Information contained herein is subject to completion or
amendment. A registration statement relating to these securities
has been filed with the Securities and Exchange Commission.
These securities may not be sold nor may any offers to buy be
accepted prior to the time that the registration statement
becomes effective. This Prospectus shall not constitute an offer
to sell or the solicitation of an offer to buy nor shall there
be any sale of these securities in any State in which such
offer, solicitation, or sale would be unlawful prior to
registration or qualification under the securities laws of any
such State.
SUBJECT TO COMPLETION July11, 1997
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
_______________, 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 Fund or calling _________________. 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
________________, 1997
<PAGE>
TABLE OF CONTENTS
(TO BE ADDED)
<PAGE>
<TABLE>
<CAPTION>
SUMMARY OF FUND EXPENSES
<S> <C> <C> <C> <C> <C>
Equity International Premier Intermediate Tax-Free
Fund Equity Fund Bond Bond
Fund Fund Fund
------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES
MAXIMUM SALES CHARGE IMPOSED ON PURCHASES 3.00% 3.00% 3.00% 3.00% 3.00%
(AS A PERCENTAGE OF OFFERING PRICE)
MAXIMUM SALES CHARGE IMPOSED ON REINVESTED DIVIDENDS None None None None None
(AS A PERCENTAGE OF OFFERING PRICE)
CONTINGENT DEFERRED SALES CHARGE (AS A PERCENTAGE None None None None None
OF ORIGINAL PURCHASE PRICE OR REDEMPTION PROCEEDS,
AS APPLICABLE)
REDEMPTION FEES (AS A PERCENTAGE OF AMOUNT REDEEMED, None None None None None
IF APPLICABLE)
EXCHANGE FEE None None None None None
ANNUAL FUND OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver, if applicable) 0.75% 1.25% 0.80% 0.50% 0.50%
(1).......................
12b-1 Fees None None None None None
(2).....................................................................................
Other Expenses (after waivers, if 0.28% 0.41% 0.59% 0.30% 0.38%
applicable)(3)..........................
Shareholder Servicing Agent None None None None None
Fee(2)...........................................
Total Fund Operating Expenses (after waivers, 1.03% 1.66% 1.39% 0.80% 0.88%
if applicable)
(4)......................................................................
</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%
(2) A 12b-1 fee and shareholder servicing fee exist, however, the
Funds have no intention of accruing or paying these fees for the
fiscal year ending August 31, 1998. If a 12b-1 fee were charged,
long-term shareholders may pay more than the economic equivalent of
the maximum front end sales charges permitted by the National
Association of Securities Dealers, Inc.
(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 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.
Equity Premier Tax-Free
Fund International Fund Intermediate Bond
Equity Bond Fund
Fund Fund
--------------------------------------------------------------------
1 $40 $46 $44 $38 $39
Year..............................................
3 $62 $81 $73 $55 $57
Years............................................
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.
<PAGE>
SYNOPSIS
The Trust was established as a Massachusetts business trust under a
Declaration of Trust dated July 1, 1997. The Declaration of Trust
permits the Trust to offer separate series of shares of beneficial
interest representing interests in separate portfolios of securities.
The shares in any one portfolio or Fund may be offered in separate
classes. The Funds are designed for individuals and institutions as a
convenient means of participating in professionally managed Funds.
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:
o 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;
o 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;
o 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;
o 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
o 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. 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 "Investment Objective and Policies of Each Fund,"
"Portfolio Investments and Strategies," and "Additional Investment
Risks."
<PAGE>
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. 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.
<PAGE>
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:
o 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;
o common and preferred stocks of foreign companies;
o 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;
o U.S. government securities;
o 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;
o American Depositary Receipts ("ADRs"), Global Depositary Receipts
("GDRs") and European Depositary Receipts ("EDRs")
(collectively, "Depositary Receipts");
o foreign currency transactions (including forward currency
exchange contracts, currency futures contracts, and
options on currency and currency futures contracts);
o Prime Commercial Paper;
o foreign and domestic Bank Instruments;
o warrants;
o repurchase agreements; and
o 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:
o domestic and foreign issues of corporate debt obligations
(including bonds, notes and debentures);
o U.S. government securities;
o convertible securities and debentures;
o Prime Commercial Paper;
o domestic Bank Instruments;
o Mortgage-Backed Securities;
o Asset-Backed Securities;
o Zero Coupon Obligations;
o taxable Municipal Securities;
o repurchase agreements; and
o 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:
o 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
o securities of other investment companies that have a
similar objective of tax-free income.
