1933 Act Registration No. 2-74747
1940 Act Registration No. 811-3313
As filed with the Securities and Exchange Commission on February 1, 1999
================================================================================
FORM N-1A
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |X|
Pre-Effective Amendment No. ___ | |
Post-Effective Amendment No. 31 |X|
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 |X|
Amendment No. 31
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)
JAMES R. FOGGO
C/O SEI INVESTMENTS COMPANY, OAKS, PENNSYLVANIA 19456
(Name and Address of Agent for Service)
COPIES TO:
Kathleen L. Prudhomme, Esq.
Dorsey & Whitney LLP
220 South Sixth Street
Minneapolis, Minnesota 55402
It is proposed that this filing shall become effective (check
appropriate box):
|X| immediately upon filing pursuant to paragraph (b) of rule 485
| | on February 1, 1999 pursuant to paragraph (b) of rule 485
| | 60 days after filing pursuant to paragraph (a)(1) of Rule 485
| | on February 1, 1999 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
================================================================================
<PAGE>
FEBRUARY 1, 1999
MONEY MARKET FUNDS
CLASS A, CLASS B AND CLASS C SHARES
Government Obligations Fund
Prime Obligations Fund
Tax Free Obligations Fund
Treasury Obligations Fund
First American
Funds, Inc.
PROSPECTUS
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved the shares of these funds, or determined if the
information in this prospectus is accurate or complete. Any statement to the
contrary is a criminal offense.
[LOGO] FIRST AMERICAN
THE POWER OF DISCIPLINED INVESTING (R)
<PAGE>
TABLE OF
CONTENTS
FUND SUMMARIES
Government Obligations Fund 2
Prime Obligations Fund 4
Tax Free Obligations Fund 6
Treasury Obligations Fund 8
POLICIES & SERVICES
Buying Shares 10
Selling Shares 13
Managing Your Investment 14
ADDITIONAL INFORMATION
Management 16
More About The Funds 17
Financial Highlights 18
FOR MORE INFORMATION Back Cover
<PAGE>
FUND SUMMARIES
INTRODUCTION
This section of the prospectus describes the objectives of the First American
Money Market Funds, summarizes the main investment strategies used by each
fund in trying to achieve its objectives, and highlights the risks involved
with these strategies. It also provides you with information about the
performance, fees and expenses of the funds.
AN INVESTMENT IN THE FUNDS IS NOT A DEPOSIT OF U.S. BANK NATIONAL ASSOCIATION
AND IS NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION
OR ANY OTHER GOVERNMENT AGENCY. ALTHOUGH THE FUNDS SEEK TO PRESERVE THE VALUE
OF YOUR INVESTMENT AT $1.00 PER SHARE, IT IS POSSIBLE TO LOSE MONEY BY
INVESTING IN THE FUNDS.
1 PROSPECTUS - FIRST AMERICAN MONEY MARKET FUNDS
<PAGE>
FUND SUMMARIES
GOVERNMENT OBLIGATIONS FUND
- -----------------------------------------------------------------------------
OBJECTIVE
Government Obligations Fund seeks maximum current income to the extent
consistent with the preservation of capital and maintenance of liquidity.
- -----------------------------------------------------------------------------
MAIN INVESTMENT STRATEGIES
Government Obligations Fund invests exclusively in short-term U.S. government
securities and repurchase agreements secured by U.S. government securities.
U.S. government securities are bonds or other debt obligations issued or
guaranteed as to principal and interest by the U.S. government or one of its
agencies or instrumentalities. U.S. Treasury securities and some obligations
of U.S. government agencies and instrumentalities are supported by the "full
faith and credit" of the United States government. Other U.S. government
securities are backed by the right of the issuer to borrow from the U.S.
Treasury. Still others are supported only by the credit of the issuer or
instrumentality.
When selecting securities for the fund, the portfolio managers use a
"top-down" approach, looking first at general economic factors and market
conditions, then at individual securities.
To generate additional income, the fund may lend securities representing up
to one-third of the value of its total assets to broker-dealers, banks and
other institutions.
- -----------------------------------------------------------------------------
MAIN RISKS
The main risks of investing in this fund include:
o Although the fund seeks to preserve the value of your investment at $1.00
per share, it is possible to lose money by investing in the fund. A major
change in interest rates or a default on a security or repurchase agreement
held by the fund, or a securities lending agreement entered into by the
fund, could cause the value of your investment to decline.
o The level of income you receive from the fund will be affected by movements
in short-term interest rates.
o By investing solely in U.S. government securities and repurchase agreements
secured by those securities, the fund may offer less income than a money
market fund investing in other high-quality money market securities.
- -----------------------------------------------------------------------------
FUND PERFORMANCE
The illustrations below provide you with information on the fund's volatility
and performance. Of course, how the fund has performed in the past does not
necessarily indicate how it will perform in the future.
The bar chart shows you how performance of the fund's shares has varied from
year to year. The table illustrates the fund's average annual total returns
over different time periods. Both the chart and the table assume that all
distributions have been reinvested.
Information in the bar chart and the table is for the fund's class Y shares,
which are offered through another prospectus. Class A shares commenced
operations on April 29, 1998. The classes will have substantially similar
returns, because they are invested in the same portfolio of securities.
However, class A share returns will be lower because these shares have higher
expenses.
2 PROSPECTUS - FIRST AMERICAN MONEY MARKET FUNDS
<PAGE>
FUND SUMMARIES
GOVERNMENT OBLIGATIONS FUND (CONTINUED)
- -----------------------------------------------------------------------------
FUND PERFORMANCE (CONTINUED)
ANNUAL TOTAL RETURNS AS OF 12/31 EACH YEAR
[BAR GRAPH]
1991 5.56%
1992 3.34%
1993 2.89%
1994 4.00%
1995 5.69%
1996 5.13%
1997 5.26%
1998 5.15%
BEST QUARTER:
Quarter ending: 3/31/91
Total return 1.53%
WORST QUARTER:
Quarter ending: 6/30/93
Total Return 0.71%
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS Inception Since
AS OF 12/31/98 Date One Year Five Years Inception
<S> <C> <C> <C> <C>
Government Obligations Fund (Class Y) 3/1/90 5.15% 5.04% 4.92%
</TABLE>
- -----------------------------------------------------------------------------
FEES AND EXPENSES
The fund does not impose any sales charges (loads) or other fees when you
buy, sell or exchange shares. However, when you hold shares of the fund you
indirectly pay a portion of the fund's operating expenses. These expenses are
deducted from fund assets. The figures below are based on expenses during the
fiscal year ended September 30, 1998.(1)
---------------------------------------------------------------------------
SHAREHOLDER FEES Class A
--------------------------------------------------------------------------
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON PURCHASES None
MAXIMUM DEFERRED SALES CHARGE (LOAD) None
ANNUAL FUND OPERATING EXPENSES AS A % OF AVERAGE NET ASSETS
--------------------------------------------------------------------------
Management Fees 0.40%
Distribution and Service (12b-1) Fees 0.25%
Other Expenses 0.17%
TOTAL 0.82%
--------------------------------------------------------------------------
(1)"Other expenses" have been restated to reflect current fees and expenses.
Actual expenses for the fiscal year were lower than those shown in the
table because of voluntary fee waivers by the advisor. See "Additional
Information -- Financial Highlights." THE ADVISOR INTENDS TO WAIVE FEES
DURING THE CURRENT FISCAL YEAR SO THAT TOTAL FUND OPERATING EXPENSES DO
NOT EXCEED 0.76%. FEE WAIVERS MAY BE DISCONTINUED AT ANY TIME.
- -----------------------------------------------------------------------------
EXAMPLE This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes that
you invest $10,000 for the time periods indicated, that your investment has a
5% return each year, and that the fund's operating expenses remain the same.
Although your actual costs and returns may differ, based on these assumptions
your costs would be:
--------------------
1 year $ 84
3 years $ 262
5 years $ 455
10 years $1,014
3 PROSPECTUS - FIRST AMERICAN MONEY MARKET FUNDS
<PAGE>
FUND SUMMARIES
PRIME OBLIGATIONS FUND
- -----------------------------------------------------------------------------
OBJECTIVE
Prime Obligations Fund seeks maximum current income to the extent consistent
with preservation of capital and maintenance of liquidity.
- -----------------------------------------------------------------------------
MAIN INVESTMENT STRATEGIES
Prime Obligations Fund invests in high-quality short-term debt obligations,
including:
o securities issued by the U.S. government or one of its agencies or
instrumentalities;
o U.S. dollar-denominated obligations of domestic and foreign banks with
total assets of at least $500 million (including fixed and variable rate
certificates of deposit, time deposits and bankers' acceptances);
o commercial paper;
o non-convertible corporate debt securities;
o loan participation interests; and
o repurchase agreements for the securities in which the fund may invest.
When selecting securities for the fund, the portfolio managers use a
"top-down" approach, looking first at general economic factors and market
conditions, then at individual securities.
The fund may invest up to 25% of its total assets in dollar-denominated
obligations of U.S. branches of foreign banks which are subject to the same
regulation as U.S. banks. The fund also may invest up to 25% of its total
assets, collectively, in dollar-denominated obligations of foreign branches
of domestic banks, foreign banks and foreign corporations.
- -----------------------------------------------------------------------------
MAIN RISKS
The main risks of investing in this fund include:
o Although the fund seeks to preserve the value of your investment at $1.00
per share, it is possible to lose money by investing in the fund. A major
change in interest rates or a default on a security or repurchase agreement
held by the fund could cause the value of your investment to decline.
o The level of income you receive from the fund will be affected by movements
in short-term interest rates.
o Foreign securities in which the fund invests, although dollar denominated,
may present some additional risk. Political or social instability or
diplomatic developments could adversely affect the securities. There is
also the risk of 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. In addition, there may be less public information available
about foreign corporations and foreign banks and their branches.
- -----------------------------------------------------------------------------
FUND PERFORMANCE
The illustrations below provide you with information on the fund's volatility
and performance. Of course, how the fund has performed in the past does not
necessarily indicate how it will perform in the future.
The bar chart shows you how performance of the fund's class A shares has
varied from year to year. The performance of class B and class C shares will
be lower due to their higher expenses. The table illustrates the fund's
average annual total returns over different time periods. Because class C
shares were not offered prior to the date of this prospectus, no information
is presented in the table for these shares. Both the chart and the table
assume that all distributions have been reinvested.
4 PROSPECTUS - FIRST AMERICAN MONEY MARKET FUNDS
<PAGE>
FUND SUMMAREIS
PRIME OBLIGATIONS FUND (CONTINUED)
- -----------------------------------------------------------------------------
FUND PERFORMANCE (CONTINUED)
ANNUAL TOTAL RETURNS AS OF 12/31 EACH YEAR
[BAR GRAPH]
1996 4.97%
1997 5.12%
1998 5.04%
BEST QUARTER:
Quarter ending: 12/31/97
Total return 1.29%
WORST QUARTER:
Quarter ending: 12/31/98
Total Return 1.18%
AVERAGE ANNUAL TOTAL RETURNS
AS OF 12/31/98 Inception Date One Year Since Inception
- -----------------------------------------------------------------------------
Prime Obligations Fund (Class A) 1/21/95 5.04% 5.16%
- -----------------------------------------------------------------------------
Prime Obligations Fund (Class B) 1/23/95 4.28% 4.38%
- -----------------------------------------------------------------------------
FEES AND EXPENSES
As an investor, you pay fees and expenses to buy and hold shares of the fund.
You pay shareholder fees directly when you buy or sell shares. You pay annual
fund operating expenses indirectly since they are deducted from fund assets.
The figures below are based on class A and class B share expenses during the
fiscal year ended September 30, 1998.(1)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SHAREHOLDER FEES Class A Class B Class C
--------------------------------------------------------------------------------------------------------
MAXIMUM SALES CHARGE (LOAD) None None(2) None(2)
MAXIMUM DEFERRED SALES CHARGE (LOAD) PROCEEDS, WHICHEVER IS LESS None 5.00%(2) 1.00%(2)
ANNUAL FUND OPERATING EXPENSES AS A % OF AVERAGE NET ASSETS
--------------------------------------------------------------------------------------------------------
Management Fees 0.40% 0.40% 0.40%
Distribution and Service (12b-1) Fees 0.25% 1.00% 1.00%
Other Expenses 0.24% 0.13% 0.13%
TOTAL 0.89% 1.53% 1.53%
--------------------------------------------------------------------------------------------------------
</TABLE>
(1)"Other expenses" have been restated to reflect current fees and expenses.
Actual expenses for the fiscal year were lower than those shown in the
table because of voluntary fee waivers by the advisor. See "Additional
Information -- Financial Highlights." THE ADVISOR INTENDS TO WAIVE FEES
DURING THE CURRENT FISCAL YEAR SO THAT TOTAL FUND OPERATING EXPENSES DO
NOT EXCEED 0.80%, 1.45% AND 1.45%, RESPECTIVELY, FOR CLASS A, CLASS B AND
CLASS C SHARES. FEE WAIVERS MAY BE DISCONTINUED AT ANY TIME.
(2)Class B and class C shares generally are available only in exchange for
class B or class C shares, respectively, of another First American fund.
The contingent deferred sales charge imposed when you sell your class B or
class C shares of Prime Obligations Fund will be based on the date you
purchased shares of the original First American fund.
- -----------------------------------------------------------------------------
EXAMPLE This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes that
you invest $10,000 for the time periods indicated, that your investment has a
5% return each year, and that the fund's operating expenses remain the same.
Although your actual costs and returns may differ, based on these assumptions
your costs would be:
<TABLE>
<CAPTION>
CLASS B CLASS B CLASS C CLASS C
assuming assuming no assuming assuming no
redemption redemption redemption redemption
at end of at end of at end of at end of
CLASS A each period each period each period each period
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 year $ 91 $ 656 $ 156 $ 354 $ 254
3 years $ 284 $ 883 $ 483 $ 579 $ 579
5 years $ 493 $1,034 $ 834 $ 926 $ 926
10 years $1,096 $1,651 $1,651 $1,905 $1,905
</TABLE>
5 PROSPECTUS - FIRST AMERICAN MONEY MARKET FUNDS
<PAGE>
FUND SUMMARIES
TAX FREE OBLIGATIONS FUND
- -----------------------------------------------------------------------------
OBJECTIVE
Tax Free Obligations Fund seeks maximum current income exempt from federal
income taxes consistent with the preservation of capital and maintenance of
liquidity.
- -----------------------------------------------------------------------------
MAIN INVESTMENT STRATEGIES
Tax Free Obligations Fund invests at least 80% of its total assets in
high-quality, short-term municipal securities that pay interest that is
exempt from federal income tax, including the federal alternative minimum
tax. Municipal securities are issued by state and local governments and
certain U.S. territorial possessions to finance public infrastructure
projects such as streets and highways, schools, water and sewer systems,
hospitals, and airports. They also may be issued to refinance outstanding
obligations as well as to obtain funds for general operating expenses and for
loans to other public institutions and facilities. There are two principal
classifications of municipal securities:
o general obligation bonds, which are backed by the full faith, credit and
taxing power of the issuer, and
o revenue bonds, which are payable only from the revenues generated by a
specific project or from another specific revenue source.
The balance of the fund's total assets may be invested in taxable money
market securities and municipal securities subject to the alternative minimum
tax. However, the fund currently does not intend to invest in these types of
securities.
When selecting securities for the fund, the portfolio managers use a
"top-down" approach, looking first at general economic factors and market
conditions, then at individual securities.
- -----------------------------------------------------------------------------
MAIN RISKS
The main risks of investing in this fund include:
o Although the fund seeks to preserve the value of your investment at $1.00
per share, it is possible to lose money by investing in the fund. A major
change in interest rates or a default on a security or repurchase agreement
held by the fund could cause the value of your investment to decline.
o The level of income you receive from the fund will be affected by movements
in short-term interest rates.
o The value of municipal securities owned by the fund may be adversely
affected by future changes in federal income tax laws, including rate
reductions or the imposition of a flat tax.
- -----------------------------------------------------------------------------
FUND PERFORMANCE
The illustrations below provide you with information on the fund's volatility
and performance. Of course, how the fund has performed in the past does not
necessarily indicate how it will perform in the future.
The bar chart shows you how performance of the fund's shares has varied from
year to year. The table illustrates the fund's average annual total returns
over different time periods. Both the chart and the table assume that all
distributions have been reinvested.
6 PROSPECTUS - FIRST AMERICAN MONEY MARKET FUNDS
<PAGE>
FUND SUMMARIES
TAX FREE OBLIGATIONS FUND (CONTINUED)
- -----------------------------------------------------------------------------
FUND PERFORMANCE (CONTINUED)
ANNUAL TOTAL RETURNS AS OF 12/31 EACH YEAR(1)
[BAR GRAPH]
1996 2.65%
1997 2.87%
1998 2.85%
BEST QUARTER:
Quarter ending: 6/30/98
Total return 0.77%
WORST QUARTER:
Quarter ending: 9/30/96
Total Return 0.63%
AVERAGE ANNUAL TOTAL RETURNS
AS OF 12/31/98(1) Inception Date One Year Since Inception
- --------------------------------------------------------------------------------
Tax Free Obligations Fund (Class A) 1/9/95 2.85% 2.85%
- -------------------------------------------------------------------------------
(1)Performance prior to 11/25/97 is that of Qualivest Tax Free Money Market
Fund.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
The fund does not impose any sales charges (loads) or other fees when you
buy, sell or exchange shares. However, when you hold shares of the fund you
indirectly pay a portion of the fund's operating expenses. These expenses are
deducted from fund assets. The figures below are based on expenses during the
fiscal year ended September 30, 1998.(1)
---------------------------------------------------------------------------
SHAREHOLDER FEES Class A
--------------------------------------------------------------------------
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON PURCHASES None
MAXIMUM DEFERRED SALES CHARGE (LOAD) None
ANNUAL FUND OPERATING EXPENSES AS A % OF AVERAGE NET ASSETS
--------------------------------------------------------------------------
Management Fees 0.40%
Distribution and Service (12b-1) Fees 0.25%
Other Expenses 0.22%
TOTAL 0.87%
--------------------------------------------------------------------------
(1)"Other expenses" have been restated to reflect current fees and expenses.
Actual expenses for the fiscal year were lower than those shown in the
table because of voluntary fee waivers by the advisor. See "Additional
Information -- Financial Highlights." THE ADVISOR INTENDS TO WAIVE FEES
DURING THE CURRENT FISCAL YEAR SO THAT TOTAL FUND OPERATING EXPENSES DO
NOT EXCEED 0.74%. FEE WAIVERS MAY BE DISCONTINUED AT ANY TIME.
- -----------------------------------------------------------------------------
EXAMPLE This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes that
you invest $10,000 for the time periods indicated, that your investment has a
5% return each year, and that the fund's operating expenses remain the same.
Although your actual costs and returns may differ, based on these assumptions
your costs would be:
- ---------------------
1 year $ 89
3 years $ 278
5 years $ 482
10 years $1,073
7 PROSPECTUS - FIRST AMERICAN MONEY MARKET FUNDS
<PAGE>
FUND SUMMARIES
TREASURY OBLIGATIONS FUND
- -----------------------------------------------------------------------------
OBJECTIVE
Treasury Obligations Fund seeks maximum current income consistent with the
preservation of capital and maintenance of liquidity.
- -----------------------------------------------------------------------------
MAIN INVESTMENT STRATEGIES
Treasury Obligations Fund invests exclusively in short-term U.S. Treasury
obligations and repurchase agreements secured by U.S. Treasury obligations.
The U.S. Treasury obligations in which the fund invests include U.S. Treasury
bonds, notes and bills. These types of Treasury securities are essentially
the same except for differences in interest rates, maturities and dates of
issuance. U.S. Treasury obligations are backed by the full faith and credit
of the United States government.
When selecting securities for the fund, the portfolio managers use a
"top-down" approach, looking first at general economic factors and market
conditions, then at individual securities.
- -----------------------------------------------------------------------------
MAIN RISKS
The main risks of investing in this fund include:
o Although the fund seeks to preserve the value of your investment at $1.00
per share, it is possible to lose money by investing in the fund. A major
change in interest rates or a default on a repurchase agreement held by the
fund could cause the value of your investment to decline.
o The level of income you receive from the fund will be affected by movements
in short-term interest rates.
o By investing solely in U.S. Treasury obligations and repurchase agreements
secured by those securities, the fund may offer less income than a money
market fund investing in other high-quality money market securities.
- -----------------------------------------------------------------------------
FUND PERFORMANCE
The illustrations below provide you with information on the fund's volatility
and performance. Of course, how the fund has performed in the past does not
necessarily indicate how it will perform in the future.
The bar chart is designed to show you how performance of the fund's shares
has varied from year to year. However, the fund's class A shares have only
been offered for one calendar year. The table illustrates the fund's average
annual total returns over different time periods. Both the chart and the
table assume that all distributions have been reinvested.
8 PROSPECTUS - FIRST AMERICAN MONEY MARKET FUNDS
<PAGE>
FUND SUMMARIES
TREASURY OBLIGATIONS FUND (CONTINUED)
- -----------------------------------------------------------------------------
FUND PERFORMANCE (CONTINUED)
ANNUAL TOTAL RETURNS AS OF 12/31 EACH YEAR
[BAR GRAPH]
1998 4.84%
BEST QUARTER:
Quarter ending: 9/30/98
Total return 1.23%
WORST QUARTER:
Quarter ending: 12/31/98
Total Return 1.09%
ANNUAL TOTAL RETURNS AS OF 12/31 EACH YEAR
AVERAGE ANNUAL TOTAL RETURNS
AS OF 12/31/98 Inception Date One Year Since Inception
- -----------------------------------------------------------------------------
Treasury Obligations Fund (Class A) 11/3/97 4.84% 4.87%
- -----------------------------------------------------------------------------
FEES AND EXPENSES
The fund does not impose any sales charges (loads) or other fees when you
buy, sell or exchange shares. However, when you hold shares of the fund you
indirectly pay a portion of the fund's operating expenses. These expenses are
deducted from fund assets. The figures below are based on expenses during the
fiscal year ended September 30, 1998.(1)
---------------------------------------------------------------------------
SHAREHOLDER FEES Class A
--------------------------------------------------------------------------
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON PURCHASES None
MAXIMUM DEFERRED SALES CHARGE (LOAD) None
ANNUAL FUND OPERATING EXPENSES AS A % OF AVERAGE NET ASSETS
--------------------------------------------------------------------------
Management Fees 0.40%
Distribution and Service (12b-1) Fees 0.25%
Other Expenses 0.11%
TOTAL 0.76%
--------------------------------------------------------------------------
(1)Actual expenses for the fiscal year were lower than those shown in the
table because of voluntary fee waivers by the advisor. See "Additional
Information -- Financial Highlights." THE ADVISOR INTENDS TO WAIVE FEES
DURING THE CURRENT FISCAL YEAR SO THAT TOTAL FUND OPERATING EXPENSES DO
NOT EXCEED 0.70%. FEE WAIVERS MAY BE DISCONTINUED AT ANY TIME.
- -----------------------------------------------------------------------------
EXAMPLE This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes that
you invest $10,000 for the time periods indicated, that your investment has a
5% return each year, and that the fund's operating expenses remain the same.
Although your actual costs and returns may differ, based on these assumptions
your costs would be:
-------------------
1 year $ 78
3 years $243
5 years $422
10 years $942
9 PROSPECTUS - FIRST AMERICAN MONEY MARKET FUNDS
<PAGE>
POLICIES & SERVICES
BUYING SHARES
You may become a shareholder in any of the funds with an initial investment
of $1,000 or more ($250 for a retirement plan). Additional investments can be
made for as little as $100 ($25 for a retirement plan). The funds have the
right to waive these minimum investment requirements for employees of the
funds' advisor and its affiliates. The funds also have the right to reject
any purchase order.
- -----------------------------------------------------------------------------
CHOOSING A SHARE CLASS
All funds in this prospectus offer class A shares. Prime Obligations Fund
also offers class B and class C shares.
Each class has its own cost structure. Class B and class C shares are
available only in exchange for class B or class C shares, respectively, of
another First American fund or, in the case of class B shares, to set up a
systematic exchange program to purchase class B shares of other First
American funds.
CLASS A SHARES
Class A shares are offered at net asset value with no front-end or contingent
deferred sales charge.
CLASS B SHARES
Prime Obligations Fund class B shares are available only in exchange for
class B shares of another First American fund, or to set up a systematic
exchange program that will be used to purchase class B shares of other First
American funds. See "Managing Your Investment -- Systematic Exchange
Program."
Class B shares have no front-end sales charge, however they do have:
o higher annual expenses than class A shares. (See "Fees and Expenses" in the
"Fund Summaries" section.)
o a back-end sales charge, called a "contingent deferred sales charge," if
you redeem your shares within six years of the date you purchased the
original First American fund shares.
o automatic conversion to class A shares approximately eight years after
purchase, thereby reducing future annual expenses.
CLASS C SHARES
Prime Obligations Fund class C shares are available only in exchange for
class C shares of another First American fund, or to set up a systematic
exchange program that will be used to purchase class C shares of other First
American funds. Class C shares of the other First American funds have a
front-end sales charge. You pay no front-end sales charge when you exchange
other First American fund class C shares for Prime Obligations Fund class C
shares. However, Prime Obligations Fund class C shares:
o are subject to a 1% contingent deferred sales charge if you redeem your
shares within 18 months of the date you purchased the original First
American fund shares.
o have higher annual expenses than class A shares. (See "Fees and Expenses"
in the "Fund Summaries" section.)
o do not convert to class A shares.
Because class C shares do not convert to class A shares, they will continue
to have higher annual expenses than class A shares for as long as you hold
them.
- -----------------------------------------------------------------------------
12b-1 FEES
Each fund has adopted a plan under rule 12b-1 of the Investment Company Act
that allows it to pay the fund's distributor an annual fee for the
distribution and sale of its shares and for services provided to
shareholders.
FOR 12b-1 FEES ARE EQUAL TO:
----------------------------------------------------------
Class A shares 0.25% of average daily net assets
Class B shares 1% of average daily net assets
Class C shares 1% of average daily net assets
Because these fees are paid out of a fund's assets on an ongoing basis, over
time these fees will increase the cost of your investment and may cost you
more than paying other types of sales charges.
The class A share 12b-1 fee is a shareholder servicing fee. For class B and
class C shares, a portion of the 12b-1 fee equal to 0.25% of average daily
net assets is a shareholder servicing fee, and the rest is a distribution
fee.
The funds' distributor uses the shareholder servicing fee to compensate
brokers, participating institutions and "one-stop" mutual fund networks for
providing ongoing services to shareholder accounts. These institutions
receive annual fees equal to 0.25% of a fund's class A, class B and class C
share average daily net assets attributable to shares sold through such
institutions. For class B shares, the institution does not begin to receive
its annual fee until one year after the shares are sold. The funds'
distributor also pays institutions which sell class C shares a 0.75% annual
distribution fee beginning one year after the shares are sold. The
distributor may pay additional fees to institutions out of its own assets, in
exchange for sales and/or administrative services performed on behalf of the
institution's customers.
- -----------------------------------------------------------------------------
CALCULATING YOUR SHARE PRICE
Your purchase price will be based on the fund's net asset value (NAV) per
share, which is generally calculated as of the close of regular trading on
the New York Stock Exchange (usually 3:00 p.m. Central time) every day the
exchange and federally chartered banks are open. As discussed below, your
order must be received by the funds by 11:30 a.m. Central time for Tax Free
Obligations Fund, and by 2:00 p.m. Central time for Government Obligations
Fund, Prime Obligations Fund and Treasury Obligations Fund, in order for
shares to be priced at that day's NAV.
A fund's NAV is equal to the market value of its investments and other
assets, less any liabilities, divided by the number of fund shares. The
securities held by the funds are valued on the basis of amortized cost. This
involves valuing an instrument at its cost and thereafter assuming a constant
amortization of any discount or premium until the instrument's maturity,
10 PROSPECTUS - FIRST AMERICAN MONEY MARKET FUNDS
<PAGE>
POLICIES & SERVICES
BUYING SHARES (CONTINUED)
rather than looking at actual changes in the market value of the instrument.
Each fund's net asset value is normally expected to be $1 per share.
