1933 Act File No.333-31137
1940 Act File No.811-8281
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933................... X
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Pre-Effective Amendment No. 2 ........................................ _X__
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and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
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Amendment No. __2__ .................................................... X
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GREAT PLAINS FUNDS
(Exact name of Registrant as Specified in Charter)
Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779
(Address of Principal Executive Offices)
(412) 288-1900
(Registrant's Telephone Number)
Victor R. Siclari, Esq., Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering
As soon as possible after the
effectiveness of the Registration
Statement
Pursuant to the provisions of Rule 24f-2 of the Investment Company Act of 1940,
Registrant hereby elects to register an indefinite number of shares.
Amendment Pursuant to Rule 473
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission acting pursuant to said Section 8(a),
may determine.
Copies To:
Cameron S. Avery, Esquire
Bell, Boyd & Lloyd
3 First National Plaza
70 West Madison St.
Chicago, IL 60602
<PAGE>
CROSS-REFERENCE SHEET
This Registration Statement of the Great Plains Funds, which consists
of five portfolios, (1) Great Plains Equity Fund; (2) Great Plains International
Equity Fund;(3) Great Plains Premier Fund; (4) Great Plains Intermediate Bond
Fund; and (5) Great Plains Tax-Free Bond Fund, is comprised of the following:
PART A. INFORMATION REQUIRED IN A PROSPECTUS.
Prospectus Heading
(Rule 404(c) Cross Reference)
Item 1. Cover Page...............(1-5)Cover Page.
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Item 2. Synopsis.................(1-5)Summary of Fund Expenses.
--------
Item 3. Condensed Financial
Information (1-5) Performance Information;
Item 4. General Description of
Registrant..............(1-5) Synopsis; (1-5) Fund Objective and
Policies; (1-5) Portfolio Investments
and Strategies.
Item 5. Management of the Fund...(1-5) Great Plains Funds Information; (1-5)
Management of the Trust; (1-5) Brokerage
Transactions; (1-5) Distribution of Fund
Shares; (1-5) Shareholder Servicing
----------------------
Arrangements; (1-5) Administrative
Arrangements; (1-5) Administration of the
Trust; (1-5) Administrative Services; (1-5)
Expenses of the Funds; (1-5) Distribution
Plan.
Item 6. Capital Stock and Other
Securities..............(1-5) Dividends
and Capital Gains; (1-5) Certificates and
Confirmations; (1-5) Shareholder
Information; (1-5) Voting Rights; (1-5)
Effect of Banking Laws; (1-5) Tax
Information; (1-5) Federal Income Tax;
(1-5) State and Local Taxes; (5) Nebraska
Taxes.
Item 7. Purchase of Securities Being
Offered..................(1-5) Net Asset Value; (1-5) Investing in
the Funds; (1-5) Share Purchases; (1-5)
Minimum Investment Required; (1-5) What
Shares Cost; (1-5) Reducing the Sales
-------
Charge; (1-5) Sales Charge Waivers; (1-5)
Systematic Investment Program; (1-5)
Exchange Privilege.
Item 8. Redemption or Repurchase..(1-5) Redeeming Shares; (1-5) By
Telephone; (1-5) By Mail;(1-5) Systematic
Withdrawal; (1-5) Accounts with Low
Balances.
------------------------
Item 9. Pending Legal Proceedings None.
<PAGE>
PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION.
Item 10. Cover Page..........................(1-5) Cover Page.
----------
Item 11. Table of Contents (1-5) Table of Contents.
Item 12. General Information and
History (1-5) Banking Laws.
Item 13. Investment Objectives and
Policies...........................(1-5) Policies and Acceptable
Investments; (1-5) Investment
Limitations; (5) Nebraska
Investment Risks.
Item 14. Management of the Fund..............(1-5) Great Plains Funds
Management; (1-5) Trustees'
Compensation.
----------------------
Item 15. Control Persons and
Principal Holders of
Securities Not applicable.
Item 16. Investment Advisory and
Other Services.....................(1-5) Investment Advisory
Services; (1-5) Shareholder
Servicing Arrangements; (1-5)
Other Services.
Item 17. Brokerage Allocation................(1-5) Brokerage Transactions.
--------------------
Item 18. Capital Stock and Other
Securities Not applicable.
Item 19. Purchase, Redemption and Pricing
of Securities Being Offered........(1-5) Distribution Plan and
Agreement; (1-5) Determining
Market Value; (1-5) Redemption
in Kind.
---------------------------
Item 20. Tax Status..........................(1-5) Tax Status; (1-5)
Massachusetts Partnership Law;.
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Item 21. Underwriters........................Not applicable.
------------
Item 22. Calculation of Performance
Data...............................(1-5) Total Return;(1-5) Yield;
(5) Tax-Equivalent Yield; (1-5)
Performance Comparisons;
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Item 23. Financial Statements................(1-5) To be filed by Amendment.
--------------------
GREAT PLAINS FUNDS
Great Plains Funds (the "Trust") is an open-end, management investment
company. The Trust has the following five separate investment portfolios or
mutual funds (each portfolio individually referred to as a "Fund" and
collectively as the "Funds"). Each Fund offers its own shares and has a
distinct investment goal to meet specific investor needs.
GREAT PLAINS EQUITY FUND
GREAT PLAINS INTERNATIONAL EQUITY FUND
GREAT PLAINS PREMIER FUND
GREAT PLAINS INTERMEDIATE BOND FUND
GREAT PLAINS TAX-FREE BOND FUND
This prospectus contains the information you should read and know before you
invest in any of the Funds. Keep this prospectus for future reference.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
ENDORSED OR GUARANTEED BY FIRST COMMERCE BANCSHARES, INC., NATIONAL BANK OF
COMMERCE, OR ANY OF THEIR OTHER BANKING SUBSIDIARIES OR AFFILIATES, AND THE
SHARES ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE
SHARES INVOLVES INVESTMENT RISKS INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
The Trust has also filed a Statement of Additional Information dated September
18, 1997, with the Securities and Exchange Commission ("SEC"). The information
contained in the Statement of Additional Information (together with any
supplement thereto) is incorporated by reference into this prospectus. You may
request a copy of the Statement of Additional Information, or a paper copy of
this prospectus if you have received your prospectus electronically, free of
charge, obtain other information, or make inquiries about the Funds by writing
to the Funds or calling 1-800-568-8257. The Statement of Additional
Information, material incorporated by reference into this document, and other
information regarding the Funds is maintained electronically with the SEC at
its Internet Web site (http://www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
Prospectus dated September 18, 1997
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1
- -------------------------------------
SYNOPSIS 2
- -------------------------------------
Risk Factors 3
FUND OBJECTIVE AND POLICIES 4
- -------------------------------------
Great Plains Equity Fund 4
Great Plains International Equity
Fund 4
Great Plains Premier Fund 5
Great Plains Intermediate Bond
Fund 6
Great Plains Tax-Free Bond Fund 7
NET ASSET VALUE 8
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INVESTING IN THE FUNDS 8
- -------------------------------------
Share Purchases 8
Minimum Investment Required 9
Exchanging Shares for Fund Shares 9
What Shares Cost 9
Sales Charge Waivers 10
Reducing the Sales Charge 10
Systematic Investment Program 11
Certificates and Confirmations 11
Dividends and Capital Gains 12
EXCHANGE PRIVILEGE 12
- -------------------------------------
Exchanging Shares 12
Exchange by Telephone 12
REDEEMING SHARES 13
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Systematic Withdrawal Program 14
Accounts with Low Balances 15
GREAT PLAINS FUNDS INFORMATION 15
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Management of the Trust 15
Brokerage Transactions 17
Distribution of Fund Shares 18
ADMINISTRATION OF THE TRUST 18
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Expenses of the Funds 19
SHAREHOLDER INFORMATION 19
- -------------------------------------
Voting Rights 19
PERFORMANCE INFORMATION 20
- -------------------------------------
Performance Information for
Predecessor Common Investment
Funds 20
PORTFOLIO INVESTMENTS AND STRATEGIES
21
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Additional Investment Risks 33
TAX INFORMATION 38
- -------------------------------------
Federal Income Tax 38
State and Local Taxes 38
Nebraska Taxes 39
APPENDIX 42
- -------------------------------------
ADDRESSES 46
- -------------------------------------
SUMMARY OF FUND EXPENSES
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<TABLE>
<CAPTION>
INTERNATIONAL INTERMEDIATE TAX-FREE
EQUITY EQUITY PREMIER BOND BOND
SHAREHOLDER TRANSACTION FUND FUND FUND FUND FUND
EXPENSES ------ ------------- ------- ------------ --------
<S> <C> <C> <C> <C> <C>
Maximum Sales Charge Imposed
on Purchases
(as a percentage of
offering price)............ 3.00% 3.00% 3.00% 3.00% 3.00%
Maximum Sales Charge Imposed
on Reinvested Dividends (as
a percentage of offering
price)..................... None None None None None
Contingent Deferred Sales
Charge (as a percentage
of original purchase price
or redemption proceeds,
as applicable)............. None None None None None
Redemption Fees (as a
percentage of amount
redeemed,
if applicable)............. None None None None None
Exchange Fee................ None None None None None
ANNUAL FUND OPERATING EXPENSES
(As a percentage of average
net assets)
Management Fee (after
waiver, if applicable) (1). 0.75% 1.25% 0.80% 0.50% 0.50%
12b-1 Fees (2).............. 0.00% 0.00% 0.00% 0.00% 0.00%
Other Expenses (after
waivers, if applicable)
(3)........................ 0.28% 0.41% 0.59% 0.30% 0.38%
Shareholder Servicing Agent
Fee (4).................... 0.00% 0.00% 0.00% 0.00% 0.00%
Total Fund Operating
Expenses (after waivers,
if applicable) (5)........ 1.03% 1.66% 1.39% 0.80% 0.88%
</TABLE>
(1) The estimated management fee for the Premier Fund has been reduced to
reflect the anticipated voluntary waiver by the investment adviser. The
adviser can terminate this voluntary waiver at any time at its sole
discretion. The maximum management fee is 1.00%. The investment adviser
intends to waive its advisory fee on that portion of the Equity Fund's
assets that are invested in the International Equity Fund.
(2) The Funds have no intention of accruing or paying a 12b-1 fee for the
fiscal year ending August 31, 1998. The Funds can pay up to 0.25% of
average daily net assets as a 12b-1 fee to the distributor.
(3) Other expenses are estimated to be 0.56% for the International Equity
Fund, 1.04% for the Premier Fund, 0.31% for the Intermediate Bond Fund,
and 0.42% for the Tax-Free Bond Fund, absent the anticipated voluntary
waivers by the administrator and portfolio accountant.
(4) The Funds have no intention of accruing or paying a Shareholder Servicing
Fee for the fiscal year ending August 31, 1998. The Funds can pay up to
0.25% of average daily net assets for Shareholder Servicing Fees.
(5) The Total Fund Operating Expenses are estimated to be 1.81% for the
International Equity Fund, 2.04% for the Premier Fund, 0.81% for the
Intermediate Bond Fund, and 0.92% for the Tax-Free Bond Fund, absent the
voluntary waivers described above in Notes 1 and 3.
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of the Funds will bear either
directly or indirectly. For more complete descriptions of the various costs
and expenses, see "Great Plains Funds Information," "Administration of the
Trust" and "Investing in the Funds." Wire transferred redemptions will be
subject to additional fees.
EXAMPLE
You would pay the following expenses on a $1,000 investment assuming (1) 5%
annual return; (2) redemption at the end of each time period; and (3) payment
of the maximum sales charge. As noted in the table above, the Fund charges no
redemption fees.
<TABLE>
<CAPTION>
INTERNATIONAL INTERMEDIATE TAX-FREE
EQUITY EQUITY PREMIER BOND BOND
FUND FUND FUND FUND FUND
------ ------------- ------- ------------ --------
<S> <C> <C> <C> <C> <C>
1 Year....................... $40 $46 $44 $38 $39
3 Years...................... $62 $81 $73 $55 $57
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THIS
EXAMPLE IS BASED ON ESTIMATED DATA FOR THE FISCAL YEAR ENDING AUGUST 31, 1998.
SYNOPSIS
- -------------------------------------------------------------------------------
The Trust was established as a Massachusetts business trust under a
Declaration of Trust dated July 1, 1997. The Declaration of Trust permits the
Trust to offer separate series of shares of beneficial interest representing
interests in separate portfolios of securities. The shares in any one
portfolio or Fund may be offered in separate classes. The Funds are designed
for individuals and institutions as a convenient means of participating in a
professionally managed portfolio of securities. First Commerce Investors, Inc.
serves as investment adviser (the "Adviser") to the Funds. The Adviser is a
subsidiary of First Commerce Bancshares, Inc. Peter A. Kinney serves as sub-
adviser (the "Sub-Adviser") to the Great Plains Equity Fund and Great Plains
International Equity Fund.
As of the date of this prospectus, the Trust is comprised of the following
five Funds:
. GREAT PLAINS EQUITY FUND ("EQUITY FUND")--seeks total return (current
income and capital appreciation) over the long-term by investing in a
non-diversified portfolio of securities consisting primarily of domestic
and foreign common and preferred stocks selected on the basis of a value
approach to investing. The foreign securities investments may be pursued
directly or indirectly through an investment in the Great Plains
International Equity Fund;
. GREAT PLAINS INTERNATIONAL EQUITY FUND ("INTERNATIONAL EQUITY FUND")--
seeks total return (current income and capital appreciation) over the
long-term by investing in a non-diversified portfolio of securities
consisting primarily of equity securities of non-U.S. issuers selected
on the basis of a value approach to investing;
. GREAT PLAINS PREMIER FUND ("PREMIER FUND")--seeks total return (current
income and capital appreciation) over the long-term by investing in a
non-diversified portfolio of securities consisting primarily of domestic
and foreign common and preferred stocks issued by companies whose market
capitalizations at the time of investment are under $1 billion, selected
on the basis of a value approach to investing;
. GREAT PLAINS INTERMEDIATE BOND FUND ("INTERMEDIATE BOND FUND")--seeks
total return (current income and capital appreciation) by investing in a
diversified portfolio of securities consisting primarily of
intermediate-term bonds and notes; and
. GREAT PLAINS TAX-FREE BOND FUND ("TAX-FREE BOND FUND")--as a primary
objective, seeks current income exempt from federal regular income tax
and, as a secondary objective, seeks current income exempt from personal
income taxes imposed by the State of Nebraska by investing in a non-
diversified portfolio of municipal securities that generate such income.
The Tax-Free Bond Fund is designed to offer Nebraska residents the
additional advantage of state (as well as federal) tax-free income to
the extent it can purchase suitable tax-free Nebraska municipal
securities. However, because of the Fund's tax-free nature, it may not
be a suitable investment for retirement plans.
Although certain of the Funds have been designated non-diversified under the
Investment Company Act of 1940 (the "1940 Act"), all of the Funds will comply
with the diversification requirements of Subchapter M of the Internal Revenue
Code. See "Portfolio Investments and Strategies--Additional Investment Risks--
Non-Diversification."
For information on how to purchase shares of any of the Funds, please refer to
"Investing in the Funds." A minimum initial investment of $1,000 is required
for each Fund. Subsequent investments in each Fund must be in amounts of at
least $100. Fund shares may be purchased for Individual Retirement Accounts
("IRA's") with a minimum initial investment of $500, and subsequent
investments of at least $50. The Funds reserve the right to waive or reduce
investment minimums from time to time. Shares of each Fund are sold at net
asset value plus any applicable sales charge, and are redeemed at net asset
value. Information on redeeming shares may be found under "Redeeming Shares."
RISK FACTORS
Investors should be aware of the following general considerations relating to
the types of investments of one or more of the Funds. The market value of
fixed-income securities may vary inversely in response to changes in
prevailing interest rates. Domestic equity securities are subject to the
volatility and unpredictability of the U.S. stock market. The securities of
smaller-capitalized companies present special risks in that such securities
have historically been more volatile than stocks of larger companies. Foreign
securities are subject to certain risks (i.e., greater price volatility and
illiquidity than U.S. equity securities; greater political, legal and economic
risks; currency exchange fluctuations; different regulatory schemes with less
publicly available information) in addition to those inherent in U.S.
investments. High yield securities are typically subject to greater market
fluctuations than investment grade bonds. Asset-backed and mortgage-backed
securities are subject to higher prepayment risks than other types of debt
instruments. The Tax-Free Bond Fund emphasizes investments in Nebraska
municipal securities, which makes it more susceptible to factors affecting
that state. The Funds may make other investments and employ certain investment
techniques that involve other risks, including lending portfolio securities
and entering into futures contracts and related options as hedges. For a
description of these investments, strategies and other risks, please see "Fund
Objective and Policies," "Portfolio Investments and Strategies," and
"Additional Investment Risks."
FUND OBJECTIVE AND POLICIES
- -------------------------------------------------------------------------------
The investment objective and policies of each Fund appear below. The
investment objective of a Fund may be changed by the Board of Trustees
("Trustees") without shareholder approval. However, shareholders of a Fund
will be notified before any change is made to a Fund's investment objective.
While a Fund cannot assure that it will achieve its investment objective, it
attempts to do so by following the investment policies described below.
Unless indicated otherwise, the investment policies of a Fund may be changed
by the Trustees without shareholder approval. However, shareholders will be
notified before any material change in these policies becomes effective.
Additional information about investments, investment limitations and
strategies, and certain investment policies appears in the "Portfolio
Investments and Strategies" section of this Prospectus and in the Statement of
Additional Information.
GREAT PLAINS EQUITY FUND
The investment objective of the Equity Fund is to achieve total return
(consisting of current income and capital appreciation) over the long-term.
The Fund pursues this objective through the application of a value-oriented
approach by investing primarily in a portfolio of common and preferred stocks
of domestic and foreign issuers as well as domestic and foreign securities
convertible into common and preferred stocks. Under normal market conditions,
the Fund intends to invest at least 65% of its total assets in these equity
securities. The issuers of these securities will consist primarily of medium
to large capitalization domestic and foreign companies. As described under the
"Portfolio Investments and Strategies--Securities of Other Investment
Companies" section of this Prospectus, the Equity Fund may seek its foreign
securities component by purchasing shares of the International Equity Fund.
Depending on market conditions, the Equity Fund anticipates investing between
0% and 35% of its net assets in foreign securities either directly, or
indirectly through an investment in the International Equity Fund.
Accordingly, investors in the Equity Fund should also review the description
of the International Equity Fund's investment objective and strategies as well
as the list below of Acceptable Investments.
GREAT PLAINS INTERNATIONAL EQUITY FUND
The investment objective of the International Equity Fund is to seek total
return (consisting of current income and capital appreciation) over the long-
term. Under normal market conditions, at least 65% of the Fund's total assets
will be invested in equity securities of issuers domiciled in at least three
different nations outside the United States. The Fund's foreign investments
will emphasize primarily Western European countries and secondarily Asia and
Latin America, and emphasize developed over emerging markets. However, the
Fund reserves the investment discretion to invest in other countries and
regions, subject to its 65% investment policy noted above. The Fund may also
invest up to 35% of its total assets in foreign and domestic debt securities,
warrants or rights to subscribe to or purchase equity securities, or debt
securities convertible into common or preferred stocks when, in the judgment
of the Fund's Adviser, such investments are consistent with the Fund's
objective of total return. Certain debt securities can provide the potential
for capital appreciation in addition to current income based on various
factors such as changes in interest rates, economic and market conditions,
improvement in an issuer's ability to repay principal and pay interest, and
ratings upgrades. The Fund may invest in foreign and domestic debt or
preferred securities which have equity features, such as conversion or
exchange rights, or which carry warrants to purchase common stock or other
equity interests. Such equity features enable the holder of the bond or
preferred security to benefit from increases in the market price of the
underlying equity security. In selecting securities, the Fund's Adviser uses a
value-oriented approach to investing and attempts to identify those companies
in various countries and industries where economic and political factors,
including currency movements, are likely to produce above-average
opportunities for capital appreciation.
GREAT PLAINS PREMIER FUND
The investment objective of the Premier Fund is to seek total return
(consisting of current income and capital appreciation) over the long-term.
The Fund will pursue this objective through the application of a value-
oriented approach by investing primarily in a portfolio of common and
preferred stocks of domestic and foreign issuers as well as domestic and
foreign securities convertible into common and preferred stocks. Under normal
market conditions, at least 65% of its total assets will be invested in common
and preferred stocks issued by companies whose market capitalizations at the
time of investment are under $1 billion (which includes small capitalization
stocks). As an operational policy, this Fund intends to limit its foreign
investments to 35% of its total assets. As described under the "Portfolio
Investments and Strategies--Securities of Other Investment Companies" section
of this Prospectus, the Premier Fund reserves the option of seeking its
foreign securities component by purchasing shares of the International Equity
Fund, although it presently intends to purchase foreign securities directly.
Accordingly, investors in the Premier Fund should also review the description
of the International Equity Fund's investment objective and strategies, as
well as the list below of Acceptable Investments.
THE STOCK FUNDS' ACCEPTABLE INVESTMENTS. The Equity Fund, International Equity
Fund and Premier Fund will sometimes collectively be referred to as the "Stock
Funds." The Stock Funds share the same value approach to investing. Subject to
their investment strategies described above, these Funds seek high quality
domestic and/or international companies that, in the opinion of the Adviser,
combine the qualitative and quantitative characteristics of companies with
compelling valuation levels, and offer significant investment potential.
Attractive company qualities include, but are not limited to: proven
management, businesses with identifiable franchises, earnings and shareholder
growth potential, increasing market share, cash flow which is intelligently
reinvested, high return on equity and assets, low debt, and operating margins
which are high or improving. In the Adviser's opinion, compelling valuations
can be observed by: asset values of businesses; low price/earnings, price/cash
flow, and price/sales ratios relative to growth potential; and attractive
discounted future valuation models. The Stock Funds may invest in the same
types of acceptable investments which include the following and are described
in more detail below under the "Portfolio Investments and Strategies" section
of this Prospectus:
. common and preferred stocks of domestic (U.S.) companies that are listed
on the New York or American Stock Exchange, or other domestic exchange,
or traded in over-the-counter markets;
. common and preferred stocks of foreign companies;
. convertible securities of domestic and foreign issuers that are rated in
the top two categories by a nationally recognized statistical rating
organization ("NRSRO") such as AA or better by Standard & Poor's ("S&P")
or Fitch Investors Service, Inc. ("Fitch"), or Aa or better by Moody's
Investors Services, Inc. ("Moody's") or, if unrated, are of comparable
quality as determined by the Fund's Adviser;
. U.S. government securities;
. debt obligations (including bonds, notes and debentures) issued by U.S.
or foreign corporations and governments that are rated in the top two
categories by an NRSRO (such as AA or better by S&P or Fitch, or Aa or
better by Moody's) or, if unrated, are of comparable quality as
determined by the Fund's Adviser;
. American Depositary Receipts ("ADRs"), Global Depositary Receipts
("GDRs") and European Depositary Receipts ("EDRs") (collectively,
"Depositary Receipts");
. foreign currency transactions (including forward currency exchange
contracts, currency futures contracts, and options on currency and
currency futures contracts);
. Prime Commercial Paper;
. foreign and domestic Bank Instruments;
. warrants;
. repurchase agreements; and
. securities of other investment companies.
For additional information on other investment techniques and strategies of
the Stock Funds, see the "Portfolio Investments and Strategies" section of
this Prospectus.
GREAT PLAINS INTERMEDIATE BOND FUND
The investment objective of the Intermediate Bond Fund is to seek total return
(consisting of current income and capital appreciation). The Fund pursues this
objective by investing primarily in a diversified portfolio of investment
grade intermediate-term bonds and notes with an average dollar-weighted
maturity of three to ten years. The Fund will invest, under normal
circumstances, at least 65% of the value of its total assets in bonds. For
purposes of this investment policy, "bonds" shall include all permitted types
of debt instruments, including debt held as collateral for repurchase
agreements. Investment grade debt obligations are rated in the top four
categories by an NRSRO (such as BBB or better by S&P or Fitch, or Baa or
better by Moody's), or if unrated, are of comparable quality as determined by
the Adviser. See "Ratings" in the "Portfolio Investments and Strategies"
section of this Prospectus. The Fund reserves the right to invest up to 35%
(although it intends to operate with not more than 15%) of its total assets in
debt obligations rated below investment grade but not lower than BB by S&P or
Fitch or Ba by Moody's, or which are of comparable quality. Such debt
obligations are sometimes referred to as high-yield debt obligations or "junk
bonds." For a description of these types of securities and the additional
risks associated with them, see "High-Yield Debt Obligations" in the
"Portfolio Investments and Strategies" section of this Prospectus.
THE INTERMEDIATE BOND FUND'S ACCEPTABLE INVESTMENTS. Acceptable investments
include the following and are described in more detail below under the
"Portfolio Investments and Strategies" section of this Prospectus:
. domestic and foreign issues of corporate debt obligations (including
bonds, notes and debentures);
. U.S. government securities;
. convertible securities and debentures;
. Prime Commercial Paper;
. domestic Bank Instruments;
. Mortgage-Backed Securities;
. Asset-Backed Securities;
. Zero Coupon Obligations;
. taxable Municipal Securities;
. repurchase agreements; and
. securities of other investment companies.
For additional information on other investment techniques and strategies of
the Fund, see the "Portfolio Investments and Strategies" section of this
Prospectus.
GREAT PLAINS TAX-FREE BOND FUND
The primary investment objective of the Tax-Free Bond Fund is to seek current
income that is exempt from federal regular income tax. As a secondary
investment objective, the Fund seeks current income that is also exempt from
the regular income taxes imposed by the State of Nebraska. As an operational
policy and not an investment policy, the Fund will seek to maintain an average
dollar-weighted portfolio maturity of five to fifteen years.
THE TAX-FREE BOND FUND'S ACCEPTABLE INVESTMENTS. The Tax-Free Bond Fund
pursues its objective by investing in a non-diversified portfolio of debt
obligations issued by or on behalf of any state, territory or possession of
the United States, including the District of Columbia, or any of their
political subdivisions or financing authorities ("Municipal Securities"), with
a portion of the portfolio consisting of Municipal Securities issued by or on
behalf of the State of Nebraska, its political subdivisions or agencies
("Nebraska Municipal Securities"). As a fundamental investment policy that
cannot be changed without shareholder approval, under normal market
conditions, at least 80% of the Tax-Free Bond Fund's net assets will be
invested in Municipal Securities, the income from which is exempt from federal
income tax (including the federal alternative minimum tax). Interest income of
the Tax-Free Bond Fund that is exempt from federal income tax and the Nebraska
state personal income tax retains its tax-free status when distributed to
shareholders. The Fund's acceptable investments include the following and are
described in more detail below under the "Portfolio Investments and
Strategies" section of this Prospectus:
. investment grade Municipal Securities (rated in the top four categories
by an NRSRO such as BBB by S&P or Fitch, or Baa by Moody's or, if
unrated, of comparable quality as determined by the Fund's Adviser); and
. securities of other investment companies that have a similar objective
of tax-free income.
For additional information on the other investment techniques and strategies
of the Fund, see the "Portfolio Investments and Strategies" section of this
Prospectus. For investment risks associated with
investments in Nebraska Municipal Securities, see "Additional Investment
Risks--Municipal Securities" under the "Portfolio Investments and Strategies"
section of the Prospectus.
NET ASSET VALUE
- -------------------------------------------------------------------------------
The Funds' net asset value per share fluctuates. The net asset value per share
is determined by dividing the sum of the market value of all securities and
all other assets, less liabilities, by the number of shares outstanding.
The net asset value is determined as of the close of regular trading on the
New York Stock Exchange (normally 3:00 p.m., Central time), Monday through
Friday, except on: (i) days on which there are not sufficient changes in the
value of a Fund's portfolio securities that its net asset value might be
materially affected; (ii) days during which no shares are tendered for
redemption and no orders to purchase shares are received; or (iii) the
following holidays: New Year's Day, Martin Luther King Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Columbus Day,
Veterans' Day, Thanksgiving Day, and Christmas Day.
INVESTING IN THE FUNDS
- -------------------------------------------------------------------------------
SHARE PURCHASES
Fund shares are sold on days on which the New York Stock Exchange and the
Federal Reserve Wire System are open for business. Fund shares may be
purchased through National Bank of Commerce ("NBC") in connection with
qualified trust accounts, through authorized broker/dealers, or directly from
the Fund. All purchases must be made in U.S. dollars and checks must be drawn
on a United States bank. In connection with the sale of Fund shares, Edgewood
Services, Inc. (the "Distributor") may, from time to time, offer certain items
of nominal value to any shareholder or investor. Each Fund reserves the right
to reject any purchase request.
BY TELEPHONE. New accounts cannot be established over the phone unless it is
through an authorized broker/dealer or through the Trust Division of NBC. All
other investors must submit a completed application by mail along with payment
for shares. See "By Mail" below. To place an order to purchase shares of the
Funds in an existing account, call Great Plains Funds Shareholder Services at
1-800-568-8257 to authorize payment via Automated Clearing House ("ACH")
system transfer. The order must be placed before the close of regular trading
on the New York Stock Exchange (normally 3:00 p.m. Central time) for shares to
be purchased at that day's price.
PAYMENT BY WIRE. If you have an existing account, you may purchase shares by
Federal Reserve Wire. Trust customers should contact their account officer.
All other customers should call Great Plains Funds Shareholder Services at 1-
800-568-8257. Wire orders will only be accepted on days on which the Funds,
NBC and the Federal Reserve Banks are open for business.
BY MAIL. To purchase Fund shares by mail, submit payment for Fund shares and a
completed account application (for new accounts) or additional investment form
(for existing accounts) to: Great Plains Funds Shareholder Services, P.O. Box
8612, Boston, MA 02266-8612. Your form of payment may be by
a check payable to the particular Fund or by authorization in your account
application to withdraw funds from your checking account at an ACH member
bank. Orders by mail are considered received on the day the Fund or its
transfer agent receives a properly completed application and method of
payment, provided the check is converted into federal funds. Purchases may not
be made by third-party checks.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in the Funds is $1,000. Subsequent investments
in each Fund may be in amounts of $100 or more. The minimum initial investment
in the Funds for investors purchasing through an IRA account is $500;
subsequent investments may be in amounts of $50 or more. The Funds reserve the
right to waive or reduce investment minimums from time to time.
EXCHANGING SECURITIES FOR FUND SHARES
The Funds may accept securities in exchange for Fund shares. A Fund will allow
such exchanges only upon prior approval of a Fund and a determination by a
Fund and the Adviser that the securities to be exchanged are acceptable.
Any securities exchanged must meet the investment objective and policies of a
Fund and must have a readily ascertainable market value. The market value of
any securities exchanged in an initial investment, plus any cash, must be at
least $25,000.
Securities accepted by a Fund will be valued in the same manner as a Fund
values its assets or as otherwise required by the 1940 Act. The basis of the
exchange will depend upon the net asset value of Fund shares on the day the
securities are valued. One share of a Fund will be issued for each equivalent
amount of securities accepted.
Any interest earned on the securities prior to the exchange will be considered
in valuing the securities. All interest, dividends, subscription or other
rights attached to the securities become the property of a Fund, along with
the securities.
WHAT SHARES COST
Shares of the Funds are sold at their net asset value next determined after an
order is received, plus a sales charge as follows:
<TABLE>
<CAPTION>
SALES CHARGE DEALER
SALES CHARGE AS % OF ALLOWANCE
AS % OF NET AMOUNT AS % OF
AMOUNT OF TRANSACTION OFFERING PRICE INVESTED OFFERING PRICE
- --------------------- -------------- ------------ --------------
<S> <C> <C> <C>
Less than $100,000 3.00% 3.09% 2.55%
$100,000 but less than
$250,000 2.50% 2.56% 2.12%
$250,000 but less than
$500,000 2.00% 2.04% 1.70%
$500,000 but less than
$1,000,000 1.50% 1.52% 1.27%
$1,000,000 or more 0.00% 0.00% 0.00%
</TABLE>
As described below, the sales charge may be waived or reduced for certain
investors and transactions.
DEALER ALLOWANCE. For sales of shares of the Funds, any authorized dealer will
normally receive up to 85% of the applicable sales charge. Any portion of the
sales charge which is not paid to authorized dealers will be retained by the
Distributor. The Distributor may, periodically, uniformly offer to pay
additional amounts in the form of cash or promotional incentives consisting of
trips to sales seminars at luxury resorts, tickets or other such items, to all
dealers selling shares of the Funds. Such payments, all or a portion of which
may be paid from the sales charge it normally retains or any other source
available to it, will be predicated upon the amount of shares of the Funds
that are sold by the dealer.
The sales charge for shares sold other than through authorized dealers will be
retained by the Distributor. The Distributor may pay fees to financial
institutions out of the sales charge in exchange for sales and/or
administrative services performed on behalf of the financial institution's
customers in connection with the initiation of customer accounts and purchases
of a Fund's shares.
SALES CHARGE WAIVERS
PURCHASES AT NET ASSET VALUE. Shares of the Funds may be purchased at net
asset value, without a sales charge: by or through the Trust Division of NBC
or other affiliates of NBC for accounts which are held in a fiduciary, agency,
custodial, or similar capacity; by trustees/directors, current and retired
employees, and shareholders of NBC, the Adviser, the Distributor and their
affiliates, as well as the spouses and children under the age of 21 of such
trustees/directors, employees and shareholders; any accounts for which a
current or retired employee of NBC, the Adviser, the Distributor and their
affiliates serves in a fiduciary, agency, custodial or similar capacity; by
trust companies or trust divisions of other non-affiliated financial
depository institutions; or by investors who purchase shares through a wrap
account or a no-transaction fee program if the sponsor of the wrap account or
no-transaction fee program has entered into a sales agreement with the
Distributor. In addition, a Fund may purchase shares of another Fund at net
asset value without any sales charge.
REINVESTMENT PRIVILEGE. If shares in a Fund have been redeemed, the
shareholder has a one-time right, within 30 days, to reinvest the redemption
proceeds at the next-determined net asset value without any sales charge.
Great Plains Funds Shareholder Services must be notified of the reinvestment
by the shareholder in writing in order to eliminate the sales charge. If the
shareholder redeems shares in a Fund, there may be tax consequences.
REDUCING THE SALES CHARGE
The sales charge can be reduced on the purchase of a Fund's shares through:
. quantity discounts and accumulated purchases;
. signing a 13-month letter of intent; or
. concurrent purchases.
QUANTITY DISCOUNTS AND ACCUMULATED PURCHASES. As shown in the table under
"What Shares Cost," larger purchases reduce the sales charge paid. Each Fund
will combine purchases made on the same day by the investor, his or her
spouse, and his or her children under age 21, when calculating the sales
charge. In addition, the sales charge, if applicable, is reduced for purchases
made at one time by a trustee or fiduciary for a single trust estate or a
single fiduciary account.
If an additional purchase of Fund shares is made, each Fund will consider the
previous purchase(s) still invested in that Fund. For example, if a
shareholder already owns shares having a current value at the public offering
price of $90,000 and he or she purchases $10,000 more at the current public
offering price, the sales charge on the additional purchase according to the
schedule now in effect would be 2.50%, not 3.00%.
To receive the sales charge reduction, Great Plains Funds Shareholder Services
must be notified by the shareholder in writing at the time the purchase is
made that Fund shares are already owned or that purchases are being combined.
