ANNUAL REPORT MARCH 31, 1998
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First Omaha
Family of Funds(R)
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NOTICE TO INVESTORS
SHARES of the First Omaha Funds are:
----------------------
NOT FDIC INSURED
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MAY LOSE VALUE
NO BANK GUARANTEE
THE U.S. GOVERNMENT OBLIGATIONS FUND IS NOT INSURED OR GUARANTEED BY THE U.S.
GOVERNMENT, NOR CAN THERE BE ANY ASSURANCE THAT THE FUND WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
THE FIRST OMAHA FUNDS ARE DISTRIBUTED BY SUNSTONE DISTRIBUTION SERVICES, LLC.
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First Omaha Funds ANNUAL REPORT
April 1998
DEAR SHAREHOLDER:
We are pleased to provide you with the First Omaha Family of Fund's Annual
Report for the period ended March 31, 1998. In it you will find helpful
information regarding your investment, its performance and its management. Also,
our portfolio managers have given their observations on the stock and bond
markets. Please read this Report carefully and retain it with your Prospectus
for future reference.
While the stock market has rewarded investors greatly over the last three years,
you should continue to remind yourself that the positive double-digit returns
will not continue indefinitely. Stocks will experience reversals and sell-offs.
The key is to maintain a long-term investment perspective and to invest in funds
which match your objective and risk tolerance.
Once again, thank you for your investment in the First Omaha Family of Funds. We
look forward to serving your future investment needs.
THE STOCK MARKET OUTLOOK
The equity markets continued to climb dramatically. The total return of the S&P
500 was 38% in 1995, 23% in 1996 and 33% in 1997. The average annual return of
the S&P 500 for the three-year period ended December 31, 1997, was 31%, and the
five-year return was 20%. To top off this remarkable period, the S&P 500 had a
total return of 14% in the quarter ended March 31, 1998.
The S&P MidCap 400's average annual return over the three-year period ending
December 31, 1997 was 27%, while the S&P SmallCap 600 earned a similar return of
29%. For the quarter ended March 31, 1998, the total return for both the S&P
MidCap 400 and the S&P SmallCap 600 was about 11%. While not quite as strong as
the S&P 500 returns, these indices also performed well above the long-term
average return for stocks of 10 - 12%.
While stocks have performed very well in general, the largest stocks turned in
the best returns. During 1997, the first four deciles of stocks in the S&P 500
ranked by market capitalization<F1> (or stocks with market capitalizations
greater than $8.3 billion on January 1, 1997) outperformed the next five
deciles (stocks with market capitalizations between $1.4 billion and $8.3
billion) by over 10%. In addition to the focus on the largest stocks, several
sectors performed much better than others. In particular, the financial
stocks (especially the bank stocks), the health care stocks, communication
services and consumer cyclicals outperformed the S&P 500.
As the bull market progressed, investors have gotten more confident. The highest
P/E (price to earnings) decile of the S&P 500 stocks was up 20% in the first
quarter of 1998, almost 7% above the equally-weighted market and 5.5% above any
other decile. It seems peculiar to us that investors appear to be less cautious
as the market goes up, not more cautious.
A great number of factors have contributed to the stock market's rise, not the
least of which has been a significant increase in corporate return on equity to
its highest level in 30 years. The average annual return from 1967 to 1998 was
15.7%, while the average annual return on equity for that same time period
excluding the past five years was 13.5%. The return on equity for the S&P
Industrials in 1997 was just under 25%.
The rise of return on equity has been the result of several well-discussed
factors. Some of these factors were driven by corporate management. Productivity
improvements brought about by technology, corporate restructuring and cost-
cutting efforts have contributed significantly to margin improvement. In
addition several factors, beyond the control of corporate management, have had
very positive impacts on returns and profitability. For example, a weaker dollar
has made U.S. corporations more competitive worldwide. Weak commodity prices
have had a positive impact by reducing input costs. A moderately growing economy
with low inflation has kept interest costs down. And, last but not least, a
corporate tax cut in 1986 added measurably to corporate profitability.
Rising profitability and lower interest rates and inflation have contributed to
rising equity valuations. Since the early 1980s, the price/earnings ratio of the
S&P Industrials has risen from under 10x to the current levels over 25x trailing
earnings. The yield of the S&P Industrials is at about 1.5% compared to a 30-
year average of almost 3.5%. Even when you add stock buybacks, the yield in 1997
would have been about 2%. Price to book value has averaged about 2.7x over the
past 30 years and is currently slightly above 6.5x.
<F1> CAPITALIZATION or its abbreviation CAP represents the value of a company as
determined by the stock price multiplied by the number of outstanding shares.
Is the market too high? We really can't predict the market, but what we do know
is that this earnings expansion has been long relative to past experience,
profitability is at historically high levels, stock valuations are high and
expectations by market participants are very high. The potential for positive
surprises, not yet discounted by the market, seem to be growing fewer in number
while the potential for negative surprises appears to be increasing. So far,
negative earnings surprises seem to have been concentrated in the commodity-
oriented sectors such as energy, papers, chemicals, metals and semiconductors.
However, slowing unit volume growth and rising unit labor costs could result in
negative surprises spreading to other sectors of the economy in the future.
We believe it is key in all market environments to keep focused on the long-term
attractiveness of any investment under consideration. Two factors are key to
this decision. First - are the long-term fundamentals of the business attractive
and sustainable? Second - can the stock be purchased below its long-term
intrinsic value? Because the sustainability of current profit levels is in
question and stock valuations are high, we remain neither bullish nor bearish _
but cautious.
FIRST OMAHA SMALL CAP VALUE FUND
The inception date for the First Omaha Small Cap Value Fund was June 10, 1996.
The Fund has lagged both the S&P 400 MidCap and the S&P 600 SmallCap for the
six-month period ending March 31, 1998. This can be explained by our disciplined
approach to a diversified investment portfolio. The diversification across all
sectors of the market is what leads to a portfolio that is less potentially
volatile than comparable indices. In addition, performance was negatively
impacted because the portfolio was underweighted in two strong performing
sectors, telecommunications and communication services. Most of the stocks in
those sectors simply did not meet our value criteria. Over the long term the
Fund needs to stick to its strategy of investing in companies with strong market
share, solid balance sheets and above average or improving return on shareholder
equity. It is a diversified portfolio of equities chosen through consistent
fundamental analysis that we believe will provide the potential for above
average risk-adjusted returns over a normal market cycle.
During the six-month period ended March 31, 1998, there were no new additions or
eliminations from the portfolio, although there were a number of portfolio
adjustments made for valuation reasons. The position in Bandag, Inc. was
reduced. While the company remains fundamentally sound we felt it warranted a
lesser position in the portfolio due to recent price appreciation. Midwest
Express Holdings, Inc. was also trimmed as it appreciated approximately 70% from
its original purchase price, leaving us uncomfortable with its position in the
portfolio. In addition to the two previously mentioned equities, both Dexter
Corp. and Teleflex, Inc. were also assigned to lower positions in the portfolio
due to appreciation.
Three of our existing holdings were added to during the period: Calgon Carbon
Corp., Tecumseh Products Co. and Kellwood Co. Calgon Carbon has lagged the
market as of late and we felt it presented more upside potential than those
equities mentioned above. In addition, both Kellwood and Tecumseh Products
experienced sell-offs at the end of 1997. After analyzing the companies' future
prospects, we felt the sell-off presented an opportunity for attractive returns
going forward.
THE PORTFOLIO
The current structure of the Small Cap Value Fund is a diverse portfolio of
small- and mid-cap companies with strong fundamental profiles. We believe that
the portfolio should consist of companies with solid balance sheets that can
generate sufficient cash flow and that are currently selling below their
intrinsic value.
As of March 31, 1998, the portfolio was 89.7% invested in stocks and held cash
reserves of 10.3%. The equities were diversified across 29 positions with
significant exposure to the various sectors of the market.
SMALL CAP VALUE FUND
PORTFOLIO COMPOSITION<F1>
as of March 31, 1998
BASIC INDUSTRIES 39%
CONSUMER STAPLES 16%
CAPITAL GOODS/ TECHNOLOGY 11%
CONSUMER CYCLICALS 13%
FINANCIAL 8%
UTILITIES 6%
TRANSPORTATION 7%
The five largest positions in the portfolio at the end of March represented 21%
of the portfolio (see chart below).
TOP FIVE HOLDINGS<F2>
as of March 31, 1998
% OF NET ASSETS
- ------------------------------------------
CLARCOR Inc. 5.18%
- ------------------------------------------
The Guarantee Life Companies, Inc. 4.30
- ------------------------------------------
Cleveland-Cliffs, Inc. 4.26
- ------------------------------------------
Universal Foods Corp. 4.17
- ------------------------------------------
First Brands Corp. 3.52
- ------------------------------------------
<F1> Sector weightings represent the percentage of the Fund's equity investments
in certain general sectors. These sectors include more than one industry.
<F2> Excluding cash and cash equivalents
Portfolio composition and holdings are subject to change at any time.
We believe the portfolio, on a weighted average basis, is strong fundamentally
and has an attractive valuation as demonstrated by the following tables:
PORTFOLIO FUNDAMENTAL PROFILE
as of March 31, 1998
WEIGHTED S&P
AVERAGE 400
- ------------------------------------------
Payout Ratio<F1> 32.0% 28.3%
- ------------------------------------------
Debt/Capital 24.9% 36.0%
- ------------------------------------------
ROE<F1> 15.4% 22.0%
- ------------------------------------------
PORTFOLIO VALUATION PROFILE
as of March 31, 1998
WEIGHTED S&P
AVERAGE 400
- ------------------------------------------
Price/Earnings<F1> 15.0x 24.0x
- ------------------------------------------
Price/Book Value<F1> 0.1x 4.8x
- ------------------------------------------
Yield 2.2% 1.2%
- ------------------------------------------
<F1> Based on 1998 estimates
PAYOUT RATIO is a ratio used to analyze a company's policy of paying cash
dividends, calculated by dividing the dividends paid on common stock by the net
income available for common stockholders. DEBT/CAPITAL is the ratio of total
debt to total stockholder's equity. ROE (RETURN ON EQUITY) equals earnings
available to common stock divided by common shareholder's equity.
TOTAL RETURN
as of March 31, 1998
AVERAGE
1 YEAR ENDED ANNUAL SINCE
3/31/98 COMMENCEMENT<F1>
- ------------------------------------------------
First Omaha Small
Cap Value Fund 29.60% 20.00%
- ------------------------------------------------
<F1> Commencement date is 6/10/96
RETURN ON A $10,000 INVESTMENT
JUNE 10, 1996 MARCH 1997 MARCH 1998
------------- ---------- ----------
FIRST OMAHA SMALL
CAP VALUE FUND $10,000 $10,730 $13,906
S&P MIDCAP 400 INDEX $10,000 $10,587 $15,777
S&P SMALLCAP 600 INDEX $10,000 $9,960 $14,707
This chart assumes an initial investment of $10,000 made on 6/10/96. Total
Return is based on net change in N.A.V. assuming reinvestment of distributions.
Returns shown on this page include the reinvestment of all dividends and other
distributions. Performance figures reflect fee waivers in effect, represent past
performance, which is no guarantee of future results, and will fluctuate. In the
absence of fee waivers, Total Return would be reduced. The investment return and
principal value of an investment in the First Omaha Small Cap Value Fund will
fluctuate so that an investor's shares in the Fund, when redeemed, may be worth
more or less than their original cost. This Fund is advised by First National
Bank of Omaha.
The S&P MidCap 400 Index consists of 400 domestic stocks chosen for market size,
liquidity and industry group representation. It is also a market-value weighted
index and was the first benchmark of midcap stock price movement.
The S&P SmallCap 600 Index consists of 600 domestic stocks chosen for market
size, liquidity (bid-asked spread, ownership, share turnover and number of no
trade days) and industry group representation. It too is a market-value weighted
index.
FIRST OMAHA EQUITY FUND
The First Omaha Equity Fund outperformed the S&P 500 from its inception in
December of 1992 until the second half of 1995. Since that time, it has been
difficult to beat the dramatic returns of the S&P 500. As stated often in our
shareholder letter, we maintain a broadly diversified equity portfolio with
exposure to most of the major sectors of the economy. During 1997, five sectors
outperformed the price performance of the S&P 500. The portfolio was
underweighted in two of the outperforming sectors, health care and
communications services, due to the high valuations held by most companies in
those sectors. Most of the stocks in those sectors simply did not meet our value
criteria. While the portfolio had a market weighting in the financial sector,
the insurance companies we held significantly underperformed the S&P financials.
We believe, however, that these insurance stocks represent good long-term
values. Despite our disappointment regarding the underperformance of the Fund,
we will continue to follow a deliberate, focused approach to investing. We will
continue to invest in companies _ not stocks. The current market environment
makes this task challenging.