CLASS A SHARES
Your purchase price for class A shares is their net asset value. You pay no
front-end or contingent deferred sales charge.
CLASS B SHARES
Prime Obligations Fund class B shares are available only in exchange for
class B shares of another First American fund, or to set up a systematic
exchange program that will be used to purchase class B shares of other First
American funds. See "Managing Your Investment -- Systematic Exchange
Program."
Your purchase price for class B shares is their net asset value -- there is
no front-end sales charge. However, if you redeem your shares within six
years of the date you purchased the original First American fund shares, you
will pay a back-end sales charge, called a contingent deferred sales charge
(CDSC). Although you pay no front-end sales charge when you buy class B
shares, the funds' distributor pays a sales commission of 4.25% of the amount
invested to brokers and financial institutions which sell class B shares. The
funds' distributor receives any CDSC imposed when you sell your class B
shares.
Your CDSC will be based on the value of your original First American fund
shares when they were purchased or on the value of the Prime Obligations Fund
class B shares at the time of sale, whichever is less. The charge does not
apply to shares you acquired by reinvesting your dividend or capital gain
distributions. Shares will be sold in the order that minimizes your CDSC.
YEAR SINCE PURCHASE OF ORIGINAL CDSC AS A % OF THE
FIRST AMERICAN FUND SHARES VALUE OF YOUR SHARES
-------------------------------------------------------------
First 5%
Second 5%
Third 4%
Fourth 3%
Fifth 2%
Sixth 1%
Seventh 0%
Eighth 0%
Your class B shares will automatically convert to class A shares eight years
after the first day of the month you purchased the original First American
fund shares. For example, if you purchase class B shares of one of the First
American funds on June 15, 1999, and later exchange them for Prime
Obligations Fund class B shares, the Prime Obligations Fund shares will
convert to class A shares on June 1, 2007.
The CDSC will be waived for:
o redemptions following the death or disability (as defined in the Internal
Revenue Code) of a shareholder.
o redemptions that equal the minimum required distribution from an individual
retirement account or other retirement plan to a shareholder who has
reached the age of 70 1/2.
o redemptions through a systematic withdrawal plan, at a rate of up to 12% a
year of your account's value. During the first year, the 12% annual limit
will be based on the value of your account on the date the plan is
established. Thereafter, it will be based on the value of your account on
the preceding December 31.
CLASS C SHARES
Prime Obligations Fund class C shares are available only in exchange for
class C shares of another First American fund. The purchase price for class C
shares of the other First American funds is their net asset value plus a
front-end sales charge equal to 1% of the purchase price (1.01% of the net
amount invested). You pay no front-end sales charge when you exchange other
First American fund class C shares for Prime Obligations Fund class C shares.
However, if you redeem your shares within 18 months of the date you purchased
the original First American fund shares, you will be assessed a contingent
deferred sales charge (CDSC) of 1% of the value of the original First
American fund shares at the time of purchase or the Prime Obligations Fund
class C shares at the time of sale, whichever is less. The CDSC does not
apply to shares you acquired by reinvesting your dividend or capital gain
distributions. Shares will be sold in the order that minimizes your CDSC.
The distributor receives any CDSC imposed when you sell your class C shares.
The CDSC for class C shares will be waived in the same circumstances as the
class B share CDSC. See "Class B Shares" above.
Unlike class B shares, class C shares do not convert to class A shares after
a specified period of time. Therefore, your shares will continue to have
higher annual expenses than class A shares.
11 PROSPECTUS - FIRST AMERICAN MONEY MARKET FUNDS
<PAGE>
POLICIES & SERVICES
BUYING SHARES (CONTINUED)
- -----------------------------------------------------------------------------
HOW TO BUY SHARES
You may buy shares on any day when the New York Stock Exchange and federally
chartered banks are open. Your shares will be priced at the net asset value
determined on the day your purchase order is processed. To make sure that
your order is accepted, follow the directions for purchasing shares given
below.
BY PHONE
You may purchase shares by calling your broker or financial institution, if
they have a sales agreement with the funds' distributor. In order for shares
to be purchased at that day's price, your broker or financial institution
must transmit orders to the funds by 11:30 a.m. Central time for Tax Free
Obligations Fund and 2:00 p.m. Central time for Government Obligations Fund,
Prime Obligations Fund and Treasury Obligations Fund. Your broker or
financial institution will specify the time by which they must receive your
purchase order to assure same day processing.
Some financial institutions may charge a fee for helping you purchase shares.
Contact your broker or financial institution for more information.
If you are paying by wire, you may purchase shares by calling 1-800-637-2548
before 11:30 a.m. Central time for Tax Free Obligations Fund, and before 2
p.m. Central time for Government Obligations Fund, Prime Obligations Fund and
Treasury Obligations Fund. All information will be taken over the telephone,
and your order will be placed when the funds' custodian receives payment by
wire. Wire federal funds as follows:
U.S. Bank National Association, Minneapolis, MN
ABA Number 091000022
For Credit to: DST Systems, Inc.:
Account Number 160234580266
For Further Credit to (investor name and fund name)
BY MAIL
To purchase shares by mail, simply complete and sign a new account form,
enclose a check made payable to the fund you wish to invest in, and mail both
to:
First American Funds
c/o DST Systems, Inc.
P.O. Box 419382
Kansas City, Missouri 64141-6382.
After you have established an account, you may continue to purchase shares by
mailing your check to First American Funds at the same address.
Please note the following:
o All purchases must be made in U.S. dollars.
o Third-party checks, credit cards, credit card checks and cash are not
accepted.
o If a check does not clear your bank, the funds reserve the right to cancel
the purchase, and you could be liable for any losses or fees incurred.
- -----------------------------------------------------------------------------
INVESTING AUTOMATICALLY
To purchase shares as part of a savings discipline, you may add to your
investment on a regular basis by having $100 or more automatically withdrawn
from your bank account on a periodic basis and invested in fund shares. You
may apply for participation in this program through your broker or financial
institution or by calling 1-800-637-2548.
12 PROSPECTUS - FIRST AMERICAN MONEY MARKET FUNDS
<PAGE>
POLICIES & SERVICES
SELLING SHARES
- -----------------------------------------------------------------------------
HOW TO SELL SHARES
You may sell your shares on any day when the New York Stock Exchange and
federally chartered banks are open. Your shares will be sold at the net asset
value determined on the day your redemption is processed, less any applicable
contingent deferred sales charge. To make sure that your order is accepted,
follow the directions for selling shares given below.
The proceeds from your sale normally will be mailed or wired within one day,
but in no event more than seven days, after your request is received in
proper form.
BY PHONE
If you purchased shares through a broker or financial institution, simply
call them to sell your shares. Your broker or financial institution must
transmit redemption requests to the funds by 11:30 a.m. Central time for Tax
Free Obligations Fund and 2:00 p.m. Central time for Government Obligations
Fund, Prime Obligations Fund and Treasury Obligations Fund in order for
redemptions to be processed on that day. Your broker or financial institution
will specify the time by which they must receive your redemption request to
assure same day processing. Contact your broker or financial institution
directly for more information.
If you did not purchase shares through a broker or financial institution, you
may sell your shares by calling 1-800-637-2548 before 11:30 a.m. Central time
for Tax Free Obligations Fund, and before 2:00 p.m. Central time for
Government Obligations Fund, Prime Obligations Fund and Treasury Obligations
Fund. Calls received after these times will be processed the following
business day. Proceeds can be wired to your bank account (if the proceeds are
at least $1,000 and you have previously supplied your bank account
information to the transfer agent) or sent to you by check.
If you recently purchased your shares by check or through the Automated
Clearing House (ACH), proceeds from the sale of those shares may not be
available until your check or ACH payment has cleared, which may take up to
10 calendar days from the date of purchase.
BY MAIL
To sell shares by mail, send a written request to your broker or financial
institution, or to the funds' transfer agent at the following address:
First American Funds
c/o DST Systems, Inc.
P.O. Box 419382
Kansas City, Missouri 64141-6382.
Your request should include the following information:
o name of the fund;
o account number;
o dollar amount or number of shares redeemed;
o name on the account; and
o signatures of all registered account owners.
Signatures on a written request must be guaranteed if:
o you would like the proceeds from the sale to be paid to anyone other than
to the shareholder of record.
o you would like the check mailed to an address other than the address on the
funds' records.
o your redemption request is for $25,000 or more.
A signature guarantee assures that a signature is genuine and protects
shareholders from unauthorized account transfers. Banks, savings and loan
associations, trust companies, credit unions, broker-dealers and member firms
of a national securities exchange may guarantee signatures. Call your
financial institution to determine if it has this capability.
Proceeds from a written redemption request will be sent to you by check.
BY CHECKING ACCOUNT
Checkwriting privileges are available for class A shares of Prime Obligations
Fund. You may sign up for checkwriting privileges when you complete a new
account form, or by calling your broker, financial institution or the funds.
With a fund checking account, you may redeem shares simply by writing a check
for $100 or more. A fee is charged for this service. Call 1-800-637-2548 for
more information.
Please note that you may not use a check to close your account.
- -----------------------------------------------------------------------------
SYSTEMATIC WITHDRAWALS
If your account has a value of $5,000 or more, you may redeem a specific
dollar amount from your account on a regular basis. To set up systematic
withdrawals, contact your broker or financial institution.
You should not make systematic withdrawals if you plan to continue investing
in the fund, due to sales charges and tax liabilities. In addition, it may
not be in your best interest to make systematic withdrawals of class B or
class C shares, since these withdrawals may be subject to a CDSC.
ACCOUNTS WITH LOW BALANCES
Except for retirement plans, if your account balance falls below $500 as a
result of selling or exchanging shares, you will receive written notice and
be given 60 days to re-establish the minimum balance. If you do not, the fund
may close your account and send you the proceeds, less any applicable
contingent deferred sales charge.
13 PROSPECTUS - FIRST AMERICAN MONEY MARKET FUNDS
<PAGE>
POLICIES & SERVICES
MANAGING YOUR INVESTMENT
- -----------------------------------------------------------------------------
SYSTEMATIC EXCHANGE PROGRAM
You may make automatic monthly exchanges of your class A, class B or class C
shares of Prime Obligations Fund for the same class of shares of another
First American fund. Investing a fixed dollar amount at regular intervals,
sometimes referred to as "dollar cost averaging," has the effect of reducing
the average cost per share of the fund acquired.
To set up a systematic exchange program, you initially purchase an amount of
class A, class B or class C shares of Prime Obligations Fund equal to the
total amount that you wish to invest in the other First American fund. On a
monthly basis, the dollar amount of Prime Obligations Fund shares that you
specify will then be exchanged for shares of the other First American fund.
Exchanges of class A shares will be subject to the applicable sales charge
imposed by the First American fund into which you are exchanging. Therefore,
you may wish to execute a letter of intent in connection with a class A share
systematic exchange program. (A letter of intent indicates a non-binding
intent to purchase $50,000 or more of First American fund class A shares over
a 13-month period, which lowers your sales charge. See the prospectus of the
First American fund into which you plan to exchange for more information.)
Exchanges of Prime Obligations Fund class B or class C shares will not be
subject to a CDSC. See "Exchanging Shares," below. However, if you redeem the
Prime Obligations Fund class B or class C shares in your account, rather than
exchange them, they will be subject to a CDSC.
You may set up a systematic exchange program through your broker or financial
institution, or by calling 1-800-637-2548.
- -----------------------------------------------------------------------------
EXCHANGING SHARES
If your investment goals or your financial needs change, you may move from
one First American fund to another. There is no fee to exchange shares.
You may exchange your shares only for shares of the same class of the other
First American fund. Exchanges are made based on the net asset value per
share of each fund at the time of the exchange. When you exchange your class
A shares for class A shares of another First American fund, you will have to
pay the sales charge imposed by the other fund, unless your money market fund
shares were originally issued in exchange for shares of a First American fund
that had a sales charge. When you exchange your class B or class C shares for
class B or class C shares of another First American fund, the time you held
the shares of the "old" fund will be added to the time you hold the shares of
the "new" fund for purposes of determining your CDSC or, in the case of class
B shares, calculating when your shares convert to class A shares.
Before exchanging into any fund, be sure to read its prospectus carefully. A
fund may change or cancel its exchange policies at any time. You will be
notified of any changes. The funds have the right to limit exchanges to four
times per year.
BY PHONE
You may exchange shares by calling your broker, your financial institution,
or the funds' transfer agent, provided that both funds have identical
shareholder registrations. To request an exchange through the funds' transfer
agent, call 1-800-637-2548. Your instructions must be received by the funds'
transfer agent before 11:30 a.m. Central time for Tax Free Obligations Fund
and before 2:00 p.m. Central time for Government Obligations Fund, Prime
Obligations Fund and Treasury Obligations Fund, or by an earlier time
specified by your broker or financial institution, in order for shares to be
exchanged the same day.
BY MAIL
To exchange shares by written request, please follow the procedures under
"Selling Shares." Be sure to include the names of both funds involved in the
exchange.
TELEPHONE TRANSACTIONS
You may buy, sell or exchange shares by telephone, unless you elected on your
new account form to restrict this privilege. If you wish to reinstate this
option on an existing account, please call Investor Services at
1-800-637-2548 to request the appropriate form.
The funds and their agents will not be responsible for any losses that may
result from acting on wire or telephone instructions that they reasonably
believe to be genuine. The funds and their agents will each follow reasonable
procedures to confirm that instructions received by telephone are genuine,
which may include taping telephone conversations.
It may be difficult to reach the funds by telephone during periods of unusual
market activity. If you are unable to reach the funds or their agents by
telephone, please consider sending written instructions.
14 PROSPECTUS - FIRST AMERICAN MONEY MARKET FUNDS
<PAGE>
POLICIES & SERVICES
MANAGING YOUR INVESTMENT (CONTINUED)
- -----------------------------------------------------------------------------
STAYING INFORMED
SHAREHOLDER REPORTS
Shareholder reports are mailed twice a year, in November and May. They
include financial statements, performance information, a message from your
portfolio managers, and, on an annual basis, the auditors' report.
In an attempt to reduce shareholder costs and help eliminate duplication, the
funds will try to limit their mailings to one report for each address that
lists one or more shareholders with the same last name. If you would like
additional copies, please call 1-800-637-2548.
STATEMENTS AND CONFIRMATIONS
Statements summarizing activity in your account are mailed at least
quarterly. Confirmations are mailed following each purchase or sale of fund
shares.
- -----------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS
Dividends from a fund's net investment income are declared daily, starting on
the day you purchase your shares, and paid monthly. You will not receive a
dividend for the day on which you sell shares.
Dividends will be reinvested in additional shares of the same fund, unless
you request that distributions be reinvested in another First American fund
or paid in cash. This request may be made on your new account form or by
writing to the fund. If you request that your distributions be paid in cash
but those distributions cannot be delivered because of an incorrect mailing
address, the undelivered distributions and all future distributions will be
reinvested in fund shares.
- -----------------------------------------------------------------------------
TAXES
Some of the tax consequences of investing in the funds are discussed below.
More information about taxes is in the Statement of Additional Information.
However, because everyone's tax situation is unique, always consult your tax
professional about federal, state and local tax consequences.
For Government Obligations Fund, Prime Obligations Fund and Treasury
Obligations Fund, dividends you receive from the fund are generally taxable
as ordinary income, whether you reinvest them or take them in cash. Dividends
attributable to income from U.S. government securities may be exempt from
state personal income taxes. You should consult your tax advisor for more
information.
Tax Free Obligations Fund intends to meet certain federal tax requirements so
that distributions of tax-exempt interest income may be treated as
"exempt-interest dividends." These dividends are not subject to regular
federal tax. However, although it has no current intention of doing so, the
fund may invest up to 20% of its net assets in municipal securities subject
to the federal alternative minimum tax. Any portion of exempt-interest
dividends attributable to interest on these securities may increase some
shareholders' alternative minimum tax.
15 PROSPECTUS - FIRST AMERICAN MONEY MARKET FUNDS
<PAGE>
ADDITIONAL INFORMATION
MANAGEMENT
INVESTMENT ADVISOR
First American Asset Management
601 Second Avenue South
Minneapolis, Minnesota 55402
U.S. Bank National Association (U.S. Bank), acting through its First American
Asset Management division, is the funds' investment advisor. First American
Asset Management provides investment management services to individuals and
institutions, including corporations, foundations, pensions and retirement
plans. As of December 31, 1998, it had more than $80 billion in assets under
management, including investment company assets of approximately $30 billion.
As investment advisor, First American Asset Management manages the funds'
business and investment activities, subject to the authority of the board of
directors. Each fund pays the investment advisor a monthly fee for providing
investment advisory services. During their most recent fiscal years, after
taking into account fee waivers, the funds paid the following investment
advisory fees to First American Asset Management:
ADVISORY FEE
AS A % OF
AVERAGE DAILY
NET ASSETS
---------------------------------------------
Government Obligations Fund 0.33%
Prime Obligations Fund 0.32%
Tax Free Obligations Fund 0.27%
Treasury Obligations Fund 0.34%
CUSTODIAN
U.S. Bank National Association
U.S. Bank Center
180 East Fifth Street
St. Paul, Minnesota 55101
ADMINISTRATOR
SEI Investments Management Corporation
Oaks, Pennsylvania 19456
DISTRIBUTOR
SEI Investments Distribution Co.
Oaks, Pennsylvania 19456
TRANSFER AGENT
DST Systems, Inc.
330 West Ninth Street
Kansas City, Missouri 64105
ADDITIONAL COMPENSATION
U.S. Bank and other affiliates of U.S. Bancorp may act as fiduciary with
respect to plans subject to the Employee Retirement Income Security Act of
1974 (ERISA) and other trust and agency accounts that invest in the funds. As
described above, U.S. Bank receives compensation for acting as the funds'
investment advisor. U.S. Bank and its affiliates also receive compensation in
connection with the following:
CUSTODY SERVICES. As compensation for acting as the funds' custodian, U.S.
Bank is paid monthly fees equal, on an annual basis, to 0.03% of a fund's
average daily net assets. In addition, U.S. Bank is reimbursed for its
out-of-pocket expenses incurred while providing custody services to the
funds.
SUB-ADMINISTRATION SERVICES. U.S. Bank assists the administrator and provides
sub-administration services to the funds. For providing these services, U.S.
Bank is compensated by the funds' administrator at an annual rate of up to
0.05% of each fund's average daily net assets.
TRANSFER AGENT SERVICES. U.S. Bank performs certain transfer agent and
dividend disbursing agent services with respect to the class A, class B and
class C shares of the funds held through accounts at U.S. Bank and its
affiliates. The funds pay U.S. Bank an annual fee of $15 per account for
providing these services.
SECURITIES LENDING SERVICES. In connection with lending its portfolio
securities, Government Obligations Fund pays administrative and custodial
fees to U.S. Bank which are equal to 40% of the fund's income from these
securities lending transactions.
BROKERAGE TRANSACTIONS. The funds purchase most of their portfolio securities
directly from the issuer or from an underwriter or market maker, and not from
a broker acting as agent. However, the funds may from time to time use
brokers when buying portfolio securities. The funds' investment advisor may
place trades through its affiliates, U.S. Bancorp Investments, Inc. and U.S.
Bancorp Piper Jaffray Inc., which will earn commissions on such transactions.
SALES OF FUND SHARES. U.S. Bancorp Investments, Inc. and U.S. Bancorp Piper
Jaffray Inc., broker-dealers affiliated with U.S. Bank, have entered into
agreements with the funds' distributor to sell fund shares and will earn
commissions and annual shareholder servicing fees in connection with these
sales.
PORTFOLIO MANAGEMENT
Each fund's investments are managed by a team of persons associated with
First American Asset Management.
16 PROSPECTUS - FIRST AMERICAN MONEY MARKET FUNDS
<PAGE>
ADDITIONAL INFORMATION
MORE ABOUT THE FUNDS
- -----------------------------------------------------------------------------
INVESTMENT STRATEGIES
The funds' main investment strategies are discussed in the "Fund Summaries"
section. These are the strategies that the funds' investment advisor believes
are most likely to be important in trying to achieve the funds' objectives.
You should be aware that each fund may also use strategies and invest in
securities that are not described in this prospectus, but that are described
in the Statement of Additional Information (SAI). For a copy of the SAI, call
Investor Services at 1-800-637-2548.
In addition to the securities specified in the "Fund Summaries" section, each
fund may invest in other money market funds that invest in the same types of
securities as the respective fund, including money market funds advised by
U.S. Bank.
INVESTMENT APPROACH
Each fund complies with Securities and Exchange Commission regulations that
apply to money market funds. These regulations require that each fund's
investments mature within 397 days from the date of purchase, and that the
average maturity of each fund's investments (on a dollar-weighted basis) be
90 days or less. The funds may invest in securities with variable or floating
interest rates and securities with demand features. The maturities of these
securities are determined according to regulations which allow the funds to
consider some of these securities as having maturities shorter than their
stated maturity dates. All of the funds' investments must be in U.S.
dollar-denominated high quality securities which have been determined by the
funds' advisor to present minimal credit risks.
When selecting securities for the funds, the portfolio managers use a
"top-down" approach, looking first at general economic factors and market
conditions, then at individual securities. The portfolio managers look for
value while adhering to the credit and other restrictions on money market
funds.
- -----------------------------------------------------------------------------
YEAR 2000 ISSUES
Like other mutual funds and business and financial organizations, the funds
could be adversely affected if the computer systems used by the funds'
advisor, other service providers and entities with computer systems that are
linked to fund records do not properly process and calculate date-related
information from and after January 1, 2000. While year 2000-related computer
problems could have a negative effect on the funds, the funds' administrator
has undertaken a program designed to assess and monitor the steps being taken
by the funds' service providers to address year 2000 issues.This program
includes seeking assurances from service providers that their systems are or
will be year 2000 compliant and reviewing service providers' periodic reports
to monitor their status concerning their year 2000 readiness and compliance.
The administrator and the advisor also report regularly to the funds' board
of directors concerning their own and other service providers' progress
toward year 2000 readiness. Although these reports indicate that service
providers are or expect to be year 2000 compliant, there can be no assurance
that this will be the case in all instances or that year 2000 difficulties
experienced by others in the financial services industry will not impact the
funds. In addition, there can be no assurance that year 2000 difficulties
will not have an adverse effect on the funds' investments or on global
markets or economies, generally. The funds are not bearing any of the
expenses incurred by their service providers in preparing for the year 2000.
17 PROSPECTUS - FIRST AMERICAN MONEY MARKET FUNDS
<PAGE>
ADDITIONAL INFORMATION
FINANCIAL HIGHLIGHTS
The tables that follow present performance information about the class A
shares of each fund and the class B shares of Prime Obligations Fund. There
were no class C shares outstanding during the periods for which information
is presented. This information is intended to help you understand each fund's
financial performance for the past five years or, if shorter, the period of
the fund's operations. Some of this information reflects financial results
for a single fund share. Total returns in the tables represent the rate that
you would have earned or lost on an investment in a fund, excluding sales
charges and assuming you reinvested all of your dividends and distributions.
This information has been audited by KPMG Peat Marwick LLP, independent
auditors, whose report, along with the funds' financial statements, is
included in the funds' annual report, which is available upon request.
GOVERNMENT OBLIGATIONS FUND
FISCAL PERIOD ENDED
CLASS A SHARES SEPTEMBER 30, 1998(1)
- -------------------------------------------------------------------------------
PER SHARE DATA
Net Asset Value, Beginning of Period $ 1.00
Net Investment Income 0.02
Dividends (from net investment income) (0.02)
------------------
Net Asset Value, End of Period $ 1.00
==================
Total Return 2.10%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $325,024
Ratio of Expenses to Average Net Assets 0.70%(2)
Ratio of Net Income to Average Net Assets 4.93%(2)
Ratio of Expenses to Average Net Assets (excluding waivers) 0.76%(2
Ratio of Net Income to Average Net Assets (excluding waivers) 4.87%(2)
------------------------------------------------------------------------------
(1)Class A shares have been offered since April 29, 1998.
(2)Annualized.
18 PROSPECTUS - FIRST AMERICAN MONEY MARKET FUNDS
<PAGE>
ADDITIONAL INFORMATION
FINANCIAL HIGHLIGHTS (CONTINUED)
PRIME OBLIGATIONS FUND
<TABLE>
<CAPTION>
FISCAL PERIOD ENDED SEPTEMBER 30,
CLASS A SHARES 1998 1997 1996 1995(1)
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value, Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net Investment Income 0.05 0.05 0.05 0.04
Dividends (from net investment income) (0.05) (0.05) (0.05) (0.04)
-------------------------------------------------
Net Asset Value, End of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00
=================================================
Total Return 5.15% 5.06% 5.08% 3.84%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $3,699,197 $218,261 $135,146 $96,083
Ratio of Expenses to Average Net Assets 0.70% 0.70% 0.70% 0.70%(3)
Ratio of Net Income to Average Net Assets 5.00% 4.95% 4.94% 5.43%(3)
Ratio of Expenses to Average Net Assets (excluding waivers) 0.79% 0.77% 0.79% 0.82%(3)
Ratio of Net Income to Average Net Assets (excluding
waivers) 4.91% 4.88% 4.85% 5.31%(3)
---------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FISCAL PERIOD ENDED SEPTEMBER 30,
CLASS B SHARES 1998 1997 1996 1995(2)
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value, Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net Investment Income 0.04 0.04 0.04 0.03
Dividends (from net investment income) (0.04) (0.04) (0.04) (0.03)
----------------------------------------
Net Asset Value, End of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00
========================================
Total Return 4.37% 4.27% 4.29% 3.28%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $2,397 $2,018 $1,763 $ 14
Ratio of Expenses to Average Net Assets 1.45% 1.45% 1.45% 1.45%(3)
Ratio of Net Income to Average Net Assets 4.29% 4.17% 4.15% 4.70%(3)
Ratio of Expenses to Average Net Assets (excluding waivers) 1.53% 1.52% 1.54% 1.57%(3)
Ratio of Net Income to Average Net Assets (excluding
waivers) 4.21% 4.10% 4.06% 4.58%(3)
------------------------------------------------------------------------------------------------------
</TABLE>
(1)Class A shares have been offered since January 21, 1995.
(2)Class B shares have been offered since January 23, 1995.
(3)Annualized.
19 PROSPECTUS - FIRST AMERICAN MONEY MARKET FUNDS
<PAGE>
ADDITIONAL INFORMATION
FINANCIAL HIGHLIGHTS (CONTINUED)
TAX FREE OBLIGATIONS FUND(1)
<TABLE>
<CAPTION>
FISCAL PERIOD FISCAL PERIOD
ENDED ENDED
SEPTEMBER 30, NOVEMBER 30, FISCAL YEAR ENDED JULY 31
CLASS A SHARES 1998 1997 1997 1996 1995(2)
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value, Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net Investment Income 0.02 0.01 0.03 0.03 0.02
Dividends (from net investment income) (0.02) (0.01) (0.03) (0.03) (0.02)
--------------------------------------------------------------------
Net Asset Value, End of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====================================================================
Total Return 2.45% 0.96% 2.76% 2.81% 1.66%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $247,154 $28,662 $31,668 $30,143 $33,569
Ratio of Expenses to Average Net Assets 0.70%(3) 0.89%(3) 0.88% 0.89% 1.00%(3)
Ratio of Net Income to Average Net Assets 2.84%(3) 2.83%(3) 2.73% 2.78% 2.98%(3)
Ratio of Expenses to Average Net Assets
(excluding waivers) 0.83%(3) 1.23%(3) 1.23% 1.25% 1.36%(3)
Ratio of Net Income to Average Net Assets
(excluding waivers) 2.71%(3) 2.49%(3) 2.38% 2.42% 2.62%(3)
----------------------------------------------------------------------------------------------------------------
</TABLE>
(1)The financial highlights for Tax Free Obligations Fund include the
historical financial highlights of the Qualivest Tax-Free Money Market
Fund. The assets of Qualivest Tax Free Money Market Fund were acquired by
Tax Free Obligations Fund on November 25, 1997.
(2)Class A shares have been offered since January 9, 1995.
(3)Annualized.
