1933 Act Registration No. __________
1940 Act Registration No. __________
As filed with the Securities and Exchange Commission on December 30th, 1999
FORM N-1A
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. __ [ ]
Post-Effective Amendment No. __ [ ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 [X]
Amendment No. ___
FIRST AMERICAN INSURANCE PORTFOLIOS, INC.
(Exact Name of Registrant as Specified in Charter)
OAKS, PENNSYLVANIA 19456
(Address of Principal Executive Offices) (Zip Code)
(610) 676-1924
(Registrant's Telephone Number, including Area Code)
JAMES R. FOGGO
C/O SEI INVESTMENTS COMPANY, OAKS, PENNSYLVANIA 19456
(Name and Address of Agent for Service)
COPIES TO:
Christopher O. Petersen
U.S. Bank National Association
601 2nd Avenue South, MPFP 2016
Minneapolis, Minnesota 55402
Approximate date of proposed offering: As soon as practicable after the
effective date of the Registration Statement.
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective
date for a previously filed post-effective amendment.
<PAGE>
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
<PAGE>
EFFECTIVE DATE
INSURANCE PORTFOLIOS
Growth Equity Fund
Value Equity Fund
Technology Fund
Bond Fund
First American
Insurance Portfolios, Inc.
PROSPECTUS
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved the shares of these funds, or determined if the
information in this prospectus is accurate or complete. Any statement to the
contrary is a criminal offense.
FIRST AMERICAN(R)
THE POWER OF DISCIPLINED INVESTING(R)
1 PROSPECTUS - FIRST AMERICAN INSURANCE PORTFOLIOS
<PAGE>
TABLE OF
CONTENTS
FUND SUMMARIES
- --------------------------------------------------------------------------------
Growth Equity Fund
- --------------------------------------------------------------------------------
Value Equity Fund
- --------------------------------------------------------------------------------
Technology Fund
- --------------------------------------------------------------------------------
Bond Fund
- --------------------------------------------------------------------------------
POLICIES & SERVICES
- --------------------------------------------------------------------------------
Buying and Selling Shares
- --------------------------------------------------------------------------------
Managing Your Investment
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
Management
- --------------------------------------------------------------------------------
More About The Funds
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
FOR MORE INFORMATION
- --------------------------------------------------------------------------------
2 PROSPECTUS - FIRST AMERICAN INSURANCE PORTFOLIOS
<PAGE>
FUND SUMMARIES
INTRODUCTION
This section of the Prospectus describes the objectives of the funds in the
First American Insurance Portfolios, summarizes the main investment strategies
used by each fund in trying to achieve its objectives, and highlights the risks
involved with these strategies. (Note that individual investors cannot purchase
shares of the funds directly. Shares of the funds may be purchased only by the
separate accounts of insurance companies for the purpose of funding variable
annuity contracts or variable life insurance policies.)
AN INVESTMENT IN THE FUNDS IS NOT A DEPOSIT OF U.S. BANK NATIONAL ASSOCIATION
AND IS NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR
ANY OTHER GOVERNMENT AGENCY.
3 PROSPECTUS - FIRST AMERICAN INSURANCE PORTFOLIOS
<PAGE>
FUND SUMMARIES
GROWTH EQUITY FUND
================================================================================
OBJECTIVE
Growth Equity Fund's objective is long-term growth of capital.
================================================================================
MAIN INVESTMENT STRATEGIES
Under normal market conditions, Growth Equity Fund invests primarily (at least
75% of its total assets) in common stocks of companies that have market
capitalizations of at least $5 billion at the time of purchase. The advisor will
select companies that it believes exhibit the potential for superior growth
based on factors such as:
* above average growth in revenue and earnings;
* strong competitive position;
* strong management; and
* sound financial condition.
Up to 25% of the fund's total assets may be invested in securities of
foreign issuers which are either listed on a United States stock exchange or
represented by American Depositary Receipts.
To generate additional income, the fund may lend securities representing up to
one-third of the value of its total assets to broker-dealers, banks and other
institutions.
MAIN RISKS
The value of your investment in this fund will change daily, which means you
could lose money. The main risks of investing in this fund include:
RISKS OF COMMON STOCKS
Stocks may decline significantly in price over short or extended periods of
time. Price changes may occur in the market as a whole, or they may occur in
only a particular company, industry or sector of the market. In addition, growth
stocks and/or large capitalization stocks may underperform the market as a
whole.
4 PROSPECTUS - FIRST AMERICAN INSURANCE PORTFOLIOS
<PAGE>
FOREIGN SECURITY RISK
Securities of foreign issuers, even when dollar-denominated and publicly traded
in the United States, may involve risks not associated with the securities of
domestic issuers, including the risks of adverse currency fluctuations and of
political or social instability or diplomatic developments that could adversely
affect the securities.
RISKS OF SECURITIES LENDING
The fund is subject to the risk that the other party to a securities lending
agreement will default on its obligations.
- --------------------------------------------------------------------------------
FUND PERFORMANCE
Growth Equity Fund is a newly organized fund and does not yet have its own
performance record. However, this fund has substantially the same investment
objectives, policies and strategies, and restrictions as the Large Cap Growth
Fund series of First American Investment Funds, Inc. (FAIF Large Cap Growth
Fund), another registered open-end investment company managed by the investment
advisor. Performance information for FAIF Large Cap Growth Fund is presented on
the next page to provide you with a track record (performance and volatility)
of the investment advisor in managing a fund substantially similar to the Growth
Equity Fund.
The performance illustrations are based on FAIF Large Cap Growth Fund Class Y
institutional shares. Of course, past performance does not guarantee future
results, and investors should not consider this data as a substitute for past
performance of Growth Equity Fund or an indication of future performance of
Growth Equity Fund.
The bar chart shows you how performance of FAIF Large Cap Growth Fund has varied
from year to year. The table compares the fund's performance over different time
periods to that of the fund's benchmark index, which is a broad measure of
market performance. The fund's performance reflects fund fees and expenses
(after waivers). By way of example, for the fiscal year ended September 30,
1999, the fees and expenses for FAIF Large Cap Growth Fund were _______% of net
assets. (Note that the fees and expenses for Growth Equity Fund are different
from those of FAIF Large Cap Growth Fund as discussed, in part, below.) The
benchmark is unmanaged and has no expenses. Both the chart and the table assume
that all distributions have been reinvested.
FAIF Large Cap Growth Fund is not offered through separate accounts of insurance
companies. Therefore, the performance information does not reflect the deduction
of any separate account insurance fees or charges imposed by the participating
insurance companies in connection with their sale of variable life insurance
policies or variable annuity contracts to investors that may be deducted from an
investment in Growth Equity Fund. Investors should refer to the participating
insurance companies' separate account prospectuses describing contract fees and
expenses. Any such fees and expenses will reduce the performance of the fund.
5 PROSPECTUS - FIRST AMERICAN INSURANCE PORTFOLIOS
<PAGE>
FUND SUMMARIES
GROWTH EQUITY FUND (CONTINUED)
- --------------------------------------------------------------------------------
FAIF LARGE CAP GROWTH FUND COMPARATIVE PERFORMANCE
ANNUAL TOTAL RETURNS AS OF 12/31 EACH YEAR
32.78% 23.23% 21.61% 24.05%
- -----------------------------------------------------------
1995 1996 1997 1998 1999
BEST QUARTER:
Quarter ending: 12/31/98
Total return 21.21%
WORST QUARTER:
Quarter ending: 9/30/98
Total return -14.09%
AVERAGE ANNUAL TOTAL RETURNS Inception One Five Since
AS OF 12/31/99 Date Year Years Inception
- --------------------------------------------------------------------------------
FAIF Large Cap Growth Fund 8/2/94 _____% _____% _____%
- --------------------------------------------------------------------------------
Standard & Poor's 500 Composite Index(1) _____% _____% _____%
- --------------------------------------------------------------------------------
(1) An unmanaged index of large capitalization stocks. The since inception
performance of the index is calculated from 8/31/94. The S & P 500 Composite
Index will be the comparative benchmark for the Growth Equity Fund.
6 PROSPECTUS - FIRST AMERICAN INSURANCE PORTFOLIOS
<PAGE>
FUND SUMMARIES
VALUE EQUITY FUND
- --------------------------------------------------------------------------------
OBJECTIVE
Value Equity Fund's primary objective is capital appreciation. Current income is
a secondary objective of the fund.
- --------------------------------------------------------------------------------
MAIN INVESTMENT STRATEGIES
Under normal market conditions, Value Equity Fund invests primarily (at least
75% of its total assets) in common stocks of companies that cover a broad range
of industries and that have market capitalizations of at least $5 billion at the
time of purchase. In selecting stocks, the fund's advisor invests in securities
that it believes:
* are undervalued relative to other securities in the same industry or
market;
* exhibit good or improving fundamentals; and
* exhibit an identifiable catalyst that could close the gap between market
value and fair value over the next one to two years.
Up to 25% of the fund's total assets may be invested in securities of foreign
issuers which are either listed on a United States stock exchange or represented
by American Depositary Receipts.
To generate additional income, the fund may lend securities representing up to
one-third of the value of its total assets to broker-dealers, banks and other
institutions.
- --------------------------------------------------------------------------------
MAIN RISKS
The value of your investment in this fund will change daily, which means you
could lose money. The main risks of investing in this fund include:
RISKS OF COMMON STOCKS
Stocks may decline significantly in price over short or extended periods of
time. Price changes may occur in the market as a whole, or they may occur in
only a particular company, industry or sector of the market. In addition, value
stocks and/or large capitalization stocks may underperform the market as a
whole.
7 PROSPECTUS - FIRST AMERICAN INSURANCE PORTFOLIOS
<PAGE>
FOREIGN SECURITY RISK
Securities of foreign issuers, even when dollar-denominated and publicly traded
in the United States, may involve risks not associated with the securities of
domestic issuers, including the risks of adverse currency fluctuations and of
political or social instability or diplomatic developments that could adversely
affect the securities.
RISKS OF SECURITIES LENDING
The fund is subject to the risk that the other party to a securities lending
agreement will default on its obligations.
- --------------------------------------------------------------------------------
FUND PERFORMANCE
Value Equity Fund is a newly organized fund and does not yet have its own
performance record. However, this fund has substantially the same investment
objectives, policies and strategies, and restrictions as the Large Cap Value
Fund series of First American Investment Funds, Inc. (FAIF Large Cap Value
Fund), another registered open-end investment company managed by the investment
advisor. Performance information for FAIF Large Cap Value Fund is presented on
the next page to provide you with a track record (performance and volatility)
of the investment advisor in managing a fund substantially similar to the Value
Equity Fund.
The performance illustrations are based on FAIF Large Cap Value Fund Class Y
institutional shares. Of course, past performance does not guarantee future
results, and investors should not consider this data as a substitute for past
performance of Value Equity Fund or an indication of future performance of
Value Equity Fund.
The bar chart shows you how performance of FAIF Large Cap Value Fund has varied
from year to year. The table compares the fund's performance over different time
periods to that of the fund's benchmark index, which is a broad measure of
market performance. The fund's performance reflects fund fees and expenses
(after waivers). By way of example, for the fiscal year ended September 30,
1999, the fees and expenses for FAIF Large Cap Value Fund were _______% of net
assets. (Note that the fees and expenses for Growth Equity Fund are different
from those of FAIF Large Cap Growth Fund as discussed, in part, below.) The
benchmark is unmanaged and has no expenses. Both the chart and the table assume
that all distributions have been reinvested.
FAIF Large Cap Value Fund is not offered through separate accounts of insurance
companies. Therefore, the performance information does not reflect the deduction
of any separate account insurance fees or charges imposed by the participating
insurance companies in connection with their sale of variable life insurance
policies or variable annuity contracts to investors that may be deducted from an
investment in Value Equity Fund. Investors should refer to the participating
insurance companies' separate account prospectuses describing contract fees and
expenses. Any such fees and expenses will reduce the performance of the fund.
8 PROSPECTUS - FIRST AMERICAN INSURANCE PORTFOLIOS
<PAGE>
FUND SUMMARIES
VALUE EQUITY FUND (CONTINUED)
- --------------------------------------------------------------------------------
FAIF LARGE CAP VALUE FUND COMPARATIVE PERFORMANCE
ANNUAL TOTAL RETURNS AS OF 12/31 EACH YEAR
32.23% 29.47% 22.80% 9.99%
- -----------------------------------------------------------
1995 1996 1997 1998 1999
BEST QUARTER:
Quarter ending: 12/31/98
Total return 16.64%
WORST QUARTER:
Quarter ending: 9/30/98
Total return -13.85%
AVERAGE ANNUAL TOTAL RETURNS Inception One Five Since
AS OF 12/31/99 Date Year Years Inception
- --------------------------------------------------------------------------------
FAIF Large Cap Value Fund 2/4/94 _____% _____% _____%
- --------------------------------------------------------------------------------
Standard & Poor's 500 Composite Index(1) _____% _____% _____%
- --------------------------------------------------------------------------------
(1) An unmanaged index of large capitalization stocks. The since inception
performance of the index is calculated from 2/28/94. The S & P 500 Composite
Index will be the comparative benchmark for the Growth Value Fund.
9 PROSPECTUS - FIRST AMERICAN INSURANCE PORTFOLIOS
<PAGE>
FUND SUMMARIES
TECHNOLOGY FUND
- --------------------------------------------------------------------------------
OBJECTIVE
Technology Fund has an objective of long-term growth of capital.
- ----------------------------------------------------------------
MAIN INVESTMENT STRATEGIES
Under normal market conditions, Technology Fund invests primarily (at least 65%
of its total assets) in common stocks of companies which the fund's advisor
believes either have, or will develop, products, processes or services that will
provide or will benefit significantly from technological innovations, advances
and improvements. These may include:
* inexpensive computing power, such as personal computers;
* improved methods of communications, such as satellite transmission; and
* technology related services such as internet related marketing services.
The prime emphasis of the fund is to identify companies which the advisor
believes are positioned to benefit from technological advances in areas such as
semiconductors, computers, software, communications, and online services.
Companies in which the fund invests may include development stage companies
(companies that do not have significant revenues) and small capitalization
companies. The advisor will generally select companies that it believes exhibit
strong management teams, a strong competitive position, above average growth in
revenues and a sound balance sheet.
Under certain market conditions, the fund may frequently invest in companies at
the time of their initial public offering (IPO). By virtue of its size and
institutional nature, the advisor may have greater access than individual
investors have to IPOs, including access to so-called "hot issues" which are
generally traded in the aftermarket at prices in excess of the IPO price. IPOs
will frequently be sold within 12 months of purchase which may result in
increased short-term capital gains.
Up to 25% of the fund's total assets may be invested in securities of foreign
issuers which are either listed on a United States stock exchange or represented
by American Depositary Receipts.
To generate additional income, the fund may lend securities representing up to
one-third of the value of its total assets to broker-dealers, banks and other
institutions.
10 PROSPECTUS - FIRST AMERICAN INSURANCE PORTFOLIOS
<PAGE>
- --------------------------------------------------------------------------------
MAIN RISKS
The value of your investment in this fund will change daily, which means you
could lose money. The main risks of investing in this fund include:
RISKS OF COMMON STOCKS
Stocks may decline significantly in price over short or extended periods of
time. Price changes may affect the market as a whole, or they may affect only a
particular company, industry or sector of the market.
RISKS OF NON-DIVERSIFICATION
The fund is non-diversified. This means that it may invest a larger portion of
its assets in a limited number of companies than a diversified fund. Because a
relatively high percentage of the fund's assets may be invested in the
securities of a limited number of issuers, and because those issuers will be in
the same or related economic sectors, the fund's portfolio securities may be
more susceptible to any single economic, technological or regulatory occurrence
than the portfolio securities of a diversified fund.
RISKS OF THE TECHNOLOGY SECTOR
Because the fund invests primarily in technology related stocks, it is
particularly susceptible to risks associated with the technology industry.
Competitive pressures may have a significant effect on the financial condition
of companies in that industry.
RISKS OF DEVELOPMENT STAGE AND SMALL CAP STOCKS
Stocks of development stage and small capitalization companies involve
substantial risk. These stocks historically have experienced greater price
volatility than stocks of more established and larger capitalization companies,
and they may be expected to do so in the future.
RISKS OF IPOS
Companies involved in IPOs generally have limited operating histories and
prospects for future profitability are uncertain. Prices of IPOs may also be
unstable due to the absence of a prior public market, the small number of shares
available for trading and limited investor information. IPOs will frequently be
sold within 12 months of purchase. This may result in increased short-term
capital gains, which will be taxable to shareholders as ordinary income.
FOREIGN SECURITY RISK
Securities of foreign issuers, even when dollar-denominated and publicly traded
in the United States, may involve risks not associated with the securities of
domestic issuers, including the risks of adverse currency fluctuations and of
political or social instability or diplomatic developments that could adversely
affect the securities.
11 PROSPECTUS - FIRST AMERICAN INSURANCE PORTFOLIOS
<PAGE>
RISKS OF SECURITIES LENDING
The fund is subject to the risk that the other party to a securities lending
agreement will default on its obligations.
- --------------------------------------------------------------------------------
FUND PERFORMANCE
Technology Fund is a newly organized fund and does not yet have its own
performance record. However, this fund has substantially the same investment
objectives, policies and strategies, and restrictions as the Technology Fund
series of First American Investment Funds, Inc. (FAIF Technology Fund), another
registered open-end investment company managed by the investment advisor.
Performance information for FAIF Technology Fund is presented on the next page
to provide you with a track record (performance and volatility) of the
investment advisor in managing a fund substantially similar to the Technology
Fund.
The performance illustrations are based on FAIF Technology Fund Class Y
institutional shares. Of course, past performance does not guarantee future
results, and investors should not consider this data as a substitute for past
performance of Technology Fund or an indication of future performance of
Technology Fund.
The bar chart shows you how performance of FAIF Technology Fund has varied from
year to year. The table compares the fund's performance over different time
periods to that of the fund's benchmark index, which is a broad measure of
market performance. The fund's performance reflects fund fees and expenses
(after waivers). By way of example, for the fiscal year ended September 30,
1999, the fees and expenses for FAIF Technology Fund were _______% of net
assets. (Note that the fees and expenses for Growth Equity Fund are different
from those of FAIF Large Cap Growth Fund as discussed, in part, below.) The
benchmark is unmanaged and has no expenses. Both the chart and the table assume
that all distributions have been reinvested.
FAIF Technology Fund is not offered through separate accounts of insurance
companies. Therefore, the performance information does not reflect the deduction
of any separate account insurance fees or charges imposed by the participating
insurance companies in connection with their sale of variable life insurance
policies or variable annuity contracts to investors that may be deducted from an
investment in Technology Fund. Investors should refer to the participating
insurance companies' separate account prospectuses describing contract fees and
expenses. Any such fees and expenses will reduce the performance of the fund.
12 PROSPECTUS - FIRST AMERICAN INSURANCE PORTFOLIOS
<PAGE>
FUND SUMMARIES
TECHNOLOGY FUND (CONTINUED)
- --------------------------------------------------------------------------------
FAIF TECHNOLOGY FUND COMPARATIVE PERFORMANCE
ANNUAL TOTAL RETURNS AS OF 12/31 EACH YEAR(1)
41.02% 22.43% 7.31% 32.70%
- -----------------------------------------------------------
1995 1996 1997 1998 1999
BEST QUARTER:
Quarter ending: 12/31/98
Total return 41.73%
WORST QUARTER:
Quarter ending: 9/30/98
Total return -18.20%
AVERAGE ANNUAL TOTAL RETURNS Inception One Five Since
AS OF 12/31/99(1) Date Year Years Inception
- --------------------------------------------------------------------------------
FAIF Technology Fund 4/4/94 _____% _____% _____%
- --------------------------------------------------------------------------------
S & P Technology Composite Index(2) _____% _____% _____%
- --------------------------------------------------------------------------------
(1) One factor having a positive impact on the fund's total returns in 1999 has
been the availability of initial public offerings (IPOs). There is no assurance
that the future availability of IPOs will be the same as it was in 1999, and
there is no assurance that the fund's future investments in IPOs will have the
same effect on performance as they did in 1999.
(2) An unmanaged index comprised of technology stocks in the S & P 500 (an
unmanaged index of large capitalization stocks). The S & P 500 Technology
Composite Index will be the comparative benchmark for the Technology Fund in
this prospectus.
13 PROSPECTUS - FIRST AMERICAN INSURANCE PORTFOLIOS
<PAGE>
FUND SUMMARIES
BOND FUND
- --------------------------------------------------------------------------------
OBJECTIVE
Bond Fund's objective is to provide investors with a high level of current
income consistent with prudent risk to capital.
- --------------------------------------------------------------------------------
MAIN INVESTMENT STRATEGIES
Under normal market conditions, Bond Fund will invest primarily in a combination
of:
* corporate debt obligations;
* U.S. dollar denominated debt obligations of foreign issuers;
* securities issued or guaranteed by the U.S. government or its agencies and
instrumentalities; and
* mortgage- and asset-backed securities.
Fund managers employ a bottom-up approach to identify relative value in the
corporate bond market through fundamental credit research. Positions are sold in
anticipation of credit deterioration or when a security is priced expensively
relative to other comparable investments.
The fund invests primarily in securities rated investment grade at the time of
purchase or in unrated securities of comparable quality. However, up to 35% of
the fund's debt securities may be rated lower than investment grade at the time
of purchase or unrated and of comparable quality. The fund will not invest in
securities rated lower than B at the time of purchase or in unrated securities
of equivalent quality. Unrated securities will not exceed 25% of the fund's
total assets. Quality determinations regarding these securities will be made by
the fund's advisor.
The fund may invest up to 25% of its total assets in foreign securities payable
in U.S. dollars.
Under normal market conditions the fund attempts to maintain a weighted average
maturity for its portfolio securities of 15 years or less and an average
effective duration of four to nine years.
14 PROSPECTUS - FIRST AMERICAN INSURANCE PORTFOLIOS
<PAGE>
To generate additional income, the fund may lend securities representing up to
one-third of the value of its total assets to broker-dealers, banks and other
institutions.
- --------------------------------------------------------------------------------
MAIN RISKS
The price and yield of this fund will change daily due to changes in interest
rates and other factors, which means you could lose money. The main risks of
investing in this fund include:
INTEREST RATE RISK
Debt securities typically decrease in value when interest rates rise. This risk
is usually greater for longer-term debt securities. One measure of interest rate
risk is effective duration, explained in "More About the Funds -- Investment
Strategies" section.
INCOME RISK
The fund's income could decline due to falling market interest rates.
CREDIT RISK
An issuer of debt securities may not make timely principal or interest payments
on its securities, or the other party to a contract (such as a securities
lending agreement) may default on its obligations.
CALL RISK
During periods of falling interest rates, a bond issuer may "call" -- or repay
- -- its high-yielding bonds before their maturity date. The fund would then be
forced to invest the unanticipated proceeds at lower interest rates, resulting
in a decline in the fund's income.
RISKS OF MORTGAGE- AND ASSET-BACKED SECURITIES
Falling interest rates could cause faster than expected prepayments of the
obligations underlying mortgage- and asset-backed securities, which the fund
would have to invest at lower interest rates. On the other hand, rising interest
rates could cause prepayments of the obligations to decrease, extending the life
of mortgage- and asset-backed securities with lower payment rates.
FOREIGN SECURITY RISK
Securities of foreign issuers, even when dollar-denominated and publicly traded
in the United States, may involve risks not associated with the securities of
domestic issuers, including the risks of adverse currency fluctuations and of
political or social instability or diplomatic developments that could adversely
affect the securities.
RISKS OF HIGH-YIELD SECURITIES
A significant portion of the fund's portfolio may consist of lower-rated debt
obligations, which are commonly called "high-yield" securities or "junk bonds."
High-yield securities generally
15 PROSPECTUS - FIRST AMERICAN INSURANCE PORTFOLIOS
<PAGE>
have more volatile prices and carry more risk to principal than investment grade
securities.
- --------------------------------------------------------------------------------
FUND PERFORMANCE
Because Bond Fund shares were not offered prior to the date of this prospectus,
no performance information is presented for these shares. Comparative
performance information is not available for Bond Fund.
16 PROSPECTUS - FIRST AMERICAN INSURANCE PORTFOLIOS
<PAGE>
POLICIES & SERVICES
BUYING AND SELLING SHARES
Shares of the funds are only made available through separate investment accounts
of participating insurance companies as an underlying investment for your
variable annuity contract or variable life insurance policy. Individual
investors cannot obtain shares of the funds directly. Please refer to the
accompanying prospectus of the participating insurance company for more
information on how to select the funds as an investment option.
- --------------------------------------------------------------------------------
Your participating insurance company is the funds' designee for receipt of
purchase orders for your variable annuity contract or variable life insurance
policy. The funds do not impose any separate charge on the contract owners or
policy holders (contract owners) for the purchase or redemption of shares.
Participating insurance companies purchase or redeem shares for separate
accounts at net asset value (NAV) without any sales or redemption charge. Any
separate charges imposed by the participating insurance company are described in
the accompanying prospectus of the participating insurance company. A
participating insurance company may also impose certain restrictions or
limitations on the allocation of purchase payment or contract value to the funds
in a separate account. Prospective investors should consult the applicable
participating insurance company prospectus for information regarding fees and
expenses of the contract and separate account and any applicable restrictions or
limitations.
The share price that applies to a purchase or redemption order of fund shares is
based on the next calculation of the NAV per share that is made after the
participating insurance company receives such order from the contract owner on a
regular business day. See "Calculating Your Share Price" for more information.
Only the participating insurance companies that hold fund shares in their
separate accounts for the benefit of contract owners can place orders to
purchase or redeem shares. Contract owners should not directly contact the fund
to request a purchase or redemption of fund shares. Contract owners should refer
to the instructions in the participating insurance company prospectus for more
information.
- --------------------------------------------------------------------------------
CALCULATING YOUR SHARE PRICE
Your share price is based on the fund's NAV per share, which is generally
calculated as of the close of regular trading on the New York Stock Exchange
(usually 3 p.m. Central time) every day the exchange is open.
A fund's NAV is equal to the market value of its investments and other assets,
less any liabilities, divided by the number of fund shares. If market prices are
not readily available for an investment or if the advisor believes they are
unreliable, fair value prices may be determined in good faith using methods
approved by the funds' board of directors.
Funds may hold portfolio securities that trade on weekends or other days when
the fund does not
17 PROSPECTUS - FIRST AMERICAN INSURANCE PORTFOLIOS
<PAGE>
price its shares. Therefore, the net asset value of a fund's shares may change
on days when shareholders will not be able to purchase or redeem their shares.
- --------------------------------------------------------------------------------
POTENTIAL CONFLICTS OF INTEREST
Shares of the funds may serve as the underlying investments for both variable
annuity and variable life insurance contracts of various insurance companies.
Due to differences in tax treatment or other considerations, the interests of
various contract owners might at some time be in conflict. The funds currently
do not foresee any such conflict. However, the Board of Directors of the funds
intends to monitor events to identify any material conflicts that may arise and
determine what action, if any, should be taken in response to such conflicts. If
such a conflict were to occur, one or more participating insurance companies'
separate accounts might be required to withdraw its investments in the funds.
This might force the funds to sell securities at disadvantageous prices.
18 PROSPECTUS - FIRST AMERICAN INSURANCE PORTFOLIOS
<PAGE>
MANAGING YOUR INVESTMENT
DIVIDENDS AND DISTRIBUTIONS
Dividends from the Growth Equity Fund, Value Equity Fund and Bond Fund's net
investment income are declared and paid monthly. Dividends from the Technology
Fund's net investment income are declared and paid quarterly. The funds have no
fixed dividend rate and cannot guarantee that dividends will be paid. Dividend
and capital gain distributions will be reinvested in additional shares of the
fund paying the distribution at NAV.
- --------------------------------------------------------------------------------
TAXES
For a discussion of the tax status of a variable annuity contract or a variable
life insurance policy, please consult your tax professional or refer to the
accompanying prospectus of the participating insurance company. Because shares
of the funds may be purchased only through insurance company separate accounts
for variable annuity contracts and variable life insurance policies, dividends
paid by the fund from net investment income and distributions (if any) of net
realized short term and long term capital gains will be taxable, if at all, to
the participating insurance company.
Because everyone's tax situation is unique, always consult your tax professional
about federal, state and local tax consequences.
19 PROSPECTUS - FIRST AMERICAN INSURANCE PORTFOLIOS
<PAGE>
ADDITIONAL INFORMATION
MANAGEMENT
INVESTMENT ADVISOR
First American Asset Management
601 Second Avenue South
Minneapolis, Minnesota 55402
U.S. Bank National Association (U.S. Bank), acting through its First American
Asset Management division, is the funds' investment advisor. First American
Asset Management provides investment management services to individuals and
institutions, including corporations, foundations, pensions and retirement
plans. As of December 31, 1999, it had more than $______ billion in assets under
management, including investment company assets of more than $______ billion. As
investment advisor, First American Asset Management manages the funds' business
and investment activities, subject to the authority of the board of directors.
Each fund pays the investment advisor a monthly fee for providing investment
advisory services, at the annual rate set forth in the table:
Advisory fee
as a % of
average daily
net assets
- --------------------------------------------------------------------------------
GROWTH EQUITY FUND(1) _________%
VALUE EQUITY FUND(1) _________%
BOND FUND(1) _________%
TECHNOLOGY FUND(1) _________%
- --------------------------------------------------------------------------------
(1) The funds commenced operations as of the date of this Prospectus. The
contractual fee rate is shown in the table.
CUSTODIAN
U.S. Bank National Association
U.S. Bank Center
180 East Fifth Street
St. Paul, Minnesota 55101
ADMINISTRATOR
U.S Bank National Association
U.S. Bank Place
601 Second Avenue South
Minneapolis, Minnesota 55402
DISTRIBUTOR
20 PROSPECTUS - FIRST AMERICAN INSURANCE PORTFOLIOS
<PAGE>
SEI Investments Distribution Co.
Oaks, Pennsylvania 19456
PORTFOLIO MANAGEMENT
Each fund's investments are managed by a team of persons associated with First
American Asset Management.
21 PROSPECTUS - FIRST AMERICAN INSURANCE PORTFOLIOS
<PAGE>
ADDITIONAL INFORMATION
MORE ABOUT THE FUNDS
- --------------------------------------------------------------------------------
OBJECTIVES
The funds' objectives, which are described in the "Fund Summaries" section, may
be changed without shareholder approval. If a fund's objectives change, you will
be notified at least 30 days in advance. Please remember: There is no guarantee
that any fund will achieve its objectives.
- --------------------------------------------------------------------------------
INVESTMENT STRATEGIES
The funds' main investment strategies are discussed in the "Fund Summaries"
section. These are the strategies that the funds' investment advisor believes
are most likely to be important in trying to achieve the funds' objectives. You
should be aware that each fund may also use strategies and invest in securities
that are not described in this prospectus, but that are described in the
Statement of Additional Information (SAI). For a copy of the SAI, call Investor
Services at 1-800-637-2548.
TEMPORARY INVESTMENTS
In an attempt to respond to adverse market, economic, political or other
conditions, each fund may temporarily invest without limit in cash and in U.S.
dollar-denominated high-quality money market instruments and other short-term
securities, including money market funds advised by the funds' advisor. Being
invested in these securities may keep a fund from participating in a market
upswing and prevent the fund from achieving its investment objectives.
EFFECTIVE DURATION
Bond Fund attempts to maintain the effective duration of its portfolio
securities within four to nine years. Effective duration, one measure of
interest rate risk, measures how much the value of a security is expected to
change with a given change in interest rates. The longer a security's effective
duration, the more sensitive its price to changes in interest rates. For
example, if interest rates were to increase by one percentage point, the market
value of a bond with an effective duration of five years would decrease by 5%,
with all other factors being constant. However, all other factors are rarely
constant. Effective duration is based on assumptions and subject to a number of
limitations. It is most useful when interest rate changes are small, rapid and
occur equally in short-term and long-term securities. In addition, it is
difficult to calculate precisely for bonds with prepayment options, such as
mortgage- and asset-backed securities, because the calculation requires
assumptions about prepayment rates. For these reasons, the effective durations
of funds which invest a significant portion of their assets in these securities
can be greatly affected by changes in interest rates.
22 PROSPECTUS - FIRST AMERICAN INSURANCE PORTFOLIOS
<PAGE>
PORTFOLIO TURNOVER
Portfolio managers for the funds may trade securities frequently, resulting,
from time to time, in an annual portfolio turnover rate of over 100%. Under
normal market conditions, annual portfolio turnover for Bond Fund is expected to
be low, and annual portfolio turnover for Technology Fund is expected to be
high, sometimes exceeding 100%. Trading of securities may produce capital gains,
which are taxable to shareholders when distributed. Active trading may also
increase the amount of commissions or mark-ups to broker-dealers that the fund
pays when it buys and sells securities.
- --------------------------------------------------------------------------------
RISKS COMMON TO ALL FUNDS
The main risks of investing in the funds are summarized in the "Fund Summaries"
section. More information about fund risks is presented below.
FOREIGN SECURITY RISK
Each fund may invest up to 25% of its total assets in securities of foreign
issuers which are either listed on a United States stock exchange or represented
by American Depositary Receipts. Securities of foreign issuers, even when
dollar-denominated and publicly traded in the United States, may involve risks
not associated with the securities of domestic issuers. For certain foreign
countries, political or social instability or diplomatic developments could
adversely affect the securities. There is also the risk of loss due to
governmental actions such as a change in tax statutes or the modification of
individual property rights. In addition, individual foreign economies may differ
favorably or unfavorably from the U.S. economy.
RISKS OF ACTIVE MANAGEMENT
Each fund is actively managed and its performance therefore will reflect in part
the advisor's ability to make investment decisions which are suited to achieving
the fund's investment objectives. Due to their active management, the funds
could underperform other mutual funds with similar investment objectives.
RISKS OF SECURITIES LENDING
When a fund loans its portfolio securities, it will receive collateral equal to
at least 100% of the value of the loaned securities. Nevertheless, the fund
risks a delay in the recovery of the loaned securities, or even the loss of
rights in the collateral deposited by the borrower if the borrower should fail
financially. To reduce these risks, the funds enter into loan arrangements only
with institutions which the funds' advisor has determined are creditworthy under
guidelines established by the funds' board of directors.
23 PROSPECTUS - FIRST AMERICAN INSURANCE PORTFOLIOS
<PAGE>
ADDITIONAL RISKS OF GROWTH EQUITY FUND, VALUE EQUITY FUND AND TECHNOLOGY FUND
MARKET RISK
All stocks are subject to price movements due to changes in general economic
conditions, the level of prevailing interest rates or investor perceptions of
the market. Prices also are affected by the outlook for overall corporate
profitability.
COMPANY RISK
Individual stocks can perform differently than the overall market. This may be a
result of specific factors such as changes in corporate profitability due to the
success or failure of specific products or management strategies, or it may be
due to changes in investor perceptions regarding a company.
SECTOR RISK
The stocks of companies within specific industries or sectors of the economy can
periodically perform differently than the overall stock market. This can be due
to changes in such things as the regulatory or competitive environment or to
changes in investor perceptions of a particular industry or sector.
RISKS OF THE TECHNOLOGY SECTOR. Technology Fund invests primarily in equity
securities of companies which the fund's advisor believes have, or will develop,
products, processes or services that will provide or benefit significantly from
technological advances and improvements. Competitive pressures may have a
significant effect on the financial condition of companies in the technology
industry. For example, if technology continues to advance at an accelerated rate
and the number of companies and product offerings continues to expand, these
companies could become increasingly sensitive to short product cycles and
aggressive pricing.
RISKS OF DEVELOPMENT STAGE AND SMALL CAP STOCKS
Technology Fund may have significant investments in development stage and small
capitalization companies. Stocks of development stage and small capitalization
companies involve substantial risk. These companies may lack the management
expertise, financial resources, product diversification and competitive
strengths of larger companies. Their stock prices may be subject to more abrupt
or erratic movements than stock prices of larger, more established companies or
the market averages in general. In addition, the frequency and volume of their
trading may be less than is typical of larger companies, making them subject to
wider price fluctuations. In some cases, there could be difficulties in selling
the stocks of development stage and small capitalization companies at the
desired time and price.
RISKS OF IPOS
Technology Fund may frequently invest in companies at the time of their initial
public offering. Most IPOs involve a high degree of risk not normally associated
with offerings of more seasoned
24 PROSPECTUS - FIRST AMERICAN INSURANCE PORTFOLIOS
<PAGE>
companies. Companies involved in IPOs generally have limited operating
histories, and their prospects for future profitability are uncertain. These
companies often are engaged in new and evolving businesses and are particularly
vulnerable to competition and to changes in technology, markets and economic
conditions. They may be dependent on certain key managers and third parties,
need more personnel and other resources to manage growth and require significant
additional capital. They may also be dependent on limited product lines and
uncertain property rights and need regulatory approvals. Investors in IPOs can
be affected by substantial dilution in the value of their shares by sales of
additional shares and by concentration of control in existing management and
principal shareholders. Stock prices of IPOs can also be highly unstable, due to
the absence of a prior public market, the small number of shares available for
trading and limited investor information.
ADDITIONAL RISKS OF BOND FUND
INTEREST RATE RISK
Debt securities in the fund will fluctuate in value with changes in interest
rates. In general, debt securities will increase in value when interest rates
fall and decrease in value when interest rates rise. Longer-term debt securities
are generally more sensitive to interest rate changes. Securities which do not
pay interest on a current basis, such as zero coupon securities and delayed
interest securities, may be highly volatile as interest rates rise or fall.
Payment-in-kind bonds, which pay interest in other securities rather than in
cash, also may be highly volatile.
INCOME RISK
The fund's income could decline due to falling market interest rates. This is
because, in a falling interest rate environment, the fund generally will have to
invest the proceeds from sales of fund shares, as well as the proceeds from
maturing portfolio securities (or portfolio securities that have been called,
see "Call Risk," or prepaid, see "Prepayment Risk") in lower-yielding
securities.
CREDIT RISK
Bond Fund is subject to the risk that the issuers of debt securities held by the
fund will not make payments on the securities, or that the other party to a
contract (such as a securities lending agreement or repurchase agreement) will
default on its obligations. There is also the risk that an issuer could suffer
adverse changes in financial condition that could lower the credit quality of a
security. This could lead to greater volatility in the price of the security and
in shares of the fund. Also, a change in the credit quality rating of a bond
could affect the bond's liquidity and make it more difficult for the fund to
sell. When a fund purchases unrated securities, it will depend on the advisor's
analysis of credit risk more heavily than usual
RISKS OF HIGH-YIELD SECURITIES
A significant portion of Bond Fund may consist of lower-rated corporate debt
obligations, which are commonly referred to as "high yield" securities or "junk
bonds." Although these securities usually offer higher yields than investment
grade securities, they also involve more risk. High
25 PROSPECTUS - FIRST AMERICAN INSURANCE PORTFOLIOS
<PAGE>
yield bonds may be more susceptible to real or perceived adverse economic
conditions than investment grade bonds. In addition, the secondary trading
market may be less liquid. High yield securities generally have more volatile
prices and carry more risk to principal than investment grade securities.
LIQUIDITY RISK
Bond Fund is exposed to liquidity risk because of its investments in high yield
bonds. Trading opportunities are more limited for debt securities that have
received ratings below investment grade and it may be more difficult to sell or
buy these securities at a favorable price or time. Consequently, Bond Fund may
have to accept a lower price to sell a security, sell other securities to raise
cash or give up an investment opportunity, any of which could have a negative
effect on the fund's performance. Infrequent trading may also lead to greater
price volatility.
CALL RISK
Many corporate bonds may be redeemed at the option of the issuer, or "called,"
before their stated maturity date. In general, an issuer will call its bonds if
they can be refinanced by issuing new bonds which bear a lower interest rate.
The funds are subject to the possibility that during periods of falling interest
rates, a bond issuer will call its high-yielding bonds. A fund would then be
forced to invest the unanticipated proceeds at lower interest rates, resulting
in a decline in the fund's income.
PREPAYMENT RISK
Mortgage-backed securities are secured by and payable from pools of mortgage
loans. Similarly, asset-backed securities are supported by obligations such as
automobile loans or home equity loans. These mortgages and other obligations
generally can be prepaid at any time without penalty. As a result, mortgage- and
asset-backed securities are subject to prepayment risk, which is the risk that
falling interest rates could cause prepayments of the securities to occur more
quickly than expected. This occurs because, as interest rates fall, more
homeowners refinance the mortgages underlying mortgage-related securities or
prepay the debt obligations underlying asset-backed securities. A fund holding
these securities must reinvest the prepayments at a time when interest rates are
falling, reducing the income of the fund. In addition, when interest rates fall,
prices on mortgage- and asset-backed securities may not rise as much as for
other types of comparable debt securities because investors may anticipate an
increase in prepayments.
EXTENSION RISK
Mortgage- and asset-backed securities also are subject to extension risk, which
is the risk that rising interest rates could cause mortgages or other
obligations underlying the securities to be prepaid more slowly than expected,
resulting in slower prepayments of the securities. This would, in effect,
convert a short- or medium-duration mortgage- or asset-backed security into a
longer-duration security, increasing its sensitivity to interest rate changes
and causing its price to decline.
26 PROSPECTUS - FIRST AMERICAN INSURANCE PORTFOLIOS
<PAGE>
ADDITIONAL INFORMATION
FINANCIAL HIGHLIGHTS
The funds had not commenced operations prior to the date of this prospectus.
27 PROSPECTUS - FIRST AMERICAN INSURANCE PORTFOLIOS
<PAGE>
FOR MORE INFORMATION
More information about the funds is available in
the funds' Statement of Additional Information and
annual and semiannual reports.
