1933 Act Registration No.
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 8, 1997
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. [ ]
(Check appropriate box or boxes)
Exact name of Registrant as Specified in Charter:
FIRST AMERICAN STRATEGY FUNDS, INC.
Area Code and Telephone Number:
(610) 254-1924
Address of Principal Executive Offices:
Oaks, Pennsylvania 19456
Name and Address of Agent for Service:
David G. Lee
c/o SEI Investments Company
Oaks, Pennsylvania 19456
COPIES TO:
Kathryn L. Stanton, Esq. Kathleen L. Prudhomme, Esq.
SEI Investments Company Dorsey & Whitney LLP
Oaks, Pennsylvania 19456 220 South Sixth Street
Minneapolis, Minnesota 55402
It is proposed that this filing become effective on September 7, 1997
(30 days after filing) pursuant to Rule 488.
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No filing fee is required because an indefinite number of shares have previously
been registered pursuant to Rule 24f-2 under the Investment Company Act of 1940.
Registrant is incorporating herein by reference its earlier declaration under
Rule 24f-2.
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FIRST AMERICAN STRATEGY FUNDS, INC.
REGISTRATION STATEMENT ON FORM N-14
CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 481(a))
PART A OF FORM N-14 PROSPECTUS/PROXY STATEMENT CAPTION
<S> <C>
1. Beginning of Registration Statement
and Outside Front Cover Page of Prospectus ........... Cross Reference Sheet and Cover Page
2. Beginning and Outside Back Cover Page
of Prospectus......................................... Table of Contents
3. Fee Table, Synopsis Information and
Risk Factors ......................................... Summary; Principal Risk Factors, Appendix V; Appendix VII
4. Information about the Transaction..................... Summary; Information Relating to the Interim Advisory Agreement;
Information Relating to the Proposed Reorganization; Comparison of
FASF and Qualivest
5. Information about the Registrant...................... Inside Front Cover (Incorporation by Reference); Comparison of FASF
and Qualivest; Additional Information about FASF; Appendix IV
6. Information about the Company Being
Acquired.............................................. Inside Front Cover (Incorporation by Reference); Comparison of FASF
and Qualivest; Additional Information about Qualivest; Appendix IV
7. Voting Information.................................... Summary; Information about the Reorganization; Information Relating to
Voting Matters
8. Interest of Certain Persons and Experts............... Information Relating to Voting Matters
9. Additional Information................................ Not Applicable
STATEMENT OF ADDITIONAL
PART B OF FORM N-14 INFORMATION CAPTION
10. Cover Page............................................ Cover Page
11. Table of Contents..................................... Not Applicable
12. Additional Information about the Registrant........... Cover Page (Incorporation by Reference)
13. Additional Information about the Company
Being Acquired........................................ Cover Page (Incorporation by Reference)
14. Financial Statements.................................. Cover Page (Incorporation by Reference); Pro Forma Financial Statements
</TABLE>
PART C OF FORM N-14
Information required to be included in Part C is set forth under the appropriate
item in Part C of this Registration Statement.
<PAGE>
FIRST AMERICAN STRATEGY FUNDS, INC.
REGISTRATION STATEMENT ON FORM N-14
PART A
PRESIDENT'S LETTER
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
PROSPECTUS/PROXY STATEMENT
<PAGE>
QUALIVEST FUNDS
3435 STELZER ROAD
COLUMBUS, OHIO 43219-3035
_________, 1997
Dear Qualivest Shareholder:
On behalf of the Board of Trustees of Qualivest Funds ("Qualivest"), we are
pleased to invite you to a special meeting of shareholders on ____________ ,
1997 (the "Meeting"), that has been called to consider matters that are
important to you. At the Meeting, you will be asked to consider (1) the approval
of an interim advisory agreement with First Bank National Association ("FBNA"),
which became effective on August 1, 1997 (when U.S. Bancorp merged with First
Bank System, Inc., as discussed below), and (2) a proposed reorganization of the
four funds in the Qualivest Dynamic Allocation Series (the "Qualivest
Portfolios") into four corresponding funds of First American Strategy Funds,
Inc. (the "FASF Funds"). FBNA currently acts as the investment adviser to the
FASF Funds.
As a result of the merger of U.S. Bancorp and First Bank System, Inc.,
representatives of U.S. Bancorp and First Bank System, Inc. recommended to the
Board of Trustees of Qualivest that the Trustees consider and approve combining
the Qualivest Portfolios with the FASF Funds. This recommendation was made
because the representatives of the two banking institutions believed that
combining the Qualivest Portfolios and FASF Funds would offer a number of
potential benefits to the shareholders of the two mutual fund groups.
QUALIVEST'S BOARD OF TRUSTEES RECOMMENDS THAT YOU VOTE TO APPROVE BOTH THE
INTERIM ADVISORY AGREEMENT AND THE PROPOSED REORGANIZATION.
BACKGROUND. On August 1, 1997, U.S. Bancorp, the ultimate parent company of
Qualivest Capital Management, Inc. ("Qualivest Capital"), merged with First Bank
System, Inc. ("FBS"), the parent company of FBNA, and the name of FBS was
changed to U.S. Bancorp. By law, this merger resulted in the automatic
termination of the Qualivest Portfolios' then current investment advisory
agreement with Qualivest Capital. Because a number of Qualivest investment
personnel were expected to leave the employ of Qualivest Capital as a result of
the merger, Qualivest's Board of Trustees approved the interim investment
advisory agreement with FBNA, effective August 1, 1997, in order to provide, to
the extent practicable, continuity of management and to avoid harm to the
Qualivest Portfolios. At the upcoming meeting, you will be asked to ratify and
approve this interim advisory agreement, including the receipt of investment
advisory fees by FBNA for the period from August 1, 1997 forward.
In addition, at the upcoming meeting, you will be asked to approve a
reorganization of your Qualivest Portfolio into a corresponding FASF Fund. Each
FASF Fund is a series of First American Strategy Funds, Inc., an open-end
investment company advised by FBNA. If required approvals are obtained, the
Qualivest Portfolios are expected to be reorganized into the corresponding FASF
Funds on or about November 28, 1997, when your Qualivest Portfolio shares will
be exchanged for shares of the corresponding FASF Fund of equal value.
Shareholders of the nine other investment portfolios of Qualivest (Small
Companies Value Fund, Large Companies Value Fund, Optimized Stock Fund,
Intermediate Bond Fund, Diversified Bond Fund, International Opportunities Fund,
U.S. Treasury Money Market Fund, Money Market Fund and Tax-Free Money Market
Fund), including the Qualivest mutual funds in which the Qualivest Portfolios
invest, are being asked to approve the reorganizations of such portfolios into
investment portfolios First American Investment Funds, Inc. or First American
Funds, Inc. These proposed reorganizations are covered by two additional sets of
proxy materials. The reorganization that you are being asked to approve should
benefit shareholders by:
* facilitating investment management, administration and marketing by
combining the Qualivest Portfolios and the FASF Funds;
* improving efficiency, including the potential for economies of scale;
* eliminating duplicative shareholder costs; and
* making available to shareholders a greater number of investment portfolio
options.
<PAGE>
In considering these matters, you should note:
* IDENTICAL TERMS AND FEES
The terms of the interim advisory agreement with FBNA are substantially
identical to the terms of the Qualivest Portfolios' previous advisory
agreement with Qualivest Capital. The fee rates are unchanged.
* SIMILAR OBJECTIVES AND POLICIES All four Qualivest Portfolios will merge into
operating FASF Funds. Like the Qualivest Portfolios, each of the FASF Funds
is a "fund of funds." The FASF Funds invest their assets in the First
American family of mutual funds. The objectives and policies of each FASF
Fund are generally similar to those of its corresponding Qualivest Portfolio.
There are some differences, however, which are discussed in the enclosed
Combined Proxy Statement/Prospectus, and you should consider these
differences carefully.
* SIMILAR ACCESS ARRANGEMENTS
You will enjoy access to the FASF Funds through distribution, transaction and
shareholder servicing arrangements that are substantially similar to the
Qualivest Portfolios' current arrangements.
* SAME VALUE OF SHARES
The total value of the FASF Fund shares that you receive in the
reorganization will be the same as the total value of the Qualivest Portfolio
shares that you hold immediately before the reorganization.
* LOWER OPERATING EXPENSE RATIOS
The annual fund operating expense ratio (after waivers) for the corresponding
FASF Fund after the reorganization is expected to be less than or equal to
the annual fund operating expense ratio of your Qualivest Portfolio through
at least September 30, 1998.
The formal Notice of Special Meeting, a Combined Proxy Statement/Prospectus and
a Proxy Ballot are enclosed. If you own shares in more than one Qualivest
Portfolio, more than one Proxy Ballot accompanies these proxy materials. You
will receive additional proxy materials if you are a shareholder of one or more
of the nine other investment portfolios of Qualivest.
YOUR VOTE IS VERY IMPORTANT TO US. WHETHER OR NOT YOU PLAN TO ATTEND THE
SPECIAL MEETING, PLEASE MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY BALLOT
PROMPTLY, USING THE ENCLOSED POSTAGE-PAID ENVELOPE.
The interim investment advisory arrangements with FBNA, the proposed
reorganization and the reasons for the Qualivest Board of Trustees'
recommendation are discussed in detail in the enclosed materials, which you
should read carefully. If you have any questions about the new investment
advisory arrangements or the reorganization, please do not hesitate to call
________________ toll free at 1-800-___-_____.
Very truly yours,
Irimga McKay
President
<PAGE>
QUALIVEST FUNDS
3435 STELZER ROAD
COLUMBUS, OHIO 43219-3035
NOTICE OF SPECIAL SHAREHOLDERS MEETING
TO BE HELD ON _________, 1997
NOTICE IS HEREBY GIVEN THAT a Special Meeting of the Shareholders of Allocated
Conservative Fund, Allocated Balanced Fund, Allocated Growth Fund and Allocated
Aggressive Fund (each a "Qualivest Portfolio"), series of QUALIVEST FUNDS
("Qualivest"), will be held at the offices of __________ on _____________, 1997,
at ________ A.M. _______________ Time for the purpose of considering and
voting upon:
1. A proposal to ratify and approve an interim investment advisory agreement
between Qualivest, on behalf of each Qualivest Portfolio, and First Bank
National Association ("FBNA"), and the receipt of investment advisory fees by
FBNA for the period from August 1, 1997 forward.
2. A proposal to approve an Agreement and Plan of Reorganization providing for
the transfer of the assets and liabilities of each Qualivest Portfolio to a
corresponding fund of First American Strategy Funds, Inc. ("FASF") in exchange
for shares of the corresponding FASF fund.
3. Such other business as may properly come before the Special Meeting or any
adjournment(s).
The proposals are described in the attached Combined Proxy Statement/
Prospectus. YOUR TRUSTEES RECOMMEND THAT YOU VOTE IN FAVOR OF EACH OF THESE
PROPOSALS.
Shareholders of record as of the close of business on ____________ , 1997 are
entitled to notice of, and to vote at, the Special Meeting or any adjournment(s)
thereof.
SHAREHOLDERS ARE REQUESTED TO MARK, DATE, SIGN AND RETURN PROMPTLY IN THE
ENCLOSED ENVELOPE THE ACCOMPANYING PROXY CARD, WHICH IS BEING SOLICITED BY
THE QUALIVEST BOARD OF TRUSTEES. THIS IS IMPORTANT TO ENSURE A QUORUM AT THE
MEETING. PROXIES MAY BE REVOKED AT ANY TIME BEFORE THEY ARE EXERCISED BY
SUBMITTING TO QUALIVEST A WRITTEN NOTICE OF REVOCATION OR A SUBSEQUENTLY
EXECUTED PROXY OR BY ATTENDING THE MEETING AND VOTING IN PERSON. HOWEVER,
ATTENDANCE AT THE MEETING WILL NOT BY ITSELF SERVE TO REVISE A PROXY.
Gregory T. Maddox
Secretary
______________, 1997
<PAGE>
COMBINED PROXY STATEMENT/PROSPECTUS
DATED _____________, 1997
QUALIVEST FUNDS
3435 STELZER ROAD
COLUMBUS, OHIO 43219-3035
1-800-743-8637
FIRST AMERICAN STRATEGY FUNDS, INC.
OAKS, PENNSYLVANIA 19456
1-800-637-2548
This Combined Proxy Statement/Prospectus is furnished in connection with the
solicitation of proxies by the Board of Trustees of Qualivest Funds
("Qualivest") in connection with a Special Meeting of Shareholders of Allocated
Conservative Fund, Allocated Balanced Fund, Allocated Growth Fund and Allocated
Aggressive Fund (the "Qualivest Portfolios" or the "Portfolios") to be held at
______ A.M. _____________ Time on ________ , 1997 at the offices of
______________________ . At the meeting, shareholders will be asked (i) to
ratify and approve an interim investment advisory agreement with First Bank
National Association ("FBNA") and the receipt of investment advisory fees by
FBNA for the period from August 1, 1997 forward, and (ii) to approve a proposed
Agreement and Plan of Reorganization dated ________ , 1997 (the "Reorganization
Agreement") between Qualivest and First American Strategy Funds, Inc. ("FASF").
Copies of the interim investment advisory agreement and the Reorganization
Agreement are attached as Appendices I and III, respectively.
Qualivest and FASF are open-end management investment companies (mutual funds)
that each currently offer their shares in four different investment portfolios,
or "funds." The Reorganization Agreement provides for the transfer of the assets
and liabilities of the four Qualivest Portfolios to the corresponding investment
portfolios of FASF (the "FASF Funds" or the "Funds") in exchange for shares of
the FASF Funds having an equal aggregate value (the Reorganization"). As a
result of the Reorganization, shareholders of the Qualivest Portfolios will
become shareholders of the FASF Funds. Table I, under "Summary--Proposed
Reorganization," shows each Qualivest Portfolio and the corresponding FASF Fund.
Each FASF Fund currently offers only one class of shares. Both the Class A and
Class Y shareholders of the Qualivest Portfolios will receive shares of that one
class in the Reorganization. It has also been proposed that the nine other
investment portfolios of Qualivest (Small Companies Value Fund, Large Companies
Value Fund, Optimized Stock Fund, Intermediate Bond Fund, Diversified Bond Fund,
International Opportunities Fund, U.S. Treasury Money Market Fund, Money Market
Fund and Tax-Free Money Market Fund) be reorganized into First American
Investment Funds, Inc. or First American Funds, Inc. These other proposed
reorganizations are not covered by this Combined Proxy Statement/Prospectus.
This Combined Proxy Statement/Prospectus sets forth concisely the information
that a Qualivest Portfolio shareholder should know before voting, and should be
retained for future reference. This Combined Proxy Statement/Prospectus is
accompanied by the following additional documents: (i) the 1997 Semi-Annual
Report for the FASF Funds and (ii) the current Prospectus for the FASF Funds
dated October 1, 1996, as supplemented January 31, 1997 and through the date
hereof. Additional information relating to this Combined Proxy
Statement/Prospectus is set forth in the Statement of Additional Information,
dated the date hereof, which is incorporated herein by reference, and in the
Prospectuses dated December 1, 1996, as supplemented through the date hereof,
for the Qualivest Portfolios. Each of these documents is on file with the
Securities and Exchange Commission (the "SEC"), and is available without charge
by calling or writing Qualivest or FASF at the respective telephone numbers or
addresses stated above. The information contained in the FASF Prospectus and the
Prospectuses for the Qualivest Portfolios is incorporated by reference into this
Combined Proxy Statement/Prospectus.
This Combined Proxy Statement/Prospectus is expected to be first sent to
shareholders on or about ____________ , 1997.
THE SECURITIES OF THE FASF FUNDS OFFERED HEREBY HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS COMBINED
PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS COMBINED PROXY
STATEMENT/PROSPECTUS AND IN THE MATERIALS EXPRESSLY INCORPORATED HEREIN BY
REFERENCE AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY QUALIVEST, FASF OR THEIR
RESPECTIVE ADVISERS AND DISTRIBUTORS.
SHARES OF QUALIVEST AND FASF ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, FIRST BANK NATIONAL ASSOCIATION, THE UNITED STATES NATIONAL BANK
OF OREGON OR ANY OTHER BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
MUTUAL FUND SHARES INVOLVE CERTAIN INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS
OF PRINCIPAL.
<PAGE>
TABLE OF CONTENTS
SUMMARY 5
Interim Advisory Agreement 5
Qualivest Board Considerations 6
Proposed Reorganization 6
Table I -- Qualivest Portfolios and Corresponding FASF Funds 6
Overview of FASF and Qualivest 6
Qualivest and FASF Board Considerations 7
Voting Information 8
PRINCIPAL RISK FACTORS 8
INFORMATION RELATING TO THE INTERIM ADVISORY AGREEMENT 9
The Merger of U.S. Bancorp into First Bank System, Inc. 9
The Interim Advisory Agreement 10
Information About FBNA 11
Payments to FBNA Affiliates 12
Affiliated Broker Commissions 12
Section 15(f) of the 1940 Act 12
Approval of Qualivest's Board of Trustees 13
INFORMATION RELATING TO THE PROPOSED REORGANIZATION 14
Description of the Reorganization Agreement 14
Qualivest Board Considerations 15
Capitalization 16
Table II -- Pro Forma Capitalization (as of June 30, 1997) 16
Federal Income Tax Treatment 18
COMPARISON OF FASF AND QUALIVEST 19
Investment Objectives and Policies 19
Underlying Funds and Portfolios 20
Investment Advisory Fees and Total Expense Ratios 21
Table III -- Investment Advisory And Total Expense Information 22
FASF Funds' Investment Advisory Agreement 22
Information About FBNA and Other Service Providers 22
Share Structure 23
Distribution and Shareholder Services Plans 24
Shareholder Transactions and Services 24
INFORMATION RELATING TO VOTING MATTERS 25
General Information 25
Shareholder and Board Approvals 26
Table IV(A) -- Qualivest Portfolios -- 5% Ownership as of _______, 1997 27
Table IV(B) -- FASF Funds -- 5% Ownership as of _______, 1997 27
Quorum 27
Annual Meetings 27
Interests of Certain Persons 28
ADDITIONAL INFORMATION ABOUT FASF 28
ADDITIONAL INFORMATION ABOUT QUALIVEST 28
FINANCIAL STATEMENTS 29
OTHER BUSINESS 29
SHAREHOLDER INQUIRIES 29
<PAGE>
APPENDICES I -- INVESTMENT ADVISORY AGREEMENT
II -- PRINCIPAL EXECUTIVE OFFICER AND DIRECTORS OF FIRST
BANK NATIONAL ASSOCIATION
III -- AGREEMENT AND PLAN OF REORGANIZATION
IV -- FEES AND EXPENSES OF THE QUALIVEST PORTFOLIOS AND
CORRESPONDING FASF FUNDS
V -- COMPARISON OF INTERIM ADVISORY AGREEMENT AND FASF
INVESTMENT ADVISORY AGREEMENT
VI -- SHAREHOLDER TRANSACTIONS AND SERVICES
<PAGE>
SUMMARY
The following is a summary of certain information relating to the interim
investment advisory agreement and the proposed Reorganization, and is qualified
by reference to the more complete information contained elsewhere in this
Combined Proxy Statement/Prospectus, the Prospectuses and Statements of
Additional Information for the Qualivest Portfolios and the FASF Funds, and the
Appendices attached hereto.
INTERIM ADVISORY AGREEMENT. On August 1, 1997, pursuant to an Agreement and
Plan of Merger, U.S. Bancorp merged with and into First Bank System, Inc.
("FBS") and the name of FBS was changed to U.S. Bancorp ("New U.S. Bancorp")
(the "Holding Company Merger"). As a result of the Holding Company Merger,
Qualivest Capital Management, Inc. ("Qualivest Capital"), the investment
adviser to the Qualivest Portfolios at that time, became an indirect
wholly-owned subsidiary of New U.S. Bancorp. In accordance with the terms of
the then current investment advisory agreement between Qualivest Capital and
Qualivest, on behalf of the Qualivest Portfolios (the "Old Advisory
Agreement"), and consistent with the requirements of the Investment Company
Act of 1940, as amended (the "1940 Act"), this change in control of Qualivest
Capital resulted in the automatic and immediate termination of the Old
Advisory Agreement.
To better ensure that the Holding Company Merger and this automatic termination
would not disrupt the investment advisory services provided to the Qualivest
Portfolios, Qualivest, Qualivest Capital and FBNA obtained an exemptive order
from the SEC (the "Order") permitting FBNA to act as investment adviser to the
Qualivest Portfolios after the termination of the Old Advisory Agreement, but
prior to obtaining shareholder approval, under a new, interim investment
advisory agreement with Qualivest on behalf of the Portfolios (the "Interim
Advisory Agreement"). In accordance with the Order, the Interim Advisory
Agreement is subject to ratification and approval by the shareholders of the
Qualivest Portfolios at a meeting to be held within 120 days after August 1,
1997 (the "Interim Period").
The Trustees of Qualivest now are proposing that the shareholders of each
Qualivest Portfolio ratify and approve the Interim Advisory Agreement. The
Interim Advisory Agreement became effective on August 1, 1997, the effective
date of the Holding Company Merger. Pending the ratification and approval of the
Interim Advisory Agreement, all fees payable under the Agreement are being held
in escrow. Any escrowed fees relating to a Qualivest Portfolio will be received
by FBNA only if the Interim Advisory Agreement is ratified and approved by the
shareholders of such Qualivest Portfolio.
The terms of the Interim Advisory Agreement are substantially identical to the
terms of the Old Advisory Agreement, except for (i) the change in the investment
adviser, (ii) the effective date, (iii) the termination date, and (iv) inclusion
of a provision requiring that all fees payable by each Qualivest Portfolio under
the Interim Advisory Agreement be held in escrow until the Agreement is approved
by such Portfolio's shareholders. The rate of the advisory fee payable under the
Interim Advisory Agreement by each Qualivest Portfolio is identical to the rate
of the fee under the Old Advisory Agreement. A description of FBNA, the Interim
Advisory Agreement and the services provided by FBNA thereunder is set forth
below under the heading "Information Relating to the Interim Advisory
Agreement." A copy of the Interim Advisory Agreement is attached to this
Combined Proxy Statement/Prospectus as Appendix I. The description of the
Interim Advisory Agreement is qualified in its entirety by reference to the copy
of the Interim Advisory Agreement attached hereto.
If ratified and approved, the Interim Advisory Agreement will continue in effect
with respect to the Qualivest Portfolios either (i) for successive one year
terms, subject to certain annual approval requirements, or (ii) until the
Reorganization is completed (which, subject to various conditions described
herein, is expected to occur on or about November 21, 1997) (the "Closing"),
whichever occurs earlier. It is expected that after the Closing, FBNA will serve
as investment adviser to each of the FASF Funds. In the event that the Interim
Advisory Agreement is not ratified and approved with respect to a Qualivest
Portfolio, the fees held in escrow with respect to that Portfolio will be
returned to the Portfolio, and Qualivest's Board of Trustees will consider what
actions should be taken with respect to management of the assets of the
Qualivest Portfolio until a new investment advisory agreement is approved by the
shareholders of the Portfolio or the Reorganization occurs.
<PAGE>
QUALIVEST BOARD CONSIDERATIONS. In approving the Interim Advisory Agreement and
recommending its ratification and approval to the shareholders of the Qualivest
Portfolios, Qualivest's Board of Trustees reviewed the qualifications of FBNA to
serve as investment adviser to the Qualivest Portfolios and considered that a
number of Qualivest investment personnel could leave the employ of Qualivest
Capital as a result of the Holding Company Merger. In light of this fact, the
Board determined that doubt existed as to whether the remaining personnel of
Qualivest Capital, acting alone, would be able to provide the appropriate scope
and quality of advisory services to the Qualivest Portfolios following the
Holding Company Merger. It was proposed that certain Qualivest investment
personnel would become employees of FBNA at the effective date of the Holding
Company Merger and that FBNA would then assume management of the Qualivest
Portfolios pursuant to the Interim Advisory Agreement. The Board of Trustees
determined that this arrangement would serve Qualivest shareholders better than
any available alternatives. The Board also considered, among other things, that
the provisions of the Interim Advisory Agreement were substantially similar, and
advisory fee rates were exactly the same, as those of the Old Advisory
Agreement. See "Information Relating to the Interim Advisory Agreement --
Approval of Qualivest's Board of Trustees." QUALIVEST'S BOARD OF TRUSTEES
RECOMMENDS THAT QUALIVEST SHAREHOLDERS RATIFY AND APPROVE THE INTERIM ADVISORY
AGREEMENT AND THE RECEIPT OF INVESTMENT ADVISORY FEES BY FBNA FOR THE PERIOD
FROM AUGUST 1, 1997 FORWARD.
PROPOSED REORGANIZATION. The Reorganization Agreement provides for: (i) the
transfer of all of the assets and liabilities of each of the four Qualivest
Portfolios to FASF in exchange for shares of the corresponding FASF Funds; and
(ii) the distribution of these FASF Fund shares to the shareholders of the
Qualivest Portfolios in liquidation of the Qualivest Portfolios. The
Reorganization is subject to a number of conditions with respect to each
Qualivest Portfolio, including the shareholder approvals described below.
Following the Reorganization (and the reorganization of the nine other
investment portfolios of Qualivest into investment portfolios of First American
Funds, Inc. or First American Investment Funds, Inc.), it is contemplated that
there will be a winding up of Qualivest's affairs, including the deregistration
of Qualivest as an investment company under the 1940 Act.
As a result of the proposed Reorganization, each shareholder of a Qualivest
Portfolio will become a shareholder of the corresponding FASF Fund and will
hold, immediately after the Closing, shares of the corresponding FASF Fund
having a total value equal to the total value of the shares of the Qualivest
Portfolio the shareholder holds immediately before the Closing. The following
Table I shows each Qualivest Portfolio and the corresponding FASF Fund. Each
FASF Fund currently offers only one class of shares. Both the Class A and Class
Y shareholders of the Qualivest Portfolios will receive shares of that one class
in the Reorganization.
TABLE I
QUALIVEST PORTFOLIOS AND CORRESPONDING FASF FUNDS
QUALIVEST PORTFOLIO CORRESPONDING FASF FUND
Allocated Conservative Fund Strategy Income Fund
Allocated Balanced Fund Strategy Growth and Income Fund
Allocated Growth Fund Strategy Growth Fund
Allocated Aggressive Fund Strategy Aggressive Growth Fund
The Reorganization Agreement provides that the Reorganization may be abandoned
at any time prior to the Closing upon the mutual consent of both Qualivest and
FASF, among other reasons. For further information, see "Information Relating to
the Proposed Reorganization."
OVERVIEW OF FASF AND QUALIVEST. The investment objectives, policies and
restrictions of the Qualivest Portfolios are, in general, similar to those of
their corresponding FASF Funds. Each of the FASF Funds operates as a "fund of
funds" by investing up to 100% of its assets in other mutual funds in the First
American family of funds (the "Underlying Funds"). The Underlying Funds in which
the FASF Funds invest are series of First American Investment Funds, Inc.
("FAIF") and First American Funds, Inc. ("FAF"), which are also open-end
management investment companies. Each of the four
<PAGE>
Qualivest Portfolios also operates as a "fund of funds" by investing up to 100%
of its assets in other mutual fund portfolios of Qualivest (the "Underlying
Portfolios"). See "Comparison of FASF and Qualivest."
The Qualivest Board has recommended, subject to shareholder approval and the
satisfaction of certain conditions, a reorganization of each of the Underlying
Portfolios into a series of either FAIF or FAF (the "Underlying Portfolios
Reorganizations"). Thus, even if shareholders of the Qualivest Portfolios do not
approve the Reorganization, they will hold indirect investments in certain First
American mutual funds if the Underlying Portfolios Reorganizations are approved.
The investment objective of each Qualivest Portfolio is fundamental, which means
that it cannot be changed without the vote of a majority of the outstanding
shares (as defined in the 1940 Act) of such Portfolio. Each FASF Fund's
investment objective is non-fundamental, which means that it can be changed
without a vote of shareholders. Shareholders will receive written notification
at least 30 days prior to any change in an FASF Fund's investment objective.
Additional information is provided below under "Comparison of FASF and Qualivest
- -- Investment Objectives and Policies" and "-- Underlying Funds and Portfolios."
As discussed under "Comparison of FASF and Qualivest -- Investment Advisory Fees
and Total Expense Ratios," FBNA currently serves as the investment adviser to
each FASF Fund. Table III thereunder shows the investment advisory fees paid by
the Qualivest Portfolios during the six months ended January 31, 1997 and the
investment advisory fees that would be paid after consummation of the
Reorganization. Table III also shows that in all cases, the overall expense
ratios of the FASF Funds, after waivers, are expected to be equal to or less
than the overall expense ratios of the corresponding Qualivest Portfolios, as
FBNA has agreed to waive fees and reimburse expenses to the extent necessary to
maintain an expense ratio of 0.25% for each FASF Fund for the period commencing
on the Closing and continuing until September 30, 1998. The Qualivest Portfolios
and FASF Funds currently have different administrators, distributors, transfer
agents, independent auditors and trustees/directors, as discussed under
"Comparison of FASF and Qualivest -- Information About FBNA and Other Service
Providers." Appendix IV to this Combined Proxy Statement/Prospectus provides
additional information about the fees and expenses for the FASF Funds and
corresponding Qualivest Portfolios.
As discussed under "Comparison of FASF and Qualivest -- Share Structure," each
of the FASF Funds currently issues only one class of shares and will issue only
that one class of shares in connection with the Reorganization. Currently, the
Qualivest Portfolios offer Class A and Class Y shares. Class A and Class Y
shares of the Qualivest Portfolios are in some respects similarly structured to
the shares of the FASF Funds. However, Class A shares of the Qualivest
Portfolios are currently offered for sale with a maximum sales load of 4.00% of
the public offering price and are subject to Rule 12b-1 fees of 0.25% of average
daily net assets. Class Y shares of the Qualivest Portfolios are offered at net
asset value and are not subject to Rule 12b-1 fees. The shares of the FASF Funds
are offered for sale without a sales load and are not subject to a Rule 12b-1
fee, but are subject to a shareholder servicing fee of 0.25% of average daily
net assets.
With certain exceptions, the purchase, redemption, dividend and other policies
and procedures of the FASF Funds and Qualivest Portfolios are generally similar.
Additional information concerning these policies and procedures for the
Qualivest Portfolios and the FASF Funds is discussed further under "Comparison
of FASF and Qualivest -- Shareholder Transactions and Services" and in Appendix
VI to this Combined Proxy Statement/Prospectus. NO FRONT-END OR CONTINGENT
DEFERRED SALES CHARGE WILL BE IMPOSED ON ANY OF THE FASF FUND SHARES THAT ARE
ISSUED TO QUALIVEST SHAREHOLDERS IN CONNECTION WITH THE REORGANIZATION.
QUALIVEST AND FASF BOARD CONSIDERATIONS. In reviewing the proposed
Reorganization, the Boards of Qualivest and FASF considered, among other things,
(i) the terms and conditions of the Reorganization Agreement, including
provisions intended to avoid the dilution of shareholder interests; (ii) the
investment management capabilities of FBNA; (iii) the systems capabilities of
FBNA to provide shareholder servicing, reporting and systems integration with
related bank programs for Qualivest Portfolio shareholders; (iv) the similarity
of the distribution channels used by the FASF Funds and the
<PAGE>
Qualivest Portfolios; (v) the investment objectives, policies and limitations of
the Portfolios and the Funds; (vi) the historical investment performance of the
Portfolios and the Funds; (vii) the historical and projected operating expenses
of the Portfolios and the Funds; and (viii) the anticipated tax treatment of the
Reorganization. See "Information Relating to the Proposed Reorganization --
Board Considerations."
Based upon their evaluations of the information presented to them, and in light
of their fiduciary duties under Federal and state law, the Board of Trustees of
Qualivest and the Board of Directors of FASF, including all of the members of
each Board who are not interested persons, as that term is defined in the 1940
Act, of Qualivest or FASF, have determined that the proposed Reorganization is
in the best interests of the shareholders of each Qualivest Portfolio and each
FASF Fund, respectively, and that the interests of the shareholders of the
respective Portfolios and Funds will not be diluted as a result of the
Reorganization. QUALIVEST'S BOARD OF TRUSTEES RECOMMENDS THAT THE QUALIVEST
SHAREHOLDERS APPROVE THE REORGANIZATION AGREEMENT.
VOTING INFORMATION. This Combined Proxy Statement/Prospectus is being furnished
in connection with the solicitation of proxies by Qualivest's Board of Trustees
for a Special Meeting of Shareholders to be held at the offices of on ________ ,
1997 at _______ A.M. _______ Time. (This special meeting and any adjournment(s)
thereof are referred to as the "Meeting.") Only shareholders of record at the
close of business on ________ , 1997 will be entitled to vote at the Meeting.
Shares are entitled to one vote for each dollar of value invested and a
proportionate fractional vote for any fraction of a dollar invested. Shares
represented by a properly executed proxy will be voted in accordance with the
instructions thereon or, if no specification is made, the persons named as
proxies will vote in favor of each proposal set forth in the Notice of Meeting.
Proxies may be revoked at any time before they are exercised by submitting to
Qualivest a written notice of revocation or a subsequently executed proxy or by
attending the Meeting and voting in person. However, attendance at the Meeting
will not by itself serve to revoke a proxy. For additional information,
including a description of the shareholder votes required for approval of the
Interim Advisory Agreements and the Reorganization Agreement, see "Information
Relating to Voting Matters."
PRINCIPAL RISK FACTORS
The risks associated with an investment in the FASF Funds are discussed in
greater detail in the accompanying prospectus for the FASF Funds under
"Investment Objectives and Policies -- Risks to Consider." In view of the
similar nature of the Qualivest Portfolios and the FASF Funds, in that both are
"funds of funds," management believes that an investment in an FASF Fund
involves risks that are generally similar to those of its corresponding
Qualivest Portfolio. However, to the extent the Underlying Funds differ from the
Underlying Portfolios, the risks of investing in the FASF Funds and the
Qualivest Portfolios will differ. The risks of investing in the FASF Funds
include, among others:
*The performance of the FASF Funds will reflect in part the ability of the
Funds' investment adviser to make asset allocation and other investment
decisions which are suited to achieving the Funds' investment objectives.
Due to their active management, the FASF Funds could underperform other
mutual funds with similar investment objectives. The Qualivest Portfolios
are subject to the same risks.
*Investing in the Underlying Funds through the FASF Funds involves certain
additional expenses that are not present in a direct investment in the
Underlying Funds. Investing in the Underlying Portfolios through the
Qualivest Portfolios also involves additional expenses.
*The Underlying Funds are actively managed, and could underperform other
mutual funds with similar investment objectives (including the Underlying
Portfolios).
*Each of the Underlying Funds is subject to the risk of generally adverse
markets. In general, the market prices of equity securities frequently are
subject to greater volatility than the prices of fixed income securities.
Therefore, it may be expected that the net asset values of FASF Funds which
are permitted to invest higher proportions of their assets in Underlying
Funds which
<PAGE>
invest in equity securities ("Underlying Equity Funds") may be more
volatile than FASF Funds which are limited to lower proportions.
*With respect to the Underlying Equity Funds, (i) certain of these funds are
subject to risks associated with investing in small-capitalization
companies; (ii) Technology Fund, Health Sciences Fund and Real Estate
Securities Fund are subject to risks associated with concentrating their
investments in a single or related economic sectors; (iii) Real Estate
Securities Fund is subject to risks associated with direct investments in
real estate investment trusts; (iv) International Fund is subject to risks
associated with investing in foreign securities and to currency risk; (v)
Equity Income Fund may invest a significant portion of its assets in less
than investment grade convertible debt obligations; (vi) certain of the
other Equity Funds may invest specified portions of their assets in
securities of foreign issuers which are listed on a United States stock
exchange or are represented by American Depository Receipts; and (vii)
certain Underlying Funds may engage (but not for speculative purposes) in
options and futures transactions.
*The Underlying Fund which invests in fixed income securities (i) is subject
to interest rate risk (the risk that increases in market interest rates
will cause declines in the value of the debt securities held by the fund),
credit risk (the risk that the issuers of debt securities held by the fund
default in making required payments), and call or prepayment risk (the risk
that a borrower may exercise the right to prepay a debt obligation before
its stated maturity, requiring the fund to reinvest the prepayment at a
lower interest rate); (ii) may invest in mortgage-backed securities which
are subject to certain additional risks; and (iii) may, in order to attempt
to reduce risk, invest in exchange traded put and call options on interest
rate futures contracts and on interest rate indices. In addition, to the
limited extent to which the Underlying Equity Funds may invest in
fixed-rate debt securities, they also are subject to interest rate risk,
credit risk and call risk.
*It is possible that situations could arise in which the interests of the
FASF Funds diverge from those of the Underlying Funds.
As indicated above, some of the Underlying Funds, i.e., Technology Fund, Health
Sciences Fund and Real Estate Securities Fund, concentrate their investments in
a single or related economic sector and, as such, may be more susceptible to any
single economic, technological or regulatory occurrence than the other
Underlying Funds or the Underlying Portfolios. In addition, the Regional Equity
Fund, one of the Underlying Funds, concentrates its investments in a particular
geographic region which means that it will be subject to adverse economic,
political or other developments in that region. To the extent the assets of an
FASF Fund are allocated to one or more of such Underlying Funds, the risks of
such FASF Fund will differ from those of its corresponding Qualivest Portfolio.
The Underlying Funds and their risks are summarized in the accompanying
prospectus for the FASF Funds under the caption "The Underlying Funds."