For additional information on the other investment techniques and
strategies of the Fund, see the "Portfolio Investments and Strategies"
section of this Prospectus. For investment risks associated with
investments in Nebraska Municipal Securities, see "Additional
Investment Risks--Municipal Securities" under the "Portfolio
Investments and Strategies" section of the Prospectus.
NET ASSET VALUE
The Funds' net asset value per share fluctuates. The net asset value
per share is determined by dividing the sum of the market value of all
securities and all other assets, less liabilities, by the number of
shares outstanding.
The net asset value is determined as of the close of trading on the
New York Stock Exchange (normally 3:00 p.m., Central time), Monday
through Friday, except on: (i) days on which there are not sufficient
changes in the value of a Fund's portfolio securities that its net
asset value might be materially affected; (ii) days during which no
shares are tendered for redemption and no orders to purchase shares
are received; or (iii) the following holidays: New Year's Day, Martin
Luther King Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Columbus Day, Veterans' Day, Thanksgiving
Day, and Christmas Day.
INVESTING IN THE FUNDS
SHARE PURCHASES
Fund shares are sold on days on which the New York Stock Exchange and
the Federal Reserve Wire System are open for business. Fund shares may
be purchased through National Bank of Commerce ("NBC") in connection
with qualified trust accounts, through authorized broker/dealers, or
directly from the Fund. 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-___________. 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-
_____________. 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, ________________________.
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.
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. 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:
SALES CHARGE
SALES CHARGE AS % OF DEALER ALLOWANCE
AMOUNT OF AS % OF NET AMOUNT AS % OF
TRANSACTION OFFERING PRICE INVESTED OFFERING PRICE
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%
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. The Distributor must be notified by the shareholder in
writing or by ___________ of the reinvestment 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:
o quantity discounts and accumulated purchases;
o signing a 13-month letter of intent; or
o 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, the Distributor must be
notified by the shareholder in writing or by _________ 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, the Distributor must be
notified by the shareholder in writing or by ___________ 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")
automated 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-_____________________.
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. Prior to any exchange, the shareholder must receive a
copy of the current prospectus of the Fund into which an exchange is
to be effected. 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--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-__________________.
EXCHANGE BY TELEPHONE
Shareholders may provide instructions for exchanges between Funds by
calling Great Plains Funds Shareholder Services at _________. 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
session trading on the New York Stock Exchange (normally 3:00 p.m
Central time) for shares to be exchanged the same day. Shareholders
who exchange into shares of the Funds will not receive a dividend from
a Fund on the date of the exchange.
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 on
the next business day to the shareholder's bank account designated in
the Fund account application. 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 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-___________. 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 MAIL. Any shareholder may redeem a Fund's shares by sending a
written request to the Funds at: P.O. Box ________. 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-______________ 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
signatures on written redemption requests guaranteed by:
o 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");
o a member of the New York, American, Boston, Midwest, or Pacific
Stock Exchange;
o a savings bank or savings association whose deposits are
insured by the Savings Association Insurance Fund, which
is administered by the FDIC; or
o 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-_______________. 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 .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 .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.
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
$__________.
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 (pending registration) 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 1984. 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. __________________________ has
been appointed shareholder servicing agent for the Funds. As such,
_________________ provides 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 ________ a fee
computed at an annual rate of up to .25% of the average daily net
asset value of the Funds' shares for which ________ 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:
MAXIMUM AVERAGE AGGREGATE DAILY NET
ADMINISTRATIVE FEE ASSETS OF THE TRUST
.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
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.
<PAGE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIOD ENDED JUNE 30, 1997*
REFLECTING LOAD/WITHOUT LOAD
PREDECESSOR COMMON FUNDS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
------ ------- -------
(CORRESPONDING GREAT PLAINS FUNDS)
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)
*TheAverage 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.
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIOD ENDED JUNE 30, 1997*
REFLECTING LOAD/WITHOUT LOAD
PREDECESSOR COLLECTIVE FUNDS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- -------
(CORRESPONDING GREAT PLAINS FUNDS)
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)
* 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.
