1933 Act Registration No. 33-16905
1940 Act Registration No. 811-5309
As filed with the Securities and Exchange Commission on November 5, 1997
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [x]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 31 [x]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 [x]
Amendment No. 32
FIRST AMERICAN INVESTMENT FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
OAKS, PENNSYLVANIA 19456
(Address of Principal Executive Offices) (Zip Code)
(610) 254-1924
(Registrant's Telephone Number, including Area Code)
DAVID LEE
C/O SEI INVESTMENTS COMPANY, OAKS, PENNSYLVANIA 19456
(Name and Address of Agent for Service)
COPIES TO:
Kathryn Stanton, Esq. Michael J. Radmer, Esq.
SEI Investments Company James D. Alt, Esq.
Oaks, Pennsylvania 19456 Dorsey & Whitney LLP
220 South Sixth Street
Minneapolis, Minnesota 55402
It is proposed that this filing shall become effective (check appropriate box):
[ ] immediately upon filing pursuant to paragraph (b) of rule 485
[x] on November 6, 1997 pursuant to paragraph (b) of rule 485
[ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485
[ ] on (date) pursuant to paragraph (a)(1) of Rule 485
[ ] 75 days after filing pursuant to paragraph (a)(2) of Rule 485
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485
Registrant has registered an indefinite number or amount of securities under the
Securities Act of 1933 pursuant to Rule 24f-2 under the Investment Company Act
of 1940. A Rule 24f-2 Notice was filed with the Securities and Exchange
Commission on November 25, 1996.
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<PAGE>
FIRST AMERICAN INVESTMENT FUNDS, INC.
POST-EFFECTIVE AMENDMENT NO. 31
CROSS REFERENCE SHEET FOR ITEMS REQUIRED BY FORM N-1A
NOTE: PART A of this Registration Statement consists of two
Prospectuses, as follows:
1. Retail Class Prospectus relating to Class A Shares and Class B
Shares of Small Cap Value Fund and International Index Fund.
2. Institutional Class Prospectus relating to Class C Shares of
Small Cap Value Fund and International Index Fund.
PART B of this Registration Statement consists of one Statement of
Additional Information, which relates to both of the Prospectuses listed above.
<PAGE>
CROSS REFERENCE SHEET
ITEM NUMBER OF FORM N-1A
PART A CAPTION IN PROSPECTUS
- ------ ---------------------
RETAIL CLASSES PROSPECTUS
- -------------------------
1 Cover Page
2 Summary; Fees and Expenses
3 Not Applicable
4 The Funds; Investment Objectives and Policies; Special Investment
Methods
5 Management; Distributor
5A Not Applicable
6 Fund Shares; Investing in the Funds; Income Taxes
7 Distributor; Investing in the Funds; Determining the Price of
Shares
8 Redeeming Shares
9 Not Applicable
INSTITUTIONAL CLASS PROSPECTUS
- ------------------------------
1 Cover Page
2 Summary; Fees and Expenses
3 Not Applicable
4 The Funds; Investment Objectives and Policies; Special Investment
Methods
5 Management; Distributor
5A Not Applicable
6 Fund Shares; Purchases and Redemptions of Shares; Income Taxes
7 Distributor; Purchases and Redemptions of Shares
8 Purchases and Redemptions of Shares
9 Not Applicable
CAPTION IN STATEMENT
PART B OF ADDITIONAL INFORMATION
- ------ -------------------------
10 Cover Page
11 Table of Contents
12 General Information
13 Additional Information Concerning Fund Investments; Investment
Restrictions
14 Directors and Executive Officers
15 Capital Stock
16 Investment Advisory and Other Services
17 Portfolio Transactions and Allocation of Brokerage
18 Not Applicable
19 Net Asset Value and Public Offering Price
20 Taxation
21 Investment Advisory and Other Services
22 Fund Performance
23 Not Applicable
<PAGE>
FIRST AMERICAN INVESTMENT FUNDS, INC.
RETAIL CLASSES
SMALL CAP VALUE FUND
INTERNATIONAL INDEX FUND
PROSPECTUS
November 6, 1997
[LOGO] FIRST AMERICAN FUNDS
THE POWER OF DISCIPLINED INVESTING
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FIRST AMERICAN INVESTMENT FUNDS, INC.
Oaks, Pennsylvania 19456
RETAIL CLASSES PROSPECTUS
The shares described in this Prospectus represent interests in First
American Investment Funds, Inc., which consists of mutual funds with
several different investment portfolios and objectives. This Prospectus
relates to the Class A and Class B Shares of the following funds (the
"Funds"):
* SMALL CAP VALUE FUND
* INTERNATIONAL INDEX FUND
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, INCLUDING FIRST BANK NATIONAL ASSOCIATION AND ANY
OF ITS AFFILIATES, NOR ARE THEY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. AN
INVESTMENT IN THE FUNDS INVOLVES INVESTMENT RISK, INCLUDING POSSIBLE
LOSS OF PRINCIPAL, DUE TO FLUCTUATIONS IN EACH FUND'S NET ASSET VALUE.
This Prospectus concisely sets forth information about the Funds that a
prospective investor should know before investing. It should be read and
retained for future reference.
A Statement of Additional Information dated November 6, 1997 for the
Funds has been filed with the Securities and Exchange Commission ("SEC")
and is incorporated in its entirety by reference in this Prospectus. To
obtain copies of the Statement of Additional Information at no charge,
or to obtain other information or make inquiries about the Funds, call
(800) 637-2548 or write SEI Investments Distribution Co., Oaks,
Pennsylvania 19456. The SEC maintains a World Wide Web site that
contains reports and information regarding issuers that file
electronically with the SEC. The address of such site is
"http://www.sec.gov."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRE- SENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The date of this Prospectus is November 6, 1997.
<PAGE>
TABLE OF CONTENTS
PAGE
----
SUMMARY ................................... 4
FEES AND EXPENSES ......................... 7
Class A Share Fees and Expenses ....... 7
Class B Share Fees and Expenses ....... 8
Information Concerning Fees and
Expenses ............................ 9
THE FUNDS ................................. 10
INVESTMENT OBJECTIVES AND POLICIES ........ 10
Small Cap Value Fund .................. 11
International Index Fund .............. 12
Risks to Consider ..................... 13
MANAGEMENT ................................ 14
Investment Adviser .................... 14
Portfolio Managers .................... 16
Custodian ............................. 16
Administrator ......................... 17
Transfer Agent ........................ 17
DISTRIBUTOR ............................... 17
INVESTING IN THE FUNDS .................... 19
Share Purchases ....................... 19
Minimum Investment Required ........... 20
Alternative Sales Charge
Options ............................. 20
Class A Shares ........................ 22
Class B Shares ........................ 25
Systematic Exchange Program ........... 26
Systematic Investment Program ......... 26
Exchanging Securities for
Fund Shares ......................... 26
Certificates and Confirmations ........ 27
Dividends and Distributions ........... 27
Exchange Privilege .................... 27
REDEEMING SHARES .......................... 29
By Telephone .......................... 29
By Mail ............................... 30
By Systematic Withdrawal
Program ............................. 31
Redemption Before Purchase
Instruments Clear ................... 31
Accounts with Low Balances ............ 32
DETERMINING THE PRICE OF SHARES ........... 32
Determining Net Asset Value ........... 32
Foreign Securities .................... 33
INCOME TAXES .............................. 34
Federal Income Taxation ............... 34
FUND SHARES ............................... 35
CALCULATION OF PERFORMANCE DATA ........... 36
SPECIAL INVESTMENT METHODS ................ 37
Repurchase Agreements ................. 37
When-Issued and Delayed-
Delivery Transactions ............... 38
Lending of Portfolio Securities ....... 38
Options Transactions .................. 39
Cash Items ............................ 40
Futures and Options on Futures ........ 40
Fixed Income Securities ............... 41
Foreign Securities .................... 42
Portfolio Transactions ................ 43
Portfolio Turnover .................... 44
Investment Restrictions ............... 44
Information Concerning
Compensation Paid to First Trust
National Association and its
Affiliates .......................... 45
<PAGE>
SUMMARY
First American Investment Funds, Inc. ("FAIF") is an open-end investment
company which offers shares in several different mutual funds. This
Prospectus provides information with respect to the Class A Shares and
Class B Shares of the following funds (the "Funds"):
SMALL CAP VALUE FUND has an objective of capital appreciation. Under
normal market conditions, the Fund invests at least 65% of its total
assets in equity securities of small-capitalization companies (those
with market capitalizations of less than $1 billion at the time of
purchase). In selecting equity securities, the Fund's adviser utilizes a
value-based selection discipline, investing in equity securities it
believes are undervalued relative to other securities at the time of
purchase.
INTERNATIONAL INDEX FUND has an objective of providing investment
results that correspond to the performance of the Morgan Stanley Europe,
Australia, Far East Composite Index (the "EAFE Index"). The Fund invests
primarily (at least 65% of total assets) in common stocks included in
the EAFE Index. The Fund's adviser believes that its objective can be
best achieved by investing in common stocks of approximately 50% to 100%
of the issues included in the EAFE Index, depending on the size of the
Fund.
INVESTMENT ADVISER First Bank National Association (the "Adviser") (also
known as U.S. Bank National Association) serves as investment adviser to
each of the Funds. See "Management."
DISTRIBUTOR; ADMINISTRATOR SEI Investments Distribution Co. (the
"Distributor") serves as the distributor of the Funds' shares. SEI
Investments Management Corporation (the "Administrator") serves as the
administrator of the Funds. See "Management" and "Distributor."
OFFERING PRICES Class A Shares of the Funds are sold at net asset value
plus a maximum sales charge of 4.50%. These sales charges are reduced on
purchases of $50,000 or more. Purchases of $1 million or more of Class A
Shares are not subject to an initial sales charge, but a contingent
deferred sales charge of 1.00% will be imposed on such purchases in the
event of redemption within 24 months following the purchase except in
the case of International Index Fund. Class A Shares of the Funds
otherwise are redeemed at net asset value without any additional charge.
Class A Shares of each Fund are subject to a shareholder servicing fee
computed at an annual rate of 0.25% of the average daily net assets of
that class. See "Investing in the Funds -- Alternative Sales Charge
Options."
Class B Shares of each Fund are sold at net asset value without an
initial sales charge. Class B Shares of each Fund are subject to Rule
12b-1 distribution and shareholder servicing fees computed at an annual
rate totaling 1.00% of the average daily net assets of that class. If
Class B Shares are redeemed within
<PAGE>
six years after purchase, they are subject to a contingent deferred
sales charge declining from 5.00% in the first year to zero after six
years. Class B Shares automatically convert into Class A Shares
approximately eight years after purchase. See "Investing in the Funds --
Alternative Sales Charge Options."
MINIMUM INITIAL AND SUBSEQUENT INVESTMENTS The minimum initial
investment is $1,000 ($250 for IRAs) for each Fund. Subsequent
investments must be $100 or more. Regular investment in the Funds is
simplified through the Systematic Investment Program through which
monthly purchases of $100 or more are possible. See "Investing in the
Funds -- Minimum Investment Required" and "-- Systematic Investment
Program."
EXCHANGES Shares of either Fund may be exchanged for the same class of
shares of other funds in the First American family at the shares'
respective net asset values with no additional charge. See "Investing
in the Funds -- Exchange Privilege."
REDEMPTIONS Shares of each Fund may be redeemed at any time at their
net asset value next determined after receipt of a redemption request by
the Funds' transfer agent, less any applicable contingent deferred sales
charge. Each Fund may, upon 60 days written notice, redeem an account if
the account's net asset value falls below $500. See "Investing in the
Funds" and "Redeeming Shares."
RISKS TO CONSIDER Each of the Funds is subject to the risk of generally
adverse equity markets. Investors also should recognize that market
prices of equity securities generally, and of particular companies'
equity securities, frequently are subject to greater volatility than
prices of fixed income securities.
Because Small Cap Value Fund is actively managed, its performance will
reflect in part the ability of the Adviser to select securities which
are suited to achieving its investment objectives. Due to its active
management, this Fund could underperform other mutual funds with similar
investment objectives or the market generally.
In addition, (i) Small Cap Value Fund is subject to risks associated
with investing in small-capitalization companies; (ii) International
Index Fund is subject to risks associated with investing in foreign
securities and to currency risk; (iii) Small Cap Value Fund may invest a
specified portion of its assets in securities of foreign issuers which
are listed on a United States stock exchange or represented by American
Depositary Receipts; (iv) the Funds may invest (but not for speculative
purposes) in options on stock indices; and (v) International Index Fund
may invest (but not for speculative purposes) in stock index futures
contracts, options on stock index futures, and/or index participation
contracts based on the EAFE Index. See "Investment Objectives and
Policies -- Risks to Consider" and "Special Investment Methods."
<PAGE>
SHAREHOLDER INQUIRIES Any questions or communications regarding the
Funds or a shareholder account should be directed to the Distributor by
calling (800) 637-2548, or to the financial institution which holds
shares on an investor's behalf.
<PAGE>
FEES AND EXPENSES
CLASS A SHARE FEES AND EXPENSES
SMALL CAP INTERNATIONAL
VALUE INDEX
FUND FUND
SHAREHOLDER TRANSACTION EXPENSES
Maximum sales load imposed on
purchases (as a percentage of offering
price)(1) 4.50% 4.50%
Maximum sales load imposed on
reinvested dividends None None
Deferred sales load None None
Redemption fees None None
Exchange fees None None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
Investment advisory fees
(after voluntary fee waivers)(2) 0.70% 0.46%
Rule 12b-1 fees (after voluntary fee
waivers)(2) 0.25% 0.25%
Other expenses (after
reimbursements)(2) 0.20% 0.29%
Total fund operating expenses
(after voluntary fee waivers and
reimbursements)(2) 1.15% 1.00%
EXAMPLE(3)
You would pay the following expenses on a $1,000 investment, assuming (i) the
maximum applicable sales charge for all funds; (ii) a 5% annual return; and
(iii) redemption at the end of each time period:
1 year $56 $55
3 years $80 $75
(1) The rules of the Securities and Exchange Commission require that the maximum
sales charge be reflected in the above table. However, certain investors may
qualify for reduced sales charges. Purchases of $1 million or more of Class
A Shares are not subject to an initial sales charge, but a contingent
deferred sales charge of 1.00% will be imposed on such purchases in the
event of redemption within 24 months following the purchase except in the
case of International Index Fund. See "Investing in the Funds -- Alternative
Sales Charge Options."
(2) The Adviser intends to waive a portion of its fees and/or reimburse expenses
on a voluntary basis, and the amounts shown reflect these waivers and
reimbursements as of the date of this Prospectus. Each of these persons
intends to maintain such waivers and reimbursements in effect through
September 30, 1998. Absent any fee waivers or reimbursements, investment
advisory fees for each Fund as an annualized percentage of average daily net
assets would be 0.70%; Rule 12b-1 fees calculated on such basis would be
0.25%; and total fund operating expenses calculated on such basis would be
1.15% for Small Cap Value Fund and 1.24% for International Index Fund.
"Other expenses" includes an administration fee and is based on estimated
amounts for the current fiscal year.
(3) Absent the fee waivers and reimbursements referred to in (2) above, the
dollar amounts for the 1 and 3-year periods would be as follows: Small Cap
Value Fund, $56 and $80, and International Index Fund, $57 and $83.
<PAGE>
CLASS B SHARE FEES AND EXPENSES
SMALL CAP INTERNATIONAL
VALUE INDEX
FUND FUND
SHAREHOLDER TRANSACTION EXPENSES
Maximum sales load imposed on purchases (as a
percentage of offering price) None None
Maximum sales load imposed on reinvested dividends None None
Maximum contingent deferred sales charge (as a
percentage of original purchase price or redemption
proceeds, as applicable) 5.00% 5.00%
Redemption fees None None
Exchange fees None None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
Investment advisory fees
(after voluntary fee waivers)(1) 0.70% 0.46%
Rule 12b-1 fees 1.00%(2) 1.00%(2)
Other expenses(1) 0.20% 0.29%
Total fund operating expenses
(after voluntary fee waivers)(1) 1.90% 1.75%
EXAMPLE
ASSUMING REDEMPTION(3)
You would pay the following expenses on a $1,000 investment, assuming (i) a
5% annual return; (ii) redemption at the end of each time period; and (iii)
payment of the maximum applicable contingent deferred sales charge of 5% in
year 1 and 4% in year 3:
1 year $69 $68
3 years $100 $95
ASSUMING NO REDEMPTION(4)
You would pay the following expenses on the same investment, assuming no
redemption:
1 year $19 $18
3 years $60 $55
(1) The Adviser intends to waive a portion of its fees on a voluntary basis, and
the amounts shown reflect these waivers as of the date of this Prospectus.
The Adviser intends to maintain such waivers in effect through September 30,
1998. Absent any fee waivers or reimbursements, investment advisory fees as
an annualized percentage of average daily net assets would be 0.70%; and
total fund operating expenses would be 1.90% for Small Cap Value Fund and
1.99% for International Index Fund. "Other expenses" includes an
administration fee and is based on estimated amounts for the current fiscal
year.
(2) Of this amount, 0.25% is designated as a shareholder servicing fee and 0.75%
as a distribution fee.
(3) Absent the fee waivers and reimbursements referred to in (1) above, the
dollar amounts for the 1 and 3-year periods would be as follows: Small Cap
Value Fund, $69 and $100, and International Index Fund, $70 and $102.
(4) Absent the fee waivers and reimbursements referred to in (1) above, the
dollar amounts for the 1 and 3-year periods would be as follows: Small Cap
Value Fund, $19 and $60, and International Index Fund, $20 and $62.
<PAGE>
INFORMATION CONCERNING FEES AND EXPENSES
The purpose of the preceding tables is to assist the investor in
understanding the various costs and expenses that an investor in a Fund
may bear directly or indirectly. THE EXAMPLES CONTAINED IN THE TABLES
SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES.
ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The information
set forth in the foregoing tables and examples relates only to the Class
A Shares and the Class B Shares of Small Cap Value Fund and
International Index Fund. The Funds also offer Class C Shares which are
subject to the same expenses except that they bear no sales loads or
shareholder servicing fees.
The examples in the above tables are based on annual Fund operating
expenses after voluntary fee waivers and expense reimbursements by the
Adviser. The Adviser intends to maintain such waivers in effect through
September 30, 1998. Prior to fee waivers, investment advisory fees
accrue at the annual rate as a percentage of average daily net assets of
0.70% for each of the Funds. "Other expenses" in the tables are based on
estimates.
The Class A Shares of each Fund pay shareholder servicing fees to the
Distributor in an amount equaling 0.25% per year of each such class's
average daily net assets, and the Class B Shares of each Fund bear
distribution and shareholder servicing fees totaling 1.00% per year of
such class's average daily net assets. The Distributor also receives the
sales charge for distributing the Funds' Class A Shares. Due to the
distribution and shareholder servicing fees paid by the Class A and
Class B Shares, long-term shareholders may pay more than the equivalent
of the maximum front-end sales charges otherwise permitted by NASD
rules. For additional information, see "Distributor."
Other expenses include fees paid by each Fund to the Administrator for
providing various services necessary to operate the Funds. These include
shareholder servicing and certain accounting and other services. The
Administrator provides these services for a fee calculated at an annual
rate of 0.12% of average daily net assets of each Fund subject to a
minimum of $50,000 per Fund per fiscal year; provided, that to the
extent that the aggregate net assets of all First American funds exceed
$8 billion, the percentage stated above is reduced to 0.105%. Other
expenses of the Funds also includes the cost of maintaining shareholder
records, furnishing shareholder statements and reports, and other
services. Investment advisory fees, administrative fees and other
expenses are reflected in the Funds' daily dividends and are not charged
to individual shareholder accounts.
<PAGE>
THE FUNDS
FAIF is an open-end management investment company which offers shares in
several different mutual funds (collectively, the "FAIF Funds"), each of
which evidences an interest in a separate and distinct investment
portfolio. Shareholders may purchase shares in each FAIF Fund through
several separate classes which provide for variations in distribution
costs, shareholder servicing fees, voting rights and dividends. Except
for these differences among classes, each share of each FAIF Fund
represents an undivided proportionate interest in that fund. FAIF is
incorporated under the laws of the State of Maryland, and its principal
offices are located at Oaks, Pennsylvania 19456.
This Prospectus relates only to the Class A and the Class B Shares of
the Funds named on the cover hereof. Information regarding the Class C
Shares of these Funds and regarding the Class A, Class B and Class C
Shares of the other FAIF Funds is contained in separate prospectuses
that may be obtained from FAIF's Distributor, SEI Investments
Distribution Co., Oaks, Pennsylvania 19456, or by calling (800)
637-2548. The Board of Directors of FAIF may authorize additional series
or classes of common stock in the future.
INVESTMENT OBJECTIVES AND POLICIES
This section describes the investment objectives and policies of the
Funds. There is no assurance that any of these objectives will be
achieved. The Funds' investment objectives are not fundamental and
therefore may be changed without a vote of shareholders. Such changes
could result in a Fund having investment objectives different from those
which shareholders considered appropriate at the time of their
investment in a Fund. Shareholders will receive written notification at
least 30 days prior to any change in a Fund's investment objectives.
Each of the Funds is a diversified investment company, as defined in the
Investment Company Act of 1940 (the "1940 Act").
If a percentage limitation on investments by a Fund stated below or in
the Statement of Additional Information is adhered to at the time of an
investment, a later increase or decrease in percentage resulting from
changes in asset values will not be deemed to violate the limitation
except in the case of the limitation on illiquid investments. Similarly,
if a Fund is required or permitted to invest a stated percentage of its
assets in companies with no more or no less than a stated market
capitalization, deviations from the stated percentages which result from
changes in companies' market capitalizations after the Fund purchases
its shares will not be deemed to violate the
<PAGE>
limitation. A Fund which is limited to investing in securities with
specified ratings is not required to sell a security if its rating is
reduced or discontinued after purchase, but the Fund may consider doing
so. However, in no event will more than 5% of either Fund's net assets
be invested in non-investment grade securities. Descriptions of the
rating categories of Standard & Poor's Corporation ("Standard & Poor's")
and Moody's Investors Service, Inc. ("Moody's") are contained in the
Statement of Additional Information.
When the term "equity securities" is used in this Prospectus, it refers
to common stock and securities which are convertible into or
exchangeable for, or which carry warrants or other rights to acquire,
common stock.
This section also contains information concerning certain investment
risks borne by Fund shareholders under the heading "-- Risks to
Consider." Further information concerning the securities in which the
Funds may invest and related matters is set forth under "Special
Investment Methods."
SMALL CAP VALUE FUND
OBJECTIVE. Small Cap Value Fund has an objective of capital
appreciation.
INVESTMENT POLICIES. Under normal market conditions, Small Cap Value
Fund invests at least 65% of its total assets in equity securities of
small-capitalization companies. For these purposes, small-capitalization
companies are deemed those with market capitalizations of less than $1
billion at the time of purchase. In selecting equity securities, the
Adviser utilizes a value-based selection discipline, investing in equity
securities it believes are undervalued relative to other securities at
the time of purchase. In assessing relative value, the Adviser will
consider such factors as ratios of market price to book value, market
price to earnings, and market price to assets, estimated earnings growth
rate, cash flow, and liquidation value.
The Fund also may invest up to 35% of its total assets in the aggregate
in equity securities of issuers with a market capitalization of $1
billion or more and in fixed income securities of the kinds described
under "Special Investment Methods -- Fixed Income Securities."
Subject to the limitations stated above, the Fund may invest up to 25%
of its total assets in securities of foreign issuers which are either
listed on a United States stock exchange or represented by American
Depositary Receipts. For information about these kinds of investments
and certain associated risks, see "Special Investment Methods -- Foreign
Securities."
In addition, the Fund may (i) enter into repurchase agreements; (ii) in
order to attempt to reduce risk, purchase put and call options on equity
securities and on stock indices; (iii) write covered call options
covering up to 25% of
<PAGE>
the equity securities owned by the Fund; (iv) purchase securities on a
when-issued or delayed-delivery basis; and (v) engage in the lending of
portfolio securities. For information about these investment methods,
restrictions on their use, and certain associated risks, see the related
headings under "Special Investment Methods."
For temporary defensive purposes during times of unusual market
conditions, the Fund may without limitation hold cash or invest in cash
items of the kinds described under "Special Investment Methods -- Cash
Items." The Fund also may invest not more than 35% of its total assets
in cash and cash items in order to utilize assets awaiting normal
investment.
INTERNATIONAL INDEX FUND
OBJECTIVE. International Index Fund has an objective of providing
investment results that correspond to the performance of the Morgan
Stanley Europe, Australia, Far East Composite Index (the "EAFE Index").
INVESTMENT POLICIES. International Index Fund invests primarily (at
least 65% of total assets) in common stocks included in the EAFE Index.
The EAFE Index includes approximately 1,077 companies representing the
stock markets of approximately 14 European countries, Australia, New
Zealand, Japan, Hong Kong and Singapore/Malaysia. The Adviser believes
that the Fund's objective can best be achieved by investing in the
common stocks of approximately 50% to 100% of the issues included in the
EAFE Index, depending on the size of the Fund. Normally, International
Index Fund will invest at least 65% of its total assets in securities
traded in at least three foreign countries.
Morgan Stanley designates the stocks included in the EAFE Index. A
particular stock's weighting in the EAFE Index is based on its total
market value (that is, its market price per share times the number of
shares outstanding) relative to that of all stocks included in the EAFE
Index. From time to time, Morgan Stanley may add or delete stocks to or
from the EAFE Index. Inclusion of a particular stock in the EAFE Index
does not imply any opinion by Morgan Stanley as to its merits as an
investment, nor is Morgan Stanley a sponsor of or in any way affiliated
with the Fund.
The Fund is managed by utilizing a computer program that identifies
which stocks should be purchased or sold in order to replicate, as
closely as possible, the composition of the EAFE Index. The Fund
includes a stock in its investment portfolio in the order of the stock's
weighting in the EAFE Index, starting with the most heavily weighted
stock. Thus, the proportion of Fund assets invested in an industry or
country closely approximates the percentage of the EAFE Index
represented by that industry or country. Portfolio turnover is expected
to be well below that of actively managed mutual funds.
<PAGE>
Unlike the EAFE Index, the Fund's performance will reflect sales charges
(if any), commissions, and other expenses. For this reason, and because
the Fund may not always hold all of the stocks included in the EAFE
Index, the Fund will not duplicate the EAFE Index performance precisely.
However, there will be a close correlation between the Fund's
performance and that of the EAFE Index in both rising and falling
markets. The Fund will attempt to achieve a correlation between the
performance of its portfolio and that of the EAFE Index of at least 95%,
without taking into account expenses of the Fund. A perfect correlation
would be indicated by a figure of 100%, which would be achieved if the
Fund's net asset value, including the value of its dividends and capital
gains distributions, increased or decreased in exact proportion to
changes in the EAFE Index. The Fund's ability to replicate the
performance of the EAFE Index may be affected by, among other things,
changes in securities markets, the manner in which Morgan Stanley
calculates the EAFE Index, administrative and other expenses incurred by
the Fund, taxes (including foreign withholding taxes, which will affect
the Fund) and the amount and timing of cash flows into and out of the
Fund. Although cash flows into and out of the Fund will affect the
Fund's portfolio turnover rate and its ability to replicate the EAFE
Index's performance, investment adjustments will be made, as practicably
as possible, to account for these circumstances. In the event the Fund
is unable to achieve this correlation over time, the Board of Directors
of the Fund will consider alternative strategies for the Fund.
The Fund also may invest up to 20% of its total assets in the aggregate
in stock index futures contracts, options on stock indices, options on
stock index futures and index participation contracts based on the EAFE
Index. The Fund will not invest in these types of contracts and options
for speculative purposes, but rather to maintain sufficient liquidity to
meet redemption requests; to increase the level of Fund assets devoted
to replicating the composition of the EAFE Index; and to reduce
transaction costs. These types of contracts and options and certain
associated risks are described under "Special Investment Methods --
Options Transactions." In addition, the Fund may enter into repurchase
agreements and engage in securities lending as described under "Special
Investment Methods -- Repurchase Agreements" and "Special Investment
Methods -- Lending of Portfolio Securities."
In order to maintain liquidity during times of unusual market
conditions, the Fund also may invest up to 100% of the value of its
total assets temporarily in cash and cash items of the kinds described
under "Special Investment Methods -- Cash Items."
RISKS TO CONSIDER
An investment in Small Cap Value Fund and International Index Fund
involves certain risks. These include the following:
EQUITY SECURITIES GENERALLY. Market prices of equity securities
generally, and of particular companies' equity securities, frequently
are subject to greater volatility than prices of fixed income
securities. Market prices of equity securities as a group have dropped
dramatically in a short period of time on
<PAGE>
several occasions in the past, and they may do so again in the future.
Each of the Funds is subject to the risk of generally adverse equity
markets.
SMALL-CAPITALIZATION COMPANIES. Small Cap Value Fund emphasizes
investments in companies with small market capitalizations. The equity
securities of such companies frequently have experienced greater price
volatility in the past than those of larger-capitalization companies,
and they may be expected to do so in the future. To the extent that
Small Cap Value Fund invests in small-capitalization companies, they are
subject to this risk of greater volatility.
ACTIVE MANAGEMENT. Small Cap Value Fund is actively managed by the
Adviser. The performance of this Fund therefore will reflect in part the
ability of the Adviser to select securities which are suited to
achieving the Fund's investment objective. Due to its active management,
this Fund could underperform other mutual funds with similar investment
objectives or the market generally.
FOREIGN SECURITIES. International Index Fund is subject to special risks
associated with investing in foreign securities and to declines in net
asset value resulting from changes in exchange rates between the United
States dollar and foreign currencies. These risks are discussed under
"Special Investment Methods -- Foreign Securities" elsewhere herein.
Because of the special risks associated with foreign investing the Fund
may be subject to greater volatility than most mutual funds which invest
principally in domestic securities.
OTHER. Investors also should review "Special Investment Methods" for
information concerning risks associated with certain investment
techniques which may be utilized by the Funds.
MANAGEMENT
The Board of Directors of FAIF has the primary responsibility for
overseeing the overall management and electing the officers of FAIF.
Subject to the overall direction and supervision of the Board of
Directors, the Adviser acts as investment adviser for and manages the
investment portfolios of FAIF.
INVESTMENT ADVISER
First Bank National Association ("First Bank") (also known as U.S. Bank
National Association), 601 Second Avenue South, Minneapolis, Minnesota
55480, acts as the Funds' investment adviser through its First Asset
Management group. The Adviser has acted as an investment adviser to FAIF
since its inception in 1987 and has acted as investment adviser to First
<PAGE>
American Funds, Inc. since 1982 and to First American Strategy Funds,
Inc. since 1996. As of December 31, 1996, the Adviser was managing
accounts with an aggregate value of approximately $35 billion, including
mutual fund assets in excess of $12 billion. U.S. Bancorp, 601 Second
Avenue South, Minneapolis, Minnesota 55480, is the holding company for
the Adviser.
Small Cap Value Fund and International Index Fund has each agreed to pay
the Adviser monthly fees calculated on an annual basis equal to 0.70% of
their respective average daily net assets. The Adviser may, at its
option, waive any or all of its fees, or reimburse expenses, with
respect to either Fund from time to time. Any such waiver or
reimbursement is voluntary and may be discontinued at any time. The
Adviser 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.
The Glass-Steagall Act generally prohibits banks from engaging in the
business of underwriting, selling or distributing securities and from
being affiliated with companies principally engaged in those activities.
In addition, administrative and judicial interpretations of the
Glass-Steagall Act prohibit bank holding companies and their bank and
nonbank subsidiaries from organizing, sponsoring or controlling
registered open-end investment companies that are continuously engaged
in distributing their shares. Bank holding companies and their bank and
nonbank subsidiaries may serve, however, as investment advisers to
registered investment companies, subject to a number of terms and
conditions.
Although the scope of the prohibitions and limitations imposed by the
Glass-Steagall Act has not been fully defined by the courts or the
appropriate regulatory agencies, the Funds have received an opinion from
their counsel that the Adviser is not prohibited from performing the
investment advisory services described above, and that FBS Investment
Services, Inc. ("ISI"), a wholly owned broker-dealer subsidiary of the
Adviser, is not prohibited from serving as a Participating Institution
as described herein. In the event of changes in federal or state
statutes or regulations or judicial and administrative interpretations
or decisions pertaining to permissible activities of bank holding
companies and their bank and nonbank subsidiaries, the Adviser and ISI
might be prohibited from continuing these arrangements. In that event,
it is expected that the Board of Directors would make other arrangements
and that shareholders would not suffer adverse financial consequences.
<PAGE>
PORTFOLIO MANAGERS
Small Cap Value Fund is managed by a committee composed of Albin S.
Dubiak, Gerald C. Bren, Robert L. Buss, Anthony W. Hipple, and Douglas
K. Rose.
ALBIN S. DUBIAK began his investment career as a security trader with
First National Bank of Chicago in 1963 before joining the Adviser as an
investment analyst in 1969. Mr. Dubiak received his bachelor's degree
from Indiana University and his master's degree in business
administration from the University of Arizona. Mr. Dubiak also is
portfolio co-manager for several other First American equity funds and
is a member of the committees which manage several other First American
equity funds.
GERALD C. BREN is a member of the committee which manages three of the
Funds, as set forth above, and he is portfolio co-manager for Emerging
Growth Fund and Health Sciences Fund. Gerald joined the Adviser in 1972
as an investment analyst. He received his master's degree in business
administration from the University of Chicago in 1972 and his Chartered
Financial Analyst certification in 1977.
ROBERT L. BUSS joined the Adviser in 1989 designing and building the
technology infrastructure used in investment analysis, trading and
portfolio management. In 1996, Mr. Buss began analytical work in the
equity research area covering electric equipment, machinery and
diversified manufacturing. He holds a bachelor's degree in Economics
from the University of Minnesota. Mr. Buss is currently a Chartered
Financial Analyst candidate and is nearing the completion of his
master's degree in business administration from the University of St.
Thomas.
ANTHONY W. HIPPLE is an equity analyst for the Adviser, focusing on
industrials, utilities, retail, energy and telecommunications. He joined
the firm in 1996 and has 4 years of investment industry experience.
Prior to joining the Adviser, Mr. Hipple was with the Private Banking
and Trust group of First Bank. He holds a bachelor's degree from the
University of Northern Iowa and a master's degree in business
administration from the University of Iowa.
DOUGLAS K. ROSE is an equity analyst for the Adviser. He joined the firm
in 1991 and has 10 years of industry experience. Mr. Rose covers the
business services, environmental services, leisure and
restaurant/lodging industries. He holds a bachelor's degree from the
University of Nebraska, a master's degree in business administration
from the University of Minnesota and is a member of the Twin Cities
Society of Security Analysts.
International Index Fund is co-managed by James S. Rovner and Evan
Lundquist.
JAMES S. ROVNER joined the Adviser in 1986 and has managed assets for
institutional and individual clients for over 15 years. Mr. Rovner
received his bachelor's degree and his master's degree in business
administration from the University of Wisconsin and is a Chartered
Financial Analyst.
EVAN LUNDQUIST joined the Adviser in 1993 and received his bachelor's
degree from St. Mary's College.
CUSTODIAN
The custodian of the Funds' assets is First Trust National Association
(The "Custodian"), First Trust Center, 180 East Fifth Street, St. Paul,
Minnesota 55101. The Custodian is a subsidiary of U.S. Bancorp, which
also controls the Adviser.
As compensation for its services to the Funds, the Custodian receives
monthly fees calculated on an annual basis equal to, for Small Cap Value
Fund, 0.03%
<PAGE>
of Small Cap Value Fund's average daily net assets, and, for
International Index Fund, 0.10% of International Index Fund's average
daily net assets. In addition, the Custodian is reimbursed by the Funds
for its out-of-pocket expenses incurred while providing its services to
the Funds. Rules adopted under the 1940 Act permit International Index
Fund to maintain its securities and cash in the custody of certain
eligible foreign banks and depositories. International Index Fund's
portfolio of non-United States securities are held by sub-custodians
which are approved by the directors of FAIF or a foreign custody manager
appointed by the Board of Directors in accordance with these rules. This
determination is made pursuant to these rules following a consideration
of a number of factors including, but not limited to, the reliability
and financial stability of the institution; the ability of the
institution to perform custodian services for International Index Fund;
the reputation of the institution in its national market; the political
and economic stability of the country in which the institution is
located; and the risks of potential nationalization or expropriation of
International Index Fund's assets. Sub-custodian fees with respect to
International Index Fund are paid by the Custodian out of the
Custodian's fees.
ADMINISTRATOR
The Administrator for the Funds is SEI Investments Management
Corporation, Oaks, Pennsylvania 19456. The Administrator, a wholly-owned
subsidiary of SEI Investments Company, provides the Funds with certain
administrative services necessary to operate the Funds. These services
include shareholder servicing and certain accounting and other services.
The Administrator provides these services for a fee calculated at an
annual rate of 0.12% of each Fund's average daily net assets, subject to
a minimum administrative fee during each fiscal year of $50,000 per
Fund; provided, that to the extent that the aggregate net assets of all
First American funds exceed $8 billion, the percentage stated above is
reduced to 0.105%. From time to time, the Administrator may voluntarily
waive its fees or reimburse expenses with respect to any of the Funds.
Any such waivers or reimbursements may be made at the Administrator's
discretion and may be terminated at any time. The Funds have approved
the appointment of First Bank as a sub-administrator (the
"Sub-Administrator"), effective January 1, 1998. It is contemplated that
the Sub-Administrator will assist SEI in the performance of
administrative services for the Funds. The Sub-Administration Agreement
provides that SEI will compensate the Sub-Administrator at an annual
rate of up to 0.05% of each Fund's average daily net assets.
TRANSFER AGENT
DST Systems, Inc. (The "Transfer Agent") serves as the transfer agent
and dividend disbursing agent for the Funds. The address of the Transfer
Agent is 1004 Baltimore, Kansas City, Missouri 64105. The Transfer Agent
is not affiliated with the Distributor, the Administrator or the
Adviser.
DISTRIBUTOR
SEI Investments Distribution Co. is the principal distributor for shares
of the Funds and of the other FAIF Funds. The Distributor is a
Pennsylvania
<PAGE>
corporation and is the principal distributor for a number of investment
companies. The Distributor is a wholly-owned subsidiary of SEI
Investments Company, and is located at Oaks, Pennsylvania 19456. The
Distributor is not affiliated with the Adviser, U.S. Bancorp, the
Custodian or their respective affiliates.
Shares of the Funds are distributed through the Distributor and
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.
FAIF has adopted a Plan of Distribution for the Class A Shares pursuant
to Rule 12b-1 under the 1940 Act (the "Class A Distribution Plan"). The
Class A Distribution Plan authorizes the Distributor to retain the sales
charge paid upon purchase of Class A Shares, except that portion which
is reallowed to Participating Institutions. See "Investing in the Funds
-- Class A Shares." Each Fund also pays the Distributor a shareholder
servicing fee monthly at an annual rate of 0.25% of the Fund's Class A
Shares' average daily net assets. The shareholder servicing fee is
intended to compensate the Distributor for ongoing servicing and/or
maintenance of shareholder accounts and may be used by the Distributor
to provide compensation to institutions through which shareholders hold
their shares for ongoing servicing and/or maintenance of shareholder
accounts. The shareholder servicing fee may be used to provide
compensation for shareholder services provided by "one-stop" mutual fund
networks through which the Funds are made available. In addition, the
Distributor and the Adviser and its affiliates may provide compensation
for services provided by such networks from their own resources. From
time to time, the Distributor may voluntarily waive its fees with
respect to the Class A Shares of either of the Funds. Any such waivers
may be made at the Distributor's discretion and may be terminated at any
time.
Under another distribution plan (the "Class B Distribution Plan")
adopted in accordance with Rule 12b-1 under the 1940 Act, each Fund may
pay to the Distributor a sales support fee at an annual rate of up to
0.75% of the average daily net assets of the Class B Shares of the Fund,
which fee may be used by the Distributor to provide compensation for
sales support and distribution activities with respect to Class B Shares
of the Fund. This fee is calculated and paid each month based on the
average daily net assets for that month. In addition to this fee, the
Distributor is paid a shareholder servicing fee of 0.25% of the average
daily net assets of the Class B Shares pursuant to a service plan (the
"Class B Service Plan"), which fee may be used by the Distributor to
provide compensation for ongoing servicing and/or maintenance of
shareholder accounts with respect to Class B Shares of the Fund.
Although
<PAGE>
Class B Shares are sold without an initial sales charge, the Distributor
pays a total of 4.25% of the amount invested (including a prepaid
service fee of 0.25% of the amount invested) to dealers who sell Class B
Shares (excluding exchanges from other Class B Shares in the First
American family). The service fee payable under the Class B Service Plan
is prepaid for the first year as described above.
The Class A Distribution Plan and Class B Distribution Plan recognize
that the Adviser, the Administrator, the Distributor, and any
Participating Institution may in their discretion use their own assets
to pay for certain additional costs of distributing Fund shares. Any
arrangement to pay such additional costs may be commenced or
discontinued by any of these persons at any time. In addition, while
there is no sales charge on purchases of Class A Shares of $1 million
and more, the Adviser may pay amounts to broker-dealers from its own
assets with respect to such sales. ISI, a subsidiary of the Adviser, is
a Participating Institution.
INVESTING IN THE FUNDS
SHARE PURCHASES
Shares of the Funds are sold at their net asset value, next determined
after an order is received, plus any applicable sales charge, on days on
which the New York Stock Exchange is open for business. Shares may be
purchased as described below. The Funds reserve the right to reject any
purchase request.
THROUGH A FINANCIAL INSTITUTION. Shares may be purchased through a
financial institution which has a sales agreement with the Distributor.
An investor may call his or her financial institution to place an order.
Purchase orders must be received by the financial institution by the
time specified by the institution to be assured same day processing, and
purchase orders must be transmitted to and received by the Funds by 3:00
p.m. Central time in order for shares to be purchased at that day's
price. It is the financial institution's responsibility to transmit
orders promptly.
Certain brokers assist their clients in the purchase or redemption of
shares and charge a fee for this service.
BY MAIL. An investor may place an order to purchase shares of the Funds
directly through the Transfer Agent. Orders by mail will be executed
upon receipt of payment by the Transfer Agent. If an investor's check
does not clear, the purchase will be cancelled and the investor could be
liable for any losses or fees incurred. Third-party checks, credit
cards, credit card checks and cash will not be accepted. When purchases
are made by check, the
<PAGE>
proceeds of redemptions of the shares purchased 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. In order to purchase shares by mail, an investor must:
* complete and sign the new account form;
* enclose a check made payable to (Fund name); and
* mail both to DST Systems, Inc., P.O. Box 419382, Kansas City,
Missouri 64141-6382.
After an account is established, an investor can purchase shares by mail
by enclosing a check and mailing it to DST Systems, Inc. at the above
address.
BY WIRE. To purchase shares of a Fund by wire, call (800) 637-2548
before 3:00 p.m. Central time. All information needed will be taken over
the telephone, and the order will be considered placed when the
Custodian receives payment by wire. If the Custodian does not receive
the wire by 3:00 p.m. Central time, the order will be executed the next
business day. Federal funds should be wired as follows: U.S. Bank
National Association, Minneapolis, Minnesota, ABA Number 091000022; For
Credit to: DST Systems, Account Number 160234580266; For Further Credit
To: (Investor Name and Fund Name). Shares cannot be purchased by Federal
Reserve wire on days on which the New York Stock Exchange is closed and
on federal holidays upon which wire transfers are restricted.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment for each Fund is $1,000 unless the
investment is in a retirement plan, in which case the minimum investment
is $250. The minimum subsequent investment is $100. The Funds reserve
the right to waive the minimum investment requirement for employees of
First Bank National Association, First Trust National Association and
U.S. Bancorp and their respective affiliates.
ALTERNATIVE SALES CHARGE OPTIONS
THE TWO ALTERNATIVES: OVERVIEW. An investor may purchase shares of a
Fund at a price equal to its net asset value plus a sales charge. This
sales charge may be imposed, at the investor's election, either (i) at
the time of the purchase (the Class A "initial sales charge
alternative"), or (ii) on a contingent deferred basis (the Class B
"deferred sales charge alternative"). Each of Class A and Class B
represents a Fund's interest in its portfolio of investments. The
classes have the same rights and are identical in all respects except
that
<PAGE>
(i) Class B Shares bear the expenses of the contingent deferred sales
charge arrangement and distribution and service fees resulting from such
sales arrangement, while Class A Shares bear only shareholder servicing
fees; (ii) each class has exclusive voting rights with respect to
approvals of any Rule 12b-1 distribution plan related to that specific
class (although Class B shareholders may vote on any distribution fees
imposed on Class A Shares as long as Class B Shares convert into Class A
Shares); (iii) only Class B Shares carry a conversion feature; and (iv)
each class has different exchange privileges. Sales personnel of
financial institutions distributing the Funds' shares, and other persons
entitled to receive compensation for selling shares, may receive
differing compensation for selling Class A and Class B Shares.
These alternative purchase arrangements permit an investor in a Fund to
choose the method of purchasing shares that is more beneficial to that
investor. The amount of a purchase, the length of time an investor
expects to hold the shares, and whether the investor wishes to receive
dividends in cash or in additional shares, will all be factors in
determining which sales charge option is best for a particular investor.
An investor should consider whether, over the time he or she expects to
maintain the investment, the accumulated sales charges on Class B Shares
prior to conversion would be less than the initial sales charge on Class
A Shares, and to what extent the differential may be offset by the
expected higher yield of Class A Shares. Class A Shares will normally be
more beneficial to an investor if he or she qualifies for reduced sales
charges as described below. Accordingly, orders for Class B Shares of a
Fund for $250,000 or more ordinarily will be treated as orders for Class
A Shares or declined.
The Directors of FAIF have determined that no conflict of interest
currently exists between the Class A and Class B Shares. On an ongoing
basis, the Directors, pursuant to their fiduciary duties under the 1940
Act and state laws, will seek to ensure that no such conflict arises.
<PAGE>
CLASS A SHARES.
WHAT CLASS A SHARES COST. Class A Shares of each Fund are offered on a
continuous basis at their next determined offering price, which is net
asset value, plus a sales charge as set forth below:
EACH FUND:
<TABLE>
<CAPTION>
MAXIMUM
AMOUNT OF
SALES CHARGE SALES CHARGE SALES CHARGE
AS PERCENTAGE AS PERCENTAGE REALLOWED TO
OF OFFERING OF NET ASSET PARTICIPATING
PRICE VALUE INSTITUTIONS
<S> <C> <C> <C>
Less than $50,000 4.50% 4.71% 4.05%
$50,000 but less than $100,000 4.00% 4.17% 3.60%
$100,000 but less than $250,000 3.50% 3.63% 3.15%
$250,000 but less than $500,000 2.75% 2.83% 2.47%
$500,000 but less than $1,000,000 2.00% 2.04% 1.80%
$1,000,000 and over 0.00% 0.00% 0.00%
</TABLE>
There is no initial sales charge on purchases of Class A Shares of $1
million or more. However, Participating Institutions will receive a
commission of 1.00% on such sales. Redemptions of Class A Shares
purchased at net asset value within 24 months of purchase will be
subject to a contingent deferred sales charge of 1.00% (unless a
Participating Institution waived its commission on the initial purchase)
except in the case of International Index Fund. Class A Shares that are
redeemed will not be subject to this contingent deferred sales charge to
the extent that the value of the shares represents capital appreciation
of Fund assets or reinvestment of dividends or capital gain
distributions.
Net asset value is determined at 3:00 p.m. Central time Monday through
Friday except on (i) days on which there are not sufficient changes in
the value of a Fund's portfolio securities that its net asset value
might be materially affected; (ii) days during which no shares are
tendered for redemption and no orders to purchase shares are received;
and (iii) on the following federal holidays: New Year's Day, Martin
Luther King, Jr. Day, Presidents' Day, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day, and Christmas Day. In addition, net asset
value will not be calculated on Good Friday.
DEALER CONCESSION. A dealer will normally receive up to 90% of the
applicable sales charge. Any portion of the sales charge which is not
paid to a dealer will be retained by the Distributor. In addition, the
Distributor may, from time to time in its sole discretion, institute one
or more promotional incentive programs which will be paid by the
Distributor from the sales charge it receives or from any other source
available to it. Under any such program, the Distributor will provide
promotional incentives, in the form of
<PAGE>
cash or other compensation including merchandise, airline vouchers,
trips and vacation packages, to all dealers selling shares of the Funds.
Promotional incentives of these kinds will be offered uniformly to all
dealers and predicated upon the amount of shares of the Funds sold by
the dealer. Whenever 90% or more of a sales charge is paid to a dealer,
that dealer may be deemed to be an underwriter as defined in the
Securities Act of 1933.
The sales charge for shares sold other than through registered
broker/dealers will be retained by the Distributor. The Distributor may
pay fees to financial institutions out of the sales charge in exchange
for sales and/or administrative services performed on behalf of the
institution's customers in connection with the initiation of customer
accounts and purchases of Fund shares.
REDUCING THE CLASS A SALES CHARGE. The sales charge can be reduced on
the purchase of Class A Shares through (i) quantity discounts and
accumulated purchases, or (ii) signing a 13-month letter of intent:
* QUANTITY DISCOUNTS AND ACCUMULATED PURCHASES: As shown in the
table above, larger purchases of Class A Shares reduce the
percentage sales charge paid. Each Fund will combine purchases
made on the same day by an investor, the investor's spouse, and
the investor's children under age 21 when it calculates the
sales charge. In addition, the sales charge, if applicable, is
reduced for purchases made at one time by a trustee or fiduciary
for a single trust estate or a single fiduciary account.
The sales charge discount applies to the total current market
value of any Fund, plus the current market value of any other
FAIF Fund and any other mutual funds having a sales charge and
distributed as part of the First American family of funds. Prior
purchases and concurrent purchases of Class A Shares of any FAIF
Fund will be considered in determining the sales charge
reduction. In order for an investor to receive the sales charge
reduction on Class A Shares, the Transfer Agent must be notified
by the investor in writing or by his or her financial
institution at the time the purchase is made that Fund shares
are already owned or that purchases are being combined.
* LETTER OF INTENT: If an investor intends to purchase at least
$50,000 of Class A Shares in a Fund and other FAIF Funds over
the next 13 months, the sales charge may be reduced by signing a
letter of intent to that effect. This letter of intent includes
a provision for a sales charge adjustment depending on the
amount actually purchased within the 13-month period and a
provision for the Custodian to hold a percentage equal to the
particular FAIF Fund's maximum sales charge rate of the total
amount intended to be purchased in escrow (in shares) for all
FAIF Funds until the purchase is completed.
<PAGE>
The amount held in escrow for all FAIF Funds will be applied to
the investor's account at the end of the 13-month period after
deduction of the sales load applicable to the dollar value of
shares actually purchased. In this event, an appropriate number
of escrowed shares may be redeemed in order to realize the
difference in the sales charge.
A letter of intent will not obligate the investor to purchase
shares, but if he or she does, each purchase during the period
will be at the sales charge applicable to the total amount
intended to be purchased. This letter may be dated as of a prior
date to include any purchases made within the past 90 days.
SALES OF CLASS A SHARES AT NET ASSET VALUE. Purchases of a Fund's Class
A Shares by the Adviser, or any of its affiliates, or any of its or
FAIF's officers, directors, employees, retirees, sales representatives
and partners, registered representatives of any broker/dealer authorized
to sell Fund shares, and full-time employees of FAIF's general counsel,
and members of their immediate families (i.e., parent, child, spouse,
sibling, step or adopted relationships, and UTMA accounts naming
qualifying persons), may be made at net asset value without a sales
charge. A Fund's Class A Shares also may be purchased at net asset value
without a sales charge by fee-based registered investment advisers,
financial planners and registered broker/dealers who are purchasing
shares on behalf of their customers and by purchasers through "one-stop"
mutual fund networks through which the Funds are made available. In
addition, Class A Shares may be purchased at net asset value without a
sales charge by qualified defined contribution plans participating in
the First American 401(k) Plan Program and by retirement and deferred
compensation plans and the trusts used to fund such plans (including,
but not limited to, those defined in section 401(a), 403(b) and 457 of
the Internal Revenue Code and "rabbi trusts"), which plans and trusts
purchase through "one-stop" mutual fund networks.
If Class A Shares of a Fund have been redeemed, the shareholder has a
one-time right, within 30 days, to reinvest the redemption proceeds in
Class A Shares of any FAIF fund at the next-determined net asset value
without any sales charge. The Transfer Agent must be notified by the
shareholder in writing or by his or her financial institution of the
reinvestment in order to eliminate a sales charge. If the shareholder
redeems his or her shares of a Fund, there may be tax consequences.
In addition, purchases of Class A Shares of a Fund that are funded by
proceeds received upon the redemption (within 60 days of the purchase of
Fund shares) of shares of any unrelated open-end investment company that
charges a sales load and rollovers from retirement plans that utilize
the Funds as investment options may be made at net asset value. To make
such a
<PAGE>
purchase at net asset value, an investor or the investor's broker must,
at the time of purchase, submit a written request to the Transfer Agent
that the purchase be processed at net asset value pursuant to this
privilege, accompanied by a photocopy of the confirmation (or similar
evidence) showing the redemption from the unrelated fund. The redemption
of the shares of the non-related fund is, for federal income tax
purposes, a sale upon which a gain or loss may be realized.
CLASS B SHARES.
CONTINGENT DEFERRED SALES CHARGE. Class B Shares of each Fund are sold
at net asset value without any initial sales charge. If an investor
redeems Class B Shares within eight years of purchase, he or she will
pay a contingent deferred sales charge at the rates set forth below.
This charge is assessed on an amount equal to the lesser of the
then-current market value or the cost of the shares being redeemed.
Accordingly, no sales charge is imposed on increases in net asset value
above the initial purchase price or on shares derived from reinvestment
of dividends or capital gain distributions.
CONTINGENT DEFERRED
SALES CHARGE AS A
PERCENTAGE OF
DOLLAR AMOUNT
YEAR SINCE PURCHASE SUBJECT TO CHARGE
First 5.00%
Second 5.00%
Third 4.00%
Fourth 3.00%
Fifth 2.00%
Sixth 1.00%
Seventh None
Eighth None
In determining whether a particular redemption is subject to a
contingent deferred sales charge, it is assumed that the redemption is
first of any Class A Shares in the shareholder's Fund account; second,
of any Class B Shares held for more than eight years and Class B Shares
acquired pursuant to reinvestment of dividends or other distributions;
and third, of Class B Shares held longest during the eight-year period.
This method should result in the lowest possible sales charge.
The contingent deferred sales charge is waived on redemption of Class B
Shares (i) within one year following the death or disability (as defined
in the Internal Revenue Code) of a shareholder, and (ii) to the extent
that the redemption represents a minimum required distribution from an
individual
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retirement account or other retirement plan to a shareholder who has
attained the age of 701|M/2. A shareholder or his or her representative
must notify the Transfer Agent prior to the time of redemption if such
circumstances exist and the shareholder is eligible for this waiver.
CONVERSION FEATURE. At the end of the period ending eight years after
the beginning of the month in which the shares were issued, Class B
Shares of each Fund will automatically convert to Class A Shares and
will no longer be subject to the Class B distribution and service fees.
This conversion will be on the basis of the relative net asset values of
the two classes.
SYSTEMATIC EXCHANGE PROGRAM
Shares of a Fund may also be purchased through automatic monthly
deductions from a shareholder's account in the same class of shares of
Prime Obligations Fund of First American Funds, Inc. Under a systematic
exchange program, a shareholder enters an agreement to purchase a
specified class of shares of one or more Funds over a specified period
of time, and initially purchases Prime Obligations Fund shares of the
same class in an amount equal to the total amount of the investment. On
a monthly basis a specified dollar amount of shares of Prime Obligations
Fund is exchanged for shares of the same class of the Funds specified.