INFORMATION RELATING TO THE INTERIM ADVISORY AGREEMENT
THE MERGER OF U.S. BANCORP INTO FIRST BANK SYSTEM, INC. On August 1, 1997,
pursuant to an Agreement and Plan of Merger, U.S. Bancorp merged with and into
FBS and the name of FBS was changed to U.S. Bancorp ("New U.S. Bancorp"). As a
result of this Holding Company Merger, Qualivest Capital, the investment adviser
to the Qualivest Portfolios, became an indirect wholly-owned subsidiary of New
U.S. Bancorp. In accordance with the terms of the Old Advisory Agreement and
consistent with the requirements of the 1940 Act, this change in control of
Qualivest Capital resulted in the automatic and immediate termination of the Old
Advisory Agreement. The Old Advisory Agreement was dated July 29, 1994, was
adopted by the sole shareholder of each Qualivest Portfolio prior to
commencement of operations, and was last approved by the Qualivest Board of
Trustees on June 17, 1997. Table III, under "Comparison of FASF and Qualivest --
Investment Advisory Fees and Total Expense Ratios," shows for their latest
fiscal periods the advisory fees actually paid to Qualivest Capital by the
Qualivest Portfolios after waivers, the effective rate of such payments and the
contractual rate that Qualivest Capital was entitled to receive.
<PAGE>
To better ensure that this automatic termination would not disrupt the
investment advisory services provided to the Qualivest Portfolios, Qualivest,
Qualivest Capital and FBNA filed an exemptive application with the SEC on May
12, 1997 and an amendment on June 12, 1997. This application requested that the
SEC permit FBNA to act as investment adviser to the Qualivest Portfolios after
the termination of the Old Advisory Agreement, but prior to obtaining the
approval of the shareholders of the Qualivest Portfolios of the Interim Advisory
Agreement. In this connection, this application also requested that the SEC
permit FBNA to receive fees during the Interim Period from each Qualivest
Portfolio, under the Interim Advisory Agreement, subject to approval by
Qualivest's shareholders at a meeting to be held no later than November 28,
1997. In connection with this application, FBNA agreed to take steps to ensure
that the scope and quality of the investment advisory services will be the same
during the Interim Period as previously provided to Qualivest by Qualivest
Capital. The requested Order was granted by the SEC on July 29, 1997.
THE INTERIM ADVISORY AGREEMENT. As a result of the automatic termination of the
Old Advisory Agreement as described above, the Trustees are proposing that the
shareholders of the Qualivest Portfolios ratify and approve the Interim Advisory
Agreement. The Interim Advisory Agreement became effective on August 1, 1997,
the effective time of the Holding Company Merger. Pending such ratification and
approval, in accordance with the conditions of the Order, all fees payable by
the Qualivest Portfolios under the Interim Advisory Agreement are being held in
escrow. Such escrowed fees attributable to a Qualivest Portfolio will be
received by FBNA only if the Interim Advisory Agreement is ratified and approved
by the shareholders of such Qualivest Portfolio. If ratified and approved, the
Interim Advisory Agreement will continue in effect for successive one year
terms, subject to certain annual approval requirements, or until the Closing
(which, subject to various conditions described herein, is expected to occur on
or about November 21, 1997), whichever occurs earlier. In the event the Interim
Advisory Agreement is not ratified and approved with respect to a Qualivest
Portfolio, in accordance with the conditions of the Order, the escrowed fees
payable by that Portfolio will be returned to the Portfolio and Qualivest's
Board of Trustees will consider what actions should be taken with respect to
management of the assets of the Qualivest Portfolio until a new investment
advisory agreement is approved by the shareholders of the Portfolio or the
Reorganization occurs.
As more fully described below, the terms of the Interim Advisory Agreement are
substantially identical to the terms of the Old Advisory Agreement, except for
(i) the change in the investment adviser, (ii) the effective date, (iii) the
termination date and (iv) inclusion of a provision requiring that all fees
payable by each Qualivest Portfolio under the Interim Advisory Agreement be held
in escrow until the Agreement is approved by such Portfolio's shareholders. The
advisory fee rates payable under the Interim Advisory Agreement are identical to
those payable under the Old Advisory Agreement. A copy of the Interim Advisory
Agreement is attached to this Combined Proxy Statement/Prospectus as Appendix I.
Pursuant to the Interim Advisory Agreement, FBNA agrees to provide, subject to
the supervision of Qualivest's Board of Trustees, a continuous investment
program for the Qualivest Portfolios, including investment research and
management with respect to all securities and investments and cash equivalents
in the Portfolios. FBNA will determine from time to time what allocations will
be made of the Qualivest Portfolios assets among the Underlying Portfolios, in
accordance with the current Prospectus of the Qualivest Portfolios, and
(assuming approval of the Interim Advisory Agreement by the shareholders of the
Underlying Portfolios) will determine what securities and other investments will
be purchased, retained or sold by Qualivest with respect to the Underlying
Portfolios, and will provide the services under the Interim Advisory Agreement
in accordance with each Portfolio's investment objectives, policies and
restrictions. Responsibilities under the Interim Advisory Agreement also include
maintaining books and records with respect to each Portfolio's securities
transactions; providing to Qualivest's Board of Trustees such periodic and
special reports as the Board may request; and using its best efforts to obtain
and provide to Qualivest's fund accountant price information with respect to any
security held, when requested to do so by Qualivest's accountant. The Interim
Advisory Agreement provides that FBNA will pay its own expenses incurred in
connection with its activities under the Interim Advisory Agreement other than
the cost of securities purchased for the Qualivest Portfolios.
<PAGE>
Portfolio securities of the Underlying Portfolios will not be purchased from or
sold to FBNA, Qualivest's distributor or any affiliated person (as defined in
the 1940 Act) of the foregoing companies except to the extent permitted by an
SEC exemptive order or by applicable law. FBNA may, however, cause the
Underlying Portfolios to pay brokerage commissions to an affiliate of FBNA or of
Qualivest's distributor on securities acquired by the Underlying Portfolios.
The Interim Advisory Agreement provides that FBNA will not be liable for any
error of judgment or mistake of law or for any loss suffered by Qualivest in
connection with the performance of the Interim Advisory Agreement, except a loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful misfeasance, bad
faith or gross negligence on FBNA's part in the performance of its duties or
from reckless disregard by FBNA of its obligations and duties under the Interim
Advisory Agreement. Qualivest agrees in the Interim Advisory Agreement to
indemnify FBNA to the full extent permitted by Qualivest's Declaration of Trust.
The Interim Advisory Agreement provides that, unless sooner terminated, it will
continue in effect with respect to the Qualivest Portfolios for an initial
period of 120 days and thereafter for successive annual terms, provided that
such successive terms are specifically approved at least annually (a) by a vote
of a majority of those members of Qualivest's Board of Trustees who are not
parties to the Agreement or "interested persons" (as defined in the 1940 Act) of
any party to the Agreement, cast in person at a meeting called for the purpose
of voting on such approval, and (b) by the vote of a majority of the Board of
Trustees of Qualivest or, with respect to a particular Qualivest Portfolio, a
vote of a majority of the outstanding shares of such Portfolio.
The Interim Advisory Agreement provides that it will terminate immediately in
the event of its assignment and that it is terminable with respect to a
Qualivest Portfolio at any time without penalty by Qualivest (either by vote of
the Trustees or by vote of a majority of the outstanding shares of such
Portfolio), or by FBNA, on 60 days' written notice. To the extent required by
the 1940 Act, the Interim Advisory Agreement may not be amended as to a
Qualivest Portfolio without the approval of the shareholders of such Portfolio.
INFORMATION ABOUT FBNA. FBNA is a national banking association that has
professionally managed accounts for individuals, insurance companies,
foundations, commingled accounts, trust funds and others for over 75 years. FBNA
acts as the investment adviser to the Qualivest Portfolios through its First
Asset Management group. FBNA is a subsidiary of New U.S. Bancorp, 601 Second
Avenue South, Minneapolis, Minnesota 55480, which is a regional, multi-state
bank holding company headquartered in Minneapolis, Minnesota.
In addition to serving as the investment adviser to the Qualivest Portfolios,
FBNA acts as the investment adviser to a number of other mutual funds, including
the following series of FASF, FAIF and FAF that have investment objectives
similar to those of one or more of the Qualivest Portfolios or the Underlying
Portfolios. FBNA is entitled to receive advisory fees from such series as
follows:
<TABLE>
<CAPTION>
CURRENT
CONTRACTUAL ADVISORY
NET ASSETS AS ADVISORY FEE RATE
OF JUNE 30, 1997 FEE RATE AFTER WAIVERS
<S> <C> <C> <C>
SERIES OF FIRST AMERICAN STRATEGY FUNDS, INC.:
Strategy Income Fund $ 17,169,909 0.25% 0.00%
Strategy Growth and Income Fund $ 17,767,463 0.25% 0.00%
Strategy Growth Fund $ 7,210,190 0.25% 0.00%
Strategy Aggressive Growth Fund $ 6,066,369 0.25% 0.00%
SERIES OF FIRST AMERICAN FUNDS, INC.:
Prime Obligations Fund $3,766,294,049 0.40% 0.31%
Treasury Obligations Fund $3,727,459,707 0.40% 0.30%
Government Obligations Fund $1,175,274,283 0.40% 0.32%
<PAGE>
SERIES OF FIRST AMERICAN INVESTMENT FUNDS,
INC.:
Stock Fund $1,065,554,369 0.70% 0.62%
Equity Index Fund $ 527,681,689 0.70% 0.16%
Balanced Fund $ 446,823,078 0.70% 0.61%
Asset Allocation Fund $ 117,220,306 0.70% 0.47%
Diversified Growth Fund $ 592,029,154 0.70% 0.57%
Emerging Growth Fund $ 129,945,121 0.70% 0.63%
Regional Equity Fund $ 357,727,906 0.70% 0.68%
Special Equity Fund $ 515,319,003 0.70% 0.70%
Technology Fund $ 137,227,632 0.70% 0.59%
Health Sciences Fund $ 38,523,406 0.70% 0.00%
Real Estate Securities Fund $ 36,697,851 0.70% 0.00%
International Fund $ 209,421,079 1.25% 1.25%
Limited Term Income Fund $ 107,139,577 0.70% 0.46%
Intermediate Term Income Fund $ 153,588,480 0.70% 0.52%
Fixed Income Fund $ 660,337,231 0.70% 0.53%
Intermediate Government Bond Fund $ 179,490,927 0.70% 0.52%
</TABLE>
As of June 30, 1997, FBNA was managing accounts with an aggregate value of
approximately $42 billion, including mutual fund assets in excess of $14
billion. FBNA's main offices are located at 601 Second Avenue South,
Minneapolis, Minnesota 55480. Appendix II identifies the principal executive
officer and the directors of FBNA.
No officer or Trustee of Qualivest is an officer, employee, director, general
partner or shareholder of FBNA or any of its affiliates. In addition, no Trustee
of Qualivest has any material interest in any material transaction in which FBNA
or its affiliates is a party.
PAYMENTS TO FBNA AFFILIATES. Entities which, as a result of the Holding Company
Merger, are affiliates of FBNA have served as custodian for the Qualivest
Portfolios during the six-month period ended January 31, 1997 and have received
fees pursuant to certain distribution and shareholder service plans that have
been in effect during such year. The table below sets forth the amounts of the
payments made to such affiliates by the Qualivest Portfolios.
DISTRIBUTION AND
SHAREHOLDER
QUALIVEST PORTFOLIO CUSTODY FEES SERVICE PLAN FEES
Allocated Conservative Fund $ 225 $ 556
Allocated Balanced Fund $1,558 $1,887
Allocated Growth Fund $ 360 $2,549
Allocated Aggressive Fund $ 287 $1,228
It is expected that affiliates of FBNA will continue to receive custody,
distribution and shareholder servicing fees from the Qualivest Portfolios until
the Reorganization.
AFFILIATED BROKER COMMISSIONS. During the fiscal period ended January 31, 1997,
the Qualivest Portfolios paid no brokerage commissions in connection with
purchases and sales of portfolio securities to any parties that would be treated
as an affiliated broker as defined in Item 22(a)(1)(ii) of Schedule 14A under
the Securities Exchange Act of 1934, as amended.
SECTION 15(f) OF THE 1940 ACT. FBNA has agreed to use its best efforts to meet
the requirements for the statutory exemption offered by Section 15(f) of the
1940 Act to an investment adviser that receives "any amount or benefit" in
connection with the sale of interests that constitute a "change in control" of
the adviser. The statutory exemption under Section 15(f) is available provided
two conditions are satisfied: (1) for a three-year period following the
transaction, Qualivest or its successor(s) (which, assuming the Reorganization
is consummated, may include FASF) maintains a Board of Trustees or
<PAGE>
Directors at least 75% of whose members are not "interested persons," as that
term is defined under the 1940 Act, of the predecessor or successor investment
adviser, and (2) no "unfair burden" is imposed on Qualivest as a result of the
transaction. As defined in the 1940 Act, an "unfair burden" includes any
arrangement during the two-year period after the change in control whereby the
investment adviser (or predecessor or successor adviser), or any interested
person of such adviser, receives or is entitled to receive any compensation
directly or indirectly, from the investment company or its security holders
(other than fees for bona fide investment advisory or other services), or from
any person in connection with the purchase or sale of securities or other
property to, from, or on behalf of, the investment company (other than fees for
bona fide principal underwriting services provided to the investment company).
No such prohibited compensation arrangements are contemplated in connection with
either the Holding Company Merger or the Reorganization.
APPROVAL OF QUALIVEST'S BOARD OF TRUSTEES. As described above, the Old Advisory
Agreement that was previously in effect for the Qualivest Portfolios
automatically terminated on August 1, 1997 as a result of the Holding Company
Merger. In anticipation of this termination, and in order to minimize any
potential disruption of the advisory services provided to the Qualivest
Portfolios, on May 8, 1997 the Qualivest Board of Trustees authorized the filing
of the exemptive application described above with the SEC in order to permit
FBNA to act as investment adviser to the Qualivest Portfolios on and after
August 1, 1997 but prior to obtaining shareholder approval. At such meeting the
Board concluded that retaining FBNA would be the most appropriate means for the
Qualivest Portfolios to receive after the Holding Company Merger advisory
services of comparable scope and quality to the services received before such
Merger. In addition, at such meeting, Qualivest's Board of Trustees, including
all of the Trustees who are not interested persons (as that term is defined in
the 1940 Act) of Qualivest or FBNA (the "Non-Interested Trustees"), approved the
Interim Advisory Agreement with FBNA that became effective upon the consummation
of the Holding Company Merger on August 1, 1997. If approved by shareholders at
the Meeting, this agreement will continue in effect for the remainder of the
Interim Period and terminate, with respect to the Qualivest Portfolios, upon the
consummation of the Reorganization, at which point it will no longer be needed
since all Qualivest Portfolios will have been combined with FASF Funds.
In considering whether to approve the Interim Advisory Agreement and submit it
to shareholders for their approval, the Board of Trustees considered that a
number of Qualivest investment personnel were expected to leave the employ of
Qualivest Capital by or shortly after the effective date of the Holding Company
Merger. In light of this, the Board of Trustees determined that doubt existed
whether the remaining personnel of Qualivest Capital, acting alone, would be
able to provide an appropriate scope and quality of advisory services to the
Qualivest Portfolios after the Holding Company Merger. Accordingly, it was
necessary for the Board to consider arrangements that would avoid the harm to
the Portfolios that would result if Qualivest Capital's services proved to be
inadequate following the Holding Company Merger. In order to provide, to the
extent practicable, continuity of portfolio management and to avoid harm to the
Qualivest Portfolios, FBNA proposed that certain Qualivest investment personnel
employed by Qualivest Capital become employees of FBNA at the effective date of
the Holding Company Merger. These individuals, together with the large and
experienced group of investment professionals already employed by FBNA, then
would assume management of the Portfolios at the effective date of the Holding
Company Merger pursuant to the Interim Advisory Agreement.
The Board of Trustees determined that entering into the Interim Advisory
Agreement with FBNA would serve Portfolio shareholders better than any available
alternatives, in that it would (i) provide that the Portfolios would, to the
extent possible under the circumstances, continue to be managed by the same
individuals who managed them prior to the Holding Company Merger; (ii) ensure
that, to the extent portfolio managers of the Portfolios departed Qualivest
Capital, the affected Portfolios would be managed after the Holding Company
Merger by a group of investment professionals which the Board had determined
could provide the appropriate scope and quality of advisory services; and (iii)
avoid the need for the Board to consider on an emergency, AD HOC basis how to
proceed if and to the extent additional portfolio managers decided to leave
Qualivest Capital.
The Board of Trustees also considered the following factors: (i) FBNA's
representations that it would provide investment advisory and other services to
the Qualivest Portfolios of a scope and quality
<PAGE>
comparable, in the Board's judgment, to the scope and quality of services
previously provided to the Qualivest Portfolios by Qualivest Capital; (ii) the
substantially similar terms and conditions contained in the Interim Advisory
Agreement as compared to the Old Advisory Agreement; and (iii) FBNA's
representation that in the event of any material change in personnel providing
services under the Interim Advisory Agreement during the Interim Period, the
Board of Trustees of Qualivest would be consulted for the purpose of assuring
themselves that the services provided would not be diminished in scope or
quality.
Based on the foregoing factors, the Trustees concluded that approval of the
Interim Advisory Agreement was in the best interests of the Qualivest Portfolios
and their shareholders. The Board of Trustees further concluded that entering
into the Interim Advisory Agreement would be appropriate and fair considering
that (i) the fees to be paid, and the services to be provided therefor, would be
unchanged from the Old Advisory Agreement; (ii) the fees would be maintained in
an interest-bearing escrow account until payment was approved or disapproved by
shareholders of the Qualivest Portfolios; (iii) because of the relatively short
period for the consummation of the Holding Company Merger, there was
insufficient time to seek prior shareholder approval of the Interim Advisory
Agreement; and (iv) the non-payment of investment advisory fees during the
Interim Period would be an unduly harsh result to FBNA in view of the services
provided by FBNA to the Qualivest Portfolios, and the expenses incurred in
connection with such services, under the Interim Advisory Agreement.
Each Qualivest Portfolio will vote separately on a portfolio-by-portfolio basis
with respect to the approval of the Interim Advisory Agreement. QUALIVEST'S
BOARD OF TRUSTEES RECOMMENDS THAT QUALIVEST SHAREHOLDERS RATIFY AND APPROVE THE
INTERIM ADVISORY AGREEMENT AND THE RECEIPT OF INVESTMENT ADVISORY FEES BY FBNA
FOR THE PERIOD FROM AUGUST 1, 1997 FORWARD.
INFORMATION RELATING TO THE PROPOSED REORGANIZATION
The terms and conditions of the Reorganization are set forth in the
Reorganization Agreement. Significant provisions of the Reorganization Agreement
are summarized below; however, this summary is qualified in its entirety by
reference to the Reorganization Agreement, a copy of which is attached as
Appendix III to this Combined Proxy Statement/Prospectus.
DESCRIPTION OF THE REORGANIZATION AGREEMENT. The Reorganization Agreement
provides that at the Closing the assets and liabilities of the Qualivest
Portfolios will be transferred to corresponding FASF Funds in exchange for full
and fractional shares of the FASF Funds, as shown in Table I above under
"Summary -- Proposed Reorganization."
The total shares issued by each FASF Fund in the Reorganization will have an
aggregate value equal to the aggregate value of the shares of the corresponding
Qualivest Portfolio that are outstanding immediately before the Closing.
Immediately after the Closing, the Qualivest Portfolios will distribute the
shares of the FASF Funds received in the Reorganization to their shareholders in
liquidation of the Qualivest Portfolios. Each shareholder owning Class A or
Class Y Shares of a particular Qualivest Portfolio at the Closing will receive
shares of the corresponding FASF Fund of equal value, and will receive any
unpaid dividends or distributions that were declared before the Closing on their
Qualivest Portfolio shares. Each FASF Fund currently offers only one class of
shares. Both the Class A and Class Y shareholders of the Qualivest Portfolios
will receive shares of that one class in the Reorganization. FASF will establish
an account for each former shareholder of the Qualivest Portfolios reflecting
the appropriate number of FASF Fund shares distributed to the shareholder. These
accounts will be identical to the accounts currently maintained by Qualivest for
each shareholder. Shares of the FASF Funds are in uncertificated form.
Upon completion of the Reorganization, all outstanding shares of the Qualivest
Portfolios will be redeemed and canceled in exchange for shares of the FASF
Funds distributed. Thereafter, assuming that the nine other investment
portfolios of Qualivest that are not parties to the Reorganization have been
reorganized into investment portfolios of First American Funds, Inc. or First
American Investment Funds, Inc., Qualivest will wind up its affairs and be
deregistered as an investment company under the
<PAGE>
1940 Act. The stock transfer books of the Qualivest Portfolios will be
permanently closed as of the Closing. Exchange or redemption requests received
thereafter will be deemed to be exchange or redemption requests for shares of
the FASF Funds distributed to the former shareholders of the Qualivest
Portfolios.
The Reorganization is subject to a number of conditions, including approval of
the Reorganization Agreement by Qualivest Portfolio shareholders; the receipt of
certain legal opinions described in the Reorganization Agreement (which include
an opinion of counsel to FASF that the FASF Fund shares issued in the
Reorganization will be validly issued, fully paid and non-assessable); the
receipt of certain certificates from the parties concerning the continuing
accuracy of the representations and warranties in the Reorganization Agreement;
and the parties' performance in all material respects of their respective
agreements and undertakings in the Reorganization Agreement. Assuming
satisfaction of the conditions in the Reorganization Agreement, the Closing will
be effective on November 21, 1997 or such other date as agreed to by the
parties.
FBNA has undertaken to bear any Reorganization expenses incurred by the
Qualivest Portfolios and FASF Funds, including the costs associated with this
Combined Proxy Statement/Prospectus and the Meeting, but not including share
registration expenses.
The Reorganization may be abandoned at any time prior to the Closing upon the
mutual consent of both Qualivest and FASF, or by either Qualivest or FASF if
determined by the Board of Trustees or Directors that proceeding with the
Reorganization is inadvisable. The Reorganization Agreement provides further
that at any time before or (to the extent permitted by law) after approval of
the agreement by the shareholders of Qualivest (i) the parties may, by written
agreement authorized by their respective Boards of Trustees/Directors and with
or without the approval of their shareholders, amend any of the provisions of
the Reorganization Agreement and (ii) either party may waive any default by the
other party or the failure to satisfy any of the conditions to its obligations
(the waiver to be in writing and authorized by the Board of Trustees/Directors
of the waiving party with or without the approval of such party's shareholders).
QUALIVEST BOARD CONSIDERATIONS. At its May 8, 1997 meeting at which the Interim
Advisory Agreement described above was approved, the Qualivest Board of Trustees
was advised that FBNA was also considering the possibility of consolidating the
Qualivest Portfolios with the FASF Funds following the Holding Company Merger.
Following that meeting, FBNA provided information requested by the Board
relating to the possible consolidation of the two fund groups. This information
was reviewed in detail by the independent trustees of Qualivest at a meeting
held on June 16, 1997 and by the full Qualivest Board of Trustees at a meeting
held June 17, 1997, at which the proposal that the Qualivest Portfolios be
reorganized into the FASF Funds, as set forth in the Reorganization Agreement,
was approved by the Board of Trustees of Qualivest.
During its deliberations, Qualivest's Board of Trustees (with the advice and
assistance of independent counsel) reviewed, among other things: (i) the
potential effect of the Reorganization on the shareholders of the Qualivest
Portfolios; (ii) the investment management capabilities of FBNA; (iii) the
systems capabilities of FBNA to provide shareholder servicing, reporting and
systems integration with related bank programs for Qualivest Portfolio
shareholders; (iv) the similarity of the distribution channels used by the FASF
Funds and the Qualivest Portfolios; (v) the investment advisory and other fees
paid by the FASF Funds, and the historical and projected expense ratios of the
FASF Funds as compared to those of the Qualivest Portfolios; (vi) the potential
economies of scale that may result from the Reorganization; (vii) the expected
cost-savings for certain of the Portfolios as a result of the Reorganization;
(viii) the investment objectives, policies and limitations of the FASF Funds and
their relative compatibility with those of the Portfolios as discussed further
in this Combined Proxy Statement/Prospectus; (ix) the historical investment
performance records of the Qualivest Portfolios and Underlying Portfolios and
the FASF Funds and Underlying Funds; (x) the terms and conditions of the
Reorganization Agreement, including those provisions that were intended to avoid
dilution of the interests of Qualivest's shareholders; (xi) the sales load
structure applicable to the FASF Funds as compared to the sales loads applicable
to their corresponding Portfolios; (xii) the greater number of investment
portfolio options that would be available to shareholders after the
Reorganization; and (xiii) the anticipated tax treatment of the Reorganization
for the respective Qualivest Portfolios and their shareholders.
<PAGE>
Qualivest's Board of Trustees also noted FBNA's offer to pay the expenses
incurred by Qualivest and FASF in connection with the Reorganization and to
continue, at FBNA's expense, the Board of Trustees' liability coverage currently
carried by Qualivest. In addition, Qualivest's Board of Trustees considered
FBNA's agreement to waive fees and reimburse expenses to the extent necessary to
maintain, commencing on the Closing and until September 30, 1998, an expense
ratio of 0.25% for each FASF Fund, which will be equal to or less than the
current expense ratios for both the Class A and the Class Y shares of the
Qualivest Portfolios. FBNA has also agreed that, from October 1, 1998 through
September 30, 1999, it will waive fees and reimburse expenses to the extent
necessary so that no FASF Fund will have total fund operating expense ratios in
excess of those currently applicable to the Class A shares of its corresponding
Qualivest Portfolio, as set forth in Appendix IV.
After consideration of all of the factors described above, the Qualivest Board
of Trustees determined that the Reorganization Agreement was in the best
interests of the shareholders of each Qualivest Portfolio, and that the
interests of the shareholders of the respective Qualivest Portfolios would not
be diluted as a result of the Reorganization.
BISYS Fund Services has asserted that consummation of the Reorganization would
cause certain amounts to become payable to it under its administration and fund
accounting agreements with Qualivest. The Qualivest Board of Trustees' approval
of the Reorganization is conditioned upon FBNA and BISYS Fund Services reaching
agreement as to the amount, if any, which is so payable and FBNA's payment of
such amount. Discussions between BISYS Fund Services and FBNA regarding this
matter are under way.
CAPITALIZATION. The following table sets forth, as of June 30, 1997, (i) the
capitalization of each of the four Qualivest Portfolios; (ii) the capitalization
of each of the corresponding FASF Funds; and (iii) the pro forma capitalization
of each of the FASF Funds as adjusted to give effect to the Reorganization of
the Qualivest Portfolios. The capitalization of each Qualivest Portfolio and
FASF Fund is likely to be different at the Closing as a result of daily share
purchase and redemption activity in the Qualivest Portfolios and the FASF Funds,
as well as the effects of the Qualivest Portfolios' and the FASF Funds' other
ongoing operations.
TABLE II
PRO FORMA CAPITALIZATION (AS OF JUNE 30, 1997)
(IN THOUSANDS, EXCEPT PER SHARE VALUES)
QUALIVEST ALLOCATED CONSERVATIVE FUND/FASF STRATEGY INCOME FUND
<TABLE>
<CAPTION>
QUALIVEST
PORTFOLIO FASF FUND PRO FORMA
<S> <C> <C> <C>
Class A Shares(1)
Net assets $ 2,841 -- --
Net asset value per share $ 10.87 -- --
Shares outstanding 261 -- --
Class Y Shares(1)
Net assets $ 9,145 -- --
Net asset value per share $ 10.88 -- --
Shares outstanding 840 -- --
Common Shares (no class designation)(2)
Net assets -- $17,170 $29,156
Net asset value per share -- $ 10.49 $ 10.49
Shares outstanding -- 1,637 2,778
Total Net Assets $11,986 $17,170 $29,156
</TABLE>
(1) Not offered by FASF.
(2) Not offered by Qualivest.
<PAGE>
QUALIVEST ALLOCATED BALANCED FUND/FASF STRATEGY GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
QUALIVEST
PORTFOLIO FASF FUND PRO FORMA
<S> <C> <C> <C>
Class A Shares(1)
Net assets $ 9,897 -- --
Net asset value per share $ 11.49 -- --
Shares outstanding 861 -- --
Class Y Shares(1)
Net assets $118,507 -- --
Net asset value per share $ 11.39 -- --
Shares outstanding 10,407 -- --
Common Shares (no class designation)(2)
Net assets -- $17,767 $146,171
Net asset value per share -- $ 11.07 $ 11.07
Shares outstanding -- 1,605 13,207
Total Net Assets $128,404 $17,767 $146,171
</TABLE>
(1) Not offered by FASF.
(2) Not offered by Qualivest.
QUALIVEST ALLOCATED GROWTH FUND/FASF STRATEGY GROWTH FUND
<TABLE>
<CAPTION>
QUALIVEST
PORTFOLIO FASF FUND PRO FORMA
<S> <C> <C> <C>
Class A Shares(1)
Net assets $13,445 -- --
Net asset value per share $ 12.13 -- --
Shares outstanding 1,109 -- --
Class Y Shares(1)
Net assets $12,493 -- --
Net asset value per share $ 11.99 -- --
Shares outstanding 1,042 -- --
Common Shares (no class designation)(2)
Net assets -- $7,210 $33,148
Net asset value per share -- $11.24 $ 11.24
Shares outstanding -- 642 2,951
Total Net Assets $25,938 $7,210 $33,148
</TABLE>
(1) Not offered by FASF.
(2) Not offered by Qualivest.
<PAGE>
QUALIVEST ALLOCATED AGGRESSIVE FUND/FASF STRATEGY AGGRESSIVE GROWTH FUND
<TABLE>
<CAPTION>
QUALIVEST
PORTFOLIO FASF FUND PRO FORMA
<S> <C> <C> <C>
Class A Shares(1)
Net assets $ 8,315 -- --
Net asset value per share $ 12.37 -- --
Shares outstanding 672 -- --
Class Y Shares(1)
Net assets $20,812 -- --
Net asset value per share $ 12.34 -- --
Shares outstanding 1,687 -- --
Common Shares (no class designation)(2)
Net assets -- $6,066 $35,193
Net asset value per share -- $11.43 $ 11.43
Shares outstanding -- 531 3,079
Total Net Assets $29,127 $6,066 $35,193
</TABLE>
(1) Not offered by FASF.
(2) Not offered by Qualivest.
FEDERAL INCOME TAX TREATMENT. Consummation of the Reorganization with respect to
each Qualivest Portfolio is subject to the condition that Qualivest and FASF
receive an opinion from Dorsey & Whitney LLP, counsel to FASF, to the effect
that, for federal income tax purposes: (i) the transfer of all of the assets and
liabilities of each Qualivest Portfolio to its corresponding FASF Fund in
exchange for shares of the FASF Fund and the distribution of these FASF shares
to shareholders of the Qualivest Portfolio, as described in the Reorganization
Agreement, will constitute a reorganization within the meaning of Section
368(a)(1)(C) or Section 368(a)(1)(D) of the Internal Revenue Code of 1986, as
amended (the "Code"); (ii) no income, gain or loss will be recognized by the
Qualivest Portfolios as a result of these transactions; (iii) no income, gain or
loss will be recognized by the FASF Funds as a result of these transactions;
(iv) no income, gain or loss will be recognized by the shareholders of each
Qualivest Portfolio on the distribution to them of shares of the corresponding
FASF Fund in exchange for their shares of the Qualivest Portfolio (but
shareholders of a Qualivest Portfolio subject to taxation will recognize income
upon receipt of any net investment income or net capital gains of such Qualivest
Portfolio which are distributed by such Qualivest Portfolio prior to the
Closing); (v) the tax basis of FASF Fund shares received by a shareholder of a
Qualivest Portfolio will be the same as the tax basis of the shareholder's
Qualivest Portfolio shares immediately before the Reorganization; (vi) the tax
basis to each FASF Fund of the assets of the corresponding Qualivest Portfolio
received pursuant to the Reorganization will be the same as the tax basis of the
assets in the hands of the Qualivest Portfolio immediately before the
Reorganization; (vii) a shareholder's holding period for FASF Fund shares will
be determined by including the period for which the shareholder held the
Qualivest Portfolio shares exchanged therefor, provided the shareholder held the
Qualivest Portfolio shares as a capital asset; (viii) each FASF Fund's holding
period with respect to the assets received in the Reorganization will include
the period for which the assets were held by the corresponding Qualivest
Portfolio, provided that each corresponding Qualivest Portfolio held such
Portfolio assets as capital assets; and (ix) each FASF Fund will succeed to and
take into account the earnings and profits, or deficit in earnings and profits,
of the corresponding Qualivest Portfolio immediately before the Reorganization.
FASF and Qualivest have not sought, and do not intend to seek, a ruling from the
Internal Revenue Service ("IRS") concerning the tax treatment of the
Reorganization. The opinion of counsel is not binding on the IRS and does not
preclude the IRS from adopting a contrary position. Shareholders may wish to
consult their own tax advisors concerning the potential tax consequences of the
Reorganization to them, including state and local income tax consequences.
<PAGE>
COMPARISON OF FASF AND QUALIVEST
INVESTMENT OBJECTIVES AND POLICIES. The investment objectives, policies and
restrictions of the FASF Funds are similar to those of the Qualivest Portfolios.
The investment objectives of the Qualivest Portfolios, as compared to the
investment objectives of the FASF Funds, are as follows:
The ALLOCATED CONSERVATIVE FUND seeks to produce current income with a
secondary objective of long-term capital appreciation, whereas its
corresponding FASF Fund, the STRATEGY INCOME FUND, seeks to provide a high
level of current income consistent with limited risk to capital. The
Strategy Income Fund's limited equity component is designed to help offset
inflation and provide a source for potential increases in income over time.
The ALLOCATED BALANCED FUND seeks to provide a balance between long-term
capital appreciation and current income, whereas its corresponding FASF
Fund, the STRATEGY GROWTH AND INCOME FUND, seeks to provide both capital
growth and current income through a balanced approach to equity securities
and fixed-income investments.
The ALLOCATED GROWTH FUND seeks to provide capital appreciation and
income growth, whereas its corresponding FASF Fund, the STRATEGY GROWTH
FUND, seeks to provide capital growth with a moderate level of current
income. The Strategy Growth Fund provides high allocations to various equity
categories including small company and international company equity
securities.
The ALLOCATED AGGRESSIVE FUND seeks to provide maximum capital
appreciation, whereas its corresponding FASF Fund, the STRATEGY AGGRESSIVE
GROWTH FUND, seeks to provide a high level of capital growth. The Strategy
Aggressive Growth Fund provides high allocations to various equity
categories including small company and international company equity
securities and may include high allocations to technology and health care
company equity securities.
Each FASF Fund and each Qualivest Portfolio seeks to achieve its investment
objectives by investing in a variety of the Underlying Funds or Underlying
Portfolios. There is no assurance that the objectives of the Qualivest
Portfolios or the FASF Funds will be achieved. The investment objective of each
Qualivest Portfolio is fundamental, which means that it may not be changed
without a vote of the holders of a majority, as that term is defined in the 1940
Act, of the outstanding shares of that Portfolio. The investment objectives of
the FASF Funds are not fundamental and therefore may be changed without a vote
of shareholders. Such changes could result in an FASF Fund having investment
objectives different from those which shareholders considered appropriate at the
time of approving the Reorganization. Shareholders will receive written
notification at least 30 days prior to a change in an FASF Fund's investment
objectives.
The FASF Funds, in addition to investing in shares of the Underlying Funds, may
hold cash or invest in short-term obligations such as rated commercial paper and
variable amount master demand notes, U.S. dollar-denominated time and savings
deposits (including certificates of deposit), bankers acceptances, obligations
of the U.S. Government or its agencies or instrumentalities, repurchase
agreements, securities of other mutual funds which invest primarily in debt
obligations with remaining maturities of 13 months or less, and other similar
high-quality short-term U.S. dollar-denominated obligations. Under normal
circumstances, the aggregate investments of the FASF Funds in Prime Obligations
Fund (a money market fund) and such cash and cash items will not exceed the
maximum percentages set forth in the table below for Prime Obligations Fund. See
"Underlying Funds and Portfolios -- FASF Fund Investments in the Underlying
Funds." However, for temporary defensive purposes during times of unusual market
conditions, the FASF Funds may without limitation hold shares of Prime
Obligations Fund and such cash and cash items.
Similarly, the Qualivest Portfolios, in addition to investing in shares of the
Underlying Portfolios, may invest, for temporary cash management purposes, in
short-term obligations (with maturities of 12 months or less) consisting of
commercial paper (including variable amount master demand notes), bankers'
acceptances, certificates of deposit, repurchase agreements, reverse repurchase
agreements and dollar roll agreements, obligations issued or guaranteed by the
U.S. Government or its agencies or instrumentalities, asset-backed and
mortgage-related securities, and demand and time deposits of domestic and
foreign banks and savings and loan associations. The Qualivest Portfolios also
may hold depositary or custodial receipts representing beneficial interests in
any of the foregoing securities.
<PAGE>
The FASF Funds are permitted to invest in futures contracts and options on
futures in order to remain effectively fully invested in proportions consistent
with their current asset allocation strategy in a cost effective manner, to
re-allocate assets among asset categories while minimizing transactions costs,
to maintain cash reserves while simulating full investment, to facilitate
trading, or to seek higher investment returns when a futures contract is priced
more attractively than the underlying security or index. For more information
about these investment methods, restrictions on their use, and certain
associated risks, see "Special Investment Methods -- Futures and Options on
Futures" in the accompanying prospectus for the FASF Funds. The Qualivest
Portfolios may not engage in these investment methods.
UNDERLYING FUNDS AND PORTFOLIOS. Information with respect to the investment
objectives, policies and restrictions of the Underlying Funds for the FASF
Funds, and of the Underlying Portfolios for the Qualivest Portfolios, is
included in their respective prospectuses, which have been incorporated herein
by reference. See "Investment Objectives and Policies" and "The Underlying
Funds" in the accompanying FASF Funds' prospectus and "Investment Objectives and
Policies -- Underlying Funds" and "Underlying Funds' Investment Techniques and
Risk Factors" in the Qualivest Portfolios' prospectuses. The performance of the
Qualivest Portfolios and the FASF Funds is directly related to the performance
of the Underlying Portfolios and the Underlying Funds. Qualivest Portfolio
shareholders should be aware that the shareholders of each Underlying Portfolio
have been asked to approve a proposal whereby each such Portfolio would be
reorganized into a series of either FAIF or FAF (the "Underlying Portfolios
Reorganizations"). Thus, even if shareholders of the Qualivest Portfolios do not
approve the Reorganization, they will hold indirect investments in certain First
American mutual funds if the Underlying Portfolios Reorganizations are approved.