During the past six months, we added two new positions to the equity portfolio _
Lafarge Corp. and GTE Corp. Lafarge produces cement, ready-mixed concrete, other
concrete products, asphalt, aggregates and gypsum wallboard. It has cement
manufacturing plants in Ohio, Kansas, Pennsylvania, Michigan, Iowa, Illinois,
Missouri and Canada. Cement is a cyclical business; however, we are optimistic
about the industry's fundamentals because of the favorable supply/demand
conditions in the industry. As a result, we believe the company's current level
of profitability may be sustainable over the next several years. The company has
strong cash flow and cash on the balance sheet. Long-term debt represents just
11% of capital which will enable Lafarge to expand its operations. The stock was
at just 11x 1998 earnings estimates and yielded 1.5% when we initiated our
position.
GTE is one of the largest publicly held telecommunications companies in the
world. It provides local telephone service and is a leading cellular provider.
Its markets encompass about a third of the U.S. population. Outside the U.S.,
GTE serves over seven million wireline and wireless customers as well. GTE's
return on equity has exceeded 30% for the past three years and we believe it may
be sustainable. Attractive service areas, data initiatives and bundled service
offerings could result in good revenue growth in the future. In addition, we
believe costs associated with the data initiatives should decline in 1999, which
will contribute to better margins. The stock sold at just 14x 1998 estimated
earnings and yielded over 4.0% when we initiated the position.
No positions were eliminated from the portfolio during the past six months.
THE PORTFOLIO
On March 31, 1998, 88.3% of the portfolio was invested in equities with the
balance invested in cash and cash equivalents. The portfolio held 34 company
stocks and remains well-diversified with exposure to all major sectors of the
economy.
EQUITY FUND
PORTFOLIO COMPOSITION<F1>
as of March 31, 1998
CONSUMER STAPLES 19%
CAPITAL GOODS/ TECHNOLOGY 22%
CONSUMER CYCLICALS 18%
FINANCIAL 15%
ENERGY 9%
BASIC INDUSTRIES 13%
UTILITIES 4%
TOP TWO HOLDINGS<F2>
as of March 31, 1998
% OF NET ASSETS
- ------------------------------------------
J.C. Penney Co., Inc. 4.70%
- ------------------------------------------
Ingersoll-Rand Co. 4.33
- ------------------------------------------
R.R. Donnelley & Sons Co. 4.04
- ------------------------------------------
Exxon Corp. 4.04
- ------------------------------------------
American Financial Group, Inc. 4.03
- ------------------------------------------
<F1> Sector weightings represent the percentage of the Fund's equity investments
in certain general sectors. These sectors include more than one industry.
<F2> Excluding cash and cash equivalents
Portfolio composition and holdings are subject to change at any time.
The five largest holdings are listed above. These stocks represented
approximately 21% of the Fund's net assets and approximately 24% of the value of
the equities in the portfolio.
The Fund holds stocks that are fundamentally strong, yet are inexpensively
valued as indicated in the charts below. We believe that above-average (compared
to the S&P 500) companies owned at below intrinsic values provide some downside
protection in the event of a market correction. These investments also offer the
most upside potential over the long term.
PORTFOLIO FUNDAMENTAL PROFILE
as of March 31, 1998
WEIGHTED S&P
AVERAGE 400
- ------------------------------------------
Payout Ratio<F1> 38.0% 28.3%
- ------------------------------------------
Debt/Capital 31.1% 36.0%
- ------------------------------------------
ROE<F1> 18.3% 22.0%
- ------------------------------------------
PORTFOLIO VALUATION PROFILE
as of March 31, 1998
WEIGHTED S&P
AVERAGE 400
- ------------------------------------------
Price/Earnings<F1> 17.6x 24.0x
- ------------------------------------------
Price/Book Value<F1> 3.2x 4.8x
- ------------------------------------------
Yield 2.2% 1.2%
- ------------------------------------------
<F1> Based on 1998 estimates
See the definitions on page 3 of the terms listed above.
TOTAL RETURN
as of March 31, 1998
1 YEAR ENDED AVERAGE ANNUAL SINCE
3/31/98 COMMENCEMENT<F1>
- --------------------------------------------------
First Omaha
Equity Fund<F2> 28.89% 17.11%
- --------------------------------------------------
<F1> Commencement date is 12/13/92
<F2> Performance data from commencement through April 9, 1995 relates to a
predecessor, First Omaha Equity Fund, the assets of which were acquired by
the Fund on that date.
RETURN ON A $10,000 INVESTMENT
DEC.13, MARCH MARCH MARCH MARCH MARCH MARCH
1992 1993 1994 1995 1996 1997 1998
----- ----- ----- ----- ----- ----- -----
FIRST OMAHA
EQUITY FUND $10,000 $10,470 $10,805 $12,757 $15,584$17,921 $23,097
S&P 500 COMPOSITE $10,000 $10,511 $10,666 $12,326 $16,283$19,511 $28,876
This chart assumes an initial investment of $10,000 made on 12/13/92. Total
Return is based on net change in N.A.V. assuming reinvest ment of distributions.
Returns shown on this page include the reinvestment of all dividends and other
distributions. Performance figures reflect fee waivers in effect, represent past
perform ance, which is no guarantee of future results, and will fluctuate. In
the absence of fee waivers, Total Return would be reduced. The investment return
and principal value of an investment in the First Omaha Equity Fund will
fluctuate so that an investor's shares in the Fund, when redeemed, may be worth
more or less than their original cost. This Fund is advised by First National
Bank of Omaha.
The S&P 500 Composite is an unmanaged index of 500 selected common stocks, most
of which are listed on the New York Stock Exchange. The Index is heavily
weighted toward stocks with large market capitalizations and represents
approximately two-thirds of the total market value of all domestic common
stocks. The returns for this index do not reflect any fees or expenses.
FIRST OMAHA BALANCED FUND
We continue to manage the First Omaha Balanced Fund with the primary goal of
providing a combination of current income and capital appreciation by focusing
our efforts on purchasing securities that provide good value and a reasonable
margin-of-safety. Our emphasis on the bond and stock selection is based on our
philosophy of buying securities that sell below their intrinsic value and meet
our quantitative and qualitative criteria. Because we have a long-term
investment horizon of 3 to 5 years, we focus on long-term results. Additionally,
by focusing on the individual security's investment merits, and whether or not
we can find attractive prospects at reasonable prices, the asset allocation
decision unfolds quite naturally. Stocks are purchased when more attractive than
bonds over our investment horizon. Bonds are purchased when they appear
attractive. Cash reserves will be a result of our stock and bond selection
processes. If we cannot find attractive candidates, cash will build. Conversely,
if there are numerous prospects that meet our requirements, cash will decrease.
The First Omaha Balanced Fund provided a one-year total return of 22.34%, which
lagged the benchmark indices. We remarked in last year's annual letter that
starting a fund in a period of peak returns on corporate capital, combined with
high valuations, provided an extra challenge to an asset manager that follows a
value philosophy. In our opinion, our conservative approach to investing has not
been rewarded, as it has been historically, due to the popular perceptions of
declining risks in the financial markets. This situation has inflated valuations
on many attractive businesses to levels which eliminate the margin-of-safety
that we feel is necessary to meet our objective of providing above-average,
long-term returns with below-average risk. Thus, we deployed your capital into
situations which we believe have provided satisfactory returns for the risk
taken.
THE PORTFOLIO
Given the existing environment, our target asset allocation will be 55 - 60%
stocks, 40 - 45% bonds and 0 - 10% cash and cash equivalents. In line with our
stated target range, the asset mix at March 31, 1998 consisted of 3% cash, 41%
bonds and 56% stocks.
We were able to take advantage of a number of attractive situations in the bond
market which resulted in moderate activity during the latest period. New
corporate bond purchases included Rockwell International Corp., Norwest
Financial, Inc. and Laclede Gas Co. The bond composition consisted of 53% high-
quality corporate bonds and 47% government bonds and agencies. The breakdown of
the corporate bond portion of the portfolio as of March 31, 1998, was 18%
Industrials, 17% Electric/Gas Utilities, 12% Financial issues, 5% Transportation
issues and 1% Telephone Utility issues. The average coupon was 6.3%. The average
maturity of the portfolio was 7.6 years. The fixed income portfolio remained
well diversified and had a weighted-average quality rating of AA2 at the end of
the quarter.
Likewise, there was moderate activity in the equity portion of the portfolio.
Major additions were made to American Financial Group, Inc., Cyprus Amax
Minerals Co., Harsco Corp. and Lafarge Corp. A number of positions were reduced
to rebalance the portfolio. The dividend yield on the equity portion of the
portfolio was 2.2% at the end of the quarter, which compares favorably to the
S&P 500 yield of 1.5%. The equity portfolio contained 34 company stocks, with
the top five positions at the end of the quarter comprising approximately 24% of
the total capital employed, including Cyprus Amax Minerals Co., J.C. Penney Co.,
Inc., Ingersoll-Rand Co., Exxon Corp. and American Financial Group, Inc. The
characteristics of the equity portion of the portfolio mirror those found in the
First Omaha Equity Fund. Companies we own are fundamentally and financially
stronger when compared to the overall market. In addition, they boast an above-
average dividend yield and a more favorable valuation which we believe could
provide some downside protection for the portfolio in declining markets.
Our strategy going forward will be neither bullish nor bearish in an
increasingly speculative environment. We realize that our investment style has
always been more conservative. Admittedly, it is psychologically painful to earn
exceptional absolute returns of 35% on equities in a period where more
aggressive investors are earning in excess of 45%. However, we believe that the
speculative influences of the market have caused many investors to disconnect
their understanding of what levels of risk they're comfortable with from the
investments they're making. Regardless of what the general market does, we will
continue to favor conservative investments in companies with high-quality
balance sheets, improving returns on capital and managers that have demonstrated
that they effectively use shareholder capital to improve valuations.
BALANCED FUND
PORTFOLIO COMPOSITION
as of March 31,1998
COMMON STOCKS 56%
U.S. GOVERNMENT AGENCIES 4%
U.S. GOVERNMENT 15%
CORPORATE BONDS 22%
CASH EQUIVALENTS 3%
TOP FIVE HOLDINGS*
as of March 31,1998
% OF NET ASSETS
- ------------------------------------------
LaClede Gas Co., 6.50%, 10/15/12 2.95%
- ------------------------------------------
Norwest Financial, Inc.,
6.375%, 12/1/07 2.93
- ------------------------------------------
J.C. Penney Co., Inc. 2.83
- ------------------------------------------
Ingersoll-Rand Co. 2.72
- ------------------------------------------
Exxon Corp. 2.66
- ------------------------------------------
* Excluding cash and cash equivalents
Portfolio composition and holdings are subject to change at any time.
TOTAL RETURN
as of March 31, 1998
1 YEAR ENDED AVERAGE ANNUAL SINCE
3/31/98 COMMENCEMENT<F1>
- --------------------------------------------------
First Omaha
Balanced Fund 22.34% 17.13%
- --------------------------------------------------
<F1> Commencement date is 8/6/96
RETURN ON A $10,000 INVESTMENT
Aug. 6, 1996 MARCH 1997 MARCH 1998
------------- ---------- ----------
FIRST OMAHA
BALANCED FUND $10,000 $10,614 $12,985
S&P 500 COMPOSITE $10,000 $11,603 $17,172
LEHMAN BROS. GOV'T./
CORP. BOND INDEX $10,000 $10,378 $11,663
This chart assumes an initial investment of $10,000 made on 8/6/96. Total Return
is based on net change in N.A.V. assuming reinvestment of distributions. Returns
shown on this page include the reinvestment of all dividends and other
distributions. Performance figures reflect fee waivers in effect, represent past
performance, which is no guarantee of future results, and will fluctuate. In the
absence of fee waivers, Total Return would be reduced. The investment return and
principal value of an investment in the First Omaha Balanced Fund will fluctuate
so that an investor's shares in the Fund, when redeemed, may be worth more or
less than their original cost. This Fund is advised by First National Bank of
Omaha.
The S&P 500 Composite is an unmanaged index of 500 selected common stocks, most
of which are listed on the New York Stock Exchange. The Index is heavily
weighted toward stocks with large market capitalizations and represents
approximately two-thirds of the total market value of all domestic common
stocks. The returns for this index do not reflect any fees or expenses.
The Lehman Bros. Gov't./Corp. Bond Index includes all public obligations of the
U.S. Treasury, excluding flower bonds and foreign-targeted issues; all publicly
issued debt of U.S. government agencies and quasi-federal corporations, and
corporate debt guaranteed by the U.S. government; and all publicly issued, fixed
rate, nonconvertible, investment grade, dollar-denominated, SEC-registered
corporate debt (including debt issued or guaranteed by foreign sovereign
governments, municipalities, or govern mental agencies, or international
agencies). The returns for this index do not reflect any fees or expenses.
THE BOND MARKET OUTLOOK
The beat goes on. The economic expansion is now entering its eighth year, and
continued to exhibit above-average growth with little or no signs of inflation.
Domestic demand has been very strong, led by El Nino's mild winter effect for
much of the U.S., strong employment markets, earlier payments of tax refunds and
increases in bonuses paid to workers. Rising incomes and lower mortgage rates
have contributed to the strength shown in the housing market. Debt burdens by
consumers appear to have moderated somewhat during the first quarter. Effects
from the Asian financial crisis have only been noticeable in recent trade
figures; January's trade deficit reportedly widened to $12 billion from a $9.7
billion monthly average during the last quarter of 1997. We will likely see
continued weakness during the second quarter from our Asian trading partners.
