1933 Act Registration No. 033-16905
1940 Act Registration No. 811-05309
As filed with the Securities and Exchange Commission on July 31, 2007
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ x ]
Pre-Effective Amendment No. _____ [ ]
Post-Effective Amendment No. 87 [ x ]
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and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940
Amendment No. 87 [ x ]
FIRST AMERICAN INVESTMENT FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
800 Nicollet Mall
Minneapolis, Minnesota 55402
(Address of Principal Executive Offices) (Zip Code)
(612) 303-7987
(Registrant's Telephone Number, including Area Code)
Richard J. Ertel
U.S. Bancorp Center
800 Nicollet Mall, BC-MN-H05F
Minneapolis, Minnesota 55402
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box):
[ x ] immediately upon filing pursuant to paragraph (b) of Rule 485.
[ ] on (date) pursuant to paragraph (b) of Rule 485.
[ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485.
[ ] on (date) pursuant to paragraph (a)(1) of Rule 485.
[ ] 75 days after filing pursuant to paragraph (a)(2) of Rule 485.
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485.
July 31, 2007
PROSPECTUS
First American Investment Funds, Inc.
ASSET CLASS - QUANTITATIVE FUNDS
QUANTITATIVE FUNDS
Class A, Class C, Class R, and Class Y Shares
QUANTITATIVE LARGE CAP CORE FUND
QUANTITATIVE LARGE CAP GROWTH FUND
QUANTITATIVE LARGE CAP VALUE FUND
As with all mutual funds, the Securities and
Exchange Commission has not approved or
disapproved the shares of these funds, or
determined if the information in this prospectus
is accurate or complete. Any statement to the
contrary is a criminal offense.
(FIRST AMERICAN FUNDS LOGO)
TABLE OF
CONTENTS
FUND SUMMARIES
General Investment Approach 2
Quantitative Large Cap Core Fund 3
Quantitative Large Cap Growth Fund 5
Quantitative Large Cap Value Fund 7
MORE ABOUT THE FUNDS
Investment Strategies, Risks, and Other Investment
Matters 9
POLICIES AND SERVICES
Purchasing, Redeeming, and Exchanging Shares 10
Managing Your Investment 19
ADDITIONAL INFORMATION
Management 20
FOR MORE INFORMATION Back Cover
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Fund Summaries
INTRODUCTION
This section of the prospectus describes the objectives of the First American Quantitative Funds, summarizes the principal investment strategies used by each fund in trying to achieve its objective, and highlights the risks involved with these strategies. It also provides you with information about the performance, fees, and expenses of the funds.
AN INVESTMENT IN THE FUNDS IS NOT A DEPOSIT OF U.S. BANK NATIONAL ASSOCIATION AND IS NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
THIS PROSPECTUS AND THE RELATED STATEMENT OF ADDITIONAL INFORMATION (SAI) DO NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY SHARES IN THE FUNDS, NOR SHALL ANY SUCH SHARES BE OFFERED OR SOLD TO ANY PERSON IN ANY JURISDICTION IN WHICH AN OFFER, SOLICITATION, PURCHASE, OR SALE WOULD BE UNLAWFUL UNDER THE SECURITIES LAWS OF SUCH JURISDICTION.
PROSPECTUS - First American Quantitative Funds
Fund Summaries
General Investment Approach
The First American Quantitative Funds are designed to provide an alternative to the investment strategies used by index funds and traditional actively managed funds. Index funds are unmanaged and designed to very closely track the performance of a particular index. Traditional actively managed funds generally use fundamental research to pick stocks in an attempt to outperform a benchmark index. However, these funds often have a high "tracking error," meaning their returns differ significantly, both positively and negatively, from index returns. Thus, while a traditional actively managed fund may have the potential to significantly outperform its benchmark index, there also is a considerable risk that it will significantly underperform that index. The First American Quantitative Funds are actively managed, but use a quantitative approach described further in the "Principal Investment Strategies" section for each fund. Using this quantitative approach to stock selection, each First American Quantitative Fund attempts to maintain a low tracking error as compared to its benchmark index, while producing higher returns than the index. Of course, there is no guarantee that any fund will achieve this goal.
PROSPECTUS - First American Quantitative Funds
Fund Summaries
Quantitative Large Cap Core Fund
OBJECTIVE
Quantitative Large Cap Core Fund's objective is to provide, over the long term, a total return that exceeds the total return of the S&P 500 Index.
PRINCIPAL INVESTMENT STRATEGIES
The fund invests, under normal market conditions, at least 80% of its net assets plus the amount of any borrowings for investment purposes in common stocks of large-capitalization companies, although it is currently anticipated that the fund normally will invest at least 95% of its net assets in these stocks. The fund defines large-capitalization companies as companies that have market capitalizations at the time of purchase within the range of market capitalizations of companies in the S&P 500 Index. The S&P 500 Index is an unmanaged index of 500 stocks chosen for market size, liquidity and industry group representation, with a focus on the large cap segment of the market. The market capitalizations of companies in the S&P 500 Index ranged from approximately $1.6 billion to $472.5 billion as of June 30, 2007, with an average market capitalization of approximately $26.7 billion. Although the fund may from time to time emphasize smaller or larger capitalization companies within this range as a result of the quantitative process discussed below, the advisor anticipates that generally the fund's capitalization weightings will be similar to those of the S&P 500 Index. The fund's investments may include common stocks of foreign issuers which are listed on a United States stock exchange and included in the S&P 500 Index.
The fund is actively managed using a proprietary quantitative process which projects a stock's performance based upon a variety of factors, such as the stock's growth or value style, market capitalization, earnings volatility, earnings yield, financial leverage and currency sensitivity. This process tracks the historical performance of each of these factors against relevant economic and market variables, and then determines how each of the factors is expected to perform given today's economic conditions. The process then measures the relative sensitivity of each of the stocks in the fund's investable universe to the various factors and projects each stock's performance based on this sensitivity. Stocks are selected for purchase or sale using an optimization formula which is designed to maximize the fund's overall projected return within the constraints that have been established to limit the fund's tracking error as compared to the S&P 500 Index.
In selecting common stocks, the advisor is limited to companies included in the S&P 500 Index. If a company held by the fund falls out of the S&P 500 Index, the fund will sell the security as soon as practicable. The fund will not hold all of the securities in the S&P 500 Index.
In addition to investing in common stocks within the S&P 500 Index, the fund may invest in S&P 500 Index futures contracts and exchange traded funds in order to reduce cash balances in the fund and increase the level of fund assets exposed to companies within the fund's benchmark index.
PRINCIPAL RISKS
The value of your investment in this fund will change daily, which means you could lose money. The principal risks of investing in this fund include:
- Active Quantitative Management Risk. Because the fund is actively managed using the quantitative process described above, the fund could underperform other mutual funds with similar investment objectives.
- Additional Expenses. When the fund invests in exchange-traded funds, you bear both your proportionate share of fund expenses and, indirectly, the expenses of the exchange-traded funds.
- Common Stock Risk. Stocks may decline significantly in price over short or extended periods of time.
- Foreign Security Risk. Securities of foreign issuers, even when dollar-denominated and publicly traded in the United States, may involve risks not associated with the securities of domestic issuers.
- Futures Contract Risk. The use of stock index futures contracts exposes the fund to additional risks and transaction costs.
See "More About the Funds" for additional information about some of these risks.
FUND PERFORMANCE
Since the fund commenced operations as of the date of this prospectus, no performance information is presented. The fund's investment advisor manages other accounts which are similar to the Quantitative Large Cap Core Fund. The historical performance of these accounts is presented under "Management -- Performance of Portfolios Similar to Quantitative Large Cap Core Fund."
PROSPECTUS - First American Quantitative Funds
Fund Summaries
Quantitative Large Cap Core Fund CONTINUED
FEES AND EXPENSES
As an investor, you pay fees and expenses to buy and hold shares of the fund. You pay shareholder fees directly when you buy or sell shares. You pay annual fund operating expenses indirectly since they are deducted from fund assets.
------------------------------------------------------------------------------------------------------------ SHAREHOLDER FEES(1) (FEES PAID DIRECTLY FROM YOUR INVESTMENT) CLASS A CLASS C CLASS R CLASS Y ------------------------------------------------------------------------------------------------------------ MAXIMUM SALES CHARGE (LOAD) IMPOSED ON PURCHASES (as a percentage of offering price) 5.50%(2) None None None MAXIMUM DEFERRED SALES CHARGE (LOAD) (as a percentage of original purchase price or redemption proceeds, whichever is less) None(3) 1.00% None None ------------------------------------------------------------------------------------------------------------ ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets) (as a percentage of average net assets) ------------------------------------------------------------------------------------------------------------ Management Fees 0.30% 0.30% 0.30% 0.30% Distribution and/or Service (12b-1) Fees 0.25% 1.00% 0.50% None Other Expenses(4) 0.31% 0.31% 0.31% 0.31% Total Annual Fund Operating Expenses(5) 0.86% 1.61% 1.11% 0.61% Less Fee Waivers(6) (0.16)% (0.16)% (0.16)% (0.16)% Net Expenses(6) 0.70% 1.45% 0.95% 0.45% ------------------------------------------------------------------------------------------------------------ |
EXAMPLE This example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds. It assumes that you invest $10,000 for the time periods indicated, that your investment has a 5% return each year, and that the fund's operating expenses remain the same. Although your actual costs and returns may differ, based on these assumptions your costs would be:
CLASS C CLASS C
assuming assuming no
redemption redemption
at end of at end of
CLASS A each period each period CLASS R CLASS Y
---------------------------------------------------------------------------------------------------------------------------------
1 year $ 618 $ 248 $ 148 $ 97 $ 46
---------------------------------------------------------------------------------------------------------------------------------
3 years $ 794 $ 492 $ 492 $ 337 $ 179
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(1)An annual account maintenance fee of $50 may be charged under certain circumstances. See "Policies and Services -- Purchasing, Redeeming, and Exchanging Shares -- Additional Information on Purchasing, Redeeming, and Exchanging Shares -- Accounts with Low Balances."
(2)Investors may qualify for reduced sales charges.
(3)Class A share investments of $1 million or more on which no front-end sales charge is paid may be subject to a contingent deferred sales charge.
(4)Other Expenses are based on estimated amounts for the current fiscal year.
(5)Total Annual Fund Operating Expenses do not include securities lending income received by the advisor. The advisor receives fees of up to 25% of the fund's net income from securities lending transactions in connection with the lending services it provides the fund.
(6)The advisor has contractually agreed to waive fees and reimburse other fund expenses through July 31, 2008, so that total annual fund operating expenses, excluding indirect fees and expenses incurred through investment in exchange traded funds and other investment companies, do not exceed 0.70%, 1.45%, 0.95%, and 0.45%, respectively, for Class A, Class C, Class R, and Class Y shares. These fee waivers and expense reimbursements may be terminated at any time after July 31, 2008, at the discretion of the advisor. Prior to that time, such waivers and reimbursements may not be terminated without the approval of the fund's board of directors.
PROSPECTUS - First American Quantitative Funds
Fund Summaries
Quantitative Large Cap Growth Fund
OBJECTIVE
Quantitative Large Cap Growth Fund's objective is to provide, over the long term, a total return that exceeds the total return of the Russell 1000 Growth Index.
PRINCIPAL INVESTMENT STRATEGIES
The fund invests, under normal market conditions, at least 80% of its net assets plus the amount of any borrowings for investment purposes in common stocks of large-capitalization companies, although it is currently anticipated that the fund normally will invest at least 95% of its net assets in these stocks. The fund defines large-capitalization companies as companies that have market capitalizations at the time of purchase within the range of market capitalizations of companies in the Russell 1000 Index. The Russell 1000 Index is an unmanaged index of the 1,000 largest companies in the Russell 3000 Index (an index of the 3,000 largest companies in the United States, based on total market capitalization), which represents approximately 92% of the total market capitalization of the Russell 3000 Index. The market capitalizations of companies in the Russell 1000 Index ranged from approximately $1.5 billion to $472.5 billion as of June 30, 2007, with an average market capitalization of approximately $90.0 billion. Although the fund may from time to time emphasize smaller or larger capitalization companies within this range as a result of the quantitative process discussed below, the advisor anticipates that generally the fund's capitalization weightings will be similar to those of the Russell 1000 Index. The fund's investments may include common stocks of foreign issuers which are listed on a United States stock exchange and included in the Russell 1000 Index.
The fund is actively managed using a proprietary quantitative process which projects a stock's performance based upon a variety of factors, such as the stock's growth or value style, market capitalization, earnings volatility, earnings yield, financial leverage and currency sensitivity. This process tracks the historical performance of each of these factors against relevant economic and market variables, and then determines how each of the factors is expected to perform given today's economic conditions. The process then measures the relative sensitivity of each of the stocks in the fund's investable universe to the various factors and projects each stock's performance based on this sensitivity. Stocks are selected for purchase or sale using an optimization formula which is designed to maximize the fund's overall projected return within the constraints that have been established to limit the fund's tracking error as compared to the Russell 1000 Growth Index.
In selecting common stocks, the advisor is limited to companies included in the Russell 1000 Index, but will invest principally in companies that also are included in the Russell 1000 Growth Index. The Russell 1000 Growth Index consists of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values. If a company held by the fund falls out of the Russell 1000 Index, the fund will sell the security as soon as practicable. The fund will not hold all of the securities in the Russell 1000 Index or the Russell 1000 Growth Index.
In addition to investing in common stocks within the Russell 1000 Index, the fund may invest in stock index futures contracts and exchange traded funds in order to reduce cash balances in the fund and increase the level of fund assets exposed to companies within the fund's benchmark index.
PRINCIPAL RISKS
The value of your investment in this fund will change daily, which means you could lose money. The principal risks of investing in this fund include:
- Active Quantitative Management Risk. Because the fund is actively managed using the quantitative process described above, the fund could underperform other mutual funds with similar investment objectives.
- Additional Expenses. When the fund invests in exchange-traded funds, you bear both your proportionate share of fund expenses and, indirectly, the expenses of the exchange-traded funds.
- Common Stock Risk. Stocks may decline significantly in price over short or extended periods of time.
- Foreign Security Risk. Securities of foreign issuers, even when
dollar-denominated and publicly traded in the United States, may involve risks
not associated with the securities of domestic issuers.
- Futures Contract Risk. The use of stock index futures contracts exposes the
fund to additional risks and transaction costs.
- Growth Stock Risk. There is a risk that growth stocks may underperform other types of stocks and the market as a whole. In addition, growth stocks can be more volatile than other types of stocks.
See "More About the Funds" for additional information about some of these risks.
FUND PERFORMANCE
Since the fund commenced operations as of the date of this prospectus, no performance information is presented.
PROSPECTUS - First American Quantitative Funds
Fund Summaries
Quantitative Large Cap Growth Fund CONTINUED
FEES AND EXPENSES
As an investor, you pay fees and expenses to buy and hold shares of the fund. You pay shareholder fees directly when you buy or sell shares. You pay annual fund operating expenses indirectly since they are deducted from fund assets.
------------------------------------------------------------------------------------------------------------ SHAREHOLDER FEES(1) (FEES PAID DIRECTLY FROM YOUR INVESTMENT) CLASS A CLASS C CLASS R CLASS Y ------------------------------------------------------------------------------------------------------------ MAXIMUM SALES CHARGE (LOAD) IMPOSED ON PURCHASES (as a percentage of offering price) 5.50%(2) None None None MAXIMUM DEFERRED SALES CHARGE (LOAD) (as a percentage of original purchase price or redemption proceeds, whichever is less) None(3) 1.00% None None ------------------------------------------------------------------------------------------------------------ ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets) (as a percentage of average net assets) ------------------------------------------------------------------------------------------------------------ Management Fees 0.30% 0.30% 0.30% 0.30% Distribution and/or Service (12b-1) Fees 0.25% 1.00% 0.50% None Other Expenses(4) 0.75% 0.75% 0.75% 0.75% Total Annual Fund Operating Expenses(5) 1.30% 2.05% 1.55% 1.05% Less Fee Waivers(6) (0.60)% (0.60)% (0.60)% (0.60)% Net Expenses(6) 0.70% 1.45% 0.95% 0.45% ------------------------------------------------------------------------------------------------------------ |
EXAMPLE This example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds. It assumes that you invest $10,000 for the time periods indicated, that your investment has a 5% return each year, and that the fund's operating expenses remain the same. Although your actual costs and returns may differ, based on these assumptions your costs would be:
CLASS C CLASS C
assuming assuming no
redemption redemption
at end of at end of
CLASS A each period each period CLASS R CLASS Y
---------------------------------------------------------------------------------------------------------------------------------
1 year $ 618 $ 248 $ 148 $ 97 $ 46
---------------------------------------------------------------------------------------------------------------------------------
3 years $ 883 $ 585 $ 585 $ 431 $ 274
---------------------------------------------------------------------------------------------------------------------------------
|
(1)An annual account maintenance fee of $50 may be charged under certain circumstances. See "Policies and Services -- Purchasing, Redeeming, and Exchanging Shares -- Additional Information on Purchasing, Redeeming, and Exchanging Shares -- Accounts with Low Balances."
(2)Investors may qualify for reduced sales charges.
(3)Class A share investments of $1 million or more on which no front-end sales charge is paid may be subject to a contingent deferred sales charge.
(4)Other Expenses are based on estimated amounts for the current fiscal year.
(5)Total Annual Fund Operating Expenses do not include securities lending income received by the advisor. The advisor receives fees of up to 25% of the fund's net income from securities lending transactions in connection with the lending services it provides the fund.
(6)The advisor has contractually agreed to waive fees and reimburse other fund expenses through July 31, 2008, so that total annual fund operating expenses, excluding indirect fees and expenses incurred through investment in exchange traded funds and other investment companies, do not exceed 0.70%, 1.45%, 0.95%, and 0.45%, respectively, for Class A, Class C, Class R, and Class Y shares. These fee waivers and expense reimbursements may be terminated at any time after July 31, 2008, at the discretion of the advisor. Prior to that time, such waivers and reimbursements may not be terminated without the approval of the fund's board of directors.
PROSPECTUS - First American Quantitative Funds
Fund Summaries
Quantitative Large Cap Value Fund
OBJECTIVE
Quantitative Large Cap Value Fund's objective is to provide, over the long term, a total return that exceeds the total return of the Russell 1000 Value Index.
PRINCIPAL INVESTMENT STRATEGIES
The fund invests, under normal market conditions, at least 80% of its net assets plus the amount of any borrowings for investment purposes in common stocks of large-capitalization companies, although it is currently anticipated that the fund normally will invest at least 95% of its net assets in these stocks. The fund defines large-capitalization companies as companies that have market capitalizations at the time of purchase within the range of market capitalizations of companies in the Russell 1000 Index. The Russell 1000 Index is an unmanaged index of the 1,000 largest companies in the Russell 3000 Index (an index of the 3,000 largest companies in the United States, based on total market capitalization), which represents approximately 92% of the total market capitalization of the Russell 3000 Index. The market capitalizations of companies in the Russell 1000 Index ranged from approximately $1.5 billion to $472.5 billion as of June 30, 2007, with an average market capitalization of approximately $90.0 billion. Although the fund may from time to time emphasize smaller or larger capitalization companies within this range as a result of the quantitative process discussed below, the advisor anticipates that generally the fund's capitalization weightings will be similar to those of the Russell 1000 Index. The fund's investments may include common stocks of foreign issuers which are listed on a United States stock exchange and included in the Russell 1000 Index.
The fund is actively managed using a proprietary quantitative process which projects a stock's performance based upon a variety of factors, such as the stock's growth or value style, market capitalization, earnings volatility, earnings yield, financial leverage and currency sensitivity. This process tracks the historical performance of each of these factors against relevant economic and market variables, and then determines how each of the factors is expected to perform given today's economic conditions. The process then measures the relative sensitivity of each of the stocks in the fund's investable universe to the various factors and projects each stock's performance based on this sensitivity. Stocks are selected for purchase or sale using an optimization formula which is designed to maximize the fund's overall projected return within the constraints that have been established to limit the fund's tracking error as compared to the Russell 1000 Value Index.
In selecting common stocks, the advisor is limited to companies included in the Russell 1000 Index, but will invest principally in companies that also are included in the Russell 1000 Value Index. The Russell 1000 Value Index consists of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values. If a company held by the fund falls out of the Russell 1000 Index, the fund will sell the security as soon as practicable. The fund will not hold all of the securities in the Russell 1000 Index or the Russell 1000 Value Index.
In addition to investing in common stocks within the Russell 1000 Index, the fund may invest in stock index futures contracts and exchange traded funds in order to reduce cash balances in the fund and increase the level of fund assets exposed to companies within the fund's benchmark index.
PRINCIPAL RISKS
The value of your investment in this fund will change daily, which means you could lose money. The principal risks of investing in this fund include:
- Active Quantitative Management Risk. Because the fund is actively managed using the quantitative process described above, the fund could underperform other mutual funds with similar investment objectives.
- Additional Expenses. When the fund invests in exchange-traded funds, you bear both your proportionate share of fund expenses and, indirectly, the expenses of the exchange-traded funds.
- Common Stock Risk. Stocks may decline significantly in price over short or extended periods of time.
- Foreign Security Risk. Securities of foreign issuers, even when dollar-denominated and publicly traded in the United States, may involve risks not associated with the securities of domestic issuers.
- Futures Contract Risk. The use of stock index futures contracts exposes the fund to additional risks and transaction costs.
- Value Stock Risk. There is a risk that value stocks may underperform other types of stocks and the market as a whole. Value stocks can continue to be undervalued by the market for long periods of time.
See "More About the Funds" for additional information about some of these risks.
FUND PERFORMANCE
Since the fund commenced operations as of the date of this prospectus, no performance information is presented.
PROSPECTUS - First American Quantitative Funds
Fund Summaries
Quantitative Large Cap Value Fund CONTINUED
FEES AND EXPENSES
As an investor, you pay fees and expenses to buy and hold shares of the fund. You pay shareholder fees directly when you buy or sell shares. You pay annual fund operating expenses indirectly since they are deducted from fund assets.
------------------------------------------------------------------------------------------------------------ SHAREHOLDER FEES(1) (FEES PAID DIRECTLY FROM YOUR INVESTMENT) CLASS A CLASS C CLASS R CLASS Y ------------------------------------------------------------------------------------------------------------ MAXIMUM SALES CHARGE (LOAD) IMPOSED ON PURCHASES (as a percentage of offering price) 5.50%(2) None None None MAXIMUM DEFERRED SALES CHARGE (LOAD) (as a percentage of original purchase price or redemption proceeds, whichever is less) None(3) 1.00% None None ------------------------------------------------------------------------------------------------------------ ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets) (as a percentage of average net assets) ------------------------------------------------------------------------------------------------------------ Management Fees 0.30% 0.30% 0.30% 0.30% Distribution and/or Service (12b-1) Fees 0.25% 1.00% 0.50% None Other Expenses(4) 0.75% 0.75% 0.75% 0.75% Total Annual Fund Operating Expenses(5) 1.30% 2.05% 1.55% 1.05% Less Fee Waivers(6) (0.60)% (0.60)% (0.60)% (0.60)% Net Expenses(6) 0.70% 1.45% 0.95% 0.45% ------------------------------------------------------------------------------------------------------------ |
EXAMPLE This example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds. It assumes that you invest $10,000 for the time periods indicated, that your investment has a 5% return each year, and that the fund's operating expenses remain the same. Although your actual costs and returns may differ, based on these assumptions your costs would be:
CLASS C CLASS C
assuming assuming no
redemption redemption
at end of at end of
CLASS A each period each period CLASS R CLASS Y
---------------------------------------------------------------------------------------------------------------------------------
1 year $ 618 $ 248 $ 148 $ 97 $ 46
---------------------------------------------------------------------------------------------------------------------------------
3 years $ 883 $ 585 $ 585 $ 431 $ 274
|
(1)An annual account maintenance fee of $50 may be charged under certain circumstances. See "Policies and Services -- Purchasing, Redeeming, and Exchanging Shares -- Additional Information on Purchasing, Redeeming, and Exchanging Shares -- Accounts with Low Balances."
(2)Investors may qualify for reduced sales charges.
(3)Class A share investments of $1 million or more on which no front-end sales charge is paid may be subject to a contingent deferred sales charge.
(4)Other Expenses are based on estimated amounts for the current fiscal year.
(5)Total Annual Fund Operating Expenses do not include securities lending income received by the advisor. The advisor receives fees of up to 25% of the fund's net income from securities lending transactions in connection with the lending services it provides the fund.
(6)The advisor has contractually agreed to waive fees and reimburse other fund expenses through July 31, 2008, so that total annual fund operating expenses, excluding indirect fees and expenses incurred through investment in exchange traded funds and other investment companies, do not exceed 0.70%, 1.45%, 0.95%, and 0.45%, respectively, for Class A, Class C, Class R, and Class Y shares. These fee waivers and expense reimbursements may be terminated at any time after July 31, 2008, at the discretion of the advisor. Prior to that time, such waivers and reimbursements may not be terminated without the approval of the fund's board of directors.
PROSPECTUS - First American Quantitative Funds
More About the Funds
Investment Strategies, Risks, and Other Investment Matters
OBJECTIVES
The funds' objectives, which are described in the "Fund Summaries" section, may be changed without shareholder approval. If a fund's objective changes, you will be notified at least 60 days in advance. Please remember, there is no guarantee that any fund will achieve its objective.
INVESTMENT STRATEGIES
The funds' principal investment strategies are discussed in the "Fund Summaries" section. These are the strategies that the funds' investment advisor believes are most likely to be important in trying to achieve the funds' objectives. This section provides additional information about certain strategies, as well as information about some additional non-principal strategies that the funds' investment advisor may use to achieve the funds' objectives. You should be aware that each fund may also use strategies and invest in securities that are not described in this prospectus, but that are described in the Statement of Additional Information (SAI). For a copy of the SAI, call Investor Services at 800 677-FUND.
Large-Capitalization Companies. Each fund invests at least 80% of its net assets plus the amount of any borrowings for investment purposes in common stocks of large-capitalization companies. A fund will provide you with at least 60 days' notice of any change in this policy.
Changes to an Index. The companies comprising a fund's benchmark index will change over time. The S&P 500 Index is changed throughout the year on an as needed basis. The Russell 1000 Index is reconstituted annually, although small changes to the index may be made in the interim.
Temporary Investments. In an attempt to respond to adverse market, economic, political, or other conditions, each fund may temporarily invest without limit in cash and in U.S. dollar-denominated high-quality money market instruments and other short-term securities, including money market funds advised by the funds' advisor. Being invested in these securities may keep a fund from participating in a market upswing and prevent the fund from achieving its investment objectives.
Portfolio Turnover. Fund managers may trade securities frequently, resulting, from time to time, in an annual portfolio turnover rate of over 100%. Trading of securities may produce capital gains, which are taxable to shareholders when distributed. Active trading may also increase the amount of commissions or mark-ups to broker-dealers that the fund pays when it buys and sells securities.
PRINCIPAL RISKS
The principal risks of investing in each fund are described in the "Fund Summaries" section. More information about some of these risks is presented below.
Active Quantitative Management Risk. The funds are actively managed using the quantitative process described under "Fund Summaries -- Principal Investment Strategies" for each fund. Securities selected using this process could underperform the market as a whole as a result of the factors used in the process, the weight placed on each factor, and changes in the way each factor performs in today's economic conditions as compared to the factor's historical performance. Due to its active management, a fund could underperform its benchmark index or other mutual funds with similar investment objectives.
Common Stock Risk. 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, such as value stocks, growth stocks, and/or large-capitalization stocks, may underperform the market as a whole.
Foreign Security Risk. Each fund may invest in dollar denominated foreign securities which are listed on a United States stock exchange and included in the index from which the fund's common stock investments are selected. Securities of foreign issuers, even when dollar-denominated and publicly traded in the United States, may involve risks not associated with the securities of domestic issuers. Even though these securities are traded in U.S. dollars, their prices are indirectly influenced by currency fluctuations. For certain foreign countries, political or social instability or diplomatic developments could adversely affect the securities. There is also the risk of loss due to governmental actions such as a change in tax statutes or the modification of individual property rights. In addition, individual foreign economies may differ favorably or unfavorably from the United States' economy.
Futures Contract Risk. The use of stock index futures contracts exposes a fund to additional risks and transaction costs. Additional risks include leverage risk, which is the risk that adverse price movements in the index could result in a loss substantially greater than the fund's initial investment in the instrument; the risk of an imperfect correlation between the price of the futures contract and the prices of the securities in the index; and the possible absence of a liquid secondary market for the futures contract or possible exchange imposed price fluctuation limits, either of which may make it difficult or impossible to close out a position when desired.
DISCLOSURE OF PORTFOLIO HOLDINGS
A description of the funds' policies and procedures with respect to the disclosure of each fund's portfolio securities is available in the funds' SAI.
PROSPECTUS - First American Quantitative Funds
Policies and Services
Purchasing, Redeeming, and Exchanging Shares
GENERAL
You may purchase, redeem, or exchange shares of the funds on any day when the New York Stock Exchange (NYSE) is open, except that shares cannot be purchased by wire transfer on days that federally chartered banks are closed. Purchases, redemptions and exchanges may be restricted in the event of an early or unscheduled close of the NYSE.
The funds have authorized certain investment professionals and financial institutions ("financial intermediaries") to accept purchase, redemption, or exchange orders on their behalf. Your purchase or redemption price will be based on the net asset value (NAV) per share next calculated by the funds after your order is received by the funds or an authorized financial intermediary in proper form. Exchanges are also made at the NAV per share next calculated by the fund after your exchange request is received in proper form. See "Additional Information on Purchasing, Redeeming, and Exchanging Shares -- Calculating Net Asset Value" below. Contact your financial intermediary to determine the time by which it must receive your order to be assured same day processing. To make sure your order is in proper form, you must follow the instructions set forth below under "Purchase, Redemption, and Exchange Procedures."
Some financial intermediaries may charge a fee for helping you purchase, redeem, or exchange shares. Contact your financial intermediary for more information. No such fee will be imposed if you purchase shares directly from the funds.
The funds may be offered only to persons in the United States. This prospectus should not be considered a solicitation or offering of fund shares outside the United States.
CHOOSING A SHARE CLASS
The funds issue their shares in four classes with each class having a different cost structure. As noted below, only certain eligible investors can purchase Class R and Class Y shares of the funds, whereas Class A and Class C shares (the "Retail Share Classes") are generally available to investors. You should decide which share class best suits your needs.
Eligibility to Invest in Class R and Class Y Shares
CLASS R SHARES generally are available only to 401(k) plans, 457 plans, employer-sponsored 403(b) plans, profit-sharing and money purchase pension plans, defined benefit plans and nonqualified deferred compensation plans ("retirement plans"), and must be held in plan level or omnibus accounts.
Class R shares are not available to retail retirement or non-retirement accounts, Traditional and Roth Individual Retirement Accounts (IRAs), Coverdell Education Savings Accounts, SEPs, SARSEPs, SIMPLE IRAs, individual 403(b) plans and 529 college savings plans.
CLASS Y SHARES are offered to group retirement plans and to certain persons who are charged fees for advisory, investment, consulting or similar services by a financial intermediary or other service provider. Such persons may include, but are not limited to, individuals, corporations, and endowments.
Class Share Overview
Contingent Deferred
Front-End Sales Sales Charge Annual 12b-1 Fees
Charge (FESC) (CDSC) (as a % of net assets)
-------------------------------------------------------------------------------------
Class A 5.50%(1) None(2) 0.25%
Class C None 1.00%(3) 1.00%
Class R None None 0.50%
Class Y None None None
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(1)The FESC is reduced for larger purchases. See "Determining Your Share Price -- Class A Shares" below.
(2)Class A share investments of $1 million or more on which no FESC is paid may be subject to a 1% CDSC.
(3)A 1.00% CDSC applies if you redeem your Class C shares within 12 months of purchase.
Among the Retail Share Classes, Class A shares may be a better choice if your investment qualifies for a reduced sales charge. You should not place Class C share orders that would cause your total investment in First American Funds Class A, Class B (for funds offering such share class), and Class C shares (not including First American money market funds) to equal or exceed $1 million dollars, using the aggregation principles discussed below under "Determining Your Share Price -- Class A Shares -- Reducing Your Sales Charge on Class A Shares." To the extent operationally possible, these orders will be automatically rejected.
Class R or Class Y shares are generally a better choice than a Retail Share Class if you are eligible to purchase these share classes. However, if you intend to hold your shares for a long time, or if you are eligible to invest in Class A shares with a reduced or waived sales charge, Class A may be a better choice than an investment in Class R shares.
DETERMINING YOUR SHARE PRICE
Class A Shares
Your purchase price for Class A shares is typically the net asset value of your shares, plus a front-end sales charge. Sales charges vary depending on the amount of your purchase. The sales charge you pay may differ slightly from the amount set forth below because of rounding that occurs in the calculation used to determine your sales charge.
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Purchasing, Redeeming, and Exchanging Shares CONTINUED
Sales Charge
------------------------------
As a % As a %
of of Net
Offering Amount
Purchase Amount Price Invested
-----------------------------------------------------
Less than $50,000 5.50% 5.82%
50,000 - $99,999 4.50% 4.71%
$100,000 - $249,999 3.50% 3.63%
$250,000 - $499,999 2.50% 2.56%
$500,000 - $999,999 2.00% 2.04%
$1 million and over 0.00% 0.00%
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Reducing Your Sales Charge on Class A Shares. As shown in the preceding table, larger purchases of Class A shares reduce the percentage sales charge you pay. In determining whether you are entitled to pay a reduced sales charge, you may aggregate certain other purchases with your current purchase, as follows.
Prior Purchases. Prior purchases of Class A, Class B (for funds offering such share class), and Class C shares of any First American Fund (except a money market fund) will be factored into your sales charge calculation. You will receive credit for the current net asset value of the other Class A, Class B, and Class C shares you hold at the time of your purchase, including shares held in individual retirement, custodial or personal trust accounts. For example, let's say you're making a $10,000 investment and you already own other First American Fund Class A shares that are currently valued at $45,000. You will receive credit for the current value of these shares and your sales charge will be based on a total purchase amount of $55,000. If the current net asset value of your shares is less than their original purchase price, you may receive credit for their original purchase price instead, but only if you provide a written request to the funds and provide them with the records necessary to demonstrate the shares' purchase price.
Purchases by Related Accounts. Concurrent and prior purchases by certain other accounts of Class A, Class B (for funds offering such share class), and Class C shares of any First American Fund (except a money market fund) also will be combined with your purchase to determine your sales charge. The fund will combine purchases made by you, your spouse or domestic partner, and your dependent children when it calculates the sales charge, including purchases in individual retirement, custodial and personal trust accounts.
Letter of Intent. If you plan to invest $50,000 or more over a 13-month period in Class A, Class B (for funds offering such share class), or Class C shares of any First American Fund except the money market funds, you may reduce your sales charge for Class A purchases by signing a non-binding letter of intent. If you do not fulfill the letter of intent, you must pay the applicable sales charge. In addition, if you reduce your sales charge to zero under a letter of intent and then sell your Class A shares within 18 months of their purchase, you may be charged a contingent deferred sales charge of 1%. See "Class A Share Investments of Over $1 Million" below.
It is your responsibility to determine whether you are entitled to pay a reduced sales charge. The fund is not responsible for making this determination. To receive a reduced sales charge, you must notify the fund at the time of the purchase order that a quantity discount may apply to your current purchase. If you purchase shares by mail, you must notify the fund in writing. Otherwise, simply inform your financial intermediary, or Investor Services if you are purchasing shares directly from the funds, and they will notify the fund.
You should provide your financial intermediary with information or records
regarding any other accounts in which there are holdings eligible to be
aggregated, including:
- all of your accounts at your financial intermediary.
- all of your accounts at any other financial intermediary.
- all accounts of any related party (such as a spouse or dependent child) held
with any financial intermediary.
You should keep the records necessary to demonstrate the purchase price of shares held in these accounts since neither the fund and its transfer agent nor your financial intermediary may have this information.
More information on these ways to reduce your sales charge appears in the SAI.
Purchasing Class A Shares Without a Sales Charge. The following persons may
purchase a fund's Class A shares at net asset value without a sales charge:
- directors, advisory board members, full-time employees and retirees of the
advisor and its affiliates.
- current and retired officers and directors of the funds.
- full-time employees of any broker-dealer authorized to sell fund shares.
- full-time employees of the fund's counsel.
- members of the immediate families of any of the foregoing (i.e., a spouse or
domestic partner and any dependent children).
- persons who purchase the funds through "one-stop" mutual fund networks through
which the funds are made available.
- persons participating in a fee-based program sponsored and maintained by a
registered broker-dealer.
- trust companies and bank trust departments acting in a fiduciary, advisory,
agency, custodial or similar capacity.
- group retirement plans.
You must notify the funds or your financial intermediary if you are eligible to purchase Class A shares without a sales charge.
Reinvesting After a Redemption. If you redeem Class A shares of a First American Fund (except money market fund shares on which you have not paid a sales charge), you may reinvest in Class A shares of that fund or another First
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Purchasing, Redeeming, and Exchanging Shares CONTINUED
American Fund within 180 days without a sales charge. To reinvest in Class A shares at net asset value (without paying a sales charge), you must notify the fund directly in writing or notify your financial intermediary.
Class A Share Investments of Over $1 Million. There is no initial sales charge on Class A share purchases of $1 million or more (including purchases that reach the $1 million level as a result of aggregating prior purchases and purchases by related accounts). However, your financial intermediary may receive a commission of up to 1% on your purchase. If such a commission is paid, you will be assessed a contingent deferred sales charge (CDSC) of 1% if you sell your shares within 18 months. The CDSC you pay may differ slightly from this amount because of rounding that occurs in the calculation used to determine your CDSC. To find out whether you will be assessed a CDSC, ask your financial intermediary.
The CDSC is based on the value of your shares at the time of purchase or at the time of redemption, whichever is less. The charge does not apply to shares you acquired by reinvesting your dividend or capital gain distributions. To help lower your costs, Class A shares that are not subject to a CDSC will be redeemed first. The CDSC will be waived in the circumstances described below under "Waiving Contingent Deferred Sales Charges."
Additional Information on Reducing Sales Charges. A link to information regarding the funds' Class A share sales charge breakpoints is available on the funds' web site at www.firstamericanfunds.com.