QUALIVEST PORTFOLIO INVESTMENTS IN UNDERLYING PORTFOLIOS
Each Qualivest Portfolio currently seeks its investment objective by investing
in the following Underlying Portfolios, each of which is an investment portfolio
of Qualivest: Large Companies Value Fund, Small Companies Value Fund,
International Opportunities Fund and Optimized Stock Fund (collectively, the
"Equity Funds"); Intermediate Bond Fund and Diversified Bond Fund (collectively,
the "Income Funds"); and U.S. Treasury Money Market Fund and Money Market Fund
(collectively, the "Money Funds").
The Qualivest Portfolios invest their assets in the Underlying Portfolios within
the ranges (expressed as a percentage of each Qualivest Portfolio's assets)
indicated below, determined at the time an investment is made:
CONSERVATIVE BALANCED GROWTH AGGRESSIVE
UNDERLYING PORTFOLIO FUND FUND FUND FUND
Large Companies Fund 0-35% 0-35% 0-35% 0-50%
Small Companies Fund 0-35% 0-35% 0-35% 0-35%
International Fund 0-35% 0-35% 0-35% 0-35%
Optimized Fund 0-35% 0-35% 0-35% 0-50%
Intermediate Bond Fund 0-50% 0-35% 0-35% 0%
Bond Fund 0-50% 0-35% 0-35% 0%
U.S. Treasury Fund 0-10% 0-10% 0-10% 0%
Money Market Fund 0-10% 0-10% 0-10% 0-10%
<PAGE>
Although the Portfolios' investment adviser intends to invest each Qualivest
Portfolio's assets in the Underlying Portfolios within the ranges set forth
above, and to periodically adjust the allocations in response to economic and
market conditions, each Qualivest Portfolio has the following "neutral mix"
representing the intended typical allocation of the Portfolio's assets over
time:
UNDERLYING PORTFOLIOS
INCOME AND
QUALIVEST PORTFOLIO EQUITY FUNDS MONEY FUNDS
Conservative Fund 30% 70%
Balanced Fund 60% 40%
Growth Fund 80% 20%
Aggressive Fund 100% 0%
The Qualivest Portfolios have adopted a policy of limiting redemptions to no
more than 3% of any Underlying Portfolio's shares during any month, except as
necessary to meet redemption requests by the Underlying Portfolio's
shareholders. The Qualivest Portfolios may be unable to reallocate assets among
the Underlying Portfolios as quickly as would be the case in the absence of this
constraint.
FASF FUND INVESTMENTS IN THE UNDERLYING FUNDS
Each FASF Fund seeks to achieve its investment objectives by investing in a
variety of the Underlying Funds. The Underlying Funds include the ten Equity
Funds named in the table below, Fixed Income Fund, and Prime Obligations Fund (a
money market fund). FBNA allocates and re-allocates the assets of the FASF Funds
among the Underlying Funds within the following ranges, expressed as percentages
of the FASF Funds' net assets:
<TABLE>
<CAPTION>
GROWTH AND AGGRESSIVE
INCOME FUND INCOME FUND GROWTH FUND GROWTH FUND
MINIMUM MAXIMUM MINIMUM MAXIMUM MINIMUM MAXIMUM MINIMUM MAXIMUM
<S> <C> <C> <C> <C> <C> <C> <C>
<C>
Equity Funds as a whole 20% 40% 40% 70% 55% 85% 65% 95%
Equity Income Fund 20% 40% 0% 0% 0% 0% 0% 0%
Stock Fund 0% 0% 10% 30% 10% 35% 10% 40%
Diversified Growth Fund 0% 0% 10% 30% 10% 35% 10% 40%
Emerging Growth Fund 0% 0% 0% 15% 5% 25% 10% 40%
Regional Equity Fund 0% 0% 0% 15% 5% 25% 10% 40%
Special Equity Fund 0% 0% 0% 15% 5% 25% 10% 40%
International Fund 0% 0% 0% 15% 5% 25% 10% 30%
Technology Fund 0% 0% 0% 0% 0% 0% 0% 20%
Health Sciences Fund 0% 0% 0% 0% 0% 0% 0% 20%
Real Estate Securities Fund 0% 10% 0% 10% 0% 0% 0% 0%
Fixed Income Fund 60% 80% 30% 60% 15% 45% 5% 35%
Prime Obligations Fund 0% 20% 0% 30% 0% 30% 0% 30%
</TABLE>
The ranges set forth above, and FBNA's allocations within the ranges, are
intended to reflect the FASF Funds' differing balances between the investment
objectives of current income and of growth of capital. The FASF Funds may make
alterations to the ranges and the Underlying Funds set forth above without
shareholder approval, provided that the FASF Funds' prospectus is appropriately
amended or supplemented. If the Reorganizations are approved by shareholders,
the FASF Funds will also invest in Small Cap Value Fund and International Index
Fund, series of FAIF into which Qualivest Small Companies Fund and Qualivest
International Fund will be reorganized.
If the Reorganizations are approved by shareholders, it is likely that, for a
period of time following the Reorganization, investments in the Underlying Funds
will not be within the ranges set forth above. To insure that the investments in
the Underlying Funds comply with each Fund's range, the FASF Funds may alter the
permissible ranges, which would require the prospectus to be amended and
supplemented, or adjust the investments in the Underlying Funds. Changes in
investments may result in a realization of capital gains for the Funds and
Shareholders.
INVESTMENT ADVISORY FEES AND TOTAL EXPENSE RATIOS. Currently, FBNA serves as the
investment adviser for each of the FASF Funds, and would continue to do so after
the Reorganization at the fee rates stated in Table III below. FBNA is also
providing investment advisory services to the Qualivest Portfolios under the
Interim Advisory Agreement.
Table III shows (i) the advisory fees in dollars actually paid by the Qualivest
Portfolios for the six month period ended January 31, 1997, (ii) the current
contractual advisory fee rates payable with respect to the Qualivest Portfolios
(which are the same as the effective advisory fee rates for the latest fiscal
period, since no fees were waived), (iii) the post-Reorganization contractual
advisory fees payable with
<PAGE>
respect to the corresponding FASF Funds, (iv) the current total expense ratio of
the Qualivest Portfolios after waivers and (v) the pro forma total expense ratio
of the corresponding FASF Funds based upon the fee arrangements, including
waivers and reimbursements, that will be in place upon consummation of the
Reorganization. All fee rates are annualized, and are computed daily and payable
monthly based on a Qualivest Portfolio's or FASF Fund's average daily net
assets. Table III shows that while the contractual investment advisory fee rates
of the FASF Funds are higher than the contractual rates for the corresponding
Qualivest Portfolios, FBNA has agreed to waive fees and reimburse expenses to
the extent necessary to maintain, commencing on the Closing and until September
30, 1998, an expense ratio of 0.25% for each FASF Fund, which is the same as or
lower than the current expense ratios of the corresponding Qualivest Portfolios.
FBNA has also agreed that, from October 1, 1998 through September 30, 1999, it
will waive fees and reimburse expenses to the extent necessary so that no FASF
Fund will have total fund operating expense ratios in excess of those currently
applicable to the Class A shares of its corresponding Qualivest Portfolio, as
set forth in Appendix IV. Detailed pro forma expense information for each
proposed reorganization is included in Appendix IV to this Combined Proxy
Statement/Prospectus.
TABLE III
INVESTMENT ADVISORY AND TOTAL EXPENSE INFORMATION
<TABLE>
<CAPTION>
POST-
CURRENT REORGANIZATION TOTAL FUND PRO FORMA FUND
ADVISORY FEES CONTRACTUAL CONTRACTUAL OPERATING OPERATING
NAME OF QUALIVEST FOR SIX MONTHS ADVISORY ADVISORY EXPENSES EXPENSES
PORTFOLIO ENDED 1/31/97* FEE RATE FEE RATE AS OF 1/31/97** (AFTER WAIVERS)
<S> <C> <C> <C> <C> <C>
Allocated $ 2,255 0.05% 0.25% 0.63% 0.25%
Conservative (Class A)
Fund 0.39%
(Class Y)
Allocated $15,575 0.05% 0.25% 0.53% 0.25%
Balanced Fund (Class A)
0.25%
(Class Y)
Allocated Growth $ 3,602 0.05% 0.25% 0.56% 0.25%
Fund (Class A)
0.29%
(Class Y)
Allocated $ 2,874 0.05% 0.25% 0.59% 0.25%
Aggressive Fund (Class A)
0.32%
(Class Y)
</TABLE>
* The Qualivest Portfolios commenced operations on May 1, 1996.
** Annualized, based on the six-month period ended January 31, 1997.
FASF FUNDS' INVESTMENT ADVISORY AGREEMENT. After the Closing, FBNA will continue
to serve as the investment adviser for each FASF Fund pursuant to the FASF
Funds' Investment Advisory Agreement. As set forth in Table III, the contractual
fee rates of the FASF Funds differ from those of the corresponding Qualivest
Portfolios. In addition, there are certain differences between the Interim
Advisory Agreement and the FASF Funds' Investment Advisory Agreement. The
significant differences between these Agreements are summarized and compared in
Appendix V to this Combined Proxy Statement/Prospectus.
INFORMATION ABOUT FBNA AND OTHER SERVICE PROVIDERS. FBNA acts as the investment
adviser to the FASF Funds through its First Asset Management group. FBNA has
acted as an investment adviser to FASF since its inception in 1996 and has acted
as investment adviser to FAIF and FAF since 1987 and 1982, respectively.
Additional information about FBNA is set forth above under "Information Relating
to the Interim Advisory Agreement -- Information About FBNA."
The Glass-Steagall Act generally prohibits banks from engaging in the business
of underwriting, selling or distributing securities and from being affiliated
with companies principally engaged in those
<PAGE>
activities. In addition, administrative and judicial interpretations of the
Glass-Steagall Act prohibit bank holding companies and their bank and nonbank
subsidiaries from organizing, sponsoring or controlling registered open-end
investment companies that are continuously engaged in distributing their shares.
Bank holding companies and their bank and nonbank subsidiaries may serve,
however, as investment advisers to registered investment companies, subject to a
number of terms and conditions.
Although the scope of the prohibitions and limitations imposed by the
Glass-Steagall Act has not been fully defined by the courts or the appropriate
regulatory agencies, FASF has received an opinion from its counsel that FBNA and
its affiliates are not prohibited from performing the services contemplated by
the FASF Funds' Investment Advisory Agreement and the prospectus for the FASF
Funds. In the event of changes in federal or state statutes or regulations or
judicial and administrative interpretations or decisions pertaining to
permissible activities of bank holding companies and their bank and nonbank
subsidiaries, FBNA and its affiliates might be prohibited from continuing these
arrangements. In that event, it is expected that the Board of Directors would
make other arrangements and that shareholders would not suffer adverse financial
consequences.
The other service providers for the Qualivest Portfolios and the FASF Funds are
different, as set forth in the following table.
OTHER SERVICE PROVIDERS
FOR QUALIVEST PORTFOLIOS AND FASF FUNDS
<TABLE>
<CAPTION>
QUALIVEST PORTFOLIOS FASF FUNDS
<S> <C> <C>
Distributor BISYS Fund Services SEI Investments Distribution Co.
Administrator BISYS Fund Services SEI Investments Management Corporation
Transfer Agent BISYS Fund Services Ohio, Inc. DST Systems, Inc.
Custodian United States National Bank First Trust National Association
of Oregon
Independent Auditors Deloitte & Touche LLP KPMG Peat Marwick LLP
</TABLE>
BISYS Fund Services, a division of BISYS Group, Inc., maintains offices at 3435
Stelzer Road, Columbus, Ohio 43219-3035. SEI Investments Distribution Co. and
SEI Investments Management Corporation, wholly owned subsidiaries of SEI
Investments Company, are located at Oaks, Pennsylvania 19456.
SHARE STRUCTURE. Both Qualivest and FASF are registered as open-end management
investment companies under the 1940 Act. Each offers its shares in a number of
separate investment portfolios, or "funds."
Qualivest is organized as a Massachusetts business trust and is subject to the
provisions of its Declaration of Trust and By-Laws. Qualivest is authorized to
issue an unlimited number of units of beneficial interest (referred to herein as
shares), without par value, which may be divided into separate portfolios and
separate classes of shares. FASF is organized as a corporation under the laws of
the State of Minnesota and is subject to the provisions of its Articles of
Incorporation and Bylaws. Although the rights of shareholders of a Minnesota
corporation vary in certain respects from the rights of a Shareholder of a
Massachusetts business trust, the attributes of a share of common stock in FASF
are comparable to those of a share of beneficial interest in Qualivest, except
that there are differences with respect to voting rights. Shares of the FASF
Funds are entitled to one vote for each share held and fractional votes for
fractional shares held. Shares of the Qualivest Portfolios are entitled to one
vote for each dollar of value invested and a proportionate fractional vote for
any fraction of a dollar invested. Shareholders of both the Qualivest Portfolios
and the FASF Funds will vote in the aggregate and not by portfolio or class
except as otherwise required by law or when portfolio or class voting is
permitted by their Board of Trustees/Directors. Shares of both the Qualivest
Portfolios and FASF have noncumulative voting rights. In addition, shares of
FASF have no pre-exemptive or conversion rights and shares of the Qualivest
Portfolios have only such conversion rights, exchange rights and preemptive
rights as the Board of Trustees of Qualivest may grant in its discretion. When
issued for payment or in accordance with their
<PAGE>
dividend reinvestment plans, as described in their respective prospectuses, FASF
Fund shares and Qualivest shares are fully paid and non-assessable except, with
respect to Qualivest, as required under Massachusetts law.
Under Minnesota law, FASF Fund shareholders have no personal liability for
FASF's acts or obligations. Under Massachusetts law, shareholders of Qualivest
could, under certain circumstances, be held personally liable for the
obligations of Qualivest. However, Qualivest's Declaration of Trust provides
that shareholders shall not be subject to any personal liability for the
obligations of Qualivest. The Declaration of Trust also provides for
indemnification out of the property of a Qualivest Portfolio of any shareholder
held personally liable by reason of being or having been a shareholder of the
Portfolio. Thus, the risk of a shareholder incurring a financial loss on account
of shareholder liability is limited to circumstances in which a Qualivest
Portfolio itself would be unable to meet its obligations.
The Qualivest Portfolios offer Class A and Class Y shares in order to allocate
certain expenses, such as distribution and shareholder servicing fees and other
"class" expenses to different shareholder groups for which the fees and expenses
are incurred. The FASF Funds currently do not offer separate share classes.
Additional information concerning the attributes of the shares issued by
Qualivest and FASF is included in their respective prospectuses, as supplemented
to the date hereof, which are incorporated herein by reference. Shareholders may
obtain copies of FASF's Articles of Incorporation and Bylaws and Qualivest's
Declaration of Trust and By-Laws from FASF upon written request at its principal
office.
DISTRIBUTION AND SHAREHOLDER SERVICE PLANS. FASF has adopted and entered into a
shareholder service plan and agreement (the "Service Agreement") pursuant to
which the distributor of the Funds' shares agrees to provide, or to enter into
written agreements with service providers to provide, one or more specified
shareholder services to beneficial owners of shares of the FASF Funds. In
consideration of the services and facilities to be provided by the FASF Funds'
distributor or any service provider, each FASF Fund pays to the distributor a
shareholder servicing fee at an annual rate of 0.25% of the average net asset
value of all shares of each FASF Fund, which fee is computed daily and paid
monthly. The shareholder servicing fee is intended to compensate the distributor
of the FASF Funds' shares for the provision of shareholders services and may be
used by the distributor to provide compensation to institutions through which
shareholders hold their shares for ongoing service and/or maintenance of
shareholder accounts.
Qualivest has adopted a distribution and shareholder service plan with respect
to the Class A shares of each Qualivest Portfolio (the "Class A Plan"). The
Class Y shares of the Qualivest Portfolios are not subject to a distribution and
shareholder service plan. However, each Portfolio has adopted, but not
implemented, a plan under which up to 0.25% of its average daily net assets
attributable to Class Y shares may be expended to procure shareholder services.
Pursuant to Qualivest's Class A Plan, each Portfolio is authorized to pay or
reimburse the distributor of the Class A shares for certain expenses incurred in
connection with shareholder servicing and distribution services. Payments under
the Class A Plan are calculated daily and paid monthly at an annual rate not to
exceed 0.25% of the average daily net assets of the Class A shares of each
Portfolio. Payments to the distributor of Qualivest Portfolio shares pursuant to
Qualivest's Class A Plan are used (i) to compensate banks, broker-dealers and
other institutions for providing distribution assistance relating to Qualivest
Portfolio shares, (ii) for promotional activities intended to result in the
sales of Qualivest Portfolio shares, such as to pay for the preparation,
printing and distribution of prospectuses to other than current Qualivest
Portfolio shareholders, and (iii) to compensate banks, broker-dealers and other
institutions for providing shareholder services with respect to their customers
who are, from time to time, beneficial and record holders of shares of the
Portfolios.
SHAREHOLDER TRANSACTIONS AND SERVICES. The respective purchase, redemption,
exchange, dividend and other policies and procedures of the FASF Funds and the
corresponding Qualivest Portfolios are generally similar. These policies and
procedures are more fully set forth in Appendix VI to this Combined Proxy
Statement/Prospectus.
Qualivest Portfolios' Class A and Class Y shareholders will receive the same
class of FASF Fund shares in connection with the Reorganization, as the FASF
Funds issue their shares in only one class. As
<PAGE>
shown in Appendix VI, there are differences in the sales charge structures
applicable to the Class A shares of the Qualivest Portfolios and the FASF Fund
shares to be received in the Reorganization. The Class A shares of the Qualivest
Portfolios are currently sold with a front-end sales charge. Qualivest
Portfolios' Class Y shares, and all FASF Fund shares, are currently sold at net
asset value without any front-end or contingent deferred sales charge. NO SALES
CHARGE WILL BE IMPOSED ON ANY OF THE FASF FUND SHARES THAT ARE ISSUED TO
QUALIVEST SHAREHOLDERS IN CONNECTION WITH THE REORGANIZATION.
Purchase, redemption and exchange procedures for the Qualivest Portfolios are
generally similar to those for the FASF Funds. However, the minimum purchase
amount is lower for the Class A shares of the Qualivest Portfolios than for the
FASF Funds. The minimum purchase required to open an account generally is $500
for the Class A shares of the Qualivest Portfolios and $1,000 for the FASF
Funds. Subsequent purchases generally require a minimum payment of $100 in both
instances. Class Y shares of the Qualivest Portfolios are offered only through
trust departments of banks and through other institutional investors for moneys
that are held in a fiduciary, agency, custodial or similar capacity.
There are also some differences in the dividend policies of the Qualivest
Portfolios and the FASF Funds. For the Allocated Conservative Fund and Allocated
Balanced Fund, and for their corresponding FASF Funds, net income dividends are
declared and paid monthly. For the Qualivest Allocated Growth Fund and Allocated
Aggressive Fund, which invest in Underlying Portfolios that in turn invest
primarily in equity securities, net income dividends are declared and paid
quarterly. For their corresponding FASF Funds, however, such dividends are
declared and paid monthly. For all Funds and Portfolios, distributions of any
net realized long-term capital gains are made at least once annually.
INFORMATION RELATING TO VOTING MATTERS
GENERAL INFORMATION. This Combined Proxy Statement/Prospectus is being furnished
in connection with the solicitation of proxies for the Meeting by the Board of
Trustees of Qualivest. It is expected that the solicitation of proxies will be
primarily by mail. Officers and service contractors of Qualivest and FASF also
may solicit proxies by telephone, telegraph or personal interview. In this
connection, Qualivest has retained _______ to assist in the solicitation of
proxies for the Reorganization. The cost of solicitation is estimated to be
_______ and will be borne by FBNA. Shareholders may vote by marking, signing,
dating and returning the enclosed Proxy Ballot in the enclosed postage-paid
envelope. Any shareholder giving a proxy may revoke it at any time before it is
exercised by submitting to Qualivest a written notice of revocation or a
subsequently executed proxy or by attending the Meeting and voting in person.
Only shareholders of record at the close of business on , 1997 will be entitled
to vote at the Meeting. On that date, the following shares of the Qualivest
Portfolios were outstanding and entitled to be voted.
NAME OF PORTFOLIO AND CLASS SHARES ENTITLED TO VOTE
Allocated Conservative Fund --
Class A Shares
Class Y Shares
Allocated Balanced Fund --
Class A Shares
Class Y Shares
Allocated Growth Fund --
Class A Shares
Class Y Shares
Allocated Aggressive Fund --
Class A Shares
Class Y Shares
Shares are entitled to one vote for each dollar of value invested and a
proportionate fractional vote for any fraction of a dollar invested.
If the accompanying proxy is executed and returned in time for the Meeting, the
shares covered thereby will be voted in accordance with the proxy on all matters
that may properly come before the Meeting.
SHAREHOLDER AND BOARD APPROVALS. Pursuant to the Application, and the conditions
under which the Order was granted by the SEC, the Interim Advisory Agreement is
being submitted for the ratification and approval of the shareholders of each of
the Qualivest Portfolios. The Interim Advisory Agreement must be ratified and
approved by a majority of the outstanding shares of a Qualivest Portfolio in
order to remain effective with respect to such Portfolio. In the event the
Interim Advisory Agreement is not ratified and approved with respect to a
Qualivest Portfolio, the Interim Advisory Agreement will terminate, the
investment advisory fees accrued under such Agreement and held in escrow with
respect to that Portfolio will be returned to the Portfolio, and Qualivest's
Board of Trustees will consider what actions should be taken with respect to
management of the assets of the Qualivest Portfolio until a new investment
advisory agreement is approved by the shareholders of that Portfolio or the
Reorganization occurs.
The Reorganization Agreement is being submitted for approval at the Meeting by
the shareholders of each of the Qualivest Portfolios pursuant to the provisions
of Qualivest's Declaration of Trust. The Reorganization Agreement must be
approved for each Qualivest Portfolio by a majority of the shares outstanding
and entitled to vote of such Qualivest Portfolio, voting separately on a
portfolio-by-portfolio basis. The Reorganization Agreement provides that in the
event the Reorganization Agreement is approved with respect to some but not all
of the Qualivest Portfolios, the Board of Directors of FASF and the Board of
Trustees of Qualivest may, in the exercise of their reasonable business
judgment, either abandon the Reorganization Agreement with respect to all of the
Qualivest Portfolios or direct that the Reorganization and the other
transactions described in the Reorganization Agreement be consummated to the
extent they deem advisable.
The term "majority of the outstanding shares" of a particular Qualivest
Portfolio means the lesser of (i) 67% of the shares of the Portfolio present at
the Meeting if the holders of more than 50% of the outstanding shares of such
Portfolio are present or (ii) more than 50% of the outstanding shares of the
Portfolio, as applicable. The vote of the shareholders of the FASF Funds is not
being solicited, since their approval or consent is not necessary for the
Reorganization.
The approval of the Reorganization Agreement by the Board of Trustees of
Qualivest is discussed above under "Information Relating to the Proposed
Reorganization -- Board Considerations." The Reorganization Agreement was
unanimously approved by the Board of Directors of FASF at a meeting held on
[August 14], 1997.
As of _____ , 1997, the officers and Trustees of Qualivest as a group owned less
than 1% of each Qualivest Portfolio. As of _____ , 1997, the officers and
Directors of FASF as a group owned less than 1% of each FASF Fund. Table IV(A)
shows the name, address and share ownership of each person known to Qualivest to
have beneficial or record ownership with respect to 5% or more of a class of a
Qualivest Portfolio as of _____ , 1997. Table IV(B) shows the name, address and
share ownership of each person known to FASF to have beneficial or record
ownership with respect to 5% or more of a class of a FASF Fund as of _____ ,
1997.
<PAGE>
TABLE IV(A)
QUALIVEST PORTFOLIOS -- 5% OWNERSHIP AS OF _________, 1997
<TABLE>
<CAPTION>
CLASS AND AMOUNT OF PERCENTAGE
NAME AND SHARES OWNED AND PERCENTAGE PERCENTAGE OF PORTFOLIO
QUALIVEST PORTFOLIO ADDRESS TYPE OF OWNERSHIP OF CLASS OF PORTFOLIO POST-CLOSING
<S> <C> <C> <C> <C> <C>
</TABLE>
TABLE IV(B)
FASF FUNDS -- 5% OWNERSHIP AS OF __________, 1997
<TABLE>
<CAPTION>
CLASS AND AMOUNT OF PERCENTAGE
NAME AND SHARES OWNED AND PERCENTAGE PERCENTAGE OF PORTFOLIO
FASF FUND ADDRESS TYPE OF OWNERSHIP OF CLASS OF PORTFOLIO POST-CLOSING
<S> <C> <C> <C> <C> <C>
</TABLE>
For purposes of the 1940 Act, any person who owns directly or through one or
more controlled companies more than 25% of the voting securities of a company is
presumed to "control" such company. Under this definition, _____________ and its
affiliates may be deemed to be controlling persons of each of the FASF Funds and
Qualivest Portfolios.
QUORUM. In the event that a quorum is not present at the Meeting, or in the
event that a quorum is present at the Meeting but sufficient votes to approve
the Interim Advisory Agreement or the Reorganization Agreement are not received
with respect to one or more of the Qualivest Portfolios, the persons named as
proxies may propose one or more adjournments of the Meeting to permit further
solicitation of proxies. Any such adjournment(s) will require the affirmative
vote of a majority of those shares affected by the adjournment(s) that are
represented at the Meeting in person or by proxy. If a quorum is present, the
persons named as proxies will vote those proxies which they are entitled to vote
FOR the particular proposal for which a quorum exists in favor of such
adjournment(s), and will vote those proxies required to be voted AGAINST such
proposal against any adjournment(s). A shareholder vote may be taken with
respect to one or more Qualivest Portfolios (but not the other Qualivest
Portfolios) on some or all matters before any such adjournment(s) if sufficient
votes have been received for approval. A quorum is constituted with respect to a
Qualivest Portfolio by the presence in person or by proxy of the holders of more
than 50% of the outstanding shares of the Portfolio entitled to vote at the
Meeting. For purposes of determining the presence of a quorum for transacting
business at the Meeting, abstentions will be treated as shares that are present
at the Meeting but which have not been voted. Abstentions will have the effect
of a "no" vote for purposes of obtaining the requisite approvals. Broker
"non-votes" (that is, proxies from brokers or nominees indicating that such
persons have not received instructions from the beneficial owners or other
persons entitled to vote shares on a particular matter with respect to which the
brokers or nominees do not have discretionary power) will not be treated as
shares that are present at the Meeting and, accordingly, could make it more
difficult to obtain the requisite approvals.
ANNUAL MEETINGS. Shareholder meetings are not required by Qualivest's
Declaration of Trust or other authority except, under certain circumstances, to
elect Trustees, amend the Declaration of Trust, approve an investment advisory
agreement and to satisfy certain other requirements. Qualivest is required to
call a special shareholder meeting for purposes of considering the removal of
one or more Trustees upon the written request of shareholders holding not less
than 10% of the outstanding votes of Qualivest. The Bylaws of FASF provide that
annual shareholders meetings are not required and that meetings of shareholders
need only be held with such frequency as required under Minnesota law and the
1940 Act.
<PAGE>
INTERESTS OF CERTAIN PERSONS. The following receive payments from the FASF Funds
for services rendered pursuant to contractual arrangements with the Funds: FBNA,
as the adviser of each Fund, receives payments for its investment advisory and
management services; SEI Investments Distribution Co., as the distributor for
each Fund, receives payments for providing distribution services; SEI
Investments Management Corporation, in its capacity as the administrator for
each Fund, receives payments for providing shareholder servicing, legal and
accounting and other administrative personnel and services; DST Systems, Inc.,
in its capacity as transfer and dividend disbursing agent for each Fund,
receives payments for providing transfer agency and dividend disbursing
services; and First Trust National Association, a subsidiary of New U.S.
Bancorp, receives payments for providing custodial services for each Fund, and
may also act as securities lending agent in connection with the Funds'
securities lending transactions and receive, as compensation for such securities
lending services, fees based on a percentage of the Funds' income from such
securities lending transactions.
ADDITIONAL INFORMATION ABOUT FASF
Additional information about the FASF Funds is included in its Prospectus and
Statement of Additional Information dated January 31, 1997, as supplemented
through the date hereof, copies of which, to the extent not included herewith,
may be obtained without charge by writing to FASF, c/o SEI Investments
Distribution Co., Oaks, Pennsylvania 19456, or by calling 1-800-637-2548. FASF
is subject to the informational requirements of the Securities Exchange Act of
1934, as amended, and the 1940 Act, and in accordance therewith it files
reports, proxy materials and other information with the SEC. Reports and other
information filed by FASF can be inspected and copied at the Public Reference
Facilities maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C.
20549. In addition, these materials can be inspected and copied at the SEC's
Regional Offices at 7 World Trade Center, Suite 1300, New York, New York 10048,
and Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such materials also can be obtained from the Public
Reference Branch, Office of Consumer Affairs and Information Services,
Securities and Exchange Commission, Washington, D.C. 20549, at prescribed rates.
Information included in this Combined Proxy Statement/Prospectus concerning FASF
was provided by FASF.
ADDITIONAL INFORMATION ABOUT QUALIVEST
Additional information about the Qualivest Portfolios is included in the
Prospectuses, dated December 1, 1996, as supplemented through the date hereof,
which have been filed with the SEC. Copies of these Prospectuses and the related
Statement of Additional Information may be obtained without charge by writing to
Qualivest Funds, c/o BISYS Fund Services, 3435 Stelzer Road, Columbus, Ohio
43219-3035 or by calling 1-800-743-8637. Reports and other information filed by
Qualivest can be inspected and copied at the Public Reference Facilities
maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549 and at
the offices of Qualivest Funds listed above. In addition, these materials can be
inspected and copied at the SEC's Regional Offices at 7 World Trade Center,
Suite 1300, New York, New York 10048, and Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials
also can be obtained from the Public Reference Branch, Office of Consumer
Affairs and Information Services, Securities and Exchange Commission,
Washington, D.C. 20549, at prescribed rates.
Information included in this Combined Proxy Statement/Prospectus concerning
Qualivest was provided by Qualivest.
<PAGE>
FINANCIAL STATEMENTS
The audited statements of assets and liabilities, including the schedules of
portfolio investments, of the Qualivest Portfolios as of July 31, 1996, and the
related statements of operations, statements of changes in net assets and
financial highlights for the period then ended, as included in the July 31, 1996
Annual Report of Qualivest, and the audited statement of assets and liabilities
of the FASF Funds as of September 5, 1996, have been incorporated by reference
into this Combined Proxy Statement/Prospectus in reliance on the respective
reports of Deloitte & Touche LLP, independent auditors for Qualivest, and KPMG
Peat Marwick LLP, independent auditors for FASF, given on the authority of such
firms as experts in accounting and auditing. In addition, the unaudited January
31, 1997 financial statements of the Qualivest Portfolios and the unaudited
March 31, 1997 financial statements of the FASF Funds, as included in the
January 31, 1997 Semi-Annual Report of Qualivest and the March 31, 1997
Semi-Annual Report of FASF, are incorporated herein by reference.
OTHER BUSINESS
Qualivest's Board of Trustees knows of no other business to be brought before
the Meeting. However, if any other matters come before the Meeting, it is the
intention that proxies which do not contain specific restrictions to the
contrary will be voted on such matters in accordance with the judgment of the
persons named in the enclosed form of proxy.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be addressed to Qualivest Funds or to First
American Strategy Funds, Inc. in writing at the appropriate addresses on the
cover page of this Combined Proxy Statement/Prospectus or by telephoning
Qualivest at 1-800-743-8637 or FASF at 1-800-637-2548.
* * *
SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE MEETING ARE REQUESTED TO
MARK, SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE.
NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES. SHAREHOLDERS ALSO MAY
RETURN PROXIES BY TELEFAX OR VOTE BY TELEPHONE.
QUALIVEST FUNDS WILL FURNISH, WITHOUT CHARGE, COPIES OF ITS JULY 31, 1996
SHAREHOLDERS REPORT AND ITS JANUARY 31, 1997 SEMI-ANNUAL SHAREHOLDERS REPORT TO
ANY SHAREHOLDER UPON REQUEST ADDRESSED TO 3435 STELZER ROAD, COLUMBUS, OHIO
43219 OR BY TELEPHONE AT 1-800-743-8637.
<PAGE>
APPENDIX I
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this day 1st of August, 1997, between QUALIVEST FUNDS (the
"Trust"), a Massachusetts business trust having its principal place of business
at 3435 Stelzer Road, Columbus, Ohio 43219-3035, and FIRST BANK NATIONAL
ASSOCIATION (the "Investment Adviser"), a national banking association, having
its principal place of business at First Bank Place, 601 Second Avenue South,
Minneapolis, Minnesota 55402.
WHEREAS, the Trust is registered as an open-end, management investment company
under the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Trust desires to retain the Investment Adviser to furnish
investment advisory and administrative services to newly created investment
portfolios of the Trust and may retain the Investment Adviser to serve in such
capacity with respect to certain additional investment portfolios of the Trust,
all as now or hereafter may be identified in Schedule A hereto as such Schedule
may be amended from time to time (individually referred to herein as a "Fund"
and collectively referred to herein as the "Funds") and the Investment Adviser
represents that it is willing and possesses legal authority to so furnish such
services without violation of applicable laws and regulations;
NOW, THEREFORE, in consideration of the premises and mutual covenants herein
contained, it is agreed between the parties hereto as follows:
1. APPOINTMENT. The Trust hereby appoints the Investment Adviser to act as
investment adviser to the Funds for the period and on the terms set forth in
this Agreement. The Investment Adviser accepts such appointment and agrees to
furnish the services herein set forth for the compensation herein provided.
Additional investment portfolios may from time to time be added to those covered
by this Agreement by the parties executing a new Schedule A which shall become
effective upon its execution and shall supersede any Schedule A having an
earlier date.
2. DELIVERY OF DOCUMENTS. The Trust has furnished the Investment Adviser with
copies properly certified or authenticated of each of the following:
(a) the Trust's Agreement and Declaration of Trust, dated as of May 19,
1994, and any and all amendments thereto or restatements thereof (such
Declaration, as presently in effect and as it shall from time to time
be amended or restated, is herein called the "Declaration of Trust");
(b) the Trust's By-Laws and any amendments thereto;
(c) resolutions of the Trust's Board of Trustees authorizing the
appointment of the Investment Adviser and approving this Agreement;
(d) the Trust's Notification of Registration on Form N-8A under the 1940
Act as filed with the Securities and Exchange Commission (the
"Commission") on May 20, 1994, and all amendments thereto;
(e) the Trust's Registration Statement on Form N-1A under the Securities
Act of 1933, as amended (the "1933 Act"), and under the 1940 Act as
filed with the Commission and all amendments thereto (the
"Registration Statement"); and
(f) the most recent Prospectus and Statement of Additional Information of
each of the Funds (such Prospectus and Statement of Additional
Information, as presently in effect, and all amendments and
supplements thereto, are herein collectively called the "Prospectus").
The Trust will furnish the Investment Adviser from time to time with copies of
all amendments of or supplements to the foregoing.
3. MANAGEMENT. Subject to the supervision of the Trust's Board of Trustees,
the Investment Adviser will provide a continuous investment program for the
Funds, including investment research and management with respect to all
securities and investments and cash equivalents in the Funds. The Investment
Adviser will determine from time to time what securities and other
investments will be
<PAGE>
purchased, retained or sold by the Trust with respect to the Funds. The
Investment Adviser will provide the services under this Agreement in accordance
with each of the Fund's investment objectives, policies, and restrictions as
stated in the Prospectus and resolutions of the Trust's Board of Trustees. The
Investment Adviser further agrees that it:
(a) will use the same skill and care in providing such services as it uses
in providing services to fiduciary accounts for which it has
investment responsibilities;
(b) will conform with all applicable Rules and Regulations of the
Commission under the 1940 Act and in addition will conduct its
activities under this Agreement in accordance with any applicable
regulations of any governmental authority pertaining to the investment
advisory activities of the Investment Adviser;
(c) will not make loans to any person to purchase or carry units of
beneficial interest ("shares") in the Trust or make loans to the
Trust;
(d) will place or cause to be placed orders for the Funds either directly
with the issuer or with any broker or dealer. In placing orders with
brokers and dealers, the Investment Adviser will attempt to obtain
prompt execution of orders in an effective manner at the most
favorable price. Consistent with this obligation and to the extent
permitted by the 1940 Act, when the execution and price offered by two
or more brokers or dealers are comparable, the Investment Adviser may,
in its discretion, purchase and sell portfolio securities to and from
brokers and dealers who provide the Investment Adviser with research
advice and other services. In no instance will portfolio securities be
purchased from or sold to BISYS Fund Services, the Investment Adviser,
or any affiliated person of the Trust, BISYS Fund Services or the
Investment Adviser, except to the extent permitted by the 1940 Act and
the Commission;
(e) will maintain all books and records with respect to the securities
transactions of the Funds and will furnish the Trust's Board of
Trustees with such periodic and special reports as the Board may
request;
(f) will treat confidentially and as proprietary information of the Trust
all records and other information relative to the Trust and the Funds
and prior, present or potential shareholders, and will not use such
records and information for any purpose other than performance of its
responsibilities and duties hereunder, except after prior notification
to and approval in writing by the Trust, which approval shall not be
unreasonably withheld and may not be withheld where the Investment
Adviser may be exposed to civil or criminal contempt proceedings for
failure to comply, when requested to divulge such information by duly
constituted authorities, or when so requested by the Trust;
(g) will maintain its policy and practice of conducting its fiduciary
functions independently. In making investment recommendations for the
Funds, the Investment Adviser's personnel will not inquire or take
into consideration whether the issuers of securities proposed for
purchase or sale for the Trust's account are customers of the
Investment Adviser or of its parent or its subsidiaries or affiliates.
