1933 Act Registration No. 2-74747
1940 Act Registration No. 811-3313
As filed with the Securities and Exchange Commission on October 7, 1997
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No.__ [ ]
Post-Effective Amendment No. 25 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 [X]
Amendment No. 25
FIRST AMERICAN FUNDS, 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)
DAVID LEE
C/O SEI INVESTMENTS COMPANY, OAKS, PENNSYLVANIA 19456
(Name and Address of Agent for Service)
COPIES TO:
Kathryn Stanton, Esq. Michael J. Radmer, Esq.
SEI Investments Company James D. Alt, Esq.
Oaks, Pennsylvania 19456 Dorsey & Whitney LLP
220 South Sixth Street
Minneapolis, Minnesota 55402
It is proposed that this filing shall become effective (check appropriate box):
[ ] immediately upon filing pursuant to paragraph (b) of rule 485
[X] on October 8, 1997 pursuant to paragraph (b) of rule 485
[ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485
[ ] on (date) pursuant to paragraph (a)(1) of Rule 485
[ ] 75 days after filing pursuant to paragraph (a)(2) of Rule 485
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485
Registrant has registered an indefinite number or amount of securities under the
Securities Act of 1933 pursuant to Rule 24f-2 under the Investment Company Act
of 1940. A Rule 24f-2 Notice was filed with the Securities and Exchange
Commission on November 25, 1996.
<PAGE>
FIRST AMERICAN FUNDS, INC.
POST-EFFECTIVE AMENDMENT NO. 25
CROSS REFERENCE SHEET FOR ITEMS REQUIRED BY FORM N-1A
NOTE: PART A of this Registration Statement consists of three Prospectuses, as
follows:
1. Retail Class Prospectus relating to Class A Shares of Tax Free
Obligations Fund and Treasury Obligations Fund.
2. Institutional Class Prospectus relating to Class C Shares of Tax Free
Obligations Fund.
3. Corporate Trust Class Prospectus relating to Class D Shares of Tax Free
Obligations Fund.
PART B of this Registration Statement consists of one Statement of Additional
Information which relates to each of the Prospectuses listed above.
<PAGE>
CROSS REFERENCE SHEET
CLASS A SHARES PROSPECTUS
PART A
ITEM NO. CAPTION IN PROSPECTUS
- -------- ---------------------
1 Cover Page
2 Summary of Fund Expenses
3 Calculation of Performance Data
4 The Fund; Investment Objective and Policies
5 Management of the Fund; Distributor; Investment Objective and Policies
5A Not Applicable
6 The Fund; Investing in the Funds; Taxes
7 Distributor; Investing in the Funds; Redeeming Shares; Determining the
Price of Shares
8 Redeeming Shares
9 Not Applicable
CLASS C SHARES PROSPECTUS
PART A
ITEM NO. CAPTION IN PROSPECTUS
- -------- ---------------------
1 Cover Page
2 Summary of Fund Expenses
3 Calculation of Performance Data
4 The Fund; Investment Objective and Policies
5 Management of the Fund; Distributor; Investment Objective and Policies
5A Not Applicable
6 The Fund; Purchase and Redemption of Shares; Taxes
7 Distributor; Purchase and Redemption of Shares; Determining the Price
of Shares
8 Purchase and Redemption of Shares
9 Not Applicable
<PAGE>
CLASS D SHARES PROSPECTUS
PART A
ITEM NO. CAPTION IN PROSPECTUS
- -------- ---------------------
1 Cover Page
2 Summary of Fund Expenses
3 Calculation of Performance Data
4 The Fund; Investment Objective and Policies
5 Management of the Fund; Distributor; Investment Objective and Policies
5A Not Applicable
6 The Fund; Purchase and Redemption of Shares; Taxes
7 Distributor; Purchase and Redemption of Shares; Determining the Price
of Shares
8 Purchase and Redemption of Shares
9 Not Applicable
COMBINED STATEMENT OF ADDITIONAL INFORMATION
PART B
ITEM NO. CAPTION IN STATEMENT OF ADDITIONAL INFORMATION
- -------- ----------------------------------------------
10 Cover Page
11 Table of Contents
12 General Information
13 Investment Restrictions
14 Directors and Executive Officers
15 Capital Stock
16 Investment Advisory and Other Services
17 Portfolio Transactions
18 Not Applicable
19 Net Asset Value and Public Offering Price; Valuation of Portfolio
Securities
20 Taxes
21 Investment Advisory and Other Services
22 Calculation of Performance Data
23 Not Applicable
<PAGE>
FIRST AMERICAN FUNDS, INC.
MONEY MARKET FUNDS
RETAIL CLASSES
TAX FREE OBLIGATIONS FUND
TREASURY OBLIGATIONS FUND
PROSPECTUS
October 8, 1997
[LOGO]
FIRST AMERICAN FUNDS
The power of disciplined investing
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FIRST AMERICAN FUNDS, INC.
Oaks, Pennsylvania 19456
RETAIL CLASSES PROSPECTUS
The shares described in this Prospectus represent interests in First American
Funds, Inc., which consists of mutual funds with four different investment
portfolios and objectives. This Prospectus relates to the Class A Shares of the
following funds (the "Funds"):
* TAX FREE OBLIGATIONS FUND
* TREASURY OBLIGATIONS FUND
Tax Free Obligations Fund seeks to achieve maximum current income exempt from
federal income taxes consistent with preservation of capital and maintenance of
liquidity. Treasury Obligations Fund seeks to achieve maximum current income to
the extent consistent with the preservation of capital and maintenance of
liquidity. Each Fund has its own policies designed to meet its investment
objective. Tax Free Obligations Fund pursues its objective by investing in money
market instruments the income from which is exempt from federal income tax.
Treasury Obligations Fund pursues its objective by investing in United States
Treasury obligations and repurchase and reverse repurchase agreements with
respect to such obligations. Each Fund is a diversified open-end mutual fund.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, INCLUDING FIRST BANK NATIONAL ASSOCIATION OR ANY OF ITS
AFFILIATES, NOR ARE THEY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. AN INVESTMENT IN THE FUNDS
INVOLVES INVESTMENT RISK, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
This Prospectus sets forth concisely information about the Funds that a
prospective investor should know before investing. It should be read and
retained for future reference.
A Statement of Additional Information dated October 8, 1997 for the Funds has
been filed with the Securities and Exchange Commission ("SEC") and is
incorporated in its entirety by reference in this Prospectus. To obtain copies
of the Statement of Additional Information at no charge, or to obtain other
information or make inquiries about the Funds, call (800) 637-2548 or write SEI
Investments Distribution Co., Oaks, Pennsylvania 19456. The SEC maintains a
World Wide Web site that contains reports and information regarding issuers that
file electronically with the SEC. The address of such site is
"http://www.sec.gov."
AN INVESTMENT IN THE FUNDS IS NEITHER INSURED NOR GUARANTEED BY THE UNITED
STATES GOVERNMENT, AND THERE IS NO ASSURANCE THAT THE FUNDS WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is October 8, 1997.
<PAGE>
TABLE OF CONTENTS
PAGE
----
SUMMARY OF FUND EXPENSES 4
Class A Share Fees and Expenses 4
Information Concerning Fees and
Expenses 5
THE FUNDS 6
INVESTMENT OBJECTIVES AND POLICIES 6
Tax Free Obligations Fund 6
Treasury Obligations Fund 7
MANAGEMENT OF THE FUNDS 7
Investment Adviser 8
Portfolio Managers 9
Custodian 9
Administrator 9
Transfer Agent 9
DISTRIBUTOR 10
PORTFOLIO TRANSACTIONS 11
INVESTING IN THE FUNDS 11
Share Purchases 11
Minimum Investment Required 12
Systematic Investment Program 12
Systematic Exchange Program 13
Certificates and Confirmations 13
Dividends and Distributions 13
Exchange Privilege 14
REDEEMING SHARES 15
By Telephone 15
By Mail 16
By Checking Account 17
By Systematic Withdrawal Program 17
Redemption Before Purchase
Instruments Clear 17
Accounts with Low Balances 17
DETERMINING THE PRICE OF SHARES 18
TAXES 18
FUND SHARES 19
CALCULATION OF PERFORMANCE DATA 19
INVESTMENT RESTRICTIONS AND
TECHNIQUES 20
General 20
Municipal Obligations 22
Loan Participations; Section 4(2) and
Rule 144A Securities 23
Securities of Foreign Banks and
Branches 24
United States Government Securities 24
Repurchase Agreements 25
Reverse Repurchase Agreements 25
Credit Enhancement Agreements 26
Put Options 26
Variable and Floating Rate
Obligations 27
Lending of Portfolio Securities 27
When-Issued and Delayed- Delivery
Securities 27
Money Market Funds 28
Information Concerning Compensation
Paid to First Trust National
Association and Its Affiliates 28
<PAGE>
SUMMARY OF FUND EXPENSES
CLASS A SHARE FEES AND EXPENSES
TAX FREE TREASURY
OBLIGATIONS OBLIGATIONS
FUND FUND
SHAREHOLDER TRANSACTION EXPENSES
Maximum sales load imposed on purchases None None
Maximum sales load imposed on reinvested
dividends None None
Maximum contingent deferred sales charge
(as a percentage of original purchase
price or redemption proceeds, as
applicable) None None
Redemption fees None None
Exchange fees None None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
Investment advisory fees (after voluntary
fee waivers and reimbursements)(1) 0.11% 0.30%
Rule 12b-1 fees 0.25%(2) 0.25%(2)
Other expenses 0.34% 0.15%
Total fund operating expenses
(after voluntary fee waivers and
reimbursements)(1) 0.70% 0.70%
EXAMPLE(3)
You would pay the following expenses on a $1,000 investment, assuming (i) a 5%
annual return, and (ii) redemption at the end of each time period:
1 year $ 7 $ 7
3 years $ 22 $ 22
5 years (Treasury Obligations Fund) -- $ 39
10 years (Treasury Obligations Fund) -- $ 87
(1) First Bank National Association, the investment adviser for the Funds,
intends to waive a portion of its fees and/or reimburse expenses on a
voluntary basis, and the amounts shown above reflect these waivers and
reimbursements as of the date of this Prospectus. The Funds' investment
adviser intends to maintain such waivers and reimbursements until
September 30, 1998. Absent any fee waivers or reimbursements,
investment advisory fees for the Fund as an annualized percentage of
average daily net assets would be 0.40%; and total fund operating
expenses calculated on such basis would be 0.99% for Tax Free
Obligations Fund and 0.80% for Treasury Obligations Fund. Other
expenses include an annual administration fee.
(2) Of this amount, 0.25% is designated as a shareholder servicing fee and
none as a distribution fee.
(3) Absent the fee waivers and reimbursement referred to in (1) above, the
dollar amounts for the 1 and 3-year periods would be as follows: Tax
Free Obligations Fund, $10 and $32, and Treasury Obligations Fund, $8
and $26, and, in the case of Treasury Obligations Fund, the dollar
amounts for the 5 and 10-year periods would be $44 and $99.
<PAGE>
INFORMATION CONCERNING FEES AND EXPENSES
The purpose of the preceding table is to assist the investor in understanding
the various costs and expenses that an investor in the Funds may bear directly
or indirectly. THE DATA CONTAINED IN THE TABLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN. The information set forth in the tables relates only to
the Class A Shares of the Funds. The Funds also offer Class C and Class D
Shares.
Investment advisory fees are paid by the Funds to First Bank National
Association (the "Adviser") for managing its investments. The examples in the
above table are based on annual operating expenses for the Funds after voluntary
fee waivers and expense reimbursements by the Adviser. Prior to fee waivers,
investment advisory fees accrue at the annual rate of 0.40% of the average daily
net assets of the Funds. "Other expenses" include administrative fees which are
paid by the Funds to SEI Investments Management Corporation (the
"Administrator") for providing various services necessary to operate the Funds.
These include shareholder servicing and certain accounting and other services.
The Administrator provides these services for a fee calculated as described
under "Management of the Funds -- Administrator" below. "Other expenses" in the
tables are based on estimates.
The Class A Shares of the Funds pay a shareholder servicing fee to the
Distributor in an amount equalling 0.25% of the annual average daily net assets
attributable to the Class A Shares. Due to the payment of such fees by the Class
A Shares of the Funds, long-term shareholders may pay more than the equivalent
of the maximum front-end sales charges otherwise permitted by NASD rules.
<PAGE>
THE FUNDS
First American Funds, Inc. ("FAF") is an open-end management investment company
that offers its shares in four different mutual funds, each of which evidences
an interest in a separate and distinct investment portfolio. Shareholders may
purchase shares in the Funds through separate classes that provide for
variations in distribution costs, shareholder servicing fees, voting rights and
dividends. Except for these differences among classes, each share of a Fund
represents an undivided proportionate interest in such Fund. FAF is incorporated
under the laws of the State of Minnesota, and its principal offices are located
at Oaks, Pennsylvania 19456.
This Prospectus relates only to the Class A Shares of the Funds. Information
regarding the Class C and Class D Shares of the Funds is contained in separate
prospectuses that may be obtained from the Funds' Distributor, SEI Investments
Distribution Co., Oaks, Pennsylvania 19456, or by calling (800) 637-2548. The
Board of Directors of FAF may authorize additional series or classes of common
stock in the future.
INVESTMENT OBJECTIVES AND POLICIES
The Adviser will purchase investments for each Fund consistent with its
investment objective described below and that meet the quality characteristics
established for such Fund. As discussed below, each Fund pursues different
strategies in seeking to achieve its investment objective. A Fund's investment
objective may not be changed without an affirmative vote of the holders of a
majority (as defined in the Investment Company Act of 1940, as amended (the
"1940 Act"), of the outstanding shares of the Fund. The Funds may not always
achieve their objectives.
TAX FREE OBLIGATIONS FUND
As a fundamental investment objective, Tax Free Obligations Fund seeks to
achieve maximum current income exempt from federal income taxes consistent with
preservation of capital and maintenance of liquidity. In seeking to achieve this
objective and as a fundamental policy, the Fund invests at least 80% of its
total assets in municipal obligations, the income from which is exempt from
federal income tax. In addition, the Fund may invest up to 20% of its total
assets in municipal obligations, the income from which is an item of tax
preference for purposes of the federal alternative minimum tax. For more
information on these types of securities, see "Investment Restrictions and
Techniques -- Municipal Obligations" below.
The Fund may also (i) engage in repurchase agreements with respect to any of its
portfolio securities, (ii) purchase credit enhancement agreements to
<PAGE>
enhance the creditworthiness of its portfolio securities, (iii) lend securities
from its portfolio, (iv) purchase the securities described above on a
when-issued or delayed-delivery basis, (v) purchase put options with respect to
its portfolio securities and (vi) invest in variable or floating rate
obligations. See "Investment Restrictions and Techniques" below.
The Fund may invest up to 20% of its total assets collectively in taxable money
market securities including marketable securities issued or guaranteed by the
United States Government or its agencies or instrumentalities; certain United
States dollar denominated obligations (including bankers acceptances, time
deposits, and certificates of deposit, including variable rate certificates of
deposit) of banks (including commercial banks, savings banks, and savings and
loan associations) organized under the laws of the United States or any state,
foreign banks, United States branches of foreign banks, if such banks have total
assets of not less than $500 million; and certain corporate and other
obligations, including high grade commercial paper, non-convertible corporate
debt securities, and loan participation interests with no more than 397 days
remaining to maturity as determined pursuant to Rule 2a-7 under the 1940 Act. In
addition, the Fund's engagement in lending portfolio securities and in
purchasing put options with respect to its portfolio securities may result in
taxable income. For defensive purposes, the Fund may temporarily invest more
than 20% (up to 100%) of the value of its total assets in taxable money market
securities and certain tax-exempt securities, the income on which is an item of
tax preference for purposes of the federal alternative minimum tax when, in the
opinion of the Adviser, it is advisable to do so in light of prevailing market
and economic conditions for purposes of preserving liquidity or capital. See
"Investment Restrictions and Techniques" for a discussion of the risks relating
to investments in such securities.
TREASURY OBLIGATIONS FUND
As a fundamental investment objective, Treasury Obligations Fund seeks to
achieve maximum current income consistent with preservation of capital and
maintenance of liquidity. In seeking to achieve its investment objective,
Treasury Obligations Fund invests in United States Treasury obligations maturing
within 397 days or less as determined pursuant to Rule 2a-7 under the 1940 Act
and repurchase agreements and reverse repurchase agreements relating to such
securities. The Fund may also purchase such securities on a when-issued or
delayed-delivery basis and lend securities from its portfolio. For a discussion
of these securities and techniques, see "Investment Restrictions and Techniques"
below.
MANAGEMENT OF THE FUNDS
The Board of Directors of FAF has the primary responsibility for overseeing the
overall management and electing other officers of FAF. Subject to the
<PAGE>
overall direction and supervision of the Board of Directors, the Adviser acts as
investment adviser for and manages the investment portfolios of FAF.
INVESTMENT ADVISER
First Bank National Association, 601 Second Avenue South, Minneapolis, Minnesota
55480, acts as the Funds' investment adviser through its First Asset Management
group. The Adviser provides the Funds with investment research and portfolio
management. As of December 31, 1996, the Adviser was managing accounts with an
aggregate value of approximately $35 billion, including mutual fund assets in
excess of $12 billion. U.S. Bancorp (formerly known as First Bank System, Inc.),
601 Second Avenue South, Minneapolis, Minnesota 55480, is the holding company
for the Adviser.
Each Fund pays the Adviser a monthly fee equal, on an annual basis, to 0.40% of
the Fund's average daily net assets. The Adviser may, at its option, waive any
or all of its fees, or reimburse expenses, with respect to the Funds from time
to time. Any such waiver or reimbursement is voluntary. The Adviser also may
absorb or reimburse expenses of a Fund 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
the Funds' 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.
The Glass-Steagall Act generally prohibits banks from engaging in the business
of underwriting, selling, or distributing securities and from being affiliated
with companies principally engaged in those activities. In addition,
administrative and judicial interpretations of the Glass-Steagall Act prohibit
bank holding companies and their bank and nonbank subsidiaries from organizing,
sponsoring, or controlling registered open-end investment companies that are
continuously engaged in distributing their shares. Bank holding companies and
their bank and nonbank subsidiaries may serve, however, as investment advisers
to registered investment companies, subject to a number of terms and conditions.
Although the scope of the prohibitions and limitations imposed by the
Glass-Steagall Act has not been fully defined by the courts or the appropriate
regulatory agencies, the Funds have received an opinion from their counsel that
the Adviser is not prohibited from performing the investment advisory services
described above, and that FBS Investment Services, Inc. ("ISI"), a wholly-owned
broker-dealer of the Adviser, is not prohibited from serving as a Participating
Institution as described herein. In the event of changes in federal or state
statutes or regulations or judicial and administrative interpretations or
decisions pertaining to permissible activities of bank holding companies and
their bank and nonbank subsidiaries, the Adviser might be prohibited from
<PAGE>
continuing these arrangements. In that event, it is expected that the Board of
Directors would make other arrangements and shareholders would not suffer
adverse financial consequences.
PORTFOLIO MANAGERS
JOSEPH M. ULREY III is portfolio co-manager for each of the Funds. He spent
10 years overseeing various functions in the Treasury and Finance Divisions
of First Bank System before joining the Adviser. For the past 5 1/2 years Mr.
Ulrey has managed assets for individuals and institutional clients of the
Adviser. Mr. Ulrey graduated from Macalester College with a bachelor's degree
in mathematics/economics and went on to the University of Chicago for his
master's in business administration, concentrating in finance.
JAMES D. PALMER is portfolio co-manager for each of the Funds. Mr. Palmer
joined the Adviser in 1992, prior to which he was a securities lending trader
and senior master trust accountant with First Trust National Association. Mr.
Palmer holds a bachelor's degree from the University of Wisconsin -- LaCrosse
and a master's of business administration degree from the University of
Minnesota.
CUSTODIAN
The custodian of the Funds' assets is First Trust National Association (the
"Custodian"), First Trust Center, 180 East Fifth Street, St. Paul, Minnesota
55101. The Custodian is a subsidiary of FBS, which also controls the Adviser. As
compensation for its services to the Funds, the Custodian is paid 0.03% of each
Fund's average daily net assets. In addition, the Custodian is reimbursed by the
Funds for its out-of-pocket expenses incurred in providing services to the
Funds.
ADMINISTRATOR
SEI Investments Management Corporation (the "Administrator"), a wholly-owned
subsidiary of SEI Investments Company ("SEI"), provides the Funds with certain
administrative personnel and services necessary to operate the Funds. Such
services include shareholder servicing and certain legal and accounting
services. The Administrator provides these personnel and services for
compensation at an annual rate equal to 0.07% of each Fund's average daily net
assets, subject to a minimum administrative fee during each fiscal year of
$50,000; provided, that to the extent the aggregate net assets of all First
American funds exceed $8 billion, the percentage stated above is reduced to
0.055%. The Funds have approved the appointment of First Bank National
Association as a Sub-Administrator (the "Sub-Administrator"), effective January
1, 1998. It is contemplated that the Sub-Administrator will assist SEI in the
performance of administrative services for the Funds. The Sub-Administration
Agreement provides that SEI will compensate the Sub-Administrator at an annual
rate of up to 0.05% of the Fund's average daily net assets.
TRANSFER AGENT
DST Systems, Inc. serves as the transfer agent (the "Transfer Agent") and
dividend disbursing agent for the Funds. The address of the Transfer Agent is
<PAGE>
1004 Baltimore, Kansas City, Missouri 64105. The Transfer Agent is not
affiliated with the Distributor, the Administrator or the Adviser.
DISTRIBUTOR
SEI Investments Distribution Co. (the "Distributor") is the principal
distributor for shares of the Funds. The Distributor is a Pennsylvania
corporation organized on July 20, 1981, and is the principal distributor for a
number of investment companies. The Distributor is a wholly-owned subsidiary of
SEI and is located at Oaks, Pennsylvania 19456. The Distributor is not
affiliated with the Adviser, U.S. Bancorp, the Custodian and their respective
affiliates.
FAF has adopted a Rule 12b-1 plan and entered into a distribution and
shareholder servicing agreement with the Distributor with respect to
distribution-related activities and shareholder servicing for the Class A Shares
of each Fund. Under this plan and agreement, each Fund pays the Distributor a
shareholder servicing fee monthly at an annual rate of 0.25% of the Fund's Class
A Shares' average daily net assets. The shareholder servicing fee is intended to
compensate the Distributor for ongoing servicing and/or maintenance of
shareholder accounts and may be used by the Distributor to provide compensation
to institutions through which shareholders hold their shares for ongoing
servicing and/or maintenance of shareholder accounts.
The foregoing plan recognizes that the Distributor, the Administrator and the
Adviser may in their discretion use their own assets to pay for certain costs of
distributing Fund shares. Any such arrangement to pay such additional costs may
be in the form of cash or promotional incentives and may be commenced or
discontinued by the Adviser, the Administrator, the Distributor, or any
Participating Institutions (as defined below) at any time. The Distributor may
engage securities dealers, financial institutions (including, without
limitation, banks), and other industry professionals (the "Participating
Institutions") to perform share distribution and shareholder support services
for the Funds. ISI, a subsidiary of the Adviser, is a Participating Institution.
The investment company shares and other securities distributed by the
Distributor are not deposits or obligations of, or endorsed or guaranteed by,
First Bank National Association or its affiliates, and are not insured by the
Bank Insurance Fund, which is administered by the Federal Deposit Insurance
Corporation.
<PAGE>
PORTFOLIO TRANSACTIONS
The Funds anticipate being as fully invested as practicable in debt securities.
Most of the Funds' portfolio transactions are effected with dealers at a spread
or markup. The dealer's profit, if any, is the difference, or spread, between
the dealer's purchase and sale price for the obligation. The Funds may authorize
the Adviser to place brokerage orders with some brokers who help distribute the
Funds' shares, if the Adviser reasonably believes that the commission and
transaction quality are comparable to that available from other qualified
brokers. Because the Adviser trades a large number of securities, dealers
generally are willing to work with the Adviser on a more favorable spread to the
Funds than would be possible for most individual investors.
INVESTING IN THE FUNDS
SHARE PURCHASES
Shares are sold at their net asset value on days on which the New York Stock
Exchange and the Federal Reserve wire system are open for business. Shares of
each Fund may be purchased as described below. The Funds reserve the right to
reject any purchase request.
THROUGH A FINANCIAL INSTITUTION. Shares may be purchased through a financial
institution which has a sales agreement with the Distributor. An investor may
call his or her financial institution to place an order. Purchase orders must be
received by the financial institution by the time specified by the institution
to be assured same day processing, and purchase orders must be transmitted to
and received by a Fund by 12:00 noon Central time in order for shares to be
purchased at that day's price. It is the financial institution's responsibility
to transmit orders promptly.
Certain brokers assist their clients in the purchase or redemption of shares
and charge a fee for this service.
BY MAIL. An investor may place an order to purchase shares of the Funds directly
through the Transfer Agent. Orders by mail will be executed upon receipt of
payment by the Transfer Agent. If an investor's check does not clear, the
purchase will be cancelled and the investor could be liable for any losses or
fees incurred. Third-party checks, credit cards, credit card checks and cash
will not be accepted. When purchases are made by check, the proceeds of
redemptions of the shares are not available until the Transfer Agent is
reasonably certain that the purchase payment has cleared, which could take up to
ten calendar days from the purchase date.
<PAGE>
In order to purchase shares by mail, an investor must:
* complete and sign the new account form;
* enclose a check made payable to (Fund name); and
* mail both to DST Systems, Inc., P.O. Box 419382, Kansas City,
Missouri 64141-6382.
After an account is established, an investor can purchase shares by mail by
enclosing a check and mailing it to DST Systems, Inc. at the above address.
BY WIRE. To purchase shares of the Funds by wire, call (800) 637-2548 before
12:00 noon Central time to place an order. All information needed will be taken
over the telephone, and the order will be considered received when the Custodian
receives payment by wire. If the Custodian does not receive the wire by 12:00
noon Central time, the order will be executed the next business day. Federal
funds should be wired as follows: First Bank National Association, Minneapolis,
Minnesota; ABA Number 091000022; For Credit to: DST Systems: Account Number
160234580266; For Further Credit To: (Investor Name and Fund Name). Shares
cannot be purchased by Federal Reserve wire on days on which the New York Stock
Exchange is closed and on federal holidays upon which wire transfers are
restricted.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment is $1,000, unless the investment is in a
retirement plan, in which case the minimum initial investment is $250. The
minimum subsequent investment is $100. The Funds reserve the right to waive the
minimum investment requirement in certain cases for employees of First Bank
National Association, First Trust National Association, First Bank
System, Inc., and their respective affiliates.
SYSTEMATIC INVESTMENT PROGRAM
Once an account has been opened, shareholders may add to their investment on a
regular basis in a minimum amount of $100. Under this program, funds may be
automatically withdrawn periodically from the shareholder's checking account and
invested in a Fund's shares at the net asset value next determined after an
order is received. A shareholder may apply for participation in this program
through his or her financial institution or call (800) 637-2548.
SYSTEMATIC EXCHANGE PROGRAM
Shares of the Funds also may be exchanged through automatic monthly deductions
from an investor's account for the same class of shares of First American
Investment Funds, Inc. or First American Strategy Funds, Inc. Under a systematic
exchange program, an investor initially purchases Class A Shares
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of a Fund in an amount equal to the total amount of the investment the investor
desires to make in the same class of shares of First American Investment Funds
or First American Strategy Funds. On a monthly basis a specified dollar amount
of a Fund shares is exchanged for shares of the same class of a specified
portfolio of First American Investment Funds or First American Strategy Funds.
Exchanges of Class A Shares will be subject to the applicable sales charge
imposed by the First American Investment Funds portfolio and, accordingly, it
may be beneficial for an investor to execute a letter of intent in connection
with a Class A Shares systematic exchange program. Shares of First American
Strategy Funds are not subject to a sales charge. The systematic exchange
program of investing a fixed dollar amount at regular intervals over time in a
First American Investment Funds or First American Strategy Funds portfolio has
the effect of reducing the average cost per share of the shares of the portfolio
acquired. This effect also can be achieved through the First American Investment
Funds or First American Strategy Funds systematic investment program, which is
described in the applicable prospectuses. A shareholder may apply for
participation in the systematic exchange program through his or her financial
institution or by calling (800) 637-2548.
CERTIFICATES AND CONFIRMATIONS
The Transfer Agent maintains a share account for each shareholder. Share
certificates will not be issued by the Funds. Monthly confirmations are sent
to report all transactions and dividends paid during that month.
DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income will be accrued daily and paid monthly.
Dividends are automatically reinvested on payment dates in additional shares of
the Funds, unless cash payments are requested by contacting the applicable Fund.
Shares purchased through the Fund before 12:00 noon Central time earn dividends
that day.
EXCHANGE PRIVILEGE
Shareholders may exchange Class A Shares of each Fund for currently available
Class A Shares, of the other funds in the First American family. Exchanges of
Class A Shares of the Funds will be subject to imposition of sales charges, as
applicable, unless such shares are shown to have been originally issued in
exchange for shares in the First American family of funds that had a sales
charge. Exchanges of shares among the funds must meet any applicable minimum
investment of the fund for which shares are being exchanged.
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The ability to exchange shares of the funds does not constitute an offering or
recommendation of shares of one fund by another fund. This privilege is
available to shareholders resident in any state in which the fund shares being
acquired may be sold. Exchanges may be accomplished by a written request, or by
telephone if a preauthorized exchange authorization is on file with the Transfer
Agent, shareholder servicing agent, or financial institution.
Written exchange requests must be signed exactly as shown on the authorization
form, and the signatures may be required to be guaranteed as for a redemption of
shares by an entity described under "Redeeming Shares -- By Mail." Neither the
Funds, the Distributor, the Transfer Agent, any shareholder servicing agent, nor
any financial institution will be responsible for further verification of the
authenticity of the exchange instructions. See also "Redeeming Shares."
Telephone exchange instructions made by the investor may be carried out only if
a telephone authorization form completed by the investor is on file with the
Transfer Agent, shareholder servicing agent, or financial institution. Shares
may be exchanged between two funds by telephone only if the two funds have
identical shareholder registrations.
Telephone exchange instructions may be recorded and will be binding upon the
shareholder. Telephone instructions must be received by the Transfer Agent
before 12:00 noon Central time, or by a shareholder's shareholder servicing
agent or financial institution by the time specified by it, in order for shares
to be exchanged the same day. Neither the Transfer Agent nor the Funds will be
responsible for the authenticity of exchange instructions received by telephone
if it reasonably believes those instructions to be genuine. The Funds and the
Transfer Agent will each employ reasonable procedures to confirm that telephone
instructions are genuine, and they may be liable for losses resulting from
unauthorized or fraudulent telephone instructions if they do not employ these
procedures.
Shareholders of a Fund may have difficulty in making exchanges by telephone
through brokers and other financial institutions during times of drastic
economic or market changes. If a shareholder cannot contact his or her broker or
financial institution by telephone, it is recommended that an exchange request
be made in writing and sent by overnight mail to DST Systems, Inc., 1004
Baltimore, Kansas City, Missouri 64105.
The terms of any exchange privileges may be modified or terminated by the Funds
at any time. There are currently no additional fees or charges for the exchange
service and the Funds do not contemplate establishing such fees or charges,
although each Fund reserves the right to do so. Shareholders will be notified of
any modification or termination of the exchange privilege and of the imposition
of any additional fees or charges.
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REDEEMING SHARES
Each Fund redeems shares at the net asset value next determined after the
Transfer Agent receives the redemption request. Redemptions will be made on days
on which a Fund computes its net asset value. Redemptions can be made as
described below and must be received in proper form.
BY TELEPHONE
A shareholder may redeem shares of the Funds, if he or she elects the privilege
on the initial shareholder application, by calling his or her financial
institution to request the redemption. Shares will be redeemed at the net asset
value next determined after a Fund receives the redemption request from the
financial institution. Redemption requests must be received by the financial
institution by the time specified by the institution to be assured same day
processing and redemption requests must be transmitted to and received by a Fund
by 12:00 noon Central time for same day processing. Pursuant to instructions
received from the financial institution, redemptions will be made by check or by
wire transfer. It is the financial institution's responsibility to transmit
redemption requests promptly. Redemptions processed by 12:00 noon Central time
will not receive that day's dividend. Redemption requests placed after that time
will earn that day's dividend, but will not receive proceeds until the following
day.
