1933 Act Registration No. 33-16905 1940 Act Registration No. 811-05309 As filed with the Securities and Exchange Commission on September 24, 2004 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ x ] Pre-Effective Amendment No. _____ [ ] Post-Effective Amendment No. 72 [ x ] and/or REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 Amendment No. 72 [ x ] FIRST AMERICAN INVESTMENT FUNDS, INC. (Exact Name of Registrant as Specified in Charter) 800 Nicollet Mall Minneapolis, Minnesota 55402 (Address of Principal Executive Offices) (Zip Code) (612) 303-4241 (Registrant's Telephone Number, including Area Code) Charles R. Manzoni, Jr. U.S. Bancorp Center 800 Nicollet Mall, BC-MN-HOSF Minneapolis, Minnesota 55402 (Name and Address of Agent for Service) Copy to: Kathleen L. Prudhomme Dorsey & Whitney LLP 50 South Sixth Street, Suite 1500 Minneapolis, MN 55402 It is proposed that this filing will become effective (check appropriate box): [ ] immediately upon filing pursuant to paragraph (b) of Rule 485. [ ] on (date) pursuant to paragraph (b) of Rule 485. [ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485. [ ] on (date) pursuant to paragraph (a)(1) of Rule 485. [ X ] 75 days after filing pursuant to paragraph (a)(2) of Rule 485. [ ] on date pursuant to paragraph (a)(2) of Rule 485.
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October 1, 2004 |
Prospectus | |
First American Investment Funds, Inc. | |
ASSET CLASS ~ Bond Funds | |
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Income Funds
Class A and Class C Shares |
Inflation Protected Securities Fund
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As with all mutual funds, the Securities and Exchange Commission has not approved or disapproved the shares of this fund, or determined if the information in this prospectus is accurate or complete. Any statement to the contrary is a criminal offense.
Contents
Inflation Protected Securities Fund
Introduction
This section of the prospectus describes the objective of the First American Inflation Protected Securities Fund, summarizes the principal investment strategies used by the fund in trying to achieve its objective, and highlights the risks involved with these strategies. It also provides you with information about the performance, fees, and expenses of the fund.
An investment in the fund is not a deposit of U.S. Bank National Association and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
This prospectus and the related Statement of Additional Information do not constitute an offer to sell or a solicitation of an offer to buy shares in the fund, nor shall any such shares be offered or sold to any person in any jurisdiction in which an offer, solicitation, purchase, or sale would be unlawful under the securities laws of such jurisdiction.
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First American Inflation Protected Securities Fund
Class A and Class C Shares |
1
Inflation Protected Securities FUND
Inflation Protected Securities Fund seeks to provide investors with total return that exceeds the rate of inflation over an economic cycle.
Under normal market conditions, Inflation Protected Securities Fund will invest primarily (at least 80% of its net assets, plus the amount of any borrowings for investment purposes) in inflation protected debt securities. These securities will be issued by the U.S. and non-U.S. governments, their agencies and instrumentalities, and corporations. The funds investments in U.S. Government inflation protected securities will include U.S. Treasury inflation-protection securities as well as inflation protected securities issued by agencies and instrumentalities of the U.S. Government. Securities issued by the U.S. Treasury are backed by the full faith and credit of the U.S. Government. Some securities issued by agencies and instrumentalities of the U.S. Government are supported only by the credit of the issuing agency or instrumentality.
Inflation protected debt securities are designed to provide protection against the negative effects of inflation. Unlike traditional debt securities, which pay regular fixed interest payments on a fixed principal amount, interest payments on inflation protected debt securities will vary with the rate of inflation. Inflation protected debt securities have two common structures. The U.S. Treasury and some other issuers use a structure that accrues inflation into the principal value of the bond. If the index measuring the rate of inflation rises, the principal value of the security will increase. Because interest payments will be calculated with respect to a larger principal amount, interest payments also will increase. Conversely, if the index measuring the rate of inflation falls, the principal value of the security will fall and interest payments will decrease. Other issuers adjust the interest rates payable on the security according to the rate of inflation, but the principal amount remains the same.
The U.S. Treasury uses the Consumer Price Index for Urban Consumers (CPI-U) as the inflation measure. Inflation protected bonds issued by a foreign government are generally adjusted to reflect an inflation index calculated by that government. In the event of sustained deflation, the U.S. Treasury has guaranteed that it will repay at maturity at least the original face value of the inflation protected securities that it issues. Other inflation protected debt securities that accrue inflation into their principal value may or may not provide a similar guarantee. For securities that do not provide such a guarantee, the adjusted principal value of the security repaid at maturity may be less than the original principal value.
Up to 20% of the Funds assets may be invested in holdings that are not inflation protected . These holdings may include the following:
When selecting securities for the fund, the portfolio managers use a top-down approach, looking first at general economic factors and market conditions. The managers then select securities that they believe have strong relative value based on an analysis of a securitys characteristics (such as principal value, coupon rate, maturity, duration and yield) in light of these general economic factors and market conditions.
The fund invests primarily in securities rated investment grade at the time of purchase or in unrated securities of comparable quality. However, up to 10% of the funds net assets may be invested in securities that are rated lower than investment grade at the time of purchase or that are unrated and of comparable quality (securities commonly referred to as high-yield securities or junk bonds). The fund will not invest in securities rated lower than B at the time of purchase or in unrated securities of equivalent quality. Quality determinations regarding unrated securities will be made by the funds advisor.
The fund may invest up to 20% of its net assets in non-dollar denominated securities, and may invest without limitation in U.S. dollar denominated securities of foreign issuers.
The fund may invest in debt securities of any maturity, but expects to maintain , under normal market conditions, a weighted average effective maturity of between 8 and 15 years and an average effective duration of between 4 and 10 years . The funds weighted average effective maturity and average effective duration are measure s of how the fund may react to interest rate changes.
To generate additional income, the fund may lend securities representing up to one-third of the value of its total assets to broker-dealer, banks, and other institutions.
The fund may utilize the following derivatives: options; futures contracts; options on futures contracts; foreign currency contracts; interest rate caps and floors; index- and other asset-linked notes; swap agreements, including swap agreements on interest rates, currency rates, security indexes and specific securities, and credit default swap agreements; and options on the foregoing types of swap agreements. The fund may also invest in commodity-linked derivative instruments, including swap agreements on commodity indexes or specific commodities; commodity options, futures and options on futures; and commodity-linked notes. The fund may enter into standardized derivatives contracts traded on domestic or foreign securities
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Inflation Protected Securities FUND continued
exchanges, boards of trade, or similar entities, and non-standardized derivatives contracts traded in the over-the-counter (OTC) market. The fund will use these derivatives in an attempt to manage market or business risk .
The price and yield of this fund will change daily due to changes in interest rates, inflation and other factors, which means you could lose money. The principal risks of investing in this fund include:
Interest Rate Risk. Debt securities typically decrease in value when interest rates rise and increase in value when interest rates fall, with longer-term debt securities generally being more sensitive to interest rate changes. However, interest rates on conventional debt securities have two components: a real interest rate and an increment that reflects investor expectations of future inflation. Because interest rates on inflation protected securities are adjusted for inflation, the values of these securities are not materially affected by inflation expectations. Therefore, the values of inflation protected debt securities are expected to change in response to changes in real interest rates. Generally, the value of an inflation protected debt security will fall when real interest rates rise and rise when real interest rates fall. Effective maturity and effective duration, explained in More About the Fund Investment Strategies, are measures of the funds interest rate risk. A lthough inflation protected debt securities are expected to be protected from long-term inflationary trends, short-term increases in inflation may lead to a decline in the funds value. See Risks of Indexing Methodology, below.
Income Risk. The funds income could decline due to falling market interest rates. In addition, the funds income distributions are expected to fluctuate significantly more than those of a typical bond fund, since the funds income will change with changes in inflation. During periods of extreme deflation, the fund could have no income at all to distribute.
Credit Risk. An issuer of debt securities may not make timely principal or interest payments on its securities, or the other party to a contract may default on its obligations. There is also the risk that an issuer could suffer adverse changes in financial condition that could lower the credit quality of a security.
Call Risk. During periods of falling interest rates, a bond issuer may call or repay its high-yielding bonds before their maturity date. The fund would then be forced to invest the unanticipated proceeds at lower interest rates, resulting in a decline in the funds income.
Tax Consequences of Inflation Adjustments. Periodic adjustments for inflation to the principal amount of an inflation protected security will give rise to original issue discount, which will be includable in the funds gross income. Because the fund is required to distribute its taxable income to avoid corporate level tax, the fund may be required to make annual distributions to shareholders that exceed the cash it receives, which may require the fund to liquidate certain investments when it is not advantageous to do so.
Risks of Indexing Methodology. There can be no assurance that the CPI-U or any foreign inflation index will accurately measure the real rate of inflation in the prices of goods and services. Moreover, there can be no assurance that the rate of inflation in a foreign country will be correlated to the rate of inflation in the United States. If the market perceives that the adjustment mechanism of an inflation protected security does not accurately adjust for inflation, the value of the security could be adversely affected. There may be a lag between the time a security is adjusted for inflation and the time interest is paid on that security. This may have an adverse effect on the trading price of the security, particularly during periods of significant, rapid changes in inflation. In addition, to the extent that inflation has increased during the period of time between the inflation adjustment and the interest payment, the interest payment will not be protected from the inflation increase.
Liquidity Risk. The market for inflation protected debt securities is relatively new and is still developing. For this reason, the market may, at times, have relatively low trading volume, which could result in lower liquidity and increased volatility in prices.
Risks of Mortgage- and Asset-Backed Securities. Falling interest rates could cause faster than expected prepayments of the obligations underlying mortgage- and asset-backed securities, which the fund would have to re invest at lower interest rates. This is referred to as prepayment risk. On the other hand, rising interest rates could cause prepayments of the obligations to decrease, extending the life of mortgage- and asset-backed securities and causing their interest rate sensitivity to increase. This is referred to as extension risk. For additional explanation, see Prepayment Risk and Extension Risk in More About The Fund Risks.
Foreign Security Risk. Investing in the securities of foreign issuers may involve risks not associated with the securities of domestic issuers, including the risks of 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 of High-Yield Securities. A portion of the funds portfolio may consist of lower-rated debt obligations, which are commonly called high-yield securities or junk bonds. High-yield securities generally have more volatile prices and carry more risk to principal than investment grade securities. High-yield securities may be more susceptible to real or perceived
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First American Inflation Protected Securities Fund
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Inflation Protected Securities FUND continued
adverse economic conditions than investment grade securities. In addition, the secondary trading market may be less liquid.
Risks of Securities Lending. When the fund lends securities, it is subject to the risk that the other party to a securities lending agreement will default on its obligation.
Risks of Derivative Instruments. The fund will suffer a loss in connection with its use of derivatives if interest rates, currencies, indices, or securities or commodities prices do not move in the direction anticipated by the funds advisor when entering into the derivative instruments or, in the case of credit default swaps, if the funds advisor does not correctly evaluate the creditworthiness of the company or companies on which the swap is based. The Fund may enter into OTC derivatives. Transactions in the OTC markets generally are conducted between institutions on a principal-to-principal basis. The terms and conditions of these instruments generally are not standardized and tend to be more specialized or complex, and the instruments may be harder to value. In addition, there may not be a liquid market for OTC derivatives. As a result, it may not be possible to initiate a transaction or liquidate a position at an advantageous time or price.
Risks of Active Management. The fund is actively managed and its performance therefore will reflect in part the advisors ability to make investment decisions which are suited to achieving the funds investment objective. Due to its active management, the fund could underperform other mutual funds with similar investment objectives.
Because Inflation Protected Securities Fund was not offered prior to the date of this prospectus, no performance information is presented.
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First American Inflation Protected Securities Fund
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Inflation Protected Securities FUND continued
As an investor, you pay fees and expenses to buy and hold shares of the fund. You pay shareholder fees directly when you buy or sell shares. You pay annual fund operating expenses indirectly since they are deducted from fund assets.
1 Certain investors may qualify for reduced sales charges. See Policies & Services Buying Shares, Calculating Your Share Price.
2 Class A share investments of $1 million or more on which no front-end sales charge is paid may be subject to a 1% contingent deferred sales charge. See Policies & Services Buying Shares, Calculating Your Share Price.
3 The fund reserves the right to charge your account an annual maintenance fee of $50 if your balance falls below $500 as a result of selling or exchanging shares. See Policies & Services Selling Shares, Accounts with Low Balances.
4 Other Expenses are based on estimated amounts for the current fiscal year.
5 The advisor intends to voluntarily waive fees during the current fiscal year so that total operating expenses, after waivers, do not exceed 0.85% and 1.60%, respectively, for Class A and Class C shares. Fee waivers may be discontinued at any time.
Example This example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds. It assumes that you invest $10,000 for the time periods indicated, that your investment has a 5% return each year, and that the funds operating expenses remain the same. Although your actual costs and returns may differ, based on these assumptions your costs would be:
Class A |
Class C
assuming redemption at end of each period |
Class C
assuming no redemption at end of each period |
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1 year | $528 | $283 | $183 | ||||||||
3 years | $745 | $566 | $566 |
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This prospectus offers Class A and Class C shares , which have different cost structures. You should decide which class best suits your needs. Generally, it is more advantageous for an investor who is considering an investment in Class C shares of more than $1,000,000, or who is otherwise eligible to purchase Class A shares without a front-end sales charge, to invest in Class A shares instead.
Class A Shares. Class A shares have:
Class C Shares. Class C shares have:
The fund has adopted a plan under Rule 12b-1 of the Investment Company Act that allows it to pay the funds distributor an annual fee for the distribution and sale of its shares and for services provided to shareholders.
For | 12b-1 fees are equal to: |
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Class A shares | 0.25% of average daily net assets |
Class C shares | 1% of average daily net assets |
Because these fees are paid out of the funds assets on an ongoing basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of sales charges.
The Class A share 12b-1 fee is a shareholder servicing fee. For Class C shares, a portion of the 12b-1 fee equal to 0.25% of average daily net assets is a shareholder servicing fee and 0.75% is a distribution fee. The funds distributor may use these fees to compensate investment professionals, participating institutions, and one-stop mutual fund networks (institutions) for sales and/or administrative services performed on behalf of the institutions customers. The advisor or the distributor may pay additional fees to institutions out of their own assets in exchange for these services.
Your purchase price will be based on the funds net asset value (NAV) per share, which is generally calculated as of the close of regular trading on the New York Stock Exchange (usually 3:00 p.m. Central time) every day the exchange is open.
The funds NAV is equal to the market value of its investments and other assets, less any liabilities, divided by the number of fund shares. If market prices are not readily available for an investment or if the advisor believes they are unreliable, fair value prices may be determined in good faith using methods approved by the funds board of directors.
Class A Shares. Your purchase price for Class A shares is typically the net asset value of your shares, plus a front-end sales charge. Sales charges vary depending on the amount of your purchase. The funds distributor receives the sales charge you pay and reallows a portion of the sales charge to your investment professional or participating institution.
Reducing Your Sales Charge. As shown in the preceding table, larger purchases of Class A shares reduce the percentage sales charge you pay. In determining whether you are entitled to pay a reduced sales charge, you may aggregate certain other purchases with your current purchase, as described below.
T o take advantage of the aggregation feature s described below , you must notify the fund at the time of the purchase order that a quantity discount may apply to your current purchase. If you purchase shares by mail, you must notify the fund in writing. Otherwise, simply inform your investment professional or financial institution, or Investors Services if you are purchasing shares by wire, and they will notify the fund.
You should provide your investment professional or financial institution with information or records regarding any other accounts in which there are holdings eligible to be aggregated, including:
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Buying Shares continued
You should keep the records necessary to demonstrate the purchase price of shares held in these accounts since neither the fund and its transfer agent nor your investment professional or financial institution may have this information.
Prior Purchases. Prior purchases of Class A, Class B, and Class C shares of any First American fund (except a money market fund) will be factored into your sales charge calculation. That is, you will receive credit for either the original purchase price or the current net asset value of the other Class A, Class B, and Class C shares you hold at the time of your purchase, whichever is greater. For example, lets say youre making a $10,000 investment and you already own other First American fund Class A shares that you purchased for $25,000, but that are now valued at $45,000. Since the current net asset value of your shares is greater than their purchase price, you will receive credit for their current value and your sales charge will be based on a total purchase amount of $55,000.
Purchases by Related Accounts. Concurrent and prior purchases of Class A, Class B, and Class C shares of any First American fund by certain other accounts also will be combined with your purchase to determine your sales charge. The fund will combine purchases made by you, your spouse, and your children when it calculates the sales charge , including purchases in individual retirement, custodial and personal trust accounts .
Letter of Intent. If you plan to invest $50,000 or more over a 13-month period in Class A, Class B, or Class C shares of any First American fund except the money market funds, you may reduce your sales charge by signing a non-binding letter of intent. (If you do not fulfill the letter of intent, you must pay the applicable sales charge.) In addition, if you reduce your sales charge to zero under a letter of intent and then sell your Class A shares within 18 months of their purchase, you may be charged a contingent deferred sales charge of 1%. See For Investments of Over $1 Million.
More information on these ways to reduce your sales charge appears in the Statement of Additional Information (SAI).
Purchasing Class A Shares Without a Sales Charge. The following persons may purchase the funds Class A shares at net asset value without a sales charge:
Additional Information. A link to additional information regarding the funds shares and sales charge breakpoints will be available on the funds web site at http://www.firstamericanfunds.com, beginning no later than December 31, 2004.
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Class A and Class C Shares |
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Buying Shares continued
For Investments of Over $1 Million
There is no initial sales charge on Class A share purchases of $1 million or more. However, your investment professional or financial institution may receive a commission of up to 1% on your purchase. If such a commission is paid, you will be assessed a contingent deferred sales charge (CDSC) of 1% if you sell your shares within 18 months. To find out whether you will be assessed a CDSC, ask your investment professional or financial institution. The funds distributor receives any CDSC imposed when you sell your Class A shares. The CDSC is based on the value of your shares at the time of purchase or at the time of sale, whichever is less. The charge does not apply to shares you acquired by reinvesting your dividend or capital gain distributions.
To help lower your costs, shares that are not subject to a CDSC will be sold first. Other shares will then be sold in an order that minimizes your CDSC. The CDSC for Class A shares will be waived for:
Class C Shares. Your purchase price for Class C shares is their net asset value there is no front-end sales charge. However, if you redeem your shares within 12 months of purchase, you will be assessed a contingent deferred sales charge (CDSC) of 1% of the value of your shares at the time of purchase or at the time of sale, whichever is less. The CDSC does not apply to shares you acquired by reinvesting your dividend or capital gain distributions. Shares will be sold in the order that minimizes your CDSC.
Although you pay no front-end sales charge when you buy Class C shares, the funds distributor pays a sales commission of 1% of the amount invested to your investment professional or participating institution. The distributor receives any CDSC imposed when you sell your Class C shares.
The CDSC will be waived for:
Some investors attempt to profit through short-term trading, or purchasing and redeeming the funds shares within a short time period. Frequent short-term trading may hurt the long-term performance of the fund by disrupting portfolio management strategies and increasing fund expenses. If the advisor believes that a shareholder has engaged in frequent short-term trading, it may refuse to process the shareholders purchase request and/or limit or cancel the shareholders exchange privileges (in addition to the four-exchange limit described under Selling Shares How to Exchange Shares).
Although the advisor will attempt to monitor for short-term trading that could be detrimental to the fund and its shareholders, you should understand that this monitoring will not eliminate the possibility that frequent short-term trading in the fund may occur. For example, the ability of the advisor to monitor trades that are placed by the underlying shareholders of omnibus accounts maintained by brokers, retirement plan accounts, and approved fee-based program accounts is significantly limited when the underlying shareholder accounts are not maintained by the advisor.
To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify, and record information that identifies each person who opens an account.
What this means is that when you open an account, we will ask for your name, address, date of birth, and other information that will allow us to identify you. We may also ask for other identifying documents or information.
You may become a shareholder in the fund with an initial investment of $1,000 or more ($500 for a retirement plan or a Uniform Gifts to Minors Act/Uniform Transfers to Minors Act (UGMA/UTMA) account). Additional investments can be made for as little as $100 ($25 for a retirement plan or an UGMA/UTMA account). The fund has the right to waive these minimum investment requirements for employees of the
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Buying Shares continued
funds advisor and its affiliates. The fund also has the right to reject any purchase order.
You may buy shares on any day the New York Stock Exchange is open. However, purchases of shares may be restricted in the event of an early or unscheduled close of the New York Stock Exchange. Your shares will be priced at the next NAV calculated after your order is received in proper form by the fund or one of its authorized financial intermediaries, plus any applicable sales charge. An authorized financial intermediary is an investment professional or financial institution that the fund has authorized to accept orders on its behalf. To make sure that your order is in proper form, you must follow the directions for purchasing shares given below and supply the fund with any identifying information required under Federal law, as discussed above.
By Phone. You may purchase shares by calling your investment professional or financial institution, if they have a sales agreement with the funds distributor. Orders placed through an authorized financial intermediary will be effective that day if received by the intermediary by the close of regular trading on the New York Stock Exchange. In the case of other investment professionals or financial institutions , you will have to transmit your request by an earlier time in order for your purchase request to be effective that day. This allows your investment professional or financial institution time to process your request and transmit it to the fund by the close of regular trading on the New York Stock Exchange . Some financial institutions may charge a fee for helping you purchase shares. Contact your investment professional or financial institution for more information.
If you are paying by wire, you may purchase shares by calling Investor Services at 800 677-FUND before the close of regular trading on the New York Stock Exchange (usually 3:00 p.m. Central time). All information will be taken over the telephone, and your order will be placed when the fund receives payment by wire. Wire federal funds as follows:
U.S. Bank National Association
ABA
Number: 0750-00022
Account Number: 112-952-137
Credit to:
First American Inflation Protected Securities Fund
(investor name and investor account #)
You cannot purchase shares by wire on days when federally chartered banks are closed.
By Mail. To purchase shares by mail, simply complete and sign a new account form, enclose a check made payable to the fund you wish to invest in, and mail both to:
First American Funds
P.O. Box 3011
Milwaukee, WI 532013011
Overnight express mail may be sent to:
First American Funds
615 East Michigan Street
Milwaukee, WI 53202
After you have established an account, you may continue to purchase shares by mailing your check to First American Funds at the same address.
Please note the following:
To purchase shares as part of a savings discipline, you may add to your investment on a regular basis:
You may apply for participation in either of these programs through your investment professional or financial institution or by calling Investor Services at 800 677-FUND.
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You may sell your shares on any day when the New York Stock Exchange is open. However, redemption of shares may be restricted in the event of an early or unscheduled close of the New York Stock Exchange. Your shares will be sold at the next net asset value calculated after your order is accepted by the fund or an authorized financial intermediary , less any applicable contingent deferred sales charge. Be sure to read the section Buying Shares for a description of contingent deferred sales charges. To make sure that your order is in proper form , follow the directions for selling shares given below.
