IAI Investment Funds, VIII, Inc.
File No. 2-84589
SUPPLEMENT DATED MAY 12, 1998
TO THE JOINT PROSPECTUS DATED AUGUST 1, 1997
OF
IAI VALUE FUND
(a portfolio of IAI Investment Funds VIII, Inc.)
Value Fund generally closed to new investors on May 12, 1998. Shareholders of
Value Fund as of such closing date may continue to add to an account through the
reinvestment of dividends and cash distributions on any Value Fund shares owned,
through an existing systematic purchase or exchange plan, or through an existing
retirement plan allocation. No changes in these plans or allocations having the
effect of increasing current purchases of Value Fund shares will be permitted
while the Fund is closed.
Value Fund invests from time to time directly in privately held, early-stage
developing companies. One such company (the "Venture Company") recently filed a
registration statement with the SEC for the purposes of offering its securities
for public sale, also known as an initial public offering or "IPO". Using a fair
value methodology based on information available to IAI, the Fund's investment
adviser and manager, the Fund's Board of Directors approved a substantial
increase in the valuation of the Venture Company's securities. This valuation
has had several effects, including a substantial increase in the Fund's net
asset value. Some of these effects, however, have resulted in increased risks
associated with investing in Value Fund. Certain of these risks results from the
large percentage of the Value Fund's net assets invested in the Venture Company
(approximately 26% as of May 11, 1998).
The Venture Company intends to become a leading provider of high quality, low
cost, long haul telecommunications capacity to second and third tier markets
throughout the United States primarily by upgrading existing wireless
infrastructure to develop a state-of-the-art, digital SONET network. The Venture
Company believes there is a substantial market opportunity available to it, and
that it will enjoy various competitive advantages.
However, the Value Fund investment in the Venture Company is subject to the
significant risks of investing in small and early-stage developing companies
described under "Venture Capital" and "Special Risk Factors Associated with
Investing in Small Companies" at pages 19 and 23 of the Prospectus. The
investment in the Venture Company is also subject to other significant risk
factors including: (1) its limited history of operations, operating losses and
negative cash flow; (2) its significant capital requirements and uncertainty of
obtaining additional financing; (3) its substantial use of leverage, and its
ability to service its current and substantial additional indebtedness; (4) its
ability to timely and cost-effectively complete its digital network, and sell a
substantial amount of its capacity; (5) its ability to maintain and add
additional long-term contractual relationships with various entities to enable
it to deploy its network; (6) its ability to manage its future anticipated
growth; (7) its dependence on key personnel; (8) its ability to successfully
compete in the highly competitive telecommunications industry, where price
competition has generally been intense and is expected to increase; (9) its
substantial reliance on a single supplier of telecommunications equipment; (10)
the existence of various technical limitations on its network; (11) the risk of
rapid technological changes in the telecommunications industry; (12) the
existence of substantial regulation by federal, state and local governmental
agencies of its digital network; (13) the possibility that wireless equipment
may pose health risks to humans due to radio frequency emissions; (14) the fact
that the Venture Company does not expect to pay cash dividends for the
foreseeable future; and (15) the risk that the IPO will not occur.
As of May 11, 1998, approximately 36.3% of the Value Fund's assets were
illiquid. Since market quotations for such securities are not readily available,
these securities are valued using a "fair value" methodology. The Venture
Company's securities held by the Value Fund will be subject to substantial
restrictions on sale even after the Venture Company's IPO. Currently, the
underwriters of the Venture Company's IPO have the ability to request that the
Fund not sell or otherwise transfer the Venture Company's stock during the
180-day period following the effective date of the IPO. If such a request is
made, IAI intends to attempt to obtain some ability to sell the stock during
this period, although any such sale will likely be at discount to the stock's
market price at the time.