The systematic exchange program of investing a fixed dollar amount at
regular intervals over time has the effect of reducing the average cost
per share of the Funds. This effect also can be achieved through the
systematic investment program described below. Because purchases of
Class A Shares are subject to an initial sales charge, it may be
beneficial for an investor to execute a Letter of Intent in connection
with the systematic exchange program. A shareholder may apply for
participation in this program through his or her financial institution
or by calling (800) 637-2548.
SYSTEMATIC INVESTMENT PROGRAM
Once a Fund account has been opened, shareholders may add to their
investment on a regular basis in a minimum amount of $100. Under this
program, funds may be automatically withdrawn periodically from the
shareholder's checking account and invested in Fund shares at the net
asset value next determined after an order is received, plus any
applicable sales charge. A shareholder may apply for participation in
this program through his or her financial institution or call (800)
637-2548.
EXCHANGING SECURITIES FOR FUND SHARES
A Fund may accept securities in exchange for Fund shares. A Fund will
allow such exchanges only upon the prior approval by the Fund and a
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determination by the Fund and the Adviser that the securities to be
exchanged are acceptable. Securities accepted by a Fund will be valued
in the same manner that a Fund values its assets. The basis of the
exchange will depend upon the net asset value of Fund shares on the day
the securities are valued.
CERTIFICATES AND CONFIRMATIONS
The Transfer Agent maintains a share account for each shareholder.
Share certificates will not be issued by the Funds.
Confirmations of each purchase and redemption are sent to each
shareholder. In addition, monthly confirmations are sent to report all
transactions and dividends paid during that month for the Funds.
DIVIDENDS AND DISTRIBUTIONS
Dividends with respect to each Fund are declared and paid quarterly to
all shareholders of record on the record date. Distributions of any net
realized long-term capital gains will be made at least once every 12
months. Dividends and distributions are automatically reinvested in
additional shares of the Fund paying the dividend on payment dates at
the ex-dividend date net asset value without a sales charge, unless
shareholders request cash payments on the new account form or by writing
to the Fund.
All shareholders on the record date are entitled to the dividend. If
shares are purchased before a record date for a dividend or a
distribution of capital gains, a shareholder will pay the full price for
the shares and will receive some portion of the purchase price back as a
taxable dividend or distribution (to the extent, if any, that the
dividend or distribution is otherwise taxable to holders of Fund
shares). If shares are redeemed or exchanged before the record date for
a dividend or distribution or are purchased after the record date, those
shares are not entitled to the dividend or distribution.
The amount of dividends payable on Class A and Class B Shares generally
will be less than the dividends payable on Class C Shares because of the
distribution and/or shareholder servicing expenses charged to Class A
and Class B Shares. The amount of dividends payable on Class A Shares
generally will be more than the dividends payable on the Class B Shares
because of the higher distribution and shareholder servicing fees paid
by the Class B shares.
EXCHANGE PRIVILEGE
Shareholders may exchange Class A Shares or Class B Shares of a Fund for
currently available Class A or Class B Shares, respectively, of the
other FAIF Funds or of other funds in the First American family. Class A
Shares of the
<PAGE>
Funds, whether acquired by direct purchase, reinvestment of dividends on
such shares, or otherwise, may be exchanged for Class A Shares of other
funds without the payment of any sales charge (i.e., at net asset
value). Exchanges of shares among the First American family of funds
must meet any applicable minimum investment of the fund for which shares
are being exchanged.
For purposes of calculating the Class B Shares' eight-year conversion
period or contingent deferred sales charges payable upon redemption, the
holding period of Class B Shares of the "old" fund and the holding
period of Class B Shares of the "new" fund are aggregated.
The ability to exchange shares of the Funds does not constitute an
offering or recommendation of shares of one fund by another fund. This
privilege is available to shareholders resident in any state in which
the fund shares being acquired may be sold. An investor who is
considering acquiring shares in another First American fund pursuant to
the exchange privilege should obtain and carefully read a prospectus of
the fund to be acquired. Exchanges may be accomplished by a written
request, or by telephone if a preauthorized exchange authorization is on
file with the Transfer Agent, shareholder servicing agent, or financial
institution.
Written exchange requests must be signed exactly as shown on the
authorization form, and the signatures may be required to be guaranteed
as for a redemption of shares by an entity described below under
"Redeeming Shares." Neither the Funds, the Distributor, the Transfer
Agent, any shareholder servicing agent, or any financial institution
will be responsible for further verification of the authenticity of the
exchange instructions.
Telephone exchange instructions made by an investor may be carried out
only if a telephone authorization form completed by the investor is on
file with the Transfer Agent, shareholder servicing agent, or financial
institution. Shares may be exchanged between two First American funds by
telephone only if both funds have identical shareholder registrations.
Telephone exchange instructions may be recorded and will be binding upon
the shareholder. Telephone instructions must be received by the Transfer
Agent before 3:00 p.m. Central time, or by a shareholder's shareholder
servicing agent or financial institution by the time specified by it, in
order for shares to be exchanged the same day. Neither the Transfer
Agent nor any Fund will be responsible for the authenticity of exchange
instructions received by telephone if it reasonably believes those
instructions to be genuine. The Funds and the Transfer Agent will each
employ reasonable procedures to confirm that telephone instructions are
genuine, and they may be liable for losses resulting from unauthorized
or fraudulent telephone instructions if they do not employ these
procedures.
<PAGE>
Shareholders of the Funds may have difficulty in making exchanges by
telephone through brokers and other financial institutions during times
of drastic economic or market changes. If a shareholder cannot contact
his or her broker or financial institution by telephone, it is
recommended that an exchange request be made in writing and sent by
overnight mail to DST Systems, Inc., 1004 Baltimore, Kansas City,
Missouri 64105.
Shareholders who become eligible to purchase Class C Shares may exchange
Class A Shares for Class C Shares. An example of such an exchange would
be a situation in which an individual holder of Class A Shares
subsequently opens a custody or agency account with a financial
institution which invests in Class C Shares.
The terms of any exchange privilege may be modified or terminated by the
Funds at any time. There are currently no additional fees or charges for
the exchange service. The Funds do not contemplate establishing such
fees or charges, but they reserve the right to do so. Shareholders will
be notified of any modification or termination of the exchange privilege
and of the imposition of any additional fees or changes.
REDEEMING SHARES
Each Fund redeems shares at their net asset value next determined after
the Transfer Agent receives the redemption request, reduced by any
applicable contingent deferred sales charge. Redemptions will be made on
days on which the Fund computes its net asset value. Redemption requests
can be made as described below and must be received in proper form.
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. Redemption requests
must be received by the financial institution by the time specified by
the institution in order for shares to be redeemed at that day's net
asset value, and redemption requests must be transmitted to and received
by the Funds by 3:00 p.m. Central time in order for shares to be
redeemed at that day's net asset value. 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.
<PAGE>
Shareholders who did not purchase their shares of a Fund through a
financial institution may redeem their shares by telephoning (800)
637-2548. At the shareholder's request, redemption proceeds will be paid
by check 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 more than seven days after the request.
Wire instructions must be previously established on the account or
provided in writing. The minimum amount for a wire transfer is $1,000.
If at any time the Funds determine 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 shares by telephone. If this 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 transfer instructions or telephone
instructions that it reasonably believes to be genuine. These procedures
may include taping of telephone conversations. To ensure authenticity of
redemption or exchange instructions received by telephone, the Transfer
Agent examines each shareholder request by verifying the account number
and/or taxpayer identification number at the time such request is made.
The Transfer Agent subsequently sends confirmations of both exchange
sales and exchange purchases to the shareholder for verification. If
reasonable procedures are not employed, the Transfer Agent and the Funds
may be liable for any losses due to unauthorized or fraudulent telephone
transactions.
BY MAIL
Any shareholder may redeem Fund shares by sending a written request to
the Transfer Agent, shareholder servicing agent, or financial
institution. The written request should include the shareholder's name,
the Fund name, the account number, and the share or dollar amount
requested to be redeemed, and should be signed exactly as the shares are
registered. Shareholders should call the Fund, shareholder servicing
agent or financial institution for assistance in redeeming by mail. A
check for redemption proceeds normally is mailed within one business
day, but in no event more than seven days, after receipt of a proper
written redemption request.
<PAGE>
Shareholders requesting a redemption of $5,000 or more, a redemption of
any amount to be sent to an address other than that on record with the
Fund, or a redemption payable other than to the shareholder of record,
must have signatures on written redemption requests guaranteed by:
* a trust company or commercial bank the deposits of which are
insured by the Bank Insurance Fund, which is administered by the
Federal Deposit Insurance Corporation ("FDIC");
* a member firm of the New York, American, Boston, Midwest, or
Pacific Stock Exchanges or of the National Association of
Securities Dealers;
* a savings bank or savings and loan association the deposits of
which are insured by the Savings Association Insurance Fund,
which is administered by the FDIC; or
* any other "eligible guarantor institution," as defined in the
Securities Exchange Act of 1934.
The Funds do not accept signatures guaranteed by a notary public.
The Funds and the Transfer Agent have adopted standards for accepting
signature guarantees from the above institutions. The Funds may elect in
the future to limit eligible signature guarantees to institutions that
are members of a signature guarantee program. The Funds and the Transfer
Agent reserve the right to amend these standards at any time without
notice.
BY SYSTEMATIC WITHDRAWAL PROGRAM
Shareholders whose account value is at least $5,000 may elect to
participate in the Systematic Withdrawal Program. Under this program,
Fund shares are redeemed to provide for periodic withdrawal payments in
an amount directed by the shareholder. A shareholder may apply to
participate in this program through his or her financial institution. It
is generally not in a shareholder's best interest to participate in the
Systematic Withdrawal Program at the same time that the shareholder is
purchasing additional shares if a sales charge must be paid in
connection with such purchases.
REDEMPTION BEFORE PURCHASE INSTRUMENTS CLEAR
When shares are purchased by check or with funds transmitted through the
Automated Clearing House, the proceeds of redemptions 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.
<PAGE>
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, a Fund
may redeem shares in any account, except retirement plans, and pay the
proceeds, less any applicable contingent deferred sales charge, to the
shareholder if the account balance falls below the required minimum
value of $500. Shares will not be redeemed in this manner, however, if
the balance falls below $500 because of changes in a Fund's net asset
value. Before shares are redeemed to close an account, the shareholder
will be notified in writing and allowed 60 days to purchase additional
shares to meet the minimum account requirement.
DETERMINING THE PRICE OF SHARES
Class A Shares of the Funds are sold at net asset value plus a sales
charge, while Class B Shares of the Funds are sold without a front-end
sales charge. Shares are redeemed at net asset value less any applicable
contingent deferred sales charge. See "Investing in the Funds --
Alternative Sales Charge Options."
The net asset value per share is determined as of the earlier of the
close of the New York Stock Exchange or 3:00 p.m. Central time on each
day the New York Stock Exchange is open for business, provided that net
asset value need not be determined on days when no Fund shares are
tendered for redemption and no order for that Fund's shares is received
and on days on which changes in the value of portfolio securities will
not materially affect the current net asset value of the Fund's shares.
The price per share for purchases or redemptions is such value next
computed after the Transfer Agent receives the purchase order or
redemption request.
It is the responsibility of Participating Institutions promptly to
forward purchase and redemption orders to the Transfer Agent. In the
case of redemptions and repurchases of shares owned by corporations,
trusts or estates, the Transfer Agent or Fund may require additional
documents to evidence appropriate authority in order to effect the
redemption, and the applicable price will be that next determined
following the receipt of the required documentation.
DETERMINING NET ASSET VALUE
The net asset value per share for each of the Funds is determined by
dividing the value of the securities owned by the Fund plus any cash and
other assets (including interest accrued and dividends declared but not
collected), less all liabilities, by the number of Fund shares
outstanding. For the purpose of
<PAGE>
determining the aggregate net assets of the Funds, cash and receivables
will be valued at their face amounts. Interest will be recorded as
accrued and dividends will be recorded on the ex-dividend date.
Investments in equity securities which are traded on a national
securities exchange (or reported on the NASDAQ national market system)
are stated at the last quoted sales price if readily available for such
equity securities on each business day; other equity securities traded
in the over-the-counter market and listed equity securities for which no
sale was reported on that date are stated at the last quoted bid price.
Debt obligations exceeding 60 days to maturity which are actively traded
are valued by an independent pricing service at the most recently quoted
bid price. Debt obligations with 60 days or less remaining until
maturity may be valued at their amortized cost. Foreign securities are
valued based upon quotation from the primary market in which they are
traded. When market quotations are not readily available, securities are
valued at fair value as determined in good faith by procedures
established and approved by the Board of Directors.
Portfolio securities underlying actively traded options are valued at
their market price as determined above. The current market value of any
exchange traded option held or written by a Fund is its last sales price
on the exchange prior to the time when assets are valued, unless the bid
price is higher or the asked price is lower, in which event the bid or
asked price is used. In the absence of any sales that day, options will
be valued at the current closing bid price.
FOREIGN SECURITIES
Any assets or liabilities of International Index Fund initially
expressed in terms of foreign currencies are translated into United
States dollars using current exchange rates. Trading in securities on
foreign markets may be completed before the close of business on each
business day of International Index Fund. Thus, the calculation of the
Fund's net asset value may not take place contemporaneously with the
determination of the prices of foreign securities held in the Fund's
portfolios. If events materially affecting the value of foreign
securities occur between the time when their price is determined and the
time when the Fund's net asset value is calculated, such securities will
be valued at fair value as determined in good faith by or under the
direction of the Board of Directors. In addition, trading in securities
on foreign markets may not take place on all days on which the New York
Stock Exchange (the "Exchange") is open for business or may take place
on days on which the Exchange is not open for business. Therefore, the
net asset value of International Index Fund might be significantly
affected on days when an investor has no access to the Fund.
<PAGE>
INCOME TAXES
FEDERAL INCOME TAXATION
Each Fund is treated as a different entity for federal income tax
purposes. each of the Funds intends to qualify as a regulated investment
company under the Internal Revenue Code of 1986, as amended (the
"Code"). If so qualified and provided certain distribution requirements
are met, a Fund will not be liable for federal income taxes to the
extent it distributes its income to its shareholders.
Distributions paid from the net investment income and from any net
realized short-term capital gains of a Fund, will be taxable to
shareholders as ordinary income, whether received in cash or in
additional shares. Dividends paid by the Funds attributable to
investments in the securities of foreign issuers will not be eligible
for the 70% deduction for dividends received by corporations.
Distributions paid from a Fund's net capital gains and designated as
capital gain dividends are taxable as long-term capital gains in the
hands of shareholders, regardless of the length of time during which
they have held their shares. For individuals, the Taxpayer Relief Act of
1997 (the "1997 Act") has created new "mid-term capital gain" rates that
apply to the sale of capital assets held more than one year but not more
than 18 months. Although the 1997 Act has not expressly addressed this
issue, it is expected that IRS regulations issued pursuant to the Act
will provide that regulated investment companies such as the Funds must
notify shareholders who are individuals as to whether they must treat
capital gain dividends that they receive as mid-term or long-term
capital gains.
Gain or loss realized on the sale or exchange of shares in a Fund will
be treated as capital gain or loss, provided that (as is usually the
case) the shares represented a capital asset in the hands of the
shareholder. For shareholders who are individuals, the gain or loss will
be considered long-term if the shareholder has held the shares for more
than 18 months and mid-term if the shareholder has held the shares for
more than one year but not more than 18 months.
A Fund may be required to "back-up" withhold 31% of any dividend,
distribution, or redemption payment made to a shareholder who fails to
furnish the Fund with the shareholder's Social Security number or other
taxpayer identification number or to certify that he or she is not
subject to back-up withholding.
International Index Fund may be required to pay withholding and other
taxes imposed by foreign countries, generally at rates from 10% to 40%,
which would reduce the Fund's investment income. Tax conventions between
certain countries and the United States may reduce or eliminate such
taxes.
If at the end of International Index Fund's taxable year more than 50%
of its total assets consist of securities of foreign corporations, it
will be eligible to file an election with the Internal Revenue Service
pursuant to which shareholders of the Fund will be required to include
their respective pro rata portions of such foreign taxes in gross
income, treat such amounts as foreign taxes paid by them, and deduct
such amounts in computing their taxable income or, alternatively, use
them as foreign tax credits against their federal
<PAGE>
income taxes. If such an election is filed for a year, International
Index Fund shareholders will be notified of the amounts which they may
deduct as foreign taxes paid or used as foreign tax credits.
Alternatively, if the amount of foreign taxes paid by International
Index Fund is not large enough in future years to warrant its making the
election described above, the Fund may claim the amount of foreign taxes
paid as a deduction against its own gross income. In that case,
shareholders would not be required to include any amount of foreign
taxes paid by the Fund in their income and would not be permitted either
to deduct any portion of foreign taxes from their own income or to claim
any amount of foreign tax credit for taxes paid by the Fund.
This is a general summary of the federal tax laws applicable to the
Funds and their shareholders as of the date of this Prospectus. See the
Statement of Additional Information for further details.
FUND SHARES
Each share of a Fund is fully paid, nonassessable, and transferable.
Shares may be issued as either full or fractional shares. Fractional
shares have pro rata the same rights and privileges as full shares.
Shares of the Funds have no preemptive or conversion rights.
Each share of a Fund has one vote. On some issues, such as the election
of directors, all shares of all FAIF 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.
Under the laws of the State of Maryland and FAIF's Articles of
Incorporation, FAIF is not required to hold shareholder meetings unless
they (i) are required by the 1940 Act, or (ii) are requested in writing
by the holders of 25% or more of the outstanding shares of FAIF.
<PAGE>
CALCULATION OF PERFORMANCE DATA
From time to time, either of the Funds may advertise information
regarding its performance. Each Fund may publish its "yield," its
"cumulative total return," its "average annual total return," and its
"distribution rate." Distribution rates may only be used in connection
with sales literature and shareholder communications preceded or
accompanied by a Prospectus. Each of these performance figures is based
upon historical results and is not intended to indicate future
performance, and, except for "distribution rate," is standardized in
accordance with Securities and Exchange Commission ("SEC") regulations.
"Yield" for the Funds is computed by dividing the net investment income
per share (as defined in applicable SEC regulations) earned during a
30-day period (which period will be stated in the advertisement) by the
maximum offering price per share on the last day of the period. Yield is
an annualized figure, in that it assumes that the same level of net
investment income is generated over a one year period. The yield formula
annualizes net investment income by providing for semi-annual
compounding.
"Total return" is based on the overall dollar or percentage change in
value of a hypothetical investment in a Fund assuming reinvestment of
dividend distributions and deduction of all charges and expenses,
including the maximum sales charge imposed on Class A Shares or the
contingent deferred sales charge imposed on Class B Shares redeemed at
the end of the specified period covered by the total return figure.
"Cumulative total return" reflects a Fund's performance over a stated
period of time. "Average annual total return" reflects the hypothetical
annually compounded rate that would have produced the same cumulative
total return if performance had been constant over the entire period.
Because average annual returns tend to smooth out variations in a Fund's
performance, they are not the same as actual year-by-year results. As a
supplement to total return computations, a Fund may also publish "total
investment return" computations which do not assume deduction of the
maximum sales charge imposed on Class A Shares or the contingent
deferred sales charge imposed on Class B Shares.
"Distribution rate" is determined by dividing the income dividends per
share for a stated period by the maximum offering price per share on the
last day of the period. All distribution rates published for the Funds
are measures of the level of income dividends distributed during a
specified period. Thus, these rates differ from yield (which measures
income actually earned by a Fund) and total return (which measures
actual income, plus realized and unrealized gains or losses of a Fund's
investments). Consequently, distribution rates alone should not be
considered complete measures of performance.
The performance of the Class A and Class B Shares of a Fund will
normally be lower than for the Class C Shares because Class C Shares are
not subject
<PAGE>
to the sales charges and distribution and/or shareholder servicing
expenses applicable to Class A and Class B Shares. In addition, the
performance of Class A and Class B Shares of a Fund will differ because
of the different sales charge structures of the classes and because of
the differing distribution and shareholder servicing fees charged to
Class B Shares.
In reports or other communications to shareholders and in advertising
material, the performance of each Fund may be compared to recognized
unmanaged indices or averages of the performance of similar securities
and to composites of such indices and averages. Also, the performance of
each Fund may be compared to that of other funds of similar size and
objectives as listed in the rankings prepared by Lipper Analytical
Services, Inc. or similar independent mutual fund rating services, and
each Fund may include in such reports, communications and advertising
material evaluations published by nationally recognized independent
ranking services and publications. For further information regarding the
Funds' performance, see "Fund Performance" in the Statement of
Additional Information.
SPECIAL INVESTMENT METHODS
This section provides additional information concerning the securities
in which the Funds may invest and related topics. Further information
concerning these matters is contained in the Statement of Additional
Information.
REPURCHASE AGREEMENTS
Each Fund is permitted to enter into repurchase agreements. A repurchase
agreement involves the purchase by a Fund of securities with the
agreement that after a stated period of time, the original seller will
buy back the same securities ("collateral") at a predetermined price or
yield. Repurchase agreements involve certain risks not associated with
direct investments in securities. If the original seller defaults on its
obligation to repurchase as a result of its bankruptcy or otherwise, the
purchasing Fund will seek to sell the collateral, which could involve
costs or delays. Although collateral (which may consist of any fixed
income security which is an eligible investment for the Fund entering
into the repurchase agreement) will at all times be maintained in an
amount equal to the repurchase price under the agreement (including
accrued interest), a Fund would suffer a loss if the proceeds from the
sale of the collateral were less than the agreed-upon repurchase price.
The Adviser will monitor the creditworthiness of the firms with which
the Funds enter into repurchase agreements.
<PAGE>
WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS
Small Cap Value Fund may purchase securities on a when-issued or
delayed-delivery basis. When such a transaction is negotiated, the
purchase price is fixed at the time the purchase commitment is entered,
but delivery of and payment for the securities take place at a later
date. The Fund will not accrue income with respect to securities
purchased on a when-issued or delayed-delivery basis prior to their
stated delivery date. Pending delivery of the securities, the Fund will
maintain in a segregated account cash or liquid high-grade securities in
an amount sufficient to meet its purchase commitments.
The purchase of securities on a when-issued or delayed-delivery basis
exposes the Fund to risk because the securities may decrease in value
prior to delivery. In addition, the Fund's purchase of securities on a
when-issued or delayed-delivery basis while remaining substantially
fully invested could increase the amount of the Fund's total assets that
are subject to market risk, resulting in increased sensitivity of net
asset value to changes in market prices. However, the Fund will engage
in when-issued and delayed-delivery transactions only for the purpose of
acquiring portfolio securities consistent with their investment
objectives, and not for the purpose of investment leverage. A seller's
failure to deliver securities to the Fund could prevent the Fund from
realizing a price or yield considered to be advantageous.
LENDING OF PORTFOLIO SECURITIES
In order to generate additional income, each of the Funds may lend
portfolio securities representing up to one-third of the value of its
total assets to broker-dealers, banks or other institutional borrowers
of securities. If the Funds engage in securities lending, distributions
paid to shareholders from the resulting income will not be excludable
from shareholders' 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 Adviser 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. 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 Adviser) in
connection with these loans. Fees paid to the Custodian are 40% of the
Funds' income from such securities lending transactions.
<PAGE>
OPTIONS TRANSACTIONS
PURCHASES OF PUT AND CALL OPTIONS. Small Cap Value Fund may purchase put
and call options on equity securities, and both Funds may purchase put
and call options on stock indices. These transactions will be undertaken
only for the purpose of reducing risk to the Fund; that is, for
"hedging" purposes.
A put option on a security gives the purchaser of the option the right
(but not the obligation) to sell, and the writer of the option the
obligation to buy, the underlying security at a stated price (the
"exercise price") at any time before the option expires. A call option
on a security gives the purchaser the right (but not the obligation) to
buy, and the writer the obligation to sell, the underlying security at
the exercise price at any time before the option expires. The purchase
price for a put or call option is the "premium" paid by the purchaser
for the right to sell or buy.
Options on indices are similar to options on securities except that,
rather than the right to take or make delivery of a specific security at
a stated price, an option on an index gives the holder the right to
receive, upon exercise of the option, a defined amount of cash if the
closing value of the index upon which the option is based is greater
than, in the case of a call, or less than, in the case of a put, the
exercise price of the option.
Neither Fund will invest more than 5% of the value of its total assets
in purchased options, provided that options which are "in the money" at
the time of purchase may be excluded from this 5% limitation. A call
option is "in the money" if the exercise price is lower than the current
market price of the underlying security or index, and a put option is
"in the money" if the exercise price is higher than the current market
price. A Fund's loss exposure in purchasing an option is limited to the
sum of the premium paid and the commission or other transaction expenses
associated with acquiring the option.
The use of purchased put and call options involves certain risks. These
include the risk of an imperfect correlation between market prices of
securities held by the Fund and the prices of options, and the risk of
limited liquidity in the event that the Fund seeks to close out an
options position before expiration by entering into an offsetting
transaction.
WRITING OF CALL OPTIONS. Small Cap Value Fund may write (sell) covered
call options on equity securities which it owns or has the right to
acquire to the extent specified under "Investment Objectives and
Policies." These transactions would be undertaken primarily to produce
additional income.
When the Fund sells a covered call option, it is paid a premium by the
purchaser. If the market price of the security covered by the option
does not
<PAGE>
increase above the exercise price before the option expires, the option
generally will expire without being exercised, and the Fund will retain
both the premium paid for the option and the security. If the market
price of the security covered by the option does increase above the
exercise price before the option expires, however, the option is likely
to be exercised by the purchaser. In that case the Fund will be required
to sell the security at the exercise price, and it will not realize the
benefits of increases in the market price of the security above the
exercise price of the option.
OPTIONS ON STOCK INDICES. Each Fund also may write call options on stock
indices the movements of which generally correlate with those of the
Fund's portfolio holdings. These transactions, which would be undertaken
principally to produce additional income, entail the risk of an
imperfect correlation between movements of the index covered by the
option and movements in the price of the Fund's portfolio securities.
CASH ITEMS
The "cash items" in which each Fund may invest, as described under
"Investment Objectives and Policies," include short-term obligations
such as commercial paper and variable amount master demand notes; United
States dollar-denominated time and savings deposits (including
certificates of deposit); bankers acceptances; obligations of the United
States Government or its agencies or instrumentalities; repurchase
agreements collateralized by eligible investments of the Fund;
securities of other mutual funds which invest primarily in debt
obligations with remaining maturities of 13 months or less (which
investments are subject to the advisory fee); and other similar
high-quality short-term United States dollar-denominated obligations.
The other mutual funds in which each Fund may so invest include money
market funds advised by the Adviser, subject to certain restrictions
contained in an exemptive order issued by the Securities and Exchange
Commission with respect thereto.
FUTURES AND OPTIONS ON FUTURES
International Index Fund may engage in futures transactions and purchase
options on futures to the extent specified under "Investment Objectives
and Policies." These transactions may include the purchase of stock
index futures and options on stock index futures.
A futures contract on an index obligates the seller to deliver, and
entitles the purchaser to receive, an amount of cash equal to a specific
dollar amount times the difference between the value of the index at the
expiration date of the contract and the index value specified in the
contract. The acquisition of put and call options on futures contracts
will, respectively, give International
<PAGE>
Index Fund the right (but not the obligation), for a specified exercise
price, to sell or to purchase the underlying futures contract at any
time during the option period.
The Fund may use futures contracts and options on futures in an effort
to hedge against market risks. In addition, International Index Fund may
use stock index futures and options on futures to maintain sufficient
liquidity to meet redemption requests, to increase the level of Fund
assets devoted to replicating the composition of the EAFE Index and to
reduce transaction costs.
Aggregate initial margin deposits for futures contracts, and premiums
paid for related options, may not exceed 5% of the Fund's total assets.
Futures transactions will be limited to the extent necessary to maintain
the Fund's qualification as a regulated investment company under the
Internal Revenue Code of 1986, as amended.
Where International Index Fund is permitted to purchase options on
futures, its potential loss is limited to the amount of the premiums
paid for the options. As stated above, this amount may not exceed 5% of
the Fund's total assets. Where International Index Fund is permitted to
enter into futures contracts obligating it to purchase an index in the
future at a specified price, the Fund could lose 100% of its net assets
in connection therewith if it engaged extensively in such transactions
and if the value of the subject index at the delivery or settlement date
fell to zero for all contracts into which the Fund was permitted to
enter.
Futures transactions involve brokerage costs and require International
Index Fund to segregate assets to cover contracts that would require it
to purchase an index in the future at a specified date. The Fund may
lose the expected benefit of futures transactions if the index value or
exchange rates moves in an unanticipated manner. Such unanticipated
changes may also result in poorer overall performance than if the Fund
had not entered into any futures transactions. There is no assurance of
liquidity in the secondary market for purposes of closing out futures
positions.
FIXED INCOME SECURITIES
The fixed income securities in which Small Cap Value Fund may invest
include securities issued or guaranteed by the United States Government
or its agencies or instrumentalities, nonconvertible preferred stocks,
nonconvertible corporate debt securities, and short-term obligations of
the kinds described above under "-- Cash Items." Investments in
nonconvertible preferred stocks and nonconvertible corporate debt
obligations will be limited to securities which are rated at the time of
purchase not less than BBB by Standard &
<PAGE>
Poor's or Baa by Moody's (or equivalent short-term ratings), or which
have been assigned an equivalent rating by another nationally recognized
statistical rating organization, or which are of comparable quality in
the judgment of the Adviser. Obligations rated BBB, Baa or their
equivalent, although investment grade, have speculative characteristics
and carry a somewhat higher risk of default than obligations rated in
the higher investment grade categories. In addition, Small Cap Value
Fund may invest up to 5% of its net assets in less than investment grade
convertible debt obligations.
The fixed income securities specified above are subject to (i) interest
rate risk, (the risk that increases in market interest rates will cause
declines in the value of debt securities held by the Fund), (ii) credit
risk (the risk that issuers of debt securities held by the Fund default
in making required payments), and (iii) call or prepayment risk (the
risk that a borrower may exercise the right to prepay a debt obligation
before its stated maturity, requiring the Fund to reinvest the
prepayment at a lower interest rate).
FOREIGN SECURITIES
GENERAL. Under normal market conditions, International Index Fund
invests at least 65% of its total assets in equity securities which
trade in markets other than the United States. In addition, Small Cap
Value Fund may invest up to 25% of its total assets in securities of
foreign issuers which are either listed on a United States securities
exchange or represented by American Depositary Receipts.
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.
<PAGE>
Confiscatory taxation or diplomatic developments could also affect
investment in those countries. In addition, foreign branches of United
States banks, foreign banks and foreign issuers may be subject to less
stringent reserve requirements and to different accounting, auditing,
reporting, and recordkeeping standards than those applicable to domestic
branches of United States banks and United States domestic issuers.
JAPANESE SECURITIES. Japanese securities comprised 29.2% of the EAFE
Index as of September 30, 1997. As a result, securities of Japanese
companies may represent a significant component of International Index
Fund's investment assets.
Japan is politically organized as a democratic, parliamentary republic
and has a population of approximately 122 million. The Japanese economy
is heavily industrial and export-oriented. Although Japan is dependent
upon foreign economies for raw materials, Japan's balance of payments in
recent years has been strong and positive. Japan has eight stock
exchanges located throughout the country, but over 80% of all trading is
conducted on the Tokyo Stock Exchange. Prices of stocks listed on the
Japanese stock exchange are quoted continuously during regular business
hours. Trading commissions are at fixed scale rates which vary by the
type and the value of the transaction, but can be negotiable for large
transactions. Securities in Japan are denominated and quoted in yen. Yen
are fully convertible and transferable based on floating exchange rates
into all currencies, without administrative or legal restrictions, for
both nonresidents and residents of Japan.
A significant investment in Japanese securities by International Index
Fund may entail a higher degree of risk than with more diversified
international portfolios.
AMERICAN DEPOSITARY RECEIPTS AND EUROPEAN DEPOSITARY RECEIPTS. For many
foreign securities, United States dollar-denominated American Depositary
Receipts, which are traded in the United States on exchanges or
over-the-counter, are issued by domestic banks. American Depositary
Receipts represent the right to receive securities of foreign issuers
deposited in a domestic bank or a correspondent bank. American
Depositary Receipts do not eliminate all the risk inherent in investing
in the securities of foreign issuers. However, by investing in American
Depositary Receipts rather than directly in foreign issuers' stock, the
Fund can avoid currency risks during the settlement period for either
purchases or sales. In general, there is a large, liquid market in the
United States for many American Depositary Receipts. The information
available for American Depositary Receipts is subject to the accounting,
auditing and financial reporting standards of the domestic market or
exchange on which they are traded, which standards are more uniform and
more exacting than those to which many foreign issuers may be subject.
International Index Fund also may invest in European Depositary
Receipts, which are receipts evidencing an arrangement with a European
bank similar to that for American Depositary Receipts and which are
designed for use in the European securities markets. European Depositary
Receipts are not necessarily denominated in the currency of the
underlying security.
Certain American Depositary Receipts and European Depositary Receipts,
typically those denominated as unsponsored, require the holders thereof
to bear most of the costs of the facilities while issuers of sponsored
facilities normally pay more of the costs thereof. The depository of an
unsponsored facility frequently is under no obligation to distribute
shareholder communications received from the issuer of the deposited
securities or to pass through the voting rights to facility holders in
respect to the deposited securities, whereas the depository of a
sponsored facility typically distributes shareholder communications and
passes through voting rights.
PORTFOLIO TRANSACTIONS
Portfolio transactions in the over-the-counter market will be effected
with market makers or issuers, unless better overall price and execution
are available through a brokerage transaction. It is anticipated that
most portfolio transactions involving debt securities will be executed
on a principal basis. Also, with respect to the placement of portfolio
transactions with securities
<PAGE>
firms, subject to the overall policy to seek to place portfolio
transactions as efficiently as possible and at the best price, research
services and placement of orders by securities firms for a Fund's shares
may be taken into account as a factor in placing portfolio transactions
for the Fund.
PORTFOLIO TURNOVER
Although the Funds do not intend generally to trade for short-term
profits, they may dispose of a security without regard to the time it
has been held when such action appears advisable to the Adviser. The
portfolio turnover rate for a Fund may vary from year to year and may be
affected by cash requirements for redemptions of shares. High portfolio
turnover rates (100% or more) generally would result in higher
transaction costs and could result in additional tax consequences to a
Fund's shareholders.
INVESTMENT RESTRICTIONS
The fundamental and nonfundamental investment restrictions of the Funds
are set forth in full in the Statement of Additional Information. The
fundamental restrictions include the following:
* Neither of the Funds will borrow money, except from banks for
temporary or emergency purposes. The amount of such borrowing
may not exceed 10% of the borrowing Fund's total assets. Neither
of the Funds will borrow money for leverage purposes. 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. If a Fund engages in borrowing, its share
price may be subject to greater fluctuation, and the interest
expense associated with the borrowing may reduce the Fund's net
income.
* Neither of the Funds will mortgage, pledge or hypothecate its
assets, except in an amount not exceeding 15% of the value of
its total assets to secure temporary or emergency borrowing.
* Neither of the Funds will make short sales of securities.
* Neither of the Funds will purchase any securities on margin
except to obtain such short-term credits as may be necessary for
the clearance of transactions and other accounts.
A fundamental policy or restriction, including those stated above,
cannot be changed without an affirmative vote of the holders of a
"majority" of the outstanding shares of the applicable Fund, as defined
in the 1940 Act.
<PAGE>
As a nonfundamental policy, neither of the Funds will invest more than
15% of its net assets in all forms of illiquid investments. Section 4(2)
commercial paper and Rule 144A securities may be determined to be
"liquid" under guidelines adopted by the Board of Directors. 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.
INFORMATION CONCERNING COMPENSATION PAID TO FIRST TRUST NATIONAL
ASSOCIATION AND ITS AFFILIATES
First Trust National Association ("First Trust") and First Bank may act
as fiduciary with respect to plans subject to the Employee Retirement
Income Security Act of 1974 ("ERISA") and other accounts which invest in
the Funds. First Trust and First Bank are subsidiaries of U.S. Bancorp.
This section sets forth information concerning compensation that U.S.
Bancorp may receive from the Funds.
First Trust, as custodian for the assets of the Funds, receives the
custodian fees specified herein under the caption "Management --
Custodian." First Trust also may act as securities lending agent in
connection with the Funds' securities lending transactions and receive
as compensation the fees described under the caption "Special
Investment Methods -- Lending of Portfolio Securities."
First Bank acts as investment adviser to the Funds and receives the
advisory fees specified herein under the caption "Management --
Investment Adviser." First Bank also acts as sub-administrator to the
Funds and receives the sub-administration fees from the Administrator as
described under the caption "Management -- Administrator."
First Trust and its affiliates may receive shareholder servicing fees in
the amounts specified herein under the caption "Distributor."
<PAGE>
FIRST AMERICAN INVESTMENT FUNDS, INC.
Oaks, Pennsylvania 19456
INVESTMENT ADVISER
FIRST BANK NATIONAL ASSOCIATION
601 Second Avenue South
Minneapolis, Minnesota 55402
CUSTODIAN
FIRST TRUST NATIONAL ASSOCIATION
180 East Fifth Street
St. Paul, Minnesota 55101
DISTRIBUTOR
SEI INVESTMENTS DISTRIBUTION CO.
Oaks, Pennsylvania 19456
ADMINISTRATOR
SEI INVESTMENTS MANAGEMENT
CORPORATION
Oaks, Pennsylvania 19456
TRANSFER AGENT
DST SYSTEMS, INC.
1004 Baltimore
Kansas City, Missouri 64105
INDEPENDENT AUDITORS
KPMG PEAT MARWICK LLP
90 South Seventh Street
Minneapolis, Minnesota 55402
COUNSEL
DORSEY & WHITNEY LLP
220 South Sixth Street
Minneapolis, Minnesota 55402
FAIF-1002 (7/97)R
<PAGE>
FIRST AMERICAN INVESTMENT FUNDS, INC.
INSTITUTIONAL CLASS
SMALL CAP VALUE FUND
INTERNATIONAL INDEX FUND
PROSPECTUS
November 6, 1997
[LOGO] FIRST AMERICAN FUNDS
THE POWER OF DISCIPLINED INVESTING
<PAGE>
FIRST AMERICAN INVESTMENT FUNDS, INC.
Oaks, Pennsylvania 19456
INSTITUTIONAL CLASS PROSPECTUS
The shares described in this Prospectus represent interests in First
American Investment Funds, Inc., which consists of mutual funds with
several different investment portfolios and objectives. This Prospectus
relates to the Class C Shares of the following funds (the "Funds"):
* SMALL CAP VALUE FUND
* INTERNATIONAL INDEX FUND
Class C Shares of the Funds are offered through banks and certain other
institutions for the investment of their own funds and funds for which
they act in a fiduciary, agency or custodial capacity.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, INCLUDING FIRST BANK NATIONAL ASSOCIATION AND ANY
OF ITS AFFILIATES, NOR ARE THEY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. AN
INVESTMENT IN THE FUNDS INVOLVES INVESTMENT RISK, INCLUDING POSSIBLE
LOSS OF PRINCIPAL, DUE TO FLUCTUATIONS IN EACH FUND'S NET ASSET VALUE.
This Prospectus concisely sets forth information about the Funds that a
prospective investor should know before investing. It should be read and
retained for future reference.
A Statement of Additional Information dated November 6, 1997 for the
Funds has been filed with the Securities and Exchange Commission ("SEC")
and is incorporated in its entirety by reference in this Prospectus. To
obtain copies of the Statement of Additional Information at no charge,
or to obtain other information or make inquiries about the Funds, call
(800) 637-2548 or write SEI Investments Distribution Co., Oaks,
Pennsylvania 19456. The SEC maintains a World Wide Web site that
contains reports and information regarding issuers that file
electronically with the SEC. The address of such site is
"http://www.sec.gov."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is November 6, 1997.
<PAGE>
TABLE OF CONTENTS
PAGE
----
SUMMARY .................................... 4
FEES AND EXPENSES .......................... 6
Class C Share Fees and Expenses ........ 6
Information Concerning Fees and
Expenses ............................. 7
THE FUNDS .................................. 8
INVESTMENT OBJECTIVES AND POLICIES ......... 8
Small Cap Value Fund ................... 9
International Index Fund ............... 10
Risks to Consider ...................... 11
MANAGEMENT ................................. 12
Investment Adviser ..................... 12
Portfolio Managers ..................... 13
Custodian .............................. 14
Administrator .......................... 15
Transfer Agent ......................... 15
DISTRIBUTOR ................................ 15
PURCHASES AND REDEMPTIONS OF SHARES ........ 16
Share Purchases and Redemptions ........ 16
What Shares Cost ....................... 16
Foreign Securities ..................... 17
Exchanging Securities for Fund
Shares ............................... 18
Certificates and Confirmations ......... 18
Dividends and Distributions ............ 18
Exchange Privilege ..................... 19
INCOME TAXES ............................... 19
Federal Income Taxation ................ 19
FUND SHARES ................................ 21
CALCULATION OF PERFORMANCE DATA ............ 21
SPECIAL INVESTMENT METHODS ................. 23
Repurchase Agreements .................. 23
When-Issued and Delayed-
Delivery Transactions ................ 23
Lending of Portfolio Securities ........ 24
Options Transactions ................... 24
Cash Items ............................. 25
Futures and Options on Futures ......... 26
Fixed Income Securities ................ 27
Foreign Securities ..................... 27
Portfolio Transactions ................. 29
Portfolio Turnover ..................... 29
Investment Restrictions ................ 29
Information Concerning
Compensation Paid to First Trust
National Association and its
Affiliates ........................... 30
<PAGE>
SUMMARY
First American Investment Funds, Inc. ("FAIF") is an open-end investment
company which offers shares in several different mutual funds. This
Prospectus provides information with respect to the Class C Shares of
the following funds (the "Funds"):
SMALL CAP VALUE FUND has an objective of capital appreciation. Under
normal market conditions, the Fund invests at least 65% of its total
assets in equity securities of small-capitalization companies (those
with market capitalizations of less than $1 billion at the time of
purchase). In selecting equity securities, the Fund's adviser utilizes a
value-based selection discipline, investing in equity securities it
believes are undervalued relative to other securities at the time of
purchase.
INTERNATIONAL INDEX FUND has an objective of providing investment
results that correspond to the performance of the Morgan Stanley Europe,
Australia, Far East Composite Index (the "EAFE Index"). The Fund invests
primarily (at least 65% of total assets) in common stocks included in
the EAFE Index. The Fund's adviser believes that its objective can be
best achieved by investing in common stocks of approximately 50% to 100%
of the issues included in the EAFE Index, depending on the size of the
Fund.
INVESTMENT ADVISER First Bank National Association (the "Adviser") (also
known as U.S. Bank National Association) serves as investment adviser to
each of the Funds. See "Management."
DISTRIBUTOR; ADMINISTRATOR SEI Investments Distribution Co. (the
"Distributor") serves as the distributor of the Funds' shares. SEI
Investments Management Corporation (the "Administrator") serves as the
administrator of the Funds. See "Management" and "Distributor."
ELIGIBLE INVESTORS; OFFERING PRICES Class C Shares are offered through
banks and certain other institutions for the investment of their own
funds and funds for which they act in a fiduciary, agency or custodial
capacity. Class C Shares are sold at net asset value without any
front-end or deferred sales charges. See "Purchases and Redemptions of
Shares."
EXCHANGES Class C Shares of any Fund may be exchanged for Class C
Shares of other funds in the First American family at the shares'
respective net asset values with no additional charge. See "Purchases
and Redemptions of Shares -- Exchange Privilege."
REDEMPTIONS Shares of each Fund may be redeemed at any time at their
net asset value next determined after receipt of a redemption request
by the Funds' transfer agent, with no additional charge. See "Purchases
and Redemptions of Shares."
<PAGE>
RISKS TO CONSIDER Each of the Funds is subject to the risk of generally
adverse equity markets. Investors also should recognize that market
prices of equity securities generally, and of particular companies'
equity securities, frequently are subject to greater volatility than
prices of fixed income securities.
Because Small Cap Value Fund is actively managed, its performance will
reflect in part the ability of the Adviser to select securities which
are suited to achieving its investment objectives. Due to its active
management, this Fund could underperform other mutual funds with similar
investment objectives or the market generally.
In addition, (i) Small Cap Value Fund is subject to risks associated
with investing in small-capitalization companies; (ii) International
Index Fund is subject to risks associated with investing in foreign
securities and to currency risks; (iii) the Small Cap Value Fund may
invest a specified portion of its assets in securities of foreign
issuers which are listed on a United States stock exchange or
represented by American Depositary Receipts; (iv) the Funds may invest
(but not for speculative purposes) in options on stock indices; and (v)
International Index Fund may invest (but not for speculative purposes)
in stock index futures contracts, options on stock index futures, and/or
index participation contracts based on the EAFE Index. See "Investment
Objectives and Policies -- Risks to Consider" and "Special Investment
Methods."
SHAREHOLDER INQUIRIES Any questions or communications regarding the
Funds or a shareholder account should be directed to the Distributor by
calling (800) 637-2548, or to the financial institution which holds
shares on an investor's behalf.
<PAGE>
FEES AND EXPENSES
CLASS C SHARE FEES AND EXPENSES
SMALL CAP INTERNATIONAL
VALUE INDEX
FUND FUND
SHAREHOLDER TRANSACTION EXPENSES
Maximum sales load imposed on
purchases None None
Maximum sales load imposed on
reinvested dividends None None
Deferred sales load None None
Redemption fees None None
Exchange fees None None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
Investment advisory fees
(after voluntary fee waivers)(1) 0.70% 0.46%
Rule 12b-1 fees None None
Other expenses
(after reimbursements)(1) 0.20% 0.29%
Total fund operating expenses
(after voluntary fee waivers and
reimbursements)(1) 0.90% 0.75%
EXAMPLE(2)
You would pay the following expenses on a $1,000 investment, assuming (i) a
5% annual return and (ii) redemption at the end of each time period:
1 year $9 $8
3 years $29 $24
(1) The Adviser intends to waive a portion of its fees and/or reimburse expenses
on a voluntary basis, and the amounts shown reflect these waivers and
reimbursements as of the date of this Prospectus. The Adviser intends to
maintain such waivers and reimbursements in effect through September 30,
1998. Absent any fee waivers or reimbursements, investment advisory fees for
each Fund as an annualized percentage of average daily net assets would be
0.70%; and total fund operating expenses calculated on such basis would be
0.90% for Small Cap Value Fund and 0.99% for International Index Fund.
"Other expenses" includes an administration fee and is based on estimated
amounts for the current fiscal year.
(2) Absent the fee waivers and reimbursements referred to in (1) above, the
dollar amounts for the 1 and 3-year periods would be as follows: Small Cap
Value Fund, $9 and $29, and International Index Fund, $10 and $32.
<PAGE>
INFORMATION CONCERNING FEES AND EXPENSES
The purpose of the preceding tables is to assist the investor in
understanding the various costs and expenses that an investor in a Fund
may bear directly or indirectly. THE EXAMPLES CONTAINED IN THE TABLES
SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES.
ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The information
set forth in the foregoing tables and examples relates only to the Class
C Shares of the Funds. The Funds also expect to offer Class A and Class
B Shares which are subject to the same expenses and, in addition, to a
front-end or contingent deferred sales load and certain shareholder
servicing expenses.
The examples in the above tables are based on annual Fund operating
expenses after voluntary fee waivers and expense reimbursements by the
Adviser. The Adviser intends to maintain such waivers in effect through
September 30, 1998. Prior to fee waivers, investment advisory fees
accrue at the annual rate as a percentage of average daily net assets of
0.70% for each of the Funds. "Other expenses" in the tables are based on
estimates.
Other expenses include fees paid by each Fund to the Administrator for
providing various services necessary to operate the Funds. These include
shareholder servicing and certain accounting and other services. The
Administrator provides these services for a fee calculated at an annual
rate of 0.12% of average daily net assets of each Fund subject to a
minimum of $50,000 per Fund per fiscal year; provided, that to the
extent that the aggregate net assets of all First American funds exceed
$8 billion, the percentage stated above is reduced to 0.105%. Other
expenses of the Funds also includes the cost of maintaining shareholder
records, furnishing shareholder statements and reports, and other
services. Investment advisory fees, administrative fees and other
expenses are reflected in the Funds' daily dividends and are not charged
to individual shareholder accounts.
<PAGE>
THE FUNDS
FAIF is an open-end management investment company which offers shares in
several different mutual funds (collectively, the "FAIF Funds"), each of
which evidences an interest in a separate and distinct investment
portfolio. Shareholders may purchase shares in each FAIF Fund through
several separate classes which provide for variations in distribution
costs, shareholder servicing fees, voting rights and dividends. Except
for these differences among classes, each share of each FAIF Fund
represents an undivided proportionate interest in that fund. FAIF is
incorporated under the laws of the State of Maryland, and its principal
offices are located at Oaks, Pennsylvania 19456.
This Prospectus relates only to the Class C Shares of the Funds named on
the cover hereof. Information regarding the Class A and Class B Shares
of these Funds and regarding the Class A, Class B and Class C Shares of
the other FAIF Funds is contained in separate prospectuses that may be
obtained from FAIF's Distributor, SEI Investments Distribution Co.,
Oaks, Pennsylvania, 19456, or by calling (800) 637-2548. The Board of
Directors of FAIF may authorize additional series or classes of common
stock in the future.
INVESTMENT OBJECTIVES AND POLICIES
This section describes the investment objectives and policies of the
Funds. There is no assurance that any of these objectives will be
achieved. The Funds' investment objectives are not fundamental and
therefore may be changed without a vote of shareholders. Such changes
could result in a Fund having investment objectives different from those
which shareholders considered appropriate at the time of their
investment in a Fund. Shareholders will receive written notification at
least 30 days prior to any change in a Fund's investment objectives.
Each of the Funds is a diversified investment company, as defined in the
Investment Company Act of 1940 (the "1940 Act").
If a percentage limitation on investments by a Fund stated below or in
the Statement of Additional Information is adhered to at the time of an
investment, a later increase or decrease in percentage resulting from
changes in asset values will not be deemed to violate the limitation
except in the case of the limitation on illiquid investments. Similarly,
if a Fund is required or permitted to invest a stated percentage of its
assets in companies with no more or no less than a stated market
capitalization, deviations from the stated percentages which result from
changes in companies' market capitalizations after the Fund purchases
its shares will not be deemed to violate the limitation. A Fund which is
limited to investing in securities with specified
<PAGE>
ratings is not required to sell a security if its rating is reduced or
discontinued after purchase, but the Fund may consider doing so.
However, in no event will more than 5% of either any Fund's net assets
be invested in non-investment grade securities. Descriptions of the
rating categories of Standard & Poor's Corporation ("Standard & Poor's")
and Moody's Investors Service, Inc. ("Moody's") are contained in the
Statement of Additional Information.
When the term "equity securities" is used in this Prospectus, it refers
to common stock and securities which are convertible into or
exchangeable for, or which carry warrants or other rights to acquire,
common stock.
This section also contains information concerning certain investment
risks borne by Fund shareholders under the heading "-- Risks to
Consider." Further information concerning the securities in which the
Funds may invest and related matters is set forth under "Special
Investment Methods."
SMALL CAP VALUE FUND
OBJECTIVES. Small Cap Value Fund has an objective of capital
appreciation.
INVESTMENT POLICIES. Under normal market conditions, Small Cap Value
Fund invests at least 65% of its total assets in equity securities of
small-capitalization companies. For these purposes, small-capitalization
companies are deemed those with market capitalizations of less than $1
billion at the time of purchase. In selecting equity securities, the
Adviser utilizes a value-based selection discipline, investing in equity
securities it believes are undervalued relative to other securities at
the time of purchase. In assessing relative value, the Adviser will
consider such factors as ratios of market price to book value, market
price to earnings, and market price to assets, estimated earnings growth
rate, cash flow, and liquidation value.
The Fund also may invest up to 35% of its total assets in the aggregate
in equity securities of issuers with a market capitalization of $1
billion or more and in fixed income securities of the kinds described
under "Special Investment Methods -- Foreign Securities."
Subject to the limitations stated above, the Fund may invest up to 25%
of its total assets in securities of foreign issuers which are either
listed on a United States stock exchange or represented by American
Depositary Receipts. For information about these kinds of investments
and certain associated risks, see "Special Investment Methods -- Foreign
Securities."
In addition, the Fund may (i) enter into repurchase agreements; (ii) in
order to attempt to reduce risk, purchase put and call options on equity
securities and on stock indices; (iii) write covered call options
covering up to 25% of the equity securities owned by the Fund; (iv)
purchase securities on a when-issued or delayed-delivery basis; and (v)
engage in the lending of
<PAGE>
portfolio securities. For information about these investment methods,
restrictions on their use, and certain associated risks, see the
related headings under "Special Investment Methods."
For temporary defensive purposes during times of unusual market
conditions, the Fund may without limitation hold cash or invest in cash
items of the kinds described under "Special Investment Methods -- Cash
Items." The Fund also may invest not more than 35% of its total assets
in cash and cash items in order to utilize assets awaiting normal
investment.
INTERNATIONAL INDEX FUND
OBJECTIVE. International Index Fund has an objective of providing
investment results that correspond to the performance of the Morgan
Stanley Europe, Australia, Far East Composite Index (the "EAFE Index").
INVESTMENT POLICIES. International Index Fund invests primarily (at
least 65% of total assets) in common stocks included in the EAFE Index.
The EAFE Index includes approximately 1,077 companies representing the
stock markets of approximately 14 European countries, Australia, New
Zealand, Japan, Hong Kong and Singapore/Malaysia. The Adviser believes
that the Fund's objective can best be achieved by investing in the
common stocks of approximately 50% to 100% of the issues included in the
EAFE Index, depending on the size of the Fund. Normally, International
Index Fund will invest at least 65% of its total assets in securities
traded in at least three foreign countries.
Morgan Stanley designates the stocks included in the EAFE Index. A
particular stock's weighting in the EAFE Index is based on its total
market value (that is, its market price per share times the number of
shares outstanding) relative to that of all stocks included in the EAFE
Index. From time to time, Morgan Stanley may add or delete stocks to or
from the EAFE Index. Inclusion of a particular stock in the EAFE Index
does not imply any opinion by Morgan Stanley as to its merits as an
investment, nor is Morgan Stanley a sponsor of or in any way affiliated
with the Fund.
The Fund is managed by utilizing a computer program that identifies
which stocks should be purchased or sold in order to replicate, as
closely as possible, the composition of the EAFE Index. The Fund
includes a stock in its investment portfolio in the order of the stock's
weighting in the EAFE Index, starting with the most heavily weighted
stock. Thus, the proportion of Fund assets invested in an industry or
country closely approximates the percentage of the EAFE Index
represented by that industry or country. Portfolio turnover is expected
to be well below that of actively managed mutual funds.
Unlike the EAFE Index, the Fund's performance will reflect sales charges
(if any), commissions, and other expenses. For this reason, and because
the Fund may not always hold all of the stocks included in the EAFE
Index, the Fund will not duplicate the EAFE Index performance precisely.