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI provides more details about the funds and
their policies. A current SAI is on file with the
Securities and Exchange Commission (SEC) and is
incorporated into this prospectus by reference
(which means that it is legally considered part of
this prospectus).
ANNUAL AND SEMIANNUAL REPORTS
Additional information about the funds'
investments will be available in the funds' annual
and semiannual reports to shareholders. In the
funds' annual report, you will find a discussion
of the market conditions and investment strategies
that significantly affected the funds' performance
during their last fiscal year.
You can obtain a free copy of the funds' SAI
and/or free copies of the funds' most recent
annual or semiannual reports by calling Investor
Services at 1-800-637-2548. The material you
request will be sent by first-class mail or other
means designed to ensure equally prompt delivery,
within three business days of receipt of the
request.
You can also obtain copies by visiting the SEC's
Public Reference Room in Washington, DC, or by
sending your request and a duplicating fee to the
SEC's Public Reference Section, Washington, DC
20549-6009. For more information, call
1-800-SEC-0330.
Information about the funds is also available on
the Internet. Text-only versions of fund documents
can be viewed online or down- loaded from the
SEC's Internet site at http://www.sec.gov.
28 PROSPECTUS - FIRST AMERICAN INSURANCE PORTFOLIOS
<PAGE>
PART B
FIRST AMERICAN INSURANCE PORTFOLIOS, INC.
STATEMENT OF ADDITIONAL INFORMATION
DATED ________ ____ , ________
GROWTH EQUITY FUND
VALUE EQUITY FUND
TECHNOLOGY FUND
BOND FUND
This Statement of Additional Information relates to the funds named
above (the "Funds"), each of which is a series of First American Insurance
Portfolios, Inc. This Statement of Additional Information is not a prospectus,
but should be read in conjunction with the Funds' current Prospectus dated
______ ___ , _____. This Statement of Additional Information is incorporated
into the Funds' Prospectus by reference. To obtain copies of the Prospectus or
the Funds' Annual Report(s) at no charge, write the Funds' distributor, SEI
Investments Distribution Co., Oaks, Pennsylvania 19456, or call Investor
Services at 1-800-637-2548. Please retain this Statement of Additional
Information for future reference.
<PAGE>
TABLE OF CONTENTS
PAGE
GENERAL INFORMATION
ADDITIONAL INFORMATION CONCERNING FUND INVESTMENTS
Short-Term Investments
U.S. Government Securities
Repurchase Agreements
When-Issued and Delayed Delivery Transactions
Lending of Portfolio Securities
Options Transactions
Futures and Options on Futures
Fixed Income Securities -- Equity Funds
Foreign Securities
Mortgage-Backed Securities
Asset-backed Securities
Zero Coupon Securities
Adjustable Rate Mortgage Securities
Debt Obligations Rated Less Than Investment Grade
Floating Rate Corporate Debt Obligations
Fixed Rate Corporate Debt Obligations
Payment-In-Kind Debentures and Delayed Interest Securities
Preferred Stock
Participation Interests
CFTC INFORMATION
INVESTMENT RESTRICTIONS
DIRECTORS AND EXECUTIVE OFFICERS
Directors
Executive Officers
Compensation
INVESTMENT ADVISORY AND OTHER SERVICES
Investment Advisory Agreement
Administration Agreement
Distributor
Custodian; Counsel; Auditors
PORTFOLIO TRANSACTIONS AND ALLOCATION OF BROKERAGE
CAPITAL STOCK
NET ASSET VALUE AND PUBLIC OFFERING PRICE
FUND PERFORMANCE
TAXATION
RATINGS
Ratings of Corporate Debt Obligations and Municipal Bonds
Ratings of Preferred Stock
Ratings of Municipal Notes
Ratings of Commercial Paper
i
<PAGE>
FINANCIAL STATEMENT
Seed money balance sheet
ii
<PAGE>
GENERAL INFORMATION
First American Insurance Portfolios, Inc. ("FAIP") was incorporated in
the State of Minnesota on August 27, 1999. FAIP is organized as a series fund
and currently issues its shares in four series. Each series of shares represents
a separate investment portfolio with its own investment objective and policies
(in essence, a separate mutual fund). The series of FAIP to which this Statement
of Additional Information relates are named on the cover. These series are
referred to in this Statement of Additional Information as the "Funds."
The Bylaws of FAIP 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 Investment Company Act of 1940 (the
"1940 Act"). Minnesota law provides that if a regular meeting of shareholders
has not been held during the immediately preceding 15 months, a shareholder or
shareholders holding 3% or more of the voting power of all shares entitled to
vote may demand a regular meeting of shareholders. Minnesota law further
provides that a special meeting of shareholders may be called by a shareholder
or shareholders holding 10% or more of the voting power of all shares entitled
to vote, except that a special meeting for the purpose of considering any action
to facilitate or effect a business combination, including any action to change
or otherwise affect the composition of the board of directors for that purpose,
must be called by 25% or more of the voting power of all shares entitled to
vote. The 1940 Act requires a shareholder vote for all amendments to fundamental
investment policies and restrictions, for approval of all investment advisory
agreements, and for the adoption of, and material increases in amounts payable
under, Rule 12b-1 distribution plans.
Growth Equity Fund, Value Equity Fund and Bond Fund are each
diversified open-end management investment companies. Technology Fund is a
non-diversified open-end management investment company.
This Statement of Additional Information may also refer to affiliated
investment companies, including: First American Funds, Inc. ("FAF"); First
American Strategy Funds, Inc. ("FASF"); First American Investment Funds, Inc.
("FAIF"); and eleven separate closed-end funds (American Strategic Income
Portfolio Inc., American Strategic Income Portfolio Inc.-II, American Strategic
Income Portfolio Inc.-III, American Municipal Income Portfolio Inc., Minnesota
Municipal Income Portfolio Inc., American Select Portfolio Inc., American
Municipal Term Trust Inc., American Municipal Term Trust Inc.-II, American
Municipal Term Trust Inc.-III, Minnesota Municipal Term Trust Inc., and
Minnesota Municipal Term Trust Inc.-II) collectively referred to as the First
American Closed-End Funds ("FACEF").
1
<PAGE>
ADDITIONAL INFORMATION CONCERNING FUND INVESTMENTS
The main investment strategies of each Fund are set forth in the Funds'
Prospectus. Additional information concerning main investment strategies of the
Funds, and other investment strategies which may be used by the Funds, is set
forth below. The Funds have attempted to identify investment strategies that
will be employed in pursuing each Fund's investment objective. However, in the
absence of an affirmative limitation, a Fund may utilize any strategy or
technique that is consistent with its investment objective. The Funds do not
anticipate that any such strategy or technique would exceed 5% of a Fund's
assets absent specific identification of that practice. Additional information
concerning the Funds' investment restrictions is set forth below under
"Investment Restrictions."
If a percentage limitation on investments by a Fund stated in this
Section or in "Investment Restrictions" below is adhered to at the time of an
investment, a later increase or decrease in percentage resulting from changes in
asset value will not be deemed to violate the limitation except in the case of
the limitations on borrowing. A Fund which is limited to investing in securities
with specified ratings is not required to sell a security if its rating is
reduced or discontinued after purchase, but the Fund may consider doing so.
Descriptions of the rating categories of Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies, Inc. ("Standard & Poor's") and Moody's
Investors Service, Inc. ("Moody's") are contained in "Ratings" below.
SHORT-TERM INVESTMENTS
The Funds can invest in a variety of short-term instruments such as
rated commercial paper and variable amount master demand notes; United States
dollar-denominated time and savings deposits (including certificates of
deposit); bankers' acceptances; obligations of the United States Government or
its agencies or instrumentalities; repurchase agreements collateralized by
eligible investments of a Fund; securities of other mutual funds that invest
primarily in debt obligations with remaining maturities of 13 months or less
(which investments also are subject to the advisory fee); and other similar
high-quality short-term United States dollar-denominated obligations. The other
mutual funds in which the Funds may so invest include money market funds advised
by U.S. Bank National Association, the Funds' investment advisor ("U.S. Bank" or
the "Advisor"), subject to certain restrictions contained in an exemptive order
issued by the Securities and Exchange Commission ("SEC") with respect thereto.
The Funds may also invest in Eurodollar Certificates of Deposit issued
by foreign branches of United States or foreign banks; Eurodollar Time Deposits,
which are United States dollar-denominated deposits in foreign branches of
United States or foreign banks; and Yankee Certificates of Deposit, which are
United States dollar-denominated certificates of deposit issued by United States
branches of foreign banks and held in the United States. In each instance, these
Funds may only invest in bank instruments issued by an institution which has
capital, surplus and undivided profits of more than $100 million or the deposits
of which are insured by the Bank Insurance Fund or the Savings Association
Insurance Fund.
Short-term investments and repurchase agreements may be entered into on
a joint basis by the Funds and other funds advised by the Advisor to the extent
permitted by an exemptive order issued by the Securities and Exchange Commission
with respect to the Funds. A brief description of certain kinds of short-term
instruments follows:
COMMERCIAL PAPER. Commercial paper consists of unsecured promissory
notes issued by corporations. Issues of commercial paper normally have
maturities of less than nine months and fixed rates of return. The Funds may
purchase commercial paper consisting of issues rated at the time of purchase
within the two highest rating categories by Standard & Poor's or Moody's or
which have been assigned an equivalent rating by another nationally recognized
statistical rating organization. The Funds also may invest in commercial paper
that is not rated but that is determined by the Advisor to be of comparable
quality to instruments that are so rated. For a description of the rating
categories of Standard & Poor's and Moody's, see "Ratings."
BANKERS' ACCEPTANCES. Bankers' acceptances are credit instruments
evidencing the obligation of a bank to pay a draft drawn on it by a customer.
These instruments reflect the obligation both of the bank and of the drawer to
pay the full amount of the instrument upon maturity.
2
<PAGE>
VARIABLE AMOUNT MASTER DEMAND NOTES. Variable amount master demand
notes are unsecured demand notes that permit the indebtedness thereunder to vary
and provide for periodic adjustments in the interest rate according to the terms
of the instrument. Because master demand notes are direct lending arrangements
between a Fund and the issuer, they are not normally traded. Although there is
no secondary market in the notes, a Fund may demand payment of principal and
accrued interest at any time. While the notes are not typically rated by credit
rating agencies, issuers of variable amount master demand notes (which are
normally manufacturing, retail, financial, and other business concerns) must
satisfy the same criteria as set forth above for commercial paper. The Advisor
will consider the earning power, cash flow and other liquidity ratios of the
issuers of such notes and will continuously monitor their financial status and
ability to meet payment on demand.
VARIABLE RATE DEMAND OBLIGATIONS. Variable rate demand obligations
("VRDO") are securities in which the interest rate is adjusted at pre-designated
periodic intervals. VRDOs may include a demand feature which is a put that
entitles the holder to receive the principal amount of the underlying security
or securities and which may be exercised either at any time on no more than 30
days' notice or at specified intervals not exceeding 397 calendar days on no
more than 30 days' notice.
U.S. GOVERNMENT SECURITIES
The U.S. government securities in which the Funds may invest are either
issued or guaranteed by the U.S. government, its agencies or instrumentalities.
The U.S. government securities in which the Funds invest principally are:
o direct obligations of the U.S. Treasury, such as U.S. Treasury
bills, notes, and bonds;
o notes, bonds, and discount notes issued and guaranteed by U.S.
government agencies and instrumentalities supported by the
full faith and credit of the United States;
o notes, bonds, and discount notes of U.S. government agencies
or instrumentalities which receive or have access to federal
funding; and
o notes, bonds, and discount notes of other U.S. government
instrumentalities supported only by the credit of the
instrumentalities.
The government securities in which the Funds may invest are backed in a
variety of ways by the U.S. government or its agencies or instrumentalities.
Some of these securities, such as Government National Mortgage Association
("GNMA") mortgage-backed securities, are backed by the full faith and credit of
the U.S. government. Other securities, such as obligations of the Federal
National Mortgage Association ("FNMA") or the Federal Home Loan Mortgage
Corporation ("FHLMC") are backed by the credit of the agency or instrumentality
issuing the obligations but not the full faith and credit of the U.S.
government. No assurances can be given that the U.S. government will provide
financial support to these other agencies or instrumentalities because it is not
obligated to do so.
U.S. TREASURY INFLATION-PROTECTION SECURITIES. The Funds' investments in U.S.
Government securities may include may invest in U.S. Treasury
inflation-protection securities, which are issued by the United States
Department of Treasury ("Treasury") with a nominal return linked to the
inflation rate in prices. The index used to measure inflation is the
non-seasonally adjusted U.S. City Average All Items Consumer Price Index for All
Urban Consumers ("CPI-U").
The value of the principal is adjusted for inflation, and pays interest
every six months. The interest payment is equal to a fixed percentage of the
inflation-adjusted value of the principal. The final payment of principal of the
security will not be less than the original par amount of the security at
issuance.
The principal of the inflation-protection security is indexed to the
non-seasonally adjusted CPI-U. To calculate the inflation-adjusted principal
value for a particular valuation date, the value of the principal at issuance is
multiplied by the index ratio applicable to that valuation date. The index ratio
for any date is the ratio of the reference CPI applicable to such date to the
reference CPI applicable to the original issue date. Semiannual coupon interest
is
3
<PAGE>
determined by multiplying the inflation-adjusted principal amount by one-half of
the stated rate of interest on each interest payment date.
Inflation-adjusted principal or the original par amount, whichever is
larger, is paid on the maturity date as specified in the applicable offering
announcement. If at maturity the inflation-adjusted principal is less than the
original principal value of the security, an additional amount is paid at
maturity so that the additional amount plus the inflation-adjusted principal
equals the original principal amount. Some inflation-protection securities may
be stripped into principal and interest components. In the case of a stripped
security, the holder of the stripped principal component would receive this
additional amount. The final interest payment, however, will be based on the
final inflation-adjusted principal value, not the original par amount.
The reference CPI for the first day of any calendar month is the CPI-U
for the third preceding calendar month. (For example, the reference CPI for
December 1 is the CPI-U reported for September of the same year, which is
released in October.) The reference CPI for any other day of the month is
calculated by a linear interpolation between the reference CPI applicable to the
first day of the month and the reference CPI applicable to the first day of the
following month.
Any revisions the Bureau of Labor Statistics (or successor agency)
makes to any CPI-U number that has been previously released will not be used in
calculations of the value of outstanding inflation-protection securities. In the
case that the CPI-U for a particular month is not reported by the last day of
the following month, the Treasury will announce an index number based on the
last year-over-year CPI-U inflation rate available. Any calculations of the
Treasury's payment obligations on the inflation-protection security that need
that month's CPI-U number will be based on the index number that the Treasury
has announced. If the CPI-U is rebased to a different year, the Treasury will
continue to use the CPI-U series based on the base reference period in effect
when the security was first issued as long as that series continues to be
published. If the CPI-U is discontinued during the period the
inflation-protection security is outstanding, the Treasury will, in consultation
with the Bureau of Labor Statistics (or successor agency), determine an
appropriate substitute index and methodology for linking the discontinued series
with the new price index series. Determinations of the Secretary of the Treasury
in this regard are final.
Inflation-protection securities will be held and transferred in either
of two book-entry systems: the commercial book-entry system (TRADES) and
TREASURY DIRECT. The securities will be maintained and transferred at their
original par amount, i.e., not at their inflation-adjusted value. STRIPS
components will be maintained and transferred in TRADES at their value based on
the original par amount of the fully constituted security.
REPURCHASE AGREEMENTS
Each Fund may invest in repurchase agreements to the extent specified
in their respective Prospectuses. A repurchase agreement involves the purchase
by a Fund of securities with the agreement that after a stated period of time,
the original seller will buy back the same securities ("collateral") at a
predetermined price or yield. Repurchase agreements involve certain risks not
associated with direct investments in securities. If the original seller
defaults on its obligation to repurchase as a result of its bankruptcy or
otherwise, the purchasing Fund will seek to sell the collateral, which could
involve costs or delays. Although collateral (which may consist of any fixed
income security which is an eligible investment for the Fund entering into the
repurchase agreement) will at all times be maintained in an amount equal to the
repurchase price under the agreement (including accrued interest), a Fund would
suffer a loss if the proceeds from the sale of the collateral were less than the
agreed-upon repurchase price. The Advisor will monitor the creditworthiness of
the firms with which the Funds enter into repurchase agreements.
The Funds' custodian will hold the securities underlying any repurchase
agreement, or the securities will be part of the Federal Reserve/Treasury Book
Entry System. The market value of the collateral underlying the repurchase
agreement will be determined on each business day. If at any time the market
value of the collateral falls below the repurchase price under the repurchase
agreement (including any accrued interest), the appropriate Fund will promptly
receive additional collateral (so the total collateral is an amount at least
equal to the repurchase price plus accrued interest).
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
4
<PAGE>
The Funds may purchase securities on a when-issued or delayed delivery
basis. When such a transaction is negotiated, the purchase price is fixed at the
time the purchase commitment is entered into, but delivery of and payment for
the securities take place at a later date. A Fund will not accrue income with
respect to securities purchased on a when-issued or delayed delivery basis prior
to their stated delivery date. Pending delivery of the securities, each Fund
will maintain in a segregated account cash or liquid high-grade securities in an
amount sufficient to meet its purchase commitments.
The purchase of securities on a when-issued or delayed delivery basis
exposes a Fund to risk because the securities may decrease in value prior to
delivery. In addition, a Fund's purchase of securities on a when-issued or
delayed delivery basis while remaining substantially fully invested could
increase the amount of the Fund's total assets that are subject to market risk,
resulting in increased sensitivity of net asset value to changes in market
prices. However, the Funds will engage in when-issued and delayed delivery
transactions only for the purpose of acquiring portfolio securities consistent
with their investment objectives, and not for the purpose of investment
leverage. A seller's failure to deliver securities to a Fund could prevent the
Fund from realizing a price or yield considered to be advantageous.
In connection with its ability to purchase securities on a when-issued
or delayed delivery basis, Bond Fund may enter into mortgage "dollar rolls" in
which it sells securities and simultaneously contracts with the same
counterparty to repurchase similar (same type, coupon and maturity) but not
identical securities on a specified future date. In a mortgage dollar roll, Bond
Fund gives up the right to receive principal and interest paid on the securities
sold. However, Bond Fund would benefit to the extent of any difference between
the price received for the securities sold and the lower forward price for the
future purchase plus any fee income received. Unless such benefits exceed the
income, capital appreciation and gain or loss due to mortgage prepayments that
would have been realized on the securities sold as part of the mortgage dollar
roll, the use of this technique will diminish the investment performance of Bond
Fund compared with what such performance would have been without the use of
mortgage dollar rolls. Bond Fund will hold and maintain in a segregated account
until the settlement date cash or liquid securities in an amount equal to the
forward purchase price.
When one of the Funds agrees to purchase securities on a when-issued or
delayed delivery basis, the Fund's custodian will maintain in a segregated
account cash or liquid securities in an amount sufficient to meet the Fund's
purchase commitments. It may be expected that a Fund's net assets will fluctuate
to a greater degree when it sets aside securities to cover such purchase
commitments than when it sets aside cash. In addition, because a Fund will set
aside cash or liquid securities to satisfy its purchase commitments in the
manner described above, its liquidity and the ability of the Advisor to manage
it might be affected in the event its commitments to purchase when-issued or
delayed delivery securities ever exceeded 25% of the value of its total assets.
Under normal market conditions, however, a Fund's commitments to purchase
when-issued or delayed delivery securities will not exceed 25% of the value of
its total assets.
LENDING OF PORTFOLIO SECURITIES
In order to generate additional income, each of the Funds may lend
portfolio securities representing up to one-third of the value of its total
assets to broker-dealers, banks or other institutional borrowers of securities.
As with other extensions of credit, there may be risks of delay in recovery of
the securities or even loss of rights in the collateral should the borrower of
the securities fail financially. However, the Funds will only enter into loan
arrangements with broker-dealers, banks, or other institutions which the Advisor
has determined are creditworthy under guidelines established by the Board of
Directors. The Funds will pay a portion of the income earned on the lending
transaction to the placing broker and may pay administrative and custodial fees
(including fees to the Advisor, acting as securities lending agent) in
connection with these loans which, in the case of U.S. Bank, are 40% of the
Funds' income from such securities lending transactions.
In these loan arrangements, the Funds will receive collateral in the
form of cash, United States Government securities or other high-grade debt
obligations equal to at least 100% of the value of the securities loaned. This
collateral must be valued daily by the Advisor and, if the market value of the
loaned securities increases, the borrower must furnish additional collateral to
the lending Fund. During the time portfolio securities are on loan, the borrower
pays the lending Fund any dividends or interest paid on the securities. Loans
are subject to termination at any time by
5
<PAGE>
the lending Fund or the borrower. While a Fund does not have the right to vote
securities on loan, it would terminate the loan and regain the right to vote if
that were considered important with respect to the investment.
U.S. Bank, the Funds' custodian and investment advisor, may act as
securities lending agent for the Funds and receive separate compensation for
such services, subject to compliance with conditions contained in an SEC
exemptive order permitting U.S. Bank to provide such services and receive such
compensation.
OPTIONS TRANSACTIONS
To the extent set forth below, the Funds may purchase put and call
options on equity securities, stock indices, interest rate indices and/or
foreign currencies on securities that they own or have the right to acquire.
These transactions will be undertaken for the purpose of reducing risk to the
Funds; that is, for "hedging" purposes. Options on futures contracts are
discussed below under "-- Futures and Options on Futures."
OPTIONS ON SECURITIES. The Funds may purchase put and call options on
securities they own or have the right to acquire. A put option on a security
gives the purchaser of the option the right (but not the obligation) to sell,
and the writer of the option the obligation to buy, the underlying security at a
stated price (the "exercise price") at any time before the option expires. A
call option on a security gives the purchaser the right (but not the obligation)
to buy, and the writer the obligation to sell, the underlying security at the
exercise price at any time before the option expires. The purchase price for a
put or call option is the "premium" paid by the purchaser for the right to sell
or buy.
A Fund may purchase put options to hedge against a decline in the value
of its portfolio. By using put options in this way, a Fund would reduce any
profit it might otherwise have realized in the underlying security by the amount
of the premium paid for the put option and by transaction costs. In similar
fashion, a Fund may purchase call options to hedge against an increase in the
price of securities that the Fund anticipates purchasing in the future. The
premium paid for the call option plus any transaction costs will reduce the
benefit, if any, realized by the Fund upon exercise of the option, and, unless
the price of the underlying security rises sufficiently, the option may expire
unexercised.
OPTIONS ON STOCK INDICES. Growth Equity Fund, Value Equity Fund and
Technology Fund may purchase put and call options on stock indices. Options on
stock indices are similar to options on individual stocks except that, rather
than the right to take or make delivery of stock at a specified price, an option
on a stock index gives the holder the right to receive, upon exercise of the
option, an amount of cash if the closing value of the stock index upon which the
option is based is greater than, in the case of a call, or lesser than, in the
case of a put, the exercise price of the option. This amount of cash is equal to
the difference between the closing price of the index and the exercise price of
the option expressed in dollars times a specified multiple (the "multiplier").
The writer of the option is obligated, in return for the premium received, to
make delivery of this amount. Unlike stock options, all settlements for stock
index options are in cash, and gain or loss depends on price movements in the
stock market generally (or in a particular industry or segment of the market)
rather than price movements in individual stocks. The multiplier for an index
option performs a function similar to the unit of trading for a stock option. It
determines the total dollar value per contract of each point in the difference
between the underlying stock index. A multiplier of 100 means that a one-point
difference will yield $100. Options on different stock indices may have
different multipliers.
OPTIONS ON INTEREST RATE INDICES. Bond Fund may purchase put and call
options on interest rate indices. An option on an interest rate index gives the
holder the right to receive, upon exercise of the option, an amount of cash if
the closing value of the interest rate index upon which the option is based is
greater than, in the case of a call, or less than, in the case of a put, the
exercise price of the option. This amount of cash is equal to the difference
between the closing price of the index and the exercise price of the option
expressed in dollars times a specified multiple (the "multiplier"). The writer
of the option is obligated, for the premium received, to make delivery of this
amount. Unlike interest rate futures options contracts, settlements for interest
rate index options are always in cash. Gain or loss depends on interest rate
movements with respect to specific financial instruments. As with stock index
options, the multiplier for interest rate index options determines the total
dollar value per contract of each point in the difference between the exercise
price of an option and the current value of the underlying interest rate index.
Options on different interest rate indices may have different multipliers.
6
<PAGE>
WRITING OF CALL OPTIONS. Growth Equity Fund, Value Equity Fund and
Technology Fund may write (sell) covered call options. These transactions would
be undertaken principally to produce additional income. These Funds may write
(sell) covered call options covering up to 25% of the equity securities owned by
such Fund.
When a Fund sells a covered call option, it is paid a premium by the
purchaser. If the market price of the security covered by the option does not
increase above the exercise price before the option expires, the option
generally will expire without being exercised, and the Fund will retain both the
premium paid for the option and the security. If the market price of the
security covered by the option does increase above the exercise price before the
option expires, however, the option is likely to be exercised by the purchaser.
In that case the Fund will be required to sell the security at the exercise
price, and it will not realize the benefit of increases in the market price of
the security above the exercise price of the option. These Funds may also write
call options on stock indices the movements of which generally correlate with
those of the respective Funds' portfolio holdings. These transactions, which
would be undertaken principally to produce additional income, entail the risk of
an imperfect correlation between movements of the index covered by the option
and movements in the price of the Fund's portfolio securities.
The writer (seller) of a call option has no control over when the
underlying securities must be sold; the writer may be assigned an exercise
notice at any time prior to the termination of the option. If a call option is
exercised, the writer experiences a profit or loss from the sale of the
underlying security. The writer of a call option that wishes to terminate its
obligation may effect a "closing purchase transaction." This is accomplished by
buying an option on the same security as the option previously written. If a
Fund was unable to effect a closing purchase transaction in a secondary market,
it would not be able to sell the underlying security until the option expires or
it delivers the underlying security upon exercise.
LIMITATIONS. None of the Funds will invest more than 5% of the value of
its total assets in purchased options, provided that options which are "in the
money" at the time of purchase may be excluded from this 5% limitation. A call
option is "in the money" if the exercise price is lower than the current market
price of the underlying security or index, and a put option is "in the money" if
the exercise price is higher than the current market price. A Fund's loss
exposure in purchasing an option is limited to the sum of the premium paid and
the commission or other transaction expenses associated with acquiring the
option.
The use of purchased put and call options involves certain risks. These
include the risk of an imperfect correlation between market prices of securities
held by a Fund and the prices of options, and the risk of limited liquidity in
the event that a Fund seeks to close out an options position before expiration
by entering into an offsetting transaction.
FUTURES AND OPTIONS ON FUTURES
Bond Fund may engage in futures transactions and options on futures
transactions, including interest rate futures, interest rate index futures and
options thereon. Futures contracts and options on futures may be used in an
effort to hedge against market risks.
A futures contract on a security obligates one party to purchase, and
the other to sell, a specified security at a specified price on a date certain
in the future. A futures contract on an index obligates the seller to deliver,
and entitles the purchaser to receive, an amount of cash equal to a specific
dollar amount times the difference between the value of the index at the
expiration date of the contract and the index value specified in the contract.
The acquisition of put and call options on futures contracts will, respectively,
give Bond Fund the right (but not the obligation), for a specified exercise
price, to sell or to purchase the underlying futures contract at any time during
the option period.
At the same time a futures contract is purchased or sold, Bond Fund
generally must allocate cash or securities as a deposit payment ("initial
deposit"). It is expected that the initial deposit would be approximately 1-1/2%
to 5% of a contract's face value. Daily thereafter, the futures contract is
valued and the payment of "variation margin" may be required, since each day the
Fund would provide or receive cash that reflects any decline or increase in the
contract's value. Futures transactions also involve brokerage costs and require
the Fund to segregate liquid assets, such as cash, United States Government
securities or other liquid high grade debt obligations equal to at least 100% of
its performance under such contracts.
7
<PAGE>
Aggregate initial margin deposits for futures contracts, and premiums
paid for related options, may not exceed 5% of Bond Fund's total assets, and the
value of securities that are the subject of such futures and options (both for
receipt and delivery) may not exceed 1/3 of the market value of the Fund's total
assets. Futures transactions will be limited to the extent necessary to maintain
the Fund's qualification as a regulated investment company under the Code.
When Bond Fund purchases options on futures, its potential loss is
limited to the amount of the premiums paid for the options. As stated above,
this amount may not exceed 5% of the Fund's total assets. When Bond Fund enters
into futures contracts obligating it to purchase securities or an index in the
future at a specified price, the Fund could lose 100% of its net assets in
connection therewith if it engaged extensively in such transactions and if the
market value or index value of the subject securities or index at the delivery
or settlement date fell to zero for all contracts into which a Fund had entered.
When Bond Fund enters into futures contracts obligating it to sell securities,
its potential losses are unlimited if it does not own the securities covered by
the contracts and it is unable to close out the contracts prior to the
settlement date.
Futures transactions involve brokerage costs and require the Fund to
segregate assets to cover contracts that would require it to purchase securities
or currencies. The Fund may lose the expected benefit of futures transactions if
interest rates or securities prices move in an unanticipated manner. Such
unanticipated changes may also result in poorer overall performance than if the
Fund had not entered into any futures transactions. In addition, the value of
the Fund's futures positions may not prove to be perfectly or even highly
correlated with the value of its portfolio securities limiting the Fund's
ability to hedge effectively against interest rate or market risk and giving
rise to additional risks. There is no assurance of liquidity in the secondary
market for purposes of closing out futures positions.
FIXED INCOME SECURITIES -- EQUITY FUNDS
The fixed income securities in which Growth Equity Fund, Value Equity
Fund and Technology Fund may invest include securities issued or guaranteed by
the United States Government or its agencies or instrumentalities,
nonconvertible preferred stocks, nonconvertible corporate debt securities, and
short-term obligations of the kinds described above. Investments in
nonconvertible preferred stocks and nonconvertible corporate debt securities
will be limited to securities which are rated at the time of purchase not less
than BBB by Standard & Poor's or Baa by Moody's (or equivalent short-term
ratings), or which have been assigned an equivalent rating by another nationally
recognized statistical rating organization, or which are of comparable quality
in the judgment of the Advisor. Obligations rated BBB, Baa or their equivalent,
although investment grade, have speculative characteristics and carry a somewhat
higher risk of default than obligations rated in the higher investment grade
categories.
The fixed income securities specified above are subject to (i) interest
rate risk (the risk that increases in market interest rates will cause declines
in the value of debt securities held by a Fund); (ii) credit risk (the risk that
the issuers of debt securities held by a Fund default in making required
payments); and (iii) call or prepayment risk (the risk that a borrower may
exercise the right to prepay a debt obligation before its stated maturity,
requiring a Fund to reinvest the prepayment at a lower interest rate).
FOREIGN SECURITIES
GENERAL. Under normal market conditions Growth Equity Fund, Value
Equity Fund and Technology Fund may invest up to 25% of total assets in
securities of foreign issuers which are either listed on a United States
securities exchange or represented by American Depositary Receipts.
Furthermore, Bond Fund may invest up to 25%, of total assets in foreign
securities payable in United States dollars. These securities may include
securities issued or guaranteed by (i) the Government of Canada, any Canadian
Province or any instrumentality and political subdivision thereof; (ii) any
other foreign government agency or instrumentality; (iii) foreign subsidiaries
of U.S. corporations and (iv) bonds of foreign issuers having total capital and
surplus at the time of investment of at least $1 billion.
Investment in foreign securities is subject to special investment risks
that differ in some respects from those related to investments in securities of
United States domestic issuers. These risks include political, social or
economic
8
<PAGE>
instability in the country of the issuer, the difficulty of predicting
international trade patterns, the possibility of the imposition of exchange
controls, expropriation, limits on removal of currency or other assets,
nationalization of assets, foreign withholding and income taxation, and foreign
trading practices (including higher trading commissions, custodial charges and
delayed settlements). Foreign securities also may be subject to greater
fluctuations in price than securities issued by United States corporations. The
principal markets on which these securities trade may have less volume and
liquidity, and may be more volatile, than securities markets in the United
States.
In addition, there may be less publicly available information about a
foreign company than about a United States domiciled company. Foreign companies
generally are not subject to uniform accounting, auditing and financial
reporting standards comparable to those applicable to United States domestic
companies. There is also generally less government regulation of securities
exchanges, brokers and listed companies abroad than in the United States.
Confiscatory taxation or diplomatic developments could also affect investment in
those countries. In addition, foreign branches of United States banks, foreign
banks and foreign issuers may be subject to less stringent reserve requirements
and to different accounting, auditing, reporting, and recordkeeping standards
than those applicable to domestic branches of United States banks and United
States domestic issuers.
AMERICAN DEPOSITARY RECEIPTS. For many foreign securities, United
States dollar-denominated American Depositary Receipts, which are traded in the
United States on exchanges or over-the-counter, are issued by domestic banks.
American Depositary Receipts represent the right to receive securities of
foreign issuers deposited in a domestic bank or a correspondent bank. American
Depositary Receipts do not eliminate all the risk inherent in investing in the
securities of foreign issuers. However, by investing in American Depositary
Receipts rather than directly in foreign issuers' stock, a Fund can avoid
currency risks during the settlement period for either purchases or sales. In
general, there is a large, liquid market in the United States for many American
Depositary Receipts. The information available for American Depositary Receipts
is subject to the accounting, auditing and financial reporting standards of the
domestic market or exchange on which they are traded, which standards are more
uniform and more exacting than those to which many foreign issuers may be
subject.
Certain American Depositary Receipts, typically those denominated as
unsponsored, require the holders thereof to bear most of the costs of the
facilities while issuers of sponsored facilities normally pay more of the costs
thereof. The depository of an unsponsored facility frequently is under no
obligation to distribute shareholder communications received from the issuer of
the deposited securities or to pass through the voting rights to facility
holders in respect to the deposited securities, whereas the depository of a
sponsored facility typically distributes shareholder communications and passes
through voting rights.
Fixed commissions on foreign securities exchanges are generally higher
than negotiated commissions on United States exchanges. Foreign markets also
have different clearance and settlement procedures, and in some markets there
have been times when settlements have been unable to keep pace with the volume
of securities transactions, making it difficult to conduct such transactions.
MORTGAGE-BACKED SECURITIES
As described in the Prospectus, Bond Fund may invest in mortgage-backed
securities. It will invest only in mortgage-backed securities that are Agency
Pass-Through Certificates or collateralized mortgage obligations ("CMOs"), as
defined and described below. In addition, the Fund may invest in private
pass-through securities.
Agency Pass-Through Certificates are mortgage pass-through certificates
representing undivided interests in pools of residential mortgage loans.
Distribution of principal and interest on the mortgage loans underlying an
Agency Pass-Through Certificate is an obligation of or guaranteed by GNMA, FNMA
or FHLMC. GNMA is a wholly-owned corporate instrumentality of the United States
within the Department of Housing and Urban Development. The guarantee of GNMA
with respect to GNMA certificates is backed by the full faith and credit of the
United States, and GNMA is authorized to borrow from the United States Treasury
in an amount which is at any time sufficient to enable GNMA, with no limitation
as to amount, to perform its guarantee.
FNMA is a federally chartered and privately owned corporation organized
and existing under federal law. Although the Secretary of the Treasury of the
United States has discretionary authority to lend funds to FNMA, neither
9
<PAGE>
the United States nor any agency thereof is obligated to finance FNMA's
operations or to assist FNMA in any other manner.
FHLMC is a federally chartered corporation organized and existing under
federal law, the common stock of which is owned by the Federal Home Loan Banks.
Neither the United States nor any agency thereof is obligated to finance FHLMC's
operations or to assist FHLMC in any other manner.
The mortgage loans underlying GNMA certificates are partially or fully
guaranteed by the Federal Housing Administration or the Veterans Administration,
while the mortgage loans underlying FNMA certificates and FHLMC certificates are
conventional mortgage loans which are, in some cases, insured by private
mortgage insurance companies. Agency Pass-Through Certificates may be issued in
a single class with respect to a given pool of mortgage loans or in multiple
classes.
The residential mortgage loans evidenced by Agency Pass-Through
Certificates and upon which CMOs are based generally are secured by first
mortgages on one- to four-family residential dwellings. Such mortgage loans
generally have final maturities ranging from 15 to 30 years and provide for
monthly payments in amounts sufficient to amortize their original principal
amounts by the maturity dates. Each monthly payment on such mortgage loans
generally includes both an interest component and a principal component, so that
the holder of the mortgage loans receives both interest and a partial return of
principal in each monthly payment. In general, such mortgage loans can be
prepaid by the borrowers at any time without any prepayment penalty. In
addition, many such mortgage loans contain a "due-on-sale" clause requiring the
loans to be repaid in full upon the sale of the property securing the loans.
Because residential mortgage loans generally provide for monthly amortization
and may be prepaid in full at any time, the weighted average maturity of a pool
of residential mortgage loans is likely to be substantially shorter than its
stated final maturity date. The rate at which a pool of residential mortgage
loans is prepaid may be influenced by many factors and is not predictable with
precision.
Private mortgage pass-through securities ("Private Pass-Throughs") are
structured similarly to GNMA, FNMA and FHLMC mortgage pass-through securities
and are issued by originators of and investors in mortgage loans, including
savings and loan associations, mortgage bankers, commercial banks, investment
banks and special purpose subsidiaries of the foregoing. These securities
usually are backed by a pool of conventional fixed rate or adjustable loans.
Since Private Pass-Throughs typically are not guaranteed by an entity having the
credit status of GNMA, FNMA or FHLMC, such securities generally are structured
with one or more types of credit enhancement. Such credit support falls into two
categories: (i) liquidity protection and (ii) protection against losses
resulting from ultimate default by an obligor on the underlying assets.
Liquidity protection refers to the provisions of advances, generally by the
entity administering the pool of assets, to ensure that the pass-through of
payments due on the underlying pool occurs in a timely fashion. Protection
against losses resulting from ultimate default enhances the likelihood of
ultimate payment of the obligations on at least a portion of the assets in the
pool. Such protection may be provided through guarantees, insurance policies or
letters of credit obtained by the issuer or sponsor from third parties, through
various means of structuring the transaction or through a combination of such
approaches. Bond Fund will not pay any additional fees for such credit support,
although the existence of credit support may increase the price of a security.
The ratings of securities for which third-party credit enhancement
provides liquidity protection or protection against losses from default are
generally dependent upon the continued creditworthiness of the enhancement
provider. The ratings of such securities could be subject to reduction in the
event of deterioration in the creditworthiness of the credit enhancement
provider even in cases where the delinquency and loss experience on the
underlying pool of assets is better than expected.
CMOs are debt obligations typically issued by a private special-purpose
entity and collateralized by residential or commercial mortgage loans or Agency
Pass-Through Certificates. Because CMOs are debt obligations of private
entities, payments on CMOs generally are not obligations of or guaranteed by any
governmental entity, and their ratings and creditworthiness typically depend,
among other factors, on the legal insulation of the issuer and transaction from
the consequences of a sponsoring entity's bankruptcy.
CMOs generally are issued in multiple classes, with holders of each
class entitled to receive specified portions of the principal payments and
prepayments and/or of the interest payments on the underlying mortgage loans.
These entitlements can be specified in a wide variety of ways, so that the
payment characteristics of various classes may
10
<PAGE>
differ greatly from one another. For instance, holders may hold interests in CMO
tranches called Z-tranches which defer interest and principal payments until one
or other classes of the CMO have been paid in full. In addition, for example:
o In a sequential-pay CMO structure, one class is entitled to
receive all principal payments and prepayments on the
underlying mortgage loans (and interest on unpaid principal)
until the principal of the class is repaid in full, while the
remaining classes receive only interest; when the first class
is repaid in full, a second class becomes entitled to receive
all principal payments and prepayments on the underlying
mortgage loans until the class is repaid in full, and so
forth.
o A planned amortization class ("PAC") of CMOs is entitled to
receive principal on a stated schedule to the extent that it
is available from the underlying mortgage loans, thus
providing a greater (but not absolute) degree of certainty as
to the schedule upon which principal will be repaid.
o An accrual class of CMOs provides for interest to accrue and
be added to principal (but not be paid currently) until
specified payments have been made on prior classes, at which
time the principal of the accrual class (including the accrued
interest which was added to principal) and interest thereon
begins to be paid from payments on the underlying mortgage
loans.
o As discussed above with respect to Agency Pass-Through
Certificates, an interest- only class of CMOs entitles the
holder to receive all of the interest and none of the
principal on the underlying mortgage loans, while a
principal-only class of CMOs entitles the holder to receive
all of the principal payments and prepayments and none of the
interest on the underlying mortgage loans.
o A floating rate class of CMOs entitles the holder to receive
interest at a rate which changes in the same direction and
magnitude as changes in a specified index rate. An inverse
floating rate class of CMOs entitles the holder to receive
interest at a rate which changes in the opposite direction
from, and in the same magnitude as or in a multiple of,
changes in a specified index rate. Floating rate and inverse
floating rate classes also may be subject to "caps" and
"floors" on adjustments to the interest rates which they bear.
o A subordinated class of CMOs is subordinated in right of
payment to one or more other classes. Such a subordinated
class provides some or all of the credit support for the
classes that are senior to it by absorbing losses on the
underlying mortgage loans before the senior classes absorb any
losses. A subordinated class which is subordinated to one or
more classes but senior to one or more other classes is
sometimes referred to as a "mezzanine" class. A subordinated
class generally carries a lower rating than the classes that
are senior to it, but may still carry an investment grade
rating.