In dealing with such customers, the Investment Adviser and its parent,
subsidiaries, and affiliates will not inquire or take into
consideration whether securities of those customers are held by the
Trust;
(h) will promptly review all (1) current security reports, (2) summary
reports of transactions and (3) current cash position reports upon
receipt thereof from the Trust and will report any errors or
discrepancies in such reports to the Trust or its designee within
three (3) business days; and
(i) will use its best efforts to obtain and provide to the Trust's fund
accountant (1) dealer quotations, (2) prices from a pricing service,
(3) matrix prices, or (4) any other price information believed to be
reliable by the Investment Adviser with respect to any security held
by a Fund, when requested to do so by the Trust's fund accountant.
4. SERVICES NOT EXCLUSIVE. The investment management services furnished by the
Investment Adviser hereunder are not to be deemed exclusive, and the Investment
Adviser shall be free to furnish similar services to others so long as its
services under this Agreement are not impaired thereby.
5. BOOKS AND RECORDS. In compliance with the requirements of Rule 31a-3 under
the 1940 Act, the Investment Adviser hereby agrees that all records which it
maintains for the Funds are the property of the Trust and further agrees to
surrender promptly to the Trust any of such records upon the Trust's
<PAGE>
request. The Investment Adviser further agrees to preserve for the periods
prescribed by Rule 31a-2 under the 1940 Act the following records: (a) completed
trade tickets for all portfolio transactions, (b) broker confirmations for
individual and block trades, (c) credit files relating to (i) money market
securities and their issuers, (ii) repurchase agreement counterparties and (iii)
letter of credit providers, (d) transaction records indicating the method of
allocation with respect to the selection of brokers, and (e) such other records
that may be deemed necessary and appropriate by the parties to this Agreement.
6. EXPENSES. During the term of this Agreement, the Investment Adviser will
pay all expenses incurred by it in connection with its activities under this
Agreement other than the cost of securities (including brokerage commissions,
if any) purchased for the Funds.
7. COMPENSATION. For the services provided and the expenses assumed pursuant to
this Agreement, each of the Funds will pay the Investment Adviser and the
Investment Adviser will accept as full compensation therefor a fee as set forth
on Schedule A hereto. The obligation of each Fund to pay the above-described fee
to the Adviser will begin as of the date of the initial public sale of shares in
such Fund. The fee attributable to each Fund shall be the obligation of that
Fund and not of any other Fund.
Pursuant to the terms of an order of exemption granted by the Commission in
QUALIVEST FUNDS, ET AL., Investment Company Act Rel. No. 22771 (July 29, 1997),
all fees payable under this Agreement by any Fund shall be payable to an
independent escrow agent to be maintained in an interest-bearing escrow account
until this Agreement is approved by shareholders in accordance with the
provisions of Section 9 of this Agreement. If shareholders of any Fund fail to
approve this Agreement, the escrow agent will pay to the Fund the applicable
escrow amounts (including interest earned). The escrow agent will release the
escrow funds only upon receipt of a certificate from officers of the Trust
stating whether the escrowed funds are to be delivered to the Investment Adviser
or to the Fund.
If in any fiscal year the aggregate expenses of any of the Funds (as defined
under the securities regulations of any state having jurisdiction over the
Trust) exceed the expense limitations of any such state, the Investment Adviser
will reimburse the Fund for a portion of such excess expenses equal to such
excess times the ratio of the fees otherwise payable by the Fund to the
Investment Adviser hereunder to the aggregate fees otherwise payable by the Fund
to the Investment Adviser hereunder and to BISYS Fund Services under the
Management and Administration Agreement between BISYS Fund Services and the
Trust. The obligation of the Investment Adviser to reimburse the Funds hereunder
is limited in any fiscal year to the amount of its fee hereunder for such fiscal
year, provided, however, that notwithstanding the foregoing, the Investment
Adviser shall reimburse the Funds for such proportion of such excess expenses
regardless of the amount of fees paid to it during such fiscal year to the
extent that the securities regulations of any state having jurisdiction over the
Trust so require. Such expense reimbursement, if any, will be estimated daily
and reconciled and paid on a monthly basis.
8. LIMITATION OF LIABILITY. The Investment Adviser shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Funds in
connection with the performance of this Agreement, except a loss resulting from
a breach of fiduciary duty with respect to the receipt of compensation for
services or a loss resulting from willful misfeasance, bad faith or gross
negligence on the part of the Investment Adviser in the performance of its
duties or from reckless disregard by it of its obligations and duties under this
Agreement. It is further agreed that the Investment Adviser shall have no
responsibility or liability for the accuracy or completeness of the Trust's
Registration Statement under the 1940 Act and the 1933 Act, except for
information supplied by the Investment Adviser for inclusion therein or
information known by the Investment Adviser to be false or misleading. The Trust
agrees to indemnify the Investment Adviser to the full extent permitted by the
Trust's Declaration of Trust.
9. DURATION AND TERMINATION. This Agreement will become effective with respect
to each Fund listed on Schedule A as of the date first written above (or, if a
particular Fund is not in existence on that date, on the date a registration
statement relating to that Fund becomes effective with the Commission) and,
unless sooner terminated as provided herein, shall continue in effect for an
initial period of 120 days, provided that this Agreement is approved by a
majority of the outstanding voting securities of the applicable Fund.
Thereafter, if not terminated, this Agreement shall continue in effect as to a
particular Fund for successive one-year terms, only so long as such continuance
is specifically approved at least
<PAGE>
annually (a) by the vote of a majority of those members of the Trust's Board of
Trustees who are not parties to this Agreement or interested persons of any
party to this Agreement, cast in person at a meeting called for the purpose of
voting on such approval, and (b) by the vote of a majority of the Trust's Board
of Trustees or by the vote of a majority of all votes attributable to the
outstanding shares of such Fund. Notwithstanding the foregoing, this Agreement
may be terminated as to a particular Fund at any time on sixty days' written
notice, without the payment of any penalty, by the Trust (by vote of the Trust's
Board of Trustees or by vote of a majority of the outstanding voting securities
of such Fund) or by the Investment Adviser. This Agreement will immediately
terminate in the event of its assignment. (As used in this Agreement, the terms
"majority of the outstanding voting securities", "interested persons" and
"assignment" shall have the same meanings as ascribed to such terms in the 1940
Act.)
10. INVESTMENT ADVISER'S REPRESENTATIONS. The Investment Adviser hereby
represents and warrants that it is willing and possesses all requisite legal
authority to provide the services contemplated by this Agreement without
violation of applicable laws and regulations.
11. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument
in writing signed by the party against which enforcement of the change,
waiver, discharge or termination is sought.
12. GOVERNING LAW. This Agreement shall be governed by and its provisions
shall be construed in accordance with the laws of the Commonwealth of
Massachusetts.
13. MISCELLANEOUS. It is expressly agreed that the obligations of the Trust
hereunder shall not be binding upon any of the Trustees, shareholders, nominees,
officers, agents or employees of the Trust personally, but shall bind only the
trust property of the Trust. The execution and delivery of this Agreement have
been authorized by the Trustees, and this Agreement has been signed and
delivered by an authorized officer of the Trust, acting as such, and neither
such authorization by the Trustees nor such execution and delivery by such
officer shall be deemed to have been made by any of them individually or to
impose any liability on any of them personally, but shall bind only the trust
property of the Trust as provided in the Trust's Agreement and Declaration of
Trust.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
[SEAL] QUALIVEST FUNDS
By: /s/ Irimga McKay
-----------------------------------
Title: Chairman
--------------------------------
[SEAL] FIRST BANK NATIONAL ASSOCIATION
By: /s/ Jeffrey M. Wilson
-----------------------------------
Title: Vice President
--------------------------------
<PAGE>
Dated: August 1, 1997
SCHEDULE A
TO THE INVESTMENT ADVISORY AGREEMENT
BETWEEN QUALIVEST FUNDS AND
FIRST BANK NATIONAL ASSOCIATION
<TABLE>
<CAPTION>
NAME OF FUND COMPENSATION
<S> <C>
Qualivest U.S. Treasury Money Market Fund Annual rate of thirty five one-hundredths of one
percent (.35%) of the average daily net assets of
such Fund.
Qualivest Money Market Fund Annual rate of thirty five one-hundredths of one
percent (.35%) of the average daily net assets of
such Fund.
Qualivest Tax-Free Money Market Fund Annual rate of thirty five one-hundredths of one
percent (.35%) of the average daily net assets of
such Fund.
Qualivest Intermediate Bond Fund Annual rate of sixty one-hundredths of one percent
(.60%) of the average daily net assets of such Fund.
Qualivest Diversified Bond Fund Annual rate of sixty one-hundredths of one percent
(.60%) of the average daily net assets of such Fund.
Qualivest Tax-Free National Bond Fund Annual rate of fifty one-hundredths of one percent
(.50%) of the average daily net assets of such Fund.
Qualivest Large Companies Growth Fund Annual rate of one percent (1.00%) of the average
daily net assets of such Fund.
Qualivest MicroCap Value Fund Annual rate of one percent (1.00%) of the average
daily net assets of such Fund.
Qualivest Small Companies Value Fund Annual rate of eighty one-hundredths of one percent
(.80%) of the average daily net assets of such Fund.
Qualivest Large Companies Value Fund Annual rate of seventy five one-hundredths of one
percent (.75%) of the average daily net assets of
such Fund.
Qualivest Income Equity Value Fund Annual rate of sixty one-hundredths of one percent
(.60%) of the average daily net assets of such Fund.
Qualivest International Opportunities Fund Annual rate of sixty one-hundredths of one percent
(.60%) of the average daily net assets of such Fund.
Qualivest Optimized Stock Fund Annual rate of fifty one-hundredths of one percent
(.50%) of the average daily net assets of such Fund.
Qualivest Allocated Conservative Fund Annual rate of five one-hundredths of one percent
(.05%) of the average daily net assets of such Fund.
Qualivest Allocated Balanced Fund Annual rate of five one-hundredths of one percent
(.05%) of the average daily net assets of such Fund.
<PAGE>
Qualivest Allocated Growth Fund Annual rate of five one-hundredths of one percent
(.05%) of the average daily net assets of such Fund.
Qualivest Allocated Aggressive Fund Annual rate of five one-hundredths of one percent
(.05%) of the average daily net assets of such Fund.
</TABLE>
All fees are computed daily and paid monthly.
QUALIVEST FUNDS
By: /s/ Irimga McKay
-----------------------------------
Name: Irimga McKay
---------------------------------
Title: Senior Vice President
--------------------------------
FIRST BANK NATIONAL ASSOCIATION
By: /s/ Jeffrey M. Wilson
-----------------------------------
Name: Jeffrey M. Wilson
---------------------------------
Title: Vice President
--------------------------------
<PAGE>
APPENDIX II
PRINCIPAL EXECUTIVE OFFICER AND DIRECTORS OF
FIRST BANK NATIONAL ASSOCIATION
The directors and the principal executive officer of FBNA are listed below,
together with their addresses and principal occupations.
<TABLE>
<CAPTION>
OTHER POSITIONS AND OFFICES
NAME POSITIONS AND OFFICES WITH FBNA AND PRINCIPAL BUSINESS ADDRESS
<S> <C> <C>
John F. Grundhofer Chairman, President and Chief Executive Chairman, President and Chief
Officer Executive Officer of U.S. Bancorp*
Richard A. Zona Director and Vice Chairman--Finance Vice Chairman--Finance of U.S. Bancorp*
Philip G. Heasley Director and Vice Chairman Vice Chairman and Group Head of the
Retail Product Group of U.S. Bancorp*
Daniel C. Rohr Director and Executive Vice President Executive Vice President, Commercial
Banking Group of U.S. Bancorp*
J. Robert Hoffman Director, Executive Vice President and Executive Vice President and Chief
Chief Credit Officer Credit Officer of U.S. Bancorp*
Lee R. Mitau Director, Executive Vice President, Executive Vice President, General
General Counsel and Secretary Counsel and Secretary of U.S. Bancorp*
Susan E. Lester Director, Executive Vice President and Executive Vice President and Chief
Chief Financial Officer Financial Officer of U.S. Bancorp*
Robert D. Sznewajs Director and Vice Chairman Vice Chairman of U.S. Bancorp*
Gary T. Duim Director and Vice Chairman Vice Chairman of U.S. Bancorp*
</TABLE>
* Address: 601 Second Avenue South, Minneapolis, Minnesota 55402.
<PAGE>
APPENDIX III
AGREEMENT AND PLAN OF REORGANIZATION
BY AND BETWEEN
FIRST AMERICAN STRATEGY FUNDS, INC.
AND QUALIVEST FUNDS
DATED: AS OF ______________, 1997
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C> <C>
1. CONVEYANCE OF ASSETS OF QUALIVEST FUNDS 2
2. Liquidation of Qualivest Funds 3
3. Effective Time of the Reorganization 3
4. Certain Representations, Warranties and Agreements of
Qualivest 4
5. Certain Representations, Warranties and Agreements of FASF 6
6. Shareholder Action 7
7. Regulatory Filings 8
8. FASF Conditions 8
9. Qualivest Conditions 10
10. Further Assurances 11
11. Indemnification 11
12. Survival of Representations and Warranties 11
13. Termination of Agreement 12
14. Amendment and Waiver 12
15. Governing Law 12
16. Successors and Assigns 12
17. Beneficiaries 12
18. Brokerage Fees and Expenses 12
19. Qualivest Liability 12
20. Notices 12
21. Announcements 13
22. Entire Agreement 13
23. Counterparts 13
</TABLE>
This AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as of this
day of _______ , 1997 by and between Qualivest Funds ("Qualivest"), a
Massachusetts business trust consisting of multiple investment portfolios
including, among others, Allocated Conservative Fund, Allocated Balanced Fund,
Allocated Growth Fund and Allocated Aggressive Fund (the "Qualivest Funds") and
First American Strategy Funds, Inc. ("FASF"), a Minnesota corporation consisting
of the following investment portfolios: Strategy Income Fund, Strategy Growth
and Income Fund, Strategy Growth Fund and Strategy Aggressive Growth Fund (the
"FASF Funds").
WHEREAS, each of Qualivest and FASF is an open-end management investment company
registered with the Securities and Exchange Commission (the "SEC") under the
Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, the parties desire that the assets and liabilities of each Qualivest
Fund be conveyed to, and be acquired and assumed by, the respective FASF Fund
corresponding thereto, as stated herein, in exchange for shares of specified
classes of the corresponding FASF Fund which shall thereafter promptly be
distributed by Qualivest to the shareholders of the corresponding classes of the
Qualivest Fund in connection with its liquidation as described in this Agreement
(the "Reorganization"); and
<PAGE>
WHEREAS, Qualivest maintains nine additional investment portfolios that have
commenced operations -- U.S. Treasury Money Market Fund, Money Market Fund,
Tax-Free Money Market Fund, Large Companies Value Fund, Small Companies Value
Fund, Optimized Stock Fund, Intermediate Bond Fund, Diversified Bond Fund and
International Opportunities Fund -- that are not parties to the Reorganization,
but are being reorganized into series of First American Investment Funds, Inc.
or First American Funds, Inc.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth and subject to the terms and conditions hereof, the
parties hereto, intending to be legally bound, agree as follows:
1. CONVEYANCE OF ASSETS OF QUALIVEST FUNDS. (a) At the Effective Time of the
Reorganization, as defined in Section 3, all assets of every kind, and all
interests, rights, privileges and powers of each of the Qualivest Funds, subject
to all liabilities of such Portfolios, whether accrued, absolute, contingent or
otherwise existing as of the Effective Time of the Reorganization, which
liabilities shall include any obligation of the Qualivest Funds to indemnify
Qualivest's trustees and officers acting in their capacities as such to the
fullest extent permitted by law and Qualivest's Declaration of Trust as in
effect on the date hereof (such assets subject to such liabilities are herein
referred to as the "Fund Assets"), shall be transferred and conveyed by each
Qualivest Fund to the corresponding FASF Fund (as set forth below) and shall be
accepted and assumed by such FASF Fund as more particularly set forth in this
Agreement, such that at and after the Effective Time of the Reorganization: (i)
all assets of the Qualivest Funds shall become and be the assets of the
respective corresponding FASF Funds; and (ii) all liabilities of the Qualivest
Funds shall attach to the respective corresponding FASF Funds as aforesaid and
may thenceforth be enforced against the respective FASF Funds to the same extent
as if incurred by them.
(b) Without limiting the generality of the foregoing, it is understood that the
Fund Assets shall include all property and assets of any nature whatsoever,
including, without limitation, all cash, cash equivalents, securities, claims
(whether absolute or contingent, known or unknown, accrued or unaccrued) and
receivables (including dividend and interest receivables) owned by each
Qualivest Fund, and any deferred or prepaid expenses shown as an asset on each
Qualivest Fund's books, at the Effective Time of the Reorganization, and all
goodwill, all other intangible property and all books and records belonging to
the Qualivest Funds. Notwithstanding anything herein to the contrary, FASF shall
not be deemed to have assumed any liability of Qualivest to FASF that arises as
a result of the breach of any of the representations, warranties and agreements
of Qualivest set forth in Section 4, hereof.
(c) In particular, the Fund Assets of each Qualivest Fund shall be transferred
and conveyed to the corresponding FASF Fund, as set forth below:
QUALIVEST FUND CORRESPONDING FASF FUND
Allocated Conservative Fund Strategy Income Fund
Allocated Balanced Fund Strategy Growth and Income Fund
Allocated Growth Fund Strategy Growth Fund
Allocated Aggressive Fund Strategy Aggressive Growth Fund
(d) In exchange for the transfer of the Fund Assets, each FASF Fund shall
simultaneously issue to each corresponding Qualivest Fund at the Effective Time
of the Reorganization full and fractional shares of common stock in the FASF
Fund having an aggregate net asset value equal to the net value of the Fund
Assets so conveyed, all determined and adjusted as provided in this Section 1.
In particular, each FASF Fund shall deliver to the corresponding Qualivest Fund
the number of shares, including fractional shares, determined by dividing the
value of the Fund Assets of the corresponding Qualivest Fund that are so
conveyed computed in the manner and as of the time and date set forth in this
Section, by the net asset value of one FASF Fund share, computed in the manner
and as of the time and date set forth in this Section.
(e) The net asset value of shares to be delivered by the FASF Funds, and the net
value of the Fund Assets to be conveyed by the Qualivest Funds, shall, in each
case, be determined as of the Effective Time of the Reorganization. The net
asset value of shares of the FASF Funds shall be computed in the manner set
forth in the FASF Funds' then current prospectuses under the Securities Act of
1933, as amended
<PAGE>
(the "1933 Act"). The net value of the Fund Assets to be transferred by the
Qualivest Funds shall be computed by Qualivest and shall be subject to
adjustment by the amount, if any, agreed to by FASF and the respective Qualivest
Funds. In determining the value of the securities transferred by the Qualivest
Funds to the FASF Funds, each security shall be priced in accordance with the
pricing policies and procedures of FASF as described in its then current
prospectus. For such purposes, price quotations and the security characteristics
relating to establishing such quotations shall be determined by Qualivest,
provided that such determination shall be subject to the approval of FASF.
Qualivest and FASF agree to use all commercially reasonable efforts to resolve
any material pricing differences between the prices of portfolio securities
determined in accordance with the pricing policies and procedures of Qualivest
and those determined in accordance with the pricing policies and procedures of
FASF prior to the Effective Time of the Reorganization.
(f) The holders of both Class A and Class Y shares of each Qualivest Fund will
receive in the Reorganization shares of the single currently outstanding class
of shares of the corresponding FASF Fund.
2. LIQUIDATION OF QUALIVEST FUNDS. At the Effective Time of the Reorganization,
each of the Qualivest Funds shall make a liquidating distribution to its
shareholders as follows. Shareholders of record of each Qualivest Fund shall be
credited with full and fractional shares of the class of common stock that is
issued by the corresponding FASF Fund in connection with the Reorganization with
respect to the shares that are held of record by the shareholder. In addition,
each shareholder of record of a Qualivest Fund shall have the right to receive
any unpaid dividends or other distributions which were declared before the
Effective Time of the Reorganization with respect to the shares of such
Qualivest Fund that are held by the shareholder at the Effective Time of the
Reorganization. In accordance with instructions it receives from Qualivest, FASF
shall record on its books the ownership of the respective FASF Fund shares by
the shareholders of record of the Qualivest Funds. All of the issued and
outstanding shares of the Qualivest Funds at the Effective Time of the
Reorganization shall be redeemed and canceled on the books of Qualivest at such
time. After the Effective Time of the Reorganization, Qualivest shall wind up
the affairs of the Qualivest Funds and shall file any final regulatory reports,
including but not limited to any Form N-SAR and Rule 24f-2 filings with respect
to the Qualivest Funds and, assuming the nine other investment portfolios of
Qualivest have been reorganized into series of First American Funds, Inc. or
First American Investment Funds, Inc., an application pursuant to Section 8(f)
of the 1940 Act for an order declaring that Qualivest has ceased to be an
investment company.
3. EFFECTIVE TIME OF THE REORGANIZATION. (a) Delivery of the Fund Assets and the
shares of the FASF Funds to be issued pursuant to Section 1 and the liquidation
of the Qualivest Funds pursuant to Section 2 (the "Closing") shall occur after
the close of normal trading on the New York Stock Exchange (the "Exchange")
(currently, 4:00 p.m. Eastern time), and after (i) the declaration of any
dividends or distributions on such date and (ii) the closing of the
reorganization of the other investment portfolios of Qualivest into series of
First American Investment Funds, Inc. or First American Funds, Inc., on November
28, 1997, or at such time on such later date as provided herein or as the
parties otherwise may agree in writing. (The date and time at which such actions
are taken are referred to herein as the "Effective Time of the Reorganization.")
To the extent any Fund Assets are, for any reason, not transferred at the
Effective Time of the Reorganization, Qualivest shall cause such Fund Assets to
be transferred in accordance with this Agreement at the earliest practicable
date thereafter. All acts taking place at the Closing shall be deemed to take
place simultaneously as of the Effective Time of the Reorganization unless
otherwise agreed to by the parties. The Closing shall be held at the offices of
Dorsey & Whitney LLP, 220 South Sixth Street, Minneapolis, Minnesota 55402, or
at such other place as the parties may agree.
(b) In the event the Effective Time of the Reorganization occurs on a day on
which (i) the Exchange or another primary trading market for portfolio
securities of the FASF Funds or the Qualivest Funds shall be closed to trading
or trading thereon shall be restricted, or (ii) trading or the reporting of
trading on the Exchange or elsewhere shall be disrupted so that accurate
appraisal of the value of the net assets of the FASF Funds or the Qualivest
Funds is impracticable, the Effective Time of the Reorganization shall be
postponed until the close of normal trading on the Exchange on the first
business day when trading shall have been fully resumed and reporting shall have
been restored.
<PAGE>
4. CERTAIN REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF QUALIVEST. Qualivest,
on behalf of itself and the Qualivest Funds, represents and warrants to, and
agrees with, FASF as follows, such representations, warranties and agreements
being made on behalf of each Qualivest Fund on a several (and not joint, or
joint and several) basis:
(a) It is a Massachusetts business trust duly created pursuant to its
Declaration of Trust for the purpose of acting as a management investment
company under the 1940 Act, and is validly existing under the laws of the
Commonwealth of Massachusetts. It is registered as an open-end management
investment company under the 1940 Act, and its registration with the SEC as an
investment company is in full force and effect.
(b) It has the power to own all of its properties and assets and, subject to the
approvals of shareholders referred to in Section 6, to carry out and consummate
the transactions contemplated herein, and has all necessary federal, state and
local authorizations to carry on its business as now being conducted and, except
as stated in Section 4(j), below, to consummate the transactions contemplated by
this Agreement.
(c) This Agreement has been duly authorized, executed and delivered by it, and
represents a valid and binding contract, enforceable in accordance with its
terms, subject as to enforcement to bankruptcy, insolvency, reorganization,
moratorium or other similar laws of general application relating to or affecting
creditors' rights and to the application of general principles of equity. The
execution and delivery of this Agreement does not, and, subject to the approval
of shareholders referred to in Section 6, the consummation of the transactions
contemplated by this Agreement will not, violate Qualivest's Declaration of
Trust or By-Laws or any agreement or arrangement to which it is a party or by
which it is bound.
(d) Each Qualivest Fund has elected to qualify and has qualified as a regulated
investment company under Part I of Subchapter M of Subtitle A, Chapter 1, of the
Internal Revenue Code of 1986, as amended (the "Code"), as of and since its
first taxable year; has been a regulated investment company under such Part of
the Code at all times since the end of its first taxable year when it so
qualified; and qualifies and shall continue to qualify as a regulated investment
company for its taxable year ending upon its liquidation.
(e) The audited financial statements for its fiscal period ended July 31, 1996,
and the unaudited financial statements for the period ended January 31, 1997,
copies of which have been previously furnished to FASF, present fairly the
financial position of the Qualivest Funds as of such dates and the results of
their operations and changes in their net assets for the periods indicated, in
conformity with generally accepted accounting principles applied on a consistent
basis. To the best of Qualivest's knowledge, there are no liabilities of a
material amount of any Qualivest Fund, whether accrued, absolute, contingent or
otherwise existing, other than: (i) as of January 31, 1997, liabilities
disclosed or provided for in the unaudited financial statements for the period
ended January 31, 1997 and liabilities incurred in the ordinary course of
business subsequent to January 31, 1997 and (ii) as of the Effective Time of the
Reorganization, liabilities disclosed or provided for in the statement of assets
and liabilities of each Qualivest Fund that is delivered to FASF pursuant to
Section 8(b) of this Agreement and liabilities incurred in the ordinary course
of business.
(f) Since the end of its most recently concluded fiscal year, there have been no
material changes by any Qualivest Fund in accounting methods, principles or
practices, including those required by generally accepted accounting principles,
except as disclosed in writing to FASF.
(g) It has valued, and will continue to value, its portfolio securities and
other assets in accordance with applicable legal requirements.
(h) There are no material legal, administrative or other proceedings pending or,
to its knowledge, threatened, against it or the Qualivest Funds which could
result in liability on the part of Qualivest or the Qualivest Funds and
Qualivest knows of no facts that might form the basis of a legal, administrative
or other proceeding which, if adversely determined, would materially and
adversely affect any Qualivest Fund's financial condition or the conduct of its
business and Qualivest is not a party to or subject to the provisions of any
order, decree or judgment of any court or governmental body that materially and
<PAGE>
adversely affects, or is reasonably likely to materially and adversely affect,
its business or its ability to consummate the transactions contemplated herein.
(i) At the Effective Time of the Reorganization, all federal and other tax
returns and reports of each Qualivest Fund required by law to have been filed by
such time shall have been filed, and all federal and other taxes shall have been
paid so far as due, or provision shall have been made for the payment thereof
and, to the best of Qualivest's knowledge, no such return or report shall be
currently under audit and no assessment shall have been asserted with respect to
such returns or reports.
(j) Subject to the approvals of shareholders referred to in Section 6, at the
Effective Time of the Reorganization, it shall have full right, power and
authority to sell, assign, transfer and deliver the Fund Assets and, upon
delivery and payment for the Fund Assets as contemplated herein, the FASF Funds
shall acquire good and marketable title thereto, subject to no restrictions on
the ownership or transfer thereof, except as imposed by federal or state
securities laws or as disclosed to FASF in writing prior to the Effective Time
of the Reorganization.
(k) No consent, approval, authorization or order of any court or governmental
authority is required for the consummation by it of the transactions
contemplated by this Agreement, except such as may be required under the 1933
Act, the Securities Exchange Act of 1934, as amended (the "1934 Act"), the 1940
Act, the rules and regulations under those Acts, or state securities laws, all
of which shall have been received prior to the Effective Time of the
Reorganization, except for such consents, approvals, authorizations or orders as
may be required subsequent to the Effective Time of the Reorganization.
(l) Insofar as the following relate to it, (i) the registration statement filed
by FASF on Form N-14 relating to the shares of the FASF Funds that will be
registered with the SEC pursuant to this Agreement, which shall include or
incorporate by reference the proxy statement of the Qualivest Funds and
prospectus of the FASF Funds with respect to the transactions contemplated by
this Agreement, and any supplement or amendment thereto or to the documents
contained or incorporated therein by reference (the "N-14 Registration
Statement"), and (ii) the proxy materials of Qualivest included in the N-14
Registration Statement and filed with the SEC pursuant to Section 14(a) of the
1934 Act and Section 20(a) of the 1940 Act with respect to the transactions
contemplated by this Agreement, and any supplement or amendment thereto or the
documents appended thereto (the "Reorganization Proxy Materials"), from their
respective effective and clearance dates with the SEC, through the time of the
shareholders meeting referred to in Section 6 and at the Effective Time of the
Reorganization: (i) shall comply in all material respects with the provisions of
the 1933 Act, 1934 Act and the 1940 Act, and the rules and regulations
thereunder, and (ii) shall not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading; provided, that the representations
and warranties made by it in this subsection shall not apply to statements in or
omissions from the N-14 Registration Statement or the Reorganization Proxy
Materials made in reliance upon and in conformity with information furnished by
or on behalf of FASF for use therein as provided in Section 7. For these
purposes, information shall be considered to have been provided "on behalf" of
FASF if furnished by its investment adviser, administrator, custodian or
transfer agent, acting in their capacity as such.
(m) All of the issued and outstanding shares of each of the Qualivest Funds have
been validly issued and are fully paid and non-assessable (recognizing that,
under Massachusetts law, shareholders of the Qualivest Funds could, under
certain circumstances, be held personally liable for obligations of Qualivest),
and were offered for sale and sold in conformity with the registration
requirements of all applicable federal and state securities laws.
(n) It shall not sell or otherwise dispose of any shares of the FASF Funds to be
received in the transactions contemplated herein, except in distribution to its
shareholders as contemplated herein.
(o) It shall operate its business in the ordinary course between the date hereof
and the Effective Time of the Reorganization. It is understood that such
ordinary course of business will include the declaration and payment of
customary dividends and distributions and any other dividends and distributions
deemed advisable.
<PAGE>
(p) Any reporting responsibility of a Qualivest Fund is and shall remain the
responsibility of the Qualivest Fund for all periods before and including the
Effective Time of the Reorganization and such later date on which the Qualivest
Fund is terminated.
(q) Except for agreements or other arrangements relating to the purchase and
sale of portfolio securities, it has furnished FASF with copies or descriptions
of all contracts to which it is a party.
(r) Each Qualivest Fund shall provide a list of all portfolio securities held by
it to FASF at least fifteen days before the Effective Time of the Reorganization
and shall immediately notify FASF's investment adviser of any portfolio security
thereafter acquired or sold by the Qualivest Fund. At the Effective Time of the
Reorganization, no Qualivest Fund shall hold any portfolio security that is
impermissible under the investment policies, objectives and limitations of the
corresponding FAIF Fund.
5. CERTAIN REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF FASF. FASF, on behalf
of the FASF Funds, represents and warrants to, and agrees with, Qualivest as
follows, such representations, warranties and agreements being made on behalf of
each FASF Fund on a several (and not joint, or joint and several) basis:
(a) It is a Minnesota corporation duly created pursuant to its Articles of
Incorporation for the purpose of acting as a management investment company under
the 1940 Act, and is validly existing under the laws of the State of Minnesota.
It is registered as an open-end management investment company under the 1940 Act
and its registration with the SEC as an investment company is in full force and
effect.
(b) It has the power to own all of its properties and assets and to consummate
the transactions contemplated herein, and has all necessary federal, state and
local authorizations to carry on its business as now being conducted and, except
as stated in Section 5(j) below, to consummate the transactions contemplated by
this Agreement.
(c) This Agreement has been duly authorized, executed and delivered by it, and
represents a valid and binding contract, enforceable in accordance with its
terms, subject as to enforcement to bankruptcy, insolvency, reorganization,
moratorium or other similar laws of general application relating to or affecting
creditors' rights and to the application of general principles of equity. The
execution and delivery of this Agreement does not, and the consummation of the
transactions contemplated by this Agreement will not, violate FASF's Articles of
Incorporation or Bylaws or any agreement or arrangement to which it is a party
or by which it is bound.
(d) Each FASF Fund has elected to qualify and has qualified as a regulated
investment company under Part I of Subchapter M of Subtitle A, Chapter 1, of the
Code, as of and since its first taxable year; has been a regulated investment
company under such Part of the Code at all times since the end of its first
taxable year when it so qualified; and qualifies and shall continue to qualify
as a regulated investment company for its current taxable year.
(e) The unaudited financial statements for the period ended March 31, 1997,
copies of which have been previously furnished to Qualivest, present fairly the
financial position of the FASF Funds as of such dates and the results of their
operations for the periods indicated, in conformity with generally accepted
accounting principles applied on a consistent basis. To the best of FASF's
knowledge, there are no liabilities of a material amount of any FASF Fund,
whether accrued, absolute, contingent or otherwise existing, other than, as of
March 31, 1997, liabilities disclosed or provided for in the unaudited financial
statements for the period ended March 31, 1997, and liabilities incurred in the
ordinary course of business subsequent to March 31, 1997.
(f) It has valued, and will continue to value, its portfolio securities and
other assets in accordance with applicable legal requirements.
(g) There are no material contracts outstanding with respect to the FASF Funds
that have not been disclosed in FASF's current registration statement and which
under applicable law are required to be disclosed therein.
(h) At the Effective Time of the Reorganization, all federal and other tax
returns and reports of each FASF Fund required by law to have been filed by such
time shall have been filed, and all federal
<PAGE>
and other taxes shall have been paid so far as due, or provisions shall have
been made for the payment thereof and, to the best knowledge of each FASF Fund,
no such return or report shall be currently under audit and no assessment shall
have been asserted with respect to such returns or reports.
(i) There are no material legal, administrative or other proceedings pending or,
to its knowledge threatened, against it or the FASF Funds which could result in
liability on the part of FASF or the FASF Funds and FASF knows of no facts that
might form the basis of a legal, administrative or other proceeding which, if
adversely determined, would materially and adversely affect any FASF Fund's
financial condition or the conduct of its business and FASF is not a party to or
subject to the provisions of any order, decree or judgment of any court or
governmental body that materially and adversely affects, or is reasonably likely
to materially and adversely affect, its business or its ability to consummate
the transactions contemplated herein.
(j) No consent, approval, authorization or order of any court or governmental
authority is required for the consummation by FASF of the transactions
contemplated by this Agreement, except such as may be required under the 1933
Act, the 1934 Act, the 1940 Act, the rules and regulations under those Acts, or
state securities laws, all of which shall have been received prior to the
Effective Time of the Reorganization, except for such consents, approvals,
authorizations or orders as may be required subsequent to the Effective Time of
the Reorganization.
(k) The N-14 Registration Statement and the Reorganization Proxy Materials, from
their respective effective and clearance dates with the SEC, through the time of
the shareholders meeting referred to in Section 6 and at the Effective Time of
the Reorganization, insofar as they relate to FASF (i) shall comply in all
material respects with the provisions of the 1933 Act, 1934 Act and the 1940
Act, and the rules and regulations thereunder, and (ii) shall not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements made therein not
misleading; provided, that the representations and warranties in this subsection
shall not apply to statements in or omissions from the N-14 Registration
Statement or the Reorganization Proxy Materials made in reliance upon and in
conformity with information furnished by or on behalf of Qualivest for use
therein as provided in Section 7. For those purposes, information shall be
considered to have been provided "on behalf" of Qualivest if furnished by its
investment adviser, administrator, custodian or transfer agent, acting in their
capacity as such.
(l) The shares of the FASF Funds to be issued and delivered to the Qualivest
Funds for the account of the shareholders of the Qualivest Funds, pursuant to
the terms hereof, shall have been duly authorized as of the Effective Time of
the Reorganization and, when so issued and delivered, shall be duly and validly
issued, fully paid and non-assessable, and no shareholder of FASF shall have any
preemptive right of subscription or purchase in respect thereto.
(m) All of the issued and outstanding shares of each of the FASF Funds have been
validly issued and are fully paid and non-assessable, and were offered for sale
and sold in conformity with the registration requirements of all applicable
federal and state securities laws.
(n) It shall operate its business in the ordinary course between the date hereof
and the Effective Time of the Reorganization. It is understood that such
ordinary course of business will include the declaration and payment of
customary dividends and distributions and any other dividends and distributions
deemed advisable.
6. SHAREHOLDER ACTION. As soon as practicable after the effective date of the
N-14 Registration Statement and SEC clearance of the proxy solicitation
materials referred to in Section 7, but in any event prior to the Effective Time
of the Reorganization and as a condition thereto, the Board of Trustees of
Qualivest shall call, and Qualivest shall hold, a meeting of the shareholders of
all of its investment portfolios for the purpose of considering and voting upon:
(a) in the case of all Qualivest Funds, a proposal, in connection with
the merger between U.S. Bancorp and First Bank System, Inc., to ratify and
approve investment advisory agreements, on behalf of each Qualivest Fund,
between Qualivest and First Bank National Association;
(b) in the case of all Qualivest Funds, approval of this Agreement and
the transactions contemplated hereby; and
<PAGE>
(c) such other matters as may be determined by the Board of Trustees of
Qualivest and the Board of Directors of FASF.
7. REGULATORY FILINGS. FASF shall file an N-14 Registration Statement, which
shall include the Reorganization Proxy Materials of Qualivest, with the SEC, and
with the appropriate state securities commissions, relating to the matters
described in Section 6 as promptly as practicable. FASF and Qualivest have
cooperated and shall continue to cooperate with each other, and have furnished
and shall continue to furnish each other with the information relating to itself
that is required by the 1933 Act, the 1934 Act, the 1940 Act, and the rules and
regulations under each of those Acts, to be included in the N-1A Post-Effective
Amendment, the N-14 Registration Statement and the Reorganization Proxy
Materials.
8. FASF CONDITIONS. The obligations of FASF hereunder shall be subject to the
following conditions precedent:
(a) This Agreement and the transactions contemplated by this Agreement (which
shall not be deemed to include, for these purposes, the matters described in
Section 6(a)) shall have been approved by the Board of Trustees of Qualivest and
by the shareholders of the Qualivest Funds in the manner required by law and
this Agreement.