Each Fund will reduce the sales charge after it confirms the purchases.
LETTER OF INTENT. If a shareholder intends to purchase at least $100,000 of
shares in the Funds over the next 13 months, the sales charge may be reduced
by signing a letter of intent to that effect. This letter includes a provision
for a sales charge adjustment depending on the amount actually purchased
within the 13-month period and a provision for the custodian to hold in escrow
(in shares) 3.00% of the total amount intended to be purchased until such
purchase is completed.
The shares held in escrow will be transferred to the shareholder's account at
the end of the 13-month period unless the amount specified in the letter of
intent is not purchased. In this event, an appropriate number of escrowed
shares may be redeemed in order to realize the difference in the sales charge.
This letter of intent will not obligate the shareholder to purchase shares,
but if he or she does, each purchase during the period will be at the sales
charge applicable to the total amount intended to be purchased. The current
balance in the shareholder's account will provide a purchase credit towards
fulfillment of the letter of intent. Prior trade prices will not be adjusted.
CONCURRENT PURCHASES. For purposes of qualifying for a sales charge reduction,
a shareholder has the privilege of combining concurrent purchases of two or
more Funds in the Trust, the purchase price of which includes a sales charge.
For example, if a shareholder concurrently invested $30,000 in one of the
Funds and $70,000 in another Fund, the sales charge would be reduced.
To receive this sales charge reduction, Great Plains Funds Shareholder
Services must be notified by the shareholder in writing or by calling 1-800-
568-8257 at the time the concurrent purchases are made. The Funds will reduce
the sales charge after they confirm the purchases.
SYSTEMATIC INVESTMENT PROGRAM
Once an account has been opened, shareholders may add to their investment on a
regular basis in a minimum amount of $50. Under this program, funds may be
automatically withdrawn periodically from the shareholder's checking account
at an Automated Clearing House ("ACH") member and invested in Fund shares. A
shareholder may apply for participation in this program by designating this
option in the Fund account application or by requesting the proper form by
calling Great Plains Funds Shareholder Services at 1-800-568-8257.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Funds, Federated Shareholder Services Company
maintains a share account for each shareholder of record. Share certificates
are not issued. Detailed confirmations of each purchase and redemption are
sent to each shareholder. Confirmations are also sent to report dividends
paid.
DIVIDENDS AND CAPITAL GAINS
Dividends of the Equity Fund and Premier Fund are declared and paid monthly.
Dividends of the International Equity Fund are declared and paid annually.
Dividends of the Intermediate Bond Fund and Tax-Free Bond Fund are declared
daily and paid monthly. Only shareholders invested in a particular Fund on the
record date of the dividend declaration are paid that dividend except that
Intermediate Bond Fund and Tax-Free Bond Fund shareholders earn dividends only
on those shares for which the Fund has received payment in federal funds. Net
capital gains realized by a Fund will be distributed at least once every 12
months. Unless you request cash payments of dividends and capital gains on
your Fund application or subsequently by writing to your Fund, your dividends
and capital gains are automatically reinvested in additional shares of the
respective Fund on payment dates at the ex-dividend date net asset value
(without a sales charge).
EXCHANGE PRIVILEGE
- -------------------------------------------------------------------------------
EXCHANGING SHARES
Shareholders of any Fund in the Trust may exchange their Fund shares for the
shares of any other Fund in the Trust at net asset value without a sales
charge, subject to meeting any minimum investment requirements. The exchange
privilege is available to shareholders residing in any state in which the Fund
shares being acquired may legally be sold.
Upon receipt of proper instructions and all necessary supporting documents,
shares submitted for exchange will be redeemed at the next-determined net
asset value. If the exchanging shareholder does not have an account in the
Fund whose shares are being acquired, a new account will be established with
the same registration, dividend, and capital gain options as the account from
which shares are exchanged, unless otherwise specified by the shareholder. In
the case where the new account registration is not identical to that of the
existing account, a signature guarantee is required. (See "Redeeming Shares--
Signatures.") Exercise of this privilege is treated as a sale for federal
income tax purposes and, depending on the circumstances, a short or long-term
capital gain or loss may be realized. The exchange privilege may be terminated
at any time. Shareholders will be notified of the termination of the exchange
privilege. A shareholder may obtain further information on the exchange
privilege by calling Great Plains Funds Shareholder Services at 1-800-568-
8257.
EXCHANGE BY TELEPHONE
Shareholders may provide instructions for exchanges between Funds by calling
Great Plains Funds Shareholder Services at 1-800-568-8257. In addition,
investors may exchange shares by calling their authorized broker directly.
It is recommended that investors request this telephone exchange privilege at
the time of their initial application. If not completed at the time of initial
application, authorization forms and information on this service can be
obtained through Great Plains Funds Shareholder Services or an authorized
broker.
Shares may be exchanged by telephone only between Fund accounts having
identical shareholder registrations. Telephone exchange instructions may be
recorded. If reasonable procedures are not
followed by the Funds, they may be liable for losses due to unauthorized or
fraudulent telephone instructions.
Telephone exchange instructions must be received by Great Plains Funds
Shareholder Services or an authorized broker and transmitted to Federated
Shareholder Services Company before the close of regular trading on the New
York Stock Exchange (normally 3:00 p.m Central time) for shares to be
exchanged the same day.
Shareholders of the Funds may have difficulty in making exchanges by telephone
through banks, brokers, and other financial institutions during times of
drastic economic or market changes. If shareholders cannot contact Great
Plains Funds Shareholder Services or their authorized broker by telephone, it
is recommended that an exchange request be made in writing and sent by mail
for next day delivery.
REDEEMING SHARES
- -------------------------------------------------------------------------------
Shares are redeemed at their net asset value next determined after a Fund
receives the redemption request. Redemptions will be made on days on which the
Funds compute their net asset value. Redemption requests cannot be executed on
days on which the New York Stock Exchange is closed or on Federal holidays
when wire transfers are restricted. Requests for redemption can be made by
telephone or by mail.
If a redemption order is received before the close of regular trading on the
New York Stock Exchange (normally 3:00 p.m. Central time), the redemption
proceeds will normally be paid through the ACH system to the shareholder's
bank account designated in the Fund account application, normally the second
business day. In the absence of a designated bank account, a check will be
sent to the address of record. Normally, a check for redemption proceeds is
mailed within one business day after receipt of a proper written redemption
request. Redemption proceeds will be wired upon request. In no event will
redemption proceeds be sent more than seven calendar days after a proper
request for redemption has been received, provided the Fund or its agents have
received payment in federal funds from the shareholder for the shares being
redeemed.
BY TELEPHONE. Shareholders may redeem shares of a Fund by calling Great Plains
Funds Shareholder Services at 1-800-568-8257. The shareholder must designate
the telephone redemption option in the Fund account application or complete an
authorization form permitting the Funds to accept telephone requests.
Authorization forms and information on this service are available from Great
Plains Funds Shareholder Services. Telephone redemption instructions may be
recorded. If reasonable procedures are not followed by the Funds, they may be
liable for losses due to unauthorized or fraudulent telephone instructions.
In the event of drastic economic or market changes, a shareholder may
experience difficulty in redeeming by telephone. If such a case should occur,
another method of redemption should be utilized, such as transmitting a
written request by mail or next day delivery to Great Plains Funds Shareholder
Services.
If at any time the Funds determine it necessary to terminate or modify this
method of redemption, shareholders would be promptly notified.
BY WIRE. To redeem shares and receive proceeds by Federal Reserve Wire, trust
customers should contact their account officer. All other customers should
call Great Plains Funds Shareholder Services at 1-800-568-8257. A $5.00 fee
will be imposed by the Funds for wire redemptions. Wire orders will only be
accepted on days on which the Funds, NBC and the Federal Reserve Banks are
open for business.
BY MAIL. Any shareholder may redeem a Fund's shares by sending a written
request to the Funds at: P.O. Box 8612, Boston, MA 02266-8612. The written
request should include the shareholder's name, the Fund name, the account
number, and the share or dollar amount requested, and should be signed exactly
as the shares are registered. Shareholders should call 1-800-568-8257 for
assistance in redeeming by mail.
SIGNATURES. Shareholders requesting a redemption of any amount to be sent to
an address other than on record with the Funds, or a redemption payable other
than to the shareholder of record, must have all signatures on written
redemption requests guaranteed by:
. a trust company or commercial bank whose deposits are insured by the
Bank Insurance Fund, which is administered by the Federal Deposit
Insurance Corporation ("FDIC");
. a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;
. a savings bank or savings association whose deposits are insured by the
Savings Association Insurance Fund, which is administered by the FDIC;
or
. any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.
The Funds do not accept signatures guaranteed by a notary public.
The Funds and Federated Shareholder Services Company have adopted standards
for accepting signature guarantees from the above institutions. The Funds may
elect in the future to limit eligible signature guarantors to institutions
that are members of a signature guarantee program. The Funds and Federated
Shareholder Services Company reserve the right to amend these standards at any
time without notice.
SYSTEMATIC WITHDRAWAL PROGRAM
Shareholders who desire to receive payments of a predetermined amount may take
advantage of the Systematic Withdrawal Program. Under this program, Fund
shares are redeemed to provide for periodic withdrawal payments in an amount
directed by the shareholder. Depending upon the amount of the withdrawal
payments and the amount of dividends paid with respect to Fund shares,
redemptions may reduce, and eventually deplete, the shareholder's investment
in the Funds. For this reason, payments under this program should not be
considered as yield or income on the shareholder's investment in the Funds. To
be eligible to participate in this program, a shareholder must have an account
value of at least $10,000. A shareholder may apply for participation in this
program by designating this option on the Fund account application or by
completing an authorization form, which can be requested by calling Great
Plains Funds Shareholder Services at
1-800-568-8257. Due to the fact that the Funds' shares are sold with a sales
charge, it is not advisable for shareholders to purchase shares of the Funds
while participating in this program.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Funds may
redeem shares in any account and pay the proceeds to the shareholder if the
account balance falls below a required minimum value of $1,000 due to
shareholder redemptions. This redemption would not occur if the account
balance falls below $1,000 because of changes in the Funds' net asset value.
Before shares are redeemed to close an account, the shareholder is notified in
writing and allowed 30 days to purchase additional shares to meet the minimum
balance requirement.
GREAT PLAINS FUNDS INFORMATION
- -------------------------------------------------------------------------------
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES. The Trustees are responsible for managing the business
affairs of the Trust and for exercising all of the powers of the Trust except
those reserved for the shareholders.
INVESTMENT ADVISER AND SUB-ADVISER. Pursuant to an investment advisory
contract with the Trust, First Commerce Investors, Inc. serves as the
investment adviser to, and makes investment decisions for, each Fund, subject
to direction by the Trustees. The Adviser continually conducts investment
research and supervision for each Fund and is responsible for the purchase and
sale of portfolio instruments, for which it receives an advisory fee from the
assets of each Fund.
The Adviser has entered into a Sub-Advisory Agreement with Peter A. Kinney
pursuant to which the Sub-Adviser provides investment advice regarding
international markets and recommends (but does not select) foreign securities
for purchase by the Equity Fund and the International Equity Fund. Investment
advice provided by the Sub-Adviser shall consist of economic and financial
forecasts, financial analyses of companies having their principal operations
or place of business abroad, research analyses and various reports on such
companies, and monitoring relative foreign currency exchange valuations. The
Sub-Adviser's investment advice shall not consist of any discretionary
management. The Adviser is solely responsible for making the determination as
to whether the purchase or sale of securities is consistent with the Funds'
investment objectives, policies and limitations, and is solely responsible for
evaluating the investment merits of the Funds' individual security selections
and executing purchases or sales of securities on behalf of the Funds.
The Trust, the Adviser, the Sub-Adviser and the Funds' Distributor have
adopted strict codes of ethics governing the conduct of all employees who
manage the Trust and its portfolio securities. These codes recognize that such
persons owe a fiduciary duty to the Trust's shareholders and must place the
interests of shareholders ahead of the employees' own interest. Among other
things, the codes: require preclearance and periodic reporting of personal
securities transactions; restrict personal transactions in securities being
purchased or sold, or being considered for purchase or sale, by the Trust;
prohibit personal purchases of securities in initial public offerings; and, in
the case of the Trust and the Distributor, prohibit taking profits on
securities held for less than sixty days. Violations of the codes are subject
to review by the Trustees, and could result in severe penalties.
ADVISORY FEES. The Adviser is entitled to receive an investment advisory fee
equal to a percentage of each Fund's average daily net assets at the following
annual rates: 0.75% of Equity Fund; 1.25% of International Equity Fund; 1.00%
of Premier Fund and 0.50% of Intermediate Bond Fund and Tax-Free Bond Fund.
The Adviser has agreed to compensate the Sub-Adviser for its services at an
annual fee equal to the greater of $75,000 or 0.16% of the International
Equity Fund's daily net assets. This fee will be paid solely by the Adviser
and not by any Fund, notwithstanding that the fee may be based on the assets
of the International Equity Fund. The Adviser can voluntarily waive its
advisory fees or reimburse a Fund's expenses in whole or in part from time to
time at the Adviser's sole discretion. In that regard, the Adviser has
voluntarily undertaken to waive its investment advisory fee on that portion of
the Equity Fund's assets that are invested in the International Equity Fund.
Investment recommendations and decisions for the Funds will be made
independently from those of any fiduciary or other accounts that may be
managed by the Adviser, Sub-Adviser or the affiliates of either. If, however,
such accounts, a Fund, the Adviser or Sub-Adviser for its own account, are
simultaneously engaged in transactions involving the same securities, the
transactions may be combined and allocated to each account. Although this
system may adversely affect the price the Funds pay or receive, or the size of
the position they obtain, it may also enable the Funds to benefit from lower
transaction costs.
ADVISER'S BACKGROUND. First Commerce Investors, Inc. is a registered
investment adviser and a wholly owned subsidiary of First Commerce Bancshares,
Inc. (hereinafter "FCB"), a multi-bank holding company organized as a Nebraska
corporation. FCB, through its subsidiaries and affiliates, provides a
comprehensive range of trust, commercial, consumer, correspondent and mortgage
banking services. At December 31, 1996, FCB had an asset base of over $2
billion with banking offices throughout Nebraska including: Lincoln, Grand
Island, Hastings, Kearney, West Point, McCook and North Platte. FCB's primary
business is the ownership and management of seven commercial bank
subsidiaries, a mortgage company, a computer company and an asset management
company.
The Adviser, a Nebraska corporation, offers financial services that include,
but are not limited to: investment supervisory services including stock and
bond portfolio management, and asset allocation and individual security
selection for its clients, the Trust Division of the National Bank of Commerce
and FCB. As of December 31, 1996, the Adviser managed assets of over $1.6
billion. Although the Adviser has not previously served as an investment
adviser to a mutual fund, it has managed, on behalf of its trust clients,
eight common and collective investment funds having a market value of
approximately $413 million.
As part of its regular banking operations, NBC may make loans to public
companies and municipalities. Thus, it may be possible, from time to time, for
the Funds to hold or acquire the securities of issuers which are also lending
clients of NBC. Because of the internal controls maintained by the Adviser and
NBC to restrict the flow of non-public information, Fund investments are
typically made without any knowledge of NBC's or its affiliates' lending
relationships with an issuer; therefore, the lending relationship will not be
a factor in the selection of securities.
SUB-ADVISER'S BACKGROUND. Peter A. Kinney is a registered investment adviser
and has been acting in a consulting capacity for the Adviser since 1993.
During that period, he has provided consultation and recommendations on
international equities, economies and currencies to the Adviser.
From 1988 to 1993, Mr. Kinney was an International Equity Analyst for the
Adviser. Mr. Kinney received a Bachelor of Business Studies from Trinity
College, Dublin, Ireland. He received the designation of Chartered Financial
Analyst in 1991. He is a member of the Association of Investment Management
and Research and the Chicago Society of Financial Analysts. Mr. Kinney has not
previously served as an investment adviser to a mutual fund.
PORTFOLIO MANAGERS' BACKGROUND. The Equity Fund, International Equity Fund and
the Premier Fund are managed by H. Cameron Hinds who has been President and
Chief Investment Officer of the Adviser since 1994. Mr. Hinds previously
served as an equity analyst and portfolio manager for the Adviser since 1986.
Mr. Hinds received a B.S. in Business Administration and an M.A. in Business
Administration, with a concentration in Finance, from the University of
Nebraska. He received the designation of Chartered Financial Analyst in 1987.
The Intermediate Bond Fund and the Tax-Free Bond Fund are managed by an
investment committee.
BROKERAGE TRANSACTIONS
When selecting broker-dealers to handle the purchase and sale of portfolio
instruments, the Adviser looks for prompt execution of the order at a
favorable net price. In working with dealers, the Adviser will generally
utilize those who are recognized dealers in specific portfolio instruments,
except when a better price and execution of the order can be obtained
elsewhere. When consistent with these objectives, business may be placed with
broker-dealers who furnish investment research or services. This allows the
Adviser to supplement its own investment research activities and enables the
Adviser to obtain views and information of individuals and research staffs of
many different securities firms prior to making investment decisions. The
Adviser and Sub-Adviser have not entered into any formal or informal
agreements with any broker-dealers, nor do they maintain any "formula" which
must be followed in connection with the placement of the client's transactions
in exchange for research services provided to the Adviser and Sub-Adviser,
except as noted below. However, the Adviser does maintain a formal list of
broker-dealers, which is used from time to time as a general guide in the
placement of the client's business. The Adviser may also give consideration to
those firms which have sold or are selling shares of the Funds and other funds
distributed by the Distributor.
The Adviser will authorize payment of an amount of commission for effecting a
securities transaction in excess of the amount of commission another broker-
dealer would have been charged only if the Adviser determines in good faith
that such amount of commission is reasonable in relation to the value of the
brokerage and research services provided by such broker-dealer, viewed in
terms of either that particular transaction or the Adviser's overall
responsibilities with respect to the accounts to which it exercises investment
discretion.
The Adviser makes decisions on portfolio transactions and selects brokers and
dealers subject to review by the Trustees.
DISTRIBUTION OF FUND SHARES
Edgewood Services, Inc., a subsidiary of Federated Investors, is the principal
distributor for shares of the Funds and a number of other investment
companies. It is a New York corporation organized on October 26, 1993.
DISTRIBUTION PLAN. Pursuant to the provisions of a distribution plan adopted
in accordance with Rule 12b-1 under the 1940 Act (the "Plan"), the Funds may
pay to the Distributor an amount computed at an annual rate of 0.25% of the
average daily net asset value of the Funds' shares to finance any activity
which is principally intended to result in the sale of the shares subject to
the Plan. The Funds have no present intention of paying or accruing 12b-1 fees
during the fiscal year ending August 31, 1998. The Distributor may, from time
to time and for such periods as it deems appropriate, voluntarily reduce its
compensation under the Plan.
The Glass-Steagall Act prohibits a bank holding company or its affiliate (such
as a commercial bank or a savings association) from being an underwriter or
distributor of most securities, but does not prohibit such entities from
acting in certain other capacities for, or providing certain other services
to, investment companies. In the event the Glass-Steagall Act is deemed to
prohibit such entities from acting in these capacities or providing these
services or should Congress relax current restrictions on such entities, the
Trustees will consider appropriate changes in the services any of these
entities may provide to the Trust or the Funds.
SHAREHOLDER SERVICING ARRANGEMENTS. The Funds may appoint a shareholder
servicing agent for the Funds. As such, the shareholder servicing agent would
provide shareholder services which include, but are not limited to:
distributing prospectuses and other information, providing shareholder
assistance, and communicating or facilitating purchases and redemptions of
shares. The Funds may pay the shareholder servicing agent a fee computed at an
annual rate of up to 0.25% of the average daily net asset value of the Funds'
shares for which the shareholder servicing agent provides shareholder
services. The Funds have no present intention of paying or accruing
shareholder servicing fees during the fiscal year ending August 31, 1998.
ADMINISTRATIVE ARRANGEMENTS. The Distributor may select brokers, dealers and
administrators (including depository or other institutions such as commercial
banks and savings associations) to provide distribution and/or administrative
services for which they may receive fees from the distributor based upon
shares owned by their clients or customers. These administrative services
include distributing prospectuses and other information, providing account
assistance, and communicating or facilitating purchases and redemptions of the
Funds' shares. The fees are calculated as a percentage of the average
aggregate net asset value of shareholder accounts held during the period for
which the brokers, dealers, and administrators provide services. Any fees paid
for these services by the Distributor will be reimbursed by the Adviser and
not the Funds.
ADMINISTRATION OF THE TRUST
- -------------------------------------------------------------------------------
Federated Services Company, a subsidiary of Federated Investors, provides the
Funds with certain administrative personnel and services necessary to operate
the Trust. Such services include certain
shareholder servicing, legal and accounting services. Federated Services
Company provides these services to the Trust at an annual rate as specified
below:
<TABLE>
<CAPTION>
AVERAGE AGGREGATE DAILY
MAXIMUM ADMINISTRATIVE FEE NET ASSETS OF THE TRUST
- -------------------------- -----------------------------------
<S> <C>
.150% on the first $250 million
.125% on the next $250 million
.100% on the next $250 million
.075% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$75,000 per Fund and $30,000 per class. Federated Services Company may choose
voluntarily to reimburse all or a portion of its fee at any time at its sole
discretion.
EXPENSES OF THE FUNDS
Each Fund pays all of its own expenses and its allocable share of the Trust's
expenses. These expenses include, but are not limited to, the cost of:
organizing the Trust and continuing its existence; Trustees' fees; investment
advisory and administrative services; printing prospectuses and other Fund
documents for shareholders; registering the Trust, the Funds, and shares of
each Fund; taxes and commissions; issuing, purchasing, repurchasing, and
redeeming shares; fees for custodians, transfer agents, dividend disbursing
agents, shareholder servicing agents, and registrars; printing, mailing,
auditing, and certain accounting and legal expenses; reports to shareholders;
meetings of Trustees and shareholders and proxy solicitations therefor;
insurance premiums; association membership dues; and such non-recurring and
extraordinary items as may arise.
In addition, to the extent a Fund invests in another Fund, the investing Fund
bears a proportionate share of the expenses borne by such underlying Fund.
Accordingly, a shareholder in such investing Fund also bears indirectly the
expenses of the underlying Fund, including any of its distribution expenses.
However, an investor would bear those expenses if it invested directly in the
underlying Fund, rather than indirectly as a shareholder of the investing
Fund.
SHAREHOLDER INFORMATION
- -------------------------------------------------------------------------------
VOTING RIGHTS
Each share of the Trust owned by a shareholder gives that shareholder one vote
in Trustee elections and other matters submitted to shareholders for vote. All
shares of each Fund in the Trust have equal voting rights, except that in
matters affecting only a particular Fund, only shareholders of that Fund are
entitled to vote. The Trust is not required to hold annual shareholder
meetings. Shareholder approval will be sought only for certain changes in the
Trust's or a Fund's operation and for election of Trustees under certain
circumstances.
Trustees may be removed by the Trustees or by shareholders at a special
meeting. A special meeting shall be called by the Trustees upon the written
request of shareholders owning at least 10% of the outstanding shares of the
Trust entitled to vote.
PERFORMANCE INFORMATION
- -------------------------------------------------------------------------------
From time to time, all of the Funds may advertise total return and yield, and
the Tax-Free Bond Fund may advertise its tax-equivalent yield.
Total return represents the change, over a specified period of time, in the
value of an investment in a Fund after reinvesting all income and capital
gains distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.
The yield for a Fund is calculated by dividing the net investment income per
share (as defined by the SEC) earned by the Fund over a thirty-day period by
the offering price per share of the Fund on the last day of the period. This
number is then annualized using semi-annual compounding. The tax-equivalent
yield is calculated similarly to the yield, but is adjusted to reflect the
taxable yield that the Tax-Free Bond Fund would have had to earn to equal its
actual yield, assuming a specific tax rate. The yield and the tax-equivalent
yield do not necessarily reflect income actually earned by a Fund and,
therefore, may not correlate to the dividends or other distributions paid to
shareholders.
From time to time, advertisements for the Funds may refer to ratings,
rankings, and other information in certain financial publications and/or
compare their performance to certain indices.
PERFORMANCE INFORMATION FOR PREDECESSOR COMMON INVESTMENT FUNDS
Each Fund emanates from a single common investment fund currently managed by
the Adviser (the "Common Fund(s)"). It is anticipated that the assets from
each Common Fund will be transferred to the corresponding Fund in connection
with each Fund's commencement of operations.
Set forth below are certain past performance data for the Common Funds
currently managed by the Funds' Adviser. This information is deemed relevant
because the Common Funds have been managed in a manner that, the Adviser
believes, will be in all material respects equivalent to the management of the
corresponding Funds, using substantially the same investment objective,
policies, strategies, and limitations as those used by each of the
corresponding Funds. However, the past performance data shown below is not
necessarily indicative of each Fund's future performance. Each Fund is
actively managed, and its investments will vary from time to time. Each Fund's
investments will not be identical to the past portfolio investments of the
Common Funds. In that regard, the Common Funds are not registered investment
companies under the 1940 Act and therefore are not subject to certain
investment restrictions and other rules and regulations of the 1940 Act to
which the Funds are subject as registered investment companies. In addition,
the Common Funds are not subject to the various Internal Revenue Code
provisions applicable to registered investment companies. All of these
differences may have an impact on performance. Moreover, the Common Funds did
not incur the same types or amount of expenses that correspond to the
advisory, administrative, and other fees to which each Fund is subject.
Accordingly, the past performance information for the Common Funds shown below
has been adjusted to reflect the anticipated total expense ratios for each
Fund. This adjustment has the effect of lessening the actual performance for
the Common Funds. Because a sales charge was not imposed on the Common Funds,
the past performance figures for the Common Funds shown below have been
further adjusted in a separate column to reflect the effect of the maximum
sales load (i.e., 3.00% on each Fund) applicable to certain purchasers of each
Fund. This adjustment further reduces the past performance of the Common
Funds. Corresponding performance figures which do not reflect the sales charge
are also provided.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIOD ENDED JUNE 30, 1997*
REFLECTING LOAD/WITHOUT LOAD
PREDECESSOR COMMON FUNDS -------------------------------------------------------
(CORRESPONDING GREAT PLAINS FUNDS) 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---------------------------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Value Plus Stock Fund "A" 29.01%/33.01% 24.09%/25.36% 16.35%/17.07% 12.39%/12.74%
(GREAT PLAINS EQUITY FUND)
Premier Stock Fund "J" 32.03%/36.12% 22.78%/24.04% 16.04%/16.75% 12.05%/12.44%**
(GREAT PLAINS PREMIER FUND)
Income Bond Fund "B" 4.05%/7.27% 6.34%/7.43% 5.57%/6.22% 7.32%/7.65%
(GREAT PLAINS INTERMEDIATE
BOND FUND)
Tax-Exempt Bond Fund "G" 2.65%/5.83% 4.51%/5.58% 4.32%/4.95% 5.59%/5.91%
(GREAT PLAINS TAX-FREE BOND
FUND)
</TABLE>
- --------
* The Average Annual Total Return for each common fund has been adjusted to
reflect each corresponding Fund's expenses, net of voluntary waivers.
** Since inception of October 1988.
PORTFOLIO INVESTMENTS AND STRATEGIES
- -------------------------------------------------------------------------------
Following is a description of the various portfolio investments and strategies
that the Funds may utilize to achieve their investment objectives.
ASSET-BACKED SECURITIES. The Intermediate Bond Fund may invest in Asset-Backed
Securities. Asset-Backed Securities have structural characteristics similar to
Mortgage-Backed Securities (described below) but have underlying assets that
generally are not mortgage loans or interests in mortgage loans. The Fund may
invest in Asset-Backed Securities including, but not limited to, interests in
pools of receivables, such as motor vehicle installment purchase obligations
and credit card receivables, equipment leases, manufactured housing (mobile
home) leases, or home equity loans. These securities may be in the form of
pass-through instruments or asset-backed bonds. The securities are issued by
non-governmental entities and carry no direct or indirect government
guarantee. See also "Additional Investment Risks--Mortgage-Backed and Asset-
Backed Securities" section below.
BANK INSTRUMENTS. All of the Funds except the Tax-Free Bond Fund may invest in
domestic Bank Instruments, which are instruments (including time and savings
deposits, bankers' acceptances and certificates of deposit) of banks and
savings associations that have capital, surplus and undivided profits of over
$100 million or for which the principal amount of the instrument is insured by
the Bank Insurance Fund or the Savings Association Insurance Fund, which are
administered by the Federal Deposit Insurance Corporation. In addition, the
Equity Fund, International Equity Fund and Premier
Fund may purchase foreign Bank Instruments, which include Eurodollar
Certificates of Deposit ("ECDs"), Yankee Certificates of Deposit ("Yankee
CDs") and Eurodollar Time Deposits ("ETDs"). ECDs are U.S. dollar-denominated
certificates of deposit issued by foreign branches of U.S. banks or foreign
banks. Yankee CDs are U.S. dollar-denominated certificates of deposit issued
in the U.S. by branches and agencies of foreign banks. ETDs are U.S. dollar-
denominated deposits in foreign branches of U.S. banks or foreign banks. The
Funds will treat securities credit-enhanced with a bank's irrevocable letter
of credit or unconditional guaranty as Bank Instruments.
BORROWING. Each of the Funds is permitted as a fundamental investment policy
to borrow money for temporary purposes from banks or through reverse
repurchase agreements (arrangements in which a Fund sells a portfolio
instrument for a percentage of its cash value with an agreement to buy it back
on a set date) in amounts of up to one-third of its total assets, and pledge
some assets as collateral.
COMMON AND PREFERRED STOCK. The Equity Fund, International Equity Fund and
Premier Fund may invest in common and preferred stock, which represent
ownership interests in the issuer of the stock. Generally, preferred stock
pays a specified dividend, and has priority over common stock as to dividend
payments by, and the rights to assets of, the issuer. However, common stock
usually has voting rights and preferred stock usually does not.
CONVERTIBLE SECURITIES. All of the Funds except the Tax-Free Bond Fund may
invest in convertible securities. Convertible securities are fixed income
securities which may be exchanged or converted into a predetermined number of
the issuer's underlying common stock at the option of the holder during a
specified time period. Convertible securities may take the form of convertible
bonds, convertible preferred stock or debentures, units consisting of "usable"
bonds and warrants or a combination of the features of several of these
securities. The investment characteristics of each convertible security vary
widely, which allows convertible securities to be employed for different
investment objectives. In selecting a convertible security, the Fund's Adviser
evaluates the investment characteristics of the convertible security as a
fixed income instrument, and the investment potential of the underlying
security for capital appreciation.
Convertible bonds and convertible preferred stocks generally retain the
investment characteristics of fixed income securities until they have been
converted but also react to movements in the underlying equity securities. The
holder is entitled to receive the fixed income of a bond or the dividend
preference of a preferred stock until the holder elects to exercise the
conversion privilege. Usable bonds are corporate bonds that can be used in
whole or in part, customarily at full face value, in lieu of cash to purchase
the issuer's common stock. Convertible securities are senior to equity
securities, and therefore have a claim to assets of the corporation prior to
the holders of common stock in the case of liquidation. However, convertible
securities are generally subordinated to similar nonconvertible securities of
the same company. The interest income and dividends from convertible bonds and
preferred stocks provide a stable stream of income with generally higher
yields than common stocks, but lower than nonconvertible securities of similar
quality. The Equity Fund, the International Equity Fund and the Premier Fund
may exchange or convert the convertible securities held in their portfolio
into shares of the underlying common stocks when, in the opinion of the Funds'
Adviser, the investment characteristics of the underlying common shares will
assist the Fund in achieving its investment objective. Otherwise, such Funds
will hold or trade the convertible securities.
CREDIT ENHANCEMENT. Certain of a Fund's acceptable investments may have been
credit-enhanced by a guaranty, letter of credit, or insurance. The Fund's
evaluation of an acceptable investment may include the credit quality and
ratings of credit-enhanced securities based upon the financial condition and
ratings of the party providing the credit enhancement (the "credit enhancer").
However, credit-enhanced securities will not be treated as having been issued
by the credit enhancer for diversification purposes, unless the Fund has
invested more than 10% of its assets in securities issued, guaranteed or
otherwise credit-enhanced by the credit enhancer, in which case the securities
will be treated as having been issued both by the issuer and the credit
enhancer. The bankruptcy, receivership or default of the credit enhancer will
adversely affect the quality and marketability of the underlying security.
DEBT OBLIGATIONS. The Funds may invest in debt obligations, including bonds,
notes, and debentures of corporate issuers or governments, which may have
floating or fixed rates of interest.
FIXED RATE DEBT OBLIGATIONS. The Funds may invest in fixed rate debt
obligations, including fixed rate debt securities with short-term
characteristics. Fixed rate securities with short-term characteristics are
long-term debt obligations but are treated in the market as having short
maturities because call features of the securities may make them callable
within a short period of time. A fixed rate security with short-term
characteristics would include a fixed income security priced close to call
or redemption price or fixed income security approaching maturity, where
the expectation of call or redemption is high.
Fixed rate securities exhibit more price volatility during times of rising
or falling interest rates than securities with floating rates of interest.
This is because floating rate securities, as described below, behave like
short-term instruments in that the rate of interest they pay is subject to
periodic adjustments based on a designated interest rate index. Fixed rate
securities pay a fixed rate of interest and are more sensitive to
fluctuating interest rates. In periods of rising interest rates the value
of a fixed rate security is likely to fall. Fixed rate securities with
short-term characteristics are not subject to the same price volatility as
fixed rate securities without such characteristics. Therefore, they behave
more like floating rate securities with respect to price volatility.
FLOATING RATE DEBT OBLIGATIONS. The Funds may invest in floating rate debt
obligations, including increasing rate securities. Floating rate
securities are generally offered at an initial interest rate which is at
or above prevailing market rates. The interest rate paid on these
securities is then reset periodically (commonly every 90 days) to an
increment over some predetermined interest rate index. Commonly utilized
indices include the three-month Treasury bill rate, the 180-day Treasury
bill rate, the one-month or three-month London Interbank Offered Rate
(LIBOR), the prime rate of a bank, the commercial paper rates, or the
longer-term rates on U.S. Treasury securities. Increasing rate securities'
rates are reset periodically at different levels on a predetermined scale.
These levels of interest are ordinarily set at progressively higher
increments over time. Some increasing rate securities may, by agreement,
revert to a fixed rate status. These securities may also contain features
which allow the issuer the option to convert the increasing rate of
interest to a fixed rate under such terms, conditions, and limitations as
are described in each issuer's prospectus.
DEMAND FEATURES. Each of the Funds may acquire securities that are subject to
puts and standby commitments ("demand features") to purchase the securities at
their principal amount (usually with accrued interest) within a fixed period
(usually seven days following a demand by a Fund). The demand feature may be
issued by the issuer of the underlying securities, a dealer in the securities
or by another third party, and may not be transferred separately from the
underlying security. A Fund uses these arrangements to provide it with
liquidity and not to protect against changes in the market value of the
underlying securities. The bankruptcy, receivership or default by the issuer
of the demand feature, or a default on the underlying security or other event
that terminates the demand feature before its exercise, will adversely affect
the liquidity of the underlying security. Demand features that are exercisable
even after a payment default on the underlying security may be treated as a
form of credit enhancement.