Shareholders who did not purchase their shares through a financial institution
may redeem Fund shares by telephoning (800) 637-2548. At the shareholder's
request, redemption proceeds will be paid by check and mailed to the
shareholder's address of record or wire transferred to the shareholder's account
at a domestic commercial bank that is a member of the Federal Reserve System,
normally within one business day, but in no event longer than seven days after
the request. Wire instructions must be previously established in the account or
provided in writing. The minimum amount for a wire transfer is $1,000. If at any
time a Fund determines it necessary to terminate or modify this method of
redemption, shareholders will be promptly notified.
In the event of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If such a case should occur, another
method of redemption should be considered. Neither the Transfer Agent nor the
Funds will be responsible for any loss, liability, cost or expense for acting
upon wire instructions or upon telephone instructions that it reasonably
believes to be genuine. These procedures may include taping of telephone
conversations. To ensure authenticity of redemption or exchange instructions
received by telephone, the Transfer Agent examines each shareholder request by
verifying the account number and/or taxpayer identification number at the time
such request is made. The Transfer Agent
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subsequently sends confirmations of both exchange sales and exchange purchases
to the shareholder for verification. If reasonable procedures are not employed,
the Transfer Agent and the Funds may be liable for any losses due to
unauthorized or fraudulent telephone transactions.
BY MAIL
Any shareholder may redeem Fund shares by sending a written request to the
Transfer Agent, shareholder servicing agent, or financial institution. The
written request should include the shareholder's name, the Fund name, the
account number, and the share or dollar amount requested to be redeemed, and
should be signed exactly as the shares are registered. Shareholders should call
the applicable Fund, shareholder servicing agent or financial institution for
assistance in redeeming by mail. A check for redemption proceeds normally is
mailed within one business day, but in no event more than seven business days,
after receipt of a proper written redemption request.
Shareholders requesting a redemption of $5,000 or more, a redemption of any
amount to be sent to an address other than that on record with a Fund, or a
redemption payable other than to the shareholder of record must have signatures
on written redemption requests guaranteed by:
* a trust company or commercial bank, the deposits of which are
insured by the Bank Insurance Fund, which is administered by
the Federal Deposit Insurance Corporation ("FDIC");
* a member firm of the New York, American, Boston, Midwest, or
Pacific Stock Exchanges or the National Association of
Securities Dealers;
* a savings bank or savings and loan association the deposits of
which are insured by the Savings Association Insurance Fund,
which is administered by the FDIC; or
* any other "eligible guarantor institution," as defined in the
Securities Exchange Act of 1934.
The Funds do not accept signatures guaranteed by a notary public.
The Funds and the Transfer Agent have adopted standards for accepting signature
guarantees from the above institutions. The Funds may elect in the future to
limit eligible signature guarantees to institutions that are members of a
signature guarantee program. The Funds and the Transfer Agent reserve the right
to amend these standards at any time without notice.
BY CHECKING ACCOUNT
At the shareholder's request, the Transfer Agent will establish a checking
account for redeeming Fund shares. With a Fund checking account, shares
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may be redeemed simply by writing a check for $100 or more. The redemption will
be made at the net asset value on the date that the Transfer Agent presents the
check to a Fund. A check may not be written to close an account. If a
shareholder wishes to redeem shares and have the proceeds available, a check may
be written and negotiated through the shareholder's bank. Checks should never be
sent to the Transfer Agent to redeem shares. Copies of canceled checks are
available upon request. A fee is charged for this service. For further
information, contact the Funds.
BY SYSTEMATIC WITHDRAWAL PROGRAM
Shareholders whose account value is at least $5,000 may elect to participate in
the Systematic Withdrawal Program. Under this program, Fund shares are redeemed
to provide for periodic withdrawal payments in an amount directed by the
shareholder. A shareholder may apply for participation in this program through
his or her financial institution.
REDEMPTION BEFORE PURCHASE INSTRUMENTS CLEAR
When shares are purchased by check or with funds transferred through the
Automated Clearing House, the proceeds of redemption of those shares are not
available until the Transfer Agent is reasonably certain that the purchase
payment has cleared, which could take up to ten calendar days from the purchase
date.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Funds may
redeem shares in any account, except retirement plans, and pay the proceeds to
the shareholder if the account balance falls below the required minimum value of
$500. This requirement does not apply, however, if the balance falls below $500
because of changes in the Funds' net asset value. Before shares are redeemed to
close an account, the shareholder will be notified in writing and allowed 60
days to purchase additional shares to meet the minimum account requirement.
DETERMINING THE PRICE OF SHARES
The net asset value per share is determined as of the earlier of the close of
the New York Stock Exchange or 3:00 p.m. Central time on each day the New York
Stock Exchange is open for business, provided that the net asset value need not
be determined on days when no Fund shares are tendered for redemption and no
order to purchase Fund shares is received and on days on which changes in the
value of portfolio securities will not materially affect the current net asset
value of the Funds' shares. The price per share for purchases
<PAGE>
or redemptions is such value next computed after the Transfer Agent receives the
purchase order or redemption request. It is the responsibility of Participating
Institutions to promptly forward purchase and redemption orders to the Transfer
Agent. In the case of redemptions and repurchases of shares owned by
corporations, trusts or estates, the Transfer Agent or a Fund may require
additional documents to evidence appropriate authority in order to effect the
redemption and the applicable price will be that next determined following the
receipt of the required documentation.
The net asset value per share for each Fund is determined by dividing the value
of the securities owned by the Fund plus any cash and other assets (including
interest accrued and dividends declared but not collected), less all
liabilities, by the number of Fund shares outstanding.
Securities in the Funds' portfolio are valued on the basis of amortized cost.
This means valuation assumes a steady rate of payment from the date of purchase
until maturity instead of looking at actual changes in market value. The Funds'
other assets are valued by a method which the FAF Board of Directors believes
would accurately reflect fair value.
TAXES
The Funds will distribute all of their net income to shareholders. Dividends
paid by Treasury Obligations Fund will be taxable as ordinary income to
shareholders, whether reinvested or received in cash. Tax Free Obligations Fund
intends to take all actions required under the Internal Revenue Code of 1986 (as
amended) to ensure that it may pay "exempt-interest dividends." If the Fund
meets these requirements, distributions of net interest income from tax-exempt
obligations that are designated by the Fund as exempt-interest dividends will be
excludable from gross income of the Fund's shareholders. Distributions paid from
other interest income will be taxable to shareholders as ordinary income. For
federal income tax purposes, an alternative minimum tax ("AMT") is imposed on
taxpayers to the extent that such tax, if any, exceeds a taxpayer's regular
income tax liability (with certain adjustments). Liability for AMT will depend
upon each shareholder's tax situation. Exempt-interest dividends attributable to
interest income on certain tax-exempt obligations issued after August 7, 1986,
to finance certain private activities will be treated as an item of tax
preference that is included in alternative minimum taxable income for purposes
of calculating the AMT for all taxpayers. Tax Free Obligations Fund may invest
up to 20% of its total assets in securities, the interest on which is treated as
an item of tax preference that is included in alternative minimum taxable income
for purposes of calculating the AMT. Each shareholder is advised to consult his
or her tax adviser with respect to the possible effects of such tax preference
items.
For a more detailed discussion of the taxation of the Funds and the tax
consequences of an investment in the Funds, see "Taxes" in the Statement of
Additional Information.
FUND SHARES
Each share of the Funds is fully paid, nonassessable, and transferable.
Shares may be issued as either full or fractional shares. Fractional shares
have pro
<PAGE>
rata the same rights and privileges as full shares. Shares of the Funds have no
preemptive or conversion rights.
Each share of the Funds has one vote. On some issues, such as the election of
directors, all shares of all FAF 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 or
class, the shares of that fund or class will vote as a separate series. Examples
of such issues would be proposals to alter a fundamental investment restriction
pertaining to a fund or to approve, disapprove or alter a distribution plan
pertaining to a class.
The Bylaws of FAF provide that annual shareholders' meetings are not required
and that meetings of shareholders need be held only with such frequency as
required under Minnesota law and the 1940 Act.
CALCULATION OF PERFORMANCE DATA
From time to time each Fund may advertise its "yield," "effective yield" and, in
the case of Tax Free Obligations Fund, "tax equivalent yield" in advertisements
or in reports or other communications with shareholders. These yield figures are
based on historical earnings and are not intended to indicate future
performance. The "yield" of a Fund refers to the income generated by an
investment over a seven-day period (which period will be stated in the
advertisement). This income is then "annualized," that is, the amount of income
generated by the investment during that week is assumed to be generated each
week over a 52-week period and is shown as a percentage of the investment. The
"effective yield" is calculated similarly but, when annualized, the income
earned by an investment in the Fund is assumed to be reinvested. The "effective
yield" will be slightly higher than the "yield" because of the compounding
effect of this assumed reinvestment. "Tax-equivalent yield" is that yield which
a taxable investment must generate in order to equal a Fund's yield for an
investor in a stated income tax bracket. Tax equivalent yield is computed by
dividing that income tax rate, and adding the resulting amount to that portion,
if any, of the yield which is not tax exempt.
Advertisements and other sales literature for a Fund may refer to the Fund's
"cumulative total return" and "average annual total return." Total return is
based on the overall dollar or percentage change in value of a hypothetical
investment in a Fund assuming dividend distributions are reinvested. A
cumulative total return reflects the Funds' performance over a stated period of
time. An average annual total return reflects the hypothetical annually
<PAGE>
compounded rate that would have produced the same cumulative total return if
performance had been constant over the entire period. Because average annual
returns tend to smooth out variations in a Fund's performance, they are not the
same as actual year-by-year results.
Performance quotations are computed separately for Class A, Class C and Class D
Shares of each Fund. The performance of each class will differ due to the
varying levels of distribution fees and shareholder service fees applicable to
each class.
INVESTMENT RESTRICTIONS AND TECHNIQUES
GENERAL
The Funds are subject to the investment restrictions of Rule 2a-7 under the 1940
Act in addition to other policies and restrictions discussed herein. Pursuant to
Rule 2a-7, each Fund is required to invest exclusively in securities that mature
within 397 days from the date of purchase and to maintain an average weighted
maturity of not more than 90 days. Under Rule 2a-7, securities which are subject
to specified types of demand or put features may be deemed to mature at the next
demand or put date although they have a longer stated maturity. Rule 2a-7 also
requires that all investments by each Fund be limited to United States
dollar-denominated investments that (a) present "minimal credit risk" and (b)
are at the time of acquisition "Eligible Securities." Eligible Securities
include, among others, securities that are rated by two Nationally Recognized
Statistical Rating Organizations ("NRSROs") in one of the two highest categories
for short-term debt obligations, such as A-1 or A-2 by Standard & Poor's
Corporation ("Standard & Poor's"), or Prime-1 or Prime-2 by Moody's Investors
Service, Inc. ("Moody's"). It is the responsibility of the Adviser to determine
that the Funds' investments present only "minimal credit risk" and are Eligible
Securities. The Board of Directors of FAF has established written guidelines and
procedures for the Adviser and oversees the Adviser's determination that the
Funds' portfolio securities present only "minimal credit risk" and are Eligible
Securities.
Rule 2a-7 requires, among other things, that Treasury Obligations Fund may not
invest, other than in United States "Government Securities" (as defined in the
1940 Act), more than 5% of its total assets in securities of a single issuer;
provided, that the Fund may invest in First Tier Securities (as defined in Rule
2a-7) in excess of that limitation for a period of up to three business days
after the purchase thereof provided that the Fund may not make more than one
such investment at any time. Rule 2a-7 also requires that Treasury Obligations
Fund may not invest, other than in United States Government securities, (a) more
than 5% of its total assets in Second Tier Securities (i.e.,
<PAGE>
Eligible Securities that are not rated by two NRSROs in the highest category
such as A-1 and Prime-1) and (b) more than the greater of 1% of its total assets
or $1,000,000 in Second Tier Securities of any one issuer.
In order to provide shareholders with full liquidity, each Fund has implemented
the following practices to maintain a constant price of $1.00 per share:
limiting the portfolio's dollar-weighted average maturity to 90 days or less and
buying securities which mature within 397 days from the date of acquisition as
determined pursuant to Rule 2a-7 under the 1940 Act. The Funds cannot guarantee
a $1.00 share price but these practices help to minimize any price fluctuations
that might result from rising or declining interest rates. All money market
instruments, including United States Government securities, can change in value
when interest rates or an issuer's creditworthiness changes. The value of the
securities in the Funds' portfolios can be expected to vary inversely with
changes in prevailing interest rates, with the amount of such variation
depending primarily upon the period of time remaining to maturity of the
security. If the security is held to maturity, no gain or loss will be realized
as a result of interest rate fluctuations.
As a non-fundamental policy, neither Fund will purchase a security if as a
result more than 10% of its net assets would be in illiquid assets including
time deposits and repurchase agreements maturing in more than seven days. As a
fundamental policy, neither Fund will purchase a security if, as a result, 25%
or more of its assets would be in any single industry (including tax-exempt
municipal bonds issued by non-governmental issuers) provided that there is no
limitation on the purchase of obligations issued or guaranteed by the United
States, its agencies or instrumentalities, or obligations of domestic commercial
banks, excluding for this purpose, foreign branches of domestic commercial
banks.
Unless otherwise stated, the policies described above in this section for the
Funds are non-fundamental and may be changed by a vote of the Board of
Directors. The Funds have adopted certain other investment restrictions, which
are set forth in detail in the Statement of Additional Information. These
restrictions are fundamental and may not be changed without the approval of the
holders of a majority (as defined in the 1940 Act) of the outstanding shares of
the Funds.
If a percentage limitation under this section or "Investment Objectives and
Policies," or under "Investment Restrictions" in the Statement of Additional
Information, is adhered to at the time of an investment, a later increase or
decrease in percentage resulting from changes in values of assets will not
constitute a violation of such limitation except in the case of the limitation
on illiquid investments.
The securities in which the Funds invest may not yield as high a level of
current income as longer term or lower grade securities, which generally have
<PAGE>
less liquidity and a greater fluctuation in value. All securities in the
portfolio are purchased with and payable in United States dollars.
MUNICIPAL OBLIGATIONS
As described under "Investment Objectives and Policies," Tax Free Obligations
Fund invests principally in municipal obligations such as municipal bonds and
other debt obligations. These municipal bonds and debt obligations are issued by
the states and by their local and special-purpose political subdivisions. The
term "municipal bond" as used in this Prospectus includes short-term municipal
notes and other commercial paper issued by the states and their political
subdivisions.
The two general classifications of municipal bonds are "general obligation"
bonds and "revenue" bonds. General obligation bonds are secured by the
governmental issuer's pledge of its faith, credit and taxing power for the
payment of principal and interest. They are usually paid from general revenues
of the issuing governmental entity. Revenue bonds, on the other hand, are
usually payable only out of a specific revenue source rather than from general
revenues. Revenue bonds ordinarily are not backed by the faith, credit or
general taxing power of the issuing governmental entity. The principal and
interest on revenue bonds for private facilities are typically paid out of rents
or other specified payments made to the issuing governmental entity by a private
company which uses or operates the facilities. Examples of these types of
obligations are industrial revenue bonds and pollution control revenue bonds.
Industrial revenue bonds are issued by governmental entities to provide
financing aid to community facilities such as hospitals, hotels, business or
residential complexes, convention halls and sport complexes. Pollution control
revenue bonds are issued to finance air, water and solids pollution control
systems for privately operated industrial or commercial facilities.
Revenue bonds for private facilities usually do not represent a pledge of the
credit, general revenues or taxing powers of the issuing governmental entity.
Instead, the private company operating the facility is the sole source of
payment of the obligation. Sometimes, the funds for payment of revenue bonds
come solely from revenue generated by operation of the facility. Revenue bonds
which are not backed by the credit of the issuing governmental entity frequently
provide a higher rate of return than other municipal obligations, but they
entail greater risk than obligations which are guaranteed by a governmental unit
with taxing power. Federal income tax laws place substantial limitations on
industrial revenue bonds, and particularly certain specified private activity
bonds issued after August 7, 1986. In the future, legislation could be
introduced in Congress which could further restrict or eliminate the income tax
exemption for interest on debt obligations in which the Funds may invest.
<PAGE>
The Fund's investment in municipal bonds and other debt obligations that are
purchased from financial institutions such as commercial and investment banks,
savings associations and insurance companies may take the form of
participations, beneficial interests in a trust, partnership interests or any
other form of indirect ownership that allows the Fund to treat the income from
the investment as exempt from federal income tax.
In addition, Tax Free Obligations Fund may invest in other federal income
tax-free securities such as (i) tax and revenue anticipation notes issued to
finance working capital needs in anticipation of receiving taxes or other
revenues, (ii) bond anticipation notes that are intended to be refinanced
through a later issuance of longer-term bonds, (iii) variable and floating rate
obligations including variable rate demand notes, and (iv) participation, trust
and partnership interests in any of the foregoing obligations.
LOAN PARTICIPATIONS; SECTION 4(2) AND RULE 144A SECURITIES
Tax Free Obligations Fund's investments in taxable money market securities may
include loan participation interests. A loan participation interest represents a
pro rata undivided interest in an underlying bank loan. Participation interests,
like the underlying loans, may have fixed, floating, or variable rates of
interest. The bank selling a participation interest generally acts as a mere
conduit between its borrower and the purchasers of interests in the loan. The
purchaser of an interest generally does not have recourse against the bank in
the event of a default on the underlying loan. Therefore, the credit risk
associated with such instruments is governed by the creditworthiness of the
underlying borrowers and not by the banks selling the interests. Loan
participation interests that can be sold within a seven-day period are deemed by
the Adviser to be liquid investments. If a loan participation interest is
restricted from being sold within a seven-day period, then it, as a
non-fundamental policy, will be limited, together with other illiquid
investments, to not more than 10% of the Fund's net assets. Commercial paper
issued in reliance on the exemption from registration afforded by Section 4(2)
of the Securities Act of 1933 and corporate obligations qualifying for resale to
certain "qualified institutional buyers" pursuant to Rule 144A under the
Securities Act of 1933 that meet the criteria for liquidity established by the
Board of Directors are considered liquid. Consequently, Tax Free Obligations
Fund does not intend to subject such securities to the limitation applicable to
restricted securities. Investing in Rule 144A securities could have the effect
of increasing the level of illiquidity in the Fund to the extent that qualified
institutional buyers become, for a time, uninterested in purchasing these
securities.
<PAGE>
SECURITIES OF FOREIGN BANKS AND BRANCHES
Because Tax Free Obligations Fund's investments in taxable money market
securities may include securities of foreign branches of domestic banks, foreign
banks, and United States branches of foreign banks, the Fund may be subject to
additional investment risks that are different in some respects from those
incurred by a fund that invests only in debt obligations of United States banks.
These risks may include future unfavorable political and economic developments
and possible withholding taxes, seizure of foreign deposits, currency controls,
interest limitations, or other governmental restrictions which might affect the
payment of principal or interest on securities owned by the Fund. Additionally,
there may be less public information available about foreign banks and their
branches. The Adviser carefully considers these factors when making investments.
The Fund has agreed that, in connection with investment in securities issued by
foreign banks, United States branches of foreign banks, and foreign branches of
domestic banks, consideration will be given to the domestic marketability of
such securities in light of these factors.
UNITED STATES GOVERNMENT SECURITIES
The Funds may invest in securities issued or guaranteed as to principal or
interest by the United States Government, or, political subdivisions, agencies
or instrumentalities of the United States Government. These investments include
direct obligations of the United States Treasury such as United States Treasury
bonds, notes, and bills. The Treasury securities are essentially the same except
for differences in interest rates, maturities, and dates of issuance. In
addition to Treasury securities, the Funds may invest in securities, such as
notes, bonds, and discount notes which are issued or guaranteed by agencies of
the United States Government and various instrumentalities which have been
established or sponsored by the United States Government. Except for United
States Treasury securities, these United States Government obligations, even
those which are guaranteed by federal agencies or instrumentalities, may or may
not be backed by the "full faith and credit" of the United States. In the case
of securities not backed by the full faith and credit of the United States, the
investor must look principally to the agency issuing or guaranteeing the
obligation for ultimate repayment and may not be able to assert a claim against
the United States itself in the event the agency or instrumentality does not
meet its commitment. The Adviser considers securities guaranteed by an
irrevocable letter of credit issued by a government agency to be guaranteed by
that agency.
United States Treasury obligations include bills, notes and bonds issued by the
United States Treasury and separately traded interest and principal component
parts of such obligations that are transferable through the Federal book-entry
system known as Separately Traded Registered Interest and Principal Securities
<PAGE>
("STRIPS"). STRIPS are sold as zero coupon securities, which means that they are
sold at a substantial discount and redeemed at face value at their maturity date
without interim cash payments of interest or principal. This discount is
accreted over the life of the security, and such accretion will constitute the
income earned on the security for both accounting and tax purposes. Because of
these features, such securities may be subject to greater interest rate
volatility than interest paying United States Treasury obligations. The Fund's
investments in STRIPS will be limited to components with maturities of less than
397 days and the Fund will not actively trade such components.
REPURCHASE AGREEMENTS
Each Fund may engage in repurchase agreements with respect to any of its
portfolio securities. In a repurchase agreement, a Fund buys a security at one
price and simultaneously promises to sell that same security back to the seller
at a mutually agreed upon time and price. The Funds may engage in repurchase
agreements with any member bank of the Federal Reserve System or dealer in
United States Government securities. Repurchase agreements usually are for short
periods, such as under one week, not to exceed 30 days. In all cases, the
Adviser must be satisfied with the creditworthiness of the other party to the
agreement before entering a repurchase agreement. In the event of bankruptcy of
the other party to a repurchase agreement, the Funds might experience delays in
recovering its cash. To the extent that, in the meantime, the value of the
securities the Funds purchased may have decreased, the Funds could experience a
loss.
REVERSE REPURCHASE AGREEMENTS
Treasury Obligations Fund may also enter into reverse repurchase agreements.
These transactions are similar to borrowing cash. The Fund will not enter into
reverse repurchase agreements to increase income (leveraging), and it will only
enter into such agreements for temporary or emergency purposes, for the purpose
of meeting redemption requests which might otherwise require the untimely
disposition of assets. In a reverse repurchase agreement, the Fund transfers
possession of a portfolio instrument to another person, such as a financial
institution, broker, or dealer, in return for a percentage of the instrument's
market value in cash, and agrees that on a stipulated date in the future the
Fund will repurchase the portfolio instrument by remitting the original
consideration plus interest at an agreed upon rate. The use of reverse
repurchase agreements may enable Treasury Obligations Fund to avoid selling
portfolio instruments at a time when a sale may be deemed to be disadvantageous,
but the ability to enter into reverse repurchase agreements does not ensure that
Treasury Obligations Fund will be able to avoid selling portfolio instruments at
a disadvantageous time.
<PAGE>
When effecting reverse repurchase agreements, liquid assets of Treasury
Obligations Fund, in a dollar amount sufficient to make payment for the
obligations to be purchased, are segregated on the Fund's records at the trade
date. These assets are marked to market daily and are maintained until the
transaction is settled.
During the period any reverse repurchase agreements are outstanding, but only to
the extent necessary to assure completion of the reverse repurchase agreements,
Treasury Obligations Fund will restrict the purchase of portfolio instruments to
money market instruments maturing on or before the expiration date of the
reverse repurchase agreements.
CREDIT ENHANCEMENT AGREEMENTS
Tax Free Obligations Fund may arrange for guarantees, letters of credit, or
other forms of credit enhancement agreements (collectively, "Guarantees") for
the purpose of further securing the payment of principal and/or interest on the
Fund's investment securities. Although each investment security, at the time it
is purchased, must meet the Fund's creditworthiness criteria, Guarantees
sometimes are purchased from banks and other institutions (collectively,
"Guarantors") when the Adviser, through yield and credit analysis, deems that
credit enhancement of certain of the Fund's securities is advisable. As a
non-fundamental policy, the Fund will limit the value of all investment
securities issued or guaranteed by each Guarantor to not more than 10% of the
value of the Fund's total assets.
PUT OPTIONS
Tax Free Obligations Fund may purchase tax-exempt securities which provide for
the right to resell them to the issuer, a bank or a broker-dealer at a specified
price within a specified period of time prior to the maturity date of such
obligations. Such a right to resell, which is commonly known as a "put," may be
sold, transferred or assigned only with the underlying security or securities.
The Fund may pay a higher price for a tax-exempt security with a put than would
be paid for the same security without a put. The primary purpose of purchasing
such securities with puts is to permit the Fund to be as fully invested as
practicable in tax-exempt securities while at the same time providing the Fund
with appropriate liquidity.
VARIABLE AND FLOATING RATE OBLIGATIONS
Certain of the obligations in which Tax Free Obligations Fund may invest may be
variable or floating rate obligations in which the interest rate is adjusted
either at predesignated periodic intervals (variable rate) or when there is a
change in the index rate of interest on which the interest rate payable on the
obligation is based (floating rate). Variable or floating rate
<PAGE>
obligations 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. Variable or floating rate instruments with a demand feature enable the
Fund to purchase instruments with a stated maturity in excess of 397 calendar
days. The Fund determines the maturity of variable or floating rate instruments
in accordance with Securities and Exchange Commission rules which allow the Fund
to consider certain of such instruments as having maturities that are less than
the maturity date on the face of the instrument.
LENDING OF PORTFOLIO SECURITIES
Each Fund may from time to time lend securities from its portfolio to brokers,
dealers, and financial institutions and receive collateral in cash or securities
issued or guaranteed by the United States Government which will be maintained at
all times in an amount equal to at least 100% of the current value of the loaned
securities. Such loans may not exceed one-third of the value of a Fund's total
assets. The Funds will pay a portion of the income earned on a lending
transaction to the placing broker and may pay administrative and custodial fees
(including fees to an affiliate of the Adviser) in connection with these loans.
For additional information, see "Investment Restrictions" in the Statement of
Additional Information.
WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES
The Funds may purchase the securities described above on a when-issued or
delayed-delivery basis. The settlement dates for these types of transactions are
determined by mutual agreement of the parties and may occur a month or more
after the parties have agreed to the transaction. Securities purchased on a
when-issued or delayed-delivery basis are subject to market fluctuation and no
interest accrues to the Funds during the period prior to settlement. At the time
a Fund commits to purchase securities on a when-issued or delayed- delivery
basis, it will record the transaction and thereafter reflect the value, each
day, of such security in determining its net asset value. At the time of
delivery of the securities, the value may be more or less than the purchase
price. The Funds will also establish a segregated account with its Custodian in
which it will maintain cash or cash equivalents or other portfolio securities
equal in value to commitments for such when-issued or delayed-delivery
securities. The Funds will not purchase securities on a when-issued or delayed-
delivery basis if, as a result thereof, more than 15% of each Fund's net assets
would be so invested.
<PAGE>
MONEY MARKET FUNDS
Each of the Funds may invest, to the extent permitted by the 1940 Act, in
securities issued by other money market funds, provided that the permitted
investments of such other money market funds constitute permitted investments of
the investing Fund. The Adviser will waive its advisory fee on amounts which are
invested in such other money market funds. The money market funds in which a
Fund may invest include other money market funds advised by the Adviser.
Investments by a Fund in other money market funds advised by the Adviser are
subject to certain restrictions contained in an exemptive order issued by the
Securities and Exchange Commission.
INFORMATION CONCERNING COMPENSATION PAID TO FIRST TRUST NATIONAL
ASSOCIATION AND ITS AFFILIATES
First Trust National Association ("First Trust") may act as fiduciary with
respect to plans subject to the Employee Retirement Income Security Act of 1974
("ERISA") which invest in the Funds. This section sets forth information
concerning compensation that First Trust and its affiliates may receive from a
Fund.
First Trust, as custodian for the assets of the Funds, receives the custodian
fees specified herein under the caption "Management -- Custodian."
First Bank National Association, which is under common ownership with First
Trust, acts as investment adviser to the Fund and receives the advisory fees
specified herein under the caption "Management -- Investment Adviser."
First Trust and its affiliates may receive shareholder servicing fees in the
amounts specified herein under the caption "Distributor." First Trust also may
act as securities lending agent in connection with the Funds' securities lending
transactions and receive, as compensation for such services, fees equal to 40%
of the Funds' income from such securities lending transactions.
<PAGE>
FIRST AMERICAN FUNDS, INC.
Oaks, Pennsylvania 19456
INVESTMENT ADVISER
FIRST BANK NATIONAL ASSOCIATION
601 Second Avenue South
Minneapolis, Minnesota 55402
CUSTODIAN
FIRST TRUST NATIONAL ASSOCIATION
180 East Fifth Street
St. Paul, Minnesota 55101
DISTRIBUTOR
SEI INVESTMENTS DISTRIBUTION CO.
Oaks, Pennsylvania 19456
ADMINISTRATOR
SEI INVESTMENTS MANAGEMENT
CORPORATION
Oaks, Pennsylvania 19456
TRANSFER AGENT
DST SYSTEMS, INC.
1004 Baltimore
Kansas City, Missouri 64105
INDEPENDENT AUDITORS
KPMG PEAT MARWICK LLP
90 South Seventh Street
Minneapolis, Minnesota 55402
COUNSEL
DORSEY & WHITNEY LLP
220 South Sixth Street
Minneapolis, Minnesota 55402
FAF-1901 (7/97)R
<PAGE>
FIRST AMERICAN FUNDS, INC.
MONEY MARKET FUNDS
INSTITUTIONAL CLASS
TAX FREE OBLIGATIONS FUND
PROSPECTUS
October 8, 1997
[LOGO]
FIRST AMERICAN FUNDS
The power of disciplined investing
<PAGE>
FIRST AMERICAN FUNDS, INC.
Oaks, Pennsylvania 19456
INSTITUTIONAL CLASS PROSPECTUS
The shares described in this Prospectus represent interests in First American
Funds, Inc., which consists of mutual funds with four different investment
portfolios and objectives. This Prospectus relates to the Class C Shares of the
following fund (the "Fund"):
* TAX FREE OBLIGATIONS FUND
Class C Shares of the Fund are offered through banks and certain other
institutions for the investment of their own funds and funds for which they act
in a fiduciary, agency or custodial capacity.
The Fund seeks to achieve maximum current income exempt from federal income
taxes consistent with preservation of capital and maintenance of liquidity. The
Fund pursues its objective by investing in money market instruments, the income
from which is exempt from federal income tax. The Fund is a diversified open-end
mutual fund.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, INCLUDING FIRST BANK NATIONAL ASSOCIATION OR ANY OF ITS
AFFILIATES, NOR ARE THEY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. AN INVESTMENT IN THE FUND
INVOLVES INVESTMENT RISK, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
This Prospectus sets forth concisely information about the Fund that a
prospective investor should know before investing. It should be read and
retained for future reference.
A Statement of Additional Information dated October 8, 1997 for the Fund
has been filed with the Securities and Exchange Commission ("SEC") and is
incorporated in its entirety by reference in this Prospectus. To obtain copies
of the Statement of Additional Information at no charge, or to obtain other
information or make inquiries about the Fund, call (800) 637-2548 or write SEI
Investments Distribution Co., Oaks, Pennsylvania 19456. The SEC maintains a
World Wide Web site that contains reports and information regarding issuers that
file electronically with the SEC. The address of such site is
"http://www.sec.gov."
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE UNITED STATES
GOVERNMENT, AND THERE IS NO ASSURANCE THAT THE FUND WILL BE ABLE TO MAINTAIN A
STABLE NET ASSET VALUE OF $1.00 PER SHARE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is October 8, 1997.
<PAGE>
TABLE OF CONTENTS
PAGE
SUMMARY OF FUND EXPENSES 4
Class C Share Fees and Expenses 4
Information Concerning Fees and
Expenses 5
THE FUND 6
INVESTMENT OBJECTIVES AND POLICIES 6
MANAGEMENT OF THE FUND 7
Investment Adviser 7
Portfolio Managers 8
Custodian 9
Administrator 9
Transfer Agent 9
DISTRIBUTOR 9
PORTFOLIO TRANSACTIONS 10
PURCHASE AND REDEMPTION OF SHARES 10
Share Purchases and Redemptions 10
What Shares Cost 11
Exchanging Securities for Fund Shares 12
Certificates and Confirmations 12
Dividends 12
Capital Gains 12
Exchange Privilege 13
TAXES 13
FUND SHARES 13
CALCULATION OF PERFORMANCE DATA 14
INVESTMENT RESTRICTIONS AND
TECHNIQUES 15
General Restrictions 15
Municipal Obligations 16
Loan Participations; Section 4(2) and
Rule 144A Securities 18
Securities of Foreign Banks and
Branches 18
United States Government
Securities 19
Repurchase Agreements 19
Credit Enhancement Agreements 20
Put Options 20
Variable and Floating Rate
Obligations 20
Lending of Portfolio Securities 21
When-Issued and Delayed-Delivery
Securities 21
Money Market Funds 21
Information Concerning Compensation
Paid to First Trust National
Association and Its Affiliates 22
<PAGE>
SUMMARY OF FUND EXPENSES
CLASS C SHARE FEES AND EXPENSES
TAX FREE
OBLIGATIONS FUND
SHAREHOLDER TRANSACTION EXPENSES
Maximum sales load imposed on
purchases None
Maximum sales load imposed on
reinvested dividends None
Deferred sales load None
Redemption fees None
Exchange fees None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
Investment advisory fees (after
voluntary fee waivers and
reimbursements)(1) 0.11%
Rule 12b-1 fees None
Other expenses 0.34%
Total fund operating expenses
(after voluntary fee
waivers and reimbursements)(1) 0.45%
EXAMPLE(2)
You would pay the following expenses on a $1,000
investment, assuming (i) a 5% annual return, and (ii)
redemption at the end of each time period:
1 year $5
3 years $14
(1) First Bank National Association, the investment adviser for the Fund,
intends to waive a portion of its fees and/or reimburse expenses on a
voluntary basis, and the amounts shown above reflect these waivers and
reimbursements as of the date of this Prospectus. The Fund's investment
adviser intends to maintain such waivers and reimbursements until
September 30, 1998. Absent any fee waivers or reimbursements,
investment advisory fees for the Fund as an annualized percentage of
average daily net assets would be 0.40%; and total fund operating
expenses with respect to Class C Shares calculated on such basis would
be 0.74% for the Fund. Other expenses include an annual administration
fee.