(b) Qualivest shall have delivered to FASF a statement of assets and liabilities
of each Qualivest Fund, together with a list of the portfolio securities of the
Qualivest Fund showing the tax costs of such securities by lot and the holding
periods of such securities, as of the Effective Time of the Reorganization,
certified by the Treasurer or Assistant Treasurer of Qualivest as having been
prepared in accordance with generally accepted accounting principles
consistently applied.
(c) Qualivest shall have duly executed and delivered to FASF such bills of sale,
assignments, certificates and other instruments of transfer ("Transfer
Documents") as FASF may deem necessary or desirable to transfer all of each
Qualivest Fund's right, title and interest in and to the Fund Assets. Such Fund
Assets shall be accompanied by all necessary state stock transfer stamps or cash
for the appropriate purchase price therefor.
(d) All representations and warranties of Qualivest made in this Agreement shall
be true and correct in all material respects as if made at and as of the
Effective Time of the Reorganization.
(e) Qualivest shall have delivered to FASF a certificate executed in its name by
its President or Vice President and its Treasurer or Assistant Treasurer, in a
form reasonably satisfactory to FASF and dated as of the Effective Time of the
Reorganization, to the effect that the representations and warranties of the
Qualivest Funds made in this Agreement are true and correct at and as of the
Effective Time of the Reorganization, except as they may be affected by the
transactions contemplated by this Agreement.
(f) Qualivest shall have delivered to FASF Qualivest's written instructions to
the custodian for the Qualivest Funds, acknowledged and agreed to in writing by
such custodian, irrevocably instructing such custodian to transfer to each FASF
Fund all of the corresponding Qualivest Fund's portfolio securities, cash and
any other assets to be acquired by such FASF Fund pursuant to this Agreement.
(g) Qualivest shall have delivered to FASF a certificate of Qualivest's transfer
agent stating that the records maintained by the transfer agent (which shall be
made available to FASF) contain the names and addresses of the shareholders of
each Qualivest Fund and the numbers and classes of the outstanding shares of
such Qualivest Fund owned by each such shareholder as of the Effective Time of
the Reorganization.
(h) At or prior to the Effective Time of the Reorganization, the expenses
incurred by each Qualivest Fund (or accrued up to the Effective Time of the
Reorganization) shall have been maintained by Qualivest Funds' investment
adviser or otherwise so as not to exceed any contractual expense limitations or
any expense limitations set forth in such Qualivest Fund's then current
prospectus.
(i) At or prior to the Effective Time of the Reorganization, appropriate action
shall have been taken by Qualivest Funds' investment adviser or otherwise such
that no unamortized organizational expenses shall be reflected in any Qualivest
Fund's statement of assets and liabilities delivered pursuant to Section 8(b).
<PAGE>
(j) FASF shall have received an opinion of Dechert Price & Rhoads, counsel to
Qualivest, in form reasonably satisfactory to FASF and dated the Effective Time
of the Reorganization, substantially to the effect that (i) Qualivest is a
Massachusetts business trust duly established and validly existing under the
laws of the Commonwealth of Massachusetts; (ii) this Agreement and the Transfer
Documents have been duly authorized, executed and delivered by Qualivest and
represent legal, valid and binding contracts, enforceable in accordance with
their terms, subject as to enforcement to bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance and other similar laws of
general application relating to or affecting creditors' rights and to the
application of general principles of equity; (iii) the execution and delivery of
this Agreement did not, and the consummation of the transactions contemplated by
this Agreement will not, violate the Declaration of Trust or By-Laws of
Qualivest or any material contract known to such counsel to which Qualivest is a
party or by which it is bound; (iv) the only Qualivest shareholder approvals
required with respect to the consummation of the transactions contemplated by
this Agreement are the approval of a majority of the shareholders of each
Qualivest Fund voting separately on a portfolio-by-portfolio basis; and (v) no
consent, approval, authorization or order of any court or governmental authority
is required for the consummation by Qualivest of the transactions contemplated
by this Agreement, except such as have been obtained under the 1933 Act, the
1934 Act, the 1940 Act, the rules and regulations under those Acts and such as
may be required under the state securities laws or such as may be required
subsequent to the Effective Time of the Reorganization. Such opinion may rely on
the opinion of other counsel to the extent set forth in such opinion, provided
such other counsel is reasonably acceptable to FASF.
(k) FASF shall have received an opinion of Dorsey & Whitney LLP addressed to
FASF and Qualivest in form reasonably satisfactory to them, and dated the
Effective Time of the Reorganization, substantially to the effect that, for
federal income tax purposes (i) the transfer by each Qualivest Fund of all of
its Fund Assets to the corresponding FASF Fund in exchange for shares of the
corresponding FASF Fund, and the distribution of such shares to the shareholders
of the Qualivest Fund, as provided in this Agreement, will constitute a
reorganization within the meaning of Section 368(a)(1)(C) or (D) of the Code;
(ii) no income, gain or loss will be recognized by the Qualivest Funds as a
result of such transactions; (iii) no income, gain or loss will be recognized by
the FASF Funds as a result of such transactions; (iv) no income, gain or loss
will be recognized by the shareholders of the Qualivest Funds on the
distribution to them by the Qualivest Funds of shares of the corresponding FASF
Funds in exchange for their shares of the Qualivest Funds (but shareholders of a
Qualivest Fund subject to taxation will recognize income upon receipt of any net
investment income or net capital gains of such Qualivest Fund which are
distributed by such Qualivest Fund prior to the Effective Time of the
Reorganization); (v) the tax basis of the FASF Fund shares received by each
shareholder of a Qualivest Fund will be the same as the tax basis of the
shareholder's Qualivest Fund shares exchanged therefor; (vi) the tax basis of
the Fund Assets received by each FASF Fund will be the same as the basis of such
Fund Assets in the hands of the corresponding Qualivest Fund immediately prior
to the transactions; (vii) a shareholder's holding period for FASF Fund shares
will be determined by including the period for which the shareholder held the
shares of the Qualivest Fund exchanged therefor, provided that the shareholder
held such shares of the Qualivest Fund as a capital asset at the Effective Time
of the Reorganization; (viii) the holding period of each FASF Fund with respect
to the Fund Assets will include the period for which such Fund Assets were held
by the corresponding Qualivest Fund provided that the Qualivest Fund held such
assets as capital assets; and (ix) each FASF Fund will succeed to and take into
account the earnings and profits, or deficit in earnings and profits, of the
corresponding Qualivest Fund as of the Effective Time of the Reorganization.
(l) The Fund Assets to be transferred to an FASF Fund under this Agreement
shall include no assets which such FASF Fund may not properly acquire pursuant
to its investment limitations or objectives or may not otherwise lawfully
acquire.
(m) The N-14 Registration Statement shall have become effective under the 1933
Act and no stop order suspending such effectiveness shall have been instituted
or, to the knowledge of FASF, contemplated by the SEC and the parties shall have
received all permits and other authorizations necessary under state securities
laws to consummate the transactions contemplated by this Agreement.
(n) No action, suit or other proceeding shall be threatened or pending before
any court or governmental agency in which it is sought to restrain or prohibit
or obtain damages or other relief in connection with this Agreement or the
transactions contemplated herein.
<PAGE>
(o) The SEC shall not have issued any unfavorable advisory report under Section
25(b) of the 1940 Act nor instituted any proceeding seeking to enjoin
consummation of the transactions contemplated by this Agreement under Section
25(c) of the 1940 Act.
(p) Prior to the Effective Time of the Reorganization, each Qualivest Fund shall
have declared a dividend or dividends, with a record date and ex-dividend date
prior to the Effective Time of the Reorganization, which, together with all
previous dividends, shall have the effect of distributing to its shareholders
all of its net investment company taxable income, if any, for the taxable years
ending July 31, 1997 and for the taxable periods from said date to and including
the Effective Time of the Reorganization (computed without regard to any
deduction for dividends paid), and all of its net capital gain, if any, realized
in taxable years ending July 31, 1997, and in the taxable periods from said date
to and including the Effective Time of Reorganization.
(q) Qualivest shall have performed and complied in all material respects with
each of its agreements and covenants required by this Agreement to be performed
or complied with by it prior to or at the Effective Time of the Reorganization.
(r) FASF shall have been furnished at the Effective Time of the Reorganization
with a certificate signed by an appropriate officer of BISYS Group, Inc.
("BISYS") dated as of such date stating that all statistical and research data,
clerical, accounting and bookkeeping records, periodic reports to the SEC and
any state securities agencies, tax returns and other tax filings, shareholder
lists and other material shareholder data, complaint files and all other
information, books, records and documents maintained by BISYS (or any affiliate
of BISYS) and belonging to the Qualivest Funds, including those required to be
maintained by Section 31(a) of the 1940 Act and Rules 31a-1 to 31a-3 thereunder,
have been delivered to FASF.
9. QUALIVEST CONDITIONS. The obligations of Qualivest hereunder shall be
subject to the following conditions precedent:
(a) This Agreement and the transactions contemplated by this Agreement (which
shall not be deemed, for these purposes, to include the matter described in
Section 6(a)) shall have been approved by the Board of Directors of FASF and by
the shareholders of the Qualivest Funds in the manner required by law and this
Agreement.
(b) All representations and warranties of FASF made in this Agreement shall be
true and correct in all material respects as if made at and as of the Effective
Time of the Reorganization.
(c) FASF shall have delivered to Qualivest a certificate executed in its name by
its President or Vice President and its Treasurer or Assistant Treasurer, in a
form reasonably satisfactory to Qualivest and dated as of the Effective Time of
the Reorganization, to the effect that the representations and warranties of the
FASF Funds made in this Agreement are true and correct at and as of the
Effective Time of the Reorganization, except as they may be affected by the
transactions contemplated by this Agreement and that, to its best knowledge, the
Fund Assets to be transferred to an FASF Fund under this Agreement as set forth
in Subsection 8(b) include only assets which such FASF Fund may properly acquire
under its investment policies, limitations and objectives and may otherwise be
lawfully acquired by such FASF Fund.
(d) Qualivest shall have received an opinion of Dorsey & Whitney LLP in form
reasonably satisfactory to Qualivest and dated the Effective Time of the
Reorganization, substantially to the effect that (i) FASF is a Minnesota
corporation duly incorporated and validly existing under the laws of the State
of Minnesota; (ii) the shares of the FASF Funds to be delivered to the Qualivest
Funds as provided for by this Agreement are duly authorized and upon delivery
will be validly issued, fully paid and non-assessable by FASF; (iii) this
Agreement has been duly authorized, executed and delivered by FASF, and
represents a legal, valid and binding contract, enforceable in accordance with
its terms, subject as to enforcement to bankruptcy, insolvency, reorganization,
moratorium or other similar laws of general application relating to or affecting
creditors' rights generally and to the application of general principles of
equity; (iv) the execution and delivery of this Agreement did not, and the
consummation of the transactions contemplated by this Agreement will not,
violate the Articles of Incorporation or Bylaws of FASF or any material contract
known to such counsel to which FASF is a party or by which it is bound;
<PAGE>
and (v) no consent, approval, authorization or order of any court or
governmental authority is required for the consummation by FASF of the
transactions contemplated by this Agreement, except such as have been obtained
under the 1933 Act, the 1934 Act, the 1940 Act, the rules and regulations under
those Acts and such as may be required by state securities laws or such as may
be required subsequent to the Effective Time of the Reorganization. Such opinion
may rely on the opinion of other counsel to the extent set forth in such
opinion, provided such other counsel is reasonably acceptable to Qualivest.
(e) Qualivest shall have received an opinion of Dorsey & Whitney LLP addressed
to FASF and Qualivest in form reasonably satisfactory to them, and dated the
Effective Time of Reorganization, with respect to the matters specified in
Subsection 8(k).
(f) The N-14 Registration Statement shall have become effective under the 1933
Act and no stop order suspending the effectiveness shall have been instituted,
or to the knowledge of FASF, contemplated by the SEC and the parties shall have
received all permits and other authorizations necessary under state securities
laws to consummate the transactions contemplated herein.
(g) No action, suit or other proceeding shall be threatened or pending before
any court or governmental agency in which it is sought to restrain or prohibit,
or obtain damages or other relief in connection with, this Agreement or the
transactions contemplated herein.
(h) The SEC shall not have issued any unfavorable advisory report under Section
25(b) of the 1940 Act nor instituted any proceeding seeking to enjoin
consummation of the transactions contemplated by this Agreement under Section
25(c) of the 1940 Act.
(i) FASF shall have performed and complied in all material respects with each of
its agreements and covenants required by this Agreement to be performed or
complied with by it prior to or at the Effective Time of the Reorganization.
(j) Qualivest shall have received from FASF a duly executed instrument whereby
each FASF Fund assumes all of the liabilities of its corresponding Qualivest
Fund.
10. FURTHER ASSURANCES. Subject to the terms and conditions herein provided,
each of the parties hereto shall use its best efforts to take, or cause to be
taken, such action, to execute and deliver, or cause to be executed and
delivered, such additional documents and instruments and to do, or cause to be
done, all things necessary, proper or advisable under the provisions of this
Agreement and under applicable law to consummate and make effective the
transactions contemplated by this Agreement, including without limitation,
delivering and/or causing to be delivered to the other party hereto each of the
items required under this Agreement as a condition to such party's obligations
hereunder. In addition, Qualivest shall deliver or cause to be delivered to
FASF, each account, book, record or other document of the Qualivest Funds
required to be maintained by Section 31(a) of the 1940 Act and Rules 31a-1 to
31a-3 thereunder (regardless of whose possession they are in).
11. INDEMNIFICATION.
(a) FASF agrees to indemnify and hold harmless Qualivest and each of Qualivest's
trustees and officers from and against any and all losses, claims, damages,
liabilities or expenses (including, without limitation, the payment of
reasonable legal fees and reasonable costs of investigation) to which, jointly
or severally, Qualivest or any of its trustees or officers may become subject,
insofar as any such loss, claim, damage, liability or expense (or actions with
respect thereto) arises out of or is based on any breach by FASF of any of its
representations, warranties, covenants or agreements set forth in this
Agreement.
(b) Qualivest agrees to indemnify and hold harmless FASF and each of FASF's
directors and officers from and against any and all losses, claims, damages,
liabilities or expenses (including, without limitation, the payment of
reasonable legal fees and reasonable costs of investigation) to which, jointly
or severally, FASF or any of its directors or officers may become subject,
insofar as any such loss, claim, damage, liability or expense (or actions with
respect thereto) arises out of or is based on any breach by Qualivest of any of
its representation, warranties, covenants or agreements set forth in this
Agreement.
12. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the parties set forth in this Agreement shall survive the
delivery of the Fund Assets to the FASF Funds and the issuance of the shares
of the FASF Funds at the Effective Time of the Reorganization.
<PAGE>
13. TERMINATION OF AGREEMENT. This Agreement may be terminated by a party at
or, in the case of Subsections 13(c) or (d), below, at any time prior to, the
Effective Time of the Reorganization by a vote of a majority of its Board of
Directors/Trustees as provided below:
(a) by FASF if the conditions set forth in Section 8 are not satisfied
as specified in said Section;
(b) by Qualivest if the conditions set forth in Section 9 are not
satisfied as specified in said Section;
(c) by mutual consent of both parties; and
(d) by Qualivest or FASF if determined by its Board of Trustees or
Directors that proceeding with the transactions contemplated herein is
inadvisable.
14. AMENDMENT AND WAIVER. At any time prior to or (to the fullest extent
permitted by law) after approval of this Agreement by the shareholders of
Qualivest (a) the parties hereto may, by written agreement authorized by their
respective Boards of Directors/Trustees and with or without the further approval
of their shareholders, amend any of the provisions of this Agreement, and (b)
either party may waive any breach by the other party or the failure to satisfy
any of the conditions to its obligations (such waiver to be in writing and
authorized by the Board of Directors/Trustees of the waiving party with or
without the approval of such party's shareholders). Without limiting the
foregoing, in the event shareholder approval of the matters specified in Section
6 is obtained with respect to certain Qualivest Funds but not with respect to
the other Qualivest Funds, with the result that the transactions contemplated by
this Agreement may be consummated with respect to some but not all the Qualivest
Funds, the Board of Directors of FASF and the Board of Trustees of Qualivest
may, in the exercise of their reasonable business judgment, either abandon this
Agreement with respect to all of the Qualivest Funds or direct that the
Reorganization and other transactions described herein be consummated to the
degree the Boards deem advisable.
15. GOVERNING LAW. This Agreement and the transactions contemplated hereby
shall be governed, construed and enforced in accordance with the laws of the
State of Minnesota.
16. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
respective successors and permitted assigns of the parties hereto. This
Agreement and the rights, obligations and liabilities hereunder may not be
assigned by either party without the consent of the other party.
17. BENEFICIARIES. Nothing contained in this Agreement shall be deemed to
create rights in persons not parties hereto, other than the successors and
permitted assigns of the parties.
18. BROKERAGE FEES AND EXPENSES. FASF and Qualivest each represents and
warrants to the other that there are no brokers or finders entitled to
receive any payments in connection with the transactions provided for herein.
19. QUALIVEST LIABILITY. The Declaration of Trust for Qualivest, filed on May
19, 1994, a copy of which, together with all amendments thereto, is on file in
the Office of the Secretary of the Commonwealth of Massachusetts, provides (i)
that the name "Qualivest Funds" refers to the trustees under the Declaration of
Trust collectively as trustees and not as individuals or personally, (ii) that
no shareholder shall be subject to any personal liability whatsoever to any
person in connection with trust property or the acts, obligations or affairs of
the trust, and (iii) that no trustee, officer, employee or agent of the trust
shall be subject to any personal liability whatsoever to any person, other than
to the trust or its shareholders, in connection with trust property or the
affairs of the trust, save only that arising from bad faith, willful
misfeasance, gross negligence or reckless disregard of his duties with respect
to such person; and all such persons shall look solely to the trust property for
satisfaction of claims of any nature arising in connection with the affairs of
the trust.
20. NOTICES. All notices required or permitted herein shall be in writing and
shall be deemed to be properly given when delivered personally or by
telefacsimile to the party entitled to receive the notice or when sent by
certified or registered mail, postage prepaid, or delivered to an
internationally recognized overnight courier service, in each case properly
addressed to the party entitled to receive
<PAGE>
such notice at the address or telefax number stated below or to such other
address or telefax number as may hereafter be furnished in writing by notice
similarly given by one party to the other party hereto:
If to FASF: First American Strategy Funds, Inc.
Oaks, Pennsylvania 19456
With copies to: Michael J. Radmer
Dorsey & Whitney LLP
Pillsbury Center South
220 South Sixth Street
Minneapolis, Minnesota 55402
Telefax Number: (612) 340-8738
If to Qualivest: Qualivest Funds
3435 Stelzer Road
Columbus, Ohio 43219-3035
With copies to: Marie J. Lilly, Esq.
Law Division
U.S. Bancorp
111 S.W. Fifth Avenue, Suite T-2
Portland, Oregon 97204
Telefax Number: (503) 275-5000
Jeffrey L. Steele, Esq.
Dechert Price & Rhoads
1500 K Street, N.W.
Washington, D.C. 20005
Telefax Number: (202) 626-3334
21. ANNOUNCEMENTS. Any announcement or similar publicity with respect to this
Agreement or the transactions contemplated herein shall be made only at such
time and in such manner as the parties shall agree; provided that nothing herein
shall prevent either party upon notice to the other party from making such
public announcements as such party's counsel may consider advisable in order to
satisfy the party's legal and contractual obligations in such regard.
22. ENTIRE AGREEMENT. This Agreement embodies the entire agreement and
understanding of the parties hereto and supersedes any and all prior
agreements, arrangements and understandings relating to matters provided for
herein.
23. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when executed and delivered shall be deemed to be
an original, but all of which together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their duly authorized officers designated below as of the date first
written above.
QUALIVEST FUNDS
ATTEST:
- ----------------------------------- -------------------------------------
Gregory T. Maddox Irimga McKay
Treasurer and Secretary President and Chief Executive Officer
<PAGE>
FIRST AMERICAN INVESTMENT FUNDS, INC.
ATTEST:
- ----------------------------------- -------------------------------------
Michael J. Radmer David Lee
Secretary President
<PAGE>
APPENDIX IV
FEES AND EXPENSES OF THE QUALIVEST PORTFOLIOS
AND CORRESPONDING FASF FUNDS
The following tables compare the current fees and expenses for each Qualivest
Portfolio and its corresponding FASF Fund. FBNA has agreed that, for the period
commencing on the Closing and continuing until September 30, 1998, it will waive
fees and reimburse expenses to the FASF Funds to the extent necessary to
maintain FASF Fund total operating expenses at the levels provided in the
tables. Fee and expense information for the Qualivest Portfolios has been
annualized and is based on the six-month period ended January 31, 1997. The
purpose of these tables is to assist shareholders in understanding the various
costs and expenses that investors in these funds will bear as shareholders. THE
EXAMPLES CONTAINED IN THE TABLES SHOULD NOT BE CONSIDERED REPRESENTATIONS OF
PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
QUALIVEST ALLOCATED CONSERVATIVE FUND/FASF STRATEGY INCOME FUND
<TABLE>
<CAPTION>
QUALIVEST ALLOCATED FASF STRATEGY
CONSERVATIVE FUND INCOME FUND
CLASS A CLASS Y
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) 4.00% None None
Maximum Sales Charge Imposed on Reinvested Dividends None None None
Deferred Sales Charge (as a percentage of
redemption proceeds)1 None None None
Redemption Fees None None None
Exchange Fees None None None
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Investment Advisory Fees (after waivers)2 0.05% 0.05% 0.00%
Rule 12b-1 Fees 0.25% None None
Shareholder Servicing Fees 0.00% 0.00% 0.25%
Other Expenses (after waivers and reimbursements)3 0.33% 0.34% 0.00%
Total Fund Operating Expenses (after waivers and
reimbursements)4 0.63% 0.39% 0.25%
</TABLE>
1 For Class A shares of the Qualivest Portfolio, a 1% contingent deferred
sales charge ("CDSC") is imposed on purchases of $1 million or more that were
not subject to an initial sales charge. Such CDSC is imposed on shares
redeemed within 12 months of purchase.
2 Investment advisory fees for the FASF Fund reflect voluntary fee waivers by
FBNA. Absent voluntary waivers, current investment advisory fees for the FASF
Fund would be 0.25% of average daily net assets.
3 Other expenses for the FASF Fund reflect voluntary fee waivers and/or expense
reimbursements by the Fund's investment adviser and administrator. Absent such
voluntary waivers and reimbursements, other expenses for the FASF Fund are
estimated to be 1.78% of average daily net assets. The Qualivest Portfolio has
adopted, but not implemented, a plan under which up to 0.25% of the
Portfolio's average daily net assets attributable to Class Y shares may be
expended to procure shareholder services.
4 Absent any voluntary fee waivers or expense reimbursements, total fund
operating expenses are estimated to be 2.03% of average daily net assets for
the shares of the FASF Fund.
<PAGE>
Example:
An investor would pay the following expenses on a $1,000 investment, assuming
(1) the maximum applicable sales charge, (2) 5% annual return, and (3)
redemption at the end of each time period:
QUALIVEST ALLOCATED FASF STRATEGY
CONSERVATIVE FUND INCOME FUND
CLASS A CLASS Y
1 year $46 $ 4 $ 3
3 years $59 $13 $ 8
5 years $74 $22 $14
10 years $115 $49 $32
In addition to the expenses set forth above, the investor will indirectly bear
their pro rata share of fees and expenses incurred by the Underlying Funds. For
an example of such expenses, see the expense tables in the Funds' Prospectus,
which accompanies this Proxy Statement/Prospectus.
QUALIVEST ALLOCATED BALANCED FUND/FAIF STRATEGY GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
FASF STRATEGY
QUALIVEST ALLOCATED GROWTH AND
BALANCED FUND INCOME FUND
CLASS A CLASS Y
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) 4.00% None None
Maximum Sales Charge Imposed on Reinvested Dividends None None None
Deferred Sales Charge (as a percentage of
redemption proceeds)1 None None None
Redemption Fees None None None
Exchange Fees None None None
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Investment Advisory Fees (after waivers)2 0.05% 0.05% 0.00%
Rule 12b-1 Fees 0.25% None None
Shareholder Servicing Fees 0.00% 0.00% 0.25%
Other Expenses (after waivers and reimbursements)3 0.23% 0.20% 0.00%
Total Fund Operating Expenses (after waivers and
reimbursements)4 0.53% 0.25% 0.25%
</TABLE>
1 For Class A shares of the Qualivest Portfolio, a 1% contingent deferred
sales charge ("CDSC") is imposed on purchases of $1 million or more that were
not subject to an initial sales charge. Such CDSC is imposed on shares
redeemed within 12 months of purchase.
2 Investment advisory fees for the FASF Fund reflect voluntary fee waivers by
FBNA. Absent voluntary waivers, current investment advisory fees for the FASF
Fund would be 0.25% of average daily net assets.
3 Other expenses for the FASF Fund reflect voluntary fee waivers and/or expense
reimbursements by the Fund's investment adviser and administrator. Absent such
voluntary waivers and reimbursements, other expenses for the FASF Fund are
estimated to be 1.78% of average daily net assets. The Qualivest Portfolio has
adopted, but not implemented, a plan under which up to 0.25% of the
Portfolio's average daily net assets attributable to Class Y shares may be
expended to procure shareholder services.
4 Absent any voluntary fee waivers or expense reimbursements, total fund
operating expenses are estimated to be 2.03% of average daily net assets for
the shares of the FASF Fund.
<PAGE>
Example:
An investor would pay the following expenses on a $1,000 investment, assuming
(1) the maximum applicable sales charge, (2) 5% annual return, and (3)
redemption at the end of each time period:
FASF STRATEGY
QUALIVEST ALLOCATED GROWTH AND
BALANCED FUND INCOME FUND
CLASS A CLASS Y
1 year $45 $ 3 $ 3
3 years $56 $ 8 $ 8
5 years $68 $14 $14
10 years $104 $32 $32
In addition to the expenses set forth above, the investor will indirectly bear
their pro rata share of fees and expenses incurred by the Underlying Funds. For
an example of such expenses, see the expense tables in the Funds' Prospectus,
which accompanies this Proxy Statement/Prospectus.
QUALIVEST ALLOCATED GROWTH FUND/FASF STRATEGY GROWTH FUND
<TABLE>
<CAPTION>
QUALIVEST ALLOCATED FASF STRATEGY
GROWTH FUND GROWTH FUND
CLASS A CLASS Y
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) 4.00% None None
Maximum Sales Charge Imposed on Reinvested Dividends None None None
Deferred Sales Charge (as a percentage of
redemption proceeds)1 None None None
Redemption Fees None None None
Exchange Fees None None None
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Investment Advisory Fees (after waivers)2 0.05% 0.05% 0.00%
Rule 12b-1 Fees 0.25% None None
Shareholder Servicing Fees 0.00% 0.00% 0.25%
Other Expenses (after waivers and reimbursements)3 0.26% 0.24% 0.00%
Total Fund Operating Expenses (after waivers and
reimbursements)4 0.56% 0.29% 0.25%
</TABLE>
1 For Class A shares of the Qualivest Portfolio, a 1% contingent deferred
sales charge ("CDSC") is imposed on purchases of $1 million or more that were
not subject to an initial sales charge. Such CDSC is imposed on shares
redeemed within 12 months of purchase.
2 Investment advisory fees for the FASF Fund reflect voluntary fee waivers by
FBNA. Absent voluntary waivers, current investment advisory fees for the FASF
Fund would be 0.25% of average daily net assets.
3 Other expenses for the FASF Fund reflect voluntary fee waivers and/or expense
reimbursements by the Fund's investment adviser and administrator. Absent such
voluntary waivers and reimbursements, other expenses for the FASF Fund are
estimated to be 1.78% of average daily net assets. The Qualivest Portfolio has
adopted, but not implemented, a plan under which up to 0.25% of the
Portfolio's average daily net assets attributable to Class Y shares may be
expended to procure shareholder services.
4 Absent any voluntary fee waivers or expense reimbursements, total fund
operating expenses are estimated to be 2.03% of average daily net assets for
the shares of the FASF Fund.
<PAGE>
Example:
An investor would pay the following expenses on a $1,000 investment, assuming
(1) the maximum applicable sales charge, (2) 5% annual return, and (3)
redemption at the end of each time period:
QUALIVEST ALLOCATED FASF STRATEGY
GROWTH FUND GROWTH FUND
CLASS A CLASS Y
1 year $45 $ 3 $ 3
3 years $57 $ 9 $ 8
5 years $70 $16 $14
10 years $107 $37 $32
In addition to the expenses set forth above, the investor will indirectly bear
their pro rata share of fees and expenses incurred by the Underlying Funds. For
an example of such expenses, see the expense tables in the Funds' Prospectus,
which accompanies this Proxy Statement/Prospectus.
QUALIVEST ALLOCATED AGGRESSIVE FUND/FASF AGGRESSIVE GROWTH FUND
<TABLE>
<CAPTION>
QUALIVEST ALLOCATED FASF AGGRESSIVE
AGGRESSIVE FUND GRWOTH FUND
CLASS A CLASS Y
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) 4.00% None None
Maximum Sales Charge Imposed on Reinvested Dividends None None None
Deferred Sales Charge (as a percentage of
redemption proceeds)1 None None None
Redemption Fees None None None
Exchange Fees None None None
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Investment Advisory Fees (after waivers)2 0.05% 0.05% 0.00%
Rule 12b-1 Fees 0.25% None None
Shareholder Servicing Fees 0.00% 0.00% 0.25%
Other Expenses (after waivers and reimbursements)3 0.29% 0.27% 0.00%
Total Fund Operating Expenses (after waivers and
reimbursements)4 0.59% 0.32% 0.25%
</TABLE>
1 For Class A shares of the Qualivest Portfolio, a 1% contingent deferred
sales charge ("CDSC") is imposed on purchases of $1 million or more that were
not subject to an initial sales charge. Such CDSC is imposed on shares
redeemed within 12 months of purchase.
2 Investment advisory fees for the FASF Fund reflect voluntary fee waivers by
FBNA. Absent voluntary waivers, current investment advisory fees for the FASF
Fund would be 0.25% of average daily net assets.
3 Other expenses for the FASF Fund reflect voluntary fee waivers and/or expense
reimbursements by the Fund's investment adviser and administrator. Absent such
voluntary waivers and reimbursements, other expenses for the FASF Fund are
estimated to be 1.78% of average daily net assets. The Qualivest Portfolio has
adopted, but not implemented, a plan under which up to 0.25% of the
Portfolio's average daily net assets attributable to Class Y shares may be
expended to procure shareholder services.
4 Absent any voluntary fee waivers or expense reimbursements, total fund
operating expenses are estimated to be 2.03% of average daily net assets for
the shares of the FASF Fund.
<PAGE>
Example:
An investor would pay the following expenses on a $1,000 investment, assuming
(1) the maximum applicable sales charge, (2) 5% annual return, and (3)
redemption at the end of each time period:
QUALIVEST ALLOCATED FASF AGGRESSIVE
AGGRESSIVE FUND GROWTH FUND
CLASS A CLASS Y
1 year $46 $ 3 $ 3
3 years $58 $10 $ 8
5 years $72 $18 $14
10 years $111 $41 $32
In addition to the expenses set forth above, the investor will indirectly bear
their pro rata share of fees and expenses incurred by the Underlying Funds. For
an example of such expenses, see the expense tables in the Funds' Prospectus,
which accompanies this Proxy Statement/Prospectus.
<PAGE>
APPENDIX V
COMPARISON OF INTERIM ADVISORY AGREEMENT AND
FASF INVESTMENT ADVISORY AGREEMENT
This Appendix summarizes and compares certain significant provisions of the
Interim Advisory Agreement (the "Interim Agreement") against corresponding
provisions of the FASF Investment Advisory Agreement (the "FASF Agreement").
Fees payable under the Agreements are set forth in Table III in the Combined
Proxy Statement/Prospectus.
ADVISORY SERVICES. The Interim Agreement provides that the adviser will provide
a continuous investment program for the Qualivest Portfolios, including
investment research and management with respect to all securities and
investments and cash equivalents in the Portfolios. The Interim Agreement
provides that the adviser will pay all expenses incurred by it in connection
with its activities under the Agreement other than the cost of securities
(including brokerage commissions, if any) purchased by the portfolios.
Similarly, the FASF Agreement provides that the adviser agrees to act as the
investment adviser for, and to manage the investment of the assets of, the FASF
Funds. Under the FASF Agreement the adviser is required, at its own expense, to
provide the FASF Funds with all necessary office space, personnel and facilities
necessary and incident to the performance of the adviser's services under the
Agreement. In addition, under the FASF Agreement, the adviser is required to pay
or be responsible for the payment of all compensation to personnel of the FASF
Funds and the officers and directors of the FASF Funds who are affiliated with
the adviser or any entity which controls, is controlled by or is under common
control with the adviser.
FEE AND EXPENSE LIMITATIONS. Each Agreement requires that if, in any fiscal
year, the aggregate expenses of any Fund or Portfolio exceed the expense
limitations imposed under the securities regulations of a state, the adviser
will reimburse the Fund or Portfolio. A portion of such reimbursement will be
paid by the administrator in the case of the Interim Agreement. Such
reimbursement shall not exceed the advisory fees paid to the adviser during the
year, unless otherwise required by the state and, in the case of the FASF
Agreement, unless the adviser agrees to be bound by such state requirement.
Under federal law, states may no longer impose expense limitations on mutual
funds.
STANDARD OF CARE. The Interim Agreement provides that the adviser shall not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Portfolios in connection with the performance of the Interim Agreement,
except a loss resulting from a breach of fiduciary duty with respect to the
receipt of compensation for services or a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of the adviser in the
performance of its duties or from reckless disregard by it of its obligations
and duties under the Interim Agreement.
The FASF Agreement provides that the adviser shall be liable to the Funds and
their shareholders or former shareholders for any negligence or willful
misconduct on the part of the adviser or any of its directors, officers,
employees, representatives or agents in connection with the responsibilities
assumed by it under the FASF Agreement, provided that the adviser shall not be
liable for any investments made by the adviser in accordance with the explicit
or implicit direction of the Board of Directors of FASF or the investment
objectives and policies of a Fund, and provided further that any liability of
the adviser resulting from a breach of fiduciary duty with respect to the
receipt of compensation for services shall be limited to the period and amount
set forth in Section 36(b)(3) of the 1940 Act. In addition, the adviser agrees
in the FASF agreement to indemnify FASF and each Fund with respect to any loss,
liability, judgment, cost or penalty which FASF or any Fund may directly or
indirectly suffer or incur in any way arising out of or in connection with any
breach of the FASF Agreement by the adviser.
PORTFOLIO TRANSACTIONS. The Interim Agreement provides that the adviser will
place or cause to be placed orders for the Portfolios either directly with the
issuer or with any broker or dealer. The Interim Agreement requires that, in
placing orders with brokers and dealers, the adviser will attempt to obtain
prompt execution of orders in an effective manner at the most favorable price.
To the extent permitted by the 1940 Act, when the execution and price offered by
two or more brokers or dealers are
<PAGE>
comparable, the adviser may purchase and sell portfolio securities to and from
brokers and dealers who provide the adviser with research advice and other
services. The Interim Agreement provides that portfolio securities will not be
purchased from or sold to the administrator, the adviser, or any affiliated
person of the administrator, the adviser or Qualivest, except to the extent
permitted by the 1940 Act.
The FASF Agreement does not address the issue of the adviser placing Fund
portfolio transactions with brokers and dealers who provide research advice and
other services to the adviser. Such a practice is permitted, however, under the
current prospectuses for the FASF Funds. The FASF Agreement specifically
provides that the adviser may utilize the Funds' distributor or an affiliate of
the adviser as a broker in accordance with the 1940 Act and the Funds'
registration statement. The FASF Agreement also provides that allocation of
portfolio transactions shall be subject to such policies and supervision as
FASF's Board of Directors or any committee thereof deems appropriate and any
brokerage policy set forth in the then current registration statement of the
Funds.
<PAGE>
APPENDIX VI
SHAREHOLDER TRANSACTIONS AND SERVICES
This Appendix compares the shareholder transactions and services of the
Qualivest Portfolios and the corresponding FASF Funds. The following is
qualified in its entirety by the more detailed information included in the
prospectuses for the Qualivest Portfolios and the FASF Funds which are
incorporated by reference in this Combined Proxy Statement/Prospectus.
PURCHASE, EXCHANGE AND REDEMPTION PROCEDURES
PURCHASES OF FASF FUNDS SHARES AND QUALIVEST CLASS A SHARES. Class A shares of
the Qualivest Portfolios may be purchased at a public offering price equal to
their net asset value per share plus a sales charge equal to 4.00% of the public
offering price, which sales charge is reduced when the total purchase amount is
$50,000 or more. Shares of the FASF Funds are sold at net asset value without
any front-end or contingent deferred sales charge.
The minimum initial investment for Qualivest Portfolio Class A shares generally
is $500, with a $100 minimum for subsequent purchases. The minimum initial
investment for FASF Fund shares generally is $1,000, with a minimum of $100 for
subsequent purchases.
Class A Qualivest Portfolio shares may be purchased directly from the
Portfolios' distributor or through a broker-dealer who has established a dealer
agreement with the distributor. Such purchases may be made by mail, by telephone
or by wire. FASF Fund shares may be purchased through a financial institution
which has a sales agreement with the Funds' distributor, by mail directly
through the Funds' transfer agent, or by wire.
Both the FASF Fund shares and the Qualivest Portfolio Class A shares have
automatic investment programs which allow shareholders to make regular purchases
of shares through automatic deduction from their bank accounts and, in the case
of the FASF Funds, from the Prime Obligations Fund, a series of First American
Funds, Inc.
PURCHASES AT REDUCED OR NO SALES CHARGE. For the Class A shares of the Qualivest
Portfolios, various persons, entities and groups may qualify for reduced sales
charges, or for purchases at net asset value without a sales charge. Ways in
which the sales charge may be reduced or waived are set forth in the prospectus
for the Class A shares of the Qualivest Portfolios incorporated herein by
reference.
