Registration No. 333-40756
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 13, 2000
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. _2_ [X]
(Check appropriate box or boxes)
Exact name of Registrant as Specified in Charter:
FIRST AMERICAN INVESTMENT FUNDS, INC.
Area Code and Telephone Number:
(800) 637-2548
Address of Principal Executive Offices:
601 Second Avenue South
Minneapolis, Minnesota 55402
Name and Address of Agent for Service:
Christopher J. Smith
U.S. Bank National Association
601 Second Avenue South
Minneapolis, Minnesota 55402
COPIES TO:
Thomas A. Berreman Kathleen L. Prudhomme
U.S. Bank National Association 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 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 August 2, 2000 (30 days after filing) pursuant to Rule 488.
<PAGE>
FIRST AMERICAN INVESTMENT FUNDS, INC.
REGISTRATION STATEMENT ON FORM N-14
CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 481(a))
<TABLE>
<CAPTION>
PROSPECTUS/PROXY
PART A OF FORM N-14 STATEMENT CAPTION
------------------- -----------------
<S> <C>
1. Beginning of Registration Statement Cross Reference Sheet and Cover
and Outside Front Cover Page of Prospectus Page
2. Beginning and Outside Back Cover Page Table of Contents
of Prospectus
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 International Index Fund
and the International Fund
6. Information about the Company Inside Front Cover (Incorporation by
being Acquired Reference); Summary; Information
About the International Index Fund
And the International 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
<PAGE>
STATEMENT OF ADDITIONAL
PART B OF FORM N-14 INFORMATION CAPTION
------------------- -------------------
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 Cover Page (Incorporation by
Being Acquired 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.
<PAGE>
FIRST AMERICAN INVESTMENT FUNDS, INC.
REGISTRATION STATEMENT ON FORM N-14
PART A
PRESIDENT'S LETTER
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
PROSPECTUS/PROXY STATEMENT
CURRENT RETAIL CLASS PROSPECTUS OF INTERNATIONAL FUND AND
INTERNATIONAL INDEX FUND
CURRENT INSTITUTIONAL CLASS PROSPECTUS OF INTERNATIONAL
FUND AND INTERNATIONAL INDEX FUND
ANNUAL REPORT OF FIRST AMERICAN INVESTMENT FUNDS, INC.
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1999
<PAGE>
[LOGO]
FIRST AMERICAN INVESTMENT FUNDS, INC.
MINNEAPOLIS, MINNESOTA 55402
(800) 637-2548
August 9, 2000
To the Shareholders of International Index Fund:
Enclosed with this letter is a proxy voting ballot, a Prospectus/Proxy Statement
and related information concerning a Special Meeting of Shareholders of the
International Index Fund of First American Investment Funds, Inc. ("First
American") to be held on September 15, 2000. The purpose of this Special Meeting
is to submit to shareholders of International Index Fund a proposal to combine
that Fund with and into First American's International 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 International Fund that you currently hold in International
Index Fund. The exchange of shares will take place on the basis of the relative
net asset values per share of the respective classes of the two Funds. Sales
charges and Rule 12b-1 distribution and shareholder servicing fees will remain
unchanged, however, investment advisory fees will increase due to the actively
managed investment style of the International Fund. As discussed in the proxy
materials, this actively managed investment approach has historically resulted
in significantly better performance.
At March 31, 2000, International Index Fund had net assets of approximately $150
million, while International Fund had net assets of approximately $994 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 International Index Fund shareholders because, among other things,
it is expected to improve investment performance experienced by such
shareholders and to avoid potential adverse tax consequences in the event a
significant International Index Fund shareholder redeems its shares.
Both Funds offer investors an opportunity to diversify their portfolios by
investing in equity securities that trade in markets other than the United
States. However, there are significant differences in the investment objectives
of, and the investment strategies used by, the Funds. Shareholders should
carefully consider both the similarities and the differences between the two
Funds. These similarities and differences, as well as other important
information concerning the proposed combination of Funds, are described in
detail in the Prospectus/Proxy Statement, which you are encouraged to review
carefully. If you have any additional questions, please call your
1
<PAGE>
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,
Thomas Plumb
President
2
<PAGE>
INTERNATIONAL INDEX FUND
A SEPARATELY MANAGED SERIES OF
FIRST AMERICAN INVESTMENT FUNDS, INC.
MINNEAPOLIS, MINNESOTA 55402
(800) 637-2548
-----------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD SEPTEMBER 15, 2000
-----------------------------
NOTICE IS HEREBY GIVEN that a special meeting of shareholders of International
Index Fund, a separately managed series of First American Investment Funds, Inc.
("First American") will be held at 10:00 a.m. Central Time, on Friday, September
15, 2000, on the 7th floor of U.S. Bank Place, 601 Second Avenue South,
Minneapolis, Minnesota 55402. The purpose of the special meeting is as follows:
1. To consider and vote on a proposed Agreement and Plan of Reorganization
(the "Plan") providing for (a) the acquisition of all of the assets and
the assumption of all liabilities of the International Index Fund by
the International Fund, a separately managed series of First American,
in exchange for shares of common stock of the International Fund having
an aggregate net asset value equal to the aggregate value of the assets
acquired (less the liabilities assumed) of the International Index Fund
and (b) the liquidation of the International Index Fund and the pro
rata distribution of the International Fund shares to International
Index Fund shareholders. Under the Plan, International Index Fund
shareholders will receive the same class of shares of the International
Fund that they held in the International Index Fund, having a net asset
value equal as of the effective time of the Plan to the net asset value
of their International Index 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 International Index 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.
THE BOARD OF DIRECTORS OF FIRST AMERICAN
RECOMMENDS APPROVAL OF THE PLAN.
3
<PAGE>
The close of business on July 19, 2000, 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. YOU MAY ALSO VOTE
BY TELEPHONE BY FOLLOWING THE INSTRUCTIONS INCLUDED WITH THESE PROXY MATERIALS.
IN ORDER TO AVOID THE ADDITIONAL EXPENSE OF FURTHER SOLICITATION, WE
RESPECTFULLY ASK FOR YOUR COOPERATION IN VOTING 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,
Christopher J. Smith
Secretary
August 9, 2000
4
<PAGE>
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
International Index Fund can decide whether or not to reorganize their Fund. If
shareholders decide in favor of the proposal, International Index Fund will
merge with International Fund, another international mutual fund in the First
American fund family, and you will become a shareholder of International Fund.
HOW ARE THESE TWO FUNDS ALIKE?
The Funds are similar, in that they both offer investors an opportunity to
diversify their portfolios by investing in equity securities that trade in
markets other than the United States. However, there are significant differences
in investment objectives and strategies:
|_| International Index Fund's objective is to provide investment results that
correspond to the performance of the Morgan Stanley Capital International
Europe, Australasia, Far East Index (the "EAFE Index").
|_| Under normal market conditions, the International Index Fund invests at
least 90% of its total assets in common stocks included in the EAFE Index.
The EAFE Index currently includes approximately 1,077 companies
representing the stock markets of approximately 14 European countries,
Australia, New Zealand, Japan, Hong Kong and Singapore. A computer program
is used to identify which stocks should be purchased or sold in order to
replicate, as closely as possible, the composition of the EAFE Index. The
Fund attempts to achieve a correlation between the performance of its
portfolio and that of the EAFE Index of at least 95%, without taking into
account expenses of the Fund.
|_| International Fund has an objective of long-term growth of capital. The
Fund does not attempt to match the performance of any particular index of
securities.
|_| The International Fund invests primarily in equity securities that trade in
markets other than the United States. In choosing investments for the Fund,
the Fund's sub-adviser generally places primary emphasis on country
selection. This is followed by the selection of industries or sectors
within or across countries and the selection of individual stocks within
those industries or sectors.
5
<PAGE>
WHAT ARE THE ADVANTAGES OF MERGING THE FUNDS?
The International Fund uses an actively managed investment approach compared to
a passive, model driven investment approach used by the International Index
Fund. The International Fund's actively managed investment approach has resulted
in significantly higher fund performance than the International Index Fund.
The following table sets forth the comparative average annual total returns 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, 1999
---------------------------------------------------------------------
Since Inception
One Year Five Years Ten Years (1)
INTERNATIONAL INDEX FUND
<S> <C> <C> <C> <C>
Class A 20.71% N/A N/A 11.09%
Class B 21.36% N/A N/A 19.38%
Class Y 27.63% N/A N/A 12.76%
INTERNATIONAL FUND
Class A 73.61% 24.56% N/A 19.59%
Class B 76.62% 24.74% N/A 20.61%
Class Y 83.40% 26.14% N/A 20.84%
</TABLE>
(1) Inception dates are July 3, 1995, November 24, 1997 and July 3, 1995 for
Class A, Class B and Class Y, respectively, of the International Index Fund, and
April 7, 1994, August 15, 1994 and April 4, 1994 for Class A, Class B and Class
Y, respectively, of the International Fund.
The Reorganization also may help avoid significant adverse tax consequences to
International Index Fund shareholders. A significant number of International
Index Fund shares are held by defined benefit plans sponsored by U.S. Bancorp or
its subsidiaries. Should one or more of these plans redeem their shares, the
Fund would be required to sell securities to meet redemption requests. Such a
sale would most likely result in capital gains, which would be taxable to
International Index Fund shareholders.
The potential benefits and possible disadvantages are explained in more detail
in the enclosed proxy statement.
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 the International Fund of the same class as, and
equal in value to, the shares of the International Index 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.
6
<PAGE>
Consequently, the shareholders of International Index Fund will not recognize
gain or loss for federal income tax purposes on the exchange of their shares for
the shares of International 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 First American 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
International Index Fund shares will be represented at this Fund's special
shareholders meeting.
WHERE DO I GET MORE INFORMATION ABOUT FIRST AMERICAN INTERNATIONAL FUND?
|_| Please call Investor Services toll-free at 1-800-637-2548.
7
<PAGE>
FIRST AMERICAN INVESTMENT FUNDS, INC.
MINNEAPOLIS, MINNESOTA 55402
(800) 637-2548
PROSPECTUS/PROXY STATEMENT
DATED AUGUST 9, 2000
ACQUISITION OF THE ASSETS OF
INTERNATIONAL INDEX FUND
A SEPARATELY MANAGED SERIES OF
FIRST AMERICAN INVESTMENT FUNDS, INC.
BY AND IN EXCHANGE FOR SHARES OF
INTERNATIONAL FUND
A SEPARATELY MANAGED SERIES OF
FIRST AMERICAN INVESTMENT FUNDS, INC.
This Prospectus/Proxy Statement is being furnished to the shareholders of
International Index Fund, a separately managed series of First American
Investment Funds, Inc. ("First American"), in connection with a special meeting
of the shareholders of the International Index Fund to be held at the offices of
U.S. Bank National Association, Minneapolis, Minnesota on Friday, September 15,
2000, for the purposes set forth in the accompanying Notice of Special Meeting
of Shareholders. This Prospectus/Proxy Statement is being mailed to shareholders
of the International Index Fund on or about August 9, 2000.
This Prospectus/Proxy Statement relates to a proposal for the acquisition of all
the assets and the assumption of all liabilities of the International Index Fund
by the International Fund in exchange for shares of common stock of the
International Fund having an aggregate net asset value equal to the aggregate
value of the assets acquired (less liabilities assumed) of the International
Index Fund. As a result of the transactions, each shareholder of the
International Index Fund will receive International Fund shares of the same
class that he or she held in the International Index Fund, with a net asset
value equal to the net asset value of the shareholder's International Index Fund
shares.
First American, of which the International Index Fund and the International Fund
are separate series, is an open-end management investment company. The
International Index Fund and the International Fund are both diversified,
open-end funds that offer investors an opportunity to diversify their portfolios
by investing in equity securities that trade in markets other than the United
States.
This Prospectus/Proxy Statement, which should be retained for future reference,
sets forth concisely the information about the proposed reorganization and about
the International Fund and its affiliates that each International Index Fund
shareholder should know prior to voting on the proposed reorganization.
8
<PAGE>
A Statement of Additional Information dated August 9, 2000 relating to this
Prospectus/Proxy Statement has been filed with the Securities and Exchange
Commission (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 First American Asset
Management, P.O. Box 1330, Minneapolis, Minnesota 55448-1330 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.
9
<PAGE>
PROSPECTUS/PROXY STATEMENT
AUGUST 9, 2000
PROPOSED ACQUISITION OF ASSETS OF
INTERNATIONAL INDEX FUND
A SEPARATELY MANAGED SERIES OF
FIRST AMERICAN INVESTMENT FUNDS, INC.
BY AND IN EXCHANGE FOR SHARES OF
INTERNATIONAL FUND
A SEPARATELY MANAGED SERIES OF
FIRST AMERICAN INVESTMENT FUNDS, INC.
-----------------
TABLE OF CONTENTS
-----------------
PAGE
INCORPORATION BY REFERENCE 1
SUMMARY 2
RISK FACTORS 9
INFORMATION ABOUT THE REORGANIZATION 11
INFORMATION ABOUT THE INTERNATIONAL
INDEX FUND AND THE INTERNATIONAL FUND 16
VOTING INFORMATION 19
FINANCIAL STATEMENTS AND EXPERTS 22
LEGAL MATTERS 22
EXHIBIT A -- AGREEMENT AND PLAN OF 23
REORGANIZATION
The Following Documents Accompany This Prospectus/Proxy Statement:
|_| International Funds Retail Class Prospectus Dated January 31, 2000, of
First American Investment Funds, Inc.
|_| International Funds Institutional Class Prospectus Dated January 31,
2000, of First American Investment Funds, Inc.
|_| Annual Report for the Fiscal Year Ended September 30, 1999, of First
American Investment Funds, Inc.
10
<PAGE>
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 August 9, 2000 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 First American Asset
Management, P.O. Box 1330, Minneapolis, Minnesota 55448-1330 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 January 31, 2000 and the Institutional
Class Prospectus dated January 31, 2000 of the International Fund and the
International Index 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 January 31, 2000 of First
American, as it relates to the Retail Class and the Institutional Class of
both the International Index Fund and the International Fund, is
incorporated by reference in the Statement of Additional Information
relating to this Prospectus/Proxy Statement.
3. The financial statements of International Fund and International Index Fund
included in the Annual Report of First American for the fiscal year ended
September 30, 1999, are 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 financial statements of International Fund and International Index Fund
included in the Semi-Annual Report of First American for the six months
ended March 31, 2000, are 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.
11
<PAGE>
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 International Fund and the International Index Fund, each dated January
31, 2000, and the Agreement and Plan of Reorganization (the "Plan"), a copy of
which is attached to this Prospectus/Proxy Statement as Exhibit A. International
Index Fund shareholders should review the accompanying documents carefully in
connection with their review of this Prospectus/Proxy Statement.
PROPOSED REORGANIZATION
The Plan provides for (i) the acquisition of all of the assets and the
assumption of all liabilities of the International Index Fund by the
International Fund in exchange for shares of common stock of the International
Fund having an aggregate net asset value equal to the aggregate value of the
assets acquired (less liabilities assumed) of the International Index Fund and
(ii) the liquidation of the International Index Fund and the pro rata
distribution of its holdings of International Fund shares to International Index
Fund shareholders (the "Reorganization") 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 September 22,
2000, or such later date as provided for in the Plan) (such time and date, the
"Effective Time"). The value of the International Index Fund assets and
liabilities to be acquired by the International Fund, and the value of the
International Fund shares to be exchanged therefor, will be computed as of the
Effective Time. As a result of the Reorganization, each shareholder of the
International Index Fund will receive International Fund shares of the same
class that he or she held in the International Index Fund, with a net asset
value equal to the net asset value of the shareholder's International Index 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 International Index Fund and that the
interests of International Fund's existing shareholders would not be diluted as
a result of the transactions contemplated by the Reorganization. Therefore, the
Board of Directors has approved the Reorganization and has submitted the Plan
for approval by International Index Fund shareholders.
The Board of Directors of First American has also concluded that the
Reorganization would be in the best interests of the International Fund's
existing shareholders and has therefore approved the Reorganization on behalf of
the International Fund.
Approval of the Plan and Reorganization will require the affirmative
vote of a majority of the outstanding shares of each class of the International
Index Fund, voting as separate classes.
12
<PAGE>
Information concerning the voting rights of each International Index Fund
shareholder is set forth under "Voting Information" below. Directors and
officers of First American and employees of U.S. Bank National Association, the
administrator for the International Index Fund, may, without cost to the
International Index Fund, solicit proxies for management of the International
Index Fund by means of mail, telephone, or personal calls. Persons holding
shares as nominees will, upon request, be reimbursed for their reasonable
expenses incurred in sending proxy soliciting materials on behalf of the Board
of Directors to beneficial owners of International Index Fund shares. The
Adviser may also arrange for an outside firm, Shareholder Communications
Corporation, to solicit shareholder votes by telephone on behalf of the Fund.
The procedure is expected to cost approximately $1,000 per share class which
will be paid by the Adviser.
In addition to the approval of the Plan and Reorganization by
International Index 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 International Index Fund, will have received from counsel an opinion that,
upon the Reorganization and the transfer of the assets of the International
Index Fund, no gain or loss will be recognized by the International Index Fund
or its shareholders for federal income tax purposes. The holding period and
aggregate tax basis of International Fund shares that are received by each
International Index Fund shareholder will be the same as the holding period and
aggregate tax basis of the International Index Fund shares previously held by
such shareholders. In addition, the holding period and tax basis of the assets
of the International Index Fund in the hands of the International Fund as a
result of the Reorganization will be the same as in the hands of the
International Index 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 International Index Fund and the
International Fund are separate series, is an open-end management investment
company. The International Index Fund and the International Fund are both
diversified, open-end funds. The Funds are similar, in that they both offer
investors an opportunity to diversify their portfolios by investing in equity
securities that trade in markets other than the United States. However, the
Funds have different investment objectives and pursue these objectives using
different principal investment strategies. Specifically:
|_| The International Fund's objective is long-term growth of capital. The Fund
attempts to achieve this objective by investing primarily in equity
securities that trade in markets other than the United States. In choosing
investments for the Fund, the Fund's sub-adviser generally places primary
emphasis on country selection. This is followed by the selection of
industries or sectors within or across countries and the selection of
individual stocks within those industries or sectors. The Fund invests
primarily in developed markets and larger
13
<PAGE>
capitalization companies, but also has the ability to invest in emerging
markets and smaller capitalization companies.
In order to hedge against adverse movements in currency exchange rates, the
International Fund may enter into forward foreign currency exchange
contracts. To generate additional income, the Fund may lend securities
representing up to one-third of the value of its total assets to
broker-dealers, banks and other institutions.
|_| International Index Fund's objective is to provide investment results that
correspond to the performance of the Morgan Stanley Capital International
Europe, Australasia, Far East Index (the "EAFE Index"). Under normal market
conditions, International Index Fund invests at least 90% of its total
assets in common stocks included in the EAFE Index. The EAFE Index
currently includes approximately 1,077 companies representing the stock
markets of approximately 14 European countries, Australia, New Zealand,
Japan, Hong Kong and Singapore. The Fund's adviser believes that the Fund's
objective can best be achieved by investing in common stocks of
approximately 50% to 100% of the issues included in the EAFE Index,
depending on the size of the Fund. A computer program is used to identify
which stocks should be purchased or sold in order to replicate, as closely
as possible, the composition of the EAFE Index. The Fund will attempt to
achieve a correlation between the performance of its portfolio and that of
the EAFE Index of at least 95%, without taking into account expenses of the
Fund.
Unlike the International Fund, the International Index Fund does not enter
into forward currency exchange contracts or lend its portfolio securities.
The Funds' investment objectives and principal strategies are described
and compared in further detail herein under "Information about the International
Index Fund and the International Fund-- Comparison of Investment Objectives and
Principal Strategies."
The following table sets forth the comparative average annual total
returns 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, 1999
---------------------------------------------------------------------
Since Inception
One Year Five Years Ten Years (1)
<S> <C> <C> <C> <C>
INTERNATIONAL INDEX FUND
Class A 20.71% N/A N/A 11.09%
Class B 21.36% N/A N/A 19.38%
Class Y 27.63% N/A N/A 12.76%
INTERNATIONAL FUND
Class A 73.61% 24.56% N/A 19.59%
Class B 76.62% 24.74% N/A 20.61%
Class Y 83.40% 26.14% N/A 20.84%
</TABLE>
14
<PAGE>
(1) Inception dates are July 3, 1995, November 24, 1997 and July 3, 1995 for
Class A, Class B and Class Y, respectively, of the International Index Fund, and
April 7, 1994, August 15, 1994 and April 4, 1994 for Class A, Class B and Class
Y, respectively, of the International 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"). Marvin &
Palmer Associates, Inc. is the International Fund's sub-adviser ("Sub-Adviser").