(2) Absent the voluntary reduction of fees the dollar amounts for the 1 and
3-year periods in the example above would be $8 and $24 for the Fund.
<PAGE>
INFORMATION CONCERNING FEES AND EXPENSES
The purpose of the preceding table is to assist the investor in understanding
the various costs and expenses that an investor in the Fund may bear directly or
indirectly. THE DATA CONTAINED IN THE TABLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN. The information set forth in the tables relates only to
the Class C Shares of the Fund. The Fund also offers Class A and Class D Shares
which are subject to the same expenses and additional sales, shareholder
servicing and/or distribution expenses.
Investment advisory fees are paid by the Fund to First Bank National Association
(the "Adviser") for managing its investments. The examples in the above table
are based on annual operating expenses for the Fund after voluntary fee waivers
and expense reimbursements by the Adviser. Prior to fee waivers, investment
advisory fees accrue at the annual rate of 0.40% of the average daily net assets
of the Fund. "Other expenses" include administrative fees which are paid by the
Fund to SEI Investments Management Corporation (the "Administrator") for
providing various services necessary to operate the Fund. These include
shareholder servicing and certain accounting and other services. The
Administrator provides these services for a fee calculated as described under
"Management of the Fund -- Administrator" below. "Other expenses" in the tables
are based on estimates.
<PAGE>
THE FUND
First American Funds, Inc. ("FAF") is an open-end management investment company
which offers its shares in four different mutual funds, each of which evidences
an interest in a separate and distinct investment portfolio. Shareholders may
purchase shares in the Fund through separate classes that provide for variations
in shareholder servicing fees, distribution costs, voting rights and dividends.
Except for these differences among classes, each share of the Fund represents an
undivided proportionate interest in the Fund. FAF is incorporated under the laws
of the State of Minnesota, and its principal offices are located at Oaks,
Pennsylvania 19456.
This Prospectus relates only to the Class C Shares of the Fund named on the
cover hereof. Information regarding the Class A and Class D Shares of the Fund
is contained in separate prospectuses that may be obtained from the Fund's
Distributor, SEI Investments Distribution Co., Pennsylvania 19456, or by calling
(800) 637-2548. The Board of Directors of FAF may authorize additional series or
classes of common stock in the future.
INVESTMENT OBJECTIVES AND POLICIES
As a fundamental investment objective, the Fund seeks to achieve maximum current
income exempt from federal income taxes consistent with preservation of capital
and maintenance of liquidity. The Adviser will purchase investments for the Fund
consistent with such investment objective. The Fund's investment objective may
not be changed without an affirmative vote of the holders of a majority (as
defined in the Investment Company Act of 1940, as amended (the "1940 Act")) of
the outstanding shares of the Fund. The Fund may not always achieve its
objectives.
In seeking to achieve its investment objective and as a fundamental policy, the
Fund invests at least 80% of its total assets in municipal obligations, the
income from which is exempt from federal income tax. In addition, the Fund may
invest up to 20% of its total assets in municipal obligations, the income from
which is an item of tax preference for purposes of the federal alternative
minimum tax. For more information on these types of securities, see "Investment
Restrictions and Techniques -- Municipal Obligations" below.
The Fund may also (i) engage in repurchase agreements with respect to any of its
portfolio securities, (ii) purchase credit enhancement agreements to enhance the
creditworthiness of its portfolio securities, (iii) lend securities from its
portfolio, (iv) purchase the securities described above on a when-issued or
delayed-delivery basis, (v) purchase put options with respect to its portfolio
securities and (vi) invest in variable or floating rate obligations.
<PAGE>
For more information on these techniques, see "Investment Restrictions and
Techniques" below.
The Fund may invest up to 20% of its total assets collectively in taxable money
market securities including marketable securities issued under or guaranteed by
the United States Government or its agencies or instrumentalities; certain
United States dollar denominated obligations (including bankers' acceptances,
time deposits, and certificates of deposit, including variable rate certificates
of deposit) of banks (including commercial banks, savings banks and savings and
loan associations) organized under the laws of the United States or any state,
foreign banks, United States branches of foreign banks, if such banks have total
assets of not less than $500 million and certain corporate and other obligations
including high grade commercial paper, nonconvertible corporate debt securities,
and loan participation interests with no more than 397 days remaining to
maturity as determined pursuant to Rule 2a-7 under the 1940 Act. In addition,
the Fund's engagement in lending portfolio securities and in purchasing put
options with respect to its portfolio securities may result in taxable income.
For defensive purposes, the Fund may temporarily invest more than 20% (up to
100%) of the value of its total assets in taxable money market securities and
certain tax-exempt securities, the income on which is an item of tax preference
for purposes of the federal alternative minimum tax when, in the opinion of the
Adviser, it is advisable to do so in light of prevailing market and economic
conditions for purposes of preserving liquidity or capital. See "Investment
Restrictions and Techniques" for a discussion of the risks relating to
investments in such securities.
MANAGEMENT OF THE FUND
The Board of Directors of FAF has the primary responsibility for overseeing the
overall management and electing other officers of FAF. Subject to the overall
direction and supervision of the Board of Directors, the Adviser acts as
investment adviser for and manages the investment portfolios of FAF.
INVESTMENT ADVISER
First Bank National Association, 601 Second Avenue South, Minneapolis, Minnesota
55480, acts as the Fund's investment adviser through its First Asset Management
group. The Adviser provides the Fund with investment research and portfolio
management. As of December 31, 1996, the Adviser was managing accounts with an
aggregate value of approximately $35 billion, including mutual fund assets in
excess of $12 billion. U.S. Bancorp (formerly known as First Bank System, Inc.),
601 Second Avenue South, Minneapolis, Minnesota 55480, is the holding company
for the Adviser.
<PAGE>
The Fund pays the Adviser a monthly fee equal, on an annual basis, to 0.40% of
the Fund's average daily net assets. The Adviser may, at its option, waive any
or all of its fees, or reimburse expenses. Any such waiver or reimbursement is
voluntary and may be discontinued at any time. The Adviser also may absorb or
reimburse expenses of the Fund from time to time, in its discretion, while
retaining the ability to be reimbursed by the Fund for such amounts prior to the
end of the fiscal year. This practice would have the effect of lowering the
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.
The Glass-Steagall Act generally prohibits banks from engaging in the business
of underwriting, selling, or distributing securities and from being affiliated
with companies principally engaged in those activities. In addition,
administrative and judicial interpretations of the Glass-Steagall Act prohibit
bank holding companies and their bank and nonbank subsidiaries from organizing,
sponsoring, or controlling registered open-end investment companies that are
continuously engaged in distributing their shares. Bank holding companies and
their bank and nonbank subsidiaries may serve, however, as investment advisers
to registered investment companies, subject to a number of terms and conditions.
Although the scope of the prohibitions and limitations imposed by the
Glass-Steagall Act has not been fully defined by the courts or the appropriate
regulatory agencies, the Fund has received an opinion from its counsel that the
Adviser is not prohibited from performing the investment advisory services
described above, and that FBS Investment Services, Inc. ("ISI"), a wholly-owned
broker-dealer of the Adviser, is not prohibited from serving as a Participating
Institution as described herein. In the event of changes in federal or state
statutes or regulations or judicial and administrative interpretations or
decisions pertaining to permissible activities of bank holding companies and
their bank and nonbank subsidiaries, the Adviser might be prohibited from
continuing these arrangements. In that event, it is expected that the Board of
Directors would make other arrangements and shareholders would not suffer
adverse financial consequences.
PORTFOLIO MANAGERS
JOSEPH M. ULREY III is portfolio co-manager for the Fund. He spent 10 years
overseeing various functions in the Treasury and Finance Divisions of First Bank
System before joining the Adviser. For the past 5 1/2 years Mr. Ulrey has
managed assets for individuals and institutional clients of the Adviser. Mr.
Ulrey graduated from Macalester College with a bachelor's degree in
mathematics/economics and went on to the University of Chicago for his master's
in business administration, concentrating in finance.
<PAGE>
JAMES D. PALMER is portfolio co-manager for the Fund. Mr. Palmer joined the
Adviser in 1992, prior to which he was a securities lending trader and senior
master trust accountant with First Trust National Association. Mr. Palmer
holds a bachelor's degree from the University of Wisconsin -- LaCrosse and a
master's of business administration degree from the University of Minnesota.
CUSTODIAN
The custodian of the Fund's assets is First Trust National Association (the
"Custodian"), First Trust Center, 180 East Fifth Street, St. Paul, Minnesota
55101. The Custodian is a subsidiary of FBS, which also controls the Adviser. As
compensation for its services to the Fund, the Custodian is paid 0.03% of the
Fund's average daily net assets. In addition, the Custodian is reimbursed for
its out-of-pocket expenses incurred in providing services to the Fund.
ADMINISTRATOR
SEI Investments Management Corporation (the "Administrator"), a wholly-owned
subsidiary of SEI Investments Company ("SEI"), provides the Fund with certain
administrative personnel and services necessary to operate the Fund. Such
services include shareholder servicing and certain legal and accounting
services. The Administrator provides these personnel and services for
compensation at an annual rate equal to 0.07% of the Fund's average daily net
assets, subject to a minimum administrative fee during each fiscal year of
$50,000; provided, that to the extent that the aggregate net assets of all First
American funds exceed $8 billion, the percentage stated above is reduced to
0.055%. The Fund has approved the appointment of First Bank National Association
as a Sub-Administrator (the "Sub-Administrator"), effective January 1, 1998. It
is contemplated that the Sub-Administrator will assist SEI in the performance of
administrative services for the Fund. The Sub-Administration Agreement provides
that SEI will compensate the Sub-Administrator at an annual rate of up to 0.05%
of the Fund's average daily net assets.
TRANSFER AGENT
DST Systems, Inc. serves as the transfer agent (the "Transfer Agent") and
dividend disbursing agent for the Fund. The address of the Transfer Agent is
1004 Baltimore, Kansas City, Missouri 64105. The Transfer Agent is not
affiliated with the Distributor, the Administrator or the Adviser.
DISTRIBUTOR
SEI Investments Distribution Co. (the "Distributor") is the principal
distributor for shares of the Fund. The Distributor is a Pennsylvania
corporation organized on July 20, 1981, and is the principal distributor for a
number of investment companies. The Distributor is a wholly-owned subsidiary of
SEI and is located at Oaks, Pennsylvania 19456. The Distributor is not
affiliated with the Adviser, U.S. Bancorp, the Custodian and their respective
affiliates.
The Distributor, the Administrator and the Adviser may in their discretion use
their own assets to pay for certain costs of distributing Fund shares. They also
<PAGE>
may discontinue any payment of such costs at any time. The Distributor may
engage securities dealers, financial institutions (including, without
limitation, banks), and other industry professionals (the "Participating
Institutions") to perform share distribution and shareholder support services
for the Fund.
ISI, a subsidiary of the Adviser, is a Participating Institution. The Adviser
currently pays ISI 0.25% of the portion of the Fund's average daily net assets
attributable to Class C Shares for which ISI is responsible in connection with
ISI's distribution of shares and/or provision of shareholder support services.
The investment company shares and other securities distributed by the
Distributor are not deposits or obligations of, or endorsed or guaranteed by,
First Bank National Association or its affiliates, and are not insured by the
Bank Insurance Fund, which is administered by the Federal Deposit Insurance
Corporation.
PORTFOLIO TRANSACTIONS
The Fund anticipates being as fully invested as practicable in debt securities.
Most of the Fund's portfolio transactions are effected with dealers at a spread
or markup. The dealer's profit, if any, is the difference, or spread, between
the dealer's purchase and sale price for the obligation. The Fund may authorize
the Adviser to place brokerage orders with some brokers who help distribute the
Fund's shares, if the Adviser reasonably believes that the commission and
transaction quality are comparable to that available from other qualified
brokers. Because the Adviser trades a large number of securities, dealers
generally are willing to work with the Adviser on a more favorable spread to the
Fund than would be possible for most individual investors.
PURCHASE AND REDEMPTION OF SHARES
SHARE PURCHASES AND REDEMPTIONS
Shares are sold and redeemed on days on which the New York Stock Exchange and
the Federal Reserve wire system are open for business ("Business Days"). Payment
for Class C Shares may be made only by wire. Wire transfers of federal funds for
share purchases should be sent to First Bank National Association, Minneapolis,
Minnesota; ABA Number 091000022; For Credit to: DST Systems, Inc.; Account
Number 160234580266; For Further Credit to: (Investor Name and Fund Name).
Shares cannot be purchased by Federal Reserve wire on days on which the New York
Stock Exchange is closed and on federal holidays restricting wire transfers.
Orders placed through a financial institution are considered received when the
Fund
<PAGE>
is notified of the purchase order. Purchase orders must be received by the
financial institution by the time specified by the institution to be assured
same day processing and purchase orders must be transmitted to and received by
the Fund by 12:00 noon Central time in order for shares to be purchased at that
day's price. It is the financial institution's responsibility to transmit orders
promptly.
Purchase orders will be effective and eligible to receive dividends declared the
same day if the Transfer Agent receives an order before the time specified
above, and the Custodian receives Federal funds before the close of business
that day. Otherwise, the purchase order will be effective the next Business Day.
The purchase price is the net asset value per share, which is expected to remain
constant at $1.00, next determined after the purchase order is effective. The
net asset value per share is calculated as of 3:00 p.m. Central time, each
Business Day based on the amortized cost method. The Fund reserves the right to
reject a purchase order when the Transfer Agent determines that it is not in the
best interest of the Fund and/or shareholder(s) to accept such purchase order.
The Fund is required to redeem for cash all full and fractional shares of the
Fund. The redemption price is the net asset value per share of the Fund
(normally $1.00 per share) next determined after receipt by the Transfer Agent
of the redemption order.
Redemption orders may be made any time before 12:00 noon Central time, if
redeeming directly through the Fund, or by the time specified by the financial
institution if redeeming through a financial institution, in order to receive
that day's redemption price. For redemption orders received before such times,
payment will be made the same day by transfer of Federal funds. Otherwise,
payment will be made on the next Business Day. Redeemed shares are not entitled
to dividends declared on the day the redemption order is effective.
WHAT SHARES COST
Class C Shares of the Fund are sold at their net asset value next determined
after an order is received and accepted by the Fund. There is no sales charge
imposed on Class C Shares by the Fund. The term "net asset value per share" or
"NAV" refers to the worth or price of one share. NAV is computed by adding the
value of the Fund's securities plus cash and other assets, deducting
liabilities, and then dividing the result by the number of shares outstanding.
Securities in the Fund's portfolio are valued on the basis of amortized cost.
This means valuation assumes a steady rate of payment from the date of purchase
until maturity instead of looking at actual changes in market value. The Fund's
other assets are valued by a method which the Board of Directors believes would
accurately reflect fair value.
<PAGE>
The net asset value is determined at 3:00 p.m. Central time, Monday through
Friday, except on (i) days on which there are not sufficient changes in the
value of the Fund's portfolio securities that its net asset value might be
materially affected; (ii) days during which no shares are tendered for
redemption and no orders to purchase shares are received; or (iii) on the
following federal holidays: New Year's Day, Presidents' Day, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day. In addition,
the net asset value will not be calculated on Good Friday.
EXCHANGING SECURITIES FOR FUND SHARES
The Fund may accept securities in exchange for Fund shares. The Fund will allow
such exchanges only upon the prior approval of the Fund and a determination by
the Fund and the Adviser that the securities to be exchanged are acceptable.
Securities accepted by the Fund will be valued in the same manner that the Fund
values its assets. The basis of the exchange will depend upon the net asset
value of the Fund shares on the day the securities are valued.
CERTIFICATES AND CONFIRMATIONS
The Transfer Agent for the Fund maintains a share account for each shareholder
of record. Share certificates are not issued by the Fund. Monthly confirmations
are sent to report transactions such as purchases and redemptions as well as
dividends paid during the month.
DIVIDENDS
Dividends are declared daily and paid monthly. Shares purchased through the Fund
by wire before 12:00 noon Central time begin earning dividends that day. Shares
purchased by check begin earning dividends on the day after the check is
converted into federal funds. Dividends are automatically reinvested in
additional shares of the Fund unless cash payments are requested by contacting
the Fund. Whether dividends are paid in cash or are reinvested in additional
shares, they will be taxable as ordinary income under the Code. The amount of
dividends payable on Class C Shares generally will be more than the dividends
payable on the Class A and Class D Shares because Class C Shares are not charged
a distribution or shareholder servicing fee.
CAPITAL GAINS
The Fund does not expect to incur any capital gains or losses. If, for some
extraordinary reason, the Fund realizes net long-term capital gains, they will
distribute them at least once every 12 months.
<PAGE>
EXCHANGE PRIVILEGE
Shareholders may exchange Class C Shares of the Fund at net asset value for
currently available Class C Shares of other funds in the First American family.
There is currently no fee for this service and the Fund does not currently
contemplate establishing such a charge, although it reserves the right to do so.
The ability to exchange shares of the Fund does not constitute an offering or
recommendation of shares of one fund by another fund. This privilege is
available to shareholders resident in any state in which the fund shares being
acquired may be sold. An investor who is considering acquiring shares in another
First American fund pursuant to the exchange privilege should obtain and
carefully read a prospectus of the fund to be acquired. Exchanges may be
accomplished by a written request, or by telephone if a preauthorized exchange
authorization is on file with the Transfer Agent, shareholder servicing agent or
financial institution. Neither the Transfer Agent nor the Fund will be
responsible for the authenticity of exchange instructions received by telephone
if it reasonably believes those instructions to be genuine. The Fund and the
Transfer Agent will each employ reasonable procedures to confirm that telephone
instructions are genuine, and they may be liable for losses resulting from
unauthorized or fraudulent telephone instructions if they do not employ these
procedures. These procedures may include taping of telephone conversations.
TAXES
The Fund will distribute all of its net income to shareholders. The Fund intends
to take all actions required under the Internal Revenue Code of 1986 (as
amended) to ensure that it may pay "exempt-interest dividends." If the Fund
meets these requirements, distributions of net interest income from tax-exempt
obligations that are designated by the Fund as exempt-interest dividends will be
excluded from the gross income of the Fund's shareholders. Distributions paid
from other interest income will be taxable to shareholders as ordinary income.
For federal income tax purposes, an alternative minimum tax ("AMT") is imposed
on taxpayers to the extent that such tax, if any, exceeds a taxpayer's regular
income tax liability (with certain adjustments). Liability for AMT will depend
upon each shareholder's tax situation. Exempt-interest dividends attributable to
interest income on certain tax-exempt obligations issued after August 7, 1986,
to finance certain private activities will be treated as an item of tax
preference that is included in alternative minimum taxable income for purposes
of calculating the AMT for all taxpayers. The Fund may invest up to 20% of its
total assets in securities, the interest on which is treated as an item of tax
preference that is included in alternative minimum taxable income for purposes
of calculating the AMT. Each shareholder is advised to consult his or her tax
adviser with respect to the possible effects of such tax preference items.
For a more detailed discussion of the taxation of the Fund and the tax
consequences of an investment in the Fund, see "Taxes" in the Statement of
Additional Information.
<PAGE>
FUND SHARES
Each share of the Fund 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 Fund have no
preemptive or conversion rights.
Each share of the Fund has one vote. On some issues, such as the election of
directors, all shares of all FAF 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 or
class, the shares of that fund or class will vote as a separate series. Examples
of such issues would be proposals to alter a fundamental investment restriction
pertaining to a fund or to approve, disapprove or alter a distribution plan
pertaining to a class.
The Bylaws of FAF provide that annual shareholders' meetings are not required
and that meetings of shareholders need be held only with such frequency as
required under Minnesota law and the 1940 Act.
CALCULATION OF PERFORMANCE DATA
From time to time the Fund may advertise its "yield," "effective yield" and "tax
equivalent yield" in advertisements or in reports or other communications with
shareholders. These yield figures are based on historical earnings and are not
intended to indicate future performance. The "yield" of the Fund refers to the
income generated by an investment over a seven-day period (which period will be
stated in the advertisement). This income is then "annualized," that is, the
amount of income generated by the investment during that week is assumed to be
generated each week over a 52-week period and is shown as a percentage of the
investment. The "effective yield" is calculated similarly but, when annualized,
the income earned by an investment in the Fund is assumed to be reinvested. The
"effective yield" will be slightly higher than the "yield" because of the
compounding effect of this assumed reinvestment. "Tax equivalent yield" is that
yield which a taxable investment must generate in order to equal the Fund's
yield for an investor in a stated income tax bracket. Tax equivalent yield is
computed by dividing that income tax rate, and adding the resulting amount to
that portion, if any, of the yield which is not tax exempt.
Advertisements and other sales literature for the Fund may refer to the Fund's
"cumulative total return" and "average annual total return." Total return is
based on the overall dollar or percentage change in value of a hypothetical
<PAGE>
investment in the Fund assuming dividend distributions are reinvested. A
cumulative total return reflects the Fund's performance over a stated period of
time. An average annual total return reflects the hypothetical annually
compounded rate that would have produced the same cumulative total return if
performance had been constant over the entire period. Because average annual
returns tend to smooth out variations in the Fund's performance, they are not
the same as actual year-by-year results.
Performance quotations are computed separately for Class A, Class C and Class D
Shares of the Fund. The performance of each class of shares will differ due to
the varying levels of distribution fees and shareholder service fees applicable
to each class.
INVESTMENT RESTRICTIONS AND TECHNIQUES
GENERAL RESTRICTIONS
The Fund is subject to the investment restrictions of Rule 2a-7 under the
1940 Act in addition to their other policies and restrictions discussed below.
Pursuant to Rule 2a-7, the Fund is required to invest exclusively in securities
that mature within 397 days from the date of purchase and to maintain an average
weighted maturity of not more than 90 days. Under Rule 2a-7, securities which
are subject to certain types of demand or put features may be deemed to mature
at the next demand or put date although they have a longer stated maturity. Rule
2a-7 also requires that all investments by the Fund be limited to United States
dollar-denominated investments that (a) present "minimal credit risk" and (b)
are at the time of acquisition "Eligible Securities." Eligible Securities
include, among others, securities that are rated by two Nationally Recognized
Statistical Rating Organizations ("NRSROs") in one of the two highest categories
for short-term debt obligations, such as A-1 or A-2 by Standard & Poor's
Corporation ("Standard & Poor's"), or Prime-1 or Prime-2 by Moody's Investors
Service, Inc. ("Moody's"). It is the responsibility of the Adviser to determine
that the Fund's investments present only "minimal credit risk" and are Eligible
Securities. The Board of Directors of FAF has established written guidelines and
procedures for the Adviser and oversees the Adviser's determination that the
Fund's portfolio securities present only "minimal credit risk" and are Eligible
Securities.
In order to provide shareholders with full liquidity, the Fund has implemented
the following practices to maintain a constant price of $1.00 per share:
limiting the portfolio's dollar-weighted average maturity to 90 days or less and
buying securities which mature within 397 days from the date of acquisition as
determined pursuant to Rule 2a-7 under the 1940 Act. The Fund cannot guarantee a
$1.00 share price but these practices help to minimize any price fluctuations
that might result from rising or declining interest rates. All money
<PAGE>
market instruments, including United States Government securities, can change in
value when interest rates or an issuer's creditworthiness changes. The value of
the securities in the Fund's portfolios can be expected to vary inversely with
changes in prevailing interest rates, with the amount of such variation
depending primarily upon the period of time remaining to maturity of the
security. If the security is held to maturity, no gain or loss will be realized
as a result of interest rate fluctuations.
As a non-fundamental policy, the Fund will not purchase a security if as a
result more than 10% of its net assets would be in illiquid assets including
time deposits and repurchase agreements maturing in more than seven days. As a
fundamental policy, the Fund will not purchase a security if, as a result, 25%
or more of its assets would be in any single industry (including tax-exempt
municipal bonds issued by non-governmental issuers), provided that there is no
limitation on the purchase of obligations issued or guaranteed by the United
States, its agencies or instrumentalities, or obligations of domestic commerical
banks, excluding for this purpose, foreign branches of domestic commercial
banks.
The securities in which the Fund invests may not yield as high a level of
current income as longer term or lower grade securities. These other securities
may have less stability of principal, be less liquid, and fluctuate more in
value than the securities in which the Fund invests. All securities in the
Fund's portfolio are purchased with and payable in United States dollars.
Unless otherwise stated, the policies described above in this section and under
"Investment Objectives and Policies" for the Fund are non-fundamental and may be
changed by a vote of the Board of Directors. The Fund has adopted certain other
investment restrictions, which are set forth in detail in the Statement of
Additional Information. These restrictions are fundamental and may not be
changed without the approval of the holders of a majority (as defined in the
1940 Act) of the outstanding shares of the Fund.
If a percentage limitation under this section or "Investment Objectives and
Policies" or under "Investment Restrictions" in the Statement of Additional
Information, is adhered to at the time of an investment, a later increase or
decrease in percentage resulting from changes in values of assets will not
constitute a violation of such limitation except in the case of the limitation
on illiquid investments.
MUNICIPAL OBLIGATIONS
As described under "Investment Objectives and Policies," the Fund invests
principally in municipal obligations such as municipal bonds and other debt
obligations. These municipal bonds and debt obligations are issued by the states
and by their local and special-purpose political subdivisions. The term
"municipal bond" as used in this Prospectus includes short-term municipal notes
and other commercial paper issued by the states and their political
subdivisions.
<PAGE>
The two general classifications of municipal bonds are "general obligation"
bonds and "revenue" bonds. General obligation bonds are secured by the
governmental issuer's pledge of its faith, credit and taxing power for the
payment of principal and interest. They are usually paid from general revenues
of the issuing governmental entity. Revenue bonds, on the other hand, are
usually payable only out of a specific revenue source rather than from general
revenues. Revenue bonds ordinarily are not backed by the faith, credit or
general taxing power of the issuing governmental entity. The principal and
interest on revenue bonds for private facilities are typically paid out of rents
or other specified payments made to the issuing governmental entity by a private
company which uses or operates the facilities. Examples of these types of
obligations are industrial revenue bonds and pollution control revenue bonds.
Industrial revenue bonds are issued by governmental entities to provide
financing aid to community facilities such as hospitals, hotels, business or
residential complexes, convention halls and sport complexes. Pollution control
revenue bonds are issued to finance air, water and solids pollution control
systems for privately operated industrial or commercial facilities.
Revenue bonds for private facilities usually do not represent a pledge of the
credit, general revenues or taxing powers of the issuing governmental entity.
Instead, the private company operating the facility is the sole source of
payment of the obligation. Sometimes, the funds for payment of revenue bonds
come solely from revenue generated by operation of the facility. Revenue bonds
which are not backed by the credit of the issuing governmental entity frequently
provide a higher rate of return than other municipal obligations, but they
entail greater risk than obligations which are guaranteed by a governmental unit
with taxing power. Federal income tax laws place substantial limitations on
industrial revenue bonds, and particularly certain specified private activity
bonds issued after August 7, 1986. In the future, legislation could be
introduced in Congress which could further restrict or eliminate the income tax
exemption for interest on debt obligations in which the Funds may invest.
The Fund's investment in municipal bonds and other debt obligations that are
purchased from financial institutions such as commercial and investment banks,
savings associations and insurance companies may take the form of
participations, beneficial interests in a trust, partnership interests or any
other form of indirect ownership that allows the Fund to treat the income from
the investment as exempt from federal income tax.
In addition, the Fund may invest in other federal income tax-free securities
such as (i) tax and revenue anticipation notes issued to finance working capital
needs in anticipation of receiving taxes or other revenues, (ii) bond
anticipation notes that are intended to be refinanced through a later issuance
of longer-term bonds, (iii) variable and floating rate obligations, including
<PAGE>
variable rate demand notes, and (iv) participation, trust and partnership
interests in any of the foregoing obligations.
LOAN PARTICIPATIONS; SECTION 4(2) AND RULE 144A SECURITIES
The Fund may invest in taxable money market securities such as loan
participation interests. A loan participation interest represents a pro rata
undivided interest in an underlying bank loan. Participation interests, like the
underlying loans, may have fixed, floating, or variable rates of interest. The
bank selling a participation interest generally acts as a mere conduit between
its borrower and the purchasers of interests in the loan. The purchaser of an
interest generally does not have recourse against the bank in the event of a
default on the underlying loan. Therefore, the credit risk associated with such
instruments is governed by the creditworthiness of the underlying borrowers and
not by the banks selling the interests. Loan participation interests that can be
sold within a seven-day period are deemed by the Adviser to be liquid
investments. If a loan participation interest is restricted from being sold
within a seven-day period, then it, as a non-fundamental policy, will be
limited, together with other illiquid investments, to not more than 10% of the
Fund's net assets. Commercial paper issued in reliance on the exemption from
registration afforded by Section 4(2) of the Securities Act of 1933 and
corporate obligations qualifying for resale to certain "qualified institutional
buyers" pursuant to Rule 144A under the Securities Act of 1933 that meet the
criteria for liquidity established by the Board of Directors are considered
liquid. Consequently, the Fund does not intend to subject such securities to the
limitation applicable to restricted securities. Investing in Rule 144A
securities could have the effect of increasing the level of illiquidity in the
Fund to the extent that qualified institutional buyers become, for a time,
uninterested in purchasing these securities.
SECURITIES OF FOREIGN BANKS AND BRANCHES
Because the Fund's investments in taxable money market securities may include
securities of foreign branches of domestic banks, foreign banks, and United
States branches of foreign banks, the Fund may be subject to additional
investment risks that are different in some respects from those incurred by a
fund that invests only in debt obligations of United States banks. These risks
may include future unfavorable political and economic developments and possible
withholding taxes, seizure of foreign deposits, currency controls, interest
limitations, or other governmental restrictions which might affect the payment
of principal or interest on securities owned by the Fund. Additionally, there
may be less public information available about foreign banks and their branches.
The Adviser carefully considers these factors when making investments. The Fund
has agreed that, in connection with investment in securities issued by foreign
banks, United States branches of foreign banks,
<PAGE>
and foreign branches of domestic banks, consideration will be given to the
domestic marketability of such securities in light of these factors.
UNITED STATES GOVERNMENT SECURITIES
The Fund may invest in direct obligations of the United States Treasury such as
United States Treasury bonds, notes, and bills. The Treasury securities are
essentially the same except for differences in interest rates, maturities, and
dates of issuance. In addition to Treasury securities, the Fund may invest in
securities, such as notes, bonds, and discount notes which are issued or
guaranteed by agencies of the United States Government and various
instrumentalities which have been established or sponsored by the United States
Government. Except for United States Treasury securities, these United States
Government obligations, even those which are guaranteed by federal agencies or
instrumentalities, may or may not be backed by the "full faith and credit" of
the United States. In the case of securities not backed by the full faith and
credit of the United States, the investor must look principally to the agency
issuing or guaranteeing the obligation for ultimate repayment and may not be
able to assert a claim against the United States itself in the event the agency
or instrumentality does not meet its commitment. The Adviser considers
securities guaranteed by an irrevocable letter of credit issued by a government
agency to be guaranteed by that agency.
United States Treasury obligations include bills, notes and bonds issued by the
United States Treasury and separately traded interest and principal component
parts of such obligations that are transferable through the Federal book-entry
system known as Separately Traded Registered Interest and Principal Securities
("STRIPS"). STRIPS are sold as zero coupon securities, which means that they are
sold at a substantial discount and redeemed at face value at their maturity date
without interim cash payments of interest or principal. This discount is
accreted over the life of the security, and such accretion will constitute the
income earned on the security for both accounting and tax purposes. Because of
these features, such securities may be subject to greater interest rate
volatility than interest paying United States Treasury obligations. The Fund's
investments in STRIPS will be limited to components with maturities of less than
397 days and the Fund will not actively trade such components.
