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. 1 ..................................... _X__
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and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
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Amendment No. __1__ .................................................... 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
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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.
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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. NFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION.
Item 10. Cover Page........................(1-5) Cover Page.
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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.
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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.
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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.
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Item 20. Tax Status........................(1-5) Tax Status; (1-5)
Massachusetts Partnership Law;.
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Item 21. Underwriters......................Not applicable.
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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.
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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
15, 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 15, 1997
TABLE OF CONTENTS
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SUMMARY OF FUND EXPENSES 1
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SYNOPSIS 2
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Risk Factors 3
FUND OBJECTIVE AND POLICIES 4
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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
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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
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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 17
ADMINISTRATION OF THE TRUST 18
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Expenses of the Funds 19
SHAREHOLDER INFORMATION 19
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Voting Rights 19
PERFORMANCE INFORMATION 20
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Performance Information for
Predecessor Common and Collective
Investment Funds 20
PORTFOLIO INVESTMENTS AND STRATEGIES
22
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Additional Investment Risks 34
TAX INFORMATION 39
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Federal Income Tax 39
State and Local Taxes 40
Nebraska Taxes 40
APPENDIX 43
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ADDRESSES 47
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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."
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
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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
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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
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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. To place an order to purchase shares of
the Funds, individual investors should call Great Plains Funds Shareholder
Services at 1-800-568- 8257. 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 is expected the next
business day, but must be received by the Fund within three business days of
placing the order. PAYMENT BY WIRE. To 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
shares of the Funds by mail, investors may send an application (for a new
account) and a check made payable to the particular Fund to: Great Plains Funds
Shareholder Services, P.O. Box 8612, Boston, MA 02266-8612.
Orders by mail are considered received after payment by check is converted into
federal funds. This is normally the next business day after Federated
Shareholder Services Company receives the check. 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> <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 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> <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 AND COLLECTIVE
INVESTMENT FUNDS
Each Fund emanates from common and/or collective investment funds currently
managed by the Adviser (the "Common and Collective Fund(s)"). It is anticipated
that the assets from each Common and Collective 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 and Collective
Funds currently managed by the Funds' Adviser. This information is deemed
relevant because the Common and Collective 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 and Collective Funds. In that regard, the Common and Collective 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 and Collective 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
and Collective 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 and
Collective 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 and Collective
Funds. Because a sales charge was not imposed on the Common and Collective
Funds, the past performance figures for the Common and Collective 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 and Collective Funds. Corresponding performance figures which do not
reflect the sales charge are also provided.
Finally, because the assets of more than one of the Common and Collective Funds
(which are managed in a manner that the Adviser believes is in all material
respects equivalent to each other) will be transferred to a single Corresponding
Fund, the past performance of those similarly managed Common and Collective
Funds have been blended together and reflect the adjustments noted above.
<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.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIOD ENDED JUNE 30, 1997*
REFLECTING LOAD/WITHOUT LOAD
PREDECESSOR COLLECTIVE FUNDS -------------------------------------------------------
(CORRESPONDING GREAT PLAINS FUNDS) 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---------------------------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Value Plus Stock Fund "C" 26.31%/30.22% 23.09%/24.35% 15.66%/16.79% 11.48%/11.83%
(GREAT PLAINS EQUITY FUND)
Total Return Bond Fund "D" 3.88%/7.10% 6.31%/7.40% 5.62%/6.27% 7.30%/7.63%
(GREAT PLAINS INTERMEDIATE
BOND FUND)
Premier Stock Fund "K" 31.18%/35.24% 22.98%/24.24% 16.15%/16.86% 12.86%/13.26%**
(GREAT PLAINS PREMIER FUND)
</TABLE>
- --------
* The Average Annual Total Return for each collective fund has been adjusted to
reflect each corresponding Fund's anticipated expenses, net of voluntary
waivers.
** Since inception of November 1988.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIOD ENDED JUNE 30, 1997*
BLENDED PERFORMANCE OF PREDECESSOR REFLECTING LOAD/WITHOUT LOAD
COMMON AND COLLECTIVE FUNDS -------------------------------------------------------
(CORRESPONDING GREAT PLAINS FUNDS) 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---------------------------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Value Plus Stock Fund "A" 27.79%/31.75% 23.64%/24.90% 16.25%/16.96% 11.99%/12.33%
Value Plus Stock Fund "C"
(GREAT PLAINS EQUITY FUND)
Premier Stock Fund "J" 31.58%/35.66% 22.88%/24.14% 16.09%/16.80% 12.44%/12.84%**
Premier Stock Fund "K" (GREAT PLAINS PREMIER FUND) Income Bond Fund "B"
3.97%/7.19% 6.33%/7.42% 5.60%/6.24% 7.32%/7.64% Total Return Bond Fund "D"
(GREAT PLAINS INTERMEDIATE
BOND FUND)
</TABLE>
- --------
* The Average Annual Total Return for each common/collective fund has been
adjusted to reflect each corresponding Fund's anticipated 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 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 during the next two years, 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
- -------------------------------------------------------------------------------
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
- -------------------------------------------------------------------------------
<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
39) 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
- --------------------------------------------------------------------------------
<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
- ----------------------------------------------------------------------------------------------------------------------------
Sub-Adviser
Peter A. Kinney 11 S. LaSalle, #2900
Chicago, Illinois 60603
- ----------------------------------------------------------------------------------------------------------------------------
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
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
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)
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 15, 1997
his Statement of Additional Information should be read with the
prospectus, dated September 15, 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>
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 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.
TAXABLE YIELD EQUIVALENT FOR 1997
STATE OF NEBRASKA
COMBINED FEDERAL AND STATE INCOME TAX BRACKET:
<TABLE>
<CAPTION>
<S> <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>
TAXABLE YIELD EQUIVALENT FOR 1997
MULTISTATE MUNICIPAL FUNDS
FEDERAL INCOME TAX BRACKET:
<TABLE>
<CAPTION>
<S> <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; (To be filed by amendment)
(a-e) Conformed Copy of Exhibits A through E to the Investment
Advisory Contract; (To be filed by amendment)
(ii) Conformed Copy the Sub-Advisory Contract; (To be filed by
amendment)
(6) (i) Conformed Copy of Distributor's Contract of the
Registrant; +
(ii)Conformed Copy of Exhibit A to the Distributor's Contract; +
(iii)Conformed Copy of Mutual Fund Sales and
Service Agreement; +
(7) Not applicable;
(8) (i) Conformed Copy of Custodian Contract of the
Registrant; (To be filed by amendment)
(ii)Conformed Copy of Sub-Custodian Contract of
the Registrant; (To be filed by amendment)
(9) Conformed Copy of Agreement for Fund Accounting, Administrative
Services, and Transfer Agency Services of the Registrant; +
(10) Conformed Copy of Opinion and Consent of Counsel as to legality of
shares being registered;+
(11) Conformed Copy of Consent of Independent Auditors; +
(12) Not applicable;
(13) Conformed Copy of Initial Capital
Understanding;(to be filed by amendment)
(14) Not applicable;
(15) (i) Conformed Copy of Distribution Plan of Registrant; +
(ii) Conformed Copy of Exhibit A to the Distribution Plan; +
(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; +
Item 25. Persons Controlled by or Under Common Control with Registrant
None
(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.)
- -------------------------
+ All exhibits have been filed electronically.
<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 0
Great Plains Tax-Free Bond Fund 1
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.
(b)
<TABLE>
<CAPTION>
<S> <C> <C>
(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") 1248 "O" Street
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 10th day of September, 1997.
GREAT PLAINS FUNDS
BY: /s/ Victor R. Siclari
Victor R. Siclari
Attorney in Fact for Edward C. Gonzales
September 10, 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 August 20, 1997
For the Persons
Listed Below
NAME TITLE
Edward C Gonzales* President August 20, 1997
C. Christine Thomson* Treasurer August 20, 1997
Dr. Keith Broman* Trustee August 20, 1997
Hugh Hansen* Trustee August 20, 1997
George E. Howard* Trustee August 20, 1997
Dr. Martin A. Massengale* Trustee August 20, 1997
Keith C. Mitchell* Trustee August 20, 1997
* By Power of Attorney
CLINE, WILLIAMS, WRIGHT, JOHNSON & OLDFATHER
MEMORANDUM
TO: First Commerce Investors/NBC Trust Department
FROM: John C. Miles
DATE: September 4, 1997
RE: Predecessor Funds Performance Review
NBC01-CB002
This memorandum analyzes the investment policies, objectives,
strategies, guidelines and restrictions, and performance information for
selected common trust and collective investment funds (collectively "bank
funds") operated by the Trust Department of National Bank of Commerce (the
"Bank") as they relate to and/or are compared with the stated investment
objectives and policies of certain portfolios of the Great Plains Funds, a
Massachusetts business trust formed and registered as an open end registered
investment management company under the Investment Company Act of 1940 (the
"1940 Act"). The purpose of this memorandum is to provide sufficient analysis of
the investment policies, objectives, strategies, guidelines and restrictions,
and performance history of the bank funds to provide a basis for including the
bank funds' historical performance information in the prospectus of the Great
Plains Funds consistent with the requirements set forth in (i) the Mass Mutual
Institutional Funds SEC No Action letter (September 28, 1995) ("Mass Mutual")
and its progeny and/or the Nicholas Applegate SEC No Action Letter (August 6,
1996). Additionally this memorandum provides information responsive to the SEC
staff's comment letter dated August 14, 1997 relating to the registration
statement filed with the SEC for Great Plains Funds.
Mass Mutual Analysis
Under Mass Mutual the staff of the SEC has set forth the conditions
under which a registered management investment company (a "RIC") may include in
its prospectus, statement of additional information, advertisements and sales
literature, the predecessor performance information of the bank funds for the
periods prior to the effective date of the RIC's registration statement in
calculating the total return of the investment company. The Mass Mutual letter
requires an analysis and determination that:
<PAGE>
the investment policies, objectives, guidelines, and restrictions of
each portfolio of the Great Plains Funds are in all material respects
equivalent to those of the corresponding bank fund;
the investment management practices and financial characteristics of
each portfolio of the Great Plains Funds are in all material respects
identical to those of the corresponding bank fund; each portfolio of
the Great Plains Funds is effectively a continuation of the
predecessor bank fund and such predecessor bank fund was created for
purposes entirely unrelated to the
establishment of a performance record;
each corresponding bank fund would have been likely able to comply
with the investment restrictions imposed by investment companies under
sub chapter M of the Internal Revenue Code; any of the Great Plains
Funds' performance in the prospectus that includes performance of the
bank funds will be accompanied by specific disclosures; and the bank
fund's performance will be restated to reflect fees and expenses of
Great Plains Funds subject to certain restrictions.
This memo does not address items five and six, which are disclosure
requirements and are already addressed in the Great Plains Funds' registration
statement.
Great Plain Funds will initially consist of five different investment
portfolios, namely Great Plains Equity Fund ("Equity Fund"), Great Plains
International Equity Fund, Great Plains Premier Fund ("Premier Fund"), Great
Plains Intermediate Bond Fund ("Intermediate Bond Fund"), and Great Plains
Tax-Free Bond Fund ("Tax-Free Bond Fund"). The Great Plains International Equity
Fund will not receive any assets from a preexisting bank fund and therefore will
not be considered in this memorandum. In that regard, there are no similarly
managed accounts of the Bank.
This analysis will only focus upon the predecessor performance
information of those bank funds that will be converted into the portfolios
identified as the Equity Fund, Premier Fund, Intermediate Bond Fund and Tax-Free
Bond Fund.
<PAGE>
The bank funds consist of "common funds" which are utilized by the
Bank's trust department for revocable and irrevocable trust accounts that do not
involve pension plan assets and "collective funds" which are used exclusively
for employment benefit or pension plan assets (referred to herein as "ERISA
assets"). The bank funds, which were operated pursuant to the exemption under
Section 3(c)(3) of the 1940 Act have been continuously managed by First Commerce
Investors, Inc. ("FCI"), a registered investment adviser, since FCI was formed
in 1986. FCI was formed by First Commerce Bancshares, Inc., the bank holding
company that owns the Bank to consolidate the investment management functions
and personnel of the Bank's Trust Department. The Bank's Trust Department had
managed the existing bank funds prior to 1986. FCI is the investment adviser to
the Great Plains Funds and the same investment management personnel that
presently manage the bank funds will manage the Great Plains Funds. Absent
banking rules, the Internal Revenue Code and ERISA, which prohibit commingling
of ERISA assets with non-ERISA assets (hence the need for common funds and
collective funds) the Bank could have operated one bank fund in which all trust
customers could invest. Indeed absent the Section 3(c)(3) exemption the funds
would have been required to register as investment companies. One of the
benefits in converting the bank funds to the Great Plains Funds is the
elimination of the need for separate funds for ERISA and non-ERISA accounts as
the Great Plains Funds can accept any type of trust customer whether they are
tax exempt or not.
The Bank has historically established a common fund and a corresponding
collective fund with identical investment objectives and policies and has
managed the common and collective funds as "mirror" funds. By way of example,
common fund A and collective fund C, while differing in asset size, have
consistently been managed as mirror funds and hold substantially the same
portfolio securities. Differences in the investment portfolios are largely the
result of differing asset sizes which results in minor differences in the
percentage of assets invested in specific securities. Additionally, because of
asset size, minor differences in percentages invested in cash equivalents are
evident as are the specific cash equivalents used. Finally differences in
portfolio turnover, which is really only significant in bank funds B and D, are
largely the result of managing the common funds for income and managing the
collective funds for capital appreciation because the participants in the
collective funds are tax exempt. While these differences are evident, portfolio
makeup is substantially identical between corresponding bank funds.
Comparison of historical performance of the mirror bank funds evidences
minor variances over all comparison periods for all mirror bank funds. For
example common fund A and collective fund C reflect one year average annual
returns without sales load of 33.01% and 30.22% respectively and over ten years
12.74% and 11.83% respectively (see preliminary prospectus for comparative data
for all bank funds). Copies of unaudited reports showing portfolio composition
and other selected data in support of the conclusions contained herein as of
recent practical dates are attached.
The mirror bank funds that will be converted into the various
portfolios of the Great Plains Funds and the name of the corresponding Great
Plains Funds portfolios are as follows:
Great Plains Equity Fund
<PAGE>
Value Plus Stock Fund A (common fund)
Value Plus Stock Fund C (collective fund)
Great Plains Premier Fund
Premier Stock Fund J (common fund)
Premier Stock Fund K (collective fund)
Great Plains Intermediate Bond Fund
Income Bond Fund B (common fund)
Total Return Bond Fund D (collective fund)
Great Plains Tax-free Bond Fund
Tax-Exempt Bond Fund G (common fund)
no corresponding collective fund
At present, management anticipates simultaneously transferring all
assets of the bank funds to the corresponding portfolio of the Great Plains
Funds. As a result management takes the position that because the mirror funds
have been managed consistently and the variance between the historical
performance information for bank fund A and C, J and K, and B and D is
insignificant, the performance information of such funds should and can be
blended to reflect the combined performance of the mirror funds over the
comparative periods. The presentation of blended performance information, while
not specifically addressed in the Mass Mutual letter, is consistent with the
basic premise of the Mass Mutual letter of allowing the use of past performance
information of the predecessor fund, given that the mirror funds would be
converted simultaneously. Notwithstanding the foregoing, management could elect
to convert one or the other of the bank funds first and utilize its historical
performance information and clearly comply with Mass Mutual.
<PAGE>
We have reviewed (i) the "Fact Sheets", (ii) historical performance
information and (iii) portfolio composition for each of the bank funds, all of
which was supplied by FCI on all bank funds that will be transferred to the
Great Plains Funds, as well as current drafts of the Prospectus and Statement of
Additional Information supplied by the Great Plains Funds and Federated Services
Company and have asked questions of management of FCI and inspected such other
information and documents as we have deemed appropriate in the circumstances.
Based on the foregoing and subject to the limitations and assumptions
set forth herein, we are of the opinion that the predecessor performance
information for the bank funds can be included in the prospectus for the Great
Plains Fund in conformity with the Mass Mutual No Action Letter. Notwithstanding
the foregoing, we have not reviewed the accuracy or calculation of the
performance information and do not express an opinion as to the method of
calculation or presentation of such performance information. Such performance
information has been compiled by Federated Services Company, the Administrator
and Distributor of, and Portfolio Accountant for, the Great Plains Funds, based
upon information provided by FCI as to the historical unit values, income and
fund size of each of the respective bank funds.
