FIRST OMAHA FUNDS INC, 497, 1998-03-17

FIRST OMAHA FUNDS INC
497, 1998-03-17

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<PAGE> 1
PROSPECTUS

MARCH 16, 1998

FIRST OMAHA GROWTH FUND

FIRST OMAHA FUNDS PROSPECTUS

MARCH 16, 1998

First Omaha Funds, Inc. For purchase and
1620 Dodge Street FNC Trust Group, n.a. redemption information,
Omaha, Nebraska 68102-1596 Investment Adviser call 1-800-OMAHA-03

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 Growth
Fund, a no-load diversified investment company. FNC Trust Group, n.a. (the
"Adviser"), a subsidiary of First National Colorado, Inc., which is a
subsidiary of First National of Nebraska, Inc. ("FNN"), acts as the investment
adviser to the Fund.

FIRST OMAHA GROWTH FUND (the "Fund") seeks as its investment objective
long-term capital appreciation.

THE SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, FNC TRUST GROUP, N.A., FIRST NATIONAL COLORADO,
INC., FIRST NATIONAL BANK OF OMAHA, 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 THE FUND INVOLVES CERTAIN INVESTMENT RISKS, INCLUDING
THE POSSIBLE LOSS OF PRINCIPAL.

This Prospectus sets forth concisely the information about the Fund that a
prospective investor ought to know before investing. Investors should read
this Prospectus and retain it for future reference. Additional information
about the Fund is contained in a Statement of Additional Information, dated the
same date as the Prospectus. The Statement of Additional Information, which
may be revised from time to time, has been filed with the Securities and
Exchange Commission and is available upon request without charge by writing to
the Fund at its address above or by calling the Fund at the telephone number
shown above. The Statement of Additional Information is incorporated by
reference in its entirety into this Prospectus.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.

<PAGE> 2

TABLE OF CONTENTS

Prospectus Summary
Fee Table
Performance Information
Investment Objectives and Policies
Investment Restrictions
Valuation of Shares
How to Purchase and Redeem Shares
Dividends and Taxes
Management of the Company
General Information
Additional Performance Information

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 Fund
or its Distributor. This Prospectus does not constitute an offering by the
Fund or by the Distributor in any jurisdiction in which such offering may not
lawfully be made.

<PAGE> 3

PROSPECTUS SUMMARY

TYPE OF COMPANY

The Fund is a no-load, diversified series of an open-end, management investment
company.

INVESTMENT OBJECTIVE

The investment objective of the Fund is long-term capital appreciation.

INVESTMENT POLICY

The Fund seeks to achieve its investment objective by investing in companies
that the Adviser believes to have the potential for earnings growth more rapid
than their peer group. In selecting investments for the Fund, the Adviser will
emphasize (under normal market conditions more than 50% of the Fund's total
assets) the securities of companies that, at the time of purchase, have market
capitalizations between $500 million and $10 billion. These companies are
considered to be mid-capitalization companies by the Adviser. The balance of
the Fund's assets may be invested in securities of companies that, at the time
of purchase, have market capitalizations in excess of $10 billion. While the
Adviser intends to invest primarily in common stocks and securities convertible
into common stocks under normal market conditions, the Fund may also invest in
fixed income securities for capital appreciation, temporary defensive purposes,
pending investment or to meet anticipated redemption requests.

RISK FACTORS AND SPECIAL CONSIDERATIONS

An investment in the Fund is subject to certain risks, as set forth in
detail under "INVESTMENT OBJECTIVES AND POLICIES" and "OTHER INVESTMENT
POLICIES AND RISKS." The Fund's share price is expected to fluctuate and may,
at redemption, be worth more or less than the initial purchase price. Equity
securities such as those in which the Fund may invest are more volatile and
carry more risk than some other investments. Market risks associated with
equity investments include the possibility that stock prices in general will
decline over short or even extended periods in response to changes in market
conditions, interest rates and other company, political and economic news.
This risk is in addition to the risks inherent in individual stock selection.
As with other mutual funds, there can be no assurance that the Fund will
achieve its investment objective. Subject to certain limitations, the Fund 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. These investment practices and
techniques involve risks that are different in some respects from those
associated with similar funds that do not use them. See "INVESTMENT
OBJECTIVES AND POLICIES" and "OTHER INVESTMENT POLICIES AND RISKS" for more
information.

OFFERING PRICE

The public offering price of the Fund is equal to its net asset value per
Share.

<PAGE> 4

SHARES OFFERED

Shares of common stock ("Shares") of the Growth Fund, 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. Net
realized capital gains are distributed at least annually.

INVESTMENT ADVISER

FNC Trust Group, n.a. (the "Adviser").

ADMINISTRATOR

Sunstone Financial Group, Inc. (the "Administrator").

DISTRIBUTOR

Sunstone Distribution Services, LLC (the "Distributor").

<PAGE> 5

FEE TABLE

The following table is designed to assist you in understanding the expenses you
will bear directly or indirectly as a shareholder of the Fund. Shareholder
Transaction Expenses are charges that you pay when buying or selling shares of
the Fund. Annual Fund Operating Expenses are paid out of the Fund's assets and
include fees for portfolio management, maintenance of shareholder accounts,
general Fund administration, shareholder servicing, accounting and other
services. Actual total operating expenses may be higher or lower than those
indicated. An example based on the summary is also shown.