Each Fund pays the Adviser a monthly fee for providing investment advisory
services equal, on an annual basis, to 0.70% of the International Index Fund's
average daily net assets and 1.25% of the International Fund's average daily net
assets. Thus, contractual investment advisory fees will increase as a result of
the Reorganization. This is the result of the actively managed investment
approach of the International Fund compared to the passive, model driven
investment approach of the International Index Fund. As noted above, however,
the International Fund has consistently realized significantly higher annual
total returns as a result of this actively managed investment approach.
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 and
1.00% of average daily net assets for Class B and Class C shares. Class Y shares
are not subject to a Rule 12b-1 fee. Thus, Rule 12b-1 fees 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 1.00%, 1.75% and 0.75%,
respectively, for the Class A, Class B and Class Y shares of International Index
Fund, and 1.60%, 2.35% and 1.35%, respectively, for the Class A, Class B and
Class Y shares of International Fund. The Adviser intends to keep the waivers
for the International Fund in place through September 30, 2000. Waivers may be
discontinued at any time.
PRO FORMA FEES AND EXPENSES
The following tables are intended to assist International Index 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 International Index Fund shareholders; (ii) that
shareholders of the International Fund currently bear; and (iii) that such
shareholders can expect to bear as International Fund shareholders after the
Reorganization is consummated. The following tables are as of September 30,
1999.
<TABLE>
<CAPTION>
CLASS A SHARES FEES AND EXPENSES
INTERNATIONAL INTERNATIONAL
INDEX FUND
FUND PRO FORMA
<S> <C> <C> <C>
SHAREHOLDER FEES (PAID DIRECTLY FROM YOUR
15
<PAGE>
INVESTMENT)
Maximum sales load imposed
on purchases (as a percentage
of offering price) (1) 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
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE
DEDUCTED FROM FUND ASSETS) (2)
Management fees 0.70% 1.25% 1.25%
Distribution and service (12b-1) fees 0.25% 0.25% 0.25%
Other expenses 0.30% 0.26% 0.26%
Total fund operating expenses 1.25% 1.76% 1.76%
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 $ 646 $ 694 $ 694
3 Years 901 1,050 1,050
5 Years 1,175 1,429 1,429
10 Years 1,957 2,489 2,489
</TABLE>
(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 International Fund and the International Index Fund.
(2) Actual expenses for the fiscal year were lower than those shown in the table
because of voluntary fee waivers by the Adviser. The Adviser intends to waive
fees during the current fiscal year so that total fund operating expenses do not
exceed 1.60% and 1.00% for the International Fund and the International Index
Fund, respectively. Fee waivers may be discontinued at any time.
<TABLE>
<CAPTION>
CLASS B SHARES FEES AND EXPENSES
INTERNATIONAL INTERNATIONAL
INDEX FUND
FUND PRO FORMA
<S> <C> <C> <C>
SHAREHOLDER FEES (PAID DIRECTLY FROM
YOUR INVESTMENT)
Maximum sales load imposed on purchases
(as a percentage of offering price) None None None
Maximum deferred sales charge (as a percentage of net
asset value at purchase or
16
<PAGE>
redemption, whichever is less)
5.00% 5.00% 5.00%
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE
DEDUCTED FROM FUND ASSETS) (1)
Management fees 0.70% 1.25% 1.25%
Distribution and service (12b-1) fees 1.00% 1.00% 1.00%
Other expenses 0.31% 0.26% 0.26%
Total fund operating expenses 2.01% 2.51% 2.51%
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 $ 704 $ 754 $ 754
3 Years 1,030 1,182 1,182
5 Years 1,283 1,535 1,535
10 Years 2,142 2,662 2,662
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 $ 204 $ 254 $ 254
3 Years 630 782 782
5 Years 1,083 1,335 1,335
10 Years 2,142 2,662 2,662
</TABLE>
(1) Actual expenses for the fiscal year were lower than those shown in the table
because of voluntary fee waivers by the Adviser. The Adviser intends to waive
fees during the current fiscal year so that total fund operating expenses do not
exceed 2.35% and 1.75% for the International Fund and the International Index
Fund, respectively. Fee waivers may be discontinued at any time.
<TABLE>
<CAPTION>
CLASS Y SHARES FEES AND EXPENSES
INTERNATIONAL INTERNATIONAL
INDEX FUND
FUND PRO FORMA
<S> <C> <C> <C>
SHAREHOLDER FEES (PAID DIRECTLY FROM
YOUR INVESTMENT)
Maximum sales load imposed on purchases
17
<PAGE>
(as a percentage of offering price) None None None
Maximum deferred sales charge (as a percentage of net
asset value at purchase or redemption, whichever is less)
None None None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE
DEDUCTED FROM FUND ASSETS) (1)
Management fees 0.70% 1.25% 1.25%
Distribution and service (12b-1) fees None None None
Other expenses 0.30% 0.26% 0.26%
Total fund operating expenses (1) 1.00% 1.51% 1.51%
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 $ 102 $ 154 $ 154
3 Years 318 477 477
5 Years 552 824 824
10 Years 1,225 1,802 1,802
</TABLE>
----------------
(1) Actual expenses for the fiscal year were lower than those shown in the table
because of voluntary fee waivers by the Adviser. The Adviser intends to waive
fees during the current fiscal year so that total fund operating expenses do not
exceed 1.35% and 0.75% for the International Fund and the International Index
Fund, respectively. Fee waivers may be discontinued at any time.
PURCHASE, EXCHANGE AND REDEMPTION PROCEDURES
Class A and Class B shares of the International Fund received by
International Index 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 International Index Fund. These procedures are
discussed in the Retail Class Prospectus of the International Index Fund and the
International 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 International Fund received by International
Index 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 International Index Fund. These procedures are discussed in the
Institutional Class Prospectus of the International Index
18
<PAGE>
Fund and the International Fund which accompanies this Prospectus/Proxy
Statement under the heading "Buying Shares and Selling Shares."
The Plan provides that if Class A shares of the International Fund are
distributed in the Reorganization to former holders of Class A shares of the
International Index Fund with respect to which the front-end sales charge was
waived due to a purchase of $1 million or more, the International Fund will give
credit for the period during which the holder thereof held such International
Index Fund shares in determining whether a deferred sales charge is payable upon
the sale of such Class A shares of the International Fund.
DIVIDENDS AND DISTRIBUTIONS
Dividends are declared and paid quarterly for the International Index
Fund and annually for the International Fund. Distributions of any net realized
capital gains are made at least once every twelve months with respect to both
Funds. Dividends and distributions for each Fund are automatically reinvested in
additional shares of the Fund unless a shareholder requests that they be
reinvested in shares of another First American fund or paid in cash.
SHAREHOLDER VOTING RIGHTS
Each Fund issues Class A, Class B, Class C and Class Y shares. Class A,
Class B, Class C and Class Y 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 each Fund invests primarily in equity securities that trade on
markets outside the United States, the risks of investing in the Funds are
similar. Principal risks of investing in each Fund are the risks of investing in
equity securities and the risks of international investing. The International
Fund is subject to additional risks because of its ability to invest in emerging
markets and smaller capitalization companies. These types of securities are
generally not included in the EAFE Index. In addition, unlike International
Index Fund, International Fund may enter into foreign currency hedging
transactions and may lend its portfolio securities. These transactions subject
International Fund to additional risks. Each of these risks is discussed below.
The price of each Fund will change daily due to changes in the market value of
its investments and other factors, which means you could lose money.
RISKS OF EQUITY SECURITIES
Equity securities may decline significantly in price over short or extended
periods of time. Price changes may occur in the world market as a whole, or they
may occur in only a particular country, company, industry or sector of the world
market.
19
<PAGE>
RISKS OF INTERNATIONAL INVESTING
International investing involves risks not typically associated with domestic
investing. Because of these risks, each Fund may be subject to greater
volatility than mutual funds that invest principally in domestic securities.
Risks of international investing include adverse currency fluctuations,
potential political and economic instability, limited liquidity and volatile
prices of non-U.S. securities, limited availability of information regarding
non-U.S. companies, investment and repatriation restrictions, and foreign
taxation. Risks may be even greater for International Fund because of the
Sub-Adviser's ability to invest substantial portions of the Fund's assets in a
small number of countries.
RISKS OF EMERGING MARKETS
As a main investment strategy, International Fund may invest in emerging markets
where the risks of international investing are particularly significant.
Investing in emerging markets generally involves exposure to economic structures
that are less diverse and mature, and to political systems that are less stable,
than those of developed countries. In addition, issuers in emerging markets
typically are subject to a greater degree of change in earnings and business
prospects than are companies in developed markets.
RISKS OF SMALLER CAPITALIZATION COMPANIES
International Fund may invest in stocks of smaller capitalization companies as a
main investment strategy. Stocks of smaller capitalization companies involve
substantial risk and their prices may be subject to more abrupt or erratic
movements than those of larger, more established companies or of market averages
in general.
RISKS OF FOREIGN CURRENCY HEDGING TRANSACTIONS
In order to hedge against adverse movements in currency exchange rates,
International Fund may enter into forward foreign currency exchange contracts.
If the Sub-Adviser's forecast of exchange rate movements is incorrect, the Fund
may realize losses on its foreign currency transactions. In addition, the Fund's
hedging transactions may prevent the Fund from realizing the benefits of a
favorable change in the value of foreign currencies.
RISKS OF SECURITIES LENDING
To generate additional income, International Fund may lend securities
representing up to one-third of the value of its total assets to broker-dealers,
banks and other institutions. As a result, the Fund is subject to the risk that
the other party to a securities lending agreement will default on its
obligations.
20
<PAGE>
INFORMATION ABOUT THE REORGANIZATION
REASONS FOR THE REORGANIZATION
The First American Board of Directors, including all of the
"non-interested" directors, has determined that it is advantageous to combine
the International Index Fund with the International Fund. As discussed in detail
below under "Comparison of Investment Objectives and Principal Investment
Strategies," the Funds are similar in that each invests primarily in equity
securities that trade on markets outside the United States. In addition, the
Funds have the same investment adviser, distributor, custodian, transfer agent
and auditors.
The First American Board of Directors has determined that the
Reorganization is expected to provide certain benefits to the International
Index Fund and the International 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 International Index Fund
shareholders, including the potential for enhanced investment
performance;
2. The tax-free nature of the proposed Reorganization;
3. The terms and conditions of the Plan, including that (a) the exchange
of International Index Fund shares for International Fund shares will
take place on a net asset value basis; and (b) no sales charge will be
incurred by International Index Fund shareholders in connection with
their acquisition of International Fund shares in the Reorganization;
4. The agreement of the Adviser to bear the costs associated with the
proposed Reorganization;
5. The fact that the Rule 12b-1 fees and sales charges would remain
constant for International Index Fund shareholders;
6. The International Fund's agreement that in applying the 18 month 1%
deferred sales charge on Class A shares with respect to which the
front-end sales charge was waived, credit will be given for the period
a former International Index Fund shareholder who is subject to such a
deferred sales charge held his or her shares.
The Board also considered that defined benefit plans sponsored by U.S.
Bancorp or its subsidiaries own approximately 76% of the total outstanding
shares of the International Index Fund. As noted above, the International Fund
has enjoyed significantly better investment returns, and for this reason the
Trustees of these defined benefit plans have indicated that, absent a merger
with the International Fund, it may be in the best interests of the plan
participants for the plans to exchange shares of the International Index Fund
for shares of the International Fund, although at this time there is no
definitive plan to do so. If this exchange were to occur, the sale
21
<PAGE>
of assets required to redeem the shares of International Index Fund held by the
plans would generate realized capital gains of approximately $13.94 per
International Index Fund share, resulting in potentially significant, adverse
tax consequences to the remaining International Index Fund shareholders. The
Board concluded that the proposed reorganization is therefore in the best
interests of the remaining International Index Fund shareholders as a way to
avoid such adverse tax consequences.
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
International Fund realizes overall expense ratios before fee waivers consistent
with those before the Reorganization, the combination of Funds would have the
effect of decreasing the cost to U.S. Bank of providing such waivers. The Board
also noted, however, that U.S. Bank is not obligated to make any such waivers
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 above render the proposed
Reorganization fair to and in the best interests of shareholders of the
International Index Fund and the International 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, the International Fund will acquire all of the assets and assume
all liabilities of the International Index Fund in exchange for International
Fund shares having an aggregate net asset value equal to the aggregate value of
the assets acquired (less liabilities assumed) from the International Index
Fund. The International Index Fund and the International Fund are separate
series of shares within First American, a single Maryland corporation. As a
result, for corporate law purposes, the acquisition of assets, assumption of
liabilities and exchange of shares is structured under the Plan as a
reallocation of assets and liabilities from the International Index Fund to the
International Fund coupled with the issuance and exchange of Class A, Class B
and Class Y International Fund shares in exchange for Class A, Class B and Class
Y International Index 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 International Index Fund will receive, at the Effective Time, Class A,
Class B or Class Y shares of the International Fund, as applicable, with an
aggregate net asset value equal to the aggregate net asset value of the
International Index Fund shares owned by such shareholder immediately prior to
the Effective Time. At the Effective Time, the International Fund will issue and
distribute, at the direction of First American's Board of Directors, to the
International Index Fund's shareholders of record, determined as of the
Effective Time, the International Fund Shares issued in exchange for the
International Index Fund Shares as described above. Thereafter, no additional
shares representing interests in the International Index Fund will be issued,
and the International Index Fund will be deemed to be liquidated.
22
<PAGE>
Under the Plan, the net asset value per share of the International
Index Fund's and the International Fund's Class A, Class B and Class Y shares
will be computed as of the Effective Time using the valuation procedures set
forth in First American's amended and restated articles of incorporation and
bylaws and the then current Prospectuses and Statement of Additional Information
of International Index Fund and International Fund and as may be required by the
Investment Company Act. The distribution of International Fund shares to former
International Index Fund shareholders described above will be accomplished by
the establishment of accounts on the share records of the International Fund in
the names of International Index Fund shareholders, each representing the
respective classes and numbers of full and fractional International Fund shares
due such shareholders.
The Plan provides that no sales charges will be incurred by
International Index Fund shareholders in connection with the acquisition by them
of International Fund shares pursuant thereto. The Plan provides that if Class A
shares of the International Fund are distributed in the Reorganization to former
holders of Class A shares of the International Index Fund with respect to which
the front-end sales charge was waived due to a purchase of $1 million or more,
the International Fund will give credit for the period during which the holder
thereof held such International Index Fund shares in determining whether a
deferred sales charge is payable upon the sale of such Class A shares of the
International Fund.
The International Index Fund contemplates that it will make a
distribution, immediately prior to the Effective Time, of all of its net income
and net realized capital gains, if any, not previously distributed. This
distribution will be taxable to International Index 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 International Index 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 International Index Fund and the
International Fund in the Plan; and (iv) the delivery of customary closing
certificates. See the Plan attached hereto as Exhibit A for a complete listing
of the conditions to the consummation of the Reorganization. The Plan may be
terminated and the Reorganization abandoned at any time prior to the Effective
Time, before or after approval by shareholders of the International Index Fund,
by resolution of the Board of Directors of First American, if circumstances
should develop that, in the opinion of the Board, make proceeding with the
consummation of the Plan and Reorganization not in the best interests of either
Fund's shareholders. The Plan provides that the Adviser will pay all expenses
incurred in connection with the Reorganization, and neither Fund will be liable
for such expenses.
Approval of the Plan will require the affirmative vote of a majority of
the outstanding shares of each class of the International Index Fund, voting as
separate classes. Approval of the Plan by International Index 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
23
<PAGE>
action. International Index 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 INTERNATIONAL FUND SHARES
The Class A, Class B, Class C and Class Y shares of the International
Fund issued in the Reorganization will represent shares of common stock, $.0001
par value, in the International Fund, which is an open-end mutual fund and a
series of First American. First American is an open-end management investment
company incorporated under the laws of the State of Maryland. Each share of the
International 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 International Fund have no preemptive
or conversion rights.
Each share of the International 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 (i) required by the Investment Company Act, or (ii) 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 International Fund shares for the
International Index Fund's net assets and the distribution of such shares to the
International Index Fund's shareholders upon liquidation of the International
Index Fund will be treated as a tax-free reorganization under the Code and that,
for federal income tax purposes, no income, gain or loss will be recognized by
the International Index Fund's shareholders (except that the International Index
Fund contemplates that it will make a distribution, immediately prior to the
Effective Time, of all of its net income and net realized capital gains, if any,
not previously distributed, and this distribution will be taxable to
International Index Fund shareholders subject to taxation). First American has
not asked, nor does it plan to ask, the Internal Revenue Service to rule on the
tax consequences of the Reorganization.
As a condition to the closing of the Reorganization, the two Funds will
receive an opinion from Dorsey & Whitney LLP, counsel to the Funds, based in
part on certain representations to be furnished by each Fund and their Adviser,
substantially to the effect that the federal income tax consequences of the
Reorganization will be as follows:
24
<PAGE>
(i) the Reorganization will constitute a reorganization within the
meaning of Section 368(a)(1)(C) of the Code, and the
International Fund and the International Index Fund each will
qualify as a party to the Reorganization under Section 368(b) of
the Code;
(ii) International Index Fund shareholders will recognize no income,
gain or loss upon receipt, pursuant to the Reorganization, of
International Fund shares. International Index Fund shareholders
subject to taxation will recognize income upon receipt of any
net investment income or net capital gains of the International
Index Fund which are distributed by the International Index Fund
prior to the Effective Time;
(iii) the tax basis of the International Fund shares received by each
International Index Fund shareholder pursuant to the
Reorganization will be equal to the tax basis of the
International Index Fund shares exchanged therefor;
(iv) the holding period of the International Fund shares received by
each International Index Fund shareholder pursuant to the
Reorganization will include the period during which the
International Index Fund shareholder held the International
Index Fund shares exchanged therefor, provided that the
International Index Fund shares were held as a capital asset at
the Effective Time;
(v) the International Index Fund will recognize no income, gain or
loss by reason of the Reorganization;
(vi) the International Fund will recognize no income, gain or loss by
reason of the Reorganization;
(vii) the tax basis of the assets received by the International Fund
pursuant to the Reorganization will be the same as the basis of
those assets in the hands of the International Index Fund as of
the Effective Time;
(viii) the holding period of the assets received by the International
Fund pursuant to the Reorganization will include the period
during which such assets were held by the International Index
Fund; and
(ix) the International Fund will succeed to and take into account the
earnings and profits, or deficit in earnings and profits, of the
International Index Fund as of the Effective Time.
Shareholders of the International Index 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 International Index Fund should consult their tax advisors as to state and
local tax consequences, if any, of the Reorganization.
25
<PAGE>
RECOMMENDATION AND VOTE REQUIRED
The Board of Directors of First American, including the
"non-interested" directors, recommends that shareholders of the International
Index 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 International
Index Fund, voting as separate classes. Approval of the Plan by International
Index 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 INTERNATIONAL INDEX FUND
AND THE INTERNATIONAL FUND
Information concerning the International Fund and the International
Index Fund is incorporated herein by reference from the current Retail Class
Prospectus and the current Institutional Class Prospectus, each related to both
the International Fund and the International Index Fund and dated January 31,
2000, 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 International Fund, the International Index 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
International Fund, the International Index 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.
COMPARISON OF INVESTMENT OBJECTIVES AND
PRINCIPAL INVESTMENT STRATEGIES
The International Index Fund and the International Fund are both
diversified, open-end funds. The Funds are similar, in that they both offer
investors an opportunity to diversify their portfolios by investing in equity
securities that trade in markets other than the United States. However, there
are significant differences in the investment objectives of the Funds and the
principal investment strategies the Funds use in attempting to achieve these
objectives.
INTERNATIONAL FUND
International Fund has an objective of long-term growth of capital.
Under normal market conditions, International Fund invests primarily (at least
65% of its total assets) in equity
26
<PAGE>
securities that trade in markets other than the United States. These securities
generally are issued by companies:
|_| that are domiciled in countries other than the United States, or
|_| that derive at least 50% of either their revenues or their pre-tax
income from activities outside of the United States.
Normally, the Fund will invest in securities traded in at least three
foreign countries. In choosing investments for the Fund, the Sub-Adviser
generally places primary emphasis on country selection. This is followed by the
selection of industries or sectors within or across countries and the selection
of individual stocks within those industries or sectors. Investments are
expected to be made primarily in developed markets and larger capitalization
companies. However, the Fund also has the ability to invest in emerging markets
and smaller capitalization companies.
Equity securities in which the Fund invests include common and
preferred stock. In addition, the Fund may invest in securities representing
underlying international securities, such as American Depositary Receipts and
European Depositary Receipts, and in securities of other investment companies.
In order to hedge against adverse movements in currency exchange rates,
the Fund may enter into forward foreign currency exchange contracts.
To generate additional income, the Fund may lend securities
representing up to one-third of the value of its total assets to broker-dealers,
banks and other institutions.