The proceeds from your sale normally will be mailed or wired within three days, but in no event more than seven days, after your request is received in proper form.
To minimize the effect of large redemption requests, the fund reserves the right to fulfill these redemption requests by distributing readily marketable securities in the funds portfolio, rather than paying you in cash. See Redemption In Kind.
By Phone. If you purchased shares through an investment professional or financial institution, simply call them to sell your shares. If your investment professional or financial institution is an authorized financial intermediary, your redemption will be effective that day if received by the intermediary by the close of regular trading on the New York Stock Exchange. In the case of other investment professionals or financial institutions , you will have to call by an earlier time in order for your redemption to be effective that day. This allows your investment professional or financial institution time to process your request and transmit it to the fund by the close of regular trading on the New York Stock Exchange . Contact your investment professional or financial institution directly for more information.
If you did not purchase shares through an investment professional or financial institution, you may sell your shares by calling Investor Services at 800 677-FUND. Proceeds can be wired to your bank account (if the proceeds are at least $1,000 and you have previously supplied your bank account information to the fund) or sent to you by check. The First American funds reserve the right to limit telephone redemptions to $50,000 per day.
If you recently purchased your shares by check or through the Automated Clearing House (ACH), proceeds from the sale of those shares may not be available until your check or ACH payment has cleared, which may take up to 15 calendar days from the date of purchase.
By Mail. To sell shares by mail, send a written request to your investment professional or financial institution, or to the fund at the following address:
First American Funds
P.O. Box 3011
Milwaukee, WI 532013011
Overnight express mail may be sent to:
First American Funds
615 East Michigan Street
Milwaukee, WI 53202
Your request should include the following information:
Signatures on a written request must be guaranteed if:
A signature guarantee assures that a signature is genuine and protects shareholders from unauthorized account transfers. Banks, savings and loan associations, trust companies, credit unions, broker-dealers, and member firms of a national securities exchange may guarantee signatures. Call your financial institution to determine if it has this capability.
Proceeds from a written redemption request will be sent to you by check unless another form of payment is requested.
If your account has a value of $5,000 or more, you may redeem a specific dollar amount from your account on a regular basis. To set up systematic withdrawals, contact your investment professional or financial institution.
You should not make systematic withdrawals if you plan to continue investing in the fund, due to sales charges and tax liabilities.
If you sell Class A shares of a First American fund (except money market fund shares on which you have not paid a sales charge), you may reinvest in Class A shares of that fund or another First American fund within 180 days without a sales charge. To reinvest in Class A shares at net asset value (without paying a sales charge), you must notify the fund directly in writing or notify your investment professional or financial institution.
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Selling Shares continued
Accounts with Low Balances
If your account balance falls below $500 as a result of selling or exchanging shares, the fund reserves the right to either:
Before taking any action, however, the fund will send you written notice of the action it intends to take and give you 30 days to re-establish a minimum account balance of $500.
If your investment goals or your financial needs change, you may move from one First American fund to another First American fund. There is no fee to exchange shares. You may exchange your shares on any day when the New York Stock Exchange is open. However, exchanges of shares may be restricted in the event of an early or unscheduled close of the New York Stock Exchange.
Generally, you may exchange your shares only for shares of the same class. However, you may exchange your Class A shares for Class Y shares of the same or another First American fund if you subsequently become eligible to participate in that class (for example, by opening a fiduciary, custody, or agency account with a financial institution which invests in Class Y shares).
Exchanges are made based on the net asset value per share of each fund at the time of the exchange. When you exchange your Class A shares of the fund for Class A shares of another First American fund, you do not have to pay a sales charge. When you exchange your Class C shares for Class C shares of another First American fund, the time you held the shares of the old fund will be added to the time you hold the shares of the new fund for purposes of determining your CDSC.
Before exchanging into any fund, be sure to read its prospectus carefully. A fund may change or cancel its exchange policies at any time. You will be notified of any changes. The First American funds have the right to limit exchanges to four times per year.
By Phone. If both funds have identical shareholder registrations, you may exchange shares by calling your investment professional, your financial institution, or by calling the funds directly. To request an exchange through the funds, call Investor Services at 800 677-FUND. Your instructions must be received before 3:00 p.m. Central time, or by the earlier time specified by an investment professional or financial institution that is not an authorized financial intermediary , in order for shares to be exchanged the same day.
By Mail. To exchange shares by written request, please follow the procedures under Selling Shares. Be sure to include the names of both funds involved in the exchange.
Telephone Transactions
You may buy, sell, or exchange shares by telephone, unless you elected on your new account form to restrict this privilege. If you wish to reinstate this option on an existing account, please call Investor Services at 800 677-FUND to request the appropriate form.
The fund and its agents will not be responsible for any losses that may result from acting on wire or telephone instructions that they reasonably believe to be genuine. The fund and its agents will each follow reasonable procedures to confirm that instructions received by telephone are genuine, which may include taping telephone conversations.
It may be difficult to reach the fund by telephone during periods of unusual market activity. If you are unable to reach the fund or its agents by telephone, please consider sending written instructions.
Generally, proceeds from redemption requests will be paid in cash. However, to minimize the effect of large redemption requests on the fund and its remaining shareholders, the fund reserves the right to pay part or all of the proceeds from a redemption request in a proportionate share of readily marketable securities in the fund instead of cash. In selecting securities for a redemption in kind, the advisor will consider the best interests of the fund and the remaining fund shareholders, and will value these securities in accordance with the pricing methods employed to calculate the funds net asset value per share. If you receive redemption proceeds in kind, you should expect to incur transaction costs upon disposition of the securities received in the redemption.
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Shareholder Reports. Shareholder reports are mailed twice a year, in November and May. They include financial statements and performance information, and, on an annual basis, a message from your portfolio managers and the auditors report.
In an attempt to reduce shareholder costs and help eliminate duplication, the fund will try to limit its mailings to one report for each address that lists one or more shareholders with the same last name. If you would like additional copies, please call Investor Services at 800 677-FUND.
Statements and Confirmations. Statements summarizing activity in your account are mailed quarterly. Confirmations are mailed following each purchase or sale of fund shares. Generally, the fund does not send statements for funds held in a brokerage account.
Dividends from the funds net investment income are declared and paid monthly. Any capital gains are distributed at least once each year.
On the ex-dividend date for a distribution, the funds share price is reduced by the amount of the distribution. If you buy shares just before the ex-dividend date, in effect, you buy the dividend. You will pay the full price for the shares and then receive a portion of that price back as a taxable distribution.
Dividend and capital gain distributions will be reinvested in additional shares of the fund, unless you request that distributions be reinvested in another First American fund or paid in cash. This request may be made on your new account form or by contacting your financial institution. If you request that your distributions be paid in cash but those distributions cannot be delivered because of an incorrect mailing address, the undelivered distributions and all future distributions will be reinvested in fund shares at the current NAV.
Some of the tax consequences of investing in the fund are discussed below. More information about taxes is in the Statement of Additional Information. However, because everyones tax situation is unique, always consult your tax professional about federal, state, and local tax consequences.
Taxes on Distributions. The fund pays its shareholders dividends from its net investment income and any net capital gains that it has realized. For most investors, fund dividends and distributions are taxable whether they are reinvested or taken in cash (unless your investment is in an IRA or other tax-advantaged account).
Dividends from the funds net investment income and short-term capital gains are taxable as ordinary income. Distributions of the funds long-term capital gains are taxable as long-term gains, regardless of how long you have held your shares. The fund expects that, as a result of its investment objective and strategies, its distributions will consist primarily of ordinary income and that the distributions will not be treated as qualified dividends that are taxed at the same rates as long-term capital gains.
Periodic adjustments for inflation to the principal amount of an inflation protected security will give rise to original issue discount, which will be includable in the funds gross income. Because the fund is required to distribute its taxable income to avoid corporate level tax , the fund may be required to make annual distributions to shareholders that exceed the cash it receives, which may require the fund to liquidate certain investments when it is not advantageous to do so. Also, if the principal value of an inflation protected security is adjusted downward due to deflation, amounts previously distributed in the taxable year may be characterized in some circumstances as a return of capital. Estimates of inflation may be used in the determination of monthly income dividend rates.
Taxes on Transactions. The sale of fund shares, or the exchange of the funds shares for shares of another First American fund, will be a taxable event and may result in a capital gain or loss. The gain or loss will be considered long-term if you have held your shares for more than one year. A gain or loss on shares held for one year or less is considered short-term and is taxed at the same rates as ordinary income.
If in redemption of his or her shares a shareholder receives a distribution of readily marketable securities instead of cash, the shareholder will be treated as receiving an amount equal to the fair market value of the securities at the time of the distribution for purposes of determining capital gain or loss on the redemption, and will also acquire a basis in the shares for federal income tax purposes equal to their fair market value.
The exchange of one class of the funds shares for another class of the funds shares will not be taxable.
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U.S. Bancorp Asset Management, Inc., is the funds investment advisor. U.S. Bancorp Asset Management provides investment management services to individuals and institutions, including corporations, foundations, pensions, and retirement plans. As of June 30, 2004, U.S. Bancorp Asset Management and its affiliates had more than $ 122 billion in assets under management, including investment company assets of more than $ 56 billion. As investment advisor, U.S. Bancorp Asset Management manages the funds business and investment activities, subject to the authority of the funds board of directors. The fund pays the investment advisor a monthly fee for providing investment advisory services equal, on an annual basis, to 0.50% of the funds average daily net assets.
Direct Correspondence to:
First American Funds
P.O. Box 1330
Minneapolis, MN 55440-1330
Investment Advisor
U.S. Bancorp Asset Management, Inc.
800 Nicollet Mall
Minneapolis, MN 55402
Distributor
Quasar Distributors, LLC
615 E. Michigan Street
Milwaukee, WI 53202
U.S. Bancorp Asset Management and other affiliates of U.S. Bancorp may act as fiduciary with respect to plans subject to the Employee Retirement Income Security Act of 1974 (ERISA) and other trust and agency accounts that invest in the First American funds. As described above, U.S. Bancorp Asset Management receives compensation for acting as the funds investment advisor. U.S. Bancorp Asset Management and its affiliates also receive compensation in connection with the following:
Custody Services. U.S. Bank National Association (U.S. Bank) provides or compensates others to provide custody services to the fund. U.S. Bank is paid monthly fees equal, on an annual basis, to 0.01% of the funds average daily net assets. In addition, U.S. Bank is reimbursed for its out-of-pocket expenses incurred while providing custody services to the fund.
Administration Services. U.S. Bancorp Asset Management and its affiliate, U.S. Bancorp Fund Services, LLC (Co-Administrators), provide or compensate others to provide administrative services to the First American family of funds. These services include general administrative and accounting services, transfer agency and dividend disbursing services, blue sky services, and shareholder services. With respect to the First American open-end mutual funds, the Co-Administrators receive total fees, on an annual basis, of up to 0.25% of the aggregate average daily net assets of First American Investment Funds, Inc., First American Strategy Funds, Inc., and First American Insurance Portfolios, Inc., and up to 0.20% of the aggregate average daily net assets of First American Funds, Inc. The funds also pay the Co-Administrators fees based upon the number of funds and shareholder accounts maintained. In addition, the Co-Administrators are reimbursed for their out-of-pocket expenses incurred while providing administration services to the funds.
Distribution Services. Quasar Distributors, LLC, an affiliate of U.S. Bancorp Asset Management, serves as distributor of the fund and receives sales charges, distribution and shareholder servicing fees, and is reimbursed for its out of pocket expenses incurred while providing distribution and other sub-administrative services for the fund.
Securities Lending Services. In connection with lending its portfolio securities, the fund pays administrative and custodial fees to U.S. Bancorp Asset Management which are equal to 35 % of the funds income from these securities lending transactions.
Shareholder Servicing Fees. To the extent that fund shares are held through U.S. Bancorp Asset Management, U.S. Bank or their broker-dealer affiliate, U.S. Bancorp Investments, Inc., those entities may receive shareholder servicing fees from the funds distributor.
The fund is managed by a team of persons associated with U.S. Bancorp Asset Management.
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The funds objective, which is described in the Fund Summary section, may be changed without shareholder approval. If the funds objective changes, you will be notified at least 60 days in advance. Please remember: There is no guarantee that the fund will achieve its objective.
The funds principal investment strategies are discussed in the Fund Summary section. These are the strategies that the funds investment advisor believes are most likely to be important in trying to achieve the funds objective. You should be aware that the fund may also use strategies and invest in securities that are not described in this prospectus, but that are described in the Statement of Additional Information (SAI). For a copy of the SAI, call Investor Services at 800 677-FUND.
Consistent with its name, the fund has adopted an investment strategy requiring that at least 80% of its net assets (plus the amount of any borrowings for investment purposes) be invested in inflation protected debt securities. You will be notified at least 60 days in advance of any change to this investment strategy.
Investment Approach. Fund managers generally employ a top-down approach in selecting securities for the fund. First, they determine their economic outlook and the direction in which inflation and interest rates are expected to move. Then they choose certain sectors or industries within the overall market. Last, they select individual securities within those sectors for the fund. Fund managers also analyze expected changes to the yield curve under multiple market conditions to help define maturity and duration selection.
Effective Maturity. Effective maturity differs from actual stated or final maturity, which may be substantially longer. In calculating effective maturity, the advisor estimates the effect of expected principal payments and call provisions on securities held in the portfolio. Effective maturity provides the advisor with a better estimate of interest rate risk under normal market conditions, but may underestimate interest rate risk in an environment of adverse (rising) interest rates.
Effective Duration. Effective duration, one measure of interest rate risk, measures how much the value of a security is expected to change with a given change in interest rates. For example, if interest rates were to increase by one percentage point, the market value of a bond with an effective duration of five years would decrease by 5%, with all other factors being constant. However, all other factors are rarely constant. Effective duration is based on assumptions and subject to a number of limitations. It is most useful when interest rate changes are small, rapid, and occur equally in short-term and long-term securities. In addition, it is difficult to calculate precisely for bonds with prepayment options, such as mortgage- and asset-backed securities, because the calculation requires assumptions about prepayment rates. For these reasons, the effective durations of funds which invest a significant portion of their assets in these securities can be greatly affected by changes in interest rates.
Temporary Investments. In an attempt to respond to adverse market, economic, political, or other conditions, the 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 funds advisor. These investments may result in a lower yield than would be available from investments with a lower quality or longer term and may prevent the fund from achieving its investment objectives.
Portfolio Turnover. Fund managers 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.
The principal risks of investing in the fund are summarized in the Fund Summary section. More information about principal fund risks is presented below.
Income Risk. The funds income could decline due to falling market interest rates. This is because, in a falling interest rate environment, the fund generally will have to invest the proceeds from sales of fund shares, as well as the proceeds from maturing portfolio securities (or portfolio securities that have been called, see Call Risk, or prepaid, see Prepayment Risk) in lower-yielding securities.
Credit Risk. The fund is subject to the risk that the issuers of debt securities held by the fund will not make payments on the securities, or that the other party to a contract (such as a securities lending agreement or repurchase agreement) will default on its obligations. There is also the risk that an issuer could suffer adverse changes in financial condition that could lower the credit quality of a security. This could lead to greater volatility in the price of the security and in shares of the fund. Also, a change in the credit quality rating of a bond could affect the bonds liquidity and make it more difficult for the fund to sell. When the fund purchases unrated securities, it will depend on the advisors analysis of credit risk more heavily than usual.
The fund attempts to minimize credit risk by investing primarily in securities considered at least investment grade at the time of purchase or in unrated securities of comparable quality. The fund may invest up to 10% of its net assets in securities rated lower than investment grade. However, all of these securities,
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especially those in the lower investment grade rating categories, have credit risk. In adverse economic or other circumstances, issuers of these lower rated securities are more likely to have difficulty making principal and interest payments than issuers of higher rated securities.
Risks of High-Yield Securities. A portion of the funds portfolio may consist of lower-rated corporate debt obligations, which are commonly referred to as high-yield securities or junk bonds. Although these securities usually offer higher yields than investment grade securities, they also involve more risk. High-yield bonds may be more susceptible to real or perceived adverse economic conditions than investment grade bonds. In addition, the secondary trading market may be less liquid. High-yield securities generally have more volatile prices and carry more risk to principal than investment grade securities.
Liquidity Risk. The fund is exposed to liquidity risk because of its investments in high-yield bonds. Trading opportunities are more limited for debt securities that have received ratings below investment grade. These features may make it more difficult to sell or buy a security at a favorable price or time. Consequently, the fund may have to accept a lower price to sell a security, sell other securities to raise cash, or give up an investment opportunity, any of which could have a negative effect on the funds performance. Infrequent trading may also lead to greater price volatility.
Foreign Security Risk. International investing involves risks not typically associated with U.S. investing. These risks include:
Currency Risk. Because foreign securities often trade in currencies other than the U.S. dollar, changes in currency exchange rates will affect the funds net asset value, the value of dividends and interest earned, and gains and losses realized on the sale of securities. A strong U.S. dollar relative to these other currencies will adversely affect the value of the fund.
Political and Economic Risks. International investing is subject to the risk of political, social, or economic instability in the country of the issuer of a security, the difficulty of predicting international trade patterns, the possibility of the imposition of exchange controls, expropriation, limits on removal of currency or other assets, and nationalization of assets.
Foreign Tax Risk. The funds income from foreign issuers may be subject to non-U.S. withholding taxes. In some countries, the fund also may be subject to taxes on trading profits and, on certain securities transactions, transfer or stamp duties tax. To the extent foreign income taxes are paid by the fund, U.S. shareholders may be entitled to a credit or deduction for U.S. tax purposes. See the Statement of Additional Information for details.
Risk of Investment Restrictions. Some countries, particularly emerging markets, restrict to varying degrees foreign investment in their securities markets. In some circumstances, these restrictions may limit or preclude investment in certain countries or may increase the cost of investing in securities of particular companies.
Foreign Securities Market Risk. Securities of many non-U.S. companies may be less liquid and their prices more volatile than securities of comparable U.S. companies. Securities of companies traded in many countries outside the U.S., particularly emerging markets countries, may be subject to further risks due to the inexperience of local investment professionals and financial institutions, the possibility of permanent or temporary termination of trading, and greater spreads between bid and asked prices for securities. In addition, non-U.S. stock exchanges and investment professionals are subject to less governmental regulation, and commissions may be higher than in the United States. Also, there may be delays in the settlement of non-U.S. stock exchange transactions.
Information Risk. Non-U.S. companies generally are not subject to uniform accounting, auditing, and financial reporting standards or other regulatory requirements that apply to U.S. companies. As a result, less information may be available to investors concerning non-U.S. issuers. Accounting and financial reporting standards in emerging markets may be especially lacking.
Call Risk. Many corporate bonds may be redeemed at the option of the issuer, or called, before their stated maturity date. In general, an issuer will call its bonds if they can be refinanced by issuing new bonds which bear a lower interest rate. The fund is subject to the possibility that during periods of falling interest rates, a bond issuer will call its high-yielding bonds. The fund would then be forced to invest the unanticipated proceeds at lower interest rates, resulting in a decline in the funds income.
Prepayment Risk. Mortgage-backed securities are secured by and payable from pools of mortgage loans. Similarly, asset-backed securities are supported by obligations such as credit card loans, automobile loans, home equity loans, corporate bonds, or commercial loans. These mortgages and other obligations generally can be prepaid at any time without penalty. As a result, mortgage- and asset-backed securities are subject to prepayment risk, which is the risk that falling interest rates could cause prepayments of the securities to occur more quickly than expected. This occurs because, as interest rates fall, more homeowners refinance the mortgages underlying mortgage-related securities or prepay the debt obligations underlying asset-backed securities. The fund would have to reinvest the prepayments at a time when interest rates are falling, reducing the income of the fund. In addition, when interest
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rates fall, prices on mortgage- and asset-backed securities may not rise as much as for other types of comparable debt securities because investors may anticipate an increase in prepayments.
Extension Risk. Mortgage- and asset-backed securities also are subject to extension risk, which is the risk that rising interest rates could cause mortgages or other obligations underlying the securities to be prepaid more slowly than expected, resulting in slower prepayments of the securities. This would, in effect, convert a short- or medium-duration mortgage- or asset-backed security into a longer-duration security, increasing its sensitivity to interest rate changes and causing its price to decline.
Risks of Securities Lending. When the fund loans its portfolio securities, it will receive collateral equal to at least 100% of the value of the loaned securities. Nevertheless, the fund risks a delay in the recovery of the loaned securities, or even the loss of rights in the collateral deposited by the borrower if the borrower should fail financially. To reduce these risks, the fund enters into loan arrangements only with institutions which the funds advisor has determined are creditworthy under guidelines established by the funds board of directors.
Risks of Derivative Instruments. The use of derivative instruments exposes the fund to additional risks and transaction costs. Risks inherent in the use of derivative instruments include: the risk that securities or commodities prices, index prices, currencies or interest rates will not move in the direction that the advisor anticipates; in the case of a credit default swap, the risk that the advisor will incorrectly evaluate the creditworthiness of the company or companies on which the swap is based; an imperfect correlation between the price of derivative instruments and movements in the prices of the securities being hedged; the possible absence of a liquid secondary market for any particular instrument and possible exchange imposed price fluctuation limits, either of which may make it difficult or impossible to close out a position when desired; leverage risk, which is the risk that adverse price movements in an instrument can result in a loss substantially greater than the funds initial investment in that instrument; and, particularly, in the case of privately negotiated instruments, the risk that the counterparty will fail to perform its obligations, which could leave the fund worse off than if it had not entered into the position. If the fund uses derivative instruments and the advisors judgment proves incorrect, the funds performance could be worse than if it had not used these instruments.
The funds investments in commodity-linked derivative instruments may subject the fund to greater volatility than investments in traditional securities. The value of commodity-linked derivative instruments may be affected by changes in overall market movements, commodity index volatility, changes in interest rates, or factors affecting a particular industry or commodity, such as drought, floods, weather, livestock disease, embargoes, tariffs and international economic, political and regulatory developments.
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More information about the fund is available in the funds Statement of Additional Information and annual and semiannual reports, and on the First American funds Internet Web site.
Information about the First American funds may be viewed on the funds Internet Web site at http://www.firstamericanfunds.com.
The SAI provides more details about the fund and its policies. A current SAI is on file with the Securities and Exchange Commission (SEC) and is incorporated into this prospectus by reference (which means that it is legally considered part of this prospectus).
Additional information about the funds investments will be available in the funds annual and semiannual reports to shareholders. In the funds annual report, you will find a discussion of the market conditions and investment strategies that significantly affected the funds performance during its last fiscal year.
You can obtain a free copy of the funds SAI and/or free copies of the funds most recent annual or semiannual reports by calling Investor Services at 800 677-FUND. The material you request will be sent by first-class mail or other means designed to ensure equally prompt delivery, within three business days of receipt of the request.