<TABLE>
<CAPTION>
GROWTH FUND(1)
-----------
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES

Maximum Sales Load Imposed on Purchases (as a percentage of
offering price) 0%

Maximum Sales Load Imposed on Reinvested Dividends (as a
percentage of offering price) 0%

Deferred Sales Load (as a percentage of original purchase price
or redemption proceeds, as applicable) 0%

Redemption Fees (as a percentage of amount redeemed, if
applicable) 0%

Exchange Fee 0%

ANNUAL FUND OPERATING EXPENSES (as a percentage of average net
assets)

Management Fees .50%

12b-1 Fees(2) .01%

Other Expenses After Voluntary Fee Reduction, including
administration fees, administrative servicing fees and other
expenses(3) .66%

Total Fund Operating Expenses After Voluntary Fee Reduction 1.17%
</TABLE>

(1) The above information reflects estimates of the expenses for the Fund for
the fiscal year ended March 31, 1999 and reflects anticipated voluntary
fee reductions, waivers and reimbursements. Without voluntary fee

<PAGE> 6

reductions, waivers and reimbursements, Management Fees, Other Expenses and
Total Fund Operating Expenses are estimated to be .75%, .80% and 1.56%.
Fee reductions, waivers and reimbursements, if any, may be eliminated at
any time. See "MANAGEMENT OF THE COMPANY."
(2) The Company has adopted a Rule 12b-1 Plan pursuant to which the Fund 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 the Fund. As of the date of this Prospectus, it is
estimated that 12b-1 expenses will be .01% of average daily net assets of
the Fund. The distribution expenses for long-term shareholders may total
more than the maximum sales charge that would have been permissible if
imposed entirely as an initial sales charge.
(3) "Other Expenses" include administration fees and legal, accounting and
other miscellaneous expenses to be incurred during the fiscal year.

EXAMPLE:

You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period:

<TABLE>
<CAPTION>
1 YEAR 3 YEARS
<S> <C> <C>
Growth Fund $12 $37
</TABLE>

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 the Fund.

THE EXAMPLES SHOWN ABOVE SHOULD NOT BE CONSIDERED REPRESENTATIONS OF PAST OR
FUTURE EXPENSES OR RATES OF RETURN. ACTUAL OPERATING EXPENSES AND INVESTMENT
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN. Information about the actual
performance of the Fund will be contained in the Fund's future annual reports
to shareholders, which may be obtained without charge when they become
available.

PERFORMANCE INFORMATION

From time to time, performance information for the Fund showing its 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 the Fund. Average
annual total return is measured by comparing the value of an investment in the
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

<PAGE> 7

return is calculated similarly to average annual total return except that the
return figure is aggregated over the relevant period instead of annualized.
The Fund may, when citing performance in marketing and sales literature,
include the performance of investment vehicles which were predecessors to the
Fund. See "ADDITIONAL PERFORMANCE INFORMATION" herein. Yield will be computed
by dividing the Fund's net investment income per share (as calculated on a
yield to maturity basis) earned during a recent 30-day period by the 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.

In addition, from time to time, the Fund may present its 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 the 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 the 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 the 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 the Fund's Shares may be compared to
data prepared by Lipper Analytical Services, Inc. In addition, the total
return of the 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, or the Dow Jones Industrial
Average, a recognized unmanaged index of common stocks of 30 industrial
companies listed on the New York Stock Exchange. 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 Fund. In addition to performance information,
general information about the Fund 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 the Fund 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 the
Fund, as discussed below, the yield

<PAGE> 8

and total return of the 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 Fund and its predecessors, see "ADDITIONAL PERFORMANCE
INFORMATION."

INVESTMENT OBJECTIVES AND POLICIES

The Fund's investment objective is long-term capital appreciation. The
investment objective of the Fund is a fundamental policy and, as such, may not
be changed without a vote of the holders of a majority of the outstanding
shares of the Fund (as defined in "GENERAL INFORMATION-Miscellaneous"). There
can be no assurance that the investment objective of the Fund will be achieved.

The characteristics considered by the Adviser in selecting securities for the
Fund include: market share gains, product innovation, low-cost production or a
history of greater than average earnings and dividend growth.

The Adviser intends to invest primarily in common stocks and securities
convertible into common stocks under normal market conditions. However, at the
Adviser's discretion, the Fund may also invest in fixed income securities for
capital appreciation, pending investment or to meet anticipated redemption
requests. Under normal market conditions, the Fund may invest up to 35% of the
value of its total assets in preferred stocks, bonds, notes and warrants when
the Adviser believes they present capital appreciation potential, and
short-term obligations for purposes of portfolio liquidity to meet anticipated
redemption requirements, pending investment and to pay expenses. Short-term
obligations (securities with maturities of 12 months or less at the time of
purchase) consist of domestic and foreign commercial paper (including variable
amount master demand notes), banker's acceptances, domestic bank certificates
of deposit, securities of investment companies holding themselves out as "money
market" funds, repurchase agreements, and obligations issued or guaranteed by
the U.S. government or its agencies or instrumentalities. However, 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. To the
extent that the Fund is so invested in debt obligations, the Fund may not
achieve its investment objective. While the Fund retains the authority to take
a temporary defensive position, the Fund may remain substantially fully

<PAGE> 9

invested when the Adviser deems it appropriate. As such, investors should not
consider the Fund to present by itself a complete or balanced investment
program.

Subject to the foregoing limitations, the Fund will invest only in 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"), including
"Baa" and higher by Moody's Investors Service, Inc. ("Moody's"), "BBB" and
higher by Standard & Poor's Corporation ("S&P"), or, if unrated, which the
Adviser deems to be of comparable quality. For a description of the rating
symbols of the NRSROs, see the Appendix to the Statement of Additional
Information. For a discussion of debt securities rated within the fourth
highest rating groups assigned by Moody's and S&P, see "OTHER INVESTMENT
POLICIES AND RISKS - Securities Ratings" herein.

Equity securities such as those in which the Fund may invest are more volatile
and carry more risk than some other investments, including investments in high-
grade fixed income securities. Depending upon the performance of the Fund's
investments, the net asset value per share of the Fund may fluctuate. The
emphasis on appreciation and medium-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 relatively smaller market
capitalization in general present greater risks than securities issued by
companies with larger market capitalizations 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.

<PAGE> 10

OTHER INVESTMENT POLICIES AND RISKS

The Fund may also invest in securities described in the following paragraphs to
the extent indicated.

U.S. GOVERNMENT SECURITIES - The Fund may 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.