TREASURY OBLIGATIONS FUND
Fiscal period ended
September 30,
CLASS A SHARES 1998(1)
------------------------------------------------------------------------------
PER SHARE DATA
Net Asset Value, Beginning of Period $ 1.00
Net Investment Income 0.05
Dividends (from net investment income) (0.05)
-------------------
Net Asset Value, End of Period $ 1.00
===================
Total Return 4.54%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $101,749
Ratio of Expenses to Average Net Assets 0.70%(2)
Ratio of Net Income to Average Net Assets 4.88%(2)
Ratio of Expenses to Average Net Assets (excluding waivers) 0.76%(2)
Ratio of Net Income to Average Net Assets (excluding
waivers) 4.82%(2)
------------------------------------------------------------------------------
(1)Class A shares have been offered since November 3, 1997.
(2)Annualized.
20 PROSPECTUS - FIRST AMERICAN MONEY MARKET FUNDS
<PAGE>
FOR MORE INFORMATION
More information about the funds is available in the funds' Statement of
Additional Information and annual and semiannual reports.
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI provides more details about the funds and their policies. A current SAI
is on file with the Securities and Exchange Commission (SEC) and is incorporated
into this prospectus by reference (which means that it is legally considered
part of this prospectus).
ANNUAL AND SEMIANNUAL REPORTS
Additional information about the funds' investments is available in the funds'
annual and semiannual reports to shareholders. In the funds' annual report, you
will find a discussion of the market conditions and investment strategies that
significantly affected the funds' performance during their last fiscal year.
You can obtain a free copy of the funds' SAI and/or free copies of the funds'
most recent annual or semiannual reports by calling Investor Services at
1-800-637-2548. The material you request will be sent by first-class mail or
other means designed to ensure equally prompt delivery, within three business
days of receipt of the request.
You can also obtain copies by visiting the SEC's Public Reference Room in
Washington, DC, or by sending your request and a duplicating fee to the SEC's
Public Reference Section, Washington, DC 20549-6009. For more information, call
1-800-SEC-0330.
Information about the funds is also available on the Internet. Text-only
versions of fund documents can be viewed online or down-loaded from the SEC's
Internet site at http://www.sec.gov.
SEC file number: 811-3313
FAF-1901 (2/1999)R
<PAGE>
FEBRUARY 1, 1999
MONEY MARKET FUNDS
CLASS Y SHARES
Government Obligations Fund
Prime Obligations Fund
Tax Free Obligations Fund
Treasury Obligations Fund
First American
Funds, Inc.
PROSPECTUS
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved the shares of these funds, or determined if the
information in this prospectus is accurate or complete. Any statement to the
contrary is a criminal offense.
[LOGO] FIRST AMERICAN
THE POWER OF DISCIPLINED INVESTING(R)
<PAGE>
TABLE OF
CONTENTS
FUND SUMMARIES
Government Obligations Fund 2
Prime Obligations Fund 4
Tax Free Obligations Fund 6
Treasury Obligations Fund 8
POLICIES & SERVICES
Buying and Selling Shares 10
Managing Your Investment 11
ADDITIONAL INFORMATION
Management 12
More About The Funds 13
Financial Highlights 14
FOR MORE INFORMATION Back Cover
<PAGE>
FUND SUMMARIES
INTRODUCTION
This section of the prospectus describes the objectives of the First American
Money Market Funds, summarizes the main investment strategies used by each
fund in trying to achieve its objectives, and highlights the risks involved
with these strategies. It also provides you with information about the
performance, fees and expenses of the funds.
AN INVESTMENT IN THE FUNDS IS NOT A DEPOSIT OF U.S. BANK NATIONAL ASSOCIATION
AND IS NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION
OR ANY OTHER GOVERNMENT AGENCY. ALTHOUGH THE FUNDS SEEK TO PRESERVE THE VALUE
OF YOUR INVESTMENT AT $1.00 PER SHARE, IT IS POSSIBLE TO LOSE MONEY BY
INVESTING IN THE FUNDS.
1 PROSPECTUS - FIRST AMERICAN MONEY MARKET FUNDS
<PAGE>
FUND SUMMARIES
GOVERNMENT OBLIGATIONS FUND
- --------------------------------------------------------------------------------
OBJECTIVE
Government Obligations Fund seeks maximum current income to the extent
consistent with the preservation of capital and maintenance of liquidity.
- --------------------------------------------------------------------------------
MAIN INVESTMENT STRATEGIES
Government Obligations Fund invests exclusively in short-term U.S. government
securities and repurchase agreements secured by U.S. government securities.
U.S. government securities are bonds or other debt obligations issued or
guaranteed as to principal and interest by the U.S. government or one of its
agencies or instrumentalities. U.S. Treasury securities and some obligations
of U.S. government agencies and instrumentalities are supported by the "full
faith and credit" of the United States government. Other U.S. government
securities are backed by the right of the issuer to borrow from the U.S.
Treasury. Still others are supported only by the credit of the issuer or
instrumentality.
When selecting securities for the fund, the portfolio managers use a
"top-down" approach, looking first at general economic factors and market
conditions, then at individual securities.
To generate additional income, the fund may lend securities representing up
to one-third of the value of its total assets to broker-dealers, banks and
other institutions.
- --------------------------------------------------------------------------------
MAIN RISKS
The main risks of investing in this fund include:
o Although the fund seeks to preserve the value of your investment at $1.00
per share, it is possible to lose money by investing in the fund. A major
change in interest rates or a default on a security or repurchase agreement
held by the fund, or a securities lending agreement entered into by the
fund, could cause the value of your investment to decline.
o The level of income you receive from the fund will be affected by movements
in short-term interest rates.
o By investing solely in U.S. government securities and repurchase agreements
secured by those securities, the fund may offer less income than a money
market fund investing in other high-quality money market securities.
- --------------------------------------------------------------------------------
FUND PERFORMANCE
The illustrations below provide you with information on the fund's volatility
and performance. Of course, how the fund has performed in the past does not
necessarily indicate how it will perform in the future.
The bar chart shows you how performance of the fund's shares has varied from
year to year. The table illustrates the fund's average annual total returns
over different time periods. Both the chart and the table assume that all
distributions have been reinvested.
2 PROSPECTUS - FIRST AMERICAN MONEY MARKET FUNDS
<PAGE>
FUND SUMMARIES
GOVERNMENT OBLIGATIONS FUND (CONTINUED)
- -----------------------------------------------------------------------------
FUND PERFORMANCE (CONTINUED)
ANNUAL TOTAL RETURNS AS OF 12/31 EACH YEAR
[BAR GRAPH]
1991 5.56%
1992 3.34%
1993 2.89%
1994 4.00%
1995 5.69%
1996 5.13%
1997 5.26%
1998 5.15%
BEST QUARTER:
Quarter ending: 3/31/91
Total return 1.53%
WORST QUARTER:
Quarter ending: 6/30/93
Total Return 0.71%
AVERAGE ANNUAL TOTAL RETURNS Inception Since
AS OF 12/31/98 Date One Year Five Years Inception
- --------------------------------------------------------------------------------
Government Obligations Fund 3/1/90 5.15% 5.04% 4.92%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FEES AND EXPENSES
The fund does not impose any sales charges (loads) or other fees when you
buy, sell or exchange shares. However, when you hold shares of the fund you
indirectly pay a portion of the fund's operating expenses. These expenses are
deducted from fund assets. The figures below are based on expenses during the
fiscal year ended September 30, 1998.(1)
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
------------------------------------------------------------------------------
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON PURCHASES None
MAXIMUM DEFERRED SALES CHARGE (LOAD) None
ANNUAL FUND OPERATING EXPENSES AS A % OF AVERAGE NET ASSETS
------------------------------------------------------------------------------
Management Fees 0.40%
Distribution and Service (12b-1) Fees None
Other Expenses 0.12%
TOTAL 0.52%
------------------------------------------------------------------------------
(1)Actual expenses for the fiscal year were lower than those shown in the
table because of voluntary fee waivers by the advisor. See "Additional
Information -- Financial Highlights." THE ADVISOR INTENDS TO WAIVE FEES
DURING THE CURRENT FISCAL YEAR SO THAT TOTAL FUND OPERATING EXPENSES DO
NOT EXCEED 0.45%. FEE WAIVERS MAY BE DISCONTINUED AT ANY TIME.
- --------------------------------------------------------------------------------
EXAMPLE This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes that
you invest $10,000 for the time periods indicated, that your investment has a
5% return each year, and that the fund's operating expenses remain the same.
Although your actual costs and returns may differ, based on these assumptions
your costs would be:
-------------------
1 year $ 53
3 years $167
5 years $291
10 years $653
3 PROSPECTUS - FIRST AMERICAN MONEY MARKET FUNDS
<PAGE>
FUND SUMMARIES
PRIME OBLIGATIONS FUND
- --------------------------------------------------------------------------------
OBJECTIVE
Prime Obligations Fund seeks maximum current income to the extent consistent
with preservation of capital and maintenance of liquidity.
- -----------------------------------------------------------------------------
MAIN INVESTMENT STRATEGIES
Prime Obligations Fund invests in high-quality short-term debt obligations,
including:
o securities issued by the U.S. government or one of its agencies or
instrumentalities;
o U.S. dollar-denominated obligations of domestic and foreign banks with
total assets of at least $500 million (including fixed and variable rate
certificates of deposit, time deposits and bankers' acceptances);
o commercial paper;
o non-convertible corporate debt securities;
o loan participation interests; and
o repurchase agreements for the securities in which the fund may invest.
When selecting securities for the fund, the portfolio managers use a
"top-down" approach, looking first at general economic factors and market
conditions, then at individual securities.
The fund may invest up to 25% of its total assets in dollar-denominated
obligations of U.S. branches of foreign banks which are subject to the same
regulation as U.S. banks. The fund also may invest up to 25% of its total
assets, collectively, in dollar-denominated obligations of foreign branches
of domestic banks, foreign banks and foreign corporations.
- -----------------------------------------------------------------------------
MAIN RISKS
The main risks of investing in this fund include:
o Although the fund seeks to preserve the value of your investment at $1.00
per share, it is possible to lose money by investing in the fund. A major
change in interest rates or a default on a security or repurchase agreement
held by the fund could cause the value of your investment to decline.
o The level of income you receive from the fund will be affected by movements
in short-term interest rates.
o Foreign securities in which the fund invests, although dollar denominated,
may present some additional risk. Political or social instability or
diplomatic developments could adversely affect the securities. There is
also the risk of 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. In addition, there may be less public information available
about foreign corporations and foreign banks and their branches.
- -----------------------------------------------------------------------------
FUND PERFORMANCE
The illustrations below provide you with information on the fund's volatility
and performance. Of course, how the fund has performed in the past does not
necessarily indicate how it will perform in the future.
The bar chart shows you how performance of the fund's shares has varied from
year to year. The table illustrates the fund's average annual total returns
over different time periods. Both the chart and the table assume that all
distributions have been reinvested.
4 PROSPECTUS - FIRST AMERICAN MONEY MARKET FUNDS
<PAGE>
FUND SUMMARIES
PRIME OBLIGATIONS FUND (CONTINUED)
- -----------------------------------------------------------------------------
FUND PERFORMANCE (CONTINUED)
ANNUAL TOTAL RETURNS AS OF 12/31 EACH YEAR
[BAR GRAPH]
1991 5.86%
1992 3.54%
1993 2.99%
1994 4.08%
1995 5.78%
1996 5.23%
1997 5.39%
1998 5.32%
BEST QUARTER:
Quarter ending: 3/31/91
Total return 1.65%
WORST QUARTER:
Quarter ending: 6/30/93
Total Return 0.73%
AVERAGE ANNUAL TOTAL RETURNS Inception Since
AS OF 12/31/98 Date One Year Five Years Inception
- --------------------------------------------------------------------------------
Prime Obligations Fund 3/1/90 5.32% 5.16% 5.09%
- --------------------------------------------------------------------------------
FEES AND EXPENSES
The fund does not impose any sales charges (loads) or other fees when you
buy, sell or exchange shares. However, when you hold shares of the fund you
indirectly pay a portion of the fund's operating expenses. These expenses are
deducted from fund assets. The figures below show expenses during the fiscal
year ended September 30, 1998.(1)
------------------------------------------------------------------------------
SHAREHOLDER FEES
-----------------------------------------------------------------------------
MAXIMUM SALES CHARGE (LOAD) None
MAXIMUM DEFERRED SALES CHARGE (LOAD) PROCEEDS, WHICHEVER IS LESS None
ANNUAL FUND OPERATING EXPENSES AS A % OF AVERAGE NET ASSETS
-----------------------------------------------------------------------------
Management Fees 0.40%
Distribution and Service (12b-1) Fees None
Other Expenses 0.13%
TOTAL 0.53%
-----------------------------------------------------------------------------
(1)Actual expenses for the fiscal year were lower than those shown in the
table because of voluntary fee waivers by the advisor. See "Additional
Information -- Financial Highlights." THE ADVISOR INTENDS TO WAIVE FEES
DURING THE CURRENT FISCAL YEAR SO THAT TOTAL FUND OPERATING EXPENSES DO
NOT EXCEED 0.45%. FEE WAIVERS MAY BE DISCONTINUED AT ANY TIME.
- -----------------------------------------------------------------------------
EXAMPLE This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes that
you invest $10,000 for the time periods indicated, that your investment has a
5% return each year, and that the fund's operating expenses remain the same.
Although your actual costs and returns may differ, based on these assumptions
your costs would be:
-------------------
1 year $ 54
3 years $170
5 years $296
10 years $665
5 PROSPECTUS - FIRST AMERICAN MONEY MARKET FUNDS
<PAGE>
FUND SUMMARIES
TAX FREE OBLIGATIONS FUND
- -----------------------------------------------------------------------------
OBJECTIVE
Tax Free Obligations Fund seeks maximum current income exempt from federal
income taxes consistent with the preservation of capital and maintenance of
liquidity.
- -----------------------------------------------------------------------------
MAIN INVESTMENT STRATEGIES
Tax Free Obligations Fund invests at least 80% of its total assets in
high-quality, short-term municipal securities that pay interest that is
exempt from federal income tax, including the federal alternative minimum
tax. Municipal securities are issued by state and local governments and
certain U.S. territorial possessions to finance public infrastructure
projects such as streets and highways, schools, water and sewer systems,
hospitals, and airports. They also may be issued to refinance outstanding
obligations as well as to obtain funds for general operating expenses and for
loans to other public institutions and facilities. There are two principal
classifications of municipal securities:
o general obligation bonds, which are backed by the full faith, credit and
taxing power of the issuer; and
o revenue bonds, which are payable only from the revenues generated by a
specific project or from another specific revenue source.
The balance of the fund's total assets may be invested in taxable money
market securities and municipal securities subject to the alternative minimum
tax. However, the fund currently does not intend to invest in these types of
securities.
When selecting securities for the fund, the portfolio managers use a
"top-down" approach, looking first at general economic factors and market
conditions, then at individual securities.
- -----------------------------------------------------------------------------
MAIN RISKS
The main risks of investing in this fund include:
o Although the fund seeks to preserve the value of your investment at $1.00
per share, it is possible to lose money by investing in the fund. A major
change in interest rates or a default on a security or repurchase agreement
held by the fund could cause the value of your investment to decline.
o The level of income you receive from the fund will be affected by movements
in short-term interest rates.
o The value of municipal securities owned by the fund may be adversely
affected by future changes in federal income tax laws, including rate
reductions or the imposition of a flat tax.
- -----------------------------------------------------------------------------
FUND PERFORMANCE
The illustrations below provide you with information on the fund's volatility
and performance. Of course, how the fund has performed in the past does not
necessarily indicate how it will perform in the future.
The bar chart shows you how performance of the fund's shares has varied from
year to year. The table illustrates the fund's average annual total returns
over different time periods. Both the chart and the table assume that all
distributions have been reinvested.
6 PROSPECTUS - FIRST AMERICAN MONEY MARKET FUNDS
<PAGE>
FUND SUMMARIES
TAX FREE OBLIGATIONS FUND (CONTINUED)
- -----------------------------------------------------------------------------
FUND PERFORMANCE (CONTINUED)
ANNUAL TOTAL RETURNS AS OF 12/31 EACH YEAR(1)
[BAR GRAPH]
1996 3.06%
1997 3.26%
1998 3.12%
BEST QUARTER:
Quarter ending: 6/30/97
Total return 0.85%
WORST QUARTER:
Quarter ending: 3/31/97
Total Return 0.73%
AVERAGE ANNUAL TOTAL RETURNS Inception Since
AS OF 12/31/98(1) Date One Year Inception
- --------------------------------------------------------------------------------
Tax Free Obligations Fund 1/9/95 3.12% 3.22%
- -----------------------------------------------------------------------------
(1)Performance prior to 11/25/97 is that of Qualivest Tax Free Money Market
Fund.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
The fund does not impose any sales charges (loads) or other fees when you
buy, sell or exchange shares. However, when you hold shares of the fund you
indirectly pay a portion of the fund's operating expenses. These expenses are
deducted from fund assets. The figures below are based on expenses during the
fiscal year ended September 30, 1998.(1)
--------------------------------------------------------------------------
SHAREHOLDER FEES
-------------------------------------------------------------------------
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON PURCHASES None
MAXIMUM DEFERRED SALES CHARGE (LOAD) None
ANNUAL FUND OPERATING EXPENSES AS A % OF AVERAGE NET ASSETS
-------------------------------------------------------------------------
Management Fees 0.40%
Distribution and Service (12b-1) Fees None
Other Expenses 0.18%
TOTAL 0.58%
-------------------------------------------------------------------------
(1)Actual expenses for the fiscal year were lower than those shown in the
table because of voluntary fee waivers by the advisor. See "Additional
Information -- Financial Highlights." THE ADVISOR INTENDS TO WAIVE FEES
DURING THE CURRENT FISCAL YEAR SO THAT TOTAL FUND OPERATING EXPENSES DO
NOT EXCEED 0.45%. FEE WAIVERS MAY BE DISCONTINUED AT ANY TIME.
- -----------------------------------------------------------------------------
EXAMPLE This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes that
you invest $10,000 for the time periods indicated, that your investment has a
5% return each year, and that the fund's operating expenses remain the same.
Although your actual costs and returns may differ, based on these assumptions
your costs would be:
-------------------
1 year $ 59
3 years $186
5 years $324
10 years $726
7 PROSPECTUS - FIRST AMERICAN MONEY MARKET FUNDS
<PAGE>
FUND SUMMARIES
TREASURY OBLIGATIONS FUND
- -----------------------------------------------------------------------------
OBJECTIVE
Treasury Obligations Fund seeks maximum current income consistent with the
preservation of capital and maintenance of liquidity.
- -----------------------------------------------------------------------------
MAIN INVESTMENT STRATEGIES
Treasury Obligations Fund invests exclusively in short-term U.S. Treasury
obligations and repurchase agreements secured by U.S. Treasury obligations.
The U.S. Treasury obligations in which the fund invests include U.S. Treasury
bonds, notes and bills. These types of Treasury securities are essentially
the same except for differences in interest rates, maturities and dates of
issuance. U.S. Treasury obligations are backed by the full faith and credit
of the United States government.
When selecting securities for the fund, the portfolio managers use a
"top-down" approach, looking first at general economic factors and market
conditions, then at individual securities.
- -----------------------------------------------------------------------------
MAIN RISKS
The main risks of investing in this fund include:
o Although the fund seeks to preserve the value of your investment at $1.00
per share, it is possible to lose money by investing in the fund. A major
change in interest rates or a default on a repurchase agreement held by the
fund could cause the value of your investment to decline.
o The level of income you receive from the fund will be affected by movements
in short-term interest rates.
o By investing solely in U.S. Treasury obligations and repurchase agreements
secured by those securities, the fund may offer less income than a money
market fund investing in other high-quality money market securities.
- -----------------------------------------------------------------------------
FUND PERFORMANCE
The illustrations below provide you with information on the fund's volatility
and performance. Of course, how the fund has performed in the past does not
necessarily indicate how it will perform in the future.
The bar chart shows you how performance of the fund's shares has varied from
year to year. The table illustrates the fund's average annual total returns
over different time periods. Both the chart and the table assume that all
distributions have been reinvested.
8 PROSPECTUS - FIRST AMERICAN MONEY MARKET FUNDS
<PAGE>
FUND SUMMARIES
TREASURY OBLIGATIONS FUND (CONTINUED)
- -----------------------------------------------------------------------------
FUND PERFORMANCE (CONTINUED)
ANNUAL TOTAL RETURNS AS OF 12/31 EACH YEAR
[BAR GRAPH]
1996 5.05%
1997 5.20%
1998 5.10%
BEST QUARTER:
Quarter ending: 12/31/97
Total return 1.31%
WORST QUARTER:
Quarter ending: 12/31/98
Total Return 1.15%
AVERAGE ANNUAL TOTAL RETURNS Inception Since
AS OF 12/31/98 Date One Year Inception
- -----------------------------------------------------------------------------
Treasury Obligations Fund 1/24/95 5.10% 5.23%
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
FEES AND EXPENSES
The fund does not impose any sales charges (loads) or other fees when you
buy, sell or exchange shares. However, when you hold shares of the fund you
indirectly pay a portion of the fund's operating expenses. These expenses are
deducted from fund assets. The figures below are based on expenses during the
fiscal year ended September 30, 1998.(1)
- --------------------------------------------------------------------------
SHAREHOLDER FEES
-------------------------------------------------------------------------
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON PURCHASES None
MAXIMUM DEFERRED SALES CHARGE (LOAD) None
ANNUAL FUND OPERATING EXPENSES AS A % OF AVERAGE NET ASSETS
-------------------------------------------------------------------------
Management Fees 0.40%
Distribution and Service (12b-1) Fees None
Other Expenses 0.11%
TOTAL 0.51%
-------------------------------------------------------------------------
(1)Actual expenses for the fiscal year were lower than those shown in the
table because of voluntary fee waivers by the advisor. See "Additional
Information -- Financial Highlights." THE ADVISOR INTENDS TO WAIVE FEES
DURING THE CURRENT FISCAL YEAR SO THAT TOTAL FUND OPERATING EXPENSES DO
NOT EXCEED 0.45%. FEE WAIVERS MAY BE DISCONTINUED AT ANY TIME.
- -----------------------------------------------------------------------------
EXAMPLE This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes that
you invest $10,000 for the time periods indicated, that your investment has a
5% return each year, and that the fund's operating expenses remain the same.
Although your actual costs and returns may differ, based on these assumptions
your costs would be:
-------------------
1 year $ 52
3 years $164
5 years $285
10 years $640
9 PROSPECTUS - FIRST AMERICAN MONEY MARKET FUNDS
<PAGE>
POLICIES & SERVICES
BUYING AND SELLING SHARES
Class Y shares are offered through banks and other financial institutions
that have entered into sales agreements with the funds' distributor. Class Y
shares are available to certain accounts for which the financial institution
acts in a fiduciary, agency or custodial capacity, such as certain trust
accounts and investment advisory accounts. To find out whether you may
purchase class Y shares, contact your financial institution.
- -----------------------------------------------------------------------------
CALCULATING YOUR SHARE PRICE
Your purchase price will be equal to the fund's net asset value (NAV) per
share, which is generally calculated as of the close of regular trading on
the New York Stock Exchange (usually 3:00 p.m. Central time) every day the
exchange and federally chartered banks are open. As discussed below, your
order must be received by the funds by 11:30 a.m. Central time for Tax Free
Obligations Fund, and by 2:00 p.m. Central time for Government Obligations
Fund, Prime Obligations Fund and Treasury Obligations Fund, in order for
shares to be priced at that day's NAV.
A fund's NAV is equal to the market value of its investments and other
assets, less any liabilities, divided by the number of fund shares. The
securities held by the funds are valued on the basis of amortized cost. This
involves valuing an instrument at its cost and thereafter assuming a constant
amortization of any discount or premium until the instrument's maturity,
rather than looking at actual changes in the market value of the instrument.
Each fund's net asset value is normally expected to be $1 per share.
- -----------------------------------------------------------------------------
HOW TO BUY AND SELL SHARES
You may purchase or sell shares by calling your financial institution. Shares
may be purchased and sold only on days when both the New York Stock Exchange
and federally chartered banks are open.
When purchasing shares, payment must be made by wire transfer, which can be
arranged by your financial institution.
Purchase orders and redemption requests must be received by your financial
institution by the time specified by the institution to be assured same day
processing. In order for shares to be purchased or sold at that day's price,
the funds must receive your purchase order or redemption request by 11:30
a.m. Central time for Tax Free Obligations Fund, and by 2:00 p.m. Central
time for Government Obligations Fund, Prime Obligations Fund and Treasury
Obligations Fund. It is the responsibility of your financial institution to
promptly transmit orders to the funds. In addition, a purchase order will be
effective on the day given only if the funds' custodian receives payment by
wire before the close of business.
If a fund receives a redemption request by the time specified above, payment
will be made the same day by transfer of federal funds. Otherwise, payment
will be made on the next business day.
- -----------------------------------------------------------------------------
HOW TO EXCHANGE SHARES
If your investment goals or your financial needs change, you may exchange
your shares for class Y shares of another First American fund. Exchanges will
be made at the net asset value per share of each fund at the time of the
exchange. There is no fee to exchange shares. If you are no longer eligible
to hold class Y shares, for example, if you decide to discontinue your
fiduciary, agency or custodian account, you may exchange your shares for
class A shares at net asset value. Class A shares have higher expenses than
class Y shares.
To exchange your shares, call your financial institution. In order for your
shares to be exchanged the same day, you must call your financial institution
by the time specified by the institution and your exchange order must be
received by the funds by 11:30 a.m. Central time for Tax Free Obligations
Fund, and by 2:00 p.m. Central time for Government Obligations Fund, Prime
Obligations Fund and Treasury Obligations Fund. It is the responsibility of
your financial institution to promptly transmit your exchange order to the
funds. Before exchanging into any fund, be sure to read its prospectus
carefully. A fund may change or cancel its exchange policies at any time. You
will be notified of any changes. The funds have the right to limit exchanges
to four times per year.
10 PROSPECTUS - FIRST AMERICAN MONEY MARKET FUNDS
<PAGE>
POLICIES & SERVICES
MANAGING YOUR INVESTMENT
- -----------------------------------------------------------------------------
STAYING INFORMED
SHAREHOLDER REPORTS
Shareholder reports are mailed twice a year, in November and May. They
include financial statements, performance information, a message from your
portfolio managers, and, on an annual basis, the auditors' report.
In an attempt to reduce shareholder costs and help eliminate duplication, the
funds will try to limit their mailings to one report for each address that
lists one or more shareholders with the same last name. If you would like
additional copies, please call 1-800-637-2548.
STATEMENTS AND CONFIRMATIONS
Statements summarizing activity in your account are mailed at least
quarterly. Confirmations are mailed following each purchase or sale of fund
shares.
- -----------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS
Dividends from a fund's net investment income are declared daily, starting on
the day you purchase your shares, and paid monthly. You will not receive a
dividend for the day on which you sell shares.
Dividends will be reinvested in additional shares of the same fund, unless
you request that distributions be reinvested in another First American fund
or paid in cash. This request may be made on your new account form or by
writing to the fund. If you request that your distributions be paid in cash
but those distributions cannot be delivered because of an incorrect mailing
address, the undelivered distributions and all future distributions will be
reinvested in fund shares.
- -----------------------------------------------------------------------------
TAXES
Some of the tax consequences of investing in the funds are discussed below.
More information about taxes is in the Statement of Additional Information.
However, because everyone's tax situation is unique, always consult your tax
professional about federal, state and local tax consequences.
For Government Obligations Fund, Prime Obligations Fund and Treasury
Obligations Fund, dividends you receive from the fund are generally taxable
as ordinary income, whether you reinvest them or take them in cash. Dividends
attributable to income from U.S. government securities may be exempt from
state personal income taxes. You should consult your tax advisor for more
information.
Tax Free Obligations Fund intends to meet certain federal tax requirements so
that distributions of tax-exempt interest income may be treated as
"exempt-interest dividends." These dividends are not subject to regular
federal tax. However, although it has no current intention of doing so, the
fund may invest up to 20% of its net assets in municipal securities subject
to the federal alternative minimum tax. Any portion of exempt-interest
dividends attributable to interest on these securities may increase some
shareholders' alternative minimum tax.