DEMAND MASTER NOTES. Each of the Funds may invest in variable amount demand
master notes. Demand master notes are short-term borrowing arrangements
between a corporation or government agency and an institutional lender (such
as the Fund(s)) payable upon demand by either party. The notice period for
demand typically ranges from one to seven days, and the party may demand full
or partial payment. Generally, master notes give a Fund the option of
increasing or decreasing the principal amount of the master note on a daily or
weekly basis within certain limits. Demand master notes usually provide for
floating or variable rates of interest.
DEPOSITARY RECEIPTS. The Equity Fund, International Equity Fund and Premier
Fund may invest in foreign issuers by purchasing Depositary Receipts
(sponsored or unsponsored ADRs, GDRs and EDRs). ADRs are typically issued by a
U.S. bank or trust company which evidence ownership of underlying securities
issued by a foreign corporation. EDRs and GDRs are typically issued by foreign
banks or trust companies, although they also may be issued by U.S. banks or
trust companies, and evidence ownership of underlying securities issued by
either a foreign or a United States corporation. Generally, Depositary
Receipts in registered form are designed for use in the U.S. securities market
and Depositary Receipts in bearer form are designed for use in securities
markets outside the United States. Depositary Receipts may not necessarily be
denominated in the same currency as the underlying securities into which they
may be converted. Ownership of unsponsored Depositary Receipts may not entitle
a Fund to financial or other reports from the issuer of the underlying
security, to which it would be entitled as the owner of sponsored Depositary
Receipts. Depositary Receipts also involve the risks of other investments in
foreign securities.
DIVERSIFICATION. The Intermediate Bond Fund will be a diversified Fund under
the 1940 Act. As such, with respect to 75% of the value of its total assets,
the Intermediate Bond Fund will not invest more than 5% in securities of any
one issuer, other than cash, cash items, securities of investment companies or
securities issued or guaranteed by the government of the United States or its
agencies or instrumentalities and repurchase agreements collateralized by U.S.
government securities, nor will the Intermediate Bond Fund acquire more than
10% of the outstanding voting securities of any one issuer (for which purposes
all indebtedness of an issuer shall be deemed a single class and all preferred
stock of an issuer shall be deemed a single class, except that futures or
option contracts and securities of mutual funds shall not be subject to this
restriction). This policy cannot be changed without the approval of holders of
a majority of the Fund's shares. All of the other Funds will elect to be non-
diversified Funds under the 1940 Act, although they will comply with the
diversification requirements
of Subchapter M of the Internal Revenue Code. For a description of the
associated risks, see "Additional Investment Risks--Non-Diversification"
below.
FOREIGN CURRENCY TRANSACTIONS. The Equity Fund, the International Equity Fund
and the Premier Fund may enter into foreign currency transactions to obtain
the necessary currencies to settle securities transactions. Currency
transactions may be conducted either on a spot or cash basis at prevailing
rates or through forward foreign currency exchange contracts, futures
contracts, or options on foreign currencies and futures contracts, as
described below.
The Equity Fund, the International Equity Fund and the Premier Fund may also
enter into foreign currency transactions to protect their assets against
adverse changes in foreign currency exchange rates or exchange control
regulations. Such changes could unfavorably affect the value of Fund assets
which are denominated in foreign currencies, such as foreign securities or
funds deposited in foreign banks, as measured in U.S. dollars. Although
foreign currency exchanges may be used by the Funds to protect against a
decline in the value of one or more currencies, such efforts may also limit
any potential gain that might result from a relative increase in the value of
such currencies and might, in certain cases, result in losses to the Funds.
Further, the Funds may be affected either unfavorably or favorably by
fluctuations in the relative rates of exchange between the currencies of
different nations. Cross-hedging transactions by the Funds involve the risk of
imperfect correlation between changes in the values of the currencies to which
such transactions relate and changes in the value of the currency or other
asset or liability that is the subject of the hedge.
The Equity Fund, the International Equity Fund and the Premier Fund may enter
into a forward foreign currency exchange contract ("forward contract"), which
is an obligation to purchase or sell an amount of a particular currency at a
specific price and on a future date agreed upon by the parties.
Generally, no commission charges or deposits are involved. At the time that a
Fund enters into a forward contract, Fund assets with a value equal to the
Fund's obligation under the forward contract are segregated on the Fund's
records and are maintained until the contract has been settled. The Funds
generally will not enter into a forward contract with a term of more than one
year. The Funds will generally enter into a forward contract to provide the
proper currency to settle a securities transaction at the time the transaction
occurs ("trade date"). The period between trade date and settlement date will
vary between twenty-four hours and thirty days, depending upon local custom.
The Funds may also protect against the decline of a particular foreign
currency by entering into a forward contract to sell an amount of that
currency approximating the value of all or a portion of their assets
denominated in that currency ("hedging"). The success of this type of short-
term hedging strategy is highly uncertain due to the difficulties of
predicting short-term currency market movements and of precisely matching
forward contract amounts and the constantly changing value of the securities
involved. Although the Adviser will consider the likelihood of changes in
currency values when making investment decisions, the Adviser believes that it
is important to be able to enter into forward contracts when it believes the
interests of the Funds will be served. The Funds will not enter into forward
contracts for hedging purposes in a particular currency in an amount in excess
of their assets denominated in that currency.
The Equity Fund, the International Equity Fund and the Premier Fund may
purchase put options on foreign currencies for the purpose of protecting
against declines in the U.S. dollar value of foreign
currency-denominated portfolio securities and against increases in the U.S.
dollar cost of such securities to be acquired. As in the case of other kinds
of options, however, the writing of an option on a foreign currency
constitutes only a partial hedge, up to the amount of the premium received,
and the Funds could be required to purchase or sell foreign currencies at
disadvantageous exchange rates, thereby incurring losses. The purchase of an
option on a foreign currency may constitute an effective hedge against
fluctuations in exchange rates although, in the event of rate movements
adverse to the Funds' position, they may forfeit the entire amount of the
premium plus related transaction costs. Options on foreign currencies to be
written or purchased by the Funds may be traded on U.S. and foreign exchanges
or over-the-counter.
The Equity Fund, International Equity Fund and Premier Fund may invest in
currency futures transactions for bona fide hedging purposes. A futures
contract on a foreign currency is an agreement to buy or sell a specified
amount of a currency for a set price on a future date. When the Fund enters
into a futures contract, it must make an initial deposit, known as "initial
margin," as a partial guarantee of its performance under the contract. As the
value of the currency fluctuates, either party to the contract is required to
make additional margin payments, known as "variation margin," to cover any
additional obligation it may have under the contract. In addition, when the
Fund enters into a futures contract, it will segregate assets to "cover" its
position in accordance with the 1940 Act. See "Policies and Acceptable
Investments--Foreign Currency Hedging Transactions" in the Statement of
Additional Information for additional information on these transactions.
FORWARD COMMITMENTS, WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Funds
may enter into forward commitments and purchase portfolio securities on a
when-issued and delayed delivery basis. These transactions are arrangements in
which a Fund purchases securities with payment and delivery scheduled for a
future time. The seller's failure to complete these transactions may cause a
Fund to miss a price or yield considered to be advantageous. Settlement dates
may be a month or more after entering into these transactions, and the market
values of the securities purchased may vary from the purchase prices.
The Funds may dispose of a commitment prior to settlement if the Adviser deems
it appropriate to do so. In addition, a Fund may enter into transactions to
sell its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at
later dates. The Fund may realize short-term profits or losses upon the sale
of such commitments.
HIGH-YIELD DEBT OBLIGATIONS. The Intermediate Bond Fund may invest up to 35%
(although it intends to operate with not more than 15%) of its total assets in
debt securities that are rated below investment-grade but not lower than BB or
Ba by an NRSRO (or, if unrated, are determined by the Adviser to be of
comparable quality). Some of these securities may involve equity
characteristics. The Fund may invest in equity securities, including unit
offerings which combine fixed rate securities and common stock or common stock
equivalents such as warrants, rights and options. Securities which are rated
BB or Ba are considered speculative with respect to capacity to pay interest
and repay principal in accordance with the terms of the obligations. These
securities are commonly referred to as "junk bonds." Debt obligations that are
not determined to be investment grade are high-yield, high-risk bonds,
typically subject to greater market fluctuations and greater risk of loss of
income and principal due to an issuer's default. To a greater extent than
investment-grade bonds, lower-rated bonds tend to reflect short-term
corporate, economic and market developments, as well as investor
perceptions of the issuer's credit quality. In addition, lower-rated bonds may
be more difficult to dispose of or to value than higher-rated, lower-yielding
bonds. A description of the rating categories for the permissible investments
are contained in the Appendix to this Prospectus. See also "Additional
Investment Risks--High Yield Debt Obligations."
ILLIQUID AND RESTRICTED SECURITIES. Each of the Funds may invest in illiquid
and restricted securities. Illiquid securities are any securities a Fund owns
which it may not be able to sell quickly (within seven days) at a fair price.
Restricted securities are any securities in which a Fund may otherwise invest
pursuant to its investment objective and policies, but which are subject to
restriction on resale under federal securities laws. To the extent restricted
securities are deemed to be illiquid, a Fund will limit its purchases,
together with other securities considered to be illiquid, to 15% of its net
assets.
LENDING PORTFOLIO SECURITIES. In order to generate additional income, each of
the Funds is permitted as a fundamental investment policy to lend portfolio
securities on a short-term or long-term basis, or both, up to one-third of the
value of its respective total assets to broker/dealers, banks, or other
institutional borrowers of securities. The Funds will only enter into loan
arrangements with broker/dealers, banks, or other institutions which the
Adviser has determined are creditworthy under guidelines established by the
Trustees and will receive collateral in the form of cash or U.S. government
securities equal to at least 100% of the value of the securities loaned.
Collateral received in the form of cash may be invested in highly liquid
investments, including repurchase agreements and other money market
instruments. There is the risk that when lending portfolio securities, the
securities may not be available to a Fund on a timely basis and the Fund may,
therefore, lose the opportunity to sell the securities at a desirable price.
In addition, in the event that a borrower of securities would file for
bankruptcy or become insolvent, disposition of the securities may be delayed
pending court action.
MORTGAGE-BACKED SECURITIES. The Intermediate Bond Fund may invest in mortgage-
backed securities rated at the time of purchase investment grade (BBB or Baa
or better) by an NRSRO, or which are of comparable quality in the judgment of
the Adviser. Mortgage-backed securities are securities that directly or
indirectly represent a participation in, or are secured by and payable from,
mortgage loans on real property. There are currently four basic types of
mortgage-backed securities: (i) those issued or guaranteed by the U.S.
government or one of its agencies or instrumentalities, such as the Government
National Mortgage Association ("Ginnie Mae"), Federal National Mortgage
Association ("Fannie Mae"), and Federal Home Loan Mortgage Corporation
("Freddie Mac"); (ii) those issued by private issuers that represent an
interest in or are collateralized by mortgage-backed securities issued or
guaranteed by the U.S. government or one of its agencies or instrumentalities;
(iii) those issued by private issuers that represent an interest in or are
collateralized by whole loans or mortgage-backed securities without a
government guarantee but usually having some form of private credit
enhancement; and (iv) privately issued securities which are collateralized by
pools of mortgages in which each mortgage is guaranteed as to payment of
principal and interest by an agency or instrumentality of the U.S. government.
The privately issued mortgage-related securities provide for a periodic
payment consisting of both interest and/or principal. The interest portion of
these payments will be distributed by the Fund as income, and the capital
portion will be reinvested.
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS"). The Intermediate Bond Fund
may invest in CMOs. CMOs are debt obligations collateralized by mortgage
loans or mortgage pass-through securities. Typically, CMOs are
collateralized by Ginnie Mae, Fannie Mae or Freddie Mac certificates, but
may be collateralized by whole loans or private pass-through securities.
CMOs may have fixed or floating rates of interest.
The Intermediate Bond Fund may also invest in certain CMOs which are
issued by private entities such as investment banking firms and companies
related to the construction industry. The CMOs in which the Fund may
invest may be: (i) securities which are collateralized by pools of
mortgages in which each mortgage is guaranteed as to payment of principal
and interest by an agency or instrumentality of the U.S. government; (ii)
securities which are collateralized by pools of mortgages in which payment
of principal and interest is guaranteed by the issuer and such guarantee
is collateralized by U.S. government securities; (iii) collateralized by
pools of mortgages in which payment of principal and interest is dependent
upon the underlying pool of mortgages with no U.S. government guarantee;
or (iv) other securities in which the proceeds of the issuance are
invested in mortgage-backed securities and payment of the principal and
interest is supported by the credit of an agency or instrumentality of the
U.S. government.
PAC BONDS AND PARALLEL PAY CMOS. The Intermediate Bond Fund may invest in
parallel pay CMOs and Planned Amortization Class CMOs ("PAC Bonds").
Parallel pay CMOs are structured to provide payments of principal on each
payment date to more than one class. These simultaneous payments are taken
into account in calculating the stated maturity date or final distribution
date of each class, which, as with other CMO structures, must be retired
by its stated maturity date or final distribution date but may be retired
earlier. PAC Bonds generally require payments of a specified amount of
principal on each payment date. PAC Bonds are always parallel pay CMOs
with the required principal payment on such securities having the highest
priority after interest has been paid to all classes.
REAL ESTATE MORTGAGE INVESTMENT CONDUITS. The Intermediate Bond Fund may
invest in real estate mortgage investment conduits ("REMICs") which are
offerings of multiple class real estate Mortgage-Backed Securities which
qualify and elect treatment as such under provisions of the Internal
Revenue Code. Issuers of REMICs may take several forms, such as trusts,
partnerships, corporations, associations or a segregated pool of
mortgages. Once REMIC status is elected and obtained, the entity is not
subject to federal income taxation. Instead, income is passed through the
entity and is taxed to the person or persons who hold interests in the
REMIC. A REMIC interest must consist of one or more classes of "regular
interests," some of which may offer adjustable rates, and a single class
of "residual interests." To qualify as a REMIC, substantially all of the
assets of the entity must be in assets directly or indirectly secured
principally by real property.
MUNICIPAL SECURITIES. The Intermediate Bond Fund and the Tax-Free Bond Fund
may invest in Municipal Securities which are generally issued to finance
public works such as airports, bridges, highways, housing, hospitals, mass
transportation projects, schools, streets, and water and sewer works. They are
also issued to repay outstanding obligations, to raise funds for general
operating expenses, and to make loans to other public institutions and
facilities. The Tax-Free Bond Fund will, to the extent available and
consistent with its investment objectives, invest in Nebraska Municipal
Securities. While the Tax-Free Bond Fund will purchase Municipal Securities
that pay tax-free income, the Intermediate Bond Fund will generally purchase
taxable Municipal Securities. A significant portion of the Municipal
Securities held by the Intermediate Bond Fund and the Tax-Free Bond Fund may
be covered by insurance. See "Portfolio Investments and Strategies--Credit
Enhancement".
Municipal Securities include industrial development bonds issued by or on
behalf of public authorities to provide financing aid to acquire sites or
construct and equip facilities for privately or publicly owned corporations.
The availability of this financing encourages these corporations to locate
within the sponsoring communities and thereby increases local employment.
The two principal classifications of Municipal Securities are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its full faith and credit and taxing power for the payment
of principal and interest. Interest on and principal of revenue bonds,
however, are payable only from the revenue generated by the facility financed
by the bond or other specified sources of revenue. Revenue bonds do not
represent a pledge of credit or create any debt of or charge against the
general revenues of a municipality or public authority. Industrial development
bonds are typically classified as revenue bonds.
MUNICIPAL LEASES. The Intermediate Bond Fund and the Tax-Free Bond Fund
may purchase municipal leases, which are obligations issued by state and
local governments or authorities to finance the acquisition of equipment
and facilities and may be considered to be illiquid. They may take the
form of a lease, an installment purchase contract, a conditional sales
contract, or a participation interest in any of these.
PARTICIPATION INTERESTS. The Intermediate Bond Fund and the Tax-Free Bond
Fund may purchase interests in Municipal Securities from financial
institutions such as commercial and investment banks, savings associations
and insurance companies. These interests may take the form of
participations, beneficial interests in a trust, partnership interests or
any other form of indirect ownership that allows the Fund to treat the
income from the investment as exempt from federal income tax. The
financial institutions from which the Fund purchases participation
interests frequently provide or obtain irrevocable letters of credit or
guarantees to attempt to assure that the participation interests are of
acceptable quality. The Funds invest in these participation interests in
order to obtain credit enhancement or demand features that would not be
available through direct ownership of the underlying Municipal Securities.
NEBRASKA MUNICIPAL SECURITIES. Historically, many of the Municipal
Securities offered by Nebraska issuers have been unrated. This is in part
due to the relatively small size of many offerings, the cost and
conditions of obtaining a rating and the historical willingness of the
capital markets to purchase municipal securities offered by Nebraska
issuers without insurance or ratings. As a result, it is likely that many
of the Nebraska Municipal Securities that the Tax-Free Bond Fund will
purchase will be uninsured or unrated. The Fund will only purchase unrated
securities if they are insured or of comparable quality to the rated
Municipal Securities that the Fund is allowed to purchase. In determining
whether unrated Municipal Securities are of comparable quality, the
Adviser will perform a credit analysis of each issuer of such unrated
securities pursuant to policies and procedures reviewed and approved by
the Trustees on an ongoing basis.
The Tax-Free Bond Fund's investment emphasis on securities issued by
Nebraska municipalities and political subdivisions involves somewhat
greater risks than a fund broadly invested in securities issued by
municipalities and political subdivisions in many states. The credit
quality of the issuers of the Nebraska Municipal Securities will depend on
the future financial strength of the Nebraska economy and the financial
condition of the Nebraska municipalities and political subdivisions
issuing such securities. While most Nebraska municipalities and political
subdivisions are predominantly reliant on independent revenue sources,
such as property and sales taxes, they are not immune to budget shortfalls
caused by cutbacks in state aid. While many observers believe the Nebraska
economy has been generally immune from national recessionary forces, the
state economy is agriculturally based and can be significantly impacted by
down trends in the commodity markets and cutbacks in federal agricultural
programs. See the Statement of Additional Information for information
about the Nebraska economy.
PRIME COMMERCIAL PAPER. Each of the Funds except the Tax-Free Bond Fund may
purchase Prime Commercial Paper, which is a short-term debt obligation that
matures in 270 days or less, is issued by banks, corporations or other
institutions, and is rated one of the two highest rating categories for short-
term obligations by an NRSRO or, if unrated, is of comparable quality to
securities having such ratings, as determined by the Adviser.
PORTFOLIO TURNOVER. Although none of the Funds intends to invest for the
purpose of seeking short-term profits, securities will be sold whenever the
Fund's Adviser believes it is appropriate to do so in light of the Fund's
investment objective, without regard to the length of time a particular
security may have been held. The Adviser does not presently expect the
portfolio turnover rate of the Funds to exceed 100%.
RATINGS. Securities rated in the fourth highest investment grade category (Baa
by Moody's, or BBB by S&P or Fitch) have speculative characteristics and
changes in economic conditions or other circumstances are more likely to lead
to a weakened capacity to make principal and interest payments than higher
rated securities. The Appendix to this Prospectus contains a complete
description of ratings.
If a security is downgraded below the permissible investment category for a
Fund, the Adviser will determine whether or not the security continues to be
an acceptable investment; if not, the security will be sold.
REPURCHASE AGREEMENTS. The securities in which the Funds invest may be
purchased pursuant to repurchase agreements. Repurchase agreements are
arrangements in which banks, broker/dealers, and other recognized financial
institutions sell U.S. government securities or other securities to a Fund and
agree at the time of sale to repurchase them at a mutually agreed upon time
and price. To the extent that the original seller does not repurchase the
securities from a Fund, the Fund could receive less than the repurchase price
on any sale of such securities.
SECURITIES OF OTHER INVESTMENT COMPANIES. Each of the Funds may invest in the
securities of other investment companies, but generally will not own more than
3% of the total outstanding voting stock of any investment company, invest
more than 5% of its respective total assets in any one investment company, or
invest more than 10% of its respective total assets in investment companies in
general,
unless permitted to exceed these limitations by other provisions of the
Investment Company Act of 1940 or an exemptive order of the SEC.
If the SEC grants a pending exemptive request, each Fund will have the ability
to invest a portion of its assets in another Fund, provided it is consistent
with its investment objective and complies with certain SEC conditions. In
that regard, the Equity Fund intends to invest a portion of its assets in the
International Equity Fund in lieu of directly purchasing foreign securities,
and the Adviser has undertaken to waive its advisory fee on that portion of
the Equity Fund's assets that are invested in the International Equity Fund.
Depending on market conditions, the Equity Fund anticipates investing between
0% and 35% of its net assets in the International Equity Fund. Similarly, the
Premier Fund may invest a portion of its assets in the International Equity
Fund, although it has no present intention to do so. It should be noted that
each investment company incurs certain of the same types of expenses and,
therefore, any investment by a Fund in shares of another investment company
would be subject to such duplicate expenses. See "Expenses of the Funds"
herein.
The International Equity Fund may invest indirectly in foreign capital markets
by purchasing shares of closed-end investment companies, but generally only in
open-market transactions involving only customary brokerage commissions.
Sometimes the Fund may pay a premium over net asset value for such shares.
SHORT SALES. The Equity Fund, International Equity Fund and Premier Fund may
make short sales pursuant to a fundamental policy. A short sale occurs when a
borrowed security is sold in anticipation of a decline in its price. If the
decline occurs, shares equal in number to those sold short can be purchased at
the lower price. If the price increases, the higher price must be paid. The
purchased shares are then returned to the original lender. Risk arises because
no loss limit can be placed on the transaction. When a Fund enters into a
short sale, assets equal to the market price of the securities sold short or
any lesser price at which the Fund can obtain such securities, are segregated
on the Fund's records and maintained until the Fund meets its obligations
under the short sale.
TEMPORARY INVESTMENTS. When the Adviser judges that market conditions warrant
a defensive investment position, each of the Funds may temporarily invest up
to 100% of their assets in short-term debt obligations (money market
instruments). These investments include commercial paper, bank instruments,
U.S. government obligations, repurchase agreements, securities of other
investment companies, taxable or tax-free Municipal Securities and foreign
securities. Each Fund's temporary investments must be of comparable quality to
its primary investments.
U.S. GOVERNMENT SECURITIES. All of the Funds may invest in U.S. government
securities. These instruments are either issued or guaranteed by the U.S.
government, its agencies, or instrumentalities. These securities include, but
are not limited to:
. direct obligations of the U.S. Treasury, such as U.S. Treasury bills,
notes, and bonds;
. notes, bonds, and discount notes issued or guaranteed by U.S. government
agencies and instrumentalities supported by the full faith and credit of
the United States;
. notes, bonds, and discount notes of other U.S. government agencies or
instrumentalities which receive or have access to federal funding; and
. notes, bonds, and discount notes of other U.S. government
instrumentalities supported only by the credit of the instrumentalities.
VARIABLE RATE DEMAND NOTES. Each Fund may purchase variable rate demand notes,
which are long-term debt instruments that have variable or floating interest
rates and provide the Fund with the right to tender the security for
repurchase at its stated principal amount plus accrued interest. Such
securities typically bear interest at a rate that is intended to cause the
securities to trade at par. The interest rate may float or be adjusted at
regular intervals (ranging from daily to annually), and is normally based on a
published interest rate or interest rate index. Many variable rate demand
notes allow a Fund to demand the repurchase of the security on not more than
seven days prior notice. Other notes only permit a Fund to tender the security
at the time of each interest rate adjustment or at other fixed intervals. (See
"Demand Features"). Each Fund treats variable rate demand notes as maturing on
the later of the date of the next interest rate adjustment or the date on
which a Fund may next tender the security for repurchase.
WARRANTS. The Equity Fund, the International Equity Fund and Premier Fund may
invest in warrants. Warrants provide an option to purchase common stock at a
specific price (usually at a premium above the market value of the optioned
common stock at issuance) valid for a specific period of time. Warrants may
have a life ranging from less than a year to twenty years or may be perpetual.
However, most warrants have expiration dates after which they are worthless.
In addition, if the market price of the common stock does not exceed the
warrant's exercise price during the life of the warrant, the warrant will
expire as worthless. Warrants have no voting rights, pay no dividends, and
have no rights with respect to the assets of the corporation issuing them. The
percentage increase or decrease in the market price of the warrant may tend to
be greater than the percentage increase or decrease in the market price of the
underlying common stock.
ZERO COUPON SECURITIES. The Intermediate Bond Fund may invest in zero coupon
bonds. The Fund may invest in zero coupon bonds in order to receive the rate
of return through the appreciation of the bond. This application is extremely
attractive in a falling rate environment as the price of the bond rises
rapidly in value as opposed to regular coupon bonds. A zero coupon bond makes
no periodic interest payments and the entire obligation becomes due only upon
maturity.
Zero coupon bonds are debt securities which are issued at a discount to their
face amount and do not entitle the holder to any periodic payments of interest
prior to maturity. Rather, interest earned on zero coupon securities accretes
at a stated yield until the security reaches its face amount at maturity. In
addition, zero coupon securities usually have put features that provide the
holder with the opportunity to sell the bonds back to the issuer at a stated
price before maturity.
Generally, the prices of zero coupon securities are more sensitive to
fluctuations in interest than are conventional bonds and convertible
securities. In addition, federal tax law requires the holder of a zero coupon
security to recognize income from the security prior to the receipt of cash
payments. To maintain its qualification as a regulated investment company and
to avoid liability for federal income taxes, the Fund will be required to
distribute income accrued from zero coupon securities which it owns, and may
have to sell portfolio securities (perhaps at disadvantageous times) in order
to generate cash to satisfy these distribution requirements.
ADDITIONAL INVESTMENT RISKS
DEBT MARKET. In the debt market, prices move inversely to interest rates. A
decline in market interest rates results in a rise in the market prices of
outstanding debt obligations. Conversely, an increase in market interest rates
results in a decline in market prices of outstanding debt obligations. In
either case, the amount of change in market prices of debt obligations in
response to changes in market interest rates generally depends on the maturity
of the debt obligations: the debt obligations with the longest maturities will
experience the greatest market price changes.
The market value of debt obligations, and therefore each Fund's net asset
value, will fluctuate due to changes in economic conditions and other market
factors such as interest rates which are beyond the control of the Funds'
Adviser or Sub-Adviser. The Funds' Adviser or Sub-Adviser could be incorrect
in its expectations about the direction or extent of these market factors.
Although debt obligations with longer maturities offer potentially greater
returns, they have greater exposure to market price fluctuation. Consequently,
to the extent a Fund is significantly invested in debt obligations with longer
maturities, there is a greater possibility of fluctuation in the Fund's net
asset value.
HIGH YIELD DEBT OBLIGATIONS. The Intermediate Bond Fund may invest in high
yield debt obligations. These lower-rated securities will usually offer higher
yields than higher-rated securities. However, there is more risk associated
with these investments. (For example, securities rated in the lowest category
may have been unable to satisfy their obligations under the bond indenture.)
These lower-rated bonds may be more susceptible to real or perceived adverse
economic conditions than investment grade bonds. These lower-rated bonds are
regarded as predominantly speculative with regard to each issuer's continuing
ability to make principal and interest payments. In addition, the secondary
trading market for lower-rated bonds may be less liquid than the market for
investment grade bonds. As a result of these factors, lower-rated securities
tend to have more price volatility and carry more risk to principal than
higher-rated securities. The Adviser will endeavor to limit these risks
through diversifying the portfolio and through careful credit analysis of
individual issuers. Purchasers should carefully assess the risks associated
with an investment in the Fund.
Many corporate debt obligations, including many lower-rated bonds, permit the
issuers to call the security and thereby redeem their obligations earlier than
the stated maturity dates. Issuers are more likely to call bonds during
periods of declining interest rates. In these cases, if the Intermediate Bond
Fund owns a bond which is called, the Fund will receive its return of
principal earlier than expected and would likely be required to reinvest the
proceeds at lower interest rates, thus reducing income to the Fund. In
addition, lower-rated bonds may be more difficult to dispose of or to value
than higher-rated, lower-yielding bonds.
MORTGAGE-BACKED AND ASSET-BACKED SECURITIES. Mortgage-Backed and Asset-Backed
Securities generally pay back principal and interest over the life of the
security. At the time a Fund reinvests the payments and any unscheduled
prepayments of principal received, the Fund may receive a rate of interest
which is actually lower than the rate of interest paid on these securities
("prepayment risks"). Mortgage-Backed and Asset-Backed Securities are subject
to higher prepayment risks than most other types of debt instruments with
prepayment risks because the underlying mortgage loans or the collateral
supporting Asset-Backed Securities may be prepaid without penalty or premium.
Prepayment risks on Mortgage-Backed Securities tend to increase during periods
of declining
mortgage interest rates because many borrowers refinance their mortgages to
take advantage of the more favorable rates. Prepayments on Mortgage-Backed
Securities are also affected by other factors, such as the frequency with
which people sell their homes or elect to make unscheduled payments on their
mortgages. Although Asset-Backed Securities generally are less likely to
experience substantial prepayments than are Mortgage-Backed Securities,
certain factors that affect the rate of prepayments on Mortgage-Backed
Securities also affect the rate of prepayments on Asset-Backed Securities.
While Mortgage-Backed Securities generally entail less risk of a decline
during periods of rapidly rising interest rates, Mortgage-Backed Securities
may also have less potential for capital appreciation than other similar
investments (e.g., investments with comparable maturities) because as interest
rates decline, the likelihood increases that mortgages will be prepaid.
Furthermore, if Mortgage-Backed Securities are purchased at a premium,
mortgage foreclosures and unscheduled principal payments may result in some
loss of a holder's principal investment to the extent of the premium paid.
Conversely, if Mortgage-Backed Securities are purchased at a discount, both a
scheduled payment of principal and an unscheduled prepayment of principal
would increase current and total returns and would accelerate the recognition
of income, which would be taxed as ordinary income when distributed to
shareholders.
Asset-Backed Securities present certain risks that are not presented by
Mortgage-Backed Securities. Primarily, these securities do not have the
benefit of the same security interest in the related collateral. Credit card
receivables are generally unsecured and the debtors are entitled to the
protection of a number of state and federal consumer credit laws, many of
which give such debtors the right to set off certain amounts owed on the
credit cards, thereby reducing the balance due. Most issuers of Asset-Backed
Securities backed by motor vehicle installment purchase obligations permit the
servicer of such receivables to retain possession of the underlying
obligations. If the servicer sells these obligations to another party, there
is a risk that the purchaser would acquire an interest superior to that of the
holders of the related Asset-Backed Securities. Further, if a vehicle is
registered in one state and is then re-registered because the owner and
obligor moves to another state, such reregistration could defeat the original
security interest in the vehicle in certain cases. In addition, because of the
large number of vehicles involved in a typical issuance and technical
requirements under state laws, the trustee for the holders of Asset-Backed
Securities backed by automobile receivables may not have a proper security
interest in all of the obligations backing such receivables. Therefore, there
is the possibility that recoveries on repossessed collateral may not, in some
cases, be available to support payments on these securities.
MUNICIPAL SECURITIES. Yields on Municipal Securities depend on a variety of
factors, including: the general conditions of the short-term municipal note
market and of the municipal bond market; the size of the particular offering;
the maturity of the obligations; and the rating of the issue. The ability of
the Intermediate Bond Fund or Tax-Free Bond Fund to achieve its investment
objective by purchasing Municipal Securities also depends on the continuing
ability of the issuers of Municipal Securities and demand features, or the
credit enhancers of either, to meet their obligations for the payment of
interest and principal when due.
Since the Tax-Free Bond Fund may invest a significant portion of its assets in
Nebraska Municipal Securities, the Fund is susceptible to political and
economic factors affecting the issuers of Nebraska Municipal Securities. The
Nebraska economy performed steadily during 1996 as the national economy
continued its slow expansion. The Nebraska economy generally avoided the
national recession of the early 1990's and continued to expand in 1996 with
growth in the labor force, jobs, retail sales, tourism visits and population.
Overall, it is anticipated that the State's economy will grow moderately,
reflecting the national economy. Historically, the Nebraska economy tends to
be less cyclical than the national economy. It typically does not grow as fast
as the national economy during expansions and does not contract as much during
recessions.
The Tax-Free Bond Bond Fund has a fundamental investment restriction which
prohibits the Fund from investing more than 25% of its total assets in
securities of issuers in any single industry. This restriction does not,
however, place any such limitation on the purchase of securities issued or
guaranteed by the U.S. government, its agencies or instrumentalities, or by
Nebraska, its political subdivisions, municipalities, agencies and
authorities. Moreover, the Fund may invest 25% or more of its total assets in
Municipal Securities whose revenue sources are from mortgage loans, community
development, education, electric utilities, health care, housing and
transportation. There may be economic, business or political developments or
changes that affect securities of a similar type, such as changes in
government regulation, increased costs of necessary materials, increased
competition, or declining market needs. Therefore, developments affecting a
single issuer or industry or securities financing such projects may have a
significant impact on the Fund's performance.
STOCK MARKET. As with other mutual funds that invest primarily in equity
securities, the Equity Fund, International Equity Fund and Premier Fund are
subject to market risks. That is, the possibility exists that common stocks
will decline over short or even extended periods of time, and the United
States equity market tends to be cyclical, experiencing both periods when
stock prices generally increase and periods when stock prices generally
decrease.
SMALL AND MEDIUM CAPITALIZATION STOCKS. Stocks in the small and medium
capitalization sector of the United States equity market tend to be
slightly more volatile in price than larger capitalization stocks, such as
those included in the Standard & Poor's Daily Stock Price Index of 500
Common Stocks ("S&P 500"). This is because, among other things, small- and
medium-sized companies may have less certain growth prospects than larger
companies, have a lower degree of liquidity in the equity market, and tend
to have a greater sensitivity to changing economic conditions. Further, in
addition to exhibiting slightly higher volatility, the stocks of small-
and medium-sized companies may, to some degree, fluctuate independently of
the stocks of large companies. That is, the stocks of small- and medium-
sized companies may decline in price as the price of large company stocks
rise or vice versa.
FOREIGN SECURITIES. Investing in non-U.S. securities carries substantial risks
in addition to those associated with domestic investments. The risks
associated with investing in foreign securities include: risks of adverse
political, social, diplomatic and economic developments (including possible
governmental seizure or nationalization of assets) and difficulty assessing
trends in these areas; the possible imposition of exchange controls or other
governmental restrictions; default in foreign government securities; foreign
companies are not generally subject to uniform financial reporting, auditing
and accounting standards, and auditing practices and requirements may not be
comparable to those applicable to U.S. companies; there are less readily
available market quotations on foreign companies; there is the possibility of
less publicly available information on foreign securities and their issuers;
there are differences in government regulation and supervision of foreign
stock exchanges,
brokers, listed companies, and banks; there is generally lower foreign stock
market volume; there is the likelihood that foreign securities may be less
liquid or more volatile; foreign brokerage commissions and other transaction
costs (such as custodial services) may be higher; there is unreliable mail
service between countries; there are restrictions on foreign investments in
other jurisdictions; there are difficulties which may be encountered in
enforcing contractual obligations and obtaining or enforcing a court judgment
abroad and effecting repatriation of capital invested abroad; and there are
delays or problems in settlement of foreign transactions, which could
adversely affect shareholder equity or cause the Fund to miss attractive
investment opportunities. In addition, foreign securities may be subject to
foreign taxes, which reduce yield and total return.