REPURCHASE AGREEMENTS - Securities held by the Fund may be subject to
repurchase agreements. Under the terms of a repurchase agreement, the 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 the 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 the 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 the 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, the 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 the 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 - The Fund may borrow funds for temporary
purposes by entering into reverse repurchase agreements in accordance with the
investment restrictions described below. Pursuant to such agreements, the Fund
would sell certain of its

<PAGE> 11

securities to financial institutions such as banks and broker-dealers, and
agree to repurchase them at a mutually agreed-upon date and price. The Fund
intends to enter into reverse repurchase agreements only to avoid otherwise
selling securities during unfavorable market conditions to meet redemptions.
At the time the 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 the 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 the Fund may decline below the price
at which the 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 the 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, the
Fund may invest up to 10% of its assets in foreign securities, either directly
or indirectly through the purchase of investment companies that invest in
foreign securities or through the purchase of sponsored and unsponsored
American Depositary 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. As a shareholder of another
investment company, the Fund will bear, along with other shareholders, its pro
rata portion of the other investment company's expenses including advisory
fees. These expenses would be in addition to the advisory fees and other
expenses the Fund bears directly in connection with its own operations.
Investments in other investment companies will be subject to the limits imposed
by the 1940 Act. 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

<PAGE> 12

foreign securities are made in foreign currencies, the 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 - The Fund may purchase
securities on a when-issued or delayed-delivery basis. These transactions are
arrangements in which the Fund purchases securities with payment and delivery
scheduled for a future time. The 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. The Fund will
generally not pay for such securities or start earning interest on them until
they are received on the settlement date. When the 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, the Fund
relies on the seller to complete the transaction; the seller's failure to do so
may cause the Fund to miss a price or yield considered to be advantageous. The
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, the Fund may invest in debt securities
rated in the fourth highest rating group assigned by one or more appropriate
NRSROs and comparable unrated securities ("Baa" by Moody's or "BBB" by S&P).
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 the
Fund to fall below the fourth highest rating category, or cease to be rated,
the Adviser will consider such an event in determining whether the Fund should
continue to hold that security. The Adviser expects that it would not retain
more than 5% of the assets of the Fund in such downgraded securities. In no
event, however, would the 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 income, the Fund may, from time to time, lend its
portfolio securities to broker-dealers, banks, or institutional borrowers of
securities. The 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 the Fund. During the time portfolio
securities are on loan, the borrower pays the Fund any dividends or interest
received on such securities. Loans are subject to termination by the Fund or
the borrower at any time. While the Fund does not

<PAGE> 13

have the right to vote securities on loan, the 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,
the Fund bears the risk of delay in recovery of the portfolio securities and
the loss of rights in the collateral. The 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 the Fund's investment objective and policies, the Fund 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
the Fund. The 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 First
Omaha U.S. Government Obligations Fund (the "Money Market Fund"), the Adviser,
the Administrator and their affiliates will reduce their fees charged to the
Fund by an amount equal to the fees charged by such service providers based on
a percentage of the Fund's assets attributable to the Fund's investment in the
Money Market Fund. Additional restrictions on the Fund's investments in the
securities of other mutual funds are contained in the Statement of Additional
Information.

The Fund may not purchase or otherwise acquire any securities if, as a result,
more than 5% of the Fund's net assets would be invested in securities that are
illiquid.

INVESTMENT RESTRICTIONS

The 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 the Fund (see
"GENERAL INFORMATION - Miscellaneous").

The Fund 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 the Fund's
total assets would be invested in such issuer; or (b) the Fund would hold more
than 10% of the outstanding voting securities of such issuer; except that up to
25% of the value of the 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 the
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

<PAGE> 14

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 the 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 the Fund's total assets at the
time of its borrowing. The Fund will not purchase securities while its
borrowings (including reverse repurchase agreements) exceed 5% of its total
assets.

4. Make loans, except that the 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.

A list of the Fund's objectives, policies and restrictions, both fundamental
and non-fundamental, is set forth in the Statement of Additional Information.
In order to provide a degree of flexibility, investment policies that are not
deemed fundamental may be modified by the Board of Directors without
shareholder approval. Unless otherwise expressly noted, all of the Fund's
investment policies are not fundamental and may be changed without shareholder
approval.

In addition to the above investment restrictions, the Fund is subject to
certain other investment restrictions set forth under "INVESTMENT OBJECTIVES
AND POLICIES - Investment Restrictions" in the Fund's Statement of Additional
Information.

VALUATION OF SHARES

The net asset value of the Fund is determined and its Shares are priced as of
the close of trading of the New York Stock Exchange (currently 4:00 p.m.
Eastern Time) (the "Valuation Time") on each Business Day. A "Business Day" of
the 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 the Fund are tendered for
redemption and no order to purchase Shares is received) during which there is
sufficient trading in the 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 the Fund, less the
liabilities charged to the Fund, by the number of the Fund's outstanding
Shares. The net asset value per share of the Fund will fluctuate as the value
of the investment portfolio of the Fund changes.

<PAGE> 15

The securities of the Fund will be valued at market value. If market
quotations are not available, securities will be valued by a method that 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 the 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 Fund. Shares may be purchased directly by
investors. Investors may purchase Shares of the Fund directly from the Fund 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 Fund, to: First Omaha Funds, Inc., P.O.
Box 419022, Kansas City, Missouri 64141-6022. Subsequent purchases of Shares
of the Fund may be made at any time by mailing a check (or other negotiable
bank draft or money order) payable to the 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 Fund's 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 the Adviser 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. Shares of
the Fund 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 Fund 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 Fund 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 Fund at 1-800-OMAHA-03.

The Banks and other institutions may impose particular customer account
requirements in connection with investments in the Fund, such as minimum
account size or minimum account

<PAGE> 16

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 Fund, 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 the 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 the Fund 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 the Fund will be effected only on a
Business Day (as defined in "VALUATION OF SHARES") of the 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 the Fund.