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIOD ENDED JUNE 30,1997*
REFLECTING LOAD/WITHOUT LOAD
BLENDED PERFORMANCE OF PREDECESSOR COMMON AND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- -------
COLLECTIVE FUNDS
(CORRESPONDING GREAT PLAINS FUNDS)
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% 6.353%/7.42% 5.60%/6.24% 7.32%/7.64%
Total Return Bond Fund "D"
</TABLE>
(GREAT PLAINS INTERMEDIATE BOND FUND)
* 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.
<PAGE>
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 CMO'S. 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.
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.
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 unaffiliated 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.
In addition, subject to granting of an exemptive order of the SEC,
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.
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 investment companies incur certain
expenses such as management fees and, therefore, any investment by a
Fund in shares of another investment company would be subject to
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:
o direct obligations of the U.S. Treasury, such as U.S. Treasury
bills, notes, and bonds;
o 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;
o notes, bonds, and discount notes of other U.S. government
agencies or instrumentalities which receive or have access to federal
funding; and
o 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
1995 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 1995 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.
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, as such, are subject to
less stringent limitations on the percentage of assets which can be
invested in any single issuer. 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.
<PAGE>
APPENDIX
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.
<PAGE>
<TABLE>
<CAPTION>
ADDRESSES
<S> <C> <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
1248 "O" Street
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 Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
ADMINISTRATOR AND PORTFOLIO ACCOUNTANT
Federated Services Company Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
SHAREHOLDER SERVICING AGENT
LEGAL COUNSEL
BELL, BOYD & LLOYD Three First National Plaza
70 West Madison Street
Chicago, Illinois 60602
</TABLE>
INDEPENDENT PUBLIC ACCOUNTANTS
Edgewood Services, Inc.
Distributor
Information contained herein is subject to completion or
amendment. A registration statement relating to these securities
has been filed with the Securities and Exchange Commission.
These securities may not be sold nor may any offers to buy be
accepted prior to the time that the registration statement
becomes effective. This Statement of Additional Information
shall not constitute an offer to sell or the solicitation of an
offer to buy nor shall there be any sale of these securities in
any State in which such offer, solicitation, or sale would be
unlawful prior to registration or qualification under the
securities laws of any such State.
SUBJECT TO COMPLETION July 11, 1997
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
________________, 1997
This Statement of Additional Information should be read with the
prospectus, dated ____________, 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 _________________ at
__________________________.
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 6
Fundamental Limitations 6
Non-Fundamental Limitations 7
NEBRASKA INVESTMENT RISKS 9
GREAT PLAINS FUNDS MANAGEMENT 13
Officers and Trustees 13
Fund Ownership 14
Trustees' Compensation 14
INVESTMENT ADVISORY SERVICES 14
Adviser to the Funds 14
Advisory Fees 14
Sub-Advisory Fees 14
OTHER SERVICES 15
Administrative Services 15
Transfer Agent, Dividend Disbursing Agent and
Portfolio Accounting Services 15
Custodian 15
Independent Public Accountants 15
SHAREHOLDER SERVICING ARRANGEMENTS 15
BROKERAGE TRANSACTIONS 15
DISTRIBUTION PLAN AND AGREEMENT 16
Administrative Arrangements 16
Conversion to Federal Funds 16
DETERMINING MARKET VALUE 16
Market Values 16
Trading in Foreign Securities 17
REDEMPTION IN KIND 17
EFFECT OF BANKING LAWS 17
MASSACHUSETTS PARTNERSHIP LAW 18
TAX STATUS 18
The Funds' Tax Status 18
Foreign Taxes 18
Shareholders' Tax Status 18
Capital Gains 19
TOTAL RETURN 19
YIELD 19
TAX-EQUIVALENT YIELD 20
Tax-Equivalency Table-Nebraska 20
Tax-Equivalency Table-Multi-State 21
PERFORMANCE COMPARISONS 22
Economic and Market Information 24
<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 [or Sub-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. 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."
<PAGE>
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.
To be completed
The Tax-Free Bond Fund's investment emphasis on debt obligations of
the State of Nebraska carries a higher risk than a portfolio that is
geographically diversified. There are 93 counties and 535 incorporated
municipalities in Nebraska, many of which may have outstanding debt. A
number of other public authorities and private, nonprofit
organizations, including utilities, also issue tax exempt debt within
the State of Nebraska.