PURCHASES OF QUALIVEST PORTFOLIO CLASS Y SHARES. The Class Y shares of the
Qualivest Portfolios are offered at net asset value without any initial or
contingent deferred sales charges. Such shares are offered only to certain
institutional investors and bank trust departments purchasing shares on behalf
of fiduciary, advisory, agency, custody or other similar accounts maintained by
or on behalf of their customers. Such shares may be purchased through a
broker-dealer, bank or trust company that has established a dealer agreement
with the Portfolios' distributor and also may be purchased directly by mail, by
telephone or by wire.
EXCHANGES. Shares of a Qualivest Portfolio may be exchanged for shares of the
same class of any other Qualivest mutual fund (including the Underlying
Portfolios). Shares of an FASF Fund may be exchanged for shares of the other
FASF Funds or for the Class A shares of the Prime Obligations Fund. Shares of
the FASF Funds may not be exchanged for shares of the Underlying Funds (other
than the Class A shares of the Prime Obligations Fund).
REDEMPTIONS. Shares of the Qualivest Portfolios and the FASF Funds may be
redeemed by written request or by telephone. In addition, Class A Qualivest
Portfolio shareholders with an account balance of at least $500 and FASF Fund
shareholders with an account balance of at least $5,000 may elect to participate
in a systematic withdrawal program under which shares are redeemed to provide
for periodic withdrawal payments in an amount directed by the shareholder.
DIVIDENDS AND DISTRIBUTIONS.
There are differences in the dividend and distribution policies of the Qualivest
Portfolios and the FASF Funds. For the Allocated Conservative Fund and Allocated
Balanced Fund, and for their
<PAGE>
corresponding FASF Funds, net income dividends are declared and paid monthly.
For the Qualivest Allocated Growth Fund and Allocated Aggressive Fund, which
invest in Underlying Portfolios that in turn invest primarily in equity
securities, net income dividends are declared and paid quarterly. For their
corresponding FASF Funds, however, such dividends are declared and paid monthly.
For all Funds and Portfolios, distributions of any net realized long-term
capital gains are made at least once annually. For both the FASF Funds and the
Qualivest Portfolios, all dividends and distributions are automatically
reinvested in shares of the Fund or Portfolio at net asset value unless the
shareholders elects to receive dividends or distributions in cash or, in the
case of the Class A shares of the Qualivest Portfolios, in the same class of
another Qualivest mutual fund.
<PAGE>
PART B
STATEMENT OF ADDITIONAL INFORMATION
DATED _________, 1997
PROPOSED ACQUISITION OF ASSETS OF
ALLOCATED CONSERVATIVE FUND, ALLOCATED BALANCED FUND,
ALLOCATED GROWTH FUND AND ALLOCATED AGGRESSIVE FUND
PORTFOLIOS OF
QUALIVEST FUNDS
3435 STELZER ROAD
COLUMBUS, OHIO 43219-3035
1-800-743-8637
BY AND IN EXCHANGE FOR SHARES OF
STRATEGY INCOME FUND, STRATEGY GROWTH FUND, STRATEGY GROWTH AND
INCOME FUND AND STRATEGY AGGRESSIVE GROWTH FUND
PORTFOLIOS OF
FIRST AMERICAN STRATEGY FUNDS, INC.
OAKS, PENNSYLVANIA 19456
1-800-637-2548
This Statement of Additional Information relates to the proposed
Agreement and Plan of Reorganization providing for (a) the acquisition of all of
the assets and the assumption of all liabilities of the Allocated Conservative
Fund, Allocated Balanced Fund, Allocated Growth Fund and Allocated Aggressive
Fund (the "Qualivest Portfolios"), each separately managed portfolios of
Qualivest Funds ("Qualivest"), by the Strategy Income Fund, Strategy Growth
Fund, Strategy Growth and Income Fund and Strategy Aggressive Growth Fund ("FASF
Funds"), each separately managed series of First American Strategy Funds, Inc.
("FASF"), in exchange for shares of capital stock of the FASF Funds having an
aggregate net asset value equal to the aggregate value of the assets acquired
(less the liabilities assumed) of the Qualivest Portfolios and (b) the
liquidation of the Qualivest Portfolios and the pro rata distribution of the
Qualivest Portfolio shares to FASF Fund shareholders. This Statement of
Additional Information consists of this cover page, and the following documents,
each of which is incorporated by reference herein:
1. Statement of Additional Information of FASF dated October 1,
1996, as supplemented January 31, 1997 and March 26, 1997.
2. Statement of Additional Information of Qualivest dated
December 1, 1996.
3. Semi-Annual report of FASF for the six months ended March 31,
1997.
4. Annual report of Qualivest for the fiscal year ended July 31,
1996.
5. Semi-Annual report of Qualivest for the six months ended
January 31, 1997.
6. Financial Statements required by Form N-14, Item 14 (to the
extent not included in Items 3, 4 and 5 above).
This Statement of Additional Information is not a prospectus. The
Prospectus/Proxy Statement dated the date hereof relating to the
above-referenced transaction may be obtained without charge by writing or
calling Qualivest or FASF at the addresses or telephone numbers noted above.
This Statement of Additional Information relates to, and should be read in
conjunction with, such Prospectus/Proxy Statement.
Note: In the SEC filing package, Item No. 3 referred to above is included in
Part A as materials to be delivered with the Prospectus/Proxy Statement. A copy
of Items No. 1, 2, 4 and 5 also will be delivered to any person requesting the
Statement of Additional Information.
<PAGE>
FIRST AMERICAN STRATEGY FUNDS, INC.
INTRODUCTION TO PRO FORMA COMBINING STATEMENTS
MARCH 31, 1997
The accompanying unaudited pro forma combining Statements of Assets and
Liabilities, Statements of Operations and Schedules of Investments, reflect the
accounts of Qualivest Allocated Conservative Fund, Qualivest Allocated Balanced
Fund, Qualivest Allocated Growth Fund and Qualivest Allocated Aggressive Fund
(the Qualivest Funds) by the corresponding First American Strategy Funds, Inc.
(the FASF Funds) which include the First American Strategy Income Fund, First
American Strategy Growth and Income Fund, First American Strategy Growth Fund
and First American Strategy Aggressive Growth Fund (collectively, the Funds).
These statements have been derived from the underlying accounting records for
the FASF Funds and Qualivest Funds used in calculating net asset values for the
periods ended March 31, 1997. The pro forma combining Statements of Operations
have been prepared based upon the fee and expense structure of the FASF Funds.
Under the proposed merger agreement and plan of reorganization, all outstanding
shares of each class of each Qualivest Fund will be issued in exchange for
shares of specified classes of the corresponding FASF Fund.
<PAGE>
<TABLE>
<CAPTION>
First American Strategy Funds, Inc.
Strategy Income Fund
Pro Forma Combining Statement of Assets and Liabilities
3/31/97
(Unaudited)
Pro Forma
Allocated Strategy Adjustments Pro Forma
Conservative Income (Note 2) Combined
(000) (000) (000) (000)
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Assets:
Total Investments (Cost $10,830,
$12,368 and $23,198, respectively) $ 10,841 $ 12,185 $ - $ 23,026
Receivables:
Accrued Income 1 3 - 4
Capital Shares Sold 46 1,232 - 1,278
Other Assets 1 27 - 28
-------- -------- -------- --------
Total Assets 10,889 13,447 - 24,336
-------- -------- -------- --------
Liabilities:
Payables
Investment Securities Purchased - 133 - 133
Capital Shares Redeemed - 27 - 27
Accrued Expenses 4 8 - 12
Other Liabilities - 38 - 38
-------- -------- -------- --------
Total Liabilities 4 206 - 210
-------- -------- -------- --------
Net Assets applicable to:
Strategy Income
($.01 par value - 20 billion authorized)
based on 1,310,136 and 2,386,793
outstanding shares, respectively - 13,404 10,682 (a) 24,086
Allocated Conservative Class A based on
159,305 outstanding shares 1,656 - (1,656)(a) -
Allocated Conservative Class Y based on
897,392 outstanding shares 9,026 - (9,026)(a) -
Undistributed net investment income - (1) - (1)
Accumulated net realized gain/(loss)
on investments 192 21 - 213
Net unrealized appreciation/(depreciation)
of investments 11 (183) - (172)
-------- -------- -------- --------
Total Net Assets $ 10,885 $ 13,241 $ - $ 24,126
======== ======== ======== ========
Net Asset Value,
offering price and redemption price per share $ 10.11 $ 10.11
======== ========
Net Asset Value,
offering price and redemption price per share -
Class A $ 10.28
========
Net Asset Value,
offering price and redemption price per share -
Class Y $ 10.30
========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
First American Strategy Funds, Inc.
Strategy Growth and Income Fund
Pro Forma Combining Statement of Assets and Liabilities
3/31/97
(Unaudited)
Strategy Pro Forma
Allocated Growth and Adjustments Pro Forma
Balanced Income (Note 2) Combined
(000) (000) (000) (000)
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Assets:
Total Investments (Cost $70,736,
$9,843 and $80,579, respectively) $ 71,391 $ 9,577 $ - $ 80,968
Receivables:
Accrued Income 7 3 - 10
Capital Shares Sold 87 653 - 740
Other Assets 7 27 - 34
-------- -------- -------- --------
Total Assets 71,451 10,260 - 81,711
-------- -------- -------- --------
Liabilities:
Payables
Investment Securities Purchased - 68 - 68
Capital Shares Redeemed - 68 - 68
Accrued Expenses 29 2 - 31
Other Liabilities 41 38 - 38
-------- -------- -------- --------
Total Liabilities 29 176 - 205
-------- -------- -------- --------
Net Assets applicable to:
Strategy Growth and Income
($.01 par value - 20 billion authorized)
based on 984,133 and 7,952,133
outstanding shares, respectively - 10,277 68,696 (a) 78,973
Allocated Balanced Class A based on
614,566 outstanding shares 6,526 - (6,526)(a) -
Allocated Balanced Class Y based on
6,215,385 outstanding shares 62,170 - (62,170)(a) -
Undistributed net investment income (1) (1) - (2)
Accumulated net realized gain/(loss)
on investments 2,072 74 - 2,146
Net unrealized appreciation/(depreciation)
of investments 655 (266) - 389
-------- -------- -------- --------
Total Net Assets $ 71,422 $ 10,084 $ - $ 81,506
======== ======== ======== ========
Net Asset Value,
offering price and redemption price per share $ 10.25 $ 10.25
======== ========
Net Asset Value,
offering price and redemption price per share -
Class A $ 10.54
========
Net Asset Value,
offering price and redemption price per share -
Class Y $ 10.45
========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
First American Strategy Funds, Inc.
Strategy Growth Fund
Pro Forma Combining Statement of Assets and Liabilities
3/31/97
(Unaudited)
Pro Forma
Allocated Strategy Adjustments Pro Forma
Growth Growth (Note 2) Combined
(000) (000) (000) (000)
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Assets:
Total Investments (Cost $21,041,
$4,343 and $25,384, respectively) $ 21,214 $ 4,221 $ - $ 25,435
Receivables:
Accrued Income 2 1 - 3
Capital Shares Sold 206 96 - 302
Other Assets 2 27 - 29
-------- -------- -------- --------
Total Assets 21,424 4,345 - 25,769
-------- -------- -------- --------
Liabilities:
Payables
Investment Securities Purchased - 55 - 55
Capital Shares Redeemed - 36 - 36
Accrued Expenses 7 36 - 43
-------- -------- -------- --------
Total Liabilities 7 127 - 134
-------- -------- -------- --------
Net Assets applicable to:
Strategy Growth
($.01 par value - 20 billion authorized)
based on 414,704 and 2,520,604
outstanding shares, respectively - 4,284 20,598 (a) 24,882
Allocated Growth Class A based on
741,999 outstanding shares 8,053 - (8,053)(a) -
Allocated Growth Class Y based on
1,246,320 outstanding shares 12,545 - (12,545)(a) -
Undistributed net investment income 43 - - 43
Accumulated net realized gain/(loss)
on investments 603 56 - 659
Net unrealized appreciation/(depreciation)
of investments 173 (122) - 51
-------- -------- -------- --------
Total Net Assets $ 21,417 $ 4,218 $ - $ 25,635
======== ======== ======== ========
Net Asset Value,
offering price and redemption price per share $ 10.17 $ 10.17
======== ========
Net Asset Value,
offering price and redemption price per share -
Class A $ 10.85
========
Net Asset Value,
offering price and redemption price per share -
Class Y $ 10.73
========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
First American Strategy Funds, Inc.
Strategy Aggressive Growth Fund
Pro Forma Combining Statement of Assets and Liabilities
3/31/97
(Unaudited)
Strategy Pro Forma
Allocated Aggressive Adjustments Pro Forma
Aggressive Growth (Note 2) Combined
(000) (000) (000) (000)
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Assets:
Total Investments (Cost $23,149, $3,869
and $27,018, respectively) $ 23,270 $ 3,733 $ - $ 27,003
Receivables:
Accrued Income 3 1 - 4
Capital Shares Sold 44 117 - 161
Other Assets 1 27 - 28
-------- -------- -------- --------
Total Assets 23,318 3,878 - 27,196
-------- -------- -------- --------
Liabilities:
Payables
Accrued Expenses 7 35 - 42
-------- -------- -------- --------
Total Liabilities 7 35 - 42
-------- -------- -------- --------
Net Assets applicable to:
Strategy Aggressive Growth
($.01 par value - 20 billion authorized)
based on 379,328 and 2,680,513
outstanding shares, respectively - 3,911 22,594 (a) 26,505
Allocated Aggressive Class A based on
428,298 outstanding shares 4,724 - (4,724)(a) -
Allocated Aggressive Class Y based on
1,716,449 outstanding shares 17,870 - (17,870)(a) -
Undistributed net investment income 6 - - 6
Accumulated net realized gain/(loss)
on investments 590 68 - 658
Net unrealized appreciation/(depreciation)
of investments 121 (136) - (15)
-------- -------- -------- --------
Total Net Assets $ 23,311 $ 3,843 $ - $ 27,154
======== ======== ======== ========
Net Asset Value,
offering price and redemption price per share $ 10.13 $ 10.13
======== ========
Net Asset Value,
offering price and redemption price per share -
Class A $ 10.88
========
Net Asset Value,
offering price and redemption price per share -
Class Y $ 10.84
========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
First American Strategy Funds, Inc.
Strategy Income Fund
Pro Forma Combining Statement of Operations
For the Period Ended March 31, 1997 (Note 3)
(Unaudited)
Pro Forma Adjustments
Strategy Allocated (Note 2) Pro Forma
Income Conservative Debit Credit Combined
(000) (000) (000) (000) (000)
----- ----- --------- --------- -----
<S> <C> <C> <C> <C> <C>
Investment Income:
Interest $ 9 $ 10 $ - $ - $ 19
Dividends 131 316 - - 447
----- ----- --------- --------- -----
Total investment income 140 326 - - 466
----- ----- --------- --------- -----
Expenses:
Investment advisory fees 7 4 20(b) 4(b) 27
Waiver of investment advisory fees (7) - - 20(b) (27)
Reimbursement of expenses by advisor (57) - - 40(b) (97)
Administrative fees 25 6 21(b) 6(b) 46
Transfer agent fees 7 1 1(c) 1(c) 8
Amortization of organizational costs 2 - - - 2
Custodian fees 1 - 2(b) - 3
Directors' fees - 1 1(c) 1(c) 1
Registration fees 13 6 4(c) 6(c) 17
Professional fees 11 10 1(c) 10(c) 12
Printing 5 1 1(c) 1(c) 6
Shareholder servicing fee 7 - 20(b) - 27
Distribution fees - Qualivest Class A - 1 - 1(b) -
Other 2 - - - 2
----- ----- --------- --------- -----
Total expenses after waivers and
reimbursements 16 30 71 90 27
----- ----- --------- --------- -----
Investment income (loss) - net 124 296 (71) (90) 439
----- ----- --------- --------- -----
Realized and Unrealized Gains (Losses) on Investments
and Foreign Currency Transactions - Net
Realized capital gain distributions from investments 11 - - - 11
Net realized gain (loss) on investments 10 196 - - 206
Net change in unrealized appreciation
(depreciation) of invesments (183) 10 - - (173)
----- ----- --------- --------- -----
Net Gain (Loss) on Investments (162) 206 - - 44
----- ----- --------- --------- -----
Net Increase (Decrease) in Net Assets
Resulting from Operations $ (38) $ 502 $ (71) $ (90) $ 483
===== ===== ========= ========= =====
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
First American Strategy Funds, Inc.
Strategy Growth and Income Fund
Pro Forma Combining Statement of Operations
For the Period Ended March 31, 1997(Note 3)
(Unaudited)
Pro Forma Adjustments
Strategy (Note 2)
Growth and Allocated Pro Forma
Income balanced Debit Credit Combined
(000) (000) (000) (000) (000)
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Investment Income:
Interest $ 7 $ 68 $ - $ - $ 75
Dividends 65 1,508 - - 1,573
------- ------- ------- ------- -------
Total investment income 72 1,576 - - 1,648
------- ------- ------- ------- -------
Expenses:
Investment advisory fees 5 26 130(b) 26(b) 135
Waiver of investment advisory fees (5) - - 130(b) (135)
Reimbursement of expenses by advisor (54) - - 87(b) (141)
Administrative fees 25 41 36(b) 41(b) 61
Transfer agent fees 7 26 10(c) 26(c) 17
Amortization of organizational costs 2 - - - 2
Custodian fees 1 3 15(b) 3(b) 16
Directors' fees - 2 1(c) 2(c) 1
Registration fees 13 14 10(c) 14(c) 23
Professional fees 9 12 5(c) 12(c) 14
Printing 4 4 1(c) 4(c) 5
Shareholder servicing fee 5 - 130(b) - 135
Distribution fees - Qualivest Class A - 4 - 4(b) -
Other 1 1 1(c) 1(c) 2
------- ------- ------- ------- -------
Total expenses after waivers and reimbursements 13 133 339 350 135
------- ------- ------- ------- -------
Investment income (loss) - net 59 1,443 (339) (350) 1,513
------- ------- ------- ------- -------
Realized and Unrealized Gains (Losses) on Investments
and Foreign Currency Transactions - Net
Realized capital gain distributions from investments 52 - - - 52
Net realized gain (loss) on investments 22 2,090 - - 2,112
Net change in unrealized appreciation
(depreciation) of investments (266) 655 - - 389
------- ------- ------- ------- -------
Net Gain (Loss) on Investments (192) 2,745 - - 2,553
------- ------- ------- ------- -------
Net Increase (Decrease) in Net Assets Resulting
from Operations $ (133) $ 4,188 $ (339) $ (350) $ 4,066
======= ======= ======= ======= =======
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
First American Strategy Funds, Inc.
Strategy Growth Fund
Pro Forma Combining Statement of Operations
For the Period Ended March 31, 1997 (Note 3)
(Unaudited)
Pro Forma Adjustments
Strategy Allocated (Note 2) Pro Forma
Growth Growth Debit Credit Combined
(000) (000) (000) (000) (000)
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Investment Income:
Interest $ 3 $ 17 $ - $ - $ 20
Dividends 23 237 - - 260
------ ------ ------ ------ ------
Total investment income 26 254 - - 280
------ ------ ------ ------ ------
EXPENSES:
Investment advisory fees 3 6 30(b) 6(b) 33
Waiver of investment advisory fees (3) - - 30(b) (33)
Reimbursement of expenses by advisor (47) - - 37(b) (84)
Administrative fees 25 10 21(b) 10(b) 46
Transfer agent fees 6 2 2(c) 2(c) 8
Amortization of organizational costs 2 - - - 2
Custodian fees - 1 4(b) 1(b) 4
Directors' fees - 1 1(c) 1(c) 1
Registration fees 10 7 2(c) 7(c) 12
Professional fees 4 9 2(c) 9(c) 6
Printing 2 1 1(c) 1(c) 3
Shareholder servicing fee 3 - 30(b) - 33
Distribution fees - Qualivest Class A - 5 - 5(b) -
Other 1 - - - 1
------ ------ ------ ------ ------
Total expenses after waivers and reimbursements 6 42 93 109 33
------ ------ ------ ------ ------
Investment income (loss) - net 20 212 (93) (109) 247
------ ------ ------ ------ ------
Realized and Unrealized Gains (Losses) on Investments
and Foreign Currency Transactions - Net
Realized capital gain distributions from investments 54 - - - 54
Net realized gain (loss) on investments 2 614 - - 616
Net change in unrealized appreciation
(depreciation) of investments (122) 173 - - 51
------ ------ ------ ------ ------
Net Gain (Loss) on Investments (66) 787 - - 721
------ ------ ------ ------ ------
Net Increase (Decrease) in Net Assets
Resulting from Operations $ (46) $ 999 $ (93) $ (109) $ 968
====== ====== ====== ====== ======
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
First American Strategy Funds, Inc.
Strategy Aggressive Growth Fund
Pro Forma Combining Statement of Operations
For the Period Ended March 31, 1997 (Note 3)
(Unaudited)
Pro Forma Adjustments
Strategy (Note 2)
Aggressive Allocated Pro Forma
Growth aggressive Debit Credit Combined
(000) (000) (000) (000) (000)
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Investment Income:
Interest $ 3 $ 16 - $ - $ 19
Dividends 15 102 - - 117
------ ------ ------ ------ ------
Total investment income 18 118 - - 136
------ ------ ------ ------ ------
Expenses:
Investment advisory fees 3 5 25(b) 5(b) 28
Waiver of investment advisory fees (3) - - 25(b) (28)
Reimbursement of expenses by advisor (46) - - 38(b) (84)
Administrative fees 25 9 21(b) 9(b) 46
Transfer agent fees 6 2 2(c) 2(c) 8
Amortization of organizational costs 2 - - - 2
Custodian fees - 1 3(b) 1(b) 3
Directors' fees - 1 1(c) 1(c) 1
Registration fees 10 6 2(c) 6(c) 12
Professional fees 4 9 2(c) 9(c) 6
Printing 2 1 2(c) 1(c) 4
Shareholder servicing fee 3 - 25(b) - 28
Distribution fees - Qualivest Class A - 3 - 3(b) -
Other - - 1(c) - 1
------ ------ ------ ------ ------
Total expenses after waivers and reimbursements 6 37 85 100 28
------ ------ ------ ------ ------
Investment income (loss) - net 12 81 (85) (100) 108
------ ------ ------ ------ ------
Realized and Unrealized Gains (Losses) on Investments
and Foreign Currency Transactions - Net
Realized capital gain distributions from investments 64 - - - 64
Net realized gain (loss) on investments 4 590 - - 594
Net change in unrealized appreciation
(depreciation) of investments (136) 121 - - (15)
------ ------ ------ ------ ------
Net Gain (Loss) on Investments (68) 711 - - 643
====== ====== ====== ====== ======
Net Increase (Decrease) in Net Assets Resulting
from Operations $ (56) $ 792 $ (85) $ (100) $ 751
====== ====== ====== ====== ======
See accompanying notes to financial statements
</TABLE>
<PAGE>
FIRST AMERICAN STRATEGY FUNDS, INC.
NOTES TO PRO FORMA STATEMENTS
(UNAUDITED)
1. BASIS OF COMBINATION
The unaudited pro forma combining Statements of Assets and Liabilities,
Statements of Operations and Schedules of Investments give effect to the
proposed acquisition of the Qualivest Allocated Conservative Fund (Allocated
Conservative), Qualivest Allocated Balanced Fund (Allocated Balanced), Qualivest
Allocated Growth Fund (Allocated Growth) and Qualivest Allocated Aggressive Fund
(Allocated Aggressive) (the Qualivest Funds) by the corresponding First American
Strategy Funds, Inc. (the FASF Funds) which include the First American Strategy
Income Fund (Strategy Income), First American Strategy Growth and Income Fund
(Strategy Growth and Income), First American Strategy Growth Fund (Strategy
Growth) and First American Strategy Aggressive Growth Fund (Strategy Aggressive
Growth) (collectively, the Funds). The proposed acquisition will be accounted
for by the method of accounting for tax free mergers of investment companies
(sometimes referred to as the pooling without restatement method). The
acquisition will be accomplished by an exchange of all outstanding shares of
each class for each Qualivest Fund in exchange for shares of specified classes
of the corresponding FASF Fund.
The pro forma combining statements should be read in conjunction with the
historical financial statements of the constituent funds and the notes thereto
incorporated by reference in the Statement of Additional Information.
Strategy Income Fund, Strategy Growth and Income Fund, Strategy Growth Fund and
Strategy Aggressive Growth Fund, are portfolios offered by First American
Investment Funds, Inc. (FASF) an open-end, management investment company
registered under the Investment Company Act of 1940, as amended. FASF presently
includes a series of four funds.
2. PRO FORMA ADJUSTMENTS
(a) The pro forma combining statements of assets and liabilities
assumes the issuance of additional shares of the Funds as if
the reorganization were to have taken place on March 31, 1997
and is based on the net asset value of the acquiring fund.
Transactions in shares of capital stock are as follows:
159,305, 614,566, 741,999, 428,298 Class A shares and 897,392,
6,215,385, 1,246,320, 1,716,449 Class Y shares of Allocated
Conservative Fund, Allocated Balanced Fund, Allocated Growth
Fund and Allocated Aggressive Fund, respectively, exchanged
for 1,076,657, 6,968,000,
<PAGE>
2,105,900, 2,301,185 Common shares (no class designation) of
Strategy Income Fund, Strategy Growth and Income Fund,
Strategy Growth Fund and Strategy Aggressive Growth Fund,
respectively.
(b) The pro forma adjustments to investment advisory fees
(including waivers), administrative fees, custodian fees and
distribution fees (including waivers) reflect the difference
in fees charged by the FASF Funds based upon the effective fee
schedule.
First Bank National Association (FBNA) has agreed to waive
fees and reimburse expenses through September 30, 1998, to the
extent necessary to maintain overall total proforma Fund
operating expense ratios at 0.25% of average daily net assets
for each Fund.
(c) The pro forma adjustments to transfer agent fees, directors'
fees, registration fees, professional fees, printing expenses
and other expenses reflect the expected savings due to the
combination of the funds.
(d) The pro forma adjustments to the Schedule of Investments
reflect a reorganization, subject to shareholder approval and
the satisfaction of certain conditions, of each of the
underlying portfolios into a series of either First American
Funds, Inc. or First American Investment Funds, Inc.
3. PRESENTATION PERIOD (STATEMENT OF OPERATIONS)
The FASF Funds commenced operations on October 1, 1996. The statements of
operations reflect the results of operations for the period from October 1, 1996
to March 31, 1997. The Qualivest Funds commenced operations May 1, 1996. The
statements of operations reflect the results of operations for the period from
May 1, 1996 to March 31, 1997. The proforma combining statements of operations
reflect the combined results of operations for the period from May 1, 1996 to
March 31, 1997.
4. INVESTMENT OBJECTIVES AND POLICIES
These statements do not reflect the effects of proposed differing investment
objectives and policies of the Funds, in regards to their investments and
allocations between underlying portfolios. To insure that the investments in the
underlying portfolios comply with each funds' allocation range, the FASF Funds
may alter the permissable ranges which would require the prospectus to be
amended or supplemented, or adjust the investments in the underlying portfolios.
Changes in investments may result in a realization of capital gains for the
Funds and shareholders.
<PAGE>
<TABLE>
<CAPTION>
First American Strategy Funds, Inc.
Strategy Income Fund
Pro Forma Combining Schedule of Investments
3/31/97
(Unaudited)
Shares Value
------ -----
Pro Forma
Pro Forma Allocated Strategy Adjustments Pro Forma
Allocated Strategy Adjustments Pro Forma Conservative Income (Note 2) Combined
Conservative Income (Note 2) Combined Security (000) (000) (000) (000)
- ------------ ------ --------- --------- -------- ------- ------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
EQUITY FUNDS - 29.2% (Percentages represent pro forma value of investments
compared to pro forma net assets)
18,602 - (18,602) (d) - QUALIVEST INTERNATIONAL OPPORTUNITIES $ 883 $ - $ (883)(d) $ -
96,294 - (96,294) (d) - QUALIVEST LARGE COMPANIES VALUE 1,263 - (1,263)(d) -
61,824 - (61,824) (d) - QUALIVEST OPTIMIZED STOCK 843 - (843)(d) -
35,817 - (35,817) (d) - QUALIVEST SMALL COMPANIES VALUE 535 - (535)(d) -
- - 81,602 (d) 81,602 FIRST AMERICAN INTERNATIONAL INDEX - - 883 (d) 883
- - 54,864 (d) 54,864 FIRST AMERICAN STOCK - - 1,263 (d) 1,263
- - 50,831 (d) 50,831 FIRST AMERICAN EQUITY INDEX - - 843 (d) 843
- - 35,817 (d) 35,817 FIRST AMERICAN SMALL CAP VALUE - - 535 (d) 535
- 220,041 - 220,041 FIRST AMERICAN EQUITY INCOME - 2,935 - 2,935
- 45,531 - 45,531 FIRST AMERICAN REAL ESTATE SECURITIES - 601 - 601
---------------------------------------
TOTAL EQUITY FUNDS 3,524 3,536 - 7,060
---------------------------------------
FIXED INCOME FUNDS - 62.2%
363,448 - (363,448) (d) - QUALIVEST DIVERSIFIED BOND 3,609 - (3,609)(d) -
349,969 - (349,969) (d) - QUALIVEST INTERMEDIATE BOND 3,475 - (3,475)(d) -
- 746,540 340,475 (d) 1,087,015 FIRST AMERICAN FIXED INCOME - 7,913 3,609 (d) 11,522
- - 355,701 (d) 355,701 FIRST AMERICAN INTERMEDIATE TERM INCOME - - 3,475 (d) 3,475
---------------------------------------
TOTAL FIXED INCOME FUNDS 7,084 7,913 - 14,997
---------------------------------------
MONEY MARKET FUNDS - 4.0%
233,291 - (233,291) (d) - QUALIVEST MONEY MARKET 233 - (233)(d) -
- 735,789 233,291 (d) 969,080 FIRST AMERICAN PRIME OBLIGATIONS - 736 233 (d) 969
---------------------------------------
TOTAL MONEY MARKET FUNDS 233 736 - 969
---------------------------------------
TOTAL INVESTMENTS (Cost $10,830,
$12,368 and $23,198, respectively) $10,841 $12,185 $ - $23,026
=======================================
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
First American Strategy Funds, Inc.
Strategy Growth and Income Fund
Pro Forma Combining Schedule of Investments
3/31/97
(Unaudited)
Shares Value
------ -----
Strategy Pro Forma
Strategy Pro Forma Allocated Growth Adjustments Pro Forma
Allocated Growth Adjustments Pro Forma Balance and Income (Note 2) Combined
Balance and Income (Note 2) Combined Security (000) (000) (000) (000)
- ------------ ----- ------------- --------- -------- -------- ----- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
EQUITY FUNDS - 57.7% (Percentages represent pro forma value of
investments compared to pro forma net assets)
1,023,893 - (1,023,893)(d) - QUALIVEST INTERNATIONAL OPPORTUNITIES $ 11,079 $ - $(11,079)(d) $ -
1,173,715 - (1,173,715)(d) - QUALIVEST LARGE COMPANIES VALUE 15,387 - (15,387)(d) -
717,629 - (717,629)(d) - QUALIVEST OPTIMIZED STOCK 9,788 - (9,788)(d) -
377,351 - (377,351)(d) - QUALIVEST SMALL COMPANIES VALUE 5,630 - (5,630)(d) -
- - 1,023,893 (d) 1,023,893 FIRST AMERICAN INTERNATIONAL INDEX - - 11,079 (d) 11,079
- 64,931 668,727 (d) 733,658 FIRST AMERICAN STOCK - 1,494 15,387 (d) 16,881
- - 590,022 (d) 590,022 FIRST AMERICAN EQUITY INDEX - - 9,788 (d) 9,788
- - 377,351 (d) 377,351 FIRST AMERICAN SMALL CAP VALUE - - 5,630 (d) 5,630
- 105,538 - 105,538 FIRST AMERICAN DIVERSIFIED GROWTH - 1,476 - 1,476
- 51,703 - 51,703 FIRST AMERICAN EMERGING GROWTH - 663 - 663
- 44,127 - 44,127 FIRST AMERICAN INTERNATIONAL - 482 - 482
- 28,960 - 28,960 FIRST AMERICAN REAL ESTATE SECURITIES - 382 - 382
- 38,774 - 38,774 FIRST AMERICAN REGIONAL EQUITY - 663 - 663
-----------------------------------------
TOTAL EQUITY FUNDS 41,884 5,160 - 47,044
-----------------------------------------
FIXED INCOME FUNDS - 39.1%
1,731,964 - (1,731,964)(d) - QUALIVEST DIVERSIFIED BOND 17,198 - (17,198)(d) -
1,084,651 - (1,084,651)(d) - QUALIVEST INTERMEDIATE BOND 10,771 - (10,771)(d) -
- 365,357 1,622,491 (d) 1,987,848 FIRST AMERICAN FIXED INCOME - 3,873 17,198 (d) 21,071
- - 1,102,414 (d) 1,102,414 FIRST AMERICAN INTERMEDIATE TERM INCOME - - 10,771 (d) 10,771
-----------------------------------------
TOTAL FIXED INCOME FUNDS 27,969 3,873 - 31,842
-----------------------------------------
MONEY MARKET FUNDS - 2.6%
1,537,885 - (1,537,885)(d) - QUALIVEST MONEY MARKET 1,538 - (1,538)(d) -
- 544,319 1,537,885 (d) 2,082,204 FIRST AMERICAN PRIME OBLIGATIONS - 544 1,538 (d) 2,082
-----------------------------------------
TOTAL MONEY MARKET FUNDS 1,538 544 - 2,082
-----------------------------------------
TOTAL INVESTMENTS (Cost $70,736,
$9,843 and $80,579, respectively) $ 71,391 $ 9,577 $ - $80,968
=========================================
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
First American Strategy Funds, Inc.
Strategy Growth Fund
Pro Forma Combining Schedule of Investments
3/31/97
(Unaudited)
Shares Value
------ -----
Pro Forma
Pro Forma Allocated Strategy Adjustments Pro Forma
Allocated Strategy Adjustments Pro Forma Growth Growth (Note 2) Combined
Growth Growth (Note 2) Combined Security (000) (000) (000) (000)
- ------------ ----- ----------- -------- --------- ------- ------ ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
EQUITY FUNDS - 77.0% (Percentages represent pro forma value of
investments compared to pro forma net assets)
402,195 - (402,195)(d) - QUALIVEST INTERNATIONAL OPPORTUNITIES $ 4,352 $ - $(4,352)(d) $ -
444,865 - (444,865)(d) - QUALIVEST LARGE COMPANIES VALUE 5,832 - (5,832)(d) -
289,018 - (289,018)(d) - QUALIVEST OPTIMIZED STOCK 3,943 - (3,943)(d) -
183,050 - (183,050)(d) - QUALIVEST SMALL COMPANIES VALUE 2,731 - (2,731)(d) -
- - 402,195 (d) 402,195 FIRST AMERICAN INTERNATIONAL INDEX - - 4,352(d) 4,352
- 26,760 253,463 (d) 280,223 FIRST AMERICAN STOCK - 616 5,832(d) 6,448
- - 237,625 (d) 237,625 FIRST AMERICAN EQUITY INDEX - - 3,943(d) 3,943
- - 183,050 (d) 183,050 FIRST AMERICAN SMALL CAP VALUE - - 2,731(d) 2,731
- 43,495 - 43,495 FIRST AMERICAN DIVERSIFIED GROWTH - 608 - 608
- 32,460 - 32,460 FIRST AMERICAN EMERGING GROWTH - 416 - 416
- 38,788 - 38,788 FIRST AMERICAN INTERNATIONAL - 424 - 424
- 24,345 - 24,345 FIRST AMERICAN REGIONAL EQUITY - 416 - 416
- 21,179 - 21,179 FIRST AMERICAN SPECIAL EQUITY - 411 - 411
----------------------------------------
TOTAL EQUITY FUNDS 16,858 2,891 - 19,749
----------------------------------------
FIXED INCOME FUNDS - 19.2%
236,066 - (236,066)(d) - QUALIVEST DIVERSIFIED BOND 2,344 - (2,344)(d) -
152,165 - (152,165)(d) - QUALIVEST INTERMEDIATE BOND 1,511 - (1,511)(d) -
- 100,346 221,145 (d) 321,491 FIRST AMERICAN FIXED INCOME - 1,064 2,344(d) 3,408
- - 154,657 (d) 154,657 FIRST AMERICAN INTERMEDIATE TERM INCOME - - 1,511(d) 1,511
----------------------------------------
TOTAL FIXED INCOME FUNDS 3,855 1,064 - 4,919
----------------------------------------
MONEY MARKET FUNDS - 3.0%
501,260 - (501,260)(d) - QUALIVEST MONEY MARKET 501 - (501)(d) -
- 266,116 501,260 (d) 767,376 FIRST AMERICAN PRIME OBLIGATIONS - 266 501(d) 767
----------------------------------------
TOTAL MONEY MARKET FUNDS 501 266 - 767
----------------------------------------
TOTAL INVESTMENTS (Cost $21,041,
$4,343 and $25,384, respectively) $21,214 $ 4,221 $ - $25,435
========================================
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
First American Strategy Funds, Inc.