You can also obtain copies of this information, after paying a duplicating fee, by electronic request at the following email address: publicinfo@sec.gov, or by writing the SECs Public Reference Section, Washington, D.C. 20549-0102. For more information, call 1-202-942-8090.
Information about the fund is also available on the Internet. Text-only versions of fund documents can be viewed online or downloaded from the EDGAR Database on the SECs Internet site at http://www.sec.gov.
First American Funds P.O. Box 1330, Minneapolis, MN 55440-1330
U.S. Bancorp Asset Management, Inc., serves as the investment advisor to the First American Funds.
PROIPSA 10/04
SEC file number: 811-05309
First American Funds
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October 1, 2004 |
Prospectus | |
First American Investment Funds, Inc. | |
ASSET CLASS ~ Bond Funds | |
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Income Funds
Class R Shares |
Inflation Protected Securities Fund
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As with all mutual funds, the Securities and Exchange Commission has not approved or disapproved the shares of this fund, or determined if the information in this prospectus is accurate or complete. Any statement to the contrary is a criminal offense.
Contents
Inflation Protected Securities Fund
Introduction
This section of the prospectus describes the objective of the First American Inflation Protected Securities Fund, summarizes the principal investment strategies used by the fund in trying to achieve its objective, and highlights the risks involved with these strategies. It also provides you with information about the performance, fees, and expenses of the fund.
An investment in the fund is not a deposit of U.S. Bank National Association and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
This prospectus and the related Statement of Additional Information do not constitute an offer to sell or a solicitation of an offer to buy shares in the fund, nor shall any such shares be offered or sold to any person in any jurisdiction in which an offer, solicitation, purchase, or sale would be unlawful under the securities laws of such jurisdiction.
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Inflation Protected Securities FUND
Inflation Protected Securities Fund seeks to provide investors with total return that exceeds the rate of inflation over an economic cycle.
Under normal market conditions, Inflation Protected Securities Fund will invest primarily (at least 80% of its net assets, plus the amount of any borrowings for investment purposes) in inflation protected debt securities. These securities will be issued by the U.S. and non-U.S. governments, their agencies and instrumentalities, and corporations. The funds investments in U.S. Government inflation protected securities will include U.S. Treasury inflation-protection securities as well as inflation protected securities issued by agencies and instrumentalities of the U.S. Government. Securities issued by the U.S. Treasury are backed by the full faith and credit of the U.S. Government. Some securities issued by agencies and instrumentalities of the U.S. Government are supported only by the credit of the issuing agency or instrumentality.
Inflation protected debt securities are designed to provide protection against the negative effects of inflation. Unlike traditional debt securities, which pay regular fixed interest payments on a fixed principal amount, interest payments on inflation protected debt securities will vary with the rate of inflation. Inflation protected debt securities have two common structures. The U.S. Treasury and some other issuers use a structure that accrues inflation into the principal value of the bond. If the index measuring the rate of inflation rises, the principal value of the security will increase. Because interest payments will be calculated with respect to a larger principal amount, interest payments also will increase. Conversely, if the index measuring the rate of inflation falls, the principal value of the security will fall and interest payments will decrease. Other issuers adjust the interest rates payable on the security according to the rate of inflation, but the principal amount remains the same.
The U.S. Treasury uses the Consumer Price Index for Urban Consumers (CPI-U) as the inflation measure. Inflation protected bonds issued by a foreign government are generally adjusted to reflect an inflation index calculated by that government. In the event of sustained deflation, the U.S. Treasury has guaranteed that it will repay at maturity at least the original face value of the inflation protected securities that it issues. Other inflation protected debt securities that accrue inflation into their principal value may or may not provide a similar guarantee. For securities that do not provide such a guarantee, the adjusted principal value of the security repaid at maturity may be less than the original principal value.
Up to 20% of the Funds assets may be invested in holdings that are not inflation protected . These holdings may include the following:
When selecting securities for the fund, the portfolio managers use a top-down approach, looking first at general economic factors and market conditions. The managers then select securities that they believe have strong relative value based on an analysis of a securitys characteristics (such as principal value, coupon rate, maturity, duration and yield) in light of these general economic factors and market conditions.
The fund invests primarily in securities rated investment grade at the time of purchase or in unrated securities of comparable quality. However, up to 10% of the funds net assets may be invested in securities that are rated lower than investment grade at the time of purchase or that are unrated and of comparable quality (securities commonly referred to as high-yield securities or junk bonds). The fund will not invest in securities rated lower than B at the time of purchase or in unrated securities of equivalent quality. Quality determinations regarding unrated securities will be made by the funds advisor.
The fund may invest up to 20% of its net assets in non-dollar denominated securities, and may invest without limitation in U.S. dollar denominated securities of foreign issuers.
The fund may invest in debt securities of any maturity, but expects to maintain , under normal market conditions, a weighted average effective maturity of between 8 and 15 years and an average effective duration of between 4 and 10 years . The funds weighted average effective maturity and average effective duration are measure s of how the fund may react to interest rate changes.
To generate additional income, the fund may lend securities representing up to one-third of the value of its total assets to broker-dealer, banks, and other institutions.
The fund may utilize the following derivatives: options; futures contracts; options on futures contracts; foreign currency contracts; interest rate caps and floors; index- and other asset-linked notes; swap agreements, including swap agreements on interest rates, currency rates, security indexes and specific securities, and credit default swap agreements; and options on the foregoing types of swap agreements. The fund may also invest in commodity-linked derivative instruments, including swap agreements on commodity indexes or specific commodities; commodity options, futures and options on futures; and commodity-linked notes. The fund may enter into standardized derivatives contracts traded on domestic or foreign securities
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Inflation Protected Securities FUND continued
exchanges, boards of trade, or similar entities, and non-standardized derivatives contracts traded in the over-the-counter (OTC) market. The fund will use these derivatives in an attempt to manage market or business risk .
The price and yield of this fund will change daily due to changes in interest rates, inflation and other factors, which means you could lose money. The principal risks of investing in this fund include:
Interest Rate Risk. Debt securities typically decrease in value when interest rates rise and increase in value when interest rates fall, with longer-term debt securities generally being more sensitive to interest rate changes. However, interest rates on conventional debt securities have two components: a real interest rate and an increment that reflects investor expectations of future inflation. Because interest rates on inflation protected securities are adjusted for inflation, the values of these securities are not materially affected by inflation expectations. Therefore, the values of inflation protected debt securities are expected to change in response to changes in real interest rates. Generally, the value of an inflation protected debt security will fall when real interest rates rise and rise when real interest rates fall. Effective maturity and effective duration, explained in More About the Fund Investment Strategies, are measures of the funds interest rate risk. A lthough inflation protected debt securities are expected to be protected from long-term inflationary trends, short-term increases in inflation may lead to a decline in the funds value. See Risks of Indexing Methodology, below.
Income Risk. The funds income could decline due to falling market interest rates. In addition, the funds income distributions are expected to fluctuate significantly more than those of a typical bond fund, since the funds income will change with changes in inflation. During periods of extreme deflation, the fund could have no income at all to distribute.
Credit Risk. An issuer of debt securities may not make timely principal or interest payments on its securities, or the other party to a contract may default on its obligations. There is also the risk that an issuer could suffer adverse changes in financial condition that could lower the credit quality of a security.
Call Risk. During periods of falling interest rates, a bond issuer may call or repay its high-yielding bonds before their maturity date. The fund would then be forced to invest the unanticipated proceeds at lower interest rates, resulting in a decline in the funds income.
Tax Consequences of Inflation Adjustments. Periodic adjustments for inflation to the principal amount of an inflation protected security will give rise to original issue discount, which will be includable in the funds gross income. Because the fund is required to distribute its taxable income to avoid corporate level tax, the fund may be required to make annual distributions to shareholders that exceed the cash it receives, which may require the fund to liquidate certain investments when it is not advantageous to do so.
Risks of Indexing Methodology. There can be no assurance that the CPI-U or any foreign inflation index will accurately measure the real rate of inflation in the prices of goods and services. Moreover, there can be no assurance that the rate of inflation in a foreign country will be correlated to the rate of inflation in the United States. If the market perceives that the adjustment mechanism of an inflation protected security does not accurately adjust for inflation, the value of the security could be adversely affected. There may be a lag between the time a security is adjusted for inflation and the time interest is paid on that security. This may have an adverse effect on the trading price of the security, particularly during periods of significant, rapid changes in inflation. In addition, to the extent that inflation has increased during the period of time between the inflation adjustment and the interest payment, the interest payment will not be protected from the inflation increase.
Liquidity Risk. The market for inflation protected debt securities is relatively new and is still developing. For this reason, the market may, at times, have relatively low trading volume, which could result in lower liquidity and increased volatility in prices.
Risks of Mortgage- and Asset-Backed Securities. Falling interest rates could cause faster than expected prepayments of the obligations underlying mortgage- and asset-backed securities, which the fund would have to re invest at lower interest rates. This is referred to as prepayment risk. On the other hand, rising interest rates could cause prepayments of the obligations to decrease, extending the life of mortgage- and asset-backed securities and causing their interest rate sensitivity to increase. This is referred to as extension risk. For additional explanation, see Prepayment Risk and Extension Risk in More About The Fund Risks.
Foreign Security Risk. Investing in the securities of foreign issuers may involve risks not associated with the securities of domestic issuers, including the risks of 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 of High-Yield Securities. A portion of the funds portfolio may consist of lower-rated debt obligations, which are commonly called high-yield securities or junk bonds. High-yield securities generally have more volatile prices and carry more risk to principal than investment grade securities. High-yield securities may be more susceptible to real or perceived
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Inflation Protected Securities FUND continued
adverse economic conditions than investment grade securities. In addition, the secondary trading market may be less liquid.
Risks of Securities Lending. When the fund lends securities, it is subject to the risk that the other party to a securities lending agreement will default on its obligation.
Risks of Derivative Instruments. The fund will suffer a loss in connection with its use of derivatives if interest rates, currencies, indices, or securities or commodities prices do not move in the direction anticipated by the funds advisor when entering into the derivative instruments or, in the case of credit default swaps, if the funds advisor does not correctly evaluate the creditworthiness of the company or companies on which the swap is based. The Fund may enter into OTC derivatives. Transactions in the OTC markets generally are conducted between institutions on a principal-to-principal basis. The terms and conditions of these instruments generally are not standardized and tend to be more specialized or complex, and the instruments may be harder to value. In addition, there may not be a liquid market for OTC derivatives. As a result, it may not be possible to initiate a transaction or liquidate a position at an advantageous time or price.
Risks of Active Management. The fund is actively managed and its performance therefore will reflect in part the advisors ability to make investment decisions which are suited to achieving the funds investment objective. Due to its active management, the fund could underperform other mutual funds with similar investment objectives.
Because Inflation Protected Securities Fund was not offered prior to the date of this prospectus, no performance information is presented.
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Inflation Protected Securities FUND continued
The fund does not impose any sales charges (loads) or other fees when you buy, sell, or exchange shares. However, when you hold shares of the fund you indirectly pay a portion of the funds operating expenses. These expenses are deducted from fund assets.
1 Miscellaneous Other Expenses are based on estimated amounts for the current fiscal year.
2 The advisor intends to voluntarily waive fees during the current fiscal year so that total operating expenses, after waivers, do not exceed 1.10%. Fee waivers may be discontinued at any time.
Example This example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds. It assumes that you invest $10,000 for the time periods indicated, that your investment has a 5% return each year, and that the funds operating expenses remain the same. Although your actual costs and returns may differ, based on these assumptions your costs would be:
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1 year | $ | 148 | |||
3 years | $ | 459 |
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Inflation Protected Securities Fund issues its shares in multiple classes. This prospectus offers Class R shares.
Class R shares:
Your purchase price will be equal to the funds net asset value (NAV) per share, which is generally calculated as of the close of regular trading on the New York Stock Exchange (usually 3:00 p.m. Central time) every day the exchange is open.
The funds NAV is equal to the market value of its investments and other assets, less any liabilities, divided by the number of fund shares. If market prices are not readily available for an investment or if the advisor believes they are unreliable, fair value prices may be determined in good faith using methods approved by the funds board of directors.
Some investors attempt to profit through short-term trading, or purchasing and redeeming the funds shares within a short time period. Frequent short-term trading may hurt the long-term performance of the fund by disrupting portfolio management strategies and increasing fund expenses. If the advisor believes that a shareholder has engaged in frequent short-term trading, it may refuse to process the shareholders purchase request and/or limit or cancel the shareholders exchange privileges (in addition to the four-exchange limit described under Buying and Selling Shares How to Exchange Shares).
Although the advisor will attempt to monitor for short-term trading that could be detrimental to the fund and its shareholders, you should understand that this monitoring will not eliminate the possibility that frequent short-term trading in the fund may occur. For example, the ability of the advisor to monitor trades that are placed by the underlying shareholders of omnibus accounts maintained by brokers, retirement plan accounts, and approved fee-based program accounts is significantly limited when the underlying shareholder accounts are not maintained by the advisor.
To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify, and record information that identifies each person who opens an account.
What this means is that when you open an account, we will ask for your name, address, date of birth, and other information that will allow us to identify you. We may also ask for other identifying documents or information.
Class R shares are available to certain tax-deferred retirement plans (including 401(k) and other profit sharing plans, money purchase pension plans, and defined benefit plans), to be held in plan level or omnibus accounts. Class R shares are not available to non-retirement accounts, 403(b) plans, 457 plans, stock bonus plans, traditional or Roth IRAs, Coverdell Education Savings Accounts, SEPs, SAR-SEPs, SIMPLE IRAs, and most individual retirement accounts or retirement plans that are not subject to the Employee Retirement Income Security Act of 1974 (ERISA). Eligible retirement plans generally may open an account and purchase Class R shares by contacting any investment firm or plan administrator authorized to sell the funds shares. Participants in retirement plans generally must contact the plans administrator to purchase, sell or exchange shares. Shares may be purchased or sold on any day when the New York Stock Exchange is open.
Share purchases by eligible retirement plans must be made by wire transfer. Wire federal funds as follows:
U.S. Bank National Association
ABA Number: 0750-00022
Account Number: 112-952-137
Credit to: First American Inflation Protected Securities Fund
(investor name and investor account #)
The fund has authorized the plan administrators of retirement plans offering Class R shares to accept orders on the funds behalf. As a result, plan participants must place their purchase orders and redemption requests with their plan administrator by 3:00 p.m. Central time in order to receive that days price. Purchase orders and redemption requests may be restricted in the event of an early or unscheduled close of the New York Stock Exchange.
If your plan administrator receives a redemption request by 3:00 p.m. Central time, payment of the redemption proceeds will ordinarily be made by wire on the next business day. It is possible, however, that payment could be delayed by up to seven days.
To minimize the effect of large redemption requests, the fund reserves the right to fulfill these redemption requests by distributing readily marketable securities in the funds portfolio, rather than paying cash. See Redemption In Kind on the following page.
The fund has adopted a plan under Rule 12b-1 of the Investment Company Act that allows the fund to pay its distributor an annual fee equal to 0.50% of the funds average daily net assets
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Buying and Selling Shares continued
attributable to Class R shares for the distribution and sale of its Class R shares. The funds distributor uses the fee to pay commissions to investment firms and plan administrators that sell fund shares.
Because these fees are paid out of the funds assets on an ongoing basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of sales charges.
The fund has also adopted a non-12b-1 shareholder servicing plan and agreement. Under this plan and agreement, the fund pays U.S. Bancorp Asset Management a shareholder servicing fee at an annual rate of 0.15% of the funds average daily net assets attributable to Class R shares for providing or arranging for the provision of shareholder services to plans or plan participants holding Class R shares. No distribution-related services are provided under this plan and agreement. U.S. Bancorp Asset Management is currently waiving all fees under this plan and agreement. This waiver may be discontinued at any time.
The adviser or the distributor may pay additional fees to investment firms and plan administrators out of their own assets in exchange for sales and/or administrative services performed on behalf of the investment firms or plan administrators customers.
If you are a plan participant and your investment goals or your financial needs change, you may exchange your shares for Class R shares of another First American fund offered through your retirement plan. Exchanges are made at the net asset value per share of each fund at the time of the exchange. There is no fee to exchange shares.
To exchange your shares, call your plan administrator. In order for your shares to be exchanged the same day, you must call your plan administrator by 3:00 p.m. Central time.
Before exchanging into any fund, be sure to read its prospectus carefully. A fund may change or cancel its exchange policies, or the funds offered through your retirement plan may change, at any time. You will be notified of any changes. The First American funds have the right to limit exchanges to four times per year.
Generally, proceeds from redemption requests will be paid in cash. However, to minimize the effect of large redemption requests on the fund and its remaining shareholders, the fund reserves the right to pay part or all of the proceeds from a redemption request in a proportionate share of readily marketable securities in the fund instead of cash. In selecting securities for a redemption in kind, the advisor will consider the best interests of the fund and the remaining fund shareholders, and will value these securities in accordance with the pricing methods employed to calculate the funds net asset value per share. If you receive redemption proceeds in kind, you should expect to incur transaction costs upon disposition of the securities received in the redemption.
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Shareholder Reports. Shareholder reports are mailed twice a year, in November and May. They include financial statements and performance information, and, on an annual basis, a message from your portfolio managers and the auditors report.
In an attempt to reduce shareholder costs and help eliminate duplication, the fund will try to limit its mailings to one report for each address that lists one or more shareholders with the same last name. If you would like additional copies, please call Investor Services at 800 677-FUND.
Statements and Confirmations. Statements summarizing activity in shareholder accounts are mailed quarterly. Confirmations are mailed following each purchase or sale of fund shares. Generally, the fund does not send statements to individuals who have their shares held in an omnibus account, such as retirement plan participants.
Dividends from the funds net investment income are declared and paid monthly. Any capital gains are distributed at least once each year.
On the ex-dividend date for a distribution, the funds share price is reduced by the amount of the distribution. If you buy shares just before the ex-dividend date, in effect, you buy the dividend. You will pay the full price for the shares and then receive a portion of that price back as a taxable distribution.
Dividend and capital gain distributions will be reinvested in additional shares of the fund, unless you request that distributions be reinvested in another First American fund or paid in cash. This request may be made by contacting your plan administrator.
Some of the tax consequences of investing in the fund are discussed below. More information about taxes is in the Statement of Additional Information. However, because everyones tax situation is unique, always consult your tax professional about federal, state, and local tax consequences.
Taxes on Distributions. The fund pays its shareholders dividends from its net investment income and any net capital gains that it has realized. For most investors, fund dividends and distributions are taxable whether they are reinvested or taken in cash (unless your investment is in a retirement plan or other tax-advantaged account).
Dividends from the funds net investment income and short-term capital gains are taxable as ordinary income. Distributions of the funds long-term capital gains are taxable as long-term gains, regardless of how long you have held your shares. The fund expects that, as a result of its investment objective and strategies, its distributions will consist primarily of ordinary income and that the distributions will not be treated as qualified dividends that are taxed at the same rates as long-term capital gains.
Periodic adjustments for inflation to the principal amount of an inflation protected security will give rise to original issue discount, which will be includable in the funds gross income. Because the fund is required to distribute its taxable income to avoid corporate level tax , the fund may be required to make annual distributions to shareholders that exceed the cash it receives, which may require the fund to liquidate certain investments when it is not advantageous to do so. Also, if the principal value of an inflation protected security is adjusted downward due to deflation, amounts previously distributed in the taxable year may be characterized in some circumstances as a return of capital. Estimates of inflation may be used in the determination of monthly income dividend rates.
Taxes on Transactions. The sale of fund shares, or the exchange of the funds shares for shares of another First American fund, will be a taxable event and may result in a capital gain or loss. The gain or loss will be considered long-term if you have held your shares for more than one year. A gain or loss on shares held for one year or less is considered short-term and is taxed at the same rates as ordinary income.
If in redemption of his or her shares a shareholder receives a distribution of readily marketable securities instead of cash, the shareholder will be treated as receiving an amount equal to the fair market value of the securities at the time of the distribution for purposes of determining capital gain or loss on the redemption, and will also acquire a basis in the shares for federal income tax purposes equal to their fair market value.
The exchange of one class of the funds shares for another class of the funds shares will not be taxable.
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U.S. Bancorp Asset Management, Inc., is the funds investment advisor. U.S. Bancorp Asset Management provides investment management services to individuals and institutions, including corporations, foundations, pensions, and retirement plans. As of June 30, 2004, U.S. Bancorp Asset Management and its affiliates had more than $ 122 billion in assets under management, including investment company assets of more than $ 56 billion. As investment advisor, U.S. Bancorp Asset Management manages the funds business and investment activities, subject to the authority of the funds board of directors. The fund pays the investment advisor a monthly fee for providing investment advisory services equal, on an annual basis, to 0.50% of the funds average daily net assets.
Direct Correspondence to:
First American Funds
P.O. Box 1330
Minneapolis, MN 55440-1330
Investment Advisor
U.S. Bancorp Asset Management, Inc.
800 Nicollet Mall
Minneapolis, MN 55402
Distributor
Quasar Distributors, LLC
615 E. Michigan Street
Milwaukee, WI 53202
U.S. Bancorp Asset Management and other affiliates of U.S. Bancorp may act as fiduciary with respect to plans subject to the Employee Retirement Income Security Act of 1974 (ERISA) and other trust and agency accounts that invest in the First American funds. As described above, U.S. Bancorp Asset Management receives compensation for acting as the funds investment advisor. U.S. Bancorp Asset Management and its affiliates also receive compensation in connection with the following:
Custody Services. U.S. Bank National Association (U.S. Bank) provides or compensates others to provide custody services to the fund. U.S. Bank is paid monthly fees equal, on an annual basis, to 0.01% of the funds average daily net assets. In addition, U.S. Bank is reimbursed for its out-of-pocket expenses incurred while providing custody services to the fund.
Administration Services. U.S. Bancorp Asset Management and its affiliate, U.S. Bancorp Fund Services, LLC (Co-Administrators), provide or compensate others to provide administrative services to the First American family of funds. These services include general administrative and accounting services, transfer agency and dividend disbursing services, blue sky services, and shareholder services. With respect to the First American open-end mutual funds, the Co-Administrators receive total fees, on an annual basis, of up to 0.25% of the aggregate average daily net assets of First American Investment Funds, Inc., First American Strategy Funds, Inc., and First American Insurance Portfolios, Inc., and up to 0.20% of the aggregate average daily net assets of First American Funds, Inc. The funds also pay the Co-Administrators fees based upon the number of funds and shareholder accounts maintained. In addition, the Co-Administrators are reimbursed for their out-of-pocket expenses incurred while providing administration services to the funds.
Distribution Services. Quasar Distributors, LLC, an affiliate of U.S. Bancorp Asset Management, serves as distributor of the fund and receives distribution fees, and is reimbursed for its out of pocket expenses incurred while providing distribution and other sub-administrative services for the fund.
