Services
207 East Buffalo Street Treasurer Group Manager, Sunstone
Suite 400 Financial Group, Inc.
Milwaukee, WI 53202 (1993-present); previously
Audit Manager, Sta-Rite
Industries, Inc. (1990-
1993)
Principal
Position(s) Held Occupation(s)
Name and Address with the Company During Past 5 Years
Joseph Caggiano Director Vice Chairman (1967-1993),
302 South 36th Street Chief Financial Officer
Omaha, NE 68131 (1967-1991) and Vice-
Chairman Emeritus (1993-
present) of Bozell Jacobs
Harry A. Koch, Jr.* Director President and Treasurer,
P.O. Box 6215 The Harry A. Koch Co.,
Omaha, NE 68106 insurance agents and
brokers (1958-present)
Robert A. Reed Director President and Chief
2600 Dodge Street Executive Officer,
Omaha, NE 68131 Physicians Mutual Insurance
Company and Physicians Life
Insurance Company (1974-
present)
Gary Witt Director President and Shareholder,
11837 Miracle Hills Drive Lutz & Company, P.C.,
Suite 100 Certified Public Accountants
Omaha, NE 68154 (1987-present)
* Denotes "interested directors" as defined in the 1940 Act.
Mr. Witt joined the Board in March 1997, filling the vacancy created by the
death of M.T. Crummer.
The following table sets forth certain information concerning compensation
paid by the Company to its Directors and officers in the fiscal year ending
March 31, 1997.
Pension or
Retirement
Aggregate Benefits Estimated Total
Compensation Accrued Annual Compensation
Name and to be Paid as Part of Retirement From
Position by Company Company Expenses Benefits Company
David P. Greer $4,000 -0- -0- $4,000
President and Director
Randy M. Pavlick -0- -0- -0- -0-
Secretary
Pension or
Retirement
Aggregate Benefits Estimated Total
Compensation Accrued Annual Compensation
Name and to be Paid as Part of Retirement From
Position by Company Company Expenses Benefits Company
Richard P. Snyder -0- -0- -0- -0-
Vice President and
Treasurer
Joseph Caggiano $4,000 -0- -0- $4,000
Director
Harry A. Koch, Jr. $4,000 -0- -0- $4,000
Director
Robert A. Reed $4,000 -0- -0- $4,000
Director
M.T. Crummer $2,500 -0- -0- $2,500
Director
As of May 31, 1997, the Company's officers and Directors, as a group, owned
less than 1% of each Fund's outstanding Shares.
The officers of the Company receive no compensation directly from the
Company for performing the duties of their offices. Sunstone Financial Group,
Inc. receives fees from each of the Funds for acting as administrator and the
Administrator or its affiliates may receive fees from each of the Funds pursuant
to the Distribution and Service Plan and the Administrative Services Plan
described below. Messrs. Pavlick and Snyder are employees of, and are
compensated by, the Administrator.
Investment Adviser
Investment advisory services are provided to each of the Funds by First
National Bank of Omaha, Omaha, Nebraska, the Adviser, pursuant to the Investment
Advisory Agreement dated as of December 20, 1994 as amended as of December 5,
1995 and June 4, 1996 (the "Investment Advisory Agreement"). The Adviser is a
wholly owned subsidiary of First National of Nebraska, Inc., a Nebraska
corporation.
Under the Investment Advisory Agreement, the Adviser has agreed to provide
investment advisory services as described in the Prospectus of the Funds. For
the services provided and expenses assumed pursuant to the Investment Advisory
Agreement, the Small Cap Value Fund, the Equity Fund, the Balanced Fund, the
Fixed Income Fund and the Short/Intermediate Fund and the Money Market Fund,
pay the Adviser a fee equal to the lesser of (a) a fee computed daily and paid
monthly, at an annual rate of eighty-five one-hundredths of one percent (.85%),
seventy-five one-hundredths of one percent (.75%), seventy-five one-hundredths
of one percent (.75%), sixty one-hundredths of one percent (.60%), fifty
one-hundredths of one percent (.50%) twenty-five one-hundredths of one percent
(.25%), and respectively, of the average daily net assets of that Fund, or (b)
such other fee as may be agreed upon from time to time in writing by the Company
and the Adviser. The Adviser may periodically voluntarily reduce all or a
portion of its advisory fee with respect to any Fund, which reduction would
increase the net income of that Fund available for distribution as dividends.
For the fiscal period ended March 31, 1996, the Adviser earned advisory
fees of $1,43904 for the Equity Fund, $396,808 (net of $36,073 of fee waivers)
for the Fixed Income Fund $97,823 (net of $10,869 of fee waivers) for the
Short/Intermediate Fund and $216,379 for the Money Market Fund.
For the fiscal period ended March 31, 1997, the Adviser earned advisory
fees of $407 (net of $25,647 of fee waivers) for the Small Cap Value Fund,
$1,838,101 for the Equity Fund, $0 (net of $25,234 of fee waivers) for the
Balanced Fund, $429,257 (net of $39,046 of fee waivers) for the Fixed Income
Fund, $96,855 (net of $10,762 of fee waivers) for the Short/Intermediate Fund
and $264,627 for the Money Market Fund.
Unless sooner terminated, the Investment Advisory Agreement for all Funds
will continue in effect until June 30, 1998, and from year to year thereafter,
if, as to each Fund, such continuance is approved at least annually by the
Company's Board of Directors or by vote of a majority of the outstanding Shares
of that Fund (as defined under "GENERAL INFORMATION - Miscellaneous" in the
Prospectus), and a majority of the Directors who are not parties to the
Investment Advisory Agreement or interested persons (as defined in the 1940 Act)
of any party to the Investment Advisory Agreement by votes cast in person at a
meeting called for such purpose. The Investment Advisory Agreement is terminable
as to a Fund at any time on 60 days written notice without penalty by the
Directors, by vote of a majority of the outstanding Shares of that Fund, or by
the Adviser. The Investment Advisory Agreement also terminates automatically in
the event of any assignment, as defined in the 1940 Act.
The Investment Advisory Agreement provides that the Adviser shall not be
liable for any error of judgment or mistake of law or for any loss suffered by a
Fund in connection with the performance of the Investment Advisory Agreement,
except a loss resulting from a breach of fiduciary duty with respect to the
receipt of compensation for services or a loss resulting from willful
misfeasance, bad faith, or gross negligence on the part of the Adviser in the
performance of its duties, or from reckless disregard by the Adviser of its
duties and obligations thereunder.
The Adviser also serves as the Funds' custodian as more fully discussed
under "Custodian" below.
Portfolio Transactions
Pursuant to the Investment Advisory Agreement, the Adviser determines,
subject to the general supervision of the Board of Directors of the Company and
in accordance with each Fund's investment objective and restrictions, which
securities are to be purchased and sold by a Fund, and which brokers are to be
eligible to execute such Fund's portfolio transactions. Purchases and sales of
fixed income debt securities acquired for the Balanced Fund, the Fixed Income
Fund, the Short/Intermediate Fund and the Money Market Fund usually are
principal transactions in which portfolio securities are normally purchased
directly from the issuer or from an underwriter or market maker for the
securities. Purchases from underwriters of other portfolio securities for the
Funds generally include a commission or concession paid by the issuer to the
underwriter, and purchases from dealers serving as market makers may include the
spread between the bid and asked price. Transactions on stock exchanges involve
the payment of negotiated brokerage commissions. Transactions in the over-the-
counter market are generally principal transactions with dealers. With respect
to the over-the-counter market, the Company, where possible, will deal directly
with dealers who make a market in the securities involved except in those
circumstances where better price and execution are available elsewhere.
Allocation of transactions, including their frequency, to various brokers
and dealers is determined by the Adviser in its best judgment and in a manner
deemed fair and reasonable to Shareholders. The primary consideration is prompt
execution of orders in an effective manner at the most favorable price. Subject
to this consideration, brokers and dealers who provide supplemental investment
research to the Adviser may receive orders for transactions on behalf of the
Funds. Information so received is in addition to and not in lieu of services
required to be performed by the Adviser and does not reduce the advisory fees
payable to the Adviser by the Funds. Such information may be useful to the
Adviser in serving a Fund and other clients and, conversely, supplemental
information obtained by the placement of business of other clients may be useful
to the Adviser in carrying out its obligations to each of the Funds. The
Adviser may authorize a Fund to pay a commission in excess of the commission
another broker-dealer would have charged if the Adviser determines in good faith
that such commission is reasonable in relation to the value of the brokerage and
research services provided by such broker-dealer, viewed either in terms of that
particular transaction or the Adviser's overall responsibilities to the accounts
it manages.
While the Adviser generally seeks competitive commissions, the Company may
not necessarily pay the lowest commission available on each brokerage
transaction, for reasons discussed above. For the fiscal period ended March 31,
1996, the Equity Fund paid $132,860 of brokerage commissions on total
transactions of $89,946,945. For the fiscal period ended March 31, 1997, the
Small Cap Value Fund paid $17,770 of brokerage commissions on total transactions
of $6,402,342, the Equity Fund paid $140,910 of brokerage commissions on total
transactions of $101,527,949 and the Balanced Fund paid $8,952 of brokerage
commissions on total transactions of $5,575,479.
Except as otherwise disclosed to the Shareholders of the Funds and as
permitted by applicable laws, rules and regulations, the Company will not, on
behalf of any of the Funds, execute portfolio transactions through, acquire
portfolio securities issued by, make savings deposits in, or enter into
repurchase or reverse repurchase agreements with the Adviser, the Distributor,
or their affiliates, and will not give preference to the Adviser's
correspondents with respect to such transactions, securities, savings deposits,
repurchase agreements, and reverse repurchase agreements.
Investment decisions for each Fund are made independently from those for
the other Funds of the Company, any other investment company or account managed
by the Adviser. Any such other fund, investment company or account may also
invest in the same securities as the Company. When a purchase or sale of the
same security is made at substantially the same time on behalf of a Fund and
another investment company or account, the transaction will be averaged as to
price, and available investments will be allocated as to amount in a manner
which the Adviser believes to be equitable to the Fund and such other investment
company or account. In some instances, this investment procedure may adversely
affect the price paid or received by a Fund or the size of the position obtained
by a Fund. To the extent permitted by law, the Adviser may aggregate the
securities to be sold or purchased for a Fund with those to be sold or purchased
for the other investment companies or accounts in order to obtain best
execution. As provided by the Investment Advisory Agreement, in making
investment recommendations for each of the Funds, the Adviser will not inquire
or take into consideration whether an issuer of securities proposed for purchase
or sale by the Company is a customer of the Adviser, its parent or its
subsidiaries or affiliates and, in dealing with its customers, the Adviser, its
parent, subsidiaries, and affiliates will not inquire or take into consideration
whether securities of such customers are held by the Funds.
Glass-Steagall Act
In 1971, the United States Supreme Court held in Investment Company
Institute v. Camp that the Federal statutes commonly referred to as the
Glass-Steagall Act prohibit a national bank from operating a mutual fund for the
collective investment of managing agency accounts. Subsequently, the Board of
Governors of the Federal Reserve System (the "Board") issued a regulation and
interpretation to the effect that the Glass-Steagall Act and such decision: (a)
forbid a bank holding company registered under the Federal Bank Holding Company
Act of 1956 (the "Holding Company Act") or any non-bank affiliate thereof from
sponsoring, organizing, or controlling a registered, open-end investment company
continuously engaged in the issuance of its shares, but (b) do not prohibit such
a holding company or affiliate from acting as investment adviser, transfer
agent, and custodian to such an investment company. In 1981, the United States
Supreme Court held in Board of Governors of the Federal Reserve System v.
Investment Company Institute that the Board did not exceed its authority under
the Holding Company Act when it adopted its regulation and interpretation
authorizing bank holding companies and their non-bank affiliates to act as
investment advisers to registered closed-end investment companies. In the Board
of Governors case, the Supreme Court also stated that if a national bank
complied with the restrictions imposed by the Board in its regulation and
interpretation authorizing bank holding companies and their non-bank affiliates
to act as investment advisers to investment companies, a national bank
performing investment advisory services for an investment company would not
violate the Glass-Steagall Act.
The Adviser believes that it possesses the legal authority to perform the
services for each of the Funds contemplated by the Prospectus, this Statement of
Additional Information, the Investment Advisory Agreement, the Custodian
Agreement and the Servicing Agreement without violation of applicable statutes
and regulations. The Adviser has been advised by its counsel that counsel
believes that such laws should not prevent the Adviser from providing the
services required of it under the Investment Advisory Agreement, the Custodian
Agreements, and the Servicing Agreement. Future changes in either Federal or
state statutes and regulations relating to the permissible activities of banks
or bank holding companies and the subsidiaries or affiliates of those entities,
as well as further judicial or administrative decisions or interpretations of
present and future statutes and regulations, could prevent or restrict the
Adviser from continuing to perform such services for the Company. Depending
upon the nature of any changes in the services which could be provided by the
Adviser, the Board of Directors of the Company would review the Company's
relationship with the Adviser and consider taking all action necessary in the
circumstances.
Should future legislative, judicial, or administrative action prohibit or
restrict the proposed activities of the Adviser and its affiliated and
correspondent banks in connection with Customer purchases of Shares of any of
the Funds, those banks might be required to alter materially or discontinue the
services offered by them to Customers. It is not anticipated, however, that any
change in the Company's method of operations would affect its net asset value
per share or result in financial losses to any Customer.
Administrator/Fund Accountant
Sunstone Financial Group, Inc. serves as administrator and fund accountant
(the "Administrator") to each of the Funds pursuant to the Administration and
Fund Accounting Agreement dated April 10, 1995 and amended December 5, 1995 and
June 4, 1996 (the "Administration Agreement"). The Administrator and its
affiliates provide administration, distribution and fund accounting services to
other investment companies.
Under the Administration Agreement, the Administrator has agreed to provide
office space, facilities, equipment and personnel, compile data for and prepare
with respect to the Funds timely Notices to the Commission required pursuant to
Rule 24f-2 under the Act and semi-annual reports on Form N-SAR; prepare and file
all federal income and excise tax returns and state income tax returns (and such
other required tax filings as may be agreed to by the parties) other than those
required to be made by the Funds' custodian or transfer agent; prepare
compliance filings relating to the registration of the securities of the Funds
pursuant to state securities laws with the advice of Funds' counsel; perform
securities valuations; determine the income and expense accruals of the Funds;
calculate daily net asset values and income factors of the Funds; maintain all
general ledger accounts and related subledgers; prepare financial statements for
the Annual and Semi-Annual Reports required pursuant to Section 30(d) under the
Act; review the Registration Statement for the Funds (on Form N-1A or any
replacement therefor) and any amendments thereto, and proxy materials; prepare
and monitor each Fund's expense accruals and cause all appropriate expenses to
be paid from Fund assets on proper authorization from the Funds; assist in the
acquisition of First Omaha Funds' fidelity bond required by the Act, monitor the
amount of the bond and make the necessary Commission filings related thereto;
check each Fund's compliance with the policies and limitations relating to
portfolio investments as set forth in the Prospectus, Statement of Additional
Information and Articles of Incorporation and monitor each Fund's status as a
regulated investment company under Subchapter M of the Internal Revenue Code, as
amended; maintain, and/or coordinate with the other service providers the
maintenance of, the accounts, books and other documents required pursuant to
Rule 31a-1(a) and (b) under the Act; and generally assist in each Fund's
administrative operations.
The Administrator receives a fee from each Fund for its services as
administrator and fund accountant and expenses assumed pursuant to the
Administration Agreement, equal to the lesser of a fee calculated daily and paid
periodically, at the annual rate of twenty one-hundredths of one percent (.20%)
of that Fund's average daily net assets subject to a minimum fee of $300,000 for
the Equity Fund, the Fixed Income Fund, the Short/Intermediate Fund and the
Money Market Funds in the aggregate and to a minimum fee of $50,000 for each of
the Small Cap Value and Balanced Funds, or such other fee as may be agreed upon
in writing by the Company and the Administrator. The Administrator may
periodically voluntarily reduce all or a portion of its fee with respect to a
Fund in order to increase the net income of one or more of the Funds available
for distribution as dividends.
Unless sooner terminated as provided therein, the Administration Agreement
will continue in effect until December 20, 1998. The Administration Agreement
thereafter shall be renewed automatically for successive one-year terms, unless
earlier terminated. The Administration Agreement is terminable with respect to
a particular Fund only upon mutual agreement of the parties to the Administra-
tion Agreement and, after the initial term, on not less than 90 days' notice by
the Company's Board of Directors or by the Administrator.
The Administration Agreement provides that the Administrator shall not be
liable for any error of judgment or mistake of law or any loss suffered by any
of the Funds in connection with the matters to which the Administration
Agreement relates, except a loss resulting from willful misfeasance, bad faith,
or gross negligence in the performance of its duties, or from the reckless
disregard by the Administrator of its obligations and duties thereunder. For
the fiscal period ended March 31, 1996, the Administrator earned $296,944,
$112,054, $33,763, and $134,426, net of fee waivers of $85,431, $32,240, $9,714,
and $38,677 for the Equity, Fixed Income, Short/Intermediate and Money Market
Funds, respectively. For the fiscal period ended March 31, 1997, the
Administrator earned $4,513, $453,766, $3,873, $144,475, $39,821 and $196,204,
net of fee waivers of $35,762, $36,394, $28,731, $11,626, $3,226 and $15,497 for
the Small Cap Value, Equity, Balanced, Fixed Income, Short/Intermediate and
Money Market Funds, respectively.
Expenses
The Investment Advisory Agreement provides that if total expenses borne by
any of the Funds in any fiscal year exceed expense limitations imposed by
applicable state securities regulations, the Adviser will reimburse that Fund by
the amount of such excess in proportion to its respective fees. As of the date
of this Statement of Additional Information, the Funds are not aware of any
state imposed expense limitation applicable to the Funds. Fees imposed upon
customer accounts by the Adviser or its affiliated or correspondent banks for
cash management services are not included within Fund expenses for purposes of
any such expense limitation.
Distributor
Sunstone Distribution Services, LLC serves as agent for each of the Funds
in the distribution of its Shares pursuant to a Distribution Agreement dated
January 1, 1997 (the "Distribution Agreement"). Prior to that date, Sunstone
Financial Group, Inc., an affiliate of Sunstone Distribution Services, served as
agent for each of the Funds in the distribution of its Shares. Unless otherwise
terminated, the Distribution Agreement remains in effect from year to year for
successive annual periods ending on June 30 if approved at least annually (a) by
the Company's Board of Directors or by the vote of a majority of the outstanding
shares of the Company, and (b) by the vote of a majority of the Directors of the
Company who are not parties to the Distribution Agreement or interested persons
(as defined in the 1940 Act) of any party to the Distribution Agreement, cast in
person at a meeting called for the purpose of voting on such approval. The
Distribution Agreement may be terminated in the event of any assignment, as
defined in the 1940 Act.
The Distributor solicits orders for the sale of Shares, advertises and pays
the costs of advertising, office space and the personnel involved in such
activities. The Distributor receives no compensation under the Distribution
Agreement with the Company, but may receive compensation under the Distribution
and Service Plan described below.
As described in the Prospectus, the Company has adopted a Distribution and
Service Plan (the "Plan") pursuant to Rule 12b-1 under the 1940 Act under which
each Fund is authorized to make payments to banks, including the Adviser, other
institutions and broker-dealers, (with all of the foregoing organizations being
referred to as "Participating Organizations") for providing distribution or
shareholder service assistance. Payments to such Participating Organizations
may be made pursuant to agreements entered into upon the recommendation of the
Distributor. The Plan authorizes each Fund to make payments in an amount not in
excess, on an annual basis, of 0.25% of the average daily net assets of that
Fund. As required by Rule 12b-1, the Plan was approved by the sole shareholder
of each of the Funds and by the Board of Directors, including a majority of the
Directors who are not interested persons of any of the Funds and who have no
direct or indirect financial interest in the operation of the Plan (the
"Independent Directors"). The Plan may be terminated as to a Fund by vote of a
majority of the Independent Directors, or by vote of majority of the outstanding
Shares of that Fund. Any change in the Plan that would materially increase the
distribution cost to a Fund requires Shareholder approval. The Directors review
quarterly a written report of such costs and the purposes for which such costs
have been incurred. The Plan may be amended by vote of the Directors including
a majority of the Independent Directors, cast in person at a meeting called for
that purpose. For so long as the Plan is in effect, selection and nomination of
those Directors who are not interested persons of the Company shall be committed
to the discretion of such disinterested persons. All agreements with any person
relating to the implementation of the Plan may be terminated at any time on 60
days' written notice without payment of any penalty, by vote of a majority of
the Independent Directors or by a vote of the majority of the outstanding Shares
of any of the Funds. The Plan will continue in effect for successive one-year
periods, provided that each such continuance is specifically approved (a) by the
vote of a majority of the Independent Directors, and (b) by a vote of a majority
of the entire Board of Directors cast in person at a meeting called for that
purpose. The Board of Directors has a duty to request and evaluate such
information as may be reasonably necessary for them to make an informed
determination of whether the Plan should be implemented or continued. In
addition, the Directors in approving the Plan must determine that there is a
reasonable likelihood that the Plan will benefit each Fund and its Shareholders.
The Board of Directors of the Company believes that the Plan is in the best
interests of each Fund since it encourages Fund growth. As a Fund grows in
size, certain expenses, and therefore total expenses, per Share, may be reduced
and overall performance per Share may be improved.
Administrative Services Plan
As described in the Prospectus, the Company has also adopted an
Administrative Services Plan (the "Services Plan") under which each Fund is
authorized to pay certain financial institutions, including the Adviser, its
correspondent and affiliated banks, and the Distributor (a "Service
Organization"), to provide certain ministerial, record keeping, and
administrative support services to their customers who own of record or
beneficially Shares in a Fund. Payments to such service organizations are made
pursuant to Servicing Agreements between the Company and the Service
Organization. The Services Plan authorizes each Fund to make payments to
Service Organizations in an amount, on an annual basis, of up to 0.25% of the
average daily net assets of that Fund. The Services Plan has been approved by
the Board of Directors of the Company, including a majority of the Directors who
are not interested persons of the Company (as defined in the 1940 Act) and who
have no direct or indirect financial interest in the operation of the Services
Plan or in any Servicing Agreements thereunder (the "Disinterested Directors").
The Services Plan may be terminated as to a Fund by a vote of a majority of the
Disinterested Directors. The Directors review quarterly a written report of the
amounts expended pursuant to the Services Plan and the purposes for which such
expenditures were made. The Services Plan may be amended by a vote of the
Directors, provided that any material amendments also require the vote of a
majority of the Disinterested Directors. For so long as the Services Plan is in
effect, selection and nomination of those Disinterested Directors shall be
committed to the discretion of the Company's Disinterested Directors. All
Servicing Agreements may be terminated at any time without the payment of any
penalty by a vote of a majority of the Disinterested Directors. The Services
Plan will continue in effect for successive one-year periods, provided that each
such continuance is specifically approved by a majority of the Board of
Directors, including a majority of the Disinterested Directors.
As authorized by the Services Plan, the Company has entered into a
Servicing Agreement with the Adviser pursuant to which the Adviser has agreed to
provide certain administrative support services in connection with Shares of the
Funds owned of record or beneficially by its customers. Such administrative
support services may include, but are not limited to, (a) processing dividend
and distribution payments from a Fund on behalf of customers; (b) providing
periodic statements to its customers showing their positions in the Shares; (c)
arranging for bank wires; (d) responding to routine customer inquiries relating
to services performed by the Adviser; (e) providing sub-accounting with respect
to the Shares beneficially owned by the Adviser's customers or the information
necessary for sub-accounting; (f) if required by law, forwarding shareholder
communications from a Fund (such as proxies, shareholder reports, annual and
semi-annual financial statements and dividend, distribution and tax notices) to
its customers; (g) aggregating and processing purchase, exchange, and redemption
requests from customers and placing net purchase, exchange, and redemption
orders for customers; and (h) providing customers with a service that invests
the assets of their account in the Shares pursuant to specific or preauthorized
instructions. In consideration of such services, the Company, on behalf of each
Fund, except the Money Market Fund, may pay the Adviser a monthly fee, computed
at the annual rate of .10% of the average aggregate net asset value of Shares of
that Fund held during the period by customers for whom the Adviser has provided
services under the Servicing Agreement. For the fiscal period ended March 31,
1997, the Adviser earned fees of $0, $49,214, $0, $15,740 and $4,045, net of fee
waivers of $1,863, $39,615, $2,354, $12,513 and $3,231 for the Small Cap Value,
Equity, Balanced, Fixed Income and Short/Intermediate Funds, respectively.
In addition, the Company, on behalf of a Fund, may enter into, from time to
time, other Servicing Agreements with other service organizations pursuant to
which such Service Organizations will provide similar services as those
discussed above.
Custodian
First National Bank of Omaha (the "Custodian"), One First National Center,
Omaha, Nebraska 68102, in addition to serving as the investment adviser and
transfer agent to the Funds, also serves as custodian to each of the Funds
pursuant to the Custodian Agreement dated December 20, 1994 and amended as of
December 5, 1995 and June 4, 1996 (the "Custodian Agreement"). The Custodian's
responsibilities include safeguarding and controlling each Fund's cash and
securities, handling the receipt and delivery of securities, and collecting
interest on each Fund's investments. In consideration of such services, each
Fund pays the Custodian a fee, computed daily and paid monthly, at the annual
rate of .03% of such Fund's average daily net assets.