Class C Shares
Your purchase price for Class C shares is their net asset value -- there is no front-end sales charge. However, if you redeem your shares within 12 months of purchase, you will be assessed a CDSC of 1% of the value of your shares at the time of purchase or at the time of sale, whichever is less. The CDSC you pay may differ slightly from this amount because of rounding that occurs in the calculation used to determine your CDSC. The CDSC does not apply to shares you acquired by reinvesting your dividend or capital gain distributions. To help lower your costs, Class C shares that are not subject to a CDSC will be redeemed first. The CDSC will be waived in the circumstances described below under "Waiving Contingent Deferred Sales Charges."
Retirement Plan Availability of Class C Shares
Class C shares are available to individual plans and certain smaller group plans, such as SIMPLE, SEP and Solo 401(k) plans. Class C shares are not available to certain employer-sponsored plans, such as 401(k), employer-sponsored 403(b), money purchase and profit sharing plans, except for those plans invested in Class C shares of other First American Funds prior to July 20, 2007.
Waiving Contingent Deferred Sales Charges
CDSCs on Class A and Class C share redemptions will be waived for:
- redemptions following the death or disability (as defined in the Internal
Revenue Code) of a shareholder.
- redemptions that equal the minimum required distribution from an IRA or other
retirement plan to a shareholder who has reached the age of 70 1/2.
- redemptions through a systematic withdrawal plan, at a rate of up to 12% a
year of your account's value. The systematic withdrawal limit will be based on
the market value of your account at the time of each withdrawal.
- redemptions required as a result of over-contribution to an IRA plan.
Class R and Class Y Shares
Your purchase price for Class R and Class Y shares is their net asset value. These share classes do not have a front-end sales charge or a CDSC.
12B-1 FEES
Each fund has adopted a plan pursuant to Rule 12b-1 under the Investment Company Act that allows the fund to pay its distributor an annual fee for the distribution and sale of its shares and/or for services provided to shareholders. The funds do not pay 12b-1 fees on Class Y shares. The 12b-1 fees paid by the funds are designated as distribution fees and/or shareholder servicing fees, as described below.
Annual 12b-1 Fees
(as a percentage of average
daily net assets)
----------------------------
Shareholder
Distribution Servicing
Fee Fee
---------------------------------------------------------
Class A None 0.25%
Class C 0.75% 0.25%
Class R 0.25% 0.25%
Class Y None None
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Because 12b-1 fees are paid out of a fund's assets on an ongoing basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of sales charges.
COMPENSATION PAID TO FINANCIAL INTERMEDIARIES
The funds' distributor receives any front-end sales charge or CDSC that you pay and any 12b-1 fees paid by the funds. From this revenue, the distributor will pay financial intermediaries for the services they provide. The funds' advisor and/or distributor may make additional payments to
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Purchasing, Redeeming, and Exchanging Shares CONTINUED
intermediaries from their own assets, as described below under "Additional Payments to Financial Intermediaries."
Sales Charge Reallowance
The distributor pays (or "reallows") a portion of the front-end sales charge on Class A shares to your financial intermediary, as follows:
Maximum Reallowance
as a % of
Purchase Amount Purchase Price
-----------------------------------------------------
Less than $50,000 5.00%
$50,000 - $99,999 4.00%
$100,000 - $249,999 3.25%
$250,000 - $499,999 2.25%
$500,000 - $999,999 1.75%
$1 million and over 0.00%
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Sales Commissions
There is no initial sales charge on Class A share purchases of $1 million or more; however, your financial intermediary may receive a commission of up to 1% on your purchase. Although you pay no front-end sales charge when you buy Class C shares, the funds' distributor pays a sales commission of 1.00% of the amount invested to intermediaries selling Class C shares.
12b-1 Fees
The funds' distributor uses the 12b-1 shareholder servicing fee to compensate financial intermediaries for administrative services performed on behalf of the intermediaries' customers. These intermediaries receive shareholder servicing fees of up to 0.25% of a fund's Class A, Class C, and Class R share average daily net assets attributable to shares sold through them. For Class A and Class R shares, the distributor begins to pay shareholder servicing fees to these intermediaries immediately after you purchase shares. For Class C shares, the distributor begins to pay shareholder servicing fees to these intermediaries one year after you purchase shares, but only if you continue to hold the shares at that time.
The funds' distributor uses the 12b-1 distribution fee to compensate financial intermediaries for the sale of fund shares to their customers. The funds' distributor pays intermediaries that sell Class C shares a 0.75% annual distribution fee beginning one year after the shares are sold. The funds' distributor pays intermediaries that sell Class R shares a 0.25% annual distribution fee beginning immediately after you purchase shares.
In all cases, intermediaries continue to receive 12b-1 fees for as long as you hold fund shares.
Additional Payments to Financial Intermediaries
The advisor and/or the distributor may pay additional compensation to financial intermediaries out of their own legitimate profits in connection with the sale or retention of fund shares and/or in exchange for sales and/or administrative services performed on behalf of the intermediaries' customers. The amount of these payments may be significant, and may create an incentive for an intermediary or its employees or associated persons to recommend or sell shares of the funds to you. These payments are not reflected in the fees and expenses listed in the "Fund Summaries" section of the prospectus because they are not paid by the funds.
These payments are negotiated and may be based on such factors as the number or value of shares that the financial intermediary sells or may sell; the value of the assets invested in the funds by the intermediary's customers; reimbursement of ticket or operational charges (fees that an intermediary charges its representatives for effecting transactions in fund shares); lump sum payment for services provided; the type and nature of services or support furnished by the intermediary; and/or other measures as determined from time to time by the advisor and/or distributor.
The advisor and/or distributor may make other payments or allow other promotional incentives to financial intermediaries to the extent permitted by SEC and NASD rules and by other applicable laws and regulations. Certain intermediaries also receive payments in recognition of sub-accounting, recordkeeping or other services they provide to shareholders or plan participants who invest in the fund or other First American Funds through their retirement plan.
You can ask your financial intermediary for information about any payments it receives from the advisor and/or the distributor and from the funds, and any services your intermediary provides, as well as about fees and/or commissions your intermediary charges. You can also find more details about payments made by the advisor, and/or the distributor in the funds' SAI.
PURCHASE, REDEMPTION, AND EXCHANGE PROCEDURES
To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify, and record information that identifies each person who opens an account.
As a result, when you open an account, we will ask for your name, permanent street address, date of birth, and social security or taxpayer identification number. Addresses containing a P.O. Box only will not be accepted. We may also ask for other identifying documents or information.
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Purchasing Class A and Class C Shares
You can become a shareholder in any of the funds by making the following minimum initial or additional investments.
Minimum Minimum
Initial Additional
Account Types Investment Investment
------------------------------------------------------
Retirement plan, Uniform Gift
to Minors Act (UGMA)/
Uniform Transfers to Minors
Act (UTMA) accounts $ 500 $ 25
All other accounts $1,000 $100
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The funds have the right to waive these minimum investment requirements for shares offered through certain institutions and for employees of the funds' advisor and its affiliates. The funds also have the right to reject any purchase order.
By Phone. You can purchase shares by calling your financial intermediary, if they have a sales agreement with the funds' distributor. You can also place purchase orders of $100 or more by calling Investor Services at 800 677-FUND. Funds will be transferred electronically from your bank account through the Automated Clearing House (ACH) network. Before making a purchase by electronic funds transfer, you must submit a new account form to the funds and elect this option. Be sure to include all of your banking information on the form.
By Wire. You can purchase shares by making a wire transfer from your bank. Before making an initial investment by wire, you must submit a new account form to the funds. After receiving your form, a service representative will contact you with your account number and wiring instructions. Your order will be priced at the next NAV or public offering price, as applicable based on your share class, calculated after the funds' custodian receives your payment by wire. Before making any additional purchases by wire, you should call Investor Services at 800 677-FUND. You cannot purchase shares by wire on days when federally chartered banks are closed.
By Mail. To purchase shares by mail, simply complete and sign a new account form, enclose a check made payable to the fund you wish to invest in, and mail both to:
REGULAR U.S. MAIL: OVERNIGHT EXPRESS MAIL: ------------------------ ------------------------ First American Funds First American Funds P.O. Box 3011 615 East Michigan Street Milwaukee, WI 53201-3011 Milwaukee, WI 53202 |
After you have established an account, you may continue to purchase shares by mailing your check to First American Funds at the same address.
Please note the following:
- All purchases must be drawn on a bank located within the United States and
payable in U.S. dollars to First American Funds.
- Cash, money orders, cashier's checks in amounts less than $10,000, third-party
checks, Treasury checks, credit card checks, traveler's checks, starter
checks, and credit cards will not be accepted. We are unable to accept post
dated checks, post dated on-line bill pay checks, or any conditional order or
payment.
- If a check or ACH does not clear your bank, the funds reserve the right to
cancel the purchase, and you may be charged a fee of $25 per check or
transaction. You could be liable for any losses or fees incurred by the fund
as a result of your check or ACH transaction failing to clear.
By Systematic Investment Plan. To purchase shares as part of a savings
discipline, you may add to your investment on a regular basis:
- by having $100 or more ($25 for a retirement account or a Uniform Gifts to
Minors Act/Uniform Transfers to Minors Act account) automatically withdrawn
from your bank account on a periodic basis and invested in fund shares, or
- through automatic monthly exchanges of your First American fund into another
First American fund of the same class.
You may apply for participation in either of these programs through your financial intermediary or by calling Investor Services at 800 677-FUND.
Redeeming Class A and Class C Shares
When you redeem shares, the proceeds are normally sent on the next business day, but in no event more than seven days, after your request is received in proper form.
By Phone. If you purchased shares through a financial intermediary, simply call them to redeem your shares.
If you did not purchase shares through a financial intermediary, you may redeem your shares by calling Investor Services at 800 677-FUND. Proceeds can be wired to your bank account (if the proceeds are at least $1,000 and you have previously supplied your bank account information to the fund) or sent to you by check. The funds charge a $15 fee for wire redemptions, which in certain instances may be waived. Proceeds also can be sent directly to your bank or brokerage account via electronic funds transfer if your bank or brokerage firm is a member of the ACH network. Credit is usually available within 2-3 business days. The First American Funds reserve the right to limit telephone redemptions to $50,000 per day.
If you recently purchased your shares by check or through the ACH network, proceeds from the sale of those shares may not be available until your check or ACH payment has cleared, which may take up to 15 calendar days from the date of purchase.
PROSPECTUS - First American Quantitative Funds
Policies and Services
Purchasing, Redeeming, and Exchanging Shares CONTINUED
By Mail. To redeem shares by mail, send a written request to your financial intermediary, or to the fund at the following address:
REGULAR U.S. MAIL: OVERNIGHT EXPRESS MAIL: ------------------------ ------------------------ First American Funds First American Funds P.O. Box 3011 615 East Michigan Street Milwaukee, WI 53201-3011 Milwaukee, WI 53202 |
Your request should include the following information:
- name of the fund
- account number
- dollar amount or number of shares redeemed
- name on the account
- signatures of all registered account owners
A signature guarantee is required on written requests if:
- you would like redemption proceeds to be paid to anyone other than to the
shareholder of record.
- you would like the redemption check mailed to an address or bank account other
than those on the fund's records, or you have changed the address on the
fund's records within the last 30 days.
- your redemption request is more than $50,000.
- bank information related to an automatic investment plan, telephone purchase
or telephone redemption is changed.
In addition to the situations described above, the funds reserve the right to require a signature guarantee in other instances based on the circumstances of a particular situation.
A signature guarantee assures that a signature is genuine and protects shareholders from unauthorized account transfers. Banks, savings and loan associations, trust companies, credit unions, broker-dealers, and member firms of a national securities exchange may guarantee signatures. Call your financial intermediary to determine if it has this capability. A notary public is not an acceptable signature guarantor.
Proceeds from a written redemption request will be sent to you by check unless another form of payment is requested.
By Wire. You can call or write to have redemption proceeds sent to a bank account. See the policies for redeeming shares by phone or by mail. Before requesting to have redemption proceeds sent to a bank account, please make sure the funds have your bank account information on file. If the funds do not have this information, you will need to send written instructions with your bank's name and a voided check or savings account deposit slip. You must provide written instructions signed by all fund and bank account owners, and each individual must have their signature guaranteed.
By Systematic Withdrawal Plan. If your account has a value of $5,000 or more, you may redeem a specific dollar amount from your account on a regular basis. You may set up a systematic withdrawal when you complete a new account form or by calling your financial intermediary.
You should not make systematic withdrawals if you plan to continue investing in a fund, due to sales charges and tax liabilities.
Exchanging Class A and Class C Shares
If your investment goals or your financial needs change, you may move from one First American Fund to another First American Fund. There is no fee to exchange shares.
Generally, you may exchange your shares only for the same class of shares of the other fund. However, you may exchange your Class A shares for Class Y shares of the same or another First American Fund if you subsequently become eligible to purchase Class Y shares.
When you exchange your Class A shares of one of the funds for Class A shares of another First American fund, you do not have to pay a sales charge. When you exchange your Class C shares for Class C shares of another First American fund, the time you held the shares of the "old" fund will be added to the time you hold the shares of the "new" fund for purposes of determining your CDSC.
Before exchanging into any fund, be sure to read its prospectus carefully. A fund may change or cancel its exchange policies at any time. You will be notified of any changes. The funds have the right to limit exchanges that are deemed to constitute short-term trading. See "Additional Information on Purchasing, Redeeming, and Exchanging Shares -- Short-Term Trading of Fund Shares" below.
By Phone. If both funds have identical shareholder registrations, you may exchange shares by calling your financial intermediary or by calling the funds directly at 800 677-FUND.
By Mail. To exchange shares by written request, please follow the procedures under "Redeeming Class A and Class C Shares" above. Be sure to include the names of both funds involved in the exchange.
By Systematic Exchange Plan. You may add to your investment on a regular basis through automatic monthly exchanges of your First American fund into another First American fund of the same class. You may apply for participation in this program through your financial intermediary or by calling Investor Services at 800 677-FUND.
Purchasing, Redeeming, and Exchanging Class R Shares
Eligible retirement plans generally may open an account and purchase Class R shares by contacting any financial intermediary or plan administrator authorized to sell the funds' shares. Participants in retirement plans generally must contact the plan's administrator to purchase, redeem or exchange shares.
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Purchasing, Redeeming, and Exchanging Shares CONTINUED
Share purchases by eligible retirement plans are generally made by wire transfer. You cannot purchase shares by wire on days when federally chartered banks are closed.
Purchase orders and redemption requests from a retirement plan or participant in the plan must be received by the financial intermediary or plan administrator by the time specified by that institution to be assured same day processing. In order for shares to be purchased or sold at that day's price, the funds must receive the purchase order or redemption request from the financial intermediary or plan administrator by 3:00 p.m. Central time. It is the responsibility of the financial intermediary or plan administrator to promptly transmit orders to the funds.
If the funds receive a redemption request by 3:00 p.m. Central time, payment of the redemption proceeds will ordinarily be made by wire on the next business day. It is possible, however, that payment could be delayed by up to seven days.
Exchanging Class R Shares. If you are a plan participant and your investment goals or your financial needs change, you may exchange your shares for Class R shares of another First American Fund offered through your retirement plan. There is no fee to exchange shares.
To exchange your shares, call your financial intermediary or plan administrator. In order for your shares to be exchanged the same day, you must call your financial intermediary or plan administrator by the time specified by that institution and your exchange order must be received by the funds by 3:00 p.m. Central time. It is the responsibility of your financial intermediary or plan administrator to promptly transmit your exchange order to the funds.
Before exchanging into any fund, be sure to read its prospectus carefully. A fund may change or cancel its exchange policies, or the funds offered through your retirement plan may change, at any time. You will be notified of any changes. The funds have the right to limit exchanges that are deemed to constitute short-term trading. See "Additional Information on Purchasing, Redeeming, and Exchanging Shares -- Short-Term Trading of Fund Shares" below.
Purchasing, Redeeming, and Exchanging Class Y Shares
You may purchase or redeem shares by calling your financial intermediary. When purchasing shares, payment must generally be made by wire transfer, which can be arranged by your financial intermediary. You cannot purchase shares by wire on days when federally chartered banks are closed. The funds reserve the right to impose minimum investment amounts on clients of financial intermediaries that charge the funds or the advisor transaction or recordkeeping fees.
If the fund or an authorized financial intermediary receives your redemption request by 3:00 p.m. Central time, payment of your redemption proceeds will ordinarily be made by wire on the next business day. It is possible, however, that payment could be delayed by up to seven days.
Exchanging Class Y Shares. If your investment goals or your financial needs change, you may exchange your shares for Class Y shares of another First American Fund. There is no fee to exchange shares. If you are no longer eligible to purchase Class Y shares, you may exchange your shares for Class A shares at net asset value. Class A shares have higher expenses than Class Y shares.
To exchange your shares, call your financial intermediary.
Before exchanging into any fund, be sure to read its prospectus carefully. A fund may change or cancel its exchange policies at any time. You will be notified of any changes. The funds have the right to limit exchanges that are deemed to constitute short-term trading. See "Additional Information on Purchasing, Redeeming, and Exchanging Shares -- Short-Term Trading of Fund Shares" below.
Systematic Transactions. You may add to your investment, or redeem a specific dollar amount from your account, on a regular, automatic basis through a systematic investment or withdrawal plan. You may also move from one First American Fund to another First American Fund of the same class on a regular basis through automatic monthly exchanges. You may apply for participation in these programs through your financial intermediary.
You should not make systematic withdrawals if you plan to continue investing in a fund, due to sales charges and tax liabilities.
ADDITIONAL INFORMATION ON PURCHASING, REDEEMING, AND EXCHANGING SHARES
Calculating Net Asset Value
The funds generally calculate their NAV as of 3:00 p.m. Central time every day the New York Stock Exchange is open.
A fund's NAV is equal to the market value of its investments and other assets, less any liabilities, divided by the number of fund shares.
Investments and other assets will be valued at their market values. For securities traded on an exchange, we receive the price as reported by the exchange from one or more independent pricing services that have been approved by the funds' board of directors. These independent pricing services also provide security valuations for certain other investments not traded on an exchange. If market prices are not readily available for an investment or if the advisor believes they are unreliable, fair value prices may be determined in good faith using procedures approved by the funds' board of directors. Under these procedures, fair values are generally determined by
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Purchasing, Redeeming, and Exchanging Shares CONTINUED
a pricing committee appointed by the board of directors. The types of securities
for which such fair value pricing might be required include, but are not limited
to:
- Securities, including securities traded in foreign markets, where an event
occurs after the close of the market in which such security principally
trades, but before NAV is determined, that will affect the value of such
security, or the closing value is otherwise deemed unreliable;
- Securities whose trading has been halted or suspended;
- Fixed-income securities that have gone into default and for which there is no
current market value quotation; and
- Securities with limited liquidity, including certain high-yield securities or
securities that are restricted as to transfer or resale.
Valuing securities at fair value involves greater reliance on judgment than valuing securities that have readily available market quotations. Fair value determinations can also involve reliance on quantitative models employed by a fair value pricing service. There can be no assurance that a fund could obtain the fair value assigned to a security if it were to sell the security at approximately the time at which the fund determines its NAV per share.
Short-Term Trading of Fund Shares
The funds discourage purchases and redemptions of their shares in response to short-term fluctuations in the securities markets. The funds' board of directors has adopted policies and procedures designed to detect and deter short-term trading in the funds' shares that may disadvantage long-term fund shareholders. These policies are described below. The funds will not knowingly accommodate trading in the funds' shares in violation of these policies. As discussed below, however, there is no guarantee that the funds will be able to detect such trading in all accounts. See "Omnibus Accounts" below.
Risks Associated with Short-Term Trading. Short-term trading in a fund's shares, particularly in larger amounts, may be detrimental to long-term shareholders of the fund. Depending on various factors, including the size of a fund, the amount of assets the fund typically maintains in cash or cash equivalents, the dollar amount and number and frequency of trades, and the types of securities in which the fund typically invests, short-term trading may interfere with the efficient management of the fund's portfolio, increase the fund's transaction costs, administrative costs and taxes, and/or impact the fund's performance.
In addition, the nature of a fund's portfolio holdings may allow a shareholder engaging in a short-term trading strategy to take advantage of possible delays between the change in the value of a fund's portfolio holdings and the reflection of that change in the net asset value of the fund's shares. Such a delay may occur in funds that have significant investments in foreign securities, where the value of those securities is established some time before the fund calculates its own share price, or in funds that hold significant investments in small-cap securities, high-yield (junk) bonds and other types of investments that may not be frequently traded. This type of short-term trading is sometimes referred to as "arbitrage market timing," and there is the possibility that such trading may dilute the value of fund shares if redeeming shareholders receive proceeds (and buying shareholders receive shares) based upon net asset values which do not reflect appropriate fair value prices.
Short-Term Trading Policies. The funds' advisor monitors trading in fund shares in an effort to identify short-term trading activity that may disadvantage long-term shareholders. Only transactions that exceed a certain dollar threshold that has been determined to be potentially disruptive to the management of a fund are subject to monitoring. It is the policy of the funds to permit no more than one round trip by an investor during any 90-calendar-day period. A round trip is defined as a purchase into or redemption out of a fund (including purchases or redemptions accomplished by an exchange) paired with an opposite direction redemption out of or purchase into the same fund within 10 calendar days, in a dollar amount that exceeds the monitoring threshold. If the advisor determines that a shareholder has made more than one round trip during any 90-calendar-day period, the shareholder conducting such trading will, in less serious instances, be given an initial warning to discontinue such trading. In more serious instances (generally involving larger dollar amounts), or in the case of a second violation after an initial warning has been given, the shareholder may be temporarily or permanently barred from making future purchases into one or all of the funds or, alternatively, the funds may limit the amount, number or frequency of any future purchases and/or the method by which the shareholder may request future purchases (including purchases by an exchange or transfer between a fund and any other fund). In addition to the foregoing sanctions, the funds reserve the right to reject any purchase order at any time and for any reason, without prior written notice. The funds also reserve the right to revoke the exchange privileges of any person at any time and for any reason. In making determinations concerning the rejection of purchase orders and the revocation of exchange privileges, and in considering which sanctions to impose, the funds may consider an investor's trading history in any of the First American Funds, in non-First American mutual funds, or in accounts under a person's common ownership or control.
Certain transactions are not subject to the funds' short-term trading policies. These include transactions such as systematic redemptions and purchases; retirement plan contributions, loans and distributions (including hardship withdrawals); purchase transactions involving transfers of assets, rollovers, Roth IRA conversions and IRA re-characterizations; regular portfolio re- balancings in fee-based programs of registered investment advisors, financial planners and registered broker-dealers; and similar transactions.
Policies and Services
Purchasing, Redeeming, and Exchanging Shares CONTINUED
Omnibus Accounts. Fund shares are frequently held through omnibus account arrangements, whereby a broker-dealer, investment advisor, retirement plan sponsor or other financial intermediary maintains an omnibus account with a fund for trading on behalf of its customers. The funds seek to apply their short-term trading policies and procedures to these omnibus account arrangements and will request that the intermediary provide individual account level detail (or participant level detail in the case of retirement plans) to the funds if more than one round trip in any 90 day period is detected at the omnibus or plan level and such round trips appear to be (a) attributable to an individual shareholder or plan participant and (b) potentially detrimental to the respective fund and its shareholders based on such factors as the time between transactions, the size of the transactions and the type of fund involved. If short-term trading is detected at the individual account or participant level, the funds will request that the financial intermediary take appropriate action to curtail the activity. If the financial intermediary does not take action, the funds will take such steps as are reasonably practicable to curtail the excessive trading, including terminating the relationship with the intermediary if necessary.
While the funds will request that financial intermediaries either apply the funds' short-term trading policies to their customers who invest indirectly in the funds, or maintain policies reasonably designed to achieve the objective of the funds' short-term trading policies, the funds are limited in their ability to monitor the trading activity or enforce the funds' short-term trading policies with respect to customers of financial intermediaries. However, the funds have entered into shareholder information agreements with certain financial intermediaries pursuant to Rule 22c-2 of the Investment Company Act of 1940 under which the financial intermediaries have agreed to assist the funds in monitoring trading activity and enforcing the funds' short-term trading policies with respect to the financial intermediaries' customers.
Telephone Transactions
The funds and their agents will not be responsible for any losses that may result from acting on wire or telephone instructions that they reasonably believe to be genuine. The funds and their agents will each follow reasonable procedures to confirm that instructions received by telephone are genuine, which may include taping telephone conversations.
It may be difficult to reach the funds by telephone during periods of unusual market activity. If you are unable to reach the funds or their agents by telephone, please consider sending written instructions.
Accounts with Low Balances
If your account balance falls below $500, the funds reserve the right to either:
- deduct a $50 annual account maintenance fee, or
- close your account and send you the proceeds, less any applicable contingent
deferred sales charge.
Before taking any action, however, the funds will send you written notice of the action they intend to take and give you 30 days to re-establish a minimum account balance of $500.
Redemption in Kind
Generally, proceeds from redemption requests will be paid in cash. However, to minimize the effect of large redemption requests on a fund and its remaining shareholders, if you redeem more than $250,000 of a fund's assets within a 30-day period, the fund reserves the right to pay part or all of the proceeds from a redemption request in a proportionate share of securities from the fund's portfolio instead of cash. In selecting securities for a redemption in kind, the advisor will consider the best interests of the fund and the remaining fund shareholders, and will value these securities in accordance with the pricing methods employed to calculate the fund's net asset value per share. If you receive redemption proceeds in kind, you should expect to incur transaction costs upon disposition of the securities received in the redemption. In addition, you will bear the market risk associated with these securities until their disposition.
Policies and Services
Managing Your Investment
STAYING INFORMED
Shareholder Reports
Shareholder reports are mailed twice a year. They include financial statements and performance information, and, on an annual basis, a message from your portfolio managers and the report of independent registered public accounting firm.
In an attempt to reduce shareholder costs and help eliminate duplication, the funds will try to limit their mailings to one report for each address that lists one or more shareholders with the same last name. If you would like additional copies, please call Investor Services at 800 677-FUND.
Statements and Confirmations
Statements summarizing activity in your account are mailed quarterly. Confirmations generally are mailed following each purchase or sale of fund shares, but some transactions, such as systematic purchases and dividend reinvestments, are reported on your account statement. Generally, the funds do not send statements for shares held in a brokerage account or to individuals who have their shares held in an omnibus account, such as retirement plan participants. Please review your statements and confirmations as soon as you receive them and promptly report any discrepancies to your financial intermediary or to Investor Services at 800 677-FUND.
DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income are declared and paid quarterly. For each of the funds, any capital gains are distributed at least once each year.
On the ex-dividend date for a distribution, a fund's share price is reduced by the amount of the distribution. If you buy shares just before the ex-dividend date, in effect, you "buy the dividend." You will pay the full price for the shares and then receive a portion of that price back as a taxable distribution.
Dividend and capital gain distributions will be reinvested in additional shares of the fund, unless you request that distributions be reinvested in another First American Fund or paid in cash. This request may be made on your new account form, by contacting your financial intermediary, or by calling Investor Services at 800 677-FUND. If you request that your distributions be paid in cash but those distributions cannot be delivered because of an incorrect mailing address, or if a distribution check remains uncashed for six months, the undelivered or uncashed distributions and all future distributions will be reinvested in fund shares at the current NAV.
TAXES
Some of the tax consequences of investing in the funds are discussed below. More information about taxes is in the SAI. However, because everyone's tax situation is unique, always consult your tax professional about federal, state, and local tax consequences.
Taxes on Distributions
Each fund pays its shareholders dividends from its net investment income and any net capital gains that it has realized. For most investors, fund dividends and distributions are considered taxable whether they are reinvested or taken in cash (unless your investment is in an IRA or other tax-advantaged account).
Dividends from a fund's short-term capital gains are taxable as ordinary income. Dividends paid from the net investment income of each fund may constitute "qualified dividends" taxable at the same rate as long-term capital gains (currently subject to a maximum rate of 15%). Each fund will inform its shareholders of the portion of its dividends (if any) that constitutes "qualified dividends." Dividends paid from a fund's net investment income that do not constitute "qualified dividends" and dividends paid from short-term capital gains are taxable as ordinary income. Distributions of a fund's long-term capital gains are taxable as long-term gains, regardless of how long you have held your shares. Because of their investment objectives and strategies, the funds' distributions are expected to consist primarily of capital gains.
Taxes on Transactions
The sale of fund shares, or the exchange of one fund's shares for shares of another fund, will be a taxable event and may result in a capital gain or loss. The gain or loss will be considered long-term if you have held your shares for more than one year. A gain or loss on shares held for one year or less is considered short-term and is taxed at the same rates as ordinary income.
The exchange of one class of shares for another class of shares in the same fund will not be taxable.
Considerations for Retirement Plan Clients
A plan participant whose retirement plan invests in a fund generally is not taxed on fund dividends or distributions received by the plan or on sales or exchanges of fund shares by the plan for federal income tax purposes. However, distributions to plan participants from a retirement plan generally are taxable to plan participants as ordinary income. You should consult your tax professional about federal, state and local tax considerations.
Additional Information
Management
FAF Advisors, Inc., formerly known as U.S. Bancorp Asset Management, Inc., is the funds' investment advisor. FAF Advisors provides investment management services to individuals and institutions, including corporations, foundations, pensions, and retirement plans. As of June 30, 2007, FAF Advisors and its affiliates had more than $110.1 billion in assets under management, including investment company assets of more than $90.9 billion. As investment advisor, FAF Advisors manages the funds' business and investment activities, subject to the authority of the funds' board of directors.
Each fund pays the investment advisor a monthly management fee for providing investment advisory services equal, on an annual basis, to 0.30% of the fund's average daily net assets.
A discussion regarding the basis for the board of directors' approval of the funds' investment advisory agreement will appear in the funds' annual report to shareholders for the fiscal period ending October 31, 2007.
Direct Correspondence to:
First American Funds
P.O. Box 1330
Minneapolis, MN 55440-1330
Investment Advisor
FAF Advisors, Inc.
800 Nicollet Mall
Minneapolis, MN 55402
Distributor
Quasar Distributors, LLC
615 E. Michigan Street
Milwaukee, WI 53202
ADDITIONAL COMPENSATION
FAF Advisors, U.S. Bank National Association (U.S. Bank) and other affiliates of U.S. Bancorp may act as fiduciary with respect to plans subject to the Employee Retirement Income Security Act of 1974 (ERISA) and other trust and agency accounts that invest in the First American Funds. As described above, FAF Advisors receives compensation for acting as the funds' investment advisor. FAF Advisors, U.S. Bank and their affiliates also receive compensation from the funds as set forth below.
Administration Services. FAF Advisors and its affiliate, U.S. Bancorp Fund Services, LLC (Fund Services), act as the funds' administrator and sub-administrator, respectively, providing administration services that include general administrative and accounting services, blue sky services and shareholder services. For such services, each fund pays FAF Advisors the fund's pro rata portion of up to 0.25% of the aggregate average daily net assets of all open-end funds in the First American family of funds. FAF Advisors pays Fund Services a portion of its fee, as agreed to from time to time. In addition to these fees, the funds may reimburse FAF Advisors for any out-of-pocket expenses incurred in providing administration services.
Custody Services. U.S. Bank is paid monthly fees equal, on an annual basis, to 0.005% of each fund's average daily net assets for providing custody services to the funds.
Transfer Agency Services. Fund Services provides transfer agency and dividend disbursing services, as well as certain shareholder services, to the funds. Fund Services receives fees for transfer agency and dividend disbursing services on a per shareholder account basis, subject to a minimum fee per share class. In addition, the funds may reimburse Fund Services for any out-of-pocket expenses incurred in providing transfer agency services.
Distribution Services. Quasar Distributors, LLC, an affiliate of FAF Advisors, receives distribution and shareholder servicing fees for acting as the funds' distributor.
Securities Lending Services. In connection with lending their portfolio securities, the funds pay fees to FAF Advisors of up to 25% of each fund's net income from these securities lending transactions. In addition, collateral for securities on loan will be invested in a money market fund administered by FAF Advisors and FAF Advisors will receive an administration fee equal to 0.02% of such fund's average daily net assets.
Other Compensation. To the extent that fund shares are held through U.S. Bank or its broker-dealer affiliate, U.S. Bancorp Investments, Inc., those entities may receive distribution and/or shareholder servicing fees from the funds' distributor as well as other payments from the funds' distributor and/or advisor as described above under "Policies and Services -- Purchasing, Redeeming, and Exchanging Shares -- Compensation Paid to Financial Intermediaries -- Additional Payments to Financial Intermediaries."
PORTFOLIO MANAGEMENT
The portfolio managers responsible for each fund's management are:
Walter A. French, Senior Equity Portfolio Manager. Mr. French serves as the primary portfolio manager for each fund. Mr. French entered the financial services industry in 1974 and joined FAF Advisors in 1999.
David R. Cline, Senior Equity Portfolio Manager. Mr. Cline serves as a co-manager for each fund. Mr. Cline entered the financial services industry in 1988 and joined FAF Advisors in 1989.
David A. Friar, Equity Portfolio Manager. Mr. Friar serves as a co-manager for each fund. Mr. Friar entered the financial services industry in 1998 and joined FAF Advisors in 1999.
Keith B. Hembre, CFA, Chief Economist and Head of Quantitative Analysis. Mr. Hembre serves as a co-manager for each fund. Mr. Hembre entered the financial services industry in 1992 and joined FAF Advisors in 1997.
PROSPECTUS - First American Quantitative Funds
Additional Information
Management CONTINUED
The SAI provides additional information about the portfolio managers' compensation, other accounts managed by the portfolio managers, and the portfolio managers' ownership of securities in the funds.
Performance of Portfolios Similar to Quantitative Large Cap Core Fund
The tables below compare the returns for the S&P 500 Index with the returns for the FAF Advisors Enhanced Equity Index Composite (the "Composite"), which consists of all FAF Advisors' portfolios (segregated accounts and pooled funds) which have investment objectives, policies, and strategies substantially similar to those of Quantitative Large Cap Core Fund. The S&P 500 Index is compared with the Composite for the one-, five-, and ten-year periods ended June 30, 2007 and on an annual basis as of December 31 of each of the last 10 years. This information is designed to show you how investment portfolios managed by FAF Advisors which are similar to Quantitative Large Cap Core Fund have performed over various periods in the past. It does not indicate how Quantitative Large Cap Core Fund will perform in the future. Past performance is not a guarantee of future results.
AVERAGE ANNUAL TOTAL RETURNS
(AS OF JUNE 30, 2007)
FAF Advisors FAF Advisors
Enhanced Equity Index Enhanced Equity Index
Composite Composite
(At Max Sales (With No Sales
Charge and Net of Charge and Net of S&P 500
Operating Expenses)(1) Operating Expenses)(2) Index(3)
-----------------------------------------------------------------------------------
One Year 15.64% 22.30% 20.59%
Five Years 10.24% 11.61% 10.71%
Ten Years 6.90% 7.46% 7.13%
-----------------------------------------------------------------------------------
|
(1)Reflects the deduction of Quantitative Large Cap Core Fund Class A sales charges of 5.50% and net operating expenses of 0.70%.
(2)Reflects the deduction of Quantitative Large Cap Core Fund Class A net operating expenses of 0.70%. These net operating expenses are after contractual fee waivers and expense reimbursements, which may be terminated at any time after July 31, 2008. See "Fund Summaries -- Quantitative Large Cap Core Fund -- Fees and Expenses."
(3)The S&P 500 Index is an unmanaged market-capitalization weighted index of 500 stocks chosen for market size, liquidity and industry group representation, with a focus on the large cap segment of the market.
ANNUAL TOTAL RETURNS
(AS OF DECEMBER 31 OF EACH YEAR)
FAF Advisors
Enhanced Equity Index
Composite
(With No Sales
Charge and Net of S&P 500
Operating Expenses)(1) Index (%)(2)
------------------------------------------------------------
1997 30.18% 33.36%
1998 26.99% 28.58%
1999 18.32% 21.04%
2000 (6.41)% (9.10)%
2001 (11.43)% (11.89)%
2002 (22.83)% (22.10)%
2003 29.43% 28.68%
2004 12.02% 10.88%
2005 6.56% 4.91%
2006 18.50% 15.79%
------------------------------------------------------------
|
(1)Reflects the deduction of Quantitative Large Cap Core Fund Class A net operating expenses of 0.70%. These net operating expenses are after contractual fee waivers and expense reimbursements, which may be terminated at any time after July 31, 2008. See "Fund Summaries -- Quantitative Large Cap Core Fund -- Fees and Expenses."
(2)The S&P 500 Index is an unmanaged market-capitalization weighted index of 500 stocks chosen for market size, liquidity and industry group representation, with a focus on the large cap segment of the market.
The Composite performance data is made up of the asset-weighted averages of the performance of all of the individual portfolios in the Composite using beginning of period weightings. The performance results are calculated monthly using a method that negates the effects of external cash flows within the individual portfolios (e.g., client-driven inflows and outflows of cash and securities). Performance reflects any capital changes and income earned within the individual portfolios and is net of brokerage commissions. This method for calculating performance differs from the required SEC method for calculating mutual fund performance. The gross total returns for the Composite in the Average Annual Total Returns and Annual Total Returns tables were adjusted to reflect the deduction of net operating expenses (after waivers) for Class A shares of Quantitative Large Cap Core Fund. The performance results of the Composite would be different if they were adjusted to reflect the deduction of net operating expenses (after waivers) of Class C, R or Y shares. The Annual Total Returns table for the Composite does not reflect the deduction of any sales load, which would have reduced those performance numbers.
The portfolios in the Composite are not mutual funds and are not subject to the diversification requirements, specific tax restrictions and the investment limitations imposed on the fund by the Investment Company Act of 1940 or Subchapter M of the Internal Revenue Code. Additionally, the portfolios in the Composite were not subject to the unpredictable cash flows that characterize mutual funds and were not required to maintain cash reserves to accommodate shareholder redemptions. If the portfolios in the Composite were subject to such restrictions, the Composite performance might have been lower.
PROSPECTUS - First American Quantitative Funds
(FIRST AMERICAN FUNDS LOGO)
FOR MORE INFORMATION
More information about the First American Funds is available on the funds' Internet site at www.firstamericanfunds.com and in the following documents:
ANNUAL AND SEMIANNUAL REPORTS
Additional information about the funds' investments will be available in the funds' annual and semiannual reports to shareholders. In the funds' annual report, you will find a discussion of the market conditions and investment strategies that significantly affected the funds' performance during their last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI provides more details about the funds and their policies and is incorporated into this prospectus by reference (which means that it is legally part of this prospectus).
