STATEMENT OF ADDITIONAL INFORMATION

DECEMBER __, 2009

GLOBAL TACTICAL OPPORTUNITIES FUND

This Statement of Additional Information relates to the Class Y Shares of Global Tactical Opportunities 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 current Prospectus dated December __, 2009. This Statement of Additional Information is incorporated into the Fund's Prospectus by reference. To obtain copies of the Prospectus 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
   Asset Coverage Requirements...........................................      2
   Commodity-Linked Securities...........................................      2
   Debt Obligations......................................................      2
   Derivatives...........................................................      5
   Equity Securities.....................................................     12
   Exchange-Traded Funds.................................................     12
   Foreign Securities....................................................     12
   Money Market Funds....................................................     13
INVESTMENT RESTRICTIONS..................................................     13
DISCLOSURE OF PORTFOLIO HOLDINGS.........................................     15
      Public Disclosure..................................................     15
      Nonpublic Disclosure...............................................     15
DIRECTORS AND EXECUTIVE OFFICERS.........................................     18
      Independent Directors..............................................     18
      Executive Officers.................................................     19
      Standing Committees of the Board of Directors......................     21
      Fund Shares Owned by the Directors.................................     22
      Compensation.......................................................     23
CODE OF ETHICS...........................................................     24
PROXY VOTING POLICIES AND RECORDS........................................     24
INVESTMENT ADVISORY AND OTHER SERVICES FOR THE FUND......................     24
      Investment Advisor.................................................     24
      Additional Payments to Financial Intermediaries....................     25
      Administrator......................................................     29
      Transfer Agent.....................................................     29
      Distributor........................................................     29
      Custodian and Independent Registered Public Accounting Firm........     29
PORTFOLIO MANAGERS.......................................................     30
      Other Accounts Managed.............................................     30
      Compensation.......................................................     30
      Ownership of Fund Shares...........................................     31
PORTFOLIO TRANSACTIONS AND ALLOCATION OF BROKERAGE.......................     31
CAPITAL STOCK............................................................     32
NET ASSET VALUE AND PUBLIC OFFERING PRICE................................     33
TAXATION.................................................................     33
RECEIPT OF ORDERS BY FINANCIAL INTERMEDIARIES............................     34

ADDITIONAL INFORMATION ABOUT REDEEMING SHARES............................     34
      By Telephone.......................................................     34
      By Mail............................................................     35
      Redemptions Before Purchase Instruments Clear......................     35
RATINGS..................................................................    A-1
PROXY VOTING POLICIES AND PROCEDURES.....................................    B-1

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 shares in 41 series. Each series of shares represents a separate investment portfolio with its own investment objectives and policies (in essence, a separate mutual fund) (collectively, the "Funds" or "FAIF Funds"). This Statement of Additional Information relates to the series of FAIF known as the Global Tactical Opportunities Fund (the "Fund"). The Fund is an open-end diversified investment company. Class Y shares are the only class of shares available for purchase by shareholders.

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 Investment Company Act of 1940, as amended (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 investment advisory contracts and amendments thereto, and for amendments to Rule 12b-1 distribution plans (the Fund currently has not adopted a Rule 12b-1 distribution plan).

This Statement of Additional Information may also refer to affiliated investment companies, including: First American Funds, Inc. ("FAF"); First American Strategy Funds, Inc. ("FASF"); Mount Vernon Securities Lending Trust ("Mount Vernon Trust"); 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").

ADDITIONAL INFORMATION CONCERNING FUND INVESTMENTS

The principal investment strategies of the Fund are set forth in the Fund's Prospectus. Additional information concerning principal investment strategies of the Fund, and information on non-principal investment strategies that may be used by the Fund, is set forth below. The Fund has attempted to identify investment strategies that will be employed in pursuing the Fund's investment objective. 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 SAI or the Prospectus 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 limitations on borrowing. To the extent the Fund is limited to investing in securities with specified ratings or of a certain credit quality, the Fund 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"), Fitch, Inc. ("Fitch") and Moody's Investors Service, Inc. ("Moody's) are contained in Appendix A.

ASSET COVERAGE REQUIREMENTS

To the extent required by SEC guidelines, the Fund will only engage in transactions that expose it to an obligation to another party if it owns either
(a) an offsetting position for the same type of financial asset, or (b) cash or liquid securities, designated on the Fund's books or held in a segregated account, with a value sufficient at all times to cover its potential obligations not covered as provided in (a). Examples of transactions governed by these asset coverage requirements include, for example, options written by the Fund, futures contracts and options on futures contracts, and swaps. Assets used as offsetting positions, designated on the Fund's books, or held in a segregated account cannot be sold while the positions requiring cover are open unless replaced with other appropriate assets. As a result, the commitment of a large portion of assets to be used as offsetting positions or to be designated or segregated in such a manner could impede portfolio management or the ability to meet redemption requests or other current obligations.

COMMODITY-LINKED SECURITIES

As a principal investment strategy, the Fund may invest in commodity-linked exchange-traded funds ("ETFs") and derivative securities, which are designed to provide investment exposure to commodities without direct investment in physical commodities or commodities futures contracts. Commodities to which the Fund may gain exposure include assets such as oil, gas, industrial and precious metals, livestock, and agricultural or meat products, or other items that have tangible properties. The Fund may invest in securities that give it exposure to various commodities and commodity sectors. The value of commodity-linked securities held by the Fund may be affected by a variety of factors, including, but not limited to, overall market movements and other factors affecting the value of particular industries or commodities, such as weather, disease, embargoes, acts of war or terrorism, or political and regulatory developments.

The prices of commodity-linked securities may move in different directions than investments in traditional equity and debt securities. For example, during periods of rising inflation, debt securities have historically tended to decline in value due to the general increase in prevailing interest rates. Conversely, during those same periods of rising inflation, the prices of certain commodities, such as oil and metals, have historically tended to increase. Of course, there cannot be any guarantee that these investments will perform in that manner in the future, and at certain times the price movements of commodity-linked securities have been parallel to those of debt and equity securities. Commodities have historically tended to increase and decrease in value during different parts of the business cycle than financial assets. Nevertheless, at various times, commodities prices may move in tandem with the prices of financial assets and thus may not provide overall portfolio diversification benefits.

DEBT OBLIGATIONS

The Fund may invest in instruments that give it exposure to debt obligations as a principal investment strategy. These include U.S. Treasury obligations, corporate debt securities, sovereign debt obligations, inflation protected

securities, exchange-traded notes, and short-term obligations of the kinds described below under "Short-Term Investments." The Fund's investments in debt obligations may include securities that are rated below investment-grade.

The debt obligations specified above are subject to (i) interest rate risk (the risk that increases in market interest rates will cause declines in the value of debt securities held by the Fund); and (ii) credit risk (the risk that the issuers of debt securities held by the Fund default in making required payments).

Corporate Debt Securities. Corporate debt securities are fully taxable debt obligations issued by corporations. These securities fund capital improvements, expansions, debt refinancing or acquisitions that require more capital than would ordinarily be available from a single lender. Investors in corporate debt securities lend money to the issuing corporation in exchange for interest payments and repayment of the principal at a set maturity date. Rates on corporate debt securities are set according to prevailing interest rates at the time of the issue, the credit rating of the issuer, the length of the maturity and other terms of the security, such as a call feature. Corporate debt securities are subject to the risk of an issuer's inability to meet principal and interest payments on the obligations and may also be subject to price volatility due to such factors as market interest rates, market perception of the creditworthiness of the issuer and general market liquidity. In addition, corporate restructurings, such as mergers, leveraged buyouts, takeovers or similar corporate transactions are often financed by an increase in a corporate issuer's debt securities. As a result of the added debt burden, the credit quality and market value of an issuer's existing debt securities may decline significantly.

Sovereign Debt Obligations. The Fund may invest in instruments that give it exposure to sovereign debt obligations. Investments in sovereign debt obligations involve special risks which are not present in corporate debt securities. The foreign issuer of the sovereign debt or the foreign governmental authorities that control the repayment of the debt may be unable or unwilling to repay principal or interest when due, and there may be limited recourse in the event of a default. During periods of economic uncertainty, the market prices of sovereign debt, and the net asset value of the Fund, to the extent it invests in such securities, may be more volatile than prices of U.S. debt issuers. In the past, certain foreign countries have encountered difficulties in servicing their debt obligations, withheld payments of principal and interest and declared moratoria on the payment of principal and interest on their sovereign debt.

A sovereign debtor's willingness or ability to repay principal and pay interest in a timely manner may be affected by, among other factors, its cash flow situation, the extent of its foreign currency reserves, the availability of sufficient foreign exchange, the relative size of the debt service burden, the sovereign debtor's policy toward principal international lenders and local political constraints. Sovereign debtors may also be dependent on expected disbursements from foreign governments, multilateral agencies and other entities to reduce principal and interest arrearages on their debt. The failure of a sovereign debtor to implement economic reforms, achieve specified levels of economic performance or repay principal or interest when due may result in the cancellation of third party commitments to lend funds to the sovereign debtor, which may further impair such debtor's ability or willingness to service its debts.

Debt Obligations Rated Less than Investment Grade. The Fund may invest in instruments that give it exposure to non-investment grade debt obligations. Debt obligations rated less than "investment grade" are sometimes referred to as "high yield securities" or "junk bonds." The Fund considers a debt obligation to be rated "investment grade" if two of Moody's, Standard & Poor's and Fitch rate the security investment-grade (i.e. at least Baa, BBB and BBB, respectively). If ratings are provided by only two of those rating agencies, the more conservative rating is used to determine whether the security is investment-grade. If only one of those rating agencies provides a rating, that rating is used.