However, there will be a close correlation between the Fund's
performance and that of the EAFE Index in both rising and falling
markets. The Fund will attempt to achieve a correlation between the
performance of its
<PAGE>
portfolio and that of the EAFE Index of at least 95%, without taking
into account expenses of the Fund. A perfect correlation would be
indicated by a figure of 100%, which would be achieved if the Fund's net
asset value, including the value of its dividends and capital gains
distributions, increased or decreased in exact proportion to changes in
the EAFE Index. The Fund's ability to replicate the performance of the
EAFE Index may be affected by, among other things, changes in securities
markets, the manner in which Morgan Stanley calculates the EAFE Index,
administrative and other expenses incurred by the Fund, taxes (including
foreign withholding taxes, which will affect the Fund) and the amount
and timing of cash flows into and out of the Fund. Although cash flows
into and out of the Fund will affect the Fund's portfolio turnover rate
and its ability to replicate the EAFE Index's performance, investment
adjustments will be made, as practicably as possible, to account for
these circumstances. In the event the Fund is unable to achieve this
correlation over time, the Board of Directors of the Fund will consider
alternative strategies for the Fund.
The Fund also may invest up to 20% of its total assets in the aggregate
in stock index futures contracts, options on stock indices, options on
stock index futures and index participation contracts based on the EAFE
Index. The Fund will not invest in these types of contracts and options
for speculative purposes, but rather to maintain sufficient liquidity to
meet redemption requests; to increase the level of Fund assets devoted
to replicating the composition of the EAFE Index; and to reduce
transaction costs. These types of contracts and options and certain
associated risks are described under "Special Investment Methods --
Options Transactions." In addition, the Fund may enter into repurchase
agreements and engage in securities lending as described under "Special
Investment Methods -- Repurchase Agreements" and "Special Investment
Methods -- Lending of Portfolio Securities."
In order to maintain liquidity during times of unusual market
conditions, the Fund also may invest up to 100% of the value of its
total assets temporarily in cash and cash items of the kinds described
under "Special Investment Methods -- Cash Items."
RISKS TO CONSIDER
An investment in Small Cap Value Fund and International Index Fund
involves certain risks. these include the following:
EQUITY SECURITIES GENERALLY. Market prices of equity securities
generally, and of particular companies' equity securities, frequently
are subject to greater volatility than prices of fixed income
securities. Market prices of equity securities as a group have dropped
dramatically in a short period of time on several occasions in the past,
and they may do so again in the future. Each of the Funds is subject to
the risk of generally adverse equity markets.
SMALL-CAPITALIZATION COMPANIES. Small Cap Value Fund emphasizes
investments in companies with small market capitalizations. The equity
securities of such companies frequently have experienced greater price
<PAGE>
volatility in the past than those of larger-capitalization companies,
and they may be expected to do so in the future. To the extent that
Small Cap Value Fund invests in small-capitalization companies, they are
subject to this risk of greater volatility.
ACTIVE MANAGEMENT. Small Cap Value Fund is actively managed by the
Adviser. The performance of this Fund therefore will reflect in part the
ability of the Adviser to select securities which are suited to
achieving the Fund's investment objective. Due to its active management,
this Fund could underperform other mutual funds with similar investment
objectives or the market generally.
FOREIGN SECURITIES. International Index Fund is subject to special risks
associated with investing in foreign securities and to declines in net
asset value resulting from changes in exchange rates between the United
States dollar and foreign currencies. These risks are discussed under
"Special Investment Methods -- Foreign Securities" elsewhere herein.
Because of the special risks associated with foreign investing the Fund
may be subject to greater volatility than most mutual funds which invest
principally in domestic securities.
OTHER. Investors also should review "Special Investment Methods" for
information concerning risks associated with certain investment
techniques which may be utilized by the Funds.
MANAGEMENT
The Board of Directors of FAIF has the primary responsibility for
overseeing the overall management and electing the officers of FAIF.
Subject to the overall direction and supervision of the Board of
Directors, the Adviser acts as investment adviser for and manages the
investment portfolios of FAIF.
INVESTMENT ADVISER
First Bank National Association ("First Bank") (also known as U.S. Bank
National Association), 601 Second Avenue South, Minneapolis, Minnesota
55480, acts as the Funds' investment adviser through its First Asset
Management group. The Adviser has acted as an investment adviser to FAIF
since its inception in 1987 and has acted as investment adviser to First
American Funds, Inc. since 1982 and to First American Strategy Funds,
Inc. since 1996. As of December 31, 1996, the Adviser was managing
accounts with an aggregate value of approximately $35 billion, including
mutual fund assets in excess of $12 billion. U.S. Bancorp, 601 Second
Avenue South, Minneapolis, Minnesota 55480, is the holding company for
the Adviser.
<PAGE>
Small Cap Value Fund and International Index Fund has each agreed to pay
the Adviser monthly fees calculated on an annual basis equal to 0.70% of
its respective average daily net assets. The Adviser may, at its option,
waive any or all of its fees, or reimburse expenses, with respect to
either Fund from time to time. Any such waiver or reimbursement is
voluntary and may be discontinued at any time. The Adviser 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.
The Glass-Steagall Act generally prohibits banks from engaging in the
business of underwriting, selling or distributing securities and from
being affiliated with companies principally engaged in those activities.
In addition, administrative and judicial interpretations of the
Glass-Steagall Act prohibit bank holding companies and their bank and
nonbank subsidiaries from organizing, sponsoring or controlling
registered open-end investment companies that are continuously engaged
in distributing their shares. Bank holding companies and their bank and
nonbank subsidiaries may serve, however, as investment advisers to
registered investment companies, subject to a number of terms and
conditions.
Although the scope of the prohibitions and limitations imposed by the
Glass-Steagall Act has not been fully defined by the courts or the
appropriate regulatory agencies, the Funds have received an opinion from
their counsel that the Adviser is not prohibited from performing the
investment advisory services described above. In the event of changes in
federal or state statutes or regulations or judicial and administrative
interpretations or decisions pertaining to permissible activities of
bank holding companies and their bank and nonbank subsidiaries, the
Adviser might be prohibited from continuing these arrangements. In that
event, it is expected that the Board of Directors would make other
arrangements and that shareholders would not suffer adverse financial
consequences.
PORTFOLIO MANAGERS
Small Cap Value Fund is managed by a committee composed of Albin S.
Dubiak, Gerald C. Bren, Douglas K. Rose, Anthony W. Hipple, and Robert
L. Buss.
ALBIN S. DUBIAK began his investment career as a security trader with
First National Bank of Chicago in 1963 before joining the Adviser as an
investment analyst in 1969. Mr. Dubiak received his bachelor's degree
from Indiana University and his master's degree in business
administration from the University of Arizona. Mr. Dubiak also is
portfolio co-manager for several other First American equity funds and
is a member of the committees which manage several other First American
equity funds.
<PAGE>
GERALD C. BREN is a member of the committee which manages three of the
Funds, as set forth above, and he is portfolio co-manager for Emerging
Growth Fund and Health Sciences Fund. Gerald joined the Adviser in 1972
as an investment analyst. He received his master's degree in business
administration from the University of Chicago in 1972 and his Chartered
Financial Analyst certification in 1977.
ROBERT L. BUSS joined the Adviser in 1989 designing and building the
technology infrastructure used in investment analysis, trading and
portfolio management. In 1996, Mr. Buss began analytical work in the
equity research area covering electric equipment, machinery and
diversified manufacturing. He holds a bachelor's degree in Economics
from the University of Minnesota. Mr. Buss is currently a Chartered
Financial Analyst candidate and is nearing the completion of his
master's degree in business administration from the University of St.
Thomas.
ANTHONY W. HIPPLE is an equity analyst for the Adviser, focusing on
industrials, utilities, retail, energy and telecommunications. He joined
the firm in 1996 and has 4 years of investment industry experience.
Prior to joining the Adviser, Mr. Hipple was with the Private Banking
and Trust group of First Bank. He holds a bachelor's degree from the
University of Northern Iowa and a master's degree in business
administration from the University of Iowa.
DOUGLAS K. ROSE is an equity analyst for the Adviser. He joined the firm
in 1991 and has 10 years of industry experience. Mr. Rose covers the
business services, environmental services, leisure and
restaurant/lodging industries. He holds a bachelor's degree from the
University of Nebraska, a master's degree in business administration
from the University of Minnesota and is a member of the Twin Cities
Society of Security Analysts.
International Index Fund is co-managed by James S. Rovner and Evan
Lundquist.
JAMES S. ROVNER joined the Adviser in 1986 and has managed assets for
institutional and individual clients for over 15 years. Mr. Rovner
received his bachelor's degree and his master's degree in business
administration from the University of Wisconsin and is a Chartered
Financial Analyst.
EVAN LUNDQUIST joined the Adviser in 1993 and received his bachelor's
degree from St. Mary's College.
CUSTODIAN
The custodian of the Funds' assets is First Trust National Association
(The "Custodian"), First Trust Center, 180 East Fifth Street, St. Paul,
Minnesota 55101. The Custodian is a subsidiary of U.S. Bancorp, which
also controls the Adviser.
As compensation for its services to the Funds, the Custodian receives
monthly fees calculated on an annual basis equal to, for Small Cap Value
Fund, 0.03% of Small Cap Value Fund's average daily net assets, and for
International Index Fund, 0.10% of International Index Fund's average
daily net assets. In addition, the Custodian is reimbursed by the Funds
for its out-of-pocket expenses incurred while providing its services to
the Funds. Rules adopted under the 1940 Act permit International Index
Fund to maintain its securities and cash in the custody of certain
eligible foreign banks and depositories. International Index Fund's
portfolio of non-United States securities are held by sub-custodians
which are approved by the directors of FAIF or a foreign custody manager
appointed by the Board of Directors in accordance with these rules. This
determination is made pursuant to these rules following a consideration
of a number of factors including but not limited to, the reliability and
financial stability of the institution; the ability of the institution
to perform custodian services for International Index Fund; the
reputation of the institution in its national market; the political and
economic stability of
<PAGE>
the country in which the institution is located; and the risks of
potential nationalization or expropriation of International Index Fund's
assets. Sub-custodian fees with respect to International Index Fund are
paid by the Custodian out of the custodian's fees.
ADMINISTRATOR
The administrator for the Funds is SEI Investments Management
Corporation, Oaks, Pennsylvania 19456. The Administrator, a wholly-owned
subsidiary of SEI Investments Company, provides the Funds with certain
administrative services necessary to operate the Funds. These services
include shareholder servicing and certain accounting and other services.
The Administrator provides these services for a fee calculated at an
annual rate of 0.12% of each Fund's average daily net assets, subject to
a minimum administrative fee during each fiscal year of $50,000 per
Fund; provided, that to the extent that the aggregate net assets of all
First American funds exceed $8 billion, the percentage stated above is
reduced to 0.105%. From time to time, the Administrator may voluntarily
waive its fees or reimburse expenses with respect to any of the Funds.
Any such waivers or reimbursements may be made at the Administrator's
discretion and may be terminated at any time. The Funds have approved
the appointment of First Bank as a sub-administrator (the
"Sub-Administrator"), effective January 1, 1998. It is contemplated that
the Sub-Administrator will assist SEI in the performance of
administrative services for the Funds. The Sub-Administration Agreement
provides that SEI will compensate the Sub-Administrator at an annual
rate of up to 0.05% of each Fund's average daily net assets.
TRANSFER AGENT
DST Systems, Inc. (The "Transfer Agent") serves as the transfer agent
and dividend disbursing agent for the Funds. The address of the Transfer
Agent is 1004 Baltimore, Kansas City, Missouri 64105. The Transfer Agent
is not affiliated with the Distributor, the Administrator or the
Adviser.
DISTRIBUTOR
SEI Investments Distribution Co. is the principal distributor for shares
of the Funds and of the other FAIF Funds. The Distributor is a
Pennsylvania corporation and is the principal distributor for a number
of investment companies. The Distributor is a wholly-owned subsidiary of
SEI Investments Company and is located at Oaks, Pennsylvania, 19456. The
Distributor is not affiliated with the Adviser, U.S. Bancorp, the
Custodian or their respective affiliates.
The Distributor, the Administrator and the Adviser may in their
discretion use their own assets to pay for certain costs of distributing
Fund shares. They also may discontinue any payment of such costs at any
time. In addition, the Distributor and the Adviser and its affiliates
may provide compensation from their own resources for shareholder
services provided by third parties, including "one-stop" mutual fund
networks through which the Funds are made available.
<PAGE>
PURCHASES AND REDEMPTIONS OF SHARES
SHARE PURCHASES AND REDEMPTIONS
Shares of the Funds are sold and redeemed on days on which the New York
Stock Exchange is open for business ("Business Days").
Payment for shares can be made only by wire transfer. Wire transfers of
federal funds for share purchases should be sent to U.S. Bank National
Association, Minneapolis, Minnesota, ABA Number 091000022; For Credit
to: DST Systems: Account Number 160234580266; For Further Credit To:
(Investor Name and Fund Name). Shares cannot be purchased by Federal
Reserve wire on days on which the New York Stock Exchange is closed and
on Federal holidays upon which wire transfers are restricted. Purchase
orders will be effective and eligible to receive dividends declared the
same day if the Transfer Agent receives an order before 3:00 p.m.
Central time and the Custodian receives Federal funds before the close
of business that day. Otherwise, the purchase order will be effective
the next Business Day. The net asset value per share is calculated as of
3:00 p.m. Central time each Business Day. The Funds reserve the right to
reject a purchase order.
The Funds are required to redeem for cash all full and fractional shares
of the Funds. Redemption orders may be made any time before 3:00 p.m.
Central time in order to receive that day's redemption price. For
redemption orders received before 3:00 p.m. Central time, payment will
ordinarily be made the next business day by transfer of Federal funds,
but payment may be made up to 7 days later.
WHAT SHARES COST
Class C Shares of the Funds are sold and redeemed at net asset value.
the net asset value per share is determined as of the earlier of the
close of the New York Stock Exchange or 3:00 p.m. Central time on each
day the New York Stock Exchange is open for business, provided that net
asset value need not be determined on days when no Fund shares are
tendered for redemption and no order for that Fund's shares is received
and on days on which changes in the value of portfolio securities will
not materially affect the current net asset value of the Fund's shares.
The price per share for purchases or redemptions is such value next
computed after the Transfer Agent receives the purchase order or
redemption request. In the case of redemptions and repurchases of shares
owned by corporations, trusts or estates, the Transfer Agent may require
additional documents to evidence appropriate authority in order to
effect the redemption, and the applicable price will be that next
determined following the receipt of the required documentation.
<PAGE>
DETERMINING NET ASSET VALUE. The net asset value per share for each of
the Funds is determined by dividing the value of the securities owned by
the Fund plus any cash and other assets (including interest accrued and
dividends declared but not collected), less all liabilities, by the
number of Fund shares outstanding. For the purpose of determining the
aggregate net assets of the Funds, cash and receivables will be valued
at their face amounts. Interest will be recorded as accrued and
dividends will be recorded on the ex-dividend date. Investments in
equity securities which are traded on a national securities exchange (or
reported on the NASDAQ national market system) are stated at the last
quoted sales price if readily available for such equity securities on
each business day; other equity securities traded in the
over-the-counter market and listed equity securities for which no sale
was reported on that date are stated at the last quoted bid price. Debt
obligations exceeding 60 days to maturity which are actively traded are
valued by an independent pricing service at the most recently quoted bid
price. Debt obligations with 60 days or less remaining until maturity
may be valued at their amortized cost. Foreign securities are valued
based upon quotation from the primary market in which they are traded.
When market quotations are not readily available, securities are valued
at fair value as determined in good faith by procedures established and
approved by the Board of Directors.
Portfolio securities underlying actively traded options are valued at
their market price as determined above. The current market value of any
exchange traded option held or written by a Fund is its last sales price
on the exchange prior to the time when assets are valued, unless the bid
price is higher or the asked price is lower, in which event the bid or
asked price is used. In the absence of any sales that day, options will
be valued at the current closing bid price.
Although the methodology and procedures for determining net asset value
are identical for all classes of shares, the net asset value per share
of different classes of shares of the same Fund may differ because of
the distribution and/or shareholder servicing expenses charged to Class
A and Class B Shares.
FOREIGN SECURITIES
Any assets or liabilities of International Index Fund initially
expressed in terms of foreign currencies are translated into United
States dollars using current exchange rates. Trading in securities on
foreign markets may be completed before the close of business on each
business day of International Index Fund. Thus, the calculation of the
Fund's net asset value may not take place contemporaneously with the
determination of the prices of foreign securities held in the Fund's
portfolios. If events materially affecting the value of foreign
securities occur between the time when their price is determined and the
time when the Fund's net asset value is calculated, such securities will
be valued at fair value as determined in good faith by or under the
direction of the Board
<PAGE>
of Directors. In addition, trading in securities on foreign markets may
not take place on all days on which the New York Stock Exchange (the
"Exchange") is open for business or may take place on days on which the
Exchange is not open for business. Therefore, the net asset value of
International Index Fund might be significantly affected on days when an
investor has no access to the Fund.
EXCHANGING SECURITIES FOR FUND SHARES
A Fund may accept securities in exchange for Fund shares. A Fund will
allow such exchanges only upon the prior approval by the Fund and a
determination by the Fund and the Adviser that the securities to be
exchanged are acceptable. Securities accepted by a Fund will be valued
in the same manner that a Fund values its assets. The basis of the
exchange will depend upon the net asset value of Fund shares on the day
the securities are valued.
CERTIFICATES AND CONFIRMATIONS
The Transfer Agent maintains a share account for each shareholder.
Share certificates will not be issued by the Funds.
Confirmations of each purchase and redemption are sent to each
shareholder. In addition, monthly confirmations are sent to report all
transactions and dividends paid during that month for the Funds.
DIVIDENDS AND DISTRIBUTIONS
Dividends are declared and paid quarterly to all shareholders of record
on the record date. Distributions of any net realized long-term capital
gains will be made at least once every 12 months. Dividends and
distributions are automatically reinvested in additional shares of the
Fund paying the dividend on payment dates at the ex-dividend date net
asset value without a sales charge, unless shareholders request cash
payments on the new account form or by writing to the Fund.
All shareholders on the record date are entitled to the dividend. If
shares are purchased before a record date for a dividend or a
distribution of capital gains, a shareholder will pay the full price for
the shares and will receive some portion of the purchase price back as a
taxable dividend or distribution (to the extent, if any, that the
dividend or distribution is otherwise taxable to holders of Fund
shares). If shares are redeemed or exchanged before the record date for
a dividend or distribution or are purchased after the record date, those
shares are not entitled to the dividend or distribution.
<PAGE>
The amount of dividends payable on Class C Shares generally will be more
than the dividends payable on Class A or Class B Shares because of the
distribution and/or shareholder servicing expenses charged to Class A
and Class B Shares.
EXCHANGE PRIVILEGE
Shareholders may exchange Class C Shares of a Fund for currently
available Class C Shares of the other FAIF Funds or of other funds in
the First American family at net asset value. Exchanges of shares among
the First American family of funds must meet any applicable minimum
investment of the fund for which shares are being exchanged.
The ability to exchange shares of the Funds does not constitute an
offering or recommendation of shares of one fund by another fund. This
privilege is available to shareholders resident in any state in which
the fund shares being acquired may be sold. An investor who is
considering acquiring shares in another First American fund pursuant to
the exchange privilege should obtain and carefully read a prospectus of
the fund to be acquired. Exchanges may be accomplished by a written
request, or by telephone if a preauthorized exchange authorization is on
file with the Transfer Agent, shareholder servicing agent, or financial
institution. Neither the Transfer Agent nor any Fund will be responsible
for the authenticity of exchange instructions received by telephone if
it reasonably believes those instructions to be genuine. The Funds and
the Transfer Agent will each employ reasonable procedures to confirm
that telephone instructions are genuine, and they may be liable for
losses resulting from unauthorized or fraudulent telephone instructions
if they do not employ these procedures. These procedures may include
taping of telephone conversations.
Shares of a class in which an investor is no longer eligible to
participate may be exchanged for shares of a class in which that
investor is eligible to participate. An example of this kind of exchange
would be a situation in which Class C Shares of a Fund held by a
financial institution in a trust or agency capacity for one or more
individual beneficiaries are exchanged for Class A Shares of that Fund
and distributed to the individual beneficiaries.
INCOME TAXES
FEDERAL INCOME TAXATION
Each Fund is treated as a different entity for federal income tax
purposes. Each of the Funds intends to qualify as a regulated investment
company under the Internal Revenue Code of 1986, as amended (the
"Code"). If so qualified
<PAGE>
and provided certain distribution requirements are met, a Fund will not
be liable for federal income taxes to the extent it distributes its
income to its shareholders.
Distributions paid from the net investment income and from any net
realized short-term capital gains of each Fund will be taxable to
shareholders as ordinary income, whether received in cash or in
additional shares. Dividends paid by the Funds attributable to
investments in the securities of foreign issuers will not be eligible
for the 70% deduction for dividends received by corporations.
Distributions paid from a Fund's net capital gains and designated as
capital gain dividends are taxable as long-term capital gains in the
hands of shareholders, regardless of the length of time during which
they have held their shares. For individuals, the Taxpayer Relief Act of
1997 (the "1997 Act") has created new "mid-term capital gain" rates that
apply to the sale of capital assets held more than one year but not more
than 18 months. Although the 1997 Act has not expressly addressed this
issue, it is expected that IRS regulations issued pursuant to the Act
will provide that regulated investment companies such as the Funds must
notify shareholders who are individuals as to whether they must treat
capital gain dividends that they receive as mid-term or long-term
capital gains.
Gain or loss realized on the sale or exchange of shares in a Fund will
be treated as capital gain or loss, provided that (as is usually the
case) the shares represented a capital asset in the hands of the
shareholder. For shareholders who are individuals, the gain or loss will
be considered long-term if the shareholder has held the shares for more
than 18 months and mid-term if the shareholder has held the shares for
more than one year but not more than 18 months.
International Index Fund may be required to pay withholding and other
taxes imposed by foreign countries, generally at rates from 10% to 40%,
which would reduce the Fund's investment income. Tax conventions between
certain countries and the United States may reduce or eliminate such
taxes.
If at the end of International Index Fund's taxable year more than 50%
of its total assets consist of securities of foreign corporations, it
will be eligible to file an election with the Internal Revenue Service
pursuant to which shareholders of the Fund will be required to include
their respective pro rata portions of such foreign taxes in gross
income, treat such amounts as foreign taxes paid by them, and deduct
such amounts in computing their taxable income or, alternatively, use
them as foreign tax credits against their federal income taxes. If such
an election is filed for a year, International Index Fund shareholders
will be notified of the amounts which they may deduct as foreign taxes
paid or used as foreign tax credits.
Alternatively, if the amount of foreign taxes paid by International
Index Fund is not large enough in future years to warrant its making the
election described above, the Fund may claim the amount of foreign taxes
paid as a deduction against its own gross income. In that case,
shareholders would not be required to include any amount of foreign
taxes paid by the Fund in their income and would not be permitted either
to deduct any portion of foreign taxes from their own income or to claim
any amount of foreign tax credit for taxes paid by the Fund.
<PAGE>
This is a general summary of the federal tax laws applicable to the
Funds and their shareholders as of the date of this Prospectus. See the
Statement of Additional Information for further details.
FUND SHARES
Each share of a Fund is fully paid, nonassessable, and transferable.
Shares may be issued as either full or fractional shares. Fractional
shares have pro rata the same rights and privileges as full shares.
Shares of the Funds have no preemptive or conversion rights.
Each share of a Fund has one vote. On some issues, such as the election
of directors, all shares of all FAIF 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.
Under the laws of the State of Maryland and FAIF's Articles of
Incorporation, FAIF is not required to hold shareholder meetings unless
they (i) are required by the 1940 Act, or (ii) are requested in writing
by the holders of 25% or more of the outstanding shares of FAIF.
CALCULATION OF PERFORMANCE DATA
From time to time, any of the Funds may advertise information regarding
its performance. Each Fund may publish its "yield," its "cumulative
total return," its "average annual total return," and its "distribution
rate." Distribution rates may only be used in connection with sales
literature and shareholder communications preceded or accompanied by a
Prospectus. Each of these performance figures is based upon historical
results and is not intended to indicate future performance, and, except
for "distribution rate," is standardized in accordance with Securities
and Exchange Commission ("SEC") regulations.
"Yield" for the Funds is computed by dividing the net investment income
per share (as defined in applicable SEC regulations) earned during a
30-day period (which period will be stated in the advertisement) by the
maximum offering price per share on the last day of the period. Yield is
an annualized figure, in that it assumes that the same level of net
investment income is
<PAGE>
generated over a one year period. The yield formula annualizes net
investment income by providing for semi-annual compounding.
"Total return" is based on the overall dollar or percentage change in
value of a hypothetical investment in a Fund assuming reinvestment of
dividend distributions and deduction of all charges and expenses,
including the maximum sales charge imposed on Class A Shares or the
contingent deferred sales charge imposed on Class B Shares at the end of
the specified period covered by the total return figure. "Cumulative
total return" reflects a Fund's performance over a stated period of
time. "Average annual total return" reflects the hypothetical annually
compounded rate that would have produced the same cumulative total
return if performance had been constant over the entire period. Because
average annual returns tend to smooth out variations in a Fund's
performance, they are not the same as actual year-by-year results. As a
supplement to total return computations, a Fund may also publish "total
investment return" computations which do not assume deduction of the
maximum sales charge imposed on Class A Shares or the contingent
deferred sales charge imposed on Class B Shares.
"Distribution rate" is determined by dividing the income dividends per
share for a stated period by the maximum offering price per share on the
last day of the period. All distribution rates published for the Funds
are measures of the level of income dividends distributed during a
specified period. Thus, these rates differ from yield (which measures
income actually earned by a Fund) and total return (which measures
actual income, plus realized and unrealized gains or losses of a Fund's
investments). Consequently, distribution rates alone should not be
considered complete measures of performance.
The performance of the Class C Shares of a Fund will normally be higher
than for the Class A and Class B Shares because Class C Shares are not
subject to the sales charges and distribution and/or shareholder
servicing expenses applicable to Class A and Class B Shares.
In reports or other communications to shareholders and in advertising
material, the performance of each Fund may be compared to recognized
unmanaged indices or averages of the performance of similar securities
and to composites of such indices and averages. Also, the performance of
each Fund may be compared to that of other funds of similar size and
objectives as listed in the rankings prepared by Lipper Analytical
Services, Inc. or similar independent mutual fund rating services, and
each Fund may include in such reports, communications and advertising
material evaluations published by nationally recognized independent
ranking services and publications. For further information regarding the
Funds' performance, see "Fund Performance" in the Statement of
Additional Information.
<PAGE>
SPECIAL INVESTMENT METHODS
This section provides additional information concerning the securities
in which the Funds may invest and related topics. Further information
concerning these matters is contained in the Statement of Additional
Information.
REPURCHASE AGREEMENTS
Each Fund is permitted to enter into repurchase agreements. A repurchase
agreement involves the purchase by a Fund of securities with the
agreement that after a stated period of time, the original seller will
buy back the same securities ("collateral") at a predetermined price or
yield. Repurchase agreements involve certain risks not associated with
direct investments in securities. If the original seller defaults on its
obligation to repurchase as a result of its bankruptcy or otherwise, the
purchasing Fund will seek to sell the collateral, which could involve
costs or delays. Although collateral (which may consist of any fixed
income security which is an eligible investment for the Fund entering
into the repurchase agreement) will at all times be maintained in an
amount equal to the repurchase price under the agreement (including
accrued interest), a Fund would suffer a loss if the proceeds from the
sale of the collateral were less than the agreed-upon repurchase price.
The Adviser will monitor the creditworthiness of the firms with which
the Funds enter into repurchase agreements.
WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS
Small Cap Value Fund may purchase securities on a when-issued or
delayed-delivery basis. When such a transaction is negotiated, the
purchase price is fixed at the time the purchase commitment is entered,
but delivery of and payment for the securities take place at a later
date. The Fund will not accrue income with respect to securities
purchased on a when-issued or delayed-delivery basis prior to their
stated delivery date. Pending delivery of the securities, the Fund will
maintain in a segregated account cash or liquid high-grade securities in
an amount sufficient to meet its purchase commitments.
The purchase of securities on a when-issued or delayed-delivery basis
exposes the Fund to risk because the securities may decrease in value
prior to delivery. In addition, the Fund's purchase of securities on a
when-issued or delayed-delivery basis while remaining substantially
fully invested could increase the amount of the Fund's total assets that
are subject to market risk, resulting in increased sensitivity of net
asset value to changes in market prices. However, the Fund will engage
in when-issued and delayed-delivery transactions only for the purpose of
acquiring portfolio securities consistent with their investment
objectives, and not for the purpose of investment leverage.
<PAGE>
A seller's failure to deliver securities to the Fund could prevent the
Fund from realizing a price or yield considered to be advantageous.
LENDING OF PORTFOLIO SECURITIES
In order to generate additional income, each of the Funds may lend
portfolio securities representing up to one-third of the value of its
total assets to broker-dealers, banks or other institutional borrowers
of securities. If the Funds engage in securities lending, distributions
paid to shareholders from the resulting income will not be excludable
from shareholders' 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 Adviser 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. 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 Adviser) in
connection with these loans. Fees paid to the Custodian are 40% of the
Funds' income from such securities lending transactions.
OPTIONS TRANSACTIONS
PURCHASES OF PUT AND CALL OPTIONS. Small Cap Value Fund may purchase put
and call options on equity securities, and both Funds may purchase put
and call options on stock indices. These transactions will be undertaken
only for the purpose of reducing risk to the Fund; that is, for
"hedging" purposes.
A put option on a security gives the purchaser of the option the right
(but not the obligation) to sell, and the writer of the option the
obligation to buy, the underlying security at a stated price (the
"exercise price") at any time before the option expires. A call option
on a security gives the purchaser the right (but not the obligation) to
buy, and the writer the obligation to sell, the underlying security at
the exercise price at any time before the option expires. The purchase
price for a put or call option is the "premium" paid by the purchaser
for the right to sell or buy.
Options on indices are similar to options on securities except that,
rather than the right to take or make delivery of a specific security at
a stated price, an option on an index gives the holder the right to
receive, upon exercise of the option, a defined amount of cash if the
closing value of the index upon which the option is based is greater
than, in the case of a call, or less than, in the case of a put, the
exercise price of the option.
<PAGE>
Neither Fund will invest more than 5% of the value of its total assets
in purchased options, provided that options which are "in the money" at
the time of purchase may be excluded from this 5% limitation. A call
option is "in the money" if the exercise price is lower than the current
market price of the underlying security or index, and a put option is
"in the money" if the exercise price is higher than the current market
price. A Fund's loss exposure in purchasing an option is limited to the
sum of the premium paid and the commission or other transaction expenses
associated with acquiring the option.
The use of purchased put and call options involves certain risks. These
include the risk of an imperfect correlation between market prices of
securities held by the Fund and the prices of options, and the risk of
limited liquidity in the event that the Fund seeks to close out an
options position before expiration by entering into an offsetting
transaction.
WRITING OF CALL OPTIONS. Small Cap Value Fund may write (sell) covered
call options on equity securities which it owns or has the right to
acquire to the extent specified under "Investment Objectives and
Policies." These transactions would be undertaken primarily to produce
additional income.
When the Fund sells a covered call option, it is paid a premium by the
purchaser. If the market price of the security covered by the option
does not increase above the exercise price before the option expires,
the option generally will expire without being exercised, and the Fund
will retain both the premium paid for the option and the security. If
the market price of the security covered by the option does increase
above the exercise price before the option expires, however, the option
is likely to be exercised by the purchaser. In that case the Fund will
be required to sell the security at the exercise price, and it will not
realize the benefits of increases in the market price of the security
above the exercise price of the option.
OPTIONS ON STOCK INDICES. Each Fund also may write call options on stock
indices the movements of which generally correlate with those of the
Fund's portfolio holdings. These transactions, which would be undertaken
principally to produce additional income, entail the risk of an
imperfect correlation between movements of the index covered by the
option and movements in the price of the Fund's portfolio securities.
CASH ITEMS
The "cash items" in which each Fund may invest, as described under
"Investment Objectives and Policies," include short-term obligations
such as commercial paper and variable amount master demand notes; United
States dollar-denominated time and savings deposits (including
certificates of deposit); bankers acceptances; obligations of the United
States Government or its agencies or instrumentalities; repurchase
agreements collateralized by
<PAGE>
eligible investments of the Fund; securities of other mutual funds which
invest primarily in debt obligations with remaining maturities of 13
months or less (which investments are subject to the advisory fee); and
other similar high-quality short-term United States dollar-denominated
obligations. The other mutual funds in which each Fund may so invest
include money market funds advised by the Adviser, subject to certain
restrictions contained in an exemptive order issued by the Securities
and Exchange Commission with respect thereto.
FUTURES AND OPTIONS ON FUTURES
International Index Fund may engage in futures transactions and purchase
options on futures to the extent specified under "Investment Objectives
and Policies." These transactions may include the purchase of stock
index futures and options on stock index futures.
A futures contract on an index obligates the seller to deliver, and
entitles the purchaser to receive, an amount of cash equal to a specific
dollar amount times the difference between the value of the index at the
expiration date of the contract and the index value specified in the
contract. The acquisition of put and call options on futures contracts
will, respectively, give International Index Fund the right (but not the
obligation), for a specified exercise price, to sell or to purchase the
underlying futures contract at any time during the option period.
The Fund may use futures contracts and options on futures in an effort
to hedge against market risks. In addition, International Index Fund may
use stock index futures and options on futures to maintain sufficient
liquidity to meet redemption requests, to increase the level of Fund
assets devoted to replicating the composition of the EAFE Index and to
reduce transaction costs.
Aggregate initial margin deposits for futures contracts, and premiums
paid for related options, may not exceed 5% of the Fund's total assets.
Futures transactions will be limited to the extent necessary to maintain
the Fund's qualification as a regulated investment company under the
Internal Revenue Code of 1986, as amended.
Where International Index Fund is permitted to purchase options on
futures, its potential loss is limited to the amount of the premiums
paid for the options. As stated above, this amount may not exceed 5% of
the Fund's total assets. Where International Index Fund is permitted to
enter into futures contracts obligating it to purchase an index in the
future at a specified price, the Fund could lose 100% of its net assets
in connection therewith if it engaged extensively in such transactions
and if the value of the subject index at the delivery or settlement date
fell to zero for all contracts into which the Fund was permitted to
enter.
<PAGE>
Futures transactions involve brokerage costs and require International
Index Fund to segregate assets to cover contracts that would require it
to purchase an index in the future at a specified date. The Fund may
lose the expected benefit of futures transactions if the index value or
exchange rates moves in an unanticipated manner. Such unanticipated
changes may also result in poorer overall performance than if the Fund
had not entered into any futures transactions. There is no assurance of
liquidity in the secondary market for purposes of closing out futures
positions.
FIXED INCOME SECURITIES
The Fixed Income securities in which Small Cap Value Fund may invest
include securities issued or guaranteed by the United States Government
or its agencies or instrumentalities, nonconvertible preferred stocks,
nonconvertible corporate debt securities, and short-term obligations of
the kinds described above under "-- Cash Items." Investments in
nonconvertible preferred stocks and nonconvertible corporate debt
obligations will be limited to securities which are rated at the time of
purchase not less than BBB by Standard & Poor's or Baa by Moody's (or
equivalent short-term ratings), or which have been assigned an
equivalent rating by another nationally recognized statistical rating
organization, or which are of comparable quality in the judgment of the
Adviser. Obligations rated BBB, Baa or their equivalent, although
investment grade, have speculative characteristics and carry a somewhat
higher risk of default than obligations rated in the higher investment
grade categories. In addition, Small Cap Value Fund may invest up to 5%
of its net assets in less than investment grade convertible debt
obligations.
The fixed income securities specified above are subject to (i) interest
rate risk (the risk that increases in market interest rates will cause
declines in the value of debt securities held by the Fund), (ii) credit
risk (the risk that issuers of debt securities held by the Fund default
in making required payments), and (iii) call or prepayment risk (the
risk that a borrower may exercise the right to prepay a debt obligation
before its stated maturity, requiring the Fund to reinvest the
prepayment at a lower interest rate).
FOREIGN SECURITIES
GENERAL. Under normal market conditions, International Index Fund
invests at least 65% of its total assets in equity securities which
trade in markets other than the United States. In addition, Small Cap
Value Fund may invest up to 25% of its total assets in securities of
foreign issuers which are either listed on a United States securities
exchange or represented by American Depositary Receipts.
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
<PAGE>
instability in the country of the issuer, the difficulty of predicting
international trade patterns, the possibility of the imposition of
exchange controls, expropriation, limits on removal of currency or other
assets, nationalization of assets, foreign withholding and income
taxation, and foreign trading practices (including higher trading
commissions, custodial charges and delayed settlements). Foreign
securities also may be subject to greater fluctuations in price than
securities issued by United States corporations. The principal markets
on which these securities trade may have less volume and liquidity, and
may be more volatile, than securities markets in the United States.
In addition, there may be less publicly available information about a
foreign company than about a United States domiciled company. Foreign
companies generally are not subject to uniform accounting, auditing and
financial reporting standards comparable to those applicable to United
States domestic companies. There is also generally less government
regulation of securities exchanges, brokers and listed companies abroad
than in the United States. Confiscatory taxation or diplomatic
developments could also affect investment in those countries. In
addition, foreign branches of United States banks, foreign banks and
foreign issuers may be subject to less stringent reserve requirements
and to different accounting, auditing, reporting, and recordkeeping
standards than those applicable to domestic branches of United States
banks and United States domestic issuers.
JAPANESE SECURITIES. Japanese securities comprised 29.2% of the EAFE
Index as of September 30, 1997. As a result, securities of Japanese
companies may represent a significant component of International Index
Fund's investment assets.
Japan is politically organized as a democratic, parliamentary republic
and has a population of approximately 122 million. The Japanese economy
is heavily industrial and export-oriented. Although Japan is dependent
upon foreign economies for raw materials, Japan's balance of payments in
recent years has been strong and positive. Japan has eight stock
exchanges located throughout the country, but over 80% of all trading is
conducted on the Tokyo Stock Exchange. Prices of stocks listed on the
Japanese stock exchange are quoted continuously during regular business
hours. Trading commissions are at fixed scale rates which vary by the
type and the value of the transaction, but can be negotiable for large
transactions. Securities in Japan are denominated and quoted in yen. Yen
are fully convertible and transferable based on floating exchange rates
into all currencies, without administrative or legal restrictions, for
both nonresidents and residents of Japan.
A significant investment in Japanese securities by International Index
Fund may entail a higher degree of risk than with more diversified
international portfolios.
AMERICAN DEPOSITARY RECEIPTS AND EUROPEAN DEPOSITARY RECEIPTS. For many
foreign securities, United States dollar-denominated American Depositary
Receipts, which are traded in the United States on exchanges or
over-the-counter, are issued by domestic banks. American Depositary
Receipts represent the right to receive securities of foreign issuers
deposited in a domestic bank or a correspondent bank. American
Depositary Receipts do not eliminate all the risk inherent in investing
in the securities of foreign issuers. However, by investing in American
Depositary Receipts rather than directly in foreign issuers' stock, the
Fund can avoid currency risks during the settlement period for either
purchases or sales. In general, there is a large, liquid market in the
United States for many American Depositary Receipts. The information
available for American Depositary Receipts is subject to the accounting,
auditing and financial reporting standards of the domestic market or
exchange on which they are traded, which standards are more uniform and
more exacting than those to which many foreign issuers may be subject.
International Index Fund also may invest in European Depositary
Receipts, which are receipts evidencing an arrangement with a European
bank similar to that for American Depositary Receipts and which are
designed for use in the European securities markets. European Depositary
Receipts are not necessarily denominated in the currency of the
underlying security.
Certain American Depositary Receipts and European Depositary Receipts,
typically those denominated as unsponsored, require the holders thereof
to
<PAGE>
bear most of the costs of the facilities while issuers of sponsored
facilities normally pay more of the costs thereof. The depository of an
unsponsored facility frequently is under no obligation to distribute
shareholder communications received from the issuer of the deposited
securities or to pass through the voting rights to facility holders in
respect to the deposited securities, whereas the depository of a
sponsored facility typically distributes shareholder communications and
passes through voting rights.
PORTFOLIO TRANSACTIONS
Portfolio transactions in the over-the-counter market will be effected
with market makers or issuers, unless better overall price and execution
are available through a brokerage transaction. It is anticipated that
most portfolio transactions involving debt securities will be executed
on a principal basis. Also, with respect to the placement of portfolio
transactions with securities firms, subject to the overall policy to
seek to place portfolio transactions as efficiently as possible and at
the best price, research services and placement of orders by securities
firms for a Fund's shares may be taken into account as a factor in
placing portfolio transactions for the Fund.
PORTFOLIO TURNOVER
Although the Funds do not intend generally to trade for short-term
profits, they may dispose of a security without regard to the time it
has been held when such action appears advisable to the Adviser. The
portfolio turnover rate for a Fund may vary from year to year and may be
affected by cash requirements for redemptions of shares. High portfolio
turnover rates (100% or more) generally would result in higher
transaction costs and could result in additional tax consequences to a
Fund's shareholders.
INVESTMENT RESTRICTIONS
The fundamental and nonfundamental investment restrictions of the Funds
are set forth in full in the Statement of Additional Information. The
fundamental restrictions include the following:
* None of the Funds will borrow money, except from banks for
temporary or emergency purposes. The amount of such borrowing
may not exceed 10% of the borrowing Fund's total assets. None of
the Funds will borrow money for leverage purposes. 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. If a Fund engages in borrowing, its share
price may be subject to greater fluctuation, and the interest
expense associated with the borrowing may reduce the Fund's net
income.
<PAGE>
* None of the Funds will mortgage, pledge or hypothecate its
assets, except in an amount not exceeding 15% of the value of
its total assets to secure temporary or emergency borrowing.
* None of the Funds will make short sales of securities.
* None of the Funds will purchase any securities on margin except
to obtain such short-term credits as may be necessary for the
clearance of transactions and other accounts.
A fundamental policy or restriction, including those stated above,
cannot be changed without an affirmative vote of the holders of a
"majority" of the outstanding shares of the applicable Fund, as defined
in the 1940 Act.
As a nonfundamental policy, none of the Funds will invest more than 15%
of its net assets in all forms of illiquid investments. Section 4(2)
commercial paper and Rule 144A securities may be determined to be
"liquid" under guidelines adopted by the Board of Directors. 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.
INFORMATION CONCERNING COMPENSATION PAID TO FIRST TRUST NATIONAL
ASSOCIATION AND ITS AFFILIATES
First Trust National Association ("First Trust") and First Bank may act
as fiduciary with respect to plans subject to the Employee Retirement
Income Security Act of 1974 ("ERISA") and other accounts which invest in
the Funds. First Trust and First Bank are both subsidiaries of U.S.
Bancorp. This section sets forth information concerning compensation
that U.S. Bancorp may receive from the Funds.
First Trust, as custodian for the assets of the Funds, receives the
custodian fees specified herein under the caption "Management --
Custodian." First Trust also may act as securities lending agent in
connection with the Funds' securities lending transactions and receive
as compensation the fees described under the caption "Special Investment
Methods -- Lending of Portfolio Securities."
First Bank National Association acts as investment adviser to the Funds
and receives the advisory fees specified herein under the caption
"Management -- Investment Adviser." First Bank also acts as
sub-administrator to the Funds and receives the sub-administration fees
from the Administrator as described under the caption "Management --
Administrator."
First Trust and its affiliates may receive shareholder servicing fees in
the amounts specified herein under the caption "Distributor."
<PAGE>
FIRST AMERICAN INVESTMENT FUNDS, INC.
Oaks, Pennsylvania 19456
INVESTMENT ADVISER
FIRST BANK NATIONAL ASSOCIATION
601 Second Avenue South
Minneapolis, Minnesota 55402
CUSTODIAN
FIRST TRUST NATIONAL ASSOCIATION
180 East Fifth Street
St. Paul, Minnesota 55101
DISTRIBUTOR
SEI INVESTMENTS DISTRIBUTION CO.
Oaks, Pennsylvania 19456
ADMINISTRATOR
SEI INVESTMENTS MANAGEMENT
CORPORATION
Oaks, Pennsylvania 19456
TRANSFER AGENT
DST SYSTEMS, INC.
1004 Baltimore
Kansas City, Missouri 64105
INDEPENDENT AUDITORS
KPMG PEAT MARWICK LLP
90 South Seventh Street
Minneapolis, Minnesota 55402
COUNSEL
DORSEY & WHITNEY LLP
220 South Sixth Street
Minneapolis, Minnesota 55402
FAIF-1502 (7/97)I
<PAGE>
PART B
FIRST AMERICAN INVESTMENT FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION
DATED NOVEMBER 6, 1997
SMALL CAP VALUE FUND
INTERNATIONAL INDEX FUND
This Statement of Additional Information relates to the Class A Shares,
Class B Shares and Class C Shares of Small Cap Value Fund and International
Index Fund, each of which is a series of First American Investment Funds, Inc.
("FAIF"). This Statement of Additional Information is not a prospectus, but
should be read in conjunction with the Funds' current Prospectuses dated
November 6, 1997. This Statement of Additional Information is incorporated into
the Funds' Prospectuses by reference. To obtain copies of a Prospectus, write or
call the Funds' distributor SEI Investments Distribution Co., Oaks, Pennsylvania
19456, telephone: (800) 637-2548. Please retain this Statement of Additional
Information for future reference.
TABLE OF CONTENTS
PAGE
GENERAL INFORMATION............................ 2
ADDITIONAL INFORMATION CONCERNING
FUND INVESTMENTS............................... 3
Short-Term Investments.................... 3
Repurchase Agreements..................... 3
When-Issued and Delayed-Delivery
Transactions.......................... 4
Lending of Portfolio Securities........... 4
Options Transactions...................... 4
Foreign Securities........................ 5
Debt Obligations Rated Less Than
Investment Grade...................... 5
CFTC Information.......................... 6
INVESTMENT RESTRICTIONS........................ 6
DIRECTORS AND EXECUTIVE OFFICERS............... 9
Directors................................. 9
Executive Officers........................ 9
Compensation.............................. 11
INVESTMENT ADVISORY AND OTHER
SERVICES....................................... 12
Investment Advisory Agreement............. 12
Administration Agreement.................. 12
Distributor and Distribution Plans........ 12
Custodian; Transfer Agent; Counsel;
Accountants........................... 14
PORTFOLIO TRANSACTIONS AND ALLOCATION
OF BROKERAGE................................... 14
CAPITAL STOCK.................................. 16
NET ASSET VALUE AND PUBLIC OFFERING
PRICE.......................................... 16
FUND PERFORMANCE............................... 17
SEC Standardized Performance Figures...... 17
Non-Standard Distribution Rates........... 18
Certain Performance Comparisons........... 18
PORTFOLIO TURNOVER............................. 18
TAXATION....................................... 19
RATINGS........................................ 22
Ratings of Corporate Debt Obligations
and Municipal Bonds................... 22
Ratings of Preferred Stock................ 24
Ratings of Municipal Notes................ 24
Ratings of Commercial Paper............... 25
<PAGE>
GENERAL INFORMATION
First American Investment Funds, Inc. ("FAIF") was incorporated in the
State of Maryland on August 20, 1987 under the name "SECURAL Mutual Funds, Inc."
The Board of Directors and shareholders, at meetings held January 10, 1991, and
April 2, 1991, respectively, approved amendments to the Articles of
Incorporation providing that the name "SECURAL Mutual Funds, Inc." be changed to
"First American Investment Funds, Inc."
FAIF is organized as a series fund and currently issues its shares in
26 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 FAIF 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 Small Cap Value Fund and
International Index Fund through Class A, Class B, and Class C Shares. The
different classes provide for variations in distribution costs, shareholder
servicing fees, voting rights and dividends. To the extent permitted by the
Investment Company Act of 1940, the Funds may also provide for variations in
other costs among the classes although they have no present intention to do so.
In addition, a sales load is imposed on the sale of Class A and Class B Shares
of the Funds. Except for differences among the classes pertaining to
distribution costs and shareholder servicing fees, each share of each Fund
represents an equal proportionate interest in that Fund. Class A and Class B
Shares sometimes are referred to together as the "Retail Class Shares," and
Class C Shares sometimes are referred to as the "Institutional Class Shares."
FAIF has prepared and will provide a Prospectus relating to the Retail
Class Shares (the "Retail Class Prospectus") and a Prospectus relating to the
Institutional Class Shares (the "Institutional Class Prospectus") of the Funds.
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 both to the Retail Class Prospectus and to the Institutional
Class Prospectus for the Funds. It should be read in conjunction with the
applicable Prospectus. Separate prospectuses and statements of additional
information relate to the other funds offered by FAIF.
The Articles of Incorporation and Bylaws of FAIF provide that meetings
of shareholders be held as determined by the Board of Directors and as required
by the 1940 Act. Maryland corporation law requires a meeting of shareholders to
be held upon the written request of shareholders holding 10% or more of the
voting shares of FAIF, with the cost of preparing and mailing the notice of such
meeting payable by the requesting shareholders. The 1940 Act requires a
shareholder vote for all amendments to fundamental investment policies and
restrictions, for approval of all investment advisory contracts and amendments
thereto, and for all amendments to Rule 12b-1 distribution plans.
<PAGE>
ADDITIONAL INFORMATION CONCERNING FUND INVESTMENTS
The investment objectives, policies and restrictions of the Funds are
set forth in their respective Prospectuses. Additional information concerning
the investments which may be made by the Funds is set forth under this caption.
Additional information concerning the Funds' investment restrictions is set
forth below under the caption "Investment Restrictions."
SHORT-TERM INVESTMENTS
The Funds can invest in a variety of short-term instruments which are
specified, with respect to the respective Funds, in their Prospectuses.
Short-term investments and repurchase agreements may be entered into on a joint
basis by the Funds and other funds advised by the Adviser to the extent
permitted by Securities and Exchange Commission exemptive order relief obtained
by them. A brief description of certain kinds of short-term instruments follows:
COMMERCIAL PAPER. Commercial paper consists of unsecured promissory
notes issued by corporations. Issues of commercial paper normally have
maturities of less than nine months and fixed rates of return. Subject to the
limitations described in the Prospectuses, the Funds may purchase commercial
paper consisting of issues rated at the time of purchase within the two highest
rating categories by Standard & Poor's Corporation ("Standard & Poor's") or
Moody's Investors Service, Inc. ("Moody's"), or which have been assigned an
equivalent rating by another nationally recognized statistical rating
organization. The Funds also may invest in commercial paper that is not rated
but that is determined by the Adviser to be of comparable quality to instruments
that are so rated. For a description of the rating categories of Standard &
Poor's and Moody's, see "Ratings" herein.
BANKERS ACCEPTANCES. Bankers acceptances are credit instruments
evidencing the obligation of a bank to pay a draft drawn on it by a customer.
These instruments reflect the obligation both of the bank and of the drawer to
pay the full amount of the instrument upon maturity.
VARIABLE AMOUNT MASTER DEMAND NOTES. Variable amount master demand
notes are unsecured demand notes that permit the indebtedness thereunder to vary
and provide for periodic adjustments in the interest rate according to the terms
of the instrument. Because master demand notes are direct lending arrangements
between a Fund and the issuer, they are not normally traded. Although there is
no secondary market in the notes, a Fund may demand payment of principal and
accrued interest at any time. While the notes are not typically rated by credit
rating agencies, issuers of variable amount master demand notes (which are
normally manufacturing, retail, financial, and other business concerns) must
satisfy the same criteria as set forth above for commercial paper. The Adviser
will consider the earning power, cash flow, and other liquidity ratios of the
issuers of such notes and will continuously monitor their financial status and
ability to meet payment on demand.
REPURCHASE AGREEMENTS
The Funds may invest in repurchase agreements to the extent specified
in their Prospectuses. The Custodian will hold the securities underlying any
repurchase agreement, or the securities will be part of the Federal
Reserve/Treasury Book Entry System. The market value of the collateral
underlying the repurchase agreement will be determined on each business day. If
at any time the market value of the collateral falls below the repurchase price
under the repurchase agreement (including any accrued interest), the appropriate
Fund will promptly receive additional collateral (so the total collateral is an
amount at least equal to the repurchase price plus accrued interest).
<PAGE>
WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS
When Small Cap Value Fund agrees to purchase securities on a
when-issued or delayed-delivery basis, the Custodian will set aside cash or
liquid securities equal to the amount of the commitment in a separate account.
Normally, the Custodian will set aside securities to satisfy the purchase
commitment, and in that case, Small Cap Value Fund may be required subsequently
to place additional assets in the separate account in order to assure that the
value of the account remains equal to the amount of the Fund's commitments. It
may be expected that Small Cap Value Fund's net assets will fluctuate to a
greater degree when it sets aside securities to cover such purchase commitments
than when it sets aside cash. In addition, because Small Cap Value Fund will set
aside cash or liquid securities to satisfy its purchase commitments in the
manner described above, its liquidity and the ability of the Adviser to manage
it might be affected in the event its commitments to purchase when-issued or
delayed-delivery securities ever exceeded 25% of the value of its assets. Under
normal market conditions, however, Small Cap Value Fund's commitments to
purchase when-issued or delayed-delivery securities will not exceed 25% of the
value of its assets.
LENDING OF PORTFOLIO SECURITIES
When a Fund lends portfolio securities, it must receive 100% collateral
as described in the Prospectuses. This collateral must be valued daily by the
Adviser and, if the market value of the loaned securities increases, the
borrower must furnish additional collateral to the lending Fund. During the time
portfolio securities are on loan, the borrower pays the lending Fund any
dividends or interest paid on the securities. Loans are subject to termination
by the lending Fund or the borrower at any time. While a Fund does not have the
right to vote securities on loan, it would terminate the loan and regain the
right to vote if that were considered important with respect to the investment.
First Trust National Association, the Funds' custodian and an affiliate
of their Adviser, may act as securities lending agent for the Funds and receive
separate compensation for such services, subject to compliance with conditions
contained in a Securities and Exchange Commission exemptive order permitting
First Trust to provide such services and receive such compensation.
OPTIONS TRANSACTIONS
OPTIONS ON SECURITIES. To the extent specified in the Prospectuses,
Small Cap Value Fund may purchase put and call options on securities and may
write covered call options on securities which it owns or has the right to
acquire. The Fund may purchase put options to hedge against a decline in the
value of its portfolio. By using put options in this way, the Fund would reduce
any profit it might otherwise have realized in the underlying security by the
amount of the premium paid for the put option and by transaction costs. In
similar fashion, the Fund may purchase call options to hedge against an increase
in the price of securities that the Fund anticipates purchasing in the future.
The premium paid for the call option plus any transaction costs will reduce the
benefit, if any, realized by the Fund upon exercise of the option, and, unless
the price of the underlying security rises sufficiently, the option may expire
unexercised.
The writer (seller) of a call option has no control over when the
underlying securities must be sold; the writer may be assigned an exercise
notice at any time prior to the termination of the option. If a call option is
exercised, the writer experiences a profit or loss from the sale of the
underlying security. The writer of a call option that wishes to terminate its
obligation may effect a "closing purchase transaction." This is accomplished by
buying an option on the same security as the option previously written. If the
Fund was unable to effect a closing purchase transaction in a secondary market,
it would not be able to sell the underlying security until the option expires or
it delivers the underlying security upon exercise.
<PAGE>
OPTIONS ON STOCK INDICES. Options on stock indices are similar to
options on individual stocks except that, rather than the right to take or make
delivery of stock at a specified price, an option on a stock index gives the
holder the right to receive, upon exercise of the option, an amount of cash if
the closing value of the stock index upon which the option is based is greater
than, in the case of a call, or lesser than, in the case of a put, the exercise
price of the option. This amount of cash is equal to the difference between the
closing price of the index and the exercise price of the option expressed in
dollars times a specified multiple (the "multiplier"). The writer of the option
is obligated, in return for the premium received, to make delivery of this
amount. Unlike stock options, all settlements for stock index options are in
cash, and gain or loss depends on price movements in the stock market generally
(or in a particular industry or segment of the market) rather than price
movements in individual stocks. The multiplier for an index option performs a
function similar to the unit of trading for a stock option. It determines the
total dollar value per contract of each point in the difference between the
underlying stock index. A multiplier of 100 means that a one-point difference
will yield $100. Options on different stock indices may have different
multipliers.