11 PROSPECTUS - FIRST AMERICAN MONEY MARKET FUNDS
<PAGE>
ADDITIONAL INFORMATION
MANAGEMENT
INVESTMENT ADVISOR
First American Asset Management
601 Second Avenue South
Minneapolis, Minnesota 55402
U.S. Bank National Association (U.S. Bank), acting through its First American
Asset Management division, is the funds' investment advisor. First American
Asset Management provides investment management services to individuals and
institutions, including corporations, foundations, pensions and retirement
plans. As of December 31, 1998, it had more than $80 million in assets under
management, including investment company assets of approximately $30 million.
As investment advisor, First American Asset Management manages the funds'
business and investment activities, subject to the authority of the board of
directors. Each fund pays the investment advisor a monthly fee for providing
investment advisory services. During their most recent fiscal years, after
taking into account fee waivers, the funds paid the following investment
advisory fees to First American Asset Management:
ADVISORY FEE
AS A % OF
AVERAGE DAILY
NET ASSETS
---------------------------------------------
Government Obligations Fund 0.33%
Prime Obligations Fund 0.32%
Tax Free Obligations Fund 0.27%
Treasury Obligations Fund 0.34%
---------------------------------------------
CUSTODIAN
U.S. Bank National Association
U.S. Bank Center
180 East Fifth Street
St. Paul, Minnesota 55101
ADMINISTRATOR
SEI Investments Management Corporation
Oaks, Pennsylvania 19456
DISTRIBUTOR
SEI Investments Distribution Co.
Oaks, Pennsylvania 19456
TRANSFER AGENT
DST Systems, Inc.
330 West Ninth Street
Kansas City, Missouri 64105
ADDITIONAL COMPENSATION
U.S. Bank and other affiliates of U.S. Bancorp may act as fiduciary with
respect to plans subject to the Employee Retirement Income Security Act of
1974 (ERISA) and other trust and agency accounts that invest in the funds. As
described above, U.S. Bank receives compensation for acting as the funds'
investment advisor. U.S. Bank and its affiliates also receive compensation in
connection with the following:
Custody Services. As compensation for acting as the funds' custodian, U.S.
Bank is paid monthly fees equal, on an annual basis, to 0.03% of a fund's
average daily net assets. In addition, U.S. Bank is reimbursed for its
out-of-pocket expenses incurred while providing custody services to the
funds.
Sub-Administration Services. U.S. Bank assists the administrator and provides
sub-administration services to the funds. For providing these services, U.S.
Bank is compensated by the funds' administrator at an annual rate of up to
0.05% of each fund's average daily net assets.
Securities Lending Services. In connection with lending its portfolio
securities, Government Obligations Fund pays administrative and custodial
fees to U.S. Bank which are equal to 40% of the fund's income from these
securities lending transactions.
Brokerage Transactions. The funds purchase most of their portfolio securities
directly from the issuer or from an underwriter or market maker, and not from
a broker acting as agent. However, the funds may from time to time use
brokers when buying portfolio securities. The funds' investment advisor may
place trades through its affiliates, U.S. Bancorp Investments, Inc. and U.S.
Bancorp Piper Jaffray Inc., which will earn commissions on such transactions.
PORTFOLIO MANAGEMENT
Each fund's investments are managed by a team of persons associated with
First American Asset Management.
12 PROSPECTUS - FIRST AMERICAN MONEY MARKET FUNDS
<PAGE>
ADDITIONAL INFORMATION
MORE ABOUT THE FUNDS
- -----------------------------------------------------------------------------
INVESTMENT STRATEGIES
The funds' main investment strategies are discussed in the "Fund Summaries"
section. These are the strategies that the funds' investment advisor believes
are most likely to be important in trying to achieve the funds' objectives.
You should be aware that each fund may also use strategies and invest in
securities that are not described in this prospectus, but that are described
in the Statement of Additional Information (SAI). For a copy of the SAI, call
Investor Services at 1-800-637-2548.
In addition to the securities specified in the "Fund Summaries" section, each
fund may invest in other money market funds that invest in the same types of
securities as the respective fund, including money market funds advised by
U.S. Bank.
INVESTMENT APPROACH
Each fund complies with Securities and Exchange Commission regulations that
apply to money market funds. These regulations require that each fund's
investments mature within 397 days from the date of purchase, and that the
average maturity of each fund's investments (on a dollar-weighted basis) be
90 days or less. The funds may invest in securities with variable or floating
interest rates and securities with demand features. The maturities of these
securities are determined according to regulations which allow the funds to
consider some of these securities as having maturities shorter than their
stated maturity dates. All of the funds' investments must be in U.S.
dollar-denominated high quality securities which have been determined by the
funds' advisor to present minimal credit risks.
When selecting securities for the funds, the portfolio managers use a
"top-down" approach, looking first at general economic factors and market
conditions, then at individual securities. The portfolio managers look for
value while adhering to the credit and other restrictions on money market
funds.
- -----------------------------------------------------------------------------
YEAR 2000 ISSUES
Like other mutual funds and business and financial organizations, the funds
could be adversely affected if the computer systems used by the funds'
advisor, other service providers and entities with computer systems that are
linked to fund records do not properly process and calculate date-related
information from and after January 1, 2000. While year 2000-related computer
problems could have a negative effect on the funds, the funds' administrator
has undertaken a program designed to assess and monitor the steps being taken
by the funds' service providers to address year 2000 issues.This program
includes seeking assurances from service providers that their systems are or
will be year 2000 compliant and reviewing service providers' periodic reports
to monitor their status concerning their year 2000 readiness and compliance.
The administrator and the advisor also report regularly to the funds' board
of directors concerning their own and other service providers' progress
toward year 2000 readiness. Although these reports indicate that service
providers are or expect to be year 2000 compliant, there can be no assurance
that this will be the case in all instances or that year 2000 difficulties
experienced by others in the financial services industry will not impact the
funds. In addition, there can be no assurance that year 2000 difficulties
will not have an adverse effect on the funds' investments or on global
markets or economies, generally. The funds are not bearing any of the
expenses incurred by their service providers in preparing for the year 2000.
13 PROSPECTUS - FIRST AMERICAN MONEY MARKET FUNDS
<PAGE>
ADDITIONAL INFORMATION
FINANCIAL HIGHLIGHTS
The tables that follow present performance information about the class Y
shares of each fund. This information is intended to help you understand each
fund's financial performance for the past five years or, if shorter, the
period of the fund's operations. Some of this information reflects financial
results for a single fund share. Total returns in the tables represent the
rate that you would have earned or lost on an investment in a fund, assuming
you reinvested all of your dividends and distributions.
This information has been audited by KPMG Peat Marwick LLP, independent
auditors, whose report, along with the funds' financial statements, is
included in the funds' annual report, which is available upon request.
GOVERNMENT OBLIGATIONS FUND
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30,
1998 1997 1996 1995 1994
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value, Beginning of Period $ 1.00 $ 1.00 $ 1.00 % 1.00 $ 1.00
Net Investment Income 0.05 0.05 0.05 0.06 0.04
Dividends (from net investment income) (0.05) (0.05) (0.05) (0.06) (0.04)
----------------------------------------------------------------------
Net Asset Value, End of Period 1.00 1.00 1.00 1.00 1.00
======================================================================
Total Return 5.30% 5.20% 5.24% 5.55% 3.48%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $1,000,043 $946,196 $777,594 %551,286 $455,869
Ratio of Expenses to Average Net Assets 0.45% 0.45% 0.45% 0.45% 0.45%
Ratio of Net Income to Average Net Assets 5.18% 5.07% 5.10% 5.44% 3.61%
Ratio of Expenses to Average Net Assets
(excluding waivers) 0.52% 0.52% 0.54% 0.60% 0.61%
Ratio of Net Income to Average Net Assets
(excluding waivers) 5.11% 5.00% 5.01% 5.29% 3.45%
------------------------------------------------------------------------------------------------------------------
</TABLE>
PRIME OBLIGATIONS FUND
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30,
1998 1997 1996 1995 1994
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value, Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net Investment Income 0.05 0.05 0.05 0.06 0.04
Dividends (from net investment income) (0.05) (0.05) (0.05) (0.06) (0.04)
----------------------------------------------------------------------
Net Asset Value, End of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======================================================================
Total Return 5.42% 5.32% 5.34% 5.64% 3.56%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $5,445,685 $3,615,873 $3,166,213 $2,911,055 $1,307,347
Ratio of Expenses to Average Net Assets 0.45% 0.45% 0.45% 0.45% 0.45%
Ratio of Net Income to Average Net Assets 5.28% 5.19% 5.20% 5.53% 3.58%
Ratio of Expenses to Average Net Assets
(excluding waivers) 0.53% 0.52% 0.54% 0.60% 0.60%
Ratio of Net Income to Average Net Assets
(excluding waivers) 5.20% 5.12% 5.11% 5.38% 3.43%
------------------------------------------------------------------------------------------------------------------
</TABLE>
14 PROSPECTUS - FIRST AMERICAN MONEY MARKET FUNDS
<PAGE>
ADDITIONAL INFORMATION
FINANCIAL HIGHLIGHTS (C0NTINUED)
TAX FREE OBLIGATIONS FUND(1)
<TABLE>
<CAPTION>
FISCAL PERIOD FISCAL PERIOD
ENDED ENDED
SEPTEMBER 30, NOVEMBER 30, FISCAL YEAR ENDED JULY 31
1998 1997(1) 1997 1996 1995(2)
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value, Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net Investment Income 0.03 0.01 0.03 0.03 0.02
Dividends (from net investment income) (0.03) (0.01) (0.03) (0.03) (0.02)
-----------------------------------------------------------------
Net Asset Value, End of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=================================================================
Total Return 2.67% 1.08% 3.17% 3.22% 1.88%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $272,995 $10,703 $9,137 $3,895 $1,264
Ratio of Expenses to Average Net Assets 0.45%(3) 0.64%(3) 0.48% 0.41% 0.59%(3)
Ratio of Net Income to Average Net Assets 3.13%(3) 3.09%(3) 3.13% 2.92% 3.38%(3)
Ratio of Expenses to Average Net Assets
(excluding waivers) 0.58%(3) 0.97%(3) 0.83% 0.79% 0.94%(3)
Ratio of Net Income to Average Net Assets
(excluding waivers) 3.00%(3) 2.76%(3) 2.78% 2.54% 3.03%(3)
-------------------------------------------------------------------------------------------------------------
</TABLE>
(1)The financial highlights for Tax Free Obligations Fund include the
historical financial highlights of the Qualivest Tax-Free Money Market
Fund. The assets of Qualivest Tax-Free Money Market Fund were acquired by
Tax Free Obligations Fund on November 25, 1997.
(2)Class Y shares have been offered since January 9, 1995.
(3)Annualized.
TREASURY OBLIGATIONS FUND
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30,
1998 1997 1996 1995(1)
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value, Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net Investment Income 0.05 0.05 0.05 0.04
Dividends (from net investment income) (0.05) (0.05) (0.05) (0.04)
------------------------------------------------
Net Asset Value, End of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00
================================================
Total Return 5.26% 5.14% 5.15% 3.83%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $1,803,608 $897,797 $317,392 $117,171
Ratio of Expenses to Average Net Assets 0.45% 0.45% 0.45% 0.45%(2)
Ratio of Net Income to Average Net Assets 5.13% 5.03% 5.00% 5.50%(2)
Ratio of Expenses to Average Net Assets (excluding waivers) 0.51% 0.53% 0.55% 0.55%(2)
Ratio of Net Income to Average Net Assets (excluding
waivers) 5.07% 4.95% 4.90% 5.40%(2)
--------------------------------------------------------------------------------------------------------------
</TABLE>
(1)Class Y shares have been offered since January 24, 1995.
(2)Annualized.
15 PROSPECTUS - FIRST AMERICAN MONEY MARKET FUNDS
<PAGE>
FOR MORE INFORMATION
More information about the funds is available in the funds' Statement of
Additional Information and annual and semiannual reports.
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI provides more details about the funds and their policies. A current SAI
is on file with the Securities and Exchange Commission (SEC) and is incorporated
into this prospectus by reference (which means that it is legally considered
part of this prospectus).
ANNUAL AND SEMIANNUAL REPORTS
Additional information about the funds' investments is available in the funds'
annual and semiannual reports to shareholders. In the funds' annual report, you
will find a discussion of the market conditions and investment strategies that
significantly affected the funds' performance during their last fiscal year.
You can obtain a free copy of the funds' SAI and/or free copies of the funds'
most recent annual or semiannual reports by calling Investor Services at
1-800-637-2548. The material you request will be sent by first-class mail or
other means designed to ensure equally prompt delivery, within three business
days of receipt of the request.
You can also obtain copies by visiting the SEC's Public Reference Room in
Washington, DC, or by sending your request and a duplicating fee to the SEC's
Public Reference Section, Washington, DC 20549-6009. For more information, call
1-800-SEC-0330.
Information about the funds is also available on the Internet. Text-only
versions of fund documents can be viewed online or down-loaded from the SEC's
Internet site at http://www.sec.gov.
SEC file number: 811-3313
FAF-1902 (2/1999)Y
<PAGE>
FEBRUARY 1, 1999
MONEY MARKET FUNDS
CLASS D SHARES
Government Obligations Fund
Prime Obligations Fund
Tax Free Obligations Fund
Treasury Obligations Fund
First American
Funds, Inc.
PROSPECTUS
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved the shares of these funds, or determined if the
information in this prospectus is accurate or complete. Any statement to the
contrary is a criminal offense.
[LOGO] FIRST AMERICAN
THE POWER OF DISCIPLINED INVESTING (R)
<PAGE>
TABLE OF
CONTENTS
FUND SUMMARIES
Government Obligations Fund 2
Prime Obligations Fund 4
Tax Free Obligations Fund 6
Treasury Obligations Fund 8
POLICIES & SERVICES
Buying and Selling Shares 10
Managing Your Investment 11
ADDITIONAL INFORMATION
Management 12
More About The Funds 13
Financial Highlights 14
FOR MORE INFORMATION Back Cover
<PAGE>
FUND SUMMARIES
INTRODUCTION
This section of the prospectus describes the objectives of the First American
Money Market Funds, summarizes the main investment strategies used by each
fund in trying to achieve its objectives, and highlights the risks involved
with these strategies. It also provides you with information about the
performance, fees and expenses of the funds.
AN INVESTMENT IN THE FUNDS IS NOT A DEPOSIT OF U.S. BANK NATIONAL ASSOCIATION
AND IS NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION
OR ANY OTHER GOVERNMENT AGENCY. ALTHOUGH THE FUNDS SEEK TO PRESERVE THE VALUE
OF YOUR INVESTMENT AT $1.00 PER SHARE, IT IS POSSIBLE TO LOSE MONEY BY
INVESTING IN THE FUNDS.
1 PROSPECTUS - FIRST AMERICAN MONEY MARKET FUNDS
<PAGE>
FUND SUMMARIES
GOVERNMENT OBLIGATIONS FUND
- -----------------------------------------------------------------------------
OBJECTIVE
Government Obligations Fund seeks maximum current income to the extent
consistent with the preservation of capital and maintenance of liquidity.
- -----------------------------------------------------------------------------
MAIN INVESTMENT STRATEGIES
Government Obligations Fund invests exclusively in short-term U.S. government
securities and repurchase agreements secured by U.S. government securities.
U.S. government securities are bonds or other debt obligations issued or
guaranteed as to principal and interest by the U.S. government or one of its
agencies or instrumentalities. U.S. Treasury securities and some obligations
of U.S. government agencies and instrumentalities are supported by the "full
faith and credit" of the United States government. Other U.S. government
securities are backed by the right of the issuer to borrow from the U.S.
Treasury. Still others are supported only by the credit of the issuer or
instrumentality.
When selecting securities for the fund, the portfolio managers use a
"top-down" approach, looking first at general economic factors and market
conditions, then at individual securities.
To generate additional income, the fund may lend securities representing up
to one-third of the value of its total assets to broker-dealers, banks and
other institutions.
- -----------------------------------------------------------------------------
MAIN RISKS
The main risks of investing in this fund include:
o Although the fund seeks to preserve the value of your investment at $1.00
per share, it is possible to lose money by investing in the fund. A major
change in interest rates or a default on a security or repurchase agreement
held by the fund, or a securities lending agreement entered into by the
fund, could cause the value of your investment to decline.
o The level of income you receive from the fund will be affected by movements
in short-term interest rates.
o By investing solely in U.S. government securities and repurchase agreements
secured by those securities, the fund may offer less income than a money
market fund investing in other high-quality money market securities.
- -----------------------------------------------------------------------------
FUND PERFORMANCE
The illustrations below provide you with information on the fund's volatility
and performance. Of course, how the fund has performed in the past does not
necessarily indicate how it will perform in the future.
The bar chart shows you how performance of the fund's shares has varied from
year to year. The table illustrates the fund's average annual total returns
over different time periods. Both the chart and the table assume that all
distributions have been reinvested.
2 PROSPECTUS - FIRST AMERICAN MONEY MARKET FUNDS
<PAGE>
FUND SUMMARIES
GOVERNMENT OBLIGATIONS FUND (CONTINUED)
- -----------------------------------------------------------------------------
FUND PERFORMANCE (CONTINUED)
ANNUAL TOTAL RETURNS AS OF 12/31 EACH YEAR
[BAR GRAPH]
1996 4.97%
1997 5.10%
1998 4.99%
BEST QUARTER:
Quarter ending: 12/31/97
Total return 1.28%
WORST QUARTER:
Quarter ending: 12/31/98
Total Return 1.14%
AVERAGE ANNUAL TOTAL RETURNS Inception Since
AS OF 12/31/98 Date One Year Inception
- --------------------------------------------------------------------------------
Government Obligations Fund 1/21/95 4.99% 5.14%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FEES AND EXPENSES
The fund does not impose any sales charges (loads) or other fees when you
buy, sell or exchange shares. However, when you hold shares of the fund you
indirectly pay a portion of the fund's operating expenses. These expenses are
deducted from fund assets. The figures below are based on expenses during the
fiscal year ended September 30, 1998.(1)
--------------------------------------------------------------------------
SHAREHOLDER FEES
-------------------------------------------------------------------------
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON PURCHASES None
MAXIMUM DEFERRED SALES CHARGE (LOAD) None
ANNUAL FUND OPERATING EXPENSES AS A % OF AVERAGE NET ASSETS
-------------------------------------------------------------------------
Management Fees 0.40%
Distribution and Service (12b-1) Fees 0.15%
Other Expenses 0.12%
TOTAL 0.67%
-------------------------------------------------------------------------
(1)Actual expenses for the fiscal year were lower than those shown in the
table because of voluntary fee waivers by the advisor. See "Additional
Information -- Financial Highlights." THE ADVISOR INTENDS TO WAIVE FEES
DURING THE CURRENT FISCAL YEAR SO THAT TOTAL FUND OPERATING EXPENSES DO
NOT EXCEED 0.60%. FEE WAIVERS MAY BE DISCONTINUED AT ANY TIME.
- -----------------------------------------------------------------------------
EXAMPLE This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes that
you invest $10,000 for the time periods indicated, that your investment has a
5% return each year, and that the fund's operating expenses remain the same.
Although your actual costs and returns may differ, based on these assumptions
your costs would be:
-------------------
1 year $ 68
3 years $214
5 years $373
10 years $835
3 PROSPECTUS - FIRST AMERICAN MONEY MARKET FUNDS
<PAGE>
FUND SUMMARIES
PRIME OBLIGATIONS FUND
- -----------------------------------------------------------------------------
OBJECTIVE
Prime Obligations Fund seeks maximum current income to the extent consistent
with preservation of capital and maintenance of liquidity.
- -----------------------------------------------------------------------------
MAIN INVESTMENT STRATEGIES
Prime Obligations Fund invests in high-quality short-term debt obligations,
including:
o securities issued by the U.S. government or one of its agencies or
instrumentalities;
o U.S. dollar-denominated obligations of domestic and foreign banks with
total assets of at least $500 million (including fixed and variable rate
certificates of deposit, time deposits and bankers' acceptances);
o commercial paper;
o non-convertible corporate debt securities;
o loan participation interests; and
o repurchase agreements for the securities in which the fund may invest.
When selecting securities for the fund, the portfolio managers use a
"top-down" approach, looking first at general economic factors and market
conditions, then at individual securities.
The fund may invest up to 25% of its total assets in dollar-denominated
obligations of U.S. branches of foreign banks which are subject to the same
regulation as U.S. banks. The fund also may invest up to 25% of its total
assets, collectively, in dollar-denominated obligations of foreign branches
of domestic banks, foreign banks and foreign corporations.
- -----------------------------------------------------------------------------
MAIN RISKS
The main risks of investing in this fund include:
o Although the fund seeks to preserve the value of your investment at $1.00
per share, it is possible to lose money by investing in the fund. A major
change in interest rates or a default on a security or repurchase agreement
held by the fund could cause the value of your investment to decline.
o The level of income you receive from the fund will be affected by movements
in short-term interest rates.
o Foreign securities in which the fund invests, although dollar denominated,
may present some additional risk. Political or social instability or
diplomatic developments could adversely affect the securities. There is
also the risk of 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. In addition, there may be less public information available
about foreign corporations and foreign banks and their branches.
- -----------------------------------------------------------------------------
FUND PERFORMANCE
The illustrations below provide you with information on the fund's volatility
and performance. Of course, how the fund has performed in the past does not
necessarily indicate how it will perform in the future.
The bar chart shows you how performance of the fund's shares has varied from
year to year. The table illustrates the fund's average annual total returns
over different time periods. Both the chart and the table assume that all
distributions have been reinvested.
4 PROSPECTUS - FIRST AMERICAN MONEY MARKET FUNDS
<PAGE>
FUND SUMMARIES
PRIME OBLIGATIONS FUND (CONTINUED)
- ----------------------------------------------------------------------------
FUND PERFORMANCE (CONTINUED)
ANNUAL TOTAL RETURNS AS OF 12/31 EACH YEAR
[BAR GRAPH]
1996 5.08%
1997 5.23%
1998 5.17%
BEST QUARTER:
Quarter ending: 12/31/97
Total return 1.32%
WORST QUARTER:
Quarter ending: 12/31/98
Total Return 1.23%
AVERAGE ANNUAL TOTAL RETURNS Inception Since
AS OF 12/31/98 Date One Year Inception
- -----------------------------------------------------------------------------
Prime Obligations Fund 1/24/95 5.17% 5.27%
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
FEES AND EXPENSES
The fund does not impose any sales charges (loads) or other fees when you
buy, sell or exchange shares. However, when you hold shares of the fund you
indirectly pay a portion of the fund's operating expenses. These expenses are
deducted from fund assets. The figures below are based on expenses during the
fiscal year ended September 30, 1998.(1)
------------------------------------------------------------------------------
SHAREHOLDER FEES
-----------------------------------------------------------------------------
MAXIMUM SALES CHARGE (LOAD) None
MAXIMUM DEFERRED SALES CHARGE (LOAD) PROCEEDS, WHICHEVER IS LESS None
ANNUAL FUND OPERATING EXPENSES AS A % OF AVERAGE NET ASSETS
-----------------------------------------------------------------------------
Management Fees 0.40%
Distribution and Service (12b-1) Fees 0.15%
Other Expenses 0.13%
TOTAL 0.68%
-----------------------------------------------------------------------------
(1)Actual expenses for the fiscal year were lower than those shown in the
table because of voluntary fee waivers by the advisor. See "Additional
Information -- Financial Highlights." THE ADVISOR INTENDS TO WAIVE FEES
DURING THE CURRENT FISCAL YEAR SO THAT TOTAL FUND OPERATING EXPENSES DO
NOT EXCEED 0.60%. FEE WAIVERS MAY BE DISCONTINUED AT ANY TIME.
- -----------------------------------------------------------------------------
EXAMPLE This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes that
you invest $10,000 for the time periods indicated, that your investment has a
5% return each year, and that the fund's operating expenses remain the same.
Although your actual costs and returns may differ, based on these assumptions
your costs would be:
- -----------------------------------------------------------------------------
1 year $ 60
3 years $218
5 years $379
10 years $847
5 PROSPECTUS - FIRST AMERICAN MONEY MARKET FUNDS
<PAGE>
FUND SUMMARIES
TAX FREE OBLIGATIONS FUND
- -----------------------------------------------------------------------------
OBJECTIVE
Tax Free Obligations Fund seeks maximum current income exempt from federal
income taxes consistent with the preservation of capital and maintenance of
liquidity.
- -----------------------------------------------------------------------------
MAIN INVESTMENT STRATEGIES
Tax Free Obligations Fund invests at least 80% of its total assets in
high-quality, short-term municipal securities that pay interest that is
exempt from federal income tax, including the federal alternative minimum
tax. Municipal securities are issued by state and local governments and
certain U.S. territorial possessions to finance public infrastructure
projects such as streets and highways, schools, water and sewer systems,
hospitals, and airports. They also may be issued to refinance outstanding
obligations as well as to obtain funds for general operating expenses and for
loans to other public institutions and facilities. There are two principal
classifications of municipal securities:
o general obligation bonds, which are backed by the full faith, credit and
taxing power of the issuer; and
o revenue bonds, which are payable only from the revenues generated by a
specific project or from another specific revenue source.
The balance of the fund's total assets may be invested in taxable money
market securities and municipal securities subject to the alternative minimum
tax. However, the fund currently does not intend to invest in these types of
securities.
When selecting securities for the fund, the portfolio managers use a
"top-down" approach, looking first at general economic factors and market
conditions, then at individual securities.
- -----------------------------------------------------------------------------
MAIN RISKS
The main risks of investing in this fund include:
o Although the fund seeks to preserve the value of your investment at $1.00
per share, it is possible to lose money by investing in the fund. A major
change in interest rates or a default on a security or repurchase agreement
held by the fund could cause the value of your investment to decline.
o The level of income you receive from the fund will be affected by movements
in short-term interest rates.
o The value of municipal securities owned by the fund may be adversely
affected by future changes in federal income tax laws, including rate
reductions or the imposition of a flat tax.
- -----------------------------------------------------------------------------
FUND PERFORMANCE
The illustrations below provide you with information on the fund's volatility
and performance. Of course, how the fund has performed in the past does not
necessarily indicate how it will perform in the future.
The bar chart is intended to show you how performance of the fund's shares
has varied from year to year. However, because class D shares were first
offered in 1997, only one calendar year of information is available. The
table illustrates the fund's average annual total returns over different time
periods. Both the chart and the table assume that all distributions have been
reinvested.
6 PROSPECTUS - FIRST AMERICAN MONEY MARKET FUNDS
<PAGE>
FUND SUMMARIES
TAX FREE OBLIGATIONS FUND (CONTINUED)
- -----------------------------------------------------------------------------
FUND PERFORMANCE (CONTINUED)
ANNUAL TOTAL RETURNS AS OF 12/31 EACH YEAR
[BAR GRAPH]
1998 2.95%
BEST QUARTER:
Quarter ending: 6/30/98
Total return 0.80%
WORST QUARTER:
Quarter ending: 12/31/98
Total Return 0.70%
AVERAGE ANNUAL TOTAL RETURNS Inception Since
AS OF 12/31/98 Date One Year Inception
- -----------------------------------------------------------------------------
Tax Free Obligations Fund 1/26/97 2.95% 2.97%
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
FEES AND EXPENSES
The fund does not impose any sales charges (loads) or other fees when you
buy, sell or exchange shares. However, when you hold shares of the fund you
indirectly pay a portion of the fund's operating expenses. These expenses are
deducted from fund assets. The figures below are based on expenses during the
fiscal year ended September 30, 1998.(1)
--------------------------------------------------------------------------
SHAREHOLDER FEES
-------------------------------------------------------------------------
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON PURCHASES None
MAXIMUM DEFERRED SALES CHARGE (LOAD) None
ANNUAL FUND OPERATING EXPENSES AS A % OF AVERAGE NET ASSETS
-------------------------------------------------------------------------
Management Fees 0.40%
Distribution and Service (12b-1) Fees 0.15%
Other Expenses 0.18%
TOTAL 0.73%
-------------------------------------------------------------------------
(1)Actual expenses for the fiscal year were lower than those shown in the
table because of voluntary fee waivers by the advisor. See "Additional
Information -- Financial Highlights." THE ADVISOR INTENDS TO WAIVE FEES
DURING THE CURRENT FISCAL YEAR SO THAT TOTAL FUND OPERATING EXPENSES DO
NOT EXCEED 0.60%. FEE WAIVERS MAY BE DISCONTINUED AT ANY TIME.
