DRAFT - LIMITED TERM INCOME
Registration No. 333-
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 20, 1999
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. ___ [ ]
Post-Effective Amendment No. ___ [ ]
(Check appropriate box or boxes)
Exact name of Registrant as Specified in Charter:
FIRST AMERICAN INVESTMENT FUNDS, INC.
Area Code and Telephone Number:
(610) 254-1924
Address of Principal Executive Offices:
Oaks, Pennsylvania 19456
Name and Address of Agent for Service:
Mark Nagle
c/o SEI Investments Company
Oaks, Pennsylvania 19456
COPIES TO:
Thomas A. Berreman, Esq. Kathleen L. Prudhomme, Esq.
U.S. Bancorp Dorsey & Whitney LLP
601 Second Avenue South 220 South Sixth Street
Minneapolis, Minnesota 55402 Minneapolis, Minnesota 55402
Title of Securities Being Registered:
Common Stock, par value $0.0001
No filing fee is required because of reliance by the Registrant on Section 24f-2
under the Investment Company Act of 1940.
Approximate Date of Proposed Public Offering:
As soon as possible following the effective date of this Registration Statement.
It is proposed that this filing become effective on November 19, 1999 (30
days after filing) pursuant to Rule 488.
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FIRST AMERICAN INVESTMENT FUNDS, INC.
REGISTRATION STATEMENT ON FORM N-14
CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 481(a))
<TABLE>
<CAPTION>
PROSPECTUS/PROXY
PART A OF FORM N-14 STATEMENT CAPTION
- -------------------------------------------- ------------------------------------
<S> <C>
1. Beginning of Registration Statement Cross Reference Sheet and Cover
and Outside Front Cover Page of Prospectus Page
2. Beginning and Outside Back Cover Page
of Prospectus Table of Contents
3. Synopsis Information and Risk Factors Summary; Risk Factors
4. Information about the Transaction Summary; Information About the
Reorganization; Voting Information
5. Information about the Registrant Inside Front Cover (Incorporation by
Reference); Summary; Information
About the Adjustable Rate Mortgage
Securities Fund and the Limited
Term Income Fund
6. Information about the Company Inside Front Cover (Incorporation by
being Acquired Reference); Summary; Information
About the Adjustable Rate Mortgage
Securities Fund and the Limited
Term Income Fund
7. Voting Information Summary; Information About the
Reorganization; Voting Information
8. Interest of Certain Persons and Experts Voting Information
9. Additional Information Not Applicable
</TABLE>
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<TABLE>
<CAPTION>
STATEMENT OF ADDITIONAL
PART B OF FORM N-14 INFORMATION CAPTION
- -------------------------------------------- ------------------------------------
<S> <C>
10. Cover Page Cover Page
11. Table of Contents Not Applicable
12. Additional Information about the Registrant Cover Page (Incorporation by
Reference)
13. Additional Information about the Company
Being Acquired Cover Page (Incorporation by
Reference)
14. Financial Statements Cover Page (Incorporation by
Reference)
</TABLE>
PART C OF FORM N-14
Information required to be included in Part C is set forth under the appropriate
item in Part C of this Registration Statement.
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FIRST AMERICAN INVESTMENT FUNDS, INC.
REGISTRATION STATEMENT ON FORM N-14
PART A
PRESIDENT'S LETTER
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
PROSPECTUS/PROXY STATEMENT
CURRENT RETAIL CLASS PROSPECTUS OF LIMITED TERM INCOME
FUND AND ADJUSTABLE RATE MORTGAGE SECURITIES FUND
CURRENT INSTITUTIONAL CLASS PROSPECTUS OF LIMITED TERM
INCOME FUND AND ADJUSTABLE RATE MORTGAGE SECURITIES FUND
ANNUAL REPORT OF FIRST AMERICAN INVESTMENT FUNDS, INC.
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1998
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November 29, 1999
FIRST AMERICAN INVESTMENT FUNDS, INC.
OAKS, PENNSYLVANIA 19456
(800) 637-2548
To the Shareholders of Adjustable Rate Mortgage Securities Fund:
Enclosed with this letter is a proxy voting ballot, a Prospectus/Proxy Statement
and related information concerning a Special Meeting of Shareholders of the
Adjustable Rate Mortgage Securities Fund of First American Investment Funds,
Inc. ("First American") to be held on January 14, 2000. The purpose of this
Special Meeting is to submit to shareholders of Adjustable Rate Mortgage
Securities Fund a proposal to combine that Fund with and into First American's
Limited Term Income Fund by means of the reorganization described in the
Prospectus/Proxy Statement.
If the proposed combination of Funds is approved, you will receive the same
class of shares in Limited Term Income Fund that you currently hold in
Adjustable Rate Mortgage Securities Fund. The exchange of shares will take place
on the basis of the relative net asset values per share of the respective
classes of the two Funds. Investment advisory fees, sales charges, and Rule
12b-1 distribution and shareholder servicing fees all will remain unchanged.
At June 30, 1999, Adjustable Rate Mortgage Securities Fund had net assets of
approximately $107 million and Limited Term Income Fund had net assets of
approximately $130 million. As described in the Prospectus/Proxy Statement,
First American's Board of Directors believes that the proposed combination of
Funds is in the best interests of Adjustable Rate Mortgage Securities Fund
shareholders because, among other things, it is expected to lower the total
expense ratio experienced by such shareholders (before fee waivers, if any) due
to the economies of scale associated with becoming part of a larger Fund.
The investment objectives of the two Funds are he same. Both seek to provide
investors with current income while maintaining a high degree of principal
stability. However, ther are significant differences in the investment
strategies used by the Funds to achieve this objective. Shareholders should
carefully consider both the similarities and the differences between the two
Funds. These similarities and differences, as well as other important
information concerning the proposed combination of Funds, are described in
detail in the Prospectus/Proxy Statement, which you are encouraged to review
carefully. If you have any additional questions, please call your account
administrator, investment sales representative, or First American directly at
1-800-637-2548.
First American's Board of Directors has approved the proposed combination of
Funds and recommends it for your approval. I encourage you to vote in favor of
the proposal, and ask that you please send your completed proxy ballot in as
soon as possible to help save the cost of additional solicitations. As always,
we thank you for your confidence and support.
Sincerely,
Mark Nagle
President
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WHAT YOU SHOULD KNOW
ABOUT THIS PROPOSED FUND MERGER
FIRST AMERICAN AND THE FUND'S BOARD OF DIRECTORS ENCOURAGE YOU TO READ THE
ENCLOSED PROXY STATEMENT CAREFULLY. THE FOLLOWING IS A BRIEF OVERVIEW OF THE KEY
ISSUES.
WHY IS MY FUND HOLDING A SPECIAL SHAREHOLDERS MEETING?
The reason for the meeting is so that shareholders of First American's
Adjustable Rate Mortgage Securities Fund can decide whether or not to reorganize
their fund. If shareholders decide in favor of the proposal, Adjustable Rate
Mortgage Securities Fund will merge with Limited Term Income Fund, another
similar mutual fund in the First American fund family, and you will become a
shareholder of Limited Term Income Fund.
WHAT ARE THE ADVANTAGES OF MERGING THE FUNDS?
There are two key potential advantages:
|_| By combining the Funds, shareholders may enjoy lower overall expense ratios
over time. Larger funds tend to enjoy economies of scale by spreading the
fixed costs of fund operations over a larger asset base.
|_| These lower costs may lead to stronger performance, since total return to a
fund's shareholders is net of fund expenses.
The potential benefits and possible disadvantages are explained in more detail
in the enclosed proxy statement.
HOW ARE THESE TWO FUNDS ALIKE?
The investment objective of the Funds are identical; they both seek to provide
investors with current income while maintaining a high degree of principal
stability. However, there are significant differences in investment strategy:
|_| Adjustable Rate Mortgage Securities Fund invests primarily in adjustable
rate mortgage securities ("ARMS"). ARMS have interest rates that reset
periodically in response to changes in the current interest rate
environment.
|_| Limited Term Income Fund, on the other hand, invests primarily in
investment grade debt securities, such as:
|_| mortgage- and asset-backed securities;
|_| fixed and floating rate corporate debt obligations;
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|_| U.S. government securities, which are securities issued or guaranteed by
the U.S. government or its agencies or instrumentalities; and
|_| commercial paper.
WHAT HAPPENS IF SHAREHOLDERS DECIDE IN FAVOR OF A MERGER?
A closing date will be set for the reorganization. Shareholders will receive
full and fractional shares of Limited Term Income Fund of the same class as, and
equal in value to, the shares of Adjustable Rate Mortgage Securities Fund that
they owned on the closing date.
IF THE FUNDS MERGE, WILL THERE BE TAX CONSEQUENCES FOR ME?
Before the closing of the reorganization, First American will have received an
opinion from its counsel, Dorsey & Whitney LLP, that the transaction will
qualify as a tax-free reorganization. Consequently, the shareholders of
Adjustable Rate Mortgage Securities Fund will not recognize gain or loss for
federal income tax purposes on the exchange of their shares for the shares of
Limited Term Income Fund in the reorganization.
However, you should consult your own tax advisor regarding any possible effect a
reorganization might have on you, given your personal circumstances --
particularly regarding state and local taxes.
WHO WILL PAY FOR THIS REORGANIZATION?
The expenses of the reorganization, including legal expenses, printing,
packaging and postage, plus the costs of any supplementary solicitation, will be
borne by First American Asset Management, investment adviser for the Funds.
WHAT DOES THE FIRST AMERICAN BOARD OF DIRECTORS RECOMMEND?
The Board believes you should vote in favor of the reorganization. Before you
do, however, be sure to study the issues involved and call us with any
questions, then vote promptly to ensure that a quorum of Adjustable Rate
Mortgage Securities Fund shares will be represented at this Fund's special
shareholders meeting.
WHERE DO I GET MORE INFORMATION ABOUT FIRST AMERICAN LIMITED TERM INCOME FUND?
|_| Please call Investor Services toll-free at 1-800-637-2548.
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ADJUSTABLE RATE MORTGAGE SECURITIES FUND
A SEPARATELY MANAGED SERIES OF
FIRST AMERICAN INVESTMENT FUNDS, INC.
OAKS, PENNSYLVANIA 19456
(800) 637-2548
---------------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD JANUARY 14, 2000
---------------------------------
NOTICE IS HEREBY GIVEN that a special meeting of shareholders of Adjustable Rate
Mortgage Securities Fund, a separately managed series of First American
Investment Funds, Inc. ("First American") will be held at 10:30 a.m. Eastern
Time, on Friday, January 14, 2000, at the offices of SEI Investments Company,
Oaks, Pennsylvania, First Floor, Management Conference Room. The purpose of the
special meeting is as follows:
1. To consider and vote on a proposed Agreement and Plan of
Reorganization (the "Plan") providing for (a) the acquisition of all
of the assets and the assumption of all liabilities of the
Adjustable Rate Mortgage Securities Fund by the Limited Term Income
Fund, a separately managed series of First American, in exchange for
shares of common stock of the Limited Term Income Fund having an
aggregate net asset value equal to the aggregate value of the assets
acquired (less the liabilities assumed) of the Adjustable Rate
Mortgage Securities Fund and (b) the liquidation of the Adjustable
Rate Mortgage Securities Fund and the pro rata distribution of the
Limited Term Income Fund shares to Adjustable Rate Mortgage
Securities Fund shareholders. Under the Plan, Adjustable Rate
Mortgage Securities Fund shareholders will receive the same class of
shares of the Limited Term Income Fund that they held in the
Adjustable Rate Mortgage Securities Fund, having a net asset value
equal as of the effective time of the Plan to the net asset value of
their Adjustable Rate Mortgage Securities Fund shares. A vote in
favor of the Plan will be considered a vote in favor of an amendment
to the articles of incorporation of First American required to
effect the reorganization contemplated by the Plan.
2. To transact such other business as may properly come before the
meeting or any adjournments or postponements thereof.
Even if Adjustable Rate Mortgage Securities Fund shareholders vote to approve
the Plan, consummation of the Plan is subject to certain other conditions. See
"Information About the Reorganization -- Plan of Reorganization" in the attached
Prospectus/Proxy Statement.
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THE BOARD OF DIRECTORS OF FIRST AMERICAN
RECOMMENDS APPROVAL OF THE PLAN.
The close of business on November 17, 1999 has been fixed as the record date for
the determination of shareholders entitled to notice of and to vote at the
meeting and any adjournments or postponements thereof.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE SIGN AND PROMPTLY RETURN
THE ENCLOSED PROXY IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE. IN ORDER TO AVOID
THE ADDITIONAL EXPENSE OF FURTHER SOLICITATION, WE RESPECTFULLY ASK FOR YOUR
COOPERATION IN MAILING IN YOUR PROXY PROMPTLY. If you are present at the
meeting, you may then revoke your proxy and vote in person, as explained in the
Prospectus/Proxy Statement in the section entitled "Voting Information."
By Order of the Board of Directors,
Michael J. Radmer
Secretary
November 29, 1999
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FIRST AMERICAN INVESTMENT FUNDS, INC.
OAKS, PENNSYLVANIA 19456
(800) 637-2548
PROSPECTUS/PROXY STATEMENT
DATED NOVEMBER 29, 1999
ACQUISITION OF THE ASSETS OF
ADJUSTABLE RATE MORTGAGE SECURITIES FUND
A SEPARATELY MANAGED SERIES OF
FIRST AMERICAN INVESTMENT FUNDS, INC.
BY AND IN EXCHANGE FOR SHARES OF
LIMITED TERM INCOME FUND
A SEPARATELY MANAGED SERIES OF
FIRST AMERICAN INVESTMENT FUNDS, INC.
This Prospectus/Proxy Statement is being furnished to the shareholders of
Adjustable Rate Mortgage Securities Fund, a separately managed series of First
American Investment Funds, Inc. ("First American"), in connection with a special
meeting of the shareholders of the Adjustable Rate Mortgage Securities Fund to
be held at the offices of SEI Investments Company, Oaks, Pennsylvania on Friday,
January 14, 2000, for the purposes set forth in the accompanying Notice of
Special Meeting of Shareholders. This Prospectus/Proxy Statement is being mailed
to shareholders of the Adjustable Rate Mortgage Securities Fund on or about
November 29,1999.
This Prospectus/Proxy Statement relates to a proposal for the acquisition of all
the assets and the assumption of all liabilities of the Adjustable Rate Mortgage
Securities Fund by the Limited Term Income Fund in exchange for shares of common
stock of the Limited Term Income Fund having an aggregate net asset value equal
to the aggregate value of the assets acquired (less liabilities assumed) of the
Adjustable Rate Mortgage Securities Fund. As a result of the transactions, each
shareholder of the Adjustable Rate Mortgage Securities Fund will receive Limited
Term Income Fund shares of the same class that he or she held in the Adjustable
Rate Mortgage Securities Fund, with a net asset value equal to the net asset
value of the shareholder's Adjustable Rate Mortgage Securities Fund shares.
First American, of which the Adjustable Rate Mortgage Securities Fund and the
Limited Term Income Fund are separate series, is an open-end management
investment company. The Adjustable Rate Mortgage Securities Fund and the Limited
Term Income Fund are both diversified, open-end funds with identical investment
objectives of providing investors with current income while maintaining a high
degree of principal stability.
This Prospectus/Proxy Statement, which should be retained for future reference,
sets forth concisely the information about the proposed reorganization and about
the Limited Term Income Fund and its affiliates that each Adjustable Rate
Mortgage Securities Fund shareholder should know prior to voting on the proposed
reorganization.
A Statement of Additional Information dated November 29, 1999 relating to this
Prospectus/Proxy Statement has been filed with the Commission and is also
incorporated by reference into this Prospectus/Proxy Statement. This means that
you should consider the contents of the Statement of Additional Information to
be a part of the Prospectus/Proxy Statement. The Commission maintains a web site
(http://www.sec.gov) that contains the Statement of Additional Information,
material incorporated by reference and other information regarding the Funds.
This information is also available upon request and without charge by writing to
SEI Investments Distribution Co., Oaks, Pennsylvania 19456 or by calling (800)
637-2548.
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.
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PROSPECTUS/PROXY STATEMENT
NOVEMBER 29, 1999
PROPOSED ACQUISITION OF ASSETS OF
ADJUSTABLE RATE MORTGAGE SECURITIES FUND
A SEPARATELY MANAGED SERIES OF
FIRST AMERICAN INVESTMENT FUNDS, INC.
BY AND IN EXCHANGE FOR SHARES OF
LIMITED TERM INCOME FUND
A SEPARATELY MANAGED SERIES OF
FIRST AMERICAN INVESTMENT FUNDS, INC.
---------------------------------
TABLE OF CONTENTS
---------------------------------
PAGE
INCORPORATION BY REFERENCE 12
SUMMARY 13
RISK FACTORS 19
INFORMATION ABOUT THE REORGANIZATION 20
INFORMATION ABOUT THE ADJUSTABLE RATE
MORTGAGE SECURITIES FUND AND THE
LIMITED TERM INCOME FUND 26
VOTING INFORMATION 29
FINANCIAL STATEMENTS AND EXPERTS 31
LEGAL MATTERS 31
EXHIBIT A -- AGREEMENT AND PLAN OF
REORGANIZATION
The Following Documents Accompany This Prospectus/Proxy Statement:
|_| Bond Funds Retail Class Prospectus Dated February 1, 1999, of First
American Investment Funds, Inc.
|_| Bond Funds Institutional Class Prospectus Dated February 1, 1999 of First
American Investment Funds, Inc.
|_| Annual Report for the Fiscal Year Ended September 30, 1998, of First
American Investment Funds, Inc.
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INCORPORATION BY REFERENCE
The documents listed in items 1 and 2 below, which have been filed
with the Securities and Exchange Commission (the "Commission"), are incorporated
herein by reference to the extent noted below. A Statement of Additional
Information dated November 29, 1999 relating to this Prospectus/Proxy Statement
has been filed with the Commission and is also incorporated by reference into
this Prospectus/Proxy Statement. A copy of the Statement of Additional
Information is available upon request and without charge by writing to SEI
Investments Distribution Co., Oaks, Pennsylvania 19456 or by calling (800)
637-2548. The documents listed in items 3 and 4 below are incorporated by
reference into the Statement of Additional Information and will be provided with
the Statement of Additional Information when requested. Any documents requested
will be sent within one business day of receipt of the request by first class
mail or other means designed to ensure equally prompt delivery.
1. The Retail Class Prospectus dated February 1, 1999 and the Institutional
Class Prospectus dated February 1, 1999 of the Limited Term Income Fund
and the Adjustable Rate Mortgage Securities Fund are incorporated herein
in their entirety by reference, and a copy of each accompanies this
Prospectus/Proxy Statement.
2. The Statement of Additional Information dated February 1, 1999 of First
American, as it relates to the Retail Classes and the Institutional Class
of both the Adjustable Rate Mortgage Securities Fund and the Limited Term
Income Fund, is incorporated by reference in the Statement of Additional
Information relating to this Prospectus/Proxy Statement.
3. Annual Report of First American for the fiscal year ended September 30,
1998, as it relates to the Retail Classes and the Institutional Class of
both the Limited Term Income Fund and the Adjustable Rate Mortgage
Securities Fund, is incorporated by reference in the Statement of
Additional Information relating to this Prospectus/Proxy Statement. A copy
of such Annual Report accompanies this Prospectus/Proxy Statement.
4. The Semi-Annual Report of First American for the six months ended March
31, 1999, as it relates to the Retail Classes and the Institutional Class
of both the Adjustable Rate Mortgage Securities Fund and the Limited Term
Income Fund, is incorporated by reference in the Statement of Additional
Information relating to this Prospectus/Proxy Statement.
Also accompanying and attached to this Prospectus/Proxy Statement as Exhibit A
is a copy of the Plan for the proposed Reorganization.