FOREIGN SECURITIES
As described in the applicable Prospectuses, under normal market
conditions International Index Fund invests principally in foreign securities,
and Small Cap Value Fund may invest lesser proportions of their assets in
securities of foreign issuers which are either listed on a United States
securities exchange or represented by American Depositary Receipts.
Fixed commissions on foreign securities exchanges are generally higher
than negotiated commissions on United States exchanges. Foreign markets also
have different clearance and settlement procedures, and in some markets there
have been times when settlements have been unable to keep pace with the volume
of securities transactions, making it difficult to conduct such transactions.
Delays in settlement could result in temporary periods when a portion of the
assets of International Index Fund is uninvested. In addition, settlement
problems could cause International Index Fund to miss attractive investment
opportunities or to incur losses due to an inability to sell or deliver
securities in a timely fashion. In the event of a default by an issuer of
foreign securities, it may be more difficult for a Fund to obtain or to enforce
a judgment against the issuer.
DEBT OBLIGATIONS RATED LESS THAN INVESTMENT GRADE
As described in the Prospectuses, the "equity securities" in which
Small Cap Value Fund may invest include corporate debt obligations which are
convertible into common stock. These convertible debt obligations may include
obligations rated as low as CCC by Standard & Poor's or Caa by Moody's or which
have been assigned an equivalent rating by another nationally recognized
statistical rating organization. Debt obligations rated BB, B or CCC by Standard
& Poor's or Ba, B or Caa by Moody's are considered to be less than "investment
grade" and are sometimes referred to as "junk bonds." The limitations on
investments by this Fund in less than investment grade convertible debt
obligations are set forth in the applicable Prospectuses.
Purchases of less than investment grade corporate debt obligations
generally involve greater risks than purchases of higher rated obligations. Less
than investment grade debt obligations are especially subject to adverse changes
in general economic conditions and to changes in the financial condition of
their issuers. During periods of economic downturn or rising interest rates,
issuers of such obligations may experience financial stress that could adversely
affect their ability to make payments of principal and interest and increase the
possibility of default.
Yields on less than investment grade debt obligations will fluctuate
over time. The prices of such obligations have been found to be less sensitive
to interest rate changes than higher rated obligations, but more sensitive to
adverse economic changes or individual corporate developments. Also, during an
economic downturn or period of rising interest rates, highly leveraged issuers
may experience financial
<PAGE>
stress which could adversely affect their ability to service principal and
interest payment obligations, to meet projected business goals, and to obtain
additional financing. In addition, periods of economic uncertainty and changes
can be expected to result in increased volatility of market prices of less than
investment grade debt obligations.
In addition, the secondary trading market for less than investment
grade debt obligations may be less developed than the market for investment
grade obligations. This may make it more difficult for Small Cap Value Fund to
value and dispose of such obligations. Adverse publicity and investor
perceptions, whether or not based on fundamental analysis, may decrease the
values and liquidity of less than investment grade obligations, especially in a
thin secondary trading market.
Certain risks also are associated with the use of credit ratings as a
method for evaluating less than investment grade debt obligations. For example,
credit ratings evaluate the safety of principal and interest payments, not the
market value risk of such obligations. In addition, credit rating agencies may
not timely change credit ratings to reflect current events. Thus, the success of
Small Cap Value Fund's use of less than investment grade convertible debt
obligations may be more dependent on the Adviser's own credit analysis than is
the case with investment grade obligations.
CFTC INFORMATION
The Commodity Futures Trading Commission (the "CFTC"), a federal
agency, regulates trading activity pursuant to the Commodity Exchange Act, as
amended. The CFTC requires the registration of "commodity pool operators," which
are defined as any person engaged in a business which is of the nature of an
investment trust, syndicate or a similar form of enterprise, and who, in
connection therewith, solicits, accepts or receives from others funds,
securities or property for the purpose of trading in any commodity for future
delivery on or subject to the rules of any contract market. The CFTC has adopted
Rule 4.5, which provides an exclusion from the definition of commodity pool
operator for any registered investment company which (i) will use commodity
futures or commodity options contracts solely for bona fide hedging purposes
(provided, however, that in the alternative, with respect to each long position
in a commodity future or commodity option contract, an investment company may
meet certain other tests set forth in Rule 4.5); (ii) will not enter into
commodity futures and commodity options contracts for which the aggregate
initial margin and premiums exceed 5% of its assets; (iii) will not be marketed
to the public as a commodity pool or as a vehicle for investing in commodity
interests; (iv) will disclose to its investors the purposes of and limitations
on its commodity interest trading; and (v) will submit to special calls of the
CFTC for information. Any investment company desiring to claim this exclusion
must file a notice of eligibility with both the CFTC and the National Futures
Association. FAIF has made such notice filings with respect to those Funds which
may invest in commodity futures or commodity options contracts.
INVESTMENT RESTRICTIONS
In addition to the investment objectives and policies set forth in the
Prospectuses and under the caption "Additional Information Concerning Fund
Investments" above, each of the Funds is subject to the investment restrictions
set forth below. The investment restrictions set forth in paragraphs 1 through
10 below are fundamental and cannot be changed with respect to a Fund without
approval by the holders of a majority of the outstanding shares of that Fund as
defined in the Investment Company Act of 1940, as amended (the "1940 Act"),
i.e., by the lesser of the vote of (a) 67% of the shares of the Fund present at
a meeting where more than 50% of the outstanding shares are present in person or
by proxy, or (b) more than 50% of the outstanding shares of the Fund.
<PAGE>
Neither of the Funds will:
1. Invest in any securities if, as a result, 25% or more of the
value of its total assets would be invested in the securities
of issuers conducting their principal business activities in
any one industry. This restriction does not apply to general
obligation bonds or notes. This restriction does not apply to
securities of the United States Government or its agencies and
instrumentalities or repurchase agreements relating thereto.
2. Issue any senior securities (as defined in the 1940 Act),
other than as set forth in restriction number 3 below and
except to the extent that using options or purchasing
securities on a when-issued basis may be deemed to constitute
issuing a senior security.
3. Borrow money, except from banks for temporary or emergency
purposes. The amount of such borrowing may not exceed 10% of
the borrowing Fund's total assets. Neither of the Funds will
borrow money for leverage purposes. 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, neither Fund will make
additional investments while its borrowings exceed 5% of total
assets.)
4. Mortgage, pledge or hypothecate its assets, except in an
amount not exceeding 15% of the value of its total assets to
secure temporary or emergency borrowing.
5. Make short sales of securities.
6. Purchase any securities on margin except to obtain such
short-term credits as may be necessary for the clearance of
transactions.
7. Purchase or sell physical commodities (including, by way of
example and not by way of limitation, grains, oilseeds,
livestock, meat, food, fiber, metals, petroleum,
petroleum-based products or natural gas) or futures or options
contracts with respect to physical commodities. This
restriction shall not restrict either Fund from purchasing or
selling any financial contracts or instruments which may be
deemed commodities (including, by way of example and not by
way of limitation, options, futures and options on futures
with respect, in each case, to interest rates, currencies,
stock indices, bond indices or interest rate indices) or any
security which is collateralized or otherwise backed by
physical commodities.
8. Purchase or sell real estate or real estate mortgage loans,
except that the Funds may invest in securities secured by real
estate or interests therein or issued by companies that invest
in or hold real estate or interests therein.
9. Act as an underwriter of securities of other issuers, except
to the extent a Fund may be deemed to be an underwriter, under
Federal securities laws, in connection with the disposition of
portfolio securities.
10. Lend any of their assets, except portfolio securities
representing up to one-third of the value of their total
assets.
The following restrictions are non-fundamental and may be changed by
FAIF's Board of Directors without shareholder vote. Neither of the Funds will:
11. Invest more than 15% of its net assets in all forms of
illiquid investments.
<PAGE>
12. Invest in any securities, if as a result more than 5% of the
value of its total assets is invested in the securities of any
issuers which, with their predecessors, have a record of less
than three years continuous operation. (Securities of any of
such issuers will not be deemed to fall within this limitation
if they are guaranteed by an entity which has been in
continuous operation for more than three years.)
13. Invest for the purpose of exercising control or management.
14. Purchase or sell real estate limited partnership interests, or
oil, gas or other mineral leases, rights or royalty contracts,
except that the Funds may purchase or sell securities of
companies which invest in or hold the foregoing.
15. Purchase securities of any other registered investment company
(as defined in the 1940 Act), except, subject to 1940 Act
limitations, (a) each Fund may, as part of its investment in
cash items, invest in securities of other mutual funds which
invest primarily in debt obligations with remaining maturities
of 13 months or less; (b) International Index Fund may
purchase shares of investment companies which invest in
permitted investments for such Fund; and (c) each Fund may
purchase securities as part of a merger, consolidation,
reorganization or acquisition of assets.
16. Invest in foreign securities, except that Small Cap Value Fund
may invest up to 25% of its total assets in securities of
foreign issuers which are either listed on a United States
stock exchange or represented by American Depositary Receipts
and International Index Fund may invest in foreign securities
without limitation.
17. Invest in warrants; provided, that a Fund may invest in
warrants in an amount not exceeding 5% of the Fund's net
assets. No more than 2% of this 5% may be warrants which are
not listed on the New York Stock Exchange.
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of FAIF 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 FAIF are identified with an asterisk.
DIRECTORS
Robert J. Dayton, 5140 Norwest Center, Minneapolis, Minnesota 55402:
Director of FAIF since September 1994 and of First American Funds, Inc. ("FAF")
since December 1994 and of First American Strategy Funds, Inc. ("FASF") since
June 1996; Chairman (1989-1993) and Chief Executive Officer (1993-present),
Okabena Company (private family investment office). Age: 54.
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; employee at United Airlines since 1967. Age: 51.
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: 49.
Leonard W. Kedrowski, 16 Dellwood Avenue, Dellwood, Minnesota 55110:
Director of FAIF and FAF since November 1993 and of FASF since June 1996;
President and owner of Executive Management Consulting, Inc., a management
consulting firm; Vice President, Chief Financial Officer, Treasurer, Secretary
and Director of Anderson Corporation, a large privately-held manufacturer of
wood windows, from 1983 to October 1992. Age: 55.
* Robert L. Spies, 4715 Twin Lakes Avenue, Brooklyn Center, Minnesota
55429: Director of FAIF, FAF and FASF since January 31, 1997; employed by U.S.
Bancorp and its subsidiaries from 1957 to January 31, 1997, most recently as
Vice President, First Bank National Association. Age: 62.
Joseph D. Strauss, 8617 Edenbrook Crossing, # 443, Brooklyn Park,
Minnesota 55443: Director of FAF since 1984 and of FAIF since April 1991 and of
FASF since June 1996; Chairman of FAF's and FAIF's Boards since 1993 and of
FASF's Board since 1996; President of FAF and FAIF from June 1989 to November
1989; Owner and President, Strauss Management Company, since 1993; Owner and
President, Community Resource Partnerships, Inc., a community business retention
survey company, since 1992; attorney-at-law. Age: 56.
Virginia L. Stringer, 712 Linwood Avenue, St. Paul, Minnesota 55105:
Director of FAIF since August 1987 and of FAF since April 1991 and of FASF since
June 1996; Owner and President, Strategic Management Resources, Inc. since 1993;
formerly President and Director of The Inventure Group, a management consulting
and training company, President of Scott's, Inc., a transportation company, and
Vice President of Human Resources of The Pillsbury Company. Age: 52.
EXECUTIVE OFFICERS
<PAGE>
David Lee, SEI Investments Company, Oaks, Pennsylvania 19456: President
of FAIF and FAF since April 1994 and of FASF since June 1996; Senior Vice
President and Assistant Secretary of FAF and FAIF beginning June 1, 1993; Senior
Vice President of SEI Investments Distribution Co. (the "Distributor") since
1991; President, GW Sierra Trust Funds prior to 1991. Age: 44.
Carmen V. Romeo, SEI Investments Company, Oaks, Pennsylvania 19456:
Treasurer and Assistant Secretary of FAIF and FAF since November 1992 and of
FASF since June 1996; Director, Executive Vice President, Chief Financial
Officer and Treasurer of SEI Investments Company ("SEI"), SEI Investments
Management Corporation (the "Administrator") and the Distributor since 1981.
Age: 52.
Kevin P. Robins, SEI Investments Company, Oaks, Pennsylvania 19456:
Vice President and Assistant Secretary of FAIF and FAF since April 1994 and of
FASF since June 1996; Vice President, Assistant Secretary and General Counsel of
the Administrator and the Distributor. Age: 36.
Kathryn Stanton, SEI Investments Company, Oaks, Pennsylvania 19456:
Vice President and Assistant Secretary of FAIF and FAF since April 1994 and of
FASF since June 1996; Vice President and Assistant Secretary of the
Administrator and the Distributor since April 1994; Associate, Morgan, Lewis &
Bockius, from 1989 to 1994. Age: 37.
Sandra K. Orlow, SEI Investments Company, Oaks, Pennsylvania 19456:
Vice President and Assistant Secretary of FAIF and FAF since 1992 and of FASF
since June 1996; Vice President and Assistant Secretary of SEI, the
Administrator and the Distributor since 1983. Age: 40.
Marc Cahn, SEI Investments Company, Oaks, Pennsylvania 19456: Vice
President and Assistant Secretary of FAIF, FAF and FASF since June 1996; Vice
President and Assistant Secretary of the Administrator and Distributor since May
1996; Associate General Counsel, Barclays Bank PLC, from 1994 to 1996; ERISA
Counsel, First Fidelity Bancorporation, prior to 1994. Age: 39.
Barbara A. Nugent, SEI Investments Company, Oaks, Pennsylvania 19456:
Vice President and Assistant Secretary of FAIF, FAF and FASF since June 1996;
Vice President and Assistant Secretary of the Administrator and Distributor
since April 1996; Associate, Drinker, Biddle & Reath, from 1994 to 1996;
Assistant Vice President/Administration (1992 to 1993) and Operations (1988 to
1992), Delaware Service Company, Inc. Age: 39.
Stephen G. Meyer, SEI Investments Company, Oaks, Pennsylvania 19456:
Controller of FAIF and FAF since March 1995 and of FASF since June 1996;
Director of Internal Audit and Risk Management of SEI from 1992 to 1995; Senior
Associate, Coopers & Lybrand, from 1990 to 1992. Age: 31.
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: 52.
<PAGE>
COMPENSATION
The First American Family of Funds, which includes FAIF, FAF and FASF,
currently pays only to directors of the funds who are not paid employees or
affiliates of the funds a fee of $15,000 per year ($22,500 in the case of the
Chair) plus $2,500 ($3,750 in the case of the Chair) per meeting of the Board
attended and $800 per committee meeting attended ($1,600 in the case of a
committee chair) and reimburses travel expenses of directors and officers to
attend Board meetings. In the event of telephonic Board or committee meetings,
each director receives a fee of $500 per Board or committee meeting ($750 in the
case of the Chair or a committee chair). In addition, directors may receive a
per diem fee of $1,000 per day plus travel expenses when directors travel out of
town on Fund business. However, directors do not receive the $1,000 per diem
amount plus the foregoing Board or committee fee for an out of town Board or
committee meeting but instead receive the greater of the total per diem fee or
meeting fee. Legal fees and expenses are also paid to Dorsey & Whitney LLP, the
law firm of which Michael J. Radmer, secretary of FAIF, FAF and FASF, is a
partner. The following table sets forth information concerning aggregate
compensation paid to each director of FAIF (i) by FAIF (column 2), and (ii) by
FAIF, FAF and FASF collectively (column 5) during the fiscal year ended
September 30, 1997. No executive officer or affiliated person of FAIF had
aggregate compensation from FAIF in excess of $60,000 during such fiscal year:
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
Total
Compensation
Aggregate Pension or Retirement Estimated From Registrant
Name of Compensation Benefits Accrued as Annual Benefits and Fund Complex
Person, Position From Registrant Part of Fund Expenses Upon Retirement Paid to Directors
- -------------------------------- --------------- --------------------- --------------- -----------------
<S> <C> <C> <C> <C>
Robert J. Dayton, Director $12,632 -0- -0- $35,500
Andrew M. Hunter III, Director $ 9,046 -0- -0- $23,250
Leonard W. Kedrowski, Director $12,291 -0- -0- $32,700
Robert L. Spies, Director $ 9,331 -0- -0- $24,050
Joseph D. Strauss, Director $14,974 -0- -0- $39,925
Virginia L. Stringer, Director $15,254 -0- -0- $39,925
Roger A. Gibson, Director* -0- -0- -0- -0-
- ------------------
* Not a director during fiscal year ended September 30, 1997.
</TABLE>
<PAGE>
INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISORY AGREEMENT
First Bank National Association (the "Adviser"), 601 Second Avenue
South, Minneapolis, Minnesota 55480, serves as the investment adviser and
manager of the Funds through its First Asset Management group. The Adviser is a
national banking association that has professionally managed accounts for
individuals, insurance companies, foundations, commingled accounts, trust funds,
and others for over 75 years. The Adviser is a subsidiary of U.S. Bancorp, 601
Second Avenue South, Minneapolis, Minnesota 55480, which is a regional,
multi-state bank holding company headquartered in Minneapolis, Minnesota. U.S.
Bancorp is comprised of 6 banks and several trust and nonbank subsidiaries, with
over 1,000 banking locations. Through its subsidiaries, U.S. Bancorp provides
consumer banking, commercial lending, financing of import/export trade, foreign
exchange and investment services as well as mortgage banking, trust, commercial
and agricultural finance, data processing, leasing and brokerage services.
Pursuant to an Investment Advisory Agreement dated April 2, 1991 (the
"Advisory Agreement"), the Funds engage the Adviser to act as investment adviser
for and to manage the investment of the assets of the Funds. Each Fund pays the
Adviser monthly fees calculated on an annual basis equal to 0.70% of its average
daily net assets.
In addition to the investment advisory fee, each Fund pays all its
expenses that are not expressly assumed by the Adviser or any other organization
with which the Fund may enter into an agreement for the performance of services.
Each Fund is liable for such nonrecurring expenses as may arise, including
litigation to which the Fund may be a party, and it may have an obligation to
indemnify its directors and officers with respect to such litigation.
The Funds had not commenced operations as of September 30, 1997, the
end of FAIF's most recent fiscal year. They therefore paid no advisory fees to
the Adviser during such year.
ADMINISTRATION AGREEMENT
SEI Investments Management Corporation (the "Administrator") serves as
administrator for the Funds pursuant to an Administration Agreement between it
and the Funds. The Administrator is a wholly-owned subsidiary of SEI Investments
Company, which also owns the Funds' distributor. See "-- Distributor and
Distribution Plans" below. Under the Administration Agreement, the Administrator
provides administrative personnel and services to the Funds for a fee as
described in the Funds' Prospectuses. These services include, among others,
regulatory reporting, fund and portfolio accounting, shareholder reporting
services, and compliance monitoring services.
The Funds have approved the appointed of First Bank National Association
as a sub-administrator (the "Sub-Administrator") effective January 1, 1998. It
is contemplated that the Sub-Administrator will assist the Administrator in the
performance of administrative services for the Funds.
The Funds had not commenced operations as of September 30, 1997, the
end of FAIF's most recent fiscal year. They therefore paid no fees to the
Administrator or Sub-Administrator during such year.
DISTRIBUTOR AND DISTRIBUTION PLANS
SEI Investments Distribution Co. (the "Distributor") serves as the
distributor for the Class A, Class B and Class C Shares of the Funds. The
Distributor is a wholly-owned subsidiary of SEI Investments Company, which also
owns the Funds' Administrator. See "-- Administration Agreement" above.
<PAGE>
The Distributor serves as distributor for the Class A and Class C
Shares pursuant to a Distribution Agreement dated February 10, 1994 (the "Class
A/Class C Distribution Agreement") between itself and the Funds, and as
distributor for the Class B Shares pursuant to a Distribution and Service
Agreement dated August 1, 1994, as amended September 14, 1994 (the "Class B
Distribution and Service 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 Distribution Agreements provide that shares of the Funds are
distributed through the Distributor and, with respect to Class A and Class B
Shares, 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.
The Distributor receives no compensation for distribution of the Class
C Shares. With respect to the Class A Shares, the Distributor receives all of
the front-end sales charges paid upon purchase of the Funds' shares except for a
portion (as disclosed in the Prospectuses) which may be re-allowed to
Participating Institutions. The Class A Shares of each Fund also pay a
shareholder servicing fee to the Distributor monthly at the annual rate of 0.25%
of each Fund's Class A average daily net assets, which fee may be used by the
Distributor to provide compensation for shareholder servicing activities with
respect to the Class A Shares of the kinds described in the Retail Class
Prospectuses.
The Class B Shares of each Fund pay to the Distributor a sales support
fee at an annual rate of 0.75% of the average daily net assets of the Class B
Shares of such Fund, which fee may be used by the Distributor to provide
compensation for sales support and distribution activities with respect to the
Class B Shares. This fee is calculated and paid each month based on average
daily net assets of Class B of each Fund 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 each Fund's Class B Shares pursuant to
a service plan (the "Class B Service Plan"), which fee may be used by the
Distributor to provide compensation for shareholder servicing activities with
respect to the Class B Shares of a Fund of the kinds described in the Retail
Class Prospectuses. Although Class B Shares are sold without a front-end sales
charge, the Distributor pays a total of 4.25% of the amount invested (including
a pre-paid service fee of 0.25% of the amount invested) to dealers who sell
Class B Shares (excluding exchanges from other Class B Shares in the First
American family). The servicing fee payable under the Class B Service Plan is
prepaid as described above.
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 FAIF and by the vote of the majority of those
Board members of FAIF who are not interested persons of FAIF and who have no
direct or indirect financial interest in the operation of FAIF's Rule 12b-1
Plans of Distribution or in any agreement related to such Plans.
FAIF has adopted plans of distribution with respect to the Class A and
Class B Shares of the Funds, respectively, pursuant to Rule 12b-1 under the 1940
Act (collectively, the "Plans"). 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 Distributor to retain the sales
charges paid upon purchase of Class A and Class B Shares. Each of the Plans 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. The Class B Plan authorizes the Distributor
to retain the contingent deferred sales charge applied on redemptions of Class B
Shares, except that portion which is re-allowed to Participating Institutions.
The Plans recognize that the Distributor, any Participating
<PAGE>
Institution, the Administrator, and the Adviser, in their discretion, may from
time to time use their own assets to pay for certain additional costs of
distributing Class A and Class B Shares. Any such arrangements to pay such
additional costs may be commenced or discontinued by the Distributor, any
Participating Institution, the Administrator, or the Adviser at any time.
The Funds had not commenced operations as of September 30, 1997, the
end of FAIF's most recent fiscal year. They therefore paid no distribution or
shareholder servicing fees during such year.
CUSTODIAN; TRANSFER AGENT; COUNSEL; ACCOUNTANTS
The custodian of the Funds' assets is First Trust National Association
(the "Custodian"), First Trust Center, 180 East Fifth Street, St. Paul,
Minnesota 55101. The Custodian is a subsidiary of U.S. Bancorp, which also owns
the Adviser.
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.
All of the instruments representing the investments of the Funds and all cash is
held by the Custodian or, as described in the Prospectuses for International
Index Fund, by a sub-custodian with respect to such Fund. The Custodian or such
sub-custodian delivers securities against payment upon sale and pays for
securities against delivery upon purchase. The Custodian also remits Fund assets
in payment of Fund expenses, pursuant to instructions of FAIF's officers or
resolutions of the Board of Directors.
As compensation for its services to the Funds, the Custodian is paid a
monthly fee by each Fund calculated on an annual basis equal to, for Small Cap
Value Fund, 0.03% of Small Cap Value Fund's average daily net assets, and, for
International Index Fund, 0.10% of International Index 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 FAIF.
DST Systems, Inc., 1004 Baltimore, Kansas City, Missouri 64105, is
transfer agent and dividend disbursing agent for the shares of the Funds.
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, acts as the Funds' independent auditors, providing audit services
including audits of the annual financial statements and assistance and
consultation in connection with SEC filings.
PORTFOLIO TRANSACTIONS AND ALLOCATION OF BROKERAGE
Decisions with respect to placement of the Funds' portfolio
transactions are made by the Adviser. The Funds' policy is to seek to place
portfolio transactions with brokers or dealers who will execute transactions as
efficiently as possible and at the most favorable price. The Adviser may,
however, select a broker or dealer to effect a particular transaction without
communicating with all brokers or dealers who might be able to effect such
transaction because of the volatility of the market and the desire of the
Adviser to accept a particular price for a security because the price offered by
the broker or dealer meets guidelines for profit, yield or both. Many of the
portfolio transactions involve payment of a brokerage commission by the
appropriate Fund. In some cases, transactions are with dealers or issuers who
act as principal for their own accounts and not as brokers. Transactions
effected on a principal basis are made without the payment of brokerage
commissions but at net prices, which
<PAGE>
usually include a spread or markup. In effecting transactions in
over-the-counter securities, the Funds deal with market makers unless it appears
that better price and execution are available elsewhere.
While the Adviser does not deem it practicable and in the Funds' best
interest to solicit competitive bids for commission rates on each transaction,
consideration will regularly be given by the Adviser to posted commission rates
as well as to other information concerning the level of commissions charged on
comparable transactions by other qualified brokers. The Funds had not commenced
operations as of September 30, 1997, the end of FAIF's most recent fiscal year.
They therefore paid no commissions during such year.
It is expected that International Index Fund will purchase most foreign
equity securities in the over-the-counter markets or stock exchanges located in
the countries in which the respective principal offices of the issuers of the
various securities are located if that is the best available market. The fixed
commissions paid in connection with most such foreign stock transactions
generally are higher than negotiated commissions on United States transactions.
There generally is less governmental supervision and regulation of foreign stock
exchanges than in the United States. Foreign securities settlements may in some
instances be subject to delays and related administrative uncertainties.
Foreign equity securities may be held in the form of American
Depositary Receipts, or ADRs, European Depositary Receipts, or EDRs, or
securities convertible into foreign equity securities. ADRs and EDRs may be
listed on stock exchanges or traded in the over-the-counter markets in the
United States or overseas. The foreign and domestic debt securities and money
market instruments in which the Funds may invest are generally traded in the
over-the-counter markets.
Subject to the policy of seeking favorable price and execution for the
transaction size and risk involved, in selecting brokers and dealers other than
the Distributor and determining commissions paid to them, the Adviser may
consider ability to provide supplemental performance, statistical and other
research information as well as computer hardware and software for research
purposes for consideration, analysis and evaluation by the staff of the Adviser.
In accordance with this policy, the Funds do not execute brokerage transactions
solely on the basis of the lowest commission rate available for a particular
transaction. Subject to the requirements of favorable price and efficient
execution, placement of orders by securities firms for the purchase of shares of
the Funds may be taken into account as a factor in the allocation of portfolio
transactions.
Research services that may be received by the Adviser 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 issuers, industries, securities, economic
factors and trends, portfolio strategy, and the performance of accounts. The
research services may allow the Adviser to supplement its own investment
research activities and enable the Adviser to obtain the views and information
of individuals and research staffs of many different securities firms prior to
making investment decisions for the Funds. To the extent portfolio transactions
are effected with brokers and dealers who furnish research services, the Adviser
would receive a benefit, which is not capable of evaluation in dollar amounts,
without providing any direct monetary benefit to the Funds from these
transactions. Research services furnished by brokers and dealers used by the
Funds for portfolio transactions may be utilized by the Adviser in connection
with investment services for other accounts and, likewise, research services
provided by brokers and dealers used for transactions of other accounts may be
utilized by the Adviser in performing services for the Funds. The Adviser
determines the reasonableness of the commissions paid in relation to their view
of the value of the brokerage and research services provided, considered in
terms of the particular transactions and their overall responsibilities with
respect to all accounts as to which they exercise investment discretion.
The Adviser has not entered into any formal or informal agreements with
any broker or dealer, and do not maintain any "formula" that must be followed in
connection with the placement of Fund
<PAGE>
portfolio transactions in exchange for research services provided to the
Adviser, except as noted below. The Adviser may, from time to time, maintain an
informal list of brokers and dealers that will be used as a general guide in the
placement of Fund business in order to encourage certain brokers and dealers to
provide the Adviser with research services, which the Adviser anticipates will
be useful to it. Any list, if maintained, would be merely a general guide, which
would be used only after the primary criteria for the selection of brokers and
dealers (discussed above) had been met, and, accordingly, substantial deviations
from the list could occur. The Adviser would authorize the Funds to pay an
amount of commission for effecting a securities transaction in excess of the
amount of commission another broker or dealer would have charged only if the
Adviser determined in good faith that the amount of such commission was
reasonable in relation to the value of the brokerage and research services
provided by such broker or dealer, viewed in terms of either that particular
transaction or the overall responsibilities of the Adviser with respect to the
Funds.
The Funds do not effect any brokerage transactions in their portfolio
securities with any broker or dealer affiliated directly or indirectly with the
Adviser, or the Distributor unless such transactions, including the frequency
thereof, the receipt of commissions payable in connection therewith, and the
selection of the affiliated broker or dealer effecting such transactions are not
unfair or unreasonable to the shareholders of the Funds, as determined by the
Board of Directors. Any transactions with an affiliated broker or dealer must be
on terms that are both at least as favorable to the Funds as the Funds can
obtain elsewhere and at least as favorable as such affiliated broker or dealer
normally gives to others.
When two or more clients of the Adviser are simultaneously engaged in
the purchase or sale of the same security, the prices and amounts are allocated
in accordance with a formula considered by the Adviser to be equitable to each
client. In some cases, this system could have a detrimental effect on the price
or volume of the security as far as each client is concerned. In other cases,
however, the ability of the clients to participate in volume transactions may
produce better executions for each client.
CAPITAL STOCK
As of July 11, 1997, no shares of the Funds were outstanding.
NET ASSET VALUE AND PUBLIC OFFERING PRICE
The method for determining the public offering price of the shares of a
Fund is summarized in the Retail Class Prospectus under the captions "Investing
in the Funds" and "Determining the Price of Shares" and in the Institutional
Class Prospectus under the caption "Purchases and Redemptions of Shares." The
net asset value of each Fund's shares is determined on each day during which the
New York Stock Exchange (the "NYSE") is open for business. The NYSE is not open
for business on the following holidays (or on the nearest Monday or Friday if
the holiday falls on a weekend): New Year's Day, Martin Luther King, Jr. Day,
Washington's Birthday (observed), Good Friday, Memorial Day (observed),
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. Each year the
NYSE may designate different dates for the observance of these holidays as well
as designate other holidays for closing in the future. To the extent that the
securities of a Fund are traded on days that the Fund is not open for business,
such Fund's net asset value per share may be affected on days when investors may
not purchase or redeem shares. This may occur, for example, where a Fund holds
securities which are traded in foreign markets.
<PAGE>
FUND PERFORMANCE
SEC STANDARDIZED PERFORMANCE FIGURES
YIELD FOR THE FUNDS. Yield for the Funds is a measure of the net
investment income per share (as defined) earned over a 30-day period expressed
as a percentage of the maximum offering price of a Fund's shares at the end of
the period. Such yield figures are determined by dividing the net investment
income per share earned during the specified 30-day period by the maximum
offering price per share on the last day of the period, according to the
following formula:
Yield = 2 [((a - b) / cd) + 1)(6th power) - 1]
Where: a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = average daily number of shares outstanding during the
period that were entitled to receive dividends
d = maximum offering price per share on the last day of the
period
TOTAL RETURN. Total return measures both the net investment income
generated by, and the effect of any realized or unrealized appreciation or
depreciation of, the underlying investments in a Fund's portfolio. The Funds'
average annual and cumulative total return figures are computed in accordance
with the standardized methods prescribed by the Securities and Exchange
Commission.
AVERAGE ANNUAL TOTAL RETURN. Average annual total return figures are
computed by determining the average annual compounded rates of return over the
periods indicated in the advertisement, sales literature or shareholders'
report, that would equate the initial amount invested to the ending redeemable
value, according to the following formula:
P(1 + T)(nth power) = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value at the end of the period of a
hypothetical $1,000 payment made at the beginning of
such period
This calculation (i) assumes all dividends and distributions are reinvested at
net asset value on the appropriate reinvestment dates as described in the
Prospectuses, and (ii) deducts (a) the maximum sales charge from the
hypothetical initial $1,000 investment (if applicable), and (b) all recurring
fees, such as advisory fees, charged as expenses to all shareholder accounts.
CUMULATIVE TOTAL RETURN. Cumulative total return is computed by finding
the cumulative compounded rate of return over the period indicated in the
advertisement that would equate the initial amount invested to the ending
redeemable value, according to the following formula:
CTR = ((ERV - P) / P ) 10
Where: CTR = cumulative total return
ERV = ending redeemable value at the end of, the period of a
hypothetical $1,000 payment made at the beginning of
such period; and
P = initial payment of $1,000
<PAGE>
This calculation (i) assumes all dividends and distributions are reinvested at
net asset value on the appropriate reinvestment dates as described in the
Prospectuses, and (ii) deducts (a) the maximum sales charge from the
hypothetical initial $1,000 investment (if applicable), and (b) all recurring
fees, such as advisory fees, charged as expenses to all shareholder accounts.
NON-STANDARD DISTRIBUTION RATES
HISTORICAL DISTRIBUTION RATES. The Funds' historical annualized
distribution rates are computed by dividing the income dividends of a Fund for a
stated period by the maximum offering price on the last day of such period.
ANNUALIZED CURRENT DISTRIBUTION RATES. The Funds' annualized current
distribution rates are computed by dividing a Fund's income dividends for a
specified month (or three-month period, in the case of an equity Fund) by the
number of days in that month (or three-month period, in the case of an equity
Fund) and multiplying by 365, and dividing the resulting figure by the maximum
offering price on the last day of the specified period.
CERTAIN PERFORMANCE COMPARISONS
The Funds may compare their performance to that of certain published or
otherwise widely disseminated indices or averages compiled by third parties. The
Funds, and the indices and averages to which they may compare their performance,
are as follows, among others:
SMALL CAP VALUE FUND may compare its performance to the RUSSELL 2000
INDEX, which is a broadly diversified index consisting of approximately 2,000
small capitalization common stocks that can be used to compare to the total
returns of funds whose portfolios are invested primarily in small capitalization
common stocks. Small Cap Value Fund also may compare its performance to the
LIPPER SMALL CAP AVERAGE, which is an average of funds which invest primarily in
companies with market capitalizations of less than $1 billion at the time of
purchase.
INTERNATIONAL INDEX FUND may compare its performance to the Morgan
Stanley Europe, Australia, Far East Composite Index which is an aggregate of 15
individual country indices that collectively represent many of the major markets
in the world, excluding the United States and Canada. International Index Fund
also may compare its performance to the LIPPER INTERNATIONAL AVERAGE, which is
an average of funds which primarily invest in equity securities whose primary
trading markets are outside the United States.
Each of the Funds also may compare its performance to the CONSUMER
PRICE INDEX, which is a measure of the average change in prices over time in a
fixed market basket of goods and services.
PORTFOLIO TURNOVER
The portfolio turnover rate for a Fund is calculated by dividing the
lesser of purchases or sales by such Fund of investment securities for a
particular fiscal year by the monthly average value of investment securities
owned by the Fund during the same fiscal year. A 100% portfolio turnover rate
would occur, for example, if the lesser of the value of purchases or sales of
investment securities for a particular year were equal to the average monthly
value of the investment securities owned during such year. Adviser estimates
that the annual portfolio turnover rate of Small Cap Value Fund may exceed 100%.
Although International Index Fund will use a passive, indexing approach to
investing, the Fund may engage in a substantial number of portfolio
transactions. The rate of portfolio turnover will be a limiting factor when the
Adviser considers whether to purchase or sell securities for the Fund only to
the extent that the Adviser will consider the impact of transaction costs on
International Index Fund's
<PAGE>
tracking error. Changes in securities comprising the Morgan Stanley Europe,
Australia, Far East Composite Index, (the "EAFE Index") will tend to increase
International Index Fund's portfolio turnover rate, as the Adviser restructures
the Fund's securities holdings to reflect changes in the EAFE Index.
TAXATION
The tax status of the Funds and the distributions that the Funds will
make to shareholders are summarized in the Prospectuses in the sections entitled
"Income Taxes." Each Fund intends to fulfill the requirements of Subchapter M of
the Internal Revenue Code of 1986, as amended (the "Code"), as a regulated
investment company. If so qualified, each Fund will not be liable for federal
income taxes to the extent it distributes its taxable income to its
shareholders.
To qualify under Subchapter M for tax treatment as a regulated
investment company, each Fund must, among other things: (1) derive at least 90%
of its gross income from dividends, interest, and certain other types of
payments related to its investment in stock or securities; (2) distribute to its
shareholders at least 90% of its investment company taxable income (as that term
is defined in the Code determined without regard to the deduction for dividends
paid) and 90% of its net tax-exempt income; (3) derive less than 30% of its
annual gross income from the sale or other disposition of stock, securities,
options, futures, or forward contracts held for less than three months; and (4)
diversify its holdings so that, at the end of each fiscal quarter of the Fund,
(a) at least 50% of the market value of the Fund's assets is represented by
cash, cash items, U.S. Government securities and securities of other regulated
investment companies, and other securities, with these other securities limited,
with respect to any one issuer, to an amount no greater than 5% of the Fund's
total assets and no greater than 10% of the outstanding voting securities of
such issuer, and (b) not more than 25% of the market value of the Fund's total
assets is invested in the securities of any one issuer (other than U.S.
Government securities or securities of other regulated investment companies).
Each Fund is subject to a nondeductible excise tax equal to 4% of the
excess, if any, of the amount required to be distributed for each calendar year
over the amount actually distributed. For this purpose, any amount on which the
Fund is subject to corporate-level income tax is considered to have been
distributed. In order to avoid the imposition of this excise tax, each Fund must
declare and pay dividends representing 98% of its net investment income for that
calendar year and 98% of its capital gains (both long-term and short-term) for
the twelve-month period ending October 31 of the calendar year.
Any loss on the sale or exchange of shares of a Fund generally will be
disallowed to the extent that a shareholder acquires or contracts to acquire
shares of the same Fund within 30 days before or after such sale or exchange.
Furthermore, if Fund shares with respect to which a long-term capital gain
distribution has been made are held for less than six months, any loss on the
sale or exchange of such shares will be treated as a long-term capital loss to
the extent of such long-term capital gain distribution.
For federal tax purposes, if a shareholder exchanges shares of a Fund
for shares of any other FAIF Fund pursuant to the exchange privilege (see
"Investing in the Funds -- Exchange Privilege" in the Prospectus for Class A and
Class B Shares, and "Purchases and Redemptions of Shares -- Exchange Privilege"
in the Prospectus for Class C Shares), such exchange will be considered a
taxable sale of the shares being exchanged. Furthermore, if a shareholder of
Retail Class Shares carries out the exchange within 90 days of purchasing shares
in a fund on which he or she has incurred a sales charge, the sales charge
cannot be taken into account in determining the shareholder's gain or loss on
the sale of those shares to the extent that the sales charge that would have
been applicable to the purchase of the later-acquired shares in the other fund
is reduced because of the exchange privilege. However, the amount of any sales
charge that may not be taken into account in determining the shareholder's gain
or
<PAGE>
loss on the sale of the first-acquired shares may be taken into account in
determining gain or loss on the eventual sale or exchange of the later-acquired
shares.
Dividends generally are taxable to shareholders at the time they are
paid. However, dividends declared in October, November and December, made
payable to shareholders of record in such a month and actually paid in January
of the following year are treated as paid and are thereby taxable to
shareholders as of December 31.
If a Fund invests in U.S. Treasury inflation-protection securities, it
will be required to treat as original issue discount any increase in the
principal amount of the securities that occurs during the course of its taxable
year. If a Fund purchases such inflation-protection securities that are issued
in stripped form either as stripped bonds or coupons, it will be treated as if
it had purchased a newly issued debt instrument having original issue discount.
Generally, the original issue discount equals the difference between the "stated
redemption price at maturity" of the obligation and its "issue price" as those
terms are defined in the Code. A Fund holding an obligation with original issue
discount is required to accrue as ordinary income a portion of such original
issue discount even though it receives no cash currently as interest payment
corresponding to the amount of the original issue discount. Because each Fund is
required to distribute substantially all of its net investment income (including
accrued original issue discount) in order to be taxed as a regulated investment
company, it may be required to distribute an amount greater than the total cash
income it actually receives. Accordingly, in order to make the required
distributions, a Fund may be required to borrow or liquidate securities. The
extent to which a Fund may liquidate securities at a gain may be limited by the
requirement that less than 30% of the Fund's gross income (on an annual basis)
consists of gains from the sale of securities held for less than three months.
Under Code Section 1256, except for the transactions the Fund has
identified as hedging transactions, each Fund is required for federal income tax
purposes to recognize as income for each taxable year its net unrealized gains
and losses on futures contracts and options as of the end of the year as well as
those actually realized during the year. Except for transactions in futures
contracts or options that are classified as part of a "mixed straddle," gain or
loss recognized with respect to such contracts or options is considered to be
60% long-term capital gain or loss and 40% short-term capital gain or loss,
without regard to the holding period of the contract. In the case of a
transaction classified as a "mixed straddle," the recognition of losses may be
deferred to a later taxable year.
Sales of forward currency contracts that are intended to hedge against
a change in the value of securities or currencies held by a Fund may affect the
holding period of such securities or currencies and, consequently, the nature of
the gain or loss on such securities or currencies upon disposition.
As stated above, the Code requires a regulated investment company to
diversity its holdings. The Internal Revenue Service has not made its position
clear regarding the treatment of futures contracts and options for purposes of
the diversification test, and the extent to which a Fund can buy or sell futures
contracts and options may be limited by this requirement.
It is expected that any net gain realized from the closing out of
futures contracts or options will be considered gain from the sale of securities
or currencies and therefore qualifying income for purposes of the 90% of gross
income from qualified sources requirement, as discussed above. In order to avoid
realizing excessive gains on securities held less than three months, each Fund
may be required to defer the closing out of futures contracts or options beyond
the time when it would otherwise be advantageous to do so. It is expected that
unrealized gains on futures contracts or options, which have been open for less
than three months as of the end of a Fund's fiscal year and which are recognized
for tax purposes, will not be considered gains on securities held less than
three months for purposes of the 30% test, as discussed above.
<PAGE>
Any realized gain or loss on closing out a futures contract or option
will generally result in a recognized capital gain or loss for tax purposes.
Code Section 988 may also apply to forward currency contracts. Under Section
988, each foreign currency gain or loss is generally computed separately and
treated as ordinary income or loss. In the case of overlap between Sections 1256
and 988, special provisions determine the character and timing of any income,
gain or loss. International Index Fund will attempt to monitor Section 988
transactions to avoid an adverse tax impact.
Each Fund will distribute to shareholders annually any net long-term
capital gains that have been recognized for federal income tax purposes
(including unrealized gains at the end of the Fund's fiscal year) on futures
contract or option contract transactions. Such distributions will be combined
with distributions of capital gains realized on the Fund's other investments.
Pursuant to the Code, distributions of net investment income by a Fund
to a shareholder who, as to the United States, is a nonresident alien
individual, nonresident alien fiduciary of a trust or estate, foreign
corporation, or foreign partnership (a "foreign shareholder") will be subject to
U.S. withholding tax (at a rate of 30% or lower treaty rate). Withholding will
not apply if a dividend paid by a Fund to a foreign shareholder is "effectively
connected" with a U.S. trade or business of such shareholder, in which case the
reporting and withholding requirements applicable to U.S. citizens or domestic
corporations will apply. Distributions of net long-term capital gains are not
subject to tax withholding but, in the case of a foreign shareholder who is a
nonresident alien individual, such distributions ordinarily will be subject to
U.S. income tax at a rate of 30% if the individual is physically present in the
U.S. for more than 182 days during the taxable year. Each Fund will report
annually to its shareholders the amount of any withholding.
The foregoing relates only to federal income taxation and is a general
summary of the federal tax law in effect as of the date of this Statement of
Additional Information.
<PAGE>
RATINGS
A rating of a rating service represents that service's opinion as to
the credit quality of the rated security. However, such ratings are general and
cannot be considered absolute standards of quality or guarantees as to the
creditworthiness of an issuer. A rating is not a recommendation to purchase,
sell or hold a security, because it does not take into account market value or
suitability for a particular investor. Market values of debt securities may
change as a result of a variety of factors unrelated to credit quality,
including changes in market interest rates.
When a security has been rated by more than one service, the ratings
may not coincide, and each rating should be evaluated independently. Ratings are
based on current information furnished by the issuer or obtained by the rating
services from other sources which they consider reliable. Ratings may be
changed, suspended or withdrawn as a result of changes in or unavailability of
such information, or for other reasons. In general, the Funds are not required
to dispose of a security if its rating declines after it is purchased, although
they may consider doing so.
RATINGS OF CORPORATE DEBT OBLIGATIONS AND MUNICIPAL BONDS
STANDARD & POOR'S CORPORATION
AAA: Securities rated AAA have the highest rating assigned by Standard
& Poor's to a debt obligation. Capacity to pay interest and repay
principal is extremely strong.
AA: Securities rated AA have a very strong capacity to pay interest and
repay principal and differ from the highest rated issues only to a
small degree.
A: Securities rated A have a strong capacity to pay interest and repay
principal, although they are somewhat more susceptible to adverse
effects of changes in circumstances and economic conditions than bonds
in higher rated categories.
BBB: Securities rated BBB are regarded as having an adequate capacity
to pay interest and repay principal. Although such securities normally
exhibit adequate protection standards, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity
to pay interest and repay principal for securities in this category
than for those in higher rated categories.
Debt rated BB, B, CCC, CC, and C by Standard & Poor's is regarded, on balance,
as predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and C the highest degree of speculation. While such
debt will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse conditions.
BB: Securities rated BB have less near-term vulnerability to default
than other speculative issues. However, they face major ongoing
uncertainties or exposure to adverse business, financial, or economic
conditions which could lead to inadequate capacity to meet timely
interest and principal payments. The BB rating category is also used
for debt subordinated to senior debt that is assigned an actual or
implied BBB- rating.
B: Securities rated B have a greater vulnerability to default but
currently have the capacity to meet interest payments and principal
repayments. Adverse business, financial, or economic conditions will
likely impair capacity or willingness to pay interest and repay
principal. The B rating category is also used for debt subordinated to
senior debt that is assigned an actual or implied BB or BB- rating.
<PAGE>
CCC: Securities rated CCC have a currently identifiable vulnerability
to default, and are dependent upon favorable business, financial, and
economic conditions to meet timely payment of interest and repayment of
principal. In the event of adverse business, financial, or economic
conditions, they are not likely to have the capacity to pay interest
and repay principal. The CCC rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied B or
B- rating.
The ratings from AA to CCC may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within the major rating categories.
MOODY'S INVESTORS SERVICE, INC.
Aaa: Securities which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and are
generally referred to as "gilt edge." Interest payments are protected
by a large or exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa: Securities which are rated Aa are judged to be of high quality by
all standards. Together with the Aaa group, they comprise what are
generally known as high grade securities. They are rated lower than the
best securities because margins of protection may not be as large as in
Aaa securities, or fluctuation of protective elements may be of greater
magnitude, or there may be other elements present which make the
long-term risks appear somewhat greater than in Aaa securities.
A: Securities which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations.
Factors giving security to principal and interest are considered
adequate, but elements may be present which suggest a susceptibility to
impairment sometime in the future.
Baa: Securities which are rated Baa are considered as medium grade
obligations, being neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the
present, but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such
securities lack outstanding investment characteristics, and in fact
have some speculative characteristics.
Ba: An issue which is rated Ba is judged to have speculative elements;
its future cannot be considered as well assured. Often the protection
of interest and principal payments may be very moderate and thereby not
well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes issues in this class.
B: An issue which is rated B generally lacks characteristics of the
desirable investment. Assurance of interest and principal payments or
of maintenance of other terms of the contract over any long period of
time may be small.
Caa: An issue which is rated Caa is of poor standing. Such an issue may
be in default or there may be present elements of danger with respect
to principal or interest.
Those securities in the Aa, A and Baa groups which Moody's believes possess the
strongest investment attributes are designated by the symbols Aa-1, A-1 and
Baa-1. Other Aa, A and Baa securities comprise the balance of their respective
groups. These rankings (1) designate the securities which offer the maximum in
security within their quality groups, (2) designate securities which can be
bought for possible upgrading in quality, and (3) additionally afford the
investor an opportunity to gauge more precisely the relative attractiveness of
offerings in the marketplace.
<PAGE>
RATINGS OF PREFERRED STOCK
STANDARD & POOR'S CORPORATION. Standard & Poor's ratings for preferred
stock have the following definitions:
AAA: An issue rated "AAA" has the highest rating that may be assigned
by Standard & Poor's to a preferred stock issue and indicates an
extremely strong capacity to pay the preferred stock obligations.
AA: A preferred stock issue rated "AA" also qualifies as a high-quality
fixed income security. The capacity to pay preferred stock obligations
is very strong, although not as overwhelming as for issues rated "AAA."
A: An issue rated "A" is backed by a sound capacity to pay the
preferred stock obligations, although it is somewhat more susceptible
to the adverse effects of changes in circumstances and economic
conditions.
BBB: An issue rated "BBB" is regarded as backed by an adequate capacity
to pay the preferred stock obligations. Whereas it normally exhibits
adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to make
payments for a preferred stock in this category than for issues in the
category.
MOODY'S INVESTORS SERVICE, INC. Moody's ratings for preferred stock
include the following:
aaa: An issue which is rated "aaa" is considered to be a top-quality
preferred stock. This rating indicates good asset protection and the
least risk of dividend impairment within the universe of preferred
stocks.
aa: An issue which is rated "aa" is considered a high grade preferred
stock. This rating indicates that there is reasonable assurance that
earnings and asset protection will remain relatively well maintained in
the foreseeable future.
a: An issue which is rate "a" is considered to be an upper medium grade
preferred stock. While risks are judged to be somewhat greater than in
the "aaa" and "aa" classifications, earnings and asset protection are,
nevertheless, expected to be maintained at adequate levels.
baa: An issue which is rated "baa" is considered to be medium grade,
neither highly protected nor poorly secured. Earnings and asset
protection appear adequate at present but may be questionable over any
great length of time.
RATINGS OF MUNICIPAL NOTES
STANDARD & POOR'S CORPORATION
SP-1: Very strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics are given a
plus (+) designation.
SP-2: Satisfactory capacity to pay principal and interest.
SP-3: Speculative capacity to pay principal and interest.
None of the Funds will purchase SP-3 municipal notes.
<PAGE>
MOODY'S INVESTORS SERVICE, INC. Generally, Moody's ratings for state
and municipal short-term obligations are designated Moody's Investment Grade
("MIG"); however, where an issue has a demand feature which makes the issue a
variable rate demand obligation, the applicable Moody's rating is "VMIG."
MIG 1/VMIG 1: This designation denotes the best quality. There is
strong protection by established cash flows, superior liquidity support
or demonstrated broad-based access to the market for refinancing.
MIG 2/VMIG 2: This designation denotes high quality, with margins of
protection ample although not so large as available in the preceding
group.
MIG 3/VMIG 3: This designation denotes favorable quality, with all
security elements accounted for, but lacking the strength of the
preceding grades. Liquidity and cash flow protection may be narrow and
market access for refinancing is likely to be less well established.
None of the Funds will purchase MIG 3/VMIG 3 municipal notes.
RATINGS OF COMMERCIAL PAPER
STANDARD & POOR'S CORPORATION. Commercial paper ratings are graded into
four categories, ranging from "A" for the highest quality obligations to "D" for
the lowest. Issues assigned the A rating are regarded as having the greatest
capacity for timely payment. Issues in this category are further refined with
the designation 1, 2 and 3 to indicate the relative degree of safety. The "A-1"
designation indicates that the degree of safety regarding timely payment is very
strong. Those issues determined to possess overwhelming safety characteristics
will be denoted with a plus (+) symbol designation. None of the Funds will
purchase commercial paper rated A-3 or lower.
MOODY'S INVESTORS SERVICE, INC. Moody's commercial paper ratings are
opinions as to the ability of the issuers to timely repay promissory obligations
not having an original maturity in excess of nine months. Moody's makes no
representation that such obligations are exempt from registration under the
Securities Act of 1933, and it does not represent that any specific instrument
is a valid obligation of a rated issuer or issued in conformity with any
applicable law. Moody's employs the following three designations, all judged to
be investment grade, to indicate the relative repayment capacity of rated
issuers:
PRIME-1: Superior capacity for repayment.
PRIME-2: Strong capacity for repayment.
PRIME-3: Acceptable capacity for repayment.
None of the Funds will purchase Prime-3 commercial paper.
<PAGE>
PART C -- OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Not applicable.
(b) Exhibits
(1) Articles of Incorporation, as amended and supplemented
through October 1997.*
(2) Bylaws, as amended through October 1997.*
(3) Not applicable.
(4) Specimen form of Common Stock Certificate. (Incorporated
by reference to Exhibit (4) to Post-Effective Amendment
No. 21.)
(5)(a) Investment Advisory Agreement dated April 2, 1991,
between Registrant and First Bank National Association,
as amended and supplemented through August 1994.
(Incorporated by reference to Exhibit (5)(a) to
Post-Effective Amendment No. 21.)
(5)(b) Amendment No. 5 to Exhibit A to Investment Advisory
Agreement. (Incorporated by reference to Exhibit (5)(b)
to Post-Effective Amendment No. 24.)
(5)(c) Sub-Advisory Agreement relating to International Fund
between First Bank National Association and Marvin &
Palmer Associates, Inc. (Incorporated by reference to
Exhibit (5)(b) to Post-Effective Amendment No. 21.)
(5)(d) Amendment No. 6 to Exhibit A to Investment Advisory
Agreement. (Incorporated by reference to Exhibit (5)(d)
to Post-Effective Amendment No. 27.)
(6)(a) Distribution Agreement [Class A and Class C] dated
February 10, 1994 between Registrant and SEI Financial
Services Company. (Incorporated by reference to Exhibit
(6)(a) to Post-Effective Amendment No. 21.)
(6)(b) Distribution and Service Agreement [Class B] dated
August 1, 1994, as amended September 14, 1994 between
Registrant and SEI Financial Services Company.
(Incorporated by reference to Exhibit (6)(b) to
Post-Effective Amendment No. 21.)
(6)(c) Form of Dealer Agreement. (Incorporated by reference to
Exhibit (6)(c) to Post-Effective Amendment No. 21.)
(7) Not applicable.
(8)(a) Custodian Agreement dated September 20, 1993, between
Registrant and First Trust National Association, as
supplemented through August 1994. (Incorporated by
reference to Exhibit (8) to Post-Effective Amendment No.
18.)
<PAGE>
(8)(b) Compensation Agreement dated as of June 1, 1995,
pursuant to Custodian Agreement. (Incorporated by
reference to Exhibit (8)(b) to Post-Effective Amendment
No. 24.)
(8)(c) Compensation Agreement dated as of January 1, 1997,
pursuant to Custodian Agreement. (Incorporated by
reference to Exhibit (8)(c) to Post-Effective Amendment
No. 27.)
(9)(a) Administration Agreement dated as of January 1, 1995
between Registrant and SEI Financial Management
Corporation. (Incorporated by reference to Exhibit
(9)(a) to Post-Effective Amendment No. 23.)