REMICs are offerings of multiple class real estate mortgage-backed
securities which qualify and elect treatment as such under provisions of the
Internal Revenue Code. Issuers of REMICs may take several forms, such as trusts,
partnerships, corporations, associations, or segregated pools of mortgages. Once
REMIC status is elected and obtained, the entity is not subject to federal
income taxation. Instead, income is passed through the entity and is taxed to
the person or persons who hold interests in the REMIC. A REMIC interest must
consist of one or more classes of "regular interests," some of which may offer
adjustable rates of interest and a single class of "residual interests." To
qualify as a REMIC, substantially all the assets of the entity must be in assets
directly or indirectly secured principally by real property.
It generally is more difficult to predict the effect of changes in
market interest rates on the return on mortgage-backed securities than to
predict the effect of such changes on the return of a conventional fixed-rate
debt instrument, and the magnitude of such effects may be greater in some cases.
The return on interest-only and principal-only mortgage-backed securities is
particularly sensitive to changes in interest rates and prepayment speeds. When
interest rates decline and prepayment speeds increase, the holder of an
interest-only mortgage-backed security may not even recover its initial
investment. Similarly, the return on an inverse floating rate CMO is likely to
decline more sharply in
11
<PAGE>
periods of increasing interest rates than that of a fixed-rate security. For
these reasons, interest-only, principal-only and inverse floating rate
mortgage-backed securities generally have greater risk than more conventional
classes of mortgage-backed securities. In no event will Bond Fund invest more
than 10% of its total assets in interest-only, principal-only, inverse interest
only or inverse floating rate mortgage-backed securities.
ASSET-BACKED SECURITIES
Bond Fund may invest in asset-backed securities. Asset-backed
securities generally constitute interests in, or obligations secured by, a pool
of receivables other than mortgage loans, such as automobile loans and leases,
credit card receivables, home equity loans and trade receivables. Asset-backed
securities generally are issued by a private special-purpose entity. Their
ratings and creditworthiness typically depend on the legal insulation of the
issuer and transaction from the consequences of a sponsoring entity's
bankruptcy, as well as on the credit quality of the underlying receivables and
the amount and credit quality of any third-party credit enhancement supporting
the underlying receivables or the asset-backed securities. Asset-backed
securities and their underlying receivables generally are not issued or
guaranteed by any governmental entity.
ZERO COUPON SECURITIES
Bond Fund may invest in zero coupon, fixed income securities. Zero
coupon securities pay no cash income to their holders until they mature and are
issued at substantial discounts from their value at maturity. When held to
maturity, their entire return comes from the difference between their purchase
price and their maturity value. Because interest on zero coupon securities is
not paid on a current basis, the values of securities of this type are subject
to greater fluctuations than are the value of securities that distribute income
regularly and may be more speculative than such securities. Accordingly, the
values of these securities may be highly volatile as interest rates rise or
fall.
ADJUSTABLE RATE MORTGAGE SECURITIES
Bond Fund may invest in adjustable rate mortgage securities ("ARMS").
ARMS are pass-through mortgage securities collateralized by mortgages with
interest rates that are adjusted from time to time. ARMS also include adjustable
rate tranches of CMOs. The adjustments usually are determined in accordance with
a predetermined interest rate index and may be subject to certain limits. While
the values of ARMS, like other debt securities, generally vary inversely with
changes in market interest rates (increasing in value during periods of
declining interest rates and decreasing in value during periods of increasing
interest rates), the values of ARMS should generally be more resistant to price
swings than other debt securities because the interest rates of ARMs move with
market interest rates. The adjustable rate feature of ARMS will not, however,
eliminate fluctuations in the prices of ARMS, particularly during periods of
extreme fluctuations in interest rates.
ARMS typically have caps which limit the maximum amount by which the
interest rate may be increased or decreased at periodic intervals or over the
life of the loan. To the extent interest rates increase in excess of the caps,
ARMS can be expected to behave more like traditional debt securities and to
decline in value to a greater extent than would be the case in the absence of
such caps. Also, since many adjustable rate mortgages only reset on an annual
basis, it can be expected that the prices of ARMS will fluctuate to the extent
changes in prevailing interest rates are not immediately reflected in the
interest rates payable on the underlying adjustable rate mortgages. The extent
to which the prices of ARMS fluctuate with changes in interest rates will also
be affected by the indices underlying the ARMS.
DEBT OBLIGATIONS RATED LESS THAN INVESTMENT GRADE
Bond Fund may invest in debt obligations rated less than investment
grade or unrated and of comparable quality as determined by the Advisor. Bond
Fund may also invest in "equity securities" which include corporate debt
obligations convertible into common stock. Generally, debt obligations rated BB,
B or CCC by Standard & Poor's or Ba, B or Caa by Moody's are considered to be
less than "investment grade" and are sometimes referred to as "junk bonds." Bond
Fund may invest in both investment grade and non-investment grade (lower-rated)
bonds rated at least B of equivalent quality.
Participation in non-investment grade securities involves greater
returns in the form of higher average yields. Yields on less than investment
grade debt obligations will fluctuate over time. The prices of such obligations
have been
12
<PAGE>
found to be less sensitive to interest rate changes than higher rated
obligations, but more sensitive to adverse economic changes or individual
corporate developments. Also, during an economic downturn or period of rising
interest rates, highly leveraged issuers may experience financial stress which
could adversely affect their ability to service principal and interest payment
obligations, to meet projected business goals, and to obtain additional
financing. In addition, periods of economic uncertainty and changes can be
expected to result in increased volatility of market prices of less than
investment grade debt obligations. If the issuer of a security held by Bond Fund
defaulted, the Fund might incur additional expenses to seek recovery.
In addition, the secondary trading market for less than investment
grade debt obligations may be less developed than the market for investment
grade obligations. This may make it more difficult for Bond Fund to value and
dispose of such obligations. Adverse publicity and investor perceptions, whether
or not based on fundamental analysis, may decrease the values and liquidity of
less than investment grade obligations, especially in a thin secondary trading
market.
Certain risks also are associated with the use of credit ratings as a
method for evaluating less than investment grade debt obligations. For example,
credit ratings evaluate the safety of principal and interest payments, not the
market value risk of such obligations. In addition, credit rating agencies may
not timely change credit ratings to reflect current events. Thus, the success of
Bond Fund's use of less than investment grade convertible debt obligations may
be more dependent on the Advisor's own credit analysis than is the case with
investment grade obligations.
FLOATING RATE CORPORATE DEBT OBLIGATIONS
Bond Fund expects to invest in floating rate corporate debt obligations
including increasing rate securities. Floating rate securities are generally
offered at an initial interest rate which is at or above prevailing market
rates. The interest rate paid on these securities is then reset periodically
(commonly every 90 days) to an increment over some predetermined interest rate
index. Commonly utilized indices include the three-month Treasury bill rate, the
180-day Treasury bill rate, the one-month or three-month London Interbank
Offered Rate (LIBOR), the prime rate of a bank, the commercial paper rates, or
the longer-term rates on U.S. Treasury securities.
FIXED RATE CORPORATE DEBT OBLIGATIONS
Bond Fund will invest in fixed rate securities. Fixed rate securities
tend to exhibit more price volatility during times of rising or falling interest
rates than securities with floating rates of interest. This is because floating
rate securities, as described above, behave like short-term instruments in that
the rate of interest they pay is subject to periodic adjustments based on a
designated interest rate index. Fixed rate securities pay a fixed rate of
interest and are more sensitive to fluctuating interest rates. In periods of
rising interest rates the value of a fixed rate security is likely to fall.
Fixed rate securities with short-term characteristics are not subject to the
same price volatility as fixed rate securities without such characteristics.
Therefore, they behave more like floating rate securities with respect to price
volatility.
PAYMENT-IN-KIND DEBENTURES AND DELAYED INTEREST SECURITIES
Bond Fund may invest in debentures the interest on which may be paid in
other securities rather than cash ("PIKs"). Typically, during a specified term
prior to the debenture's maturity, the issuer of a PIK may provide for the
option or the obligation to make interest payments in debentures, common stock
or other instruments (i.e., "in kind" rather than in cash). The type of
instrument in which interest may or will be paid would be known by the Fund at
the time of investment. While PIKs generate income for purposes of generally
accepted accounting standards, they do not generate cash flow and thus could
cause the Fund to be forced to liquidate securities at an inopportune time in
order to distribute cash, as required by the Code.
Unlike PIKs, delayed interest securities do not pay interest for a
specified period. Because values of securities of this type are subject to
greater fluctuations than are the values of securities that distribute income
regularly, they may be more speculative than such securities.
PREFERRED STOCK
13
<PAGE>
The Funds may invest in preferred stock. Preferred stock, unlike common
stock, offers a stated dividend rate payable from the issuer's earnings.
Preferred stock dividends may be cumulative or non-cumulative, participating, or
auction rate. If interest rates rise, the fixed dividend on preferred stocks may
be less attractive, causing the price of preferred stocks to decline. Preferred
stock may have mandatory sinking fund provisions, as well as call/redemption
provisions prior to maturity, a negative feature when interest rates decline.
Although Bond Fund will not make direct purchases of common or
preferred stocks or rights to acquire common or preferred stocks, it may invest
in debt securities which are convertible into or exchangeable for, or which
carry warrants or other rights to acquire, such stocks. Equity interests
acquired through conversion, exchange or exercise of rights to acquire stock
will be disposed of by Bond Fund as soon as practicable in an orderly manner.
PARTICIPATION INTERESTS
Bond Fund may acquire participation interests in senior, fully secured
floating rate loans that are made primarily to U.S. companies. The Fund's
investments in participation interests are subject to its limitation on
investments in illiquid securities. The Fund may purchase only those
participation interests that mature in one year or less, or, if maturing in more
than one year, have a floating rate that is automatically adjusted at least once
each year according to a specified rate for such investments, such as a
published interest rate or interest rate index. Participation interests are
primarily dependent upon the creditworthiness of the borrower for payment of
interest and principal.
CFTC INFORMATION
The Commodity Futures Trading Commission (the "CFTC"), a federal
agency, regulates trading activity pursuant to the Commodity Exchange Act, as
amended. The CFTC requires the registration of "commodity pool operators," which
are defined as any person engaged in a business which is of the nature of an
investment trust, syndicate or a similar form of enterprise, and who, in
connection therewith, solicits, accepts or receives from others funds,
securities or property for the purpose of trading in a commodity for future
delivery on or subject to the rules of any contract market. The CFTC has adopted
Rule 4.5, which provides an exclusion from the definition of commodity pool
operator for any registered investment company which (i) will use commodity
futures or commodity options contracts solely for bona fide hedging purposes
(provided, however, that in the alternative, with respect to each long position
in a commodity future or commodity option contract, an investment company may
meet certain other tests set forth in Rule 4.5); (ii) will not enter into
commodity futures and commodity options contracts for which the aggregate
initial margin and premiums exceed 5% of its assets; (iii) will not be marketed
to the public as a commodity pool or as a vehicle for investing in commodity
interests; (iv) will disclose to its investors the purposes of and limitations
on its commodity interest trading; and (v) will submit to special calls of the
CFTC for information. Any investment company desiring to claim this exclusion
must file a notice of eligibility with both the CFTC and the National Futures
Association. FAIP has made such notice filings with respect to Bond Fund which
may invest in commodity futures or commodity options contracts.
INVESTMENT RESTRICTIONS
In addition to the investment objectives and policies set forth in the
Prospectus and under the caption "Additional Information Concerning Fund
Investments" above, each of the Funds is subject to the investment restrictions
set forth below. The investment restrictions set forth in paragraphs 1 through 6
below are fundamental and cannot be changed with respect to a Fund without
approval by the holders of a majority of the outstanding shares of that Fund as
defined in the Investment Company Act of 1940, as amended (the "1940 Act"),
i.e., by the lesser of the vote of (a) 67% of the shares of the Fund present at
a meeting where more than 50% of the outstanding shares are present in person or
by proxy, or (b) more than 50% of the outstanding shares of the Fund.
None of the Funds will:
1. Borrow money or issue senior securities, except as permitted
under the 1940 Act, as interpreted or modified from time to
time by any regulatory authority having jurisdiction. (As a
non-fundamental policy, no fund will make additional
investments while its borrowings exceed 5% of total assets.)
14
<PAGE>
2. Concentrate its investments in a particular industry, except
that Technology Fund will concentrate its investments in the
technology industry. For purposes of this limitation, the U.S.
Government, and state or municipal governments and their
political subdivisions, are not considered members of any
industry. Whether a Fund is concentrating in an industry shall
be determined in accordance with the 1940 Act, as interpreted
or modified from time to time by any regulatory authority
having jurisdiction.
3. Act as an underwriter of securities of other issuers, except
to the extent that, in connection with the disposition of
portfolio securities, it may be deemed an underwriter under
applicable laws.
4. Purchase or sell real estate unless as a result of ownership
of securities or other instruments, but this shall not prevent
the Funds from investing in securities or other instruments
backed by real estate or interest therein or in securities of
companies that deal in real estate or mortgages.
5. Purchase physical commodities or contracts relating to
physical commodities.
6. Make loans except as permitted under the 1940 Act, as
interpreted or modified from time to time by any regulatory
authority having jurisdiction.
The following restriction is non-fundamental and may be changed by
FAIP's Board of Directors without a shareholder vote: None of the Funds will
invest more than 15% of its net assets in all forms of illiquid investments.
For determining compliance with its investment restriction relating to
industry concentration, Bond Fund classifies asset-backed securities in its
portfolio in separate industries based upon a combination of the industry of the
issuer or sponsor and the type of collateral. The industry of the issuer or
sponsor and the type of collateral will be determined by the Advisor. For
example, an asset-backed security known as "Money Store 94-D A2" would be
classified as follows: the issuer or sponsor of the security is The Money Store,
a personal finance company, and the collateral underlying the security is
automobile receivables. Therefore, the industry classification would be Personal
Finance Companies -- Automobile. Similarly, an asset-backed security known as
"Midlantic Automobile Grantor Trust 1992-1 B" would be classified as follows:
the issuer or sponsor of the security is Midlantic National Bank, a banking
organization, and the collateral underlying the security is automobile
receivables. Therefore, the industry classification would be Banks --
Automobile. Thus, an issuer or sponsor may be included in more than one
"industry" classification, as may a particular type of collateral.
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of FAIP are listed below, together
with their business addresses and their principal occupations during the past
five years. Directors who are "interested persons" (as that term is defined in
the 1940 Act) of FAIP are identified with an asterisk.
DIRECTORS
Robert J. Dayton, 5140 Norwest Center, Minneapolis, Minnesota 55402:
Director of FAF since December 1994 and of FAIF since September 1994, of FASF
since June 1996 and of FAIP since August 1999; Chairman (1989-1993) and Chief
Executive Officer (1993-present), Okabena Company (private family investment
office). Age: 56.
Roger A. Gibson, 1020 15th Street, Ste. 41A, Denver, Colorado 80202:
Director of FAF, FAIF and FASF since October 1997, and of FAIP since August
1999; Vice President North America-Mountain Region for United Airlines since
June 1995; prior to his current position, served most recently as Vice President
Customer Service for United Airlines in the West Region in San Francisco and the
Mountain Region in Denver, Colorado; employee at United Airlines since 1967.
Age: 52.
15
<PAGE>
Andrew M. Hunter III, 537 Harrington Road, Wayzata, Minnesota 55391:
Director of FAIF, FAF and FASF since January 1997, and of FAIP since August
1999; Chairman of Hunter, Keith Industries, a diversified manufacturing and
services management company, since 1975. Age: 51.
Leonard W. Kedrowski, 16 Dellwood Avenue, Dellwood, Minnesota 55110:
Director of FAF and FAIF since November 1993, of FASF since June 1996, and of
FAIP since August 1999; Owner and President of Executive and Management
Consulting, Inc., a management consulting firm since 1992; Vice President, Chief
Financial Officer, Treasurer, Secretary and Director of Anderson Corporation, a
large privately-held manufacturer of wood windows, from 1983 to October 1992.
Age: 57.
* John M. Murphy, Jr., 601 Second Avenue South, Minneapolis, Minnesota
55402; Director of FAIF, FAF and FASF since June 1999, and of FAIP since August
1999; Executive Vice President of U.S. Bancorp since January 1999; Chairman and
Chief Investment Officer of First American Asset Management and U.S. Bank Trust,
N.A., and Executive Vice President of U.S. Bancorp, from 1991 to 1999. Age 57.
* Robert L. Spies, 4715 Twin Lakes Avenue, Brooklyn Center, Minnesota
55429: Director of FAIF, FAF and FASF since January 31, 1997, and of FAIP since
August 1999; employed by U.S. Bancorp and subsidiaries from 1957 to January 31,
1997, most recently as Vice President, U.S. Bank National Association. Age: 65.
Joseph D. Strauss, 8617 Edenbrook Crossing, # 443, Brooklyn Park,
Minnesota 55443: Director of FAF since 1984 and of FAIF since April 1991, of
FASF since June 1996, and of FAIP since August 1999; Chairman of FAF's and
FAIF's Boards from 1993 to September 1997 and of FASF's Board from June 1996 to
September 1997; President of FAF and FAIF from June 1989 to November 1989; Owner
and President, Strauss Management Company, since 1993; Owner and President,
Community Resource Partnerships, Inc., a community business retention survey
company, since 1992; attorney-at-law. Age: 58.
Virginia L. Stringer, 712 Linwood Avenue, St. Paul, Minnesota 55105:
Director of FAIF since August 1987, of FAF since April 1991, of FASF since June
1996, and of FAIP since August 1999; Chair of FAIF's, FAF's and FASF's Boards
since September 1997; Owner and President, Strategic Management Resources, Inc.
since 1993; formerly President and Director of The Inventure Group, a management
consulting and training company, President of Scott's, Inc., a transportation
company, and Vice President of Human Resources of The Pillsbury Company. Age:
55.
EXECUTIVE OFFICERS
Mark Nagle, SEI Investments Company, Oaks, Pennsylvania 19456;
President of FAIF, FAF and FASF since September 1998, and of FAIP since
September 1999; President and Senior Vice President of Fund Accounting and
Administration of the Sub-Administrator since 1998; Vice President of Fund
Accounting and Administration of the Sub-Administrator from 1996 to 1998; Vice
President of the Distributor since December 1997; Vice President of Fund
Accounting, BISYS Fund Services, Inc., from November 1995 to November 1996;
Senior Vice President, Fidelity Investments, prior to November 1995. Age: 41.
James F. Volk, SEI Investments Company, Oaks, Pennsylvania 19456;
Controller and Treasurer of FAIF, FAF, FASF and FAIP since September 1999;
Director, Investment Accounting Operations and Co-director, International Fund
Accounting Group, SEI Investments Mutual Funds Services since February 1996;
Assistant Chief Accountant, SEC's Division of Investment Management from 1993 to
1996; Senior Manager, Coopers & Lybrand, from 1984 to 1993. Age: 37.
Michael J. Radmer, 220 South Sixth Street, Minneapolis, Minnesota
55402; Secretary of FAIF since April 1991, and of FAF since 1981, and of FASF
since June 1996, and of FAIP since September 1999; Partner, Dorsey & Whitney
LLP, a Minneapolis-based law firm and general counsel of FAIF, FAF and FASF.
Age: 55.
James D. Alt, 220 South Sixth Street, Minneapolis, Minnesota 55402;
Assistant Secretary of FAF, FAIF and FASF since September 1998, and of FAIP
since September 1999; Partner, Dorsey & Whitney LLP, a Minneapolis-based law
firm.
Age: 48.
16
<PAGE>
Kathleen L. Prudhomme, 220 South Sixth Street, Minneapolis, Minnesota
55402; Assistant Secretary of FAF, FAIF and FASF since September 1998, and of
FAIP since September 1999; Partner, Dorsey & Whitney LLP, a Minneapolis-based
law firm. Age: 46.
Kevin P. Robins, SEI Investments Company, Oaks, Pennsylvania 19456:
Vice President and Assistant Secretary of FAIF and FAF since April 1994, and of
FASF since June 1996 and of FAIP since September 1999; Senior Vice President and
General Counsel of the Sub-Administrator and Distributor since 1994. Vice
President of the Administrator and Distributor from 1992 to 1994. Associate,
Morgan Lewis & Bockius from 1988 to 1992. Age: 37.
Todd Cipperman, SEI Investments Company, Oaks, Pennsylvania 19456: Vice
President and Assistant Secretary of FAIF, FAF and FASF since December 1996, and
of FAIP since September 1999; Vice President and Assistant Secretary of the
Sub-Administrator and the Distributor since 1995. Associate, Dewey Ballantine
from 1994 to 1995; Associate, Winston & Stawn from 1991 to 1994. Age: 33.
Lydia A. Gavalis, SEI Investments Company, Oaks, Pennsylvania 19456;
Vice President and Assistant Secretary of FAIF, FAF and FASF since January 1998,
and of FAIP since September 1999; Vice President and Assistant Secretary of the
Sub-Administrator and the Distributor each since January 1998. Assistant General
Counsel and Director of Arbitration, Philadelphia Stock Exchange from 1989 to
1998. Age: 37.
Lynda J. Streigel, SEI Investments Company, Oaks, Pennsylvania 19456;
Vice President and Assistant Secretary of FAIF, FAF and FASF since January 1998,
and of FAIP since September 1999; Vice President and Assistant Secretary of the
Sub-Administrator and the Distributor since January 1998; Senior Asset
Management Counsel, Barnett Banks, Inc. from 1993 to 1997; Partner, Groom and
Nordberg, Chartered from 1996 to 1997; and Associate General Counsel, Riggs
Bank, N.A. from 1992 to 1995. Age: 53.
James R. Foggo, SEI Investments Company, Oaks, Pennsylvania 19456; Vice
President and Assistant Secretary of FAIF, FAF and FASF since September 1998,
and of FAIP since September 1999; Vice President and Assistant Secretary of the
Administrator and Distributor since September 1998; Associate Attorney, Paul,
Weiss, Rifkind, Wharton and Garrison from January 1998 to August 1998; Associate
Attorney, Baker & McKenzie from January 1995 to January 1998. Age: 36.
Edward T. Searle, SEI Investments Company, Oaks, Pennsylvania
19456;Vice President and Assistant Secretary of FAF, FAIF, FASF and FAIP since
September 1999; Vice President and Assistant Secretary of the Administrator and
Distributor since August 1999; Associate, Drinker, Biddle, and Reath, LLP from
1998 to 1999; Associate, Ballard, Spahr, Andrews and Ingersoll, LLP from 1995 to
1998. Age: 45.
COMPENSATION
The First American Family of Funds, which includes FAIF, FAF, FASF,
FAIP and FACEF, currently pays only to directors of the funds who are not paid
employees or affiliates of the funds a fee of $27,000 per year ($40,500 in the
case of the Chair) plus $4,000 ($6,000 in the case of the Chair) per meeting of
the Board attended and $1,200 per committee meeting attended ($1,800 in the case
of a committee chair) and reimburses travel expenses of directors and officers
to attend Board meetings. In the event of telephonic Board or committee
meetings, each director receives a fee of $500 per Board or committee meeting
($750 in the case of the Chair or committee chair). In addition, directors may
receive a per diem fee of $1,500 per day, plus travel expenses when directors
travel out of town on Fund business. However, directors do not receive the
$1,500 per diem amount plus the foregoing Board or committee fee for an
out-of-town committee or Board meeting but instead receive the greater of the
total per diem fee or meeting fee. Legal fees and expenses are also paid to
Dorsey & Whitney LLP, the law firm of which Michael J. Radmer, secretary of
FAIF, FAF, FASF, FAIP and FACEF, James D. Alt, assistant secretary of of FAIF,
FAF, FASF, FAIP and FACEF, and Kathleen L. Prudhomme, assistant secretary of of
FAIF, FAF, FASF, FAIP and FACEF, are partners. The following table sets forth
information concerning aggregate compensation paid to each director of FAIP by
FAIF, FAF, FASF and FACEF collectively (column 5) during the fiscal year ended
September 30, 1999 (no fees were paid by FAIP during the fiscal year ended
September 30, 1999).
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
NAME OF PERSON, POSITION AGGREGATE PENSION OR ESTIMATED ANNUAL TOTAL
17
<PAGE>
COMPENSATION RETIREMENT BENEFITS UPON COMPENSATION FROM
FROM REGISTRANT BENEFITS RETIREMENT REGISTRANT AND
ACCRUED AS FUND COMPLEX PAID
PART OF FUND TO DIRECTORS
EXPENSES
<S> <C> <C> <C> <C>
Robert J. Dayton, Director -0- -0- -0- $64,750.00
Roger A. Gibson, Director -0- -0- -0- 56,200.00
Andrew M. Hunter III, Director -0- -0- -0- 68,530.00
Leonard W. Kedrowski, Director -0- -0- -0- 62,200.00
Robert L. Spies, Director -0- -0- -0- 60,400.00
John M. Murphy, Jr., Director -0- -0- -0- 0
Joseph D. Strauss, Director -0- -0- -0- 73,110.00
Virginia L. Stringer, Director -0- -0- -0- 80,052.00
</TABLE>
The directors may elect to defer payment of up to 100% of the fees they
receive in accordance with a Deferred Compensation Plan (the "Plan"). Under the
Plan, a director may elect to have his or her deferred fees treated as if they
had been invested in the shares of one or more funds and the amount paid to the
director under the Plan will be determined based on the performance of such
investments. Distributions may be taken in a lump sum or over a period years.
The Plan will remain unfunded for federal income tax purposes under the Internal
Revenue Code of 1986, as amended. Deferral of director fees in accordance with
the Plan will have a negligible impact on Fund assets and liabilities and will
not obligate the Funds to retain any director or pay any particular level of
compensation.
INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISORY AGREEMENT
U.S. Bank National Association (the "Advisor"), 601 Second Avenue
South, Minneapolis, Minnesota 55480, serves as the investment advisor and
manager of the Funds through its First American Asset Management group. The
Advisor 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. The Advisor is a subsidiary of U.S.
Bancorp ("USB"), 601 Second Avenue South, Minneapolis, Minnesota 55480, which is
a regional multi-state bank holding company headquartered in Minneapolis,
Minnesota that primarily serves the Midwestern, Rocky Mountain and Northwestern
states. USB operates four banks and eleven trust companies with banking offices
in 16 contiguous states. USB also has various other subsidiaries engaged in
financial services. At September 30, 1999 on a pro forma combined basis, USB and
its consolidated subsidiaries had consolidated assets of more than $77 billion,
consolidated deposits of more than $47 billion and shareholders' equity of more
than $6 billion.
Pursuant to an Investment Advisory Agreement dated ________ ____ ,
_______ (the "Advisory Agreement"), the Funds engage the Advisor to act as
investment Advisor for and to manage the investment of the assets of the Funds.
Each Fund pays the Advisor monthly fees calculated on an annual basis equal to
_____% of its average daily net assets. The Advisory Agreement requires the
Advisor to provide FAIP with all necessary office space, personnel and
facilities necessary and incident to the Advisor's performance of its services
thereunder. The Advisor is responsible for the payment of all compensation to
personnel of FAIP and the officers and directors of FAIP, if any, who are
affiliated with the Advisor or any of its affiliates.
In addition to the investment advisory fee, each Fund pays all its
expenses that are not expressly assumed by the Advisor or any other organization
with which the Fund may enter into an agreement for the performance of services.
Each Fund is liable for such nonrecurring expenses as may arise, including
litigation to which the Fund may be a party, and it may have an obligation to
indemnify its directors and officers with respect to such litigation.
The Advisor may, at its option, waive any or all of its fees, or
reimburse expenses, with respect to any Fund from time to time. Any such waiver
or reimbursement is voluntary and may be discontinued at any time. The Advisor
also may absorb or reimburse expenses of the Funds from time to time, in its
discretion, while retaining the ability to be reimbursed by the Funds for such
amounts prior to the end of the fiscal year. This practice would have the effect
of lowering a Fund's overall expense ratio and of increasing yield to investors,
or the converse, at the time such amounts are absorbed or reimbursed, as the
case may be.
18
<PAGE>
The Funds had not commenced operations prior to the date of this
Statement of Additional Information. The contractual fee rate is shown in the
following table :
ADVISORY FEE
Growth Equity Fund
Value Equity Fund
Technology Fund
Bond Fund
ADMINISTRATION AGREEMENT
The Advisor also serves as the Administrator for the Funds pursuant to
an Administration Agreement between it and the Funds. Under the Administration
Agreement, the Administrator is compensated to provide, or, compensates other
entities to provide services to the Funds. These services include, various
legal, oversight and administrative services, accounting services, transfer
agency and dividend disbursing services and shareholder services. The Funds pay
the Administrator an asset-based fee at an annual rate, which is calculated
daily and paid monthly, equal to each Fund's pro rata share of an amount equal
to _____% of the aggregate average daily assets of all open-end mutual funds in
the First American fund family up to $8 billion, and ______% of the aggregate
average daily net assets of all open-end mutual funds in the First American fund
family in excess of $8 billion. (For the purposes of this Agreement, the First
American fund family includes all series of FAF, FAIF, FASF and FAIP.) In
addition, the funds pay the Administrator annual fees of $________ per CUSIP,
shareholder account fees of $____ per account and closed account fees of $_____
per account.
DISTRIBUTOR
SEI Investments Distribution Co. (the "Distributor"), Oaks PA 19456,
serves as the distributor for the Funds. The Distributor is a wholly-owned
subsidiary of SEI Investments Company. Distributor has agreed to perform all
distribution services and functions of the Funds to the extent such services and
functions are not provided to the Funds pursuant to another agreement.
Fund shares and other securities distributed by the Distributor are not
deposits or obligations of, or endorsed or guaranteed by, U.S. Bank or its
affiliates, and are not insured by the Bank Insurance Fund, which is
administered by the Federal Deposit Insurance Corporation.
The Distribution Agreement provides that it will continue in effect for
a period of more than one year from the date of its execution only so long as
such continuance is specifically approved at least annually by the vote of a
majority of the Board of Directors of FAIP and by the vote of the majority of
those Board members of FAIP who are not interested persons of FAIP.
CUSTODIAN; COUNSEL; AUDITORS
CUSTODIAN. The Advisor also acts as Custodian of the Funds' assets. The
address of U.S. Bank's custodian operations is U.S. Bank Center, 180 East Fifth
Street, St. Paul, Minnesota 55101. All of the instruments representing the
investments of the Funds and all cash is held by the Custodian. The Custodian
delivers securities against payment upon sale and pays for securities against
delivery upon purchase. The Custodian also remits Fund assets in payment of Fund
expenses, pursuant to instructions of FAIP's officers or resolutions of the
Board of Directors.
As compensation for its services to the Funds, the Custodian is paid a
monthly fee calculated on an annual basis equal to _______% of such Fund's
average daily net assets. In addition, the Custodian is reimbursed for its
out-of-pocket expenses incurred while providing its services to the Funds. The
Custodian continues to serve so long as its appointment is approved at least
annually by the Board of Directors including a majority of the directors who are
not interested persons (as defined under the 1940 Act) of FAIP.
19
<PAGE>
COUNSEL. Dorsey & Whitney LLP, 220 South Sixth Street, Minneapolis,
Minnesota 55402, is independent counsel for the Funds.
AUDITORS. Ernst & Young LLP, 1400 Pillsbury Center, Minneapolis,
Minnesota 55402, serves as the Funds' independent auditors, providing audit
services, including audits of the annual financial statements and assistance and
consultation in connection with SEC filings.
PORTFOLIO TRANSACTIONS AND ALLOCATION OF BROKERAGE
Decisions with respect to placement of the Funds' portfolio
transactions are made by the Advisor. The Funds' policy is to seek to place
portfolio transactions with brokers or dealers who will execute transactions as
efficiently as possible and at the most favorable price. The Advisor may,
however, select a broker or dealer to effect a particular transaction without
communicating with all brokers or dealers who might be able to effect such
transaction because of the volatility of the market and the desire of the
Advisor to accept a particular price for a security because the price offered by
the broker or dealer meets guidelines for profit, yield or both. Many of the
portfolio transactions involve payment of a brokerage commission by the
appropriate Fund. In some cases, transactions are with dealers or issuers who
act as principal for their own accounts and not as brokers. Transactions
effected on a principal basis are made without the payment of brokerage
commissions but at net prices, which usually include a spread or markup. In
effecting transactions in over-the-counter securities, the Funds deal with
market makers unless it appears that better price and execution are available
elsewhere.
While the Advisor does not deem it practicable and in the Funds' best
interest to solicit competitive bids for commission rates on each transaction,
consideration will regularly be given by the Advisor to posted commission rates
as well as to other information concerning the level of commissions charged on
comparable transactions by other qualified brokers.
Subject to the policy of seeking favorable price and execution for the
transaction size and risk involved, in selecting brokers and dealers other than
the Distributor and determining commissions paid to them, the Advisor may
consider ability to provide supplemental performance, statistical and other
research information as well as computer hardware and software for research
purposes for consideration, analysis and evaluation by the staff of the Advisor.
In accordance with this policy, the Funds do not execute brokerage transactions
solely on the basis of the lowest commission rate available for a particular
transaction. Subject to the requirements of favorable price and efficient
execution, placement of orders by securities firms for the purchase of shares of
the Funds may be taken into account as a factor in the allocation of portfolio
transactions.
Research services that may be received by the Advisor would include
advice, both directly and indirectly and in writing, as to the value of
securities, the advisability of investing in, purchasing, or selling securities,
and the availability of securities or purchasers or sellers of securities, as
well as analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy, and the performance of
accounts. The research services may allow the Advisor to supplement its own
investment research activities and enable the Advisor to obtain the views and
information of individuals and research staffs of many different securities
firms prior to making investment decisions for the Funds. To the extent
portfolio transactions are effected with brokers and dealers who furnish
research services, the Advisor would receive a benefit, which is not capable of
evaluation in dollar amounts, without providing any direct monetary benefit to
the Funds from these transactions. Research services furnished by brokers and
dealers used by the Funds for portfolio transactions may be utilized by the
Advisor in connection with investment services for other accounts and, likewise,
research services provided by brokers and dealers used for transactions of other
accounts may be utilized by the Advisor in performing services for the Funds.
The Advisor determines the reasonableness of the commissions paid in relation to
it view of the value of the brokerage and research services provided, considered
in terms of the particular transactions and it overall responsibilities with
respect to all accounts as to which it exercises investment discretion.
The Advisor has not entered into any formal or informal agreements with
any broker or dealer, and does not maintain any "formula" that must be followed
in connection with the placement of Fund portfolio transactions in exchange for
research services provided to the Advisor, except as noted below. The Advisor
may, from time to time, maintain an informal list of brokers and dealers that
will be used as a general guide in the placement of Fund business in order to
encourage certain brokers and dealers to provide the Advisor with research
services, which the Advisor
20
<PAGE>
anticipates will be useful to it. Any list, if maintained, would be merely a
general guide, which would be used only after the primary criteria for the
selection of brokers and dealers (discussed above) had been met, and
accordingly, substantial deviations from the list could occur. The Advisor would
authorize the Funds to pay an amount of commission for effecting a securities
transaction in excess of the amount of commission another broker or dealer would
have charged only if the Advisor determined in good faith that the amount of
such commission was reasonable in relation to the value of the brokerage and
research services provided by such broker or dealer, viewed in terms of either
that particular transaction or the overall responsibilities of the Advisor with
respect to the Funds.
The Funds do not effect any brokerage transactions in their portfolio
securities with any broker or dealer affiliated directly or indirectly with the
Advisor or the Distributor unless such transactions, including the frequency
thereof, the receipt of commission payable in connection therewith, and the
selection of the affiliated broker or dealer effecting such transactions are not
unfair or unreasonable to the shareholders of the Funds, as determined by the
Board of Directors. Any transactions with an affiliated broker or dealer must be
on terms that are both at least as favorable to the Funds as the Funds can
obtain elsewhere and at least as favorable as such affiliated broker or dealer
normally gives to others.
When two or more clients of the Advisor are simultaneously engaged in
the purchase or sale of the same security, the prices and amounts are allocated
in accordance with a formula considered by the Advisor to be equitable to each
client. In some cases, this system could have a detrimental effect on the price
or volume of the security as far as each client is concerned. In other cases,
however, the ability of the clients to participate in volume transactions may
produce better executions for each client.
CAPITAL STOCK
Each share of each Fund's $.01 par value common stock is fully paid,
nonassessable, and transferable. Shares may be issued as either full or
fractional shares. Fractional shares have pro rata the same rights and
privileges as full shares. Shares of the Funds have no preemptive or conversion
rights.
Each share of a Fund has one vote. On some issues, such as the election
of directors, all shares of all FAIP Funds vote together as one series. The
shares do not have cumulative voting rights. Consequently, the holders of more
than 50% of the shares voting for the election of directors are able to elect
all of the directors if they choose to do so. On issues affecting only a
particular Fund, the shares of that Fund will vote as a separate series. An
example of such an issue would be a proposal to alter a fundamental investment
restriction pertaining to a Fund.
The Bylaws of FAIP 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.
As of ____________ ___, 2000, [NAME] [ADDRESS], owned 100% of the
outstanding shares of each Fund. ____________ will be able to control all votes
of each Fund's shareholders until other purchase a number of shares of a Fund
sufficient to constitute a majority of such Fund's shares.
Percentage of Shares Owned
---------------------------------
Growth Equity Fund
100%
Value Equity Fund
100%
Technology Fund
100%
Bond Fund
100%
NET ASSET VALUE AND PUBLIC OFFERING PRICE
21
<PAGE>
The public offering price of the shares of a Fund generally equals the
Fund's net asset value. On ___________, 2000, the net asset value per share for
each Fund was calculated as follows:
Net Asset Value
---------------------------------
Growth Equity Fund
Value Equity Fund
Technology Fund
Bond Fund
The net asset value of each Fund's shares is determined on each day
during which the New York Stock Exchange (the "NYSE") is open for business. The
NYSE is not open for business on the following holidays (or on the nearest
Monday or Friday if the holiday falls on a weekend): New Year's Day, Martin
Luther King, Jr. Day, Washington's Birthday (observed), Good Friday, Memorial
Day (observed), Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Each year the NYSE may designate different dates for the observance of these
holidays as well as designate other holidays for closing in the future. To the
extent that the securities of a Fund are traded on days that the Fund is not
open for business, such Fund's net asset value per share may be affected on days
when investors may not purchase or redeem shares.
FUND PERFORMANCE
Advertisements and other sales literature for the Funds may refer to a
Fund's "average annual total return" and "cumulative total return." In addition,
Bond Fund may provide yield calculations in advertisements and other sales
literature. All such yield and total return quotations are based on historical
earnings and are not intended to indicate future performance. The return on and
principal value of an investment in any of the Funds will fluctuate, so that an
investor's shares, when redeemed, may be worth more or less than their original
cost.
AVERAGE ANNUAL TOTAL RETURN. Average annual total return is the average
annual compounded rate of return on a hypothetical $1,000 investment made at the
beginning of the advertised period. Average annual total return figures are
computed according to the following formula:
n
P(1 + T) = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value at the end of the
period of a hypothetical $1,000
payment made at the beginning of such period
This calculation deducts the maximum sales charge from the initial hypothetical
$1,000 investment, assumes all dividends and capital gains distributions are
reinvested at net asset value on the appropriate reinvestment dates as described
in the Prospectus, and includes all recurring fees, such as investment advisory
and management fees, charged to all shareholder accounts.
The Advisor and Distributor may waive a portion of their fees on a
voluntary basis, thereby increasing total return and yield. These fees may or
may not be waived in the future in the Advisor's or Distributor's discretion.
CUMULATIVE TOTAL RETURN. Cumulative total return is calculated by
subtracting a hypothetical $1,000 investment in a Fund from the redeemable value
of such investment at the end of the advertised period, dividing such difference
by $1,000 and multiplying the quotient by 100. Cumulative total return is
computed according to the following formula:
CTR = (ERV-P) 100
(-----)
( P )
Where: CTR = Cumulative total return;
22
<PAGE>
ERV = ending redeemable value at the end of the
period of a hypothetical $1,000 payment
made at the beginning of such period; and
P = initial payment of $1,000.
This calculation assumes all dividends and capital gain distributions are
reinvested at net asset value on the appropriate reinvestment dates as described
in the applicable Prospectus and includes all recurring fees, such as investment
advisory and management fees, charged to all shareholder accounts.
YIELD. Yield is computed by dividing the net investment income per
share (as defined under Securities and Exchange Commission rules and
regulations) earned during the advertised period by the offering price per share
(including the maximum sales charge) on the last day of the period. The result
will then be "annualized" using a formula that provides for semi-annual
compounding of income. Yield is computed according to the following formula:
6
YIELD = 2[(a-b + 1) - 1]
(--- )
(cd )
Where: a = dividends and interest earned during the period;
b = expenses accrued for the period (net of
reimbursements);
c = the average daily number of shares
outstanding during the period that were
entitled to receive dividends; and
d = the maximum offering price per share on the last
day of the period.
CERTAIN PERFORMANCE COMPARISONS. In addition to advertising total
return and yield, comparative performance information may be used from time to
time in advertising the Funds' shares, including data from Lipper Analytical
Services, Inc. ("Lipper"), Morningstar, other industry publications and other
entities or organizations which track the performance of investment companies.
The performance of each Fund may be compared to that of its unmanaged benchmark
index and to the performance of similar funds as reported by Lipper or such
other database services.
HISTORICAL DISTRIBUTION RATES. The Funds' historical annualized
distribution rates are computed by dividing the income dividends of a Fund for a
stated period by the maximum offering price on the last day of such period.
ANNUALIZED CURRENT DISTRIBUTION RATES. The Funds' annualized current
distribution rates are computed by dividing a Fund's income dividends for a
specified month (or three-month period, in the case of Technology Fund) by the
number of days in that month (or three-month period, in the case of Technology
Fund) and multiplying by 365, and dividing the resulting figure by the maximum
offering price on the last day of the specified period.