REPURCHASE AGREEMENTS
The Fund may engage in repurchase agreements with respect to any of its
portfolio securities. In a repurchase agreement, the Fund buys a security at one
price and simultaneously promises to sell that same security back to the seller
at a mutually agreed upon time and price. The Fund may engage in repurchase
agreements with any member bank of the Federal Reserve System or dealer in
United States Government securities. Repurchase agreements usually are for short
periods, such as under one week, not to exceed 30 days.
<PAGE>
In all cases, the Adviser must be satisfied with the creditworthiness of the
other party to the agreement before entering a repurchase agreement. In the
event of bankruptcy of the other party to a repurchase agreement, the Fund might
experience delays in recovering its cash. To the extent that, in the meantime,
the value of the securities the Fund purchased may have decreased, the Fund
could experience a loss.
CREDIT ENHANCEMENT AGREEMENTS
The Fund may arrange for guarantees, letters of credit, or other forms of credit
enhancement agreements (collectively, "Guarantees") for the purpose of further
securing the payment of principal and/or interest on the Fund's investment
securities. Although each investment security, at the time it is purchased, must
meet the Fund's creditworthiness criteria, Guarantees sometimes are purchased
from banks and other institutions (collectively, "Guarantors") when the Adviser,
through yield and credit analysis, deems that credit enhancement of certain of
the Fund's securities is advisable. As a non-fundamental policy, the Fund will
limit the value of all investment securities issued or guaranteed by each
Guarantor to not more than 10% of the value of the Fund's total assets.
PUT OPTIONS
The Fund may purchase tax-exempt securities which provide for the right to
resell them to the issuer, a bank or a broker-dealer at a specified price within
a specified period of time prior to the maturity date of such obligations. Such
a right to resell, which is commonly known as a "put," may be sold, transferred
or assigned only with the underlying security or securities. The Fund may pay a
higher price for a tax-exempt security with a put than would be paid for the
same security without a put. The primary purpose for purchasing such securities
with puts is to permit the Fund to be as fully invested as practicable in
tax-exempt securities while at the same time providing the Fund with appropriate
liquidity.
VARIABLE AND FLOATING RATE OBLIGATIONS
Certain of the obligations in which the Fund may invest may be variable or
floating rate obligations in which the interest rate is adjusted either at
predesignated periodic intervals (variable rate) or when there is a change in
the index rate of interest on which the interest rate payable on the obligation
is based (floating rate). Variable or floating rate obligations 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. Variable or
floating rate instruments with a demand feature enable the Fund to purchase
<PAGE>
instruments with a stated maturity in excess of 397 calendar days. The Fund
determines the maturity of variable or floating rate instruments in accordance
with Securities and Exchange Commission rules which allow the Fund to consider
certain of such instruments as having maturities that are less than the maturity
date on the face of the instrument.
LENDING OF PORTFOLIO SECURITIES
The Fund may from time to time lend securities from its portfolio to brokers,
dealers, and financial institutions and receive collateral in cash or securities
issued or guaranteed by the United States Government which will be maintained at
all times in an amount equal to at least 100% of the current value of the loaned
securities. Such loans may not exceed one-third of the value of the lending
Fund's total assets. The Fund will pay a portion of the income earned on a
lending transaction to the placing broker and may pay administrative and
custodial fees (including fees to an affiliate of the Adviser) in connection
with these loans. For additional information, see "Investment Restrictions" in
the Statement of Additional Information.
WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES
The Fund may purchase the securities described above on a when-issued or
delayed-delivery basis. The settlement dates for these types of transactions are
determined by mutual agreement of the parties and may occur a month or more
after the parties have agreed to the transaction. Securities purchased on a
when-issued or delayed-delivery basis are subject to market fluctuation and no
interest accrues to the Fund during the period prior to settlement. At the time
the Fund commits to purchase securities on a when-issued or delayed- delivery
basis, it will record the transaction and thereafter reflect the value, each
day, of such security in determining its net asset value. At the time of
delivery of the securities, the value may be more or less than the purchase
price. The Fund will also establish a segregated account with its Custodian in
which it will maintain cash or cash equivalents or other portfolio securities
equal in value to commitments for such when-issued or delayed-delivery
securities. The Fund will not purchase securities on a when-issued or delayed-
delivery basis if, as a result thereof, more than 15% of that Fund's net assets
would be so invested.
MONEY MARKET FUNDS
The Fund may invest, to the extent permitted by the 1940 Act, in securities
issued by other money market funds, provided that the permitted investments of
such other money market funds constitute permitted investments of the investing
Fund. The Adviser will waive its advisory fee on amounts which are invested in
such other money market funds. Investments by the Fund in such
<PAGE>
other Fund are subject to restrictions contained in an exemptive order issued by
the Securities and Exchange Commission.
INFORMATION CONCERNING COMPENSATION PAID TO FIRST TRUST
NATIONAL ASSOCIATION AND ITS AFFILIATES
First Trust National Association ("First Trust") may act as fiduciary with
respect to plans subject to the Employee Retirement Income Security Act of 1974
("ERISA") which invest in the Fund. This section sets forth information
concerning compensation that First Trust and its affiliates may receive from the
Fund.
First Trust, as custodian for the assets of the Fund, receives the custodian
fees specified herein under the caption "Management -- Custodian."
First Bank National Association, which is under common ownership with First
Trust, acts as investment adviser to the Funds and receives the advisory fees
specified herein under the caption "Management -- Investment Adviser."
First Trust also may act as securities lending agent in connection with the
Fund's securities lending transactions and receive, as compensation for such
services, fees equal to 40% of the Fund's income from such securities lending
transactions.
<PAGE>
FIRST AMERICAN FUNDS, INC.
Oaks, Pennsylvania 19456
INVESTMENT ADVISER
FIRST BANK NATIONAL ASSOCIATION
601 Second Avenue South
Minneapolis, Minnesota 55402
CUSTODIAN
FIRST TRUST NATIONAL ASSOCIATION
180 East Fifth Street
St. Paul, Minnesota 55101
DISTRIBUTOR
SEI INVESTMENTS DISTRIBUTION CO.
Oaks, Pennsylvania 19456
ADMINISTRATOR
SEI INVESTMENTS MANAGEMENT
CORPORATION
Oaks, Pennsylvania 19456
TRANSFER AGENT
DST SYSTEMS, INC.
1004 Baltimore
Kansas City, Missouri 64105
INDEPENDENT AUDITORS
KPMG PEAT MARWICK LLP
90 South Seventh Street
Minneapolis, Minnesota 55402
COUNSEL
DORSEY & WHITNEY LLP
220 South Sixth Street
Minneapolis, Minnesota 55402
FAF-1902 (7/97)I
<PAGE>
FIRST AMERICAN FUNDS, INC.
MONEY MARKET FUNDS
CORPORATE TRUST CLASS
TAX FREE OBLIGATIONS FUND
PROSPECTUS
October 8, 1997
[LOGO]
FIRST AMERICAN FUNDS
The power of disciplined investing
<PAGE>
FIRST AMERICAN FUNDS, INC.
Oaks, Pennsylvania 19456
CORPORATE TRUST CLASS PROSPECTUS
The shares described in this Prospectus represent interests in First American
Funds, Inc., which consists of mutual funds with four different investment
portfolios and objectives. This Prospectus relates to the Class D Shares of the
following fund (the "Fund"):
* TAX FREE OBLIGATIONS FUND
Class D Shares of the Fund are offered to corporations and certain
governmental entities.
The Fund seeks to achieve maximum current income exempt from federal income
taxes consistent with preservation of capital and maintenance of liquidity. The
Fund pursues its objective by investing in money market investments, the income
from which is exempt from federal income tax. The Fund is a diversified open-end
mutual fund.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, INCLUDING FIRST BANK NATIONAL ASSOCIATION OR ANY OF ITS
AFFILIATES, NOR ARE THEY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. AN INVESTMENT IN THE FUND
INVOLVES INVESTMENT RISK, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
This Prospectus sets forth concisely information about the Fund that a
prospective investor should know before investing. It should be read and
retained for future reference.
A Statement of Additional Information dated October 8, 1997 for the Fund has
been filed with the Securities and Exchange Commission ("SEC") and is
incorporated in its entirety by reference in this Prospectus. To obtain copies
of the Statement of Additional Information at no charge, or to obtain other
information or make inquiries about the Funds, call (800) 637-2548 or write SEI
Investments Distribution Co. Oaks, Pennsylvania 19456. The SEC maintains a World
Wide Web site that contains reports and information regarding issuers that file
electronically with the SEC. The address of such site is "http://www.sec.gov."
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE UNITED STATES
GOVERNMENT, AND THERE IS NO ASSURANCE THAT THE FUND WILL BE ABLE TO MAINTAIN A
STABLE NET ASSET VALUE OF $1.00 PER SHARE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is October 8, 1997.
<PAGE>
TABLE OF CONTENTS
PAGE
----
SUMMARY OF FUND EXPENSES 4
Class D Share Fees and Expenses 4
Information Concerning Fees and
Expenses 5
THE FUND 6
INVESTMENT OBJECTIVES AND POLICIES 6
MANAGEMENT OF THE FUND 7
Investment Adviser 7
Portfolio Managers 8
Custodian 9
Administrator 9
Transfer Agent 9
DISTRIBUTOR 9
PORTFOLIO TRANSACTIONS 10
PURCHASE AND REDEMPTION OF SHARES 11
Share Purchases and Redemptions 11
What Shares Cost 12
Exchanging Securities for Fund
Shares 12
Certificates and Confirmations 12
Dividends 12
Capital Gains 13
TAXES 13
FUND SHARES 13
CALCULATION OF PERFORMANCE DATA 14
INVESTMENT RESTRICTIONS AND
TECHNIQUES 15
General Restrictions 15
Municipal Obligations 16
Loan Participations; Section 4(2)
and Rule 144A Securities 17
Securities of Foreign Banks and
Branches 18
United States Government Securities 18
Repurchase Agreements 19
Credit Enhancement Agreements 19
Put Options 20
Variable and Floating Rate
Obligations 20
Lending of Portfolio Securities 20
When-Issued and Delayed-Delivery
Securities 21
Money Market Funds 21
<PAGE>
SUMMARY OF FUND EXPENSES
CLASS D SHARE FEES AND EXPENSES
TAX FREE
OBLIGATIONS
FUND
SHAREHOLDER TRANSACTION EXPENSES
Maximum sales load imposed on purchases None
Maximum sales load imposed on reinvested dividends None
Deferred sales load None
Redemption fees None
Exchange fees None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
Investment advisory fees (after voluntary
fee waivers and reimbursements)(1) 0.11%
Rule 12b-1 fees 0.15%(2)
Other expenses 0.34%
Total fund operating expenses (after voluntary fee
waivers and reimbursements)(1) 0.60%
EXAMPLE(3)
You would pay the following expenses on a $1,000 investment, assuming (i) a 5%
annual return, and (ii) redemption at the end of each time period:
1 year $ 6
3 years $ 19
(1) First Bank National Association, the investment adviser for the Fund,
intends to waive a portion of its fees and/or reimburse expenses on a
voluntary basis, and the amounts shown above reflect these waivers and
reimbursements as of the date of this Prospectus. The Fund's investment
adviser intends to maintain such waivers and reimbursements until
September 30, 1998. Absent any fee waivers or reimbursements,
investment advisory fees for the Fund as an annualized percentage of
average daily net assets would be 0.40%; and total fund operating
expenses with respect to Class D Shares calculated on such basis would
be 0.89% for the Fund. Other expenses include an annual administration
fee.
(2) Of this amount, 0.15% is designated as a shareholder servicing fee and
none as a distribution fee.
(3) Absent the voluntary reduction of fees the dollar amounts for the 1 and
3-year periods in the example above would be $9 and $28 for the Fund.
<PAGE>
INFORMATION CONCERNING FEES AND EXPENSES
The purpose of the preceding table is to assist the investor in understanding
the various costs and expenses that an investor in the Fund may bear directly or
indirectly. THE DATA CONTAINED IN THE TABLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN. The information set forth in the tables relates only to
the Class D Shares of the Fund. The Fund also offers Class A and Class C Shares
which may be subject to different expenses and sales charges.
Investment advisory fees are paid by the Fund to First Bank National Association
(the "Adviser") for managing its investments. The examples in the above table
are based on annual operating expenses for the Fund after voluntary fee waivers
and expense reimbursements by the Adviser. Prior to fee waivers, investment
advisory fees accrue at the annual rate of 0.40% of the average daily net assets
of the Fund. Other expenses include administrative fees which are paid by the
Fund to SEI Investments Management Corporation (the "Administrator") for
providing various services necessary to operate the Fund. These include
shareholder servicing and certain accounting and other services. The
Administrator provides these services for a fee calculated as described under
"Management of the Fund -- Administrator" below. "Other expenses" in the tables
are based on estimates.
The Class D Shares of the Fund pay a shareholder servicing fee to SEI
Investments Distribution Co. (the "Distributor"), the Fund's distributor, in an
amount equalling 0.15% of the annual average daily net assets attributable to
the Class D Shares of the Fund. Due to the payment of such fees, long term
shareholders may pay more than the equivalent of the maximum front-end sales
charges otherwise permitted by NASD rules.
<PAGE>
THE FUND
First American Funds, Inc. ("FAF") is an open-end management investment company
which offers its shares in four different mutual funds, each of which evidences
an interest in a separate and distinct investment portfolio. Shareholders may
purchase shares in the Fund through separate classes which provide for
variations in shareholder servicing fees, distribution costs, voting rights and
dividends. Except for these differences among classes, each share of the Fund
represents an undivided proportionate interest in the Fund. FAF is incorporated
under the laws of the State of Minnesota, and its principal offices are located
at Oaks, Pennsylvania 19456.
This Prospectus relates only to the Class D Shares of the Fund named on the
cover hereof. Information regarding the Class A and Class C Shares of the Fund
is contained in separate prospectuses that may be obtained from the Fund's
Distributor, SEI Investments Distribution Co., Oaks, Pennsylvania 19456, or by
calling (800) 637-2548. The Board of Directors of FAF may authorize additional
series or classes of common stock in the future.
INVESTMENT OBJECTIVES AND POLICIES
As a fundamental investment objective, the Fund seeks to achieve maximum current
income exempt from federal income taxes consistent with preservation of capital
and maintenance of liquidity. The Adviser will purchase investments for the Fund
consistent with such investment objective. The Fund's investment objective may
not be changed without an affirmative vote of the holders of a majority (as
defined in the Investment Company Act of 1940, as amended (the "1940 Act")) of
the outstanding shares of the Fund. The Fund may not always achieve its
objectives.
In seeking to achieve its investment objective and as a fundamental policy, the
Fund invests at least 80% of its total assets in municipal obligations, the
income from which is exempt from federal income tax. In addition, the Fund may
invest up to 20% of its total assets in municipal obligations, the income from
which is an item of tax preference for purposes of the federal alternative
minimum tax. For more information on these types of securities, see "Investment
Restrictions and Techniques -- Municipal Obligations" below.
The Fund may also (i) engage in repurchase agreements with respect to any of its
portfolio securities, (ii) purchase credit enhancement agreements to enhance the
creditworthiness of its portfolio securities, (iii) lend securities from its
portfolio, (iv) purchase the securities described above on a when-issued or
delayed-delivery basis, (v) purchase put options with respect to its portfolio
securities and (vi) invest in variable or floating rate obligations.
<PAGE>
For more information on these techniques, see "Investment Restrictions and
Techniques" below.
The Fund may invest up to 20% of its total assets collectively in taxable money
market securities including marketable securities issued under or guaranteed by
the United States Government or its agencies or instrumentalities; certain
United States dollar denominated obligations (including bankers acceptances,
time deposits, and certificates of deposit including variable rate certificates
of deposit) of banks (including commercial banks, savings banks and savings and
loan associations) organized under the laws of the United States or any states,
foreign banks, United States branches of foreign banks, if such banks have total
assets of not less than $500 million and certain corporate and other obligations
including high grade commercial paper, non-convertible corporate debt
securities, and loan participation interests with no more than 397 days
remaining to maturity as determined pursuant to Rule 2a-7 under the 1940 Act. In
addition, the Fund's engagement in lending portfolio securities and in
purchasing put options with respect to its portfolio securities may result in
taxable income. For defensive purposes, the Fund may temporarily invest more
than 20% (up to 100%) of the value of its total assets in taxable money market
securities and certain tax exempt securities, the income on which is an item of
tax preference for purposes of the federal alternative minimum tax when, in the
opinion of the Adviser, it is advisable to do so in light of prevailing market
and economic conditions for purposes of preserving liquidity or capital. See
"Investment Restrictions and Techniques" for a discussion of the risks relating
to investments in such securities.
MANAGEMENT OF THE FUND
The Board of Directors of FAF has the primary responsibility for overseeing the
overall management and electing other officers of FAF. Subject to the overall
direction and supervision of the Board of Directors, the Adviser acts as
investment adviser for and manages the investment portfolios of FAF.
INVESTMENT ADVISER
First Bank National Association, 601 Second Avenue South, Minneapolis, Minnesota
55480, acts as the Fund's investment adviser through its First Asset Management
group. The Adviser provides the Fund with investment research and portfolio
management. As of December 31, 1996, the Adviser was managing accounts with an
aggregate value of approximately $35 billion, including mutual fund assets in
excess of $12 billion. U.S. Bancorp (formerly known as First Bank System, Inc.),
601 Second Avenue South, Minneapolis, Minnesota 55480, is the holding company
for the Adviser.
<PAGE>
The Fund pays the Adviser a monthly fee equal, on an annual basis, to 0.40% of
the Fund's average daily net assets. The Adviser may, at its option, waive any
or all of its fees, or reimburse expenses. Any such waiver or reimbursement is
voluntary. The Adviser also may absorb or reimburse expenses of the Fund from
time to time, in its discretion, while retaining the ability to be reimbursed by
the Fund for such amounts prior to the end of the fiscal year. This practice
would have the effect of lowering the 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.
The Glass-Steagall Act generally prohibits banks from engaging in the business
of underwriting, selling, or distributing securities and from being affiliated
with companies principally engaged in those activities. In addition,
administrative and judicial interpretations of the Glass-Steagall Act prohibit
bank holding companies and their bank and nonbank subsidiaries from organizing,
sponsoring, or controlling registered open-end investment companies that are
continuously engaged in distributing their shares. Bank holding companies and
their bank and nonbank subsidiaries may serve, however, as investment advisers
to registered investment companies, subject to a number of terms and conditions.
Although the scope of the prohibitions and limitations imposed by the
Glass-Steagall Act has not been fully defined by the courts or the appropriate
regulatory agencies, the Fund has received an opinion from its counsel that the
Adviser is not prohibited from performing the investment advisory services
described above, and that FBS Investment Services, Inc. ("ISI") , a wholly-owned
broker-dealer of the Adviser, is not prohibited from serving as a Participating
Institution as described herein. In the event of changes in federal or state
statutes or regulations or judicial and administrative interpretations or
decisions pertaining to permissible activities of bank holding companies and
their bank and nonbank subsidiaries, the Adviser might be prohibited from
continuing these arrangements. In that event, it is expected that the Board of
Directors would make other arrangements and shareholders would not suffer
adverse financial consequences.
PORTFOLIO MANAGERS
JOSEPH ULREY III is portfolio co-manager for the Fund. He spent 10 years
overseeing various functions in the Treasury and Finance Divisions of First Bank
System before joining the Adviser. For the past 5 1/2 years Mr. Ulrey has
managed assets for individuals and institutional clients of the Adviser. Mr.
Ulrey graduated from Macalester College with a bachelor's degree in
mathematics/economics and went on to the University of Chicago for his master's
in business administration, concentrating in finance.
JAMES D. PALMER is portfolio co-manager for the Fund. Mr. Palmer joined the
Adviser in 1992, prior to which he was a securities lending trader and senior
<PAGE>
master trust accountant with First Trust National Association. Mr. Palmer
holds a bachelor's degree from the University of Wisconsin -- LaCrosse and a
master's of business administration degree from the University of Minnesota.
CUSTODIAN
The custodian of the Fund's assets is First Trust National Association (the
"Custodian"), First Trust Center, 180 East Fifth Street, St. Paul, Minnesota
55101. The Custodian is a subsidiary of FBS, which also controls the Adviser. As
compensation for its services to the Fund, the Custodian is paid 0.03% of the
Fund's average daily net assets. In addition, the Custodian is reimbursed for
its out-of-pocket expenses incurred in providing services to the Fund.
ADMINISTRATOR
SEI Investments Management Corporation (the "Administrator"), a wholly-owned
subsidiary of SEI Investments Company ("SEI"), provides the Fund with certain
administrative personnel and services necessary to operate the Fund. Such
services include shareholder servicing and certain legal and accounting
services. The Administrator provides these personnel and services for
compensation at an annual rate equal to 0.07% of the Fund's average daily net
assets subject to a minimum administrative fee during each fiscal year of
$50,000; provided, that to the extent the aggregate net assets of all First
American funds exceed $8 billion, the percentage stated above is reduced to
0.055%. The Fund has approved the appointment of First Bank National Association
as a Sub-Administrator (the "Sub-Administrator"), effective January 1, 1998. It
is contemplated that the Sub-Administrator will assist SEI in the performance of
administrative services for the Fund. The Sub-Administration Agreement provides
that SEI will compensate the Sub-Administrator at an annual rate of up to 0.05%
of the Fund's average daily net assets.
TRANSFER AGENT
DST Systems, Inc. serves as the transfer agent (the "Transfer Agent") and
dividend disbursing agent for the Fund. The address of the Transfer Agent is
1004 Baltimore, Kansas City, Missouri 64105. The Transfer Agent is not
affiliated with the Distributor, the Administrator or the Adviser.
DISTRIBUTOR
SEI Investments Distribution Co. (the "Distributor") is the principal
distributor for shares of the Fund. The Distributor is a Pennsylvania
corporation organized on July 20, 1981, and is the principal distributor for a
number of investment companies. The Distributor is a wholly-owned subsidiary of
SEI and is located at Oaks, Pennsylvania 19456. The Distributor is not
affiliated with the Adviser, U.S. Bancorp, the Custodian and their respective
affiliates.
FAF has adopted a plan and entered into an agreement with the Distributor with
respect to shareholder servicing for the Class D Shares of the Fund (the
"Plan"), pursuant to Rule 12b-1 under the 1940 Act and has entered into a
<PAGE>
Distribution Agreement with the Distributor on behalf of the Class D Shares of
the Funds (the "Distribution Agreement"). Under this plan and agreement, the
Fund pays the Distributor a shareholder servicing fee monthly at an annual rate
of 0.15% of the Fund's Class D Shares' average daily net assets. The shareholder
servicing fee is intended to compensate the Distributor for ongoing servicing
and/or maintenance of shareholder accounts and may be used by the Distributor to
provide compensation to institutions through which shareholders hold their
shares for ongoing servicing and/or maintenance of shareholder accounts.
The foregoing plan recognizes that the Distributor, the Administrator and the
Adviser may in their discretion use their own assets to pay for certain costs of
distributing Fund shares. Any such arrangement to pay such additional costs may
be in the form of cash or promotional incentives and may be commenced or
discontinued by the Adviser, the Administrator, the Distributor, or any
Participating Institutions (as defined below) at any time. The Distributor may
engage securities dealers, financial institutions (including, without
limitation, banks), and other industry professionals (the "Participating
Institutions") to perform share distribution and shareholder support services
for the Fund. ISI, a subsidiary of the Adviser, is a Participating Institution.
The investment company shares and other securities distributed by the
Distributor are not deposits or obligations of, or endorsed or guaranteed by,
First Bank National Association or its affiliates, and are not insured by the
Bank Insurance Fund, which is administered by the Federal Deposit Insurance
Corporation.
PORTFOLIO TRANSACTIONS
The Fund anticipates being as fully invested as practicable in debt securities.
Most of the Fund's portfolio transactions are effected with dealers at a spread
or markup. The dealer's profit, if any, is the difference, or spread, between
the dealer's purchase and sale price for the obligation. The Fund may authorize
the Adviser to place brokerage orders with some brokers who help distribute the
Fund's shares, if the Adviser reasonably believes that the commission and
transaction quality are comparable to that available from other qualified
brokers. Because the Adviser trades a large number of securities, dealers
generally are willing to work with the Adviser on a more favorable spread to the
Fund than would be possible for most individual investors.
<PAGE>
PURCHASE AND REDEMPTION OF SHARES
SHARE PURCHASES AND REDEMPTIONS
Shares are sold and redeemed on days on which the New York Stock Exchange and
the Federal Reserve wire system are open for business ("Business Days"). Payment
for Class D Shares may be made only by wire. Wire transfers of federal funds for
share purchases should be sent to First Bank National Association, Minneapolis,
Minnesota; ABA Number 091000022; For Credit to: DST Systems, Inc., Account
Number 160234580266; For Further Credit to: (Investor Name and Fund Name).
Shares cannot be purchased by Federal Reserve wire on days on which the New York
Stock Exchange is closed and on federal holidays restricting wire transfers.
Orders placed through a financial institution are considered received when the
Fund is notified of the purchase order. Purchase orders must be received by the
financial institution by the time specified by the institution to be assured
same day processing and purchase orders must be transmitted to and received by
the Fund by 12:00 noon Central time in order for shares to be purchased at that
day's price. It is the financial institution's responsibility to transmit orders
promptly.
Purchase orders will be effective and eligible to receive dividends declared the
same day if the Transfer Agent receives an order before the time specified
above, and the Custodian receives Federal funds before the close of business
that day. Otherwise, the purchase order will be effective the next Business Day.
The purchase price is the net asset value per share, which is expected to remain
constant at $1.00, next determined after the purchase order is effective. The
net asset value per share is calculated as of 3:00 p.m. Central time, each
Business Day based on the amortized cost method. The Fund reserves the right to
reject a purchase order when the Transfer Agent determines that it is not in the
best interest of the Fund and/or shareholder(s) to accept such purchase order.
The Funds are required to redeem for cash all full and fractional shares of the
Funds. The redemption price is the net asset value per share of the Fund
(normally $1.00 per share) next determined after receipt by the Transfer Agent
of the redemption order.
Redemption orders may be made any time before 12:00 noon Central time, if
redeeming directly through the Fund, or by the time specified by the financial
institution if redeeming through a financial institution, in order to receive
that day's redemption price. For redemption orders received before such times,
payment will be made the same day by transfer of Federal funds. Otherwise,
payment will be made on the next Business Day. Redeemed shares are not entitled
to dividends declared on the day the redemption order is effective.
<PAGE>
WHAT SHARES COST
Class D Shares of the Fund are sold at their net asset value next determined
after an order is received and accepted by the Fund. There is no sales charge
imposed on Class D Shares by the Fund. The term "net asset value per share" or
"NAV" refers to the worth or price of one share. NAV is computed by adding the
value of a Fund's securities plus cash and other assets, deducting liabilities,
and then dividing the result by the number of shares outstanding.
Securities in the Fund's portfolio are valued on the basis of amortized cost.
This means valuation assumes a steady rate of payment from the date of purchase
until maturity instead of looking at actual changes in market value. The Fund's
other assets are valued by a method which the Board of Directors believes would
accurately reflect fair value.
The net asset value is determined at 3:00 p.m. Central time, Monday through
Friday, except on (i) days on which there are not sufficient changes in the
value of the Fund's portfolio securities that its net asset value might be
materially affected; (ii) days during which no shares are tendered for
redemption and no orders to purchase shares are received; or (iii) on the
following federal holidays: New Year's Day, Presidents' Day, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day. In addition,
the net asset value will not be calculated on Good Friday.
EXCHANGING SECURITIES FOR FUND SHARES
The Fund may accept securities in exchange for Fund shares. The Fund will allow
such exchanges only upon the prior approval of the Fund and a determination by
the Fund and the Adviser that the securities to be exchanged are acceptable.
Securities accepted by the Fund will be valued in the same manner that the Fund
values its assets. The basis of the exchange will depend upon the net asset
value of the Fund shares on the day the securities are valued.
CERTIFICATES AND CONFIRMATIONS
The Transfer Agent for the Fund maintains a share account for each shareholder
of record. Share certificates are not issued by the Fund. Monthly confirmations
are sent to report transactions such as purchases and redemptions as well as
dividends paid during the month.
DIVIDENDS
Dividends are declared daily and paid monthly. Shares purchased through the Fund
by wire before 12:00 noon Central time begin earning dividends that day. Shares
purchased by check begin earning dividends on the day after the check is
converted into federal funds. Dividends are automatically reinvested
<PAGE>
in additional shares of the Fund unless cash payments are requested by
contacting the Fund. Whether dividends are paid in cash or are reinvested in
additional shares, they will be taxable as ordinary income under the Code. The
amount of dividends payable on Class D Shares generally will be less than the
dividends payable on the Class C Shares and more than the dividends payable on
Class A Shares because Class C Shares are not charged a distribution or
shareholder servicing fee and Class A Shares are charged distribution and/or
shareholder servicing fees in excess of the shareholder servicing fees charged
to the Class D Shares.
CAPITAL GAINS
The Fund does not expect to incur any capital gains or losses. If, for some
extraordinary reason, the Fund realizes net long-term capital gains, they will
distribute them at least once every 12 months.
TAXES
The Fund will distribute all of its net income to shareholders. The Fund intends
to take all actions required under the Internal Revenue Code of 1986 (as
amended) to ensure that it may pay "exempt-interest dividends." If the Fund
meets these requirements, distributions of net interest income from the tax
exempt obligations that are designated by the Fund as exempt-interest dividends
will be excluded from the gross income of the Fund's shareholders. Distributions
paid from other interest income will be taxable to shareholders as ordinary
income. For federal income tax purposes, an alternative minimum tax ("AMT") is
imposed on taxpayers to the extent that such tax, if any, exceeds a taxpayer's
regular income tax liability (with certain adjustments). Liability for AMT will
depend upon each shareholder's tax situation. Exempt-interest dividends
attributable to interest income on certain tax-exempt obligations issued after
August 7, 1986, to finance certain private activities will be treated as an item
of tax preference that is included in alternative minimum taxable income for
purposes of calculating the AMT for all taxpayers. The Fund may invest up to 20%
of its total assets in securities, the interest on which is treated as an item
of tax preference that is included in alternative minimum taxable income for
purposes of calculating the AMT. Each shareholder is advised to consult his or
her tax adviser with respect to the possible effects of such tax preference
items.
For a more detailed discussion of the taxation of the Fund and the tax
consequences of an investment in the Funds, see "Taxes" in the Statement of
Additional Information.
FUND SHARES
Each share of the Fund 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 Fund have
no preemptive or conversion rights.
Each share of the Fund has one vote. On some issues, such as the election of
directors, all shares of all FAF funds vote together as one series. The shares
do not have cumulative voting rights. Consequently, the holders of more than
<PAGE>
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 or class, the shares of that fund or class will vote as a separate series.
Examples of such issues would be proposals to alter a fundamental investment
restriction pertaining to a fund or to approve, disapprove or alter a
distribution plan pertaining to a class.
The Bylaws of FAF provide that annual shareholders' meetings are not required
and that meetings of shareholders need be held only with such frequency as
required under Minnesota law and the 1940 Act.
CALCULATION OF PERFORMANCE DATA
From time to time the Fund may advertise its "yield", "effective yield" and "tax
equivalent yield" in advertisements or in reports or other communications with
shareholders. These yield figures are based on historical earnings and are not
intended to indicate future performance. The "yield" of the Fund refers to the
income generated by an investment over a seven-day period (which period will be
stated in the advertisement). This income is then "annualized," that is, the
amount of income generated by the investment during that week is assumed to be
generated each week over a 52-week period and is shown as a percentage of the
investment. The "effective yield" is calculated similarly but, when annualized,
the income earned by an investment in the Fund is assumed to be reinvested. The
"effective yield" will be slightly higher than the "yield" because of the
compounding effect of this assumed reinvestment. "Tax equivalent yield" is that
yield which a taxable investment must generate in order to equal the Fund's
yield for an investor in a stated income tax bracket. Tax equivalent yield is
computed by dividing that income tax rate, and adding the resulting amount to
that portion, if any, of the yield which is not tax exempt.
Advertisements and other sales literature for the Fund may refer to the Fund's
"cumulative total return" and "average annual total return." Total return is
based on the overall dollar or percentage change in value of a hypothetical
investment in the Fund assuming dividend distributions are reinvested. A
cumulative total return reflects the Fund's performance over a stated period of
time. An average annual total return reflects the hypothetical annually
compounded rate that would have produced the same cumulative total return if
performance had been constant over the entire period. Because average annual
returns tend to smooth out variations in the Fund's performance, they are not
the same as actual year-by-year results.