(9)(b) Transfer Agency Agreement dated as of March 31, 1994,
between Registrant and Supervised Service Company, Inc.
[superseded] (Incorporated by reference to Exhibit
(9)(b) to Post-Effective Amendment No. 21.)
(9)(c) Assignment of Transfer Agency Agreement to DST Systems,
Inc. [superseded] (Incorporated by reference to Exhibit
(9)(c) to Post-Effective Amendment No. 24.)
(9)(d) Form of Transfer Agency Agreement dated as of October 1,
1996, between Registrant and DST Systems, Inc.
(Incorporated by reference to Exhibit (9)(d) to
Post-Effective Amendment No. 27.)
(9)(e) Sub-Administration Agreement dated July 1, 1997 between
SEI and First Bank National Association.
(9)(f) Amended and Restated Administration Agreement dated
July 1, 1997 by and between Registrant and SEI
Investments Management Corporation.
(9)(g) Agreement dated July 1, 1997 between First Bank National
Association and SEI Investments Management Corporation.
(9)(h) Agreement dated July 1, 1997 between First Bank National
Association and SEI Investments Management Corporation.
(10)(a) Opinion and Consent of D'Ancona & Pflaum dated November
10, 1987. (Incorporated by reference to Exhibit (10)(a)
to Post-Effective Amendment No. 21.)
(10)(b) Opinion and Consent of Dorsey & Whitney. (Incorporated
by reference to Exhibit (10)(a) to Post-Effective
Amendment No. 15.)
(11)(a) Not applicable.
(11)(b) Opinion and Consent of Dorsey & Whitney dated November
25, 1991. (Incorporated by reference to Exhibit (11)(b)
to Post-Effective Amendment No. 21.)
(12) Not applicable.
(13) Not applicable.
<PAGE>
(14)(a) 401(k) Prototype Basic Plan Document # 02 (1989
Restatement), including Amendment Nos. 1, 2, and 3 and
sample Adoption Agreement. (Incorporated by reference to
Exhibit (14)(a) to Post-Effective Amendment No. 27.)
(14)(b) Defined Contribution Prototype Basic Plan Document # 01
(1989 Restatement), including Amendment Nos. 1 and 2 and
sample Adoption Agreement. (Incorporated by reference to
Exhibit (14)(b) to Post-Effective Amendment No. 27.)
(14)(c) IRA Applications and Documentation. (Incorporated by
reference to Exhibit (14)(c) to Post-Effective Amendment
No. 27.)
(15)(a) Form of Distribution Plan [Class A]. (Incorporated by
reference to Exhibit (15)(a) to Post-Effective Amendment
No. 21.)
(15)(b) Class B Distribution Plan. (Incorporated by reference to
Exhibit (15)(b) to Post-Effective Amendment No. 21.)
(15)(c) Service Plan [Class B]. (Incorporated by reference to
Exhibit (15)(c)) to Post-Effective Amendment No. 21.)
(16) Not applicable.
(17) Not applicable.
(18) Multiple Class Plan Pursuant to Rule 18f-3.
(Incorporated by reference to Exhibit (18) to
Post-Effective Amendment No. 23.)
(19)(a) Powers of attorney of Directors Dayton, Kedrowski,
Strauss, Stringer and Veit. (Incorporated by reference
to Exhibit (19) to Post-Effective Amendment No. 26).
(19)(b) Power of attorney of Director Hunter. (Incorporated by
reference to Exhibit (19)(b) to Post-Effective Amendment
No. 27.)
(19)(c) Consent to being named and power of attorney of director
nominee Spies. (Incorporated by reference to Exhibit
(19)(c) to Post-Effective Amendment No. 27.)
- -----------------
* Filed herewith
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None.
<PAGE>
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
The following table sets forth the number of holders of shares of each
series of Common Stock of the Registrant as of July 11, 1997:
<TABLE>
<CAPTION>
NUMBER OF RECORD HOLDERS
------------------------------------------
FUND CLASS A CLASS B CLASS C
---- ------- ------- -------
<S> <C> <C> <C>
Stock Fund................................... 2,865 4,957 159
Equity Index Fund............................ 840 1,659 20
Balanced Fund................................ 2,067 2,735 7
Asset Allocation Fund........................ 181 411 7
Equity Income Fund........................... 242 523 35
Diversified Growth Fund...................... 648 986 58
Emerging Growth Fund......................... 234 225 26
Regional Equity Fund......................... 3,113 4,553 42
Special Equity Fund.......................... 2,663 3,464 46
Technology Fund.............................. 765 1,267 21
International Fund........................... 302 346 29
Real Estate Securities Fund.................. 171 315 6
Health Sciences Fund......................... 105 135 6
Limited Term Income Fund..................... 150 0 7
Intermediate Term Income Fund................ 154 0 31
Fixed Income Fund............................ 519 833 103
Intermediate Government Bond Fund............ 183 0 13
Intermediate Tax Free Fund................... 72 0 19
Minnesota Insured Intermediate Tax
Free Fund.............................. 109 0 14
Colorado Intermediate Tax Free Fund.......... 118 0 9
Oregon Intermediate Tax Free Fund............ * * 0
California Intermediate Tax Free Fund........ 0 * 0
Micro Cap Value Fund......................... 0 0 0
Small Cap Value Fund......................... 0 0 0
International Index Fund..................... 0 0 0
---------------
* Not registered.
</TABLE>
ITEM 27. INDEMNIFICATION
The first four paragraphs of Item 27 of Part C of Pre-Effective
Amendment No. 1 to the Registrant's Registration Statement on Form N-1A, dated
November 27, 1987, are incorporated herein by reference.
On February 18, 1988 the indemnification provisions of the Maryland
General Corporation Law (the "Law") were amended to permit, among other things,
corporations to indemnify directors and officers unless it is proved that the
individual (1) acted in bad faith or with active and deliberate dishonesty, (2)
actually received an improper personal benefit in money, property or services,
or (3) in the case of a criminal proceeding, had reasonable cause to believe
that his act or omission was unlawful. The Law was also amended to permit
corporations to indemnify directors and officers for amounts paid in settlement
of stockholders' derivative suits.
<PAGE>
The Registrant undertakes that no indemnification or advance will be
made unless it is consistent with Sections 17(h) or 17(i) of the Investment
Company Act of 1940, as now enacted or hereafter amended, and Securities and
Exchange Commission rules, regulations, and releases (including, without
limitation, Investment Company Act of 1940 Release No. 11330, September 2,
1980).
Insofar as the indemnification for liability arising under the
Securities Act of 1933, as amended, may be permitted to directors, officers, and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in such Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer, or
controlling person of the Registrant in the successful defense of any action,
suit, or proceeding) is asserted by such director, officer, or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933, as amended, and will be governed by the final
adjudication of such issue.
<PAGE>
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Information on the business of the Registrant's investment adviser,
First Bank National Association (the "Adviser"), is described in the section of
the Registrant's Statement of Additional Information, filed as part of this
Registration Statement, entitled "Investment Advisory and Other Services." The
directors and officers of the Adviser are listed below, together with their
principal occupation or other positions of a substantial nature during the past
two fiscal years.
<TABLE>
<CAPTION>
OTHER POSITIONS AND OFFICES
NAME POSITIONS AND OFFICES WITH ADVISER AND PRINCIPAL BUSINESS ADDRESS
- ---- ---------------------------------- ------------------------------
<S> <C> <C>
John F. Grundhofer Chairman, President and Chief Chairman, President and Chief
Executive Officer Executive Officer of U.S. Bancorp*
Richard A. Zona Director and Vice Chairman--Finance Vice Chairman--Finance of U.S. Bancorp*
Philip G. Heasley Director and Vice Chairman Vice Chairman and Group Head of the
Retail Product Group of U.S. Bancorp*
Daniel C. Rohr Director and Executive Vice President Executive Vice President, Commercial
Banking Group of U.S. Bancorp*
J. Robert Hoffmann Director, Executive Vice President Executive Vice President and Chief
and Chief Credit Officer Credit Officer of U.S. Bancorp*
Lee R. Mitau Director, Executive Vice President, Executive Vice President, General
General Counsel and Secretary Counsel and Secretary of U.S. Bancorp;
prior to October 1995 partner in Dorsey &
Whitney LLP*
Susan E. Lester Director, Executive Vice President and Executive Vice President and Chief
Chief Financial Officer Financial Officer of U.S. Bancorp; prior
to December 1995 executive vice president
and chief financial officer of Shawmut
National Corporation.*
Larry S. Crawford Executive Vice President and General --*
Manager, Retail Banking Group
Robert J. Anderson Executive Vice President --*
John M. Murphy, Jr. Executive Vice President Executive Vice President of U.S. Bancorp;
Chairman and Chief Investment Officer,
First Trust National Association.*
Robert H. Sayre Executive Vice President Executive Vice President, Human
Resources of U.S. Bancorp*
- ---------------
* Address: 601 Second Avenue South, Minneapolis, Minnesota 55402.
</TABLE>
<PAGE>
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Furnish the name of each investment company (other than the
Registrant) for which each principal underwriter currently distributing
securities of the Registrant also acts as a principal 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 International Trust, Stepstone Funds, The Advisors' Inner Circle Fund,
Pillar Funds, CUFund, STI Classic Funds, CoreFunds, Inc., First American Funds,
Inc., The Arbor Fund, 1784 Funds, Marquis Funds, Morgan Grenfell Investment
Trust, The PBHG Funds, Inc., Inventor Funds, Inc., The Achievement Funds Trust,
Insurance Investment Products Trust, Bishop Street Funds, CrestFunds, Inc., STI
Classic Variable Trust, ARK Funds, Monitor Funds, FMB Funds, Inc., SEI Asset
Allocation Trust, Turner Funds, and First American Strategy Funds, Inc. pursuant
to distribution agreements dated November 29, 1982, July 15, 1982, December 3,
1982, July 10, 1985, January 22, 1987, August 30, 1988, January 30, 1991,
November 14, 1991, February 28, 1992, May 1, 1992, May 29, 1992, October 30,
1992, November 1, 1992, January 28, 1993, June 1, 1993, August 17, 1993, January
3, 1994, August 1, 1994, December 27, 1994, December 30, 1994, January 27, 1995,
March 1, 1995, August 18, 1995, November 1, 1995, January 11, 1996, March 1,
1996, April 1, 1996, April 29, 1996, and October 1, 1996, respectively.
The Distributor provides numerous financial services to investment
managers, pension plan sponsors, and bank trust departments. These services
include portfolio evaluation, performance measurement, and consulting services
("Funds Evaluation") and automated execution, clearing and settlement of
securities transactions ("MarketLink").
(b) Furnish the information required by the following table with
respect to each director, officer or partner of each principal underwriter named
in the answer to Item 21 of Part B. Unless otherwise noted, the business address
of each director or officer is One Freedom Valley Drive, Oaks, Pennsylvania
19456.
<TABLE>
<CAPTION>
NAME POSITIONS AND OFFICES WITH UNDERWRITER POSITIONS AND OFFICES WITH REGISTRANT
- ---- -------------------------------------- -------------------------------------
<S> <C> <C>
Alfred P. West, Jr. Director, Chairman & Chief --
Executive Officer
Henry H. Greer Director, President & Chief --
Operating Officer
Carmen V. Romeo Director, Executive Treasurer, Assistant Secretary
Vice President & Treasurer
Gilbert L. Beebower Executive Vice President --
Richard B. Lieb Executive Vice President, President-Investment --
Services Division
Leo J. Dolan, Jr. Senior Vice President --
Carl A. Guarino Senior Vice President --
Jerome Hickey Senior Vice President --
Larry Hutchinson Senior Vice President --
David G. Lee Senior Vice President President
Jack May Senior Vice President --
A. Keith McDowell Senior Vice President --
Dennis J. McGonigle Senior Vice President --
Hartland J. McKeown Senior Vice President --
Barbara J. Moore Senior Vice President --
James V. Morris Senior Vice President --
Steven Onofrio Senior Vice President --
<PAGE>
NAME POSITIONS AND OFFICES WITH UNDERWRITER POSITIONS AND OFFICES WITH REGISTRANT
- ---- -------------------------------------- -------------------------------------
Kevin P. Robins Senior Vice President, General Counsel Vice President & Assistant Secretary
& Secretary
Robert Wagner Senior Vice President --
Patrick K. Walsh Senior Vice President --
Kenneth Zimmer Senior Vice President --
Robert Aller Vice President --
Marc H. Cahn Vice President & Assistant Secretary Vice President & Assistant Secretary
Gordon W. Carpenter Vice President --
Todd Cipperman Vice President & Assistant Secretary Vice President & Assistant Secretary
Robert Crudup Vice President & Managing Director --
Ed Daly Vice President --
Jeff Drennen Vice President --
Mick Duncan Vice President & Team Leader --
Vic Galef Vice President & Managing Director --
Kathy Heilig Vice President --
Michael Kantor Vice President --
Samuel King Vice President --
Kim Kirk Vice President & Managing Director --
Donald H. Korytowski Vice President --
John Krzeminski Vice President & Managing Director --
Robert S. Ludwig Vice President & Team Leader --
Vicki Malloy Vice President & Team Leader --
Carolyn McLaurin Vice President & Managing Director --
W. Kelso Morrill Vice President --
Barbara A. Nugent Vice President & Assistant Secretary Vice President & Assistant Secretary
Sandra K. Orlow Vice President & Assistant Secretary Vice President & Assistant Secretary
Donald Pepin Vice President & Managing Director --
Larry Pokora Vice President --
Kim Rainey Vice President --
Paul Sachs Vice President --
Mark Samuels Vice President & Managing Director --
Steve Smith Vice President --
Daniel Spaventa Vice President --
Kathryn L. Stanton Vice President & Assistant Secretary Vice President & Assistant Secretary
Wayne M. Withrow Vice President & Managing Director --
William Zawaski Vice President --
James Dougherty Director of Brokerage Services --
</TABLE>
<PAGE>
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
<TABLE>
<CAPTION>
LOCATION
OF TYPE OF
REGULATION RECORD RECORD FUND
- ---------- ------ ------------------------------------------------------------- -------
<S> <C> <C> <C>
270.31a-1(a) 2 General Ledger B
2 Cash Transaction Statement D
2 Monthly Cash Summary Report M
2 Purchases Report D
2 Sales Report D
2 Realized Gain/Loss Report D
2 Securities Movement and Control List of Assets for Close of
Business B
270.31a-1(b)(1) 2 Daily Portfolio Transaction Detail D
2 Daily Settled Purchase and Sales Journal D
2 Money Market Monthly Transaction Journal M
2 Money Market General Ledger Activity Journal M
270.31a-1(b)2(i) 2 General Ledger B
2 Money Market General Ledger Activity Journal M
2 Open Trades/Secs. Out for Transfer Report D
2 Securities Movement and Control List of Assets for Close of
Business B
2 Federal Reserve 3E Safe-Keeping Acct. Listing of Securities
held by the Fund B
2 Div. Income Summary Report D
2 Div. and Interest Receivable Report D
2 Earned Income Report B
2 Money Market Daily Accrual Report M
2 Money Market Daily Amortization Report M
2 Statement of Condition B
270.31a-1(b)2(ii) 2 Fund Master Ledger D
2 Corporate Action Announcement Report D
2 Purchases Report D
2 Sales Report D
270.31a-1(b)2(iii) 2 Brokerage Alloc/Commission Detail Report D
270.31a-1(b)2(iv) 1 Shareholder Master File -- CRT B
1 Shareholder History File -- CRT B
270.31a-1(b)3 2 Fund Master Ledger D
270.31a-1(b)4 1 Articles of Incorporation B
1 Declaration of Trust B
1 By-Laws B
1 Minute Books B
270.31a-1(b)5 1 Trade Tickets B
2 Purchase Report D
2 Sales Report D
270.31a-1(b)5 1 Trade Tickets B
2 Purchase Report D
2 Sales Report D
270.31a-1(b)6 1 Trade Tickets B
270.31a-1(b)7 2 Fund Master Ledger D
270.31a-1(b)8 2 Statement of Condition B
2 General Ledger B
2 Money Market General Ledger Activity Journal M
<PAGE>
LOCATION
OF TYPE OF
REGULATION RECORD RECORD FUND
- ---------- ------ ------------------------------------------------------------- -------
270.31a-1(b)9 2 Brokerage Alloc./Commission Detail Report D
1 Brokerage Commission Report B
1 Reduction and Commission Report D
1 Quarterly Brokerage Log B
270.31a-1(b)10 1 Custodian Blanket Authorization B
1 Portfolio Manager Signoff B
270.31a-1(b)11 1 Portfolio Manager Signoff B
270.31a-1(b)12 2 All supporting documentation B
270.31a-1(c) Not applicable
270.31a-1(d) 1 Director Payments thru Fund Journal B
1 Exchange Purchase Journal B
1 Confirmed Payments Journal B
1 Fiduciary Contribution Journal B
1 Direct Payments Journal B
1 Direct Redemptions Journal B
2 General Ledger B
1 Shareholder Master File-- CRT B
1 Shareholder History File-- CRT B
1 Daily Div. Close-out Journal B
1 Asset Transfer/Rollover Journal B
1 Redemption Check Register B
1 Purchase Cancellations Journal B
1 Redemption Cancellation Journal B
1 Fail/Free Report B
1 Broker/Dealer Order Ticket B
1 Inv. Services Order Breakdowns B
1 EDGE Transaction Journal B
1 Shareholder Receipt-- Retail B
1 Account Application-- Retail B
1 Additional Deposit Slip-- Retail B
1 Trade Cancel Form B
1 Confirmation Statement B
1 Shareholder Statement B
1 Form U-4 B
1 Fingerprint Card B
1 Form U-4 Status Report B
1 Form U-4 Score Report B
1 Form U-5 B
270.31a-1(e) Not applicable
270.31a-1(f) 2 General Ledger B
1 Portfolio Manager Signoff B
1 Trade Tickets B
270.31a-2(a)(1) 2 Daily Portfolio Transaction Detail D
2 Daily Settled Pur. and Sales Journal D
2 Money Market Monthly Transaction Journal M
2 Money Market General Ledger Activity Journal M
2 Open Trades/Secs. Out for Transfer Report D
<PAGE>
LOCATION
OF TYPE OF
REGULATION RECORD RECORD FUND
- ---------- ------ ------------------------------------------------------------- -------
2 Securities Movement and Control List of Assets for Close of
Business B
2 Fed. Reserve 3E Safe-Keeping Acct. Listing of Securities held
by the Fund B
270.31a-2(a)(1) 2 Div. Income Summary Report D
2 Div. and Interest Receivable Report D
2 Earned Income Report B
2 Money Market Daily Accrual Report M
2 Money Market Daily Amortization Report M
2 Statement of Condition B
2 Fund Master Ledger D
2 Corporate Action Announcement Report D
2 Brokerage Alloc./Commission Detail Report D
1 Shareholder Master File-- CRT B
1 Shareholder History File-- CRT B
1 Declaration of Trust B
1 By-laws B
1 Minute Books B
270.31a-2(a)(2) 2 Purchases Report D
2 Sales Report D
2 General Ledger B
2 Money Market General Ledger Activity Journal M
2 Statement of Condition B
2 Fund Master Ledger D
2 Brokerage Alloc./Commission Detail Report D
1 Trade Tickets B
1 Brokerage Commission Report B
1 Reduction and Commission Report D
1 Quarterly Brokerage Log B
1 Custodian Blanket Authorization B
1 Portfolio Manager Signoff B
270.31a-2(a)(3) 1 Sales Literature File B
270.31a-2(b) Not applicable
270.31a-2(c) 1 Director Payments thru Fund Journal B
1 Exchange Purchase Journal B
1 Confirmed Payments Journal B
1 Fiduciary Contribution Journal B
1 Direct Payments Journal B
1 Direct Redemptions Journal B
2 General Ledger B
1 Shareholder Master File-- CRT B
1 Shareholder History File-- CRT B
1 Daily Div. Close-Out Journal B
1 Asset Transfer/Rollover Journal B
1 Redemption Check Register B
1 Purchase Cancellations Journal B
1 Redemption Cancellation Journal B
1 Fail/Free Report B
<PAGE>
LOCATION
OF TYPE OF
REGULATION RECORD RECORD FUND
- ---------- ------ ------------------------------------------------------------- -------
1 Broker/Dealer Order Ticket B
1 Inv. Services Order Breakdowns B
1 EDGE Transaction Journal B
1 Shareholder Receipt-- Retail B
1 Account Application-- Retail B
1 Additional Deposit Slip-- Retail B
1 Trade Cancel Form B
270.31a-2(c) 1 Confirmation Statement B
1 Shareholder Statement B
1 Form U-4 B
1 Fingerprint Card B
1 Form U-4 Status Report B
1 Form U-4 Score Report B
1 Form U-5 B
270.31a-2(d) Not applicable
270.31a-2(e) 2 General Ledger B
1 Portfolio Manager Signoff B
1 Trade Tickets B
270.31a-2(f)(1) 1 Microfilm B
270.31a-2(f)(2) 1 Retention Plan B
270.31a-2(f)(3) Not applicable
270.31a-3 1 Custodian Agreement B
(1) SEI Investments Management Corporation and SEI Investments Distribution
Co. Oaks, Pennsylvania 19456
(2) First Trust National Association
180 East Fifth Street
St. Paul, Minnesota 55101
B = Both D = Debt Equity M = Money Market
</TABLE>
ITEM 31. MANAGEMENT SERVICES
Not applicable.
ITEM 32. UNDERTAKINGS
Registrant undertakes to call a meeting of shareholders for the purpose
of voting upon the question of removal of a Director(s) when requested in
writing to do so by the holders of at least 10% of Registrant's outstanding
shares and in connection with such meetings to comply with the provisions of
Section 16(c) of the Investment Company Act of 1940 relating to shareholder
communications.
Registrant, on behalf of Small Cap Value Fund and International Index
Fund, undertakes to file a post-effective amendment, using financial statements
which need not be certified, within four to six months from the date such funds
commence operations.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, as amended, the Registrant has duly caused this
Post-Effective Amendment to its Registration Statement No. 33-16905 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Oaks, Commonwealth of Pennsylvania, on the 5th day of November, 1997.
FIRST AMERICAN INVESTMENT FUNDS, INC.
ATTEST: /s/ Stephen G. Meyer By /s/ Kathryn L. Stanton
----------------------------- ----------------------------------------
Stephen G. Meyer Kathryn L. Stanton, Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below by the following
persons in the capacity and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Stephen G. Meyer Controller (Principal **
- ------------------------------- Financial and Accounting
Stephen G. Meyer Officer)
* Director **
- -------------------------------
Robert J. Dayton
* Director **
- -------------------------------
Andrew M. Hunter III
* Director **
- -------------------------------
Robert L. Spies
* Director **
- -------------------------------
Leonard W. Kedrowski
* Director **
- -------------------------------
Joseph D. Strauss
* Director **
- -------------------------------
Virginia L. Stringer
Director **
- -------------------------------
Roger A. Gibson
* By: /s/ Kathryn L. Stanton
- -------------------------------
Kathryn L. Stanton
Attorney in Fact
** November 5, 1997.
EXHIBIT 1
ARTICLES OF AMENDMENT AND RESTATEMENT
OF
FIRST AMERICAN INVESTMENT FUNDS, INC.
First American Investment Funds, Inc., a Maryland corporation, having
its principal office in Baltimore, Maryland (the"Corporation"), hereby certifies
to the State Department of Assessments and Taxation of Maryland that:
FIRST: The Articles of Incorporation of the Corporation are amended and
restated in their entirety to read as follows:
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
FIRST AMERICAN INVESTMENT FUNDS, INC.
ARTICLE I
NAME
The name of the corporation (hereinafter referred to as the
"Corporation") is "First American Investment Funds, Inc."
ARTICLE II
PURPOSES AND POWERS
The purposes for which the Corporation is formed are to engage in,
conduct, operate and carry on the business of an open-end management investment
company under the Investment Company Act of 1940 (including any amendment
thereof or other applicable Act of Congress hereafter enacted) (hereinafter
called the "1940 Act"), and to do any and all acts or things as are necessary,
convenient, appropriate, incidental or customary therewith.
ARTICLE III
PRINCIPAL OFFICE AND RESIDENT AGENT
The address of the principal office of the corporation in the State of
Maryland is:
First American Investment Funds, Inc.
c/o The Corporation Trust Incorporated
32 South Street
Baltimore, Maryland 21202
The name and address of the resident agent of the Corporation in the
State of Maryland is:
The Corporation Trust Incorporated
32 South Street
Baltimore, Maryland 21202
The resident agent is a corporation organized under the laws of the
State of Maryland.
<PAGE>
ARTICLE IV
CAPITAL STOCK
Section 1. (a) The total number of shares of capital stock that the
Corporation has authority to issue is one hundred twenty billion
(120,000,000,000) shares of common stock (individually, a "Share" and,
collectively, the "Shares"), of the par value of $.0001 per Share and of the
aggregate par value of twelve million dollars ($12,000,000). Unless otherwise
prohibited by law, so long as the Corporation is registered as an open-end
investment company under the 1940 Act, the Board of Directors shall have the
power and authority, without the approval of the holders of any outstanding
Shares, to increase or decrease the number of shares of capital stock or the
number of shares of capital stock of any class or series the the Corporation has
authority to issue.
(b) Of the total authorized Shares, two billion (2,000,000,000) Shares
shall constitute the class designated as "Class A Common Shares" (formerly
referred to as "government bond fund shares"), two billion (2,000,000,000)
Shares shall constitute the class designated as "Class B Common Shares"
(formerly referred to as "fixed income fund shares"), two billion
(2,000,000,000) Shares shall constitute the class designated as "Class C Common
Shares" (formerly referred to as "municipal bond fund shares"), two billion
(2,000,000,000) Shares shall constitute the class designated as "Class D Common
Shares" (formerly referred to as "stock fund shares"), two billion
(2,000,000,000) Shares shall constitute the class designated as "Class E Common
Shares" (formerly referred to as "special equity fund shares"), two billion
(2,000,000,000) Shares shall constitute the class designated as "Class F Common
Shares" (formerly referred to as "asset allocation fund shares"), two billion
(2,000,000,000) Shares shall constitute the class designated as "Class G Common
Shares" (formerly referred to as "balanced fund shares"), two billion
(2,000,000,000) Shares shall constitute the class designated as "Class H Common
Shares" (formerly referred to as "equity index fund shares"), two billion
(2,000,000,000) Shares shall constitute the class designated as "Class I Common
Shares" (formerly referred to as "intermediate term income fund shares"), two
billion (2,000,000,000) Shares shall constitute the class designated as "Class J
Common Shares" (formerly referred to as "limited term income fund shares"), two
billion (2,000,000,000) Shares shall constitute the class designated as "Class K
Common Shares" (formerly referred to as "mortgage securities fund shares"), two
billion (2,000,000,000) Shares shall constitute the class designated as "Class L
Common Shares" (formerly referred to as "regional equity fund shares"), and the
remaining ninety-six billion (96,000,000,000) authorized Shares shall initially
be unclassified Shares. Any class of the Shares, including the Class A through
Class L Common Shares and each class hereafter created by the Board of
Directors, shall be referred to herein individually as a "Class" and
collectively as "Classes." The Board of Directors of the Corporation may further
classify or reclassify any unissued Shares into a Class or Series thereof
(whether or not such Shares have been previously classified or reclassified into
a Class or a Series thereof) from time to time by setting or changing the
preferences, conversion, or other rights, voting powers, designations,
restrictions, limitations as to dividends, qualifications, or terms or
conditions of redemption of such unissued Shares.
(c) The Shares of each Class may be further classified by the Board of
Directors into one or more series (individually a "Series" and collectively,
together with any other series within any Class, the "Series") with such
relative rights and preferences as shall be contained in Articles Supplementary
filed with the State Department of Assessments and Taxation of the State of
Maryland. All Series of a particular Class of the Corporation shall represent
the same interest in the Corporation and have identical voting, dividend,
liquidation, and other rights of any other Shares of such Class, except that the
shares of each Series within a Class may be subject to such charges and expenses
(including by way of example, but not by way of limitation, such front-end and
deferred sales charges as may be permitted under the 1940 Act and rules of the
National Association of Securities Dealers, Inc. ("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 Corporation in accordance, to the extent applicable, with the
1940 Act, which charges and expenses may differ from those applicable to another
Series within such Class, and all of the charges and expenses to which a Series
is
<PAGE>
subject shall be borne by such Series 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 Series.
(d) A description of the relative preferences, conversion, and other
rights, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption of all Classes of Shares
is as follows, unless otherwise set forth in Articles Supplementary filed with
the State Department of Assessments and Taxation of the State of Maryland
describing any further Class or Classes from time to time created by the Board
of Directors of the Corporation:
(i) Assets Belonging to a Class. All consideration received by
the Corporation for the issue or sale of Shares of a particular Class,
together with all assets in which such consideration is invested or
reinvested, all income, earnings, profits, and proceeds thereof,
including any proceeds received from the sale, exchange, or liquidation
of such assets, and any funds or payments derived from any reinvestment
of such proceeds in whatever form the same may be, shall irrevocably
belong to that Class for all purposes, subject only to the rights of
creditors, and shall be so recorded upon the books of account of the
Corporation. Such consideration, assets, income, earnings, profits, and
proceeds, including any proceeds derived from the sale, exchange, or
liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds, in whatever form the same may be
together with any General Assets (as hereinafter defined) allocated to
that Class as provided in the following sentence, are herein referred
to as "assets belonging to" that Class. In the event that there are any
assets, income, earnings, profits, or proceeds thereof, funds or
payments which are not readily identifiable as belonging to any
particular Class (collectively, "General Assets"), the Board of
Directors shall allocate such General Assets to and among any one or
more of the Classes created from time to time in the manner and on such
basis as the Board of Directors, in its sole discretion, deems fair and
equitable; and any General Assets so allocated to a particular Class
shall belong to that Class. Each such allocation by the Board of
Directors shall be conclusive and binding upon the stockholders of all
Classes for all purposes.
(ii) Liabilities Belonging to a Class. The assets belonging to
each particular Class shall be charged with the liabilities of the
Corporation in respect of that Class and with all expenses, costs,
charges, and reserves attributable to that Class, and such charges
shall be so recorded upon the books of account of the Corporation. Such
liabilities, expenses, costs, charges and reserves, together with any
General Liabilities (as hereinafter defined) allocated to that Class as
provided in the following sentence, so charged to that class are herein
referred to as "liabilities belonging to" that Class. In the event
there are any general liabilities, expenses, costs, charges, or
reserves of the Corporation which are not readily identifiable as
belonging to any particular Class (collectively, "General
Liabilities"), the Board of Directors shall allocate and charge such
General Liabilities to and among any one or more of the Classes created
from time to time in such manner and on such basis as the Board of
Directors, in its sole discretion, deems fair and equitable; and any
General Liabilities so allocated and charged to a particular Class
shall belong to that Class. Each such allocation by the Board of
Directors shall be conclusive and binding upon the stockholders of all
Classes for all purposes.
(iii) Dividends and Distributions: Dividends and distributions
on Shares of a particular Class may be paid to the holders of Shares of
that Class at such times, in such manner and from such of the income
and capital gains, accrued or realized, from the assets belonging to
that Class, after providing for actual and accrued liabilities
belonging to that Class, as the Board of Directors may determine.
(iv) Liquidation. In the event of the liquidation or
dissolution of the Corporation, the stockholders of each Class that has
been created shall be entitled to receive, as a Class, when and as
declared by the Board of Directors, the excess of the assets belonging
to that Class
<PAGE>
over the liabilities belonging to that Class. The assets so
distributable to the stockholders of any particular Class shall be
distributed among the stockholders in proportion to the number of
Shares of that Class held by them and recorded on the books of the
Corporation.
(v) Voting. On each matter submitted to a vote of the
stockholders, each holder of a Share shall be entitled to one vote for
each such Share standing in his name on the books of the Corporation,
irrespective of the Class thereof, and all Shares of all Classes shall
vote as a single class ("Single Class Voting"); provided, however, that
(A) as to any matter with respect to which a separate vote of any Class
is required by the 1940 Act or would be required under the General
Corporation Law of the State of Maryland, such requirements as to a
separate vote by that Class shall apply in lieu of Single Class Voting
as described above; (B) in the event that the separate vote
requirements referred to in (A) above apply with respect to one or more
Classes, then, subject to (C) below, the Shares of all other Classes
shall vote as a single class; (C) as to any matter which does not
affect the interest of a particular Class, only the holders of Shares
of the one or more affected Classes shall be entitled to vote; and (D)
as to any matter which affects only a particular Series, only the
holders of the Shares of the affected Series shall be entitled to vote
and, if permitted by the 1940 Act and any other applicable law, the
Series of more than one Class may vote together as a single class on
any such matter which shall have the same effect on each Series.
(e) The Corporation shall not be obligated to issue certificates
representing shares of any Class or Series of capital stock. At the time of
issue or transfer of Shares without certificates, the Corporation shall provide
the stockholder with such information as may be required under the Maryland
General Corporation Law.
Section 2. Subject to compliance with the requirements of the 1940 Act,
the Board of Directors shall have the authority to provide that Shares of any
Series shall be convertible (automatically, optionally, or otherwise) into
Shares of one or more other Series in accordance with such requirements and
procedures as may be established by the Board of Directors.
Section 3. The presence in person or by proxy of the holders of record
of 30% of the Shares of all Classes issued and outstanding entitled to vote
thereat shall constitute a quorum for the transaction of any business at all
meetings of the stockholders except as otherwise provided by law or in these
Articles of Incorporation and except that where the holders of Shares of any
Class or Series thereof are entitled to a separate vote as a Class or Series
(for purposes of this Section 3, such Series or Class, being referred to as a
"Separate Class") or where the holders of Shares of two or more (but not all)
Classes or Series thereof are required to vote as a single Class or Series for
purposes of this Section 3 (such Series or Classes being referred to as a
"Combined Class"), the presence in person or by proxy of the holders of 30% of
the Shares of that Separate Class or Combined Class, as the case may be, issued
and outstanding and entitled to vote thereat shall constitute a quorum for such
vote. If, however, a quorum with respect to all Classes, a Separate Class or a
Combined Class, as the case may be, shall not be present or represented at any
meeting of stockholders, the holders of a majority of the Shares of all Classes,
such Separate Class or such Combined Class, as the case may be, present in
person or by proxy and entitled to vote shall have power to adjourn the meeting
from time to time (to a date or dates not more than 120 days after the original
record date) as to all Classes, such Separate Class or such Combined Class, as
the case may be, without notice other than announcement at the meeting, until
the requisite number of Shares entitled to vote at such meeting shall be
present. At such adjourned meeting at which the requisite number of Shares
entitled to vote thereat shall be represented any business may be transacted
which might have been transacted at the meeting as originally notified. The
absence from any meeting of stockholders of the number of Shares in excess of
30% of the Shares of all Classes or of the affected Class or Classes or Series
thereof, as the case may be, which may be required by the laws of the State of
Maryland, the 1940 Act, any other applicable law or these Articles of
Incorporation, for action upon any given matter shall not prevent action at such
meeting upon any other matter or matters which may properly come before the
meeting, if there shall be present thereat, in
<PAGE>
person or by proxy, holders of the number of Shares required for action in
respect of such other matter or matters. Notwithstanding any provision of the
General Corporation Law of the State of Maryland requiring that any action be
taken or authorized by the affirmative vote of the holders of a designated
proportion greater than a majority of the shares or votes entitled to be cast,
such action shall be effective and valid if taken or authorized by the
affirmative vote of the holders of a majority of the total number of shares
outstanding and entitled to vote thereon. When such shares are voted by
individual Class or Series, any such action shall be effective and valid if
taken or authorized by the affirmative vote of the holders of a majority of the
total number of shares of such Class or Series outstanding and entitled to vote
thereon.
Section 4. All Shares now or hereafter authorized shall be subject to
redemption and redeemable at the option of the stockholder, in the sense used in
the General Corporation Law of the State of Maryland. Each holder of a Share of
any Class (or Series thereof), upon request to the Corporation accompanied by
surrender of the appropriate stock certificate or certificates, if any, in
proper form for transfer, shall be entitled to require the Corporation to redeem
all or any part of the Shares of that Class (or Series thereof) standing in the
name of such holder on the books of the Corporation at a redemption price per
Share based on the net asset value per Share of that Class (or Series thereof)
determined in accordance with Section 4 of Article VI hereof. Nothing herein
shall prohibit the Corporation from imposing, at the time of the redemption of
Shares of any Class or Series thereof, a fee or sales charge provided that such
fee or sales charge has been duly adopted by the Board of Directors and is
permitted under the applicable provisions of the 1940 Act and applicable rules
of the NASD.
Section 5. All Shares now or hereafter authorized shall be subject to
redemption and redeemable at the option of the Corporation. The Board of
Directors may by resolution from time to time authorize the Corporation to
require the redemption of all or any part of the outstanding Shares of any Class
(or Series thereof) upon the sending of written notice thereof to each
stockholder any of whose Shares of that Class (or Series thereof) are so
redeemed and upon such terms and conditions as the Board of Directors shall deem
advisable, out of funds legally available thereof, at a redemption price per
Share based on the net asset value per Share of that Class (or Series thereof)
determined in accordance with Section 4 of Article VI hereof and to take all
other steps deemed necessary or advisable in connection therewith. The
Corporation shall have the right to require the redemption of all Shares owned
or held by any one stockholder and having an aggregate net asset value, as
determined at any time in accordance with Article VI hereof, of less than
$500.00, or such other minimum as the Board of Directors may from time to time
established in its discretion.
Section 6. The Board of Directors may by resolution from time to time
authorize the repurchase by the Corporation, either directly or through an
agent, of Shares of any Class upon such terms and conditions and for such
consideration as the Board of Directors shall deem advisable, out of funds
legally available therefor, at prices per Share not in excess of the net asset
value per Share of that Class determined in accordance with Section 4 of Article
VI hereof and to take all other steps deemed necessary or advisable in
connection therewith.
Section 7. Except as otherwise permitted by the 1940 Act, payment of
the redemption or repurchase price of Shares surrendered to the Corporation for
redemption pursuant to the provisions of Section 4 or 5 of this Article IV or
for repurchase by the Corporation pursuant to the provisions of Section 6 of
this Article IV shall be made by the Corporation within seven days after
surrender of such Shares to the Corporation for such purpose. Any such payment
may be made in whole or in part in portfolio securities or in cash, as the Board
of Directors shall deem advisable, and no stockholder shall have the right,
other than as determined by the Board of Directors, to have his Shares redeemed
or repurchased in portfolio securities.
Section 8. No holder of Shares shall, as such holder, have any
preemptive right to purchase or subscribe for any part of any new or additional
issue of stock of any Class, or of rights or
<PAGE>
options to purchase any stock, or of securities convertible into, or carrying
rights or options to purchase, stock of any Class, whether now or hereafter
authorized or whether issued for money, for a consideration other than money or
by way of a dividend or otherwise, and all such rights are hereby waived by each
holder of capital stock of any other Class of stock or securities of the
Corporation that may hereafter be created.
Section 9. All persons who shall acquire any of the Shares shall
acquire the same subject to the provisions of these Articles of Incorporation.
Section 10. The Corporation shall not be required to hold an annual
meeting of stockholders in any year unless such meeting is required under the
1940 Act, including any regulation thereunder.
ARTICLE V
DIRECTORS
Section 1. The Bylaws of the Corporation may fix the number of
directors and may authorize the Board of Directors to increase or decrease the
number of directors within a limit specified by the Bylaws, and to fill the
vacancies created by any such increase in the number of directors. Unless
otherwise provided by the Bylaws of the Corporation, the directors of the
Corporation need not be stockholders.
Section 2. The Bylaws of the Corporation may divide the Directors of
the Corporation into classes and prescribe the tenure of office of the several
classes.
Section 3. The Bylaws of the Corporation shall provide the number of
directors which shall constitute a quorum; provided, that in no event shall a
quorum be less than one-third of the entire Board of Directors nor less than two
directors.
Section 4. Stockholders of the Corporation may remove a Director by the
affirmative vote of a majority of the Corporation's outstanding Shares.
ARTICLE VI
MANAGEMENT OF THE AFFAIRS OF THE CORPORATION
Section 1. The Board of Directors shall have the general management and
control of the business and property of the Corporation, and may exercise all
the powers of the Corporation, except such as are by statute or by these
Articles of Incorporation or by the Bylaws conferred upon or reserved to the
stockholders. The Corporation may in its Bylaws confer powers on the Board of
Directors in addition to the powers expressly conferred by statute.
Section 2. The Board of Directors shall have the power to adopt, alter,
or repeal the Bylaws of the Corporation except to the extent that the Bylaws
otherwise provide.
Section 3. The Board of Directors shall have the power from time to
time to determine whether and to what extent, at what times and places, and
under what conditions and regulations, the accounts and books of the Corporation
or any of them shall be open to the inspection of stockholders, and no
stockholder shall have any right to inspect any account, book or document of the
Corporation except to the extent required by statute or permitted by the Bylaws.
Section 4. The Board of Directors shall have the power to determine, as
provided in these Articles of Incorporation, or if provision is not made herein,
in accordance with generally accepted accounting principles, what constitutes
net income, total assets, and the net asset value of the Shares of each Class of
the Corporation, and of the Shares of each Series of such Class. Any such
determination made in good faith shall be final and conclusive, and shall be
binding upon the Corporation, and all
<PAGE>
holders of shares of each Series of each Class (past, present, and future), and
Shares of each Class are issued and sold on the condition and undertaking,
evidenced by acceptance of certificates for such Shares by, or confirmation of
such Shares being held for the account of, any stockholder, that any and all
such determinations shall be binding as aforesaid. Nothing in this Section 4
shall be construed to protect any director or officer of the Corporation against
any liability to the Corporation or its stockholders to which he would otherwise
be subject by reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of his office.
Section 5. The Board of Directors shall have the power to authorize
additional shares of stock and provide for the issuance and sale of shares of
the stock of the Corporation.
ARTICLE VII
INDEMNIFICATION; LIABILITY
Section 1. Each present or former director, officer, agent and employee
of the Corporation or any predecessor or constituent corporation, and each
person who, at the request of the Corporation, serves or served another business
enterprise in any such capacity, and the heirs and personal representatives of
each of the foregoing shall be indemnified by the Corporation to the fullest
extent permitted by law against all expenses, including without limitation
amounts of judgments, fines, amounts paid in settlement, attorneys' and
accountants' fees, and costs of litigation, which shall necessarily or
reasonably be incurred by him or her in connection with any action, suit or
proceeding to which he or she was, is or shall be a party, or with which he or
she may be threatened, by reason of his or her being or having been a director,
officer, agent or employee of the Corporation or such predecessor or constituent
corporation or such business enterprise, whether or not he or she continues to
be such at the time of incurring such expenses. Such indemnification may include
without limitation the purchase of insurance and advancement of any expenses,
and the Corporation shall be empowered to enter into agreements to limit the
liability of directors and officers of the Corporation. No indemnification shall
be made in violation of the General Corporation Law of the State of Maryland or
the 1940 Act.
Section 2. No director or officer of the Corporation shall be liable to
the Corporation or its stockholders for money damages, except (i) to the extent
that it is proved that such director or officer actually received an improper
benefit or profit in money, property or services, for the amount of the benefit
or profit in money, property or services actually received, or (ii) to the
extent that a judgment or other final adjudication adverse to such director or
officer is entered in a proceeding based on a finding in the proceeding that
such director's or officer's action, or failure to act, was the result of active
and deliberate dishonesty and was material to the cause of action adjudicated in
the proceeding. The foregoing shall not be construed to protect or purport to
protect any director or officer of the Corporation against any liability to the
Corporation or its stockholders to which such director or officer would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of such
office.
ARTICLE VIII
PERPETUAL EXISTENCE
The duration of the Corporation shall be perpetual.
ARTICLE IX
AMENDMENTS
The Corporation reserves the right from time to time to make any
amendments of its charter which may now or hereafter be authorized by law,
including any amendments changing the terms or contract rights, as expressly set
forth in its charter, of any of its outstanding stock by classification,
reclassification, or otherwise.
----------------------------
<PAGE>
The terms "Articles of Incorporation" as used herein and in the Bylaws
of the Corporation shall be deemed to mean these Articles of Incorporation as
from time to time amended, restated, or supplemented.
----------------------------
SECOND: (a) As of immediately before the amendment, the total number of
shares of stock of all classes that the Corporation had authority to issue is
twelve billion (12,000,000,000) shares, all of which are shares of common stock
(par value $.001 per share), and such shares had an aggregate par value of
twelve million dollars ($12,000,000).
(b) As amended, the total number of shares of stock of all classes
which the Corporation has authority to issue is one hundred twenty billion
(120,000,000,000) shares, all of which are shares of common stock (par value
$.0001 per share), and such shares have an aggregate par value of twelve million
dollars ($12,000,000).
(c) Because the amendment effects a change in the par value of each
authorized share of the Corporation's common stock from $.001 per share to
$.0001 per share, the Corporation's charter is hereby amended by changing and
reclassifying each of the shares of the Corporation's common stock (par value
$.001 per share) into one share of common stock (par value $.0001 per share),
and by transferring from the common stock account of the Corporation to the
capital in excess of par value account $.0009 for each share of common stock
which is issued and outstanding at the effective time of this amendment.
THIRD: The foregoing Articles of Amendment and Restatement have been
advised by the Board of Directors and approved by the stockholders of the
Corporation.
IN WITNESS WHEREOF, the Corporation has caused these presents to be
signed in its name and on its behalf by its President and witnessed on January
21, 1994.
FIRST AMERICAN INVESTMENT FUNDS,INC.
WITNESS:
By /s/ Robert A. Nesher
Robert A. Nesher, President
/s/ Richard J. Shoch
Assistant Secretary
THE UNDERSIGNED, President of the Corporation, who executed on behalf of
the Corporation the foregoing Articles of Amendment and Restatement of which
this certificate is made a part, hereby acknowledges in the name and on behalf
of said Corporation the foregoing Articles of Amendment and Restatement to be
the corporate act of said Corporation and hereby certifies that to the best of
his knowledge, information, and belief the matters and facts set forth therein
with respect to the authorization and approval thereof are true in all material
respects under the penalties of perjury.
/s/ Robert A. Nesher
Robert A. Nesher, President
<PAGE>
FIRST AMERICAN INVESTMENT FUNDS, INC.
ARTICLES SUPPLEMENTARY
First American Investment Funds, Inc., a corporation organized under the
laws of the State of Maryland (the "Corporation"), does hereby file for record
with the State Department of Assessments and Taxation of Maryland the following
Articles Supplementary to its Articles of Incorporation:
FIRST: The Corporation is registered as an open-end investment company
under the Investment Company Act of 1940 (the "1940 Act"). As hereinafter set
forth, the Corporation has classified its authorized capital stock in accordance
with the Maryland General Corporation Law.
SECOND: Immediately before the classifications hereinafter set forth, the
Corporation had authority to issue one hundred twenty billion (120,000,000,000)
shares of common stock (individually, a "Share"and collectively, the "Shares"),
of the par value of $.0001 per Share and of the aggregate par value of twelve
million dollars ($12,000,000), classified as follows:
(1) Class A Common Shares (formerly referred to as "government
bond fund shares"): Two billion (2,000,000,000) Shares.
(2) Class B Common Shares (formerly referred to as "fixed
income fund shares"): Two billion (2,000,000,000) Shares.
(3) Class C Common Shares (formerly referred to as municipal
bond fund shares"): Two billion (2,000,000,000) Shares.
(4) Class D Common Shares (formerly referred to as "stock fund
shares"): Two billion (2,000,000,000) Shares.
(5) Class E Common Shares (formerly referred to as "special
equity fund shares"): Two billion (2,000,000,000) Shares.
(6) Class F Common Shares (formerly referred to as "asset
allocation fund shares"): Two billion (2,000,000,000) Shares.
(7) Class G Common Shares (formerly referred to as "balance
fund shares"): Two billion (2,000,000,000) Shares.
(8) Class H Common Shares (formerly referred to as "equity
index fund shares"): Two billion (2,000,000,000) Shares.
(9) Class I Common Shares (formerly referred to as
"intermediate term income fund shares"): Two billion (2,000,000,000)
Shares.
(10) Class J Common Shares (formerly referred to as "limited
term income fund shares"): Two billion (2,000,000,000) Shares.
(11) Class K Common Shares (formerly referred to as "mortgage
securities fund shares"): Two billion (2,000,000,000) Shares.
(12) Class L Common Shares (formerly referred to as "regional
equity fund shares"): Two billion (2,000,000,000) Shares.
<PAGE>
(13) Unclassified Shares: Ninety-six billion (96,000,000,000)
Shares.
THIRD: Pursuant to the authority contained in Article IV of the
Articles of Incorporation of the Corporation and Section 2-208 of the Maryland
General Corporation Law, the Board of Directors of the Corporation, by
resolution adopted at a meeting held on December 7, 1993, classified the
following additional Shares out of the authorized, unissued and unclassified
Shares of the Corporation:
(1) Class A, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(2) Class B, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(3) Class C, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(4) Class D, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(5) Class E, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(6) Class F, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(7) Class G, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(8) Class H, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(9) Class I, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(10) Class J, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(11) Class K, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(12) Class L, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(13) Class M Common Shares: Two billion (2,000,000,000)
Shares.
(14) Class M, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(15) Class N Common Shares: Two billion (2,000,000,000)
Shares.
(16) Class N, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(17) Class O Common Shares: Two billion (2,000,000,000)
Shares.
(18) Class O, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(19) Class P Common Shares: Two billion (2,000,000,000)
Shares.
(20) Class P, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(21) Class Q Common Shares: Two billion (2,000,000,000)
Shares.
(22) Class Q, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
<PAGE>
FOURTH: The Shares classified pursuant to THIRD above shall have the
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and conditions of
redemption, set forth in the Corporation's Articles of Incorporation. Any Class
or Series of Shares classified pursuant to THIRD above may be subject to such
charges and expenses (including by way of example, but not by way of limitation,
such front-end and deferred sales charges as may be permitted under the 1940 Act
and rules of the National Association of Securities Dealers, Inc. ("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 Corporation in accordance, to the extent applicable,
with the 1940 Act, and all of the charges and expenses to which such a Class or
Series is subject shall be borne by such Class or Series 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 or Series.
FIFTH: Immediately after the classifications hereinbefore set forth and
upon filing for record of these Articles Supplementary, the Corporation has
authority to issue one hundred twenty billion (120,000,000,000) shares of common
stock (individually, a "Share" and collectively, the "Shares"), of the par value
of $.0001 per Share and of the aggregate par value of twelve million dollars
($12,000,000), classified as follows:
(1) Class A Common Shares (formerly referred to as "government
bond fund shares"): Two billion (2,000,000,000) Shares.
(2) Class A, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(3) Class B Common Shares (formerly referred to as "fixed
income fund shares"): Two billion (2,000,000,000) Shares.
(4) Class B, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(5) Class C Common Shares (formerly referred to as municipal
bond fund shares"): Two billion (2,000,000,000) Shares.
(6) Class C, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(7) Class D Common Shares (formerly referred to as "stock fund
shares"): Two billion (2,000,000,000) Shares.
(8) Class D, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(9) Class E Common Shares (formerly referred to as "special
equity fund shares"): Two billion (2,000,000,000) Shares.
(10) Class E, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(11) Class F Common Shares (formerly referred to as "asset
allocation fund shares"): Two billion (2,000,000,000) Shares.
(12) Class F, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
<PAGE>
(13) Class G Common Shares (formerly referred to as "balance
fund shares"): Two billion (2,000,000,000) Shares.
(14) Class G, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(15) Class H Common Shares (formerly referred to as "equity
index fund shares"): Two billion (2,000,000,000) Shares.
(16) Class H, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(17) Class I Common Shares (formerly referred to as
"intermediate term income fund shares"): Two billion (2,000,000,000)
Shares.
(18) Class I, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(19) Class J Common Shares (formerly referred to as "limited
term income fund shares"): Two billion (2,000,000,000) Shares.
(20) Class J, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(21) Class K Common Shares (formerly referred to as "mortgage
securities fund shares"): Two billion (2,000,000,000) Shares.
(22) Class K, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(23) Class L Common Shares (formerly referred to as "regional
equity fund shares"): Two billion (2,000,000,000) Shares.
(24) Class L, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(25) Class M Common Shares: Two billion (2,000,000,000)
Shares.
(26) Class M, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(27) Class N Common Shares: Two billion (2,000,000,000)
Shares.
(28) Class N, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(29) Class O Common Shares: Two billion (2,000,000,000)
Shares.
(30) Class O, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(31) Class P Common Shares: Two billion (2,000,000,000)
Shares.
(32) Class P, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(33) Class Q Common Shares: Two billion (2,000,000,000)
Shares.
(34) Class Q, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(35) Unclassified Shares: Fifty-two billion (52,000,000,000)
Shares.
<PAGE>
SIXTH: The aforesaid action by the Board of Directors of the
Corporation was taken pursuant to authority and power contained in the Articles
of Incorporation of the Corporation.
IN WITNESS WHEREOF, the Corporation has caused these Articles
Supplementary to be signed in its name and on its behalf by its President and
witnessed on January 21, 1994.
First American Investment Funds, Inc.
By /s/ Robert A. Nesher
Robert A. Nesher, President
WITNESS:
/s/ Richard J. Shoch
Assistant Secretary
<PAGE>
Final
FIRST AMERICAN INVESTMENT FUNDS, INC.
ARTICLES SUPPLEMENTARY
First American Investment Funds, Inc., a corporation organized under the
laws of the State of Maryland (the "Corporation"), does hereby file for record
with the State Department of Assessments and Taxation of Maryland the following
Articles Supplementary to its Articles of Incorporation:
FIRST: The Corporation is registered as an open-end investment company
under the Investment Company Act of 1940 (the "1940 Act"). As hereinafter set
forth, the Corporation has classified its authorized capital stock in accordance
with the Maryland General Corporation Law.
SECOND: Immediately before the classifications hereinafter set forth,
the Corporation had authority to issue one hundred twenty billion
(120,000,000,000) shares of common stock (individually, a "Share" and
collectively, the "Shares"), of the par value of $.0001 per Share and of the
aggregate par value of twelve million dollars ($12,000,000), classified as
follows:
(1) Class A Common Shares (formerly referred to as "government
bond fund shares"): Two billion (2,000,000,000) Shares.
(2) Class A, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(3) Class B Common Shares (formerly referred to as "fixed
income fund shares"): Two billion (2,000,000,000) Shares.
(4) Class B, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(5) Class C Common Shares (formerly referred to as "municipal
bond fund shares"): Two billion (2,000,000,000) Shares.
(6) Class C, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(7) Class D Common Shares (formerly referred to as "stock fund
shares"): Two billion (2,000,000,000) Shares.
(8) Class D, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(9) Class E Common Shares (formerly referred to as "special
equity fund shares"): Two billion (2,000,000,000) Shares.
(10) Class E, Series 2 Common Shares:: Two billion
(2,000,000,000) Shares.
(11) Class F Common Shares (formerly referred to as "asset
allocation fund shares"): Two billion (2,000,000,000) Shares.
(12) Class F, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(13) Class G Common Shares (formerly referred to as "balanced
fund shares"): Two billion (2,000,000,000) Shares.
(14) Class G, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
<PAGE>
(15) Class H Common Shares (formerly referred to as "equity
index fund shares"): Two billion (2,000,000,000) Shares.
(16) Class H, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(17) Class I Common Shares (formerly referred to as
"intermediate term income fund shares"): Two billion (2,000,000,000)
Shares.
(18) Class I, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(19) Class J Common Shares (formerly referred to as "limited
term income fund shares"): Two billion (2,000,000,000) Shares.