TAXATION
Shares of the Funds are offered only to Separate Accounts that fund
variable annuity contracts and variable life insurance policies issued by
Participating Insurance Companies. See the Prospectus of such contracts for a
discussion of the special taxation of insurance companies with respect to the
Separate Accounts, the variable annuity contracts, variable insurance policies,
and the holders thereof.
The following is a summary of the principal U.S. federal income, and
certain state and local, tax considerations regarding the purchase, ownership
and disposition of shares in each Fund of FAIP. This summary does not address
special tax rules applicable to certain classes of investors, such as tax-exempt
entities, insurance companies and financial institutions. Each prospective
shareholder is urged to consult his or her own tax adviser with respect to the
specific federal, state, local and foreign tax consequences of investing in each
Fund. The summary is based on the laws in effect on the date of this Additional
Statement, which are subject to change.
GENERAL. The following is only a summary of certain additional tax
considerations generally affecting each Fund that are not described in the
Prospectuses. The discussions below and in the Prospectuses are not intended as
substitutes for careful tax planning.
The holders of variable life insurance policies or annuity contracts
should not be subject to tax with respect to distributions made on, or
redemptions of, Fund shares, assuming that the variable life insurance policies
and annuity
23
<PAGE>
contracts qualify under the Code as life insurance contracts or annuities,
respectively, and that the shareholders are not treated as owners of the Fund
shares. Thus, this summary does not describe the tax consequences to a holder of
a life insurance policy or annuity contract as a result of the ownership of such
policies or contracts. Policy or contract holders must consult the prospectuses
of their respective policies or contracts for information concerning the federal
income tax consequences of owning such policies or contracts. This summary also
does not describe the tax consequences applicable to the owners of the Fund
shares because the Fund shares will be sold only to insurance companies. Thus,
purchasers of Fund shares must consult their own tax advisers regarding the
federal, state, and local tax consequences of owning Fund shares.
Each Fund intends to fulfill the requirements of Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"), as a regulated
investment company. If so qualified, each Fund will not be liable for federal
income taxes to the extent it distributes its taxable income to its
shareholders.
Qualification as a regulated investment company under the Code
requires, among other things, that (a) a Fund derive at least 90% of its gross
income for its taxable year from dividends, interest, payments with respect to
securities loans and gains from the sale or other disposition of stocks or
securities or foreign currencies, or other income (including but not limited to
gains from options, futures, and forward contracts) derived with respect to its
business of investing in such stock, securities or currencies (the "90% gross
income test"); and (b) such Fund diversify its holdings so that, at the close of
each quarter of its taxable year, (i) at least 50% of the market value of such
Fund's total (gross) assets is comprised of cash, cash items, U.S. Government
securities, securities of other regulated investment companies and other
securities limited in respect of any one issuer to an amount not greater in
value than 5% of the value of such Fund's total assets and to not more than 10%
of the outstanding voting securities of such issuer, and (ii) not more than 25%
of the value of its total (gross) assets is invested in the securities of any
one issuer (other than U.S. Government securities and securities of other
regulated investment companies) or two or more issuers controlled by the Fund
and engaged in the same, similar or related trades or businesses.
If a Fund complies with such provisions, then in any taxable year in
which such Fund distributes, in compliance with the Code's timing and other
requirements, at least 90% of its "investment company taxable income" (which
includes dividends, taxable interest, taxable accrued original issue discount
and market discount income, income from securities lending, any net short-term
capital gain in excess of net long-term capital loss, certain net realized
foreign exchange gains and any other taxable income other than "net capital
gain," as defined below, and is reduced by deductible expenses), and at least
90% of the excess of its gross tax-exempt interest income (if any) over certain
disallowed deductions, such Fund (but not its shareholders) will be relieved of
federal income tax on any income of the Fund, including long-term capital gains,
distributed to shareholders. However, if a Fund retains any investment company
taxable income or "net capital gain" (the excess of net long-term capital gain
over net short-term capital loss), it will be subject to a tax at regular
corporate rates on the amount retained. If the Fund retains any net capital
gain, the Fund may designate the retained amount as undistributed capital gains
in a notice to its shareholders who, if subject to U.S. federal income tax on
long-term capital gains, (i) will be required to include in income for federal
income tax purposes, as long-term capital gain, their shares of such
undistributed amount, and (ii) will be entitled to credit their proportionate
shares of the tax paid by the Fund against their U.S. federal income tax
liabilities, if any, and to claim refunds to the extent the credit exceeds such
liabilities. For U.S. federal income tax purposes, the tax basis of shares owned
by a shareholder of the Fund will be increased by an amount equal under current
law to 65% of the amount of undistributed net capital gain included in the
shareholder's gross income. Each Fund intends to distribute for each taxable
year to its shareholders all or substantially all of its investment company
taxable income, net capital gain and any net tax-exempt interest.
If a Fund invests in U.S. Treasury inflation-protection securities, it
will be required to treat as original issue discount any increase in the
principal amount of the securities that occurs during the course of its taxable
year. If a Fund purchases such inflation-protection securities that are issued
in stripped form either as tripped bonds or coupons, it will be treated as if it
had purchased a newly issued debt instrument having original issue discount.
Generally, the original issue discount equals the difference between the "stated
redemption price at maturity" of the obligation and its "issue price" as those
terms are defined in the Code. A Fund holding an obligation with original issue
discount is required to accrue as ordinary income a portion of such original
issue discount even though it receives no cash currently as interest payment
corresponding to the amount of the original issue discount. Because each Fund is
required to distribute substantially all of its net investment income (including
accrued original issue discount) in order to be taxed as a regulated investment
company, it may be required to distribute an amount greater than the total cash
24
<PAGE>
income it actually receives. Accordingly, in order to make the required
distributions, a Fund may be required to borrow or liquidate securities.
Some of the investment practices that may be employed by the Funds will
be subject to special provisions that, among other things, may defer the use of
certain losses of such Funds, affect the holding period of the securities held
by the Funds and, particularly in the case of transactions in or with respect to
foreign currencies, affect the character of the gains or losses realized. These
provisions may also require the Funds to mark-to-market some of the positions in
their respective Funds (i.e., treat them as closed out) or to accrue original
discount, both of which may cause such Funds to recognize income without
receiving cash with which to make distributions in amounts necessary to satisfy
the distribution requirements for qualification as a regulated investment
company and for avoiding income and excise taxes. Accordingly, in order to make
the required distributions, a Fund may be required to borrow or liquidate
securities. Each Fund will monitor its transactions and may make certain
elections in order to mitigate the effect of these rules and prevent
disqualification of the Funds as regulated investments companies.
It is expected that any net gain realized from the closing out of
futures contracts, options, or forward currency contracts will be considered
gain from the sale of securities or currencies and therefore qualifying income
for purposes of the 90% of gross income from qualified sources requirement, as
discussed above.
Each Fund intends to comply with the diversification requirements
imposed by Section 817(h) of the Code and the regulations thereunder. Under Code
Section 817(h), a variable life insurance or annuity contract will not be
treated as a life insurance policy or annuity contract, respectively, under the
Code, unless the segregated asset account upon which such contract or policy is
based is "adequately diversified." A segregated asset account will be adequately
diversified if it satisfies one of two alternative tests set forth in the
Treasury Regulations. Specifically, the Treasury Regulations provide that,
except as permitted by the "safe harbor" discussed below, as of the end of each
calendar quarter (or within 30 days thereafter) no more than 55% of the
segregated asset account's total assets may be represented by any one
investment, no more than 70% by any two investments, no more than 80% by any
three investments and no more than 90% by any four investments. For this
purpose, all securities of the same issuer are considered a single investment,
and each U.S. Government agency and instrumentality is considered a separate
issuer. As a safe harbor, a segregated asset account will be treated as being
adequately diversified if the diversification requirements under Subchapter M
are satisfied and no more than 55% of the value of the account's total assets
are cash and cash items, U.S. Government securities and securities of other
regulated investment companies. In addition, a segregated asset account with
respect to a variable life insurance contract is treated as adequately
diversified to the extent of its investment in securities issued by the United
States Treasury.
For purposes of these alternative diversification tests, a segregated
asset account investing in shares of a regulated investment company will be
entitled to "look through" the regulated investment company to its pro rata
portion of the regulated investment company's assets, provided that the shares
of such regulated investment company are held only by insurance companies and
certain fund managers (a "Closed Fund").
If the segregated asset account upon which a variable contract is based
is not "adequately diversified" under the foregoing rules for each calendar
quarter, then (a) the variable contract is not treated as a life insurance
contract or
25
<PAGE>
annuity contract under the Code for all subsequent periods during which such
account is not "adequately diversified" and (b) the holders of such contract
must include as ordinary income the "income on the contract" for each taxable
year. Further, the income on a life insurance contract for all prior taxable
years is treated as received or accrued during the taxable year of the
policyholder in which the contract ceases to meet the definition of a "life
insurance contract" under the Code. The "income on the contract" is, generally,
the excess of (i) the sum of the increase in the net surrender value of the
contract during the taxable year and the cost of the life insurance protection
provided under the contract during the year, over (ii) the premiums paid under
the contract during the taxable year. In addition, if a Fund does not constitute
a Closed Fund, the holders of the contracts and annuities which invest in the
Fund through a segregated asset account may be treated as owners of Fund shares
and may be subject to tax on distributions made by the Fund.
In order to avoid a 4% federal excise tax, each Fund must distribute
(or be deemed to have distributed) by December 31 of each calendar year at least
98% of its taxable ordinary income for such year, at least 98% of the excess of
its capital gains over its capital losses (generally computed on the basis of
the one-year period ending on October 31 of such year), and all taxable ordinary
income and the excess of capital gains over capital losses for the previous year
that were not distributed for such year and on which the Fund paid no federal
income tax. For federal income tax purposes, dividends declared by a Fund in
October, November or December to shareholders of record on a specified date in
such a month and paid during January of the following year are taxable to such
shareholders as if received on December 31 of the year declared. The Funds
anticipate that they will generally make timely distributions of income and
capital gains in compliance with these requirements so that they will generally
not be required to pay the excise tax. For federal income tax purposes, each
Fund is permitted to carry forward a net capital loss in any year to offset its
own capital gains, if any, during the eight years following the year of the
loss.
Certain Funds will be subject to foreign taxes on their income
(possibly including, in some cases, capital gains) from foreign securities. Tax
conventions between certain countries and the U.S. may reduce or eliminate such
taxes in some cases.
STATE AND LOCAL. Each Fund may be subject to state or local taxes in
jurisdictions in which such Fund may be deemed to be doing business. In
addition, in those states or localities which have income tax laws, the
treatment of such Fund and its shareholders under such laws may differ from
their treatment under federal income tax laws, and investment in such Fund may
have tax consequences for shareholders different from those of a direct
investment in such Fund's securities.
The foregoing relates only to federal income taxation and is a general
summary of the federal tax law in effect as of the date of this Statement of
Additional Information.
RATINGS
A rating of a rating service represents that service's opinion as to
the credit quality of the rated security. However, such ratings are general and
cannot be considered absolute standards of quality or guarantees as to the
creditworthiness of an issuer. A rating is not a recommendation to purchase,
sell or hold a security, because it does not take into account market value or
suitability for a particular investor. Markets values of debt securities may
change as a result of a variety of factors unrelated to credit quality,
including changes in market interest rates.
When a security has been rated by more than one service, the ratings
may not coincide, and each rating should be evaluated independently. Ratings are
based on current information furnished by the issuer or obtained by the rating
services from other sources which they consider reliable. Ratings may be
changed, suspended or withdrawn as a result of changes in or unavailability of
such information, or for other reasons. In general, the Funds are not required
to dispose of a security if its rating declines after it is purchased, although
they may consider doing so.
RATINGS OF CORPORATE DEBT OBLIGATIONS AND MUNICIPAL BONDS
STANDARD & POOR'S
AAA: Securities rated AAA have the highest rating assigned by Standard
& Poor's to a debt obligation. Capacity to pay interest and repay
principal is extremely strong.
26
<PAGE>
AA: Securities rated AA have a very strong capacity to pay interest and
repay principal and differ from the highest rated issues only to a
small degree.
A: Securities rated A have a strong capacity to pay interest and repay
principal, although they are somewhat more susceptible to adverse
effects of changes in circumstances and economic conditions than bonds
in higher rated categories.
BBB: Securities rated BBB are regarded as having an adequate capacity
to pay interest and repay principal. Although such securities normally
exhibit adequate protection standards, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity
to pay interest and repay principal for securities in this category
than for those in higher rated categories.
Debt rated BB, B, CCC, CC, and C by Standard & Poor's is regarded, on balance,
as predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and C the highest degree of speculation. While such
debt will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse conditions.
BB: Securities rated BB have less near-term vulnerability to default
than other speculative issues. However, they face major ongoing
uncertainties or exposure to adverse business, financial, or economic
conditions which could lead to inadequate capacity to meet timely
interest and principal payments. The BB rating category is also used
for debt subordinated to senior debt that is assigned an actual or
implied BBB-rating.
B: Securities rated B have a greater vulnerability to default but
currently have the capacity to meet interest payments and principal
repayments. Adverse business, financial, or economic conditions will
likely impair capacity or willingness to pay interest and repay
principal. The B rating category is also used for debt subordinated to
senior debt that is assigned an actual or implied BB or BB-rating.
CCC: Securities rated CCC have a currently identifiable vulnerability
to default, and are dependent upon favorable business, financial, and
economic conditions to meet timely payment of interest and repayment of
principal. In the event of adverse business, financial, or economic
conditions, they are not likely to have the capacity to pay interest
and repay principal. The CCC rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied B or
B-rating.
The ratings from AA to CCC may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within the major rating categories.
Securities rated SD or D are in selective default or default, respectively. Such
a rating is assigned when an obligor has failed to pay one or more of its
financial obligations (rated or unrated) when it came due.
MOODY'S
Aaa: Securities which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and are
generally referred to as "gilt edge." Interest payments are protected
by a large or exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa: Securities which are rated Aa are judged to be of high quality by
all standards. Together with the Aaa group, they comprise what are
generally known as high grade securities. They are rated lower than the
best securities because margins of protection may not be as large as in
Aaa securities, or fluctuation of protective elements may be of greater
magnitude, or there may be other elements present which make the
long-term risks appear somewhat greater than in Aaa securities.
27
<PAGE>
A: Securities which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations.
Factors giving security to principal and interest are considered
adequate, but elements may be present which suggest a susceptibility to
impairment sometime in the future.
Baa: Securities which are rated Baa are considered as medium grade
obligations, being neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the
present, but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such
securities lack outstanding investment characteristics, and in fact
have some speculative characteristics.
Ba: An issue which is rated Ba is judged to have speculative elements;
its future cannot be considered as well assured. Often the protection
of interest and principal payments may be very moderate and thereby not
well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes issues in this class.
B: An issue which is rated B generally lacks characteristics of the
desirable investment. Assurance of interest and principal payments or
of maintenance of other terms of the contract over any long period of
time may be small.
Caa: An issue which is rated Caa is of poor standing. Such an issue may
be in default or there may be present elements of danger with respect
to principal or interest.
Those securities in the Aa, A and Baa groups which Moody's believes possess the
strongest investment attributes are designated by the symbols Aa-1, A-1 and
Baa-1. Other Aa, A and Baa securities comprise the balance of their respective
groups. These rankings (1) designate the securities which offer the maximum in
security within their quality groups, (2) designate securities which can be
bought for possible upgrading in quality and (3) additionally afford the
investor an opportunity to gauge more precisely the relative attractiveness of
offerings in the marketplace.
RATINGS OF PREFERRED STOCK
STANDARD & POOR'S. Standard & Poor's ratings for preferred stock have
the following definitions:
AAA: An issue rated "AAA" has the highest rating that may be assigned
by Standard & Poor's to a preferred stock issue and indicates an
extremely strong capacity to pay the preferred stock obligations.
AA: A preferred stock issue rated "AA" also qualifies as a high-quality
fixed income security. The capacity to pay preferred stock obligations
is very strong, although not as overwhelming as for issues rated "AAA."
A: An issue rated "A" is backed by a sound capacity to pay the
preferred stock obligations, although it is somewhat more susceptible
to the adverse effects of changes in circumstances and economic
conditions.
BBB: An issue rated "BBB" is regarded as backed by an adequate capacity
to pay the preferred stock obligations. Whereas it normally exhibits
adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to make
payments for a preferred stock in this category than for issues in the
category.
MOODY'S. Moody's ratings for preferred stock include the following:
aaa: An issue which is rated "aaa" is considered to be a top-quality
preferred stock. This rating indicates good asset protection and the
least risk of dividend impairment within the universe of preferred
stocks.
28
<PAGE>
aa: An issue which is rated "aa" is considered a high grade preferred
stock. This rating indicates that there is reasonable assurance that
earnings and asset protection will remain relatively well maintained in
the foreseeable future.
a: An issue which is rate "a" is considered to be an upper medium grade
preferred stock. While risks are judged to be somewhat greater than in
the "aaa" and "aa" classifications, earnings and asset protection are,
nevertheless, expected to be maintained at adequate levels.
baa: An issue which is rated "baa" is considered to be medium grade,
neither highly protected nor poorly secured. Earnings and asset
protection appear adequate at present but may be questionable over any
great length of time.
RATINGS OF MUNICIPAL NOTES
STANDARD & POOR'S
SP-1: Very strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics are given a
plus (+) designation.
SP-2: Satisfactory capacity to pay principal and interest.
SP-3: Speculative capacity to pay principal and interest.
None of the Funds will purchase SP-3 municipal notes.
MOODY'S. Generally, Moody's ratings for state and municipal short-term
obligations are designated Moody's Investment Grade ("MIG"); however, where an
issue has a demand feature which makes the issue a variable rate demand
obligation, the applicable Moody's rating is "VMIG."
MIG 1/VMIG 1: This designation denotes the best quality. There is
strong protection by established cash flows, superior liquidity support
or demonstrated broad-based access to the market for refinancing.
MIG 2/VMIG 2: This designation denotes high quality, with margins of
protection ample although not so large as available in the preceding
group.
MIG 3/VMIG 3: This designation denotes favorable quality, with all
security elements accounted for, but lacking the strength of the
preceding grades. Liquidity and cash flow protection may be narrow and
market access for refinancing is likely to be less well established.
None of the Funds will purchase MIG 3/VMIG 3 municipal notes.
RATINGS OF COMMERCIAL PAPER
STANDARD & POOR'S. Commercial paper ratings are graded into four
categories, ranging from "A" for the highest quality obligations to "D" for the
lowest. Issues assigned the A rating are regarded as having the greatest
capacity for timely payment. Issues in this category are further refined with
the designation 1, 2 and 3 to indicate the relative degree of safety. The "A-1"
designation indicates that the degree of safety regarding timely payment is very
strong. Those issues determined to possess overwhelming safety characteristics
will be denoted with a plus (+) symbol designation. None of the Funds will
purchase commercial paper rated A-3 or lower.
MOODY'S. Moody's commercial paper ratings are opinions as to the
ability of the issuers to timely repay promissory obligations not having an
original maturity in excess of nine months. Moody's makes no representation that
such obligations are exempt from registration under the Securities Act of 1933,
and it does not represent that any specific instrument is a valid obligation of
a rated issuer or issued in conformity with any applicable law. Moody's
29
<PAGE>
employs the following three designations, all judged to be investment grade, to
indicate the relative repayment capacity of rated issuers:
PRIME-1: Superior capacity for repayment.
PRIME-2: Strong capacity for repayment.
PRIME-3: Acceptable capacity for repayment.
None of the Funds will purchase Prime-3 commercial paper.
[SEED MONEY BALANCE SHEET]
30
<PAGE>
FIRST AMERICAN INSURANCE PORTFOLIOS, INC.
PART C -- OTHER INFORMATION
ITEM 23. EXHIBITS
* (a)(1) Amended and Restated Articles of Incorporation, as filed
August 27, 1999.
* (a)(2) Certificate of Designation designating Series D, Class
One Shares, dated December 1999.
* (b) By-laws of Registrant, as Amended through December 8, 1999.
(c) Not Applicable.
* (d) Investment Advisory Agreement between Registrant and U.S. Bank
National Association, dated December 8, 1999.
* (e) Distribution Agreement between Registrant and SEI Investments
Management Co., dated December 8, 1999.
(f) Not Applicable.
* (g)(1) Custodian Agreement between Registrant and U.S. Bank National
Association, dated December 8, 1999.
* (g)(2) Compensation Agreement Dated as of December 8, 1999 Pursuant
to Custodian Agreement.
* (h)(1) Administration Agreement between Registrant and U.S.
Bank National Association, dated December 8, 1999 (with
Schedule attached).
* (h)(2) Form of Participation Agreement by and among Registrant, SEI
Investments Distribution Co. and Insurance Company on Behalf
of Itself and its Separate Accounts and Distribution Company,
Inc.
** (i) Legal Opinion. An opinion and consent of counsel regarding
the legality of the securities being registered, stating
whether the securities will, when sold, be legally issued,
fully paid, and non-assessable.
(j) Not Applicable.
(k) Not Applicable.
** (l) Initial Capital Agreements. Any agreements or understandings
made in consideration for providing the initial capital
between or among the
<PAGE>
Fund, the underwriter, adviser, promoter or initial
shareholders and written assurances from promoters or initial
shareholders that purchases were made for investment purposes
and not with the intention of redeeming or reselling.
(m) Not Applicable.
(n) Not Applicable.
* Filed herewith.
** To be filed by amendment.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not applicable.
ITEM 25. 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, and any rules, regulations, or releases promulgated
thereunder.
Section 302A.521 of the Minnesota Statutes, 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 acts 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
2
<PAGE>
(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.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Information on the business of the Registrant's investment adviser,
U.S. Bank National Association (the "Advisor"), is described in the section the
Statement of Additional Information, filed as part of this Registration
Statement, entitled "Investment Advisory and Other Services." The directors and
officers of the Advisor are listed below, together with their principal
occupation or other positions of a substantial nature during the past two fiscal
years.
<TABLE>
<CAPTION>
POSITIONS AND OFFICES OTHER POSITIONS AND OFFICES
NAME WITH THE ADVISOR AND PRINCIPAL BUSINESS ADDRESS
-------- ----------------------------- --------------------------------------------------
<S> <C> <C>
John F. Grundhofer Chairman, President and Chief Chairman, President and Chief
Executive 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*
J. Robert Hoffmann Director, Chief Credit Officer and Executive Vice President and Chief Credit
Executive Vice President Officer of U.S. Bancorp*
Lee R. Mitau Director, General Counsel, Executive Vice President,
3
<PAGE>
Executive Vice President and Secretary, and General Counsel of
Secretary 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.
ITEM 27. PRINCIPAL UNDERWRITERS:
(a) State the name of each investment company (other than the
Registrant) for which each principal underwriter currently distributing the
Registrant's securities also acts as a principal underwriter, distributor or
investment adviser:
Registrant's distributor, SEI Investments Distribution Co.
(the "Distributor") acts as distributor for SEI Liquid Asset Trust, SEI Daily
Income Trust, SEI Tax Exempt Trust, SEI Index Funds, SEI Institutional Managed
Trust, SEI Institutional International Trust, The Advisors' Inner Circle Fund,
The Pillar Funds, CUFund, STI Classic Funds, First American Funds, Inc., First
American Investment Funds, Inc., The Arbor Fund, Boston 1784 Funds, The PBHG
Funds, Inc., The Achievement Funds Trust, Bishop Street Funds, STI Classic
Variable Trust, ARK Funds, Huntington Funds, SEI Asset Allocation Trust, TIP
Funds, SEI Institutional Investments Trust, First American Strategy Funds, Inc.,
Highmark Funds, Armada Funds, PBHG Insurance Series Fund, Inc., Expedition
Funds, Alpha Select Funds, Oak Associates Funds, The Nevis Funds, Inc., The
Parkstone Group of Funds, CNI Charter Funds, The Parkstone Advantage Funds and
Ameriund Funds, Inc. pursuant to distribution agreements dated November 29,
1982, July 15, 1982, December 3, 1982, July 10, 1985, January 22, 1987, August
30, 1988, November 14, 1991, February 28, 1992, May 1, 1992, May 29, 1992,
November 1, 1992, November 1, 1992, January 28, 1993, June 1, 1993, July 16,
1993, December 27, 1994, January 27, 1995, March 1, 1995, August 18, 1995,
November 1, 1995, January 11, 1996, April 1, 1996, April 28, 1996, June 14,
1996, October 1, 1996, February 15, 1997, March 8, 1997, April 1, 1997, June 9,
1997, January 1, 1998, February 27, 1998, June 29, 1998, September 14, 1998,
April 1, 1999, May 1, 1999 and July 13, 1999, respectively.
The Distributor provides numerous financial services to
investment managers, pension plan sponsors, and bank trust departments. These
services include portfolio evaluation, performance measurement, and consulting
services ("Funds Evaluation") and automated execution, clearing and settlement
of securities transactions ("MarketLink").
4
<PAGE>
(b) Provide the information required by the following table
for each director, officer, or partner of each principal underwriter named in
the response to Item 20. Unless otherwise noted, the business address of each
director or officer is One Freedom Valley Drive, Oaks, Pennsylvania 19456.
<TABLE>
<CAPTION>
NAME POSITIONS AND OFFICES WITH UNDERWRITER POSITIONS AND OFFICES WITH REGISTRANT
---- -------------------------------------- -------------------------------------
<S> <C>
Alfred P. West, Jr. Director, Chairman & Chief Executive --
Officer
Richard B. Lieb Director, Executive Vice President --
Carmen V. Romeo Director --
Mark J. Held President & Chief Operating Officer --
Gilbert L. Beebower Executive Vice President --
Dennis J. McGonigle Executive Vice President --
Robert M. Silvestri Chief Financial Officer & Treasurer --
Leo J. Dolan, Jr. Senior Vice President --
Carl A. Guarino Senior Vice President --
Larry Hutchinson Senior Vice President --
Jack May Senior Vice President --
Hartland J. McKeown Senior Vice President --
Kevin P. Robins Senior Vice President & General Counsel Vice President & Assistant Secretary
Patrick K. Walsh Senior Vice President --
Ronert Aller Vice President --
Gordon W. Carpenter Vice President --
Todd Cipperman Vice President & Assistant Secretary --
S. Courtney E. Collier Vice President & Assistant Secretary Vice President & Assistant Secretary
Richard Deak Vice President & Assistant Secretary
Robert Crudup Vice President & Managing Director --
Barbara Doyne Vice President --
Jeff Drennen Vice President --
James R. Foggo Vice President & Assistant Secretary --
Vic Galef Vice President & Managing Director --
Lydia A. Gavalis Vice President & Assistant Secretary Vice President & Assistant Secretary
Kathy Heilig Vice President
5
<PAGE>
Greg Gettinger Vice President & Assistant Secretary --
Jeff Jacobs Vice President --
Samuel King Vice President --
Kim Kirk Vice President & Managing Director --
John Krzeminski Vice President & Managing Director --
Carolyn McLaurin Vice President & Managing Director --
Mark Nagle Vice President President
Joanne Nelson Vice President --
Cynthia M. Parrish Vice President & Assistant Secretary --
Kim Rainey Vice President --
Rob Redecan Vice President --
Maria Rinehart Vice President --
Edward Searle Vice President & Assistant Secretary
Steve Smith Vice President --
Daniel Spaventa Vice President --
Kathryn L. Stanton Vice President & Assistant Secretary --
Lynda J. Striegel Vice President & Assistant Secretary Vice President & Assistant Secretary
Lori L. White Vice President & Assistant Secretary --
Wayne M. Withrow Vice President & Managing Director --
</TABLE>
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
All accounts, books, and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the rules promulgated
thereunder are maintained by SEI Investments Distribution Co., Oaks,
Pennsylvania 19456.
ITEM 29. MANAGEMENT SERVICES
Not applicable.
ITEM 30. UNDERTAKINGS
Not applicable.
6
<PAGE>
SIGNATURES
As required by the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended, the Registrant certifies that it
meets all of the requirements for effectiveness of this Registration Statement
under the Securities Act of 1933, as amended, and has duly caused this
Registration Statement No. ______________ to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Oaks, Commonwealth of
Pennsylvania, on the 30th day of December, 1999.
FIRST AMERICAN INSURANCE PORTFOLIOS, INC.
ATTEST: /s/ James Volk By: /s/ James R. Foggo
-------------------------- -------------------------------
James Volk James R. Foggo
Vice President
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment to the Registration Statement has been signed below by the
following persons in the capacity and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
---------------- -------- --------
<S> <C> <C>
/s/ James Volk Controller (Principal **
- ------------------------------- Financial and Accounting Officer)
James Volk
* Director **
- - ------------------------------
John M. Murphy, Jr.
* Director **
- - ------------------------------
Robert J. Dayton
* Director **
- - ------------------------------
Andrew M. Hunter III
* Director **
- - ------------------------------
Leonard W. Kedrowski
* Director **
- - ------------------------------
Robert L. Spies
7
<PAGE>
* Director **
- - ------------------------------
Joseph D. Strauss
* Director **
- - ------------------------------
Virginia L. Stringer
* Director **
- - ------------------------------
Roger A. Gibson
* By: /s/ James R. Foggo
-------------------------
James R. Foggo
Attorney-in-Fact
** December 30, 1999
</TABLE>
8
EXHIBIT (a)(1)
ARTICLES OF INCORPORATION
OF
FIRST AMERICAN INSURANCE PORTFOLIOS, INC.
The undersigned, for the purpose of forming a corporation under Minnesota
Statutes Chapter 302A, does hereby adopt the following Articles of
Incorporation:
ARTICLE I
NAME
The name of this corporation is "First American Insurance Portfolios, Inc."
ARTICLE II
PURPOSES AND POWERS
The purposes for which the Corporation is formed are to engage in, conduct,
operate and carry on the business of an open-end management investment company
under the Investment Company Act of 1940 (including any amendment thereof or
other applicable Act of Congress hereafter enacted) (hereinafter called the
"1940 Act"), and to do any and all acts or things as are necessary, convenient,
appropriate, incidental or customary therewith.
ARTICLE III
REGISTERED OFFICE
The location and address of the corporation's registered office in the state of
Minnesota is:
First American Insurance Portfolios, Inc.
U.S. Bank Place, 20th Floor
601 Second Avenue South
Minneapolis, Minnesota 55402
ARTICLE IV
CAPITAL STOCK
SECTION 4.1 The total authorized number of shares of this corporation is ten
trillion (10,000,000,000,000), all of which shall be common shares of the par
value of $.01 each. Of said common shares:
(a) 100,000,000,000 shares may be issued in the series of common shares
hereby designated as "Series A Common Shares;" of such Series A Common
Shares, 20,000,000,000 shares may be issued in the class hereby
designated as "Series A, Class One Common Shares;" and the balance of
80,000,000,000 Series A Common Shares may be issued in one or more
additional classes with such designations, preferences and relative,
participating, optional or other special rights, or qualifications,
limitations or
9
<PAGE>
restrictions thereof, as shall be stated or expressed in a resolution
or resolutions providing for the issue of such class as may be adopted
from time to time by the Board of Directors of this corporation
pursuant to the authority hereby vested in the Board of Directors;
(b) 100,000,000,000 shares may be issued in the series of common shares
hereby designated as "Series B Common Shares;" of such Series B Common
Shares, 20,000,000,000 shares may be issued in the class hereby
designated as "Series B, Class One Common Shares;" and the balance of
80,000,000,000 Series B Common Shares may be issued in one or more
additional classes with such designations, preferences and relative,
participating, optional or other special rights, or qualifications,
limitations or restrictions thereof, as shall be stated or expressed in
a resolution or resolutions providing for the issue of such class as
may be adopted from time to time by the Board of Directors of this
corporation pursuant to the authority hereby vested in the Board of
Directors; and
(c) 100,000,000,000 shares may be issued in the series of common shares
hereby designated as "Series C Common Shares;" of such Series C Common
Shares, 20,000,000,000 shares may be issued in the class hereby
designated as "Series C, Class One Common Shares;" and the balance of
80,000,000,000 Series C Common Shares may be issued in one or more
additional classes with such designations, preferences and relative,
participating, optional or other special rights, or qualifications,
limitations or restrictions thereof, as shall be stated or expressed in
a resolution or resolutions providing for the issue of such class as
may be adopted from time to time by the Board of Directors of this
corporation pursuant to the authority hereby vested in the Board of
Directors.
The balance of 9,700,000,000,000 shares may be issued in such other series with
such designations, preferences and relative, participating, optional or other
special rights, or qualifications, limitations or restrictions thereof, as shall
be stated or expressed in a resolution or resolutions providing for the issue of
such series of common shares as may be adopted from time to time by the Board of
Directors of this corporation pursuant to the authority hereby vested in the
Board of Directors. The shares of any series hereafter established may be
classified by the Board of Directors into one or more classes with such relative
rights and preferences as shall be stated or expressed in a resolution or
resolutions providing for the issue of such class or classes as may be adopted
from time to time by the Board of Directors of the corporation pursuant to the
authority hereby vested in the Board of Directors and Minnesota Statutes Section
302A.401, Subd. 3, or any successor provision.
The Board of Directors, from time to time, may select names for any series or
class of the corporation, without the authorization or approval of the holders
of shares of any series or class of the corporation. Unless and until the Board
of Directors selects different names, the series and classes designated in
paragraphs (a), (b) and (c) above shall be known as follows:
Series A, Class One: Growth Equity Fund.
Series B, Class One: Value Equity Fund.
Series C, Class One: Bond Fund.
10
<PAGE>
Shares of any series or class of the corporation may be issued to the holders of
shares of another series or class of this corporation, whether to effect a stock
dividend or split or otherwise, without the authorization or approval of the
holders of shares of any series or class of the corporation. The corporation may
issue and sell any of its shares in fractional denominations to the same extent
as its whole shares, and shares and fractional denominations shall have, in
proportion to the relative fractions represented thereby, all the rights of
whole shares, including, without limitation, the right to vote, the right to
receive dividends and distributions, and the right to participate upon
liquidation of the corporation. The Series A Common Shares, the Series B Common
Shares, and the Series C Common Shares each evidence, and each other series of
common shares which the Board of Directors may establish, as provided herein,
may evidence, if the Board of Directors shall so determine by resolution, an
interest in a separate and distinct portion of the corporation's assets, which
takes the form of a separate portfolio of investment securities, cash and other
assets. Authority to establish such other separate portfolios is hereby vested
in the Board of Directors of this corporation, and such other separate
portfolios may be established by the Board of Directors without the
authorization or approval of the holders of any series or class of shares of
this corporation. The shares of each class within a series may be subject to
such charges and expenses (including by way of example, but not by way of
limitation, such front-end and deferred sales charges as may be permitted under
the 1940 Act and rules of the National Association of Securities Dealers, Inc.,
expenses under Rule 12b-1 plans, administration plans, service plans, or other
plans or arrangements, however designated) adopted from time to time by the
Board of Directors of the corporation in accordance, to the extent applicable,
with the 1940 Act, which charges and expenses may differ from those applicable
to another class within such series, and all of the charges and expenses to
which a class is subject shall be borne by such class and shall be appropriately
reflected (in the manner determined by the Board of Directors) in determining
the net asset value and the amounts payable with respect to dividends and
distributions on, and redemptions or liquidations of, the shares of such class.
Subject to compliance with the requirements of the 1940 Act, the Board of
Directors shall have the authority to provide that shares of any class shall be
convertible (automatically, optionally or otherwise) into shares of one or more
other classes of the same series in accordance with such requirements and
procedures as may be established by the Board of Directors.
SECTION 4.2 The shareholders of each series or class of common shares of this
corporation:
(a) shall not have the right to cumulate votes for the election of
directors; and
(b) shall have no preemptive right to subscribe to any issue of shares
of any series or class of this corporation now or hereafter made.
SECTION 4.3 The shareholders of Series A Common Shares, Series B Common Shares,
and Series C Common Shares shall have the following rights and preferences:
(a) On any matter submitted to a vote of shareholders of this
corporation, all common shares of this corporation then issued and
outstanding and entitled to vote, irrespective of series or class,
shall be voted in the aggregate and not by series or class, except: (i)
when otherwise required by Minnesota Statutes, Chapter 302A, in which
case shares will be
11
<PAGE>
voted by individual series or class; (ii) when otherwise required by
the 1940 Act or the rules adopted thereunder, in which case shares
shall be voted by individual series or class; and (iii) when the matter
does not affect the interests of a particular series or class, in which
case only shareholders of the series or classes affected shall be
entitled to vote thereon and shall vote by individual series or class.
(b) All consideration received by this corporation for the issue or
sale of shares of any series or class, together with all assets,
income, earnings, profits and proceeds derived therefrom (including all
proceeds derived from the sale, exchange or liquidation thereof and, if
applicable, any assets derived from any reinvestment of such proceeds
in whatever form the same may be) shall become part of the assets of
the portfolio to which the shares of that series or class relate, for
all purposes, subject only to the rights of creditors, and shall be so
treated upon the books of account of this corporation. Such assets,
income, earnings, profits and proceeds (including any proceeds derived
from the sale, exchange or liquidation thereof and, if applicable, any
assets derived from any reinvestment of such proceeds in whatever form
the same may be) are herein referred to as "assets belong to" a series
or class of the common shares of this corporation.
(c) Assets of this corporation not belonging to any particular series
or class are referred to herein as "General Assets." General Assets
shall be allocated to each series or class in proportion to the
respective net assets belonging to such series or class. The
determination of the Board of Directors shall be conclusive as to the
amount of assets, as to the characterization of assets as those
belonging to a series or class or as General Assets, and as to the
allocation of General Assets.
(d) The assets belonging to a particular series or class of common
share shall be charged with the liabilities incurred specifically on
behalf of such series or class of common shares ("Special
Liabilities"). Such assets shall also be charged with a share of the
general liabilities of this corporation ("General Liabilities") in
proportion to the respective net assets belonging to such series or
class of common shares. The determination of the Board of Directors
shall be conclusive as to the amount of liabilities, including accrued
expenses and reserves, as to the characterization of any liability as a
Special Liability or General Liability, and as to the allocation of
General Liabilities.
(e) The Board of Directors may, to the extent permitted by Minnesota
Statutes, Chapter 302A, and in the manner provided herein, declare and
pay dividends or distributions in shares or cash on any or all classes
or series of common shares, the amount of such dividends and the
payment thereof being wholly in the discretion of the Board of
Directors. Dividends or distributions on shares of any series or class
of common shares shall be paid only out of the earnings, surplus or
other lawfully available assets belonging to such series or class
(including, for this purpose, any General Assets allocated to such
series or class).
(f) In the event of the liquidation or dissolution of this corporation,
holders of the shares of any series or class shall have priority over
the holders of any other series or class with respect to, and shall be
entitled to receive, out of the assets of this corporation available
12
<PAGE>
for distribution to holders of shares, the assets belonging to such
series or class of common shares and the General Assets allocated to
such series or class of common shares, and the assets so distributable
to the holders of the shares of any series or class shall be
distributed among such holders in proportion to the number of shares of
such series or class held by them and recorded on the books of this
corporation.
ARTICLE V
DIRECTORS
The names and addresses of the first directors, who shall serve until the first
annual or special meeting of shareholders or until their successors are elected
and qualified, are:
David T. Bennett Robert J. Dayton
3400 City Center 5140 Norwest Center
33 South Sixth Street 90 South Seventh Street
Minneapolis, MN 55402 Minneapolis, MN 55402
Roger Gibson Andrew M. Hunter
1225 17th Street 5100 IDS Center
Suite 2240 80 South Eighth Street
Denver, CO 80202 Minneapolis, MN 55402
Leonard W. Kedrowski John W. Murphy
16 Dellwood Avenue 601 Second Avenue South
Dellwood, MN 55110 Minneapolis, MN 55402
Robert Spies Joseph D. Strauss
4715 Twin Lakes Avenue 8525 Edenbrook Crossing, #5
Brooklyn Center, MN 55429 Brooklyn Park, MN 55443
Virginia Stringer
712 Linwood Avenue
St. Paul, MN 55105
ARTICLE VI
INDEMNIFICATION; LIABILITY
The corporation shall indemnify such persons for such expenses and liabilities,
in such manner, under such circumstances, and to the full extent 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 1940 Act, as now enacted or hereafter amended.
To the fullest extent permitted by the Minnesota Business Corporation Act, as
the same exists or may hereafter be amended (except as prohibited by the 1940
Act), a director of this corporation shall not be liable to this corporation or
its shareholders for monetary damages for breach of fiduciary duty as a
director.
13
<PAGE>
ARTICLE VII
ACTIONS WITHOUT A MEETING
Except as required by the 1940 Act, any action which might be taken at a meeting
of the Board of Directors, or any duly constituted committee thereof, may be
taken without a meeting if done in writing and signed by a majority of the
directors or committee members.
ARTICLE VIII
INCORPORATOR
The name and address of the incorporator of this corporation is:
Thomas A. Berreman
U.S. Bank Place, MPFP 2016
601 Second Avenue South
Minneapolis, MN 55402
IN WITNESS WHEREOF, the undersigned has set his hand this 27th day of
August, 1999.
/s/ Thomas A. Berreman
Thomas A. Berreman, Incorporator
14
<PAGE>
EXHIBIT (a)(2)
FIRST AMERICAN INSURANCE PORTFOLIOS, INC.
CERTIFICATE OF DESIGNATION
OF
SERIES D, CLASS ONE SHARES
PURSUANT TO MINN. STAT. SS.SS. 302A.401(3)(b)
The undersigned duly elected Vice President of First American Insurance
Portfolios, Inc. (the "Fund"), a Minnesota corporation, hereby certifies that
the following is a true, complete and correct copy of resolutions duly adopted
by a majority of the directors of the Board of Directors of the Fund on December
8, 1999.