You can obtain a free copy of the funds' most recent annual or semiannual reports or the SAI, request other information about the funds, or make other shareholder inquiries by calling Investor Services at 800 677-3863 (FUND) or by contacting the funds at the address below. Annual or semiannual reports and the SAI are also available on the funds' Internet site.
Information about the funds (including the SAI) can also be reviewed and copied at the Securities and Exchange Commission's (SEC) Public Reference Room in Washington, DC. To find out more about this public service, call the SEC at 1-202-942-8090. Reports and other information about the funds are also available on the EDGAR database on the SEC's Internet site at www.sec.gov, or you can receive copies of this information, for a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov, or by writing the SEC's Public Reference Section, Washington, DC 20549-0102.
FIRST AMERICAN FUNDS
P.O. Box 1330
Minneapolis, MN 55440-1330
FIRST AMERICAN INVESTMENT FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION
JULY 31, 2007
FIRST AMERICAN QUANTITATIVE EQUITY FUNDS
QUANTITATIVE LARGE CAP CORE FUND
QUANTITATIVE LARGE CAP GROWTH FUND
QUANTITATIVE LARGE CAP VALUE FUND
This Statement of Additional Information relates to the Class A, Class C, Class R and Class Y shares of the funds named above (the "Funds"), each of which is 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 July 31, 2007. This Statement of Additional Information is incorporated into the Funds' Prospectus by reference. To obtain copies of the Prospectus, or the Funds' Annual Report when one becomes available, at no charge, write the Funds' 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
GENERAL INFORMATION......................................................... 1 ADDITIONAL INFORMATION CONCERNING FUND INVESTMENTS.......................... 2 Debt Obligations......................................................... 2 Exchange Traded Funds.................................................... 3 Foreign Securities....................................................... 3 Futures and Options on Futures........................................... 4 Lending of Portfolio Securities.......................................... 5 Options Transactions..................................................... 6 Repurchase Agreements.................................................... 8 Short-Term Temporary Investments......................................... 8 When-Issued and Delayed Delivery Transactions............................ 9 INVESTMENT RESTRICTIONS..................................................... 9 DISCLOSURE OF PORTFOLIO HOLDINGS............................................11 Public Disclosure........................................................11 Non public Disclosure ...................................................12 DIRECTORS AND EXECUTIVE OFFICERS............................................13 Independent Directors....................................................13 Executive Officers.......................................................15 Standing Committees of the Board of Directors............................16 Fund Shares Owned by the Directors.......................................18 Compensation.............................................................18 Sales Loads..............................................................20 CODE OF ETHICS..............................................................20 PROXY VOTING POLICIES.......................................................20 INVESTMENT ADVISORY AND OTHER SERVICES FOR THE FUNDS........................20 Investment Advisor.......................................................20 Additional Payments to Financial Intermediaries..........................21 Administrator............................................................25 Transfer Agent...........................................................25 Distributor..............................................................25 Custodian and Independent Registered Public Accounting Firm..............26 PORTFOLIO MANAGERS..........................................................26 Other Accounts Managed...................................................26 Portfolio Manager Compensation...........................................27 Ownership of Fund Shares.................................................28 PORTFOLIO TRANSACTIONS AND ALLOCATION OF BROKERAGE..........................28 CAPITAL STOCK...............................................................29 NET ASSET VALUE AND PUBLIC OFFERING PRICE...................................30 TAXATION ...................................................................30 |
REDUCING SALES CHARGES......................................................31 Class A Sales Charge.....................................................31 Sales of Class A Shares at Net Asset Value...............................32 Reinvestment Right.......................................................32 RECEIPT OF ORDERS BY FINANCIAL INTERMEDIARIES...............................33 ADDITIONAL INFORMATION ABOUT REDEEMING SHARES...............................33 By Telephone.............................................................33 By Mail..................................................................33 Redemptions Before Purchase Instruments Clear............................34 RATINGS.............................................................Appendix A PROXY VOTING POLICIES AND PROCEDURES................................Appendix B |
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 42 series. Each series of shares represents a separate investment portfolio with its own investment objectives and policies (in essence, a separate mutual fund). The series of FAIF to which this Statement of Additional Information relates are named on the cover. These series are referred to in this Statement of Additional Information individually as the "Fund," and collectively as the "Funds." The Funds are diversified open-end management investment companies.
Shareholders may purchase shares of each Fund through four separate classes, Class A, Class C, Class R, and Class Y, which provide for variations in distribution costs, shareholder servicing fees, voting rights and dividends. To the extent permitted by the Investment Company Act of 1940, as amended (the "1940 Act"), the Funds may also provide for variations in other costs among the classes. In addition, a sales load is imposed on the sale of Class A and Class C shares of the Funds. Except for the foregoing differences among the classes pertaining to costs and fees, each share of each Fund represents an equal proportionate interest in that Fund.
The Articles of Incorporation and Bylaws of FAIF provide that meetings of shareholders be held as determined by the Board of Directors and as required by the 1940 Act. Maryland corporation law requires a meeting of shareholders to be held upon the written request of shareholders holding 10% or more of the voting shares of FAIF, with the cost of preparing and mailing the notice of such meeting payable by the requesting shareholders. The 1940 Act requires a shareholder vote for, among other things, all amendments to fundamental investment policies and restrictions, for approval of investment advisory contracts and amendments thereto, and for amendments to Rule 12b-1 distribution plans.
This Statement of Additional Information may also refer to affiliated investment companies, including: First American Funds, Inc. ("FAF"); First American Strategy Funds, Inc. ("FASF"); 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 each Fund are set forth in the Funds' Prospectus. Additional information concerning certain principal investment strategies of the Funds, and information on non-principal investment strategies that may be used by the Funds, is set forth below. The Funds have attempted to identify investment strategies that will be employed in pursuing each Fund's investment objective. However, in the absence of an affirmative limitation, a Fund may utilize any strategy or technique that is consistent with its investment objective. The Funds do not anticipate that any such strategy or technique would exceed 5% of a Fund's assets absent specific identification of that practice. Additional information concerning the Funds' investment restrictions is set forth below under "Investment Restrictions."
If a percentage limitation on investments by a 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 a 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.
DEBT OBLIGATIONS
The Funds may invest in debt obligations as a non-principal investment strategy. These include securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities, preferred stocks, corporate debt securities, and short-term obligations of the kinds described below under "Short-Term Investments." The Funds' investments in debt obligations also may include securities which are convertible into or exchangeable for, or which carry warrants or other rights to acquire, common or preferred stocks. Investments in debt obligations will be limited to investment-grade securities, defined as securities which are rated at the time of purchase by two of Moody's, Standard & Poor's and Fitch not less than Baa, BBB and BBB (or the equivalent short-term ratings), respectively, unless only one of those rating agencies provides a rating, in which case that rating must be at least Baa or BBB, or which are of comparable quality in the judgment of the Advisor. Obligations rated BBB, Baa or their equivalent have speculative characteristics and carry a somewhat higher risk of default than higher rated obligations.
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 a Fund); (ii) credit risk (the risk that the issuers of debt securities held by a Fund default in making required payments); and (iii) call or prepayment risk (the risk that a borrower may exercise the right to prepay a debt obligation before its stated maturity, requiring a Fund to reinvest the prepayment at a lower interest rate).
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.
Fixed and Floating Rate Debt Obligations. The debt obligations in which the Funds invest as a non-principal investment strategy may have either fixed or floating rates. Floating rate securities are generally offered at an initial interest rate which is at or above prevailing market rates. The interest rate paid on these securities is then reset periodically (commonly every 90 days) to an increment over some predetermined interest rate index. Commonly utilized indices include the three-month Treasury bill rate, the 180-day Treasury bill rate, the one-month or three-month London Interbank Offered Rate (LIBOR), the prime rate of a bank, the commercial paper rates, or the longer-term rates on U.S. Treasury securities. Fixed rate securities tend to exhibit more price volatility during times of rising or falling
interest rates than securities with floating rates of interest. This is because floating rate securities behave like short-term instruments in that the rate of interest they pay is subject to periodic adjustments based on a designated interest rate index. Fixed rate securities pay a fixed rate of interest and are more sensitive to fluctuating interest rates. In periods of rising interest rates the value of a fixed rate security is likely to fall. Fixed rate securities with short-term characteristics are not subject to the same price volatility as fixed rate securities without such characteristics. Therefore, they behave more like floating rate securities with respect to price volatility.
Preferred Stock. Preferred stock, unlike common stock, offers a stated dividend rate payable from the issuer's earnings. Preferred stock dividends may be cumulative or non-cumulative, participating, or auction rate. If interest rates rise, the fixed dividend on preferred stocks may be less attractive, causing the price of preferred stocks to decline. Preferred stock may have mandatory sinking fund provisions, as well as call/redemption provisions prior to maturity, a negative feature when interest rates decline. Each Fund, as a non-principal investment strategy, may invest in debt securities which are convertible into or exchangeable for, or which carry warrants or other rights to acquire, common or preferred stocks.
U.S. Government Securities. The U.S. government securities in which the Funds may invest are either issued or guaranteed by the U.S. government, its agencies or instrumentalities. The U.S. government securities in which the Funds invest principally are:
- direct obligations of the U.S. Treasury, such as U.S. Treasury bills, notes, and bonds;
- notes, bonds, and discount notes issued and guaranteed by U.S. government agencies and instrumentalities supported by the full faith and credit of the United States;
- notes, bonds, and discount notes of U.S. government agencies or instrumentalities which receive or have access to federal funding; and
- notes, bonds, and discount notes of other U.S. government instrumentalities supported only by the credit of the instrumentalities.
The government securities in which the Funds may invest are backed in a variety of ways by the U.S. government or its agencies or instrumentalities. Some of these securities, such as Government National Mortgage Association ("GNMA") mortgage-backed securities, are backed by the full faith and credit of the U.S. government. Other securities, such as obligations of the Federal National Mortgage Association ("FNMA") or the Federal Home Loan Mortgage Corporation ("FHLMC") are backed by the credit of the agency or instrumentality issuing the obligations but not the full faith and credit of the U.S. government. No assurances can be given that the U.S. government will provide financial support to these other agencies or instrumentalities because it is not obligated to do so.
EXCHANGE TRADED FUNDS
The Funds may invest in exchange traded funds ("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 fixed portfolio of securities designed to track a particular market index. A Fund could purchase an ETF to temporarily gain exposure to a portion of the U.S. market while awaiting the purchase of underlying securities. 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.
FOREIGN SECURITIES
The Funds may invest in foreign securities as a principal investment strategy. Under normal market conditions, the Funds each may invest up to 25% of its total assets in securities of foreign issuers which are listed on a U.S. securities exchange.
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.
FUTURES AND OPTIONS ON FUTURES
The Funds may invest in stock index futures contracts as a principal investment strategy in order to manage large inflows or outflows of cash. The Funds also may purchase options on stock index futures contracts as a non-principal investment strategy.
A futures contract on a stock index 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 made.
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. In the case of a put option, the opposite is true.
A futures contract can be closed out prior to delivery by offsetting purchases or sales of matching futures contracts (same exchange, security, and delivery month). Closing out a futures contract sale is effected by purchasing a futures contract for the same aggregate amount of the specific type of financial instrument with the same delivery date. If an offsetting purchase price is less than the original sale price, the Fund realizes a capital gain, or if it is more, the Fund realizes a capital loss. Conversely, if an offsetting sale price is more than the original purchase price, the Fund realizes a capital loss. The transaction costs must also be included in these calculations.
The Funds will only enter into futures contracts and futures options which are standardized and traded on a U.S. exchange, board of trade or similar entity, or quoted on an automated quotation system.
When a purchase or sale of a futures contract is made by a Fund, the Fund is required to deposit with its custodian (or broker, if legally permitted) a specified amount of liquid assets ("initial margin"). The margin required for a futures contract is set by the exchange on which the contract is traded and may be modified during the term of the contract. The initial margin is in the nature of a performance bond or good faith deposit on the futures contract which is returned to the Fund upon termination of the contract, assuming all contractual obligations have been satisfied. The Fund expects to earn interest income on its initial margin deposits. A futures contract held by the Fund is valued daily at the official settlement price of the exchange on which it is traded. Each day the Fund pays or receives cash, called "variation margin," equal to the daily change in value of the futures contract. This process is known as "marking to market." Variation margin does not represent a borrowing or loan by the Fund but is instead a settlement between the Fund and the broker of the amount one would owe the other if the futures contract expired. In computing daily net asset value, the Fund will mark to market its open futures positions.
The Fund is also required to deposit and maintain margin with respect to put and call options on futures contracts written by it. Such margin deposits will vary depending on the nature of the underlying futures contract (and the related initial margin requirements), the current market value of the option, and other futures positions held by the Fund.
Futures transactions also involve brokerage costs and the Fund may have to segregate additional liquid assets in accordance with applicable SEC requirements.
The Funds 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 Use of Futures and Futures Options. Aggregate initial margin deposits for futures contracts, and premiums paid for related options, may not exceed 5% of a Fund's total assets. Futures transactions will be limited to the extent necessary to maintain a Fund's qualification as a regulated investment company under the Internal Revenue Code of 1986, as amended (the "Code").
Risks Associated with Futures and Futures Options. There are several risks associated with the use of futures contracts and futures options. A purchase or sale of a futures contract may result in losses in excess of the amount invested in the futures contract. In addition, there are significant differences between the securities and futures markets that could result in an imperfect correlation between the futures contract or option and the underlying index. The degree of imperfection of correlation depends on circumstances such as variations in speculative market demand for futures and futures options, including technical influences in futures trading and futures options.
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.
There can be no assurance that a liquid market will exist at a time when a 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. In addition, many of the contracts discussed above are relatively new instruments without a significant trading history. As a result, there can be no assurance that an active secondary market will develop or continue to exist.
CFTC Information. The Commodity Futures Trading Commission (the "CFTC"), a federal agency, regulates trading activity pursuant to the Commodity Exchange Act, as amended (the "CEA"). The CFTC requires the registration of a Commodity Pool Operator (a "CPO"), which is defined as any person engaged in a business which is of the nature of an investment trust, syndicate or a similar form of enterprise, and who, in connection therewith, solicits, accepts or receives from others funds, securities or property for the purpose of trading in a commodity for future delivery on or subject to the rules of any contract market. The CFTC has adopted Rule 4.5, which provides an exclusion from the definition of commodity pool operator for any registered investment company which files a notice of eligibility. The Funds have filed a notice of eligibility claiming exclusion from the status of CPO and, therefore, are not subject to registration or regulation as a CPO under the CEA.
LENDING OF PORTFOLIO SECURITIES
In order to generate additional income, as a non-principal investment strategy each of the Funds may lend portfolio securities representing up to one-third of the value of its total assets to broker-dealers, banks or other institutional borrowers of securities. As with other extensions of credit, there may be risks of delay in recovery of the securities or even loss of rights in the collateral should the borrower of the securities fail financially. However, the Funds will only enter into domestic loan arrangements with broker-dealers, banks, or other institutions which the Advisor has determined are creditworthy under guidelines established by the Board of Directors. The Funds will pay a portion of the income earned on the lending transaction to the placing broker and may pay administrative and custodial fees in connection with these loans.
In these loan arrangements, the Funds will receive collateral in the form of cash, U.S. government securities or other high-grade debt obligations equal to at least 100% of the value of the securities loaned. This collateral must be valued daily by the Advisor or the applicable Fund's lending agent and, if the market value of the loaned securities increases, the borrower must furnish additional collateral to the lending Fund. During the time portfolio securities are on loan, the borrower pays the lending Fund any dividends or interest paid on the securities. Loans are subject to termination at any time by the lending Fund or the borrower. While a Fund does not have the right to vote securities on loan, it would terminate the loan and regain the right to vote if that were considered important with respect to the investment.
When a Fund lends portfolio securities to a borrower, payments in lieu of dividends made by the borrower to the Fund will not constitute "qualified dividends" taxable at the same rate as long-term capital gains, even if the actual dividends would have constituted qualified dividends had the Fund held the securities. See "Taxation."
The Advisor acts as securities lending agent for the Funds and receives separate compensation for such services, subject to compliance with conditions contained in an SEC exemptive order permitting the Advisor to provide such services and receive such compensation. The Advisor receives fees of up to 25% of each Fund's net income from securities lending transactions. For each Fund, collateral for securities on loan is invested in a money market fund administered by FAF Advisors and FAF Advisors receives an administration fee equal to 0.02% of such Fund's average daily net assets.
OPTIONS TRANSACTIONS
The Funds may purchase put and call options on securities and/or stock indices as a non-principal investment strategy. These transactions may be undertaken for the purpose of reducing risk to the Funds; that is, for "hedging" purposes, or, in the case of options written by a Fund, to produce additional income. Options on futures contracts are discussed above under "-- Futures and Options on Futures."
Options on Securities. As a non-principal investment strategy, each Fund may purchase put and call options on securities it owns or has 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.
A Fund may purchase put options to hedge against a decline in the value of its portfolio. By using put options in this way, a 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, a 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 Stock Indices. As a non-principal investment strategy, each Fund may purchase put and call options on stock 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. 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.
Writing Call Options. As a non-principal investment strategy, the Funds may write (sell) covered call options covering up to 25% of the equity securities owned by such Funds. These transactions would be undertaken principally to produce additional income.
Covered Options. 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, the option is covered if the Fund segregates liquid assets in an amount equal to the contract value of the index. A call option is also covered if the Fund holds a call on the same security, index 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 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 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 a 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 a 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, 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.
A 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. A 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 or index in relation to the exercise price of the option, the volatility of the underlying security or index, and the time remaining until the expiration date.
The premium paid for a put or call option purchased by a Fund is an asset of the Fund. The premium received for an option written by a 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.
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. If a put or call option purchased by a 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 a Fund seeks to close out an option position. If a 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 a 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 a Fund, the Fund would not be able to close out the option. If restrictions on exercise were imposed, a Fund might be unable to exercise an option it had purchased. Except to the extent that a call option on an index written by a 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.
Limitations. None of the Funds will invest more than 5% of the value of its total assets in purchased options, provided that options which are "in the money" at the time of purchase may be excluded from this 5% limitation. A call option is "in the money" if the exercise price is lower than the current market price of the underlying security or index, and a put option is "in the money" if the exercise price is higher than the current market price. A Fund's loss exposure in purchasing an option is limited to the sum of the premium paid and the commission or other transaction expenses associated with acquiring the option.
REPURCHASE AGREEMENTS
Each of the Funds may enter into repurchase agreements as a non-principal investment strategy. Ordinarily, the Funds do not expect its investments in repurchase agreements to exceed 10% of its total assets. However, because a Fund may invest without limit in cash and short-term securities for temporary defensive purposes, there is no limit on a Fund's ability to invest in repurchase agreements. A repurchase agreement involves the purchase by a Fund of securities with the agreement that after a stated period of time, the original seller will buy back the same securities ("collateral") at a predetermined price or yield. Repurchase agreements involve certain risks not associated with direct investments in securities. If the original seller defaults on its obligation to repurchase as a result of its bankruptcy or otherwise, the purchasing Fund will seek to sell the collateral, which could involve costs or delays. Although collateral (which may consist of any fixed income security which is an eligible investment for the Fund) will at all times be maintained in an amount equal to the repurchase price under the agreement (including accrued interest), a Fund would suffer a loss if the proceeds from the sale of the collateral were less than the agreed-upon repurchase price. The Advisor will monitor the creditworthiness of the firms with which the Funds enter into repurchase agreements.
The Funds' custodian will hold the securities underlying any repurchase agreement, or the securities will be part of the Federal Reserve/Treasury Book Entry System. The market value of the collateral underlying the repurchase agreement will be determined on each business day. If at any time the market value of the collateral falls below the repurchase price under the repurchase agreement (including any accrued interest), the appropriate Fund will promptly receive additional collateral (so the total collateral is an amount at least equal to the repurchase price plus accrued interest).
SHORT-TERM TEMPORARY INVESTMENTS
In an attempt to respond to adverse market, economic, political or other conditions, the Funds may temporarily invest without limit in a variety of short-term instruments such as rated commercial paper and variable amount master demand notes; U.S. dollar-denominated time and savings deposits (including certificates of deposit); bankers' acceptances; obligations of the U.S. government or its agencies or instrumentalities; repurchase agreements collateralized by eligible investments of a Fund; securities of other mutual funds that invest primarily in debt obligations with remaining maturities of 13 months or less (which investments also are subject to an advisory fee); and other similar high-quality short-term U.S. dollar-denominated obligations. The other mutual funds in which the Fund may so invest include money market funds advised by the Advisor.
Short-term investments and repurchase agreements may be entered into on a joint basis by the Funds and other funds advised by the Advisor to the extent permitted by an exemptive order issued by the SEC with respect to the Funds. A brief description of certain kinds of short-term instruments follows:
Commercial Paper. Commercial paper consists of unsecured promissory notes issued by corporations. Issues of commercial paper normally have maturities of less than nine months and fixed rates of return. Subject to the limitations described in the Prospectus, the Funds may purchase commercial paper consisting of issues rated at the time of purchase within the two highest rating categories by Standard & Poor's, Fitch or Moody's, or which have been assigned an equivalent rating by another nationally recognized statistical rating organization. The Funds also may invest in commercial paper that is not rated but that is determined by the Advisor to be of comparable quality to instruments that are so rated. For a description of the rating categories of Standard & Poor's, Fitch and Moody's, see Appendix A.
Bankers' Acceptances. Bankers' acceptances are credit instruments evidencing the obligation of a bank to pay a draft drawn on it by a customer. These instruments reflect the obligation both of the bank and of the drawer to pay the full amount of the instrument upon maturity.
Variable Amount Master Demand Notes. Variable amount master demand notes are unsecured demand notes that permit the indebtedness thereunder to vary and provide for periodic adjustments in the interest rate according to the terms of the instrument. Because master demand notes are direct lending arrangements between a Fund and the issuer, they are not normally traded. Although there is no secondary market in the notes, a Fund may demand payment of principal and accrued interest at any time. While the notes are not typically rated by credit rating agencies, issuers of variable amount master demand notes (which are normally manufacturing, retail, financial, and other business concerns) must satisfy the same criteria as set forth above for commercial paper. The Advisor will consider the earning power, cash flow and other liquidity ratios of the issuers of such notes and will continuously monitor their financial status and ability to meet payment on demand.
Variable Rate Demand Obligations. Variable rate demand obligations ("VRDO") are securities in which the interest rate is adjusted at pre-designated periodic intervals. VRDOs may include a demand feature which is a put that entitles the holder to receive the principal amount of the underlying security or securities and which may be exercised either at any time on no more than 30 days' notice or at specified intervals not exceeding 397 calendar days on no more than 30 days' notice.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
Each of the Funds may purchase securities on a when-issued or delayed delivery basis as a non-principal investment strategy. When such a transaction is negotiated, the purchase price is fixed at the time the purchase commitment is entered, but delivery of and payment for the securities take place at a later date. A Fund will not accrue income with respect to securities purchased on a when-issued or delayed delivery basis prior to their stated delivery
date. Pending delivery of the securities, each Fund will segregate cash or liquid securities in an amount sufficient to meet its purchase commitments.
The purchase of securities on a when-issued or delayed delivery basis exposes a Fund to risk because the securities may decrease in value prior to delivery. In addition, a Fund's purchase of securities on a when-issued or delayed delivery basis while remaining substantially fully invested could increase the amount of the Fund's total assets that are subject to market risk, resulting in increased sensitivity of net asset value to changes in market prices. A seller's failure to deliver securities to a Fund could prevent the Fund from realizing a price or yield considered to be advantageous.
When a Fund agrees to purchase securities on a when-issued or delayed delivery basis, the Fund will segregate cash or liquid securities in an amount sufficient to meet the Fund's purchase commitments. It may be expected that a Fund's net assets will fluctuate to a greater degree when it sets aside securities to cover such purchase commitments than when it sets aside cash. In addition, because a Fund will set aside cash or liquid securities to satisfy its purchase commitments, its liquidity and the ability of the Advisor to manage it might be affected in the event its commitments to purchase when-issued or delayed delivery securities ever became significant. Under normal market conditions, however, a Fund's commitments to purchase when-issued or delayed delivery securities will not exceed 25% of the value of its total assets.
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, each of the Funds 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 a Fund without approval by the holders of a majority of the outstanding shares of that 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.
None of the Funds will:
1. Concentrate its investments in a particular industry. For purposes of this limitation, the U.S. Government is not considered a member of any industry. 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.
6. Purchase or sell real estate unless as a result of ownership of securities or other instruments, but this shall not prevent the Funds 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, a 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 Funds will use industry classifications provided by the Global Industry Classification System.
For purposes of applying the limitation set forth in number 2 above, under the 1940 Act as currently in effect, a Fund is not permitted to issue senior securities, except that a 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% a 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 a Fund to an
unaffiliated party. However, when a Fund loans its portfolio securities, the
obligation on the part of the Fund to return collateral upon termination of the
loan could be deemed to involve the issuance of a senior security within the
meaning of Section 18(f) of the 1940 Act. In order to avoid violation of Section
18(f), a Fund may not make a loan of portfolio securities if, as a result, more
than one-third of its total asset value (at market value computed at the time of
making a loan) would be on loan.
The following restrictions are non-fundamental and may be changed by FAIF's Board of Directors without a shareholder vote:
None of the Funds will:
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. None of the Funds will 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. No Fund will make additional investments while its borrowings exceed 5% of total assets.
3. Make short sales of securities.
4. Lend portfolio securities representing in excess of one-third of the value of its total assets.
5. 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.
6. Acquire any securities of registered open-end investment companies or registered unit investment trusts in reliance on subparagraph (F) or subparagraph (G) of Section 12(d)(1) of the 1940 Act.
With respect to the non-fundamental restriction set forth in number 1 above, each Fund will monitor portfolio liquidity on an ongoing basis and, in the event more than 15% of a Fund's net assets are invested in illiquid investments, that Fund will reduce its holdings of illiquid securities in an orderly fashion in order to maintain adequate liquidity.
The Board of Directors has adopted guidelines and procedures under which the Funds' investment advisor is to determine whether the following types of securities which may be held by the Funds are "liquid" and to report to the Board concerning its determinations: (i) securities eligible for resale pursuant to Rule 144A under the Securities Act of 1933; (ii) commercial paper issued in reliance on the "private placement" exemption from registration under Section 4(2) of the Securities Act of 1933, whether or not it is eligible for resale pursuant to Rule 144A; (iii) interest-only and
principal-only, inverse floating and inverse interest-only securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities; and (iv) municipal leases and securities that represent interests in municipal leases.
For determining compliance with its investment restriction relating to
industry concentration, the Funds classify asset-backed securities in their
portfolios in separate industries based upon a combination of the industry of
the issuer or sponsor and the type of collateral. The industry of the issuer or
sponsor and the type of collateral will be determined by the Advisor. For
example, an asset-backed security known as "Money Store 94-D A2" would be
classified as follows: the issuer or sponsor of the security is The Money Store,
a personal finance company, and the collateral underlying the security is
automobile receivables. Therefore, the industry classification would be Personal
Finance Companies -- Automobile. Similarly, an asset-backed security known as
"Midlantic Automobile Grantor Trust 1992-1 B" would be classified as follows:
the issuer or sponsor of the security is Midlantic National Bank, a banking
organization, and the collateral underlying the security is automobile
receivables. Therefore, the industry classification would be Banks --
Automobile. Thus, an issuer or sponsor may be included in more than one
"industry" classification, as may a particular type of collateral.
DISCLOSURE OF PORTFOLIO HOLDINGS
PUBLIC DISCLOSURE
Each Fund 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 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.
Because the portfolios of the Index Funds generally mirror the composition of published indices, the Index Funds are not subject to the Disclosure Policies. In addition, the Money Market Funds are not subject to the Disclosure Policies because these Funds hold only short-term money market securities that generally do not vary significantly in value over short periods of time. The Mount Vernon Trust is not subject to the Disclosure Policies because the series of the trust are not available to the general public, but are only offered in connection with the investment of collateral received in connection with securities lending. Because of the types of securities held by, or the limited purpose of, the foregoing Funds, such Funds' portfolio holdings information would not be subject to the types of misuses that the Disclosure Policies are designed to prevent.
Disclosure within FAF Advisors and Its Affiliates and to Fund Directors. Undisclosed Holdings Information and information derived therefrom may be provided (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; (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 may be provided to organizations that provide or propose to provide services to the First American Funds, such as sub-advisors, custodians, administrators, transfer agents, securities lending agents, outside accountants, outside counsel, entities that provide certain class share financing, proxy voting organizations, financial printers, pricing services and the like, provided that such organization has entered 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.
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. Undisclosed Holdings Information and information derived therefrom may not be provided to investors, prospective investors, or investor consultants without 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.
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of FAIF are listed below, together with their business addresses and their principal occupations during the past five years. The Board of Directors is generally responsible for the overall operation and management of FAIF. Each of the Directors is an independent director.
INDEPENDENT DIRECTORS
NUMBER OF
PORTFOLIOS
NAME, POSITION IN FUND OTHER
ADDRESS, HELD TERM OF OFFICE PRINCIPAL COMPLEX DIRECTORSHIPS
AND YEAR WITH AND LENGTH OF OCCUPATION(S) OVERSEEN BY HELD BY
OF BIRTH FUND TIME SERVED DURING PAST 5 YEARS DIRECTOR DIRECTOR*
-------- -------- -------------- -------------------- ------------ ---------
Benjamin R. Director Term expiring Retired; Senior First None
Field III, earlier of Financial Advisor, American
P.O. Box death, Bemis Company, Inc. Funds
1329, resignation, from May 2002 to Complex:
Minneapolis, removal, March 2004; Senior twelve
Minnesota disqualification, Vice President, registered
55440-1329 or successor Chief Financial investment
(1938) duly elected Officer and companies,
and qualified. Treasurer, Bemis including 62
Director of Company, through portfolios
FAIF since April 2002
September 2003
Roger A. Director Term expiring Director, First None
Gibson, earlier of Charterhouse Group, American
P.O. Box death, Inc., a private Funds
1329, resignation, equity firm, since Complex:
Minneapolis, removal, October 2005; Vice twelve
MN disqualification, President and Chief registered
55440-1329 or successor Operating Officer, investment
(1946) duly elected Cargo - United companies,
and qualified. Airlines, from July including 62
Director of 2001 through portfolios
FAIF since retirement in June
October 1997 2004
Victoria J. Director Term expiring Investment First None
Herget, earlier of consultant and American
P.O. Box death, non-profit board Funds
1329, resignation, member since 2001 Complex:
Minneapolis, removal, twelve
Minnesota disqualification, registered
55440-1329 or successor investment
(1951) duly elected companies,
and qualified. including 62
Director of portfolios
FAIF since
September 2003
John P. Director Term expiring Retired; Principal First None
Kayser earlier of (1983-2004) and American
P.O. Box death, Chief Financial Funds
1329, resignation, Officer and Chief Complex:
Minneapolis, removal, Administrative twelve
MN disqualification, Officer registered
55440-1329 or successor (1988-2002), investment
(1949) duly elected William Blair & companies,
and qualified. Company, LLC including 62
Director of portfolios
FAIF since
October 2006
Leonard W. Director Term expiring Owner and First None
Kedrowski, earlier of President, American
P.O. Box death, Executive and Funds
1329, resignation, Management Complex:
Minneapolis, removal, Consulting, Inc., a twelve
Minnesota disqualification, management registered
55440-1329 or successor consulting firm; investment
(1941) duly elected Board member, GC companies,
and qualified. McGuiggan including 62
Director of Corporation (dba portfolios
FAIF since Smyth Companies), a
November 1993 label printer;
former Chief
Executive Officer,
Creative Promotions
International, LLC,
a promotional award
programs and
products company,
through October
2003; Advisory
Board Member,
Designer Doors, a
manufacturer of
designer doors,
through 2002
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NUMBER OF
PORTFOLIOS
NAME, POSITION IN FUND OTHER
ADDRESS, HELD TERM OF OFFICE PRINCIPAL COMPLEX DIRECTORSHIPS
AND YEAR WITH AND LENGTH OF OCCUPATION(S) OVERSEEN BY HELD BY
OF BIRTH FUND TIME SERVED DURING PAST 5 YEARS DIRECTOR DIRECTOR*
-------- -------- -------------- -------------------- ------------ ---------
Richard K. Director Term expiring Owner and CEO, RKR First Cleveland-Cliffs
Riederer, earlier of Consultants, Inc., American Inc. (a
P.O. Box death, a management Funds producer
1329, resignation, consulting firm, Complex: of iron
Minneapolis, removal, and non-profit twelve ore
Minnesota disqualification, board member since registered pellets)
55440-1329 or successor 2005 investment
(1944) duly elected companies,
and qualified. including 62
Director of portfolios
FAIF since
August 2001
Joseph D. Director Term expiring Attorney At Law, First None
Strauss, earlier of Owner and American
P.O. Box death, President, Strauss Funds
1329, resignation, Management Company, Complex:
Minneapolis, removal, a Minnesota holding twelve
Minnesota disqualification, company for various registered
55440-1329 or successor organizational investment
(1940) duly elected management business companies,
and qualified. ventures; Owner, including 62
Director of Chairman and Chief portfolios
FAIF since Executive Officer,
April 1991 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,
since 2001
Virginia L. Chair; Chair term Governance First None
Stringer, Director three years. consultant and American
P.O. Box Director term non-profit board Funds
1329, expiring member; former Complex:
Minneapolis, earlier of Owner and twelve
Minnesota death, President, registered
55440-1329 resignation, Strategic investment
(1944) removal, Management companies,
disqualification, Resources, Inc., a including 62
or successor management portfolios
duly elected consulting firm;
and qualified. Executive
Chair of FAIF's Consultant for
Board since State Farm
September 1997; Insurance Company
Director of through 2003
FAIF since
September 1987
James M. Director Term expiring Owner and First None
Wade, earlier of President, Jim Wade American
P.O. Box death, Homes, a Funds
1329, resignation, homebuilding Complex:
Minneapolis, removal, company, since 1999 twelve
Minnesota disqualification, registered
55440-1329 or successor investment
(1943) duly elected companies,
and qualified. including 62
Director of portfolios
FAIF since
August 2001
|
* Includes only directorships in a company with a class of securities registered pursuant to Section 12 of the Securities Exchange Act or subject to the requirements of Section 15(d) of the Securities Exchange Act, or any company registered as an investment company under the Investment Company Act.
EXECUTIVE OFFICERS
NAME, ADDRESS, POSITION(s) TERM OF OFFICE AND HELD AND LENGTH OF PRINCIPAL OCCUPATION(s) YEAR OF BIRTH WITH FUND TIME SERVED DURING PAST 5 YEARS ------------- ----------- -------------- ----------------------- Thomas S. President Re-elected by Chief Executive Officer of FAF Schreier, Jr., the Board Advisors, Inc. FAF Advisors, annually; Inc. President of 800 Nicollet FAIF since Mall, February 2001 Minneapolis, Minnesota 55402 (1962) * |
NAME, ADDRESS, POSITION(s) TERM OF OFFICE
AND HELD AND LENGTH OF PRINCIPAL OCCUPATION(s)
YEAR OF BIRTH WITH FUND TIME SERVED DURING PAST 5 YEARS
------------- ----------- -------------- -----------------------
Mark S. Jordahl, Vice Re-elected by Chief Investment Officer of FAF
FAF Advisors, President the Board Advisors, Inc.
Inc. - annually;
800 Nicollet Investment Vice
Mall, President --
Minneapolis, Investments
Minnesota 55402 of FAIF since
(1960) * September 2001
Jeffery M. Vice Re-elected by Senior Vice President of FAF
Wilson, President the Board Advisors, Inc.
FAF Advisors, - annually;
Inc. Administra Vice
800 Nicollet President --
Mall, Administration
Minneapolis, of FAIF since
Minnesota 55402 March 2000
(1956) *
Charles D. Treasurer Re-elected by Mutual Funds Treasurer, FAF Advisors,
Gariboldi, Jr., the Board Inc., since October 2004; prior
FAF Advisors, annually; thereto, Vice President for
Inc. Treasurer of investment accounting and fund
800 Nicollet FAIF Since treasurer of Thrivent Financial for
Mall, December 2004 Lutherans
Minneapolis,
Minnesota 55402
(1959) *
Jill M. Assistant Re-elected by Assistant Mutual Funds Treasurer, FAF
Stevenson, Treasurer the Board Advisors, Inc. since September 2005;
FAF Advisors, annually; Director, Senior Project Manager, FAF
Inc. Assistant Advisors, Inc. from May 2003 to September
800 Nicollet Treasurer of 2005; prior thereto, Vice President,
Mall, FAIF since Director of Operations, Paladin
Minneapolis, September 2005 Investment Associates, LLC
Minnesota 55402
(1965)*
David H. Lui, Chief Re-elected by Chief Compliance Officer of FAF
FAF Advisors, Compliance the Advisors, Inc. since March 2005;
Inc. Officer Board Chief Compliance Officer, Franklin
800 Nicollet annually; Advisors, Inc. and Chief Compliance
Mall, Chief Counsel, Franklin Templeton
Minneapolis, Compliance Investments from March 2004 to March
Minnesota 55402 Officer of 2005; prior thereto, Vice President,
(1960) * FAIF since Charles Schwab & Co., Inc.
March 2005
Jason Mitchell, Anti-Money Re-elected by Anti-Money Laundering Officer for
FAF Advisors, Laundering the Board First American Funds and FAF
Inc. Officer annually; Advisors, Inc. since September 2006.
800 Nicollet Anti-Money Compliance Manager for FAF Advisors,
Mall, Laundering Inc. since June 2006. Prior thereto,
Minneapolis, Officer of Compliance Analyst for FAF Advisors,
Minnesota 55402 FAIF since Inc. from October 2004 through June
(1976) * September 2006 2006. Prior to that, Senior Systems
Helpdesk Analyst for Wachovia
Retirement Services from November
2002 through October 2004. Prior to
that, Senior Retirement Plan
Specialist for PFPC, Inc.
Kathleen L. Secretary Re-elected by Deputy General Counsel, FAF Advisors,
Prudhomme, the Board Inc., since November 2004; prior
FAF Advisors, annually; thereto, Partner, Dorsey & Whitney
Inc. Secretary of LLP, a Minneapolis-based law firm
800 Nicollet FAIF since
Mall, December
Minneapolis, 2004;
Minnesota 55402 Assistant
(1953) * Secretary of
FAIF from
September
1998 through
December 2004
Brett L. Agnew, Assistant Re-elected by Attorney, FAF Advisors, Inc., since
FAF Advisors, Secretary the Board August 2004; Senior Counsel, Thrivent
Inc. annually; Financial for Lutherans from 2001 to
800 Nicollet Assistant August 2004
Mall, Secretary of
Minneapolis, FAIF since
Minnesota December 2004
55402 (1971)*
James D. Alt, Assistant Re-elected by Partner, Dorsey & Whitney LLP, a
Dorsey & Whitney Secretary the Board Minneapolis-based law firm
LLP, annually;
50 South Sixth Assistant
Street, Suite Secretary of
1500, FAIF since
Minneapolis, December
Minnesota 55402 2004;
(1951) Secretary of
FAIF from June 2002
through December
2004; Assistant
Secretary of FAIF
from September
1998 through June
2002
|
NAME, ADDRESS, POSITION(s) TERM OF OFFICE
AND HELD AND LENGTH OF PRINCIPAL OCCUPATION(s)
YEAR OF BIRTH WITH FUND TIME SERVED DURING PAST 5 YEARS
------------- ----------- -------------- -----------------------
James R. Arnold, Assistant Re-elected by Vice President, U.S. Bancorp Fund
U.S. Bancorp Secretary the Board Services, LLC since March 2002;
Fund Services, annually; Senior Administration Services
LLC, Assistant Manager, UMB Fund Services, Inc.
615 E. Michigan Secretary of through March 2002
Street, FAIF since
Milwaukee, WI June 2003
53202 (1957)*
Richard J. Ertel, Assistant Re-elected by Counsel, FAF Advisors, Inc., since
FAF Advisors, Secretary the Board May 2006; prior thereto, Counsel,
Inc. annually; Ameriprise Financial Services, Inc.
800 Nicollet Assistant from September 2004 to May 2006;
Mall, Secretary of prior to that, Counsel, FAF Advisors,
Minneapolis, FAIF since Inc. from May 2003 to August 2004;
Minnesota 55402 June 2006 and prior to May 2003, Associate Counsel,
(1967) * from June Hartford Life and Accident Insurance
2003 through Company
August 2004
Douglas G. Hess, Assistant Re-elected by, Vice President, U.S. Bancorp Fund
U.S. Bancorp Secretary the Board Services, LLC since November 2002;
Fund Services, annually; prior thereto, Assistant Vice
LLC, Assistant President, Fund Compliance
615 E. Michigan Secretary of Administrator, U.S. Bancorp Fund
Street, FAIF since Services LLC
Milwaukee, WI September 2001
53202 (1967) *
|
* Messrs. Schreier, Jordahl, Wilson, Gariboldi, Lui, Mitchell, Agnew, Ertel, Ms. Stevenson and Ms. Prudhomme are each officers and/or employees of FAF Advisors, Inc., which serves as investment advisor and administrator for FAIF. Messrs. Arnold and Hess are officers of U.S. Bancorp Fund Services, LLC, which is a subsidiary of U.S. Bancorp and which serves as transfer agent for FAIF.
STANDING COMMITTEES OF THE BOARD OF DIRECTORS
There are currently three standing committees of the FAIF Board of Directors: Audit Committee, Pricing Committee and Governance Committee.
NUMBER OF
FUND
COMPLEX
COMMITTEE
MEETINGS
HELD
DURING
FAIF'S
FISCAL
YEAR ENDED
COMMITTEE FUNCTION COMMITTEE MEMBERS 10/31/06
------------------ ----------------- --------
Audit The purposes of the Committee are (1) Leonard W. 8
Committee to oversee the Funds' accounting and Kedrowski (Chair)
financial reporting policies and Benjamin R. Field
practices, their internal controls III
and, as appropriate, the internal John P. Kayser
controls of certain service providers; Richard K.
(2) to oversee the quality of the Riederer
Funds' financial statements and the Virginia L.
independent audit thereof; (3) to Stringer
assist Board oversight of the Funds' (ex-officio)
compliance with 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 Roger A. Gibson 6
Committee valuing portfolio securities for which (Chair)
market quotations are not readily James M. Wade
available, pursuant to procedures Benjamin R. Field
established by the Board of Directors. III
Virginia L.
Stringer
(ex-officio)
Governance The Committee has responsibilities Joseph D. 3
Committee relating to (1) Board and Committee Strauss (Chair)
composition (including, interviewing James M. Wade
and recommending to the Board nominees Victoria J. Herget
for election as directors; reviewing Virginia L.
the independence of all independent Stringer
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
|
NUMBER OF
FUND
COMPLEX
COMMITTEE
MEETINGS
HELD
DURING
FAIF'S
FISCAL
YEAR ENDED
COMMITTEE FUNCTION COMMITTEE MEMBERS 10/31/06
------------------ ----------------- ----------
(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).
|
In addition to the above committees, the Board of Directors also appoints a Fund Review Liaison. The responsibility of the Fund Review Liaison is to lead the Board of Directors, together with the Board Chair, in evaluating Fund performance, Fund service provider contracts and arrangements for execution of Fund trades. Ms. Herget is the current Fund Review Liaison.
The Governance Committee will consider shareholder recommendations for director nominees in the event there is a vacancy on the Board of Directors or in connection with any special shareholders meeting which is called for the purpose of electing directors. FAIF does not hold regularly scheduled annual shareholders meetings. There are no differences in the manner in which the Governance Committee evaluates nominees for director based on whether the nominee is recommended by a shareholder.
A shareholder who wishes to recommend a director nominee should submit his or her recommendation in writing to the Chair of the Board (Ms. Stringer) or the Chair of the Governance Committee (Mr. Strauss), in either case at First American Funds, P.O. Box 1329, Minneapolis, Minnesota 55440-1329. At a minimum, the recommendation should include:
- the name, address, and business, educational, and/or other pertinent background of the person being recommended;
- a statement concerning whether the person is "independent" within the meaning of New York Stock Exchange and American Stock Exchange listing standards and is not an "interested person" as defined in the Investment Company Act of 1940;
- any other information that the Fund would be required to include in a proxy statement concerning the person if he or she was nominated; and
- the name and address of the person submitting the recommendation, together with the number of Fund shares held by such person and the period for which the shares have been held.
The recommendation also can include any additional information which the person submitting it believes would assist the Governance Committee in evaluating the recommendation. Shareholder recommendations for
nominations to the Board will be accepted on an ongoing basis and will be kept on file for consideration when there is a vacancy on the Board or prior to a shareholders meeting called for the purpose of electing directors.
FUND SHARES OWNED BY THE DIRECTORS
The information in the table below discloses the dollar ranges of (i) each Director's beneficial ownership in FAIF, and (ii) each Director's aggregate beneficial ownership in all funds within the First American Funds complex, including in each case the value of fund shares elected by Directors in the directors' deferred compensation plan.
DOLLAR RANGE OF EQUITY AGGREGATE DOLLAR RANGE OF EQUITY SECURITIES
NAME OF DIRECTOR 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
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* The dollar range disclosed is based on the value of the securities as of June 30, 2007.
As of June 30, 2007, none of the independent Directors or their
immediate family members owned, beneficially, or of record, any securities in
(i) an investment advisor or principal underwriter of the Funds or (ii) a person
(other than a registered investment company) directly of indirectly controlling,
controlled by, or under common control with an investment advisor or principal
underwriter of the Funds.
COMPENSATION
The First American Family of Funds, which includes FAIF, FAF, FASF, and FACEF, currently pays directors who are not paid employees or affiliates of the Funds an annual retainer of $115,000 ($215,000 in the case of the Chair). The Fund Review Liaison and the Audit Committee Chair each receive an additional annual retainer of $20,000. The other standing Committee Chairs receive an additional annual retainer of $15,000. In addition, directors are paid the following fees for attending Board and committee meetings:
- $1,000 for attending the first day of an in-person Board of Directors meeting ($1,500 in the case of the Chair);
- $2,000 for attending the second day of an in-person Board of Directors meeting ($3,000 in the case of the Chair), assuming the second day ends no later than early afternoon;
- $1,000 for attending the third day of an in-person Board of Directors meeting ($1,500 in the case of the Chair);
- $500 for in-person attendance at any committee meeting ($750 in the case of the Chair of each committee);
A Director who participates telephonically in any in-person Board or Committee meeting receives half of the fee that Director would have received for attending, in-person, the Board or Committee meeting. For telephonic Board and Committee meetings, the Chair and each Director and Committee Chair, as applicable, receive a fee equal to half the fee he or she would have received for attending an in-person meeting.
Directors also receive $3,500 per day when traveling, on behalf of a Fund, out of town on Fund business which does not involve a Board or committee meeting. In addition, directors are reimbursed for their out-of-pocket expenses in traveling from their primary or secondary residence to Board and committee meetings, on Fund business and to attend mutual fund industry conferences or seminars. The amounts specified in this paragraph are allocated evenly among the funds in the First American Family of Funds.
Prior to January 1, 2007, directors who were not paid employees or affiliates of the Funds were paid an annual retainer of $40,000 ($80,000 in the case of the Chair). The Fund Review Liaison received an additional annual retainer of $15,000. In addition, directors were paid the following fees for attending Board and committee meetings:
- $5,000 per day for in-person attendance at Board of Directors meetings ($10,000 in the case of the Chair);
- $2,500 per day for telephonic attendance at Board of Directors meetings ($5,000 in the case of the Chair);
- $2,500 for in-person attendance at any committee meeting ($4,250 for the Audit Committee Chair; $3,750 for all other committee chairs);
- $1,250 for telephonic attendance at any committee meeting ($2,125 for the Audit Committee Chair; $1,875 for all other committee chairs); and
- $2,500 for in-person attendance at any opening executive session ($5,000 in the case of the Chair).
Directors also received $2,500 per day when traveling, on behalf of a Fund, out of town on Fund business which did not involve a Board or committee meeting. In addition, directors were reimbursed for their out-of-pocket expenses in traveling from their primary or secondary residence to Board and committee meetings, on Fund business and to attend mutual fund industry conferences or seminars. The amounts specified in this paragraph were allocated among the funds in the First American Family of Funds.
The directors may elect to defer payment of up to 100% of the fees they receive in accordance with a Deferred Compensation Plan (the "Plan"). Under the Plan, a director may elect to have his or her deferred fees treated as if they had been invested in shares of one or more funds and the amount paid to the director under the Plan will be determined based on the performance of such investments. Distributions may be taken in a lump sum or over a period of years. The Plan will remain unfunded for federal income tax purposes under the Internal Revenue Code of 1986, as amended. Deferral of director fees in accordance with the Plan will have a negligible impact on Fund assets and liabilities and will not obligate the Funds to retain any director or pay any particular level of compensation. The Funds do not provide any other pension or retirement benefits to directors.
Legal fees and expenses are also paid to Dorsey & Whitney LLP, the law firm of which James D. Alt, Assistant Secretary of FAIF, FAF, FASF, and FACEF, is a partner.
The following table sets forth information concerning aggregate compensation paid to each director of FAIF (i) by FAIF (column 2), and (ii) by FAIF, FAF, FASF, and FACEF collectively (column 5) during the fiscal year ended October 31, 2006. No executive officer or affiliated person of FAIF received any compensation from FAIF in excess of $60,000 during such fiscal year or fiscal period.
Compensation During Fiscal Year Ended October 31, 2006
PENSION OR
AGGREGATE RETIREMENT TOTAL COMPENSATION
NAME OF PERSON, POSITION COMPENSATION BENEFITS ACCRUED AS ESTIMATED ANNUAL FROM REGISTRANT AND
FROM PART OF FUND BENEFITS UPON FUND COMPLEX PAID TO
REGISTRANT (1) EXPENSES RETIREMENT DIRECTORS (2)
-------------- ------------------- ---------------- --------------------
Benjamin R. Field III, Director $81,074 -0- -0- $133,750
Roger A. Gibson, Director 70,467 -0- -0- 123,125
Victoria J. Herget, Director 71,224 -0- -0- 117,500
Leonard W. Kedrowski, Director 57,569 -0- -0- 131,750
Richard K. Riederer, Director 70,466 -0- -0- 116,250
Joseph D. Strauss, Director 66,302 -0- -0- 111,875
Virginia L. Stringer, Director & 136,386 -0- -0- 225,000
Chair
James M. Wade, Director 74,254 -0- -0- 122,500
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(1) Included in the Aggregate Compensation from Registrant are amounts deferred by Directors pursuant to the Deferred Compensation Plan discussed below. Pursuant to this Plan, compensation was deferred for the following directors: Roger A. Gibson, $10,760; Leonard W. Kedrowski, $57,569; and Joseph D. Strauss, $3,905.
(2) Included in the Total Compensation are amounts deferred for the following directors pursuant to the Deferred Compensation Plan: Roger A. Gibson, $24,625; Leonard W. Kedrowski, $131,750; and Joseph D. Strauss, $8,938.
SALES LOADS
Directors of the Fund and certain other Fund affiliates may purchase the Fund's Class A shares at net asset value without a sales charge. See the prospectus for details.
CODE OF ETHICS
First American Investment Funds, Inc., FAF Advisors, Inc., and Quasar Distributors, LLC have each adopted a Code of Ethics pursuant to Rule 17j-1 of the 1940 Act. Each of these Codes of Ethics permits personnel to invest in securities for their own accounts, including securities that may be purchased or held by the Fund. These Codes of Ethics are on public file with, and are available from, the SEC.
PROXY VOTING POLICIES
FAF Advisors, as investment manager for the First American family of mutual funds, has been delegated the authority by the board of directors of FAIF to vote proxies with respect to the investments held in the Fund. The policies and procedures that the Fund uses to determine how to vote proxies on behalf of the Funds are set forth in Appendix B.
INVESTMENT ADVISORY AND OTHER SERVICES FOR THE FUNDS
INVESTMENT ADVISOR
FAF Advisors, Inc. (the "Advisor"), 800 Nicollet Mall, Minneapolis, Minnesota 55402, serves as the investment advisor and manager of the Funds. The Advisor is a wholly owned subsidiary of U.S. Bank National Association ("U.S. Bank"), 800 Nicollet Mall, Minneapolis, Minnesota 55402, a national banking association that has professionally managed accounts for individuals, insurance companies, foundations, commingled accounts, trust funds, and others for over 75 years. U.S. Bank is a subsidiary of U.S. Bancorp, 800 Nicollet Mall, Minneapolis, Minnesota 55402, which is a regional multi-state bank holding company headquartered in Minneapolis, Minnesota that primarily serves the Midwestern, Rocky Mountain and Northwestern states. U.S. Bancorp also has various other subsidiaries engaged in financial services. At June 30, 2007, U.S. Bancorp and its consolidated subsidiaries had consolidated assets of more than $222.5 billion, consolidated deposits of more than $119.7 billion and shareholders' equity of $20.3 billion.
Pursuant to an Investment Advisory Agreement dated April 2, 1991 (the "Advisory Agreement"), as amended, the Funds engaged U.S. Bank, through its First American Asset Management division ("FAAM"), to act as investment Advisor for, and to manage the investment of, the Funds' assets. The Advisory Agreement was assigned to the Advisor on May 2, 2001. The monthly fees paid to the Advisor are calculated on an annual basis based on each Fund's average daily net assets (before any waivers) as set forth in the table below:
FUND GROSS ADVISORY FEE % ---- -------------------- Quantitative Large Cap Core Fund (1) 0.30 Quantitative Large Cap Growth Fund (1) 0.30 Quantitative Large Cap Value Fund (1) 0.30 |
(1) The Advisor has contractually agreed to waive fees and reimburse other fund expenses through July 31, 2008, so that total annual fund operating expenses do not exceed 0.70%, 1.45%, 0.95%, and 0.45%, respectively, for Class A, Class C, Class R, and Class Y shares. These fee waivers and expense reimbursements may be terminated at any time after July 31, 2008, at the discretion of the Advisor. Prior to that time, such waivers and reimbursements may not be terminated without the approval of the Funds' Board of Directors.
The Advisory Agreement requires the Advisor to arrange, if requested by FAIF, for officers or employees of the Advisor to serve without compensation from the Funds as directors, officers, or employees of FAIF if duly elected to such positions by the shareholders or directors of FAIF. The Advisor has the authority and responsibility to make and execute investment decisions for the Funds within the framework of the Funds' investment policies, subject to review by the Board of Directors of FAIF. The Advisor is also responsible for monitoring the performance of the various
organizations providing services to the Funds, including the Funds' distributor, shareholder services agent, custodian, and accounting agent, and for periodically reporting to FAIF's Board of Directors on the performance of such organizations. The Advisor will, at its own expense, furnish the Funds with the necessary personnel, office facilities, and equipment to service the Funds' investments and to discharge its duties as investment advisor of the Funds.
In addition to the investment advisory fee, each Fund pays all of its expenses that are not expressly assumed by the Advisor or any other organization with which the Fund may enter into an agreement for the performance of services. Each Fund is liable for such nonrecurring expenses as may arise, including litigation to which the Fund may be a party. FAIF may have an obligation to indemnify its directors and officers with respect to such litigation. The Advisor will be liable to the Funds under the Advisory Agreement for any negligence or willful misconduct by the Advisor other than liability for investments made by the Advisor in accordance with the explicit direction of the Board of Directors or the investment objectives and policies of the Funds. The Advisor has agreed to indemnify the Funds with respect to any loss, liability, judgment, cost or penalty that the Funds may suffer due to a breach of the Advisory Agreement by the Advisor.
The Advisor may agree to a voluntary fee waiver for each of the Funds, which will be set forth in the Funds' Prospectuses. Any such fee waiver (or reimbursement) may be discontinued at any time. The Advisor also may absorb or reimburse expenses of the Funds from time to time, in its discretion, while retaining the ability to be reimbursed by the Funds for such amounts prior to the end of the fiscal year. This practice would have the effect of lowering a Fund's overall expense ratio and of increasing yield to investors, or the converse, at the time such amounts are absorbed or reimbursed, as the case may be.
ADDITIONAL PAYMENTS TO FINANCIAL INTERMEDIARIES
In addition to the sales charge payments and the distribution, service and transfer agency fees described in the prospectus and elsewhere in this Statement of Additional Information, the Advisor and/or the Distributor may make additional payments out of its own assets to selected intermediaries that sell shares of First American Funds (such as brokers, dealers, banks, registered investment advisors, retirement plan administrators and other intermediaries; hereinafter, individually, "Intermediary," and collectively, "Intermediaries") under the categories described below for the purposes of promoting the sale of Fund shares, maintaining share balances and/or for sub-accounting, administrative or shareholder processing services.
The amounts of these payments could be significant and may create an incentive for an Intermediary or its representatives to recommend or offer shares of the Funds or other First American Funds to its customers. The Intermediary may elevate the prominence or profile of the Funds within the Intermediary's organization by, for example, placement on a list of preferred or recommended funds, and/or granting the Advisor and/or the Distributor preferential or enhanced opportunities to promote the Funds in various ways within the Intermediary's organization.
These payments are made pursuant to agreements with Intermediaries and do not change the price paid by investors for the purchase of a share or the amount a Fund will receive as proceeds from such sales. Furthermore, these payments are not reflected in the fees and expenses listed in the fee table section of the Funds' prospectuses and described above because they are not paid by the Funds.
The categories of payments described below are not mutually exclusive, and a single Intermediary may receive payments under all categories.
Marketing Support Payments and Program Servicing Payments
The Advisor and/or the Distributor may make payments for marketing support and/or program servicing to certain Intermediaries that are registered as holders or dealers of record for accounts in one or more of the First American Funds, or certain Intermediaries that sell First American Fund shares through retirement plans and other investment programs to compensate them for a variety of services they provide to such programs.
Marketing Support Payments. Services for which an Intermediary receives marketing support payments may include business planning assistance, advertising, educating the Intermediary's personnel about the First American Funds and shareholder financial planning needs, placement on the Intermediary's preferred or recommended fund company list, and access to sales meetings, sales representatives and management representatives of the Intermediary.
In addition, Intermediaries may be compensated for enabling Fund representatives to participate in and/or present at conferences or seminars, sales or training programs for invited registered representatives and other employees, client and investor events and other events sponsored by the Intermediary. The Advisor and/or the Distributor compensates Intermediaries differently depending upon, among other factors, sales and assets levels, redemption rates, ability to attract and retain assets, reputation in the industry and the level and/or type of marketing assistance and educational activities provided by the Intermediary.
Marketing support payments typically apply to retail sales and assets but may apply to other specific types of sales or assets, such as to retirement plans or fee-based advisory programs, in certain situations. The payments are negotiated and may be based on such factors as the number or value of shares that the Intermediary sells or may sell, the value of the assets invested in the Funds by the Intermediary's customers and/or other measures as determined from time to time by the Advisor and/or the Distributor. In addition, payments may include the reimbursement of ticket or operational charges (fees that an Intermediary charges its representatives for effecting transactions in Fund shares) and/or the payment of a lump sum for services provided.
Program Servicing Payments. Services for which an Intermediary receives program servicing payments typically include recordkeeping, reporting, or transaction processing, but may also include services rendered in connection with Fund/investment selection and monitoring, employee enrollment and education, plan balance rollover or separation, or other similar services. An Intermediary may perform program services itself or may arrange with a third party to perform program services.
Program servicing payments typically apply to employee benefit plans, such as retirement plans, or fee-based advisory programs but may apply to retail sales and assets in certain situations. The payments are negotiated and are based on such factors as the type and nature of services or support furnished by the Intermediary. In addition, payments may include the reimbursement of ticket or operational charges (fees that an Intermediary charges its representatives for effecting transactions in Fund shares) and/or the payment of a lump sum for services provided.
The Advisor and/or the Distributor may make one-time or periodic payments to selected Intermediaries receiving program servicing payments to reimburse printing and/or distribution costs for literature for participants, for account maintenance, for ticket charges of up to $25 per purchase or exchange order placed by an Intermediary, or for the establishment of First American Funds on the Intermediary's trading system. In addition, the Advisor and/or the Distributor, at the direction of a retirement plan's sponsor, may reimburse or pay direct expenses of the plan that would otherwise be payable by the plan. These payments may cause the aggregate amount of the payments to an Intermediary on an annual basis to exceed the basis point amount set forth below.
Except as described in the foregoing paragraph, in the case of any one Intermediary (other than U.S. Bank, N.A.), marketing support and program servicing payments are not expected, with certain limited exceptions, to exceed, in the aggregate, 0.35% of the average net assets of Fund shares attributable to that Intermediary on an annual basis. Such exceptions include instances in which an Intermediary is not receiving distribution fees with respect to a Fund share class which has a distribution fee, in which case such Intermediary may receive up to 0.50% of the average net assets of that Fund share class attributable to that Intermediary on an annual basis. In addition, in connection with the sale of a business by the Advisor's parent company, U.S. Bank, N.A., to Great-West Life & Annuity Insurance Company, the Advisor has entered into a services agreement with GWFS Equities, Inc., an affiliate of Great-West Life & Annuity Insurance Company, which provides for program servicing payments of up to 0.60% of the average net assets of Fund shares attributable to GWFS Equities, Inc. on an annual basis.
Other Payments
From time to time, the Advisor and/or the Distributor, at its expense, may provide compensation to Intermediaries that sell or arrange for the sale of shares of the Fund(s), in addition to marketing support and program servicing payments described above. In addition, certain Intermediaries may not receive marketing support payments or program servicing payments, but may receive other payments from the Advisor and/or the Distributor.
The Advisor and/or the Distributor may compensate Intermediaries for National Securities Clearing Corporation networking system services (e.g., shareholder communication, account statements, trade confirmations, and tax reporting) on an asset based or per account basis. The Advisor and/or the Distributor may also compensate Intermediaries for providing Fund shareholder trading information.
When not provided for in a marketing support or program servicing agreement, the Advisor and/or the Distributor may pay Intermediaries for enabling the Advisor and/or the Distributor to participate in and/or present at conferences or seminars, sales or training programs for invited registered representatives and other Intermediary employees, client and investor events and other Intermediary -sponsored events, and for travel expenses, including lodging incurred by registered representatives and other employees in connection with prospecting, asset retention and due diligence trips. These payments may vary depending upon the nature of the event. The Advisor and/or the Distributor makes payments for such events as it deems appropriate, subject to its internal guidelines and applicable law.
The Advisor and/or the Distributor occasionally sponsors due diligence meetings for registered representatives during which they receive updates on various First American Funds and are afforded the opportunity to speak with portfolio managers. Invitations to these meetings are not conditioned on selling a specific number of shares. Those who have shown an interest in First American Funds, however, are more likely to be considered. To the extent permitted by their firm's policies and procedures, registered representatives' expenses in attending these meetings may be covered by the Advisor and/or the Distributor.
Certain employees of the Advisor and its affiliates may receive cash compensation from the Advisor and/or the Distributor in connection with establishing new client relationships with the First American Funds. The total compensation of employees who have marketing and/or sales responsibilities is based in part on their generation of new client relationships, including new client relationships with the First American Funds. Other employees of the Advisor and its affiliates may receive a one-time referral fee from the Advisor and/or the Distributor for new business to the First American Funds based on a percentage of the annual revenue generated by the new client relationship. Such compensation will not exceed 10% of the annual revenue generated, up to a maximum of $10,000.
Other compensation may be offered to the extent not prohibited by state laws or any self-regulatory agency, such as the NASD. Investors can ask their Intermediary for information about any payments it receives from the Advisor and/or the Distributor and the services it provides for those payments.
Investors may wish to take such payment arrangements into account when considering and evaluating any recommendations relating to Fund shares.
Intermediaries Receiving Additional Payments
The following is a list of Intermediaries receiving one or more of the types of payments discussed above as of September 30, 2006:
401(k) Investment Services, Inc.
A.G. Edwards & Sons, Inc.
Administration Resources Corporation
American Stock Transfer & Trust Company
Ameriprise Financial Services, Inc.
Bisys Retirement Services, Inc.
Ceridian Corporation
Charles Schwab & Co., Inc.
Citigroup Global Markets Inc.
City National Bank
Commonwealth Equity Services, LLP, DBA Commonwealth Financial Network
CPI Qualified Plan Consultants, Inc.
D.A. Davidson & Co.
Dyatech, LLC
ExpertPlan, Inc.
Fidelity Brokerage Services LLC/National Financial Services LLC
Fidelity Investments Institutional Operations Company, Inc.
Fidelity Investments Institutional Services Company, Inc./Fidelity Investments
Institutional Operations Company, Inc.
Fintegra, LLC
GWFS Equities, Inc.
Hewitt Associates LLC
International Clearing Trust Company
J.P. Morgan Retirement Plan Services, LLC
Leggette Actuaries, Inc.
Linsco/Private Ledger Corp.
Marshall & Ilsley Trust Company, N.A.
Massachusetts Mutual Life Insurance Company
McDonald Investments, Inc.
Mercer HR Outsourcing LLC
Merrill Lynch, Pierce, Fenner & Smith Inc.
Mid Atlantic Capital Corporation
Morgan Stanley DW Inc
MSCS Financial Services, LLC
National Investor Services Corp.
National Planning Holdings, Inc.
Pershing LLC
Principal Life Insurance Company
Prudential Investment Management Services, LLC/Prudential Investments LLC
Prudential Life Insurance Company of America (The)
Raymond James & Associates/Raymond James Financial Services, Inc.
RBC Dain Rauscher, Inc.
Reliance Trust Company
Retirement Plan Company, LLC (The)
Robert W. Baird & Co., Inc.
Stanton Trust Company N.A.
Stifel, Nicolaus & Co., Inc.
Symetra Life Insurance Company
T. Rowe Price Investment Services, Inc./T. Rowe Price
Retirement Plan Services, Inc.
TCF Investments, Inc.
U.S. Bancorp Investments, Inc.
U.S. Bank, N.A.
UBS Financial Services, Inc.
Unified Trust Company, N.A.
Wachovia Bank, N.A.
Wachovia Securities, LLC
Wells Fargo Bank, N.A.
Wilmington Trust Company
Any additions, modification or deletions to the list of Intermediaries identified above that have occurred since September 30, 2006 are not reflected.
ADMINISTRATOR
FAF Advisors, Inc. (the "Administrator") serves as Administrator pursuant to an Administration Agreement between the Administrator and the Funds, dated July 1, 2006. U.S. Bancorp Fund Services, LLC ("USBFS"), 615 East Michigan Street, Milwaukee, WI 53202, serves as sub-administrator pursuant to a Sub-Administration Agreement between the Administrator and USBFS dated July 1, 2005. USBFS is a subsidiary of U.S. Bancorp. Under the Administration Agreement, the Administrator provides, or compensates others to provide, services to the Funds. These services include various legal, oversight, administrative, and accounting services. The Funds pay the Administrator fees which are calculated daily and paid monthly equal to, on an annual basis, 0.25% of the aggregate average daily net assets of all open-end mutual funds in the First American Family of Funds up to $8 billion, 0.235% on the next $17 billion of the aggregate average daily net assets, 0.22% on the next $25 billion of the aggregate average daily net assets, and 0.20% of the aggregate average daily net assets in excess of $50 billion. In addition to these fees, the Funds may reimburse the Administrator for any out-of-pocket expenses incurred in providing administration services.
TRANSFER AGENT
USBFS serves as the Funds' transfer agent pursuant to a Transfer Agency and Shareholder Servicing Agreement (the "Transfer Agent Agreement") between USBFS and the Funds dated July 1, 2006. The Funds are
charged transfer agent fees on a per shareholder account basis, subject to a minimum fee per share class. These fees will be charged to each Fund based on the number of accounts within that Fund. The Funds may also reimburse USBFS for out-of-pocket expenses incurred in providing transfer agent services.
DISTRIBUTOR
Quasar Distributors, LLC ("Quasar" or the "Distributor") serves as the distributor for the Funds' shares pursuant to a Distribution Agreement dated July 1, 2005 (the "Distribution Agreement"). The Distributor is a wholly owned subsidiary of U.S. Bancorp.
Fund shares and other securities distributed by the Distributor are not deposits or obligations of, or endorsed or guaranteed by, U.S. Bank or its affiliates, and are not insured by the Bank Insurance Fund, which is administered by the Federal Deposit Insurance Corporation.
Under the Distribution Agreement, the Funds have granted to the Distributor the exclusive right to sell shares of the Funds as agent and on behalf of the Funds. The Distributor pays compensation pursuant to the Distribution Agreement to securities firms, financial institutions (including, without limitation, banks) and other industry professionals (the "Participating Intermediaries") which enter into sales agreements with the Distributor. U.S. Bancorp Investment Services, Inc. ("USBI"), a broker-dealer affiliated with the Advisor, and U.S. Bank, are Participating Intermediaries.
The Class A shares pay to the Distributor a shareholder servicing fee at an annual rate of 0.25% of the average daily net assets of the Class A shares. The fee may be used by the Distributor to provide compensation for shareholder servicing activities with respect to the Class A shares. The shareholder servicing fee is intended to compensate the Distributor for ongoing servicing and/or maintenance of shareholder accounts and may be used by the Distributor to provide compensation to intermediaries through whom shareholders hold their shares for ongoing servicing and/or maintenance of shareholder accounts. This fee is calculated and paid each month based on average daily net assets of Class A shares each Fund for that month.
The Class C shares pay to the Distributor a shareholder servicing fee at the annual rate of 0.25% of the average daily net assets of the Class C shares. The fee may be used by the Distributor to provide compensation for shareholder servicing activities with respect to the Class C shares. This fee is calculated and paid each month based on average daily net assets of the Class C shares. The Class C shares also pay to the Distributor a distribution fee at the annual rate of 0.75% of the average daily net assets of the Class C shares. The Distributor may use the distribution fee to provide compensation to intermediaries through which shareholders hold their shares beginning one year after purchase.
The Class R shares pay to the Distributor a distribution fee at the annual rate of 0.50% of the average daily net assets of Class R shares. The fee may be used by the Distributor to provide initial and ongoing sales compensation to its investment executives and to Participating Intermediaries in connection with sales of Class R shares and to pay for advertising and other promotional expenses in connection with the distribution of Class R shares. This fee is calculated and paid each month based on average daily net assets of the Class R shares.
The Distributor receives no compensation for distribution of the Class Y shares.
The Distribution Agreement provides that it will continue in effect for a period of more than one year from the date of its execution only so long as such continuance is specifically approved at least annually by the vote of a majority of the Board members of FAIF and by the vote of the majority of those Board members of FAIF who are not interested persons of FAIF and who have no direct or indirect financial interest in the operation of FAIF's Rule 12b-1 Distribution and Service Plan or in any agreement related to such plan.
FAIF has also adopted a Distribution and Service Plan with respect to the Class A, Class C and Class R shares of the Fund pursuant to Rule 12b-1 under the 1940 Act (the "Plan"). Rule 12b-1 provides in substance that a mutual fund may not engage directly or indirectly in financing any activity which is primarily intended to result in the sale of shares, except pursuant to a plan adopted under the Rule. The Plan authorizes the Distributor to retain the sales charges paid upon purchase of Class A and Class C shares and authorize the Funds to pay the Distributor distribution and/or shareholder servicing fees. The Plan is a "compensation-type" plan under which the Distributor is entitled to receive the distribution and shareholder servicing fees regardless of whether its actual distribution and shareholder servicing expenses are more or less than the amount of the fees. The distribution fees under the Plan are used for primary purpose
of compensating broker-dealers for their sales of the Funds. The shareholder servicing fees are used primarily for the purpose of providing compensation for the ongoing servicing and/or maintenance of shareholder accounts. The Plan authorizes the Distributor to retain the contingent deferred sales charge applied on redemptions of Class C shares, except that portion which is reallowed to Participating Institutions. The Plan recognizes that the Distributor and the Advisor, in their discretion, may from time to time use their own assets to pay for certain additional costs of distributing Class A, Class C and Class R shares. Any such arrangements to pay such additional costs may be commenced or discontinued by the Distributor or the Advisor at any time.
CUSTODIAN AND INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Custodian. U.S. Bank acts as custodian for the Funds (the "Custodian"). The Custodian takes no part in determining the investment policies of the Funds or in deciding which securities are purchased or sold by the Funds. All of the instruments representing the investments of the Funds and all cash are held by the Custodian. The Custodian delivers securities against payment upon sale and pays for securities against delivery upon purchase. The Custodian also remits Fund assets in payment of Fund expenses, pursuant to instructions of FAIF's officers or resolutions of the Board of Directors.
As compensation for its services as custodian, the Custodian is paid a monthly fee calculated on an annual basis equal to 0.005% of each such Fund's average daily net assets. In addition, the Custodian is reimbursed for its out-of-pocket expenses incurred while providing services to the Funds. The Custodian continues to serve so long as its appointment is approved at least annually by the Board of Directors including a majority of the directors who are not interested persons (as defined under the 1940 Act) of FAIF.
Independent Registered Public Accounting Firm. Ernst & Young LLP, 220 South Sixth Street, Suite 1400, Minneapolis, Minnesota 55402, serves as the Funds' independent registered public accounting firm, providing audit services, including audits of the annual financial statements.
PORTFOLIO MANAGERS
OTHER ACCOUNTS MANAGED
The following table sets forth the number and total assets of the mutual funds and accounts managed by the Fund's portfolio managers as of June 30, 2007.
AMOUNT
SUBJECT TO
NUMBER OF PERFORMANCE-
PORTFOLIO MANAGER TYPE OF ACCOUNT MANAGED ACCOUNTS ASSETS BASED FEE
----------------- ----------------------- -------- ------ ---------
David R. Cline Registered Investment Company 6 $ 1.1 billion 0
Other Pooled Investment Vehicles 0 0 0
Other Accounts 4 $ 42.2 million 0
Walter A. French Registered Investment Company 5 $ 2.9 billion 0
Other Pooled Investment Vehicles 0 0 0
Other Accounts 32 $998.8 million 0
David A. Friar Registered Investment Company 4 $ 2.6 billion 0
Other Pooled Investment Vehicles 0 0 0
Other Accounts 32 $998.8 million 0
Keith B. Hembre Registered Investment Company 6 $979.1 million 0
Other Pooled Investment Vehicles 0 0 0
Other Accounts 0 0 0
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The Funds' portfolio managers often manage multiple accounts. The Advisor has adopted policies and procedures regarding brokerage and trade allocation and allocation of investment opportunities that it believes are reasonably designed to address potential conflicts of interest associated with managing multiple accounts for multiple clients.
PORTFOLIO MANAGER COMPENSATION
Portfolio manager compensation consists primarily of base pay, an annual cash incentive and long term incentive payments.
Base pay is determined based upon an analysis of the portfolio manager's general performance, experience, and market levels of base pay for such position.
The Fund's portfolio managers are paid an annual cash incentive based upon investment performance, generally over the past one- and three-year periods unless the portfolio manager's tenure is shorter. The maximum potential annual cash incentive is equal to a multiple of base pay, determined based upon the particular portfolio manager's performance and experience, and market levels of base pay for such position.
For managers of the Fund, the portion of the maximum potential annual cash
incentive that is paid out is based upon performance relative to the portfolio's
benchmark and performance relative to an appropriate Lipper industry peer group.
Generally, the threshold for payment of an annual cash incentive is (i)
benchmark performance and (ii) median performance versus the peer group, and the
maximum annual cash incentive is attained at (i) a spread over the benchmark
which the Advisor believes will, over time, deliver top quartile performance and
(ii) top quartile performance versus the Lipper industry peer group.
Investment performance is measured on a pre-tax basis, gross of fees for Fund results and for the Lipper industry peer group.
Long term incentive payments are paid to portfolio managers on an annual
basis based upon general performance and expected contributions to the success
of the Advisor. Long-term incentive payments are comprised of two components:
(i) performance equity units of the Advisor and (ii) U.S. Bancorp options and
restricted stock.
There are generally no differences between the methods used to determine compensation with respect to the Fund and the Other Accounts shown in the table above.