Securities Lending Services. In connection with lending its portfolio securities, the fund pays administrative and custodial fees to U.S. Bancorp Asset Management which are equal to 35 % of the funds income from these securities lending transactions.
Shareholder Servicing Fees. The fund pays U.S. Bancorp Asset Management a shareholder servicing fee at an annual rate of 0.15% of the funds average daily net assets attributable to Class R shares for providing or arranging for the provision of shareholder services to the holders of its Class R shares.
The fund is managed by a team of persons associated with U.S. Bancorp Asset Management.
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The funds objective, which is described in the Fund Summary section, may be changed without shareholder approval. If the funds objective changes, you will be notified at least 60 days in advance. Please remember: There is no guarantee that the fund will achieve its objective.
The funds principal investment strategies are discussed in the Fund Summary section. These are the strategies that the funds investment advisor believes are most likely to be important in trying to achieve the funds objective. You should be aware that the fund may also use strategies and invest in securities that are not described in this prospectus, but that are described in the Statement of Additional Information (SAI). For a copy of the SAI, call Investor Services at 800 677-FUND.
Consistent with its name, the fund has adopted an investment strategy requiring that at least 80% of its net assets (plus the amount of any borrowings for investment purposes) be invested in inflation protected debt securities. You will be notified at least 60 days in advance of any change to this investment strategy.
Investment Approach. Fund managers generally employ a top-down approach in selecting securities for the fund. First, they determine their economic outlook and the direction in which inflation and interest rates are expected to move. Then they choose certain sectors or industries within the overall market. Last, they select individual securities within those sectors for the fund. Fund managers also analyze expected changes to the yield curve under multiple market conditions to help define maturity and duration selection.
Effective Maturity. Effective maturity differs from actual stated or final maturity, which may be substantially longer. In calculating effective maturity, the advisor estimates the effect of expected principal payments and call provisions on securities held in the portfolio. Effective maturity provides the advisor with a better estimate of interest rate risk under normal market conditions, but may underestimate interest rate risk in an environment of adverse (rising) interest rates.
Effective Duration. Effective duration, one measure of interest rate risk, measures how much the value of a security is expected to change with a given change in interest rates. For example, if interest rates were to increase by one percentage point, the market value of a bond with an effective duration of five years would decrease by 5%, with all other factors being constant. However, all other factors are rarely constant. Effective duration is based on assumptions and subject to a number of limitations. It is most useful when interest rate changes are small, rapid, and occur equally in short-term and long-term securities. In addition, it is difficult to calculate precisely for bonds with prepayment options, such as mortgage- and asset-backed securities, because the calculation requires assumptions about prepayment rates. For these reasons, the effective durations of funds which invest a significant portion of their assets in these securities can be greatly affected by changes in interest rates.
Temporary Investments. In an attempt to respond to adverse market, economic, political, or other conditions, the 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 funds advisor. These investments may result in a lower yield than would be available from investments with a lower quality or longer term and may prevent the fund from achieving its investment objectives.
Portfolio Turnover. Fund managers 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.
The principal risks of investing in the fund are summarized in the Fund Summary section. More information about principal fund risks is presented below.
Income Risk. The funds income could decline due to falling market interest rates. This is because, in a falling interest rate environment, the fund generally will have to invest the proceeds from sales of fund shares, as well as the proceeds from maturing portfolio securities (or portfolio securities that have been called, see Call Risk, or prepaid, see Prepayment Risk) in lower-yielding securities.
Credit Risk. The fund is subject to the risk that the issuers of debt securities held by the fund will not make payments on the securities, or that the other party to a contract (such as a securities lending agreement or repurchase agreement) will default on its obligations. There is also the risk that an issuer could suffer adverse changes in financial condition that could lower the credit quality of a security. This could lead to greater volatility in the price of the security and in shares of the fund. Also, a change in the credit quality rating of a bond could affect the bonds liquidity and make it more difficult for the fund to sell. When the fund purchases unrated securities, it will depend on the advisors analysis of credit risk more heavily than usual.
The fund attempts to minimize credit risk by investing primarily in securities considered at least investment grade at the time of purchase or in unrated securities of comparable quality. The fund may invest up to 10% of its net assets in securities rated lower than investment grade. However, all of these securities,
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More About The Fund continued
especially those in the lower investment grade rating categories, have credit risk. In adverse economic or other circumstances, issuers of these lower rated securities are more likely to have difficulty making principal and interest payments than issuers of higher rated securities.
Risks of High-Yield Securities. A portion of the funds portfolio may consist of lower-rated corporate debt obligations, which are commonly referred to as high-yield securities or junk bonds. Although these securities usually offer higher yields than investment grade securities, they also involve more risk. High-yield bonds may be more susceptible to real or perceived adverse economic conditions than investment grade bonds. In addition, the secondary trading market may be less liquid. High-yield securities generally have more volatile prices and carry more risk to principal than investment grade securities.
Liquidity Risk. The fund is exposed to liquidity risk because of its investments in high-yield bonds. Trading opportunities are more limited for debt securities that have received ratings below investment grade. These features may make it more difficult to sell or buy a security at a favorable price or time. Consequently, the fund may have to accept a lower price to sell a security, sell other securities to raise cash, or give up an investment opportunity, any of which could have a negative effect on the funds performance. Infrequent trading may also lead to greater price volatility.
Foreign Security Risk. International investing involves risks not typically associated with U.S. investing. These risks include:
Currency Risk. Because foreign securities often trade in currencies other than the U.S. dollar, changes in currency exchange rates will affect the funds net asset value, the value of dividends and interest earned, and gains and losses realized on the sale of securities. A strong U.S. dollar relative to these other currencies will adversely affect the value of the fund.
Political and Economic Risks. International investing is subject to the risk of political, social, or economic instability in the country of the issuer of a security, the difficulty of predicting international trade patterns, the possibility of the imposition of exchange controls, expropriation, limits on removal of currency or other assets, and nationalization of assets.
Foreign Tax Risk. The funds income from foreign issuers may be subject to non-U.S. withholding taxes. In some countries, the fund also may be subject to taxes on trading profits and, on certain securities transactions, transfer or stamp duties tax. To the extent foreign income taxes are paid by the fund, U.S. shareholders may be entitled to a credit or deduction for U.S. tax purposes. See the Statement of Additional Information for details.
Risk of Investment Restrictions. Some countries, particularly emerging markets, restrict to varying degrees foreign investment in their securities markets. In some circumstances, these restrictions may limit or preclude investment in certain countries or may increase the cost of investing in securities of particular companies.
Foreign Securities Market Risk. Securities of many non-U.S. companies may be less liquid and their prices more volatile than securities of comparable U.S. companies. Securities of companies traded in many countries outside the U.S., particularly emerging markets countries, may be subject to further risks due to the inexperience of local investment professionals and financial institutions, the possibility of permanent or temporary termination of trading, and greater spreads between bid and asked prices for securities. In addition, non-U.S. stock exchanges and investment professionals are subject to less governmental regulation, and commissions may be higher than in the United States. Also, there may be delays in the settlement of non-U.S. stock exchange transactions.
Information Risk. Non-U.S. companies generally are not subject to uniform accounting, auditing, and financial reporting standards or other regulatory requirements that apply to U.S. companies. As a result, less information may be available to investors concerning non-U.S. issuers. Accounting and financial reporting standards in emerging markets may be especially lacking.
Call Risk. Many corporate bonds may be redeemed at the option of the issuer, or called, before their stated maturity date. In general, an issuer will call its bonds if they can be refinanced by issuing new bonds which bear a lower interest rate. The fund is subject to the possibility that during periods of falling interest rates, a bond issuer will call its high-yielding bonds. The fund would then be forced to invest the unanticipated proceeds at lower interest rates, resulting in a decline in the funds income.
Prepayment Risk. Mortgage-backed securities are secured by and payable from pools of mortgage loans. Similarly, asset-backed securities are supported by obligations such as credit card loans, automobile loans, home equity loans, corporate bonds, or commercial loans. These mortgages and other obligations generally can be prepaid at any time without penalty. As a result, mortgage- and asset-backed securities are subject to prepayment risk, which is the risk that falling interest rates could cause prepayments of the securities to occur more quickly than expected. This occurs because, as interest rates fall, more homeowners refinance the mortgages underlying mortgage-related securities or prepay the debt obligations underlying asset-backed securities. The fund would have to reinvest the prepayments at a time when interest rates are falling, reducing the income of the fund. In addition, when interest
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More About The Fund continued
rates fall, prices on mortgage- and asset-backed securities may not rise as much as for other types of comparable debt securities because investors may anticipate an increase in prepayments.
Extension Risk. Mortgage- and asset-backed securities also are subject to extension risk, which is the risk that rising interest rates could cause mortgages or other obligations underlying the securities to be prepaid more slowly than expected, resulting in slower prepayments of the securities. This would, in effect, convert a short- or medium-duration mortgage- or asset-backed security into a longer-duration security, increasing its sensitivity to interest rate changes and causing its price to decline.
Risks of Securities Lending. When the fund loans its portfolio securities, it will receive collateral equal to at least 100% of the value of the loaned securities. Nevertheless, the fund risks a delay in the recovery of the loaned securities, or even the loss of rights in the collateral deposited by the borrower if the borrower should fail financially. To reduce these risks, the fund enters into loan arrangements only with institutions which the funds advisor has determined are creditworthy under guidelines established by the funds board of directors.
Risks of Derivative Instruments. The use of derivative instruments exposes the fund to additional risks and transaction costs. Risks inherent in the use of derivative instruments include: the risk that securities or commodities prices, index prices, currencies or interest rates will not move in the direction that the advisor anticipates; in the case of a credit default swap, the risk that the advisor will incorrectly evaluate the creditworthiness of the company or companies on which the swap is based; an imperfect correlation between the price of derivative instruments and movements in the prices of the securities being hedged; the possible absence of a liquid secondary market for any particular instrument and possible exchange imposed price fluctuation limits, either of which may make it difficult or impossible to close out a position when desired; leverage risk, which is the risk that adverse price movements in an instrument can result in a loss substantially greater than the funds initial investment in that instrument; and, particularly, in the case of privately negotiated instruments, the risk that the counterparty will fail to perform its obligations, which could leave the fund worse off than if it had not entered into the position. If the fund uses derivative instruments and the advisors judgment proves incorrect, the funds performance could be worse than if it had not used these instruments.
The funds investments in commodity-linked derivative instruments may subject the fund to greater volatility than investments in traditional securities. The value of commodity-linked derivative instruments may be affected by changes in overall market movements, commodity index volatility, changes in interest rates, or factors affecting a particular industry or commodity, such as drought, floods, weather, livestock disease, embargoes, tariffs and international economic, political and regulatory developments.
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More information about the fund is available in the funds Statement of Additional Information and annual and semiannual reports, and on the First American funds Internet Web site.
Information about the First American funds may be viewed on the funds Internet Web site at http://www.firstamericanfunds.com.
The SAI provides more details about the fund and its policies. A current SAI is on file with the Securities and Exchange Commission (SEC) and is incorporated into this prospectus by reference (which means that it is legally considered part of this prospectus).
Additional information about the funds investments will be available in the funds annual and semiannual reports to shareholders. In the funds annual report, you will find a discussion of the market conditions and investment strategies that significantly affected the funds performance during its last fiscal year.
You can obtain a free copy of the funds SAI and/or free copies of the funds most recent annual or semiannual reports by calling Investor Services at 800 677-FUND. The material you request will be sent by first-class mail or other means designed to ensure equally prompt delivery, within three business days of receipt of the request.
You can also obtain copies of this information, after paying a duplicating fee, by electronic request at the following email address: publicinfo@sec.gov, or by writing the SECs Public Reference Section, Washington, D.C. 20549-0102. For more information, call 1-202-942-8090.
Information about the fund is also available on the Internet. Text-only versions of fund documents can be viewed online or downloaded from the EDGAR Database on the SECs Internet site at http://www.sec.gov.
First American Funds P.O. Box 1330, Minneapolis, MN 55440-1330
U.S. Bancorp Asset Management, Inc., serves as the investment advisor to the First American Funds.
PROIPSR 10/04
SEC file number: 811-05309
First American Funds
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October 1, 2004 |
Prospectus | |
First American Investment Funds, Inc. | |
ASSET CLASS ~ Bond Funds | |
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Income Funds
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Inflation Protected Securities Fund
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As with all mutual funds, the Securities and Exchange Commission has not approved or disapproved the shares of this fund, or determined if the information in this prospectus is accurate or complete. Any statement to the contrary is a criminal offense.
Contents
Inflation Protected Securities Fund
Introduction
This section of the prospectus describes the objective of the First American Inflation Protected Securities Fund, summarizes the principal investment strategies used by the fund in trying to achieve its objective, and highlights the risks involved with these strategies. It also provides you with information about the performance, fees, and expenses of the fund.
An investment in the fund is not a deposit of U.S. Bank National Association and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
This prospectus and the related Statement of Additional Information do not constitute an offer to sell or a solicitation of an offer to buy shares in the fund, nor shall any such shares be offered or sold to any person in any jurisdiction in which an offer, solicitation, purchase, or sale would be unlawful under the securities laws of such jurisdiction.
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Inflation Protected Securities FUND
Inflation Protected Securities Fund seeks to provide investors with total return that exceeds the rate of inflation over an economic cycle.
Under normal market conditions, Inflation Protected Securities Fund will invest primarily (at least 80% of its net assets, plus the amount of any borrowings for investment purposes) in inflation protected debt securities. These securities will be issued by the U.S. and non-U.S. governments, their agencies and instrumentalities, and corporations. The funds investments in U.S. Government inflation protected securities will include U.S. Treasury inflation-protection securities as well as inflation protected securities issued by agencies and instrumentalities of the U.S. Government. Securities issued by the U.S. Treasury are backed by the full faith and credit of the U.S. Government. Some securities issued by agencies and instrumentalities of the U.S. Government are supported only by the credit of the issuing agency or instrumentality.
Inflation protected debt securities are designed to provide protection against the negative effects of inflation. Unlike traditional debt securities, which pay regular fixed interest payments on a fixed principal amount, interest payments on inflation protected debt securities will vary with the rate of inflation. Inflation protected debt securities have two common structures. The U.S. Treasury and some other issuers use a structure that accrues inflation into the principal value of the bond. If the index measuring the rate of inflation rises, the principal value of the security will increase. Because interest payments will be calculated with respect to a larger principal amount, interest payments also will increase. Conversely, if the index measuring the rate of inflation falls, the principal value of the security will fall and interest payments will decrease. Other issuers adjust the interest rates payable on the security according to the rate of inflation, but th e principal amount remains the same.
The U.S. Treasury uses the Consumer Price Index for Urban Consumers (CPI-U) as the inflation measure. Inflation protected bonds issued by a foreign government are generally adjusted to reflect an inflation index calculated by that government. In the event of sustained deflation, the U.S. Treasury has guaranteed that it will repay at maturity at least the original face value of the inflation protected securities that it issues. Other inflation protected debt securities that accrue inflation into their principal value may or may not provide a similar guarantee. For securities that do not provide such a guarantee, the adjusted principal value of the security repaid at maturity may be less than the original principal value.
Up to 20% of the Funds assets may be invested in holdings that are not inflation protected . These holdings may include the following:
When selecting securities for the fund, the portfolio managers use a top-down approach, looking first at general economic factors and market conditions. The managers then select securities that they believe have strong relative value based on an analysis of a securitys characteristics (such as principal value, coupon rate, maturity, duration and yield) in light of these general economic factors and market conditions.
The fund invests primarily in securities rated investment grade at the time of purchase or in unrated securities of comparable quality. However, up to 10% of the funds net assets may be invested in securities that are rated lower than investment grade at the time of purchase or that are unrated and of comparable quality (securities commonly referred to as high-yield securities or junk bonds). The fund will not invest in securities rated lower than B at the time of purchase or in unrated securities of equivalent quality. Quality determinations regarding unrated securities will be made by the funds advisor.
The fund may invest up to 20% of its net assets in non-dollar denominated securities, and may invest without limitation in U.S. dollar denominated securities of foreign issuers.
The fund may invest in debt securities of any maturity, but expects to maintain , under normal market conditions, a weighted average effective maturity of between 8 and 15 years and an average effective duration of between 4 and 10 years . The funds weighted average effective maturity and average effective duration are measure s of how the fund may react to interest rate changes.
To generate additional income, the fund may lend securities representing up to one-third of the value of its total assets to broker-dealer, banks, and other institutions.
The fund may utilize the following derivatives: options; futures contracts; options on futures contracts; foreign currency contracts; interest rate caps and floors; index- and other asset-linked notes; swap agreements, including swap agreements on interest rates, currency rates, security indexes and specific securities, and credit default swap agreements; and options on the foregoing types of swap agreements. The fund may also invest in commodity-linked derivative instruments, including swap agreements on commodity indexes or specific commodities; commodity options, futures and options on futures; and commodity-linked notes. The fund may enter into standardized derivatives contracts traded on domestic or foreign securities
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exchanges, boards of trade, or similar entities, and non-standardized derivatives contracts traded in the over-the-counter (OTC) market. The fund will use these derivatives in an attempt to manage market or business risk .
The price and yield of this fund will change daily due to changes in interest rates, inflation and other factors, which means you could lose money. The principal risks of investing in this fund include:
Interest Rate Risk. Debt securities typically decrease in value when interest rates rise and increase in value when interest rates fall, with longer-term debt securities generally being more sensitive to interest rate changes. However, interest rates on conventional debt securities have two components: a real interest rate and an increment that reflects investor expectations of future inflation. Because interest rates on inflation protected securities are adjusted for inflation, the values of these securities are not materially affected by inflation expectations. Therefore, the values of inflation protected debt securities are expected to change in response to changes in real interest rates. Generally, the value of an inflation protected debt security will fall when real interest rates rise and rise when real interest rates fall. Effective maturity and effective duration, explained in More About the Fund Investment Strategies, are measures of the funds interest rate risk. A lthough inflation protected debt securities are expected to be protected from long-term inflationary trends, short-term increases in inflation may lead to a decline in the funds value. See Risks of Indexing Methodology, below.
Income Risk. The funds income could decline due to falling market interest rates. In addition, the funds income distributions are expected to fluctuate significantly more than those of a typical bond fund, since the funds income will change with changes in inflation. During periods of extreme deflation, the fund could have no income at all to distribute.
Credit Risk. An issuer of debt securities may not make timely principal or interest payments on its securities, or the other party to a contract may default on its obligations. There is also the risk that an issuer could suffer adverse changes in financial condition that could lower the credit quality of a security.
Call Risk. During periods of falling interest rates, a bond issuer may call or repay its high-yielding bonds before their maturity date. The fund would then be forced to invest the unanticipated proceeds at lower interest rates, resulting in a decline in the funds income.
Tax Consequences of Inflation Adjustments. Periodic adjustments for inflation to the principal amount of an inflation protected security will give rise to original issue discount, which will be includable in the funds gross income. Because the fund is required to distribute its taxable income to avoid corporate level tax, the fund may be required to make annual distributions to shareholders that exceed the cash it receives, which may require the fund to liquidate certain investments when it is not advantageous to do so.
Risks of Indexing Methodology. There can be no assurance that the CPI-U or any foreign inflation index will accurately measure the real rate of inflation in the prices of goods and services. Moreover, there can be no assurance that the rate of inflation in a foreign country will be correlated to the rate of inflation in the United States. If the market perceives that the adjustment mechanism of an inflation protected security does not accurately adjust for inflation, the value of the security could be adversely affected. There may be a lag between the time a security is adjusted for inflation and the time interest is paid on that security. This may have an adverse effect on the trading price of the security, particularly during periods of significant, rapid changes in inflation. In addition, to the extent that inflation has increased during the period of time between the inflation adjustment and the interest payment, the interest payment will not be protected from the inflation increase.
Liquidity Risk. The market for inflation protected debt securities is relatively new and is still developing. For this reason, the market may, at times, have relatively low trading volume, which could result in lower liquidity and increased volatility in prices.
Risks of Mortgage- and Asset-Backed Securities. Falling interest rates could cause faster than expected prepayments of the obligations underlying mortgage- and asset-backed securities, which the fund would have to re invest at lower interest rates. This is referred to as prepayment risk. On the other hand, rising interest rates could cause prepayments of the obligations to decrease, extending the life of mortgage- and asset-backed securities and causing their interest rate sensitivity to increase. This is referred to as extension risk. For additional explanation, see Prepayment Risk and Extension Risk in More About The Fund Risks.
Foreign Security Risk. Investing in the securities of foreign issuers may involve risks not associated with the securities of domestic issuers, including the risks of 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 of High-Yield Securities. A portion of the funds portfolio may consist of lower-rated debt obligations, which are commonly called high-yield securities or junk bonds. High-yield securities generally have more volatile prices and carry more risk to principal than investment grade securities. High-yield securities may be more susceptible to real or perceived
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adverse economic conditions than investment grade securities. In addition, the secondary trading market may be less liquid.
Risks of Securities Lending. When the fund lends securities, it is subject to the risk that the other party to a securities lending agreement will default on its obligation.
Risks of Derivative Instruments. The fund will suffer a loss in connection with its use of derivatives if interest rates, currencies, indices, or securities or commodities prices do not move in the direction anticipated by the funds advisor when entering into the derivative instruments or, in the case of credit default swaps, if the funds advisor does not correctly evaluate the creditworthiness of the company or companies on which the swap is based. The Fund may enter into OTC derivatives. Transactions in the OTC markets generally are conducted between institutions on a principal-to-principal basis. The terms and conditions of these instruments generally are not standardized and tend to be more specialized or complex, and the instruments may be harder to value. In addition, there may not be a liquid market for OTC derivatives. As a result, it may not be possible to initiate a transaction or liquidate a position at an advantageous time or price.
Risks of Active Management. The fund is actively managed and its performance therefore will reflect in part the advisors ability to make investment decisions which are suited to achieving the funds investment objective. Due to its active management, the fund could underperform other mutual funds with similar investment objectives.
Because Inflation Protected Securities Fund was not offered prior to the date of this prospectus, no performance information is presented.
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The fund does not impose any sales charges (loads) or other fees when you buy, sell, or exchange shares. However, when you hold shares of the fund you indirectly pay a portion of the funds operating expenses. These expenses are deducted from fund assets.
1 Other Expenses are based on estimated amounts for the current fiscal year.
2 The advisor intends to voluntarily waive fees during the current fiscal year so that total operating expenses, after waivers, do not exceed 0.60%. Fee waivers may be discontinued at any time.
Example This example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds. It assumes that you invest $10,000 for the time periods indicated, that your investment has a 5% return each year, and that the funds operating expenses remain the same. Although your actual costs and returns may differ, based on these assumptions your costs would be:
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1 year | $ | 82 | |||
3 years | $ | 255 |
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Inflation Protected Securities Fund issues its shares in multiple classes. This prospectus offers Class Y shares.