Lower prices from overseas, especially from Asia, have contributed to the low
inflationary environment we experienced. Labor and medical care cost pressures
are mounting, but so far lower energy and commodity prices have been able to
offset these increases. Year-over-year inflation figures through March of this
year have been encouraging. For the year ended March 31, 1998, consumer prices
are up only 1.4%, while producer prices have fallen 1.8%. Inflation indicators
may have difficulty finding their way lower, but we consider the risk that they
rise substantially over the next few months is low.
The Federal Reserve met twice during the first quarter, each time leaving the
Fed Funds rate unchanged. Alan Greenspan and the Federal Reserve Board members
are apparently waiting for concrete signs that the economy will weaken from
either a sharp falloff in export orders or signs that inflation is headed
higher. So it appears that the Fed has adopted a "reactive" versus a
"preemptive" posture. Recent comments from various Fed Board members suggest
that the policy bias has shifted back to a tightening stance from the neutral
stance adopted at last December's meeting.
The federal budget outlook is very favorable. It appears that for fiscal 1998
the budget will record a surplus for the first time since 1969. The strong labor
markets, increases in wages and capital gain payments have all contributed to
the increase in individual tax payments. Debt management strategies will
undoubtedly change due to the budget surplus. How the Treasury handles the
budget surplus with regard to their financing remains uncertain at this time.
As we venture into the second quarter, the temporary factors such as a warmer
than normal winter and early tax refunds that most likely contributed to the
stronger than normal economic conditions in the first quarter, are likely to
cease in the second quarter. The first quarter may have borrowed some strength
from the second quarter; thus, we may see some moderation in economic strength
in the coming months.
FIRST OMAHA FIXED INCOME FUND
The First Omaha Fixed Income Fund invests at least 65% of its total assets in
investment grade fixed income securities. The portfolio is constructed
primarily through the laddering of bonds with maturities of one to twenty years
in maturity. In this manner we seek to reduce credit and reinvestment rate risk
over the long term.
As of March 31, 1998, the portfolio composition was 27% government and agency
securities, 71% corporate bonds and 2% cash. The overall weighted average credit
quality of the portfolio remained the same at AA/Aa. The weighted average
maturity of the portfolio was 9.0 years.
In terms of asset allocation, the Fund's allocation between governments and
corporate sectors did not vary significantly over the last 12 months. We
purchased two positions in a Federal Home Loan Bank strip, yielding 8% to
maturity. The bond's structure was a 15-year stated maturity with a two-year
call option. At a 8% yield to call, we received over 2.0% above a comparable
two-year Treasury note rate. In most scenarios, the bonds will be called at
their first call date. Also in the agency sector, we sold two callable agencies
and replaced the bonds with similar agencies, but with better call protection.
In the corporate sector we added two new names and added to an existing name.
The new names added to the portfolio were First Data Corp. and Albertson's, Inc.
First Data is a market leader in credit card processing, while Albertson's is a
strong grocery store chain located mostly in the Mountain and Midwest regions.
We also purchased a General Electric Capital Corp. bond due in 2015. Our
position in J.C. Penney was sold due to credit quality concerns.
The Fund has outperformed the Lehman Gov't./Corp. Index over the last 12 months.
The outperformance was primarily due to the Fund's longer duration and its
overweighting in corporate bonds compared to the Index. While economic growth
exceeded expectations, inflation continued to fall across the consumer and
producer sectors, thus allowing bond yields to move lower over the last 12
months.
FIXED INCOME FUND
PORTFOLIO COMPOSITION
as of March 31, 1998
CORPORATE BONDS 71%
U.S. GOVERNMENTS 14%
U.S. GOVERNMENT AGENCIES 13%
CASH EQUIVALENTS 2%
TOP FIVE HOLDINGS<F1>
as of March 31, 1998
% OF NET ASSETS
- ------------------------------------------
U.S. Treasury STRIP, 2/15/07 5.03%
- ------------------------------------------
U.S. Treasury STRIP, 2/15/12 3.62
- ------------------------------------------
AT&T Corp., 7.75%, 3/1/07 3.54
- ------------------------------------------
Citizens Utilities Co.,
7.60%, 6/1/06 3.48
- ------------------------------------------
PPG Industries, Inc.,
7.375%, 6/1/16 3.48
- ------------------------------------------
<F1> Excluding cash and cash equivalents
Portfolio composition and holdings are subject to change at any time.
TOTAL RETURN
as of March 31, 1998
1 YEAR ENDED AVERAGE ANNUAL SINCE
3/31/98 COMMENCEMENT<F1>
- --------------------------------------------------
First Omaha Fixed
Income Fund<F2> 12.50% 7.09%
- --------------------------------------------------
<F1> Commencement date is 12/13/92
<F2> Performance data from commencement through April 9, 1995 relates to a
predecessor, First Omaha Fixed Income Fund, the assets of which were
acquired by the Fund on that date.
RETURN ON A $10,000 INVESTMENT
DEC.13 MARCH MARCH MARCH MARCH MARCH MARCH
1992 1993 1994 1995 1996 1997 1998
----- ----- ----- ----- ----- ----- -----
FIRST OMAHA
FIXED INCOME FUND $10,000 $10,547 $10,852 $11,221 $12,404 $12,784 $14,381
LEHMAN BROS. GOV'T/
CORP. BOND INDEX $10,000 $10,576 $10,870 $11,368 $12,610 $13,172 $14,804
This chart assumes an initial investment of $10,000 made on 12/13/92. Total
Return is based on net change in N.A.V. assuming reinvestment of distributions.
Returns shown on this page include the reinvestment of all dividends and other
distributions. Performance figures reflect fee waivers in effect, represent past
performance, which is no guarantee of future results, and will fluctuate. In the
absence of fee waivers, Total Return would be reduced. The investment return and
principal value of an investment in the First Omaha Fixed Income Fund will
fluctuate so that an investor's shares in the Fund, when redeemed, may be worth
more or less than their original cost. This Fund is advised by First National
Bank of Omaha.
The Lehman Bros. Gov't./Corp. Bond Index includes all public obligations of the
U.S. Treasury, excluding flower bonds and foreign-targeted issues; all publicly
issued debt of U.S. government agencies and quasi-federal corporations, and
corporate debt guaranteed by the U.S. government; and all publicly issued, fixed
rate, nonconvertible, investment grade, dollar-denominated, SEC-registered
corporate debt (including debt issued or guaranteed by foreign sovereign
governments, municipalities, or governmental agencies, or international
agencies). The returns for this index do not reflect any fees or expenses.
FIRST OMAHA SHORT/INTERMEDIATE FIXED INCOME FUND
The First Omaha Short/Intermediate Fixed Income Fund invests at least 65% of its
total assets in investment grade fixed income securities. The portfolio expects
to maintain a weighted average maturity of two to five years.
As of March 31, 1998 the portfolio's composition was 33% government and agency
securities, 64% corporate bonds and 3% cash. The overall weighted average credit
quality remained AA/Aa for the portfolio, while the weighted average maturity
was 4.2 years.
During the last year we lengthened the portfolio's average maturity to 4.2 years
from 3.7 years. This was done to capture additional yield that was available
with slightly longer maturities. We added two government agency securities to
the portfolio, while adding three new corporate bond positions: Sears Roebuck
Acceptance Notes, Ford Motor Credit Co. and LG&E Capital Corp. bonds.
The Fund performed equal to its benchmark, with a slight outperformance over the
last 12 months. By extending the average maturity and duration of this Fund, we
feel that the additional yield we attained with our extension trades helped the
performance of the Fund in this interest rate environment.
SHORT/INTERMEDIATE FIXED INCOME FUND
PORTFOLIO COMPOSITION
as of March 31, 1998
CORPORATE BONDS 64%
U.S. GOVERNMENT AGENCIES 9%
U.S. GOVERNMENTS 24%
CASH EQUIVALENTS 3%
TOP FIVE HOLDINGS<F1>
as of March 31, 1998
% OF NET ASSETS
- ------------------------------------------
U.S. Treasury STRIP, 2/15/02 5.56%
- ------------------------------------------
Federal Home Loan Bank,
6.50%, 11/29/05 5.29
- ------------------------------------------
U.S. Treasury Note,
6.125%, 12/31/01 5.20
- ------------------------------------------
U.S. Treasury Note,
5.875%, 2/15/04 5.18
- ------------------------------------------
Wisconsin Electric Power Co.,
5.125%, 9/15/98 5.11
- ------------------------------------------
<F1> Excluding cash and cash equivalents
Portfolio composition and holdings are subject to change at any time.
TOTAL RETURN
as of March 31, 1998
1 YEAR ENDED AVERAGE ANNUAL SINCE
3/31/98 COMMENCEMENT<F1>
- -------------------------------------------------------
First Omaha Short/
Intermediate
- -------------------------------------------------------
Fixed Income Fund<F2> 8.37% 5.53%
- -------------------------------------------------------
<F1> Commencement date is 12/13/92
<F2> Performance data from commencement through April 9, 1995 relates to a
predecessor, First Omaha Short/Intermediate Fixed Income Fund, the
assets of which were acquired by the Fund on that date.
RETURN ON A $10,000 INVESTMENT
DEC.13, MARCH MARCH MARCH MARCH MARCH MARCH
1992 1993 1994 1995 1996 1997 1998
----- ----- ----- ----- ----- ----- -----
FIRST OMAHA
SHORT/INTERMEDIATE
FIXED INCOME FUND $10,000 $10,340 $10,561 $10,951 $11,803 $12,275 $13,302
LEHMAN BROS. MUTUAL
FUND SHORT (1-5)
U.S. GOV'T. INDEX $10,000 $10,377 $10,631 $11,080 $12,016 $12,622 $13,674
This chart assumes an initial investment of $10,000 made on 12/13/92. Total
Return is based on net change in N.A.V. assuming reinvestment of distributions.
Returns shown on this page include the reinvestment of all dividends and other
distributions. Performance figures reflect fee waivers in effect, represent past
performance, which is no guarantee of future results, and will fluctuate. In the
absence of fee waivers, Total Return would be reduced. The investment return and
principal value of an investment in the First Omaha Short/Intermediate Fixed
Income Fund will fluctuate so that an investor's shares in the Fund, when
redeemed, may be worth more or less than their original cost. This Fund is
advised by First National Bank of Omaha.
The Lehman Bros. Mutual Fund Short (1-5) U.S. Government Index is an index made
up of the Treasury Bond Index (all public obligations of the U.S. Treasury,
excluding flower bonds and foreign-targeted issues) and the Agency Bond Index
(all publicly issued debt of U.S. government agencies and quasi-federal
corporations, and corporate debt guaranteed by the U.S. government). It includes
only those bonds with maturities of up to five years. The returns for this index
do not reflect any fees or expenses.
SCHEDULE OF PORTFOLIO INVESTMENTS
March 31, 1998
SMALL CAP VALUE FUND
NUMBER
OF SHARES VALUE
- --------- -----
COMMON STOCKS 89.64%
AIRLINES 2.96%
10,300 Midwest Express Holdings, Inc.<F1> $ 504,700
----------
BUSINESS SERVICES 2.64%
18,500 Franklin Covey Co. <F1>449,781
----------
CHEMICALS 8.29%
9,400 Dexter Corp. 388,925
35,700 Oil-Dri Corp. of America 571,200
14,800 WD-40 Co. 450,475
----------
1,410,600
----------
CONSUMER PRODUCTS 3.52%
24,000 First Brands Corp. 598,500
----------
ELECTRONICS 2.34%
9,500 Teleflex, Inc. 399,000
----------
ENVIRONMENTAL CONTROL 4.63%
48,000 Calgon Carbon Corp. 561,000
25,900 Isco, Inc. 226,625
----------
787,625
----------
FOOD 7.12%
25,200 Nash-Finch Co. 500,850
14,500 Universal Foods Corp. 710,500
----------
1,211,350
----------
HOME FURNISHINGS 3.04%
12,000 National Presto Industries, Inc. 516,750
----------
INSURANCE 7.43%
12,300 American Financial Group, Inc. 533,513
24,600 The Guarantee Life Companies, Inc. 731,850
----------
1,265,363
----------
MACHINERY & EQUIPMENT 8.70%
18,500 Lawson Products, Inc. 494,875
13,500 Modine Manufacturing Co. 469,125
9,600 Tecumseh Products Co., Class A 516,000
----------
1,480,000
----------
MANUFACTURING 3.43%
14,200 Tennant Co. 583,975
----------
METAL PRODUCTS 2.82%
22,200 Amcast Industrial Corp. $ 480,075
----------
MINING 4.26%
13,500 Cleveland-Cliffs, Inc. 725,625
----------
MOTOR VEHICLE PARTS & ACCESSORIES 5.18%
26,500 CLARCOR Inc. 881,125
----------
PACKAGING & CONTAINERS 2.18%
12,300 The West Co., Inc. 370,538
----------
PAPER PRODUCTS 3.40%
32,000 P.H. Glatfelter Co. 578,000
----------
TEXTILE MANUFACTURING 3.46%
19,100 Kellwood Co. 589,712
----------
TIRE & RUBBER 2.70%
7,800 Bandag, Inc. 459,712
----------
TOBACCO 3.18%
12,300 Universal Corp. 541,969
----------
TRUCKING LEASING 3.33%
22,200 Werner Enterprises, Inc. 566,100
----------
UTILITIES -
ELECTRIC SERVICES 2.33%
20,300 DPL Inc. 395,850
----------
UTILITIES -
TELECOMMUNICATIONS 2.70%
13,500 Aliant Communications, Inc. 459,000
----------
Total Common Stocks (cost $13,198,425) 15,255,350
----------
Principal
Amount
- ---------
U.S. Treasury Bills 5.86%
$1,000,000 4/16/98 997,740
----------
Total U.S. Treasury Bills
(cost $997,898) 997,740
----------
NUMBER
OF SHARES VALUE
- --------- -----
INVESTMENT COMPANIES 4.40%
350,000 Federated Treasury Obligations $ 350,000
398,810 Goldman Sachs ILA Treasury
Obligations Portfolio 398,810
----------
Total Investment Companies
(cost $748,810) 748,810
----------
Total Investments
(cost $14,945,133) 99.90% 17,001,900
Other Assets, less Liabilities 0.10% 17,502
----------
Net Assets 100.00% $17,019,402
===========
<F1> Non-income producing security
See notes to financial statements.