APPROVAL OF CREATION AND DESIGNATION OF
SERIES D, CLASS ONE SHARES
WHEREAS, the Board of Directors of the Fund approved the issuance of up
to 100,000,000,000 shares in a new series of shares designated as "Series D
Common Shares" and designated 20,000,000,000 of such shares as "Series D, Class
One Common Shares"; and
WHEREAS, the Board of Directors of the Fund approved that the balance
of 80,000,000,000 Series D Common Shares may be issued in one or more additional
classes with such designations, preferences and relative, participating,
optional or other special rights, or qualifications, limitations or restrictions
thereof, as shall be stated or expressed in a resolution or resolutions
providing for the issue of such class as may be adopted from time to time by the
Board of Directors of this corporation pursuant to the authority hereby vested
in the Board of Directors.
NOW, THEREFORE, BE IT RESOLVED, that 100,000,000,000 previously
unissued shares of the Fund, be issued as Series D Common Shares.
FURTHER RESOLVED, that 20,000,000,000 of the Series D Common Shares be
designated as Series D, Class One Common Shares.
FURTHER RESOLVED, that the Series D, Class One Common Shares designated
by these resolutions shall have the relative rights and preferences set forth in
Section 4.3 of the Articles of the Fund. As provided in Article IV of the
Articles of the Fund, the Board of Directors may designate portfolios for this
Fund, and the Series D, Class One Common Shares designated by these resolutions
may be subject to such charges and expenses (including by way of example, but
not by way of limitation, such front-end and deferred sales charges as may be
permitted under the Investment Company Act of 1940, as amended (the "1940 Act")
and rules of the National Association of Securities Dealers, Inc., expenses
under Rule 12b-1 plans, administration plans, service plans, or other plans or
arrangements, however designated) adopted from time to time by the Board of
Directors of the
15
<PAGE>
Fund in accordance, to the extent applicable, with the 1940 Act, which charges
and expenses may differ from those applicable to other classes within such
series, and all of the charges and expenses to which such class is subject shall
be borne by such class and shall be appropriately reflected (in the manner
determined by the Board of Directors) in determining the net asset value and the
amounts payable with respect to dividends and distributions on, and redemptions
or liquidations of, such class.
FURTHER RESOLVED, that unless and until the Board of Directors selects
a different name for the Series D, Class One Common Shares pursuant to Article
IV of the Articles of the Fund, the Series D, Class One Common Shares shall be
known as the "Technology Fund."
IN WITNESS WHEREOF, the undersigned has signed this Certificate of
Designation on behalf of First American Insurance Portfolios, Inc. this 20th day
of December, 1999.
/s/ James Foggo
James Foggo, Vice President
16
EXHIBIT b
AMENDMENT TO ARTICLE I, SECTION 1.1 PROVIDING FOR NEW SERIES APPROVED AT BOARD
OF DIRECTORS MEETING ON DECEMBER 8, 1999.
BYLAWS
OF
FIRST AMERICAN INSURANCE PORTFOLIOS, INC.
ARTICLE I.
SERIES NAMES, OFFICES, CORPORATE SEAL
SECTION 1.1. NAMES OF SERIES. The names of the series represented by the series
of shares designated in the corporation's articles of incorporation shall be as
follows:
Series A, Class One: Growth Equity Fund.
Series B, Class One: Value Equity Fund.
Series C, Class One: Bond Fund.
Series D, Class One: Technology Fund
SECTION 1.2. REGISTERED OFFICE. The registered office of the corporation in
Minnesota shall be that set forth in the Articles of Incorporation or in the
most recent amendment of the Articles of Incorporation or resolution of the
directors filed with the Secretary of State of Minnesota changing the registered
office.
SECTION 1.3. OTHER OFFICES. The corporation may have such other offices, within
or without the State of Minnesota, as the directors shall, from time to time,
determine.
ARTICLE II.
MEETINGS OF SHAREHOLDERS
SECTION 2.1. PLACE AND TIME OF MEETING. Except as provided otherwise by
Minnesota Statutes Chapter 302A, meetings of the shareholders may be held at any
place, within or without the State of Minnesota, designated by the directors
and, in the absence of such designation, shall be held at the registered office
of the corporation in the State of Minnesota. The directors shall designate the
time of day for each meeting and, in the absence of such designation, every
meeting of shareholders shall be held at ten o'clock a.m.
SECTION 2.2. REGULAR MEETINGS. Annual meetings of shareholders are not required
by these Bylaws. Regular meetings shall be held only with such frequency and at
such times and places as provided in and required by Minnesota Statutes Section
302A.431 and the Investment Company Act of 1940.
17
<PAGE>
SECTION 2.3. SPECIAL MEETINGS. Special meetings of the shareholders may be held
at any time and for any purpose and may be called by the Chairman of the Board,
the President, any two directors, or by one or more shareholders holding ten
percent (10%) or more of the shares entitled to vote on the matters to be
presented to the meeting.
Section 2.4. Quorum, Adjourned Meetings. The holders of ten percent (10%) of the
shares outstanding and entitled to vote shall constitute a quorum for the
transaction of business at any regular or special meeting. In case a quorum
shall not be present at a meeting, those present in person or by proxy shall
adjourn the meeting to such day as they shall, by majority vote, agree upon
without further notice other than by announcement at the meeting at which such
adjournment is taken. If a quorum is present, a meeting may be adjourned from
time to time without notice other than announcement at the meeting. At adjourned
meetings at which a quorum is present, any business may be transacted which
might have been transacted at the meeting as originally noticed. If a quorum is
present, the shareholders may continue to transact business until adjournment
notwithstanding the withdrawal of enough shareholders to leave less than a
quorum.
Section 2.5. Voting. At each meeting of the shareholders, every shareholder
having the right to vote shall be entitled to vote either in person or by proxy.
Each shareholder, unless the Articles of Incorporation provide otherwise, shall
have one vote for each share having voting power registered in his name on the
books of the corporation. Except as otherwise specifically provided by these
Bylaws or as required by provisions of the Investment Company Act of 1940 or
other applicable laws, all questions shall be decided by a majority vote of the
number of shares entitled to vote and represented at the meeting at the time of
the vote. If the matter(s) to be presented at a regular or special meeting
relates only to particular series or classes of the corporation, then only the
shareholders of such series or classes are entitled to vote on such matter(s).
Section 2.6. Voting - Proxies. The right to vote by proxy shall exist only if
the instrument authorizing such proxy to act shall have been executed in writing
by the shareholder himself or by his attorney thereunto duly authorized in
writing. No proxy shall be voted after eleven months from its date unless it
provides for a longer period. Proxies may be signed and transmitted by any means
permitted by Minnesota Statutes Section 302A.449, Subd.
1, or any successor provision.
Section 2.7. Closing of Books. The Board of Directors may fix a time, not
exceeding sixty (60) days preceding the date of any meeting of shareholders, as
a record date for the determination of the shareholders entitled to notice of,
and to vote at, such meeting, notwithstanding any transfer of shares on the
books of the corporation after any record date so fixed. The Board of Directors
may close the books of the corporation against the transfer of shares during the
whole or any part of such period. If the Board of Directors fails to fix a
record date for determination of the shareholders entitled to notice of, and to
vote at, any meeting of shareholders, the record date shall be the thirtieth
(30th) day preceding the date of such meeting.
Section 2.8. Notice of Meetings. There shall be mailed to each shareholder
entitled to vote at a meeting, shown by the books of the corporation to be a
holder of record of voting shares, at his address as shown by the books of the
corporation, a notice setting out the date, time and place of
18
<PAGE>
each regular meeting and each special meeting, except where the meeting is an
adjourned meeting and the date, time and place of the meeting were announced at
the time of adjournment, which notice shall be mailed within the period required
by law. Every notice of any special meeting shall state the purpose or purposes
for which the meeting has been called, pursuant to Section 2.03, and the
business transacted at all special meetings shall be confined to the purpose
stated in such notice.
Section 2.9. Waiver of Notice. Notice of any regular or special meeting may be
waived either before, at or after such meeting orally or in a writing signed by
each shareholder or representative thereof entitled to vote the shares so
represented. A shareholder, by his attendance at any meeting of shareholders,
shall be deemed to have waived notice of such meeting, except where the
shareholder objects at the beginning of the meeting to the transaction of
business because the item may not lawfully be considered at that meeting and
does not participate at that meeting in the consideration of the item at that
meeting.
Section 2.10. Written Action. Any action which might be taken at a meeting of
the shareholders may be taken without a meeting if done in writing and signed by
all of the shareholders entitled to vote on that action. If the action to be
taken relates to particular series or classes of the corporation, then only
shareholders of such series or classes are entitled to vote on such action.
ARTICLE III.
DIRECTORS
Section 3.1. Number, Qualification and Term of Office. Until the first meeting
of shareholders, the number of directors shall be the number named in the
Articles of Incorporation. Thereafter, the number of directors shall be
established by resolution of the shareholders (subject to the authority of the
Board of Directors to increase or decrease the number of directors as permitted
by law). In the absence of such shareholder resolution, the number of directors
shall be the number last fixed by the shareholders, the Board of Directors or
the Articles of Incorporation. Directors need not be shareholders. Each of the
directors shall hold office until the regular meeting of shareholders next held
after his election and until his successor shall have been elected and shall
qualify, or until the earlier death, resignation, removal or disqualification of
such director.
Section 3.2. Election of Directors. Except as otherwise provided in Sections
3.11 and 3.12 hereof, the directors shall be elected at the regular
shareholders' meeting. In the event that directors are not elected at a regular
shareholders' meeting, then directors may be elected at a special shareholders'
meeting, provided that the notice of such meeting shall contain mention of such
purpose. At each shareholders' meeting for the election of directors, the
directors shall be elected by a plurality of the votes validly cast at such
election. Each holder of shares of each series or class of stock of the
corporation shall be entitled to vote for directors and shall have equal voting
power for each share of each series or class of the corporation.
Section 3.3. General Powers.
19
<PAGE>
(a) Except as otherwise permitted by statute, the property, affairs and business
of the corporation shall be managed by the Board of Directors, which may
exercise all the powers of the corporation except those powers vested solely in
the shareholders of the corporation by statute, the Articles of Incorporation or
these Bylaws, as amended.
(b) All acts done by any meeting of the directors or by any person acting as a
director, so long as his successor shall not have been duly elected or
appointed, shall, notwithstanding that it be afterwards discovered that there
was some defect in the election of the directors or such person acting as
aforesaid or that they or any of them were disqualified, be as valid as if the
directors or such other person, as the case may be, had been duly elected and
were or was qualified to be directors or a director of the corporation.
Section 3.4. Power to Declare Dividends.
(a) The Board of Directors, from time to time as they may deem advisable, may
declare and pay or ratify dividends in cash or other property of the
corporation, out of any source available for dividends, to the shareholders of
each series or class of stock of the corporation according to their respective
rights and interests in the investment portfolio of the corporation issuing such
series or class of stock.
(b) The Board of Directors shall cause to be accompanied by a written statement
any dividend payment wholly or partly from any source other than
(i) the accumulated and accrued undistributed net income of each series or class
(determined in accordance with generally accepted accounting practice and the
rules and regulations of the Securities and Exchange Commission then in effect)
and not including profits or losses realized upon the sale of securities or
other properties; or
(ii) the net income of each series or class so determined for the current or
preceding fiscal year.
Such statement shall adequately disclose the source or sources of such payment
and the basis of calculation and shall be in such form as the Securities and
Exchange Commission may prescribe.
(c) Notwithstanding the above provisions of this Section 3.4, the Board of
Directors may at any time declare and distribute pro rata among the shareholders
of each series or class of stock a "stock dividend" out of the authorized but
unissued shares of stock of each series or class, including any shares
previously purchased by a series or class of the corporation.
Section 3.5. Board Meetings. Meetings of the Board of Directors may be held from
time to time at such time and place within or without the State of Minnesota as
may be designated in the notice of such meeting.
Section 3.6. Calling Meetings, Notice. A director may call a board meeting by
giving two (2) days notice to all directors of the date, time and place of the
meeting; provided that if the day or date, time and place of a board meeting
have been announced at a previous meeting of the board, no notice is required.
20
<PAGE>
Section 3.7. Waiver of Notice. Notice of any meeting of the Board of Directors
may be waived by any director either before, at or after such meeting orally or
in a writing signed by such director. A director, by his attendance and
participation in the action taken at any meeting of the Board of Directors,
shall be deemed to have waived notice of such meeting, except where the director
objects at the beginning of the meeting to the transaction of business because
the item may not lawfully be considered at that meeting and does not participate
at that meeting in the consideration of the item at that meeting.
Section 3.8. Quorum. A majority of the directors holding office immediately
prior to a meeting of the Board of Directors shall constitute a quorum for the
transaction of business at such meeting; provided however, notwithstanding the
above, if the Board of Directors is taking action pursuant to the Investment
Company Act of 1940, as now enacted or hereafter amended, a majority of
directors who are not "interested persons" (as defined by the Investment Company
Act of 1940, as now enacted or hereafter amended) of the corporation shall
constitute a quorum for taking such action.
Section 3.9. Advance Consent or Opposition. A director may give advance written
consent or opposition to a proposal to be acted on at a meeting of the Board of
Directors. If such director is not present at the meeting, consent or opposition
to a proposal does not constitute presence for purposes of determining the
existence of a quorum, but consent or opposition shall be counted as a vote in
favor of or against the proposal and shall be entered in the minutes or other
record of action at the meeting, if the proposal acted on at the meeting is
substantially the same or has substantially the same effect as the proposal to
which the director has consented or objected. This procedure shall not be used
to act on any investment advisory agreement or on any plan of distribution
adopted under Rule 12b-1 of the Investment Company Act of 1940, as amended.
Section 3.10. Conference Communications. Any or all directors may participate in
any meeting of the Board of Directors, or of any duly constituted committee
thereof, by any means of communication through which the directors may
simultaneously hear each other during such meeting. For the purposes of
establishing a quorum and taking any action at the meeting, such directors
participating pursuant to this Section 3.10 shall be deemed present in person at
the meeting, and the place of the meeting shall be the place of origination of
the conference communication. This procedure shall not be used to act on any
investment advisory agreement or on any plan of distribution adopted under Rule
12b-1 of the Investment Company Act of 1940, as amended.
Section 3.11. Vacancies; Newly Created Directorships. Vacancies in the Board of
Directors of this corporation occurring by reason of death, resignation, removal
or disqualification shall be filled for the unexpired term by a majority of the
remaining directors of the Board although less than a quorum; newly created
directorships resulting from an increase in the authorized number of directors
by action of the Board of Directors as permitted by Section 3.01 may be filled
by a two-thirds (2/3) vote of the directors serving at the time of such
increase; and each person so elected shall be a director until his successor is
elected by the shareholders at their next regular or special meeting; provided,
however, that no vacancy can be filled as provided above if prohibited by the
provisions of the Investment Company Act of 1940.
21
<PAGE>
Section 3.12. Removal. The entire Board of Directors or an individual director
may be removed from office, with or without cause, by a vote of the shareholders
holding a majority of the shares entitled to vote at an election of directors.
In the event that the entire Board or any one or more directors be so removed,
new directors shall be elected at the same meeting, or the remaining directors
may, to the extent vacancies are not filled at such meeting, fill any vacancy or
vacancies created by such removal. A director named by the Board of Directors to
fill a vacancy may be removed from office at any time, with or without cause, by
the affirmative vote of the remaining directors if the shareholders have not
elected directors in the interim between the time of the appointment to fill
such vacancy and the time of the removal.
Section 3.13. Committees. A resolution approved by the affirmative vote of a
majority of the Board of Directors may establish committees having the authority
of the Board in the management of the business of the corporation to the extent
provided in the resolution. A committee shall consist of one or more persons,
who need not be directors, appointed by affirmative vote of a majority of the
directors present. Committees are subject to the direction and control of, and
vacancies in the membership thereof shall be filled by, the Board of Directors.
A majority of the members of the committee present at a meeting is a quorum for
the transaction of business, unless a larger or smaller proportion or number is
provided in a resolution approved by the affirmative vote of a majority of the
directors present.
Section 3.14. Written Action. Any action which might be taken at a meeting of
the Board of Directors, or any duly constituted committee thereof, may be taken
without a meeting if done in writing and signed by all of the directors or
committee members. Any action, other than an action requiring shareholder
approval, which might be taken at a meeting of the Board of Directors, or any
duly constituted committee thereof, may be taken without a meeting if done in
writing and signed by a majority of all of the directors or committee members.
Section 3.15. Compensation. Directors shall receive such fixed sum per meeting
attended or such fixed annual sum as shall be determined, from time to time, by
resolution of the Board of Directors. All directors shall receive their
expenses, if any, of attendance at meetings of the Board of Directors or any
committee thereof. Nothing herein contained shall be construed to preclude any
director from serving this corporation in any other capacity and receiving
proper compensation therefor.
ARTICLE IV.
OFFICERS AND CHAIRMAN OF THE BOARD OF DIRECTORS
Section 4.1. Number. The officers of the corporation shall consist of the
President, one or more Vice Presidents (if desired by the Board), a Secretary, a
Treasurer and such other officers and agents as may, from time to time, be
elected by the Board of Directors. Any number of offices may be held by the same
person.
22
<PAGE>
Section 4.2. Election, Term of Office and Qualifications. The Board of Directors
shall elect, from within or without their number, the officers referred to in
Section 4.01 of these Bylaws, each of whom shall have the powers, rights,
duties, responsibilities and terms in office provided for in these Bylaws or a
resolution of the Board not inconsistent therewith. The resident and all other
officers who may be directors shall continue to hold office until the election
and qualification of their successors, notwithstanding an earlier termination of
their directorship.
Section 4.3. Resignation. Any officer (or the Chairman of the Board of
Directors) may resign his office at any time by delivering a writtenresignation
to the corporation. Unless otherwise specified therein, such resignation shall
take effect upon delivery.
Section 4.4. Removal and Vacancies. Any officer (or the Chairman of the Board of
Directors) may be removed from his office by a majority of the Board of
Directors with or without cause. Such removal, however, shall be without
prejudice to the contract rights of the person so removed. If there be a vacancy
among the officers (or the Chairman of the Board of Directors) of the
corporation by reason of death, resignation or otherwise, such vacancy shall be
filled for the unexpired term by the Board of Directors.
Section 4.5. Chairman of the Board. The Board of Directors may elect one of its
members as Chairman of the Board. The Chairman of the Board, if one is elected,
shall preside at all meetings of the shareholders and directors and shall have
such other duties as may be prescribed, from time to time, by the Board of
Directors. The Chairman of the Board of Directors will under no circumstances be
deemed to be an "officer" of the corporation, and an individual serving as
Chairman of the Board of Directors will not be deemed to be an "affiliated
person" with respect to the corporation (under the Investment Company Act of
1940, as amended) solely by virtue of such person's position as Chairman of the
Board of Directors of the corporation.
Section 4.6. President. The President shall have general active management of
the business of the corporation. In the absence of the Chairman of the Board, he
shall preside at all meetings of the shareholders and directors. He shall be the
chief executive officer of the corporation and shall see that all orders and
resolutions of the Board of Directors are carried into effect. He shall be ex
officio a member of all standing committees. He may execute and deliver, in the
name of the corporation, any deeds, mortgages, bonds, contracts or other
instruments pertaining to the business of the corporation and, in general, shall
perform all duties usually incident to the office of the President. He shall
have such other duties as may, from time to time, be prescribed by the Board of
Directors.
Section 4.7. Vice President. Each Vice President shall have such powers and
shall perform such duties as may be specified in the Bylaws or prescribed by the
Board of Directors or by the President. In the event of absence or disability of
the President, Vice Presidents shall succeed to his power and duties in the
order designated by the Board of Directors.
Section 4.8. Secretary. The Secretary shall be secretary of, and shall attend,
all meetings of the shareholders and Board of Directors and shall record all
proceedings of such meetings in the minute book of the corporation. He shall
give proper notice of meetings of shareholders and
23
<PAGE>
directors. He shall perform such other duties as may, from time to time, be
prescribed by the Board of Directors or by the President.
Section 4.9. Treasurer. The Treasurer shall be the chief financial officer and
shall keep accurate accounts of all money of the corporation received or
disbursed. He shall deposit all moneys, drafts and checks in the name of, and to
the credit of, the corporation in such banks and depositories as a majority of
the Board of Directors shall, from time to time, designate. He shall have power
to endorse, for deposit, all notes, checks and drafts received by the
corporation. He shall disburse the funds of the corporation, as ordered by the
Board of Directors, making proper vouchers therefor. He shall render to the
President and the directors, whenever required, an account of all his
transactions as Treasurer and of the financial condition of the corporation, and
shall perform such other duties as may, from time to time, be prescribed by the
Board of Directors or by the President.
Section 4.10. Assistant Secretaries. At the request of the Secretary, or in his
absence or disability, any Assistant Secretary shall have power to perform all
the duties of the Secretary, and, when so acting, shall have all the powers of,
and be subject to all restrictions upon, the Secretary. The Assistant
Secretaries shall perform such other duties as from time to time may be assigned
to them by the Board of Directors or the President.
Section 4.11. Assistant Treasurers. At the request of the Treasurer, or in his
absence or disability, any Assistant Treasurer shall have power to perform all
the duties of the Treasurer, and when so acting, shall have all the powers of,
and be subject to all the restrictions upon, the Treasurer. The Assistant
Treasurers shall perform such other duties as from time to time may be assigned
to them by the Board of Directors or the President.
Section 4.12. Compensation. The officers (and the Chairman of the Board of
Directors) of this corporation shall receive such compensation for their
services as may be determined, from time to time, by resolution of the Board of
Directors.
Section 4.13. Surety Bonds. The Board of Directors may require any officer or
agent of the corporation to execute a bond (including, without limitation, any
bond required by the Investment Company Act of 1940 and the rules and
regulations of the Securities and Exchange Commission) to the corporation in
such sum and with such surety or sureties as the Board of Directors may
determine, conditioned upon the faithful performance of his duties to the
corporation, including responsibility for negligence and for the accounting of
any of the corporation's property, funds or securities that may come into his
hands. In any such case, a new bond of like character shall be given at least
every six years, so that the dates of the new bond shall not be more than six
years subsequent to the date of the bond immediately preceding.
ARTICLE V.
SHARES AND THEIR TRANSFER AND REDEMPTION
Section 5.1. Certificate for Shares.
24
<PAGE>
(a) The corporation may have certificated or uncertificated shares, or both, as
designated by resolution of the Board of Directors. Every owner of certificated
shares of the corporation shall be entitled to a certificate, to be in such form
as shall be prescribed by the Board of Directors, certifying the number of
shares of the corporation owned by him. Within a reasonable time after the
issuance or transfer of uncertificated shares, the corporation shall send to the
new shareholder the information required to be stated on certificates.
Certificated shares shall be numbered in the order in which they shall be issued
and shall be signed, in the name of the corporation, by the President or a Vice
President and by the Secretary or an Assistant Secretary or by such officers as
the Board of Directors may designate. Such signatures may be by facsimile if
authorized by the Board of Directors. Every certificate surrendered to the
corporation for exchange or transfer shall be cancelled, and no new certificate
or certificates shall be issued in exchange for any existing certificate until
such existing certificate shall have been so cancelled, except in cases provided
for in Section 5.8.
(b) In case any officer, transfer agent or registrar who shall have signed any
such certificate, or whose facsimile signature has been placed thereon, shall
cease to be such an officer (because of death, resignation or otherwise) before
such certificate is issued, such certificate may be issued and delivered by the
corporation with the same effect as if he were such officer, transfer agent or
registrar at the date of issue.
Section 5.2. Issuance of Shares. The Board of Directors is authorized to cause
to be issued shares of the corporation up to the full amount authorized by the
Articles of Incorporation in such series or classes and in such amounts as may
be determined by the Board of Directors and as may be permitted by law. No
shares shall be allotted except in consideration of cash or other property,
tangible or intangible, received or to be received by the corporation under a
written agreement, of services rendered or to be rendered to the corporation
under a written agreement, or upon a share dividend. At the time of such
allotment of shares, the Board of Directors making such allotments shall state,
by resolution, their determination of the fair value to the corporation in
monetary terms of any consideration other than cash for which shares are
allotted. No shares of stock issued by the corporation shall be issued, sold or
exchanged by or on behalf of the corporation for any amount less than the net
asset value per share of the shares outstanding as determined pursuant to
Article X hereunder.
Section 5.3. Redemption of Shares. Upon the demand of any shareholder, this
corporation shall redeem any share of stock issued by it held and owned by such
shareholder at the net asset value thereof as determined pursuant to Article X
hereunder. The Board of Directors may suspend the right of redemption or
postpone the date of payment during any period when: (a) trading on the New York
Stock Exchange is restricted or such Exchange is closed for other than weekends
or holidays; (b) the Securities and Exchange Commission has by order permitted
such suspension; or (c) an emergency as defined by rules of the Securities and
Exchange Commission exists, making disposal of portfolio securities or valuation
of net assets of the corporation not reasonably practicable.
If the value of such shareholder's interest in the corporation falls below the
required minimum investment, as may be set from time to time by the Board of
Directors, the corporation's officers are authorized, in their discretion and on
behalf of the corporation, to redeem such shareholder's
25
<PAGE>
entire interest and remit such amount, provided that such a redemption will only
be effected by the corporation following: (a) a redemption by a shareholder,
which causes the value of such shareholder's interest in the corporation to fall
below the required minimum investment; (b) the mailing by the corporation to
such shareholder of a "notice of intention to redeem"; and (c) the passage of at
least sixty (60) days from the date of such mailing, during which time the
shareholder will have the opportunity to make an additional investment in the
corporation to increase the value of such shareholder's account to at least the
required minimum investment.
Section 5.4. Transfer of Shares. Transfer of shares on the books of the
corporation may be authorized only by the shareholder named in the certificate,
or the shareholder's legal representative, or the shareholder's duly authorized
attorney-in-fact, and upon surrender of the certificate or the certificates for
such shares or a duly executed assignment covering shares held in unissued form.
The corporation may treat as the absolute owner of shares of the corporation the
person or persons in whose name shares are registered on the books of the
corporation.
Section 5.5. Registered Shareholders. The corporation shall be entitled to treat
the holder of record of any share or shares of stock as the holder in fact
thereof and accordingly shall not be bound to recognize any equitable or other
claim to or interest in such share on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise expressly
provided by the laws of Minnesota.
Section 5.6. Transfer of Agents and Registrars. The Board of Directors may from
time to time appoint or remove transfer agents and/or registrars of transfers of
shares of stock of the corporation, and it may appoint the same person as both
transfer agent and registrar. Upon any such appointment being made all
certificates representing shares of capital stock thereafter issued shall be
countersigned by one of such transfer agents or by one of such registrars of
transfers or by both and shall not be valid unless so countersigned. If the same
person shall be both transfer agent and registrar, only one countersignature by
such person shall be required.
Section 5.7. Transfer Regulations. The shares of stock of the corporation may be
freely transferred, and the Board of Directors may from time to time adopt rules
and regulations with reference to the method of transfer of shares of stock of
the corporation.
Section 5.8. Lost, Stolen, Destroyed and Mutilated Certificates. The holder of
any stock of the corporation shall immediately notify the corporation of any
loss, theft, destruction or mutilation of any certificate therefor, and the
Board of Directors may, in its discretion, cause to be issued to him a new
certificate or certificates of stock, upon the surrender of the mutilated
certificate or in case of loss, theft or destruction of the certificate upon
satisfactory proof of such loss, theft or destruction. A new certificate or
certificates of stock will be issued to the owner of the lost, stolen or
destroyed certificate only after such owner, or his legal representatives, gives
to the corporation and to such registrar or transfer agent as may be authorized
or required to countersign such new certificate or certificates a bond, in such
sum as they may direct, and with such surety or sureties, as they may direct, as
indemnity against any claim that may be made against them or any of them on
account of or in connection with the alleged loss, theft or destruction of any
such certificate.
26
<PAGE>
ARTICLE VI.
DIVIDENDS
The net investment income of each series or class of the corporation will be
determined, and its dividends shall be declared and made payable at such
time(s), as the Board of Directors shall determine; dividends shall be payable
to shareholders of record as of the date specified or ratified by the Board of
Directors. It shall be the policy of each series or class of the corporation to
qualify for and elect the tax treatment applicable to regulated investment
companies under the Internal Revenue Code, so that such series or class will not
be subjected to federal income tax on such part of its income or capital gains
as it distributes to shareholders.
ARTICLE VII.
BOOKS AND RECORDS, AUDIT, FISCAL YEAR
Section 7.1. Share Register. The Board of Directors of the corporation shall
cause to be kept at its principal executive office, or at another place or
places within the United States determined by the Board:
(a) a share register not more than one year old, containing the names and
addresses of the shareholders and the number and series or class of shares held
by each shareholder; and
(b) a record of the dates on which certificates or transaction statements
representing shares were issued.
Section 7.2. Other Books and Records. The Board of Directors shall cause to be
kept at its principal executive office, or, if its principal executive office is
not in Minnesota, shall make available at its registered office within ten days
after receipt by an officer of the corporation of a written demand for them made
by a shareholder or other person authorized by Minnesota Statutes Section
302A.461, originals or copies of the documents required by Minnesota Statutes
Section 302A.461, Subd. 2, as the same may be amended from time to time, or any
successor provision.
Section 7.3. Audit; Accountant.
(a) The Board of Directors shall cause the records and books of account of the
corporation to be audited at least once in each fiscal year and at such other
times as it may deem necessary or appropriate.
(b) The corporation shall employ an independent public accountant or firm of
independent public accountants as its Accountant to examine the accounts of the
corporation and to sign and certify financial statements filed by the
corporation. The Accountant's certificates and reports shall be addressed both
to the Board of Directors and to the shareholders.
(c) A majority of the members of the Board of Directors shall select the
Accountant annually within a reasonable period before or after the beginning of
the corporation's fiscal year. Such
27
<PAGE>
selection shall be submitted for ratification or rejection at the next
succeeding regular shareholders' meeting. If such meeting shall reject such
selection, the Accountant shall be selected by majority vote, either at the
meeting at which the rejection occurred or at a subsequent meeting of
shareholders called for the purpose.
(d) Any vacancy occurring between annual meetings, due to the death, resignation
or otherwise of the Accountant, may be filled by the Board of Directors.
Section 7.4. Fiscal Year. The fiscal year of the corporation shall be determined
by the Board of Directors.
ARTICLE VIII.
INDEMNIFICATION OF CERTAIN PERSONS
The corporation shall indemnify such persons, for such expenses and liabilities,
in such manner, under such circumstances, and to such 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 hereinafter amended.
ARTICLE IX.
VOTING OF STOCK HELD
Unless otherwise provided by resolution of the Board of Directors, the
President, any Vice President, the Secretary or the Treasurer, may from time to
time appoint an attorney or attorneys or agent or agents of the corporation, in
the name and on behalf of the corporation, to cast the votes which the
corporation may be entitled to cast as a stockholder or otherwise in any other
corporation or association, any of whose stock or securities may be held by the
corporation, at meetings of the holders of the stock or other securities of any
such other corporation or association, or to consent in writing to any action by
any such other corporation or association, and may instruct the person or
persons so appointed as to the manner of casting such votes or giving such
consent, and may execute or cause to be executed on behalf of the corporation,
such written proxies, consents, waivers or other instruments as it may deem
necessary or proper; or any of such officers may themselves attend any meeting
of the holders of stock or other securities of any such corporation or
association and thereat vote or exercise any or all other rights of the
corporation as the holder of such stock or other securities of such other
corporation or association, or consent in writing to any action by any such
other corporation or association.
ARTICLE X.
VALUATION OF NET ASSET VALUE
The net asset value per share of each series or class of stock of the
corporation shall be determined in good faith by or under supervision of the
officers of the corporation as authorized
28
<PAGE>
by the Board of Directors as often and on such days and at such time(s) as the
Board of Directors shall determine, or as otherwise may be required by law,
rule, regulation or order of the Securities and Exchange Commission.
ARTICLE XI.
CUSTODY OF ASSETS
All securities and cash owned by this corporation shall, as hereinafter
provided, be held by or deposited with a bank or trust company having (according
to its last published report) not less than Two Million Dollars ($2,000,000)
aggregate capital, surplus and undivided profits (the "Custodian"). This
corporation shall enter into a written contract with the Custodian regarding the
powers, duties and compensation of the Custodian with respect to the cash and
securities of this corporation held by the Custodian. Said contract and all
amendments thereto shall be approved by the Board of Directors of this
corporation. In the event of the Custodian's resignation or termination, the
corporation shall use its best efforts promptly to obtain a successor Custodian
and shall require that the cash and securities owned by this corporation held by
the Custodian be delivered directly to such successor Custodian.
ARTICLE XII.
AMENDMENTS
These Bylaws may be amended or altered by a vote of the majority of the Board of
Directors at any meeting provided that notice of such proposed amendment shall
have been given in the notice given to the directors of such meeting. Such
authority in the Board of Directors is subject to the power of the shareholders
to change or repeal such bylaws by a majority vote of the shareholders present
or represented at any regular or special meeting of shareholders called for such
purpose, and the Board of Directors shall not make or alter any Bylaws fixing a
quorum for meetings of shareholders, prescribing procedures for removing
directors or filling vacancies in the Board of Directors, or fixing the number
of directors or their classifications, qualifications or terms of office, except
that the Board of Directors may adopt or amend any Bylaw to increase or decrease
their number.
ARTICLE XIII.
MISCELLANEOUS
Section 13.1. Interpretation. When the context in which words are used in these
Bylaws indicates that such is the intent, singular words will include the plural
and vice versa, and masculine words will include the feminine and neuter genders
and vice versa.
Section 13.2. Article and Section Titles. The titles of Articles and Sections in
these Bylaws are for descriptive purposes only and will not control or alter the
meaning of any of these Bylaws as set forth in the text.
29
EXHIBIT d
FIRST AMERICAN INSURANCE PORTFOLIOS, INC.
INVESTMENT ADVISORY AGREEMENT
This Agreement, made as of this 8th day of December 1999, by and
between First American Insurance Portfolios, Inc., a Minnesota corporation (the
"Fund"), on behalf of each portfolio represented by a series of shares of common
stock of the Fund that adopts this Agreement (the "Portfolios") (the Portfolios,
together with the date each Portfolio adopts this Agreement, are set forth in
Exhibit A hereto, which shall be updated from time to time to reflect additions,
deletions or other changes thereto), and U.S. Bank National Association, a
national banking association organized and existing under the laws of the United
States of America (the "Adviser").
1. The Fund on behalf of the Portfolios hereby retains the Adviser, and the
Adviser hereby agrees to act, as investment adviser for, and to manage the
investment of the assets of, the Portfolios as set forth herein and as further
requested by the Board of Directors of the Fund. In acting hereunder the Adviser
shall be an independent contractor and, unless otherwise expressly provided or
authorized hereunder or by the Board of Directors of the Fund, shall have no
authority to act for or represent the Fund or any Portfolio in any way or
otherwise be an agent of the Fund or any Portfolio.
2. The Adviser, at its own expense, shall provide the Fund with all necessary
office space, personnel and facilities necessary and incident to the performance
of the Adviser's services hereunder. The Adviser shall pay or be responsible for
the payment of all compensation to personnel of the fund and the officers and
directors of the Fund who are affiliated with the Adviser or any entity which
controls, is controlled by or is under common control with the Adviser.
3. The Adviser shall be responsible only for those expenses expressly stated in
paragraph 2 to be the responsibility of the Adviser and shall not be responsible
for any other expenses of the Fund or any Portfolio including, as illustrative
and without limitation, fees and charges of any custodian (including charges as
custodian and for keeping books and records and similar services to the Fund and
the Portfolios); fees and expenses of directors, other than directors described
in paragraph 2; fees and expenses of independent auditors, legal counsel,
transfer agents, dividend disbursing agents, and registrars; costs of and
incident to issuance, redemption and transfer of its shares, and distributions
to shareholders (including dividend payments and reinvestment of dividends);
brokers' commissions; interest charges; taxes and corporate fees payable to any
government or governmental body or agency (including those incurred on account
of the registration or qualification of securities issued by the Fund); dues and
other expenses incident to the Fund's membership in the Investment Company
Institute and other like associations; costs of stock certificates, shareholder
meetings, corporate reports, and reports and notices to shareholders; and costs
of printing, stationery and bookkeeping forms. The Adviser shall be reimbursed
by the Fund or the applicable Portfolios on or before the fifteenth
30
<PAGE>
day of each calendar month for all expenses paid or incurred during the
preceding calendar month by the Adviser for or on behalf of, or at the request
or direction of, the Fund or the applicable Portfolios which are not the
responsibility of the Adviser hereunder.
4. The Adviser may utilize the Fund's distributor or an affiliate of the Adviser
as a broker, including as a principal broker, provided that the brokerage
transactions and procedures are in accordance with Rule 17e-1 under the
Investment Company Act of 1940, as amended (the "Act"), and the then effective
Registration Statement of the Fund under the Securities Act of 1933, as amended.
All allocation of portfolio transactions shall be subject to such policies and
supervision as the Fund's Board of Directors or any committee thereof deem
appropriate and any brokerage policy set forth in the then current Registration
Statement of the Fund.
5. The Adviser shall see that there are rendered to the Board of Directors of
the Fund such periodic and special reports as the Board of Directors may
reasonably request, including any reports in respect to placement of security
transactions for the Portfolios.
6. If, in any fiscal year of a Portfolio, the sum of such Portfolio's expenses
(including deferred organizational expenses and investment advisory fees, but
excluding taxes, interest, brokerage fees, payments made to the distributor
which are deemed to be made pursuant to Rule 12b-1 under the Act and, where
permitted, extraordinary expenses) exceeds the expense limitations applicable to
such Portfolio imposed by state securities administrators, as such limitations
may be lowered or raised from time to time, the Adviser shall reimburse such
Portfolio in the amount of such excess; provided, however, that such payment or
refund shall be made only out of the advisory fees paid by the Portfolio to the
Adviser during the fiscal year the payment or refund becomes due and shall not
exceed such advisory fees unless payment of such excess is required by any
applicable state securities administrator and the Adviser agrees to be bound by
any such requirement.
7. For the services provided and the expenses assumed by the Adviser pursuant to
this Agreement, each Portfolio will pay to the Adviser as full compensation
therefor a fee based on the fee schedule set forth in Exhibit A hereto. This fee
will be computed based on net assets at the beginning of each day and will be
paid to the Advisor monthly on or before the fifteenth day of the month next
succeeding the month for which the fee is paid. The fee shall be prorated for
any fraction of a fiscal year at the commencement and termination of this
Agreement. Anything to the contrary notwithstanding, the Adviser may at any time
and from time to time waive any part or all of any fee payable to it pursuant to
this Agreement.
8. Services of the Adviser herein provided are not to be deemed exclusive, and
the Adviser shall be free to render similar services or other services to others
so long as its services hereunder shall not be impaired thereby.
The Adviser agrees to indemnify the Fund and each Portfolio with
respect to any loss, liability, judgment, cost or penalty which the Fund or any
Portfolio may directly or indirectly suffer or incur in any way arising out of
or in connection with any breach of this Agreement by the Adviser.
31
<PAGE>
The Adviser shall be liable to the Fund and its 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 hereunder, provided, however,
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
the Fund or the investment objectives and policies of the Fund as set forth in
the then current Registration Statement of the 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 Act.
9. It is understood that the officers, directors, agents and
shareholders of the Fund are or may be interested in the Adviser or the
distributor of the Fund as officers, directors, agents or shareholders
and that the officers, directors, shareholders and agents of the
Adviser may be interested in the Fund otherwise than as shareholders.
10. The effective date of this Agreement with respect to each Portfolio
shall be the date set forth on Exhibit A hereto, which date shall not precede
the date that this Agreement is approved by the vote of the holders of at least
a majority of the outstanding shares of such Portfolio and the vote of the Board
of Directors of the Fund, including the vote of a majority of the directors who
are not parties to this Agreement or "interested persons" (as defined in the
Act) of the Adviser or of the Fund, cast in person at a meeting called for the
purpose of voting on such approval.
Unless sooner terminated as hereinafter provided, this Agreement shall
continue in effect with respect to each Portfolio for a period of more than two
years from the date of its execution but only as long as such continuance is
specifically approved at least annually by (a) the Board of Directors of the
Fund or by the vote of a majority of the outstanding shares of the applicable
Portfolio and (b) the vote of a majority of the directors, who are not parties
to this Agreement or "interested persons" (as defined in the Act) of the Adviser
or of the Fund, cast in person at a meeting called for the purpose of voting on
such approval.
11. This Agreement may be terminated with respect to any Portfolio at
any time, without the payment of any penalty, by the Board of Directors
of the Fund or by the vote of a majority of the outstanding shares of
such Portfolio, or by the Adviser, upon 60 days' written notice to the
other party.
This Agreement shall automatically terminate in the event of
its "assignment" (as defined in the Act), provided, however, that such
automatic termination shall be prevented in a particular case by an
order of exemption from the Securities and Exchange Commission or a
no-action letter of the staff of the Commission to the effect that such
assignment does not require termination as a statutory or regulatory
matter.
12. This Agreement may be modified by mutual consent, such consent as
to any Portfolio only to be authorized by a majority of the directors
who are not parties to this Agreement or "interested persons" (as
defined in the Act) of the Adviser or of the Fund and the vote of a
majority of the outstanding shares of such Portfolio.