This memorandum addresses each of the Great Plains Funds and its
corresponding predecessor bank funds based upon the first four criteria set
forth by the SEC in Mass Mutual. As previously indicated we believe it is
appropriate, under applicable precedent and in the interests of providing
potential shareholders of the Great Plains Funds with helpful and complete
information, for the predecessor performance of the bank funds to be blended
where both a common bank fund and a collective fund are to be simultaneously
converted into the same portfolio of the Great Plains Funds.
Great Plains Equity Fund/Value Plus Stock Fund A; Value Plus Stock Fund C
Question
Are the investment policies, objectives, guidelines and restrictions of
the Equity Fund in all material respects equivalent to those of bank funds A and
C?
The stated investment objective of the Equity Fund is to achieve total
return (consisting of current income and capital appreciation) over the long
term. Bank funds A and C have been managed with a primary objective of long term
total return performance and growth of assets. While bank fund A was available
to any foundation, endowment or personal trust customer, bank fund C was only
available to qualified retirement plans or other assets subject to the
restrictions of ERISA. Furthermore, while the stated objectives of bank fund A
and C were phrased slightly differently, an analysis of their respective
investment portfolios and stated investment policies indicate virtually
identical investment portfolios, and investment policies. While aggregate market
value of A & C showed some differences, portfolio turnover and percentage of
foreign securities are also virtually identical within a minor variance which in
our view is not material.
<PAGE>
Bank funds A and C were formed to meet diversification requirements of
the Internal Revenue Code with respect to common and collective investment funds
operated by banks. Under these rules (Internal Revenue Code sections 584(b)(4)
and 368(a)(2)(F)(ii)) common and collective funds, such as bank funds A & C,
must restrict their investments such that not more than 25% of the value of
their total assets are invested in the securities of any one issuer and further,
such that not more than 50% of the value of their total assets are invested in
the securities of 5 or fewer issuers. For purposes of this test government
securities are excluded from the 25% test but included in the 50% test. While
this test is slightly more liberal than Subchapter M, bank funds A & C were
managed more restrictively. The trust documents establishing each of bank funds
A & C recite these requirements. Nevertheless, a review of the stated investment
policies and restrictions of the Equity Fund against the historical portfolio
makeup of bank funds A & C indicates that bank funds A & C could have met the
more detailed objectives, guidelines and restrictions of the Equity Fund.
Based upon the foregoing it is our opinion that the investment policies,
objectives, guidelines and restrictions of the Equity Fund are in all material
respects equivalent to those of bank funds A & C.
Question
Are the management practices of the Equity Fund in all material
respects identical to those of bank funds A and C?
The initial registration statement of the Great Plains Funds indicates
that the Equity Fund will pursue its investment objective
through the application of a value-oriented approach by investing
primarily in a portfolio of common and preferred stocks of foreign and
domestic issuers as well as domestic and foreign securities
convertible into common and preferred stocks.
The fact sheets for bank fund A indicate that the investment strategy
of that fund is as follows:
We actively search for high-quality domestic and international
companies which combine the qualitative and quantitative
characteristics of companies with compelling valuation levels. These
companies offer significant investment potential.
Attractive company qualities include:
proven management,
businesses with identifiable franchises,
earnings and shareholder growth potential,
increasing market share,
<PAGE>
cash-flow which is intelligently reinvested,
high return on equity and assets, low debt, and operating
margins which are high or improving.
Compelling valuation levels can be observed by:
asset values of business(es),
low price/earnings, price/cash-flow, and price/sales relative
to growth potential, and attractive discounted future
valuation models.
The fact sheets for bank fund C indicate that the investment strategy
of that fund is as follows:
We actively search for high-quality domestic and international
companies which combine attractive qualitative and
quantitative characteristics with compelling valuation levels.
These companies offer significant investment potential.
Attractive company qualities include: 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.
Compelling valuation levels can be observed by: asset values
of business(es), low price/earnings, price/cash-flow,
and price/sales relative to growth potential, and
attractive discounted future valuation models.
<PAGE>
It is clear that the investment strategies (i.e. management practices)
of bank fund A and bank fund C are identical and further, that this management
approach can fairly be characterized as a "value-oriented approach," which is
the stated management practice of the Equity Fund and is described as such in
the prospectus of the Equity Fund. Further, FCI, as adviser of the Equity Fund,
intends to manage the Equity Fund in all material respects identical to the
manner in which bank funds A and C have been managed by FCI, subject to the
additional requirements of the 1940 Act. Because the Equity Fund will be offered
as an open- end investment company and will have daily pricing, there may be
minor differences between the management practices of the Equity Fund as they
relate to liquidity in meeting redemption requests compared to the prior
management practices of FCI in managing bank funds A & C. For instance, bank
fund A (as with all other common bank funds) was priced monthly with monthly
purchase and redemption by permitted trust accounts, while bank fund C (as with
all other bank collective funds) has been priced daily since the beginning of
1996 with daily purchase and redemption. Nevertheless, management of FCI and the
Bank have represented to us that bank funds A & C have been managed for
liquidity in anticipation of converting bank funds A & C into a portfolio of the
Great Plains Funds and therefore any differences should be immaterial.
Based upon the foregoing, it is our opinion that the management practices
of the Equity Fund as set forth in the initial registration statement of the
Great Plains Fund are in all material respects identical to those of bank funds
A and C.
Question
Is the Equity Fund effectively a continuation of bank funds A and C, and
were such bank funds created for purposes entirely unrelated to the
establishment of the Great Plain Funds?
Bank fund A commenced operations in 1975 and bank fund C commenced
operations in 1973. Each was formed for the purpose of providing a pooled
investment vehicle to trust accounts administered by the Trust Department of the
Bank . The Equity Fund will receive all of the assets of the bank funds A & C.
Based upon the foregoing, it is our opinion that each of bank fund A
and bank fund C were created for purposes entirely unrelated to the
establishment of the Equity Fund. Further, we are of the opinion that the Equity
Fund is effectively a continuation of the predecessor bank funds A and C.
Question
Would bank funds A & C have been able to comply with the requirements
of Sub-chapter M of the Internal Revenue Code?
<PAGE>
Since their inception, neither bank fund A nor bank fund C were
required to meet the diversification requirements of Sub-chapter M of the
Internal Revenue Code. Under Sub-chapter M, a registered investment company must
meet several tests. A review of the historical make-up of bank fund A and bank
fund C indicates clearly that these bank funds could have easily complied with
the 90 percent of gross income test.
As far as compliance with the short short test, our analysis was not
determinative insofar as we did not have sufficient data on purchase and sale
transactions of individual securities to determine whether or not bank funds A &
C would have met the test. Nevertheless, bank funds A and C have consistently
been managed by NBC and FCI for the long term and generally have not been
engaged in short term trading of the securities to achieve investment results.
Insofar as the short-short test has been repealed, analysis of its applicability
is retrospective only. As a result, had bank funds A and C been subject to the
requirements of Sub-chapter M, we are confidant that NBC and FCI could have
managed the respective portfolios to meet the requirements of the short short
test.
With respect to the diversification requirements required by
Sub-chapter M, the first test requires that, as to 50 percent of assets, no more
than 5% of the fund can be invested in securities of any one issue. A historical
review of the bank funds A and C portfolios indicates historical diversification
among stocks and securities held by both bank funds. While there have been
occasions over the last three years when one security reached a little over 6%
of market value of bank fund A investment portfolio, this occurred once and
other incidents of the percentage exceeding 5% in either bank fund A or C were
rare with most positions constituting no more than two to three percent in any
one time. In any event, these positions in excess of 5% are permissible as to
the other 50% of the fund's assets as noted in the next paragraph. As a result,
had bank funds A and C been subject to the requirements of Sub-chapter M they
would have been able to comply with the 50 percent of assets test.
The final significant test on investments under Sub-chapter M is the 25
percent of assets test. A historical review of the securities held by both bank
fund A and C indicate that at no time in the last three years have either of
these funds ever had in excess of six percent of their respective assets
invested in any one security.
Based upon the foregoing, we are of the opinion that bank funds A and C
would have been able to comply with the investment restrictions imposed on
investment companies by Sub-chapter M of the Internal Revenue Code had they been
required to do so.
Great Plains Premier Fund/ Premier Stock Funds J and K
Question
<PAGE>
Are the investment policies, objectives, guidelines and restrictions of
the Premier Fund in all material respects equivalent to those of bank funds J
and K?
The stated investment objective of the Premier Fund is to seek total
return (consisting of current income and capital appreciation) over the long
term. Bank funds J and K have been managed with a primary objective of long term
capital appreciation. FCI has represented to us that the language of the
investment objective couched as "total return" is not inconsistent with their
management of the bank funds J & K. The Premier Fund also has a stated policy of
investing at least 65% of its portfolio in stocks of companies with market
capitalizations of $1 billion or less. Beginning in 1995-1996, FCI began to
manage the bank funds J & K under a policy that would result in the bank funds
achieving a focus of at least 65% of the portfolios in companies meeting a small
capitalization criteria. At present, bank funds J & K meet the criteria of the
Premier Fund. While bank fund J was available to any foundation, endowment or
personal trust customer, bank fund K was only available to qualified retirement
plans or other assets subject to the restrictions of ERISA. Furthermore, while
the stated objectives of bank fund J and K were phrased slightly differently, an
analysis of their investment portfolios and stated investment policies indicate
virtually identical investment portfolios, diversification and investment
policies. While aggregate market value of J & K showed some differences,
portfolio turnover and percentage of foreign securities are virtually identical
within a minor variance which in our view is not material.
Bank funds J and K were formed to meet diversification requirements of
the Internal Revenue Code with respect to common and collective investment funds
operated by banks. Under these rules (Internal Revenue Code sections 584(b)(4)
and 368(a)(2)(F)(ii)) common and collective funds like bank funds J & K must
restrict their investments such that not more than 25% of the value of their
total assets are invested in the securities of any one issuer and further, such
that not more than 50% of the value of their total assets are invested in the
securities of 5 or fewer issuers. For purposes of this test government
securities are excluded from the 25% test but included in the 50% test. While
this test is slightly more liberal than Subchapter M, bank funds J & K were
managed more restrictively. The trust documents establishing bank funds J & K
recite these requirements.. Nevertheless, a review of the historical portfolio
makeup of bank funds J & K indicates that bank funds J & K could have met the
more detailed objectives, guidelines and restrictions of the Premier Fund.
Based upon the foregoing, it is our opinion that the investment policies,
objectives, guidelines and restrictions of the Premier Fund are in all material
respects equivalent to those of bank funds J & K.
<PAGE>
Question
Are the management practices of the Premier Fund in all material
respects identical to those of bank funds J and K?
The initial registration statement for the Great Plains Funds indicates
that the Premier Fund will pursue its investment 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.
The fact sheets for bank fund J indicate that the investment strategy of that
fund is as follows:
We actively search for high-quality domestic and international
companies which combine attractive qualitative and quantitative
characteristics with compelling valuation levels. These companies offer
significant investment potential.
Attractive company qualities include:
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.
Compelling valuation levels can be observed by:
asset values of business(es),
low price/earnings, price/cash-flow, and price/sales relative
to growth potential, and attractive discounted future
valuation models.
The fact sheets for bank fund K indicate that the investment strategy of that
fund is as follows:
<PAGE>
We actively search for high-quality domestic and international
companies which combine attractive qualitative and quantitative
characteristics with compelling valuation levels. These companies offer
significant investment potential.
Attractive company qualities include:
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.
Compelling valuation levels can be observed by:
asset values of business(es),
low price/earnings, price/cash-flow, and price/sales relative
to growth potential, and attractive discounted future
valuation models.
It is clear that the investment strategies (i.e. management practices)
of bank fund J and bank fund K are identical and further, that this management
approach can fairly be characterized as a "value-oriented approach," which is
the stated management practice of the Premier Fund and is described as such in
the prospectus of the Premier Fund. Further, FCI as adviser of the Premier Fund
intends to manage the Premier Fund in all material respects identical to the
manner in which bank funds J and K have been managed by FCI, subject to the
additional requirements of subchapter M of the Internal Revenue Code. Because
the Premier Fund will be offered as an open-end investment company and will have
daily pricing, there may be minor differences between the management practices
of the Premier Fund as they relate to liquidity in meeting redemption requests
compared to the prior management practices of FCI in managing the bank funds.
For example, bank fund J (as with all other common bank funds) was priced
monthly with monthly purchase and redemption by permitted trust accounts, while
bank fund K (as with all other bank collective funds) has been priced daily
since the beginning of 1996 with daily purchase and redemption. Nevertheless,
management of FCI and the Bank have represented to us that bank funds J & K have
been managed for liquidity in anticipation of converting bank funds J & K into a
portfolio of the Great Plains Funds and therefore any differences should be in
immaterial.
Based upon the foregoing, it is our opinion that the management practices
of the Premier Fund as set forth in the initial registration statement of the
Great Plains Funds are in all material respects identical to those of bank funds
J and K.
<PAGE>
Question
Is the Premier Fund effectively a continuation of bank funds J and K and
were such bank funds created for purposes entirely unrelated to the
establishment of the Great Plains Funds?
Bank fund J commenced operations in 1988 and bank fund K commenced
operations in 1988. Each was formed for the purpose of providing a pooled
investment vehicle to trust accounts administered by the Trust Department of the
Bank. The Premier Fund will receive all of the assets of bank funds J & K.
Based upon the foregoing, it is our opinion that each of bank fund J
and bank fund K were created for purposes entirely unrelated to the
establishment of the Premier Fund. Further, we are of the opinion that the
Premier Fund is effectively a continuation of the predecessor bank funds J & K.
Question
Would bank funds J & K have been able to comply with the requirements
of Sub-chapter M of the Internal Revenue Code?
Since their inception, neither bank fund J nor bank fund K were
required to meet the diversification requirements of Sub-chapter M of the
Internal Revenue Code. Under Sub-chapter M, a registered investment company must
meet several tests. A review of the historical make-up of bank fund J and bank
fund K indicates clearly that these bank funds could have complied with the 90
percent of gross income test.
As far as compliance with the short short test, our analysis was not
determinative insofar as we did not have sufficient data on purchase and sale
transactions of individual securities to determine whether or not bank funds J &
K would have met the test. Nevertheless, bank funds J & K have consistently been
managed by NBC and FCI for the long term and generally have not been engaged in
short term trading of the securities to achieve investment results. Insofar as
the short-short test has been repealed, analysis of its applicability is
retrospective only. As a result, had bank funds J and K been subject to the
requirements of Sub-chapter M, we are confidant that NBC and FCI could have
managed the respective portfolios to meet the requirements of the short short
test.
<PAGE>
With respect to the diversification requirements required by
Sub-chapter M, the first test requires that, as to 50 percent of assets, no more
than 5% of the fund can be invested in securities of any one issue. A historical
review of the bank fund J and K portfolios indicates historical diversification
among stocks and securities held by both bank funds. While there have been
occasions over the last three years when one security reached a little over 10%
of the market value of the investment portfolios of bank funds J & K, other
incidents of the percentage exceeding 5% were rare with most positions
constituting no more than three to five percent at any one time. In those
instances where the percentages exceeded 10%, analysis indicated that the bank
funds J & K would have complied with the 50% test in any event.
The final significant test on investments under Sub-chapter M is the 25
percent of assets test. A historical review of the securities held by both bank
funds J and K indicate that at no time in the last three years have either of
these bank funds ever exceeded the limit.
Based upon the foregoing, we are of the opinion that bank funds J and K
would have been able to comply with the investment restrictions imposed on
investment companies by Sub-chapter M of the Internal Revenue Code had they been
required to do so.
Great Plains Intermediate Bond Fund/Income Bond Fund B and Total Return Bond
Fund D
Question
Are the investment policies, objectives, guidelines and restrictions of
the Intermediate Bond Fund in all material respects equivalent to those of bank
funds B and D.