SCHEDULE OF PORTFOLIO INVESTMENTS
March 31, 1998
EQUITY FUND
NUMBER
OF SHARES VALUE
- --------- -----
COMMON STOCKS 88.20%
BUILDING PRODUCTS 2.49%
202,800 Lafarge Corp. $ 7,782,450
------------
COMMUNICATIONS EQUIPMENT 3.18%
163,600 Motorola, Inc. 9,918,250
------------
COMPUTERS & PERIPHERALS 1.81%
54,200 International Business
Machines Corp. 5,630,025
------------
COSMETICS 1.52%
100,500 International Flavors
& Fragrances, Inc. 4,736,063
------------
ELECTRICAL EQUIPMENT 1.24%
59,400 Emerson Electric Co. 3,872,138
------------
ENVIRONMENTAL CONTROL 0.63%
169,200 Calgon Carbon Corp. 1,977,525
------------
FOOD MISCELLANEOUS 1.45%
35,100 BestFoods 4,102,313
11,775 Corn Products
International, Inc.<F1> 422,428
------------
4,524,741
------------
GROCERY STORES 2.30%
341,590 Food Lion, Inc., Class A 3,650,743
322,540 Food Lion, Inc., Class B 3,537,861
------------
7,188,604
------------
HEAVY MACHINERY 4.33%
282,000 Ingersoll-Rand Co. 13,518,375
------------
INSTRUMENTS AND CONTROLS 2.45%
149,250 Parker-Hannifin Corp. 7,649,063
------------
INSURANCE 12.88%
289,900 American Financial Group, Inc. 12,574,413
170,800 American General Corp. 11,048,625
67,800 Marsh & McLennan Cos., Inc. 5,919,788
195,100 SAFECO Corp. 10,663,434
------------
40,206,260
------------
MANUFACTURING 3.38%
229,500 Harsco Corp. 10,542,656
------------
NUMBER
OF SHARES VALUE
- --------- -----
MEDICAL SUPPLIES 1.28%
58,900 Becton, Dickinson & Co. $ 4,008,881
------------
MINING 3.86%
724,800 Cyprus Amax Minerals Co. 12,049,800
------------
MOTOR VEHICLE PARTS &
ACCESSORIES 1.81%
169,200 CLARCOR Inc. 5,625,900
------------
OIL 7.77%
186,400 Exxon Corp. 12,605,300
86,800 Texaco Inc. 5,229,700
165,500 Unocal Corp. 6,402,781
------------
24,237,781
------------
PACKAGING & CONTAINERS 3.01%
234,800 Sonoco Products Co. 9,406,675
------------
PHARMACEUTICALS 1.39%
41,600 Bristol-Myers Squibb Co. 4,339,400
------------
PHOTOGRAPHY 3.74%
179,900 Eastman Kodak Co. 11,671,012
------------
PUBLISHING 4.04%
307,100 R.R. Donnelley & Sons Co. 12,610,294
------------
RETAIL 8.57%
193,800 J.C. Penney Co., Inc. 14,668,237
352,400 Rite Aid Corp. 12,069,700
------------
26,737,937
------------
SOAPS & CLEANING AGENTS 1.49%
53,600 Colgate-Palmolive Co. 4,643,100
------------
TELEPHONE 2.91%
151,600 GTE Corp. 9,077,050
------------
TEXTILE MANUFACTURING 3.79%
383,300 Kellwood Co. 11,834,387
------------
TOBACCO 3.46%
245,400 Universal Corp. 10,812,937
------------
NUMBER
OF SHARES VALUE
- --------- -----
UTILITIES -
ELECTRIC SERVICES 3.42%
387,450 DPL Inc. $ 7,555,275
79,400 Texas Utilities Co. 3,121,412
------------
10,676,687
------------
Total Common Stocks
(cost $180,978,936) 275,277,991
------------
PRINCIPAL
AMOUNT
- ---------
U.S. TREASURY BILLS 8.48%
$ 6,000,000 8/6/98 5,893,080
9,000,000 8/20/98 8,820,180
12,000,000 9/3/98 11,739,600
------------
Total U.S. Treasury Bills
(cost $26,454,312) 26,452,860
------------
NUMBER
OF SHARES
- ---------
INVESTMENT COMPANIES 3.22%
10,038,654 Goldman Sachs ILA
Treasury
Obligations
Portfolio 10,038,654
------------
Total Investment Companies
(cost $10,038,654) 10,038,654
------------
Total Investments
(cost $217,471,902) 99.90% 311,769,505
Other Assets, less Liabilities 0.10% 303,784
------------
NET ASSETS 100.00% $312,073,289
============
See notes to financial statements.
SCHEDULE OF PORTFOLIO INVESTMENTS
March 31, 1998
BALANCED FUND
NUMBER
OF SHARES VALUE
- --------- -----
COMMON STOCKS 55.19%
BUILDING PRODUCTS 1.57%
10,500 Lafarge Corp. $ 402,938
------------
COMMUNICATIONS EQUIPMENT 2.08%
8,800 Motorola, Inc. 533,500
------------
COMPUTERS & PERIPHERALS 1.09%
2,700 International Business
Machines Corp. 280,463
------------
COSMETICS 0.92%
5,000 International Flavors &
Fragrances, Inc. 235,625
------------
ELECTRICAL EQUIPMENT 0.96%
3,800 Emerson Electric Co. 247,713
------------
ENVIRONMENTAL CONTROL 0.41%
9,000 Calgon Carbon Corp. 105,188
------------
FOOD MISCELLANEOUS 1.00%
2,000 BestFoods 233,750
625 Corn Products
International, Inc.<F1> 22,422
------------
256,172
------------
GROCERY STORES 1.61%
22,100 Food Lion, Inc., Class A 236,194
16,270 Food Lion, Inc., Class B 178,462
------------
414,656
------------
HEAVY MACHINERY 2.72%
14,600 Ingersoll-Rand Co. 699,888
------------
INSTRUMENTS AND CONTROLS 1.52%
7,600 Parker-Hannifin Corp. 389,500
------------
INSURANCE 8.05%
15,200 American Financial Group, Inc. 659,300
8,900 American General Corp. 575,719
3,400 Marsh & McLennan Cos., Inc. 296,863
9,800 SAFECO Corp. 535,631
------------
2,067,513
------------
MANUFACTURING 2.16%
12,100 Harsco Corp. 555,844
------------
MEDICAL SUPPLIES 0.79%
3,000 Becton, Dickinson & Co. 204,187
------------
NUMBER
OF SHARES VALUE
- --------- -----
MINING 2.47%
38,100 Cyprus Amax Minerals Co. $ 633,412
------------
MOTOR VEHICLE
PARTS & ACCESSORIES 1.07%
8,300 CLARCOR Inc. 275,975
------------
OIL 5.11%
10,100 Exxon Corp. 683,012
4,800 Texaco Inc. 289,200
8,800 Unocal Corp. 340,450
------------
1,312,662
------------
PACKAGING & CONTAINERS 1.84%
11,800 Sonoco Products Co. 472,737
------------
PHARMACEUTICALS 0.73%
1,800 Bristol-Myers Squibb Co. 187,762
------------
PHOTOGRAPHY 2.37%
9,400 Eastman Kodak Co. 609,825
------------
PUBLISHING 2.46%
15,400 R.R. Donnelley & Sons Co. 632,362
------------
RETAIL 5.28%
9,600 J.C. Penney Co., Inc. 726,600
18,400 Rite Aid Corp. 630,200
------------
1,356,800
------------
SOAPS & CLEANING AGENTS 0.91%
2,700 Colgate-Palmolive Co. 233,887
------------
TELEPHONE 1.58%
6,800 GTE Corp. 407,150
------------
TEXTILE MANUFACTURING 2.36%
19,600 Kellwood Co. 605,150
------------
TOBACCO 2.09%
12,200 Universal Corp. 537,562
------------
UTILITIES -
ELECTRIC SERVICES 2.04%
19,700 DPL Inc. 384,150
3,500 Texas Utilities Co. 137,594
------------
521,744
------------
Total Common Stocks
(cost $11,566,259) 14,180,215
------------
PRINCIPAL
AMOUNT VALUE
- --------- -----
CORPORATE BONDS 21.88%
FINANCIAL SERVICES 5.00%
$500,000 General Electric Capital Corp.,
6.90%, 9/15/15 $ 530,210
750,000 Norwest Financial, Inc.,
6.375%, 12/1/07 753,682
------------
1,283,892
------------
FOOD PRODUCTS 2.01%
500,000 Anheuser-Busch Cos., Inc.,
6.75%, 8/1/03 516,270
------------
INDUSTRIAL 1.92%
500,000 Rockwell International Corp.,
6.15%, 1/15/08 492,915
------------
PHARMACEUTICALS 1.96%
500,000 Eli Lilly & Co.,
6.57%, 1/1/16 502,335
------------
RAIL CAR LEASING 2.11%
500,000 Union Tank Car Co.,
7.45%, 6/1/09 540,940
------------
RETAIL 1.59%
400,000 Wal-Mart Stores, Inc.,
6.75%, 5/15/02 409,176
------------
UTILITIES - ELECTRIC SERVICES 2.36%
100,000 Indianapolis Power & Light Co.,
7.375%, 8/1/07 107,966
500,000 Tampa Electric Co.,
5.75%, 5/1/00 498,235
------------
606,201
------------
UTILITIES - NATURAL GAS 4.55%
400,000 Consolidated Natural Gas Co.,
6.625%, 12/1/08 409,876
750,000 Laclede Gas Co.