OWNERSHIP OF FUND SHARES
The following table indicates as of June 30, 2007 the value, within the indicated range, of shares beneficially owned by the portfolio managers in each Fund they manage. For purposes of this table, the following letters indicate the range listed next to each letter:
A - $0
B - $1 - $10,000
C - $10,001 - $50,000
D - $50,001 - $100,000
E - $100,001 - $500,000
F - $500,001 - $1,000,000
G - More than $1 million
OWNERSHIP OWNERSHIP IN
PORTFOLIO MANAGER FUND IN FUND FUND COMPLEX
----------------- ---- ------- ------------
David R. Cline Quantitative Large Cap Growth Fund A E
Quantitative Large Cap Value Fund A
Quantitative Large Cap Core Fund A
Walter A. French Quantitative Large Cap Growth Fund A D
Quantitative Large Cap Value Fund A
Quantitative Large Cap Core Fund A
David A. Friar Quantitative Large Cap Growth Fund A A
Quantitative Large Cap Value Fund A
Quantitative Large Cap Core Fund A
|
OWNERSHIP OWNERSHIP IN
PORTFOLIO MANAGER FUND IN FUND FUND COMPLEX
----------------- ---- ------- ------------
Keith B. Hembre Quantitative Large Cap Growth Fund A E
Quantitative Large Cap Value Fund A
Quantitative Large Cap Core Fund A
|
PORTFOLIO TRANSACTIONS AND ALLOCATION OF BROKERAGE
Decisions with respect to which securities are to be bought or sold, the total amount of securities to be bought or sold, the broker-dealer with or through which the securities transactions are to be effected and the commission rates applicable to the trades are made by the Advisor.
In selecting a broker-dealer to execute securities transactions, the Advisor considers the full range and quality of a broker-dealer's services including, among other things: the value, nature and quality of any brokerage and research products and services; execution capability; commission rate; financial responsibility (including willingness to commit capital); the likelihood of price improvement; the speed of execution and likelihood of execution for limit orders; the ability to minimize market impact; the maintenance of the confidentiality of orders; and responsiveness of the broker-dealer. The determinative factor is not the lowest possible commission cost but whether the transaction represents the best qualitative execution for the Funds. Subject to the satisfaction of its obligation to seek best execution, another factor considered by the Advisor in selecting a broker-dealer may include the broker-dealer's access to initial public offerings.
For certain transactions, the Advisor may cause the Funds to pay a broker-dealer a commission higher than that which another broker-dealer might have charged for effecting the same transaction (a practice commonly referred to as "paying up"). The Advisor causes a Fund to pay up in recognition of the value of the brokerage and research products and services provided by the broker-dealer. The broker-dealer may directly provide such products or services to the Funds or purchase them from a third party for the Funds. In such cases, the Advisor is in effect paying for the brokerage and research products and services with client commissions -- so-called "soft dollars." The Advisor will only cause a Fund to pay up if the Advisor, subject to their overall duty to seek best execution, determine in good faith that the amount of such commission is reasonable in relation to the value of the brokerage and research products and services provided by such broker-dealer, viewed in terms of either that particular transaction or the overall responsibilities of the Advisor with respect to the managing of its accounts.
The types of research products and services the Advisor receives include economic analysis and forecasts, financial market analysis and forecasts, industry and company specific analysis, performance monitoring, interest rate forecasts, arbitrage relative valuation analysis of various debt securities, analysis of U.S. Treasury securities, research-dedicated computer software and related consulting services and other services that assist in the investment decision making process. Research products and services are received primarily in the form of written reports, computer-generated services, telephone contacts and personal meetings with security analysts. Research services may also be provided in the form of meetings arranged by broker-dealers with corporate management teams and spokespersons, as well as industry spokespersons.
The brokerage and research products and services the Advisor receives from broker-dealers supplement the Advisor's own normal research activities. As a practical matter, the Advisor could not, on its own, generate all of the research that broker-dealers provide without materially increasing expenses. The brokerage and research products and services the Advisor receives from broker-dealers may be put to a variety of uses and may be provided as part of a product that bundles research and brokerage products with other products into one package as further described below. The Advisor reduces its expenses through its use of soft dollars.
As a general matter, the brokerage and research products and services the Advisor receives from broker-dealers are used to service all of the Advisor's accounts, including the Funds. However, any particular brokerage and research product or service may not be used to service each and every account, and may not benefit the particular accounts that generated the brokerage commissions. For example, equity commissions are used for brokerage and research products and services utilized in managing fixed income accounts.
The Advisor receives brokerage or research products or services that they also use for business purposes unrelated to brokerage or research. For example, certain brokerage services are provided as a part of a product that bundles many separate and distinct brokerage, execution, investment management, custodial and recordkeeping services into one package. Market data services are a specific example of mixed use services that the Advisor might acquire because certain employees of the Advisor may use such services for marketing or administrative purposes while others use them for research purposes. The acquisition of mixed use products and services causes a conflict of interest for the Advisor, in that, clients pay up for this type of brokerage or research product or service while the product or service also directly benefits the Advisor. For this reason, and in accordance with general SEC guidance, the Advisor and its applicable affiliates (that may also utilize such mixed use products or services) make a good faith effort to determine what percentage of the product or service is used for non-brokerage or research purposes and pay cash ("hard dollars") for such percentage of the total cost. To ensure that their practices are consistent with their fiduciary responsibilities to their clients and to address this conflict, the Advisor makes all determinations with regard to whether mixed use items may be acquired and, if so, what the appropriate allocations are between soft dollar and hard dollar payments for such products and services. These determinations themselves represent a conflict of interest as the Advisor has a financial incentive to allocate a greater proportion of the cost of mixed use products to soft dollars.
Many of the Funds' portfolio transactions involve payment of a brokerage commission by the applicable Fund. In some cases, transactions are with dealers or issuers who act as principal for their own accounts and not as brokers. Transactions effected on a principal basis, other than certain transactions effected on a so-called riskless principal basis, are made without the payment of brokerage commissions but at net prices which usually include a spread or markup. In effecting transactions in over-the-counter securities, the Funds typically deal with market makers unless it appears that better price and execution are available elsewhere.
The Funds do not effect any brokerage transactions in their portfolio securities with any broker or dealer affiliated directly or indirectly with the Advisor or Distributor unless such transactions, including the frequency thereof, the receipt of commission payable in connection therewith, and the selection of the affiliated broker or dealer effecting such transactions are not unfair or unreasonable to the shareholders of the Funds, as determined by the Board of Directors. Any transactions with an affiliated broker or dealer must be on terms that are both at least as favorable to the Funds as the Funds can obtain elsewhere and at least as favorable as such affiliated broker or dealer normally gives to others.
When two or more clients of the Advisor are simultaneously engaged in the purchase or sale of the same security, the prices and amounts are allocated in a manner considered by the Advisor to be equitable to each client. In some cases, this system could have a detrimental effect on the price or volume of the security as far as each client is concerned. In other cases, however, the ability of the clients to participate in volume transactions may produce better executions for each client.
CAPITAL STOCK
Each share of each Fund's $.01 par value common stock is fully paid, nonassessable, and transferable. Shares may be issued as either full or fractional shares. Fractional shares have pro rata the same rights and privileges as full shares. Shares of the Funds have no preemptive or conversion rights.
Each share of a Fund has one vote. On some issues, such as the election of directors, all shares of all FAIF Funds vote together as one series. The shares do not have cumulative voting rights. On issues affecting only a particular Fund, the shares of that Fund will vote as a separate series. Examples of such issues would be proposals to alter a fundamental investment restriction pertaining to a Fund or to approve, disapprove or alter a distribution plan. The Bylaws of FAIF provide that annual shareholders meetings are not required and that meetings of shareholders need only be held with such frequency as required under Maryland law and the 1940 Act.
As of the date of this Statement of Additional Information, there were 40 shares of each Fund outstanding, all of which were held by FAF Advisors, Inc.
NET ASSET VALUE AND PUBLIC OFFERING PRICE
The public offering price of the shares of a Fund generally equals the Fund's net asset value plus any applicable sales charge. A summary of any applicable sales charge assessed on Fund share purchases is set forth in the Funds' Prospectus.
The net asset value of each Fund's shares is determined on each day during which the New York Stock Exchange (the "NYSE") is open for business. The NYSE is not open for business on the following holidays (or on the nearest Monday or Friday if the holiday falls on a weekend): New Year's Day, Martin Luther King, Jr. Day, Washington's Birthday (observed), Good Friday, Memorial Day (observed), Independence Day, Labor Day, Thanksgiving Day and Christmas Day. Each year the NYSE may designate different dates for the observance of these holidays as well as designate other holidays for closing in the future. To the extent that the securities held by a Fund are traded on days that the Fund is not open for business, such Fund's net asset value per share may be affected on days when investors may not purchase or redeem shares. This may occur, for example, where a Fund holds securities which are traded in foreign markets.
TAXATION
Each Fund intends to fulfill the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"), as a regulated investment company. If so qualified, each Fund will not be liable for federal income taxes to the extent it distributes its taxable income to its shareholders.
Some of the investment practices that may be employed by the Funds will be subject to special provisions that, among other things, may defer the use of certain losses of such Funds, affect the holding period of the securities held by the Funds and, particularly in the case of transactions in or with respect to foreign currencies, affect the character of the gains or losses realized. These provisions may also require the Funds to mark-to-market some of the positions in their respective portfolios (i.e., treat them as closed out) or to accrue original discount, both of which may cause such Funds to recognize income without receiving cash with which to make distributions in amounts necessary to satisfy the distribution requirements for qualification as a regulated investment company and for avoiding income and excise taxes. Accordingly, in order to make the required distributions, a Fund may be required to borrow or liquidate securities. Each Fund will monitor its transactions and may make certain elections in order to mitigate the effect of these rules and prevent disqualification of the Funds as regulated investment companies.
When a Fund lends portfolio securities to a borrower as described above in "Lending of Portfolio Securities," payments in lieu of dividends made by the borrower to the Fund will not constitute "qualified dividends" taxable at the same rate as long-term capital gains, even if the actual dividends would have constituted qualified dividends had the Fund held the securities. Such payments in lieu of dividends are taxable as ordinary income.
It is expected that any net gain realized from the closing out of futures contracts, options, or forward currency contracts will be considered gain from the sale of securities or currencies and therefore qualifying income for purposes of the requirement that a regulated investment company derive at least 90% of gross income from investment securities.
Any loss on the sale or exchange of shares of a Fund generally will be disallowed to the extent that a shareholder acquires or contracts to acquire shares of the same Fund within 30 days before or after such sale or exchange. Furthermore, if Fund shares with respect to which a long-term capital gain distribution has been made are held for less than six months, any loss on the sale of exchange of such shares will be treated as a long-term capital loss to the extent of such long-term capital gain distribution.
For federal tax purposes, if a shareholder exchanges shares of a Fund for shares of any other FAIF Fund pursuant to the exchange privilege (see "Policies and Services -- Purchasing, Redeeming, and Exchanging Shares" in the Prospectus), such exchange will be considered a taxable sale of the shares being exchanged. Furthermore, if a shareholder of Class A or Class C shares carries out the exchange within 90 days of purchasing shares in a Fund on which he or she has incurred a sales charge, the sales charge cannot be taken into account in determining the shareholder's gain or loss on the sale of those shares to the extent that the sales charge that would have been applicable to the purchase of the later-acquired shares in the other Fund is reduced because of the exchange privilege. However, the amount of any sales charge that may not be taken into account in determining the shareholder's gain or loss on the sale of the first-acquired shares may be taken into account in determining gain or loss on the eventual sale or exchange of the later-acquired shares.
Pursuant to the Code, distributions of net investment income by a Fund to a shareholder who is a foreign shareholder (as defined below) will be subject to U.S. withholding tax (at a rate of 30% or lower treaty rate). Withholding will not apply if a dividend paid by a Fund to a foreign shareholder is "effectively connected" with a U.S. trade or business of such shareholder, in which case the reporting and withholding requirements applicable to U.S. citizens or domestic corporations will apply. Distributions of net long-term capital gains are not subject to tax
withholding but, in the case of a foreign shareholder who is a nonresident alien individual, such distributions ordinarily will be subject to U.S. income tax at a rate of 30% if the individual is physically present in the U.S. for more than 182 days during the taxable year. Each Fund will report annually to its shareholders the amount of any withholding.
A foreign shareholder is any person who is not (i) a citizen or resident of the United States, (ii) a corporation, partnership or other entity organized in the United States or under the laws of the United States or a political subdivision thereof, (iii) an estate whose income is includible in gross income for U.S. federal income tax purposes or (iv) a trust whose administration is subject to the primary supervision of the U.S. court and which has one or more U.S. fiduciaries who have authority to control all substantial decisions of the trust.
The foregoing relates only to federal income taxation and is a general summary of the federal tax law in effect as of the date of this Statement of Additional Information.
REDUCING SALES CHARGES
CLASS A SALES CHARGE
Sales charges on the purchase of Class A shares can be reduced through (i) quantity discounts and accumulated purchases, or (ii) signing a 13-month letter of intent.
QUANTITY DISCOUNTS AND ACCUMULATED PURCHASES: Each Fund will combine purchases made by an investor, the investor's spouse or domestic partner, and the investor's dependent children when it calculates the sales charge.
For each Fund, the sales charge discount will be determined by adding (i) the purchase price (including sales charge) of the Fund shares that are being purchased, plus (ii) the purchase price of the Class A, Class B (if offered), and Class C shares of any other First American fund (other than a money market fund) that you are concurrently purchasing, plus (iii) the current net asset value of Class A and Class C shares of the Fund or Class A, Class B (if offered), and Class C shares of any other First American fund (other than a money market fund) that you already own. In order for an investor to receive the sales charge reduction on Class A shares, the Fund must be notified by the investor in writing or by his or her financial institution at the time the purchase is made that Fund shares are already owned or that purchases are being combined. If the purchase price of shares that the investor owns is higher than their current net asset value, the investor may receive credit for this higher purchase price instead, but only if the investor notifies the Fund of this request in advance in writing and provides written records of the original purchase price.
LETTER OF INTENT: If an investor intends to purchase, in the aggregate, at least $50,000 of Class A, Class B (if offered) or Class C shares in the Funds, or other First American funds (other than money market funds), over the next 13 months, the sales charge may be reduced by signing a letter of intent to that effect. This letter of intent includes a provision for a sales charge adjustment depending on the amount actually purchased within the 13-month period and a provision for the Fund's custodian to hold a percentage equal to the Funds' maximum sales charge rate of the total amount intended to be purchased in escrow (in shares) until the purchase is completed.
The amount held in escrow for all FAIF Funds will be applied to the investor's account at the end of the 13-month period after deduction of the sales load applicable to the dollar value of shares actually purchased. In this event, an appropriate number of escrowed shares may be redeemed in order to realize the difference in the sales charge.
A letter of intent will not obligate the investor to purchase shares, but if he or she does, each purchase during the period will be at the sales charge applicable to the total amount intended to be purchased. This letter may be dated as of a prior date to include any purchases made within the past 90 days. Absent complete and current notification from the investor or from his or financial intermediary to the Fund, the investor may not realize the benefit of a reduced sales charge.
SALES OF CLASS A SHARES AT NET ASSET VALUE
General. The prospectuses for the Funds set forth the categories of investors eligible to purchase Class A shares without a sales charge.
Purchases of $1 Million or More. Class A shares may be purchased without a sales charge by non-retirement accounts if the purchase, when aggregated with certain Class A, B (if offered) and C share purchases as described in the Funds' prospectus, totals $1 million or more. Your investment professional or financial intermediary may receive a commission equal to 1.00% on purchases of $1 million to $3 million, 0.50% on purchases in excess of $3 million up to $10 million, and 0.25% on purchases in excess of $10 million. Note that your investment professional or financial intermediary will only receive a commission equal to the rate required by the actual investment (without taking into account aggregation). For example, if your aggregated investments, including your current investment, total $6 million, but your current investment equals $2 million, your investment professional or financial intermediary may receive a commission equal to 1.00% of $2 million. If such a commission is paid, you will be assessed a contingent deferred sales charge (CDSC) of 1% if you sell your shares within 18 months.
Class A shares may also be purchased without a sales charge by 401(k), 403(b) and 457 plans, and profit sharing and pension plans, which invest $1 million or more. Your representative must notify the Fund if your retirement/deferred compensation plan is eligible for the sales load waiver. Securities firms, financial institutions and other industry professionals that enter into sales agreements with the Funds' distributor to perform share distribution services may receive a commission on such sales of the Funds equal to 0.25% on purchases in excess of $10 million. If such a commission is paid, the plan will be assessed a contingent deferred sales charge (CDSC) of 0.25% if it sells the shares within 18 months. A commission is paid only on Class A shares of First American Funds.
REINVESTMENT RIGHT
If Class A shares of a Fund have been redeemed, the shareholder has a one-time right, within 180 days, to reinvest the redemption proceeds in Class A shares of any First American fund at the next-determined net asset value without any sales charge. The Fund must be notified by the shareholder in writing or by his or her financial intermediary of the reinvestment in order to eliminate a sales charge. If the shareholder redeems his or her shares of a Fund, there may be tax consequences.
RECEIPT OF ORDERS BY FINANCIAL INTERMEDIARIES
The Funds have authorized one or more Intermediaries to receive purchase and redemption orders on the Funds' behalf. Intermediaries are authorized to designate other intermediaries to receive purchase and redemption orders on the Funds' behalf. A Fund will be deemed to have received a purchase or redemption order when an authorized Intermediary or, if applicable, an Intermediary's authorized designee, receives the order. An order will be priced at the applicable Fund's net asset value next computed after the order is received by an authorized Intermediary or the Intermediary's authorized designee and accepted by the Fund.
ADDITIONAL INFORMATION ABOUT REDEEMING SHARES
BY TELEPHONE
A shareholder may redeem shares of a Fund, if he or she elects the privilege on the initial shareholder application, by calling his or her financial intermediary to request the redemption. Shares will be redeemed at the net asset value next determined after the Fund receives the redemption request from the financial intermediary (less the amount of any applicable contingent deferred sales charge). Redemption requests must be received by the financial intermediary by the time specified by the intermediary in order for shares to be redeemed at that day's net asset value, and redemption requests must be transmitted to and received by the Funds as of the close of regular trading on the New York Stock Exchange (usually by 3:00 p.m. Central time) in order for shares to be redeemed at that day's net asset value unless the financial intermediary has been authorized to accept redemption requests on behalf of the Funds. Pursuant to instructions received from the financial intermediary, redemptions will be made by check or by wire transfer. It is the financial intermediary's responsibility to transmit redemption requests promptly. Certain financial intermediaries are authorized to act as the Funds' agent for the purpose of accepting redemption requests, and the Funds will be deemed to have received a redemption request upon receipt of the request by the financial institution.
Shareholders who did not purchase their shares of a Fund through a financial intermediary may redeem their shares by telephoning Investor Services at 800 677-FUND. At the shareholder's request, redemption proceeds will be paid by check mailed to the shareholder's address of record or wire transferred to the shareholder's account at a domestic commercial bank that is a member of the Federal Reserve System, normally within one business day, but in no event more than seven days after the request. Wire instructions must be previously established on the account or provided in writing. The minimum amount for a wire transfer is $1,000. If at any time the Funds determine it necessary to terminate or modify this method of redemption, shareholders will be promptly notified. The Funds may limit telephone redemption requests to an aggregate of $50,000 per day across the First American Fund family.
In the event of drastic economic or market changes, a shareholder may experience difficulty in redeeming shares by telephone. If this should occur, another method of redemption should be considered. Neither the Administrator nor the Funds will be responsible for any loss, liability, cost or expense for acting upon wire transfer instructions or telephone instructions that they reasonably believe to be genuine. The Administrator and the Funds will each employ reasonable procedures to confirm that instructions communicated are genuine. These procedures may
include taping of telephone conversations. To ensure authenticity of redemption or exchange instructions received by telephone, the Administrator examines each shareholder request by verifying the account number and/or tax identification number at the time such request is made. The Administrator subsequently sends confirmation of both exchange sales and exchange purchases to the shareholder for verification. If reasonable procedures are not employed, the Administrator and the Funds may be liable for any losses due to unauthorized or fraudulent telephone transactions.
BY MAIL
Any shareholder may redeem Fund shares by sending a written request to the Administrator, shareholder servicing agent, financial intermediary or USBFS. The written request should include the shareholder's name, the Fund name, the account number, and the share or dollar amount requested to be redeemed, and should be signed exactly as the shares are registered. Shareholders should call the Fund, shareholder servicing agent or financial institution for assistance in redeeming by mail. Unless another form of payment is requested, a check for redemption proceeds normally is mailed within three days, but in no event more than seven days, after receipt of a proper written redemption request.
Shareholders requesting a redemption of $50,000 or more, a redemption of any amount to be sent to an address other than that on record with the Fund, or a redemption payable other than to the shareholder of record, must have signatures on written redemption requests guaranteed by:
- a trust company or commercial bank the deposits of which are insured by the Bank Insurance Fund, which is administered by the Federal Deposit Insurance Corporation ("FDIC");
- a member firm of the New York, American, Boston, Midwest, or Pacific Stock Exchanges or of the National Association of Securities Dealers;
- a savings bank or savings and loan association the deposits of which are insured by the Savings Association;
- any other "eligible guarantor institution," as defined in the Securities Exchange Act of 1934.
The Funds do not accept signatures guaranteed by a notary public.
The Funds, the Administrator and USBFS have adopted standards for accepting signature from the above institutions. The Funds may elect in the future to limit eligible signature guarantees to institutions that are members of a signature guarantee program. The Funds, the Administrator and USBFS reserve the right to amend these standards at any time without notice.
REDEMPTIONS BEFORE PURCHASE INSTRUMENTS CLEAR
When shares are purchased by check or with funds transmitted through the Automated Clearing House, the proceeds of redemptions of those shares are not available until the Administrator or USBFS is reasonably certain that the purchase payment has cleared, which could take up to fifteen calendar days from the purchase date.
APPENDIX A
RATINGS
A rating of a rating service represents that service's opinion as to the credit quality of the rated security. However, such ratings are general and cannot be considered absolute standards of quality or guarantees as to the creditworthiness of an issuer. A rating is not a recommendation to purchase, sell or hold a security, because it does not take into account market value or suitability for a particular investor. Market values of debt securities may change as a result of a variety of factors unrelated to credit quality, including changes in market interest rates.
When a security has been rated by more than one service, the ratings may not coincide, and each rating should be evaluated independently. Ratings are based on current information furnished by the issuer or obtained by the rating services from other sources which they consider reliable. Ratings may be changed, suspended or withdrawn as a result of changes in or unavailability of such information, or for other reasons. In general, the Funds are not required to dispose of a security if its rating declines after it is purchased, although they may consider doing so.
RATINGS OF LONG-TERM CORPORATE DEBT OBLIGATIONS
STANDARD & POOR'S
AAA: An obligation rated AAA has the highest rating assigned by Standard & Poor's. The obligor's capacity to meet its financial commitment on the obligation is extremely strong.
AA: An obligation rated AA differs from the highest rated obligations only in small degree. The obligor's capacity to meet its financial commitment on the obligation is very strong.
A: An obligation rated A is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than bonds in higher rated categories. However, the obligor's capacity to meet its financial commitment on the obligation is still strong.
BBB: An obligation rated BBB exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.
Obligations rated BB, B, CCC, CC, and C are regarded as having significant speculative characteristics. BB indicates the least degree of speculation and C the highest. While such obligations will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse conditions.
BB: An obligation rated BB is less vulnerable to nonpayment than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial or economic conditions which could lead to the obligor's inadequate capacity to meet its financial commitment on the obligation.
B: An obligation rated B is more vulnerable to nonpayment than obligations rated BB, but the obligor currently has the capacity to meet its financial commitment on the obligation. Adverse business, financial, or economic conditions will likely impair the obligor's capacity or willingness to meet its financial commitment on the obligation.
CCC: An obligation rated CCC is currently vulnerable to nonpayment, and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation. In the event of adverse business, financial, or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation.
CC: An obligation rated CC is currently highly vulnerable to nonpayment.
C: A subordinated debt or preferred stock obligation rated C is currently highly vulnerable to nonpayment. The C rating may be used to cover a situation where a bankruptcy petition has been filed or similar action taken, but
payments on this obligation are being continued. A C also will be assigned to a preferred stock issue in arrears on dividends or sinking fund payments, but that is currently paying.
D: An obligation rated D is in payment default. The D rating category is used when payments on an obligation are not made on the date due even if the applicable grace period has not expired, unless Standard & Poor's believes that such payments will be made during such grace period. The D rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action if payments on an obligation are jeopardized.
The ratings from AA to CCC may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories.
MOODY'S
AAA: Bonds and preferred stock that are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt edge." Interest payments are protected by a large or exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues.
AA: Bonds and preferred stock that are rated Aa are judged to be of high quality by all standards. Together with the Aaa group, they comprise what are generally known as high-grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities, or fluctuation of protective elements may be of greater amplitude, or there may be other elements present which make the long-term risks appear somewhat greater than in Aaa securities.
A: Bonds and preferred stock that are rated A possess many favorable investment attributes and are to be considered as upper-medium-grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment some time in the future.
BAA: Bonds and preferred stock that are rated Baa are considered as medium-grade obligations (i.e., they are neither highly protected nor poorly secured). Interest payments and principal security appear adequate for the present, but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such securities lack outstanding investment characteristics, and in fact have speculative characteristics as well.
BA: Bonds and preferred stock that are rated Ba are judged to have speculative elements; their future cannot be considered as well assured. Often the protection of interest and principal payments may be very moderate, and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes issues in this class.
B: Bonds and preferred stock that are rated B generally lack characteristics of the desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small.
CAA: Bonds and preferred stock that are rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest.
CA: Bonds and preferred stock that are rated Ca represent obligations that are speculative in a high degree. Such issues are often in default or have other marked shortcomings.
C: Bonds and preferred stock that are rated C are the lowest rated class of bonds, and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing.
Moody's applies numerical modifiers 1, 2, and 3 in each generic rating classification from Aa through Caa. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating category.
FITCH
AAA: Securities considered to be investment grade and of the highest credit quality. These ratings denote the lowest expectation of credit risk and are assigned only in case of exceptionally strong capacity for timely payment of financial commitments. This capacity is highly unlikely to be adversely affected by foreseeable events.
AA: Securities considered to be investment grade and of very high credit quality. These ratings denote a very low expectation of credit risk and indicate very strong capacity for timely payment of financial commitments. This capacity is not significantly vulnerable to foreseeable events.
A: Securities considered to be investment grade and of high credit quality. These ratings denote a low expectation of credit risk and indicate strong capacity for timely payment of financial commitments. This capacity may, nevertheless, be more vulnerable to changes in circumstances or in economic conditions than is the case for higher ratings.
BBB: Securities considered to be investment grade and of good credit quality. These ratings denote that there is currently a low expectation of credit risk. The capacity for timely payment of financial commitments is considered adequate, but adverse changes in circumstances and in economic conditions are more likely to impair this capacity. This is the lowest investments grade category.
BB: Securities considered to be speculative. These ratings indicate that there is a possibility of credit risk developing, particularly as the result of adverse economic change over time; however, business or financial alternatives may be available to allow financial commitments to be met. Securities rated in this category are not investment grade.
B: Securities are considered highly speculative. These ratings indicate that significant credit risk is present, but a limited margin of safety remains. Financial commitments are currently being met; however, capacity for continued payment is contingent upon a sustained, favorable business and economic environment.
CCC, CC AND C: Securities have high default risk. Default is a real possibility, and capacity for meeting financial commitments is solely reliant upon sustained, favorable business or economic developments. CC ratings indicate that default of some kind appears probable, and C ratings signal imminent default.
DDD, DD AND D: Securities are in default. The ratings of obligations in this category are based on their prospects for achieving partial or full recovery in a reorganization or liquidation of the obligor. While expected recovery values are highly speculative and cannot be estimated with any precision, the following serve as general guidelines. DDD obligations have the highest potential for recovery, around 90%-100% of outstanding amounts and accrued interest. DD indicates potential recoveries in the range of 50%-90%, and D the lowest recovery potential, i.e., below 50%.
Entities rated in this category have defaulted on some or all of their obligations. Entities rated DDD have the highest prospect for resumption of performance or continued operation with or without a formal reorganization process. Entities rated DD and D are generally undergoing a formal reorganization or liquidation process; those rated DD are likely to satisfy a higher portion of their outstanding obligations, while entities rated D have a poor prospect for repaying all obligations.
The ratings from AA to CCC may be modified by the addition of a plus (+) or minus (-) sign to show the relative standing within the major rating categories.
RATINGS OF COMMERCIAL PAPER
STANDARD & POOR'S
Commercial paper ratings are graded into four categories, ranging from A for the highest quality obligations to D for the lowest. None of the Funds will purchase commercial paper rated A-3 or lower.
A-1: A short-term obligation rated A-1 is rated in the highest category by Standard & Poor's. The obligor's capacity to meet its financial commitment on the obligation is strong. Within this category, certain obligations are designated with a plus sign (+). This indicates that the obligor's capacity to meet its financial commitment on these obligations is extremely strong.
A-2: A short-term obligation rated A-2 is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher rating categories. However, the obligor's capacity to meet its financial commitment on the obligation is satisfactory.
A-3: A short-term obligation rated A-3 exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.
MOODY'S
Moody's employs the following three designations, all judged to be investment grade, to indicate the relative repayment capacity of rated issuers. None of the Funds will purchase Prime-3 commercial paper.
PRIME-1: Issuers rated Prime-1 (or supporting institutions) have a superior ability for repayment of senior short-term debt obligations. Prime-1 repayment ability will often be evidenced by many of the following characteristics:
- Leading market positions in well-established industries.
- High rates of return on funds employed.
- Conservative capitalization structure with moderate reliance on debt and ample asset protection.
- Broad margins in earnings coverage of fixed financial charges and high internal cash generation.
- Well-established access to a range of financial markets and assured sources of alternate liquidity.
PRIME-2: Issuers rated Prime-2 (or supporting institutions) have a strong ability for repayment of senior short-term debt obligations. This will normally be evidenced by many of the characteristics cited above but to a lesser degree. Earnings trends and coverage ratios, while sound, may be more subject to variation. Capitalization characteristics, while still appropriate, may be more affected by external conditions. Ample alternate liquidity is maintained.
PRIME-3: Issuers (or supporting institutions) rated Prime-3 have an acceptable ability for repayment of senior short-term obligations. The effect of industry characteristics and market compositions may be more pronounced. Variability in earnings and profitability may result in changes in the level of debt-protection measurements and may require relatively high financial leverage. Adequate alternate liquidity is maintained.
FITCH
Fitch employs the following three designations, all judged to be investment grade, to indicate the relative repayment capacity of rated issuers. None of the Funds will purchase F3 commercial paper.
F1: Securities possess the highest credit quality. This designation indicates the strongest capacity for timely payment of financial commitments and may have an added "+" to denote any exceptionally strong credit feature.
F2: Securities possess good credit quality. This designation indicates a satisfactory capacity for timely payment of financial commitments, but the margin of safety is not as great as in the case of the higher ratings.
F3: Securities possess fair credit quality. This designation indicates that the capacity for timely payments of financial commitments is adequate; however, near-term adverse changes could result in a reduction to non-investment grade.
APPENDIX B
FAF ADVISORS, INC.
PROXY VOTING POLICIES AND PROCEDURES
GENERAL PRINCIPLES
FAF Advisors, Inc. ("FAF Advisors") is the investment adviser for the First American family of mutual funds (the "Funds") and for institutional and other separately managed accounts (collectively, with the Funds, "Client Accounts"). As such, Client Accounts may confer upon FAF Advisors complete discretion to vote proxies. It is FAF Advisors' duty to vote proxies in the best interests of its clients. In voting proxies, FAF Advisors also seeks to maximize total investment return for its clients.
In the event that FAF Advisors contracts with another investment adviser to act as a sub-adviser for a Client Account, FAF Advisors may delegate proxy voting responsibility to the sub-adviser. Where FAF has delegated proxy voting responsibility, the sub-adviser will be responsible for developing and adhering to its own proxy voting policies. FAF Advisors will approve a sub-adviser's proxy voting policies, and will review these policies at least annually.
FAF Advisors' Investment Policy Committee ("IPC"), comprised of the firm's most senior investment professionals, is charged with oversight of the proxy voting policies and procedures. The IPC is responsible for (1) approving the proxy voting policies and procedures, and (2) oversight of the activities of FAF Advisors' Proxy Voting Administration Committee ("PVAC"). The PVAC is responsible for providing an administrative framework to facilitate and monitor FAF Advisors' exercise of its fiduciary duty to vote client proxies and fulfill the obligations of reporting and recordkeeping under the federal securities laws.
POLICIES
The IPC, after reviewing and concluding that such policies are reasonably designed to vote proxies in the best interests of clients, has approved and adopted the proxy voting policies of Institutional Shareholder Services, Inc. ("ISS"), a leading national provider of proxy voting administrative and research services. As a result, such policies set forth FAF Advisors' positions on recurring proxy issues and criteria for addressing non-recurring issues. These policies are reviewed periodically by ISS, and therefore are subject to change. Even though it has adopted ISS' policies, FAF Advisors maintains the fiduciary responsibility for all proxy voting decisions.
PROCEDURES
A. Supervision of Proxy Voting Service
The PVAC shall supervise the relationship with FAF Advisors' proxy voting service, ISS. ISS apprises FAF Advisors of shareholder meeting dates, provides research on proxy proposals and voting recommendations, and casts the actual proxy votes. ISS also serves as FAF Advisors' proxy voting record keeper and generates reports on how proxies were voted.
B. Conflicts of Interest
As an affiliate of U.S. Bancorp, a large multi-service financial institution, FAF Advisors recognizes that there are circumstances wherein it may have a perceived or real conflict of interest in voting the proxies of issuers or proxy proponents (e.g., a special interest group) who are clients or potential clients of some part of the U.S. Bancorp enterprise. Directors and officers of such companies may have personal or familial
relationships with the U.S. Bancorp enterprise and/or its employees that could give rise to potential conflicts of interest.
FAF Advisors will vote proxies in the best interest of its clients regardless of such real or perceived conflicts of interest. By adopting ISS' policies, FAF Advisors believes the risk related to conflicts will be minimized.
To further minimize this risk, the IPC will review ISS' conflict avoidance policy at least annually to ensure that it adequately addresses both the actual and perceived conflicts of interest the proxy voting service may face.
In the event that ISS faces a material conflict of interest with respect to a specific vote, the PVAC shall direct ISS how to vote. The PVAC shall receive voting direction from the Head of Equity Research, who will seek voting direction from appropriate investment personnel. Before doing so, however, the PVAC will confirm that FAF Advisors faces no material conflicts of its own with respect to the specific proxy vote.
If the PVAC concludes that a material conflict does exist, it will recommend to the IPC a course of action designed to address the conflict. Such actions could include, but are not limited to:
1. Obtaining instructions from the affected client(s) on how to vote the proxy;
2. Disclosing the conflict to the affected client(s) and seeking their consent to permit FAF Advisors to vote the proxy;
3. Voting in proportion to the other shareholders;
4. Recusing an IPC member from all discussion or consideration of the matter, if the material conflict is due to such person's actual or potential conflict of interest; or
5. Following the recommendation of a different independent third party.
In addition to all of the above, members of the IPC and the PVAC must notify FAF Advisors' Chief Compliance Officer of any direct, indirect or perceived improper influence exerted by any employee, officer or director within the U.S. Bancorp enterprise or First American Fund complex with regard to how FAF Advisors should vote proxies. The Chief Compliance Officer will investigate the allegations and will report the findings to FAF Advisors' Chief Executive Officer and the General Counsel. If it is determined that improper influence was attempted, appropriate action shall be taken. Such appropriate action may include disciplinary action, notification of the appropriate senior managers within the U.S. Bancorp enterprise, or notification of the appropriate regulatory authorities. In all cases, the IPC shall not consider any improper influence in determining how to vote proxies, and will vote in the best interests of clients.
C. Proxy Vote Override
From time to time, a Portfolio Manager may initiate action to override the ISS recommendation for a particular vote. Any such override shall be reviewed by FAF Advisors' Legal Department for material conflicts. If the Legal Department determines that no material conflicts exist, the approval of one investment professional on the IPC or the Head of Equity Research shall authorize the override. If a material conflict exists then the override will not be effectuated.
D. Securities Lending
In order to generate incremental revenue, some clients may participate in U.S. Bank's securities lending program. If a client has elected to participate in the lending program then it will not have the right to vote the proxies of any securities that are on loan as of the shareholder meeting record date. A client, or a Portfolio Manager, may place restrictions on loaning securities and/or recall a security on loan at any time. Such actions must be affected prior to the record date for a meeting if the purpose for the restriction or recall is to secure the vote.
Portfolio Managers and/or Analysts who become aware of upcoming proxy issues relating to any securities in portfolios they manage, or issuers they follow, will consider the desirability of recalling the affected securities that are on loan or restricting the affected securities prior to the record date for the matter. If the proxy issue is determined to be material, and the determination is made prior to the shareholder meeting record date the Portfolio Manager(s) will contact the Securities Lending Department to recall securities on loan or restrict the loaning of any security held in any portfolio they manage, if they determine that it is in the best interest of shareholders to do so. Training regarding the process to recall securities on loan or restrict the loaning of securities is given to all Portfolio Managers and Analysts.
E. Proxy Voting for ERISA Clients
In the event that a proxy voting issue arises for an ERISA client, FAF Advisors is prohibited from voting shares with respect to any issue advanced by a party in interest, such as U.S. Bancorp or any of the First American Funds.
F. Proxy Voting Records
As required by Rule 204-2 of the Investment Company Act of 1940, FAF Advisors shall make and retain five types of records relating to proxy voting; (1) proxy voting policies and procedures; (2) proxy statements received for client and fund securities; (3) records of votes cast on behalf of clients and funds; (4) records of written requests for proxy voting information and written responses from the advisor to either a written or oral request; and (5) any documents prepared by the advisor that were material to making a proxy voting decision or that memorialized the basis for the decision. FAF Advisors may rely on ISS to make and retain on our behalf records pertaining to the rule.
Each sub-advisor shall be responsible for making and retaining all proxy voting records required by the rule and shall provide them to FAF Advisors upon request.
G. Fund of Funds Provision
In instances where FAF Advisors provides investment advice to a fund of funds that acquires shares of affiliated funds or three percent or more of the outstanding voting securities of an unaffiliated fund, the acquiring fund shall seek instructions from its shareholders as to how to vote shares of those acquired funds, or to vote the shares in the same proportion as the vote of all other shareholders of the acquired fund. If compliance with this policy results in a vote of any shares in a manner different than the ISS recommendation, such vote will not require compliance with the Proxy Vote Override procedures set forth above.