32
<PAGE>
13. Wherever referred to in this Agreement, the vote or approval of the
holders of a majority of the outstanding shares of a Portfolio shall
mean the lessor of (a) the vote of 67% or more of the shares of such
Portfolio represented at a meeting where more than 50% of the
outstanding shares are present in person or by proxy, or (b) the vote
of more than 50% of the outstanding shares of such Portfolio.
14. If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder shall not
be thereby affected.
15. Any notice under this Agreement shall be in writing, addressed,
delivered or mailed, postage prepaid, to the other party at such
address as such other party may designate in writing for receipt of
such notice.
16. The internal law, and not the law of conflicts, of the State of
Minnesota will govern all questions concerning the construction,
validity and interpretation of this Agreement and the performance of
the obligations imposed by this Agreement.
17. This Agreement, including its exhibits, constitutes the entire
agreement between the parties concerning its subject matter and
supersedes all prior and contemporaneous agreements, representations
and understandings of the parties.
IN WITNESS WHEREOF, the Fund and the Adviser have caused this
Agreement to be executed by their duly authorized officers as of the
day an year first above written.
FIRST AMERICAN INSURANCE PORTFOLIOS, INC.
By ___________________________
Its __________________________
U.S. BANK NATIONAL ASSOCIATION
By ___________________________
Its __________________________
33
<PAGE>
FIRST AMERICAN INSURANCE PORTFOLIOS, INC.
EXHIBIT A
TO
INVESTMENT ADVISORY AGREEMENT
EFFECTIVE DATES:
----------------
PORTFOLIO EFFECTIVE DATE
--------- --------------
Growth Equity April 1, 2000
Value Equity April 1, 2000
Technology April 1, 2000
Bond April 1, 2000
ADVISORY FEES:
--------------
PORTFOLIO ANNUAL ADVISORY FEE AS A PERCENTAGE OF
--------- AVERAGE DAILY NET ASSETS
------------------------
Growth Equity 0.70%
Value Equity 0.70%
Technology 0.70%
Bond 0.70%
EXHIBIT e
DISTRIBUTION AGREEMENT
THIS AGREEMENT is made as of this 8th day of December 1999, between
FIRST AMERICAN INSURANCE PORTFOLIOS, INC., a Minnesota corporation (the "Fund"),
and SEI Financial Services Company (the "Distributor"), a Pennsylvania
corporation.
WHEREAS, the Fund is registered as an investment company with the
Securities and Exchange Commission ("SEC") under the Investment Company Act of
1940, as amended ("1940 Act"), and its Shares are registered with the SEC under
the Securities Act of 1933, as amended ("1933 Act"); and
WHEREAS, the Distributor is registered as a broker-dealer with the SEC
under the Securities Exchange Act of 1934, as amended;
WHEREAS, the Fund desires to appoint the Distributor to act as
distributor and shareholder servicing agent for the shares of the Fund's
portfolios, as now in existence or hereinafter created from time to time
(collectively, the "Shares"), in accordance with the terms and conditions of
this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
contained, the Fund and Distributor hereby agree as follows:
ARTICLE 1. Sale of Shares. The Fund grants to the Distributor the
exclusive right to sell Shares of each portfolio of the Fund (each a
"Portfolio"), at the net asset value per Share to the separate accounts of
insurance companies in accordance with the current prospectus, as agent and on
behalf of the Fund, during the term of this Agreement and subject to the
registration requirements of the 1933 Act, the rules and regulations of the SEC
and the laws governing the sale of securities in the various states ("Blue Sky
Laws").
ARTICLE 2. Solicitation of Sales. In consideration of these rights
granted to the Distributor, the Distributor agrees to use all reasonable
efforts, consistent with its other business, in connection with the distribution
of Shares of the Fund; provided, however, that the Distributor shall not be
prevented from entering into like arrangements with other issuers. The
provisions of this paragraph do not obligate the Distributor to register as a
broker or dealer under the Blue Sky Laws of any jurisdiction when it determines
it would be uneconomical for it to do so or to maintain its registration in any
jurisdiction in which it is now registered nor obligate the Distributor to sell
any particular number of Shares.
ARTICLE 3. Authorized Representations. The Distributor is not
authorized by the Fund to give any information or to make any representations
other than those contained in the current registration statements and
prospectuses of the Fund filed with the SEC or contained in Shareholder reports
or other material that may be prepared by or on behalf of the Fund for the
<PAGE>
Distributor's use. The Distributor may prepare and distribute sales literature
and other material as it may deem appropriate, provided that such literature and
materials have been approved by the Fund prior to their use.
<PAGE>
ARTICLE 4. Registration of Shares. The Fund agrees that it will take
all action necessary to register Shares under the federal and state securities
laws so that there will be available for sale the number of Shares the
Distributor may reasonably be expected to sell and to pay all fees associated
with said registration. The Fund shall make available to the Distributor such
number of copies of its currently effective prospectus and statement of
additional information as the Distributor may reasonably request. The Fund shall
furnish to the Distributor copies of all information, financial statements and
other papers which the Distributor may reasonably request for use in connection
with the distribution of Shares of the Fund.
ARTICLE 5. Compensation and Allocation of Expenses.
(a) The parties acknowledge that SEI Financial Management Corporation,
which is under common ownership with the Distributor, provides administrative
services to the Fund and receives compensation therefor. Recognizing the benefit
that accrues to the Distributor's ultimate parent from such arrangement and the
arrangements contemplated hereby, the Distributor agrees to serve as distributor
of the Fund pursuant to this Agreement for no separate compensation or fee.
(b) During the period of this Agreement, the Fund shall pay or cause to
be paid all expenses, costs and fees incurred by the Fund which are not
assumed by the Distributor. The Distributor agrees to provide, and
shall pay costs which it incurs in connection with providing,
administrative or accounting services to shareholders of the retail
class of each Portfolio (such costs are referred to as "Shareholder
Servicing Costs"). The Distributor shall also pay all of its own costs
incurred in connection with the distribution of the shares of each such
class ("Distribution Expenses"). Distribution Expenses include, but are
not limited to, the following expenses incurred by the Distributor:
initial and ongoing sales compensation (in addition to sales loads)
paid to investment executives of the Distributor and to other
broker-dealers and participating financial institutions which the
Distributor has agreed to pay; expenses incurred in the printing of
prospectuses, statements of additional information and reports used for
sales purposes; expenses of preparation and distribution of sales
literature; expenses of advertising of any type; an allocation of the
Distributor's overhead; payments to and expenses of persons who provide
support services in connection with the distribution of Fund shares;
and other distribution-related expenses. Shareholder Servicing Costs
include all expenses of the Distributor incurred in connection with
providing administrative or accounting services to shareholders of each
such class, including, but not limited to, an allocation of the
Distributor's overhead and payments made to persons, including
employees of the Distributor, who respond to inquiries of shareholders
regarding their ownership of such classes of shares, or who provide
other administrative or accounting services not otherwise required to
be provided by the applicable Portfolio's investment adviser, transfer
agent or other agent. The Fund and the Distributor acknowledge that
they may enter into a separate Shareholder Service Plan and Agreement
pursuant to which the Distributor would be compensated in connection
with the provision of certain shareholder services.
<PAGE>
ARTICLE 6. Indemnification of Distributor. The Fund agrees to indemnify
and hold harmless the Distributor and each of its directors and officers and
each person, if any, who controls the Distributor within the meaning of Section
15 of the 1933 Act against any loss, liability, claim, damages or expense
(including the reasonable cost of investigating or defending any alleged loss,
liability, claim, damages, or expense and reasonable counsel fees and
disbursements incurred in connection therewith), arising by reason of any person
acquiring any Shares, based upon the ground that the registration statement,
prospectus, Shareholder reports or other information filed or made public by the
Fund (as from time to time amended) included an untrue statement of a material
fact or omitted to state a material fact required to be stated or necessary in
order to make the statements made not misleading. However, the Fund does not
agree to indemnify the Distributor or hold it harmless to the extent that the
statements or omission was made in reliance upon, and in conformity with,
information furnished to the Fund by or on behalf of the Distributor.
In no case (i) is the indemnity of the Fund to be deemed to protect the
Distributor against any liability to the Fund or its Shareholders to which the
Distributor or such person otherwise would be subject by reason of willful
misfeasance, bad faith or negligence in the performance of its duties or by
reason of its reckless disregard of its obligations and duties under this
Agreement, or (ii) is the Fund to be liable to the Distributor under the
indemnity agreement contained in this paragraph with respect to any claim made
against the Distributor or any person indemnified unless the Distributor or
other person shall have notified the Fund in writing of the claim within a
reasonable time after the summons or other first written notification giving
information of the nature of the claim shall have been served upon the
Distributor or such other person (or after the Distributor or the person shall
have received notice of service on any designated agent). However, failure to
notify the Fund of any claim shall not relieve the Fund from any liability which
it may have to the Distributor or any person against whom such action is brought
otherwise than on account of its indemnity agreement contained in this
paragraph.
The Fund shall be entitled to participate at its own expense in the
defense or, if it so elects, to assume the defense of any suit brought to
enforce any claims subject to this indemnity provision. If the Fund elects to
assume the defense of any such claim, the defense shall be conducted by counsel
chosen by the Fund and satisfactory to the indemnified defendants in the suit
whose approval shall not be unreasonably withheld. In the event that the Fund
elects to assume the defense of any suit and retain counsel, the indemnified
defendants shall bear the fees and expenses of any additional counsel retained
by them. If the Fund does not elect to assume the defense of a suit, it will
reimburse the indemnified defendants for the reasonable fees and expenses of any
counsel retained by the indemnified defendants.
The Fund agrees to notify the Distributor promptly of the commencement
of any litigation or proceedings against it or any of its officers or Directors
in connection with the issuance or sale of any of its Shares.
ARTICLE 7. Indemnification of Fund. The Distributor covenants and
agrees that it will indemnify and hold harmless the Fund and each of its
Directors and officers and each person, if any, who controls the Fund within the
meaning of Section 15 of the Act, against any loss, liability, damages, claim or
expense (including the reasonable cost of investigating or defending
<PAGE>
any alleged loss, liability, damages, claim or expense and reasonable counsel
fees incurred in connection therewith) based upon the 1933 Act or any other
statute or common law and arising by reason of any person acquiring any Shares,
and alleging a wrongful act of the Distributor or any of its employees or
alleging that the registration statement, prospectus, Shareholder reports or
other information filed or made public by the Fund (as from time to time
amended) included an untrue statement of a material fact or omitted to state a
material fact required to be stated or necessary in order to make the statements
not misleading, insofar as the statement or omission was made in reliance upon
and in conformity with information furnished to the Fund by or on behalf of the
Distributor.
In no case (i) is the indemnity of the Distributor in favor of the Fund
or any other person indemnified to be deemed to protect the Fund or any other
person against any liability to which the Fund or such other person would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of its reckless
disregard of its obligations and duties under this Agreement, or (ii) is the
Distributor to be liable under its indemnity agreement contained in this
paragraph with respect to any claim made against the Fund or any person
indemnified unless the Fund or person, as the case may be, shall have notified
the Distributor in writing of the claim within a reasonable time after the
summons or other first written notification giving information of the nature of
the claim shall have been served upon the Fund or upon any person (or after the
Fund or such person shall have received notice of service on any designated
agent). However, failure to notify the Distributor of any claim shall not
relieve the Distributor from any liability which it may have to the Fund or any
person against whom the action is brought otherwise than on account of its
indemnity agreement contained in this paragraph.
The Distributor shall be entitled to participate, at its own expense,
in the defense or, if it so elects, to assume the defense of any suit brought to
enforce the claim, but if the Distributor elects to assume the defense, the
defense shall be conducted by counsel chosen by the Distributor and satisfactory
to the indemnified defendants whose approval shall not be unreasonably withheld.
In the event that the Distributor elects to assume the defense of any suit and
retain counsel, the defendants in the suit shall bear the fees and expenses of
any additional counsel retained by them. If the Distributor does not elect to
assume the defense of any suit, it will reimburse the indemnified defendants in
the suit for the reasonable fees and expenses of any counsel retained by them.
The Distributor agrees to notify the Fund promptly of the commencement
of any litigation or proceedings against it in connection with the issue and
sale of any of the Fund's Shares.
ARTICLE 8. Effective Date. This Agreement shall be effective upon its
execution, and unless terminated as provided, shall continue in force for one
year from the effective date and thereafter from year to year, provided that
such annual continuance is approved by (i) either the vote of a majority of the
Directors of the Fund, or the vote of a majority of the outstanding voting
securities of the Fund, and (ii) the vote of a majority of those Directors of
the Fund who are not parties to this Agreement or the Fund's Distribution Plan
or interested persons of any such party ("Qualified Directors"), cast in person
at a meeting called for the purpose of voting on the
<PAGE>
approval. This Agreement shall automatically terminate in the event of its
assignment. As used in this paragraph the terms "vote of a majority of the
outstanding voting securities", "assignment" and "interested person" shall have
the respective meanings specified in the 1940 Act. In addition, this Agreement
may at any time be terminated without penalty by the Distributor, by a vote of a
majority of Qualified Directors or by vote of a majority of the outstanding
voting securities of the Fund upon not less than sixty days prior written notice
to the other party.
ARTICLE 9. Notices. Any notice required or permitted to be given by
either party to the other shall be deemed sufficient if sent by registered or
certified mail, postage prepaid, addressed by the party giving notice to the
other party at the last address furnished by the other party to the party giving
notice: if to the Fund, at c/o Kevin P. Robins, General Counsel, SEI Financial
Management Corporation, 680 East Swedesford Road, Wayne, PA 19087; and to its
Secretary at the following address: Michael J. Radmer, Esq., Dorsey & Whitney
L.L.P., 220 South Sixth Street, Minneapolis, MN 55402-1498; and if to the
Distributor, 680 East Swedesford Road, Wayne, PA 19087.
ARTICLE 10. Multiple Originals. This Agreement may be executed in two
or more counterparts, each of which when so executed shall be deemed to be an
original, but such counterparts shall together constitute but one and the same
instrument.
IN WITNESS, the Fund and Distributor have each duly executed this
Agreement, as of the day and year above written.
FIRST AMERICAN INSURANCE
PORTFOLIOS, INC.
By ___________________________
Its ________________________
SEI FINANCIAL SERVICES
COMPANY
By ___________________________
Its ________________________
EXHIBIT (g)(1)
CUSTODIAN AGREEMENT
FIRST AMERICAN INSURANCE PORTFOLIOS, INC.
U.S. BANK NATIONAL ASSOCIATION
THIS AGREEMENT, made this 8th day of December 1999, by and between
First American Insurance Portfolios, Inc., a Minnesota corporation (hereinafter
called the "Fund"), and U.S. Bank National Association, a national banking
association organized and existing under the laws of the United States of
America with its principal place of business at Minneapolis, Minnesota
(hereinafter called the "Custodian").
WITNESSETH:
WHEREAS, the Fund is a mutual fund that currently offers its shares
in four series - Growth Equity Fund, Value Equity Fund, Technology Fund and Bond
Fund, - the investment portfolios, investment objectives, and other aspects of
which are different in certain respects.
WHEREAS, the Fund desires that its securities and cash shall be
hereafter held and administered by the Custodian, pursuant to the terms of this
Agreement.
NOW, THEREFORE, in consideration of the mutual agreements herein
made, the Fund and the Custodian agree as follows:
ARTICLE 1. DEFINITIONS
The word "Securities" as used herein shall be construed to include,
without being limited to, shares, stocks, treasury stocks, including any stocks
of the Fund, options, notes, bonds, debentures, evidences of indebtedness,
certificates of interest or participation in any profit-sharing agreements,
collateral trust certificates, reorganization certificates or subscriptions,
transferable shares, investment contracts, voting trust certificates,
certificates of deposit for a security, fractional or undivided interests in
oil, gas, or other mineral rights, or any certificates of interest or
participation in, temporary or interim certificates for, receipts for,
guarantees of, or warrants or rights to subscribe to or purchase any of the
foregoing, acceptances and other obligations, and any evidence of any right or
interest in or to any property or assets, financial futures contracts and
options thereon, and any other interest or instrument commonly known as a
security or commodity.
The word "Series" shall refer individually or collectively, as the
context requires, to Growth Equity Fund, Value Equity Fund, Technology Fund,
Bond Fund, and any further series of common stock of the Fund created hereafter
by resolution of the Fund's board of directors and on behalf of which series of
common stock the Fund's board of directors adopts this Agreement.
<PAGE>
The words "Written Order from the Fund" or "Written Order" shall mean a
request or direction or certification in writing directed to the Custodian and
signed in the name of the Fund by any two of the individuals designated in the
current certified list referred to in Article 2, provided that one of the
individuals so signing shall be an officer of the Fund designated in said
current certified list.
ARTICLE 2. NAMES TITLES AND SIGNATURES
OF FUND'S OFFICERS
The Fund shall certify to the Custodian the names, titles, and
signatures of officers and other persons who are authorized to give Written
Orders to the Custodian on behalf of each individual Series of the Fund. The
Fund agrees that, whenever any change in such authorization occurs, it will file
with the Custodian a new certified list of names, titles, and signatures which
shall be signed by at least one officer previously certified to the Custodian if
any such officer still holds an office in the Fund. The Custodian is authorized
to rely and act upon the names, titles, and signatures of the individuals as
they appear in the most recent such certified list which has been delivered to
the Custodian as hereinbefore provided.
ARTICLE 3. RECEIPT AND DISBURSING OF MONEY
Section 1. The Fund shall from time to time cause cash owned by the
Fund to be delivered or paid to the Custodian for the account of any Series, but
the Custodian shall not be under any obligation or duty to determine whether all
cash of the Fund is being so deposited, to which Series account any such cash is
being deposited, or to take any action or to give any notice with respect to
cash not so deposited. The Custodian agrees to hold such cash, together with any
other sum collected or received by it for or on behalf of the Fund, for the
account of the Fund Series designated by the Fund, in the name of "First
American Insurance Portfolio, Inc., Custodian Account, [Growth Equity Fund],
[Value Equity Fund], [Technology Fund], [Bond Fund], (or in the name of any
Series created hereafter and adopting this Agreement) in conformity with the
terms of this Agreement. The Custodian shall make payments of cash for the
account of the Fund only:
(a) for bills, statements and other obligations of Fund (including
but not limited to obligations in connection with the
conversion, exchange or surrender of securities owned by Fund,
interest charges, dividend disbursements, taxes, management
fees, custodian fees, legal fees, auditors' fees, transfer
agents' fees, brokerage commissions, compensation to
personnel, and other operating expenses of Fund) pursuant to
Written Orders from the Fund setting forth the name of the
person to whom payment is to be made, the amount of the
payment, and the purpose of the payment;
(b) as provided in Article 4 hereof; and
(c) upon the termination of this Agreement.
<PAGE>
Section 2. The Custodian is hereby appointed the attorney-in-fact of
the Fund to enforce and collect all checks, drafts, or other orders for the
payment of money received by the Custodian for the account of the Fund and drawn
to or to the order of the Fund and to deposit them in said Custodian Account of
the Fund.
ARTICLE 4. RECEIPT OF SECURITIES
The Fund agrees to place all of its Securities in the custody
of the Custodian but the Custodian shall not be under any obligation or duty to
determine whether all Securities of the Fund are being so deposited, or to
require that they be so deposited, or to take any action or give any notice with
respect to the Securities not so deposited. The Custodian agrees to hold such
Securities for the account of the Fund, in the name of the Fund or of bearer or
of a nominee of the Custodian, and in conformity with the terms of this
Agreement. The Custodian also agrees, upon Written Order from the Fund, to
receive from persons other than the Fund and to hold for the account of the Fund
Securities specified in said Written Order, and, if the same are in proper form,
to cause payment to be made therefore to the persons from whom such Securities
were received, from the funds of the Fund held by it in said Custodian Account
in the amounts provided and in the manner directed by the Written Order from the
Fund.
The Custodian agrees that all Securities of the Fund placed in
its custody shall be kept physically segregated at all times from those of any
other person, firm, or corporation, and shall be held by the Custodian with all
reasonable precautions for the safekeeping thereof, with safeguards
substantially equivalent to those maintained by the Custodian for its own
Securities.
Subject to such rules, regulations, and orders as the
Securities and Exchange Commission may adopt, the Fund may direct the Custodian
to deposit all or any part of the Securities owned by the Fund in a system for
the central handling of Securities established by a national securities exchange
or a national securities association registered with the Securities and Exchange
Commission under the Securities Exchange Act of 1934, or such other person as
may be permitted by the Commission, pursuant to which system all Securities of
any particular class of any issuer deposited within the system are treated as
fungible and may be transferred or pledged by bookkeeping entry without physical
delivery of such Securities, provided that all such deposits shall be subject to
withdrawal only at the direction of the Fund.
ARTICLE 5. TRANSFER, EXCHANGE,
REDELIVERY, ETC. OF SECURITIES
The Custodian agrees to transfer, exchange, or deliver Securities as
provided in Article 6, or on receipt by it of, and in accordance with, a Written
Order from the Fund in which the Fund shall state specifically which of the
following cases is covered thereby, provided that it shall not be the
responsibility of the Custodian to determine the propriety or legality of any
such order:
(a) In the case of deliveries of Securities sold by the Fund,
against receipt by the Custodian of the proceeds of sale and
after receipt of a confirmation from a broker or dealer with
respect to the transaction;
<PAGE>
(b) In the case of deliveries of Securities which may mature or be
called, redeemed, retired, or otherwise become payable,
against receipt by the Custodian of the sums payable thereon
or against interim receipts or other proper delivery receipts;
(c) In the case of deliveries of Securities which are to be
transferred to and registered in the name of the Fund or of a
nominee of the Custodian and delivered to the Custodian for
the account of the Fund, against receipt by the Custodian of
interim receipts or other proper delivery receipts;
(d) In the case of deliveries of Securities to the issuer thereof,
its transfer agent or other proper agent, or to any committee
or other organization for exchange for other Securities to be
delivered to the Custodian in connection with a reorganization
or recapitalization of the issuer or any split-up or similar
transaction involving such Securities, against receipt by the
Custodian of such other Securities or against interim receipts
or other proper delivery receipts;
(e) In the case of deliveries of temporary certificates in
exchange for permanent certificates, against receipt by the
Custodian of such permanent certificates or against interim
receipts or other proper delivery receipts;
(f) In the case of deliveries of Securities upon conversion
thereof into other Securities, against receipt by the
Custodian of such other Securities or against interim receipts
or other proper delivery receipts;
(g) In the case of deliveries of Securities in exchange for other
Securities (whether or not such transactions also involve the
receipt or payment of cash), against receipt by the Custodian
of such other Securities or against interim receipts or other
proper delivery receipts;
(h) In a case not covered by the preceding paragraphs of this
Article, upon receipt of a resolution adopted by the Board of
Directors of the Fund, signed by an officer of the Fund and
certified to by the Secretary, specifying the Securities and
assets to be transferred, exchanged, or delivered, the
purposes for which such delivery is being made, declaring such
purposes to be proper corporate purposes, and naming a person
or persons (each of whom shall be a properly bonded officer or
employee of the Fund) to whom such transfer, exchange, or
delivery is to be made; and
(i) In the case of deliveries pursuant to paragraphs (a), (b),
(c), (d), (e), (f), and (g) above, the Written Order from
the Fund shall direct that the proceeds of any Securities
delivered, or Securities or other assets exchanged for or
in lieu of Securities so delivered, are to be delivered to
the Custodian.
ARTICLE 6. CUSTODIAN'S ACTS WITHOUT INSTRUCTIONS
Unless and until the Custodian receives contrary Written Orders from
the Fund, the
<PAGE>
Custodian shall without order from the Fund:
(a) Present for payment all bills, notes, checks, drafts, and
similar items, and all coupons or other income items (except
stock dividends), held or received for the account of the
Fund, and which require presentation in the ordinary course of
business, and credit such items to the aforesaid Custodian
Account of the Fund pursuant to Custodian's then current funds
availability schedule; but Custodian shall have no duty to
take action to effect collection of any amount if the assets
upon which such payment is due are in default or if payment is
refused after due demand and presentation;
(b) Present for payment all Securities which may mature or be
called, redeemed, retired, or otherwise become payable and
credit such items to the aforesaid Custodian Account of the
Fund pursuant to Custodian's then current funds availability
schedule; but Custodian shall have no duty to take action to
effect collection of any amount if the assets upon which such
payment is due are in default or if payment is refused after
due demand and presentation;
(c) Hold for and credit to the account of the Fund all shares of
stock and other Securities received as stock dividends or as
the result of a stock split or otherwise from or on account of
Securities of the Fund, and notify the Fund promptly of the
receipt of such item;
(d) Deposit any cash received by it from, for or on behalf of the
Fund to the credit of the Fund in the aforesaid Custodian
Account (in its own deposit department without liability for
interest);
(e) Charge against the aforesaid Custodian Account for the Fund
disbursements authorized to be made by the Custodian hereunder
and actually made by it, and notify the Fund of such charges
at least once a month;
(f) Deliver Securities which are to be transferred to and reissued
in the name of the Fund, or of a nominee of the Custodian for
the account of the Fund, and temporary certificates which are
to be exchanged for permanent certificates, to a proper
transfer agent for such purpose against interim receipts or
other proper delivery receipts; and
(g) Hold for disposition in accordance with Written Orders from
the Fund hereunder all options, rights, and similar Securities
which may be received by the Custodian and which are issued
with respect to any securities held by it hereunder, and
notify the Fund promptly of the receipt of such items.
ARTICLE 7. DELIVERY OF PROXIES
The Custodian shall deliver promptly to the Fund all proxies, written
notices, and communications with relation to Securities held by it which it may
receive from securities issuers
<PAGE>
or obligors and/or via the industry standard information services to which
Custodian subscribes.
ARTICLE 8. TRANSFER
The Fund shall furnish to the Custodian appropriate instruments to
enable the Custodian to hold or deliver in proper form for transfer any
Securities which it may hold for the Series accounts of the Fund. For the
purpose of facilitating the handling of Securities, unless the Fund shall
otherwise direct by Written Order, the Custodian is authorized to hold
Securities deposited with it under this Agreement in the name of its registered
nominee or nominees (as defined in the Internal Revenue Code and any Regulations
of the United States Treasury Department issued thereunder or in any provision
of any subsequent federal tax law exempting such transaction from liability for
stock transfer taxes) and shall execute and deliver all such certificates in
connection therewith as may be required by such laws or regulations or under the
laws of any state. The Custodian shall advise the Fund of the certificate number
of each certificate so presented for transfer and that of the certificate
received in exchange therefor, and shall use its best efforts to the end that
the specific Securities held by it hereunder shall be at all times identifiable.
ARTICLE 9. TRANSFER TAXES AND
OTHER DISBURSEMENTS
The Fund shall pay or reimburse the Custodian for any transfer taxes
payable upon transfers of Securities made hereunder, including transfers
incident to the termination of this Agreement, and for all other necessary and
proper disbursements, advances and expenses made or incurred by the Custodian in
the performance or incident to the termination of this Agreement, and the
Custodian shall have a lien upon any cash or Securities held by it for the
account of the Fund for all such items, enforceable, after thirty days' Written
Notice by registered mail to the Fund, by the sale of sufficient Securities to
satisfy such lien. In the event that any advance of funds is made by Custodian
on behalf of the Fund, the Fund agrees to repay the Custodian on demand the
amount of the advance plus accrued interest at the then effective Federal funds
rate. The Custodian may reimburse itself by deducting from the proceeds of any
sale of Securities an amount sufficient to pay any transfer taxes payable upon
the transfer of Securities sold. The Custodian shall execute such certificates
in connection with Securities delivered to it under this Agreement as may be
required, under the provisions of any federal revenue act and any Regulations of
the Treasury Department issued thereunder or any state laws, to exempt from
taxation any transfers and/or deliveries of any such Securities as may qualify
for such exemption.
<PAGE>
ARTICLE 10. CUSTODIAN'S LIABILITY FOR
PROCEEDS OF SECURITIES SOLD
If the mode of payment for Securities to be delivered by the
Custodian is not specified in the Written Order from the Fund directing such
delivery, the Custodian shall make delivery of such Securities against receipt
by it of cash, a postal money order or a check drawn by a bank, trust company,
or other banking institution, or by a broker named in such Written Order from
the Fund, for the amount the Custodian is directed to receive. The Custodian
shall be liable for the proceeds of any delivery of Securities made pursuant to
this Article, but provided that it has complied with the provisions of this
Article, only to the extent that such proceeds are actually received.
ARTICLE 11. LIMITATION OF LIABILITY;
STANDARD OF CARE
Custodian shall hold harmless and indemnify Fund from and against any
claims, loss, liability or expense (collectively a "Claim") arising out of
Custodian's failure to comply with the terms of this Agreement or arising out of
Custodian's negligence, willful misconduct, or bad faith. Custodian shall not be
liable for consequential, special or punitive damages. Custodian may reasonably
request and obtain the advice and opinion of counsel for Fund, or of its own
counsel with respect to questions or matters of law, and it shall be without
liability to Fund for any action taken or omitted by it in good faith, in
conformity with such advice or opinion.
The Fund agrees to indemnify and hold the Custodian harmless from and
against any Claim arising from the Custodian's performance of its duties
hereunder or its actions taken at the direction of the Fund, provided that the
Custodian shall not be indemnified for any Claim arising out of Custodian's
failure to comply with the terms of this Agreement or arising out of Custodian's
negligence, bad faith or willful misconduct. Fund shall not be liable for
consequential, special or punitive damages.
Custodian may rely upon the advice of Fund and upon statements of
Fund's accountants and other persons believed by it in good faith, to be expert
in matters upon which they are consulted, and Custodian shall not be liable for
any actions taken, in good faith without negligence in reliance upon such
statements.
If Fund requires Custodian in any capacity to take, with respect to any
securities, any action which involves the payment of money by it, or which in
Custodian's opinion might make it or its nominee liable for payment of monies or
in any other way, Custodian, upon notice to Fund given prior to such actions,
shall be and be kept indemnified by Fund in an amount and form satisfactory to
Custodian against any liability on account of such action.
Custodian shall be entitled to receive, and Fund agrees to pay to
Custodian, on demand, reimbursement for such cash disbursements, costs and
expenses as may be agreed upon from time to time by Custodian and Fund.
Custodian shall be protected in acting as custodian hereunder upon any
instructions, advice, notice, request, consent, certificate or other instrument
or paper reasonably appearing to
<PAGE>
it to be genuine and to have been properly executed and shall, unless otherwise
specifically provided herein, be entitled to receive as conclusive proof of any
fact or matter required to be ascertained from Fund hereunder, a certificate
signed by the Fund's President, or other officer specifically authorized for
such purpose.
Without limiting the generality of the foregoing, Custodian shall be
under no duty or obligation to inquire into, and shall not be liable for:
a. The validity of the issue of any securities purchased by or
for Fund, the legality of the purchase thereof or evidence of
ownership required by Fund to be received by Custodian, or the
propriety of the decision to purchase or amount paid
therefore; or
b. The legality of the sale of any securities by or for Fund, or
the propriety of the amount for which the same are sold.
Custodian shall not be liable for any loss or diminution of securities
by reason of investment experience or for its actions taken in reliance upon an
instruction from Fund.
Custodian shall not be liable for, or considered to be Custodian of,
any money represented by any check, draft, wire transfer, clearing house funds,
uncollected funds, or instrument for the payment or money received by it on
behalf of Fund, until Custodian actually receives such money, provided only that
it shall advise Fund promptly if it fails to receive any such money in the
ordinary course of business, and use its best efforts and cooperate with Fund
toward the end that such money shall be received.
Custodian shall not be responsible for loss occasioned by the acts,
neglect, defaults or insolvency of any broker, bank trust company, or any other
person with whom Custodian may deal in the absence of negligence, or bad faith
on the part of Custodian.
ARTICLE 12. CUSTODIAN'S REPORT
The Custodian shall furnish the Fund, as of the close of business on
the last business day of each month, a statement showing all cash transactions
and entries for the accounts of the Series of the Fund. The books and records of
the Custodian pertaining to its actions as Custodian under this Agreement shall
be open to inspection and audit, at reasonable times, by officers of, and
auditors employed by, the Fund. The Custodian shall furnish the Fund with a list
of the Securities held by it in custody for the account of the Fund as of the
close of business on the last business day of each quarter of the Fund's fiscal
year.
ARTICLE 13. CUSTODIAN'S COMPENSATION
The Custodian shall be paid compensation at such rates and at such
times as may from time to time be agreed on in writing by the parties hereto,
and the Custodian shall have a lien for unpaid compensation, to the date of
termination of this Agreement, upon any cash or Securities
<PAGE>
held by it for the Series accounts of the Fund, enforceable in the manner
specified in Article 9 hereof.
ARTICLE 14. DURATION, TERMINATION AND
AMENDMENT OF AGREEMENT
This Agreement shall remain in effect, as it may from time to time be
amended, until it shall have been terminated as hereinafter provided, but no
such alteration or termination shall affect or impair any rights or liabilities
arising out of any acts or omissions to act occurring prior to such amendment or
termination.
The Custodian may terminate this Agreement by giving the Fund ninety
days' written notice of such termination by registered mail addressed to the
Fund at its principal place of business.
The Fund may terminate this Agreement by giving ninety days', written
notice thereof delivered, together with a copy of the resolution of the Board of
Directors authorizing such termination and certified by the Secretary of the
Fund, by registered mail to the Custodian at its principal place of business.
Additionally, this Agreement may be terminated with respect to any Series of the
Fund pursuant to the same procedures, in which case this Agreement shall
continue in full effect with respect to all other Series of the Fund.
Upon termination of this Agreement, the assets of the Fund, or Series
thereof, held by the Custodian shall be delivered by the Custodian to a
successor custodian upon receipt by the Custodian of a copy of the resolution of
the Board of Directors of the Fund, certified by the Secretary, designating the
successor Custodian; and if no successor custodian is designated the Custodian
shall, upon such termination, deliver all such assets to the Fund.
This Agreement may be amended at any time by the mutual agreement of
the Fund and the Custodian. Additionally, this Agreement may be amended with
respect to any Series of the Fund at any time by the mutual agreement of the
Fund and the Custodian, in which case such amendment would apply to such Series
amending this Agreement but not to the other Series of the Fund.
This Agreement may not be assigned by the Custodian without the consent
of the Fund, authorized or approved by a resolution of its Board of Directors.
ARTICLE 15. SUCCESSOR CUSTODIAN
Any bank or trust company into which the Custodian or any successor
custodian may be merged or converted or with which it or any successor custodian
may be consolidated, or any bank or trust company resulting from any merger,
conversion or consolidation to which the Custodian or any successor custodian
shall be a party, or any bank or trust company succeeding to the business of the
Custodian, shall be and become the successor custodian without the execution of
any instrument or any further act on the part of the Fund or the Custodian or
any successor custodian.
<PAGE>
Any successor custodian shall have all the power, duties, and
obligations of the preceding custodian under this Agreement and any amendments
thereof and shall succeed to all the exemptions and privileges of the preceding
custodian under this Agreement and any amendments thereof.
ARTICLE 16. GENERAL
Nothing expressed or mentioned in or to be implied from any
provisions of this Agreement is intended to give or shall be construed to give
any person or corporation other than the parties hereto any legal or equitable
right, remedy or claim under or in respect of this Agreement or any covenant,
condition or provision herein contained, this Agreement and all of the
covenants, conditions and provisions hereof being intended to be, and being, for
the sole and exclusive benefit of the parties hereto and their respective
successors and assigns.
It is the purpose and intention of the parties hereto that the Fund
shall retain all the power, rights and responsibilities of determining policy,
exercising discretion and making decisions with respect to the purchase, or
other acquisitions, and the sale, or other disposition, of all of its
Securities, and that the duties and responsibilities of the Custodian hereunder
shall be limited to receiving and safeguarding the assets and Securities of the
Fund and to delivering or disposing of them pursuant to the Written Order of the
Fund as aforesaid, and the Custodian shall have no authority, duty or
responsibility for the investment policy of the Fund or for any acts of the Fund
in buying or otherwise acquiring, or in selling or otherwise disposing of, any
Securities, except as hereinbefore specifically set forth.
The Custodian shall in no case or event permit the withdrawal of any
money or Securities of the Fund upon the mere receipt of any director, officer
employee or agent of the Fund, but shall hold such money and Securities for
disposition under the procedures herein set forth.
ARTICLE 17. EFFECTIVE DATE
This agreement shall become effective when it is executed and
delivered by the parties hereto, which date shall not preceed the date it shall
have been approved by the Board of Directors of the Fund. The Fund shall
transmit to the Custodian promptly after such approval by said Board of
Directors a copy of its resolution embodying such approval, certified by the
Secretary of the Fund.
ARTICLE 18. GOVERNING LAW
This agreement is executed and delivered in Minneapolis, Minnesota and
the laws of the State of Minnesota shall be controlling and shall govern the
construction, validity and effect of this contract.
IN WITNESS WHEREOF, the Fund and the Custodian have caused this
Agreement to be executed in duplicate as of the date first above written by
their duly authorized officers.
<PAGE>
FIRST AMERICAN INSURANCE PORTFOLIOS, INC.
By _____________________________________
Its __________________________________
U.S. BANK NATIONAL ASSOCIATION
By _____________________________________
Its __________________________________
EXHIBIT (g)(2)
FIRST AMERICAN INSURANCE PORTFOLIOS, INC.
COMPENSATION AGREEMENT DATED AS OF DECEMBER 8, 1999
PURSUANT TO CUSTODIAN AGREEMENT
WHEREAS, First American Insurance Portfolios, Inc., a Minnesota
corporation (hereinafter called the "Fund"), and U.S. Bank National Association,
a national banking association organized and existing under the laws of the
United States of America with its principal place of business at Minneapolis,
Minnesota (hereinafter called the "Custodian"), entered into that Custodian
Agreement dated December 8, 1999 (the "Custodian Agreement"); and
WHEREAS, Article 13 of the Custodian Agreement provides that the
Custodian shall be paid compensation at such rates and at such times as may from
time to time be agreed on in writing by the parties thereto; and
WHEREAS, the Fund and the Custodian wish to make provision for the
compensation to be paid by the Fund to the Custodian with respect to the
respective series of the Fund.
NOW, THEREFORE, the Fund and the Custodian agrees as follows:
1. The compensation payable to the Custodian pursuant to the
Custodian Agreement with respect to Growth Equity Fund, Value
Equity Fund, Technology Fund, and Bond Fund, shall be payable
monthly at the annual rate, as a percentage of the respective
series' average daily net assets, of 0.03%.
2. This Compensation Agreement restates and supersedes all prior
compensation agreements, if any, pursuant to Article 12 of the
Custodian Agreement.
IN WITNESS WHEREOF, the Fund and the Custodian have caused this
instrument to be executed in duplicate as of the date first above written by
their duly authorized officers.
FIRST AMERICAN INSURANCE PORTFOLIOS, INC.
By ______________________________________
Its _________________________________
U.S. BANK NATIONAL ASSOCIATION
By ______________________________________
Its _________________________________
EXHIBIT (h)(1)
ADMINISTRATION AGREEMENT
THIS AGREEMENT, made as of this 1st day of January 2000, by and between
First American Insurance Portfolios, Inc., a Minnesota corporation (the "Fund"),
and U.S. Bank National Association, a national banking association organized and
existing under the laws of the United States of America (the "Administrator").
WHEREAS, the Fund is an open-end diversified management investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act"), consisting of several series of shares of Common Stock; and
WHEREAS, the Fund desires the Administrator to provide, and the
Administrator is willing to provide, administrative and other services as set
forth herein to such portfolios of the Fund as the Fund and the Administrator
may agree ("Portfolios") and as listed on the schedules attached hereto
("Schedules") and made a part of this Agreement, on the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, the Fund and the Administrator hereby agree as follows:
ARTICLE 1. Retention of the Administrator. The Fund hereby retains the
Administrator to act as the administrator of the Portfolios and to furnish the
Portfolios with the administrative and other services set forth in Article 2
below. The Administrator hereby accepts such employment to perform the duties
set forth below.
The Administrator shall, for all purposes herein, be deemed to be an
independent contractor and, unless otherwise expressly provided or authorized,
shall have no authority to act for or represent the Fund in any way and shall
not be deemed an agent of the Fund.
ARTICLE 2. Administrative Services. The Administrator shall perform, or
supervise the performance by others of, administrative and other services as set
forth herein in connection with the operations of the Portfolios. The
Administrator is authorized to appoint and compensate from its resources one or
more other entities to perform such services on a subcontracted basis in
connection with the operations of the Portfolios and, on behalf of the Fund,
will investigate, assist in the selection of and conduct relations with
custodians, depositories, accountants, legal counsel, underwriters, brokers and
dealers, corporate fiduciaries, insurers, banks and persons in any other
capacity deemed to be necessary or desirable for the Portfolios' operations. If
the Administrator appoints one or more other entities to perform services called
for by this Agreement on a subcontracted basis as aforesaid, the Administrator
nevertheless shall remain liable to the Fund and the Portfolios for the acts and
omissions of such other entities as if the Administrator itself performed such
services.
(A) Administrative and Accounting Services. The Administrator shall
provide the Fund with regulatory reporting, fund accounting and related
portfolio accounting services, all necessary office space, equipment, personnel,
compensation and facilities (including facilities for
<PAGE>
Shareholders' and Directors' meetings) for handling the affairs of the
Portfolios and such other services as the Administrator shall, from time to
time, determine to be necessary to perform its obligations under this Agreement.
In addition, at the request of the Board of Directors, the Administrator shall
make reports to the Fund's Directors concerning the performance of its
obligations hereunder including such activities as are set forth on Exhibit A
hereto, as amended by agreement of the parties from time to time.