6.50%, 10/15/12 758,670
------------
1,168,546
------------
PRINCIPAL
AMOUNT VALUE
- --------- -----
UTILITIES -
TELECOMMUNICATIONS 0.38%
$100,000 Illinois Bell Telephone Co.,
5.80%, 2/1/04 $ 98,527
------------
Total Corporate Bonds
(cost $5,456,411) 5,618,802
------------
U.S. GOVERNMENT AGENCIES 3.97%
500,000 Federal Home Loan Mortgage Corp.,
7.065%, 7/18/12 506,950
500,000 Federal National
Mortgage Association,
7.27%, 8/24/05 513,265
------------
Total U.S. Government Agencies
(cost $1,010,884) 1,020,215
------------
U.S. TREASURY NOTES 13.97%
500,000 5.125%, 4/30/98 499,910
500,000 5.875%, 8/15/98 500,735
500,000 6.75%, 5/31/99 506,465
500,000 6.625%, 6/30/01 513,625
500,000 5.875%, 2/15/04 504,950
500,000 6.50%, 8/15/05 522,220
500,000 7.00%, 7/15/06 540,035
------------
Total U.S. Treasury Notes
(cost $3,501,568) 3,587,940
------------
U.S. TREASURY STRIPS 1.45%
850,000 2/15/12 373,447
------------
Total U.S. Treasury Strips
(cost $333,119) 373,447
------------
Number
of Shares
- ---------
INVESTMENT COMPANIES 2.88%
741,110 Goldman Sachs ILA Treasury
Obligations Portfolio 741,110
------------
Total Investment Companies
(cost $741,110) 741,110
------------
Total Investments
(cost $22,609,351) 99.34% 25,521,729
Other Assets, less Liabilities 0.66% 169,841
------------
NET ASSETS 100.00% $25,691,570
============
SCHEDULE OF PORTFOLIO INVESTMENTS
March 31, 1998
FIXED INCOME FUND
Principal
Amount Value
- --------- -----
CORPORATE BONDS 69.62%
COMMUNICATIONS EQUIPMENT 3.28%
$2,500,000 Motorola, Inc.,
6.50%, 3/1/08 $ 2,550,325
------------
FINANCIAL SERVICES 6.58%
2,500,000 General Electric Capital Corp.,
5.50%, 11/1/01 2,457,775
2,500,000 General Electric Capital Corp.,
6.90%, 9/15/15 2,651,050
------------
5,108,825
------------
FOOD PRODUCTS 3.34%
2,500,000 Anheuser-Busch Cos., Inc.,
7.25%, 9/15/15 2,591,925
------------
FOREST PRODUCTS 3.34%
2,500,000 Kimberly-Clark Corp.,
6.875%, 2/15/14 2,598,025
------------
INDUSTRIAL GOODS & SERVICES 15.04%
2,000,000 Air Products & Chemicals, Inc.,
6.25%, 6/15/03 2,001,780
2,000,000 Albertson's, Inc.,
6.34%, 2/25/13 1,977,740
2,500,000 First Data Corp.,
6.375%, 12/15/07 2,494,325
2,500,000 Monsanto Co.,
6.00%, 7/1/00 2,501,325
2,500,000 PPG Industries, Inc.,
7.375%, 6/1/16 2,705,050
------------
11,680,220
------------
OIL & GAS EXPLORATION &
PRODUCTION 3.34%
2,500,000 Amoco Canada Petroleum Co. Ltd.,
6.75%, 2/15/05 2,592,075
------------
PHARMACEUTICALS 2.59%
2,000,000 Eli Lilly & Co.,
6.25%, 3/15/03 2,014,340
------------
RAILROADS 0.66%
500,000 Southern Railway Co.,
7.75%, 8/1/99 510,950
------------
Principal
Amount Value
- --------- -----
RETAIL 3.16%
$2,500,000 Wal-Mart Stores, Inc.,
5.875%, 10/15/05 $ 2,457,150
------------
SOAPS & CLEANING AGENTS 1.96%
1,500,000 Colgate-Palmolive Co.,
6.85%, 11/24/99 1,519,755
------------
UTILITIES -
ELECTRIC SERVICES 6.61%
2,500,000 National Rural Utilities
Cooperative Finance Corp.,
6.50%, 9/15/02 2,534,025
2,500,000 Union Electric Co.,
6.75%, 5/1/08 2,597,375
------------
5,131,400
------------
UTILITIES - ELECTRIC &
OTHER SERVICES COMBINED 4.79%
2,500,000 Citizens Utilities Co.,
7.60%, 6/1/06 2,706,625
1,000,000 Louisville Gas & Electric Co.,
7.50%, 7/1/02 1,013,190
------------
3,719,815
------------
UTILITIES - NATURAL GAS 5.19%
2,500,000 Laclede Gas Co.,
6.50%, 11/15/10 2,532,250
1,500,000 Northern Illinois Gas Co.,
6.25%, 2/1/99 1,500,540
------------
4,032,790
------------
UTILITIES -
TELECOMMUNICATIONS 9.74%
2,500,000 AT&T Corp.,
7.75%, 3/1/07 2,750,400
2,500,000 Chesapeake & Potomac Telephone
Co. of Maryland,
5.25%, 5/1/05 2,370,175
1,000,000 Southern Bell Telephone &
Telegraph Co.,4.75%, 9/1/00 971,180
1,500,000 Southern Bell Telephone &
Telegraph Co.,6.00%, 10/1/04 1,473,330
------------
7,565,085
------------
Total Corporate Bonds
(cost $52,225,179) 54,072,680
------------
Principal
Amount Value
- --------- -----
U.S. GOVERNMENT AGENCIES 9.87%
$2,500,000 Federal National
Mortgage Association,
6.85%, 9/12/05 $2,535,125
2,500,000 Federal National
Mortgage Association,
7.15%, 10/11/06 2,575,750
2,500,000 Federal National
Mortgage Association,
6.88%, 11/20/06 2,552,700
------------
Total U.S. Government Agencies
(cost $7,605,278) 7,663,575
------------
U.S. GOVERNMENT AGENCY STRIPS 2.81%
5,300,000 Federal Home Loan Bank,
7/2/12 1,746,880
1,320,000 Federal Home Loan Bank,
7/2/12 435,072
------------
Total U.S. Government Agency Strips
(cost $2,163,306) 2,181,952
------------
U.S. TREASURY BONDS 2.97%
1,000,000 8.75%, 11/15/08 1,138,040
1,000,000 9.125%, 5/15/09 1,167,440
------------
Total U.S. Treasury Bonds
(cost $2,268,750) 2,305,480
------------
U.S. TREASURY STRIPS 11.36%
510,000 8/15/01 422,632
2,122,000 5/15/02 1,686,374
6,513,000 2/15/07 3,906,107
6,400,000 2/15/12 2,811,840
------------
Total U.S. Treasury Strips
(cost $7,503,028) 8,826,953
------------
Number
of Shares
- ---------
INVESTMENT COMPANIES 2.04%
1,585,740 Goldman Sachs ILA Treasury
Obligations Portfolio 1,585,740
------------
Total Investment Companies
(cost $1,585,740) 1,585,740
------------
Total Investments
(cost $73,351,281) 98.67% 76,636,380
Other Assets, less
Liabilities 1.33% 1,034,982
------------
NET ASSETS 100.00% $77,671,362
===========
See notes to financial statements.
SCHEDULE OF PORTFOLIO INVESTMENTS
March 31, 1998
SHORT/INTERMEDIATE FIXED INCOME FUND
PRINCIPAL
AMOUNT VALUE
- --------- ------
CORPORATE BONDS 63.33%
FINANCIAL SERVICES 11.51%
$ 750,000 Ford Motor Credit Co.,
6.125%, 1/9/06 $ 736,013
750,000 General Electric Capital Corp.,
6.875%, 4/15/00 763,650
750,000 LG&E Capital Corp.,
6.46%, 1/15/08 745,342
------------
2,245,005
------------
FOOD PRODUCTS 3.90%
750,000 Anheuser-Busch Cos., Inc.,
6.90%, 10/1/02 761,108
------------
Pharmaceuticals 11.87%
750,000 Eli Lilly & Co.,
8.125%, 12/1/01 801,337
750,000 SmithKline Beecham PLC,
6.625%, 10/1/05 763,845
750,000 Upjohn Co., 5.875%, 4/15/00 749,918
------------
2,315,100
------------
RETAIL 7.87%
750,000 Sears Roebuck Acceptance Notes,
6.90%, 8/1/03 769,838
750,000 Wal-Mart Stores, Inc.
6.50%, 6/1/03 765,480
------------
1,535,318
------------
UTILITIES -
ELECTRIC SERVICES 11.62%
750,000 Florida Power & Light Co.,
5.50%, 7/1/99 745,665
750,000 Monongahela Power Co.,
5.625%, 4/1/00 746,025
750,000 Union Electric Co.,
6.875%, 8/1/04 775,785
------------
2,267,475
------------
UTILITIES -
ELECTRIC & OTHER SERVICES
COMBINED 8.87%
750,000 Northern States Power Co.,
5.75%, 10/1/03 734,647
1,000,000Wisconsin Electric Power Co.,
5.125%, 9/15/98 996,440
------------
1,731,087
------------
PRINCIPAL
AMOUNT VALUE
- --------- ------
UTILITIES - NATURAL GAS 3.85%
$ 750,000 Northern Illinois Gas Co.,
6.25%, 2/1/99 $ 750,270
------------
UTILITIES -
TELECOMMUNICATIONS 3.84%
750,000 Chesapeake & Potomac Telephone
Co. of Maryland,
5.875%, 9/15/99 748,372
------------
Total Corporate Bonds
(cost $12,195,822) 12,353,735
------------
U.S. GOVERNMENT AGENCIES 9.12%
1,000,000 Federal Home Loan Bank,
6.50%, 11/29/05 1,031,470
750,000 Federal Home Loan
Mortgage Corp.,5.95%, 1/19/06 747,593
------------
Total U.S. Government Agencies
(cost $1,764,782) 1,779,063
------------
U.S. TREASURY NOTES 10.37%
1,000,000 6.125%, 12/31/01 1,014,060
1,000,000 5.875%, 2/15/04 1,009,900
------------
Total U.S. Treasury Notes
(cost $1,977,113) 2,023,960
------------
U.S. TREASURY STRIPS 13.02%
702,000 2/15/99 669,245
896,000 8/15/00 786,025
1,345,000 2/15/02 1,083,908
------------
Total U.S. Treasury Strips
(cost $2,534,623) 2,539,178
------------
Number
of Shares
- ---------
INVESTMENT COMPANIES 2.61%
450,000 Federated Trust for U.S. Treasury
Obligations 450,000
60,115 Goldman Sachs ILA Treasury
Obligations Portfolio 60,115
------------
Total Investment Companies
(cost $510,115) 510,115
------------
Total Investments
(cost $18,982,455) 98.45% 19,206,051
Other Assets, less Liabilities 1.55% 302,996
------------
NET ASSETS 100.00% $19,509,047
============
SCHEDULE OF PORTFOLIO INVESTMENTS
March 31, 1998
U.S. GOVERNMENT OBLIGATIONS FUND
PRINCIPAL
AMOUNT VALUE
- --------- -----
U.S. TREASURY BILLS 34.60%
$5,000,000 4/9/98 $ 4,994,222
5,000,000 4/16/98 4,989,500
10,000,000 4/23/98 9,967,963
5,000,000 5/28/98 4,960,417
5,000,000 6/25/98 4,941,090
5,000,000 7/23/98 4,921,685
------------
Total U.S. Treasury Bills
(cost $34,774,877) 34,774,877
------------
U.S. TREASURY NOTES 29.83%
5,000,000 5.125%, 4/30/98 4,998,462
10,000,000 5.375%, 5/31/98 9,997,299
10,000,000 5.25%, 7/31/98 9,990,197
5,000,000 4.75%, 8/31/98 4,987,680
------------
Total U.S. Treasury Notes
(cost $29,973,638) 29,973,638
------------
REPURCHASE AGREEMENTS 35.58%
19,754,680 G. X. Clarke & Co.,
5.75%, dated 3/31/98,
repurchase price
$19,757,835, maturing
4/1/98 (collateralized
by U.S. Treasury Notes,
5.875%, 1/31/99 and
5.75%, 6/25/98) 19,754,680
16,000,000 HSBC Securities,
Inc., 5.65%, dated
3/31/98, repurchase price
$16,002,511, maturing
4/1/98 (collateralized
by U.S. Treasury
Notes, 6.00%, 8/15/99) 16,000,000
------------
Total Repurchase Agreements
(cost $35,754,680) 35,754,680
------------
Total Investments
(cost $100,503,195) 100.01% 100,503,195
Liabilities, less Other Assets (0.01)% (6,476)
------------
NET ASSETS 100.00% $100,496,719
============
See notes to financial statements.
<TABLE>
<CAPTION>
STATEMENTS OF ASSETS AND LIABILITIES
March 31, 1998
Short/ U.S.
Small Cap Fixed Intermediate Government
Value Equity Balanced Income Fixed Income Obligations
Fund Fund Fund Fund Fund Fund
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
ASSETS:
- ---------------------------------------------------
Investments, at value (cost $14,945,133,
$217,471,902, $22,609,351, $73,351,281,
$18,982,455 and $64,748,515, respectively) $17,001,900 $311,769,505 $25,521,729 $76,636,380 $19,206,051 $64,748,515
- ---------------------------------------------------
Repurchase agreements, at value (cost
$0, $0, $0, $0, $0 and $35,754,680, respectively) _ _ _ _ _ 35,754,680
- ---------------------------------------------------
Receivable for securities sold _ _ _ _ 3,577 _
- ---------------------------------------------------
Interest and dividends receivable 17,834 322,039 177,951 1,028,314 288,403 400,349
- ---------------------------------------------------
Organizational expenses, net of
accumulated amortization 6,133 14,085 3,128 14,085 14,085 14,085
- ---------------------------------------------------
Other assets 5,757 57,211 5,889 23,016 11,467 36,556
- --------------------------------------------------- ---------- ----------- ---------- ---------- ---------- -----------
Total Assets 17,031,624 312,162,840 25,708,697 77,701,795 19,523,583 100,954,185
- ------------------------------------------------------------- ----------- ---------- ---------- ---------- -----------
LIABILITIES:
- ---------------------------------------------------
Dividend payable _ _ _ _ _ 404,759
- ---------------------------------------------------
Accrued expenses and other liabilities 11,216 45,378 15,354 22,359 12,835 31,930
- ---------------------------------------------------
Accrued investment advisory fee 1,006 44,173 1,773 8,074 1,701 20,777
- ------------------------------------------------------------- ---------- ---------- ---------- ---------- ----------
Total Liabilities 12,222 89,551 17,127 30,433 14,536 457,466
- ------------------------------------------------------------- ---------- ---------- ---------- ---------- ----------
NET ASSETS $17,019,402 $312,073,289 $25,691,570 $77,671,362 $19,509,047 $100,496,719
- ---------------------------------------------------=========== =========== =========== =========== =========== ============
NET ASSETS CONSIST OF:
Capital stock 13 193 21 74 20 1,005
- ---------------------------------------------------
Paid-in capital in excess of par 14,795,865 211,235,489 22,611,225 74,359,276 19,608,071 100,508,996
- ---------------------------------------------------
Undistributed net investment income 5,296 3,256 11,439 83,872 20,277 5,998
- ---------------------------------------------------
Undistributed net realized gain (loss)
on investments 161,461 6,536,748 156,507 (56,959) (342,917) (19,280)
- ---------------------------------------------------
Net unrealized appreciation
on investments 2,056,767 94,297,603 2,912,378 3,285,099 223,596 _
- ------------------------------------------------------------- ---------- ---------- ---------- ---------- ----------
Net Assets $17,019,402 $312,073,289 $25,691,570 $77,671,362 $19,509,047 $100,496,719
- ---------------------------------------------------=========== ============ =========== =========== =========== ============
CAPITAL STOCK, $0.00001 par value
Authorized 50,000,000 50,000,000 50,000,000 50,000,000 50,000,000 300,000,000
- ---------------------------------------------------
Issued and outstanding 1,315,076 19,273,261 2,099,271 7,430,912 1,957,569 100,515,911
- ---------------------------------------------------
NET ASSET VALUE, REDEMPTION PRICE,
AND OFFERING PRICE PER SHARE
(NET ASSETS/SHARES OUTSTANDING) $12.94 $16.19 $12.24 $10.45 $9.97 $1.00
=========== =========== =========== =========== =========== ===========
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements.