MINIMUM INVESTMENT - Except as otherwise discussed below under "Auto Invest
Plan," the minimum investment is $500 for the initial purchase of Shares of the
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 Fund reserves the right to reject any order for the
purchase of its Shares in whole or in part. Transactions as a result of the
automatic reinvestment of dividends and capital gains distributions, as well as
the Fund's 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 Fund 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 the Fund through automatic
deduction from their

<PAGE> 17

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 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 the 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 Fund or through Banks or
other institutions. When Shares are purchased directly from the Fund, 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 the 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

<PAGE> 18

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 therefore 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 Fund nor its
service providers will be liable for any loss, damages, expense or cost arising
out of any telephone redemption effected in accordance with the Fund's
telephone redemption procedures, acting upon instructions reasonably believed
to be genuine. The Fund will employ procedures designed to provide reasonable
assurance that instructions by telephone are genuine; if these procedures are
not followed, the 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 the
Fund 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

<PAGE> 19

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, the 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. Eastern Time on a Business Day or, if the request for
redemption is received after 4:00 p.m. Eastern Time, to honor requests for
payment on the second Business Day, unless it would be disadvantageous to the
Fund or the Shareholders of the 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, the Fund
reserves the right to redeem, at net asset value, the Shares of the 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 the 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 the 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 the 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. Distributable net
realized capital gains are distributed at least

<PAGE> 20

annually. A Shareholder of the Fund will automatically receive all
distributions in additional full and fractional Shares of the 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 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 the Fund.

FEDERAL TAXES - The Fund is treated as a separate entity for federal income tax
purposes and 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 the 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. The Fund
contemplates declaring as dividends 100% of the Fund's investment company
taxable income (before deduction of dividends paid).

In order to avoid the imposition of an excise tax, the 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, the
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 the Fund bear to its gross income.

Distribution by the 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

<PAGE> 21

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 portion of distributions of net income to 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 the Fund may be subject to state and local taxes
with respect to their ownership of Shares or their receipt of distributions
from the Fund. In addition, to the extent Shareholders receive distributions
of income attributable to investments in repurchase agreements by the 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 the Fund and its Shareholders. Potential
investors in the 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. The Company, on behalf of the Fund, has
entered into agreements with various parties to provide investment advisory,
administration, distribution, transfer agency, custodian and other services.
The Company will be managed by the Directors in accordance with the laws of
Nebraska governing corporations.

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 - FNC Trust Group, n. a., the investment adviser of the
Fund, was established in May 1997 as a wholly-owned subsidiary of First
National Colorado, Inc. First National Colorado, Inc. is a wholly-owned
subsidiary of First National Nebraska, Inc.

The Adviser was created to provide trust and asset management services both
directly and as an agent for banks with trust powers. Currently, the Adviser
provides trust administrative and asset management services as an agent for
clients of Union Colony Bank, Greeley, Colorado and has offices in Boulder and
Loveland, Colorado, directly servicing those communities. The predecessor to
the Adviser was the Trust Division of Union Colony Bank, whose staff moved to
the Adviser upon its formation. The Adviser has no previous experience in
managing a registered investment company. David Jordan, the Portfolio Manager,
has been the Senior Investment Officer of First National Bank of Fort Collins
since 1995. From 1992 to 1995 he served as Portfolio Manager of First
Interstate Bank of Denver.

The Adviser provides a full range of trust and asset management services to
clients. As of December 31, 1997, FNC had $225 million in assets under
administration either directly or as agent, including over $170 million for
which the Adviser had investment responsibility.

Subject to the general supervision of the Company's Board of Directors and in
accordance with the Fund's investment objectives and restrictions, the Adviser
manages the investments of the Fund, makes decisions with respect to and places
orders for, all purchases and sales of the Fund's portfolio securities, and
maintains the Fund's records relating to such purchases and sales. All
investment decisions for the Fund are made by an investment committee and no
one 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 Fund,
computed daily and paid monthly,

<PAGE> 22

equal to the lesser of: (1) a fee at the annual rate of seventy-five
one-hundredths of one percent (.75%) of the 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
paid by most other mutual funds. The Adviser may periodically voluntarily
waive all or a portion of its advisory fee with respect to the 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 the 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 the Fund. 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 the Fund's average net assets subject
to a minimum fee of $50,000. The Administrator may periodically voluntarily
waive all or a portion of its administrative fee with respect to the Fund.
These waivers may be terminated at any time at the Administrator's discretion.
The Administrator may not seek reimbursement of such voluntarily reduced fees
at a later date. The reduction of such fee will cause the performance of the
Fund to be higher than it would be in the absence of such reduction. Messrs.
Snyder and Pavlick, officers of the Company, are officers and/or employees of
the Administrator.

Sunstone Distribution Services, LLC, an affiliate of the Administrator, acts as
distributor for the Fund. The Distributor receives no compensation from the
Fund 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 the
Fund. The 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 the
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 the Fund is
authorized to pay a periodic amount representing distribution expenses
calculated at an annual rate not to exceed

<PAGE> 23

twenty-five one-hundredths of one percent (.25%) of the average daily net assets
of the 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 Fund 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 the 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, recordkeeping and/or administrative support services for their
customers or account holders (collectively, "customers") who are the beneficial
or record owner of Shares of the Fund. In consideration for such services, a
Service Organization receives a fee from the Fund, computed daily and paid
monthly at an annual rate of up to twenty-five one-hundredths of one percent
(.25%) of the average daily net asset value of Shares of the Fund owned
beneficially or of record by such Service Organization's customers for whom the
Service Organization provides such services.

The servicing agreements adopted under the Services Plan (the "Servicing
Agreements") require the Service Organizations receiving such compensation to
perform certain ministerial, recordkeeping and/or administrative support
services with respect to the beneficial or record owners of Shares of the Fund,
such as processing dividend and distribution payments from the Fund on behalf
of customers, providing periodic statements to customers showing their
positions in the Shares of the Fund, providing subaccounting 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 Fund
pursuant to specific or pre-authorized instructions.

As authorized by the Services Plan, the Company has entered into a Servicing
Agreement with First National Bank of Omaha ("FNBO"), an affiliate of the
Adviser pursuant to which FNBO has agreed to provide certain administrative
support services in connection with Shares of the Fund 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 the 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 or FNBO; (5) providing subaccounting with
respect to the Shares beneficially owned by FNBO's customers or the information
necessary for subaccounting; (6) if required by law, forwarding shareholder
communications from the 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 the Fund, may pay FNBO a monthly fee, computed at the annual rate
of ten one-hundredths of one percent (.10%) of the average aggregate net asset

<PAGE> 24

value of Shares of the Fund held during the period by customers for whom FNBO
has provided services under the Servicing Agreement. FNBO may periodically
voluntarily reduce all or a portion of its administrative services fee with
respect to the Fund. The reduction of such fee will cause the yield and total
return of the Fund to be higher than they would be in the absence of such
reduction.