Class Y shares:
Your purchase price will be equal to the funds net asset value (NAV) per share, which is generally calculated as of the close of regular trading on the New York Stock Exchange (usually 3:00 p.m. Central time) every day the exchange is open.
The funds NAV is equal to the market value of its investments and other assets, less any liabilities, divided by the number of fund shares. If market prices are not readily available for an investment or if the advisor believes they are unreliable, fair value prices may be determined in good faith using methods approved by the funds board of directors.
Some investors attempt to profit through short-term trading, or purchasing and redeeming the funds shares within a short time period. Frequent short-term trading may hurt the long-term performance of the fund by disrupting portfolio management strategies and increasing fund expenses. If the advisor believes that a shareholder has engaged in frequent short-term trading, it may refuse to process the shareholders purchase request and/or limit or cancel the shareholders exchange privileges (in addition to the four-exchange limit described under Buying and Selling Shares How to Exchange Shares).
Although the advisor will attempt to monitor for short-term trading that could be detrimental to the fund and its shareholders, you should understand that this monitoring will not eliminate the possibility that frequent short-term trading in the fund may occur. For example, the ability of the advisor to monitor trades that are placed by the underlying shareholders of omnibus accounts maintained by brokers, retirement plan accounts, and approved fee-based program accounts is significantly limited when the underlying shareholder accounts are not maintained by the advisor.
To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify, and record information that identifies each person who opens an account.
What this means is that when you open an account, we will ask for your name, address, date of birth, and other information that will allow us to identify you. We may also ask for other identifying documents or information.
You may purchase or sell shares by calling your financial institution. When purchasing shares, payment must be made by wire transfer, which can be arranged by your financial institution. Shares may be purchased or sold on any day when the New York Stock Exchange is open. Wire federal funds as follows:
U.S. Bank National Association
ABA Number: 0750-00022
Account Number: 112-952-137
Credit to: First American Inflation Protected Securities Fund
(investor name and investor account #)
Purchase orders and redemption requests must be received by your financial institution by the time specified by the institution to be assured same day processing. The fund has authorized certain financial institutions (authorized financial intermediaries) to accept orders on its behalf. If your financial institution is an authorized financial intermediary, you will receive that days price if your order is received by your financial institution by 3:00 p.m. Central time. If your financial institution is not an authorized financial intermediary, it must transmit your order to the fund and the fund must receive your order by 3:00 p.m. Central time in order to receive that days price. Contact your financial institution to determine the time by which it must receive your order to be assured same day processing. Purchase orders and redemption requests may be restricted in the event of an early or unscheduled close of the New York Stock Exchange.
If the fund or an authorized financial intermediary receives your redemption request by 3:00 p.m. Central time, payment of your redemption proceeds will ordinarily be made by wire on the next business day. It is possible, however, that payment could be delayed by up to seven days.
To minimize the effect of large redemption requests, the fund reserves the right to fulfill these redemption requests by distributing readily marketable securities in the funds portfolio, rather than paying you in cash. See Policies & Services Buying and Selling Shares, Redemption In Kind.
If your investment goals or your financial needs change, you may exchange your shares for Class Y shares of another First American fund. Exchanges are made at the net asset value per share of each fund at the time of the exchange. There is no fee to exchange shares. If you are no longer eligible to hold Class Y shares, for example, if you decide to discontinue your
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fiduciary, agency, or custodian account, you may exchange your shares for Class A shares at net asset value. Class A shares have higher expenses than Class Y shares.
To exchange your shares, call your financial institution. In order for your shares to be exchanged the same day, your exchange order must be received by the funds or an authorized financial intermediary by 3:00 p.m. Central time.
Before exchanging into any fund, be sure to read its prospectus carefully. A fund may change or cancel its exchange policies at any time. You will be notified of any changes. The First American funds have the right to limit exchanges to four times per year.
Generally, proceeds from redemption requests will be paid in cash. However, to minimize the effect of large redemption requests on the fund and its remaining shareholders, the fund reserves the right to pay part or all of the proceeds from a redemption request in a proportionate share of readily marketable securities in the fund instead of cash. In selecting securities for a redemption in kind, the advisor will consider the best interests of the fund and the remaining fund shareholders, and will value these securities in accordance with the pricing methods employed to calculate the funds net asset value per share. If you receive redemption proceeds in kind, you should expect to incur transaction costs upon disposition of the securities received in the redemption.
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Shareholder Reports. Shareholder reports are mailed twice a year, in November and May. They include financial statements and performance information, and, on an annual basis, a message from your portfolio managers and the auditors report.
In an attempt to reduce shareholder costs and help eliminate duplication, the fund will try to limit its mailings to one report for each address that lists one or more shareholders with the same last name. If you would like additional copies, please call Investor Services at 800 677-FUND.
Statements and Confirmations. Statements summarizing activity in your account are mailed quarterly. Confirmations are mailed following each purchase or sale of fund shares. Generally, the fund does not send statements for funds held in an omnibus account.
Dividends from the funds net investment income are declared and paid monthly. Any capital gains are distributed at least once each year.
On the ex-dividend date for a distribution, the funds share price is reduced by the amount of the distribution. If you buy shares just before the ex-dividend date, in effect, you buy the dividend. You will pay the full price for the shares and then receive a portion of that price back as a taxable distribution.
Dividend and capital gain distributions will be reinvested in additional shares of the fund, unless you request that distributions be reinvested in another First American fund or paid in cash. This request may be made on your new account form or by contacting your financial institution. If you request that your distributions be paid in cash but those distributions cannot be delivered because of an incorrect mailing address, the undelivered distributions and all future distributions will be reinvested in fund shares at the current NAV.
Some of the tax consequences of investing in the fund are discussed below. More information about taxes is in the Statement of Additional Information. However, because everyones tax situation is unique, always consult your tax professional about federal, state, and local tax consequences.
Taxes on Distributions. The fund pays its shareholders dividends from its net investment income and any net capital gains that it has realized. For most investors, fund dividends and distributions are taxable whether they are reinvested or taken in cash (unless your investment is in an IRA or other tax-advantaged account).
Dividends from the funds net investment income and short-term capital gains are taxable as ordinary income. Distributions of the funds long-term capital gains are taxable as long-term gains, regardless of how long you have held your shares. The fund expects that, as a result of its investment objective and strategies, its distributions will consist primarily of ordinary income and that the distributions will not be treated as qualified dividends that are taxed at the same rates as long-term capital gains.
Periodic adjustments for inflation to the principal amount of an inflation protected security will give rise to original issue discount, which will be includable in the funds gross income. Because the fund is required to distribute its taxable income to avoid corporate level tax , the fund may be required to make annual distributions to shareholders that exceed the cash it receives, which may require the fund to liquidate certain investments when it is not advantageous to do so. Also, if the principal value of an inflation protected security is adjusted downward due to deflation, amounts previously distributed in the taxable year may be characterized in some circumstances as a return of capital. Estimates of inflation may be used in the determination of monthly income dividend rates.
Taxes on Transactions. The sale of fund shares, or the exchange of the funds shares for shares of another First American fund, will be a taxable event and may result in a capital gain or loss. The gain or loss will be considered long-term if you have held your shares for more than one year. A gain or loss on shares held for one year or less is considered short-term and is taxed at the same rates as ordinary income.
If in redemption of his or her shares a shareholder receives a distribution of readily marketable securities instead of cash, the shareholder will be treated as receiving an amount equal to the fair market value of the securities at the time of the distribution for purposes of determining capital gain or loss on the redemption, and will also acquire a basis in the shares for federal income tax purposes equal to their fair market value.
The exchange of one class of the funds shares for another class of the funds shares will not be taxable.
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U.S. Bancorp Asset Management, Inc., is the funds investment advisor. U.S. Bancorp Asset Management provides investment management services to individuals and institutions, including corporations, foundations, pensions, and retirement plans. As of June 30, 2004, U.S. Bancorp Asset Management and its affiliates had more than $ 122 billion in assets under management, including investment company assets of more than $ 56 billion. As investment advisor, U.S. Bancorp Asset Management manages the funds business and investment activities, subject to the authority of the funds board of directors. The fund pays the investment advisor a monthly fee for providing investment advisory services equal, on an annual basis, to 0.50% of the funds average daily net assets.
Direct Correspondence to:
First American Funds
P.O. Box 1330
Minneapolis, MN 55440-1330
Investment Advisor
U.S. Bancorp Asset Management, Inc.
800 Nicollet Mall
Minneapolis, MN 55402
Distributor
Quasar Distributors, LLC
615 E. Michigan Street
Milwaukee, WI 53202
U.S. Bancorp Asset Management and other affiliates of U.S. Bancorp may act as fiduciary with respect to plans subject to the Employee Retirement Income Security Act of 1974 (ERISA) and other trust and agency accounts that invest in the First American funds. As described above, U.S. Bancorp Asset Management receives compensation for acting as the funds investment advisor. U.S. Bancorp Asset Management and its affiliates also receive compensation in connection with the following:
Custody Services. U.S. Bank National Association (U.S. Bank) provides or compensates others to provide custody services to the fund. U.S. Bank is paid monthly fees equal, on an annual basis, to 0.01% of the funds average daily net assets. In addition, U.S. Bank is reimbursed for its out-of-pocket expenses incurred while providing custody services to the fund.
Administration Services. U.S. Bancorp Asset Management and its affiliate, U.S. Bancorp Fund Services, LLC (Co-Administrators), provide or compensate others to provide administrative services to the First American family of funds. These services include general administrative and accounting services, transfer agency and dividend disbursing services, blue sky services, and shareholder services. With respect to the First American open-end mutual funds, the Co-Administrators receive total fees, on an annual basis, of up to 0.25% of the aggregate average daily net assets of First American Investment Funds, Inc., First American Strategy Funds, Inc., and First American Insurance Portfolios, Inc., and up to 0.20% of the aggregate average daily net assets of First American Funds, Inc. The funds also pay the Co-Administrators fees based upon the number of funds and shareholder accounts maintained. In addition, the Co-Administrators are reimbursed for their out-of-pocket expenses incurred while providing administration services to the funds.
Distribution Services. Quasar Distributors, LLC, an affiliate of U.S. Bancorp Asset Management, serves as distributor of the fund and is reimbursed for its out of pocket expenses incurred while providing distribution and other sub-administrative services for the fund.
Securities Lending Services. In connection with lending its portfolio securities, the fund pays administrative and custodial fees to U.S. Bancorp Asset Management which are equal to 35 % of the funds income from these securities lending transactions.
The fund is managed by a team of persons associated with U.S. Bancorp Asset Management.
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The funds objective, which is described in the Fund Summary section, may be changed without shareholder approval. If the funds objective changes, you will be notified at least 60 days in advance. Please remember: There is no guarantee that the fund will achieve its objective.
The funds principal investment strategies are discussed in the Fund Summary section. These are the strategies that the funds investment advisor believes are most likely to be important in trying to achieve the funds objective. You should be aware that the fund may also use strategies and invest in securities that are not described in this prospectus, but that are described in the Statement of Additional Information (SAI). For a copy of the SAI, call Investor Services at 800 677-FUND.
Consistent with its name, the fund has adopted an investment strategy requiring that at least 80% of its net assets (plus the amount of any borrowings for investment purposes) be invested in inflation protected debt securities. You will be notified at least 60 days in advance of any change to this investment strategy.
Investment Approach. Fund managers generally employ a top-down approach in selecting securities for the fund. First, they determine their economic outlook and the direction in which inflation and interest rates are expected to move. Then they choose certain sectors or industries within the overall market. Last, they select individual securities within those sectors for the fund. Fund managers also analyze expected changes to the yield curve under multiple market conditions to help define maturity and duration selection.
Effective Maturity. Effective maturity differs from actual stated or final maturity, which may be substantially longer. In calculating effective maturity, the advisor estimates the effect of expected principal payments and call provisions on securities held in the portfolio. Effective maturity provides the advisor with a better estimate of interest rate risk under normal market conditions, but may underestimate interest rate risk in an environment of adverse (rising) interest rates.
Effective Duration. Effective duration, one measure of interest rate risk, measures how much the value of a security is expected to change with a given change in interest rates. For example, if interest rates were to increase by one percentage point, the market value of a bond with an effective duration of five years would decrease by 5%, with all other factors being constant. However, all other factors are rarely constant. Effective duration is based on assumptions and subject to a number of limitations. It is most useful when interest rate changes are small, rapid, and occur equally in short-term and long-term securities. In addition, it is difficult to calculate precisely for bonds with prepayment options, such as mortgage- and asset-backed securities, because the calculation requires assumptions about prepayment rates. For these reasons, the effective durations of funds which invest a significant portion of their assets in these securities can be greatly affected by changes in interest rates.
Temporary Investments. In an attempt to respond to adverse market, economic, political, or other conditions, the 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 funds advisor. These investments may result in a lower yield than would be available from investments with a lower quality or longer term and may prevent the fund from achieving its investment objectives.
Portfolio Turnover. Fund managers 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.
The principal risks of investing in the fund are summarized in the Fund Summary section. More information about principal fund risks is presented below.
Income Risk. The funds income could decline due to falling market interest rates. This is because, in a falling interest rate environment, the fund generally will have to invest the proceeds from sales of fund shares, as well as the proceeds from maturing portfolio securities (or portfolio securities that have been called, see Call Risk, or prepaid, see Prepayment Risk) in lower-yielding securities.
Credit Risk. The fund is subject to the risk that the issuers of debt securities held by the fund will not make payments on the securities, or that the other party to a contract (such as a securities lending agreement or repurchase agreement) will default on its obligations. There is also the risk that an issuer could suffer adverse changes in financial condition that could lower the credit quality of a security. This could lead to greater volatility in the price of the security and in shares of the fund. Also, a change in the credit quality rating of a bond could affect the bonds liquidity and make it more difficult for the fund to sell. When the fund purchases unrated securities, it will depend on the advisors analysis of credit risk more heavily than usual.
The fund attempts to minimize credit risk by investing primarily in securities considered at least investment grade at the time of purchase or in unrated securities of comparable quality. The fund may invest up to 10% of its net assets in securities rated lower than investment grade. However, all of these securities,
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especially those in the lower investment grade rating categories, have credit risk. In adverse economic or other circumstances, issuers of these lower rated securities are more likely to have difficulty making principal and interest payments than issuers of higher rated securities.
Risks of High-Yield Securities. A portion of the funds portfolio may consist of lower-rated corporate debt obligations, which are commonly referred to as high-yield securities or junk bonds. Although these securities usually offer higher yields than investment grade securities, they also involve more risk. High-yield bonds may be more susceptible to real or perceived adverse economic conditions than investment grade bonds. In addition, the secondary trading market may be less liquid. High-yield securities generally have more volatile prices and carry more risk to principal than investment grade securities.
Liquidity Risk. The fund is exposed to liquidity risk because of its investments in high-yield bonds. Trading opportunities are more limited for debt securities that have received ratings below investment grade. These features may make it more difficult to sell or buy a security at a favorable price or time. Consequently, the fund may have to accept a lower price to sell a security, sell other securities to raise cash, or give up an investment opportunity, any of which could have a negative effect on the funds performance. Infrequent trading may also lead to greater price volatility.
Foreign Security Risk. International investing involves risks not typically associated with U.S. investing. These risks include:
Currency Risk. Because foreign securities often trade in currencies other than the U.S. dollar, changes in currency exchange rates will affect the funds net asset value, the value of dividends and interest earned, and gains and losses realized on the sale of securities. A strong U.S. dollar relative to these other currencies will adversely affect the value of the fund.
Political and Economic Risks. International investing is subject to the risk of political, social, or economic instability in the country of the issuer of a security, the difficulty of predicting international trade patterns, the possibility of the imposition of exchange controls, expropriation, limits on removal of currency or other assets, and nationalization of assets.
Foreign Tax Risk. The funds income from foreign issuers may be subject to non-U.S. withholding taxes. In some countries, the fund also may be subject to taxes on trading profits and, on certain securities transactions, transfer or stamp duties tax. To the extent foreign income taxes are paid by the fund, U.S. shareholders may be entitled to a credit or deduction for U.S. tax purposes. See the Statement of Additional Information for details.
Risk of Investment Restrictions. Some countries, particularly emerging markets, restrict to varying degrees foreign investment in their securities markets. In some circumstances, these restrictions may limit or preclude investment in certain countries or may increase the cost of investing in securities of particular companies.
Foreign Securities Market Risk. Securities of many non-U.S. companies may be less liquid and their prices more volatile than securities of comparable U.S. companies. Securities of companies traded in many countries outside the U.S., particularly emerging markets countries, may be subject to further risks due to the inexperience of local investment professionals and financial institutions, the possibility of permanent or temporary termination of trading, and greater spreads between bid and asked prices for securities. In addition, non-U.S. stock exchanges and investment professionals are subject to less governmental regulation, and commissions may be higher than in the United States. Also, there may be delays in the settlement of non-U.S. stock exchange transactions.
Information Risk. Non-U.S. companies generally are not subject to uniform accounting, auditing, and financial reporting standards or other regulatory requirements that apply to U.S. companies. As a result, less information may be available to investors concerning non-U.S. issuers. Accounting and financial reporting standards in emerging markets may be especially lacking.
Call Risk. Many corporate bonds may be redeemed at the option of the issuer, or called, before their stated maturity date. In general, an issuer will call its bonds if they can be refinanced by issuing new bonds which bear a lower interest rate. The fund is subject to the possibility that during periods of falling interest rates, a bond issuer will call its high-yielding bonds. The fund would then be forced to invest the unanticipated proceeds at lower interest rates, resulting in a decline in the funds income.
Prepayment Risk. Mortgage-backed securities are secured by and payable from pools of mortgage loans. Similarly, asset-backed securities are supported by obligations such as credit card loans, automobile loans, home equity loans, corporate bonds, or commercial loans. These mortgages and other obligations generally can be prepaid at any time without penalty. As a result, mortgage- and asset-backed securities are subject to prepayment risk, which is the risk that falling interest rates could cause prepayments of the securities to occur more quickly than expected. This occurs because, as interest rates fall, more homeowners refinance the mortgages underlying mortgage-related securities or prepay the debt obligations underlying asset-backed securities. The fund would have to reinvest the prepayments at a time when interest rates are falling, reducing the income of the fund. In addition, when interest
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rates fall, prices on mortgage- and asset-backed securities may not rise as much as for other types of comparable debt securities because investors may anticipate an increase in prepayments.
Extension Risk. Mortgage- and asset-backed securities also are subject to extension risk, which is the risk that rising interest rates could cause mortgages or other obligations underlying the securities to be prepaid more slowly than expected, resulting in slower prepayments of the securities. This would, in effect, convert a short- or medium-duration mortgage- or asset-backed security into a longer-duration security, increasing its sensitivity to interest rate changes and causing its price to decline.
Risks of Securities Lending. When the fund loans its portfolio securities, it will receive collateral equal to at least 100% of the value of the loaned securities. Nevertheless, the fund risks a delay in the recovery of the loaned securities, or even the loss of rights in the collateral deposited by the borrower if the borrower should fail financially. To reduce these risks, the fund enters into loan arrangements only with institutions which the funds advisor has determined are creditworthy under guidelines established by the funds board of directors.
Risks of Derivative Instruments. The use of derivative instruments exposes the fund to additional risks and transaction costs. Risks inherent in the use of derivative instruments include: the risk that securities or commodities prices, index prices, currencies or interest rates will not move in the direction that the advisor anticipates; in the case of a credit default swap, the risk that the advisor will incorrectly evaluate the creditworthiness of the company or companies on which the swap is based; an imperfect correlation between the price of derivative instruments and movements in the prices of the securities being hedged; the possible absence of a liquid secondary market for any particular instrument and possible exchange imposed price fluctuation limits, either of which may make it difficult or impossible to close out a position when desired; leverage risk, which is the risk that adverse price movements in an instrument can result in a loss substantially greater than the funds initial investment in that instrument; and, particularly, in the case of privately negotiated instruments, the risk that the counterparty will fail to perform its obligations, which could leave the fund worse off than if it had not entered into the position. If the fund uses derivative instruments and the advisors judgment proves incorrect, the funds performance could be worse than if it had not used these instruments.
The funds investments in commodity-linked derivative instruments may subject the fund to greater volatility than investments in traditional securities. The value of commodity-linked derivative instruments may be affected by changes in overall market movements, commodity index volatility, changes in interest rates, or factors affecting a particular industry or commodity, such as drought, floods, weather, livestock disease, embargoes, tariffs and international economic, political and regulatory developments.
Prospectus |
First American Inflation Protected Securities Fund
Class Y Shares |
12
More information about the fund is available in the funds Statement of Additional Information and annual and semiannual reports, and on the First American funds Internet Web site.
Information about the First American funds may be viewed on the funds Internet Web site at http://www.firstamericanfunds.com.
The SAI provides more details about the fund and its policies. A current SAI is on file with the Securities and Exchange Commission (SEC) and is incorporated into this prospectus by reference (which means that it is legally considered part of this prospectus).
Additional information about the funds investments will be available in the funds annual and semiannual reports to shareholders. In the funds annual report, you will find a discussion of the market conditions and investment strategies that significantly affected the funds performance during its last fiscal year.
You can obtain a free copy of the funds SAI and/or free copies of the funds most recent annual or semiannual reports by calling Investor Services at 800 677-FUND. The material you request will be sent by first-class mail or other means designed to ensure equally prompt delivery, within three business days of receipt of the request.
You can also obtain copies of this information, after paying a duplicating fee, by electronic request at the following email address: publicinfo@sec.gov, or by writing the SECs Public Reference Section, Washington, D.C. 20549-0102. For more information, call 1-202-942-8090.
Information about the fund is also available on the Internet. Text-only versions of fund documents can be viewed online or downloaded from the EDGAR Database on the SECs Internet site at http://www.sec.gov.
First American Funds P.O. Box 1330, Minneapolis, MN 55440-1330
U.S. Bancorp Asset Management, Inc., serves as the investment advisor to the First American Funds.