(20) Class J, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(21) Class K Common Shares (formerly referred to as "mortgage
securities fund shares"): Two billion (2,000,000,000) Shares.
(22) Class K, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(23) Class L Common Shares (formerly referred to as "regional
equity fund shares"): Two billion (2,000,000,000) Shares.
(24) Class L, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(25) Class M Common Shares: Two billion (2,000,000,000)
Shares.
(26) Class M, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(27) Class N Common Shares: Two billion (2,000,000,000)
Shares.
(28) Class N, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(29) Class O Common Shares: Two billion (2,000,000,000)
Shares.
(30) Class O, Series 2 Common Shares:: Two billion
(2,000,000,000) Shares.
(31) Class P Common Shares: Two billion (2,000,000,000)
Shares.
(32) Class P, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(33) Class Q Common Shares: Two billion (2,000,000,000)
Shares.
(34) Class Q, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(35) Unclassified Shares: Fifty-two billion (52,000,000,000)
Shares.
THIRD: Pursuant to the authority contained in Article IV of the Articles
of Incorporation of the Corporation and Section 2-208 of the Maryland General
Corporation Law, the Board of Directors of the Corporation, by resolution
adopted at a meeting held on June 8, 1994, classified the following additional
Shares out of the authorized, unissued and unclassified Shares of the
Corporation:
<PAGE>
(1) Class A, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(2) Class B, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(3) Class C, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(4) Class D, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(5) Class E, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(6) Class F, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(7) Class G, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(8) Class H, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(9) Class I, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(10) Class J, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(11) Class K, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(12) Class L, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(13) Class M, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(14) Class N, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(15) Class O, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(16) Class P, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(17) Class Q, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(18) Class R Common Shares: Two billion (2,000,000,000)
Shares.
(19) Class R, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(20) Class R, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
FOURTH: The Shares classified pursuant to THIRD above shall have the
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and conditions of
redemption, set forth in the Corporation's Articles of Incorporation. Any Class
or Series of Shares classified pursuant to THIRD above may be subject to such
charges and expenses (including by way of example, but not by way of limitation,
such front-end and deferred sales charges as may be permitted under the 1940 Act
and rules of the National Association of Securities Dealers, Inc. ("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 Corporation in accordance, to the extent applicable,
with the 1940 Act, and all of the charges and expenses to which such a Class or
Series is subject shall be borne by such Class or Series and shall be
<PAGE>
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 or Series.
FIFTH: Immediately after the classifications hereinbefore set forth and
upon filing for record of these Articles Supplementary, the Corporation has
authority to issue one hundred twenty billion (120,000,000,000) shares of common
stock (individually, a "Share" and collectively, the "Shares"), of the par value
of $.0001 per Share and of the aggregate par value of twelve million dollars
($12,000,000), classified as follows:
(1) Class A Common Shares (formerly referred to as "government
bond fund shares"): Two billion (2,000,000,000) Shares.
(2) Class A, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(3) Class A, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(4) Class B Common Shares (formerly referred to as "fixed
income fund shares"): Two billion (2,000,000,000) Shares.
(5) Class B, Series 2 Common Shares:: Two billion
(2,000,000,000) Shares.
(6) Class B, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(7) Class C Common Shares (formerly referred to as "municipal
bond fund shares"): Two billion (2,000,000,000) Shares.
(8) Class C, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(9) Class C, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(10) Class D Common Shares (formerly referred to as "stock
fund shares"): Two billion (2,000,000,000) Shares.
(11) Class D, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(12) Class D, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(13) Class E Common Shares (formerly referred to as "special
equity fund shares"): Two billion (2,000,000,000) Shares.
(14) Class E, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(15) Class E, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(16) Class F Common Shares (formerly referred to as "asset
allocation fund shares"): Two billion (2,000,000,000) Shares.
(17) Class F, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(18) Class F, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
<PAGE>
(19) Class G Common Shares (formerly referred to as "balanced
fund shares"): Two billion (2,000,000,000) Shares.
(20) Class G, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(21) Class G, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(22) Class H Common Shares (formerly referred to as "equity
index fund shares"): Two billion (2,000,000,000) Shares.
(23) Class H, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(24) Class H, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(25) Class I Common Shares (formerly referred to as
"intermediate term income fund shares"): Two billion (2,000,000,000)
Shares.
(26) Class I, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(27) Class I, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(28) Class J Common Shares (formerly referred to as "limited
term income fund shares"): Two billion (2,000,000,000) Shares.
(29) Class J, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(30) Class J, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(31) Class K Common Shares (formerly referred to as "mortgage
securities fund shares"): Two billion (2,000,000,000) Shares.
(32) Class K, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(33) Class K, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(34) Class L Common Shares (formerly referred to as "regional
equity fund shares"): Two billion (2,000,000,000) Shares.
(35) Class L, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(36) Class L, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(37) Class M Common Shares: Two billion (2,000,000,000)
Shares.
(38) Class M, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(39) Class M, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(40) Class N Common Shares: Two billion (2,000,0000,000)
Shares.
<PAGE>
(41) Class N, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(42) Class N, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(43) Class O Common Shares: Two billion (2,000,000,000)
Shares.
(44) Class O, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(45) Class O, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(46) Class P Common Shares: Two billion (2,000,000,000)
Shares.
(47) Class P, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(48) Class P, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(49) Class Q Common Shares: Two billion (2,000,000,000)
Shares.
(50) Class Q, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(51) Class Q, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(52) Class R Common Shares: Two billion (2,000,000,000)
Shares.
(53) Class R, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(54) Class R, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(55) Unclassified Shares: Twelve billion (12,000,000,000)
Shares.
SIXTH: The aforesaid action by the Board of Directors of the
Corporation was taken pursuant to authority and power contained in the Articles
of Incorporation of the Corporation.
IN WITNESS WHEREOF, the Corporation has caused these Articles
Supplementary to be signed in its name and on its behalf by its President and
witnessed by its Secretary on July 29, 1994.
First American Investment Funds, Inc.
By /s/ David Lee
David Lee, President
WITNESS:
/s/ Michael J. Radmer
Michael J. Radmer, Secretary
<PAGE>
ARTICLES OF REVIVAL
FOR
FIRST AMERICAN INVESTMENT FUNDS, INC.
First American Investment Funds, Inc. (the "Corporation") does hereby
certify to the State Department of Assessments and Taxation of Maryland that:
FIRST: The name of the Corporation at the time the charter was
forfeited was First American Investment Funds, Inc.
SECOND: The name which the Corporation will use after revival is First
American Investment Funds, Inc.
THIRD: The address of the principal office of the Corporation in the
State of Maryland is:
First American Investment Funds, Inc.
c/o The Corporation Trust Incorporated
32 South Street
Baltimore, Maryland 21202
FOURTH: The name and address of the resident agent of the Corporation
in the State of Maryland is:
The Corporation Trust Incorporated
32 South Street
Baltimore, Maryland 21202
FIFTH: These Articles of Revival are for the purpose of reviving the
charter of the Corporation.
SIXTH: At or prior to the filing of these Articles of Revival, the
Corporation has (a) paid all fees required by law; (b) filed all annual reports
which should have been filed by the Corporation if its charter had not been
forfeited; (c) paid all state and local taxes, except taxes on real estate, and
all interest and penalties due by the Corporation or which would have become due
if the charter had not been forfeited whether or not barred by limitations.
The undersigned, who were respectively the last acting Vice President
and Secretary of the Corporation, severally acknowledge the Articles to be their
act.
/s/ Kathryn L. Stanton
Kathryn L. Stanton
Vice President
/s/ Michael J. Radmer
Michael J. Radmer
Secretary
<PAGE>
AFFIDAVIT FOR REVIVAL OF A CHARTER
I, Kathryn L. Stanton of First American Investment Funds, Inc., hereby
declare that the previously mentioned Corporation has paid all State and local
taxes except taxes on real estate, and all interest and penalties due by the
Corporation or which would have become due if the charter had not been forfeited
whether or not barred by limitations.
/s/ Kathryn L. Stanton
----------------------------------
Kathryn L. Stanton
Vice President
I hereby certify that on January 30th (insert date) before me, the
subscriber, a notary public of the State of Pennsylvania, in and for Chester
(insert name or county for which notary is appointed) personally appeared
Kathryn L. Stanton (insert name of person swearing) and made oath under the
penalties of perjury that the matters and facts set forth in this affidavit are
true to the best of his or her knowledge, information and belief.
As witness my hand and notarial seal
/s/ Christine L. Trecrod
(Signature of notary public)
My Commission expires 10/12/98.
-----------
----------------------------------------------
Notary Seal
Christine L. Trecrod, Notary Public
Tredythin Twp., Chester County
My Commission Expires Oct. 12, 1998
----------------------------------------------
Member, Pennsylvania Association of Notaries
<PAGE>
FIRST AMERICAN INVESTMENT FUNDS, INC.
ARTICLES SUPPLEMENTARY
First American Investment Funds, Inc., a corporation organized under the
laws of the State of Maryland (the "Corporation"), does hereby file for record
with the State Department of Assessments and Taxation of Maryland the following
Articles Supplementary to its Articles of Incorporation:
FIRST: The Corporation is registered as an open-end investment company
under the Investment Company Act of 1940 (the "1940 Act"). As hereinafter set
forth, the Corporation has classified its authorized capital stock in accordance
with the Maryland General Corporation Law.
SECOND: Immediately before the classifications hereinafter set forth,
the Corporation had authority to issue one hundred twenty billion
(120,000,000,000) shares of common stock (individually, a "Share" and
collectively, the "Shares"), of the par value of $.0001 per Share and of the
aggregate par value of twelve million dollars ($12,000,000), classified as
follows:
(1) Class A Common Shares (formerly referred to as government
bond fund shares"): Two billion (2,000,000,000) Shares.
(2) Class A, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(3) Class A, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(4) Class B Common Shares (formerly referred to as "fixed
income fund shares"): Two billion (2,000,000,000) Shares.
(5) Class B, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(6) Class B, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(7) Class C Common Shares (formerly referred to as "municipal
bond fund shares"): Two billion (2,000,000,000) Shares.
(8) Class C, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(9) Class C, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(10) Class D Common Shares (formerly referred to as "stock
fund shares"): Two billion (2,000,000,000) Shares.
(11) Class D, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(12) Class D, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(13) Class E Common Shares (formerly referred to as "special
equity fund shares"): Two billion (2,000,000,000) Shares.
(14) Class E, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(15) Class E, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(16) Class F Common Shares (formerly referred to as "asset
allocation fund shares"): Two billion (2,000,000,000) Shares.
(17) Class F, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
<PAGE>
(18) Class F, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(19) Class G Common Shares (formerly referred to as "balanced
fund shares"): Two billion (2,000,000,000) Shares.
(20) Class G, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(21) Class G, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(22) Class H Common Shares (formerly referred to as "equity
index fund shares"): Two billion (2,000,000,000) Shares.
(23) Class H, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(24) Class H, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(25) Class I Common Shares (formerly referred to as
"intermediate term income shares"): Two billion (2,000,000,000) Shares.
(26) Class I, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(27) Class I, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(28) Class J Common Shares (formerly referred to as "limited
term income shares"): Two billion (2,000,000,000) Shares.
(29) Class J, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(30) Class J, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(31) Class K Common Shares (formerly referred to as "mortgage
securities, shares"): Two billion (2,000,000,000) Shares.
(32) Class K, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(33) Class K, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(34) Class L Common Shares (formerly referred to as "regional
equity fund shares"): Two billion (2,000,000,000) Shares.
(35) Class L, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(36) Class L, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(37) Class M Common Shares: Two billion (2,000,000,000)
Shares.
(38) Class M, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(39) Class M, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(40) Class N Common Shares: Two billion (2,000,000,000)
Shares.
(41) Class N, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
<PAGE>
(42) Class N, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(43) Class O Common Shares: Two billion (2,000,000,000)
Shares.
(44) Class O, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(45) Class O, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(46) Class P Common Shares: Two billion (2,000,000,000)
Shares.
(47) Class P, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(48) Class P, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(49) Class Q Common Shares: Two billion (2,000,000,000)
Shares.
(50) Class Q, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(51) Class Q, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(52) Class R Common Shares: Two billion (2,000,000,000)
Shares.
(53) Class R, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(54) Class R, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(55) Unclassified Shares: Twelve billion (12,000,000,000)
Shares.
THIRD: Pursuant to the authority contained in Sections 2-105(c) and
2-208.1 of the Maryland General Corporation Law, the Board of Directors of the
Corporation, by resolution adopted at a meeting held on December 7, 1994,
authorized an increase in the total authorized shares of the Corporation from
one hundred twenty billion (120,000,000,000) shares of common stock, of the par
value of $.0001 per share and of the aggregate par value of twelve million
dollars ($12,000,000), to two hundred billion (200,000,000,000) shares of common
stock, of the par value of $.0001 per share and of the aggregate par value of
twenty million dollars ($20,000,000).
FOURTH: Pursuant to the authority contained in Article IV of the
Articles of Incorporation of the Corporation and Section 2-208 of the Maryland
General Corporation Law, the Board of Directors of the Corporation, by
resolution adopted at a meeting held on December 7, 1994, classified the
following additional Shares out of the authorized, unissued and unclassified
Shares of the Corporation:
(1) Class S, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(2) Class S, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(3) Class S, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(4) Class T, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(5) Class T, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(6) Class T, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
<PAGE>
(7) Class U, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(8) Class U, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(9) Class U, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
FIFTH: The Shares classified pursuant to FOURTH above shall have the
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and conditions of
redemption, set forth in the Corporation's Articles of Incorporation. Any Class
or Series of Shares classified pursuant to FOURTH above may be subject to such
charges and expenses (including by way of example, but not by way of limitation,
such front-end and deferred sales charges as may be permitted under the 1940 Act
and rules of the National Association of Securities Dealers, Inc. ("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 Corporation in accordance, to the extent applicable,
with the 1940 Act, and all of the charges and expenses to which such a Class or
Series is subjects shall be borne by such Class or Series 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 or Series.
SIXTH: Immediately after the classifications hereinbefore set forth and
upon filing for record of these Articles Supplementary, the Corporation has
authority to issue two hundred billion (200,000,000,000) shares of common stock
(individually, a "Share" and collectively, the "Shares"), of the par value of
$.0001 per Share and of the aggregate par value of twenty million dollars
($20,000,000), classified as follows:
(1) Class A Common Shares (formerly referred to as "government
bond fund shares"): Two billion (2,000,000,000) Shares.
(2) Class A, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(3) Class A, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(4) Class B Common Shares (formerly referred to as "fixed
income fund shares"): Two billion (2,000,000,000) Shares.
(5) Class B, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(6) Class B, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(7) Class C Common Shares (formerly referred to as "municipal
bond fund shares"): Two billion (2,000,000,000) Shares.
(8) Class C, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(9) Class C, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(10) Class D Common Shares (formerly referred to as "stock
fund shares"): Two billion (2,000,000,000) Shares.
(11) Class D, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(12) Class D, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
<PAGE>
(13) Class E Common Shares (formerly referred to as "special
equity fund shares"): Two billion (2,000,000,000) Shares.
(14) Class E, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(15) Class E, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(16) Class F Common Shares (formerly referred to as "asset
allocation fund shares"): Two billion (2,000,000,000) Shares.
(17) Class F, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(18) Class F, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(19) Class G Common Shares (formerly referred to as "balanced
fund shares"): Two billion (2,000,000,000) Shares.
(20) Class G, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(21) Class G, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(22) Class H Common Shares (formerly referred to as "equity
index fund shares"): Two billion (2,000,000,000) Shares.
(23) Class H, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(24) Class H, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(25) Class I Common Shares (formerly referred to as
"intermediate term income fund shares"): Two billion (2,000,000,000)
Shares.
(26) Class I, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(27) Class I, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(28) Class J Common Shares (formerly referred to as "limited
term income fund shares"): Two billion (2,000,000,000) Shares.
(29) Class J, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(30) Class J, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(31) Class K Common Shares (formerly referred to as "mortgage
securities fund shares"): Two billion (2,000,000,000) Shares.
(32) Class K, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(33) Class K, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(34) Class L Common Shares (formerly referred to as "regional
equity fund shares"): Two billion (2,000,000,000) Shares.
(35) Class L, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
<PAGE>
(36) Class L, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(37) Class M Common Shares: Two billion (2,000,000,000)
Shares.
(38) Class M, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(39) Class M, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(40) Class N Common Shares: Two billion (2,000,000,000)
Shares.
(41) Class N, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(42) Class N, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(43) Class O Common Shares: Two billion (2,000,000,000)
Shares.
(44) Class O, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(45) Class O, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(46) Class P Common Shares: Two billion (2,000,000,000)
Shares.
(47) Class P, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(48) Class P, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(49) Class Q Common Shares: Two billion (2,000,000,000)
Shares.
(50) Class Q, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(51) Class Q, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(52) Class R Common Shares: Two billion (2,000,000,000)
Shares.
(53) Class R, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(54) Class R, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(55) Class S Common Shares: Two billion (2,000,000,000)
Shares.
(56) Class S, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(57) Class S, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(58) Class T Common Shares: Two billion (2,000,000,000)
Shares.
(59) Class T, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(60) Class T, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(61) Class U Common Shares: Two billion (2,000,000,000)
Shares.
(62) Class U, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
<PAGE>
(63) Class U, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(64) Unclassified Shares: Seventy-four billion
(74,000,000,000) Shares.
SEVENTH: The aforesaid action by the Board of Directors of the
Corporation was taken pursuant to authority and power contained in the Articles
of Incorporation of the Corporation.
IN WITNESS WHEREOF, the Corporation has caused these Articles
Supplementary to be signed in its name and on its behalf by its President and
witnessed by its Secretary on January 25, 1995.
First American Investment Fund Inc.
By /s/ David Lee
David Lee, President
WITNESS:
/s/ Michael J. Radmer
Michael J. Radmer, Secretary
<PAGE>
FIRST AMERICAN INVESTMENT FUNDS, INC.
ARTICLES SUPPLEMENTARY
First American Investment Funds, Inc., a corporation organized under the
laws of the State of Maryland (the "Corporation"), does hereby file for record
with the State Department of Assessments and Taxation of Maryland the following
Articles Supplementary to its Articles of Incorporation:
FIRST: The Corporation is registered as an open-end investment company
under the Investment Company Act of 1940 (the "1940 Act"). As hereinafter set
forth, the Corporation has classified its authorized capital stock in accordance
with the Maryland General Corporation Law.
SECOND: Immediately before the classifications hereinafter set forth,
the Corporation had authority to issue two hundred billion (200,000,000,000)
shares of common stock (individually, a "Share" and collectively, the "Shares"),
of the par value of $.0001 per Share and of the aggregate par value of twenty
million dollars ($20,000,000,000), classified as follows:
(1) Class A Common Shares (formerly referred to as "government
bond fund shares"): Two billion (2,000,000,000)) Shares.
(2) Class A, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(3) Class A, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(4) Class B Common Shares (formerly referred to as "fixed
income fund shares"): Two billion (2,000,000,000) Shares.
(5) Class B, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(6) Class B, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(7) Class C Common Shares (formerly referred to as "municipal
bond fund shares"): Two billion (2,000,000,000) Shares.
(8) Class C, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(9) Class C, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(10) Class D Common Shares (formerly referred to as "stock
fund shares"): Two billion (2,000,000,000) Shares.
(11) Class D, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(12) Class D, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(13) Class E Common Shares (formerly referred to as "special
equity fund shares"): Two billion (2,000,000,000) Shares.
(14) Class E, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(15) Class E, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(16) Class F Common Shares (formerly referred to as "asset
allocation fund shares"): Two billion (2,000,000,000) Shares.
(17) Class F, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
<PAGE>
(18) Class F, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(19) Class G Common Shares (formerly referred to as "balanced
fund shares"): Two billion (2,000,000,000) Shares.
(20) Class G, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(21) Class G, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(22) Class H Common Shares (formerly referred to as "equity
index fund shares"): Two billion (2,000,000,000) Shares.
(23) Class H, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(24) Class H, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(25) Class I Common Shares (formerly referred to as
"intermediate term income fund shares"): Two billion (2,000,000,000)
Shares.
(26) Class I, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(27) Class I, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(28) Class J Common Shares (formerly referred to as "limited
term income fund shares"): Two billion (2,000,000,000) Shares.
(29) Class J, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(30) Class J, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(31) Class K Common Shares (formerly referred to as "mortgage
securities fund shares"): Two billion (2,000,000,000) Shares.
(32) Class K, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(33) Class K, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(34) Class L Common Shares (formerly referred to as "regional
equity fund shares"): Two billion (2,000,000,000) Shares.
(35) Class L, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(36) Class L, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(37) Class M Common Shares: Two billion (2,000,000,000)
Shares.
(38) Class M, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(39) Class M, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(40) Class N Common Shares: Two billion (2,000,000,000)
Shares.
(41) Class N, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
<PAGE>
(42) Class N, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(43) Class O Common Shares: Two billion (2,000,000,000)
Shares.
(44) Class O, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(45) Class O, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(46) Class P Common Shares: Two billion (2,000,000,000)
Shares.
(47) Class P, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(48) Class P, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(49) Class Q Common Shares: Two billion (2,000,000,000)
Shares.
(50) Class Q, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(51) Class Q, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(52) Class R Common Shares: Two billion (2,000,000,000)
Shares.
(53) Class R, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(54) Class R, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(55) Class S Common Shares: Two billion (2,000,000,000)
Shares.
(56) Class S, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(57) Class S, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(58) Class T Common Shares: Two billion (2,000,000,000)
Shares.
(59) Class T, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(60) Class T, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(61) Class U Common Shares: Two billion (2,000,000,000)
Shares.
(62 Class U, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(63) Class U, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(64) Unclassified Shares: Seventy-four billion
(74,000,000,000) Shares.
THIRD: Pursuant to the authority contained in Article IV of the Articles
of Incorporation of the Corporation and Section 2-208 of the Maryland General
Corporation Law, the Board of Directors of the Corporation, by resolution
adopted at a meeting held on March 6, 1995, classified the following additional
Shares out of the authorized, unissued and unclassified Shares of the
Corporation:
(1) Class V Common Shares: Two billion (2,000,000,000) Shares.
<PAGE>
(2) Class V, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(3) Class V, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
FOURTH: The Shares classified pursuant to THIRD above shall have the
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and conditions of
redemption, set forth in the Corporation's Articles of Incorporation. Any Class
or Series of Shares classified pursuant to THIRD above may be subject to such
charges and expenses (including by way of example, but not by way of limitation,
such front-end and deferred sales charges as may be permitted under the 1940 Act
and rules of the National Association of Securities Dealers, Inc. ("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 Corporation in accordance, to the extent applicable,
with the 1940 Act, and all of the charges and expenses to which such a Class or
Series is subject shall be borne by such Class or Series 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 or Series.
FIFTH: Immediately after the classifications hereinbefore set forth and
upon filing for record of these Articles Supplementary, the Corporation has
authority to issue two hundred billion (200,000,0OO,000) shares of common stock
(individually, a "Share" and collectively, the "Shares"), of the par value of
$.0001 per Share and of the aggregate par value of twenty million dollars
($20,000,000), classified as follows:
(1) Class A Common Shares (formerly referred to as "government
bond fund shares"): Two billion (2,000,000,000) Shares.
(2) Class A, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(3) Class A, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(4) Class B Common Shares (formerly referred to as "fixed
income fund shares"): Two billion (2,000,000,000) Shares.
(5) Class B, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(6) Class B, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(7) Class C Common Shares (formerly referred to as "municipal
bond fund shares"): Two billion (2,000,000,000) Shares.
(8) Class C, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(9) Class C, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(10) Class D Common Shares (formerly referred to as "stock
fund shares"): Two billion (2,000,000,000) Shares.
(11) Class D, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(12) Class D, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(13) Class E Common Shares (formerly referred to as "special
equity fund shares"): Two billion (2,000,000,000) Shares.
<PAGE>
(14) Class E, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(15) Class E, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(16) Class F Common Shares (formerly referred to as "asset
allocation fund shares"): Two billion (2,000,000,000)) Shares.
(17) Class F, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(18) Class F, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(19) Class G Common Shares (formerly referred to as "balanced
fund shares"): Two billion (2,000,000,000) Shares.
(20) Class G, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(21) Class G, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(22) Class H Common Shares (formerly referred to as "equity
index fund shares"): Two billion (2,000,000,000) Shares.
(23) Class H, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(24) Class H, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(25) Class I Common Shares (formerly referred to as
"intermediate term income fund shares"): Two billion (2,000,000,000)
Shares.
(26) Class I, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(27) Class I, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(28) Class J Common Shares (formerly referred to as "limited
term income fund shares"): Two billion (2,000,000,000) Shares.
(29) Class J, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(30) Class J, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(31) Class K Common Shares (formerly referred to as "mortgage
securities fund shares"): Two billion (2,000,000,000) Shares.
(32) Class K, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(33) Class K, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(34) Class L Common Shares (formerly referred to as "regional
equity fund shares"): Two billion (2,000,000,000) Shares.
(35) Class L, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(36) Class L, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
<PAGE>
(37) Class M Common Shares: Two billion (2,000,000,000)
Shares.
(38) Class M, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(39) Class M, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(40) Class N Common Shares: Two billion (2,000,000,000)
Shares.
(41) Class N, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(42) Class N, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(43) Class O Common Shares: Two billion (2,000,000,000)
Shares.
(44) Class O, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(45) Class O, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(46) Class P Common Shares: Two billion (2,000,000,000)
Shares.
(47) Class P, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(48) Class P, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(49) Class Q Common Shares: Two billion (2,000,000,000)
Shares.
(50) Class Q, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(51) Class Q, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(52) Class R Common Shares: Two billion (2,000,000,000)
Shares.
(53) Class R, Series 2 Common Shares Two billion
(2,000,000,000) Shares.
(54) Class R, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(55) Class S Common Shares: Two billion (2,000,000,000)
Shares.
(56) Class S, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(57) Class S, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(58) Class T Common Shares: Two billion (2,000,000,000)
Shares.
(59) Class T, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(60) Class T, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(61) Class U Common Shares: Two billion (2,000,000,000)
Shares.
(62) Class U, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(63) Class U, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
<PAGE>
(64) Class V Common Shares: Two billion (2,000,000,000)
Shares.
(65) Class V, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(66) Class V, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(67) Unclassified Shares: Sixty-eight billion
(68,000,000,000) Shares.
SIXTH: The aforesaid action by the Board of Directors of the
Corporation was taken pursuant to authority and power contained in the Articles
of Incorporation of the Corporation.
IN WITNESS WHEREOF, the Corporation has caused these Articles
Supplementary to be signed in its name and on its behalf by its President and
witnessed by its Secretary on June 14, 1995.
First American Investment Funds, Inc.
By /s/ Keith L. Stewart
Keith L. Stewart
Its /s/ Vice President
Vice President
WITNESS:
/s/ Michael J. Radmer
Michael J. Radmer, Secretary
The abovesigned, Vice President of First American Investment Funds,
Inc. who executed on behalf of said corporation, the foregoing Articles of
Supplementary, of which this certificate is made a part, hereby acknowledges, in
the name and on behalf of said corporation, the foregoing Articles of
Supplementary to be the corporate act of said corporation and further certifies
that, to the best of his knowledge, information and belief, the matters and
facts set forth therein with respect to the approval thereof are true in all
material respects, under the penalties of perjury.
<PAGE>
FIRST AMERICAN INVESTMENT FUNDS, INC.
ARTICLES SUPPLEMENTARY
First American Investment Funds, Inc., a corporation organized under the
laws of the State of Maryland (the "Corporation"), does hereby file for record
with the State Department of Assessments and Taxation of Maryland the following
Articles Supplementary to its Articles of Incorporation:
FIRST: The Corporation is registered as an open-end investment company
under the Investment Company Act of 1940 (the "1940 Act"). As hereinafter set
forth, the Corporation has classified its authorized capital stock in accordance
with the Maryland General Corporation Law.
SECOND: Immediately before the classifications hereinafter set forth,
the Corporation had authority to issue two hundred billion (200,000,000,000)
shares of common stock (individually, a "Share" and collectively, the "Shares"),
of the par value of $.0001 per Share and of the aggregate par value of twenty
million dollars ($20,000,000), classified as follows:
(1) Class A Common Shares (formerly referred to as "government
bond fund shares"): Two billion (2,000,000,000) Shares.
(2) Class A, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(3) Class A, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(4) Class B Common Shares (formerly referred to as "fixed
income fund shares"): Two billion (2,000,000,000) Shares.
(5) Class B, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(6) Class B, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(7) Class C Common Shares (formerly referred to as "municipal
bond fund shares"): Two billion (2,000,000,000) Shares.
(8) Class C, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(9) Class C, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(10) Class D Common Shares (formerly referred to as "stock
fund shares"): Two billion (2,000,000,000) Shares.
(11) Class D, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(12) Class D, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(13) Class E Common Shares (formerly referred to as "special
equity fund shares"): Two billion (2,000,000,000) Shares.
(14) Class E, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(15) Class E, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(16) Class F Common Shares (formerly referred to as "asset
allocation fund shares"): Two billion (2,000,000,000) Shares.
(17) Class F, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
<PAGE>
(18) Class F, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(19) Class G Common Shares (formerly referred to as "balanced
fund shares"): Two billion (2,000,000,000) Shares.
(20) Class G, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(21) Class G, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(22) Class H Common Shares (formerly referred to as "equity
index fund shares"): Two billion (2,000,000,000) Shares.
(23) Class H, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(24) Class H, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(25) Class I Common Shares (formerly referred to as
"intermediate term income fund shares"): Two billion (2,000,000,000)
Shares.
(26) Class I, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(27) Class I, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(28) Class J Common Shares (formerly referred to as "limited
term income fund shares"): Two billion (2,000,000,000) Shares.
(29) Class J, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(30) Class J, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(31) Class K Common Shares (formerly referred to as "mortgage
securities fund shares"): billion (2,000,000,000) Shares.
(32) Class K, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(33) Class K, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(34) Class L Common Shares (formerly referred to as
"regional equity fund shares"): Two billion (2,000,000,000) Shares.
(35) Class L, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(36) Class L, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(37) Class M Common Shares: Two billion (2,000,000,000)
Shares.
(38) Class M, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(39) Class M, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(40) Class N Common Shares: Two billion (2,000,000,000)
Shares.
(41) Class N, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
<PAGE>
(42) Class N, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(43) Class O Common Shares: Two billion (2,000,000,000)
Shares.
(44) Class O, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(45) Class O, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(46) Class P Common Shares: Two billion (2,000,000,000)
Shares.
(47) Class P, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(48) Class P, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(49) Class Q Common Shares: Two billion (2,000,000,000)
Shares.
(50) Class Q, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(51) Class Q, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(52) Class R Common Shares: Two billion (2,000,000,000)
Shares.
(53) Class R, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(54) Class R, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(55) Class S Common Shares: Two billion (2,000,000,000)
Shares.
(56) Class S, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(57) Class S, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(58) Class T Common Shares: Two billion (2,000,000,000)
Shares.
(59) Class T, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(60) Class T, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(61) Class U Common Shares: Two billion (2,000,000,000)
Shares.
(62) Class U, Series 2 Common Shares: Two billion
(2,000,000,000) Shares
(63) Class U, Series 3 Common Shares: Two billion
(2,000,000,000) Shares
(64) Class V Common Shares: Two billion (2,000,000,000)
Shares.
(65) Class V, Series 2 Common Shares: Two billion
(2,000,000,000) Shares
(66) Class V, Series 3 Common Shares: Two billion
(2,000,000,000) Shares
(67) Unclassified Shares: Sixty-eight billion (68,000,000,000)
Shares.
<PAGE>
THIRD: Pursuant to the authority contained in Article IV of the Articles
of Incorporation of the Corporation and Section 2-208 of the Maryland General
Corporation Law, the Board of Directors of the Corporation, by resolution
adopted by written action dated October 26, 1995, classified the following
additional Shares out of the authorized, unissued and unclassified Shares of the
Corporation:
(1) Class W Common Shares: Two billion (2,000,000,000) Shares.
(2) Class W, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(3) Class W, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
FOURTH: The Shares classified pursuant to THIRD above shall have the
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and conditions of
redemption, set forth in the Corporation's Articles of Incorporation. Any Class
or Series of Shares classified pursuant to THIRD above may be subject to such
charges and expenses (including by way of example, but not by way of limitation,
such front-end and deferred sales charges as may be permitted under the 1940 Act
and rules of the National Association of Securities Dealers, Inc. ("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 Corporation in accordance, to the extent applicable,
with the 1940 Act, and all of the charges and expenses to which such a Class or
Series is subject shall be borne by such Class or Series 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 or Series.
FIFTH: Immediately after the classifications hereinbefore set forth and
upon filing for record of these Articles Supplementary, the Corporation has
authority to issue two hundred billion (200,000,000,000) shares of common stock
(individually, a "Share" and collectively, the "Shares"), of the par value of
$.0001 per Share and of the aggregate par value of twenty million dollars
($20,000,000), classified as follows:
(1) Class A Common Shares (formerly referred to as "government
bond fund shares"): Two billion (2,000,000,000) Shares.
(2) Class A, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(3) Class A, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(4) Class B Common Shares (formerly referred to as "fixed
income fund shares"): Two billion (2,000,000,000) Shares.
(5) Class B, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(6) Class B, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(7) Class C Common Shares (formerly referred to as "municipal
bond fund shares"): Two billion (2,000,000,000) Shares.
(8) Class C, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(9) Class C, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
<PAGE>
(10) Class D Common Shares (formerly referred to as "stock
fund shares"): Two billion (2,000,000,000) Shares.
(11) Class D, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(12) Class D, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(13) Class E Common Shares (formerly referred to as "special
equity fund shares"): Two billion (2,000,000,000) Shares.
(14) Class E, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(15) Class E, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(16) Class F Common Shares (formerly referred to as "asset
allocation fund shares"): Two billion (2,000,000,000) Shares.
(17) Class F, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(18) Class F, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(19) Class G Common Shares (formerly referred to as "balanced
fund shares"): Two billion (2,000,000,000) Shares.
(20) Class G, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(21) Class G, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(22) Class H Common Shares (formerly referred to as "equity
index fund shares"): Two billion (2,000,000,000) Shares.
(23) Class H, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(24) Class H, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(25) Class I Common Shares (formerly referred to as
"intermediate term income fund shares"): Two billion (2,000,000,000)
Shares.
(26) Class I, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(27) Class I, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(28) Class J Common Shares (formerly referred to as "limited
term income fund shares"): Two billion (2,000,000,000) Shares.
(29) Class J, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(30) Class J, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(31) Class K Common Shares (formerly referred to as "mortgage
securities fund shares"): Two billion (2,000,000,000) Shares.
(32) Class K, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
<PAGE>
(33) Class K, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(34) Class L Common Shares (formerly referred to as "regional
equity fund shares"): Two billion (2,000,000,000) Shares.
(35) Class L, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(36) Class L, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(37) Class M Common Shares: Two billion (2,000,000,000)
Shares.
(38) Class M, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(39) Class M, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(40) Class N Common Shares: Two billion (2,000,000,000)
Shares.
(41) Class N, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(42) Class N, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(43) Class O Common Shares: Two billion (2,000,000,000)
Shares.
(44) Class O, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(45) Class O, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(46) Class P Common Shares: Two billion (2,000,000,000)
Shares.
(47) Class P, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(48) Class P, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(49) Class Q Common Shares: Two billion (2,000,000,000)
Shares.
(50) Class Q, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(51) Class Q, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(52) Class R Common Shares: Two billion (2,000,000,000)
Shares.
(53) Class R, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(54) Class R, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(55) Class S Common Shares: Two billion (2,000,000,000)
Shares.
(56) Class S, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(57) Class S, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(58) Class T Common Shares: Two billion (2,000,000,000)
Shares.
(59) Class T, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
<PAGE>
(60) Class T, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(61) Class U Common Shares: Two billion (2,000,000,000)
Shares.
(62) Class U, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(63) Class U, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(64) Class V Common Shares: Two billion (2,000,000,000)
Shares.
(65) Class V, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(66) Class V, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(67) Class W Common Shares: Two billion (2,000,000,000)
Shares.
(68) Class W, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(69) Class W, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(70) Unclassified Shares: Sixty-two billion (62,000,000,000)
Shares.
SIXTH: The aforesaid action by the Board of Directors of the
Corporation was taken pursuant to authority and power contained in the Articles
of Incorporation of the Corporation.
The undersigned officer of the Corporation hereby acknowledges, in the
name and on behalf of the Corporation, the foregoing Articles Supplementary to
be the corporate act of the Corporation and further certifies that, to the best
of his or her knowledge, information and belief, the matters and facts set forth
therein with respect to the approval thereof are true in all material respects,
under the penalties of perjury.
IN WITNESS WHEREOF, the Corporation has caused these Articles Supplementary to
be signed in its name and on its behalf by its Vice President and witnessed by
its Assistant Secretary on November 9, 1995.
First American Investment Funds, Inc.
By /s/ Keith L. Stewart
Its /s/ Vice President
WITNESS:
/s/ Richard J. Shoch
Richard J. Shoch
Assistant Secretary
<PAGE>
ARTICLES OF AMENDMENT
T0
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
FIRST AMERICAN INVESTMENT FUNDS, INC
The undersigned officer of First American Investment Funds, Inc. (the
"Corporation"), a Maryland corporation, hereby certifies that the following
amendments to the Corporation's Amended and Restated Articles of Incorporation
have been advised by the Corporation's Board of Directors and approved by the
Corporation's stockholders in the manner required by the Maryland General
Corporation Law:
WHEREAS, the Corporation is registered as an open end management
investment company (i.e., a mutual fund) under the Investment Company
Act of 1940 and offers its shares to the public in several classes,
each of which represents a separate and distinct portfolio of assets;
and
WHEREAS, it is desirable and in the best interests of the holders of
the Class R shares of the Corporation (also known as "Limited
Volatility Stock Fund") that the assets belonging to such class be sold
to a separate portfolio of the Corporation which is known as "Stock
Fund" and which is represented by the Corporation's Class D shares, in
exchange for shares of Stock Fund which are to be delivered to former
Limited Volatility Stock Fund holders; and
WHEREAS, Limited Volatility Stock Fund and Stock Fund have entered into
an Agreement and Plan of Reorganization providing for the foregoing
transactions; and
WHEREAS, the Agreement and Plan of Reorganization requires that, in
order to bind all holders of shares of Limited Volatility Stock Fund to
the foregoing transactions, and in particular to bind such holders to
the exchange of their Limited Volatility Stock Fund shares for Stock
Fund shares, it is necessary to adopt an amendment to the Corporation's
Amended and Restated Articles of Incorporation.
NOW, THEREFORE, BE IT RESOLVED, that the Corporation's Amended and
Restated Articles of Incorporation be, and the same hereby are, amended
to add the following Article IV(A)) immediately following Article IV
thereof:
Article IV(A). (a) For purposes of this Article IV(A), the
following terms shall have the following meanings:
"Corporation" means this corporation.
"Acquired Fund" means the Corporation's Limited Volatility Stock Fund,
which is represented by the Corporation's Class R shares.
"Class A Acquired Fund Shares" means the Corporation's Class R Common
Shares.
"Class B Acquired Fund Shares" means the Corporation's Class R, Series
2 Common Shares.
<PAGE>
"Class C Acquired Fund Shares" means the Corporation's Class R, Series
3 Common Shares.
"Acquiring Fund" means the Corporation's Stock Fund, which is
represented by the Corporation's Class D shares.
"Class A Acquiring Fund Shares" means the Corporation's Class D Common
Shares.
"Class B Acquiring Fund Shares" means the Corporation's Class D, Series
2 Common Shares.
"Class C Acquiring Fund Shares" means the Corporation's Class D, Series
3 Common Shares.
"Effective Time" means 4:00 p.m. Eastern time on the date upon which
these Articles of Amendment are filed with the Maryland State
Department of Assessments and Taxation.
(b) At the Effective Time, the assets belonging to the Acquired Fund,
the liabilities belonging to the Acquired Fund, and the General Assets and
General Liabilities allocated to the Acquired Fund, shall become, without
further action, assets belonging to the Acquiring Fund, liabilities belonging to
the Acquiring Fund, and General Assets and General Liabilities allocated to the
Acquiring Fund. For purposes of the foregoing, the terms "assets belonging to,"
"liabilities belonging to" "General Assets" and "General Liabilities" have the
meanings assigned to them in Article IV, Section 1(d)(i) and (ii) of the
Corporation's Amended and Restated Articles of Incorporation.
(c) At the Effective Time, each issued and outstanding Acquired Fund
share shall be, without further action, exchanged for those numbers and classes
of Acquiring Fund shares calculated in accordance with paragraph (d) below.
(d) The numbers of Class A, Class B and Class C Acquiring Fund Shares to
be issued in exchange for the Class A, Class B and Class C Acquired Fund Shares
shall be determined as follows:
(i) The net asset value per share of the Acquired Fund's and
the Acquiring Fund's Class A Shares, Class B Shares and Class C Shares
shall be computed as of the Effective Time using the valuation
procedures set forth in the Corporation's articles of incorporation and
bylaws and then-current Prospectuses and Statement of Additional
Information and as may be required by the Investment Company Act of
1940, as amended (the "1940 Act").
(ii) The total number of Class A Acquiring Fund Shares to be
issued (including fractional shares, if any) in exchange for the Class
A Acquired Fund Shares shall be determined as of the Effective Time by
multiplying the number of Class A Acquired Fund Shares outstanding
immediately prior to the Effective Time times a fraction, the numerator
of which is the net asset value per share of Class A Acquired Fund
Shares immediately prior to the Effective Time, and the denominator of
which is the net asset value per share of the Class A Acquiring Fund
Shares immediately prior to the Effective Time, each as determined
pursuant to (i) above.
(iii) The total number of Class B Acquiring Fund Shares to be
issued (including fractional shares, if any) in exchange for the Class
B Acquired
<PAGE>
Fund Shares shall be determined as of the Effective Time by multiplying
the number of Class B Acquired Fund Shares outstanding immediately
prior to the Effective Time times a fraction, the numerator of which is
the net asset value per share of Class B Acquired Fund Shares
immediately prior to the Effective Time, and the denominator of which
is the net asset value per share of the Class B Acquiring Fund Shares
immediately prior to the Effective Time, each as determined pursuant to
(i) above.
(iv) The total number of Class C Acquiring Fund Shares to be
issued (including fractional shares, if any) in exchange for the Class
C Acquired Fund Shares shall be determined as of the Effective Time by
multiplying the number of Class C Acquired Fund Shares outstanding
immediately prior to the Effective Time times a fraction, the numerator
of which is the net asset value per share of Class C Acquired Fund
Shares immediately prior to the Effective Time, and the denominator of
which is the net asset value per share of the Class C Acquiring Fund
Shares immediately prior to the Effective Time, each as determined
pursuant to (i) above.
(v) At the Effective Time, the Acquired Fund shall issue and
distribute to the Acquired Fund shareholders of the respective classes
pro rata within such classes (based upon the ratio that the number of
Acquired Fund Shares of the respective classes owned by each Acquired
Fund shareholder immediately prior to the Effective Time bears to the
total number of issued and outstanding Acquired Fund shares of the
respective classes immediately prior to the Effective Time) the full
and fractional Acquiring Fund shares of the respective classes" issued
by the Acquiring Fund pursuant to (ii) through (iv) above. Accordingly,
each Class A Acquired Fund shareholder shall receive, at the Effective
Time, Class A Acquiring Fund Shares with an aggregate net asset value
equal to the aggregate net asset value of the Class A Acquired Fund
Shares owned by such Acquired Fund shareholder immediately prior to the
Effective Time; each Class B Acquired Fund shareholder shall receive,
at the Effective Time, Class B Acquiring Fund Shares with an aggregate
net asset value equal to the aggregate net asset value of the Class B
Acquired Fund Shares owned by such Acquired Fund shareholder
immediately prior to the Effective Time; and each Class C Acquired Fund
shareholder shall receive, at the Effective Time, Class C Acquiring
Fund Shares with an aggregate net asset value equal to the aggregate
net asset value of the Class C Acquired Fund Shares owned by such
Acquired Fund shareholder immediately prior to the Effective Time.
(e) The distribution of Acquiring Fund Shares to Acquired Fund
shareholders provided for in paragraphs (c) and (d) above shall be accomplished
by the issuance of such Acquiring Fund Shares to open accounts on the share
records of the Acquiring Fund in the names of the Acquired Fund shareholders
representing the numbers and classes" of Acquiring Fund shares due each such
shareholder pursuant to the foregoing provisions. All issued and outstanding
shares of the Acquired Fund shall simultaneously be cancelled on the books of
the Acquired Fund and retired. From and after the Effective Time, share
certificates formerly representing Acquired Fund Shares shall represent the
numbers and classes of Acquiring Fund shares determined in accordance with the
foregoing provisions.
(f) From and after the Effective Time, the Acquired Fund shares
cancelled and retired pursuant to paragraph (e) above shall have the status of
authorized and unissued Class R common shares of the Corporation, without
designation as to series.
The undersigned officer of the Corporation hereby acknowledges, in the
name and on behalf of the Corporation, the foregoing Articles of Amendment to
be the corporate act of the Corporation and further certifies that, to the best
of his or her knowledge, information and belief, the matters and facts set forth
therein with respect to the approval thereof are true in all material respects,
under the penalties of perjury.
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused these Article of
Amendment to be signed in its name and on its behalf by its President or a Vice
President and witnessed by its Secretary or an Assistant Secretary on January
25, 1996.
FIRST AMERICAN INVESTMENT FUNDS, INC
By /s/ Keith L. Stewart
Its Vice President
WITNESS:
/s/ Michael J. Radmer
Secretary
<PAGE>
Execution
ARTICLES OF AMENDMENT
TO
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
FIRST AMERICAN INVESTMENT FUNDS, INC.
The undersigned officer of First American Investment Funds, Inc. (the
"Corporation"), a Maryland corporation, hereby certifies that the following
amendments to the Corporation's Amended and Restated Articles of Incorporation
have been advised by the Corporation's Board of Directors and approved by the
Corporation's stockholders in the manner required by the Maryland General
Corporation Law:
WHEREAS, the Corporation is registered as an open end management
investment company (i.e., a mutual fund) under the Investment Company
Act of 1940 and offers its shares to the public in several classes,
each of which represents a separate and distinct portfolio of assets;
and
WHEREAS, it is desirable and in the best interests of the holders of
the Class R shares of the Corporation (also known as "Limited
Volatility Stock Fund") that the assets belonging to such class be sold
to a separate portfolio of the Corporation which is known as "Stock
Fund" and which is represented by the Corporation's Class D shares, in
exchange for shares of Stock Fund which are to be delivered to former
Limited Volatility Stock Fund holders; and
WHEREAS, Limited Volatility Stock Fund and Stock Fund have entered into
an Agreement and Plan of Reorganization providing for the foregoing
transactions; and
WHEREAS, the Agreement and Plan of Reorganization requires that, in
order to bind all holders of shares of Limited Volatility Stock Fund to
the foregoing transactions, and in particular to bind such holders to
the exchange of their Limited Volatility Stock Fund shares for Stock
Fund shares, it is necessary to adopt an amendment to the Corporation's
Amended and Restated Articles of Incorporation.
NOW, THEREFORE, BE IT RESOLVED, that the Corporation's Amended and
Restated Articles of Incorporation be, and the same hereby are, amended
to add the following Article IV(A) immediately following Article IV
thereof:
Article IV(A). (a) For purposes of this Article IV(A), the
following terms shall have the following meanings:
"Corporation" means this corporation.
"Acquired Fund" means the Corporation's Limited Volatility
Stock Fund, which is represented by the Corporation's Class R
shares.
"Class A Acquired Fund Shares" means the Corporation's Class R
Common Shares.
"Class B Acquired Fund Shares" means the Corporation's Class
R, Series 2 Common Shares.
<PAGE>
"Class C Acquired Fund Shares" means the Corporation's Class
R, Series 3 Common Shares.
"Acquiring Fund" means the Corporation's Stock Fund, which is
represented by the Corporation's Class D shares.
"Class A Acquiring Fund Shares" means the Corporation's Class
D Common Shares.
"Class B Acquiring Fund Shares" means the Corporation's Class
D, Series 2 Common Shares.
"Class C Acquiring Fund Shares" means the Corporation's Class
D, Series 3 Common Shares.
"Effective Time" means 4:00 p.m. Eastern time on the date upon
which these Articles of Amendment are filed with the Maryland
State Department of Assessments and Taxation.
(b) At the Effective Time, the assets belonging to the
Acquired Fund, the liabilities belonging to the Acquired Fund, and the
General Assets and General Liabilities allocated to the Acquired Fund,
shall become, without further action, assets belonging to the Acquiring
Fund, liabilities belonging to the Acquiring Fund, and General Assets
and General Liabilities allocated to the Acquiring Fund. For purposes
of the foregoing, the terms "assets belonging to," "liabilities
belonging to," "General Assets" and "General Liabilities" have the
meanings assigned to them in Article IV, Section 1(d)(i) and (ii) of
the Corporation's Amended and Restated Articles of Incorporation.
(c) At the Effective Time, each issued and outstanding
Acquired Fund share shall be, without further action, exchanged for
those numbers and classes of Acquiring Fund shares calculated in
accordance with paragraph (d) below.
(d) The numbers of Class A, Class B and Class C Acquiring Fund
Shares to be issued in exchange for the Class A, Class B and Class C
Acquired Fund Shares shall be determined as follows:
(i) The net asset value per share of the Acquired
Fund's and the Acquiring Fund's Class A Shares, Class B Shares
and Class C Shares shall be computed as of the Effective Time
using the valuation procedures set forth in the Corporation's
articles of incorporation and bylaws and then-current
Prospectuses and Statement of Additional Information and as
may be required by the Investment Company Act of 1940, as
amended (the "1940 Act").
(ii) The total number of Class A Acquiring Fund
Shares to be issued (including fractional shares, if any) in
exchange for the Class A Acquired Fund Shares shall be
determined as of the Effective Time by multiplying the number
of Class A Acquired Fund Shares outstanding immediately prior
to the Effective Time times a fraction, the numerator of which
is the net asset value per share of Class A Acquired Fund
Shares immediately prior to the Effective Time, and the
denominator of which is the net asset value per share of the
Class A Acquiring Fund Shares immediately prior to the
Effective Time, each as determined pursuant to (i) above.
(iii) The total number of Class B Acquiring Fund
Shares to be issued (including fractional shares, if any) in
exchange for the Class B Acquired Fund Shares shall be
determined as of the Effective Time by multiplying the number
of Class B Acquired
<PAGE>
Fund Shares outstanding immediately prior to the Effective
Time times a fraction, the numerator of which is the net asset
value per share of Class B Acquired Fund Shares immediately
prior to the Effective Time, and the denominator of which is
the net asset value per share of the Class B Acquiring Fund
Shares immediately prior to the Effective Time, each as
determined pursuant to (i) above.
(iv) The total number of Class C Acquiring Fund
Shares to be issued (including fractional shares, if any) in
exchange for the Class C Acquired Fund Shares shall be
determined as of the Effective Time by multiplying the number
of Class C Acquired Fund Shares outstanding immediately prior
to the Effective Time times a fraction, the numerator of which
is the net asset value per share of Class C Acquired Fund
Shares immediately prior to the Effective Time, and the
denominator of which is the net asset value per share of the
Class C Acquiring Fund Shares immediately prior to the
Effective Time, each as determined pursuant to (i) above.
(v) At the Effective Time, the Acquired Fund shall
issue and distribute to the Acquired Fund shareholders of the
respective classes pro rata within such classes (based upon
the ratio that the number of Acquired Fund shares of the
respective classes owned by each Acquired Fund shareholder
immediately prior to the Effective Time bears to the total
number of issued and outstanding Acquired Fund shares of the
respective classes immediately prior to the Effective Time)
the full and fractional Acquiring Fund shares of the
respective classes issued by the Acquiring Fund pursuant to
(ii) through (iv) above. Accordingly, each Class A Acquired
Fund shareholder shall receive, at the Effective Time, Class A
Acquiring Fund Shares with an aggregate net asset value equal
to the aggregate net asset value of the Class A Acquired Fund
Shares owned by such Acquired Fund shareholder immediately
prior to the Effective Time; each Class B Acquired Fund
shareholder shall receive, at the Effective Time, Class B
Acquiring Fund Shares with an aggregate net asset value equal
to the aggregate net asset value of the Class B Acquired Fund
Shares owned by such Acquired Fund shareholder immediately
prior to the Effective Time; and each Class C Acquired Fund
shareholder shall receive, at the Effective Time, Class C
Acquiring Fund Shares with an aggregate net asset value equal
to the aggregate net asset value of the Class C Acquired Fund
Shares owned by such Acquired Fund shareholder immediately
prior to the Effective Time.
(e) The distribution of Acquiring Fund shares to Acquired Fund
shareholders provided for in paragraphs (c) and (d) above shall be
accomplished by the issuance of such Acquiring Fund shares to open
accounts on the share records of the Acquiring Fund in the names of the
Acquired Fund shareholders representing the numbers and classes of
Acquiring Fund shares due each such shareholder pursuant to the
foregoing provisions. All issued and outstanding shares of the Acquired
Fund shall simultaneously be cancelled on the books of the Acquired
Fund and retired. From and after the Effective Time, share certificates
formerly representing Acquired Fund shares shall represent the numbers
and classes of Acquiring Fund shares determined in accordance with the
foregoing provisions.
(f) From and after the Effective Time, the Acquired Fund
shares cancelled and retired pursuant to paragraph (e) above shall have
the status of authorized and unissued Class R common shares of the
Corporation, without designation as to series.
The undersigned officer of the Corporation hereby acknowledges, in the
name and on behalf of the Corporation, the foregoing Articles of Amendment to be
the corporate act of the Corporation and further certifies that, to the best of
his or her knowledge, information and belief, the matters and facts set forth
therein with respect to the approval thereof are true in all material respects,
under the penalties of perjury.
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused these Article of
Amendment to be signed in its name and on its behalf by its President or a Vice
President and witnessed by its Secretary or an Assistant Secretary on January
25, 1996.
FIRST AMERICAN INVESTMENT FUNDS, INC
By /s/ Keith L. Stewart
Its Vice President
WITNESS:
/s/ Michael J. Radmer
Secretary
<PAGE>
7/97
FIRST AMERICAN INVESTMENT FUNDS, INC.
ARTICLES SUPPLEMENTARY
First American Investment Funds, Inc., a corporation organized under
the laws of the State of Maryland (the "Corporation"), does hereby file for
record with the State Department of Assessments and Taxation of Maryland the
following Articles Supplementary to its Articles of Incorporation:
FIRST: The Corporation is registered as an open-end investment company
under the Investment Company Act of 1940 (the "1940 Act"). As hereinafter set
forth, the Corporation has classified its authorized capital stock in accordance
with the Maryland General Corporation Law.
SECOND: Immediately before the classifications hereinafter set forth,
the Corporation had authority to issue two hundred billion (200,000,000,000)
shares of common stock (individually, a "Share" and collectively, the "Shares"),
of the par value of $.0001 per Share and of the aggregate par value of twenty
million dollars ($20,000,000), classified as follows:
(1) Class A Common Shares (formerly referred to as "government
bond fund shares"): Two billion (2,000,000,000) Shares.
(2) Class A, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(3) Class A, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(4) Class B Common Shares (formerly referred to as "fixed
income fund shares"): Two billion (2,000,000,000) Shares.
(5) Class B, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(6) Class B, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(7) Class C Common Shares (formerly referred to as "municipal
bond fund shares"): Two billion (2,000,000,000) Shares.