<PAGE>
The stated investment objective of the Intermediate Bond Fund is to
achieve total return (consisting of current income and capital appreciation).
Bank funds B and D have been managed with primary objectives of providing fixed
investment income that provides a consistent income stream. While bank fund B
was available to any foundation, endowment or personal trust customer, bank fund
D was only available to qualified retirement plans, or other assets subject to
the restrictions of ERISA. Furthermore, while the stated objectives of bank
funds B and D were phrased slightly differently, an analysis of their respective
investment portfolios and stated investment policies indicate virtually
identical investment portfolios, diversification and investment policies. While
aggregate market value of B and D showed some differences, portfolio turnover
and average maturity are virtually identical within a minor variance which in
our view is not material.
Bank funds B and D were formed to meet diversification requirements of
the Internal Revenue Code with respect to common and collective investment funds
operated by banks. Under these rules (Internal Revenue Code sections 584(b)(4)
and 368(a)(2)(F)(ii)) common and collective funds, such as bank funds B & D,
must restrict their investments such that not more than 25% of the value of
their total assets are invested in the securities of any one issuer and further,
such that not more than 50% of the value of their total assets are invested in
the securities of 5 or fewer issuers. For purposes of this test government
securities are excluded from the 25% test but included in the 50% test. While
this test is slightly more liberal than Subchapter M, bank funds B & D were
managed more restrictively. The trust documents establishing bank funds B & D
recite these requirements. A review of the stated investment policies and
restrictions of the Intermediate Bond Fund against historical portfolios of bank
funds B and D indicates that bank funds B and D could easily have met the more
detailed objectives, guidelines and restrictions of the Intermediate Bond Fund
including the more restrictive diversification requirements under the 1940 Act.
Based upon the foregoing, it is our opinion that the investment policies,
objectives, guidelines and restrictions of the Intermediate Bond Fund are in all
material respects equivalent to those of bank funds B and D.
Question
Are the management practices of the Intermediate Bond Fund in all
material respects identical to those of bank funds B and D?
The initial registration statement for the Great Plains Funds indicates that the
Intermediate Bond Fund will pursue its investment 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 fact sheets for the bank funds B and D indicate that the investment strategy
for each of those funds is as follows:
<PAGE>
The fund's average maturity is based on First Commerce Investors'
interest rate forecast. FCI will lengthen maturities if declining rates
are expected, and shorten maturities if rising rates are anticipated.
However, the fund does not make major interest rate bets. Value is
added by seeking corporate bonds and mortgage-backed bonds which are
attractively priced.
Asset allocation between corporate bonds, government bonds, and
mortgage-backed bonds is determined by the incremental yield of each
sector relative to Treasuries. These "yield spreads" vary according to
market conditions. For example, yields of corporate bonds are
relatively attractive in a recessionary environment because investors
are concerned about credit deterioration. Corporate bonds prices
typically outperform Treasury bond prices in an improving economic
environment because investors perceive that corporate bond credit
quality will improve.
It is clear that the investment strategies (i.e. management practices) of bank
fund B and bank fund D are substantively identical to the stated management
practice of the Intermediate Bond Fund. Further, FCI as adviser of the
Intermediate Bond Fund intends to manage the Intermediate Bond Fund in all
material respects identical to the manner in which bank funds B and D have been
managed by FCI, subject to the additional requirements of the 1940 Act. Because
the Intermediate Bond Fund will be offered as an open- end investment company
and will have daily pricing, there may be minor differences between the
management practices of the Intermediate Bond Fund as they relate to liquidity
in meeting redemption requests compared to the prior management practices of FCI
in managing bank funds B & D. For example, bank fund B (as with all other common
bank funds) was priced monthly with monthly purchase and redemption by permitted
trust accounts, while bank fund D (as with all other bank collective funds) has
been priced daily since the beginning of 1996 with daily purchase and
redemption. Nevertheless, management of FCI and the Bank have represented to us
that bank funds B & D have been managed for liquidity in anticipation of
converting bank funds B & D into a portfolio of the Great Plains Funds and
therefore any differences should be immaterial.
Based upon the foregoing, it is our opinion that the management practices
of the Intermediate Bond Fund as set forth in the initial registration statement
of the Great Plains Funds are in all material respects identical to those of
bank funds B and D.
Question
Is the Intermediate Bond Fund effectively a continuation of bank funds
B and D and were such bank funds created for purposes entirely unrelated to the
establishment of the Great Plains Funds?
<PAGE>
Bank fund B commenced operations in 1975, and bank fund D commenced
operations in 1973. Each was formed for the purpose of providing a pooled
investment vehicle to trust accounts administered by the Trust Department of the
Bank. The Intermediate Bond Fund will receive all of the assets of the bank
funds B & D.
Based upon the foregoing, it is our opinion bank funds B and D were
created for purposes entirely unrelated to the establishment of the Intermediate
Bond Fund. Further, we are of the opinion that the Intermediate Bond Fund is
effectively a continuation of the predecessor bank funds B and D.
Question
Would bank funds B & D have been able to comply with the requirements
of Sub-chapter M of the Internal Revenue Code?
Since their inception, neither bank fund B nor bank fund D were
required to meet the diversification requirements of Sub-chapter M of the
Internal Revenue Code. Under Sub-chapter M, a registered investment company must
meet several tests. A review of the historical make-up of bank fund B and bank
fund D indicates clearly that these bank funds could have easily complied with
the 90 percent of gross income test.
As far as compliance with the short short test, our analysis was not
determinative insofar as we did not have sufficient data on purchase and sale
transactions of individual securities to determine whether or not bank funds B &
D would have met the test. Nevertheless, bank funds B & D have consistently been
managed by NBC and FCI for the long term and generally have not been engaged in
short term trading of the securities to achieve investment results. Insofar as
the short-short test has been repealed, analysis of its applicability is
retrospective only. As a result, had bank funds B and D been subject to the
requirements of Sub-chapter M, we are confidant that NBC and FCI could have
managed the respective portfolios to meet the requirements of the short short
test.
With respect to the diversification requirements required by
Sub-chapter M, the first test requires that, as to 50 percent of assets, no more
than 5% of the fund can be invested in securities of any one issue. A historical
review of the bank fund B and D portfolios indicates historical diversification
among stocks and securities held by both bank funds. As a result, had bank funds
B and D been subject to the requirements of Sub-chapter M they would have been
able to comply with the 50 percent of assets test.
<PAGE>
The final significant test on investments under Sub-chapter M is the 25
percent of assets test. A historical review of the securities held by both bank
fund B and bank fund D indicates that at no time in the last three years have
either of these funds ever exceeded the limit.
As a result , we are of the opinion that bank funds B and D would have been
able to comply with the investment restrictions imposed on investment companies
by Sub-chapter M of the Internal Revenue Code had they been required to do so.
Tax-Free Bond Fund/Tax-Exempt Bond Fund G
Question
Are the investment policies, objectives, guidelines and restrictions of
the Tax-Free Bond Fund in all material respects equivalent to those of bank fund
G?
The stated investment objective of the Tax-Free Bond Fund is to seek
current income exempt from federal regular income tax with a secondary
investment objective of current income that is also exempt from regular income
taxes imposed by the State of Nebraska. Bank fund G has been managed under a
primary objective of tax-free fixed income. Bank fund G was only available to
those trust accounts for which tax exempt income is appropriate.
<PAGE>
Bank fund G was formed to meet diversification requirements of the
Internal Revenue Code with respect to common and collective investment funds
operated by banks. Under these rules (Internal Revenue Code sections 584(b)(4)
and 368(a)(2)(F)(ii)) common and collective funds, such as bank fund G, must
restrict their investments such that not more than 25% of the value of their
total assets are invested in the securities of any one issuer and further, such
that not more than 50% of the value of their total assets are invested in the
securities of 5 or fewer issuers. For purposes of this test government
securities are excluded from the 25% test but included in the 50% test. While
this test is slightly more liberal than Subchapter M, bank fund G was managed
more restrictively. The trust documents establishing bank fund G recite these
requirements. Nevertheless, a review of the historical portfolio makeup of bank
fund G indicates that bank fund G could easily have met the more detailed
objectives, guidelines and restrictions of the Tax-Free Bond Fund.
Based upon the foregoing, it is our opinion that the investment policies,
objectives, guidelines and restrictions of the Tax-Free Bond Fund are in all
material respects equivalent to those of bank fund G.
Question
Are the management practices of the Tax-Free Bond Fund in all material
respects identical to those of bank fund G?
The initial registration statement for the Great Plains Funds indicates
that the Tax-Free Bond Fund will pursue its investment 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").
The fact sheets for bank fund G indicate that the investment strategy for that
fund is as follows:
The fund's laddered portfolio is maintained primarily by investing
available funds in new issue municipal issues that meet credit quality
guidelines (issues rated A or better by the established rating
services). The fund is managed to provide a stable, tax-advantaged
income stream as well as preservation of principal. Municipal issues
are purchased with a preference toward issues originating in Nebraska.
The fund's Nebraska exposure will vary over time, depending upon
new-issue volume, interest rate environment and credit quality of
available issues. Municipal issues of other states that are purchased
also meet the fund's stringent credit quality requirements.
<PAGE>
It is clear that the investment strategies (i.e. management practices) of bank
fund G are substantively identical to the stated management practice of the
Tax-Free Bond Fund. Further, FCI as adviser of the Tax-Free Bond Fund intends to
manage the Tax-Free Bond Fund in all material respects identical to the manner
in which bank fund G has been managed by FCI, subject to the additional
requirements of the 1940 Act. Because the Tax-Free Bond Fund will be offered as
an open- end investment company and will have daily pricing, there may be minor
differences between the management practices of the Tax-Free Bond Fund as they
relate to liquidity in meeting redemption requests compared to the prior
management practices of FCI in managing the bank funds. For instance, bank fund
G (as with all other common bank funds) was priced monthly with monthly purchase
and redemption by permitted trust accounts. Nevertheless, management of FCI and
the Bank have represented to us that bank fund G has been managed for liquidity
in anticipation of converting bank fund G to a portfolio of the Great Plains
Funds and therefore any differences should be immaterial.
Based upon the foregoing, it is our opinion that the management practices
of the Tax-Free Bond Fund as set forth in the initial registration statement of
the Great Plains Funds are in all material respects identical to those of bank
fund G.
Question
Is the Tax-Free Fund effectively a continuation of bank fund G and was
bank fund G created for purposes entirely unrelated to the establishment of the
Great Plains Funds?
Bank fund G commenced operations in 1979, and was formed for the purpose of
providing a pooled investment vehicle to trust accounts administered by the
Trust Department of the Bank. The Tax-Free Bond Fund will receive all of the
assets of bank fund G.
Based upon the foregoing, it is our opinion that bank fund G was
created for purposes entirely unrelated to the establishment of the Tax-Free
Bond Fund. Further, we are of the opinion that the Tax-Free Bond Fund is
effectively a continuation of the predecessor bank fund G.
Question
Would bank fund G have been able to comply with the requirements of
Sub-chapter M of the Internal Revenue Code?
<PAGE>
-40-
207974 .2
Since its inception, bank fund G was not required to meet the
diversification requirements of Sub-chapter M of the Internal Revenue Code.
Under Sub-chapter M, a registered investment company must meet several tests. A
review of the historical make-up of bank fund G indicates clearly that this bank
fund could have easily complied with the 90 percent of gross income test.
As far as compliance with the short short test, our analysis was not
determinative insofar as we did not have sufficient data on purchase and sale
transactions of individual securities to determine whether or not bank fund G
would have met the test. Nevertheless, bank fund G has consistently been managed
by NBC and FCI for the long term and generally has not been engaged in short
term trading of the securities to achieve investment results. Insofar as the
short-short test has been repealed, analysis of its applicability is
retrospective only. As a result, had bank fund G been subject to the
requirements of Sub-chapter M, we are confidant that NBC and FCI could have
managed the portfolio to meet the requirements of the short short test.
With respect to the diversification requirements required by
Sub-chapter M, the first test requires that, as to 50 percent of assets, no more
than 5% of the fund can be invested in securities of any one issue. A historical
review of the bank fund G portfolio indicates historical diversification. Had
bank fund G been subject to the requirements of Sub-chapter M it would have been
able to comply with the 50 percent of assets test.
The final significant test on investments under Sub-chapter M is the 25
percent of assets test. A historical review of the securities held by bank fund
G indicates that at no time in the last three years did bank fund G ever exceed
the limit.
Based upon the foregoing, we are of the opinion that bank fund G would have
been able to comply with the investment restrictions imposed on investment
companies by Sub-chapter M of the Internal Revenue Code had it been required to
do so.
Nicholas Applegate Analysis
Regardless of whether the Mass Mutual No Action letter provides the
basis for including in the prospectus, statement of additional information,
advertisements and sales literature, the predecessor performance information of
the bank funds for the periods prior to the effective date of the Great Plains
Funds' registration statement in calculating the total return of the various
Great Plains Funds, the Nicholas Applegate No Action letter clearly provides an
alternative basis for including the information in the Great Plains Funds'
prospectus. The Nicholas Applegate No Action letter sets forth the SEC staff's
current views on whether a mutual fund can include in its prospectus performance
information of certain private accounts that are similarly managed by the mutual
fund's investment adviser. Under this letter it is permissible for a mutual fund
to include performance information of such private accounts provided that such
information is provided for all private accounts with substantially similar
investment objectives, policies and strategies and further provided that the
information is not presented in a misleading manner and not as a substitute for
the mutual fund's own performance. While management takes the position that the
bank fund performance information should be regarded as the Great Plains Funds
performance under Mass Mutual, if it is not permitted, such information will be
presented in conformity with the Nicholas Applegate No Action letter.
In response to SEC staff's comments contained in the August 14, 1997
letter, the comparative analysis of the bank funds' investment objectives,
policies and restrictions provided above for purposes of the Mass Mutual letter
are equally applicable here. The prior performance information for the bank
funds includes only those private accounts maintained by National Bank of
Commerce and managed by FCI which have substantially similar investment
objectives, policies and strategies of the corresponding portfolios of the Great
Plains Funds. The information does not exclude any period, for which information
is required to be presented, during which the bank funds existed.
<PAGE>
Securities and Exchange Commission
September 5, 1997
Page 40
As indicated previously, management does not anticipate that there will
be differences in the types of securities purchased by the Great Plains Funds
and those historically purchased by the corresponding bank funds. Indeed
management views the corresponding Great Plains Funds as being continuations of
the bank funds. All assets of the bank funds will be transferred to the
corresponding portfolios of the Great Plains Funds on the conversion date,
resulting in identical securities. A review of the past portfolios of the bank
funds also reflects substantially similar securities compared to those
anticipated for the corresponding portfolios of the Great Plains Funds. While
the Great Plains Funds have adopted various percentage restrictions of the types
and amounts of securities in order to comply with the regulatory and
diversification requirements of the 1940 Act and Sub-chapter M, a review of the
bank funds' historical investments indicates compliance with the Great Plains
Funds requirements.
The bank funds will be converted to the Great Plains Funds and as a
result are anticipated to be virtually identical in size to the corresponding
portfolios of the Great Plains Funds at conversion. As of August 20, 1997, bank
fund A had assets of approximately $103, 250,000, bank fund C had assets of
approximately $84,500,000 (making the Great Plains Equity Fund having initial
assets of approximately $188,000,000 if converted this day), bank fund J had
assets of approximately $9,300,000, bank fund K had assets of approximately
$10,300,00 (making the Great Plains Premier Fund having initial assets of
approximately $19,700,000 if converted this day). On August 6,1997 bank fund G
had assets of approximately $61,500,000 (making the Great Plains Tax-Free Fund
the same size if converted this day), bank fund B had assets of approximately
$69,200,000 and bank fund D had assets of approximately $57,600,000 (making the
Great Plains Intermediate Bond Fund approximately $127,000,000 if converted this
day).