BANKING LAWS - The Adviser and the Custodian believe that each possesses the
legal authority to perform the services for the Fund contemplated by the Plan
adopted by the Company, the Investment Advisory Agreement and the 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 the Investment Advisory Agreement, the Servicing Agreement and
the 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 or the
Custodian could continue to perform such services for the Fund. 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. Each Share of the Fund represents an
equal proportionate interest in the Fund with other Shares of the Fund, and is
entitled to such dividends and distributions out of the income earned on the
assets belonging to the 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 the 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 Fund.

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.

<PAGE> 25

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 the Fund 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 the Fund 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 the Fund and therefore, will be presumed to control
the Fund within the meaning of the 1940 Act.

Overall responsibility for the management of the Fund 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 the 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"), an affiliate of the
Adviser, serves as custodian for the Fund. Pursuant to the Custodian Agreement
with the Company, the Custodian receives compensation from the Fund for such
services in an amount equal to a fee, computed daily and paid monthly, at the
annual rate of three one-hundredths of one percent (.03%) of the Fund's average
daily net assets. The Custodian may periodically waive all or a portion of its
custody fees with respect to the 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"),
an affiliate of the Adviser, serves as the Fund's 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

<PAGE> 26

the Fund's Shareholders of record: maintenance of shareholder records for the
Fund's Shareholders of record; processing shareholder purchase and redemption
orders; processing transfers and exchanges of Shares of the 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 Fund
based on the number of Shareholders of record, subject to certain minimum
amounts from the Fund.

DST Systems, Inc., 210 W. 10th Street, Kansas City, Missouri 64105-1614, serves
as sub-transfer agent for the Fund 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 Fund under such Agreement and receives a fee
from the Transfer Agent 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 the Fund" means the consideration received by the Fund
upon the issuance or sale of Shares in the 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 the Fund
that are allocated to the 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 Fund are
conclusive.

As used in this Prospectus and in the Statement of Additional Information, a
"vote of a majority of the outstanding Shares" of the 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 the Fund present at a meeting
at which the holders of more than 50% of the votes attributable to Shareholders
of record of the Fund are represented in person or by proxy; or (2) the holders
of more than 50% of the outstanding Shares of the Fund.

ADDITIONAL PERFORMANCE INFORMATION

The Fund is successor to a common trust fund. The following table describes the
performance of the predecessor common trust fund. The common trust fund was
managed by the Adviser who manages the Fund. The Adviser has represented
that the Fund is managed in a manner that is in all material respects
equivalent to the management of the common trust fund, that is the Fund's
objective, policies and guidelines are in all material respects equivalent to
those of the common trust fund. However, the following information should not
be viewed as an indication of the future performance of the Fund. The tables
below include information regarding the common trust fund's operations for
periods before the Fund's registration statement became effective, as adjusted
to reflect the higher expenses borne by the Fund. The common trust fund was
not registered under the 1940 Act and

<PAGE> 27
therefore was not subject to certain investment restrictions that are imposed
by that Act. If the common trust fund had been registered, its performance
might have been adversely affected.

AVERAGE ANNUAL TOTAL RETURNS
COMMON TRUST FUND
FOR THE PERIODS ENDED DECEMBER 31, 1997

<TABLE>
<CAPTION>
ONE THREE FIVE SINCE
YEAR YEARS YEARS COMMENCEMENT
------ ------ ------ ------------
<S> <C> <C> <C> <C>
Pooled Growth Fund 25.86% 25.06% 14.21% 13.94%(1)
</TABLE>

(1) The predecessor common trust fund commenced operations on November 30, 1992.

TOTAL RETURNS FOR THE YEARS ENDED DECMBER 31,

<TABLE>
<CAPTION>
GROWTH FUND(1)
YEARS
<S> <C>
1997 25.86%
1996 12.81%
1995 37.77%
1994 (0.49)%
1993 (0.16)%
1992 (0.05)%(2)
</TABLE>

(1) Results represent the performance of the predecessor common trust fund
which has been adjusted to reflect the Fund's estimated operating
expenses for its first fiscal year. See "FEE TABLE." The performance
of the predecessor common trust fund as adjusted to reflect the Fund's
estimated operating expenses with voluntary fee reductions, reimbursements
and waivers were 26.35%, 13.25%, 38.30%, (0.10)%, 0.23% and (0.02)% for
the fiscal years 1997 to 1992, respectively.

(2) Total return from inception through December 31, 1992 is not annualized.

Performance quotations of the common trust fund represent its past
performance and should not be considered as representative of future results of
the Fund. The investment return and principal value of an investment in the
Fund will fluctuate so that an investor's Shares, when redeemed, may be worth
more or less than their original cost.

<PAGE> 28

INVESTMENT ADVISER
FNC Trust Group, n.a.
1701 23rd Avenue
Greeley, Colorado 80632

CUSTODIAN
First National Bank of Omaha
1620 Dodge Street
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

<PAGE> 29
First Omaha Growth Fund
An Investment Portfolio of
FIRST OMAHA FUNDS, INC.

Statement of Additional Information

March 16, 1998

This Statement of Additional Information is not a Prospectus, but should be
read in conjunction with the Prospectus (the "Prospectus") of the First Omaha
Growth Fund (the "Fund") dated as of the date hereof. The Fund is a separate
investment portfolio 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.