INTERNATIONAL INDEX FUND
International Index Fund's objective is to provide investment results
that correspond to the performance of the EAFE Index.Under normal market
conditions, International Index Fund invests at least 90% of its total assets in
common stocks included in the EAFE Index. The EAFE Index currently includes
approximately 1,077 companies representing the stock markets of approximately 14
European countries, Australia, New Zealand, Japan, Hong Kong and Singapore. The
Adviser believes that the Fund's objective can best be achieved by investing in
common stocks of approximately 50% to 100% of the issues included in the EAFE
Index, depending on the size of the Fund. A computer program is used to identify
which stocks should be purchased or sold in order to replicate, as closely as
possible, the composition of the EAFE Index.
Because the Fund may not always hold all of the stocks included in the
EAFE Index, and because the Fund has expenses and the index does not, the Fund
will not duplicate the index's performance precisely. However, the Adviser
believes that there should be a close correlation between the Fund's performance
and that of the EAFE Index in both rising and falling markets.
27
<PAGE>
The Fund will attempt to achieve a correlation between the performance
of its portfolio and that of the EAFE Index of at least 95%, without taking into
account expenses of the Fund. A perfect correlation would be indicated by a
figure of 100%, which would be achieved if the Fund's net asset value, including
the value of its dividends and capital gains distributions, increased or
decreased in exact proportion to changes in the EAFE Index. If the Fund is
unable to achieve a correlation of 95% over time, the Fund's board of directors
will consider alternative strategies for the Fund.
TEMPORARY INVESTMENTS
In an attempt to respond to adverse market, economic, political or
other conditions, each Fund may temporarily invest without limit in cash and in
U.S. dollar-denominated high-quality money market instruments and other
short-term securities, including money market funds advised by the Adviser.
Being invested in these securities may keep a Fund from participating in a
market upswing and prevent the Fund from achieving its investment objective.
PORTFOLIO TURNOVER
Portfolio managers for the International Fund may trade securities
frequently, resulting, from time to time, in an annual portfolio turnover rate
of over 100%. Trading of securities may produce capital gains, which are taxable
to shareholders when distributed. Active trading may also increase the amount of
commissions or mark-ups to broker-dealers that the Fund pays when it buys and
sells securities. Portfolio turnover for International Index Fund is expected to
be well below that of actively managed International Fund. The "Financial
Highlights" section of the current Retail Class Prospectus and the current
Institutional Class Prospectus accompanying this Prospectus/Proxy Statement
shows each Fund's historical portfolio turnover rate.
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 International Index
Fund and of the International Fund as of March 31, 2000 and on a pro forma basis
as of that date, giving effect to the proposed Reorganization (in thousands,
except per share values):
<TABLE>
<CAPTION>
INTERNATIONAL INTERNATIONAL
INDEX FUND
FUND PRO FORMA
<S> <C> <C> <C>
CLASS A SHARES
Net assets $3,555 $104,130 $107,685
Net asset value per share $14.87 $24.47 $24.47
Shares outstanding 239 4,255 4,400
28
<PAGE>
CLASS B SHARES
Net assets $972 $11,671 $12,643
Net asset value per share $14.81 $23.67 $23.67
Shares outstanding 66 493 534
CLASS C SHARES (1)
Net assets $8 $7,176 $7,716
Net asset value per share $14.92 $24.25 $24.25
Shares outstanding 1 296 296
CLASS Y SHARES
Net assets $145,204 $870,577 $1,015,781
Net asset value per share $14.92 $24.51 $24.51
Shares outstanding 9,732 35,518 41,442
</TABLE>
(1) All outstanding Class C shares of International Index Fund were redeemed
prior to the record date.
VOTING INFORMATION
GENERAL
This Prospectus/Proxy Statement is furnished in connection with a
solicitation of proxies by the Board of Directors of First American to be used
at the Meeting of International Index Fund shareholders to be held at 10:00
a.m., Central Time, on September 15, 2000, at the offices of U.S. Bank National
Association, Minneapolis, Minnesota and at any adjournments thereof. This
Prospectus/Proxy Statement, along with a Notice of Special Meeting and a proxy
card, is first being mailed to shareholders of the International Index Fund on
or about August 4, 2000. Only shareholders of record as of the close of business
on July 19, 2000 (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. Shareholders will also 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. 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, Minneapolis, Minnesota 55402, or by
properly executing and submitting a later-dated proxy, or by voting in person at
the Meeting.
If a shareholder executes and returns a proxy but abstains from voting,
the shares held by such shareholder will be deemed present at the Meeting for
purposes of determining a quorum but will not be included in determining the
total number of votes cast. If a proxy is received from
29
<PAGE>
a broker or nominee indicating that such person has not received instructions
from the beneficial owner or other person entitled to vote International Index
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 June 21, 2000, (i) the International Index Fund had the following
numbers of shares outstanding and entitled to vote at the Meeting: Class A,
236,706.098 shares, Class B, 68,179.956 shares, and Class Y, 8,042,707.060
shares; (ii) the International Fund had the following numbers of shares
outstanding: Class A, 4,477,613.464 shares, Class B, 646,808.642 shares, Class
C, 475,515.826 shares, and Class Y, 36,568,866.372 shares; and (iii) the
directors and officers of the respective Funds as a group owned less than one
percent of the outstanding shares of either Fund or any class thereof. The
following table sets forth information concerning those persons known by the
respective Funds to own of record or beneficially more than 5% of the
outstanding shares of either Fund or any class thereof (including 25% holders)
as of such date:
<TABLE>
<CAPTION>
PERCENTAGE
NAME AND ADDRESS NUMBER AND CLASS OWNERSHIP
OF HOLDER OF SHARES OWNED OF CLASS
<S> <C> <C>
INTERNATIONAL INDEX FUND:
Class A
U.S. Bancorp Investments, Inc. 23,507.64* 9.94%
FBO 412227871
100 South Fifth Street Suite 1400
Minneapolis, MN 55402
Class B
A G Edwards & Sons Custodian 3,439.67 5.05%
FBO IRA Acct
6838 W. Elmhurst Ave.
Littleton, CO 80128
Class Y
USB Cash Balance Pension Plan 6,163,111.66 76.63%
USB Benefits
4000 West Broadway Ave.
Robbinsdale, MN 55422
30
<PAGE>
INTERNATIONAL FUND:
Class Y
USB Cash Balance Pension Plan 2,352,597.32 6.44%
USB Benefits
4000 West Broadway Ave.
Robbinsdale, MN 55422
USB/FA International Fund 3,818,542.18 10.45%
USB Benefits
4000 West Broadway Ave.
Robbinsdale, MN 55422
</TABLE>
* 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 Adviser may also arrange for an outside firm, Shareholder
Communications Corporation, to solicit shareholder votes by telephone on behalf
of the Fund. 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 International Index Fund and
the International 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, a portion of which is paid to Marvin & Palmer Associates,
Inc. as the Sub-Adviser for the International Fund; SEI Investments Distribution
Co., as the Distributor for each Fund, receives payments for providing
distribution services; U.S. Bank National Association, in its capacity as the
Administrator for each Fund, receives payments for providing shareholder
servicing, legal and accounting and other administrative personnel and
31
<PAGE>
services, a portion of which is paid to SEI Investments Mutual Funds Services as
the Sub-Administrator; U.S. Bank, 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 DST Systems,
Inc. 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, a portion of which is paid to Bankers Trust Company as the
Sub-Custodian for certain accounts, and may also act as securities lending agent
in connection with International Fund's 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, International Index Fund shareholders are not entitled to assert
dissenters' rights of appraisal in connection with the Plan or Reorganization.
FINANCIAL STATEMENTS AND EXPERTS
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 International Fund and the
International Index Fund as of September 30, 1999, 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 January 31, 2000, have been incorporated by reference into
this Prospectus/Proxy Statement in reliance on the report of Ernst & Young 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 International Fund and the International
Index Fund for the six-month period ending March 31, 2000, as included in the
Semi-Annual Report of First American for the six-month period ending March 31,
2000, are incorporated herein by reference.
LEGAL MATTERS
Certain legal matters concerning the issuance of the shares of the
International Fund to be issued in the Reorganization will be passed upon by
Dorsey & Whitney LLP, 220 South Sixth Street, Minneapolis, Minnesota 55402.
32
<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
INTERNATIONAL FUND AND
INTERNATIONAL INDEX FUND
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as of this
__ day of ______________, 2000, by and between Class Q (also known as
"International Fund") (the "Acquiring Fund") of First American Investment Funds,
Inc., a Maryland corporation ("FAIF"), and Class BB (also known as
"International Index Fund") (the "Acquired Fund") of FAIF. The shares of the
Acquiring Fund and the Acquired Fund designated in FAIF's amended and restated
articles of incorporation, as supplemented by articles supplementary thereto
filed through the date hereof, are referred to herein by the names set forth in
Article V, Section 3 of FAIF's bylaws, as follows:
Designation in Articles of Incorporation
or Articles Supplementary Name Assigned in Bylaws
------------------------- -----------------------
Class Q Common Shares International Fund,
Retail Class or Class A
Class Q, Series 2 Common Shares International Fund,
Institutional Class or Class Y
Class Q, Series 3 Common Shares International Fund,
CDSC Class or Class B
Class Q, Series 4 Common Shares International Fund,
Class C
Class BB Common Shares International Index
Fund, Retail Class or Class A
Class BB, Series 2 Common Shares International Index
Fund, CDSC Class or Class B
Class BB, Series 3 Common Shares International Index
Fund, Institutional Class or Class Y
Class BB, Series 4 Common Shares International Index
Fund, Class C
This Agreement is intended to be and is adopted as a plan of reorganization and
liquidation pursuant to Sections 368(a)(1)(C) of the United States Internal
Revenue Code of 1986, as amended (the "Code"). The reorganization (the
"Reorganization") will consist of the consolidation of the Acquired Fund with
and into the Acquiring Fund by means of the exchange of shares of common stock,
par value $.0001 per share, of the Acquiring Fund (the" Acquiring Fund Shares"),
having an aggregate net asset value equal to the aggregate net asset value of
the Acquired Fund, for all of the issued and outstanding shares of common stock,
par value $.0001 per share, of the Acquired Fund (the "Acquired Fund Shares"),
all upon the terms and conditions
33
<PAGE>
hereinafter set forth in this Agreement. The exchange of Acquiring Fund Shares
for Acquired Fund Shares will be effected pursuant to an amendment to FAIF's
Articles of Incorporation in the form attached hereto as Exhibit 1 (the
"Amendment") to be adopted in accordance with the Maryland General Corporation
Law.
RECITALS
A. FAIF is a registered, open-end management investment company that
offers its shares of common stock in multiple series (each of which series
represents a separate and distinct portfolio of assets and liabilities).
B. Each of the Acquiring Fund and the Acquired Fund series of FAIF
offers Class A shares, Class B shares, Class C shares and Class Y shares.
C. The Acquired Fund owns securities that generally are assets of the
character in which the Acquiring Fund is permitted to invest.
D. The Board of Directors of FAIF has determined that the consolidation
of the Acquired Fund with and into the Acquiring Fund by means of the exchange
of Class A, Class B, Class C and Class Y Acquiring Fund Shares for all of the
issued and outstanding Class A, Class B, Class C and Class Y Acquired Fund
Shares, respectively, on the basis set forth herein is in the best interests of
the Acquired Fund shareholders and the Acquiring Fund shareholders.
AGREEMENT
In consideration of the premises and of the covenants and agreements hereinafter
set forth, the parties hereto covenant and agree as follows:
1. EXCHANGE OF SHARES; REALLOCATION OF ASSETS AND LIABILITIES
1.1 Subject to the requisite approval by the Acquired Fund shareholders
and to the other terms and conditions herein set forth and on the basis of the
representations and warranties contained herein, the Acquired Fund and the
Acquiring Fund agree that at the Effective Time (as defined in Section 3.1), (a)
each issued and outstanding Class A Acquired Fund Share shall be, without
further action, exchanged for that number of Class A Acquiring Fund Shares
calculated in accordance with Article 2 hereof and the Amendment; (b) each
issued and outstanding Class B Acquired Fund Share shall be, without further
action, exchanged for that number of Class B Acquiring Fund Shares calculated in
accordance with Article 2 hereof and the Amendment; (c) each issued and
outstanding Class C Acquired Fund Share shall be, without further action,
exchanged for that number of Class C Acquiring Fund Shares calculated in
accordance with Article 2 hereof and the Amendment; and (d) each issued and
outstanding Class Y Acquired Fund Share shall be, without further action,
exchanged for that number of Class Y Acquiring Fund Shares calculated in
accordance with Article 2 hereof and the Amendment.
1.2 (a) At the Effective Time, the assets and liabilities belonging to
34
<PAGE>
the Acquired Fund and its respective classes shall become, without further
action, assets and liabilities belonging to the Acquiring Fund and its
respective classes, all in accordance with Article IV, Section 1(d)(i) and (ii)
of FAIF's amended and restated articles of incorporation. For purposes of the
foregoing, the terms "assets belonging to" and "liabilities belonging to" have
the meanings assigned to them in said Article IV, Section 1(d)(i) and (ii). Such
assets belonging to the Acquired Fund to become assets belonging to the
Acquiring Fund shall consist of all of Acquired Fund's property, including, but
not limited to, all cash, securities, commodities and futures interests and
dividends or interest receivable which are assets belonging to the Acquired Fund
as of the Effective Time. All of said assets shall be set forth in detail in an
unaudited statement of assets and liabilities of the Acquired Fund as of the
Effective Time (the "Effective Time Statement"). The Effective Time Statement
shall, with respect to the listing of the Acquired Fund's portfolio securities,
detail the adjusted tax basis of such securities by lot, the respective holding
periods of such securities and the current and accumulated earnings and profits
of the Acquired Fund. The Effective Time Statement shall be prepared in
accordance with generally accepted accounting principles (except for footnotes)
consistently applied.
(b) The Acquired Fund has provided the Acquiring Fund with a list of
all of the Acquired Fund's assets as of the date of execution of this Agreement.
The Acquired Fund reserves the right to sell any of these securities prior to
the Effective Time and to acquire additional securities in the ordinary course
of its business.
1.3 Pursuant to Section 1.2(a), at the Effective Time the liabilities,
expenses, costs, charges and reserves (including, but not limited to, expenses
incurred in the ordinary course of the Acquired Fund's operations, such as
accounts payable relating to custodian and transfer agency fees, investment
management and administrative fees, legal and audit fees, and expenses of state
securities registration of the Acquired Fund's shares) as reflected in the
Effective Time Statement shall become liabilities, expenses, costs, charges and
reserves of the Acquiring Fund.
1.4 At the Effective Time and pursuant to the plan of reorganization
adopted herein, the Acquiring Fund will issue and distribute (as provided in
Article 2) to the Acquired Fund or, at the direction of the Acquired Fund's
Board of Directors, to the Acquired Fund's shareholders of record, determined as
of the Effective Time (the "Acquired Fund Shareholders"), the Acquiring Fund
Shares issued in exchange for the Acquired Fund Shares pursuant to Section 1.1
and Article 2. Thereafter, no additional shares representing interests in the
Acquired Fund shall be issued, and the Acquired Fund shall be deemed to be
liquidated. Such distribution shall be accomplished by the issuance of such
Acquiring Fund Shares to open accounts on the share records of the Acquiring
Fund in the names of the Acquired Fund Shareholders representing the numbers and
classes of Acquiring Fund Shares due each such shareholder. All issued and
outstanding shares of the Acquired Fund will simultaneously be cancelled on the
books of the Acquired Fund, although from and after the Effective Time share
certificates representing interests in the Acquired Fund will represent those
numbers and classes of Acquiring Fund Shares as determined in accordance with
Article 2. Unless requested by Acquired Fund Shareholders, the Acquiring Fund
will not issue certificates representing the Acquiring Fund Shares in connection
with such exchange.
1.5 Ownership of Acquiring Fund Shares will be shown on the books of
the Acquiring Fund. Shares of the Acquiring Fund will be issued in the manner
described in the Acquiring
35
<PAGE>
Fund's Prospectuses and Statement of Additional Information (in effect as of the
Effective Time), except that no sales charges will be incurred by the Acquired
Fund Shareholders in connection with the acquisition by the Acquired Fund
Shareholders of Acquiring Fund Shares pursuant to this Agreement.
1.6 The Acquiring Fund agrees that in determining contingent deferred
sales charges applicable to Class B or Class C shares issued by it in the
Reorganization and, with respect to Class B shares, the date upon which such
shares convert to Class A shares, it shall give credit for the period during
which the holders thereof held the Class B or Class C shares of the Acquired
Fund in exchange for which such Acquiring Fund shares were issued. In the event
that Class A shares of the Acquiring Fund are distributed in the Reorganization
to former holders of Class A shares of the Acquired Fund with respect to which
the front-end sales charge was waived due to a purchase of $1 million or more,
the Acquiring Fund agrees that in determining whether a deferred sales charge is
payable upon the sale of such Class A shares of the Acquiring Fund it shall give
credit for the period during which the holder thereof held such Acquired Fund
shares.
1.7 Any reporting responsibility of the Acquired Fund, including, but
not limited to, the responsibility for filing of regulatory reports, tax
returns, or other documents with the Securities and Exchange Commission (the
"Commission"), any state securities commissions, and any federal, state or local
tax authorities or any other relevant regulatory authority, is and shall remain
the responsibility of the Acquired Fund.
2. EXCHANGE RATIOS; VALUATION; ISSUANCE OF ACQUIRING FUND SHARES
2.1 The net asset value per share of the Acquired Fund's and the
Acquiring Fund's Class A shares, Class B shares, Class C shares and Class Y
shares shall be computed as of the Effective Time using the valuation procedures
set forth in FAIF's amended and restated articles of incorporation and bylaws
and then-current Prospectuses and Statement of Additional Information and as may
be required by the Investment Company Act of 1940, as amended (the "1940 Act").
2.2 (a) The total number of the Acquiring Fund's Class A shares to be
issued (including fractional shares, if any) in exchange for the Acquired Fund's
Class A shares shall be determined as of the Effective Time by multiplying the
number of the Acquired Fund's Class A shares outstanding immediately prior to
the Effective Time times a fraction, the numerator of which is the net asset
value per share of the Acquired Fund's Class A shares immediately prior to the
Effective Time, and the denominator of which is the net asset value per share of
the Acquiring Fund's Class A shares immediately prior to the Effective Time,
each as determined pursuant to Section 2.1.
(b) The total number of the Acquiring Fund's Class B shares to be
issued (including fractional shares, if any) in exchange for the Acquired Fund's
Class B shares shall be determined as of the Effective Time by multiplying the
number of the Acquired Fund's Class B shares outstanding immediately prior to
the Effective Time times a fraction, the numerator of which is the net asset
value per share of the Acquired Fund's Class B shares immediately prior to the
Effective Time, and the denominator of which is the net asset value per share of
the Acquiring
36
<PAGE>
Fund's Class B shares immediately prior to the Effective Time, each as
determined pursuant to Section 2.1.
(c) The total number of the Acquiring Fund's Class C shares to be
issued (including fractional shares, if any) in exchange for the Acquired Fund's
Class C shares shall be determined as of the Effective Time by multiplying the
number of the Acquired Fund's Class C shares outstanding immediately prior to
the Effective Time times a fraction, the numerator of which is the net asset
value per share of the Acquired Fund's Class C shares immediately prior to the
Effective Time, and the denominator of which is the net asset value per share of
the Acquiring Fund's Class C shares immediately prior to the Effective Time,
each as determined pursuant to Section 2.1.
(d) The total number of the Acquiring Fund's Class Y shares to be
issued (including fractional shares, if any) in exchange for the Acquired Fund's
Class Y shares shall be determined as of the Effective Time by multiplying the
number of the Acquired Fund's Class Y shares outstanding immediately prior to
the Effective Time times a fraction, the numerator of which is the net asset
value per share of the Acquired Fund's Class Y shares immediately prior to the
Effective Time, and the denominator of which is the net asset value per share of
the Acquiring Fund's Class Y shares immediately prior to the Effective Time,
each as determined pursuant to Section 2.1.
2.3 At the Effective Time, the Acquiring Fund shall issue and
distribute to the Acquired Fund Shareholders of the respective classes pro rata
within such classes (based upon the ratio that the number of Acquired Fund
shares of the respective classes owned by each Acquired Fund Shareholder
immediately prior to the Effective Time bears to the total number of issued and
outstanding Acquired Fund shares of the respective classes immediately prior to
the Effective Time) the full and fractional Acquiring Fund Shares of the
respective classes to be issued by the Acquiring Fund pursuant to Section 2.2.