Unless sooner terminated, the Custodian Agreement will continue in effect
until terminated by either party upon 60 days advance written notice to the
other party. Notwithstanding the foregoing, the Custodian Agreement, with
respect to a Fund, will be approved at least annually by the Company's Board of
Directors or by vote of a majority of the outstanding Shares of that Fund (as
defined under "GENERAL INFORMATION - Miscellaneous" in the Prospectus), and a
majority of the Directors who are not parties to the Custodian Agreement or
interested persons (as defined in the 1940 Act) of any party to the Custodian
Agreement by votes cast in person at a meeting called for such purpose.
In the fiscal period ended March 31, 1996, the Custodian earned custody
fees of $25,965 for the Money Market Fund and earned and waived $49,446, $21,644
and $6,522 for the Equity, Fixed Income and Short/Intermediate Funds,
respectively. In the fiscal period ended March 31, 1997, the Custodian earned
custody fees of $31,694 for the Money Market Fund and earned and waived $915,
$73,360, $998, $23,428 and $6,457 for the Small Cap Value, Equity, Balanced,
Fixed Income and Short/Intermediate Funds, respectively.
In the opinion of the staff of the Commission, since the custodian is
serving as both the investment adviser and custodian of each of the Funds, each
of the Funds and the Custodian are subject to the requirements of Rule 17f-2
under the 1940 Act, and therefore the Funds and the Custodian will comply with
the requirements of such rule.
Transfer Agency Services
First National Bank of Omaha (the "Transfer Agent") serves as transfer agent
and dividend disbursing agent for the Company pursuant to the Transfer Agency
Agreement dated December 20, 1994 and amended as of December 5, 1995 and
June 4, 1996. Pursuant to such Agreement, the Transfer Agent, among other
things, performs the following services in connection with each Fund's
shareholders of record: maintenance of shareholder records for each of the
Company's shareholders of record; processing shareholder purchase and redemption
orders; processing transfers and exchanges of shares of the Company on the
shareholder files and records; processing dividend payments and reinvestments;
and assistance in the mailing of shareholder reports and proxy solicitation
materials. For such services the Transfer Agent receives a fee based on the
number of shareholders of record. Pursuant to authority in the Transfer
Agency Agreement, the Transfer Agent has appointed as sub-transfer agent
DST Systems, Inc., 210 West 10th Street, Kansas City, Missouri 64105.
In the fiscal period ended March 31, 1996, transfer agent fees of $22,000,
$ 21,239, $23,125 and $22,462 were incurred by the Equity, Fixed Income,
Short/Intermediate and Money Market Funds, respectively. In the fiscal period
ended March 31, 1997, transfer agent fees of $5,400 (net of $10,125 of fee
waivers), $29,235, $4,800 (net of $6,000 of fee waivers), $24,000, $24,000 and
$24,000 were incurred by the Small Cap Value, Equity, Balanced, Fixed Income,
Short/Intermediate and Money Market Funds, respectively.
Auditors
The financial statements of each Fund as of March 31, 1997 appearing in
this Statement of Additional Information have been audited by KPMG Peat Marwick
LLP, Two Central Park Plaza, Suite 1501, Omaha, Nebraska 68102, as set forth in
their report appearing elsewhere herein, and are included in reliance upon such
report and on the authority of such firm as experts in auditing and accounting.
Legal Counsel
Cline, Williams, Wright, Johnson & Oldfather, 1900 FirsTier Bank Building,
Lincoln, Nebraska 68508, is counsel to the Company.
ADDITIONAL INFORMATION
Organization and Capital Structure
The Company is authorized to issue a total of 1,000,000,000 Shares of
common stock in series with a par value of $.00001 per share. Five Hundred
fifty million of these Shares have been authorized by the Board of Directors to
be issued in series designated for the existing six Funds. The Board of
Directors may authorize additional Shares in series, or may divide the Shares of
any existing or new series into two or more subseries or classes, all without
shareholder approval.
All Shares, when issued, will be fully paid and non-assessable and will be
redeemable and freely transferable. All Shares have equal voting rights. They
can be issued as full or fractional Shares. A fractional Share has pro rata the
same kind of rights and privileges as a full Share. The Shares possess no
preemptive or conversion rights.
Each Share of a Fund has one vote (with proportionate voting for fractional
shares) irrespective of the relative net asset value of the Shares. On some
issues, such as the election of directors, all Shares of the Fund vote together
as one series. Cumulative voting is authorized. This means that in a vote for
the election of directors, Shareholders may multiply the number of Shares they
own by the number of directorships being filled and then allocate such votes to
one or more directors. On issues affecting only a particular Fund, the Shares
of the affected Fund vote as a separate series. An example of such an issue
would be a fundamental investment restriction pertaining to only one Fund.
Shareholder Meetings
It is possible that the Fund will not hold annual or periodically scheduled
regular meetings of Shareholders. Annual meetings of Shareholders will not be
held unless called by the Shareholders pursuant to the Nebraska Business
Corporation Act or unless required by the Investment Company Act of 1940 and the
rules and regulations promulgated thereunder. Special meetings of the
Shareholders may be held, however, at any time and for any purpose, if called by
(a) the Chairman of the Board, the President and two or more directors, (b) by
one or more Shareholders holding ten percent or more of the Shares entitled to
vote on matters presented to the meeting, or (c) if the annual meeting is not
held within any thirteen month period, the local district court, upon
application of any Shareholder, may summarily order that such meeting be held.
In addition, the 1940 Act requires a Shareholder vote for all amendments to
fundamental investment policies, investment advisory contracts and amendments
thereto.
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted to the holders of the outstanding voting securities of an investment
company such as the Company shall not be deemed to have been effectively acted
upon unless approved by the holders of a majority of the outstanding shares of
each Fund affected by the matter. For purposes of determining whether the
approval of a majority of the outstanding shares of a Fund will be required in
connection with a matter, a Fund will be deemed to be affected by a matter
unless it is clear that the interests of each Fund in the matter are identical,
or that the matter does not affect any interest of the Fund. Under Rule 18f-2,
the approval of an investment advisory agreement or any change in investment
policy would be effectively acted upon with respect to a Fund only if approved
by a majority of the outstanding shares of such Fund. However, Rule 18f-2 also
provides that the ratification of independent public accountants, the approval
of principal underwriting contracts, and the election of Directors may be
effectively acted upon by Shareholders of the Company voting without regard to
series.
Ownership of Shares
As of June 30, 1997, the Adviser and its affiliates held of record
substantially all of the outstanding Shares of the Funds as agent, custodian,
trustee or investment adviser on behalf of their customers. At such date, First
National Bank of Omaha, One First National Center, Omaha, Nebraska 68102-1596,
and its affiliates held as beneficial owner five percent or more of the
outstanding Shares of the Funds because they possessed sole or shared voting or
investment power with respect to such Shares.
Vote of a Majority of the Outstanding Shares
As used in the Prospectus and this Statement of Additional Information, a
"vote of a majority of the outstanding Shares" of a Fund means the affirmative
vote, at a meeting of Shareholders duly called, of the lesser of (a) 67% or more
of the votes of Shareholders of such Fund present at a meeting at which the
holders of more than 50% of the votes attributable to Shareholders of record of
that Fund are represented in person or by proxy, or (b) the holders of more than
50% of the outstanding Shares of that Fund.
Additional Tax Information
Although each Fund expects to qualify as a "regulated investment company"
and to be relieved of all or substantially all federal income taxes, depending
upon the extent of its activities in states and localities in which its offices
are maintained, in which its agents or independent contractors are located, or
in which it is otherwise deemed to be conducting business, a Fund may be subject
to the tax laws of such states or localities. In addition, if for any taxable
year that Fund does not qualify for the special tax treatment afforded regulated
investment companies, all of its taxable income will be subject to federal tax
at regular corporate rates (without any deduction for distributions to its
Shareholders). In such event, dividend distributions would be taxable to
Shareholders to the extent of earnings and profits, and would be eligible for
the dividends received deduction for corporations.
Foreign taxes may be imposed on a Fund by foreign countries with respect to
its income from foreign securities. Since less than 50% in value of a Fund's
total assets at the end of its fiscal year are expected to be invested in stocks
or securities of foreign corporations, such Fund will not be entitled under the
Code to pass through to its Shareholders their pro rata share of the foreign
taxes paid by the Fund. These taxes will be taken as a deduction by such Fund.
Each Fund will be required in certain cases to withhold and remit to the
United States Treasury 31% of taxable dividends paid to any Shareholder who has
provided either an incorrect tax identification number or no number at all, or
who is subject to withholding by the Internal Revenue Service for failure
properly to include on their return payments of interest or dividends.
Information set forth in the Prospectus and this Statement of Additional
Information which relates to federal taxation is only a summary of some of the
important federal tax considerations generally affecting purchasers of Shares of
a Fund. No attempt has been made to present a detailed explanation of the
federal income tax treatment of a Fund or its Shareholders and this discussion
is not intended as a substitute for careful tax planning. Accordingly,
potential purchasers of Shares of a Fund are urged to consult their tax advisers
with specific reference to their own tax situation. In addition, the tax
discussion in the Prospectus and this Statement of Additional Information is
based on tax laws and regulations which are in effect on the date of the
Prospectus and this Statement of Additional Information; such laws and
regulations may be changed by legislative or administrative action.
Yield of the Money Market Fund
For the seven-day period ended March 31, 1997, the yield and effective
yield, respectively, of the Money Market Fund were 4.69% and 4.80%. For the
30-day period ended March 31, 1997, the yield for such Fund was 4.65%. In the
absence of fee waivers, the yields for the period ended March 31, 1997 would
have been 4.68%, 4.79% and 4.63%, respectively. The standardized seven-day
yield for the Money Market Fund is computed by determining the net change,
exclusive of capital changes, in the value of a hypothetical pre-existing
account in the Money Market Fund having a balance of one Share at the beginning
of the period, subtracting a hypothetical charge reflecting deductions from
Shareholder accounts, and dividing the difference by the value of the account at
the beginning of the base period to obtain the base period return, and then
multiplying the base period return by (365/7). The net change in the account
value of the Money Market Fund includes the value of additional Shares purchased
with dividends from the original Share, dividends declared on both the original
Share and any such additional Shares, and all fees, other than non-recurring
account or sales charges, that are charged to all Shareholder accounts in
proportion to the length of the base period and assuming the Money Market Fund's
average account size. The capital changes to be excluded from the calculation
of the net change in account value are realized gains and losses from the sale
of securities and unrealized appreciation and depreciation. The 30-day yield
and effective yield are calculated as described above except that the base
period is 30 days rather than seven days.
The effective yield for the Money Market Fund is computed by compounding
the base period return, as calculated above, by adding 1 to the base period
return raising the sum to a power equal to 365 divided by seven and subtracting
1 from the result.
Yield of the Fixed Income Fund and the Short/Intermediate Fund
As summarized in the Prospectus under the heading "PERFORMANCE
INFORMATION," yield of each of the Fixed Income Fund and the Short/Intermediate
Fund will be computed by annualizing net investment income per share for a
recent 30-day period and dividing that amount by such Share's net asset value
per share (reduced by any undeclared earned income expected to be paid shortly
as a dividend) on the last trading day of that period. Net investment income
will reflect amortization of any market value, premium or discount of fixed
income securities (except for obligations backed by mortgages or other assets)
and may include recognition of a pro rata portion of the stated dividend rate of
dividend paying portfolio securities. The yield of each of the Fixed Income
Fund and the Short/Intermediate Fund will vary from time to time depending upon
market conditions, the composition of such Fund's portfolio and operating
expenses of the Company allocated to such Fund. These factors and possible
differences in the methods used in calculating yield, should be considered when
comparing a Fund's yield to yields published for other investment companies and
other investment vehicles. Yield should also be considered relative to changes
in the value of a Fund's shares and to the relative risks associated with the
investment objective and policies of each Fund.
For the 30-day period ended March 31, 1997, the yields for the Fixed Income
Fund and the Short/Intermediate Fund were 6.08% and 5.50%, respectively. In the
absence of fee waivers, the yields for the Fixed Income Fund and the
Short/Intermediate Fund would have been 5.93% and 5.35%, respectively.
Calculation of Total Return
As summarized in the Prospectus under the headings "PERFORMANCE
INFORMATION" and "ADDITIONAL PERFORMANCE INFORMATION," average annual total
return is a measure of the change in value of an investment in a Fund over the
period covered, which assumes any dividends or capital gains distributions are
reinvested in such Fund immediately rather than paid to the investor in cash.
Average annual total return will be calculated by: (a) adding to the total
number of Shares purchased by a hypothetical $10,000 investment in that Fund all
additional Shares which would have been purchased if all dividends and
distributions paid during the period had been immediately reinvested; (b)
calculating the value of the hypothetical initial investment of $10,000 as of
the end of the period by multiplying the total number of Shares owned at the end
of the period by the net asset value per share on the last trading day of the
period; (c) assuming redemption at the end of the period; and (d) dividing this
account value for the hypothetical investor by the initial $10,000 investment.
Aggregate total return is a measure of change in value of an investment in a
Fund over the relevant period and is similar to average annual total return
except that the result is not annualized.
Distribution Rates
The Small Cap Value Fund, the Equity Fund, the Balanced Fund, the Fixed
Income Fund and the Short/Intermediate Fund may from time to time advertise
current distribution rates which are calculated in accordance with the method
discussed in such Funds' Prospectus.
Performance Comparisons
Investors may judge the performance of each of the Funds by comparing them
to the performance of other mutual funds with comparable investment objectives
and policies through various mutual fund or market indices such as those
prepared by Dow Jones & Co., Inc. and Standard & Poor's Corporation and to data
prepared by Lipper Analytical Services, Inc., a widely recognized independent
service which monitors the performance of mutual funds. Comparisons may also be
made to indices or data published in Donoghue's MONEY MARKET REPORT, a
nationally recognized money market fund reporting service, MONEY MAGAZINE,
FORBES, BARRON'S, THE WALL STREET JOURNAL, MORNINGSTAR, INC., IBBOTSON
ASSOCIATES, CDA/WIESENBERGER, THE NEW YORK TIMES, BUSINESS WEEK, U.S.A. TODAY
and local periodicals. In addition to performance information, general
information about each of the Funds that appears in a publication such as those
mentioned above may be included in advertisements, in sales literature and in
reports to Shareholders.
From time to time, each of the Funds may include general comparative
information, such as statistical data regarding inflation, securities indices or
the features or performance of alternative investments, in advertisements, sales
literature and reports to Shareholders. A Fund may also include calculations,
such as hypothetical compounding examples, which describe hypothetical
investment results in such communications. Such performance examples will be
based on an express set of assumptions and are not indicative of performance of
any of the Funds.
Current yields or total return will fluctuate from time to time and are not
necessarily representative of future results. Accordingly, a Fund's yield or
total return may not provide for comparison with bank deposits or other
investments that pay a fixed return for a stated period of time. Yield and
total return are functions of a Fund's quality, composition and maturity, as
well as expenses allocated to such Fund. Fees imposed upon Customer accounts by
the Adviser or its affiliated or correspondent banks for cash management
services will reduce a Fund's effective yield and total return to Customers.
Miscellaneous
The Prospectus and this Statement of Additional Information omit certain of
the information contained in the Registration Statement filed with the
Commission. Copies of such information may be obtained from the commission upon
payment of the prescribed fee.
The Prospectus and this Statement of Additional Information are not an
offering of the securities herein described in any state in which such offering
may not lawfully be made. No salesman, dealer, or other person is authorized to
give any information or make any representation other than those contained in
the Prospectus and this Statement of Additional Information.
Financial Statements
The following audited financial statements are attached hereto:
Small Cap Value, Equity, Balanced, Fixed Income, Short/Intermediate and
Money Market Funds
1. Schedules of Portfolio Investments as of March 31, 1997
2. Statements of Assets and Liabilities as of March 31, 1997
3. Statements of Operations for the period ended March 31, 1997
4. Statements of Changes in Net Assets for the periods ended March
31, 1997 and 1996
5. Financial Highlights
6. Notes to Financial Statements
7. Independent Auditors' Report
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
APPENDIX
COMMERCIAL PAPER RATINGS. Commercial paper ratings of Standard & Poor's
Corporation ("S&P") are current assessments of the likelihood of timely payment
of debt considered short-term in the relevant market. Commercial paper rated
A-1 by S&P indicates that the degree of safety regarding timely payment is
strong. Those issues determined to possess extremely strong safety
characteristics are denoted A-l+. Commercial paper rated A-2 by S&P indicates
that capacity for timely payment on issues is satisfactory. However, the
relative degree of safety is not as high as for issues designated A-1.
Commercial paper rated A-3 by S&P indicates adequate capacity for timely
payment. Such paper is, however, more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher designations.
Commercial paper rated B by S&P is regarded as having only speculative capacity
for timely payment. Commercial paper rated C by S&P is regarded as short-term
obligations with a doubtful capacity for payment. Commercial paper rated D by
S&P is in payment default. The D rating category is used when interest payments
or principal payments are not made on the date due, even if the applicable grace
period has not expired, unless S&P believes that such payments will be made
during such grace period.
Moody's Investors Service, Inc.'s ("Moody's") commercial paper rating are
opinions of the ability of issuers to repay punctually senior debt obligations
which have an original maturity not exceeding one year. The rating Prime-1 is
the highest commercial paper rating assigned by Moody's. Issuers rated Prime-1
(or supporting institutions) are considered to have a superior capacity for
repayment of senior short-term debt obligations. Prime-1 repayment ability will
often be evidenced by many of the following characteristics: leading market
positions in well established industries; high rates of return on funds
employed; conservative capitalization structure with moderate reliance on debt
and ample asset protection; broad margins in earnings coverage of fixed
financial charges and high internal cash generation; and well-established access
to a range of financial markets and assured sources of alternate liquidity.
Issuers rated Prime-2 (or supporting institutions) have a strong ability for
repayment of senior short-term debt obligations. This will normally be
evidenced by many of the characteristics of Prime-1 rated issuers, but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variations. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternative liquidity is
maintained. Issuers rated Prime-3 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. The effects of
industry characteristics and market composition may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and the requirement for relatively high financial
leverage. Adequate alternate liquidity is maintained. Issuers rated Not Prime
do not fall within any of the Prime rating categories.
Commercial paper rated F-l+ by Fitch Investors Service ("Fitch") is
regarded as having the strongest degree of assurance for timely payments.
Commercial paper rated F-1 by Fitch is regarded as having an assurance of timely
payment only slightly less than the strongest rating, i.e., F-l+. Commercial
paper rated F-2 by Fitch is regarded as having a satisfactory degree of
assurance of timely payment, but the margin of safety is not as great as for
issues assigned F-l+ or F-1 ratings. Commercial paper rated F-3 by Fitch is
regarded as having characteristics suggesting that the degree of assurance for
timely payment is adequate, however, near-term adverse changes could cause these
securities to be rated below investment grade. Commercial paper rated F-S by
Fitch is regarded as having characteristics suggesting a minimal degree of
assurance for timely payment and is vulnerable to near term adverse changes in
financial and economic conditions. Commercial paper rated D by Fitch is in
actual or imminent payment default.
The description of the three highest short-term debt ratings by Duff &
Phelps, Inc. ("Duff") (Duff incorporates gradations of "1+" (one plus) and "1-"
(one minus) to assist investors in recognizing quality differences within the
highest rating category) are as follows. Duff 1+ is regarded as having the
highest certainty of timely payment. Short-term liquidity, including internal
operating factors and/or access to alternative sources of funds, is outstanding,
and safety is just below risk-free U.S. Treasury short-term obligations. Duff 1
is regarded as having a very high certainty of timely payment. Liquidity
factors are excellent and supported by good fundamental protection factors.
Risk factors are minor. Duff 1- is regarded as having a high certainty of timely
payment. Liquidity factors are strong and supported by good fundamental
protection factors. Risk factors are minor. Duff 2 is regarded as having a good
certainty of timely payment. Liquidity factors and company fundamentals are
sound. Although ongoing funding needs may enlarge total financing requirements,
access to capital markets is good. Risk factors are small. Duff 3 is regarded
as having a satisfactory liquidity and other protection factors qualify issue as
to investment grade. Risk factors are larger and subject to more variation.
Nevertheless, timely payment is expected. Duff 4 is considered as having
speculative investment characteristics. Liquidity is not sufficient to insure
against disruption in debt service. Operating factors and market access may be
subject to a high degree of variation. Duff 5 indicates that the issuer has
failed to meet scheduled principal and/or interest payments.
Commercial paper rated A1 by IBCA Limited and its affiliate, IBCA Inc.
(collectively "IBCA") is regarded by IBCA as obligations supported by the
highest capacity for timely repayment. Where issues possess a particularly
strong credit feature, a rating of Al+ is assigned. Obligations rated A2 are
supported by a good capacity for timely repayment. Obligations rated A3 are
supported by a satisfactory capacity for timely repayment. Obligations rated B
are those for which there is an uncertainty as to the capacity to ensure timely
repayment. Obligations rated C are those for which there is a high risk of
default or which are currently in default.
The following summarizes the description of the three highest short-term
ratings of Thomson BankWatch, Inc. ("Thomson"). TBW-1 is the highest category
and indicates a very high likelihood that principal and interest will be paid on
a timely basis. TBW-2 is the second highest category indicating that while the
degree of safety regarding timely repayment of principal and interest is strong,
the relative degree of safety is not as high as for issues rated "TBW-1." TBW-3
is the lowest investment grade category and indicates that while more
susceptible to adverse developments (both internal and external) than
obligations with higher ratings, capacity to service principal and interest in a
timely fashion is considered adequate. TBW-4 is the lowest rating category and
is regarded as non-investment grade and therefore speculative.
The plus (+) sign is used after a rating symbol to designate the relative
position of an issuer within the rating category.
CORPORATE DEBT RATINGS. A S&P corporate debt rating is a current
assessment of the creditworthiness of an obligor with respect to a specific
obligation. Debt rated AAA has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong. Debt rated AA has a very
strong capacity to pay interest and to repay principal and differs from the
highest rated issues only in small degree. Debt rated A has a strong capacity
to pay interest and repay principal although it is somewhat more susceptible to
adverse effects of changes in circumstances and economic conditions than debt in
higher rated categories. Debt rated BBB is regarded as having an adequate
capacity to pay interest and repay principal. Whereas it normally exhibits
adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay interest and
repay principal for debt in this category than in higher rated categories.
The following summarizes the four highest ratings used by Moody's for
corporate debt. Bonds that are rated Aaa by Moody's are judged to be of the
best quality. They carry the smallest degree of investment risk and are
generally referred to as "gilt edged." Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position of such
issues. Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally known
as high-grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities. Bonds that are rated A by Moody's possess many favorable investment
attributes and are to be considered as upper medium-grade obligations. Factors
giving security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment some time in the
future. Bonds that are rated Baa by Moody's are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as well.
Moody's applies numerical modifiers (1, 2, and 3) with respect to bonds
rated Aa through Baa. The modifier 1 indicates that the bond being rated ranks
in the higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates that the bond ranks in the lower
end of its generic rating category.
The following summarizes the four highest long-term debt ratings by Duff.
Debt rated AAA has the highest credit quality. The risk factors are negligible
being only slightly more than for risk-free U.S. Treasury debt. Debt rated AA
has a high credit quality and protection factors are strong. Risk is modest but
may vary slightly from time to time because of economic conditions. Debt rated
A has protection factors that are average but adequate. However, risk factors
are more variable and greater in periods of economic stress. Debt rated BBB has
below average protection factors but is still considered sufficient for prudent
investment. However, there is considerable variability in risk during economic
cycles.
To provide more detailed indications of credit quality, the ratings from AA
to BBB may be modified by the addition of a plus or minus sign to show relative
standing within this major rating category.
The following summarizes the four highest long-term debt ratings by Fitch
(except for AAA ratings, plus or minus signs are used with a rating symbol to
indicate the relative position of the credit within the rating category). Bonds
rated AAA are considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events. Bonds rated AA are considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated "AAA." Because bonds
rated in the "AAA" and "AA" categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issues is generally
rated "F-1+". Bonds rated as A are considered to be investment grade and of
high credit quality. The obligor's ability to pay interest and repay principal
is considered to be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings. Bonds
rated BBB are considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these bonds,
and therefore, impair timely payment. The likelihood that the ratings for these
bonds will fall below investment grade is higher than for bonds with higher
ratings.
The following summarizes IBCA's four highest long-term debt ratings.
Obligations rated AAA are those for which there is the lowest expectation of
investment risk. Capacity for timely repayment of principal and interest is
substantial, such that adverse changes in business, economic or financial
conditions are unlikely to increase investment risk significantly. Obligations
rated AA are those for which there is a very low expectation of investment risk.
Capacity for timely repayment of principal and interest is substantial. Adverse
changes in business, economic, or financial conditions may increase investment
risk albeit not very significantly. Obligations rated A are those for which
there is a low expectation of investment risk. Capacity for timely repayment of
principal and interest is strong, although adverse changes in business, economic
or financial conditions may lead to increased investment risk. Obligations
rated BBB are those for which there is currently a low expectation of investment
risk. Capacity for timely repayment of principal and interest is adequate,
although adverse changes in business, economic, or financial conditions are more
likely to lead to increased investment risk than for obligations in other
categories.
The following summarizes Thomson's description of its four highest
long-term debt ratings (Thomson may include a plus (+) or minus (-) designation
to indicate where within the respective category the issue is placed). AAA is
the highest category and indicates that the ability to repay principal and
interest on a timely basis is very high. AA is the second highest category and
indicates a superior ability to repay principal and interest on a timely basis
with limited incremental risk versus issues rated in the highest category. A is
the third highest category and indicates the ability to repay principal and
interest is strong. Issues rated "A" could be more vulnerable to adverse
developments (both internal and external) than obligations with higher ratings.