EMERGING MARKETS. Generally included in emerging markets are all countries
in the world except Australia, Canada, Japan, New Zealand, the United
States, and most western European countries. The risks of investing in
developing or emerging markets are similar to, but greater than, the risks
of investing in the securities of developed international markets since
emerging or developing markets tend to have economic structures that are
less diverse and mature, and political systems that are less stable, than
developed countries.
In certain emerging market countries, there is less government supervision
and regulation of business and industry practices, stock exchanges,
brokers, and listed companies than in the United States. The economies of
emerging market countries may be predominantly based on a few industries
and may be highly vulnerable to change in local or global trade
conditions. The securities markets of many of these countries also may be
smaller, less liquid, and subject to greater price volatility than those
in the United States. Some emerging market countries also may have fixed
or managed currencies which are not free-floating against the U.S. dollar.
Further, certain emerging market country currencies may not be
internationally traded. Certain of these currencies have experienced a
steady devaluation relative to the U.S. dollar. Any devaluations in the
currencies in which portfolio securities are denominated may have an
adverse impact on the Fund. Finally, many emerging market countries have
experienced substantial, and in some periods, extremely high, rates of
inflation for many years. Inflation and rapid fluctuations in inflation
rates have had, and may continue to have, negative effects on the
economies for individual emerging market countries. Moreover, the
economies of individual emerging market countries may differ favorably or
unfavorably from the U.S. economy in such respects as the rate of growth
of domestic product, inflation, capital reinvestment, resource self-
sufficiency and balance of payments position.
EXCHANGE RATES. Foreign securities may be denominated in foreign
currencies. Although the International Equity Fund intends to invest in
such foreign currency-denominated securities to a greater extent than the
Equity Fund and Premier Fund, the value in U.S. dollars of each of these
Funds' assets and income may be affected by changes in exchange rates and
regulations. Although each Fund values its assets daily in U.S. dollars,
it will not convert its holding of foreign currencies to U.S. dollars
daily. When a Fund converts its holdings to another currency, it may incur
conversion costs. Foreign exchange dealers realize a profit on the
difference between the prices at which they buy and sell currencies.
FOREIGN MONEY MARKET INSTRUMENTS. ECDs, ETDs, Yankee CDs, and Europaper
are subject to somewhat different risks than domestic obligations of
domestic issuers. Examples of these risks
include international, economic, and political developments, foreign
governmental restrictions that may adversely affect the payment of
principal or interest, foreign withholding or other taxes on interest
income, difficulties in obtaining or enforcing a judgment against the
issuing bank, and the possible impact of interruptions in the flow of
international currency transactions. Different risks may also exist for
ECDs, ETDs, and Yankee CDs because the banks issuing these instruments, or
their domestic or foreign branches, are not necessarily subject to the
same regulatory requirements that apply to domestic banks, such as reserve
requirements, loan limitations, examinations, accounting, auditing, and
recordkeeping, and the public availability of information. These factors
will be carefully considered by a Fund's Adviser in selecting these
investments.
U.S. GOVERNMENT POLICIES. In the past, U.S. government policies have
discouraged or restricted certain investments abroad by investors. When
such policies are instituted, the Equity Fund, International Equity Fund
and Premier Fund will abide by them.
FUTURES AND OPTIONS. When a Fund uses futures and options on futures as
hedging devices, there is a risk that the values of the currencies subject to
the futures contracts may not correlate with the values of the currencies in
the Fund's portfolio. This may cause the futures contract and any related
options to react differently than the portfolio securities to market changes.
In addition, the Fund's Adviser or Sub-Adviser could be incorrect in its
expectations about the direction or extent of market factors such as interest
or currency exchange rate movements. In these events, the Fund may lose money
on the futures contract or option. Also, it is not certain that a secondary
market for positions in futures contracts or for options will exist at all
times. Although the Fund's Adviser will consider liquidity before entering
into such transactions, there is no assurance that a liquid secondary market
on an exchange or otherwise will exist for any particular futures contract or
option at any particular time. The Fund's ability to establish and close out
futures and options positions depends on this secondary market.
NON-DIVERSIFICATION. The Equity Fund, International Equity Fund, Premier Fund
and Tax-Free Bond Fund are designated as non-diversified investment portfolios
under the 1940 Act and, therefore, are not subject to the issuer limitations
imposed on a diversified portfolio (see the "Diversification" section above
relating to the Intermediate Bond Fund). An investment in these Funds,
therefore, will entail greater risk than would exist in a diversified
portfolio of securities because the higher percentage of investments among
fewer issuers may result in greater fluctuation in the total market value of
such Funds' portfolios. Any economic, political, or regulatory developments
affecting the value of the securities in these Funds' portfolios may have a
greater impact on the total value of the portfolios than would be the case if
the portfolios were diversified among more issuers.
Notwithstanding the foregoing, each Fund intends to comply with the
diversification requirements of Subchapter M of the Internal Revenue Code.
This requires that at the end of each quarter of the Fund's taxable year, the
aggregate value of all investments of the Fund in any one issuer (except U.S.
government obligations, cash, cash items and other investment companies) which
exceed 5% of the Fund's total assets (valued at the time of investment) shall
not exceed 50% of the value of its total assets, and, with respect to the
remaining assets, no more than 25% of the Fund's assets (valued at the time of
investment) shall be invested in a single issuer.
TAX INFORMATION
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FEDERAL INCOME TAX
None of the Funds will pay federal income tax because each expects to meet
requirements of the Internal Revenue Code applicable to regulated investment
companies and to receive the special tax treatment afforded to such companies.
Each Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by the
other Funds of the Trust, if any, will not be combined for tax purposes with
those realized by any of the other Funds.
Unless otherwise exempt, you are required to pay federal income tax on any
dividends and other distributions received. However, shareholders of Tax-Free
Bond Fund are not required to pay the federal regular income tax on any
dividends received from the Fund that represent net interest on tax-exempt
municipal bonds; but, under the Tax Reform Act of 1986, dividends representing
net interest earned on certain "private-activity" municipal bonds may be
included in calculating the federal individual alternative minimum tax or the
federal alternative minimum tax for corporations. Dividends of the Tax-Free
Bond Fund representing net interest income earned on some temporary taxable
investments and any realized net short-term gains are taxed as ordinary
income.
Investment income received by the International Equity Fund from sources
within foreign countries may be subject to foreign taxes withheld at the
source. The United States has entered into tax treaties with many foreign
countries that entitle the International Equity Fund to reduced tax rates or
exemptions on this income. The effective rate of foreign tax cannot be
predicted since the amount of International Equity Fund's assets to be
invested within various countries is unknown. However, the International
Equity Fund intends to operate so as to qualify for treaty-reduced tax rates
where applicable.
If more than 50% of the value of the International Equity Fund's assets at the
end of the tax year is represented by stock or securities of foreign
corporations, the International Equity Fund intends to qualify for certain
Internal Revenue Code stipulations that would allow shareholders to claim a
foreign tax credit or deduction on their U.S. income tax returns. The Internal
Revenue Code may limit a shareholder's ability to claim a foreign tax credit.
Furthermore, shareholders who elect to deduct their portion of the
International Equity Fund's foreign taxes rather than take the foreign tax
credit must itemize deductions on their income tax returns.
To the extent the Equity Fund or the Premier Fund invests in the International
Equity Fund, the shareholders of the Equity Fund and Premier Fund will not be
able to earn the foreign tax credit on investments held by the International
Equity Fund.
These tax consequences apply whether dividends are received in cash or as
additional shares. Information on the tax status of dividends and
distributions is provided annually.
STATE AND LOCAL TAXES
Distributions on the Tax-Free Bond Fund representing net interest received on
tax-exempt municipal securities are not necessarily free from income taxes of
any state or local taxing authority, although they may be exempt from Nebraska
personal income tax. State laws differ on this issue, and you
should consult your tax adviser for specific details regarding the status of
your account under state and local tax laws, including treatment of
distributions as income or return of capital.
NEBRASKA TAXES
Under existing Nebraska laws, distributions made by the Tax-Free Bond Fund
will not be subject to Nebraska income taxes to the extent that such
distributions qualify as exempt-interest dividends under the Internal Revenue
Code, and represent (i) interest from obligations of Nebraska, its political
subdivisions, authorities, commissions or instrumentalities; or (ii) interest
from obligations of the United States and its territories and possessions or
of any authority, commission, or instrumentality of the United States to the
extent exempt from state income taxes under the laws of the United States.
Conversely, to the extent that distributions made by the Tax-Free Bond Fund
are attributable to other types of obligations, such distributions will be
subject to Nebraska income taxes.
GREAT PLAINS INTERMEDIATE BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 25, 1997
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<TABLE>
<S> <C>
ASSETS:
- --------------------------------------------------
Cash $100,000
- --------------------------------------------------
LIABILITIES: --
- -------------------------------------------------- --------
Net Assets for 10,000 shares outstanding $100,000
- -------------------------------------------------- ========
NET ASSET VALUE AND REDEMPTION PROCEEDS PER SHARE:
- --------------------------------------------------
($100,000 / 10,000 shares outstanding) $10.00
- -------------------------------------------------- ========
Offering Price Per Share (100/97 of $10.00) $10.31
- -------------------------------------------------- ========
</TABLE>
Notes:
(1) Great Plains Intermediate Bond Fund (the "Fund") is a diversified
portfolio of Great Plains Funds (the "Trust"), an open-end management
investment company (a mutual fund). The Trust was established as a
Massachusetts business trust under a Declaration of Trust dated July 1,
1997, and has no operations since that date other than those relating to
organizational matters, including the issuance on August 25, 1997 of
10,000 shares at $10.00 per share to Federated Services Company, the
Administrator to the Fund. Expenses of organization incurred by the Fund,
estimated at $30,000, were borne initially by the Administrator. The Fund
has agreed to reimburse the Administrator for the organizational expenses
within five years of the date the Fund becomes effective.
(2) Reference is made to the "Management of the Trust" (on page 15),
"Administration of the Trust" (on page 18) and "Tax Information" (on page
38) in the prospectus for descriptions of the investment advisory fee,
administrative and other services and federal tax aspects of the Fund.
(3) Certain Officers and Trustees of the Trust are Officers and Directors or
Trustees of the Adviser and the Administrator.
INDEPENDENT AUDITORS' REPORT
- -------------------------------------------------------------------------------
To the Board of Trustees of the GREAT PLAINS FUNDS
and the Shareholder of GREAT PLAINS INTERMEDIATE BOND FUND:
We have audited the accompanying statement of assets and liabilities of Great
Plains Intermediate Bond Fund as of August 25, 1997. This financial statement
is the responsibility of the Fund's management. Our responsibility is to
express an opinion on this financial statement 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 statement is free of
material misstatement. An audit included examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. 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, such statement of assets and liabilities presents fairly, in
all material respects, the financial position of Great Plains Intermediate
Bond Fund as of August 25, 1997, in conformity with generally accepted
accounting principles.
Deloitte & Touche LLP
Pittsburgh, Pennsylvania
August 27, 1997
APPENDIX
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STANDARD AND POOR'S CORPORATE BOND RATINGS
AAA--Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA--Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB--Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB, B, CCC, CC--Debt rated BB, B, CCC and CC is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and CC the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties of major risk exposures to adverse
conditions.
C--The rating C typically is applied to debt subordinated to senior debt which
is assigned an actual or implied "CCC-" debt rating. The C rating may be used
to cover a situation where a bankruptcy petition has been filed, but debt
service payments are continued.
D--Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if
the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period. The D rating also will be used
upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
NR--Indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not rate
a particular type of obligation as a matter of policy.
MOODY'S INVESTORS SERVICE, INC. CORPORATE BOND RATINGS
Aaa--Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such issues.
Aa--Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long term risks appear somewhat larger than in Aaa
securities.
A--Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa--Bonds which are rated Baa are considered as medium grade obligations,
(i.e., they are neither highly protected nor poorly secured.) Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba--Bonds which are Ba are judged to have speculative elements; their future
cannot be considered as well-assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B--Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa--Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
or interest.
Ca--Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.
C--Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
NR--Not rated by Moody's.
FITCH INVESTORS SERVICE, INC. LONG-TERM DEBT RATINGS
AAA--Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events.
AA--Bonds considered to be investment grade and of very high credit quality.
The obligor's ability to pay interest and repay principal is very strong,
although not quite as strong as bonds rated AAA.
Because bonds rated in the AAA and AA categories are not significantly
vulnerable to foreseeable future developments, short-term debt of these
issuers is generally rated F-1+.
A--Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions
and circumstances than bonds with higher ratings.
BBB--Bonds considered to be investment grade and of satisfactory credit
quality. The obligator's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these bonds,
and therefore, impair timely payment. The likelihood that the ratings of these
bonds will fall below investment grade is higher than for bonds with higher
ratings.
BB--Bonds are considered speculative. The obligor's ability to pay interest
and repay principal may be affected over time by adverse economic changes.
However, business and financial alternatives can be identified which could
assist the obligor in satisfying its debt service requirements.
B--Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued
timely payment of principal and interest reflects the obligor's limited margin
of safety and the need for reasonable business and economic activity
throughout the life of the issue.
CCC--Bonds have certain identifiable characteristics which, if not remedied,
may lead to default. The ability to meet obligations requires an advantageous
business and economic environment.
CC--Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C--Bonds are in imminent default in payment or interest or principal.
DDD, DD, AND D--Bonds are in default on interest and/or principal payments.
Such bonds are extremely speculative and should be valued on the basis of
their ultimate recovery value in liquidation or reorganization of the obligor.
"DDD" represents the highest potential for recovery on these bonds, and "D"
represents the lowest potential for recovery.
NR--Indicates that Fitch does not rate the specific issue.
STANDARD AND POOR'S COMMERCIAL PAPER RATINGS
A-1--This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. The issues determined to
possess overwhelming safety characteristics are denoted with a plus (+) sign
designation.
A-2--Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as high as for issues designated
A-1.
MOODY'S INVESTORS SERVICES, INC. COMMERCIAL PAPER RATINGS
P-1--Issuers rated PRIME-1 (for related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. PRIME-1
repayment capacity will normally be evidenced by the following
characteristics: conservative capitalization structures with moderate reliance
on debt and ample asset protection; broad margins in earning coverage of fixed
financial charges and high internal cash generation; and well-established
access to a range of financial markets and assured sources of alternate
liquidity.
P-2--Issuers rated PRIME-2 (for related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternate liquidity is
maintained.
FITCH INVESTORS SERVICE, INC. SHORT-TERM RATINGS
F-1+--(Exceptionally Strong Credit Quality). Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1--(Very Strong Credit Quality). Issues assigned to this rating reflect an
assurance of timely payment only slightly less in degree than issues rated F-
1+.
F-2--(Good Credit Quality). Issues carrying this rating have a satisfactory
degree of assurance for timely payment but the margin of safety is not as
great as the F-1+ and F-1 categories.
ADDRESSES
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<TABLE>
<S> <C> <C>
Great Plains Equity Fund Federated Investors Tower
Great Plains International Equity Fund Pittsburgh, Pennsylvania 15222-3779
Great Plains Premier Fund
Great Plains Intermediate Bond Fund
Great Plains Tax-Free Bond Fund
- ----------------------------------------------------------------------------------------------------------------------------
Distributor
Edgewood Services, Inc. Clearing Operations
P.O. Box 897
Pittsburgh, Pennsylvania 15222-3779
- ----------------------------------------------------------------------------------------------------------------------------
Adviser to all Funds
First Commerce Investors, Inc. 610 NBC Center
Lincoln, Nebraska 68508
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Sub-Adviser
Peter A. Kinney 11 S. LaSalle, #2900
Chicago, Illinois 60603
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Custodian
National Bank of Commerce 1248 "O" Street
Lincoln, Nebraska 68508
- ----------------------------------------------------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Shareholder Services Company P.O. Box 8612
Boston, MA 02266-8612
- ----------------------------------------------------------------------------------------------------------------------------
Administrator and Portfolio Accountant
Federated Services Company Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ----------------------------------------------------------------------------------------------------------------------------
Legal Counsel
Bell, Boyd & Lloyd Three First National Plaza
70 West Madison Street
Chicago, Illinois 60602
Independent Public Auditors
Deloitte & Touche LLP 2500 One PPG Place
Pittsburgh, Pennsylvania 15222-5401
</TABLE>
Edgewood Services, Inc.
Distributor
Cusip 391163102
Cusip 391163201
Cusip 391163300
Cusip 391163409
Csuip 391163508
G02180-01 (9/97)
Table of Contents
- ---------------------------------------------------------------------------
Great Plains Equity Fund
Great Plains Premier Fund
Great Plains International Equity Fund
Great Plains Intermediate Bond Fund
Great Plains Tax-Free Bond Fund
(Portfolios of Great Plains Funds)
Statement of Additional Information
September 18, 1997
This Statement of Additional Information should be read with the
prospectus, dated September 18, 1997, for the Funds listed above. This
Statement is not a prospectus itself. You may request a copy of a
prospectus or a paper copy of this Statement, if you have received it
electronically, free of charge, by writing or calling the Funds at
1-800-568-8257.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
EDGEWOOD SERVICES, INC.
Distributor
A subsidiary of FEDERATED INVESTORS
<PAGE>
Table of Contents
- --------------------------------------------------------------------------------
Policies and Acceptable Investments 1
Investment Limitations 7
Fundamental Limitations 7
Non-Fundamental Limitations 8
Nebraska Investment Risks 9
Great Plains Funds Management 13
Officers and Trustees 13
Fund Ownership 15
Trustees' Compensation 15
Investment Advisory Services 15
Adviser to the Funds 15
Advisory Fees 16
Sub-Advisory Fees 16
Other Services 16
Administrative Services 16
Transfer Agent, Dividend Disbursing Agent and
Portfolio Accounting Services 16
Custodian 16
Independent Auditors 16
Shareholder Servicing Arrangements 16
Brokerage Transactions 16
Distribution Plan and Agreement 17
Administrative Arrangements 17
Conversion to Federal Funds 17
Determining Market Value 17
Market Values 17
Trading in Foreign Securities 18
Redemption in Kind 18
Effect of Banking Laws 18
Massachusetts Partnership Law 19
Tax Status 19
The Funds' Tax Status 19
Foreign Taxes 19
Shareholders' Tax Status 19
Capital Gains 20
Total Return 20
Yield 20
Tax-Equivalent Yield 21
Tax-Equivalency Table-Nebraska 21
Tax-Equivalency Table-Multi-State 22
Performance Comparisons 23
Economic and Market Information 25
<PAGE>
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1
1 This Statement contains additional information about the Great Plains Funds
(the "Trust") and its five investment portfolios (the "Funds"). This Statement
uses the same terms as defined in the Prospectus.
Policies and Acceptable Investments
Asset-Backed Securities. Asset-Backed Securities are bonds or notes backed by
loans or accounts receivable originated by banks, or other credit providers or
financial institutions. Asset-Backed Securities may be pooled and then divided
into classes of securities, known as tranches, and resold. Each tranche has a
specified interest rate and maturity. The cash flows from the underlying pool of
Asset-Backed Securities are applied first to pay interest and then to retire
securities. All principal payments are directed first to the shortest-maturity
tranche. When those securities are completely retired, all principal payments
are then directed to the next-shortest-maturity tranche. This process continues
until all of the tranches have been completely retired.
Average Maturity. For purposes of determining the dollar-weighted average
maturity of a Fund's portfolio, the maturity of a security will be its ultimate
maturity. If it is probable that the issuer of the security will take advantage
of maturity-shortening devices such as a call, refunding, or redemption
provision, the maturity date will be the date on which it is probable that the
security will be called, refunded, or redeemed. If the security includes the
right to demand payment, the maturity of the security for purposes of
determining a Fund's dollar-weighted average portfolio maturity will be the
period remaining until the principal amount of the security can be recovered by
exercising the right to demand payment.
Convertible Securities. When owned as part of a unit along with warrants, which
entitle the holder to buy the common stock, convertible securities function as
convertible bonds, except that the warrants generally will expire before the
bonds' maturity. A Fund will exchange or convert the convertible securities held
in its portfolio into shares of the underlying common stocks when, in the
Adviser's opinion, the investment characteristics of the underlying common
shares will assist the Fund in achieving its investment objective. Otherwise,
the Fund will hold or trade the convertible securities. In evaluating these
matters with respect to a particular convertible security, the Fund's Adviser
considers numerous factors, including the economic and political outlook, the
value of the security relative to other investment alternatives, trends in the
determinants of the issuer's profits, and the issuer's management capability and
practices.
Derivative Contracts and Securities. The term derivative has traditionally been
applied to certain contracts (including futures, forward, option and swap
contracts) that "derive" their value from changes in the value of an underlying
security, currency, commodity or index. Certain types of securities that
incorporate the performance characteristics of these contracts are also referred
to as "derivatives." The term has also been applied to securities "derived" from
the cash flows from underlying securities, mortgages or other obligations.
Derivative contracts and securities can be used to reduce or increase the
volatility of an investment portfolio's total performance. While the response of
certain derivative contracts and securities to market changes may differ from
traditional investments, such as stock and bonds, derivatives do not necessarily
present greater market risks than traditional investments. The Funds will only
use derivative contracts for the purposes disclosed in the applicable sections
of their Prospectus or this Statement. To the extent that a Fund invests in
securities that could be characterized as derivatives, it will only do so in a
manner consistent with its investment objective, policies, and limitations.
Duration. Duration is a commonly used measure of potential volatility in the
price of a bond, or other fixed income security, or in a portfolio of fixed
income securities, prior to maturity. Volatility is the magnitude of the change
in the price of a bond relative to a given change in the market rate of
interest. A bond's price volatility depends on three primary variables: the
bond's coupon rate; maturity date; and the level of market yields of similar
fixed income securities. Generally, bonds with lower coupons or longer
maturities will be more volatile than bonds with higher coupons or shorter
maturities. Duration combines these variables into a single measure.
Duration is calculated by dividing the sum of time-weighted values of the cash
flows of a bond or bonds, including interest and principal payments, by the sum
of the present values of the cash flows. When a Fund invests in mortgage
pass-through securities, its duration will be calculated in a manner which
requires assumptions to be made regarding future principal prepayments. A more
complete description of this calculation is available upon request from the
Funds.
Foreign Currency Hedging Transactions. In order to hedge against foreign
currency exchange rate risks, the Equity Fund, International Equity Fund and
Premier Fund may enter into forward foreign currency exchange contracts and
foreign currency futures contracts, as well as purchase put or call options on
foreign currencies or currency futures transactions, as described below. The
Funds may also conduct their foreign currency exchange transactions on a spot
(i.e., cash) basis at the spot rate prevailing in the foreign currency exchange
market.
The Equity Fund, International Equity Fund and Premier Fund may enter into
forward foreign currency exchange contracts ("forward contracts") to attempt to
minimize the risk to a Fund from adverse changes in the relationship between the
U.S. dollar and foreign currencies. A forward contract is an obligation to
purchase or sell a specific currency for an agreed price at a future date which
is individually negotiated and privately traded by currency traders and their
customers. A Fund may enter into a forward contract, for example, when it enters
into a contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. dollar price of the security. In
addition, for example, when a Fund believes that a foreign currency may suffer a
substantial decline against the U.S. dollar, it may enter into a forward
contract to sell an amount of that foreign currency approximating the value of
some or all of the Fund's portfolio securities denominated in such foreign
currency; or when a Fund believes that the U.S. dollar may suffer a substantial
decline against a foreign currency, it may enter into a forward contract to buy
that foreign currency for a fixed dollar amount. This second investment practice
is generally referred to as "cross-hedging." Because in connection with a Fund's
forward foreign currency transactions an amount of the Fund's assets equal to
the amount of the purchase will be held aside or segregated to be used to pay
for the commitment, the Fund will always have cash, cash equivalents or high
quality debt securities available sufficient to cover any commitments under
these contracts or to minimize potential risk. The segregated account will be
marked to market on a daily basis. While these contracts are not presently
regulated by the Commodity Futures Trading Commission ("CFTC"), the CFTC may in
the future assert authority to regulate forward contracts. In such event, the
Fund's ability to utilize forward contracts in the manner set forth above may be
restricted. Forward contracts may limit potential gain from a positive change in
the relationship between the U.S. dollar and foreign currencies. Unanticipated
changes in currency prices may result in poorer overall performance for the Fund
than if it had not engaged in such contracts.
The Equity Fund, International Equity Fund and Premier Fund may purchase and
write put and call options on foreign currencies for the purpose of protecting
against declines in the dollar value of foreign portfolio securities and against
increases in the dollar cost of foreign securities to be acquired. As is the
case with other kinds of options, however, the writing of an option on foreign
currency will constitute only a partial hedge, up to the amount of the premium
received, and a Fund could be required to purchase or sell foreign currencies at
disadvantageous exchange rates, thereby incurring losses. The purchase of an
option on foreign currency may constitute an effective hedge against fluctuation
in exchange rates, although, in the event of rate movements adverse to the
Fund's position, the Fund may forfeit the entire amount of the premium plus
related transaction costs. Options on foreign currencies to be written or
purchased by a Fund will be traded on U.S. and foreign exchanges or
over-the-counter.
The Equity Fund, International Equity Fund and Premier Fund may enter into
exchange-traded contracts for the purchase or sale for future delivery of
foreign currencies ("foreign currency futures") and may purchase and write put
and call options on foreign currency futures. This investment technique will be
used only to hedge against anticipated future changes in exchange rates which
otherwise might adversely affect the value of a Fund's portfolio securities or
adversely affect the prices of securities that the Fund intends to purchase at a
later date. The successful use of foreign currency futures will usually depend
on the ability of a Fund's Adviser and Sub-Adviser to forecast currency exchange
rate movements correctly. Should exchange rates move in an unexpected manner,
the Fund may not achieve the anticipated benefits of foreign currency futures or
may realize losses.
"Margin" In Futures Transactions. Unlike the purchase or sale of a
security, the Equity Fund, International Equity Fund and Premier Fund do
not pay or receive money upon the purchase or sale of a futures contract.
Rather, the Fund is required to deposit an amount of "initial margin" in
cash, U.S. government securities or highly-liquid debt securities with
its custodian (or the broker, if legally permitted). The nature of
initial margin in futures transactions is different from that of margin
in securities transactions in that initial margin in futures transactions
does not involve the borrowing of funds by the Fund to finance the
transactions. Initial margin is in the nature of a performance bond or
good faith deposit on the contract which is returned to the Fund upon
termination of the futures contract, assuming all contractual obligations
have been satisfied.
A futures contract held by the Equity Fund, International Equity Fund and
Premier Fund is valued daily at the official settlement price of the
exchange on which it is traded. Each day a Fund pays or receives cash,
called "variation margin," equal to the daily change in value of the
futures contract. This process is known as "marking to market." Variation
margin does not represent a borrowing or loan by the Fund but is instead
settlement between the Fund and the broker of the amount one would owe
the other if the futures contract expired. In computing its daily net
asset value, the Fund will mark to market its open futures positions. The
Fund is also required to deposit and maintain margin when it writes call
options on futures contracts. When the Fund purchases futures contracts,
an amount of cash and cash equivalents, equal to the underlying commodity
value of the futures contracts (less any related margin deposits), will
be deposited in a segregated account with the Fund's custodian (or the
broker, if legally permitted) to collateralize the position and thereby
insure that the use of such futures contracts is unleveraged.
To the extent required to comply with CFTC Regulation 4.5 and thereby
avoid status as a "commodity pool operator," the Equity Fund,
International Equity Fund and Premier Fund will not enter into a futures
contract for other than bona fide hedging purposes, or purchase an option
thereon, if immediately thereafter the initial margin deposits for
futures contracts held by it, plus premiums paid by it for open options
on futures contracts, would exceed 5% of the market value of a Fund's net
assets, after taking into account the unrealized profits and losses on
those contracts it has entered into; and, provided further, that in the
case of an option that is in-the-money at the time of purchase, the
in-the-money amount may be excluded in computing such 5%. Second, the
Funds will not enter into these contracts for speculative purposes;
rather, these transactions are entered into only for bona fide hedging
purposes, or other permissible purposes pursuant to regulations
promulgated by the CFTC. Third, since the Funds do not constitute a
commodity pool, they will not market themselves as such, nor serve as a
vehicle for trading in the commodities futures or commodity options
markets. Finally, because the Funds will submit to the CFTC special calls
for information, the Funds will not register as commodities pool
operators.
Limitation on Open Futures Positions. The Equity Fund, International
Equity Fund and Premier Fund will not maintain open positions in futures
contracts they have sold or call options they have written on futures
contracts if, in the aggregate, the value of the open positions (marked
to market) exceeds the current market value of their respective
securities portfolio plus or minus the unrealized gain or loss on those
open positions, adjusted for the correlation of volatility between the
hedged securities and the futures contracts. If this limitation is
exceeded at any time, the Funds will take prompt action to close out a
sufficient number of open contracts to bring their respective open
futures and options positions within this limitation.
Risks. When the Equity Fund, International Equity Fund and Premier Fund
use futures and options on futures as hedging devices, there is a risk
that the prices of the securities or foreign currency subject to the
futures contracts may not correlate perfectly with the prices of the
securities or currency in that Fund's portfolio. This may cause the
futures contract and any related options to react differently to market
changes than the portfolio securities or foreign currency. In addition, a
Fund's Adviser or Sub-Adviser could be incorrect in its expectations
about the direction or extent of market factors such as stock price
movements or foreign currency exchange rate fluctuations. In these
events, a Fund may lose money on the futures contract or option.
It is not certain that a secondary market for positions in futures
contracts or for options will exist at all times. Although the Adviser
will consider liquidity before entering into these transactions, there is
no assurance that a liquid secondary market on an exchange or otherwise
will exist for any particular futures contract or option at any
particular time. The Funds' ability to establish and close out futures
and options positions depends on this secondary market. The inability to
close these positions could have an adverse effect on the Funds' ability
to hedge their respective portfolios.
Lending of Portfolio Securities. The collateral received when a Fund lends
portfolio securities must be valued daily and, should the market value of the
loaned securities increase, the borrower must furnish additional collateral to
the Fund. During the time portfolio securities are on loan, the borrower pays
the Fund any dividends or interest paid on such securities. Loans are subject to
termination at the option of the Fund or the borrower. The Fund may pay
reasonable administrative and custodial fees in connection with a loan and may
pay a negotiated portion of the interest earned on the cash or equivalent
collateral to the borrower or placing broker. If the Fund does not have the
right to vote securities on loan, it would terminate the loan and regain the
right to vote if that were considered important with respect to the investment.
Mortgage-Backed Securities. The following is additional information about
Mortgage-Backed Securities.
Collateralized Mortgage Obligations ("CMOs"). The following example
illustrates how mortgage cash flows are prioritized in the case of CMOs -
most of the CMOs in which the Intermediate Bond Fund invests use the same
basic structure: (1) Several classes of securities are issued against a
pool of mortgage collateral. A common structure may contain four classes
of securities. The first three (A, B, and C bonds) pay interest at their
stated rates beginning with the issue date, and the final class (Z bond)
typically receives any excess income from the underlying investments
after payments are made to the other classes and receives no principal or
interest payments until the shorter maturity classes have been retired,
but then receives all remaining principal and interest payments; (2) The
cash flows from the underlying mortgages are applied first to pay
interest and then to retire securities; (3) The classes of securities are
retired sequentially. All principal payments are directed first to the
shortest-maturity class (or A bond). When those securities are completely
retired, all principal payments are then directed to the next
shortest-maturity security (or B bond). This process continues until all
of the classes have been paid off.
Because the cash flow is distributed sequentially instead of pro rata, as
with pass-through securities, the cash flows and average lives of CMOs
are more predictable, and there is a period of time during which the
investors in the longer-maturity classes receive no principal paydowns.
The interest portion of these payments is distributed by the Fund as
income, and the capital portion is reinvested.
Municipal Securities. Examples of Municipal Securities include, but are not
limited to: tax and revenue anticipation notes ("TRANs") issued to finance
working capital needs in anticipation of receiving taxes or other revenues; tax
anticipation notes ("TANs") issued to finance working capital needs in
anticipation of receiving taxes; revenue anticipation notes ("RANs") issued to
finance working capital needs in anticipation of receiving revenues; bond
anticipation notes ("BANs") that are intended to be refinanced through a later
issuances of longer-term bonds; municipal commercial paper and other short-term
notes; variable rate demand notes; municipal bonds (including bonds having
serial maturities and pre-refunded bonds) and leases; construction loan notes
insured by the Federal Housing Administration and financed by the Federal or
Government National Mortgage Associations; and participation, trust and
partnership interests in any of the foregoing obligations. Although an emphasis
will be placed on purchasing Nebraska Municipal Securities, the Tax-Free Bond
Fund's investments may consist of issues of Municipal Securities representative
of various areas of the U.S. and general obligations of states, cities and
school districts as well as some revenue issues which meet the Fund's acceptable
quality criteria.
Municipal Leases. The Intermediate Bond Fund and the Tax-Free-Bond Fund
may purchase Municipal Securities in the form of participation interests
that represent an undivided proportional interest in lease payments by a
governmental or nonprofit entity. The lease payments and other rights
under the lease provide for and secure payments on the certificates.
Lease obligations may be limited by municipal charter or the nature of
the appropriation for the lease. In particular, lease obligations may be
subject to periodic appropriation. If the entity does not appropriate
funds for future lease payments, the entity cannot be compelled to make
such payments. Furthermore, a lease may provide that the participants
cannot accelerate lease obligations upon default. The participants would
only be able to enforce lease payments as they became due. In the event
of a default or failure of appropriation, unless the participation
interests are credit enhanced, it is unlikely that the participants would
be able to obtain an acceptable substitute source of payment.
Under the criteria currently established by the Trustees, the Funds'
Adviser must consider the following factors in determining the liquidity
of municipal lease securities: (1) the frequency of trades and quotes for
the security; (2) the volatility of quotations and trade prices for the
security; (3) the number of dealers willing to purchase or sell the
security and the number of potential purchasers; (4) dealer undertakings
to make a market in the security; (5) the nature of the security and the
nature of the marketplace trades; (6) the rating of the security and the
financial condition and prospects of the issuer of the security; (7) such
other factors as may be relevant to the Funds' ability to dispose of the
security; (8) whether the lease can be terminated by the lessee; (9) the
potential recovery, if any, from a sale of the leased property upon
termination of the lease; (10) the lessee's general credit strength; (11)
the likelihood that the lessee will discontinue appropriating funding for
the leased property because the property is no longer deemed essential to
its operations; and (12) any credit enhancement or legal recourse
provided upon an event of nonappropriation or other termination of the
lease.
Variable Rate Municipal Securities. Variable interest rates generally
reduce changes in the market value of Municipal Securities from their
original purchase prices. Accordingly, as interest rates decrease or
increase, the potential for capital appreciation or depreciation is less
for variable rate Municipal Securities than for fixed income obligations.
Many Municipal Securities with variable interest rates purchased by a
Fund are subject to repayment of principal (usually within seven days) on
the Fund's demand. For purposes of determining the Funds' average
maturity, the maturities of these variable rate demand Municipal
Securities (including participation interests) are the longer of the
periods remaining until the next readjustment of their interest rates or
the periods remaining until their principal amounts can be recovered by
exercising the right to demand payment. The terms of these variable rate
demand instruments require payment of principal and accrued interest from
the issuer of the municipal obligations, the issuer of the participation
interests, or a guarantor of either issuer.