(8) Class C, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(9) Class C, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(10) Class D Common Shares (formerly referred to as "stock
fund shares"): Two billion (2,000,000,000) Shares.
(11) Class D, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(12) Class D, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(13) Class E Common Shares (formerly referred to as "special
equity fund shares"): Two billion (2,000,000,000) Shares.
(14) Class E, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(15) Class E, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(16) Class F Common Shares (formerly referred to as "asset
allocation fund shares"): Two billion (2,000,000,000) Shares.
(17) Class F, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
<PAGE>
(18) Class F, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(19) Class G Common Shares (formerly referred to as "balanced
fund shares"): Two billion (2,000,000,000) Shares.
(20) Class G, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(21) Class G, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(22) Class H Common Shares (formerly referred to as "equity
index fund shares"): Two billion (2,000,000,000) Shares.
(23) Class H, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(24) Class H, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(25) Class I Common Shares (formerly referred to as
"intermediate term income fund shares"): Two billion (2,000,000,000)
Shares.
(26) Class I, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(27) Class I, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(28) Class J Common Shares (formerly referred to as "limited
term income fund shares"): Two billion (2,000,000,000) Shares.
(29) Class J, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(30) Class J, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(31) Class K Common Shares (formerly referred to as "mortgage
securities fund shares"): Two billion (2,000,000,000) Shares.
(32) Class K, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(33) Class K, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(34) Class L Common Shares (formerly referred to as "regional
equity fund shares"): Two billion (2,000,000,000) Shares.
(35) Class L, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(36) Class L, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(37) Class M Common Shares: Two billion (2,000,000,000)
Shares.
(38) Class M, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(39) Class M, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(40) Class N Common Shares: Two billion (2,000,000,000)
Shares.
(41) Class N, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
<PAGE>
(42) Class N, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(43) Class O Common Shares: Two billion (2,000,000,000)
Shares.
(44) Class O, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(45) Class O, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(46) Class P Common Shares: Two billion (2,000,000,000)
Shares.
(47) Class P, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(48) Class P, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(49) Class Q Common Shares: Two billion (2,000,000,000)
Shares.
(50) Class Q, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(51) Class Q, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(52) Class R Common Shares: Two billion (2,000,000,000)
Shares.
(53) Class R, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(54) Class R, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(55) Class S Common Shares: Two billion (2,000,000,000)
Shares.
(56) Class S, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(57) Class S, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(58) Class T Common Shares: Two billion (2,000,000,000)
Shares.
(59) Class T, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(60) Class T, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(61) Class U Common Shares: Two billion (2,000,000,000)
Shares.
(62) Class U, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(63) Class U, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(64) Class V Common Shares: Two billion (2,000,000,000)
Shares.
(65) Class V, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(66) Class V, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(67) Class W Common Shares: Two billion (2,000,000,000)
Shares.
(68) Class W, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
<PAGE>
(69) Class W, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(70) Unclassified Shares: Sixty-two billion (62,000,000,000)
Shares.
THIRD: Pursuant to the authority contained in Article IV of the
Articles of Incorporation of the Corporation and Section 2-208 of the Maryland
General Corporation Law, the Board of Directors of the Corporation, by
resolution adopted June 4, 1997, classified the following additional Shares out
of the authorized, unissued and unclassified Shares of the Corporation:
(1) Class X Common Shares: Two billion (2,000,000,000) Shares.
(2) Class Y Common Shares: Two billion (2,000,000,000) Shares.
(3) Class Y, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(4) Class Z Common Shares: Two billion (2,000,000,000) Shares.
(5) Class Z, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(6) Class Z, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
FOURTH: The Shares classified pursuant to THIRD above shall have the
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and conditions of
redemption, set forth in the Corporation's Articles of Incorporation. Any Class
or Series of Shares classified pursuant to THIRD above may be subject to such
charges and expenses (including by way of example, but not by way of limitation,
such front-end and deferred sales charges as may be permitted under the 1940 Act
and rules of the National Association of Securities Dealers, Inc. ("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 Corporation in accordance, to the extent applicable,
with the 1940 Act, and all of the charges and expenses to which such a Class or
Series is subject shall be borne by such Class or Series 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 or Series.
FIFTH: Immediately after the classifications hereinbefore set forth and
upon filing for record of these Articles Supplementary, the Corporation has
authority to issue two hundred billion (200,000,000,000) shares of common stock
(individually, a "Share" and collectively, the "Shares"), of the par value of
$.0001 per Share and of the aggregate par value of twenty million dollars
($20,000,000), classified as follows:
(1) Class A Common Shares (formerly referred to as "government
bond fund shares"): Two billion (2,000,000,000) Shares.
(2) Class A, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(3) Class A, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(4) Class B Common Shares (formerly referred to as "fixed
income fund shares"): Two billion (2,000,000,000) Shares.
(5) Class B, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(6) Class B, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
<PAGE>
(7) Class C Common Shares (formerly referred to as "municipal
bond fund shares"): Two billion (2,000,000,000) Shares.
(8) Class C, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(9) Class C, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(10) Class D Common Shares (formerly referred to as "stock
fund shares"): Two billion (2,000,000,000) Shares.
(11) Class D, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(12) Class D, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(13) Class E Common Shares (formerly referred to as "special
equity fund shares"): Two billion (2,000,000,000) Shares.
(14) Class E, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(15) Class E, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(16) Class F Common Shares (formerly referred to as "asset
allocation fund shares"): Two billion (2,000,000,000) Shares.
(17) Class F, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(18) Class F, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(19) Class G Common Shares (formerly referred to as "balanced
fund shares"): Two billion (2,000,000,000) Shares.
(20) Class G, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(21) Class G, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(22) Class H Common Shares (formerly referred to as "equity
index fund shares"): Two billion (2,000,000,000) Shares.
(23) Class H, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(24) Class H, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(25) Class I Common Shares (formerly referred to as
"intermediate term income fund shares"): Two billion (2,000,000,000)
Shares.
(26) Class I, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(27) Class I, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(28) Class J Common Shares (formerly referred to as "limited
term income fund shares"): Two billion (2,000,000,000) Shares.
(29) Class J, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
<PAGE>
(30) Class J, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(31) Class K Common Shares (formerly referred to as "mortgage
securities fund shares"): Two billion (2,000,000,000) Shares.
(32) Class K, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(33) Class K, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(34) Class L Common Shares (formerly referred to as "regional
equity fund shares"): Two billion (2,000,000,000) Shares.
(35) Class L, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(36) Class L, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(37) Class M Common Shares: Two billion (2,000,000,000)
Shares.
(38) Class M, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(39) Class M, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(40) Class N Common Shares: Two billion (2,000,000,000)
Shares.
(41) Class N, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(42) Class N, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(43) Class O Common Shares: Two billion (2,000,000,000)
Shares.
(44) Class O, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(45) Class O, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(46) Class P Common Shares: Two billion (2,000,000,000)
Shares.
(47) Class P, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(48) Class P, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(49) Class Q Common Shares: Two billion (2,000,000,000)
Shares.
(50) Class Q, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(51) Class Q, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(52) Class R Common Shares: Two billion (2,000,000,000)
Shares.
(53) Class R, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(54) Class R, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(55) Class S Common Shares: Two billion (2,000,000,000)
Shares.
<PAGE>
(56) Class S, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(57) Class S, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(58) Class T Common Shares: Two billion (2,000,000,000)
Shares.
(59) Class T, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(60) Class T, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(61) Class U Common Shares: Two billion (2,000,000,000)
Shares.
(62) Class U, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(63) Class U, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(64) Class V Common Shares: Two billion (2,000,000,000)
Shares.
(65) Class V, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(66) Class V, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(67) Class W Common Shares: Two billion (2,000,000,000)
Shares.
(68) Class W, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(69) Class W, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(70) Class X Common Shares: Two billion (2,000,000,000)
Shares.
(71) Class Y Common Shares: Two billion (2,000,000,000)
Shares.
(72) Class Y, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(73) Class Z Common Shares: Two billion (2,000,000,000)
Shares.
(74) Class Z, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(75) Class Z, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(76) Unclassified Shares: Fifty billion (50,000,000,000)
Shares.
SIXTH: The aforesaid action by the Board of Directors of the
Corporation was taken pursuant to authority and power contained in the Articles
of Incorporation of the Corporation.
The undersigned officer of the Corporation hereby acknowledges, in the
name and on behalf of the Corporation, the foregoing Articles Supplementary to
be the corporate act of the Corporation and further certifies that, to the best
of his or her knowledge, information and belief, the matters and facts set forth
therein with respect to the approval thereof are true in all material respects,
under the penalties of perjury.
IN WITNESS WHEREOF, the Corporation has caused these Articles
Supplementary to be signed in its
<PAGE>
name and on its behalf by its President and witnessed by its Secretary on July
17, 1997.
First American Investment Funds, Inc.
By /s/ Kathryn L. Stanton
Kathryn L. Stanton
Its Vice President
WITNESS:
/s/ Michael J. Radmer
Michael J. Radmer, Secretary
<PAGE>
10/97
FIRST AMERICAN INVESTMENT FUNDS, INC.
ARTICLES SUPPLEMENTARY
First American Investment Funds, Inc., a corporation organized under
the laws of the State of Maryland (the "Corporation"), does hereby file for
record with the State Department of Assessments and Taxation of Maryland the
following Articles Supplementary to its Articles of Incorporation:
FIRST: The Corporation is registered as an open-end investment company
under the Investment Company Act of 1940 (the "1940 Act"). As hereinafter set
forth, the Corporation has classified its authorized capital stock in accordance
with the Maryland General Corporation Law.
SECOND: Immediately before the classifications hereinafter set forth,
the Corporation had authority to issue two hundred billion (200,000,000,000)
shares of common stock (individually, a "Share" and collectively, the "Shares"),
of the par value of $.0001 per Share and of the aggregate par value of twenty
million dollars ($20,000,000), classified as follows:
(1) Class A Common Shares (formerly referred to as "government
bond fund shares"): Two billion (2,000,000,000) Shares.
(2) Class A, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(3) Class A, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(4) Class B Common Shares (formerly referred to as "fixed
income fund shares"): Two billion (2,000,000,000) Shares.
(5) Class B, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(6) Class B, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(7) Class C Common Shares (formerly referred to as "municipal
bond fund shares"): Two billion (2,000,000,000) Shares.
(8) Class C, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(9) Class C, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(10) Class D Common Shares (formerly referred to as "stock
fund shares"): Two billion (2,000,000,000) Shares.
(11) Class D, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(12) Class D, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(13) Class E Common Shares (formerly referred to as "special
equity fund shares"): Two billion (2,000,000,000) Shares.
(14) Class E, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(15) Class E, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(16) Class F Common Shares (formerly referred to as "asset
allocation fund shares"): Two billion (2,000,000,000) Shares.
(17) Class F, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
<PAGE>
(18) Class F, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(19) Class G Common Shares (formerly referred to as "balanced
fund shares"): Two billion (2,000,000,000) Shares.
(20) Class G, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(21) Class G, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(22) Class H Common Shares (formerly referred to as "equity
index fund shares"): Two billion (2,000,000,000) Shares.
(23) Class H, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(24) Class H, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(25) Class I Common Shares (formerly referred to as
"intermediate term income fund shares"): Two billion (2,000,000,000)
Shares.
(26) Class I, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(27) Class I, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(28) Class J Common Shares (formerly referred to as "limited
term income fund shares"): Two billion (2,000,000,000) Shares.
(29) Class J, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(30) Class J, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(31) Class K Common Shares (formerly referred to as "mortgage
securities fund shares"): Two billion (2,000,000,000) Shares.
(32) Class K, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(33) Class K, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(34) Class L Common Shares (formerly referred to as "regional
equity fund shares"): Two billion (2,000,000,000) Shares.
(35) Class L, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(36) Class L, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(37) Class M Common Shares: Two billion (2,000,000,000)
Shares.
(38) Class M, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(39) Class M, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(40) Class N Common Shares: Two billion (2,000,000,000)
Shares.
(41) Class N, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
<PAGE>
(42) Class N, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(43) Class O Common Shares: Two billion (2,000,000,000)
Shares.
(44) Class O, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(45) Class O , Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(46) Class P Common Shares: Two billion (2,000,000,000)
Shares.
(47) Class P, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(48) Class P, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(49) Class Q Common Shares: Two billion (2,000,000,000)
Shares.
(50) Class Q, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(51) Class Q, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(52) Class R Common Shares: Two billion (2,000,000,000)
Shares.
(53) Class R, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(54) Class R, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(55) Class S Common Shares: Two billion (2,000,000,000)
Shares.
(56) Class S, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(57) Class S, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(58) Class T Common Shares: Two billion (2,000,000,000)
Shares.
(59) Class T, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(60) Class T, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(61) Class U Common Shares: Two billion (2,000,000,000)
Shares.
(62) Class U, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(63) Class U, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(64) Class V Common Shares: Two billion (2,000,000,000)
Shares.
(65) Class V, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(66) Class V, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(67) Class W Common Shares: Two billion (2,000,000,000)
Shares.
(68) Class W, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
<PAGE>
(69) Class W, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(70) Class X Common Shares: Two billion (2,000,000,000)
Shares.
(71) Class Y Common Shares: Two billion (2,000,000,000)
Shares.
(72) Class Y, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(73) Class Z Common Shares: Two billion (2,000,000,000)
Shares.
(74) Class Z, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(75) Class Z, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(76) Unclassified Shares: Fifty billion (50,000,000,000)
Shares.
THIRD: Pursuant to the authority contained in Article IV of the
Articles of Incorporation of the Corporation and Section 2-208 of the Maryland
General Corporation Law, the Board of Directors of the Corporation, by
resolution adopted June 4, 1997, classified the following additional Shares out
of the authorized, unissued and unclassified Shares of the Corporation:
(1) Class AA Common Shares: Two billion (2,000,000,000)
Shares.
(2) Class AA, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(3) Class AA, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(4) Class BB Common Shares: Two billion (2,000,000,000)
Shares.
(5) Class BB, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(6) Class BB, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
FOURTH: The Shares classified pursuant to THIRD above shall have the
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and conditions of
redemption, set forth in the Corporation's Articles of Incorporation. Any Class
or Series of Shares classified pursuant to THIRD above may be subject to such
charges and expenses (including by way of example, but not by way of limitation,
such front-end and deferred sales charges as may be permitted under the 1940 Act
and rules of the National Association of Securities Dealers, Inc. ("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 Corporation in accordance, to the extent applicable,
with the 1940 Act, and all of the charges and expenses to which such a Class or
Series is subject shall be borne by such Class or Series 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 or Series.
FIFTH: Immediately after the classifications hereinbefore set forth and
upon filing for record of these Articles Supplementary, the Corporation has
authority to issue two hundred billion (200,000,000,000) shares of common stock
(individually, a "Share" and collectively, the "Shares"), of the par value of
$.0001 per Share and of the aggregate par value of twenty million dollars
($20,000,000), classified as follows:
<PAGE>
(1) Class A Common Shares (formerly referred to as "government
bond fund shares"): Two billion (2,000,000,000) Shares.
(2) Class A, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(3) Class A, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(4) Class B Common Shares (formerly referred to as "fixed
income fund shares"): Two billion (2,000,000,000) Shares.
(5) Class B, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(6) Class B, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(7) Class C Common Shares (formerly referred to as "municipal
bond fund shares"): Two billion (2,000,000,000) Shares.
(8) Class C, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(9) Class C, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(10) Class D Common Shares (formerly referred to as "stock
fund shares"): Two billion (2,000,000,000) Shares.
(11) Class D, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(12) Class D, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(13) Class E Common Shares (formerly referred to as "special
equity fund shares"): Two billion (2,000,000,000) Shares.
(14) Class E, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(15) Class E, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(16) Class F Common Shares (formerly referred to as "asset
allocation fund shares"): Two billion (2,000,000,000) Shares.
(17) Class F, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(18) Class F, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(19) Class G Common Shares (formerly referred to as "balanced
fund shares"): Two billion (2,000,000,000) Shares.
(20) Class G, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(21) Class G, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(22) Class H Common Shares (formerly referred to as "equity
index fund shares"): Two billion (2,000,000,000) Shares.
(23) Class H, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
<PAGE>
(24) Class H, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(25) Class I Common Shares (formerly referred to as
"intermediate term income fund shares"): Two billion (2,000,000,000)
Shares.
(26) Class I, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(27) Class I, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(28) Class J Common Shares (formerly referred to as "limited
term income fund shares"): Two billion (2,000,000,000) Shares.
(29) Class J, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(30) Class J, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(31) Class K Common Shares (formerly referred to as "mortgage
securities fund shares"): Two billion (2,000,000,000) Shares.
(32) Class K, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(33) Class K, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(34) Class L Common Shares (formerly referred to as "regional
equity fund shares"): Two billion (2,000,000,000) Shares.
(35) Class L, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(36) Class L, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(37) Class M Common Shares: Two billion (2,000,000,000)
Shares.
(38) Class M, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(39) Class M, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(40) Class N Common Shares: Two billion (2,000,000,000)
Shares.
(41) Class N, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(42) Class N, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(43) Class O Common Shares: Two billion (2,000,000,000)
Shares.
(44) Class O, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(45) Class O , Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(46) Class P Common Shares: Two billion (2,000,000,000)
Shares.
(47) Class P, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(48) Class P, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
<PAGE>
(49) Class Q Common Shares: Two billion (2,000,000,000)
Shares.
(50) Class Q, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(51) Class Q, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(52) Class R Common Shares: Two billion (2,000,000,000)
Shares.
(53) Class R, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(54) Class R, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(55) Class S Common Shares: Two billion (2,000,000,000)
Shares.
(56) Class S, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(57) Class S, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(58) Class T Common Shares: Two billion (2,000,000,000)
Shares.
(59) Class T, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(60) Class T, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(61) Class U Common Shares: Two billion (2,000,000,000)
Shares.
(62) Class U, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(63) Class U, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(64) Class V Common Shares: Two billion (2,000,000,000)
Shares.
(65) Class V, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(66) Class V, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(67) Class W Common Shares: Two billion (2,000,000,000)
Shares.
(68) Class W, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(69) Class W, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(70) Class X Common Shares: Two billion (2,000,000,000)
Shares.
(71) Class Y Common Shares: Two billion (2,000,000,000)
Shares.
(72) Class Y, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(73) Class Z Common Shares: Two billion (2,000,000,000)
Shares.
(74) Class Z, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(75) Class Z, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
<PAGE>
(76) Class AA Common Shares: Two billion (2,000,000,000)
Shares.
(77) Class AA, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(78) Class AA, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(79) Class BB Common Shares: Two billion (2,000,000,000)
Shares.
(80) Class BB, Series 2 Common Shares: Two billion
(2,000,000,000) Shares.
(81) Class BB, Series 3 Common Shares: Two billion
(2,000,000,000) Shares.
(82) Unclassified Shares: Thirty-eight billion
(38,000,000,000) Shares.
SIXTH: The aforesaid action by the Board of Directors of the
Corporation was taken pursuant to authority and power contained in the Articles
of Incorporation of the Corporation.
The undersigned officer of the Corporation hereby
acknowledges, in the name and on behalf of the Corporation, the foregoing
Articles Supplementary to be the corporate act of the Corporation and further
certifies that, to the best of his or her knowledge, information and belief, the
matters and facts set forth therein with respect to the approval thereof are
true in all material respects, under the penalties of perjury.
IN WITNESS WHEREOF, the Corporation has caused these Articles Supplementary to
be signed in its name and on its behalf by its President and witnessed by its
Secretary on October 30, 1997.
First American Investment Funds, Inc.
By /s/ David Lee
Its President
WITNESS:
/s/ Michael J. Radmer
Michael J. Radmer, Secretary
EXHIBIT 2
NAME CHANGE FROM "SECURAL MUTUAL FUNDS, INC." TO "FIRST AMERICAN INVESTMENT
FUNDS, INC." APPROVED AT BOARD OF DIRECTORS' MEETINGS ON FEBRUARY 12, 1991;
AMENDMENT ADDING NEW SECTION 8 TO ARTICLE I APPROVED AT BOARD OF DIRECTORS'
MEETINGSON DECEMBER 15, 1992; AMENDMENTS TO ARTICLE III APPROVED AT BOARD OF
DIRECTORS' MEETINGS ON SEPTEMBER 7, 1993; AMENDMENT ADDING NEW SECTION 3 TO
ARTICLE V APPROVED AT BOARD OF DIRECTORS' MEETING ON DECEMBER 7, 1993; AMENDMENT
TO ARTCLE V, SECTION 3 CHANGING FUND NAMES APPROVED AT BOARD OF DIRECTORS'
MEETING ON MARCH 7, 1994; AMENDMENT TO ARTICLE V, SECTION 3 PROVIDING FOR NAMES
OF NEW CLASSES AND SERIES APPROVED AT BOARD OF DIRECTORS MEETING ON JUNE 8,
1994; AMENDMENT TO ARTICLE V, SECTION 3 PROVIDING FOR NAMES OF NEW CLASSES AND
SERIES APPROVED AT BOARD OF DIRECTORS MEETING ON DECEMBER 7, 1994; AMENDMENT TO
ARTICLE V, SECTION 3 PROVIDING FOR NAMES OF NEW CLASSES AND SERIES APPROVED AT
BOARD OF DIRECTORS MEETING ON MARCH 6, 1995; AMENDMENT TO ARTICLE V, SECTION 3
PROVIDING FOR NAMES OF NEW CLASSES AND SERIES APPROVED AT BOARD OF DIRECTORS
MEETING ON DECEMBER 6, 1995; AMENDMENT TO ARTICLE V, SECTION 3 PROVIDING FOR
NAMES OF NEW CLASSES AND SERIES APPROVED AT BOARD OF DIRECTORS MEETING ON JUNE
4, 1997.
BYLAWS
OF
FIRST AMERICAN INVESTMENT FUNDS, INC.
(A MARYLAND CORPORATION)
ARTICLE I
STOCKHOLDERS
SECTION 1. Meetings. Annual or special meetings of
stockholders may be held on such date and at such time as shall be set or
provided for by the Board of Directors or, if not so set or provided for, then
as stated in the notice of meeting. The notice of meeting shall state the
purpose or purposes for which the meeting is called.
SECTION 2. Place of Meetings. All meetings of stockholders
shall be held at such place in the United States as is set or provided for by
the Board of Directors or, if not so set or provided for, then as stated in the
notice of meeting.
SECTION 3. Organization. At any meeting of the stockholders,
in the absence of the Chairman of the Board of Directors, if any, and of the
President or a Vice President acting in his stead, the stockholders shall choose
a chairman to preside over the meeting. In the absence of the Secretary or an
Assistant Secretary, acting in his stead, the chairman of the meeting shall
appoint a secretary to keep the record of all the votes and minutes of the
proceedings.
SECTION 4. Proxies. At any meeting of the stockholders, every
stockholder having the right to vote shall be entitled to vote in person or by
proxy appointed by an instrument executed in writing by such stockholder or his
duly authorized attorney-in-fact and bearing a date not more than eleven (11)
months prior to said meeting, unless otherwise provided in the proxy.
SECTION 5. Voting. At any meeting of the stockholders, every
stockholder shall be entitled to one vote or a fractional vote on each matter
<PAGE>
submitted to a vote for each share or fractional share of stock standing in his
name on the books of the Corporation as of the close of business on the record
date for such meeting. Unless the voting is conducted by inspectors, all
questions relating to the qualifications of voters, validity of proxies and
acceptance or rejection of votes shall be decided by the chairman of the
meeting.
SECTION 6. Record Date; Closing of Transfer Books. The Board
of Directors may fix, in advance, a date as the record date for the purpose of
determining stockholders entitled to notice of, or to vote at, any meeting of
stockholders, or stockholders entitled to receive payment of any dividend or the
allotment of any rights, or in order to make a determination of stockholders for
any other proper purpose. Such date, in any case, shall be not more than sixty
days, and in case of a meeting of stockholders not less than ten days, prior to
the date on which the particular action requiring such determination of
stockholders is to be taken. In lieu of fixing a record date, the Board of
Directors may provide that the stock transfer books shall be closed for a stated
period but not to exceed, in any case, twenty days. If the stock transfer books
are closed for the purpose of determining stockholders entitled to notice of or
to vote at a meeting of stockholders, such books shall be closed for at least
ten days immediately preceding such meeting.
SECTION 7. Registered Stockholders. The Corporation shall be
entitled to recognize the exclusive right of a person registered on its books as
the owner of shares and shall not be bound to recognize any equitable or other
claim to or interest in such share or shares on the part of any other person,
whether or not it shall have express or other notice thereof.
SECTION 8. Calling of Special Meeting of Shareholders. A
special meeting of stockholders shall be called upon the written request of the
holders of shares entitled to cast not less than 10% of all votes entitled to
vote at such meeting.
ARTICLE II
BOARD OF DIRECTORS
SECTION 1. Number, Qualification, Tenure and Vacancies. The
initial Board of Directors shall consist of five (5) directors. Except as
hereinafter provided, a director shall be elected to serve until his successor
shall be elected and shall qualify or until his earlier death, resignation,
retirement or removal. The directors may at any time when the stockholders are
not assembled in meeting, establish, increase or decrease their own number by
majority vote of the entire Board of Directors; provided, that the number of
directors shall never be less than three (3) nor more than twelve (12). The
number of directors may not be decreased so as to affect the term of any
incumbent director. If the number be increased, the additional directors
<PAGE>
to fill the vacancies thus created may, except as hereinafter provided, by
elected by majority vote of the entire Board of Directors. Any vacancy occurring
for any cause may be filled by a majority of the remaining members of the Board
of Directors, although such majority is less than a quorum; provided, however,
that after filling any vacancy for any cause whatsoever two-thirds (2/3) of the
entire Board of Directors shall have been elected by the stockholders of the
Corporation. A director elected under any circumstance shall be elected to hold
office until his successor is elected and qualified, or until such director's
earlier death, resignation, retirement or removal.
SECTION 2. When Stockholder Meeting Required. If at any time
less than a majority of the directors holding office were elected by the
stockholders of the Corporation, the directors or the President or Secretary
shall cause a meeting of stockholders to be held as soon as possible and, in any
event, within sixty (60) days, unless extended by order of the Securities and
Exchange Commission, for the purpose of electing directors to fill any vacancy.
SECTION 3. Regular Meetings. Regular meetings of the Board of
Directors may be held at such time and place as shall be determined from time to
time by agreement or fixed by resolution of the Board of Directors.
SECTION 4. Special Meetings. Special meetings of the Board of
Directors may be called at any time by the Chairman of the Board or President
and shall be called by the Secretary upon the written request of any two (2)
directors.
SECTION 5. Notice of Meetings. Except as otherwise provided in
these Bylaws, notice need not be given of regular meetings of the Board of
Directors held at times fixed by agreement or resolution of the Board of
Directors. Notice of special meetings of the Board of Directors, stating the
place, date and time thereof, shall be given not less than two (2) days before
such meeting to each director. Notice to a director may be given personally, by
telegram, cable or wireless, by telephone by mail, or by leaving such notice at
his place of residence or usual place of business. If mailed, such notice shall
be deemed to be given when deposited in the United States mail, postage prepaid,
directed to the director at his address as it appears on the records of the
Corporation. Meetings may be held at any time without notice if all the
directors are present, or if those not present waive notice of the meeting in
writing. If the President shall determine in advance that a quorum would not be
present on the date set for any regular or special meeting, such meeting may be
held at such later date, time and place as he shall determine, upon at least
twenty-four (24) hours' notice.
SECTION 6. Quorum. A majority of the directors then in office,
at a meeting duly assembled, but not less than one-third of the entire Board of
Directors nor in any event less than two directors, shall constitute a quorum
for the
<PAGE>
transaction of business. The vote of a majority of directors present at a
meeting at which a quorum is present shall be the act of the Board of Directors,
except as may be otherwise specifically provided by statute or by the Articles
of Incorporation or by these Bylaws. If at any meeting of the Board of
Directors, there shall be less than a quorum present, a majority of those
present may adjourn the meeting, without further notice, from time to time until
a quorum shall have been obtained.
SECTION 7. Removal. At any meeting of stockholders, duly
called and at which a quorum is present, the stockholders may, by the
affirmative vote of the holders of a majority of the votes entitled to be cast
thereon, remove any director or directors from office and may elect a successor
or successors to fill any resulting vacancies.
SECTION 8. Committees. The Board of Directors, may, by
resolution adopted by a majority of the entire Board of Directors, from time to
time appoint from among its members one or more committees as it may determine.
Each committee appointed by the Board of Directors shall be composed of two (2)
or more directors and may, to the extent provided in such resolution, have and
exercise all the powers of the Board of Directors, except the power to declare
dividends, to issue stock or to recommend to stockholders any action requiring
stockholder approval. Each such committee shall serve at the pleasure of the
Board of Directors. Each such committee shall keep a record of its proceedings
and shall adopt its own rules of procedure. It shall make reports as may be
required by the Board of Directors.
ARTICLE III
OFFICERS AND CHAIRMAN OF THE BOARD OF DIRECTORS
SECTION 1. Offices. The elected officers of the Corporation
shall be the President, the Secretary and the Treasurer, and may also include
one or more Vice Presidents, one or more Assistant Secretaries, one or more
Assistant Treasurers and such other officers as the Board of Directors may
determine. Any two or more offices may be held by the same person, except that
no person may hold both the office of President and the office of Vice
President. A person who holds more than one office in the Corporation shall not
act in more than one capacity to execute, acknowledge or verify an instrument
required by law to be executed, acknowledged or verified by more than one
officer.
SECTION 2. Selection, Term of Office and Vacancies. The
initial officers of the Corporation shall be elected by the Board of Directors
at the first meeting of the Board of Directors. Additional officers may be
elected at any regular or special meeting of the Board of Directors. Each
officer shall serve at the pleasure
<PAGE>
of the Board of Directors or until his earlier death, resignation or retirement.
If any office becomes vacant, the vacancy shall be filled by the Board of
Directors.
SECTION 3. Chairman of the Board. The Board of Directors may
elect one of its members as Chairman of the Board. Except as otherwise provided
in these Bylaws, in the event the Board of Directors elects a Chairman of the
Board of Directors, he shall preside at all meetings of the stockholders and the
Board of Directors and shall perform such other duties as from time to time may
be assigned to him 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. President. The president shall be the chair
executive officer of the Corporation and shall perform such other duties as from
time to time may be assigned to him by the Board of Directors. He shall perform
the duties of the Chairman of the Board of Directors in the event there is no
Chairman or in the event the Chairman is absent.
SECTION 5. Vice Presidents. A Vice President shall perform
such duties as may be assigned by the President or the Board of Directors. In
the absence of the President and in accordance with such order of priority as
may be established by the Board of Directors, he may perform the duties of the
President, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the President.
SECTION 6. Secretary. The Secretary shall (a) keep the minutes
of the stockholders' and Board of Directors' meetings in one or more books
provided for that purpose, and shall perform like duties for committees when
requested, (b) see that all notices are duly given in accordance with the
provisions of these Bylaws or as required by law, (c) be custodian of the
corporate records and of the seal of the Corporation and see that the seal of
the Corporation is affixed to all documents the execution of which on behalf of
the Corporation under its seal is duly authorized or required by law, and (d) in
general perform all duties incident to the office of Secretary and such other
duties as may be assigned by the President or the Board of Directors.
SECTION 7. Assistant Secretaries. One or more Assistant
Secretaries may be elected by the Board of Directors or appointed by the
President. In the absence of the Secretary and in accordance with such order as
may be established by the Board of Directors, an Assistant Secretary shall have
the power to perform his duties including the certification, execution and
attestation of corporate records and
<PAGE>
corporate instruments. Assistant Secretaries shall perform such other duties as
may be assigned to them by the President or the Board of Directors.
SECTION 8. Treasurer. The Treasurer (a) shall be the principal
financial officer of the Corporation, (b) shall see that all funds and
securities of the Corporation are held by the custodian of the Corporation's
assets, and (c) shall be the principal accounting officer of the Corporation.
SECTION 9. Assistant Treasurers. One or more Assistant
Treasurers may be elected by the Board of Directors or appointed by the
President. In the absence of the Treasurer and in accordance with such order as
may be established by the Board of Directors, an Assistant Treasurer shall have
the power to perform his duties. Assistant Treasurers shall perform such other
duties as may be assigned to them by the President or the Board of Directors.
SECTION 10. Other Officers. The Board of Directors may appoint
or may authorize the Chairman of the Board or the President to appoint such
other officers and agents as the appointer may deem necessary and proper, who
shall hold their offices for such terms and shall exercise such powers and
perform such duties as shall be determined from time to time by the appointer.
SECTION 11. Bond. If required by the Board of Directors, the
Treasurer and such other directors, officers, employees and agents of the
Corporation as the Board of Directors may specify, shall give the Corporation a
bond in such amount, in such form and with such security, surety or sureties, as
may be satisfactory to the Board of Directors, conditioned on the faithful
performance of the duties of their office and for the restoration to the
Corporation, in case of their death, resignation, or removal from their office
of all books, papers, vouchers, monies, securities and property of whatever kind
in their possession belonging to the Corporation. All premiums on such bonds
shall be paid by the Corporation.
SECTION 12. Removal. Any officer (or the Chairman of the Board
of Directors) of the Corporation may be removed by the Board of Directors
whenever, in its judgment, the best interests of the Corporation will be served
thereby, but such removal shall be without prejudice to the contractual rights,
if any, of the officer (or the Chairman of the Board of Directors) so removed.
ARTICLE IV
CAPITAL STOCK
SECTION 1. Stock Certificates. Certificates representing
shares of stock of the Corporation shall be in such form consistent with the
laws of the State of
<PAGE>
Maryland as shall be determined by the Board of Directors. All certificates for
shares of stock shall be consecutively numbered or otherwise identified. The
name and address of the person to whom the shares of stock represented thereby
are issued, with the number of shares and date of issue, shall be entered on the
stock transfer records of the Corporation.
SECTION 2. Redemption and Transfer. Any holder of stock of the
Corporation desiring to redeem or transfer shares of stock standing in the name
of such holder on the books of the Corporation shall deliver to the Corporation
or to its agent duly authorized for such purpose a written unconditional
request, in form acceptable to the Corporation, for such redemption or transfer.
If certificates evidencing such shares have been issued, such certificates shall
also be so delivered in transferable form duly endorsed or accompanied by all
necessary stock transfer stamps or currency or certified or bank cashier's check
payable to the order of the Corporation for the appropriate price thereof. The
Corporation or its duly authorized agent may require that the signature of a
redeeming stockholder on any or all of the request, endorsement or stock power
be guaranteed and that other documentation in accordance with the custom of
brokers be so delivered where appropriate, such as proof of capacity and power
to make request or transfer. All documents and funds shall be deemed to have
been delivered only when physically deposited at such office or other place of
deposit as the Corporation or its duly authorized agent shall from time to time
designate. At any time during which the right of redemption is suspended or
payment for such shares is postponed pursuant to the Investment Company Act of
1940, as amended, or any rule, regulation or order thereunder, any stockholder
may withdraw his request (and certificates and funds, if any) or may leave the
same on deposit, in which case the redemption price shall be the net asset value
next applicable after such suspension or postponement is terminated.
SECTION 3. Lost, Mutilated, Destroyed or Wrongfully Taken
Certificates. Any person claiming a stock certificate to have been lost,
mutilated, destroyed or wrongfully taken, and who requests the issuance of a new
certificate before the Corporation has notice that the certificate alleged to
have been lost, mutilated, destroyed or wrongfully taken has been acquired by a
bona fide purchaser, shall make an affidavit of that fact and shall give the
Corporation and its transfer agents and registrars a bond, with sufficient
surety, to indemnify them against any loss or claim arising as a result of the
issuance of a new certificate. The form and amount of such bond and the surety
thereon shall in each case be deemed sufficient if satisfactory to the President
or Treasurer of the Corporation.
<PAGE>
ARTICLE V
GENERAL PROVISIONS
SECTION 1. Fiscal Year. The fiscal year of the Corporation
shall be established by resolution of the Board of Directors.
SECTION 2. Amendments. These Bylaws may be altered, amended or
repealed and new Bylaws may be adopted by a majority of the entire Board of
Directors at any meeting of the Board of Directors.
SECTION 3. Names of Classes and Series of Shares. The names of
the classes and series of shares which have been classified by the Corporation
in its Articles of Incorporation and in Articles Supplementary shall be as
follows:
<TABLE>
<CAPTION>
Designation of Shares in
Articles of Incorporation
or Articles Supplementary Name of Class or Series
- ------------------------- -----------------------
<S> <C>
Class A Common Shares Intermediate Government Bond Fund,
Retail Class or Class A
Class A, Series 2 Common Shares Intermediate Government Bond Fund,
Institutional Class or Class C
Class A, Series 3 Common Shares Intermediate Government Bond Fund,
CDSC Class or Class B
Class B Common Shares Fixed Income Fund, Retail Class or Class A
Class B, Series 2 Common Shares Fixed Income Fund, Institutional Class or Class B
Class B, Series 3 Common Shares Fixed Income Fund, CDCS Class or Class B
Class C Common Shares Intermediate Tax Free Fund, Retail Class or Class A
Class C, Series 2 Common Shares Intermediate Tax Free Fund, Institutional
Class or Class C
Class C, Series 3 Common Shares Intermediate Tax Free Fund, CDSC Class or Class B
Class D Common Shares Stock Fund, Retail Class or Class A
Class D, Series 2 Common Shares Stock Fund, Institutional Class or Class C
Class D, Series 3 Common Shares Stock Fund, CDCS Class or Class B
Class E Common Shares Special Equity Fund, Retail Class or Class A
Class E, Series 2 Common Shares Special Equity Fund, Institutional Class or Class C
Class E, Series 3 Common Shares Special Equity Fund, CDSC Class or Class B
Class F Common Shares Asset Allocation Fund, Retail Class or Class A
<PAGE>
Class F, Series 2 Common Shares Asset Allocation Fund, Institutional Class or Class C
Class F, Series 3 Common Shares Asset Allocation Fund, CDSC Class or Class B
Class G Common Shares Balanced Fund, Retail Class or Class A
Class G, Series 2 Common Shares Balanced Fund, Institutional Class or Class C
Class G, Series 3 Common Shares Balanced Fund, CDSC Class or Class B
Class H Common Shares Equity Index Fund, Retail Class or Class A
Class H, Series 2 Common Shares Equity Index Fund, Institutional Class or Class C
Class H, Series 3 Common Shares Equity Index Fund, CDSC Class or Class B
Class I Common Shares Intermediate Term Income Fund, Retail
Class or Class A
Class I, Series 2 Common Shares Intermediate Term Income Fund,
Institutional Class or Class C
Class I, Series 3 Common Shares Intermediate Term Income Fund,
CDSC Class or Class B
Class J Common Shares Limited Term Income Fund, Retail Class or Class A
Class J, Series 2 Common Shares Limited Term Income Fund,
Institutional Class or Class C
Class J, Series 3 Common Shares Limited Term Income Fund, CDSC Class or Class B
Class K Common Shares Reserved (formerly Mortgage Securities Fund, Retail Class or Class A)
Class K, Series 2 Common Shares Reserved (formerly Mortgage Securities Fund, Institutional Class or Class C)
Class K, Series 3 Common Shares Reserved (formerly Mortgage Securities Fund, CDSC Class or Class B)
Class L Common Shares Regional Equity Fund, Retail Class or Class A
Class L, Series 2 Common Shares Regional Equity Fund, Institutional Class or Class C
Class L, Series 3 Common Shares Regional Equity Fund, CDSC Class or Class B
Class M Common Shares Minnesota Insured Intermediate Tax Free
Fund, Retail Class or Class A
Class M, Series 2 Common Shares Minnesota Insured Intermediate Tax Free
Fund, Institutional Class or Class C
Class M, Series 3 Common Shares Minnesota Insured Intermediate Tax Free
Fund, CDSC Class or Class B
Class N Common Shares Colorado Intermediate Tax Free Fund,
Retail Class or Class A
Class N, Series 2 Common Shares Colorado Intermediate Tax Free Fund,
Institutional Class or Class C
Class N, Series 3 Common Shares Colorado Intermediate Tax Free Fund,
CDSC Class or Class B
<PAGE>
Class O Common Shares Emerging Growth Fund, Retail Class or Class A
Class O, Series 2 Common Shares Emerging Growth Fund, Institutional Class or Class C
Class O, Series 3 Common Shares Emerging Growth Fund, CDSC Class or Class B
Class P Common Shares Technology Fund, Retail Class or Class A
Class P, Series 2 Common Shares Technology Fund, Institutional Class or Class C
Class P, Series 3 Common Shares Technology Fund, CDSC Class or Class B
Class Q Common Shares International Fund, Retail Class or Class A
Class Q, Series 2 Common Shares International Fund, Institutional Class or Class C
Class Q, Series 3 Common Shares International Fund, CDSC Class or Class B
Class R Common Shares Reserved (formerly Limited Volatility Stock Fund, Retail Class or Class A)
Class R, Series 2 Common Shares Reserved (formerly Limited Volatility Stock Fund, Institutional Class or Class C)
Class R, Series 3 Common Shares Reserved (formerly Limited Volatility Stock Fund, CDSC Class or Class B)
Class S Common Shares Diversified Growth Fund, Retail Class or Class A
Class S, Series 2 Common Shares Diversified Growth Fund, CDSC Class or Class B
Class S, Series 3 Common Shares Diversified Growth Fund, Institutional Class or Class C
Class T Common Shares Equity Income Fund, Retail Class or Class A
Class T, Series 2 Common Shares Equity Income Fund, CDSC Class or Class B
Class T, Series 3 Common Shares Equity Income Fund, Institutional Class or Class C
Class U Common Shares Reserved (formerly Limited Term Tax Free Income Fund, Retail Class or Class A)
Class U, Series 2 Common Shares Reserved (formerly Limited Term Tax Free Income Fund, CDSC Class or Class B)
Class U, Series 3 Common Shares Reserved (formerly Limited Term Tax Free Income Fund, Institutional Class or Class C)
Class V Common Shares Real Estate Securities Fund, Retail Class or Class A
Class V, Series 2 Common Shares Real Estate Securities Fund, CDSC Class or Class B
Class V, Series 3 Common Shares Real Estate Securities Fund, Institutional Class or Class C
<PAGE>
Class W Common Shares Health Sciences Fund, Retail Class or Class A
Class W, Series 2 Common Shares Health Sciences Fund, CDSC Class or Class B
Class W, Series 3 Common Shares Health Sciences Fund, Institutional Class or Class C
Class X Common Shares Oregon Intermediate Tax Free Fund, Institutional Class or Class C
Class Y Common Shares California Intermediate Tax Free Fund, Retail Class or Class A
Class Y, Series 2 Common Shares California Intermediate Tax Free Fund, Institutional Class or Class C
Class Z Common Shares Micro Cap Value Fund, Retail Class or Class A
Class Z, Series 2 Common Shares Micro Cap Value Fund, CDSC Class or Class B
Class Z, Series 3 Common Shares Micro Cap Value Fund, Institutional Class or Class C
Class AA Common Shares Small Cap Value Fund, Retail Class or Class A
Class AA, Series 2 Common Shares Small Cap Value Fund, CDSC Class or Class B
Class AA, Series 3 Common Shares Small Cap Value Fund, Institutional Class or Class C
Class BB Common Shares International Index Fund, Retail Class or Class A
Class BB, Series 2 Common Shares International Index Fund, CDSC Class or Class B
Class BB, Series 3 Common Shares International Index Fund, Institutional Class or Class C
</TABLE>
Exhibit 9(e)
SUB-ADMINISTRATION AGREEMENT
AGREEMENT made effective this 1st day of January, 1998, between SEI
INVESTMENTS MANAGEMENT CORPORATION ("SEI"), a Delaware business trust, and
having its principal place of business at Oaks, PA 19456, and First Bank
National Association (the "Sub-Administrator"), a national banking association
having its main office at 601 2nd Avenue South, Minneapolis, MN 55402.
WHEREAS, SEI has entered into an Amended and Restated Administration
Agreement, dated as of July 1, 1997 (the "Administration Agreement"), with First
American Investment Funds, Inc. ("First American"), a Minnesota corporation
having its principal place of business at Oaks, PA 19456, concerning the
provision of management and administrative services for the investment
portfolios of First American identified on Schedule A hereto, as such Schedule
shall be amended from time to time (individually referred to herein as the
"Fund" and collectively as the "Funds"); and
WHEREAS, SEI desires to retain the Sub-Administrator to assist it in
performing administrative services with respect to each Fund and the
Sub-Administrator is willing to perform such services on the terms and
conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. Services as Sub-Administrator. The Sub-Administrator will assist SEI
in providing administrative services with respect to each Fund as may be
reasonably requested by SEI from time to time. Such services may include, but
are in no way limited to, such clerical, bookkeeping, accounting, stenographic,
and administrative services which will enable SEI to more efficiently perform
its obligations under the Administration Agreement. Specific assignments may
include:
(i) With regard to the investment adviser to First American, and
at the direction of SEI, to:
a. advise with regard to various compliance requirements
including but not limited to the performance of
credit analysis as required by Rule 2a-7 under the
Investment Company Act of 1940, as amended (the "1940
Act");
b. assist in the preparation of Directors' compliance
reports;
c. assist in the resolution of other technical issues of
a non-compliance nature; and
<PAGE>
d. serve as on-site liaison;
(ii) Gathering of information deemed necessary by SEI to support
(a) required state regulatory filings (including filings
required to be made with California tax, blue sky and bank
agencies) and (b) required federal regulatory filings;
(iii) Preparation of statistical and research data;
(iv) Assistance in the preparation of First American's Annual and
Semi-Annual Reports to Shareholders; and
(v) Assistance in the gathering of data for inclusion in SEI's
periodic reports to the Directors.
The Sub-Administrator will keep and maintain all books and records relating to
its services in accordance with Rule 31a-1 under the 1940 Act.
2. Compensation; Reimbursement of Expenses. SEI shall pay the Sub-
Administrator for the services to be provided by the Sub-Administrator under
this Agreement in accordance with, and in the manner set forth in, Schedule A
hereto. In addition, SEI agrees to reimburse the Sub-Administrator for the
Sub-Administrator's reasonable out-of-pocket expenses in providing services
hereunder.
3. Effective Date. This Agreement shall become effective with respect
to a Fund as of the date first written above (or, if a particular Fund is not in
existence on that date, on the date specified in the amendment to Schedule A to
this Agreement relating to such Fund) (the "Effective Date").
4. Term. This Agreement shall continue in effect with respect to a Fund
for as long as the Administration Agreement remains in effect. Compensation due
the Sub-Administrator and unpaid by SEI upon such termination shall be
immediately due and payable upon and notwithstanding such termination. The
Sub-Administrator shall be entitled to collect from SEI, in addition to the
compensation described under paragraph 2 hereof, the amount of all the
Sub-Administrator's cash disbursements for services in connection with the
Sub-Administrator's activities in effecting such termination, including without
limitation, the delivery to SEI, First American, and/or their respective
designees of First American's property, records, instruments and documents, or
any copies thereof. Subsequent to such termination for a reasonable fee to be
paid by SEI, the Sub-Administrator will provide SEI and/or First American with
reasonable access to any First American documents or records remaining in its
possession.
5. Standard of Care: Reliance on Records and Instructions;
Indemnification. The Sub-Administrator shall use its best efforts to insure the
accuracy of all services performed under this Agreement, but shall not be liable
to SEI or First American for any action taken or omitted by
<PAGE>
the Sub-Administrator in the absence of bad faith, willful misfeasance,
negligence or from reckless disregard by it of its obligations and duties. SEI
agrees to indemnify and hold harmless the Sub-Administrator, its employees,
agents, directors, officers and nominees from and against any and all claims,
demands, actions and suits, whether groundless or otherwise, and from and
against any and all judgments, liabilities, losses, damages, costs, charges,
counsel fees and other expenses of every nature and character arising out of or
in any way relating to the Sub-Administrator's actions taken or nonactions with
respect to the performance of services under this Agreement with respect to a
Fund or based, if applicable, upon reasonable reliance on information, records,
instructions or requests with respect to such Fund given or made to the
Sub-Administrator by a duly authorized representative of SEI; provided that this
indemnification shall not apply to actions or omissions of the Sub-Administrator
in cases of its own bad faith, willful misfeasance, negligence or from reckless
disregard by it of its obligations and duties, and further provided that prior
to confessing any claim against it which may be the subject of this
indemnification, the Sub-Administrator shall give SEI written notice of and
reasonable opportunity to defend against said claim in its own name or in the
name of the Sub-Administrator.
6. Record Retention and Confidentiality. The Sub-Administrator shall
keep and maintain on behalf of First American all books and records which First
American and the Sub-Administrator are, or may be, required to keep and maintain
in connection with the services to be provided hereunder pursuant to any
applicable statutes, rules and regulations, including without limitation Rules
31a-1 and 31a-2 under the 1940 Act. The Sub-Administrator further agrees that
all such books and records shall be the property of First American and to make
such books and records available for inspection by First American, by SEI, or by
the Securities and Exchange Commission at reasonable times and otherwise to keep
confidential all books and records and other information relative to First
American and its shareholders; except when requested to divulge such information
by duly-constituted authorities or court process.
7. Uncontrollable Events. The Sub-Administrator assumes no
responsibility hereunder, and shall not be liable, for any damage, loss of data,
delay or any other loss whatsoever caused by events beyond its reasonable
control.
8. Rights of Ownership. All computer programs and procedures developed
to perform the services to be provided by the Sub-Administrator under this
Agreement are the property of the Sub-Administrator. All records and other data
except such computer programs and procedures are the exclusive property of First
American and all such other records and data will be furnished to SEI and/or
First American in appropriate form as soon as practicable after termination of
this Agreement for any reason.
9. Return of Records. The Sub-Administrator may at its option at any
time, and shall promptly upon the demand of SEI and/or First American, turn over
to SEI and/or First American and cease to retain the Sub-Administrator's files,
records and documents created and maintained by the Sub-Administrator pursuant
to this Agreement which are no longer needed by the Sub-Administrator in the
performance of its services or for its legal protection. If not so turned over
<PAGE>
to SEI and/or First American, such documents and records will be retained by the
Sub-Administrator for six years from the year of creation. At the end of such
six-year period, such records and documents will be turned over to SEI and/or
First American unless First American authorizes in writing the destruction of
such records and documents.
10. Representations of SEI. SEI certifies to the Sub-Administrator that
this Agreement has been duly authorized by SEI and, when executed and delivered
by SEI, will constitute a legal, valid and binding obligation of SEI,
enforceable against SEI in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting the rights and remedies of creditors and secured parties.
11. Representations of the Sub-Administrator. The Sub-Administrator
represents and warrants that: (1) the various procedures and systems which the
Sub-Administrator has implemented with regard to safeguarding from loss or
damage attributable to fire, theft, or any other cause of the records and other
data of First American and the Sub-Administrator's records, data, equipment
facilities and other property used in the performance of its obligations
hereunder are adequate and that it will make such changes therein from time to
time as are required for the secure performance of it obligations hereunder, and
(2) this Agreement has been duly authorized by the Sub-Administrator and, when
executed and delivered by the Sub-Administrator, will constitute a legal, valid
and binding obligation of the Sub-Administrator, enforceable against the
Sub-Administrator in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting the rights and remedies of creditors and secured parties.
12. Insurance. The Sub-Administrator shall notify SEI should any of its
insurance coverage be canceled or reduced. Such notification shall include the
date of change and the reasons therefor. The Sub-Administrator shall notify SEI
of any material claims against it with respect to services performed under this
Agreement, whether or not they may be covered by insurance, and shall notify SEI
from time to time as may be appropriate of the total outstanding claims made by
the Sub-Administrator under its insurance coverage.
13. Notices. Any notice provided hereunder shall be sufficiently given
when sent by registered or certified mail to SEI at the following address: One
Freedom Valley Road, Oaks, PA 19456, and to the Sub-Administrator at the
following address: 601 2nd Avenue South, Minneapolis, MN 55402, or at such other
address as either party may from time to time specify in writing to the other
party pursuant to this Section.
14. Headings. Paragraph headings in this Agreement are included for
convenience only and are not to be used to construe or interpret this Agreement.
15. Assignment. This Agreement and the rights and duties hereunder
shall not be assignable with respect to a Fund by either of the parties hereto
except by the specific written consent of the other party and with the specific
written consent of First American.
<PAGE>
16. Governing Law. This Agreement shall be governed by and provisions
shall be construed in accordance with the laws of the State of Minnesota.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
SEI INVESTMENTS MANAGEMENT
CORPORATION
By: /s/ Kevin P. Robins
Name: Kevin P. Robins
Title: Senior Vice President
FIRST BANK NATIONAL ASSOCIATION
By: /s/ Jeff Wilson
Name: Jeff Wilson
Title: VP
<PAGE>
SCHEDULE A
DATED AS OF JANUARY 1, 1998
TO THE SUB-ADMINISTRATION AGREEMENT
BETWEEN
SEI INVESTMENTS MANAGEMENT CORPORATION
AND
FIRST BANK NATIONAL ASSOCIATION
I. Investment Portfolios
Effective Date
--------------
Stock Fund January 1, 1998
Equity Index Fund January 1, 1998
Balanced Fund January 1, 1998
Asset Allocation Fund January 1, 1998
Equity Income Fund January 1, 1998
Diversified Growth Fund January 1, 1998
Emerging Growth Fund January 1, 1998
Regional Equity Fund January 1, 1998
Special Equity Fund January 1, 1998
Technology Fund January 1, 1998
Health Sciences Fund January 1, 1998
Real Estate Securities Fund January 1, 1998
International Fund January 1, 1998
Limited Term Income January 1, 1998
Intermediate Term Income Fund January 1, 1998
Fixed Income Fund January 1, 1998
Intermediate Government Bond Fund January 1, 1998
Intermediate Tax Free Fund January 1, 1998
Minnesota Insured Intermediate Tax Free Fund January 1, 1998
Colorado Intermediate Tax Free Fund January 1, 1998
<PAGE>
II. Compensation
Annual Rate of up to 0.05% of each such Fund's average daily net assets
SEI INVESTMENTS MANAGEMENT
CORPORATION
By: /s/ Kevin P. Robins
Title: Senior Vice President
FIRST BANK NATIONAL ASSOCIATION
By: /s/ Jeff Wilson
Title: VP
Exhibit 9(f)
AMENDED AND RESTATED
ADMINISTRATION AGREEMENT
THIS AMENDED AND RESTATED AGREEMENT is made as of this 1st day of July,
1997, by and between FIRST AMERICAN FUNDS, INC. a Minnesota corporation (the
"Fund"), and SEI Investments Management Corporation (the "Administrator"), a
Delaware corporation.
WHEREAS, the Fund and SEI entered into an Administration Agreement as
of January 1, 1995 and the Fund and SEI now desire to amend and restate such
Agreement;
WHEREAS, the Fund is an open-end diversified management investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act"), consisting of several series of shares of Common Stock; and
WHEREAS, the Fund desires the Administrator to provide, and the
Administrator is willing to provide, management and administrative services to
such portfolios of the Fund as the Fund and the Administrator may agree on
("Portfolios") and as listed on the schedules attached hereto ("Schedules") and
made a part of this Agreement, on the terms and conditions hereinafter set
forth;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, the Fund and the Administrator hereby agree as follows:
ARTICLE 1. Retention of the Administrator. The Fund hereby retains the
Administrator to act as the administrator of the Portfolios and to furnish the
Portfolios with the management and administrative services as set forth in
Article 2 below. The Administrator hereby accepts such employment to perform the
duties set forth below.
The Administrator shall, for all purposes herein, be deemed to be an
independent contractor and, unless otherwise expressly provided or authorized,
shall have no authority to act for or represent the Fund in any way and shall
not be deemed an agent of the Fund.