Strategy Aggressive Growth Fund
Pro Forma Combining Schedule of Investments
3/31/97
(Unaudited)
Shares Value
------------
Strategy Pro Forma
Strategy Pro Forma Allocated Aggressive Adjustments Pro Forma
Allocated Aggressive Adjustments Pro Forma Aggressive Growth (Note 2) Combined
Aggressive Growth (Note 2) Combined Security (000) (000) (000) (000)
- --------- ------ ----------- -------- -------- ------- ------- ---------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
EQUITY FUNDS - 95.5% (Percentages represent pro forma value of
investments compared to pro forma net assets)
554,969 - (554,969)(d) - QUALIVEST INTERNATIONAL OPPORTUNITIES $6,005 $ - $(6,005)(d) $ -
563,174 - (563,174)(d) - QUALIVEST LARGE COMPANIES VALUE 7,383 - (7,383)(d) -
327,375 - (327,375)(d) - QUALIVEST OPTIMIZED STOCK 4,466 - (4,466)(d) -
328,846 - (328,846)(d) - QUALIVEST SMALL COMPANIES VALUE 4,906 - (4,906)(d) -
- - 554,969 (d) 554,969 FIRST AMERICAN INTERNATIONAL INDEX - - 6,005(d) 6,005
- 19,231 320,870 (d) 340,101 FIRST AMERICAN STOCK - 442 7,383(d) 7,825
- - 269,161 (d) 269,161 FIRST AMERICAN EQUITY INDEX - - 4,466(d) 4,466
- - 328,846 (d) 328,846 FIRST AMERICAN SMALL CAP VALUE - - 4,906(d) 4,906
- 28,654 - 28,654 FIRST AMERICAN DIVERSIFIED GROWTH - 401 - 401
- 37,927 - 37,927 FIRST AMERICAN EMERGING GROWTH - 486 - 486
- 15,354 - 15,354 FIRST AMERICAN HEALTH SCIENCES - 148 - 148
- 52,303 - 52,303 FIRST AMERICAN INTERNATIONAL - 572 - 572
- 28,442 - 28,442 FIRST AMERICAN REGIONAL EQUITY - 486 - 486
- 24,472 - 24,472 FIRST AMERICAN SPECIAL EQUITY - 480 - 480
- 10,226 - 10,226 FIRST AMERICAN TECHNOLOGY - 144 - 144
----------------------------------------------
TOTAL EQUITY FUNDS 22,760 3,159 - 25,919
----------------------------------------------
FIXED INCOME FUNDS - 1.4%
- 36,086 - 36,086 FIRST AMERICAN FIXED INCOME - 383 - 383
----------------------------------------------
MONEY MARKET FUNDS - 2.6%
510,032 - (510,032)(d) - QUALIVEST MONEY MARKET 510 - (510)(d) -
- 190,812 510,032 (d) 700,844 FIRST AMERICAN PRIME OBLIGATIONS - 191 510(d) 701
----------------------------------------------
TOTAL MONEY MARKET FUNDS 510 191 - 701
----------------------------------------------
TOTAL INVESTMENTS (Cost $23,149,
$3,869 and $27,018, respectively) $23,270 $ 3,733 $ - $27,003
==============================================
See accompanying notes to financial statements
</TABLE>
<PAGE>
FIRST AMERICAN STRATEGY FUNDS, INC.
PART C - OTHER INFORMATION
ITEM 15. INDEMNIFICATION.
The Registrant's Articles of Incorporation and Bylaws provide that the
Registrant shall indemnify such persons for such expenses and liabilities, in
such manner, under such circumstances, and to the full extent as permitted by
Section 302A.521 of the Minnesota Statutes, as now enacted or hereafter amended;
provided, however, that no such indemnification may be made if it would be in
violation of Section 17(h) of the Investment Company Act of 1940, as now enacted
or hereafter amended, any rules, regulations, or releases promulgated
thereunder.
Section 302A.521 of the Minnesota Statues, as now enacted, provides
that a corporation shall indemnify a person made or threatened to be made a
party to a proceeding by reason of the former or present official capacity of
the person against judgments, penalties, fines, settlements and reasonable
expenses, including attorneys' fees and disbursements, incurred by the person in
connection with the proceeding if, with respect to the acts or omissions of the
person complained of in the proceeding, the person has not been indemnified by
another organization for the same judgments, penalties, fines, settlements, and
reasonable expenses incurred by the person in connection with the proceeding
with respect to the same act or omissions; acted in good faith, received no
improper personal benefit, and the Minnesota Statutes dealing with directors'
conflicts of interest, if applicable, have been satisfied; in the case of a
criminal proceeding, had no reasonable cause to believe that the conduct was
unlawful; and reasonably believed that the conduct was in the best interests of
the corporation or, in certain circumstances, reasonably believed that the
conduct was not opposed to the best interests of the corporation.
The Registrant undertakes that no indemnification or advance will be
made unless it is consistent with Sections 17(h) or 17(i) of the Investment
Company Act of 1940, as now enacted or hereafter amended, and Securities and
Exchange Commission rules, regulations, and releases (including, without
limitation, Investment Company Act of 1940 Release No. 11330, September 2,
1980).
Insofar as the indemnification for liability arising under the
Securities Act of 1933, as amended, may be permitted to directors, officers, and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in such Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer, or
controlling person of the Registrant in the successful defense of any action,
suit, or proceeding) is asserted by such director, officer, or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933, as amended, and will be governed by the final
adjudication of such issue.
The Registrant maintains officers' and directors' liability insurance
providing coverage, with certain exceptions, for acts and omissions in the
course of the covered persons' duties as officers and directors.
<PAGE>
ITEM 16. EXHIBITS
(1) Articles of Incorporation of Registrant. (Incorporated by
reference to Exhibit (1) to Registrant's initial Registration
Statement on Form N-1A, File No. 333-7463 (the "Initial
Registration Statement").)
(2) Bylaws of Registrant (Incorporated by reference to Exhibit (2)
to the Initial Registration Statement.)
(3) Not Applicable.
*(4) Agreement and Plan of Reorganization, attached as Appendix
III to the Prospectus/Proxy Statement included in Part A of
this Registration Statement on Form N-14.
(5) Not Applicable
(6) Form of Investment Advisory Agreement between the Registrant
and First Bank National Association. (Incorporated by
reference to Exhibit (5) to the Initial Registration
Statement).
(7) Form of Distribution Agreement between the Registrant and SEI
Financial Services Company. (Incorporated by reference to
Exhibit (6) to the Initial Registration Statement.)
(8) Not Applicable.
(9) (a) Form of Custodian Agreement dated October 1, 1996,
between the Registrant and First Trust National
Association, including form of Compensation Agreement
pursuant thereto. (Incorporated by reference to
Exhibit (8) to the Initial Registration Statement.)
(10) Not Applicable
*(11) Opinion and Consent of Dorsey & Whitney LLP with respect to
the legality of the securities being registered.
**(12) Opinion and Consent of Dorsey & Whitney LLP with respect to
tax matters (to be filed by Amendment to this Registration
Statement on Form N-14.)
(13) (a) Form of Administration Agreement between the
Registrant and SEI Financial Management Corporation.
(Incorporated by reference to Exhibit (9) (a) to the
Initial Registration Statement.)
*(b) Transfer Agency Agreement dated as of January 1,
1997, between Registrant and DST Systems, Inc.
(c) Form of Shareholder Service Plan and Agreement
between the
<PAGE>
Registrant and SEI Financial Services Company.
(Incorporated by reference to Exhibit (9)(c) to the
Initial Registration Statement.)
*(14) (a) Consent of KPMG Peat Marwick LLP
(b) Consent of Deloitte & Touche LLP
*(16) Powers of Attorney of Directors signing the Registration
Statement
(17) (a) Declaration of Election of Registrant pursuant to
Rule 24f-2 on Cover Page of the Initial Registration
Statement is incorporated by reference herein
*(b) Form of Proxy Card
* Filed herewith.
** To be filed by amendment.
ITEM 17. UNDERTAKINGS.
(1) The undersigned Registrant agrees that prior to any public
reoffering of the securities registered through the use of a prospectus which is
a part of this Registration Statement by any person or party who is deemed to be
an underwriter within the meaning of Rule 145(c) of the Securities Act, the
reoffering prospectus will contain the information called for by the applicable
registration form for reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other items of the applicable
form.
(2) The undersigned Registrant agrees that every prospectus that is
filed under paragraph (1) above will be filed as a part of an amendment to the
Registration Statement and will not be used until the amendment is effective,
and that, in determining any liability under the 1933 Act, each post- effective
amendment shall be deemed to be a new registration statement for the securities
offered therein, and the offering of the securities at that time shall be deemed
to be the initial bona fide offering of them.
(3) The undersigned Registrant agrees to file, by post-effective
amendment, an opinion of counsel or a copy of a ruling of the Internal Revenue
Service supporting the tax consequences of the proposed reorganization within a
reasonable time after receipt of such opinion or ruling.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
and the Investment Company Act of 1940, as amended, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Oaks, Commonwealth of
Pennsylvania, on the 8th day of August, 1997.
FIRST AMERICAN STRATEGY FUNDS, INC.
ATTEST: /s/ Stephen G. Meyer By /s/ Kathryn L. Stanton
Stephen G. Meyer Kathryn L. Stanton, Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below by the following
persons in the capacity and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Stephen G. Meyer Controller (Principal **
Stephen G. Meyer Financial and Accounting
Officer)
* Director **
Robert J. Dayton
* Director **
Andrew M. Hunter III
* Director **
Robert L. Spies
* Director **
Leonard W. Kedrowski
* Director **
Joseph D. Strauss
* Director **
Virginia L. Stringer
* Director **
Gae B. Veit
* By: /s/ Kathryn L. Stanton
Kathryn L. Stanton
Attorney in Fact
** August 8, 1997.
EXHIBIT 11
[LETTERHEAD OF DORSEY & WHITNEY LLP]
August 8, 1997
First American Strategy Funds, Inc.
Oaks, Pennsylvania 19456
Re: First American Strategy Funds, Inc.
Shares to be Issued Pursuant to Agreement and Plan of Reorganization
Ladies and Gentlemen:
We have acted as counsel to First American Strategy Funds, Inc., a
Minnesota corporation ("FASF"), in connection with FASF's authorization and
proposed issuance of its common shares, par value $.01 per share, of Series A,
Series B, Series C and Series D of FASF (the "Shares"). The Shares are to be
issued pursuant to an Agreement and Plan of Reorganization (the "Agreement"), by
and between FASF (the "Acquiring Fund"), and Qualivest Funds (the "Acquired
Fund"), the form of which Agreement is included as Appendix III to the Combined
Proxy Statement/Prospectus relating to the transactions contemplated by the
Agreement included in FASF's Registration Statement on Form N-14 filed with the
Securities and Exchange Commission (the "Registration Statement").
In rendering the opinions hereinafter expressed, we have reviewed the
corporate proceedings taken by FASF in connection with the authorization and
issuance of the Shares, and we have reviewed such questions of law and examined
copies of such corporate records of FASF, certificates of public officials and
of responsible officers of FASF, and other documents as we have deemed necessary
as a basis for such opinions. As to the various matters of fact material to such
opinions, we have, when such facts were not independently established, relied to
the extent we deem proper on certificates of public officials and of responsible
officers of FASF. In connection with such review and examination, we have
assumed that all copies of documents provided to us conform to the originals;
that all signatures are genuine; and that prior to the consummation of the
transactions contemplated thereby, the Agreement will have been duly and validly
executed and delivered on behalf of each of the parties thereto in substantially
the form included in the Registration Statement.
Based on the foregoing, it is our opinion that:
1. FASF is validly existing as a corporation in good standing under the
laws of the State of Minnesota.
<PAGE>
2. The Shares, when issued and delivered by the Acquiring Fund pursuant
to, and upon satisfaction of the conditions contained in, the Agreement, will be
duly authorized, validly issued, fully paid and non-assessable.
In rendering the foregoing opinions (a) we express no opinion as to the
laws of any jurisdiction other than the State of Minnesota; and (b) we have
assumed, with your concurrence, that the conditions to closing set forth in the
Agreement will have been satisfied.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm under the caption
"Information Relating to the Proposed Reorganization--Federal Income Tax
Consequences" in FASF's final Combined Proxy Statement/Prospectus relating to
the Shares included in the Registration Statement.
Very truly yours,
/s/ Dorsey & Whitney LLP
JDA
EXHIBIT (13)(b)
AGENCY AGREEMENT
THIS AGREEMENT made the 1st day of January, 1997, by and between FIRST
AMERICAN STRATEGY FUNDS, INC., a corporation existing under the laws of the
State of Maryland, having its principal place of business at 680 East Swedesford
Road, Wayne, Pennsylvania 19087 (the "Fund"), and DST SYSTEMS, INC., a
corporation existing under the laws of the State of Delaware, having its
principal place of business at 333 W. 11th St., 5th Fl., Kansas City, Missouri
64105 ("DST"):
WITNESSETH:
WHEREAS, the Fund desires to appoint DST as Transfer Agent and Dividend
Disbursing Agent, and DST desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
1. Documents to be Filed with Appointment.
In connection with the appointment of DST as Transfer Agent and
Dividend Disbursing Agent for the Fund, there will be filed with DST
the following documents:
A. A certified copy of the resolutions of the Board of Directors
of the Fund (which term when used herein shall include any
Board of Trustees, or other governing body of the Fund,
however styled) appointing DST as Transfer Agent and Dividend
Disbursing Agent, approving the form of this Agreement, and
designating certain persons to sign stock certificates, if
any, and give written instructions and requests on behalf of
the Fund;
B. A certified copy of the Articles of Incorporation (which term
as used herein shall include, where relevant, the Declaration
of Trust, or other basic instrument establishing the existence
and nature of the Fund) of the Fund and all amendments
thereto;
C. A certified copy of the Bylaws of the Fund;
D. Copies of Registration Statements and amendments thereto,
filed with the Securities and Exchange Commission.
E. Specimens of all forms of outstanding stock certificates, in
the forms approved by the Board of Directors of the Fund, with
a certificate of the Secretary of the Fund, as to such
approval;
F. Specimens of the signatures of the officers of the Fund
authorized to sign stock certificates and individuals
authorized to sign written instructions and requests;
G. An opinion of counsel for the Fund, as such opinion(s) have
been filed with the Fund's Registration Statement or notices
required under Rule 24f-2 under the Investment Company Act of
1940 (the "1940 Act"), with respect to:
(1) The Fund's organization and existence under the laws
of its state of organization, and
(2) That all issued shares are validly issued, fully paid
and nonassessable.
2. Certain Representations and Warranties of DST.
DST represents and warrants to the Fund that:
A. It is a corporation duly organized and existing and in good
standing under the laws of Delaware.
B. It is duly qualified to carry on its business in the State of
Missouri.
C. It is empowered under applicable laws and by its Articles of
Incorporation and Bylaws to enter into and perform the
services contemplated in this Agreement.
D. It is registered as a transfer agent to the extent required
under the Securities Exchange Act of 1934 (the "1934 Act").
E. All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.
F. It has and will continue to have and maintain the necessary
facilities, equipment and personnel to perform its duties and
obligations under this Agreement.
G. It is in compliance with Securities and Exchange Commission
("SEC") regulations and is not subject to restrictions under
Rule 17Ad.
H. Copies of DST's Rule 17Ad-13 reports will be provided to the
Fund annually as and to the extent required under Rule 17Ad-13
under the 1934 Act.
I. Its fidelity bonding and minimum capital meet the transfer
agency requirements of the New York Stock Exchange and the
American Stock Exchange.
3. Certain Representations and Warranties of the Fund.
The Fund represents and warrants to DST that:
A. It is a corporation duly organized and existing and in good
standing under the laws of the State of Maryland.
B. It is an open-end management investment company registered
under the 1940 Act, as amended, the portfolios of which may be
diversified or non-diversified.
C. A registration statement under the Securities Act of 1933 has
been filed and will be effective with respect to all shares of
the Fund being offered for sale.
D. All requisite steps have been and will continue to be taken to
register the Fund's shares for sale in all applicable states
and such registration will be effective at all times shares
are offered for sale in such state.
E. The Fund is empowered under applicable laws and by its charter
and Bylaws to enter into and perform this Agreement.
4. Scope of Appointment.
A. Subject to the conditions set forth in this Agreement, the
Fund hereby appoints DST as Transfer Agent and Dividend
Disbursing Agent.
B. DST hereby accepts such appointment and agrees that it will
act as the Fund's Transfer Agent and Dividend Disbursing
Agent. DST agrees that it will also act as agent in connection
with the Fund's periodic withdrawal payment accounts and other
open accounts or similar plans for shareholders, if any.
C. The Fund agrees to use its reasonable efforts to deliver to
DST in Kansas City, Missouri, as soon as they are available,
all of its shareholder account records.
D. DST, utilizing TA2000(R), DST's computerized data processing
system for securityholder accounting (the "TA2000 System"),
will perform the following services as transfer and dividend
disbursing agent for the Fund, and as agent of the Fund for
shareholder accounts thereof, in a timely manner: issuing
(including countersigning), transferring and canceling share
certificates, if any; maintaining all shareholder accounts;
providing transaction journals; as requested by the Fund and
subject to payment by the Fund of an additional fee, preparing
shareholder meeting lists for use in connection with any
annual or special meeting and arrange for an affiliate to
print, mail and receive back proxies and to certify the
shareholder votes of the Fund of any portfolios thereof;
mailing shareholder reports and prospectuses; withholding, as
required by federal law, taxes on shareholder accounts,
disbursing income dividends and capital gains distributions to
shareholders, preparing, filing and mailing U.S. Treasury
Department Forms 1099, 1042, and 1042S and performing and
paying backup withholding as required for all shareholders;
preparing and mailing confirmation forms to shareholders and
dealers, as instructed, for all purchases and liquidations of
shares of the Fund and other confirmable transactions in
shareholders' accounts; recording reinvestment of dividends
and distributions in shares of the Fund; providing or making
available on-line daily and monthly reports as provided by the
TA2000 System and as requested by the Fund or its management
company; maintaining those records necessary to carry out
DST's duties hereunder, including all information reasonably
required by the Fund to account for all transactions in the
Fund shares, calculating the appropriate sales charge with
respect to each purchase of the Fund shares as set forth in
the prospectus for the Fund, determining the portion of each
sales charge payable to the dealer participating in a sale in
accordance with schedules delivered to DST by the Fund's
principal underwriter or distributor (hereinafter "principal
underwriter") from time to time, disbursing dealer commissions
collected to such dealers, determining the portion of each
sales charge payable to such principal underwriter and
disbursing such commissions to the principal underwriter;
receiving correspondence pertaining to any former, existing or
new shareholder account, processing such correspondence for
proper recordkeeping, and responding promptly to shareholder
correspondence; mailing to dealers confirmations of wire order
trades; mailing copies of shareholder statements to
shareholders and registered representatives of dealers in
accordance with the Fund's instructions; interfacing with,
accepting and effectuating order for transactions and
registration and maintenance information, all on an automated
basis, from, and providing advices to the Fund's custodian
bank and to the Fund's settlement bank in connection with the
settling of such transactions, with, the National Securities
Clearing Corporation ("NSCC") pertaining to NSCC's Fund/SERV
and Networking programs; and processing, generally on the date
of receipt, purchases or redemptions or instructions to settle
any mail or wire order purchases or redemptions received in
proper order as set forth in the prospectus, rejecting
promptly any requests not received in proper order (as defined
by the Fund or its agents), and causing exchanges of shares to
be executed in accordance with the Fund's instructions and
prospectus and the general exchange privilege applicable.
E. At the request of Fund, DST shall use reasonable efforts to
provide the services set forth in Section 4.D. other than
through DST's usual methods of and procedures to utilize the
TA2000 System, that is by using methods and procedures other
than those usually employed by DST to perform services
requiring more manual intervention by DST, either in the entry
of data, in the maintenance of account lists and/or the
effecting of transactions with respect to timers and accounts
subject to agreements with timers, or in the modification or
amendment of reports generated by the TA2000 System, or which
provides information to DST after the commencement of the
nightly processing cycle of the TA2000 System, thereby
decreasing the effective time for performance by DST (the
"Exception Services").
F. DST shall use reasonable efforts to provide, reasonably
promptly under the circumstances, the same transfer agent
services with respect to any new, additional functions or
features or any changes or improvements to existing functions
or features as provided for in the Fund's instructions,
prospectus or application as amended from time to time, for
the Fund provided (i) DST is advised in advance by the Fund of
any changes therein and (ii) the TA2000 System and the mode of
operations utilized by DST as then constituted supports such
additional functions and features. If any addition to,
improvement of or change in the features and functions
currently provided by the TA2000 System or the operations as
requested by the Fund requires an enhancement or modification
to the TA2000 System or to operations as then conducted by
DST, DST shall not be liable therefore until such modification
or enhancement is installed on the TA2000 System or new mode
of operation is instituted. If any new, additional function or
feature or change or improvement to existing functions or
features or new service or mode of operation measurably
increases DST's cost of performing the services required
hereunder at the current level of service, DST shall advise
the Fund of the amount of such increase and if the Fund elects
to utilize such function, feature or service, DST shall be
entitled to increase its fees by the amount of the increase in
costs. In no event shall DST be responsible for or liable to
provide any additional function, feature, improvement or
change in method of operation until it has consented thereto
in writing.
G. The Fund shall have the right to add new series to the TA2000
System upon at least thirty (30) days' prior written notice to
DST provided that the requirements of the new series are
generally consistent with services then being provided by DST
under this Agreement. Rates or charges for additional series
shall be as set forth in Exhibit A, as hereinafter defined,
for the remainder of the contract term except as such series
use functions, features or characteristics for which DST has
imposed an additional charge as part of its standard pricing
schedule. In the latter event, rates and charges shall be in
accordance with DST's then-standard pricing schedule.
5. Limit of Authority.
Unless otherwise expressly limited by the resolution of appointment or
by subsequent action by the Fund, the appointment of DST as Transfer
Agent will be construed to cover the full amount of authorized stock of
the class or classes for which DST is appointed as the same will, from
time to time, be constituted, and any subsequent increases in such
authorized amount.
In case of such increase the Fund will file with DST:
A. If the appointment of DST was theretofore expresslynd National
Securities Clearing Corporation ("NSCC") transaction fees to
the extent any of the foregoing are paid by DST. The Fund
agrees to pay postage expenses at least one day in advance if
so requested. In addition, any other expenses incurred by DST
at the request or with the consent of the Fund will be
promptly reimbursed by the Fund.
C. Amounts due hereunder shall be due and paid on or before the
thirtieth (30th) business day after receipt of the statement
therefor by the Fund (the "Due Date"). The Fund is aware that
its failure to pay all amounts in a timely fashion so that
they will be received by DST on or before the Due Date will
give rise to costs to DST not contemplated by this Agreement,
including but not limited to carrying, processing and
accounting charges. Accordingly, subject to Section 6.D.
hereof, in the event that any amounts due hereunder are not
received by DST by the Due Date, the Fund shall pay a late
charge equal to the lesser of the maximum amount permitted by
applicable law or the product of that rate announced from time
to time by State Street Bank and Trust Company as its "Prime
Rate" plus three (3) percentage points times the amount
overdue, times the number of days from the Due Date up to and
including the day on which payment is received by DST divided
by 365. The parties hereby agree that such late charge
represents a fair and reasonable computation of the costs
incurred by reason of late payment or payment of amounts not
properly due. Acceptance of such late charge shall in no event
constitute a waiver of the Fund's or DST's default or prevent
the non-defaulting party from exercising any other rights and
remedies available to it.
D. In the event that any charges are disputed, the Fund shall, on
or before the Due Date, pay all undisputed amounts due
hereunder and notify DST in writing of any disputed charges
for billable expenses which it is disputing in good faith.
Payment for such disputed charges shall be due on or before
the close of the fifth (5th) business day after the day on
which DST provides to the Fund documentation which an
objective observer would agree reasonably supports the
disputed charges (the "Revised Due Date"). Late charges shall
not begin to accrue as to charges disputed in good faith until
the first business day after the Revised Due Date.
E. The fees and charges set forth on Exhibit A shall increase or
may be increased as follows:
(1) On the first day of each new term, but only in
accordance with the "Fee Increases" provision in
Exhibit A;
(2) DST may increase the fees and charges set forth on
Exhibit A upon at least ninety (90) days prior
written notice, if changes in existing laws, rules or
regulations: (i) require substantial system
modifications or (ii) materially increase cost of
performance hereunder;
(3) Upon at least ninety (90) days prior written notice,
DST may impose a reasonable charge for additional
features of TA2000 used by the Fund which features
are not consistent with the Fund's current processing
requirements; and
(4) In the event DST, at the Fund's request or direction,
pernd National Securities Clearing Corporation
("NSCC") transaction fees to the extent any of the
foregoing are paid by DST. The Fund agrees to pay
postage expenses at least one day in advance if so
requested. In addition, any other expenses incurred
by DST at the request or with the consent of the Fund
will be promptly reimbursed by the Fund.
C. Amounts due hereunder shall be due and paid on or before the
thirtieth (30th) business day after receipt of the statement
therefor by the Fund (the "Due Date"). The Fund is aware that
its failure to pay all amounts in a timely fashion so that
they will be received by DST on or before the Due Date will
give rise to costs to DST not contemplated by this Agreement,
including but not limited to carrying, processing and
accounting charges. Accordingly, subject to Section 6.D.
hereof, in the event that any amounts due hereunder are not
received by DST by the Due Date, the Fund shall pay a late
charge equal to the lesser of the maximum amount permitted by
applicable law or the product of that rate announced from time
to time by State Street Bank and Trust Company as its "Prime
Rate" plus three (3) percentage points times the amount
overdue, times the number of days from the Due Date up to and
including the day on which payment is received by DST divided
by 365. The parties hereby agree that such late charge
represents a fair and reasonable computation of the costs
incurred by reason of late payment or payment of amounts not
properly due. Acceptance of such late charge shall in no event
constitute a waiver of the Fund's or DST's default or prevent
the non-defaulting party from exercising any other rights and
remedies available to it.
D. In the event that any charges are disputed, the Fund shall, on
or before the Due Date, pay all undisputed amounts due
hereunder and notify DST in writing of any disputed charges
for billable expenses which it is disputing in good faith.
Payment for such disputed charges shall be due on or before
the close of the fifth (5th) business day after the day on
which DST provides to the Fund documentation which an
objective observer would agree reasonably supports the
disputed charges (the "Revised Due Date"). Late charges shall
not begin to accrue as to charges disputed in good faith until
the first business day after the Revised Due Date.
E. The fees and charges set forth on Exhibit A shall increase or
may be increased as follows:
(1) On the first day of each new term, but only in
accordance with the "Fee Increases" provision in
Exhibit A;
(2) DST may increase the fees and charges set forth on
Exhibit A upon at least ninety (90) days prior
written notice, if changes in existing laws, rules or
regulations: (i) require substantial system
modifications or (ii) materially increase cost of
performance hereunder;
(3) Upon at least ninety (90) days prior written notice,
DST may impose a reasonable charge for additional
features of TA2000 used by the Fund which features
are not consistent with the Fund's current processing
requirements; and
(4) In the event DST, at the Fund's request or direction,
performs Exception Services, DST shall be entitled to
impose a reasonable increase in the fees and charges
for such Exception Services from those set forth on
Exhibit A to the extent such Exception Services
increase DST's cost of performance.
If DST notifies the Fund of an increase in fees or charges
pursuant to subparagraph (2) of this Section 6.E., the parties shall
confer, diligently and in good faith and agree upon a new fee to cover
the amount necessary, but not more than such amount, to reimburse DST
for the Fund's aliquot portion of the cost of developing the new
software to comply with regulatory charges and for the increased cost
of operation.
If DST notifies the Fund of an increase in fees or charges
under subparagraphs (3) or (4) of this Section 6.E., the parties shall
confer, diligently and in good faith, and agree upon a new fee to cover
such new fund feature.
7. Operation of DST System.
In connection with the performance of its services under this
Agreement, DST is responsible for such items as:
A. That entries in DST's records, and in the Fund's records on
the TA2000 System created by DST, accurately reflect the
orders, instructions, and other information received by DST
from the Fund, the Fund's distributor, manager or principal
underwriter, the Fund's investment adviser, or the Fund's
administrator (each an "Authorized Person"), broker-dealers
and/or shareholders;
B. That shareholder lists, shareholder account verifications,
confirmations and other shareholder account information to be
produced from its records or data be available and accurately
reflect the data in the Fund's records on the TA2000 System;
C. The accurate and timely issuance of dividend and distribution
checks in accordance with instructions received from the Fund
and the data in the Fund's records on the TA2000 System;
D. That redemption transactions and payments be effected timely,
under normal circumstances on the day of receipt, and
accurately in accordance with redemption instructions received
by DST from Authorized Persons, broker-dealers or shareholders
and the data in the Fund's records on the TA2000 System;
E. The deposit daily in the Fund's appropriate bank account of
all checks and payments received by DST from NSCC,
broker-dealers or shareholders for investment in shares;
F. Notwithstanding anything herein to the contrary, with respect
to "as of" adjustments, DST will not assume one hundred
percent (100%) responsibility for losses resulting from "as
ofs" due to clerical errors or misinterpretations of
shareholder instructions by DST, but DST will discuss with the
Fund DST's accepting liability for an "as of" on a
case-by-case basis and will accept "financial responsibility"
for a particular situation resulting in a "material" financial
loss to the Fund where DST acted in bad faith or without due
diligence. As used herein: (i) the terms "as of" or "as ofs"
refer to the situation where, as a result of DST's sole error
or omission, DST enters a transaction into the TA2000 System
on a basis of a price determined other than the price next
determined after the receipt by DST of instructions to perform
such transaction; (ii) the term "financial responsibility"
shall include only the loss experienced by the Fund during the
period between the entry of the erroneous transaction or the
omission to enter the transaction into the TA2000 System and
one (1) day after the earliest time when a record disclosing
the erroneous transaction or the omission to process shall
have been made available to or received by the presentor or
the presentor's agent [plus any delay occasioned by DST to
research and to correct the error or omission after notice
thereof has been received by DST]; and a financial loss shall
be "material" when the financial consequences to the Fund of
DST's error or omission shall have resulted in a loss to the
Fund of one full cent ($0.01) per share or greater.
G. The requiring of proper forms of instructions, signatures and
signature guarantees(1) and any necessary documents supporting
the opening of shareholder accounts, transfers, redemptions
and other shareholder account transactions, all in conformance
with DST's present procedures as set forth in its Legal
Manual, Check Acceptance Policy, Checkwriting Draft
Procedures, and Signature Guarantee Procedures (collectively
the "Procedures") with such changes or deviations therefrom as
may be from time to time required or approved by the Fund, its
investment adviser, principal underwriter or administrator, or
its or DST's counsel and the rejection of orders or
instructions not in good order in accordance with the
applicable prospectus or the Procedures;
---------------------
(1) DST shall ascertain that what reasonably purports to be an appropriate
signature guarantee is present if a signature guarantee is required, but DST
shall have no responsibility for verifying the authenticity thereof or the
authority of the person executing the signature guarantee.
H. The maintenance of customary records in connection with its
agency, and particularly those records required to be
maintained pursuant to subparagraph (2)(iv) of paragraph (b)
of Rule 31a-1 under the Investment Company Act of 1940, if
any; and
I. The maintenance of a current, duplicate set of the Fund's
essential records at a secure separate location, in a form
available and usable forthwith in the event of any breakdown
or disaster disrupting its main operation.
8. Indemnification.
A. DST shall at all times use reasonable care, due diligence and
act in good faith in performing its duties under this
Agreement. DST shall provide its services as Transfer Agent in
accordance with Section 17A of the Securities Exchange Act of
1934, and the rules and regulations thereunder. In the absence
of bad faith, willful misconduct, knowing violations of
applicable law pertaining to the manner in which transfer
agency services are to be performed by DST (excluding any
violations arising directly or indirectly out of the actions
or omissions to act of third parties unaffiliated with DST),
reckless disregard of the performance of its duties, or
negligence on its part, DST shall not be liable for any action
taken, suffered, or omitted by it or for any error of judgment
(including reasonable interpretations of unclear, ambiguous or
obscure instructions) made by it or its employees in the
performance of its duties under this Agreement. For those
activities or actions delineated in the Procedures, DST shall
be presumed to have used reasonable care, due diligence and
acted in good faith if it has acted in accordance with the
Procedures, copies of which have been provided to the SEI
Corporation ("SEI"), the administrator to the Fund and
reviewed and approved by SEI's counsel, as amended from time
to time with approval of counsel, or for any deviation
therefrom approved by the Fund or DST counsel.
B. DST shall not be responsible for, and the Fund shall indemnify
and hold DST harmless from and against, any and all losses,
damages, costs, charges, counsel fees, payments, expenses and
liability which are asserted against DST or for which DST is
to be liable, arising out of or attributable to:
(1) All actions of DST required to be taken by DST
pursuant to this Agreement, provided that DST has
acted in good faith and with due diligence and
reasonable care;
(2) The Fund's refusal or failure to comply with the
terms of this Agreement, the Fund's negligence or
willful misconduct, or the breach of any
representation or warranty of the Fund hereunder;
(3) The good faith reliance on, or the carrying out of,
any written or oral instructions or requests of
persons designated by the Fund in writing (see
Exhibit C) from time to time as authorized to give
instructions on its behalf or representatives of an
Authorized Person or DST's good faith reliance on, or
use of, information, data, records and documents
received from, or which have been prepared and/or
maintained by the Fund, its investment advisor, its
sponsor or its principal underwriter;
(4) Defaults by dealers or shareowners with respect to
payment for share orders previously entered if DST
has acted in good faith;
(5) The offer or sale of the Fund's shares in violation
of any requirement under federal securities laws or
regulations or the securities laws or regulations of
any state or in violation of any stop order or other
determination or ruling by any federal agency or
state with respect to the offer or sale of such
shares in such state (unless such violation results
from DST's failure to comply with written
instructions of the Fund or of any officer of the
Fund that no offers or sales be input into the Fund's
securityholder records in or to residents of such
state);
(6) The Fund's errors and mistakes in the use of the
TA2000 System, the data center, computer and related
equipment used to access the TA2000 System (the "DST
Facilities"), and control procedures relating thereto
in the verification of output and in the remote input
of data;
(7) Errors, inaccuracies, and omissions in, or errors,
inaccuracies or omissions of DST arising out of or
resulting from such errors, inaccuracies and
omissions in, the Fund's records, shareholder and
other records, delivered to DST hereunder by the Fund
or its prior agent(s);
(8) Actions or omissions to act by the Fund or agents
designated by the Fund with respect to duties assumed
thereby as provided for in Section 21 hereof; and
(9) DST's performance of Exception Services except where
DST acted or omitted to act in bad faith, with
reckless disregard of its obligations or with gross
negligence.
C. Except where DST is entitled to indemnification under Section
8.B. hereof and with respect to "as ofs" set forth in Section
7.F., DST shall indemnify and hold the Fund harmless from and
against any and all losses, damages, costs, charges, counsel
fees, payments, expenses and liability arising out of DST's
failure to comply with the terms of this Agreement or arising
out of or attributable to DST's negligence or willful
misconduct or breach of any representation or warranty of DST
hereunder.
D. EXCEPT FOR VIOLATIONS OF SECTION 23, IN NO EVENT AND UNDER NO
CIRCUMSTANCES SHALL EITHER PARTY TO THIS AGREEMENT BE LIABLE
TO ANYONE, INCLUDING, WITHOUT LIMITATION TO THE OTHER PARTY,
FOR CONSEQUENTIAL DAMAGES FOR ANY ACT OR FAILURE TO ACT UNDER
ANY PROVISION OF THIS AGREEMENT EVEN IF ADVISED OF THE
POSSIBILITY THEREOF.
E. Promptly after receipt by an indemnified person of notice of
the commencement of any action, such indemnified person will,
if a claim in respect thereto is to be made against an
indemnifying party hereunder, notify the indemnifying party in
writing of the commencement thereof; but the failure so to
notify the indemnifying party will not relieve an indemnifying
party from any liability that it may have to any indemnified
person for contribution or otherwise under the indemnity
agreement contained herein except to the extent it is
prejudiced as a proximate result of such failure to timely
notify. In case any such action is brought against any
indemnified person and such indemnified person seeks or
intends to seek indemnity from an indemnifying party, the
indemnifying party will be entitled to participate in, and, to
the extent that it may wish, assume the defense thereof (in
its own name or in the name and on behalf of any indemnified
party or both with counsel reasonably satisfactory to such
indemnified person); provided, however, if the defendants in
any such action include both the indemnified person and an
indemnifying party and the indemnified person shall have
reasonably concluded that there may be a conflict between the
positions of the indemnified person and an indemnifying party
in conducting the defense of any such action or that there may
be legal defenses available to it and/or other indemnified
persons which are inconsistent with those available to an
indemnifying party, the indemnified person or indemnified
persons shall have the right to select one separate counsel
(in addition to local counsel) to assume such legal defense
and to otherwise participate in the defense of such action on
behalf of such indemnified person or indemnified persons at
such indemnified party's sole expense. Upon receipt of notice
from an indemnifying party to such indemnified person of its
election so to assume the defense of such action and approval
by the indemnified person of counsel, which approval shall not
be unreasonably withheld (and any disapproval shall be
accompanied by a written statement of the reasons therefor),
the indemnifying party will not be liable to such indemnified
person hereunder for any legal or other expenses subsequently
incurred by such indemnified person in connection with the
defense thereof. An indemnifying party will not settle or
compromise or consent to the entry of any judgment with
respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution
may be sought hereunder (whether or not the indemnified
persons are actual or potential parties to such claim, action,
suit or proceeding) unless such settlement, compromise or
consent includes an unconditional release of each indemnified
person from all liability arising out of such claim, action,
suit or proceeding. An indemnified party will not, without the
prior written consent of the indemnifying party settle or
compromise or consent to the entry of any judgment with
respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution
may be sought hereunder. If it does so, it waives its right to
indemnification therefor.
9. Certain Covenants of DST and the Fund.
A. All requisite steps will be taken by the Fund from time to
time when and as necessary to register the Fund's shares for
sale in all states in which the Fund's shares shall at the
time be offered for sale and require registration. If at any
time the Fund receives notice of any stop order or other
proceeding in any such state affecting such registration or
the sale of the Fund's shares, or of any stop order or other
proceeding under the federal securities laws affecting the
sale of the Fund's shares, the Fund will give prompt notice
thereof to DST.