Municipal Bond Insurance. The Intermediate Bond Fund and Tax-Free Bond Fund may
purchase municipal securities covered by insurance which guarantees the timely
payment of principal at maturity and interest on such securities ("Policy" or
"Policies"). These insured municipal securities are either (1) covered by an
insurance policy applicable to a particular security, whether obtained by the
issuer of the security or by a third party ("Issuer-Obtained Insurance") or (2)
insured under master insurance policies issued by municipal bond insurers, which
may be purchased by the Funds. The premiums for the Policies may be paid by the
Funds and the yield on the Funds' portfolios may be reduced thereby.
The Funds may require or obtain municipal bond insurance when purchasing
municipal securities which would not otherwise meet the Funds' quality
standards. The Funds may also require or obtain municipal bond insurance when
purchasing or holding specific municipal securities, when, in the opinion of the
Funds' Adviser, such insurance would benefit the Funds (for example, through
improvement of portfolio quality or increased liquidity of certain securities).
Issuer-Obtained Insurance policies are noncancellable and continue in force as
long as the municipal securities are outstanding and their respective insurers
remain in business. If a municipal security is covered by Issuer-Obtained
Insurance, then such security need not be insured by the Policies purchased by a
Fund.
The Funds may purchase two types of Policies issued by municipal bond insurers.
One type of Policy covers certain municipal securities only during the period in
which they are in the Funds' portfolio. In the event that a municipal security
covered by such a Policy is sold from a Fund, the insurer of the relevant Policy
will be liable for those payments of interest and principal which are due and
owing at the time of the sale.
The other type of Policy covers municipal securities not only while they remain
in the Funds' portfolio but also until their final maturity if they are sold out
of the Funds' portfolio, so that the coverage may benefit all subsequent holders
of those municipal securities. The Funds will obtain insurance which covers
municipal securities until final maturity even after they are sold out of the
Funds' portfolio only if, in the judgment of the Adviser, the Funds would
receive net proceeds from the sale of those securities, after deducting the cost
of such permanent insurance and related fees, in excess of the proceeds the
Funds would receive if such municipal securities were sold without insurance.
Payments received from municipal bond insurers may not be tax-exempt income to
shareholders of the Funds.
The Funds may purchase municipal securities insured by Policies from MBIA Corp.
("MBIA"), AMBAC Indemnity Corporation ("AMBAC"), Financial Guaranty Insurance
Company ("FGIC"), or any other municipal bond insurer which is rated AAA by S&P
or Aaa by Moody's. Each Policy guarantees the payment of principal and interest
on those municipal securities it insures. The Policies will have the same
general characteristics and features. A municipal security will be eligible for
coverage if it meets certain requirements set forth in the Policy. In the event
interest or principal on an insured municipal security is not paid when due, the
insurer covering the security will be obligated under its Policy to make such
payment not later than 30 days after it has been notified by a Fund that such
non-payment has occurred. MBIA, AMBAC, and FGIC will not have the right to
withdraw coverage on securities insured by their Policies so long as such
securities remain in the Funds' portfolio, nor may MBIA, AMBAC, or FGIC cancel
their Policies for any reason except failure to pay premiums when due.
MBIA, AMBAC, and FGIC will reserve the right at any time upon 90 days' written
notice to the Funds to refuse to insure any additional municipal securities
purchased by the Funds after the effective date of such notice. The Funds
reserve the right to terminate any of the Policies if they determine that the
benefits to a Fund of having its portfolio insured under such Policy are not
justified by the expense involved.
Additionally, the Funds reserve the right to enter into contracts with insurance
carriers other than MBIA, AMBAC, or FGIC if such carriers are rated AAA by S&P
or Aaa by Moody's.
Repurchase Agreements. Each Fund requires its custodian to take possession of
the securities subject to repurchase agreements and these securities are marked
to market daily. To the extent that the original seller does not repurchase the
securities from a Fund, the Fund could receive less than the repurchase price on
any sale of such securities. In the event that such a defaulting seller files
for bankruptcy or becomes insolvent, disposition of such securities by the Fund
might be delayed pending court action. The Funds believe that, under the regular
procedures normally in effect for custody of the portfolio securities subject to
repurchase agreements, a court of competent jurisdiction would rule in favor of
the Funds and allow retention or disposition of such securities. The Funds will
only enter into repurchase agreements with banks and other recognized financial
institutions, such as broker/dealers, which are deemed by a Fund's Adviser [or
Sub-Adviser] to be creditworthy pursuant to guidelines established by the
Trustees.
Restricted Securities. The Funds may invest in commercial paper issued in
reliance on the exemption from restriction afforded by Section 4(2) of the
Securities Act of 1933. Section 4(2) commercial paper is restricted as to
disposition under federal securities law and is generally sold to institutional
investors, such as the Funds, who agree that they are purchasing the paper for
investment purposes and not with a view to public distribution. Any resale by
the purchaser must be in an exempt transaction. Section 4(2) commercial paper is
normally resold to other institutional investors like the Funds through or with
the assistance of the issuer or investment dealers who make a market in Section
4(2) commercial paper, thus providing liquidity. The Funds believe that Section
4(2) commercial paper and possibly certain other restricted securities which
meet the criteria for liquidity established by the Trustees are quite liquid.
The Funds intend, therefore, to treat the restricted securities which meet the
criteria for liquidity established by the Trustees, including Section 4(2)
commercial paper (as determined by a Fund's Adviser), as liquid and not subject
to the investment limitation applicable to illiquid securities. In addition,
because Section 4(2) commercial paper is liquid, the Funds intend to not subject
such paper to the limitation applicable to restricted securities.
Reverse Repurchase Agreements. Each Fund may enter into reverse repurchase
agreements. This transaction is similar to borrowing cash. In a reverse
repurchase agreement, the Fund transfers possession of a portfolio instrument to
another person, such as a financial institution, broker, or dealer, in return
for a percentage of the instrument's market value in cash, and agrees that on a
stipulated date in the future the Fund will repurchase the portfolio instrument
by remitting the original consideration plus interest at an agreed upon rate.
The use of reverse repurchase agreements may enable the Fund to avoid selling
portfolio instruments at a time when a sale may be deemed to be disadvantageous,
but the ability to enter into reverse repurchase agreements does not ensure that
the Fund will be able to avoid selling portfolio instruments at a
disadvantageous time.
When effecting reverse repurchase agreements, liquid assets of the Fund, in a
dollar amount sufficient to make payment for the obligations to be purchased,
are segregated at the trade date. These securities are marked to market daily
and maintained until the transaction is settled.
Short Sales. The Equity Fund, International Equity Fund and Premier Fund will
not sell securities short unless the Funds (1) own, or have a right to acquire,
an equal amount of such securities, or (2) have segregated an amount of their
other assets equal to the lesser of the market value of the securities sold
short or the amount required to acquire such securities. The segregated amount
will not exceed 25% of the respective Fund's net assets. While in a short
position, each Fund will retain the securities, rights, or segregated assets.
Swap Transactions. In a standard swap transaction, two parties agree to exchange
the returns (or differentials in rates of return) earned or realized on
particular predetermined investments or instruments, which may be adjusted for
an interest factor. The gross returns to be exchanged or "swapped" between the
parties are generally calculated with respect to a "notional amount," which is
the return on or increase in value of a particular dollar amount invested at a
particular interest rate, or in a "basket" of securities representing a
particular index. For example, a $10 million LIBOR swap would require one party
to pay the equivalent of the London Interbank Offer Rate on $10 million
principal amount in exchange for the right to receive the equivalent of a fixed
rate of interest on $10 million principal amount. Neither party to the swap
would actually advance $10 million to the other. The Funds expect to enter into
swap transactions primarily to hedge against changes in the price of other
portfolio securities. For example, the Funds may hedge against changes in the
market value of a fixed rate note by entering into a concurrent swap that
requires the Funds to pay the same or a lower fixed rate of interest on a
notional principal amount equal to the principal amount of the note in exchange
for a variable rate of interest based on a market index. Interest accrued on the
hedged note would then equal or exceed the Funds' obligations under the swap,
while changes in the market value of the swap would largely offset any changes
in the market value of the note. The Funds may also enter into swaps and caps to
preserve or enhance a return or spread on a portfolio security. The Funds do not
intend to use these transactions in a speculative manner. The Funds will usually
enter into swaps on a net basis (i.e., the two payment streams are netted out),
with a Fund receiving or paying, as the case may be, only the net amount of the
two payments. The net amount of the excess, if any, of the Funds' obligations
over its entitlements with respect to each interest rate swap will be accrued on
a daily basis, and the Funds will segregate liquid assets in an aggregate net
asset value at least equal to the accrued excess, if any, on each business day.
If a Fund enters into a swap on other than a net basis, a Fund will segregate
liquid assets in the full amount accrued on a daily basis of a Fund's
obligations with respect to the swap. If there is a default by the other party
to such a transaction, the Funds will have contractual remedies pursuant to the
agreements related to the transaction. The swap market has grown substantially
in recent years with a large number of banks and investment banking firms acting
both as principals and agents utilizing standardized swap documentation. The
Adviser and Sub-Adviser have determined that, as a result, the swap market has
become relatively liquid. Interest rate caps and floors are more recent
innovations for which standardized documentation has not yet been developed and,
accordingly, they are less liquid than other swaps. To the extent swaps, caps or
floors are determined by the Adviser or Sub-Adviser to be illiquid, they will be
included in a Fund's limitation on investments in illiquid securities. To the
extent a Fund sells caps and floors, it will maintain in a segregated account
cash and/or U.S. government securities having an aggregate net asset value at
least equal to the full amount, accrued on a daily basis, of a Fund's
obligations with respect to caps and floors.
The use of swaps is a highly specialized activity which involves investment
techniques and risks different from those associated with ordinary portfolio
securities transactions. If the Adviser or Sub-Adviser is incorrect in its
forecasts of market values, interest rates and other applicable factors, the
investment performance of a Fund would diminish compared with what it would have
been if these investment techniques were not utilized. Moreover, even if the
Adviser or Sub-Adviser is correct in its forecasts, there is a risk that the
swap position may correlate imperfectly with the price of the portfolio security
being hedged. Swap transactions do not involve the delivery of securities or
other underlying assets or principal. Accordingly, the risk of loss with respect
to a default on an interest rate swap is limited to the net asset value of the
swap together with the net amount of interest payments owed to a Fund by the
defaulting party. A default on a portfolio security hedged by an interest rate
swap would also expose a Fund to the risk of having to cover its net obligations
under the swap with income from other portfolio securities.
When-Issued and Delayed Delivery Transactions. These transactions are made to
secure what is considered to be an advantageous price or yield for the Funds.
Settlement dates may be a month or more after entering into these transactions,
and the market values of the securities purchased may vary from the purchase
prices. No fees or other expenses, other than normal transaction costs, are
incurred. However, liquid assets of a Fund sufficient to make payment for the
securities to be purchased are segregated on a Fund's records at the trade date.
These assets are marked to market daily and are maintained until the transaction
has been settled.
Investment Limitations
Fundamental Limitations
The following investment limitations are fundamental and cannot be changed
without shareholder approval except that no investment limitation of the Fund
shall prevent the Fund from investing substantially all of its assets (except
for assets which are not considered "investment securities" under the Investment
Company Act of 1940, or assets exempted by the SEC) in an open end investment
company with substantially the same investment objective.
Selling Short and Buying on Margin
Except for the Equity Fund, International Equity Fund and Premier Fund, none of
the other Funds will sell any securities short or purchase any securities on
margin, but may obtain such short-term credits as may be necessary for clearance
of purchases and sales of portfolio securities. A deposit or payment by a Fund
of initial or variation margin in connection with futures contracts, forward
contracts or related options transactions is not considered the purchase of a
security on margin.
Issuing Senior Securities and Borrowing Money
The Funds will not issue senior securities except that each Fund may borrow
money, directly or through reverse repurchase agreements, in amounts up to
one-third of the value of its total assets including the amounts borrowed; and
except to the extent that a Fund is permitted to enter into futures contracts,
options or forward contracts. A Fund will not borrow money or engage in reverse
repurchase agreements for investment leverage, but rather as a temporary,
extraordinary, or emergency measure or to facilitate management of its portfolio
by enabling the Fund to meet redemption requests when the liquidation of
portfolio securities is deemed to be inconvenient or disadvantageous. A Fund
will not purchase any securities while any borrowings in excess of 5% of its
total assets are outstanding.
Pledging Assets
The Funds will not mortgage, pledge, or hypothecate any assets except to secure
permitted borrowings. In those cases, each Fund may pledge assets having a
market value not exceeding the lesser of the dollar amounts borrowed or
one-third of the value of its total assets at the time of the pledge. For
purposes of this limitation, the following are not deemed to be pledges: margin
deposits for the purchase and sale of futures contracts and related options; and
segregation of collateral arrangements made in connection with options
activities, forward contracts or the purchase of securities on a when-issued or
delayed delivery basis.
Lending Cash or Securities
The Funds will not lend any of their assets except portfolio securities. Loans
may not exceed one-third of the value of a Fund's total assets. This shall not
prevent a Fund from purchasing or holding U.S. government obligations, money
market instruments, variable rate demand notes, bonds, debentures, notes,
certificates of indebtedness, or other debt securities, entering into repurchase
agreements, or engaging in other transactions where permitted by a Fund's
investment objective, policies, and limitations.
Investing in Commodities
The Funds will not purchase or sell commodities, commodity contracts, or
commodity futures contracts. However, each Fund may purchase and sell futures
contracts and related options and enter into forward contracts and related
options.
Investing in Real Estate
The Funds will not purchase or sell real estate, although a Fund may invest in
the securities of companies whose business involves the purchase or sale of real
estate or in securities which are secured by real estate or which represent
interests in real estate.
Diversification of Investments
With respect to securities comprising 75% of the value of its total assets, the
Intermediate Bond Fund will not purchase securities issued by any one issuer
(other than cash, cash items, securities of other investment companies, or
securities issued or guaranteed by the government of the United States or its
agencies or instrumentalities and repurchase agreements collateralized by such
securities) if as a result more than 5% of the value of its total assets would
be invested in the securities of that issuer or if it would own more than 10% of
the outstanding voting securities of such issuer.
Concentration of Investments
Each Fund will not invest 25% or more of the value of its total assets in any
one industry. Each Fund may invest 25% or more of the value of its total assets
in cash or cash items, securities of other investment companies, securities
issued or guaranteed by the U.S. government, its agencies, or instrumentalities,
and repurchase agreements collateralized by such securities.
In addition, the Tax-Free Bond Fund may invest more than 25% of the value of its
total assets in obligations issued by any state, territory, or possession of the
United States, the District of Columbia or any of their authorities, agencies,
instrumentalities or political subdivisions, including tax-exempt project notes
guaranteed by the U.S. government, regardless of the location of the issuing
municipality. This policy applies to securities which are related in such a way
that an economic, business, or political development affecting one security
would also affect the other securities (such as securities paid from revenues
from selected projects in transportation, public works, education, or housing).
Underwriting
A Fund will not underwrite any issue of securities, except as it may be deemed
to be an underwriter under the Securities Act of 1933 in connection with the
sale of restricted securities which the Fund may purchase pursuant to its
investment objective, policies and limitations.
Non-Fundamental Limitations
The following investment limitations are non-fundamental and, therefore, may be
changed by the Trustees without shareholder approval except that no investment
limitation of the Fund shall prevent the Fund from investing substantially all
of its assets (except for assets which are not considered "investment
securities" under the Investment Company Act of 1940, or assets exempted by the
SEC) in an open end investment company with substantially the same investment
objective.
Shareholders will be notified before any material change in these limitations
becomes effective.
Investing in Illiquid and Restricted Securities
The Funds will invest in illiquid and restricted securities. However, the Funds
will not invest more than 15% of the value of their net assets in illiquid
securities, including repurchase agreements providing for settlement in more
than seven days after notice, non-negotiable fixed time deposits with maturities
over seven days, over-the-counter options, guaranteed investment contracts, and
certain securities not determined by the Trustees to be liquid (including
certain municipal leases).
Purchasing Securities to Exercise Control
The Funds will not purchase securities of a company for the purpose of
exercising control.
Investing in Options
The Equity Fund, International Equity Fund and Premier Fund will not purchase
put options or write call options on securities (other than options on
currencies) unless the securities are held in the Funds' portfolio or unless the
Funds are entitled to them in deliverable form without further payment or have
segregated cash in the amount of any further payment.
Except with respect to borrowing money, if a percentage limitation is adhered to
at the time of investment, a later increase or decrease in percentage resulting
from any change in value or net assets will not result in a violation of such
restriction. For purposes of its policies and limitations, the Funds consider
instruments (such as certificates of deposit and demand and time deposits)
issued by a U.S. branch of a domestic bank or savings and loan having capital,
surplus, and undivided profits in excess of $100,000,000 at the time of
investment to be "cash items."
Nebraska Investment Risks
The Tax-Free Bond Fund may invest in obligations of Nebraska (the "State")
issuers which result in the Fund's performance being subject to risks associated
with the overall conditions present within the State. The following information
is a general summary of the State's financial condition and a brief summary of
the prevailing economic conditions. This information is based on various sources
that are believed to be reliable but should not be considered as a complete
description of all relevant information.
The Tax-Free Bond Fund's investment emphasis on debt obligations of Nebraska
issuers carries a higher risk than a portfolio that is geographically
diversified. There are 93 counties and 535 incorporated municipalities in
Nebraska, many of which have outstanding debt. A number of other public
authorities and private, nonprofit organizations, including utilities, also
issue tax exempt debt within the State.
Economy. The economy of the State continues to demonstrate relatively strong
performance, with per capita personal income for 1996 at $23,047. Per capita
income is total personal income divided by population, so it is a measure of
income distributed among all residents. Since not all persons have an annual
income, this statistic is not a measure of individual economic well-being. Total
State employment was 886,163 in 1996, with the majority of jobs in trade,
services and government. Annual average unemployment was 2.9% in 1996, compared
to a national average of 5.4%. The State's population in 1990 was 1,578,385,
with 1,652,093 estimated for 1996. Two-fifths of the population is concentrated
in the three metropolitan areas of Lincoln, Omaha and South Sioux City.
Debt. The State of Nebraska does not issue debt. Local governments issue three
basic types of debt, with varying degrees of credit risk: general obligation
bonds backed by the unlimited, and in some cases limited, taxing power of the
issuer, revenue bonds secured by specific pledged fees or charges for a related
utililty or project, and tax-exempt lease obligations, secured by annual
appropriations by the issuer, usually with no implied tax or specific revenue
appropriations by the issuer. In 1995, $849 million in municipal debt was issued
in Nebraska, with approximately 25% representing general obligation debt and 75%
revenue bonds, compared to 38% general obligation and 62% revenue backed bonds
nationally.
Many Nebraska agencies and instrumentalities are authorized to borrow money
under legislation which expressly provides that the loan obligations shall not
be deemed to constitute a debt or pledge of the faith and credit of the State.
Representative issuers of this kinds of debt include the Nebraska Educational
Facilities Authority and Nebraska Investment Finance Authority. The principal of
and interest on bonds issued by these bodies are payable solely from specific
sources, principally fees generated from the use of the facilities, or
enterprises financed by the bonds, or other dedicated revenues.
Financial. To a large degree, the risk of the Tax-Free Bond Fund is dependent
upon the financial strength of the State of Nebraska and its political
subdivisions. Agriculture traditionally has been the backbone of Nebraska's
economy, although its relative importance has diminished in the last two decades
compared to other sectors. Its continued importance to the State's economy was
clearly demonstrated in recent years, when increasing farm credit problems and
adverse weather conditions affected other sectors interacting with agriculture.
These sectors include manufacturers of farm equipment and supplies; feed, seed,
and other farm supply retailers; truckers transporting farm products; and banks
providing loans for farm operating capital. While Nebraska has not experienced
severe symptoms of past national recessions, Nebraska political subdivisions
have faced budget crises in the recent past (see Property Tax System below).
Property Tax System. In 1996, the Nebraska legislature enacted legislation
intended to reduce the level of property taxation in the State. LB299 provides
for a new overall budget limitation on certain restricted funds, and LB1114
reduces the rate of taxation for general property taxes authorized for cities.
LB299 imposes for the current budget year for cities a limitation on the growth
of restricted funds of 2% plus a factor for population growth, if any. For the
next subsequent budget year the limitation on growth in restricted funds will be
0% plus a factor for population growth, if any. Restricted funds include
property taxes (excluding any amounts required to pay interest and principal on
bonded indebtedness), payments in lieu of taxes, local option sales taxes,
permit and regulatory fees, state aid and fees from enterprise funds to the
extent budgeted for general purposes rather than the enterprise function. The
limitation imposed does not apply to capital improvements or revenues pledged to
retire bonded indebtedness. The 2% or 0% limitation may be exceeded by an
additional 1% upon an affirmative vote of at least 75% of the governing body.
State aid may be withheld from governmental units which fail to comply. Under
LB1114 the rates for levying property taxes are to be limited for each type of
governmental unit in the State. The rate for cities will, after July 1, 1998, be
no more than $0.45 per $100 of taxable value. Property tax levies to pay bonded
debt are not included in such limitation. A political subdivision may exceed the
limits upon rates for tax levies with approval from the voters of such
subdivision.
Puerto Rico. From time to time the Tax-Free Bond Fund may invest in obligations
of the Commonwealth of Puerto Rico and its public corporations exempt from
federal and Nebraska state and local income taxes. The majority of the
Commonwealth's debt is issued by ten of the major public agencies that are
responsible for many of the islands' public functions, such as water,
wastewater, highways, telecommunications, education, and public construction.
Since the 1980's, Puerto Rico's economy and financial operations have paralleled
the economic cycles of the United States. The island's economy, particularly the
manufacturing sector, has experienced substantial gains in employment.
Unemployment, while reaching its lowest level in ten years, still remains high.
Much of these economic gains are attributable in part to favorable treatment
under Section 936 of the U.S. Federal Tax Code for U.S. corporations doing
business in Puerto Rico.
Debt ratios for the Commonwealth are high as it assumes much of the
responsibility for local infrastructure. Sizable infrastructure improvements are
anticipated to upgrade the island's water, sewer, and road system. The
Commonwealth's general obligation debt is secured by a first lien on all
available revenues.
The Commonwealth's economy remains vulnerable to changes in oil prices, American
trade, foreign policy, and levels of federal assistance. Per capita income
levels, while the highest in the Caribbean, lag for behind the United States.
Other Risk Factors. Because of its investment policies, the Tax-Free Bond Fund
may not be suitable or appropriate for all investors. The Fund is designed for
investors who want a high level of current income that is exempt from federal
and Nebraska state income taxes. Investors in the Fund should not rely on the
Fund for their short-term financial needs. The principal values of longer term
securities fluctuate more widely in response to changes in interest rates than
those of shorter term securities, providing greater opportunity for capital gain
or risk of capital loss.
There can be no assurance that the Tax-Free Bond Fund will achieve its
investment objective. Yields on Municipal Securities are dependent on a variety
of factors, including the general conditions of the money market and the
municipal bond market, the size of a particular offering, the maturity of the
obligation, and the rating of the issue. Municipal Securities with longer
maturities tend to produce higher yields and are generally subject to
potentially greater capital appreciation and depreciation than obligations with
shorter maturities and lower yields. The market prices of Municipal Securities
usually vary, depending upon available yields. An increase in interest rates
will generally reduce the value of Fund investments, and a decline in interest
rates will generally increase the value of Fund investments. The ability of the
Fund to achieve its investment objective is also dependent on the continuing
ability of the issuers of Municipal Securities to meet their obligations for the
payment of interest and principal when due. The ratings of Moody's and S&P
represent their opinions as to the quality of Municipal Securities which they
undertake to rate. Ratings are not absolute standards of quality; consequently,
Municipal Securities with the same maturity, coupon, and rating may have
different yields. There are variations in Municipal Securities, both within a
particular classification and between classifications, depending on numerous
factors. It should also be pointed out that, unlike other types of investments,
Municipal Securities have traditionally not been subject to regulation by, or
registration with, the Securities and Exchange Commission, although there have
been proposals which would provide for regulation in the future.
The federal bankruptcy statutes relating to the debts of political subdivisions
and authorities of states of the United States provide that, in certain
circumstances, such subdivisions or authorities may be authorized to initiate
bankruptcy proceedings without prior notice to or consent of creditors, which
proceedings could result in material and adverse changes in the rights of
holders of their obligations.
Proposals have been introduced in Congress to restrict or eliminate the federal
income tax exemption for interest on Municipal Securities, and similar proposals
may be introduced in the future. Some of the past proposals would have applied
to interest on Municipal Securities issued before the date of enactment, which
would have adversely affected their value to a degree. If such a proposal were
enacted, the availability of Municipal Securities for investment by the Fund and
the value of each Fund's investments would be affected and, in such an event,
the Fund would reevaluate its investment objectives and policies.
The Fund's investment emphasis on securities issued by municipalities and
political subdivisions of the State of Nebraska involves greater risk than
investing in Municipal Securities issued by a diversified group of entities from
various geographical areas in the United States. Specifically, the credit
quality of the Fund will depend upon the continued financial strength of the
public bodies and municipalities in Nebraska. The State of Nebraska does not
issue debt and, as a result, the financial condition of each municipality or
political subdivision for each issue must be analyzed separately.
Nebraska Municipal Securities generally have been highly regarded. Defaults on
Nebraska Municipal Securities have been confined to issues made by sanitary
improvement districts primarily occurring in the early 1980's and a few
industrial development bond issues also occurring in the early 1980's.
The Fund expects to invest a substantial portion of its assets in the debt
obligations of local governments and public authorities in the State of
Nebraska. While local governments in Nebraska are predominantly reliant on
independent revenue sources, such a property taxes, they are not immune to
budget shortfalls caused by cut-backs in State aid. None of the obligations
issued by public authorities in Nebraska are backed by the full faith and credit
of the State of Nebraska. In addition, property tax increases and general
increases in governmental sending may be subject to voter approval.
The Fund may also invest in certain sectors of the municipal securities market
which have unique risks. The sectors include, but are not limited to,
investments in issuances of health care providers, electric revenue issues with
exposure to nuclear power plants and deregulation intended to foster
competition, and private activity bonds without governmental backing. Each of
these sectors is impacted by its own unique set of circumstances, including
significant regulator impacts, which may adversely affect an issuer's financial
performance.
Over 25% of the Nebraska Municipal Securities in the Tax-Free Bond Fund's
portfolio may be health care revenue bonds. Ratings of bonds issued for health
care facilities are sometimes based on feasibility studies that contain
projections of occupancy levels, revenues and expenses. A facility's gross
receipts and net income available for debt service may be affected by future
events and conditions including among other things, demand for services, the
ability of the facility to provide the services required, physicians' confidence
in the facility, management capabilities, competition with other hospitals,
efforts by insurers and governmental agencies to limit rates, legislation
establishing state rate- setting agencies, expenses, government regulation, the
cost and possible unavailability of malpractice insurance and the termination of
restriction of governmental financial assistance, including that associated with
Medicare, Medicaid and other similar third party payor programs. Pursuant to
recent federal legislation, Medicare reimbursements are currently calculated on
a prospective basis utilizing a single nationwide schedule of rates. Prior to
such legislation Medicare reimbursements were based on the actual costs incurred
by the health facility. Legislation may in the future adversely affect
reimbursements to hospitals and other facilities for services provided under the
Medicare program.
Over 25% of the Nebraska Municipal Securities in the Tax-Free Bond Fund's
portfolio may derive their payment from mortgage loans. Certain of the Nebraska
Municipal Securities in the Fund's portfolio may be single family mortgage
revenue bonds, which are issued for the purpose of acquiring from originating
financial institutions notes secured by mortgages on residences located within
the issuer's boundaries and owned by persons of low or moderate income. Mortgage
loans are generally partially or completely prepaid prior to their final
maturities as a result of events such as sale of the mortgaged premises,
default, condemnation or casualty loss. Because these bonds are subject to
extraordinary mandatory redemption in whole or in part from such prepayments of
mortgage loans, a substantial portion of such bonds will probably be redeemed
prior to their scheduled maturities or even prior to their ordinary call dates.
The redemption price of such issues may be more or less than the offering price
of such bonds. Extraordinary mandatory redemption without premium could also
result from the failure of the originating financial institutions to make
mortgage loans in sufficient amounts within a specified time period or, in some
cases, from the sale by the bond issuer of the mortgage loans. Failure of the
originating financial institutions to make mortgage loans would be due
principally to the interest rates on mortgage loans funded from other sources
becoming competitive with the interest rates on the mortgage loans funded with
the proceeds of the single family mortgage revenue bonds. Single family mortgage
revenue bonds issued after December 31, 1980, were issued under Section 103A of
the Internal Revenue Code, which Section contains certain ongoing requirements
relating to the use of the proceeds of such bonds in order for the interest on
such bonds to retain its tax-exempt status. In each case, the issuer of the
bonds has covenanted to comply with applicable ongoing requirements, and bond
counsel to such issuer has issued an opinion that the interest on the bonds is
exempt from federal income tax under existing laws and regulations. There can be
no assurances that the ongoing requirements will be met. The failure to meet
these requirements could cause the interest on the bonds to become taxable,
possibly retroactively to the date of issuance.
Certain of the Nebraska Municipal Securities in the Fund's portfolio may be
obligations of issuers whose revenues are primarily derived from mortgage loans
to housing projects for low to moderate income families. The ability of such
issuers to make debt service payments will be affected by events and conditions
affecting financed projects including, among other things, the achievement and
maintenance of sufficient occupancy levels and adequate rental income, increases
in taxes, employment and income conditions prevailing in local labor markets,
utility costs and other operating expenses, the managerial ability of project
managers, changes in laws and governmental regulations, the appropriation of
subsidies and social and economic trends affecting the localities in which the
projects are located. The occupancy of housing projects may be adversely
affected by high rent levels and income limitations imposed under federal and
state programs. Like single family mortgage revenue bonds, multi-family mortgage
revenue bonds are subject to redemption and call features, including
extraordinary mandatory redemption features, upon prepayment, sale or
non-origination of mortgage loans as well as upon the occurrence of other
events. Certain issuers of single or multi-family housing bonds have considered
various ways to redeem bonds they have issued prior to the stated first
redemption dates for such bonds. In one situation, the New York City Housing
Development Corporation, in reliance on its interpretation of certain language
in the indenture under which one of its bond issues was created, redeemed all of
such issue at par in spite of the fact that such indenture provided that the
first optional redemption was to include a premium over par and could not occur
prior to a specific date.
Over 25% of the Nebraska Municipal Securities in the Tax-Free Bond Fund's
portfolio may be obligations of issuers whose revenues are primarily derived
from the sale of electric energy. Utilities are generally subject to extensive
regulation by state utility commissions which, among other things, establish the
rates which may be charged and the appropriate rate of return on an approved
asset base. The problems faced by such issuers include the difficulty in
obtaining approval for timely and adequate rate increases from the governing
public utility commission, the difficulty in financing large construction
programs, the limitations on operations and increased costs and delays
attributable to environmental considerations, increased competition, recent
reductions in estimates of future demand for electricity in certain areas of the
country, the difficulty of the capital market in absorbing utility debt, the
difficulty in obtaining fuel at reasonable prices and the effect of energy
conservation. All of such issuers have been experiencing certain of these
problems in varying degrees. In addition, federal, state and municipal
governmental authorities may from time to time review existing and impose
additional regulations governing the licensing, construction and operation of
nuclear and other power plants, which may adversely affect the ability of the
issuers of such bonds to make payments of principal and/or interest of such
bonds. The utility industry is undergoing deregulation in many states.
Deregulation of an industry has historically increased competition. In some
cases, electric utilities will not be allowed to recoup costs associated with
nuclear plants, expansions and other high cost projects.
The yields on Nebraska Municipal Securities are dependent on a variety of
factors, including general money market conditions, the financial condition of
the issuer, general conditions of the Nebraska tax-exempt obligation market, the
size of a particular offering, the maturity of the obligation and the rating of
the issue or issuer. The ratings of NRSROs represent their opinions as to the
quality of the Nebraska Municipal Securities which they undertake to rate. It
should be emphasized, however, that ratings are general, and not absolute,
standards of quality. Consequently, Nebraska Municipal Securities of the same
maturity, interest rate and rating may have different yields, while Nebraska
Municipal Securities of the same maturity and interest rate with different
ratings may have the same yield. Subsequent to their purchase by the Tax-Free
Bond Fund, particular Nebraska Municipal Securities or other investments may
cease to be rated or their ratings may be reduced below the minimum rating
required for purchase by the Fund.
Great Plains Funds Management
Officers and Trustees
Officers and Trustees are listed with their addresses, principal occupations,
birthdates and present positions, including any affiliation with First Commerce
Investors, Inc., National Bank of Commerce, Federated Investors, Edgewood
Services, Inc., Federated Shareholder Services Company and Federated Services
Company.
Keith Broman*
3540 Calvert St.
Lincoln, NE 68506
Birthdate: July 13, 1922
Trustee
Chairman of Investment Committee, First Commerce Investors, Inc.; Professor
Emeritus, University of Nebraska; Professor, Finance, University of Nebraska.
Hugh Hansen@
1325 Fall Creek Road
Lincoln, NE 68510
Birthdate: September 27, 1927
Trustee
Consultant, First Commerce Bancshares, Inc.; Formerly, President, COO and
Director, First Commerce Bancshares, Inc.; Formerly, Vice Chairman and Director,
National Bank of Commerce; Formerly, Chairman and Director, North Platte
National Bank; Formerly, Director, First National Bank, Kearney, NE, McCook, NE
and West Point, NE; Formerly, Director, First Commerce Mortgage Co.; Formerly,
Director, Overland National Bank; Formerly, Director, NBC Computer Services
Corporation.
George Howard@
3901 South 27th Street, #50
Lincoln, NE 68508
Birthdate: August 11, 1924
Trustee
Formerly, Chairman and CEO, Lincoln Mutual Life Insurance Company.
<PAGE>
Dr. Martin Massengale
220 Keim Hall
University of Nebraska-Lincoln
Lincoln, NE 68583-0953
Birthdate: October 25, 1933
Trustee
Distinguished Professor, President Emeritus, Director for Grassland Studies, and
Foundation, University of Nebraska; Director, IBP, Inc., America First Companies
LLC, and Woodmen Life and Accident Company.
Keith Mitchell
621 Rose Street
Lincoln, NE 68502
Birthdate: September 25, 1943
Trustee
Vice President and Chief Financial Officer, MDS-Harris; Financial Consultant;
General Partner, Deloitte & Touche LLP.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
President
Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice President,
Federated Advisers, Federated Management, Federated Research, Federated Research
Corp., Federated Global Research Corp. and Passport Research, Ltd.; Executive
Vice President and Director, Federated Securities Corp.; Trustee, Federated
Shareholder Services Company; Trustee or Director of certain investment
companies distributed, organized, or advised by Federated Investors and its
affiliates (Federated Funds); President, Executive Vice President and Treasurer
of some of the Federated Funds.