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SUMMARY
This summary is qualified in its entirety by reference to the more
complete information contained elsewhere in this Prospectus/Proxy Statement, the
Prospectuses and Statement of Additional Information of First American relating
to the Limited Term Income Fund and the Adjustable Rate Mortgage Securities
Fund, each dated February 1, 1999, and the Agreement and Plan of Reorganization
(the "Plan"), a copy of which is attached to this Prospectus/Proxy Statement as
Exhibit A. Adjustable Rate Mortgage Securities Fund shareholders should review
the accompanying documents carefully in connection with their review of this
Prospectus/Proxy Statement.
PROPOSED REORGANIZATION
The Plan provides for (i) the acquisition of all of the assets and
the assumption of all liabilities of the Adjustable Rate Mortgage Securities
Fund by the Limited Term Income Fund in exchange for shares of common stock of
the Limited Term Income Fund having an aggregate net asset value equal to the
aggregate value of the assets acquired (less liabilities assumed) of the
Adjustable Rate Mortgage Securities Fund and (ii) the liquidation of the
Adjustable Rate Mortgage Securities Fund and the pro rata distribution of its
holdings of Limited Term Income Fund shares to Adjustable Rate Mortgage
Securities Fund shareholders as of the effective time of the Reorganization
(anticipated to be at the close of normal trading on the New York Stock
Exchange, currently 4:00 p.m. Eastern Time, on or about February 25, 2000, or
such later date as provided for in the Plan) (such time and date, the "Effective
Time"). The value of the Adjustable Rate Mortgage Securities Fund assets and
liabilities to be acquired by the Limited Term Income Fund, and the value of the
Limited Term Income Fund shares to be exchanged therefor, will be computed as of
the Effective Time. As a result of the Reorganization, each shareholder of the
Adjustable Rate Mortgage Securities Fund will receive Limited Term Income Fund
shares of the same class that he or she held in the Adjustable Rate Mortgage
Securities Fund, with a net asset value equal to the net asset value of the
shareholder's Adjustable Rate Mortgage Securities Fund shares as of the
Effective Time. See "Information About the Reorganization."
For the reasons set forth below under "Information About the
Reorganization -- Reasons for the Reorganization," the Board of Directors of
First American, including all of the "non-interested" Directors, as that term is
defined in the Investment Company Act of 1940, as amended (the "Investment
Company Act"), has concluded that the Reorganization would be in the best
interests of the shareholders of the Adjustable Rate Mortgage Securities Fund
and that the interests of Limited Term Income Fund's existing shareholders would
not be diluted as a result of the transactions contemplated by the
Reorganization. Therefore, the Board of Directors has approved the
Reorganization and has submitted the Plan for approval by Adjustable Rate
Mortgage Securities Fund shareholders.
The Board of Directors of First American has also concluded that the
Reorganization would be in the best interests of the Limited Term Income Fund's
existing shareholders and has therefore approved the Reorganization on behalf of
the Limited Term Income Fund.
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Approval of the Plan and Reorganization will require the affirmative
vote of a majority of the outstanding shares of each class of the Adjustable
Rate Mortgage Securities Fund, voting as separate classes. Information
concerning the voting rights of each Adjustable Rate Mortgage Securities Fund
shareholder is set forth under "Voting Information" below. Directors and
officers of First American and employees of SEI Investments Management
Corporation, the administrator for the Adjustable Rate Mortgage Securities Fund,
may, without cost to the Adjustable Rate Mortgage Securities Fund, solicit
proxies for management of the Adjustable Rate Mortgage Securities Fund by means
of mail, telephone, or personal calls. Persons holding shares as nominees will,
upon request, be reimbursed for their reasonable expenses incurred in sending
proxy soliciting materials on behalf of the Board of Directors to their
beneficial owners of Adjustable Rate Mortgage Securities Fund shares.
In addition to the approval of the Plan and Reorganization by
Adjustable Rate Mortgage Securities Fund shareholders, the consummation of the
Reorganization is subject to certain other conditions. See "Information About
the Reorganization -- Plan of Reorganization."
TAX CONSEQUENCES
Prior to completion of the Reorganization, First American, on behalf
of the Adjustable Rate Mortgage Securities Fund, will have received from counsel
an opinion that, upon the Reorganization and the transfer of the assets of the
Adjustable Rate Mortgage Securities Fund, no gain or loss will be recognized by
the Adjustable Rate Mortgage Securities Fund or its shareholders for federal
income tax purposes. The holding period and aggregate tax basis of Limited Term
Income Fund shares that are received by each Adjustable Rate Mortgage Securities
Fund shareholder will be the same as the holding period and aggregate tax basis
of the Adjustable Rate Mortgage Securities Fund shares previously held by such
shareholders. In addition, the holding period and tax basis of the assets of the
Adjustable Rate Mortgage Securities Fund in the hands of the Limited Term Income
Fund as a result of the Reorganization will be the same as in the hands of the
Adjustable Rate Mortgage Securities Fund immediately prior to the
Reorganization. See "Information About the Reorganization -- Federal Income Tax
Consequences."
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
First American, of which the Adjustable Rate Mortgage Securities
Fund and the Limited Term Income Fund are separate series, is an open-end
management investment company. The Adjustable Rate Mortgage Securities Fund and
the Limited Term Income Fund are both diversified, open-end funds with identical
investment objectives of providing investors with current income while
maintaining a high degree of principal stability.
The Funds attempt to achieve their investment objectives using different
investment strategies. Specifically:
|_| Adjustable Rate Mortgage Securities Fund invests primarily in adjustable
rate mortgage securities ("ARMS"). ARMS have interest rates that reset
periodically in response to changes in the current interest rate
environment.
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|_| Limited Term Income Fund, on the other hand, invests primarily in
investment grade debt securities, such as:
|_| mortgage- and asset-backed securities;
|_| fixed and floating rate corporate debt obligations;
|_| U.S. government securities, which are securities issued or guaranteed
by the U.S. government or its agencies or instrumentalities; and
|_| commercial paper.
The Funds' investment objectives and principal strategies are
described and compared in further detail herein under "Information about the
Adjustable Rate Mortgage Securities Fund and the Limited Term Income Fund --
Comparison of Investment Objectives and Principal Investment Staretegies."
The following table sets forth the comparative average annual total
return for each class of the respective Funds for the periods indicated.
Historic returns are not necessarily indicative of future results.
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
Class A Class Y
----------------------------------------------------------------------------
Adjustable Rate Limited Term Adjustable Rate Limited Term
Mortgage Securities Income Mortgage Securities Income
Fund Fund Fund Fund
----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
One Year 2.16% 3.48% 4.80% 6.08%
Five Years 3.67% 4.97% 4.20% N/A
Since Inception (1) 4.57% 4.82% 4.96% 5.56%
</TABLE>
(1) Inception dates are January 30, 1992 for Class A and Class Y of the
Adjustable Rate Mortgage Securities Fund and December 14, 1992 and February 4,
1994, respectively, for Class A and Class Y of the Limited Term Income Fund.
ADVISORY AND DISTRIBUTION FEES
U.S. Bank National Association, acting through its First American
Asset Management division is the Funds' investment adviser (the "Adviser"). Each
Fund pays the Adviser a monthly fee for providing investment advisory fees
equal, on an annual basis, to 0.70% of the Fund's average daily net assets.
Thus, contractual investment advisory fees will remain unchanged as a result of
the Reorganization.
Each Fund has adopted a plan under Rule 12b-1 of the Investment
Company Act that allows it to pay SEI Investments Distribution Co. (the
"Distributor"), the distributor of each Fund's shares, an annual fee for the
distribution and sale of its shares and for services provided to shareholders.
For each Fund, this fee is equal to 0.25% of average daily net assets for Class
A
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shares. Class Y shares are not subject to a Rule 12b-1 fee. Thus, Rule 12b-1
fees also will remain unchanged as a result of the Reorganization.
During the fiscal year ended September 30, 1999, the Adviser and the
Distributor waived fees so that total operating expenses did not exceed 0.80%
and 0.65%, respectively, for the Class A and Class Y shares of Adjustable Rate
Mortgage Securities Fund, and 0.60% for both the Class A and Class Y shares of
Limited Term Income Fund. The Adviser and the Distributor have agreed to keep
the waivers for Limited Term Income Fund in place through September 30, 2000.
Waivers may be discontinued at any time thereafter.
FEES AND EXPENSES
The following tables are intended to assist Adjustable Rate Mortgage
Securities Fund shareholders of the respective classes in understanding the
various fees and expenses (expressed as a percentage of average net assets) (i)
that such shareholders currently bear as Adjustable Rate Mortgage Securities
Fund shareholders; (ii) that shareholders of the Limited Term Income Fund
currently bear; and (iii) that such shareholders can expect to bear as Limited
Term Income Fund shareholders after the Reorganization is consummated. The
following tables are based on expenses during the fiscal year ended September
30, 1998.
CLASS A SHARES FEES AND EXPENSES
ADJUSTABLE
RATE LIMITED
MORTGAGE TERM
SECURITIES INCOME
FUND FUND PRO FORMA
SHAREHOLDER FEES (PAID DIRECTLY FROM YOUR
INVESTMENT)
Maximum sales load imposed on purchases
(as a percentage of offering price)(1) 2.50% 2.50% 2.50%
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND
ASSETS)
Management fees (2) 0.70% 0.70% 0.70%
Distribution and service (12b-1) fees (2)(3) 0.25% 0.25% 0.25%
Other expenses 0.29% 0.17% 0.17%
Total fund operating expenses (2) 1.24% 1.12% 1.12%
EXAMPLE
You would pay the following expenses on a
$10,000 investment, assuming (i) a 5%
annual return; and (ii) redemption at the end
of each time period:
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1 Year $ 373 $ 361 $ 361
3 Years 634 597 597
5 Years 914 851 851
10 Years 1,712 1,579 1,579
- ---------------------
(1) Certain investors may qualify for reduced sales charges. Investments of $1
million or more on which no front-end sales charge is paid may be subject to a
contingent deferred sales charge. See "Buying Shares" in the Retail Class
Prospectus of the Limited Term Income Fund and the Adjustable Rate Securities
Fund.
(2) "Other expenses" have been restated to reflect current fees and expenses.
Actual expenses for the fiscal year were lower than those shown in the table
because of voluntary fee waivers by the advisor and the distributor. See
"Additional Information -- Financial Highlights." THE DISTRIBUTOR INTENDS TO
LIMIT ITS 12b-1 FEE DURING THE CURRENT FISCAL YEAR TO 0.15% FOR THE ADJUSTABLE
RATE MORTGAGE SECURITIES FUND AND TO WAIVE ALL 12b-1 FEES FOR THE LIMITED TERM
INCOME FUND. IN ADDITION, THE ADVISER INTENDS TO WAIVE FEES DURING THE CURRENT
FISCAL YEAR SO THAT TOTAL FUND OPERATING EXPENSES DO NOT EXCEED 0.80% AND 0.60%
FOR THE ADJUSTABLE RATE MORTGAGE SECURITIES FUND AND THE LIMITED TERM INCOME
FUND, RESPECTIVELY. FEE WAIVERS MAY BE DISCONTINUED AT ANY TIME.
(3) Of this amount, 0.25% is designated as a shareholder servicing fee and none
as a distribution fee.
CLASS Y SHARES FEES AND EXPENSES
ADJUSTABLE
RATE LIMITED
MORTGAGE TERM
SECURITIES INCOME
FUND FUND PRO FORMA
SHAREHOLDER FEES (PAID DIRECTLY FROM YOUR
INVESTMENT)
Maximum sales load imposed on purchases
(as a percentage of offering price) None None None
Maximum deferred sales charge (as a
percentage of net asset value at purchase or
redemption, whichever is less) None None None
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND
ASSETS)
Management fees (1) 0.70% 0.70% 0.70%
Distribution and service (12b-1) fees None None None
Other expenses 0.29% 0.17% 0.17%
Total fund operating expenses (1) 0.99% 0.87% 0.87%
EXAMPLE
You would pay the following expenses on a
$10,000 investment, assuming (i) a 5%
annual return; and (ii) redemption at the end
of each time period:
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1 Year $ 101 $ 89 $ 89
3 Years 315 278 278
5 Years 547 482 482
10 Years 1,213 1,073 1.073
- -----------------------
(1) "Other expenses" have been restated to reflect current fees and expenses.
Actual expenses for the fiscal year were lower than those shown in the table
because of voluntary fee waivers by the advisor and the distributor. See
"Additional Information -- Financial Highlights." THE ADVISER INTENDS TO WAIVE
FEES DURING THE CURRENT FISCAL YEAR SO THAT TOTAL FUND OPERATING EXPENSES DO NOT
EXCEED 0.65% AND 0.60% FOR THE ADJUSTABLE RATE MORTGAGE SECURITIES FUND AND THE
LIMITED TERM INCOME FUND, RESPECTIVELY. FEE WAIVERS MAY BE DISCONTINUED AT ANY
TIME.
PURCHASE, EXCHANGE AND REDEMPTION PROCEDURES
Class A shares of the Limited Term Income Fund received by
Adjustable Rate Mortgage Securities Fund shareholders in the Reorganization will
be subject to the same purchase, exchange and redemption procedures that
currently apply to Class A shares of the Adjustable Rate Mortgage Securities
Fund. These procedures are discussed in the Retail Class Prospectus of the
Adjustable Rate Mortgage Securities Fund and the Limited Term Income Fund which
accompanies this Prospectus/Proxy Statement under the headings "Buying Shares,"
"Selling Shares" and "Managing Your Investment - Exchanging Shares."
Class Y shares of the Limited Term Income Fund received by
Adjustable Rate Mortgage Securities Fund shareholders in the Reorganization will
be subject to the same purchase, exchange and redemption procedures that
currently apply to Class Y shares of the Adjustable Rate Mortgage Securities
Fund. These procedures are discussed in the Institutional Class Prospectus of
the Adjustable Rate Mortgage Securities Fund and the Limited Term Income Fund
which accompanies this Prospectus/Proxy Statement under the heading "Buying
Shares and Selling Shares."
The Plan provides that if Class A shares of the Limited Term Income
Fund are distributed in the Reorganization to former holders of Class A shares
of the Adjustable Rate Mortgage Securities Fund with respect to which the
front-end sales charge was waived due to a purchase of $1 million or more, the
Limited Term Income Fund will give credit for the period during which the holder
thereof held such Adjustable Rate Mortgage Securities Fund shares in determining
whether a deferred sales charge is payable upon the sale of such Class A shares
of the Limited Term Income Fund.
DIVIDENDS AND DISTRIBUTIONS
Dividends from investment income are declared and paid monthly with
respect to both the Adjustable Rate Mortgage Securities Fund and the Limited
Term Income Fund. Distributions of any net realized capital gains are made at
least once every twelve months with respect to both Funds. Dividends and
distributions for each Fund are automatically reinvested in additional shares of
the Fund unless cash payments or payments in shares of another First American
fund are requested by contacting the Fund.
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<PAGE>
SHAREHOLDER VOTING RIGHTS
Both Funds currently issue Class A and Class Y shares. The classes
of shares within a Fund vote together as a single class on most issues, such as
election of directors, and as separate classes on issues that affect only a
particular class, such as Rule 12b-1 distribution plans.
RISK FACTORS
Because the Funds have identical investment objectives and invest
primarily in debt securities, the risks of investing in the Funds are similar.
Principal risks of investing in each Fund are interest rate risk, income risk,
credit risk, call risk and the risks of investing in mortgage- and asset-backed
securities. Limited Term Income Fund is also subject to foreign security risk
since it may invest up to 15% of its total assets in foreign securities payable
in U.S. dollars. Each of these risks is discussed below. The price and yield of
each Fund will change daily due to changes in interest rates and other factors,
which means you could lose money.
INTEREST RATE RISK. In general, debt securities in which the Funds invest will
increase in value when interest rates fall and decrease in value when interest
rates rise. Longer-term debt securities are generally more sensitive to interest
rate changes. ARMS (in which the Adjustable Rate Securities Fund primarily
invests) are generally less sensitive to interest rate changes because their
interest rates move with market rates. One measure of interest rate risk is
effective duration. Adjustable Rate Mortgage Securities Fund attempts to
maintain an average effective duration for its portfolio securities of zero to
four years. Limited Term Income Fund attempts to maintain an average effective
duration for its portfolio securities of six months to two years. Effective
duration measures how much the value of a security is expected to change with a
given change in interest rates. The longer a security's effective duration, the
more sensitive its price to changes in interest rates. For example, if interest
rates were to increase by one percentage point, the market value of a bond with
an effective duration of five years would decrease by 5%, with all other factors
being constant. However, all other factors are rarely constant. Effective
duration is based on assumptions and subject to a number of limitations. It is
most useful when interest rate changes are small, rapid and occur equally in
short-term and long-term securities. In addition, it is difficult to calculate
precisely for bonds with prepayment options, such as mortgage- and asset-backed
securities, because the calculation requires assumptions about prepayment rates.
For these reasons, the effective durations of funds which invest a significant
portion of their assets in these securities can be greatly affected by changes
in interest rates.
INCOME RISK. Each Fund's income could decline due to falling market
interest rates. This is because, in a falling interest rate environment, a Fund
generally will have to invest the proceeds from sales of its shares, as well as
the proceeds from maturing portfolio securities, in lower-yielding securities.
CREDIT RISK. An issuer of debt securities may not make timely
principal or interest payments on its securities, or the other party to a
contract (such as a securities lending
19
<PAGE>
agreement) may default on its obligations. There is also the risk that an issuer
could suffer adverse changes in financial condition that could lower the credit
quality of a security. This could lead to greater volatility in the price of the
security and in shares of the Fund. Also, a change in the credit quality rating
of a bond could affect the bond's liquidity and make it more difficult for the
fund to sell.
CALL RISK. During periods of falling interest rates, a bond issuer
may "call" -- or repay -- its high-yielding bonds before their maturity date. A
Fund holding these bonds would then be forced to invest the unanticipated
proceeds at lower interest rates, resulting in a decline in the Fund's income.
RISKS OF MORTGAGE AND ASSET-BACKED SECURITIES. Falling interest
rates could cause faster than expected prepayments of the obligations underlying
mortgage- and asset-backed securities held by a Fund, which the Fund would have
to invest at lower interest rates. On the other hand, rising interest rates
could cause prepayments of the obligations to decrease, extending the life of
mortgage- and asset-backed securities with lower interest rates.
FOREIGN SECURITY RISK. Limited Term Income Fund may invest up to 15%
of its total assets in foreign securities payable in U.S. dollars. Securities of
foreign issuers, even when dollar-denominated and publicly traded in the United
States, may involve risks not associated with the securities of domestic issue
risk, including the risks of adverse currency fluctuations and of political or
social instability or diplomatic developments that could adversely affect the
securities.
INFORMATION ABOUT THE REORGANIZATION
REASONS FOR THE REORGANIZATION
The Board of Directors of First American, including all of the
"non-interested" directors, has determined that it is advantageous to combine
the Adjustable Rate Mortgage Securities Fund with the Limited Term Income Fund.
As discussed in detail below under "Information About the Adjustable Rate
Mortgage Securities Fund and the Limited Term Income Fund," the Funds have
identical investment objectives and similar investment strategies. The Funds
also have the same investment adviser and the same distributor, custodian,
transfer agent and auditors.
The Board of Directors of First American has determined that the
Reorganization is expected to provide certain benefits to the Adjustable Rate
Mortgage Securities Fund and the Limited Term Income Fund and is in the best
interests of each Fund and its respective shareholders. The Board of Directors
has also determined that the interests of the existing shareholders of each Fund
will not be diluted as a result of the Reorganization. The Board considered,
among other things, the following factors in making such determinations:
1. The advantages which may be realized by the Adjustable Rate Mortgage
Securities Fund and the Limited Term Income Fund, consisting of a
potentially
20
<PAGE>
reduced expense ratio before waivers, economies of scale resulting
from fund growth, and facilitation of portfolio management;
2. The tax-free nature of the proposed Reorganization;
3. The terms and conditions of the Plan, including that (a) the
exchange of Adjustable Rate Mortgage Securities Fund shares for
Limited Term Income Fund shares will take place on a net asset value
basis; and (b) no sales charge will be incurred by Adjustable Rate
Mortgage Securities Fund shareholders in connection with their
acquisition of Limited Term Income Fund shares in the
Reorganization;
4. The agreement of the Adviser to bear the costs associated with the
proposed Reorganization;
5. The fact that the advisory fee, Rule 12b-1 fees and sales charges
would remain constant for Adjustable Rate Mortgage Securities Fund
shareholders;
6. The Limited Term Income Fund's agreements that in applying the 18-
month 1% deferred sales charge on purchases of Class A shares with
respect to which the front-end sales charge was waived, credit will
be given for the period a former Adjustable Rate Mortgage Securities
Fund shareholder who is subject to such a deferred sales charge held
his or her shares; and
7. The fact that the Funds' adviser has agreed to waive fees during the
fiscal year ended September 30, 2000 so that total operating
expenses for each class of Limited Term Income Fund do not exceed
0.60% of average net assets, which compares favorably to the expense
cap of 0.65% for Class Y shares and 0.80% for Class A shares
maintained for Adjustable Rate Mortgage Securities Fund during the
fiscal year ended September 30, 1999.
The Board also considered the potential benefits to the Adviser
which could result from the proposed Reorganization. The Board recognized that
if the Adviser determines to waive advisory fees in the future, to the extent
that the proposed Reorganization results in lower overall expense ratios before
fee waivers, the combination of Funds would have the effect of decreasing the
cost to the Adviser of providing such waivers. The Board also noted, however,
that the Adviser is not obligated to make any such waivers and that if such
waivers are not made, former shareholders of the Adjustable Rate Mortgage
Securities Fund and shareholders of the Limited Term Income Fund would benefit
directly from any decreases in overall expense ratios and that, in any event,
the proposed Reorganization is expected to provide other benefits to
shareholders. The Board thus concluded that, despite these potential benefits to
the Adviser, the factors noted in (1) through (7) above render the proposed
Reorganization fair to and in the best interests of shareholders of the
Adjustable Rate Mortgage Securities Fund and the Limited Term Income Fund.
21
<PAGE>
PLAN OF REORGANIZATION
The following summary of the proposed Plan and the Reorganization is
qualified in its entirety by reference to the Plan attached to this
Prospectus/Proxy Statement as Exhibit A. The Plan provides that, as of the
Effective Time, the Limited Term Income Fund will acquire all of the assets and
assume all liabilities of the Adjustable Rate Mortgage Securities Fund in
exchange for Limited Term Income Fund shares having an aggregate net asset value
equal to the aggregate value of the assets acquired (less liabilities assumed)
from the Adjustable Rate Mortgage Securities Fund. The Adjustable Rate Mortgage
Securities Fund and the Limited Term Income Fund are separate series of shares
within First American, a single Maryland corporation. As a result, for corporate
law purposes, the acquisition of assets, assumption of liabilities and exchange
of shares is structured under the Plan as a reallocation of assets and
liabilities from the Adjustable Rate Mortgage Securities Fund to the Limited
Term Income Fund coupled with the issuance and exchange of Class A and Class Y
Limited Term Income Fund shares in exchange for Class A and Class Y Adjustable
Rate Mortgage Securities Fund shares, respectively. This reallocation of assets
and liabilities and exchange of shares is accomplished under the Plan by
amending the articles of incorporation of First American in the manner set forth
in the amendment to First American's articles of incorporation included as
Exhibit 1 to the Plan attached hereto as Exhibit A.
Pursuant to the Plan, each holder of Class A or Class Y shares of
the Adjustable Rate Mortgage Securities Fund will receive, at the Effective
Time, Class A or Class Y shares of the Limited Term Income Fund, as applicable,
with an aggregate net asset value equal to the aggregate net asset value of the
Adjustable Rate Mortgage Securities Fund shares owned by such shareholder
immediately prior to the Effective Time. At the Effective Time, the Limited Term
Income Fund will issue and distribute, at the direction of the Adjustable Rate
Mortgage Securities Fund's Board of Directors, to the Adjustable Rate Mortgage
Securities Fund's shareholders of record, determined as of the Effective Time,
the Limited Term Income Fund Shares issued in exchange for the Adjustable Rate
Mortgage Securities Fund Shares as described above. Thereafter, no additional
shares representing interests in the Adjustable Rate Mortgage Securities Fund
will be issued, and the Adjustable Rate Mortgage Securities Fund will be deemed
to be liquidated.
Under the Plan, the net asset value per share of the Adjustable Rate
Mortgage Securities Fund's and the Limited Term Income Fund's Class A and Class
Y shares will be computed as of the Effective Time using the valuation
procedures set forth in First American's amended and restated articles of
incorporation and bylaws and the Adjustable Rate Mortgage Securities Fund's and
the Limited Term Income Fund's then current Prospectuses and Statement of
Additional Information and as may be required by the Investment Company Act. The
distribution of Limited Term Income Fund shares to former Adjustable Rate
Mortgage Securities Fund shareholders described above will be accomplished by
the establishment of accounts on the share records of the Limited Term Income
Fund in the names of Adjustable Rate Mortgage Securities Fund shareholders, each
representing the respective classes and numbers of full and fractional Limited
Term Income Fund shares due such shareholders.
The Plan provides that no sales charges will be incurred by
Adjustable Rate Mortgage Securities Fund shareholders in connection with the
acquisition by them of Limited Term Income Fund shares pursuant thereto. The
Plan provides that if Class A shares of the Limited
22
<PAGE>
Term Income Fund are distributed in the Reorganization to former holders of
Class A shares of the Adjustable Rate Mortgage Securities Fund with respect to
which the front-end sales charge was waived due to a purchase of $1 million or
more, the Limited Term Income Fund will give credit for the period during which
the holder thereof held such Adjustable Rate Mortgage Securities Fund shares in
determining whether a deferred sales charge is payable upon the sale of such
Class A shares of the Limited Term Income Fund.
The Adjustable Rate Mortgage Securities Fund contemplates that it
will make a distribution, immediately prior to the Effective Time, of all of its
net income and net realized capital gains, if any, not previously distributed.
This distribution will be taxable to Adjustable Rate Mortgage Securities Fund
shareholders subject to taxation.
The consummation of the Reorganization is subject to the conditions
set forth in the Plan, including, among others: (i) approval of the Plan, which
includes the related amendment of First American's articles of incorporation
attached to the Plan, by the shareholders of the Adjustable Rate Mortgage
Securities Fund; (ii) the delivery of the opinion of counsel described below
under " -- Federal Income Tax Consequences;" (iii) the accuracy as of the
Effective Time of the representations and warranties made by the Adjustable Rate
Mortgage Securities Fund and the Limited Term Income Fund in the Plan; and (iv)
the delivery of customary closing certificates. See the Plan attached hereto as
Exhibit A for a complete listing of the conditions to the consummation of the
Reorganization. The Plan may be terminated and the Reorganization abandoned at
any time prior to the Effective Time, before or after approval by shareholders
of the Adjustable Rate Mortgage Securities Fund, by resolution of the Board of
Directors of First American, if circumstances should develop that, in the
opinion of the Board, make proceeding with the consummation of the Plan and
Reorganization not in the best interests of either Fund's shareholders. The Plan
provides that the Adviser will pay all expenses incurred in connection with the
Reorganization, and neither Fund will be liable for such expenses.
Approval of the Plan will require the affirmative vote of a majority
of the outstanding shares of each class of the Adjustable Rate Mortgage
Securities Fund, voting as separate classes. Approval of the Plan by Adjustable
Rate Mortgage Securities Fund shareholders will be deemed approval of the
amendment to the amended and restated articles of incorporation of First
American attached to the Plan. If the Plan is not approved, the Board of
Directors of First American will consider other possible courses of action.
Adjustable Rate Mortgage Securities Fund shareholders are not entitled to assert
dissenters' rights of appraisal in connection with the Plan or Reorganization.
See "Voting Information -- No Dissenters' Rights of Appraisal" below.
DESCRIPTION OF LIMITED TERM INCOME FUND SHARES
The Class A and Class Y shares of the Limited Term Income Fund
issued in the Reorganization will represent shares of common stock, $.0001 par
value, in the Limited Term Income Fund, which is an open-end mutual fund and a
series of First American. First American is an open-end management investment
company incorporated under the laws of the State of Maryland. Each share of the
Limited Term Income Fund issued in the Reorganization will be fully paid,
nonassessable, and transferable. Shares may be issued as either full or
fractional
23
<PAGE>
shares. Fractional shares have pro rata the same rights and privileges as full
shares. Shares of the Limited Term Income Fund have no preemptive or conversion
rights.
Each share of the Limited Term Income Fund has one vote. On some
issues, such as the election of directors, all shares of all series of First
American 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 series or class within a series,
the shares of that series or class will vote as a separate series or class.
Examples of such issues would be proposals to alter a fundamental investment
restriction pertaining to a series or to approve, disapprove or alter a
distribution plan pertaining to a class.
Under the laws of the State of Maryland and First American's
articles of incorporation, First American is not required to hold shareholder
meetings unless they (i) are required by the Investment Company Act, or (ii) are
requested in writing by the holders of 25% or more of the outstanding shares of
First American.
FEDERAL INCOME TAX CONSEQUENCES
It is intended that the exchange of Limited Term Income Fund shares
for the Adjustable Rate Mortgage Securities Fund's net assets and the
distribution of such shares to the Adjustable Rate Mortgage Securities Fund's
shareholders upon liquidation of the Adjustable Rate Mortgage Securities Fund
will be treated as a tax-free reorganization under the Code and that, for
federal income tax purposes, no income, gain or loss will be recognized by the
Adjustable Rate Mortgage Securities Fund's shareholders (except that the
Adjustable Rate Mortgage Securities Fund contemplates that it will make a
distribution, immediately prior to the Effective Time, of all of its net income
and net realized capital gains, if any, not previously distributed, and this
distribution will be taxable to Adjustable Rate Mortgage Securities Fund
shareholders subject to taxation). First American has not asked, nor does it
plan to ask, the Internal Revenue Service to rule on the tax consequences of the
Reorganization.
As a condition to the closing of the Reorganization, the two Funds
will receive an opinion from Dorsey & Whitney LLP, counsel to the Funds, based
in part on certain representations to be furnished by each Fund and their
Adviser, substantially to the effect that the federal income tax consequences of
the Reorganization will be as follows:
(ii) the Reorganization will constitute a reorganization
within the meaning of Section 368(a)(1)(C) of the Code,
and the Limited Term Income Fund and the Adjustable Rate
Mortgage Securities Fund each will qualify as a party to
the Reorganization under Section 368(b) of the Code;
(iii) Adjustable Rate Mortgage Securities Fund shareholders
will recognize no income, gain or loss upon receipt,
pursuant to the Reorganization, of Intermediate Term
Income Fund shares. Adjustable Rate Mortgage Securities
Fund shareholders subject to taxation will recognize
income upon receipt of any net investment income or net
capital
24
<PAGE>
gains of the Adjustable Rate Mortgage Securities Fund
which are distributed by the Adjustable Rate Mortgage
Securities Fund prior to the Effective Time;
(iv) the tax basis of the Limited Term Income Fund shares
received by each Adjustable Rate Mortgage Securities
Fund shareholder pursuant to the Reorganization will be
equal to the tax basis of the Adjustable Rate Mortgage
Securities Fund shares exchanged therefor;
(v) the holding period of the Limited Term Income Fund
shares received by each Adjustable Rate Mortgage
Securities Fund shareholder pursuant to the
Reorganization will include the period during which the
Adjustable Rate Mortgage Securities Fund shareholder
held the Adjustable Rate Mortgage Securities Fund shares
exchanged therefor, provided that the Adjustable Rate
Mortgage Securities Fund shares were held as a capital
asset at the Effective Time;
(vi) the Adjustable Rate Mortgage Securities Fund will
recognize no income, gain or loss by reason of the
Reorganization;
(vii) the Limited Term Income Fund will recognize no income,
gain or loss by reason of the Reorganization;
(viii) the tax basis of the assets received by the Limited Term
Income Fund pursuant to the Reorganization will be the
same as the basis of those assets in the hands of the
Adjustable Rate Mortgage Securities Fund as of the
Effective Time;
(ix) the holding period of the assets received by the Limited
Term Income Fund pursuant to the Reorganization will
include the period during which such assets were held by
the Adjustable Rate Mortgage Securities Fund; and
(x) the Limited Term Income Fund will succeed to and take
into account the earnings and profits, or deficit in
earnings and profits, of the Adjustable Rate Mortgage
Securities Fund as of the Effective Time.
The foregoing advice is based in part upon certain representations
furnished by First American and the Adviser, of which three principal ones are:
(a) that assets representing at least 90% of the fair market value of the
Adjustable Rate Mortgage Securities Fund's net assets and at least 70% of the
fair market value of the Adjustable Rate Mortgage Securities Fund's gross assets
at the Effective Time are exchanged solely for Limited Term Income shares with
unrestricted voting rights, (b) that there is no plan or intention by the
Limited Term Income to reacquire any of the Limited Term Income Fund shares to
be issued pursuant to the Reorganization and (c) following the Reorganization,
the Limited Term Income Fund will either continue the historic business of the
Adjustable Rate Mortgage Securities Fund or use a significant portion of the
historic business assets of the Adjustable Rate Mortgage Securities Fund in a
business carried on by the Limited Term Income Fund.
25
<PAGE>
Shareholders of the Adjustable Rate Mortgage Securities Fund should
consult their tax advisors regarding the effect, if any, of the proposed
Reorganization in light of their individual circumstances. Since the foregoing
discussion only relates to the federal income tax consequences of the
Reorganization, shareholders of the Adjustable Rate Mortgage Securities Fund
should consult their tax advisors as to state and local tax consequences, if
any, of the Reorganization.
RECOMMENDATION AND VOTE REQUIRED
The Board of Directors of First American, including the
"non-interested" directors, recommends that shareholders of the Adjustable Rate
Mortgage Securities Fund approve the Plan. Approval of the Plan will require the
affirmative vote of a majority of the outstanding shares of each class of the
Adjustable Rate Mortgage Securities Fund, voting as separate classes. Approval
of the Plan by Adjustable Rate Mortgage Securities Fund shareholders will be
deemed approval of the amendment to the amended and restated articles of
incorporation of First American attached to the Plan.
INFORMATION ABOUT THE ADJUSTABLE RATE MORTGAGE SECURITIES
FUND AND THE LIMITED TERM INCOME FUND
Information concerning the Limited Term Income Fund and the
Adjustable Rate Mortgage Securities Fund is incorporated herein by reference
from the current Retail Class Prospectus and the current Institutional Class
Prospectus, each related to both the Limited Term Income Fund and the Adjustable
Rate Mortgage Securities Fund and dated February 1, 1999, accompanying this
Prospectus/Proxy Statement and forming part of the Registration Statement of
First American on Form N-1A which has been filed with the Commission.
The Limited Term Income Fund, the Adjustable Rate Mortgage
Securities Fund and First American are subject to the informational requirements
of the Securities Exchange Act of 1934 (the "Exchange Act") and in accordance
therewith file reports and other information including proxy materials, reports
and charter documents with the Commission. These proxy materials, reports and
other information filed by the Limited Term Income Fund, the Adjustable Rate
Mortgage Securities Fund and First American can be inspected and copies obtained
at the Public Reference Facilities maintained by the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the New York Regional Office of the
Commission at Seven World Trade Center, 13th Floor, New York, New York 10048.
Copies of such material can also be obtained from the Public Reference Branch,
Office of Consumer Affairs and Information Services, Securities and Exchange
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates.
The Commission maintains a website that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission; the address of this site is http://www.sec.gov.
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<PAGE>
COMPARISON OF INVESTMENT OBJECTIVES AND
PRINCIPAL INVESTMENT STRATEGIES
The Adjustable Rate Mortgage Securities Fund and the Limited Term Income Fund
are both diversified, open-end funds with identical investment objectives of
providing investors with current income while maintaining a high degree of
principal stability. However, there are significant differences in the principal
investment strategies the Funds use in attempting to achieve these objectives.
In attempting to achieve its objective, Adjustable Rate Mortgage
Securities Fund invests at least 65% of its total assets in adjustable rate
mortgage securities (ARMS). ARMS have interest rates that reset periodically in
response to changes in the current interest rate environment. Adjustable Rate
Mortgage Securities Fund may also invest in other debt securities, including:
|_| Fixed-rate mortgage-backed securities;
|_| U.S. government securities, which are securities issued or
guaranteed by the U.S. government or its agencies or
instrumentalities;
|_| Asset-backed securities; and
|_| Corporate debt obligations.
Limited Term Income Fund attempts to achieve its objective by
investing primarily in debt securities such as:
|_| Mortgage- and asset-backed securities;
|_| Fixed and floating rate corporate debt obligations;
|_| U.S. government securities; and
|_| commercial paper.
Although they are a permitted investment, Limited Term Income Fund does not
focus on ARMS.
The Funds also have slightly different targeted average effective
durations. Under normal market conditions, Adjustable Rate Mortgage Securities
Fund and Limited Term Income Fund attempt to maintain average effective duration
for their portfolio securities of zero to four years and six months to two
years, respectively. However, as of September 30, 1999 average effective
durations of the Funds were nearly identical, at 1.5 years for Adjustable Rate
Mortgage Securities Fund and 1.3 years for Limited Term Income Fund.
The Funds also have different strategies regarding investments in
foreign securities. Up to 15% of Limited Term Income Fund" total assets may be
invested in foreign securities payable in U.s. dollars. Adjustable Rate Mortgage
Securities Fund does not invest in foreign securities as a principal investment
strategy.
Other than the differences in investment strategies noted above, the
Funds have the same principal investment strategies. These include the
following:
|_| Each Fund invests in securities rated investment grade at the time
of purchase or, if unrated, determined to be of comparable quality
by the Adviser. At least 65% of each Fund's debt securities must be
either U.S. government securities or securities that have
27
<PAGE>
received at least an A or equivalent rating. Unrated securities will
not exceed 25% of either Fund's total assets.
|_| Each Fund may lend securities representing up to one-third of the
value of its total assets to broker-dealers, banks and other
institutions.
|_| Fund managers for each Fund select securities using a "top-down"
approach, which begins with the formulation of their general
economic outlook. Following this, various sectors and industries are
analyzed and selected for investment. Finally, fund managers select
individual securities within these sectors or industries.
For a complete discussion of the investment objectives and
strategies of the respective Funds, see the Retail Class Prospectus and the
Institutional Class Prospectus accompanying this Prospectus/Proxy Statement and
the Statement of Additional Information referred to under "Incorporation by
Reference."
CAPITALIZATION
The following table shows the capitalization of the Adjustable Rate
Mortgage Securities Fund and of the Limited Term Income Fund as of March 31,
1999 and on a pro forma basis as of that date, giving effect to the proposed
Reorganization:
(In thousands, except per share values)
ADJUSTABLE LIMITED
RATE TERM
MORTGAGE INCOME
SECURITIES FUND PRO FORMA
FUND
CLASS A SHARES
Net assets $113,268 $ 4,778 $118,046
Net asset value per share $ 8.10 $ 9.95 $ 9.95
Shares outstanding 13,981 480 11,864
CLASS Y SHARES
Net assets $ 806 $130,715 $131,521
Net asset value per share $ 8.11 $ 9.95 $ 9.95
Shares outstanding 99 13,139 13,220
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VOTING INFORMATION
GENERAL
This Prospectus/Proxy Statement is furnished in connection with a
solicitation of proxies by the Board of Directors of First American to be used
at the Meeting of Adjustable Rate Mortgage Securities Fund shareholders to be
held at 10:00 a.m., Eastern Time, on January 14, 2000, at the offices of SEI
Investments Company, Oaks, Pennsylvania and at any adjournments thereof. This
Prospectus/Proxy Statement, along with a Notice of Special Meeting and a proxy
card, is first being mailed to shareholders of the Adjustable Rate Mortgage
Securities Fund on or about November 29, 1999. Only shareholders of record as of
the close of business on November 17, 1999 (the "Record Date") will be entitled
to notice of, and to vote at, the Meeting or any adjournment thereof. If the
enclosed form of proxy is properly executed and returned on time to be voted at
the Meeting, the proxies named therein will vote the shares represented by the
proxy in accordance with the instructions marked thereon. Unmarked proxies will
be voted "for" the proposed Plan and Reorganization. A proxy may be revoked by
giving written notice, in person or by mail, of revocation before the Meeting to
First American at its principal executive offices, Oaks, Pennsylvania 19456, or
by properly executing and submitting a later-dated proxy, or by voting in person
at the Meeting.
If a shareholder executes and returns a proxy but abstains from
voting, the shares held by such shareholder will be deemed present at the
Meeting for purposes of determining a quorum and will be included in determining
the total number of votes cast. If a proxy is received from a broker or nominee
indicating that such person has not received instructions from the beneficial
owner or other person entitled to vote Adjustable Rate Mortgage Securities Fund
shares (i.e., a broker "non-vote"), the shares represented by such proxy will
not be considered present at the Meeting for purposes of determining a quorum
and will not be included in determining the number of votes cast. Brokers and
nominees will not have discretionary authority to vote shares for which
instructions are not received from the beneficial owner.
Approval of the Plan and Reorganization will require the affirmative
vote described above under "Information About the Reorganization --
Recommendation and Vote Required."
As of October 15, 1999, (i) the Adjustable Rate Mortgage Securities
Fund had the following numbers of shares outstanding and entitled to vote at the
Meeting: Class A, 12,383,300.340 shares; and Class Y, 80,212.323 shares; (ii)
the Limited Term Income Fund had the following numbers of shares outstanding:
Class A, 543,615.666 shares; and Class Y, 11,964,224.761 shares; and (iii) the
directors and officers of the respective Funds as a group owned less than one
percent of the outstanding shares of either Fund or any class thereof. The
following table sets forth information concerning those persons known by the
respective Funds to own of record or beneficially more than 5% of the
outstanding shares of either Fund or any class thereof (including 25% holders)
as of such date:
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PERCENTAGE
NAME AND ADDRESS NUMBER AND CLASS OWNERSHIP
OF HOLDER OF SHARES OWNED OF CLASS
ADJUSTABLE RATE MORTGAGE SECURITIES FUND:
Julia T. Oehlert 30,742.860 38.34%
31 Island Way Class Y *
Clear Water FL 33767
Pauline Baldie 18,649.920 23.26%
Border Brokerage Company Class Y *
#12 Pacific Highway
Blaine WA 98230
Haldis R. Heim 11,436.130 14.26%
6205 Mineral Point Rd Class Y *
Madison WI 53705
LIMITED TERM INCOME FUND:
Planned Parenthood of Minnesota 88,746.130 17.26%
1965 Ford Parkway Class A *
St. Paul MN 55116
Charles A. Beck MD LTD Money 32,328.587 6.29%
Purchase Trust Class A *
71 W 156th Street
Harvey IL 60426
CENTCO 30,090.270 5.85%
FBO Ansco Windows Class A *
PO Box 1498
Provo UT 84603
* Record Ownership Only.
Proxies are solicited by mail. Additional solicitations may be made
by telephone or personal contact by officers or employees of the Distributor and
its affiliates. The cost of solicitation will be born by the Adviser.
In the event that sufficient votes to approve the Plan and
Reorganization are not received by the date set for the Meeting, the persons
named as proxies may propose one or more adjournments of the Meeting for up to
120 days to permit further solicitation of proxies. In determining whether to
adjourn the Meeting, the following factors may be considered: the percentage of
votes actually cast, the percentage of negative votes actually cast, the nature
of any further solicitation and the information to be provided to shareholders
with respect to the reasons for the solicitation. Any such adjournment will
require the affirmative vote of a majority of the shares present in person or by
proxy and entitled to vote at the Meeting. The persons named as
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proxies will vote upon such adjournment after consideration of the best
interests of all shareholders.
INTERESTS OF CERTAIN PERSONS
The following receive payments from the Adjustable Rate Mortgage
Securities Fund and the Limited Term Income Fund for services rendered pursuant
to contractual arrangements with each of the Funds: U.S. Bank National
Association, as the Adviser of each Fund, receives payments for its investment
advisory and management services; SEI Investments Distribution Co., as the
Distributor for each Fund, receives payments for providing distribution
services; SEI Investments Management Corporation, in its capacity as the
Administrator for each Fund, receives payments for providing shareholder
servicing, legal and accounting and other administrative personnel and services,
a portion of which is paid to U.S. Bank as the Sub Administrator; DST Systems,
Inc., in its capacity as transfer and dividend disbursing agent for each Fund,
receives payments for providing transfer agency and dividend disbursing
services, a portion of which is paid to U.S. Bank as the Sub Transfer Agent for
certain accounts; and U.S. Bank as the Custodian of each Fund, receives payments
for providing custodial services for each Fund, and may also act as securities
lending agent in connection with the Funds' securities lending transactions and
receive, as compensation for such services, fees based on a percentage of the
Funds' income from such securities lending transactions.
NO DISSENTERS' RIGHTS OF APPRAISAL
Under the Maryland General Corporation Law and the Investment
Company Act, Adjustable Rate Mortgage Securities Fund shareholders are not
entitled to assert dissenters' rights of appraisal in connection with the Plan
or Reorganization.
FINANCIAL STATEMENTS AND EXPERTS
KPMG LLP, 90 South Seventh Street, Minneapolis, Minnesota 55402,
acted as the Funds' independent auditors, providing audit services including
audits of the annual financial statements and assistance and consultation in
connection with SEC filings for the fiscal periods ended on or before September
30, 1998. First American's Board of Directors, upon recommendation of its Audit
Committee, dismissed KPMG effective upon completion of the audit of the annual
financial statements for the fiscal period ended on September 30, 1998. KPMG's
report on the financial statements for the past two fiscal years contained an
unqualified opinion, and there was no disagreement with KPMG on any matter of
accounting principles, financial statement disclosure or auditing scope or
procedure.
Ernst & Young LLP, 1400 Pillsbury Center, Minneapolis, Minnesota
55402, serves as the Funds' independent auditors, providing audit services,
including audits of the annual financial statements and assistance and
consultation in connection with SEC filings for the year ended September 30,
1999.
The audited statement of net assets of the Limited Term Income Fund
and the Adjustable Rate Mortgage Securities Fund as of September 30, 1998, and
the related statement of operations for the year then ended, changes in net
assets for each of the years in the two-year period then ended and the financial
highlights for the periods indicated therein, as included in the Statement of
Additional Information of First American dated February 1, 1999, have been
incorporated by reference into this Prospectus/Proxy Statement in reliance on
the report of KPMG LLP, independent auditors for First American Investment
Funds, Inc., given on the authority of such firm as experts in accounting and
auditing. In addition, the unaudited financial statements for the Limited Term
Income Fund and the Adjustable Rate Mortgage Securities Fund for the six-month
period ending March 31, 1999, as included in the Semi-Annual Report of First
American for the six-month period ending March 31, 1999, are incorporated herein
by reference.
LEGAL MATTERS
Certain legal matters concerning the issuance of the shares of the
Limited Term Income Fund to be issued in the Reorganization will be passed upon
by Dorsey & Whitney LLP, 220 South Sixth Street, Minneapolis, Minnesota 55402.
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EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
LIMITED TERM INCOME FUND AND ADJUSTABLE RATE MORTGAGE SECURITIES FUND
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AGREEMENT AND PLAN OF REORGANIZATION
LIMITED TERM INCOME FUND AND
ADJUSTABLE RATE MORTGAGE SECURITIES FUND
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as of this
___ day of ________________, 1999, by and between Class J (also known as
"Limited Term Income Fund") (the "Acquiring Fund") of First American Investment
Funds, Inc., a Maryland corporation ("FAIF"), and Class CC (also known as
"Adjustable Rate Mortgage Securities Fund") (the "Acquired Fund") of FAIF. The
shares of the Acquiring Fund and the Acquired Fund designated in FAIF's amended
and restated articles of incorporation, as supplemented by articles
supplementary thereto filed through the date hereof, are referred to herein by
the names set forth in Article V, Section 3 of FAIF's bylaws, as follows:
Designation in Articles of Incorporation
or Articles Supplementary Name Assigned in Bylaws
- ---------------------------------------- ------------------------------------
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 Y
Class J, Series 3 Common Shares Limited Term Income Fund, CDSC
Class or Class B
Class J, Series 4 Common Shares Limited Term Income Fund, Class C
Class CC Common Shares Adjustable Rate Mortgage Securities
Fund, Retail Class or Class A
Class CC, Series 2 Common Shares Adjustable Rate Mortgage Securities
Fund, CDSC Class or Class B
Class CC, Series 3 Common Shares Adjustable Rate Mortgage Securities
Fund, Institutional Class or Class Y
Class CC, Series 4 Common Shares Adjustable Rate Mortgage Securities
Fund, Class C
This Agreement is intended to be and is adopted as a plan of reorganization and
liquidation pursuant to Sections 368(a)(1)(C) of the United States Internal
Revenue Code of 1986, as amended (the "Code"). The reorganization (the
"Reorganization") will consist of the consolidation of the Acquired Fund with
and into the Acquiring Fund by means of the exchange of shares of common stock,
par value $.0001 per share, of the Acquiring Fund (the" Acquiring Fund Shares"),
having an aggregate net asset value equal to the aggregate net asset value of
the Acquired Fund, for all of the issued and outstanding shares of common stock,
par value $.0001 per share, of the Acquired Fund (the "Acquired Fund Shares"),
all upon the terms and conditions hereinafter set forth in this Agreement.
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The exchange of Acquiring Fund Shares for Acquired Fund Shares will be effected
pursuant to an amendment to FAIF's Articles of Incorporation in the form
attached hereto as Exhibit 1 (the "Amendment") to be adopted in accordance with
the Maryland General Corporation Law.
RECITALS
A. FAIF is a registered, open-end management investment company that
offers its shares of common stock in multiple series (each of which series
represents a separate and distinct portfolio of assets and liabilities).
B. Each of the Acquiring Fund and the Acquired Fund series of FAIF
offers Class A shares, Class B shares, Class C shares and Class Y shares.
C. The Acquired Fund owns securities which generally are assets of
the character in which the Acquiring Fund is permitted to invest.
D. The Board of Directors of FAIF has determined that the
consolidation of the Acquired Fund with and into the Acquiring Fund by means of
the exchange of Class A, Class B, Class C and Class Y Acquiring Fund Shares for
all of the issued and outstanding Class A, Class B, Class C and Class Y Acquired
Fund Shares, respectively, on the basis set forth herein is in the best
interests of the Acquired Fund shareholders and the Acquiring Fund shareholders.
AGREEMENT
In consideration of the premises and of the covenants and agreements hereinafter
set forth, the parties hereto covenant and agree as follows:
1. EXCHANGE OF SHARES; REALLOCATION OF ASSETS AND LIABILITIES
1.1 Subject to the requisite approval by the Acquired Fund
shareholders and to the other terms and conditions herein set forth and on the
basis of the representations and warranties contained herein, the Acquired Fund
and the Acquiring Fund agree that at the Effective Time (as defined in Section
3.1), (a) each issued and outstanding Class A Acquired Fund Share shall be,
without further action, exchanged for that number of Class A Acquiring Fund
Shares calculated in accordance with Article 2 hereof and the Amendment; (b)
each issued and outstanding Class B Acquired Fund Share shall be, without
further action, exchanged for that number of Class B Acquiring Fund Shares
calculated in accordance with Article 2 hereof and the Amendment; (c) each
issued and outstanding Class C Acquired Fund Share shall be, without further
action, exchanged for that number of Class C Acquiring Fund Shares calculated in
accordance with Article 2 hereof and the Amendment; and (d) each issued and
outstanding Class Y Acquired Fund Share shall be, without further action,
exchanged for that number of Class Y Acquiring Fund Shares calculated in
accordance with Article 2 hereof and the Amendment.
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1.2 (a) At the Effective Time, the assets and liabilities belonging
to the Acquired Fund and its respective classes shall become, without further
action, assets and liabilities belonging to the Acquiring Fund and its
respective classes, all in accordance with Article IV, Section 1(d)(i) and (ii)
of FAIF's amended and restated articles of incorporation. For purposes of the
foregoing, the terms "assets belonging to" and "liabilities belonging to" have
the meanings assigned to them in said Article IV, Section 1(d)(i) and (ii). Such
assets belonging to the Acquired Fund to become assets belonging to the
Acquiring Fund shall consist of all of Acquired Fund's property, including, but
not limited to, all cash, securities, commodities and futures interests and
dividends or interest receivable which are assets belonging to the Acquired Fund
as of the Effective Time. All of said assets shall be set forth in detail in an
unaudited statement of assets and liabilities of the Acquired Fund as of the
Effective Time (the "Effective Time Statement"). The Effective Time Statement
shall, with respect to the listing of the Acquired Fund's portfolio securities,
detail the adjusted tax basis of such securities by lot, the respective holding
periods of such securities and the current and accumulated earnings and profits
of the Acquired Fund. The Effective Time Statement shall be prepared in
accordance with generally accepted accounting principles (except for footnotes)
consistently applied.
(b) The Acquired Fund has provided the Acquiring Fund with a list of
all of the Acquired Fund's assets as of the date of execution of this Agreement.
The Acquired Fund reserves the right to sell any of these securities prior to
the Effective Time and to acquire additional securities in the ordinary course
of its business.
1.3 Pursuant to Section 1.2(a), at the Effective Time the
liabilities, expenses, costs, charges and reserves (including, but not limited
to, expenses incurred in the ordinary course of the Acquired Fund's operations,
such as accounts payable relating to custodian and transfer agency fees,
investment management and administrative fees, legal and audit fees, and
expenses of state securities registration of the Acquired Fund's shares) as
reflected in the Effective Time Statement shall become liabilities, expenses,
costs, charges and reserves of the Acquiring Fund.
1.4 At the Effective Time and pursuant to the plan of reorganization
adopted herein, the Acquiring Fund will issue and distribute (as provided in
Article 2) to the Acquired Fund or, at the direction of the Acquired Fund's
Board of Directors, to the Acquired Fund's shareholders of record, determined as
of the Effective Time (the "Acquired Fund Shareholders"), the Acquiring Fund
Shares issued in exchange for the Acquired Fund Shares pursuant to Section 1.1
and Article 2. Thereafter, no additional shares representing interests in the
Acquired Fund shall be issued, and the Acquired Fund shall be deemed to be
liquidated. Such distribution 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. All issued and
outstanding shares of the Acquired Fund will simultaneously be cancelled on the
books of the Acquired Fund, although from and after the Effective Time share
certificates representing
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interests in the Acquired Fund will represent those numbers and classes of
Acquiring Fund Shares as determined in accordance with Article 2. Unless
requested by Acquired Fund Shareholders, the Acquiring Fund will not issue
certificates representing the Acquiring Fund Shares in connection with such
exchange.
1.5 Ownership of Acquiring Fund Shares will be shown on the books of
the Acquiring Fund. Shares of the Acquiring Fund will be issued in the manner
described in the Acquiring Fund's Prospectuses and Statement of Additional
Information (in effect as of the Effective Time), except that no sales charges
will be incurred by the Acquired Fund Shareholders in connection with the
acquisition by the Acquired Fund Shareholders of Acquiring Fund Shares pursuant
to this Agreement.
1.6 The Acquiring Fund agrees that in determining contingent
deferred sales charges applicable to Class B or Class C shares issued by it in
the Reorganization and, with respect to Class B shares, the date upon which such
shares convert to Class A shares, it shall give credit for the period during
which the holders thereof held the Class B or Class C shares of the Acquired
Fund in exchange for which such Acquiring Fund shares were issued. In the event
that Class A shares of the Acquiring Fund are distributed in the Reorganization
to former holders of Class A shares of the Acquired Fund with respect to which
the front-end sales charge was waived due to a purchase of $1 million or more,
the Acquiring Fund agrees that in determining whether a deferred sales charge is
payable upon the sale of such Class A shares of the Acquiring Fund it shall give
credit for the period during which the holder thereof held such Acquired Fund
shares.
1.7 Any reporting responsibility of the Acquired Fund, including,
but not limited to, the responsibility for filing of regulatory reports, tax
returns, or other documents with the Securities and Exchange Commission (the
"Commission"), any state securities commissions, and any federal, state or local
tax authorities or any other relevant regulatory authority, is and shall remain
the responsibility of the Acquired Fund.
2. EXCHANGE RATIOS; VALUATION; ISSUANCE OF ACQUIRING FUND SHARES
2.1 The net asset value per share of the Acquired Fund's and the
Acquiring Fund's Class A shares, Class B shares, Class C shares and Class Y
shares shall be computed as of the Effective Time using the valuation procedures
set forth in FAIF's amended and restated 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").
2.2 (a) The total number of the Acquiring Fund's Class A shares to
be issued (including fractional shares, if any) in exchange for the Acquired
Fund's Class A shares shall be determined as of the Effective Time by
multiplying the number of the Acquired Fund's Class A shares outstanding
immediately prior to the Effective Time times a fraction, the numerator of which
is the net asset value per share of the Acquired Fund's Class A shares
immediately prior to the Effective Time, and the denominator of which is
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the net asset value per share of the Acquiring Fund's Class A shares immediately
prior to the Effective Time, each as determined pursuant to Section 2.1.
(b) The total number of the Acquiring Fund's Class B shares to be
issued (including fractional shares, if any) in exchange for the Acquired Fund's
Class B shares shall be determined as of the Effective Time by multiplying the
number of the Acquired Fund's Class B shares outstanding immediately prior to
the Effective Time times a fraction, the numerator of which is the net asset
value per share of the Acquired Fund's Class B shares immediately prior to the
Effective Time, and the denominator of which is the net asset value per share of
the Acquiring Fund's Class B shares immediately prior to the Effective Time,
each as determined pursuant to Section 2.1.
(c) The total number of the Acquiring Fund's Class C shares to be
issued (including fractional shares, if any) in exchange for the Acquired Fund's
Class C shares shall be determined as of the Effective Time by multiplying the
number of the Acquired Fund's Class C shares outstanding immediately prior to
the Effective Time times a fraction, the numerator of which is the net asset
value per share of the Acquired Fund's Class C shares immediately prior to the
Effective Time, and the denominator of which is the net asset value per share of
the Acquiring Fund's Class C shares immediately prior to the Effective Time,
each as determined pursuant to Section 2.1.
(d) The total number of the Acquiring Fund's Class Y shares to be
issued (including fractional shares, if any) in exchange for the Acquired Fund's
Class Y shares shall be determined as of the Effective Time by multiplying the
number of the Acquired Fund's Class Y shares outstanding immediately prior to
the Effective Time times a fraction, the numerator of which is the net asset
value per share of the Acquired Fund's Class Y shares immediately prior to the
Effective Time, and the denominator of which is the net asset value per share of
the Acquiring Fund's Class Y shares immediately prior to the Effective Time,
each as determined pursuant to Section 2.1.
2.3 At the Effective Time, the Acquiring 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 to be issued by the Acquiring Fund pursuant to Section 2.2.
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; each Class C Acquired Fund
Shareholder shall receive, at the Effective
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<PAGE>
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; and each
Class Y Acquired Fund Shareholder shall receive, at the Effective Time, Class Y
Acquiring Fund Shares with an aggregate net asset value equal to the aggregate
net asset value of the Class Y Acquired Fund Shares owned by such Acquired Fund
Shareholder immediately prior to the Effective Time.
3. EFFECTIVE TIME OF CLOSING
3.1 The closing of the transactions contemplated by this Agreement
(the"Closing") shall occur as of the close of normal trading on the New York
Stock Exchange (the "Exchange") (currently, 4:00 p.m. Eastern time) on the first
day upon which the conditions to closing shall have been satisfied, or at such
time on such later date as provided herein or as the parties otherwise may agree
in writing (such time and date being referred to herein as the "Effective
Time"). All acts taking place at the Closing shall be deemed to take place
simultaneously as of the Effective Time unless otherwise agreed to by the
parties. The Closing shall be held at the offices of U.S. Bank, 601 Second
Avenue South, Minneapolis, Minnesota 55402, or at such other place as the
parties may agree.
3.2 The custodian for the Acquiring Fund (the "Custodian") shall
deliver at the Closing a certificate of an authorized officer stating that it
holds the Acquired Fund's portfolio securities, cash, and any other assets being
allocated to the Acquiring Fund pursuant to this Agreement.
3.3 In the event that the Effective Time occurs on a day on which
(a) the Exchange or another primary trading market for portfolio securities of
the Acquiring Fund or the Acquired Fund shall be closed to trading or trading
thereon shall be restricted, or (b) trading or the reporting of trading on the
Exchange or elsewhere shall be disrupted so that accurate appraisal of the value
of the net assets of the Acquiring Fund or the Acquired Fund is impracticable,
the Effective Time shall be postponed until the close of normal trading on the
Exchange on the first business day when trading shall have been fully resumed
and reporting shall have been restored.
3.4 The Acquired Fund shall deliver at the Closing its certificate
stating that the records maintained by its transfer agent (which shall be made
available to the Acquiring Fund) contain the names and addresses of the Acquired
Fund Shareholders and the number of outstanding Acquired Fund shares owned by
each such shareholder as of the Effective Time. The Acquiring Fund shall certify
at the Closing that the Acquiring Fund Shares required to be issued by it
pursuant to this Agreement have been issued and delivered as required herein. At
the Closing, each party shall deliver to the other such bills of sale, liability
assumption agreements, checks, assignments, share certificates, if any, receipts
or other documents as such other party or its counsel may reasonably request.
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4. REPRESENTATIONS, WARRANTIES AND COVENANTS
4.1 The Acquired Fund represents, warrants and covenants to the
Acquiring Fund as follows:
(a) FAIF is a corporation duly organized, validly existing and in
good standing under the laws of the State of Maryland;
(b) FAIF is a registered investment company classified as a
management company of the open-end type, and its registration with the
Commission as an investment company under the 1940 Act, and of each series of
shares offered by FAIF under the Securities Act of 1933, as amended (the "1933
Act"), is in full force and effect;
(c) Shares of the Acquired Fund are registered in all jurisdictions
in which they are required to be registered under applicable state securities
laws and any other applicable laws, and said registrations, including any
periodic reports or supplemental filings, are complete and current, and all fees
required to be paid have been paid, and the Acquired Fund is in good standing,
is not subject to any stop orders, and is fully qualified to sell its shares in
any state in which its shares have been registered;
(d) The Acquired Fund is not in violation, and the execution,
delivery and performance of this Agreement will not result in a violation, of
FAIF's amended and restated articles of incorporation or bylaws or of any
material agreement, indenture, instrument, contract, lease or other undertaking
to which the Acquired Fund is a party or by which it is bound;
(e) No material litigation or administrative proceeding or
investigation of or before any court or governmental body is presently pending
or, to the Acquired Fund's knowledge, threatened against the Acquired Fund or
any of its properties or assets. The Acquired Fund is not a party to or subject
to the provisions of any order, decree or judgment of any court or governmental
body which materially and adversely affects its business or its ability to
consummate the transactions herein contemplated;
(f) The statement of assets and liabilities of the Acquired Fund as
of September 30, 1999 has been audited by Ernst & Young LLP, independent
accountants, and is in accordance with generally accepted accounting principles
consistently applied, and such statement (a copy of which has been furnished to
the Acquiring Fund) presents fairly, in all material respects, the financial
position of the Acquired Fund as of such date, and there are no known material
contingent liabilities of the Acquired Fund as of such date not disclosed
therein;
(g) Since September 30, 1999, there has not been any material
adverse change in the Acquired Fund's financial condition, assets, liabilities
or business other than changes occurring in the ordinary course of business,
except as otherwise disclosed to the
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Acquiring Fund. For the purposes of this paragraph (g), a decline in net asset
value per share of the Acquired Fund, the discharge or incurrence of Acquired
Fund liabilities in the ordinary course of business, or the redemption of
Acquired Fund shares by Acquired Fund Shareholders shall not constitute such a
material adverse change;
(h) All material federal and other tax returns and reports of the
Acquired Fund required by law to have been filed prior to the Effective Time
shall have been filed and shall be correct, and all federal and other taxes
shown as due or required to be shown as due on said returns and reports shall
have been paid or provision shall have been made for the payment thereof, and,
to the best of the Acquired Fund's knowledge, no such return is currently or
shall be under audit and no assessment shall have been asserted with respect to
such returns;
(i) For each taxable year of its operation, the Acquired Fund has
met the requirements of Subchapter M of the Code for qualification and treatment
as a regulated investment company, and the Acquired Fund intends to meet the
requirements of Subchapter M of the Code for qualification and treatment as a
regulated investment company for its final, partial taxable year;
(j) All issued and outstanding shares of the Acquired Fund are, and
at the Effective Time will be, duly and validly issued and outstanding, fully
paid and non-assessable. All of the issued and outstanding shares of the
Acquired Fund will, at the Effective Time, be held by the persons and in the
amounts set forth in the records of the Acquired Fund, as provided in Section
3.4. The Acquired Fund does not have outstanding any options, warrants or other
rights to subscribe for or purchase any of the Acquired Fund shares, and there
is not outstanding any security convertible into any of the Acquired Fund
shares;
(k) At the Effective Time, the Acquired Fund will have good and
marketable title to the Acquired Fund's assets to be allocated to the Acquiring
Fund pursuant to Section 1.2, and from and after the Effective Time the
Acquiring Fund will have good and marketable title thereto, subject to no
restrictions on the transfer thereof, including such restrictions as might arise
under the 1933 Act other than as disclosed to the Acquiring Fund in the
Effective Time Statement;
(l) The execution, delivery and performance of this Agreement will
have been duly authorized prior to the Effective Time by all necessary action on
the part of FAIF's Board of Directors, and, subject to the approval of the
Acquired Fund Shareholders, this Agreement will constitute a valid and binding
obligation of the Acquired Fund, enforceable in accordance with its terms,
subject, as to enforcement, to bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance and other laws relating to or affecting
creditors' rights and to the application of equitable principles in any
proceeding, whether at law or in equity;
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(m) The information to be furnished by the Acquired Fund for use in
registration statements, proxy materials and other documents which may be
necessary in connection with the transactions contemplated hereby shall be
accurate and complete in all material respects;
(n) All information pertaining to the Acquired Fund and its agents
and affiliates and included in the Registration Statement referred to in Section
5.5 (or supplied by the Acquired Fund, its agents or affiliates for inclusion in
said Registration Statement), on the effective date of said Registration
Statement and up to and including the Effective Time, will not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which such statements are made, not materially misleading
(other than as may timely be remedied by further appropriate disclosure);
(o) Since September 30, 1999, there have been no material changes by
the Acquired Fund in accounting methods, principles or practices, including
those required by generally accepted accounting principles, except as disclosed
in writing to the Acquiring Fund; and
(p) The Effective Time Statement will be prepared in accordance with
generally accepted accounting principles (except for footnotes) consistently
applied and will present accurately the assets and liabilities of the Acquired
Fund as of the Effective Time, and the values of the Acquired Fund's assets and
liabilities to be set forth in the Effective Time Statement will be computed as
of the Effective Time using the valuation procedures set forth in FAIF's amended
and restated articles of incorporation and bylaws and the Acquired Fund's
then-current Prospectuses and Statement of Additional Information and as may be
required by the 1940 Act.
4.2 The Acquiring Fund represents, warrants and covenants to the
Acquired Fund as follows:
(a) FAIF is a corporation duly organized, validly existing and in
good standing under the laws of the State of Maryland;
(b) FAIF is a registered investment company classified as a
management company of the open-end type, and its registration with the
Commission as an investment company under the 1940 Act, and of each series of
shares offered by FAIF under the 1933 Act, is in full force and effect;
(c) At or before the Effective Time, shares of the Acquiring Fund
(including, but not limited to, the Acquiring Fund Shares) will be registered in
all jurisdictions in which they will be required to be registered under
applicable state securities laws and any other applicable laws (including, but
not limited to, all jurisdictions necessary to effect the Reorganization), and
said registrations, including any periodic reports or supplemental filings, will
be complete and current, and all fees required to be paid will have been paid,
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<PAGE>
and the Acquiring Fund will be in good standing, and will not be subject to any
stop orders, and will be fully qualified to sell its shares in any state in
which its shares will have been registered;
(d) The Prospectuses and Statement of Additional Information of the
Acquiring Fund, as of the date hereof and up to and including the Effective
Time, conform and will conform in all material respects to the applicable
requirements of the 1933 Act and the 1940 Act and the rules and regulations of
the Commission thereunder and do not and will not include any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not materially misleading;
(e) The Acquiring Fund is not in violation, and the execution,
delivery and performance of this Agreement will not result in a violation, of
FAIF's amended and restated articles of incorporation or bylaws or of any
material agreement, indenture, instrument, contract, lease or other undertaking
to which the Acquiring Fund is a party or by which it is bound;
(f) No material litigation or administrative proceeding or
investigation of or before any court or governmental body is presently pending
or, to the Acquiring Fund's knowledge, threatened against the Acquiring Fund or
any of its properties or assets. The Acquiring Fund is not a party to or subject
to the provisions of any order, decree or judgment of any court or governmental
body which materially and adversely affects its business or its ability to
consummate the transactions herein contemplated;
(g) The statement of assets and liabilities of the Acquiring Fund as
of September 30, 1999 has been audited by Ernst & Young LLP, independent
accountants, and is in accordance with generally accepted accounting principles
consistently applied, and such statement (a copy of which has been furnished to
the Acquired Fund) presents fairly, in all material respects, the financial
position of the Acquiring Fund as of such date, and there are no known material
contingent liabilities of the Acquiring Fund as of such date not disclosed
therein;
(h) Since September 30, 1999, there has not been any material
adverse change in the Acquiring Fund's financial condition, assets, liabilities
or business other than changes occurring in the ordinary course of business,
except as otherwise disclosed to the Acquired Fund. For the purposes of this
paragraph (h), a decline in net asset value per share of the Acquiring Fund, the
discharge or incurrence of Acquiring Fund liabilities in the ordinary course of
business, or the redemption of Acquiring Fund Shares by Acquiring Fund
shareholders shall not constitute a material adverse change;
(i) All material federal and other tax returns and reports of the
Acquiring Fund required by law to have been filed prior to the Effective Time
shall have been filed and shall be correct, and all federal and other taxes
shown as due or required to be shown as due on said returns and reports shall
have been paid or provision shall have been made for
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<PAGE>
the payment thereof, and to the best of the Acquiring Fund's knowledge no such
return is currently or shall be under audit and no assessment shall have been
asserted with respect to such returns;
(j) For each taxable year of its operation, the Acquiring Fund has
met the requirements of Subchapter M of the Code for qualification and treatment
as a regulated investment company, and the Acquiring Fund intends to meet the
requirements of Subchapter M of the Code for qualification and treatment as a
regulated investment company in the current and future years;
(k) All issued and outstanding shares of the Acquiring Fund are, and
at Effective Time will be, duly and validly issued and outstanding, fully paid
and non-assessable;
(l) The Acquiring Fund Shares to be issued and delivered to the
Acquired Fund, for the account of the Acquired Fund Shareholders, pursuant to
the terms of this Agreement, at the Effective Time will have been duly
authorized and, when so issued and delivered, will be duly and validly issued
Acquiring Fund Shares and will be fully paid and non-assessable;
(m) The Acquiring Fund does not have outstanding any options,
warrants or other rights to subscribe for or purchase any of the Acquiring Fund
Shares, and there is not outstanding any security convertible into any of the
Acquiring Fund Shares (other than Class B shares which automatically convert to
Class A shares after a specified period);
(n) At the Effective Time, the Acquiring Fund will have good and
marketable title to the Acquiring Fund's assets;
(o) Since September 30, 1999, there have been no material changes by
the Acquiring Fund in accounting methods, principles or practices, including
those required by generally accepted accounting principles, except as disclosed
in writing to the Acquired Fund;
(p) The execution, delivery and performance of this Agreement will
have been duly authorized prior to the Effective Time by all necessary action on
the part of the Board of Directors of FAIF, as issuer of the Acquiring Fund
Shares, and this Agreement will constitute a valid and binding obligation of the
Acquiring Fund enforceable in accordance with its terms, subject as to
enforcement, to bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance and other laws relating to or affecting creditors' rights and to the
application of equitable principles in any proceeding, whether at law or in
equity. Consummation of the transactions contemplated by this Agreement does not
require the approval of the Acquiring Fund's shareholders;
(q) The information to be furnished by the Acquiring Fund for use in
registration statements, proxy materials and other documents which may be
necessary in connection
43
<PAGE>
with the transactions contemplated hereby shall be accurate and complete in all
material respects;
(r) Following the Reorganization, the Acquiring Fund shall determine
its net asset value per share in accordance with the valuation procedures set
forth in FAIF's amended and restated articles of incorporation and bylaws and
the Acquiring Fund's Prospectuses and Statement of Additional Information (as
the same may be amended from time to time) and as may be required by the 1940
Act; and
(s) The Registration Statement referred to in Section 5.5, on its
effective date and up to and including the Effective Time, will (i) conform in
all material respects to the applicable requirements of the 1933 Act, the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and the 1940 Act
and the rules and regulations of the Commission thereunder, and (ii) not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which such statements were made, not materially
misleading (other than as may timely be remedied by further appropriate
disclosure); provided, however, that the representations and warranties in
clause (ii) of this paragraph shall not apply to statements in (or omissions
from) the Registration Statement concerning the Acquired Fund.
5. FURTHER COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND.
5.1 Each of the Acquired Fund and the Acquiring Fund will operate
its business in the ordinary course between the date hereof and the Effective
Time, it being understood that such ordinary course of business will include the
declaration and payment of customary dividends and distributions, and any other
distributions that may be advisable (which may include distributions prior to
the Effective Time of net income and/or net realized capital gains not
previously distributed).
5.2 The Acquired Fund will call a meeting of its shareholders to
consider and act upon this Agreement and to take all other action necessary to
obtain approval of the transactions contemplated herein.
5.3 The Acquired Fund will assist the Acquiring Fund in obtaining
such information as the Acquiring Fund reasonably requests concerning the
beneficial ownership of the Acquired Fund shares.
5.4 Subject to the provisions of this Agreement, the Acquiring Fund
and the Acquired Fund will each take, or cause to be taken, all actions, and do
or cause to be done, all things reasonably necessary, proper or advisable to
consummate and make effective the transactions contemplated by this Agreement.
5.5 The Acquired Fund will provide the Acquiring Fund with
information reasonably necessary with respect to the Acquired Fund and its
agents and affiliates for
44
<PAGE>
the preparation of the Registration Statement on Form N-14 of the Acquiring Fund
(the "Registration Statement"), in compliance with the 1933 Act, the 1934 Act
and the 1940 Act.
5.6 The Acquiring Fund agrees to use all reasonable efforts to
obtain the approvals and authorizations required by the 1933 Act, the 1940 Act
and such of the state blue sky or securities laws as may be necessary in order
to conduct its operations after the Effective Time.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND. The obligations of
the Acquired Fund to consummate the transactions provided for herein shall be
subject, at its election, to the performance by the Acquiring Fund of all the
obligations to be performed by it hereunder at or before the Effective Time,
and, in addition thereto, the following further conditions (any of which may be
waived by the Acquired Fund, in its sole and absolute discretion):
(a) All representations and warranties of the Acquiring Fund
contained in this Agreement shall be true and correct as of the date hereof and,
except as they may be affected by the transactions contemplated by this
Agreement, as of the Effective Time with the same force and effect as if made at
such time; and
(b) The Acquiring Fund shall have delivered to the Acquired Fund a
certificate executed in its name by its President or a Vice President, in a form
reasonably satisfactory to the Acquired Fund and dated as of the date of the
Closing, to the effect that the representations and warranties of the Acquiring
Fund made in this Agreement are true and correct at the Effective Time, except
as they may be affected by the transactions contemplated by this Agreement and
as to such other matters as the Acquired Fund shall reasonably request.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND. The obligations of
the Acquiring Fund to complete the transactions provided for herein shall be
subject, at its election, to the performance by the Acquired Fund of all of the
obligations to be performed by it hereunder at or before the Effective Time and,
in addition thereto, the following conditions (any of which may be waived by the
Acquiring Fund, in its sole and absolute discretion):
(a) All representations and warranties of the Acquired Fund
contained in this Agreement shall be true and correct as of the date hereof and,
except as they may be affected by the transactions contemplated by this
Agreement, as of the Effective Time with the same force and effect as if made at
such time;
(b) The Acquiring Fund shall have received, and certified as to its
receipt of, the Effective Time Statement;
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<PAGE>
(c) The Acquired Fund shall have delivered to the Acquiring Fund a
certificate executed in its name by its President or a Vice President, in form
and substance satisfactory to the Acquiring Fund and dated as of the date of the
Closing, to the effect that the representations and warranties of the Acquired
Fund made in this Agreement are true and correct at and as of the Effective
Time, except as they may be affected by the transactions contemplated by this
Agreement, and as to such other matters as the Acquiring Fund shall reasonably
request;
(d) At or prior to the Effective Time, the Acquired Fund's
investment adviser, or an affiliate thereof, shall have paid or agreed to pay
the Acquired Fund an amount equal to the unamortized organizational expenses, if
any, on the books of the Acquired Fund, and such unamortized organizational
expenses shall not be reflected in the Effective Time Statement; and
(e) At or prior to the Effective Time, the Acquired Fund's
investment adviser, or an affiliate thereof, shall have reimbursed or agreed to
reimburse the Acquired Fund by the amount, if any, that the expenses incurred by
the Acquired Fund (or accrued up to the Effective Time) exceed any applicable
contractual or state-imposed expense limitations.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
AND THE ACQUIRED FUND. The following shall constitute further conditions
precedent to the consummation of the Reorganization:
(a) This Agreement and the transactions contemplated herein shall
have been approved by the requisite vote of the holders of the outstanding
shares of the Acquired Fund in accordance with the provisions of its amended and
restated articles of incorporation and bylaws and applicable law, and certified
copies of the resolutions evidencing such approval shall have been delivered to
the Acquiring Fund. Notwithstanding anything herein to the contrary, neither the
Acquiring Fund nor the Acquired Fund may waive the conditions set forth in this
Section 8(a);
(b) FAIF shall have obtained such exemptive relief from the
provisions of Section 17 of the 1940 Act as may, in the view of its counsel, be
required in order to consummate the transactions contemplated hereby;
(c) The Acquiring Fund's investment adviser shall have paid or
agreed to pay the costs incurred by FAIF in connection with the Reorganization,
including the fees and expenses associated with the preparation and filing of
the application for exemptive relief referred to in Section 8(b) above and the
Registration Statement referred to in Section 5.5 above, and the expenses of
printing and mailing the prospectus/proxy statement, soliciting proxies and
holding the shareholders meeting required to approve the transactions
contemplated by this Agreement;
(d) As of the Effective Time, no action, suit or other proceeding
shall be threatened or pending before any court or governmental agency in which
it is sought to
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<PAGE>
restrain or prohibit, or obtain damages or other relief in connection with, this
Agreement or the transactions contemplated herein;
(e) All consents of other parties and all other consents, orders and
permits of federal, state and local regulatory authorities deemed necessary by
the Acquiring Fund or the Acquired Fund to permit consummation, in all material
respects, of the transactions contemplated hereby shall have been obtained,
except where failure to obtain any such consent, order or permit would not
involve a risk of a material adverse effect on the assets or properties of the
Acquiring Fund or the Acquired Fund, provided that either party hereto may for
itself waive any of such conditions;
(f) The Registration Statement shall have become effective under the
1933 Act, and no stop orders suspending the effectiveness thereof shall have
been issued and, to the best knowledge of the parties hereto, no investigation
or proceeding for that purpose shall have been instituted or be pending,
threatened or contemplated under the 1933 Act;
(g) The parties shall have received the opinion of Dorsey & Whitney
LLP addressed to the Acquired Fund and the Acquiring Fund, dated as of the date
of the Closing, and based in part on certain representations to be furnished by
the Acquired Fund, the Acquiring Fund, and their investment adviser and other
service providers, substantially to the effect that:
(i) the Reorganization will constitute a reorganization
within the meaning of Section 368(a)(1)(C) of the Code, and the
Acquiring Fund and the Acquired Fund each will qualify as a party to
the Reorganization under Section 368(b) of the Code;
(ii) the Acquired Fund Shareholders will recognize no
income, gain or loss upon receipt, pursuant to the Reorganization,
of the Acquiring Fund Shares. Acquired Fund Shareholders subject to
taxation will recognize income upon receipt of any net investment
income or net capital gains of the Acquired Fund which are
distributed by the Acquired Fund prior to the Effective Time;
(iii) the tax basis of the Acquiring Fund Shares
received by each Acquired Fund Shareholder pursuant to the
Reorganization will be equal to the tax basis of the Acquired Fund
Shares exchanged therefor;
(iv) the holding period of the Acquiring Fund Shares
received by each Acquired Fund Shareholder pursuant to the
Reorganization will include the period during which the Acquired
Fund Shareholder held the Acquired Fund Shares exchanged therefor,
provided that the Acquired Fund shares were held as a capital asset
at the Effective Time;
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<PAGE>
(v) the Acquired Fund will recognize no income, gain or
loss by reason of the Reorganization;
(vi) the Acquiring Fund will recognize no income, gain
or loss by reason of the Reorganization;
(vii) the tax basis of the assets received by the
Acquiring Fund pursuant to the Reorganization will be the same as
the basis of those assets in the hands of the Acquired Fund as of
the Effective Time;
(viii) the holding period of the assets received by the
Acquiring Fund pursuant to the Reorganization will include the
period during which such assets were held by the Acquired Fund; and
(ix) the Acquiring Fund will succeed to and take into
account the earnings and profits, or deficit in earnings and
profits, of the Acquired Fund as of the Effective Time; and
(h) The Amendment shall have been filed in accordance with the
applicable provisions of Maryland law.
9. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
9.1 The Acquiring Fund and the Acquired Fund agree that neither
party has made any representation, warranty or covenant not set forth herein and
that this Agreement constitutes the entire agreement between the parties.
9.2 The representations and warranties contained in this Agreement
or in any document delivered pursuant hereto or in connection herewith shall
survive the consummation of the transactions contemplated hereunder.
10. TERMINATION. This Agreement and the transactions contemplated hereby may be
terminated and abandoned by either party by resolution of FAIF's Board of
Directors at any time prior to the Effective Time, if circumstances should
develop that, in the good faith opinion of such Board, make proceeding with the
Agreement not in the best interest of the shareholders of the Acquired Fund or
the Acquiring Fund.
11. AMENDMENTS. This agreement may be amended, modified or supplemented in such
manner as may be mutually agreed upon in writing by the authorized officers of
the Acquired Fund and the Acquiring Fund; provided, however, that following the
meeting of the Acquired Fund Shareholders called by the Acquired Fund pursuant
to Section 5.2 of this Agreement, no such amendment may have the effect of
changing the provisions for determining the number of the Acquiring Fund Shares
to be issued to the Acquired Fund Shareholders under this Agreement to the
detriment of such shareholders without their further approval.
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12. NOTICES. Any notice, report, statement or demand required or permitted by
any provisions of this Agreement shall be in writing and shall be deemed duly
given if delivered or mailed by registered mail, postage prepaid, addressed to
the Acquiring Fund or the Acquired Fund, Oaks, Pennsylvania 19456, Attention:
President (with a copy to U.S. Bank, 601 Second Avenue South, Minneapolis,
Minnesota 55402, Attention: Thomas A. Berreman).
13. HEADINGS; COUNTERPARTS; ASSIGNMENT; MISCELLANEOUS.
13.1 The Article and Section headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
13.2 This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original and all of which together shall
constitute one and the same agreement.
13.3 This Agreement shall bind and inure to the benefit of the
parties hereto and their respective successors and assigns, but no assignment or
transfer hereof or of any rights or obligations hereunder shall be made by any
party without the prior written consent of the other party. Nothing herein
expressed or implied is intended or shall be construed to confer upon or give
any person, firm or corporation, other than the parties hereto and their
respective successors and assigns, any rights or remedies under or by reason of
this Agreement.
13.4 The validity, interpretation and effect of this Agreement shall
be governed exclusively by the laws of the State of Minnesota, without giving
effect to the principles of conflict of laws thereof.
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<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by its President or a Vice President.
FIRST AMERICAN INVESTMENT FUNDS, INC.
on behalf of its
LIMITED TERM INCOME FUND
By
----------------------------------
Its
---------------------------------
FIRST AMERICAN INVESTMENT FUNDS, INC.
on behalf of its
ADJUSTABLE RATE MORTGAGE SECURITIES FUND
By
----------------------------------
Its
---------------------------------
50
<PAGE>
EXHIBIT 1 TO AGREEMENT AND PLAN OF REORGANIZATION
ARTICLES OF AMENDMENT
TO
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
FIRST AMERICAN INVESTMENT FUNDS, INC.
[COPY ATTACHED]
51
<PAGE>
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 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 CC shares of the Corporation (also known as "Adjustable Rate Mortgage
Securities Fund") that the assets belonging to such class be sold to a separate
portfolio of the Corporation which is known as "Limited Term Income Fund" and
which is represented by the Corporation's Class J shares, in exchange for shares
of Limited Term Income Fund which are to be delivered to former Adjustable Rate
Mortgage Securities Fund holders; and
WHEREAS, Adjustable Rate Mortgage Securities Fund and Limited Term
Income 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 Adjustable Rate Mortgage Securities Fund
to the foregoing transactions, and in particular to bind such holders to the
exchange of their Adjustable Rate Mortgage Securities Fund shares for Limited
Term Income 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(D) immediately following Article IV(C) thereof:
ARTICLE IV(D). (a) For purposes of this Article IV(D), the following
terms shall have the following meanings:
"Corporation" means this corporation.
"Acquired Fund" means the Corporation's Adjustable Rate Mortgage
Securities Fund, which is represented by the Corporation's Class CC shares.
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<PAGE>
"Class A Acquired Fund Shares" means the Corporation's Class CC
Common Shares.
"Class B Acquired Fund Shares" means the Corporation's Class CC,
Series 2 Common Shares.
"Class Y Acquired Fund Shares" means the Corporation's Class CC,
Series 3 Common Shares.
"Class C Acquired Fund Shares" means the Corporation's Class CC,
Series 4 Common Shares.
"Acquiring Fund" means the Corporation's Limited Term Income Fund,
which is represented by the Corporation's Class J shares.
"Class A Acquiring Fund Shares" means the Corporation's Class J
Common Shares.
"Class Y Acquiring Fund Shares" means the Corporation's Class J,
Series 2 Common Shares.
"Class B Acquiring Fund Shares" means the Corporation's Class J,
Series 3 Common Shares.
"Class C Acquiring Fund Shares" means the Corporation's Class J,
Series 4 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.
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<PAGE>
(d) The numbers of Class A, Class B, Class C and Class Y Acquiring
Fund Shares to be issued in exchange for the Class A, Class B, Class C and Class
Y Acquired Fund Shares shall be determined as follows:
(1) The net asset value per share of the Acquired Fund's and the
Acquiring Fund's Class A Shares, Class B Shares, Class C and Class Y
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").
(2) 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 (1) above.
(3) 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 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 (1) above.
(4) 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 (1) above.
(5) The total number of Class Y Acquiring Fund Shares to be issued
(including fractional shares, if any) in exchange for the Class Y
Acquired Fund Shares shall be determined as of the Effective Time by
multiplying the number of Class Y 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 Y
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<PAGE>
Acquired Fund Shares immediately prior to the Effective Time, and
the denominator of which is the net asset value per share of the
Class Y Acquiring Fund Shares immediately prior to the Effective
Time, each as determined pursuant to (1) above.
(6) 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 (2)
through (5) 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; 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;
and each Class Y Acquired Fund shareholder shall receive, at the
Effective Time, Class Y Acquiring Fund Shares with an aggregate net
asset value equal to the aggregate net asset value of the Class Y
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 CC common shares of the Corporation, without
designation as to series.
55
<PAGE>
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.
IN WITNESS WHEREOF, the Corporation has caused these Articles 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 February
__, 2000.
FIRST AMERICAN INVESTMENT FUNDS, INC.
By
------------------------------------------
Its
-----------------------------------------
WITNESS:
- --------------------------------------------
Secretary, First American Investment Funds, Inc.
56
<PAGE>
PART B
STATEMENT OF ADDITIONAL INFORMATION
DATED NOVEMBER 29, 1999
PROPOSED ACQUISITION OF ASSETS OF
ADJUSTABLE RATE MORTGAGE SECURITIES FUND
A SEPARATELY MANAGED SERIES OF
FIRST AMERICAN INVESTMENT FUNDS, INC.
OAKS, PENNSYLVANIA 19456
(800) 637-2548
BY AND IN EXCHANGE FOR SHARES OF
LIMITED TERM INCOME FUND
A SEPARATELY MANAGED SERIES OF
FIRST AMERICAN INVESTMENT FUNDS, INC.
OAKS, PENNSYLVANIA 19456
(800) 637-2548
This Statement of Additional Information relates to the proposed acquisition of
all the assets and the assumption of all liabilities of the Adjustable Rate
Mortgage Securities Fund (the "Acquired Fund") by the Limited Term Income Fund
in exchange for shares of common stock of the Limited Term Income Fund having an
aggregate net asset value equal to the aggregate value of the assets (less
liabilities assumed) of the Acquired Fund. As a result of the transactions, each
shareholder of the Adjustable Rate Mortgage Securities Fund will receive Limited
Term Income Fund shares of the same class that he or she held in the Adjustable
Rate Mortgage Securities Fund, with a net asset value equal to the net asset
value of the shareholder's Adjustable Rate Mortgage Securities Fund. This
Statement of Additional Information consists of this cover page and the
following documents, each of which is incorporated by reference herein:
1. Statement of Additional Information of First American
Investment Funds, Inc. ("First American") dated January
31, 1999, containing additional information concerning
the Retail Classes and the Institutional Class of both
the Limited Term Income Fund and the Adjustable Rate
Mortgage Securities Fund.
2. Annual report of First American for the fiscal year
ended September 30, 1998, relating to the Retail Classes
and the Institutional Class of Limited Term Income Fund
and the Adjustable Rate Mortgage Securities Fund.
57
<PAGE>
3. Semi-Annual report of First American for the six months
ended March 31, 1999, relating to the Retail Classes and
the Institutional Class of the Limited Term Income Fund
and the Adjustable Rate Mortgage Securities Fund.
This Statement of Additional Information is not a prospectus. A
Prospectus/Proxy Statement dated November 29, 1999 relating to the
above-referenced transaction may be obtained without charge by writing or
calling the Funds at the addresses or telephone numbers noted above. This
Statement of Additional Information relates to, and should be read in
conjunction with, such Prospectus/Proxy Statement.
Note: In the SEC filing package, Item No. 2 referred to above is included in
Part A as materials to be delivered with the Prospectus/Proxy Statement. A copy
of Item No. 2 also will be delivered to any person requesting the Statement of
Additional Information.
58
<PAGE>
FIRST AMERICAN INVESTMENT FUNDS, INC.
LIMITED TERM INCOME FUND
INTRODUCTION TO PRO FORMA COMBINING STATEMENTS
MARCH 31, 1999
The accompanying unaudited pro forma combining Statement of Assets and
Liabilities, Statement of Operations and Schedule of Investments, reflect the
accounts of First American Adjustable Rate Mortgage Securities Fund and the
First American Limited Term Income Fund.
The pro forma combining Schedule of Investments does not reflect any changes
which could occur before or after the reorganization closing date due to changes
in market conditions or differences in investment management practices of the
Funds. However, aside from portfolio decisions made as a result of market
condition changes that have or may occur between the date of the pro forma
financial statements and the reorganization closing date, the Funds' Adviser
does not have any specific plans at this time regarding the disposition of
investments presented in the pro forma schedules of investments that would have
a material impact on the presentation of such schedules.
These statements have been derived from the underlying accounting records for
the Adjustable Rate Mortgage Securities Fund and Limited Term Income Fund used
in calculating net asset values for the fiscal year ended September 30, 1998 and
the six-month period ended March 31, 1999. The pro forma combining Statement of
Operations have been prepared based upon the fee and expense structure of the
Limited Term Income Fund.
Under the proposed merger agreement and plan of reorganization, all outstanding
shares of each class of the Adjustable Rate Mortgage Securities Fund will be
exchanged for the respective classes of the shares of the Limited Term Income
Fund.
59
<PAGE>
LIMITED TERM INCOME FUND
PRO FORMA COMBINING FINANCIAL STATEMENTS (UNAUDITED)
STATEMENT OF ASSETS AND LIABILITIES (000'S)
MARCH 31,1999
<TABLE>
<CAPTION>
LIMITED TERM ADJUSTABLE RATE PRO FORMA
INCOME FUND MORTGAGE FUND ADJUSTMENTS COMBINED
------------ --------------- ------------ ------------
<S> <C> <C> <C> <C>
ASSETS:
Investments at value (Cost $133,829, $113,285 and
$247,114 respectively $ 134,333 $ 113,660 $ 247,993
Cash 1 2 3
Dividends and interest receivable 961 593 1,554
Receivable for Fund shares sold 267 -- 267
Cash collateral received for securities on loan 28,076 -- 28,076
Interest on Securities Sold 3 72 75
Prepaid expenses and other assets 1 16 17
------------ ------------ ------------ ------------
Total Assets 163,642 114,343 277,985
------------ ------------ ------------ ------------
LIABILITIES:
Payable for Fund shares repurchased 4 213 217
Payable upon return of securities on loan 28,076 -- 28,076
Accrued expenses and other liabilities 70 55 125
------------ ------------ ------------ ------------
Total Liabilities 28,150 268 28,418
------------ ------------ ------------ ------------
NET ASSETS $ 135,492 $ 114,075 $ 249,567
============ ============ ============ ============
Net Assets are comprised of:
Paid in Capital $ 138,845 $ 259,732 $ 398,577
Undistributed net investment income 40 -- 40
Distributions in excess of net investment income -- (110) (110)
Accumulated net realized loss on investments (3,897) (145,922) (149,819)
Net unrealized appreciation of investments 504 375 879
------------ ------------ ------------ ------------
NET ASSETS $ 135,492 $ 114,075 $ 249,567
============ ============ ============ ============
NET ASSET VALUE AND OFFERING PRICE:
CLASS A:
Net assets $ 4,778 $ 113,268 $ 118,046
Shares outstanding ($.0001 par value -- 2 billion authorized) 480 13,981 (2,597)(B) 11,864
Net asset value and redemption price per share $ 9.95 $ 8.10 $ 9.95
Maximum sales charge of 2.50% (A) 0.26 0.21 0.26
------------ ------------ ------------ ------------
Offering price per share $ 10.21 $ 8.31 $ 10.21
============ ============ ============ ============
CLASS Y:
Net assets 130,715 806 131,521
Shares outstanding ($.0001 par value -- 2 billion authorized) 13,139 99 (18)(B) 13,220
Net asset value, offering price and redemption price per
share $ 9.95 $ 8.11 $ 9.95
============ ============ ============ ============
</TABLE>
(A) The offering price is calculated by dividing the net asset value by 1 minus
the maximum sales charge of 2.50%.
(B) Reflects the impact of converting shares of the target fund into the
survivor fund.
See Notes to Pro Forma Combining Financial Statements.
60
<PAGE>
LIMITED TERM INCOME FUND
PRO FORMA COMBINING FINANCIAL STATEMENTS (UNAUDITED)
STATEMENTS OF OPERATIONS (000'S OMITTED)
FOR THE 6 MONTH PERIOD ENDED 3/31/99
<TABLE>
<CAPTION>
LIMITED ADJUSTABLE
TERM RATE MORTGAGE
INCOME SECURITIES PRO-FORMA PRO-FORMA
FUND FUND ADJUSTMENT COMBINED
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Investment Income:
Interest 4,832* 3,537 8,369
------------ ------------ ------------ ------------
Total Investment Income 4,832 3,537 -- 8,369
Expenses:
Investment Advisory Fees 590 430 1,020
Less: Waiver of investment advisory fees (233) (208) (441)
Administrator fees 92 67 159
Transfer agent fees 14 82 96
Custodian fees 25 18 43
Directors' fees 2 1 3
Registration fees 8 1 9
Professional fees 2 2 4
Printing 5 3 8
Distribution fees-Class A 6 153 159
Less: Waiver of distribution fees-Class A (6) (61) (92)(A) (159)
Other 2 2 4
------------ ------------ ------------ ------------
Total net expenses 507 490 (92) 905
------------ ------------ ------------ ------------
Investment income-net 4,325 3,047 92 7,464
------------ ------------ ------------ ------------
Realized and Unrealized Losses
on Investments - Net
Net realized loss on investments (36) (21) (57)
Net change in unrealized appreciation
(depreciation) of investments (1,494) (588) (2,082)
------------ ------------ ------------ ------------
Net loss on investments (1,530) (609) -- (2,139)
------------ ------------ ------------ ------------
Net increase in net assets resulting
from operations 2,795 2,438 92 5,325
============ ============ ============ ============
</TABLE>
* - Includes income from securities lending program.
(A) Reflects a increase to the waiver necessary because of the surviving Fund's
fee schedule.
See Notes to the Pro Forma Combined Financial Statements.
61
<PAGE>
LIMITED TERM INCOME FUND
PRO FORMA COMBINING FINANCIAL STATEMENTS (UNAUDITED)
STATEMENTS OF OPERATIONS (000'S OMITTED)
FOR THE YEAR ENDED 9/30/98
<TABLE>
<CAPTION>
LIMITED ADJUSTABLE
TERM RATE MORTGAGE
INCOME SECURITIES PRO-FORMA PRO-FORMA
FUND FUND ADJUSTMENT COMBINED
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Investment Income:
Interest 11,157* 9,905 21,062
------------ ------------ ------------ ------------
Total Investment Income 11,157 9,905 -- 21,062
Expenses:
Investment Advisory Fees 1,318 628 1,946
Less: Waiver of investment advisory fees (516) (82) (598)
Administrator fees 207 138 345
Transfer agent fees 34 212 246
Custodian fees 57 24 81
Directors' fees 3 16 19
Registration fees 7 31 38
Professional fees 7 38 45
Printing 9 47 56
Distribution fees-Class A 13 259 272
Less: Waiver of distribution fees-Class A (13) (22) (237)(A) (272)
Other 4 9 13
------------ ------------ ------------ ------------
Total net expenses 1,130 1,298 (237) 2,191
------------ ------------ ------------ ------------
Investment income-net 10,027 8,607 237 18,871
------------ ------------ ------------ ------------
Realized and Unrealized Gains(Losses)
on Investments - Net
Net realized gain on investments 197 665 862
Net change in unrealized appreciation
(depreciation) of investments 1,621 (766) 855
------------ ------------ ------------ ------------
Net gain (loss) on investments 1,818 (101) -- 1,717
------------ ------------ ------------ ------------
Net increase in net assets resulting
from operations 11,845 8,506 237 20,588
============ ============ ============ ============
</TABLE>
* - Includes income from securities lending program.
(A) Reflects a increase to the waiver necessary because of the surviving Fund's
fee schedule.
See Notes to the Pro Forma Combined Financial Statements.
62
<PAGE>
LIMITED TERM INCOME FUND
PRO FORMA COMBINING FINANCIAL STATEMENTS (UNAUDITED)
STATEMENT OF NET ASSETS (000'S)
MARCH 31, 1999
<TABLE>
<CAPTION>
LIMITED TERM INCOME
FUND
------------------------------------
Interest Rate Maturity Date Par (000)/Shares Market Value (000)
<S> <C> <C> <C> <C>
Asset-Backed Securities--21.6%
Automobiles--7.3%
Auto Bond Receivables Trust Series 1993-1 Class A (A) 6.125 08/15/1999 106 $ 105
Budget Fleet Finance Series 1994-A Class A (A) (C) 5.435 04/25/2000 6,400 6,396
Fasco Auto Trust Series 1996-1 1 Class A 6.650 11/15/2001 1,912 1,927
General Motors Acceptance Series 1997 Class A 6.500 04/15/2002 1,857 1,875
MMCA Automobile Trust Series 1997-1 Class A3 6.080 05/15/2001 6,654 6,688
Southern Pacific Thrift & Loan Association Series 1996-
C1 Class A1 (A) (C) 5.287 04/25/2028 133 134
The Money Store Auto Grantor Trust Series 1997-2
Class A 6.170 03/20/2001 1,145 1,150
------------------
Total Automobiles 18,275
------------------
Credit Cards--8.6%
Discover Card Master Trust Series 1993-1 Class B 5.300 10/16/2001 775 775
Fingerhut Master Trust Series 1996-1 Class A 6.450 02/20/2002 4,349 4,372
First USA Credit Card Master Series Trust 1996-1
Class B (A) (C) 5.226 11/15/2003 1,500 1,505
Household Credit Card Master Trust Series 1995-1
Class B (A) (C) 5.286 12/15/2002 6,375 6,391
MBNA Master Credit Card Trust Seires 1994-B Class A (A) 5.047 01/15/2002 8,250 8,261
------------------
Total Credit Cards 21,304
------------------
Equipment Leases--2.0%
Icon Receivables Series 1997-A Class A1 (C) 6.435 06/01/2005 3,769 3,789
JLC Lease Receivables Trust Series 1994-1 Class A (A) 5.219 12/22/1999 1,253 1,254
------------------
Total Equipment Leases 5,043
------------------
Home Equity--3.3%
BCI Home Equity Loan Series 1994-1 Class B (A) (C) 5.600 03/29/2044 1,632 1,647
Green Tree Home Improvement Loan Trust Series 1996-F
Class HEA3 6.900 01/15/2028 4,000 4,046
Prudential Home Mortgage Securities Series 1992-36
Class A7 6.500 11/25/1999 412 412
The Money Store Home Equity Loan Trust Series 1993-B
Class A1 5.400 08/15/2005 198 198
Wilshire Mortgage Loan Trust Series 1996-4 Class A2 6.750 06/25/2015 1,906 1,929
------------------
Total Home Equity 8,232
------------------
Vacation Properties--0.4%
Patten Series 1995-1A (A) (C) 7.250 08/01/2011 999 980
------------------
Total Vacation Properties 980
------------------
Total Asset-Backed Securities (Cost $53,670, $0, and
$53,670 respectively) 53,834
------------------
Corporate Bonds--17.0%
Finance--17.0%
Associates of North America 5.850 01/15/2001 7,500 7,534
Bear Stearns, Series B 6.238 10/03/2000 7,500 7,557
CIT Group Holdings 6.250 03/28/2001 6,500 6,566
Commercial Credit 5.550 02/15/2001 4,500 4,491
General Motors Acceptance 6.625 01/10/2002 3,500 3,576
Lehman Brothers Holdings 6.900 03/30/2001 5,000 5,047
Salomon Smith Barney 5.980 03/26/2001 7,750 7,771
------------------
</TABLE>
[WIDE TABLE CONTINUED FROM ABOVE]
<TABLE>
<CAPTION>
ADJUSTABLE RATE MORTGAGE PRO FORMA
SECURITIES FUND COMBINED
------------------------------------ ------------------------------------
Par (000)/Shares Market Value (000) Par (000)/Shares Market Value (000)
<S> <C> <C> <C> <C>
Asset-Backed Securities--21.6%
Automobiles--7.3%
Auto Bond Receivables Trust Series 1993-1 Class A (A) 106 $ 105
Budget Fleet Finance Series 1994-A Class A (A) (C) 6,400 6,396
Fasco Auto Trust Series 1996-1 1 Class A 1,912 1,927
General Motors Acceptance Series 1997 Class A 1,857 1,875
MMCA Automobile Trust Series 1997-1 Class A3 6,654 6,688
Southern Pacific Thrift & Loan Association Series 1996-
C1 Class A1 (A) (C) 133 134
The Money Store Auto Grantor Trust Series 1997-2
Class A 1,145 1,150
------------------ ------------------
Total Automobiles -- 18,275
------------------ ------------------
Credit Cards--8.6%
Discover Card Master Trust Series 1993-1 Class B 775 775
Fingerhut Master Trust Series 1996-1 Class A 4,349 4,372
First USA Credit Card Master Series Trust 1996-1
Class B (A) (C) 1,500 1,505
Household Credit Card Master Trust Series 1995-1
Class B (A) (C) 6,375 6,391
MBNA Master Credit Card Trust Seires 1994-B Class A (A) 8,250 8,261
------------------ ------------------
Total Credit Cards -- 21,304
------------------ ------------------
Equipment Leases--2.0%
Icon Receivables Series 1997-A Class A1 (C) 3,769 3,789
JLC Lease Receivables Trust Series 1994-1 Class A (A) 1,253 1,254
------------------ ------------------
Total Equipment Leases -- 5,043
------------------ ------------------
Home Equity--3.3%
BCI Home Equity Loan Series 1994-1 Class B (A) (C) 1,632 1,647
Green Tree Home Improvement Loan Trust Series 1996-F
Class HEA3 4,000 4,046
Prudential Home Mortgage Securities Series 1992-36
Class A7 412 412
The Money Store Home Equity Loan Trust Series 1993-B
Class A1 198 198
Wilshire Mortgage Loan Trust Series 1996-4 Class A2 1,906 1,929
------------------ ------------------
Total Home Equity -- 8,232
------------------ ------------------
Vacation Properties--0.4%
Patten Series 1995-1A (A) (C) 999 980
------------------ ------------------
Total Vacation Properties -- 980
------------------ ------------------
Total Asset-Backed Securities (Cost $53,670, $0, and
$53,670 respectively) -- 53,834
------------------ ------------------
Corporate Bonds--17.0%
Finance--17.0%
Associates of North America 7,500 7,534
Bear Stearns, Series B 7,500 7,557
CIT Group Holdings 6,500 6,566
Commercial Credit 4,500 4,491
General Motors Acceptance 3,500 3,576
Lehman Brothers Holdings 5,000 5,047
Salomon Smith Barney 7,750 7,771
------------------ ------------------
</TABLE>
63
<PAGE>
<TABLE>
<CAPTION>
LIMITED TERM INCOME
FUND
------------------------------------
Interest Rate Maturity Date Par (000)/Shares Market Value (000)
<S> <C> <C> <C> <C>
------------------
Total Finance 42,542
------------------
Total Corporate Bonds (Cost $42,402, $0 and $42,402
respectively) 42,542
------------------
U.S. Government and Agency Securities--11.0%
U.S. Agency Debentures--2.2%
FHLB 5.690 08/07/2001 5,500 5,549
------------------
Total U.S. Agency Debentures 5,549
------------------
U.S. Treasuries--8.8%
U.S. Treasury Notes 5.625 02/28/2001 16,500 16,684
U.S. Treasury Notes 6.250 10/31/2001 5,000 5,138
------------------
Total Treasuries 21,822
------------------
Total U.S. Government and Agency Securities (Cost
$27,217, $0 and $27,217 respectively) 27,371
------------------
Private Mortgage-Backed Securities--4.4%
Adjustable Rate--3.6%
CMC Securities II Series 1993-2H Class A1 (A) 7.040 09/25/2023
Merrill Lynch Mortgage Investors Series 1993-A4
Class C (A) 5.938 03/15/2018 4,850 4,903
------------------
Total Adjustable Rate 4,903
------------------
Fixed Rate--0.8%
Residential Funding Series 1999-S5 Class A1 6.000 02/25/2029
------------------
Total Fixed Rate --
------------------
Total Private Mortgage-Backed Securities (Cost $4,856,
$6,075 and $10,931 respectively) 4,903
------------------
U.S. Agency Mortgage-Backed Securities--43.2%
Adjustable Rate--37.1%
FHLMC Pool #350022 (A) 7.000 11/01/2016
FHLMC Pool #350036 (A) 7.250 01/01/2017
FHLMC Pool #785781 (A) 6.491 02/01/2027
FHLMC Series 1364 Class A (A) 5.450 09/15/2007
FNMA Pool #093872 (A) 6.448 11/01/2017
FNMA Pool #102549 (A) 7.176 01/01/2020
FNMA Pool #176370 (A) 7.153 02/01/2022
FNMA Pool #238842 (A) 7.029 03/01/2028
FNMA Pool #325073 (A) 7.304 10/01/2025
FNMA Pool #415285 (A) 5.764 02/01/2028
FNMA Pool #605324 (A) 6.901 06/01/2018
FNMA Pool #785730 (A) 6.273 12/01/2026
FNMA Series 1993-65 Class FC(A) 5.510 06/25/2012
FNMA Series 1993-170 Class FC (A) 5.458 09/25/2008
FNMA Series 1994-12 Class FB (A) 5.710 01/25/2009
FNMA Series 1994-30 Class F (A) 5.710 06/25/2023
FNMA Series 1994-33 Class FD (A) 5.610 03/25/2009
GNMA Pool #8006 (A) 6.625 07/20/2022
GNMA Pool #8191 (A) 6.875 05/20/2023
GNMA Pool #8288 (A) 6.625 09/20/2023
GNMA Pool #8445 (A) 6.875 06/20/2024
GNMA Pool #8699 (A) 6.625 09/20/2025
GNMA Pool #8747 (A) 6.125 11/20/2025
GNMA Pool #8824 (A) 6.625 08/20/2021
</TABLE>
[WIDE TABLE CONTINUED FROM ABOVE]
<TABLE>
<CAPTION>
ADJUSTABLE RATE MORTGAGE PRO FORMA
SECURITIES FUND COMBINED
------------------------------------ ------------------------------------
Par (000)/Shares Market Value (000) Par (000)/Shares Market Value (000)
<S> <C> <C> <C> <C>
------------------ ------------------
Total Finance -- 42,542
------------------ ------------------
Total Corporate Bonds (Cost $42,402, $0 and $42,402
respectively) -- 42,542
------------------ ------------------
U.S. Government and Agency Securities--11.0%
U.S. Agency Debentures--2.2%
FHLB 5,500 5,549
------------------ ------------------
Total U.S. Agency Debentures -- 5,549
------------------ ------------------
U.S. Treasuries--8.8%
U.S. Treasury Notes 16,500 16,684
U.S. Treasury Notes 5,000 5,138
------------------ ------------------
Total Treasuries -- 21,822
------------------ ------------------
Total U.S. Government and Agency Securities (Cost
$27,217, $0 and $27,217 respectively) -- 27,371
------------------ ------------------
Private Mortgage-Backed Securities--4.4%
Adjustable Rate--3.6%
CMC Securities II Series 1993-2H Class A1 (A) 4,003 $ 4,016 4,003 4,016
Merrill Lynch Mortgage Investors Series 1993-A4
Class C (A) 4,850 4,903
------------------ ------------------
Total Adjustable Rate 4,016 8,919
------------------ ------------------
Fixed Rate--0.8%
Residential Funding Series 1999-S5 Class A1 2,000 1,996 2,000 1,996
------------------ ------------------
Total Fixed Rate 1,996 2,000 1,996
------------------ ------------------
Total Private Mortgage-Backed Securities (Cost $4,856,
$6,075 and $10,931 respectively) 6,012 2,000 10,915
------------------ ------------------
U.S. Agency Mortgage-Backed Securities--43.2%
Adjustable Rate--37.1%
FHLMC Pool #350022 (A) 4,180 4,206 4,180 4,206
FHLMC Pool #350036 (A) 512 519 512 519
FHLMC Pool #785781 (A) 3,798 3,828 3,798 3,828
FHLMC Series 1364 Class A (A) 4,238 4,249 4,238 4,249
FNMA Pool #093872 (A) 4,634 4,687 4,634 4,687
FNMA Pool #102549 (A) 1,001 1,031 1,001 1,031
FNMA Pool #176370 (A) 797 819 797 819
FNMA Pool #238842 (A) 3,261 3,337 3,261 3,337
FNMA Pool #325073 (A) 3,286 3,350 3,286 3,350
FNMA Pool #415285 (A) 7,153 7,208 7,153 7,208
FNMA Pool #605324 (A) 921 943 921 943
FNMA Pool #785730 (A) 3,126 3,133 3,126 3,133
FNMA Series 1993-65 Class FC(A) 5,500 5,438 5,500 5,438
FNMA Series 1993-170 Class FC (A) 1,000 985 1,000 985
FNMA Series 1994-12 Class FB (A) 2,403 2,395 2,403 2,395
FNMA Series 1994-30 Class F (A) 3,129 3,117 3,129 3,117
FNMA Series 1994-33 Class FD (A) 2,000 1,958 2,000 1,958
GNMA Pool #8006 (A) 3,878 3,962 3,878 3,962
GNMA Pool #8191 (A) 4,594 4,683 4,594 4,683
GNMA Pool #8288 (A) 3,978 4,066 3,978 4,066
GNMA Pool #8445 (A) 4,206 4,293 4,206 4,293
GNMA Pool #8699 (A) 3,508 3,576 3,508 3,576
GNMA Pool #8747 (A) 555 564 555 564
GNMA Pool #8824 (A) 3,638 3,717 3,638 3,717
</TABLE>
64
<PAGE>
<TABLE>
<CAPTION>
LIMITED TERM INCOME
FUND
------------------------------------
Interest Rate Maturity Date Par (000)/Shares Market Value (000)
<S> <C> <C> <C> <C>
GNMA Pool #8847 (A) 6.875 04/20/2026
GNMA Pool #8855 (A) 6.125 10/20/2021
GNMA Pool #80106 (A) 6.625 08/20/2027
GNMA Pool #80154 (A) 6.000 01/20/2028
GNMA Pool #80213 (A) 5.500 07/20/2028
------------------
Total Adjustable Rate --
------------------
Fixed Rate--6.1%
FHLMC Pool #G10735 7.500 09/01/2012
FHLMC Pool #G40274 6.000 06/01/2003
FHLMC Pool #N96388 5.500 04/01/2003
FNMA Pool #450543 5.500 01/01/2006
FNMA Series 1992-152 Class J 7.000 05/25/2006 1,731 1,734
GNMA Pool #158777 9.000 05/15/2016
GNMA Pool #780081 10.000 02/15/2025
GNMA Pool #780398 9.000 04/15/2021
------------------
Total Fixed Rate 1,734
------------------
U.S. Agency Mortgage-Backed Securities (Cost $1,735,
$105,715 and $107,450 respectively) 1,734
------------------
Related Party Money Market Fund--2.2%
First American Prime Obligations Fund (B) 3,949,292 3,949
------------------
Total Related Party Money Market Fund (Cost $3,949,
$1,495 and $5,444 respectively) 3,949
------------------
Total Investments--99.4% (Cost $133,829, $113,285 and
$247,114 respectively) 134,333
------------------
Other Assets and Liabilities, Net--0.6% (D) 1,159
------------------
Total Net Assets--100.0% $ 135,492
==================
</TABLE>
[WIDE TABLE CONTINUED FROM ABOVE]
<TABLE>
<CAPTION>
ADJUSTABLE RATE MORTGAGE PRO FORMA
SECURITIES FUND COMBINED
------------------------------------ ------------------------------------
Par (000)/Shares Market Value (000) Par (000)/Shares Market Value (000)
<S> <C> <C> <C> <C>
GNMA Pool #8847 (A) 3,576 3,636 3,576 3,636
GNMA Pool #8855 (A) 3,466 3,522 3,466 3,522
GNMA Pool #80106 (A) 2,107 2,146 2,107 2,146
GNMA Pool #80154 (A) 2,338 2,373 2,338 2,373
GNMA Pool #80213 (A) 4,730 4,782 4,730 4,782
------------------ ------------------
Total Adjustable Rate 92,523 92,523
------------------ ------------------
Fixed Rate--6.1%
FHLMC Pool #G10735 2,523 2,604 2,523 2,604
FHLMC Pool #G40274 3,228 3,239 3,228 3,239
FHLMC Pool #N96388 1,369 1,357 1,369 1,357
FNMA Pool #450543 2,991 2,954 2,991 2,954
FNMA Series 1992-152 Class J 1,731 1,734
GNMA Pool #158777 599 641 599 641
GNMA Pool #780081 1,153 1,268 1,153 1,268
GNMA Pool #780398 1,449 1,567 1,449 1,567
------------------ ------------------
Total Fixed Rate 13,630 15,364
------------------ ------------------
U.S. Agency Mortgage-Backed Securities (Cost $1,735,
$105,715 and $107,450 respectively) 106,153 107,887
------------------ ------------------
Related Party Money Market Fund--2.2%
First American Prime Obligations Fund (B) 1,495,488 1,495 5,444,780 5,444
------------------ ------------------
Total Related Party Money Market Fund (Cost $3,949,
$1,495 and $5,444 respectively) 1,495 5,444
------------------ ------------------
Total Investments--99.4% (Cost $133,829, $113,285 and
$247,114 respectively) 113,660 247,993
------------------ ------------------
Other Assets and Liabilities, Net--0.6% (D) 415 1,574
------------------ ------------------
Total Net Assets--100.0% $ 114,075 $ 249,567
================== ==================
</TABLE>
(A) Variable Rate Security-the rate reported is the rate in effect as of March
31, 1999.
(B) This money market fund is advised by U.S. Bank National Association who also
serves as advisor for this fund.
(C) Security sold within the terms of a private placement memorandum, exempt
from registration under section 144A of the Securities Act of 1933, as amended,
and may be sold only to dealers in that program or other "qualified
institutional investors." These securities have been determined to be liquid
under guidelines established by the Board of Directors.
(D) Other assets and liabilities representing greater than five percent of
total net assets include the following (000):
Cash collateral received for securities on loan 28,076
Payable upon return of securities on loan 28,076
FHLB-Federal Home Loan Bank
FNMA-Federal National Mortgage Association
FHLMC-Federal Home Loan Mortgage Corporation
GNMA-Government National Mortgage Association
See Notes to Pro Forma Combining Financial Statements.
65
<PAGE>
LIMITED TERM INCOME FUND
NOTES TO PRO FORMA COMBINING FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 1999 (000'S OMITTED)
1. Basis of Combination
The Pro Forma Combining Statement of Assets and Liabilities, including the
Pro Forma Statement of Net Assets, and the related pro forma Combining
Statement of Operations ("Pro Forma Statements") reflect the accounts of
the Limited Term Income Fund, and the Adjustable Rate Mortgage Securities
Fund at March 31, 1999 and for the periods ended March 31, 1999 and
September 30, 1998.
The Pro Forma Statements give effect to the proposed Agreement and Plan of
Reorganization (the "Reorganization") to be submitted to shareholders of
the Adjustable Rate Mortgage Securities Fund. The Reorganization provides
for the acquisition of all assets and liabilities of the Adjustable Rate
Mortgage Securities Fund by the Limited Term Income Fund, in exchange for
Class A and Y shares of the Limited Term Income Fund. Thereafter, there
will be a distribution of Class A and Y shares of the Limited Term Income
Fund to the respective shareholders of the Adjustable Rate Mortgage
Securities Fund in liquidation and subsequent termination thereof. As a
result of the Reorganization, the shareholders of the Adjustable Rate
Mortgage Securities Fund will become the owners of that number of full and
fractional Class A and Y shares of the Limited Term Income Fund having an
aggregate net asset value equal to the aggregate net asset value of their
shares of the Adjustable Rate Mortgage Securities Fund as of the close of
business immediately prior to the date that the Adjustable Rate Mortgage
Securities Fund assets are exchanged for Class A and Y shares of the
Limited Term Income Fund.
The Pro Forma Statements reflect the expenses of each Fund in carrying out
its obligations under the Reorganization as though the merger occurred at
the beginning of the period presented.
The information contained herein is based on the experience of each Fund
for the periods ended March 31, 1999 and September 30, 1998 and is
designed to permit the shareholders of the consolidating mutual funds to
evaluate the financial effect of the proposed Reorganization. The expenses
of the Adjustable Rate Mortgage Securities Fund in connection with the
Reorganization (including the cost of any proxy soliciting agents) will be
borne by U.S. Bancorp of Minneapolis, Minnesota. It is not anticipated
that the securities of the combined portfolio will be sold in significant
amounts in order to comply with the policies and investment practices of
the Limited Term Income Fund.
66
<PAGE>
The Pro Forma Statements should be read in conjunction with the historical
financial statements of each Fund incorporated by reference in the
Statement of Additional Information.
2. Shares of Beneficial Interest
The Pro Forma net asset values per share assume the issuance of Class A
and Y shares of the Limited Term Income Fund which would have been issued
at March 31, 1999 in connection with the proposed Reorganization.
Shareholders of the Adjustable Rate Mortgage Securities Fund would receive
Class A and Y shares of the Limited Term Income Fund based on conversion
ratios determined on March 31, 1999. The conversion ratios are calculated
by dividing the net asset value of the Adjustable Rate Mortgage Securities
Fund by the net asset value per share of the respective class of the
Limited Term Income Fund.
3. Pro Forma Operations
The Pro Forma Combining Statement of Operations assumes similar rates of
gross investment income for the investments of each Fund. Accordingly, the
combined gross investment income is equal to the sum of each Fund's gross
investment income. Pro Forma operating expenses include the actual
expenses of the Funds adjusted to reflect the expected expenses of the
combined entity. The investment advisory and distribution fees have been
charged to the combined Fund based on the fee schedule in effect for the
Limited Term Income Fund at the combined level of average net assets for
the periods ended March 31, 1999 and September 30, 1998.
67
<PAGE>
PART C
OTHER INFORMATION
ITEM 15. 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.
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.
The Registrant maintains officers' and directors' liability
insurance providing coverage, with certain exceptions, for acts and omissions in
the course of the covered persons' duties as officers and directors.
68
<PAGE>
ITEM 16. EXHIBITS.
1 Articles of Incorporation, as amended and supplemented through April
2, 1998. (Incorporated by reference to Exhibit (1) to Post-Effective
Amendment No. 36 to the Registrant's Registration Statement on Form
N-1A.)
2 Bylaws, as amended through December 1998. (Incorporated by reference
to Exhibit (2) to Post-Effective Amendment No. 36 to the
Registrant's Registration Statement on Form N-1A.)
3 Not Applicable.
4 Agreement and Plan of Reorganization is attached as Exhibit A to the
Prospectus/Proxy Statement included in Part A of this Registration
Statement on Form N-14.
5 Not Applicable.
6(a) Investment Advisory Agreement dated April 2, 1991, between the
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 to the
Registrant's Registration Statement on Form N-1A.)
6(b) Amendment No. 9 to Investment Advisory Agreement (Incorporated by
reference to Exhibit (d)(2) to Post-Effective Amendment No. 41 to
the Registrant's Registration Statement on Form N-1A.)
6(c) Sub-Advisory Agreement dated March 28, 1994, between First Bank
National Association and Marvin & Palmer Associates, Inc., with
respect to International Fund (Incorporated by reference to Exhibit
5(b) to Post-Effective Amendment No. 21 to the Registrant's
Registration Statement on Form N-1A)
6(d) Sub-Advisory Agreement dated July 23, 1998, between U.S. Bank
National Association and Marvin & Palmer Associates, Inc., with
respect to Emerging Markets Fund (Incorporated by reference to
Exhibit 5(f) to Post-Effective Amendment No. 39 to the Registrant's
Registration Statement on Form N-1A.)
6(e) Sub-Advisory Agreement dated July 24, 1998, between U.S. Bank
National Association and Federated Global Research Corp., with
respect to Strategic Income Fund (Incorporated by reference to
Exhibit 5(g) to Post-Effective Amendment No. 39 to the Registrant's
Registration Statement on Form N-1A.)
6(f) Sub-Advisory Agreement dated July 24, 1998, between U.S. Bank
National Association and Federated Investment Counseling, with
respect to Strategic Income Fund (Incorporated by reference to
Exhibit 5(h) to Post-Effective Amendment No. 39 to the Registrant's
Registration Statement on Form N-1A.)
69
<PAGE>
6(g) Amendment No. 1 to Sub-Advisory Agreement between Bank National
Association and Marvin & Palmer Associates, Inc., with respect to
International Fund (Incorporated by reference to Exhibit 5(d) to
Post-Effective Amendment No. 34 to the Registrant's Registration
Statement on Form N-1A.)
7(a) Distribution Agreement [Class A and Class Y Shares,] dated February
10, 1994, between the Registrant and SEI Financial Services Company
(Incorporated by reference to Exhibit (6)(a) to Post-Effective
Amendment No. 21 to the Registrant's Registration Statement on Form
N-1A.)
7(a) 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 to the Registrant's Registration
Statement on Form N-1A.)
7(a) Distribution and Service Agreement [Class C] dated December 9, 1998,
between Registrant and SEI Investments Distribution Co.
7(a) Form of Dealer Agreement (Incorporated by reference to Exhibit
(6)(c) to Post-Effective Amendment No. 21 to the Registrant's
Registration Statement on Form N-1A.)
8 Not Applicable.
9(a) Custodian Agreement dated September 20, 1993, between the Registrant
and First Trust National Association, as supplemented through August
1994 (Incorporated by reference to Exhibit (8) to Post-Effective
Amendment No. 18 to the Registrant's Registration Statement on Form
N-1A.)
9(b) Supplement dated March 15, 1994, to Custodian Agreement dated
September 20, 1993.
9(c) Further Supplement dated November 21, 1997, with respect to
International Index Fund, and July 23, 1998, with respect to
Strategic Income Fund and Emerging Markets Fund, to Custodian
Agreement dated September 20, 1993 (Incorporated by reference to
Exhibit 8(c) to Post-Effective Amendment No. 39 to the Registrant's
Registration Statement on Form N-1A.)
9(d) Compensation Agreement dated July 23, 1998, pursuant to Custodian
Agreement dated September 20, 1993 (Incorporated by reference to
Exhibit (8)(b) to Post-Effective Amendment No. 38 to the
Registrant's Registration Statement on Form N-1A.)
9(e) Assignment of Custodian Agreements and Security Lending Agency
Agreement to U.S. Bank National Association, dated May 1, 1998
70
<PAGE>
(Incorporated by reference to Exhibit (g)(5) to Post-Effective
Amendment No. 41 to the Registrant's Registration Statement on Form
N-1A.)
10(a) Amended and Restated Administration Agreement, dated July 1, 1997,
by and between the Registrant and SEI Investments Management
Corporation (Incorporated herein by reference to Exhibit 9(f) to
Post-effective Amendment No. 31 to the Registrant's Registration
Statement on Form N-1A.)
10(b) Sub-Administration Agreement effective January 1, 1998, by and
between SEI and First Bank National Association (Incorporated herein
by reference to Exhibit (9)(e) to Post-Effective Amendment No. 31 to
the Registrant's Registration Statement on Form N-1A.)
10(c) Revised Schedule A, dated June 29, 1998, to Sub-Administration
Agreement (Incorporated by reference to Exhibit (h)(3) to
Post-Effective Amendment No. 41 to the Registrant's Registration
Statement on Form N-1A.)
10(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 to the
Registrant's Registration Statement on Form N-1A.)
10(e) Shareholder Account Servicing Agreement dated October 1, 1998,
between the Registrant and U.S. Bank National Association
(Incorporated by reference to Exhibit 9(d) to Post-Effective
Amendment No. 39 to the Registrant's Registration Statement on Form
N-1A.)
* 11 Opinion and Consent of Dorsey & Whitney LLP with respect to the
legality of the securities being registered.
** 12 Opinion and Consent of Dorsey & Whitney LLP with respect to tax
matters.
13(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 to
the Registrant's Registration Statement on Form N-1A.)
13(b) Transfer Agent Agreement dated as of March 31, 1994, between
Registrant and Supervised Service Company, Inc. [superseded]
(Incorporated by reference to Exhibit (9)(a) to Post-Effective
Amendment No. 23 to the Registrant's Registration Statement on Form
N-1A, File No. 33-16905.)
13(c) Assignment Transfer Agency Agreement to DST Systems, Inc.
[superseded] (Incorporated by reference to Exhibit (9)(c) to
Post-Effective Amendment No. 24 to the Registrant's Registration
Statement on Form N-1A, File No. 33-16905.)
71
<PAGE>
13(d) Transfer Agency Agreement dated as of January 1, 1997 between
Registrant and DST Systems, Inc.
* 14 Consent of KPMG LLP.
15 Not Applicable.
* 16 Powers of Attorney of Directors signing the Registration
Statement.
* 17(a) Form of Proxy Card.
- -----------------------------------------------
* Filed herewith.
** To be filed by amendment.
ITEM 17. UNDERTAKINGS.
(1) The undersigned Registrant agrees that prior to any public reoffering of the
securities registered through the use of a prospectus which is a part of this
Registration Statement by any person or party who is deemed to be an underwriter
within the meaning of Rule 145(c) of the Securities Act, the reoffering
prospectus will contain the information called for by the applicable
registration form for reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other items of the applicable
form.
(2) The undersigned Registrant agrees that every prospectus that is filed under
paragraph (1) above will be filed as a part of an amendment to the Registration
Statement and will not be used until the amendment is effective, and that, in
determining any liability under the 1933 Act, each post-effective amendment
shall be deemed to be a new registration statement for the securities offered
therein, and the offering of the securities at that time shall be deemed to be
the initial bona fide offering of them.
(3) The undersigned Registrant agrees to file, by post-effective amendment, an
opinion of counsel or a copy of a ruling of the Internal Revenue Service
supporting the tax consequences of the proposed reorganization within a
reasonable time after receipt of such opinion or ruling.
SIGNATURES
As required by the Securities Act of 1933, this registration statement has been
signed on behalf of the registrant, in the City of Oaks, Commonwealth of
Pennsylvania, on the 20th day of October, 1999.
72
<PAGE>
FIRST AMERICAN INVESTMENT FUNDS, INC.
By: /s/ James R. Foggo
---------------------------
James R. Foggo
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
- -------------------- -------- ----
* Director **
- --------------------
Robert J. Dayton
* Director **
- --------------------
Roger Gibson
* Director **
- --------------------
Andrew M. Hunter III
* Director **
- --------------------
Leonard W. Kedrowski
* Director **
- --------------------
John M. Murphy, Jr.
* Director **
- --------------------
Robert L. Spies
* Director **
- --------------------
Joseph D. Strauss
* Director **
- --------------------
Virginia L. Stringer
* By: /s/ Christopher J. Smith
------------------------------
Christopher J. Smith
Attorney in Fact
** October 20, 1999
73
EXHIBIT 11
[LETTERHEAD OF DORSEY & WHITNEY LLP]
October 20, 1999
First American Investment Funds, Inc.
Oaks, Pennsylvania 19456
Re: First American Investment Funds, Inc.
Shares to be Issued Pursuant to Agreement and Plan of
Reorganization
Ladies and Gentlemen:
We have acted as counsel to First American Investment Funds, Inc., a
Maryland corporation ("FAIF"), in connection with FAIF's authorization and
proposed issuance of its Class J (also known as "Limited Term Income Fund")
common shares, par value $.0001 per share (the "Shares"). The Shares are to be
issued pursuant to an Agreement and Plan of Reorganization (the "Agreement"), by
and between Limited Term Income Fund, a series of FAIF (the "Acquiring Fund"),
and Adjustable Rate Mortgage Securities Fund, another series of FAIF (the
"Acquired Fund"), the form of which Agreement is included as Exhibit A to the
Prospectus/Proxy Statement relating to the transactions contemplated by the
Agreement included in the FAIF's Registration Statement on Form N-14 filed with
the Securities and Exchange Commission (the "Registration Statement").
In rendering the opinions hereinafter expressed, we have reviewed
the corporate proceedings taken by FAIF in connection with the authorization and
issuance of the Shares, and we have reviewed such questions of law and examined
copies of such corporate records of FAIF, certificates of public officials and
of responsible officers of FAIF, and other documents as we have deemed necessary
as a basis for such opinions. As to the various matters of fact material to such
opinions, we have, when such facts were not independently established, relied to
the extent we deemed proper on certificates of public officials and of
responsible officers of FAIF. In connection with such review and examination, we
have assumed that all copies of documents provided to us conform to the
originals; that all signatures are genuine; and that prior to the consummation
of the transactions contemplated thereby, the Agreement will have been duly and
validly executed and delivered on behalf of each of the parties thereto in
substantially the form included in the Registration Statement.
Based on the foregoing, it is our opinion that:
<PAGE>
1. FAIF is validly existing as a corporation in good standing under
the laws of the State of Maryland.
2. The Shares, when issued and delivered by the Acquiring Fund
pursuant to, and upon satisfaction of the conditions contained in, the
Agreement, will be duly authorized, validly issued, fully paid and
non-assessable.
In rendering the foregoing opinions (a) we express no opinion as to
the laws of any jurisdiction other than the State of Maryland, and (b) we have
assumed, with your concurrence, that the conditions to closing set forth in the
Agreement will have been satisfied.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm under the caption
"Legal Matters" in FAIF's final Prospectus/Proxy Statement relating to the
Shares included in the Registration Statement.
Very truly yours,
/s/ Dorsey & Whitney LLP
EXHIBIT 14
[LETTERHEAD]
Independent Auditors' Consent
The Board of Directors
First American Investment Funds, Inc.:
We consent to the incorporation by reference in the registration statement on
Form N-14 (the "Registration Statement") of First American Investment Funds,
Inc. (the "Funds") of our report, dated November 13, 1998, relating to the
financial statements and financial highlights of the Funds. We also consent to
the references to our Firm under the headings (a) "Financial Statements and
Experts" in the Registration Statement, (b) "Financial Highlights" in the
prospectuses of the Funds dated February 1, 1999, which are incorporated by
reference in the Registration Statement, and (c) "Custodian; Transfer Agent;
Counsel; Accountants" in the statement of additional information of the Funds
dated February 1, 1999, which is incorporated by reference in the Registration
Statement.
/s/ KPMG LLP
KPMG LLP
Minneapolis, Minnesota
October 20, 1999
EXHIBIT 16
FIRST AMERICAN INVESTMENT FUNDS, INC.
POWER OF ATTORNEY -- N-14 REGISTRATION STATEMENT
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Mark Nagle, James R. Foggo, Kevin P.
Robins and Christopher J. Smith, and each of them, his or her true and lawful
attorneys-in-fact and agents, each acting alone, with full power of substitution
and resubstitution, for him or her and in his or her name, place and stead, in
any and all capacities, to sign a Registration Statement on Form N-14 of First
American Investment Funds, Inc., relating to the combination of Asset Allocation
Fund with and into each of Balanced Fund, and any and all amendments thereto,
including post-effective amendments, and to file the same, with all exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, each
acting alone, full power and authority to do and perform to all intents and
purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, each acting alone, or the
substitutes for such attorneys-in-fact and agents, may lawfully do or cause to
be done by virtue hereof.
SIGNATURE TITLE DATE
- ------------------------------------ -------- ----------------
/s/ Robert J. Dayton Director October 12, 1999
- ------------------------------------
Robert J. Dayton
/s/ Roger Gibson Director October 13, 1999
- ------------------------------------
Roger Gibson
/s/ Andrew M. Hunter III Director October 14, 1999
- ------------------------------------
Andrew M. Hunter III
/s/ Leonard W. Kedrowski Director October 14, 1999
- ------------------------------------
Leonard W. Kedrowski
/s/ John M. Murphy, Jr. Director October 12, 1999
- ------------------------------------
John M. Murphy, Jr.
/s/ Robert L. Spies Director October 12, 1999
- ------------------------------------
Robert L. Spies
/s/ Joseph D. Strauss Director October 15, 1999
- ------------------------------------
Joseph D. Strauss
/s/ Virginia L. Stringer Director October 13, 1999
- ------------------------------------
Virginia L. Stringer
EXHIBIT 17(a)
PROXY
ADJUSTABLE RATE MORTGAGE SECURITIES FUND
A SEPARATELY MANAGED SERIES OF
FIRST AMERICAN INVESTMENT FUNDS, INC.
OAKS, PENNSYLVANIA 19456
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS OF FIRST
AMERICAN INVESTMENT FUNDS, INC.
The undersigned hereby appoints Mark Nagle, James R. Foggo and Kevin
P. Robins, and each of them, with power to act without the other and with the
right of substitution in each, as proxies of the undersigned and hereby
authorizes each of them to represent and to vote, as designated below, all the
shares of Adjustable Rate Mortgage Securities Fund (the "Acquired Fund"), a
series of First American Investment Funds, Inc. ("First American"), held of
record by the undersigned on November 17, 1999, at the Special Meeting of
shareholders of the Acquired Fund to be held on January 14, 2000, or any
adjournments or postponements thereof, with all powers the undersigned would
possess if present in person. All previous proxies given with respect to the
Special Meeting hereby are revoked.
THE PROXIES ARE INSTRUCTED TO VOTE AS FOLLOWS:
1. PROPOSAL TO APPROVE AN AGREEMENT AND PLAN OF REORGANIZATION (the "Plan")
providing for (a) the acquisition of all of the assets and the assumption of all
liabilities of the Acquired Fund by Limited Term Income Fund (the "Acquiring
Fund"), a separately managed series of First American, in exchange for shares of
common stock of the Acquiring Fund having an aggregate net asset value equal to
the aggregate value of the assets acquired (less the liabilities assumed) of the
Acquired Fund and (b) the liquidation of the Acquired Fund and the pro rata
distribution of the Acquiring Fund shares to Acquired Fund shareholders.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
<PAGE>
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE
VOTED "FOR" PROPOSAL 1 ABOVE. RECEIPT OF THE NOTICE OF SPECIAL MEETING OF
SHAREHOLDERS AND THE PROXY STATEMENT RELATING TO THE MEETING IS ACKNOWLEDGED BY
YOUR EXECUTION OF THIS PROXY.
PLEASE SIGN THIS PROXY EXACTLY AS YOUR NAME APPEARS BELOW. WHEN SHARES ARE HELD
BY JOINT TENANTS, BOTH SHOULD SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. IF A
CORPORATION, PLEASE SIGN IN FULL CORPORATE NAME BY PRESIDENT OR OTHER AUTHORIZED
OFFICER. IF A PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY PARTNER OR OTHER
AUTHORIZED PERSON.
DATED:_______________ ___, ________
- --------------------------------
Signature
- --------------------------------
Signature if held jointly
TO SAVE FURTHER SOLICITATION EXPENSE, PLEASE MARK, SIGN, DATE AND RETURN THIS
PROXY PROMPTLY USING THE ENCLOSED POSTAGE-PREPAID ENVELOPE.