<PAGE>
Performance quotations are computed separately for Class A, Class C and Class D
Shares of the Fund. The performance of each class will differ due to the varying
levels of distribution fees and shareholder service fees applicable to each
class.
INVESTMENT RESTRICTIONS AND TECHNIQUES
GENERAL RESTRICTIONS
The Fund is subject to the investment restrictions of Rule 2a-7 under the 1940
Act in addition to their other policies and restrictions discussed below.
Pursuant to Rule 2a-7, the Fund is required to invest exclusively in securities
that mature within 397 days from the date of purchase and to maintain an average
weighted maturity of not more than 90 days. Under Rule 2a-7, securities which
are subject to certain types of demand or put features may be deemed to mature
at the next demand or put date although they have a longer stated maturity. Rule
2a-7 also requires that all investments by the Fund be limited to United States
dollar-denominated investments that (a) present "minimal credit risk" and (b)
are at the time of acquisition "Eligible Securities." Eligible Securities
include, among others, securities that are rated by two Nationally Recognized
Statistical Rating Organizations ("NRSROs") in one of the two highest categories
for short-term debt obligations, such as A-1 or A-2 by Standard & Poor's
Corporation ("Standard & Poor's"), or Prime-1 or Prime-2 by Moody's Investors
Service, Inc. ("Moody's"). It is the responsibility of the Adviser to determine
that the Fund's investments present only "minimal credit risk" and are Eligible
Securities. The Board of Directors of FAF has established written guidelines and
procedures for the Adviser and oversees the Adviser's determination that the
Fund's portfolio securities present only "minimal credit risk" and are Eligible
Securities.
In order to provide shareholders with full liquidity, the Fund has implemented
the following practices to maintain a constant price of $1.00 per share:
limiting the portfolio's dollar-weighted average maturity to 90 days or less and
buying securities which mature within 397 days from the date of acquisition as
determined pursuant to Rule 2a-7 under the 1940 Act. The Fund cannot guarantee a
$1.00 share price but these practices help to minimize any price fluctuations
that might result from rising or declining interest rates. All money market
instruments, including United States Government securities, can change in value
when interest rates or an issuer's creditworthiness changes. The value of the
securities in the Fund's portfolios can be expected to vary inversely with
changes in prevailing interest rates, with the amount of such variation
depending primarily upon the period of time remaining to maturity of the
security. If the security is held to maturity, no gain or loss will be realized
as a result of interest rate fluctuations.
<PAGE>
As a non-fundamental policy, the Fund will not purchase a security if as a
result more than 10% of its net assets would be in illiquid assets including
time deposits and repurchase agreements maturing in more than seven days. As a
fundamental policy, the Fund will not purchase a security if, as a result, 25%
or more of its assets would be in any single industry (including tax-exempt
municipal bonds issued by non-governmental issuers) provided that there is no
limitation on the purchase of obligations issued or guaranteed by the United
States, its agencies or instrumentalities, or obligations of domestic commercial
banks, excluding for this purpose, foreign branches of domestic commercial
banks.
The securities in which the Fund invests may not yield as high a level of
current income as longer term or lower grade securities. These other securities
may have less stability of principal, be less liquid, and fluctuate more in
value than the securities in which the Fund invests. All securities in the
Fund's portfolio are purchased with and payable in United States dollars.
Unless otherwise stated, the policies described above in this section and under
"Investment Objectives and Policies" for the Fund are non-fundamental and may be
changed by a vote of the Board of Directors. The Fund has adopted certain other
investment restrictions, which are set forth in detail in the Statement of
Additional Information. These restrictions are fundamental and may not be
changed without the approval of the holders of a majority (as defined in the
1940 Act) of the outstanding shares of the Fund.
If a percentage limitation under this section or "Investment Objectives and
Policies" or under "Investment Restrictions" in the Statement of Additional
Information, is adhered to at the time of an investment, a later increase or
decrease in percentage resulting from changes in values of assets will not
constitute a violation of such limitation except in the case of the limitation
on illiquid investments.
MUNICIPAL OBLIGATIONS
As described under "Investment Objectives and Policies," the Fund invests
principally in municipal obligations such as municipal bonds and other debt
obligations. These municipal bonds and debt obligations are issued by the states
and by their local and special-purpose political subdivisions. The term
"municipal bond" as used in this Prospectus includes short-term municipal notes
and other commercial paper issued by the states and their political
subdivisions.
The two general classifications of municipal bonds are "general obligation"
bonds and "revenue" bonds. General obligation bonds are secured by the
governmental issuer's pledge of its faith, credit and taxing power for the
payment of principal and interest. They are usually paid from general revenues
of the issuing governmental entity. Revenue bonds, on the other hand, are
usually payable only out of a specific revenue source rather than
<PAGE>
from general revenues. Revenue bonds ordinarily are not backed by the faith,
credit or general taxing power of the issuing governmental entity. The principal
and interest on revenue bonds for private facilities are typically paid out of
rents or other specified payments made to the issuing governmental entity by a
private company which uses or operates the facilities. Examples of these types
of obligations are industrial revenue bonds and pollution control revenue bonds.
Industrial revenue bonds are issued by governmental entities to provide
financing aid to community facilities such as hospitals, hotels, business or
residential complexes, convention halls and sport complexes. Pollution control
revenue bonds are issued to finance air, water and solids pollution control
systems for privately operated industrial or commercial facilities.
Revenue bonds for private facilities usually do not represent a pledge of the
credit, general revenues or taxing powers of the issuing governmental entity.
Instead, the private company operating the facility is the sole source of
payment of the obligation. Sometimes, the funds for payment of revenue bonds
come solely from revenue generated by operation of the facility. Revenue bonds
which are not backed by the credit of the issuing governmental entity frequently
provide a higher rate of return than other municipal obligations, but they
entail greater risk than obligations which are guaranteed by a governmental unit
with taxing power. Federal income tax laws place substantial limitations on
industrial revenue bonds, and particularly certain specified private activity
bonds issued after August 7, 1986. In the future, legislation could be
introduced in Congress which could further restrict or eliminate the income tax
exemption for interest on debt obligations in which the Funds may invest.
The Fund's investment in municipal bonds and other debt obligations that are
purchased from financial institutions such as commercial and investment banks,
savings associations and insurance companies may take the form of
participations, beneficial interests in a trust, partnership interests or any
other form of indirect ownership that allows the Fund to treat the income from
the investment as exempt from federal income tax.
In addition, the Fund may invest in other federal income tax-free securities
such as (i) tax and revenue anticipation notes issued to finance working capital
in anticipation of receiving taxes or other revenues, (ii) bond anticipation
notes that are intended to be refinanced through a later issuance of longer-term
bonds, (iii) variable and floating rate obligations, including variable rate
demand notes, and (iv) participation, trust and partnership interests in any of
the foregoing obligations.
<PAGE>
LOAN PARTICIPATIONS; SECTION 4(2) AND RULE 144A SECURITIES
The Fund may invest in taxable money market securities such as loan
participation interests. A loan participation interest represents a pro rata
undivided interest in an underlying bank loan. Participation interests, like the
underlying loans, may have fixed, floating, or variable rates of interest. The
bank selling a participation interest generally acts as a mere conduit between
its borrower and the purchasers of interests in the loan. The purchaser of an
interest generally does not have recourse against the bank in the event of a
default on the underlying loan. Therefore, the credit risk associated with such
instruments is governed by the creditworthiness of the underlying borrowers and
not by the banks selling the interests. Loan participation interests that can be
sold within a seven-day period are deemed by the Adviser to be liquid
investments. If a loan participation interest is restricted from being sold
within a seven-day period, then it, as a non-fundamental policy, will be
limited, together with other illiquid investments, to not more than 10% of the
Fund's net assets. Commercial paper issued in reliance on the exemption from
registration afforded by Section 4(2) of the Securities Act of 1933 and
corporate obligations qualifying for resale to certain "qualified institutional
buyers" pursuant to Rule 144A under the Securities Act of 1933 that meet the
criteria for liquidity established by the Board of Directors are considered
liquid. Consequently, the Fund does not intend to subject such securities to the
limitation applicable to restricted securities. Investing in Rule 144A
securities could have the effect of increasing the level of illiquidity in the
Fund to the extent that qualified institutional buyers become, for a time,
uninterested in purchasing these securities.
SECURITIES OF FOREIGN BANKS AND BRANCHES
Because the Fund's investments in taxable money market securities may include
securities of foreign branches of domestic banks, foreign banks, and United
States branches of foreign banks, the Fund may be subject to additional
investment risks that are different in some respects from those incurred by a
fund that invests only in debt obligations of United States banks. These risks
may include future unfavorable political and economic developments and possible
withholding taxes, seizure of foreign deposits, currency controls, interest
limitations, or other governmental restrictions which might affect the payment
of principal or interest on securities owned by the Fund. Additionally, there
may be less public information available about foreign banks and their branches.
The Adviser carefully considers these factors when making investments. The Fund
has agreed that, in connection with investment in securities issued by foreign
banks, United States branches of foreign banks, and foreign branches of domestic
banks, consideration will be given to the domestic marketability of such
securities in light of these factors.
<PAGE>
UNITED STATES GOVERNMENT SECURITIES
The Fund may invest in direct obligations of the United States Treasury such as
United States Treasury bonds, notes, and bills. The Treasury securities are
essentially the same except for differences in interest rates, maturities, and
dates of issuance. In addition to Treasury securities, the Fund may invest in
securities, such as notes, bonds, and discount notes which are issued or
guaranteed by agencies of the United States Government and various
instrumentalities which have been established or sponsored by the United States
Government. Except for United States Treasury securities, these United States
Government obligations, even those which are guaranteed by federal agencies or
instrumentalities, may or may not be backed by the "full faith and credit" of
the United States. In the case of securities not backed by the full faith and
credit of the United States, the investor must look principally to the agency
issuing or guaranteeing the obligation for ultimate repayment and may not be
able to assert a claim against the United States itself in the event the agency
or instrumentality does not meet its commitment. The Adviser considers
securities guaranteed by an irrevocable letter of credit issued by a government
agency to be guaranteed by that agency.
United States Treasury obligations include bills, notes and bonds issued by the
United States Treasury and separately traded interest and principal component
parts of such obligations that are transferable through the Federal book-entry
system known as Separately Traded Registered Interest and Principal Securities
("STRIPS"). STRIPS are sold as zero coupon securities, which means that they are
sold at a substantial discount and redeemed at face value at their maturity date
without interim cash payments of interest or principal. This discount is
accreted over the life of the security, and such accretion will constitute the
income earned on the security for both accounting and tax purposes. Because of
these features, such securities may be subject to greater interest rate
volatility than interest paying United States Treasury obligations. The Fund's
investments in STRIPS will be limited to components with maturities of less than
397 days and the Fund will not actively trade such components.
REPURCHASE AGREEMENTS
The Fund may engage in repurchase agreements with respect to any of its
portfolio securities. In a repurchase agreement, the Fund buys a security at one
price and simultaneously promises to sell that same security back to the seller
at a mutually agreed upon time and price. The Fund may engage in repurchase
agreements with any member bank of the Federal Reserve System or dealer in
United States Government securities. Repurchase agreements usually are for short
periods, such as under one week, not to exceed 30 days. In all cases, the
Adviser must be satisfied with the creditworthiness of the other party to the
agreement before entering a repurchase agreement. In the event of bankruptcy of
the other party to a repurchase agreement, the Fund
<PAGE>
might experience delays in recovering its cash. To the extent that, in the
meantime, the value of the securities the Fund purchased may have decreased, the
Fund could experience a loss.
CREDIT ENHANCEMENT AGREEMENTS
The Fund may arrange for guarantees, letters of credit, or other forms of credit
enhancement agreements (collectively, "Guarantees") for the purpose of further
securing the payment of principal and/or interest on the Fund's investment
securities. Although each investment security, at the time it is purchased, must
meet the Fund's creditworthiness criteria, Guarantees sometimes are purchased
from banks and other institutions (collectively, "Guarantors") when the Adviser,
through yield and credit analysis, deems that credit enhancement of certain of
the Fund's securities is advisable. As a non-fundamental policy, the Fund will
limit the value of all investment securities issued or guaranteed by each
Guarantor to not more than 10% of the value of the Fund's total assets.
PUT OPTIONS
The Fund may purchase tax-exempt securities which provide for the right to
resell them to the issuer, a bank or a broker-dealer at a specified price within
a specified period of time prior to the maturity date of such obligations. Such
a right to resell, which is commonly known as a "put," may be sold, transferred
or assigned only with the underlying security or securities. The Fund may pay a
higher price for a tax-exempt security with a put than would be paid for the
same security without a put. The primary purpose of purchasing such securities
with puts is to permit the Fund to be as fully invested as practicable in
tax-exempt securities while at the same time providing the Fund with appropriate
liquidity.
VARIABLE AND FLOATING RATE OBLIGATIONS
Certain of the obligations in which the Fund may invest may be variable or
floating rate obligations in which the interest rate is adjusted either at
predesignated periodic intervals (variable rate) or when there is a change in
the index rate of interest on which the interest rate payable on the obligation
is based (floating rate). Variable or floating rate obligations 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. Variable or
floating rate instruments with a demand feature enable the Fund to purchase
instruments with a stated maturity in excess of 397 calendar days. The Fund
determines the maturity of variable or floating rate instruments in accordance
with Securities and Exchange Commission rules which allow the Fund to
<PAGE>
consider certain of such instruments as having maturities that are less than the
maturity date on the face of the instrument.
LENDING OF PORTFOLIO SECURITIES
The Fund may from time to time lend securities from its portfolio to brokers,
dealers, and financial institutions and receive collateral in cash or securities
issued or guaranteed by the United States Government which will be maintained at
all times in an amount equal to at least 100% of the current value of the loaned
securities. Such loans may not exceed one-third of the value of the lending
Fund's total assets. The Fund will pay a portion of the income earned on a
lending transaction to the placing broker and may pay administrative and
custodial fees (including fees to an affiliate of the Adviser) in connection
with these loans. For additional information, see "Investment Restrictions" in
the Statement of Additional Information.
WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES
The Fund may purchase the securities described above on a when-issued or
delayed-delivery basis. The settlement dates for these types of transactions are
determined by mutual agreement of the parties and may occur a month or more
after the parties have agreed to the transaction. Securities purchased on a
when-issued or delayed-delivery basis are subject to market fluctuation and no
interest accrues to the Fund during the period prior to settlement. At the time
the Fund commits to purchase securities on a when-issued or delayed- delivery
basis, it will record the transaction and thereafter reflect the value, each
day, of such security in determining its net asset value. At the time of
delivery of the securities, the value may be more or less than the purchase
price. The Fund will also establish a segregated account with its Custodian in
which it will maintain cash or cash equivalents or other portfolio securities
equal in value to commitments for such when-issued or delayed-delivery
securities. The Fund will not purchase securities on a when-issued or delayed-
delivery basis if, as a result thereof, more than 15% of that Fund's net assets
would be so invested.
MONEY MARKET FUNDS
The Fund may invest, to the extent permitted by the 1940 Act, in securities
issued by other money market funds, provided that the permitted investments of
such other money market funds constitute permitted investments of the investing
Fund. The Adviser will waive its advisory fee on amounts which are invested in
such other money market funds. Investments by the Fund in such other Fund are
subject to restrictions contained in an exemptive order issued by the Securities
and Exchange Commission.
<PAGE>
FIRST AMERICAN FUNDS, INC.
Oaks, Pennsylvania 19456
INVESTMENT ADVISER
FIRST BANK NATIONAL ASSOCIATION
601 Second Avenue South
Minneapolis, Minnesota 55402
CUSTODIAN
FIRST TRUST NATIONAL ASSOCIATION
180 East Fifth Street
St. Paul, Minnesota 55101
DISTRIBUTOR
SEI INVESTMENTS DISTRIBUTION CO.
Oaks, Pennsylvania 19456
ADMINISTRATOR
SEI INVESTMENTS MANAGEMENT
CORPORATION
Oaks, Pennsylvania 19456
TRANSFER AGENT
DST SYSTEMS, INC.
1004 Baltimore
Kansas City, Missouri 64105
INDEPENDENT AUDITORS
KPMG PEAT MARWICK LLP
90 South Seventh Street
Minneapolis, Minnesota 55402
COUNSEL
DORSEY & WHITNEY LLP
220 South Sixth Street
Minneapolis, Minnesota 55402
FAF-1903 (7/97)CT
<PAGE>
Part B
FIRST AMERICAN FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION
DATED OCTOBER 8, 1997
TAX FREE OBLIGATIONS FUND
TREASURY OBLIGATIONS FUND
This Statement of Additional Information relates to the Class A Shares
of Tax Free Obligations Fund and Treasury Obligations Fund, and the Class C and
Class D Shares of Tax Free Obligations Fund (each a "Fund," and collectively the
"Funds"), each of which is a series of First American Funds, Inc. This Statement
of Additional Information is not a prospectus, but should be read in conjunction
with the Funds' current Prospectuses dated September 17, 1997. This Statement of
Additional Information is incorporated into the Funds' Prospectuses by
reference. To obtain copies of the Prospectuses, call (800) 637-2548 or write
SEI Investments Distribution Co., Oaks, Pennsylvania 19456. Please retain this
Statement of Additional Information for future reference.
TABLE OF CONTENTS
PAGE
----
General Information............................. 2
Investment Restrictions......................... 3
Portfolio Turnover ............................. 7
Directors and Executive Officers................ 7
Capital Stock .................................. 10
Investment Advisory and Other Services.......... 10
Portfolio Transactions.......................... 13
Net Asset Value and Public Offering Price ...... 14
Valuation of Portfolio Securities............... 14
Taxes........................................... 15
Calculation of Performance Data................. 16
Commercial Paper and Bond Ratings............... 17
<PAGE>
GENERAL INFORMATION
First American Funds, Inc. ("FAF") was incorporated under the name
"First American Money Fund, Inc." The Board of Directors and shareholders, at
meetings held December 6, 1989 and January 18, 1990, respectively, approved
amendments to the Articles of Incorporation providing that the name "First
American Money Fund, Inc." be changed to "First American Funds, Inc."
FAF 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 FAF to which this Statement of Additional Information
relates are named on the cover hereof.
Shareholders may purchase shares of each Fund through Class A, Class C
and Class D Shares. The various classes provide for variations in distribution
costs, voting rights and dividends. To the extent permitted under the Investment
Company Act of 1940 (the "1940 Act"), the Funds may also provide for variations
in other costs among the classes although they have no present intention to do
so. Except for differences among the classes pertaining to distribution costs,
each share of each Fund represents an equal proportionate interest in that Fund.
FAF has prepared and will provide a separate Prospectus relating to the
Class A (the "Retail Class Prospectus"), the Class C (the "Institutional Class
Prospectus") and the Class D Shares of the Funds (the "Corporate Trust Class
Prospectus"), respectively. These Prospectuses can be obtained by calling or
writing SEI Investments Distribution Co. at the address and telephone number set
forth on the cover of this Statement of Additional Information. This Statement
of Additional Information relates to all Prospectuses for the Class A Shares of
Tax Free Obligations Fund and Treasury Obligations Fund, and Class C and D
Shares of Tax Free Obligations Fund. It should be read in conjunction with the
applicable Prospectus.
The By-laws of FAF provide that meetings of shareholders be held only
with such frequency as required under Minnesota law and the 1940 Act. Minnesota
corporation law requires only that the Board of Directors convene shareholders'
meetings when it deems appropriate. In addition, 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 shares of FAF may demand a regular meeting of shareholders by written
notice given to the chief executive officer or chief financial officer of FAF.
Within 30 days after receipt of the demand, the Board of Directors shall cause a
regular meeting of shareholders to be called, which meeting shall be held no
later than 40 days after receipt of the demand, all at the expense of FAF. In
addition, the 1940 Act requires a shareholder vote for all amendments to
fundamental investment policies and restrictions, for approval of all investment
advisory contracts and amendments thereto, and for all amendments to Rule 12b-1
distribution plans.
<PAGE>
INVESTMENT RESTRICTIONS
TAX FREE OBLIGATIONS FUND
Tax Free Obligations Fund has adopted the following investment
limitations and fundamental policies. These policies and limitations cannot be
changed by the Fund without approval by the holders of a majority of the
outstanding shares of the Fund as defined in the 1940 Act (i.e., the lesser of
the vote of (a) 67% of the shares of the Fund 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). Tax Free Obligations Fund may not:
1. Purchase common stocks, preferred stocks, warrants, other
equity securities, corporate bonds or debentures, state bonds,
municipal bonds, or industrial revenue bonds (except through
the purchase of obligations referred to under "Investment
Objectives and Policies" in the Fund's Prospectus).
2. Borrow money except from banks for temporary or emergency
purposes for the purpose of meeting redemption requests which
might otherwise require the untimely disposition of
securities. Borrowing in the aggregate may not exceed 10% of
the value of the Fund's total assets (including the amount
borrowed) valued at the lesser of cost or market less
liabilities (not including the amount borrowed) at the time
the borrowing is made. The borrowings will be repaid before
any additional investments are made. However, even with such
authority to borrow money, there is no assurance that the Fund
will not have to dispose of securities on an untimely basis to
meet redemption requests. For the purpose of this investment
restriction, the use of options and futures transactions and
the purchase of securities on a when-issued or
delayed-delivery basis shall not be deemed the borrowing of
money. (As a fundamental policy, the Fund will not make
additional investments while its borrowings exceed 5% of total
assets).
3. Pledge, hypothecate, mortgage or otherwise encumber its
assets, except in an amount up to 15% of the value of its
total assets but only to secure borrowings for temporary or
emergency purposes.
4. Sell securities short or purchase securities on margin.
5. Write or purchase put or call options, except that the Fund
may write or purchase put or call options in connection with
the purchase of variable rate certificates of deposit
described below and as otherwise permitted as provided in the
Fund's Prospectus.
6. Underwrite the securities of other issuers except to the
extent the Fund may be deemed to be an underwriter, under
federal securities laws, in connection with the disposition of
portfolio securities, or purchase securities with contractual
or other restrictions on resale.
7. Purchase or sell real estate, real estate investment trust
securities, commodities or commodity contracts, or oil and gas
interests.
8. Lend money to others except through the purchase of debt
obligations of the type which the Fund is permitted to
purchase (see "Investment Objectives and Policies" in the
Fund's Prospectus).
9. Invest in companies for the purpose of exercising control.
<PAGE>
10. Issue any senior securities (as defined in the 1940 Act),
except as set forth in investment restriction number (2)
above, and except to the extent that using options, futures
contracts and options on futures contracts, purchasing or
selling on a when-issued, delayed delivery or forward
commitment basis or using similar investment strategies may be
deemed to constitute issuing a senior security.
11. Invest 25% or more of its total assets in the securities of
any single industry (including tax-exempt municipal bonds
issued by non-governmental issuers); provided that there shall
be no limitation on the purchase of obligations issued or
guaranteed by the United States, its agencies or
instrumentalities, or obligations of domestic commercial
banks, excluding for this purpose, foreign branches of
domestic commercial banks. As to utility companies, gas,
electric, water, and telephone companies are considered as
separate industries. As to finance companies, the following
two categories are each considered a separate industry: (A)
business credit institutions, such as Honeywell Finance
Corporation and General Electric Credit Corp., and (B)
personal credit institutions, such as Sears Roebuck Acceptance
Corp. and Household Finance Corporation.
As a non-fundamental policy, Tax Free Obligations Fund may not purchase
or retain the securities of any issuer if any of the officers or directors of
the Fund or its investment adviser owns beneficially more than 1/2 of 1% of the
securities of such issuer and together own more than 5% of the securities of
such issuer.
As a non-fundamental policy, Tax Free Obligations Fund may not invest
more than 10% of its net assets in illiquid assets, including, without
limitation, time deposits and repurchase agreements maturing in more than seven
days.
In connection with Tax Free Obligations Fund's purchase of variable
rate certificates of deposit ("CDs"), it may enter into agreements with banks or
dealers allowing the Fund to resell the certificates to the bank or dealer, at
the Fund's option. Time deposits which may be purchased by the Fund are deposits
held in foreign branches of United States banks which have a specified term or
maturity. The Fund purchases CDs from only those domestic savings and loan
institutions which are regulated by the Office of Thrift Supervision and the
Federal Deposit Insurance Corporation ("FDIC"), and whose deposits are insured
by either the Savings Association Insurance Fund or the Bank Insurance Fund,
each of which is administered by the FDIC. However, because the Fund purchases
large denomination CDs, it does not expect to benefit materially from such
insurance. The policies described in this paragraph are nonfundamental and may
be changed by the Board of Directors.
Tax Free Obligations Fund may invest in obligations of foreign branches
of United States banks and United States branches of foreign banks. The
obligations of foreign branches of United States banks may be general
obligations of the parent bank in addition to the issuing branch, or may be
limited by the terms of a specific obligation and by governmental regulation.
Payment of interest and principal upon these obligations may also be affected by
governmental action in the country of domicile of the branch (generally referred
to as sovereign risk). In addition, evidences of ownership of portfolio
securities may be held outside of the United States and the Fund may be subject
to the risks associated with the holding of such property overseas. Various
provisions of federal law governing the establishment and operation of domestic
branches do not apply to foreign branches of domestic banks. Obligations of
United States branches of foreign banks may be general obligations of the parent
bank in addition to the issuing branch, or may be limited by the terms of a
specific obligation and by federal and state regulation as well as by
governmental action in the country in which the foreign bank has its head
office.
<PAGE>
TREASURY OBLIGATIONS FUND
Treasury Obligations Fund has adopted the following investment
limitations and fundamental policies. These limitations cannot be changed by the
Fund without approval by the holders of a majority of the outstanding shares of
the Fund as defined in the 1940 Act. Treasury Obligations Fund may not:
1. Borrow money except that the Fund may borrow from banks or
enter into reverse repurchase agreements for temporary or
emergency purposes, for the purpose of meeting redemption
requests which might otherwise require the untimely
disposition of securities in aggregate amounts not exceeding
10% of the value of the Fund's total assets (including the
amount borrowed or subject to reverse repurchase agreements)
valued at the lesser of cost or market less liabilities (not
including the amount borrowed or subject to reverse repurchase
agreements) at the time the borrowing or reverse repurchase
agreement is entered into. Any borrowings will be repaid
before any additional investments are made. During the period
any reverse repurchase agreements are outstanding, the Fund
will restrict the purchase of portfolio securities to
instruments maturing on or before the expiration date of the
reverse repurchase agreements, but only to the extent
necessary to assure completion of the reverse repurchase
agreements. Interest paid on borrowed funds will decrease the
net earnings of the Fund. The Fund will not borrow or enter
into reverse repurchase agreements to increase income
(leveraging).
2. Issue any senior securities (as defined in the 1940 Act),
except as set forth in investment restriction number (1)
above, and except to the extent that purchasing or selling on
a when-issued, delayed delivery or forward commitment basis or
using similar investment strategies may be deemed to
constitute issuing a senior security.
3. Pledge, hypothecate, mortgage or otherwise encumber its
assets, except in an amount up to 15% of the value of its
total assets but only to secure borrowings for temporary or
emergency purposes.
4. Sell securities short or purchase securities on margin.
5. Underwrite the securities of other issuers except to the
extent the Fund may be deemed to be an underwriter, under
federal securities laws, in connection with the disposition of
portfolio securities.
6. Invest 25% or more of its assets in the securities of issuers
in any single industry (including tax-exempt municipal bonds
issued by non-governmental issuers); provided that there shall
be no limitation on the purchase of obligations issued or
guaranteed by the United States, its agencies or
instrumentalities, or obligations of domestic commercial
banks, excluding for this purpose, for branches of domestic
commercial banks.
7. Purchase or sell real estate, real estate investment trust
securities, commodities or commodity contracts, or oil and gas
interests.
8. Lend money to others except through the purchase of debt
obligations of the type which the Fund is permitted to
purchase (see "Investment Objectives and Policies" in the
Fund's Prospectus).
<PAGE>
As a non-fundamental policy, Treasury Obligations Fund will not (i)
invest in oil, gas or other mineral leases and (ii) invest more than 10% of its
net assets in illiquid assets, including, without limitation, repurchase
agreements maturing in more than seven days.
As to investment restriction (6) above, utility companies, gas,
electric, water and telephone companies are considered separate industries, and
as to finance companies, the following two categories are each considered a
separate industry:
A. business credit institutions, such as Honeywell
Finance Corporation and General Electric Credit
Corp., and
B. personal credit institutions, such as Sears Roebuck
Acceptance Corp. and Household Finance Corporation.
The Funds may not invest in obligations of any affiliate of First Bank
System, Inc., including First Bank National Association (the "Adviser").
The Funds may lend securities to the extent described in the
Prospectuses under "Investment Restrictions and Techniques -- Lending of
Portfolio Securities." When a Fund lends portfolio securities, it continues to
be entitled to the interest payable on the loaned securities and, in addition,
receives interest on the amount of the loan at a rate negotiated with the
borrower. The Fund may pay a portion of the income earned on the lending
transaction to the placing broker and may pay administrative and custodial fees
in connection with these loans. The Funds contemplate that (to the extent
permissible under the 1940 Act) the Custodian may be the recipient of such
administrative and custodial fees in connection with some such lending
transactions. As set forth in the Prospectuses, First Trust National
Association, the Funds' custodian and an affiliate of the Adviser, may act as
securities lending agent for the Funds and receive separate compensation for
such services, subject to compliance with conditions contained in a Securities
and Exchange Commission exemptive order permitting First Trust to provide such
services and receive such compensation.
Short-term investments and repurchase agreements may be entered into on
a joint basis by the Funds and other funds advised by the Adviser to the extent
permitted by Securities and Exchange Commission exemptive order.
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 any 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
<PAGE>
Association. FAF has made such notice filings with respect to those Funds which
may invest in commodity futures or commodity options contracts.
PORTFOLIO TURNOVER
The Funds generally intend to hold their portfolio securities to
maturity. In certain instances, however, a Fund may dispose of its portfolio
securities prior to maturity when it appears such action will be in the best
interest of the Fund because of changing money market conditions, redemption
requests, or otherwise. A Fund may attempt to maximize the total return on its
portfolio by trading to take advantage of changing money market conditions and
trends or to take advantage of what are believed to be disparities in yield
relationships between different money market instruments. Because each Fund
invests in short-term securities and manages its portfolio as described above in
"Investment Restrictions" and as described in the Prospectus under "Investment
Objectives and Policies," the Fund's portfolio will turn over several times a
year. Because brokerage commissions as such are not usually paid in connection
with the purchase or sale of the securities in which the Funds invest and
because the transactional costs are small, the high turnover is not expected
materially to affect net asset values or yields. Securities with maturities of
less than one year are excluded from required portfolio turnover rate
calculations, and, therefore, each Fund's turnover rate for reporting purposes
will be zero.
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of FAF 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 FAF are identified with an asterisk.
DIRECTORS
Robert J. Dayton, 5140 Norwest Center, Minneapolis, Minnesota 55402:
Director of FAF since December 1994 and of First American Investment Funds, Inc.
("FAIF") since September 1994 and of First American Strategy Funds, Inc.
("FASF") since June 1996; Chairman (1989-1993) and Chief Executive Officer
(1993-present), Okabena Company (private family investment office). Age: 54.
Andrew M. Hunter III, 537 Harrington Road, Wayzata, Minnesota 55391:
Director of FAF, FAIF and FASF since January 1997; Chairman of Hunter, Keith
Industries, a diversified manufacturing and services management company, since
1975. Age: 49.
Leonard W. Kedrowski, 16 Dellwood Avenue, Dellwood, Minnesota 55110:
Director of FAF and FAIF since November 1993 and of FASF since June 1996;
President and owner of Executive Management Consulting, Inc., a management
consulting firm; 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: 55.
* Robert L. Spies, 4715 Twin Lakes Avenue, Brooklyn Center, Minnesota
55429: Director of FAF, FAIF and FASF since January 31, 1997; employed by First
Bank System, Inc. and subsidiaries from 1957 to January 31, 1997, most recently
as Vice President, First Bank National Association. Age: 62.
Joseph D. Strauss, 8617 Edenbrook Crossing, # 443, Brooklyn Park,
Minnesota 55443: Director of FAF since 1984 and of FAIF since April 1991 and of
FASF since June 1996; Chairman of FAF's and FAIF's Boards since 1993 and of
FASF's Board since 1996; 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: 56.