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
For the Year Ended March 31, 1998
Short/ U.S.
Small Cap Fixed Intermediate Government
Value Equity Balanced Income Fixed Income Obligations
Fund Fund Fund Fund Fund Fund
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 231,420 $ 5,763,019 $ 234,028 _ _ _
Interest 77,004 2,622,646 601,268 $5,105,941 $1,306,579 $5,930,064
- ---------------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
308,424 8,385,665 835,296 5,105,941 1,306,579 5,930,064
----------- ----------- ----------- ----------- ----------- -----------
EXPENSES:
Investment advisory fees 96,035 2,151,925 147,073 461,166 99,747 275,046
- ----------------------------------------------
Fund administration and accounting fees 50,000 573,847 50,000 153,722 39,899 220,037
- ----------------------------------------------
Shareholder servicing fees 25,668 67,902 26,690 34,416 27,413 39,321
- ----------------------------------------------
Federal and state registration fees 14,015 30,837 14,308 15,475 11,351 26,105
- ----------------------------------------------
Professional fees 11,142 30,962 11,158 15,475 11,218 11,945
- ----------------------------------------------
Administrative services plan fees 10,604 261,349 16,721 73,799 18,251 _
- ----------------------------------------------
Custody fees 3,383 86,097 5,874 23,063 5,986 33,005
- ----------------------------------------------
Amortization of organization expenses 1,923 6,946 934 6,946 6,946 6,946
- ----------------------------------------------
Reports to shareholders 1,505 30,651 2,698 10,480 2,912 15,994
- ----------------------------------------------
Pricing fees 1,237 1,978 3,869 4,676 2,684 311
- ----------------------------------------------
Directors' fees 429 11,160 759 2,996 785 4,357
- ----------------------------------------------
Insurance 151 10,739 207 3,406 947 4,595
- ----------------------------------------------
Other expenses 452 3,851 572 1,685 1,382 1,057
- ---------------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Total expenses before waiver 216,544 3,268,244 280,863 807,305 229,521 638,719
- ----------------------------------------------
Waiver of expenses (90,826) (313,626) (107,673) (124,288) (31,721) (36,249)
- ---------------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Net Expenses 125,718 2,954,618 173,190 683,017 197,800 602,470
- ---------------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
NET INVESTMENT INCOME 182,706 5,431,047 662,106 4,422,924 1,108,779 5,327,594
- ---------------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on investments 576,625 15,146,102 247,580 (25,309) 10,043 _
- ----------------------------------------------
Change in unrealized appreciation
on investments 1,932,576 51,301,415 2,925,211 4,616,812 476,475 _
- ---------------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Net Gain on Investments 2,509,201 66,447,517 3,172,791 4,591,503 486,518 _
- ---------------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $2,691,907 $71,878,564 $3,834,897 $9,014,427 $1,595,297 $5,327,594
========== ========== ========== ========== ========== ==========
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements.
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
SMALL CAP VALUE FUND EQUITY FUND BALANCED FUND
-------------------------- ------------------------ ------------------------
JUNE 10, AUG. 6,
YEAR ENDED 1996<F1> YEAR ENDED YEAR ENDED YEAR ENDED 1996<F1>
MAR. 31, TO MAR. 31, MAR. 31, MAR. 31, TO
1998 MAR. 31, 1997 1998 1997 1998 MAR. 31, 1997
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income $ 182,706 $ 65,818 $5,431,047 $5,308,437 $ 662,106 $ 109,468
- -------------------------------------------------
Net realized gain (loss) on investments 576,625 59,722 15,146,102 20,637,056 247,580 43,091
- -------------------------------------------------
Change in unrealized appreciation (depreciation)
on investments 1,932,576 124,191 51,301,415 8,274,849 2,925,211 (12,833)
- ------------------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Net increase in net assets resulting
from operations 2,691,907 249,731 71,878,564 34,220,342 3,834,897 139,726
- ------------------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income (181,609) (65,097) (5,458,420) (5,313,779) (657,708) (103,973)
- -------------------------------------------------
Net capital gains (454,364) (20,522) (19,230,779) (17,157,052) (134,164) _
- ------------------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Total distributions (635,973) (85,619) (24,689,199) (22,470,831) (791,872) (103,973)
- ------------------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares 9,529,746 7,322,097 36,250,380 39,307,623 14,375,680 11,063,418
- -------------------------------------------------
Proceeds from reinvestment of dividends 634,827 85,592 24,523,415 22,427,121 789,660 103,947
- -------------------------------------------------
Redemption of shares (2,373,895) (399,511) (55,089,677) (38,453,262) (3,411,519) (308,394)
- ------------------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) from share transactions 7,790,678 7,008,178 5,684,118 23,281,482 11,753,821 10,858,971
- ------------------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS 9,846,612 7,172,290 52,873,483 35,030,993 14,796,846 10,894,724
- -------------------------------------------------
NET ASSETS:
Beginning of period 7,172,790 500 259,199,806 224,168,813 10,894,724 _
- ------------------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
End of period $17,019,402 $7,172,790 $312,073,289 $259,199,806 $25,691,570 $10,894,724
- ------------------------------------------------- ========== ========== ========== ========== ========== ==========
Undistributed net investment income,
end of period $3,373 $2,276 $ 1,242 $ 28,615 $10,505 $6,107
========== ========== ========== ========== ========== ==========
- -----------------------------------------------------------------------------------------------------------------------------------
<F1> Commencement of operations
</TABLE>
See notes to financial statements.
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
SHORT/INTERMEDIATE U.S. GOVERNMENT
FIXED INCOME FUND FIXED INCOME FUND OBLIGATIONS FUND
-------------------------- ------------------------ ------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MAR. 31, MAR. 31, MAR. 31, MAR. 31, MAR. 31, MAR. 31,
1998 1997 1998 1997 1998 1997
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income $ 4,422,924 $ 3,493,559 $ 1,108,779 $1,077,899 $ 5,327,594 $ 4,940,378
- -------------------------------------------------
Net realized gain (loss) on investments (25,309) 231,327 10,043 (64,983) _ (3,242)
- -------------------------------------------------
Change in unrealized appreciation (depreciation)
on investments 4,616,812 (1,285,148) 476,475 (164,132) _ _
- ------------------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Net increase in net assets resulting
from operations 9,014,427 2,439,738 1,595,297 848,784 5,327,594 4,937,136
- ------------------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income (4,427,433) (3,598,700) (1,112,789) (1,105,302) (5,327,594) (4,940,378)
- -------------------------------------------------
Net capital gains _ _ _ _ _ _
- ------------------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Total distributions (4,427,433) (3,598,700) (1,112,789) (1,105,302) (5,327,594) (4,940,378)
- ------------------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares 11,070,510 12,299,589 3,159,589 4,544,931 378,648,091 392,817,505
- -------------------------------------------------
Proceeds from reinvestment of dividends 4,382,227 3,579,341 1,063,195 1,088,509 158,162 443,533
- -------------------------------------------------
Redemption of shares (17,892,679) (15,537,577) (6,238,476) (6,390,503) (403,722,643)(355,559,420)
- ------------------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) from share transactions (2,439,942) 341,353 (2,015,692) (757,063) (24,916,390) 37,701,618
- ------------------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS 2,147,052 (817,609) (1,533,184) (1,013,581) (24,916,390) 37,698,376
- -------------------------------------------------
NET ASSETS:
Beginning of period 75,524,310 76,341,919 21,042,231 22,055,812 125,413,109 87,714,733
- ------------------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
End of period $77,671,362 $75,524,310 $19,509,047 $21,042,231 $100,496,719 $125,413,109
- ------------------------------------------------- ========== ========== ========== ========== ========== ==========
Undistributed net investment income,
end of period $81,858 $86,367 $18,263 $22,273 $3,984 $3,984
========== ========== ========== ========== ========== ==========
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS<F1>
SMALL CAP VALUE FUND EQUITY FUND
-------------------------- ---------------------------------------------------
JUNE 10, APRIL 10, JULY 1, 1994
YEAR ENDED 1996<F2> YEAR ENDED YEAR ENDED 1995<F2> TO
MAR. 31, TO MAR. 31, MAR. 31, TO APRIL 9,
1998 MAR. 31, 1997 1998 1997 MAR. 31, 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.52 $10.00 $13.74 $13.07 $11.39 $10.48
- -------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.19 0.15 0.29 0.30 0.28 0.21
- -------------------------------------------------
Net realized and unrealized gains on investments 2.88 0.58 3.50 1.63 2.13 1.48
- ------------------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Total from investment operations 3.07 0.73 3.79 1.93 2.41 1.69
- ------------------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income 0.19 0.15 0.29 0.30 0.28 0.22
- -------------------------------------------------
Distributions from capital gains 0.46 0.06 1.05 0.96 0.45 0.56
- ------------------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Total distributions 0.65 0.21 1.34 1.26 0.73 0.78
- ------------------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD $12.94 $10.52 $16.19 $13.74 $13.07 $11.39
- ------------------------------------------------- =========== =========== =========== =========== =========== ===========
TOTAL RETURN<F3> 29.60% 7.30% 28.89% 14.99% 21.52% 16.48%
- -------------------------------------------------
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (000s) $17,019 $7,173 $312,073 $259,200 $224,169 $161,323
- -------------------------------------------------
Ratio of net expenses to average net assets<F4> 1.11% 1.34% 1.03% 1.04% 0.99% 1.03%
- -------------------------------------------------
Ratio of net investment income to average
net assets<F4> 1.62% 2.15% 1.89% 2.17% 2.32% 2.50%
- -------------------------------------------------
Ratio of net expenses to average
net assets<F4><F5> 1.92% 3.76% 1.14% 1.10% 1.07% 1.62%
- -------------------------------------------------
Ratio of net investment income to average
net assets<F4><F5> 0.81% (0.27)% 1.78% 2.11% 2.24% 1.91%
- -------------------------------------------------
Portfolio turnover rate<F3> 16.54% 7.45% 15.87% 25.66% 26.60% 14.36%
- -------------------------------------------------
Average commission rate paid on
portfolio investment transactions<F6> $0.0600 $0.0662 $0.0603 $0.0677 N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
<F1> Performance data for each Fund prior to April 10, 1995 relates to a corresponding predecessor First Omaha Fund, the assets of
which were acquired on that date.
<F2> Commencement of operations
<F3> Not annualized
<F4> Annualized
<F5> During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the ratios
would have been as indicated.
<F6> Required by regulations first effective for the fiscal year ended March 31, 1997
</TABLE>
See notes to financial statements.
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS<F1>
EQUITY FUND (CON'T.) BALANCED FUND FIXED INCOME FUND
-------------------------- ------------------------ -------------------------
DEC. 13, 1992 AUG. 6, JULY 1, 1994
YEAR ENDED TO YEAR ENDED 1996<F2> YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30, MAR. 31, TO MAR. 31, MAR. 31, MAR. 31,
1994 1993 1998 1997 1998 1997
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.55 $10.00 $10.41 $10.00 $ 9.84 $10.00
- -------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.20 0.11 0.38 0.21 0.59 0.45
- -------------------------------------------------
Net realized and unrealized gains on investments 0.15 0.54 1.90 0.40 0.61 (0.15)
- ------------------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Total from investment operations 0.35 0.65 2.28 0.61 1.20 0.30
- ------------------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income 0.20 0.10 0.38 0.20 0.59 0.46
- -------------------------------------------------
Distributions from capital gains 0.22 _ 0.07 _ _ _
- ------------------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Total distributions 0.42 0.10 0.45 0.20 0.59 0.46
- ------------------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD $10.48 $10.55 $12.24 $10.41 $10.45 $ 9.84
- ------------------------------------------------- =========== =========== =========== =========== =========== ===========
TOTAL RETURN<F3> 3.34% 6.55% 22.34% 6.14% 12.50% 3.06%
- -------------------------------------------------
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (000s) $129,381 $111,059 $25,692 $10,895 $77,671 $75,524
- -------------------------------------------------
Ratio of net expenses to average net assets<F4> 1.04% 1.01% 0.88% 1.16% 0.89% 0.89%
- -------------------------------------------------
Ratio of net investment income to average
net assets<F4> 1.93% 1.90% 3.37% 3.25% 5.74% 4.48%
- -------------------------------------------------
Ratio of net expenses to average
net assets<F4><F5> 1.54% 1.32% 1.43% 3.04% 1.05% 1.00%
- -------------------------------------------------
Ratio of net investment income to average
net assets<F4><F5> 1.43% 1.59% 2.82% 1.37% 5.58% 4.37%
- -------------------------------------------------
Portfolio turnover rate<F3> 15.86% 4.94% 10.46% 5.92% 19.03% 12.66%
- -------------------------------------------------
Average commission rate paid on
portfolio investment transactions<F6> N/A N/A $0.0601 $0.0686 _ _
- -----------------------------------------------------------------------------------------------------------------------------------
<F1> Performance data for each Fund prior to April 10, 1995 relates to a corresponding predecessor First Omaha Fund, the assets of
which were acquired on that date.