BBB is the lowest investment grade category and indicates an acceptable capacity
to repay principal and interest. Issues rated BBB are, however, more vulnerable
to adverse developments (both internal and external) than obligations with
higher ratings.
MUNICIPAL OBLIGATIONS RATINGS
- -----------------------------
The following summarizes the three highest ratings used by Moody's for
state and municipal short-term obligations. Obligations bearing MIG-1 or VMIG-1
designations are of the best quality, enjoying strong protection by established
cash flows, superior liquidity support or demonstrated broad-based access to the
market for refinancing. Obligations rated MIG-2 or VMIG-2 denote high quality
with ample margins of protection although not so large as in the preceding
rating group. Obligations bearing MIG-3 or VMIG-3 denote favorable quality.
All security elements are accounted for but there is lacking the undeniable
strength of the preceding grades. Liquidity and cash flow protection may be
narrow and market access for refinancing is likely to be less well established.
S&P SP-1, SP-2, and SP-3 municipal note ratings (the three highest ratings
assigned) are described as follows:
"SP-1": Very strong or strong capacity to pay principal and interest.
Those issues determined to possess overwhelming safety characteristics
will be given a plus (+) designation.
"SP-2": Satisfactory capacity to pay principal and interest.
"SP-3": Speculative capacity to pay principal and interest.
The following summarizes the four highest ratings used by Moody's for state
and municipal bonds:
"Aaa": Bonds judged to be of the best quality. They carry the smallest
degree of investment risk and are generally referred to as "gilt edge."
Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective
elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such
issues.
"Aa": Bonds judged to be of high quality by all standards. Together
with the Aaa group they comprise what are generally known as high-grade
bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other
elements present which make the long-term risks appear somewhat larger
than in Aaa securities.
"A": Bonds which possess many favorable investment attributes and are
to be considered as upper medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but
elements may be present which suggest a susceptibility to impairment
sometime in the future.
"Baa": Bonds which are considered as medium grade obligations, i.e,
they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics
as well.
The following summarizes the four highest ratings used by S&P for state and
municipal bonds:
"AAA": Debt which has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
"AA": Debt which has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small
degree.
"A": Debt which has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt
in higher rated categories.
"BBB": Debt which has adequate capacity to pay interest and repay
principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to pay interest and repay
principal for debt in this category than in higher rated categories.
DEFINITIONS OF CERTAIN MONEY MARKET INSTRUMENTS
- -----------------------------------------------
Commercial Paper
Commercial paper consists of unsecured promissory notes issued by
corporations. Issues of commercial paper normally have maturities of less than
nine months and fixed rates of return.
Certificates of Deposit
Certificates of Deposit are negotiable certificates issued against funds
deposited in a commercial bank or a savings and loan association for a definite
period of time and earning a specified return.
Bankers' Acceptances
Bankers' acceptances are negotiable drafts or bills of exchange, normally
drawn by an importer or exporter to pay for specific merchandise, which are
"accepted" by a bank, meaning, in effect, that the bank unconditionally agrees
to pay the face value of the instrument on maturity.
U.S. Treasury Obligations
U.S. Treasury Obligations are obligations issued or guaranteed as to
payment of principal and interest by the full faith and credit of the U.S.
government. These obligations may include Treasury bills, notes and bonds, and
issues of agencies and instrumentalities of the U.S. government, provided such
obligations are guaranteed as to payment of principal and interest by the full
faith and credit of the U.S. government.
U.S. Government Agency and Instrumentality Obligations
Obligations of the U.S. government include Treasury bills, certificates of
indebtedness, notes and bonds, and issues of agencies and instrumentalities of
the U.S. government, such as the Government National Mortgage Association, the
Tennessee Valley Authority, the Farmers Home Administration, the Federal Home
Loan Banks, the Federal Intermediate Credit Banks, the Federal Farm Credit
Banks, the Federal Land Banks, the Federal Housing Administration, the Federal
National Mortgage Association, the Federal Home Loan Mortgage Corporation, and
the Student Loan Marketing Association. Some of these obligations, such as
those of the Government National Mortgage Association, are supported by the full
faith and credit of the U.S. Treasury; others, such as those of the Federal
National Mortgage Association, are supported by the right of the issuer to
borrow from the Treasury; others, such as those of the Student Loan Marketing
Association, are supported by the discretionary authority of the U.S. government
to purchase the agency's obligations; still others, such as those of the Federal
Farm Credit Banks, are supported only by the credit of the instrumentality. No
assurance can be given that the U. S. government would provide financial support
to U.S. government-sponsored instrumentalities if it is not obligated to do so
by law.
PART C
------
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
(1) Not applicable.
(2) Included in Part B:
A. First Omaha Funds, Inc.'s Schedules of Portfolio Investments
as of March 31, 1997. Statements of Assets and Liabilities
as of March 31, 1997. Statements of Operations for the
period ended March 31, 1997. Statements of Changes in Net
Assets for the periods ended March 31, 1996 and 1997.
Financial Highlights. Notes to Financial Statements.
(b) Exhibits
EXHIBIT
NO. DESCRIPTION
- ------- -----------
1.1 Articles of Incorporation (incorporated by reference to exhibit 1.1 to
PEA No. 5 on Form N-1A Registration Statement filed July 23, 1996)
1.2 Amendment to Articles of Incorporation, dated December 19, 1994
(incorporated by reference to exhibit 1.2 to PEA No. 5 on Form N-1A
Registration Statement filed July 23, 1996)
1.3 Amendment to Articles of Incorporation, dated January 31, 1996
(incorporated by reference to exhibit 1.3 to PEA No. 5 on Form N-1A
Registration Statement filed July 23, 1996)
1.4 Amendment to Articles of Incorporation, dated July 29, 1996
(incorporated by reference to exhibit 1.4 to PEA No. 6 on Form N-1A
Registration Statement filed December 10, 1996)
2. Bylaws (incorporated by reference to exhibit 2 to PEA No. 5 on Form N-
1A Registration Statement filed July 23, 1996)
3. None.
4. None.
5.1 Investment Advisory Agreement, as amended (incorporated by reference
to exhibit 5.1 to PEA No. 5 on Form N-1A Registration Statement filed
July 23, 1996)
EXHIBIT
NO. DESCRIPTION
- ------- -----------
6.1 Distribution Agreement (incorporated by reference to exhibit 6 to
original Form N-1A Registration Statement filed November 1, 1994)
(superceded)
6.2 Amended Schedule A to the Distribution Agreement by and between First
Omaha Funds, Inc. and Sunstone Financial Group, Inc. (incorporated by
reference to exhibit 6.2 to PEA No. 5 on Form N-1A Registration
Statement filed July 23, 1996) (superceded)
6.3 Distribution Agreement by and between First Omaha Funds, Inc. and
Sunstone Distribution Services, LLC
7. None.
8.1 Custodian Agreement, as amended (incorporated by reference to exhibit
8.1 to PEA No. 5 on Form N-1A Registration Statement filed July 23,
1996)
9.1 Administration and Fund Accounting Agreement
9.2 Form of Amended and Restated Schedule A to the Administration and Fund
Accounting Agreement by and between First Omaha Funds, Inc. and
Sunstone Financial Group, Inc. (incorporated by reference to exhibit
9.2 to PEA No. 5 on Form N-1A Registration Statement filed July 23,
1996)
9.3 Administrative Services Plan and Servicing Agreement (incorporated by
reference to exhibit 9.3 to PEA No. 5 on Form N-1A Registration
Statement filed July 23, 1996)
9.4 Transfer Agency Agreement, as amended (incorporated by reference to
exhibit 9.4 to PEA No. 5 on Form N-1A Registration Statement filed
July 23, 1996)
9.5 Form of Amended and Restated Schedule A to the Transfer Agency
Agreement By and Between First Omaha Funds, Inc. and First National
Bank of Omaha (incorporated by reference to exhibit 9.5 to PEA No. 5
on Form N-1A Registration Statement filed July 23, 1996)
9.6 Form of Amended and Restated Servicing Agreement to Administrative
Services Plan (incorporated by reference to exhibit 9.6 to PEA No. 6
on Form N-1A Registration Statement filed December 10, 1996)
10. Opinion and Consent of Messrs. Cline, Williams, Wright, Johnson &
Oldfather (incorporated by reference to exhibit 10. to PEA No. 5 on
Form N-1A Registration Statement filed July 23, 1996)
11. Consent of Independent Certified Public Accountants
12. None.
13. Subscription Agreement of Miriam M. Allison (incorporated by reference
to exhibit 13. to PEA No. 5 on Form N-1A Registration Statement filed
July 23, 1996)
14.1 Individual Retirement Account Disclosure Statement and Custodial
Account Agreement
14.2 SIMPLE Individual Retirement Account Disclosure Statement and
Custodial Account Agreement
15. Distribution and Service Plan (incorporated by reference to exhibit
15. to PEA No. 5 on Form N-1A Registration Statement filed July 23,
1996)
16. Not applicable.
EXHIBIT
NO. DESCRIPTION
- ------- -----------
17.1 First Omaha Small Cap Value Fund
Financial Data Schedule as of March 31, 1997
17.2 First Omaha Equity Fund
Financial Data Schedule as of March 31, 1997
17.3 First Omaha Balanced Fund
Financial Data Schedule as of March 31, 1997
17.4 First Omaha Fixed Income Fund
Financial Data Schedule as of March 31, 1997
17.5 First Omaha Short/Intermediate Fixed Income Fund
Financial Data Schedule as of March 31, 1997
17.6 First Omaha U.S. Government Obligations Fund
Financial Data Schedule as of March 31, 1997
18. None.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
NUMBER OF
RECORD HOLDERS
TITLE OF CLASS AS OF May 31, 1997
- -------------- ------------------
U.S. Government Obligations Fund 93
Equity Fund 1,375
Short/Intermediate Fixed Income Fund 174
Fixed Income Fund 247
Small Cap Value Fund 98
Balanced Fund 47
ITEM 27. INDEMNIFICATION
Section 21-2004(15) of the Nebraska Business Corporation Act allows
indemnification of officers and directors of the Registrant under circumstances
set forth therein. The Registrant has made such indemnification mandatory.
Reference is made to Article 8-D of the Articles of Incorporation (Exhibit 1),
Article XIII of the Bylaws of Registrant (Exhibit 2).
The general effect of such provision is to require indemnification of
persons who are in an official capacity with the corporation against judgments,
penalties, fines and reasonable expenses including attorneys' fees incurred by
said person if: (1) the person has not been indemnified by another organization
for the same judgments, penalties, fines and expenses for the same acts or
omissions; (2) the person acted in good faith; (3) the person received no
improper personal benefit; (4) in the case of a criminal proceeding, the person
had no reasonable cause to believe the conduct was unlawful; and (5) in the case
of directors, officers and employees of the corporation, such persons reasonably
believed that the conduct was in the best interests of the corporation, or in
the case of directors, officers or employees serving at the request of the
corporation for another organization, such person reasonably believed that the
conduct was not opposed to the best interests of the corporation. A corporation
is permitted to maintain insurance on behalf of any officer, director, employee
or agent of the corporation, or any person serving as such at the request of the
corporation, against any liability of such person.
Nevertheless, Article 8-D of the Articles of Incorporation prohibits any
indemnification which would be in violation of Section 17(h) of the Investment
Company Act of 1940, as now enacted or hereafter amended and Article XIII of the
Fund's Bylaws prohibits any indemnification inconsistent with the guidelines set
forth in Investment Company Act Releases No. 7221 (June 9, 1972) and No. 11330
(September 2, 1980). Such Releases prohibit indemnification in cases involving
willful misfeasance, bad faith, gross negligence and reckless disregard of duty
and establish procedures for the determination of entitlement to indemnification
and expense advances.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions or otherwise, the Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification by the Registrant is against public policy as expressed in the
Act and, therefore, may be unenforceable. In the event that a claim for such
indemnification (except insofar as it provides for the payment by the Registrant
of expenses incurred or paid by a director, officer or controlling person in the
successful defense of any action, suit or proceeding) is asserted against the
Registrant by such director, officer or controlling person and the Securities
and Exchange Commission is still of the same opinion, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
or not such indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
In addition to the indemnification provisions contained in the Registrant's
Articles and Bylaws, there are also indemnification and hold harmless provisions
contained in the Investment Advisory Agreement, Distribution Agreement,
Administration and Fund Accounting Agreement and Custodian Agreement. Finally,
the Registrant has also included in its Articles of Incorporation (See Article X
of the Articles of Incorporation (Exhibit 1)) a provision which eliminates the
liability of outside directors to monetary damages for breach of fiduciary duty
by such directors. Pursuant to Neb. Rev. Stat. Section 21-2035(2), such
limitation of liability does not eliminate or limit liability of such directors
for any act or omission not in good faith which involves intentional misconduct
or a knowing violation of law, any transaction from which such director derived
an improper direct or indirect financial benefit, for paying a divided or
approving a stock repurchase which was in violation of the Nebraska Business
Corporation Act and for any act or omission which violates a declaratory or
injunctive order obtained by the Registrant or its shareholders.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
First National Bank of Omaha (the "Adviser") is the investment adviser for
First Omaha Small Cap Value Fund, First Omaha Equity Fund, First Omaha
Balanced Fund, First Omaha Fixed Income Fund, First Omaha Short/Intermediate
Fixed Income Fund and First Omaha U.S. Government Obligations Fund. The Adviser
is a subsidiary of First National of Nebraska, Inc., a Nebraska corporation with
total assets of approximately $6.9 billion as of December 31, 1996. The Adviser
provides a full range of financial and trust services to businesses,
individuals, and government entities. The Adviser serves Nebraska, as well as
other areas of the Midwest. As of December 31, 1996, the Adviser's Trust
Division had approximately $7.5 billion of assets under administration,
including approximately $2.9 billion under management.
To the knowledge of Registrant, none of the directors or officers of the
Adviser is or has been at any time during the past two fiscal years engaged in
any other business, profession, vocation or employment of a substantial nature,
except that certain officers and directors of the Adviser also hold positions
with the Adviser's parent, First National of Nebraska, Inc., or its subsidiaries
or affiliates.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Sunstone Distribution Services, LLC currently serves as
distributor of the shares of Haven Capital Management Trust, Green
Century Funds, The Garzarelli Funds and Northern Funds Trust.
(b) To the best of Registrant's knowledge, the directors and executive
officers of Sunstone Distribution Services, LLC, distributor for
Registrant, are as follows:
POSITIONS AND POSITIONS AND
NAME AND PRINCIPAL OFFICES WITH OFFICES WITH
BUSINESS ADDRESS UNDERWRITER REGISTRANT
- ------------------ ------------- ----------
Miriam M. Allison President and None
207 E. Buffalo Street Director
Suite 400
Milwaukee, WI 53202
Daniel S. Allison Secretary and None
1241 N. Franklin Place Director
Milwaukee, WI 53202
Mary M. Tenwinkel Vice President None
207 E. Buffalo Street
Suite 400
Milwaukee, WI 53202
(c) None.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
Records relating to Sunstone Financial Group, Inc.'s functions as
fund accountant and administrator for the Registrant are located at
207 E. Buffalo Street, Suite 400, Milwaukee, Wisconsin 53202. All other
accounts, books and other documents required to be maintained under Section
31(a) of the Investment Company Act of 1940 and the Rules promulgated thereunder
are in the physical possession of the Adviser, One First National Center, Omaha,
Nebraska 68102 or DST Systems, Inc., 210 W. 10th Street, Kansas City, Missouri
64105.
ITEM 31. MANAGEMENT SERVICES
Not applicable.
ITEM 32. UNDERTAKINGS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned Registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
The Registrant undertakes to provide a copy of its Annual Report to
Shareholders upon request and without charge to each person to whom the
Prospectus of the Funds has been delivered.
The Registrant undertakes, if requested to do so by the holders of at least
10% of Registrant's outstanding shares, to call a meeting of shareholders for
the purpose of voting upon the question of removal of any director and to assist
in communications with other shareholders as required by Section 16(c).
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets the requirements for
effectiveness of this amendment to its Registration Statement under Rule 485(b)
under the Securities Act of 1933 and has duly caused this Post-Effective
Amendment to the Registration Statement on Form N-1A to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Omaha and the
State of Nebraska, on the 16th day of July, 1997. No other material event
requiring prospectus disclosure has occurred since the later of the three dates
specified by Rule 485(b).
FIRST OMAHA FUNDS, INC.
By: /s/Marc M Diehl
-------------------------
David P. Greer, President
by Marc M Diehl, attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this amendment to
the Registration Statement has been signed below by the following persons in the
capacities indicated on July 16, 1997.
Signature Title
--------- -----
/s/ Marc M Diehl*
- ----------------------- President, Principal
David P. Greer Executive, Financial
& Accounting Officer
& Director
/s/ Marc M Diehl*
- ----------------------- Director
Joseph Caggiano
*/s/Marc M Diehl
/s/ Marc M Diehl* ----------------------------------
- ----------------------- Director by Marc M Diehl, attorney-in-fact
Robert A. Reed
/s/ Marc M Diehl*
- ---------------------- Director
Harry A. Koch, Jr.
- ---------------------- Director
Gary Witt
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
- ------- -----------
1.1 Articles of Incorporation (incorporated by reference to exhibit 1.1 to
PEA No. 5 on Form N-1A Registration Statement filed July 23, 1996)
1.2 Amendment to Articles of Incorporation, dated December 19, 1994
(incorporated by reference to exhibit 1.2 to PEA No. 5 on Form N-1A
Registration Statement filed July 23, 1996)
1.3 Amendment to Articles of Incorporation, dated January 31, 1996
(incorporated by reference to exhibit 1.3 to PEA No. 5 on Form N-1A
Registration Statement filed July 23, 1996)
1.4 Amendment to Articles of Incorporation, dated July 29, 1996
(incorporated by reference to exhibit 1.4 to PEA No. 6 on Form N-1A
Registration Statement filed December 10, 1996)
2. Bylaws (incorporated by reference to exhibit 2 to PEA No. 5 on Form N-
1A Registration Statement filed July 23, 1996)
3. None.
4. None.
5.1 Investment Advisory Agreement, as amended (incorporated by reference
to exhibit 5.1 to PEA No. 5 on Form N-1A Registration Statement filed
July 23, 1996)
EXHIBIT
NO. DESCRIPTION
- ------- -----------
6.1 Distribution Agreement (incorporated by reference to exhibit 6 to
original Form N-1A Registration Statement filed November 1, 1994)
(superceded)
6.2 Amended Schedule A to the Distribution Agreement by and between First
Omaha Funds, Inc. and Sunstone Financial Group, Inc. (incorporated by
reference to exhibit 6.2 to PEA No. 5 on Form N-1A Registration
Statement filed July 23, 1996) (superceded)
6.3 Distribution Agreement by and between First Omaha Funds, Inc. and
Sunstone Distribution Services, LLC
7. None.
8.1 Custodian Agreement, as amended (incorporated by reference to exhibit
8.1 to PEA No. 5 on Form N-1A Registration Statement filed July 23,
1996)
9.1 Administration and Fund Accounting Agreement
9.2 Form of Amended and Restated Schedule A to the Administration and Fund
Accounting Agreement by and between First Omaha Funds, Inc. and
Sunstone Financial Group, Inc. (incorporated by reference to exhibit
9.2 to PEA No. 5 on Form N-1A Registration Statement filed July 23,
1996)
9.3 Administrative Services Plan and Servicing Agreement (incorporated by
reference to exhibit 9.3 to PEA No. 5 on Form N-1A Registration
Statement filed July 23, 1996)
9.4 Transfer Agency Agreement, as amended (incorporated by reference to
exhibit 9.4 to PEA No. 5 on Form N-1A Registration Statement filed
July 23, 1996)
9.5 Form of Amended and Restated Schedule A to the Transfer Agency
Agreement By and Between First Omaha Funds, Inc. and First National
Bank of Omaha (incorporated by reference to exhibit 9.5 to PEA No. 5
on Form N-1A Registration Statement filed July 23, 1996)
9.6 Form Of Amended and Restated Servicing Agreement to Administrative
Services Plan (incorporated by reference to exhibit 9.6 to PEA No. 6
on Form N-1A Registration Statement filed December 10, 1996)
10. Opinion and Consent of Messrs. Cline, Williams, Wright, Johnson &
Oldfather (incorporated by reference to exhibit 10. to PEA No. 5 on
Form N-1A Registration Statement filed July 23, 1996)
11. Consent of Independent Certified Public Accountants
12. None.
13. Subscription Agreement of Miriam M. Allison (incorporated by reference
to exhibit 13. to PEA No. 5 on Form N-1A Registration Statement filed
July 23, 1996)
14.1 Individual Retirement Account Disclosure Statement and Custodial
Account Agreement
14.2 SIMPLE Individual Retirement Account Disclosure Statement and
Custodial Account Agreement
15. Distribution and Service Plan (incorporated by reference to exhibit
15. to PEA No. 5 on Form N-1A Registration Statement filed July 23,
1996)
16. Not applicable.
EXHIBIT
NO. DESCRIPTION
- ------- -----------
17.1 First Omaha Small Cap Value Fund
Financial Data Schedule as of March 31, 1997
17.2 First Omaha Equity Fund
Financial Data Schedule as of March 31, 1997
17.3 First Omaha Balanced Fund
Financial Data Schedule as of March 31, 1997
17.4 First Omaha Fixed Income Fund
Financial Data Schedule as of March 31, 1997
17.5 First Omaha Short/Intermediate Fixed Income Fund
Financial Data Schedule as of March 31, 1997
17.6 First Omaha U.S. Government Obligations Fund
Financial Data Schedule as of March 31, 1997
18. None.
DISTRIBUTION AGREEMENT
THIS AGREEMENT is made as of January 1st, 1997, by and between First Omaha
Funds, Inc., a Nebraska corporation ("First Omaha Funds") and Sunstone
Distribution Services, LLC, a Wisconsin limited liability company (the
"Distributor").
W I T N E S S E T H :
WHEREAS, First Omaha Funds is registered under the Investment Company Act
of 1940, as amended (the "1940 Act"), as an open-end management investment
company and is authorized to issue shares of common stock ("Shares") in separate
series with each such series representing the interests in a separate portfolio
of securities and other assets;
WHEREAS, the Distributor is registered as a broker-dealer under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and is a member in
good standing of the National Association of Securities Dealers, Inc. (the
"NASD"); and
WHEREAS, First Omaha Funds and Distributor desire to enter into an
agreement pursuant to which Distributor shall be the distributor of the Shares
of First Omaha Funds representing the investment portfolios listed on Schedule A
hereto and any additional investment portfolios First Omaha Funds and
Distributor may agree upon and include on Schedule A as such Schedule may be
amended from time to time (such investment portfolios and any additional
investment portfolios are individually referred to as a "Fund" and collectively
the "Funds").
NOW, THEREFORE, in consideration of the mutual promises and agreements
herein contained and other good and valuable consideration, the receipt of which
is hereby acknowledged, the parties hereto, intending to be legally bound, do
hereby agree as follows:
1. Appointment of the Distributor.
First Omaha Funds hereby appoints the Distributor as agent for the
distribution of the Shares, on the terms and for the period set forth in this
Agreement. Distributor hereby accepts such appointment as agent for the
distribution of the Shares on the terms and for the period set forth in this
Agreement.
2. Services as Distributor.
2.1(a) Distributor will act as agent for the distribution of Shares in
accordance with the instructions of First Omaha Funds' Board of Directors and
the registration statement and prospectus then in effect with respect to the
Funds under the Securities Act of 1933, as amended (the "1933 Act"), and will
transmit promptly any orders received for the purchase or redemption of Shares
either directly to the transfer agent for the Funds or to any qualified
broker/dealer for transmittal to said agent.
2.1(b) Distributor, at its own expense, shall finance appropriate
activities which it deems reasonable which are primarily intended to result in
the sale of Shares, including, but not limited to, advertising, the printing and
mailing of prospectuses to other than current shareholders, and the printing and
mailing of sales literature. Distributor may enter into servicing and/or
selling agreements with qualified broker/dealers and other persons with respect
to the offering of Shares to the public, and if it so chooses Distributor will
act only on its own behalf as principal. The Distributor shall not be obligated
to sell any number of Shares of any Fund. All advertising and sales literature
relating to the Funds shall be filed with the NASD as required by the NASD's
Rules of Fair Practice.
2.1(c) All Shares of the Funds offered for sale by Distributor shall be
offered for sale to the public at a price per share (the "offering price")
equal to (a) their net asset value (determined in the manner set forth in First
Omaha Funds' then current prospectus) plus (b) the applicable sales charge, if
any, determined as set forth in the then current prospectus. The offering
price, if not an exact multiple of one cent, shall be adjusted to the nearest
cent. Concessions by Distributor to broker/dealers and other persons shall be
set forth in either the selling agreements between Distributor and such
broker/dealers and persons or, if such concessions are described in First Omaha
Funds' then current prospectus, shall be as so set forth. No broker/dealer or
other person who enters into a selling agreement with Distributor shall be
authorized to act as agent for First Omaha Funds in connection with the offering
or sale of Shares to the public or otherwise.
2.1(d) If any Shares sold by First Omaha Funds are redeemed or
repurchased by First Omaha Funds or by Distributor as agent and are tendered for
redemption within seven business days after the date of confirmation of the
original purchase of said Shares, Distributor shall forfeit the amount above the
net asset value received by it in respect of such Shares, if any, provided that
the portion, if any, of such amount re-allowed by Distributor to broker/dealers
or other persons shall be repayable to First Omaha Funds only to the extent
recovered by Distributor from the broker/dealer or other person concerned.