H. Review and Reports
The PVAC shall maintain a review schedule. The schedule shall include reviews for the proxy voting policy, the proxy voting record, account maintenance, and other reviews as deemed appropriate by the PVAC. The PVAC shall review the schedule at least annually.
The PVAC will report to the IPC with respect to all identified conflicts and how they were addressed. These reports will include all Client Accounts, including those that are sub-advised. With respect to the review of votes cast on behalf of investments by the Funds, such review will also be reported to the Board of Directors of the Funds at each of their regularly scheduled meetings.
I. Vote Disclosure to Shareholders
FAF Advisors shall disclose its proxy voting record on the Funds' website at www.firstamericanfunds.com and/or on the SEC's website at www.sec.gov. Additionally, shareholders can receive, on request, the voting records for the Funds by calling a toll free number (1-800-677-3863).
FAF Advisors' institutional and separately managed account clients can contact their relationship manager for more information on FAF Advisors' policies and the proxy voting record for their account. The information available includes name of issuer, ticker/CUSIP, shareholder meeting date, description of item and FAF Advisors' vote.
J. Form N-PX
FAF Advisors will cause Form N-PX to be filed with the Securities and Exchange Commission, and ensure that any other proxy vote related filings as required by regulation or contract are timely made.
ISS PROXY VOTING GUIDELINES SUMMARY
The following is a concise summary of ISS's proxy voting policy guidelines.
1. AUDITORS
AUDITOR RATIFICATION
Vote FOR proposals to ratify auditors, unless any of the following apply:
- An auditor has a financial interest in or association with the company, and is therefore not independent,
- There is reason to believe that the independent auditor has rendered an opinion which is neither accurate nor indicative of the company's financial position; or
- Fees for non-audit services ("Other" fees) are excessive.
2. BOARD OF DIRECTORS
VOTING ON DIRECTOR NOMINEES IN UNCONTESTED ELECTIONS
Vote CASE-BY-CASE on director nominees, examining, but not limited to, the following factors:
- Composition of the board and key board committees;
- Attendance at board and committee meetings;
- Corporate governance provisions and takeover activity;
- Disclosures under Section 404 of Sarbanes-Oxley Act;
- Long-term company performance relative to a market and peer index;
- Extent of the director's investment in the company;
- Existence of related party transactions;
- Whether the chairman is also serving as CEO;
- Whether a retired CEO sits on the board;
- Number of outside boards at which a director serves;
- Majority vote standard for director elections without a provision to allow for plurality voting when there are more nominees than seats.
WITHHOLD from individual directors who:
- Attend less than 75 percent of the board and committee meetings without a valid excuse (such as illness, service to the nation, work on behalf of the company);
- Sit on more than six public company boards;
- Are CEOs of public companies who sit on the boards of more than two public companies besides their own-- withhold only at their outside boards.
WITHHOLD from the entire board of directors, (except from new nominees, who should be considered on a CASE-BY-CASE basis) if:
- The company's proxy indicates that not all directors attended 75% of the aggregate of their board and committee meetings, but fails to provide the required disclosure of the names of the directors involved. If this information cannot be obtained, withhold from all incumbent directors;
- The company's poison pill has a dead-hand or modified dead-hand feature. Withhold every year until this feature is removed;
- The board adopts or renews a poison pill without shareholder approval since the beginning of 2005, does not commit to putting it to shareholder vote within 12 months of adoption, or reneges on a commitment to put the pill to a vote, and has not yet received a withhold recommendation for this issue;
- The board failed to act on a shareholder proposal that received approval by a majority of the shares outstanding the previous year;
- The board failed to act on a shareholder proposal that received approval of the majority of shares cast for the previous two consecutive years;
- The board failed to act on takeover offers where the majority of the shareholders tendered their shares;
- At the previous board election, any director received more than 50 percent withhold votes of the shares cast and the company has failed to address the issue(s) that caused the high withhold rate;
- The company is a Russell 3000 company that underperformed its industry group (GICS group) under the criteria discussed in the section "Performance Test for Directors".
WITHHOLD from Inside Directors and Affiliated Outside Directors (per the Classification of Directors below) when:
- The inside or affiliated outside director serves on any of the three key committees: audit, compensation, or nominating;
- The company lacks an audit, compensation, or nominating committee so that the full board functions as that committee;
- The company lacks a formal nominating committee, even if board attests that the independent directors fulfill the functions of such a committee;
- The full board is less than majority independent.
WITHHOLD from the members of the Audit Committee if:
- The non - audit fees paid to the auditor are excessive (see discussion under Auditor Ratification);
- A material weakness identified in the Section 404 Sarbanes-Oxley Act disclosures rises to a level of serious concern; there are chronic internal control issues and an absence of established effective control mechanisms;
- There is persuasive evidence that the audit committee entered into an inappropriate indemnification agreement with its auditor that limits the ability of the company, or its shareholders, to pursue legitimate legal recourse against the audit firm.
WITHHOLD from the members of the Compensation Committee if:
- There is a negative correlation between the chief executive's pay and company performance (see discussion under Equity Compensation Plans);
- The company reprices underwater options for stock, cash or other consideration without prior shareholder approval, even if allowed in their equity plan;
- The company fails to submit one-time transfers of stock options to a shareholder vote;
- The company fails to fulfill the terms of a burn rate commitment they made to shareholders;
- The company has backdated options (see "Options Backdating" policy);
- The company has poor compensation practices (see "Poor Pay Practices" policy). Poor pay practices may warrant withholding votes from the CEO and potentially the entire board as well.
WITHHOLD from directors, individually or the entire board, for egregious actions or failure to replace management as appropriate.
CLASSIFICATION/DECLASSIFICATION OF THE BOARD
Vote AGAINST proposals to classify the board. Vote FOR proposals to repeal classified boards, and to elect all directors annually.
INDEPENDENT CHAIR (SEPARATE CHAIR/CEO)
Generally vote FOR shareholder proposals requiring an independent director fill the position of chair, unless there are compelling reasons to recommend against the proposal, such as a counterbalancing governance structure. This should include all of the following:
- Has a designated lead director, elected by and from the independent board members with clearly delineated and comprehensive duties. (The role may alternatively reside with a presiding director, vice chairman, or rotating lead director; however the director must serve a minimum of one year in order to qualify as a lead director.) At a minimum these should include:
- Presiding at all meetings of the board at which the chairman is not present, including executive sessions of the independent directors,
- Serving as liaison between the chairman and the independent directors,
- Approving information sent to the board,
- Approving meeting agendas for the board,
- Approves meetings schedules to assure that there is sufficient time for discussion of all agenda items,
- Having the authority to call meetings of the independent directors,
- If requested by major shareholders, ensuring that he is available for consultation and direct communication;
- Two-thirds independent board;
- All-independent key committees;
- Established governance guidelines;
- The company does not under-perform its peers*.
*Starting in 2007, the industry peer group used for this evaluation will change from the 4-digit GICS group to the average of the 12 companies in the same 6-digit GICS group that are closest in revenue to the company, and identified on the executive compensation page of proxy analyses. To fail, the company must under-perform its index and industry group on all 4 measures (1 and 3 year performance, industry peers, and index).
MAJORITY VOTE SHAREHOLDER PROPOSALS
Generally vote FOR precatory and binding resolutions requesting that the board change the company's bylaws to stipulate that directors need to be elected with an affirmative majority of votes cast, provided it does not conflict with the state law where the company is incorporated. Binding resolutions need to allow for a carve-out for a plurality vote standard when there are more nominees than board seats. Companies are strongly encouraged to also adopt a post-election policy (also know as a director resignation policy) that will provide guidelines so that the company will promptly address the situation of a holdover director.
3. PROXY CONTESTS
VOTING FOR DIRECTOR NOMINEES IN CONTESTED ELECTIONS
Vote CASE-BY-CASE on the election of directors in contested elections, considering the following factors:
- Long-term financial performance of the target company relative to its industry;
- Management's track record;
- Background to the proxy contest;
- Qualifications of director nominees (both slates);
- Strategic plan of dissident slate and quality of critique against management;
- Likelihood that the proposed goals and objectives can be achieved (both slates);
- Stock ownership positions.
REIMBURSING PROXY SOLICITATION EXPENSES
Vote CASE-BY-CASE on proposals to reimburse proxy solicitation expenses. When voting in conjunction with support of a dissident slate, vote FOR the reimbursement of all appropriate proxy solicitation expenses associated with the election.
4. TAKEOVER DEFENSES
POISON PILLS
Vote FOR shareholder proposals requesting that the company submit its poison pill to a shareholder vote or redeem it UNLESS the company has: (1) A shareholder approved poison pill in place; or (2) The company has adopted a policy concerning the adoption of a pill in the future specifying that the board will only adopt a shareholder rights plan if either:
- Shareholders have approved the adoption of the plan; or
- The board, in its exercise of its fiduciary responsibilities, determines that it is in the best interest of shareholders under the circumstances to adopt a pill without the delay in adoption that would result from seeking stockholder approval (i.e. the "fiduciary out" provision). A poison pill adopted under this fiduciary out will be put to a shareholder ratification vote within twelve months of adoption or expire. If the pill is not approved by a majority of the votes cast on this issue, the plan will immediately terminate.
Vote FOR shareholder proposals calling for poison pills to be put to a vote within a time period of less than one year after adoption. If the company has no non-shareholder approved poison pill in place and has adopted a policy with the provisions outlined above, vote AGAINST the proposal. If these conditions are not met, vote FOR the proposal, but with the caveat that a vote within twelve months would be considered sufficient.
Vote CASE-by-CASE on management proposals on poison pill ratification, focusing on the features of the shareholder rights plan. Rights plans should contain the following attributes:
- No lower than a 20% trigger, flip-in or flip-over;
- A term of no more than three years;
- No dead-hand, slow-hand, no-hand or similar feature that limits the ability of a future board to redeem the pill;
- Shareholder redemption feature (qualifying offer clause); if the board refuses to redeem the pill 90 days after a qualifying offer is announced, ten percent of the shares may call a special meeting or seek a written consent to vote on rescinding the pill.
SUPERMAJORITY VOTE REQUIREMENTS
Vote AGAINST proposals to require a supermajority shareholder vote. Vote FOR proposals to lower supermajority vote requirements.
5. MERGERS AND CORPORATE RESTRUCTURINGS
For mergers and acquisitions, review and evaluate the merits and drawbacks of the proposed transaction, balancing various and sometimes countervailing factors including:
- Valuation - Is the value to be received by the target shareholders (or paid by the acquirer) reasonable? While the fairness opinion may provide an initial starting point for assessing valuation reasonableness, emphasis is placed on the offer premium, market reaction and strategic rationale.
- Market reaction - How has the market responded to the proposed deal? A negative market reaction should cause closer scrutiny of a deal.
- Strategic rationale - Does the deal make sense strategically? From where is the value derived? Cost and revenue synergies should not be overly aggressive or optimistic, but reasonably achievable. Management should also have a favorable track record of successful integration of historical acquisitions.
- Negotiations and process - Were the terms of the transaction negotiated at arm's-length? Was the process fair and equitable? A fair process helps to ensure the best price for shareholders. Significant negotiation "wins" can also signify the deal makers' competency. The comprehensiveness of the sales process (e.g., full auction, partial auction, no auction) can also affect shareholder value.
- Conflicts of interest - Are insiders benefiting from the transaction disproportionately and inappropriately as compared to non-insider shareholders? As the result of potential conflicts, the directors and officers of the company may be more likely to vote to approve a merger than if they did not hold these interests. Consider whether these interests may have influenced these directors and officers to support or recommend the merger. The CIC figure presented in the "ISS Transaction Summary" section of this report is an aggregate figure that can in certain cases be a misleading indicator of the true value transfer from shareholders to insiders. Where such figure appears to be excessive, analyze the underlying assumptions to determine whether a potential conflict exists.
- Governance - Will the combined company have a better or worse governance profile than the current governance profiles of the respective parties to the transaction? If the governance profile is to change for the worse, the burden is on the company to prove that other issues (such as valuation) outweigh any deterioration in governance.
6. STATE OF INCORPORATION
REINCORPORATION PROPOSALS
Vote CASE-BY-CASE on proposals to change a company's state of incorporation, taking into consideration both financial and corporate governance concerns, including the reasons for reincorporating, a comparison of the governance provisions, comparative economic benefits, and a comparison of the jurisdictional laws. Vote FOR re-incorporation when the economic factors outweigh any neutral or negative governance changes.
7. CAPITAL STRUCTURE
COMMON STOCK AUTHORIZATION
Vote CASE-BY-CASE on proposals to increase the number of shares of common stock authorized for issuance using a model developed by ISS. Vote FOR proposals to approve increases beyond the allowable increase when a company's shares are in danger of being de-listed or if a company's ability to continue to operate as a going concern is uncertain.
In addition, for capital requests that are less than or equal to 300 percent of the current authorized shares and marginally fail the calculated allowable cap (i.e., exceed the allowable cap by no more than 5 percent) vote on a CASE-BY-CASE basis, In this situation, vote FOR the increase based on the company's performance, and whether the company's ongoing use of shares has shown prudence.
ISSUE STOCK FOR USE WITH RIGHTS PLAN
Vote AGAINST proposals that increase authorized common stock for the explicit purpose of implementing a non-shareholder approved shareholder rights plan (poison pill).
PREFERRED STOCK
Vote AGAINST proposals authorizing the creation of new classes of preferred stock with unspecified voting, conversion, dividend distribution, and other rights ("blank check" preferred stock). Vote FOR
proposals to create "de-clawed" blank check preferred stock (stock that cannot be used as a takeover defense). Vote FOR proposals to authorize preferred stock in cases where the company specifies the voting, dividend, conversion, and other rights of such stock and the terms of the preferred stock appear reasonable. Vote AGAINST proposals to increase the number of blank check preferred stock authorized for issuance when no shares have been issued or reserved for a specific purpose. Vote CASE-BY-CASE on proposals to increase the number of blank check preferred shares after analyzing the number of preferred shares available for issue given a company's industry and performance in terms of shareholder returns.
8. EXECUTIVE AND DIRECTOR COMPENSATION
POOR PAY PRACTICES
WITHHOLD from compensation committee members, CEO, and potentially the entire board, if the company has poor compensation practices, such as:
- Egregious employment contracts (e.g., those containing multi-year guarantees for bonuses and grants);
- Excessive perks that dominate compensation (e.g., tax gross-ups for personal use of corporate aircraft);
- Huge bonus payouts without justifiable performance linkage or proper disclosure;
- Performance metrics that are changed (e.g., canceled or replaced during the performance period without adequate explanation of the action and the link to performance);
- Egregious pension/SERP (supplemental executive retirement plan) payouts (e.g., the inclusion of additional years of service not worked or inclusion of performance-based equity awards in the pension calculation);
- New CEO awarded an overly generous new hire package (e.g., including excessive "make whole" provisions or any of the poor pay practices listed in this policy);
- Excessive severance provisions (e.g., including excessive change in control payments);
- Change in control payouts without loss of job or substantial diminution of job duties;
- Internal pay disparity;
- Options backdating (covered in a separate policy); and
EQUITY COMPENSATION PLANS
Vote CASE-BY-CASE on equity-based compensation plans. Vote AGAINST the equity plan if any of the following factors apply:
- The total cost of the company's equity plans is unreasonable;
- The plan expressly permits the repricing of stock options without prior shareholder approval;
- There is a disconnect between CEO pay and the company's performance;
- The company's three year burn rate exceeds the greater of 2% and the mean plus 1 standard deviation of its industry group; or
- The plan is a vehicle for poor pay practices.
DIRECTOR COMPENSATION
Vote CASE-BY-CASE on compensation plans for non-employee directors, based on the cost of the plans against the company's allowable cap.
On occasion, director stock plans that set aside a relatively small number of shares when combined with employee or executive stock compensation plans exceed the allowable cap. Vote for the plan if ALL of the following qualitative factors in the board's compensation are met and disclosed in the proxy statement:
- Director stock ownership guidelines with a minimum of three times the annual cash retainer.
- Vesting schedule or mandatory holding/deferral period:
- A minimum vesting of three years for stock options or restricted stock; or
- Deferred stock payable at the end of a three-year deferral period.
- Mix between cash and equity:
- A balanced mix of cash and equity, for example 40% cash/60% equity or 50% cash/50% equity; or
- If the mix is heavier on the equity component, the vesting schedule or deferral period should be more stringent, with the lesser of five years or the term of directorship.
- No retirement/benefits and perquisites provided to non-employee directors; and
- Detailed disclosure provided on cash and equity compensation delivered
to each non-employee director for the most recent fiscal year in a
table. The column headers for the table may include the following:
name of each non-employee director, annual retainer, board meeting
fees, committee retainer, committee-meeting fees, and equity grants.
EMPLOYEE STOCK PURCHASE PLANS--QUALIFIED PLANS
Vote CASE-BY-CASE on qualified employee stock purchase plans. Vote FOR employee stock purchase plans where all of the following apply:
- Purchase price is at least 85% of fair market value;
- Offering period is 27 months or less; and
- The number of shares allocated to the plan is ten percent or less of the outstanding shares.
EMPLOYEE STOCK PURCHASE PLANS--NON-QUALIFIED PLANS
Vote CASE-by-CASE on nonqualified employee stock purchase plans. Vote FOR nonqualified employee stock purchase plans with all the following features:
- Broad-based participation (i.e., all employees of the company with the exclusion of individuals with 5% or more of beneficial ownership of the company);
- Limits on employee contribution, which may be a fixed dollar amount or expressed as a percent of base salary;
- Company matching contribution up to 25% of employee's contribution, which is effectively a discount of 20% from market value;
- No discount on the stock price on the date of purchase, since there is a company matching contribution.
OPTIONS BACKDATING
In cases where a company has practiced options backdating, WITHHOLD on a CASE-BY-CASE basis from the members of the compensation committee, depending on the severity of the practices and the subsequent corrective actions on the part of the board. WITHHOLD from the compensation committee members who oversaw the questionable options grant practices or from current compensation committee members who fail to respond to the issue proactively, depending on several factors, including, but not limited to:
- Reason and motive for the options backdating issue, such as inadvertent vs. deliberate grant date changes;
- Length of time of options backdating;
- Size of restatement due to options backdating;
- Corrective actions taken by the board or compensation committee, such as canceling or repricing backdated options, or recouping option gains on backdated grants;
- Adoption of a grant policy that prohibits backdating, and creation of a fixed grant schedule or window period for equity grants going forward.
SEVERANCE AGREEMENTS FOR EXECUTIVES/GOLDEN PARACHUTES
Vote FOR shareholder proposals to require golden parachutes or executive severance agreements to be submitted for shareholder ratification, unless the proposal requires shareholder approval prior to entering into employment contracts. Vote on a CASE-BY-CASE basis on proposals to ratify or cancel golden parachutes. An acceptable parachute should include, but is not limited to, the following:
- The triggering mechanism should be beyond the control of management;
- The amount should not exceed three times base amount (defined as the average annual taxable W-2 compensation) during the five years prior to the year in which the change of control occurs;
- Change-in-control payments should be double-triggered, i.e., (1) after a change in control has taken place, and (2) termination of the executive as a result of the change in control. Change in control is defined as a change in the company ownership structure.
9. CORPORATE RESPONSIBILITY
ANIMAL RIGHTS
Generally vote AGAINST proposals to phase out the use of animals in product testing unless:
- The company is conducting animal testing programs that are unnecessary or not required by regulation;
- The company is conducting animal testing when suitable alternatives are accepted and used at peer firms;
- The company has been the subject of recent, significant controversy related to its testing programs.
DRUG PRICING AND RE-IMPORTATION
Generally vote AGAINST proposals requesting that companies implement specific price restraints on pharmaceutical products, unless the company fails to adhere to legislative guidelines or industry norms in its product pricing. Vote CASE-BY-CASE on proposals requesting that the company evaluate their product pricing considering:
- The existing level of disclosure on pricing policies;
- Deviation from established industry pricing norms;
- The company's existing initiatives to provide its products to needy consumers;
- Whether the proposal focuses on specific products or geographic regions.
Generally vote FOR proposals requesting that companies report on the financial and legal impact of their policies regarding prescription drug re-importation unless such information is already publicly disclosed. Generally vote AGAINST proposals requesting that companies adopt specific policies to encourage or constrain prescription drug re-importation.
GENETICALLY MODIFIED FOODS
Vote AGAINST proposals asking companies to voluntarily label genetically engineered (GE) ingredients in their products, or alternatively to provide interim labeling and eventually eliminate GE ingredients due to the costs and feasibility of labeling and/or phasing out the use of GE ingredients.
TOBACCO
Most tobacco-related proposals (such as on second-hand smoke, advertising to youth, and spin-offs of tobacco-related business) should be evaluated on a CASE-BY-CASE basis.
TOXIC CHEMICALS
Generally vote FOR resolutions requesting that a company discloses its policies related to toxic chemicals. Vote CASE-BY-CASE on resolutions requesting that companies evaluate and disclose the potential financial and legal risks associated with utilizing certain chemicals.
Generally vote AGAINST resolutions requiring that a company reformulate its products within a certain timeframe, unless such actions are required by law in specific markets.
ARCTIC NATIONAL WILDLIFE REFUGE
Generally vote AGAINST request for reports outlining potential environmental damage from drilling in the Arctic National Wildlife Refuge (ANWR) unless:
- New legislation is adopted allowing development and drilling in the ANWR region;
- The company intends to pursue operations in the ANWR; and
- The company has not disclosed an environmental risk report for its ANWR operations.
CONCENTRATED AREA FEEDING OPERATIONS (CAFOS)
Vote FOR resolutions requesting that companies report to shareholders on the risks and liabilities associated with CAFOs, unless:
- The company has publicly disclosed guidelines for its corporate and contract farming operations, including compliance monitoring; or
- The company does not directly source from CAFOs.
GLOBAL WARMING AND KYOTO PROTOCOL COMPLIANCE
Generally vote FOR proposals requesting a report on greenhouse gas emissions from company operations and/or products unless this information is already publicly disclosed or such factors are not integral to the company's line of business. Generally vote AGAINST proposals that call for reduction in greenhouse gas emissions by specified amounts or within a restrictive time frame unless the company lags industry standards and has been the subject of recent, significant fines or litigation resulting from greenhouse gas emissions.
Generally vote FOR resolutions requesting that companies outline their preparations to comply with standards established by Kyoto Protocol signatory markets unless:
- The company does not maintain operations in Kyoto signatory markets;
- The company already evaluates and substantially discloses such information; or,
- Greenhouse gas emissions do not significantly impact the company's core businesses.
POLITICAL CONTRIBUTIONS
Vote CASE-BY-CASE on proposals to improve the disclosure of a company's political contributions considering: recent significant controversy or litigation related to the company's political contributions or governmental affairs; and the public availability of a policy on political contributions. Vote AGAINST proposals barring the company from making political contributions.
LINK EXECUTIVE COMPENSATION TO SOCIAL PERFORMANCE
Vote CASE-BY-CASE on proposals to review ways of linking executive compensation to social factors, such as corporate downsizings, customer or employee satisfaction, community involvement, human rights, environmental performance, predatory lending, and executive/employee pay disparities.
OUTSOURCING/OFF-SHORING
Vote CASE-BY-CASE on proposals calling for companies to report on the risks associated with outsourcing, considering: the risks associated with certain international markets; the utility of such a report to shareholders; the existence of a publicly available code of corporate conduct that applies to international operations.
COUNTRY-SPECIFIC HUMAN RIGHTS REPORTS
Vote CASE-BY-CASE on requests for reports detailing the company's operations in a particular country and on proposals to implement certain human rights standards at company facilities or those of its suppliers and to commit to outside, independent monitoring.
10. MUTUAL FUND PROXIES
ELECTION OF DIRECTORS
Vote CASE-BY-CASE on the election of directors and trustees, following the same guidelines for uncontested directors for public company shareholder meetings. However, mutual fund boards do not usually have compensation committees, so do not withhold for the lack of this committee.
CONVERTING CLOSED-END FUND TO OPEN-END FUND
Vote CASE-BY-CASE on conversion proposals, considering the following factors:
- Past performance as a closed-end fund;
- Market in which the fund invests;
- Measures taken by the board to address the discount; and
- Past shareholder activism, board activity, and votes on related proposals.
ESTABLISH DIRECTOR OWNERSHIP REQUIREMENT
Generally vote AGAINST shareholder proposals that mandate a specific minimum amount of stock that directors must own in order to qualify as a director or to remain on the board.
REIMBURSE SHAREHOLDER FOR EXPENSES INCURRED
Vote CASE-BY-CASE on shareholder proposals to reimburse proxy solicitation expenses. When supporting the dissidents, vote FOR the reimbursement of the proxy solicitation expenses.
FIRST AMERICAN INVESTMENT FUNDS, INC.
PART C - OTHER INFORMATION
ITEM 23. EXHIBITS
(a)(1) Amended and Restated Articles of Incorporation (Incorporated by reference to Exhibit (1) to Post-Effective Amendment No. 21, Filed on May 15, 1995 (File Nos. 033-16905, 811-05309)).
(a)(2) Articles Supplementary, designating new series and new share classes (Incorporated by reference to Exhibit (1) to Post-Effective Amendment No. 36, Filed on April 15, 1998 (File Nos. 033-16905, 811-05309)).
(a)(3) Articles Supplementary, designating new series and new share classes (Incorporated by reference to Exhibit (a)(2) to Post-Effective Amendment No. 54, Filed on June 27, 2001 (File Nos. 033-16905, 811-05309)).
(a)(4) Articles Supplementary, designating new series (Incorporated by reference to Exhibit (a)(3) to Post-Effective Amendment No. 61, Filed on April 30, 2002 (File Nos. 033-16905, 811-05309)).
(a)(5) Articles Supplementary designating new series (Incorporated by reference to Exhibit (a)(4) to Post-Effective Amendment No. 65, Filed on October 24, 2002 (File Nos. 033-16905, 811-05309)).
(a)(6) Articles Supplementary designating new series (Incorporated by reference to Exhibit (a)(5) to Post-Effective Amendment No. 66, Filed on January 28, 2003 (File Nos. 033-16905, 811-05309)).
(a)(7) Articles Supplementary decreasing authorizations of specified classes and series and decreasing total authorized shares (Incorporated by reference to Exhibit (a)(6) to Post-Effective Amendment No. 70, filed on June 30, 2004 (File nos. 033-16905, 811-05309)).
(a)(8) Articles Supplementary designating new series (Incorporated by reference to Exhibit (a)(7) to Post-Effective Amendment No. 72, filed on September 24, 2004 (File Nos. 033-16905, 811-05309)).
(a)(9) Articles Supplementary designating new series (Incorporated by reference to Exhibit (a)(9) to Post-Effective Amendment No. 84, filed on December 20, 2006 (File Nos. 033-16905, 811-05309)).
(a)(10) Articles Supplementary designating new series.*
(b) Bylaws, as amended.*
(c) Not applicable.
(d)(1) Investment Advisory Agreement dated April 2, 1991, between the Registrant and First Bank National Association (Incorporated by reference to Exhibit (d)(1) to Post-Effective Amendment No. 73, Filed on December 2, 2004 (File Nos. 033-16905, 811-05309)).
(d)(2) Assignment and Assumption Agreement dated May 2, 2001, relating to
assignment of Investment Advisory Agreement to U.S. Bancorp Piper
Jaffray Asset Management, Inc. (Incorporated by reference to Exhibit
(d)(3) to Post-Effective Amendment No. 73, Filed on December 2, 2004
(File Nos. 033-16905, 811-05309)).
(d)(3) Amendment to Investment Advisory Agreement dated May 3, 2007 relating to authority to appoint a sub-advisor to any series of the Registrant (Incorporated by reference to Exhibit (d)(3) to Post Effective Amendment No. 86, filed on May 17, 2007 (File Nos. 033-16905, 811-05309)).
(d)(4) Exhibit A to Investment Advisory Agreement, effective June 20, 2007.*
(d)(5) Expense Limitation Agreement between Registrant and FAF Advisors, Inc., dated February 28, 2007, effective through February 29, 2008 (Incorporated by reference to Exhibit (d)(5) to Post-Effective Amendment No. 85, filed on February 28, 2007 (File Nos. 033-16905, 811-05309)).
(d)(6) Expense Limitation Agreement between Registrant and FAF Advisors, Inc., dated July 31, 2007, effective through July 31, 2008, with respect to the Quantitative Funds.*
(d)(7) Sub-Advisory Agreement dated December 9, 2004, by and among Registrant,
FAF Advisors, Inc. and J.P. Morgan Investment Management Inc. with
respect to International Fund (Incorporated by reference to Exhibit
(d)(6) to Post-Effective Amendment No. 74, Filed on January 31, 2005
(File Nos. 033-16905, 811-05309)).
(d)(8) Letter of Agreement dated March 28, 2007, by and between FAF Advisors and J.P. Morgan Investment Management Inc. with respect to International Fund.*
(d)(9) Amendment to Sub-Advisory Agreement dated May 3, 2007, by and among Registrant, FAF Advisors, Inc. and J.P. Morgan Investment Management Inc. with respect to International Fund (Incorporated by reference to Exhibit (d)(11) to Post Effective Amendment No. 86, filed on May 17, 2007 (File Nos. 033-16905, 811-05309)).
(d)(10) Sub-Advisory Agreement dated November 27, 2006, by and between FAF Advisors, Inc. and Altrinsic Global Advisors, LLC with respect to International Select Fund (Incorporated by reference to Exhibit (d)(6) to Post-Effective Amendment No. 84, filed on December 20, 2006 (File Nos. 033-16905, 811-05309)).
(d)(11) Letter of Agreement dated March 28, 2007, by and between FAF Advisors and Altrinsic Global Advisors, LLC with respect to International Select Fund.*
(d)(12) Amendment to Sub-Advisory Agreement dated May 3, 2007, by and between FAF Advisors, Inc. and Altrinsic Global Advisors, LLC with respect to International Select Fund (Incorporated by reference to Exhibit (d)(12) to Post Effective Amendment No. 86, filed on May 17, 2007 (File Nos. 033-16905, 811-05309)).
(d)(13) Sub-Advisory Agreement dated February 22, 2007, by and between FAF Advisors, Inc. and Hansberger Global Investors, Inc. with respect to International Select Fund.*
(d)(14) Letter of Agreement dated March 28, 2007, by and between FAF Advisors and Hansberger Global Investors, Inc. with respect to International Select Fund.*
(d)(15) Amendment to Sub-Advisory Agreement dated May 3, 2007, by and between FAF Advisors, Inc. and Hansberger Global Investors, Inc. with respect to International Select Fund (Incorporated by reference to Exhibit (d)(13) to Post Effective Amendment No. 86, filed on May 17, 2007 (File Nos. 033-16905, 811-05309)).
(d)(16) Sub-Advisory Agreement dated November 27, 2006, by and between FAF Advisors, Inc. and Lazard Asset Management LLC with respect to International Select Fund (Incorporated by reference to Exhibit (d)(8) to Post-Effective Amendment No. 84, filed on December 20, 2006 (File Nos. 033-16905, 811-05309)).
(d)(17) Letter of Agreement dated March 28, 2007, by and between FAF Advisors and Lazard Asset Management LLC with respect to International Select Fund.*
(d)(18) Amendment to Sub-Advisory Agreement dated May 3, 2007, by and between FAF Advisors, Inc. and Lazard Asset Management LLC with respect to International Select Fund (Incorporated by reference to Exhibit (d)(14) to Post Effective Amendment No. 86, filed on May 17, 2007 (File Nos. 033-16905, 811-05309)).
(e)(1) Distribution Agreement between the Registrant and Quasar Distributors, LLC, effective July 1, 2007.*
(e)(2) Form of Dealer Agreement.*
(f)(1) Deferred Compensation Plan for Directors Trust Agreement dated January
1, 2000, as amended February 2005 (Incorporated by reference to Exhibit
(f)(1) to Post-Effective Amendment No. 76, filed May 13, 2005 (File Nos.
033-16905, 811-05309)).
(f)(2) Deferred Compensation Plan for Directors Trust Agreement, Amended Summary of Terms dated February 2005 (Incorporated by reference to Exhibit (f)(2) to Post-Effective Amendment No. 76, filed May 13, 2005 (File Nos. 033-16905, 811-05309)).
(g)(1) Custody Agreement dated July 1, 2006, between the Registrant and U.S. Bank National Association (Incorporated by reference to Exhibit (g)(1) to Post-Effective Amendment No. 80, Filed on August 31, 2006 (File Nos. 033-16905, 811-05309)).
(g)(2) Amendment to Custody Agreement dated July 1, 2007, by and between Registrant and U.S. Bank National Association.*
(g)(3) Exhibit C effective June 20, 2007 to Custody Agreement dated July 1, 2006.*
(g)(4) Exhibit D effective December 5, 2006 to Custody Agreement dated July 1, 2006.*
(g)(5) Custodian Agreement dated July 1, 2005, by and between Registrant and State Street Bank and Trust Company with respect to International Fund (Incorporated by reference to Exhibit (g)(5) to Post-Effective Amendment No. 77, Filed on August 3, 2005 (File Nos. 033-16905, 811-05309)).
(g)(6) Letter Amendment dated November 21, 2006 to the Custodian Agreement dated July 1, 2005 by and between Registrant and State Street Bank and Trust Company with respect to International Select Fund (Incorporated by reference to Exhibit (g)(3) to Post-Effective Amendment No. 84, filed on December 20, 2006 (File Nos. 033-16905, 811-05309)).
(h)(1) Administration Agreement dated July 1, 2006, by and between Registrant and FAF Advisors, Inc. (Incorporated by reference to Exhibit (h)(1) to Post-Effective Amendment No. 80, Filed on August 31, 2006 (File Nos. 033-16905, 811-05309)).
(h)(2) Schedule A to Administration Agreement dated July 1, 2006 between
Registrant and FAF Advisors, Inc. (Incorporated by reference to Exhibit
(h)(2) to Post-Effective Amendment No. 80, Filed on August 31, 2006
(File Nos. 033-16905, 811-05309)).
(h)(3) Sub-Administration Agreement dated July 1, 2005, by and between FAF Advisors, Inc. and U.S. Bancorp Fund Services, LLC (Incorporated by reference to Exhibit (h)(2) to Post-Effective Amendment No. 77, Filed on August 3, 2005 (File Nos. 033-16905, 811-05309)).
(h)(4) Transfer Agent and Shareholder Servicing Agreement dated September 19, 2006, by and among Registrant, U.S. Bancorp Fund Services, LLC, and FAF Advisors, Inc.*
(h)(5) Exhibit A to Transfer Agent and Shareholder Servicing Agreement effective April 1, 2007.*
(h)(6) Securities Lending Agreement dated January 1, 2007, by and between Registrant and U.S. Bank National Association.*
(i) Opinion and Consent of Dorsey & Whitney LLP dated July 31, 2007.*
(j) Not applicable.
(k) Not applicable.
(l) Not applicable.
(m) Amended and Restated Distribution and Service Plan for Class A, B, C, and R shares, effective September 19, 2006.*
(n) Amended and Restated Multiple Class Plan Pursuant to Rule 18f-3, effective June 20, 2007.*
(o) Reserved.
(p)(1) First American Funds Code of Ethics adopted under Rule 17j-1 of the
Investment Company Act of 1940 and Section 406 of the Sarbanes-Oxley
Act, effective April 14, 2005 (Incorporated by reference to Exhibit
(p)(1) to Post-Effective Amendment No. 80, Filed on August 31, 2006
(File Nos. 033-16905, 811-05309)).
(p)(2) FAF Advisors, Inc. Code of Ethics adopted under Rule 17j-1 of the Investment Company Act of 1940.*
(p)(3) J.P. Morgan Investment Management Inc. Code of Ethics adopted under Rule 17j-1 of the Investment Company Act of 1940, effective February 1, 2005, revised September 29, 2005 (Incorporated by reference to Exhibit (p)(3) to Post-Effective Amendment No. 80, Filed on August 31, 2006 (File Nos. 033-16905, 811-05309)).
(p)(4) Altrinsic Global Advisors, LLC Code of Ethics adopted under Rule 17j-1 of the Investment Company Act of 1940, effective November 1, 2004, as amended December 1, 2005, March 1, 2006, May 3, 2006, and January 1, 2007 (Incorporated by reference to Exhibit (p)(4) to Post-Effective Amendment No. 85, filed on February 28, 2007 (File Nos. 033-16905, 811-05309)).
(p)(5) Hansberger Global Investors, Inc. Code of Ethics adopted under Rule 17j-1 of the Investment Company Act of 1940, as amended May 17, 2007.*
(p)(6) Lazard Asset Management LLC Code of Ethics adopted under Rule 17j-1 of the Investment Company Act of 1940, as amended February 2006 (Incorporated by reference to Exhibit (p)(6) to Post-Effective Amendment No. 84, filed on December 20, 2006 (File Nos. 033-16905, 811-05309)).
(p)(7) Quasar Distributors, LLC Code of Ethics adopted under Rule 17j-1 of the Investment Company Act of 1940, effective September 1, 2005 (Incorporated by reference to Exhibit (p)(4) to Post-Effective Amendment No. 79, Filed on December 27, 2005 (File Nos. 033-16905, 811-05309)).
(q) Power of Attorney dated February 20, 2007 (Incorporated by reference to Exhibit (q) to Post-Effective Amendment No. 85, filed on February 28, 2007 (File Nos. 033-16905, 811-05309)).
* Filed herewith.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not applicable.
ITEM 25. INDEMNIFICATION
The Registrant's Articles of Incorporation and Bylaws provide that each present or former director, officer, agent and employee of the Registrant or any predecessor or constituent corporation, and each person who, at the request of the Registrant, serves or served another business enterprise in any such capacity, and the heirs and personal representatives of each of the foregoing shall be indemnified by the Registrant to the fullest extent permitted by law against all expenses, including without limitation amounts of judgments, fines, amounts paid in settlement, attorneys' and accountants' fees, and costs of litigation, which shall necessarily or reasonably be incurred by him or her in connection with any action, suit or proceeding to which he or she was, is or shall be a party, or with which he or she may be threatened, by reason of his or her being or having been a director, officer, agent or employee of the Registrant or such predecessor or constituent corporation or such business enterprise, whether or not he or she continues to be such at the time of incurring such expenses. Such indemnification may include without limitation the purchase of insurance and advancement of any expenses, and the Registrant shall be empowered to enter into agreements to limit the liability of directors and officers of the Registrant. No indemnification shall be made in violation of the General Corporation Law of the State of Maryland or the Investment Company Act of 1940 (the "1940 Act"). The Registrant's Articles of Incorporation and Bylaws further provide that no director or officer of the Registrant shall be liable to the Registrant or its stockholders for money damages, except (i) to the extent that it is proved that such director or officer actually received an improper benefit or profit in money, property or services, for the amount of the benefit or profit in money, property or services actually received, or (ii) to the extent that a judgment or other final adjudication adverse to such director or officer is entered in a proceeding based on a finding in the proceeding that such director's or officer's action, or failure to act, was the result of active and deliberate dishonesty and was material to the cause of action adjudicated in the proceeding. The foregoing shall not be construed to protect or purport to protect any director or officer of the Registrant against any liability to the Registrant or its stockholders to which such director or officer would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved
in the conduct of such office. The Registrant undertakes that no indemnification or advance will be made unless it is consistent with Sections 17(h) or 17(i) of the Investment Company Act of 1940, as now enacted or hereafter amended, and Securities and Exchange Commission rules, regulations, and releases (including, without limitation, Investment Company Act of 1940 Release No. 11330, September 2, 1980). Insofar as the indemnification for liability arising under the Securities Act of 1933, as amended, (the "1933 Act") may be permitted to directors, officers, and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the 1933 Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer, or controlling person of the Registrant in the successful defense of any action, suit, or proceeding) is asserted by such director, officer, or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the 1933 Act, as amended, and will be governed by the final adjudication of such issue. The Registrant maintains officers' and directors' liability insurance providing coverage, with certain exceptions, for acts and omissions in the course of the covered persons' duties as officers and directors.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Information on the business of the Registrant's investment adviser, FAF Advisors, Inc. (the "Manager"), is described in the section of each series' Statement of Additional Information, filed as part of this Registration Statement, entitled "Investment Advisory and Other Services." The directors and officers of the Manager are listed below, together with their principal occupation or other positions of a substantial nature during the past two fiscal years.
Thomas S. Schreier, Jr., President and Chief Executive Officer and chair of Board of Directors, FAF Advisors, Inc. ("FAF Advisors"), Minneapolis, MN (May 2001 to present); President, First American Investment Funds, Inc. ("FAIF"), First American Funds, Inc. ("FAF"), First American Strategy Funds, Inc. ("FASF"), and eight closed-end funds advised by FAF Advisors--American Strategic Income Portfolio Inc., American Strategic Income Portfolio Inc. - II, American Strategic Income Portfolio Inc. - III, American Select Portfolio Inc., American Municipal Income Portfolio Inc., Minnesota Municipal Income Portfolio Inc., First American Minnesota Municipal Income Fund II, Inc., and American Income Fund, Inc. collectively referred to as the First American Closed-End Funds ("FACEF"), Minneapolis, MN (February 2001 to present); President, Mount Vernon Securities Lending Trust, Minneapolis, MN (October 2005 to present).
Mark S. Jordahl, Chief Investment Officer and director on Board of
Directors, FAF Advisors, Minneapolis, MN (July 2001 to present); Vice President
- Investments, FAIF, FAF, FASF, and FACEF, Minneapolis, MN (September 2001 to
present); Vice President - Investments, Mount Vernon Securities Lending Trust,
Minneapolis, MN (October 2005 to present).
Charles R. Manzoni, Jr., General Counsel and Secretary and director on Board of Directors, FAF Advisors, Minneapolis, MN (June 2004 to present).
Joseph M. Ulrey, III, Chief Financial Officer and director on Board of Directors, FAF Advisors, Minneapolis, MN (December 2004 to present).
Frank L. Wheeler, Head of Distribution, FAF Advisors, Minneapolis, MN (April 2007 to present); Managing Director and Head of Institutional Marketing, Merrill Lynch Investment Managers, Princeton, New Jersey (2004 to April 2007). David H. Lui, Chief Compliance Officer, FAF Advisors, Minneapolis, MN (March 2005 to present); Chief Compliance Officer, FAIF, FAF, FASF, and FACEF, Minneapolis, MN (February 2005 to present); Chief Compliance Officer, Mount Vernon Securities Lending Trust, Minneapolis, MN (October 2005 to present); Chief Compliance Officer, Franklin Advisers, Inc. and Chief Compliance Counsel, Franklin Templeton Investments, San Mateo, CA (2004 to February 2005).
Jason K. Mitchell, Anti-Money Laundering Officer, FAF Advisors, Minneapolis, MN (September 2006 to present); Anti-Money Laundering Officer, FAIF, FAF, FASF, FACEF, and Mount Vernon Securities Lending Trust, Minneapolis, MN (September 2006 to present); Compliance Manager, FAF Advisors, Minneapolis, MN (June 2006 to September 2006); Compliance Analyst, FAF Advisors, Minneapolis, MN (October 2004 to June 2006).
John P. Kinsella, Senior Vice President and Director of Tax, FAF Advisors, Minneapolis, MN (February 2003 to present).
ITEM 27. PRINCIPAL UNDERWRITERS
Registrant's distributor, Quasar Distributors, LLC (the "Distributor") acts as principal underwriter and distributor for the following investment companies:
AIP Alternative Strategies Funds
Akros Absolute Return Fund
Al Frank Funds
Allied Asset Advisors Funds
Alpine Equity Trust
Alpine Income Trust
Alpine Series Trust
American Trust Allegiance Fund
Appleton Group
Brandes Investment Trust
Brandywine Blue Funds, Inc.
Brazos Mutual Funds
Bridges Investment Fund, Inc.
Buffalo Funds
Capital Advisors Funds
Chase Funds
Cookson Peirce
Counterpoint Select Fund
Country Funds
Cullen Funds
Duncan-Hurst Funds
Edgar Lomax Value Fund
Everest Funds
Fairholme Fund
FFTW Funds, Inc.
FIMCO Funds
First American Funds, Inc.
First American Investment Funds, Inc.
First American Strategy Funds, Inc.
Fort Pitt Capital Group, Inc.
Fund X Funds
Glenmede Fund, Inc.
Glenmede Portfolios
Greenspring Fund
Greenville Small Cap Growth Fund
Guinness Atkinson Funds
Harding Loevner Funds
Hennessy Funds, Inc
Hennessy Mutual Funds, Inc.
Hester Total Return Fund
High Pointe Funds
Hodges Fund
Hotchkis and Wiley Funds
Huber Funds
Intrepid Capital Management
Jacob Internet Fund Inc.
Jensen Portfolio
Julius Baer Funds
Kensington Funds
Keystone Mutual Funds
Kiewit Investment Fund L.P.
Kirr Marbach Partners Funds, Inc
Leader Short Term Bond Fund
LKCM Funds
Masters' Select Fund Trust
Matrix Asset Advisors, Inc.
McCarthy Fund
Monetta Fund, Inc.
Monetta Trust
MP63 Fund
Muhlenkamp (Wexford Trust)
Mutuals.com
Mutuals.com Vice Fund
Nicholas Funds
Osterweis Funds
Perkins Capital Management
Permanent Portfolio Funds
Perritt Opportunities Funds
Phocas Financial Funds
PIA Funds
PIC Funds
Portfolio 21
Primecap Odyssey Funds
Prudent Bear Funds, Inc.
Purisima Funds
Quaker Investment Trust
Rainier Funds
Rigel Capital, LLC
Rockland Small Cap Growth Fund
Snow Fund
Stephens Management Co.
Summit Funds
Teberg Fund
Thompson Plumb (TIM)
TIFF Investment Program, Inc.
Tygh Capital Management
Villere Fund
Wisconsin Capital Funds, Inc.
Women's Equity Fund
WY Funds
The board members and officers of Quasar Distributors, LLC and their positions or offices with the Registrant are identified in the following table. Unless otherwise noted, the business address for each board member or officer is Quasar Distributors, LLC 615 East Michigan Street, Milwaukee, WI 53202.
POSITION AND OFFICES WITH POSITION AND OFFICES WITH
NAME UNDERWRITER REGISTRANT
---- ------------------------- -------------------------
James R. Schoenike President, Board Member None
Joe D. Redwine Board Member None
Robert Kern Board Member None
777 East Wisconsin Avenue
Milwaukee, WI 53202
Eric W. Falkeis Board Member None
777 East Wisconsin Avenue
Milwaukee, WI 53202
Susan L. La Fond Financial Operations Principal None
Andrew M. Strnad Secretary None
Teresa Cowan Assistant Secretary None
|
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
All accounts, books, and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the rules promulgated
thereunder are maintained by FAF Advisors, Inc., 800 Nicollet Mall, Minneapolis,
Minnesota, 55402, and U.S. Bancorp Fund Services, LLC, 615 E. Michigan Street,
Milwaukee, Wisconsin 53202.
ITEM 29. MANAGEMENT SERVICES
Not applicable.
ITEM 30. UNDERTAKINGS
Not applicable.
SIGNATURES
As required by the Securities Act of 1933, as amended, and the Investment Company Act of 1940, as amended, the Registrant certifies that it meets all of the requirements for effectiveness of this Registration Statement under Rule 485(b) under the Securities Act and has duly caused this Post-Effective Amendment to its Registration Statement Nos. 033-16905 and 811-05309 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Minneapolis, State of Minnesota, on the 31st day of July 2007.
FIRST AMERICAN INVESTMENT FUNDS, INC.
By: /s/ Thomas S. Schreier, Jr.
------------------------------------
Thomas S. Schreier, Jr.
President
|
Pursuant to the requirements of the Securities Act of 1933, as amended, this Amendment to the Registration Statement has been signed below by the following persons in the capacities indicated and on July 31, 2007.
SIGNATURE TITLE
--------- -----
/s/ Thomas S. Schreier, Jr.
------------------------------------- President
Thomas S. Schreier, Jr.
/s/ Charles D. Gariboldi, Jr.
------------------------------------- Treasurer (principal financial/accounting officer)
Charles D. Gariboldi, Jr.
*
------------------------------------- Director
Benjamin R. Field, III
*
------------------------------------- Director
Victoria J. Herget
*
------------------------------------- Director
Roger A. Gibson
*
------------------------------------- Director
John P. Kayser
*
------------------------------------- Director
Leonard W. Kedrowski
*
------------------------------------- Director
Richard K. Riederer
*
------------------------------------- Director
Joseph D. Strauss
*
------------------------------------- Director
Virginia L. Stringer
*
------------------------------------- Director
James M. Wade
|
* Richard J. Ertel, by signing his name hereto, does hereby sign this document on behalf of each of the above-named Directors of First American Investment Funds, Inc. pursuant to the powers of attorney duly executed by such persons.
By: /s/ Richard J. Ertel
--------------------------------- Attorney-in-Fact
Richard J. Ertel
|
INDEX TO EXHIBITS
EXHIBIT NUMBER NAME OF EXHIBIT -------------- --------------- (a)(10) Articles Supplementary (b) Bylaws, as amended (d)(4) Exhibit A to Investment Advisory Agreement (d)(6) Expense Limitation Agreement (d)(8) Sub-Advisory Letter of Agreement (JP Morgan) (d)(11) Sub-Advisory Letter of Agreement (Altrinsic) (d)(13) Sub-Advisory Agreement (Hansberger) (d)(14) Sub-Advisory Letter of Agreement (Hansberger) (d)(17) Sub-Advisory Letter of Agreement (Lazard) (e)(1) Distribution Agreement (e)(2) Form of Dealer Agreement (g)(2) Amendment to Custody Agreement (U.S. Bank) (g)(3) Exhibit C to Custody Agreement (U.S. Bank) (g)(4) Exhibit D to Custody Agreement (U.S. Bank) (h)(4) Transfer Agent and Shareholder Servicing Agreement (h)(5) Exhibit A to Transfer Agent and Shareholder Servicing Agreement (h)(6) Securities Lending Agreement (i) Legal Opinion (m) Rule 12b-1 Plan (n) Rule 18f-3 Plan (p)(2) Code of Ethics (FAF Advisors) (p)(5) Code of Ethics (Hansberger) |
FIRST AMERICAN INVESTMENT FUNDS, INC.
ARTICLES SUPPLEMENTARY
[June 2007]
First American Investment Funds, Inc., a corporation organized under the laws of the State of Maryland (the "Corporation"), does hereby file for record with the State Department of Assessments and Taxation of Maryland the following Articles Supplementary to its Articles of Incorporation:
FIRST: The Corporation is registered as an open-end investment company under the Investment Company Act of 1940 (the "1940 Act"). As hereinafter set forth, the Corporation has classified its authorized capital stock in accordance with the Maryland General Corporation Law.
SECOND: Immediately before the increase in total authorized shares hereinafter set forth and the classifications hereinafter set forth, the Corporation had authority to issue three hundred thirty-four billion (334,000,000,000) shares of common stock (individually, a "Share" and collectively, the "Shares"), of the par value of $.0001 per Share and of the aggregate par value of thirty-three million four hundred thousand dollars ($33,400,000), classified as follows:
(1) Class B Common Shares (formerly referred to as "fixed income fund shares"): Two billion (2,000,000,000) Shares.
(2) Class B, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(3) Class B, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(4) Class B, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(5) Class B, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(6) Class C Common Shares (formerly referred to as "municipal bond fund shares"): Two billion (2,000,000,000) Shares.
(7) Class C, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(8) Class C, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(9) Class C, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(10) Class D Common Shares (formerly referred to as "stock fund shares"): Two billion (2,000,000,000) Shares.
(11) Class D, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(12) Class D, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(13) Class D, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(14) Class D, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(15) Class E Common Shares (formerly referred to as "special equity fund shares"): Two billion (2,000,000,000) Shares.
(16) Class E, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(17) Class E, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(18) Class E, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(19) Class E, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(20) Class G Common Shares (formerly referred to as "balanced fund shares"): Two billion (2,000,000,000) Shares.
(21) Class G, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(22) Class G, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(23) Class G, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(24) Class G, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(25) Class H Common Shares (formerly referred to as "equity index fund shares"): Two billion (2,000,000,000) Shares.
(26) Class H, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(27) Class H, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(28) Class H, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(29) Class H, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(30) Class I Common Shares (formerly referred to as "intermediate term income fund shares"): Two billion (2,000,000,000) Shares.
(31) Class I, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(32) Class I, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(33) Class I, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(34) Class I, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(35) Class J Common Shares (formerly referred to as "limited term income fund shares"): Two billion (2,000,000,000) Shares.
(36) Class J, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(37) Class J, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(38) Class J, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(39) Class J, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(40) Class M Common Shares: Two billion (2,000,000,000) Shares.
(41) Class M, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(42) Class M, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(43) Class M, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(44) Class N Common Shares: Two billion (2,000,000,000) Shares.
(45) Class N, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(46) Class N, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(47) Class N, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(48) Class P Common Shares: Two billion (2,000,000,000) Shares.
(49) Class P, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(50) Class P, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(51) Class P, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(52) Class P, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(53) Class Q Common Shares: Two billion (2,000,000,000) Shares.
(54) Class Q, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(55) Class Q, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(56) Class Q, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(57) Class Q, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(58) Class T Common Shares: Two billion (2,000,000,000) Shares.
(59) Class T, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(60) Class T, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(61) Class T, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(62) Class T, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(63) Class V Common Shares: Two billion (2,000,000,000) Shares.
(64) Class V, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(65) Class V, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(66) Class V, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(67) Class V, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(68) Class X Common Shares: Two billion (2,000,000,000) Shares.
(69) Class X, Series 1 Common Shares: Two billion (2,000,000,000) Shares.
(70) Class X, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(71) Class Y Common Shares: Two billion (2,000,000,000) Shares.
(72) Class Y, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(73) Class Y, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(74) Class AA Common Shares: Two billion (2,000,000,000) Shares.
(75) Class AA, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(76) Class AA, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(77) Class AA, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(78) Class AA, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(79) Class DD Common Shares: Two billion (2,000,000,000) Shares.
(80) Class DD, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(81) Class DD, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(82) Class DD, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(83) Class EE Common Shares: Two billion (2,000,000,000) Shares.
(84) Class EE, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(85) Class EE, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(86) Class EE, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(87) Class HH Common Shares: Two billion (2,000,000,000) Shares.
(88) Class HH, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(89) Class HH, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(90) Class HH, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(91) Class HH, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(92) Class I I Common Shares: Two billion (2,000,000,000) Shares.
(93) Class I I, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(94) Class I I, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(95) Class JJ Common Shares: Two billion (2,000,000,000) Shares.
(96) Class JJ, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(97) Class JJ, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(98) Class KK Common Shares: Two billion (2,000,000,000) Shares.
(99) Class KK, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(100) Class KK, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(101) Class LL Common Shares: Two billion (2,000,000,000) Shares.
(102) Class LL, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(103) Class LL, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(104) Class LL, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(105) Class LL, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(106) Class MM Common Shares: Two billion (2,000,000,000) Shares.
(107) Class MM, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(108) Class MM, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(109) Class QQ Common Shares: Two billion (2,000,000,000) Shares.
(110) Class QQ, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(111) Class QQ, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(112) Class QQ, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(113) Class QQ, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(114) Class SS Common Shares: Two billion (2,000,000,000) Shares.
(115) Class SS, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(116) Class SS, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(117) Class SS, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(118) Class SS, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(119) Class TT Common Shares: Two billion (2,000,000,000) Shares.
(120) Class TT, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(121) Class TT, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(122) Class TT, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(123) Class TT, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(124) Class UU Common Shares: Two billion (2,000,000,000) Shares.
(125) Class UU, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(126) Class UU, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(127) Class UU, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(128) Class UU, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(129) Class WW Common Shares: Two billion (2,000,000,000) Shares.
(130) Class WW, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(131) Class WW, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(132) Class WW, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(133) Class WW, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(134) Class XX Common Shares: Two billion (2,000,000,000) Shares.
(135) Class XX, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(136) Class XX, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(137) Class XX, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(138) Class XX, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(139) Class ZZ Common Shares: Two billion (2,000,000,000) Shares.
(140) Class ZZ, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(141) Class ZZ, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(142) Class ZZ, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(143) Class ZZ, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(144) Class AAA Common Shares: Two billion (2,000,000,000) Shares.
(145) Class AAA, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(146) Class AAA, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(147) Class BBB Common Shares: Two billion (2,000,000,000) Shares.
(148) Class BBB, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(149) Class BBB, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(150) Class CCC Common Shares: Two billion (2,000,000,000) Shares.
(151) Class CCC, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(152) Class DDD Common Shares: Two billion (2,000,000,000) Shares.
(153) Class DDD, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(154) Class EEE Common Shares: Two billion (2,000,000,000) Shares.
(155) Class EEE, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(156) Class EEE, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(156) Class EEE, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(158) Class EEE, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(159) Class FFF Common Shares: Two billion (2,000,000,000) Shares.
(160) Class FFF, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(161) Class FFF, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(162) Class FFF, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(163) Class GGG Common Shares: Two billion (2,000,000,000) Shares.
(164) Class GGG, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(165) Class GGG, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(166) Class GGG, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(167) Class GGG, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(168) Unclassified Shares: Zero (-0-) Shares.
THIRD: Pursuant to the authority contained in Sections 2-105(c) and 2-208.1 of the Maryland General Corporation Law, the Board of Directors of the Corporation, by resolution adopted at a meeting held on June 20, 2007, authorized an increase in the total authorized shares of the Corporation from three hundred thirty-four billion (334,000,000,000) shares of common stock, of the par value of $.0001 per share, and of the aggregate par value of thirty-three million four hundred thousand dollars ($33,400,000), to three hundred fifty-eight billion (358,000,000,000) shares of common stock, of the par value of $.0001 per share, and of the aggregate par value of thirty-five million eight hundred thousand dollars ($35,800,000).
FOURTH: Pursuant to the authority contained in Article IV of the Articles of Incorporation of the Corporation and Section 2-208 of the Maryland General Corporation Law, the Board of Directors of the Corporation, by resolution adopted June 20, 2007, classified the following additional Shares out of the authorized, unissued and unclassified Shares of the Corporation:
(1) Class HHH Common Shares: Two billion (2,000,000,000) Shares.
(2) Class HHH, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(3) Class HHH, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(4) Class HHH, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(5) Class I I I Common Shares: Two billion (2,000,000,000) Shares.
(6) Class I I I, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(7) Class I I I, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(8) Class I I I, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(9) Class JJJ Common Shares: Two billion (2,000,000,000) Shares.
(10) Class JJJ, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(11) Class JJJ, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(12) Class JJJ, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
FIFTH: The Shares classified pursuant to FOURTH above shall have the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications, and terms and conditions of redemption, set forth in the Corporation's Articles of Incorporation. Any Class or Series of Shares classified pursuant to FOURTH above may be subject to such charges and expenses (including by way of example, but not by way of limitation, such front-end and deferred sales charges as may be permitted under the 1940 Act and rules of the National Association of Securities Dealers, Inc. ("NASD"), expenses under Rule 12b-1 plans, administration plans, service plans, or other plans or arrangements, however designated) adopted from time to time by the Board of Directors of the Corporation in accordance, to the extent applicable, with the 1940 Act, and all of the charges and expenses to which such a Class or Series is subject shall be borne by such Class or Series and shall be appropriately reflected (in the manner determined by the Board of Directors) in determining the net asset value and the amounts payable with respect to dividends and distributions on and redemptions or liquidations of, the Shares of such Class or Series.
SIXTH: Immediately after the increase in total authorized shares hereinbefore set forth and the classifications hereinbefore set forth and upon filing for record of these Articles Supplementary, the Corporation has authority to issue three hundred fifty-eight billion (358,000,000,000) shares of common stock (individually, a "Share" and collectively, the "Shares"), of the par value of $.0001 per Share and of the aggregate par value of thirty-five million eight hundred thousand dollars ($35,800,000), classified as follows:
(1) Class B Common Shares (formerly referred to as "fixed income fund shares"): Two billion (2,000,000,000) Shares.
(2) Class B, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(3) Class B, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(4) Class B, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(5) Class B, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(6) Class C Common Shares (formerly referred to as "municipal bond fund shares"): Two billion (2,000,000,000) Shares.
(7) Class C, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(8) Class C, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(9) Class C, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(10) Class D Common Shares (formerly referred to as "stock fund shares"): Two billion (2,000,000,000) Shares.
(11) Class D, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(12) Class D, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(13) Class D, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(14) Class D, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(15) Class E Common Shares (formerly referred to as "special equity fund shares"): Two billion (2,000,000,000) Shares.
(16) Class E, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(17) Class E, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(18) Class E, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(19) Class E, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(20) Class G Common Shares (formerly referred to as "balanced fund shares"): Two billion (2,000,000,000) Shares.
(21) Class G, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(22) Class G, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(23) Class G, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(24) Class G, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(25) Class H Common Shares (formerly referred to as "equity index fund shares"): Two billion (2,000,000,000) Shares.
(26) Class H, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(27) Class H, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(28) Class H, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(29) Class H, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(30) Class I Common Shares (formerly referred to as "intermediate term income fund shares"): Two billion (2,000,000,000) Shares.
(31) Class I, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(32) Class I, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(33) Class I, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(34) Class I, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(35) Class J Common Shares (formerly referred to as "limited term income fund shares"): Two billion (2,000,000,000) Shares.
(36) Class J, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(37) Class J, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(38) Class J, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(39) Class J, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(40) Class M Common Shares: Two billion (2,000,000,000) Shares.
(41) Class M, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(42) Class M, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(43) Class M, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(44) Class N Common Shares: Two billion (2,000,000,000) Shares.
(45) Class N, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(46) Class N, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(47) Class N, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(48) Class P Common Shares: Two billion (2,000,000,000) Shares.
(49) Class P, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(50) Class P, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(51) Class P, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(52) Class P, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(53) Class Q Common Shares: Two billion (2,000,000,000) Shares.
(54) Class Q, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(55) Class Q, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(56) Class Q, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(57) Class Q, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(58) Class T Common Shares: Two billion (2,000,000,000) Shares.
(59) Class T, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(60) Class T, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(61) Class T, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(62) Class T, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(63) Class V Common Shares: Two billion (2,000,000,000) Shares.
(64) Class V, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(65) Class V, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(66) Class V, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(67) Class V, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(68) Class X Common Shares: Two billion (2,000,000,000) Shares.
(69) Class X, Series 1 Common Shares: Two billion (2,000,000,000) Shares.
(70) Class X, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(71) Class Y Common Shares: Two billion (2,000,000,000) Shares.
(72) Class Y, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(73) Class Y, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(74) Class AA Common Shares: Two billion (2,000,000,000) Shares.
(75) Class AA, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(76) Class AA, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(77) Class AA, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(78) Class AA, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(79) Class DD Common Shares: Two billion (2,000,000,000) Shares.
(80) Class DD, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(81) Class DD, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(82) Class DD, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(83) Class EE Common Shares: Two billion (2,000,000,000) Shares.
(84) Class EE, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(85) Class EE, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(86) Class EE, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(87) Class HH Common Shares: Two billion (2,000,000,000) Shares.
(88) Class HH, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(89) Class HH, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(90) Class HH, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(91) Class HH, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(92) Class I I Common Shares: Two billion (2,000,000,000) Shares.
(93) Class I I, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(94) Class I I, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(95) Class JJ Common Shares: Two billion (2,000,000,000) Shares.
(96) Class JJ, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(97) Class JJ, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(98) Class KK Common Shares: Two billion (2,000,000,000) Shares.
(99) Class KK, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(100) Class KK, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(101) Class LL Common Shares: Two billion (2,000,000,000) Shares.
(102) Class LL, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(103) Class LL, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(104) Class LL, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(105) Class LL, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(106) Class MM Common Shares: Two billion (2,000,000,000) Shares.
(107) Class MM, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(108) Class MM, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(109) Class QQ Common Shares: Two billion (2,000,000,000) Shares.
(110) Class QQ, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(111) Class QQ, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(112) Class QQ, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(113) Class QQ, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(114) Class SS Common Shares: Two billion (2,000,000,000) Shares.
(115) Class SS, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(116) Class SS, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(117) Class SS, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(118) Class SS, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(119) Class TT Common Shares: Two billion (2,000,000,000) Shares.
(120) Class TT, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(121) Class TT, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(122) Class TT, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(123) Class TT, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(124) Class UU Common Shares: Two billion (2,000,000,000) Shares.
(125) Class UU, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(126) Class UU, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(127) Class UU, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(128) Class UU, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(129) Class WW Common Shares: Two billion (2,000,000,000) Shares.
(130) Class WW, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(131) Class WW, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(132) Class WW, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(133) Class WW, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(134) Class XX Common Shares: Two billion (2,000,000,000) Shares.
(135) Class XX, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(136) Class XX, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(137) Class XX, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(138) Class XX, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(139) Class ZZ Common Shares: Two billion (2,000,000,000) Shares.
(140) Class ZZ, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(141) Class ZZ, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(142) Class ZZ, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(143) Class ZZ, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(144) Class AAA Common Shares: Two billion (2,000,000,000) Shares.
(145) Class AAA, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(146) Class AAA, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(147) Class BBB Common Shares: Two billion (2,000,000,000) Shares.
(148) Class BBB, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(149) Class BBB, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(150) Class CCC Common Shares: Two billion (2,000,000,000) Shares.
(151) Class CCC, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(152) Class DDD Common Shares: Two billion (2,000,000,000) Shares.
(153) Class DDD, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(154) Class EEE Common Shares: Two billion (2,000,000,000) Shares.
(155) Class EEE, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(156) Class EEE, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(156) Class EEE, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(158) Class EEE, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(159) Class FFF Common Shares: Two billion (2,000,000,000) Shares.
(160) Class FFF, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(161) Class FFF, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(162) Class FFF, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(163) Class GGG Common Shares: Two billion (2,000,000,000) Shares.
(164) Class GGG, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(165) Class GGG, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(166) Class GGG, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(167) Class GGG, Series 5 Common Shares: Two billion (2,000,000,000) Shares.
(168) Class HHH Common Shares: Two billion (2,000,000,000) Shares.
(169) Class HHH, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(170) Class HHH, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(171) Class HHH, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(172) Class I I I Common Shares: Two billion (2,000,000,000) Shares.
(173) Class I I I, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(174) Class I I I, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(175) Class I I I, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(176) Class JJJ Common Shares: Two billion (2,000,000,000) Shares.
(177) Class JJJ, Series 2 Common Shares: Two billion (2,000,000,000) Shares.
(178) Class JJJ, Series 3 Common Shares: Two billion (2,000,000,000) Shares.
(179) Class JJJ, Series 4 Common Shares: Two billion (2,000,000,000) Shares.
(180) Unclassified Shares: Zero (-0-) Shares.
SEVENTH: The aforesaid action by the Board of Directors of the Corporation was taken pursuant to authority and power contained in the Articles of Incorporation of the Corporation.
The undersigned officer of the Corporation hereby acknowledges, in the name and on behalf of the Corporation, the foregoing Articles Supplementary to be the corporate act of the Corporation and further certifies that, to the best of his or her knowledge, information and belief, the matters and facts set forth therein with respect to the approval thereof are true in all material respects, under the penalties of perjury.
IN WITNESS WHEREOF, the Corporation has caused these Articles Supplementary to be signed in its name and on its behalf by its Vice President and witnessed by its Assistant Secretary on June 21, 2007.
FIRST AMERICAN INVESTMENT FUNDS, INC.
By /s/ Jeffery M. Wilson ------------------------------------- Jeffery M. Wilson, Vice President |
WITNESS:
/s/ James D. Alt ------------------------------------- James D. Alt, Assistant Secretary |
NAME CHANGE FROM "SECURAL MUTUAL FUNDS, INC." TO "FIRST AMERICAN INVESTMENT FUNDS, INC." APPROVED AT BOARD OF DIRECTORS' MEETINGS ON FEBRUARY 12, 1991; AMENDMENT ADDING NEW SECTION 8 TO ARTICLE I APPROVED AT BOARD OF DIRECTORS' MEETING ON DECEMBER 15, 1992; AMENDMENTS TO ARTICLE III APPROVED AT BOARD OF DIRECTORS' MEETINGS ON SEPTEMBER 7, 1993; AMENDMENT ADDING NEW SECTION 3 TO ARTICLE V APPROVED AT BOARD OF DIRECTORS' MEETING ON DECEMBER 7, 1993; AMENDMENT TO ARTICLE V, SECTION 3 CHANGING FUND NAMES APPROVED AT BOARD OF DIRECTORS' MEETING ON MARCH 7, 1994; AMENDMENT TO ARTICLE V, SECTION 3 PROVIDING FOR NAMES OF NEW CLASSES AND SERIES APPROVED AT BOARD OF DIRECTORS MEETING ON JUNE 8, 1994; AMENDMENT TO ARTICLE V, SECTION 3 PROVIDING FOR NAMES OF NEW CLASSES AND SERIES APPROVED AT BOARD OF DIRECTORS MEETING ON DECEMBER 7, 1994; AMENDMENT TO ARTICLE V, SECTION 3 PROVIDING FOR NAMES OF NEW CLASSES AND SERIES APPROVED AT BOARD OF DIRECTORS MEETING ON MARCH 6, 1995; AMENDMENT TO ARTICLE V, SECTION 3 PROVIDING FOR NAMES OF NEW CLASSES AND SERIES APPROVED AT BOARD OF DIRECTORS MEETING ON DECEMBER 6, 1995; AMENDMENT TO ARTICLE V, SECTION 3 PROVIDING FOR NAMES OF NEW CLASSES AND SERIES APPROVED AT BOARD OF DIRECTORS MEETING ON JUNE 4, 1997; AMENDMENT TO ARTICLE V, SECTION 3 PROVIDING FOR NAMES OF CLASSES AND SERIES APPROVED AT BOARD OF DIRECTORS MEETING ON FEBRUARY 23, 1998; AMENDMENT TO ARTICLE V, SECTION 3 PROVIDING FOR NAMES OF NEW CLASSES AND SERIES APPROVED AT BOARD OF DIRECTORS MEETING ON DECEMBER 9, 1998; AMENDMENT TO ARTICLE II, SECTION 8 SPECIFYING COMMITTEE QUORUM APPROVED AT BOARD OF DIRECTORS MEETING ON FEBRUARY 23, 1999; AMENDMENT TO ARTICLE V, SECTION 3 PROVIDING FOR NAMES OF NEW CLASSES AND SERIES APPROVED AT BOARD OF DIRECTORS MEETING ON SEPTEMBER 8, 1999; AMENDMENT TO ARTICLE I, SECTION 4 PROVIDING FOR ELECTRONIC VOTING APPROVED AT BOARD OF DIRECTORS MEETING ON DECEMBER 8, 1999; AMENDMENT TO ARTICLE V, SECTION 3 PROVIDING FOR NAMES OF CLASSES AND SERIES APPROVED AT BOARD OF DIRECTORS MEETING ON FEBRUARY 28, 2001; AMENDMENT TO ARTICLE V, SECTION 3 PROVIDING FOR NAMES OF CLASSES AND SERIES APPROVED AT BOARD OF DIRECTORS MEETING ON JUNE 1, 2001; AMENDMENT TO ARTICLE V, SECTION 3 PROVIDING FOR NAMES OF CLASSES AND SERIES APPROVED AT BOARD OF DIRECTORS MEETING ON FEBRUARY 21, 2002; AMENDMENT TO ARTICLE V, SECTION 3 PROVIDING FOR NAMES OF CLASSES AND SERIES APPROVED AT BOARD OF DIRECTORS MEETING ON SEPTEMBER 18, 2002; AMENDMENTS TO ARTICLE V, SECTION 3 PROVIDING FOR NAME CHANGES AND NAMES OF NEW CLASS AND SERIES APPROVED AT BOARD OF DIRECTORS MEETING ON DECEMBER 4, 2002; AMENDMENTS TO ARTICLE V, SECTION 3 PROVIDING FOR NAME CHANGES APPROVED AT BOARD OF DIRECTORS MEETING ON FEBRUARY 18, 2004; AMENDMENTS TO ARTICLE V, SECTION 3 PROVIDING FOR NAMES OF NEW CLASS AND SERIES APPROVED AT BOARD OF DIRECTORS MEETING ON SEPTEMBER 16, 2004; AMENDMENT TO ARTICLE V, SECTION 3 CHANGING FUND NAMES APPROVED AT BOARD OF DIRECTORS' MEETING ON FEBRUARY 15, 2005; AMENDMENT TO ARTICLE V, SECTION 3 CHANGING FUND NAMES APPROVED AT BOARD OF DIRECTORS' MEETING ON JUNE 21, 2005; AMENDMENT TO ARTICLE V, SECTION 3 PROVIDING FOR NAMES OF NEW CLASS AND SERIES APPROVED AT BOARD OF DIRECTORS MEETING ON DECEMBER 5, 2006; AMENDMENTS TO ARTICLE V, SECTION 3 PROVIDING FOR NAMES OF NEW CLASS AND SERIES APPROVED AT BOARD OF DIRECTORS MEETING ON JUNE 20, 2007.
BYLAWS
OF
FIRST AMERICAN INVESTMENT FUNDS, INC.
(A MARYLAND CORPORATION)
ARTICLE I
STOCKHOLDERS
SECTION 1. Meetings. Annual or special meetings of stockholders may be held on such date and at such time as shall be set or provided for by the Board of Directors or, if not so set or provided for, then as stated in the notice of meeting. The notice of meeting shall state the purpose or purposes for which the meeting is called.
SECTION 2. Place of Meetings. All meetings of stockholders shall be held at such place in the United States as is set or provided for by the Board of Directors or, if not so set or provided for, then as stated in the notice of meeting.
SECTION 3. Organization. At any meeting of the stockholders, in the absence of the Chairman of the Board of Directors, if any, and of the President or a Vice President acting in his stead, the stockholders shall choose a chairman to preside over the meeting. In the absence of the Secretary or an Assistant Secretary, acting in his stead, the chairman of the meeting shall appoint a secretary to keep the record of all the votes and minutes of the proceedings.
SECTION 4. Proxies. At any meeting of the stockholders, every stockholder having the right to vote shall be entitled to vote in person or by proxy submitted by any means permitted by Maryland Statutes Section 2-507(c)(3) or any successor provision of Maryland Statutes. No proxy shall be voted after eleven months from its date unless it provides for a longer period.
SECTION 5. Voting. At any meeting of the stockholders, every stockholder shall be entitled to one vote or a fractional vote on each matter submitted to a vote for each share or fractional share of stock standing in his name on the books of the Corporation as of the close of business on the record date for such meeting. Unless the voting is conducted by inspectors, all questions relating to the qualifications of voters, validity of proxies and acceptance or rejection of votes shall be decided by the chairman of the meeting.
SECTION 6. Record Date; Closing of Transfer Books. The Board of Directors may fix, in advance, a date as the record date for the purpose of determining stockholders entitled to notice of, or to vote at, any meeting of stockholders, or stockholders entitled to receive payment of any dividend or the allotment of any rights, or in order to make a determination of stockholders for any other proper purpose. Such date, in any case, shall be not more than sixty days, and in case of a meeting of stockholders not less than ten days, prior to the date on which the particular action requiring such determination of stockholders is to be taken. In lieu of fixing a record date, the Board of Directors may provide that the stock transfer books shall be closed for a stated period but not to exceed, in any case, twenty days. If the stock transfer books are closed for the purpose of determining stockholders entitled to notice of or to vote at a meeting of stockholders, such books shall be closed for at least ten days immediately preceding such meeting.
SECTION 7. Registered Stockholders. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof.
SECTION 8. Calling of Special Meeting of Shareholders. A special meeting of stockholders shall be called upon the written request of the holders of shares entitled to cast not less than 10% of all votes entitled to vote at such meeting.
ARTICLE II
BOARD OF DIRECTORS
SECTION 1. Number, Qualification, Tenure and Vacancies. The initial Board of Directors shall consist of five (5) directors. Except as hereinafter provided, a director shall be
elected to serve until his successor shall be elected and shall qualify or until his earlier death, resignation, retirement or removal. The directors may at any time when the stockholders are not assembled in meeting, establish, increase or decrease their own number by majority vote of the entire Board of Directors; provided, that the number of directors shall never be less than three (3)
nor more than twelve (12). The number of directors may not be decreased so as to affect the term of any incumbent director. If the number be increased, the additional directors to fill the vacancies thus created may, except as hereinafter provided, by elected by majority vote of the entire Board of Directors. Any vacancy occurring for any cause may be filled by a majority of the remaining members of the Board of Directors, although such majority is less than a quorum; provided, however, that after filling any vacancy for any cause whatsoever two-thirds (2/3) of the entire Board of Directors shall have been elected by the stockholders of the Corporation. A director elected under any circumstance shall be elected to hold office until his successor is elected and qualified, or until such director's earlier death, resignation, retirement or removal.