PROIPSY 10/04
SEC file number: 811-05309
First American Funds
i INFLATION PROTECTED SECURITIES FUND STATEMENT OF ADDITIONAL INFORMATION DATED OCTOBER 1, 2004 This Statement of Additional Information relates to the Class A, Class C, Class R and Class Y Shares of Inflation Protected Securities Fund (the "Fund"), a series of First American Investment Funds, Inc. ("FAIF"). This Statement of Additional Information is not a prospectus, but should be read in conjunction with the Fund's current Prospectuses dated October 1, 2004. This Statement of Additional Information is incorporated into the Fund's Prospectuses by reference. To obtain copies of Prospectuses or the Fund's Annual Report, when one becomes available, at no charge, write the Fund's distributor, Quasar Distributors, LLC, 615 East Michigan Street, Milwaukee, WI 53202, or call Investor Services at 800 677-FUND. Please retain this Statement of Additional Information for future reference.TABLE OF CONTENTS PAGE ---- GENERAL INFORMATION......................................................1 ADDITIONAL INFORMATION CONCERNING FUND INVESTMENTS.......................2 Principal Investment Strategies.......................................2 Other Investment Strategies..........................................17 INVESTMENT RESTRICTIONS.................................................20 FUND NAME...............................................................22 PORTFOLIO TURNOVER......................................................22 DIRECTORS AND EXECUTIVE OFFICERS........................................23 Independent Directors................................................23 Officers.............................................................24 Standing Committees of the Board of Directors........................26 Fund Shares Owned by the Directors...................................27 Approval of Investment Advisory Contract.............................28 Compensation.........................................................28 Sales Loads..........................................................29 CODE OF ETHICS..........................................................30 PROXY VOTING POLICIES...................................................30 INVESTMENT ADVISORY AND OTHER SERVICES FOR THE FUNDS....................35 Investment Advisor...................................................35 Administrator........................................................36 Distributor..........................................................36 Custodian and Auditors...............................................37 PORTFOLIO TRANSACTIONS AND ALLOCATION OF BROKERAGE......................38 CAPITAL STOCK...........................................................39 NET ASSET VALUE AND PUBLIC OFFERING PRICE...............................40 TAXATION................................................................40 REDUCING SALES CHARGES..................................................41 Class A Sales Charge.................................................41 Sales of Class A Shares at Net Asset Value...........................42 ADDITIONAL INFORMATION ABOUT SELLING SHARES.............................43 By Telephone.........................................................43 By Mail..............................................................44 Redemptions Before Purchase Instruments Clear........................44 RATINGS.................................................................44 GENERAL INFORMATION First American Investment Funds, Inc. ("FAIF") was incorporated in the State of Maryland on August 20, 1987 under the name "SECURAL Mutual Funds, Inc." The Board of Directors and shareholders, at meetings held January 10, 1991, and April 2, 1991, respectively, approved amendments to the Articles of Incorporation providing that the name "SECURAL Mutual Funds, Inc." be changed to "First American Investment Funds, Inc." FAIF is organized as a series fund and currently issues its shares in 38 series. Each series of shares represents a separate investment portfolio with its own investment objective and policies (in essence, a separate mutual fund). The series to which this Statement of Additional Information relates is Inflation Protected Securities Fund, which is referred to in this Statement of Additional Information as the "Fund." Shareholders may purchase shares of the Fund through four separate classes, Class A, Class C, Class R and Class Y, which provide for variations in distribution costs, shareholder servicing fees, voting rights and dividends. To the extent permitted by the Investment Company Act of 1940, as amended ("1940 Act"), the Fund may also provide for variations in other costs among the classes although it has no present intention to do so. In addition, a sales load is imposed on the sale of Class A and Class C Shares of the Fund. Except for differences among the classes pertaining to distribution costs and shareholder servicing fees, each share of the Fund represents an equal proportionate interest in the Fund. The Articles of Incorporation and Bylaws of FAIF provide that meetings of shareholders be held as determined by the Board of Directors and as required by the 1940 Act. Maryland corporation law requires a meeting of shareholders to be held upon the written request of shareholders holding 10% or more of the voting shares of FAIF, with the cost of preparing and mailing the notice of such meeting payable by the requesting shareholders. The 1940 Act requires a shareholder vote for, among other things, all amendments to fundamental investment policies and restrictions, for approval of all investment advisory contracts and amendments thereto, and for all amendments to Rule 12b-1 distribution plans. This Statement of Additional Information may also refer to affiliated investment companies, including: First American Funds, Inc. ("FAF"); First American Strategy Funds, Inc. ("FASF"), First American Insurance Portfolios, Inc. ("FAIP") and eight separate closed-end funds (American Strategic Income Portfolio Inc., American Strategic Income Portfolio Inc. -- II, American Strategic Income Portfolio Inc. -- III, American Municipal Income Portfolio Inc., Minnesota Municipal Income Portfolio Inc., First American Minnesota Municipal Income Fund II Inc., American Select Portfolio Inc., and American Income Fund, Inc.), collectively referred to as the First American Closed-End Funds ("FACEF"). The shareholders of FAIP approved the liquidation of the seven portfolios included in such investment company at a meeting held August 17, 2004, and such liquidations were consummated in August and September 2004. 1 ADDITIONAL INFORMATION CONCERNING FUND INVESTMENTS The principal investment strategies of the Fund are set forth in the Fund's Prospectuses. Additional information concerning the principal investment strategies of the Fund, and other investment strategies which may be used by the Fund, is set forth below. The Fund has attempted to identify investment strategies that will be employed in pursuing its investment objective. However, in the absence of an affirmative limitation, the Fund may utilize any strategy or technique that is consistent with its investment objective. The Fund does not anticipate that any such strategy or technique would exceed 5% of its assets absent specific identification of that practice. Additional information concerning the Fund's investment restrictions is set forth below under "Investment Restrictions." If a percentage limitation on investments by the Fund stated in this section or in "Investment Restrictions" below is adhered to at the time of an investment, a later increase or decrease in percentage resulting from changes in asset value will not be deemed to violate the limitation except in the case of the limitation on borrowing. Although the Fund is limited to investing in securities with specified ratings or of a certain credit quality, it is not required to sell a security if its rating is reduced or its credit quality declines after purchase, but the Fund may consider doing so. Descriptions of the rating categories of Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. ("Standard & Poor's") and Moody's Investors Service, Inc. ("Moody's) are contained in "Ratings" below.
EXHIBIT (a)(7)
FIRST AMERICAN INVESTMENT FUNDS, INC.
ARTICLES SUPPLEMENTARY
[September 2004]
First American Investment Funds, Inc., a corporation organized under the laws of the State of Maryland (the "Corporation"), does hereby file for record with the State Department of Assessments and Taxation of Maryland the following Articles Supplementary to its Articles of Incorporation:
FIRST: The Corporation is registered as an open-end investment company under the Investment Company Act of 1940 (the "1940 Act"). As hereinafter set forth, the Corporation has classified its authorized capital stock in accordance with the Maryland General Corporation Law.
SECOND: Immediately before the increase in total authorized shares hereinafter set forth and the classifications hereinafter set forth, the Corporation had authority to issue three hundred sixteen billion (316,000,000,000) shares of common stock (individually, a "Share" and collectively, the "Shares"), of the par value of $.0001 per Share and of the aggregate par value of thirty-one million six hundred thousand dollars ($31,600,000), classified as follows:
(1) Class B Common Shares (formerly referred to as "fixed income fund shares"): Two billion (2,000,000,000) Shares.
(2) Class B, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(3) Class B, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(4) Class B, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(5) Class B, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(6) Class C Common Shares (formerly referred to as "municipal bond fund shares"): Two billion (2,000,000,000) Shares.
(7) Class C, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(8) Class C, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(9) Class C, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(10) Class D Common Shares (formerly referred to as "stock fund shares"): Two billion (2,000,000,000) Shares.
(11) Class D, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(12) Class D, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(13) Class D, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(14) Class D, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(15) Class E Common Shares (formerly referred to as "special equity fund shares"): Two billion (2,000,000,000) Shares.
(16) Class E, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(17) Class E, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(18) Class E, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(19) Class E, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(20) Class G Common Shares (formerly referred to as "balanced fund shares"): Two billion (2,000,000,000) Shares.
(21) Class G, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(22) Class G, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(23) Class G, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(24) Class G, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(25) Class H Common Shares (formerly referred to as "equity index fund shares"): Two billion (2,000,000,000) Shares.
(26) Class H, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(27) Class H, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(28) Class H, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(29) Class H, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(30) Class I Common Shares (formerly referred to as "intermediate term income fund shares"): Two billion (2,000,000,000) Shares.
(31) Class I, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(32) Class I, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(33) Class I, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(34) Class I, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(35) Class J Common Shares (formerly referred to as "limited term income fund shares"): Two billion (2,000,000,000) Shares.
(36) Class J, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(37) Class J, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(38) Class J, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(39) Class J, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(40) Class M Common Shares: Two billion (2,000,000,000) Shares.
(41) Class M, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(42) Class M, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(43) Class M, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(44) Class N Common Shares: Two billion (2,000,000,000) Shares.
(45) Class N, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(46) Class N, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(47) Class N, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(48) Class P Common Shares: Two billion (2,000,000,000) Shares.
(49) Class P, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(50) Class P, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(51) Class P, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(52) Class P, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(53) Class Q Common Shares: Two billion (2,000,000,000) Shares.
(54) Class Q, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(55) Class Q, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(56) Class Q, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(57) Class Q, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(58) Class T Common Shares: Two billion (2,000,000,000) Shares.
(59) Class T, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(60) Class T, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(61) Class T, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(62) Class T, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(63) Class V Common Shares: Two billion (2,000,000,000) Shares.
(64) Class V, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(65) Class V, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(66) Class V, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(67) Class V, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(68) Class X Common Shares: Two billion (2,000,000,000) Shares.
(69) Class X, Series 1 Common Shares: Two billion (2,000,000,000) Shares.
(70) Class X, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(71) Class Y Common Shares: Two billion (2,000,000,000) Shares.
(72) Class Y, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(73) Class Y, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(74) Class AA Common Shares: Two billion (2,000,000,000) Shares.
(75) Class AA, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(76) Class AA, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(77) Class AA, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(78) Class AA, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(79) Class DD Common Shares: Two billion (2,000,000,000) Shares.
(80) Class DD, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(81) Class DD, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(82) Class DD, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(83) Class EE Common Shares: Two billion (2,000,000,000) Shares.
(84) Class EE, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(85) Class EE, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(86) Class EE, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(87) Class HH Common Shares: Two billion (2,000,000,000) Shares.
(88) Class HH, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(89) Class HH, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(90) Class HH, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(91) Class HH, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(92) Class I I Common Shares: Two billion (2,000,000,000) Shares.
(93) Class I I, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(94) Class I I, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(95) Class JJ Common Shares: Two billion (2,000,000,000) Shares.
(96) Class JJ, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(97) Class JJ, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(98) Class KK Common Shares: Two billion (2,000,000,000) Shares.
(99) Class KK, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(100) Class KK, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(101) Class LL Common Shares: Two billion (2,000,000,000) Shares.
(102) Class LL, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(103) Class LL, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(104) Class LL, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(105) Class LL, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(106) Class MM Common Shares: Two billion (2,000,000,000) Shares.
(107) Class MM, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(108) Class MM, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(109) Class QQ Common Shares: Two billion (2,000,000,000) Shares.
(110) Class QQ, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(111) Class QQ, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(112) Class QQ, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(113) Class QQ, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(114) Class SS Common Shares: Two billion (2,000,000,000) Shares.
(115) Class SS, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(116) Class SS, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(117) Class SS, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(118) Class SS, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(119) Class TT Common Shares: Two billion (2,000,000,000) Shares.
(120) Class TT, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(121) Class TT, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(122) Class TT, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(123) Class TT, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(124) Class UU Common Shares: Two billion (2,000,000,000) Shares.
(125) Class UU, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(126) Class UU, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(127) Class UU, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(128) Class UU, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(129) Class WW Common Shares: Two billion (2,000,000,000) Shares.
(130) Class WW, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(131) Class WW, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(132) Class WW, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(133) Class WW, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(134) Class XX Common Shares: Two billion (2,000,000,000) Shares.
(135) Class XX, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(136) Class XX, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(137) Class XX, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(138) Class XX, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(139) Class ZZ Common Shares: Two billion (2,000,000,000) Shares.
(140) Class ZZ, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(141) Class ZZ, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(142) Class ZZ, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(143) Class ZZ, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(144) Class AAA Common Shares: Two billion (2,000,000,000) Shares.
(145) Class AAA, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(146) Class AAA, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(147) Class BBB Common Shares: Two billion (2,000,000,000) Shares.
(148) Class BBB, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(149) Class BBB, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(150) Class CCC Common Shares: Two billion (2,000,000,000) Shares.
(151) Class CCC, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(152) Class DDD Common Shares: Two billion (2,000,000,000) Shares.
(153) Class DDD, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(154) Class EEE Common Shares: Two billion (2,000,000,000) Shares.
(155) Class EEE, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(156) Class EEE, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(156) Class EEE, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(158) Class EEE, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(159) Unclassified Shares: Zero (-0-) Shares.
THIRD: Pursuant to the authority contained in Sections 2-105(c) and 2-208.1 of the Maryland General Corporation Law, the Board of Directors of the Corporation, by resolution adopted at a meeting held on September 16, 2004, authorized an increase in the total authorized shares of the Corporation from three hundred sixteen billion (316,000,000,000) shares of common stock, of the par value of $.0001 per share, and of the aggregate par value of thirty-one million six hundred thousand dollars ($31,600,000), to three hundred twenty-four billion (324,000,000,000) shares of common stock, of the par value of $.0001 per share, and of the aggregate par value of thirty-two million four hundred thousand dollars ($32,400,000).
FOURTH: Pursuant to the authority contained in Article IV of the Articles of Incorporation of the Corporation and Section 2-208 of the Maryland General Corporation Law, the Board of Directors of the Corporation, by resolution adopted September 16, 2004, classified the following additional Shares out of the authorized, unissued and unclassified Shares of the Corporation:
(1) Class FFF Common Shares: Two billion (2,000,000,000) Shares.
(2) Class FFF, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(3) Class FFF, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(4) Class FFF, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
FIFTH: The Shares classified pursuant to FOURTH above shall have the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications, and terms and conditions of redemption, set forth in the Corporation's Articles of Incorporation. Any Class or Series of Shares classified pursuant to FOURTH above may be subject to such charges and expenses (including by way of example, but not by way of limitation, such front-end and deferred sales charges as may be permitted under the 1940 Act and rules of the National Association of Securities Dealers, Inc. ("NASD"), expenses under Rule 12b-1 plans, administration plans, service plans, or other plans or arrangements, however designated) adopted from time to time by the Board of Directors of the Corporation in accordance, to the extent applicable, with the 1940 Act, and all of the charges and expenses to which such a Class or Series is subject shall be borne by such Class or Series and shall be appropriately reflected (in the manner determined by the Board of Directors) in determining the net asset value and the amounts payable with respect to dividends and distributions on and redemptions or liquidations of, the Shares of such Class or Series.
SIXTH: Immediately after the increase in total authorized shares hereinbefore set forth and the classifications hereinbefore set forth and upon filing for record of these Articles Supplementary, the Corporation has authority to issue three hundred twenty-four billion (324,000,000,000) shares of common stock (individually, a "Share" and collectively, the "Shares"), of the par value of $.0001 per Share and of the aggregate par value of thirty-two million four hundred thousand dollars ($32,400,000), classified as follows:
(1) Class B Common Shares (formerly referred to as "fixed income fund shares"): Two billion (2,000,000,000) Shares.
(2) Class B, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(3) Class B, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(4) Class B, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(5) Class B, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(6) Class C Common Shares (formerly referred to as "municipal bond fund shares"): Two billion (2,000,000,000) Shares.
(7) Class C, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(8) Class C, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(9) Class C, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(10) Class D Common Shares (formerly referred to as "stock fund shares"): Two billion (2,000,000,000) Shares.
(11) Class D, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(12) Class D, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(13) Class D, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(14) Class D, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(15) Class E Common Shares (formerly referred to as "special equity fund shares"): Two billion (2,000,000,000) Shares.
(16) Class E, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(17) Class E, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(18) Class E, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(19) Class E, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(20) Class G Common Shares (formerly referred to as "balanced fund shares"): Two billion (2,000,000,000) Shares.
(21) Class G, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(22) Class G, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(23) Class G, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(24) Class G, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(25) Class H Common Shares (formerly referred to as "equity index fund shares"): Two billion (2,000,000,000) Shares.
(26) Class H, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(27) Class H, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(28) Class H, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(29) Class H, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(30) Class I Common Shares (formerly referred to as "intermediate term income fund shares"): Two billion (2,000,000,000) Shares.
(31) Class I, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(32) Class I, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(33) Class I, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(34) Class I, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(35) Class J Common Shares (formerly referred to as "limited term income fund shares"): Two billion (2,000,000,000) Shares.
(36) Class J, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(37) Class J, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(38) Class J, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(39) Class J, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(40) Class M Common Shares: Two billion (2,000,000,000) Shares.
(41) Class M, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(42) Class M, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(43) Class M, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(44) Class N Common Shares: Two billion (2,000,000,000) Shares.
(45) Class N, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(46) Class N, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(47) Class N, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(48) Class P Common Shares: Two billion (2,000,000,000) Shares.
(49) Class P, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(50) Class P, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(51) Class P, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(52) Class P, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(53) Class Q Common Shares: Two billion (2,000,000,000) Shares.
(54) Class Q, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(55) Class Q, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(56) Class Q, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(57) Class Q, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(58) Class T Common Shares: Two billion (2,000,000,000) Shares.
(59) Class T, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(60) Class T, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(61) Class T, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(62) Class T, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(63) Class V Common Shares: Two billion (2,000,000,000) Shares.
(64) Class V, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(65) Class V, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(66) Class V, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(67) Class V, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(68) Class X Common Shares: Two billion (2,000,000,000) Shares.
(69) Class X, Series 1 Common Shares: Two billion (2,000,000,000) Shares.
(70) Class X, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(71) Class Y Common Shares: Two billion (2,000,000,000) Shares.
(72) Class Y, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(73) Class Y, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(74) Class AA Common Shares: Two billion (2,000,000,000) Shares.
(75) Class AA, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(76) Class AA, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(77) Class AA, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(78) Class AA, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(79) Class DD Common Shares: Two billion (2,000,000,000) Shares.
(80) Class DD, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(81) Class DD, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(82) Class DD, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(83) Class EE Common Shares: Two billion (2,000,000,000) Shares.
(84) Class EE, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(85) Class EE, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(86) Class EE, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(87) Class HH Common Shares: Two billion (2,000,000,000) Shares.
(88) Class HH, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(89) Class HH, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(90) Class HH, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(91) Class HH, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(92) Class I I Common Shares: Two billion (2,000,000,000) Shares.
(93) Class I I, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(94) Class I I, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(95) Class JJ Common Shares: Two billion (2,000,000,000) Shares.
(96) Class JJ, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(97) Class JJ, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(98) Class KK Common Shares: Two billion (2,000,000,000) Shares.
(99) Class KK, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(100) Class KK, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(101) Class LL Common Shares: Two billion (2,000,000,000) Shares.
(102) Class LL, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(103) Class LL, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(104) Class LL, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(105) Class LL, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(106) Class MM Common Shares: Two billion (2,000,000,000) Shares.
(107) Class MM, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(108) Class MM, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(109) Class QQ Common Shares: Two billion (2,000,000,000) Shares.
(110) Class QQ, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(111) Class QQ, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(112) Class QQ, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(113) Class QQ, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(114) Class SS Common Shares: Two billion (2,000,000,000) Shares.
(115) Class SS, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(116) Class SS, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(117) Class SS, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(118) Class SS, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(119) Class TT Common Shares: Two billion (2,000,000,000) Shares.
(120) Class TT, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(121) Class TT, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(122) Class TT, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(123) Class TT, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(124) Class UU Common Shares: Two billion (2,000,000,000) Shares.
(125) Class UU, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(126) Class UU, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(127) Class UU, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(128) Class UU, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(129) Class WW Common Shares: Two billion (2,000,000,000) Shares.
(130) Class WW, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(131) Class WW, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(132) Class WW, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(133) Class WW, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(134) Class XX Common Shares: Two billion (2,000,000,000) Shares.
(135) Class XX, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(136) Class XX, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(137) Class XX, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(138) Class XX, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(139) Class ZZ Common Shares: Two billion (2,000,000,000) Shares.
(140) Class ZZ, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(141) Class ZZ, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(142) Class ZZ, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(143) Class ZZ, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(144) Class AAA Common Shares: Two billion (2,000,000,000) Shares.
(145) Class AAA, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(146) Class AAA, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(147) Class BBB Common Shares: Two billion (2,000,000,000) Shares.
(148) Class BBB, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(149) Class BBB, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(150) Class CCC Common Shares: Two billion (2,000,000,000) Shares.
(151) Class CCC, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(152) Class DDD Common Shares: Two billion (2,000,000,000) Shares.
(153) Class DDD, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(154) Class EEE Common Shares: Two billion (2,000,000,000) Shares.
(155) Class EEE, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(156) Class EEE, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(156) Class EEE, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(158) Class EEE, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(159) Class FFF Common Shares: Two billion (2,000,000,000) Shares.
(160) Class FFF, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(161) Class FFF, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(162) Class FFF, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(163) Unclassified Shares: Zero (-0-) Shares.
SEVENTH: The aforesaid action by the Board of Directors of the Corporation was taken pursuant to authority and power contained in the Articles of Incorporation of the Corporation.
The undersigned officer of the Corporation hereby acknowledges, in the name and on behalf of the Corporation, the foregoing Articles Supplementary to be the corporate act of the Corporation and further certifies
that, to the best of his or her knowledge, information and belief, the matters and facts set forth therein with respect to the approval thereof are true in all material respects, under the penalties of perjury.
IN WITNESS WHEREOF, the Corporation has caused these Articles Supplementary to be signed in its name and on its behalf by its Vice President and witnessed by its Secretary on September ____, 2004.
FIRST AMERICAN INVESTMENT FUNDS, INC.