Accordingly, each Class A Acquired Fund Shareholder shall receive, at the
Effective Time, Class A Acquiring Fund Shares with an aggregate net asset value
equal to the aggregate net asset value of the Class A Acquired Fund Shares owned
by such Acquired Fund Shareholder immediately prior to the Effective Time; each
Class B Acquired Fund Shareholder shall receive, at the Effective Time, Class B
Acquiring Fund Shares with an aggregate net asset value equal to the aggregate
net asset value of the Class B Acquired Fund Shares owned by such Acquired Fund
Shareholder immediately prior to the Effective Time; each Class C Acquired Fund
Shareholder shall receive, at the Effective Time, Class C Acquiring Fund Shares
with an aggregate net asset value equal to the aggregate net asset value of the
Class C Acquired Fund Shares owned by such Acquired Fund Shareholder immediately
prior to the Effective Time; and each Class Y Acquired Fund Shareholder shall
receive, at the Effective Time, Class Y Acquiring Fund Shares with an aggregate
net asset value equal to the aggregate net asset value of the Class Y Acquired
Fund Shares owned by such Acquired Fund Shareholder immediately prior to the
Effective Time.
3. EFFECTIVE TIME OF CLOSING
3.1 The closing of the transactions contemplated by this Agreement (the
"Closing") shall occur as of the close of normal trading on the New York Stock
Exchange (the "Exchange")
37
<PAGE>
(currently, 4:00 p.m. Eastern time) on the first day upon which the conditions
to closing shall have been satisfied, or at such time on such later date as
provided herein or as the parties otherwise may agree in writing (such time and
date being referred to herein as the "Effective Time"). All acts taking place at
the Closing shall be deemed to take place simultaneously as of the Effective
Time unless otherwise agreed to by the parties. The Closing shall be held at the
offices of U.S. Bank, 601 Second Avenue South, Minneapolis, Minnesota 55402, or
at such other place as the parties may agree.
3.2 The custodian for the Acquiring Fund (the "Custodian") shall
deliver at the Closing a certificate of an authorized officer stating that it
holds the Acquired Fund's portfolio securities, cash, and any other assets being
allocated to the Acquiring Fund pursuant to this Agreement.
3.3 In the event that the Effective Time occurs on a day on which (a)
the Exchange or another primary trading market for portfolio securities of the
Acquiring Fund or the Acquired Fund shall be closed to trading or trading
thereon shall be restricted, or (b) trading or the reporting of trading on the
Exchange or elsewhere shall be disrupted so that accurate appraisal of the value
of the net assets of the Acquiring Fund or the Acquired Fund is impracticable,
the Effective Time shall be postponed until the close of normal trading on the
Exchange on the first business day when trading shall have been fully resumed
and reporting shall have been restored.
3.4 The Acquired Fund shall deliver at the Closing its certificate
stating that the records maintained by its transfer agent (which shall be made
available to the Acquiring Fund) contain the names and addresses of the Acquired
Fund Shareholders and the number of outstanding Acquired Fund shares owned by
each such shareholder as of the Effective Time. The Acquiring Fund shall certify
at the Closing that the Acquiring Fund Shares required to be issued by it
pursuant to this Agreement have been issued and delivered as required herein. At
the Closing, each party shall deliver to the other such bills of sale, liability
assumption agreements, checks, assignments, share certificates, if any, receipts
or other documents as such other party or its counsel may reasonably request.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS
4.1 The Acquired Fund represents, warrants and covenants to the
Acquiring Fund as follows:
(a) FAIF is a corporation duly organized, validly existing and in good
standing under the laws of the State of Maryland;
(b) FAIF is a registered investment company classified as a management
company of the open-end type, and its registration with the Commission as an
investment company under the 1940 Act, and of each series of shares offered by
FAIF under the Securities Act of 1933, as amended (the "1933 Act"), is in full
force and effect;
(c) Shares of the Acquired Fund are registered in all jurisdictions in
which they are required to be registered under applicable state securities laws
and any other applicable laws, and said registrations, including any periodic
reports or supplemental filings, are complete and
38
<PAGE>
current, and all fees required to be paid have been paid, and the Acquired Fund
is in good standing, is not subject to any stop orders, and is fully qualified
to sell its shares in any state in which its shares have been registered;
(d) The Acquired Fund is not in violation, and the execution, delivery
and performance of this Agreement will not result in a violation, of FAIF's
amended and restated articles of incorporation or bylaws or of any material
agreement, indenture, instrument, contract, lease or other undertaking to which
the Acquired Fund is a party or by which it is bound;
(e) No material litigation or administrative proceeding or
investigation of or before any court or governmental body is presently pending
or, to the Acquired Fund's knowledge, threatened against the Acquired Fund or
any of its properties or assets. The Acquired Fund is not a party to or subject
to the provisions of any order, decree or judgment of any court or governmental
body which materially and adversely affects its business or its ability to
consummate the transactions herein contemplated;
(f) The statement of assets and liabilities of the Acquired Fund as of
September 30, 1999 has been audited by Ernst & Young LLP, independent
accountants, and is in accordance with accounting principles generally accepted
in the United States consistently applied, and such statement (a copy of which
has been furnished to the Acquiring Fund) presents fairly, in all material
respects, the financial position of the Acquired Fund as of such date, and there
are no known material contingent liabilities of the Acquired Fund as of such
date not disclosed therein;
(g) Since September 30, 1999, there has not been any material adverse
change in the Acquired Fund's financial condition, assets, liabilities or
business other than changes occurring in the ordinary course of business, except
as otherwise disclosed to the Acquiring Fund. For the purposes of this paragraph
(g), a decline in net asset value per share of the Acquired Fund, the discharge
or incurrence of Acquired Fund liabilities in the ordinary course of business,
or the redemption of Acquired Fund shares by Acquired Fund Shareholders shall
not constitute such a material adverse change;
(h) All material federal and other tax returns and reports of the
Acquired Fund required by law to have been filed prior to the Effective Time
shall have been filed and shall be correct, and all federal and other taxes
shown as due or required to be shown as due on said returns and reports shall
have been paid or provision shall have been made for the payment thereof, and,
to the best of the Acquired Fund's knowledge, no such return is currently or
shall be under audit and no assessment shall have been asserted with respect to
such returns;
(i) For each taxable year of its operation, the Acquired Fund has met
the requirements of Subchapter M of the Code for qualification and treatment as
a regulated investment company, and the Acquired Fund intends to meet the
requirements of Subchapter M of the Code for qualification and treatment as a
regulated investment company for its final, partial taxable year;
(j) All issued and outstanding shares of the Acquired Fund are, and at
the Effective Time will be, duly and validly issued and outstanding, fully paid
and non-assessable. All of the issued and outstanding shares of the Acquired
Fund will, at the Effective Time, be held by the persons
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and in the amounts set forth in the records of the Acquired Fund, as provided in
Section 3.4. The Acquired Fund does not have outstanding any options, warrants
or other rights to subscribe for or purchase any of the Acquired Fund shares,
and there is not outstanding any security convertible into any of the Acquired
Fund shares (other than Class B shares which automatically convert to Class A
shares after a specified period);
(k) At the Effective Time, the Acquired Fund will have good and
marketable title to the Acquired Fund's assets to be allocated to the Acquiring
Fund pursuant to Section 1.2, and from and after the Effective Time the
Acquiring Fund will have good and marketable title thereto, subject to no
restrictions on the transfer thereof, including such restrictions as might arise
under the 1933 Act other than as disclosed to the Acquiring Fund in the
Effective Time Statement;
(l) The execution, delivery and performance of this Agreement will have
been duly authorized prior to the Effective Time by all necessary action on the
part of FAIF's Board of Directors, and, subject to the approval of the Acquired
Fund Shareholders, this Agreement will constitute a valid and binding obligation
of the Acquired Fund, enforceable in accordance with its terms, subject, as to
enforcement, to bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance and other laws relating to or affecting creditors' rights and to the
application of equitable principles in any proceeding, whether at law or in
equity;
(m) The information to be furnished by the Acquired Fund for use in
registration statements, proxy materials and other documents which may be
necessary in connection with the transactions contemplated hereby shall be
accurate and complete in all material respects;
(n) All information pertaining to the Acquired Fund and its agents and
affiliates and included in the Registration Statement referred to in Section 5.5
(or supplied by the Acquired Fund, its agents or affiliates for inclusion in
said Registration Statement), on the effective date of said Registration
Statement and up to and including the Effective Time, will not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which such statements are made, not materially misleading
(other than as may timely be remedied by further appropriate disclosure);
(o) Since September 30, 1999, there have been no material changes by
the Acquired Fund in accounting methods, principles or practices, including
those required by generally accepted accounting principles, except as disclosed
in writing to the Acquiring Fund; and
(p) The Effective Time Statement will be prepared in accordance with
generally accepted accounting principles (except for footnotes) consistently
applied and will present accurately the assets and liabilities of the Acquired
Fund as of the Effective Time, and the values of the Acquired Fund's assets and
liabilities to be set forth in the Effective Time Statement will be computed as
of the Effective Time using the valuation procedures set forth in FAIF's amended
and restated articles of incorporation and bylaws and the Acquired Fund's
then-current Prospectuses and Statement of Additional Information and as may be
required by the 1940 Act.
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4.2 The Acquiring Fund represents, warrants and covenants to the
Acquired Fund as follows:
(a) FAIF is a corporation duly organized, validly existing and in good
standing under the laws of the State of Maryland;
(b) FAIF is a registered investment company classified as a management
company of the open-end type, and its registration with the Commission as an
investment company under the 1940 Act, and of each series of shares offered by
FAIF under the 1933 Act, is in full force and effect;
(c) At or before the Effective Time, shares of the Acquiring Fund
(including, but not limited to, the Acquiring Fund Shares) will be registered in
all jurisdictions in which they will be required to be registered under
applicable state securities laws and any other applicable laws (including, but
not limited to, all jurisdictions necessary to effect the Reorganization), and
said registrations, including any periodic reports or supplemental filings, will
be complete and current, and all fees required to be paid will have been paid,
and the Acquiring Fund will be in good standing, and will not be subject to any
stop orders, and will be fully qualified to sell its shares in any state in
which its shares will have been registered;
(d) The Prospectuses and Statement of Additional Information of the
Acquiring Fund, as of the date hereof and up to and including the Effective
Time, conform and will conform in all material respects to the applicable
requirements of the 1933 Act and the 1940 Act and the rules and regulations of
the Commission thereunder and do not and will not include any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not materially misleading;
(e) The Acquiring Fund is not in violation, and the execution, delivery
and performance of this Agreement will not result in a violation, of FAIF's
amended and restated articles of incorporation or bylaws or of any material
agreement, indenture, instrument, contract, lease or other undertaking to which
the Acquiring Fund is a party or by which it is bound;
(f) No material litigation or administrative proceeding or
investigation of or before any court or governmental body is presently pending
or, to the Acquiring Fund's knowledge, threatened against the Acquiring Fund or
any of its properties or assets. The Acquiring Fund is not a party to or subject
to the provisions of any order, decree or judgment of any court or governmental
body which materially and adversely affects its business or its ability to
consummate the transactions herein contemplated;
(g) The statement of assets and liabilities of the Acquiring Fund as of
September 30, 1999 has been audited by Ernst & Young LLP, independent
accountants, and is in accordance with accounting principles generally accepted
in the United States consistently applied, and such statement (a copy of which
has been furnished to the Acquired Fund) presents fairly, in all material
respects, the financial position of the Acquiring Fund as of such date, and
there are no known material contingent liabilities of the Acquiring Fund as of
such date not disclosed therein;
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(h) Since September 30, 1999, there has not been any material adverse
change in the Acquiring Fund's financial condition, assets, liabilities or
business other than changes occurring in the ordinary course of business, except
as otherwise disclosed to the Acquired Fund. For the purposes of this paragraph
(h), a decline in net asset value per share of the Acquiring Fund, the discharge
or incurrence of Acquiring Fund liabilities in the ordinary course of business,
or the redemption of Acquiring Fund Shares by Acquiring Fund shareholders shall
not constitute a material adverse change;
(i) All material federal and other tax returns and reports of the
Acquiring Fund required by law to have been filed prior to the Effective Time
shall have been filed and shall be correct, and all federal and other taxes
shown as due or required to be shown as due on said returns and reports shall
have been paid or provision shall have been made for the payment thereof, and to
the best of the Acquiring Fund's knowledge no such return is currently or shall
be under audit and no assessment shall have been asserted with respect to such
returns;
(j) For each taxable year of its operation, the Acquiring Fund has met
the requirements of Subchapter M of the Code for qualification and treatment as
a regulated investment company, and the Acquiring Fund intends to meet the
requirements of Subchapter M of the Code for qualification and treatment as a
regulated investment company in the current and future years;
(k) All issued and outstanding shares of the Acquiring Fund are, and at
Effective Time will be, duly and validly issued and outstanding, fully paid and
non-assessable;
(l) The Acquiring Fund Shares to be issued and delivered to the
Acquired Fund, for the account of the Acquired Fund Shareholders, pursuant to
the terms of this Agreement, at the Effective Time will have been duly
authorized and, when so issued and delivered, will be duly and validly issued
Acquiring Fund Shares and will be fully paid and non-assessable;
(m) The Acquiring Fund does not have outstanding any options, warrants
or other rights to subscribe for or purchase any of the Acquiring Fund Shares,
and there is not outstanding any security convertible into any of the Acquiring
Fund Shares (other than Class B shares which automatically convert to Class A
shares after a specified period);
(n) At the Effective Time, the Acquiring Fund will have good and
marketable title to the Acquiring Fund's assets;
(o) Since September 30, 1999, there have been no material changes by
the Acquiring Fund in accounting methods, principles or practices, including
those required by generally accepted accounting principles, except as disclosed
in writing to the Acquired Fund;
(p) The execution, delivery and performance of this Agreement will have
been duly authorized prior to the Effective Time by all necessary action on the
part of the Board of Directors of FAIF, as issuer of the Acquiring Fund Shares,
and this Agreement will constitute a valid and binding obligation of the
Acquiring Fund enforceable in accordance with its terms, subject as to
enforcement, to bankruptcy, insolvency, reorganization, moratorium, fraudulent
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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, not materially
misleading (other than as may timely be remedied by further appropriate
disclosure); provided, however, that the representations and warranties in
clause (ii) of this paragraph shall not apply to statements in (or omissions
from) the Registration Statement concerning the Acquired Fund.
5. FURTHER COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND.
5.1 Each of the Acquired Fund and the Acquiring Fund will operate its
business in the ordinary course between the date hereof and the Effective Time,
it being understood that such ordinary course of business will include the
declaration and payment of customary dividends and distributions, and any other
distributions that may be advisable (which may include distributions prior to
the Effective Time of net income and/or net realized capital gains not
previously distributed).
5.2 The Acquired Fund will call a meeting of its shareholders to
consider and act upon this Agreement and to take all other action necessary to
obtain approval of the transactions contemplated herein.
5.3 The Acquired Fund will assist the Acquiring Fund in obtaining such
information as the Acquiring Fund reasonably requests concerning the beneficial
ownership of the Acquired Fund shares.
5.4 Subject to the provisions of this Agreement, the Acquiring Fund and
the Acquired Fund will each take, or cause to be taken, all actions, and do or
cause to be done, all things
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reasonably necessary, proper or advisable to consummate and make effective the
transactions contemplated by this Agreement.
5.5 The Acquired Fund will provide the Acquiring Fund with information
reasonably necessary with respect to the Acquired Fund and its agents and
affiliates for the preparation of the Registration Statement on Form N-14 of the
Acquiring Fund (the "Registration Statement"), in compliance with the 1933 Act,
the 1934 Act and the 1940 Act.
5.6 The Acquiring Fund agrees to use all reasonable efforts to obtain
the approvals and authorizations required by the 1933 Act, the 1940 Act and such
of the state blue sky or securities laws as may be necessary in order to conduct
its operations after the Effective Time.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND. The obligations of
the Acquired Fund to consummate the transactions provided for herein shall be
subject, at its election, to the performance by the Acquiring Fund of all the
obligations to be performed by it hereunder at or before the Effective Time,
and, in addition thereto, the following further conditions (any of which may be
waived by the Acquired Fund, in its sole and absolute discretion):
(a) All representations and warranties of the Acquiring Fund contained
in this Agreement shall be true and correct as of the date hereof and, except as
they may be affected by the transactions contemplated by this Agreement, as of
the Effective Time with the same force and effect as if made at such time; and
(b) The Acquiring Fund shall have delivered to the Acquired Fund a
certificate executed in its name by its President or a Vice President, in a form
reasonably satisfactory to the Acquired Fund and dated as of the date of the
Closing, to the effect that the representations and warranties of the Acquiring
Fund made in this Agreement are true and correct at the Effective Time, except
as they may be affected by the transactions contemplated by this Agreement and
as to such other matters as the Acquired Fund shall reasonably request.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND. The obligations of
the Acquiring Fund to complete the transactions provided for herein shall be
subject, at its election, to the performance by the Acquired Fund of all of the
obligations to be performed by it hereunder at or before the Effective Time and,
in addition thereto, the following conditions (any of which may be waived by the
Acquiring Fund, in its sole and absolute discretion):
(a) All representations and warranties of the Acquired Fund contained
in this Agreement shall be true and correct as of the date hereof and, except as
they may be affected by the transactions contemplated by this Agreement, as of
the Effective Time with the same force and effect as if made at such time;
(b) The Acquiring Fund shall have received, and certified as to its
receipt of, the Effective Time Statement;
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(c) The Acquired Fund shall have delivered to the Acquiring Fund a
certificate executed in its name by its President or a Vice President, in form
and substance satisfactory to the Acquiring Fund and dated as of the date of the
Closing, to the effect that the representations and warranties of the Acquired
Fund made in this Agreement are true and correct at and as of the Effective
Time, except as they may be affected by the transactions contemplated by this
Agreement, and as to such other matters as the Acquiring Fund shall reasonably
request;
(d) At or prior to the Effective Time, the Acquired Fund's investment
adviser, or an affiliate thereof, shall have paid or agreed to pay the Acquired
Fund an amount equal to the unamortized organizational expenses, if any, on the
books of the Acquired Fund, and such unamortized organizational expenses shall
not be reflected in the Effective Time Statement; and
(e) At or prior to the Effective Time, the Acquired Fund's investment
adviser, or an affiliate thereof, shall have reimbursed or agreed to reimburse
the Acquired Fund by the amount, if any, that the expenses incurred by the
Acquired Fund (or accrued up to the Effective Time) exceed any applicable
contractual or state-imposed expense limitations.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
AND THE ACQUIRED FUND. The following shall constitute further conditions
precedent to the consummation of the Reorganization:
(a) This Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding shares of
the Acquired Fund in accordance with the provisions of its amended and restated
articles of incorporation and bylaws and applicable law, and certified copies of
the resolutions evidencing such approval shall have been delivered to the
Acquiring Fund. Notwithstanding anything herein to the contrary, neither the
Acquiring Fund nor the Acquired Fund may waive the conditions set forth in this
Section 8(a);
(b) FAIF shall have obtained such exemptive relief from the provisions
of Section 17 of the 1940 Act as may, in the view of its counsel, be required in
order to consummate the transactions contemplated hereby;
(c) The Acquiring Fund's investment adviser shall have paid or agreed
to pay the costs incurred by FAIF in connection with the Reorganization,
including the fees and expenses associated with the preparation and filing of
the application for exemptive relief referred to in Section 8(b) above and the
Registration Statement referred to in Section 5.5 above, and the expenses of
printing and mailing the prospectus/proxy statement, soliciting proxies and
holding the shareholders meeting required to approve the transactions
contemplated by this Agreement;
(d) As of the Effective Time, no action, suit or other proceeding shall
be threatened or pending before any court or governmental agency in which it is
sought to restrain or prohibit, or obtain damages or other relief in connection
with, this Agreement or the transactions contemplated herein;
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(e) All consents of other parties and all other consents, orders and
permits of federal, state and local regulatory authorities deemed necessary by
the Acquiring Fund or the Acquired Fund to permit consummation, in all material
respects, of the transactions contemplated hereby shall have been obtained,
except where failure to obtain any such consent, order or permit would not
involve a risk of a material adverse effect on the assets or properties of the
Acquiring Fund or the Acquired Fund, provided that either party hereto may for
itself waive any of such conditions;
(f) The Registration Statement shall have become effective under the
1933 Act, and no stop orders suspending the effectiveness thereof shall have
been issued and, to the best knowledge of the parties hereto, no investigation
or proceeding for that purpose shall have been instituted or be pending,
threatened or contemplated under the 1933 Act;
(g) The parties shall have received the opinion of Dorsey & Whitney LLP
addressed to the Acquired Fund and the Acquiring Fund, dated as of the date of
the Closing, and based in part on certain representations to be furnished by the
Acquired Fund, the Acquiring Fund, and their investment adviser and other
service providers, substantially to the effect that:
(i) the Reorganization will constitute a reorganization within
the meaning of Section 368(a)(1)(C) of the Code, and the Acquiring Fund
and the Acquired Fund each will qualify as a party to the
Reorganization under Section 368(b) of the Code;
(ii) the Acquired Fund Shareholders will recognize no income,
gain or loss upon receipt, pursuant to the Reorganization, of the
Acquiring Fund Shares. Acquired Fund Shareholders subject to taxation
will recognize income upon receipt of any net investment income or net
capital gains of the Acquired Fund which are distributed by the
Acquired Fund prior to the Effective Time;
(iii) the tax basis of the Acquiring Fund Shares received by
each Acquired Fund Shareholder pursuant to the Reorganization will be
equal to the tax basis of the Acquired Fund Shares exchanged therefor;
(iv) the holding period of the Acquiring Fund Shares received
by each Acquired Fund Shareholder pursuant to the Reorganization will
include the period during which the Acquired Fund Shareholder held the
Acquired Fund Shares exchanged therefor, provided that the Acquired
Fund shares were held as a capital asset at the Effective Time;
(v) the Acquired Fund will recognize no income, gain or loss
by reason of the Reorganization;
(vi) the Acquiring Fund will recognize no income, gain or loss
by reason of the Reorganization;
(vii) the tax basis of the assets received by the Acquiring
Fund pursuant to the Reorganization will be the same as the basis of
those assets in the hands of the Acquired Fund as of the Effective
Time;
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(viii) the holding period of the assets received by the
Acquiring Fund pursuant to the Reorganization will include the period
during which such assets were held by the Acquired Fund; and
(ix) the Acquiring Fund will succeed to and take into account
the earnings and profits, or deficit in earnings and profits, of the
Acquired Fund as of the Effective Time.