ECONOMY. The economy of the State of Nebraska continues to demonstrate
relatively strong performance, with estimated personal income for 1995
at $21,703. Total State employment was 869,000 in 1995, with the
majority of jobs in trade, services and government. Unemployment was
2.6% in 1995, compared to a national average of 5.6%. The State's
population in 1990 was 1,578,385, with 1,637,112 estimated for 1995.
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 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 agencies and other instrumentalities of the State government 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 of Nebraska.
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 various sources, principally fees
generated from the use of the facilities, enterprises financed by the
bonds, or other dedicated fees.
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 strength 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, the State has faced budget crises in the recent past (see
Property Tax System below).
PROPERTY TAX SYSTEM. The passage of certain legislation relating to
personal property taxes by the Nebraska Legislature and a recent
challenge of the current taxation system make it difficult to predict
what the effect will be on the ability of political subdivisions in
the State to levy and collect ad valorem taxes to support their
governmental operations. These concerns were initiated by litigation
involving railroad rolling stock, the taxation of which is governed by
the provisions of the Federal Railroad Revitalization and Regulatory
Reform Act (the "4-R Act"). As a result of the successful challenge by
the railroad of personal property taxes levied on railroad rolling
stock, further challenges to personal property taxes levied on
pipelines and other interstate businesses with personal property in
Nebraska were filed and ultimately raised the issue of the validity of
Nebraska's system of personal property taxation under the provisions
of Article VIII. Section 1 of the Nebraska Constitution requiring that
taxes be "levied uniformly and proportionately upon all tangible
property and franchises."
In order to resolve the constitutional issues raised by a number of
lawsuits, the 1992 Nebraska Legislature submitted an amendment to
Article VIII, Section 1 of the Nebraska Constitution ("Amendment 1")
allowing the exemption of certain classes of personal property from
taxation and the taxation of nonexempted personal property at
depreciated cost to the electors of the State of Nebraska at the May
12, 1992 primary election. The Constitutional amendment was approved
by the required number of voters and has been effective since June 8,
1992. As a result of the adoption of Amendment 1, the Legislature has
exempted certain classes of tangible personal property from taxation
and concern over the validity of the State's property taxation system
has been reduced. The 1992 Nebraska Legislature also passed, during a
special session following the approval of Amendment 1, Legislative
Bill 1 containing revisions to the Nebraska statutes concerning the
levy and collection of property taxes and taxing all depreciable
income-producing personal property at its net book value beginning in
tax year 1992.
Both Amendment 1 and Legislative Bill 1, as enacted, were recently
challenged in Lancaster County District Court as unconstitutional
because they create ad valorem taxes that are not uniform nor
proportionate. BOETTCHER V. STATE, 494-102. The case was dismissed on
May 30, 1995 based upon lack of jurisdiction, but the plaintiffs have
appealed such dismissal. The Nebraska Supreme Court removed the case
from the docket of the Nebraska Court of Appeals and assumed
jurisdiction. Briefs in the case were filed in December, 1995 and
argument before the Supreme Court is not expected earlier than June,
1997.
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 Tax-Free Bond 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 of the industrial
development bond issues also occurring in the early 1980's. The
Tax-Free Bond 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 Tax-Free Bond 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 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. The current legislation may 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 revenues available for the payment of the
principal of or interest on such 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 from
the date of issuance.
Certain of the Nebraska Municipal Securities in the Tax-Free Bond
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 1992.
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 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 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.
<PAGE>
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.
TO BE COMPLETED
<PAGE>
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*#
To be completed
* 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 Trust is the only investment company in
the Fund Complex. # 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.
<PAGE>
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 PUBLIC ACCOUNTANTS
The Independent Public Accountants for the Funds are___________________.
SHAREHOLDER SERVICING ARRANGEMENTS
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.
<PAGE>
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.
___________________________ 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 derive less than 30% of its gross income from the sale of securities
held less than three months;
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. However, if a Fund may invest
in the stock of certain foreign corporations that constitute a Passive
Foreign Investment Company (PFIC), then federal income taxes may be
imposed on a Fund upon disposition of PFIC investments.
SHAREHOLDERS' TAX STATUS
Shareholders are subject to federal income tax on dividends and
capital gains received as cash or additional shares. The dividends
received deduction for corporations will apply to ordinary income
distributions to the extent the distribution represents amounts that
would qualify for the dividends received deduction to the Equity Fund,
the International Equity Fund or the Premier Fund if those Funds were
regular corporations, and to the extent designated by those Funds as
so qualifying. These dividends, and any short-term capital gains are
taxable as ordinary income.