James Stuart, III
610 NBC Center
Lincoln, NE 68508
Birthdate: December 4, 1963
Vice President
Chairman and Chief Executive Officer, First Commerce Investors, Inc.; Chief
Investment Officer and Secretary, Stuart Global Investment Company, BVI; James
Stuart, III, Sole Proprietorship, Consultant; Stuart Investment Co., Executive
Vice President.
Anne E. Hansen
610 NBC Center
Lincoln, NE 68508
Birthdate: October 3, 1960
Vice President
Assistant Vice President and Compliance Officer, First Commerce Investors, Inc.
C. Christine Thomson
Federated Investors Tower
Pittsburgh, PA 15222
Birthdate: September 1, 1957
Vice President and Treasurer
Vice President and Assistant Treasurer of some of the Federated Funds.
Victor R. Siclari
Federated Investors Tower
Pittsburgh, PA 15222
Birthdate: November 17, 1961
Secretary
Corporate Counsel and Vice President, Federated Services Company; formerly
Attorney, Morrison & Foerster (law firm).
* This Trustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940.
@ Member of the Executive Committee. The Executive Committee of the
Board of Trustees handles the responsibilities of the Board between meetings of
the Board.
Fund Ownership
Officers and Trustees of the Trust own less than 1% of each Fund's outstanding
shares.
Trustees' Compensation
NAME, AGGREGATE
POSITION WITH COMPENSATION
TRUST FROM TRUST*#
- ----- ----------
Keith Broman $ 9,000
Trustee
Hugh Hansen $ 9,000
Trustee
George Howard $ 9,000
Trustee
Dr. Martin Massengale $ 9,000
Trustee
Keith Mitchell $ 9,000
Trustee
* Information is estimated and furnished for the period from the Trust's date of
organization, July 11, 1997, through its fiscal year ending August 31, 1998.
# The aggregate compensation is provided for the Trust which is comprised of
five portfolios.
Investment Advisory Services
Adviser to the Funds
The Funds' investment adviser is First Commerce Investors, Inc. ("Adviser"). The
Adviser shall not be liable to the Trust, the Funds or any shareholder of the
Funds for any losses that may be sustained in the purchase, holding, or sale of
any security, or for anything done or omitted by it, except acts or omissions
involving willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties imposed upon it by its contract with the Trust. Because
of the internal controls maintained by the Adviser's affiliates to restrict the
flow of non-public information, Fund investments are typically made without any
knowledge of the Adviser or its affiliates' lending relationships with an
issuer. The Adviser has contracted with Peter A. Kinney ("Sub-Adviser") for
investment advice on international securities and markets.
Advisory Fees
For its advisory services, the Adviser receives an annual investment advisory
fee as described in the prospectus.
Sub-Advisory Fees
For its advisory services, the Sub-Adviser receives from the Adviser, an annual
investment advisory fee as described in the prospectus.
Other Services
Administrative Services
Federated Services Company, a subsidiary of Federated Investors, provides
administrative personnel and services to the Funds for a fee as described in the
prospectus.
Transfer Agent, Dividend Disbursing Agent, and Portfolio Accounting Services
Federated Services Company, Pittsburgh, Pennsylvania, through its registered
transfer agent, Federated Shareholder Services Company, is transfer agent for
shares of the Funds and dividend disbursing agent for the Funds. Federated
Services Company also provides certain accounting and recordkeeping services
with respect to the Funds' portfolio investments.
Custodian
National Bank of Commerce (the "Bank") is custodian for the securities and cash
of the Funds. Under the custodian agreement, the Bank holds the Funds' portfolio
securities and keeps all necessary records and documents relating to its duties.
The Bank's fees for custody services are based upon the market value of the
Funds' securities held in custody plus certain securities transaction charges.
Subject to arrangements approved by the Trustees, the Bank may place the
securities and cash of the Funds with other qualified custodial entities.
Independent Auditors
The Independent Auditors for the Funds are Deloitte & Touche LLP, Pittsburgh,
Pennsylvania.
Shareholder Servicing Arrangements
These arrangements permit the payment of fees to the shareholder servicing agent
to cause services to be provided to shareholders by a representative who has
knowledge of the shareholder's particular circumstances and goals. These
activities and services may include, but are not limited to, providing office
space, equipment, telephone facilities, and various clerical, supervisory,
computer, and other personnel as necessary or beneficial to establish and
maintain shareholder accounts and records; processing purchase and redemption
transactions and automatic investments of client account cash balances;
answering routine client inquiries; and assisting clients in changing dividend
options, account designations, and addresses.
Brokerage Transactions
Research services provided by brokers and dealers may be used by the Adviser and
the Sub-Adviser in advising the Funds and other accounts. The Adviser and its
affiliates exercise reasonable business judgment in selecting brokers who offer
brokerage and research services to execute securities transactions. They
determine in good faith that commissions charged by such persons are reasonable
in relationship to the value of the brokerage and research services provided.
These services may be furnished directly to a Fund and the Adviser and may
include: advice, both directly and in writing, as to the value of securities,
the advisability of securities, or purchasers or sellers of securities, as well
as analyses and reports concerning issues, industries, securities, economic
factors and trends, portfolio strategy and the performance of accounts. To the
extent that receipt of these services may supplant services for which the
Adviser, or its affiliates might otherwise have paid, it would tend to reduce
their expenses. In addition, it is understood by the Board of Trustees that
other clients of the Adviser or its affiliates might also benefit from the
information obtained for the Funds, in the same manner that the Funds might also
benefit from information obtained by the Adviser or its affiliates in performing
services to others.
Although investment decisions for the Funds are made independently from those
for other investment advisory clients of the Adviser, it may develop that the
same investment decision is made for both a Fund and one or more other advisory
clients. If both a Fund and other clients purchase or sell that same class of
securities on the same day, the transactions will be allocated as to amount and
price in a manner considered equitable to each.
Distribution Plan and Agreement
The Trust has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1
under the Investment Company Act of 1940 and a form of Distribution Agreement.
These arrangements permit the payment of fees to the Distributor to stimulate
distribution activities and to cause services to be provided to shareholders by
a representative who has knowledge of the shareholder's particular circumstances
and goals. The Distributor may select certain entities to provide sales and/or
administrative services as agents for holders of Plan shares. These activities
and services may include, but are not limited to, marketing efforts, providing
office space, equipment, telephone facilities, and various clerical,
supervisory, computer, and other personnel as necessary or beneficial to
establish and maintain shareholder accounts and records, processing purchase and
redemption transactions and automatic investments of client account cash
balances, answering routine client inquiries, and assisting clients in changing
dividend options, account designations, and addresses; and providing such other
services as the Funds reasonably request. Such entities will receive fees from
the Distributor based upon Plan shares owned by their clients or customers. The
schedules of such fees and the basis upon which such fees will be paid will be
determined from time to time by the Distributor.
The Funds' Plan is a compensation type plan. As such, the Funds make no payments
to the Distributor except as described above. Therefore, the Funds do not pay
for unreimbursed expenses of the Distributor, including amounts expended by the
Distributor in excess of amounts received by it from the Funds, interest,
carrying or other financing charges in connection with excess amounts expended,
or the Distributor's overhead expenses.
However, the Distributor may be able to recover such amounts or may earn a
profit from future payments made by the Funds under the Plan.
By adopting the Plan, the Trustees expect that the Funds will be able to achieve
a more predictable flow of cash for investment purposes and to meet redemptions.
This will facilitate more efficient portfolio management and assist the Funds in
pursuing their investment objectives. By identifying potential investors whose
needs are served by a Fund's objective, and properly servicing these accounts,
it may be possible to curb sharp fluctuations in rates of redemptions and sales.
Other benefits, which may be realized under either arrangement, may include: (1)
providing personal services to shareholders; (2) investing shareholder assets
with a minimum of delay and administrative detail; (3) enhancing shareholder
recordkeeping systems; and (4) responding promptly to shareholders' requests and
inquiries concerning their accounts.
Administrative Arrangements
The administrative services include, but are not limited to, providing office
space, equipment, telephone facilities, and various personnel, including
clerical, supervisory, and computer, as is necessary or beneficial to establish
and maintain shareholders' accounts and records, process purchase and redemption
transactions, process automatic investments of client account cash balances,
answer routine client inquiries regarding the Funds, assist clients in changing
dividend options, account designations, and addresses, and providing such other
services as the Funds may reasonably request.
Conversion to Federal Funds
It is the Funds' policy to be as fully invested as possible so that maximum
interest may be earned. To this end, all payments from shareholders must be in
federal funds or be converted into federal funds before shareholders begin to
earn dividends. Federated Shareholder Services Company acts as the shareholder's
agent in depositing checks and converting them to federal funds.
Determining Market Value
Market Values
Market values of portfolio securities of the Funds are determined as follows:
o for domestic equity securities and foreign securities, according to the
last reported sales price on a recognized securities exchange, if available;
o in the absence of recorded sales for domestic equity securities,
according to the mean between the last closing bid and asked prices;
o in the absence of reported sales prices for foreign securities or
if the foreign security is traded over-the-counter, according to
the last reported bid price;
o for domestic bonds and other fixed income securities, at the last
sales price on a national securities exchange if available,
otherwise as determined by an independent pricing service;
o for domestic short-term obligations, according to the mean
between bid and asked price as furnished by an independent
pricing service;
o for short-term obligations with remaining maturities of less than
60 days at the time of purchase, at amortized cost, which
approximates fair value; or
o at fair value as determined in good faith by the Trustees.
If a security is traded on more than one exchange, the price on the primary
market for that security, as determined by the Funds' Adviser, is used. Prices
provided by independent pricing services may be determined without relying
exclusively on quoted prices and may reflect institutional trading in similar
groups of securities, yield, quality, coupon rate, maturity, type of issue,
trading characteristics, and other market data.
The Funds will value futures contracts, and options on stocks, stock indices and
futures contracts at their market values established by the exchanges at the
close of trading on such exchanges unless the Trustees determine in good faith
that another method of valuing these positions is necessary.
Trading in Foreign Securities
Trading in foreign securities may be completed at times which vary from the
closing of the New York Stock Exchange. In computing their net asset value, the
Funds value foreign securities at the latest closing price on the exchange on
which they are traded immediately prior to the closing of the New York Stock
Exchange. Certain foreign currency exchange rates may also be determined at the
latest rate prior to the closing of the New York Stock Exchange. Foreign
securities quoted in foreign currencies are translated into U.S. dollars at
current rates. Occasionally, events that affect these values and exchange rates
may occur between the times at which they are determined and the closing of the
New York Stock Exchange. If such events materially affect the value of portfolio
securities, these securities may be valued at their fair value as determined in
good faith by the Trustees, although the actual calculation may be done by
others.
Redemption in Kind
Although the Trust intends to redeem shares in cash, it reserves the right under
certain circumstances to pay the redemption price in whole or in part by a
distribution of securities from a Fund's portfolio. To the extent available,
such securities will be readily marketable.
Redemption in kind will be made in conformity with applicable Securities and
Exchange Commission rules, taking such securities at the same value employed in
determining net asset value and selecting the securities in a manner the
Trustees determine to be fair and equitable.
The Trust has elected to be governed by Rule 18f-1 under the Investment Company
Act of 1940, which obligates the Trust to redeem shares for any one shareholder
in cash only up to the lesser of $250,000 or 1% of a Fund's net asset value
during any 90-day period.
Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving their securities and selling them before their
maturity could receive less than the redemption value of their securities and
could incur transaction costs.
Effect of Banking Laws
The Glass-Steagall Act and other banking laws and regulations presently prohibit
a bank holding company registered under the Bank Holding Company Act of 1956 or
any affiliate thereof from sponsoring, organizing or controlling a registered,
open-end investment company continuously engaged in the issuance of its shares,
and from issuing, underwriting, selling or distributing securities in general.
Such laws and regulations do not prohibit such a holding company or affiliate
from acting as investment adviser, transfer agent, or custodian to such an
investment company or from purchasing shares of such a company as agent for, and
upon the order of, their customers.
Some entities providing services to the Trust are subject to such banking laws
and regulations. They believe, based on the advice of its counsel, that they may
perform those services for the Trust contemplated by any agreement entered into
with the Trust without violating those laws or regulations. Changes in either
federal or state statutes and regulations relating to the permissible activities
of banks and their subsidiaries or affiliates, as well as further judicial or
administrative decisions or interpretations of present or future statutes and
regulations, could prevent these entities from continuing to perform all or a
part of the above services. If this happens, the Trustees would consider
alternative means of continuing available services. It is not expected that
shareholders would suffer any adverse financial consequences as a result of any
of these occurrences.
Massachusetts Partnership Law
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust. To protect its
shareholders, the Trust has filed legal documents with Massachusetts that
expressly disclaim the liability of its shareholders for acts or obligations of
the Trust. These documents require notice of this disclaimer to be given in each
agreement, obligation, or instrument the Trust or its Trustees enter into or
sign.
In the unlikely event a shareholder is held personally liable for the Trust's
obligations, the Trust is required by the Declaration of Trust to use its
property to protect or compensate the shareholder. On request, the Trust will
defend any claim made and pay any judgment against a shareholder for any act or
obligation of the Trust. Therefore, financial loss resulting from liability as a
shareholder will occur only if the Trust itself cannot meet its obligations to
indemnify shareholders and pay judgments against them.
Tax Status
The Funds' Tax Status
The Funds will pay no federal income tax because each Fund expects to meet the
requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment afforded
to such companies. To qualify for this treatment, each Fund must, among other
requirements:
o derive at least 90% of its gross income from dividends, interest,
and gains from the sale of securities;
o invest in securities within certain statutory limits; and
o distribute to its shareholders at least 90% of its net income
earned during the year.
There are tax uncertainties with respect to whether increasing rate securities
will be treated as having an original issue discount. If it is determined that
the increasing rate securities have original issue discount, a holder will be
required to include as income in each taxable year, in addition to interest paid
on the security for that year, an amount equal to the sum of the daily portions
of original issue discount for each day during the taxable year that such holder
holds the security. There may also be tax uncertainties with respect to whether
an extension of maturity on an increasing rate note will be treated as a taxable
exchange. In the event it is determined that an extension of maturity is a
taxable exchange, a holder will recognize a taxable gain or loss, which will be
a short-term capital gain or loss if the holder holds the security as a capital
asset, to the extent that the value of the security with an extended maturity
differs from the adjusted basis of the security deemed exchanged therefor.
Foreign Taxes
Investment income on certain foreign securities may be subject to foreign
withholding or other taxes that could reduce the return on these securities. Tax
treaties between the United States and foreign countries, however, may reduce or
eliminate the amount of foreign taxes to which a Fund would be subject.
Shareholders are required to hold International Equity Fund shares for a
specified period to claim a foreign tax credit. However, if a Fund may invest in
the stock of certain foreign corporations that constitute a Passive Foreign
Investment Company (PFIC), then federal income taxes may be imposed on a Fund
upon disposition of PFIC investments.
Shareholders' Tax Status
Shareholders are subject to federal income tax on dividends and capital gains
received as cash or additional shares. The dividends received deduction for
corporations will apply to ordinary income distributions to the extent the
distribution represents amounts that would qualify for the dividends received
deduction to the Equity Fund, the International Equity Fund or the Premier Fund
if those Funds were regular corporations, and to the extent designated by those
Funds as so qualifying. These dividends, and any short-term capital gains are
taxable as ordinary income.
Capital Gains
Capital gains, when experienced by a Fund, could result in an increase in
dividends. Capital losses could result in a decrease in dividends. When a Fund
realizes net long-term capital gains, it will distribute them at least once
every 12 months.
Total Return
The average annual total return for a Fund is the average compounded rate of
return for a given period that would equate a $1,000 initial investment to the
ending redeemable value of that investment. The ending redeemable value is
computed by multiplying the number of shares owned at the end of the period by
the net asset value per share at the end of the period. The number of shares
owned at the end of the period is based on the number of shares purchased at the
beginning of the period with $1,000, adjusted over the period by any additional
shares, assuming the quarterly reinvestment of any dividends and distributions.
Cumulative total return reflects a Fund's total performance over a specific
period of time.
Yield
The yield is determined by dividing the net investment income per share (as
defined by the Securities and Exchange Commission) earned by a Fund over a
thirty-day period by the offering price per share of the Fund on the last day of
the period. This value is annualized using semi-annual compounding. This means
that the amount of income generated during the thirty-day period is assumed to
be generated each month over a twelve-month period and is reinvested every six
months. The yield does not necessarily reflect income actually earned by a Fund
because of certain adjustments required by the Securities and Exchange
Commission and, therefore, may not correlate to the dividends or other
distributions paid to shareholders.
To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in a Fund,
performance will be reduced for those shareholders paying those fees.
<PAGE>
Tax-Equivalent Yield (Tax-Free Bond Fund only)
The tax-equivalent yield of the Tax-Free Bond Fund is calculated similarly to
the yield, but is adjusted to reflect the taxable yield that this Fund would
have had to earn to equal its actual yield, assuming a 39.6% tax rate (the
maximum marginal federal rate for individuals) and assuming that income is 100%
tax-exempt.
Tax-Equivalency Table
The Tax-Free Bond Fund may also use a tax-equivalency table in advertising and
sales literature. The interest earned by the municipal bonds in the Fund's
portfolio generally remains free from federal income tax* and is often free from
state and local taxes as well. As the table on the next page indicates, a
"tax-free" investment is an attractive choice for investors, particularly in
times of narrow spreads between tax-free and taxable yields.
<TABLE>
<CAPTION>
TAXABLE YIELD EQUIVALENT FOR 1997
STATE OF NEBRASKA
COMBINED FEDERAL AND STATE INCOME TAX BRACKET:
<S> <C> <C> <C> <C> <C> <C>
20.24% 34.99% 38.43% 43.76% 47.54%
JOINT $1- $41,201- $99,601- $151,751- OVER
RETURN 41,200 99,600 151,750 271,050 $271,050
SINGLE $1- $24,651- $59,751- $124,651- OVER
RETURN 24,650 59,750 124,650 271,050 $271,050
TAX-EXEMPT
YIELD TAXABLE YIELD EQUIVALENT
1.50% 1.88% 2.31% 2.44% 2.67% 2.86%
2.00% 2.51% 3.08% 3.25% 3.56% 3.81%
2.50% 3.13% 3.85% 4.06% 4.45% 4.77%
3.00% 3.76% 4.61% 4.87% 5.33% 5.72%
3.50% 4.39% 5.38% 5.68% 6.22% 6.67%
4.00% 5.02% 6.15% 6.50% 7.11% 7.62%
4.50% 5.64% 6.92% 7.31% 8.00% 8.58%
5.00% 6.27% 7.69% 8.12% 8.89% 9.53%
5.50% 6.90% 8.46% 8.93% 9.78% 10.48%
6.00% 7.52% 9.23% 9.74% 10.67% 11.44%
6.50% 8.15% 10.00% 10.56% 11.56% 12.39%
7.00% 8.78% 10.77% 11.37% 12.45% 13.34%
7.50% 9.40% 11.54% 12.18% 13.34% 14.30%
8.00% 10.03% 12.31% 12.99% 14.23% 15.25%
</TABLE>
Note: The maximum marginal tax rate for each bracket was used in
calculating the taxable yield equivalent. Furthermore, additional state
and local taxes paid on comparable taxable investments were not used to
increase federal deductions.
<PAGE>
<TABLE>
<CAPTION>
TAXABLE YIELD EQUIVALENT FOR 1997
MULTISTATE MUNICIPAL FUNDS
FEDERAL INCOME TAX BRACKET:
<S> <C> <C> <C> <C> <C> <C>
15.00% 28.00% 31.00% 36.00% 39.60%
JOINT $1- $41,201- $99,601- $151,751- OVER
RETURN 41,200 99,600 151,750 271,050 $271,050
SINGLE $1- $24,651- $59,751- $124,651- OVER
RETURN 24,650 59,750 124,650 271,050 $271,050
Tax-Exempt
Yield Taxable Yield Equivalent
1.00% 1.18% 1.39% 1.45% 1.56% 1.66%
1.50% 1.76% 2.08% 2.17% 2.34% 2.48%
2.00% 2.35% 2.78% 2.90% 3.13% 3.31%
2.50% 2.94% 3.47% 3.62% 3.91% 4.14%
3.00% 3.53% 4.17% 4.35% 4.69% 4.97%
3.50% 4.12% 4.86% 5.07% 5.47% 5.79%
4.00% 4.71% 5.56% 5.80% 6.25% 6.62%
4.50% 5.29% 6.25% 6.52% 7.03% 7.45%
5.00% 5.88% 6.94% 7.25% 7.81% 8.28%
5.50% 6.47% 7.64% 7.97% 8.59% 9.11%
6.00% 7.06% 8.33% 8.70% 9.38% 9.93%
6.50% 7.65% 9.03% 9.42% 10.16% 10.76%
7.00% 8.24% 9.72% 10.14% 10.94% 11.59%
7.50% 8.82% 10.42% 10.87% 11.72% 12.42%
8.00% 9.41% 11.11% 11.59% 12.50% 13.25%
</TABLE>
Note: The maximum marginal tax rate for each bracket was used in
calculating the taxable yield equivalent. Furthermore, additional state
and local taxes paid on comparable taxable investments were not used to
increase federal deductions.
The chart above is for illustrative purposes only. It is not an
indicator of past or future performance of Fund shares.
*Some portion of the Tax-Free Bond Fund's income may be subject to the
federal alternative minimum tax and state and local income taxes.
<PAGE>
Performance Comparisons
A Fund's performance depends upon such variables as: portfolio quality; average
portfolio maturity; type of instruments in which the portfolio is invested;
changes in interest rates and market value of portfolio securities; changes in
Fund or class expenses; the relative amount of Fund cash flow; and various other
factors.
Investors may use financial publications and/or indices to obtain a more
complete view of a Fund's performance. When comparing performance, investors
should consider all relevant factors such as the composition of any index used,
prevailing market conditions, portfolio compositions of other funds, and methods
used to value portfolio securities and compute offering price. The financial
publications and/or indices which the Fund uses in advertising may include:
o Morgan Stanley Capital International Europe, Australia And Far East
Index (EAFE) is a market capitalization weighted foreign securities
index, which is widely used to measure the performance of European,
Australian and New Zealand and Far Eastern stock markets. The index
covers approximately 1,020 companies drawn from 18 countries in the
above regions. The index values its securities daily in both U.S.
dollars and local currency and calculates total returns monthly. EAFE
U.S. dollar total return is a net dividend figure less Luxembourg
withholding tax. The EAFE is monitored by Capital International, S.A.,
Geneva, Switzerland.
o Lipper Analytical Services, Inc. ranks funds in various fund categories
by making comparative calculations using total return. Total return
assumes the reinvestment of all capital gains distributions and income
dividends and takes into account any change in net asset value over a
specific period of time. From time to time, a Fund will quote its
Lipper ranking in the growth and income category in advertising and
sales literature.
o Consumer Price Index is generally considered to be a measure of
inflation.
o Dow Jones Industrial Average ("DJIA") is an unmanaged index
representing share prices of major industrial corporations, public
utilities, and transportation companies. Produced by the Dow Jones &
Company, it is cited as a principal indicator of market conditions.
o Standard & Poor's Daily Stock Price Index Of 500 Common Stocks, a
composite index of common stocks in industry, transportation,
financial, and public utility companies. The Standard & Poor's index
assumes reinvestment of all dividends paid by stocks listed on the
index. Taxes due on any of these distributions are not included, nor
are brokerage or other fees calculated in the Standard & Poor's
figures.
o Morningstar, Inc., an independent rating service, is the publisher of
the bi-weekly Mutual Fund Values. Mutual Fund Values rates more than
1,000 NASDAQ-listed mutual funds of all types, according to their
risk-adjusted returns. The maximum rating is five stars, and ratings
are effective for two weeks.
o Bank Rate Monitor National Index, Miami Beach, Florida, is a financial
reporting service which publishes weekly average rates of 50 leading
bank and thrift institution money market deposit accounts. The rates
published in the index are an average of the personal account rates
offered on the Wednesday prior to the date of publication by ten of the
largest banks and thrifts in each of the five largest Standard
Metropolitan Statistical Areas. Account minimums range upward from
$2,500 in each institution and compounding methods vary. If more than
one rate is offered, the lowest rate is used. Rates are subject to
change at any time specified by the institution.
o The S&P/BARRA Value Index and the S&P/BARRA Growth Index are
constructed by Standard & Poor's and BARRA, Inc., an investment
technology and consulting company, by separating the S&P 500 Index into
value stocks and growth stocks. The S&P/BARRA Growth and S&P/BARRA
Value Indices are constructed by dividing the stocks in the S&P 500
Index according to their price-to-book ratios. The S&P/BARRA Growth
Index, contains companies with higher price-to-earnings ratios, low
dividends yields, and high earnings growth (concentrated in
electronics, computers, health care, and drugs). The Value Index
contains companies with lower price-to-book ratios and has 50% of the
capitalization of the S&P 500 Index. These stocks tend to have lower
price-to-earnings ratios, high dividend yields, and low historical and
predicted earnings growth (concentrated in energy, utility and
financial sectors). The S&P/BARRA Value and S&P/BARRA Growth Indices
are capitalization-weighted and rebalanced semi-annually. Standard &
Poor's/BARRA calculates these total return indices with dividends
reinvested.
o Standard & Poor's Midcap 400 Stock Price Index, a composite index of
400 common stocks with market capitalizations between $200 million and
$7.5 billion in industry, transportation, financial, and public utility
companies. The Standard & Poor's index assumes reinvestment of all
dividends paid by stocks listed on the index. Taxes due on any of these
distributions are not included, nor are brokerage or other fees
calculated in the Standard & Poor's figures.
o Merrill Lynch 1-3 Year Treasury Index is an unmanaged index tracking
short-term U.S. government securities with maturities between 1 and
2.99 years. The index is produced by Merrill Lynch, Pierce, Fenner &
Smith, Inc.
o Merrill Lynch Corporate & Government Master Index is an unmanaged index
comprised of approximately 4,821 issues which include corporate debt
obligations rated BBB or better and publicly issued, non-convertible
domestic debt of the U.S. government or any agency thereof. These
quality parameters are based on composites of ratings assigned by
Standard and Poor's Ratings Group and Moody's Investors Service, Inc.
Only notes and bonds with a minimum maturity of one year are included.
o Merrill Lynch Corporate A-Rated (1-3 Year) Bond Index is a universe of
corporate bonds and notes with maturities between 1-3 years and rated
A3 or higher.
o Lehman Brothers Government/Corporate (Total) Index is comprised of
approximately 5,000 issues which include: non-convertible bonds
publicly issued by the U.S. government or its agencies; corporate bonds
guaranteed by the U.S. government and quasi-federal corporation; and
publicly issued, fixed rate, non-convertible domestic bonds of
companies in industry, public utilities, and finance. The average
maturity of these bonds approximates nine years. Traced by Lehman
Brothers, Inc., the index calculates total return for one-month,
three-month, twelve-month, and ten-year periods and year-to-date.
o Lehman Brothers Intermediate Government/Corporate Bond Index is a
universe of government and corporate bonds rated BBB or higher with maturities
between 1-10 years.
o The Salomon Brothers Total Rate-of-Return Index for mortgage pass
through securities reflects the entire mortgage pass through market and
reflects their special characteristics. The index represents data
aggregated by mortgage pool and coupon within a given sector. A market
weighted portfolio is constructed considering all newly created pools
and coupons.
o The Merrill Lynch Taxable Bond Indices include U.S. Treasury and agency
issues and were designed to keep pace with structural changes in the
fixed income market. The performance indicators capture all rating
changes, new issues, and any structural changes of the entire market.
o Lehman Brothers Mortgage-Backed Securities Index is a universe of fixed
rate securities backed by mortgage pools of Government National
Mortgage Association (GNMA), Federal Home Loan Mortgage Corp. (FHLMC),
and Federal National Mortgage Association (FNMA).
o Lehman Brothers Five-Year State General Obligations Bonds is an index
comprised of all state general obligation debt issues with maturities
between four and six years. These bonds are rated A or better and
represent a variety of coupon ranges. Index figures are total returns
calculated for one, three, and twelve month periods as well as
year-to-date. Total returns are also calculated as of the index
inception, December 31, 1979.
o Russell 2000 Small Stock Index is an unmanaged capitalization weighted
index consisting of 2,000 small capitalization common stocks.
Investments cannot be made in an index.
o Financial Times Actuaries Indices--including the FTA-World Index (and
components thereof), which are based on stocks in major world equity markets.
Investors may also consult the fund evaluation consulting universes listed
below. Consulting universes may be composed of pension, profit sharing,
commingled, endowment/foundation, and mutual funds.
o Fiduciary Consulting Grid Universe, for example, is composed of over
1,000 funds, representing 350 different investment managers, divided
into subcategories based on asset mix. The funds are ranked quarterly
based on performance and risk characteristics.
o SEI Data Base for equity funds includes approximately 900 funds,
representing 361 money managers, divided into fund types based on
investor groups and asset mix. The funds are ranked every three, six,
and twelve months.
o Mercer Meidinger, Inc. compiles a universe of approximately 600 equity
funds, representing about 500 investment managers, and updates their
rankings each calendar quarter as well as on a one, three, and five
year basis.
o Bank Rate Monitor National Index, Miami Beach, Florida, is a financial
reporting service which publishes weekly average rates of 50 leading
bank and thrift institution money market deposit accounts. The rates
published in the index are an average of the personal account rates
offered on the Wednesday prior to the date of publication by ten of the
largest banks and thrifts in each of the five largest Standard
Metropolitan Statistical Areas. Account minimums range upward from
$2,500 in each institution and compounding methods vary. If more than
one rate is offered, the lowest rate is used. Rates are subject to
change at any time specified by the institution.
Advertising and other promotional literature may include charts, graphs and
other illustrations using a Fund's returns, or returns in general, that
demonstrate basic investment concepts such as tax-deferred compounding, dollar
cost averaging, and systematic investment. In addition, a Fund can compare its
performance, or performance for the types of securities in which it invests, to
a variety of other investments, such as bank savings accounts, certificates of
deposit, and Treasury bills.
Economic and Market Information
Advertising and sales literature for a Fund may include discussions of economic,
financial and political developments and their effect on the securities market.
Such discussions may take the form of commentary on these developments by Fund
portfolio managers and their views and analysis on how such developments could
affect a Fund. In addition, advertising and sales literature may quote
statistics and give general information about mutual fund industry, including
the growth of the industry, from sources such as the Investment Company
Institute ("ICI"). For example, according to the ICI, twenty-seven percent of
American households are pursuing their financial goals through mutual funds.
These investors, as well s business and institutions, have entrusted over $3
trillion to the more than 5,500 mutual funds available.
Cusip 391163102 Cusip 391163201 Cusip 391163300 Cusip 391163409 Cusip 391163508
G00714-02 (9/97)
PART C. OTHER INFORMATION.
Item 24. Financial Statements and Exhibits:
(a) Financial Statements (Filed in Part A)
(b) Exhibits:
(1) Conformed Copy of Declaration of Trust of the Registrant;(1.)
(2) Copy of By-Laws of the Registrant;(1.)
(3) Not applicable;
(4) Not applicable;
(5) (i) Conformed Copy of Investment Advisory Contract
of the Registrant; +
(ii-vi) Conformed Copy of Exhibits A through E to the
Investment Advisory Contract; +
(vii)Conformed Copy the Sub-Advisory Contract; +
(6) (i) Conformed Copy of Distributor's Contract of the
Registrant; (2)
(ii)Conformed Copy of Exhibit A to the Distributor's Contract;(2)
(iii)Conformed Copy of Mutual Fund Sales and Service
Agreement; (2)
(7) Not applicable;
(8) (i) Form of Custodian Contract of the Registrant; +
(9) Conformed Copy of Agreement for Fund Accounting Services,
Administrative Services, and Transfer Agency Services of the
Registrant; (2)
(10) Conformed Copy of Opinion and Consent of Counsel as to legality of
shares being registered;(2)
(11) Conformed Copy of Consent of Independent Auditors; (2)
(12) Not applicable;
(13) Conformed Copy of Initial Capital
Understanding; +
(14) Not applicable;
(15) (i) Conformed Copy of Distribution Plan of Registrant; (2)
(ii) Conformed Copy of Exhibit A to the Distribution Plan; (2)
(16) Not applicable to current filing;
(17) Not applicable to current filing;
(18) Not applicable to current filing;
(19) Conformed copy of Power of Attorney; (2)
Item 25. Persons Controlled by or Under Common Control with Registrant
None
- -------------------------
+ All exhibits have been filed electronically.
(1.) Response is incorporated by reference to Registrant's Initial
Registration Statement on Form N-1A filed July 11, 1997
(File Nos. 333-31137 and 811-8281.)
(2.) Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 1 on Form N-1A filed September 10, 1997
(File Nos. 333-31137 and 811-8281.)
<PAGE>
Item 26. Number of Holders of Securities:
Number of Record Holders
Title of Class as of_August 25, 1997
-------------- ---------------------
Shares of beneficial interest
(no par value)
Great Plains Equity Fund 0
Great Plains Premier Fund 0
Great Plains International Equity Fund 0
Great Plains Intermediate Bond Fund 1
Great Plains Tax-Free Bond Fund 0
Item 27. Indemnification:
Indemnification is provided to Officers and Trustees of the
Registrant pursuant to Section 2 of Article XI of Registrant's
Declaration of Trust. The Investment Advisory Contract between
the Registrant and First Commerce Investors ("Adviser")
provides that, in the absence of willful misfeasance, bad
faith, gross negligence, or reckless disregard of the
obligations or duties under the Investment Advisory Contract
on the part of Adviser, Adviser shall not be liable to the
Registrant or to any shareholder for any act or omission in
the course of or connected in any way with rendering services
or for any losses that may be sustained in the purchase,
holding, or sale of any security. Registrant's Trustees and
Officers are covered by an Investment Trust Errors and
Omissions Policy.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to Trustees, Officers,
and controlling persons of the Registrant by the Registrant
pursuant to the Declaration of Trust or otherwise, the
Registrant is aware that in the opinion of the Securities and
Exchange Commission, such indemnification is against public
policy as expressed in the Act and, therefore, is
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by Trustees, Officers,
or controlling persons of the Registrant in connection with
the successful defense of any act, suit, or proceeding) is
asserted by such Trustees, Officers, or controlling persons in
connection with the shares being registered, the Registrant
will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issues.
Insofar as indemnification for liabilities may be permitted
pursuant to Section 17 of the Investment Company Act of 1940
for Trustees, Officers, and controlling persons of the
Registrant by the Registrant pursuant to the Declaration of
Trust or otherwise, the Registrant is aware of the position of
the Securities and Exchange Commission as set forth in
Investment Company Act Release No. IC-11330. Therefore, the
Registrant undertakes that in addition to complying with the
applicable provisions of the Declaration of Trust or
otherwise, in the absence of a final decision on the merits by
a court or other body before which the proceeding was brought,
that an indemnification payment will not be made unless in the
absence of such a decision, a reasonable determination based
upon factual review has been made (i) by a majority vote of a
quorum of non-party Trustees who are not interested persons of
the Registrant or (ii) by independent legal counsel in a
written opinion that the indemnitee was not liable for an act
of willful misfeasance, bad faith, gross negligence, or
reckless disregard of duties. The Registrant further
undertakes that advancement of expenses incurred in the
defense of a proceeding (upon undertaking for repayment unless
it is ultimately determined that indemnification is
appropriate) against an Officer, Trustee, or controlling
person of the Registrant will not be made absent the
fulfillment of at least one of the following conditions: (i)
the indemnitee provides security for his undertaking; (ii) the
Registrant is insured against losses arising by reason of any
lawful advances; or (iii) a majority of a quorum of
disinterested non-party Trustees or independent legal counsel
in a written opinion makes a factual determination that there
is reason to believe the indemnitee will be entitled to
indemnification.