Without limiting the generality of the foregoing, the Administrator shall:
(a) calculate Fund expenses and control all disbursements for the
Fund, and as appropriate compute the Fund's yields, total
return, expense ratios, portfolio turnover rate and, if
required, portfolio average dollar-weighted maturity;
(b) assist outside Fund counsel with preparation of prospectuses,
statements of additional information, registration statements
and proxy materials;
(c) prepare such reports, applications and documents (including
reports regarding the sale and redemption of shares as may be
required in order to comply with Federal and state securities
law) as may be necessary or desirable to register the Fund's
shares with state securities authorities, monitor sale of Fund
shares for compliance with state securities laws, and file
with the appropriate securities authorities the registration
statements and reports for the Fund and the Fund's shares and
all amendments thereto, as may be necessary or convenient to
register and keep effective the Fund and the Fund's shares
with state securities authorities to enable the Fund to make a
continuous offering of its shares;
(d) develop and prepare communications to shareholders, including
the annual report to shareholders, coordinate mailing
prospectuses, notices, proxy statements, proxies and other
reports to Fund shareholders, and supervise and facilitate the
solicitation of proxies solicited by the Fund for all
shareholder meetings, including the tabulation process for
shareholder meetings;
(e) prepare, negotiate, and administer contracts on behalf of the
Fund with, among others, the Fund's distributor, subject to
any approvals or reapprovals by the Fund's Board of Directors
required by applicable law or Board procedures;
(f) maintain the Fund's general ledger and prepare the Fund's
financial statements, including expense accruals and payments,
determine the net asset value of the Fund's assets and of the
Fund's shares, and provide for the payment of dividends and
other distributions to shareholders;
(g) calculate performance data of the Fund and the Portfolios for
dissemination to information services covering the investment
company industry;
(h) coordinate and supervise the preparation and filing of the
Fund's tax returns;
<PAGE>
(i) examine and review the operations and performance of the
various organizations providing services to the Fund or any
Portfolio directly or on a subcontracted basis as provided for
herein including, without limitation, the Fund's distributor,
transfer agent, accounting services agent, outside Fund
counsel and independent public accountants, and at the request
of the Board of Directors, report to the Board on the
performance of such organizations;
(j) provide for and coordinate the layout and printing of publicly
disseminated prospectuses and the Fund's semi-annual and
annual reports to shareholders;
(k) provide internal legal and administrative services as
requested by the Fund from time to time;
(l) provide for and coordinate the design, development, and
operation of the Fund, including new portfolio and class
investment objectives, policies and structure;
(m) provide individuals reasonably acceptable to the Fund's Board
of Directors for nomination, appointment, or election as
officers of the Fund, who will be responsible for the
management of certain of the Fund's affairs as determined by
the Fund's Board of Directors;
(n) advise the Fund and its Board of Directors on matters
concerning the Fund and its affairs;
(o) obtain and keep in effect fidelity bonds and directors and
officers/errors and omissions insurance policies for the Fund
in accordance with the requirements of Rules 17g-1 and
17d-1(7) under the 1940 Act as such bonds and policies are
approved by the Fund's Board of Directors;
(p) monitor and advise the Fund and the Portfolios on their
registered investment company status under the Internal
Revenue Code of 1986, as amended;
(q) perform all administrative services and functions required for
the operation of the Fund and each Portfolio to the extent
such administrative services and functions are not provided to
the Fund or such Portfolio pursuant to the Fund's or such
Portfolio's investment advisory agreement, distribution
agreement and custodian agreement;
(r) furnish advice and recommendations with respect to other
aspects of the business and affairs of the Portfolios as the
Fund and the Administrator shall determine desirable; and
(s) prepare and file with the SEC the semi-annual reports for the
Fund on Form N-SAR and all required notices pursuant to Rule
24f-2.
<PAGE>
Also, the Administrator will perform other services for the Fund as agreed from
time to time at the request of the Board of Directors, including, but not
limited to, performing internal audit examinations; mailing annual reports of
the Portfolios; preparing a list of shareholders; and mailing notices of
shareholders' meetings, proxies and proxy statements, for all of which the Fund
will pay the Administrator's out-of-pocket expenses.
(B) Transfer Agency and Dividend Disbursing Services. The Administrator
agrees to perform the usual and ordinary services of transfer agent and dividend
disbursing agent including, without limitation, the following: maintaining all
shareholder accounts; preparing shareholder meeting lists; mailing shareholder
reports and prospectuses; tracking shareholder accounts for Blue Sky and Rule
12b-1 purposes; withholding taxes on non-resident alien and foreign corporation
accounts; preparing and mailing checks for disbursement of income dividends and
capital gains distributions; preparing and filing U.S. Treasury Department Form
1099 for all shareholders; preparing and mailing confirmation forms to
shareholders and dealers with respect to all purchases, exchanges and
liquidations of Fund shares and other transactions in shareholder accounts for
which confirmations are required; recording reinvestments of dividends and
distributions in Fund shares; recording redemptions and Fund shares; and
preparing and mailing checks for payments upon redemption and for disbursements
to withdrawal plan holders. The Administrator has and will maintain all
registrations required under applicable law in order for it to perform such
transfer agency services and maintains and will maintain such records as are
required under applicable law in connection with the provision of such services.
(C) Shareholder Services. The Administrator may provide the Fund with
other services to shareholders not otherwise the subject of this Article 2.
These shareholder services may include personal services provided to
shareholders, such as answering shareholder inquiries regarding a Portfolio and
providing reports and other information and services related to the maintenance
of shareholder accounts. The Fund hereby also authorizes the Administrator to
contract with qualifying broker-dealers, financial institutions and other such
entities for the provision of such services to Fund shareholders. Any such
arrangements shall be outside any shareholder servicing plans or agreements
entered into by the Fund, and the Administrator shall pay the amounts due to
such qualifying broker-dealers, financial institutions and other entities under
any such arrangements from the Administrator's own resources.
ARTICLE 3. Allocation of Charges and Expenses.
(A) The Administrator. The Administrator shall furnish at its own
expense the executive, supervisory and clerical personnel necessary to perform
its obligations under this Agreement. The Administrator shall also provide the
items which it is obligated to provide under this Agreement, and shall pay all
compensation, if any, of officers of the Fund as well as all Directors of the
Fund who are officers or employees of the Administrator or any affiliated
corporation of the Administrator; provided, however, that unless otherwise
specifically provided, the Administrator shall not be obligated to pay the
compensation of any employee of the Fund retained by the Directors of the Fund
to perform services on behalf of the Fund.
<PAGE>
(B) The Fund. The Fund assumes and shall pay or cause to be paid all
other expenses of the Fund not otherwise allocated herein, including, without
limitation, organizational costs, taxes, expenses for outside Fund counsel and
independent auditing services, the expenses of preparing (including
typesetting), printing and mailing reports, prospectuses, statements of
additional information, proxy solicitation material and notices to existing
shareholders, all expenses incurred in connection with issuing and redeeming
shares, the costs of custodial services, reasonable disbursements in connection
with providing transfer agency services including, without limitation, postage
and telephone communications expense, the cost of initial and ongoing
registration of the shares under Federal and state securities laws, fees and
out-of-pocket expenses of Directors who are not affiliated officers or employees
of the Administrator or any affiliated corporation of the Administrator,
insurance, interest, brokerage costs, dues and other expenses incident to the
Fund's membership in the Investment Company Institute and other like
associations, shareholder meetings, corporate reports and reports and notices to
shareholders, litigation and other extraordinary or nonrecurring expenses, and
all fees and charges of investment advisers to the Fund. The Administrator shall
provide such information to the Board at such times as the Board may reasonably
request to enable the Board to monitor such Fund expenses.
ARTICLE 4. Compensation of the Administrator.
(A) Administration Fee. For the services to be rendered, the facilities
furnished and the expenses assumed by the Administrator pursuant to this
Agreement, the Fund shall pay to the Administrator compensation at an annual
rate specified in the Schedule. Such compensation shall be calculated and
accrued daily, and paid to the Administrator monthly. The Fund shall also
reimburse the Administrator for its reasonable out-of-pocket expenses including
the travel and lodging expenses incurred by officers and employees of the
Administrator in connection with attendance at Board meetings.
If this Agreement becomes effective subsequent to the first day of a
month or terminates before the last day of a month, the Administrator's
compensation for that part of the month in which this Agreement is in effect
shall be prorated in a manner consistent with the calculation of the fees as set
forth above. Payment of the Administrator's compensation for the preceding month
shall be made promptly.
(B) Compensation from Transactions. The Fund hereby authorizes any
entity or person associated with the Administrator which is a member of a
national securities exchange to effect any transaction on the exchange for the
account of the Fund which is permitted by Section 11(a) of the Securities
Exchange Act of 1934 and Rule 11a2-2(T) thereunder, and the Fund hereby consents
to the retention of compensation for such transactions in accordance with Rule
11a2-2(T)(a)(2)(iv).
(C) Survival of Compensation Rates. All rights of compensation under
this Agreement for services performed as of the termination date shall survive
the termination of this Agreement.
<PAGE>
ARTICLE 5. Limitation of Liability of the Administrator. The duties of
the Administrator shall be confined to those expressly set forth herein, and no
implied duties are assumed by or may be asserted against the Administrator
hereunder. The Administrator shall not be liable for any error of judgment or
mistake of law or for any loss arising out of any investment or for any act or
omission in carrying out its duties hereunder, except a loss resulting from
willful misfeasance, bad faith or negligence in the performance of its duties,
or by reason of reckless disregard of its obligations and duties hereunder,
except as may otherwise be provided under provisions of applicable law which
cannot be waived or modified hereby. (As used in this Article 5, the term
"Administrator" shall include directors, officers, employees and other corporate
agents of the Administrator as well as that corporation itself.)
So long as the Administrator acts in good faith and with due diligence
and without negligence, the Fund assumes full responsibility and shall indemnify
the Administrator and hold it harmless from and against any and all actions,
suits and claims, whether groundless or otherwise, and from and against any and
all losses, damages, costs, charges, reasonable counsel fees and disbursements,
payments, expenses and liabilities (including reasonable investigation expenses)
arising directly or indirectly out of said administration, transfer agency, and
dividend disbursing relationships to the Fund or any other service rendered to
the Fund hereunder. The indemnity and defense provisions set forth herein shall
indefinitely survive the termination of this Agreement.
The rights hereunder shall include the right to reasonable advances of
defense expenses in the event of any pending or threatened litigation with
respect to which indemnification hereunder may ultimately be merited; provided,
however, that in the event that it is ultimately determined that indemnification
is not warranted, any such amounts advanced hereunder shall be repaid. In order
that the indemnification provision contained herein shall apply, however, it is
understood that if in any case the Fund may be asked to indemnify or hold the
Administrator harmless, the Fund shall be fully and promptly advised of all
pertinent facts concerning the situation in question, and it is further
understood that the Administrator will use all reasonable care to identify and
notify the Fund promptly concerning any situation which presents or appears
likely to present the probability of such a claim for indemnification against
the Fund, but failure to do so in good faith shall not affect the rights
hereunder.
The Fund shall be entitled to participate at its own expense or, if it
so elects, to assume the defense of any suit brought to enforce any claims
subject to this indemnity provision. If the Fund elects to assume the defense of
any such claim, the defense shall be conducted by counsel chosen by the Fund and
satisfactory to the Administrator, whose approval shall not be unreasonably
withheld. In the event that the Fund elects to assume the defense of any suit
and retain counsel, the Administrator shall bear the fees and expenses of any
additional counsel retained by it. If the Fund does not elect to assume the
defense of a suit, it will reimburse the Administrator for the reasonable fees
and expenses of any counsel retained by the Administrator.
The Administrator may apply to the Fund at any time for instructions
and may consult outside counsel for the Fund or its own counsel and with
accountants and other experts with respect to any matter arising in connection
with the Administrator's duties, and the Administrator
<PAGE>
shall not be liable or accountable for any action taken or omitted by it in good
faith in accordance with such instruction or with the opinion of such counsel,
accountants or other experts.
Also, the Administrator shall be protected in acting upon any document
which it reasonably believes to be genuine and to have been signed or presented
by the proper person or persons.
ARTICLE 6. Activities of the Administrator. The services of the
Administrator rendered to the Fund are not to be deemed to be exclusive. The
Administrator is free to render such services to others and to have other
businesses and interests. It is understood that directors, officers, employees
and shareholders of the Fund are or may be or become interested in the
Administrator, as directors, officers, employees and shareholders or otherwise
and that directors, officers, employees and shareholders of the Administrator
are or may be or become similarly interested in the Fund, and that the
Administrator may be or become interested in the Fund as a shareholder or
otherwise.
ARTICLE 7. Duration of this Agreement. The Term of this Agreement shall
be as specified in the Schedule.
This Agreement shall not be assignable by either party without the
written consent of the other party.
ARTICLE 8. Amendments. This Agreement may be amended by the parties
hereto only if such amendment is specifically approved (i) by the vote of a
majority of the Directors of the Fund, and (ii) by the vote of a majority of the
Directors of the Fund who are not parties to this Agreement or interested
persons of any such party, cast in person at a Board of Directors meeting called
for the purpose of voting on such approval.
ARTICLE 9. Certain Records. The Administrator shall maintain customary
records in connection with its duties as specified in this Agreement. Any
records required to be maintained and preserved pursuant to Rules 31a-1 and
31a-2 under the 1940 Act which are prepared or maintained by the Administrator
on behalf of the Fund shall be prepared and maintained at the expense of the
Administrator, but shall be the property of the Fund and will be made available
to or surrendered promptly to the Fund on request.
In case of any request or demand for the inspection of such records by
another party, the Administrator shall notify the Fund and follow the Fund's
instructions as to permitting or refusing such inspection; provided that the
Administrator may exhibit such records to any person in any case where it is
advised by its counsel that it may be held liable for failure to do so, unless
(in cases involving potential exposure only to civil liability) the Fund has
agreed to indemnify the Administrator against such liability.
ARTICLE 10. Definitions of Certain Terms. The terms "interested person"
and "affiliated person", when used in this Agreement, shall have the respective
meanings specified in the 1940 Act and the rules and regulations thereunder,
subject to such exemptions as may be granted by the Securities and Exchange
Commission.
<PAGE>
ARTICLE 11. Notice. Any notice required or permitted to be given by
either party to the other shall be deemed sufficient if sent by registered or
certified mail, postage prepaid, addressed by the party giving notice to the
other party (a) in the case of notice to the Fund, to the Chair of the Board of
Directors of the Fund at the last address furnished by such person or, if the
Chair is an affiliated person or interested person of the Administrator, to the
Directors of the Fund who are not such affiliated persons or interested persons
at the last addresses furnished by such persons, and (b) in the case of notice
to the Administrator, to the last address furnished by the Administrator for
such purpose.
ARTICLE 12. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of Minnesota and the applicable provisions
of the 1940 Act. To the extent that the applicable laws of the State of
Minnesota, or any of the provisions herein, conflict with the applicable
provisions of the 1940 Act, the latter shall control.
ARTICLE 13. Multiple Originals. This Agreement may be executed in two
or more counterparts, each of which when so executed shall be deemed to be an
original, but such counterparts shall together constitute but one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
FIRST AMERICAN INSURANCE PORTFOLIOS, INC.
By ______________________________________
Its _________________________________
U.S. BANK NATIONAL ASSOCIATION
By ______________________________________
Its _________________________________
<PAGE>
SCHEDULE TO THE
ADMINISTRATION AGREEMENT
DATED AS OF JANUARY 1, 2000
BETWEEN
FIRST AMERICAN INSURANCE PORTFOLIOS, INC.
AND
U.S. BANK NATIONAL ASSOCIATION
Portfolios: This Agreement shall apply to all Portfolios of First
American Insurance Portfolios, Inc., either now or
hereafter created (collectively, the "Portfolios").
Fees: Pursuant to Article 4, the Fund shall pay the
Administrator compensation for services rendered to the
Portfolios at an annual rate, which is calculated daily
and paid monthly, equal to such Portfolio's pro rata
share of an amount equal to (i) .12% of the aggregate
average daily net assets of all mutual funds in the
First American family of funds ("First American Fund
Family") up to $8 billion, and (ii) .105% of the
aggregate average daily net assets of the First American
Fund Family in excess of $8 billion. For the purposes of
this provision, the First American Fund Family includes
all series of First American Funds, Inc., First American
Investment Funds, Inc., First American Strategy Funds,
Inc., and First American Insurance Portfolios, Inc.
In addition, the Fund shall pay the Administrator the
following fees for transfer agency and dividend
disbursing services:
<TABLE>
<CAPTION>
Annual CUSIP Fee: $18,500/CUSIP/year
<S> <C>
Open Account Fee:
[X] Internal Accounts $15.00/account/year
[X] Third Party/External Accounts $15.00/account/year
[X] IRA Accounts N/A
[X] Certificate Processing N/A
Closed Account Fee:
[X] Internal Accounts N/A
[X] Third Party/External Accounts $3.50/account/year
</TABLE>
Term: Pursuant to Article 7, the term of this Agreement,
unless sooner terminated as specified under the heading
"Termination" below, shall commence on April 1, 2000 and
shall remain in effect through December 31, 2002
("Initial Term") and the Initial Term shall be
automatically extended on January 1, 2002 for one
successive two-year period (i.e., through December 31,
2004) if the Administrator has met or exceeded the
written service level standards set forth on Exhibit A
to this Agreement (the "Service Standards") on no less
than 90% of such Service Standards on a cumulative basis
during the period commencing January 1, 2000 and ending
on December 31, 2001. The Initial Term (as
<PAGE>
extended) shall thereafter be automatically extended on
January 1 of each year commencing with January 1, 2004,
(the "Extension Date") for successive one-year periods
(e.g., in the instance where the Extension Date is
January 1, 2004, through December 31, 2005) if the
Administrator has met or exceeded at least 90% of the
Service Standards on a cumulative basis during the prior
two-year period ending on the applicable Extension Date.
Calculation of compliance with the Service Standards
will be measured monthly, and reported to the Board of
Directors of First American Insurance Portfolios, Inc.
quarterly, as a fraction, the numerator of which is the
number of Service Standard events that were met in such
month and the denominator of which is the number of
Service Standard events to be completed for such month
("Service Level Percentage"). The Administrator will
calculate the compliance percentage, and Ernst & Young
will review such calculation, on a quarterly basis. Any
disagreements will be reported to the Board of Directors
of the First American Insurance Portfolios, Inc. for
resolution, in the Board's good faith judgment.
Termination: The Administration Agreement will be terminable by the
Portfolios by delivery to the Administrator of written
notice: (i) for any reason on six months prior written
notice to the Administrator; (ii) in the event of the
Administrator's bankruptcy or insolvency; (iii) in the
event of a conviction of the Administrator for corporate
criminal activity; (iv) if in any consecutive six-month
period the average cumulative Service Level Percentage
is less than 50%; or (v) if the Administrator has
materially failed to perform its responsibilities as
administrator under this Agreement, and such material
failure has not been cured within 45 days after written
notice is received by the Administrator specifying the
nature of the failure. The Administration Agreement will
be terminable by the Administrator by delivery to the
Portfolios of written notice of termination delivered no
less than 180 days prior to the end of the Initial Term
(as extended if applicable).
Agreed to and accepted Agreed to and accepted
FIRST AMERICAN INSURANCE U.S. BANK NATIONAL ASSOCIATION
PORTFOLIOS, INC.
By By
----------------------------------- -----------------------------------
Its Its
------------------------------ ------------------------------
Date Date
-------------------------- --------------------------
2
EXHIBIT (h)(2)
PARTICIPATION AGREEMENT
BY AND AMONG
FIRST AMERICAN INSURANCE PORTFOLIOS, INC.,
SEI INVESTMENTS DISTRIBUTION CO.,
[______________] INSURANCE COMPANY,
ON BEHALF OF ITSELF AND
ITS SEPARATE ACCOUNTS,
AND
___________ DISTRIBUTION COMPANY, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
DESCRIPTION PAGE
- ----------- ----
<S> <C> <C>
Section 1. Available Funds 4
1.1 Availability 4
1.2 Addition, Deletion or Modification of Funds 4
1.3 No Sales to the General Public 4
Section 2. Processing Transactions 4
2.1 Timely Pricing and Orders 4
2.2 Timely Payments 5
2.3 Applicable Price 5
2.4 Dividends and Distributions 6
2.5 Book Entry 6
Section 3. Costs and Expenses 6
3.1 General 6
3.2 Registration 6
3.3 Other (Non-Sales-Related) 7
3.4 Other (Sales-Related) 7
3.5 Parties To Cooperate 7
Section 4. Legal Compliance 8
4.1 Tax Laws 8
4.2 Insurance and Certain Other Laws 10
4.3 Securities Laws 10
4.4 Notice of Certain Proceedings and Other Circumstances 12
4.5 Company To Provide Documents; Information About FAIP 12
4.6 FAIP To Provide Documents; Information About Company 13
<PAGE>
DESCRIPTION PAGE
- ----------- ----
Section 5. Mixed and Shared Funding 15
5.1 General 15
5.2 Disinterested Directors 15
5.3 Monitoring for Material Irreconcilable Conflicts 15
5.4 Conflict Remedies 16
5.5 Notice to Company 18
5.6 Information Requested by Board of Directors 18
5.7 Compliance with SEC Rules 18
5.8 Other Requirements 18
Section 6. Termination 19
6.1 Events of Termination 19
6.2 Notice Requirement for Termination 20
6.3 Funds To Remain Available 20
6.4 Survival of Warranties and Indemnifications 20
6.5 Continuance of Agreement for Certain Purposes 21
Section 7. Parties To Cooperate Respecting Termination 21
Section 8. Assignment 21
Section 9. Notices 21
Section 10. Voting Procedures 22
Section 11. Foreign Tax Credits 23
Section 12. Indemnification 23
12.1 Of FAIP and SEI by Company and Contract Underwriter 23
12.2 Of Company and Contract Underwriter by FAIP and SEI 25
12.3 Effect of Notice 28
12.4 Successors 28
Section 13. Applicable Law 28
Section 14. Execution in Counterparts 28
Section 15. Severability 28
Section 16. Rights Cumulative 29
Section 17. Headings 29
Section 18. Confidentiality 29
Section 19. Parties to Cooperate 30
Section 20. Amendments 30
Section 21. Assignment 30
</TABLE>
<PAGE>
PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into as of the _____ day of _________,
2000 ("Agreement"), by and among First American Insurance Portfolios, Inc., a
Minnesota corporation ("FAIP"); SEI Investments Distribution Co., a Delaware
corporation ("SEI"), [____________] Insurance Company, a __________ life
insurance company ("Company"), on behalf of itself and each of its segregated
asset accounts listed in Schedule A hereto, as the parties hereto may amend said
Schedule A from time to time (each, an "Account," and collectively, the
"Accounts"); and [______] Distribution Company, an affiliate of Company and the
principal underwriter of the Contracts ("Contract Underwriter") (collectively,
the "Parties").
WITNESSETH THAT:
WHEREAS, FAIP is registered with the Securities and Exchange Commission
("SEC") as an open-end management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, FAIP currently consists of three separate series ("Series"),
shares ("Shares") of each of which are registered under the Securities Act of
1933, as amended (the "1933 Act") and may be sold to one or more separate
accounts of life insurance companies to fund benefits under variable annuity
contracts and variable life insurance contracts; and
WHEREAS, FAIP will make Shares of each Series listed on Schedule A
hereto as the Parties hereto may amend said Schedule A from time to time (each a
"Fund"; reference herein to "Fund" includes reference to each Fund, to the
extent the context requires) available for purchase by the Accounts; and
WHEREAS, SEI is a broker-dealer registered with the SEC under the
Securities Exchange Act of 1934 ("1934 Act") and a member in good standing of
the National Association of Securities Dealers, Inc. ("NASD"); and
WHEREAS, Company will be the issuer of certain variable annuity
contracts and variable life insurance contracts ("Contracts") as set forth on
Schedule A hereto, as the Parties hereto may amend said Schedule A from time to
time, which Contracts, if required by applicable law, will be registered under
the 1933 Act; and
WHEREAS, Company will fund the Contracts through the Accounts, each of
which may be divided into two or more subaccounts ("Subaccounts"; reference
herein to an "Account" includes reference to each Subaccount thereof to the
extent the context requires); and
WHEREAS, Company will serve as the depositor of the Accounts, each of
which is registered as a unit investment trust investment company under the 1940
Act (or exempt therefrom), and the security interests deemed to be issued by the
Accounts under the Contracts will be registered as securities under the 1933 Act
(or exempt therefrom); and
64
<PAGE>
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, Company intends to purchase Shares in one or more of the Funds on
behalf of the Accounts to fund the Contracts; and
WHEREAS, Contract Underwriter is a broker-dealer registered with the
SEC under the Securities Exchange Act of 1934 ("1934 Act") and a member in good
standing of the National Association of Securities Dealers, Inc. ("NASD");
NOW, THEREFORE, in consideration of the mutual benefits and promises
contained herein, the Parties hereto agree as follows:
SECTION 1. AVAILABLE FUNDS
1.1 AVAILABILITY.
FAIP will make Shares of each Fund available to Company for purchase
and redemption on behalf of the Accounts at net asset value and with no sales
charges, subject to the terms and conditions of this Agreement. The Board of
Directors of FAIP may refuse to sell Shares of any Fund to any person, or
suspend or terminate the offering of Shares of any Fund if such action is
required by law or by regulatory authorities having jurisdiction or if, in the
sole discretion of the Directors acting in good faith and in light of their
fiduciary duties under federal and any applicable state laws, such action is
deemed in the best interests of the shareholders of such Fund.
1.2 ADDITION, DELETION OR MODIFICATION OF FUNDS.
The Parties hereto may agree, from time to time, to add other Funds to
provide additional funding media for the Contracts, or to delete, combine, or
modify existing Funds, by amending Schedule A hereto. Upon such amendment to
Schedule A, any applicable reference to a Fund or its Shares herein shall
include a reference to any such additional Fund. Schedule A, as amended from
time to time, is incorporated herein by reference and is a part hereof.
1.3 NO SALES TO THE GENERAL PUBLIC.
FAIP represents and warrants that no shares of the Funds have been or
will be sold to the general public.
SECTION 2. PROCESSING TRANSACTIONS
2.1 TIMELY PRICING AND ORDERS.
(a) FAIP or its designated agent will use its best efforts to
provide Company with the net asset value per Share for each
Fund by 6:00 p.m. Central Time on each Business Day. As used
herein, "Business Day" shall mean any day on which (i) the New
York Stock Exchange is open for regular trading, (ii) FAIP
calculates the Fund's net asset value, and (iii) Company is
open for business.
65
<PAGE>
(b) Company will use the data provided by FAIP each Business Day
pursuant to paragraph (a) immediately above to calculate
Account unit values and to process transactions that receive
that same Business Day's Account unit values. Company will
perform such Account processing the same Business Day, and
will place corresponding orders to purchase or redeem Shares
with FAIP by 9:00 a.m. Central Time the following Business
Day; provided, however, that FAIP shall provide additional
time to Company in the event that FAIP is unable to meet the
6:00 p.m. time stated in paragraph (a) immediately above. Such
additional time shall be equal to the additional time that
FAIP takes to make the net asset values available to Company.
(c) With respect to payment of the purchase price by Company and
of redemption proceeds by FAIP, Company and FAIP shall net
purchase and redemption orders with respect to each Fund and
shall transmit one net payment per Fund in accordance with
Section 2.2, below.
(d) If FAIP provides materially incorrect Share net asset value
information (as determined under SEC guidelines), Company
shall be entitled to an adjustment to the number of Shares
purchased or redeemed to reflect the correct net asset value
per Share. Any material error in the calculation or reporting
of net asset value per Share, dividend or capital gain
information shall be reported promptly upon discovery to
Company.
2.2 TIMELY PAYMENTS.
Company will wire payment for net purchases to a custodial account
designated by Fund by 1:00 p.m. Central Time on the same day as the order for
Shares is placed, to the extent practicable. FAIP will wire payment for net
redemptions to an account designated by Company by 1:00 p.m. Central Time on the
same day as the Order is placed, to the extent practicable, but in any event
within three (3) calendar days after the date the order is placed in order to
enable Company to pay redemption proceeds within the time specified in Section
22(e) of the 1940 Act or such shorter period of time as may be required by law.
2.3 APPLICABLE PRICE.
(a) Share purchase payments and redemption orders that result from
purchase payments, premium payments, surrenders and other
transactions under Contracts (collectively, "Contract
transactions") and that Company receives prior to the close of
regular trading on the New York Stock Exchange on a Business
Day will be executed at the net asset values of the
appropriate Funds next computed after receipt by Fund or its
designated agent of the orders. For purposes of this Section
2.3(a), Company shall be the designated agent of FAIP for
receipt of orders relating to Contract transactions on each
Business Day and receipt by such designated agent shall
constitute receipt by FAIP; provided that FAIP receives notice
of such orders by 9:00 a.m. Central Time on the next following
Business Day or such later time as computed in accordance with
Section 2.1(b) hereof.
66
<PAGE>
(b) All other Share purchases and redemptions by Company will be
effected at the net asset values of the appropriate Funds next
computed after receipt by FAIP or its designated agent of the
order therefor, and such orders will be irrevocable.
2.4 DIVIDENDS AND DISTRIBUTIONS.
FAIP will furnish notice by wire or telephone (followed by written
confirmation) on or prior to the payment date to Company of any income dividends
or capital gain distributions payable on the Shares of any Fund. Company hereby
elects to reinvest all dividends and capital gains distributions in additional
Shares of the corresponding Fund at the ex-dividend date net asset values until
Company otherwise notifies FAIP in writing, it being agreed by the Parties that
the ex-dividend date and the payment date with respect to any dividend or
distribution will be the same Business Day. Company reserves the right to revoke
this election and to receive all such income dividends and capital gain
distributions in cash.
2.5 BOOK ENTRY.
Issuance and transfer of FAIP Shares will be by book entry only. Stock
certificates will not be issued to Company. Shares ordered from FAIP will be
recorded in an appropriate title for Company, on behalf of its Account.
SECTION 3. COSTS AND EXPENSES
3.1 GENERAL.
Except as otherwise specifically provided herein, each Party will bear
all expenses incident to its performance under this Agreement.
3.2 REGISTRATION.
(a) FAIP will bear the cost of its registering as a management
investment company under the 1940 Act and registering its
Shares under the 1933 Act, and keeping such registrations
current and effective; including, without limitation, the
preparation of and filing with the SEC of Forms N-SAR and Rule
24f-2 Notices with respect to FAIP and its Shares and payment
of all applicable registration or filing fees with respect to
any of the foregoing.
(b) Company will bear the cost of registering, to the extent
required, each Account as a unit investment trust under the
1940 Act and registering units of interest under the Contracts
under the 1933 Act and keeping such registrations current and
effective; including, without limitation, the preparation and
filing with the SEC of Forms N-SAR and Rule 24f-2 Notices with
respect to each Account and its units of interest and payment
of all applicable registration or filing fees with respect to
any of the foregoing.
3.3 OTHER (NON-SALES-RELATED).
67
<PAGE>
(a) FAIP will bear, or arrange for others to bear, the costs of
preparing, filing with the SEC and setting for printing FAIP's
prospectus, statement of additional information and any
amendments or supplements thereto (collectively, the "FAIP
Prospectus"), periodic reports to shareholders, FAIP proxy
material and other shareholder communications.
(b) Company will bear the costs of preparing, filing with the SEC
and setting for printing each Account's prospectus, statement
of additional information and any amendments or supplements
thereto (collectively, the "Account Prospectus"), any periodic
reports to Contract owners, annuitants, insureds or
participants (as appropriate) under the Contracts
(collectively, "Participants"), voting instruction
solicitation material, and other Participant communications.
(c) Company will print in quantity and deliver to existing
Participants the documents described in Section 3.3(b) above
and the prospectus provided by FAIP in camera ready form. FAIP
will print the FAIP statement of additional information, proxy
materials relating to FAIP and periodic reports of FAIP.
3.4 OTHER (SALES-RELATED).
Company will bear the expenses of distribution. These expenses would
include by way of illustration, but are not limited to, the costs of
distributing to Participants the following documents, whether they relate to the
Account or FAIP: prospectuses, statements of additional information, proxy
materials and periodic reports. These costs would also include the costs of
preparing, printing, and distributing sales literature and advertising relating
to the Funds, as well as filing such materials with, and obtaining approval
from, the SEC, the NASD, any state insurance regulatory authority, and any other
appropriate regulatory authority, to the extent required.
3.5 PARTIES TO COOPERATE.
Each Party agrees to cooperate with the others, as applicable, in
arranging to print, mail and/or deliver, in a timely manner, combined or
coordinated prospectuses or other materials of FAIP and the Accounts.
68
<PAGE>
SECTION 4. LEGAL COMPLIANCE
4.1 TAX LAWS.
(a) FAIP represents and warrants that each Fund is currently
qualified as a regulated investment company ("RIC") under
Subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code"), and represents that it will maintain
qualification of each Fund as a RIC. FAIP will notify Company
immediately upon having a reasonable basis for believing that
a Fund has ceased to so qualify or that it might not so
qualify in the future.
(b) FAIP represents that it will use its best efforts to comply
and to maintain each Fund's compliance with the
diversification requirements set forth in Section 817(h) of
the Code and Section 1.817-5(b) of the regulations under the
Code. FAIP will notify Company immediately upon having a
reasonable basis for believing that a Fund has ceased to so
comply or that a Fund might not so comply in the future. In
the event of a breach of this Section 4.1(b) by FAIP, it will
take all reasonable steps to adequately diversify the Fund so
as to achieve compliance within the grace period afforded by
Section 1.817-5 of the regulations under the Code.
(c) Notwithstanding Section 12.2 hereunder, Company agrees that if
the Internal Revenue Service ("IRS") asserts in writing in
connection with any governmental audit or review of Company
or, to Company's knowledge, of any Participant, that any Fund
has failed to comply with the diversification requirements of
Section 817(h) of the Code or Company otherwise becomes aware
of any facts that could give rise to any claim against FAIP or
its affiliates as a result of such a failure or alleged
failure:
(i) Company shall promptly notify FAIP of such assertion
or potential claim (subject to the Confidentiality
provisions of Section 18 as to any Participant);
(ii) Company shall consult with FAIP as to how to minimize
any liability that may arise as a result of such
failure or alleged failure;
(iii) Company shall use its best efforts to minimize any liability of
FAIP or its affiliates resulting from such failure, including, without
limitation, demonstrating, pursuant to Treasury Regulations Section
1.817-5(a)(2), to the Commissioner of the IRS that such failure was
inadvertent;
(iv) Company shall permit FAIP, its affiliates and their
legal and accounting advisors to participate in any
conferences, settlement discussions or other
administrative or judicial proceeding or contests
(including judicial appeals thereof) with the IRS,
any Participant or any other claimant regarding any
claims that could give rise to liability to FAIP or
its affiliates as a result of such a failure or
alleged failure; provided,
69
<PAGE>
however, that Company will retain control of the
conduct of such conferences discussions, proceedings,
contests or appeals;
(v) any written materials to be submitted by Company to
the IRS, any Participant or any other claimant in
connection with any of the foregoing proceedings or
contests (including, without limitation, any such
materials to be submitted to the IRS pursuant to
Treasury Regulations Section 1.817-5(a)(2)), (a)
shall be provided by Company to FAIP (together with
any supporting information or analysis); subject to
the confidentiality provisions of Section 18, at
least ten (10) business days or such shorter period
to which FAIP and Company agree prior to the day on
which such proposed materials are to be submitted,
and (b) shall not be submitted by Company to any such
person without the express written consent of FAIP
which shall not be unreasonably withheld;
(vi) Company shall provide FAIP or its affiliates and
their accounting and legal advisors with such
cooperation as FAIP shall reasonably request
(including, without limitation, by permitting FAIP
and its accounting and legal advisors to review the
relevant books and records of Company) in order to
facilitate review by FAIP or its advisors of any
written submissions provided to it pursuant to the
preceding clause or its assessment of the validity or
amount of any claim against its arising from such a
failure or alleged failure;
(vii) Company shall not with respect to any claim of the
IRS or any Participant that would give rise to a
claim against FAIP or its affiliates (a) compromise
or settle any claim, (b) accept any adjustment on
audit, or (c) forego any allowable administrative or
judicial appeals, without the express written consent
of FAIP or its affiliates, which shall not be
unreasonably withheld, provided that Company shall
not be required, after exhausting all administrative
remedies, to appeal any adverse judicial decision
unless FAIP or its affiliates shall have provided an
opinion of independent counsel to the effect that a
reasonable basis exists for taking such appeal; and
provided further that the costs of any such appeal
shall be borne equally by FAIP and Company hereto
except that Company shall not be liable for such
costs if the failure to comply with Section 817 (h)
arises from a failure to meet the requirements of
Treasury Regulation Section 1.817-5(b)(1) or (2) or
Treasury Regulation Section 1.817-5(f) through no
fault of Company; and
(viii) FAIP and its affiliates shall have no liability as a
result of such failure or alleged failure if Company
fails to comply with any of the foregoing clauses (i)
through (vii), and such failure could be shown to
have materially contributed to the liability.
70
<PAGE>
As used in this Agreement, the term "affiliates" shall have
the same meaning as "affiliated person" as defined in Section
2(a)(3) of the 1940 Act.
(d) Company represents and warrants that the Contracts currently
are and will be treated as annuity contracts or life insurance
contracts under applicable provisions of the Code and that it
will maintain such treatment; Company will notify FAIP
immediately upon having a reasonable basis for believing that
any of the Contracts have ceased to be so treated or that they
might not be so treated in the future.
(e) Company represents and warrants that each Account is a
"segregated asset account" and that interests in each Account
are offered exclusively through the purchase of or transfer
into a "variable contract," within the meaning of such terms
under Section 817 of the Code and the regulations thereunder.
Company will continue to meet such definitional requirements,
and it will notify FAIP immediately upon having a reasonable
basis for believing that such requirements have ceased to be
met or that they might not be met in the future.
4.2 INSURANCE AND CERTAIN OTHER LAWS.
(a) FAIP will comply with any applicable state insurance laws or
regulations, to the extent specifically requested in writing
by Company, including, the furnishing of information not
otherwise available to Company which is required by state
insurance law to enable Company to obtain the authority needed
to issue the Contracts in any applicable state.
(b) Company represents and warrants that (i) it is an insurance
company duly organized, validly existing and in good standing
under the laws of the State of ___________ and has full
corporate power, authority and legal right to execute, deliver
and perform its duties and comply with its obligations under
this Agreement, (ii) it has legally and validly established
and maintains each Account as a segregated asset account under
[State] Insurance Law and the regulations thereunder, and
(iii) the Contracts comply in all material respects with all
other applicable federal and state laws and regulations.
(c) FAIP represents and warrants that it is a corporation duly
organized, validly existing, and in good standing under the
laws of the State of Minnesota and has full power, authority,
and legal right to execute, deliver, and perform its duties
and comply with its obligations under this Agreement.
4.3 SECURITIES LAWS.
(a) Company represents and warrants that (i) interests in each
Account pursuant to the Contracts will be registered under the
1933 Act to the extent required by the 1933 Act, (ii) the
Contracts will be duly authorized for issuance and sold in
compliance with all applicable federal and state laws,
including, without limitation, the 1933
71
<PAGE>
Act, the 1934 Act, the 1940 Act and [State] law, (iii) each
Account is and will remain registered under the 1940 Act, to
the extent required by the 1940 Act, (iv) each Account does
and will comply in all material respects with the requirements
of the 1940 Act and the rules thereunder, to the extent
required, (v) each Account's 1933 Act registration statement
relating to the Contracts, together with any amendments
thereto, will at all times comply in all material respects
with the requirements of the 1933 Act and the rules
thereunder, (vi) Company will amend the registration statement
for its Contracts under the 1933 Act and for its Accounts
under the 1940 Act from time to time as required in order to
effect the continuous offering of its Contracts or as may
otherwise be required by applicable law, and (vii) each
Account Prospectus will at all times comply in all material
respects with the requirements of the 1933 Act and the rules
thereunder.
(b) Company will at its expense register and qualify the Contracts
for sale in accordance with the laws of any state or other
jurisdiction if and to the extent reasonably deemed advisable
by Company.
(c) FAIP represents and warrants that (i) Shares sold pursuant to
this Agreement will be registered under the 1933 Act to the
extent required by the 1933 Act and duly authorized for
issuance and sold in compliance with Minnesota law, (ii) FAIP
is and will remain registered under the 1940 Act to the extent
required by the 1940 Act, (iii) FAIP will amend the
registration statement for its Shares under the 1933 Act and
itself under the 1940 Act from time to time as required in
order to effect the continuous offering of its Shares, (iv)
FAIP does and will comply in all material respects with the
requirements of the 1940 Act and the rules thereunder, (v)
FAIP's 1933 Act registration statement, together with any
amendments thereto, will at all times comply in all material
respects with the requirements of the 1933 Act and rules
thereunder, and (vi) FAIP's Prospectus will at all times
comply in all material respects with the requirements of the
1933 Act and the rules thereunder.
(d) FAIP will at its expense register and qualify its Shares for
sale in accordance with the laws of any state or other
jurisdiction if and to the extent reasonably deemed advisable
by FAIP.
(e) FAIP currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940
Act or otherwise, although it reserves the right to make such
payments in the future. To the extent that it decides to
finance distribution expenses pursuant to Rule 12b-1, FAIP
undertakes to have its Board of Directors, a majority of whom
are not "interested" persons of FAIP, formulate and approve
any plan under Rule 12b-1 to finance distribution expenses.
72
<PAGE>
(f) FAIP represents and warrants that all of its directors,
officers, employees, investment advisers, and other
individuals/entities having access to the funds and/or
securities of the Funds are and continue to be at all times
covered by a blanket fidelity bond or similar coverage for the
benefit of the Funds in an amount not less than the minimal
coverage as required currently by Rule 17g-(1) of the 1940 Act
or related provisions as may be promulgated from time to time.