Distributor shall include in the forms of agreement with such broker/dealers and
other persons a corresponding provision for the forfeiture by them of their
concession with respect to Shares sold by them or their principals and redeemed
or repurchased by First Omaha Funds or by Distributor as agent (or tendered for
redemption) within seven business days after the date of confirmation of such
initial purchases.
2.2 Distributor shall act as distributor of the Shares in compliance with
all applicable laws, rules and regulations, including, without limitation, all
rules and regulations made or adopted pursuant to the 1940 Act, by the
Securities and Exchange Commission (the "Commission") or any securities
association registered under the 1934 Act.
2.3 Whenever in their judgment such action is warranted by market,
economic or political conditions, or by circumstances of any kind, First Omaha
Funds' officers may decline to accept any orders for, or make any sales of, any
Shares until such time as they deem it advisable to accept such orders and to
make such sales and First Omaha Funds shall advise Distributor promptly of such
determination.
3. Duties and Representations of First Omaha Funds.
3.1 First Omaha Funds shall take all necessary action to register and
maintain the registration of the Shares under the 1933 Act for sale as herein
contemplated and shall pay all costs and expenses in connection with the
registration of Shares under the 1933 Act, and be responsible for all expenses
in connection with maintaining facilities for the issue and transfer of Shares
and for supplying information, prices and other data to be furnished by First
Omaha Funds hereunder.
3.2 First Omaha Funds shall qualify and maintain the qualification of an
appropriate number of Shares and execute any and all documents and furnish any
and all information and otherwise take all actions which may be reasonably
necessary in the discretion of First Omaha Funds' officers in connection with
the qualification of the Shares for sale in such states as Distributor and First
Omaha Funds may approve, and First Omaha Funds shall pay all expenses which may
be incurred in connection with such qualification. Distributor shall pay all
expenses connected with its own qualification as a broker under State or Federal
laws and, except as otherwise specifically provided in this Agreement, all other
expenses incurred by Distributor in connection with the sale by Distributor of
Shares as contemplated in this Agreement.
3.3 First Omaha Funds shall furnish Distributor from time to time, for use
in connection with the sale of Shares, such information with respect to First
Omaha Funds and the Shares as Distributor may reasonably request, and First
Omaha Funds warrants that the statements contained in any such information shall
be true and correct. First Omaha Funds shall also furnish Distributor upon
request with: (a) annual audited reports of First Omaha Funds' books and
accounts with respect to each of the Funds, made by independent public
accountants regularly retained by First Omaha Funds, (b) semi-annual reports
with respect to each of the Funds prepared by or on behalf of First Omaha Funds,
and (c) from time to time such additional information regarding First Omaha
Funds' financial condition as Distributor may reasonably request.
3.4 First Omaha Funds represents to Distributor that all registration
statements and prospectuses filed by First Omaha Funds with the Commission under
the 1933 Act with respect to the Shares have been prepared in conformity with
the requirements of the 1933 Act, the 1940 Act, and the rules and regulations of
the Commission thereunder. As used in this Agreement the terms "registration
statement" and "prospectus" shall mean any registration statement and prospectus
(together with the related statement of additional information) at any time
filed with the Commission with respect to any of the Shares and any amendments
and supplements thereto which at any time shall have been filed with said
Commission. First Omaha Funds represents and warrants to Distributor that any
registration statement and prospectus, when such registration statement becomes
effective, will contain all statements required to be stated therein in
conformity with the 1933 Act, the 1940 Act, and the rules and regulations of the
Commission; that all statements of fact contained in the registration statement
and prospectus will be true and correct in all material respects when such
registration statement becomes effective; and that neither the registration
statement nor any prospectus when such registration statement becomes effective
will include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading to a purchaser of Shares. First Omaha Funds agrees to file from
time to time such amendments, supplements, reports and other documents as may be
necessary in order to comply with the 1933 Act and the 1940 Act and in order
that there may be no untrue statement of a material fact in a registration
statement or prospectus, or necessary in order that there may be no omission to
state a material fact in the registration statement or prospectus which omission
would make the statements therein misleading. If First Omaha Funds shall not
propose an amendment or amendments and/or supplement or supplements within
fifteen days after receipt by First Omaha Funds of a written request from
Distributor to do so, Distributor may, at its option, terminate this Agreement.
First Omaha Funds shall give Distributor notice within a reasonable period of
time prior to the filing of any amendment to the registration statement or
supplement to any prospectus; provided, however, that nothing contained in this
Agreement shall in any way limit First Omaha Funds' right to file at any time
such amendments to any registration statement and/or supplements to any
prospectus, of whatever character, as First Omaha Funds may deem advisable, such
right being in all respects absolute and unconditional.
3.5 First Omaha Funds represents that it is registered as an open-end
management investment company under the 1940 Act and that it shall comply with
all applicable laws, rules and regulations including the 1933 Act, the 1934 Act
and the 1940 Act and the rules and regulations thereunder.
3.6 First Omaha Funds agrees to advise Distributor promptly in writing:
(a) of any request by the Commission for amendments to the registration
statement or prospectus then in effect;
(b) in the event of the issuance by the Commission of any stop order suspending
the effectiveness of the registration statement or prospectus then in effect or
the initiation of any proceeding for that purpose;
(c) of the happening of any event which makes untrue any statement of a
material fact made in the registration statement or prospectus then in effect or
which requires the making of a change in such registration statement or
prospectus in order to make the statements therein not misleading; and
(d) of all actions of the Commission with respect to any amendments to any
registration statement or prospectus which may from time to time be filed with
the Commission.
4. Indemnification.
4.1(a) First Omaha Funds authorizes Distributor to use any prospectus,
in the form furnished to Distributor from time to time, in connection with the
sale of Shares. First Omaha Funds shall indemnify, defend and hold the
Distributor, and each of its present or former directors, members, officers,
employees, representatives and any person who controls or previously controlled
the Distributor within the meaning of Section 15 of the 1933 Act, free and
harmless from and against any and all losses, claims, demands, liabilities,
damages and expenses (including the costs of investigating or defending any
alleged losses, claims, demands, liabilities, damages or expenses and any
counsel fees incurred in connection therewith) which Distributor, each of its
present and former directors, members, officers, employees or representatives or
any such controlling person, may incur under the 1933 Act, the 1934 Act, any
other statute (including Blue Sky laws) or any rule or regulation thereunder, or
under common law or otherwise, arising out of or based upon any untrue
statement, or alleged untrue statement, of a material fact contained in the
registration statement or any prospectus, as from time to time amended or
supplemented, or an annual or interim report to shareholders, or arising out of
or based upon any omission, or alleged omission, to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading; provided, however, that First Omaha Funds' obligation to
indemnify Distributor and any of the foregoing indemnities, shall not be deemed
to cover any losses, claims, demands, liabilities, damages or expenses arising
out of any untrue statement or alleged untrue statement or omission or alleged
omission made in the registration statement, prospectus, or annual or interim
report in reliance upon and in conformity with information furnished to First
Omaha Funds or its counsel by Distributor for the purpose of, and used in, the
preparation thereof; and provided further that First Omaha Funds' agreement to
indemnify Distributor and any of the foregoing indemnities shall not be deemed
to cover any liability to First Omaha Funds or its shareholders to which
Distributor would otherwise be subject by reason of its willful misfeasance, bad
faith or gross negligence in the performance of its duties, or by reason of its
reckless disregard of its obligations and duties under this Agreement. First
Omaha Funds' agreement to indemnify the Distributor, and each of its present or
former directors, members, officers, employees, representatives or any
controlling person, as the case may be, with respect to any action, is expressly
conditioned upon First Omaha Funds being notified of such action brought against
Distributor, or each of its present or former directors, members, officers,
employees, representatives or any such controlling person, within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon the Distributor, or such person,
such notification to be given by letter or by telegram addressed to First Omaha
Funds' Chairman, but the failure so to notify First Omaha Funds of any such
action shall not relieve First Omaha Funds from any liability which First Omaha
Funds may have to the person against whom such action is brought by reason of
any such untrue, or alleged untrue, statement or omission, or alleged omission,
otherwise than on account of First Omaha Funds' indemnity agreement contained in
this paragraph 4.1(a).
4.1(b) First Omaha Funds shall be entitled to participate at its own
expense in the defense or, if it so elects, to assume the defense of any suit
brought to enforce any such loss, claim, demand, liability, damage or expense,
but if First Omaha Funds elects to assume the defense, such defense shall be
conducted by counsel chosen by First Omaha Funds and approved by the
Distributor, which approval shall not be unreasonably withheld. In the event
First Omaha Funds elects to assume the defense of any such suit and retain such
counsel, the indemnified defendant or defendants in such suit shall bear the
fees and expenses of any additional counsel retained by them. If First Omaha
Funds does not elect to assume the defense of any such suit, or in case the
Distributor does not, in the exercise of reasonable judgment, approve of counsel
chosen by First Omaha Funds, First Omaha Funds will reimburse the indemnified
person or persons named as defendant or defendants in such suit, for the fees
and expenses of any counsel retained by Distributor and them. First Omaha
Funds' indemnification agreement contained in this paragraph 4.1 and First Omaha
Funds' representations and warranties in this Agreement shall remain operative
and in full force and effect regardless of any investigation made by or on
behalf of the Distributor, and each of its present or former directors, members,
officers, employees, representatives or any controlling person, and shall
survive the delivery of any Shares and the termination of this Agreement. This
Agreement of indemnity will inure exclusively to the Distributor's benefit, to
the benefit of each of its present or former directors, members, officers,
employees or representatives or to the benefit of any controlling persons and
their successors. First Omaha Funds agrees promptly to notify Distributor of
the commencement of any litigation or proceedings against First Omaha Funds or
any of its officers or directors in connection with the issue and sale of any of
the Shares.
4.2 Distributor shall indemnify, defend and hold First Omaha Funds, and
each of its present or former directors, officers, employees, representatives,
and any person who controls or previously controlled First Omaha Funds within
the meaning of Section 15 of the 1933 Act, free and harmless from and against
any and all losses, claims, demands, liabilities, damages and expenses
(including the costs of investigating or defending any alleged losses, claims,
demands, liabilities, damages or expenses, and any counsel fees incurred in
connection therewith) which First Omaha Funds, and each of its present or former
directors, officers, employees, representatives, or any such controlling person,
may incur under the 1933 Act, the 1934 Act, any other statute (including Blue
Sky laws) or any rule or regulation thereunder, or under common law or
otherwise, arising out of or based upon any untrue, or alleged untrue, statement
of a material fact contained in First Omaha Funds' registration statement or any
prospectus, as from time to time amended or supplemented, or annual or interim
report to shareholders or the omission, or alleged omission, to state therein a
material fact required to be stated therein or necessary to make the statement
not misleading, but only if such statement or omission was made in reliance
upon, and in conformity with, information furnished to First Omaha Funds or its
counsel by the Distributor for the purpose of, and used in, the preparation
thereof. Distributor's agreement to indemnify First Omaha Funds and any of the
foregoing indemnities shall not be deemed to cover any liability to Distributor
to which First Omaha Funds would otherwise be subject by reason of its willful
misfeasance, bad faith or gross negligence in the performance of its duties, or
by reason of its reckless disregard of its obligations and duties, under this
Agreement. The Distributor's Agreement to indemnify First Omaha Funds, its
present or former directors, officers, employees, representatives, and any such
controlling person, as aforesaid, is expressly conditioned upon the
Distributor's being notified of any action brought against First Omaha Funds,
its present or former directors, officers, employees, representatives, or any
such controlling person, such notification to be given by letter or telegram
addressed to Distributor's President, within a reasonable time after the summons
or other first legal process giving information of the nature of the claim shall
have been served upon First Omaha Funds or such person, but the failure so to
notify Distributor of any such action shall not relieve Distributor from any
liability which Distributor may have to the person against whom such action is
brought by reason of any such untrue, or alleged untrue, statement or omission,
otherwise than on account of Distributor's indemnity agreement contained in
this paragraph 4.2. In case any action shall be brought against First Omaha
Funds, and each of its present or former directors, officers, employees,
representatives, or controlling persons, in respect of which indemnity may be
sought against the Distributor, the Distributor shall have the rights and duties
given to First Omaha Funds, and First Omaha Funds and each person so indemnified
shall have the rights and duties given to the Distributor by the provisions of
paragraph 4.1(b).
5. Offering of Shares.
5.1 No Shares shall be offered by either Distributor or First Omaha Funds
under any of the provisions of this Agreement and no orders for the purchase or
sale of such Shares hereunder shall be accepted by First Omaha Funds if and so
long as the effectiveness of the registration statement then in effect or any
necessary amendments thereto shall be suspended under any of the provisions of
the 1933 Act, or if and so long as a current prospectus as required by Section
10 of the 1933 Act, as amended, is not on file with the Commission; provided,
however, that nothing contained in this paragraph 5.1 shall in any way restrict
or have an application to or bearing upon First Omaha Funds' obligation to
repurchase Shares from any shareholder in accordance with the provisions of the
prospectus or Articles of Incorporation.
6. Term.
6.1 This Agreement shall become effective with respect to each Fund listed
on Schedule A hereof as of the date set forth on Schedule A and, with respect to
each Fund not in existence on that date, on the date an amendment to Schedule A
to this Agreement relating to that Fund is executed. Unless sooner terminated
as provided herein, this Agreement shall continue in effect with respect to each
Fund until April 10, 1997. Thereafter, if not terminated, this Agreement shall
continue automatically in effect as to each Fund for successive annual periods,
provided such continuance is specifically approved at least annually by (i)
First Omaha Funds' Board of Directors or (ii) the vote of a majority (as defined
in the 1940 Act) of the outstanding voting securities of a Fund, and provided
that in either event the continuance is also approved by a majority of First
Omaha Funds' Directors who are not "interested persons" (as defined in the 1940
Act) of any party to this Agreement, by vote cast in person at a meeting called
for the purpose of voting on such approval.
6.2 This Agreement may be terminated without penalty with respect to a
particular Fund (i) through a failure to renew this Agreement at the end of a
term, (ii) upon mutual consent of the parties, or (iii) on not less than sixty
(60) days' written notice, by First Omaha Funds' Directors, by vote of a
majority (as defined with respect to voting securities in the 1940 Act) of the
outstanding voting securities of the Fund, or by Distributor. The terms of this
Agreement shall not be waived, altered, modified, amended or supplemented in any
manner whatsoever except by a written instrument signed by the Distributor and
First Omaha Funds. This Agreement will also terminate automatically in the
event of its assignment (as defined in the 1940 Act).
7. Miscellaneous.
7.1 The services of the Distributor rendered to the Funds are not deemed
to be exclusive. The Distributor may render such services and any other
services to others, including other investment companies. First Omaha Funds
recognizes that from time to time directors, officers, and employees of the
Distributor may serve as directors, trustees, officers and employees of other
corporations or trusts (including other investment companies), that such other
entities may include the name of the Distributor as part of their name and that
the Distributor or its affiliates may enter into distribution, administration,
fund accounting or other agreements with other corporations or trusts.
7.2 Distributor agrees on behalf of itself and its employees to treat
confidentially and as proprietary information of First Omaha Funds all records
and other information relative to the Funds and prior, present or potential
shareholders of the Funds (and clients of said shareholders), and not to use
such records and information for any purpose other than performance of
Distributor's responsibilities and duties hereunder, except after prior
notification to and approval in writing by First Omaha Funds, which approval
shall not be unreasonably withheld and may not be withheld where Distributor may
be exposed to civil or criminal contempt proceedings for failure to comply, when
requested to divulge such information by duly constituted authorities, or when
so requested by First Omaha Funds.
7.3 This Agreement shall be governed by Wisconsin law. To the extent that
the applicable laws of the State of Wisconsin, or any of the provisions herein,
conflict with the applicable provisions of the 1940 Act, the latter shall
control, and nothing herein shall be construed in a manner inconsistent with the
1940 Act or any rule or order of the Commission thereunder. Any provision of
this Agreement which may be determined by competent authority to be prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
7.4 Any notice required or to be permitted to be given by either party to
the other shall be in writing and shall be deemed to have been given when hand
delivered or sent by registered or certified mail, postage prepaid, return
receipt requested, as follows: Notice to the Distributor shall be sent to
Sunstone Distribution Services, LLC, 207 East Buffalo Street, Suite 400,
Milwaukee, Wisconsin, 53202, Attention: Miriam M. Allison, and notice to First
Omaha Funds shall be sent to First Omaha Funds, Inc., One First National Center,
Omaha, Nebraska, 68102-1596, Attention: Marc M. Diehl; with a copy to Cline,
Williams, Wright, Johnson & Oldfather, 1900 FirsTier Bank Building, Lincoln,
Nebraska, 68508-2095, Attention: Donald F. Burt.
7.5 This Agreement is executed by or on behalf of First Omaha Funds with
respect to each of the Funds and the obligations hereunder are not binding upon
any of the Directors, officers or shareholders of First Omaha Funds individually
but are binding only upon the Funds to which such obligations pertain and the
assets and property of such Funds. First Omaha Funds' Articles of Incorporation
is on file with the Secretary of State of Nebraska.
7.6 This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original agreement but such counterparts shall
together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by a duly authorized officer as of the day and year first above
written.
FIRST OMAHA FUNDS
("First Omaha Funds")
By: /s/ David P. Greer
--------------------------------------
David P. Greer, President
SUNSTONE DISTRIBUTION SERVICES, LLC
("Distributor")
By: /s/ Miriam M. Allison
--------------------------------------
Miriam M. Allison, President
SCHEDULE A
TO THE
DISTRIBUTION AGREEMENT
BY AND BETWEEN
FIRST OMAHA FUNDS, INC.
AND
SUNSTONE DISTRIBUTION SERVICES, LLC
January 1, 1997
Name of Fund Effective Date
U.S. Government Obligations Fund January 1, 1997
Equity Fund January 1, 1997
Short/Intermediate Fixed Income Fund January 1, 1997
Fixed Income Fund January 1, 1997
Small Cap Value Fund January 1, 1997
Balanced Fund January 1, 1997
ADMINISTRATION AND FUND ACCOUNTING AGREEMENT
THIS AGREEMENT is made as of April 10, 1995, by and between First Omaha
Funds, Inc., a Nebraska corporation ("First Omaha Funds"), and Sunstone
Financial Group, Inc., a Wisconsin corporation (the "Administrator").
WHEREAS, First Omaha Funds is registered under the Investment Company Act
of 1940, as amended (the "Act"), as an open-end management investment company
and is authorized to issue shares of common stock (the "Shares") in separate
series with each such series representing the interests in a separate portfolio
of securities and other assets; and
WHEREAS, First Omaha Funds and the Administrator desire to enter into an
agreement pursuant to which the Administrator shall provide administration and
fund accounting services to such investment portfolios of First Omaha Funds as
are listed on Schedule A hereto and any additional investment portfolios First
Omaha Funds and Administrator may agree upon and include on Schedule A as such
Schedule may be amended from time to time (such investment portfolios and any
additional investment portfolios are individually referred to as a "Fund" and
collectively the "Funds").
NOW, THEREFORE, in consideration of the mutual promises and agreements
herein contained and other good and valuable consideration, the receipt of which
is hereby acknowledged, the parties hereto, intending to be legally bound, do
hereby agree as follows:
1. Appointment
First Omaha Funds hereby appoints the Administrator as administrator and
fund accountant of the Funds for the period and on the terms set forth in this
Agreement. The Administrator accepts such appointment and agrees to render the
services herein set forth, for the compensation herein provided.
2. Services as Administrator
(a) Subject to the direction and control of First Omaha Funds' Board of
Directors and utilizing information provided by First Omaha Funds and its
agents, the Administrator will: (1) provide office space, facilities, equipment
and personnel to carry out its services hereunder; (2) compile data for and
prepare with respect to the Funds timely Notices to the Securities and Exchange
Commission (the "Commission") required pursuant to Rule 24f-2 under the Act and
Semi-Annual Reports on Form N-SAR; (3) prepare for execution by First Omaha
Funds and file all federal income and excise tax returns and state income tax
returns (and such other required tax filings as may be agreed to by the parties)
other than those required to be made by First Omaha Funds' custodian or transfer
agent; (4) prepare compliance filings relating to the registration of the
securities of the Funds pursuant to state securities laws with the advice of
First Omaha Funds' counsel; (5) perform securities valuations; (6) determine the
income and expense accruals of the Funds; (7) calculate daily net asset values
and income factors of the Funds; (8) maintain all general ledger accounts and
related subledgers; (9) prepare financial statements for the Annual and Semi-
Annual Reports required pursuant to Section 30(d) under the Act; (10) review to
the extent requested by First Omaha Funds drafts of the Registration Statement
for the Funds (on Form N-1A or any replacement therefor) and any amendments
thereto, and proxy materials; (11) prepare and monitor each Fund's expense
accruals and cause all appropriate expenses to be paid from Fund assets on
proper authorization from First Omaha Funds; (12) assist in the acquisition of
First Omaha Funds' fidelity bond required by the Act, monitor the amount of the
bond and make the necessary Commission filings related thereto; (13) from time
to time as the Administrator deems appropriate, check each Fund's compliance
with the policies and limitations relating to portfolio investments as set forth
in the Prospectus, Statement of Additional Information, and Articles of
Incorporation and monitor each Fund's status as a regulated investment company
under Subchapter M of the Internal Revenue Code, as amended (but this function
shall not relieve each Fund's investment adviser of its primary day-to-day
responsibility for assuring such compliance); (14) maintain, and/or coordinate
with the other service providers the maintenance of, the accounts, books and
other documents required pursuant to Rule 31a-1(a) and (b) under the Act; and
(15) generally assist in each Fund's administrative operations. In addition,
the Administrator will monitor First Omaha Funds' arrangements with respect to
services provided pursuant to any plan of distribution including reporting to
the Board of Directors with respect to the amounts paid or payable by the Funds
from time to time under the plan and the nature of the services provided, and
maintaining appropriate records in connection with its monitoring duties. The
duties of the Administrator shall be confined to those expressly set forth
herein, and no implied duties are assumed by or may be asserted against the
Administrator hereunder.
(b) The Directors of First Omaha Funds shall cause the officers and
employees of First Omaha Funds, the adviser, legal counsel, independent
accountants, custodian and transfer agent and other agents and representatives
of the Funds to cooperate with the Administrator and to provide the
Administrator, upon request, with such information, documents and advice
relating to the Funds as is within the possession or knowledge of such persons,
in order to enable the Administrator to perform its duties hereunder. In
connection with its duties hereunder, the Administrator shall be entitled to
rely, shall not be liable or responsible for any losses resulting from its
reliance, and shall be held harmless by the Funds when acting in reliance, upon
the instruction, advice, information or any documents relating to the Funds
provided to the Administrator by any of the aforementioned persons or their
representatives. Fees charged by such persons shall be an expense of the Funds.
The Administrator shall be entitled to rely on any document which it reasonably
believes to be genuine and to have been signed or presented by the proper party.
The Administrator shall not be held to have notice of any change of authority of
any officer, agent or employee of First Omaha Funds until receipt of written
notice thereof from First Omaha Funds.
(c) In compliance with the requirements of Rule 31a-3 under the Act, the
Administrator hereby agrees that all records which it maintains for the Funds
are the property of the Funds and further agrees to surrender promptly to each
Fund any of such records upon a Fund's request. The Administrator further
agrees to preserve for the periods prescribed by Rule 31a-2 under the Act the
records described in (a) above which are maintained by the Administrator for the
Fund.
3. Fees; Delegation; Expenses
(a) In consideration of the services rendered pursuant to this Agreement,
First Omaha Funds will pay the Administrator a fee, computed daily and payable
monthly, at the annual rate of 0.20% of the aggregate average net assets of the
Funds, subject to a minimum fee at the annual rate of $300,000 (plus $50,000 for
each Fund in excess of four funds), plus out-of-pocket expenses. First Omaha
Funds shall also pay Administrator $40,074.61 for organizational services
provided on behalf of the Funds. Fees shall be paid at rate that would
aggregate at least the applicable minimum fee. Out-of-pocket expenses include,
but are not limited to, travel, lodging and meals in connection with travel on
behalf of First Omaha Funds, security pricing and corporate action services
utilized by the Administrator, programming and related expenses (previously
incurred or to be incurred by Administrator) in connection with providing
electronic transmission of data between the Administrator and the Funds' other
service providers, brokers, dealers and depositories, and photocopying and
overnight delivery expenses. The Administrator may waive all or a portion of
its fee hereunder, from time to time, in its discretion.
(b) For the purpose of determining fees payable to the Administrator, net
asset value shall be computed in accordance with the Funds' Prospectus and
resolutions of First Omaha Funds' Board of Directors. The fee for the period
from the day of the month this Agreement is effective until the end of that
month shall be pro-rated according to the proportion which such period bears to
the full monthly period. Upon any termination of this Agreement before the end
of any month, the fee for such part of a month shall be pro-rated according to
the proportion which such period bears to the full monthly period and shall be
payable upon the date of termination of this Agreement. Such fee as is
attributable to each Fund shall be a separate charge to such Fund and shall be
the several (and not joint or joint and several) obligation of each such Fund.
(c) The Administrator will bear all expenses in connection with the
performance of its services under this Agreement except as otherwise provided
herein. Costs and expenses to be incurred in the operation of the Funds,
including, but not limited to: taxes; interest; brokerage fees and commissions,
if any; salaries, fees and expenses of officers and Directors; Commission fees
and state Blue Sky fees; advisory and administration fees; charges of
custodians, transfer agents and dividend disbursing agents; insurance premiums;
outside auditing and legal expenses; costs of organization and maintenance of
corporate existence; typesetting, proofing, printing and mailing of
prospectuses, statements of additional information, supplements, notices and
proxy materials for regulatory purposes and for distribution to current
shareholders; typesetting, proofing, printing, mailing and other costs of
shareholder reports; expenses incidental to holding meetings of shareholders and
Directors; and any extraordinary expenses; will be borne by the Funds.