<F2> Commencement of operations
<F3> Not annualized
<F4> Annualized
<F5> During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the ratios
would have been as indicated.
<F6> Required by regulations first effective for the fiscal year ended March 31, 1997
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS<F1>
FIXED INCOME FUND (CONT'D.)
-------------------------------------------------------------------
APRIL 10, JULY 1, 1994
1995<F2> TO YEAR ENDED DEC. 13, 1992
TO MAR. 31 APRIL 9, JUNE 30, TO JUNE 30,
1996 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.63 $9.58 $10.49 $10.00
- -------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.59 0.51 0.67 0.39
- -------------------------------------------------
Net realized and unrealized gains on investments 0.35 0.07 (0.88) 0.47
- ------------------------------------------------- ----------- ----------- ----------- -----------
Total from investment operations 0.94 0.58 (0.21) 0.86
- ------------------------------------------------- ----------- ----------- ----------- ----------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income 0.57 0.53 0.67 0.37
- -------------------------------------------------
Distributions from capital gains _ _ 0.03 _
- ------------------------------------------------- ----------- ----------- ----------- -----------
Total distributions 0.57 0.53 0.70 0.37
- ------------------------------------------------- ----------- ----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD $10.00 $9.63 $ 9.58 $10.49
- ------------------------------------------------- =========== =========== =========== ===========
TOTAL RETURN<F3> 9.79% 6.35% (2.29)% 8.72%
- -------------------------------------------------
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (000s) $76,342 $66,488 $61,714 $59,178
- -------------------------------------------------
Ratio of net expenses to average net assets<F4> 0.83% 0.87% 0.86% 0.79%
- -------------------------------------------------
Ratio of net investment income to average
net assets<F4> 5.94% 6.98% 6.52% 6.89%
- -------------------------------------------------
Ratio of net expenses to average
net assets<F4><F5> 0.96% 1.51% 1.41% 1.19%
- -------------------------------------------------
Ratio of net investment income to average
net assets<F4><F5> 5.81% 6.34% 5.97% 6.49%
- -------------------------------------------------
Portfolio turnover rate<F3> 37.35% 7.04% 13.09% 2.62%
- -------------------------------------------------
Average commission rate paid on
portfolio investment transactions<F6> N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
<F1> Performance data for each Fund prior to April 10, 1995 relates to a corresponding predecessor First Omaha Fund, the assets of
which were acquired on that date.
<F2> Commencement of operations
<F3> Not annualized
<F4> Annualized
<F5> During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the ratios
would have been as indicated.
<F6> Required by regulations first effective for the fiscal year ended March 31, 1997
</TABLE>
See notes to financial statements.
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS<F1> (CONTINUED)
SHORT/INTERMEDIATE FIXED INCOME FUND
-----------------------------------------------------------------------------
APRIL 10, JULY 1, DEC. 13,
YEAR ENDED YEAR ENDED 1995<F2> 1994 YEAR ENDED 1992
MAR. 31, MAR. 31, TO TO JUNE 30, TO
1998 1997 MAR. 31, 1996 APRIL 9, 1995 1994 JUNE 30, 1993
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $9.73 $9.85 $9.66 $9.62 $10.18 $10.00
- -------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.56 0.49 0.52 0.42 0.55 0.33
- -------------------------------------------------
Net realized and unrealized gains (losses)
on investments 0.24 (0.10) 0.17 0.05 (0.56) 0.16
- ------------------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Total from investment operations 0.80 0.39 0.69 0.47 (0.01) 0.49
- ------------------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income 0.56 0.51 0.50 0.43 0.55 0.31
- -------------------------------------------------
Distributions from capital gains _ _ _ _ _ _
- ------------------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Total distributions 0.56 0.51 0.50 0.43 0.55 0.31
- ------------------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD $9.97 $9.73 $9.85 $9.66 $ 9.62 $10.18
- ------------------------------------------------- =========== =========== =========== =========== =========== ===========
TOTAL RETURN<F3> 8.37% 4.00% 7.24% 5.05% (0.22)% 5.00%
- -------------------------------------------------
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (000s) $19,509 $21,042 $22,056 $22,130 $21,938 $24,581
- -------------------------------------------------
Ratio of net expenses to average net assets<F4> 0.99% 0.97% 0.89% 0.88% 0.83% 0.79%
- -------------------------------------------------
Ratio of net investment income to average
net assets<F4> 5.54% 5.01% 5.34% 5.63% 5.44% 5.91%
- -------------------------------------------------
Ratio of net expenses to average
net assets<F4><F5> 1.15% 1.08% 1.02% 1.51% 1.38% 1.19%
- -------------------------------------------------
Ratio of net investment income to average
net assets<F4><F5> 5.38% 4.90% 5.21% 5.00% 4.89% 5.51%
- -------------------------------------------------
Portfolio turnover rate<F3> 26.58% 4.73% 41.45% 9.93% 20.52% 15.58%
- -------------------------------------------------
Average commission rate paid on
portfolio investment transactions<F6> _ _ N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
<F1> Performance data for each Fund prior to April 10, 1995 relates to a corresponding predecessor First Omaha Fund, the assets of
which were acquired on that date.
<F2> Commencement of operations
<F3> Not annualized
<F4> Annualized
<F5> During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the ratios would
have been as indicated.
<F6> Required by regulations first effective for the fiscal year ended March 31, 1997
</TABLE>
See notes to financial statements.
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS<F1> (CONTINUED)
U.S. GOVERNMENT OBLIGATIONS FUND
-----------------------------------------------------------------------------
APRIL 10, JULY 1,
YEAR ENDED YEAR ENDED 1995<F2> 1994 YEAR ENDED YEAR ENDED
MAR. 31, MAR. 31, TO TO JUNE 30, JUNE 30,
1998 1997 MAR. 31, 1996 APRIL 9, 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- -------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.05 0.05 0.05 0.04 0.03 0.03
- -------------------------------------------------
Net realized and unrealized gains (losses)
on investments - - - - - -
- ------------------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Total from investment operations 0.05 0.05 0.05 0.04 0.03 0.03
- ------------------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income 0.05 0.05 0.05 0.04 0.03 0.03
- -------------------------------------------------
Distributions from capital gains - - - - - -
- ------------------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Total distributions 0.05 0.05 0.05 0.04 0.03 0.03
- ------------------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ------------------------------------------------- =========== =========== =========== =========== =========== ===========
TOTAL RETURN<F3> 4.95% 4.76% 5.14% 3.51% 2.74% 2.72%
- -------------------------------------------------
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (000s) $100,497 $125,413 $87,715 $76,105 $89,195 $91,785
- -------------------------------------------------
Ratio of net expenses to average net assets<F4> 0.55% 0.58% 0.54% 0.63% 0.60% 0.61%
- -------------------------------------------------
Ratio of net investment income to average
net assets<F4> 4.83% 4.66% 5.12% 4.46% 2.68% 2.67%
- -------------------------------------------------
Ratio of net expenses to average
net assets<F4><F5> 0.58% 0.59% 0.59% 1.23% 1.13% 0.96%
- -------------------------------------------------
Ratio of net investment income to average
net assets<F4><F5> 4.80% 4.65% 5.07% 3.86% 2.15% 2.32%
- -------------------------------------------------
Portfolio turnover rate<F3> - - - - - -
- -------------------------------------------------
Average commission rate paid on
portfolio investment transactions<F6> - - N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
<F1> Performance data for each Fund prior to April 10, 1995 relates to a corresponding predecessor First Omaha Fund, the assets of
which were acquired on that date.
<F2> Commencement of operations
<F3> Not annualized
<F4> Annualized
<F5> During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the ratios would
have been as indicated.
<F6> Required by regulations first effective for the fiscal year ended March 31, 1997
See notes to financial statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
March 31, 1998
1.ORGANIZATION
First Omaha Funds, Inc. (the "Company") was organized in October, 1994 as a
Nebraska corporation and is registered under the Investment Company Act of 1940,
as amended (the "1940 Act"), as an open-end management investment company
issuing its shares in series, each series representing a distinct portfolio
with its own investment objectives and policies. At March 31, 1998, the only
series presently authorized are the Small Cap Value Fund, the Equity Fund,
the Balanced Fund, the Fixed Income Fund, the Short/Intermediate Fixed Income
Fund, the U.S. Government Obligations Fund (individually referred to as a
"Fund" and collectively as the "Funds") and the Growth Fund. These financial
statements only present the financial position of the Funds.
2.SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their financial statements. These
policies are in conformity with generally accepted accounting principles.
(A) INVESTMENT VALUATION
Securities traded over-the-counter or on a national securities exchange are
valued on the basis of market value in their principal and most representative
market. Securities where the principal and most representative market is a
national securities exchange are valued at the latest reported sale price on
such exchange. Exchange-traded securities for which there were no transactions
are valued at the latest reported bid price.
Securities traded on only over-the-counter markets are valued at the latest bid
price. Debt securities (other than short-term instruments) are valued at prices
furnished by a pricing service, subject to review by the Funds' investment
adviser, First National Bank of Omaha (the "Adviser"), and determination of the
appropriate price whenever a furnished price is significantly different from the
previous day's furnished price. Short-term obligations (maturing within 60
days) are valued on an amortized cost basis. Securities for which quotations are
not readily available and other assets are valued at fair value as determined in
good faith by the Adviser under the supervision of the Board of Directors.
Pursuant to Rule 2a-7 of the 1940 Act, investments of the U.S. Government
Obligations Fund are valued at either amortized cost, which approximates market
value, or at original cost, which combined with accrued interest, approximates
market value. Under the amortized cost valuation method, discount or premium is
amortized on a constant basis to the maturity of the security. In addition, the
Fund may not (i) purchase any instrument with a remaining maturity greater than
13 months unless such investment is subject to a demand
feature, or (ii) maintain a dollar-weighted average portfolio maturity which
exceeds 90 days.
(B) REPURCHASE AGREEMENTS
The Funds may acquire repurchase agreements from financial institutions such as
banks and broker/dealers which the Adviser deems creditworthy under guidelines
approved by the Board of Directors, subject to the seller's agreement to
repurchase such securities at a mutually agreed-upon date and price. The
repurchase price generally equals the price paid by each Fund plus interest
negotiated on the basis of current short-term rates, which may be more or less
than the rate on the underlying portfolio securities. The seller, under a
repurchase agreement, is required to maintain the value of collateral held
pursuant to the agreement at not less than the repurchase price (including
accrued interest). Securities subject to repurchase agreements are held by the
Funds' custodian or another qualified custodian or in the Federal
Reserve/Treasury book-entry system. Repurchase agreements are considered to be
loans by the Funds under the 1940 Act.
(C) ORGANIZATION COSTS
Costs incurred by the Funds in connection with their organization, registration
and the initial public offering of shares have been deferred and will be
amortized on a straight-line basis over a period of five years from the date
upon which the Funds commenced their investment activities. Organization costs
have been allocated equally among the respective Funds or by specific
identification, as applicable. If any of the original shares of a Fund are
redeemed by any holder thereof prior to the end of the amortization period, the
redemption proceeds will be reduced by the pro rata share of the unamortized
expenses as of the date of redemption. The pro rata share by which the proceeds
are reduced will be derived by dividing the number of original shares of the
Fund being redeemed by the total number of original shares outstanding at the
time of redemption.
(D) EXPENSES
The Funds are charged for those expenses that are directly attributable to each
portfolio, such as advisory and custodian fees. Expenses that are not directly
attributable to a portfolio are typically allocated among the portfolios in
proportion to their respective net assets.
(E) DISTRIBUTIONS TO SHAREHOLDERS
The U.S. Government Obligations Fund declares dividends of net investment income
daily. The remaining Funds declare dividends monthly; all of the Funds pay
dividends of net investment income monthly. Distributions of net realized
capital gains, if any, will be declared at least annually. Distributions to
shareholders are recorded on the ex-dividend date.