B. DST hereby agrees to perform such transfer agency functions as
are set forth in Section 4.D. above and establish and maintain
facilities and procedures reasonably acceptable to the Fund
for safekeeping of stock certificates, check forms, and
facsimile signature imprinting devices, if any; and for the
preparation or use, and for keeping account of, such
certificates, forms and devices, and to carry such insurance
as it considers adequate and reasonably available.
C. To the extent required by Section 31 of the Investment Company
Act of 1940 as amended and Rules thereunder, DST agrees that
all records maintained by DST relating to the services to be
performed by DST under this Agreement are the property of the
Fund and will be preserved and will be surrendered promptly to
the Fund on request.
D. DST agrees to furnish the Fund annual reports of its financial
condition, consisting of a balance sheet, earnings statement
and any other publicly available financial information
reasonably requested by the Fund and a copy of the report
issued by its certified public accountants pursuant to Rule
17Ad-13 under the 1934 Act as filed with the SEC. The annual
financial statements will be certified by DST's certified
public accountants and may be included in DST's publicly
distributed Annual Report.
E. DST represents and agrees that it will use its reasonable
efforts to keep current on the trends of the investment
company industry relating to shareholder services and will use
its reasonable efforts to continue to modernize and improve.
F. DST will permit the Fund and its authorized representatives to
make periodic inspections of its operations as such would
involve the Fund at reasonable times during business hours.
G. DST will provide in Kansas City at the Fund's request and
expense training for the Fund's personnel in connection with
use and operation of the TA2000 System. All travel and
reimbursable expenses incurred by the Fund's personnel in
connection with and during training at DST's Facility shall be
borne by the Fund. At the Fund's option and expense, DST also
agrees to use its reasonable efforts to provide two (2) man
weeks of training at the Fund's facility for the Fund's
personnel in connection with the continued operation of the
TA2000 System. Reasonable travel, per diem and reimbursable
expenses incurred by DST personnel in connection with and
during training at the Fund's facility or in connection with
the conversion shall be borne by the Fund.
10. Recapitalization or Readjustment.
In case of any recapitalization, readjustment or other change in the
capital structure of the Fund requiring a change in the form of stock
certificates, DST will issue or register certificates in the new form
in exchange for, or in transfer of, the outstanding certificates in the
old form, upon receiving:
A. Written instructions from an officer of the Fund;
B. Certified copy of the amendment to the Articles of
Incorporation or other document effecting the change;
C. Certified copy of the order or consent of each governmental or
regulatory authority, required by law to the issuance of the
stock in the new form, and an opinion of counsel that the
order or consent of no other government or regulatory
authority is required;
D. Specimens of the new certificates in the form approved by the
Board of Directors of the Fund, with a certificate of the
Secretary of the Fund as to such approval;
E. Opinion of counsel for the Fund stating:
(1) The status of the shares of stock of the Fund in the
new form under the Securities Act of 1933, as amended
and any other applicable federal or state statute;
and
(2) That the issued shares in the new form are, and all
unissued shares will be, when issued, validly issued,
fully paid and nonassessable.
11. Reserved.
12. Death, Resignation or Removal of Signing Officer.
The Fund will file promptly with DST written notice of any change in
the officers authorized to sign written requests or instructions to
give requests or instructions, together with two signature cards
bearing the specimen signature of each newly authorized officer.
13. Future Amendments of Charter and Bylaws.
The Fund will promptly file with DST copies of all material amendments
to its Articles of Incorporation or Bylaws made after the date of this
Agreement.
14. Instructions, Opinion of Counsel and Signatures.
At any time DST may apply to any person authorized by the Fund to give
instructions to DST, and may with the approval of a Fund officer and at
the expense of the Fund, either consult with legal counsel for the Fund
or consult with counsel chosen by DST and acceptable to the Fund, with
respect to any matter arising in connection with the agency and it will
not be liable for any action taken or omitted by it in good faith in
reliance upon such instructions or upon the opinion of such counsel.
For purposes hereof, DST's internal counsel and attorneys employed by
Sonnenschein Nath & Rosenthal, DST's primary outside counsel for
transfer agent matters, are acceptable to the Fund. DST will be
protected in acting upon any paper or document reasonably believed by
it to be genuine and to have been signed by the proper person or
persons and will not be held to have notice of any change of authority
of any person, until receipt of written notice thereof from the Fund.
It will also be protected in recognizing stock certificates which it
reasonably believes to bear the proper manual or facsimile signatures
of the officers of the Fund, and the proper countersignature of any
former Transfer Agent or Registrar, or of a co-Transfer Agent or
co-Registrar.
15. Force Majeure and Disaster Recovery Plans.
A. DST shall not be responsible or liable for its failure or
delay in performance of its obligations under this Agreement
arising out of or caused, directly or indirectly, by
circumstances beyond its reasonable control, including,
without limitation: any interruption, loss or malfunction or
any utility, transportation, computer hardware, provided such
equipment has been reasonably maintained, or third party
software or communication service; inability to obtain labor,
material, equipment or transportation, or a delay in mails;
governmental or exchange action, statute, ordinance, rulings,
regulations or direction; war, strike, riot, emergency, civil
disturbance, terrorism, vandalism, explosions, labor disputes,
freezes, floods, fires, tornadoes, acts of God or public
enemy, revolutions, or insurrection; or any other cause,
contingency, circumstance or delay not subject to DST's
reasonable control which prevents or hinders DST's performance
hereunder.
B. DST currently maintains an agreement with a third party
whereby DST is to be permitted to use on a "shared use" basis
a "hot site" (the "Recovery Facility") maintained by such
party in event of a disaster rendering the DST Facilities
inoperable. DST has developed and is continually revising a
business contingency plan (the "Business Contingency Plan")
detailing which, how, when, and by whom data maintained by DST
at the DST Facilities will be installed and operated at the
Recovery Facility. Provided the Fund is paying its pro rata
portion of the charge therefor, DST will, in the event of a
disaster rendering the DST Facilities inoperable, use
reasonable efforts to convert the TA2000 System containing the
designated Fund data to the computers at the Recovery Facility
in accordance with the then current Business Contingency Plan.
C. DST also currently maintains, separate from the area in which
the operations which provides the services to the Fund
hereunder are located, a Crisis Management Center consisting
of phones, computers and the other equipment necessary to
operate a full service transfer agency business in the event
one of its operations areas is rendered inoperable. The
transfer of operations to other operating areas or to the
Crisis Management Center is also covered in DST's Business
Contingency Plan.
16. Certification of Documents.
The required copy of the Articles of Incorporation of the Fund and
copies of all amendments thereto will be certified by the Secretary of
State (or other appropriate official) of the State of Incorporation,
and if such Articles of Incorporation and amendments are required by
law to be also filed with a county, city or other officer of official
body, a certificate of such filing will appear on the certified copy
submitted to DST. A copy of the order or consent of each governmental
or regulatory authority required by law to the issuance of the stock
will be certified by the Secretary or Clerk of such governmental or
regulatory authority, under proper seal of such authority. The copy of
the Bylaws and copies of all amendments thereto, and copies of
resolutions of the Board of Directors of the Fund, will be certified by
the Secretary or an Assistant Secretary of the Fund under the Fund's
seal.
17. Records.
DST will maintain customary records in connection with its agency, and
particularly will maintain those records required to be maintained
pursuant to subparagraph (2) (iv) of paragraph (b) of Rule 31a-1 under
the Investment Company Act of 1940, if any.
18. Disposition of Books, Records and Canceled Certificates.
DST may send periodically to the Fund, or to where designated by the
Secretary or an Assistant Secretary of the Fund, all books, documents,
and all records no longer deemed needed for current purposes and stock
certificates which have been canceled in transfer or in exchange, upon
the understanding that such books, documents, records, and stock
certificates will be maintained by the Fund under and in accordance
with the requirements of Section 17Ad-7 adopted under the Securities
Exchange Act of 1934. Such materials will not be destroyed by the Fund
without the consent of DST (which consent will not be unreasonably
withheld), but will be safely stored for possible future reference.
19. Provisions Relating to DST as Transfer Agent.
A. Instructions for the transfer, exchange or redemption of
shares of the Fund will be accepted, the registration,
redemption or transfer of the shares be effected and, where
applicable, funds remitted therefor. Upon surrender of the old
certificates in form or receipt by DST of instructions deemed
by DST properly endorsed for transfer, exchange or redemption,
accompanied by such documents as DST may deem necessary to
evidence the authority of the person making the transfer,
exchange or redemption, the transfer, exchange or redemption
of the shares reflected by such certificates be effected and
any sums due in connection therewith be remitted, in
accordance with the instructions contained herein. DST
reserves the right to refuse to transfer or redeem shares
until it is satisfied that the endorsement or signature on the
instruction or any other document is valid and genuine, and
for that purpose it may require a guaranty of signature in
accordance with the Signature Guarantee Procedures. DST also
reserves the right to refuse to transfer, exchange or redeem
shares until it is satisfied that the requested transfer,
exchange or redemption is legally authorized, and DST will
incur no liability for the refusal in good faith to make
transfers or redemptions which, in its judgment, are improper
or unauthorized. DST may, in effecting transfers, exchanges or
redemptions, rely upon DST's Procedures and Simplification
Acts, Uniform Commercial Code or other statutes which protect
it and the Fund in not requiring complete fiduciary
documentation. In cases in which DST is not directed or
otherwise required to maintain the consolidated records of
shareholder's accounts, DST will not be liable for any loss
which may arise by reason of not having such records.
B. DST will, at the expense of the Fund, issue and mail
subscription warrants, effectuate stock dividends, exchanges
or split ups, or act as Conversion Agent upon receiving
written instructions from any officer of the Fund and such
other documents as DST deems necessary.
C. DST will, at the expense of the Fund, supply a shareholder's
list to the Fund for its annual meeting upon receiving a
request from an officer of the Fund. It will also, at the
expense of the Fund, supply lists at such other times as may
be requested by an officer of the Fund.
D. Upon receipt of written instructions of an officer of the
Fund, DST will, at the expense of the Fund, address and mail
notices to shareholders.
E. In case of any request or demand for the inspection of the
stock books of the Fund or any other books in the possession
of DST, DST will endeavor to notify the Fund and to secure
instructions as to permitting or refusing such inspection. DST
reserves the right, however, to exhibit the stock books or
other books to any person in case it is advised by its counsel
that it may be held responsible for the failure to exhibit the
stock books or other books to such person.
20. Provisions Relating to Dividend Disbursing Agency.
A. DST will, at the expense of the Fund, provide a special form
of check containing the imprint of any device or other matter
desired by the Fund. Said checks must, however, be of a form
and size convenient for use by DST.
B. If the Fund desires to include additional printed matter,
financial statements, etc., with the dividend checks, the same
will be furnished DST within a reasonable time prior to the
date of mailing of the dividend checks, at the expense of the
Fund.
C. If the Fund desires its distributions mailed in any special
form of envelopes, sufficient supply of the same will be
furnished to DST but the size and form of said envelopes will
be subject to the approval of DST. If stamped envelopes are
used, they must be furnished by the Fund; or if postage stamps
are to be affixed to the envelopes, the stamps or the cash
necessary for such stamps must be furnished by the Fund.
D. DST shall establish and maintain on behalf of the Fund one or
more deposit accounts as Agent for the Fund, into which DST
shall deposit the funds DST receives for payment of dividends,
distributions, redemptions or other disbursements provided for
hereunder and to draw checks against such accounts.
E. DST is authorized and directed to stop payment of checks
theretofore issued hereunder, but not presented for payment,
when the payees thereof allege either that they have not
received the checks or that such checks have been mislaid,
lost, stolen, destroyed or through no fault of theirs, are
otherwise beyond their control, and cannot be produced by them
for presentation and collection, and, to issue and deliver
duplicate checks in replacement thereof.
21. Assumption of Duties By the Fund or Agents Designated By the Fund.
A. The Fund or its designated agents other than DST may assume
certain duties and responsibilities of DST or those services
of Transfer Agent and Dividend Disbursing Agent as those terms
are referred to in Section 4.D. of this Agreement including
but not limited to answering and responding to telephone
inquiries from shareholders and brokers, accepting shareholder
and broker instructions (either or both oral and written) and
transmitting orders based on such instructions to DST,
preparing and mailing confirmations, obtaining certified TIN
numbers, classifying the status of shareholders and
shareholder accounts under applicable tax law, establishing
shareholder accounts on the TA2000 System and assigning social
codes and Taxpayer Identification Number codes thereof, and
disbursing monies of the Fund, said assumption to be embodied
in writing to be signed by both parties.
B. To the extent the Fund or its agent or affiliate assumes such
duties and responsibilities, DST shall be relieved from all
responsibility and liability therefor and is hereby
indemnified and held harmless against any liability therefrom
and in the same manner and degree as provided for in Section 8
hereof.
C. Initially the Fund or its designees shall be responsible for
the following: (i) answer and respond to phone calls from
shareholders and broker-dealers, and (ii) monitor wire order
settlements and order cancellations of unsettled trades.
22. Termination of Agreement.
A. This Agreement shall be in effect for an initial period of
three (3) years and, thereafter, shall automatically extend
for additional, successive twelve (12) month terms upon the
expiration of any term hereof unless terminated as hereinafter
provided. This Agreement may be terminated by either party
upon the expiration of any term by the delivery to the other
party of one hundred twenty (120) days prior written notice of
such termination, provided, however, that the effective date
of any termination shall not occur during the period from
November 15 through March 15 of any year to avoid adversely
impacting year end.
B. Each party, in addition to any other rights and remedies,
shall have the right to terminate this Agreement forthwith
upon the occurrence at any time of any of the following events
with respect to the other party:
(1) The bankruptcy of the other party or its assigns or
the appointment of a receiver for the other party or
its assigns; or
(2) Failure by the other party or its assigns to perform
its duties in accordance with the Agreement, which
failure materially adversely affects the business
operations of the first party and which failure
continues for thirty (30) days after receipt of
written notice from the first party.
C. Either party may terminate this Agreement at any time by
delivering to the other party written notice of such
termination at least six (6) months prior to the effective
date of such termination.
D. In the event of any termination of this Agreement, the Fund
will continue to pay to DST as invoiced all sums due for DST's
services until completion of the conversion and will pay to
DST, no later than contemporaneously with the dispatch by DST
of the Fund's records, all amounts payable to DST hereunder.
An estimated invoice for fees and reimbursable expenses will
be presented prior to conversion for amounts anticipated to
follow the conversion. The Fund should accrue appropriate
reserves in expectation of invoices/amounts which will be
generated and received following the date of conversion, which
the Fund will pay within thirty (30) days of receipt.
E. In addition, in the event of any termination, DST will,
provided the Fund contemporaneously pays all outstanding
charges and fees, promptly transfer all of the records of the
Fund to the designated successor transfer agent. DST shall
also provide reasonable assistance to the Fund and its
designated successor transfer agent and other information
relating to its services provided hereunder (subject to the
recompense of DST for such assistance and information at its
standard rates and fees for personnel then in effect at that
time); provided, however, as used herein "reasonable
assistance" and "other information" shall not include
assisting any new service or system provider to modify, alter,
enhance, or improve its system or to improve, enhance, or
alter its current system, or to provide any new, functionality
or to require DST to disclose any DST Confidential
Information, as hereinafter defined, or any information which
is otherwise confidential to DST.
F. Subsequent to any termination of this Agreement, the Fund
shall continue to pay to DST, subject to and in accordance
with the terms and conditions set forth in Sections 6.A.,
6.B., 6.C. and 6.D. of this Agreement, for all expenses
incurred on the Fund's behalf and the post-deconversion fees
set forth in Exhibit B to this Agreement (a) until the Fund
accounts are purged from the TA2000 System (no longer being
required for Year End Reporting) with respect to closed
account fees and (b) so long as DST's services are utilized by
the Fund with respect to all fees other than those for closed
accounts.
G. In any event, the effective date of any deconversion as a
result a termination of this Agreement shall not occur during
the period from November 15th through March 15th of any year
to avoid adversely impacting year end.
23. Confidentiality.
A. DST agrees that, except as provided in the last sentence of
Section 19.J. hereof, or as otherwise required by law, DST
will keep confidential all records of and information in its
possession relating to the Fund or its shareholders or
shareholder accounts and will not disclose the same to any
person except at the request or with the consent of the Fund.
B. The Fund owns all of the data supplied by or on behalf of the
Fund to DST. The Fund has proprietary rights to all such data,
records and reports containing such data, but not including
the software programs upon which such data is installed, and
all records relating to such data will be transferred in
accordance with Section 22.D above in the event of
termination.
C. The Fund agrees to keep confidential all non-public financial
statements and other financial records of DST received
hereunder, all accountants' reports relating to DST, the terms
and provisions of this Agreement, including all exhibits and
schedules now or in the future attached hereto and all
manuals, systems and other technical information and data, not
publicly disclosed, relating to DST's operations and programs
furnished to it by DST pursuant to this Agreement and will not
disclose the same to any person except at the request or with
the consent of DST.
D. (1) The Fund acknowledges that DST has proprietary rights
in and to the TA2000 System used to perform services
hereunder including, but not limited to the
maintenance of shareholder accounts and records,
processing of related information and generation of
output, including, without limitation any changes or
modifications of the TA2000 System and any other DST
programs, data bases, supporting documentation, or
procedures (collectively "DST Confidential
Information") which the Fund's access to the TA2000
System or computer hardware or software may permit
the Fund or its employees or agents to become aware
of or to access and that the DST Confidential
Information constitutes confidential material and
trade secrets of DST. The Fund agrees to maintain the
confidentiality of the DST Confidential Information.
(2) The Fund acknowledges that any unauthorized use,
misuse, disclosure or taking of DST Confidential
Information which is confidential as provided by law,
or which is a trade secret, residing or existing
internal or external to a computer, computer system,
or computer network, or the knowing and unauthorized
accessing or causing to be accessed of any computer,
computer system, or computer network, may be subject
to civil liabilities and criminal penalties under
applicable state law. The Fund will advise all of its
employees and agents who have access to any DST
Confidential Information or to any computer equipment
capable of accessing DST or DST hardware or software
of the foregoing.
(3) The Fund acknowledges that disclosure of the DST
Confidential Information may give rise to an
irreparable injury to DST inadequately compensable in
damages. Accordingly, DST may seek (without the
posting of any bond or other security) injunctive
relief against the breach of the foregoing
undertaking of confidentiality and nondisclosure, in
addition to any other legal remedies which may be
available, and the Fund consents to the obtaining of
such injunctive relief. All of the undertakings and
obligations relating to confidentiality and
nondisclosure, whether contained in this Section or
elsewhere in this Agreement shall survive the
termination or expiration of this Agreement for a
period of ten (10) years.
24. Changes and Modifications.
A. During the term of this Agreement DST will use on behalf of
the Fund without additional cost all modifications,
enhancements, or changes which DST may make to the TA2000
System in the normal course of its business and which are
applicable to functions and features offered by the Fund,
unless substantially all DST clients are charged separately
for such modifications, enhancements or changes, including,
without limitation, substantial system revisions or
modifications necessitated by changes in existing laws, rules
or regulations. The Fund agrees to pay DST promptly for
modifications and improvements which are charged for
separately at the rate provided for in DST's standard pricing
schedule which shall be identical for substantially all
clients, if a standard pricing schedule shall exist. If there
is no standard pricing schedule, the parties shall mutually
agree upon the rates to be charged.
B. DST shall have the right, at any time and from time to time,
to alter and modify any systems, programs, procedures or
facilities used or employed in performing its duties and
obligations hereunder; provided that the Fund will be notified
as promptly as possible prior to implementation of such
alterations and modifications and that no such alteration or
modification or deletion shall materially adversely change or
affect the operations and procedures of the Fund in using or
employing the TA2000 System or DST Facilities hereunder or the
reports to be generated by such system and facilities
hereunder, unless the Fund is given thirty (30) days prior
notice to allow the Fund to change its procedures and DST
provides the Fund with revised operating procedures and
controls at the time such notice is delivered to the Fund.
C. All enhancements, improvements, changes, modifications or new
features added to the TA2000 System however developed or paid
for shall be, and shall remain, the confidential and exclusive
property of, and proprietary to, DST.
25. Subcontractors.
Nothing herein shall impose any duty upon DST in connection with or
make DST liable for the actions or omissions to act of unaffiliated
third parties such as, by way of example and not limitation, Airborne
Services, the U.S. mails and telecommunication companies, provided, if
DST selected such company, DST shall have exercised due care in
selecting the same.
26. Limitations on Liability. If the Fund is comprised of more than one
Portfolio, each Portfolio shall be regarded for all purposes hereunder
as a separate party apart from each other Portfolio. Unless the context
otherwise requires, with respect to every transaction covered by this
Agreement, every reference herein to the Fund shall be deemed to relate
solely to the particular Portfolio to which such transaction relates.
Under no circumstances shall the rights, obligations or remedies with
respect to a particular Portfolio constitute a right, obligation or
remedy applicable to any other Portfolio. The use of this single
document to memorialize the separate agreement of each Portfolio is
understood to be for clerical convenience only and shall not constitute
any basis for joining the Portfolios for any reason.
27. Miscellaneous.
A. This Agreement shall be construed according to, and the rights
and liabilities of the parties hereto shall be governed by,
the laws of the State of Missouri, excluding that body of law
applicable to choice of law.
B. All terms and provisions of this Agreement shall be binding
upon, inure to the benefit of and be enforceable by the
parties hereto and their respective successors and permitted
assigns.
C. The representations and warranties, the indemnifications
extended hereunder, and the provisions of Sections 22.F and
6.A through and including 6.D., to the extent incorporated by
Section 22.F., are intended to and shall continue after and
survive the expiration, termination or cancellation of this
Agreement.
D. No provisions of this Agreement may be amended or modified in
any manner except by a written agreement properly authorized
and executed by each party hereto.
E. The captions in this Agreement are included for convenience of
reference only, and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or
effect.
F. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
G. If any part, term or provision of this Agreement is by the
courts held to be illegal, in conflict with any law or
otherwise invalid, the remaining portion or portions shall be
considered severable and not be affected, and the rights and
obligations of the parties shall be construed and enforced as
if the Agreement did not contain the particular part, term or
provision held to be illegal or invalid.
H. This Agreement may not be assigned by the Fund or DST without
the prior written consent of the other.
I. Neither the execution nor performance of this Agreement shall
be deemed to create a partnership or joint venture by and
between the Fund and DST. It is understood and agreed that all
services performed hereunder by DST shall be as an independent
contractor and not as an employee of the Fund. This Agreement
is between DST and the Fund and neither this Agreement nor the
performance of services under it shall create any rights in
any third parties. There are no third party beneficiaries
hereto.
J. Except as specifically provided herein, this Agreement does
not in any way affect any other agreements entered into among
the parties hereto and any actions taken or omitted by any
party hereunder shall not affect any rights or obligations of
any other party hereunder.
K. The failure of either party to insist upon the performance of
any terms or conditions of this Agreement or to enforce any
rights resulting from any breach of any of the terms or
conditions of this Agreement, including the payment of
damages, shall not be construed as a continuing or permanent
waiver of any such terms, conditions, rights or privileges,
but the same shall continue and remain in full force and
effect as if no such forbearance or waiver had occurred.
L. This Agreement constitutes the entire agreement between the
parties hereto and supersedes any prior agreement, draft or
agreement or proposal with respect to the subject matter
hereof, whether oral or written, and this Agreement may not be
modified except by written instrument executed by both
parties.
M. All notices to be given hereunder shall be deemed properly
given if delivered in person or if sent by U.S. mail, first
class, postage prepaid, or if sent by facsimile and thereafter
confirmed by mail as follows:
If to DST:
DST Systems, Inc.
1055 Broadway, 7th Fl.
Kansas City, Missouri 64105
Attn: Senior Vice President-Full Service
Facsimile No.: 816-435-3455
With a copy of non-operational notices to:
DST Systems, Inc.
333 W. 11th St., 5th Fl.
Kansas City, Missouri 64105
Attn: Legal Department
Facsimile No.: 816-435-8630
If to the Fund:
First American Strategy Funds, Inc.
680 East Swedesford Rd.
Wayne, Pennsylvania 19087
Attn: General Counsel
Facsimile No.: (610) 676-1040
or to such other address as shall have been specified in
writing by the party to whom such notice is to be given.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective duly authorized officers, to be effective as of the
day and year first above written.
DST SYSTEMS, INC.
By: /s/ Thomas A. McCullough
Title: Executive Vice President
FIRST AMERICAN STRATEGY
FUNDS, INC.
By: /s/ Kate Stanton
Title: Vice President
EXHIBIT A
PAGE 1 OF 4
DST SYSTEMS, INC.
FIRST AMERICAN TRANSFER AGENCY FEE PROPOSAL
EFFECTIVE JANUARY 1, 1997 THROUGH DECEMBER 31, 1999
A. MINIMUM FEE
Year 1 - January 1997 through December 1997
Cusips in the range 1-10 $11,000/year
Cusips in the range 11-20 $10,500/year
Cusips in the range more than 20 $9,250/year
Year 2 - January 1998 through December 1998
Cusips in the range 1-10 $13,000/year
Cusips in the range 11-20 $12,500/year
Cusips in the range more than 20 $11,000/year
Year 3 - January 1999 through December 1999
Cusips in the range 1-10 $15,500/year
Cusips in the range 11-20 $14,000/year
Cusips in the range more than 20 $12,500/year
Note: Minimum fees set forth above apply to each cusip unless charges
included in Paragraph B below for each cusip exceed the applicable minimum
fee.
B. ACCOUNT MAINTENANCE AND PROCESSING FEES
Year 1 - January 1997 through December 1997
Open Accounts:
Daily Accrual Portfolio(s) $23.00 per account per year
Monthly Accrual Portfolio(s) $18.00 per account per year
Other Accruals Portfolio(s) $16.00 per account per year
Closed Accounts $2.85 per account per year
Year 2 - January 1998 through December 1998
Open Accounts:
Daily Accrual Portfolio(s) $24.00 per account per year
Monthly Accrual Portfolio(s) $19.00 per account per year
Other Accruals Portfolio(s) $17.00 per account per year
Closed Accounts $2.85 per account per year
Year 3 - January 1999 through December 1999
Open Accounts:
Daily Accrual Portfolio(s) $25.00 per account per year
Monthly Accrual Portfolio(s) $21.00 per account per year
Other Accruals Portfolio(s) $18.00 per account per year
Closed Accounts $2.85 per account per year
C. OPTIONAL SERVICES
Financial Intermediary Interface (includes generally Schwab and Schwab-like
interfaces, NSCC and transactions with entities entering more than five
transactions a week).
To be determined
12b-1 Processing $.15 per open and closed account per cycle
CDSC/Sharelot Accounting $1.90 per account per year
Ad-Hoc Reporting
Multi File Reports $400 per report
Single File Reports $250 per report
*Audio Response(TM) System - Not used currently Charges quoted
upon request
*NSCC - To be determined
Escheatment Costs - as incurred
Conversion/Acquisition Costs - Out of Pocket expenses including but not limited
to travel and accommodations, programming, training, equipment installation,
etc.
*Computer/Technical Personnel:
Business Analyst/Tester:
Dedicated $70,500 per year
On Request:
Senior Staff Support $65 per hour
Staff Support $45 per hour
Clerical Support $35 per hour
Technical/Programming:
Dedicated $115,000 per year
On Request $90 per hour
Technical/C Programming:
Dedicated $140,000 per year
On Request $115 per hour
NOTES TO THE ABOVE FEE SCHEDULE
A. The above schedule does not include reimbursable expenses that are
incurred on the Fund's behalf. Examples of reimbursable expenses are
set forth on page 37 of this Agreement. Reimbursable expenses are
billed separately from service fees on a monthly basis. Postage will be
paid in advace if so requested.
B. Any fees or reimbursable expenses not paid within 30 days of the date
of the original invoice will be charged a late payment fee of 1.0% per
month until payment is received.
C. The above fees, except for those indicated by an "*", are guaranteed
for a three year period. All items marked by an "*" are subject to
change with 60 day notice.
OPEN AND CLOSED ACCOUNTS FEES
D. The monthly fee for an open account shall be charged in the month
during which an account is opened through the month in which such
account is closed. The monthly fee for a closed account shall be
charged in the month following the month during which such account is
closed and shall cease to be charged in the month following the Purge
Date, as hereinafter defined. The "Purge Date" for any year shall be
any day after June 1st of that year, as selected by the Fund, provided
that written notification is presented to DST at least forty-five (45)
days prior to the Purge Date.
Fees Accepted By:
/s/ Thomas A. McCullough /s/ Kate Stanton
- ----------------------------------- ------------------------------------
DST Systems, Inc. First American Strategy Funds, Inc.
3/14/97
- ----------------------------------- ------------------------------------
Date Date
REIMBURSABLE EXPENSES
Forms
Postage (to be paid in advance if so requested)
Mailing Services
Computer Hardware and Software - specific to Fund or installed at remote
site at Fund's direction
Telecommunications Equipment and Lines/Long Distance Charges
Magnetic Tapes, Reels or Cartridges
Magnetic Tape Handling Charges
Microfiche/Microfilm
Freight Charges
Printing
Bank Wire and ACH Charges
Proxy Processing - per proxy mailed
not including postage
Includes: Proxy Card
Printing
Outgoing Envelope
Return Envelope
Tabulation and Certification
T.I.N. Certification (W-8 & W-9)
(Postage associated with the return
envelope is included)
N.S.C.C. Communications Charge To be determined
(Fund/Serv and Networking)
Off-site Record Storage
Second Site Disaster Currently $.07
Backup Fee (per account) (guaranteed not to
exceed $.11 through
12/31/97)
Transmission of Statement Data for Currently $.035/per
Remote Processing record
Travel, Per Diem and other Billables
Incurred by DST personnel traveling to,
at and from the Fund at the request
of the Fund
EXHIBIT B
DST SYSTEMS, INC. / FIRST AMERICAN FUNDS
POST DECONVERSION FEE SCHEDULE
ALL FEES EFFECTIVE AS OF DECONVERSION:
ACCOUNT MAINTENANCE
Closed Accounts $.20/month/acct
Transaction/Maintenance Processing$ 2.50/item
Telephone Calls $4.00/call
Research Requests $40/hour (1 hr min)
PROGRAMMING
As required at DST's then current standard rates
REIMBURSABLE EXPENSES
This schedule does not include reimbursable expenses that are incurred on the
Fund's behalf. Examples of reimbursable expenses include but are not limited to
forms, postage, mailing services, telephone line/long distance charges,
transmission of statement data for remote print/mail operations, remote client
hardware, document storage, tax certification mailings, magnetic tapes,
printing, microfiche, Fed wire bank charges, ACH bank charges, NSCC charges, as
required or incurred, etc. Reimbursable expenses are billed separately from
Account Maintenance and Programming fees on a monthly basis and late payments
are subject to late charges in accordance with Section 6.C. of this Agreement.
EXHIBIT C
AUTHORIZED PERSONNEL
Pursuant to Section 8.A. of the Agency Agreement between First American Strategy
Funds, Inc. (the "Fund") and DST (the "Agreement"), the Fund authorizes the
following Fund personnel to provide instructions to DST, and receive inquiries
from DST in connection with the Agreement:
Name Title
---- -----
Jeff Wilson First Bank - Managing Director of Mutual Funds
- ----------------------------- ----------------------------------------------
Ted Rice First Bank - Trust Counsel
- ----------------------------- ----------------------------------------------
Beth Zerbato SEI - Operations Manager
- ----------------------------- ----------------------------------------------
Craig Rife SEI - Account Director
- ----------------------------- ----------------------------------------------
Kim Petersen SEI - Operations Manager
- ----------------------------- ----------------------------------------------
Kate Stanton SEI - Deputy General Counsel/Vice
President/Asst. Secretary
- ----------------------------- ----------------------------------------------
Donna Rafa SEI - Mutual Fund Manager
- ----------------------------- ----------------------------------------------
This Exhibit may be revised by the Fund by providing DST with a substitute
Exhibit B. Any such substitute Exhibit B shall become effective twenty-four (24)
hours after DST's receipt of the document and shall be incorporated into the
Agreement.
ACKNOWLEDGMENT OF RECEIPT:
FIRST AMERICAN STRATEGY
DST SYSTEMS, INC. FUNDS, INC.
By: /s/ Thomas A. McCullough By: /s/ Kate Stanton
------------------------------- ---------------------------------
Title: Executive Vice President Title: Vice President
---------------------------- ------------------------------
Date: 3/14/97 Date:
----------------------------- -------------------------------
EXHIBIT 14(a)
[LETTERHEAD]
Independent Auditors' Consent
The Board of Directors
First American Strategy Funds, Inc.:
We consent to the incorporation by reference in the registration statement on
Form N-14 (the "Registration Statement") of First American Strategy Funds, Inc.
(the "Funds") of our report, dated September 6, 1996, relating to the September
5, 1996 statements of assets and liabilities of the Funds. We also consent to
the reference to our Firm under the heading "Custodian; Transfer Agent; Counsel;
Accountants" in the statement of additional information of the Funds dated
January 31, 1997, which is incorporated by reference in the Registration
Statement.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Minneapolis, Minnesota
August 7, 1997
EXHIBIT 14(b)
[LETTERHEAD]
INDEPENDENT AUDITORS' CONSENT
We consent to the use in the Registration Statement of First American
Strategy Funds, Inc. on Form N-14, under the Securities Act of 1933, of our
report dated September 12, 1996, relating to the Qualivest Allocated
Conservative Fund, Qualivest Allocated Balanced Fund, Qualivest Allocated Growth
Fund, and Qualivest Allocated Aggressive Fund, incorporated by reference and to
the reference to us as "experts" under the caption "Financial Statements" in
such Registration Statement.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Dayton, Ohio
August 6, 1997
EXHIBIT 16
FIRST AMERICAN STRATEGY FUNDS, INC.
POWER OF ATTORNEY -- N-14 REGISTRATION STATEMENT
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints Kathryn L. Stanton, Michael J.
Radmer, and Donna Rafa, and each of them, his or her true and lawful
attorneys-in-fact and agents, each acting alone, with full power of substitution
and resubstitution, for him or her and in his or her name, place and stead, in
any and all capacities, to sign a Registration Statement on Form N-14 of First
American Strategy Funds, Inc. ("FASF"), relating to the combination of Qualivest
Funds' Allocated Conservative Fund, Allocated Balanced Fund, Allocated Growth
Fund, and Allocated Aggressive Fund, with and into each of FASF's Strategy
Income Fund, Strategy Growth and Income Fund, Strategy Growth Fund, and Strategy
Aggressive Growth Fund, respectively, and any and all amendments thereto,
including post-effective amendments, and to file the same, with all exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, each
acting alone, full power and authority to do and perform to all intents and
purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, each acting alone, or the
substitutes for such attorneys-in-fact and agents, may lawfully do or cause to
be done by virtue hereof.
Signature Title Date
--------- ----- ----
/s/ Robert J. Dayton Director July 15, 1997
- ------------------------------
Robert J. Dayton
/s/ Virginia L. Stringer Director July 8, 1997
- ------------------------------
Virginia L. Stringer
/s/ Joseph D. Strauss Director July 7, 1997
- ------------------------------
Joseph D. Strauss
/s/ Robert L. Spies Director July 7, 1997
- ------------------------------
Robert L. Spies
/s/ Leonard W. Kedrowski Director July 3, 1997
- ------------------------------
Leonard W. Kedrowski
/s/ Andrew M. Hunter III Director July 11, 1997
- ------------------------------
Andrew M. Hunter III
/s/ Gae B. Veit Director July 7, 1997
- ------------------------------
Gae B. Veit
EXHIBIT 17(b)
FORM OF PROXY
____________________ FUND
(A SERIES OF QUALIVEST FUNDS)
OAKS, PENNSYLVANIA 19456
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES OF QUALIVEST FUNDS
The undersigned hereby appoints Kathryn L. Stanton, Michael J. Radmer,
and Donna Rafa, and each of them, with power to act without the other and with
the right of substitution in each, as proxies of the undersigned and hereby
authorizes each of them to represent and to vote, as designated below, all the
shares of _________________ Fund (the "Fund"), a series of Qualivest Funds
("Qualivest"), held of record by the undersigned on _____________________, 1997,
at the Special Meeting of Shareholders of the Fund to be held on
___________________, 1997, or any adjournments or postponements thereof, with
all powers the undersigned would possess if present in person. All previous
proxies given with respect to the Special Meeting hereby are revoked.
THE PROXIES ARE INSTRUCTED TO VOTE AS FOLLOWS:
1. PROPOSAL TO RATIFY AND APPROVE AN INTERIM ADVISORY AGREEMENT between
Qualivest, on behalf of the Fund, and First Bank National Association
("FBNA"), and the receipt of investment advisory fees by FBNA for the
period from August 1, 1997 forward.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. PROPOSAL TO APPROVE AN AGREEMENT AND PLAN OF REORGANIZATION providing
for the transfer of the assets and liabilities of the Fund to a
corresponding fund of First American Strategy Funds, Inc. ("FASF") in
exchange for shares of designated classes of the corresponding FASF
fund.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the annual meeting or any adjournments or
postponements thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS GIVEN, THIS
PROXY WILL BE VOTED "FOR" THE PROPOSALS ABOVE. RECEIPT OF THE NOTICE OF SPECIAL
MEETING OF SHAREHOLDERS AND THE PROXY STATEMENT RELATING TO THE MEETING IS
ACKNOWLEDGED BY YOUR EXECUTION OF THIS PROXY.
PLEASE SIGN THIS PROXY EXACTLY AS YOUR NAME APPEARS BELOW. WHEN SHARES
ARE HELD BY JOINT TENANTS, BOTH SHOULD SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. IF A
CORPORATION, PLEASE SIGN IN FULL CORPORATE NAME BY PRESIDENT OR OTHER AUTHORIZED
OFFICER. IF A PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY PARTNER OR OTHER
AUTHORIZED PERSON.
DATED: ___________________, 1997
________________________________________
Signature
________________________________________
Signature if held jointly
TO SAVE FURTHER SOLICITATION EXPENSE, PLEASE MARK, SIGN, DATE AND RETURN THIS
PROXY PROMPTLY USING THE ENCLOSED POSTAGE-PREPAID ENVELOPE.