Upon conversion the bank funds will be terminated and their assets will
be transferred into the open-end investment company which is the Great Plains
Funds, with daily pricing and daily purchase and redemption. The initial
shareholders of the Great Plains Funds will be the existing trust account
holders of National Bank of Commerce. It is not anticipated that there will be
significant differences in cash inflow/outflow between the bank funds and the
Great Plains Funds.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fund A Market % of combined % of Fund C Market % of combined % of Total Market Portfolio Portfolio
Value fund foreigns Value fund foreigns Value Turnover A Turnover C
1 Q 94 $59,206,629 49.50% 25.15% $60,410,215 50.50% 25.06% $119,616,844
2 Q 94 $59,312,727 49.45% 24.09% $60,631,255 50.55% 23.96% $119,943,982
3 Q 94 $61,337,919 51.92% 24.43% $56,794,873 48.08% 26.21% $118,132,792
4 Q 94 $60,664,434 53.18% 27.86% $53,410,323 46.82% 28.97% $114,074,757 25.34% 26.58%
1 Q 95 $65,037,144 53.84% 26.64% $55,769,998 46.16% 25.77% $120,807,142
2 Q 95 $65,440,969 55.64% 25.09% $52,166,412 44.36% 26.91% $117,607,381
3 Q 95 $69,229,953 56.77% 24.52% $52,708,630 43.23% 25.91% $121,938,583
4 Q 95 $72,796,731 57.46% 23.18% $53,890,174 42.54% 22.84% $126,686,905 26.79% 22.71%
1 Q 96 $77,343,217 57.84% 24.02% $56,369,368 42.16% 23.98% $133,712,585
2 Q 96 $80,226,522 57.59% 24.15% $59,080,092 42.41% 24.05% $139,306,614
3 Q 96 $83,775,431 57.56% 23.30% $61,758,269 42.44% 23.36% $145,533,700
4 Q 96 $89,861,431 57.80% 26.92% $65,612,399 42.20% 27.10% $155,473,830 29.86% 29.96%
1 Q 97 $91,419,533 55.80% 26.78% $72,401,812 44.20% 25.23% $163,821,345
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Market % of Market
Short-Term Securities $ 10,685,820.66 10.34%
Preferred Stock 327,250.00 0.31%
Common Stocks 92,377,198.17 89.44%
------------------ ------------------
Total Investments $ 103,390,268.83 100.09%
Money Due to Broker -105,786.00 -0.09%
================== ==================
Total Fund $ 103,284,482.83 100.00%
================== ==================
Par/Shares Security Price Market % Market
- ------------------ ------------------------------------------- ------------------ ------------------ -------------
SHORT-TERM SECURITIES
8,715,395.66 Northern Trust Benchmark Govt Book $ 8,715,395.66 8.43%
Select.......
2,000,000.00 Nissan Capital Commercial Paper Book 1,970,425.00 1.91%
------------------
TOTAL SHORT-TERM SECURITIES........... $ 10,685,820.66
------------------
PREFERRED STOCK
7,700.00 Time Warner Financing $1.24 42.500 327,250.00 0.32%
Pfd............
------------------
TOTAL PREFERRED STOCK............... $ 327,250.00
------------------
COMMON STOCK
AUTOMOTIVE
15,276.00 Autoliv 39.125 597,673.50 0.58%
Inc...............................................
BANKS
10,020.00 Wells Fargo & 269.500 2,700,390.00 2.61%
Co....................................
BEVERAGES
107,000.00 Guinness 9.780 1,046,460.00 1.01%
PLC..............................................
BROADCASTING
11,140.00 Canal Plus 194.880 2,170,963.20 2.10%
Ord...........................................
CHEMICALS
137,660.00 Hanna M A 28.625 3,940,517.50 3.81%
Co.........................................
85,700.00 Lilly Industries 20.125 1,724,712.50 1.67%
Inc...................................
44,800.00 Morton International 30.188 1,352,422.40 1.31%
Inc..............................
------------------
7,017,652.40
CONSTRUCTION
6,000.00 Hollandsche Benton Groep 228.260 1,369,560.00 1.32%
Nv.........................................
CONSUMER PRODUCTS
177,975.00 Reckitt & Colman 14.900 2,651,827.50 2.56%
PLC..................................
CONSUMER SERVICES
104,710.00 Manpower 44.500 4,659,595.00 4.51%
Inc...............................................
98,820.00 H & R Block 32.250 3,186,945.00 3.08%
Inc.................................................
------------------
7,846,540.00
FINANCE-INSURANCE
26,625.00 Allstate 73.000 1,943,625.00 1.88%
Corp...........................................
153,069.00 20th Century Industries 21.000 3,214,449.00 3.11%
Inc.........................................
47,720.00 SCOR..................................................... 40.270 1,921,684.40 1.86%
------------------
7,079,758.40
Par/Shares Security Price Market % Market
- ------------------ ------------------------------------------- ------------------ ------------------ -------------
FINANCE-INVESTMENTS
107.00 Berkshire Hathaway 47,200.000 5,050,400.00 4.88%
Inc.......................................
FOOD & TOBACCO
25,210.00 Grand Metropolitan New 39.188 987,929.48 0.96%
ADR.........................................................................................................
24,500.00 Nestle SA (Reg) 66.050 1,618,225.00 1.57%
ADR.........................................................
81,000.00 Philip Morris Companies 44.250 3,584,250.00 3.47%
Inc.......................................................
------------------
6,190,404.48
HEALTHCARE & MEDICAL SUPPLIES
23,500.00 Aetna 102.375 2,405,812.50 0.00 2.33%
Inc...............................................
31,600.00 Pharmacia & Upjohn 34.750 1,098,100.00 0.00 1.06%
Inc.........................
---------------------
3,503,912.50
INTERNATIONAL OIL
60,604.00 Royal Dutch Petroleum 54.375 3,295,342.50 3.19%
Co.........................
141,200.00 Saga Petroleum Inc A 19.000 2,682,800.00 2.59%
Free.................................
------------------
5,978,142.50
LEISURE & RECREATION
102,136.00 Carnival Corp Class 41.250 4,213,110.00 4.07%
A..................................................
12,200.00 Disney (Walt) 80.250 979,050.00 0.95%
Co.....................................
147,500.00 Hasbro 28.375 4,185,312.50 4.05%
Inc.........................................................................
------------------
9,377,472.50
MORTGAGE
86,400.00 Federal Home Loan Mortgage 35.000 3,024,000.00 2.92%
Corp..................................
48,260.00 Federal National Mortgage 43.625 2,105,342.50 2.04%
Assn..........................................
------------------
5,129,342.50
PRINTING & PUBLISHING
168,000.00 De 21.620 3,632,160.00 3.51%
Telegraaf........................................................................
6,480.00 Edipresse SA-SF50 Bearer 236.160 1,530,316.80 1.48%
New...................................
------------------
5,162,476.80
STEEL
40,400.00 Nucor 56.500 2,282,600.00 2.21%
Corp......................................................
TECHNOLOGY
42,000.00 Nokia Corp 73.750 3,097,500.00 2.99%
ADR..................................................
135,565.00 Vishay Intertechnology 28.938 3,922,979.97 3.78%
Inc...........................................
------------------
------------------
7,020,479.97
TELECOMMUNICATIONS
594,178.00 STET 5.831 3,464,651.92 3.34%
ORD..............................................................................................
246,710.00 360 Communications 17.125 4,224,908.75 4.10%
Co.........................
------------------
7,689,560.67
TRUCKING
129,630.00 Werner Enterprises 19.375 2,511,581.25 2.44%
Inc......................................
------------------
TOTAL COMMON $ 92,377,198.17
STOCKS.....................................
------------------
TOTAL $ 103,390,268.83
INVESTMENTS...................................
==================
</TABLE>
Exhibit 6(ii) under Form N-1A
Great Plains Funds 6 September 1, 1997
Exhibit 6(i) under Form N-1A
Exhibit 1 under Item 601/Reg. S-K
GREAT PLAINS FUNDS
DISTRIBUTOR'S CONTRACT
AGREEMENT made this 1st day of September, 1997, by and between
Great Plains Funds (the "Trust"), a Massachusetts business trust, and Edgewood
Services, Inc. ("Edgewood"), a New York Corporation.
In consideration of the mutual covenants hereinafter contained, it
is hereby agreed by and between the parties hereto as follows:
1. The Trust hereby appoints Edgewood as its agent to sell and
distribute shares of the Trust which may be offered in one or more
portfolios (the "Funds") consisting of one or more classes (the
"Classes") of shares (the "Shares"), as described and set forth on
one or more exhibits to this Agreement, at the current offering price
thereof as described and set forth in the current Prospectus(es) of
the Trust. Edgewood hereby accepts such appointment and agrees to
provide such other services for the Trust, if any, and accept such
compensation from the Trust, if any, as set forth in the applicable
exhibits to this Agreement.
2. The sale of any Shares may be suspended without prior notice whenever
in the judgment of the Trust it is in its best interest to do so.
3. Neither Edgewood nor any other person is authorized by the Trust to
give any information or to make any representation relative to any
Shares other than those contained in the Registration Statement(s),
Prospectus(es), or Statement(s) of Additional Information ("SAI(s)")
of the Trust filed with the Securities and Exchange Commission, as
the same may be amended from time to time, or in any supplemental
information to said Prospectus(es) or SAI(s) approved by the Trust.
Edgewood agrees that any other information or representations other
than those specified above which it or any dealer or other person who
purchases Shares through Edgewood may make in connection with the
offer or sale of Shares, shall be made entirely without liability on
the part of the Trust. No person or dealer, other than Edgewood, is
authorized to act as agent for the Trust for any purpose. Edgewood
agrees that in offering or selling Shares as agent of the Trust, it
will, in all respects, duly conform to all applicable state and
federal laws, rules and regulations and the rules and regulations of
the National Association of Securities Dealers, Inc., including its
Conduct Rules (formerly called the Rules of Fair Practice). Edgewood
will submit to the Trust copies of all sales literature before using
the same and will not use such sales literature if disapproved by the
Trust.
4. This Agreement is effective with respect to each Fund and each Class,
as applicable, as of the date of execution of the applicable exhibit
and shall continue in effect with respect to each such Fund or Class
presently set forth on an exhibit and any subsequent Fund or Class
added pursuant to an exhibit during the initial term of this
Agreement for one year from the date set forth above, and thereafter
for successive periods of one year if such continuance is approved at
least annually by the Trustees of the Trust including a majority of
the members of the Board of Trustees of the Trust who are not
interested persons of the Trust and have no direct or indirect
financial interest in the operation of any Distribution Plan relating
to the Trust or in any related documents to such Plan ("Disinterested
Trustees") cast in person at a meeting called for that purpose. If a
Fund or Class is added after the first annual approval by the
Trustees as described above, this Agreement will be effective as to
that Fund or Class upon execution of the applicable exhibit and will
continue in effect until the next annual approval of this Agreement
by the Trustees and thereafter for successive periods of one year,
subject to approval as described above.
5. This Agreement may be terminated with regard to a particular Fund or
Class at any time, without the payment of any penalty, by the vote of
a majority of the DisinterestedTrustees or by a majority of the
outstanding voting securities of the particular Fund or Class on not
more than sixty (60) days' written notice to any other party to this
Agreement. This Agreement may be terminated with regard to a
particular Fund or Class by Edgewood upon sixty (60) days' written
notice to the Trust.
6. This Agreement may not be assigned by Edgewood and shall
automatically terminate in the event of an assignment by Edgewood as
defined in the Investment Company Act of 1940, as amended, provided,
however, that Edgewood may employ such other person, persons,
corporation or corporations as it shall determine in order to assist
it in carrying out its duties under this Agreement.
7. Edgewood shall not be liable to the Trust 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
by this Agreement.
8. This Agreement may be amended at any time by mutual agreement in
writing of all the parties hereto, provided that such amendment is
approved by the Trustees of the Trust including a majority of the
Disinterested Trustees of the Trust cast in person at a meeting
called for that purpose.
9. This Agreement shall be construed in accordance with and governed by
the laws of the Commonwealth of Massachusetts.
10. (a) Subject to the conditions set forth below, the Trust
agrees to indemnify and hold harmless Edgewood and each
person, if any, who controls Edgewood within the meaning of
Section 15 of the Securities Act of 1933 and Section 20 of
the Securities Act of 1934, as amended, against any and all
loss, liability, claim, damage and expense whatsoever
(including but not limited to any and all expenses
whatsoever reasonably incurred in investigating, preparing
or defending against any litigation, commenced or
threatened, or any claim whatsoever) arising out of or based
upon any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement(s),
any Prospectus(es) or SAI(s) (as from time to time amended
and supplemented) or the omission or alleged omission
therefrom of a material fact required to be stated therein
or necessary to make the statements therein not misleading,
unless such statement or omission was made in reliance upon
and in conformity with written information furnished to the
Trust about Edgewood by or on behalf of Edgewood expressly
for use in the Registration Statement(s), any Prospectus(es)
and SAI(s) or any amendment or supplement thereof.
If any action is brought against Edgewood or any controlling
person thereof with respect to which indemnity may be sought
against the Trust pursuant to the foregoing paragraph,
Edgewood shall promptly notify the Trust in writing of the
institution of such action and the Trust shall assume the
defense of such action, including the employment of counsel
selected by the Trust and payment of expenses. Edgewood or
any such controlling person thereof shall have the right to
employ separate counsel in any such case, but the fees and
expenses of such counsel shall be at the expense of Edgewood
or such controlling person unless the employment of such
counsel shall have been authorized in writing by the Trust
in connection with the defense of such action or the Trust
shall not have employed counsel to have charge of the
defense of such action, in any of which events such fees and
expenses shall be borne by the Trust. Anything in this
paragraph to the contrary notwithstanding, the Trust shall
not be liable for any settlement of any such claim or for
any other action effected without its written consent. The
Trust agrees promptly to notify Edgewood of the commencement
of any litigation or proceedings against the Trust or any of
its officers or Trustees or controlling persons in
connection with the issue and sale of Shares or in
connection with the Registration Statement(s),
Prospectus(es), or SAI(s).
(b) Subject to the conditions set forth below, Edgewood agrees
to indemnify and hold harmless the Trust, each of its
Trustees, each of its officers who have signed the
Registration Statement(s) and each other person, if any, who
controls the Trust within the meaning of Section 15 of the
Securities Act of 1933 and Section 20 of the Securities Act
of 1934, as amended, against any and all loss, liability,
claim, damage and expense whatsoever (including but not
limited to any and all expenses whatsoever reasonably
incurred in investigating, preparing or defending against
any litigation, commenced or threatened, or any claim
whatsoever) arising out of or based upon any untrue
statement or alleged untrue statement of a material fact
contained in the Registration Statement(s), any
Prospectus(es) or SAI(s) (as from time to time amended and
supplemented) or the omission or alleged omission therefrom
of a material fact required to be stated therein or
necessary to make the statements therein not misleading,
unless such statement or omission was made in reliance upon
and in conformity with written information furnished to
Edgewood about the Trust by or on behalf of the Trust
expressly for use in the Registration Statement(s), any
Prospectus(es) and SAI(s) or any amendment or supplement
thereof.
If any action is brought against the Trust , any controlling
person thereof, or any other person so indemnified, with
respect to which indemnity may be sought against Edgewood
pursuant to the foregoing paragraph, the Trust shall
promptly notify Edgewood in writing of the institution of
such action and Edgewood shall assume the defense of such
action, including the employment of counsel selected by
Edgewood and payment of expenses. The Trust, any such
controlling person thereof or any other person so
indemnified, shall have the right to employ separate counsel
in any such case, but the fees and expenses of such counsel
shall be at the expense of the Trust or such persons unless
the employment of such counsel shall have been authorized in
writing by Edgewood in connection with the defense of such
action or Edgewood shall not have employed counsel to have
charge of the defense of such action, in any of which events
such fees and expenses shall be borne by Edgewood. Anything
in this paragraph to the contrary notwithstanding, Edgewood
shall not be liable for any settlement of any such claim or
for any other action effected without its written consent.
Edgewood agrees promptly to notify the Trust of the
commencement of any litigation or proceedings against
Edgewood or any of its controlling persons in connection
with the issue and sale of Shares or in connection with the
Registration Statement(s), Prospectus(es), or SAI(s).
(c) Nothing herein contained shall be deemed to protect any
person against liability to the Trust or its shareholders to
which such person would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the
performance of the duties of such person or by reason of the
reckless disregard by such person of the obligations and
duties of such person under this Agreement.