Yields on non-investment grade debt obligations will fluctuate over time. The prices of such obligations have been found to be less sensitive to interest rate changes than higher rated obligations, but more sensitive to adverse economic changes or individual corporate developments. Also, during an economic downturn or period of rising interest rates, highly leveraged issuers may experience financial stress which could adversely affect their ability to service principal and interest payment obligations, to meet projected business goals, and to obtain additional financing. In addition, periods of economic uncertainty and changes can be expected to result in increased volatility of market prices of non-investment grade debt obligations.

In addition, the secondary trading market for non-investment grade debt obligations may be less developed than the market for investment grade obligations. This may make it more difficult to value and dispose of such obligations. Adverse publicity and investor perceptions, whether or not based on fundamental analysis, may decrease the values and liquidity of non-investment grade obligations, especially in a thin secondary trading market.

Certain risks also are associated with the use of credit ratings as a method for evaluating non-investment grade debt obligations. For example, credit ratings evaluate the safety of principal and interest payments, not the market value risk of such obligations. In addition, credit rating agencies may not timely change credit ratings to reflect current events.

U.S. Treasury Obligations. The Fund may invest in direct obligations of the U.S. Treasury, such as U.S. Treasury bills, notes, and bonds. U.S. Treasury obligations are supported by the full faith and credit of the United States.

Inflation Protected Securities. The Fund may invest in inflation protected securities as a principal investment strategy. Two structures are common. The U.S. Treasury and some other issuers use a structure that accrues inflation into the principal value of the bond. Most other issuers pay out the inflation accruals as part of a semiannual coupon.

Inflation protected securities issued by the U.S. Treasury have maturities of five, ten, twenty or thirty years, although it is possible that securities with other maturities will be issued in the future. The U.S. Treasury securities pay interest on a semi-annual basis, equal to a fixed percentage of the inflation-adjusted principal amount. For example, if the Fund purchased an inflation protected bond with a par value of $1,000 and a 3% real rate of return coupon (payable 1.5% semi-annually), and inflation over the first six months were 1%, the mid-year par value of the bond would be $1,010 and the first semi-annual interest payment would be $15.15 ($1,010 times 1.5%). If inflation during the second half of the year resulted in the whole years' inflation equaling 3%, the end-of-year par value of the bond would be $1,030 and the second semi-annual interest payment would be $15.45 ($1,030 times 1.5%).

If the periodic adjustment rate measuring inflation falls, the principal value of U.S. Treasury inflation protected securities will be adjusted downward, and consequently the interest payable on these securities (calculated with respect to a smaller principal amount) will be reduced. Repayment of the original bond principal upon maturity (as adjusted for inflation) is guaranteed in the case of U.S. Treasury inflation protected bonds, even during a period of deflation. However, the current market value of the bonds is not guaranteed, and will fluctuate. Other inflation-protected securities that accrue inflation into their principal value may or may not provide a similar guarantee. If a guarantee of principal is not provided, the adjusted principal value of the bond repaid at maturity may be less than the original principal.

The value of inflation-protected securities is expected to change in response to changes in real interest rates. Real interest rates in turn are tied to the relationship between nominal interest rates and the rate of inflation. Therefore, if inflation were to rise at a faster rate than nominal interest rates, real interest rates might decline, leading to an increase in value of inflation protected securities. In contrast, if nominal interest rates increased at a faster rate than inflation, real interest rates might rise, leading to a decrease in value of inflation-protected securities.

The periodic adjustment of U.S. inflation protected bonds is tied to the Consumer Price Index for Urban Consumers ("CPI-U"), which is calculated monthly by the U.S. Bureau of Labor Statistics. The CPI-U is a measurement of changes in the cost of living, made up of components such as housing, food, transportation and energy. Inflation

protected securities issued by a foreign government are generally adjusted to reflect a comparable inflation index, calculated by that government. 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.

While inflation protected securities are expected to be protected from long-term inflationary trends, short-term increases in inflation may lead to a decline in value. The calculation of the inflation index ratio for inflation protected securities issued by the U.S. Treasury incorporates an approximate three-month lag, which may have an effect on the trading price of the securities, particularly during periods of significant, rapid changes in the inflation index. To the extent that inflation has increased during the three months prior to an interest payment, that interest payment will not be protected from the inflation increase. Further, to the extent that inflation has increased during the final three months of a security's maturity, the final value of the security will not be protected against that increase, which will negatively impact the value of the security. If interest rates rise due to reasons other than inflation (for example, due to changes in currency exchange rates), investors in inflation-protected securities may not be protected to the extent that the increase is not reflected in the bond's inflation measure.

Any increase in the principal amount of an inflation-protected security will be considered taxable income to the Fund, even though the Fund does not receive its principal until maturity.

DERIVATIVES

The Fund may use derivative instruments as a principal investment strategy. Generally, a derivative is a financial contract the value of which depends upon, or is derived from, the value of an underlying asset, reference rate or index. Derivatives generally take the form of contracts under which the parties agree to payments between them based upon the performance of a wide variety of underlying references, such as stocks, bonds, commodities, interest rates, currency exchange rates, and various domestic and foreign indexes. Derivative instruments the Fund may use include options contracts, futures contracts, options on futures contracts and swap transactions, all of which are described in more detail below.

The Fund may use derivatives for a variety of reasons, including as a substitute for investing directly in securities and currencies, as an alternative to selling a security short, as part of a hedging strategy (that is, for the purpose of reducing risk to the Fund), to manage the effective duration of the Fund's portfolio, or for other purposes related to the management of the Fund. Derivatives permit the Fund to increase or decrease the level of risk, or change the character of the risk, to which its portfolio is exposed in much the same way as the Fund can increase or decrease the level of risk, or change the character of the risk, of its portfolio by making investments in specific securities. However, derivatives may entail investment exposures that are greater than their cost would suggest. As a result, a small investment in derivatives could have a large impact on the Fund's performance.

Derivatives can be volatile and involve various types and degrees of risk, depending upon the characteristics of the particular derivative and the portfolio as a whole. If the Fund invests in derivatives at inopportune times or judges market conditions incorrectly, such investments may lower the Fund's return or result in a loss. The Fund also could experience losses if its derivatives are poorly correlated with the underlying instruments or the Fund's other investments, or if the Fund is unable to liquidate its position because of an illiquid secondary market. The market for derivatives is, or suddenly can become, illiquid. Changes in liquidity may result in significant, rapid and unpredictable changes in the prices for derivatives.

While some derivatives may be purchased on established exchanges, many other derivatives are privately negotiated and entered into in the over-the-counter market. Exchange-traded derivatives generally are guaranteed by the clearing agency. Over-the-counter derivatives have no such guarantee, and each party to an over-the-counter derivative bears the risk that the counterparty will default. In addition, over-the-counter derivatives are less liquid than exchange-traded derivatives since the other party to the transaction may be the only investor with sufficient understanding of the derivative to be interested in bidding for it.

Some derivatives involve leverage. For example, an instrument linked to the value of a securities index may return income calculated as a multiple of the price movement of the underlying index. This leverage will increase the volatility of these derivatives since they may increase or decrease in value more quickly than the underlying

instruments. As discussed under "Asset Coverage Requirements," the Fund may be required to segregate permissible liquid assets, or engage in other permitted measures, to "cover" the Fund's obligations relating to its transactions in derivatives. For example, in the case of futures contracts that are not contractually required to cash settle, the Fund must set aside liquid assets equal to such contracts' full notional value (generally, the total numerical value of the asset underlying a future contract at the time of valuation) while the positions are open. With respect to futures contracts that are contractually required to cash settle, however, the Fund is permitted to set aside liquid assets in an amount equal to the Fund's daily marked-to-market net obligation (i.e., the Fund's daily net liability) under the contracts, if any, rather than such contracts' full notional value. By setting aside assets equal to only its net obligations under cash-settled futures contracts, the Fund may employ leverage to a greater extent than if the Fund were required to segregate assets equal to the full notional value of such contracts.

The particular derivative instruments the Fund can use are described below. The Fund's portfolio managers may decide not to employ some or all of these instruments, and there is no assurance that any derivatives strategy used by the Fund will succeed. The Fund may employ new derivative instruments and strategies when they are developed, if those investment methods are consistent with the Fund's investment objective and are permissible under applicable regulations governing the Fund.

Futures and Options on Futures.

The Fund may engage in futures transactions as a principal investment strategy. The Fund may buy and sell futures contracts that relate to (1) stock indices, (2) individual stocks, (3) bond indices, (4) debt securities, (5) commodities and commodities indices, and (6) foreign currencies. The Fund also may buy and sell options on the futures contracts in which they may invest ("futures options").

A futures contract is an agreement between two parties to buy and sell a financial instrument or commodity for a set price on a future date. While futures contracts generally call for making or taking delivery of the underlying financial instrument or commodity, these contracts generally are closed out before delivery by entering into an offsetting purchase or sale of a matching futures contract (same exchange, underlying financial instrument or commodity, and delivery month). A futures contract on an index, on the other hand, is an agreement pursuant to which two parties agree to take or make delivery of an amount of cash equal to the difference between the value of the index at the close of the last trading day of the contract and the price at which the index contract was originally written. Although the value of an index might be a function of the value of certain specified securities, no physical delivery of these securities is called for. These contracts also may be settled by entering into by an offsetting futures position.