4. Proprietary and Confidential Information
The Administrator agrees on behalf of itself and its employees to treat
confidentially and as proprietary information of First Omaha Funds all records
and other information relative to the Funds and prior, present or potential
shareholders of the Funds (and clients of said shareholders), and not to use
such records and information for any purpose other than the performance of its
responsibilities and duties hereunder, except after prior notification to and
approval in writing by First Omaha Funds, which approval shall not be
unreasonably withheld and may not be withheld where the Administrator may be
exposed to civil or criminal proceedings for failure to comply, when requested
to divulge such information by duly constituted authorities, or when so
requested by First Omaha Funds.
5. Limitation of Liability
The Administrator shall not be liable for any error of judgment or mistake
of law or for any loss suffered by First Omaha Funds in connection with the
matters to which this Agreement relates, except for a loss resulting from
willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or from reckless disregard by it of its obligations
and duties under this Agreement. Notwithstanding any other provision of this
Agreement, and so long as the Administrator acts in good faith and without gross
negligence, First Omaha Funds assumes full responsibility and shall indemnify
and hold harmless the Administrator from and against any and all actions, suits,
claims, demands, losses, expenses and liabilities whether with or without basis
in fact or law (including the costs of investigating or defending any alleged
actions, suits, claims, demands, losses, expenses and liabilities) of any and
every nature which the Administrator may sustain or incur or which may be
asserted against the Administrator by any person arising directly or indirectly
out of any action taken or omitted to be taken by it in performing the services
hereunder, or in reliance upon the instruction, advice, information or documents
provided to the Administrator by any party described in Section 2(b). (As used
in this Section 5 the term "Administrator" shall include past and present
directors, officers, employees and other corporate agents of the Administrator
as well as the corporation itself). The indemnity and defense provisions set
forth herein shall indefinitely survive the termination of this Agreement.
6. Term
(a) This Agreement shall become effective with respect to each Fund listed
on Schedule A hereof as of the date set forth in Schedule A and, with respect to
each Fund not in existence on that date, on the date an amendment to Schedule A
to this Agreement relating to that Fund is executed. Unless sooner terminated
as provided herein, this Agreement shall continue in effect with respect to each
Fund until April 10, 1999 (the "Initial Term"). Thereafter, if not
terminated, this Agreement shall continue automatically in effect as to each
Fund for successive annual periods unless terminated as provided herein.
(b) This Agreement may be terminated with respect to any one or more
particular Funds without penalty after the Initial Term by either party upon not
less than ninety (90) days written notice to the other party. The terms of this
Agreement shall not be waived, altered, modified, amended or supplemented in any
manner whatsoever except by a written instrument signed by the Administrator and
First Omaha Funds.
7. Non-Exclusivity
The services of the Administrator rendered hereunder are not deemed to be
exclusive. The Administrator may render such services and any other services to
others, including other investment companies. First Omaha Funds recognizes that
from time to time directors, officers and employees of the Administrator may
serve as directors, trustees, officers and employees of other corporations or
trusts (including other investment companies), that such other entities may
include the name of the Administrator as part of their name and that the
Administrator or its affiliates may enter into administration, distribution,
fund accounting or other agreements with other corporations or trusts.
8. Governing Law; Invalidity
This Agreement shall be governed by Wisconsin law. To the extent that the
applicable laws of the State of Wisconsin, or any of the provisions herein,
conflict with the applicable provisions of the Act, the latter shall control,
and nothing herein shall be construed in a manner inconsistent with the Act or
any rule or order of the Commission thereunder. Any provision of this Agreement
which may be determined by competent authority to be prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
9. Notices
Any notice required or permitted to be given by either party to the other
shall be in writing and shall be deemed to have been given when sent by
registered or certified mail, postage prepaid, return receipt requested, as
follows: Notice to the Administrator shall be sent to Sunstone Financial Group,
Inc., 207 East Buffalo Street, Suite 400, Milwaukee, WI, 53202, Attention:
Miriam M. Allison, and notice to First Omaha Funds shall be sent to First Omaha
Funds, Inc., One First National Center, Omaha, Nebraska, 68102-1596, Attention:
Marc M. Diehl; with a copy to Cline, Williams, Wright, Johnson & Oldfather, 1900
FirsTier Bank Building, Lincoln, Nebraska, 68508-2095, Attention: Donald F.
Burt.
10. Counterparts
This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original agreement but such counterparts shall together
constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by a duly authorized officer as of the day and year first above
written.
FIRST OMAHA FUNDS, INC.
("First Omaha Funds")
By: /s/ David P. Greer
-------------------
David P. Greer
President
SUNSTONE FINANCIAL GROUP, INC.
("Administrator")
By: /s/ Miriam M. Allison
----------------------
Miriam M. Allison
President
SCHEDULE A
TO THE
ADMINISTRATION AND FUND ACCOUNTING AGREEMENT
BY AND BETWEEN
FIRST OMAHA FUNDS, INC.
AND
SUNSTONE FINANCIAL GROUP, INC.
Name of Fund Effective Date
U.S. Government Obligations Fund April 10, 1995
Equity Fund April 10, 1995
Short/Intermediate Fixed Income Fund April 10, 1995
Fixed Income Fund April 10, 1995
Small Cap Value Fund December 5, 1995
Balanced Fund June 4, 1996
Dated: April 10, 1995
Revised: December 5, 1995 and June 4, 1996
FIRST OMAHA FUNDS, INC. SUNSTONE FINANCIAL GROUP, INC.
By: /s/ David P. Greer By: /s/ Miriam M. Allison
------------------- ----------------------
David P. Greer, President Miriam M. Allison, President
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Shareholders and Board of Directors
of First Omaha Funds, Inc.:
We consent to the use of our reports incorporated herein by reference and to
the reference to our Firm under the headings "Financial Highlights" in the
Prospectus and "Auditors" in the Statement of Additional Information.
Omaha, Nebraska
July 21, 1997
INDIVIDUAL RETIREMENT ACCOUNT
DISCLOSURE STATEMENT AND
CUSTODIAL ACCOUNT AGREEMENT
(LOGO)
INDIVIDUAL RETIREMENT ACCOUNT
DISCLOSURE STATEMENT
GENERAL
Your Individual Retirement Account ("IRA") is a custodial account for the
benefit of you or your beneficiaries. The Custodian of the IRA is named on the
IRA Application.
The following information is being provided to you in accordance with the
requirements of the Internal Revenue Code. Please read it, together with the
Individual Retirement Custodial Account Agreement and the prospectus or other
offering documents for the investments which you have chosen for investment of
your IRA contributions. Because the rules with respect to IRAs are very complex,
and because misunderstanding or disregarding the rules may have serious tax
implications, you should consult your own tax adviser if you have questions
about the information contained in this Disclosure Statement. Further
information can also be obtained from any district office of the Internal
Revenue Service.
WHAT IS AN IRA?
An IRA is a trust or custodial account created or organized in the United States
for the exclusive benefit of an individual and his or her beneficiaries. Under
an IRA, you defer federal income taxes on the amount you invest (up to certain
limits). You also defer taxes on income earned in the account. State income tax
treatment of IRAs varies.
WHAT TYPES OF IRAS ARE AVAILABLE THROUGH MY FIRST OMAHA FUNDS INDIVIDUAL
RETIREMENT CUSTODIAL ACCOUNT (HEREAFTER, "FIRST OMAHA FUNDS IRA")?
A Regular IRA Account may be established for investment of tax-deductible or
non-deductible contributions made by an employed or self-employed individual.
You may also transfer funds to a Regular IRA Account from an existing IRA with
another custodian or roll over distributions from an employee-sponsored
qualified plan.
A Spousal IRA Account is used for investment of tax-deductible or non-deductible
contributions made by a Regular IRA shareholder on behalf of a spouse who either
has no earned income or has chosen to be treated as having no compensation. If
one spouse has compensation of less than $250 for the year, a Spousal IRA is
generally more advantageous than a Regular IRA.
A Rollover IRA Account is used for deferring tax on an eligible rollover
distribution from another individual retirement account, individual retirement
annuity, or an employer-sponsored qualified retirement plan.
A SEP-IRA is a simplified employee pension by which an employer makes
contributions to a SEP-IRA on behalf of an employee. If these payments are
structured correctly, the payments are excluded from the employee's gross
income.
A SIMPLE IRA is an IRA created pursuant to a Savings Incentive Match Plan for
Employees of Small Employers, also called a SIMPLE Plan. Your employer must
establish the SIMPLE Plan and your SIMPLE IRA may only receive contributions
made by your employer on your behalf under the terms of the employer's SIMPLE
Plan and transfers or rollovers from other SIMPLE IRAs. No other contributions
can be accepted.
WHO IS ELIGIBLE TO SET UP AN
INDIVIDUAL RETIREMENT ACCOUNT?
All employed people under age 70 1/2 may contribute to an IRA. If you have
retired from a job but have earned income, you may contribute to an IRA. You
cannot make deductible contributions in the calendar year in which you reach 70
1/2 or in subsequent years, but you may make rollovers into an IRA.
If you wish to set up a spousal IRA, your spouse must establish a separate IRA.
You can contribute to a spousal IRA for your spouse for tax years beginning
before 1997 if all of the following conditions are met:
A. You must be married at the end of the tax year.
B. Your spouse must be under age 70 1/2 at the end of the tax year.
C. You must file a joint return for the tax year.
D. You must have taxable compensation for the year, and
E. Your spouse must either have no compensation or choose to be treated as
having no compensation for the tax year.
For tax years beginning after 1996, the last condition is changed to read "your
spouse's taxable compensation for the year is less than yours."
AM I ELIGIBLE TO MAKE TAX-DEDUCTIBLE CONTRIBUTIONS TO A REGULAR OR SPOUSAL IRA?
The amount of the deduction you may take for contributions to an IRA depends
upon whether you or your spouse is an active participant in an employer
retirement plan.
If you are single, you may fully deduct your contributions to a Regular IRA if
you are not covered by an employer retirement plan. An employer retirement plan
includes a qualified pension, profit-sharing, 401(k), stock bonus or qualified
annuity plan, a plan established for its employees by the federal, state or
local government, other than an eligible deferred compensation plan (Section 457
plan), a simplified employee pension plan (a "SEP"), a 403(b) arrangement
maintained by a tax-exempt organization or public schools, or a SIMPLE Plan. The
Form W-2 you receive from your employer at the end of the year should have a
checkmark in the "Pension Plan" box if you are covered by a retirement plan.
The active participant status of one spouse will affect the IRA deduction limit
for contributions attributable to the other spouse, unless the married couple
lives apart. Married individuals who live apart for an entire year are treated
as single taxpayers for the purpose of determining the deductibility of IRA
contributions if: (1) separate returns are filed for such year, and (2) they do
not live together at any time during such taxable year. If you (or your spouse,
if any) are active participants in an employer's retirement plan, you may have a
full, partial or no IRA deduction, depending on your aggregate adjusted gross
income ("AGI") level and filing status as shown on the following chart:
IF YOUR FILING AND YOUR
STATUS IS: AGI IS: YOU:
- ---------------------------------------------------------------------
SINGLE OR $25,000 or less Can take a full IRA deduction
HEAD OF ----------------------------------------------------
HOUSEHOLD Over $25,000 but Can take a partial IRA deduction
less than $35,000
----------------------------------------------------
$35,000 or more Cannot take an IRA deduction
- ---------------------------------------------------------------------
MARRIED - $40,000 or less Can take a full IRA deduction
JOINT RETURN ----------------------------------------------------
Over $40,000 but Can take a partial IRA deduction
less than $50,000
----------------------------------------------------
$50,000 or more Cannot take an IRA deduction
- ---------------------------------------------------------------------
MARRIED - Over $0 but less Can take a partial IRA deduction
SEPARATE RETURN than $10,000
- ---------------------------------------------------------------------
AND
LIVING TOGETHER $10,000 or more Cannot take an IRA deduction
- ---------------------------------------------------------------------
MARRIED - $25,000 or less Can take a full IRA deduction
- ---------------------------------------------------------------------
SEPARATE RETURN
AND Over $25,000, but Can take a partial IRA deduction
LIVING APART less than $35,000
----------------------------------------------------
$35,000 or more Cannot take an IRA deduction
- ---------------------------------------------------------------------
IRS Publication 590, "Individual Retirement Arrangements," is available from
your local Internal Revenue Service office and provides worksheets and detailed
examples for calculating the amount of your deductible and nondeductible
contributions. The amount of the partial deduction will never be less than $200.
WHAT IS THE MAXIMUM DEDUCTIBLE CONTRIBUTION
I CAN MAKE TO A REGULAR OR SPOUSAL IRA?
The discussion above explains whether you are eligible to make tax-deductible
contributions to a Regular or Spousal IRA. If you are eligible to make only
partially deductible contributions, the discussion explains how you calculate
the amount of your deduction.
If you are eligible to make fully deductible contributions, up to $2,000 or 100%
of your compensation, whichever is less, can be contributed as a deductible
contribution to a Regular IRA. Annual compensation must be either wages, salary,
or self-employed income received during the year. Income from investment
sources, such as interest, dividends, or rent, generally does not qualify.
An eligible individual may also contribute and deduct up to a combined maximum
of $2,250 ($4,000 beginning in 1997) to that individual's Regular IRA and to the
Spousal IRA created on behalf of that individual's spouse. You must file a joint
return for that year and create a Spousal IRA to qualify for the larger
deduction. Under IRS rules, the investment can be split up in any way as long as
not more than $2,000 is contributed to either account.
You need not itemize other deductions in order to deduct IRA contributions. All
regular contributions must be in cash. You may not make regular contributions of
property such as stock or real estate.
If you have more than one IRA, the maximum deductible limits apply to the total
contributions to all of your IRAs and to the deductible voluntary contributions.
MAY I MAKE NONDEDUCTIBLE
CONTRIBUTIONS TO AN IRA?
If you aren't eligible to make deductible contributions to a Regular or Spousal
IRA because of the rules previously described (you or your spouse is a
participant in an employer retirement plan and your income exceeds a specified
amount) you may still make nondeductible contributions to your Regular or
Spousal IRA. Also, you may elect to treat an otherwise deductible IRA
contribution as nondeductible.
If you choose to make nondeductible IRA contributions, the maximum amount that
may be contributed is the same as is permitted as a deductible contribution by
an individual who is not an active participant in an employer-sponsored plan.
Thus, the maximum permissible contribution is $2,000, or a combined $2,250
($4,000 beginning in 1997) for an individual's and Spousal IRAs. The maximum
limits for nondeductible contributions are reduced by the amount of any tax-
deductible contributions you are entitled to make. None of the earnings on your
contributions, even your nondeductible contributions, will be taxed until they
are distributed.
If you make nondeductible contributions, you must report them on Form 8606 when
you file your tax return. You must file a Form 8606 to designate nondeductible
contributions, even if you do not have to file a tax return for the year. You
are subject to a penalty of $50 for each failure to file Form 8606 unless you
show that failure to file was due to reasonable cause. If you overstate the
amount of nondeductible contributions for a year, you are subject to a penalty
of $100 for each overstatement unless you show reasonable cause for the
overstatement. If you are married and your spouse also chooses to make a
nondeductible IRA contribution, your spouse must report the amount on a separate
Form 8606.
DO MARRIED COUPLES WITH TWO INCOMES
CONTRIBUTE TO ONE OR TWO IRAS?
Each individual must establish a separate IRA account. Contributions are based
on the compensation of each person, and each contribution is eligible for a
separate tax deduction. The application must be completed and signed by each
individual.
HOW ARE CONTRIBUTIONS MADE TO A SPOUSAL IRA?
A separate Spousal IRA account must be established in the name of the spouse in
order to take advantage of the additional deductible contribution, and each
account will have its own number. The spouse must be under age 70 1/2 and may
not have received any compensation at any time during the year (or must elect to
be treated as receiving no compensation). If the spouse becomes employed during
the year, First Omaha Funds must be advised of the change in employment status.
The Spousal IRA will become a Regular IRA, and it will be subject to the rules
explained previously as to the amount of tax-deductible contributions.
WHEN ARE CONTRIBUTIONS DUE?
To qualify as a deductible contribution, your regular contribution to a Regular
or Spousal IRA for any year must be made no later than the date required for
filing your federal income tax return for that year, without regard to any
extensions. This date is generally April 15.
CAN I MOVE MONEY FROM AN EXISTING IRA
INTO MY FIRST OMAHA FUNDS IRA?
Yes. If you have made contributions to another IRA you may invest all or part of
the assets of that account in your First Omaha Funds IRA, except that special
rollover and transfer rules apply to SIMPLE IRAs. Your investment may be made in
one of the following ways:
A. Rollover. You may roll over a distribution which you have received from an
IRA invested with one custodian or trustee for investment in another IRA.
The amount may be all or part of your current IRA. You must complete the
transaction within 60 days after receiving the distribution to avoid both
income and penalty taxes. You may "roll over" the assets of an IRA only
once each year.
B. Transfer. You may authorize one IRA custodian or trustee to transfer money
directly to another so that you do not receive the distribution. Complete
the Transfer form and the Application and contact your existing custodian or
trustee for any special requirements. Upon receipt of your Application and
Transfer form, we will send the required authorization to your custodian on
your behalf. The custodian or trustee will then transfer the assets directly
to your First Omaha Funds IRA. Unlike the "rollover" method, you can
"transfer" assets as often as you would like. There is no additional tax
deduction for a rollover or transfer; you simply preserve the tax deferral
on the amount being transferred.
You may only roll over or transfer amounts from a SIMPLE IRA to this IRA after
the expiration of a 2-year period beginning on the date you first participated
in your employer's SIMPLE Plan. If you attempt to roll over amounts held in a
SIMPLE IRA to an IRA that is not a SIMPLE IRA before that time expires, you will
not receive the favorable tax treatment accorded rollovers.
CAN I MOVE MONEY FROM ANOTHER
RETIREMENT PLAN INTO AN IRA?
Yes. A qualified plan must provide participants and beneficiaries with the
option of receiving an eligible rollover distribution by way of a direct
transfer of such amounts to an IRA. An eligible rollover distribution is
essentially all or any portion of any otherwise taxable distribution from a
qualified plan which is not part of a series of substantially equal periodic
payments over a specified period of ten years or more, the life expectancy of a
participant, or the joint life expectancy of a participant and the participant's
designated beneficiary and which is not a minimum required distribution which
must be made under the rules of the Internal Revenue Code. Accordingly, if you
are about to receive an eligible rollover distribution from a qualified plan,
you may direct the plan administrator to transfer the eligible rollover
distribution directly to a Rollover IRA. The maximum amount that may be
transferred to your Rollover IRA in a direct, tax-free transfer is that amount
which would have been included in your income if you received the distribution
and did not make the direct transfer. For example, any after-tax contributions
you may have made to a qualified plan may not be transferred. A direct transfer
of an eligible rollover distribution to your Rollover IRA will avoid the 20%
mandatory withholding requirement which would apply if you physically received
the distribution and subsequently deposited the amount in your Rollover IRA.
You may still roll over an eligible rollover distribution from a qualified plan
even if you did not direct the plan administrator to make a direct transfer of
the distribution to a Rollover IRA so long as the rollover is made within 60
days of the receipt of the distribution. The law, however, encourages direct
transfers by requiring the plan administrator to withhold for income tax
purposes 20% of any distribution which is not directly transferred. In other
words, a participant planning to roll over a distribution will only receive 80%
of the distribution and 20% is withheld for taxes if the distribution is not
directly transferred. If an individual wants to roll over the entire
distribution, he or she must provide the additional cash to deposit into the
Rollover IRA and request a tax refund. Because both direct transfers and
rollovers defer income taxes, it is generally better to take advantage of the
direct transfer option, avoiding the 20% income withholding.
The spouse of a deceased employee can roll over the taxable portion of a
distribution from a plan in which the deceased employee participated, and is
subject to the same rules that apply if the distribution were made to the
employee. Finally, you may withdraw all or a part of the funds in your IRA and
roll the amount withdrawn into another IRA without adverse tax consequences,
provided you have not taken another distribution from that IRA within the
immediately preceding 12-month period and rolled it over. This limitation does
not apply to rollovers between a qualified plan and an IRA, or to direct
transfers between IRA trustees or custodians.
There are no rollover or transfer fees charged for your First Omaha Funds IRA.
You may transfer money as often as you wish. You may make a rollover once every
12 months. The rules concerning tax-free rollovers are complicated, and you
should consult a tax adviser to make sure your rollover is accomplished
properly.
WHERE ARE THE CONTRIBUTIONS INVESTED?
Contributions to an IRA must be placed in a special custodial or trust account
and held by a bank trustee or custodian (or other person who has been approved
by the Secretary of the Treasury). The purpose of this rule is to segregate
these savings from other assets and to use them for retirement purposes only.
Under the First Omaha Funds IRA, your contributions and the earnings on your IRA
account will be invested in shares of a self-designated First Omaha Funds IRA-
authorized investment fund. The prospectus or other offering documents explain
the investment objectives of each such fund. Since the performance of each such
fund or partnership is subject to market changes, growth in value of your
account cannot be projected or guaranteed.
WHAT ARE THE FEES FOR A FIRST OMAHA FUNDS IRA?
Currently no separate custodial fees are charged to you or your account. The
Custodian reserves the right to charge an annual maintenance fee and other fees
and expenses for IRA accounts, and if it imposes these charges in the future it
will notify you. If you close your First Omaha Funds IRA account during the
year, any such fees will be deducted from the proceeds before redemption or
transfer. The Custodian reserves the right to amend its custodial and other fees
from time to time and the fees will be determined in accordance with the
published fee schedule of the Custodian as then in effect.
The fees may be deducted on your federal tax return if you itemize your
deductions and pay the fees directly during the same calendar year for which you
are claiming the deduction. If you desire to deduct the fees on your return, you
should pay the fee with a separate check to the Custodian.
Of course, shares of the fund in which your account is invested will be affected
by management fees and other expenses of the fund or partnership. These matters
are discussed in the prospectus or other offering documents which you received
prior to, or with, this packet.
WHEN CAN I TAKE MONEY OUT OF MY IRA?
Generally, distributions can be made after age 59 1/2, or upon death or
disability, without penalty and in whatever amounts and on whatever schedule you
wish. Before that time, you can take money out of your IRA, but it may be
subject to an IRS premature distribution tax of 10% of the amount distributed in
addition to the ordinary income tax due.
Beginning in 1997 there are two more situations in which you can withdraw assets
from your IRA before you reach age 59 1/2 without having to pay the 10%
additional tax. You will not have to pay 10% tax on amounts you withdraw after
1996 that are more than:
A. The amount you paid for unreimbursed medical expenses during the year of
withdrawal, minus
B. 7.5% of your adjusted gross income for the year of the withdrawal.
You can only take into account unreimbursed medical expenses that you would be
able to include in figuring a deduction for medical expenses in Schedule A, Form
1040. You do not have to itemize your deductions to take advantage of this
exception to the 10% additional tax.
Also beginning in 1997 you may not have to pay the 10% tax on amounts you
withdraw during the year that are not more than the amount you paid during the
year for medical insurance for yourself, your spouse and your dependents. You
will not have to pay the tax on these amounts if all four of the following
conditions apply:
A. You lost your job.
B. You received unemployment compensation paid under any federal and state law
for 12 consecutive weeks.
C. You make the withdrawals during either the year you receive the unemployment
compensation or the following year.
D. You make the withdrawals no later than 60 days after you have been
reemployed.
WHEN MUST I BEGIN TO TAKE MONEY OUT OF MY IRA?
You must begin to receive distributions from an IRA by April 1 of the year
following the one in which you reach age 70 1/2. You do not have to take the
distribution in one lump sum, but you must withdraw a minimum amount each year.
The distributions must be designed to distribute the full amount in the account
over a period which is not greater than your life expectancy or the combined
life expectancy of you and your beneficiary. If the distributions paid each year
are smaller than required by the IRS, there will be an excise tax penalty equal
to 50% of the difference between the amount that you should have taken and the
amount you actually took; the Internal Revenue Service can waive the excise tax
if the shortfall resulted from a reasonable error and steps are taken to correct
it.
WHAT ABOUT DISTRIBUTIONS AFTER MY DEATH?
If you are living on your required beginning date and begin to receive
distributions under the foregoing rules, but die with funds still remaining in
your IRA, your beneficiary must take distributions of the remaining funds at
least as rapidly as under the distribution method in use on the date of your
death.
If you die before required distributions to you begin under the required minimum
distribution rules, distributions of your IRA funds must be completed within
five years after the end of the year in which your death occurs. However, if
certain conditions are met, a longer payout schedule may be followed, and, if
you have designated a beneficiary and distributions begin within one year after
the end of the year in which your death occurs, distributions may be made over a
period not exceeding the beneficiary's life or life expectancy. If you have
designated your spouse as your beneficiary, the date on which distribution to
your spouse must begin may be as late as December 31 of the year in which you
would have reached age 70 1/2. If your spouse dies before distributions are
required to begin to the spouse, then similar conditions to those described
above apply to a beneficiary designated by your surviving spouse to take the
spouse's interest in your IRA upon the spouse's death.
WHAT IS THE MINIMUM AMOUNT
WHICH MUST BE DISTRIBUTED TO ME?