Item 28. Business and Other Connections of Investment Adviser:
(a) First Commerce Investors, Inc. is a registered
investment adviser providing investment management
services to individuals and institutional clients.
First Commerce Investors, Inc. is a wholly owned
subsidiary of First Commerce Bancshares, Inc., a
multi-bank holding company organized as a Nebraska
corporation ("FCB"). Through its subsidiaries and
affiliates, FCB provides a comprehensive range of
trust, commercial, consumer, correspondent and mortgage
banking services. At December 31, 1996, FCB had an
asset base of over $2 billion.
Although First Commerce Investors, Inc. has not
previously served as an investment adviser to a mutual
fund, it has managed, on behalf of its trust clients,
eight common and collective investment funds having a
market value of approximately $1.6 billion.
The principal executive officers and directors of the Trust's
Investment Adviser and Sub-Adviser are set forth in the
following tables. Unless otherwise noted, the position listed
under other Substantial Business, Profession, Vocation, or
Employment is with First Commerce Investors, Inc.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
(1) (2) (3)
Name Position with Adviser Other Substantial Business,
Profession, Vocation or Employment
James Stuart, III Chairman & CEO Chief Invest. Officer and Sec.,
Stuart Global Invest. Co., BVI;
Consultant, J. Stuart, III Sole
Proprietorship; Exec. V.P., Stuart
Investment Co.; Director, First
Commerce Bancshares
James Stuart, Jr. Vice President, Vice Chairman; Chairman & CEO, First Commerce
Director; Invest. Committee Member Bancshares; Vice Chairman, Director,
Invest. Committee Mem., First
Commerce Investors, Inc.; Chairman,
National Bank of Commerce
Harry Cameron Hinds President
Walter Bruce Remington, II Vice President Adjunct Faculty, U. of Nebraska
Jerry Edward Beyke Vice President General Partner, Beyke Asset
Management
Bradley F. Korell Director; Investment Committee President and Director, National Bank
Member of Commerce; Vice Chairman, Director
- Inv. Committee, First Commerce
Investors, Inc.
Keith LeRoy Broman Director; Chairman, Investment
Committee
Anne Elizabeth Hansen Asst. V.P. and Compliance Officer
Kenneth L. Cheloha Investment Committee Member CFO, Lincoln General Hospital;
Charles Wayne Hoskins Investment Committee Member Consultant
Gene Henry Koepke Investment Committee Member Professor, U. of Nebraska - Kearney
Roy Martin Otte Director; Investment Committee
Member
Christopher P. Sullivan Investment Officer
</TABLE>
(b) Peter A. Kinney is a registered investment adviser with
the Securities and Exchange Commission and has been acting
in a consulting capacity for First Commerce Investors,
Inc. since 1993. During that period, he has provided
consultation and recommendations on international
equities, economies and currencies to First Commerce
Investors, Inc. Peter A. Kinney serves as Sub-Adviser to
the Great Plains International Equity Fund and the Great
Plains Equity Fund.
Item 29. Principal Underwriters:
Item 29.Principal Underwriters:
(a) Edgewood Services, Inc. the Distributor for shares of
the Registrant, acts as principal underwriter for the
following open-end investment companies, including the
Registrant: BT Advisor Funds, BT Institutional Funds,
BT Investment Funds, BT Pyramid Mutual Funds, Excelsior
Funds, Excelsior Funds, Inc., (formerly, UST Master
Funds, Inc.), Excelsior Institutional Trust, Excelsior
Tax-Exempt Funds, Inc. (formerly, UST Master Tax-Exempt
Funds, Inc.), FTI Funds, FundManager Portfolios, Great
Plains Funds, Marketvest Funds, Marketvest Funds, Inc.,
Old Westbury Funds, Inc. and WesMark Funds.
<TABLE>
<CAPTION>
<S> <C> <C>
(b)
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Distributor With Registrant
Lawrence Caracciolo Director, President, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Arthur L. Cherry Director, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
J. Christopher Donahue Director, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Ronald M. Petnuch Vice President, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Thomas P. Schmitt Vice President, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Thomas P. Sholes Vice President, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Ernest L. Linane Assistant Vice President, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
<PAGE>
S. Elliott Cohan Secretary, Assistant Secretary
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Thomas J. Ward Assistant Secretary, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Kenneth W. Pegher, Jr. Treasurer, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
</TABLE>
(c) Not applicable
<PAGE>
Item 30. Location of Accounts and Records:
All accounts and records required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and Rules 31a-1 through 31a-3 promulgated
thereunder are maintained at one of the following locations:
Registrant Federated Investors Tower
Pittsburgh, PA 15222-3779
Federated Shareholder Services Company Federated Investors Tower
("Transfer Agent, Dividend Pittsburgh, PA 15222-3779
Disbursing Agent and Portfolio
Accounting Services")
Federated Services Company Federated Investors Tower
("Administrator") Pittsburgh, PA 15222-3779
National Bank of Commerce 1248 "O" Street
( "Custodian") Lincoln, Nebraska 68508
First Commerce Investors, Inc. 610 NBC Center
("Adviser") Lincoln, Nebraska 68508
Peter A. Kinney 11 S. LaSalle #2900
("Sub-Adviser") Chicago, IL 60603
Item 31. Management Services: Not applicable.
Item 32. Undertakings:
Registrant hereby undertakes to file a post-effective
amendment, using financial statements which need not be
certified, within four to six months from the effective date
of Registrant's 1933 Act Registration Statement.
Registrant hereby undertakes to comply with the provisions of
Section 16(c) of the 1940 Act with respect to the removal of Trustees and the
calling of special shareholder meetings by shareholders.
Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest annual report to
shareholders, upon request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, GREAT PLAINS FUNDS, has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Pittsburgh and
Commonwealth of Pennsylvania, on the _____ day of September, 1997.
GREAT PLAINS FUNDS
BY: /s/ Victor R. Siclari
Victor R. Siclari
Attorney in Fact for Edward C. Gonzales
September ____, 1997
Pursuant to the requirements of the Securities Act of 1933, Registration
Statement has been signed below by the following person in the capacity and on
the date indicated:
NAME TITLE DATE
By: /s/ Victor R. Siclari
Victor R. Siclari Attorney In Fact September __, 1997
For the Persons
Listed Below
NAME TITLE
Edward C Gonzales* President
C. Christine Thomson* Treasurer
Dr. Keith Broman* Trustee
Hugh Hansen* Trustee
George E. Howard* Trustee
Dr. Martin A. Massengale* Trustee
Keith C. Mitchell* Trustee
* By Power of Attorney
September 1, 1997
Exhibit 5(i) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
GREAT PLAINS FUNDS
INVESTMENT ADVISORY CONTRACT
This Contract is made this 1st day of September, 1997, between FIRST
COMMERCE INVESTORS, INC., a Nebraska corporation having its principal place of
business in Lincoln, Nebraska (the "Adviser"), and Great Plains Funds, a
Massachusetts business trust having its principal place of business in
Pittsburgh, Pennsylvania (the "Trust").
WHEREAS the Trust is an open-end management investment company as that
term is defined in the Investment Company Act of 1940, as amended (the
"1940 Act"), and is registered as such with the Securities and Exchange
Commission; and
WHEREAS Adviser is a registered investment adviser under the Investment
Advisers Act of 1940 and is engaged in the business of rendering investment
advisory and management services.
NOW, THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. The Trust hereby appoints Adviser as investment adviser for each of
the portfolios ("Funds") of the Trust which executes an exhibit to this
Contract, and Adviser accepts the appointments. Subject to the direction of the
Trustees, Adviser shall provide investment research and supervision of the
investments of the Funds and conduct a continuous program of investment
evaluation and of appropriate sale or other disposition and reinvestment of each
Fund's assets.
2. Adviser, in its supervision of the investments of each of the Funds,
will be guided by each of the Fund's investment objective and policies and the
provisions and restrictions contained in the Declaration of Trust and By-Laws of
the Trust and as set forth in the Registration Statements of the Trust under the
Securities Act of 1933 and the 1940 Act, and any amendments thereto (the
"Registration Statements"), and exhibits thereto as may be on file with the
Securities and Exchange Commission.
3. Each Fund shall pay or cause to be paid all of its own expenses and
its allocable share of Trust expenses, including, without limitation, the
expenses of organizing the Trust and continuing its existence; fees and expenses
of Trustees and officers of the Trust; fees for investment advisory services and
administrative personnel and services; expenses incurred in the distribution of
its shares ("Shares"), including expenses of administrative support services;
fees and expenses of preparing and printing the Registration Statements;
expenses of registering and qualifying the Trust, the Funds, and Shares of the
Funds under federal and state laws and regulations; expenses of preparing,
printing, and distributing prospectuses (and any amendments thereto) to
shareholders; interest expense, taxes, fees, and commissions of every kind;
expenses of issue (including cost of Share certificates, if any), purchase,
repurchase, and redemption of Shares, including expenses attributable to any
program of periodic issue; charges and expenses of custodians, transfer agents,
dividend disbursing agents, shareholder servicing agents, and registrars;
printing and mailing costs, auditing, accounting, and legal expenses; reports to
shareholders and governmental officers and commissions; expenses of meetings of
Trustees and shareholders and proxy solicitations therefor; insurance expenses;
association membership dues and such nonrecurring items as may arise, including
all losses and liabilities incurred in administering the Trust and the Funds.
Each Fund will also pay its allocable share of such extraordinary expenses as
may arise, including expenses incurred in connection with litigation,
proceedings, and claims and the legal obligations of the Trust to indemnify its
officers and Trustees and agents with respect thereto.
4. Each of the Funds shall pay to Adviser, for all services rendered
to the Fund by Adviser hereunder, the fees payable by the Fund as
set forth in the exhibits attached hereto.
5. The net asset value of each Fund's Shares as used herein will be
calculated to the nearest 1/10th of one cent.
6. Adviser may from time to time and for such periods as it deems
appropriate reduce its compensation (and, if appropriate, assume expenses of one
or more of the Funds) to the extent that any Fund's expenses exceed such expense
limitation as the Adviser may, by notice to the Fund, voluntarily declare to be
effective.
7. This Contract shall begin for each Fund as of the date of execution
on behalf of that Fund of the applicable exhibit, subject to approval by the
Trustees and shareholders of such Fund in accordance with the 1940 Act, and
shall continue in effect with respect to such Fund for two years from the date
of such execution, or any such shorter period for such initial term as specified
in such exhibit, and thereafter for successive periods of one year, subject to
the provisions for termination and all of the other terms and conditions hereof
if: (a) such continuation shall be specifically approved at least annually by
the vote of a majority of the Trustees of the Trust, including a majority of the
Trustees who are not parties to this Contract or "interested persons," as that
term is defined in the 1940 Act, of any such party cast in person at a meeting
called for that purpose; and (b) Adviser shall not have notified a Fund in
writing at least sixty (60) days prior to the anniversary date of this Contract
in any year thereafter that it does not desire such continuation with respect to
that Fund. If a Fund is added after the first approval by the Trustees and
shareholders as described above, this Contract will be effective as to that Fund
upon execution of the applicable exhibit and approval by the Trustees and
shareholders of that Fund in accordance with the 1940 Act, and will continue in
effect until the next annual approval of this Contract by the Trustees and
thereafter for successive periods of one year, subject to approval as described
above.
8. Notwithstanding any provision in this Contract, it may be terminated
at any time with respect to any Fund, without the payment of any penalty, by the
Trustees of the Trust or by a "vote of a majority of the outstanding voting
securities" of that Fund, as that term is defined in Section 2(a)(42) of the
1940 Act, on sixty (60) days' written notice to Adviser.
9. This Contract may not be assigned by Adviser and shall automatically
terminate in the event of any "assignment," as that term is defined in the 1940
Act. Adviser may employ or contract with such other person, persons,
corporation, or corporations at its own cost and expense as it shall determine
in order to assist it in carrying out this Contract.
10. In the absence of willful misfeasance, bad faith, gross negligence,
or reckless disregard of the obligations or duties under this Contract on the
part of Adviser, Adviser shall not be liable to the Trust or to any of the Funds
or to any shareholder for any act or omission in the course of or connected in
any way with rendering services or for any losses that may be sustained in the
purchase, holding, or sale of any security.
11. This Contract may be amended at any time by agreement of the
parties provided that the amendment shall be approved both by the vote of a
majority of the Trustees of the Trust, including a majority of the Trustees who
are not parties to this Contract nor interested persons of any such party (other
than as Trustees of the Trust) cast in person at a meeting called for that
purpose, and, where required by Section 15(a)(2) of the 1940 Act, on behalf of a
Fund by a "vote of a majority of the outstanding voting securities" of that Fund
as defined in Section 2(a)(42) of the 1940 Act.
12. Adviser acknowledges that all sales literature for investment
companies (such as the Trust) are subject to strict regulatory oversight. The
Adviser agrees to submit any proposed sales literature for the Trust (or any
Fund) or for itself or its affiliates which mentions the Trust (or any Fund) to
the Trust's distributor for review and filing with the appropriate regulatory
authorities prior to the public release of any such sales literature, provided,
however, that nothing herein shall be construed so as to create any obligation
or duty on the part of the Adviser to produce sales literature for the Trust (or
any Fund). The Trust agrees to cause its distributor to promptly review all such
sales literature to ensure compliance with relevant requirements, to promptly
advise Adviser of any deficiencies contained in such sales literature, to
promptly file complying sales literature with the relevant authorities, and to
cause such sales literature to be distributed to prospective investors in the
Trust.
13 Adviser is hereby expressly put on notice of the limitation of
liability as set forth in Article XI of the Declaration of Trust of the Trust
and agrees that the obligations pursuant to this Contract of a particular Fund
and of the Trust with respect to that particular Fund are limited solely to the
assets of that particular Fund, and Adviser shall not seek satisfaction of any
such obligation from any other Fund, the shareholders of any Fund, the Trustees,
officers, employees or agents of the Trust, or any of them.
14. The parties hereto acknowledge that the Adviser has reserved the
right to grant the non-exclusive use of the name "Great Plains Funds" or any
derivative thereof to any other investment company, investment company
portfolio, investment adviser, distributor or other business enterprise, and to
withdraw from the Trust and one or more of the Funds the use of the name "Great
Plains Funds". The name "Great Plains Funds" may continue to be used by the
Trust and each Fund so long as Adviser is the investment adviser to the Trust
and thereafter as long as such use is mutually agreeable to the Adviser and the
Trust.
15. This Contract shall be construed in accordance with and governed
by the laws of the Commonwealth of Massachusetts.
16. This Contract will become binding on the parties hereto upon their
execution of the attached exhibits to this Contract, which may be executed
simultaneously in two or more counterparts, each of which will be deemed an
original, but all of which together will constitute one and the same instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
Exhibit 5(ii) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
EXHIBIT A
to the
Investment Advisory Contract
Great Plains Equity Fund
For all services rendered by Adviser hereunder, the above-named Fund of
the Trust shall pay to Adviser and Adviser agrees to accept as full compensation
for all services rendered hereunder, an annual investment advisory fee at the
annual rate of 0.75% of the average daily net assets of the Fund.
The portion of the fee based upon the average daily net assets of the
Fund shall be accrued daily and paid monthly to the Adviser.
Witness the due execution hereof this 1st day of September, 1997.
Attest: FIRST COMMERCE INVESTORS, INC.
/s/ Anne E. Hansen By: /s/ James Stuart, III
Secretary Chairman
Attest: GREAT PLAINS FUNDS
/s/ Victor R. Siclari By: /s/ C. Christine Thomson
Secretary Vice President
<PAGE>
Exhibit 5(iii) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
EXHIBIT B
to the
Investment Advisory Contract
Great Plains International Equity Fund
For all services rendered by Adviser hereunder, the above-named Fund of
the Trust shall pay to Adviser and Adviser agrees to accept as full compensation
for all services rendered hereunder, an annual investment advisory fee at the
annual rate of 1.25% of the average daily net assets of the Fund.
The portion of the fee based upon the average daily net assets of the
Fund shall be accrued daily and paid monthly to the Adviser.
Witness the due execution hereof this 1st day of September, 1997.
Attest: FIRST COMMERCE INVESTORS, INC.
/s/ Anne E. Hansen By: /s/ James Stuart, III
Secretary Chairman
Attest: GREAT PLAINS FUNDS
/s/ Victor R. Siclari By: /s/ C. Christine Thomson
Secretary Vice President
<PAGE>
Exhibit 5(iv) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
EXHIBIT C
to the
Investment Advisory Contract
Great Plains Premier Fund
For all services rendered by Adviser hereunder, the above-named Fund of
the Trust shall pay to Adviser and Adviser agrees to accept as full compensation
for all services rendered hereunder, an annual investment advisory fee at the
annual rate of 1.00% of the average daily net assets of the Fund.
The portion of the fee based upon the average daily net assets of the
Fund shall be accrued daily and paid monthly to the Adviser.
Witness the due execution hereof this 1st day of September, 1997.
Attest: FIRST COMMERCE INVESTORS, INC.
/s/ Anne E. Hansen By: /s/ James Stuart, III
Secretary Chairman
Attest: GREAT PLAINS FUNDS
/s/ Victor R. Siclari By: /s/ C. Christine Thomson
Secretary Vice President
<PAGE>
Exhibit 5(v) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
EXHIBIT D
to the
Investment Advisory Contract
Great Plains Intermediate Bond Fund
For all services rendered by Adviser hereunder, the above-named Fund of
the Trust shall pay to Adviser and Adviser agrees to accept as full compensation
for all services rendered hereunder, an annual investment advisory fee at the
annual rate of 0.50% of the average daily net assets of the Fund.
The portion of the fee based upon the average daily net assets of the
Fund shall be accrued daily and paid monthly to the Adviser.
Witness the due execution hereof this 1st day of September, 1997.
Attest: FIRST COMMERCE INVESTORS, INC.
/s/ Anne E. Hansen By: /s/ James Stuart, III
Secretary Chairman
Attest: GREAT PLAINS FUNDS
/s/ Victor R. Siclari By: /s/ C. Christine Thomson
Secretary Vice President
<PAGE>
Exhibit 5(vi) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
EXHIBIT E
to the
Investment Advisory Contract
Great Plains Tax-Free Bond Fund
For all services rendered by Adviser hereunder, the above-named Fund of
the Trust shall pay to Adviser and Adviser agrees to accept as full compensation
for all services rendered hereunder, an annual investment advisory fee at the
annual rate of 0.50% of the average daily net assets of the Fund.
The portion of the fee based upon the average daily net assets of the
Fund shall be accrued daily and paid monthly to the Adviser.
Witness the due execution hereof this 1st day of September, 1997.
Attest: FIRST COMMERCE INVESTORS, INC.
/s/ Anne E. Hansen By: /s/ James Stuart, III
Secretary Chairman
Attest: GREAT PLAINS FUNDS
/s/ Victor R. Siclari By: /s/ C. Christine Thomson
Secretary Vice President
Exhibit 13 under Form N-1A
Exhibit 99 under Item 601/Reg. S-K
FEDERATED SERVICES COMPANY
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
(412) 288-1900
September 12, 1997
Great Plains Funds
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Gentlemen:
Federated Services Company agrees to purchase 10,000 shares of Great Plains
Intermediate Bond Fund, a portfolio of Great Plains Funds, at the cost of $10.00
each. These shares are purchased for investment purposes and Federated Services
Company has no present intention of redeeming these shares.
Very truly yours,
/s/ S. Elliott Cohan
S. Elliott Cohan
Vice President and
Assistant Secretary,
Federated Services Company
Exhibit 5(vii) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
FIRST COMMERCE INVESTORS, INC.
SUB-ADVISORY AGREEMENT
This sub-advisory agreement is made as of 10th day of September, 1997
by and between First Commerce Investors, Inc., a Nebraska Corporation having its
principal office and place of business at Suite 610, NBC Center, Lincoln,
Nebraska 68508 (herein referred to as "Advisor") and Peter A. Kinney having his
principal place of business at 11 S. LaSalle #2800, Chicago, Illinois 60603
(herein referred to as "Kinney").
WHEREAS, the Advisor is an investment advisor to (i) the Great Plains
Funds, a Massachusetts business trust organized and registered as an open-end
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act") under an Investment Advisory Contract dated as of September 1, 1997
("Advisory Agreement"), (ii) the Trust Department of National Bank of Commerce
Trust and Savings Association and (iii) various entities or persons controlled
by or under common control with First Commerce Bancshares, Inc.;
WHEREAS, the Advisor will manage the international foreign securities
portfolio of the Great Plains Equity Fund and the Great Plains International
Equity Fund as well as international foreign securities portfolios of its other
clients;
WHEREAS, the Advisor desires to retain Kinney to provide continuous
advice as to investments in international securities.
Now therefore, in consideration of these premises and for the mutual
covenants and agreements contained herein, the parties agree as follows:
1. Appointment.
<PAGE>
-5-
a) The Advisor hereby appoints Kinney to act as an
investment advisor for all assets under management by
the Advisor or its affiliates which now presently
consist of or in the future may consist of
international foreign securities. For purposes of
this agreement, investment advice provided by Kinney
shall consist of economic and financial forecasts for
Europe, financial analyses of companies which have
their principal operations in Europe, monitoring
relative currency values between foreign
jurisdictions and the United States, providing
research analysis and various reports on various
companies and making specific recommendations as to
the purchase and sale of foreign securities. Such
investment advisory services shall not consist of any
discretionary management of any portfolio of any
client of the Advisor, including Great Plains Funds.
Kinney accepts such appointment and agrees to furnish
such services for and in consideration of the
compensation set forth herein.
b) Kinney's investment advice shall be limited to
recommendations of stocks and/or debt instruments
issued by companies who have their principal place of
businesses in Europe. Nevertheless, the Advisor from
time to time may ask Kinney to provide investment
advice about the securities of companies having their
principal place of businesses in other foreign
jurisdictions including without limitation, Asia and
Latin America. Kinney shall periodically provide such
reports and/or other materials that the Advisor may
request from time to time.
2. Kinney warrants that he is registered as an investment advisor
and agrees that he will comply with all applicable rules and
regulations of the Securities and Exchange Commission and, in
addition, will conduct his activities under this agreement in
accordance with other applicable law. In discharging his
duties hereunder Kinney shall use the same skill and care he
might use in providing services to fiduciary accounts for
which he has investment discretion.
a) Kinney acknowledges receiving a copy of the
Registration Statement on Form N-1A of the Great
Plains Funds and a copy of the Advisory Agreement and
agrees to conduct his activities and provide any
investment advice to the Advisor relating to the
Great Plains Funds in accordance with the Great
Plains Funds investment objectives, policies and
limitations, as stated in such Registration Statement
as it may be amended from time to time, and with the
terms of the Advisory Contract, including in
particular the obligation to submit to the
distributor of Great Plains Funds for review,
approval and regulatory filing any sales literature
or advertising material that mentions the Great
Plains Funds.
3. Nonexclusive services. The services performed by Kinney hereunder
are deemed not to be exclusive, and Kinney shall be free to
furnish similar services to others so long as his services under
this Agreement are not impaired thereby.
<PAGE>
4. Books and Records. In compliance of requirements of Rule 31a-3
under the 1940 Act, Kinney hereby agrees that all records
which he maintains for each portfolio of the Great Plains
Funds are the property of the Fund, and further agrees to
surrender promptly to the Fund any of such records upon the
Fund's request. Kinney further agrees to preserve for the
periods described by Rule 31a-2 under the 1940 Act, the
records required to be maintained by 30a-1 under the 1940 Act.
5. Expenses. Kinney shall pay all expenses incurred by him in
performing his services and duties for the Advisor, other than
those incurred by him at the direct request of the Advisor,
including without limitation travel, lodging and related
expenses. All other expenses incurred in the operation of the
Great Plains Funds or other accounts managed by the Advisor
will be borne by them, except to the extent specifically
assumed by others.
6. Compensation. In consideration of the services rendered
pursuant to this Agreement, the Advisor shall pay Kinney the
fee as set forth on Schedule 1 attached hereto. In addition,
the Advisor agrees to pay one half the cost of a Bloomberg
service chosen by the mutual agreement of the parties. Kinney
agrees to accept such compensation for all services provided
to FCI and acknowledges that he shall not be entitled to any
further compensation from either the Advisor or any of the
Advisor's clients, including the Great Plains Fund in respect
of such services rendered. The payment of the investment
advisory fee to Kinney shall be made solely by the Advisor,
notwithstanding that such fee made is based upon the net
assets of the Great Plains Funds International Equity Fund.
<PAGE>
7. Term. This agreement shall continue until September 30, 1998 and
thereafter shall continue automatically for successive annual
periods ending on September 30 of each year, provided that such
continuance is specifically approved by a) the Advisor and b) the
Board of Trustees of the Great Plains Funds, or c) by a vote of
majority (as defined in the 1940 Act) of the outstanding voting
securities of the Great Plains Equity Fund, the Great Plains
International Equity Fund, and or any other portfolio of the
Great Plains Funds for which Kinney provides investment advice;
provided that in any event, the continuance of this agreement is
also approved by the majority of the Trustees of the Great Plains
Funds who are not "interested persons" (as defined in the 1940
Act) of any party to this agreement, by a vote cast in person and
meeting called for the purpose of voting on such approval. This
agreement is terminable without penalty, on not more than sixty
days written notice to Kinney by the Advisor, the Board of
Trustees of the Great Plains Funds, or by a vote of the holder of
majority of the shares of the Great Plains International Equity
Fund, the Great Plains Equity Fund, or upon not less than sixty
days written notice to the Advisor, by Kinney. This agreement
will also terminate automatically, as to the Great Plains Funds
International Equity Fund, the Great Plains Equity Fund or other
portfolios of the Great Plains Funds in the event of its
assignment (as defined in the 1940 Act). In addition,
notwithstanding anything herein to the contrary, in the event of
the termination of the Advisory Agreement between the Great
Plains Funds and the Advisor, this agreement shall terminate with
respect thereto on the same effective date as the termination of
the Advisory Agreement between the Advisor and the Great Plains
Funds.
8. Confidentiality. All information regarding the customers,
investments, investment management of First Commerce
Investors, Inc. and National Bank Of Commerce Trust and
Savings Association and all trade secrets, business and
technical information, processes, business practices, plans,
agreements, financial information and any other information
about First Commerce Bancshares, Inc. its subsidiaries and
persons controlled by or under common control with First
Commerce Bancshares, Inc provided to Kinney and not otherwise
in the public domain is deemed confidential and proprietary.
Such information may not be disclosed by Kinney to any person
not affiliated with First Commerce Bancshares, Inc. without
the prior consent of the Advisor unless required to be
disclosed by applicable law.
<PAGE>
9. In the absence of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the obligations or duties
under this Agreement on the part of Kinney, Kinney shall not
be liable to the Advisor or Great Plains Fund or to any of the
Funds or to any shareholder thereof for any act or omission in
the course of or connected in any way with rendering services
or for any losses that may be sustained in the purchase,
holding, or sale of any security. In the absence of Kinney's
willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties under this Agreement, the Advisor
hereby agrees to indemnify Kinney and hold him harmless for
any expense, fine or other cost, including legal expenses,
that Kinney may incur that arises out of any claim, cause of
action, judgement, or administrative action relating to his,
the Advisor's or the Great Plains Funds acts and or omissions
in the purchase, holding, or sale of any security for the
Great Plains Funds.
10. Kinney is hereby expressly put on notice of the limitation of
liability as set forth in Article XI of the Declaration of
Trust of the Great Plains Fund and agrees that the obligations
pursuant to this Agreement of a particular Fund and of the
Great Plains Fund with respect to that particular Fund be
limited solely to the assets of that particular Fund, and
Kinney shall not seek satisfaction of any such obligation from
any other Fund, the shareholders of any Fund, the Trustees,
officers, employees or agents of the Great Plains Fund, or any
of them.
11. Miscellaneous.
a) Amendments. No provision in this agreement may be changed,
waived, discharged or terminated except by an instrument in
writing and signed by the party against whom enforcement of the
change, waiver, discharge, or termination is sought.
b) Captions. Construction of the captions of this
agreement are included for convenience of reference
only and in no way define or limit any of the
provisions hereof or otherwise affect the
construction or fact. If any provision of this
agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder
of this agreement shall not be affected thereby. This
agreement shall be binding upon and shall adhere to
the benefit of the parties hereto, and the respective
permitted successors and assigns and shall be
governed by Nebraska law; provided, however, that
nothing herein shall be construed in a manner
inconsistent with the 1940 Act or any rule or
regulation of the Securities and Exchange Commission
thereunder.
<PAGE>
208012
--
c) Any notice or instrument in writing authorized or
required by this agreement to be given shall be
sufficiently given if addressed to the recipient
party and mailed or delivered to it at its office at
the address first above written, or such other place
as may be from time to time designated in writing.
Any notice or instrument in writing authorized or
required by this agreement to be given to Kinney
shall be sufficiently given of addressed to Kinney
and mailed or delivered to him at his office at the
address first written above, or at such other place
as Kinney may be from time to time designate in
writing.
IN WITNESS WHEREOF the parties hereto have caused this agreement to be
executed by the officers designated below as of the date first written above.
First Commerce Investors, Inc.
By: /s/ James Stuart, III
James Stuart, III
Chairman and CEO
/s/ Peter A. Kinney
Peter A. Kinney
<PAGE>
208012
-7-
208012
SCHEDULE I
Compensation for the services rendered by Mr.
Kinney to the Advisor under this
agreement.
The Advisor shall pay to Mr. Kinney the greater of $75,000.00/ year or sixteen
basis points of the average annual net assets of the International Equity Fund
of the Great Plains Funds. Such fee shall be accrued and paid on or before the
15th day of the next succeeding month for which it is calculated.
Exhibit 8(i) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
CUSTODIAN CONTRACT
Between
GREAT PLAINS FUNDS
and
NATIONAL BANK OF COMMERCE
<PAGE>
1
TABLE OF CONTENTS
Page
1. Employment of Custodian and Property to be Held by It................1
2. Duties of the Custodian With Respect to Property of the
Funds Held by the Custodian.........................................2
2.1 Holding Securities..............................................2
2.2 Delivery of Securities..........................................2
2.3 Registration of Securities......................................5
2.4 Bank Accounts...................................................6
2.5 Payments for Shares.............................................7
2.6 Availability of Federal Funds...................................7
2.7 Collection of Income............................................7
2.8 Payment of Fund Moneys..........................................8
2.9 Liability for Payment in Advance of Receipt of
Securities Purchased............................................9
2.10 Payments for Repurchases or Redemptions of Shares of a Fund......9
2.10 A Deposit of Fund Assets with Mutual Fund Transfer Agent.........9
2.11 Appointment of Agents...........................................10
2.12 Deposit of Fund Assets in Securities System.....................10
2.13 Segregated Account..............................................12
2.14 Joint Repurchase Agreements.....................................13
2.15 Ownership Certificates for Tax Purposes.........................13
2.16 Proxies ........................................................13
2.17 Communications Relating to Fund Portfolio Securities............13
2.18 Proper Instructions.............................................14
2.19 Actions Permitted Without Express Authority.....................14
2.20 Evidence of Authority...........................................15
2.21 Notice to Trust by Custodian Regarding Cash Movement............15
3. Duties of Custodian With Respect to the Books of Account and
Calculation of Net Asset Value and Net Income........................15
4. Records ........................................................16
5. Opinion of Funds' Independent Public Accountants/Auditors............16
6. Reports to Trust by Independent Public Accountants/Auditors..........17
7. Compensation of Custodian............................................17
8. Responsibility of Custodian..........................................17
9. Effective Period, Termination and Amendment..........................19
10. Successor Custodian..................................................20
11. Interpretive and Additional Provisions...............................21
12. Massachusetts Law to Apply...........................................22
13. Notices ........................................................22
14. Counterparts 22
15. Limitations of Liability.............................................22
<PAGE>
Great Plains Funds ........ 12 Draft version: 9/3/97
CUSTODIAN CONTRACT
This Contract between GREAT PLAINS FUNDS, a Massachusetts business trust (the
"Trust"), on behalf of the portfolios (hereinafter collectively called the
"Funds" and individually referred to as a "Fund") of the Trust, having its
principal place of business at Federated Investors Tower, Pittsburgh,
Pennsylvania, 15222-3779, and NATIONAL BANK OF COMMERCE, a Nebraska corporation,
having its principal place of business at 1248 "O" Street, Lincoln, Nebraska,
68508, (the "Custodian").
WITNESSETH: That in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It
The Trust hereby employs the Custodian as the custodian of the assets
of each of the Funds of the Trust, including shares of other mutual
funds ("Mutual Fund Shares"). Except as otherwise expressly provided
herein, the securities and other assets of each of the Funds shall be
segregated from the assets of each of the other Funds and from all
other persons and entities. The Trust will deliver to the Custodian all
securities and cash owned by the Funds and all payments of income,
payments of principal or capital distributions received by them with
respect to all securities owned by the Funds from time to time, and the
cash consideration received by them for shares ("Shares") of beneficial
interest of the Funds as may be issued or sold from time to time. The
Custodian shall not be responsible for any property of the Funds held
or received by the Funds and not delivered to the Custodian. With
respect to uncertificated Mutual Fund Shares, the holding of
confirmation statements that identify the Mutual Fund Shares as being
recorded in the Custodian's name on behalf of a Fund will be deemed
custody for purposes hereof.
Upon receipt of "Proper Instructions" (within the meaning of Section
2.18), the Custodian shall from time to time employ one or more
sub-custodians upon the terms specified in the Proper Instructions,
provided that the Custodian shall have no more or less responsibility
or liability to the Trust or any of the Funds on account of any actions
or omissions of any sub-custodian so employed than any such
sub-custodian has to the Custodian.
2. Duties of the Custodian With Respect to Property of the Funds Held by
the Custodian
2.1 Holding Securities. The Custodian shall hold and physically
segregate for the account of each Fund all non-cash property,
including all securities owned by each Fund, other than
securities which are maintained pursuant to Section 2.12 in a
clearing agency which acts as a securities depository or in a
book-entry system authorized by the U.S. Department of the
Treasury, collectively referred to herein as "Securities
System", securities which are subject to a joint repurchase
agreement with affiliated funds pursuant to Section 2.14 and
Mutual Fund Shares which are maintained pursuant to Section
2.10A in an account with the transfer agent for the mutual fund
(the "Fund Agent"). The Custodian shall maintain records of all
receipts, deliveries and locations of such securities, together
with a current inventory thereof, and shall conduct periodic
physical inspections of certificates representing stocks, bonds
and other securities held by it under this Contract in such
manner as the Custodian shall determine from time to time to be
advisable in order to verify the accuracy of such inventory.