Unlike when the Fund purchases or sells a security, no price is paid or received by the Fund upon the purchase or sale of a futures contract. Initially, the Fund will be required to deposit with the futures broker, known as a futures commission merchant ("FCM"), an amount of cash or securities equal to a varying specified percentage of the contract amount. This amount is known as initial margin. The margin deposit is intended to ensure completion of the contract. Minimum initial margin requirements are established by the futures exchanges and may be revised. In addition, brokers may establish margin deposit requirements that are higher than the exchange minimums. Cash held in the margin account generally is not income producing. However, coupon-bearing securities, such as Treasury securities, held in margin accounts generally will earn income. Subsequent payments to and from the FCM, called variation margin, will be made on a daily basis as the price of the underlying financial instrument or commodity fluctuates, making the future more or less valuable, a process known as marking the contract to market. Changes in variation margin are recorded by the Fund as unrealized gains or losses. At any time prior to expiration of the futures contract, the Fund may elect to close the position by taking an opposite position that will operate to terminate its position in the futures contract. A final determination of variation margin is then made, additional cash is required to be paid by or released to the Fund, and the Fund realizes a gain or loss. In the event of the bankruptcy or insolvency of an FCM that holds margin on behalf of the Fund, the Fund may be entitled to the return of margin owed to it only in proportion to the amount received by the FCM's other customers, potentially resulting in losses to the Fund. Futures transactions also involve brokerage costs and the Fund may have to segregate additional liquid assets in accordance with applicable SEC requirements. See "Asset Coverage Requirements."

A futures option gives the holder the right, in return for the premium paid, to assume a long position (call) or short position (put) in a futures contract at a specified exercise price at any time during the period of the option. Upon exercise of a call option, the holder acquires a long position in the futures contract and the writer is assigned the opposite short position. Upon the exercise of a put option, the opposite is true. Futures options possess many of the same characteristics as options on securities, currencies and indexes (discussed below under "--Options Transactions").

The Fund may write covered straddles consisting of a call and a put written on the same underlying futures contract. A straddle will be covered when sufficient assets are deposited to meet the Fund's immediate obligations.

Limitations on the Use of Futures and Futures Options. The Commodities Futures Trading Commission has eliminated limitations on futures trading by certain regulated entities including registered investment companies. Consequently, registered investment companies may engage in unlimited futures transactions and options thereon provided they have claimed an exclusion from regulation as a commodity pool operator. First American Investment Funds, Inc., on behalf of each of its series, has claimed such an exclusion. Thus, the Fund may use futures contracts and options thereon to the extent consistent with its investment objective. The requirements for qualification as a regulated investment company may limit the extent to which the Fund may enter into futures transactions. See "Taxation."

Risks Associated with Futures and Futures Options. There are risks associated with the use of futures contracts and futures options. A purchase or sale of a futures contract may result in a loss in excess of the amount invested in the futures contract. Successful use of futures by the Fund is subject to the Advisor's ability to predict correctly movements in the direction of the relevant market and, to the extent the transaction is entered into for hedging purposes, to ascertain the appropriate correlation between the securities being hedged and the price movements of the futures contract. For example, if the Fund uses futures to hedge against the possibility of a decline in the market value of securities held in its portfolio and the prices of such securities increase instead, the Fund will lose part or all of the benefit of the increased value of the securities which it has hedged because it will have offsetting losses in its futures positions. Furthermore, if in such circumstances the Fund has insufficient cash, it may have to sell securities to meet daily variation margin requirements. The Fund may have to sell such securities at a time when it may be disadvantageous to do so.

There can be no assurance that a liquid market will exist at a time when the Fund seeks to close out a futures or a futures option position, and the Fund would remain obligated to meet margin requirements until the position is closed. Futures exchanges may limit the amount of fluctuation permitted in certain futures contract prices during a single trading day. The daily limit establishes the maximum amount that the price of a futures contract may vary either up or down from the previous day's settlement price at the end of the current trading session. Once the daily limit has been reached in a futures contract subject to the limit, no more trades may be made on that day at a price beyond that limit. The daily limit governs only price movements during a particular trading day and therefore does not limit potential losses because the limit may work to prevent the liquidation of unfavorable positions. For example, futures prices have occasionally moved to the daily limit for several consecutive trading days with little or no trading, thereby preventing prompt liquidation of positions and subjecting some holders of futures contracts to substantial losses.

Additional Risks Associated with Commodity Futures Contracts. There are several additional risks associated with transactions in commodity futures contracts.

Storage. Unlike the financial futures markets, in the commodity futures markets there are costs of physical storage associated with purchasing the underlying commodity. The price of the commodity futures contract will reflect the storage costs of purchasing the physical commodity, including the time value of money invested in the physical commodity. To the extent that the storage costs for an underlying commodity change while the Fund is invested in futures contracts on that commodity, the value of the futures contract may change proportionately.

Reinvestment. In the commodity futures markets, producers of the underlying commodity may decide to hedge the price risk of selling the commodity by selling futures contracts today to lock in the price of the commodity at delivery tomorrow. In order to induce speculators to purchase the other side of the same futures contract, the commodity producer generally must sell the futures contract at a lower price than the expected future spot price. Conversely, if most hedgers in the futures market are purchasing futures contracts to hedge against a rise in prices, then speculators will only sell the other side of the futures contract at a higher futures price than the expected future spot price of the commodity. The changing nature of the hedgers and speculators in the commodity markets will influence whether futures prices are above or below the expected future spot price, which can have significant implications for the Fund. If the nature of hedgers and speculators in futures markets has shifted when it is time for the Fund to reinvest the proceeds of a maturing contract in a new futures contract, the Fund might reinvest at higher or lower futures prices, or choose to pursue other investments.

Other Economic Factors. The commodities which underlie commodity futures contracts may be subject to additional economic and non-economic variables, such as drought, floods, weather, livestock disease, embargoes, tariffs, and international economic, political and regulatory developments. These factors may have a larger impact on commodity prices and commodity-linked instruments, including futures contracts, than on traditional securities. Certain

commodities are also subject to limited pricing flexibility because of supply and demand factors. Others are subject to broad price fluctuations as a result of the volatility of the prices for certain raw materials and the instability of supplies of other materials. These additional variables may create additional investment risks which subject the Fund's investments to greater volatility than investments in traditional securities.

Options Transactions

To the extent set forth below, the Fund may purchase put and call options on specific securities (including groups or "baskets" of specific securities), stock indices, interest rate indices, commodity indices, and/or foreign currencies. In addition, the Fund may write put and call options on such financial instruments. Options on futures contracts are discussed above under "-- Futures and Options on Futures."

Options on Securities. As a principal investment strategy, the Fund may purchase put and call options on securities they own or have the right to acquire. A put option on a security gives the purchaser of the option the right (but not the obligation) to sell, and the writer of the option the obligation to buy, the underlying security at a stated price (the "exercise price") at any time before the option expires. A call option on a security gives the purchaser the right (but not the obligation) to buy, and the writer the obligation to sell, the underlying security at the exercise price at any time before the option expires. The purchase price for a put or call option is the "premium" paid by the purchaser for the right to sell or buy.

The Fund may purchase put options to hedge against a decline in the value of its portfolio. By using put options in this way, the Fund would reduce any profit it might otherwise have realized in the underlying security by the amount of the premium paid for the put option and by transaction costs. In similar fashion, the Fund may purchase call options to hedge against an increase in the price of securities that the Fund anticipates purchasing in the future. The premium paid for the call option plus any transaction costs will reduce the benefit, if any, realized by the Fund upon exercise of the option, and, unless the price of the underlying security rises sufficiently, the option may expire unexercised.

Options on Interest Rate and Commodity Indices. As principal investment strategies, the Fund may purchase put and call options on interest rate indices and Inflation commodity indices. An option on an index gives the holder the right to receive, upon exercise of the option, an amount of cash if the closing value of the index upon which the option is based is greater than, in the case of a call, or less than, in the case of a put, the exercise price of the option. This amount of cash is equal to the difference between the closing price of the index and the exercise price of the option expressed in dollars times a specified multiple (the "multiplier"). The writer of the option is obligated, for the premium received, to make delivery of this amount. Settlements for index options are always in cash. Gain or loss depends on market movements with respect to specific financial instruments or commodities. The multiplier for index options determines the total dollar value per contract of each point in the difference between the exercise price of an option and the current value of the underlying index. Options on different indices may have different multipliers.

Options on Currencies. The Fund may purchase put and call options on foreign currencies as a principal investment strategy. A foreign currency option provides the option buyer with the right to buy or sell a stated amount of foreign currency at the exercise price at a specified date or during the option period. A call option gives its owner the right, but not the obligation, to buy the currency, while a put option gives its owner the right, but not the obligation, to sell the currency. The option seller (writer) is obligated to fulfill the terms of the option sold if it is exercised. However, either seller or buyer may close its position during the option period in the secondary market for such options at any time prior to expiration.

A foreign currency call option rises in value if the underlying currency appreciates. Conversely, a foreign currency put option rises in value if the underlying currency depreciates. While purchasing a foreign currency option may protect the Fund against an adverse movement in the value of a foreign currency, it would limit the gain which might result from a favorable movement in the value of the currency. For example, if the Fund were holding securities denominated in an appreciating foreign currency and had purchased a foreign currency put to hedge against a decline in the value of the currency, it would not have to exercise its put. In such an event, however, the amount of the Fund's gain would be offset in part by the premium paid for the option. Similarly, if the Fund entered into a contract to purchase a security denominated in a foreign currency and purchased a foreign currency call to hedge against a rise in the value of the currency between the date of purchase and the settlement date, the Fund would not need to exercise its call if the currency instead depreciated in value. In such a case, the Fund could acquire the amount of foreign currency needed for settlement in the spot market at a lower price than the exercise price of the option.

Writing Options. The Fund may write (sell) covered put and call options as a principal investment strategy. These transactions would be undertaken principally to produce additional income. The Fund may write covered straddles consisting of a combination of a call and a put written on the same underlying instrument.