<PAGE>
Virginia L. Stringer, 712 Linwood Avenue, St. Paul, Minnesota 55105:
Director of FAIF since August 1987 and of FAF since April 1991 and of FASF since
June 1996; 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: 52.
Gae B. Veit, P.O. Box 6, Loretto, Minnesota 55357: Director of FAIF and
FAF since December 1993 and of FASF since June 1996; owner and CEO of Shingobee
Builders, Inc., a general contractor. Age: 53.
EXECUTIVE OFFICERS
David Lee, SEI Investments Company, Oaks, Pennsylvania 19456: President
of FAIF and FAF since April 1994 and of FASF since June 1996; Senior Vice
President and Assistant Secretary of FAF and FAIF beginning June 1, 1993; Senior
Vice President of SEI Investments Distribution Co. (the "Distributor") since
1991; President, GW Sierra Trust Funds prior to 1991. Age: 44.
Carmen V. Romeo, SEI Investments Company, Oaks, Pennsylvania 19456:
Treasurer and Assistant Secretary of FAIF and FAF since November 1992 and of
FASF since June 1996; Director, Executive Vice President, Chief Financial
Officer and Treasurer of SEI Investments Company ("SEI"), SEI Investments
Management Corporation (the "Administrator") and the Distributor since 1981.
Age: 52.
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; Vice President, Assistant Secretary and General Counsel of
the Administrator and the Distributor. Age: 36.
Kathryn Stanton, SEI Investments Company, Oaks, Pennsylvania 19456:
Vice President and Assistant Secretary of FAIF and FAF since April 1994 and of
FASF since June 1996; Vice President and Assistant Secretary of the
Administrator and the Distributor since April 1994; Associate, Morgan, Lewis &
Bockius, from 1989 to 1994. Age: 37.
Sandra K. Orlow, SEI Investments Company, Oaks, Pennsylvania 19456:
Vice President and Assistant Secretary of FAIF and FAF since 1992 and of FASF
since June 1996; Vice President and Assistant Secretary of SEI, the
Administrator and the Distributor since 1983. Age: 40.
Marc Cahn, SEI Investments Company, Oaks, Pennsylvania 19456: Vice
President and Assistant Secretary of FAIF. FAF and FASF since June 1996; Vice
President and Assistant Secretary of the Administrator and Distributor since May
1996; Associate General Counsel, Barclays Bank PLC, from 1994 to 1996; ERISA
Counsel, First Fidelity Bancorporation, prior to 1994. Age: 39.
Barbara A. Nugent, SEI Investments Company, Oaks, Pennsylvania 19456:
Vice President and Assistant Secretary of FAIF, FAF and FASF since June 1996;
Vice President and Assistant Secretary of the Administrator and Distributor
since April 1996; Associate, Drinker, Biddle & Reath, from 1994 to 1996;
Assistant Vice President/Administration (1992 to 1993) and Operations (1988 to
1992), Delaware Service Company, Inc. Age: 39.
Stephen G. Meyer, SEI Investments Company, Oaks, Pennsylvania 19456:
Controller of FAIF and FAF since March 1995 and of FASF since June 1996;
Director of Internal Audit and Risk Management of SEI from 1992 to 1995; Senior
Associate, Coopers & Lybrand, from 1990 to 1992. Age: 31.
<PAGE>
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; Partner, Dorsey & Whitney LLP, a Minneapolis-based law firm and
general counsel of FAIF and FAF. Age: 52.
COMPENSATION
The First American Family of Funds, which includes FAF, FAIF and FASF,
currently pays only to directors of the funds who are not paid employees or
affiliates of the funds a fee of $15,000 per year ($22,500 in the case of the
Chair) plus $2,500 ($3,750 in the case of the Chair) per meeting of the Board
attended and $800 per committee meeting attended ($1,600 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 a committee chair). In addition, directors may receive a
per diem fee of $1,000 per day plus travel expenses when directors travel out of
town on Fund business. However, directors do not receive the $1,000 per diem
amount plus the foregoing Board or committee fee for an out of town Board or
committee 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 FAF, FAIF and FASF, is a
partner. The following table sets forth information concerning aggregate
compensation paid to each director of FAF (i) by FAF (column 2), and (ii) by
FAF, FAIF and FASF collectively (column 5) during the fiscal year ended
September 30, 1996. No executive officer or affiliated person of FAF had
aggregate compensation from FAF in excess of $60,000 during such fiscal year:
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
Total
Compensation
Aggregate Pension or Retirement Estimated From Registrant
Name of Compensation Benefits Accrued as Annual Benefits and Fund Complex
Person, Position From Registrant Part of Fund Expenses Upon Retirement Paid to Directors
---------------- --------------- --------------------- --------------- -----------------
<S> <C> <C> <C> <C>
Robert J. Dayton, Director $21,121 -0- -0- $32,850
Andrew M. Hunter III, Director* -0- -0- -0- -0-
Leonard W. Kedrowski, Director $21,974 -0- -0- $34,150
Robert L. Spies, Director* -0- -0- -0- -0-
Joseph D. Strauss, Director $36,293 -0- -0- $56,375
Virginia L. Stringer, Director $22,730 -0- -0- $35,350
Gae B. Veit, Director $22,484 -0- -0- $34,950
- -----------
* Not a director during the fiscal year ended September 30, 1996.
</TABLE>
Under Minnesota law, each director owes certain fiduciary duties to the
Funds and to their shareholders. Minnesota law provides that a director "shall
discharge the duties of the position of director in good faith, in a manner the
director reasonably believes to be in the best interest of the corporation, and
with the care an ordinarily prudent person in a like position would exercise
under similar circumstances." Fiduciary duties of a director of a Minnesota
corporation include, therefore, both a duty of "loyalty" (to act in good faith
and in a manner reasonably believed to be in the best interest of the
corporation) and a duty of "care" (to act with the care an ordinarily prudent
person in a like position would exercise under similar circumstances). In 1987,
Minnesota enacted legislation which authorizes corporations to eliminate or
limit the personal liability of a director to the corporation or its
shareholders for monetary damages for breach of the fiduciary duty of "care."
Minnesota law does not, however, permit a corporation to eliminate or limit the
liability of a director (a) for any breach of the director's duty of "loyalty"
to the corporation or its shareholders, (b) for acts or omissions not in good
faith or that involve intentional misconduct or a knowing violation of the law,
(c) for authorizing
<PAGE>
a dividend, stock repurchase or redemption, or other distribution in violation
of Minnesota law or for violation of certain provisions of Minnesota securities
laws, or (d) for any transaction from which the director derived an improper
personal benefit. FAF's Board of Directors and shareholders, at meetings held
December 10, 1987 and March 15, 1988, respectively, approved an amendment to the
Articles of Incorporation that limits the liability of directors to the fullest
extent permitted by the Minnesota legislation and the 1940 Act.
Minnesota law does not eliminate the duty of "care" imposed on a
director. It only authorizes a corporation to eliminate monetary liability for
violations of that duty. Further, Minnesota law does not permit elimination or
limitation of liability of "officers" to the corporation for breach of their
duties as officers. Minnesota law does not permit elimination or limitation of
the availability of equitable relief, such as injunctive or rescissionary
relief. These remedies, however, may be ineffective in situations where
shareholders become aware of such a breach after a transaction has been
consummated and rescission has become impractical. Minnesota law does not permit
elimination or limitation of a director's liability under the Securities Act of
1933, as amended, or the Securities Exchange Act of 1934, as amended. The 1940
Act prohibits elimination or limitation of a director's liability for acts
involving willful malfeasance, bad faith, gross negligence, or reckless
disregard of the duties of a director.
CAPITAL STOCK
As of July 11, 1997, no shares of the Tax Free Obligations Fund and the
Class A Shares of the Treasury Obligations Fund were outstanding.
INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISER
First Bank National Association (the "Adviser"), 601 Second Avenue
South, Minneapolis, Minnesota 55480, serves as the investment adviser and
manager of the Funds through its First Asset Management group. The Adviser 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 Adviser is a subsidiary of U.S. Bancorp
(formerly known as First Bank System, Inc.), 601 Second Avenue South,
Minneapolis, Minnesota 55480, which is a regional, multi-state bank holding
company headquartered in Minneapolis, Minnesota. U.S. Bancorp is comprised of 6
banks and several trust and nonbank subsidiaries, with over 1,000 banking
locations. Through its subsidiaries, U.S. Bancorp provides consumer banking,
commercial lending, financing of import/export trade, foreign exchange and
investment services as well as mortgage banking, trust, commercial and
agricultural finance, data processing, leasing and brokerage services.
Pursuant to an Investment Advisory Agreement, effective as of January
20, 1995 (the "Advisory Agreement") between FAF, on behalf of each Fund, and the
Adviser, the Funds engage the Adviser to act as investment adviser for and to
manage the investment of the Funds' assets. The Advisory Agreement requires each
Fund to pay the Adviser a monthly fee equal, on an annual basis, to .40 of 1% of
the Fund's average daily net assets.
The Advisory Agreement requires the Adviser to arrange, if requested by
FAF, for officers or employees of the Adviser to serve without compensation from
the Funds as directors, officers, or employees of FAF if duly elected to such
positions by the shareholders or directors of FAF. The Adviser has the authority
and responsibility to make and execute investment decisions for the Funds within
the framework of the Funds' investment policies, subject to review by the Board
of Directors of
<PAGE>
FAF. The Adviser is also responsible for monitoring the performance of the
various organizations providing services to the Funds, including the Funds'
distributor, shareholder services agent, custodian, and accounting agent, and
for periodically reporting to FAF's Board of Directors on the performance of
such organizations. The Adviser will, at its own expense, furnish the Funds with
the necessary personnel, office facilities, and equipment to service the Funds'
investments and to discharge its duties as investment adviser of the Funds. In
addition to the investment advisory fee, each Fund pays all of its expenses that
are not expressly assumed by the Adviser 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. FAF may have an obligation to indemnify its
directors and officers with respect to such litigation. The Adviser will be
liable to the Funds under the Advisory Agreement for any negligence or willful
misconduct by the Adviser other than liability for investments made by the
Adviser in accordance with the explicit direction of the Board of Directors or
the investment objectives and policies of the Funds. The Adviser has agreed to
indemnify the Funds with respect to any loss, liability, judgment, cost or
penalty that a Fund may suffer due to a breach of the Advisory Agreement by the
Adviser.
Tax Free Obligations Fund and Treasury Obligations Fund (with respect
to Class A Shares) had not commenced operations as of September 30, 1996, the
end of FAF's most recent fiscal year. They therefore paid no advisory fees to
the Adviser during such year.
DISTRIBUTOR AND DISTRIBUTION PLANS
SEI Investments Distribution Co. (the "Distributor" ) serves as the
distributor for the Class A, Class C and Class D Shares of the Funds. The
Distributor is a wholly-owned subsidiary of SEI Investments Company, which also
owns the Funds' Administrator. See "-- Custodian: Administrator; Transfer Agent;
Counsel; Accountants" below.
The Distributor serves as distributor for the Class A, Class C and
Class D Shares pursuant to a Distribution Agreement effective as of January 20,
1995 between itself and the Funds. These agreements are referred to collectively
as the "Distribution Agreements."
Under the Distribution Agreements, the 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. The shares of the Funds are distributed through the Distributor and
through securities firms, financial institutions (including, without limitation,
banks) and other industry professionals (the "Participating Institutions") which
enter into sales agreements with the Distributor to perform share distribution
or shareholder support services.
FBS Investment Services, Inc. ("ISI"), a subsidiary of the Adviser, is
a Participating Institution. The Adviser currently pays ISI .25% of the portion
of each Fund's average daily net assets attributable to Class C Shares for which
ISI is responsible in connection with ISI's provision of shareholder support
services. Such amounts paid to ISI by the Adviser will not affect the Adviser's
agreement to limit expenses of each Fund as discussed under "Management of the
Funds -- Investment Adviser" in the Prospectuses.
The Class A Shares pay to the Distributor a shareholder servicing fee
at an annual rate of 0.25% of the average daily net assets of the Class A
Shares, which fee may be used by the Distributor to provide compensation for
shareholder servicing activities with respect to the Class A Shares of the kinds
described in the Retail Class Prospectus. This fee is calculated and paid each
month based on average daily net assets of Class A of each Fund for that month.
The Distributor receives no compensation for distribution of the Class
C Shares. The Class D Shares of each Fund pay a shareholder servicing fee to the
Distributor monthly at the annual rate of 0.15% of each Fund's Class D average
daily net assets, which fee may be used by the Distributor to
<PAGE>
provide compensation for shareholder servicing activities with respect to the
Class D Shares of the kinds described in the Corporate Trust Class Prospectus.
This fee is calculated and paid each month based on average daily net assets of
Class D Shares of each Fund for that month.
The Distribution Agreements provide that they will continue in effect
for a period of more than one year from the date of their execution only so long
as such continuance is specifically approved at least annually by the vote of a
majority of the Board members of FAF and by the vote of the majority of those
Board members of FAF who are not interested persons of FAF and who have no
direct or indirect financial interest in the operation of FAF's Rule 12b-1 Plans
of Distribution or in any agreement related to such Plans.
FAF has adopted Plans of Distribution (the "Plans") with respect to
Class A and Class D Shares of the Funds, respectively, pursuant to Rule 12b-1
under the 1940 Act. Rule 12b-1 provides in substance that a mutual fund may not
engage directly or indirectly in financing any activity which is primarily
intended to result in the sale of shares, except pursuant to a plan adopted
under the Rule. The Plans authorize the Funds to pay the Distributor fees for
the services it performs for the Funds as described in the preceding paragraphs.
The Plans recognize that the Adviser, the Administrator, the Distributor, and
any Participating Institution, in their discretion, may use their own assets to
pay for certain additional costs of distributing shares of the Funds. Any such
arrangement to pay such additional costs may be commenced or discontinued by the
Adviser, the Administrator, the Distributor, or any Participating Institution at
any time.
Each Plan is a "compensation-type" plan under which the Distributor is
entitled to receive the distribution fee regardless of whether its actual
distribution expenses are more or less than the amount of the fee. If, after
payments by the Distributor for advertising, marketing, and distribution, there
are any remaining fees, these may be used as the Distributor may elect. Because
the amounts payable under the Plans will be commingled with the Distributor's
general funds, including the revenues it receives in the conduct of its
business, it is possible that certain of the Distributor's overhead expenses
will be paid out of Plan fees and that these expenses may include items which
the SEC Staff has noted, for example, the costs of leases, depreciation,
communications, salaries, training, and supplies. The Funds believe that such
expenses, if paid, will be paid only indirectly out of the fees being paid under
the Plans.
Tax Free Obligations Fund and Treasury Obligations Fund (with respect
to Class A Shares) had not commenced operations as of September 30, 1996, the
end of FAIF's most recent fiscal year. They therefore paid no distribution or
shareholder servicing fees during such year.
CUSTODIAN; ADMINISTRATOR; TRANSFER AGENT; COUNSEL; ACCOUNTANTS
First Trust (the "Custodian") acts as custodian of the Funds' assets
and portfolio securities pursuant to a Custodian Agreement between First Trust
and the Funds. The Custodian takes no part in determining the investment
policies of the Funds or in deciding which securities are purchased or sold by
the Funds. The duties of the Custodian are limited to receiving and safeguarding
the assets and securities of the Funds and to delivering or disposing of them
pursuant to the Funds' order. The Funds compensate the Custodian at such rates
and at such times as the Funds and the Custodian may agree on in writing from
time to time, and the Custodian is granted a lien for unpaid compensation upon
any cash or securities held by it for the Funds.
As compensation for its services to the Funds, the Custodian is paid a
monthly fee calculated on an annual basis equal to 0.03% 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 FAF.
<PAGE>
The Administrator, a wholly owned subsidiary of SEI, provides
administrative services to the Funds for a fee as described in the prospectus.
DST Systems, Inc., 1004 Baltimore, Kansas City, Missouri 64105, is
transfer agent and dividend disbursing agent for the shares of the Funds. The
transfer agent is not affiliated with the Distributor, the Administrator or the
Adviser.
Tax Free Obligations Fund and Treasury Obligations Fund (with respect
to Class A Shares) had not commenced operations as of September 30, 1996, the
end of FAF's most recent fiscal year. They therefore paid no fees to the
Administrator during such year.
Dorsey & Whitney LLP is independent general counsel for the Funds.
KPMG Peat Marwick LLP, 90 South Seventh Street, 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
As the Funds' portfolios are exclusively composed of debt, rather than
equity securities, most of the Funds' portfolio transactions are effected with
dealers without the payment of brokerage commissions but at net prices, which
usually include a spread or markup. In effecting such portfolio transactions on
behalf of the Funds, the Adviser seeks the most favorable net price consistent
with the best execution. The Adviser may, however, select a dealer to effect a
particular transaction without communicating with all dealers who might be able
to effect such transaction because of the volatility of the money market and the
desire of the Adviser to accept a particular price for a security because the
price offered by the dealer meets guidelines for profit, yield, or both.
Decisions with respect to placement of the Funds' portfolio
transactions are made by the Adviser. The primary consideration in making these
decisions is efficiency in executing orders and obtaining the most favorable net
prices for the Funds. Most Fund transactions are with the issuer or with major
dealers acting for their own account and not as brokers. When consistent with
these objectives, business may be placed with broker-dealers who furnish
investment research services to the Adviser. Such research services would
include advice, both directly 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 issues, industries, securities, economic factors
and trends, portfolio strategy, and the performance of accounts.
The research services may allow the Adviser to supplement its own
investment research activities and enable the Adviser 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 broker-dealers who furnish research
services, the Adviser 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.
The Adviser has not entered into any formal or informal agreements with
any broker-dealers, 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 Adviser, except as noted below. The Adviser
may, from time to time, maintain an informal list of broker-dealers that will be
used as a general guide in the placement of Fund business in order to encourage
certain broker-dealers to provide the Adviser with research services, which the
Adviser 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 broker-dealers (discussed above) has been met, and,
accordingly, substantial deviations from the list could occur. While it is not
expected that any Fund will pay brokerage commissions, if it does, the Adviser
would authorize the Fund to pay an amount of commission for effecting a
securities
<PAGE>
transaction in excess of the amount of commission another broker-dealer would
have charged only if the Adviser determined in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and research
services provided by such broker-dealer, viewed in terms of either that
particular transaction or the overall responsibilities of the Adviser with
respect to the Funds.
No Fund effects brokerage transactions in its portfolio securities with
any broker-dealer affiliated directly or indirectly with its Adviser or
Distributor unless such transactions, including the frequency thereof, the
receipt of commissions payable in connection therewith, and the selection of the
affiliated broker-dealer effecting such transactions are not unfair or
unreasonable to the shareholders of the Fund, as determined by the Board of
Directors. Any transactions with an affiliated broker-dealer must be on terms
that are both at least as favorable to the Fund as such Fund can obtain
elsewhere and at least as favorable as such affiliate broker-dealer normally
gives to others.
When two or more clients of the Adviser 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 Adviser 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 will
produce better executions for each client.
Tax Free Obligations Fund and Treasury Obligations Fund (with respect
to Class A Shares) had not commenced operations as of September 30, 1996, the
end of FAF's most recent fiscal year. They therefore paid no commissions during
such year.
NET ASSET VALUE AND PUBLIC OFFERING PRICE
The method for determining the public offering price of Fund shares is
summarized in the Prospectus. Each Fund is open for business and its net asset
value per share is calculated on every day the New York Stock Exchange and the
Federal Reserve wire system are open for business. The New York Stock Exchange
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
New York Stock Exchange 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, the Funds' net asset value per share may be affected on days
when investors may not purchase or redeem shares.
VALUATION OF PORTFOLIO SECURITIES
The Funds' portfolio securities are valued on the basis of the
amortized cost method of valuation. This involves valuing an instrument at its
cost and thereafter assuming a constant amortization to maturity of any discount
or premium, regardless of the impact of fluctuating interest rates on the market
value of the instrument. While this method provides certainty in valuation, it
may result in periods during which value, as determined by amortized cost, is
higher or lower than the price a Fund would receive if it sold the instrument.
During periods of declining interest rates, the daily yield on shares of a Fund
computed as described above may tend to be higher than a like computation made
by a fund with identical investments utilizing a method of valuation based upon
market prices and estimates of market prices for all of its portfolio
instruments. Thus, if the use of amortized cost by a Fund resulted in a lower
aggregate portfolio value on a particular day, a prospective investor in the
Fund would be able to obtain a somewhat higher yield than would result from
investment in a fund utilizing solely market values, and existing investors in
the Fund would receive less investment income. The converse would apply in a
period of rising interest rates.
<PAGE>
The valuation of the Funds' portfolio instruments based upon their
amortized cost and the concomitant maintenance of the Funds' per share net asset
value of $1.00 is permitted in accordance with Rule 2a-7 under the 1940 Act,
under which the Funds must adhere to certain conditions. The Funds must maintain
a dollar-weighted average portfolio maturity of 90 days or less, purchase only
instruments having remaining maturities of 397 days or less from the date of
purchase, and invest only in securities determined by the Board of Directors to
present minimal credit risks and which are of high quality as determined by
major rating services, or, in the case of any instrument which is not so rated,
which are of comparable quality as determined by the Board of Directors. The
maturities of variable rate demand instruments held in the Funds' portfolio will
be deemed to be the longer of the demand period, or the period remaining until
the next interest rate adjustment, although stated maturities may be in excess
of one year. It is the normal practice of the Funds to hold portfolio securities
to maturity and realize par therefor unless such sale or other disposition is
mandated by redemption requirements or other extraordinary circumstances. The
Board of Directors must establish procedures designed to stabilize, to the
extent reasonably possible, the Funds' price per share as computed for the
purpose of sales and redemptions at a single value. It is the intention of the
Funds to maintain a per share net asset value of $1.00. Such procedures will
include review of the Funds' portfolio holdings by the Directors at such
intervals as they may deem appropriate, to determine whether the Funds' net
asset value calculated by using available market quotations deviates from $1.00
per share and, if so, whether such deviation may result in material dilution or
is otherwise unfair to existing shareholders. In the event the Board of
Directors determines that such a deviation exists, they will take such
corrective action as they regard as necessary and appropriate, such as selling
portfolio instruments prior to maturity to realize capital gains or losses or to
shorten average portfolio maturity, withholding dividends, or establishing a net
asset value per share by using available market quotations.
TAXES
Each Fund intends to elect each year to be taxed as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"), and, if it qualifies as such, it will not be subject to
federal income tax on the portion of its investment company taxable income and
net capital gain distributed to its shareholders. Each of the series of First
American is treated as a separate entity for federal income tax purposes. In
order to qualify as a regulated investment company for any taxable year, a Fund
must, in addition to certain other requirements, (1) derive at least 90% of its
gross income from dividends, interest, certain payments with respect to
securities loans, and gains from the sale or other disposition of stock or
securities or other income derived with respect to its business of investing in
such stock or securities; and (2) distribute at least 90% of its investment
company taxable income (net investment income and the excess of net short-term
capital gain over net long-term capital loss) for the taxable year.
To qualify as a regulated investment company, a Fund must also
diversify its holdings so that, at the close of each quarter of its taxable
year, (1) at least 50% of the value of its total assets consists of cash, cash
items, securities issued by the United States Government, its agencies and
instrumentalities, and the securities of other regulated investment companies,
and other securities limited generally with respect to any one issuer to not
more than 5% of the total assets of the Fund and not more than 10% of the
outstanding voting securities of such issuer, and (2) not more than 25% of the
value of its total assets is invested in the securities of any issuer (other
than securities issued by the United States Government, its agencies or
instrumentalities, or the securities of other regulated investment companies),
or in two or more issuers that the Fund controls and that are engaged in the
same or similar trades or businesses.
Each Fund expects to distribute net realized short-term gains (if any)
once each year, although it may distribute them more frequently, if necessary in
order to maintain the Funds' net asset value at $1.00 per share. Distributions
of net short-term capital gains are taxable to investors as ordinary income.
<PAGE>
Under the Code, each Fund is required to withhold 31% of reportable
payments (including dividends, capital gain distributions, if any, and
redemptions) paid to certain shareholders who have not certified that the social
security number or taxpayer identification number supplied by them is correct
and that they are not subject to backup withholding because of previous
underreporting to the IRS. These backup withholding requirements generally do
not apply to shareholders that are corporations or governmental units or certain
tax-exempt organizations.
Under the Code, interest on indebtedness incurred or continued to
purchase or carry shares of an investment company paying exempt-interest
dividends, such as Tax Free Obligations Fund, will not be deductible by a
shareholder in proportion to the ratio of exempt-interest dividends to all
dividends other than those treated as long-term capital gains. Indebtedness may
be allocated to shares of Tax Free Obligations Fund even though not directly
traceable to the purchase of such shares. Federal tax law also restricts the
deductibility of other expenses allocable to shares of Tax Free Obligations
Fund.
For shareholders who are or may become recipients of Social Security
benefits, exempt-interest dividends are includable in computing "modified
adjusted gross income" for purposes of determining the amount of Social Security
benefits, if any, that is required to be included in gross income. The maximum
amount of Social Security benefits includable in gross income is 85%.
The Code imposes requirements on certain tax-exempt bonds which, if not
satisfied, could result in loss of tax-exemption for interest on such bonds,
even retroactively to the date of issuance of the bonds. Proposals may be
introduced before Congress in the future, the purpose of which will be to
further restrict or eliminate the federal income tax exemption for certain
tax-exempt securities. Tax Free Obligations Fund cannot predict what additional
legislation may be enacted that may affect shareholders. The Fund will avoid
investment in such tax-exempt securities which, in the opinion of the Adviser,
pose a material risk of the loss of tax exemption. Further, if such tax-exempt
security in the Fund's portfolio loses its exempt status, the Fund will make
every effort to dispose of such investment on terms that are not detrimental to
the Fund.
<PAGE>
CALCULATION OF PERFORMANCE DATA
The Funds may issue current yield quotations. Simple yields are
computed by determining the net change, exclusive of capital changes, in the
value of a hypothetical pre-existing account having a balance of one share at
the beginning of a recent seven calendar day period, subtracting a hypothetical
charge reflecting deductions from shareholder accounts, and dividing the
difference by the value of the account at the beginning of the base period to
obtain the base period return, and then multiplying the base period return by
365/7. The resulting yield figure will be carried to at least the nearest
hundredth of one percent. Effective yields are computed by determining the net
change, exclusive of capital changes, in the value of a hypothetical
pre-existing account having a balance of one share at the beginning of a recent
seven calendar day period, subtracting a hypothetical charge reflecting
deductions from shareholder accounts, and dividing the difference by the value
of the account at the beginning of the base period to obtain the base period
return, and then compounding the base period return by adding 1, raising the sum
to a power equal to 365 divided by 7, and subtracting 1 from the result,
according to the following formula:
EFFECTIVE YIELD -- [(BASE PERIOD RETURN + 1)365/7]-1
When calculating the foregoing yield or effective yield quotations, the
calculation of net change in account value will include the value of additional
shares purchased with dividends from the original share and dividends declared
on both the original share and any such additional shares, and all fees, other
than nonrecurring accounts or sales charges that are charged to all shareholder
accounts in proportion to the length of the base period. Realized gains and
losses from the sale of securities and unrealized appreciation and depreciation
are excluded from the calculation of yield and effective yield.
From time to time, a Fund may advertise its "yield" and "effective
yield." These yield figures are based upon historical earnings and are not
intended to indicate future performance. The "yield" of a Fund refers to the
income generated by an investment in the Fund over a seven-day period (which
period will be stated in the advertisement). This income is then "annualized,"
that is, the amount of income generated by the investment during that week is
assumed to be generated each week over a 52-week period and is shown as a
percentage of the investment. The "effective yield" is calculated similarly but,
when annualized, the income earned by an investment in the Fund is assumed to be
reinvested. The "effective yield" will be slightly higher than the "yield"
because of the compounding effect of this assumed reinvestment.
Tax Free Obligations Fund may also advertise its tax equivalent yield.
This yield will be computed by dividing that portion of the seven-day yield or
effective yield of the Fund (computed as set forth above) which is tax-exempt by
one minus a stated income tax rate and adding the product of that portion, if
any, of the yield of the Fund that is not tax-exempt.
Yield information may be useful in reviewing the Funds' performance and
for providing a basis for comparison with other investment alternatives.
However, yields fluctuate, unlike investments which pay a fixed yield for a
stated period of time. Yields for the Funds are calculated on the same basis as
other money market funds as required by applicable regulations. Investors should
give consideration to the quality and maturity of the portfolio securities of
the respective investment companies when comparing investment alternatives.
Investors should recognize that in periods of declining interest rates
the Funds' yields will tend to be somewhat higher than prevailing market rates,
and in periods of rising interest rates the Funds' yields will tend to be
somewhat lower. Also, when interest rates are falling, the inflow of net new
money to a Fund from the continuous sale of its shares will likely be invested
in portfolio instruments producing lower yields than the balance of the Funds'
portfolio, thereby reducing the current yield of the Fund. In periods of rising
interest rates, the opposite can be expected to occur.
<PAGE>
Should a Fund incur or anticipate any unusual expense, loss, or
depreciation which would adversely affect its net asset values per share or
income for a particular period, the Directors would at that time consider
whether to adhere to the present dividend policy described above or revise it in
light of the then prevailing circumstances. For example, if a Fund's net asset
value per share were reduced, or were anticipated to be reduced, below $1.00,
the Directors may suspend further dividend payments until net asset value
returned to $1.00. Thus, such expenses or losses or depreciation may result in
the investor receiving upon redemption a price per share lower than that which
the investor paid.
COMMERCIAL PAPER AND BOND RATINGS
COMMERCIAL PAPER RATINGS
Standard & Poor's Corporation ("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 defined 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 either overwhelming or very strong. Those
issues determined to possess overwhelming safety characteristics will be denoted
with a plus sign designation.
Moody's Investors Service, Inc. ("Moody's") commercial paper ratings
are opinions of the ability of the issuers to repay punctually 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 note is
a valid obligation of a rated issuer or issued in conformity with any applicable
law. Moody's 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
CORPORATE BOND RATINGS
Standard & Poor's ratings for corporate bonds include the following:
Bonds 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.
Bonds rated "AA" have a very strong capacity to pay interest and repay
principal and differ from the highest-rated issues only in small
degree.
Moody's ratings for corporate bonds include the following:
Bonds 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 by an
exceptionally stable margin, and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong
position of such issues.
<PAGE>
Bonds rated "Aa" are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities, or
fluctuation of protective elements may be of greater amplitude, or
there may be other elements present that make the long-term risks
appear somewhat larger than the Aaa securities.
<PAGE>
FIRST AMERICAN FUNDS, INC.
PART C -- OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Not applicable.
(b) Exhibits
(1) (a) Amended and Restated Articles of Incorporation, as
amended through January 20, 1995. (Incorporated by
reference to Exhibit (1) to Post-Effective Amendment
No. 22.)
* (1) (b) Certificate of Designation, dated October 2, 1997.
* (2) Bylaws, as amended through September 12, 1997.
(3) Not applicable.
(4) Not applicable.
(5) Investment Advisory Agreement, dated January 20, 1995, between
the Registrant and First Bank National Association.
(Incorporated by reference to Exhibit (5) to Post-Effective
Amendment No. 22.)
(6) (a) Not applicable.
(6) (b) Distribution Agreement relating to the Class A, Class
C and Class D Shares, dated January 1, 1995, between
the Registrant and SEI Financial Services Company.
(Incorporated by reference to Exhibit (6)(b) to
Post-Effective Amendment No. 22.)
(7) Not applicable.
(8) (a) Custodian Agreement dated September 20, 1993, between
the Registrant and First Trust National Association.
(Incorporated by reference to Exhibit (8)(a) to
Post-Effective Amendment No. 22.)
(8) (b) Compensation Agreement dated January 20, 1995,
pursuant to Custodian Agreement. (Incorporated by
reference to Exhibit (8)(b) to Post-Effective
Amendment No. 22.)
(9) (a) Transfer Agency Agreement dated March 31, 1994,
between the Registrant and Supervised Service
Company. [superseded] (Incorporated by reference to
Exhibit (9)(a) to Post-Effective Amendment No. 22.)
(9) (b) Assignment of Transfer Agency Agreement to DST
Systems, Inc. [superseded] (Incorporated by reference
to Exhibit (9)(b) to Post-Effective Amendment No.
22.)
(9) (c) Administration Agreement dated January 1, 1995
between the Registrant and SEI Financial Management
Corporation. (Incorporated by reference to Exhibit
(9)(c) to Post-Effective Amendment No. 22.)
<PAGE>
(9) (d) Form of Transfer Agency Agreement dated as of
October 1, 1996, between Registrant and DST Systems,
Inc. (Incorporated by reference to Exhibit 9(d) to
Post-Effective Amendment No. 23)
* (9) (e) Sub-Administration Agreement, dated July 1, 1997,
between SEI and First Bank National Association.
* (9) (f) Amended and Restated Administrative Agreement, dated
July 1, 1997, by and between the Registrant and SEI
Investments Management Corporation.
(10) (a) Opinion and Consent of Dorsey & Whitney, dated
January 26, 1982. (Incorporated by reference to
Exhibit (10)(a) to Post-Effective Amendment No. 22.)
(10) (b) Opinion and Consent of William N. Koster, Esq.,
dated November 5, 1981. (Incorporated by reference to
Exhibit (10)(b) to Post-Effective Amendment No. 22.)
(11) (a) Not applicable.
(11) (b) Opinion and Consent of Melissa R. Fogelberg,
dated February 6, 1985. (Incorporated by reference to
Exhibit (11)(b) to Post-Effective Amendment No. 22.)
(11) (c) Opinion and Consent of Dorsey & Whitney, dated
November 25, 1991. (Incorporated by reference to
Exhibit (11)(c) to Post-Effective Amendment No. 22.)
(12) Not applicable.
(13) Letter of Investment Intent, dated November 3, 1981.
(Incorporated by reference to Exhibit (13) to Post-Effective
Amendment No. 22.)
(14) (a) 401(k) Prototype Basic Plan Document # 02 (1989
Restatement), including Amendment Nos. 1, 2, and 3
and sample Adoption Agreement. (incorporated by
reference to Exhibit 14(a) to Post-Effective
Amendment No. 23)
(14) (b) Defined Contribution Prototype Basic Plan Document #
01 (1989 Restatement), including Amendment Nos. 1 and
2 and sample Adoption Agreement. (incorporated by
reference to Exhibit 14(b) to Post-Effective
Amendment No. 23)
(14) (c) IRA Applications and Documentation. (incorporated by
reference to Exhibit 14(c) to Post-Effective
Amendment No. 23)
(15) (a) Distribution Plan for Class A Shares. (Incorporated
by reference to Exhibit (15)(a) to Post-Effective
Amendment No. 22.)
(15) (b) Not applicable.
(15) (c) Distribution Plan for Class D Shares. (Incorporated
by reference to Exhibit (15)(c) to Post-Effective
Amendment No. 22.)
(15) (d) Not applicable.
(16) Not applicable.
(17) Not applicable.
(18) Multiple Class Plan Pursuant to Rule 18f-3. (Incorporated by
reference to Exhibit (18) to Post-Effective Amendment No. 22.)
<PAGE>
(19) (a) Powers of Attorney, dated September 30, 1994.
(Incorporated by reference to Exhibit (19) to
Post-Effective Amendment No. 22.)
(19) (b) Power of attorney of Director Hunter.
(Incorporated by reference to Exhibit 19(b) to
Post-Effective Amendment No. 23)
(19) (c) Consent to being named and power of attorney of
director nominee Spies. (Incorporated by reference to
Exhibit 19(c) to Post-Effective Amendment No. 23)
- --------------------------
* Filed herewith
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not applicable.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
The following table sets forth the number of holders of shares of each
series and class of First American Funds, Inc. as of July 11, 1997:
Number of
Fund Title of Class Record Holders
---- -------------- --------------
Prime Obligations Fund Class A 734
Prime Obligations Fund Class B 218
Prime Obligations Fund Class C 11
Prime Obligations Fund Class D 3
Treasury Obligations Fund Class A 0
Treasury Obligations Fund Class C 5
Treasury Obligations Fund Class D 2
Government Obligations Fund Class C 4
Government Obligations Fund Class D 3
Tax Free Obligations Fund Class A 0
Tax Free Obligations Fund Class C 0
Tax Free Obligations Fund Class D 0
ITEM 27. 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
<PAGE>
circumstances, reasonably believed that the conduct was not opposed to the best
interests of the corporation.
The Registrant undertakes that no indemnification or advance will be
made unless it is consistent with Sections 17(h) or 17(i) of the Investment
Company Act of 1940, as now enacted or hereafter amended, and Securities and
Exchange Commission rules, regulations, and releases (including, without
limitation, Investment Company Act of 1940 Release No. 11330, September 2,
1980).
Insofar as the indemnification for liability arising under the
Securities Act of 1933, as amended, may be permitted to directors, officers, and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in such Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer, or
controlling person of the Registrant in the successful defense of any action,
suit, or proceeding) is asserted by such director, officer, or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933, as amended, and will be governed by the final
adjudication of such issue.
<PAGE>
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Information on the business of the Registrant's investment adviser,
First Bank National Association (the "Manager"), is described in the section of
each series' Statement of Additional Information, filed as part of this
Registration Statement, entitled "Investment Advisory and Other Services." The
directors and officers of the Manager 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 MANAGER 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.*
Daniel C. Rohr Director and Executive Vice President Executive Vice President, Commercial
Banking Group of U.S. Bancorp.*
J. Robert Hoffmann Director, Chief Credit Officer Executive Vice President and Chief
and Executive Vice President Credit Officer of U.S. Bancorp.*
Lee R. Mitau Director, General Counsel, Executive Vice President, Secretary,
Executive Vice President and Secretary and General Counsel of U.S. Bancorp;
prior to October 1995 partner in
Dorsey & Whitney LLP*
Susan E. Lester Director, Executive Vice President and Executive Vice President and Chief
Chief Financial Officer Financial Officer of FBS; prior to
December 1995 executive vice president
and chief financial officer of Shawmut
National Corporation.*
Larry S. Crawford Executive Vice President and General --*
Manager, Central Banking Group
Robert J. Anderson Executive Vice President --*
John M. Murphy, Jr. Executive Vice President Executive Vice President of U.S. Bancorp.*
Robert H. Sayre Executive Vice President Executive Vice President, Human
Resources.*
- ---------------
* Address: 601 Second Avenue South, Minneapolis, Minnesota 55402.
</TABLE>
<PAGE>
ITEM 29. PRINCIPAL UNDERWRITERS:
(a) Furnish the name of each investment company (other than the
Registrant) for which each principal underwriter currently distributing
securities of the Registrant also acts as a principal under-writer, 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 International Trust, Stepstone Funds, The Advisors' Inner Circle Fund,
Pillar Funds, CUFund, STI Classic Funds, CoreFunds, Inc., First American
Investment Funds, Inc., The Arbor Fund, 1784 Funds, Marquis Funds, Morgan
Grenfell Investment Trust, The PBHG Funds, Inc., Inventor Funds, Inc., The
Achievement Funds Trust, Insurance Investment Products Trust, Bishop Street
Funds, CrestFunds, Inc., STI Classic Variable Trust, ARK Funds, Monitor Funds,
FMB Funds, Inc., SEI Asset Allocation Trust, Turner Funds, and First American
Strategy 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, January 30, 1991, November 14, 1991, February 28, 1992, May 1, 1992,
May 29, 1992, October 30, 1992, November 1, 1992, January 28, 1993, June 1,
1993, August 17, 1993, January 3, 1994, August 1, 1994, December 27, 1994,
December 30, 1994, January 27, 1995, March 1, 1995, August 18, 1995, November 1,
1995, January 11, 1996, March 1, 1996, April 1, 1996, April 29, 1996, and
October 1, 1996, 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").
(b) Furnish the information required by the following table with
respect to each director, officer or partner of each principal underwriter named
in the answer to Item 21 of Part B. 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> <C>
Alfred P. West, Jr. Director, Chairman & Chief --
Executive Officer
Henry H. Greer Director, President & Chief --
Operating Officer
Carmen V. Romeo Director, Executive Treasurer, Assistant Secretary
Vice President & Treasurer
Gilbert L. Beebower Executive Vice President --
Richard B. Lieb Executive Vice President, President -
Investment Services Division --
Leo J. Dolan, Jr. Senior Vice President --
Carl A. Guarino Senior Vice President --
Jerome Hickey Senior Vice President --
David G. Lee Senior Vice President President
William Maddon Senior Vice President --
A. Keith McDowell Senior Vice President --
Dennis J. McGonigle Senior Vice President --
Hartland J. McKeown Senior Vice President --
James V. Morris Senior Vice President --
Steven Onofrio Senior Vice President --
Kevin P. Robins Senior Vice President, General Counsel Vice President & Assistant Secretary
& Secretary
<PAGE>
NAME POSITIONS AND OFFICES WITH UNDERWRITER POSITIONS AND OFFICES WITH REGISTRANT
- ---- -------------------------------------- -------------------------------------
Robert Wagner Senior Vice President --
Patrick K. Walsh Senior Vice President --
Kenneth Zimmer Senior Vice President --
Ronert Aller Vice President --
Steve Bendinell Vice President --
Marc H. Cahn Vice President & Assistant Secretary Vice President & Assistant Secretary
Gordon W. Carpenter Vice President --
Todd Cipperman Vice President & Assistant Secretary --
Robert Crudup Vice President & Managing Director --
Ed Daly Vice President --
Jeff Drennen Vice President --
Mick Duncan Vice President & Team Leader --
Vic Galef Vice President & Managing Director --
Kathy Heilig Vice President --
Larry Hutchison Vice President --
Michael Kantor Vice President --
Samuel King Vice President --
Kim Kirk Vice President & Managing Director --
Donald H. Korytowski Vice President --
John Krzeminski Vice President & Managing Director --
Robert S. Ludwig Vice President & Team Leader --
Vicki Malloy Vice President & Team Leader --
Jack May Vice President --
Carolyn McLaurin Vice President & Managing Director --
Barbara Moore Vice President & Managing Director --
W. Kelso Morrill Vice President --
Barbara A. Nugent Vice President & Assistant Secretary --
Sandra K. Orlow Vice President & Assistant Secretary Vice President & Assistant Secretary
Donald Pepin Vice President & Managing Director --
Larry Pokora Vice President --
Kim Rainey Vice President --
Paul Sachs Vice President --
Mark Samuels Vice President & Managing Director --
Steve Smith Vice President --
Daniel Spaventa Vice President --
Kathryn L. Stanton Vice President & Assistant Secretary Vice President & Assistant Secretary
Wayne M. Withrow Vice President & Managing Director --
William Zawaski Vice President --
James Dougherty Director of Brokerage Services --
</TABLE>
<PAGE>
ITEM 30. 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 31. MANAGEMENT SERVICES
Not applicable.
ITEM 32. UNDERTAKINGS
Registrant undertakes to call a meeting of Shareholders for the purpose
of voting upon the question of removal of a Director(s) when requested in
writing to do so by the holders of at least 10% of Registrant's outstanding
shares and in connection with such meetings to comply with the provisions of
Section 16(c) of the Investment Company Act of 1940 relating to Shareholder
communications.
Registrant, on behalf of Tax Free Obligations Fund and Treasury
Obligations Fund (with respect to Class A Shares), undertakes to file a
post-effective amendment, using financial statements which need not be
certified, within four to six months from the date such funds commence
operations.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, as amended, the Registrant has duly caused this
Post-Effective Amendment to its Registration Statement No. 2-74747 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Oaks, Commonwealth of Pennsylvania, on the 7th day of October, 1997.
FIRST AMERICAN FUNDS, INC.
ATTEST: /s/ Stephen G. Meyer By /s/ Kathryn L. Stanton
-------------------- ----------------------------------
Stephen G. Meyer Kathryn L. Stanton, Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below by the following
persons in the capacity and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Stephen G. Meyer Controller (Principal **
- --------------------- Financial and Accounting
Stephen G. Meyer Officer)
* Director **
- ---------------------
Robert J. Dayton
* Director **
- ---------------------
Andrew M. Hunter III
* Director **
- ---------------------
Robert L. Spies
* Director **
- ---------------------
Leonard W. Kedrowski
* Director **
- ---------------------
Joseph D. Strauss
* Director **
- ---------------------
Virginia L. Stringer
* Director **
- ---------------------
Gae B. Veit
* By: /s/ Kathryn L. Stanton
-----------------------
Kathryn L. Stanton
Attorney in Fact
** October 7, 1997.
EXHIBIT 1(b)
FIRST AMERICAN FUNDS, INC.
CERTIFICATE OF DESIGNATION
OF
SERIES F COMMON SHARES, CLASSES ONE, TWO, THREE AND FOUR,
AND OF
SERIES D, CLASS THREE COMMON SHARES
PURSUANT TO MINNESOTA STATUTES,
SECTION 302A.401, SUBD. 3
The undersigned, being the duly elected Secretary of First American
Funds, Inc., a Minnesota corporation (the "Fund"), 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 September 12,
1997:
APPROVAL OF CREATION AND DESIGNATION OF
SERIES F COMMON SHARES, CLASSES ONE, TWO, THREE AND FOUR
WHEREAS, Article 5 of the Amended and Restated Articles of
Incorporation of the Fund provides that previously undesignated shares of the
Fund may be issued in such series, and such classes within such 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 and classes of common shares as may be adopted from time to time by
the Board of Directors of the Fund pursuant to the authority vested by said
Article 5 in the Board of Directors.
WHEREAS, pursuant to said authority, the Board of Directors of the Fund
wishes to designate a new series of shares to be known as Series F Common
Shares, and to designate Class One, Class Two, Class Three and Class Four Shares
within such Series.
NOW, THEREFORE, BE IT RESOLVED, that 100,000,000,000 previously
undesignated shares of the Fund may be issued in the series of common shares
hereby designated as "Series F Common Shares"; of such Series F Common Shares,
20,000,000,000 shares may be issued in the class hereby designated as "Series F,
Class One Common Shares"; 20,000,000,000 shares may be issued in the class
hereby designated as "Series F, Class Two Common Shares"; 20,000,000,000 shares
may be issued in the class hereby designated as "Series F, Class Three Common
Shares"; 20,000,000,000 shares may be issued in the class hereby designated as
"Series F, Class Four Common Shares"; and the balance of 20,000,000,000 Series F
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
<PAGE>
time by the Board of Directors of the Fund pursuant to the authority hereby
vested in the Board of Directors.
RESOLVED, FURTHER, that the Series F, Class One, Class Two, Class Three
and Class Four Common Shares designated by these resolutions shall have the
relative rights and preferences set forth in the Amended and Restated Articles
of Incorporation of the Fund. As provided in Article 5 of such Amended and
Restated Articles of Incorporation, the Series F, Class One, Class Two, Class
Three and Class Four Common Shares designated by these resolutions may be
subject to such charges and expenses (includin 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. ("NASD"), 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 Fund in accordance, to the extent applicable, with the 1940
Act, which charges and expenses may differ among classes and 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.
RESOLVED, FURTHER, that unless and until the Board of Directors selects
different names for the classes of shares designated by these resolutions, they
shall be known by the following names:
Series F, Class One: Tax Free Obligations Fund, "Class A" or "Retail
Class"
Series F, Class Two: Tax Free Obligations Fund, "Class B" or "CDSC
Class"
Series F, Class Three: Tax Free Obligations Fund, "Class C" or
"Institutional Class"
Series F, Class Four: Tax Free Obligations Fund, "Class D" or
"Corporate Trust Class"
APPROVAL OF DESIGNATION OF
SERIES D, CLASS THREE COMMON SHARES
WHEREAS, Article 5(d) of the Amended and Restated Articles of
Incorporation of the Fund provides for the designation of 100,000,000,000 of the
Fund's shares as "Series D Common Shares" and for the designation, within such
series, of 20,000,000,000 of such shares as "Series D, Class One Common Shares"
and of 20,000,000,000 of such shares as "Series D, Class Two Common Shares," and
provides further that the balance of 60,000,000,000 of such 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
<PAGE>
resolutions providing for the issue of such class as may be adopted from time to
time by the Board of Directors of the Fund pursuant to the authority thereby
vested in the Board of Directors.
WHEREAS, pursuant to said authority, the Board of Directors of the Fund
wishes to designate a new class of Series D Common Shares to be known as Series
D, Class Three Common Shares.
NOW, THEREFORE, BE IT RESOLVED, that 20,000,000,000 previously
undesignated Series D Common Shares may be issued in the class hereby designated
as "Series D, Class Three Common Shares."
RESOLVED, FURTHER, that the Series D, Class Three Common Shares
designated by these resolutions shall have the relative rights and preferences
set forth in the Amended and Restated Articles of Incorporation of the Fund. As
provided in Article 5 of such Amended and Restated Articles of Incorporation,
the Series D, Class Three 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. ("NASD"), 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 Fund in accordance, to the extent applicable, with the 1940
Act, which charges and expenses may differ among classes and 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.
RESOLVED, FURTHER, that unless and until the Board of Directors selects
different names for the class of shares designated by these resolutions, it
shall be known by the following name:
Series D, Class Three: Treasury Obligations Fund, "Class A" or "Retail
Class"
IN WITNESS WHEREOF, the undersigned has signed this Certificate of
Designation this 2nd day of October, 1997.
/s/ Michael J. Radmer
-----------------------------------------
Michael J. Radmer, Secretary
EXHIBIT 2
As approved at Board of Directors Meeting on December 4, 1990 Amendment to
Section 1.01 approved at Board of Directors Meeting on 6/1/93; Amendments to
Article IV approved at Board of Directors Meeting on 9/7/93; Amendments to
Section 1.01 approved at Board of Directors Meeting on 12/7/94; Amendments to
Section 1.01 approved at Board of Directors meeting on September 12, 1997.
BYLAWS
OF
FIRST AMERICAN FUNDS, INC.
ARTICLE I.
OFFICES, CORPORATE SEAL
Section 1.01. Name. The name of the corporation is "FIRST
AMERICAN FUNDS, INC." The names of the series represented by the series of
shares designated in the corporation's articles of incorporation shall be as
follows:
Series B, Class One: Prime Obligations Fund, "Class C" or
"Institutional Class."
Series B, Class Two: Prime Obligations Fund, "Class D" or
"Corporate Trust Class."
Series B, Class Three: Prime Obligations Fund, "Class A" or
"Retail Class."
Series B, Class Four: Prime Obligations Fund, "Class B" or
"CDSC Class."
Series C, Class One: Government Obligations Fund, "Class C" or
"Institutional Class."
Series C, Class Two: Government Obligations Fund, "Class D" or
"Corporate Trust Class."
Series C, Class Three: Government Obligations Fund, "Class A"
or "Retail Class."
Series D, Class One: Treasury Obligations Fund, "Class C" or
"Institutional Class."
Series D, Class Two: Treasury Obligations Fund, "Class D" or
"Corporate Trust Class."
Series D, Class Three: Treasury Obligations Fund, "Class A" or
"Retail Class."
Series F, Class One: Tax Free Obligations Fund, "Class A" or
"Retail Class"
Series F, Class Two: Tax Free Obligations Fund, "Class B" or
"CDSC Class"
Series F, Class Three: Tax Free Obligations Fund, "Class C" or
"Institutional Class"
Series F, Class Four: Tax Free Obligations Fund, "Class D" or
"Corporate Trust Class"
Section 1.02. 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.
<PAGE>
Section 1.03. 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.
Section 1.04. Corporate Seal. The corporate seal shall be
circular in form and shall have inscribed thereon the name of the corporation
and the word "Minnesota" and the words "Corporate Seal." The form of the seal
shall be subject to alteration by the Board of Directors, and the seal may be
used by causing it or a facsimile to be impressed or affixed or printed or
otherwise reproduced. Any officer or director of the corporation shall have
authority to affix the corporate seal of the corporation to any document
requiring the same.
ARTICLE II.
MEETINGS OF SHAREHOLDERS
Section 2.01. 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 shareholder shall be held at ten o'clock a.m.
Section 2.02. 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.
Section 2.03. 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 2.04. 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
<PAGE>
is present, the shareholders may continue to transact business until adjournment
notwithstanding the withdrawal of enough shareholders to leave less than a
quorum.
Section 2.05. 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 classes or
series of the corporation, then only the shareholders of such classes or series
are entitled to vote on such matter(s).
Section 2.06. 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.
Section 2.07. 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 2.08. Notice of Meetings. There shall be mailed to
each shareholder, 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 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.
<PAGE>
Section 2.09. 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 no 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 classes or series of the
corporation, then only shareholders of such classes or series are entitled to
vote on such action.
ARTICLE III.
DIRECTORS
Section 3.01. 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 las 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 3.02. 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 b a plurality of the votes validly
cast at such election. Each holder of shares of each class or series of stock of
the corporation shall be entitled to vote for directors and shall have equal
voting power for each share of each class or series of the corporation.
<PAGE>
Section 3.03. General Powers.
(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 3.04. Power to Declare Dividends.
(a) The Board of Directors, from time to time as they may deem
advisable, may declare and pay dividends in cash or other property of the
corporation, out of any source available for dividends, to the shareholders of
each class or series of stock of the corporation according to their respective
rights and interests in the investment portfolio of the corporation issuing such
class or series 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 class or series (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 class or series 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 3.04,
the Board of Directors may at any time declare and distribute pro rata among the
shareholders of each class or series of stock a "stock dividend" out of the
authorized
<PAGE>
but unissued shares of stock of each class or series, including any shares
previously purchased by a class or series of the corporation.
Section 3.05. 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 3.06. Calling Meetings, Notice. A director may call a
board meeting by giving ten (10) 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.
Section 3.07. 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 3.08. 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 3.09. 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 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
<PAGE>
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 3.11 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 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.
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
<PAGE>
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.
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 4.01. 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.
Section 4.02. 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
President 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 4.03. Resignation. Any officer (or the Chairman of the
Board of Directors) may resign his office at any time by delivering a written
resignation to the corporation. Unless otherwise specified therein, such
resignation shall take effect upon delivery.
Section 4.04. 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.
<PAGE>
Section 4.05. 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 Chairma 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 4.06. 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 4.07. 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 4.08. 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
directors. He shall keep the seal of the corporation and shall affix the same to
any instrument requiring it and may, when necessary, attest the seal by his
signature. He shall perform such other duties as may, from time to time, be
prescribed by the Board of Directors or by the President.
Section 4.09. 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
<PAGE>
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 5.01. Certificate for Shares.
(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
<PAGE>
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 5.08.
(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 5.02. 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 classes or series 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 of an amount transferred from
surplus to stated capital 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 alloted. 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 5.03. 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
<PAGE>
Exchange Commission exists, making disposal of portfolio securities or valuation
of net assets of the corporation not reasonably practicable.
If following a redemption request by any shareholder of this
corporation, 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 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 5.04. 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 5.05. 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 5.06. 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 b 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 5.07. Transfer Regulations. The shares of stock of the
corporation may be freely transferred, and the Board of Directors may from time
to
<PAGE>
time adopt rules and regulations with reference to the method of transfer of
shares of stock of the corporation.
Section 5.08. 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.
ARTICLE VI.
DIVIDENDS
Section 6.01. The net investment income of each class or
series 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
of declaration.
It shall be the policy of each class or series of the
corporation to qualify for and elect the tax treatment applicable to regulated
investment companies under the Internal Revenue Code, so that such class or
series 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 7.01. 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:
(1) a share register not more than one year old,
containing the names and addresses of the
shareholders and the number and classes or series of
shares held by each shareholder; and
<PAGE>
(2) a record of the dates on which certificates or
transaction statements representing shares were
issued.
Section 7.02. 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:
(1) records of all proceedings of shareholders for the
last three years;
(2) records of all proceedings of the Board of Directors
for the last three years;
(3) its articles and all amendments currently in effect;
(4) its bylaws and all amendments currently in effect;
(5) financial statements required by Minnesota Statutes
Section 302A.463 and the financial statement for the
most recent interim period prepared in the course of
the operation of the corporation for distribution to
the shareholders or to a governmental agency as a
matter of public record;
(6) reports made to shareholders generally within the
last three years;
(7) a statement of the names and usual business addresses
of its directors and principal officers;
(8) any shareholder voting or control agreements of which
the corporation is aware; and
(9) such other records and books of account as shall be
necessary and appropriate to the conduct of the
corporate business.
Section 7.03. 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.
<PAGE>
(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 at a meeting held within thirty (30) days before
or after the beginning of the fiscal year of the corporation or before the
regular shareholders' meeting in that year. Such 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, eithe 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 7.04. Fiscal Year. The fiscal year of the corporation
shall be determined by the Board of Directors.
ARTICLE VIII.
INDEMNIFICATION OF CERTAIN PERSONS
Section 8.01. 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
Section 9.01. 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
<PAGE>
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 and under its
corporate seal, or otherwise, 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
10.01. The net asset value per share of each class or series
of stock of the corporation shall be determined in good faith by or under
supervision of the officers of the corporation as authorized 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
Section 11.01. 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.
<PAGE>
ARTICLE XII.
AMENDMENTS
Section 12.01. 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 13.01. 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 13.02. Article and Section Titles. The titles of
Sections and Articles 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.
EXHIBIT 9(e)
AGREEMENT
This AGREEMENT is entered into as of the 1st day of July, 1997, by and
between SEI Investments Management Corporation, a Delaware corporation ("SEI"),
and First Bank National Association, a national banking association ("FBNA").
WITNESSETH
WHEREAS, SEI serves as administrator to First American Funds, Inc.
("FAF"), First American Investment Funds, Inc. ("FAIF"), and First American
Strategy Funds, Inc. ("FASF," and together with FAF and FAIF, the "Funds"),
pursuant to three separate Administration Agreements; one entered into by SEI
and FAF and dated January 1, 1995 (the "FAF Agreement"); one entered into by SEI
and FAIF and dated January 1, 1995 (the "FAIF Agreement"); and one entered into
by SEI and FASF and dated October 1,1996 (the "FASF Agreement," and together
with the FAF Agreement and FAIF Agreement, the "Administration Agreements"); and
WHEREAS, FBNA serves as investment adviser to each of the Funds; and
WHEREAS, FBNA and SEI desire to enter into this Agreement to set forth
the terms and conditions relating to certain matters, including term of the
Administration Agreements relating to SEI's services as administrator to such
portfolios of the Funds ("Portfolios").
Section 1. Contract Terms. FBNA will recommend to the Board of Directors of each
Fund that the Board approve, and use its best efforts to cause such approval of,
Amended and Restated Administration Agreements, in the forms attached hereto as
Exhibit A, that will contain the following provisions:
(a) The initial term of each Administration Agreement will be
restated to extend the initial term through December 31, 1999.
(b) The initial term of each Administration Agreement will be
automatically extended as of January 1, 1999 for one successive
one-year period (i.e., through December 31, 2000) if SEI has met or
exceeded the service level standards agreed to by FBNA and SEI (and
attached hereto as Exhibit B) (the "Service Standards") on no less than
90% of such Service Standards on a cumulative basis during the period
commencing July 1, 1997 and ending on December 31, 1998. Calculation of
compliance with the Service Standards will be measured monthly 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 Standards events to be completed for such month
("Service Level Percentage"). SEI will calculate the compliance
percentage, and the investment adviser for the Portfolios' will review
such calculation on a monthly basis. Any disagreements will be reported
to the Board of Directors of the Funds for resolution, in the Board's
good faith judgement.
(c) The Administration Agreements will be terminable by the
Funds on written notice delivered to SEI: (i) for any reason on six
months prior written notice to SEI; (ii) in the event of SEI's
bankruptcy or insolvency; (iii) in the event of a conviction of SEI for
corporate criminal activity; (iv) if in any consecutive six-month
period the average cumulative Service Level Percentage is less than
50%; (v) if SEI has materially failed to perform its responsibilities
as administrator under the Administration Agreements, and such material
failure has not been cured within 45 days after written notice is
received by SEI specifying the nature of the failure; or (vi) by
delivery to SEI of written notice of termination delivered no less than
180 days prior to the end of the Initial Term (as extended
<PAGE>
if applicable), provided that if such notice is not so delivered, the
Administration Agreements will automatically continue for one
additional one-year term.
(d) The Administration Agreements will be terminable by SEI by
delivery to the Portfolios of written notice: (i) if the Portfolios
have materially failed to perform their responsibilities under the
Administration Agreements, and such material failure has not been cured
within 45 days after written notice is received by the Portfolios
specifying the nature of the failure. (ii) 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),
provided that if such notice is not so delivered, the Administration
Agreements will automatically continue for one additional one-year
term.
(e) The fees payable under the Administration Agreements will
remain as set forth in the current Administration Agreements for the
term (including any extension thereof through December 31, 2000)
thereof. SEI agrees to waive the $50,000 annual administration minimum
fee for the first 30 created portfolios aggregated across all Funds
(based on date of inception of portfolios in existence on July 1, 1997
and thereafter adding newly created portfolios, and subtracting any
portfolios that are subsequently closed or merged); and for all
portfolios thereafter, in no event shall the annual administrative fee
for any portfolio be less than $50,000.
Section 2. Fees Payable to FBNA. For so long as the Administration Agreements
remain in effect, SEI will make available for payment to FBNA an amount, based
on the aggregate average net assets of the Funds, calculated daily and paid
monthly, at the following annual rates and for the time frames specified:
(a) Until the later to occur of January 1, 1998 and the first full
month that the Funds' average net assets are more than $19
billion:
Aggregate Net Assets Payment
-------------------- -------
$0 - $8 billion 1.25 bp
$8 billion - $16 billion (.25) bp
$16 billion - $26 billion 2.5 bp
over $26 billion 3.0 bp
(b) Thereafter:
Aggregate Net Assets Payment
-------------------- -------
$0 - $8 billion 2.9 bp
$8 billion - $16 billion 1.4 bp
$16 billion - $26 billion 2.5 bp
over $26 billion 3.0 bp
The payment from the period July 1,1997 through December 31, 1997 will be paid
to FBNA as a reimbursement of Fund-related marketing expenses pursuant to the
Agreement attached hereto as Exhibit C. This Agreement will also include
reimbursement for Fund-related marketing expenses for the period July 1, 1996
through June 30, 1997 in an amount not to exceed $500,000. Commencing January 1,
1998, SEI will appoint FBNA (or its designee) as sub- administrator for the
Funds, pursuant to a Sub-Administration Agreement in the form attached hereto as
Exhibit D, and the payments described in the table above will be paid as sub-
administration fee. FBNA acknowledges and agrees that these payments must be
disclosed to the Boards of Directors of the Funds in connection with the annual
reapproval of the advisory agreements between the Funds and FBNA (or any
affiliated successor advisor).
<PAGE>
Section 3. Termination Payment.
(a) In the event of a Trigger Event (as defined below), then
FBNA or any of its affiliates shall, immediately upon demand by SEI,
make a one-time cash payment to SEI equal to the net present value of
the sum of (i) SEI's "Gross Profits" (as defined below) that SEI would
have realized through the end of the then current terms on the
Administration Agreements then in effect between SEI and any of the
portfolios of the Funds (assuming for purposes of computing this
payment that all Administration Agreements remained in effect through
the end of the then current terms whether or not they actually remain
in effect), based on the administration fees then in effect under such
Administration Agreements, plus (ii) any fixed direct costs incurred by
SEI in support of the Funds, which costs can not be terminated on less
than 30 days notice. For purposes of this Section 3, "Gross Profits"
shall mean gross revenue, plus costs to re-deploy or terminate these
resources (e.g., retention and/or severance) less marketing budget,
subadministration fees and committed marketing reimbursements, fund
accounting and administration costs and SEI-employed wholesaler costs.
For purposes of this Section 3, the net present value shall be
determined using the following assumptions: (i) an assumed factor equal
to the three year Treasury note rate in effect at the time of the
Trigger Event plus 300 basis points; (ii) assumed assets equal to the
average of the month-end net assets of the Funds for the six-month
period immediately preceding the Trigger Event.
(b) For purposes of this Section 3, "Trigger Event" means any
of the following:
(i) SEI is replaced as administrator to perform all
or part of the services provided by SEI to any of the Funds
prior to the end of the then current terms of the
Administration Agreements and FBNA or any of its affiliates or
the immediate or subsequent successors or assigns of FBNA or
any of its affiliates, directly or indirectly, without the
consent of SEI, recommends to the Board of Directors of any of
the Funds, that SEI be so replaced as administrator to perform
all or part of such services, or otherwise supports such
replacement, unless such recommendation is necessary because
SEI had materially failed to perform its responsibilities as
administrator as determined by the Board of Directors of the
Funds in the Board's good faith judgement;
(ii) in the event that any of the Funds is merged or
reorganized into another fund that SEI does not administer;
(iii) SEI's monthly administration fee, on an
annualized basis, earned under the Administration Agreements
is reduced in any month by more than 10% as compared to SEI's
average monthly administration fee earned during the
immediately preceding twelve-month period, other than a
reduction due to a general market decline or due to FBNA or
any of its affiliates exiting a line of business (such as
corporate trust); provided that SEI delivers to FBNA written
notice that SEI believes in its reasonable business judgment
(in light of information available to SEI) that the reduction
is due to action, intent or participation of FBNA or any
affiliate of FBNA to systematically reduce the assets in the
Funds.
Section 4. Termination For Convenience. In the event, and only in the event,
that the Administration Agreements are terminated by the Funds by exercise of
their right to terminate for any reason on six months prior written notice (as
described in Section 1(c)(i) above), FBNA shall pay to SEI within 30 business
days a one-time lump sum payment. This amount shall be equal to the gross fees
that SEI would have realized through the end of the then current terms of the
Administration Agreements less sub administration fees, committed marketing
reimbursements and marketing budget, based upon the average month-end assets of
the Funds for the six-month period immediately preceding the termination date.
Section 5. FBNA Responsibilities. Effective July 1, 1997, FBNA will assume full
financial responsibility (e.g., salary, benefits, incentive compensation,
expenses) for all wholesalers performing services for the
<PAGE>
Funds. After June 30, 1997, SEI shall have no further responsibility with
respect to such wholesalers. In addition, FBNA agrees to provide an experienced
and qualified full-time employee dedicated to the marketing of the Funds.
Section 6. SEI Responsibilities. SEI will maintain the current level of
personnel support provided to the Funds through the remainder of the term of the
Administration Agreements; namely, relationship manager, account director,
tactical marketing person, strategic marketing person on a limited basis (i.e.,
year end planning, special circumstances) and on-site operations person. Each of
these personnel will have the proper skill, training and background so as to be
able to perform in a competent and professional manner.
Section 7. Miscellaneous Provisions.
(a) This Agreement is the sole Agreement between SEI and FBNA
or any of its affiliates with respect to the subject matter hereof and
it supersedes all prior agreements, and understandings with respect
thereto, whether oral or written (including but not limited to, the
letter agreement dated March 14, 1997 between First Bank System, Inc.
and SEI). No modification to any provision of this Agreement shall be
binding unless in writing and signed by both SEI and FBNA. No waiver of
any rights under this Agreement will be effective unless in writing
signed by the party to be charged. This Agreement may not be modified
or altered except by written instrument duly executed by both parties.
All of the terms, obligations and provisions of this Agreement shall be
binding upon and inure to the benefit of and be enforceable by the
respective successors of the parties hereto.
(b) This Agreement shall be governed by and construed in
accordance with the laws of the State of Minnesota, without giving
effect to any conflict of laws provisions. If any provision of this
Agreement or application thereof to anyone or under any circumstances
is adjudicated to be invalid or unenforceable in any jurisdiction, such
invalidity or unenforceability shall not affect any other provision or
application of this Agreement which can be given effect without the
invalid or unenforceable provision or application and shall not
invalidate or render unenforceable such provision or application in any
other jurisdiction.
(c) This Agreement shall be effective upon the approval of the
Board of Directors of each of the Funds of the Amended and Restated
Administration Agreements in the forms attached hereto as Exhibit A. In
the event that such Agreements are not approved for each Fund to be
effective as of July 1, 1997, then this Agreement shall be null and
void and of no force and effect.
<PAGE>
IN WITNESS WHEREOF, the parties hereto, through the signatures of their
duly authorized representatives, have entered into this Agreement as of the date
first above written.
SEI INVESTMENTS MANAGEMENT CORPORATION
By: /s/ Kevin P. Robins
------------------------------
Name: Kevin P. Robins
Title: Senior Vice President
FIRST BANK NATIONAL ASSOCIATION
By: /s/ Jeff Wilson
------------------------------
Name: Jeff Wilson
Title: Vice President
Exhibit 9(f)
AMENDED AND RESTATED
ADMINISTRATION AGREEMENT
THIS AMENDED AND RESTATED AGREEMENT is made as of this 1st day of July,
1997, by and between FIRST AMERICAN FUNDS, INC. a Minnesota corporation (the
"Fund"), and SEI Investments Management Corporation (the "Administrator"), a
Delaware corporation.
WHEREAS, the Fund and SEI entered into an Administration Agreement as
of January 1, 1995 and the Fund and SEI now desire to amend and restate such
Agreement;
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, management and administrative services to
such portfolios of the Fund as the Fund and the Administrator may agree on
("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 management and administrative services as 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,
and subject to the approval of the Board of Directors of the Fund, shall have
the authority to appoint and compensate from its resources one or more
subadministrators to perform administrative services 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. The Administrator shall
provide the Directors of the Fund with such reports regarding investment
performance as they may reasonably request but shall have no responsibility for
supervising the performance by any investment adviser or sub-adviser of its
responsibilities. Certain of the activities to be performed by the Administrator
are set forth on Exhibit A attached hereto. The parties contemplate that Exhibit
A may be changed from time to time by written agreement of the parties, and in
such event, the amended Exhibit A shall be made a part of this Agreement.
The Administrator shall provide the Fund with regulatory reporting,
fund accounting and related portfolio accounting services, all necessary office
space, equipment, personnel, compensation
<PAGE>
and facilities (including facilities for 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.
Without limiting the generality of the foregoing, the Administrator
shall:
(a) calculate contractual 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-weighed maturity;
(b) assist Fund counsel with the preparation of prospectuses,
statements of additional information, registration statements,
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 state 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 tabulation process for
shareholder meetings;
(e) prepare, negotiate, and administer contracts on behalf of the
Fund with, among others, the Fund's investment adviser,
distributor, custodian, and transfer agent;
(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 supervise the Fund's transfer agent with
respect to the payment of dividends and other distributions to
shareholders;
(g) calculate performance data of the Fund and its 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;
(i) examine and review the operations and performance of the
various organizations providing services to the Fund or any
Portfolio of the Fund, including, without limitation, the
Fund's investment adviser, distributor, custodian, transfer
agent, outside legal counsel and independent public
accountants, and at the request of the Board of Directors,
report to the Board on the performance of organizations;
<PAGE>
(j) assist with the layout and printing of publicly disseminated
prospectuses and assist with and coordinate layout and
printing of 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) assist with 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 its Portfolios on their
registered investment company status under the Internal
Revenue Code of 1986, as amended;
(q) perform all administrative services and functions of the Fund
and each Portfolio to the extent 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, custodian agreement and
transfer agent 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 report for the
Fund on Form N-SAR and all required notices pursuant to Rule
24f-2.
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 the annual reports of
the Portfolios; preparing an annual 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.
ARTICLE 3. Allocation of Charges and Expenses.
(A) The Administrator. The Administrator shall furnish at its own
expense the executive,
<PAGE>
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
affiliated persons 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.
(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 legal and 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, 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 persons of the Administrator or the investment adviser to
the Fund or any affiliated corporation of the Administrator or the investment
Adviser, insurance, interest, brokerage costs, litigation and other
extraordinary or nonrecurring expenses, and all fees and charges of investment
advisers to the Fund.
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 Schedules. 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.
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
<PAGE>
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 7, 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. 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 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 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. Nor shall the Administrator be held to have
notice of any change of authority of any officers, employee or agent of the Fund
until receipt of written notice thereof from the Fund.
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,
<PAGE>
officers, employees and shareholders or otherwise and that directors, officers,
employees and shareholders of the Administrator and its counsel 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.
For special cases, the parties hereto may amend such procedures set
forth herein as may be appropriate or practical under the circumstances, and the
Administrator may conclusively assume that any special procedure which has been
approved by the Fund does not conflict with or violate any requirements of its
Charter or then current prospectuses, or any rule, regulation or requirement of
any regulatory body.
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.
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 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 Investments
Management Corporation, One Freedom Valley Drive, Oaks, PA 19456; and to its
Secretary at the following address: Michael J. Radmer, Esq., Dorsey & Whitney,
220 South Sixth Street, Minneapolis, MN 55402-1498; and if to the Administrator
at One Freedom Valley Drive, Oaks, PA 19456.
<PAGE>
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 FUNDS, INC.
By: /s/ Kevin P. Robins
Attest:
---------------------------
SEI INVESTMENTS MANAGEMENT CORPORATION
By: /s/ Kathryn Stanton
Attest:
---------------------------
<PAGE>
SCHEDULE TO THE
AMENDED AND RESTATED
ADMINISTRATION AGREEMENT
DATED AS OF JULY 1, 1997
BETWEEN
FIRST AMERICAN FUNDS, INC.
AND
SEI INVESTMENTS MANAGEMENT CORPORATION
Portfolios: This Agreement shall apply to all Portfolios of First American
Funds, Inc., either now or hereafter created. The current
portfolios of First American Funds, Inc. are set forth below:
Prime Obligations Fund, Treasury Obligations Fund, Government
Obligations Fund (collectively, the "Portfolios").
Fees: Pursuant to Article 4, Section A, the Fund shall pay the
Administrator compensation for services rendered to the
Portfolios at an annual rate, which is calculated daily and paid
monthly, at a maximum administrative fee equal to (i) .07% of
each Portfolio's average daily net assets until the aggregate net
assets of all mutual funds in the First American family of funds
("First American Fund Family") exceed $8 billion, and (ii) .055%
of each Portfolio's average daily net assets to the extent that
the aggregate net assets of the First American Fund Family exceed
$8 billion; provided however that in no event shall the annual
administrative fee for any Portfolio be less than $50,000.
The parties hereby confirm that the $50,000 per annum
administrative fee is to be applied to each Portfolio as a whole,
and not to separate classes of shares within the portfolios.
Term: Pursuant to Article 7, the term of this Agreement, unless sooner
terminated as specified under the heading "Termination" below,
shall commence on JULY 1, 1997 and shall remain in effect through
December 31, 1999 ("Initial Term") and the Initial Term shall be
automatically extended on January 1, 1998 for one successive
one-year period (i.e., through December 31, 2000) if SEI has met
or exceeded the written service level standards as may be agreed
to by the Portfolios and SEI from time to time (the "Service
Standards") on no less than 90% of such Service Standards on
cumulative basis during the period commencing July 1, 1997 and
ending on December 31, 1998. Calculation of compliance with the
Service Standards will be measured monthly, and reported to the
Board of Directors of First American Funds, 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"). SEI will calculate
the compliance percentage, and the investment adviser for the
Portfolios' will review such calculation on a monthly basis. Any
disagreements will be reported to the Board of Directors of the
First American Funds, Inc. for resolution, in the Board's good
faith judgment.
Termination: The Administration Agreement will be terminable by the Portfolios
by delivery to
<PAGE>
SEI of written notice: (i) for any reason on six months prior
written notice to SEI; (ii) in the event of SEI's bankruptcy or
insolvency; (iii) in the event of a conviction of SEI for
corporate criminal activity; (iv) if in any consecutive six-month
period the average cumulative Service Level Percentage is less
than 50%; (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; or (vi) by delivery to the
Administrator of written notice of termination delivered no less
than 180 days prior to the end of the Initial Term (as extended
if applicable), provided that if such notice is not so delivered,
the Administration Agreement will automatically continue for one
additional one-year term. The Administration Agreement will be
terminable by the Administrator by delivery to the Portfolios of
written notice: (i) if the Portfolios have materially failed to
perform their responsibilities under this Agreement, and such
material failure has not been cured within 45 days after written
notice is received by the Portfolios specifying the nature of the
failure. (ii) 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), provided that if
such notice is not so delivered, the Administration Agreement
will automatically continue for one additional one-year term.
Agreed to and accepted Agreed to and accepted
FIRST AMERICAN FUNDS, INC. SEI INVESTMENTS MANAGEMENT
CORPORATION
By: /s/ Kathryn Stanton
-------------------------------
Title: VP By: /s/ Kevin P. Robins
---------------------------- -----------------------------
Date: Title: Senior Vice President
----------------------------- --------------------------
Date:
---------------------------
<PAGE>
EXHIBIT A
TO THE AMENDED AND RESTATED ADMINISTRATION AGREEMENT
DATED AS OF JULY 1, 1997
BETWEEN
SEI INVESTMENTS MANAGEMENT CORPORATION
AND
FIRST AMERICAN FUNDS, INC.
FIRST AMERICAN INVESTMENT FUNDS, INC.
FIRST AMERICAN STRATEGY FUNDS, INC.
The following Exhibit sets forth the principal federal and state
regulatory and related actions which must be taken with respect to the First
American Funds, Inc. ("FAF"), First American Investment Funds, Inc. ("FAIF") and
First American Strategy Funds, Inc. ("FASF") (individually a "Company", and
collectively, the "Companies") that are the responsibility of SEI. This Exhibit
is intended to be modified by written agreement of the Companies and SEI, as
necessary, to reflect changes in the Companies' structure and federal and state
regulatory requirements.
Parties referred to in this Exhibit are designated as follows:
SEI Compliance Dept.
SEI Portfolio Accounting
SEI Funds Accounting
SEI Legal Dept.
SEI Tax Dept.
SEI Investor Services
July 1, 1997
<PAGE>
<TABLE>
<CAPTION>
DATE ACTION TO BE TAKEN PARTY RESPONSIBLE
- ----------------------- --------------------------------------------------------- -----------------------------
<S> <C> <C>
January 1 a) Review asset diversification to ensure compliance a) SEI Portfolio Accounting
with section 851(b)(4) of the IRC as of the end of the
preceding fiscal quarter (discrepancies must be
corrected by January 30).
b) Review sources of gross income to ascertain b) SEI Funds Accounting
year-to-date compliance with Sections 851(b)(2) and
851(b)(3) of IRC for current year. SEI Funds Accounting
and Tax Dept. monitor this test on a monthly basis. If a
company is not in compliance with these tests, the
advisor will be notified immediately. Corrective action
must be taken by the advisor prior to year end.
c) Review asset diversification for REIT fund under c) SEI Portfolio Accounting
section 851(b)(4) of the IRC as of 12/31 (discrepancies
must be corrected by 1/30).
d) Review sources of gross income REIT fund to ensure d) SEI Fund Accounting
compliance with Sections 851(b)(2) and 851(b)(3) of IRC
for current year. If a company is not in compliance with
these tests, the advisor will be notified immediately.
Corrective action must be taken by the advisor prior to
year end.
- ----------------------- --------------------------------------------------------- -----------------------------
January 15 a) File Annual Registration Form MSS-1 for Minnesota a) SEI Legal Dept.
Business Corporations for the current calendar year with
the Minnesota Secretary of State. (FAF and FASF)
b) Send REIT fund's Form 2483 to KPMG for their review b) SEI Tax Dept.
prior to filing (if applicable).
- ----------------------- --------------------------------------------------------- -----------------------------
January 28 a) Mail copies of each Company's new prospectuses to SEI Investor Services
shareholders.
- ----------------------- --------------------------------------------------------- -----------------------------
(deadline is 30 days CURRENTLY, IT IS THE REIT FUND'S POLICY TO DISTRIBUTE SEI Tax Dept.
after REIT fund's LONG-TERM CAPITAL GAINS, THEREFORE, FORM 2438 IS NOT
fiscal year end APPLICABLE. However if in the future the policy changes,
of 12/31) the REIT fund would file Form 2438 (Regulated Investment
Company Undistributed Capital Gains Tax Return) for fund
for the preceding year with IRS. This will be necessary
only for a year in which the fund has undistributed net
NOT APPLICABLE (long-term) capital gains after taking into account any
distribution to shareholders to be paid after the
taxable year under Section 855 of the IRC.
- ----------------------- --------------------------------------------------------- -----------------------------
January 31 In years where appropriate, provide Form 1099-MISC to SEI Funds Accounting
persons other than corporations to whom the Fund paid
more than $600 for services during the prior calendar
year (excluding wages paid to employees)
- ----------------------- --------------------------------------------------------- -----------------------------
July 1, 1997
<PAGE>
- ----------------------- --------------------------------------------------------- -----------------------------
February 4 All materials due to SEI Legal for preparation of the SEI Funds Accounting,
draft agenda, etc. for the March Board Meeting. SEI Compliance Dept.,
SEI Portfolio
Accounting
- ----------------------- --------------------------------------------------------- -----------------------------
February 11 Circulate draft agenda and resolutions for March Board SEI Legal Dept.
Meeting (approx. 3 weeks prior meeting).
- ----------------------- --------------------------------------------------------- -----------------------------
February 15 a)Send Federal Excise Tax Return on Form 8613 to KPMG a) SEI Tax Dept.
for review prior to filing on March 15.
b) File with New Jersey Division of Taxation b) SEI Tax Dept.
certifications for all funds with more than 80% federal
obligations.
- ----------------------- --------------------------------------------------------- -----------------------------
February 18 Pre-call to discuss agenda items for March Board Meeting SEI Legal Dept., and
(approx. 2 weeks prior to meeting.) SEI Funds Accounting
- ----------------------- --------------------------------------------------------- -----------------------------
February 25 Mail Board Materials to Board of Directors and meeting SEI Legal Dept.
participants (approx. 1 week prior to meeting).
- ----------------------- --------------------------------------------------------- -----------------------------
February 28 FOR REIT FUND ONLY a) SEI Funds Accounting
a) Issue 60 day notice to the shareholders of the REIT
fund to designate the amount of long term capital
gain and return of capital.
FOR ALL FUNDS b) SEI Tax Dept.
b) File with Indiana Department of Revenue certification
of information provided to shareholders.
- ----------------------- --------------------------------------------------------- -----------------------------
March 15 a) File Federal Excise Tax Return on Form 8613, if a) SEI Tax Dept.
necessary; pay any excise tax due.
b)File REIT fund's Federal Form 7004 "Extension of Time b) SEI Tax Dept.
to File Federal Income Tax Return" (Form 1120-RIC) and
Minnesota Form M-4E-Extension.
c) File Fidelity Bond Insurance with the SEC. c) SEI Legal Dept.
- ----------------------- --------------------------------------------------------- -----------------------------
July 1, 1997
<PAGE>
- ----------------------- --------------------------------------------------------- -----------------------------
April 1 a) Review asset diversification to ensure compliance a) SEI Portfolio Accounting
with section 851(b)(4) of the IRC as of March 31
(discrepancies must be corrected by April 30).
b) Review sources of gross income to ascertain b) SEI Funds Accounting
year-to-date compliance with Sections 851(b)(2) and
851(b)(3) of IRC for current year. SEI Funds Accounting
and Tax Dept. Monitor this test on a monthly basis. If a
company is not in compliance with these tests, the
advisor will be notified immediately. Corrective action
must be taken by the advisor prior to year end.
c) Begin preparation of each Company's Semi-Annual c) SEI Funds Accounting
Report to Shareholders. Send timeline for semi-annual
report production to FBNA, M&P, SEI Legal and D&W. Send
draft to SEI Legal and D&W for review and comment.
- ----------------------- --------------------------------------------------------- -----------------------------
April 15 File Maryland Personal Property Tax Return (FAIF Only) SEI Tax Dept.
- ----------------------- --------------------------------------------------------- -----------------------------
May 5 Prepare each Company's Form N-SAR for the period ended SEI Funds Accounting
March 31.
- ----------------------- --------------------------------------------------------- -----------------------------
May 6 All materials due to SEI Legal for preparation of the SEI Funds Accounting,
draft agenda, etc. for the June Board Meeting. SEI Compliance Dept.,
SEI Portfolio Accounting
- ----------------------- --------------------------------------------------------- -----------------------------
May 8 ALL FUNDS, EXCEPT REIT FUND
Send draft of Federal Income Tax Return Form 1120-RIC SEI Tax Dept.
and Minnesota Form M-4 to KPMG for review prior to
filing on June 15.
- ----------------------- --------------------------------------------------------- -----------------------------
May 13 Circulate draft agenda and resolutions for June Board SEI Legal Dept.
Meeting (approx. 3 weeks prior to meeting).
- ----------------------- --------------------------------------------------------- -----------------------------
May 20 Pre-call to discuss agenda items for June Board Meeting SEI Legal Dept. and SEI Funds
(approx. 2 weeks prior to meeting.) Accounting
- ----------------------- --------------------------------------------------------- -----------------------------
May 27 Mail Board materials to Board of Directors and meeting SEI Legal Dept.
participants (approx. 1 week prior to meeting.)
- ----------------------- --------------------------------------------------------- -----------------------------
July 1, 1997
<PAGE>
- ----------------------- --------------------------------------------------------- -----------------------------
May 30 a) File each Company's Form N-SAR with SEC. a) SEI Funds Accounting
b) Mail each Company's Semi-Annual Report to b) SEI Funds Accounting/SEI
Shareholders for period ended March 31. File with SEC Investor Services
and distribute copies to D&W, KPMG and SEI Legal.
- ----------------------- --------------------------------------------------------- -----------------------------
June 15 ALL FUNDS, EXCEPT REIT FUND
File Federal Regulated Investment Company Income Tax SEI Tax Dept.
Return Form 1120-RIC; tax payment is due; Section 855
election, if any, must be made (dividends pursuant to a
Section 855 election for any taxable year must be
declared and paid within 12 months of the close of that
year, but not later than the date of the first regular
dividend payment after declaration). If the filing of
Form 2438 was made on October 30, copies A of Form 2439
and duplicate of Form 2438 must be filed with Form
1120-RIC.
- ----------------------- --------------------------------------------------------- -----------------------------
June 30 For FAIF's International Fund, file with the Treasury SEI Tax Dept. and SEI
Dept. Form TD-F90-22.1. International Funds
Accounting
- ----------------------- --------------------------------------------------------- -----------------------------
July 1 a) Review asset diversification to ensure compliance a) SEI Portfolio Accounting
with section 851(b)(4) of the IRC as of June 30
(discrepancies must be corrected by July 30).
b) Review sources of gross income to ascertain b) SEI Funds Accounting
year-to-date compliance with Sections 851(b)(2) and
851(b)(3) of IRC for current year. SEI Funds Accounting
and Tax Dept. monitor this test on a monthly basis. If a
company is not in compliance with these tests, the
advisor will be notified immediately. Corrective action
must be taken by the advisor prior to year end.
- ----------------------- --------------------------------------------------------- -----------------------------
July 15 a) File Minnesota Form M-4 (FAF, FAIF and FASF) a) SEI Tax Dept.
b) Preparation of materials for August Telephonic Board b) SEI Legal Dept.
Meeting to approve insurance coverages.
- ----------------------- --------------------------------------------------------- -----------------------------
July 25-August 8 Mail Board materials to Board of Directors and meeting SEI Legal Dept.
participants for August Telephonic Board of Directors
meeting (approx. 1 week prior to meeting).
- ----------------------- --------------------------------------------------------- -----------------------------
July 1, 1997
<PAGE>
- ----------------------- --------------------------------------------------------- -----------------------------
August 1-14 Initiate a Telephonic Board of Directors meeting to SEI Legal
approve insurance coverages.
- ----------------------- --------------------------------------------------------- -----------------------------
August 13 All materials due to SEI Legal for preparation of the SEI Funds Accounting, SEI
draft agenda, etc. for the September Board Meeting. Compliance Dept., SEI Portfolio
Accounting
- ----------------------- --------------------------------------------------------- -----------------------------
August 15 Send Form 1120-RIC and Minnesota Form M-4 for REIT fund SEI Tax Dept.
to KPMG for review.
- ----------------------- --------------------------------------------------------- -----------------------------
August 20 Circulate draft agenda and resolutions for September SEI Legal Dept.
Board Meeting (approx. 3 weeks prior to meeting).
- ----------------------- --------------------------------------------------------- -----------------------------
August 27 Pre-call to discuss agenda items for September SEI Legal Dept. and SEI Funds
Board Meeting (approx. 2 weeks prior to meeting.) Accounting
- ----------------------- --------------------------------------------------------- -----------------------------
September 1 Review investments and adjust portfolio to ensure that SEI Portfolio Accounting, SEI
on the close of each Company's fiscal year the dividends Funds Accounting and DST
distributed by each Company to their Shareholders during
such fiscal year will not exceed the income realized by
each Company for federal income tax purposes during such
year.
- ----------------------- --------------------------------------------------------- -----------------------------
September 3 Mail Board materials to Board of Directors and meeting SEI Legal Dept.
participants (approx. 1 week prior to meeting.)
- ----------------------- --------------------------------------------------------- -----------------------------
September 15 File REIT fund's Federal Income Tax Return Form 1120-RIC SEI Tax Dept.
(extension may be granted to 9/15 for federal and 10/15
for Minnesota); tax payment is due; Section 855
election, if any, must be made (dividends pursuant to a
Section 855 election for any taxable year must be
declared and paid within 12 months of the close of that
year, but not later than the date of the first regular
dividend payment after declaration). If the filing of
Form 2438 was made on January 30, copies A of Form 2439
and duplicate of Form 2438 must be filed with Form 1120
RIC.
- ----------------------- --------------------------------------------------------- -----------------------------
September 19 SEI pays Directors & Officers and Fidelity Bond SEI Legal Dept.
Insurance
- ----------------------- --------------------------------------------------------- -----------------------------
July 1, 1997
<PAGE>
- ----------------------- --------------------------------------------------------- -----------------------------
October 1 a) Review asset diversification to ensure compliance a) SEI Portfolio Accounting
with section 851(b)(4) of the Internal Revenue Code
("IRC") as of September 30 (discrepancies must be
corrected by October 30).
b) Review sources of gross income to ascertain b) SEI Funds Accounting
year-to-date compliance with Sections 851(b)(2) and
851(b)(3) of IRC for current year. SEI Funds Accounting
and Tax Dept. monitor this test on a monthly basis. If a
company is not in compliance with these tests, the
advisor will be notified immediately. Corrective action
must be taken by the advisor prior to year end.
c) Begin preparation of each Company's Annual Report to c) SEI Funds Accounting
Shareholders. Send timeline for annual report production
to FBNA, M&P, SEI Legal, D&W and KPMG. SEI Legal and D&W
should receive drafts for review and comment.
- ----------------------- --------------------------------------------------------- -----------------------------
October 15 d) File Minnesota Form M-4 for REIT fund. d) SEI Tax Dept.
e) Send Form 2483 to KPMG for review prior to filing e) SEI Tax Dept.
with IRS (if applicable).
- ----------------------- --------------------------------------------------------- -----------------------------
(deadline is 30 CURRENTLY, IT IS EACH COMPANY'S POLICY TO DISTRIBUTE SEI Tax Dept.
days after Fund's LONG-TERM CAPITAL GAINS, THEREFORE, FORM 2438 IS NOT
fiscal year end) APPLICABLE. However if in the future the policy changes,
each Company would file Form 2438 (Regulated Investment
Company Undistributed Capital Gains Tax Return) for each
Portfolio for the preceding year with IRS, this will be
necessary only for a year in which the Portfolio has
Not Applicable undistributed net (long-term) capital gains after taking
into account any distribution to shareholders to be paid
after the taxable year under Section 855 of the IRC.
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November 5 Begin preparation of each Company's 24f-2 Notice; SEI Compliance Dept.
determine whether additional shares are to be registered
pursuant to Rule 24e-2.
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November 5-15 Prepare each Company's Form N-SAR for the period ended SEI Funds Accounting
September 30.
- ----------------------- --------------------------------------------------------- -----------------------------
November 12 a) All materials due to SEI Legal for preparation of the SEI Funds Accounting,
draft agenda, etc. for the December Board Meeting. SEI Compliance Dept.,
SEI Portfolio Accounting
- ----------------------- --------------------------------------------------------- -----------------------------
November 15-21 Audited financials are provided to D&W for inclusion in SEI Funds Accounting
second draft of Post-Effective Amendment.
- ----------------------- --------------------------------------------------------- -----------------------------
July 1, 1997
<PAGE>
- ----------------------- --------------------------------------------------------- -----------------------------
November 15 Signature pages for PEA filing distributed by D&W to SEI SEI Legal Dept.
Legal for execution.
- ----------------------- --------------------------------------------------------- -----------------------------
November 15 (or by File each Company's Rule 24f-2 Notice and related SEI Compliance Dept. and SEI
November 29) opinion with SEC. Legal (as to the Opinion)
- ----------------------- --------------------------------------------------------- -----------------------------
November 19 Circulate draft agenda and resolutions (including 15(c) SEI Legal Dept.
responses) for December Board Meeting (approx. 3 weeks
prior to meeting).
- ----------------------- --------------------------------------------------------- -----------------------------
November 25 Send to KPMG for their review final excise tax SEI Tax Dept.
distribution for capital gains and an estimate of
ordinary income for all portfolios except the equity
funds.
- ----------------------- --------------------------------------------------------- -----------------------------
November 26 Pre-call to discuss agenda items for December Board SEI Legal Dept. and SEI Funds
Meeting (approx. 2 weeks prior to meeting). Accounting
- ----------------------- --------------------------------------------------------- -----------------------------
November 29 a) Mail Annual Report to Shareholders for year ended a) SEI Funds Accounting/SEI
September 30. File copies with SEC and distribute copies Investor Services; SEI Legal
to KPMG, SEI Legal, D&W, FBNA, M&P and Board of Directors.
b) File each Company's Form N-SARs with SEC for year b) SEI Funds Accounting
ended September 30.
c) Notify shareholders as to what portions, if any, of c) SEI Funds Accounting
the distributions made by each Company during the prior
fiscal year (including any dividends paid pursuant to a
Section 855 election) were treated as dividends under
Section 852(b)(5), Section 853(c) and Section 854(b)(1)
and were capital gains dividends under Section
852(b)(3)(C) of the IRC. These notices may accompany the
Annual Report provided it is mailed by this date. The
preparation of the 60 day notice is the responsibility
of Fund Accounting and is reviewed by the Tax Dept.
- ----------------------- --------------------------------------------------------- -----------------------------
November 30 a) Send to KPMG for review final excise tax distribution a) SEI Tax Dept.
for capital gains and an estimate of ordinary income for
equity funds.
- ----------------------- --------------------------------------------------------- -----------------------------
December 2 Mail Board materials to Board of Directors and meeting SEI Legal Dept.
participants (approx. 1 week prior to meeting.)
- ----------------------- --------------------------------------------------------- -----------------------------
July 1, 1997
<PAGE>
- ----------------------- --------------------------------------------------------- -----------------------------
December 15 ALL FUNDS, EXCEPT REIT FUND
a) Minnesota Form M-4 to be filed (request can be made SEI Tax Dept.
for an extension to July 15 by filing Form M-4E).
b) File Federal Form 7004 "Extension of Time to File
Federal Income Tax Return"(Form 1120-RIC).
- ----------------------- --------------------------------------------------------- -----------------------------
December 20 DECLARATION OF DIVIDENDS
a) Declaration of Ordinary Income Dividend, so that the a) SEI Funds Accounting
total calendar year distributions equal to (i) at least
98 percent of "ordinary income" of each Company for the
calendar year; and (ii) 98% of section 988 income for
one-year period ending October 31, of the current year;
and (iii) at least 98 percent of the excess of net
short-term capital gain over net long-term capital loss
for the one-year period ending on October 31 of the
current year.
b) Declaration of Capital Gains Dividend, so that the b) SEI Tax Dept.
total calendar year distributions equal to the greater
of (a) at least 98 percent of "net capital gain" for the
Companies for the one-year period ending on October 31
of the current year less the sum of (1) the amount of
any "net capital gain" for the prior fiscal year on
which such Company has paid corporate capital gains tax
in the current year and (2) any
"overdistribution/underdistribution" of the Fund's "net
capital gain" for Federal excise tax purposes in the
prior year or (b) 100% of the Section 855 distributions
required for the fiscal period ended September 30.
c) Record date for dividends noted in (a) and (b) must c) SEI Tax Dept.
be on or before December 31; payment date for both
dividends may be any date prior to February 1. Payment
must be accompanied by statements required by Rule
19(a)(1) of the Investment Company Act of 1940.
- ----------------------- --------------------------------------------------------- -----------------------------
</TABLE>
OTHER ACTIONS
In addition to the actions summarized in the foregoing Exhibit, the following
actions must be taken from time to time by SEI:
1. SEI Legal Dept. must file copies of each Company's sales literature with
the NASD and in accordance with state blue sky laws.
2. SEI Legal Dept. is required to ensure that all blue sky requirements
(relative to sales of shares by the Fund and its registration and renewal
of registration in states) are satisfied.
3. When appropriate, each Company may file amendments to its registration
statement under Rule 24e2 registering additional shares with the SEC. The
number of shares to be so registered shall be determined by SEI Funds
Accounting.
4. The proper officers of each Company are required to make all necessary
filings with respect to the Fund's fidelity bond pursuant to Rule 17g-1 of
the Investment Company Act. The Fidelity Bond is filed with the SEC in Mid
March by SEI Legal Dept.
5. SEI will provide each Company's Board of Directors at each Board meeting
with such information as it may be required under the contracts, by law by
procedures and guidelines adopted by the Board or as may be requested by
the Board.
6. If any revisions to each Company's Rule 10f-3 procedures, Rule 17a-7
procedures, Rule 17e-1 procedures and custodial arrangements are to be
considered, SEI Legal will include them in the agenda for board approval.
7. As necessary, SEI mails proxy and regulatory shareholder mailings.
8. SEI delivers on an annual basis an outside auditor review (unqualified
opinion) of SEI Fund Accounting process (SAS 70).
July 1, 1997