- -----------------------------------------------------------------------------
EXAMPLE This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes that
you invest $10,000 for the time periods indicated, that your investment has a
5% return each year, and that the fund's operating expenses remain the same.
Although your actual costs and returns may differ, based on these assumptions
your costs would be:
-------------------
1 year $ 75
3 years $233
5 years $406
10 years $906
7 PROSPECTUS - FIRST AMERICAN MONEY MARKET FUNDS
<PAGE>
FUND SUMMARIES
TREASURY OBLIGATIONS FUND
- -----------------------------------------------------------------------------
OBJECTIVE
Treasury Obligations Fund seeks maximum current income consistent with the
preservation of capital and maintenance of liquidity.
- -----------------------------------------------------------------------------
MAIN INVESTMENT STRATEGIES
Treasury Obligations Fund invests exclusively in short-term U.S. Treasury
obligations and repurchase agreements secured by U.S. Treasury obligations.
The U.S. Treasury obligations in which the fund invests include U.S. Treasury
bonds, notes and bills. These types of Treasury securities are essentially
the same except for differences in interest rates, maturities and dates of
issuance. U.S. Treasury obligations are backed by the full faith and credit
of the United States government.
When selecting securities for the fund, the portfolio managers use a
"top-down" approach, looking first at general economic factors and market
conditions, then at individual securities.
- -----------------------------------------------------------------------------
MAIN RISKS
The main risks of investing in this fund include:
o Although the fund seeks to preserve the value of your investment at $1.00
per share, it is possible to lose money by investing in the fund. A major
change in interest rates or a default on a repurchase agreement held by the
fund could cause the value of your investment to decline.
o The level of income you receive from the fund will be affected by movements
in short-term interest rates.
o By investing solely in U.S. Treasury obligations and repurchase agreements
secured by those securities, the fund may offer less income than a money
market fund investing in other high-quality money market securities.
- -----------------------------------------------------------------------------
FUND PERFORMANCE
The illustrations below provide you with information on the fund's volatility
and performance. Of course, how the fund has performed in the past does not
necessarily indicate how it will perform in the future.
The bar chart shows you how performance of the fund's shares has varied from
year to year. The table illustrates the fund's average annual total returns
over different time periods. Both the chart and the table assume that all
distributions have been reinvested.
8 PROSPECTUS - FIRST AMERICAN MONEY MARKET FUNDS
<PAGE>
FUND SUMMARIES
TREASURY OBLIGATIONS FUND (CONTINUED)
- -----------------------------------------------------------------------------
FUND PERFORMANCE (CONTINUED)
ANNUAL TOTAL RETURNS AS OF 12/31 EACH YEAR
[BAR GRAPH]
1994 3.62%
1995 5.41%
1996 4.89%
1997 5.04%
1998 4.94%
BEST QUARTER:
Quarter ending: 6/30/95
Total return 1.37%
WORST QUARTER:
Quarter ending: 3/31/94
Total Return 0.66%
AVERAGE ANNUAL TOTAL RETURNS Inception Since
AS OF 12/31/98 Date One Year Five Years Inception
- -----------------------------------------------------------------------------
Treasury Obligations Fund 10/4/93 4.94% 4.78% 4.68%
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
FEES AND EXPENSES
The fund does not impose any sales charges (loads) or other fees when you
buy, sell or exchange shares. However, when you hold shares of the fund you
indirectly pay a portion of the fund's operating expenses. These expenses are
deducted from fund assets. The figures below are based on expenses during the
fiscal year ended September 30, 1998.(1)
--------------------------------------------------------------------------
SHAREHOLDER FEES
-------------------------------------------------------------------------
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON PURCHASES None
MAXIMUM DEFERRED SALES CHARGE (LOAD) None
ANNUAL FUND OPERATING EXPENSES AS A % OF AVERAGE NET ASSETS
-------------------------------------------------------------------------
Management Fees 0.40%
Distribution and Service (12b-1) Fees 0.15%
Other Expenses 0.11%
TOTAL 0.66%
-------------------------------------------------------------------------
(1)Actual expenses for the fiscal year were lower than those shown in the
table because of voluntary fee waivers by the advisor. See "Additional
Information -- Financial Highlights." THE ADVISOR INTENDS TO WAIVE FEES
DURING THE CURRENT FISCAL YEAR SO THAT TOTAL FUND OPERATING EXPENSES DO
NOT EXCEED 0.60%. FEE WAIVERS MAY BE DISCONTINUED AT ANY TIME.
- -----------------------------------------------------------------------------
EXAMPLE This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes that
you invest $10,000 for the time periods indicated, that your investment has a
5% return each year, and that the fund's operating expenses remain the same.
Although your actual costs and returns may differ, based on these assumptions
your costs would be:
-------------------
1 year $ 67
3 years $211
5 years $368
10 years $822
9 PROSPECTUS - FIRST AMERICAN MONEY MARKET FUNDS
<PAGE>
POLICIES & SERVICES
BUYING AND SELLING SHARES
Class D shares are offered through banks and other financial institutions
that have entered into sales agreements with funds' distributor. Class D
shares are available to certain accounts for which the financial institution
acts in a fiduciary, agency or custodial capacity, such as certain trust
accounts and investment advisory accounts. To find out whether you may
purchase class D shares, contact your financial institution.
- -----------------------------------------------------------------------------
12b-1 FEES
Each fund has adopted a plan under rule 12b-1 of the Investment Company Act
that allows it to pay the fund's distributor an annual fee for the
distribution and sale of its shares and for services provided to
shareholders. Each fund pays a Rule 12b-1 shareholder servicing fee equal to
0.15% of its average daily net assets.
Because these fees are paid out of a fund's assets on an ongoing basis, over
time these fees will increase the cost of your investment and may cost you
more than paying other types of sales charges.
The funds' distributor uses the shareholder servicing fee to compensate
brokers, participating institutions and "one-stop" mutual fund networks for
providing ongoing services to shareholder accounts. These institutions
receive annual fees equal to 0.15% of a fund's class D share average daily
net assets attributable to shares sold through such institutions. The
distributor may pay additional fees to institutions out of its own assets, in
exchange for sales and/or administrative services performed on behalf of the
institution's customers.
- -----------------------------------------------------------------------------
CALCULATING YOUR SHARE PRICE
Your purchase price will be equal to the fund's net asset value (NAV) per
share, which is generally calculated as of the close of regular trading on
the New York Stock Exchange (usually 3:00 p.m. Central time) every day the
exchange and federally chartered banks are open. As discussed below, your
order must be received by the funds by 11:30 a.m. Central time for Tax Free
Obligations Fund, and by 2:00 p.m. Central time for Government Obligations
Fund, Prime Obligations Fund and Treasury Obligations Fund, in order for
shares to be priced at that day's NAV.
A fund's NAV is equal to the market value of its investments and other
assets, less any liabilities, divided by the number of fund shares. The
securities held by the funds are valued on the basis of amortized cost. This
involves valuing an instrument at its cost and thereafter assuming a constant
amortization of any discount or premium until the instrument's maturity,
rather than looking at actual changes in the market value of the instrument.
Each fund's net asset value is normally expected to be $1 per share.
- -----------------------------------------------------------------------------
HOW TO BUY AND SELL SHARES
You may purchase or sell shares by calling your financial institution. Shares
may be purchased and sold only on days when both the New York Stock Exchange
and federally chartered banks are open.
When purchasing shares, payment must be made by wire transfer, which can be
arranged by your financial institution.
Purchase orders and redemption requests must be received by your financial
institution by the time specified by the institution to be assured same day
processing. In order for shares to be purchased or sold at that day's price,
the funds must receive purchase orders or redemption requests by 11:30 a.m.
Central time for Tax Free Obligations Fund, and by 2:00 p.m. Central time for
Government Obligations Fund, Prime Obligations Fund and Treasury Obligations
Fund. It is the responsibility of your financial institution to promptly
transmit orders to the funds. In addition, a purchase order will be effective
on the day given only if the funds' custodian receives payment by wire before
the close of business.
If a fund receives a redemption request by the time specified above, payment
will be made the same day by transfer of federal funds. Otherwise, payment
will be made on the next business day.
10 PROSPECTUS - FIRST AMERICAN MONEY MARKET FUNDS
<PAGE>
POLICIES & SERVICES
MANAGING YOUR INVESTMENT
- -----------------------------------------------------------------------------
STAYING INFORMED
SHAREHOLDER REPORTS
Shareholder reports are mailed twice a year, in November and May. They
include financial statements, performance information, a message from your
portfolio managers, and, on an annual basis, the auditors' report.
In an attempt to reduce shareholder costs and help eliminate duplication, the
funds will try to limit their mailings to one report for each address that
lists one or more shareholders with the same last name. If you would like
additional copies, please call 1-800-637-2548.
STATEMENTS AND CONFIRMATIONS
Statements summarizing activity in your account are mailed at least
quarterly. Confirmations are mailed following each purchase or sale of fund
shares.
- -----------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS
Dividends from a fund's net investment income are declared daily, starting on
the day you purchase your shares, and paid monthly. You will not receive a
dividend for the day on which you sell shares.
Dividends will be reinvested in additional shares of the same fund, unless
you request that distributions be reinvested in another First American fund
or paid in cash. This request may be made on your new account form or by
writing to the fund. If you request that your distributions be paid in cash
but those distributions cannot be delivered because of an incorrect mailing
address, the undelivered distributions and all future distributions will be
reinvested in fund shares.
- -----------------------------------------------------------------------------
TAXES
Some of the tax consequences of investing in the funds are discussed below.
More information about taxes is in the Statement of Additional Information.
However, because everyone's tax situation is unique, always consult your tax
professional about federal, state and local tax consequences.
For Government Obligations Fund, Prime Obligations Fund and Treasury
Obligations Fund, dividends you receive from the fund are generally taxable
as ordinary income, whether you reinvest them or take them in cash. Dividends
attributable to income from U.S. government securities may be exempt from
state personal income taxes. You should consult your tax advisor for more
information.
Tax Free Obligations Fund intends to meet certain federal tax requirements so
that distributions of tax-exempt interest income may be treated as
"exempt-interest dividends." These dividends are not subject to regular
federal tax. However, although it has no current intention of doing so, the
fund may invest up to 20% of its net assets in municipal securities subject
to the federal alternative minimum tax. Any portion of exempt-interest
dividends attributable to interest on these securities may increase some
shareholders' alternative minimum tax.
11 PROSPECTUS - FIRST AMERICAN MONEY MARKET FUNDS
<PAGE>
ADDITIONAL INFORMATION
MANAGEMENT
INVESTMENT ADVISOR
First American Asset Management
601 Second Avenue South
Minneapolis, Minnesota 55402
U.S. Bank National Association (U.S. Bank), acting through its First American
Asset Management division, is the funds' investment advisor. First American
Asset Management provides investment management services to individuals and
institutions, including corporations, foundations, pensions and retirement
plans. As of December 31, 1998, it had more than $80 million in assets under
management, including investment company assets of approximately $30 million.
As investment advisor, First American Asset Management manages the funds'
business and investment activities, subject to the authority of the board of
directors. Each fund pays the investment advisor a monthly fee for providing
investment advisory services. During their most recent fiscal years after
taking into account fee waivers, the funds paid the following investment
advisory fees to First American Asset Management:
ADVISORY FEE
AS A % OF
AVERAGE DAILY
NET ASSETS
---------------------------------------------
Government Obligations Fund 0.33%
Prime Obligations Fund 0.32%
Tax Free Obligations Fund 0.27%
Treasury Obligations Fund 0.34%
CUSTODIAN
U.S. Bank National Association
U.S. Bank Center
180 East Fifth Street
St. Paul, Minnesota 55101
ADMINISTRATOR
SEI Investments Management Corporation
Oaks, Pennsylvania 19456
DISTRIBUTOR
SEI Investments Distribution Co.
Oaks, Pennsylvania 19456
TRANSFER AGENT
DST Systems, Inc.
330 West Ninth Street
Kansas City, Missouri 64105
ADDITIONAL COMPENSATION
U.S. Bank and other affiliates of U.S. Bancorp may act as fiduciary with
respect to plans subject to the Employee Retirement Income Security Act of
1974 (ERISA) and other trust and agency accounts that invest in the funds. As
described above, U.S. Bank receives compensation for acting as the funds'
investment advisor. U.S. Bank and its affiliates also receive compensation in
connection with the following:
CUSTODY SERVICES. As compensation for acting as the funds' custodian, U.S.
Bank is paid monthly fees equal, on an annual basis, to 0.03% of a fund's
average daily net assets. In addition, U.S. Bank is reimbursed for its
out-of-pocket expenses incurred while providing custody services to the
funds.
SUB-ADMINISTRATION SERVICES. U.S. Bank assists the administrator and provides
sub-administration services to the funds. For providing these services, U.S.
Bank is compensated by the funds' administrator at an annual rate of up to
0.05% of each fund's average daily net assets.
SECURITIES LENDING SERVICES. In connection with lending its portfolio
securities, Government Obligations Fund pays administrative and custodial
fees to U.S. Bank which are equal to 40% of the funds' income from these
securities lending transactions.
BROKERAGE TRANSACTIONS. The funds purchase most of their portfolio securities
directly from the issuer or from an underwriter or market maker, and not from
a broker acting as agent. However, the funds may from time to time use
brokers when buying portfolio securities. The funds' investment advisor may
place trades through its affiliates, U.S. Bancorp Investments, Inc. and U.S.
Bancorp Piper Jaffray Inc., which will earn commissions on such transactions.
SALES OF FUND SHARES. U.S. Bancorp Investments, Inc. and U.S. Bancorp Piper
Jaffray Inc., broker-dealers affiliated with U.S. Bank, have entered into
agreements with the funds' distributor to sell fund shares and will earn
shareholder servicing fees in connection with these sales.
PORTFOLIO MANAGEMENT
Each fund's investments are managed by a team of persons associated with
First American Asset Management.
12 PROSPECTUS - FIRST AMERICAN MONEY MARKET FUNDS
<PAGE>
ADDITIONAL INFORMATION
MORE ABOUT THE FUNDS
- -----------------------------------------------------------------------------
INVESTMENT STRATEGIES
The funds' main investment strategies are discussed in the "Fund Summaries"
section. These are the strategies that the funds' investment advisor believes
are most likely to be important in trying to achieve the funds' objectives.
You should be aware that each fund may also use strategies and invest in
securities that are not described in this prospectus, but that are described
in the Statement of Additional Information (SAI). For a copy of the SAI, call
Investor Services at 1-800-637-2548.
In addition to the securities specified in the "Fund Summaries" section, each
fund may invest in other money market funds that invest in the same types of
securities as the respective fund, including money market funds advised by
U.S. Bank.
INVESTMENT APPROACH
Each fund complies with Securities and Exchange Commission regulations that
apply to money market funds. These regulations require that each fund's
investments mature within 397 days from the date of purchase, and that the
average maturity of each fund's investments (on a dollar-weighted basis) be
90 days or less. The funds may invest in securities with variable or floating
interest rates and securities with demand features. The maturities of these
securities are determined according to regulations which allow the funds to
consider some of these securities as having maturities shorter than their
stated maturity dates. All of the funds' investments must be in U.S.
dollar-denominated high quality securities which have been determined by the
funds' advisor to present minimal credit risks.
When selecting securities for the funds, the portfolio managers use a
"top-down" approach, looking first at general economic factors and market
conditions, then at individual securities. The portfolio managers look for
value while adhering to the credit and other restrictions on money market
funds.
- -----------------------------------------------------------------------------
YEAR 2000 ISSUES
Like other mutual funds and business and financial organizations, the funds
could be adversely affected if the computer systems used by the funds'
advisor, other service providers and entities with computer systems that are
linked to fund records do not properly process and calculate date-related
information from and after January 1, 2000. While year 2000-related computer
problems could have a negative effect on the funds, the funds' administrator
has undertaken a program designed to assess and monitor the steps being taken
by the funds' service providers to address year 2000 issues.This program
includes seeking assurances from service providers that their systems are or
will be year 2000 compliant and reviewing service providers' periodic reports
to monitor their status concerning their year 2000 readiness and compliance.
The administrator and the advisor also report regularly to the funds' board
of directors concerning their own and other service providers' progress
toward year 2000 readiness. Although these reports indicate that service
providers are or expect to be year 2000 compliant, there can be no assurance
that this will be the case in all instances or that year 2000 difficulties
experienced by others in the financial services industry will not impact the
funds. In addition, there can be no assurance that year 2000 difficulties
will not have an adverse effect on the funds' investments or on global
markets or economies, generally. The funds are not bearing any of the
expenses incurred by their service providers in preparing for the year 2000.
13 PROSPECTUS - FIRST AMERICAN MONEY MARKET FUNDS
<PAGE>
ADDITIONAL INFORMATION
FINANCIAL HIGHLIGHTS
The tables that follow present performance information about the class D
shares of each fund. This information is intended to help you understand each
fund's financial performance for the past five years or, if shorter, the
period of the fund's operations. Some of this information reflects financial
results for a single fund share. Total returns in the tables represent the
rate that you would have earned or lost on an investment in a fund, assuming
you reinvested all of your dividends and distributions.
This information has been audited by KPMG Peat Marwick LLP, independent
auditors, whose report, along with the funds' financial statements, is
included in the funds' annual report, which is available upon request.
GOVERNMENT OBLIGATIONS FUND
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30,
1998 1997 1996 1995(1)
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value, Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net Investment Income 0.05 0.05 0.05 0.04
Dividends (from net investment income) (0.05) (0.05) (0.05) (0.04)
----------------------------------------------
Net Asset Value, End of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00
==============================================
Total Return 5.15% 5.04% 5.08% 3.85%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $384,143 $337,199 $269,382 $198,859
Ratio of Expenses to Average Net Assets 0.60% 0.60% 0.60% 0.60%(2)
Ratio of Net Income to Average Net Assets 5.03% 4.92% 4.96% 5.45%(2)
Ratio of Expenses to Average Net Assets (excluding waivers) 0.67% 0.67% 0.69% 0.70%(2)
Ratio of Net Income to Average Net Assets (excluding
waivers) 4.96% 4.85% 4.87% 5.35%(2)
------------------------------------------------------------------------------------------------------------
</TABLE>
(1)Class D shares have been offered since January 21, 1995.
(2)Annualized.
PRIME OBLIGATIONS FUND
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30,
1998 1997 1996 1995(1)
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value, Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net Investment Income 0.05 0.05 0.05 0.04
Dividends (from net investment income) (0.05) (0.05) (0.05) (0.04)
------------------------------------------------
Net Asset Value, End of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00
================================================
Total Return 5.26% 5.16% 5.18% 3.86%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $233,675 $113,064 $109,213 $9,735
Ratio of Expenses to Average Net Assets 0.60% 0.60% 0.60% 0.60%(2)
Ratio of Net Income to Average Net Assets 5.13% 5.02% 4.98% 5.51%(2)
Ratio of Expenses to Average Net Assets (excluding waivers) 0.68% 0.67% 0.69% 0.72%(2)
Ratio of Net Income to Average Net Assets (excluding
waivers) 5.05% 4.95% 4.89% 5.39%(2)
--------------------------------------------------------------------------------------------------------------
</TABLE>
(1)Class D shares have been offered since January 24, 1995.
(2)Annualized.
14 PROSPECTUS - FIRST AMERICAN MONEY MARKET FUNDS
<PAGE>
ADDITIONAL INFORMATION
FINANCIAL HIGHLIGHTS (CONTINUED)
TAX FREE OBLIGATIONS FUND
<TABLE>
<CAPTION>
FISCAL PERIOD FISCAL PERIOD
ENDED ENDED
SEPTEMBER 30, NOVEMBER 30,
1998 1997(1)
-----------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE DATA
Net Asset Value, Beginning of Period $ 1.00 $ 1.00
Net Investment Income 0.03 --
Dividends (from net investment income) (0.03) --
--------------------------------
Net Asset Value, End of Period $ 1.00 $ 1.00
================================
Total Return 2.51% 0.04%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $30,095 $ 1
Ratio of Expenses to Average Net Assets 0.60% 0.60%(2)
Ratio of Net Income to Average Net Assets 3.02% 3.20%(2)
Ratio of Expenses to Average Net Assets
(excluding waivers) 0.73% 9.07%(2)
Ratio of Net Income (Loss) to Average Net Assets
(excluding waivers) 2.89% (5.27)%(2)
-----------------------------------------------------------------------------------
</TABLE>
(1)Class D shares have been offered since November 26, 1997.
(2)Annualized.
TREASURY OBLIGATIONS FUND
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30,
1998 1997 1996 1995 1994(1)
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value, Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net Investment Income 0.05 0.05 0.05 0.05 0.03
Dividends (from net investment income) (0.05) (0.05) (0.05) (0.05) (0.03)
------------------------------------------------------------------
Net Asset Value, End of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
==================================================================
Total Return 5.10% 4.98% 5.00% 5.22% 3.12%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $3,854,933 $2,847,215 $1,616,130 $1,038,818 $746,090
Ratio of Expenses to Average Net Assets 0.60% 0.60% 0.60% 0.60% 0.58%(2)
Ratio of Net Income to Average Net Assets 4.98% 4.88% 4.86% 5.13% 3.19%(2)
Ratio of Expenses to Average Net Assets (excluding
waivers) 0.66% 0.68% 0.70% 0.70% 0.68%(2)
Ratio of Net Income to Average Net Assets (excluding
waivers) 4.92% 4.80% 4.76% 5.03% 3.09%(2)
-------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1)Class D shares have been offered since October 4, 1993.
(2)Annualized.
15 PROSPECTUS - FIRST AMERICAN MONEY MARKET FUNDS
<PAGE>
FOR MORE INFORMATION
More information about the funds is available in the funds' Statement of
Additional Information and annual and semiannual reports.
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI provides more details about the funds and their policies. A current SAI
is on file with the Securities and Exchange Commission (SEC) and is incorporated
into this prospectus by reference (which means that it is legally considered
part of this prospectus).
ANNUAL AND SEMIANNUAL REPORTS
Additional information about the funds' investments is available in the funds'
annual and semiannual reports to shareholders. In the funds' annual report, you
will find a discussion of the market conditions and investment strategies that
significantly affected the funds' performance during their last fiscal year.
You can obtain a free copy of the funds' SAI and/or free copies of the funds'
most recent annual or semiannual reports by calling Investor Services at
1-800-637-2548. The material you request will be sent by first-class mail or
other means designed to ensure equally prompt delivery, within three business
days of receipt of the request.
You can also obtain copies by visiting the SEC's Public Reference Room in
Washington, DC, or by sending your request and a duplicating fee to the SEC's
Public Reference Section, Washington, DC 20549-6009. For more information, call
1-800-SEC-0330.
Information about the funds is also available on the Internet. Text-only
versions of fund documents can be viewed online or down-loaded from the SEC's
Internet site at http://www.sec.gov.
SEC file number: 811-3313
FAF-1903 (2/1999)D
<PAGE>
Part B
FIRST AMERICAN FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION
DATED FEBRUARY 1, 1999
GOVERNMENT OBLIGATIONS FUND
PRIME OBLIGATIONS FUND
TAX FREE OBLIGATIONS FUND
TREASURY OBLIGATIONS FUND
This Statement of Additional Information relates to the Class A, Class
Y and Class D Shares of Government Obligations Fund, Prime Obligations Fund, Tax
Free Obligations Fund and Treasury Obligations Fund and the Class B and Class C
Shares of Prime Obligations Fund, 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. 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.
<PAGE>
TABLE OF CONTENTS
PAGE
----
GENERAL INFORMATION............................................................1
INVESTMENT RESTRICTIONS........................................................1
Government Obligations Fund...........................................1
Prime Obligations Fund................................................2
Tax Free Obligations Fund.............................................3
Treasury Obligations Fund.............................................4
ADDITIONAL RESTRICTIONS........................................................5
INVESTMENT OBJECTIVES AND POLICIES.............................................6
Municipal Securities..................................................6
Loan Participations; Section 4(2) and Rule 144A Securities............7
Securities of Foreign Banks and Branches..............................7
Foreign Securities....................................................8
United States Government Securities...................................8
Repurchase Agreements.................................................9
Credit Enhancement Agreements.........................................9
Put Options...........................................................9
Variable and Floating Rate Obligations................................9
Lending of Portfolio Securities......................................10
When-Issued and Delayed Delivery Securities..........................10
Money Market Funds...................................................10
CFTC Information.....................................................10
PORTFOLIO TURNOVER............................................................11
DIRECTORS AND EXECUTIVE OFFICERS..............................................11
Directors............................................................11
Executive Officers...................................................12
Compensation.........................................................13
INVESTMENT ADVISORY AND OTHER SERVICES........................................14
Investment Advisor...................................................14
Distributor and Distribution Plans...................................15
Custodian; Administrator; Transfer Agent; Counsel; Accountants.......18
PORTFOLIO TRANSACTIONS........................................................19
CAPITAL STOCK.................................................................21
NET ASSET VALUE AND PUBLIC OFFERING PRICE.....................................22
VALUATION OF PORTFOLIO SECURITIES.............................................23
TAXES.........................................................................24
CALCULATION OF PERFORMANCE DATA...............................................24
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ADDITIONAL INFORMATION ABOUT SELLING SHARES...................................26
By Telephone.........................................................26
By Mail..............................................................27
By Checking Account..................................................27
Redemption Before Purchase Instruments Clear.........................27
COMMERCIAL PAPER AND BOND RATINGS.............................................28
Commercial Paper Ratings.............................................28
Corporate Bond Ratings...............................................28
FINANCIAL STATEMENTS..........................................................28
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<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."
As set forth in the Prospectuses, 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. These series
are referred to in this Statement of Additional Information as the "Funds."
Shareholders may purchase shares of each Fund through separate classes.
Prime Obligations Fund offers its shares in five classes, Class A, Class B,
Class C, Class Y and Class D. Government Obligations Fund, Tax Free Obligations
Fund and Treasury Obligations Fund offer their shares in three classes, Class A,
Class Y and Class D. 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.
Each of the Funds are open-end diversified companies.
FAF has prepared and will provide a separate Prospectus relating to the
Class A, Class B and Class C (the "Class A, Class B and Class C Shares
Prospectus"), the Class Y (the "Class Y Shares Prospectus") and the Class D
Shares of the Funds (the "Class D Shares 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 various classes of shares of the Funds. It should be
read in conjunction with the applicable Prospectus.
The Bylaws 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.
INVESTMENT RESTRICTIONS
GOVERNMENT OBLIGATIONS FUND
Government 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. Government Obligations Fund may not:
1. 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. Interest paid on borrowed
funds will decrease the net earnings of the Fund. The Fund
will
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<PAGE>
not borrow to increase income (leveraging). (As a
non-fundamental policy, the Fund will not make additional
investments while its borrowings exceed 5% of total assets.)
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 more than 10% of its net assets in illiquid assets,
including, without limitation, repurchase agreements maturing
in more than seven days.
7. Purchase or sell real estate, real estate investment trust
securities, commodities or commodity contracts, or oil or gas
interests.
8. Lend money to others except through purchase of debt
obligations of the type which the Fund is permitted to
purchase (see "Investment Objectives and Policies" below).
PRIME OBLIGATIONS FUND
Prime 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. Prime 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" below).
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. (As a non-fundamental policy, the
Fund will not make additional investments while its borrowings
exceed 5% of total assets.)
3. 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 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.
4. 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.
5. Sell securities short or purchase securities on margin.
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<PAGE>
6. 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.
7. 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.
8. 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.
9. Purchase or sell real estate, real estate investment trust
securities, commodities or commodity contracts, or oil and gas
interests.
10. Lend money to others except through the purchase of debt
obligations of the type which the Funds are permitted to
purchase (see "Investment Objectives and Policies" below).
11. Invest 25% or more of its assets in the securities of issuers
in any single industry; 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.
12. Invest in companies for the purpose of exercising control.
13. Purchase or retain the securities of any issuer if any of the
officers or directors of the Fund or its investment advisor
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.
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. 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" below).
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 non-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.
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<PAGE>
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 under
"Investment Objectives and Policies" below.
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" below).
9. Invest in companies for the purpose of exercising control.
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 industry; 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 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. The Funds may not invest in obligations of any affiliate of U.S. Bancorp,
including U.S. Bank National Association ("U.S. Bank" or the "Advisor").
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 (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). 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. (As a non-fundamental policy, the
Fund will not make additional investments while its borrowings
exceed 5% of total assets.) 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
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<PAGE>
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; 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" below).
As a non-fundamental policy, Treasury Obligations Fund will not 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.
ADDITIONAL RESTRICTIONS
Short-term investments and repurchase agreements may be entered into on
a joint basis by the Funds and other funds advised by the Advisor to the extent
permitted by Securities and Exchange Commission exemptive order.
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,
-5-
<PAGE>
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 Rating Services, a
division of The McGraw-Hill Companies, Inc. ("Standard & Poor's"), or Prime-1 or
Prime-2 by Moody's Investors Service, Inc. ("Moody's"). It is the responsibility
of the Board of Directors of FAF 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
Advisor and oversees the Advisor's determination that the Funds' portfolio
securities present only "minimal credit risk" and are Eligible Securities.
Rule 2a-7 requires, among other things, that each 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 issued by the issuer of the
security; provided that the applicable 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
each 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., 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.
INVESTMENT OBJECTIVES AND POLICIES
The main investment strategies of the Funds are set forth in the Funds'
current Prospectuses under "Fund Summaries." This Section describes in detail
the Funds' main investment strategies and other secondary investment strategies.
If a percentage limitation under this section or under "Investment
Restrictions" above 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. These other
securities may have less stability of principal, be less liquid, and fluctuate
more in value than the securities in which the Funds invest. All securities in
each Fund's portfolio are purchased with and payable in United States dollars.
MUNICIPAL SECURITIES
Tax Free Obligations Fund invests principally in municipal securities
such as municipal bonds and other debt obligations. These municipal bonds and
debt securities are issued by the states and by their local and special-purpose
political subdivisions. The term "municipal bond" as used in this Section
includes short-term municipal notes and other commercial paper issued by the
states and their political subdivision.
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 upon a default by the issuer of its principal
and interest payment obligation. 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
-6-
<PAGE>
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 Fund may invest.
Tax Free Obligations 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.
Tax Free Obligations Fund may also invest up to 20% of its total assets
in municipal 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 alternative minimum tax.
LOAN PARTICIPATIONS; SECTION 4(2) AND RULE 144A SECURITIES
Prime Obligations Fund and Tax Free Obligations Fund may invest in 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 (for example, a Fund) 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 Advisor to be liquid investments. If a loan participation interest is
restricted from being sold within a seven-day period, then Prime Obligations
Fund (as a non-fundamental policy) and Tax Free Obligations Fund (as a
fundamental policy) will be limited, together with other illiquid investments,
to not more than 10% of the applicable 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, Prime Obligations Fund
and Tax Free Obligations Fund do 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 a
Fund to the extent that qualified institutional buyers become, for a time,
uninterested in purchasing these securities.
SECURITIES OF FOREIGN BANKS AND BRANCHES
Prime Obligations Fund and Tax Free Obligations Fund may invest in
obligations of foreign branches of United States banks and United States
branches of foreign banks. 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.
Because the portfolios of Prime Obligations Fund's and Tax Free
Obligations Fund's investments in taxable money market securities may contain
securities of foreign branches of domestic banks, foreign banks, and United
States branches of foreign banks, such Funds may be subject to additional
investment risks that are different in some respects
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<PAGE>
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
such Fund. Additionally, there may be less public information available about
foreign banks and their branches. The Advisor carefully considers these factors
when making investments. The Funds have 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.
FOREIGN SECURITIES
Prime Obligations Fund may invest up to 25% of its total assets
collectively in U.S. dollar-denominated obligations of foreign companies.
Investment in foreign securities is subject to special investment risks
that differ in some respects from those related to investments in securities of
United States domestic issuers. These risks include political, social or
economic instability in the country of the issuer, the difficulty of predicting
international trade patterns, the possibility of the imposition of exchange
controls, expropriation, limits on removal of currency or other assets,
nationalization of assets, foreign withholding and income taxation, and foreign
trading practices (including higher trading commissions, custodial charges and
delayed settlements). Foreign securities also may be subject to greater
fluctuations in price than securities issued by United States corporations. The
principal markets on which these securities trade may have less volume and
liquidity, and may be more volatile, than securities markets in the United
States.
In addition, there may be less publicly available information about a
foreign company than about a United States domiciled company. Foreign companies
generally are not subject to uniform accounting, auditing and financial
reporting standards comparable to those applicable to United States domestic
companies. There is also generally less government regulation of securities
exchanges, brokers and listed companies abroad than in the United States.
Confiscatory taxation or diplomatic developments could also affect investment in
those countries.
UNITED STATES GOVERNMENT SECURITIES
Each Fund may invest in securities issued or guaranteed as to principal
or interest by the United States Government, or 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, Government Obligations Fund, Prime Obligations Fund and Tax Free
Obligations 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 Advisor 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. A Fund's investments in STRIPS will be limited to components with
maturities of less than 397 days and the Funds will not actively trade such
components.
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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. Each 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 Advisor must be satisfied with the creditworthiness of the other party to
the agreement before entering into a repurchase agreement. In the event of
bankruptcy of the other party to a repurchase agreement, a 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
Prime Obligations Fund and 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 such Funds' investment securities. Although each
investment security, at the time it is purchased, must meet such Funds'
creditworthiness criteria, Guarantees sometimes are purchased from banks and
other institutions (collectively, "Guarantors") when the Advisor, through yield
and credit analysis, deems that credit enhancement of certain of such Funds'
securities is advisable. As a non-fundamental policy, Prime Obligations Fund and
Tax Free Obligations Fund will limit the value of all investment securities
issued or guaranteed by each Guarantor to not more than 10% of the value of such
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
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 ("SEC") 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.
In connection with Prime Obligation Fund's and 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 such Fund are deposits held in foreign branches of United
States banks which have a specified term or maturity. The Funds purchase 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 such Funds purchase large denomination CDs, they do not
expect to benefit materially from such insurance. The policies described in this
paragraph are non-fundamental and may be changed by the Board of Directors.
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LENDING OF PORTFOLIO SECURITIES
In order to generate additional income, each of the Funds may lend
portfolio securities representing up to one-third of the value of its total
assets to broker-dealers, bank or other institutional borrowers of securities.
If the Funds engage in securities lending, distributions paid to shareholders
from the resulting income will not be excludable from a shareholder's gross
income for income tax purposes. As with other extensions of credit, there may be
risks of delay in recovery of the securities or even loss of rights in the
collateral should the borrower of the securities fail financially. However, the
Funds will only enter into loan arrangements with broker-dealers, banks, or
other institutions which the Advisor has determined are creditworthy under
guidelines established by the Board of Directors. In these loan arrangements,
the Funds will receive collateral in the form of cash, United States Government
securities or other high-grade debt obligations equal to at least 100% of the
value of the securities loaned. Collateral is marked to market daily. 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 Funds will pay a
portion of the income earned on the lending transaction to the placing broker
and may pay administrative and custodial fees (including fees to an affiliate of
the Advisor) in connection with these loans which, in the case of U.S. Bank, are
40% of the Funds' income from such securities lending transactions. U.S. Bank
may act as securities lending agent for the Funds subject to U.S. Bank's
compliance with conditions contained in an SEC exemptive order permitting U.S.
Bank to provide such services and receive compensation.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES
Each Fund may purchase securities 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 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 do not receive
income from these securities until such securities are delivered. Each 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. A 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
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 money market funds in which the Funds may invest include
other money market funds advised by the Advisor. Investments by a Fund in other
money market funds advised by the Advisor are subject to certain restrictions
contained in an exemptive order issued by the SEC.
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
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<PAGE>
commodity interest trading; and (v) will submit to special calls of the CFTC for
information. Any investment company desiring to claim this exclusion must file a
notice of eligibility with both the CFTC and the National Futures Association.
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 "Investment Objectives and Policies" above and as
set forth under "Fund Summaries" in the Funds' Prospectuses, each 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: 55.
Roger A. Gibson, 1020 15th Street, Ste. 41A, Denver, Colorado 80202:
Director of FAF, FAIF and FASF since October 1997; Vice President North
America-Mountain Region for United Airlines since June 1995; prior to his
current position, served most recently as Vice President Customer Service for
United Airlines in the West Region in San Francisco and the Mountain Region in
Denver, Colorado; employee at United Airlines since 1967. Age: 52.
David T. Bennett, 3400 City Center, 33 South Sixth Street, Minneapolis,
Minnesota 55402: Director of FAIF, FAF and FASF since August 1998; Of Counsel,
Gray, Plant, Mooty, Mooty & Bennett P.A. Prior to August 1998, Mr. Bennett
served as a director of Piper Funds Inc., Piper Funds Inc. II, Piper Global
Funds Inc., Piper Institutional Funds Inc., and various other Piper closed-end
investment companies. Age 56.
Andrew M. Hunter III, 537 Harrington Road, Wayzata, Minnesota 55391:
Director of FAIF, FAF and FASF since January 1997; Chairman of Hunter, Keith
Industries, a diversified manufacturing and services management company, since
1975. Age: 50.
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: 56.
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* Robert L. Spies, 4715 Twin Lakes Avenue, Brooklyn Center, Minnesota
55429: Director of FAIF, FAF 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: 63.
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 from 1993 to September
1997 and of FASF's Board from June 1996 to September 1997; President of FAF and
FAIF from June 1989 to November 1989; Owner and President, Strauss Management
Company, since 1993; Owner and President, Community Resource Partnerships, Inc.,
a community business retention survey company, since 1992; attorney-at-law.
Age: 57.
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; Chair of FAIF's, FAF's and FASF's Boards since September 1997; Owner
and President, Strategic Management Resources, Inc. since 1993; formerly
President and Director of The Inventure Group, a management consulting and
training company, President of Scott's, Inc., a transportation company, and Vice
President of Human Resources of The Pillsbury Company. Age: 53.
EXECUTIVE OFFICERS
Mark Nagle, SEI Investments Company, Oaks, Pennsylvania 19456;
President of FAIF, FAF and FASF since September 1998; Vice President of the
Administrator and Distributor since November 1996; Vice President of Fund
Accounting, BISYS Fund Services, Inc., from November 1995 to November 1996;
Senior Vice President, Fidelity Investments, prior to November 1995. Age: 40.
Joseph M. O'Donnell, Vice President and Assistant Secretary of FAIF,
FAF and FASF beginning in February 1998; Vice President and Assistant Secretary
of the Administrator and Distributor since January 1998; Vice President and
General Counsel, FPS Services, Inc. from 1993 to 1997; Staff Counsel and
Secretary, Provident Mutual Family of Funds from 1990 to 1993. Age: 45.
Michael G. Beattie, SEI Investments Company, Oaks, Pennsylvania 19456;
Controller and Assistant Treasurer of FAIF, FAF and FASF since December 1997;
Associate Director, Fund Accounting, SEI Investments Company since July 1997;
prior to his current position, served most recently as Fund Accounting Manager
of SEI (1993-1997); Registered Representative, First Investors, from 1988 to
1990. Age: 33.
Lydia A. Gavalis, SEI Investments Company, Oaks, Pennsylvania 19456;
Vice President and Assistant Secretary of FAIF, FAF and FASF, and Vice President
and Assistant Secretary of the Administrator and the Distributor each since
January 1998. Assistant General Counsel and Director of Arbitration,
Philadelphia Stock Exchange from 1989 to 1998. Age: 35.
Lynda J. Streigel, SEI Investments Company, Oaks, Pennsylvania 19456;
Vice President and Assistant Secretary of FAIF, FAF and FASF, and Vice President
and Assistant Secretary of the Administrator and the Distributor since January
1998; Senior Asset Management Counsel, Barnett Banks, Inc. from 1993 to 1997;
Partner, Groom and Nordberg, Chartered from 1996 to 1997; and Associate General
Counsel, Riggs Bank, N.A. from 1992 to 1995.
Age: 51.
Kathy Heilig, SEI Investments Company, Oaks, Pennsylvania 19456; Vice
President and Assistant Secretary of FAIF, FAF and FASF, and Treasurer of SEI
Investments Company since 1997; Assistant Controller of SEI Investments Company
from 1995 to 1997; and Vice President of SEI Investments Company from 1991 to
1995.
Age: 41.
James R. Foggo, SEI Investments Company, Oaks, Pennsylvania 19456; Vice
President and Assistant Secretary of FAIF, FAF and FASF since September 1998;
Vice President and Assistant Secretary of the Administrator and Distributor
since September 1998; Associate Attorney, Paul, Weiss, Rifkind, Wharton and
Garrison from January 1998 to August 1998; Associate Attorney, Baker & McKenzie
from January 1995 to January 1998. Age: 34.
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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, FAF and FASF. Age: 53.
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 $27,000 per year ($40,500 in the case of the
Chair) plus $4,000 ($6,000 in the case of the Chair) per meeting of the Board
attended and $1,200 per committee meeting attended ($1,800 in the case of a
committee chair) and reimburses travel expenses of directors and officers to
attend Board meetings. In the event of telephonic Board or committee meetings,
each director receives a fee of $500 per Board or committee meeting ($750 in the
case of the Chair or a committee chair). In addition, directors may receive a
per diem fee of $1,500 per day plus travel expenses when directors travel out of
town on Fund business. However, directors do not receive the $1,500 per diem
amount plus the foregoing Board or committee fee for an out of town 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, 1998. 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)
PENSION OR
RETIREMENT TOTAL COMPENSATION
AGGREGATE BENEFITS ACCRUED ESTIMATED ANNUAL FROM REGISTRANT AND
COMPENSATION AS PART OF FUND BENEFITS UPON FUND COMPLEX PAID
NAME OF PERSON, POSITION FROM REGISTRANT EXPENSES RETIREMENT TO DIRECTORS
- ---------------------------------- --------------- ---------------- ---------------- -------------------
<S> <C> <C> <C> <C>
Robert J. Dayton, Director $ 28,881.88 -0- -0- $ 53,100
Roger A. Gibson, Director 24,367.39 -0- -0- 44,800
David T. Bennett, Director 5,847.09 -0- -0- 10,750
Andrew M. Hunter III, Director 26,787.81 -0- -0- 49,250
Leonard W. Kedrowski, Director 30,296.06 -0- -0- 55,700
Robert L. Spies, Director 27,984.43 -0- -0- 51,450
Joseph D. Strauss, Director 34,089.87 -0- -0- 62,675
Virginia L. Stringer, Director 39,161.88 -0- -0- 72,000
</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 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
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<PAGE>
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.
INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISOR
U.S. Bank National Association, 601 Second Avenue South, Minneapolis,
Minnesota 55402, serves as the investment advisor and manager of the Funds
through its First American Asset Management group. The Advisor is a national
banking association that has professionally managed accounts for individuals,
insurance companies, foundations, commingled accounts, trust funds, and others
for over 75 years. The Advisor is a subsidiary of U.S. Bancorp ("USB"), 601
Second Avenue South, Minneapolis, Minnesota 55402, which is a regional,
multi-state bank holding company headquartered in Minneapolis, Minnesota. USB
operates five banks and eleven trust companies with offices in 17 contiguous
states from Illinois to Washington. USB also has various other subsidiaries
engaged in financial services. At September 30, 1998 on a pro forma combined
basis, USB and consolidated subsidiaries had consolidated assets of
approximately $67.5 billion, consolidated deposits of $48.2 billion and
shareholders' equity of $5.8 billion.
Pursuant to an Investment Advisory Agreement, effective as of January
20, 1995 (the "Advisory Agreement") between FAF, on behalf of each Fund, and the
Advisor, the Funds engage the Advisor to act as investment advisor for and to
manage the investment of the Funds' assets. The Advisory Agreement requires each
Fund to pay the Advisor 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 Advisor to arrange, if requested by
FAF, for officers or employees of the Advisor 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 Advisor 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 FAF. The Advisor 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 Advisor 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
advisor of the Funds.
In addition to the investment advisory fee, each Fund pays all of its
expenses that are not expressly assumed by the Advisor or any other organization
with which the Fund may enter into an agreement for the performance of services.
Each Fund is liable for such nonrecurring expenses as may arise, including
litigation to which the Fund may be a party. FAF may have an obligation to
indemnify its directors and officers with respect to such litigation. The
Advisor will be liable to the Funds under the Advisory Agreement for any
negligence or willful misconduct by the Advisor other than liability for
investments made by the Advisor in accordance with the explicit direction of the
Board of Directors or the investment objectives and policies of the Funds. The
Advisor 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 Advisor.
The Advisor may, at its option, waive any or all of its fees, or
reimburse expenses, with respect to each of the Funds from time to time. Any
such waiver or reimbursement is voluntary and may be discontinued at any time
unless as otherwise set forth in the Prospectus. The Advisor also may absorb or
reimburse expenses of the Funds from time to time, in its discretion, while
retaining the ability to be reimbursed by the Funds for such amounts prior to
the end of the fiscal year. This practice would have the effect of lowering a
Fund's overall expense ratio and of increasing yield to investors, or the
converse, at the time such amounts are absorbed or reimbursed, as the case may
be.
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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 advisors
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, FAF has received an opinion from its counsel that the
Advisor is not prohibited from performing the investment advisory services
described above, and that certain broker-dealers affiliated with the Advisor,
are not prohibited from serving as a Participating Institution (as defined in
"-- Distributor and Distribution Plans" below). 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 Advisor and
certain affiliated broker-dealers 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.
The following table sets forth total advisory fees before waivers and
after waivers for each of the Funds for the fiscal years ended September 30,
1996, September 30, 1997 and September 30, 1998:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, 1996 SEPTEMBER 30, 1997 SEPTEMBER 30, 1998
ADVISORY FEE ADVISORY FEE ADVISORY FEE ADVISORY FEE ADVISORY FEE ADVISORY FEE
BEFORE WAIVERS AFTER WAIVERS BEFORE WAIVERS AFTER WAIVERS BEFORE WAIVERS AFTER WAIVERS
-------------- ------------- -------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Government Obligations Fund $ 3,821,969 $ 3,007,413 $ 4,856,530 $ 4,020,449 $ 6,013,155 $ 5,031,567
Prime Obligations Fund 11,293,845 8,866,700 14,885,761 12,400,673 25,709,852 20,468,245
Tax Free Obligations Fund -- -- 46,188(1) 1,174(1) 1,002,936(2) 674,436(2)
Treasury Obligations Fund 6,253,637 4,688,746 12,432,597 9,904,279 19,284,901 16,240,243
</TABLE>
(1) Information is for the four month period from August 1, 1997 to November
30, 1997.
(2) Information is for the ten month period from December 1, 1998 to September
30, 1998.
DISTRIBUTOR AND DISTRIBUTION PLANS
SEI Investments Distribution Co. (the "Distributor" ) serves as the
distributor for the Class A, Class B, Class C, Class Y 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 Y and
Class D Shares pursuant to a Distribution Agreement effective as of January 20,
1995 between itself and the Funds, as the distributor for the Class B Shares
pursuant to a Distribution and Service Agreement dated January 20, 1995 (the
"Class B Distribution Agreement") between itself and the Funds, and as the
distributor for the Class C Shares pursuant to a Distribution and Service
Agreement dated December 9, 1998 (the "Class C Distribution Agreement") 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.
Fund shares and other securities distributed by the Distributor are not
deposits or obligations of, or endorsed or guaranteed by, U.S. Bank or its
affiliates, and are not insured by the Bank Insurance Fund, which is
administered by the Federal Deposit Insurance Corporation.
-15-
<PAGE>
U.S. Bancorp Investment Services, Inc. ("USBI"), a subsidiary of the
Advisor, and U.S. Bancorp Piper Jaffray Inc., a broker-dealer affiliated with
the Advisor ("Piper"), are Participating Institutions. The Advisor pays USBI and
Piper up to .25% of the portion of each Fund's average daily net assets
attributable to Class Y Shares for which USBI or Piper are responsible,
respectively, in connection with USBI's or Piper's provision of shareholder
support services. Such amounts paid to USBI and Piper, by the Advisor will not
affect any agreement by the Advisor to limit expenses of each Fund.
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. 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. This fee is calculated and paid each month based on average daily net
assets of Class A Shares of each Fund for that month.
The Class B and Class C Shares pay to the Distributor a distribution
fee at an annual rate of 0.75% of the average daily net assets of the Class B
and Class C Shares, respectively, which fee may be used by the Distributor to
provide compensation for sales support and distribution activities with respect
to the Class B and Class C Shares. This fee is calculated and paid each month
based on average daily net assets of the respective Class B and Class C Shares
for that month. In addition to this fee, the Distributor is paid a shareholder
servicing fee at an annual rate of 0.25% of the average daily net assets of
Prime Obligations Fund's Class B and Class C Shares pursuant to the Class B
Distribution Agreement and the Class C Distribution Agreement, respectively, and
a service plan for each such class (collectively, the "Class B and Class C
Service Plan"), which fee may be used by the Distributor to provide compensation
for shareholder servicing activities with respect to the Class B and Class C
Shares of Prime Obligations Fund. 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 Distributor also
receives any contingent deferred sales charges paid with respect to sales of
Class B and Class C Shares.
The Distributor receives no compensation for distribution of the Class
Y 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 provide
compensation for shareholder servicing activities with respect to the Class D
Shares of the kinds described in the Class D Shares 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.
SEI Investments Distribution Co., Fund's underwriter, received the
following compensation from each Fund during its most recent fiscal year.
<TABLE>
<CAPTION>
COMPENSATION ON
NET UNDERWRITING AND REDEMPTIONS AND BROKERAGE OTHER
COMMISSIONS REPURCHASES COMMISSIONS COMPENSATION
---------------------- ----------------- ------------- --------------
<S> <C> <C> <C> <C>
Government Obligations Fund None None None None
Prime Obligations Fund None None None None
Tax Free Obligations Fund None None None None
Treasury Obligations Fund None None None None
</TABLE>
FAF has adopted Plans of Distribution (the "Plans") with respect to
Class A, Class B, Class C 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
-16-
<PAGE>
fees for the services it performs for the Funds as described in the preceding
paragraphs. The Class B Plan and Class C Plan also authorize the Distributor to
retain the contingent deferred sales charge applied on redemptions of Class B
Shares and Class C Shares, respectively. The Plans recognize that the Advisor,
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 Advisor, 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.
The following tables set forth the total Rule 12b-1 fees, after
waivers, paid by each class of the Funds for the fiscal years ended September
30, 1996, September 30, 1997 and September 30, 1998. Please note that there were
no Class C Shares outstanding as of September 30, 1998.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1996
CLASS A CLASS B CLASS Y CLASS D
------------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Government Obligations Fund $ * $ * $ 0 $ 370,412
Prime Obligations Fund 317,080 7,227 0 82,818
Tax Free Obligations Fund * * * *
Treasury Obligations Fund * * 0 1,989,778
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1997
CLASS A CLASS B CLASS Y CLASS D
------------- ------------ ------------ -------------
Government Obligations Fund $ * $ * $ 0 $ 484,747
Prime Obligations Fund 432,465 31,045 0 222,621
Tax Free Obligations Fund (1) 39,839 * 4,123 *
Treasury Obligations Fund * * 0 3,609,010
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1998
CLASS A CLASS B CLASS Y CLASS D
------------- ------------ ------------ -------------
Government Obligations Fund $ 166,887(3)$ * $ 0 $ 621,492
Prime Obligations Fund 3,214,942 20,640 0 392,629
Tax Free Obligations Fund 203,999(4) * 0 21,952(4)
Treasury Obligations Fund 176,091(2) * 0 5,046,268
</TABLE>
* The Fund was not in operation during this fiscal year.
(1) Information is for the period from August 1, 1997 to November 30, 1997. Of
these amounts, $38,857 and $4,123 are distribution fees from the Class A
and Class Q shares of the Qualivest Tax-Free Obligations Fund,
respectively. On November 25, 1997 Tax Free Obligations Fund acquired the
assets of the Qualivest Tax-Free Money Market Fund. In connection with such
acquisition, Class A shares of the Qualivest Tax-Free Money Market Fund
were exchanged for Class A shares of Tax Free Obligations Fund, and Class Q
and Y shares of the Qualivest Tax-Free Money Market Fund were exchanged for
former Class C Shares (now designated Class Y Shares) of Tax Free
Obligations Fund.
-17-
<PAGE>
(2) For the period from November 3, 1997 to September 30, 1998.
(3) For the period from April 29, 1998 to September 30, 1998.
(4) For the ten month period from December 1, 1997 to September 30, 1998.
CUSTODIAN; ADMINISTRATOR; TRANSFER AGENT; COUNSEL; ACCOUNTANTS
U.S. Bank National Association (the "Custodian") acts as custodian of
the Funds' assets and portfolio securities pursuant to a Custodian Agreement
between First Trust National Association and the Funds. First Trust's rights and
obligations under the Custodian Agreement were assigned to U.S. Bank pursuant to
an Assignment and Assumption Agreement between First Trust and U.S. Bank. 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 each 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.
The Administrator, a wholly-owned subsidiary of SEI Investments
Company, provides administrative services to the Funds for a fee as described in
the prospectus. Pursuant to an Amended and Restated Administration Agreement
dated as of July 1, 1997 by and between FAF and the Administrator, FAF pays the
Administrator administrative fees equal to .07% of each Fund's average daily net
assets until aggregate net assets of all the Funds exceed $8 billion, and .055%
of each Fund's average daily net assets to the extent aggregate net assets of
all the Funds exceed $8 billion. The following table sets forth total
administrative fees, after waivers, paid by each of the Funds for the fiscal
years ended September 30, 1996, September 30, 1997, and September 30, 1998:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, 1996 SEPTEMBER 30, 1997 SEPTEMBER 30, 1998
----------------- ------------------ ------------------
<S> <C> <C> <C>
Government Obligations Fund $ 659,381 $ 775,846 $ 915,374
Prime Obligations Fund 1,945,261 2,375,994 3,868,312
Tax Free Obligations Fund -- 16,689(1) 149,868(2)
Treasury Obligations Fund 1,076,226 1,976,528 2,904,106
</TABLE>
(1) For the four month period from August 1, 1997 to November 30, 1997.
(2) For the ten month period from December 1, 1998 to September 30, 1998.
DST Systems, Inc., 330 West Ninth Street, Kansas City, Missouri 64105,
is transfer agent (the "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 Advisor.
Dorsey & Whitney LLP, 220 South Sixth Street, Minneapolis, Minnesota
55402, is independent general counsel for the Funds.
KPMG Peat Marwick LLP, 90 South Seventh Street, Minneapolis, Minnesota
55402, served as the Funds' independent auditors, providing audit services,
including audits of the annual financial statements and assistance and
consultation in connection with SEC filings for the year ended September 30,
1998. Ernst & Young LLP, 1400 Pillsbury Center, Minneapolis, Minnesota 55402,
serves as the Funds' independent auditors, providing audit services, including
audits of the annual financial statements and assistance and consultation in
connection with SEC filings for the year ended September 30,1999.
-18-
<PAGE>
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 Advisor seeks the most favorable net price consistent
with the best execution. The Advisor 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 Advisor to accept a particular price for a security because the
price offered by the dealer meets guidelines for profit, yield, or both. The
Funds may authorize the Advisor to place brokerage orders with some brokers who
help distribute the Funds' shares, if the Advisor reasonably believes that
transaction quality and commissions, if any, are comparable to that available
from other qualified brokers.
Decisions with respect to placement of the Funds' portfolio
transactions are made by the Advisor. 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 Advisor. 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 Advisor to supplement its own
investment research activities and enable the Advisor to obtain the views and
information of individuals and research staffs of many different securities
firms prior to making investment decisions for the Funds. To the extent
portfolio transactions are effected with broker-dealers who furnish research
services, the Advisor would receive a benefit, which is not capable of
evaluation in dollar amounts, without providing any direct monetary benefit to
the Funds from these transactions.
The Advisor 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 Advisor, except as noted below. The Advisor
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 Advisor with research services, which the
Advisor 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 Advisor
would authorize the Fund to pay an amount of commission for effecting a
securities transaction in excess of the amount of commission another
broker-dealer would have charged only if the Advisor 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
Advisor with respect to the Funds.