(h) The Amendment shall have been filed in accordance with the
applicable provisions of Maryland law.
9. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
9.1 The Acquiring Fund and the Acquired Fund agree that neither party
has made any representation, warranty or covenant not set forth herein and that
this Agreement constitutes the entire agreement between the parties.
9.2 The representations and warranties contained in this Agreement or
in any document delivered pursuant hereto or in connection herewith shall
survive the consummation of the transactions contemplated hereunder.
10. TERMINATION. This Agreement and the transactions contemplated hereby may be
terminated and abandoned by either party by resolution of FAIF's Board of
Directors at any time prior to the Effective Time if circumstances should
develop that, in the good faith opinion of such Board, make proceeding with the
Agreement not in the best interest of the shareholders of the Acquired Fund or
the Acquiring Fund.
11. AMENDMENTS. This agreement may be amended, modified or supplemented in such
manner as may be mutually agreed upon in writing by the authorized officers of
the Acquired Fund and the Acquiring Fund; provided, however, that following the
meeting of the Acquired Fund Shareholders called by the Acquired Fund pursuant
to Section 5.2 of this Agreement, no such amendment may have the effect of
changing the provisions for determining the number of the Acquiring Fund Shares
to be issued to the Acquired Fund Shareholders under this Agreement to the
detriment of such shareholders without their further approval.
12. NOTICES. Any notice, report, statement or demand required or permitted by
any provisions of this Agreement shall be in writing and shall be deemed duly
given if delivered or mailed by registered mail, postage prepaid, addressed to
the Acquiring Fund or the Acquired Fund, 601 Second Avenue South, Minneapolis,
Minnesota 55402, Attention: Christopher J. Smith (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.
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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.
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
INTERNATIONAL INDEX FUND
By ______________________________
Its _____________________________
FIRST AMERICAN INVESTMENT FUNDS, INC.
on behalf of its
INTERNATIONAL 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.
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, as amended, 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 BB shares of the Corporation (also known as "International Index
Fund") that the assets belonging to such class be sold to a separate portfolio
of the Corporation which is known as "International Fund" and which is
represented by the Corporation's Class Q shares, in exchange for shares of
International Fund which are to be delivered to former International Index Fund
holders; and
WHEREAS, International Index Fund and International 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 International Index Fund to the foregoing
transactions, and in particular to bind such holders to the exchange of their
International Index Fund shares for International 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(F) immediately following Article IV(E) thereof:
ARTICLE IV(F). (a) For purposes of this Article IV(F), the following
terms shall have the following meanings:
"Corporation" means this corporation.
"Acquired Fund" means the Corporation's International Index Fund, which
is represented by the Corporation's Class BB shares.
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"Class A Acquired Fund Shares" means the Corporation's Class BB Common
Shares.
"Class B Acquired Fund Shares" means the Corporation's Class BB, Series
2 Common Shares.
"Class Y Acquired Fund Shares" means the Corporation's Class BB, Series
3 Common Shares.
"Class C Acquired Fund Shares" means the Corporation's Class BB, Series
4 Common Shares.
"Acquiring Fund" means the Corporation's International Fund, which is
represented by the Corporation's Class Q shares.
"Class A Acquiring Fund Shares" means the Corporation's Class Q Common
Shares.
"Class Y Acquiring Fund Shares" means the Corporation's Class Q, Series
2 Common Shares.
"Class B Acquiring Fund Shares" means the Corporation's Class Q, Series
3 Common Shares.
"Class C Acquiring Fund Shares" means the Corporation's Class Q, Series
4 Common Shares.
"Effective Time" means 4:00 p.m. Eastern time on the date upon which
these Articles of Amendment are filed with the Maryland State Department of
Assessments and Taxation.
(b) At the Effective Time, the assets belonging to the Acquired Fund,
the liabilities belonging to the Acquired Fund, and the General Assets and
General Liabilities allocated to the Acquired Fund, shall become, without
further action, assets belonging to the Acquiring Fund, liabilities belonging to
the Acquiring Fund, and General Assets and General Liabilities allocated to the
Acquiring Fund. For purposes of the foregoing, the terms "assets belonging to,"
"liabilities belonging to," "General Assets" and "General Liabilities" have the
meanings assigned to them in Article IV, Section 1(d)(i) and (ii) of the
Corporation's Amended and Restated Articles of Incorporation.
(c) At the Effective Time, each issued and outstanding Acquired Fund
share shall be, without further action, exchanged for those numbers and classes
of Acquiring Fund shares calculated in accordance with paragraph (d) below.
(d) The numbers of Class A, Class B, Class C and Class Y Acquiring Fund
Shares to be issued in exchange for the Class A, Class B, Class C and Class Y
Acquired Fund Shares shall be determined as follows:
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(1) The net asset value per share of the Acquired Fund's and the Acquiring
Fund's Class A Shares, Class B Shares, Class C and Class Y Shares shall be
computed as of the Effective Time using the valuation procedures set forth in
the Corporation's articles of incorporation and bylaws and then-current
Prospectuses and Statement of Additional Information and as may be required by
the Investment Company Act of 1940, as amended (the "1940 Act").
(2) The total number of Class A Acquiring Fund Shares to be issued
(including fractional shares, if any) in exchange for the Class A
Acquired Fund Shares shall be determined as of the Effective Time by
multiplying the number of Class A Acquired Fund Shares outstanding
immediately prior to the Effective Time times a fraction, the numerator
of which is the net asset value per share of Class A Acquired Fund
Shares immediately prior to the Effective Time, and the denominator of
which is the net asset value per share of the Class A Acquiring Fund
Shares immediately prior to the Effective Time, each as determined
pursuant to (1) above.
(3) The total number of Class B Acquiring Fund Shares to be issued
(including fractional shares, if any) in exchange for the Class B
Acquired Fund Shares shall be determined as of the Effective Time by
multiplying the number of Class B Acquired Fund Shares outstanding
immediately prior to the Effective Time times a fraction, the numerator
of which is the net asset value per share of Class B Acquired Fund
Shares immediately prior to the Effective Time, and the denominator of
which is the net asset value per share of the Class B Acquiring Fund
Shares immediately prior to the Effective Time, each as determined
pursuant to (1) above.
(4) The total number of Class C Acquiring Fund Shares to be issued
(including fractional shares, if any) in exchange for the Class C
Acquired Fund Shares shall be determined as of the Effective Time by
multiplying the number of Class C Acquired Fund Shares outstanding
immediately prior to the Effective Time times a fraction, the numerator
of which is the net asset value per share of Class C Acquired Fund
Shares immediately prior to the Effective Time, and the denominator of
which is the net asset value per share of the Class C Acquiring Fund
Shares immediately prior to the Effective Time, each as determined
pursuant to (1) above.
(5) The total number of Class Y Acquiring Fund Shares to be issued
(including fractional shares, if any) in exchange for the Class Y
Acquired Fund Shares shall be determined as of the Effective Time by
multiplying the number of Class Y Acquired Fund Shares outstanding
immediately prior to the Effective Time times a fraction, the numerator
of which is the net asset value per share of Class Y Acquired Fund
Shares immediately prior to the Effective Time, and the denominator of
which is the net asset value per share of the Class Y Acquiring Fund
Shares immediately prior to the Effective Time, each as determined
pursuant to (1) above.
(6) At the Effective Time, the Acquired Fund shall issue and distribute
to the Acquired Fund shareholders of the respective classes pro rata
within such classes (based upon the ratio that the number of Acquired
Fund shares of the respective classes owned by each Acquired Fund
shareholder immediately prior to the Effective Time bears to the total
51
<PAGE>
number of issued and outstanding Acquired Fund shares of the respective
classes immediately prior to the Effective Time) the full and
fractional Acquiring Fund shares of the respective classes issued by
the Acquiring Fund pursuant to (2) through (5) above. Accordingly, each
Class A Acquired Fund shareholder shall receive, at the Effective Time,
Class A Acquiring Fund Shares with an aggregate net asset value equal
to the aggregate net asset value of the Class A Acquired Fund Shares
owned by such Acquired Fund shareholder immediately prior to the
Effective Time; each Class B Acquired Fund shareholder shall receive,
at the Effective Time, Class B Acquiring Fund Shares with an aggregate
net asset value equal to the aggregate net asset value of the Class B
Acquired Fund Shares owned by such Acquired Fund shareholder
immediately prior to the Effective Time; each Class C Acquired Fund
shareholder shall receive, at the Effective Time, Class C Acquiring
Fund Shares with an aggregate net asset value equal to the aggregate
net asset value of the Class C Acquired Fund Shares owned by such
Acquired Fund shareholder immediately prior to the Effective Time; and
each Class Y Acquired Fund shareholder shall receive, at the Effective
Time, Class Y Acquiring Fund Shares with an aggregate net asset value
equal to the aggregate net asset value of the Class Y Acquired Fund
Shares owned by such Acquired Fund shareholder immediately prior to the
Effective Time.
(e) The distribution of Acquiring Fund shares to Acquired Fund
shareholders provided for in paragraphs (c) and (d) above shall be accomplished
by the issuance of such Acquiring Fund shares to open accounts on the share
records of the Acquiring Fund in the names of the Acquired Fund shareholders
representing the numbers and classes of Acquiring Fund shares due each such
shareholder pursuant to the foregoing provisions. All issued and outstanding
shares of the Acquired Fund shall simultaneously be cancelled on the books of
the Acquired Fund and retired. From and after the Effective Time, share
certificates formerly representing Acquired Fund shares shall represent the
numbers and classes of Acquiring Fund shares determined in accordance with the
foregoing provisions.
(f) From and after the Effective Time, the Acquired Fund shares
cancelled and retired pursuant to paragraph (e) above shall have the status of
authorized and unissued Class BB common shares of the Corporation, without
designation as to series.
The undersigned officer of the Corporation hereby acknowledges, in the
name and on behalf of the Corporation, the foregoing Articles of Amendment to be
the corporate act of the Corporation and further certifies that, to the best of
his or her knowledge, information and belief, the matters and facts set forth
therein with respect to the approval thereof are true in all material respects,
under the penalties of perjury.
52
<PAGE>
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
____________ __, 2000.
FIRST AMERICAN INVESTMENT FUNDS, INC.
By ______________________________
Its _____________________________
WITNESS:
________________________________________________
Secretary, First American Investment Funds, Inc.
53
<PAGE>
PART B
STATEMENT OF ADDITIONAL INFORMATION
DATED AUGUST 9, 2000
PROPOSED ACQUISITION OF ASSETS OF
INTERNATIONAL INDEX FUND
A SEPARATELY MANAGED SERIES OF
FIRST AMERICAN INVESTMENT FUNDS, INC.
P.O. BOX 1330
MINNEAPOLIS, MINNESOTA 55448-1330
(800) 637-2548
BY AND IN EXCHANGE FOR SHARES OF
INTERNATIONAL FUND
A SEPARATELY MANAGED SERIES OF
FIRST AMERICAN INVESTMENT FUNDS, INC.
P.O. BOX 1330
MINNEAPOLIS, MINNESOTA 55448-1330
(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 International Index
Fund (the "Acquired Fund") by the International Fund in exchange for shares of
common stock of the International Fund having an aggregate net asset value equal
to the aggregate value of the assets (less liabilities assumed) of the Acquired
Fund. As a result of the transactions, each shareholder of the International
Index Fund will receive International Fund shares of the same class that he or
she held in the International Index Fund, with a net asset value equal to the
net asset value of the shareholder's International Index 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, 2000, containing
additional information concerning the Retail Classes and the
Institutional Class of both the International Fund and the
International Index Fund.
2. Financial Statements of International Fund and International Index
Fund included in the annual report of First American for the
fiscal year ended September 30, 1999.
<PAGE>
3. Financial Statements of International Fund and International Index
Fund included in the Semi-Annual report of First American for the
six months ended March 31, 2000.
This Statement of Additional Information is not a prospectus. A
Prospectus/Proxy Statement dated August 9, 2000 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, the annual report referred to in Item No. 2
above is included in Part A as materials to be delivered with the
Prospectus/Proxy Statement. A copy of the annual report also will be delivered
to any person requesting the Statement of Additional Information.
FIRST AMERICAN INVESTMENT FUNDS, INC.
INTERNATIONAL FUND
INTRODUCTION TO PRO FORMA COMBINING STATEMENTS
MARCH 31, 2000
The accompanying unaudited pro forma combining Statement of Assets and
Liabilities, Statement of Operations and Schedule of Investments, reflect the
accounts of First American International Index Fund and the First American
International Fund.
These statements have been derived from the underlying accounting records for
the International Index Fund and International Fund used in calculating net
asset values for the twelve-month period ended September 30, 1999 and the
six-month period ended March 31, 2000, as applicable. The pro forma combining
Statements of Operations have been prepared based upon the fee and expense
structure of the International Fund.
Under the proposed merger agreement and plan of reorganization, all outstanding
shares of each class of the International Index Fund will be exchanged for the
respective classes of the shares of the International Fund.
<PAGE>
FIRST AMERICAN INTERNATIONAL FUND
PRO FORMA COMBINING FINANCIAL STATEMENTS (UNAUDITED)
STATEMENT OF ASSETS AND LIABILITIES (000'S)
MARCH 31,2000
<TABLE>
<CAPTION>
INTERNATIONAL
INTERNATIONAL FUND
INTERNATIONAL INDEX PRO FORMA
FUND FUND ADJUSTMENTS COMBINED
----------- ----------- -------------- -----------
<S> <C> <C> <C> <C>
ASSETS:
Investments at value (Cost $556,025, $89,958
and $645,983 respectively) $ 976,022 $ 143,961 $ 1,119,983
Cash (151) -- (151)
Foreign currency 9,256 -- 9,256
Dividends and interest receivable 809 442 1,251
Reclaims receivable 562 368 930
Receivable for Fund shares sold 10,646 21 10,667
Receivable for investments sold 2,860 5,834 8,694
----------- ----------- -------------- -----------
Total Assets 1,000,004 150,626 -- 1,150,630
----------- ----------- -------------- -----------
LIABILITIES:
Payable for investments purchased 366 790 1,156
Payable for Fund shares repurchased 4,799 6 8(F) 4,813
Accrued expenses and other liabilities 1,265 78 1,343
Other payables 20 13 33
----------- ----------- -------------- -----------
Total Liabilities 6,450 887 8 7,345
----------- ----------- -------------- -----------
NET ASSETS $ 993,554 $ 149,739 $ (8) $ 1,143,285
=========== =========== ============== ===========
Net Assets are comprised of:
Paid in Capital $ 513,899 $ 97,525 (8)(F)$ 611,416
Distributions in excess of net investment income (29,212) (976) (30,188)
Accumulated net realized gain/(loss) on investments 88,908 (772) 88,136
Net unrealized appreciation of investments 419,997 54,003 474,000
Net unrealized depreciation of forward foreign
currency contracts, foregin currency and translation of other
assets and liabilities in foreign currency (38) (41) (79)
----------- ----------- -------------- -----------
NET ASSETS $ 993,554 $ 149,739 $ (8) $ 1,143,285
=========== =========== ============== ===========
NET ASSET VALUE AND OFFERING PRICE:
CLASS A:
Net Assets $ 104,130 $ 3,555 $ - $ 107,685
Shares outstanding ($.0001 par value - 2 billion authorized) 4,255 239 (94)(E) 4,400
Net asset value and redemption price per share $ 24.47 $ 14.87 $ 24.47
Maximum sales charge of 5.25% (A) 1.36 0.82 1.36
----------- ----------- -------------- -----------
Offering price per share $ 25.83 $ 15.69 $ 25.83
=========== =========== ============== ===========
CLASS B:
Net Assets $ 11,671 $ 972 $ 12,643
Shares outstanding ($.0001 par value - 2 billion authorized) 493 66 (25)(E),(F) 534
Net asset value and offering price per share (B) $ 23.67 $ 14.81 $ 23.67
=========== =========== ============== ===========
CLASS C:
Net Assets $ 7,176 $ 8 (8)(F)$ 7,176
Shares outstanding ($.0001 par value - 2 billion authorized) 296 1 $ (1)(F) 296
Net asset value per share (C) $ 24.25 $ 14.86 $ 24.25
Maximum sales charge of 1.00% (D) 0.24 0.15 0.24
----------- ----------- -------------- -----------
Offering price per share $ 24.49 $ 15.01 $ 24.49
=========== =========== ============== ===========
CLASS Y
Net Assets $ 870,577 $ 145,204 $ 1,015,781
Shares outstanding ($.0001 par value - 2 billion authorized) 35,518 9,732 (3,808)(E) 41,442
Net asset value, offering price, and redemption price per share $ 24.51 $ 14.92 $ 24.51
=========== =========== ============== ===========
</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 liquidation of International Index Fund Class C shares prior to
the merger.
See Notes to Pro Forma Combining Financial Statements.
<PAGE>
INTERNATIONAL FUND
PRO FORMA COMBINING FINANCIAL STATEMENTS (UNAUDITED)
STATEMENTS OF OPERATIONS (000'S OMITTED)
FOR THE SIX MONTHS ENDED MARCH 31, 2000
<TABLE>
<CAPTION>
INTERNATIONAL
INTERNATIONAL FUND
INTERNATIONAL INDEX PRO-FORMA PRO-FORMA
FUND FUND ADJUSTMENT COMBINED
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Investment Income:
Interest $ 1,198 $ 31 $ 1,229
Dividends 704 903 1,607
Less: Foreign taxes withheld (97) (93) (190)
---------- ---------- ---------- ----------
Total Investment Income 1,805 841 - 2,646
Expenses:
Investment Advisory Fees 5,112 507 $391 (A) 6,010
Less: Waiver of investment advisory fees (654) (168) 33 (B) (789)
Administrator fees 445 79 524
Transfer agent fees 118 25 143
Custodian fees 409 72 481
Directors' fees 8 1 9
Registration fees 33 4 37
Professional fees 8 1 9
Printing 29 5 34
Pricing fees 12 2 14
Distribution fees - Class A 93 4 97
Distribution fees - Class B 37 5 42
Distribution fees - Class C 15 - 15
Other 4 15 (13)(C) 6
---------- ---------- ---------- ----------
Total net expenses 5,669 552 411 6,632
---------- ---------- ---------- ----------
Investment income (loss) - net (3,864) 289 (411) (3,986)
---------- ---------- ---------- ----------
Realized and Unrealized Gains(Losses)
on Investments and Foreign Currency Transactions- Net:
Net realized gain (loss) on investments 89,203 (285) 88,918
Net realized loss on forward foreign currency contracts
and foreign currency transactions (13,973) (12) (13,985)
Net change in unrealized appreciation / depreciation
of investments 287,145 21,010 308,155
Net change in unrealized appreciation / depreciation
of forward foreign currency contracts, foreign
currency and translation of other assets and
liabilities in foreign currency 2,660 (44) 2,616
---------- ---------- ---------- ----------
Net gain on investments 365,035 20,669 - 385,704
---------- ---------- ---------- ----------
Net increase in net assets resulting from operations $ 361,171 $ 20,958 $ (411) $ 381,718
========== ========== ========== ==========
</TABLE>
(A) Adjustment reflects the management fee on the combined assets at the
surviving fund's management fee rate.