Article IV of Form 5305-A, the form you used to establish your First Omaha Funds
IRA, describes the manner in which the amount of minimum payments which must be
made are calculated. Section 2 of Article IV of Form 5305-A explains that for
purposes of calculating minimum annual payments, your life expectancy (and the
life expectancy of your spouse, if applicable) will be recalculated annually
unless you or your spouse elect not to have life expectancies recalculated. If
you elect not to have life expectancies recalculated, when computing the minimum
payment your life expectancy is determined by using your age in the year in
which you attain age 70 1/2 minus one for each year that has elapsed since the
70 1/2 year.
You should consult with your tax adviser to determine whether to elect not to
have your life expectancy recalculated. The rules for recalculating life
expectancy are complicated, and if either you or your spouse dies and you are
using the recalculated life expectancy method, there is a potential for a
dramatic reduction in the life expectancy payment period and a corresponding
increase in the required minimum distribution.
HOW DO I BEGIN RECEIVING DISTRIBUTIONS?
Contact the transfer agent for a distribution request form and information on
withholding of taxes. If you are not 59 1/2, you will have to state what you
intend to do with the distribution; e.g., roll it over to another IRA. The
transfer agent is listed in the prospectus for your chosen fund.
HOW IS THE DISTRIBUTION TAXED?
In general, all distributions from the IRA are fully taxable as ordinary income
when received. Not includable are amounts properly rolled over, and any
contribution removed on a timely basis (except the allocable income that must
accompany such a distribution is subject to income taxation for the year during
which the contribution was made). However, qualified rollovers are not taxed as
ordinary income. Furthermore, if you have made nondeductible contributions to
your IRA, you have a cost basis (or investment) in your IRA, and nondeductible
contributions are not taxed when they are returned to you. If you have made both
deductible and nondeductible contributions, part of the distribution to you is
treated as a tax-free return of the nondeductible contributions (a "return of
basis"). You cannot designate a particular distribution as being from your
nondeductible contributions, and each distribution is treated as a pro rata
recovery of both nondeductible and deductible contributions. This is true even
if you keep nondeductible contributions in a separate account. You are required
to determine how much of a distribution is taxable to you. First Omaha Funds
does not make this calculation, as only you know whether you have claimed a
deduction for your IRA contributions. Unless you elect, in writing, not to have
taxes withheld, the IRS requires us to withhold tax on the taxable portion of
IRA distributions. For non-periodic distributions, unless you elect otherwise,
we will withhold 10% of the non-periodic payment. For periodic payments, unless
you elect otherwise, we will withhold just as though the periodic payments were
wages. Distributions from an IRA are not eligible for the special lump-sum tax
provisions (as in employer-sponsored retirement plans). A premature distribution
penalty tax may also apply.
WHAT ARE THE RESTRICTIONS ON MY IRA?
In addition to various penalty taxes, your IRA account is subject to the
following restrictions:
A. No part of your IRA assets may be invested in life insurance contracts or
commingled with other property except in a common trust or investment fund.
B. Your interest in the account is nonforfeitable. It is also segregated from
other assets to ensure that it is used for retirement purposes only.
C. Transactions between yourself (or your beneficiary) and the assets held in
the account are not allowed. The specific prohibited transactions are
described in the Internal Revenue Code and include selling or exchanging
property with the account or borrowing from the account. Should a
transaction of this type occur, your entire account will lose its tax-exempt
status and be treated as having been distributed to you. The value of your
entire account will then be included in your income for that year and, if
you are not yet age 59 1/2, can be subject to the 10% penalty tax on early
distribution.
D. You may not pledge or use any portion of your IRA as security for a loan. If
you do, that portion will be treated as having been distributed to you and
will be included in your income for that year. You may also incur a 10%
penalty tax on premature distributions if you are under age 59 1/2.
E. No part of the IRA funds may be invested in collectibles, as defined in Code
Section 408(m) (e.g., art works, rugs, antiques, metals, gems, stamps,
alcoholic beverages, certain other tangible personal property and coins,
other than coins issued under the laws of any state which are acquired by
the IRA after November 10, 1988, and certain gold and silver coins minted by
the U.S. Treasury beginning October 1, 1986).
WHAT PENALTY TAXES MAY APPLY TO MY IRA?
You may incur penalty taxes in connection with your account under the following
circumstances:
A. Excess Contributions. If your IRA contributions exceed the maximum for the
year, the excess will be subject to a 6% penalty tax unless the excess
(along with any earnings) is withdrawn from your account by the due date
(including extensions) for that year's federal income tax return. You may
not claim the withdrawn portion as a deduction for that year. If you fail to
withdraw the excess contribution by the due date of your return, you will
incur an additional 6% penalty tax for each year that it remains an excess.
To avoid this recurring penalty tax for later years, you must either
withdraw the excess from the account or absorb it by reducing your future
deductible contributions by an amount corresponding to the excess. You may
also have to file an amended tax return to correct the deduction or reduce
your IRA deduction for that year. Withdrawal of the excess after the due
date of your return and before you reach age 59 1/2 will result in a 10%
penalty tax on a premature withdrawal.
B. Overstating Nondeductible Contributions. If you overstate the amount of
nondeductible contributions for a year, you are subject to a penalty of $100
for each overstatement unless you show reasonable cause.
C. Premature Distributions. If you receive distributions from your IRA before
you reach age 59 1/2, and you are not disabled, you will be subject to a 10%
penalty tax in addition to the ordinary income taxes you must pay on the
distribution. The 10% penalty tax will also apply to any portion or all of
your account which is treated as having been distributed to you because you
engaged in a prohibited transaction or pledged your account as security for
a loan. Proper rollovers into another IRA and proper withdrawal of excess
contributions are not considered premature distributions. The penalty will
also not apply if distribution begins before age 59 1/2 and is made in a
series of substantially equal payments (not less frequently than annually)
over your life expectancy or your and your designated beneficiary's joint
life expectancy, and you do not attempt to alter the payment arrangement
before the later of five years after payments begin or when you reach age 59
1/2, unless you die or become disabled before this time.
D. Excess Accumulations. After you reach age 70 1/2, a 50% penalty tax will be
imposed on any amount which is required to be distributed to you under the
minimum IRS distribution rules but which you fail to withdraw. If you have
more than one IRA account, the withdrawal must be based upon the aggregate
balance.
E. Excess Distributions. Effective for excess distributions made after December
31, 1986 and before 1997, you will be subject to a 15% penalty tax on such
amounts. The term "excess distribution" means the aggregate amount of your
retirement distribution from any plan, contract or account that at any time
has been treated as a qualified employer plan or IRA and the total you
receive during any calendar year, less certain exclusions, exceeds $160,000
in 1997, as indexed for cost-of-living adjustments. The excess distribution
tax does not apply to: (1) distributions after the participant's death; (2)
rollover distributions; (3) distributions that represent nondeductible
contributions; and (4) distributions of contributions and allocable income
pursuant to Code Section 408(d)(4). If you had an accrued balance in your
retirement plans of more than $562,500 on August 1, 1986, a special
grandfather rule permits you to elect, on a Form 5329 filed with a tax
return filed for tax year 1987 or 1988, to exempt from the tax distributions
attributable to your accrued balance as of August 1, 1986. (The election or
nonelection became irrevocable after the filing deadline for the taxable
year beginning in 1988 passed.) Although exempt from the tax, such
distributions are included in determining whether an excess distribution has
been made.
The excess distributions tax does not apply to payments made after your
death, but your estate may be subject to a 15% "excess retirement
accumulations" tax on the amount by which the present value of
undistributed amounts in IRAs, plus your interests in qualified plans or
annuities, exceeds the present value of an annuity providing annual payments
equal to the annual limitations described above for a fixed period equal to
your life expectancy immediately prior to your death. The tax may not be
offset by any credits against the estate tax, such as the unified credit. If
you elect the grandfather provisions described above, special rules apply.
Consult the IRS or your tax adviser if you need guidance as to the
applicability of these penalty taxes to your IRA.
This penalty tax has been suspended for IRA distributions after 1996 and
before January 1, 2000.
F. Use of IRA to Secure a Loan. If you use all or any portion of your IRA as
security for a loan, the portion so used is treated as distributed to you
and must be included in taxable income in the year the IRA is so used.
WHAT FORMS DO I HAVE TO FILE
WITH THE IRS FOR MY IRA?
Individuals are not required to file any annual reports, extra schedules or
special forms to deduct regular contributions. The contribution to a Regular IRA
is subtracted from gross income on Form 1040. You do not need to itemize any
other deductions in order to deduct contributions to an IRA. However, if you
make nondeductible contributions to a Regular or Spousal IRA, you must report
those contributions on Form 8606, even if you do not have to file a tax return
for that year.
Additionally, you must file Form 5329 as part of your federal income tax return
for any year in which you incur a penalty tax due to excess contributions,
premature distributions, excess accumulations or excess distributions, and
calculate the penalty tax due. If your estate becomes subject to the excess
accumulations penalty tax, your executor must file Schedule S (Form 706) with
the estate tax return. There are penalties for failing to file, or late filing
of, the 5329 for any year it is required. A rollover contribution must also be
reported on Form 1040.
You should consult with your tax adviser for more detailed information
concerning reporting requirements as they apply to your IRA. You may also obtain
a copy of IRS Publication 590, "Individual Retirement Arrangements," and other
information about IRAs from your local Internal Revenue Service office.
CAN I REVOKE MY ACCOUNT?
You will be permitted to revoke your IRA within seven (7) days after the date on
which you are given this IRA Disclosure Statement. If you have not received this
Disclosure Statement at least seven (7) calendar days before your IRA has been
established, you have the right to revoke your IRA during the seven (7) calendar
days after your IRA was established. To revoke your IRA under this seven-day
provision, you must request the revocation by giving written notice to First
Omaha Funds. If mailed, your revocation notice will be deemed mailed on the date
of the postmark (or, if sent by certified or registered mail, the date of
certification or registration) if it is deposited in the mail in the United
States in an envelope or other appropriate wrapper, first-class postage prepaid,
properly addressed. Upon such revocation, you will be entitled to a return of
the entire amount of the consideration paid to the IRA, without adjustment for
sales commissions, administrative expenses or fluctuation in the market value of
the IRA.
WHAT ARE GIFT TAX CONSEQUENCES OF
IRA CONTRIBUTIONS AND DISTRIBUTIONS?
For federal gift tax purposes, irrevocable beneficiary designations will not be
treated as gifts. Again, you should consult your tax adviser to determine the
tax consequences of an irrevocable beneficiary designation under the state gift
tax laws.
INDIVIDUAL RETIREMENT ACCOUNT
CUSTODIAL ACCOUNT AGREEMENT
The individual whose name appears on the IRA Application to which this Agreement
applies (hereinafter called "Depositor") is establishing an Individual
Retirement Account (under Section 408(a) of the Internal Revenue Code) to
provide for his or her retirement and for the support of his or her
beneficiaries after death.
The financial institution named on the IRA Application (hereinafter called
"Custodian") has agreed to serve as Custodian of the Depositor's Individual
Retirement Account established hereunder.
The Depositor has deposited with the Custodian the amount indicated as the
initial contribution on the IRA Application. Such amount and any additions
thereto and earnings thereon held by the Custodian pursuant to this Agreement
may be hereafter referred to as the "custodial account," "account" or
"custodial funds."
The Depositor and the Custodian make the following agreement:
ARTICLE I
1.1 The Custodian may accept additional cash contributions on behalf of the
Depositor for a tax year of the Depositor. The total cash contributions are
limited to $2,000 for the tax year unless the contribution is a rollover
contribution described in Section 402(c) (but only after December 31,
1992), 403(a)(4), 403(b)(8), 408(d)(3), or an employer contribution to a
Simplified Employee Pension Plan as described in Section 408(k). Rollover
contributions before January 1, 1993 include rollovers described in Section
402(a)(5), 402(a)(6), 402(a)(7), 403(a)(4), 403(b)(8), 408(d)(3), or an
employer contribution to a Simplified Employee Pension Plan as described in
Section 408(k).
ARTICLE II
2.1 The Depositor's interest in the balance in the custodial account is
nonforfeitable.
ARTICLE III
3.1 No part of the custodial funds may be invested in life insurance contracts,
nor may the assets of the custodial account be commingled with other
property except in a common trust fund or common investment fund (within
the meaning of Section 408(a)(5)).
3.2 No part of the custodial funds may be invested in collectibles (within the
meaning of Section 408(m)) except as otherwise permitted by Section
408(m)(3) which provides an exception for certain gold and silver coins and
coins issued under the laws of any state.
ARTICLE IV
4.1 Notwithstanding any provision of this Agreement to the contrary, the
distribution of the Depositor's interest in the custodial account shall be
made in accordance with the following requirements and shall otherwise
comply with Section 408(a)(6) and Proposed Regulations Section 1.408-8,
including the incidental death benefit provisions of Proposed Regulations
Section 1.401(a)(9)-2, the provisions of which are incorporated by
reference.
4.2 Unless otherwise elected by the time distributions are required to begin to
the Depositor under paragraph 4.3, or to the surviving spouse under
paragraph 4.4, other than in the case of a life annuity, life expectancies
shall be recalculated annually. Such election shall be irrevocable as to
the Depositor and the surviving spouse and shall apply to all subsequent
years. The life expectancy of a nonspouse beneficiary may not be
recalculated.
4.3 The Depositor's entire interest in the custodial account must be, or begin
to be, distributed by the Depositor's required beginning date, (April 1
following the calendar year end in which the Depositor reaches age 70 1/2).
By that date, the Depositor may elect, in a manner acceptable to the
Custodian, to have the balance in the custodial account distributed in:
(a) A single sum payment.
(b) An annuity contract that provides equal or substantially equal
monthly, quarterly, or annual payments over the life of the Depositor.
(c) An annuity contract that provides equal or substantially equal
monthly, quarterly, or annual payments over the joint and last
survivor lives of the Depositor and his or her designated beneficiary.
(d) Equal or substantially equal annual payments over a specified period
that may not be longer than the Depositor's life expectancy.
(e) Equal or substantially equal annual payments over a specified period
that may not be longer than the joint life and last survivor
expectancy of the Depositor and his or her designated beneficiary.
4.4 If the Depositor dies before his or her entire interest is distributed to
him or her, the entire remaining interest will be distributed as follows:
(a) If the Depositor dies on or after the date distribution of his or her
interest has begun, distribution must continue to be made in
accordance with paragraph 4.3.
(b) If the Depositor dies before distribution of his or her interest has
begun, the entire remaining interest will, at the election of the
Depositor or, if the Depositor has not so elected, at the election of
the beneficiary or beneficiaries, either
(i) Be distributed by the December 31 of the year containing the
fifth anniversary of the Depositor's death, or
(ii) Be distributed in equal or substantially equal payments over the
life or life expectancy of the designated beneficiary or
beneficiaries starting by December 31 of the year following the
year of the Depositor's death. If, however, the beneficiary is
the Depositor's surviving spouse, then this distribution is not
required to begin before December 31 of the year in which the
Depositor would have turned age 70 1/2.
(c) Except where distribution in the form of an annuity meeting the
requirements of Section 408(b)(3) and its related regulations has
irrevocably commenced, distributions are treated as having begun on
the Depositor's required beginning date, even though payments may
actually have been made before that date.
(d) If the Depositor dies before his or her entire interest has been
distributed and if the beneficiary is other than the surviving spouse,
no additional cash contributions or rollover contributions may be
accepted in the account.
4.5 In the case of a distribution over life expectancy in equal or
substantially equal annual payments, to determine the minimum annual
payment for each year, divide the Depositor's entire interest in the
custodial account as of the close of business on December 31 of the
preceding year by the life expectancy of the Depositor (or the joint life
and last survivor expectancy of the Depositor and the Depositor's
designated beneficiary, or the life expectancy of the designated
beneficiary, whichever applies). In the case of distributions under
paragraph 4.3, determine the initial life expectancy (or joint life and
last survivor expectancy) using the attained ages of the Depositor and
designated beneficiary as of their birthdays in the year the Depositor
reaches age 70 1/2. In the case of a distribution in accordance with
paragraph 4.4(b)(ii), determine life expectancy using the attained age of
the designated beneficiary as of the beneficiary's birthday in the year
distributions are required to commence.
4.6 The owner of two or more individual retirement accounts may use the
"alternative method" described in Notice 88-38, 1988-1 C.B. 524, to
satisfy the minimum distribution requirements described above. This method
permits an individual to satisfy these requirements by taking from one
Individual Retirement Account the amount required to satisfy the
requirement for another.
ARTICLE V
5.1 The Depositor agrees to provide the Custodian with information necessary
for the Custodian to prepare any reports required under Section 408(i) and
Regulations Sections 1.408-5 and 1.408-6.
5.2 The Custodian agrees to submit reports to the Internal Revenue Service and
the Depositor prescribed by the Internal Revenue Service.
ARTICLE VI
6.1 Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through III and this sentence will be controlling.
Any additional articles that are not consistent with Section 408(a) and the
related regulations will be invalid.
ARTICLE VII
7.1 This Agreement will be amended from time to time to comply with the
provisions of the Code and related regulations. Other amendments may be
made with the consent of the Depositor and Custodian.
ARTICLE VIII
The provisions of this Article shall apply to any and all
Custodial Accounts established pursuant to this Agreement.
8.1 INVESTMENT POWER OF CUSTODIAN
The Custodian shall invest and reinvest all contributions to the custodial
account, plus any earnings in any or all of the following:
(a) Investment shares of the Mutual Funds (regulated investment companies)
which the Custodian has designated as appropriate for investments in
the custodial account.
(b) All dividends and capital gain distributions received on the shares of
any Mutual Fund held in the Depositor's account shall be reinvested in
shares of the same Mutual Fund which paid the distribution, and
credited to the custodial account.
8.2 FEES, EXPENSES, TAXES AND PENALTIES
(a) The Depositor agrees to pay to the Custodian fees for services
performed under this Agreement in an amount specified from time to
time by the Custodian. Such fees may include, but are not limited to,
a fee to establish the custodial account and the annual maintenance
fee. The Custodian shall have the right to change such fees at any
time without prior written notice to the Depositor. As soon as
practicable after any change in fees, the Custodian shall make
available to the Depositor a new fee schedule. All fees may be billed
to the Depositor or deducted from the custodial account, at the
discretion of the Custodian. The Custodian shall also be entitled to
reimbursement for all reasonable and necessary costs, expenses and
disbursement incurred by it in the performance of services. Such
reimbursement shall be made from the account if not paid directly by
the Depositor.
(b) The Depositor shall be responsible for the payment of any income,
transfer and other taxes of any kind that may be levied or assessed
upon the custodial account, and all other administrative expenses
reasonably incurred by the Custodian in the performance of its duties,
including any fees for legal services provided to the Custodian. To
the extent the Depositor fails to pay such taxes and expenses
directly, the Custodian may, in its discretion, deduct them from the
custodial account.
(c) The Custodian shall not be responsible for excise or penalty taxes or
interest imposed by the IRS by virtue of any premature distributions,
over-contributions or excess accumulations with respect to the
Depositor's account, or for the Depositor's failure to commence
distributions at age 70 1/2, nor shall the Custodian be responsible
for providing any tax or legal advice with respect to the account. The
Custodian shall have no obligations to return any amounts withheld for
federal income tax purposes from any distribution as to which the
Depositor (or beneficiary, as applicable) has failed to provide a
withholding election notice prior thereto.
(d) Sales charges, if any, attributable to the acquisition of shares of a
Mutual Fund as stated in its then current prospectus may be charged to
the Depositor's account.
8.3 RESPONSIBILITIES OF CUSTODIAN
(a) The Custodian shall maintain the custodial account, distinct from all
other custodial accounts, for the exclusive benefit of the Depositor
and the Depositor's beneficiaries and shall be responsible for
performing only such services as are described in this Agreement.
(b) All contributions by the Depositor to the custodial account shall be
invested according to Article 8.1 hereof at the sole direction of the
Depositor, and the Custodian shall not be responsible or liable for
any investment decisions or recommendations with respect to the
investment, reinvestment, or sale of assets in the custodial account.
With regard to the Mutual Funds listed on the Application and any
other Mutual Fund, the Depositor understands that the Custodian does
not endorse the Mutual Funds as suitable investments for the
Depositor. In addition, the Custodian will not provide investment
advice to the Depositor. The Depositor assumes all responsibility for
the choice of his or her investments in the custodial account. The
Custodian shall not be responsible for reviewing any assets held in
the custodial account and shall not be responsible for questioning any
investment decision of the Depositor. The Custodian shall not be
liable for any loss resulting from any action taken by the Custodian
at the direction of the Depositor or any loss resulting from any
failure to act because of the absence of directions from the
Depositor.
(c) The Custodian shall not be responsible for inquiring into the nature
or amount of any contribution made by the Depositor, nor into the
amount or timing of any distribution requested by the Depositor, or
whether such contributions or distributions comply with the Code. The
Depositor shall have full responsibility for any tax or investment
consequences of all contributions to and distributions from the
custodial account.
(d) If the Custodian receives any investment instructions from the
Depositor which, in the opinion of the Custodian, are not in good
order or are unclear, or if the Custodian receives monies from the
Depositor which would exceed the amount that the Depositor may
contribute to the custodial account, the Custodian may hold all or a
portion of the monies uninvested pending receipt of written (or in any
other manner permitted by the Custodian) instructions or
clarification. During any such delay the Custodian will not be liable
for any loss of income or appreciation, loss of interest, or for any
other loss. The Custodian may also return all or a portion of the
monies to the Depositor. Again, in such situations, the Custodian will
not be liable for any loss.
(e) The Custodian will designate contributions (other than rollover
contributions) as being made for any particular year as requested by
the Depositor. If the Depositor does not designate a year for any
contribution, the Custodian will designate the year the contribution
was actually received.
(f) The Custodian will accept transfers of a cash amount to the custodial
account from another custodian or trustee of an Individual Retirement
Account, Qualified Retirement Plan or Individual Retirement Annuity
upon the Depositor's written direction. The Custodian will also
transfer a cash amount in the custodial account upon the written
request of the Depositor to another custodian or trustee of an
Individual Retirement Account or Annuity. For such transfer, the
Custodian may require a written acceptance of the successor custodian.
The Depositor warrants that all transfers to and from the custodial
account will be made in accordance with the rules and regulations of
the Internal Revenue Service.
(g) The Custodian is authorized to hire an agent to perform certain of its
duties hereunder, which agent may be the transfer agent for the Mutual
Fund shares authorized to be held hereunder.
(h) The Depositor agrees to indemnify and hold harmless, and to defend the
Custodian against any and all claims arising from and liabilities
incurred by reason of any action taken by the Custodian in good faith
pursuant to this Agreement.
8.4 JUDICIAL SETTLEMENT OF ACCOUNTS
The Custodian may bring an action before a court of appropriate
jurisdiction at any time to resolve any dispute or ambiguity in its
accounts. If a dispute or ambiguity exists regarding who is entitled to
receive funds from the custodial accounts, the Custodian may withhold such
funds until the dispute or ambiguity is resolved through settlement by the
parties or determination by a court of appropriate jurisdiction. The
court's resolution shall be final and binding on all parties involved. All
expenses incurred by the Custodian, including, without limitation, all
legal and accounting fees, shall be paid for from the custodial account, if
not otherwise paid by the Depositor.
8.5 NOTICE
(a) All notices or requests to the Custodian to make distributions from
the custodial account must conform to the requirements of the Internal
Revenue Code, the redemption requirements of the applicable fund
prospectus and the requirements of the Custodian and its duly
appointed agent, if any. The Custodian will make distributions from
the custodial account only after receiving a written request from the
Depositor (or any other party entitled to receive the assets of the
custodial account) in the form required by the Custodian. The
Depositor (or any other party entitled to receive the assets of the
custodial account) must provide to the Custodian any applications,
certificates, tax waivers, signature guarantees and any other
documents (including proof of any legal representative's authority)
that the Custodian requires. The Custodian will not be liable for
complying with a distribution request that appears to be genuine, nor
will the Custodian be liable for refusing to comply with a
distribution request which the Custodian is not satisfied is genuine
or in proper form. This includes any losses which may occur while the
Custodian waits for the distribution request to be in the proper form.
The Depositor (or any other party entitled to receive the assets of
the custodial account) also agrees to fully indemnify the Custodian
for any losses which may result from the Custodian's failure to act
upon an improperly made distribution request.
(b) Except as otherwise permitted by the Custodian, all instructions to
the Custodian under this Agreement must be in writing. The Depositor
may authorize an agent to act on behalf of the Custodian, provided
that such appointment and authorization is provided in writing to the
Custodian in the form required by the Custodian. Any instructions by
an authorized agent of the Depositor will be binding upon the
Depositor. Any authorization given by the Depositor will remain in
effect until the Custodian receives written notice of the Depositor's
revocation of the authorization, or the death of the Depositor,
whichever occurs first.
(c) Any notice, report, payment, distribution or other material required
to be delivered by the Custodian under this Agreement, shall be deemed
delivered and effective three days after the date mailed by the
Custodian to the Depositor at the Depositor's last address of record
as provided by the Depositor to the Custodian, and the Custodian shall
not be obligated to ascertain the actual address or whereabouts of the
Depositor.
(d) Any notice or instructions required to be delivered by the Depositor
to the Custodian under this Agreement shall be deemed delivered when
actually received by the Custodian.
(e) Any notice required to be given to the Custodian under this Agreement
shall be given to the Mutual Fund Group, the name of which appears on
the front of the Agreement, and any notice required or permitted to
be given to the Depositor under this Agreement shall be given to the
Depositor at the address filed with the Custodian from time to time.
Notices may be delivered in person or may be sent by United States
mail, first class with postage prepaid and properly addressed.