No Fund effects brokerage transactions in its portfolio securities with
any broker-dealer affiliated directly or indirectly with its Advisor 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 Advisor are simultaneously engaged in
the purchase or sale of the same security, the prices and amounts are allocated
in accordance with a formula considered by the Advisor to be equitable to each
client. In some cases, this system could have a detrimental effect on the price
or volume of the security as far as each client is concerned. In other cases,
however, the ability of the clients to participate in volume transactions will
produce better executions for each client.
-19-
<PAGE>
During the fiscal year ended September 30, 1998, Government Obligations
Fund, Prime Obligations Fund and Treasury Obligations Fund paid no brokerage
commissions to SEI Investments Distribution Co. ("SIDCO"). SIDCO also acts as
the Funds' Distributor and is under common control with the Funds'
Administrator.
At September 30, 1998, Prime Obligations Fund held securities of
broker-dealers which are deemed to be "regular brokers or dealers" of the Funds
under the 1940 Act (or of such broker-dealers' parent companies) in the
following amounts: Bankers Trust certificate of deposit, $74,976,000; Bear
Stearns note, $75,000,000; First Boston commercial paper, $35,934,000; Goldman
Sachs commercial paper, $129,900,000; Goldman Sachs notes, $238,000,000; Morgan
Stanley commercial paper, $73,093,000; Morgan Stanley notes, $75,000,000; J.P.
Morgan commercial paper, $29,757,000; J.P. Morgan certificate of deposit,
$25,000,000; and Salomon Smith Barney commercial paper, $273,831,000.
-20-
<PAGE>
CAPITAL STOCK
Each share of the Funds' $.01 par value common stock is fully paid,
nonassessable, and transferable. Shares may be issued as either full or
fractional shares. Fractional shares have pro rata the same rights and
privileges as full shares. Shares of the Funds have no preemptive or conversion
rights.
Each share of 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.
As of December 1, 1998, the directors of FAF owned shares of FAF, FAIF
and FASF with an aggregate net asset value of $4.9 million. As of December 1,
1998, the directors and officers of FAF as a group owned less than one percent
of each class of each Fund's outstanding shares. As of January 15, 1999, the
Funds were aware that the following persons owned of record five percent or more
of the outstanding shares of each class of stock of the Funds.
Please note that there were no Class C Shares outstanding as of January 15,
1999.
<TABLE>
<CAPTION>
PERCENTAGE OF OUTSTANDING SHARES
----------------------------------------------------
CLASS A CLASS B CLASS Y CLASS D
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
GOVERNMENT OBLIGATIONS FUND
Piper Jaffray for the Exclusive Benefit of Piper Jaffray
222 South 9th Street
Minneapolis, MN 55432 99.94%
Special Custody Account for the Benefit of Customers of FBS
Investment Services Inc.
100 South 5th Street, Suite 1400
Attn: Money Fund Unit R/R
Minneapolis, MN 55402-1217 50.99%
US Bank NA
US Bank Trust Center
Attn: Linda Fritz SPER0603
180 5th Street East
St. Paul, MN 55101-1631 48.45% 100.00%
PRIME OBLIGATIONS FUND
Piper Jaffray for the Exclusive Benefit of Piper Jaffray
222 South 9th Street
Minneapolis, MN 55432 80.20% 6.21%
Special Custody Account for the Benefit of FBS Investment
Services, Inc.
100 South 5th Street, Suite 1400
Attn: Money Fund Unit R/R
Minneapolis, MN 55402-1217 18.75% 35.75%
US Bancorp Investments Inc.
FBO 672423881
100 South 5th Street, Suite 1400
Minneapolis, MN 55402-1217 6.01%
US Bank Natl Assn Cust
IRA R/O Kenneth Petersen
19 Cleveland Avenue
South River, NJ 08882-1410 5.90%
</TABLE>
-21-
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE OF OUTSTANDING SHARES
----------------------------------------------------
CLASS A CLASS B CLASS Y CLASS D
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
US Bank Natl Assn Cust
IRA A/C Clive H Tobin
12315 Vickery Avenue East
Tacoma, WA 98446-3241 5.29%
US Bank NA
US Bank Trust Center
Attn: Linda Fritz SPER0603
180 5th Street East
St. Paul, MN 55101-1631 56.15% 100.00%
TAX FREE OBLIGATIONS FUND
Piper Jaffray for the Exclusive Benefit of Piper Jaffray
222 South 9th Street
Minneapolis, MN 55432 95.01%
US Bank NA
US Bank Trust Center
Attn: Linda Fritz SPER0603
180 5th Street East
St. Paul, MN 55101-1631 99.50% 100.00%
TREASURY OBLIGATIONS FUND
Piper Jaffray for the Exclusive Benefit of Piper Jaffray
222 South 9th Street
Minneapolis, MN 55432 22.21%
Special Custody Account for the Benefit of Customers of FBS
Investment Services, Inc.
100 South 5th Street, Suite 1400
Attn: Money Fund Unit R/R
Minneapolis, MN 55402-1217 77.65% 27.75%
US Bank NA 71.91% 100.00%
US Bank Trust Center
Attn: Linda Fritz SPER0603
180 5th Street East
St. Paul, MN 55101-1631
</TABLE>
NET ASSET VALUE AND PUBLIC OFFERING PRICE
The public offering price of the shares of a Fund generally equals the
Fund's net asset value plus any applicable sales change. A summary of any
applicable sales charge assessed on Fund share purchases is set forth in the
Fund's Prospectuses. Each Fund is open for business and its net asset value per
share is calculated on every day the New York Stock Exchange and
federally-chartered banks 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. On September 30, 1998, the net
asset value per share for the Funds was calculated as set forth below. Please
note that there were no Class C Shares outstanding as of September 30, 1998.
-22-
<PAGE>
<TABLE>
<CAPTION>
NET ASSET
NET ASSETS SHARES VALUE PER SHARE
(IN DOLLARS) / OUTSTANDING = (IN DOLLARS)
----------------- ------------------ -----------------
<S> <C> <C> <C>
GOVERNMENT OBLIGATIONS FUND
Class A $ 325,023,984.78 / 325,012,245.95 = $ 1.00
Class Y 1,000,043,071.31 / 1,000,284,661.46 = 1.00
Class D 384,142,885.45 / 384,228,904.56 = 1.00
PRIME OBLIGATIONS FUND
Class A 3,699,197,125.11 / 3,699,164,084.54 = 1.00
Class B 2,397,378.61 / 2,398,581.97 = 1.00
Class Y 5,445,684,653.09 / 5,445,625,713.28 = 1.00
Class D 233,674,703.86 / 233,677,271.21 = 1.00
TAX FREE OBLIGATIONS FUND
Class A 247,154,375.67 / 247,186,862.08 = 1.00
Class Y 272,993,966.07 / 272,984,164.51 = 1.00
Class D 30,044,336.77 / 30,095,359.48 = 1.00
TREASURY OBLIGATIONS FUND
Class A 101,749,291.58 / 101,735,188.48 = 1.00
Class Y 1,803,610,779.11 / 1,803,602,871.55 = 1.00
Class D 3,854,939,742.09 / 3,854,914,178.51 = 1.00
</TABLE>
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.
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.
-23-
<PAGE>
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"). If so qualified, each Fund will not be liable for federal
income taxes to the extent it distributes its taxable income to its
shareholders.
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 investment income and net short-term capital gains are taxable to
investors as ordinary income.
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 under
reporting 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 Advisor,
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.
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
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<PAGE>
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. For the
seven-day period ended September 30, 1998, the yield and effective yield,
respectively, for the Funds were as set forth below. Please note that there were
no Class C Shares outstanding as of September 30, 1998.
<TABLE>
<CAPTION>
YIELD EFFECTIVE YIELD
--------------- -----------------
<S> <C> <C>
GOVERNMENT OBLIGATIONS FUND
Class A 4.76% 4.87%
Class Y 5.01 5.13
Class D 4.86 4.97
PRIME OBLIGATIONS FUND
Class A 4.94 5.06
Class B 4.18 4.27
Class Y 5.19 5.32
Class D 5.04 5.16
TAX FREE OBLIGATIONS FUND
Class A 3.13 3.18
Class Y 3.38 3.44
Class D 3.23 3.28
TREASURY OBLIGATIONS FUND
Class A 4.71 4.82
Class Y 4.96 5.08
Class D 4.81 4.92
</TABLE>
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 the maximum federal income tax rate and adding the product of that
portion, if any, of the yield of the Fund that is not tax-exempt. For the seven
day period ended September 30, 1998, the tax-equivalent yield for Tax Free
Obligations Fund was as follows:
<TABLE>
<CAPTION>
YIELD EFFECTIVE YIELD
--------------- -----------------
<S> <C> <C>
TAX FREE OBLIGATIONS FUND
Class A 5.18% 5.26%
Class Y 5.60 5.70
Class D 5.35 5.43
</TABLE>
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
-25-
<PAGE>
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.
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.
ADDITIONAL INFORMATION ABOUT SELLING SHARES
BY TELEPHONE
A shareholder may redeem shares of a Fund, 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 the Fund receives the redemption request
from the financial institution (less the amount of any applicable contingent
deferred sales charge). 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 the
Funds by 2:00 p.m. Central Time (for Government Obligations Fund, Prime
Obligations Fund and Treasury Obligations Fund) and by 11:30 a.m. Central Time
(for Tax Free Obligations Fund), 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 2:00 p.m.
Central Time (for Government Obligations Fund, Prime Obligations Fund and
Treasury Obligations Fund) and by 11:30 a.m. Central Time (for Tax Free
Obligations Fund) will not receive that day's dividend. Redemption requests
placed after that respective 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 any Fund 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. The Transfer Agent and the Funds will each employ
reasonable procedures to confirm that instructions communicated are 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 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.
-26-
<PAGE>
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 Funds, 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 $25,000 or more, a redemption
of any amount to be sent to an address other than that on record with the Funds,
or a redemption payable other than to the shareholder of record, must have
signatures on written redemption requests guaranteed by:
* 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 for
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
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.
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.
-27-
<PAGE>
COMMERCIAL PAPER AND BOND RATINGS
COMMERCIAL PAPER RATINGS
Standard & Poor's Rating Services, a division of The McGraw-Hill
Companies, Inc. ("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.
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.
FINANCIAL STATEMENTS
The financial statements of FAF included in its annual report to
shareholders dated September 30, 1998 are incorporated herein by reference. Such
annual report to shareholders accompanies this Statement of Additional
Information.
-28-
<PAGE>
FIRST AMERICAN FUNDS, INC.
PART C -- OTHER INFORMATION
ITEM 23. EXHIBITS
(a)(1) Amended and Restated Articles of Incorporation, as amended
through October 2, 1997 (Incorporated by reference to Exhibit
(1) to Post-Effective Amendment No. 22, Exhibit (1)(b) to
Post-Effective Amendment No. 25 and Exhibit (1)(b) to
Post-Effective Amendment No. 28.)
* (a)(2) Certificate of Designation designating Class C Shares
* (b) Bylaws, as amended through December 9, 1998
(c) Not applicable
(d)(1) 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.)
(d)(2) Amendment to Exhibit A to Investment Advisory Agreement
(Incorporated by reference to Exhibit (5)(b) to Post-Effective
Amendment No. 27)
(e)(1) Distribution Agreement and Service Agreement relating to the
Class B Shares, dated January 20, 1995, between the Registrant
and SEI Financial Services Company (Incorporated by reference to
Exhibit (6)(a) to Post-Effective Amendment No. 22.)
(e)(2) Distribution Agreement relating to the Class A, Class Y and
Class D Shares, dated January 20, 1995, between the Registrant
and SEI Financial Services Company (Incorporated by reference to
Exhibit (6)(b) to Post-Effective Amendment No. 22.)
* (e)(3) Distribution and Service Agreement relating to the Class C
Shares, dated December 9, 1998, between the Registrant and SEI
Investments Distribution Co.
(f) Not applicable
(g)(1) 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.)
(g)(2) Compensation Agreement, dated January 20, 1995, pursuant to
Custodian Agreement(Incorporated by reference to Exhibit (8)(b)
to Post-Effective Amendment No. 22.)
(g)(3) Compensation Agreement dated October 8, 1997, pursuant to
Custodian Agreement (Incorporated by reference to Exhibit (5)(b)
to Post-Effective Amendment No. 27.)
(g)(4) Assignment of Custodian Agreements and Security Lending Agency
Agreement to U.S. Bank National Association, dated May 1, 1998
(Incorporated by reference to Exhibit (g)(4) to Post-Effective
Amendment No. 30.)
C-1
<PAGE>
(h)(1) 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.)
(h)(2) Assignment of Transfer Agency Agreement to DST Systems, Inc.
[superseded] (Incorporated by reference to Exhibit (9)(b) to
Post-Effective Amendment No. 22.)
(h)(3) 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.)
(h)(4) 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.)
(h)(5) Agreement dated July 1, 1997 between SEI and First Bank National
Association (Incorporated herein by reference to Exhibit 9(e) to
Post-Effective Amendment No. 25.)
(h)(6) Amended and Restated Administration Agreement, dated July 1,
1997, by and between the Registrant and SEI Investments
Management Corporation (Incorporated herein by reference to
Exhibit 9(f) to Post-effective Amendment No. 26.)
(h)(7) Sub-Administration Agreement effective January 1, 1998, by and
between SEI and First Bank National Association (Incorporated
herein by reference to Exhibit (9)(g) to Post-Effective
Amendment No. 26.)
(h)(8) Agreement dated July 1, 1997, by and between First Bank National
Association and SEI Investments Management Corporation
(Incorporated herein by reference to Exhibit (9)(h) to
Post-Effective Amendment No. 26.)
(h)(9) Shareholder Account Serving Agreement, dated October 1, 1998,
between the Registrant and U.S. Bank National Association
(Incorporated by reference to Exhibit (h)(9) to Post-Effective
Amendment No. 30.)
(i)(1) Opinion and Consent of Dorsey & Whitney, dated January 26, 1982
(Incorporated by reference to Exhibit (10)(a) to Post-Effective
Amendment No. 22.)
(i)(2) 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.)
(j)(1) Opinion and Consent of Melissa R. Fogelberg, dated February 6,
1985 (Incorporated by reference to Exhibit (11)(b) to
Post-Effective Amendment No. 22.)
(j)(2) Opinion and Consent of Dorsey & Whitney, dated November 25, 1991
(Incorporated by reference to Exhibit (11)(c) to Post-Effective
Amendment No. 22.)
* (j)(3) Consent of KPMG Peat Marwick LLP
(k) Not applicable
(l) Letter of Investment Intent, dated November 3, 1981
(Incorporated by reference to Exhibit (13) to Post-Effective
Amendment No. 22.)
C-2
<PAGE>
(m)(1) Distribution Plan for Class A Shares (Incorporated by reference
to Exhibit (15)(a) to Post-Effective Amendment No. 22.)
(m)(2) Distribution Plan for Class B Shares (Incorporated by reference
to Exhibit (15)(b) to Post-Effective Amendment No. 22.)
(m)(3) Distribution Plan for Class D Shares (Incorporated by reference
to Exhibit (15)(c) to Post-Effective Amendment No. 22.)
* (m)(4) Distribution Plan for Class C Shares
(m)(5) Service Plan for Class B Shares (Incorporated by reference to
Exhibit (15)(d) to Post-Effective Amendment No. 22.)
* (m)(6) Service Plan for Class C Shares
* (n) Financial Data Schedule
(o) Multiple Class Plan Pursuant to Rule 18f-3 (Incorporated by
reference to Exhibit (18) to Post-Effective Amendment No. 22.)
* Filed herewith
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not applicable.
ITEM 25. INDEMNIFICATION
The Registrant's Articles of Incorporation and Bylaws provide that the
Registrant shall indemnify such persons for such expenses and liabilities, in
such manner, under such circumstances, and to the full extent as permitted by
Section 302A.521 of the Minnesota Statutes, as now enacted or hereafter amended;
provided, however, that no such indemnification may be made if it would be in
violation of Section 17(h) of the Investment Company Act of 1940, as now enacted
or hereafter amended, and any rules, regulations, or releases promulgated
thereunder.
Section 302A.521 of the Minnesota Statutes, as now enacted, provides that
a corporation shall indemnify a person made or threatened to be made a party to
a proceeding by reason of the former or present official capacity of the person
against judgments, penalties, fines, settlements and reasonable expenses,
including attorneys' fees and disbursements, incurred by the person in
connection with the proceeding if, with respect to the acts or omissions of the
person complained of in the proceeding, the person has not been indemnified by
another organization for the same judgments, penalties, fines, settlements, and
reasonable expenses incurred by the person in connection with the proceeding
with respect to the same acts or omissions; acted in good faith, received no
improper personal benefit, and the Minnesota Statutes dealing with directors'
conflicts of interest, if applicable, have been satisfied; in the case of a
criminal proceeding, had no reasonable cause to believe that the conduct was
unlawful; and reasonably believed that the conduct was in the best interests of
the corporation or, in certain circumstances, reasonably believed that the
conduct was not opposed to the best interests of the corporation.
The Registrant undertakes that no indemnification or advance will be made
unless it is consistent with Sections 17(h) or 17(i) of the Investment Company
Act of 1940, as now enacted or hereafter amended, and
C-3
<PAGE>
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.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Information on the business of the Registrant's investment adviser, U.S.
Bank National Association (the "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*
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*
Susan E. Lester Director, Executive Vice President and Executive Vice President and Chief
Chief Financial Officer Financial Officer of U.S. Bancorp*
Robert D. Sznewajs Director and Vice Chairman Vice Chairman of U.S. Bancorp*
Gary T. Duim Director and Vice Chairman Vice Chairman of U.S. Bancorp*
</TABLE>
- ------------------
* Address: 601 Second Avenue South, Minneapolis, Minnesota 55402.
C-4
<PAGE>
ITEM 27. PRINCIPAL UNDERWRITERS:
(a) State the name of each investment company (other than the
Registrant) for which each principal underwriter currently distributing the
Registrant's securities also acts as a principal underwriter, distributor or
investment adviser:
Registrant's distributor, SEI Investments Distribution Co. (the
"Distributor") acts as distributor for SEI Liquid Asset Trust, SEI Daily Income
Trust, SEI Tax Exempt Trust, SEI Index Funds, SEI Institutional Managed Trust,
SEI Institutional International Trust, The Advisors' Inner Circle Fund, Pillar
Funds, CUFund, STI Classic Funds, CoreFunds, Inc., First American Funds, Inc.,
First American Investment Funds, Inc., The Arbor Fund, Boston 1784 Funds, PBHG
Funds, Inc., Marquis Funds, Morgan Grenfell Investment Trust, The Achievement
Funds Trust, Bishop Street Funds, CrestFunds, Inc., STI Classic Variable Trust,
ARK Funds, Monitor Funds, SEI Asset Allocation Trust, Expedition Funds, TIP
Funds, SEI Institutional Investments Trust, First American Strategy Funds, Inc.,
Highmark Funds, Armada Funds, PBHG Insurance Series Fund, Inc., TIP
Institutional Funds, Oak Associates Funds and The Nevis Funds, Inc., pursuant to
distribution agreements dated November 29, 1982, July 15, 1982, December 3,
1982, July 10, 1985, January 22, 1987, August 30, 1988, November 14, 1991,
February 28, 1992, May 1, 1992, May 29, 1992, October 30, 1992, November 1,
1992, November 1, 1992, January 28, 1993, June 1, 1993, July 16, 1993, August
17, 1993, January 3, 1994, December 27, 1994, January 27, 1995, March 1, 1995,
August 18, 1995, November 1, 1995, January 11, 1996, April 1, 1996, April 29,
1996, June 14, 1996, October 1, 1996, February 15, 1997, March 8, 1997, April 1,
1997, June 9, 1997, January 1, 1998, February 27, 1998 and June 29, 1998,
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) Provide the information required by the following table for each
director, officer, or partner of each principal underwriter named in the
response to Item 20. Unless otherwise noted, the business address of each
director or officer is One Freedom Valley Drive, Oaks, Pennsylvania 19456.
<TABLE>
<CAPTION>
NAME POSITIONS AND OFFICES WITH UNDERWRITER POSITIONS AND OFFICES WITH REGISTRANT
<S> <C> <C>
Alfred P. West, Jr. Director, Chairman & Chief --
Executive Officer
Henry H. Greer Director --
Carmen V. Romeo Director --
Mark J. Held President & Chief Operating Officer --
Gilbert L. Beebower Executive Vice President --
Richard B. Lieb Executive Vice President, President -
Investment Services Division --
Dennis J. McGonigle Executive Vice President --
Robert M. Silvestri Chief Financial Officer & Treasurer --
Leo J. Dolan, Jr. Senior Vice President --
Carl A. Guarino Senior Vice President --
Larry Hutchinson Senior Vice President --
Jack May Senior Vice President --
Hartland J. McKeown Senior Vice President --
Barbara J. Moore Senior Vice President --
Kevin P. Robins Senior Vice President & General Counsel Vice President & Assistant Secretary
Patrick K. Walsh Senior Vice President --
Ronert Aller Vice President --
</TABLE>
C-5
<PAGE>
<TABLE>
<S> <C> <C>
Gordon W. Carpenter Vice President --
Todd Cipperman Vice President & Assistant Secretary --
S. Courtney E. Collier Vice President & Assistant Secretary Vice President & Assistant Secretary
Robert Crudup Vice President & Managing Director --
Barbara Doyne Vice President --
Jeff Drennen Vice President --
James R. Foggo Vice President & Assistant Secretary
Vic Galef Vice President & Managing Director --
Lydia A. Gavalis Vice President & Assistant Secretary Vice President & Assistant Secretary
Greg Gettinger Vice President & Assistant Secretary --
Jeff Jacobs Vice President --
Samuel King Vice President --
Kim Kirk Vice President & Managing Director --
John Krzeminski Vice President & Managing Director --
Carolyn McLaurin Vice President & Managing Director --
W. Kelso Morrill Vice President --
Mark Nagle Vice President President
Joanne Nelson Vice President --
Joseph M. O'Donnell Vice President & Assistant Secretary Vice President & Assistant Secretary
Sandra K. Orlow Vice President & Secretary Vice President & Assistant Secretary
Cynthia M. Parrish Vice President & Assistant Secretary --
Donald Pepin Vice President & Managing Director --
Kim Rainey Vice President --
Rob Redecan Vice President --
Maria Reinhart Vice President --
Mark Samuels Vice President & Managing Director --
Steve Smith Vice President --
Daniel Spaventa Vice President --
Kathryn L. Stanton Vice President & Assistant Secretary --
Lynda J. Striegel Vice President & Assistant Secretary Vice President & Assistant Secretary
Lori L. White Vice President & Assistant Secretary --
Wayne M. Withrow Vice President & Managing Director --
</TABLE>
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
All accounts, books, and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the rules promulgated
thereunder are maintained by SEI Investments Distribution Co., Oaks,
Pennsylvania 19456.
ITEM 29. MANAGEMENT SERVICES
Not applicable.
ITEM 30. UNDERTAKINGS
Not applicable.
C-6
<PAGE>
SIGNATURES
As required by the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended, the Registrant certifies that it
meets all of the requirements for effectiveness of this Registration Statement
under Rule 485(b) of the Securities Act of 1933, as amended, and 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 29th day of January, 1999.
FIRST AMERICAN FUNDS, INC.
ATTEST: /s/ Michael G. Beattie By: /s/ James R. Foggo
-------------------------------- ----------------------------------
Michael G. Beattie James R. Foggo
Vice President
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Amendment to the Registration Statement has been signed below by
the following persons in the capacity and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Michael G. Beattie Controller (Principal **
- ------------------------------- Financial and Accounting Officer)
Michael G. Beattie
* Director **
- -------------------------------
David T. Bennett
* Director **
- -------------------------------
Robert J. Dayton
* Director **
- -------------------------------
Andrew M. Hunter III
* Director **
- -------------------------------
Leonard W. Kedrowski
* Director **
- -------------------------------
Robert L. Spies
* Director **
- -------------------------------
Joseph D. Strauss
* Director **
- -------------------------------
Virginia L. Stringer
* * Director **
- -------------------------------
Roger A. Gibson
* By: /s/ James R. Foggo
--------------------------
James R. Foggo
Attorney-in-Fact
** January 29, 1999
C-7
EXHIBIT (a)(2)
FIRST AMERICAN FUNDS, INC.
CERTIFICATE OF DESIGNATION
OF
SERIES B, CLASS FIVE COMMON SHARES
PURSUANT TO MINNESOTA STATUTES,
SECTION 302A.401, SUBD. 3
The undersigned, being the duly elected Assistant 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
December 9, 1998:
APPROVAL OF DESIGNATION OF
SERIES B, CLASS FIVE COMMON SHARES
WHEREAS, Article 5(b) 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 B Common Shares" and
for the designation, within such series, of 20,000,000,000 of such
shares as "Series B, Class One Common Shares" and of 20,000,000,000 of
such shares as "Series B, Class Two Common Shares" and of
20,000,000,000 of such shares as "Series B, Class Three Common Shares,"
and provides further that the balance of 40,000,000,000 of such Series
B Common Shares may be issued in one or more additional classes with
such designations, preferences and relative, participating, optional or
other special rights, or qualifications, limitations or restrictions
thereof, as shall be stated or expressed in a resolution or resolutions
providing for the issue of such class as may be adopted from time to
time by the Board of Directors of 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 previously has designated 20,000,000,000 of such Series B
Common Shares as "Series B, Class Four Common Shares."
WHEREAS, pursuant to said authority, the Board of Directors of
the Fund wishes to designate a new class of Series B Common Shares to
be known as Series B, Class Five Common Shares.
NOW, THEREFORE, BE IT RESOLVED, that 1,000,000,000 previously
undesignated Series B Common Shares may be issued in the class hereby
designated as "Series B, Class Five Common Shares."
RESOLVED, FURTHER, that the Series B, Class Five 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 B, Class Five Common
Shares
1
<PAGE>
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 B, Class Five: Prime Obligations Fund, "Class C"
IN WITNESS WHEREOF, the undersigned has signed this Certificate of
Designation this 10th day of December, 1998.
/s/ James D. Alt
----------------------------------------
James D. Alt, Assistant Secretary
[STAMP]
STATE OF MINNESOTA
DEPARTMENT OF STATE
FILED
DEC 11, 1998
/s/ Joan Anderson Growe
Secretary of State
EXHIBIT (b)
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 6/4/97; Amendment to
Section 1.01 approved at Board of Directors Meeting on 2/23/98; Amendment to
Section 1.01 approved at Board of Directors Meeting on 12/9/98.
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 Y."
Series B, Class Two: Prime Obligations Fund, "Class D."
Series B, Class Three: Prime Obligations Fund, "Class A."
Series B, Class Four: Prime Obligations Fund, "Class B."
Series B, Class Five: Prime Obligations Fund, "Class C."
Series C, Class One: Government Obligations Fund, "Class Y."
Series C, Class Two: Government Obligations Fund, "Class D."
Series C, Class Three: Government Obligations Fund, "Class A.
Series D, Class One: Treasury Obligations Fund, "Class Y."
Series D, Class Two: Treasury Obligations Fund, "Class D."
Series D, Class Three: Treasury Obligations Fund, "Class A."
Series F, Class One: Tax Free Money Market Fund, "Class A."
Series F, Class Two: Tax Free Money Market Fund, "Class B."
Series F, Class Three: Tax Free Money Market Fund, "Class Y."
Series F, Class Four: Tax Free Money Market Fund, "Class D."
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.
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.
<PAGE>
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 shareholders 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
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 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
-2-
<PAGE>
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.
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 not lawfully be considered at that meeting and
does not participate at that meeting in the consideration of the item at that
meeting.
Section 2.10. Written Action. Any action which might be taken at a
meeting of the shareholders may be taken without a meeting if done in writing
and signed by all of the shareholders entitled to vote on that action. If the
action to be taken relates to
-3-
<PAGE>
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 last fixed by the shareholders, the Board of Directors or
the Articles of Incorporation. Directors need not be shareholders. Each of the
directors shall hold office until the regular meeting of shareholders next held
after his election and until his successor shall have been elected and shall
qualify, or until the earlier death, resignation, removal or disqualification of
such director.
Section 3.02. 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 by 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.
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.