(B) Adjustment reflects the additional waiver amount necessary to reflect
anticipated expenses of the combined fund.
(C) Adjustment reflects elimination of fee paid to Morgan Stanley for
information on the MSCI EAFE Index.
SEE NOTES TO PRO FORMA COMBINING FINANCIAL STATEMENTS.
<PAGE>
INTERNATIONAL FUND
PRO FORMA COMBINING FINANCIAL STATEMENTS (UNAUDITED)
STATEMENTS OF OPERATIONS (000'S OMITTED)
FOR THE YEAR ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
INTERNATIONAL
INTERNATIONAL FUND
INTERNATIONAL INDEX PRO-FORMA PRO-FORMA
FUND FUND ADJUSTMENT COMBINED
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Investment Income:
Interest $ 799 $ 104 $ 903
Dividends 4,032 2,530 6,562
Less: Foreign taxes withheld (598) (209) (807)
---------- ---------- ---------- ----------
Total Investment Income 4,233 2,425 - 6,658
Expenses:
Investment Advisory Fees 5,836 889 $699 (A) 7,424
Less: Waiver of investment advisory fees (767) (320) 63 (B) (1,024)
Administrator fees 505 145 650
Transfer agent fees 173 47 220
Amortization of organization costs 1 - 1
Custodian fees 467 127 594
Directors' fees 7 2 9
Registration fees 19 21 40
Professional fees 17 5 22
Printing 28 8 36
Pricing fees 11 - 11
Distribution fees - Class A 112 6 118
Distribution fees - Class B 36 4 40
Distribution fees - Class C 3 - 3
Other 6 29 (25) 10
---------- ---------- ---------- ----------
Total net expenses 6,454 963 737 8,154
---------- ---------- ---------- ----------
Investment income (loss) - net (2,221) 1,462 (737) (1,496)
---------- ---------- ---------- ----------
Realized and Unrealized Gains(Losses)
on Investments and Foreign Currency Transactions- Net:
Net realized gain (loss) on investments 37,390 (344) 37,046
Net realized loss on forward foreign currency contracts
and foreign currency transactions (5,078) (26) (5,104)
Net change in unrealized appreciation / depreciation
of investments 104,902 32,483 137,385
Net change in unrealized appreciation / depreciation
of forward foreign currency contracts, foreign
currency and translation of other assets and
liabilities in foreign currency (2,768) (25) (2,793)
---------- ---------- ---------- ----------
Net gain on investments 134,446 32,088 - 166,534
---------- ---------- ---------- ----------
Net increase in net assets resulting from operations $ 132,225 $ 33,550 $ (737) $ 165,038
========== ========== ========== ==========
</TABLE>
(A) Adjustment reflects the management fee on the combined assets at the
surviving fund's management fee rate.
(B) Adjustment reflects the decreased waiver amount necessary to reflect
anticipated expenses of the combined fund.
(C) Adjustment reflects elimination of fee paid to Morgan Stanley for
information on the MSCI EAFE Index.
SEE NOTES TO PRO FORMA COMBINING FINANCIAL STATEMENTS.
<PAGE>
INTERNATIONAL FUND
PRO FORMA COMBINING FINANCIAL STATEMENTS (UNAUDITED)
STATEMENT OF NET ASSETS (000'S)
MARCH 31, 2000
<TABLE>
<CAPTION>
INTERNATIONAL
FUND
INTERNATIONAL INTERNATIONAL PRO FORMA
FUND INDEX(D) COMBINED
--------------------- -------------------- ---------------------
Market Value Market Value Market Value
Shares/Par (000) Shares/Par (000) Shares/Par (000)
<S> <C> <C> <C> <C> <C> <C>
Foreign Common
Stocks--91.7%
Australia--0.9%
Amcor 18,082 $63 18,082 $63
Boral* 13,213 18 13,213 18
Brambles Industries 5,692 145 5,692 145
Broken Hill Proprietary 26,847 291 26,847 291
Burns, Philp & Company* 15,097 4 15,097 4
Coca-Cola Amatil 21,218 53 21,218 53
Coles Myer 26,617 105 26,617 105
CSR 26,547 56 26,547 56
Fosters Brewing 46,622 116 46,622 116
Goodman Fielder 41,964 31 41,964 31
Lend Lease 12,594 163 12,594 163
MIM Holdings 2,632 2 2,632 2
National Australia Bank 29,706 382 29,706 382
Newcrest Mining* 21,543 43 21,543 43
News Corporation 511,500 $7,156 39,293 550 550,793 7,706
North Limited 18,526 32 18,526 32
Orica 7,707 30 7,707 30
Origin Energy 13,213 11 13,213 11
Pacific Dunlop 34,457 33 34,457 33
Pioneer International 22,792 62 22,792 62
Rio Tinto 7,547 107 7,547 107
Santos 14,125 33 14,125 33
Southcorp Holdings 16,425 48 16,425 48
Westfield Trust 32,821 62 32,821 62
Westpac Banking 41,367 259 41,367 259
WMC 28,033 110 28,033 110
----------- ---------- -----------
Total Australia 7,156 2,809 9,965
----------- ---------- -----------
Austria--0.0%
Austrian Airlines 1,410 21 1,410 21
Bank Austria 1,386 67 1,386 67
BBAG Oest Brau-Beteiligungs 885 33 885 33
Flughafen Wien 772 29 772 29
Generale Holding Vienna 269 40 269 40
Oest Elektrizatswirts, Cl A 367 39 367 39
OMV 340 26 340 26
VA Technologie 539 34 539 34
Wienerberger Baustoffindustrie 2,048 42 2,048 42
----------- ---------- -----------
Total Austria 331 331
----------- ---------- -----------
Belgium--0.1%
Bekaert 870 42 870 42
Delhaize 1,220 66 1,220 66
Electrabel 1,159 306 1,159 306
Electrabel Strip* 300 - 300 -
Fortis Strip* 180 - 180 -
Fortis, Cl B 8,388 215 8,388 215
Groupe Bruxelles Lambert 641 136 641 136
KBC Bancassurance Holding 3,420 123 3,420 123
KBC Bancassurance Holding Strip* 70 - 70 -
Solvay 1,720 123 1,720 123
Union Miniere 428 15 428 15
----------- ---------- -----------
Total Belgium 1,026 1,026
----------- ---------- -----------
Canada--3.7%
724 Solutions* 22,100 2,751 22,100 2,751
Boliden* 781 1 781 1
Nortel Networks 116,200 14,641 116,200 14,641
PMC-Sierra* 65,600 13,362 65,600 13,362
Research In Motion* 78,600 8,371 78,600 8,371
TD Waterhouse Group* 134,500 3,362 134,500 3,362
----------- ---------- -----------
Total Canada 42,487 1 42,488
----------- ---------- -----------
Denmark--0.1%
</TABLE>
<PAGE>
INTERNATIONAL FUND
PRO FORMA COMBINING FINANCIAL STATEMENTS (UNAUDITED)
STATEMENT OF NET ASSETS (000'S)
MARCH 31, 2000
<TABLE>
<CAPTION>
INTERNATIONAL
FUND
INTERNATIONAL INTERNATIONAL PRO FORMA
FUND INDEX(D) COMBINED
--------------------- -------------------- ---------------------
Market Value Market Value Market Value
Shares/Par (000) Shares/Par (000) Shares/Par (000)
<S> <C> <C> <C> <C> <C> <C>
Carlsberg, Cl A 562 16 562 16
Carlsberg, Cl B 36 1 36 1
D/S 1912, Cl B 20 228 20 228
D/S Svendborg, Cl B 15 243 15 243
Danisco 1,429 46 1,429 46
Den Danske Bank 999 105 999 105
FLS Industries, Cl B 1,105 20 1,105 20
ISS International Service System, Cl B* 840 55 840 55
Novo-Nordisk, Cl B 1,311 177 1,311 177
Radiometer, Cl B 417 14 417 14
Tele Danmark, Cl B 3,972 357 3,972 357
Unidanmark, Cl A 1,148 74 1,148 74
----------- ---------- -----------
Total Denmark 1,336 1,336
----------- ---------- -----------
Finland--6.3%
Kesko 1,700 23 1,700 23
Kone Cl B 300 17 300 17
Metra, Cl B 700 13 700 13
Nokia, Cl A 202,000 42,655 22,600 4,772 224,600 47,427
Outokumpu 3,500 43 3,500 43
Sampo Insurance, Cl A 1,350 52 1,350 52
Sanitec 65 1 65 1
Sonera Oyj 350,100 23,851 350,100 23,851
Stockmann, Cl A 1,200 18 1,200 18
Stora Enso, Cl A 2,546 27 2,546 27
Stora Enso, Cl R 4,433 47 4,433 47
UPM-Kymmene 5,740 162 5,740 162
----------- ---------- -----------
Total Finland 66,506 5,175 71,681
----------- ---------- -----------
France--6.8%
Accor 4,435 174 4,435 174
Air Liquide 1,947 270 1,947 270
Alcatel 2,878 631 2,878 631
Aventis 6,987 382 6,987 382
Axa 7,207 1,020 7,207 1,020
Banque Nationale de Paris, Cl A 3,482 274 3,482 274
BIC 1,500 61 1,500 61
Bouygues 751 594 751 594
Canal Plus 2,684 590 2,684 590
Cap Gemini 48,750 13,182 48,750 13,182
Carrefour Supermarche 6,156 788 6,156 788
Casino Guichard-Perrachon 1,550 140 1,550 140
Chargeurs 200 12 200 12
Compagnie de Saint Gobain 1,823 233 1,823 233
Danone 1,201 265 1,201 265
Equant* 137,100 11,358 137,100 11,358
Eridania Beghin-Say 650 54 650 54
Gecina 264 27 264 27
Lafarge 1,758 150 1,758 150
Lagardere SCA 2,210 179 2,210 179
Legrand 480 89 480 89
L'Oreal 1,143 737 1,143 737
Louis Vuitton Moet Hennessy 1,609 672 1,609 672
Michelin, Cl B 3,273 105 3,273 105
Pernod Ricard 1,302 63 1,302 63
Peugeot Citroen 956 206 956 206
Pinault-Printemps-Redoute 2,001 370 2,001 370
Sadexho Alliance 900 140 900 140
Sagem - New 375 491 375 491
Sanofi-Synthelabo* 9,372 357 9,372 357
Schneider 2,781 177 2,781 177
Sidel 800 52 800 52
Simco 841 63 841 63
Societe Eurafrance 110 50 110 50
Societe Generale, Cl A 1,557 310 1,557 310
STMicroelectronics 189,100 34,692 189,100 34,692
Suez Lyonnaise des Eaux 2,492 428 2,492 428
Suez Lyonnaise des Eaux (BE) 1,520 261 1,520 261
</TABLE>
<PAGE>
INTERNATIONAL FUND
PRO FORMA COMBINING FINANCIAL STATEMENTS (UNAUDITED)
STATEMENT OF NET ASSETS (000'S)
MARCH 31, 2000
<TABLE>
<CAPTION>
INTERNATIONAL
FUND
INTERNATIONAL INTERNATIONAL PRO FORMA
FUND INDEX(D) COMBINED
--------------------- -------------------- ---------------------
Market Value Market Value Market Value
Shares/Par (000) Shares/Par (000) Shares/Par (000)
<S> <C> <C> <C> <C> <C> <C>
Suez Lyonnaise des Eaux Strip* 1,520 - 1,520 -
Thomson CSF 2,632 107 2,632 107
Total Fina 11,500 1,720 11,500 1,720
Total Fina (BE) 2,079 313 2,079 313
Total Fina Strip* 2,079 - 2,079 -
Unibail 250 33 250 33
Usinor 2,568 41 2,568 41
Valeo 1,778 87 1,778 87
Vivendi 39,300 4,525 13,143 1,513 52,443 6,038
----------- ---------- -----------
Total France 63,757 14,229 77,986
----------- ---------- -----------
Germany--6.8%
Adidas-Salomon 900 50 900 50
AGIV 880 16 880 16
Allianz, Registered 19,400 7,887 3,550 1,443 22,950 9,330
BASF 8,950 424 8,950 424
Bayer 10,150 455 10,150 455
Beiersdorf 1,250 88 1,250 88
Bilfinger & Berger Bau 1,200 18 1,200 18
Brau Und Brunnen* 150 5 150 5
Continental 3,100 56 3,100 56
DaimlerChrysler 9,919 648 9,919 648
Deutsche Bank 117,000 7,764 9,100 604 126,100 8,368
Deutsche Lufthansa, Registered 6,000 137 6,000 137
Deutsche Telekom 37,950 3,053 37,950 3,053
Deutz* 550 3 550 3
Dresdner Bank 8,000 325 8,000 325
Epcos* 172,700 22,772 172,700 22,772
Fantastic* 99,000 2,930 99,000 2,930
Heidelberger Zement 995 56 995 56
Heidelberger Zement (BE)* 122 7 122 7
Hochtief 1,900 54 1,900 54
HypoVereinsbank 6,387 394 6,387 394
Infineon Technologies* 92,900 5,064 92,900 5,064
Intershop Communications* 9,450 4,758 9,450 4,758
Karstadtquelle 1,000 31 1,000 31
Linde 1,500 64 1,500 64
MAN 2,500 91 2,500 91
Merck KGAA 2,800 89 2,800 89
Metro 4,184 167 4,184 167
Muenchener Rueckvers, Registered 2,650 851 2,650 851
Preussag 2,000 92 2,000 92
RWE 6,230 223 6,230 223
SAP 970 543 970 543
Schering 1,050 141 1,050 141
Siemens 96,100 13,819 8,720 1,254 104,820 15,073
Thyssen Krupp* 7,500 185 7,500 185
Veba 7,032 359 7,032 359
Viag 10,400 211 10,400 211
Volkswagen 5,000 218 5,000 218
----------- ---------- -----------
Total Germany 64,994 12,355 77,349
----------- ---------- -----------
Hong Kong--3.5%
Bank of East Asia 15,886 35 15,886 35
Cable & Wireless HKT 180,839 474 180,839 474
Cathay Pacific Airways 54,000 80 54,000 80
Cheung Kong Holdings 611,000 9,142 33,000 494 644,000 9,636
Chinese Estates Holdings* 114,725 19 114,725 19
CITIC Pacific 505,000 3,061 505,000 3,061
CLP Holdings 29,500 132 29,500 132
Hang Seng Bank 27,300 238 27,300 238
Hong Kong and China Gas 66,831 84 66,831 84
Hong Kong and Shanghai Hotels* 29,000 15 29,000 15
SHopewell Holdings 26,227 14 26,227 14
Hutchison Whampoa 625,000 11,278 54,000 974 679,000 12,252
Hysan Development 2,500 3 2,500 3
Miramar Hotel and 19,000 16 19,000 16
Investment
Peregrine Investment Holdings* 13,000 - 13,000 -
Shangri-La Asia 38,000 43 38,000 43
</TABLE>
<PAGE>
INTERNATIONAL FUND
PRO FORMA COMBINING FINANCIAL STATEMENTS (UNAUDITED)
STATEMENT OF NET ASSETS (000'S)
MARCH 31, 2000
<TABLE>
<CAPTION>
INTERNATIONAL
FUND
INTERNATIONAL INTERNATIONAL PRO FORMA
FUND INDEX(D) COMBINED
--------------------- -------------------- ---------------------
Market Value Market Value Market Value
Shares/Par (000) Shares/Par (000) Shares/Par (000)
<S> <C> <C> <C> <C> <C> <C>
Shun Tak Holdings 75,146 11 75,146 11
Sino Land 20,657 9 20,657 9
South China Morning Post Holdings 24,000 23 24,000 23
Sun Hung Kai Properties 34,000 295 34,000 295
Swire Pacific, Cl A 20,500 106 20,500 106
Television Broadcasts 1,472,000 13,091 10,000 89 1,482,000 13,180
Wharf Holdings 2,150 4 2,150 4
Wing Lung Bank 3,500 13 3,500 13
----------- ---------- -----------
Total Hong Kong 36,572 3,171 39,743
----------- ---------- -----------
Ireland--0.0%
Allied Irish Banks 15,732 153 15,732 153
Greencore Group 5,342 16 5,342 16
Independent Newspapers 2,515 25 2,515 25
Irish Life & Permanent 5,087 46 5,087 46
Jefferson Smurfit Group 29,615 69 29,615 69
Kerry Group 4,102 53 4,102 53
Waterford Wedgwood Units 22,614 21 22,614 21
----------- ---------- -----------
Total Ireland 383 383
----------- ---------- -----------
Israel -- 0.9%
Check Point Software 60,000 10,264 60,000 10,264
Technologies*
----------- ---------- -----------
Total Israel 10,264 10,264
----------- ---------- -----------
Italy--0.8%
Assicurazioni Generali 17,794 493 17,794 493
Banca Commerciale Italiana 36,000 164 36,000 164
Banca Intesa 12,000 41 12,000 41
Benetton Group 33,400 69 33,400 69
Beni Stabili* 24,747 11 24,747 11
Burgo (Cartiere) 2,000 13 2,000 13
Edison 10,000 104 10,000 104
ENI 141,725 708 141,725 708
Fiat 6,710 177 6,710 177
Fiat RNC 2,640 35 2,640 35
Immsi* 3,500 7 3,500 7
INA 75,794 156 75,794 156
Italcementi 11,232 99 11,232 99
Italgas 14,000 64 14,000 64
Mediaset 16,984 337 16,984 337
Mediobanca 8,000 65 8,000 65
Mondadori Editore 3,099 79 3,099 79
Montedison 51,740 90 51,740 90
Olivetti* 52,800 189 52,800 189
Parmalat Finanziaria 23,400 26 23,400 26
Pirelli* 31,000 80 31,000 80
Riunione Adriatica di Sicurta 12,150 112 12,150 112
SAI 3,000 23 3,000 23
San Paolo-IMI 24,747 338 24,747 338
Sirti 3,500 7 3,500 7
SNIA BPD 20,000 19 20,000 19
Telecom Italia 62,888 937 62,888 937
Telecom Italia Mobile 267,400 3,275 120,107 1,471 387,507 4,746
Telecom Italia Mobile RNC 31,894 152 31,894 152
Telecom Italia RNC 9,883 67 9,883 67
Unicredito Italiano 57,500 229 57,500 229
Unione Immobiliare 75,794 38 75,794 38
----------- ---------- -----------
Total Italy 3,275 6,400 9,675
----------- ---------- -----------
Japan--33.2%
77 Bank 8,000 57 8,000 57
Acom 1,700 184 1,700 184
Advantest 2,200 467 2,200 467
Ajinomoto 8,000 97 8,000 97
Alps Electric 3,000 41 3,000 41
Amada 5,000 40 5,000 40
</TABLE>
<PAGE>
INTERNATIONAL FUND
PRO FORMA COMBINING FINANCIAL STATEMENTS (UNAUDITED)
STATEMENT OF NET ASSETS (000'S)
MARCH 31, 2000
<TABLE>
<CAPTION>
INTERNATIONAL
FUND
INTERNATIONAL INTERNATIONAL PRO FORMA
FUND INDEX(D) COMBINED
--------------------- -------------------- ---------------------
Market Value Market Value Market Value
Shares/Par (000) Shares/Par (000) Shares/Par (000)
<S> <C> <C> <C> <C> <C> <C>
Aoyama Trading 1,100 17 1,100 17
Asahi Bank 35,000 196 35,000 196
Asahi Breweries 7,000 70 7,000 70
Asahi Chemical Industry 19,000 121 19,000 121
Asahi Glass 16,000 136 16,000 136
Ashikaga Bank* 2,000 4 2,000 4
Bank of Tokyo-Mitsubishi 55,000 785 55,000 785
Bank of Yokohama 25,000 101 25,000 101
Bridgestone 10,000 220 10,000 220
Canon 11,000 476 11,000 476
Central Japan Railway 27 163 27 163
Chugai Pharmaceutical 5,000 94 5,000 94
Citizen Watch 1,000 8 1,000 8
Credit Saison 3,900 65 3,900 65
Dai Nippon Printing 11,000 178 11,000 178
Daicel Chemical Industries 10,000 34 10,000 34
Daiei* 16,000 57 16,000 57
Daiichi Pharmaceutical 7,000 108 7,000 108
Daikin Industries 4,000 74 4,000 74
Dainippon Ink & Chemicals 5,000 20 5,000 20
Dainippon Screen Manufacturing* 7,000 48 7,000 48
Daito Trust Construction 3,000 51 3,000 51
Daiwa House Industries 9,000 62 9,000 62
Daiwa Securities 16,000 301 16,000 301
Denki Kagaku Kogyo 13,000 49 13,000 49
Denso 17,000 405 17,000 405
East Japan Railway 47 243 47 243
Ebara 5,000 65 5,000 65
Eisai 5,000 132 5,000 132
Fanuc 3,100 325 3,100 325
Fuji Bank 42,000 394 42,000 394
Fuji Photo Film 6,000 264 6,000 264
Fujitsu 24,000 736 24,000 736
Fujitsu Support & Service 12,400 2,089 12,400 2,089
Furukawa Electric 8,000 134 8,000 134
Gunma Bank 13,000 71 13,000 71
Haseko* 15,000 6 15,000 6
Hitachi 39,000 463 39,000 463
Hokuriko Bank* 2,000 5 2,000 5
Honda Motor 12,000 495 12,000 495
House Foods 3,000 44 3,000 44
Hoya 2,000 189 2,000 189
Industrial Bank of Japan 34,000 310 34,000 310
Internet Initiative
Japan ADR* 49,500 3,453 49,500 3,453
Isetan 2,000 18 2,000 18
Itochu* 20,000 106 20,000 106
Ito-Yokado 5,000 357 5,000 357
Japan Airlines 24,000 64 24,000 64
Japan Energy 39,000 34 39,000 34
Japan Telecom 687 29,085 687 29,085
Japan Tobacco 25 179 25 179
Joyo Bank 16,000 65 16,000 65
Jusco 6,000 90 6,000 90
Kajima 25,000 69 25,000 69
Kaneka 6,000 75 6,000 75
Kansai Electric Power 8,400 125 8,400 125
Kao 7,000 214 7,000 214
Kawasaki Kisen 24,000 42 24,000 42
Kawasaki Steel 44,000 74 44,000 74
Keyence 8,580 3,424 8,580 3,424
Kinden 7,000 52 7,000 52
Kinki Nippon Railway 22,000 90 22,000 90