8.6 REPORTS, RECORDS AND ACCOUNTING
The Custodian shall maintain such records as may be reasonably necessary
for the proper administration of the account. The Custodian shall render a
report to each Depositor (or his or her beneficiaries), on the status of
his or her account or accounts at least annually. The report shall show
contributions (deposits) received, withdrawals made, dividend credits,
other credits and/or charges, and the balance at the end of the report
period. The report shall also furnish the Depositor such other information
as the Custodian may possess and as may be necessary for the Depositor to
comply with the reporting requirements of the Internal Revenue Code and any
applicable regulations. The Custodian shall have no duty to furnish
information about the account to any person except as expressly provided
herein or as required by law. Any accounting, when approved by the
Depositor, will be binding and conclusive as to the Depositor, and the
Custodian will thereby be released and discharged from any liability or
accountability to the Depositor with respect to matters set forth therein.
The Depositor or beneficiary shall advise the Custodian within 60 days
following receipt of the Custodian's report of any corrections to his or
her account. If the Depositor or beneficiary fails to advise the Custodian
of any corrections within the 60-day period, the Depositor or beneficiary
shall be deemed to have approved the Custodian's report. The Custodian
shall have the right to have its account settled by a court of competent
jurisdiction.
8.7 RECORDS RETENTION
The Custodian shall retain its records relating to the account as long as
necessary for the proper administration thereof and at least for any period
required by the Employee Retirement Income Security Act of 1974 or other
applicable law.
8.8 RESIGNATION OR REMOVAL OF CUSTODIAN
(a) The Custodian may resign as the Custodian hereunder without the
consent of the Depositor, by providing notice of such resignation 30
days prior to the effective date of the resignation. In the event of a
resignation by the Custodian, the Depositor must appoint a successor
Custodian or Trustee. Upon receipt by the Custodian of a written
acceptance of such appointment by the successor Custodian or Trustee,
the Custodian shall transfer and pay over to such successor the assets
of the custodial account. If after 30 days from notice of resignation,
the Custodian has not received written acceptance of such appointment
by the successor Custodian or Trustee, the Custodian shall pay or
otherwise transfer to the Depositor the assets remaining in the
custodial account. The Custodian is authorized, however, to reserve
such funds as it deems advisable for payment of any liabilities
constituting a charge against the assets of the custodial account or
against the Custodian, with any balance of such reserve remaining
after payment of all such items to be paid over to the successor
Custodian.
(b) Upon the appointment and qualification of a successor Custodian or
Trustee, the successor Custodian or Trustee shall assume all rights,
powers, and privileges, liabilities and duties of the Custodian. Upon
acceptance of appointment by the successor Custodian or Trustee, the
Custodian shall assign, transfer and deliver to the successor all
funds held in the custodial account. The Custodian is authorized,
however, to reserve such funds as it deems advisable for payment of
any liabilities constituting a charge against the assets of the
custodial account or against the Custodian, with any balance of such
reserve remaining after the payment of all such items to be paid over
to the successor Custodian or Trustee.
8.9 DESIGNATION OF BENEFICIARY
(a) The Depositor has the right to designate a beneficiary(ies) of his or
her account in writing on a form provided by the Custodian or in a
format approved by the Custodian. The purpose of this designation is
to identify the recipient(s) of the custodial account upon the
Depositor's death.
(b) The Depositor has the right to change this designation of beneficiary
at any time by writing to the Custodian. A beneficiary designation
when received by the Custodian shall relate back and be effective as
of the date it was signed by the Depositor, but without prejudice to
or liability of the Custodian, Mutual Fund or its agents, for any
payout made prior to receipt by them. If the beneficiary does not
survive the Depositor or if the Custodian cannot locate the
beneficiary after reasonable search, any balance in the account will
be paid to the Depositor's estate.
8.10 PAYMENT IN THE EVENT OF DISABILITY
A Depositor who becomes disabled as defined by IRC Section 72(m)(7) shall
be entitled to a distribution of his or her custodial account. The
Custodian may require what evidence it deems appropriate before
distributing on account of such disability. This determination by the
Custodian shall not constitute any warranty or assurance by the Custodian
that the distribution to the Depositor is free from the penalty on
premature distributions described in IRC Section 72(t).
8.11 EXCLUSIVE BENEFIT
The custodial account is established for the exclusive benefit of the
Depositor and his or her beneficiary(ies).
8.12 AMENDMENT
(a) The Custodian is authorized from time to time to amend this Agreement,
in whole or in part. The Custodian shall furnish copies of any such
amendments to the Depositor within 30 days of the date the amendments
are effective.
(b) This Agreement may not be amended in any manner that will cause or
permit any part of the assets of the custodial account to be divested
from any person having any interest in the custodial account unless
such amendment is necessary to satisfy the conditions of any law,
governmental regulation or ruling or to meet the requirements of the
Internal Revenue Code or any amendment thereof, in which case the
Custodian is expressly authorized to make amendments that are
necessary for such purposes. Such amendments may be made retroactively
to the later of the effective date of this Agreement or the
effective date of any future legal requirements.
8.13 CONTINUANCE OF THE CUSTODIAL RELATIONSHIP
The relationship created by this Agreement shall continue in effect until a
full distribution of the custodial account has been made and all accounts
of the Custodian have been settled.
8.14 SPECIAL MINIMUM DISTRIBUTION PROVISIONS
(a) In the event the Depositor fails to choose any methods of distribution
described in paragraph 4.3(a) through (e) by April 1 following the
calendar year in which he or she reaches age 70 1/2, the Custodian has
the right to assume that the Depositor is satisfying the minimum
distribution requirements through other IRA accounts and shall
continue to hold the assets of the account pending written directions
from the Depositor. Any and all tax consequences related to the
failure of the Depositor to timely elect a distribution option shall
be the sole responsibility of the Depositor.
(b) If any beneficiary fails to elect a distribution option on a timely
basis, distributions shall commence pursuant to paragraph 4.4(b)(ii).
(c) The provisions of paragraph 4.4(d) above shall not apply if the
Depositor's death occurred prior to 1984.
(d) A surviving spouse beneficiary shall be permitted to make the election
specified under paragraph 4.4(b)(i) or (ii) no later than the earlier
of December 31 of the fifth year after the year of death or the year
in which the Depositor would have attained age 70 1/2.
(e) A nonspouse beneficiary shall be permitted to make the election
specified under paragraph 4.4(b)(i) or (ii) no later than December 31
of the year following the year of death.
(f) Notwithstanding any provision of this Agreement to the contrary, any
surviving spouse of a Depositor who is a beneficiary shall have the
right to treat the custodial account of the deceased spouse as his or
her own IRA and to withdraw all, or a portion, of the account to the
full extent of the beneficial interest of the surviving spouse in the
custodial account.
8.15 SIMPLIFIED EMPLOYEE PENSION PLAN
(a) The custodial account may accept contributions made through a
Simplified Employee Pension Plan ("SEP") under Section 408(k).
(b) The provisions of Section 408(k) and the surrounding regulations for
proper maintenance of a SEP are the responsibility of the Depositor's
employer. The Custodian shall have no liability with respect to the
operation of the SEP.
(c) The Custodian may require written documentation from the Depositor
that the SEP has been properly established before accepting a SEP
contribution to the custodial account.
8.16 CUSTODIAN'S LIMITED LIABILITY
The Custodian shall not be liable for any action taken or omitted at the
direction of the Depositor or beneficiary, or with his or her consent and
approval, or for any action taken or omitted in accordance with the terms
and conditions of this Agreement, or applicable governmental regulations
or law, or for any other action taken or omitted by it in good faith for
any mistake in judgment, or for any loss suffered by the custodial account
except those which are a result of its own gross negligence or willful
misconduct.
8.17 GENERAL PROVISIONS
(a) Anything contained in this Agreement to the contrary notwithstanding,
neither the Depositor nor any beneficiary of the Depositor shall be
entitled to use the custodial account or any portion thereof, as
security for a loan, nor shall the Custodian or any other person or
institution engage in any prohibited transaction, within the meaning
of Section 4975 of the Code, with respect to any custodial account.
(b) Except to the extent otherwise required by law or this Agreement, none
of the amounts held in a custodial account shall be subject to the
claims of any creditor of the Depositor, or any beneficiary of the
Depositor, nor shall the Depositor or any beneficiary have the right
to anticipate, sell or pledge, option, encumber or assign any of the
benefits, payments or proceeds to which he or she may be entitled
under this Agreement.
(c) If any question arises as to the meaning of any provision of this
Agreement, the Custodian shall be authorized to construe or interpret
any such provision, and the Custodian's construction and
interpretation shall be binding upon the Depositor and any beneficiary
of the Depositor.
(d) Throughout this Agreement, the singular form includes the plural where
applicable.
(e) Any provision of this Agreement which would disqualify the custodial
account as an Individual Retirement Account shall be disregarded to
the extent necessary to make the custodial account qualify as an
Individual Retirement Account under the Code.
(f) The headings and articles of this Agreement are for convenience of
reference only, and shall have no substantive effect on provisions of
this Agreement.
(g) This Agreement and the custodial account created hereby shall be
governed by the laws of the State in which the Custodian maintains its
principal place of business. All contributions to the custodial
account shall be deemed to take place in said State.
(LOGO)
P.O. Box 419022
Kansas City, MO 64141-6022
1-800-OMAHA-03
IRADSCA-397
SIMPLE
INDIVIDUAL RETIREMENT ACCOUNT
DISCLOSURE STATEMENT
AND CUSTODIAL ACCOUNT AGREEMENT
(LOGO)
SIMPLE INDIVIDUAL RETIREMENT ACCOUNT
DISCLOSURE STATEMENT
GENERAL
Your SIMPLE Individual Retirement Account ("IRA") is a custodial account
established by you pursuant to your employer's savings incentive match plan for
employees of small employers ("SIMPLE Plan") for the benefit of you or your
beneficiaries. The Custodian of the IRA is named on the IRA Application.
The following information is being provided to you in accordance with the
requirements of the Internal Revenue Code. Please read it, together with the
SIMPLE Individual Retirement Custodial Account Agreement, the summary
description of your employer's SIMPLE Plan provided by your employer, and the
prospectus or other offering documents for the investments which you have chosen
for investment of your IRA contributions. Because the rules with respect to IRAs
are very complex, and because misunderstanding or disregarding the rules may
have serious tax implications, you should consult your own tax adviser if you
have questions about the information contained in this Disclosure Statement.
Further information can also be obtained from any district office of the
Internal Revenue Service.
WHAT IS AN IRA?
An IRA is a trust or custodial account created or organized in the United States
for the exclusive benefit of an individual and his or her beneficiaries. Under
an IRA, you defer federal income taxes on the amount you invest (up to certain
limits). You also defer taxes on income earned in the account. State income tax
treatment of IRAs varies.
WHAT IS A SIMPLE IRA?
A SIMPLE IRA is an IRA created pursuant to a savings incentive match plan for
employees of small employers, also called a SIMPLE Plan. Your employer must
establish the SIMPLE Plan by signing with the Custodian an IRS Form 5305-SIMPLE,
or by signing an IRS Form 5304-SIMPLE or another plan document satisfying the
requirements of Section 408(p) of the Internal Revenue Code. Pursuant to the
SIMPLE Plan, eligible employees may make salary reduction contributions to
SIMPLE IRAs, and the Employer may make matching or non-elective contributions as
provided in the SIMPLE Plan. Please review your employer's SIMPLE Plan Summary
Description for the specific terms of your employer's plan.
Your SIMPLE IRA may only receive contributions made by your employer on your
behalf (including salary reduction contributions) under the terms of your
employer's SIMPLE Plan and transfers or rollovers from your other SIMPLE IRAs.
No other contributions can be accepted.
WHAT OTHER TYPES OF IRAS ARE AVAILABLE
FROM FIRST OMAHA FUNDS?
As noted above, this is a SIMPLE IRA. First Omaha Funds also allows other types
of IRAs, but separate and different accounts must be established. A brief
description of these accounts follows.
A Regular IRA Account may be established for investment of tax-deductible or
non-deductible contributions made by an employed or self-employed individual.
You may also transfer funds to a Regular IRA Account from an existing IRA with
another custodian or roll over distributions from an employee-sponsored
qualified plan.
A Spousal IRA Account is used for investment of tax-deductible or non-deductible
contributions made by a Regular IRA shareholder on behalf of a spouse who either
has no earned income or has chosen to be treated as having no compensation. If
one spouse has compensation of less than $2,000 for the year, a Spousal IRA is
generally more advantageous than a Regular IRA.
A Rollover IRA Account is used for deferring tax on an eligible rollover
distribution from another individual retirement account, individual retirement
annuity, or an employer-sponsored qualified retirement plan.
A SEP IRA is a simplified employee pension by which an employer makes
contributions to a SEP IRA on behalf of an employee. If these payments are
structured correctly, the payments are excluded from the employee's gross
income.
WHO IS ELIGIBLE TO SET UP A
SIMPLE INDIVIDUAL RETIREMENT ACCOUNT?
Employees who are eligible to participate in an employer's SIMPLE Plan,
including self-employed individuals, may establish a SIMPLE IRA. The eligibility
requirements for your employer's SIMPLE Plan are set forth in your employer's
summary description of its SIMPLE Plan which your employer will provide you.
HOW DO I DETERMINE WHAT CONTRIBUTIONS
MY EMPLOYER WILL MAKE TO MY SIMPLE IRA?
You should consult the summary description of your employer's SIMPLE Plan which
your employer will provide you.
WHAT OTHER INFORMATION IS IN THE SUMMARY
DESCRIPTION OF MY EMPLOYER'S SIMPLE PLAN?
The summary description of your employer's SIMPLE Plan which your employer will
provide you includes additional information about the employer's SIMPLE Plan,
such as information concerning eligibility to participate, salary reduction
contributions, employer matching or nonelective contributions, the full vesting
of contributions to the Plan, and provisions limiting the employer's ability to
restrict withdrawals and transfers from your SIMPLE IRA.
AM I ELIGIBLE TO MAKE TAX-DEDUCTIBLE
CONTRIBUTIONS TO A SIMPLE IRA
LIKE I AM TO A REGULAR OR SPOUSAL IRA?
No, only contributions to your employer's SIMPLE Plan may be made to this SIMPLE
IRA, along with rollovers and transfers from any other SIMPLE IRA that you may
have. If you desire to make contributions to a Regular or Spousal IRA, you
should establish a separate IRA to receive those.
CAN I MOVE MONEY FROM AN EXISTING IRA
OR ANOTHER RETIREMENT PLAN INTO MY
FIRST OMAHA FUNDS SIMPLE IRA?
As noted above, you may only roll over or transfer funds from another SIMPLE IRA
into this SIMPLE IRA. There are no rollover or transfer fees charged for your
First Omaha Funds IRA. You may transfer money as often as you wish. You may make
a rollover once every 12 months. The rules concerning tax-free rollovers are
complicated, and you should consult a tax adviser to make sure your rollover is
accomplished properly.
WHERE ARE THE CONTRIBUTIONS INVESTED?
Contributions to an IRA must be placed in a special custodial or trust account
and held by a bank trustee or custodian (or other person who has been approved
by the Secretary of the Treasury). The purpose of this rule is to segregate
these savings from other assets and to use them for retirement purposes only.
Under the First Omaha Funds SIMPLE IRA, your contributions and the earnings on
your IRA account will be invested in shares of a self-designated First Omaha
Funds IRA-authorized investment fund. The Prospectus or other offering documents
explain the investment objectives of each such Fund. Since the performance of
each such Fund is subject to market changes, growth in value of your account
cannot be projected or guaranteed.
WHAT ARE THE FEES FOR A
FIRST OMAHA FUNDS SIMPLE IRA?
Currently no separate custodial fees are charged to you or your account. The
Custodian reserves the right to charge an annual maintenance fee and other fees
and expenses for IRA accounts, and if it imposes these charges in the future it
will notify you. If you close your First Omaha Funds SIMPLE IRA account during
the year, any such fees will be deducted from the proceeds before redemption or
transfer. The Custodian reserves the right to amend its custodial and other fees
from time to time and the fees will be determined in accordance with the
published fee schedule of the Custodian as then in effect.
The fees may be deducted on your federal tax return if you itemize your
deductions and pay the fees directly during the same calendar year for which you
are claiming the deduction. If you desire to deduct the fees on your return, you
should pay the fee with a separate check to the Custodian.
Of course, shares of the Fund in which your account is invested will be affected
by management fees and other expenses of the Fund. These matters are discussed
in the Prospectus or other offering documents which you received prior to, or
with, this packet.
WHEN CAN I TAKE MONEY OUT OF MY SIMPLE IRA?
Generally, distributions can be made after age 59 1/2, or upon death or
disability, without penalty and in whatever amounts and on whatever schedule you
wish. Before that time, you can take money out of your IRA, but it may be
subject to an IRS premature distribution tax of the amount distributed in
addition to the ordinary income tax due. This penalty is ordinarily 10% of the
amount of the distribution, but if you withdraw amounts from a SIMPLE IRA during
the first 2-year period after you begin participating in a SIMPLE Plan and the
distribution is subject to the additional penalty, the penalty tax is increased
from 10% to 25%. You may roll over or transfer your SIMPLE IRA account to
another SIMPLE IRA account at any time, and may roll over or transfer your
SIMPLE IRA account balance to any other IRA after a 2-year period has expired
since you first participated in the SIMPLE Plan. Your rollover or transfer must
comply with the applicable requirements of Section 408 of the Internal Revenue
Code.
WHEN MUST I BEGIN TO TAKE MONEY OUT
OF MY SIMPLE IRA?
You must begin to receive distributions from your SIMPLE IRA by April 1 of the
year following the one in which you reach age 70 1/2. You do not have to take
the distribution in one lump sum, but you must withdraw a minimum amount each
year. The distributions must be designed to distribute the full amount in the
account over a period which is not greater than your life expectancy or the
combined life expectancy of you and your beneficiary. If the distributions paid
each year are smaller than required by the IRS, there will be an excise tax
penalty equal to 50% of the difference between the amount that you should have
taken and the amount you actually took; the Internal Revenue Service can waive
the excise tax if the shortfall resulted from a reasonable error and steps are
taken to correct it.
WHAT ABOUT DISTRIBUTIONS AFTER MY DEATH?
If you are living on your required beginning date and begin to receive
distributions under the foregoing rules, but die with funds still remaining in
your IRA, your beneficiary must take distributions of the remaining funds at
least as rapidly as under the distribution method in use on the date of your
death.
If you die before required distributions to you begin under the required minimum
distribution rules, distributions of your IRA funds must be completed within
five years after the end of the year in which your death occurs. However, if
certain conditions are met, a longer payout schedule may be followed, and, if
you have designated a beneficiary and distributions begin within one year after
the end of the year in which your death occurs, distributions may be made over a
period not exceeding the beneficiary's life or life expectancy. If you have
designated your spouse as your beneficiary, the date on which distribution to
your spouse must begin may be as late as December 31 of the year in which you
would have reached age 70 1/2. If your spouse dies before distributions are
required to begin to the spouse, then similar conditions to those described
above apply to a beneficiary designated by your surviving spouse to take the
spouse's interest in your IRA upon the spouse's death.
WHAT IS THE MINIMUM AMOUNT
WHICH MUST BE DISTRIBUTED TO ME?
Article IV of your SIMPLE Individual Retirement Account Custodial Account
Agreement describes the manner in which the amount of minimum payments which
must be made are calculated. Section 2 of Article IV explains that for purposes
of calculating minimum annual payments, your life expectancy (and the life
expectancy of your spouse, if applicable) will be recalculated annually unless
you or your spouse elect not to have life expectancies recalculated. If you
elect not to have life expectancies recalculated, when computing the minimum
payment your life expectancy is determined by using your age in the year in
which you attain age 70 1/2 minus one for each year that has elapsed since the
70 1/2 year.
You should consult with your tax adviser to determine whether to elect not to
have your life expectancy recalculated. The rules for recalculating life
expectancy are complicated, and if either you or your spouse dies and you are
using the recalculated life expectancy method, there is a potential for a
dramatic reduction in the life expectancy payment period and a corresponding
increase in the required minimum distribution.
HOW DO I BEGIN RECEIVING DISTRIBUTIONS?
Contact the transfer agent for a distribution request form and information on
withholding of taxes. If you are not 59 1/2, you must state what you intend to
do with the distribution; e.g., roll it over to another IRA. The transfer agent
is listed in the Prospectus for your chosen First Omaha Fund.
WHAT ARE THE RESTRICTIONS ON MY SIMPLE IRA?
In addition to various penalty taxes, your IRA account is subject to the
following restrictions:
A. No part of your IRA assets may be invested in life insurance contracts or
commingled with other property except in a common trust or investment fund.
B. Your interest in the account is nonforfeitable. It is also segregated from
other assets to ensure that it is used for retirement purposes only.
C. Transactions between yourself (or your beneficiary) and the assets held in
the account are not allowed. The specific prohibited transactions are
described in the Internal Revenue Code and include selling or exchanging
property with the account or borrowing from the account. Should a
transaction of this type occur, your entire account will lose its tax-exempt
status and be treated as having been distributed to you. The value of your
entire account will then be included in your income for that year and, if
you are not yet age 59 1/2, can be subject to the penalty tax on early
distribution.
D. You may not pledge or use any portion of your IRA as security for a loan. If
you do, that portion will be treated as having been distributed to you and
will be included in your income for that year. You may also incur a penalty
tax on premature distributions if you are under age 59 1/2.
E. No part of the IRA funds may be invested in collectibles, as defined in Code
Section 408(m) (e.g., art works, rugs, antiques, metals, gems, stamps,
alcoholic beverages, certain other tangible personal property and coins,
other than coins issued under the laws of any state which are acquired by
the IRA after November 10, 1988, and certain gold and silver coins minted by
the U.S. Treasury beginning October 1, 1986).
WHAT ADDITIONAL PENALTY TAXES
MAY APPLY TO MY IRA?
In addition to the penalty tax for early withdrawal, you may incur penalty taxes
in connection with your account under the following circumstances:
A. Excess Accumulations. After you reach age 70 1/2, a 50% penalty tax will be
imposed on any amount which is required to be distributed to you under the
minimum IRS distribution rules but which you fail to withdraw. If you have
more than one IRA account, the withdrawal must be based upon the aggregate
balance.
B. Excess Distributions. You will be subject to a 15% penalty tax on such
amounts. The term "excess distribution" means the aggregate amount of your
retirement distribution from any plan, contract or account that at any time
has been treated as a qualified employer plan or IRA and the total you
receive during any calendar year, less certain exclusions, exceeds $160,000
in 1997, as indexed annually for cost-of-living adjustments thereafter. The
excess distribution tax does not apply to: (1) distributions after the
participant's death; (2) rollover distributions; (3) distributions that
represent nondeductible contributions; and (4) distributions of
contributions and allocable income pursuant to Code Section 408(d)(4). If
you had an accrued balance in your retirement plans of more than $562,500 on
August 1, 1986, a special grandfather rule permits you to elect, on a Form
5329 filed with a tax return filed for tax year 1987 or 1988, to exempt from
the tax distributions attributable to your accrued balance as of August 1,
1986. (The election or nonelection became irrevocable after the filing
deadline for the taxable year beginning in 1988 passed.) Although exempt
from the tax, such distributions are included in determining whether an
excess distribution has been made. This 15% tax does not apply to
withdrawals during your life in 1997, 1998 or 1999.
The excess distributions tax does not apply to payments made after your
death, but your estate may be subject to a 15% "excess retirement
accumulations" tax on the amount by which the present value of
undistributed amounts in IRAs, plus your interests in qualified plans or
annuities, exceeds the present value of an annuity providing annual payments
equal to the annual limitations described above for a fixed period equal to
your life expectancy immediately prior to your death. The tax may not be
offset by any credits against the estate tax, such as the unified credit. If
you elect the grandfather provisions described above, special rules apply.
Consult the IRS or your tax adviser if you need guidance as to the
applicability of these penalty taxes to your IRA.
C. Use of IRA to Secure a Loan. If you use all or any portion of your IRA as
security for a loan, the portion so used is treated as distributed to you
and must be included in taxable income in the year the IRA is so used.
WHAT FORMS DO I HAVE TO FILE
WITH THE IRS FOR MY IRA?
Individuals are not required to file any annual reports, extra schedules or
special forms to have contributions made to SIMPLE IRAs.
You must file Form 5329 as part of your federal income tax return for any year
in which you incur a penalty tax due to premature distributions, excess
accumulations or excess distributions, and calculate the penalty tax due. If
your estate becomes subject to the excess accumulations penalty tax, your
executor must file Schedule S (Form 706) with the estate tax return. There are
penalties for failing to file, or late filing of, the 5329 for any year it is
required. A rollover contribution must also be reported on Form 1040.
You should consult with your tax adviser for more detailed information
concerning reporting requirements as they apply to your IRA. You may also obtain
a copy of IRS Publication 590, "Individual Retirement Arrangements," and other
information about IRAs from your local Internal Revenue Service office.
CAN I REVOKE MY ACCOUNT?
If your employer's SIMPLE Plan allowed you to select the custodian of your
SIMPLE IRA, you will be permitted to revoke your IRA within seven (7) days after
the date on which you are given this SIMPLE IRA Disclosure Statement. If you
have not received this Disclosure Statement at least seven (7) calendar days
before your SIMPLE IRA has been established, you have the right to revoke your
SIMPLE IRA during the seven (7) calendar days after your SIMPLE IRA was
established. To revoke your IRA under this seven-day provision, you must request
the revocation by giving written notice to First Omaha Funds. If mailed, your
revocation notice will be deemed mailed on the date of the postmark (or, if sent
by certified or registered mail, the date of certification or registration) if
it is deposited in the mail in the United States in an envelope or other
appropriate wrapper, first-class postage prepaid, properly addressed. Upon such
revocation, your employer will be entitled to a return of the entire amount of
the consideration paid to the IRA, without adjustment for sales commissions,
administrative expenses or fluctuation in the market value of the IRA.