The character of distributions made during the year from net investment income
or net realized gains may differ from the characterization for federal income
tax purposes due to differences in the recognition of income, expense or gain
items for financial statement and tax purposes. Where appropriate,
reclassifications between net asset accounts are made for such differences that
are permanent in nature. Accordingly, at March 31, 1998, reclassifications were
recorded to increase undistributed net investment income and decrease paid-in
capital in excess of par by $1,923, $2,014, $934, $2,014, $2,014 and $2,014 in
the Small Cap Value Fund, the Equity Fund, the Balanced Fund, the Fixed Income
Fund, the Short/Intermediate Fixed Income Fund and the U.S. Government
Obligations Fund, respectively.
(F) FEDERAL INCOME TAXES
Each Fund intends to comply with the requirements of the Internal Revenue Code
necessary to qualify as a regulated investment company and to make the requisite
distributions of the income to its shareholders which will be sufficient to
relieve it from all or substantially all federal income taxes.
As of March 31, 1998, each of the Fixed Income Fund, Short/Intermediate Fixed
Income Fund and U.S. Government Obligations Fund had federal income tax capital
loss carryforwards of $39,879, $342,917 and $19,280, respectively. The $39,879
federal income tax loss carryforward for the Fixed Income Fund expires as
follows: $31,650 in 2004 and $8,229 in 2006. The $342,917 federal income tax
loss carryforward for the Short/Intermediate Fixed Income Fund expires as
follows: $30,031 in 2002, $147,691 in 2003, $109,194 in 2004 and $56,001 in
2005. The $19,280 federal income tax loss carryforward for the U.S. Government
Obligations Fund expires as follows: $16,038 in 2003 and $3,242 in 2006. It is
management's intention to make no distribution of any future realized capital
gains until the federal income tax loss carryforwards are exhausted.
(G) USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported changes in net assets during the reporting
period. Actual results could differ from those estimates.
(H) OTHER
Investment transactions are accounted for on the trade date plus one. The Funds
determine the gain or loss realized from investment transactions by comparing
the original cost of the security lot sold with the net sale proceeds. Dividend
income is recognized on the ex-dividend date and interest income is recognized
on an accrual basis. Original issue discount is amortized over the expected life
of each applicable security.
3.INVESTMENT ADVISORY AND OTHER AGREEMENTS
The Funds have an agreement with the Adviser to furnish investment advisory
services to the Funds. Under the terms of this agreement, the Funds will pay the
Adviser a monthly fee at the annual rate of the following percentages on average
daily net assets: 0.85% for the Small Cap Value Fund, 0.75% for the Equity Fund,
0.75% for the Balanced Fund, 0.60% for the Fixed Income Fund, 0.50% for the
Short/-Intermediate Fixed Income Fund and 0.25% for the U.S. Government
Obligations Fund. For the year ended March 31, 1998, advisory fees of
$62,141, $78,438, $38,430 and $9,975 were waived in the Small Cap Value Fund,
the Balanced Fund, the Fixed Income Fund and the Short/Intermediate Fixed
Income Fund, respectively.
First National Bank of Omaha also serves as custodian and transfer agent for
each of the Funds. The custodian receives compensation from each of the Funds
for such services in an amount equal to a fee, computed daily and payable
monthly, at an annual rate of 0.03% of each Fund's average daily net assets.
For the year ended March 31, 1998, custody fees of $3,383, $86,097, $5,874,
$23,063 and $5,986 were waived in the Small Cap Value Fund, the Equity Fund, the
Balanced Fund, the Fixed Income Fund and the Short/Intermediate Fixed Income
Fund, respectively. The transfer agent also receives compensation from each of
the Funds for such services.
Sunstone Financial Group, Inc. (the "Administrator") acts as Administrator for
each of the Funds. As compensation for its administrative and fund accounting
services and the assumption of certain administrative expenses, the
Administrator is entitled to a fee, computed daily and payable monthly, at an
annual rate of 0.20% of each Fund's average daily net assets. The Small Cap
Value Fund and the Balanced Fund are each subject to a $50,000 minimum annual
fee. For the year ended March 31, 1998, administrative fees of $20,000, $96,844,
$15,000, $25,895, $6,635 and $36,249 were waived in the Small Cap Value Fund,
the Equity Fund, the Balanced Fund, the Fixed Income Fund, the
Short/Intermediate Fixed Income Fund and the U.S. Government Obligations Fund,
respectively.
The Adviser and the Administrator may periodically volunteer to reduce all or a
portion of their fees with respect to one or more Funds. These waivers may be
terminated at any time. The Adviser and the Administrator may not seek
reimbursement of such voluntarily reduced fees at a later date. The reduction of
such fees will cause the yield of that Fund to be higher than it would be in the
absence of such reduction.
Sunstone Distribution Services, LLC (the "Distributor") acts as Distributor for
each of the Funds. The Distributor receives no compensation from the Funds under
its Distribution Agreement with the Company, but may receive compensation under
the Distribution and Service Plan.
4.DISTRIBUTION AND SERVICE PLAN
Pursuant to Rule 12b-1 under the 1940 Act, the Company has adopted a
Distribution and Service Plan (the "Plan"), under which each Fund is authorized
to pay a periodic amount representing distribution expenses calculated at an
annual rate not to exceed 0.25% of the average daily net assets of that Fund.
Such amount may be used to pay banks, broker/dealers and other institutions,
which may include the Adviser, its correspondent and affiliated banks and the
Distributor (each a "Participating Organization") for distribution and/or
shareholder service assistance pursuant to an agreement between the Distributor
and the Participating Organization. As of March 31, 1998, there are no 12b-1
Agreements with any Participating Organizations.
5.ADMINISTRATIVE SERVICES PLAN
The Company has adopted an Administrative Services Plan pursuant to which each
Fund is authorized to pay compensation to banks and other financial
institutions, which may include the Adviser, its correspondent and affiliated
banks and the Administrator (each a "Service Organization"). Such Service
Organizations agree to provide certain ministerial, record keeping and/or
administrative support services for their customers or account holders who are
the beneficial or record owner of shares of that Fund. In consideration for such
services, a Service Organization receives a fee from a Fund, computed daily and
paid monthly at an annual rate of up to 0.25% of the average daily net asset
value of shares of that Fund owned beneficially or of record by such Service
Organization's customers for whom the Service Organization provides such
services. Effective November 1, 1996, the Company entered into an agreement
under the Plan with the Adviser at an annual rate of 0.10% of the average daily
net assets serviced for each of the Small Cap Value Fund, the Equity Fund, the
Balanced Fund, the Fixed Income Fund and the Short/Intermediate Fixed Income
Fund. For the period ended March 31, 1998, fees of $10,604, $261,349, $16,721,
$73,799 and $18,251 were accrued under this agreement, respectively, and fees of
$5,302, $130,685, $8,361, $36,900 and $9,125 were waived by the Adviser,
respectively.
6.CAPITAL STOCK
The Company is authorized to issue a total of 1,000,000,000 shares of common
stock in series with a par value of $0.00001 per share. The Board of Directors
is empowered to issue other series of the Company's shares without share-
holder approval.
Each share of stock will have a pro rata interest in the assets of the Fund to
which the stock of that series relates and will have no interest in the assets
of any other Fund.
Transactions in shares of the Funds for the year ended March 31, 1998 were as
follows:
<TABLE>
<CAPTION>
SHORT/ U.S.
SMALL CAP FIXED INTERMEDIATE GOVERNMENT
VALUE EQUITY BALANCED INCOME FIXED INCOME OBLIGATIONS
FUND FUND FUND FUND FUND FUND
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
Shares sold 781,847 2,375,188 1,284,222 1,077,720 317,106 378,648,091
- ----------------------------------------
Shares issued to holders in
reinvestment of dividends 51,971 1,679,612 68,840 427,624 107,312 158,162
- ----------------------------------------
Shares redeemed (200,574) (3,648,325) (300,447) (1,747,925) (628,537) (403,722,643)
- ---------------------------------------- ------------- ------------- ------------- ------------- ------------- -------------
Net increase (decrease) 633,244 406,475 1,052,615 (242,581) (204,119) (24,916,390)
============= ============= ============= ============= ============= =============
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Transactions in shares of the Funds for the period ended March 31, 1997 were as
follows:
<TABLE>
<CAPTION>
SHORT/ U.S.
SMALL CAP FIXED INTERMEDIATE GOVERNMENT
VALUE EQUITY BALANCED INCOME FIXED INCOME OBLIGATIONS
FUND FUND FUND FUND FUND FUND
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
Shares sold 711,381 2,887,017 1,065,983 1,233,635 462,034 392,817,505
- ----------------------------------------
Shares issued to holders in
reinvestment of dividends 8,181 1,648,351 9,941 360,215 111,068 443,533
- ----------------------------------------
Shares redeemed (37,780) (2,817,814) (29,268) (1,554,091) (649,910) (355,559,420)
- ---------------------------------------- ------------- ------------- ------------- ------------- ------------- -------------
Net increase (decrease) 681,782 1,717,554 1,046,656 39,759 (76,808) 37,701,618
============= ============= ============= ============= ============= =============
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
March 31, 1998
7.INVESTMENT TRANSACTIONS
The aggregate purchases and sales of securities, excluding short-term
investments, for the Funds for the year
ended March 31, 1998 were as follows:
<TABLE>
<CAPTION>
SHORT/ U.S.
SMALL CAP FIXED INTERMEDIATE GOVERNMENT
VALUE EQUITY BALANCED INCOME FIXED INCOME OBLIGATIONS
FUND FUND FUND FUND FUND FUND
- ----------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
Purchases
U.S. Government - - $ 1,589,712 $7,153,453 $2,775,485 -
Other $7,938,948 $37,670,672 12,154,575 7,090,920 2,255,715 -
- ----------------------------------------------------------------------------------------------------------------
Sales
U.S. Government - - 500,000 8,180,953 1,001,143 -
Other 1,647,741 41,587,575 1,413,579 8,964,040 6,011,998 -
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
As of March 31, 1998, gross unrealized appreciation and depreciation of
investments were as follows:
<TABLE>
<CAPTION>
SHORT/ U.S.
SMALL CAP FIXED INTERMEDIATE GOVERNMENT
VALUE EQUITY BALANCED INCOME FIXED INCOME OBLIGATIONS
FUND FUND FUND FUND FUND FUND
- ----------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
Appreciation $2,270,948 $97,508,063 $3,190,639 $3,420,697 $278,883 -
- ------------------
(Depreciation) (214,181) (3,210,460) (278,261) (135,598) (55,287) -
- ------------------ ----------- ----------- ----------- ----------- ----------- -----------
NET APPRECIATION
ON INVESTMENTS $2,056,767 $94,297,603 $2,912,378 $3,285,099 $223,596 -
========== ========== ========== ========== ========== ==========
- ----------------------------------------------------------------------------------------------------------------
As of March 31, 1998, the cost of investments for federal income tax purposes is
substantially the same as for financial statement purposes.
For the period ended March 31, 1998, 100%, 100% and 35% of dividends paid from
net investment income, excluding short-term capital gains, qualifies for the
dividends received deduction available to corporate shareholders of the Small Cap
Value Fund, the Equity Fund and the Balanced Fund, respectively.
</TABLE>
INDEPENDENT AUDITORS' REPORT
To the Shareholders and
Board of Directors of
First Omaha Funds, Inc.
We have audited the accompanying statements of assets and liabilities of First
Omaha Funds, Inc. (comprised, respectively, of the Small Cap Value Fund, the
Equity Fund, the Balanced Fund, the Fixed Income Fund, the Short/Intermediate
Fixed Income Fund and the U.S. Government Obligations Fund; collectively, the
"Funds"), including the schedules of portfolio investments as of March 31, 1998,
and the related statements of operations and changes in net assets and the
financial highlights for each of the periods indicated herein. These financial
statements and financial highlights are the responsibility of the Funds'
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements and
financial highlights. Our procedures included confirmation of securities owned
as of March 31, 1998, by correspondence with the custodian. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Funds as of March 31, 1998, and the results of their operations, changes in
their net assets and the financial highlights for each of the periods indicated
herein, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Omaha, Nebraska
April 9, 1998
This page intentionally left blank.
INVESTMENT ADVISER AND CUSTODIAN
First National Bank of Omaha
Attention: Trust Division
One First National Center
Omaha, Nebraska 68102
ADMINISTRATOR
Sunstone Financial Group, Inc.
207 E. Buffalo St., Suite 400
Milwaukee, Wisconsin 53202
DISTRIBUTOR
Sunstone Distribution Services, LLC
207 E. Buffalo St., Suite 400
Milwaukee, Wisconsin 53202
LEGAL COUNSEL
Cline, Williams, Wright, Johnson & Oldfather
One Pacific Place
1125 S. 103rd St., Suite 720
Omaha, Nebraska 68124-1071
AUDITORS
KPMG Peat Marwick LLP
Two Central Park Plaza, Suite 1501
Omaha, Nebraska 68102
This report has been prepared for the general information of First Omaha Funds
shareholders. It is not authorized for distribution to prospective investors
unless accompanied or preceded by an effective First Omaha prospectus. The
prospectus contains more complete information about First Omaha Funds'
investment objectives, management fees and expenses, risks and operating
policies. Please read the prospectus carefully before investing or sending
money.
For more INFORMATION
call 1-800-OMAHA-03
or write to:
First Omaha Funds
P.O. Box 419022
Kansas City, Missouri 64141-6022