Kirin Brewery 13,000 159 13,000 159
Komatsu 16,000 76 16,000 76
Konica 3,000 14 3,000 14
Kubota 26,000 89 26,000 89
Kurita Water Industries 3,000 58 3,000 58
Kyocera 31,700 5,294 31,700 5,294
Kyocera 2,400 401 2,400 401
Kyowa Hakko Kogyo 7,000 79 7,000 79
Makita 4,000 35 4,000 35
</TABLE>
<PAGE>
INTERNATIONAL FUND
PRO FORMA COMBINING FINANCIAL STATEMENTS (UNAUDITED)
STATEMENT OF NET ASSETS (000'S)
MARCH 31, 2000
<TABLE>
<CAPTION>
INTERNATIONAL
FUND
INTERNATIONAL INTERNATIONAL PRO FORMA
FUND INDEX(D) COMBINED
--------------------- -------------------- ---------------------
Market Value Market Value Market Value
Shares/Par (000) Shares/Par (000) Shares/Par (000)
<S> <C> <C> <C> <C> <C> <C>
Marubeni 24,000 90 24,000 90
Marui 5,000 90 5,000 90
Matsushita
Communications Industrial 157,000 28,879 157,000 28,879
Matsushita Electric 24,000 717 24,000 717
Meiji Milk Products 6,000 37 6,000 37
Meiji Seika 7,000 49 7,000 49
Mitsubishi 19,000 172 19,000 172
Mitsubishi Chemical 28,000 111 28,000 111
Mitsubishi Electric 26,000 245 26,000 245
Mitsubishi Estate 16,000 173 16,000 173
Mitsubishi Heavy Industries 43,000 135 43,000 135
Mitsubishi Materials 18,000 61 18,000 61
Mitsubishi Trust & Banking 18,000 167 18,000 167
Mitsui 19,000 153 19,000 153
Mitsui Fudosan Real Estate 11,000 105 11,000 105
Mitsui Marine and Fire Insurance 22,000 99 22,000 99
Mitsui Trust & Banking 17,000 23 17,000 23
Mori Seiki 2,000 33 2,000 33
Murata Manufacturing 182,000 44,194 3,000 728 185,000 44,922
Mycal 5,000 18 5,000 18
NEC 349,000 10,292 28,000 826 377,000 11,118
New Oji Paper 23,000 161 23,000 161
NGK Insulators 8,000 69 8,000 69
NGK Spark Plug 4,000 46 4,000 46
Nichido Fire & Marine Insurance 9,000 39 9,000 39
Nichirei 11,000 31 11,000 31
Nikko Securities 2,260,000 34,180 2,260,000 34,180
Nikon 126,000 4,832 126,000 4,832
Nippon Express 22,000 163 22,000 163
Nippon Fire & Marine Insurance 8,000 20 8,000 20
Nippon Light Metal 35,000 31 35,000 31
Nippon Mitsubishi Oil 34,925 127 34,925 127
Nippon Paper Industries 13,000 93 13,000 93
Nippon Sheet Glass 22,000 223 22,000 223
Nippon Shokubai 2,000 9 2,000 9
Nippon Steel 103,000 246 103,000 246
Nippon Telegraph & Telephone 179 2,840 179 2,840
Nippon Yusen Kabushik 35,000 148 35,000 148
Nissan Motors* 17,000 69 17,000 69
Nissin Food Products 3,000 68 3,000 68
Nitto Denko 3,000 120 3,000 120
NKK* 80,000 51 80,000 51
Nomura Securities 471,000 15,356 32,000 1,043 503,000 16,399
NSK 7,000 52 7,000 52
NTN 2,000 6 2,000 6
NTT Data 452 8,490 452 8,490
NTT DoCoMo 1,090 44,661 1,090 44,661
Obayashi 17,000 62 17,000 62
Odakyu Railway 19,000 62 19,000 62
Okamato Industries 13,000 30 13,000 30
Olympus Optical 7,000 108 7,000 108
Omron 6,000 171 6,000 171
Orix 1,680 243 1,680 243
Osaka Gas 41,000 99 41,000 99
Penta-Ocean Construction 1,000 1 1,000 1
Pioneer Electronics 3,000 85 3,000 85
Rohm 51,600 17,928 3,000 1,042 54,600 18,970
Sakura Bank 50,000 380 50,000 380
Sankyo 7,000 176 7,000 176
Sanwa Shutter 9,000 27 9,000 27
Sanyo Electric 36,000 214 36,000 214
Sapporo Breweries 12,000 47 12,000 47
Secom 6,000 514 6,000 514
Sega Enterprises 2,000 41 2,000 41
Sekisui Chemical 13,000 43 13,000 43
Sekisui House 17,000 156 17,000 156
Sharp 17,000 363 17,000 363
Shimano 3,000 57 3,000 57
Shimizu 19,000 53 19,000 53
Shin-Etsu Chemical 7,000 424 7,000 424
Shiseido 8,000 109 8,000 109
</TABLE>
<PAGE>
INTERNATIONAL FUND
PRO FORMA COMBINING FINANCIAL STATEMENTS (UNAUDITED)
STATEMENT OF NET ASSETS (000'S)
MARCH 31, 2000
<TABLE>
<CAPTION>
INTERNATIONAL
FUND
INTERNATIONAL INTERNATIONAL PRO FORMA
FUND INDEX(D) COMBINED
--------------------- -------------------- ---------------------
Market Value Market Value Market Value
Shares/Par (000) Shares/Par (000) Shares/Par (000)
<S> <C> <C> <C> <C> <C> <C>
Shizuoka Bank 14,000 119 14,000 119
Showa Denko* 37,000 49 37,000 49
Softbank 36,300 32,326 36,300 32,326
Sony 203,000 28,647 14,200 2,004 217,200 30,651
Sumitomo 21,000 254 21,000 254
Sumitomo Bank 48,000 715 48,000 715
Sumitomo Chemical 16,000 87 16,000 87
Sumitomo Electric 15,000 211 15,000 211
Sumitomo Forestry 3,000 19 3,000 19
Sumitomo Marine & Fire Insurance 15,000 76 15,000 76
Sumitomo Metal Mining 11,000 33 11,000 33
Sumitomo Metal* 65,000 51 65,000 51
Taiheiyo Cement 25,000 42 25,000 42
Taisei 12,000 19 12,000 19
Taisho Pharmaceutical 7,000 241 7,000 241
Takara Shuzo 5,000 112 5,000 112
Takashimaya 7,000 57 7,000 57
Takeda Chemical Industries 800 57 18,000 1,279 18,800 1,336
Teijin 26,000 110 26,000 110
Toa 9,000 13 9,000 13
Tobu Railway 1,000 3 1,000 3
Toho 470 126 470 126
Tohoku Electric Power 10,600 136 10,600 136
Tokai Bank 25,000 151 25,000 151
Tokio Marine & Fire Insurance 27,000 277 27,000 277
Tokyo Broadcasting System 4,000 158 4,000 158
Tokyo Electric Power 21,000 460 21,000 460
Tokyo Electron 168,000 25,343 3,000 453 171,000 25,796
Tokyo Gas 43,000 92 43,000 92
Tokyu 24,000 106 24,000 106
Toppan Printing 16,000 179 16,000 179
Toray 31,000 119 31,000 119
Tosho 35,000 171 35,000 171
Tostem 5,000 81 5,000 81
Toto 10,000 51 10,000 51
Toyo Seikan Kaisha 3,000 51 3,000 51
Toyobo 31,000 47 31,000 47
Toyoda Auto Loom 6,000 116 6,000 116
Toyota Motor 66,000 3,449 66,000 3,449
Trans Cosmos 11,000 3,105 11,000 3,105
Ube Industries 39,000 88 39,000 88
Uniden Corportation 2,000 17 2,000 17
Yamaguchi Bank 4,000 28 4,000 28
Yamanouchi Pharmaceutical 7,000 383 7,000 383
Yamato Transport 8,000 229 8,000 229
Yamazaki Baking 5,000 48 5,000 48
Yasuda Trust & Banking 28,000 40 28,000 40
Yokogawa Electric 7,000 65 7,000 65
----------- ---------- -----------
Total Japan 341,635 37,979 379,614
----------- ---------- -----------
Malaysia--0.0%
Silverstone* 3,325 - 3,325 -
YTL 4,000 8 4,000 8
----------- ---------- -----------
Total Malaysia 8 8
----------- ---------- -----------
Mexico--0.4%
Grupo Televisa GDR* 72,000 4,896 72,000 4,896
----------- ---------- -----------
Total Mexico 4,896 4,896
----------- ---------- -----------
Netherlands--5.1%
ABN AMRO Holding 24,956 555 24,956 555
Ahold 9,917 258 9,917 258
Akzo Nobel 5,564 237 5,564 237
ASM Lithography Holding* 196,000 21,855 196,000 21,855
Buhrmann 1,772 45 1,772 45
CMG 106,800 9,210 106,800 9,210
Elsevier 13,457 136 13,457 136
Getronics* 106,400 8,123 1,811 138 108,211 8,261
</TABLE>
<PAGE>
INTERNATIONAL FUND
PRO FORMA COMBINING FINANCIAL STATEMENTS (UNAUDITED)
STATEMENT OF NET ASSETS (000'S)
MARCH 31, 2000
<TABLE>
<CAPTION>
INTERNATIONAL
FUND
INTERNATIONAL INTERNATIONAL PRO FORMA
FUND INDEX(D) COMBINED
--------------------- -------------------- ---------------------
Market Value Market Value Market Value
Shares/Par (000) Shares/Par (000) Shares/Par (000)
<S> <C> <C> <C> <C> <C> <C>
Heineken 6,143 328 6,143 328
ING Groep 16,419 888 16,419 888
KLM Royal Dutch Air 1,209 26 1,209 26
KPN 8,193 937 8,193 937
Philips Electronics 62,496 10,486 5,726 961 68,222 11,447
Qiagen ADR* 12,400 1,686 12,400 1,686
Royal Dutch Petroleum 36,924 2,152 36,924 2,152
TNT Post Group 9,193 206 9,193 206
Unilever 9,903 488 9,903 488
Vopak* 867 24 867 24
Wolters Kluwer 5,044 116 5,044 116
----------- ---------- -----------
Total Netherlands 51,360 7,495 58,855
----------- ---------- -----------
New Zealand--0.0%
Brierley Investments 66,325 13 66,325 13
Carter Holt Harvey 49,289 43 49,289 43
Fletcher Challenge Building 3,165 3 3,165 3
Fletcher Challenge Energy 4,794 11 4,794 11
Fletcher Challenge Forest* 19,179 5 19,179 5
Fletcher Challenge Paper 5,163 4 5,163 4
Lion Nathan 13,326 23 13,326 23
Telecom Corporation of 33,302 150 33,302 150
New Zealand
----------- ---------- -----------
Total New Zealand 252 252
----------- ---------- -----------
Norway--0.1%
Bergesen, Cl A 2,400 43 2,400 43
CRH 10,134 182 10,134 182
Dyno Industrier 1,200 27 1,200 27
Hafslund, Cl A 3,850 17 3,850 17
Hafslund, Cl B 1,600 5 1,600 5
Kvaerner* 1,450 22 1,450 22
Norsk Hydro 5,650 213 5,650 213
Norske Skogindustrier 700 26 700 26
Orkla, Cl A 5,000 76 5,000 76
Petroleum Geo-Services* 1,000 18 1,000 18
Storebrand* 9,124 56 9,124 56
----------- ---------- -----------
Total Norway 685 685
----------- ---------- -----------
Singapore--0.1%
Asia Food & Properties* 666 - 666 -
City Developments 9,000 41 9,000 41
Cycle & Carriage 7,000 19 7,000 19
DBS Group Holdings 12,211 161 12,211 161
DBS Land 20,000 26 20,000 26
Fraser & Neave 3,000 9 3,000 9
NatSteel 16,000 37 16,000 37
Overseas Chinese Banking 21,141 131 21,141 131
Singapore Airlines 22,000 206 22,000 206
Singapore Press Holdings 8,038 128 8,038 128
Singapore Telecommunications 111,000 158 111,000 158
United Industrial 77,000 32 77,000 32
United Overseas Bank 5,280 32 5,280 32
----------- ---------- -----------
Total Singapore 980 980
----------- ---------- -----------
South Korea--2.3%
Samsung Electronics GDR 145,400 25,954 145,400 25,954
(A)*
----------- ---------- -----------
Total South Korea 25,954 25,954
----------- ---------- -----------
Spain--0.9%
Acerinox* 745 29 745 29
Altadis 3,315 44 3,315 44
Autopistas Concesionaria Espanola 5,150 48 5,150 48
Banco Bilbao Vizcaya 55,328 812 55,328 812
Banco Santander Central 68,232 732 68,232 732
Hispano
Corporacion Financiera Alba 1,074 32 1,074 32
</TABLE>
<PAGE>
INTERNATIONAL FUND
PRO FORMA COMBINING FINANCIAL STATEMENTS (UNAUDITED)
STATEMENT OF NET ASSETS (000'S)
MARCH 31, 2000
<TABLE>
<CAPTION>
INTERNATIONAL
FUND
INTERNATIONAL INTERNATIONAL PRO FORMA
FUND INDEX(D) COMBINED
--------------------- -------------------- ---------------------
Market Value Market Value Market Value
Shares/Par (000) Shares/Par (000) Shares/Par (000)
<S> <C> <C> <C> <C> <C> <C>
Corporacion Mapfre 94 2 94 2
Endesa 17,984 412 17,984 412
Fomento de 1,720 37 1,720 37
Construcciones y
Contratas
Gas Natural SDG 7,368 144 7,368 144
Iberdrola 15,705 205 15,705 205
Metrovacesa 2,124 35 2,124 35
Repsol 15,444 338 15,444 338
Telefonica* 56,004 1,413 56,004 1,413
Terra Networks* 66,300 5,331 66,300 5,331
Union Electrica Fenosa 4,413 91 4,413 91
Vallehermoso 2,745 18 2,745 18
Zardoya Otis 4,040 36 4,040 36
----------- ---------- -----------
Total Spain 5,331 4,428 9,759
----------- ---------- -----------
Sweden--6.5%
ABB 40,800 4,800 40,800 4,800
Atlas Copco, Cl A 3,220 78 3,220 78
Drott, Cl B 2,459 25 2,459 25
Electrolux, Cl B 8,955 169 8,955 169
Ericsson, Cl B 33,454 2,935 33,454 2,935
Ericsson Telephone ADR* 444,100 41,662 444,100 41,662
Hennes & Mauritz, Cl B 16,340 453 16,340 453
NetCom, Cl B* 192,900 16,609 192,900 16,609
Securitas, Cl B* 246,400 5,951 246,400 5,951
Skandia Forsakrings 10,330 488 10,330 488
Skandinaviska Enskilda Banken, Cl A 11,059 119 11,059 119
Skanska, Cl B 2,459 83 2,459 83
SKF, Cl B 3,000 67 3,000 67
Svenska Cellulosa, Cl B* 4,410 104 4,410 104
Svenska Handlesbanken, Cl A 13,353 164 13,353 164
Swedish Match 20,354 63 20,354 63
Trelleborg, Cl B 2,000 14 2,000 14
Volvo, Cl A 3,737 97 3,737 97
Volvo, Cl B 5,915 159 5,915 159
----------- ---------- -----------
Total Sweden 69,022 5,018 74,040
----------- ---------- -----------
Switzerland--1.3%
ABB 2,755 316 2,755 316
Adecco, Bearer 321 222 321 222
Alusuisse Lonza Group, Registered 120 76 120 76
Ares Serono, Cl B 1,890 7,111 1,890 7,111
Credit Suisse Group, Registered 4,774 950 4,774 950
Holderbank Financiere Glarus, Bearer 141 168 141 168
Lonza* 120 65 120 65
Nestle, Registered 650 1,164 650 1,164
Novartis, Registered 1,205 1,647 1,205 1,647
Roche Holding, Bearer 24 296 24 296
Roche Holding, 116 1,259 116 1,259
Genusscheine
SAirGroup, Registered 250 47 250 47
Schindler Holding, Participating Certificates 25 37 25 37
Schindler Holding, Registered 25 37 25 37
SGS Holding, Bearer* 52 102 52 102
SGS Holding, Registered* 1 - 1 -
Swatch Group, Bearer 56 65 56 65
Swatch Group, Registered 273 64 273 64
Swiss Reinsurance, Registered 262 454 262 454
UBS, Registered 3,666 963 3,666 963
Valora Holding, Registered 70 21 70 21
Zurich Allied, Registered 60 30 60 30
----------- ---------- -----------
Total Switzerland 7,111 7,983 15,094
----------- ---------- -----------
United Kingdom--11.9%
Abbey National 24,886 327 24,886 327
Allied Zurich 31,245 343 31,245 343
Anglian Water 6,007 50 6,007 50
Arjo Wiggins Appleton 21,135 55 21,135 55
</TABLE>
<PAGE>
INTERNATIONAL FUND
PRO FORMA COMBINING FINANCIAL STATEMENTS (UNAUDITED)
STATEMENT OF NET ASSETS (000'S)
MARCH 31, 2000
<TABLE>
<CAPTION>
INTERNATIONAL
FUND
INTERNATIONAL INTERNATIONAL PRO FORMA
FUND INDEX(D) COMBINED
--------------------- -------------------- ---------------------
Market Value Market Value Market Value
Shares/Par (000) Shares/Par (000) Shares/Par (000)
<S> <C> <C> <C> <C> <C> <C>
Arm Holdings* 86,500 5,221 86,500 5,221
Associated British Food 13,873 92 13,873 92
AstraZeneca Group 17,854 722 17,854 722
AstraZeneca Group (SK) 15,833 639 15,833 639
Baltimore Technologies* 71,100 9,738 71,100 9,738
Barclays 24,874 658 24,874 658
Bass 16,415 206 16,415 206
BBA Group 9,021 59 9,021 59
BG Group 66,591 375 66,591 375
BICC Group 10,071 11 10,071 11
Blue Circle Industries 21,510 143 21,510 143
BOC Group 11,781 230 11,781 230
Boots 17,913 153 17,913 153
BP Amoco 212,006 1,936 212,006 1,936
BPB 11,171 56 11,171 56
British Aerospace CALS 58,376 329 58,376 329
British Aerospace Convertable Loan Stock 7,691 12 7,691 12
British Airways 13,920 73 13,920 73
British American Tobacco 31,245 172 31,245 172
British Sky Broadcasting 129,300 3,418 35,649 942 164,949 4,360
British Telecommunications 115,904 2,169 115,904 2,169
Burmah Castrol 3,717 91 3,717 91
Cadbury Schweppes 44,648 300 44,648 300
Cambridge Antibody
Technology* 60,800 1,973 60,800 1,973
Caradon 15,828 35 15,828 35
Carlton Communications 188,600 2,284 13,900 168 202,500 2,452
Celltech Group* 249,900 4,521 249,900 4,521
Centrica 68,043 260 68,043 260
CGU 12,556 175 12,556 175
Coats Viyella 22,869 15 22,869 15
Coca-Cola Beverages* 21,218 38 21,218 38
COLT Telecom Group* 478,400 22,743 478,400 22,743
Corus Group 60,009 97 60,009 97
De La Rue 5,595 24 5,595 24
Diageo 62,135 466 62,135 466
Electrocomponents 9,618 97 9,618 97
Elementis 8,335 13 8,335 13
EMI Group 14,007 155 14,007 155
GKN 9,305 116 9,305 116
Glaxo Wellcome 63,131 1,805 63,131 1,805
Granada Group 35,374 379 35,374 379
Great Universal Stores 20,164 122 20,164 122
Hammerson 10,193 65 10,193 65
Hanson 16,883 120 16,883 120
Hilton Group 33,285 155 33,285 155
HSBC Holdings 137,214 1,619 137,214 1,619
IMI 4,909 18 4,909 18
Imperial Chemical Industries 11,818 99 11,818 99
Invensys 36,987 164 36,987 164
J Sainsbury 34,011 153 34,011 153
Johnson Matthey 4,897 56 4,897 56
Kingfisher 23,084 189 23,084 189
Land Securities 2,531 30 2,531 30
Lasmo 21,742 42 21,742 42
Legal & General Group 101,228 262 101,228 262
Lloyds TSB 94,173 993 94,173 993
Logica 373,200 12,488 373,200 12,488
Lonrho 4,890 51 4,890 51
Marconi 56,794 677 56,794 677
Marks & Spencer 52,234 208 52,234 208
MEPC 12,784 85 12,784 85
National Grid Group 31,901 291 31,901 291
National Power 21,756 109 21,756 109
Next 6,829 51 6,829 51
Nycomed Amersham 258 2 258 2
Pearson 61,600 2,140 13,897 483 75,497 2,623
Peninsular and Oriental
Steam Navigation 10,802 112 10,802 112
Pilkington 29,405 34 29,405 34
Provident Financial 5,269 47 5,269 47
Prudential 38,852 586 38,852 586
Psion 107,300 7,112 107,300 7,112
</TABLE>
<PAGE>
INTERNATIONAL FUND
PRO FORMA COMBINING FINANCIAL STATEMENTS (UNAUDITED)
STATEMENT OF NET ASSETS (000'S)
MARCH 31, 2000
<TABLE>
<CAPTION>
INTERNATIONAL
FUND
INTERNATIONAL INTERNATIONAL PRO FORMA
FUND INDEX(D) COMBINED
--------------------- -------------------- ---------------------
Market Value Market Value Market Value
Shares/Par (000) Shares/Par (000) Shares/Par (000)
<S> <C> <C> <C> <C> <C> <C>
Racal Electronics 6,572 44 6,572 44
Rank Group 16,954 41 16,954 41
Reed International 22,618 165 22,618 165
Reuters Group 28,619 580 28,619 580
Rexam 12,784 44 12,784 44
Rio Tinto 20,309 340 20,309 340
RMC Group 6,560 81 6,560 81
Rolls-Royce 33,703 109 33,703 109
Royal & Sun Alliance Insurance Group 26,839 168 26,839 168
Royal Bank of Scotland Group 17,283 254 17,283 254
Safeway 23,210 70 23,210 70
Schroders 5,194 109 5,194 109
Scottish & Newcastle 13,226 92 13,226 92
Scottish Power 22,765 184 22,765 184
Selfridges 2,797 11 2,797 11
Shire Pharmaceutcals* 267,800 4,568 267,800 4,568
Skyepharma* 886,900 1,554 886,900 1,554
Slough Estates 9,571 53 9,571 53
SmithKline Beecham 97,428 1,285 97,428 1,285
Smiths Industries 6,601 80 6,601 80
Sun Life & Provincial Holdings 4,001 28 4,001 28
Tate & Lyle 10,382 36 10,382 36
Tesco 126,894 422 126,894 422
Thames Water 8,322 94 8,322 94
TI Group 10,548 52 10,548 52
Unilever 56,220 360 56,220 360
United Biscuits 13,488 56 13,488 56
United Utilities 11,993 125 11,993 125