B-1

<PAGE> 30

TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
THE COMPANY B-3

INVESTMENT OBJECTIVES AND POLICIES B-3

Additional Information on Portfolio Instruments B-3
Investment Restrictions B-8
Portfolio Turnover B-10

NET ASSET VALUE B-10

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION B-10

MANAGEMENT OF THE COMPANY B-11

Directors and Officers B-11
Investment Adviser B-13
Portfolio Transactions B-14
Glass-Steagall Act B-15
Administrator/Fund Accountant B-16
Expenses B-18
Distributor B-18
Administrative Services Plan B-19
Custodian B-20
Transfer Agency Services B-21
Auditors B-21
Legal Counsel B-21

ADDITIONAL INFORMATION B-21

Organization and Capital Structure B-21
Shareholder Meetings B-22
Ownership of Shares B-23
Vote of a Majority of the Outstanding Shares B-23
Additional Tax Information B-23
Calculation of Total Return B-24
Distribution Rates B-24
Performance Comparisons B-24
Miscellaneous B-25

APPENDIX A-1
</TABLE>

B-2

<PAGE> 31

STATEMENT OF ADDITIONAL INFORMATION

THE COMPANY

First Omaha Funds, Inc. (the "Company") is an open-end management
investment company. The Growth Fund is a diversified no-load investment
portfolio of the Company. Much of the information contained in this Statement
of Additional Information expands upon subjects discussed in the Prospectus of
the Fund. Capitalized terms not defined herein are defined in the Prospectus.
No investment in Shares of the Fund should be made without first reading the
Fund's Prospectus.

INVESTMENT OBJECTIVES AND POLICIES

Additional Information on Portfolio Instruments

The following policies supplement the investment objective and policies of
the Fund as set forth in the Prospectus for the Fund.

Bank Obligations. The 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 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

B-3

<PAGE> 32

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 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 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 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, the
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. The Fund will not
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,
investment companies that invest in foreign securities and securities purchased
on foreign securities exchanges, may subject the Fund to investment risks that
differ in some respects from those related to investments 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
Fund will acquire such securities only when the Adviser believes the risks
associated with such investments are minimal.

U.S. Government Obligations. The Fund 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. Obligations of
certain agencies and

B-4

<PAGE> 33

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, the 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 the 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, the 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
the Fund's commitment. It may be expected that the 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
the Fund will set aside cash or liquid portfolio securities to satisfy its
purchase commitments in the manner described above, the 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 the 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
the Fund incurring a loss or missing the opportunity to obtain a price
considered to be advantageous. The Fund 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.

Medium-Grade Debt Securities. As stated in the Prospectus, the Fund may
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

B-5

<PAGE> 34

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 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 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
the Fund 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. The Fund may invest in
securities issued by other investment companies, including in Shares of the
First Omaha U.S. Government Obligations Fund (the "Money Market Fund"). The
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, the 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 the Fund bears directly in connection with its own operations.
Investment companies in which the 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 the Fund and, therefore, will be
borne directly by shareholders.

Repurchase Agreements. Securities held by the Fund may be subject to
repurchase agreements. Under the terms of a repurchase agreement, the Fund
would acquire securities from member banks of the Federal Deposit Insurance
Corporation and registered broker-dealers which the Adviser deems credit-worthy
under guidelines approved by the Company's Board of Directors, subject to the
seller's agreement to repurchase such securities at a mutually agreed-upon date
and price. The repurchase price would generally

B-6

<PAGE> 35

equal the price paid by the 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 the 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, the 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 the
Fund were delayed pending court action. Additionally, there is no controlling
legal precedent confirming that the 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 the 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 the
Fund's custodian or another qualified custodian or in the Federal
Reserve/Treasury book-entry system. Repurchase agreements are considered to be
loans by the Fund under the 1940 Act.

Reverse Repurchase Agreements. As discussed in the Prospectus, the Fund
may borrow funds for temporary purposes by entering into reverse repurchase
agreements in accordance with the Fund's investment restrictions. Pursuant to
such agreements, the 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. The Fund intends to enter
into reverse repurchase agreements only to avoid otherwise selling securities
during unfavorable market conditions to meet redemptions. At the time the 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 the 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 the Fund may
decline below the price at which the Fund is obligated to repurchase the
securities. Reverse repurchase agreements are considered to be borrowings by
the Fund under the 1940 Act.

Illiquid Securities. The 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,

B-7

<PAGE> 36

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, the
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, the 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, the 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, the
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

The Fund's investment objective is a fundamental policy and may not be
changed without a vote of the holders of a majority of the Fund's outstanding
Shares. In addition, the following investment restrictions may be changed with
respect to the Fund only by a vote of the majority of the outstanding Shares of
the 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 Fund may not:

1. Act as an underwriter or distributor of securities other than shares of
the Fund except to the extent that the Fund's participation as part of a group
in bidding or by bidding alone, for the purchase of permissible investments
directly from an issuer or selling shareholders for the Fund's own portfolio
may be deemed an underwriting, and except to the extent that the Fund may be
deemed an underwriter under the Securities Act, by virtue of disposing of
portfolio securities;

2. Purchase or sell commodities or commodities contracts unless acquired
as a result of ownership of securities or other instruments (but this shall not
prevent the Fund from engaging in transactions involving foreign currencies,
futures contracts, options on
B-8

<PAGE> 37

futures contracts or options, or from investing in securities or other
instruments backed by physical commodities); and

3. 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 are not fundamental and
may be changed without the vote of a majority of the outstanding Shares of the
Fund. The Fund may not:

1. Purchase securities of other investment companies, except (a) in
connection with a merger, consolidation, acquisition or reorganization, and (b)
the 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;

2. Purchase securities on margin (except to obtain such short-term credits
as are necessary for the clearance of purchases and sales of securities) or
participate in a joint trading account; provided, however, the Fund may (i)
purchase or sell futures contracts, (ii) make initial and variation margin
payments in connection with purchases or sales of futures contracts or options
on futures contracts, (iii) write or invest in put or call options on
securities and indexes, and (iv) engage in foreign currency transactions. (The
"bunching" of orders for the sale or purchase of marketable portfolio
securities with other accounts under the management of the Adviser to save
brokerage costs on average prices among them is not deemed to result in a
securities trading account.);

3. Acquire illiquid securities if, as a result of such investments, more
than five percent (5%) of the Fund's net assets (taken at market value at the
time of each investment) would be invested in illiquid securities. "Illiquid
securities" means 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; and

4. Engage in any short sales.

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 the Fund's investment in illiquid securities to
exceed the Fund's limit on its investments in such securities, the Fund will
act to cause the aggregate amount of illiquid securities to come within such
limit as soon as reasonably

B-9

<PAGE> 38

practicable. In such an event, however, the 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 the Fund is calculated by dividing the
lesser of the 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. 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 the Fund is
determined and the Shares of the 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 the Fund are tendered for redemption and no order to
purchase any Shares is received) during which there is sufficient trading in
portfolio instruments that the 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 Fund

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 Fund are sold on a continuous basis by the Distributor, and
the Shares may be purchased either directly from the Fund or through Banks or
certain other

B-10

<PAGE> 39

institutions. Investors purchasing Shares of the Fund 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 the 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.