WHAT ARE GIFT TAX CONSEQUENCES OF
IRA CONTRIBUTIONS AND DISTRIBUTIONS?
For federal gift tax purposes, irrevocable beneficiary designations will not be
treated as gifts. Again, you should consult your tax adviser to determine the
tax consequences of an irrevocable beneficiary designation under the state gift
tax laws.
SIMPLE INDIVIDUAL RETIREMENT ACCOUNT
CUSTODIAL ACCOUNT AGREEMENT
The individual whose name appears on the IRA Application to which this Agreement
applies (hereinafter called "Participant") is establishing a savings incentive
match plan for employees of small employers (SIMPLE IRA) Individual Retirement
Account under Sections 408(a) and 408(p) of the Internal Revenue Code to provide
for his or her retirement and for the support of his or her beneficiaries after
death.
The financial institution named on the IRA Application (hereinafter called
"Custodian") has agreed to serve as Custodian of the Participant's Individual
Retirement Account established hereunder.
The preceding disclosure statement constitutes the disclosure statement required
under Regulations Section 1.408-6.
The Participant and the Custodian make the following agreement:
ARTICLE I
1.1 The Custodian will accept cash contributions on behalf of the Participant
by the Participant's employer under the terms of a SIMPLE Plan described in
Section 408(p). In addition, the Custodian will accept transfers and
rollovers from other SIMPLE IRAs of the Participant. No other contributions
will be accepted by the Custodian.
ARTICLE II
2.1 The Participant's interest in the balance in the custodial account is
nonforfeitable.
ARTICLE III
3.1 No part of the custodial funds may be invested in life insurance contracts,
nor may the assets of the custodial account be commingled with other
property except in a common trust fund or common investment fund (within
the meaning of Section 408(a)(5)).
3.2 No part of the custodial funds may be invested in collectibles (within the
meaning of Section 408(m)) except as otherwise permitted by Section
408(m)(3) which provides an exception for certain gold and silver coins and
coins issued under the laws of any state.
ARTICLE IV
4.1 Notwithstanding any provision of this agreement to the contrary, the
distribution of the Participant's interest in the custodial account shall
be made in accordance with the following requirements and shall otherwise
comply with Section 408(a)(6) and Proposed Regulations Section 1.408-8,
including the incidental death benefit provisions of Proposed Regulations
Section 1.401(a)(9)-2, the provisions of which are incorporated by
reference.
4.2 Unless otherwise elected by the time distributions are required to begin to
the Participant under paragraph 4.3, or to the surviving spouse under
paragraph 4.4, other than in the case of a life annuity, life expectancies
shall be recalculated annually. Such election shall be irrevocable as to
the Participant and the surviving spouse and shall apply to all subsequent
years. The life expectancy of a nonspouse beneficiary may not be
recalculated.
4.3 The Participant's entire interest in the custodial account must be, or
begin to be, distributed by the Participant's required beginning date,
(April 1 following the calendar year end in which the Participant reaches
age 70 1/2). By that date, the Participant may elect, in a manner
acceptable to the Custodian, to have the balance in the custodial account
distributed in:
(a) A single sum payment.
(b) An annuity contract that provides equal or substantially equal monthly,
quarterly, or annual payments over the life of the Participant.
(c) An annuity contract that provides equal or substantially equal monthly,
quarterly, or annual payments over the joint and last survivor lives of
the Participant and his or her designated beneficiary.
(d) Equal or substantially equal annual payments over a specified period
that may not be longer than the Participant's life expectancy.
(e) Equal or substantially equal annual payments over a specified period
that may not be longer than the joint life and last survivor expectancy
of the Participant and his or her designated beneficiary.
4.4 If the Participant dies before his or her entire interest is distributed to
him or her, the entire remaining interest will be distributed as follows:
(a) If the Participant dies on or after the date distribution of his or her
interest has begun, distribution must continue to be made in accordance
with paragraph 4.3.
(b) If the Participant dies before distribution of his or her interest has
begun, the entire remaining interest will, at the election of the
Participant or, if the Participant has not so elected, at the election
of the beneficiary or beneficiaries, either
(i) Be distributed by the December 31 of the year containing the
fifth anniversary of the Participant's death, or
(ii) Be distributed in equal or substantially equal payments over the
life or life expectancy of the designated beneficiary or
beneficiaries starting by December 31 of the year following the
year of the Participant's death. If, however, the beneficiary is
the Participant's surviving spouse, then this distribution is not
required to begin before December 31 of the year in which the
Participant would have turned age 70 1/2.
(c) Except where distribution in the form of an annuity meeting the
requirements of Section 408(b)(3) and its related regulations has
irrevocable commenced, distributions are treated as having begun on the
Participant's required beginning date, even though payments may
actually have been made before that date.
(d) If the Participant dies before his or her entire interest has been
distributed and if the beneficiary is other than the surviving spouse,
no additional cash contributions or rollover contributions may be
accepted in the account.
4.5 In the case of a distribution over life expectancy in equal or
substantially equal annual payments, to determine the minimum annual
payment for each year, divide the Participant's entire interest in the
custodial account as of the close of business on December 31 of the
preceding year by the life expectancy of the Participant (or the joint life
and last survivor expectancy of the Participant and the Participant's
designated beneficiary, or the life expectancy of the designated
beneficiary, whichever applies). In the case of distributions under
paragraph 4.3, determine the initial life expectancy (or joint life and
last survivor expectancy) using the attained ages of the Participant and
designated beneficiary as of their birthdays in the year the Participant
reaches age 70 1/2. In the case of a distribution in accordance with
paragraph 4.4(b)(ii), determine life expectancy using the attained age of
the designated beneficiary as of the beneficiary's birthday in the year
distributions are required to commence.
4.6 The owner of two or more individual retirement accounts may use the
"alternative method" described in Notice 88-38, 1988-1 C.B. 524, to
satisfy the minimum distribution requirements described above. This method
permits an individual to satisfy these requirements by taking from one
Individual Retirement Account the amount required to satisfy the
requirement for another.
ARTICLE V
5.1 The Participant agrees to provide the Custodian with information necessary
for the Custodian to prepare any reports required under Section 408(i) and
Regulations Sections 1.408-5 and 1.408-6.
5.2 The Custodian agrees to submit reports to the Internal Revenue Service and
the Participant prescribed by the Internal Revenue Service.
5.3 The Custodian also agrees to provide the Participant's employer the summary
description provided in Section 408(l)(2) unless this SIMPLE IRA is a
transfer SIMPLE IRA.
ARTICLE VI
6.1 Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through III and this sentence will be controlling.
Any additional articles that are not consistent with Section 408(a) and
408(p) and the related regulations will be invalid.
ARTICLE VII
7.1 This Agreement will be amended from time to time to comply with the
provisions of the Code and related regulations. Other amendments may be
made with the consent of the Participant and Custodian.
ARTICLE VIII
The provisions of this Article shall apply to any and all Custodial Accounts
established pursuant to this Agreement.
8.1 INVESTMENT POWER OF CUSTODIAN
The Custodian shall invest and reinvest all contributions to the custodial
account, plus any earnings in any or all of the following:
(a) Investment shares of the Mutual Funds (regulated investment companies)
which the Custodian has designated as appropriate for investments in
the custodial account.
(b) All dividends and capital gain distributions received on the shares of
any Mutual Fund held in the depositor's account shall be reinvested in
shares of the same Mutual Fund which paid the distribution, and
credited to the custodial account.
8.2 FEES, EXPENSES, TAXES AND PENALTIES
(a) The Participant agrees to pay to the Custodian fees for services
performed under this Agreement in an amount specified from time to time
by the Custodian. Such fees may include, but are not limited to, a fee
to establish the custodial account and the annual maintenance fee. The
Custodian shall have the right to change such fees at any time without
prior written notice to the Participant. As soon as practicable after
any change in fees, the Custodian shall make available to the
Participant a new fee schedule. All fees may be billed to the
Participant or deducted from the custodial account, at the discretion
of the Custodian. The Custodian shall also be entitled to reimbursement
for all reasonable and necessary costs, expenses and disbursement
incurred by it in the performance of services. Such reimbursement shall
be made from the account if not paid directly by the Participant.
(b) The Participant shall be responsible for the payment of any income,
transfer and other taxes of any kind that may be levied or assessed
upon the custodial account, and all other administrative expenses
reasonably incurred by the Custodian in the performance of its duties,
including any fees for legal services provided to the Custodian. To the
extent the Participant fails to pay such taxes and expenses directly,
the Custodian may, in its discretion, deduct them from the custodial
account.
(c) The Custodian shall not be responsible for excise or penalty taxes or
interest imposed by the IRS by virtue of any premature distributions,
over-contributions or excess accumulations with respect to the
Participant's account, or for the Participant's failure to commence
distributions at age 70 1/2, nor shall the Custodian be responsible for
providing any tax or legal advice with respect to the account. The
Custodian shall have no obligations to return any amounts withheld for
federal income tax purposes from any distribution as to which the
Participant (or beneficiary, as applicable) has failed to provide a
withholding election notice prior thereto.
(d) Sales charges, if any, attributable to the acquisition of shares of a
Mutual Fund as stated in its then current prospectus may be charged to
the Participant's account.
8.3 RESPONSIBILITIES OF CUSTODIAN
(a) The Custodian shall maintain the custodial account, distinct from all
other custodial accounts, for the exclusive benefit of the Participant
and the Participant's beneficiaries and shall be responsible for
performing only such services as are described in this Agreement.
(b) All contributions by the Participant to the custodial account shall be
invested according to Article 8.1 hereof at the sole direction of the
Participant, and the Custodian shall not be responsible or liable for
any investment decisions or recommendations with respect to the
investment, reinvestment, or sale of assets in the custodial account.
With regard to the Mutual Funds listed on the Application and any other
Mutual Fund, the Participant understands that the Custodian does not
endorse the Mutual Funds as suitable investments for the Participant.
In addition, the Custodian will not provide investment advice to the
Participant. The Participant assumes all responsibility for the choice
of his or her investments in the custodial account. The Custodian shall
not be responsible for reviewing any assets held in the custodial
account and shall not be responsible for questioning any investment
decision of the Participant. The Custodian shall not be liable for any
loss resulting from any action taken by the Custodian at the direction
of the Participant or any loss resulting from any failure to act
because of the absence of directions from the Participant.
(c) The Custodian shall not be responsible for inquiring into the nature or
amount of any contribution made by the Participant, nor into the amount
or timing of any distribution requested by the Participant, or whether
such contributions or distributions comply with the Code. The
Participant shall have full responsibility for any tax or investment
consequences of all contributions to and distributions from the
custodial account.
(d) If the Custodian receives any investment instructions from the
Participant which, in the opinion of the Custodian, are not in good
order or are unclear, or if the Custodian receives monies from the
Participant which would exceed the amount that the Participant may
contribute to the custodial account, the Custodian may hold all or a
portion of the monies uninvested pending receipt of written (or in any
other manner permitted by the Custodian) instructions or clarification.
During any such delay the Custodian will not be liable for any loss of
income or appreciation, loss of interest, or for any other loss. The
Custodian may also return all or a portion of the monies to the
Participant. Again, in such situations, the Custodian will not be
liable for any loss.
(e) The Custodian will designate contributions (other than rollover
contributions) as being made for any particular year as requested by
the Participant's employer. If the Participant's employer does not
designate a year for any contribution, the Custodian will designate the
year the contribution was actually received.
(f) The Custodian will accept transfers of a cash amount to the custodial
account from another custodian or trustee of a SIMPLE Individual
Retirement Account upon the Participant's written direction. The
Custodian will also transfer a cash amount in the custodial account
upon the written request of the Participant to another custodian or
trustee of an Individual Retirement Account or Annuity. For such
transfer, the Custodian may require a written acceptance of the
successor custodian. The Participant warrants that all transfers to and
from the custodial account will be made in accordance with the rules
and regulations of the Internal Revenue Service.
(g) The Custodian is authorized to hire an agent to perform certain of its
duties hereunder, which agent may be the transfer agent for the Mutual
Fund shares authorized to be held hereunder.
(h) The Participant agrees to indemnify and hold harmless, and to defend
the Custodian against any and all claims arising from and liabilities
incurred by reason of any action taken by the Custodian in good faith
pursuant to this Agreement.
8.4 JUDICIAL SETTLEMENT OF ACCOUNTS
The Custodian may bring an action before a court of appropriate
jurisdiction at any time to resolve any dispute or ambiguity in its
accounts. If a dispute or ambiguity exists regarding who is entitled to
receive funds from the custodial accounts, the Custodian may withhold such
funds until the dispute or ambiguity is resolved through settlement by the
parties or determination by a court of appropriate jurisdiction. The
court's resolution shall be final and binding on all parties involved. All
expenses incurred by the Custodian, including, without limitation, all
legal and accounting fees, shall be paid for from the custodial account
unless otherwise paid by the Participant.
8.5 NOTICE
(a) All notices or requests to the Custodian to make distributions from the
custodial account must conform to the requirements of the Internal
Revenue Code, the redemption requirements of the applicable fund
prospectus and the requirements of the Custodian and its duly appointed
agent, if any. The Custodian will make distributions from the custodial
account only after receiving a written request from the Participant (or
any other party entitled to receive the assets of the custodial
account) in the form required by the Custodian. The Participant (or any
other party entitled to receive the assets of the custodial account)
must provide to the Custodian any applications, certificates, tax
waivers, signature guarantees and any other documents (including proof
of any legal representative's authority) that the Custodian requires.
The Custodian will not be liable for complying with a distribution
request that appears to be genuine, nor will the Custodian be liable
for refusing to comply with a distribution request which the Custodian
is not satisfied is genuine or in proper form. This includes any losses
which may occur while the Custodian waits for the distribution request
to be in the proper form. The Participant (or any other party entitled
to receive the assets of the custodial account) also agrees to fully
indemnify the Custodian for any losses which may result from the
Custodian's failure to act upon an improperly made distribution
request.
(b) Except as otherwise permitted by the Custodian, all instructions to the
Custodian under this Agreement must be in writing. The Participant may
authorize an agent to act on behalf of the Custodian, provided that
such appointment and authorization is provided in writing to the
Custodian in the form required by the Custodian. Any instructions by an
authorized agent of the Participant will be binding upon the
Participant. Any authorization given by the Participant will remain in
effect until the Custodian receives written notice of the Participant's
revocation of the authorization, or the death of the Participant,
whichever occurs first.
(c) Any notice, report, payment, distribution or other material required to
be delivered by the Custodian under this Agreement, shall be deemed
delivered and effective three days after the date mailed by the
Custodian to the Participant at the Participant's last address of
record as provided by the Participant to the Custodian, and the
Custodian shall not be obligated to ascertain the actual address or
whereabouts of the Participant.
(d) Any notice or instructions required to be delivered by the Participant
to the Custodian under this Agreement shall be deemed delivered when
actually received by the Custodian.
(e) Any notice required to be given to the Custodian under this Agreement
shall be given to the Mutual Fund Group, the name of which appears on
the front of the Agreement, and any notice required or permitted to be
given to the Participant under this Agreement shall be given to the
Participant at the address filed with the Custodian from time to time.
Notices may be delivered in person or may be sent by United States
mail, first class with postage prepaid and properly addressed.
8.6 REPORTS, RECORDS AND ACCOUNTING
The Custodian shall maintain such records as may be reasonably necessary
for the proper administration of the account. The Custodian shall render a
report to each Participant (or his or her beneficiaries), on the status of
his or her account or accounts at least annually. The report shall show
contributions (deposits) received, withdrawals made, dividend credits,
other credits and/or charges, and the balance at the end of the report
period. The report shall also furnish the Participant such other
information as the Custodian may possess and as may be necessary for the
Participant to comply with the reporting requirements of the Internal
Revenue Code and any applicable regulations. The Custodian shall have no
duty to furnish information about the account to any person except as
expressly provided herein or as required by law. Any accounting, when
approved by the Participant, will be binding and conclusive as to the
Participant, and the Custodian will thereby be released and discharged from
any liability or accountability to the Participant with respect to matters
set forth therein. The Participant or beneficiary shall advise the
Custodian within 60 days following receipt of the Custodian's report of any
corrections to his or her account. If the Participant or beneficiary fails
to advise the Custodian of any corrections within the 60-day period, the
Participant or beneficiary shall be deemed to have approved the Custodian's
report. The Custodian shall have the right to have its account settled by a
court of competent jurisdiction.
8.7 RECORDS RETENTION
The Custodian shall retain its records relating to the account as long as
necessary for the proper administration thereof and at least for any period
required by the Employee Retirement Income Security Act of 1974 or other
applicable law.
8.8 RESIGNATION OR REMOVAL OF CUSTODIAN
(a) The Custodian may resign as Custodian hereunder without the consent of
the Participant, by providing notice of such resignation 30 days prior
to the effective date of the resignation. In the event of a resignation
by the Custodian, the Participant must appoint a successor Custodian or
Trustee. Upon receipt by the Custodian of a written acceptance of such
appointment by the successor Custodian or Trustee, the Custodian shall
transfer and pay over to such successor the assets of the custodial
account. If after 30 days from notice of resignation, the Custodian has
not received written acceptance of such appointment by the successor
Custodian or Trustee, the Custodian shall pay or otherwise transfer to
the Participant the assets remaining in the custodial account. The
Custodian is authorized, however, to reserve such funds as it deems
advisable for payment of any liabilities constituting a charge against
the assets of the custodial account or against the Custodian, with any
balance of such reserve remaining after payment of all such items to be
paid over to the successor Custodian.
(b) Upon the appointment and qualification of a successor Custodian or
Trustee, the successor Custodian or Trustee shall assume all rights,
powers and privileges, liabilities and duties of the Custodian. Upon
acceptance of appointment by the successor Custodian or Trustee, the
Custodian shall assign, transfer and deliver to the successor all funds
held in the custodial account. The Custodian is authorized, however, to
reserve such funds as it deems advisable for payment of any liabilities
constituting a charge against the assets of the custodial account or
against the Custodian, with any balance of such reserve remaining after
the payment of all such items to be paid over to the successor
Custodian or Trustee.
8.9 DESIGNATION OF BENEFICIARY
(a) The Participant has the right to designate a beneficiary(ies) of his or
her account in writing on a form provided by the Custodian or in a
format approved by the Custodian. The purpose of this designation is to
identify the recipient(s) of the custodial account upon the
Participant's death.
(b) The Participant has the right to change this designation of beneficiary
at any time by writing to the Custodian. A beneficiary designation when
received by the Custodian shall relate back and be effective as of the
date it was signed by the Participant, but without prejudice to or
liability of the Custodian, Mutual Fund or its agents, for any payout
made prior to receipt by them. If the beneficiary does not survive the
Participant or if the Custodian cannot locate the beneficiary after
reasonable search, any balance in the account will be paid to the
Participant's estate.
8.10 PAYMENT IN THE EVENT OF DISABILITY
A Participant who becomes disabled as defined by Internal Revenue Code
Section 72(m)(7) shall be entitled to a distribution of his or her
custodial account. The Custodian may require what evidence it deems
appropriate before distributing on account of such disability. This
determination by the Custodian shall not constitute any warranty or
assurance by the Custodian that the distribution to the Participant is free
from the penalty on premature distributions described in Internal Revenue
Code Section 72(t).
8.11 EXCLUSIVE BENEFIT
The custodial account is established for the exclusive benefit of the
Participant and his or her beneficiary(ies).
8.12 AMENDMENT
(a) The Custodian is authorized from time to time to amend this Agreement,
in whole or in part. The Custodian shall furnish copies of any such
amendments to the Participant within 30 days of the date the amendments
are effective.
(b) This Agreement may not be amended in any manner that will cause or
permit any part of the assets of the custodial account to be divested
from any person having any interest in the custodial account unless
such amendment is necessary to satisfy the conditions of any law,
governmental regulation or ruling or to meet the requirements of the
Internal Revenue Code or any amendment thereof, in which case the
Custodian is expressly authorized to make amendments that are necessary
for such purposes. Such amendments may be made retroactively to the
later of the effective date of this Agreement or the effective date of
any future legal requirements.
8.13 CONTINUANCE OF THE CUSTODIAL RELATIONSHIP
The relationship created by this Agreement shall continue in effect until a
full distribution of the custodial account has been made and all accounts
of the Custodian have been settled.
8.14 SPECIAL MINIMUM DISTRIBUTION PROVISIONS
(a) In the event the Participant fails to choose any methods of
distribution described in paragraph 4.3(a) through (e) by April 1
following the calendar year in which he or she reaches age 70 1/2, the
Custodian has the right to assume that the Participant is satisfying
the minimum distribution requirements through other IRA accounts and
shall continue to hold the assets of the account pending written
directions from the Participant. Any and all tax consequences related
to the failure of the Participant to timely elect a distribution option
shall be the sole responsibility of the Participant.
(b) If any beneficiary fails to elect a distribution option on a timely
basis, distributions shall commence pursuant to paragraph 4.4(b)(ii).
(c) The provisions of paragraph 4.4(d) above shall not apply if the
Participant's death occurred prior to 1984.
(d) A surviving spouse beneficiary shall be permitted to make the election
specified under paragraph 4.4(b)(i) or (ii) no later than the earlier
of December 31 of the fifth year after the year of death or the year in
which the Participant would have attained age 70 1/2.
(e) A nonspouse beneficiary shall be permitted to make the election
specified under paragraph 4.4(b)(i) or (ii) no later than December 31
of the year following the year of death.
(f) Notwithstanding any provision of this Agreement to the contrary, any
surviving spouse of a Participant who is a beneficiary shall have the
right to treat the custodial account of the deceased spouse as his or
her own IRA and to withdraw all, or a portion, of the account to the
full extent of the beneficial interest of the surviving spouse in the
custodial account.
8.15 EMPLOYER ESTABLISHED ACCOUNT
(a) The provisions of this section apply if this account is established by
an employer maintaining a SIMPLE Plan (the "Employer") on behalf of a
Participant who is unable or unwilling to establish an account on his
or her own behalf. An Employer may establish an account on behalf of
such a Participant, and the Participant on whose behalf this account is
established, his or her heirs, personal representatives, successors and
assigns, and the Employer are bound by the terms of this Agreement. The
Custodian will be fully protected in acting and relying upon written
instructions concerning the account which the Custodian in good faith
deems to have been given by the Employer. The Custodian will have no
obligation to undertake independent inquiry or investigation concerning
the establishment of the account, contributions pursuant to the
Employer's plan, or instructions received by the Custodian from the
Employer, including, but not limited to, investment instructions,
concerning the account or amounts held by the Custodian pursuant
hereto.
(b) After the Employer has established the account for a Participant
described in subsection (a) of this section, the Employer may certify
to the Custodian in a form and manner acceptable to the Custodian that
the Participant has accepted responsibility for the terms of this
Custodial Account Agreement, and upon the Custodian's receipt and
approval thereof and such other documentation and information as the
Custodian may require, the Custodian will be fully protected in acting
upon the instructions and directions of such Participant. The Custodian
may, but will not be obligated to, require the Participant to execute
an account application or establish a new account as a condition
precedent to its acting upon the Participant's instructions in
connection herewith.
8.16 CUSTODIAN'S LIMITED LIABILITY
The Custodian shall not be liable for any action taken or omitted at the
direction of the Participant or beneficiary, or with his or her consent and
approval, or for any action taken or omitted in accordance with the terms
and conditions of this Agreement, or applicable governmental regulations or
law, or for any other action taken or omitted by it in good faith for any
mistake in judgment, or for any loss suffered by the custodial account
except those which are a result of its own gross negligence or willful
misconduct.
8.17 GENERAL PROVISIONS
(a) Anything contained in this Agreement to the contrary notwithstanding,
neither the Participant nor any beneficiary of the Participant shall be
entitled to use the custodial account or any portion thereof, as
security for a loan, nor shall the Custodian or any other person or
institution engage in any prohibited transaction, within the meaning of
Section 4975 of the Code, with respect to any custodial account.
(b) Except to the extent otherwise required by law or this Agreement, none
of the amounts held in a custodial account shall be subject to the
claims of any creditor of the Participant, or any beneficiary of the
Participant, nor shall the Participant or any beneficiary have the
right to anticipate, sell or pledge, option, encumber or assign any of
the benefits, payments or proceeds to which he or she may be entitled
under this Agreement.
(c) If any question arises as to the meaning of any provision of this
Agreement, the Custodian shall be authorized to construe or interpret
any such provision, and the Custodian's construction and interpretation
shall be binding upon the Participant and any beneficiary of the
Participant.
(d) Throughout this Agreement, the singular form includes the plural where
applicable.
(e) Any provision of this Agreement which would disqualify the custodial
account as an Individual Retirement Account shall be disregarded to the
extent necessary to make the custodial account qualify as an Individual
Retirement Account under the Code.
(f) The headings and articles of this Agreement are for convenience of
reference only, and shall have no substantive effect on provisions of
this Agreement.
(g) This Agreement and the custodial account created hereby shall be
governed by the laws of the State in which the Custodian maintains its
principal place of business. All contributions to the custodial account
shall be deemed to take place in said State.
(LOGO)
P.O. Box 419022
Kansas City, MO 64141-6022
1-800-OMAHA-03
SIMPDSCAA-397
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