CAPITAL GAINS
Capital gains, when experienced by a Fund, could result in an increase
in dividends. Capital losses could result in a decrease in dividends.
When a Fund realizes net long-term capital gains, it will distribute
them at least once every 12 months.
TOTAL RETURN
The average annual total return for a Fund is the average compounded
rate of return for a given period that would equate a $1,000 initial
investment to the ending redeemable value of that investment. The
ending redeemable value is computed by multiplying the number of
shares owned at the end of the period by the net asset value per share
at the end of the period. The number of shares owned at the end of the
period is based on the number of shares purchased at the beginning of
the period with $1,000, adjusted over the period by any additional
shares, assuming the quarterly reinvestment of any dividends and
distributions. Cumulative total return reflects a Fund's total
performance over a specific period of time.
YIELD
The yield is determined by dividing the net investment income per
share (as defined by the Securities and Exchange Commission) earned by
a Fund over a thirty-day period by the offering price per share of the
Fund on the last day of the period. This value is annualized using
semi-annual compounding. This means that the amount of income
generated during the thirty-day period is assumed to be generated each
month over a twelve-month period and is reinvested every six months.
The yield does not necessarily reflect income actually earned by a
Fund because of certain adjustments required by the Securities and
Exchange Commission and, therefore, may not correlate to the dividends
or other distributions paid to shareholders. To the extent that
financial institutions and broker/dealers charge fees in connection
with services provided in conjunction with an investment in a Fund,
performance will be reduced for those shareholders paying those fees.
<PAGE>
TAX-EQUIVALENT YIELD (TAX-FREE BOND FUND ONLY)
The tax-equivalent yield of the Tax-Free Bond Fund is calculated
similarly to the yield, but is adjusted to reflect the taxable yield
that this Fund would have had to earn to equal its actual yield,
assuming a 39.6% tax rate (the maximum marginal federal rate for
individuals) and assuming that income is 100% tax-exempt.
TAX-EQUIVALENCY TABLE
The Tax-Free Bond Fund may also use a tax-equivalency table in
advertising and sales literature. The interest earned by the municipal
bonds in the Fund's portfolio generally remains free from federal
income tax* and is often free from state and local taxes as well. As
the table on the next page indicates, a "tax-free" investment is an
attractive choice for investors, particularly in times of narrow
spreads between tax-free and taxable yields.
<TABLE>
<CAPTION>
TAXABLE YIELD EQUIVALENT FOR 1997
STATE OF NEBRASKA
COMBINED FEDERAL AND STATE INCOME TAX BRACKET:
<S> <C> <C> <C> <C> <C> <C>
20.24% 34.99% 38.43% 43.76% 47.54%
JOINT $1- $41,201- $99,601- $151,751- OVER
RETURN 41,200 99,600 151,750 271,050 $271,050
SINGLE $1- $24,651- $59,751- $124,651- OVER
RETURN 24,650 59,750 124,650 271,050 $271,050
TAX-EXEMPT
YIELD TAXABLE YIELD EQUIVALENT
1.50% 1.88% 2.31% 2.44% 2.67% 2.86%
2.00% 2.51% 3.08% 3.25% 3.56% 3.81%
2.50% 3.13% 3.85% 4.06% 4.45% 4.77%
3.00% 3.76% 4.61% 4.87% 5.33% 5.72%
3.50% 4.39% 5.38% 5.68% 6.22% 6.67%
4.00% 5.02% 6.15% 6.50% 7.11% 7.62%
4.50% 5.64% 6.92% 7.31% 8.00% 8.58%
5.00% 6.27% 7.69% 8.12% 8.89% 9.53%
5.50% 6.90% 8.46% 8.93% 9.78% 10.48%
6.00% 7.52% 9.23% 9.74% 10.67% 11.44%
6.50% 8.15% 10.00% 10.56% 11.56% 12.39%
7.00% 8.78% 10.77% 11.37% 12.45% 13.34%
7.50% 9.40% 11.54% 12.18% 13.34% 14.30%
8.00% 10.03% 12.31% 12.99% 14.23% 15.25%
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:
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.
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