The Fund will write options only if they are "covered." In the case of a call option on a security, the option is "covered" if the Fund owns the security underlying the call or has an absolute and immediate right to acquire that security without additional cash consideration (or, if additional cash consideration is required, cash or other liquid assets in such amount are segregated) upon conversion or exchange of the securities held by the Fund. For a call option on an index or currency, the option is covered if the Fund segregates liquid assets in an amount equal to the contract value of the index or currency. A call option is also covered if the Fund holds a call on the same security, index or currency as the call written where the exercise price of the call held is (i) equal to or less than the exercise price of the call written, or (ii) greater than the exercise price of the call written, provided the difference is maintained by the Fund in segregated liquid assets. A put option on a security, currency or index is "covered" if the Fund segregates liquid assets equal to the exercise price. A put option is also covered if the Fund holds a put on the same security, currency or index as the put written where the exercise price of the put held is (i) equal to or greater than the exercise price of the put written, or (ii) less than the exercise price of the put written, provided the difference is maintained by the Fund in segregated liquid assets. A straddle will be covered when sufficient assets are deposited to meet the Fund's immediate obligations. The Fund may use the same liquid assets to cover both the call and put options where the exercise price of the call and put are the same, or the exercise price of the call is higher than that of the put. In such cases, the Fund will also segregate liquid assets equivalent to the amount, if any, by which the put is "in the money."

Expiration or Exercise of Options. If an option written by the Fund expires unexercised, the Fund realizes a capital gain equal to the premium received at the time the option was written. If an option purchased by the Fund expires unexercised, the Fund realizes a capital loss equal to the premium paid. Prior to the earlier of exercise or expiration, an exchange traded option may be closed out by an offsetting purchase or sale of an option of the same series (type, exchange, underlying security, currency or index, exercise price, and expiration). There can be no assurance, however, that a closing purchase or sale transaction can be effected when the Fund desires.

The Fund may sell put or call options it has previously purchased, which could result in a net gain or loss depending on whether the amount realized on the sale is more or less than the premium and other transaction costs paid on the put or call option which is sold. Prior to exercise or expiration, an option may be closed out by an offsetting purchase or sale of an option of the same series. The Fund will realize a capital gain from a closing purchase transaction if the cost of the closing option is less than the premium received from writing the option, or, if it is more, the Fund will realize a capital loss. If the premium received from a closing sale transaction is more than the premium paid to purchase the option, the Fund will realize a capital gain or, if it is less, the Fund will realize a capital loss. The principal factors affecting the market value of a put or a call option include supply and demand, interest rates, the current market price of the underlying security, currency or index in relation to the exercise price of the option, the volatility of the underlying security, currency or index, and the time remaining until the expiration date.

The premium paid for a put or call option purchased by the Fund is an asset of the Fund. The premium received for an option written by the Fund is recorded as a deferred credit. The value of an option purchased or written is marked to market daily and is valued at the closing price on the exchange on which it is traded or, if not traded on an exchange or no closing price is available, at the mean between the last bid and asked price.

Risks Associated with Options Transactions. There are several risks associated with options transactions. For example, there are significant differences between the securities and options markets that could result in an imperfect correlation between these markets, causing a given transaction not to achieve its objectives. A decision as to whether, when and how to use options involves the exercise of skill and judgment, and even a well-conceived transaction may be unsuccessful to some degree because of market behavior or unexpected events.

If a put or call option purchased by the Fund is not sold when it has remaining value, and if the market price of the underlying security remains equal to or greater than the exercise price (in the case of a put) or remains less than or equal to the exercise price (in the case of a call), the Fund will lose its entire investment in the option. Also, where a put or call option on a particular security is purchased to hedge against price movements in a related security, the price of the put or call option may move more or less than the price of the related security.

There can be no assurance that a liquid market will exist when the Fund seeks to close out an option position. If the Fund were unable to close out an option that it had purchased on a security, it would have to exercise the option in order to realize any profit or the option may expire worthless. If the Fund were unable to close out a covered call option that it had written on a security, it would not be able to sell the underlying security unless the option expired without exercise.

If trading were suspended in an option purchased by the Fund, the Fund would not be able to close out the option. If restrictions on exercise were imposed, the Fund might be unable to exercise an option it had purchased. Except to the extent that a call option on an index written by the Fund is covered by an option on the same index purchased by the Fund, movements in the index may result in a loss to the Fund; however, such losses may be mitigated by changes in the value of the Fund's securities during the period the option was outstanding.

With respect to options written by the Fund, during the option period, the covered call writer has, in return for the premium on the option, given up the opportunity to profit from a price increase in the underlying security above the exercise price, but, as long as its obligation as a writer continues, has retained the risk of loss should the price of the underlying security decline. The writer of an option has no control over the time when it may be required to fulfill it obligations as a writer of the option. Once an option writer has received an exercise notice, it cannot effect a closing purchase transaction in order to terminate its obligation under the option and must deliver the underlying security at the exercise price.

Swap Transactions

The Fund may enter into total return, interest rate, currency and credit default swap agreements and interest rate caps, floors and collars as a principal investment strategy. The Fund may also enter into options on the foregoing types of swap agreements ("swap options").

The Fund may enter into swap transactions for any purpose consistent with its investment objectives and strategies, such as for the purpose of attempting to obtain or preserve a particular return or spread at a lower cost than obtaining a return or spread through purchases and/or sales of instruments in other markets, to protect against currency fluctuations, as a duration management technique, to protect against an increase in the price of securities the Fund anticipates purchasing at a later date, to reduce risk arising from the ownership of a particular security or instrument, or to gain exposure to certain markets in the most economical way possible.

Swap agreements are two party contracts entered into primarily by institutional investors for a specified period of time. In a standard swap transaction, two parties agree to exchange the returns (or differentials in rates of return) earned or realized on a particular predetermined asset, reference rate or index. The gross returns to be exchanged or swapped between the parties are generally calculated with respect to a notional amount, e.g., the return on or increase in value of a particular dollar amount invested at a particular interest rate or in a basket of securities representing a particular index. The notional amount of the swap agreement generally is only used as a basis upon which to calculate the obligations that the parties to the swap agreement have agreed to exchange. The Fund's current obligations under a net swap agreement will be accrued daily (offset against any amounts owed to the Fund) and any accrued but unpaid net amounts owed to a swap counterparty will be covered by assets determined to be liquid by the Advisor. See "Asset Coverage Requirements."

Interest Rate Swaps, Caps, Collars and Floors. Interest rate swaps are bilateral contracts in which each party agrees to make a periodic interest payment based on an index or the value of an asset in return for a periodic payment from the other party based on a different index or asset. The purchase of an interest rate floor entitles the purchaser, to the extent that a specified index falls below a predetermined interest rate, to receive payments of interest on a notional principal amount from the party selling such interest rate floor. The purchase of an interest rate cap entitles the purchaser, to the extent that a specified index rises above a predetermined interest rate, to receive payments of interest on a notional principal amount from the party selling such interest rate cap. Interest rate collars involve selling a cap and purchasing a floor or vice versa to protect the Fund against interest rate movements exceeding given minimum or maximum levels.

Currency Swaps. A currency swap is an agreement between two parties to exchange equivalent fixed amounts in two different currencies for a fixed period of time. For the duration of the swap each party pays interest to the other on the received amount at an agreed upon fixed or floating interest rate. When the contract ends, the parties re-exchange the fixed notional amount of the swap.

Total Return Swaps. In a total return swap, one party agrees to pay the other the "total return" of a defined underlying asset during a specified period, in return for periodic payments based on a fixed or variable interest rate or the total return from other underlying assets. A total return swap may be applied to any underlying asset but is most commonly used with equity indices, single stocks, bonds and defined baskets of loans and mortgages. The Fund might enter into a total return swap involving an underlying index or basket of securities to create exposure to a potentially widely-diversified range of securities in a single trade. An index total return swap can be used by a portfolio manager to assume risk, without the complications of buying the component securities from what may not always be the most liquid of markets.

Credit Default Swaps. A credit default swap is a bilateral contract that enables an investor to buy or sell protection against a defined-issuer credit event. The Fund may enter into credit default swap agreements either as a buyer or a seller. The Fund may buy protection to attempt to mitigate the risk of default or credit quality deterioration in one or more individual holdings or in a segment of the fixed income securities market. The Fund may sell protection in an attempt to gain exposure to an underlying issuer's credit quality characteristics without investing directly in that issuer.

As the buyer of protection in a credit default swap, the Fund will pay a premium (by means of an upfront payment or a periodic stream of payments over the term of the agreement) in return for the right to deliver a referenced bond or group of bonds to the protection seller and receive the full notional or par value (or other agreed upon value) upon a default (or similar event) by the issuer(s) of the underlying referenced obligation(s). If no default occurs, the protection seller would keep the stream of payments and would have no further obligation to the Fund. Thus, the cost to the Fund would be the premium paid with respect to the agreement. If a credit event occurs, however, the Fund may elect to receive the full notional value of the swap in exchange for an equal face amount of deliverable obligations of the reference entity that may have little or no value. The Fund bears the risk that the protection seller may fail to satisfy its payment obligations.

If the Fund is a seller of protection in a credit default swap and no credit event occurs, the Fund would generally receive an up-front payment or a periodic stream of payments over the term of the swap. If a credit event occurs, however, generally the Fund would have to pay the buyer the full notional value of the swap in exchange for an equal face amount of deliverable obligations of the reference entity that may have little or no value. As the protection seller, the Fund effectively adds economic leverage to its portfolio because, in addition to being subject to investment exposure on its total net assets, the Fund is subject to investment exposure on the notional amount of the swap. Thus, the Fund bears the same risk as it would by buying the reference obligations directly.

Swap Options. A swap option is a contract that gives a counterparty the right (but not the obligation), in return for payment of a premium, to enter into a new swap agreement or to shorten, extend, cancel, or otherwise modify an existing swap agreement at some designated future time on specified terms. A cash-settled option on a swap gives the purchaser the right, in return for the premium paid, to receive an amount of cash equal to the value of the underlying swap as of the exercise date. The Fund may write (sell) and purchase put and call swap options. Depending on the terms of the particular option agreement, the Fund generally will incur a greater degree of risk when it writes a swap option than when it purchases a swap option. When the Fund purchases a swap option, it risks losing only the amount of the premium it has paid should it decide to let the option expire unexercised. However, when the Fund writes a swap option, upon exercise of the option the Fund will become obligated according to the terms of the underlying agreement.

Risks Associated with Swap Transactions. The use of swap transactions is a highly specialized activity which involves strategies and risks different from those associated with ordinary portfolio security transactions. If the Advisor is incorrect in its forecasts of default risks, market spreads or other applicable factors the investment performance of the Fund would diminish compared with what it would have been if these techniques were not used. As the protection seller in a credit default swap, the Fund effectively adds economic leverage to its portfolio because, in addition to being subject to investment exposure on its total net assets, the Fund is subject to investment exposure on the notional amount of the swap. The Fund may only close out a swap, cap, floor, collar or other two-party contract with its particular counterparty, and may only transfer a position with the consent of that counterparty. If the counterparty defaults, the Fund will have contractual remedies, but there can be no assurance that the counterparty will be able to meet its contractual obligations or that the Fund will succeed in enforcing its rights. It also is possible that developments in the derivatives market, including potential government regulation, could adversely affect the Fund's ability to terminate existing swap or other agreements or to realize amounts to be received under such agreements.

EQUITY SECURITIES

The Fund may invest in instruments that give it exposure to U.S. and foreign equity securities - including common stock - as a principal investment strategy. Common stock represents units of ownership in a corporation. Owners typically are entitled to vote on the selection of directors and other important matters as well as to receive dividends on their holdings. In the event that a corporation is liquidated, the claims of secured and unsecured creditors and owners of bonds and preferred stock take precedence over the claims of those who own common stock. The price of common stock is generally determined by corporate earnings, type of products or services offered, projected growth rates, experience of management, liquidity, and general market conditions for the markets on which the stock trades. Stocks may decline significantly in price over short or extended periods of time. Price changes may occur in the market as a whole, or they may occur in only a particular country, company, industry, or sector of the market. In addition, the types of stocks in which a particular fund invests may underperform the market or not perform as anticipated.

EXCHANGE-TRADED FUNDS

The Fund may invest in ETFs as a principal investment strategy. ETFs are a type of index fund bought and sold on a securities exchange. An ETF trades like common stock and represents a portfolio of securities designed to track a particular market index. The Fund could purchase an ETF to gain exposure to all or a portion of the U.S. market, a foreign market, a region, a commodity, a currency, or to any other index that an ETF tracks. The risks of owning an ETF generally reflect the risks of owning the underlying securities they are designed to track, although lack of liquidity in an ETF could result in it being more volatile and ETFs have management fees that increase their costs. An ETF may fail to accurately track the returns of the market segment or index that it is designed to track, and the price of an ETF's shares may fluctuate. In addition, because they, unlike traditional mutual funds, are traded on an exchange, ETFs are subject to the following risks: (i) the performance of the ETF may not replicate the performance of the underlying index that it is designed to track; (ii) the market price of the ETF's shares may trade at a premium or discount to the ETF's net asset value; (iii) an active trading market for an ETF may not develop or be maintained; and (iv) there is no assurance that the requirements of the exchange necessary to maintain the listing of the ETF will continue to be met or remain unchanged. In the event substantial market or other disruptions affecting ETFs should occur in the future, the liquidity and value of the Fund's shares could also be substantially and adversely affected.

An investment company's investments in other investment companies are typically subject to statutory limitations prescribed by the 1940 Act. Many ETFs, however, have obtained exemptive relief from the SEC to permit unaffiliated funds (such as the Fund) to invest in their shares beyond these statutory limits, subject to certain conditions and pursuant to contractual arrangements between the ETFs and the investing funds. The Fund may rely on these exemptive orders in investing in ETFs.

FOREIGN SECURITIES

General. The Fund may invest in instruments that provide exposure to foreign securities as a principal investment strategy. Investment in foreign securities is subject to special investment risks that differ in some respects from those related to investments in securities of U.S. domestic issuers. These risks include political, social or economic instability in the country of the issuer, the difficulty of predicting international trade patterns, the possibility of the imposition of exchange controls, expropriation, limits on removal of currency or other assets, nationalization of assets, foreign withholding and income taxation, and foreign trading practices (including higher trading commissions, custodial charges and delayed settlements). Foreign securities also may be subject to greater fluctuations in price than securities issued by U.S. corporations. The principal markets on which these securities trade may have less volume and liquidity, and may be more volatile, than securities markets in the U.S.

In addition, there may be less publicly available information about a foreign company than about a U.S. domiciled company. Foreign companies generally are not subject to uniform accounting, auditing and financial reporting standards comparable to those applicable to U.S. domestic companies. There is also generally less government regulation of securities exchanges, brokers and listed companies abroad than in the U.S. Confiscatory taxation or diplomatic developments could also affect investment in those countries. In addition, foreign branches of U.S. banks, foreign banks and foreign issuers may be subject to less stringent reserve requirements and to different accounting, auditing, reporting, and record keeping standards than those applicable to domestic branches of U.S. banks and U.S. domestic issuers.

Emerging Markets. The Fund may invest in instruments that give it exposure to securities issued by the governmental and corporate issuers that are located in emerging market countries. Investments in securities of issuers in emerging market countries may be subject to potentially higher risks than investments in developed countries. These risks include (i) less social, political and economic stability; (ii) the small current size of the markets for such securities and the currently low or nonexistent volume of trading, which may result in a lack of liquidity and in greater price volatility; (iii) certain national policies which may restrict the Fund's investment opportunities, including restrictions on investment in issuers or industries deemed sensitive to national interests;
(iv) foreign taxation; (v) the absence of developed structures governing private or foreign investment or allowing for judicial redress for injury to private property; (vi) the limited development and recent emergence, in certain countries, of a capital market structure or market-oriented economy; and (vii) the possibility that recent favorable economic developments in certain countries may be slowed or reversed by unanticipated political or social events in such countries.

Despite the dissolution of the Soviet Union, the Communist Party may continue to exercise a significant role in certain (particularly Eastern European) countries. To the extent of the Communist Party's influence, investments in such countries will involve risks of nationalization, expropriation and confiscatory taxation. The communist governments of a number of such countries expropriated large amounts of private property in the past, in many cases without adequate compensation, and there can be no assurance that such expropriation will not occur in the future. In the event of such expropriation, the Fund could lose a substantial portion of any investments it has made in the affected countries. Further, no accounting standards exist in many developing countries.

Certain countries, which do not have market economies, are characterized by an absence of developed legal structures governing private and foreign investments and private property. Certain countries require governmental approval prior to investments by foreign persons, or limit the amount of investment by foreign persons in a particular company, or limit the investment of foreign persons to only a specific class of securities of a company that may have less advantageous terms than securities of the company available for purchase by nationals.

Authoritarian governments in certain countries may require that a governmental or quasi-governmental authority act as custodian of the Fund's assets invested in such country. To the extent such governmental or quasi-governmental authorities do not satisfy the requirements of the 1940 Act to act as foreign custodians of the Fund's cash and securities, the Fund's investment in such countries may be limited or may be required to be effected through intermediaries. The risk of loss through governmental confiscation may be increased in such countries.

MONEY MARKET FUNDS

The Fund may invest, to the extent permitted by the 1940 Act, in securities issued by money market funds as a principal investment strategy. As a shareholder of another investment company, the Fund would bear, along with other shareholders, its pro rata portion of that company's expenses, including advisory fees. These expenses would be in addition to the advisory and other expenses that the Fund bears directly in connection with its own operations. Investment companies in which the Fund may invest may also impose a sales or distribution charge in connection with the purchase or redemption of their shares and other types of commissions or charges. Such charges will be payable by the Fund and, therefore, will be borne indirectly by their shareholders. The money market funds in which the Fund may invest include money market funds advised by the Advisor.

INVESTMENT RESTRICTIONS

In addition to the investment objectives and policies set forth in the Prospectus and under the caption "Additional Information Concerning Fund Investments" above, the Fund is subject to the investment restrictions set forth below. The investment restrictions set forth in paragraphs 1 through 8 below are fundamental and cannot be changed with respect to the Fund without approval by the holders of a majority of the outstanding shares of the Fund as defined in the 1940 Act, i.e., by the lesser of the vote of (a) 67% of the shares of the Fund present at a meeting where more than 50% of the outstanding shares are present in person or by proxy, or (b) more than 50% of the outstanding shares of the Fund.

The Fund will not:

1. Concentrate its investments in a particular industry. For purposes of this limitation, the U.S. Government, and state or municipal governments and their political subdivisions are not considered members of any industry. The Fund may concentrate its investments in other investment companies without violating this

limitation. Moreover, investing in one or more other investment companies that in turn concentrate their investments in one or more particular industries shall not violate this limitation. Whether the Fund is concentrating in an industry shall be determined in accordance with the 1940 Act, as interpreted or modified from time to time by any regulatory authority having jurisdiction.

2. Borrow money or issue senior securities, except as permitted under the 1940 Act, as interpreted or modified from time to time by any regulatory authority having jurisdiction.

3. With respect to 75% of its total assets, purchase securities of an issuer (other than (i) securities issued by other investment companies, (ii) securities issued by the U.S. Government, its agencies, instrumentalities or authorities, or (iii) repurchase agreements fully collateralized by U.S. Government securities) if (a) such purchase would, at the time, cause more than 5% of the Fund's total assets taken at market value to be invested in the securities of such issuer; or (b) such purchase would, at the time, result in more than 10% of the outstanding voting securities of such issuer being held by the Fund.