By /s/ Jeffery M. Wilson ---------------------------------- Jeffery M. Wilson, Vice President |
WITNESS:
/s/ James D. Alt --------------------------------- James D. Alt, Secretary |
EXHIBIT (B)
NAME CHANGE FROM "SECURAL MUTUAL FUNDS, INC." TO "FIRST AMERICAN INVESTMENT FUNDS, INC." APPROVED AT BOARD OF DIRECTORS' MEETINGS ON FEBRUARY 12, 1991; AMENDMENT ADDING NEW SECTION 8 TO ARTICLE I APPROVED AT BOARD OF DIRECTORS' MEETING ON DECEMBER 15, 1992; AMENDMENTS TO ARTICLE III APPROVED AT BOARD OF DIRECTORS' MEETINGS ON SEPTEMBER 7, 1993; AMENDMENT ADDING NEW SECTION 3 TO ARTICLE V APPROVED AT BOARD OF DIRECTORS' MEETING ON DECEMBER 7, 1993; AMENDMENT TO ARTICLE V, SECTION 3 CHANGING FUND NAMES APPROVED AT BOARD OF DIRECTORS' MEETING ON MARCH 7, 1994; AMENDMENT TO ARTICLE V, SECTION 3 PROVIDING FOR NAMES OF NEW CLASSES AND SERIES APPROVED AT BOARD OF DIRECTORS MEETING ON JUNE 8, 1994; AMENDMENT TO ARTICLE V, SECTION 3 PROVIDING FOR NAMES OF NEW CLASSES AND SERIES APPROVED AT BOARD OF DIRECTORS MEETING ON DECEMBER 7, 1994; AMENDMENT TO ARTICLE V, SECTION 3 PROVIDING FOR NAMES OF NEW CLASSES AND SERIES APPROVED AT BOARD OF DIRECTORS MEETING ON MARCH 6, 1995; AMENDMENT TO ARTICLE V, SECTION 3 PROVIDING FOR NAMES OF NEW CLASSES AND SERIES APPROVED AT BOARD OF DIRECTORS MEETING ON DECEMBER 6, 1995; AMENDMENT TO ARTICLE V, SECTION 3 PROVIDING FOR NAMES OF NEW CLASSES AND SERIES APPROVED AT BOARD OF DIRECTORS MEETING ON JUNE 4, 1997; AMENDMENT TO ARTICLE V, SECTION 3 PROVIDING FOR NAMES OF CLASSES AND SERIES APPROVED AT BOARD OF DIRECTORS MEETING ON FEBRUARY 23, 1998; AMENDMENT TO ARTICLE V, SECTION 3 PROVIDING FOR NAMES OF NEW CLASSES AND SERIES APPROVED AT BOARD OF DIRECTORS MEETING ON DECEMBER 9, 1998; AMENDMENT TO ARTICLE II, SECTION 8 SPECIFYING COMMITTEE QUORUM APPROVED AT BOARD OF DIRECTORS MEETING ON FEBRUARY 23, 1999; AMENDMENT TO ARTICLE V, SECTION 3 PROVIDING FOR NAMES OF NEW CLASSES AND SERIES APPROVED AT BOARD OF DIRECTORS MEETING ON SEPTEMBER 8, 1999; AMENDMENT TO ARTICLE I, SECTION 4 PROVIDING FOR ELECTRONIC VOTING APPROVED AT BOARD OF DIRECTORS MEETING ON DECEMBER 8, 1999; AMENDMENT TO ARTICLE V, SECTION 3 PROVIDING FOR NAMES OF CLASSES AND SERIES APPROVED AT BOARD OF DIRECTORS MEETING ON FEBRUARY 28, 2001; AMENDMENT TO ARTICLE V, SECTION 3 PROVIDING FOR NAMES OF CLASSES AND SERIES APPROVED AT BOARD OF DIRECTORS MEETING ON JUNE 1, 2001; AMENDMENT TO ARTICLE V, SECTION 3 PROVIDING FOR NAMES OF CLASSES AND SERIES APPROVED AT BOARD OF DIRECTORS MEETING ON FEBRUARY 21, 2002; AMENDMENT TO ARTICLE V, SECTION 3 PROVIDING FOR NAMES OF CLASSES AND SERIES APPROVED AT BOARD OF DIRECTORS MEETING ON SEPTEMBER 18, 2002; AMENDMENTS TO ARTICLE V, SECTION 3 PROVIDING FOR NAME CHANGES AND NAMES OF NEW CLASS AND SERIES APPROVED AT BOARD OF DIRECTORS MEETING ON DECEMBER 4, 2002; AMENDMENTS TO ARTICLE V, SECTION 3 PROVIDING FOR NAME CHANGES APPROVED AT BOARD OF DIRECTORS MEETING ON FEBRUARY 18, 2004; AMENDMENTS TO ARTICLE V, SECTION 3 PROVIDING FOR NAMES OF NEW CLASS AND SERIES APPROVED AT BOARD OF DIRECTORS MEETING ON SEPTEMBER 16, 2004.
BYLAWS
OF
FIRST AMERICAN INVESTMENT FUNDS, INC.
(A MARYLAND CORPORATION)
ARTICLE I
STOCKHOLDERS
SECTION 1. Meetings. Annual or special meetings of stockholders may be held on such date and at such time as shall be set or provided for by the Board of Directors or, if not so set or provided for, then as stated in the notice of meeting. The notice of meeting shall state the purpose or purposes for which the meeting is called.
SECTION 2. Place of Meetings. All meetings of stockholders shall be held at such place in the United States as is set or provided for by the Board of Directors or, if not so set or provided for, then as stated in the notice of meeting.
SECTION 3. Organization. At any meeting of the stockholders, in the absence of the Chairman of the Board of Directors, if any, and of the President or a Vice President acting in his stead, the stockholders shall choose a chairman to preside over the meeting. In the absence
of the Secretary or an Assistant Secretary, acting in his stead, the chairman of the meeting shall appoint a secretary to keep the record of all the votes and minutes of the proceedings.
SECTION 4. Proxies. At any meeting of the stockholders, every stockholder having the right to vote shall be entitled to vote in person or by proxy submitted by any means permitted by Maryland Statutes Section 2-507(c)(3) or any successor provision of Maryland Statutes. No proxy shall be voted after eleven months from its date unless it provides for a longer period.
SECTION 5. Voting. At any meeting of the stockholders, every stockholder shall be entitled to one vote or a fractional vote on each matter submitted to a vote for each share or fractional share of stock standing in his name on the books of the Corporation as of the close of business on the record date for such meeting. Unless the voting is conducted by inspectors, all questions relating to the qualifications of voters, validity of proxies and acceptance or rejection of votes shall be decided by the chairman of the meeting.
SECTION 6. Record Date; Closing of Transfer Books. The Board of Directors may fix, in advance, a date as the record date for the purpose of determining stockholders entitled to notice of, or to vote at, any meeting of stockholders, or stockholders entitled to receive payment of any dividend or the allotment of any rights, or in order to make a determination of stockholders for any other proper purpose. Such date, in any case, shall be not more than sixty days, and in case of a meeting of stockholders not less than ten days, prior to the date on which the particular action requiring such determination of stockholders is to be taken. In lieu of fixing a record date, the Board of Directors may provide that the stock transfer books shall be closed for a stated period but not to exceed, in any case, twenty days. If the stock transfer books are closed for the purpose of determining stockholders entitled to notice of or to vote at a meeting of stockholders, such books shall be closed for at least ten days immediately preceding such meeting.
SECTION 7. Registered Stockholders. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof.
SECTION 8. Calling of Special Meeting of Shareholders. A special meeting of stockholders shall be called upon the written request of the holders of shares entitled to cast not less than 10% of all votes entitled to vote at such meeting.
SECTION 1. Number, Qualification, Tenure and Vacancies. The initial Board of Directors shall consist of five (5) directors. Except as hereinafter provided, a director shall be elected to serve until his successor shall be elected and shall qualify or until his earlier death, resignation, retirement or removal. The directors may at any time when the stockholders are not assembled in meeting, establish, increase or decrease their own number by majority vote of the entire Board of Directors; provided, that the number of directors shall never be less than three (3)
nor more than twelve (12). The number of directors may not be decreased so as to affect the term of any incumbent director. If the number be increased, the additional directors to fill the vacancies thus created may, except as hereinafter provided, by elected by majority vote of the entire Board of Directors. Any vacancy occurring for any cause may be filled by a majority of the remaining members of the Board of Directors, although such majority is less than a quorum; provided, however, that after filling any vacancy for any cause whatsoever two-thirds (2/3) of the entire Board of Directors shall have been elected by the stockholders of the Corporation. A director elected under any circumstance shall be elected to hold office until his successor is elected and qualified, or until such director's earlier death, resignation, retirement or removal.
SECTION 2. When Stockholder Meeting Required. If at any time less than a majority of the directors holding office were elected by the stockholders of the Corporation, the directors or the President or Secretary shall cause a meeting of stockholders to be held as soon as possible and, in any event, within sixty (60) days, unless extended by order of the Securities and Exchange Commission, for the purpose of electing directors to fill any vacancy.
SECTION 3. Regular Meetings. Regular meetings of the Board of Directors may be held at such time and place as shall be determined from time to time by agreement or fixed by resolution of the Board of Directors.
SECTION 4. Special Meetings. Special meetings of the Board of Directors may be called at any time by the Chairman of the Board or President and shall be called by the Secretary upon the written request of any two (2) directors.
SECTION 5. Notice of Meetings. Except as otherwise provided in these Bylaws, notice need not be given of regular meetings of the Board of Directors held at times fixed by agreement or resolution of the Board of Directors. Notice of special meetings of the Board of Directors, stating the place, date and time thereof, shall be given not less than two (2) days before such meeting to each director. Notice to a director may be given personally, by telegram, cable or wireless, by telephone, by mail, or by leaving such notice at his place of residence or usual place of business. If mailed, such notice shall be deemed to be given when deposited in the United States mail, postage prepaid, directed to the director at his address as it appears on the records of the Corporation. Meetings may be held at any time without notice if all the directors are present, or if those not present waive notice of the meeting in writing. If the President shall determine in advance that a quorum would not be present on the date set for any regular or special meeting, such meeting may be held at such later date, time and place as he shall determine, upon at least twenty-four (24) hours' notice.
SECTION 6. Quorum. A majority of the directors then in office, at a meeting duly assembled, but not less than one-third of the entire Board of Directors nor in any event less than two directors, shall constitute a quorum for the transaction of business. The vote of a majority of directors present at a meeting at which a quorum is present shall be the act of the Board of Directors, except as may be otherwise specifically provided by statute or by the Articles of Incorporation or by these Bylaws. If at any meeting of the Board of Directors, there shall be less than a quorum present, a majority of those present may adjourn the meeting, without further notice, from time to time until a quorum shall have been obtained.
SECTION 7. Removal. At any meeting of stockholders, duly called and at which a quorum is present, the stockholders may, by the affirmative vote of the holders of a majority of the votes entitled to be cast thereon, remove any director or directors from office and may elect a successor or successors to fill any resulting vacancies.
SECTION 8. Committees. The Board of Directors, may, by resolution adopted by a majority of the entire Board of Directors, from time to time appoint from among its members one or more committees as it may determine. Each committee appointed by the Board of Directors shall be composed of two (2) or more directors and may, to the extent provided in such resolution, have and exercise all the powers of the Board of Directors, except the power to declare dividends, to issue stock or to recommend to stockholders any action requiring stockholder approval. Each such committee shall serve at the pleasure of the Board of Directors. Each such committee shall keep a record of its proceedings and shall adopt its own rules of procedure. It shall make reports as may be required by the Board of Directors.
A quorum of any committee shall consist of one-third of its members unless the committee is comprised of two or three members, in which event a quorum shall consist of two members. If a Pricing Committee is appointed and a member of such committee is absent from a committee meeting, the remainder of the committee (although not constituting a quorum) may appoint another director to act in place of the absent member.
SECTION 1. Offices. The elected officers of the Corporation shall be the President, the Secretary and the Treasurer, and may also include one or more Vice Presidents, one or more Assistant Secretaries, one or more Assistant Treasurers and such other officers as the Board of Directors may determine. Any two or more offices may be held by the same person, except that no person may hold both the office of President and the office of Vice President. A person who holds more than one office in the Corporation shall not act in more than one capacity to execute, acknowledge or verify an instrument required by law to be executed, acknowledged or verified by more than one officer.
SECTION 2. Selection, Term of Office and Vacancies. The initial officers of the Corporation shall be elected by the Board of Directors at the first meeting of the Board of Directors. Additional officers may be elected at any regular or special meeting of the Board of Directors. Each officer shall serve at the pleasure of the Board of Directors or until his earlier death, resignation or retirement. If any office becomes vacant, the vacancy shall be filled by the Board of Directors.
SECTION 3. Chairman of the Board. The Board of Directors may elect one of its members as Chairman of the Board. Except as otherwise provided in these Bylaws, in the event the Board of Directors elects a Chairman of the Board of Directors, he shall preside at all meetings of the stockholders and the Board of Directors and shall perform such other duties as from time to time may be assigned to him by the Board of Directors. The Chairman of the Board of Directors will under no circumstances be deemed to be an "officer" of the Corporation, and an
individual serving as Chairman of the Board of Directors will not be deemed to be an "affiliated person" with respect to the Corporation (under the Investment Company Act of 1940, as amended) solely by virtue of such person's position as Chairman of the Board of Directors of the Corporation.
SECTION 4. President. The president shall be the chair executive officer of the Corporation and shall perform such other duties as from time to time may be assigned to him by the Board of Directors. He shall perform the duties of the Chairman of the Board of Directors in the event there is no Chairman or in the event the Chairman is absent.
SECTION 5. Vice Presidents. A Vice President shall perform such duties as may be assigned by the President or the Board of Directors. In the absence of the President and in accordance with such order of priority as may be established by the Board of Directors, he may perform the duties of the President, and when so acting, shall have all the powers of and be subject to all the restrictions upon the President.
SECTION 6. Secretary. The Secretary shall (a) keep the minutes of the stockholders' and Board of Directors' meetings in one or more books provided for that purpose, and shall perform like duties for committees when requested, (b) see that all notices are duly given in accordance with the provisions of these Bylaws or as required by law, (c) be custodian of the corporate records and of the seal of the Corporation and see that the seal of the Corporation is affixed to all documents the execution of which on behalf of the Corporation under its seal is duly authorized or required by law, and (d) in general perform all duties incident to the office of Secretary and such other duties as may be assigned by the President or the Board of Directors.
SECTION 7. Assistant Secretaries. One or more Assistant Secretaries may be elected by the Board of Directors or appointed by the President. In the absence of the Secretary and in accordance with such order as may be established by the Board of Directors, an Assistant Secretary shall have the power to perform his duties including the certification, execution and attestation of corporate records and corporate instruments. Assistant Secretaries shall perform such other duties as may be assigned to them by the President or the Board of Directors.
SECTION 8. Treasurer. The Treasurer (a) shall be the principal financial officer of the Corporation, (b) shall see that all funds and securities of the Corporation are held by the custodian of the Corporation's assets, and (c) shall be the principal accounting officer of the Corporation.
SECTION 9. Assistant Treasurers. One or more Assistant Treasurers may be elected by the Board of Directors or appointed by the President. In the absence of the Treasurer and in accordance with such order as may be established by the Board of Directors, an Assistant Treasurer shall have the power to perform his duties. Assistant Treasurers shall perform such other duties as may be assigned to them by the President or the Board of Directors.
SECTION 10. Other Officers. The Board of Directors may appoint or may authorize the Chairman of the Board or the President to appoint such other officers and agents as the appointer may deem necessary and proper, who shall hold their offices for such terms and
shall exercise such powers and perform such duties as shall be determined from time to time by the appointer.
SECTION 11. Bond. If required by the Board of Directors, the Treasurer and such other directors, officers, employees and agents of the Corporation as the Board of Directors may specify, shall give the Corporation a bond in such amount, in such form and with such security, surety or sureties, as may be satisfactory to the Board of Directors, conditioned on the faithful performance of the duties of their office and for the restoration to the Corporation, in case of their death, resignation, or removal from their office of all books, papers, vouchers, monies, securities and property of whatever kind in their possession belonging to the Corporation. All premiums on such bonds shall be paid by the Corporation.
SECTION 12. Removal. Any officer (or the Chairman of the Board of Directors) of the Corporation may be removed by the Board of Directors whenever, in its judgment, the best interests of the Corporation will be served thereby, but such removal shall be without prejudice to the contractual rights, if any, of the officer (or the Chairman of the Board of Directors) so removed.
SECTION 1. Stock Certificates. Certificates representing shares of stock of the Corporation shall be in such form consistent with the laws of the State of Maryland as shall be determined by the Board of Directors. All certificates for shares of stock shall be consecutively numbered or otherwise identified. The name and address of the person to whom the shares of stock represented thereby are issued, with the number of shares and date of issue, shall be entered on the stock transfer records of the Corporation.
SECTION 2. Redemption and Transfer. Any holder of stock of the Corporation desiring to redeem or transfer shares of stock standing in the name of such holder on the books of the Corporation shall deliver to the Corporation or to its agent duly authorized for such purpose a written unconditional request, in form acceptable to the Corporation, for such redemption or transfer. If certificates evidencing such shares have been issued, such certificates shall also be so delivered in transferable form duly endorsed or accompanied by all necessary stock transfer stamps or currency or certified or bank cashier's check payable to the order of the Corporation for the appropriate price thereof. The Corporation or its duly authorized agent may require that the signature of a redeeming stockholder on any or all of the request, endorsement or stock power be guaranteed and that other documentation in accordance with the custom of brokers be so delivered where appropriate, such as proof of capacity and power to make request or transfer. All documents and funds shall be deemed to have been delivered only when physically deposited at such office or other place of deposit as the Corporation or its duly authorized agent shall from time to time designate. At any time during which the right of redemption is suspended or payment for such shares is postponed pursuant to the Investment Company Act of 1940, as amended, or any rule, regulation or order thereunder, any stockholder may withdraw his request (and certificates and funds, if any) or may leave the same on deposit, in which case the
redemption price shall be the net asset value next applicable after such suspension or postponement is terminated.
SECTION 3. Lost, Mutilated, Destroyed or Wrongfully Taken Certificates. Any person claiming a stock certificate to have been lost, mutilated, destroyed or wrongfully taken, and who requests the issuance of a new certificate before the Corporation has notice that the certificate alleged to have been lost, mutilated, destroyed or wrongfully taken has been acquired by a bona fide purchaser, shall make an affidavit of that fact and shall give the Corporation and its transfer agents and registrars a bond, with sufficient surety, to indemnify them against any loss or claim arising as a result of the issuance of a new certificate. The form and amount of such bond and the surety thereon shall in each case be deemed sufficient if satisfactory to the President or Treasurer of the Corporation.
SECTION 1. Fiscal Year. The fiscal year of the Corporation shall be established by resolution of the Board of Directors.
SECTION 2. Amendments. These Bylaws may be altered, amended or repealed and new Bylaws may be adopted by a majority of the entire Board of Directors at any meeting of the Board of Directors.