(d) Insofar as indemnification for liabilities may be permitted
pursuant to Section 17 of the Investment Company Act of
1940, as amended, for Trustees, officers, Edgewood and
controlling persons of the Trust by the Trustees pursuant to
this Agreement, the Trust is aware of the position of the
Securities and Exchange Commission as set forth in the
Investment Company Act Release No. IC-11330.
Therefore, the Trust undertakes that, in addition to
complying with the applicable provisions of this Agreement,
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, and shall not
be required to 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 Disinterested Trustees, 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 Trust
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, Edgewood or
controlling person of the Trust will not be made, and shall
not be required to be made, absent the fulfillment of at
least one of the following conditions: (i) the indemnitee
provides security for his undertaking; (ii) the Trust is
insured against losses arising by reason of any lawful
advances; or (iii) a majority of a quorum of non-party
Disinterested 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.
11. If at any time the Shares of any Fund are offered in two or more
Classes, Edgewood agrees to assist in adopting a written plan pursuant
to Rule 18f-3 under the Investment Company Act of 1940.
12. This Agreement will become binding on the parties hereto upon the
execution of the attached exhibits to the Agreement and need not be
separately executed.
13. Edgewood is hereby expressly put on notice of the limitation of
liability as set forth in the Trust's Declaration of Trust and agrees
that the obligations assumed by the Trust pursuant to this Agreement
shall be limited in any case to the Trust and its assets and Edgewood
shall not seek satisfaction of any such obligation from the
shareholders of the Trust, the Trustees, officers, employees or
agents of the Trust, or any of them.
<PAGE>
Exhibit 6(ii) under Form N-1A
Exhibit 1 under Item 601/Reg. S-K
Exhibit A
to the
Distributor's Contract
GREAT PLAINS FUNDS
Great Plains Equity Fund
Great Plains International Equity Fund
Great Plains Premier Fund
Great Plains Intermediate Bond Fund
Great Plains Tax-Free Bond Fund
The following provisions are hereby incorporated into and made part of
the Distributor's Contract dated September 1, 1997, between GREAT PLAINS FUNDS
("Trust") and Edgewood Services, Inc. ("Edgewood"), with respect to Classes, if
any, of Shares of the Funds set forth above.
1. The Trust hereby appoints Edgewood to engage in activities
principally intended to result in the sale of shares of the
above-listed Funds. Pursuant to this appointment, Edgewood is
authorized to select a group of financial institutions ("Financial
Institutions") to sell Shares at the current offering price thereof
as described and set forth in the respective Prospectus(es) of the
Trust.
2. During the term of this Agreement, the Trust will pay Edgewood for
services pursuant to this Agreement, a monthly fee under the Trust's
Rule 12b-1 Plan, computed at the annual rate of 0.25% of the average
aggregate net asset value of the Shares held during the month. For
the month in which this Agreement becomes effective or terminates,
there shall be an appropriate proration of any fee payable on the
basis of the number of days that the Agreement is in effect during
the month.
3. Edgewood may from time-to-time and for such periods as it deems
appropriate reduce its compensation to the extent any Fund's expenses
exceed such lower expense limitation as Edgewood may, by notice to the
Trust, voluntarily declare to be effective.
4. Edgewood will enter into separate written agreements with various
firms to provide certain of the services set forth in Paragraph 1
herein. Edgewood, in its sole discretion, may pay Financial
Institutions a periodic fee in respect of Shares owned from time to
time by their clients or customers. The schedules of such fees and
the basis upon which such fees will be paid shall be determined from
time to time by Edgewood in its sole discretion.
5. Edgewood will prepare reports to the Board of Trust of the Trust on a
quarterly basis showing amounts expended hereunder including amounts
paid to Financial Institutions and the purpose for such expenditures.
6. Edgewood or its affiliate will review and file all sales literature
(advertisements, brochures and shareholder communications) for the
Trust in accordance with rules and regulations of the National
Association of Securities Dealers, Inc.
<PAGE>
In consideration of the mutual covenants set forth in the Distributor's
Contract dated September 1, 1997 between Great Plains Funds and Edgewood
Services, Inc., Great Plains Funds executes and delivers this Exhibit on behalf
of the Shares of the Funds first set forth in this Exhibit.
Witness the due execution hereof this 1st day of September, 1997.
ATTEST: GREAT PLAINS FUNDS
/s/ Victor R. Siclari By: /s/ Edward C. Gonzales
Secretary President
ATTEST: EDGEWOOD SERVICES, INC.
/S/ S. Elliott Cohan By: /s/ Ronald M. Petnuch
Secretary Vice President
Great Plains Funds 9 September 1, 1997
Exhibit 6(iii) under Form N-1A
Exhibit 1 under Item 601/Reg. S-K
GREAT PLAINS FUNDS
MUTUAL FUND
SALES AND SERVICE AGREEMENT
This Mutual Fund Sales and Service Agreement (this "Agreement") is entered
into between the financial institution executing this Agreement ("Financial
Institution") and Edgewood Services, Inc. ("Edgewood") with respect to those
investment companies listed in Exhibit A hereto (referred to individually as the
"Fund" and collectively as the "Funds") for whose shares of beneficial interest
("Shares") Edgewood serves as Distributor.
A. Financial Institution.
1. Status of Financial Institution as "Bank" or Registered Broker-Dealer.
Financial Institution represents and warrants to Edgewood:
(a)(i) that it is a broker or dealer as defined in Section 3(a)(4) or
3(a)(5) of the Securities Exchange Act of 1934 ("Exchange Act"); that
it is registered with the Securities and Exchange Commission pursuant
to Section 15 of the Exchange Act; that it is a member of the National
Association of Securities Dealers, Inc.; that its customers' accounts
are insured by the Securities Investors Protection Corporation
("SIPC"); and that, during the term of this Agreement, it will abide
by all of the rules and regulations of the NASD including, without
limitation, the NASD Rules of Fair Practice. Financial Institution
agrees to notify Edgewood immediately in the event of (1) the
termination of its coverage by the SIPC; (2) its expulsion or
suspension from the NASD, or (3) its being found to have violated any
applicable federal or state law, rule or regulation arising out of its
activities as a broker-dealer or in connection with this Agreement, or
which may otherwise affect in any material way its ability to act in
accordance with the terms of this Agreement. Financial Institution's
expulsion from the NASD will automatically terminate this Agreement
immediately without notice. Suspension of Financial Institution from
the NASD for violation of any applicable federal or state law, rule or
regulation will terminate this Agreement effective immediately upon
Edgewood's written notice of termination to Financial Institution; or
(a)(ii) that it is a "bank," as that term is defined in Section 3(a)(6) of the
Exchange Act and that, during the term of this Agreement, it will abide
by the rules and regulations of those state and federal banking
authorities with appropriate jurisdiction over the Financial
Institution, including but not limited to those regulations dealing
with the activities of the Financial Institution as described under
this Agreement. Financial Institution agrees to notify Edgewood
immediately of any action by or communication from state or federal
banking authorities, state securities authorities, the Securities and
Exchange Commission, or any other party which may affect its status as
a bank, or which may otherwise affect in any material way its ability
to act in accordance with the terms of this Agreement. Any action or
decision of any of the foregoing regulatory authorities or any court of
competent jurisdiction which affects Financial Institution's ability to
act in accordance with the terms of this agreement, including the loss
of its exemption from registration as a broker or dealer, will
terminate this Agreement effective upon Edgewood's written notice of
termination to Financial Institution; and
(b) that Financial Institution is registered with the appropriate securities
authorities in all states in which its activities make such registration
necessary.
2. Financial Institution Acts as Agent for its Customers.
The parties agree that in each transaction in the Shares of any Fund and
with regard to any services rendered pursuant to this Agreement: (a) Financial
Institution is acting as agent for the customer; (b) each transaction is
initiated solely upon the order of the customer; (c) as between Financial
Institution and its customer, the customer will have full beneficial ownership
of all Shares of the Funds; (d) each transaction shall be for the account of the
customer and not for Financial Institution's account; and (e) each transaction
shall be without recourse to Financial Institution provided that Financial
Institution acts in accordance with the terms of this Agreement. Financial
Institution shall not have any authority in any transaction to act as Edgewood's
agent or as agent for the Funds.
B. Sales of Fund Shares.
3. Execution of Orders for Purchase and Redemption of Shares.
(a) All orders for the purchase of any Shares shall be executed at the
then-current public offering price per share (i.e., the net asset value
per share plus the applicable initial sales load, if any) and all orders
for the redemption of any Shares shall be executed at the net asset value
per share, in each case as described in the prospectus of the Fund. Any
applicable redemption fee will be deducted by the Fund prior to the
transmission of the redemption proceeds to Financial Institution or its
customer. Edgewood and the Funds reserve the right to reject any purchase
request in their sole discretion. If required by law, each transaction
shall be confirmed in writing on a fully disclosed basis and, if confirmed
by Edgewood, a copy of each confirmation shall be sent simultaneously to
Financial Institution if Financial Institution so requests.
(b) The procedures relating to all orders will be subject to the terms of
the prospectus of each Fund and Edgewood's written instructions to
Financial Institution from time to time.
(c) Payments for Shares shall be made as specified in the applicable Fund
prospectus. If payment for any purchase order is not received in
accordance with the terms of the applicable Fund prospectus, Edgewood
reserves the right, without notice, to cancel the sale and to hold
Financial Institution responsible for any loss sustained as a result
thereof.
4. Initial Sales Loads Payable to Financial Institution.
(a) On each order accepted by Edgewood, in exchange for the performance of
sales, Financial Institution will be entitled to receive the applicable
percentage of the initial sales load, if any, as established by Edgewood
from the amount paid by Financial Institution's customer (the "Dealer
Reallowance"). The initial sales loads for any Fund shall be those set
forth in its prospectus. The portion of the initial sales load payable to
Financial Institution may be changed at any time at Edgewood's sole
discretion upon written notice to Financial Institution.
(b) Transactions may be settled by Financial Institution: (1) by payment of
the full purchase price less an amount equal to the Dealer Reallowance, or
(2) by payment of the full purchase price, in which case Financial
Institution shall receive, not less frequently than monthly, the Dealer
Reallowance in respect of all orders received and settled during the
immediately preceding calendar month.
(c) It shall be the obligation of the Financial Institution either: (i) to
provide Edgewood with all necessary information regarding the application
of the appropriate initial sales load to each transaction, or (ii) to
assess the appropriate initial sales load for each transaction and to
forward the public offering price, net of the amount of the initial sales
load to be reallocated to the Financial Institution, to the appropriate
Fund. Neither the Fund nor Edgewood shall have any responsibility to
correct the payment or assessment of an incorrect initial sales load due
to the failure of the Financial Institution to fulfill the foregoing
obligation.
(d) If any shares are sold by the Financial Institution with a sales load and
are redeemed for the account of the Fund or are tendered for redemption
within seven (7) business days after confirmation of the purchase order
for such shares, the Financial Institution agrees to refund to Edgewood
the full dealer reallowance received on the sale and Edgewood agrees to
pay to the Fund the portion of the sales load on the sale which Edgewood
has retained as well as any amount refunded by the Financial Institution
and paid to Edgewood.
5. Advance Commissions Payable to Financial Institution.
Upon the purchase of certain Shares, as described in the applicable
prospectuses, Edgewood will pay Financial Institution an advance commission as
set forth on Exhibit A (or, if more recently published, the Fund's current
prospectus). This amount is not to be considered an initial sales load and
should not be deducted from the public offering price of the Shares which shall
be forwarded to the Fund. Generally, a contingent deferred sales charge ("CDSC")
will be assessed upon the redemption of Shares with regard to which an advance
commission is paid by Edgewood; in the event that Financial Institution notifies
Edgewood in writing that Financial Institution elects to waive such advance
commission, and if the Fund's prospectus permits such a waiver, the CDSC will
not be charged upon the redemption of the relevant Shares. To receive advance
commission from Edgewood on Shares that are subject to a CDSC, Financial
Institution must open investor accounts with the Fund on a fully-disclosed basis
or be able to account for share ownership periods used in calculating the CDSC.
Furthermore, should the custody (or record ownership) of the shares of the
investor account(s) be transferred during the applicable CDSC holding period (as
described in the Fund prospectus) to a financial institution which does not
maintain investor accounts on a fully disclosed basis and does not account for
share ownership periods, the Financial Institution agrees to reimburse Edgewood
prior to such transfer for advance commissions paid to it by Edgewood.
C. Distribution Services.
6. Agreement to Provide Distribution Services.
(a) With regard to those Funds which pay asset-based sales charges (pursuant to
Distribution Plans adopted under Investment Company Act Rule 12b-1), as noted on
Exhibit A hereto (or, if more recently published, the Fund's current
prospectus), Edgewood hereby appoints Financial Institution to render or cause
to be rendered distribution and sales services to the Funds and their
shareholders.
(b) The services to be provided under Paragraph 6(a) may include, but are
not limited to, the following:
(i) reviewing the activity in Fund accounts;
(ii)providing training and supervision of its personnel;
(iii)maintaining and distributing current copies of prospectuses and
shareholder reports;
(iv)advertising the availability of its services and products;
(v) providing assistance and review in designing materials to send to
customers and potential customers and developing methods of making such
materials accessible to customers and potential customers; and
(vi)responding to customers' and potential customers' questions about the
Funds.
7. Asset-Based Sales Loads Payable to Financial Institution.
During the term of this Agreement, Edgewood will pay Financial Institution
asset-based sales charges (also known as "Rule 12b-1 Fees") for each Fund as set
forth in Exhibit A to this Agreement (or, if more recently published, the Fund's
current prospectus). For the payment period in which this Agreement becomes
effective or terminates, there shall be an appropriate proration of the fee on
the basis of the number of days that this Agreement is in effect during the
quarter.
D. Shareholder Services.
8. Agreement to Provide Shareholder and Account Maintenance Services.
With regard to those Funds which pay a Shareholder Services Fee to
Financial Institutions, as noted on Exhibit A hereto (or, if more recently
published, the Fund's current prospectus), Financial Institution agrees to
render or cause to be rendered personal services to shareholders of the Funds
and/or the maintenance of accounts of shareholders of the Funds ("Shareholder
Services"). Financial Institution agrees to provide Shareholder Services which,
in its best judgment, are necessary or desirable for its customers who are
investors in the Funds. Financial Institution further agrees to provide
Edgewood, upon request, a written description of the Shareholder Services which
Financial Institution is providing hereunder.
9. Shareholder Service Fees Payable to Financial Institution.
During the term of this Agreement, Edgewood will pay Financial Institution
Shareholder Service Fees as set forth in Exhibit A to this Agreement (or, if
more recently published, the Fund's current prospectus). For the payment period
in which this Agreement becomes effective or terminates, there shall be an
appropriate proration of the fee on the basis of the number of days that this
Agreement is in effect during the quarter.
E. Supplemental Payments.
10. Supplemental Payments to Financial Institution.
During the term of this Agreement, Edgewood or its affiliates may make
Supplemental Payments to Financial Institution as additional compensation for
sales services; such payments will be made from the assets of Edgewood or its
affiliates, and not from assets of the Funds nor from fees payable under
applicable Distribution (Rule 12b-1) Plan. For the payment period in which this
Agreement becomes effective or terminates, there shall be an appropriate
proration of the payments on the basis of the number of days that this Agreement
is in effect during the quarter.
<PAGE>
F. Miscellaneous.
11. Delivery of Prospectuses to Customers.
Financial Institution will deliver or cause to be delivered to each
customer, at or prior to the time of any purchase of Shares, a copy of the
current prospectus of the Fund and, upon request by a customer or shareholder, a
copy of the Fund's current Statement of Additional Information. Financial
Institution shall not make any representations concerning any Shares other than
those contained in the prospectus or Statement of Additional Information of the
Fund or in any promotional materials or sales literature furnished to Financial
Institution by Edgewood or the Fund.
12. ERISA Assets.
(a) Financial Institution understands that the Department of Labor views ERISA
as prohibiting fiduciaries of discretionary ERISA assets from receiving
administrative service fees or other compensation from funds in which the
fiduciary's discretionary ERISA assets are invested. To date, the
Department of Labor has not issued any exemptive order or advisory opinion
that would exempt fiduciaries from this interpretation. Without specific
authorization from the Department of Labor, fiduciaries should carefully
avoid investing discretionary assets in any fund pursuant to an
arrangement where the fiduciary is to be compensated by the fund for such
investment. Receipt of such compensation could violate ERISA provisions
against fiduciary self-dealing and conflict of interest and could subject
the fiduciary to substantial penalties.