MANAGEMENT OF THE COMPANY

Directors and Officers

Overall responsibility for management of the Company rests with its Board
of Directors, which is elected by the Shareholders of the Company. The
Directors elect the officers of the Company to supervise actively its
day-to-day operations.

The names of the Directors and officers of the Company, their addresses,
and principal occupations during the past five years are as follows:

<TABLE>
<CAPTION>
Position(s) Held with Principal Occupation(s)
Name and Address the Company During Past 5 Years
- ---------------- ---------------------- -------------------
<S> <C> <C>
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 - General
207 East Buffalo Street Counsel, Sunstone Financial
Suite 400 Group, Inc. (1993-present);
Milwaukee, WI 53202 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)

</TABLE>

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<PAGE> 40

<TABLE>
<S> <C> <C>
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
Omaha, NE 68154 Accountants (1987-present)

</TABLE>

- ------------------
* 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.

<TABLE>
<CAPTION>
Pension or
Aggregate Retirement Benefits
Compensation Accrued Estimated
Name and to be Paid as Part of Annual Total Compensation
Position by Company Company Expenses Retirement Benefits From Company
- -------- -------------------- -------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
David P. Greer $4,000 -0- -0- $4,000
President and
Director

Randy M. Pavlick -0- -0- -0- -0-
Secretary

Richard P. Snyder -0- -0- -0- -0-
Vice President and

</TABLE>

B-12

<PAGE> 41

<TABLE>
<S> <C> <C> <C> <C>
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
</TABLE>

As of January 9, 1998, the Company's officers and Directors, as a group,
owned 0% of the Fund's outstanding Shares.

The officers of the Company receive no compensation directly from the
Company for performing the duties of their offices. The officers of the
Company may, from time to time, serve as officers of other investment companies.
Sunstone Financial Group, Inc. receives fees from the Fund for acting as
administrator and the Administrator or its affiliates may receive fees from the
Fund 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 the Fund by FNC Trust Group,
n.a. (the "Adviser") pursuant to the Investment Advisory Agreement dated as of
February 3, 1998 (the "Investment Advisory Agreement"). The Adviser is a
wholly owned subsidiary of First National Colorado, Inc. which 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 Fund. For
the services provided and expenses assumed pursuant to the Investment Advisory
Agreement, the Fund will pay the Adviser a fee equal to the lesser of (a) a fee
computed daily and paid monthly, at an annual rate of seventy-five
one-hundredths of one percent (.75%) of the average daily net assets of the
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 the Fund, which
reduction would increase the net income of the Fund available for distribution
as dividends.

Unless sooner terminated, the Investment Advisory Agreement for the Fund
will continue in effect until February 3, 1999 and from year to year
thereafter, if, as to the 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 the Fund (as defined under "GENERAL

B-13

<PAGE> 42

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 the Fund at any time on 60
days written notice without penalty by the Directors, by vote of a majority of
the outstanding Shares of the 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
the 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.

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 the Fund's investment objective and restrictions, which
securities are to be purchased and sold by the Fund, and which brokers are to
be eligible to execute the Fund's portfolio transactions. Purchases from
underwriters of other portfolio securities for the Fund generally includes 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 Fund. 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 Fund. Such information may be
useful to the Adviser in serving the 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 the Fund. The
Adviser may authorize the Fund to pay a commission in excess of the commission
another broker-dealer would have charged if the Adviser

B-14

<PAGE> 43

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.

Except as otherwise disclosed to the Shareholders of the Fund and as
permitted by applicable laws, rules and regulations, the Company will not, on
behalf of the Fund, 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 the 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 the 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 the Fund or the size of the
position obtained by the Fund. To the extent permitted by law, the Adviser may
aggregate the securities to be sold or purchased for the 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 the Fund, 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 Fund.

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

B-15

<PAGE> 44

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 and the Custodian believe that each possesses the legal
authority to perform the services for the Fund 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 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 the
Fund, 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 the Fund pursuant to the Amended and Restated
Administration and Fund Accounting Agreement dated November 4, 1997 and amended
and restated February 3, 1998 (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

B-16

<PAGE> 45

Fund 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 Fund's custodian or transfer agent; prepare
compliance filings relating to the registration of the securities of the Fund
pursuant to state securities laws with the advice of Fund's counsel; perform
securities valuations; determine the income and expense accruals of the Fund;
calculate daily net asset values of the Fund; 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 Fund (on Form N-1A or any replacement therefor)
and any amendments thereto, and proxy materials; prepare and monitor the 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 the 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 the 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 the Fund's administrative operations.

The Administrator receives a fee from the 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 the Fund's average daily net assets subject to a minimum fee of
$50,000 for the Fund, 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 the Fund in order to
increase the net income of the Fund available for distribution as dividends.

Unless sooner terminated as provided therein, the Administration Agreement
will continue in effect until April 10, 1999. The Administration Agreement
thereafter shall be renewed automatically for successive one-year terms, unless
earlier terminated. The Administration Agreement is terminable with respect to
the Fund only upon mutual agreement of the parties to the Administration
Agreement and, after the initial term, on not less than 90 days' notice by the
Company's Board of Directors or by the Administrator.

The Administration Agreement provides that the Administrator shall not be
liable for any error of judgment or mistake of law or any loss suffered by the
Fund 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.