4. Invest in companies for the purpose of control or management.

5. Purchase physical commodities or contracts relating to physical commodities. This restriction shall not prohibit the Fund from investing in investment companies that provide exposure to commodities, options on commodity indices, commodity futures contracts and options thereon, commodity-related swap agreements, and other commodity-related derivative instruments.

6. Purchase or sell real estate unless as a result of ownership of securities or other instruments, but this shall not prevent the Fund from investing in securities or other instruments backed by real estate or interests therein or in securities of companies that deal in real estate or mortgages.

7. Act as an underwriter of securities of other issuers, except to the extent that, in connection with the disposition of portfolio securities, it may be deemed an underwriter under applicable laws.

8. Make loans except as permitted under the 1940 Act, as interpreted or modified from time to time by any regulatory authority having jurisdiction.

For purposes of applying the limitation set forth in number 1 above, according to the current interpretation by the SEC, the Fund would be concentrated in an industry if 25% or more of its total assets, based on current market value at the time of purchase, were invested in that industry. The Fund will generally use industry classifications provided by the Global Industry Classification System to determine its compliance with this limitation.

For purposes of applying the limitation set forth in number 2 above, under the 1940 Act as currently in effect, the Fund is not permitted to issue senior securities, except that the Fund may borrow from any bank if immediately after such borrowing the value of the Fund's total assets is at least 300% of the principal amount of all of the Fund's borrowings (i.e., the principal amount of the borrowings may not exceed 33 1/3% of the Fund's total assets). In the event that such asset coverage shall at any time fall below 300% the Fund shall, within three days thereafter (not including Sundays and holidays) reduce the amount of its borrowings to an extent that the asset coverage of such borrowing shall be at least 300%.

For purposes of applying the limitation set forth in number 8 above, there are no limitations with respect to unsecured loans made by the Fund to an unaffiliated party.

The following restrictions are non-fundamental and may be changed by the Fund's Board of Directors without a shareholder vote:

The Fund will not:

1. Invest more than 15% of its net assets in all forms of illiquid investments.

2. Borrow money in an amount exceeding 10% of the borrowing Fund's total assets. The Fund will not borrow money for leverage purposes. For the purpose of this investment restriction, the use of options and futures transactions and the purchase of securities on a when-issued or delayed delivery basis shall not be deemed the borrowing of money. The Fund will not make additional investments while its borrowings exceed 5% of total assets.

3. Lend portfolio securities representing in excess of one-third of the value of its total assets.

4. Pledge any assets, except in connection with any permitted borrowing and then in amounts not in excess of one-third of the Fund's total assets, provided that for the purposes of this restriction, margin deposits, security interests, liens and collateral arrangements with respect to options, futures contracts, options on futures contracts, and other permitted investments and techniques are not deemed to be a pledge of assets for purposes of this limitation.

With respect to the non-fundamental restriction set forth in number 1 above, the Fund will monitor portfolio liquidity on an ongoing basis and, in the event more than 15% of the Fund's net assets are invested in illiquid investments, the Fund will reduce its holdings of illiquid securities in an orderly fashion in order to maintain adequate liquidity.

DISCLOSURE OF PORTFOLIO HOLDINGS

PUBLIC DISCLOSURE

Each Fund in the First American Fund Family is required by the SEC to file its portfolio holdings schedule with the SEC on a quarterly basis. This schedule is filed with each Fund's annual and semi-annual reports on form N-CSR for the second and fourth fiscal quarters and on Form N-Q for the first and third fiscal quarters. These filings are generally available within sixty days of the end of the relevant Fund's fiscal quarter. In addition, the First American Fund Family makes portfolio holdings information publicly available for all First American Funds other than Equity Index Fund, Mid Cap Index Fund and Small Cap Index Fund (the "Index Funds," series of FAIF), the series of FAF (the "Money Market Funds"), which are money market funds, and the series of the Mount Vernon Trust by posting the information on the First American Funds website on a quarterly basis. The Funds will attempt to post such information within ten business days of the quarter end. Until such time as it is posted, it will be Undisclosed Holdings Information, as defined below, and subject to the Funds' procedures regarding the disclosure of Undisclosed Holdings Information.

NONPUBLIC DISCLOSURE

The Funds' board of directors has adopted policies and procedures (the "Disclosure Policies"), which prohibit the release of information concerning portfolio holdings, or information derived therefrom ("Undisclosed Holdings Information"), that has not been made public through SEC filings or the website. Different exceptions to this prohibition are made depending on the type of third party that receives the Undisclosed Holdings Information. The Disclosure Policies are designed to prevent the use of portfolio holdings information to trade against the Funds, or otherwise use the information in a way that would harm the Funds, and to prevent selected investors from having nonpublic information that will allow them to make advantageous decisions with respect to purchasing and selling Fund shares.

Disclosure within FAF Advisors and Its Affiliates and to Fund Directors. Undisclosed Holdings Information and information derived therefrom is provided, or otherwise made available, on a daily basis (a) without prior approval, to individuals who are employed by FAF Advisors and who have a need to know the information, such as investment, compliance and treasury personnel, and (b) to individuals employed by affiliates of FAF Advisors who are not otherwise entitled to receive such information under "Disclosure to

Fund Service Providers and Prospective Service Providers," below, if (1) such individuals are subject to FAF Advisors Code of Ethics, or that of an affiliate, which includes a duty not to trade on such information; (2) the fund to which such information relates is subject to FAF Advisors' market timing review; and
(3) FAF Advisors' Internal Compliance Controls Committee has determined that improper use of such information by such individuals is not likely to affect the funds in any material respect based on factors such as the types of funds to which the Undisclosed Holdings Information relate, the flows of investment into such funds, and reports of portfolio managers regarding the stability of assets in such funds.

Undisclosed Holdings Information and information derived therefrom also may be provided to directors of the First American Funds and their service providers, such as counsel, as part of the materials for regular or special board of directors meetings without prior approval.

Disclosure to Fund Service Providers and Prospective Service Providers. Undisclosed Holdings Information and information derived therefrom is provided, or otherwise made available, on a daily basis to the Advisor (as described above), sub-advisors, custodians, administrator, transfer agent, securities lending agent, and outside accountant. Undisclosed Holdings Information may also be provided, as necessary, to outside counsel, proxy voting organizations, financial printers, pricing services and other organizations that provide or propose to provide services to the First American Funds. Prior to receiving Undisclosed Holdings Information, a service provider must enter into a written agreement with the Funds to maintain the information in confidence, to use the information only for the purpose for which it is provided, and not to trade on the basis of any such information that is material nonpublic information. Notwithstanding the foregoing, any sub-advisor to a First American Fund may disclose Undisclosed Holdings Information and information derived therefrom to any third party which it employs to perform accounting, administrative, reporting or ancillary services required to enable such sub-advisor to perform its functions under its sub-advisory agreement relating to such First American Fund, provided that (a) the third party is subject to a confidentiality agreement that specifically prevents the misuse of such information, and (b) the sub-advisor agrees in substance (i) to act in good faith and with due diligence in the selection, use and monitoring of such third parties, and (ii) to be solely responsible for any loss caused by, or mistake, gross negligence or misconduct of, such third party.

Disclosure to Fund Ranking and Ratings Organizations. Undisclosed Holdings Information and information derived therefrom may be provided to organizations that provide mutual fund rankings and ratings, such as Morningstar, Lipper, Moody's, and Standard & Poor's, and to entities that provide investment coverage and/or analytical information regarding a Fund's portfolio, provided that the recipient has entered into a written agreement with the Fund to maintain the information in confidence, to use the information only for the purpose for which it is provided, and not to trade on the basis of any such information that is material nonpublic information.

Disclosure to Investors, Prospective Investors, and Investor Consultants. The Disclosure Policies provide that Undisclosed Holdings Information and information derived therefrom may be provided to investors, prospective investors, or investor consultants with the prior approval of the Funds' Chief Compliance Officer in the specific instance. The Chief Compliance Officer will only approve such disclosure after concluding that it is in the best interests of the Fund in question and its shareholders and if the recipient has agreed in writing to maintain the information in confidence and not to trade on the basis of any such information that is material nonpublic information. In considering a request for such approval, the Chief Compliance Officer also shall identify and consider any conflict of interest between the Fund and its shareholders, on the one hand, and the Advisor and its affiliates, on the other, which is presented by the request. If the Chief Compliance Officer determines that there is a conflict of interest between the Fund and its shareholders on the one hand and the Advisor and its affiliates, on the other, he or she will approve such disclosure only if he or she determines that such conflict is materially mitigated by the execution of a confidentiality agreement and that, despite such conflict of interest, disclosure is in the best interests of the relevant Fund and its shareholders. The Funds' Chief Compliance Officer is responsible for the creation of a written record that states the basis for the conclusion that the disclosure is in the best interests of the relevant Fund and its shareholders.

Disclosure as Required by Applicable Law. Undisclosed Holdings Information and information derived therefrom may be disclosed to any person as required by applicable laws, rules and regulations. For example, such information may be disclosed in response to regulatory requests for information or in response to legal process in litigation matters.

Disclosure of Limited Holdings. Portfolio managers, analysts and other personnel of the Advisor and any sub-advisor may discuss portfolio information in interviews with members of the media, or in due diligence or similar meetings with clients or prospective purchasers of Fund shares or their representatives. In no case will a material number of portfolio holdings be provided that have not yet been posted on the First American Funds website or filed with the SEC unless the recipient has entered into a written agreement with the Funds to maintain the confidentiality of such information and not to trade on the basis of any such information that is material nonpublic information. In addition, brokers and dealers may be provided with individual portfolio holdings in order to obtain bids or bid and asked prices (if securities held by a Fund are not priced by the Fund's regular pricing services) or in connection with portfolio transactions.