(b) Financial Institution will not perform or provide any duties which would
cause it to be a fiduciary under Section 4975 of the Internal Revenue
Code, as amended. For purposes of that Section, Financial Institution
understands that any person who exercises any discretionary authority or
discretionary control with respect to any individual retirement account or
its assets, or who renders investment advice for a fee, or has any
authority or responsibility to do so, or has any discretionary authority
or discretionary responsibility in the administration of such an account,
is a fiduciary.
13. Indemnification.
(a) Financial Institution shall indemnify and hold harmless Edgewood, each
Fund, the transfer agents of the Funds, and their respective subsidiaries,
affiliates, officers, directors, agents and employees from all direct or
indirect liabilities, losses or costs (including attorneys fees) arising
from, related to or otherwise connected with: (1) any breach by Financial
Institution of any provision of this Agreement; or (2) any actions or
omissions of Edgewood, any Fund, the transfer agents of the Funds, and
their subsidiaries, affiliates, officers, directors, agents and employees
in reliance upon any oral, written or computer or electronically
transmitted instructions believed to be genuine and to have been given by
or on behalf of Financial Institution.
(b) Edgewood shall indemnify and hold harmless Financial Institution and its
subsidiaries, affiliates, officers, directors, agents and employees from
and against any and all direct or indirect liabilities, losses or costs
(including attorneys fees) arising from, related to or otherwise connected
with: (1) any breach by Edgewood of any provision of this Agreement; or
(2) any alleged untrue statement of a material fact contained in any
Fund's Registration Statement or Prospectus, or as a result of or based
upon any alleged omission to state a material fact required to be stated
therein or necessary to make the statements contained therein not
misleading.
(c) The agreement of the parties in this Paragraph to indemnify each other is
conditioned upon the party entitled to indemnification (Indemnified Party)
giving notice to the party required to provide indemnification
(Indemnifying Party) promptly after the summons or other first legal
process for any claim as to which indemnity may be sought is served on the
Indemnified Party. The Indemnified Party shall permit the Indemnifying
Party to assume the defense of any such claim or any litigation resulting
from it, provided that counsel for the Indemnifying Party who shall
conduct the defense of such claim or litigation shall be approved by the
Indemnified Party (which approval shall not unreasonably be withheld), and
that the Indemnified Party may participate in such defense at its expense.
The failure of the Indemnified Party to give notice as provided in this
subparagraph (c) shall not relieve the Indemnifying Party from any
liability other than its indemnity obligation under this Paragraph. No
Indemnifying Party, in the defense of any such claim or litigation, shall,
without the consent of the Indemnified Party, consent to entry of any
judgment or enter into any settlement that does not include as an
unconditional term the giving by the claimant or plaintiff to the
Indemnified Party of a release from all liability in respect to such claim
or litigation.
(d) The provisions of this Paragraph 13 shall survive the termination of this
Agreement.
14. Customer Names Proprietary to Financial Institution.
(a) The names of Financial Institution's customers are and shall remain
Financial Institution's sole property and shall not be used by Edgewood,
or its affiliates for any purpose except the performance of their
respective duties and responsibilities under this Agreement and except for
servicing and informational mailings relating to the Funds.
Notwithstanding the foregoing, this Paragraph 14 shall not prohibit
Edgewood, or any of its affiliates from utilizing the names of Financial
Institution's customers for any purpose if the names are obtained in any
manner other than from Financial Institution pursuant to this Agreement.
(b) Neither party shall use the name of the other party in any manner
without the other party's written consent, except as required by any
applicable federal or state law, rule or regulation, and except
pursuant to any mutually agreed upon promotional programs.
(c) The provisions of this Paragraph 14 shall survive the termination of this
Agreement.
15. Security Against Unauthorized Use of Funds' Recordkeeping Systems.
Financial Institution agrees to provide such security as is necessary to
prevent any unauthorized use of the Funds' recordkeeping system, accessed via
any computer hardware or software provided to Financial Institution by Edgewood.
16. Solicitation of Proxies.
Financial Institution agrees not to solicit or cause to be solicited
directly, or indirectly, at any time in the future, any proxies from the
shareholders of any or all of the Funds in opposition to proxies solicited by
management of the Fund or Funds, unless a court of competent jurisdiction shall
have determined that the conduct of a majority of the Board of Directors or
Trustees of the Fund or Funds constitutes willful misfeasance, bad faith, gross
negligence or reckless disregard of their duties. This Paragraph 16 will survive
the term of this Agreement.
17. Certification of Customers' Taxpayer Identification Numbers.
Financial Institution agrees to obtain any taxpayer identification number
certification from its customers required under Section 3406 of the Internal
Revenue Code, and any applicable Treasury regulations, and to provide Edgewood,
or its designee with timely written notice of any failure to obtain such
taxpayer identification number certification in order to enable the
implementation of any required backup withholding.
18. Notices.
Except as otherwise specifically provided in this Agreement, all notices
required or permitted to be given pursuant to this Agreement shall be given in
writing and delivered by personal delivery or by postage prepaid, registered or
certified United States first class mail, return receipt requested, overnight
courier services, or by facsimile or similar electronic means of delivery (with
a confirming copy by mail as provided herein). Unless otherwise notified in
writing, all notices to Edgewood shall be given or sent to Edgewood at its
offices located at P.O. Box 897, Pittsburgh, Pennsylvania 15230-0897, and all
notices to Financial Institution shall be given or sent to it at its address
shown below.
19. Termination and Amendment.
(a) This Agreement shall become effective in this form as of the date set
forth below or as of the first date thereafter upon which Financial
Institution executes any transaction, performs any service, or
receives any payment pursuant hereto.
(b) This Agreement, including Exhibit A hereto, may be amended by Edgewood
from time to time by the following procedure. Edgewood will mail a copy of
the amendment to Financial Institution's address, as shown below. If
Financial Institution does not object to the amendment within thirty (30)
days after its receipt, the amendment will become part of the Agreement.
Financial Institution's objection must be in writing and be received by
Edgewood within such thirty days.
(c) This Agreement may be terminated as follows:
(i) at any time, without the payment of any penalty, by the vote of a
majority of the Trustees of the Fund or by a vote of a majority of
the outstanding voting securities of the Fund as defined in the
Investment Company Act of 1940 on not more than sixty (60) days'
written notice to the parties to this Agreement;
(ii) automatically in the event of the Agreement's assignment as defined
in the Investment Company Act of 1940, upon the termination of the
"Distributor's Contract" between the Fund and Edgewood, or upon the
termination of the Distribution Plan to which this Agreement is
related; and
(iii) by any party to the Agreement without cause by giving the other party
at least sixty (60) days' written notice of its intention to terminate.
(d) The termination of this Agreement with respect to any one Fund will not
cause the Agreement's termination with respect to any other Fund.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
20. Governing Law.
This Agreement shall be construed in accordance with the laws of the
Commonwealth of Massachusetts.
EDGEWOOD SERVICES, INC.
Clearing Operations
P.O. Box 897
Pittsburgh, Pennsylvania 15230-0897
By: /s/ Ronald M. Petnuch Date: September 3, 1997
---------------------------------
Name: Ronald M. Petnuch
Title: Vice President
---------------------------------------
Financial Institution Name
(Please Print or Type)
---------------------------------------
Address
---------------------------------------
City State Zip Code
By:____________________________________
Authorized Signature
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Title
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Print Name or Type Name
Dated:_____________________
<PAGE>
GREAT PLAINS FUNDS
MUTUAL FUND
SALES AND SERVICE AGREEMENT
Exhibit A
Initial ApplicableShareholder Advance
Fund(s) Sales Load Percentage 12b-1 Fee Servicing Fee Commission
Great Plains Funds 15 September 1, 1997
Exhibit 9 under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
AGREEMENT
for
FUND ACCOUNTING SERVICES,
ADMINISTRATIVE SERVICES
and
TRANSFER AGENCY SERVICES
AGREEMENT made as of September 1, 1997, by and between GREAT PLAINS FUNDS,
a Massachusetts business trust, having its principal office and place of
business at Federated Investors Tower, Pittsburgh, PA 15222-3779 (the "Trust"),
on behalf of its portfolios (individually referred to herein as a "Fund" and
collectively as "Funds") now existing or hereafter created, as identified on
Exhibit A, as the same may be amended from time to time, and FEDERATED SERVICES
COMPANY, a Pennsylvania corporation, having its principal office and place of
business at Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779 on
behalf of itself and its subsidiaries (the "Company").
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act"),
with authorized and issued shares of beneficial interest ("Shares");
WHEREAS, the Trust desires to retain the Company as fund accountant to
provide fund accounting services (as herein defined) including certain pricing,
accounting and recordkeeping services for each of the Funds, including any
classes of shares issued by any Fund ("Classes"), and the Company desires to
accept such appointment;
WHEREAS, the Trust desires to appoint the Company as its administrator to
provide it with administrative services (as herein defined), and the Company
desires to accept such appointment; and
WHEREAS, the Trust desires to appoint the Company as its transfer agent and
dividend disbursing agent to provide it with transfer agency services (as herein
defined), and agent in connection with certain other activities, and the Company
desires to accept such appointment;
NOW THEREFORE, in consideration of the premises and mutual covenants herein
contained, and intending to be legally bound hereby, the parties hereto agree as
follows:
SECTION ONE: Fund Accounting.
Article 1. Appointment.
The Trust hereby appoints the Company to provide certain pricing and
accounting services to the Funds, and/or the Classes, for the period and on the
terms set forth in this Agreement. The Company accepts such appointment and
agrees to furnish the services herein set forth in return for the compensation
as provided in Article 3 of this Section.
Article 2. The Company's Duties.
Subject to the supervision and control of the Trust's Board of Trustees
("Board"), the Company will assist the Trust with regard to fund accounting for
the Trust, and/or the Funds, and/or the Classes, and in connection therewith
undertakes to perform the following specific services;
A. Value the assets of the Funds according to the procedures adopted by
the Board from time to time (the "Procedures"). The Company's
obligations with regard to the prices received from outside pricing
services and designated brokers or other outside sources is to
exercise reasonable care in the supervision of the pricing agent. The
Company is not the guarantor of the securities prices received from
such agents and the Company is not liable to the Funds for potential
errors in valuing a Fund's assets or calculating the net asset value
per share of such Fund or Class when the calculations are based upon
such prices. All of the sources of prices authorized by the
Procedures are deemed by the Company to be authorized sources of
security prices. The Company provides daily to the adviser the
securities prices used in calculating the net asset value of the
Fund, for its use in preparing exception reports for those prices on
which the adviser has comment. Further, upon receipt of the exception
reports generated by the adviser, the Company diligently pursues
communication regarding exception reports with the designated pricing
agents;
B. Accrue expenses and determine the net asset value per share of each
Fund and/or Class, at the time and in the manner from time to time
determined by the Board and as set forth in the Prospectus(es) and
Statement(s) of Additional Information ("Prospectus") of each Fund;
C. Calculate the net income, if any, of each of the Funds;
D. Calculate realized capital gains or losses, if any, of each of the
Funds resulting from sale or disposition of assets;
E. Maintain the general ledger and other accounts, books and financial
records of the Trust, including for each Fund, and/or Class, as
required under Section 31(a) of the 1940 Act and the Rules thereunder
in connection with the services provided by the Company;
F. Preserve for the periods prescribed by Rule 31a-2 under the 1940 Act
the records to be maintained by Rule 31a-1 under the 1940 Act in
connection with the services provided by the Company. The Company
further agrees that all such records it maintains for the Trust are
the property of the Trust and further agrees to surrender promptly to
the Trust such records, in machine-readable form, upon the Trust's
request;
G. At the request of the Trust, prepare various reports or other
financial documents in accordance with generally accepted accounting
principles as required by federal, state and other applicable laws and
regulations; and
H. Such other similar services as may be reasonably requested by the
Trust.
The foregoing, along with any additional services that the Company shall
agree in writing to perform for the Trust under this Section One, shall
hereafter be referred to as "Fund Accounting Services."
Article 3. Compensation and Allocation of Expenses.
A. The Funds will compensate the Company for Fund Accounting Services in
accordance with the fees agreed upon from time to time between the
parties hereto. The fund accounting fee in effect from time to time
shall be reflected on a schedule of compensation, which shall be
attached hereto and made a part hereof. Such fees do not include
out-of-pocket disbursements of the Company for which the Funds shall
reimburse the Company. Out-of-pocket disbursements shall include, but
shall not be limited to, the items agreed upon between the parties
from time to time.
B. The Funds and/or the Classes, and not the Company, shall bear the
cost of: custodial expenses; membership dues in the Investment
Company Institute or any similar organization; transfer agency
expenses; investment advisory expenses; costs of printing and mailing
stock certificates, Prospectus(es), reports and notices;
administrative expenses; interest on borrowed money; brokerage
commissions; taxes and fees payable to federal, state and other
governmental agencies; fees and expenses of Trustees of the Trust,
independent auditors', and other outside counsel; legal and audit
department expenses billed to the Company for work performed related
to the Trust, the Funds, or the Classes; organizational expenses; or
other expenses not specified in this Article 3 which may be properly
payable by the Funds and/or Classes.
C. The compensation and out-of-pocket expenses attributable to the Funds
shall be accrued by the Funds and shall be paid to the Company no
less frequently than monthly, and shall be paid daily upon request of
the Company. The Company will maintain detailed information about the
compensation and out-of-pocket expenses by Fund and Class.
D. Any schedule of compensation agreed to hereunder, as may be adjusted
from time to time, shall be dated and signed by a duly authorized
officer of the Trust and/or the Funds and a duly authorized officer of
the Company.
E. The fee for the period from the effective date of this Agreement with
respect to a Fund or a Class to the end of the initial month shall be
prorated according to the proportion that such period bears to the
full month period. Upon any termination of this Agreement before the
end of any month, the fee for such period shall be prorated according
to the proportion which such period bears to the full month period.
For purposes of determining fees payable to the Company, the value of
the Fund's net assets shall be computed at the time and in the manner
specified in the Fund's Prospectus.
F. The Company, in its sole discretion, may from time to time
subcontract to, employ or associate with itself such person or
persons as the Company may believe to be particularly suited to
assist it in performing Fund Accounting Services. Such person or
persons may be affiliates of the Company, third-party service
providers, or they may be officers and employees who are employed by
both the Company and the Trust; provided, however, that the Company
shall be as fully responsible to each Fund for the acts and omissions
of any such subcontractor as it is for its own acts and omissions.
The compensation of such person or persons shall be paid by the
Company and no obligation shall be incurred on behalf of the Trust,
the Funds, or the Classes in such respect.
SECTION TWO: ADMINISTRATIVE SERVICES.
Article 4. Appointment.
The Trust hereby appoints the Company as Administrator for the period on
the terms and conditions set forth in this Agreement. The Company hereby accepts
such appointment and agrees to furnish the services set forth in Article 5 of
this Agreement in return for the compensation set forth in Article 9 of this
Agreement.
Article 5. The Company's Duties.