B-17

<PAGE> 46

Expenses

The Investment Advisory Agreement provides that if total expenses borne by
the Fund in any fiscal year exceed expense limitations imposed by applicable
state securities regulations, the Adviser will reimburse the Fund by the amount
of such excess in proportion to its respective fees. As of the date of this
Statement of Additional Information, the Fund is not aware of any state imposed
expense limitation applicable to the Fund. 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 the Fund in the
distribution of its Shares pursuant to a Distribution Agreement dated January
1, 1997 and amended February 3, 1998 (the "Distribution Agreement"). Unless
otherwise terminated, the Distribution Agreement remains in effect from year to
year for successive annual periods ending on June 30 if approved at least
annually (a) by the Company's Board of Directors or by the vote of a majority
of the outstanding shares of the Company, and (b) by the vote of a majority of
the Directors of the Company who are not parties to the Distribution Agreement
or interested persons (as defined in the 1940 Act) of any party to the
Distribution Agreement, cast in person at a meeting called for the purpose of
voting on such approval. The Distribution Agreement may be terminated in the
event of any assignment, as defined in the 1940 Act.

The Distributor solicits orders for the sale of Shares, advertises and
pays the costs of advertising, office space and the personnel involved in such
activities. The Distributor receives no compensation under the Distribution
Agreement with the Company, but may receive compensation under the Distribution
and Service Plan described below.

As described in the Prospectus, the Company has adopted a Distribution and
Service Plan (the "Plan") pursuant to Rule 12b-1 under the 1940 Act under which
the 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 the Fund to make payments in an amount not in
excess, on an annual basis, of 0.25% of the average daily net assets of the
Fund. As required by Rule 12b-1, the Plan was approved by the sole shareholder
of the Fund and by the Board of Directors, including a majority of the
Directors who are not interested persons of the Fund 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 the 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 the Fund requires Shareholder approval. The Directors
review quarterly

B-18

<PAGE> 47

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 the Fund. 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
the Fund and its Shareholders.

The Board of Directors of the Company believes that the Plan is in the
best interests of the Fund since it encourages Fund growth. As the 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 the 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 the Fund. Payments to such service organizations are
made pursuant to Servicing Agreements between the Company and the Service
Organization. The Services Plan authorizes the 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 the 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 the 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

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<PAGE> 48

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 Fund 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 the 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 the 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 the 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 the Fund
held during the period by customers for whom the Adviser has provided services
under the Servicing Agreement. In addition, the Company, on behalf of the 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"), an affiliate of the
Adviser, One First National Center, Omaha, Nebraska 68102, in addition to
serving as the transfer agent to the Fund, also serves as custodian to the Fund
pursuant to the Custodian Agreement as amended through February 3, 1998 (the
"Custodian Agreement"). The Custodian's responsibilities include safeguarding
and controlling the Fund's cash and securities, handling the receipt and
delivery of securities, and collecting interest on the Fund's investments. In
consideration of such services, the Fund pays the Custodian a fee, computed
daily and paid monthly, at the annual rate of .03% of the 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 the 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 the Fund (as
defined under "GENERAL INFORMATION - Miscellaneous" in the Prospectus), and a
majority of the Directors who are not parties to the

B-20

<PAGE> 49

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 opinion of the staff of the Commission, since the custodian is
serving as both the investment adviser and custodian of the Fund, the Fund and
the Custodian are subject to the requirements of Rule 17f-2 under the 1940 Act,
and therefore the Fund and the Custodian will comply with the requirements of
such rule.

Transfer Agency Services

First National Bank of Omaha (the "Transfer Agent"), an affiliate of the
Adviser, serves as transfer agent and dividend disbursing agent for the
Company pursuant to the Transfer Agency Agreement as amended through February
3, 1998. Pursuant to such Agreement, the Transfer Agent, among other things,
performs the following services in connection with the Fund's shareholders of
record: maintenance of shareholder records for each of the Company's
shareholders of record; processing shareholder purchase and redemption orders;
processing transfers and exchanges of shares of the Company on the shareholder
files and records; processing dividend payments and reinvestments; and
assistance in the mailing of shareholder reports and proxy solicitation
materials. For such services the Transfer Agent receives a fee based on the
number of shareholders of record. Pursuant to authority in the Transfer Agency
Agreement, the Transfer Agent has appointed as sub-transfer agent DST Systems,
Inc., 210 West 10th Street, Kansas City, Missouri 64105.

Auditors

KPMG Peat Marwick LLP, Two Central Park Plaza, Suite 1501, Omaha, Nebraska
68102, are the auditors of the Company.

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. Fifty million of
these Shares have been authorized by the Board of Directors to be issued in
series designated for the Fund, with an additional Five Hundred fifty million
Shares having previously 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

B-21

<PAGE> 50

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 the 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

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<PAGE> 51

may be effectively acted upon by Shareholders of the Company voting without
regard to series.

Ownership of Shares

As of December 31, 1997, no shares of the Fund were issued or outstanding.
It is contemplated that after the public offering of the Fund's shares, the
Adviser and its affiliates will hold of record substantially all of the
outstanding Shares of the Fund as agent, custodian, trustee or investment
adviser on behalf of their customers.

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 the 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, the Fund may be
subject to the tax laws of such states or localities. In addition, if for any
taxable year the 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 the Fund by foreign countries with respect
to its income from foreign securities. Since less than 50% in value of the
Fund's total assets at the end of its fiscal year are expected to be invested
in stocks or securities of foreign corporations, the 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
the Fund.

The 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.

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<PAGE> 52

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 the Fund. No attempt has been made to present a detailed explanation
of the federal income tax treatment of the Fund or its Shareholders and this
discussion is not intended as a substitute for careful tax planning.
Accordingly, potential purchasers of Shares of the 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.

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 the 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 the
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 the Fund over the relevant period and is similar to average
annual total return except that the result is not annualized.

Distribution Rates

The Fund may from time to time advertise current distribution rates which
are calculated in accordance with the method discussed in the Prospectus.

Performance Comparisons

Investors may judge the performance of the Fund 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.,

B-24

<PAGE> 53

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 the Fund 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, the Fund 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. The 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 the Fund.

Current yields or total return will fluctuate from time to time and are
not necessarily representative of future results. Accordingly, the 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 the Fund's quality, composition and maturity,
as well as expenses allocated to the Fund. Fees imposed upon Customer accounts
by the Adviser or its affiliated or correspondent banks for cash management
services will reduce the 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.

B-25

<PAGE> 54

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

<PAGE> 55

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

<PAGE> 56

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.

<PAGE> 57

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.

<PAGE> 58

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.

<PAGE> 59

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

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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.