No Compensation or Consideration. Neither the Funds, nor the Advisor or any sub-advisor or any affiliate of either, including the Chief Compliance Officer or his or her designee, will solicit or accept any compensation or other consideration in connection with the disclosure of Undisclosed Holdings Information or information derived therefrom.

Chief Compliance Officer Reports to Fund Board. The Funds' Chief Compliance Officer must provide a quarterly report to the Funds' board of directors addressing exceptions to these policies and procedures during the preceding quarter, if any.

Detective and Corrective Action. Any unauthorized release of Undisclosed Holdings Information which comes to the attention of an employee of the Advisor shall be reported to the Chief Compliance Officer. The Chief Compliance Officer shall recommend an appropriate sanction to be imposed by the individual's supervisor if the individual releasing such information is an employee of the Advisor or other appropriate action if the individual is not an employee of the Advisor.

Designee of Chief Compliance Officer. In the event of the absence or unavailability of the Chief Compliance Officer, all of the obligations of the Chief Compliance Officer may be performed by his or her designee.

                                                                                            NUMBER OF
                                                                                          PORTFOLIOS IN         OTHER
NAME,             POSITION(S)       TERM OF OFFICE                                         FUND COMPLEX     DIRECTORSHIPS
ADDRESS, AND          HELD           AND LENGTH OF          PRINCIPAL OCCUPATION(S)        OVERSEEN BY         HELD BY
YEAR OF BIRTH      WITH FUND          TIME SERVED             DURING PAST 5 YEARS            DIRECTOR         DIRECTOR*
---------------   -----------   ----------------------   ----------------------------   -----------------   -------------
Benjamin R.       Director      Term expiring earlier    Retired.                       First American      None
Field III,                      of death, resignation,                                  Funds Complex:
P.O. Box 1329,                  removal,                                                twelve registered
Minneapolis, MN                 disqualification, or                                    investment
55440-1329                      successor duly elected                                  companies,
(1938)                          and qualified.                                          including 59
                                Director of FAIF since                                  portfolios
                                September 2003.
Roger A.          Director      Term expiring earlier    Director, Charterhouse         First American      None
Gibson,                         of death, resignation,   Group, Inc., a private         Funds Complex:
P.O. Box 1329,                  removal,                 equity firm, since October     twelve registered
Minneapolis, MN                 disqualification, or     2005; Advisor/Consultant,      investment
55440-1329                      successor duly elected   Future Freight(TM), a          companies,
(1946)                          and qualified.           logistics/supply chain         including 59
                                Director of FAIF since   company since August 2004;     portfolios
                                October 1997.            Vice President and Chief
                                                         Operating Officer, Cargo -
                                                         United Airlines, from July
                                                         2001 until retirement in
                                                         June 2004.
Victoria J.       Director      Term expiring earlier    Investment consultant and      First American      None
Herget,                         of death, resignation,   non-profit board member        Funds Complex:
P.O. Box 1329,                  removal,                 since 2001; Board Chair,       twelve registered
Minneapolis, MN                 disqualification, or     United Educators Insurance     investment
55440-1329                      successor duly elected   Company.                       companies,
(1951)                          and qualified.                                          including 59
                                Director of FAIF since                                  portfolios
                                September 2003.
John P. Kayser    Director      Term expiring earlier    Retired; Principal from 1983   First American      None
P.O. Box 1329,                  of death, resignation,   to 2004, William Blair &       Funds Complex:
Minneapolis, MN                 removal,                 Company, LLC, a                twelve registered
55440-1329                      disqualification, or     Chicago-based investment       investment
(1949)                          successor duly elected   firm.                          companies,
                                and qualified.                                          including 59
                                Director of FAIF since                                  portfolios
                                October 2006.
Leonard W.        Director      Term expiring earlier    Owner and President,           First American      None
Kedrowski,                      of death, resignation,   Executive and Management       Funds Complex:
P.O. Box 1329,                  removal,                 Consulting, Inc., a            twelve registered
Minneapolis, MN                 disqualification, or     management consulting firm;    investment
55440-1329                      successor duly elected   Board member, GC McGuiggan     companies,
(1941)                          and qualified.           Corporation (dba Smyth         including 59
                                Director of FAIF since   Companies), a label printer;   portfolios
                                November 1993.           member, investment advisory
                                                         committee, Sisters of the
                                                         Good Shepherd.
Richard K.        Director      Term expiring earlier    Owner and Chief Executive      First American      Cliffs
Riederer,                       of death, resignation,   Officer, RKR Consultants,      Funds Complex:      Natural
P.O. Box 1329,                  removal,                 Inc., a  consulting company    twelve registered   Resources,
Minneapolis, MN                 disqualification, or     providing advice on business   investment          Inc. (a
55440-1329                      successor duly elected   strategy, mergers, and         companies,          producer of
(1944)                          and qualified.           acquisitions, and non-profit   including 59        iron ore
                                Director of FAIF since   board member since 2005.       portfolios          pellets and
                                August 2001.                                                                coal)
Joseph D.         Director      Term expiring earlier    Attorney At Law, Owner and     First American      None
Strauss,                        of death, resignation,   President, Strauss             Funds Complex:
P.O. Box 1329,                  removal,                 Management Company, a          twelve registered
Minneapolis, MN                 disqualification, or     Minnesota holding company      investment
55440-1329                      successor duly elected   for various organizational     companies,
(1940)                          and qualified.           management business            including 59
                                Director of FAIF since   ventures; Owner, Chairman      portfolios
                                April 1991.              and Chief Executive Officer,
                                                         Community Resource
                                                         Partnerships, Inc., a
                                                         strategic planning,
                                                         operations management,
                                                         government relations,
                                                         transportation planning and
                                                         public relations
                                                         organization; Owner,
                                                         Chairman and Chief Executive
                                                         Officer, Excensus(TM) LLC, a
                                                         strategic demographic
                                                         planning and application
                                                         development firm.

                                                                                            NUMBER OF
                                                                                          PORTFOLIOS IN         OTHER
NAME,             POSITION(S)       TERM OF OFFICE                                         FUND COMPLEX     DIRECTORSHIPS
ADDRESS, AND          HELD           AND LENGTH OF          PRINCIPAL OCCUPATION(S)        OVERSEEN BY         HELD BY
YEAR OF BIRTH      WITH FUND          TIME SERVED             DURING PAST 5 YEARS            DIRECTOR         DIRECTOR*
---------------   -----------   ----------------------   ----------------------------   -----------------   -------------
Virginia L.       Chair;        Chair term three         Governance consultant and      First American      None
Stringer,         Director      years. Director term     non-profit board member;       Funds Complex:
P.O. Box 1329,                  expiring earlier of      former Owner and President,    twelve registered
Minneapolis, MN                 death, resignation,      Strategic Management           investment
55440-1329                      removal,                 Resources, Inc.,  a            companies,
(1944)                          disqualification, or     management consulting firm;    including 59
                                successor duly elected   Chair, Saint Paul Riverfront   portfolios
                                and qualified. Chair     Corporation, since 2005.
                                of FAIF's Board since
                                September 1997;
                                Director of FAIF since
                                September 1987.
James M. Wade,    Director      Term expiring earlier    Owner and President, Jim       First American      None
P.O. Box 1329,                  of death, resignation,   Wade Homes, a homebuilding     Funds Complex:
Minneapolis, MN                 removal,                 company.                       twelve registered
55440-1329                      disqualification, or                                    investment
(1943)                          successor duly elected                                  companies,
                                and qualified.                                          including 59
                                Director of FAIF since                                  portfolios
                                August 2001.

                                                      TERM OF OFFICE
NAME, ADDRESS, AND            POSITION(S) HELD        AND LENGTH OF
YEAR OF BIRTH                    WITH FUND             TIME SERVED                PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
-------------------------   -------------------   ---------------------   ----------------------------------------------------------
Thomas S. Schreier, Jr.,    President             Re-elected by the       Chief Executive Officer of FAF Advisors, Inc; Chief
FAF Advisors, Inc.,                               Board annually;         Investment Officer of FAF Advisors, Inc. since September
800 Nicollet Mall,                                President of FAIF       2007.
Minneapolis, MN 55402                             since February 2001
(1962) *
Jeffery M. Wilson,          Vice President -      Re-elected by the       Senior Vice President, FAF Advisors, Inc.
FAF Advisors, Inc.          Administration        Board annually; Vice
800 Nicollet Mall,                                President -
Minneapolis, MN 55402                             Administration of
(1956) *                                          FAIF since March 2000
Charles D. Gariboldi, Jr.   Treasurer             Re-elected by the       Mutual Funds Treasurer, FAF Advisors, Inc., since October
FAF Advisors, Inc.                                Board annually;         2004; prior thereto, Vice President - Investment
800 Nicollet Mall,                                Treasurer of FAIF       Accounting and Fund Treasurer, Thrivent Financial for
Minneapolis, MN 55402                             Since December 2004     Lutherans.
(1959) *