ARTICLE 2. Administrative Services. The Administrator shall perform,
and subject to the approval of the Board of Directors of the Fund, shall have
the authority to appoint and compensate from its resources one or more
subadministrators to perform administrative services in connection with the
operations of the Portfolios, and, on behalf of the Fund, will investigate,
assist in the selection of and conduct relations with custodians, depositories,
accountants, legal counsel, underwriters, brokers and dealers, corporate
fiduciaries, insurers, banks and persons in any other capacity deemed to be
necessary or desirable for the Portfolios' operations. The Administrator shall
provide the Directors of the Fund with such reports regarding investment
performance as they may reasonably request but shall have no responsibility for
supervising the performance by any investment adviser or sub-adviser of its
responsibilities. Certain of the activities to be performed by the Administrator
are set forth on Exhibit A attached hereto. The parties contemplate that Exhibit
A may be changed from time to time by written agreement of the parties, and in
such event, the amended Exhibit A shall be made a part of this Agreement.
The Administrator shall provide the Fund with regulatory reporting,
fund accounting and related portfolio accounting services, all necessary office
space, equipment, personnel,
<PAGE>
compensation and facilities (including facilities for Shareholders' and
Directors' meetings) for handling the affairs of the Portfolios and such other
services as the Administrator shall, from time to time, determine to be
necessary to perform its obligations under this Agreement. In addition, at the
request of the Board of Directors, the Administrator shall make reports to the
Fund's Directors concerning the performance of its obligations hereunder.
Without limiting the generality of the foregoing, the Administrator
shall:
(a) calculate contractual Fund expenses and control all
disbursements for the Fund, and as appropriate compute the
Fund's yields, total return, expense ratios, portfolio
turnover rate and, if required, portfolio average
dollar-weighed maturity;
(b) assist Fund counsel with the preparation of prospectuses,
statements of additional information, registration statements,
proxy materials;
(c) prepare such reports, applications and documents (including
reports regarding the sale and redemption of Shares as may be
required in order to comply with Federal and state securities
law) as may be necessary or desirable to register the Fund's
shares with state securities authorities, monitor sale of Fund
shares for compliance with state securities laws and file with
the appropriate state securities authorities the registration
statements and reports for the Fund and the Fund's shares and
all amendments thereto, as may be necessary or convenient to
register and keep effective the Fund and the Fund's shares
with state securities authorities to enable the Fund to make a
continuous offering of its shares;
(d) develop and prepare communications to shareholders, including
the annual report to shareholders, coordinate mailing
prospectuses, notices, proxy statements, proxies and other
reports to Fund shareholders, and supervise and facilitate the
solicitation of proxies solicited by the Fund for all
shareholder meetings, including tabulation process for
shareholder meetings;
(e) prepare, negotiate, and administer contracts on behalf of the
Fund with, among others, the Fund's investment adviser,
distributor, custodian, and transfer agent;
(f) maintain the Fund's general ledger and prepare the Fund's
financial statements, including expense accruals and payments,
determine the net asset value of the Fund's assets and of the
Fund's shares, and supervise the Fund's transfer agent with
respect to the payment of dividends and other distributions to
shareholders;
(g) calculate performance data of the Fund and its portfolios for
dissemination to information services covering the investment
company industry;
(h) coordinate and supervise the preparation and filing of the
Fund's tax returns;
(i) examine and review the operations and performance of the
various organizations providing services to the Fund or any
Portfolio of the Fund, including, without limitation, the
Fund's investment adviser, distributor, custodian, transfer
agent, outside legal counsel and independent public
accountants, and at the request of the Board of Directors,
report to the Board on the performance of organizations;
<PAGE>
(j) assist with the layout and printing of publicly disseminated
prospectuses and assist with and coordinate layout and
printing of the Fund's semi-annual and annual reports to
shareholders;
(k) provide internal legal and administrative services as
requested by the Fund from time to time;
(l) assist with the design, development, and operation of the
Fund, including new portfolio and class investment objectives,
policies and structure;
(m) provide individuals reasonably acceptable to the Fund's Board
of Directors for nomination, appointment, or election as
officers of the Fund, who will be responsible for the
management of certain of the Fund's affairs as determined by
the Fund's Board of Directors;
(n) advise the Fund and its Board of Directors on matters
concerning the Fund and its affairs;
(o) obtain and keep in effect fidelity bonds and directors and
officers/errors and omissions insurance policies for the Fund
in accordance with the requirements of Rules 17g-1 and
17d-1(7) under the 1940 Act as such bonds and policies are
approved by the Fund's Board of Directors;
(p) monitor and advise the Fund and its Portfolios on their
registered investment company status under the Internal
Revenue Code of 1986, as amended;
(q) perform all administrative services and functions of the Fund
and each Portfolio to the extent administrative services and
functions are not provided to the Fund or such Portfolio
pursuant to the Fund's or such Portfolio's investment advisory
agreement, distribution agreement, custodian agreement and
transfer agent agreement;
(r) furnish advice and recommendations with respect to other
aspects of the business and affairs of the Portfolios as the
Fund and the Administrator shall determine desirable; and
(s) prepare and file with the SEC the semi-annual report for the
Fund on Form N-SAR and all required notices pursuant to Rule
24f-2.
Also, the Administrator will perform other services for the Fund as agreed from
time to time at the request of the Board of Directors, including, but not
limited to performing internal audit examinations; mailing the annual reports of
the Portfolios; preparing an annual list of shareholders; and mailing notices of
shareholders' meetings, proxies and proxy statements, for all of which the Fund
will pay the Administrator's out-of-pocket expenses.
ARTICLE 3. Allocation of Charges and Expenses.
(A) The Administrator. The Administrator shall furnish at its own
expense the executive,
<PAGE>
supervisory and clerical personnel necessary to perform its obligations under
this Agreement. The Administrator shall also provide the items which it is
obligated to provide under this Agreement, and shall pay all compensation, if
any, of officers of the Fund as well as all Directors of the Fund who are
affiliated persons of the Administrator or any affiliated corporation of the
Administrator; provided, however, that unless otherwise specifically provided,
the Administrator shall not be obligated to pay the compensation of any employee
of the Fund retained by the Directors of the Fund to perform services on behalf
of the Fund.
(B) The Fund. The Fund assumes and shall pay or cause to be paid all
other expenses of the Fund not otherwise allocated herein, including, without
limitation, organizational costs, taxes, expenses for legal and auditing
services, the expenses of preparing (including typesetting), printing and
mailing reports, prospectuses, statements of additional information, proxy
solicitation material and notices to existing Shareholders, all expenses
incurred in connection with issuing and redeeming Shares, the costs of custodial
services, the cost of initial and ongoing registration of the Shares under
Federal and state securities laws, fees and out-of-pocket expenses of Directors
who are not affiliated persons of the Administrator or the investment adviser to
the Fund or any affiliated corporation of the Administrator or the investment
Adviser, insurance, interest, brokerage costs, litigation and other
extraordinary or nonrecurring expenses, and all fees and charges of investment
advisers to the Fund.
ARTICLE 4. Compensation of the Administrator.
(A) Administration Fee. For the services to be rendered, the facilities
furnished and the expenses assumed by the Administrator pursuant to this
Agreement, the Fund shall pay to the Administrator compensation at an annual
rate specified in the Schedules. Such compensation shall be calculated and
accrued daily, and paid to the Administrator monthly. The Fund shall also
reimburse the Administrator for its reasonable out-of-pocket expenses, including
the travel and lodging expenses incurred by officers and employees of the
Administrator in connection with attendance at Board meetings.
If this Agreement becomes effective subsequent to the first day of a
month or terminates before the last day of a month, the Administrator's
compensation for that part of the month in which this Agreement is in effect
shall be prorated in a manner consistent with the calculation of the fees as set
forth above. Payment of the Administrator's compensation for the preceding month
shall be made promptly.
(B) Compensation from Transactions. The Fund hereby authorizes any
entity or person associated with the Administrator which is a member of a
national securities exchange to effect any transaction on the exchange for the
account of the Fund which is permitted by Section 11 (a) of the Securities
Exchange Act of 1934 and Rule 11a2-2(T) thereunder, and the Fund hereby consents
to the retention of compensation for such transactions in accordance with Rule
11a2-2(T)(a)(2)(iv).
(C) Survival of Compensation Rates. All rights of compensation under
this Agreement for services performed as of the termination date shall survive
the termination of this Agreement.
ARTICLE 5. Limitation of Liability of the Administrator. The duties of
the Administrator shall be confined to those expressly set forth herein, and no
implied duties are assumed by or may be asserted against the Administrator
hereunder. The Administrator shall not be liable for any error of judgment or
mistake of law or for any loss arising out of any investment or for any act or
<PAGE>
omission in carrying out its duties hereunder, except a loss resulting from
willful misfeasance, bad faith or negligence in the performance of its duties,
or by reason of reckless disregard of its obligations and duties hereunder,
except as may otherwise be provided under provisions of applicable law which
cannot be waived or modified hereby. (As used in this Article 7, the term
"Administrator" shall include directors, officers, employees and other corporate
agents of the Administrator as well as that corporation itself.)
So long as the Administrator acts in good faith and with due diligence
and without negligence, the Fund assumes full responsibility and shall indemnify
the Administrator and hold it harmless from and against any and all actions,
suits and claims, whether groundless or otherwise, and from and against any and
all losses, damages, costs, charges, reasonable counsel fees and disbursements,
payments, expenses and liabilities (including reasonable investigation expenses)
arising directly or indirectly out of said administration, transfer agency, and
dividend disbursing relationships to the Fund or any other service rendered to
the Fund hereunder. The indemnity and defense provisions set forth herein shall
indefinitely survive the termination of this Agreement.
The rights hereunder shall include the right to reasonable advances of
defense expenses in the event of any pending or threatened litigation with
respect to which indemnification hereunder may ultimately be merited. In order
that the indemnification provision contained herein shall apply, however, it is
understood that if in any case the Fund may be asked to indemnify or hold the
Administrator harmless, the Fund shall be fully and promptly advised of all
pertinent facts concerning the situation in question, and it is further
understood that the Administrator will use all reasonable care to identify and
notify the Fund promptly concerning any situation which presents or appears
likely to present the probability of such a claim for indemnification against
the Fund, but failure to do so in good faith shall not affect the rights
hereunder.
The Fund shall be entitled to participate at its own expense or, if it
so elects, to assume the defense of any suit brought to enforce any claims
subject to this indemnity provision. If the Fund elects to assume the defense of
any such claim, the defense shall be conducted by counsel chosen by the Fund and
satisfactory to the Administrator, whose approval shall not be unreasonably
withheld. In the event that the Fund elects to assume the defense of any suit
and retain counsel, the Administrator shall bear the fees and expenses of any
additional counsel retained by it. If the Fund does not elect to assume the
defense of a suit, it will reimburse the Administrator for the reasonable fees
and expenses of any counsel retained by the Administrator.
The Administrator may apply to the Fund at any time for instructions
and may consult counsel for the Fund or its own counsel and with accountants and
other experts with respect to any matter arising in connection with the
Administrator's duties, and the Administrator shall not be liable or accountable
for any action taken or omitted by it in good faith in accordance with such
instruction or with the opinion of such counsel, accountants or other experts.
Also, the Administrator shall be protected in acting upon any document
which it reasonably believes to be genuine and to have been signed or presented
by the proper person or persons. Nor shall the Administrator be held to have
notice of any change of authority of any officers, employee or agent of the Fund
until receipt of written notice thereof from the Fund.
ARTICLE 6. Activities of the Administrator. The services of the
Administrator rendered to the Fund are not to be deemed to be exclusive. The
Administrator is free to render such services to others and to have other
businesses and interests. It is understood that Directors, officers,
<PAGE>
employees and Shareholders of the Fund are or may be or become interested in the
Administrator, as directors, officers, employees and shareholders or otherwise
and that directors, officers, employees and shareholders of the Administrator
and its counsel are or may be or become similarly interested in the Fund, and
that the Administrator may be or become interested in the Fund as a Shareholder
or otherwise.
ARTICLE 7. Duration of this Agreement. The Term of this Agreement shall
be as specified in the Schedule.
This Agreement shall not be assignable by either party without the
written consent of the other party.
ARTICLE 8. Amendments. This Agreement may be amended by the parties
hereto only if such amendment is specifically approved (i) by the vote of a
majority of the Directors of the Fund, and (ii) by the vote of a majority of the
Directors of the Fund who are not parties to this Agreement or interested
persons of any such party, cast in person at a Board of Directors meeting called
for the purpose of voting on such approval.
For special cases, the parties hereto may amend such procedures set
forth herein as may be appropriate or practical under the circumstances, and the
Administrator may conclusively assume that any special procedure which has been
approved by the Fund does not conflict with or violate any requirements of its
Charter or then current prospectuses, or any rule, regulation or requirement of
any regulatory body.
ARTICLE 9. Certain Records. The Administrator shall maintain customary
records in connection with its duties as specified in this Agreement. Any
records required to be maintained and preserved pursuant to Rules 31a-1 and
31a-2 under the 1940 Act which are prepared or maintained by the Administrator
on behalf of the Fund shall be prepared and maintained at the expense of the
Administrator, but shall be the property of the Fund and will be made available
to or surrendered promptly to the Fund on request.
In case of any request or demand for the inspection of such records by
another party, the Administrator shall notify the Fund and follow the Fund's
instructions as to permitting or refusing such inspection; provided that the
Administrator may exhibit such records to any person in any case where it is
advised by its counsel that it may be held liable for failure to do so, unless
(in cases involving potential exposure only to civil liability) the Fund has
agreed to indemnify the Administrator against such liability.
ARTICLE 10. Definitions of Certain Terms. The terms "interested person"
and "affiliated person," when used in this Agreement, shall have the respective
meanings specified in the 1940 Act and the rules and regulations thereunder,
subject to such exemptions as may be granted by the Securities and Exchange
Commission.
ARTICLE 11. Notice. Any notice required or permitted to be given by
either party to the other shall be deemed sufficient if sent by registered or
certified mail, postage prepaid, addressed by the party giving notice to the
other party at the last address furnished by the other party to the party giving
notice: if to the Fund, at c/o Kevin P. Robins, General Counsel, SEI Investments
Management Corporation, One Freedom Valley Drive, Oaks, PA 19456; and to its
Secretary at the following address: Michael J. Radmer, Esq., Dorsey & Whitney,
220 South Sixth Street,
<PAGE>
Minneapolis, MN 55402-1498; and if to the Administrator at One Freedom Valley
Drive, Oaks, PA 19456.
ARTICLE 12. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of Minnesota and the applicable provisions
of the 1940 Act. To the extent that the applicable laws of the State of
Minnesota, or any of the provisions herein, conflict with the applicable
provisions of the 1940 Act, the latter shall control.
ARTICLE 13. Multiple Originals. This Agreement may be executed in two
or more counterparts, each of which when so executed shall be deemed to be an
original, but such counterparts shall together constitute but one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
FIRST AMERICAN INVESTMENT FUNDS, INC.
By: /s/ Kathryn Stanton
Attest: /s/ Michael J. Radmer
---------------------------
Michael J. Radmer, Secretary
SEI INVESTMENTS MANAGEMENT CORPORATION
By: /s/ David Lee
Attest: /s/ Donna Rafa
---------------------------
<PAGE>
SCHEDULE TO THE
AMENDED AND RESTATED
ADMINISTRATION AGREEMENT
DATED AS OF JULY 1, 1997
BETWEEN
FIRST AMERICAN FUNDS, INC.
AND
SEI INVESTMENTS MANAGEMENT CORPORATION
Portfolios: This Agreement shall apply to all Portfolios of First American
Funds, Inc., either now or hereafter created. The current
portfolios of First American Funds, Inc. are set forth below:
Prime Obligations Fund, Treasury Obligations Fund, Government
Obligations Fund (collectively, the "Portfolios").
Fees: Pursuant to Article 4, Section A, the Fund shall pay the
Administrator compensation for services rendered to the
Portfolios at an annual rate, which is calculated daily and paid
monthly, at a maximum administrative fee equal to (i) .07% of
each Portfolio's average daily net assets until the aggregate net
assets of all mutual funds in the First American family of funds
("First American Fund Family") exceed $8 billion, and (ii) .055%
of each Portfolio's average daily net assets to the extent that
the aggregate net assets of the First American Fund Family exceed
$8 billion; provided however that in no event shall the annual
administrative fee for any Portfolio be less than $50,000.
The parties hereby confirm that the $50,000 per annum
administrative fee is to be applied to each Portfolio as a whole,
and not to separate classes of shares within the portfolios.
Term: Pursuant to Article 7, the term of this Agreement, unless sooner
terminated as specified under the heading "Termination" below,
shall commence on JULY 1, 1997 and shall remain in effect through
December 31, 1999 ("Initial Term") and the Initial Term shall be
automatically extended on January 1, 1998 for one successive
one-year period (i.e., through December 31, 2000) if SEI has met
or exceeded the written service level standards as may be agreed
to by the Portfolios and SEI from time to time (the "Service
Standards") on no less than 90% of such Service Standards on
cumulative basis during the period commencing July 1, 1997 and
ending on December 31, 1998. Calculation of compliance with the
Service Standards will be measured monthly, and reported to the
Board of Directors of First American Funds, Inc. quarterly, as a
fraction, the numerator of which is the number of Service
Standard events that were met in such month and the denominator
of which is the number of Service Standard events to be completed
for such month ("Service Level Percentage"). SEI will calculate
the compliance percentage, and the investment adviser for the
Portfolios' will review such calculation on a monthly basis. Any
disagreements will be reported to the Board of Directors of the
First American Funds, Inc. for resolution, in the Board's good
faith judgment.
<PAGE>
Termination: The Administration Agreement will be terminable by the Portfolios
by delivery to SEI of written notice: (i) for any reason on six
months prior written notice to SEI; (ii) in the event of SEI's
bankruptcy or insolvency; (iii) in the event of a conviction of
SEI for corporate criminal activity; (iv) if in any consecutive
six-month period the average cumulative Service Level Percentage
is less than 50%; (v) if the Administrator has materially failed
to perform its responsibilities as administrator under this
Agreement, and such material failure has not been cured within 45
days after written notice is received by the Administrator
specifying the nature of the failure; or (vi) by delivery to the
Administrator of written notice of termination delivered no less
than 180 days prior to the end of the Initial Term (as extended
if applicable), provided that if such notice is not so delivered,
the Administration Agreement will automatically continue for one
additional one-year term. The Administration Agreement will be
terminable by the Administrator by delivery to the Portfolios of
written notice: (i) if the Portfolios have materially failed to
perform their responsibilities under this Agreement, and such
material failure has not been cured within 45 days after written
notice is received by the Portfolios specifying the nature of the
failure. (ii) by delivery to the Portfolios of written notice of
termination delivered no less than 180 days prior to the end of
the Initial Term (as extended if applicable), provided that if
such notice is not so delivered, the Administration Agreement
will automatically continue for one additional one-year term.
Agreed to and accepted Agreed to and accepted
FIRST AMERICAN INVESTMENT FUNDS, INC. SEI INVESTMENTS MANAGEMENT
CORPORATION
By: /s/ Kathryn Stanton
-------------------------------
Title: VP By: /s/ Kevin P. Robins
---------------------------- -----------------------------
Date: 7-1-97 Title: Senior Vice President
----------------------------- --------------------------
Date: 7-1-97
---------------------------
<PAGE>
EXHIBIT A
TO THE AMENDED AND RESTATED ADMINISTRATION AGREEMENT
DATED AS OF JULY 1, 1997
BETWEEN
SEI INVESTMENTS MANAGEMENT CORPORATION
AND
FIRST AMERICAN FUNDS, INC.
FIRST AMERICAN INVESTMENT FUNDS, INC.
FIRST AMERICAN STRATEGY FUNDS, INC.
The following Exhibit sets forth the principal federal and state
regulatory and related actions which must be taken with respect to the First
American Funds, Inc. ("FAF"), First American Investment Funds, Inc. ("FAIF") and
First American Strategy Funds, Inc. ("FASF") (individually a "Company", and
collectively, the "Companies") that are the responsibility of SEI. This Exhibit
is intended to be modified by written agreement of the Companies and SEI, as
necessary, to reflect changes in the Companies' structure and federal and state
regulatory requirements.
Parties referred to in this Exhibit are designated as follows:
SEI Compliance Dept.
SEI Portfolio Accounting
SEI Funds Accounting
SEI Legal Dept.
SEI Tax Dept.
SEI Investor Services
July 1, 1997
<PAGE>
<TABLE>
<CAPTION>
DATE ACTION TO BE TAKEN PARTY RESPONSIBLE
- ----------------------- --------------------------------------------------------- -----------------------------
<S> <C> <C>
January 1 a) Review asset diversification to ensure compliance a) SEI Portfolio Accounting
with section 851(b)(4) of the IRC as of the end of the
preceding fiscal quarter (discrepancies must be
corrected by January 30).
b) Review sources of gross income to ascertain b) SEI Funds Accounting
year-to-date compliance with Sections 851(b)(2) and
851(b)(3) of IRC for current year. SEI Funds Accounting
and Tax Dept. monitor this test on a monthly basis. If a
company is not in compliance with these tests, the
advisor will be notified immediately. Corrective action
must be taken by the advisor prior to year end.
c) Review asset diversification for REIT fund under c) SEI Portfolio Accounting
section 851(b)(4) of the IRC as of 12/31 (discrepancies
must be corrected by 1/30).
d) Review sources of gross income REIT fund to ensure d) SEI Fund Accounting
compliance with Sections 851(b)(2) and 851(b)(3) of IRC
for current year. If a company is not in compliance with
these tests, the advisor will be notified immediately.
Corrective action must be taken by the advisor prior to
year end.
- ----------------------- --------------------------------------------------------- -----------------------------
January 15 a) File Annual Registration Form MSS-1 for Minnesota a) SEI Legal Dept.
Business Corporations for the current calendar year with
the Minnesota Secretary of State. (FAF and FASF)
b) Send REIT fund's Form 2483 to KPMG for their review b) SEI Tax Dept.
prior to filing (if applicable).
- ----------------------- --------------------------------------------------------- -----------------------------
January 28 a) Mail copies of each Company's new prospectuses to SEI Investor Services
shareholders.
- ----------------------- --------------------------------------------------------- -----------------------------
(deadline is 30 days CURRENTLY, IT IS THE REIT FUND'S POLICY TO DISTRIBUTE SEI Tax Dept.
after REIT fund's LONG-TERM CAPITAL GAINS, THEREFORE, FORM 2438 IS NOT
fiscal year end APPLICABLE. However if in the future the policy changes,
of 12/31) the REIT fund would file Form 2438 (Regulated Investment
Company Undistributed Capital Gains Tax Return) for fund
for the preceding year with IRS. This will be necessary
only for a year in which the fund has undistributed net
NOT APPLICABLE (long-term) capital gains after taking into account any
distribution to shareholders to be paid after the
taxable year under Section 855 of the IRC.
- ----------------------- --------------------------------------------------------- -----------------------------
January 31 In years where appropriate, provide Form 1099-MISC to SEI Funds Accounting
persons other than corporations to whom the Fund paid
more than $600 for services during the prior calendar
year (excluding wages paid to employees)
- ----------------------- --------------------------------------------------------- -----------------------------
July 1, 1997
<PAGE>
- ----------------------- --------------------------------------------------------- -----------------------------
February 4 All materials due to SEI Legal for preparation of the SEI Funds Accounting,
draft agenda, etc. for the March Board Meeting. SEI Compliance Dept.,
SEI Portfolio
Accounting
- ----------------------- --------------------------------------------------------- -----------------------------
February 11 Circulate draft agenda and resolutions for March Board SEI Legal Dept.
Meeting (approx. 3 weeks prior meeting).
- ----------------------- --------------------------------------------------------- -----------------------------
February 15 a)Send Federal Excise Tax Return on Form 8613 to KPMG a) SEI Tax Dept.
for review prior to filing on March 15.
b) File with New Jersey Division of Taxation b) SEI Tax Dept.
certifications for all funds with more than 80% federal
obligations.
- ----------------------- --------------------------------------------------------- -----------------------------
February 18 Pre-call to discuss agenda items for March Board Meeting SEI Legal Dept., and
(approx. 2 weeks prior to meeting.) SEI Funds Accounting
- ----------------------- --------------------------------------------------------- -----------------------------
February 25 Mail Board Materials to Board of Directors and meeting SEI Legal Dept.
participants (approx. 1 week prior to meeting).
- ----------------------- --------------------------------------------------------- -----------------------------
February 28 FOR REIT FUND ONLY a) SEI Funds Accounting
a) Issue 60 day notice to the shareholders of the REIT
fund to designate the amount of long term capital
gain and return of capital.
FOR ALL FUNDS b) SEI Tax Dept.
b) File with Indiana Department of Revenue certification
of information provided to shareholders.
- ----------------------- --------------------------------------------------------- -----------------------------
March 15 a) File Federal Excise Tax Return on Form 8613, if a) SEI Tax Dept.
necessary; pay any excise tax due.
b)File REIT fund's Federal Form 7004 "Extension of Time b) SEI Tax Dept.
to File Federal Income Tax Return" (Form 1120-RIC) and
Minnesota Form M-4E-Extension.
c) File Fidelity Bond Insurance with the SEC. c) SEI Legal Dept.
- ----------------------- --------------------------------------------------------- -----------------------------
July 1, 1997
<PAGE>
- ----------------------- --------------------------------------------------------- -----------------------------
April 1 a) Review asset diversification to ensure compliance a) SEI Portfolio Accounting
with section 851(b)(4) of the IRC as of March 31
(discrepancies must be corrected by April 30).
b) Review sources of gross income to ascertain b) SEI Funds Accounting
year-to-date compliance with Sections 851(b)(2) and
851(b)(3) of IRC for current year. SEI Funds Accounting
and Tax Dept. Monitor this test on a monthly basis. If a
company is not in compliance with these tests, the
advisor will be notified immediately. Corrective action
must be taken by the advisor prior to year end.
c) Begin preparation of each Company's Semi-Annual c) SEI Funds Accounting
Report to Shareholders. Send timeline for semi-annual
report production to FBNA, M&P, SEI Legal and D&W. Send
draft to SEI Legal and D&W for review and comment.
- ----------------------- --------------------------------------------------------- -----------------------------
April 15 File Maryland Personal Property Tax Return (FAIF Only) SEI Tax Dept.
- ----------------------- --------------------------------------------------------- -----------------------------
May 5 Prepare each Company's Form N-SAR for the period ended SEI Funds Accounting
March 31.
- ----------------------- --------------------------------------------------------- -----------------------------
May 6 All materials due to SEI Legal for preparation of the SEI Funds Accounting,
draft agenda, etc. for the June Board Meeting. SEI Compliance Dept.,
SEI Portfolio Accounting
- ----------------------- --------------------------------------------------------- -----------------------------
May 8 ALL FUNDS, EXCEPT REIT FUND
Send draft of Federal Income Tax Return Form 1120-RIC SEI Tax Dept.
and Minnesota Form M-4 to KPMG for review prior to
filing on June 15.
- ----------------------- --------------------------------------------------------- -----------------------------
May 13 Circulate draft agenda and resolutions for June Board SEI Legal Dept.
Meeting (approx. 3 weeks prior to meeting).
- ----------------------- --------------------------------------------------------- -----------------------------
May 20 Pre-call to discuss agenda items for June Board Meeting SEI Legal Dept. and SEI Funds
(approx. 2 weeks prior to meeting.) Accounting
- ----------------------- --------------------------------------------------------- -----------------------------
May 27 Mail Board materials to Board of Directors and meeting SEI Legal Dept.
participants (approx. 1 week prior to meeting.)
- ----------------------- --------------------------------------------------------- -----------------------------
July 1, 1997
<PAGE>
- ----------------------- --------------------------------------------------------- -----------------------------
May 30 a) File each Company's Form N-SAR with SEC. a) SEI Funds Accounting
b) Mail each Company's Semi-Annual Report to b) SEI Funds Accounting/SEI
Shareholders for period ended March 31. File with SEC Investor Services
and distribute copies to D&W, KPMG and SEI Legal.
- ----------------------- --------------------------------------------------------- -----------------------------
June 15 ALL FUNDS, EXCEPT REIT FUND
File Federal Regulated Investment Company Income Tax SEI Tax Dept.
Return Form 1120-RIC; tax payment is due; Section 855
election, if any, must be made (dividends pursuant to a
Section 855 election for any taxable year must be
declared and paid within 12 months of the close of that
year, but not later than the date of the first regular
dividend payment after declaration). If the filing of
Form 2438 was made on October 30, copies A of Form 2439
and duplicate of Form 2438 must be filed with Form
1120-RIC.
- ----------------------- --------------------------------------------------------- -----------------------------
June 30 For FAIF's International Fund, file with the Treasury SEI Tax Dept. and SEI
Dept. Form TD-F90-22.1. International Funds
Accounting
- ----------------------- --------------------------------------------------------- -----------------------------
July 1 a) Review asset diversification to ensure compliance a) SEI Portfolio Accounting
with section 851(b)(4) of the IRC as of June 30
(discrepancies must be corrected by July 30).
b) Review sources of gross income to ascertain b) SEI Funds Accounting
year-to-date compliance with Sections 851(b)(2) and
851(b)(3) of IRC for current year. SEI Funds Accounting
and Tax Dept. monitor this test on a monthly basis. If a
company is not in compliance with these tests, the
advisor will be notified immediately. Corrective action
must be taken by the advisor prior to year end.
- ----------------------- --------------------------------------------------------- -----------------------------
July 15 a) File Minnesota Form M-4 (FAF, FAIF and FASF) a) SEI Tax Dept.
b) Preparation of materials for August Telephonic Board b) SEI Legal Dept.
Meeting to approve insurance coverages.
- ----------------------- --------------------------------------------------------- -----------------------------
July 25-August 8 Mail Board materials to Board of Directors and meeting SEI Legal Dept.
participants for August Telephonic Board of Directors
meeting (approx. 1 week prior to meeting).
- ----------------------- --------------------------------------------------------- -----------------------------
July 1, 1997
<PAGE>
- ----------------------- --------------------------------------------------------- -----------------------------
August 1-14 Initiate a Telephonic Board of Directors meeting to SEI Legal
approve insurance coverages.
- ----------------------- --------------------------------------------------------- -----------------------------
August 13 All materials due to SEI Legal for preparation of the SEI Funds Accounting, SEI
draft agenda, etc. for the September Board Meeting. Compliance Dept., SEI Portfolio
Accounting
- ----------------------- --------------------------------------------------------- -----------------------------
August 15 Send Form 1120-RIC and Minnesota Form M-4 for REIT fund SEI Tax Dept.
to KPMG for review.
- ----------------------- --------------------------------------------------------- -----------------------------
August 20 Circulate draft agenda and resolutions for September SEI Legal Dept.
Board Meeting (approx. 3 weeks prior to meeting).
- ----------------------- --------------------------------------------------------- -----------------------------
August 27 Pre-call to discuss agenda items for September SEI Legal Dept. and SEI Funds
Board Meeting (approx. 2 weeks prior to meeting.) Accounting
- ----------------------- --------------------------------------------------------- -----------------------------
September 1 Review investments and adjust portfolio to ensure that SEI Portfolio Accounting, SEI
on the close of each Company's fiscal year the dividends Funds Accounting and DST
distributed by each Company to their Shareholders during
such fiscal year will not exceed the income realized by
each Company for federal income tax purposes during such
year.
- ----------------------- --------------------------------------------------------- -----------------------------
September 3 Mail Board materials to Board of Directors and meeting SEI Legal Dept.
participants (approx. 1 week prior to meeting.)
- ----------------------- --------------------------------------------------------- -----------------------------
September 15 File REIT fund's Federal Income Tax Return Form 1120-RIC SEI Tax Dept.
(extension may be granted to 9/15 for federal and 10/15
for Minnesota); tax payment is due; Section 855
election, if any, must be made (dividends pursuant to a
Section 855 election for any taxable year must be
declared and paid within 12 months of the close of that
year, but not later than the date of the first regular
dividend payment after declaration). If the filing of
Form 2438 was made on January 30, copies A of Form 2439
and duplicate of Form 2438 must be filed with Form 1120
RIC.
- ----------------------- --------------------------------------------------------- -----------------------------
September 19 SEI pays Directors & Officers and Fidelity Bond SEI Legal Dept.
Insurance
- ----------------------- --------------------------------------------------------- -----------------------------
July 1, 1997
<PAGE>
- ----------------------- --------------------------------------------------------- -----------------------------
October 1 a) Review asset diversification to ensure compliance a) SEI Portfolio Accounting
with section 851(b)(4) of the Internal Revenue Code
("IRC") as of September 30 (discrepancies must be
corrected by October 30).
b) Review sources of gross income to ascertain b) SEI Funds Accounting
year-to-date compliance with Sections 851(b)(2) and
851(b)(3) of IRC for current year. SEI Funds Accounting
and Tax Dept. monitor this test on a monthly basis. If a
company is not in compliance with these tests, the
advisor will be notified immediately. Corrective action
must be taken by the advisor prior to year end.
c) Begin preparation of each Company's Annual Report to c) SEI Funds Accounting
Shareholders. Send timeline for annual report production
to FBNA, M&P, SEI Legal, D&W and KPMG. SEI Legal and D&W
should receive drafts for review and comment.
- ----------------------- --------------------------------------------------------- -----------------------------
October 15 d) File Minnesota Form M-4 for REIT fund. d) SEI Tax Dept.
e) Send Form 2483 to KPMG for review prior to filing e) SEI Tax Dept.
with IRS (if applicable).
- ----------------------- --------------------------------------------------------- -----------------------------
(deadline is 30 CURRENTLY, IT IS EACH COMPANY'S POLICY TO DISTRIBUTE SEI Tax Dept.
days after Fund's LONG-TERM CAPITAL GAINS, THEREFORE, FORM 2438 IS NOT
fiscal year end) APPLICABLE. However if in the future the policy changes,
each Company would file Form 2438 (Regulated Investment
Company Undistributed Capital Gains Tax Return) for each
Portfolio for the preceding year with IRS, this will be
necessary only for a year in which the Portfolio has
Not Applicable undistributed net (long-term) capital gains after taking
into account any distribution to shareholders to be paid
after the taxable year under Section 855 of the IRC.
- ----------------------- --------------------------------------------------------- -----------------------------
November 5 Begin preparation of each Company's 24f-2 Notice; SEI Compliance Dept.
determine whether additional shares are to be registered
pursuant to Rule 24e-2.
- ----------------------- --------------------------------------------------------- -----------------------------
November 5-15 Prepare each Company's Form N-SAR for the period ended SEI Funds Accounting
September 30.
- ----------------------- --------------------------------------------------------- -----------------------------
November 12 a) All materials due to SEI Legal for preparation of the SEI Funds Accounting,
draft agenda, etc. for the December Board Meeting. SEI Compliance Dept.,
SEI Portfolio Accounting
- ----------------------- --------------------------------------------------------- -----------------------------
November 15-21 Audited financials are provided to D&W for inclusion in SEI Funds Accounting
second draft of Post-Effective Amendment.
- ----------------------- --------------------------------------------------------- -----------------------------
July 1, 1997
<PAGE>
- ----------------------- --------------------------------------------------------- -----------------------------
November 15 Signature pages for PEA filing distributed by D&W to SEI SEI Legal Dept.
Legal for execution.
- ----------------------- --------------------------------------------------------- -----------------------------
November 15 (or by File each Company's Rule 24f-2 Notice and related SEI Compliance Dept. and SEI
November 29) opinion with SEC. Legal (as to the Opinion)
- ----------------------- --------------------------------------------------------- -----------------------------
November 19 Circulate draft agenda and resolutions (including 15(c) SEI Legal Dept.
responses) for December Board Meeting (approx. 3 weeks
prior to meeting).
- ----------------------- --------------------------------------------------------- -----------------------------
November 25 Send to KPMG for their review final excise tax SEI Tax Dept.
distribution for capital gains and an estimate of
ordinary income for all portfolios except the equity
funds.
- ----------------------- --------------------------------------------------------- -----------------------------
November 26 Pre-call to discuss agenda items for December Board SEI Legal Dept. and SEI Funds
Meeting (approx. 2 weeks prior to meeting). Accounting
- ----------------------- --------------------------------------------------------- -----------------------------
November 29 a) Mail Annual Report to Shareholders for year ended a) SEI Funds Accounting/SEI
September 30. File copies with SEC and distribute copies Investor Services; SEI Legal
to KPMG, SEI Legal, D&W, FBNA, M&P and Board of Directors.
b) File each Company's Form N-SARs with SEC for year b) SEI Funds Accounting
ended September 30.
c) Notify shareholders as to what portions, if any, of c) SEI Funds Accounting
the distributions made by each Company during the prior
fiscal year (including any dividends paid pursuant to a
Section 855 election) were treated as dividends under
Section 852(b)(5), Section 853(c) and Section 854(b)(1)
and were capital gains dividends under Section
852(b)(3)(C) of the IRC. These notices may accompany the
Annual Report provided it is mailed by this date. The
preparation of the 60 day notice is the responsibility
of Fund Accounting and is reviewed by the Tax Dept.
- ----------------------- --------------------------------------------------------- -----------------------------
November 30 a) Send to KPMG for review final excise tax distribution a) SEI Tax Dept.
for capital gains and an estimate of ordinary income for
equity funds.
- ----------------------- --------------------------------------------------------- -----------------------------
December 2 Mail Board materials to Board of Directors and meeting SEI Legal Dept.
participants (approx. 1 week prior to meeting.)
- ----------------------- --------------------------------------------------------- -----------------------------
July 1, 1997
<PAGE>
- ----------------------- --------------------------------------------------------- -----------------------------
December 15 ALL FUNDS, EXCEPT REIT FUND
a) Minnesota Form M-4 to be filed (request can be made SEI Tax Dept.
for an extension to July 15 by filing Form M-4E).
b) File Federal Form 7004 "Extension of Time to File
Federal Income Tax Return"(Form 1120-RIC).
- ----------------------- --------------------------------------------------------- -----------------------------
December 20 DECLARATION OF DIVIDENDS
a) Declaration of Ordinary Income Dividend, so that the a) SEI Funds Accounting
total calendar year distributions equal to (i) at least
98 percent of "ordinary income" of each Company for the
calendar year; and (ii) 98% of section 988 income for
one-year period ending October 31, of the current year;
and (iii) at least 98 percent of the excess of net
short-term capital gain over net long-term capital loss
for the one-year period ending on October 31 of the
current year.
b) Declaration of Capital Gains Dividend, so that the b) SEI Tax Dept.
total calendar year distributions equal to the greater
of (a) at least 98 percent of "net capital gain" for the
Companies for the one-year period ending on October 31
of the current year less the sum of (1) the amount of
any "net capital gain" for the prior fiscal year on
which such Company has paid corporate capital gains tax
in the current year and (2) any
"overdistribution/underdistribution" of the Fund's "net
capital gain" for Federal excise tax purposes in the
prior year or (b) 100% of the Section 855 distributions
required for the fiscal period ended September 30.
c) Record date for dividends noted in (a) and (b) must c) SEI Tax Dept.
be on or before December 31; payment date for both
dividends may be any date prior to February 1. Payment
must be accompanied by statements required by Rule
19(a)(1) of the Investment Company Act of 1940.
- ----------------------- --------------------------------------------------------- -----------------------------
</TABLE>
OTHER ACTIONS
In addition to the actions summarized in the foregoing Exhibit, the following
actions must be taken from time to time by SEI:
1. SEI Legal Dept. must file copies of each Company's sales literature with
the NASD and in accordance with state blue sky laws.
2. SEI Legal Dept. is required to ensure that all blue sky requirements
(relative to sales of shares by the Fund and its registration and renewal
of registration in states) are satisfied.
3. When appropriate, each Company may file amendments to its registration
statement under Rule 24e2 registering additional shares with the SEC. The
number of shares to be so registered shall be determined by SEI Funds
Accounting.
4. The proper officers of each Company are required to make all necessary
filings with respect to the Fund's fidelity bond pursuant to Rule 17g-1 of
the Investment Company Act. The Fidelity Bond is filed with the SEC in Mid
March by SEI Legal Dept.
5. SEI will provide each Company's Board of Directors at each Board meeting
with such information as it may be required under the contracts, by law by
procedures and guidelines adopted by the Board or as may be requested by
the Board.
6. If any revisions to each Company's Rule 10f-3 procedures, Rule 17a-7
procedures, Rule 17e-1 procedures and custodial arrangements are to be
considered, SEI Legal will include them in the agenda for board approval.
7. As necessary, SEI mails proxy and regulatory shareholder mailings.
8. SEI delivers on an annual basis an outside auditor review (unqualified
opinion) of SEI Fund Accounting process (SAS 70).
July 1, 1997
EXHIBIT 9(g)
AGREEMENT
This AGREEMENT is entered into as of the 1st day of July, 1997, by and
between SEI Investments Management Corporation, a Delaware corporation ("SEI"),
and First Bank National Association, a national banking association ("FBNA").
WITNESSETH
WHEREAS, SEI serves as administrator to First American Funds, Inc.
("FAF"), First American Investment Funds, Inc. ("FAIF"), and First American
Strategy Funds, Inc. ("FASF," and together with FAF and FAIF, the "Funds"),
pursuant to three separate Administration Agreements; one entered into by SEI
and FAF and dated January 1, 1995 (the "FAF Agreement"); one entered into by SEI
and FAIF and dated January 1, 1995 (the "FAIF Agreement"); and one entered into
by SEI and FASF and dated October 1,1996 (the "FASF Agreement," and together
with the FAF Agreement and FAIF Agreement, the "Administration Agreements"); and
WHEREAS, FBNA serves as investment adviser to each of the Funds; and
WHEREAS, FBNA and SEI desire to enter into this Agreement to set forth
the terms and conditions relating to certain matters, including term of the
Administration Agreements relating to SEI's services as administrator to such
portfolios of the Funds ("Portfolios").
Section 1. Contract Terms. FBNA will recommend to the Board of Directors of each
Fund that the Board approve, and use its best efforts to cause such approval of,
Amended and Restated Administration Agreements, in the forms attached hereto as
Exhibit A, that will contain the following provisions:
(a) The initial term of each Administration Agreement will be
restated to extend the initial term through December 31, 1999.
(b) The initial term of each Administration Agreement will be
automatically extended as of January 1, 1999 for one successive
one-year period (i.e., through December 31, 2000) if SEI has met or
exceeded the service level standards agreed to by FBNA and SEI (and
attached hereto as Exhibit B) (the "Service Standards") on no less than
90% of such Service Standards on a cumulative basis during the period
commencing July 1, 1997 and ending on December 31, 1998. Calculation of
compliance with the Service Standards will be measured monthly as a
fraction, the numerator of which is the number of Service Standard
events that were met in such month and the denominator of which is the
number of Service Standards events to be completed for such month
("Service Level Percentage"). SEI will calculate the compliance
percentage, and the investment adviser for the Portfolios' will review
such calculation on a monthly basis. Any disagreements will be reported
to the Board of Directors of the Funds for resolution, in the Board's
good faith judgement.
(c) The Administration Agreements will be terminable by the
Funds on written notice delivered to SEI: (i) for any reason on six
months prior written notice to SEI; (ii) in the event of SEI's
bankruptcy or insolvency; (iii) in the event of a conviction of SEI for
corporate criminal activity; (iv) if in any consecutive six-month
period the average cumulative Service Level Percentage is less than
50%; (v) if SEI has materially failed to perform its responsibilities
as administrator under the Administration Agreements, and such material
failure has not been cured within 45 days after written notice is
received by SEI specifying the nature of the failure; or (vi) by
delivery to SEI of written notice of termination delivered no less than
180 days prior to the end of the Initial Term (as extended
<PAGE>
if applicable), provided that if such notice is not so delivered, the
Administration Agreements will automatically continue for one
additional one-year term.
(d) The Administration Agreements will be terminable by SEI by
delivery to the Portfolios of written notice: (i) if the Portfolios
have materially failed to perform their responsibilities under the
Administration Agreements, and such material failure has not been cured
within 45 days after written notice is received by the Portfolios
specifying the nature of the failure. (ii) by delivery to the
Portfolios of written notice of termination delivered no less than 180
days prior to the end of the Initial Term (as extended if applicable),
provided that if such notice is not so delivered, the Administration
Agreements will automatically continue for one additional one-year
term.
(e) The fees payable under the Administration Agreements will
remain as set forth in the current Administration Agreements for the
term (including any extension thereof through December 31, 2000)
thereof. SEI agrees to waive the $50,000 annual administration minimum
fee for the first 30 created portfolios aggregated across all Funds
(based on date of inception of portfolios in existence on July 1, 1997
and thereafter adding newly created portfolios, and subtracting any
portfolios that are subsequently closed or merged); and for all
portfolios thereafter, in no event shall the annual administrative fee
for any portfolio be less than $50,000.
Section 2. Fees Payable to FBNA. For so long as the Administration Agreements
remain in effect, SEI will make available for payment to FBNA an amount, based
on the aggregate average net assets of the Funds, calculated daily and paid
monthly, at the following annual rates and for the time frames specified:
(a) Until the later to occur of January 1, 1998 and the first full
month that the Funds' average net assets are more than $19
billion:
Aggregate Net Assets Payment
-------------------- -------
$0 - $8 billion 1.25 bp
$8 billion - $16 billion (.25) bp
$16 billion - $26 billion 2.5 bp
over $26 billion 3.0 bp
(b) Thereafter:
Aggregate Net Assets Payment
-------------------- -------
$0 - $8 billion 2.9 bp
$8 billion - $16 billion 1.4 bp
$16 billion - $26 billion 2.5 bp
over $26 billion 3.0 bp
The payment from the period July 1,1997 through December 31, 1997 will be paid
to FBNA as a reimbursement of Fund-related marketing expenses pursuant to the
Agreement attached hereto as Exhibit C. This Agreement will also include
reimbursement for Fund-related marketing expenses for the period July 1, 1996
through June 30, 1997 in an amount not to exceed $500,000. Commencing January 1,
1998, SEI will appoint FBNA (or its designee) as sub- administrator for the
Funds, pursuant to a Sub-Administration Agreement in the form attached hereto as
Exhibit D, and the payments described in the table above will be paid as sub-
administration fee. FBNA acknowledges and agrees that these payments must be
disclosed to the Boards of Directors of the Funds in connection with the annual
reapproval of the advisory agreements between the Funds and FBNA (or any
affiliated successor advisor).
<PAGE>
Section 3. Termination Payment.
(a) In the event of a Trigger Event (as defined below), then
FBNA or any of its affiliates shall, immediately upon demand by SEI,
make a one-time cash payment to SEI equal to the net present value of
the sum of (i) SEI's "Gross Profits" (as defined below) that SEI would
have realized through the end of the then current terms on the
Administration Agreements then in effect between SEI and any of the
portfolios of the Funds (assuming for purposes of computing this
payment that all Administration Agreements remained in effect through
the end of the then current terms whether or not they actually remain
in effect), based on the administration fees then in effect under such
Administration Agreements, plus (ii) any fixed direct costs incurred by
SEI in support of the Funds, which costs can not be terminated on less
than 30 days notice. For purposes of this Section 3, "Gross Profits"
shall mean gross revenue, plus costs to re-deploy or terminate these
resources (e.g., retention and/or severance) less marketing budget,
subadministration fees and committed marketing reimbursements, fund
accounting and administration costs and SEI-employed wholesaler costs.
For purposes of this Section 3, the net present value shall be
determined using the following assumptions: (i) an assumed factor equal
to the three year Treasury note rate in effect at the time of the
Trigger Event plus 300 basis points; (ii) assumed assets equal to the
average of the month-end net assets of the Funds for the six-month
period immediately preceding the Trigger Event.
(b) For purposes of this Section 3, "Trigger Event" means any
of the following:
(i) SEI is replaced as administrator to perform all
or part of the services provided by SEI to any of the Funds
prior to the end of the then current terms of the
Administration Agreements and FBNA or any of its affiliates or
the immediate or subsequent successors or assigns of FBNA or
any of its affiliates, directly or indirectly, without the
consent of SEI, recommends to the Board of Directors of any of
the Funds, that SEI be so replaced as administrator to perform
all or part of such services, or otherwise supports such
replacement, unless such recommendation is necessary because
SEI had materially failed to perform its responsibilities as
administrator as determined by the Board of Directors of the
Funds in the Board's good faith judgement;
(ii) in the event that any of the Funds is merged or
reorganized into another fund that SEI does not administer;
(iii) SEI's monthly administration fee, on an
annualized basis, earned under the Administration Agreements
is reduced in any month by more than 10% as compared to SEI's
average monthly administration fee earned during the
immediately preceding twelve-month period, other than a
reduction due to a general market decline or due to FBNA or
any of its affiliates exiting a line of business (such as
corporate trust); provided that SEI delivers to FBNA written
notice that SEI believes in its reasonable business judgment
(in light of information available to SEI) that the reduction
is due to action, intent or participation of FBNA or any
affiliate of FBNA to systematically reduce the assets in the
Funds.
Section 4. Termination For Convenience. In the event, and only in the event,
that the Administration Agreements are terminated by the Funds by exercise of
their right to terminate for any reason on six months prior written notice (as
described in Section 1(c)(i) above), FBNA shall pay to SEI within 30 business
days a one-time lump sum payment. This amount shall be equal to the gross fees
that SEI would have realized through the end of the then current terms of the
Administration Agreements less sub administration fees, committed marketing
reimbursements and marketing budget, based upon the average month-end assets of
the Funds for the six-month period immediately preceding the termination date.
Section 5. FBNA Responsibilities. Effective July 1, 1997, FBNA will assume full
financial responsibility (e.g., salary, benefits, incentive compensation,
expenses) for all wholesalers performing services for the
<PAGE>
Funds. After June 30, 1997, SEI shall have no further responsibility with
respect to such wholesalers. In addition, FBNA agrees to provide an experienced
and qualified full-time employee dedicated to the marketing of the Funds.
Section 6. SEI Responsibilities. SEI will maintain the current level of
personnel support provided to the Funds through the remainder of the term of the
Administration Agreements; namely, relationship manager, account director,
tactical marketing person, strategic marketing person on a limited basis (i.e.,
year end planning, special circumstances) and on-site operations person. Each of
these personnel will have the proper skill, training and background so as to be
able to perform in a competent and professional manner.
Section 7. Miscellaneous Provisions.
(a) This Agreement is the sole Agreement between SEI and FBNA
or any of its affiliates with respect to the subject matter hereof and
it supersedes all prior agreements, and understandings with respect
thereto, whether oral or written (including but not limited to, the
letter agreement dated March 14, 1997 between First Bank System, Inc.
and SEI). No modification to any provision of this Agreement shall be
binding unless in writing and signed by both SEI and FBNA. No waiver of
any rights under this Agreement will be effective unless in writing
signed by the party to be charged. This Agreement may not be modified
or altered except by written instrument duly executed by both parties.
All of the terms, obligations and provisions of this Agreement shall be
binding upon and inure to the benefit of and be enforceable by the
respective successors of the parties hereto.
(b) This Agreement shall be governed by and construed in
accordance with the laws of the State of Minnesota, without giving
effect to any conflict of laws provisions. If any provision of this
Agreement or application thereof to anyone or under any circumstances
is adjudicated to be invalid or unenforceable in any jurisdiction, such
invalidity or unenforceability shall not affect any other provision or
application of this Agreement which can be given effect without the
invalid or unenforceable provision or application and shall not
invalidate or render unenforceable such provision or application in any
other jurisdiction.
(c) This Agreement shall be effective upon the approval of the
Board of Directors of each of the Funds of the Amended and Restated
Administration Agreements in the forms attached hereto as Exhibit A. In
the event that such Agreements are not approved for each Fund to be
effective as of July 1, 1997, then this Agreement shall be null and
void and of no force and effect.
<PAGE>
IN WITNESS WHEREOF, the parties hereto, through the signatures of their
duly authorized representatives, have entered into this Agreement as of the date
first above written.
SEI INVESTMENTS MANAGEMENT CORPORATION
By: /s/ Kevin P. Robins
------------------------------
Name: Kevin P. Robins
Title: Senior Vice President
FIRST BANK NATIONAL ASSOCIATION
By: /s/ Jeff Wilson
------------------------------
Name: Jeff Wilson
Title: Vice President
Exhibit 9(h)
AGREEMENT
This Agreement is made as of July 1, 1997, between SEI Investments
Management Corporation (the "Administrator") and First Bank National Association
(the "Adviser").
WITNESSETH
Whereas, the Administrator has been engaged by First American
Investment Inc., a registered open-end investment company (the "Fund'), to
provide administrative services to the Fund in exchange for a fee based on the
value of the Fund's net assets;
WHEREAS, the Adviser has been engaged by the Fund to provide investment
management services to the Fund in exchange for a fee based on the value of the
Fund's net assets;
WHEREAS, the Administrator and the Adviser may from time to time in
accordance with applicable state and federal laws invest their own resources in
their own discretion in the promotion of the Fund and/or their services and
activities which are related to the Fund in an effort to increase the aggregate
amount of the Fund's net assets to which they are providing administrative and
investment management services, respectively, and, consequently, to increase the
amount of fees they are entitled to receive from the Fund;
WHEREAS, the Administrator recognizes that the Adviser's efforts in
promoting its own activities and services which are related to the Fund may have
the effect of promoting the Fund itself; and
WHEREAS, the Administrator desires to use its resources in its
discretion to compensate the Adviser for such efforts.
NOW THEREFORE, in consideration of the foregoing, and intending to be
legally bound hereby, the Administrator and the Adviser hereby agree as follows:
1. The Administrator may from time to time in its sole discretion use
its resources to reimburse the Adviser for expenses incurred by the Adviser in
promoting its own services and activities which are related to the Fund.
2. The Adviser shall:
a. Only seek reimbursement from the Administrator for such
services and activities that the Adviser may lawfully perform; and
b. Disclose to the Board of Directors of the Fund (the
"Board") not less often than each meeting of the Board at which the
Adviser's Investment Advisory Agreement is scheduled for renewal the
amount of any payments received by the
<PAGE>
Adviser under this Agreement since the Investment Advisory Agreement
was last approved or renewed by the Board.
3. All requests by the Adviser for reimbursement under this Agreement
shall be in writing. Within thirty (30) days of receiving any such written
request for reimbursement from the Adviser, the Administrator shall either pay
all or part of such reimbursement to the Adviser, and shall notify the Adviser
in writing if any or all of the requested reimbursement will not be paid.
4. The Adviser acknowledges that the Administrator's decision with
respect to a particular request by the Adviser for reimbursement shall be in the
Administrator's sole discretion, and that an increase or expected increase in
the amount of the Fund's net assets will not be considered by the Administrator
in making its decision.
5. This Agreement shall immediately terminate upon (a) the termination
or expiration of the Administrator's Administration Agreement with the Fund (the
"Administration Agreement"); (b) thirty (30) days written notice by either party
to the other.
6. This Agreement shall not be assignable by either party.
7. This Agreement is made pursuant to, and shall be construed and
enforced in accordance with, the internal laws of the State of Minnesota,
without giving effect to otherwise applicable principles of conflicts of law.
8. This Agreement constitutes the entire agreement between the parties
hereto with respect to the matters contemplated herein and supersedes all prior
agreements and understandings with respect thereto. Any amendment or
modification of this Agreement shall not be effective unless in writing.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
SEI INVESTMENTS MANAGEMENT CORPORATION
By: /s/ Kevin P. Robins
Name: Kevin P. Robins
Title: Senior Vice President
FIRST BANK NATIONAL ASSOCIATION
By: /s/ Jeff Wilson
Name: Jeff Wilson
Title: VP