-4-
<PAGE>
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 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
-5-
<PAGE>
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
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
-6-
<PAGE>
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
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.
-7-
<PAGE>
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 unexplored term by the Board of Directors.
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 Chairman of the Board of Directors will not be deemed to be an
"affiliated person" with respect to the corporation (under the Investment
Company Act of 1940, as amended) solely by virtue of such person's position as
Chairman of the Board of Directors of the corporation.
Section 4.06. 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
-8-
<PAGE>
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 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
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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 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.
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(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 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
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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 by both and shall not be valid unless so
countersigned. If the same person shall be both transfer agent and registrar,
only one countersignature by such person shall be required.
Section 5.07. Transfer Regulations. The shares of stock of the
corporation may be freely transferred, and the Board of Directors may from time
to time adopt rules and regulations with reference to the method of transfer of
shares of stock of the corporation.
Section 5.08. 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
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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
(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;
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(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.
(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
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selected by majority vote, either at the meeting at which the rejection occurred
or at a subsequent meeting of shareholders called for the purpose.
(d) Any vacancy occurring between annual meetings, due to the death,
resignation or otherwise of the Accountant, may be filled by the Board of
Directors.
Section 7.04. 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 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.
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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.
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.
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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.
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EXHIBIT (e)(3)
FIRST AMERICAN FUNDS, INC.
DISTRIBUTION AND SERVICE AGREEMENT
FOR
CLASS C SHARES (LEVEL-LOAD CLASSES)
THIS AGREEMENT is made as of the 9th day of December, 1998, between
FIRST AMERICAN FUNDS, INC., a Minnesota corporation (the "Fund"), and SEI
Investments Distribution Co. (the "Distributor"), a Pennsylvania corporation.
WHEREAS, the Fund is registered as an investment company with the
Securities and Exchange Commission ("SEC") under the Investment Company Act of
1940, as amended ("1940 Act"), and its shares are registered with the SEC under
the Securities Act of 1933, as amended ("1933 Act"); and
WHEREAS, the Distributor is registered as a broker-dealer with the
SEC under the Securities Exchange Act of 1934, as amended;
WHEREAS, the Fund desires to appoint the Distributor to act as
distributor and shareholder servicing agent for the Class C shares of the Fund's
portfolios, as now in existence or hereinafter created from time to time
(collectively, the "Shares"), in accordance with the terms and conditions of
this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
contained, the Fund and Distributor hereby agree as follows:
ARTICLE 1. Distribution Activities.
A. Sale of Shares. The Fund grants to the Distributor the
exclusive right to sell Shares of each portfolio of the Fund (each a
"Portfolio"), at net asset value in accordance with the current prospectus for
the Shares, as agent and on behalf of the Fund, during the term of this
Agreement and subject to the registration requirements of the 1933 Act, the
rules and regulations of the SEC and the laws governing the sale of securities
in the various states ("Blue Sky Laws").
B. Solicitation of Sales. In consideration of these rights
granted to the Distributor and the compensation payable pursuant to Article 3
hereof, the Distributor agrees to use all reasonable efforts, consistent with
its other business, in connection with the distribution of Shares; provided,
however, that the Distributor shall not be prevented from entering into like
arrangements with other issuers. The provisions of this paragraph do not
obligate the Distributor to register as a broker or dealer under the Blue Sky
Laws of any jurisdiction when it determines it
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would be uneconomical for it to do so or to maintain its registration in any
jurisdiction in which it is now registered nor obligate the Distributor to sell
any particular number of Shares.
C. Authorized Representations. The Distributor is not authorized
by the Fund to give any information or to make any representations other than
those contained in the current registration statements and prospectuses of the
fund with respect to the Shares filed with the SEC or contained in Shareholder
reports or other material that may be prepared by or on behalf of the fund for
the Distributor's use. The Distributor may prepare and distribute sales
literature and other material, as it may deem appropriate, provided that such
literature and materials have been approved by the Fund prior to their use.
D. Registration of Shares. The Fund agrees that it will take all
action necessary to register Shares under the federal and state securities laws
so that there will be available for sale the number of Shares the Distributor
may reasonably be expected to sell and to pay all fees associated with said
registration. The Fund shall make available to the Distributor such number of
copies of its currently effective prospectus and statement of additional
information as the Distributor may reasonably request. The Fund shall furnish to
the Distributor copies of all information, financial statements and other
papers, which the Distributor may reasonably request for use in connection with
the distribution of Shares of the Fund.
ARTICLE 2. Shareholder Servicing Activities.
A. Appointment. The Fund hereby appoints the Distributor a
servicing agent for the Shares of each Portfolio, as agent and on behalf of the
Fund in accordance with and during the term of this Agreement, and the
Distributor hereby accepts such appointment.
B. Shareholder Servicing Activities. As servicing agent for the
Shares of each Portfolio, and in consideration of the compensation payable
pursuant to Article 4 hereof, the Distributor shall provide personal, continuing
services to investors in the Shares of each Portfolio, including but not limited
to providing ongoing servicing and/or maintenance of shareholder accounts with
respect to the Shares of the Portfolios, responding to inquiries of the holders
of Shares regarding their ownership of Shares or their accounts with the Fund,
and providing administrative or accounting services with respect to the Shares
of the Portfolios not otherwise provided by other agents of the Fund.
Notwithstanding the foregoing, if the National Association of Securities
Dealers, Inc. ("NASD") adopts a definition of "service fee" for purposes of
Section 2830 of the Conduct Rules of the NASD that differs from the definition
of shareholder servicing activities in this paragraph, or if the NASD adopts a
related definition intended to define the same concept, the definition of
shareholder servicing activities in this paragraph shall be automatically
amended, without further action of the parties, to conform to such NASD
definition.
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ARTICLE 3. Compensation for Distribution Activities. (a) As
compensation for providing distribution services pursuant to Article 1 hereof,
the Distributor shall receive:
(1) in respect of the Shares of each Portfolio, pursuant to
the Fund's Plan of Distribution with respect to Class C Shares adopted by each
such class in accordance with Rule 12b-1 under the 1940 Act (the "Distribution
Plan"), a fee in connection with distribution-related services provided in
respect of such class, calculated and payable monthly as soon as practicable
after the end of the calendar month within which such fee accrues, but in any
event prior to the tenth day following the end of such calendar month, at the
annual rate of .75% of the value of the average daily net assets of such class.
(2) All contingent deferred sales charges applied on
redemptions of Shares of such Portfolio, payable at such time as the redemption
proceeds in respect of the redemption giving rise to the contingent deferred
sales charge is paid to the redeeming shareholder; provided that whether and at
what rate a contingent deferred sales charge will be imposed with respect to a
redemption shall be determined in accordance with, and in the manner set forth
in, the Registration Statement registering the Shares then in effect with the
SEC.
(b) Amounts payable to the Distributor under the Distribution
Plan may exceed or be less that the Distributor's actual costs incurred in
connection with the distribution of the Shares of each such class, as described
in Article 5 below. In the event such Distribution Expenses (as defined in
Article 5) exceed amounts payable to the Distributor under the Distribution
Plan, the Distributor shall not be entitled to reimbursement by the Fund.
(c) The Distributor may reallow any or all of the distribution
fees and contingent deferred sales charges which it is paid under this Agreement
to such dealers as the Distributor may from time to time determine.
(d) The Distributor may transfer its right to the payments
described in this Article 3 to third persons who provide funding to the
Distributor, provided that any such transfer shall not be deemed a transfer of
the Distributor's obligations under this Agreement. Upon receipt of direction
from the Distributor to pay such fees to a transferee, the Fund shall make
payment in accordance with such direction.
ARTICLE 4. Compensation for Shareholder Service Activities.
(a) As compensation for providing shareholder services pursuant
to Article 2 hereof, the Distributor shall receive in respect of the Shares of
each Portfolio, pursuant to the Fund's Service Plan with respect to Class C
Shares adopted by each such class in accordance with the Fund's Rule 18f-3 Plan
for multiple classes adopted by the Fund's Board of Directors (the "Service
Plan"), a fee in connection with shareholder services provided in respect of
such class, calculated and payable monthly, at the annual rate of .25% of the
value of the average daily net assets of such class.
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(b) Amounts payable to the Distributor under the Service Plan
may exceed or be less than the Distributor's actual costs incurred in connection
with the provision of shareholder services for the Shares, as described in
Article 5 below. In the event such Shareholder Servicing Expenses (as defined in
Article 5) exceed amounts payable to the Distributor under the Service Plan, the
Distributor shall not be entitled to reimbursement by the Fund.
(c) The Distributor may reallow all or any part of, or pay
compensation from, the amounts payable to the Distributor under the Service Plan
to such persons, including employees of the Distributor, and institutions who
respond to inquiries of holders of the Shares of the Portfolios or provide other
administrative or accounting services for the Shares, as the Distributor may
from time to time determine.
ARTICLE 5. Expenses.
(a) During the period of this Agreement, the Fund shall pay or
cause to be paid all expenses, costs and fees incurred by the Fund which are not
assumed by the Distributor. The Distributor shall pay all of its own costs
incurred in connection with the distribution of the Shares of each Portfolio
pursuant to Article 1 hereof ("Distribution Expenses"). The Distributor shall
also pay all of its own costs incurred in connection with providing the
personal, continuing services to shareholders of the Shares of each Portfolio
pursuant to Article 2 hereof ("Shareholder Servicing Expenses"). Distribution
Expenses include, but are not limited to, the following expenses incurred by the
Distributor: initial and ongoing sales compensation (in addition to sales loads)
paid to investment executives of the Distributor and to other broker-dealers and
participating financial institutions which the Distributor has agreed to pay;
expenses incurred in the printing of prospectuses, statements of additional
information and reports used for sales purposes; expenses of preparation and
distribution of sales literature; expenses of advertising of any type; an
allocation of the Distributor's overhead; payments to and expenses of persons
who provide support services in connection with the distribution of Fund shares;
and other distribution-related expenses. Shareholder Servicing Expenses include
all expenses of the Distributor incurred in connection with providing
administrative or accounting services to shareholders of the Shares of each
Portfolio, including, but not limited to, an allocation of the Distributor's
overhead and payments made to persons, including employees of the Distributor,
who respond to inquiries of shareholders regarding their ownership of Shares, or
who provide other administrative or accounting services for the Shares class not
otherwise required to be provided by the applicable Portfolio's investment
adviser, transfer agent or other agent.
(b) In each year during which this Agreement remains in effect,
the Distributor will prepare and furnish to the Board of Directors of the Fund,
on a quarterly basis, written reports complying with the requirements of Rule
12b-1 under the 1940 Act that set forth (i) the amounts expended under this
Agreement as Distribution Expenses for the Shares of each Portfolio and the
purposes for which those expenditures were made, and (ii) the amounts expended
under this
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Agreement as Shareholder Servicing Expenses for the Shares of each Portfolio and
the purposes for which those expenditures were made.
ARTICLE 6. Indemnification of Distributor. The Fund agrees to
indemnify and hold harmless the Distributor and each of its directors and
officers and each person, if any, who controls the Distributor within the
meaning of Section 15 of the 1933 Act against any loss, liability, claim,
damages or expense (including the reasonable cost of investigating or defending
any alleged loss, liability, claim, damages, or expense and reasonable counsel
fees and disbursements incurred in connection therewith), arising by reason of
any person acquiring any Shares, based upon the ground that the registration
statement, prospectus, Shareholder reports or other information filed or made
public by the Fund (as from time to time amended) included an untrue statement
of a material fact or omitted to state a material fact required to be stated or
necessary in order to make the statements made not misleading. However, the Fund
does not agree to indemnify the Distributor or hold it harmless to the extent
that the statements or omission was made in reliance upon, and in conformity
with, information furnished to the Fund by or on behalf of the Distributor.
In no case (i) is the indemnity of the Fund to be deemed to protect
the Distributor against any liability to the Fund or its Shareholders to which
the Distributor or such person otherwise would be subject by reason of willful
misfeasance, bad faith or negligence in the performance of its duties or by
reason of its reckless disregard of its obligations and duties under this
Agreement, or (ii) is the Fund to be liable to the Distributor under the
indemnity agreement contained in this paragraph with respect to any claim made
against the Distributor or any person indemnified unless the Distributor or
other person shall have notified the Fund in writing of the claim within a
reasonable time after the summons or other first written notification giving
information of the nature of the claim shall have been served upon the
Distributor or such other person (or after the Distributor or the person shall
have received notice of service on any designated agent). However, failure to
notify the Fund of any claim shall not relieve the Fund from any liability which
it may have to the Distributor or any person against whom such action is brought
otherwise than on account of its indemnity agreement contained in this
paragraph.
The Fund shall be entitled to participate at its own expense in the
defense or, if it so elects, to assume the defense of any suit brought to
enforce any claims subject to this indemnity provision. If the Fund elects to
assume the defense of any such claim, the defense shall be conducted by counsel
chosen by the Fund and satisfactory to the indemnified defendants in the suit
whose approval shall not be unreasonably withheld. In the event that the Fund
elects to assume the defense of any suit and retain counsel, the indemnified
defendants shall bear the fees and expenses of any additional counsel retained
by them. If the Fund does not elect to assume the defense of a suit, it will
reimburse the indemnified defendants for the reasonable fees and expenses of any
counsel retained by the indemnified defendants.
5
<PAGE>
The Fund agrees to notify the Distributor promptly of the
commencement of any litigation or proceedings against it or any of its officers
or Directors in connection with the issuance or sale of any of its Shares.
ARTICLE 7. Indemnification of Fund. The Distributor covenants and
agrees that it will indemnify and hold harmless the fund and each of its
Directors and officers and each person, if any, who controls the Fund within the
meaning of Section 15 or the 1933 Act, against any loss, liability, damages,
claim or expense (including the reasonable cost of investigating or defending
any alleged loss, liability, damages, claim or expense and reasonable counsel
fees incurred in connection therewith) based upon the 1933 Act or any other
statute or common law and arising by reason of any person acquiring any Shares,
and alleging a wrongful act of the Distributor or any of its employees or
alleging that the registration statement, prospectus, Shareholder reports or
other information filed or made public by the Fund (as from time to time
amended) included an untrue statement of a material fact or omitted to state a
material fact required to be stated or necessary in order to make the statements
not misleading, insofar as the statement or omission was made in reliance upon
and in conformity with information furnished to the Fund by or on behalf of the
Distributor.
In no case (i) is the indemnity of the Distributor in favor of the
Fund or any other person indemnified to be deemed to protect the Fund or any
other person against any liability to which the Fund or such other person would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of its reckless
disregard of its obligations and duties under this Agreement, or (ii) is the
Distributor to be liable under its indemnity agreement contained in this
paragraph with respect to any claim made against the Fund or any person
indemnified unless the Fund or person, as the case may be, shall have notified
the Distributor in writing of the claim within a reasonable time after the
summons or other first written notification giving information of the nature of
the claim shall have been served upon the Fund or upon any person (or after the
Fund or such person shall have received notice of service on any designated
agent). However, failure to notify the Distributor of any claim shall not
relieve the Distributor from any liability which it may have to the Fund or any
person against whom the action is brought otherwise than on account of its
indemnity agreement contained in this paragraph.
The Distributor shall be entitled to participate, at its own
expense, in the defense or, if it so elects, to assume the defense of any suit
brought to enforce the claim, but if the Distributor elects to assume the
defense, the defense shall be conducted by counsel chosen by the Distributor and
satisfactory to the indemnified defendants whose approval shall not be
unreasonably withheld. In the event that the Distributor elects to assume the
defense of any suit and retain counsel, the defendants in the suit shall bear
the fees and expenses of any additional counsel retained by them. If the
Distributor does not elect to assume the defense of any suit, it will reimburse
the indemnified defendants in the suit for the reasonable fees and expenses of
any counsel retained by them.
6
<PAGE>
The Distributor agrees to notify the Fund promptly of the
commencement of any litigation or proceedings against it in connection with the
issue and sale of any of the Fund's Shares.
ARTICLE 8. Effective Date. This Agreement shall be effective upon
its execution, and unless terminated as provided, shall continue in force for
one year from the effective date and thereafter from year to year, provided that
such annual continuance is approved by (i) either the vote of a majority of the
Directors of the Fund, or the vote of a majority of the outstanding voting
securities of the Shares of each Portfolio, and (ii) the vote of a majority of
those Directors of the Fund who are not parties to this Agreement or the Fund's
Distribution Plan or Service Plan or interested persons of any such party
("Qualified Directors"), cast in person at a meeting called for the purpose of
voting on the approval. This Agreement shall automatically terminate in the
event of its assignment. As used in this paragraph the terms "vote of a majority
of the outstanding voting securities", "assignment" and "interested person"
shall have the respective meanings specified in the 1940 Act. In addition, this
Agreement may at any time be terminated without penalty by the Distributor, by a
vote of a majority of Qualified Directors or by vote of a majority of the
outstanding voting securities of the Shares class of any Portfolio upon not less
than sixty days prior written notice to the other party.
ARTICLE 9. Notices. Any notice required or permitted to be given by
either party to the other shall be deemed sufficient if sent by registered or
certified mail, postage prepaid, addressed by the party giving notice to the
other party at the last address furnished by the other party to the party giving
notice: if to the Fund, at c/o James R. Foggo, Vice President, SEI Investments
Distribution Co., 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 Distributor, One Freedom
Valley Drive, Oaks Pennsylvania 19456.
ARTICLE 10. 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 11. 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.
7
<PAGE>
IN WITNESS, the Fund and Distributor have each duly executed this
Agreement, as of the day and year above written.
FIRST AMERICAN FUNDS, INC.
By: /s/ James R. Foggo
------------------------------
Attest: /s/ Donna Rafa
--------------------------
SEI INVESTMENTS DISTRIBUTION CO.
By: /s/ Joseph M. O'Donnell
------------------------------
Attest: /s/ Anne Yost
--------------------------
8
Exhibit (m)(4)
CLASS C DISTRIBUTION PLAN
[LEVEL-LOAD CLASS]
FIRST AMERICAN FUNDS, INC.
WHEREAS, FIRST AMERICAN FUNDS, INC. (the "Fund") is engaged in business
as an open-end investment company registered under the Investment Company Act of
1940, as amended ("1940 Act"); and
WHEREAS, the Directors of the Fund have determined that there is a
reasonable likelihood that the following Distribution Plan will benefit the Fund
and the owners of Class C shares of Common Stock ("Shareholders") in the Fund;
NOW, THEREFORE, the Directors of the Fund hereby adopt this
Distribution Plan pursuant to Rule 12b-1 under the 1940 Act.
SECTION 1. The Fund has adopted this Class C Distribution Plan ("Plan")
to enable the Fund to directly or indirectly bear expenses relating to the
distribution and sale of Class C shares (collectively, "Shares") of the
portfolios of the Fund, as now in existence or hereinafter created from time to
time (each a "Portfolio").
SECTION 2. The Shares of each Portfolio are authorized to pay the
principal underwriter of the Shares (the "Distributor") a total fee in
connection with distribution-related services provided in respect of such class,
calculated and payable monthly, at the annual rate of .75% of the value of the
average daily net assets of such class.
SECTION 3.
(a) The fee paid pursuant to Section 2 may be used by the
Distributor to provide initial and ongoing sales compensation
to its investment executives and to other broker-dealers in
respect of sales of Shares of the applicable Portfolios and to
pay for other advertising and promotional expenses in
connection with the distribution of the Shares. These
advertising and promotional expenses include, by way of
example but not by way of limitation, costs of printing and
mailing prospectuses, statements of additional information and
shareholder reports to prospective investors; preparation and
distribution of sales literature; advertising of any type; an
allocation of overhead and other expenses of the Distributor
related to the distribution of the Shares; and payments to,
and expenses of, officers, employees or representatives of the
Distributor, of other broker-dealers, banks or other financial
institutions, and of any other persons who provide support
services in connection with the distribution of the Shares,
including travel, entertainment, and telephone expenses.
1
<PAGE>
(b) Payments under the Plan are not tied exclusively to the
expenses for distribution related activities actually incurred
by the Distributor, so that such payments may exceed expenses
actually incurred by the Distributor. The Fund's Board of
Directors will evaluate the appropriateness of the Plan and
its payment terms on a continuing basis and in doing so will
consider all relevant factors, including expenses borne by the
distributor and amounts it receives under the Plan.
(c) The Fund's investment adviser and the Distributor may, at
their option and in their sole discretion, make payments from
their own resources to cover additional costs of distribution.
SECTION 4. This Plan shall not take effect with respect to a Portfolio
until it has been approved together with any related agreements, by votes of the
majority of both (i) the Directors of the Fund and (ii) the Qualified Directors,
cast in person at a Board of Directors meeting called for the purpose of voting
on this Plan or such agreement.
SECTION 5. This Plan shall continue in effect for a period of more than
one year after it takes effect only for so long as such continuance is
specifically approved at least annually in the manner provided in Section 4
herein for the approval of this Plan.
SECTION 6. Any person authorized to direct the disposition of monies
paid or payable by the Fund pursuant to this Plan or any related agreement shall
provide to the Directors of the Fund, at least quarterly, a written report of
the amounts so expended and the purposes for which such expenditures were made.
SECTION 7. This Plan may be terminated at any time with respect to any
Portfolio by the vote of a majority of the Qualified Directors or by vote of a
majority of the Portfolio's outstanding Class C shares.
SECTION 8. All agreements with any person relating to implementation of
this Plan shall be in writing, and any agreement related to this Plan shall
provide (a) that such agreement may be terminated at any time with respect to
any Portfolio, without payment of any penalty, by the vote of a majority of the
Qualified Directors or by the vote of shareholders holding a majority of the
Portfolio's outstanding Class C shares, on not more than 60 days written notice
to any other party to the agreement; and (b) that such agreement shall terminate
automatically in the event of its assignment.
SECTION 9. This Plan may not be amended to increase materially the
amount of distribution expenses permitted pursuant to Section 2 hereof without
the approval of shareholders holding a majority of the outstanding Class C
shares of the applicable Portfolio, and all material amendments to this Plan
shall be approved in the manner provided in Section 4 herein for the approval of
this Plan.
2
<PAGE>
SECTION 10. As used in this Plan, (a) the term "Qualified Directors"
shall mean those Directors of the Fund who are not interested persons of the
Fund, and have no direct or indirect financial interest in the operation of this
Plan or any agreements related to it, and (b) the terms "assignment" and
"interested person" 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.
SECTION 11. While this Plan is in effect, the selection and nomination
of those Directors who are not interested persons of the Fund within the meaning
of Section 2(a)(19) of the 1940 Act shall be committed to the discretion of the
Directors then in office who are not interested persons of the Fund.
SECTION 12. This Plan shall not obligate the Fund or any other party to
enter into an agreement with any particular person.
3
Exhibit (m)(6)
SERVICE PLAN
[CLASS C SHARES - LEVEL-LOAD CLASSES]
FIRST AMERICAN FUNDS, INC.
WHEREAS, FIRST AMERICAN FUNDS, INC. (the "Fund") is engaged in business
as an open-end investment company registered under the Investment Company Act of
1940, as amended ("1940 Act"); and
WHEREAS, the Directors of the Fund have determined that there is a
reasonable likelihood that the following Service Plan will benefit the Fund and
the owners of the Class C Shares (the "Shares") of the portfolios of the Fund;
NOW, THEREFORE, the Directors of the Fund hereby adopt this Service
Plan in accordance with the conditions contained in the Fund's Rule 18f-3 Plan
adopted by the Fund's Board of Directors for multi-classes.
SECTION 1. The Fund has adopted this Service Plan ("Plan") to enable
the Fund to directly or indirectly bear expenses relating to the shareholder
servicing of the Shares of the Fund's portfolios as now in existence or
hereinafter created from time to time (each a "Portfolio").
SECTION 2. The Shares of each Portfolio are authorized to pay the
principal underwriter of the Shares (the "Distributor") a fee in connection with
the personal, ongoing servicing of shareholder accounts of such Shares,
calculated and payable monthly, at the annual rate of .25% of the value of the
average daily net assets of such class.
SECTION 3.
(a) The service fee payable to the Distributor pursuant to Section
2 hereof may be used by the Distributor to provide compensation
for personal, ongoing servicing and/or maintenance of
shareholder accounts with respect to the Shares of the
applicable Portfolios. Compensation may be paid by the
Distributor, or any portion of the fee may be reallowed, to
persons, including employees of the Distributor, and
institutions who respond to inquiries of holders of the Shares
regarding their ownership of Shares or their accounts with the
Fund or who provide other administrative or accounting services
not otherwise required to be provided by the Fund's investment
adviser, transfer agent or other agent of the Fund.
Notwithstanding the foregoing, if the National Association of
Securities Dealers, Inc. ("NASD") adopts a definition of
"service fee" for purposes of Section 2830 of the Conduct Rules
of the NASD that differs from the definition of shareholder
servicing activities in this paragraph, or if the NASD adopts a
related definition intended to define the same concept, the
definition of shareholder servicing activities in this
paragraph shall be automatically amended, without further
action of the parties, to conform to such NASD definition.
1
<PAGE>
(b) Payments under the Plan are not tied exclusively to the
expenses for shareholder servicing activities actually incurred
by the Distributor, so that such payments may exceed expenses
actually incurred by the Distributor. The Fund's Board of
Directors will evaluate the appropriateness of the Plan and its
payment terms on a continuing basis and in doing so will
consider all relevant factors, including expenses borne by the
Distributor and amounts it receives under the Plan.
(c) The Fund's investment adviser and the Distributor may, at their
option and in their sole discretion, make payments from their
own resources to cover costs of additional shareholder
servicing activities.
SECTION 4. This Plan shall not take effect with respect to a Portfolio
until it has been approved, together with any related agreements, by votes of
the majority of both (i) the Directors of the Fund and (ii) the Qualified
Directors, cast in person at a Board of Directors meeting called for the purpose
of voting on this plan or such agreement.
SECTION 5. This Plan shall continue in effect for a period of more than
one year after it takes effect only for so long as such continuance is
specifically approved at least annually in the manner provided in Section 4
herein for the approval of this Plan.
SECTION 6. Any person authorized to direct the disposition of monies
paid or payable by the Fund pursuant to this Plan or any related agreement shall
provide to the Directors of the Fund, at least quarterly, a written report of
the amounts so expended and the purposes for which such expenditures were made.
SECTION 7. This Plan may be terminated at any time with respect to any
Portfolio by the vote of a majority of the Qualified Directors or by vote of a
majority of the Portfolio's outstanding Shares class voting securities.
SECTION 8. All agreements with any person relating to implementation of
this Plan shall be in writing, and any agreement related to this Plan shall
provide (a) that such agreement may be terminated at any time with respect to
any Portfolio, without payment of any penalty, by the vote of a majority of the
Qualified Directors or by the vote of a majority of the Portfolio's outstanding
Shares on not more than 60 days written notice to any other party to the
agreement; and (b) that such agreement shall terminate automatically in the
event of its assignment.
SECTION 9. This Plan may not be amended to increase materially the
amount of shareholder servicing expenses permitted pursuant to Section 2 hereof
without the approval of a majority of the outstanding Shares of the applicable
Portfolio, and all material amendments to this Plan shall be approved in the
manner provided in Section 4 herein for the approval of this Plan.
SECTION 10. As used in this Plan, (a) the term "Qualified Directors"
shall mean those
2
<PAGE>
Directors of the Fund who are not interested persons of the fund, and have no
direct or indirect financial interest in the operation of this Plan or any
agreements related to it, and (b) the terms "assignment" and "interested person"
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.
SECTION 11. While this Plan is in effect, the selection and nomination
of those Directors who are not interested persons of the Fund within the meaning
of Section 2(a)(19) of the 1940 Act shall be committed to the discretion of the
Directors then in office who are not interested persons of the Fund.
SECTION 12. This Plan shall not obligate the Fund or any other party to
enter into an agreement with any particular person.
3
EXHIBIT (j)(3)
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
First American Funds, Inc.:
We consent to the use of our report dated November 13, 1998 incorporated by
reference herein and to the references to our Firm under the headings "Financial
Highlights" in Part A and "Custodian; Administrator; Transfer Agent; Counsel;
Accountants" in Part B of the Registration Statement.
/s/ KPMG PEAT MARWICK LLP
Minneapolis, Minnesota
January 29, 1999
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