                                                      TERM OF OFFICE
NAME, ADDRESS, AND            POSITION(S) HELD        AND LENGTH OF
YEAR OF BIRTH                    WITH FUND             TIME SERVED                PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
-------------------------   -------------------   ---------------------   ----------------------------------------------------------
Jill M. Stevenson,          Assistant Treasurer   Re-elected by the       Mutual Funds Assistant Treasurer, FAF Advisors, Inc. since
FAF Advisors, Inc.                                Board annually;         September 2005; prior thereto, Director and Senior Project
800 Nicollet Mall,                                Assistant Treasurer     Manager, FAF Advisors, Inc.
Minneapolis, MN 55402                             of FAIF since
(1965)*                                           September 2005
David H. Lui,               Chief Compliance      Re-elected by the       Chief Compliance Officer, FAF Advisors, Inc. since March
FAF Advisors, Inc.          Officer               Board annually;         2005; prior thereto, Chief Compliance Officer, Franklin
800 Nicollet Mall,                                Chief Compliance        Advisors, Inc. and Chief Compliance Counsel, Franklin
Minneapolis, MN 55402                             Officer of FAIF since   Templeton Investments.
(1960) *                                          March 2005
Jason K. Mitchell           Anti-Money            Re-elected by the       Compliance Manager, FAF Advisors, Inc., since June 2006;
FAF Advisors, Inc.          Laundering Officer    Board annually;         prior thereto, Compliance Analyst, FAF Advisors, Inc.,
800 Nicollet Mall                                 Anti-Money Laundering   from October 2004 through June 2006.
Minneapolis, MN 55402                             Officer of FAIF since
(1976) *                                          December 2008 and
                                                  from September 2006
                                                  through August 2008
Kathleen L. Prudhomme,      Secretary             Re-elected by the       Deputy General Counsel, FAF Advisors, Inc., since November
FAF Advisors, Inc.                                Board annually;         2004; prior thereto, Partner, Dorsey & Whitney LLP, a
800 Nicollet Mall,                                Secretary of FAIF       Minneapolis-based law firm
Minneapolis, MN 55402                             since December 2004;
(1953) *                                          prior thereto,
                                                  Assistant Secretary
                                                  of FAIF since
                                                  September 1998
Richard J. Ertel            Assistant Secretary   Re-elected by the       Counsel, FAF Advisors, Inc., since May 2006; prior
FAF Advisors, Inc.                                Board annually;         thereto, Counsel, Ameriprise Financial Services, Inc. from
800 Nicollet Mall,                                Assistant Secretary     September 2004 to May 2006.
Minneapolis, MN 55402                             of FAIF since June
(1967) *                                          2006 and from June
                                                  2003 through August
                                                  2004
Michael W. Kremenak,        Assistant Secretary   Re-elected by the       Counsel, FAF Advisors, Inc., since January 2009; prior
FAF Advisors, Inc.,                               Board annually;         thereto, Associate, Skadden, Arps, Slate, Meagher & Flom
800 Nicollet Mall,                                Assistant Secretary     LLP from September 2005 to January 2009.
Minneapolis, MN 55402                             of FAIF since
(1978) *                                          February 2009
James D. Alt,               Assistant             Re-elected by the       Partner, Dorsey & Whitney LLP, a Minneapolis-based law
Dorsey & Whitney LLP        Secretary             Board annually;         firm.
50 South Sixth Street,                            Assistant Secretary
Suite 1500,                                       of FAIF since
Minneapolis, MN 55402                             December 2004;
(1951)                                            Secretary of FAIF
                                                  from June 2002
                                                  through December
                                                  2004; Assistant
                                                  Secretary of FAIF
                                                  from September 1998
                                                  through June 2002
James R. Arnold,            Assistant Secretary   Re-elected by the       Senior Vice President, U.S. Bancorp Fund Services, LLC.
U.S. Bancorp Fund                                 Board annually;
Services, LLC,                                    Assistant Secretary
615 E. Michigan Street,                           of FAIF since June
Milwaukee, WI 53202                               2003
(1957)*

                                                                                                     NUMBER OF FUND
                                                                                                        COMPLEX
                                                                                                       COMMITTEE
                                                                                                     MEETINGS HELD
                                                                                                     DURING FAIF'S
                                                                                                     FISCAL PERIOD
                                  COMMITTEE FUNCTION                         COMMITTEE MEMBERS       ENDED 10/31/09
               -------------------------------------------------------   -------------------------   --------------
Audit          The purposes of the Committee are (1) to oversee the         Leonard W. Kedrowski
Committee      Funds' accounting and financial reporting policies and             (Chair)
               practices, their internal controls and, as appropriate,     Benjamin R. Field III
               the internal controls of certain service providers; (2)         John P. Kayser
               to oversee the quality of the Funds' financial               Richard K. Riederer
               statements and the independent audit thereof; (3) to         Virginia L. Stringer
               assist Board oversight of the Funds' compliance with             (ex-officio)
               legal and regulatory requirements; and (4) to act as a
               liaison between the Funds' independent auditors and the
               full Board of Directors. The Audit Committee, together
               with the Board of Directors, has the ultimate authority
               and responsibility to select, evaluate and, where
               appropriate, replace the outside auditor (or to
               nominate the outside auditor to be proposed for
               shareholder approval in any proxy statement).
Pricing        The Committee is responsible for valuing portfolio         Roger A. Gibson (Chair)
Committee      securities for which market quotations are not readily      Benjamin R. Field III
               available, pursuant to procedures established by the            James M. Wade
               Board of Directors.                                          Virginia L. Stringer
                                                                                (ex-officio)
Governance     The Committee has responsibilities relating to (1)        Joseph D. Strauss (Chair)
Committee      Board and Committee composition (including,                     James M. Wade
               interviewing and recommending to the Board nominees for       Victoria J. Herget
               election as directors; reviewing the independence of         Virginia L. Stringer
               all independent directors; reviewing Board composition           (ex-officio)
               to determine the appropriateness of adding individuals
               with different backgrounds or skills; reporting to the
               Board on which current and potential members of the
               Audit Committee qualify as Audit Committee Financial
               Experts; recommending a successor to the Board Chair
               when a vacancy occurs; consulting with the Board Chair
               on Committee assignments; and in anticipation of the
               Board's request for shareholder approval of a slate of
               directors, recommending to the Board the slate of
               directors to be presented for Board and shareholder
               approval); (2) Committee structure (including, at least
               annually, reviewing each Committee's structure and
               membership and reviewing each Committee's charter and
               suggesting changes thereto); (3) director education
               (including developing an annual education calendar;
               monitoring independent director attendance at
               educational seminars and conferences; developing and
               conducting orientation sessions for new independent
               directors; and managing the Board's education program
               in a cost-effective manner); and (4) governance
               practices (including reviewing and making
               recommendations regarding director compensation and
               director expenses; monitoring director investments in
               the Funds; monitoring compliance with director
               retirement policies; reviewing compliance with the
               prohibition from serving on the board of directors of
               mutual funds that are not part of the First American
               Fund Complex; if requested, assisting the Board Chair
               in overseeing self-evaluation process; in collaboration
               with outside counsel, developing policies and
               procedures addressing matters which should come before
               the Committee in the proper exercise of its duties;
               reviewing the Board's adherence to industry "best
               practices;" reviewing and recommending changes in Board
               governance policies, procedures and practices;
               reporting the Committee's activities to the Board and
               making such recommendations; reviewing and, as
               appropriate; recommending that the Board make changes
               to the Committee's charter).

                                                                    AGGREGATE DOLLAR RANGE OF EQUITY SECURITIES
   NAME OF DIRECTOR     DOLLAR RANGE OF EQUITY SECURITIES IN FAIF       IN THE FIRST AMERICAN FUNDS COMPLEX*
---------------------   -----------------------------------------   -------------------------------------------
Benjamin R. Field III               $10,001-$50,000                              Over $100,000
Roger A. Gibson                      Over $100,000                               Over $100,000
Victoria J. Herget                   Over $100,000                               Over $100,000
John P. Kayser                       Over $100,000                               Over $100,000
Leonard W. Kedrowski                 Over $100,000                               Over $100,000
Richard K. Riederer                  Over $100,000                               Over $100,000
Joseph D. Strauss                    Over $100,000                               Over $100,000
Virginia L. Stringer                 Over $100,000                               Over $100,000
James M. Wade                        Over $100,000                               Over $100,000

                                                            PENSION OR                           TOTAL COMPENSATION
                                       AGGREGATE       RETIREMENT BENEFITS   ESTIMATED ANNUAL    FROM REGISTRANT AND
                                   COMPENSATION FROM    ACCRUED AS PART OF     BENEFITS UPON    FUND COMPLEX PAID TO
NAME OF PERSON, POSITION             REGISTRANT (1)       FUND EXPENSES         RETIREMENT          DIRECTORS (2)
--------------------------------   -----------------   -------------------   ----------------   --------------------
Benjamin R. Field III, Director            $                   -0-                  -0-                   $
Roger A. Gibson, Director                                      -0-                  -0-

                                                            PENSION OR                           TOTAL COMPENSATION
                                       AGGREGATE       RETIREMENT BENEFITS   ESTIMATED ANNUAL    FROM REGISTRANT AND
                                   COMPENSATION FROM    ACCRUED AS PART OF     BENEFITS UPON    FUND COMPLEX PAID TO
NAME OF PERSON, POSITION             REGISTRANT (1)       FUND EXPENSES         RETIREMENT          DIRECTORS (2)
--------------------------------   -----------------   -------------------   ----------------   --------------------
Victoria J. Herget, Director                                   -0-                  -0-
John P. Kayser, Director                                       -0-                  -0-
Leonard W. Kedrowski, Director                                 -0-                  -0-
Richard K. Riederer, Director                                  -0-                  -0-
Joseph D. Strauss, Director                                    -0-                  -0-
Virginia L. Stringer, Director &
   Chair                                                       -0-                  -0-
James M. Wade, Director                                        -0-                  -0-

                                                                            AMOUNT SUBJECT TO
                                                       NUMBER OF            PERFORMANCE-BASED
PORTFOLIO MANAGER       TYPE OF ACCOUNT MANAGED         ACCOUNTS   ASSETS          FEE
-----------------   --------------------------------   ---------   ------   -----------------
David R. Cline      Registered Investment Company                     $
                    Other Pooled Investment Vehicles
                    Other Accounts
Walter A. French    Registered Investment Company
                    Other Pooled Investment Vehicles
                    Other Accounts
David A. Friar      Registered Investment Company
                    Other Pooled Investment Vehicles
                    Other Accounts
Keith B. Hembre     Registered Investment Company
                    Other Pooled Investment Vehicles
                    Other Accounts