As Administrator, and subject to the supervision and control of the Board
and in accordance with Proper Instructions (as defined hereafter) from the
Trust, the Company will provide facilities, equipment, and personnel to carry
out the following administrative services for operation of the business and
affairs of the Trust and each of its Funds:
A. prepare, file, and maintain the Trust's governing documents and any
amendments thereto, including its Charter (which has already been
prepared and filed), its By-laws, and minutes of meetings of the Board
and Shareholders;
B. prepare and file with the Securities and Exchange Commission ("SEC")
and the appropriate state securities authorities the registration
statements for the Trust and the Trust's Shares and all amendments
thereto, reports to regulatory authorities and shareholders,
Prospectus(es), proxy statements, and such other documents all as may
be necessary to enable the Trust to make a continuous offering of its
Shares;
C. prepare, negotiate, and administer contracts (if any) on behalf of the
Trust with, among others, the Trust's investment advisers,
distributors and custodians, subject to any applicable restrictions of
the Board or the 1940 Act;
D monitor expenses, calculate the per share dividend and capital gains
or losses, if any, for declaration and payment in the manner
determined from time to time by the Trust's Board, and monitor
compliance with the distribution requirements of a regulated
investment company under Subchapter M of the Internal Revenue Code of
1986, as amended;
E. calculate performance data of the Trust for dissemination to
information services covering the investment company industry;
F. prepare and file the Trust's tax returns;
G. coordinate the layout and printing of publicly disseminated
Prospectus(es) and reports;
H. perform internal audit examinations in accordance with a charter to be
adopted by the Company and the Trust, and coordinate and facilitate
external audits by the Trust's independent auditors and regulatory
examinations of the Trust;
I. assist with the design, development, and operation of the Trust and
the Funds;
J. provide individuals reasonably acceptable to the Board for nomination,
appointment, or election as officers of the Trust, who will be
responsible for the management of certain of the Trust's affairs as
determined by the Trust's Board; and
K. consult with the Trust and its Board on matters concerning the Trust
and its affairs.
The foregoing, along with any additional services that the Company shall
agree in writing to perform for the Trust under this Section Two, shall
hereafter be referred to as "Administrative Services."
Article 6. Records.
The Company shall create and maintain all necessary books and records in
accordance with all applicable laws, rules and regulations, including but not
limited to records required by Section 31(a) of the 1940 Act and the rules
thereunder, as the same may be amended from time to time, pertaining to the
Administrative Services performed by it and not otherwise created and maintained
by another party pursuant to agreement with the Trust. Where applicable, such
records shall be maintained by the Company for the periods and in the places
required by Rule 31a-2 under the 1940 Act. The books and records pertaining to
the Trust which are in the possession of the Company shall be the property of
the Trust. The Trust, or the Trust's authorized representatives, shall have
access to such books and records at all times during the Company's normal
business hours. Upon the reasonable request of the Trust, copies of any such
books and records shall be provided promptly by the Company to the Trust or the
Trust's authorized representatives.
Article 7. Duties of the Funds
Except as provided in Article 10 hereof, each Fund assumes full
responsibility for the contents and distribution of its own respective offering
document and for complying with all applicable requirements of the 1940 Act, the
Internal Revenue Code, and any other laws, rules and regulations of governmental
authorities having jurisdiction over the Funds.
Article 8. Expenses.
The Company shall be responsible for expenses incurred in providing office
space, equipment, and personnel as may be necessary or convenient to provide the
Administrative Services to the Trust, including the compensation of the Company
employees who serve as Trustees or officers of the Trust. The Trust shall be
responsible for all other expenses incurred by the Company on behalf of the
Trust, including without limitation postage and courier expenses, printing
expenses, travel expenses, registration fees, filing fees, fees of outside
counsel and independent auditors, or other professional services, organizational
expenses, insurance premiums, fees payable to persons who are not the Company's
employees, trade association dues, and other expenses properly payable by the
Funds and/or the Classes.
Article 9. Compensation.
For the Administrative Services provided, the Trust shall pay to the
Company an administrative fee, calculated at an annual rate per Fund, as agreed
upon from time to time between the parties hereto. The administrative fee in
effect from time to time shall be reflected on a schedule of compensation, which
shall be attached hereto and made a part hereof, and shall be dated and signed
by a duly authorized officer of the Trust and/or the Funds and a duly authorized
officer of the Company.
The compensation and out of pocket expenses attributable to the Fund shall
be accrued by the Fund and paid to the Company no less frequently than monthly,
and shall be paid daily upon request of the Company. The Company will maintain
detailed information about the compensation and out of pocket expenses by the
Fund.
Article 10. Responsibility of Administrator.
A. The Company shall not be liable for any error of judgment or mistake
of law or for any loss suffered by the Trust in connection with the
matters to which this Agreement relates, except a loss resulting from
willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement. The Company 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.
Any person, even though also an officer, director, trustee, partner,
employee or agent of the Company, who may be or become an officer,
director, trustee, partner, employee or agent of the Trust, shall be
deemed, when rendering services to the Trust or acting on any
business of the Trust (other than services or business in connection
with the duties of the Company hereunder) to be rendering such
services to or acting solely for the Trust and not as an officer,
director, trustee, partner, employee or agent or one under the
control or direction of the Company even though paid by the Company.
B. The Company shall be kept indemnified by the Trust for any action
taken or thing done by it in performing the Administrative Services in
the absence of willful misfeasance, bad faith or gross negligence on
the part of the Company or the reckless disregard of its obligations
or duties under this Section Two. In order that the indemnification
provisions contained in this Article 10 shall apply, however, it is
understood that if in any case the Trust may be asked to indemnify or
hold the Company 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 Company 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 against the Trust. The Trust shall
have the option to defend the Company against any claim which may be
the subject of this indemnification. In the event that the Trust so
elects, it will so notify the Company and thereupon the Trust shall
take over complete defense of the claim, and the Company shall in such
situation initiate no further legal or other expenses for which it
shall seek indemnification under this Article. The Company shall in no
case confess any claim or make any compromise in any case in which the
Trust will be asked to indemnify the Company except with the Trust's
written consent.
SECTION THREE: Transfer Agency Services.
Article 11. Terms of Appointment.
Subject to the terms and conditions set forth in this Agreement, the Trust
hereby appoints the Company to act as, and the Company agrees to act as,
transfer agent and dividend disbursing agent for each Fund's Shares, and agent
in connection with any accumulation, open-account or similar plans provided to
the shareholders of any Fund ("Shareholder(s)"), including without limitation
any periodic investment plan or periodic withdrawal program.
Article 12. Duties of the Company.
The Company shall perform the following services in accordance with Proper
Instructions as may be provided from time to time by the Trust as to any Fund:
A. Purchases
(1) The Company shall receive orders and payment for the
purchase of shares from financial institutions for their own
account and on behalf of their customers, and promptly cause
them to deliver payment and appropriate documentation
therefore to the custodian of the relevant Fund (the
"Custodian"). The Company shall notify the Fund and the
Custodian on a daily basis of the total amount of orders and
payments so delivered.
(2) Pursuant to purchase orders and in accordance with the Fund's
current Prospectus, the Company shall compute and issue the
appropriate number of Shares of each Fund and/or Class and hold
such Shares in the appropriate Shareholder accounts.
(3) For certificated Funds and/or Classes, if a Shareholder or
its agent requests a certificate, the Company, as Transfer
Agent, shall countersign and mail by first class mail, a
certificate to the Shareholder at its address as set forth
on the transfer books of the Funds, and/or Classes, subject
to any Proper Instructions regarding the delivery of
certificates.
(4) In the event that any check or other order for the purchase
of Shares of the Fund and/or Class is returned unpaid for
any reason, the Company shall debit the Share account of the
Shareholder by the number of Shares that had been credited
to its account upon receipt of the check or other order,
promptly mail a debit advice to the Shareholder, and notify
the Fund and/or Class of its action. In the event that the
amount paid for such Shares exceeds proceeds of the
redemption of such Shares plus the amount of any dividends
paid with respect to such Shares, the Fund and/or the Class
or its distributor will reimburse the Company on the amount
of such excess that has been paid by the Company to the
Fund.
B. Distribution
(1) Upon notification by the Funds of the declaration of any
distribution to Shareholders, the Company shall act as
Dividend Disbursing Agent for the Funds in accordance with
the provisions of the Funds' governing document and the
then-current Prospectus of the Fund. The Company shall
prepare and mail or credit income, capital gain, or any
other payments to Shareholders. As the Dividend Disbursing
Agent, the Company shall, on or before the payment date of
any such distribution, notify the Custodian of the estimated
amount required to pay any portion of said distribution
which is payable in cash and request the Custodian to make
available sufficient funds for the cash amount to be paid
out. The Company shall reconcile the amounts so requested
and the amounts actually received with the Custodian on a
daily basis. If a Shareholder is entitled to receive
additional Shares by virtue of any such distribution or
dividend, appropriate credits shall be made to the
Shareholder's account for certificated Funds and/or Classes,
delivered where requested; and
(2) The Company shall maintain records of account for each Fund and
Class and advise the Trust, each Fund and Class and its
Shareholders as to the foregoing.
C. Redemptions and Transfers
(1) The Company shall receive redemption requests and redemption
directions from financial institutions for their own
accounts and on behalf of their customers and, if such
redemption requests comply with the procedures as may be
described in the Fund Prospectus or set forth in Proper
Instructions, deliver or cause the financial institutions to
deliver the appropriate instructions therefor to the
Custodian. The Company shall notify the Funds on a daily
basis of the total amount of redemption requests processed
and monies paid to the Company by the Custodian for
redemptions.
(2) At the appropriate time upon receiving redemption proceeds from
the Custodian with respect to any redemption, the Company shall
pay or cause to be paid the redemption proceeds in the manner
instructed by the redeeming Shareholders, pursuant to procedures
described in the then-current Prospectus of the Fund.
(3) If any certificate returned for redemption or other request
for redemption does not comply with the procedures for
redemption approved by the Fund, the Company shall promptly
notify the Shareholder of such fact, together with the
reason therefor, and shall effect such redemption at the
price applicable to the date and time of receipt of
documents complying with said procedures.
(4) The Company shall effect transfers of Shares by the registered
owners thereof.
(5) The Company shall identify and process abandoned accounts and
uncashed checks for state escheat requirements on an annual
basis, or as otherwise legally required, and report such actions
to the Fund.
D. Recordkeeping
(1) The Company shall record the issuance of Shares of each
Fund, and/or Class, and maintain pursuant to applicable
rules of the SEC a record of the total number of Shares of
the Fund and/or Class which are authorized, based upon data
provided to it by the Fund, and issued and outstanding. The
Company shall also provide the Fund on a regular basis or
upon reasonable request with the total number of Shares
which are authorized and issued and outstanding, but shall
have no obligation when recording the issuance of Shares,
except as otherwise set forth herein, to monitor the
issuance of such Shares or to take cognizance of any laws
relating to the issue or sale of such Shares, which
functions shall be the sole responsibility of the Funds.
(2) The Company shall establish and maintain records pursuant to
applicable rules of the SEC relating to the services to be
performed hereunder in the form and manner as agreed to by the
Trust or the Fund to include a record for each Shareholder's
account of the following:
(a) Name, address and tax identification number (and whether such
number has been certified);
(b) Number of Shares held;
(c) Historical information regarding the account, including dividends
paid and date and price for all transactions;
(d) Any stop or restraining order placed against the account;
(e) Information with respect to withholding in the case of a foreign
account or an account for which withholding is required by the
Internal Revenue Code;
(f) Any dividend reinvestment order, plan application, dividend
address and correspondence relating to the current maintenance of
the account;
(g) Certificate numbers and denominations for any Shareholder holding
certificates;
(h) Any information required in order for the Company to perform the
calculations contemplated or required by this Agreement.
(3) The Company shall preserve any such records required to be
maintained pursuant to the rules of the SEC for the periods
prescribed in said rules as specifically noted below. Such
record retention shall be at the expense of the Company, and
such records may be inspected by the Fund at reasonable
times. The Company may, at its option at any time, and shall
forthwith upon the Fund's demand, turn over to the Fund and
cease to retain in the Company's files, records and
documents created and maintained by the Company pursuant to
this Agreement, which are no longer needed by the Company in
performance of its services or for its protection. If not so
turned over to the Fund, such records and documents will be
retained by the Company for six years from the year of
creation, during the first two of which such documents will
be in readily accessible form. At the end of the six year
period, such records and documents will either be turned
over to the Fund or destroyed in accordance with Proper
Instructions.
E. Confirmations/Reports
(1) The Company shall furnish to the Funds periodically the following
information:
(a) A copy of the transaction register;
(b) Dividend and reinvestment blotters;
(c) The total number of Shares issued and outstanding in each state
for "blue sky" purposes as determined according to Proper
Instructions delivered from time to time by the Fund to the
Company;
(d) Shareholder lists and statistical information;
(e) Payments to third parties relating to distribution agreements,
allocations of sales loads, redemption fees, or other
transaction- or sales-related payments;
(f) Such other information as may be agreed upon from time to time.
(2) The Company shall prepare in the appropriate form, file with
the Internal Revenue Service and appropriate state agencies,
and, if required, mail to Shareholders, such notices for
reporting dividends and distributions paid as are required
to be so filed and mailed and shall withhold such sums as
are required to be withheld under applicable federal and
state income tax laws, rules and regulations.
(3) In addition to and not in lieu of the services set forth above,
the Company shall:
(a) Perform all of the customary services of a transfer
agent, dividend disbursing agent and, as relevant,
agent in connection with accumulation, open-account
or similar plans (including without limitation any
periodic investment plan or periodic withdrawal
program), including but not limited to: maintaining
all Shareholder accounts, mailing Shareholder
reports and Prospectus(es) to current Shareholders,
withholding taxes on accounts subject to back-up or
other withholding (including non-resident alien
accounts), preparing and filing reports on U.S.
Treasury Department Form 1099 and other appropriate
forms required with respect to dividends and
distributions by federal authorities for all
Shareholders, preparing and mailing confirmation
forms and statements of account to Shareholders for
all purchases and redemptions of Shares and other
conformable transactions in Shareholder accounts,
preparing and mailing activity statements for
Shareholders, and providing Shareholder account
information; and
(b) provide a system which will enable the Trust to
monitor the total number of Shares of each Fund
(and/or Class) sold in each state ("blue sky
reporting"). The Trust shall by Proper Instructions
(i) identify to the Company those transactions and
assets to be treated as exempt from the blue sky
reporting for each state and (ii) verify the
classification of transactions for each state on
the system prior to activation and thereafter
monitor the daily activity for each state. The
responsibility of the Company for each Fund's
(and/or Class's) state blue sky filing status is
limited solely to the recording of the initial
classification of transactions or accounts with
regard to blue sky compliance and the reporting of
such transactions and accounts to the Trust as
provided above.
F. Other Duties
(1) The Company shall prepare Shareholder meeting lists, mail proxy
cards and other material supplied to it by the Trust in
connection with Shareholder meetings of each Fund; receive,
examine and tabulate returned proxies; and certify the vote of
the Shareholders;
(2) The Company shall establish and maintain facilities and
procedures for safekeeping of stock certificates, check forms and
facsimile signature imprinting devices, if any; and for the
preparation or use, and for keeping account of, such
certificates, forms and devices.
The foregoing, along with any additional services that the Company shall
agree in writing to perform for the Trust under this Section Three, shall
hereafter be referred to as "Transfer Agency Services."
Article 13. Duties of the Trust.
A. Compliance
Except as otherwise provided herein, the Trust or Fund assumes full
responsibility for the preparation, contents and distribution of
their own and/or their classes' Prospectus and for complying with all
applicable requirements of the Securities Act of 1933, as amended
(the "1933 Act"), the 1940 Act and any laws, rules and regulations of
government authorities having jurisdiction.
B. Share Certificates
The Trust shall supply the Company with a sufficient supply of blank
Share certificates and from time to time shall renew such supply upon
request of the Company. Such blank Share certificates shall be
properly signed, manually or by facsimile, if authorized by the Trust
and shall bear the seal of the Trust or facsimile thereof; and
notwithstanding the death, resignation or removal of any officer of
the Trust authorized to sign certificates, the Company may continue
to countersign certificates which bear the manual or facsimile
signature of such officer until otherwise directed by the Trust.
<PAGE>
C. Distributions
The Fund shall promptly inform the Company of the declaration of any
dividend or distribution on account of any Fund's shares.
Article 14. Compensation and Expenses.
A. Fee
For performance by the Company pursuant to Section Three of this
Agreement, the Trust and/or the Fund agree to pay the Company a
maintenance fee for each Shareholder account as agreed upon between
the parties and as may be added to or amended from time to time. The
transfer agency maintenance fee in effect from time to time shall be
reflected on a schedule of fees and expenses, which shall be attached
hereto and made a part hereof. Such fees may be changed from time to
time subject to written agreement between the Trust and the Company.
Pursuant to information in the Fund Prospectus or other information
or instructions from the Fund, the Company may sub-divide any Fund
into Classes or other sub-components for recordkeeping purposes. The
Company will charge the Fund the same fees for each such Class or
sub-component the same as if each were a Fund.