Vodafone Airtouch 5,107,257 28,347 300,920 1,670 5,408,177 30,017
Vodafone Airtouch (EU)* 418,648 2,280 418,648 2,280
Williams 16,024 81 16,024 81
Wolseley 12,805 70 12,805 70
----------- ---------- -----------
Total United Kingdom 106,107 29,793 135,900
----------- ---------- -----------
Total Foreign Common
Stocks (Cost $485,413,
$88,495
and $573,908 respectively) 906,427 141,837 1,048,264
----------- ---------- -----------
Foreign Preferred
Stocks--1.3%
Australia--0.0%
News Corporation 35,455 420 35,455 420
---------- -----------
Total Australia 420 420
---------- -----------
Germany--1.2%
RWE 250 7 250 7
SAP 18,250 13,122 710 511 18,960 13,633
Volkswagen 2,000 52 2,000 52
----------- ---------- -----------
Total Germany 13,122 570 13,692
----------- ---------- -----------
Italy--0.0%
Fiat Spa 3,190 47 3,190 47
----------- ---------- -----------
Total Italy 47 47
----------- ---------- -----------
Total Foreign Preferred
Stocks (Cost $14,139,
$435
and $14,574
respectively) 13,122 1,037 14,159
----------- ---------- -----------
Foreign Warrants--0.0%
France--0.0%
Vivendi, expire
05/02/2001* 19 - 19 -
----------- ---------- -----------
Total France - -
----------- ---------- -----------
Hong Kong--0.0%
Chinese Estates
Holdings, expire
11/24/2000* 10,429 - 10,429 -
----------- ---------- -----------
Total Hong Kong - -
----------- ---------- -----------
Malaysia--0.0%
</TABLE>
<PAGE>
INTERNATIONAL FUND
PRO FORMA COMBINING FINANCIAL STATEMENTS (UNAUDITED)
STATEMENT OF NET ASSETS (000'S)
MARCH 31, 2000
<TABLE>
<CAPTION>
INTERNATIONAL
FUND
INTERNATIONAL INTERNATIONAL PRO FORMA
FUND INDEX(D) COMBINED
--------------------- -------------------- ---------------------
Market Value Market Value Market Value
Shares/Par (000) Shares/Par (000) Shares/Par (000)
<S> <C> <C> <C> <C> <C> <C>
United Engineers, expire
11/18/2002* 5,600 10 5,600 10
----------- ---------- -----------
Total Malaysia 10 10
----------- ---------- -----------
Singapore--0.0%
Asia Food & Properties,
expire 07/12/2002* 2,900 - 2,900 -
----------- ---------- -----------
Total Singapore - -
----------- ---------- -----------
Switzerland--0.0%
UBS, expire 06/30/2000* 195 3 195 3
----------- ---------- -----------
Total Switzerland 3 3
----------- ---------- -----------
Total Foreign Warrants
(Cost $0, $0 and $0
respectively) 13 13
----------- ---------- -----------
Foreign Convertible
Bonds--0.0%
Spain--0.0%
Banco Bilbao Viscaya EU 12 12 12 12
0.000%, 07/30/02
----------- ---------- -----------
Total Spain 12 12
----------- ---------- -----------
United Kingdom--0.0%
BG Transco Holdings (B) GB 9 14 9 14
7.057%, 12/14/09 GB 9 14 9 14
4.188%, 12/14/22 GB
BG Transco Holdings 9 14 9 14
7.000%, 12/16/24
----------- ---------- -----------
Total United Kingdom 42 42
----------- ---------- -----------
Total Foreign
Convertible Bonds (Cost
$0, $12 and $12
respectively) 54 54
---------- -----------
Foreign Rights--0.0%
Canada--0.0%
Boliden* 781 - 781 -
---------- -----------
Total Canada - -
---------- -----------
France--0.0%
Bouygues* 751 4 751 4
Lafarge* 1,758 - 1,758 -
---------- -----------
Total France 4 4
---------- -----------
Total Foreign Rights
(Cost $0, $0 and $0
respectively) 4 4
---------- -----------
</TABLE>
<PAGE>
INTERNATIONAL FUND
PRO FORMA COMBINING FINANCIAL STATEMENTS (UNAUDITED)
STATEMENT OF NET ASSETS (000'S)
MARCH 31, 2000
<TABLE>
<CAPTION>
INTERNATIONAL
FUND
INTERNATIONAL INTERNATIONAL PRO FORMA
FUND INDEX(D) COMBINED
--------------------- -------------------- ---------------------
Market Value Market Value Market Value
Shares/Par (000) Shares/Par (000) Shares/Par (000)
<S> <C> <C> <C> <C> <C> <C>
Related Party Money
Market Fund--5.0%
First American Prime
Obligations Fund (C) 56,473,007 56,473 1,016,313 1,016 57,489,320 57,489
----------- ---------- -----------
Total Related Party
Money Market Fund (Cost
$56,473, $1,016
and $57,489 respectively) 56,473 1,016 57,489
----------- ---------- -----------
Total
Investments--98.0%
(Cost $556,025, $89,958
and $645,983
respectively) 976,022 143,961 1,119,983
----------- ---------- -----------
Other Assets Net of
Liabilities--2.0% 17,532 5,778 23,302
----------- ---------- -----------
Net Assets--100.0% $993,554 $149,739 $1,143,285
=========== ========== ===========
</TABLE>
*Non-income producing security
(A) Security sold within the terms of a private placement memorandum, exempt
from registration under section 144A of the Securities Act of 1933, as
amended, and may be sold only to dealers in that program or other "qualified
institutional investors". These securities have been determined to be liquid
under guidelines established by the Board of Directors.
(B) Variable Rate Security - the rate reported on the Statement of Net Assets is
the rate in effect as of March 31, 2000.
(C) This money market fund is advised by U.S. Bank National Association who also
serves as advisor for this fund.
(D) The International Fund has no plan or intention to sell or otherwise dispose
of any of the assets of International Index Fund, except for dispositions
made in the ordinary course of business.
ADR - American Depositary Receipt
BE - Brussels Exchange
CALS - Capital Amortizing Loan Stock
Cl - Class
EU - Euro
GB - Great British Pound
GDR - Global Depositary Receipt
RNC - Risparmio
Non-Convertible
SK - Swedish Krona
See Notes to Pro Forma Combining Financial Statements
<PAGE>
INTERNATIONAL FUND
PRO FORMA COMBINING
FINANCIAL STATEMENTS
(UNAUDITED)
STATEMENT OF NET
ASSETS (000'S)
MARCH 31, 2000
At March 31, 2000, sector diversification of the Portfolio was as follows:
<TABLE>
<CAPTION>
International
Fund
International International Index Pro Forma
Fund Fund(D) Combined
----------------------- -------------------- ------------------------
% of % of % of
Sector Diversification Net Assets Value (000) Net Assets Value (000) Net Assets Value (000)
---------------------- ---------- ----------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Telecommunications 27.8% $275,813 10.4% $15,596 25.5% $291,409
Electronics 12.3% 122,415 7.1% 10,657 11.6% 133,072
Semiconductors 10.2% 101,610 8.9% 101,610
Computer Services 6.6% 65,094 5.7% 65,094
Financial Services 5.3% 52,899 1.8% 2,651 4.9% 55,550
Computers 4.1% 40,325 1.5% 2,256 3.7% 42,581
Telephone 2.9% 29,085 7.9% 11,773 3.6% 40,858
Internet Services 4.1% 40,408 3.5% 40,408
Multimedia 3.3% 32,985 2.9% 32,985
Audio/Video 2.9% 28,647 1.9% 2,806 2.8% 31,453
Diversified Operations 2.2% 21,968 4.3% 6,398 2.5% 28,366
Banking 0.8% 7,765 11.5% 17,255 2.2% 25,020
Pharmaceuticals 0.6% 6,178 7.7% 11,457 1.5% 17,635
Manufacturing 1.4% 13,819 1.8% 2,624 1.4% 16,443
Biomedical 1.5% 15,291 1.3% 15,291
Insurance 0.8% 7,887 4.9% 7,291 1.3% 15,178
Computer Software 1.1% 11,141 1.0% 11,141
Real Estate 0.9% 9,142 1.2% 1,751 1.0% 10,893
Food, Beverage & Tobacco 6.1% 9,067 0.8% 9,067
Oil & Gas 5.8% 8,678 0.8% 8,678
Communications Software 0.8% 8,371 0.7% 8,371
Automotive 4.5% 6,689 0.6% 6,689
Security 0.6% 5,952 0.5% 5,952
Engineering 0.5% 4,800 0.3% 466 0.5% 5,266
Photographic Equipment 0.5% 4,832 0.3% 386 0.5% 5,218
Chemicals 2.2% 3,308 0.3% 3,308
Retail 2.1% 3,150 0.3% 3,150
Television 1.8% 2,671 0.2% 2,671
Construction 1.7% 2,600 0.2% 2,600
Transportation 1.4% 2,165 0.2% 2,165
Mining 0.8% 1,205 0.1% 1,205
Cosmetics & Toiletries 0.8% 1,148 0.1% 1,148
Publishing 0.7% 1,053 0.1% 1,053
Paper Products 0.6% 942 0.1% 942
Wholesaler 0.5% 822 0.1% 822
Recreation 0.5% 774 0.1% 774
Metals 0.5% 734 0.1% 734
Consumer Goods 0.5% 717 0.1% 717
Airlines 0.5% 682 0.1% 682
Machinery 0.4% 649 0.1% 649
Defense 0.3% 450 0.0% 450
Textiles 0.2% 372 0.0% 372
Building Materials 0.2% 324 0.0% 324
Commercial Services 0.1% 157 0.0% 157
Water Treatment 0.0% 58 0.0% 58
Agriculture 0.0% 53 0.0% 53
Medical Supplies 0.0% 2 0.0% 2
----------------- ---------------- -----------------
Total Foreign Common Stock 91.2% 906,427 94.7% 141,837 91.7% 1,048,264
Total Foreign Preferred Stock 1.3% 13,122 0.7% 1,037 1.3% 14,159
Total Foreign Convertible Bonds - 0.0% 54 0.0% 54
Total Foreign Warrants - 0.0% 13 0.0% 13
Total Foreign Rights - 0.0% 4 0.0% 4
Total Related Party Money
Market Fund 5.7% 56,473 0.7% 1,016 5.0% 57,489
----------------- ---------------- -----------------
Total Investments 98.2% 976,022 96.1% 143,961 98.0% 1,119,983
Other Assets Net of
Liabilities 1.8% 17,532 3.9% 5,778 2.0% 23,302
Net Assets 100.0% $993,554 100.0% $149,739 100.0% $1,143,285
================= ================ =================
</TABLE>
See Notes to Pro Forma Combining Financial Statements
<PAGE>
INTERNATIONAL FUND
NOTES TO PRO FORMA COMBINING FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2000 (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
Statements of Operations ("Pro Forma Statements") reflect the accounts of the
International Fund and International Index Fund at March 31, 2000 and for the
periods ended March 31, 2000 and September 30, 1999.
The Pro Forma Statements give effect to the proposed Agreement and Plan of
Reorganization (the "Reorganization") to be submitted to shareholders of the
International Index Fund. The Reorganization provides for the acquisition of
all assets and liabilities of the International Index Fund by the
International Fund, in exchange for Class A, Class B and Y shares of the
International Fund. Thereafter, there will be a distribution of Class A,
Class B and Y shares of the International Fund to the shareholders of the
International Index Fund in liquidation and subsequent termination thereof.
As a result of the Reorganization, the shareholders of the International
Index Fund will become the owners of that number of full and fractional Class
A, Class B and Y shares of the International Fund having an aggregate net
asset value equal to the aggregate net asset value of their shares of the
International Index Fund as of the close of business immediately prior to the
date that the International Index Fund assets are exchanged for Class A,
Class B and Y shares of the International Fund. All Class C shares of the
International Index Fund were redeemed prior to the Reorganization.
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 periods presented.
The information contained herein is based on the experience of each Fund for
the periods ended March 31, 2000 and September 30, 1999 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
International Index Fund in connection with the Reorganization (including the
cost of any proxy soliciting agents) will be borne by U.S. Bancorp of
Minneapolis, Minnesota.
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
<PAGE>
The Pro Forma net asset values per share assume the issuance of Class A,
Class B and Y shares of the International Fund which would have been issued
at March 31, 2000 in connection with the proposed Reorganization.
Shareholders of the International Index Fund would receive Class A, Class B
and Y shares of the International Fund based on conversion ratios determined
on March 31, 2000. The conversion ratios are calculated by dividing the net
asset value of the International Index Fund by the net asset value per share
of the respective class of the International Fund.
3. Pro Forma Operations
The Pro Forma Combining Statements of Operations assume 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 Advisery, investment Advisery fee waivers and
distribution fees have been charged to the combined Fund based on the fee
schedule in effect for the International Fund at the combined level of
average net assets for the periods ended March 31, 2000 and September 30,
1999. The Adviser intends to waive fees during the current fiscal year so
that total International Fund operating expenses do not exceed 1.60%, 2.35%
and 1.35%, respectively, for Class A, Class B and Class Y. These fee waivers
may be discontinued at any time.
<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.
<PAGE>
ITEM 16. EXHIBITS.
1(a) 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.)
1(b) Articles Supplemetary designating a new Series. (Incorporated by reference
to Exhibit (d)(2) to Post-Effective Amendment No. 43 to the Registrant's
Registration Statement on Form N-1A.)
*1(c) Articles of Amendment to Articles of Incorporation dated February 25,
2000.
*2 Bylaws, as amended through December 8, 1999.
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. 10 to Investment Advisory Agreement (Incorporated by
reference to Exhibit (d)(2) to Post-Effective Amendment No. 43 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.)
<PAGE>
6(f) 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. (Incorporated by
reference to Exhibit (e)(3) to Post-Effective Amendment No. 42 to the
Registrant's Registration Statement on Form N-1A.)
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 Deferred Compensation Plan for Directors, Trust Agreement effective
January 1, 2000.
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. (Incorporated by reference to Exhibit 8 to Post-Effective
Amendment No. 18 to the Registrant's Registration Statement on Form N-1A.)
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.)
<PAGE>
9(e) Assignment of Custodian Agreements and Security Lending Agency Agreement
to U.S. Bank National Association, dated May 1, 1998 (Incorporated by
reference to Exhibit (g)(5) to Post-Effective Amendment No. 41 to the
Registrant's Registration Statement on Form N-1A.)
9(f) Supplement dated December 8, 1999 to Custodian Agreement dated September
20, 1993. (Incorporated by reference to Exhibit (g)(6) to Post-Effective
Amendment No. 44 to the Registrant's Registration Statement on Form N-1A.)
10 Administration Agreement, dated January 1, 2000, by and between the
Registrant and U.S. Bank National Association (Incorporated herein by
reference to Exhibit (h)(1) to Post-effective Amendment No. 44 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 Not Applicable.
*14(a) Consent of Ernst & Young LLP.
*14(b) Consent of KPMG LLP.
14(c) Independent Auditors' Report of KPMG LLP dated November 13, 1998
(Incorporated herein by reference to Exhibit (j)(3) to Post-effective
Amendment No. 44 to the Registrant's Registration Statement on Form N-1A.)
15 Not Applicable.
*16 Powers of Attorney of Directors signing the Registration Statement.
*17 Form of Proxy Card.
--------------------
* Filed herewith.
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
<PAGE>
for by the applicable registration form for reofferings by persons who may be
deemed underwriters, in addition to the information called for by the other
items of the applicable form.
(2) The undersigned Registrant agrees that every prospectus that is filed under
paragraph (1) above will be filed as a part of an amendment to the Registration
Statement and will not be used until the amendment is effective, and that, in
determining any liability under the 1933 Act, each post-effective amendment
shall be deemed to be a new registration statement for the securities offered
therein, and the offering of the securities at that time shall be deemed to be
the initial bona fide offering of them.
(3) The undersigned Registrant agrees to file, by post-effective amendment, an
opinion of counsel or a copy of a ruling of the Internal Revenue Service
supporting the tax consequences of the proposed reorganization within a
reasonable time after receipt of such opinion or ruling.
SIGNATURES
As required by the Securities Act of 1933, this amendment to the registration
statement has been signed on behalf of the registrant, in the City of
Minneapolis, Minnesota on the 13th day of October, 2000.
FIRST AMERICAN INVESTMENT FUNDS, INC.
By: /s/ Christopher J. Smith
------------------------
Christopher J. Smith
Secretary
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.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
------------------------------------ --------------------------- ------------
<S> <C> <C>
* Director **
------------------------------------
Robert J. Dayton
* Director **
------------------------------------
Roger Gibson
* Director **
------------------------------------
Andrew M. Hunter III
* Director **
------------------------------------
Leonard W. Kedrowski
<PAGE>
* Director **
------------------------------------
John M. Murphy, Jr.
* Director **
------------------------------------
Robert L. Spies
* Director **
------------------------------------
Joseph D. Strauss
* Director **
------------------------------------
Virginia L. Stringer
</TABLE>
* By: /s/ Christopher J. Smith
------------------------
Christopher J. Smith
Attorney in Fact
** October 13, 2000