The aforesaid bond includes coverage for larceny and
embezzlement and is issued by a reputable bonding company.
4.4 NOTICE OF CERTAIN PROCEEDINGS AND OTHER CIRCUMSTANCES.
(a) FAIP will immediately notify Company of (i) the issuance by
any court or regulatory body of any stop order, cease and
desist order, or other similar order with respect to FAIP's
registration statement under the 1933 Act or FAIP Prospectus,
(ii) any request by the SEC for any amendment to such
registration statement or Fund Prospectus that may affect the
offering of Shares of FAIP, (iii) the initiation of any
proceedings for that purpose or for any other purpose relating
to the registration or offering of FAIP's Shares, or (iv) any
other action or circumstances that may prevent the lawful
offer or sale of Shares of any Fund in any state or
jurisdiction, including, without limitation, any circumstances
in which (a) such Shares are not registered and, in all
material respects, issued and sold in accordance with
applicable state and federal law, or (b) such law precludes
the use of such Shares as an underlying investment medium of
the Contracts issued or to be issued by Company. FAIP will
make every reasonable effort to prevent the issuance, with
respect to any Fund, of any such stop order, cease and desist
order or similar order and, if any such order is issued, to
obtain the lifting thereof at the earliest possible time.
(b) Company will immediately notify FAIP of (i) the issuance by
any court or regulatory body of any stop order, cease and
desist order, or other similar order with respect to each
Account's registration statement under the 1933 Act relating
to the Contracts or each Account Prospectus, (ii) any request
by the SEC for any amendment to such registration statement or
Account Prospectus that may affect the offering of Shares of
FAIP, (iii) the initiation of any proceedings for that purpose
or for any other purpose relating to the registration or
offering of each Account's interests pursuant to the
Contracts, or (iv) any other action or circumstances that may
prevent the lawful offer or sale of said interests in any
state or jurisdiction, including, without limitation, any
circumstances in which said interests are not registered and,
in all material respects, issued and sold in accordance with
applicable state and federal law. Company will make every
reasonable effort to prevent the issuance of any such stop
order, cease and desist order or similar order and, if any
such order is issued, to obtain the lifting thereof at the
earliest possible time.
73
<PAGE>
4.5 COMPANY TO PROVIDE DOCUMENTS; INFORMATION ABOUT FAIP.
(a) Company will provide to FAIP or its designated agent at least
one (1) complete copy of all SEC registration statements,
Account Prospectuses, reports, any preliminary and final
voting instruction solicitation material, applications for
exemptions, requests for no-action letters, and all amendments
to any of the above, that relate to each Account or the
Contracts, contemporaneously with the filing of such document
with the SEC or other regulatory authorities.
(b) Company will provide to FAIP or its designated agent at least
one (1) complete copy of each piece of sales literature or
other promotional material in which FAIP or any of its
affiliates is named, at least five (5) Business Days prior to
its use or such shorter period as the Parties hereto may, from
time to time, agree upon. No such material shall be used if
FAIP or its designated agent objects to such use within five
(5) Business Days after receipt of such material or such
shorter period as the Parties hereto may, from time to time,
agree upon.
(c) Neither Company nor any of its affiliates, will give any
information or make any representations or statements on
behalf of or concerning FAIP or its affiliates in connection
with the sale of the Contracts other than (i) the information
or representations contained in the registration statement,
including the FAIP Prospectus contained therein, relating to
Shares, as such registration statement and FAIP Prospectus may
be amended from time to time; or (ii) in reports or proxy
materials for FAIP; or (iii) in published reports for FAIP
that are in the public domain and approved by FAIP for
distribution; or (iv) in sales literature or other promotional
material approved by FAIP, except with the express written
permission of FAIP.
(d) Company shall adopt and implement procedures reasonably
designed to ensure that information concerning FAIP and its
affiliates that is intended for use only by brokers or agents
selling the Contracts (i.e., information that is not intended
for distribution to Participants) ("broker only materials") is
so used, and neither FAIP nor any of its affiliates shall be
liable for any losses, damages or expenses relating to the
improper use of such broker only materials.
(e) For the purposes of this Section 4.5, the phrase "sales
literature or other promotional material" includes, but is not
limited to, advertisements (such as material published, or
designed for use in, a newspaper, magazine, or other
periodical, radio, television, telephone or tape recording,
videotape display, signs or billboards, motion pictures, or
other public media, (e.g., on-line networks such as the
Internet or other electronic messages), sales literature
(i.e., any written communication distributed or made generally
available to customers or the public, including brochures,
circulars, research reports, market letters, form letters,
seminar texts, reprints or excerpts of any other
advertisement, sales literature, or published article),
educational or training materials or other communications
distributed or made generally available to some or all agents
or employees,
74
<PAGE>
registration statements, prospectuses, statements of
additional information, shareholder reports, and proxy
materials and any other material constituting sales literature
or advertising under the NASD rules, the 1933 Act or the 1940
Act.
4.6 FAIP TO PROVIDE DOCUMENTS; INFORMATION ABOUT COMPANY.
(a) FAIP will provide to Company at least one (1) complete copy of
all SEC registration statements, FAIP Prospectuses, reports,
any preliminary and final proxy material, applications for
exemptions, requests for no-action letters, and all amendments
to any of the above, that relate to FAIP or the Shares of a
Fund, contemporaneously with the filing of such document with
the SEC or other regulatory authorities.
(b) FAIP will provide to Company camera ready or computer diskette
copies of all FAIP prospectuses and printed copies, in an
amount specified by Company, of FAIP statements of additional
information, proxy materials, periodic reports to shareholders
and other materials required by law to be sent to Participants
who have allocated any Contract value to a Fund. FAIP will
provide such copies to Company in a timely manner so as to
enable Company, as the case may be, to print and distribute
such materials within the time required by law to be furnished
to Participants.
(c) FAIP will provide to Company or its designated agent at least
one (1) complete copy of each piece of sales literature or
other promotional material in which Company, or any of its
respective affiliates is named, or that refers to the
Contracts, at least five (5) Business Days prior to its use or
such shorter period as the Parties hereto may, from time to
time, agree upon. No such material shall be used if Company or
its designated agent objects to such use within five (5)
Business Days after receipt of such material or such shorter
period as the Parties hereto may, from time to time, agree
upon. Company shall receive all such sales literature until
such time as it appoints a designated agent by giving notice
to FAIP in the manner required by Section 9 hereof.
(d) Neither FAIP nor any of its affiliates will give any
information or make any representations or statements on
behalf of or concerning Company, each Account, or the
Contracts other than (i) the information or representations
contained in the registration statement, including each
Account Prospectus contained therein, relating to the
Contracts, as such registration statement and Account
Prospectus may be amended from time to time; or (ii) in
published reports for the Account or the Contracts that are in
the public domain and approved by Company for distribution; or
(iii) in sales literature or other promotional material
approved by Company or its affiliates, except with the express
written permission of Company.
(e) FAIP shall cause its principal underwriter to adopt and
implement procedures reasonably designed to ensure that
information concerning Company, and its respective affiliates
that is intended for use only by brokers or agents selling the
75
<PAGE>
Contracts (i.e., information that is not intended for
distribution to Participants) ("broker only materials") is so
used, and neither Company, nor any of its respective
affiliates shall be liable for any losses, damages or expenses
relating to the improper use of such broker only materials.
(f) For purposes of this Section 4.6, the phrase "sales literature
or other promotional material" includes, but is not limited
to, advertisements (such as material published, or designed
for use in, a newspaper, magazine, or other periodical, radio,
television, telephone or tape recording, videotape display,
signs or billboards, motion pictures, or other public media,
(e.g., on-line networks such as the Internet or other
electronic messages), sales literature (i.e., any written
communication distributed or made generally available to
customers or the public, including brochures, circulars,
research reports, market letters, form letters, seminar texts,
reprints or excerpts of any other advertisement, sales
literature, or published article), educational or training
materials or other communications distributed or made
generally available to some or all agents or employees,
registration statements, prospectuses, statements of
additional information, shareholder reports, and proxy
materials and any other material constituting sales literature
or advertising under the NASD rules, the 1933 Act or the 1940
Act.
SECTION 5. MIXED AND SHARED FUNDING
5.1 GENERAL.
The SEC has granted an order to FAIP exempting it from certain
provisions of the 1940 Act and rules thereunder so that FAIP may be available
for investment by certain other entities, including, without limitation,
separate accounts funding variable annuity contracts or variable life insurance
contracts, separate accounts of insurance companies unaffiliated with Company,
and trustees of qualified pension and retirement plans (collectively, "Mixed and
Shared Funding"). The Parties recognize that the SEC has imposed terms and
conditions for such orders that are substantially identical to many of the
provisions of this Section 5. FAIP hereby notifies Company that, in the event
that FAIP implements Mixed and Shared Funding, it may be appropriate to include
in the prospectus pursuant to which a Contract is offered disclosure regarding
the potential risks of Mixed and Shared Funding.
5.2 DISINTERESTED DIRECTORS.
FAIP agrees that a majority of the Board of Directors of the FAIP
("Board") will consist of persons who are not "interested persons" of the
Company, as defined by Section 2(a)(19) of the 1940 Act and the rules thereunder
and as modified by any applicable orders of the SEC ("Disinterested Directors"),
except that if this condition is not met by reason of the death,
disqualification, or bona fide resignation of any director, then the operation
of this condition shall be suspended (a) for a period of forty-five (45) days if
the vacancy or vacancies may be filled by the Board; (b) for a period of sixty
(60) days if a vote of shareholders is required to fill the vacancy or
vacancies; or (c) for such longer period as the SEC may prescribe by order upon
application.
5.3 MONITORING FOR MATERIAL IRRECONCILABLE CONFLICTS.
76
<PAGE>
FAIP agrees that its Board of Directors will monitor the Funds for the
existence of any material irreconcilable conflict between the interests of the
Participants in all separate accounts of life insurance companies utilizing FAIP
("Participating Insurance Companies"), including each Account, and of
participants in qualified retirement and pension plans investing in the Funds
("Participating Plans") and determine what action, if any, should be taken in
response to such conflicts. A material irreconcilable conflict may arise for a
variety of reasons, including:
(a) an action by any state insurance or other regulatory
authority;
(b) a change in applicable federal or state insurance, tax or
securities laws or regulations, or a public ruling, private
letter ruling, no-action or interpretative letter, or any
similar action by insurance, tax or securities regulatory
authorities;
(c) an administrative or judicial decision in any relevant
proceeding;
(d) the manner in which the investments of any Fund are being
managed;
(e) a difference in voting instructions given by variable annuity
contract and variable life insurance contract Participants or
by Participants in Participating Plans;
(f) a decision by a Participating Insurance Company to disregard
the voting instructions of Participant; or
(g) a decision by a Participating Plan to disregard the voting
instructions of its Participants.
Consistent with the SEC's requirements in connection with exemptive
orders of the type referred to in Section 5.1 hereof, FAIP and Company will
report any potential or existing conflicts to the Board and will be responsible
for assisting the Board in carrying out its responsibilities under these
conditions by providing the Board with all information reasonably necessary for
the Board to consider any issues raised. This responsibility includes, but is
not limited to, an obligation of Company to inform the Board whenever it has
determined to disregard Participant voting instructions. Company agrees that
such responsibilities will be carried out with a view only to the interests of
Participants.
5.4 CONFLICT REMEDIES.
(a) It is agreed that if it is determined by a majority of the
members of the Board of Directors or a majority of its
Disinterested Directors that a material irreconcilable
conflict exists, Company will, if it is a Participating
Insurance Company for which a material irreconcilable conflict
is relevant, at its own expense and to the extent reasonably
practicable (as determined by a majority of the Disinterested
Directors), take whatever steps are necessary to remedy or
eliminate the material irreconcilable conflict, which steps
may include, but are not limited to:
77
<PAGE>
(i) withdrawing the assets allocable to some or all of
the Accounts from FAIP or any Fund and reinvesting
such assets in a different investment medium,
including another Fund of FAIP, or submitting the
question whether such segregation should be
implemented to a vote of all affected Participants
and, as appropriate, segregating the assets of any
particular group (e.g., variable annuity contract
owners or variable life insurance contract owners
that votes in favor of such segregation, or offering
to the affected contract owners the option of making
such a change; and
(ii) establishing a new registered management investment
company or a new separate account that is operated as
a management company.
(b) If the material irreconcilable conflict arises because of
Company's decision to disregard Participants' voting
instructions and that decision represents a minority position
or would preclude a majority vote, Company may be required, at
FAIP's election, to withdraw each Account's investment in FAIP
or any Fund. No charge or penalty will be imposed as a result
of such withdrawal. Any such withdrawal must take place within
six (6) months after FAIP gives notice to Company that this
provision is being implemented, and until such withdrawal FAIP
shall continue to accept and implement orders by Company for
the purchase and redemption of Shares of FAIP.
(c) If a material irreconcilable conflict arises because a
particular state insurance regulator's decision applicable to
Company conflicts with the majority of other state regulators,
then Company will withdraw each Account's investment in FAIP
within six (6) months after FAIP's Board of Directors informs
Company that it has determined that such decision has created
a material irreconcilable conflict, and until such withdrawal
FAIP shall continue to accept and implement orders by Company
for the purchase and redemption of Shares of FAIP. No charge
or penalty will be imposed as a result of such withdrawal.
(d) Company agrees that any remedial action taken by it in
resolving any material irreconcilable conflict will be carried
out at its expense and with a view only to the interests of
Participants.
(e) For purposes hereof, a majority of the Disinterested Directors
will determine whether or not any proposed action adequately
remedies any material irreconcilable conflict. In no event,
however, will FAIP or any of its affiliates be required to
establish a new funding medium for any Contracts. Company will
not be required by the terms hereof to establish a new funding
medium for any Contracts if an offer to do so has been
declined by vote of a majority of Participants materially
adversely affected by the material irreconcilable conflict.
(f) The Board's determination of the existence of a material
irreconcilable conflict and its implications will be made
known promptly and in writing to all Participants.
78
<PAGE>
5.5 NOTICE TO COMPANY.
FAIP will promptly make known in writing to Company the Board of
Directors' determination of the existence of a material irreconcilable conflict,
a description of the facts that give rise to such conflict and the implications
of such conflict.
5.6 INFORMATION REQUESTED BY BOARD OF DIRECTORS.
Company and FAIP (or its investment adviser) will at least annually
submit to the Board of Directors of FAIP such reports, materials or data as the
Board of Directors may reasonably request so that the Board of Directors may
fully carry out the obligations imposed upon it by the provisions hereof or any
exemptive order granted by the SEC to permit Mixed and Shared Funding, and said
reports, materials and data will be submitted at any reasonable time deemed
appropriate by the Board of Directors. All reports received by the Board of
Directors of potential or existing conflicts, and all Board of Directors actions
with regard to determining the existence of a conflict, notifying Participating
Insurance Companies and Participating Plans of a conflict, and determining
whether any proposed action adequately remedies a conflict, will be properly
recorded in the minutes of the Board of Directors or other appropriate records,
and such minutes or other records will be made available to the SEC upon
request.
5.7 COMPLIANCE WITH SEC RULES.
If and to the extent that Rules 6e-2 and 6e-3(T) under the 1940 Act are
amended (or if Rule 6e-3 under the 1940 Act is adopted) to provide exemptive
relief from any provision of the 1940 Act, or the rules thereunder, with respect
to mixed or shared funding on terms and conditions materially different from any
exemptions granted in the order obtained by FAIP, then the FAIP and/or Company,
as appropriate, shall take such steps as may be necessary to comply with Rules
6e-2 and 6e-3(T), as amended, or Rule 6e-3, as adopted, to the extent
applicable.
5.8 OTHER REQUIREMENTS.
FAIP will require that each Participating Insurance Company and
Participating Plan enter into an agreement with FAIP that contains in substance
the same provisions as are set forth in Sections 4.1(b), 4.1(d), 4.3(a), 4.4(b),
4.5(a), 5, and 10 of this Agreement.
79
<PAGE>
SECTION 6. TERMINATION
6.1 EVENTS OF TERMINATION.
Subject to Section 6.4 below, this Agreement will terminate as to a
Fund:
(a) at the option of any Party, with or without cause with respect
to the Fund, upon six (6) months advance written notice to the
other Parties, or, if later, upon receipt of any required
exemptive relief from the SEC, unless otherwise agreed to in
writing by the Parties; or
(b) at the option of FAIP upon institution of formal proceedings
against Company or any of its affiliates by the NASD, the SEC,
any state insurance regulator or any other regulatory body
regarding Company's obligations under this Agreement or
related to the sale of the Contracts, the operation of any
Account, or the purchase of Shares, if, in each case, FAIP
reasonably determines that such proceedings, or the facts on
which such proceedings would be based, have a material
likelihood of imposing material adverse consequences on the
Fund with respect to which the Agreement is to be terminated;
or
(c) at the option of Company upon institution of formal
proceedings against FAIP, its principal underwriter, or its
investment adviser by the NASD, the SEC, or any state
insurance regulator or any other regulatory body regarding
FAIP's obligations under this Agreement or related to the
operation or management of FAIP or the purchase of Fund
Shares, if, in each case, Company reasonably determines that
such proceedings, or the facts on which such proceedings would
be based, have a material likelihood of imposing material
adverse consequences on Company, or the Subaccount
corresponding to the Fund with respect to which the Agreement
is to be terminated; or
(d) at the option of any Party in the event that (i) the Fund's
Shares are not registered and, in all material respects,
issued and sold in accordance with any applicable federal or
state law, or (ii) such law precludes the use of such Shares
as an underlying investment medium of the Contracts issued or
to be issued by Company; or
(e) upon termination of the corresponding Subaccount's investment
in the Fund pursuant to Section 5 hereof; or
(f) at the option of Company if the Fund ceases to qualify as a
RIC under Subchapter M of the Code or under successor or
similar provisions, or if Company reasonably believes that the
Fund may fail to so qualify; or
(g) at the option of Company if the Fund fails to comply with
Section 817(h) of the Code or with successor or similar
provisions, or if Company reasonably believes that the Fund
may fail to so comply; or
80
<PAGE>
(h) at the option of FAIP if the Contracts issued by Company cease
to qualify as annuity contracts or life insurance contracts
under the Code (other than by reason of the Fund's
noncompliance with Section 817(h) or Subchapter M of the Code)
or if interests in an Account under the Contracts are not
registered, where required, and, in all material respects, are
not issued or sold in accordance with any applicable federal
or state law; or
(i) upon another Party's material breach of any provision of this
Agreement.
6.2 NOTICE REQUIREMENT FOR TERMINATION.
No termination of this Agreement will be effective unless and until the
Party terminating this Agreement gives prior written notice to the other Parties
to this Agreement of its intent to terminate, and such notice shall set forth
the basis for such termination. Furthermore:
(a) in the event that any termination is based upon the provisions
of Sections 6.1(a) or 6.1(e) hereof, such prior written notice
shall be given at least six (6) months in advance of the
effective date of termination unless a shorter time is agreed
to by the Parties hereto;
(b) in the event that any termination is based upon the provisions
of Sections 6.1(b) or 6.1(c) hereof, such prior written notice
shall be given at least sixty (60) days in advance of the
effective date of termination unless a shorter time is agreed
to by the Parties hereto; and
(c) in the event that any termination is based upon the provisions
of Sections 6.1(d), 6.1(f), 6.1(g), 6.1(h) or 6.1(i) hereof,
such prior written notice shall be given as soon as possible
within twenty-four (24) hours after the terminating Party
learns of the event causing termination to be required.
6.3 FUNDS TO REMAIN AVAILABLE.
Notwithstanding any termination of this Agreement, FAIP will, at the
option of Company, continue to make available additional shares of the Fund
pursuant to the terms and conditions of this Agreement, for all Contracts in
effect on the effective date of termination of this Agreement (hereinafter
referred to as "Existing Contracts."). Specifically, without limitation, the
owners of the Existing Contracts will be permitted to reallocate investments in
the Fund (as in effect on such date), redeem investments in the Fund and/or
invest in the Fund upon the making of additional purchase payments under the
Existing Contracts. The parties agree that this Section 6.3 will not apply to
any terminations under Section 5 and the effect of such terminations will be
governed by Section 5 of this Agreement.
6.4 SURVIVAL OF WARRANTIES AND INDEMNIFICATIONS.
All warranties and indemnifications will survive the termination of
this Agreement.
81
<PAGE>
6.5 CONTINUANCE OF AGREEMENT FOR CERTAIN PURPOSES.
If any Party terminates this Agreement with respect to any Fund
pursuant to Sections 6.1(b), 6.1(c), 6.1(d), 6.1(f), 6.1(g), 6.1(h) or 6.1(i)
hereof, this Agreement shall nevertheless continue in effect as to any Shares of
that Fund that are outstanding as of the date of such termination (the "Initial
Termination Date"). This continuation shall extend to the earlier of the date as
of which an Account owns no Shares of the affected Fund or a date (the "Final
Termination Date") nine (9) months following the Initial Termination Date,
except that Company may, by written notice shorten said nine (9) month period in
the case of a termination pursuant to Sections 6.1(d), 6.1(f), 6.1(g), 6.1(h) or
6.1(i).
SECTION 7. PARTIES TO COOPERATE RESPECTING TERMINATION
The Parties hereto agree to cooperate and give reasonable assistance to
one another in taking all necessary and appropriate steps for the purpose of
ensuring that an Account owns no Shares of a Fund after the Final Termination
Date with respect thereto, or, in the case of a termination pursuant to Section
6.1(a), the termination date specified in the notice of termination. Such steps
may include combining the affected Account with another Account, substituting
other mutual fund's shares for those of the affected Fund, or otherwise
terminating participation by the Contracts in such Fund.
SECTION 8. ASSIGNMENT
This Agreement may not be assigned by any Party, except with the
written consent of each other Party.
SECTION 9. NOTICES
Notices and communications required or permitted by Section 9 hereof
will be given by means mutually acceptable to the Parties concerned. Each other
notice or communication required or permitted by this Agreement will be given to
the following persons at the following addresses and facsimile numbers, or such
other persons, addresses or facsimile numbers as the Party receiving such
notices or communications may subsequently direct in writing:
FIRST AMERICAN INSURANCE PORTFOLIOS, INC.
601 Second Avenue South
Minneapolis, MN 55402
Attn: __________________________________
82
<PAGE>
SEI INVESTMENTS DISTRIBUTION CO.
1 Freedom Valley Drive
Oaks, PA 19456
Attn:________________________
[________________] INSURANCE COMPANY
[Address]
Attn:
[__________________] DISTRIBUTION COMPANY
[Address]
Attn:
SECTION 10. VOTING PROCEDURES
Subject to the cost allocation procedures set forth in Section 3
hereof, Company will distribute all proxy material furnished by FAIP to
Participants to whom pass-through voting privileges are required to be extended
and will solicit voting instructions from Participants. Company will vote Shares
in accordance with timely instructions received from Participants. Company will
vote Shares that are (a) not attributable to Participants to whom pass-through
voting privileges are extended, or (b) attributable to Participants, but for
which no timely instructions have been received, in the same proportion as
Shares for which said instructions have been received from Participants, so long
as and to the extent that the SEC continues to interpret the 1940 Act to require
pass through voting privileges for Participants. Neither Company nor any of its
affiliates will in any way recommend action in connection with or oppose or
interfere with the solicitation of proxies for the Shares held for such
Participants. Company reserves the right to vote shares held in any Account in
its own right, to the extent permitted by law. Company shall be responsible for
assuring that each of its Accounts holding Shares calculates voting privileges
in a manner consistent with that of other Participating Insurance Companies or
in the manner required by the Mixed and Shared Funding exemptive order obtained
by FAIP. FAIP will notify Company of any changes of interpretations or
amendments to Mixed and Shared Funding exemptive order it has obtained. FAIP
will comply with all provisions of the 1940 Act requiring voting by
shareholders, and in particular, FAIP either will provide for annual meetings
(except insofar as the SEC may interpret Section 16 of the 1940 Act not to
require such meetings) or will comply with Section 16(c) of the 1940 Act
(although Fund is not one of the trusts described in Section 16(c) of that Act)
as well as with Sections 16(a) and, if and when applicable, 16(b). Further, FAIP
will act in accordance with the
83
<PAGE>
SEC's interpretation of the requirements of Section 16(a) with respect to
periodic elections of directors and with whatever rules the SEC may promulgate
with respect thereto.
SECTION 11. FOREIGN TAX CREDITS
FAIP agrees to consult in advance with Company concerning any decision
to elect or not to elect pursuant to Section 853 of the Code to pass through the
benefit of any foreign tax credits to its shareholders.
SECTION 12. INDEMNIFICATION
12.1 OF FAIP AND SEI BY COMPANY AND CONTRACT UNDERWRITER.
(a) Except to the extent provided in Sections 12.1(b) and 12.1(c),
below, Company and Contract Underwriter jointly and severally
agree to indemnify and hold harmless FAIP, SEI, and their
respective affiliates, and each person, if any, who controls
FAIP or SEI or their respective affiliates within the meaning
of Section 15 of the 1933 Act and each of their respective
directors and officers, (collectively, the "Indemnified
Parties" for purposes of this Section 12.1) against any and
all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of Company and
Contract Underwriter) or actions in respect thereof
(including, to the extent reasonable, legal and other
expenses), to which the Indemnified Parties may become subject
under any statute, regulation, at common law or otherwise;
provided, the Account owns or at the relevant time owned
shares of the Funds and insofar as such losses, claims,
damages, liabilities or actions:
(i) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in any Account's 1933 Act registration
statement, any Account Prospectus, the Contracts, or
sales literature or advertising for the Contracts (or
any amendment or supplement to any of the foregoing),
or arise out of or are based upon the omission or the
alleged omission to state therein a material fact
required to be stated therein or necessary to make
the statements therein not misleading; provided, that
this agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or
such alleged statement or omission was made in
reliance upon and in conformity with information
furnished in writing to Company or Contract
Underwriter by or on behalf of FAIP specifically for
use in any Account's 1933 Act registration statement,
any Account Prospectus, the Contracts, or sales
literature or advertising or otherwise for use in
connection with the sale of Contracts or Shares (or
any amendment or supplement to any of the foregoing)
or was consented to by FAIP pursuant to Section
4.5(c); or
(ii) arise out of or as a result of any other statements
or representations (other than statements or
representations contained in FAIP's 1933 Act
registration statement, FAIP Prospectus, sales
literature or advertising of
84
<PAGE>
FAIP, or any amendment or supplement to any of the
foregoing, not supplied for use therein by or on
behalf of Company, Contract Underwriter or their
respective affiliates and on which such persons have
reasonably relied) or the negligent, illegal or
fraudulent conduct of Company, Contract Underwriter
or their respective affiliates or persons under their
control (including, without limitation, their
employees and "Associated Persons," as that term is
defined in paragraph (m) of Article I of the NASD's
By-Laws), in connection with the sale or distribution
of the Contracts or Shares; or
(iii) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in FAIP's 1933 Act registration statement,
FAIP Prospectus, sales literature or advertising of
FAIP, or any amendment or supplement to any of the
foregoing, or the omission or alleged omission to
state therein a material fact required to be stated
therein or necessary to make the statements therein
not misleading if such a statement or omission was
made in reliance upon and in conformity with
information furnished in writing to FAIP or its
affiliates by or on behalf of Company, Contract
Underwriter or their respective affiliates
specifically for use in FAIP's 1933 Act registration
statement, FAIP Prospectus, sales literature or
advertising of FAIP, or any amendment or supplement
to any of the foregoing or was consented to by
Company pursuant to Section 4.6 (d); or
(iv) arise as a result of any failure by Company or
Contract Underwriter to perform the obligations,
provide the services and furnish the materials
required of them under the terms of this Agreement,
or any material breach of any representation and/or
warranty made by Company or Contract Underwriter in
this Agreement or arise out of or result from any
other material breach of this Agreement by Company or
Contract Underwriter; or
(v) arise as a result of failure by the Contracts issued
by Company to qualify as annuity contracts or life
insurance contracts under the Code, otherwise than by
reason of any Fund's failure to comply with
Subchapter M or Section 817(h) of the Code.
(b) Neither Company nor Contract Underwriter shall be liable under
this Section 12.1 with respect to any losses, claims, damages,
liabilities or actions to which an Indemnified Party would
otherwise be subject by reason of willful misfeasance, bad
faith, or gross negligence in the performance by that
Indemnified Party of its duties or by reason of that
Indemnified Party's reckless disregard of obligations or
duties (i) under this Agreement, or (ii) to FAIP.
(c) Neither Company nor Contract Underwriter shall be liable under
this Section 12.1 with respect to any action against an
Indemnified
85
<PAGE>
Party unless the Indemnified Party shall have notified Company
and Contract Underwriter in writing within a reasonable time
after the summons or other first legal process giving
information of the nature of the action shall have been served
upon such Indemnified Party (or after such Indemnified Party
shall have received notice of such service on any designated
agent), but failure to notify Company and Contract Underwriter
of any such action shall not relieve Company and Contract
Underwriter from any liability which they may have to the
Indemnified Party against whom such action is brought unless
the ability of Company and Contract Underwriter to defend such
action is materially impaired thereby, except as otherwise
provided herein, in case any such action is brought against an
Indemnified Party, Company and Contract Underwriter shall be
entitled to participate, at their own expense, in the defense
of such action and also shall be entitled to assume the
defense thereof, with counsel approved by the Indemnified
Party named in the action, which approval shall not be
unreasonably withheld. After notice from Company or Contract
Underwriter to such Indemnified Party of Company's or Contract
Underwriter's election to assume the defense thereof, the
Indemnified Party will cooperate fully with Company and
Contract Underwriter and shall bear the fees and expenses of
any additional counsel retained by it, and neither Company nor
Contract Underwriter will be liable to such Indemnified Party
under this Agreement for any legal or other expenses
subsequently incurred by such Indemnified Party independently
in connection with the defense thereof, other than reasonable
costs of investigation.
12.2 OF COMPANY AND CONTRACT UNDERWRITER BY FAIP AND SEI.
(a) Except to the extent provided in Sections 4.1(c), 12.2(c),
12.2(d) and 12.2(e), below, FAIP and SEI agree to indemnify
and hold harmless Company, Contract Underwriter, their
respective affiliates, and each person, if any, who controls
Company, Contract Underwriter or their respective affiliates
within the meaning of Section 15 of the 1933 Act and each of
their respective directors and officers, (collectively, the
"Indemnified Parties" for purposes of this Section 12.2)
against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent
of FAIP and/or SEI) or actions in respect thereof (including,
to the extent reasonable, legal and other expenses), to which
the Indemnified Parties may become subject under any statute,
regulation, at common law, or otherwise; provided, insofar as
such losses, claims, damages, liabilities or actions are
related to the sale or acquisition of FAIP's shares and:
(i) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in FAIP's 1933 Act registration statement,
FAIP Prospectus or sales literature or advertising of
FAIP (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a
material fact required to be stated therein or
necessary to make the statements therein not
misleading; provided, that this agreement to
indemnify shall not apply as to any Indemnified Party
if such statement or omission or such alleged
statement or omission was made in reliance upon
86
<PAGE>
and in conformity with information furnished in
writing to FAIP or its affiliates by or on behalf of
Company specifically, Contract Underwriter or their
respective affiliates for use in FAIP's 1933 Act
registration statement, FAIP Prospectus, or in sales
literature or advertising or otherwise for use in
connection with the sale of Contracts or Shares (or
any amendment or supplement to any of the foregoing)
or was consented to by Company pursuant to Section
4.6(d); or
(ii) arise out of or as a result of any other statements
or representations (other than statements or
representations contained in any Account's 1933 Act
registration statement, any Account Prospectus, sales
literature or advertising for the Contracts, or any
amendment or supplement to any of the foregoing, not
supplied for use therein by or on behalf of FAIP or
SEI or their respective affiliates and on which such
persons have reasonably relied) or the negligent,
illegal or fraudulent conduct of FAIP or SEI or their
respective affiliates or persons under their control
(including, without limitation, their employees and
"Associated Persons" as that Term is defined in
Section (q) of Article 1 of the NASD By-Laws), in
connection with the sale or distribution of FAIP
Shares; or
(iii) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in any Account's 1933 Act registration
statement, any Account Prospectus, sales literature
or advertising covering the Contracts, or any
amendment or supplement to any of the foregoing, or
the omission or alleged omission to state therein a
material fact required to be stated therein or
necessary to make the statements therein not
misleading, if such statement or omission was made in
reliance upon and in conformity with information
furnished in writing to Company, Contract Underwriter
or their respective affiliates specifically by or on
behalf of FAIP or SEI for use in any Account's 1933
Act registration statement, any Account Prospectus,
sales literature or advertising covering the
Contracts, or any amendment or supplement to any of
the foregoing or was consented to by FAIP pursuant to
Section 4.5(c); or
(iv) arise as a result of any failure by FAIP to perform
the obligations, provide the services and furnish the
materials required of it under the terms of this
Agreement, or any material breach of any
representation and/or warranty made by FAIP in this
Agreement or arise out of or result from any other
material breach of this Agreement by FAIP.
(b) Except to the extent provided in Sections 12.2(c), 12.2(d) and
12.2(e) hereof, FAIP and SEI agree to indemnify and hold
harmless the Indemnified Parties from and against any and all
losses, claims, damages, liabilities (including amounts paid
in settlement thereof with, the written consent of FAIP) or
actions in respect thereof (including, to the extent
reasonable, legal and other expenses) to which the
87
<PAGE>
Indemnified Parties may become subject directly or indirectly
under any statute, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or actions directly or
indirectly result from or arise out of the failure of any Fund
to operate as a regulated investment company in compliance
with (i) Subchapter M of the Code and regulations thereunder,
or (ii) Section 817(h) of the Code and regulations thereunder,
including, without limitation, any income taxes and related
penalties, rescission charges, liability under state law to
Participants asserting liability against Company pursuant to
the Contracts, the costs of any ruling and closing agreement
or other settlement with the IRS, and the cost of any
substitution by Company of Shares of another investment
company or portfolio for those of any adversely affected Fund
as a funding medium for each account that Company reasonably
deems necessary or appropriate as a result of the
noncompliance.
(c) Neither FAIP nor SEI shall be liable under this Section 12.2
with respect to any losses, claims, damages, liabilities or
actions to which an Indemnified Party would otherwise be
subject by reason of willful misfeasance, bad faith, or gross
negligence in the performance by that Indemnified Party of its
duties or by reason of such Indemnified Party's reckless
disregard of its obligations and duties (i) under this
Agreement, or (ii) to Company, Contract Underwriter, each
Account or Participants.
(d) Neither FAIP nor SEI shall be liable under this Section 12.2
with respect to any action against an Indemnified Party unless
the Indemnified Party shall have notified FAIP and/or SEI in
writing within a reasonable time after the summons or other
first legal process giving information of the nature of the
action shall have been served upon such Indemnified Party (or
after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify
FAIP or SEI of any such action shall not relieve FAIP or SEI
from any liability which it may have to the Indemnified Party
against whom such action is brought unless the ability of
Company and Contract Underwriter to defend such action is
materially impaired thereby, except as otherwise provided
herein, in case any such action is brought against an
Indemnified Party, FAIP and/or SEI will be entitled to
participate, at its own expense, in the defense of such action
and also shall be entitled to assume the defense thereof
(which shall include, without limitation, the conduct of any
ruling request and closing agreement or other settlement
proceeding with the IRS), with counsel approved by the
Indemnified Party named in the action, which approval shall
not be unreasonably withheld. After notice from FAIP and/or
SEI to such Indemnified Party of FAIP's and/or SEI's election
to assume the defense thereof, the Indemnified Party will
cooperate fully with FAIP and SEI and shall bear the fees and
expenses of any additional counsel retained by it, and neither
FAIP nor SEI will be liable to such Indemnified Party under
this Agreement for any legal or other expenses subsequently
incurred by such Indemnified Party independently in connection
with the defense thereof, other than reasonable costs of
investigation.
88
<PAGE>
(e) In no event shall FAIP or SEI be liable under the
indemnification provisions contained in this Agreement to any
individual or entity, including, without limitation, Company,
Contract Underwriter or any other Participating Insurance
Company or any Participant, with respect to any losses,
claims, damages, liabilities or expenses that arise out of or
result from (i) a breach of any representation, warranty,
and/or covenant made by Company or Contract Underwriter
hereunder or by any Participating Insurance Company under an
agreement containing substantially similar representations,
warranties and covenants; (ii) the failure by Company or any
Participating Insurance Company to maintain its segregated
asset account (which invests in any Fund) as a legally and
validly established segregated asset account under applicable
state law and as a duly registered unit investment trust under
the provisions of the 1940 Act (unless exempt therefrom); or
(iii) the failure by Company or any Participating Insurance
Company to maintain its variable annuity or life insurance
contracts (with respect to which any Fund serves as an
underlying funding vehicle) as annuity contracts or life
insurance contracts under applicable provisions of the Code.
12.3 EFFECT OF NOTICE.
Any notice given by the indemnifying Party to an Indemnified Party
referred to in Sections 12.1(c) or 12.2(d) above of participation in or control
of any action by the indemnifying Party will in no event be deemed to be an
admission by the indemnifying Party of liability, culpability or responsibility,
and the indemnifying Party will remain free to contest liability with respect to
the claim among the Parties or otherwise.
12.4 SUCCESSORS.
A successor by law of any Party shall be entitled to the benefits of
the indemnification contained in this Section 12.
SECTION 13. APPLICABLE LAW
This Agreement will be construed and the provisions hereof interpreted
under and in accordance with Minnesota law, without regard for that state's
principles of conflict of laws.
SECTION 14. EXECUTION IN COUNTERPARTS
This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together will constitute one and the same
instrument.
89
<PAGE>
SECTION 15. SEVERABILITY
If any provision of this Agreement is held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement will not
be affected thereby.
SECTION 16. RIGHTS CUMULATIVE
The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, that the Parties are entitled to under federal and state
laws.
SECTION 17. HEADINGS
The Table of Contents and headings used in this Agreement are for
purposes of reference only and shall not limit or define the meaning of the
provisions of this Agreement.
SECTION 18. CONFIDENTIALITY
FAIP acknowledges that the identities of the customers of Company or
any of its affiliates (collectively, the "Company Protected Parties" for
purposes of this Section 18), information maintained regarding those customers,
and all computer programs and procedures or other information developed by the
Company Protected Parties or any of their employees or agents in connection with
Company's performance of its duties under this Agreement are the valuable
property of the Company Protected Parties. FAIP agrees that if it comes into
possession of any list or compilation of the identities of or other information
about the Company Protected Parties' customers, or any other information or
property of the Company Protected Parties, other than such information as may be
independently developed or compiled by FAIP from information supplied to it by
the Company Protected Parties' customers who also maintain accounts directly
with FAIP, FAIP will hold such information or property in confidence and refrain
from using, disclosing or distributing any of such information or other property
except: (a) with Company's prior written consent; or (b) as required by law or
judicial process. Company acknowledges that the identities of the customers of
FAIP or any of its affiliates (collectively the "FAIP Protected Parties" for
purposes of this Section 18), information maintained regarding those customers,
and all computer programs and procedures or other information developed by the
FAIP Protected Parties or any of their employees or agents in connection with
FAIP's performance of its duties under this Agreement are the valuable property
of the FAIP Protected Parties. Company agrees that if it comes into possession
of any list or compilation of the identities of or other information about the
FAIP Protected Parties' customers or any other information or property of the
FAIP Protected Parties, other than such information as may be independently
developed or compiled by Company from information supplied to it by the FAIP
Protected Parties' customers who also maintain accounts directly with Company,
Company will hold such information or property in confidence and refrain from
using, disclosing or distributing any of such information or other property
except: (a) with FAIP's prior written consent; or (b) as required by law or
judicial process. Each party acknowledges that any breach of the agreements in
this Section 18 would result in immediate and irreparable harm to the other
parties for which there would be no adequate remedy at law and agree that in the
event of such a
90
<PAGE>
breach, the other parties will be entitled to equitable relief by way of
temporary and permanent injunctions, as well as such other relief as any court
of competent jurisdiction deems appropriate.
SECTION 19. PARTIES TO COOPERATE
Each party to this Agreement will cooperate with each other party and
all appropriate governmental authorities (including, without limitation, the
SEC, the NASD and state insurance regulators) and will permit each other and
such authorities reasonable access to its books and records (including copies
thereof) in connection with any investigation or inquiry relating to this
Agreement or the transactions contemplated hereby.
SECTION 20. AMENDMENTS
No provision of this Agreement may be amended or modified in any manner
except by a written agreement executed by all parties hereto.
SECTION 21. ASSIGNMENT
This Agreement may not be assigned without the prior written consent of
all parties hereto.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed in their names and on their behalf by and through their duly authorized
officers signing below.
FIRST AMERICAN INSURANCE PORTFOLIOS, INC.
By ______________________________________
Its _________________________________
SEI INVESTMENTS DISTRIBUTION CO.
By ______________________________________
Its _________________________________
[____________] INSURANCE COMPANY
By ______________________________________
Its _________________________________
[_____________] DISTRIBUTION COMPANY
By ______________________________________
Its _________________________________
91
<PAGE>
SCHEDULE A
FUNDS AVAILABLE UNDER THE CONTRACTS
o First American Insurance Portfolios, Inc.:
Growth Equity Fund
Value Equity Fund
Bond Fund
Technology Fund
SEPARATE ACCOUNTS UTILIZING THE FUNDS
CONTRACTS FUNDED BY THE SEPARATE ACCOUNTS
o Contract Form # ______________
o Contract Form # ______________
92