B. Reimbursements
In addition to the fee paid under Article 7A above, the Trust and/or
Fund agree to reimburse the Company for out-of-pocket expenses or
advances incurred by the Company for the items agreed upon between
the parties, as may be added to or amended from time to time. In
addition, any other expenses incurred by the Company at the request
or with the consent of the Trust and/or the Fund, will be reimbursed
by the appropriate Fund.
C. Payment
The compensation and out-of-pocket expenses shall be accrued by the
Fund and shall be paid to the Company no less frequently than
monthly, and shall be paid daily upon request of the Company. The
Company will maintain detailed information about the compensation and
out-of-pocket expenses by Fund and Class.
D. Any schedule of fees and expenses agreed to hereunder, as may be
adjusted from time to time, shall be dated and signed by a duly
authorized officer of the Trust and/or the Funds and a duly
authorized officer of the Company.
SECTION FOUR: General Provisions.
Article 15. Proper Instructions.
As used throughout this Agreement, a "Proper Instruction" 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 Company 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, or the
Fund, and the Company promptly cause such oral instructions to be confirmed in
writing. Proper Instructions may include communications effected directly
between electro-mechanical or electronic devices provided that the Trust, or the
Fund, and the Company are satisfied that such procedures afford adequate
safeguards for the Fund's assets. Proper Instructions may only be amended in
writing.
Article 16. Assignment.
Except as provided below, neither this Agreement nor any of the rights or
obligations under this Agreement may be assigned by either party without the
written consent of the other party.
A. This Agreement shall inure to the benefit of and be binding upon
the parties and their respective permitted successors and
assigns.
B. With regard to Transfer Agency Services, the Company may without
further consent on the part of the Trust subcontract for the
performance of Transfer Agency Services with
(1) its subsidiary, Federated Shareholder Service Company, a Delaware
business trust, which is duly registered as a transfer agent
pursuant to Section 17A(c)(1) of the Securities Exchange Act of
1934, as amended, or any succeeding statute ("Section
17A(c)(1)"); or
(2) such other provider of services duly registered as a transfer
agent under Section 17A(c)(1) as Company shall select.
The Company shall be as fully responsible to the Trust for the acts
and omissions of any subcontractor as it is for its own acts and omissions.
C. With regard to Fund Accounting Services and Administrative
Services, the Company may without further consent on the part of
the Trust subcontract for the performance of such services with
Federated Administrative Services, a wholly-owned subsidiary of
the Company.
D. The Company shall upon instruction from the Trust subcontract for
the performance of services under this Agreement with an Agent
selected by the Trust, other than as described in B. and C.
above; provided, however, that the Company shall in no way be
responsible to the Trust for the acts and omissions of the Agent.
Article 17. Documents. A. In connection with the appointment of the
Company under this Agreement, the Trust shall file with the
Company the following documents:
(1) A copy of the Charter and By-Laws of the Trust and all amendments
thereto;
(2) A copy of the resolution of the Board of the Trust authorizing
this Agreement;
(3) Specimens of all forms of outstanding Share certificates of the
Trust or the Funds in the forms approved by the Board of the
Trust with a certificate of the Secretary of the Trust as to such
approval;
(4) All account application forms and other documents relating to
Shareholders accounts; and
(5) A copy of the current Prospectus for each Fund.
B. The Fund will also furnish from time to time the following documents:
(1) Each resolution of the Board of the Trust authorizing the
original issuance of each Fund's and/or Class's Shares;
(2) Each Registration Statement filed with the SEC and amendments
thereof and orders relating thereto in effect with respect to the
sale of Shares of any Fund and/or Class;
(3) A certified copy of each amendment to the governing document and
the By-Laws of the Trust;
(4) Certified copies of each vote of the Board authorizing officers
to give Proper Instructions to the Custodian and agents for fund
accountant and shareholder recordkeeping or transfer agency
services;
(5) Specimens of all new Share certificates representing Shares of
any Fund, accompanied by Board resolutions approving such forms;
(6) Such other certificates, documents or opinions which the Company
may, in its discretion, deem necessary or appropriate in the
proper performance of its duties; and
(7) Revisions to the Prospectus of each Fund.
Article 18. Representations and Warranties.
A. Representations and Warranties of the Company
The Company represents and warrants to the Fund that:
(1) It is a corporation duly organized and existing and in good
standing under the laws of the Commonwealth of Pennsylvania;
(2) It is duly qualified to carry on its business in each
jurisdiction where the nature of its business requires such
qualification, and in the Commonwealth of Pennsylvania;
(3) It is empowered under applicable laws and by its Articles of
Incorporation and By-Laws to enter into and perform this
Agreement;
(4) All requisite corporate proceedings have been taken to authorize
it to enter into and perform its obligations under this
Agreement;
(5) It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and
obligations under this Agreement;
(6) It is in compliance with federal securities law requirements and
in good standing as an administrator and fund accountant; and
B. Representations and Warranties of the Trust
The Trust represents and warrants to the Company that:
(1) It is an investment company duly organized and existing and in
good standing under the laws of its state of organization;
(2) It is empowered under applicable laws and by its Charter and
By-Laws to enter into and perform its obligations under this
Agreement;
(3) All corporate proceedings required by said Charter and By-Laws
have been taken to authorize it to enter into and perform its
obligations under this Agreement;
(4) The Trust is an open-end investment company registered under the
1940 Act; and
(5) A registration statement under the 1933 Act will be effective,
and appropriate state securities law filings have been made and
will continue to be made, with respect to all Shares of each Fund
being offered for sale.
Article 19. Standard of Care and Indemnification.
A. Standard of Care
With regard to Sections One and Three, the Company shall be held to a
standard of reasonable care in carrying out the provisions of this
Contract. The Company 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.
B. Indemnification by Trust
The Company shall not be responsible for and the Trust or Fund shall
indemnify and hold the Company, including its officers, directors,
shareholders and their agents, employees and affiliates, harmless
against any and all losses, damages, costs, charges, counsel fees,
payments, expenses and liabilities arising out of or attributable to:
(1) The acts or omissions of any Custodian, Adviser, Sub-adviser or
other party (other than the Company) contracted by or approved by
the Trust or Fund,
(2) The reliance on or use by the Company or its agents or
subcontractors of information, records and documents in proper
form which
(a) are received by the Company or its agents or
subcontractors (other than the Company) and
furnished to it by or on behalf of the Fund, its
Shareholders or investors regarding the purchase,
redemption or transfer of Shares and Shareholder
account information;
(b) are received by the Company from independent pricing services or
sources for use in valuing the assets of the Funds; or
(c) are received by the Company or its agents or
subcontractors from Advisers, Sub-advisers or other
third parties (other than the Company) contracted
by or approved by the Trust or Fund for use in the
performance of services under this Agreement;
(d) have been prepared and/or maintained by the Fund or its
affiliates or any other person or firm on behalf of the Trust
(other than the Company).
(3) The reliance on, or the carrying out by the Company or its agents
or subcontractors, of Proper Instructions of the Trust or the
Fund.
(4) The offer or sale of Shares in violation of any requirement
under the federal securities laws or regulations or the
securities laws or regulations of any state that such Shares
be registered or authorized for sale in such state or in
violation of any stop order or other determination or ruling
by any federal agency or any state with respect to the offer
or sale of such Shares in such state.
Provided, however, that the Company shall not be protected
by this Article 19.B. from liability for any act or omission
resulting from the Company's willful misfeasance, bad faith,
negligence or reckless disregard of its duties or failure to
meet the standard of care set forth in 19.A. above.
C. Reliance
At any time the Company may apply to any officer of the Trust or Fund
for instructions, and may consult with legal counsel with respect to
any matter arising in connection with the services to be performed by
the Company under this Agreement, and the Company and its agents or
subcontractors shall not be liable and shall be indemnified by the
Trust or the appropriate Fund for any action reasonably taken or
omitted by it in reliance upon such instructions or upon the opinion
of such counsel provided such action is not in violation of
applicable federal or state laws or regulations. The Company, its
agents and subcontractors shall be protected and indemnified in
recognizing stock certificates which are reasonably believed to bear
the proper manual or facsimile signatures of the officers of the
Trust or the Fund, and the proper countersignature of any former
transfer agent or registrar, or of a co-transfer agent or
co-registrar.
D. Notification
In order that the indemnification provisions contained in this
Article 19 shall apply, upon the assertion of a claim for which
either party may be required to indemnify the other, the party
seeking indemnification shall promptly notify the other party of such
assertion, and shall keep the other party advised with respect to all
developments concerning such claim. The party who may be required to
indemnify shall have the option to participate with the party seeking
indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any
compromise in any case in which the other party may be required to
indemnify it except with the other party's prior written consent.
Article 20. Term and Termination of Agreement.
This Agreement shall be effective from September 1, 1997 and shall continue
until August 31, 2000 (`Term"). Thereafter, the Agreement will continue for 12
month terms. The Agreement can be terminated by either party upon 12 months
notice to be effective as of the end of such 12 month period. In the event,
however, of willful misfeasance, bad faith, negligence or reckless disregard of
its duties by the Company, the Trust has the right to terminate the Agreement
upon 60 days written notice, if Company has not cured such willful misfeasance,
bad faith, negligence or reckless disregard of its duties within 60 days. The
termination date for all original or after-added Investment companies which are,
or become, a party to this Agreement, shall be coterminous. Investment Companies
that merge or dissolve during the Term, shall cease to be a party on the
effective date of such merger or dissolution.
Should the Trust exercise its rights to terminate, all out-of-pocket
expenses associated with the movement of records and materials will be borne by
the Trust or the appropriate Fund. Additionally, the Company reserves the right
to charge for any other reasonable expenses associated with such termination.
The provisions of Articles 10 and 19 shall survive the termination of this
Agreement.
Article 21. Amendment.
This Agreement may be amended or modified by a written agreement executed
by both parties.
Article 22. Interpretive and Additional Provisions.
In connection with the operation of this Agreement, the Company and the
Trust may from time to time agree on such provisions interpretive of or in
addition to the provisions of this Agreement as may in their joint opinion be
consistent with the general tenor of this Agreement. 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 Charter. No interpretive or additional provisions made as provided in the
preceding sentence shall be deemed to be an amendment of this Agreement.
Article 23. Governing Law.
This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of the Commonwealth of Massachusetts.
Article 24. 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 Company at Federated
Investors Tower, Pittsburgh, Pennsylvania, 15222-3779, or to such other address
as the Trust or the Company may hereafter specify, shall be deemed to have been
properly delivered or given hereunder to the respective address.
Article 25. Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall
be deemed an original. Article 26. Merger of Agreement. This
Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior agreement with respect to the
subject hereof whether oral or written.
Article 27. Successor Agent.
If a successor agent for the Trust shall be appointed by the Trust, the
Company shall upon termination of this Agreement deliver to such successor agent
at the office of the Company all properties of the Trust held by it hereunder,
including any electronically recorded information in machine-readable form. If
no such successor agent shall be appointed, the Company shall at its office upon
receipt of Proper Instructions deliver such properties in accordance with such
instructions.
In the event that no written order designating a successor agent or Proper
Instructions shall have been delivered to the Company on or before the date when
such termination shall become effective, then the Company shall have the right
to deliver to a bank or trust company, which is a "bank" as defined in the 1940
Act, of its own selection, having an aggregate capital, surplus, and undivided
profits, as shown by its last published report, of not less than $2,000,000, all
properties held by the Company under this Agreement. Thereafter, such bank or
trust company shall be the successor of the Company under this Agreement.
Article 28. Force Majeure.
The Company shall have no liability for cessation of services hereunder or
any damages resulting therefrom to the Fund as a result of work stoppage, power
or other mechanical failure, natural disaster, governmental action,
communication disruption or other impossibility of performance.
Article 29. Assignment; Successors.
This Agreement shall not be assigned by either party without the prior
written consent of the other party, except that either party may assign all of
or a substantial portion of its business to a successor, or to a party
controlling, controlled by, or under common control with such party. Nothing in
this Article 29 shall prevent the Company from delegating its responsibilities
to another entity to the extent provided herein.
Article 30. Severability.
In the event any provision of this Agreement is held illegal, void or
unenforceable, the balance shall remain in effect.
Article 31. Limitations of Liability of Trustees and Shareholders of the Trust.
The execution and delivery of this Agreement have been authorized by the
Board of the Trust and signed by an authorized officer of the Trust, acting as
such, and neither such authorization by such Board nor such execution and
delivery by such officer shall be deemed to have been made by any of them
individually or to impose any liability on any of them personally, and the
obligations of this Agreement are not binding upon any of the Trustees,
Directors or Shareholders of the Trust, but bind only the property of the Fund,
or Class, as provided in the Declaration of Trust.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf under their seals by and through
their duly authorized officers, as of the day and year first above written.
GREAT PLAINS FUNDS
By: /s/ C. Christine Thomson
Name: C. Christine Thomson
Title: Vice President
FEDERATED SERVICES COMPANY
By: /s/ Thomas J. Ward
Name: Thomas J. Ward
Title: Senior Vice President
<PAGE>
EXHIBIT A
CONTRACT DATE INVESTMENT COMPANY
Portfolios
Classes
September 1, 1997 GREAT PLAINS FUNDS
Great Plains Equity Fund
Great Plains International Equity Fund
Great Plains Premier Fund
Great Plains Intermediate Bond Fund
Great Plains Tax-Free Bond Fund
FEDERATED SERVICES COMPANY provides the following services:
Fund Accounting Services
Administrative Services
Transfer Agency Services
Exhibit 10 under Form N-1A
Exhibit 5 under Item 601/Reg. S-K
FEDERATED SERVICES COMPANY
Federated Investors Tower
Pittsburgh, PA 15222-3779
412-288-1900
September 10, 1997
The Trustees of
Great Plains Funds
Federated Investors Tower
Pittsburgh, PA 15222-3779
Gentlemen:
Great Plains Funds ("Trust") proposes to offer and sell shares of
beneficial interest in various portfolios of securities known as Great Plains
Equity Fund, Great Plains International Equity Fund, Great Plains Premier Fund,
Great Plains Intermediate Bond Fund, and Great Plains Tax-Free Bond Fund
("Shares") in the manner and on the terms set forth in the Trust's Registration
Statement (the "Registration Statement") filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended (the "Securities Act")
and under the Investment Company Act of 1940, as amended (the "1940 Act").
As counsel I have participated in the preparation and filing of the
Registration Statement under the Securities Act and the 1940 Act. Further, I
have examined and am familiar with the provisions of the Trust's Declaration of
Trust dated July 1, 1997, ("Declaration of Trust"), the Bylaws of the Trust and
such other documents and records as I have deemed to be relevant. I have also
reviewed questions of law and consulted with counsel thereon as deemed necessary
or appropriate by me for the purpose of this opinion.
Based upon the foregoing, it is my opinion that:
1. The Trust is duly organized and validly existing under the laws of the
Commonwealth of Massachusetts.
2. The Shares which are currently being registered by the Registration
Statement may be legally and validly issued from time to time in accordance with
the Declaration of Trust upon receipt of consideration sufficient to comply with
the Declaration of Trust and subject to compliance with the Securities Act, the
1940 Act, and applicable state laws regulating the sale of securities. Such
Shares, when so issued, will be fully paid and non-assessable by the Trust.
I hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to any application or notification required to be
filed under the securities laws of any of the States of the United States.
The foregoing opinion is limited to the Federal laws of the United
States and the laws of the Commonwealth of Massachusetts, and I express no
opinion as to the laws of any other jurisdiction.
Very truly yours,
/s/ Timothy S. Johnson
Timothy S. Johnson
Associate Corporate Counsel
Exhibit 11 under Form N-1A
Exhibit 8 under Item 601/Reg. S-K
INDEPENDENT AUDITOR'S CONSENT
To the Board of Trustees of the GREAT PLAINS FUNDS and the Shareholder of GREAT
PLAINS INTERMEDIATE BOND FUND:
We consent to the use in Pre-Effective Amendment No. 1 to Registration
Statement (No. 333-31137) of Great Plains Intermediate Bond Fund of our report
dated August 27, 1997, appearing in the Prospectus, which is part of such
Registration Statement.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Pittsburgh, Pennsylvania
August 27, 1997