SECTION 3. Names of Classes and Series of Shares. The names of the classes and series of shares which have been classified by the Corporation in its Articles of Incorporation and in Articles Supplementary shall be as follows:
Designation of Shares in Articles of Incorporation or Articles Supplementary Name of Class or Series ------------------------- ----------------------- Class B Common Shares............................... Core Bond Fund, Class A Class B, Series 2 Common Shares..................... Core Bond Fund, Class Y Class B, Series 3 Common Shares..................... Core Bond Fund, Class B Class B, Series 4 Common Shares..................... Core Bond Fund, Class C Class B, Series 5 Common Shares..................... Core Bond Fund, Class R Class C Common Shares............................... Intermediate Tax Free Fund, Class A Class C, Series 2 Common Shares..................... Intermediate Tax Free Fund, Class Y Class C, Series 3 Common Shares..................... Intermediate Tax Free Fund, Class B Class C, Series 4 Common Shares..................... Intermediate Tax Free Fund, Class C Class D Common Shares............................... Large Cap Value Fund, Class A Class D, Series 2 Common Shares..................... Large Cap Value Fund, Class Y Class D, Series 3 Common Shares..................... Large Cap Value Fund, Class B Class D, Series 4 Common Shares..................... Large Cap Value Fund, Class C Class D, Series 5 Common Shares..................... Large Cap Value Fund, Class R Class E Common Shares............................... Mid Cap Value Fund, Class A Class E, Series 2 Common Shares..................... Mid Cap Value Fund, Class Y 7 |
Class E, Series 3 Common Shares..................... Mid Cap Value Fund, Class B Class E, Series 4 Common Shares..................... Mid Cap Value Fund, Class C Class E, Series 5 Common Shares..................... Mid Cap Value Fund, Class R Class G Common Shares............................... Balanced Fund, Class A Class G, Series 2 Common Shares..................... Balanced Fund, Class Y Class G, Series 3 Common Shares..................... Balanced Fund, Class B Class G, Series 4 Common Shares..................... Balanced Fund, Class C Class G, Series 5 Common Shares..................... Balanced Fund, Class R Class H Common Shares............................... Equity Index Fund, Class A Class H, Series 2 Common Shares..................... Equity Index Fund, Class Y Class H, Series 3 Common Shares..................... Equity Index Fund, Class B Class H, Series 4 Common Shares..................... Equity Index Fund, Class C Class H, Series 5 Common Shares..................... Equity Index Fund, Class R Class I Common Shares............................... Intermediate Term Bond Fund, Class A Class I, Series 2 Common Shares..................... Intermediate Term Bond Fund, Class Y Class I, Series 3 Common Shares..................... Intermediate Term Bond Fund, Class B Class I, Series 4 Common Shares..................... Intermediate Term Bond Fund, Class C Class I, Series 5 Common Shares..................... Intermediate Term Bond Fund, Class R Class J Common Shares............................... Short Term Bond Fund, Class A Class J, Series 2 Common Shares..................... Short Term Bond Fund, Class Y Class J, Series 3 Common Shares..................... Short Term Bond Fund, Class B Class J, Series 4 Common Shares..................... Short Term Bond Fund, Class C Class J, Series 5 Common Shares..................... Short Term Bond Fund, Class R Class M Common Shares............................... Minnesota Intermediate Tax Free Fund, Class A Class M, Series 2 Common Shares..................... Minnesota Intermediate Tax Free Fund, Class Y Class M, Series 3 Common Shares..................... Minnesota Intermediate Tax Free Fund, Class B Class M, Series 4 Common Shares..................... Minnesota Intermediate Tax Free Fund, Class C Class N Common Shares............................... Colorado Intermediate Tax Free Fund, Class A Class N, Series 2 Common Shares..................... Colorado Intermediate Tax Free Fund, Class Y Class N, Series 3 Common Shares..................... Colorado Intermediate Tax Free Fund, Class B Class N, Series 4 Common Shares..................... Colorado Intermediate Tax Free Fund, Class C Class P Common Shares............................... Technology Fund, Class A Class P, Series 2 Common Shares..................... Technology Fund, Class Y Class P, Series 3 Common Shares..................... Technology Fund, Class B Class P, Series 4 Common Shares..................... Technology Fund, Class C Class P, Series 5 Common Shares..................... Technology Fund, Class R Class Q Common Shares............................... International Fund, Class A Class Q, Series 2 Common Shares..................... International Fund, Class Y Class Q, Series 3 Common Shares..................... International Fund, Class B Class Q, Series 4 Common Shares..................... International Fund, Class C Class Q, Series 5 Common Shares..................... International Fund, Class R Class T Common Shares............................... Equity Income Fund, Class A Class T, Series 2 Common Shares..................... Equity Income Fund, Class B Class T, Series 3 Common Shares..................... Equity Income Fund, Class Y Class T, Series 4 Common Shares..................... Equity Income Fund, Class C Class T, Series 5 Common Shares..................... Equity Income Fund, Class R 8 |
Class V Common Shares............................... Real Estate Securities Fund, Class A Class V, Series 2 Common Shares..................... Real Estate Securities Fund, Class B Class V, Series 3 Common Shares..................... Real Estate Securities Fund, Class Y Class V, Series 4 Common Shares..................... Real Estate Securities Fund, Class C Class V, Series 5 Common Shares..................... Real Estate Securities Fund, Class R Class X Common Shares............................... Oregon Intermediate Tax Free Fund, Class Y Class X, Series 2 Common Shares..................... Oregon Intermediate Tax Free Fund, Class A Class X, Series 3 Common Shares..................... Oregon Intermediate Tax Free Fund, Class C Class Y Common Shares............................... California Intermediate Tax Free Fund, Class A Class Y, Series 2 Common Shares..................... California Intermediate Tax Free Fund, Class Y Class Y, Series 3 Common Shares..................... California Intermediate Tax Free Fund, Class C Class AA Common Shares.............................. Small Cap Value Fund, Class A Class AA, Series 2 Common Shares.................... Small Cap Value Fund, Class B Class AA, Series 3 Common Shares.................... Small Cap Value Fund, Class Y Class AA, Series 4 Common Shares.................... Small Cap Value Fund, Class C Class AA, Series 5 Common Shares.................... Small Cap Value Fund, Class R Class DD Common Shares.............................. Tax Free Fund, Class A Class DD, Series 2 Common Shares.................... Tax Free Fund, Class B Class DD, Series 3 Common Shares.................... Tax Free Fund, Class Y Class DD, Series 4 Common Shares.................... Tax Free Fund, Class C Class EE Common Shares.............................. Minnesota Tax Free Fund, Class A Class EE, Series 2 Common Shares.................... Minnesota Tax Free Fund, Class B Class EE, Series 3 Common Shares.................... Minnesota Tax Free Fund, Class Y Class EE, Series 4 Common Shares.................... Minnesota Tax Free Fund, Class C Class HH Common Shares.............................. High Income Bond Fund, Class A Class HH, Series 2 Common Shares.................... High Income Bond Fund, Class B Class HH, Series 3 Common Shares.................... High Income Bond Fund, Class Y Class HH, Series 4 Common Shares.................... High Income Bond Fund, Class C Class HH, Series 5 Common Shares.................... High Income Bond Fund, Class R Class I I Common Shares............................. California Tax Free Fund, Class A Class I I, Series 2 Common Shares................... California Tax Free Fund, Class C Class I I, Series 3 Common Shares................... California Tax Free Fund, Class Y Class JJ Common Shares.............................. Arizona Tax Free Fund, Class A Class JJ, Series 2 Common Shares.................... Arizona Tax Free Fund, Class C Class JJ, Series 3 Common Shares.................... Arizona Tax Free Fund, Class Y Class KK Common Shares.............................. Colorado Tax Free Fund, Class A Class KK, Series 2 Common Shares.................... Colorado Tax Free Fund, Class C Class KK, Series 3 Common Shares.................... Colorado Tax Free Fund, Class Y Class LL Common Shares.............................. Corporate Bond Fund, Class A Class LL, Series 2 Common Shares.................... Corporate Bond Fund, Class B Class LL, Series 3 Common Shares.................... Corporate Bond Fund, Class C Class LL, Series 4 Common Shares.................... Corporate Bond Fund, Class Y Class LL, Series 5 Common Shares.................... Corporate Bond Fund, Class R Class MM Common Shares.............................. Nebraska Tax Free Fund, Class A Class MM, Series 2 Common Shares.................... Nebraska Tax Free Fund, Class C Class MM, Series 3 Common Shares.................... Nebraska Tax Free Fund, Class Y 9 |
Class QQ Common Shares.............................. Large Cap Growth Opportunities Fund, Class A Class QQ, Series 2 Common Shares.................... Large Cap Growth Opportunities Fund, Class B Class QQ, Series 3 Common Shares.................... Large Cap Growth Opportunities Fund, Class C Class QQ, Series 4 Common Shares.................... Large Cap Growth Opportunities Fund, Class Y Class QQ, Series 5 Common Shares.................... Large Cap Growth Opportunities Fund, Class R Class SS Common Shares.............................. Mid Cap Growth Opportunities Fund, Class A Class SS, Series 2 Common Shares.................... Mid Cap Growth Opportunities Fund, Class B Class SS, Series 3 Common Shares.................... Mid Cap Growth Opportunities Fund, Class C Class SS, Series 4 Common Shares.................... Mid Cap Growth Opportunities Fund, Class Y Class SS, Series 5 Common Shares.................... Mid Cap Growth Opportunities Fund, Class R Class TT Common Shares.............................. Small Cap Growth Opportunities Fund, Class A Class TT, Series 2 Common Shares.................... Small Cap Growth Opportunities Fund, Class B Class TT, Series 3 Common Shares.................... Small Cap Growth Opportunities Fund, Class C Class TT, Series 4 Common Shares.................... Small Cap Growth Opportunities Fund, Class Y Class TT, Series 5 Common Shares.................... Small Cap Growth Opportunities Fund, Class R Class UU Common Shares.............................. Small Cap Select Fund, Class A Class UU, Series 2 Common Shares.................... Small Cap Select Fund, Class B Class UU, Series 3 Common Shares.................... Small Cap Select Fund, Class C Class UU, Series 4 Common Shares.................... Small Cap Select Fund, Class Y Class UU, Series 5 Common Shares.................... Small Cap Select Fund, Class R Class WW Common Shares.............................. Mid Cap Index Fund, Class A Class WW, Series 2 Common Shares.................... Mid Cap Index Fund, Class B Class WW, Series 3 Common Shares.................... Mid Cap Index Fund, Class C Class WW, Series 4 Common Shares.................... Mid Cap Index Fund, Class Y Class WW, Series 5 Common Shares.................... Mid Cap Index Fund, Class R Class XX Common Shares.............................. Small Cap Index Fund, Class A Class XX, Series 2 Common Shares.................... Small Cap Index Fund, Class B Class XX, Series 3 Common Shares.................... Small Cap Index Fund, Class C Class XX, Series 4 Common Shares.................... Small Cap Index Fund, Class Y Class XX, Series 5 Common Shares.................... Small Cap Index Fund, Class R Class ZZ Common Shares.............................. U.S. Government Mortgage Fund, Class A Class ZZ, Series 2 Common Shares.................... U.S. Government Mortgage Fund, Class B Class ZZ, Series 3 Common Shares.................... U.S. Government Mortgage Fund, Class C Class ZZ, Series 4 Common Shares.................... U.S. Government Mortgage Fund, Class Y Class ZZ, Series 5 Common Shares.................... U.S. Government Mortgage Fund, Class R Class AAA Common Shares............................. Missouri Tax Free Fund, Class A Class AAA, Series 2 Common Shares................... Missouri Tax Free Fund, Class B Class AAA, Series 3 Common Shares................... Missouri Tax Free Fund, Class C Class BBB Common Shares............................. Ohio Tax Free Fund, Class A Class BBB, Series 2 Common Shares................... Ohio Tax Free Fund, Class C Class BBB, Series 3 Common Shares................... Ohio Tax Free Fund, Class Y Class CCC Common Shares............................. Short Tax Free Fund, Class A Class CCC, Series 2 Common Shares................... Short Tax Free Fund, Class Y Class DDD Common Shares............................. Intermediate Government Bond Fund, Class A Class DDD, Series 2 Common Shares................... Intermediate Government Bond Fund, Class Y Class EEE Common Shares............................. Large Cap Select Fund, Class A 10 |
Class EEE, Series 2 Common Shares................... Large Cap Select Fund, Class B Class EEE, Series 3 Common Shares................... Large Cap Select Fund, Class C Class EEE, Series 4 Common Shares................... Large Cap Select Fund, Class R Class EEE, Series 5 Common Shares................... Large Cap Select Fund, Class Y Class FFF Common Shares............................. Inflation Protected Securities Fund, Class A Class FFF, Series 2 Common Shares................... Inflation Protected Securities Fund, Class C Class FFF, Series 3 Common Shares................... Inflation Protected Securities Fund, Class R Class FFF, Series 4 Common Shares................... Inflation Protected Securities Fund, Class Y |
EXHIBIT (D)(2)
FIRST AMERICAN INVESTMENT FUNDS, INC.
EXHIBIT A TO INVESTMENT ADVISORY AGREEMENT
EFFECTIVE OCTOBER 1, 2004
ANNUAL ADVISORY FEE AS A PERCENTAGE OF AVERAGE DAILY NET PORTFOLIO EFFECTIVE DATE ASSETS --------- -------------- ------ Large Cap Value Fund (1) April 2, 1991 0.65% Mid Cap Value Fund April 2, 1991 0.70% Core Bond Fund April 2, 1991 0.50% Intermediate Tax Free Fund April 2, 1991 0.50% Intermediate Term Bond Fund September 15, 1992 0.50% Equity Index Fund September 15, 1992 0.25% Short Term Bond Fund September 15, 1992 0.50% Balanced Fund (1) September 15, 1992 0.65% Minnesota Intermediate Tax Free Fund December 31, 1993 0.50% Colorado Intermediate Tax Free Fund December 31, 1993 0.50% Technology Fund December 31, 1993 0.70% International Fund (2) December 31, 1993 1.10% Equity Income Fund (1) January 31, 1994 0.65% Real Estate Securities Fund June 12, 1995 0.70% Oregon Intermediate Tax Free Fund August 5, 1997 0.50% California Intermediate Tax Free Fund August 5, 1997 0.50% Small Cap Value Fund November 21, 1997 0.70% Tax Free Fund July 24, 1998 0.50% Minnesota Tax Free Fund July 24, 1998 0.50% California Tax Free Fund February 1, 2000 0.50% Arizona Tax Free Fund February 1, 2000 0.50% Colorado Tax Free Fund February 1, 2000 0.50% Corporate Bond Fund February 1, 2000 0.70% Nebraska Tax Free Fund February 28, 2001 0.50% High Income Bond Fund February 28, 2001 0.70% |
Large Cap Growth Opportunities Fund (1) May 2, 2001 0.65% Mid Cap Growth Opportunities Fund May 2, 2001 0.70% Small Cap Growth Opportunities Fund May 2, 2001 1.40% Small Cap Select Fund May 2, 2001 0.70% Mid Cap Index Fund May 2, 2001 0.25% Small Cap Index Fund May 2, 2001 0.40% U.S. Government Mortgage Fund May 2, 2001 0.50% Missouri Tax Free Fund May 2, 2001 0.50% Ohio Tax Free Fund April 30, 2002 0.50% Short Tax Free Fund October 25, 2002 0.50% Intermediate Government Bond Fund October 25, 2002 0.50% Large Cap Select Fund (1) December 4, 2002 0.65% Inflation Protected Securities Fund October 1, 2004 0.50% |
(1) The Adviser has agreed to a breakpoint schedule with each of Large Cap Growth Opportunities Fund, Large Cap Select Fund, Large Cap Value Fund, Balanced Fund and Equity Income Fund. The advisory fee paid separately by each of these funds will be based on an annual rate of 0.65% for the first $3 billion of each fund's average daily net assets; 0.625% for average daily net assets in excess of $3 billion up to $5 billion; and 0.60% for average daily net assets in excess of $5 billion.
(2) The Adviser has agreed to a breakpoint schedule with International Fund. The advisory fee paid by this fund will be based on an annual rate of 1.10% for the first $1.5 billion of the fund's average daily net assets; 1.05% for average daily net assets in excess of $1.5 billion up to $2.5 billion; and 1.00% for average daily net assets in excess of $2.5 billion.
EXHIBIT (G)(4)
FIRST AMERICAN INVESTMENT FUNDS, INC.
COMPENSATION AGREEMENT DATED AS OF OCTOBER 1, 2004
PURSUANT TO CUSTODIAN AGREEMENT
WHEREAS, First American Investment Funds, Inc., a Maryland corporation (hereinafter called the "Fund"), and First Trust National Association, a national banking association organized and existing under the laws of the United States of America, previously entered into that Custodian Agreement dated September 20, 1993 (the "Custodian Agreement"); and
WHEREAS, First Trust National Association, with the consent of the Fund, assigned its rights and obligations under the Custodian Agreement to U.S. Bank National Association, a national banking association organized and existing under the laws of the United States of America (the "Custodian") by an Assignment and Assumption Agreement dated as of May 1, 1998; and
WHEREAS, article 12 of the Custodian Agreement provides that the Custodian shall be paid compensation at such rates and at such times as may from time to time be agreed on in writing by the parties thereto.
NOW, THEREFORE, the Fund and the Custodian agree as follows:
1. Each series of the Fund, as now in existence or hereafter created from time to time, shall pay to the Custodian pursuant to the Custodian Agreement a monthly fee at an annual rate of 0.01% of the average daily net assets of such series. The Custodian shall pay sub-custodian fees with respect to those series that are authorized to utilize foreign sub-custodians out of the compensation payable to the Custodian by such series as set forth in the preceding sentence. The Fund shall reimburse the Custodian for all other out-of-pocket expenses incurred by the Custodian in connection with the performance of the Custodian's services under the Custodian Agreement.
2. This Compensation Agreement restates and supersedes all prior compensation agreements pursuant to Article 12 of the Custodian Agreement.
IN WITNESS WHEREOF, the Fund and the Custodian have caused this instrument to be executed in duplicate as of the date first above written by their duly authorized officers.
FIRST AMERICAN INVESTMENT FUNDS, INC.
By: /s/ Jeffery M. Wilson --------------------- Its: Vice President |
U.S. BANK NATIONAL ASSOCIATION
By: /s/ Mark Dowling ---------------- Its: Vice President |
[LOGO] DORSEY
DORSEY & WHITNEY LLP
EXHIBIT (I)
September 21, 2004
First American Investment Funds, Inc.
800 Nicollet Mall
Minneapolis, Minnesota 55402
Ladies and Gentlemen:
We have acted as counsel to First American Investment Funds, Inc., a Maryland corporation (the "Company"), in rendering the opinion hereinafter set forth with respect to the authorization of the following class and series of the Company's common shares, par value $0.001 per share, which are also known by the names set forth opposite their respective class and series designations:
Class and Series Name ---------------- ---- Class FFF Common Shares Inflation Protected Securities Fund, Class A Class FFF, Series 2 Common Shares Inflation Protected Securities Fund, Class C Class FFF, Series 3 Common Shares Inflation Protected Securities Fund, Class R Class FFF, Series 4 Common Shares Inflation Protected Securities Fund, Class Y |
The shares of the Company referred to above are referred to herein collectively as the "Shares."
We understand that the Shares are being registered under the Securities Act of 1933, as amended, and the Investment Company Act of 1940, as amended, pursuant to the Company's Registration Statement on Form N-1A relating to such shares (the "Registration Statement"). In rendering the opinion hereinafter expressed, we have reviewed the corporate proceedings taken by the Company in connection with the authorization and issuance of the Shares, and we have reviewed such questions of law and examined copies of such corporate records of the Company, certificates of public officials and of responsible officers of the Company, and other documents as we have deemed necessary as a basis for such opinion. As to the various matters of fact material to such opinion, we have, when such facts were not independently established, relied to the extent we deemed proper on certificates of public officials and of responsible officers of the Company. In connection with such review and examination, we have assumed that all copies of documents provided to us conform to the originals and that all signatures are genuine.
In addition, in rendering the opinion hereinafter expressed, we have assumed, with the concurrence of the Company, that all of the Shares will be issued and sold upon the terms and in the manner set forth in the Registration Statement; that the Company will not issue Shares in
[LOGO] DORSEY
September 21, 2004
excess of the numbers authorized in the Company's amended and restated articles of incorporation as in effect at the respective dates of issuance; and that the Company will maintain its corporate existence and good standing under the laws of the State of Maryland in effect at all times after the date of this opinion.
Based on the foregoing, it is our opinion that the Shares issued from and after the date hereof, when issued and delivered by the Company as described in the Registration Statement, will be legally issued and fully paid and non-assessable.
In rendering the foregoing opinion, we express no opinion as to the laws of any jurisdiction other than the State of Maryland. We hereby consent to the filing of this opinion letter as an exhibit to the Registration Statement.
Very truly yours,
/s/ Dorsey & Whitney LLP KLP |
EXHIBIT (N)(1)
FIRST AMERICAN INVESTMENT FUNDS, INC.
Multiple Class Plan Pursuant to Rule 18f-3
Adopted June 14, 1995
(as amended September 16, 2004, effective October 1, 2004)
I. PREAMBLE.
Each of the funds listed below (each a "Fund," and collectively the "Funds"), each a portfolio of First American Investment Funds, Inc. (the "Company"), has elected to rely on Rule 18f-3 under the Investment Company Act of 1940, as amended (the "1940 Act"), in offering multiple classes of shares in each Fund:
Real Estate Securities Fund Intermediate Term Bond Fund Technology Fund Short Term Bond Fund International Fund High Income Bond Fund Small Cap Growth Opportunities Fund U.S. Government Mortgage Fund Small Cap Select Fund Arizona Tax Free Fund Small Cap Value Fund California Intermediate Tax Free Fund Mid Cap Growth Opportunities Fund California Tax Free Fund Mid Cap Value Fund Colorado Intermediate Tax Free Fund Large Cap Growth Opportunities Fund Colorado Tax Free Fund Large Cap Select Fund Intermediate Tax Free Fund Large Cap Value Fund Minnesota Intermediate Tax Free Fund Equity Index Fund Minnesota Tax Free Fund Mid Cap Index Fund Missouri Tax Free Fund Small Cap Index Fund Nebraska Tax Free Fund Balanced Fund Ohio Tax Free Fund Equity Income Fund Oregon Intermediate Tax Free Fund Corporate Bond Fund Short Tax Free Fund Core Bond Fund Tax Free Fund Intermediate Government Bond Fund Inflation Protected Securities Fund |
This Plan sets forth the differences among classes of shares of the Funds, including distribution arrangements, shareholder services, expense allocations, conversion and exchange options, and voting rights.
II. ATTRIBUTES OF SHARE CLASSES.
The attributes of each existing class of the existing Funds (i.e. the Class A, Class B, Class C, Class R(1) and Class Y), with respect to distribution arrangements, shareholder services,
transfer agency services, and conversion and exchange options shall be as set forth in the following materials:
A. Class A, Class B and Class C Prospectuses of the respective Funds in the forms most recently filed with the Securities and Exchange Commission (the "SEC") prior to the date of this Plan as amended (with respect to the Class A, Class B and Class C shares of each Fund which offers such classes of shares).
B. Class R Prospectuses of the respective Funds in the forms most recently filed with the SEC prior to the date of this Plan as amended (with respect to the Class R shares of each Fund which offers such class of shares).
C. Class Y Prospectuses of the respective Funds in the forms most recently filed with the SEC prior to the date of this Plan as amended (with respect to the Class Y shares of each Fund).
D. Statement of Additional Information of the respective Funds in the form most recently filed with the SEC prior to the date of this Plan as amended (with respect to each Fund).
E. Class A Plan of Distribution in the form approved by the Board of Directors on June 4, 2003 (with respect to the Class A shares of each Fund).
F. Class B Plan of Distribution in the form approved by the Board of Directors on June 4, 2003 (with respect to the Class B shares of each Fund which offers such class of shares).
G. Class B Service Plan in the form approved by the Board of Directors on June 4, 2003 (with respect to the Class B shares of each Fund which offers such class of shares).
H. Class C Plan of Distribution in the form approved by the Board of Directors on June 4, 2003 (with respect to the Class C shares of each Fund which offers such class of shares).
I. Class C Service Plan in the form approved by the Board of Directors on June 4, 2003 (with respect to the Class C shares of each Fund which offers such class of shares).
J. Class R Plan of Distribution in the form approved by the Board of Directors on February 18, 2004 (with respect to the Class R shares of each Fund which offers such class of shares).
K. Class R Service Plan in the form approved by the Board of Directors on February 18, 2004 (with respect to the Class R shares of each Fund which offers such class of shares).
L. Co-Administration Agreement in the form approved by the Board of Directors on June 4, 2003 (with respect to each class of shares of each Fund).
Expenses of such existing classes of the Funds shall continue to be allocated in the manner set forth in III below. Each such existing class shall have exclusive voting rights on any matter submitted to shareholders that relates solely to its arrangement and shall have separate voting
rights on any matter submitted to shareholders in which the interests of one class differ from the interests of any other class.
III. EXPENSE ALLOCATIONS.
Expenses of the existing classes of the existing Funds shall be allocated as follows:
A. Distribution fees and service fees relating to the respective classes of shares, as set forth in the materials referred to in II above, shall be borne exclusively by the classes of shares to which they relate.
B. Except as set forth in A. above, expenses of the Funds shall be borne at the Fund level and shall not be allocated on a class basis.
Unless and until this Plan is amended to provide otherwise, the methodology and procedures for allocating income, realized gains and losses, unrealized appreciation and depreciation, and Fund-wide expenses shall be based on the net assets of each class in relation to the net assets of the company ("relative net assets") as set forth in Rule 18f-3(c)(1)(i).
The foregoing allocations shall in all cases be made in a manner consistent with Revenue Procedure 96-47 (Internal Revenue Code, Section 562) of the Internal Revenue Service.
IV. AMENDMENT OF PLAN; PERIODIC REVIEW.
A. New Funds and New Classes. With respect to any new portfolio of the Company created after the date of this Plan and any new class of shares of the existing Funds created after the date of this Plan, the Board of Directors of the Company shall approve amendments to this Plan setting forth the attributes of the classes of shares of such new portfolio or of such new class of shares.
B. Material Amendments and Periodic Reviews. The Board of Directors of the Company, including a majority of the independent directors, shall periodically review this Plan for its continued appropriateness and shall approve any material amendment of this Plan as it relates to any class of any Fund covered by this Plan.
EXHIBIT (Q)
FIRST AMERICAN FUNDS, INC.
FIRST AMERICAN INVESTMENT FUNDS, INC.
FIRST AMERICAN STRATEGY FUNDS, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned persons hereby constitute and appoint Thomas S. Schreier, Mark S. Jordahl, James D. Alt, Kathleen L. Prudhomme, Charles R. Manzoni, Brett L. Agnew and Jeffery M. Wilson, and each of them, his or her true and lawful attorneys-in-fact and agents, each acting along, with full power of substitution and re-substitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign a Registration Statement on Form N-1A of the above-referenced investment companies, and any and all amendments thereto, including post-effective amendments, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, each acting along, full power and authority to do and perform to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, each acting alone, or the substitutes for such attorneys-in-fact and agents, may lawfully do or cause to be done by virtue hereof.
Signature Title Date /s/ Benjamin R. Field, III Director September 15, 2004 ------------------------------------- Benjamin R. Field, III /s/ Roger A. Gibson Director September 15, 2004 ------------------------------------- Roger A. Gibson /s/ Mickey P. Foret Director September 15, 2004 ------------------------------------- Mickey P. Foret /s/ Leonard W. Kedrowski Director September 15, 2004 ------------------------------------- Leonard W. Kedrowski /s/ Richard K. Riederer Director September 15, 2004 ------------------------------------- Richard K. Riederer /s/ Victoria J. Herget Director September 15, 2004 ------------------------------------- Victoria J. Herget /s/ Joseph D. Strauss Director September 15, 2004 ------------------------------------- Joseph D. Strauss /s/ Virginia L. Stringer Chair September 15, 2004 ------------------------------------- Virginia L. Stringer /s/ James M. Wade Director September 15, 2004 ------------------------------------- James M. Wade |