With respect to securities held by any agent appointed pursuant
to Section 2.11 hereof, and with respect to securities held by
any sub-custodian appointed pursuant to Section 1 hereof, the
Custodian may rely upon certificates from such agent as to the
holdings of such agent and from such sub-custodian as to the
holdings of such sub-custodian, it being understood that such
reliance in no way relieves the Custodian of its
responsibilities under this Contract. The Custodian will
promptly report to the Trust the results of such inspections,
indicating any shortages or discrepancies uncovered thereby, and
take appropriate action to remedy any such shortages or
discrepancies.
2.2 Delivery of Securities. The Custodian shall release and deliver
securities owned by a Fund held by the Custodian or in a Securities
System account of the Custodian only upon receipt of Proper
---------------------- Instructions, which may be continuing
instructions when deemed appropriate by the parties, and only in the
following cases:
(1) Upon sale of such securities for the account of a Fund and receipt of
payment therefor;
(2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the Trust;
(3) In the case of a sale effected through a Securities System, in
accordance with the provisions of Section 2.12 hereof;
(4) In the case of a sale of Mutual Fund Shares, in accordance with the
provisions of Section 2.10A hereof;
(5) To the depository agent in connection with tender or other similar
offers for portfolio securities of a Fund, in accordance with the
provisions of Section 2.17 hereof;
(6) To the issuer thereof or its agent when such securities are called,
redeemed, retired or otherwise become payable; provided that, in any
such case, the cash or other consideration is to be delivered to the
Custodian;
(7) To the issuer thereof, or its agent, for transfer into the
name of a Fund or into the name of any nominee or nominees
of the Custodian or into the name or nominee name of any
agent appointed pursuant to Section 2.11 or into the name
or nominee name of any sub-custodian appointed pursuant to
Section 1; or for exchange for a different number of
bonds, certificates or other evidence representing the
same aggregate face amount or number of units; provided
that, in any such case, the new securities are to be
delivered to the Custodian;
(8) Upon the sale of such securities for the account of a
Fund, to the broker or its clearing agent, against a
receipt, for examination in accordance with "street
delivery custom"; provided that in any such case, the
Custodian shall have no responsibility or liability for
any loss arising from the delivery of such securities
prior to receiving payment for such securities except as
may arise from the Custodian's own failure to act in
accordance with the standard of reasonable care or any
higher standard of care imposed upon the Custodian by any
applicable law or regulation if such above-stated standard
of reasonable care were not part of this Contract;
(9) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or
readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion
contained in such securities, or pursuant to any deposit
agreement; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the
Custodian;
(10) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights
or similar securities or the surrender of interim receipts
or temporary securities for definitive securities;
provided that, in any such case, the new securities and
cash, if any, are to be delivered to the Custodian;
(11) For delivery in connection with any loans of portfolio
securities of a Fund, but only against receipt of adequate
collateral in the form of (a) cash, in an amount specified
by the Trust, (b) certificated securities of a description
specified by the Trust, registered in the name of the Fund
or in the name of a nominee of the Custodian referred to
in Section 2.3 hereof or in proper form for transfer, or
(c) securities of a description specified by the Trust,
transferred through a Securities System in accordance with
Section 2.12 hereof;
(12) For delivery as security in connection with any borrowings
requiring a pledge of assets by a Fund, but only against
receipt of amounts borrowed, except that in cases where
additional collateral is required to secure a borrowing
already made, further securities may be released for the
purpose;
(13) For delivery in accordance with the provisions of any
agreement among the Trust or a Fund, the Custodian and a
broker-dealer registered under the Securities Exchange Act
of 1934, as amended, (the "Exchange Act") and a member of
The National Association of Securities Dealers, Inc.
("NASD"), relating to compliance with the rules of The
Options Clearing Corporation and of any registered
national securities exchange, or of any similar
organization or organizations, regarding escrow or other
arrangements in connection with transactions for a Fund;
(14) For delivery in accordance with the provisions of any
agreement among the Trust or a Fund, the Custodian, and a
Futures Commission Merchant registered under the Commodity
Exchange Act, relating to compliance with the rules of the
Commodity Futures Trading Commission and/or any Contract
Market, or any similar organization or organizations,
regarding account deposits in connection with transaction
for a Fund;
(15) Upon receipt of instructions from the transfer agent
("Transfer Agent") for a Fund, for delivery to such Transfer
Agent or to the holders of shares in connection with
distributions in kind, in satisfaction of requests by
holders of Shares for repurchase or redemption; and
(16) For any other proper corporate purpose, but only upon
receipt of, in addition to Proper Instructions, a
certified copy of a resolution of the Executive Committee
of the Trust on behalf of a Fund signed by an officer of
the Trust and certified by its Secretary or an Assistant
Secretary, specifying the securities to be delivered,
setting forth the purpose for which such delivery is to be
made, declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom delivery
of such securities shall be made.
2.3 Registration of Securities. Securities held by the Custodian
(other than bearer securities) shall be registered in the name
of a particular Fund or in the name of any nominee of the Fund
or of any nominee of the Custodian which nominee shall be
assigned exclusively to the Fund, unless the Trust has
authorized in writing the appointment of a nominee to be used in
common with other registered investment companies affiliated
with the Fund, or in the name or nominee name of any agent
appointed pursuant to Section 2.11 or in the name or nominee
name of any sub-custodian appointed pursuant to Section 1. All
securities accepted by the Custodian on behalf of a Fund under
the terms of this Contract shall be in "street name" or other
good delivery form.
2.4 Bank Accounts. The Custodian shall open and maintain a separate
bank account or accounts in the name of each Fund, subject only
to draft or order by the Custodian acting pursuant to the terms
of this Contract, and shall hold in such account or accounts,
subject to the provisions hereof, all cash received by it from
or for the account of each Fund, other than cash maintained in a
joint repurchase account with other affiliated funds pursuant to
Section 2.14 of this Contract or by a particular Fund in a bank
account established and used in accordance with Rule 17f-3 under
the Investment Company Act of 1940, as amended, (the "1940
Act"). Funds held by the Custodian for a Fund may be deposited
by it to its credit as Custodian in the Banking Department of
the Custodian or in such other banks or trust companies as it
may in its discretion deem necessary or desirable; provided,
however, that every such bank or trust company shall be
qualified to act as a custodian under the 1940 Act and that each
such bank or trust company and the funds to be deposited with
each such bank or trust company shall be approved by vote of a
majority of the Board of Trustees/Directors ("Board") of the
Trust. Such funds shall be deposited by the Custodian in its
capacity as Custodian for the Fund and shall be withdrawable by
the Custodian only in that capacity. If requested by the Trust,
the Custodian shall furnish the Trust, not later than twenty
(20) days after the last business day of each month, an internal
reconciliation of the closing balance as of that day in all
accounts described in this section to the balance shown on the
daily cash report for that day rendered to the Trust.
2.5 Payments for Shares. The Custodian shall make such arrangements
with the Transfer Agent of each Fund, as will enable the
Custodian to receive the cash consideration due to each Fund and
will deposit into each Fund's account such payments as are
received from the Transfer Agent. The Custodian will provide
timely notification to the Trust and the Transfer Agent of any
receipt by it of payments for Shares of the respective Fund.
2.6 Availability of Federal Funds. Upon mutual agreement between the
Trust and the Custodian, the Custodian shall make federal funds
available to the Funds as of specified times agreed upon from
time to time by the Trust and the Custodian in the amount of
checks, clearing house funds, and other non-federal funds
received in payment for Shares of the Funds which are deposited
into the Funds' accounts.
2.7 Collection of Income.
(1) The Custodian shall collect on a timely basis all income
and other payments with respect to registered securities
held hereunder to which each Fund shall be entitled either
by law or pursuant to custom in the securities business,
and shall collect on a timely basis all income and other
payments with respect to bearer securities if, on the date
of payment by the issuer, such securities are held by the
Custodian or its agent thereof and shall credit such
income, as collected, to each Fund's custodian account.
Without limiting the generality of the foregoing, the
Custodian shall detach and present for payment all coupons
and other income items requiring presentation as and when
they become due and shall collect interest when due on
securities held hereunder. The collection of income due
the Funds on securities loaned pursuant to the provisions
of Section 2.2 (10) shall be the responsibility of the
Trust. The Custodian will have no duty or responsibility
in connection therewith, other than to provide the Trust
with such information or data as may be necessary to
assist the Trust in arranging for the timely delivery to
the Custodian of the income to which each Fund is properly
entitled.
(2) The Custodian shall promptly notify the Trust whenever
income due on securities is not collected in due course and
will provide the Trust with monthly reports of the status of
past due income unless the parties otherwise agree.
2.8 Payment of Fund Moneys. Upon receipt of Proper Instructions,
which may be continuing instructions when deemed appropriate
by the parties, the Custodian shall pay out moneys of each
Fund in the ---------------------- following cases only:
(1) Upon the purchase of securities, futures contracts or
options on futures contracts for the account of a Fund but
only (a) against the delivery of such securities, or
evidence of title to futures contracts, to the Custodian
(or any bank, banking firm or trust company doing business
in the United States or abroad which is qualified under
the 1940 Act to act as a custodian and has been designated
by the Custodian as its agent for this purpose) registered
in the name of the Fund or in the name of a nominee of the
Custodian referred to in Section 2.3 hereof or in proper
form for transfer, (b) in the case of a purchase effected
through a Securities System, in accordance with the
conditions set forth in Section 2.12 hereof, (c) in the
case of a purchase of Mutual Fund Shares, in accordance
with the conditions set forth in Section 2.10A hereof; (d)
in the case of repurchase agreements entered into between
the Trust and any other party, (i) against delivery of the
securities either in certificate form or through an entry
crediting the Custodian's account at the Federal Reserve
Bank with such securities or (ii) against delivery of the
receipt evidencing purchase for the account of the Fund of
securities owned by the Custodian along with written
evidence of the agreement by the Custodian to repurchase
such securities from the Fund;
(2) In connection with conversion, exchange or surrender of
securities owned by a Fund as set forth in Section 2.2
hereof;
(3) For the redemption or repurchase of Shares of a Fund issued
by the Trust as set forth in Section 2.10 hereof;
(4) For the payment of any expense or liability incurred by a
Fund, including but not limited to the following payments
for the account of the Fund: interest; taxes; management,
accounting, transfer agent and legal fees; and operating
expenses of the Fund, whether or not such expenses are to
be in whole or part capitalized or treated as deferred
expenses;
(5) For the payment of any dividends on Shares of a Fund
declared pursuant to the governing documents of the Trust;
(6) For payment of the amount of dividends received in respect
of securities sold short;
(7) For any other proper purpose, but only upon receipt of, in
addition to Proper Instructions, a certified copy of a
resolution of the Executive Committee of the Trust on
behalf of a Fund signed by an officer of the Trust and
certified by its Secretary or an Assistant Secretary,
specifying the amount of such payment, setting forth the
purpose for which such payment is to be made, declaring
such purpose to be a proper purpose, and naming the person
or persons to whom such payment is to be made.
2.9 Liability for Payment in Advance of Receipt of Securities
Purchased. Except for payments for securities held as
contemplated by Section 2.10A hereof, or as specifically stated
otherwise in this Contract, in any and every case where payment
for purchase of securities for the account of a Fund is made by
the Custodian in advance of receipt of the securities purchased,
in the absence of specific written instructions from the Trust
to so pay in advance, the Custodian shall be absolutely liable
to the Fund for such securities to the same extent as if the
securities had been received by the Custodian.
2.10 Payments for Repurchases or Redemptions of Shares of a Fund.
From such funds as may be available for the purpose of
repurchasing or redeeming Shares of a Fund, but subject to the
limitations of the Declaration of Trust and any applicable votes
of the Board of the Trust pursuant thereto, the Custodian shall,
upon receipt of instructions from the Transfer Agent, make funds
available for payment to holders of shares of such Fund who have
delivered to the Transfer Agent a request for redemption or
repurchase of their shares including without limitation through
bank drafts, automated clearinghouse facilities, or by other
means. In connection with the redemption or repurchase of Shares
of the Funds, the Custodian is authorized upon receipt of
instructions from the Transfer Agent to wire funds to or through
a commercial bank designated by the redeeming shareholders.
2.10A Deposit of Fund Assets with Mutual Fund Transfer Agent. Mutual
Fund Shares shall be deposited and/or maintained in an account
maintained with the Fund Agent. Each Fund Agent shall be deemed
to be a "securities depository" for purposes of Rule 17f-4 under
the Investment Company Act of 1940. The Trust hereby directs the
Custodian to deposit and/or maintain such Mutual Fund Shares
with Fund Agents, subject to the following provisions:
1) The Custodian shall keep Mutual Fund Shares owned by a Fund
with a Fund Agent provided that such Mutual Fund Shares are
maintained in an account on the books and records of the
Fund Agent in the name of the Custodian, as custodian for
the Funds.
2) The records of the Custodian with respect to Mutual Fund
Shares which are maintained with a Fund Agent shall identify
by book-entry those Mutual Fund Shares which a Fund or its
investment adviser has identified to the Custodian as
belonging to the Fund.
3) The Custodian shall pay for Mutual Fund Shares
purchased for the account of a Fund upon (i) receipt
of advice from the Fund's investment adviser that
such Mutual Fund Shares have been purchased and will
be transferred to the account of the Custodian, on
behalf of the Fund, on the books and records of the
Fund Agent, and (ii) the making of an entry on the
records of the Custodian to reflect such payment and
transfer for the account of the Fund. The Custodian
shall receive confirmation of the purchase of such
Mutual Fund Shares and the transfer of such Mutual
Fund Shares to the Custodian's account with the Fund
Agent only after such payment is made. The Custodian
shall transfer Mutual Fund Shares redeemed for the
account of a Fund upon (i) receipt of an advice from
the Fund's investment adviser that such Mutual Fund
Shares have been redeemed and that payment for such
Mutual Fund Shares will be transferred to the
Custodian and (ii) the making of an entry on the
records of the Custodian to reflect such transfer
and payment for the account of the Fund. The
Custodian will receive confirmation of the
redemption of such Mutual Fund Shares and payment
therefor only after such Mutual Fund Shares are
redeemed. Copies of all advices from the investment
adviser of purchases and sales of Mutual Fund Shares
for the account of a Fund shall identify the Fund,
be maintained for the Fund by the Custodian, and be
provided to the Trust at its request.
4) The Custodian shall not be liable to the Trust or
any Fund for any loss or damage to the Trust or any
Fund resulting from maintenance of Mutual Fund
Shares with a Fund Agent except for losses resulting
directly from the negligence, misfeasance or
misconduct of the Custodian or any of its agents or
any of its or their employees."
2.11 Appointment of Agents. To the extent permitted by 1940 Act and
only in compliance with the conditions thereof, the Custodian
may at any time or times in its discretion appoint (and may at
any time remove) any other bank or trust company which is itself
qualified under the 1940 Act and any applicable state law or
regulation, to act as a custodian, as its agent to carry out
such of the provisions of this Section 2 as the Custodian may
from time to time direct; provided, however, that the
appointment of any agent shall not relieve the Custodian of its
responsibilities or liabilities hereunder. The Fund Agent for
Mutual Fund Shares purchased by a Fund shall not, except as
otherwise provided herein, be deemed an agent or subcustodian of
the Custodian for purposes of this Section 2.11 or any other
provision of this Contract.
2.12 Deposit of Fund Assets in Securities System. The Custodian may
deposit and/or maintain securities owned by the Funds in a
clearing agency registered with the Securities and Exchange
Commission ("SEC") under Section 17A of the Exchange Act, which
acts as a securities depository, or in the book-entry system
authorized by the U.S. Department of the Treasury and certain
federal agencies, collectively referred to herein as "Securities
System" in accordance with applicable Federal Reserve Board and
SEC rules and regulations, if any, and subject to the following
provisions:
(1) The Custodian may keep securities of each Fund in a
Securities System provided that such securities are
represented in an account ("Account") of the Custodian in
the Securities System which shall not include any assets
of the Custodian other than assets held as a fiduciary,
custodian or otherwise for customers;
(2) The records of the Custodian with respect to securities of
the Funds which are maintained in a Securities System shall
identify by book-entry those securities belonging to each
Fund;
(3) The Custodian shall pay for securities purchased for the
account of each Fund upon (i) receipt of advice from the
Securities System that such securities have been
transferred to the Account, and (ii) the making of an
entry on the records of the Custodian to reflect such
payment and transfer for the account of the Fund. The
Custodian shall transfer securities sold for the account
of a Fund upon (i) receipt of advice from the Securities
System that payment for such securities has been
transferred to the Account, and (ii) the making of an
entry on the records of the Custodian to reflect such
transfer and payment for the account of the Fund. Copies
of all advices from the Securities System of transfers of
securities for the account of a Fund shall identify the
Fund, be maintained for the Fund by the Custodian and be
provided to the Trust at its request. Upon request, the
Custodian shall furnish the Trust confirmation of each
transfer to or from the account of a Fund in the form of a
written advice or notice and shall furnish to the Trust
copies of daily transaction sheets reflecting each day's
transactions in the Securities System for the account of a
Fund.
(4) The Custodian shall provide the Trust with any report
obtained by the Custodian on the Securities System's
accounting system, internal accounting control and
procedures for safeguarding securities deposited in the
Securities System;
(5) The Custodian shall have received the initial certificate,
required by Section 9 hereof;
(6) Anything to the contrary in this Contract notwithstanding,
the Custodian shall be liable to the Trust for any loss or
damage to a Fund resulting from use of the Securities
System by reason of any negligence, misfeasance or
misconduct of the Custodian or any of its agents or of any
of its or their employees or from failure of the Custodian
or any such agent to enforce effectively such rights as it
may have against the Securities System; at the election of
the Trust, it shall be entitled to be subrogated to the
rights of the Custodian with respect to any claim against
the Securities System or any other person which the
Custodian may have as a consequence of any such loss or
damage if and to the extent that a Fund has not been made
whole for any such loss or damage.
(7) The authorization contained in this Section 2.12 shall not
relieve the Custodian from using reasonable care and
diligence in making use of any Securities System.
2.13 Segregated Account. The Custodian shall upon receipt of Proper
Instructions establish and maintain a segregated account or
accounts for and on behalf of each Fund, into which account or
accounts may be transferred cash and/or securities, including
securities maintained in an account by the Custodian pursuant to
Section 2.12 hereof, (i) in accordance with the provisions of
any agreement among the Trust, the Custodian and a broker-dealer
registered under the Exchange Act and a member of the NASD (or
any futures commission merchant registered under the Commodity
Exchange Act), relating to compliance with the rules of The
Options Clearing Corporation and of any registered national
securities exchange (or the Commodity Futures Trading Commission
or any registered contract market), or of any similar
organization or organizations, regarding escrow or other
arrangements in connection with transactions for a Fund, (ii)
for purpose of segregating cash or government securities in
connection with options purchased, sold or written for a Fund or
commodity futures contracts or options thereon purchased or sold
for a Fund, (iii) for the purpose of compliance by the Trust or
a Fund with the procedures required by any release or releases
of the SEC relating to the maintenance of segregated accounts by
registered investment companies and (iv) for other proper
corporate purposes, but only, in the case of clause (iv), upon
receipt of, in addition to Proper Instructions, a certified copy
of a resolution of the Board or of the Executive Committee
signed by an officer of the Trust and certified by the Secretary
or an Assistant Secretary, setting forth the purpose or purposes
of such segregated account and declaring such purposes to be
proper corporate purposes.
2.14 Joint Repurchase Agreements. Upon the receipt of Proper
Instructions, the Custodian shall deposit and/or maintain any
assets of a Fund and any affiliated funds which are subject to
joint repurchase transactions in an account established solely
for such transactions for the Fund and its affiliated funds. For
purposes of this Section 2.14, "affiliated funds" shall include
all investment companies and their portfolios for which
subsidiaries or affiliates of Federated Investors serve as
investment advisers, distributors or administrators in
accordance with applicable exemptive orders from the SEC. The
requirements of segregation set forth in Section 2.1 shall be
deemed to be waived with respect to such assets.
2.15 Ownership Certificates for Tax Purposes. The Custodian shall
execute ownership and other certificates and affidavits for
all federal and state tax purposes in connection with
receipt of income or ---------------------------------------
other payments with respect to securities of a Fund held by
it and in connection with transfers of securities.
2.16 Proxies. The Custodian shall, with respect to the securities
held hereunder, cause to be promptly executed by the registered
holder of such securities, if the securities are registered
otherwise than in the name of a Fund or a nominee of a Fund, all
proxies, without indication of the manner in which such proxies
are to be voted, and shall promptly deliver to the Trust such
proxies, all proxy soliciting materials and all notices relating
to such securities.
2.17 Communications Relating to Fund Portfolio Securities. The
Custodian shall transmit promptly to the Trust all written
information (including, without limitation, pendency of calls
and maturities of securities and expirations of rights in
connection therewith and notices of exercise of call and put
options written by the Fund and the maturity of futures
contracts purchased or sold by the Fund) received by the
Custodian from issuers of the securities being held for the
Fund. With respect to tender or exchange offers, the Custodian
shall transmit promptly to the Trust all written information
received by the Custodian from issuers of the securities whose
tender or exchange is sought and from the party (or his agents)
making the tender or exchange offer. If the Trust desires to
take action with respect to any tender offer, exchange offer or
any other similar transaction, the Trust shall notify the
Custodian in writing at least three business days prior to the
date on which the Custodian is to take such action. However, the
Custodian shall nevertheless exercise its best efforts to take
such action in the event that notification is received three
business days or less prior to the date on which action is
required.
2.18 Proper Instructions. Proper Instructions as used throughout this
Section 2 means a writing signed or initialed by one or more
person or persons as the Board shall have from time to time
authorized. Each such writing shall set forth the specific
transaction or type of transaction involved. Oral instructions
will be deemed to be Proper Instructions if (a) the Custodian
reasonably believes them to have been given by a person
previously authorized in Proper Instructions to give such
instructions with respect to the transaction involved, and (b)
the Trust promptly causes such oral instructions to be confirmed
in writing. Upon receipt of a certificate of the Secretary or an
Assistant Secretary as to the authorization by the Board of the
Trust accompanied by a detailed description of procedures
approved by the Board, Proper Instructions may include
communications effected directly between electro-mechanical or
electronic devices provided that the Board and the Custodian are
satisfied that such procedures afford adequate safeguards for a
Fund's assets.
2.19 Actions Permitted Without Express Authority. The Custodian
may in its discretion, without express authority from the
Trust: -------------------------------------------
(1) make payments to itself or others for minor expenses of
handling securities or other similar items relating to its
duties under this Contract, provided that all such payments
shall be -------- accounted for to the Trust in such form
that it may be allocated to the affected Fund;
(2) surrender securities in temporary form for securities in
definitive form;
(3) endorse for collection, in the name of a Fund, checks,
drafts and other negotiable instruments; and
(4) in general, attend to all non-discretionary details in
connection with the sale, exchange, substitution, purchase,
transfer and other dealings with the securities and property
of each Fund except as otherwise directed by the Trust.
2.20 Evidence of Authority. The Custodian shall be protected in
acting upon any instructions, notice, request, consent,
certificate or other instrument or paper reasonably believed by
it to be genuine and to have been properly executed on behalf of
a Fund. The Custodian may receive and accept a certified copy of
a vote of the Board of the Trust as conclusive evidence (a) of
the authority of any person to act in accordance with such vote
or (b) of any determination of or any action by the Board
pursuant to the Declaration of Trust as described in such vote,
and such vote may be considered as in full force and effect
until receipt by the Custodian of written notice to the
contrary.
2.21 Notice to Trust by Custodian Regarding Cash Movement. The
Custodian will provide timely notification to the Trust of
any receipt of cash, income or payments to the Trust and the
release of cash or
---------------------------------------------------- payment
by the Trust.
3. Duties of Custodian With Respect to the Books of Account and
Calculation of Net Asset Value and Net Income.
The Custodian shall cooperate with and supply necessary information to
the entity or entities appointed by the Board of the Trust to keep the
books of account of each Fund and/or compute the net asset value per
share of the outstanding Shares of each Fund or, if directed in writing
to do so by the Trust, shall itself keep such books of account and/or
compute such net asset value per share. If so directed, the Custodian
shall also calculate daily the net income of a Fund as described in the
Fund's currently effective prospectus and Statement of Additional
Information ("Prospectus") and shall advise the Trust and the Transfer
Agent daily of the total amounts of such net income and, if instructed
in writing by an officer of the Trust to do so, shall advise the
Transfer Agent periodically of the division of such net income among
its various components. The calculations of the net asset value per
share and the daily income of a Fund shall be made at the time or times
described from time to time in the Fund's currently effective
Prospectus.
4. Records.
The Custodian shall create and maintain all records relating to its
activities and obligations under this Contract in such manner as will
meet the obligations of the Trust and the Funds under the 1940 Act,
with particular attention to Section 31 thereof and Rules 31a-1 and
31a-2 thereunder, and specifically including identified cost records
used for tax purposes. All such records shall be the property of the
Trust and shall at all times during the regular business hours of the
Custodian be open for inspection by duly authorized officers, employees
or agents of the Trust and employees and agents of the SEC. In the
event of termination of this Contract, the Custodian will deliver all
such records to the Trust, to a successor Custodian, or to such other
person as the Trust may direct. The Custodian shall supply daily to the
Trust a tabulation of securities owned by a Fund and held by the
Custodian and shall, when requested to do so by the Trust and for such
compensation as shall be agreed upon between the Trust and the
Custodian, include certificate numbers in such tabulations.
5. Opinion of Funds' Independent Public Accountants/Auditors.
The Custodian shall take all reasonable action, as the Trust may from
time to time request, to obtain from year to year favorable opinions
from each Fund's independent public accountants/auditors with respect
to its activities hereunder in connection with the preparation of the
Fund's registration statement, periodic reports, or any other reports
to the SEC and with respect to any other requirements of such
Commission.
6. Reports to Trust by Independent Public Accountants/Auditors.
The Custodian shall provide the Trust, at such times as the Trust may
reasonably require, with reports by independent public
accountants/auditors for each Fund on the accounting system, internal
accounting control and procedures for safeguarding securities, futures
contracts and options on futures contracts, including securities
deposited and/or maintained in a Securities System, relating to the
services provided by the Custodian for the Fund under this Contract;
such reports shall be of sufficient scope and in sufficient detail, as
may reasonably be required by the Trust, to provide reasonable
assurance that any material inadequacies would be disclosed by such
examination and, if there are no such inadequacies, the reports shall
so state.
7. Compensation of Custodian.
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time by the
Trust, on behalf of each Fund, and the Custodian.
8. Responsibility of Custodian.
The Custodian shall be held to a standard of reasonable care in
carrying out the provisions of this Contract; provided, however, that
the Custodian shall be held to any higher standard of care which would
be imposed upon the Custodian by any applicable law or regulation if
such above stated standard of reasonable care was not part of this
Contract. The Custodian shall be entitled to rely on and may act upon
advice of counsel (who may be counsel for the Trust) on all matters,
and shall be without liability for any action reasonably taken or
omitted pursuant to such advice, provided that such action is not in
violation of applicable federal or state laws or regulations, and is in
good faith and without negligence. Subject to the limitations set forth
in Section 15 hereof, the Custodian shall be kept indemnified by the
Trust but only from the assets of the Fund involved in the issue at
hand and be without liability for any action taken or thing done by it
in carrying out the terms and provisions of this Contract in accordance
with the above standards.
In order that the indemnification provisions contained in this Section
8 shall apply, however, it is understood that if in any case the Trust
may be asked to indemnify or save the Custodian harmless, the Trust
shall be fully and promptly advised of all pertinent facts concerning
the situation in question, and it is further understood that the
Custodian will use all reasonable care to identify and notify the Trust
promptly concerning any situation which presents or appears likely to
present the probability of such a claim for indemnification. The Trust
shall have the option to defend the Custodian against any claim which
may be the subject of this indemnification, and in the event that the
Trust so elects it will so notify the Custodian and thereupon the Trust
shall take over complete defense of the claim, and the Custodian shall
in such situation initiate no further legal or other expenses for which
it shall seek indemnification under this Section. The Custodian shall
in no case confess any claim or make any compromise in any case in
which the Trust will be asked to indemnify the Custodian except with
the Trust's prior written consent.
Notwithstanding the foregoing, the responsibility of the Custodian with
respect to redemptions effected by check shall be in accordance with a
separate Agreement entered into between the Custodian and the Trust.
If the Trust requires the Custodian to take any action with respect to
securities, which action involves the payment of money or which action
may, in the reasonable opinion of the Custodian, result in the
Custodian or its nominee assigned to a Fund being liable for the
payment of money or incurring liability of some other form, the
Custodian may request the Trust, as a prerequisite to requiring the
Custodian to take such action, to provide indemnity to the Custodian in
an amount and form satisfactory to the Custodian.
Subject to the limitations set forth in Section 15 hereof, the Trust
agrees to indemnify and hold harmless the Custodian and its nominee
from and against all taxes, charges, expenses, assessments, claims and
liabilities (including counsel fees) (referred to herein as authorized
charges) incurred or assessed against it or its nominee in connection
with the performance of this Contract, except such as may arise from it
or its nominee's own failure to act in accordance with the standard of
reasonable care or any higher standard of care which would be imposed
upon the Custodian by any applicable law or regulation if such
above-stated standard of reasonable care were not part of this
Contract. To secure any authorized charges and any advances of cash or
securities made by the Custodian to or for the benefit of a Fund for
any purpose which results in the Fund incurring an overdraft at the end
of any business day or for extraordinary or emergency purposes during
any business day, the Trust hereby grants to the Custodian a security
interest in and pledges to the Custodian securities held for the Fund
by the Custodian, in an amount not to exceed 10 percent of the Fund's
gross assets, the specific securities to be designated in writing from
time to time by the Trust or the Fund's investment adviser. Should the
Trust fail to make such designation, or should it instruct the
Custodian to make advances exceeding the percentage amount set forth
above and should the Custodian do so, the Trust hereby agrees that the
Custodian shall have a security interest in all securities or other
property purchased for a Fund with the advances by the Custodian, which
securities or property shall be deemed to be pledged to the Custodian,
and the written instructions of the Trust instructing their purchase
shall be considered the requisite description and designation of the
property so pledged for purposes of the requirements of the Uniform
Commercial Code. Should the Trust fail to cause a Fund to repay
promptly any authorized charges or advances of cash or securities,
subject to the provision of the second paragraph of this Section 8
regarding indemnification, the Custodian shall be entitled to use
available cash and to dispose of pledged securities and property as is
necessary to repay any such advances.
9. Effective Period, Termination and Amendment.
This Contract shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter
provided, may be amended at any time by mutual agreement of the parties
hereto and may be terminated by either party by an instrument in
writing delivered or mailed, postage prepaid to the other party, such
termination to take effect not sooner than sixty (60) days after the
date of such delivery or mailing; provided, however that the Custodian
shall not act under Section 2.12 hereof in the absence of receipt of an
initial certificate of the Secretary or an Assistant Secretary that the
Board of the Trust has approved the initial use of a particular
Securities System as required in each case by Rule 17f-4 under the 1940
Act; provided further, however, that the Trust shall not amend or
terminate this Contract in contravention of any applicable federal or
state regulations, or any provision of the Declaration of Trust, and
further provided, that the Trust may at any time by action of its Board
(i) substitute another bank or trust company for the Custodian by
giving notice as described above to the Custodian, or (ii) immediately
terminate this Contract in the event of the appointment of a
conservator or receiver for the Custodian by the appropriate banking
regulatory agency or upon the happening of a like event at the
direction of an appropriate regulatory agency or court of competent
jurisdiction.
Upon termination of the Contract, the Trust shall pay to the Custodian
such compensation as may be due as of the date of such termination and
shall likewise reimburse the Custodian for its costs, expenses and
disbursements.
10. Successor Custodian.
If a successor custodian shall be appointed by the Board of the Trust,
the Custodian shall, upon termination, deliver to such successor
custodian at the office of the Custodian, duly endorsed and in the form
for transfer, all securities then held by it hereunder for each Fund
and shall transfer to separate accounts of the successor custodian all
of each Fund's securities held in a Securities System.
If no such successor custodian shall be appointed, the Custodian shall,
in like manner, upon receipt of a certified copy of a vote of the Board
of the Trust, deliver at the office of the Custodian and transfer such
securities, funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Board shall have been delivered to the
Custodian on or before the date when such termination shall become
effective, then the Custodian shall have the right to deliver to a bank
or trust company, which is a "bank" as defined in the 1940 Act doing
business in Boston, Massachusetts, of its own selection, having an
aggregate capital, surplus, and undivided profits, as shown by its last
published report, of not less than $100,000,000, all securities, funds
and other properties held by the Custodian and all instruments held by
the Custodian relative thereto and all other property held by it under
this Contract for each Fund and to transfer to separate accounts of
such successor custodian all of each Fund's securities held in any
Securities System. Thereafter, such bank or trust company shall be the
successor of the Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing
to failure of the Trust to procure the certified copy of the vote
referred to or of the Board to appoint a successor custodian, the
Custodian shall be entitled to fair compensation for its services
during such period as the Custodian retains possession of such
securities, funds and other properties and the provisions of this
Contract relating to the duties and obligations of the Custodian shall
remain in full force and effect.
11. Interpretive and Additional Provisions.
In connection with the operation of this Contract, the Custodian and
the Trust may from time to time agree on such provisions interpretive
of or in addition to the provisions of this Contract as may in their
joint opinion be consistent with the general tenor of this Contract.
Any such interpretive or additional provisions shall be in a writing
signed by both parties and shall be annexed hereto, provided that no
such interpretive or additional provisions shall contravene any
applicable federal or state regulations or any provision of the
Declaration of Trust. No interpretive or additional provisions made as
provided in the preceding sentence shall be deemed to be an amendment
of this Contract.
12. Massachusetts Law to Apply.
This Contract shall be construed and the provisions thereof interpreted
under and in accordance with laws of The Commonwealth of Massachusetts.
13. Notices.
Except as otherwise specifically provided herein, Notices and other
writings delivered or mailed postage prepaid to the Trust at Federated
Investors Tower, Pittsburgh, Pennsylvania, 15222-3779, or to the
Custodian at 1248 "O" Street, Lincoln, Nebraska, 68508, or to such
other address as the Trust or the Custodian may hereafter specify,
shall be deemed to have been properly delivered or given hereunder to
the respective address.
14. Counterparts.
This Contract may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together will constitute one and the same instrument.
15. Limitations of Liability.
The Custodian is expressly put on notice of the limitation of liability
as set forth in Article XI of the Declaration of Trust and agrees that
the obligations and liabilities assumed by the Trust and any Fund
pursuant to this Contract, including, without limitation, any
obligation or liability to indemnify the Custodian pursuant to Section
8 hereof, shall be limited to the relevant Fund and its assets and that
the Custodian shall not seek satisfaction of any such obligation from
the shareholders of the relevant Fund, from any other Fund or its
shareholders or from the Trustees, Officers, employees or agents of the
Trust, or any of them. In addition, in connection with the discharge
and satisfaction of any claim made by the Custodian against the Trust,
for whatever reasons, involving more than one Fund, the Trust shall
have the exclusive right to determine the appropriate allocations of
liability for any such claim between or among the Funds.
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed effective as of the 1st day of September 1997.
GREAT PLAINS FUNDS
By
Name:
Title:
NATIONAL BANK OF COMMERCE
By
Name:
Title:
