Registration No. 333-89415
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 30, 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. _1_ [X]
(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))
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PROSPECTUS/PROXY
PART A OF FORM N-14 STATEMENT CAPTION
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<S> <C> <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 Regional Equity Fund,
the Micro Cap Value and the Small
Cap Value Fund
6. Information about the Company Inside Front Cover (Incorporation by
beingAcquired Reference); Summary; Information
About the Regional Equity Fund,
the Micro Cap Value and the Small
Cap Value 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
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<S> <C> <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 JOINT MEETING OF SHAREHOLDERS
PROSPECTUS/PROXY STATEMENT
CURRENT RETAIL CLASS PROSPECTUS OF SMALL CAP VALUE FUND,
REGIONAL EQUITY FUND AND MICRO CAP VALUE FUND
CURRENT INSTITUTIONAL CLASS PROSPECTUS OF SMALL CAP VALUE
FUND, REGIONAL EQUITY FUND AND MICRO CAP VALUE FUND
ANNUAL REPORT OF FIRST AMERICAN INVESTMENT FUNDS, INC.
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1998
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December 1, 1999
FIRST AMERICAN INVESTMENT FUNDS, INC.
OAKS, PENNSYLVANIA 19456
(800) 637-2548
To the Shareholders of Regional Equity Fund and Micro Cap Value Fund:
Enclosed with this letter is a proxy voting ballot, a Prospectus/Proxy Statement
and related information concerning a Special Joint Meeting of Shareholders of
the Regional Equity Fund and the Micro Cap Value 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 each of the
Funds a proposal to combine each of the Funds with and into First American's
Small Cap Value 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 Small Cap Value Fund that you currently hold in Regional
Equity Fund and/or Micro Cap Value 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 three Funds. Investment advisory fees, sales charges, and Rule
12b-1 distribution and shareholder servicing fees all will remain unchanged.
At June 30, 1999, Regional Equity Fund had net assets of approximately $214
million, Micro Cap Value Fund had net assets of approximately $73 million, and
Small Cap Value Fund had net assets of approximately $357 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 Regional
Equity Fund and Micro Cap Value 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 three Funds are identical in that they seek
capital appreciation by investing primarily in equity securities. However, there
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 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 Regional
Equity Fund and Micro Cap Value Fund can decide whether or not to reorganize
their funds. If shareholders decide in favor of the proposal, Regional Equity
Fund and Micro Cap Value Fund will each merge with Small Cap Value Fund, another
similar mutual fund in the First American fund family, and you will become a
shareholder of Small Cap Value 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 THREE FUNDS ALIKE?
The investment objectives of the Funds are identical; each has an objective of
capital appreciation. However, there are significant differences in investment
strategy:
|_| Regional Equity Fund invests primarily in equity securities of companies
headquartered in Minnesota, North and South Dakota, Montana, Wisconsin,
Michigan, Iowa, Nebraska, Colorado and Illinois that have market
capitalization of less than $1 billion at the time of purchase.
|_| Small Cap Value Fund also invests in equity securities of companies that
have market capitalization of less than $1 billion at the time of purchase,
but enjoys greater flexibility in meeting its investment objectives as it
is not constrained by the location of the companies in whose equity
securities it invests.
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|_| Micro Cap Value Fund, on the other hand, invests primarily in equity
securities of very small capitalization companies, defined as companies
that have market capitalizations of less than $500 million at the time of
purchase, without regard to the location of the companies' headquarters.
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 Small Cap Value Fund of the same class as, and
equal in value to, the shares of Regional Equity Fund or Micro Cap Value 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 Regional
Equity Fund and Micro Cap Value Fund will not recognize gain or loss for federal
income tax purposes on the exchange of their shares for the shares of Small Cap
Value 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 each of the Regional
Equity Fund and Micro Cap Value Fund shares will be represented at the Funds'
special joint shareholders meeting.
WHERE DO I GET MORE INFORMATION ABOUT FIRST AMERICAN SMALL CAP VALUE FUND?
|_| Please call Investor Services toll-free at 1-800-637-2548.
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REGIONAL EQUITY FUND AND MICRO CAP VALUE FUND
SEPARATELY MANAGED SERIES OF
FIRST AMERICAN INVESTMENT FUNDS, INC.
OAKS, PENNSYLVANIA 19456
(800) 637-2548
----------------------------------
NOTICE OF SPECIAL JOINT MEETING OF SHAREHOLDERS
TO BE HELD JANUARY 14, 2000
----------------------------------
NOTICE IS HEREBY GIVEN that a special joint meeting of shareholders of Regional
Equity Fund and Micro Cap Value Fund (the "Acquired Funds"), each a separately
managed series of First American Investment Funds, Inc. ("First American"), will
be held at 11:00 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 each Acquired
Fund by the Small Cap Value Fund, a separately managed series of First
American, in exchange for shares of common stock of the Small Cap
Value Fund having an aggregate net asset value equal to the aggregate
value of the assets acquired (less the liabilities assumed) of the
Acquired Funds, (b) the liquidation of the Acquired Funds and the pro
rata distribution of the Small Cap Value Fund shares to Acquired Fund
shareholders. Under the Plan, Regional Equity Fund and Micro Cap Value
Fund shareholders will receive the same class of shares of the Small
Cap Value Fund that they held in the Regional Equity Fund or Micro Cap
Value Fund, having a net asset value equal as of the effective time of
the Plan to the net asset value of their Regional Equity Fund or Micro
Cap Value 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 Regional Equity Fund and Micro Cap Value 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
December 1, 1999
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FIRST AMERICAN INVESTMENT FUNDS, INC.
OAKS, PENNSYLVANIA 19456
(800) 637-2548
PROSPECTUS/PROXY STATEMENT
DATED DECEMBER 1, 1999
ACQUISITION OF THE ASSETS OF
REGIONAL EQUITY FUND
AND
MICRO CAP VALUE FUND
EACH A SEPARATELY MANAGED SERIES OF
FIRST AMERICAN INVESTMENT FUNDS, INC.
BY AND IN EXCHANGE FOR SHARES OF
SMALL CAP VALUE FUND
A SEPARATELY MANAGED SERIES OF
FIRST AMERICAN INVESTMENT FUNDS, INC.
This Prospectus/Proxy Statement is being furnished to the shareholders of
Regional Equity Fund and Micro Cap Value Fund (collectively the "Acquired
Funds"), each a separately managed series of First American Investment Funds,
Inc. ("First American"), in connection with a special joint meeting of the
shareholders of the Acquired Funds 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 Joint Meeting of Shareholders. This
Prospectus/Proxy Statement is being mailed to shareholders of the Acquired Funds
on or about December 1, 1999.
This Prospectus/Proxy Statement relates to a proposal for the acquisition of all
the assets and the assumption of all liabilities of the Acquired Funds by the
Small Cap Value Fund in exchange for shares of common stock of the Small Cap
Value Fund having an aggregate net asset value equal to the aggregate value of
the assets (less liabilities assumed) of each of the Acquired Funds. As a result
of the transactions, each shareholder of the Regional Equity Fund will receive
Small Cap Value Fund shares of the same class that he or she held in the
Regional Equity Fund, with a net asset value equal to the net asset value of the
shareholder's Regional Equity Fund shares, and each shareholder of the Micro Cap
Value Fund will receive Small Cap Value Fund shares of the same class that he or
she held in the Micro Cap Value Fund, with a net asset value equal to the net
asset value of the shareholder's Micro Cap Value Fund shares.
First American, of which the Regional Equity Fund, the Micro Cap Value Fund and
the Small Cap Value Fund are separate series, is an open-end management
investment company. The Regional Equity Fund, the Micro Cap Value Fund and the
Small Cap Value Fund are each diversified, open-end funds with identical
investment objectives of capital appreciation, which they seek to achieve by
investing in equity securities.
This Prospectus/Proxy Statement, which should be retained for future reference,
sets forth concisely the information about the proposed reorganization and about
the Small Cap Value Fund and its affiliates that each Regional Equity Fund and
Micro Cap Value Fund shareholder should know prior to voting on the proposed
reorganization.
A Statement of Additional Information dated December 1, 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
DECEMBER 1, 1999
PROPOSED ACQUISITION OF ASSETS OF
REGIONAL EQUITY FUND
AND
MICRO CAP VALUE FUND
EACH A SEPARATELY MANAGED SERIES OF
FIRST AMERICAN INVESTMENT FUNDS, INC.
BY AND IN EXCHANGE FOR SHARES OF
SMALL CAP VALUE FUND
A SEPARATELY MANAGED SERIES OF
FIRST AMERICAN INVESTMENT FUNDS, INC.
------------------------------
TABLE OF CONTENTS
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PAGE
INCORPORATION BY REFERENCE 12
SUMMARY 13
RISK FACTORS 20
INFORMATION ABOUT THE REORGANIZATION 21
INFORMATION ABOUT THE REGIONAL EQUITY FUND AND THE
SMALL CAP VALUE FUND 27
VOTING INFORMATION 30
FINANCIAL STATEMENTS AND EXPERTS 33
LEGAL MATTERS 33
EXHIBIT A -- AGREEMENT AND PLAN OF
REORGANIZATION
The Following Documents Accompany This Prospectus/Proxy Statement:
|_| Equity Funds Retail Class Prospectus Dated February 1, 1999, of First
American Investment Funds, Inc.
|_| Equity 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 December 1, 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 Small Cap Value Fund, the
Micro Cap Value Fund and the Regional Equity 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 the Regional Equity Fund, the Micro Cap Value Fund and the Small Cap
Value 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
the Small Cap Value Fund, the Micro Cap Value Fund and the Regional Equity
Fund, is incorporated by reference in the Statement of Additional
Information relating to this Prospectus/Proxy Statement, and 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
the Regional Equity Fund, the Micro Cap Value Fund and the Small Cap Value
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 Small Cap Value Fund, the Micro Cap Value Fund and the Regional Equity
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. Regional Equity Fund and Micro Cap Value Fund shareholders should
review the accompanying documents carefully in connection with their review of
this Prospectus/Proxy Statement.
PROPOSED REORGANIZATION
The Plan provides for (a) the acquisition of all of the assets and the
assumption of all liabilities of the Regional Equity Fund by the Small Cap Value
Fund, a separately managed series of First American, in exchange for shares of
common stock of the Small Cap Value Fund having an aggregate net asset value
equal to the aggregate value of the assets acquired (less the liabilities
assumed) of the Regional Equity Fund, (b) the liquidation of the Regional Equity
Fund and the pro rata distribution of the Small Cap Value Fund shares to
Regional Equity Fund shareholders, (c) the acquisition of all of the assets and
the assumption of all liabilities of the Micro Cap Value Fund by the Small Cap
Value Fund, in exchange for shares of common stock of the Small Cap Value Fund
having an aggregate net asset value equal to the aggregate value of the assets
acquired (less the liabilities assumed) of the Micro Cap Value Fund, and (d) the
liquidation of the Micro Cap Value Fund and the pro rata distribution of the
Small Cap Value Fund shares to Micro Cap Value Fund shareholders. Under the
Plan, Regional Equity Fund and Micro Cap Value Fund shareholders will receive
the same class of shares of the Small Cap Value Fund that they held in the
Regional Equity Fund or Micro Cap Value Fund, having a net asset value equal to
the net asset value of their Regional Equity Fund or Micro Cap Value Fund shares
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 Regional
Equity Fund and Micro Cap Value Fund assets and liabilities to be acquired by
the Small Cap Value Fund, and the value of the Small Cap Value Fund shares to be
exchanged therefor, will be computed as of the Effective Time. As a result of
the Reorganization, each shareholder of the Regional Equity Fund will receive
Small Cap Value Fund shares of the same class that he or she held in the
Regional Equity Fund, with a net asset value equal to the net asset value of the
shareholder's Regional Equity Fund shares as of the Effective Time, and each
shareholder of the Micro Cap Value Fund will receive Small Cap Value Fund shares
of the same class that he or she held in the Micro Cap Value Fund, with a net
asset value equal to the net asset value of the shareholder's Micro Cap Value
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 Regional Equity Fund and the Micro Cap
Value Fund, and that the interests of Small Cap Value 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
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Reorganization and has submitted the Plan for approval by Regional Equity Fund
and Micro Cap Value Fund shareholders.
The Board of Directors of First American has also concluded that the
Reorganization would be in the best interests of the Small Cap Value Fund's
existing shareholders and has therefore approved the Reorganization on behalf of
the Small Cap Value Fund.
Approval of the Plan and Reorganization will require the affirmative
vote of a majority of the outstanding shares of each class of the Regional
Equity Fund and of each class of the Micro Cap Value Fund, voting as separate
classes. Information concerning the voting rights of each Regional Equity Fund
and Micro Cap Value Fund shareholder is set forth under "Voting Information"
below. Shareholder approval of one Reorganization is independent of shareholder
approval of the other Reorganization. Accordingly, the closing of one
Reorganization is not contingent upon the closing of the other Reorganization.
Directors and officers of First American and employees of SEI Investments
Management Corporation, the administrator for the Funds, may, without cost to
the Regional Equity Fund or the Micro Cap Value Fund, solicit proxies for
management of the Funds 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 beneficial owners of Regional Equity Fund and Micro
Cap Value Fund shares.
In addition to the approval of the Plan and Reorganization by Regional
Equity Fund and Micro Cap Value 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 Regional Equity Fund and the Micro Cap Value Fund, will have received from
counsel an opinion that, upon the Reorganization and the transfer of the assets
of the Funds, no gain or loss will be recognized by the Regional Equity Fund,
the Micro Cap Value Fund or their shareholders for federal income tax purposes.
The holding period and aggregate tax basis of Small Cap Value Fund shares that
are received by each Regional Equity Fund and Micro Cap Value Fund shareholder
will be the same as the holding period and aggregate tax basis of the Regional
Equity Fund or Micro Cap Value Fund shares previously held by such shareholders.
In addition, the holding period and tax basis of the assets of the Regional
Equity Fund and the Micro Cap Value Fund in the hands of the Small Cap Value
Fund as a result of the Reorganization will be the same as in the hands of the
Regional Equity Fund and the Micro Cap Value 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 Regional Equity Fund, the Micro Cap Value
Fund and the Small Cap Value Fund are separate series, is an open-end management
investment company. The Regional Equity Fund, the Micro Cap Value Fund and the
Small Cap Value Fund are each diversified, open-end funds with identical
investment objectives of capital appreciation. The Funds attempt to achieve
their investment objectives using different principal investment strategies.
Specifically:
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|_| Regional Equity Fund invests primarily in equity securities of companies
headquartered in Minnesota, North and South Dakota, Montana, Wisconsin,
Michigan, Iowa, Nebraska, Colorado and Illinois that have market
capitalizations of less than $1 billion at the time of purchase.
|_| Small Cap Value Fund also invests primarily in equity securities of
companies that have market capitalizations of less than $1 billion at the
time o purchase, but enjoys greater flexibility in meeting its investment
objectives as it is not constrained by the location of the companies in
whose equity securities it invests.
|_| Micro Cap Value Fund, on the other hand, invests primarily in equity
securities of very small capitalization companies, defined as companies
that have market capitalizations of less than $500 million at the time of
purchase, without regard to the location of the companies' headquarters.
The Funds' investment objectives and principal strategies are described
and compared in further detail herein under "Information about the Regional
Equity Fund, The Micro Cap Value Fund and the Small Cap Value Fund -- Comparison
of Investment Objectives and Principal Strategies."
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.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
TOTAL RETURN ---------------------------------------------------
12/31/98 to Since
9/30/99 One Year Five Years Ten Years Inception(1)
<S> <C> <C> <C> <C> <C>
REGIONAL EQUITY FUND
Class A -5.26% -10.67% 13.51% N/A 15.19%
Class B -5.52% -10.83% N/A N/A 15.81%
Class Y 0.27% -5.52% N/A N/A 14.94%
MICRO CAP VALUE FUND
Class A -3.29% -12.00% 13.90% 17.44% N/A
Class Y 2.44% -6.90% 15.44% 18.39% N/A
SMALL CAP VALUE FUND
Class A -5.87% -13.28% 12.92% 17.10% N/A
Class B -6.16% -13.35% N/A N/A -13.23%
Class Y -0.47% -8.26% 14.39% 18.00% N/A
</TABLE>
(1) Inception dates are December 14, 1992, August 15, 1994 and February 4, 1994,
respectively, for Class A, Class B and Class Y of the Regional Equity Fund and
November 24, 1997 for Class B of the Small Cap Value 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.
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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 shares. For
the Regional Equity Fund and Small Cap Value Fund, this fee is equal to 1.00% of
average daily net assets for Class B 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 waived
fees so that total operating expenses did not exceed the following percentages
of average net assets of the respective Funds and classes on a per annum basis:
Class A Class B Class Y
----------------------------------------------
Regional Equity Fund 1.15% 1.90% 0.90%
Micro Cap Value Fund 1.15% N/A 0.90%
Small Cap Value Fund 1.15% 1.90% 0.90%
The Adviser intends to keep the waivers for the Small Cap Value Fund in place
through September 30, 2000. Waivers may be discontinued at any time.
FEES AND EXPENSES
The following tables are intended to assist Regional Equity Fund and
Micro Cap Value Fund shareholders of the respective classes in understanding the
various costs and expenses (expressed as a percentage of average net assets) (i)
that such shareholders currently bear as Regional Equity Fund or Micro Cap Value
shareholders; (ii) that shareholders of the Small Cap Value Fund currently bear;
and (iii) that shareholders of the Regional Equity Fund and Micro Cap Value Fund
can expect to bear as Small Cap Value Fund shareholders after the Reorganization
is consummated. The following tables are as of September 30, 1998.
CLASS A SHARES FEES AND EXPENSES
REGIONAL MICRO CAP SMALL CAP
EQUITY VALUE VALUE
FUND FUND FUND PRO FORMA
SHAREHOLDER FEES (PAID DIRECTLY FROM
YOUR INVESTMENT)
Maximum sales load imposed on
purchases (as a percentage of offering
price) (1) 5.25% 5.25% 5.25% 5.25%
Maximum deferred sales charge (as a
percentage of net asset value at
purchase or redemption, whichever is
less) None None None None
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ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM
FUND ASSETS)
Management fees (2) 0.70% 0.70% 0.70% 0.70%
Distribution and service (12b-1)
fees (3) 0.25% 0.25% 0.25% 0.25%
Other expenses 0.21% 0.18% 0.18% 0.18%
Total fund operating expenses (2) 1.16% 1.13% 1.13% 1.13%
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:
1 Year $ 637 $ 634 $ 634 $ 634
3 Years 874 865 865 865
5 Years 1,130 1,115 1,115 1,115
10 Years 1,860 1,827 1,827 1,827
- --------------------
(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 adviser intends to waive
fees during the current fiscal year so that total fund operating expenses do not
exceed 1.15% for each fund. 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 B SHARES FEES AND EXPENSES
REGIONAL MICRO CAP SMALL CAP
EQUITY VALUE VALUE
FUND FUND FUND PRO FORMA
SHAREHOLDER FEES (PAID DIRECTLY FROM
YOUR INVESTMENT)
Maximum sales load imposed on
purchases (as a percentage of offering
price) None N/A None None
Maximum deferred sales charge (as a
percentage of net asset value at
purchase or redemption, whichever is
less) 5.00% N/A 5.00% 5.00%
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM
FUND ASSETS)
Management fees (1) 0.70% N/A 0.70% 0.70%
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<PAGE>
Distribution and service (12b-1)
fees (2) 1.00% N/A 1.00% 1.00%
Other expenses 0.21% N/A 0.18% 0.18%
Total fund operating expenses (1) 1.91% N/A 1.88% 1.88%
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:
1 Year $ 694 N/A $ 691 $ 691
3 Years 1,000 N/A 991 991
5 Years 1,232 N/A 1,216 1,216
10 Years 2,038 N/A 2,005 2,005
EXAMPLE
You would pay the following expenses
on a $10,000 investment, assuming (i)
a 5% annual return; and (ii) no
redemption at the end of each time
period:
1 Year $ 194 N/A $ 191 $ 191
3 Years 600 N/A 591 591
5 Years 1,032 N/A 1,016 1,016
10 Years 2,038 N/A 2,005 2,005
- -----------------
(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 1.90% for each fund. Fee waivers may be discontinued at any time.
(2) Of this amount, 0.25% is designated as a shareholder servicing fee and 0.75%
as a distribution fee.
CLASS Y SHARES FEES AND EXPENSES
REGIONAL MICRO CAP SMALL CAP
EQUITY VALUE VALUE
FUND 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 None
Maximum deferred sales charge (as a
percentage of net asset value at
purchase or redemption, whichever is
less) None None None None
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<PAGE>
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM
FUND ASSETS)
Management fees (1) 0.70% 0.70% 0.70% 0.70%
Distribution and Service (12b-1) fees None None None None
Other expenses 0.21% 0.18% 0.18% 0.18%
Total fund operating expenses (1) 0.91% 0.88% 0.88% 0.88%
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:
1 Year $ 93 $ 90 $ 90 $ 90
3 Years 290 281 281 281
5 Years 504 488 488 488
10 Years 1,120 1,084 1,084 1,084
- ----------------------
(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 0.90% for each fund. Fee waivers may be discontinued at any time.
PURCHASE, EXCHANGE AND REDEMPTION PROCEDURES
Class A and Class B shares of the Small Cap Value Fund received by
Regional Equity Fund and Micro Cap Value Fund shareholders in the Reorganization
will be subject to the same purchase, exchange and redemption procedures that
currently apply to Class A and Class B shares of the Regional Equity Fund and
the Micro Cap Value Fund. These procedures are discussed in the Retail Class
Prospectus of the Regional Equity Fund, the Micro Cap Value Fund and the Small
Cap Value 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 Small Cap Value Fund received by Regional Equity
Fund and Micro Cap Value 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 Regional Equity Fund and the Micro Cap Value Fund. These
procedures are discussed in the Institutional Class Prospectus of the Regional
Equity Fund, the Micro Cap Value Fund and the Small Cap Value Fund which
accompanies this Prospectus/Proxy Statement under the heading "Buying Shares and
Selling Shares."
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<PAGE>
The Plan provides that if Class A shares of the Small Cap Value Fund
are distributed in the Reorganization to former holders of Class A shares of the
Regional Equity Fund and Micro Cap Value Fund with respect to which the
front-end sales charge was waived due to a purchase of $1 million or more, the
Small Cap Value Fund will give credit for the period during which the holder
thereof held such Regional Equity Fund or Micro Cap Value Fund shares in
determining whether a deferred sales charge is payable upon the sale of such
Class A shares of the Small Cap Value Fund.
DIVIDENDS AND DISTRIBUTIONS
Dividends, if any, are declared and paid quarterly with respect to the
Regional Equity Fund, the Micro Cap Value Fund and the Small Cap Value Fund.
Distributions of any net realized capital gains are made at least once every
twelve months with respect to each Fund. Dividends and distributions for each
Fund are automatically reinvested in additional shares of the Fund unless cash
payments are requested by contacting the Fund.
SHAREHOLDER VOTING RIGHTS
Regional Equity Fund and Small Cap Value Fund each issue Class A, Class
B and Class Y shares. Micro Cap Value Fund issues Class A and Class B shares.
Small Cap Value Fund also isues Class C shares. The various 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 common stocks of small and very small companies, the risks of
investing in the Funds are similar. Principal risks of investing in each Fund
are the risks of investing in common stocks, the risks of investing in stocks of
small capitalization companies and the risks of engaging in securities lending.
Regional Equity Fund is also subject to the risks of focusing its investments in
a particular geographical region. In addition, each Fund is subject to foreign
security risk, since the Funds may invest up to 25% of their total assets in
foreign securities which are either listed on a United States stock exchange or
represented by American Depository Receipts. Each of these risks is discussed
below. The value of an investment in any of the Funds will change daily, which
means you could lose money.
RISKS OF COMMON STOCKS. With respect to each of the Funds, investors
should recognize that the market prices of common stocks generally, and of
particular companies' common stocks, are subject to greater volatility than
prices of fixed income securities. Stocks may decline significantly in price
over short or extended periods of time. Price changes may occur in the market as
a whole, or they may occur in only a particular company, industry or sector of
the market. In addition, value stocks (those that the Adviser believes are
undervalued relative to other securities in the same industry or market) and/or
stocks of small or very small capitalization companies may underperform the
market as a whole.
RISKS OF MICRO CAP AND SMALL CAP STOCKS. Stocks of small and very small
capitalization companies involve substantial risk. These companies may lack the
management expertise, financial resources, product diversification and
competitive strengths of larger companies. These stocks historically have
experienced greater price volatility than stocks of larger-capitalization
companies, and they may be expected to do so in the future. In some cases, there
could be difficulties in selling the stocks of small capitalization companies at
the desired time and price.
20
<PAGE>
Because Micro Cap Value Fund invests primarily in stocks of very small
capitalization companies, it may be subject to greater risk than the other
funds.
RISKS OF REGIONAL CONCENTRATION. The Regional Equity Fund's policy of
concentrating its investments in a geographic region means that it will be
subject to adverse economic, political or other developments in that region. The
Regional Equity Fund may be less diversified by industry and company than the
other Funds, which have no geographic limitation.
RISKS OF SECURITIES LENDING. To generate additional income, each Fund
may lend securities representing up to one-third of the value of its total
assets to broker-dealers, banks and other institutions. The Funds receive
collateral equal to at least 100% of the value of the loaned securities.
Nevertheless, the fund risks a delay in the recovery of the loaned securities,
or even the loss of rights in the collateral deposited by the borrower if the
borrower should fail financially.
FOREIGN SECURITY RISK. 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 issuers, including the risks of
adverse currency fluctuations and of political or social instability or
diplomatic developments that could adversely affect the securities. For certain
foreign countries, political or social instability or diplomatic developments
could adversely affect the securities. There is also the risk of loss due to
governmental actions such as a change in tax statutes or the modification of
individual property rights. In addition, individual foreign economies may differ
favorably or unfavorably from the U.S. economy.
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 Regional Equity Fund and the Micro Cap Value Fund with the Small Cap Value
Fund. As discussed in detail below under "Information About the Regional Equity
Fund, the Micro Cap Value Fund and the Small Cap Value Fund," the Funds have
identical investment objectives and 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 Regional Equity
Fund, the Micro Cap Value Fund and the Small Cap Value 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 Regional Equity
Fund, the Micro Cap Value Fund and the Small Cap Value Fund,
consisting of a potentially 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;
21
<PAGE>
3. The fact that none of the Funds had disproportionately large
unrealized capital gains.
4. The terms and conditions of the Plan, including that (a) the
exchange of Regional Equity Fund and Micro Cap Value Fund
shares for Small Cap Value Fund shares will take place on a
net asset value basis; and (b) no sales charge will be
incurred by Regional Equity Fund and Micro Cap Value
shareholders in connection with their acquisition of Small Cap
Value Fund shares in the Reorganization;
5. The agreement of the Adviser to bear the costs associated with
the proposed Reorganization;
6. The fact that the advisory fee, Rule 12b-1 fees and sales
charges would remain constant for Regional Equity Fund and
Micro Cap Value Fund shareholders;
7. The Small Cap Value Fund's agreements that (a) former holders
of Regional Equity Fund Class B shares who receive Small Cap
Value Fund Class B shares in the Reorganization will receive
credit for the period they held Regional Equity Fund or Micro
Cap Value Fund Class B shares in applying the six-year
step-down of the contingent deferred sales charge on Small Cap
Value Fund Class B shares and in determining the date upon
which such shares convert to Small Cap Value Fund Class A
shares; and (b) 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 Regional Equity Fund or Micro Cap
Value Fund shareholder who is subject to such a deferred sales
charge held his or her shares;
8. The fact that there is a substantial overlap in the holdings
of each of the Funds; and
9. The fact that in no event will the holders of Regional Equity
Fund and Micro Cap Value Fund shares become subject to a less
advantageous total expense "cap" as a result of the proposed
combination of Funds.
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 Regional Equity Fund and Micro Cap
Value Fund, and shareholders of the Small Cap Value 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 (8) above render the proposed Reorganization
fair to and in the best interests of shareholders of the Regional Equity Fund,
the Micro Cap Value Fund and the Small Cap Value Fund.
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, (i) the Small Cap Value Fund will acquire all of the assets and
assume all liabilities of the Regional Equity Fund in exchange for Small Cap
Value Fund shares having an
22
<PAGE>
aggregate net asset value equal to the aggregate value of the assets acquired
(less liabilities assumed) from the Regional Equity Fund, and (ii) the Small Cap
Value Fund will acquire all of the assets and assume all liabilities of the
Micro Cap Value Fund in exchange for Small Cap Value Fund shares having an
aggregate net asset value equal to the aggregate value of the assets acquired
(less liabilities assumed) from the Micro Cap Value Fund. The Regional Equity
Fund, the Micro Cap Value Fund and the Small Cap Value 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 (i) a reallocation of assets
and liabilities from the Regional Equity Fund to the Small Cap Value Fund
coupled with the issuance and exchange of Class A, Class B and Class Y Small Cap
Value Fund shares in exchange for Class A, Class B and Class Y Regional Equity
Fund shares, respectively, and (ii) a reallocation of assets and liabilities
from the Micro Cap Value Fund to the Small Cap Value Fund coupled with the
issuance and exchange of Class A and Class Y Small Cap Value Fund shares in
exchange for Class A and Class Y Micro Cap Value 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, Class B or Class Y shares
of the Regional Equity Fund will receive, at the Effective Time, Class A, Class
B or Class Y shares of the Small Cap Value Fund, as applicable, with an
aggregate net asset value equal to the aggregate net asset value of the Regional
Equity Fund shares owned by such shareholder immediately prior to the Effective
Time, and each holder of Class A or Class Y shares of the Micro Cap Value Fund
will receive, at the Effective Time, Class A, Class B or Class Y shares of the
Small Cap Value Fund, as applicable, with an aggregate net asset value equal to
the aggregate net asset value of the Micro Cap Value Fund shares owned by such
shareholder immediately prior to the Effective Time. At the Effective Time, the
Small Cap Value Fund will issue and distribute, at the direction of the Regional
Equity Fund's Board of Directors, to the Regional Equity Fund's shareholders of
record, determined as of the Effective Time, the Small Cap Value Fund Shares
issued in exchange for the Regional Equity Fund Shares, and the Small Cap Value
Fund will issue and distribute, at the direction of the Micro Cap Value Fund's
Board of Directors, to Micro Cap Value Fund's shareholders of record, determined
as of the Effective Time, the Small Cap Value Fund Shares issued in exchange for
the Micro Cap Value Fund Shares, all as described above. Thereafter, no
additional shares representing interests in the Regional Equity Fund or the
Micro Cap Value Fund will be issued, and the Regional Equity Fund and the Micro
Cap Value Fund will each be deemed to be liquidated.
Under the Plan, the net asset value per share of the Regional Equity
Fund's, the Micro Cap Value Fund's and the Small Cap Value Fund's Class A, Class
B and Class Y shares, as applicable, 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 Funds' then current
Prospectuses and Statement of Additional Information and as may be required by
the Investment Company Act. The distribution of Small Cap Value Fund shares to
former Regional Equity Fund and Micro Cap Value Fund shareholders described
above will be accomplished by the establishment of accounts on the share records
of the Small Cap Value Fund in the names of Regional Equity Fund and Micro Cap
Value Fund shareholders, each representing the respective classes and numbers of
full and fractional Small Cap Value Fund shares due such shareholders.
23
<PAGE>
The Plan provides that no sales charges will be incurred by Regional
Equity Fund or Micro Cap Value Fund shareholders in connection with the
acquisition by them of Small Cap Value Fund shares pursuant thereto. The Plan
also provides that in determining contingent deferred sales charges applicable
to Class B shares issued by the Small Cap Value Fund in the Reorganization and
the date upon which such shares convert to Class A shares, the Small Cap Value
Fund will give credit for the period during which the holders thereof held the
Class B shares of the Regional Equity Fund in exchange for which such Small Cap
Value Fund shares were issued. In addition, the Plan provides that if Class A
shares of the Small Cap Value Fund are distributed in the Reorganization to
former holders of Class A shares of the Regional Equity Fund and the Micro Cap
Value Fund with respect to which the front-end sales charge was waived due to a
purchase of $1 million or more, the Small Cap Value Fund will give credit for
the period during which the holder thereof held such Regional Equity Fund or
Micro Cap Value Fund shares in determining whether a deferred sales charge is
payable upon the sale of such Class A shares of the Small Cap Value Fund.
The Regional Equity Fund and the Micro Cap Value Fund each 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 Regional Equity Fund and Micro
Cap Value 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 Regional Equity Fund and the
Micro Cap Value 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 Regional Equity
Fund, the Micro Cap Value Fund and the Small Cap Value Fund in the Plan; and
(iv) the delivery of customary closing certificates. Shareholder approval of one
Reorganization is independent of shareholder approval of the other
Reorganization. Accordingly, the closing of one Reorganization is not contingent
upon the closing of the other Reorganization. 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 Regional Equity Fund and the Micro Cap Value 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 any 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 with respect to Regional Equity Fund or Micro Cap
Value Fund will require the affirmative vote of a majority of the outstanding
shares of each class of that Fund, voting as separate classes. Approval of the
Plan by Regional Equity Fund and the Micro Cap Value 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. Regional Equity Fund and Micro Cap Value 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 SMALL CAP VALUE FUND SHARES
The Class A, Class B and Class Y shares of the Small Cap Value Fund
issued in the Reorganization will represent shares of common stock, $.0001 par
value, in the Small Cap Value Fund,
24
<PAGE>
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 Small Cap Value Fund issued in the
Reorganization will be fully paid, nonassessable, and transferable. Shares may
be issued as either full or fractional shares. Fractional shares have pro rata
the same rights and privileges as full shares. Shares of the Small Cap Value
Fund have no preemptive or conversion rights.
Each share of the Small Cap Value 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 Small Cap Value Fund shares for the
Regional Equity Fund's net assets and the distribution of such shares to the
Regional Equity Fund's shareholders upon liquidation of the Regional Equity
Fund, and the exchange of Small Cap Value Fund shares for the Micro Cap Value
Fund's net assets and the distribution of such shares to the Micro Cap Value
Fund's shareholders upon liquidation of the Micro Cap Value Fund will each 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 Regional Equity
Fund's or the Micro Cap Value Fund's shareholders (except that the Regional
Equity Fund and the Micro Cap Value Fund each 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 Regional Equity Fund and Micro Cap Value 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 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:
(i) the exchange of Small Cap Value Fund shares for the
Regional Equity Fund's net assets and the distribution of such shares
to the Regional Equity Fund's shareholders, and the exchange of Small
Cap Value Fund shares for the Micro Cap Value Fund's net assets and the
distribution of such shares to the Micro Cap Value shareholders will
each constitute a reorganization within the meaning of Section
368(a)(1)(C) of the Code, and the Regional Equity Fund, the Micro Cap
Value Fund and the Small Cap Value Fund each will qualify as a party to
a reorganization under Section 368(b) of the Code;
(ii) the Regional Equity Fund Shareholders and the Micro Cap
Value Fund Shareholders will recognize no income, gain or loss upon
receipt, pursuant to the
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Reorganization, of the Small Cap Value Fund Shares. Regional Equity
Fund Shareholders and Micro Cap Value Fund Shareholders subject to
taxation will recognize income upon receipt of any net investment
income or net capital gains of the respective Acquired Fund which are
distributed by such Acquired Fund prior to the Effective Time;
(iii) the tax basis of the Small Cap Value Fund Shares
received by each Regional Equity Fund Shareholder and each Micro Cap
Value Fund Shareholder pursuant to the Reorganization will be equal to
the tax basis of the Acquired Funds Shares exchanged therefor;
(iv) the holding period of the Small Cap Value 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;
(v) neither the Regional Equity Fund nor the Micro Cap Value
Fund will recognize any income, gain or loss by reason of the
Reorganization;
(vi) the Small Cap Value Fund will recognize no income, gain
or loss by reason of the Reorganization;
(vii) the tax basis of the assets received by the Small Cap
Value Fund pursuant to the Reorganization will be the same as the basis
of those assets in the hands of the respective Acquired Fund as of the
Effective Time;
(viii) the holding period of the assets received by the Small
Cap Value Fund pursuant to the Reorganization will include the period
during which such assets were held by the respective Acquired Fund; and
(ix) the Small Cap Value Fund will succeed to and take into
account the earnings and profits, or deficit in earnings and profits,
of each Acquired Fund as of the Effective Time.
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<PAGE>
Shareholders of the Regional Equity Fund and Micro Cap Value 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 Regional Equity Fund and Micro Cap Value
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 Regional Equity
Fund and the Micro Cap Value 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 Regional Equity Fund and the Micro Cap Value Fund, voting as
separate classes. Approval of the Plan by Regional Equity Fund and Micro Cap
Value 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 REGIONAL EQUITY FUND, THE MICRO CAP VALUE
FUND AND THE SMALL CAP VALUE FUND
Information concerning the Regional Equity Fund, the Micro Cap Value
Fund and the Small Cap Value Fund is incorporated herein by reference from the
current Retail Class Prospectus and the current Institutional Class Prospectus,
each related to the Regional Equity Fund, the Micro Cap Value Fund and the Small
Cap Value 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 Regional Equity Fund, the Micro Cap Value Fund, the Small Cap Value
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 Regional Equity Fund, the Micro Cap Value Fund, the
Small Cap Value 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.
27
<PAGE>
COMPARISON OF INVESTMENT OBJECTIVES AND
PRINCIPAL INVESTMENT STRATEGIES
The Regional Equity Fund, the Micro Cap Value Fund and the Small Cap
Value Fund are each diversified, open-end funds with identical investment
objectives of capital appreciation. 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, Regional Equity Fund invests
primarily in common stocks of small capitalization companies headquartered
in Minnesota, North and South Dakota, Montana, Wisconsin, Michigan, Iowa,
Nebraska, Colorado and Illinois. Small capitalization companies are defined
as companies that have market capitalizations of less than $1 billion at
the time of purchase.
|_| Like the Regional Equity Fund, Small Cap Value Fund attempts to achieve
its objective by investing primarily in common stocks of small
capitalization companies. Small Cap Value Fund, however, is not subject to
any geographic constraints in selecting investments.
|_| Micro Cap Value Fund attempts to achieve its objective by investing in
common stocks of very small capitalization companies, defined as companies
that have market capitalizations of less than $500 million at the time of
purchase, without regard to the locations of the companies' headquarters.
Other than the differences in investment strategies noted above, the
Funds have the same principal investment strategies. These include the
following:
|_| In selecting stocks, the Fund's adviser invests in securities it believes:
|_| Are undervalued relative to other securities in the same industry or
market;
|_| Exhibit good or improving fundamentals; and
|_| Exhibit an identifiable catalyst that could close the gap between
market value and fair value over the next one to two years.
|_| To generate additional income, each Fund may lend securities representing
up to one-third of the value of its total assets to broker-dealers, banks
and other institutions.
|_| The Funds focus on the allocation of assets among the same general
industry categories. At June 30, 1999, the portfolio allocations of the
Regional Equity Fund, the Micro Cap Value Fund and the Small Cap Value
Fund among industries, expressed as percentages of their respective net
assets, were approximately as follows:
28
<PAGE>
<TABLE>
<CAPTION>
REGIONAL EQUITY FUND MICRO CAP VALUE FUND SMALL CAP VALUE FUND
<S> <C> <C> <C>
Technology 20.3% 19.0% 21.9%
Finance 15.0% 16.2% 20.4%
Capital Goods 14.2% 21.4% 15.6%
Consumer Cyclical 20.9% 14.1% 12.0%
Health Care 7.4% 3.9% 8.4%
Utilities / Energy 4.7% 10.4% 3.4%
Consumer Staples 10.8% N/A 3.2%
Other 1.8% 3.8% 5.1%
</TABLE>
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 Regional Equity
Fund, of the Micro Cap Value Fund and of the Small Cap Value 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)
REGIONAL MICRO CAP SMALL CAP
EQUITY VALUE VALUE
FUND FUND FUND PRO FORMA
CLASS A SHARES
Net assets $20,906 $1,199 $11,402 $33,679
Net asset value per share $15.84 $5.95 $12.07 $12.07
Shares outstanding 1,320 201 945 2,790
CLASS B SHARES
Net assets $23,895 $172 $809 $24,704
Net asset value per share $15.34 $5.83 $11.97 $11.97
Shares outstanding 11,558 30 68 2,064
CLASS C SHARES
Net assets N/A N/A $35,257 $35,257
Net asset value per share N/A N/A $12.06 $12.06
Shares outstanding N/A N/A 2,924 2,924
CLASS Y SHARES
Net assets $169,709 $72,948 $311,453 $554,110
Net asset value per share $15.91 $5.94 $12.10 $12.10
Shares outstanding 10,664 12,276 25,750 45,804
29
<PAGE>
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 Joint Meeting of Regional Equity Fund and Micro Cap Value 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 Joint
Meeting and a proxy card, is first being mailed to shareholders of the Regional
Equity Fund and the Micro Cap Value Fund on or about December 1, 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.
At its meeting on December 8, 1999, the Board of Directors of First
American will consider an amendment to First American's bylaws that would permit
the submission of proxies in any fashion permissible under Maryland law, the
jurisdiction of incorporation of First American. In the event that the Board
approves this amendment, shareholders will be permitted to submit their proxy by
telephone, and the proxies named telephonically will vote the shares represented
by the proxy in accordance with the instructions transmitted. All telephonically
transmitted proxies will be recorded in the event that a subsequent review of
the vote is required.
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 but will not 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 Regional Equity Fund and / or Micro Cap
Value 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 Regional Equity Fund had the following
numbers of shares outstanding and entitled to vote at the Meeting: Class A,
1,560,968.642 shares; Class B, 1,131,568.594 shares; and Class Y, 7,341,675.972
shares; (ii) the Micro Cap Value Fund had the following numbers of shares
outstanding and entitled to vote at the Meeting: Class A, 228,880.077 shares;
and Class Y, 9,032,614.870 shares; (iii) the Small Cap Value Fund had the
following numbers of shares outstanding: Class A, 800,422.932 shares; Class B,
72,559.371 shares; and Class Y, 22,671,793.996 shares; and (iv) the directors
and officers of the respective Funds as a group owned less than one percent of
the outstanding shares of any 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 any Fund
or any class thereof (including 25% holders) as of such date:
30
<PAGE>
PERCENTAGE
NAME AND ADDRESS NUMBER AND CLASS OWNERSHIP
OF HOLDER OF SHARES OWNED OF CLASS
REGIONAL EQUITY FUND:
Andersen Corporation 401(k) 485,915.240 33.68%
c/o JP Morgan/American Century Class A *
Retirement Services
PO Box 419784
Kansas City MO 64141
Fidelity Investments Instl. Ops. Co. 423,641.816 5.72%
Agent for Certain Employee Benefit Plans Class Y *
100 Magellan Way
Covington KY 41015
MICRO CAP VALUE
U.S. Bancorp Investments, Inc. 54,953.044 36.10%
FBO William Mainwaring Class A *
100 South Fifth Street
Minneapolis MN 55402
Harris Trust & Savings Bank 7,827.549 5.14%
FBO Henry C. C. Stevens II Class A *
PO Box 71940
Chicago IL 60694
SMALL CAP VALUE FUND:
Donaldson Lufkin Jenrette Securities Corp 2,005.533 23.98%
PO Box 2052 Class C *
Jersey City, NJ 07303
U.S. Bancorp Investments, Inc. 1,643.385 19.65%
FBO 140298621 Class C *
100 South Fifth Street
Minneapolis MN 55402
Richard E. Brown 733.000 8.77%
141 South Street Class C *
Jamaica Plain MA 02130
U.S. Bancorp Investments, Inc. 425.230 5.08%
FBO 385974561 Class C *
100 South Fifth Street
Minneapolis MN 55402
U.S. Bancorp Investments, Inc. 552.040 6.60%
FBO 386747011 Class C *
100 South Fifth Street
Minneapolis MN 55402
31
<PAGE>
Northern Trust Company 6,531,712.204 28.57%
FBO U.S. Bank 401(k) Class Y *
c/o U.S. Bank Trust
180 5th Street East
St. Paul MN 55101
U.S. Bancorp Investments, Inc. 3,344,087.180 14.72%
FBO U.S. Bank Cash Balance Class Y *
Pension Plan
4000 West Broadway Ave
Robbinsdale MN 55422
U.S. Bancorp Investments, Inc. 1,303,719.990 5.74%
FBO AGGR Equity Portfolio Class Y *
3900 U.S. Bancorp Tower
Portland OR 97204
* 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 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 Regional Equity Fund, the Micro
Cap Value Fund and the Small Cap Value 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
32
<PAGE>
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, Regional Equity 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 Small Cap Value Fund, the
Micro Cap Value Fund and the Regional Equity 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 Small Cap
Value Fund, the Micro Cap Value Fund and the Regional Equity 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
Small Cap Value Fund to be issued in the Reorganization will be passed upon by
Dorsey & Whitney LLP, 220 South Sixth Street, Minneapolis, Minnesota 55402.
33
<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
SMALL CAP VALUE FUND, REGIONAL EQUITY FUND AND MICRO CAP
VALUE FUND
34
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
REGIONAL EQUITY FUND, MICRO CAP VALUE FUND AND SMALL CAP
VALUE FUND
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as of this
___ day of ________________, 1999, by and among Class L (also known as "Regional
Equity Fund") of First American Investment Funds, Inc., a Maryland corporation
("FAIF"), Class Z (also known as " Micro Cap Value Fund") of FAIF (Regional
Equity Fund and Micro Cap Value Fund are sometimes collectively referred to as
"Acquired Funds") and Class AA (also known as "Small Cap Value Fund") of FAIF
(the "Acquiring Fund"). The shares of the Acquiring Fund and the Acquired Funds
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:
<TABLE>
<CAPTION>
Designation in Articles of Incorporation
or Articles Supplementary Name Assigned in Bylaws
- ------------------------- -----------------------
<S> <C>
Class L Common Shares Regional Equity Fund, Retail Class
or Class A
Class L, Series 2 Common Shares Regional Equity Fund, Institutional
Class or Class Y
Class L, Series 3 Common Shares Regional Equity Fund, CDSC Class
or Class B
Class L, Series 4 Common Shares Regional Equity Fund, Class C
Class Z Common Shares Micro Cap Value Fund, Retail Class
or Class A
Class Z, Series 2 Common Shares Micro Cap Value Fund, CDSC Class
or Class B
Class Z, Series 3 Common Shares Micro Cap Value Fund, Institutional
Class or Class Y
Class Z, Series 4 Common Shares Micro Cap Value Fund, Class C
Class AA Common Shares Small Cap Value Fund, Retail Class
or Class A
Class AA, Series 2 Common Shares Small Cap Value Fund, CDSC Class
or Class B
Class AA, Series 3 Common Shares Small Cap Value Fund, Institutional
Class or Class Y
Class AA, Series 4 Common Shares Small Cap Value Fund, Class C
</TABLE>
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
35
<PAGE>
of 1986, as amended (the "Code"). The reorganization (the "Reorganization") will
consist of the consolidation of each Acquired Fund with and into the Acquiring
Fund by means of (a) 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 Regional
Equity Fund, for all of the issued and outstanding shares of common stock, par
value $.0001 per share, of the Regional Equity Fund (the " Regional Equity Fund
Shares"), and (b) the exchange of Acquiring Fund Shares having an aggregate net
asset value equal to the aggregate net asset value of the Micro Cap Value Fund,
for all of the issued and outstanding shares of common stock, par value $.0001
per share, of the Micro Cap Value Fund (the " Micro Cap Value Fund Shares"), all
upon the terms and conditions hereinafter set forth in this Agreement. The
exchange of Acquiring Fund Shares for Regional Equity Fund Shares and Micro Cap
Value 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 Funds series of FAIF
offers Class A shares, Class B shares, Class C shares and Class Y shares.
C. Each 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 Funds 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 shares,
respectively, of each Acquired Fund on the basis set forth herein is in the best
interests of the shareholders of each Acquired Fund and the shareholders of the
Acquiring Fund.
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 shareholders of each
Acquired Fund and to the other terms and conditions herein set forth and on the
basis of the representations and warranties contained herein, the Acquired Funds
and the Acquiring
36
<PAGE>
Fund agree that at the Effective Time (as defined in Section 3.1), (a) each
issued and outstanding Class A Regional Equity Fund Share and Class A Micro Cap
Value Fund Share shall be, without further action, exchanged for the respective
number of Class A Acquiring Fund Shares calculated in accordance with Article 2
hereof and the Amendment; (b) each issued and outstanding Class B Regional
Equity Fund Share and Class B Micro Cap Value Fund Share shall be, without
further action, exchanged for the respective number of Class B Acquiring Fund
Shares calculated in accordance with Article 2 hereof and the Amendment; (c)
each issued and outstanding Class C Regional Equity Fund Share and Class C Micro
Cap Value Fund Share shall be, without further action, exchanged for the
respective 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
Regional Equity Fund Share and Class Y Micro Cap Value Fund Share shall be,
without further action, exchanged for the respective number of Class Y Acquiring
Fund Shares calculated in accordance with Article 2 hereof and the Amendment.
1.2 (a) At the Effective Time, the assets and liabilities belonging to
each 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 Funds to become assets belonging to the
Acquiring Fund shall consist of all of the property of each Acquired Fund
including, but not limited to, all cash, securities, commodities and futures
interests and dividends or interest receivable which are assets belonging to
such 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 each
Acquired Fund as of the Effective Time (the "Effective Time Statements"). The
Effective Time Statements shall, with respect to the listing of each 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 respective Acquired Fund. The Effective
Time Statements shall be prepared in accordance with generally accepted
accounting principles (except for footnotes) consistently applied.
(b) Each Acquired Fund has provided the Acquiring Fund with a list of
all of such Acquired Fund's assets as of the date of execution of this
Agreement. Each 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 With respect to each Acquired Fund, 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 such
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
37
<PAGE>
registration of such Acquired Fund's shares) as reflected in such Acquired
Fund's 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 each Acquired Fund or, at the direction of the Board of Directors
of such Acquired Fund, to the shareholders of record of such Acquired Fund,
determined as of the Effective Time (the "Regional Equity Fund Shareholders" or
the "Micro Cap Value Fund Shareholders," as the case may be), the Acquiring Fund
Shares issued in exchange for the Regional Equity Fund Shares and the Micro Cap
Value Fund Shares be pursuant to Section 1.1 and Article 2. Thereafter, no
additional shares representing interests in the Acquired Funds shall be issued,
and the Acquired Funds 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 Regional Equity
Fund Shareholders and the Micro Cap Value Fund Shareholders representing the
numbers and classes of Acquiring Fund Shares due each such shareholder. All
issued and outstanding shares of the Acquired Funds will simultaneously be
cancelled on the books of the Acquired Funds, although from and after the
Effective Time share certificates representing interests in the Acquired Funds
will represent those numbers and classes of Acquiring Fund Shares as determined
in accordance with Article 2. Unless requested by Regional Equity Fund
Shareholders or Micro Cap Value 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 Regional Equity Fund Shareholders or the Micro Cap Value
Fund Shareholders in connection with the acquisition by such 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 respective
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 an 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.
38
<PAGE>
1.7 Any reporting responsibility of an 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 such Acquired Fund.
2. EXCHANGE RATIOS; VALUATION; ISSUANCE OF ACQUIRING FUND SHARES
2.1 The net asset value per share of the Class A shares, Class B
shares, Class C shares and Class Y shares of each Acquired Fund and the
Acquiring Fund 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 Regional Equity
Fund's Class A shares shall be determined as of the Effective Time by
multiplying the number of the Regional Equity 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 Regional Equity Fund's Class A 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 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 Regional Equity
Fund's Class B shares shall be determined as of the Effective Time by
multiplying the number of the Regional Equity 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 Regional Equity 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 Regional Equity
Fund's Class C shares shall be determined as of the Effective Time by
multiplying the number of the Regional Equity 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 Regional Equity 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.
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(d) The total number of the Acquiring Fund's Class Y shares to be
issued (including fractional shares, if any) in exchange for the Regional Equity
Fund's Class Y shares shall be determined as of the Effective Time by
multiplying the number of the Regional Equity 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 Regional Equity 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.
(e) The total number of the Acquiring Fund's Class A shares to be
issued (including fractional shares, if any) in exchange for the Micro Cap Value
Fund's Class A shares shall be determined as of the Effective Time by
multiplying the number of the Micro Cap Value 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 Micro Cap Value Fund's Class A 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 A shares immediately prior
to the Effective Time, each as determined pursuant to Section 2.1.
(f) The total number of the Acquiring Fund's Class B shares to be
issued (including fractional shares, if any) in exchange for the Micro Cap Value
Fund's Class B shares shall be determined as of the Effective Time by
multiplying the number of the Micro Cap Value 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 Micro Cap Value 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.
(g) The total number of the Acquiring Fund's Class C shares to be
issued (including fractional shares, if any) in exchange for the Micro Cap Value
Fund's Class C shares shall be determined as of the Effective Time by
multiplying the number of the Micro Cap Value 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 Micro Cap Value 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.
(h) The total number of the Acquiring Fund's Class Y shares to be
issued (including fractional shares, if any) in exchange for the Micro Cap Value
Fund's Class Y shares shall be determined as of the Effective Time by
multiplying the number of the Micro Cap Value 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 Micro
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Cap Value 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 (i) to the Regional Equity Fund Shareholders of the respective
classes pro rata within such classes (based upon the ratio that the number of
Regional Equity Fund shares of the respective classes owned by each Regional
Equity Fund Shareholder immediately prior to the Effective Time bears to the
total number of issued and outstanding Regional Equity 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, and (ii) to the Micro Cap Value Fund
Shareholders of the respective classes pro rata within such classes (based upon
the ratio that the number of Micro Cap Value Fund shares of the respective
classes owned by each Micro Cap Value Fund Shareholder immediately prior to the
Effective Time bears to the total number of issued and outstanding Micro Cap
Value 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 Regional Equity 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 Regional Equity Fund Shares owned by such
Regional Equity Fund Shareholder immediately prior to the Effective Time; each
Class B Regional Equity 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 Regional Equity Fund Shares owned by
such Regional Equity Fund Shareholder immediately prior to the Effective Time;
each Class C Regional Equity 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 Regional Equity Fund Shares owned
by such Regional Equity Fund Shareholder immediately prior to the Effective
Time; each Class Y Regional Equity 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 Regional Equity Fund
Shares owned by such Regional Equity Fund Shareholder immediately prior to the
Effective Time; each Class A Micro Cap Value 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 Micro Cap Value Fund
Shares owned by such Micro Cap Value Fund Shareholder immediately prior to the
Effective Time; each Class B Micro Cap Value 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 Micro Cap Value Fund
Shares owned by such Micro Cap Value Fund Shareholder immediately prior to the
Effective Time; each Class C Micro Cap Value 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 Micro Cap Value Fund
Shares owned by such Micro Cap Value Fund Shareholder
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<PAGE>
immediately prior to the Effective Time; and each Class Y Micro Cap Value 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 Micro Cap Value Fund Shares owned by such Micro Cap Value 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 each 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 either 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 either 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 Each 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 Regional
Equity Fund Shareholders or Micro Cap Value Fund Shareholders, as the case may
be, and the number of outstanding shares of such Acquired Fund 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.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS
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<PAGE>
4.1 The Regional Equity 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 Regional Equity 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 Regional Equity 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 Regional Equity 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 Regional Equity 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 Regional Equity Fund's knowledge, threatened against the Regional
Equity Fund or any of its properties or assets. The Regional Equity 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 Regional Equity 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 Regional Equity Fund as of such date, and there are no known
material contingent liabilities of the Regional Equity Fund as of such date not
disclosed therein;
(g) Since September 30, 1999, there has not been any material adverse
change in the Regional Equity Fund's financial condition, assets, liabilities or
business other than changes occurring in the ordinary course of business, except
as otherwise disclosed to the Acquiring Fund. For the purposes of this paragraph
(g), a decline in net asset value per
43
<PAGE>
share of the Regional Equity Fund, the discharge or incurrence of Regional
Equity Fund liabilities in the ordinary course of business, or the redemption of
Regional Equity Fund shares by Regional Equity Fund Shareholders shall not
constitute such a material adverse change;
(h) All material federal and other tax returns and reports of the
Regional Equity 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 Regional Equity 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 Regional Equity Fund
has met the requirements of Subchapter M of the Code for qualification and
treatment as a regulated investment company, and the Regional Equity 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 Regional Equity 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
Regional Equity Fund will, at the Effective Time, be held by the persons and in
the amounts set forth in the records of the Regional Equity Fund, as provided in
Section 3.4. The Regional Equity Fund does not have outstanding any options,
warrants or other rights to subscribe for or purchase any of the Regional Equity
Fund shares, and there is not outstanding any security convertible into any of
the Regional Equity Fund shares;
(k) At the Effective Time, the Regional Equity Fund will have good and
marketable title to the Regional Equity 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 Statements;
(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 Regional
Equity Fund Shareholders, this Agreement will constitute a valid and binding
obligation of the Regional Equity 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;
44
<PAGE>
(m) The information to be furnished by the Regional Equity 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 Regional Equity Fund and its
agents and affiliates and included in the Registration Statement referred to in
Section 5.5 (or supplied by the Regional Equity 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 Regional Equity 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 Statements 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 Regional
Equity Fund as of the Effective Time, and the values of the Regional Equity
Fund's assets and liabilities to be set forth in the Effective Time Statements
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 Regional Equity Fund's then-current Prospectuses and Statement of Additional
Information and as may be required by the 1940 Act.
4.2 The Micro Cap Value 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 Micro Cap Value 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 Micro Cap Value Fund is in good
standing, is not subject to any stop orders,
45
<PAGE>
and is fully qualified to sell its shares in any state in which its shares have
been registered;
(d) The Micro Cap Value 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 Micro Cap Value 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 Micro Cap Value Fund's knowledge, threatened against the Micro Cap
Value Fund or any of its properties or assets. The Micro Cap Value 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 Micro Cap Value 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 Micro Cap Value Fund as of such date, and there are no known
material contingent liabilities of the Micro Cap Value Fund as of such date not
disclosed therein;
(g) Since September 30, 1999, there has not been any material adverse
change in the Micro Cap Value Fund's financial condition, assets, liabilities or
business other than changes occurring in the ordinary course of business, except
as otherwise disclosed to the Acquiring Fund. For the purposes of this paragraph
(g), a decline in net asset value per share of the Micro Cap Value Fund, the
discharge or incurrence of Micro Cap Value Fund liabilities in the ordinary
course of business, or the redemption of Micro Cap Value Fund shares by Micro
Cap Value Fund Shareholders shall not constitute such a material adverse change;
(h) All material federal and other tax returns and reports of the Micro
Cap Value 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 Micro Cap Value 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 Micro Cap Value Fund
has met the requirements of Subchapter M of the Code for qualification and
treatment as a regulated investment company, and the Micro Cap Value Fund
intends to meet the requirements of
46
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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 Micro Cap Value 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
Micro Cap Value Fund will, at the Effective Time, be held by the persons and in
the amounts set forth in the records of the Micro Cap Value Fund, as provided in
Section 3.4. The Micro Cap Value Fund does not have outstanding any options,
warrants or other rights to subscribe for or purchase any of the Micro Cap Value
Fund shares, and there is not outstanding any security convertible into any of
the Micro Cap Value Fund shares;
(k) At the Effective Time, the Micro Cap Value Fund will have good and
marketable title to the Micro Cap Value 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 Statements;
(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 Micro Cap
Value Fund Shareholders, this Agreement will constitute a valid and binding
obligation of the Micro Cap Value 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;
(m) The information to be furnished by the Micro Cap Value 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 Micro Cap Value Fund and its
agents and affiliates and included in the Registration Statement referred to in
Section 5.5 (or supplied by the Micro Cap Value 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 Micro Cap Value Fund in accounting methods, principles or practices,
including those required
47
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by generally accepted accounting principles, except as disclosed in writing to
the Acquiring Fund; and
(p) The Effective Time Statements 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 Micro Cap
Value Fund as of the Effective Time, and the values of the Micro Cap Value
Fund's assets and liabilities to be set forth in the Effective Time Statements
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 Micro Cap Value Fund's then-current Prospectuses and Statement of Additional
Information and as may be required by the 1940 Act.
4.3 The Acquiring Fund represents, warrants and covenants to the
Acquired Funds 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,
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,
48
<PAGE>
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 Funds) 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 Funds. 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 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 Funds, for the account of the Regional Equity Fund Shareholders and the
Micro Cap Value Fund
49
<PAGE>
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 Funds;
(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 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,
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<PAGE>
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 Funds.
5. FURTHER COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUNDS.
5.1 Each of the Acquired Funds 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 Each of the Acquired Funds 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 Each of the Acquired Funds will assist the Acquiring Fund in
obtaining such information as the Acquiring Fund reasonably requests concerning
the beneficial ownership of the Acquired Funds shares.
5.4 Subject to the provisions of this Agreement, the Acquiring Fund and
each of the Acquired Funds will 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 Each of the Acquired Funds will provide the Acquiring Fund with
information reasonably necessary with respect to the Acquired Funds and its
agents and affiliates for 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 FUNDS. The obligations of
each 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 such Acquired Fund, in its sole and absolute discretion):
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(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 respective Acquired
Fund a certificate executed in its name by its President or a Vice President, in
a form reasonably satisfactory to such 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 such 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 with
respect to an Acquired Fund shall be subject, at its election, to the
performance by such Acquired Funds 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 such 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 for such Acquired Fund;
(c) Such 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 such 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, such Acquired Fund's investment
adviser, or an affiliate thereof, shall have paid or agreed to pay such Acquired
Fund an amount equal to the unamortized organizational expenses, if any, on the
books of the Acquired Funds, and such unamortized organizational expenses shall
not be reflected in the Effective Time Statement for such Acquired Fund; and
(e) At or prior to the Effective Time, such Acquired Fund's investment
adviser, or an affiliate thereof, shall have reimbursed or agreed to reimburse
such Acquired Fund by the amount, if any, that the expenses incurred by such
Acquired Fund (or accrued up
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<PAGE>
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 FUNDS. The following shall constitute further conditions
precedent to the consummation of the Reorganization:
(a) In order for the Reorganization to be consummated with respect to
an Acquired Fund, this Agreement and the transactions contemplated herein shall
have been approved by the requisite vote of the holders of the outstanding
shares of such 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 respective 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 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 either 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 Funds, provided that any 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
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<PAGE>
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 Funds 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 Funds, the Acquiring Fund, and their investment adviser and other
service providers, substantially to the effect that:
(i) the exchange of Small Cap Value Fund shares for the
Regional Equity Fund's net assets and the distribution of such shares
to the Regional Equity Fund's shareholders, and the exchange of Small
Cap Value Fund shares for the Micro Cap Value Fund's net assets and the
distribution of such shares to the Micro Cap Value shareholders will
each constitute a reorganization within the meaning of Section
368(a)(1)(C) of the Code, and the Acquiring Fund and the Acquired Funds
each will qualify as a party to a reorganization under Section 368(b)
of the Code;
(ii) the Regional Equity Fund Shareholders and the Micro Cap
Value Fund Shareholders will recognize no income, gain or loss upon
receipt, pursuant to the Reorganization, of the Acquiring Fund Shares.
Regional Equity Fund Shareholders and Micro Cap Value Fund Shareholders
subject to taxation will recognize income upon receipt of any net
investment income or net capital gains of the respective Acquired Fund
which are distributed by such Acquired Fund prior to the Effective
Time;
(iii) the tax basis of the Acquiring Fund Shares received by
each Regional Equity Fund Shareholder pursuant to the Reorganization
will be equal to the tax basis of the Acquired Funds Shares exchanged
therefor;
(iv) the tax basis of the Acquiring Fund Shares received by
each Micro Cap Value Fund Shareholder pursuant to the Reorganization
will be equal to the tax basis of the Acquired Funds Shares exchanged
therefor;
(v) the holding period of the Acquiring Fund Shares received
by each Regional Equity Fund Shareholder pursuant to the Reorganization
will include the period during which the Regional Equity Fund
Shareholder held the Regional Equity Fund Shares exchanged therefor,
provided that the Regional Equity Fund Shares were held as a capital
asset at the Effective Time;
(vi) the holding period of the Acquiring Fund Shares received
by each Micro Cap Value Fund Shareholder pursuant to the Reorganization
will include the period during which the Micro Cap Value Fund
Shareholder held the Micro Cap Value Fund Shares exchanged therefor,
provided that the Micro Cap Value Fund Shares were held as a capital
asset at the Effective Time;
(vii) neither Acquired Fund will recognize any income, gain or
loss by reason of the Reorganization;
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(viii) the Acquiring Fund will recognize no income, gain or
loss by reason of the Reorganization;
(ix) 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 respective Acquired Fund as of the
Effective Time;
(x) 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 respective Acquired Fund; and
(xi) the Acquiring Fund will succeed to and take into account
the earnings and profits, or deficit in earnings and profits, of each
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 Funds agree that no party has
made any representation, warranty or covenant not set forth herein and that this
Agreement constitutes the entire agreement among 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 any 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 either Acquired Fund or of 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 Funds and the Acquiring Fund; provided, however, that following the
meeting of the Regional Equity Fund Shareholders and the Micro Cap Value Fund
Shareholders called by the respective Acquired Funds 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
Regional Equity Fund Shareholders and the Micro Cap Value 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 Funds, 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
REGIONAL EQUITY FUND
By
---------------------------------------------------
Its
---------------------------------------------------
FIRST AMERICAN INVESTMENT FUNDS, INC.
on behalf of its
MICRO CAP VALUE FUND
By
---------------------------------------------------
Its
---------------------------------------------------
FIRST AMERICAN INVESTMENT FUNDS, INC.
on behalf of its
SMALL CAP VALUE FUND
By
---------------------------------------------------
Its
---------------------------------------------------
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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]
58
<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 L shares of the Corporation (also known as "Regional Equity Fund") and
the Class Z shares of the Corporation (also known as " Micro Cap Value Fund")
that the assets belonging to each such class be sold to a separate portfolio of
the Corporation which is known as "Small Cap Value Fund" and which is
represented by the Corporation's Class AA shares, in exchange for shares of
Small Cap Value Fund which are to be delivered to former Regional Equity Fund
and Micro Cap Value Fund holders; and
WHEREAS, Regional Equity Fund, Micro Cap Value Fund and Small Cap Value
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 Regional Equity Fund and Micro Cap Value
Fund to the foregoing transactions, and in particular to bind such holders to
the exchange of their Regional Equity Fund shares and Micro Cap Value Fund
shares for Small Cap Value 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(C) immediately following Article IV(B) thereof:
ARTICLE IV(C). (a) For purposes of this Article IV(C), the following
terms shall have the following meanings:
"Corporation" means this corporation.
"Regional Fund" means the Corporation's Regional Equity Fund, which is
represented by the Corporation's Class L shares.
"Class A Regional Fund Shares" means the Corporation's Class L Common
Shares.
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"Class Y Regional Fund Shares" means the Corporation's Class L, Series
2 Common Shares.
"Class B Regional Fund Shares" means the Corporation's Class L, Series
3 Common Shares.
"Class C Regional Fund Shares" means the Corporation's Class L, Series
4 Common Shares.
"Micro Cap Value Fund" means the Corporation's Micro Cap Value Fund,
which is represented by the Corporation's Class Z shares.
"Class A Micro Cap Value Fund Shares" means the Corporation's Class Z
Common Shares.
"Class B Micro Cap Value Fund Shares" means the Corporation's Class Z,
Series 2 Common Shares.
"Class Y Micro Cap Value Fund Shares" means the Corporation's Class Z,
Series 3 Common Shares.
"Class C Micro Cap Value Fund Shares" means the Corporation's Class Z,
Series 4 Common Shares.
"Acquiring Fund" means the Corporation's Small Cap Value Fund, which is
represented by the Corporation's Class AA shares.
"Class A Acquiring Fund Shares" means the Corporation's Class AA Common
Shares.
"Class B Acquiring Fund Shares" means the Corporation's Class AA,
Series 2 Common Shares.
"Class Y Acquiring Fund Shares" means the Corporation's Class AA,
Series 3 Common Shares.
"Class C Acquiring Fund Shares" means the Corporation's Class AA,
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 Regional Fund,
the liabilities belonging to the Regional Fund, and the General Assets and
General Liabilities allocated to the Regional 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
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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 Regional Fund
share shall be, without further action, exchanged for those numbers and classes
of Acquiring Fund shares calculated in accordance with paragraph (d) below.
(d) The numbers of Class A, Class B, Class C and Class Y Acquiring Fund
Shares to be issued in exchange for the Class A, Class B, Class C and Class Y
Regional Fund Shares shall be determined as follows:
(1) The net asset value per share of the Regional 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 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
Regional Fund Shares shall be determined as of the Effective Time by
multiplying the number of Class A Regional 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 Regional 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
Regional Fund Shares shall be determined as of the Effective Time by
multiplying the number of Class B Regional 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 Regional 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
Regional Fund Shares shall be determined as of the Effective Time by
multiplying the number of Class C Regional 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 Regional 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
Regional Fund Shares shall be determined as of the Effective Time by
multiplying the number of Class Y Regional Fund Shares outstanding
immediately prior to the Effective Time times a fraction, the
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numerator of which is the net asset value per share of Class Y Regional
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 Regional Fund shall issue and distribute
to the Regional Fund shareholders of the respective classes pro rata
within such classes (based upon the ratio that the number of Regional
Fund shares of the respective classes owned by each Regional Fund
shareholder immediately prior to the Effective Time bears to the total
number of issued and outstanding Regional 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 Regional 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 Regional Fund Shares
owned by such Regional Fund shareholder immediately prior to the
Effective Time; each Class B Regional 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
Regional Fund Shares owned by such Regional Fund shareholder
immediately prior to the Effective Time; each Class C Regional 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 Regional Fund Shares owned by such
Regional Fund shareholder immediately prior to the Effective Time; and
each Class Y Regional 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 Regional Fund
Shares owned by such Regional Fund shareholder immediately prior to the
Effective Time.
(e) The distribution of Acquiring Fund shares to Regional 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 Regional 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 Regional Fund shall simultaneously be cancelled on the books of
the Regional Fund and retired. From and after the Effective Time, share
certificates formerly representing Regional 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 Regional Fund shares
cancelled and retired pursuant to paragraph (e) above shall have the status of
authorized and unissued Class L common shares of the Corporation, without
designation as to series.
(g) At the Effective Time, the assets belonging to the Micro Cap Value
Fund, the liabilities belonging to the Micro Cap Value Fund, and the General
Assets and General Liabilities allocated to the Micro Cap Value 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
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<PAGE>
"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.
(h) At the Effective Time, each issued and outstanding Micro Cap Value
Fund share shall be, without further action, exchanged for those numbers and
classes of Acquiring Fund shares calculated in accordance with paragraph (i)
below.
(i) 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
Micro Cap Value Fund Shares shall be determined as follows:
(1) The net asset value per share of the Micro Cap Value 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 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 Micro
Cap Value Fund Shares shall be determined as of the Effective Time by
multiplying the number of Class A Micro Cap Value 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
Micro Cap Value 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 Micro
Cap Value Fund Shares shall be determined as of the Effective Time by
multiplying the number of Class B Micro Cap Value 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
Micro Cap Value 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 Micro
Cap Value Fund Shares shall be determined as of the Effective Time by
multiplying the number of Class C Micro Cap Value 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
Micro Cap Value 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.
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(5) The total number of Class Y Acquiring Fund Shares to be issued
(including fractional shares, if any) in exchange for the Class Y Micro
Cap Value Fund Shares shall be determined as of the Effective Time by
multiplying the number of Class Y Micro Cap Value 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
Micro Cap Value 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 Micro Cap Value Fund shall issue and
distribute to the Micro Cap Value Fund shareholders of the respective
classes pro rata within such classes (based upon the ratio that the
number of Micro Cap Value Fund shares of the respective classes owned
by each Micro Cap Value Fund shareholder immediately prior to the
Effective Time bears to the total number of issued and outstanding
Micro Cap Value 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 Micro Cap Value 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 Micro Cap Value Fund Shares owned by
such Micro Cap Value Fund shareholder immediately prior to the
Effective Time; each Class B Micro Cap Value 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 Micro Cap Value Fund Shares owned by such Micro Cap Value Fund
shareholder immediately prior to the Effective Time; each Class C Micro
Cap Value 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 Micro Cap Value Fund Shares
owned by such Micro Cap Value Fund shareholder immediately prior to the
Effective Time; and each Class Y Micro Cap Value 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 Micro Cap Value Fund Shares owned by such Micro Cap Value Fund
shareholder immediately prior to the Effective Time.
(j) The distribution of Acquiring Fund shares to Micro Cap Value Fund
shareholders provided for in paragraphs (h) and (i) 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 Micro Cap Value 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 Micro Cap Value Fund shall simultaneously be cancelled
on the books of the Micro Cap Value Fund and retired. From and after the
Effective Time, share certificates formerly representing Micro Cap Value Fund
shares shall represent the numbers and classes of Acquiring Fund shares
determined in accordance with the foregoing provisions.
(k) From and after the Effective Time, the Micro Cap Value Fund shares
cancelled and retired pursuant to paragraph (j) above shall have the status of
authorized and unissued Class Z common shares of the Corporation, without
designation as to series.
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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.
65
<PAGE>
PART B
STATEMENT OF ADDITIONAL INFORMATION
DATED DECEMBER 1, 1999
PROPOSED ACQUISITION OF ASSETS OF
REGIONAL EQUITY FUND AND MICRO CAP VALUE FUND
SEPARATELY MANAGED SERIES OF
FIRST AMERICAN INVESTMENT FUNDS, INC.
OAKS, PENNSYLVANIA 19456
(800) 637-2548
BY AND IN EXCHANGE FOR SHARES OF
SMALL CAP VALUE 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 Regional Equity Fund
and the Micro Cap Value Fund (collectively the "Acquired Funds") by the Small
Cap Value Fund in exchange for shares of common stock of the Small Cap Value
Fund having an aggregate net asset value equal to the aggregate value of the
assets (less liabilities assumed) of the Acquired Funds. As a result of the
transactions, each shareholder of the Regional Equity Fund will receive Small
Cap Value Fund shares of the same class that he or she held in the Regional
Equity Fund, with a net asset value equal to the net asset value of the
shareholder's Regional Equity Fund, and each shareholder of the Micro Cap Value
Fund will receive Small Cap Value Fund shares of the same class that he or she
held in the Micro Cap Value Fund, with a net asset value equal to the net asset
value of the shareholder's Micro Cap Value 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 the Small Cap Value Fund, the Regional Equity
Fund and the Micro Cap Value Fund.
66
<PAGE>
2. Annual report of First American for the fiscal year ended September
30, 1998, relating to the Retail Classes and the Institutional Class
of Small Cap Value Fund, the Regional Equity Fund and the Micro Cap
Value Fund.
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 Small Cap Value Fund, the Regional Equity Fund and the Micro
Cap Value Fund.
This Statement of Additional Information is not a prospectus. A
Prospectus/Proxy Statement dated December 1, 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.
67
<PAGE>
FIRST AMERICAN INVESTMENT FUNDS, INC.
SMALL CAP VALUE FUND
INTRODUCTION TO PRO FORMA COMBINING STATEMENTS
MARCH 31, 1999
The accompanying unaudited pro forma combining Statements of Assets and
Liabilities, Statements of Operations and Schedules of Investments, reflect the
accounts of the First American Regional Equity Fund, the First American Micro
Cap Value Fund and the First American Small Cap Value Fund. As the closing of
the Regional Equity Fund's combination with the Small Cap Value Fund is not
contingent upon the closing of the Micro Cap Value Fund's combination with the
Small Cap Value Fund, and vice versa, a pro forma combining Statement of Assets
and Liabilities, Statement of Operations and Schedule of Investments is
presented for each possible combination of the three funds.
The pro forma combining Schedules 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 Regional Equity Fund, Micro Cap Value Fund and Small Cap Value 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
Small Cap Value Fund.
Under the proposed merger agreement and plan of reorganization, (i) all
outstanding shares of each class of the Micro Cap Value Fund will be exchanged
for shares of the respective classes of the Small Cap Value Fund, and (ii) all
outstanding shares of each class of the Regional Equity Fund will be exchanged
for the respective classes of the shares of the Small Cap Value Fund.
68
<PAGE>
SMALL CAP VALUE FUND
PRO FORMA COMBINING FINANCIAL STATEMENTS (UNAUDITED)
STATEMENT OF ASSETS AND LIABILITIES (000's)
MARCH 31,1999
<TABLE>
<CAPTION>
SMALL CAP
VALUE FUND
SMALL CAP VALUE REGIONAL EQUITY MICRO CAP VALUE PRO FORMA
FUND FUND FUND ADJUSTMENTS COMBINED
--------------- --------------- --------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments at value (Cost $290,716, $175,164, $77,158
and $543,038 respectively) $ 308,943 $ 203,699 $ 73,886 586,528
Cash 37 7,502 21 7,560
Dividends and interest receivable 376 146 108 630
Receivable for Fund shares sold 15,967 69 4 16,040
Receivable for investments sold 1,947 4,143 1,093 7,183
Cash collateral received for securities on loan 15,261 23,793 4,269 43,323
Prepaid expenses and other assets 10 1 3 14
--------- --------- --------- --------- ---------
Total Assets 342,541 239,353 79,384 -- 661,278
--------- --------- --------- --------- ---------
LIABILITIES:
Payable for investments purchased 1,747 143 -- 1,890
Payable for Fund shares repurchased 1,713 684 737 3,134
Accrued expenses and other liabilities 121 223 59 403
Payable upon return of securities on loan 15,261 23,793 4,269 43,323
--------- --------- --------- --------- ---------
Total Liabilities 18,842 24,843 5,065 -- 48,750
--------- --------- --------- --------- ---------
NET ASSETS $ 323,699 $ 214,510 $ 74,319 $ -- $ 612,528
========= ========= ========= ========= =========
Net Assets are comprised of:
Paid in Capital $ 314,188 $ 177,041 $ 63,889 $ 555,118
Undistributed net investment income/(loss) 86 (177) 30 (61)
Accumulated net realized loss on investments (8,802) 9,111 13,672 13,981
Net unrealized appreciation of investments 18,227 28,535 (3,272) 43,490
--------- --------- --------- --------- ---------
NET ASSETS $ 323,699 $ 214,510 $ 74,319 -- $ 612,528
========= ========= ========= ========= =========
NET ASSET VALUE AND OFFERING PRICE:
CLASS A:
</TABLE>
69
<PAGE>
<TABLE>
<S> <C> <C> <C>
Net Assets $ 11,402 $ 20,906 $ 1,199
Shares outstanding ($.0001 par value - 2 billion authorized) 945 1,320 201
Net asset value and redemption price per share $ 12.07 $ 15.84 $ 5.95
Maximum sales charge of 5.25% (A) 0.67 0.88 0.33
----------- ----------- --------
Offering price per share $ 12.74 $ 16.72 $ 6.28
=========== =========== ========
CLASS B:
Net Assets $ 809 $ 23,895 $ 172
Shares outstanding ($.0001 par value - 2 billion authorized) 68 1,558 30
Net asset value and offering price per share (B) $ 11.97 $ 15.34 $ 5.83
=========== =========== ========
CLASS C:
Net Assets $ 35 -- --
Shares outstanding ($.0001 par value - 2 billion authorized) 3 -- --
Net asset value per share (C) $ 12.06 -- --
Maximum sales charge of 1.00% (D) 0.12
----------- ----------- --------
Offering price per share $ 12.18 -- --
=========== =========== ========
CLASS Y
Net Assets $ 311,453 $ 169,709 $ 72,948
Shares outstanding ($.0001 par value - 2 billion authorized) 25,750 10,664 12,276
Net asset value, offering price, and redemption price per share $ 12.10 $ 15.91 $ 5.94
=========== =========== ========
</TABLE>
[WIDE TABLE CONTINUED]
<TABLE>
<S> <C> <C>
Net Assets 172 (F) $ 33,679
Shares outstanding ($.0001 par value - 2 billion authorized) 324 (E), (F) 2,790
Net asset value and redemption price per share $ 12.07
Maximum sales charge of 5.25% (A) 0.67
----------- --------
Offering price per share $ 12.74
=========== ========
CLASS B:
Net Assets (172) (F) $ 24,704
Shares outstanding ($.0001 par value - 2 billion authorized) 408 (E), (F) 2,064
Net asset value and offering price per share (B) $ 11.97
=========== ========
CLASS C:
Net Assets $ 35
Shares outstanding ($.0001 par value - 2 billion authorized) 3
Net asset value per share (C) $ 12.06
Maximum sales charge of 1.00% (D) 0.12
----------- --------
Offering price per share $ 12.18
=========== ========
CLASS Y
Net Assets $554,110
Shares outstanding ($.0001 par value - 2 billion authorized) (2,886) (E) 45,804
Net asset value, offering price, and redemption price per share $ 12.10
=========== ========
</TABLE>
(A) The offering price is calculated by dividing the net asset value by 1 minus
the maximum sales charge of 5.25%.
(B) Class-B has a contingent deferred sales charge. This charge declines from
a high of 5.00% in the first year to 0.00% after eight years, as outlined
in the prospectus.
(C) Class-C has a contingent deferred sales charge imposed on redemptions
made in Class-C shares for the first eighteen months, as outlined in the
prospectus.
(D) The offering price is calculated by dividing the net asset value by 1 minus
the maximum sales charge of 1.00%.
(E) Reflects the impact of converting shares of the target fund into the
survivor fund.
(F) Reflects the conversion of Micro Cap Value Fund Class-B shares into Class-A
shares.
See Notes to Pro Forma Combining Financial Statements.
70
<PAGE>
SMALL CAP VALUE FUND
PRO FORMA COMBINING FINANCIAL STATEMENTS (UNAUDITED)
STATEMENTS OF OPERATIONS (000's OMITTED)
FOR THE 6 MONTH PERIOD ENDED 3/31/99
<TABLE>
<CAPTION>
SMALL CAP
SMALL CAP REGIONAL MICRO CAP VALUE FUND
VALUE EQUITY VALUE PRO-FORMA PRO-FORMA
FUND FUND FUND ADJUSTMENT COMBINED
--------- -------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Investment Income:
Interest 748* 268* 214* 1,230
Dividends 1,346 977^ 440 2,763
------- ------- ------- ------- -------
Total Investment Income 2,094 1,245 654 -- 3,993
Expenses:
Investment Advisory Fees 1,337 965 384 2,686
Less: Waiver of investment advisory fees (17) (84) (1) (19)(A) (121)
Administrator fees 208 150 60 418
Transfer agent fees 45 141 23 209
Custodian fees 57 41 17 115
Directors' fees 4 3 1 8
Registration fees 22 10 4 36
Professional fees 5 3 1 9
Printing 11 8 3 22
Distribution fees-Class A 16 32 2 50
Distribution fees-Class B 4 149 1 154
Other 5 4 2 11
------- ------- ------- ------- -------
Total net expenses 1,697 1,422 497 (19) 3,597
------- ------- ------- ------- -------
Investment income-net 397 (177) 157 19 396
------- ------- ------- ------- -------
Realized and Unrealized Gains(Losses)
on Investments - Net
Net realized gain (loss) on investments (4,693) 9,115^ 13,675 18,097
Net change in unrealized appreciation
(depreciation) of investments (5,328) 788^ (14,318) (18,858)
------- ------- ------- ------- -------
Net gain (loss) on investments (10,021) 9,903 (643) -- (761)
------- ------- ------- ------- -------
Net increase (decrease) in net assets
resulting from operations (9,624) 9,726 (486) 19 (365)
======= ======= ======= ======= =======
</TABLE>
(A) Adjustment reflects the additional waiver amount necessary to reflect
expenses of the combined fund.
* - Includes income from securities lending program.
^ - Includes the following amounts from investments in Common Stock of
Affiliates (000): $34 of dividend income, $(52) of realized loss on
investments and $3,358 of unrealized appreciation of investments.
See Notes to Pro Forma Combining Financial Statements.
71
<PAGE>
Small Cap Value Fund
Pro Forma Combining Financial Statements (unaudited)
Statements of Operations (000's omitted)
For the Year ended 9/30/98
<TABLE>
<CAPTION>
Small Cap
Small Cap Regional Micro Cap Value Fund
Value Equity Value Pro-Forma Pro-Forma
Fund Fund Fund Adjustment Combined
--------- -------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Investment Income:
Interest 2,129* 2,310* 723* 5,162
Dividends 3,973 1,853^ 1,469 7,295
-------- -------- -------- ------- --------
Total Investment Income 6,102 4,163 2,192 -- 12,457
Expenses:
Investment Advisory Fees 3,503 2,715 1,401 7,619
Less: Waiver of investment advisory fees (67) (41) (1) (92)(A) (201)
Administrator fees 576 427 221 1,224
Transfer agent fees 115 228 44 387
Amortization of organization costs -- -- 1 1
Custodian fees 126 117 60 303
Directors' fees 9 6 3 18
Registration fees 136 9 15 160
Professional fees 5 13 7 25
Printing 42 17 9 68
Distribution fees-Class A 48 84 2 134
Distribution fees-Class B 3 394 2 399
Other 28 9 5 42
-------- -------- -------- ------- --------
Total net expenses 4,524 3,978 1,769 (92) 10,179
-------- -------- -------- ------- --------
Investment income-net 1,578 185 423 92 2,278
-------- -------- -------- ------- --------
Realized and Unrealized Gains(Losses)
on Investments - Net
Net realized gain (loss) on investments 26,343 20,276^ 27,875 74,494
Net change in unrealized appreciation --
(depreciation) of investments (153,169) (117,589)^ (77,385) (348,143)
-------- -------- -------- ------- --------
Net gain (loss) on investments (126,826) (97,313) (49,510) -- (273,649)
-------- -------- -------- ------- --------
Net increase (decrease) in net assets
resulting from operations (125,248) (97,128) (49,087) 92 (271,371)
======== ======== ======== ======= ========
</TABLE>
(A) Adjustment reflects the additional waiver amount necessary to reflect
expenses of the combined fund.
* - Includes income from securities lending program.
^ - Includes the following amounts due to investments in Common Stock of
Affiliates (000): $86 of dividend income, $1,706 of realized gains and
$20,875 of unrealized depreciation of investments.
See Notes to Pro Forma Combining Financial Statements.
72
<PAGE>
Small Cap Value Fund
Pro Forma Combining Financial Statements (unaudited)
Statements of Operations (000's omitted)
For the Year ended 9/30/98
<TABLE>
<CAPTION>
Small Cap Small Cap Small Cap
12/1/97 to 9/30/97 to 11/21/97 to Small Cap
9/30/98 11/21/97 11/30/97 Combined
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Investment Income:
Interest 1,917 171 41 2,129
Dividends 3,312 639 22 3,973
-------- -------- -------- --------
Total Investment Income 5,229 810 63 6,102
Expenses:
Investment Advisory Fees 2,861 562 80 3,503
Less: Waiver of investment advisory fees (66) -- (1) (67)
Administrator fees 449 114 13 576
Transfer agent fees 87 27 1 115
Amortization of organization costs -- -- -- --
Custodian fees 123 3 126
Directors' fees 7 2 9
Registration fees 106 30 136
Professional fees 15 (10) 5
Printing 17 24 1 42
Distribution fees-Class A 38 9 1 48
Less: Waiver of distribution fees-Class A -- -- --
Distribution fees-Class B 2 1 3
Other 7 21 28
-------- -------- -------- --------
Total net expenses 3,646 780 98 4,524
-------- -------- -------- --------
Investment income-net 1,583 30 (35) 1,578
-------- -------- -------- --------
Realized and Unrealized Gains(Losses)
on Investments - Net
Net realized gain (loss) on investments 25,057 1,074 212 26,343
Net change in unrealized appreciation --
(depreciation) of investments (116,183) (32,670) (4,316) (153,169)
-------- -------- -------- --------
Net gain (loss) on investments (91,126) (31,596) (4,104) (126,826)
-------- -------- -------- --------
Net increase (decrease) in net assets
resulting from operations (89,543) (31,566) (4,139) (125,248)
-------- -------- -------- --------
</TABLE>
73
<PAGE>
SMALL CAP VALUE FUND
PRO FORMA COMBINING FINANCIAL STATEMENTS (UNAUDITED)
STATEMENT OF NET ASSETS (000's)
MARCH 31,1999
<TABLE>
<CAPTION>
SMALL CAP VALUE REGIONAL EQUITY
FUND FUND
------------------------------------- -----------------------------------
Shares/Par (000) Market Value (000) Shares/Par (000) Market Value (000)
<S> <C> <C> <C> <C>
Common Stocks--91.1%
Basic Materials--0.9%
A.M. Castle 70,000 $ 844
BWay* 177,000 $ 2,334
CPAC 35,700 263
Hawkins Chemical 140,000 1,365
------------------ -------------------
Total Basic Materials 2,597 2,209
------------------ -------------------
Capital Goods--20.4%
AFC Cable Systems* 232,600 6,920
Alliant Techsystems* 66,300 5,151 107,800 8,375
American Aircarriers Support*
Applied Power, Cl A 235,000 6,404
Aqua Alliance* 1,362,300 3,065
Ballantyne of Omaha* 345,450 2,591
BMC Industries 187,100 830
BOLDER Technologies* 170,200 1,468
Brady 32,500 680
Bridgeport Machines* 158,600 981
Brown & Sharpe Manufacturing*
Catalytica* 682,033 7,502
Dayton Superior, CL A* 164,300 2,855
Donaldson 300,000 5,400
Dupont Photomasks* 17,900 709
Idex 70,000 1,649
L.B. Foster, Cl A* 253,800 1,174
Lindberg
LMI Aerospace*
MagneTek* 321,487 2,692
Moog, Cl A* 259,200 7,906
Newpark Resources* 479,600 3,477
Northwest Pipe* 180,000 2,970
Park Ohio Holdings* 227,300 3,182
Pentair 190,100 6,416
Shelby Williams Industries 76,050 727
SPX* 65,000 3,278
Supreme Industries
Thomas Industries 139,650 2,618
Tower Automotive* 402,100 7,489
Tredegar Industries 58,400 1,807
U.S. Filter* 29,211 895
Valmont Industries 190,000 2,636
Varlen 392,000 8,624
------------------ -------------------
Total Capital Goods 54,631 55,840
------------------ -------------------
Consumer Cyclicals--18.4%
Acxiom* 96,140 2,548
Alternate Postal Delivery (A)* 87,900 88
Applied Graphics Technologies* 190,500 1,429
Ashworth* 330,000 1,155
Bell & Howell* 195,600 5,734 115,000 3,371
Bonded Motors* 71,400 174
Borg Warner Security* 461,700 7,733 89,300 1,496
DR Horton 173,475 2,906
Department 56* 190,000 5,783
Dura Automotive Systems* 118,880 3,358 251,700 7,111
Edelbrock* 106,200 1,593
</TABLE>
[WIDE TABLE CONTINUED]
<TABLE>
<CAPTION>
MICRO CAP VALUE PRO FORMA
FUND COMBINED
------------------------------------- -----------------------------------
Shares/Par (000) Market Value (000) Shares/Par (000) Market Value (000)
<S> <C> <C> <C> <C>
Common Stocks--91.1%
Basic Materials--0.9%
A.M. Castle 70,000 $ 844
BWay* 59,400 $ 783 236,400 3,117
CPAC 9,800 72 45,500 335
Hawkins Chemical 140,000 1,365
------------------ ------------------
Total Basic Materials 855 5,661
------------------ ------------------
Capital Goods--20.4%
AFC Cable Systems* 45,000 1,339 277,600 8,259
Alliant Techsystems* 174,100 13,526
American Aircarriers Support* 60,000 540 60,000 540
Applied Power, Cl A 235,000 6,404
Aqua Alliance* 1,362,300 3,065
Ballantyne of Omaha* 345,450 2,591
BMC Industries 187,100 830
BOLDER Technologies* 100,000 862 270,200 2,330
Brady 32,500 680
Bridgeport Machines* 88,000 544 246,600 1,525
Brown & Sharpe Manufacturing* 100,000 494 100,000 494
Catalytica* 70,000 770 752,033 8,272
Dayton Superior, CL A* 75,500 1,312 239,800 4,167
Donaldson 300,000 5,400
Dupont Photomasks* 17,900 709
Idex 70,000 1,649
L.B. Foster, Cl A* 160,000 740 413,800 1,914
Lindberg 30,800 271 30,800 271
LMI Aerospace* 105,000 604 105,000 604
MagneTek* 170,000 1,424 491,487 4,116
Moog, Cl A* 62,400 1,903 321,600 9,809
Newpark Resources* 479,600 3,477
Northwest Pipe* 50,100 827 230,100 3,797
Park Ohio Holdings* 73,535 1,029 300,835 4,211
Pentair 190,100 6,416
Shelby Williams Industries 62,800 601 138,850 1,328
SPX* 65,000 3,278
Supreme Industries 76,745 566 76,745 566
Thomas Industries 41,750 783 181,400 3,401
Tower Automotive* 402,100 7,489
Tredegar Industries 58,400 1,807
U.S. Filter* 29,211 895
Valmont Industries 190,000 2,636
Varlen 392,000 8,624
------------------ ------------------
Total Capital Goods 14,609 125,080
------------------ ------------------
Consumer Cyclicals--18.4%
Acxiom* 96,140 2,548
Alternate Postal Delivery (A)* 87,900 88
Applied Graphics Technologies* 190,500 1,429
Ashworth* 330,000 1,155
Bell & Howell* 310,600 9,105
Bonded Motors* 74,600 182 146,000 356
Borg Warner Security* 100,000 1,675 651,000 10,904
DR Horton 173,475 2,906
Department 56* 190,000 5,783
Dura Automotive Systems* 60,720 1,715 431,300 12,184
Edelbrock* 37,000 555 143,200 2,148
</TABLE>
74
<PAGE>
SMALL CAP VALUE FUND
PRO FORMA COMBINING FINANCIAL STATEMENTS (UNAUDITED)
STATEMENT OF NET ASSETS (000's)
MARCH 31,1999
<TABLE>
<CAPTION>
SMALL CAP VALUE REGIONAL EQUITY
FUND FUND
------------------------------------- -----------------------------------
Shares/Par (000) Market Value (000) Shares/Par (000) Market Value (000)
<S> <C> <C> <C> <C>
Finish Line, Cl A* 196,700 2,532
Finlay Enterprises*
Friedman's, Cl A
Gildan Activewear*
Hampshire Group Limited* 55,100 441
Huffy 106,000 1,272
Inacom* 160,852 1,247 260,000 2,015
K-Swiss, Cl A 54,600 1,379
Lakes Gaming* 40,000 327
Matthews International, Cl A 135,300 3,704
Park Place Entertainment* 180,000 1,361
Piercing Pagoda* 122,250 1,093
Quaker Fabric* 358,400 1,994
Racing Champions*
Regis 225,000 5,991 300,000 7,988
Service Experts* 50,800 686
Simpson Manufacturing* 59,100 2,379
Sport-Haley (A)* 313,000 2,543
Staff Leasing* 112,300 1,607
Stanley Furniture* 233,400 4,551
Steven Madden Limited*
Synthetic Industries* 120,400 2,009
Tarrant Apparel Group* 30,300 1,273
TearDrop Golf*
Topps* 600,000 2,625
Total Containment*
TRO Learning* 212,200 1,273
Video Update, Cl A* 376,150 317
Walbro* 108,500 976
Whitehall Jewellers* 56,200 864
------------------ -------------------
Total Consumer Cyclicals 63,688 33,238
------------------ -------------------
Consumer Staples--6.2%
Avado Brands 121,600 722
Buenos Aires Embotelladora S.A.,ADR* 6,274 --
Buffets* 123,600 1,221 496,800 4,906
Drug Emporium* 141,900 683
International Multifoods 210,600 4,910
Lodgenet Entertainment* 360,000 2,363
Mac-Gray*
Merrill 152,000 2,033 562,000 7,517
Michael Foods 302,600 5,768
Pepsi-Cola Puerto Rico Bottling, Cl B* 23,387 140
Performance Food Group* 96,800 2,541
Suiza Foods* 100,300 3,379
------------------ -------------------
Total Consumer Staples 10,719 25,464
------------------ -------------------
Energy--2.5%
Atwood Oceanic* 42,000 1,260
Basin Exploration* 170,000 2,359
Bellwether Exploration*
Callon Petroleum*
Evergreen Resources* 51,000 1,020
Forest Oil* 260,360 1,953 176,000 1,320
Mallon Resources* 162,000 1,215
Veritas DGC* 152,000 2,156 110,800 1,572
------------------ -------------------
</TABLE>
[WIDE TABLE CONTINUED]
<TABLE>
<CAPTION>
MICRO CAP VALUE PRO FORMA
FUND COMBINED
------------------------------------- -----------------------------------
Shares/Par (000) Market Value (000) Shares/Par (000) Market Value (000)
<S> <C> <C> <C> <C>
Finish Line, Cl A* 196,700 2,532
Finlay Enterprises* 55,900 604 55,900 604
Friedman's, Cl A 30,800 277 30,800 277
Gildan Activewear* 80,000 980 80,000 980
Hampshire Group Limited* 34,100 273 89,200 714
Huffy 48,300 580 154,300 1,852
Inacom* 420,852 3,262
K-Swiss, Cl A 13,400 338 68,000 1,717
Lakes Gaming* 40,000 327
Matthews International, Cl A 40,000 1,095 175,300 4,799
Park Place Entertainment* 180,000 1,361
Piercing Pagoda* 32,150 287 154,400 1,380
Quaker Fabric* 80,000 445 438,400 2,439
Racing Champions* 81,000 891 81,000 891
Regis 525,000 13,979
Service Experts* 50,800 686
Simpson Manufacturing* 14,300 576 73,400 2,955
Sport-Haley (A)* 313,000 2,543
Staff Leasing* 112,300 1,607
Stanley Furniture* 60,000 1,170 293,400 5,721
Steven Madden Limited* 100,000 844 100,000 844
Synthetic Industries* 49,200 821 169,600 2,830
Tarrant Apparel Group* 30,300 1,273
TearDrop Golf* 100,600 498 100,600 498
Topps* 600,000 2,625
Total Containment* 56,500 307 56,500 307
TRO Learning* 117,700 706 329,900 1,979
Video Update, Cl A* 175,125 148 551,275 465
Walbro* 67,500 607 176,000 1,583
Whitehall Jewellers* 19,100 294 75,300 1,158
-------------------- ------------------
Total Consumer Cyclicals 15,868 112,794
-------------------- ------------------
Consumer Staples--6.2%
Avado Brands 121,600 722
Buenos Aires Embotelladora S.A.,ADR* 2,824 -- 9,098 --
Buffets* 620,400 6,127
Drug Emporium* 205,000 987 346,900 1,670
International Multifoods 210,600 4,910
Lodgenet Entertainment* 360,000 2,363
Mac-Gray* 48,400 445 48,400 445
Merrill 714,000 9,550
Michael Foods 302,600 5,768
Pepsi-Cola Puerto Rico Bottling, Cl B* 10,527 63 33,914 203
Performance Food Group* 14,000 367 110,800 2,908
Suiza Foods* 100,300 3,379
-------------------- ------------------
Total Consumer Staples 1,862 38,045
-------------------- ------------------
Energy--2.5%
Atwood Oceanic* 42,000 1,260
Basin Exploration* 40,000 555 210,000 2,914
Bellwether Exploration* 94,500 337 94,500 337
Callon Petroleum* 40,000 445 40,000 445
Evergreen Resources* 51,000 1,020
Forest Oil* 85,220 639 521,580 3,912
Mallon Resources* 162,000 1,215
Veritas DGC* 37,800 536 300,600 4,264
-------------------- ------------------
</TABLE>
75
<PAGE>
SMALL CAP VALUE FUND
PRO FORMA COMBINING FINANCIAL STATEMENTS (UNAUDITED)
STATEMENT OF NET ASSETS (000's)
MARCH 31,1999
<TABLE>
<CAPTION>
SMALL CAP VALUE REGIONAL EQUITY
FUND FUND
------------------------------------- -----------------------------------
Shares/Par (000) Market Value (000) Shares/Par (000) Market Value (000)
<S> <C> <C> <C> <C>
Total Energy 5,369 7,486
------------------ -------------------
Financials--16.8%
Amerin* 291,100 5,913 410,000 8,328
ARM Financial Group, Cl A 52,600 786 53,400 798
Astoria Financial 43,700 2,185
Chelsea GCA Realty 98,900 2,757
Community First Bankshares 102,800 2,056 455,000 9,100
Dain Rauscher 89,200 3,033 65,000 2,210
Delphi Financial Group, Cl A* -- --
Enhance Financial Services Group 281,700 6,409
Farm Family Holdings* 59,900 1,902
First Republic Bank* 183,000 4,415
Franchise Mortgage Acceptance* 414,600 3,006
Highwoods Properties 92,700 2,184
LaSalle Re Holdings 92,300 1,361
Lexington Corporate Properties 178,600 1,987
Metris 90,000 3,634
Penn Treaty American* 160,800 3,990
Philadelphia Consolidated Holding* 206,700 4,160
Roslyn Bancorp 305,040 5,148
SCPIE Holdings
Shurgard Storage Centers
Southwest Bancorp of Texas* 73,400 904
TCF Financial 235,000 6,110
UST 105,730 2,310
Walden Residential Properties 109,200 1,925
Webster Financial 110,904 3,202
Willis Lease Finance* 165,100 2,889
------------------ -------------------
Total Financials 62,522 30,180
------------------ -------------------
Health Care--6.3%
America Service Group*
ATS Medical* 255,600 1,917
Collaborative Clinical Research*
Cooper* 324,400 4,988
Diagnostic Health Services* 316,900 386
Empi* 280,000 6,055
Lifecore Biomedical* 96,200 836 483,500 4,200
Mentor 168,900 2,481
Minntech 14,200 179
Nu-Med*
Orphan Medical* 162,800 1,180
Parexel International* 174,300 3,606
PolyMedica* 225,200 1,689
Rehabilicare* 225,000 591
Respironics* 306,500 4,042
Roberts Pharmaceutical* 54,000 1,120
Spacelabs Medical* 115,600 1,944
------------------ -------------------
Total Health Care 21,092 14,122
------------------ -------------------
Technology--16.1%
Actel* 80,300 1,320
Aetrium (A)* 580,000 3,770
Alpha Industries 52,500 965
Alternative Resources* 244,900 1,561
ANADIGICS* 27,000 476
</TABLE>
[WIDE TABLE CONTINUED]
<TABLE>
<CAPTION>
MICRO CAP VALUE PRO FORMA
FUND COMBINED
------------------------------------- -----------------------------------
Shares/Par (000) Market Value (000) Shares/Par (000) Market Value (000)
<S> <C> <C> <C> <C>
Total Energy 2,512 15,367
-------------- ------------------
Financials--16.8%
Amerin* 701,100 14,241
ARM Financial Group, Cl A 106,000 1,584
Astoria Financial 43,700 2,185
Chelsea GCA Realty 27,100 755 126,000 3,512
Community First Bankshares 557,800 11,156
Dain Rauscher 8,200 279 162,400 5,522
Delphi Financial Group, Cl A* -- --
Enhance Financial Services Group 281,700 6,409
Farm Family Holdings* 30,000 952 89,900 2,854
First Republic Bank* 70,000 1,689 253,000 6,104
Franchise Mortgage Acceptance* 414,600 3,006
Highwoods Properties 92,700 2,184
LaSalle Re Holdings 22,400 330 114,700 1,691
Lexington Corporate Properties 53,000 590 231,600 2,577
Metris 90,000 3,634
Penn Treaty American* 45,000 1,117 205,800 5,107
Philadelphia Consolidated Holding* 55,000 1,107 261,700 5,267
Roslyn Bancorp 305,040 5,148
SCPIE Holdings 15,000 408 15,000 408
Shurgard Storage Centers 14,100 356 14,100 356
Southwest Bancorp of Texas* 73,400 904
TCF Financial 235,000 6,110
UST 105,730 2,310
Walden Residential Properties 34,000 599 143,200 2,524
Webster Financial 35,800 1,034 146,704 4,236
Willis Lease Finance* 40,200 703 205,300 3,592
------------------ ------------------
Total Financials 9,919 102,621
------------------ ------------------
Health Care--6.3%
America Service Group* 95,000 1,116 95,000 1,116
ATS Medical* 255,600 1,917
Collaborative Clinical Research* 160,000 680 160,000 680
Cooper* 324,400 4,988
Diagnostic Health Services* 224,500 274 541,400 660
Empi* 280,000 6,055
Lifecore Biomedical* 579,700 5,036
Mentor 168,900 2,481
Minntech 5,800 73 20,000 252
Nu-Med* 731 -- 731 --
Orphan Medical* 162,800 1,180
Parexel International* 174,300 3,606
PolyMedica* 79,000 592 304,200 2,281
Rehabilicare* 225,000 591
Respironics* 306,500 4,042
Roberts Pharmaceutical* 54,000 1,120
Spacelabs Medical* 40,000 673 155,600 2,617
------------------ ------------------
Total Health Care 3,408 8,622
------------------ ------------------
Technology--16.1%
Actel* 80,300 1,320
Aetrium (A)* 580,000 3,770
Alpha Industries 13,650 251 66,150 1,216
Alternative Resources* 244,900 1,561
ANADIGICS* 7,100 125 34,100 601
</TABLE>
76
<PAGE>
SMALL CAP VALUE FUND
PRO FORMA COMBINING FINANCIAL STATEMENTS (UNAUDITED)
STATEMENT OF NET ASSETS (000's)
MARCH 31,1999
<TABLE>
<CAPTION>
SMALL CAP VALUE REGIONAL EQUITY
FUND FUND
------------------------------------- -----------------------------------
Shares/Par (000) Market Value (000) Shares/Par (000) Market Value (000)
<S> <C> <C> <C> <C>
Applied Science & Technology*
Aris Corp*
BancTec* 228,262 2,810
BrightStar Information Technology*
Ciprico*
Comdial* 145,300 944
Communications Systems 386,000 3,667
Corsair Communications*
Digital Microwave* 197,100 1,651
DII Group* 42,100 1,231
DSP Communications* 41,400 657
Etec Systems* 26,600 783
Evolving Systems* 308,400 1,503
FEI* 131,600 1,102
Fieldworks*
Fourth Shift*
Gatefield* 537,600 470
Glenayre Technologies* 203,500 700
Government Technology Services*
Innovex 200,000 2,675
Inprise Corp* 642,800 2,491
Kofax Image Products*
Kronos* 55,200 1,352
Mosaix (A)* 535,800 4,487
National Computer Systems 111,400 2,729 258,100 6,323
Network Equipment Technology* 187,300 1,674
Norstan (A)* 510,000 4,718
Nova* 67,774 1,779
Olicom A/S* 175,900 528
P-Com* 90,900 693
Periophonics*
Pioneer-Standard Electronics 187,600 1,231
Pomeroy Computer Resources* 155,800 2,025
Powerwave Technologies* 59,100 1,677
Radisys* 209,500 6,508
Rainbow Technology*
Remec* 57,600 1,202
Sapiens International* 170,300 1,777
Sawtek* 41,200 1,390
Spectrian* 65,700 772
Sybase* 555,300 4,408
System Software Associates 811,900 1,827 642,100 1,445
Triple P N.V. (D)* 801,760 2,205
TSI (A) 420,000 3,413
Unitrode* 180,400 2,559
Wall Data*
------------------ -------------------
Total Technology 51,936 33,562
------------------ -------------------
Transportation--0.7%
Nordic American Tanker Shipping 284,800 3,275
World Airways* 46,500 46
------------------ -------------------
Total Transportation 3,321 --
------------------ -------------------
Utilities--2.8%
El Paso Electric* 250,000 1,906
Midcoast Energy Resources
TNP Enterprises 82,300 2,366
</TABLE>
[WIDE TABLE CONTINUED]
<TABLE>
<CAPTION>
MICRO CAP VALUE PRO FORMA
FUND COMBINED
------------------------------------- -----------------------------------
Shares/Par (000) Market Value (000) Shares/Par (000) Market Value (000)
<S> <C> <C> <C> <C>
Applied Science & Technology* 50,000 628 50,000 628
Aris Corp* 34,800 291 34,800 291
BancTec* 228,262 2,810
BrightStar Information Technology* 108,600 421 108,600 421
Ciprico* 117,500 969 117,500 969
Comdial* 89,600 582 234,900 1,526
Communications Systems 386,000 3,667
Corsair Communications* 138,500 710 138,500 710
Digital Microwave* 197,100 1,651
DII Group* 42,100 1,231
DSP Communications* 41,400 657
Etec Systems* 26,600 783
Evolving Systems* 200,000 975 508,400 2,478
FEI* 100,000 838 231,600 1,940
Fieldworks* 176,000 424 176,000 424
Fourth Shift* 58,200 313 58,200 313
Gatefield* 194,850 170 732,450 640
Glenayre Technologies* 203,500 700
Government Technology Services* 175,000 613 175,000 613
Innovex 200,000 2,675
Inprise Corp* 185,000 717 827,800 3,208
Kofax Image Products* 147,500 1,328 147,500 1,328
Kronos* 55,200 1,352
Mosaix (A)* 535,800 4,487
National Computer Systems 369,500 9,052
Network Equipment Technology* 187,300 1,674
Norstan (A)* 510,000 4,718
Nova* 67,774 1,779
Olicom A/S* 58,300 175 234,200 703
P-Com* 25,100 191 116,000 884
Periophonics* 50,000 316 50,000 316
Pioneer-Standard Electronics 55,000 361 242,600 1,592
Pomeroy Computer Resources* 39,200 510 195,000 2,535
Powerwave Technologies* 59,100 1,677
Radisys* 209,500 6,508
Rainbow Technology* 40,000 400 40,000 400
Remec* 57,600 1,202
Sapiens International* 45,900 479 216,200 2,256
Sawtek* 41,200 1,390
Spectrian* 17,300 203 83,000 975
Sybase* 555,300 4,408
System Software Associates 1,454,000 3,272
Triple P N.V. (D)* 183,500 505 985,260 2,710
TSI (A) 420,000 3,413
Unitrode* 180,400 2,559
Wall Data* 25,000 359 25,000 359
-------------------- ---------------
Total Technology 12,854 98,352
-------------------- ---------------
Transportation--0.7%
Nordic American Tanker Shipping 75,000 863 359,800 4,138
World Airways* 46,500 46
-------------------- ---------------
Total Transportation 863 4,184
-------------------- ---------------
Utilities--2.8%
El Paso Electric* 126,800 967 376,800 2,873
Midcoast Energy Resources 26,262 407 26,262 407
TNP Enterprises 30,000 863 112,300 3,229
</TABLE>
77
<PAGE>
SMALL CAP VALUE FUND
PRO FORMA COMBINING FINANCIAL STATEMENTS (UNAUDITED)
STATEMENT OF NET ASSETS (000's)
MARCH 31,1999
<TABLE>
<CAPTION>
SMALL CAP VALUE REGIONAL EQUITY
FUND FUND
------------------------------------- -----------------------------------
Shares/Par (000) Market Value (000) Shares/Par (000) Market Value (000)
<S> <C> <C> <C> <C>
Trigen Energy
Unisource Energy Holding* 650,000 7,191
Western Gas Resources 90,000 675
------------------ -------------------
Total Utilities 11,463 675
------------------ -------------------
Total Common Stocks (Cost $268,570,
$174,241, $69,928, and $512,739 respectively) 287,338 202,776
Convertible Bonds--0.8%
Complete Management, 62.5000 shares, 8.000%,
08/15/03 (C) 595 47
Complete Management, 71.4286 shares, 8.000%,
08/15/03 (C) 520 41
Drug Emporium, 65.1466 shares, 7.750%, 10/01/14 740 540
Leasing Solutions, 28.6533 shares, 6.875%, 10/01/03 455 52
Titan, 285.7143 shares, 0.25% 11/01/03 8.250%,
11/01/03 1,935 2,838
------------------ -------------------
Total Convertible Bonds (Cost $4,059, $0, $2,204,
and $6,263 respectively) 3,518 --
------------------ -------------------
Warrants--0.0%
Sound Advice* 505 --
------------------ -------------------
Total Warrants (Cost $0,$0, $0, and $0 respectively) -- --
------------------ -------------------
Related Party Money Market Funds--3.9%
First American Prime Obligations Fund (B) 18,087,162 18,087 923,212 923
------------------ -------------------
Total Related Party Money Market Funds (Cost
$18,087, $923, $5,026, and $24,036 respectively) 18,087 923
------------------ -------------------
Total Investments--95.8% (Cost $290,716,
$175,164, $77,158, and $543,038 respectively) 308,943 203,699
------------------ -------------------
Other Assets and Liabilities, Net--4.2% (E) 14,756 10,811
------------------ -------------------
Total Net Assets--100.0% $ 323,699 $ 214,510
================== ===================
</TABLE>
[WIDE TABLE CONTINUED]
<TABLE>
<CAPTION>
MICRO CAP VALUE PRO FORMA
FUND COMBINED
------------------------------------- -----------------------------------
Shares/Par (000) Market Value (000) Shares/Par (000) Market Value (000)
<S> <C> <C> <C> <C>
Trigen Energy 54,700 749 54,700 749
Unisource Energy Holding* 165,000 1,825 815,000 9,016
Western Gas Resources 90,000 675
------------------ ------------------
Total Utilities 4,811 16,949
------------------ ------------------
Total Common Stocks (Cost $268,570,
$174,241, $69,928, and $512,739 respectively) 67,561 557,675
Convertible Bonds--0.8%
Complete Management, 62.5000 shares, 8.000%,
08/15/03 (C) 300 24 895 71
Complete Management, 71.4286 shares, 8.000%,
08/15/03 (C) 590 46 1,110 87
Drug Emporium, 65.1466 shares, 7.750%, 10/01/14 921 672 1,661 1,212
Leasing Solutions, 28.6533 shares, 6.875%, 10/01/03 250 29 705 81
Titan, 285.7143 shares, 0.25% 11/01/03 8.250%,
11/01/03 360 528 2,295 3,366
------------------ ------------------
Total Convertible Bonds (Cost $4,059, $0, $2,204,
and $6,263 respectively) 1,299 4,817
------------------ ------------------
Warrants--0.0%
Sound Advice* 2,025 -- 2,530 --
------------------ ------------------
Total Warrants (Cost $0,$0, $0, and $0 respectively) -- --
------------------ ------------------
Related Party Money Market Funds--3.9%
First American Prime Obligations Fund (B) 5,026,223 5,026 24,036,597 24,036
------------------ ------------------
Total Related Party Money Market Funds (Cost
$18,087, $923, $5,026, and $24,036 respectively) 5,026 24,036
------------------ ------------------
Total Investments--95.8% (Cost $290,716,
$175,164, $77,158, and $543,038 respectively) 73,886 586,528
------------------ ------------------
Other Assets and Liabilities, Net--4.2% (E) 433 26,000
------------------ ------------------
Total Net Assets--100.0% $ 74,319 $ 612,528
================== ==================
</TABLE>
* Non-income producing security
(A) Investments represent five percent or more of the outstanding voting
securities of the issuer, and is or was an affiliate, as defined in the
Investment Company Act of 1940 at or during the period ended March 31, 1999.
See activity below.
(B) This money market fund is advised by U.S. Bank National Association who also
serves as advisor for this fund.
(C) Security was in default as of April 1, 1999.
(D) 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 the program or other "qualified
institutional investors".
(E) Other assets and liabilities representing greater than five percent of total
net assets include the following (000):
Cash collateral received for securities on loan 43,323
Payable upon return of securities on loan 43,323
ADR-American Depositary Receipt
Cl-Class
The activity for investments in Common Stocks of Affiliates is as follows:
<TABLE>
<CAPTION>
Shares at Shares at
Description 9/30/98 3/31/99 Difference Dividends Realized G/L
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Aetrium 686,000 580,000 106,000 -- (718,925)
Alternate Postal Delivery 210,000 87,900 (#) 122,100 -- (523,559)
</TABLE>
78
<PAGE>
SMALL CAP VALUE FUND
PRO FORMA COMBINING FINANCIAL STATEMENTS (UNAUDITED)
STATEMENT OF NET ASSETS (000's)
MARCH 31,1999
<TABLE>
<CAPTION>
SMALL CAP VALUE REGIONAL EQUITY
FUND FUND
--------------------------------------- ---------------------------------------
Shares/Par (000) Market Value (000) Shares/Par (000) Market Value (000)
<S> <C> <C> <C> <C>
Gatefield 865,550 732,450 133,100 --
Mosaix 535,800 535,800 -- --
Norstan 551,300 510,000 (#) 41,300 --
Sport Haley 313,000 313,000 -- --
TRO Learning 369,900 329,900 40,000 --
TSI 669,300 420,000 (#) 249,300 34,029
- --------------------------------------------------------------------------------------------------------------
4,200,850 3,509,050 691,800 34,029
</TABLE>
[WIDE TABLE CONTINUED]
<TABLE>
<CAPTION>
MICRO CAP VALUE PRO FORMA
FUND COMBINED
--------------------------------------- ---------------------------------------
Shares/Par (000) Market Value (000) Shares/Par (000) Market Value (000)
<S> <C> <C> <C> <C>
Gatefield (102,008)
Mosaix --
Norstan (118,567)
Sport Haley --
TRO Learning 111,442
TSI 1,308,906
- -------------------------------------------
(42,711)
</TABLE>
(#) At March 31, 1999 these issuers were not considered affiliates.
79
<PAGE>
SMALL CAP VALUE FUND
PRO FORMA COMBINING FINANCIAL STATEMENTS (UNAUDITED)
STATEMENT OF ASSETS AND LIABILITIES (000'S)
MARCH 31,1999
<TABLE>
<CAPTION>
SMALL CAP VALUE
FUND
SMALL CAP VALUE REGIONAL EQUITY PRO FORMA
FUND FUND ADJUSTMENTS COMBINED
--------------- --------------- ------------ ----------------
<S> <C> <C> <C> <C>
ASSETS:
Investments at value (Cost $290,716, $175,164, and $465,880
respectively) $ 308,943 $ 203,699 $ 512,642
Cash 37 7,502 7,539
Dividends and interest receivable 376 146 522
Receivable for Fund shares sold 15,967 69 16,036
Receivable for investments sold 1,947 4,143 6,090
Cash collateral received for securities on loan 15,261 23,793 39,054
Prepaid expenses and other assets 10 1 11
------------ ------------ ------------ ------------
Total Assets 342,541 239,353 -- 581,894
------------ ------------ ------------ ------------
LIABILITIES:
Payable for investments purchased 1,747 143 1,890
Payable for Fund shares repurchased 1,713 684 2,397
Accrued expenses and other liabilities 121 223 344
Payable upon return of securities on loan 15,261 23,793 39,054
------------ ------------ ------------ ------------
Total Liabilities 18,842 24,843 -- 43,685
------------ ------------ ------------ ------------
NET ASSETS $ 323,699 $ 214,510 $ -- $ 538,209
============ ============ ============ ============
Net Assets are comprised of:
Paid in Capital $ 314,188 $ 177,041 $ 491,229
Undistributed net investment income/(loss) 86 (177) (91)
Accumulated net realized loss on investments (8,802) 9,111 309
Net unrealized appreciation of investments 18,227 28,535 46,762
------------ ------------ ------------ ------------
NET ASSETS $ 323,699 $ 214,510 -- $ 538,209
============ ============ ============ ============
NET ASSET VALUE AND OFFERING PRICE:
CLASS A:
</TABLE>
80
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Net Assets $ 11,402 $ 20,906 $ 32,308
Shares outstanding ($.0001 par value - 2 billion authorized) 945 1,320 412(E) 2,677
Net asset value and redemption price per share $ 12.07 $ 15.84 $ 12.07
Maximum sales charge of 5.25% (A) 0.67 0.88 0.67
------------ ------------ ------------ ------------
Offering price per share $ 12.74 $ 16.72 $ 12.74
============ ============ ============ ============
CLASS B:
Net Assets $ 809 $ 23,895 $ 24,704
Shares outstanding ($.0001 par value - 2 billion authorized) 68 1,558 438(E) 2,064
Net asset value and offering price per share (B) $ 11.97 $ 15.34 $ 11.97
============ ============ ============ ============
CLASS C:
Net Assets $ 35 -- $ 35
Shares outstanding ($.0001 par value - 2 billion authorized) 3 -- 3
Net asset value per share (C) $ 12.06 -- $ 12.06
Maximum sales charge of 1.00% (D) 0.12 0.12
------------ ------------ ------------ ------------
Offering price per share $ 12.18 -- $ 12.18
============ ============ ============ ============
CLASS Y
Net Assets $ 311,453 $ 169,709 $ 481,162
Shares outstanding ($.0001 par value - 2 billion authorized) 25,750 10,664 3,362(E) 39,776
Net asset value, offering price, and redemption price per share $ 12.10 $ 15.91 $ 12.10
============ ============ ============ ============
</TABLE>
(A) The offering price is calculated by dividing the net asset value by 1 minus
the maximum sales charge of 5.25%.
(B) Class - B has a contingent deferred sales charge. This charge declines from
a high of 5.00% in the first year to 0.00% after eight years, as outlined in
the prospectus.
(C) Class - C has a contingent deferred sales charge imposed on redemptions made
in Class-C shares for the first eighteen months, as outlined in the
prospectus.
(D) The offering price is calculated by dividing the net asset value by 1 minus
the maximum sales charge of 1.00%.
(E) Reflects the impact of converting shares of the target fund into the
survivor fund.
See Notes to Pro Forma Combining Financial Statements.
81
<PAGE>
SMALL CAP VALUE FUND
PRO FORMA COMBINING FINANCIAL STATEMENTS (UNAUDITED)
STATEMENTS OF OPERATIONS (000'S OMITTED)
FOR THE 6 MONTH PERIOD ENDED 3/31/99
<TABLE>
<CAPTION>
SMALL CAP
VALUE
SMALL CAP REGIONAL FUND
VALUE EQUITY PRO-FORMA PRO-FORMA
FUND FUND ADJUSTMENT COMBINED
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Investment Income:
Interest 748* 268* 1,016*
Dividends 1,346 977^ 2,323^
---------- ---------- ---------- ----------
Total Investment Income 2,094 1,245 -- 3,339
Expenses:
Investment Advisory Fees 1,337 965 2,302
Less: Waiver of investment advisory fees (17) (84) (14)(A) (115)
Administrator fees 208 150 358
Transfer agent fees 45 141 186
Custodian fees 57 41 98
Directors' fees 4 3 7
Registration fees 22 10 32
Professional fees 5 3 8
Printing 11 8 19
Distribution fees-Class A 16 32 48
Distribution fees-Class B 4 149 153
Other 5 4 9
---------- ---------- ---------- ----------
Total net expenses 1,697 1,422 (14) 3,105
---------- ---------- ---------- ----------
Investment income-net 397 (177) 14 234
---------- ---------- ---------- ----------
Realized and Unrealized Gains(Losses)
on Investments - Net
Net realized gain (loss) on investments (4,693) 9,115^ 4,422^
Net change in unrealized appreciation
(depreciation) of investments (5,328) 788^ (4,540)^
---------- ---------- ---------- ----------
Net gain (loss) on investments (10,021) 9,903 -- (118)
---------- ---------- ---------- ----------
Net increase (decrease) in net assets
resulting from operations (9,624) 9,726 14 116
========== ========== ========== ==========
</TABLE>
* - Includes income from securities lending program.
^ - Includes the following amounts from investments in Common Stock of
Affiliates (000): $34 of dividend income, $(52) of realized loss on
investments and $3,358 of unrealized appreciation of investments.
(A) Adjustment reflects the additional waiver amount necessary to reflect
anticipated expenses of the combined fund.
See Notes to Pro Forma Combining Financial Statements.
82
<PAGE>
Small Cap Value Fund
Pro Forma Combining Financial Statements (unaudited)
Statements of Operations (000's omitted)
For the Year ended 9/30/98
<TABLE>
<CAPTION>
Small Cap
Value
Small Cap Regional Fund
Value Equity Pro-Forma Pro-Forma
Fund Fund Adjustment Combined
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Investment Income:
Interest 2,129* 2,310* 4,439*
Dividends 3,973 1,853^ 5,826^
---------- ---------- ---------- ----------
Total Investment Income 6,102 4,163 -- 10,265
Expenses:
Investment Advisory Fees 3,503 2,715 6,218
Less: Waiver of investment advisory fees (67) (41) (88) (196)
Administrator fees 576 427 1,003
Transfer agent fees 115 228 343
Amortization of organization costs -- -- --
Custodian fees 126 117 243
Directors' fees 9 6 15
Registration fees 136 9 145
Professional fees 5 13 18
Printing 42 17 59
Distribution fees-Class A 48 84 132
Distribution fees-Class B 3 394 397
Other 28 9 37
---------- ---------- ---------- ----------
Total net expenses 4,524 3,978 (88) 8,414
---------- ---------- ---------- ----------
Investment income-net 1,578 185 88 1,851
---------- ---------- ---------- ----------
Realized and Unrealized Gains(Losses)
on Investments - Net
Net realized gain (loss) on investments 26,343 20,276^ 46,619^
Net change in unrealized appreciation
(depreciation) of investments (153,169) (117,589)^ (270,758)^
---------- ---------- ---------- ----------
Net gain (loss) on investments (126,826) (97,313) -- (224,139)
---------- ---------- ---------- ----------
Net increase (decrease) in net assets
resulting from operations (125,248) (97,128) 88 (222,288)
========== ========== ========== ==========
</TABLE>
* - Includes income from securities lending program.
^ - Includes the following amounts due to investments in Common Stock of
Affiliates (000): $86 of dividend income, $1,706 of realized gains and
$20,875 of unrealized depreciation of investments.
(A) Adjustment reflects the additional waiver amount necessary to reflect
anticipated expenses of the combined fund.
See Notes to Pro Forma Combining Financial Statements.
83
<PAGE>
SMALL CAP VALUE FUND
PRO FORMA COMBINING FINANCIAL STATEMENTS (UNAUDITED)
STATEMENT OF NET ASSETS (000'S)
MARCH 31,1999
<TABLE>
<CAPTION>
SMALL CAP VALUE
FUND
SMALL CAP VALUE REGIONAL EQUITY PRO FORMA
FUND FUND COMBINED
---------------------------- --------------------------- --------------------------
Shares/Par Market Value Shares/Par Market Value Shares/Par Market Value
(000) (000) (000) (000) (000) (000)
<S> <C> <C> <C> <C> <C> <C>
Common Stocks--91.1%
Basic Materials--0.9%
A.M. Castle 70,000 $ 844 70,000 $ 844
BWay* 177,000 $ 2,334 177,000 2,334
CPAC 35,700 263 35,700 263
Hawkins Chemical 140,000 1,365 140,000 1,365
--------- --------- ---------
Total Basic Materials 2,597 2,209 4,806
--------- --------- ---------
Capital Goods--20.6%
AFC Cable Systems* 232,600 6,920 232,600 6,920
Alliant Techsystems* 66,300 5,151 107,800 8,375 174,100 13,526
Applied Power, Cl A 235,000 6,404 235,000 6,404
Aqua Alliance* 1,362,300 3,065 1,362,300 3,065
Ballantyne of Omaha* 345,450 2,591 345,450 2,591
BMC Industries 187,100 830 187,100 830
BOLDER Technologies* 170,200 1,468 170,200 1,468
Brady 32,500 680 32,500 680
Bridgeport Machines* 158,600 981 158,600 981
Catalytica* 682,033 7,502 682,033 7,502
Dayton Superior, CL A* 164,300 2,855 164,300 2,855
Donaldson 300,000 5,400 300,000 5,400
Dupont Photomasks* 17,900 709 17,900 709
Idex 70,000 1,649 70,000 1,649
L.B. Foster, Cl A* 253,800 1,174 253,800 1,174
MagneTek* 321,487 2,692 321,487 2,692
Moog, Cl A* 259,200 7,906 259,200 7,906
Newpark Resources* 479,600 3,477 479,600 3,477
Northwest Pipe* 180,000 2,970 180,000 2,970
Park Ohio Holdings* 227,300 3,182 227,300 3,182
Pentair 190,100 6,416 190,100 6,416
Shelby Williams Industries 76,050 727 76,050 727
SPX* 65,000 3,278 65,000 3,278
Thomas Industries 139,650 2,618 139,650 2,618
Tower Automotive* 402,100 7,489 402,100 7,489
Tredegar Industries 58,400 1,807 58,400 1,807
U.S. Filter* 29,211 895 29,211 895
Valmont Industries 190,000 2,636 190,000 2,636
Varlen 392,000 8,624 392,000 8,624
--------- --------- ---------
Total Capital Goods 54,631 55,840 110,471
--------- --------- ---------
Consumer Cyclicals--18.0%
Acxiom* 96,140 2,548 96,140 2,548
Alternate Postal Delivery (A)* 87,900 88 87,900 88
Applied Graphics Technologies* 190,500 1,429 190,500 1,429
Ashworth* 330,000 1,155 330,000 1,155
Bell & Howell* 195,600 5,734 115,000 3,371 310,600 9,105
Bonded Motors* 71,400 174 71,400 174
Borg Warner Security* 461,700 7,733 89,300 1,496 551,000 9,229
DR Horton 173,475 2,906 173,475 2,906
Department 56* 190,000 5,783 190,000 5,783
</TABLE>
84
<PAGE>
SMALL CAP VALUE FUND
PRO FORMA COMBINING FINANCIAL STATEMENTS (UNAUDITED)
STATEMENT OF NET ASSETS (000'S)
MARCH 31,1999
<TABLE>
<CAPTION>
SMALL CAP VALUE
FUND
SMALL CAP VALUE REGIONAL EQUITY PRO FORMA
FUND FUND COMBINED
---------------------------- --------------------------- --------------------------
Shares/Par Market Value Shares/Par Market Value Shares/Par Market Value
(000) (000) (000) (000) (000) (000)
<S> <C> <C> <C> <C> <C> <C>
Dura Automotive Systems* 118,880 3,358 251,700 7,111 370,580 10,469
Edelbrock* 106,200 1,593 106,200 1,593
Finish Line, Cl A* 196,700 2,532 196,700 2,532
Hampshire Group Limited* 55,100 441 55,100 441
Huffy 106,000 1,272 106,000 1,272
Inacom* 160,852 1,247 260,000 2,015 420,852 3,262
K-Swiss, Cl A 54,600 1,379 54,600 1,379
Lakes Gaming* 40,000 327 40,000 327
Matthews International, Cl A 135,300 3,704 135,300 3,704
Park Place Entertainment* 180,000 1,361 180,000 1,361
Piercing Pagoda* 122,250 1,093 122,250 1,093
Quaker Fabric* 358,400 1,994 358,400 1,994
Regis 225,000 5,991 300,000 7,988 525,000 13,979
Service Experts* 50,800 686 50,800 686
Simpson Manufacturing* 59,100 2,379 59,100 2,379
Sport-Haley (A)* 313,000 2,543 313,000 2,543
Staff Leasing* 112,300 1,607 112,300 1,607
Stanley Furniture* 233,400 4,551 233,400 4,551
Synthetic Industries* 120,400 2,009 120,400 2,009
Tarrant Apparel Group* 30,300 1,273 30,300 1,273
Topps* 600,000 2,625 600,000 2,625
TRO Learning* (A) 212,200 1,273 212,200 1,273
Video Update, Cl A* 376,150 317 376,150 317
Walbro* 108,500 976 108,500 976
Whitehall Jewellers* 56,200 864 56,200 864
--------- --------- ---------
Total Consumer Cyclicals 63,688 33,238 96,926
--------- --------- ---------
Consumer Staples--6.7%
Avado Brands 121,600 722 121,600 722
Buenos Aires Embotelladora S.A.,ADR* 6,274 -- 6,274 --
Buffets* 123,600 1,221 496,800 4,906 620,400 6,127
Drug Emporium* 141,900 683 141,900 683
International Multifoods 210,600 4,910 210,600 4,910
Lodgenet Entertainment* 360,000 2,363 360,000 2,363
Merrill 152,000 2,033 562,000 7,517 714,000 9,550
Michael Foods 302,600 5,768 302,600 5,768
Pepsi-Cola Puerto Rico Bottling, Cl B* 23,387 140 23,387 140
Performance Food Group* 96,800 2,541 96,800 2,541
Suiza Foods* 100,300 3,379 100,300 3,379
--------- --------- ---------
Total Consumer Staples 10,719 25,464 36,183
--------- --------- ---------
Energy--2.4%
Atwood Oceanic* 42,000 1,260 42,000 1,260
Basin Exploration* 170,000 2,359 170,000 2,359
Evergreen Resources* 51,000 1,020 51,000 1,020
Forest Oil* 260,360 1,953 176,000 1,320 436,360 3,273
Mallon Resources* 162,000 1,215 162,000 1,215
Veritas DGC* 152,000 2,156 110,800 1,572 262,800 3,728
--------- --------- ---------
Total Energy 5,369 7,486 12,855
--------- --------- ---------
</TABLE>
85
<PAGE>
SMALL CAP VALUE FUND
PRO FORMA COMBINING FINANCIAL STATEMENTS (UNAUDITED)
STATEMENT OF NET ASSETS (000'S)
MARCH 31,1999
<TABLE>
<CAPTION>
SMALL CAP VALUE
FUND
SMALL CAP VALUE REGIONAL EQUITY PRO FORMA
FUND FUND COMBINED
---------------------------- --------------------------- --------------------------
Shares/Par Market Value Shares/Par Market Value Shares/Par Market Value
(000) (000) (000) (000) (000) (000)
<S> <C> <C> <C> <C> <C> <C>
Financials--17.2%
Amerin* 291,100 5,913 410,000 8,328 701,100 14,241
ARM Financial Group, Cl A 52,600 786 53,400 798 106,000 1,584
Astoria Financial 43,700 2,185 43,700 2,185
Chelsea GCA Realty 98,900 2,757 98,900 2,757
Community First Bankshares 102,800 2,056 455,000 9,100 557,800 11,156
Dain Rauscher 89,200 3,033 65,000 2,210 154,200 5,243
Enhance Financial Services Group 281,700 6,409 281,700 6,409
Farm Family Holdings* 59,900 1,902 59,900 1,902
First Republic Bank* 183,000 4,415 183,000 4,415
Franchise Mortgage Acceptance* 414,600 3,006 414,600 3,006
Highwoods Properties 92,700 2,184 92,700 2,184
LaSalle Re Holdings 92,300 1,361 92,300 1,361
Lexington Corporate Properties 178,600 1,987 178,600 1,987
Metris 90,000 3,634 90,000 3,634
Penn Treaty American* 160,800 3,990 160,800 3,990
Philadelphia Consolidated Holding* 206,700 4,160 206,700 4,160
Roslyn Bancorp 305,040 5,148 305,040 5,148
Southwest Bancorp of Texas* 73,400 904 73,400 904
TCF Financial 235,000 6,110 235,000 6,110
UST 105,730 2,310 105,730 2,310
Walden Residential Properties 109,200 1,925 109,200 1,925
Webster Financial 110,904 3,202 110,904 3,202
Willis Lease Finance* 165,100 2,889 165,100 2,889
--------- --------- ---------
Total Financials 62,522 30,180 92,702
--------- --------- ---------
Health Care--6.5%
ATS Medical* 255,600 1,917 255,600 1,917
Cooper* 324,400 4,988 324,400 4,988
Diagnostic Health Services* 316,900 386 316,900 386
Empi* 280,000 6,055 280,000 6,055
Lifecore Biomedical* 96,200 836 483,500 4,200 579,700 5,036
Mentor 168,900 2,481 168,900 2,481
Minntech 14,200 179 14,200 179
Orphan Medical* 162,800 1,180 162,800 1,180
Parexel International* 174,300 3,606 174,300 3,606
PolyMedica* 225,200 1,689 225,200 1,689
Rehabilicare* 225,000 591 225,000 591
Respironics* 306,500 4,042 306,500 4,042
Roberts Pharmaceutical* 54,000 1,120 54,000 1,120
Spacelabs Medical* 115,600 1,944 115,600 1,944
--------- --------- ---------
Total Health Care 21,092 14,122 35,214
--------- --------- ---------
Technology--15.9%
Actel* 80,300 1,320 80,300 1,320
Aetrium (A)* 580,000 3,770 580,000 3,770
Alpha Industries 52,500 965 52,500 965
Alternative Resources* 244,900 1,561 244,900 1,561
ANADIGICS* 27,000 476 27,000 476
</TABLE>
86
<PAGE>
SMALL CAP VALUE FUND
PRO FORMA COMBINING FINANCIAL STATEMENTS (UNAUDITED)
STATEMENT OF NET ASSETS (000'S)
MARCH 31,1999
<TABLE>
<CAPTION>
SMALL CAP VALUE
FUND
SMALL CAP VALUE REGIONAL EQUITY PRO FORMA
FUND FUND COMBINED
---------------------------- --------------------------- --------------------------
Shares/Par Market Value Shares/Par Market Value Shares/Par Market Value
(000) (000) (000) (000) (000) (000)
<S> <C> <C> <C> <C> <C> <C>
BancTec* 228,262 2,810 228,262 2,810
Comdial* 145,300 944 145,300 944
Communications Systems 386,000 3,667 386,000 3,667
Digital Microwave* 197,100 1,651 197,100 1,651
DII Group* 42,100 1,231 42,100 1,231
DSP Communications* 41,400 657 41,400 657
Etec Systems* 26,600 783 26,600 783
Evolving Systems* 308,400 1,503 308,400 1,503
FEI* 131,600 1,102 131,600 1,102
Gatefield* (A) 537,600 470 537,600 470
Glenayre Technologies* 203,500 700 203,500 700
Innovex 200,000 2,675 200,000 2,675
Inprise Corp* 642,800 2,491 642,800 2,491
Kronos* 55,200 1,352 55,200 1,352
Mosaix (A)* 535,800 4,487 535,800 4,487
National Computer Systems 111,400 2,729 258,100 6,323 369,500 9,052
Network Equipment Technology* 187,300 1,674 187,300 1,674
Norstan (A)* 510,000 4,718 510,000 4,718
Nova* 67,774 1,779 67,774 1,779
Olicom A/S* 175,900 528 175,900 528
P-Com* 90,900 693 90,900 693
Pioneer-Standard Electronics 187,600 1,231 187,600 1,231
Pomeroy Computer Resources* 155,800 2,025 155,800 2,025
Powerwave Technologies* 59,100 1,677 59,100 1,677
Radisys* 209,500 6,508 209,500 6,508
Remec* 57,600 1,202 57,600 1,202
Sapiens International* 170,300 1,777 170,300 1,777
Sawtek* 41,200 1,390 41,200 1,390
Spectrian* 65,700 772 65,700 772
Sybase* 555,300 4,408 555,300 4,408
System Software Associates 811,900 1,827 642,100 1,445 1,454,000 3,272
Triple P N.V. (D)* 801,760 2,205 801,760 2,205
TSI (A) 420,000 3,413 420,000 3,413
Unitrode* 180,400 2,559 180,400 2,559
--------- --------- ---------
Total Technology 51,936 33,562 85,498
--------- --------- ---------
Transportation--0.6%
Nordic American Tanker Shipping 284,800 3,275 284,800 3,275
World Airways* 46,500 46 46,500 46
--------- --------- ---------
Total Transportation 3,321 -- 3,321
--------- --------- ---------
Utilities--2.3%
El Paso Electric* 250,000 1,906 250,000 1,906
TNP Enterprises 82,300 2,366 82,300 2,366
Unisource Energy Holding* 650,000 7,191 650,000 7,191
Western Gas Resources 90,000 675 90,000 675
--------- --------- ---------
Total Utilities 11,463 675 12,138
--------- --------- ---------
</TABLE>
87
<PAGE>
SMALL CAP VALUE FUND
PRO FORMA COMBINING FINANCIAL STATEMENTS (UNAUDITED)
STATEMENT OF NET ASSETS (000'S)
MARCH 31,1999
<TABLE>
<CAPTION>
SMALL CAP VALUE
FUND
SMALL CAP VALUE REGIONAL EQUITY PRO FORMA
FUND FUND COMBINED
---------------------------- --------------------------- --------------------------
Shares/Par Market Value Shares/Par Market Value Shares/Par Market Value
(000) (000) (000) (000) (000) (000)
<S> <C> <C> <C> <C> <C> <C>
Total Common Stocks (Cost $268,570,
$174,241, and $442,811 respectively) 287,338 202,776 490,114
Convertible Bonds--0.7%
Complete Management, 62.5000 shares,
8.000%, 08/15/03 (C) 595 47 595 47
Complete Management, 71.4286 shares,
8.000%, 08/15/03 (C) 520 41 520 41
Drug Emporium, 65.1466 shares,
7.750%, 10/01/14 740 540 740 540
Leasing Solutions, 28.6533 shares,
6.875%, 10/01/03 455 52 455 52
Titan, 285.7143 shares, 0.25% 11/01/03
8.250%, 11/01/03 1,935 2,838 1,935 2,838
--------- --------- ---------
Total Convertible Bonds (Cost $4,059,
$0 and $4,059 respectively) 3,518 -- 3,518
--------- --------- ---------
Warrants--0.0%
Sound Advice* 505 -- 505 --
--------- --------- ---------
Total Warrants (Cost $0,$0, and $0
respectively) -- -- --
--------- --------- ---------
Related Party Money Market Funds--3.4%
First American Prime Obligations Fund (B) 18,087,162 18,087 923,212 923 19,010,374 19,010
--------- --------- ---------
Total Related Party Money Market Funds
(Cost $18,087, $923, and $19,010
respectively) 18,087 923 19,010
--------- --------- ---------
Total Investments--95.2% (Cost $290,716,
$175,164, and $465,880 respectively) 308,943 203,699 512,642
--------- --------- ---------
Other Assets and Liabilities, Net--4.8% (E) 14,756 10,811 25,567
--------- --------- ---------
Total Net Assets--100.0% $323,699 $214,510 $538,209
========= ========= =========
</TABLE>
* Non-income producing security
(A) Investments represent five percent or more of the outstanding voting
securities of the issuer, and is or was an affiliate, as defined in the
Investment Company Act of 1940 at or during the period ended March 31, 1999.
See activity below.
(B) This money market fund is advised by U.S. Bank National Association who also
serves as advisor for this fund.
(C) Security was in default as of April 1, 1999.
(D) 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 the program or other "qualified
institutional investors".
(E) Other assets and liabilities representing greater than five percent of total
net assets include the following (000):
Cash collateral received for securities on loan 39,054
Payable upon return of securities on loan (39,054)
ADR-American Depositary Receipt
Cl-Class
The activity for investments in Common Stocks of Affiliates is as follows:
<TABLE>
<CAPTION>
Shares at Shares at
Description 9/30/98 3/31/99 Difference Dividends Realized G/L
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Aetrium 686,000 580,000 106,000 -- (718,925)
Alternate Postal Delivery 210,000 87,900 (#) 122,100 -- (523,559)
Gatefield 865,550 732,450 133,100 -- (102,008)
Mosaix 535,800 535,800 -- -- -
Norstan 551,300 510,000 (#) 41,300 -- (118,567)
Sport Haley 313,000 313,000 -- -- -
TRO Learning 369,900 329,900 40,000 -- 111,442
TSI 669,300 420,000 (#) 249,300 34,029 1,308,906
- ------------------------------------------------------------------------------------------------------------
4,200,850 3,509,050 691,800 34,029 (42,711)
</TABLE>
(#) At March 31, 1999 these issuers were not considered affiliates.
88
<PAGE>
SMALL CAP VALUE FUND
PRO FORMA COMBINING FINANCIAL STATEMENTS (UNAUDITED)
STATEMENT OF ASSETS AND LIABILITIES (000'S)
MARCH 31,1999
<TABLE>
<CAPTION>
SMALL CAP VALUE
FUND
SMALL CAP VALUE MICRO CAP VALUE PRO FORMA
FUND FUND ADJUSTMENTS COMBINED
--------------- --------------- ------------ ---------------
<S> <C> <C> <C> <C>
ASSETS:
Investments at value (Cost $290,716, $77,158 and $367,874
respectively) $ 308,943 $ 73,886 $ 382,829
Cash 37 21 58
Dividends and interest receivable 376 108 484
Receivable for Fund shares sold 15,967 4 15,971
Receivable for investments sold 1,947 1,093 3,040
Cash collateral received for securities on loan 15,261 4,269 19,530
Prepaid expenses and other assets 10 3 13
------------ ------------ ------------ ------------
Total Assets 342,541 79,384 -- 421,925
------------ ------------ ------------ ------------
LIABILITIES:
Payable for investments purchased 1,747 -- 1,747
Payable for Fund shares repurchased 1,713 737 2,450
Accrued expenses and other liabilities 121 59 180
Payable upon return of securities on loan 15,261 4,269 19,530
------------ ------------ ------------ ------------
Total Liabilities 18,842 5,065 -- 23,907
------------ ------------ ------------ ------------
NET ASSETS $ 323,699 $ 74,319 $ -- $ 398,018
============ ============ ============ ============
Net Assets are comprised of:
Paid in Capital $ 314,188 $ 63,889 $ 378,077
Undistributed net investment income/(loss) 86 30 116
Accumulated net realized loss on investments (8,802) 13,672 4,870
Net unrealized appreciation of investments 18,227 (3,272) 14,955
------------ ------------ ------------ ------------
NET ASSETS $ 323,699 $ 74,319 -- $ 398,018
============ ============ ============ ============
NET ASSET VALUE AND OFFERING PRICE:
CLASS A:
</TABLE>
89
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Net Assets $ 11,402 $ 1,199 172 (F) $ 12,773
Shares outstanding ($.0001 par value - 2 billion authorized) 945 201 (88)(E),(F) 1,058
Net asset value and redemption price per share $ 12.07 $ 5.95 $ 12.07
Maximum sales charge of 5.25% (A) 0.67 0.33 0.67
------------ ------------ ------------ ------------
Offering price per share $ 12.74 $ 6.28 $ 12.74
============ ============ ============ ============
CLASS B:
Net Assets $ 809 $ 172 (172)(F) $ 809
Shares outstanding ($.0001 par value - 2 billion authorized) 68 30 (30)(F) 68
Net asset value and offering price per share (B) $ 11.97 $ 5.83 $ 11.97
============ ============ ============ ============
CLASS C:
Net Assets $ 35 -- $ 35
Shares outstanding ($.0001 par value - 2 billion authorized) 3 -- 3
Net asset value per share (C) $ 12.06 -- $ 12.06
Maximum sales charge of 1.00% (D) 0.12 0.12
------------ ------------ ------------ ------------
Offering price per share $ 12.18 -- $ 12.18
============ ============ ============ ============
CLASS Y
Net Assets $ 311,453 $ 72,948 $ 384,401
Shares outstanding ($.0001 par value - 2 billion authorized) 25,750 12,276 (6,247)(E) 31,779
Net asset value, offering price, and redemption price per share $ 12.10 $ 5.94 $ 12.10
============ ============ ============ ============
</TABLE>
(A) The offering price is calculated by dividing the net asset value by 1 minus
the maximum sales charge of 5.25%.
(B) Class - B has a contingent deferred sales charge. This charge declines from
a high of 5.00% in the first year to 0.00% after eight years, as outlined in
the prospectus.
(C) Class - C has a contingent deferred sales charge imposed on redemptions made
in Class-C shares for the first eighteen months, as outlined in the
prospectus.
(D) The offering price is calculated by dividing the net asset value by 1 minus
the maximum sales charge of 1.00%.
(E) Reflects the impact of converting shares of the target fund into the
survivor fund.
(F) Reflects the conversion of Micro Cap Value Fund Class B shares into Class A
shares.
See Notes to Pro Forma Combining Financial Statements.
90
<PAGE>
SMALL CAP VALUE FUND
PRO FORMA COMBINING FINANCIAL STATEMENTS (UNAUDITED)
STATEMENTS OF OPERATIONS (000'S OMITTED)
FOR THE 6 MONTH PERIOD ENDED 3/31/99
<TABLE>
<CAPTION>
SMALL CAP
VALUE
SMALL CAP MICRO CAP FUND
VALUE VALUE PRO-FORMA PRO-FORMA
FUND FUND ADJUSTMENT COMBINED
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Investment Income:
Interest 748* 214* 962*
Dividends 1,346 440 1,786
---------- ---------- ---------- ----------
Total Investment Income 2,094 654 -- 2,748
Expenses:
Investment Advisory Fees 1,337 384 1,721
Less: Waiver of investment advisory fees (17) (1) (5)(A) (23)
Administrator fees 208 60 268
Transfer agent fees 45 23 68
Custodian fees 57 17 74
Directors' fees 4 1 5
Registration fees 22 4 26
Professional fees 5 1 6
Printing 11 3 14
Distribution fees-Class A 16 2 18
Distribution fees-Class B 4 1 5
Other 5 2 7
---------- ---------- ---------- ----------
Total net expenses 1,697 497 (5) 2,189
---------- ---------- ---------- ----------
Investment income-net 397 157 5 559
---------- ---------- ---------- ----------
Realized and Unrealized Gains(Losses)
on Investments - Net
Net realized gain (loss) on investments (4,693) 13,675 8,982
Net change in unrealized appreciation
(depreciation) of investments (5,328) (14,318) (19,646)
---------- ---------- ---------- ----------
Net gain (loss) on investments (10,021) (643) -- (10,664)
---------- ---------- ---------- ----------
Net increase (decrease) in net assets
resulting from operations (9,624) (486) 5 (10,105)
========== ========== ========== ==========
</TABLE>
* - Includes income from securities lending program.
(A) Adjustment reflects the additional waiver amount necessary to reflect
anticipated expenses of the combined fund.
See Notes to Pro Forma Combining Financial Statements.
91
<PAGE>
Small Cap Value Fund
Pro Forma Combining Financial Statements (unaudited)
Statements of Operations (000's omitted)
For the Year ended 9/30/98
<TABLE>
<CAPTION>
Small Cap
Value
Small Cap Micro Cap Fund
Value Value Pro-Forma Pro-Forma
Fund Fund Adjustment Combined
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Investment Income:
Interest 2,129* 723* 2,852*
Dividends 3,973 1,469 5,442
---------- ---------- ---------- ----------
Total Investment Income 6,102 2,192 -- 8,294
Expenses:
Investment Advisory Fees 3,503 1,401 4,904
Less: Waiver of investment advisory fees (67) (1) (4)(A) (72)
Administrator fees 576 221 797
Transfer agent fees 115 44 159
Amortization of organization costs -- 1 1
Custodian fees 126 60 186
Directors' fees 9 3 12
Registration fees 136 15 151
Professional fees 5 7 12
Printing 42 9 51
Distribution fees-Class A 48 2 50
Distribution fees-Class B 3 2 5
Other 28 5 33
---------- ---------- ---------- ----------
Total net expenses 4,524 1,769 (4) 6,289
---------- ---------- ---------- ----------
Investment income-net 1,578 423 4 2,005
---------- ---------- ---------- ----------
Realized and Unrealized Gains(Losses)
on Investments - Net
Net realized gain (loss) on investments 26,343 27,875 54,218
Net change in unrealized appreciation
(depreciation) of investments (153,169) (77,385) (230,554)
---------- ---------- ---------- ----------
Net gain (loss) on investments (126,826) (49,510) -- (176,336)
---------- ---------- ---------- ----------
Net increase (decrease) in net assets
resulting from operations (125,248) (49,087) 4 (174,331)
========== ========== ========== ==========
</TABLE>
* - Includes income from securities lending program.
(A) Adjustment reflects the additional waiver amount necessary to reflect
anticipated expenses of the combined fund.
See Notes to Pro Forma Combining Financial Statements.
92
<PAGE>
SMALL CAP VALUE FUND
PRO FORMA COMBINING FINANCIAL STATEMENTS (UNAUDITED)
STATEMENT OF NET ASSETS (000'S)
MARCH 31,1999
<TABLE>
<CAPTION>
SMALL CAP VALUE
FUND
SMALL CAP VALUE MICRO CAP VALUE PRO FORMA
FUND FUND COMBINED
---------------------------- --------------------------- --------------------------
Shares/Par Market Value Shares/Par Market Value Shares/Par Market Value
(000) (000) (000) (000) (000) (000)
<S> <C> <C> <C> <C> <C> <C>
Common Stocks--89.2%
Basic Materials--0.9%
BWay* 177,000 $ 2,334 59,400 $ 783 236,400 3,117
CPAC 35,700 263 9,800 72 45,500 335
--------- --------- ---------
Total Basic Materials 2,597 855 3,452
--------- --------- ---------
Capital Goods--17.3%
AFC Cable Systems* 232,600 6,920 45,000 1,339 277,600 8,259
Alliant Techsystems* 66,300 5,151 66,300 5,151
American Aircarriers Support* 60,000 540 60,000 540
Aqua Alliance* 1,362,300 3,065 1,362,300 3,065
BOLDER Technologies* 100,000 862 100,000 862
Bridgeport Machines* 158,600 981 88,000 544 246,600 1,525
Brown & Sharpe Manufacturing* 100,000 494 100,000 494
Catalytica* 682,033 7,502 70,000 770 752,033 8,272
Dayton Superior, CL A* 164,300 2,855 75,500 1,312 239,800 4,167
Dupont Photomasks* 17,900 709 17,900 709
L.B. Foster, Cl A* 253,800 1,174 160,000 740 413,800 1,914
Lindberg 30,800 271 30,800 271
LMI Aerospace* 105,000 604 105,000 604
MagneTek* 321,487 2,692 170,000 1,424 491,487 4,116
Moog, Cl A* 259,200 7,906 62,400 1,903 321,600 9,809
Newpark Resources* 479,600 3,477 479,600 3,477
Northwest Pipe* 180,000 2,970 50,100 827 230,100 3,797
Park Ohio Holdings* 227,300 3,182 73,535 1,029 300,835 4,211
Shelby Williams Industries 76,050 727 62,800 601 138,850 1,328
Supreme Industries 76,745 566 76,745 566
Thomas Industries 139,650 2,618 41,750 783 181,400 3,401
Tredegar Industries 58,400 1,807 58,400 1,807
U.S. Filter* 29,211 895 29,211 895
--------- --------- ---------
Total Capital Goods 54,631 14,609 69,240
--------- --------- ---------
Consumer Cyclicals--19.9%
Acxiom* 96,140 2,548 96,140 2,548
Applied Graphics Technologies* 190,500 1,429 190,500 1,429
Bell & Howell* 195,600 5,734 195,600 5,734
Bonded Motors* 71,400 174 74,600 182 146,000 356
Borg Warner Security* 461,700 7,733 100,000 1,675 561,700 9,408
DR Horton 173,475 2,906 173,475 2,906
Dura Automotive Systems* 118,880 3,358 60,720 1,715 179,600 5,073
Edelbrock* 106,200 1,593 37,000 555 143,200 2,148
Finish Line, Cl A* 196,700 2,532 196,700 2,532
Finlay Enterprises* 55,900 604 55,900 604
Friedman's, Cl A 30,800 277 30,800 277
Gildan Activewear* 80,000 980 80,000 980
Hampshire Group Limited* 55,100 441 34,100 273 89,200 714
Huffy 106,000 1,272 48,300 580 154,300 1,852
Inacom* 160,852 1,247 160,852 1,247
K-Swiss, Cl A 54,600 1,379 13,400 338 68,000 1,717
Matthews International, Cl A 135,300 3,704 40,000 1,095 175,300 4,799
</TABLE>
93
<PAGE>
SMALL CAP VALUE FUND
PRO FORMA COMBINING FINANCIAL STATEMENTS (UNAUDITED)
STATEMENT OF NET ASSETS (000'S)
MARCH 31,1999
<TABLE>
<CAPTION>
SMALL CAP VALUE
FUND
SMALL CAP VALUE MICRO CAP VALUE PRO FORMA
FUND FUND COMBINED
---------------------------- --------------------------- --------------------------
Shares/Par Market Value Shares/Par Market Value Shares/Par Market Value
(000) (000) (000) (000) (000) (000)
<S> <C> <C> <C> <C> <C> <C>
Piercing Pagoda* 122,250 1,093 32,150 287 154,400 1,380
Quaker Fabric* 358,400 1,994 80,000 445 438,400 2,439
Racing Champions* 81,000 891 81,000 891
Regis 225,000 5,991 225,000 5,991
Service Experts* 50,800 686 50,800 686
Simpson Manufacturing* 59,100 2,379 14,300 576 73,400 2,955
Staff Leasing* 112,300 1,607 112,300 1,607
Stanley Furniture* 233,400 4,551 60,000 1,170 293,400 5,721
Steven Madden Limited* 100,000 844 100,000 844
Synthetic Industries* 120,400 2,009 49,200 821 169,600 2,830
Tarrant Apparel Group* 30,300 1,273 30,300 1,273
TearDrop Golf* 100,600 498 100,600 498
Topps* 600,000 2,625 600,000 2,625
Total Containment* 56,500 307 56,500 307
TRO Learning* (A) 212,200 1,273 117,700 706 329,900 1,979
Video Update, Cl A* 376,150 317 175,125 148 551,275 465
Walbro* 108,500 976 67,500 607 176,000 1,583
Whitehall Jewellers* 56,200 864 19,100 294 75,300 1,158
--------- --------- ---------
Total Consumer Cyclicals 63,688 15,868 79,556
--------- --------- ---------
Consumer Staples--3.2%
Avado Brands 121,600 722 121,600 722
Buenos Aires Embotelladora S.A.,ADR* 6,274 -- 2,824 -- 9,098 --
Buffets* 123,600 1,221 123,600 1,221
Drug Emporium* 141,900 683 205,000 987 346,900 1,670
Mac-Gray* 48,400 445 48,400 445
Merrill 152,000 2,033 152,000 2,033
Pepsi-Cola Puerto Rico Bottling, Cl B* 23,387 140 10,527 63 33,914 203
Performance Food Group* 96,800 2,541 14,000 367 110,800 2,908
Suiza Foods* 100,300 3,379 100,300 3,379
--------- --------- ---------
Total Consumer Staples 10,719 1,862 12,581
--------- --------- ---------
Energy--2.0%
Atwood Oceanic* 42,000 1,260 42,000 1,260
Basin Exploration* 40,000 555 40,000 555
Bellwether Exploration* 94,500 337 94,500 337
Callon Petroleum* 40,000 445 40,000 445
Forest Oil* 260,360 1,953 85,220 639 345,580 2,592
Veritas DGC* 152,000 2,156 37,800 536 189,800 2,692
--------- --------- ---------
Total Energy 5,369 2,512 7,881
--------- --------- ---------
Financials--18.2%
Amerin* 291,100 5,913 291,100 5,913
ARM Financial Group, Cl A 52,600 786 52,600 786
Astoria Financial 43,700 2,185 43,700 2,185
Chelsea GCA Realty 98,900 2,757 27,100 755 126,000 3,512
Community First Bankshares 102,800 2,056 102,800 2,056
Dain Rauscher 89,200 3,033 8,200 279 97,400 3,312
Enhance Financial Services Group 281,700 6,409 281,700 6,409
</TABLE>
94
<PAGE>
SMALL CAP VALUE FUND
PRO FORMA COMBINING FINANCIAL STATEMENTS (UNAUDITED)
STATEMENT OF NET ASSETS (000'S)
MARCH 31,1999
<TABLE>
<CAPTION>
SMALL CAP VALUE
FUND
SMALL CAP VALUE MICRO CAP VALUE PRO FORMA
FUND FUND COMBINED
---------------------------- --------------------------- --------------------------
Shares/Par Market Value Shares/Par Market Value Shares/Par Market Value
(000) (000) (000) (000) (000) (000)
<S> <C> <C> <C> <C> <C> <C>
Farm Family Holdings* 59,900 1,902 30,000 952 89,900 2,854
First Republic Bank* 183,000 4,415 70,000 1,689 253,000 6,104
Franchise Mortgage Acceptance* 414,600 3,006 414,600 3,006
Highwoods Properties 92,700 2,184 92,700 2,184
LaSalle Re Holdings 92,300 1,361 22,400 330 114,700 1,691
Lexington Corporate Properties 178,600 1,987 53,000 590 231,600 2,577
Penn Treaty American* 160,800 3,990 45,000 1,117 205,800 5,107
Philadelphia Consolidated Holding* 206,700 4,160 55,000 1,107 261,700 5,267
Roslyn Bancorp 305,040 5,148 305,040 5,148
SCPIE Holdings 15,000 408 15,000 408
Shurgard Storage Centers 14,100 356 14,100 356
Southwest Bancorp of Texas* 73,400 904 73,400 904
UST 105,730 2,310 105,730 2,310
Walden Residential Properties 109,200 1,925 34,000 599 143,200 2,524
Webster Financial 110,904 3,202 35,800 1,034 146,704 4,236
Willis Lease Finance* 165,100 2,889 40,200 703 205,300 3,592
--------- --------- ---------
Total Financials 62,522 9,919 72,441
--------- --------- ---------
Health Care--6.2%
America Service Group* 95,000 1,116 95,000 1,116
Collaborative Clinical Research* 160,000 680 160,000 680
Cooper* 324,400 4,988 324,400 4,988
Diagnostic Health Services* 316,900 386 224,500 274 541,400 660
Lifecore Biomedical* 96,200 836 96,200 836
Mentor 168,900 2,481 168,900 2,481
Minntech 5,800 73 5,800 73
Nu-Med* 731 - 731 -
Parexel International* 174,300 3,606 174,300 3,606
PolyMedica* 225,200 1,689 79,000 592 304,200 2,281
Respironics* 306,500 4,042 306,500 4,042
Roberts Pharmaceutical* 54,000 1,120 54,000 1,120
Spacelabs Medical* 115,600 1,944 40,000 673 155,600 2,617
--------- --------- ---------
Total Health Care 21,092 3,408 24,500
--------- --------- ---------
Technology--16.3%
Actel* 80,300 1,320 80,300 1,320
Alpha Industries 52,500 965 13,650 251 66,150 1,216
ANADIGICS* 27,000 476 7,100 125 34,100 601
Applied Science & Technology* 50,000 628 50,000 628
Aris Corp* 34,800 291 34,800 291
BancTec* 228,262 2,810 228,262 2,810
BrightStar Information Technology* 108,600 421 108,600 421
Ciprico* 117,500 969 117,500 969
Comdial* 145,300 944 89,600 582 234,900 1,526
Corsair Communications* 138,500 710 138,500 710
Digital Microwave* 197,100 1,651 197,100 1,651
DII Group* 42,100 1,231 42,100 1,231
DSP Communications* 41,400 657 41,400 657
Etec Systems* 26,600 783 26,600 783
Evolving Systems* 200,000 975 200,000 975
</TABLE>
95
<PAGE>
SMALL CAP VALUE FUND
PRO FORMA COMBINING FINANCIAL STATEMENTS (UNAUDITED)
STATEMENT OF NET ASSETS (000'S)
MARCH 31,1999
<TABLE>
<CAPTION>
SMALL CAP VALUE
FUND
SMALL CAP VALUE MICRO CAP VALUE PRO FORMA
FUND FUND COMBINED
---------------------------- --------------------------- --------------------------
Shares/Par Market Value Shares/Par Market Value Shares/Par Market Value
(000) (000) (000) (000) (000) (000)
<S> <C> <C> <C> <C> <C> <C>
FEI* 131,600 1,102 100,000 838 231,600 1,940
Fieldworks* 176,000 424 176,000 424
Fourth Shift* 58,200 313 58,200 313
Gatefield* (A) 537,600 470 194,850 170 732,450 640
Glenayre Technologies* 203,500 700 203,500 700
Government Technology Services* 175,000 613 175,000 613
Inprise Corp* 642,800 2,491 185,000 717 827,800 3,208
Kofax Image Products* 147,500 1,328 147,500 1,328
Kronos* 55,200 1,352 55,200 1,352
National Computer Systems 111,400 2,729 111,400 2,729
Network Equipment Technology* 187,300 1,674 187,300 1,674
Nova* 67,774 1,779 67,774 1,779
Olicom A/S* 175,900 528 58,300 175 234,200 703
P-Com* 90,900 693 25,100 191 116,000 884
Periophonics* 50,000 316 50,000 316
Pioneer-Standard Electronics 187,600 1,231 55,000 361 242,600 1,592
Pomeroy Computer Resources* 155,800 2,025 39,200 510 195,000 2,535
Powerwave Technologies* 59,100 1,677 59,100 1,677
Radisys* 209,500 6,508 209,500 6,508
Rainbow Technology* 40,000 400 40,000 400
Remec* 57,600 1,202 57,600 1,202
Sapiens International* 170,300 1,777 45,900 479 216,200 2,256
Sawtek* 41,200 1,390 41,200 1,390
Spectrian* 65,700 772 17,300 203 83,000 975
Sybase* 555,300 4,408 555,300 4,408
System Software Associates 811,900 1,827 811,900 1,827
Triple P N.V. (D)* 801,760 2,205 183,500 505 985,260 2,710
Unitrode* 180,400 2,559 180,400 2,559
Wall Data* 25,000 359 25,000 359
--------- --------- ---------
Total Technology 51,936 12,854 64,790
--------- --------- ---------
Transportation--1.1%
Nordic American Tanker Shipping 284,800 3,275 75,000 863 359,800 4,138
World Airways* 46,500 46 46,500 46
--------- --------- ---------
Total Transportation 3,321 863 4,184
--------- --------- ---------
Utilities--4.1%
El Paso Electric* 250,000 1,906 126,800 967 376,800 2,873
Midcoast Energy Resources 26,262 407 26,262 407
TNP Enterprises 82,300 2,366 30,000 863 112,300 3,229
Trigen Energy 54,700 749 54,700 749
Unisource Energy Holding* 650,000 7,191 165,000 1,825 815,000 9,016
--------- --------- ---------
Total Utilities 11,463 4,811 16,274
--------- --------- ---------
Total Common Stocks (Cost $268,570,
$69,928, and $338,498 respectively) 287,338 67,561 354,899
Convertible Bonds--1.2%
</TABLE>
96
<PAGE>
SMALL CAP VALUE FUND
PRO FORMA COMBINING FINANCIAL STATEMENTS (UNAUDITED)
STATEMENT OF NET ASSETS (000'S)
MARCH 31,1999
<TABLE>
<CAPTION>
SMALL CAP VALUE
FUND
SMALL CAP VALUE MICRO CAP VALUE PRO FORMA
FUND FUND COMBINED
---------------------------- --------------------------- --------------------------
Shares/Par Market Value Shares/Par Market Value Shares/Par Market Value
(000) (000) (000) (000) (000) (000)
<S> <C> <C> <C> <C> <C> <C>
Complete Management, 62.5000 shares,
8.000%, 08/15/03 (C) 595 47 300 24 895 71
Complete Management, 71.4286 shares,
8.000%, 08/15/03 (C) 520 41 590 46 1,110 87
Drug Emporium, 65.1466 shares,
7.750%, 10/01/14 740 540 921 672 1,661 1,212
Leasing Solutions, 28.6533 shares,
6.875%, 10/01/03 455 52 250 29 705 81
Titan, 285.7143 shares, 0.25% 11/01/03
8.250%, 11/01/03 1,935 2,838 360 528 2,295 3,366
--------- --------- ---------
Total Convertible Bonds (Cost $4,059,
$2,204, and $6,263 respectively) 3,518 1,299 4,817
--------- --------- ---------
Warrants--0.0%
Sound Advice* 505 -- 2,025 -- 2,530 --
--------- --------- ---------
Total Warrants (Cost $0, $0, and $0
respectively) -- -- --
--------- --------- ---------
Related Party Money Market Funds--5.8%
First American Prime Obligations Fund (B) 18,087,162 18,087 5,026,223 5,026 23,113,385 23,113
--------- --------- ---------
Total Related Party Money Market Funds (Cost
$18,087, $5,026, and $23,113 respectively) 18,087 5,026 23,113
--------- --------- ---------
Total Investments--96.2% (Cost $290,716,
$77,158, and $367,874 respectively) 308,943 73,886 382,829
--------- --------- ---------
Other Assets and Liabilities, Net--3.8% (E) 14,756 433 15,189
--------- --------- ---------
Total Net Assets--100.0% $323,699 $ 74,319 $398,018
========= ========= =========
</TABLE>
* Non-income producing security
(A) Investments represent five percent or more of the outstanding voting
securities of the issuer, and is or was an affiliate, as defined in the
Investment Company Act of 1940 at or during the period ended March 31, 1999.
See activity below.
(B) This money market fund is advised by U.S. Bank National Association who also
serves as advisor for this fund.
(C) Security was in default as of April 1, 1999.
(D) 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 the program or other "qualified
institutional investors".
(E) Other assets and liabilities representing greater than five percent of total
net assets include the following (000):
Cash collateral received for securities on loan 19,530
Payable upon return of securities on loan (19,530)
ADR-American Depositary Receipt
Cl-Class
The activity for investments in Common Stocks of Affiliates is as follows:
<TABLE>
<CAPTION>
Shares at Shares at
Description 9/30/98 3/31/99 Difference Dividends Realized G/L
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Gatefield 865,550 732,450 133,100 -- (102,008)
TRO Learning 369,900 329,900 40,000 -- 111,442
- ------------------------------------------------------------------------------------------------------------
1,235,450 1,062,350 173,100 -- 9,434
</TABLE>
(#) At March 31, 1999 these issuers were not considered affiliates.
97
<PAGE>
SMALL CAP VALUE 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 Small Cap Value Fund, Regional Equity Fund, and Micro Cap Value 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 Regional Equity Fund and the Micro Cap Value Fund. The Reorganization
provides for the acquisition of all assets and liabilities of both the
Regional Equity Fund and Micro Cap Value Fund by the Small Cap Value Fund,
in exchange for Class A, B and Y shares of the Small Cap Value Fund.
Thereafter, there will be a distribution of Class A, B and Y shares of the
Small Cap Value Fund to the respective shareholders of the Regional Equity
Fund and the Micro Cap Value Fund in liquidation and subsequent termination
thereof. As a result of the Reorganization, the shareholders of the
Regional Equity Fund and the Micro Cap Value Fund will become the owners of
that number of full and fractional Class A, B and Y shares of the Small Cap
Value Fund having an aggregate net asset value equal to the aggregate net
asset value of their shares of the Regional Equity Fund and/or the Micro
Cap Value Fund as of the close of business immediately prior to the date
that the Regional Equity Fund and Micro Cap Value Fund assets are exchanged
for Class A, B and Y shares of the Small Cap Value Fund. Prior to the
Reorganization, all Class B shares of the Micro Cap Value Fund will be
converted into Class A shares of the Micro Cap Value Fund based on
conversion ratios determined by the net assets of each Class at March 31,
1999. All conversion ratios of the Micro Cap Value Fund into the Small Cap
Value Fund will be calculated after this Class B to Class A share
conversion for the Micro Cap Value 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
Regional Equity Fund and the Micro Cap Value Fund in connection with the
Reorganization (including the cost of any
98
<PAGE>
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 Small Cap Value Fund.
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, B
and Y shares of the Small Cap Value Fund which would have been issued at
March 31, 1999 in connection with the proposed Reorganization. Shareholders
of the Regional Equity Fund and the Micro Cap Value Fund would receive
Class A, B and Y shares of the Small Cap Value Fund based on conversion
ratios determined on March 31, 1999. The conversion ratios are calculated
by dividing the net asset value of the Regional Equity Fund and the Micro
Cap Value Fund by the net asset value per share of the respective class of
the Small Cap Value 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 Small Cap
Value Fund at the combined level of average net assets for the periods
ended March 31, 1999 and September 30, 1998.
99
<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.
100
<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.)
101
<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
102
<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.)
103
<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 Regional Equity Fund Proxy Card.
* 17(b) Form of Micro Cap Value Fund 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 on or before the
date of the closing of the reorganization.
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.
104
<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
105
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 AA (also known as "Small Cap Value 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
among Small Cap Value Fund (the "Acquiring Fund"), a series of FAIF, and
Regional Equity Fund and Micro Cap Value Fund (collectively the "Acquired
Funds"), two additional series of FAIF. A form of the 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
REGIONAL EQUITY 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
Regional Equity Fund, a series of First American Investment Funds, Inc. ("First
American"). Held of record by the undersigned on November 17, 1999, at the
Special Joint Meeting of shareholders of the Regional Equity Fund and the Micro
Cap Value Fund, another series of First American, 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 Joint 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 Regional Equity Fund by Small Cap Value Fund, a separately
managed series of First American, in exchange for shares of common stock of the
Small Cap Value Fund having an aggregate net asset value equal to the aggregate
value of the assets acquired (less the liabilities assumed) of the Regional
Equity Fund and (b) the liquidation of the Regional Equity Fund and the pro rata
distribution of the Small Cap Value Fund shares to Regional Equity Fund
shareholders.
<PAGE>
[ ] FOR [ ] AGAINST [ ] ABSTAIN
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.
EXHIBIT 17(b)
PROXY
MICRO CAP VALUE 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
Micro Cap Value Fund, a series of First American Investment Funds, Inc. ("First
American") (the "Acquired Fund"), held of record by the undersigned on November
17, 1999, at the Special Joint Meeting of shareholders of the Acquired Funds and
the Regional Equity Fund, a series of First American, 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 Joint 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 Small Cap Value 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 shareholders.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
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
<PAGE>
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.