SECTION 2. When Stockholder Meeting Required. If at any time less than a
majority of the directors holding office were elected by the stockholders of the
Corporation, the directors or the President or Secretary shall cause a meeting
of stockholders to be held as soon as possible and, in any event, within sixty
(60) days, unless extended by order of the Securities and Exchange Commission,
for the purpose of electing directors to fill any vacancy.
SECTION 3. Regular Meetings. Regular meetings of the Board of Directors may be held at such time and place as shall be determined from time to time by agreement or fixed by resolution of the Board of Directors.
SECTION 4. Special Meetings. Special meetings of the Board of Directors may be called at any time by the Chairman of the Board or President and shall be called by the Secretary upon the written request of any two (2) directors.
SECTION 5. Notice of Meetings. Except as otherwise provided in these Bylaws, notice need not be given of regular meetings of the Board of Directors held at times fixed by agreement or resolution of the Board of Directors. Notice of special meetings of the Board of Directors, stating the place, date and time thereof, shall be given not less than two (2) days before such meeting to each director. Notice to a director may be given personally, by telegram, cable or wireless, by telephone, by mail, or by leaving such notice at his place of residence or usual place of business. If mailed, such notice shall be deemed to be given when deposited in the United States mail, postage prepaid, directed to the director at his address as it appears on the records of the Corporation. Meetings may be held at any time without notice if all the directors are present, or if those not present waive notice of the meeting in writing. If the President shall determine in advance that a quorum would not be present on the date set for any regular or special meeting, such meeting may be held at such later date, time and place as he shall determine, upon at least twenty-four (24) hours' notice.
SECTION 6. Quorum. A majority of the directors then in office, at a meeting duly assembled, but not less than one-third of the entire Board of Directors nor in any event less than two directors, shall constitute a quorum for the transaction of business. The vote of a majority of
directors present at a meeting at which a quorum is present shall be the act of the Board of Directors, except as may be otherwise specifically provided by statute or by the Articles of Incorporation or by these Bylaws. If at any meeting of the Board of Directors, there shall be less than a quorum present, a majority of those present may adjourn the meeting, without further notice, from time to time until a quorum shall have been obtained.
SECTION 7. Removal. At any meeting of stockholders, duly called and at which a quorum is present, the stockholders may, by the affirmative vote of the holders of a majority of the votes entitled to be cast thereon, remove any director or directors from office and may elect a successor or successors to fill any resulting vacancies.
SECTION 8. Committees. The Board of Directors, may, by resolution adopted by a majority of the entire Board of Directors, from time to time appoint from among its members one or more committees as it may determine. Each committee appointed by the Board of Directors shall be composed of two (2) or more directors and may, to the extent provided in such resolution, have and exercise all the powers of the Board of Directors, except the power to declare dividends, to issue stock or to recommend to stockholders any action requiring stockholder approval. Each such committee shall serve at the pleasure of the Board of Directors. Each such committee shall keep a record of its proceedings and shall adopt its own rules of procedure. It shall make reports as may be required by the Board of Directors.
A quorum of any committee shall consist of one-third of its members unless the committee is comprised of two or three members, in which event a quorum shall consist of two members. If a Pricing Committee is appointed and a member of such committee is absent from a committee meeting, the remainder of the committee (although not constituting a quorum) may appoint another director to act in place of the absent member.
ARTICLE III
OFFICERS AND CHAIRMAN OF THE BOARD OF DIRECTORS
SECTION 1. Offices. The elected officers of the Corporation shall be the President, the Secretary and the Treasurer, and may also include one or more Vice Presidents, one or more Assistant Secretaries, one or more Assistant Treasurers and such other officers as the Board of Directors may determine. Any two or more offices may be held by the same person, except that no person may hold both the office of President and the office of Vice President. A person who holds more than one office in the Corporation shall not act in more than one capacity to execute, acknowledge or verify an instrument required by law to be executed, acknowledged or verified by more than one officer.
SECTION 2. Selection, Term of Office and Vacancies. The initial officers of the Corporation shall be elected by the Board of Directors at the first meeting of the Board of Directors. Additional officers may be elected at any regular or special meeting of the Board of Directors. Each officer shall serve at the pleasure of the Board of Directors or until his earlier death, resignation or retirement. If any office becomes vacant, the vacancy shall be filled by the Board of Directors.
SECTION 3. Chairman of the Board. The Board of Directors may elect one of its members as Chairman of the Board. Except as otherwise provided in these Bylaws, in the event the Board of Directors elects a Chairman of the Board of Directors, he shall preside at all meetings of the stockholders and the Board of Directors and shall perform such other duties as from time to time may be assigned to him by the Board of Directors. The Chairman of the Board of Directors will under no circumstances be deemed to be an "officer" of the Corporation, and an individual serving as Chairman of the Board of Directors will not be deemed to be an "affiliated person" with respect to the Corporation (under the Investment Company Act of 1940, as amended) solely by virtue of such person's position as Chairman of the Board of Directors of the Corporation.
SECTION 4. President. The president shall be the chair executive officer of the Corporation and shall perform such other duties as from time to time may be assigned to him by the Board of Directors. He shall perform the duties of the Chairman of the Board of Directors in the event there is no Chairman or in the event the Chairman is absent.
SECTION 5. Vice Presidents. A Vice President shall perform such duties as may be assigned by the President or the Board of Directors. In the absence of the President and in accordance with such order of priority as may be established by the Board of Directors, he may perform the duties of the President, and when so acting, shall have all the powers of and be subject to all the restrictions upon the President.
SECTION 6. Secretary. The Secretary shall (a) keep the minutes of the stockholders' and Board of Directors' meetings in one or more books provided for that purpose, and shall perform like duties for committees when requested, (b) see that all notices are duly given in accordance with the provisions of these Bylaws or as required by law, (c) be custodian of the corporate records and of the seal of the Corporation and see that the seal of the Corporation is affixed to all documents the execution of which on behalf of the Corporation under its seal is duly authorized or required by law, and (d) in general perform all duties incident to the office of Secretary and such other duties as may be assigned by the President or the Board of Directors.
SECTION 7. Assistant Secretaries. One or more Assistant Secretaries may be elected by the Board of Directors or appointed by the President. In the absence of the Secretary and in accordance with such order as may be established by the Board of Directors, an Assistant Secretary shall have the power to perform his duties including the certification, execution and attestation of corporate records and corporate instruments. Assistant Secretaries shall perform such other duties as may be assigned to them by the President or the Board of Directors.
SECTION 8. Treasurer. The Treasurer (a) shall be the principal financial officer of the Corporation, (b) shall see that all funds and securities of the Corporation are held by the custodian of the Corporation's assets, and (c) shall be the principal accounting officer of the Corporation.
SECTION 9. Assistant Treasurers. One or more Assistant Treasurers may be elected by the Board of Directors or appointed by the President. In the absence of the Treasurer and in
accordance with such order as may be established by the Board of Directors, an Assistant Treasurer shall have the power to perform his duties. Assistant Treasurers shall perform such other duties as may be assigned to them by the President or the Board of Directors.
SECTION 10. Other Officers. The Board of Directors may appoint or may authorize the Chairman of the Board or the President to appoint such other officers and agents as the appointer may deem necessary and proper, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the appointer.
SECTION 11. Bond. If required by the Board of Directors, the Treasurer and such other directors, officers, employees and agents of the Corporation as the Board of Directors may specify, shall give the Corporation a bond in such amount, in such form and with such security, surety or sureties, as may be satisfactory to the Board of Directors, conditioned on the faithful performance of the duties of their office and for the restoration to the Corporation, in case of their death, resignation, or removal from their office of all books, papers, vouchers, monies, securities and property of whatever kind in their possession belonging to the Corporation. All premiums on such bonds shall be paid by the Corporation.
SECTION 12. Removal. Any officer (or the Chairman of the Board of Directors) of the Corporation may be removed by the Board of Directors whenever, in its judgment, the best interests of the Corporation will be served thereby, but such removal shall be without prejudice to the contractual rights, if any, of the officer (or the Chairman of the Board of Directors) so removed.
ARTICLE IV
CAPITAL STOCK
SECTION 1. Stock Certificates. Certificates representing shares of stock of the Corporation shall be in such form consistent with the laws of the State of Maryland as shall be determined by the Board of Directors. All certificates for shares of stock shall be consecutively numbered or otherwise identified. The name and address of the person to whom the shares of stock represented thereby are issued, with the number of shares and date of issue, shall be entered on the stock transfer records of the Corporation.
SECTION 2. Redemption and Transfer. Any holder of stock of the Corporation desiring to redeem or transfer shares of stock standing in the name of such holder on the books of the Corporation shall deliver to the Corporation or to its agent duly authorized for such purpose a written unconditional request, in form acceptable to the Corporation, for such redemption or transfer. If certificates evidencing such shares have been issued, such certificates shall also be so delivered in transferable form duly endorsed or accompanied by all necessary stock transfer stamps or currency or certified or bank cashier's check payable to the order of the Corporation for the appropriate price thereof. The Corporation or its duly authorized agent may require that the signature of a redeeming stockholder on any or all of the request, endorsement or stock power be guaranteed and that other documentation in accordance with the custom of brokers be
so delivered where appropriate, such as proof of capacity and power to make request or transfer. All documents and funds shall be deemed to have been delivered only when physically deposited at such office or other place of deposit as the Corporation or its duly authorized agent shall from time to time designate. At any time during which the right of redemption is suspended or payment for such shares is postponed pursuant to the Investment Company Act of 1940, as amended, or any rule, regulation or order thereunder, any stockholder may withdraw his request (and certificates and funds, if any) or may leave the same on deposit, in which case the redemption price shall be the net asset value next applicable after such suspension or postponement is terminated.
SECTION 3. Lost, Mutilated, Destroyed or Wrongfully Taken Certificates. Any person claiming a stock certificate to have been lost, mutilated, destroyed or wrongfully taken, and who requests the issuance of a new certificate before the Corporation has notice that the certificate alleged to have been lost, mutilated, destroyed or wrongfully taken has been acquired by a bona fide purchaser, shall make an affidavit of that fact and shall give the Corporation and its transfer agents and registrars a bond, with sufficient surety, to indemnify them against any loss or claim arising as a result of the issuance of a new certificate. The form and amount of such bond and the surety thereon shall in each case be deemed sufficient if satisfactory to the President or Treasurer of the Corporation.
ARTICLE V
GENERAL PROVISIONS
SECTION 1. Fiscal Year. The fiscal year of the Corporation shall be established by resolution of the Board of Directors.
SECTION 2. Amendments. These Bylaws may be altered, amended or repealed and new Bylaws may be adopted by a majority of the entire Board of Directors at any meeting of the Board of Directors.
SECTION 3. Names of Classes and Series of Shares. The names of the classes and series of shares which have been classified by the Corporation in its Articles of Incorporation and in Articles Supplementary shall be as follows:
Designation of Shares in Articles of Incorporation or Articles Supplementary Name of Class or Series ------------------------- ---------------------------------------------- Class B Common Shares................. Core Bond Fund, Class A Class B, Series 2 Common Shares....... Core Bond Fund, Class Y Class B, Series 3 Common Shares....... Core Bond Fund, Class B Class B, Series 4 Common Shares....... Core Bond Fund, Class C Class B, Series 5 Common Shares....... Core Bond Fund, Class R Class C Common Shares................. Intermediate Tax Free Fund, Class A Class C, Series 2 Common Shares....... Intermediate Tax Free Fund, Class Y |
Class C, Series 3 Common Shares....... Intermediate Tax Free Fund, Class B Class C, Series 4 Common Shares....... Intermediate Tax Free Fund, Class C Class D Common Shares................. Large Cap Value Fund, Class A Class D, Series 2 Common Shares....... Large Cap Value Fund, Class Y Class D, Series 3 Common Shares....... Large Cap Value Fund, Class B Class D, Series 4 Common Shares....... Large Cap Value Fund, Class C Class D, Series 5 Common Shares....... Large Cap Value Fund, Class R Class E Common Shares................. Mid Cap Value Fund, Class A Class E, Series 2 Common Shares....... Mid Cap Value Fund, Class Y Class E, Series 3 Common Shares....... Mid Cap Value Fund, Class B Class E, Series 4 Common Shares....... Mid Cap Value Fund, Class C Class E, Series 5 Common Shares....... Mid Cap Value Fund, Class R Class G Common Shares................. Balanced Fund, Class A Class G, Series 2 Common Shares....... Balanced Fund, Class Y Class G, Series 3 Common Shares....... Balanced Fund, Class B Class G, Series 4 Common Shares....... Balanced Fund, Class C Class G, Series 5 Common Shares....... Balanced Fund, Class R Class H Common Shares................. Equity Index Fund, Class A Class H, Series 2 Common Shares....... Equity Index Fund, Class Y Class H, Series 3 Common Shares....... Equity Index Fund, Class B Class H, Series 4 Common Shares....... Equity Index Fund, Class C Class H, Series 5 Common Shares....... Equity Index Fund, Class R Class I Common Shares................. Intermediate Term Bond Fund, Class A Class I, Series 2 Common Shares....... Intermediate Term Bond Fund, Class Y Class I, Series 3 Common Shares....... Intermediate Term Bond Fund, Class B Class I, Series 4 Common Shares....... Intermediate Term Bond Fund, Class C Class I, Series 5 Common Shares....... Intermediate Term Bond Fund, Class R Class J Common Shares................. Short Term Bond Fund, Class A Class J, Series 2 Common Shares....... Short Term Bond Fund, Class Y Class J, Series 3 Common Shares....... Short Term Bond Fund, Class B Class J, Series 4 Common Shares....... Short Term Bond Fund, Class C Class J, Series 5 Common Shares....... Short Term Bond Fund, Class R Class M Common Shares................. Minnesota Intermediate Tax Free Fund, Class A Class M, Series 2 Common Shares....... Minnesota Intermediate Tax Free Fund, Class Y Class M, Series 3 Common Shares....... Minnesota Intermediate Tax Free Fund, Class B Class M, Series 4 Common Shares....... Minnesota Intermediate Tax Free Fund, Class C Class N Common Shares................. Colorado Intermediate Tax Free Fund, Class A Class N, Series 2 Common Shares....... Colorado Intermediate Tax Free Fund, Class Y Class N, Series 3 Common Shares....... Colorado Intermediate Tax Free Fund, Class B Class N, Series 4 Common Shares....... Colorado Intermediate Tax Free Fund, Class C Class P Common Shares................. Small-Mid Cap Core Fund, Class A Class P, Series 2 Common Shares....... Small-Mid Cap Core Fund, Class Y Class P, Series 3 Common Shares....... Small-Mid Cap Core Fund, Class B Class P, Series 4 Common Shares....... Small-Mid Cap Core Fund, Class C Class P, Series 5 Common Shares....... Reserved (formerly Technology Fund, Class R) Class Q Common Shares................. International Fund, Class A |
Class Q, Series 2 Common Shares....... International Fund, Class Y Class Q, Series 3 Common Shares....... International Fund, Class B Class Q, Series 4 Common Shares....... International Fund, Class C Class Q, Series 5 Common Shares....... International Fund, Class R Class T Common Shares................. Equity Income Fund, Class A Class T, Series 2 Common Shares....... Equity Income Fund, Class B Class T, Series 3 Common Shares....... Equity Income Fund, Class Y Class T, Series 4 Common Shares....... Equity Income Fund, Class C Class T, Series 5 Common Shares....... Equity Income Fund, Class R Class V Common Shares................. Real Estate Securities Fund, Class A Class V, Series 2 Common Shares....... Real Estate Securities Fund, Class B Class V, Series 3 Common Shares....... Real Estate Securities Fund, Class Y Class V, Series 4 Common Shares....... Real Estate Securities Fund, Class C Class V, Series 5 Common Shares....... Real Estate Securities Fund, Class R Class X Common Shares................. Oregon Intermediate Tax Free Fund, Class Y Class X, Series 2 Common Shares....... Oregon Intermediate Tax Free Fund, Class A Class X, Series 3 Common Shares....... Oregon Intermediate Tax Free Fund, Class C Class Y Common Shares................. California Intermediate Tax Free Fund, Class A Class Y, Series 2 Common Shares....... California Intermediate Tax Free Fund, Class Y Class Y, Series 3 Common Shares....... California Intermediate Tax Free Fund, Class C Class AA Common Shares................ Small Cap Value Fund, Class A Class AA, Series 2 Common Shares...... Small Cap Value Fund, Class B Class AA, Series 3 Common Shares...... Small Cap Value Fund, Class Y Class AA, Series 4 Common Shares...... Small Cap Value Fund, Class C Class AA, Series 5 Common Shares...... Small Cap Value Fund, Class R Class DD Common Shares................ Tax Free Fund, Class A Class DD, Series 2 Common Shares...... Tax Free Fund, Class B Class DD, Series 3 Common Shares...... Tax Free Fund, Class Y Class DD, Series 4 Common Shares...... Tax Free Fund, Class C Class EE Common Shares................ Minnesota Tax Free Fund, Class A Class EE, Series 2 Common Shares...... Minnesota Tax Free Fund, Class B Class EE, Series 3 Common Shares...... Minnesota Tax Free Fund, Class Y Class EE, Series 4 Common Shares...... Minnesota Tax Free Fund, Class C Class HH Common Shares................ High Income Bond Fund, Class A Class HH, Series 2 Common Shares...... High Income Bond Fund, Class B Class HH, Series 3 Common Shares...... High Income Bond Fund, Class Y Class HH, Series 4 Common Shares...... High Income Bond Fund, Class C Class HH, Series 5 Common Shares...... High Income Bond Fund, Class R Class I I Common Shares............... California Tax Free Fund, Class A Class I I, Series 2 Common Shares..... California Tax Free Fund, Class C Class I I, Series 3 Common Shares..... California Tax Free Fund, Class Y Class JJ Common Shares................ Arizona Tax Free Fund, Class A Class JJ, Series 2 Common Shares...... Arizona Tax Free Fund, Class C Class JJ, Series 3 Common Shares...... Arizona Tax Free Fund, Class Y Class KK Common Shares................ Colorado Tax Free Fund, Class A Class KK, Series 2 Common Shares...... Colorado Tax Free Fund, Class C |
Class KK, Series 3 Common Shares...... Colorado Tax Free Fund, Class Y Class LL Common Shares................ Total Return Bond Fund, Class A Class LL, Series 2 Common Shares...... Total Return Bond Fund, Class B Class LL, Series 3 Common Shares...... Total Return Bond Fund, Class C Class LL, Series 4 Common Shares...... Total Return Bond Fund, Class Y Class LL, Series 5 Common Shares...... Total Return Bond Fund, Class R Class MM Common Shares................ Nebraska Tax Free Fund, Class A Class MM, Series 2 Common Shares...... Nebraska Tax Free Fund, Class C Class MM, Series 3 Common Shares...... Nebraska Tax Free Fund, Class Y Class QQ Common Shares................ Large Cap Growth Opportunities Fund, Class A Class QQ, Series 2 Common Shares...... Large Cap Growth Opportunities Fund, Class B Class QQ, Series 3 Common Shares...... Large Cap Growth Opportunities Fund, Class C Class QQ, Series 4 Common Shares...... Large Cap Growth Opportunities Fund, Class Y Class QQ, Series 5 Common Shares...... Large Cap Growth Opportunities Fund, Class R Class SS Common Shares................ Mid Cap Growth Opportunities Fund, Class A Class SS, Series 2 Common Shares...... Mid Cap Growth Opportunities Fund, Class B Class SS, Series 3 Common Shares...... Mid Cap Growth Opportunities Fund, Class C Class SS, Series 4 Common Shares...... Mid Cap Growth Opportunities Fund, Class Y Class SS, Series 5 Common Shares...... Mid Cap Growth Opportunities Fund, Class R Class TT Common Shares................ Small Cap Growth Opportunities Fund, Class A Class TT, Series 2 Common Shares...... Small Cap Growth Opportunities Fund, Class B Class TT, Series 3 Common Shares...... Small Cap Growth Opportunities Fund, Class C Class TT, Series 4 Common Shares...... Small Cap Growth Opportunities Fund, Class Y Class TT, Series 5 Common Shares...... Small Cap Growth Opportunities Fund, Class R Class UU Common Shares................ Small Cap Select Fund, Class A Class UU, Series 2 Common Shares...... Small Cap Select Fund, Class B Class UU, Series 3 Common Shares...... Small Cap Select Fund, Class C Class UU, Series 4 Common Shares...... Small Cap Select Fund, Class Y Class UU, Series 5 Common Shares...... Small Cap Select Fund, Class R Class WW Common Shares................ Mid Cap Index Fund, Class A Class WW, Series 2 Common Shares...... Mid Cap Index Fund, Class B Class WW, Series 3 Common Shares...... Mid Cap Index Fund, Class C Class WW, Series 4 Common Shares...... Mid Cap Index Fund, Class Y Class WW, Series 5 Common Shares...... Mid Cap Index Fund, Class R Class XX Common Shares................ Small Cap Index Fund, Class A Class XX, Series 2 Common Shares...... Small Cap Index Fund, Class B Class XX, Series 3 Common Shares...... Small Cap Index Fund, Class C Class XX, Series 4 Common Shares...... Small Cap Index Fund, Class Y Class XX, Series 5 Common Shares...... Small Cap Index Fund, Class R Class ZZ Common Shares................ U.S. Government Mortgage Fund, Class A Class ZZ, Series 2 Common Shares...... U.S. Government Mortgage Fund, Class B Class ZZ, Series 3 Common Shares...... U.S. Government Mortgage Fund, Class C Class ZZ, Series 4 Common Shares...... U.S. Government Mortgage Fund, Class Y Class ZZ, Series 5 Common Shares...... U.S. Government Mortgage Fund, Class R Class AAA Common Shares............... Missouri Tax Free Fund, Class A Class AAA, Series 2 Common Shares..... Missouri Tax Free Fund, Class B |
Class AAA, Series 3 Common Shares..... Missouri Tax Free Fund, Class C Class BBB Common Shares............... Ohio Tax Free Fund, Class A Class BBB, Series 2 Common Shares..... Ohio Tax Free Fund, Class C Class BBB, Series 3 Common Shares..... Ohio Tax Free Fund, Class Y Class CCC Common Shares............... Short Tax Free Fund, Class A Class CCC, Series 2 Common Shares..... Short Tax Free Fund, Class Y Class DDD Common Shares............... Intermediate Government Bond Fund, Class A Class DDD, Series 2 Common Shares..... Intermediate Government Bond Fund, Class Y Class EEE Common Shares............... Large Cap Select Fund, Class A Class EEE, Series 2 Common Shares..... Large Cap Select Fund, Class B Class EEE, Series 3 Common Shares..... Large Cap Select Fund, Class C Class EEE, Series 4 Common Shares..... Large Cap Select Fund, Class R Class EEE, Series 5 Common Shares..... Large Cap Select Fund, Class Y Class FFF Common Shares............... Inflation Protected Securities Fund, Class A Class FFF, Series 2 Common Shares..... Inflation Protected Securities Fund, Class C Class FFF, Series 3 Common Shares..... Inflation Protected Securities Fund, Class R Class FFF, Series 4 Common Shares..... Inflation Protected Securities Fund, Class Y Class GGG, Series Common Shares....... International Select Fund, Class A Class GGG, Series 2 Common Shares..... International Select Fund, Class B Class GGG, Series 3 Common Shares..... International Select Fund, Class C Class GGG, Series 4 Common Shares..... International Select Fund, Class R Class GGG, Series 5 Common Shares..... International Select Fund, Class Y Class HHH Common Shares............... Quantitative Large Cap Core Fund, Class A Class HHH, Series 2 Common Shares..... Quantitative Large Cap Core Fund, Class C Class HHH, Series 3 Common Shares..... Quantitative Large Cap Core Fund, Class R Class HHH, Series 4 Common Shares..... Quantitative Large Cap Core Fund, Class Y Class I I I Common Shares............. Quantitative Large Cap Value Fund, Class A Class I I I, Series 2 Common Shares... Quantitative Large Cap Value Fund, Class C Class I I I, Series 3 Common Shares... Quantitative Large Cap Value Fund, Class R Class I I I, Series 4 Common Shares... Quantitative Large Cap Value Fund, Class Y Class JJJ Common Shares............... Quantitative Large Cap Growth Fund, Class A Class JJJ, Series 2 Common Shares..... Quantitative Large Cap Growth Fund, Class C Class JJJ, Series 3 Common Shares..... Quantitative Large Cap Growth Fund, Class R Class JJJ, Series 4 Common Shares..... Quantitative Large Cap Growth Fund, Class Y |
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First American Investment Funds, Inc.
Exhibit A to Investment Advisory Agreement Effective June 20, 2007
Annual Advisory Fee as a
Percentage of Average Daily
Portfolio Effective Date Net Assets
--------- ------------------ ---------------------------
Large Cap Value Fund (1) April 2, 1991 0.65%
Mid Cap Value Fund April 2, 1991 0.70%
Core Bond Fund April 2, 1991 0.50%
Intermediate Tax Free Fund April 2, 1991 0.50%
Intermediate Term Bond Fund September 15, 1992 0.50%
Equity Index Fund September 15, 1992 0.25%
Short Term Bond Fund September 15, 1992 0.50%
Balanced Fund (1) September 15, 1992 0.65%
Minnesota Intermediate Tax Free Fund December 31, 1993 0.50%
Colorado Intermediate Tax Free Fund December 31, 1993 0.50%
Small-Mid Cap Core Fund December 31, 1993 0.70%
International Fund December 31, 1993 1.00%
Equity Income Fund (1) January 31, 1994 0.65%
Real Estate Securities Fund June 12, 1995 0.70%
Oregon Intermediate Tax Free Fund August 5, 1997 0.50%
California Intermediate Tax Free Fund August 5, 1997 0.50%
Small Cap Value Fund November 21, 1997 0.70%
Tax Free Fund July 24, 1998 0.50%
Minnesota Tax Free Fund July 24, 1998 0.50%
California Tax Free Fund February 1, 2000 0.50%
Arizona Tax Free Fund February 1, 2000 0.50%
Colorado Tax Free Fund February 1, 2000 0.50%
Total Return Bond Fund February 1, 2000 0.60%
Nebraska Tax Free Fund February 28, 2001 0.50%
High Income Bond Fund February 28, 2001 0.70%
Large Cap Growth Opportunities Fund (1) May 2, 2001 0.65%
Mid Cap Growth Opportunities Fund May 2, 2001 0.70%
Small Cap Growth Opportunities Fund May 2, 2001 1.00%
Small Cap Select Fund May 2, 2001 0.70%
Mid Cap Index Fund May 2, 2001 0.25%
Small Cap Index Fund May 2, 2001 0.40%
U.S. Government Mortgage Fund May 2, 2001 0.50%
Missouri Tax Free Fund May 2, 2001 0.50%
Ohio Tax Free Fund April 30, 2002 0.50%
Short Tax Free Fund October 25, 2002 0.50%
Intermediate Government Bond Fund October 25, 2002 0.50%
Large Cap Select Fund (1) December 4, 2002 0.65%
Inflation Protected Securities Fund October 1, 2004 0.50%
International Select Fund December 20, 2006 1.00%
Quantitative Large Cap Core Fund June 20, 2007 0.30%
Quantitative Large Cap Growth Fund June 20, 2007 0.30%
Quantitative Large Cap Value Fund June 20, 2007 0.30%
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(1) The Adviser has agreed to a breakpoint schedule with each of Large Cap Growth Opportunities Fund, Large Cap Select Fund, Large Cap Value Fund, Balanced Fund and Equity Income Fund. The advisory fee paid separately by each of these funds will be based on an annual rate of 0.65% for the first $3 billion of each fund's average daily net assets; 0.625% for average daily net assets in excess of $3 billion up to $5 billion; and 0.60% for average daily net assets in excess of $5 billion.
EXPENSE LIMITATION AGREEMENT
THIS AGREEMENT is effective as of the 31st day of July, 2007, between FAF Advisors, Inc., as investment advisor (the "Advisor"), and First American Investment Funds, Inc. ("FAIF").
WHEREAS, FAIF includes the investment portfolios set forth in Exhibit A hereto (each a "Fund" and, collectively, the "Funds"), each of which offers one or more classes of shares; and
WHEREAS, the Advisor wishes to contractually limit fees and reimburse expenses for the Funds through July 31, 2008; and
WHEREAS, it is in the interests of both the Advisor and the shareholders of the Funds to limit Fund expenses as set forth herein.
NOW, THEREFORE, in consideration of the foregoing, the parties hereto agree that the Advisor will limit its fees and/or reimburse Fund expenses to the extent necessary to limit the annual operating expenses of the Funds to the amounts set forth in Exhibit A (which limits are set forth for each Fund on a class-by-class basis). The Advisor agrees that it may not be reimbursed by FAIF for the fees waived by the Advisor under the terms of this agreement. The Advisor agrees to continue the foregoing expense limits through July 31, 2008. Thereafter, any expense limit may be changed upon prior notice to FAIF's Board of Directors.
IN WITNESS WHEREOF, the parties have signed this agreement as of the day and year first above written.
FAF ADVISORS, INC. FIRST AMERICAN INVESTMENT FUNDS, INC.
By: /s/ Joseph M. Ulrey III By: /s/ Charles D. Gariboldi, Jr.
--------------------------------- ------------------------------------
Name: Joseph M. Ulrey III Name: Charles D. Gariboldi, Jr.
Title: Chief Financial Officer Title: Treasurer
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EXHIBIT A
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ANNUAL OPERATING EXPENSE
LIMITATION AS A PERCENTAGE OF
AVERAGE DAILY NET ASSETS
-----------------------------
Quantitative Large Cap Core Fund - Class A 0.7000%
Quantitative Large Cap Core Fund - Class C 1.4500%
Quantitative Large Cap Core Fund - Class R 0.9500%
Quantitative Large Cap Core Fund - Class Y 0.4500%
Quantitative Large Cap Growth Fund - Class A 0.7000%
Quantitative Large Cap Growth Fund - Class C 1.4500%
Quantitative Large Cap Growth Fund - Class R 0.9500%
Quantitative Large Cap Growth Fund - Class Y 0.4500%
Quantitative Large Cap Value Fund - Class A 0.7000%
Quantitative Large Cap Value Fund - Class C 1.4500%
Quantitative Large Cap Value Fund - Class R 0.9500%
Quantitative Large Cap Value Fund - Class Y 0.4500%
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LETTER OF AGREEMENT
FIRST AMERICAN INVESTMENT FUNDS, INC. - INTERNATIONAL FUND
March 28, 2007
Mr. David Warsoff
J.P. Morgan Investment Management Inc.
245 Park Avenue
New York, New York 10167
Dear Mr. Warsoff:
J.P. Morgan Investment Management Inc. (the "Sub-Advisor") currently serves as sub-advisor to the International Fund (the "Fund"), a series of First American Investment Funds, Inc. (the "Corporation"), pursuant to an Investment Sub-Advisory Agreement between FAF Advisors, Inc. (the "Advisor") and the Sub-Advisor, dated December 9, 2004 (the "Agreement").
Section 11 of the Agreement provides that the Agreement is terminable, without penalty, on 90 days' written notice by the Advisor, by the Corporation's Board, or by the Sub-Advisor. This section of the Agreement also provides that "the date of termination may be less than or more than 90 days after the written notice of termination so long as the duration of the notice period is agreed upon by the Advisor and Sub-Advisor." As the Advisor and Sub-Advisor desire to allow for a notice period of not more than 60 days, the Advisor and Sub-Advisor hereby agree as follows:
The Agreement is terminable, without penalty, on 60 days' written notice (the date of termination may be less than 60 days after the written notice of termination so long as the duration of the notice period is agreed upon by the Advisor and Sub-Advisor) by the Advisor, by the Corporation's Board, by vote of a majority of the Fund's outstanding voting securities, or by the Sub-Advisor, and will immediately terminate upon termination of the Advisory Agreement.
If the foregoing accurately sets forth our agreement, kindly indicate your acceptance hereof by signing and returning one of the enclosed copies hereof.
Very truly yours,
FAF ADVISORS, INC.
By: /s/ Joseph M. Ulrey, III
------------------------------------
Name: Joseph M. Ulrey, III
Title: Chief Financial Officer
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Accepted:
J.P. MORGAN INVESTMENT MANAGEMENT INC.
By: /s/ David Warsoff
----------------------------------
Name: David Warsoff
Title: Vice President
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LETTER OF AGREEMENT
FIRST AMERICAN INVESTMENT FUNDS, INC. - INTERNATIONAL SELECT FUND
March 28, 2007
Mr. John D. Hock
Altrinsic Global Advisors, LLC
100 First Stamford Place
Stamford, Connecticut 06902
Dear Mr. Hock:
Altrinsic Global Advisors, LLC (the "Sub-Advisor") currently serves as sub-advisor to the International Select Fund (the "Fund"), a series of First American Investment Funds, Inc. ("FAIF"), pursuant to an Investment Sub-Advisory Agreement between FAF Advisors, Inc. (the "Advisor") and the Sub-Advisor, dated November 27, 2006 (the "Agreement").
Section 11 of the Agreement provides that the Agreement is terminable, without penalty, on 90 days' written notice by the Advisor, by FAIF's Board, or by the Sub-Advisor. This section of the Agreement also provides that "the date of termination may be less than or more than 90 days after the written notice of termination so long as the duration of the notice period is agreed upon by the Advisor and Sub-Advisor." As the Advisor and Sub-Advisor desire to allow for a notice period of not more than 60 days, the Advisor and Sub-Advisor hereby agree as follows:
The Agreement is terminable, without penalty, on 60 days' written notice (the date of termination may be less than 60 days after the written notice of termination so long as the duration of the notice period is agreed upon by the Advisor and Sub-Advisor) by the Advisor, by FAIF's Board, by vote of a majority of the Fund's outstanding voting securities, or by the Sub-Advisor, and will immediately terminate upon termination of the Advisory Agreement.
If the foregoing accurately sets forth our agreement, kindly indicate your acceptance hereof by signing and returning one of the enclosed copies hereof.
Very truly yours,
FAF ADVISORS, INC.
By: /s/ Joseph M. Ulrey, III
------------------------------------
Name: Joseph M. Ulrey, III
Title: Chief Financial Officer
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Accepted:
ALTRINSIC GLOBAL ADVISORS, LLC
By: /s/ John D. Hock
----------------------------------
Name: John D. Hock
Title: Managing Member
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INVESTMENT SUB-ADVISORY AGREEMENT
FIRST AMERICAN INVESTMENT FUNDS, INC.
INTERNATIONAL SELECT FUND
THIS AGREEMENT is made as of the 22nd day of February, 2007, between FAF Advisors, Inc., a Delaware corporation (the "Advisor") and Hansberger Global Investors, Inc., a Delaware corporation (the "Sub-Advisor").
WHEREAS, the Advisor acts as the investment advisor for International Select Fund (the "Fund"), a series of First American Investment Funds, Inc. ("FAIF"), pursuant to an investment advisory agreement between the Advisor and FAIF (the "Advisory Agreement");
WHEREAS, the Advisor is responsible for the day-to-day management of the Fund and for the coordination of the investment of the Fund's assets in portfolio securities;
WHEREAS, specific portfolio purchases and sales for all or a portion of the Fund's assets may be made by one or more sub-advisors selected and appointed by the Advisor, subject to the pre-approval of the Board of Directors of FAIF (the "Board");
WHEREAS, the Advisor and the Sub-Advisor entered into an Investment Sub-Advisory Agreement, dated as of November 27, 2006, (the "Prior Agreement"), whereby the Advisor retained the Sub-Advisor to act as investment sub-advisor for that portion of the Fund's assets that the Advisor has determined to allocate to the Sub-Advisor, and the Sub-Advisor has been rendering such services to the Fund pursuant to the terms and conditions set forth in the Prior Agreement;
WHEREAS, Hansberger Group, Inc. ("Hansberger"), the parent company of the Sub-Advisor, is a party to a certain Stock Purchase Agreement, dated as of November 15, 2006 (the "Stock Purchase Agreement"), by and between Hansberger, certain stockholders of Hansberger and IXIS Asset Management US Group, L.P ("IXIS");
WHEREAS, pursuant to the Stock Purchase Agreement, IXIS, currently a minority stockholder of Hansberger, will acquire a majority of the issued and outstanding capital stock of Hansberger;
WHEREAS, the closing of the proposed transactions contemplated by the Stock Purchase Agreement will result in an assignment of the Prior Agreement for purposes of the Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, pursuant to the terms of the Prior Agreement, the Prior Agreement will terminate upon an assignment of the Prior Agreement for purposes of the 1940 Act;
WHEREAS, effective upon the closing of the transactions contemplated by the Stock Purchase Agreement (the "Effective Date"), the Prior Agreement will terminate and be of no further force and effect and this Agreement will become effective;
WHEREAS, in the event that this Agreement has not been approved by a majority of the outstanding voting securities of the Fund (as defined in the 1940 Act) before the assignment, Rule 15a-4 permits the Sub-Advisor to continue to provide services to the Fund for a period of 150 days after the Effective Date, subject to certain conditions; and
WHEREAS, the Board of Directors of FAIF has approved this Agreement and the Sub-Advisor is willing to furnish such services upon the terms and conditions herein set forth.
NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants contained herein, the parties agree as follows:
1. Appointment of Sub-Advisor. The Advisor desires to engage and hereby appoints the Sub-Advisor to act as investment sub-advisor for that portion of the assets of the Fund that the Advisor determines to allocate to the Sub-Advisor from time to time (referred to herein as the "Sub-Advisory Portfolio"). The Sub-Advisor accepts the appointment and agrees to furnish the services described herein for the compensation set forth below.
2. Duties of Sub-Advisor.
The Sub-Advisor is hereby employed and authorized to conduct a continual
program of investment, evaluation and, if appropriate, sale and reinvestment of
the assets in the Sub-Advisory Portfolio. In connection therewith, the
Sub-Advisor will (a) make investment decisions for the Sub-Advisory Portfolio;
(b) place purchase and sale orders for portfolio transactions in the
Sub-Advisory Portfolio; and (c) employ professional portfolio managers and
securities analysts to provide research services relating to the Sub-Advisory
Portfolio. Subject to the supervision of the Board and the Advisor, the
Sub-Advisor will manage the assets in the Sub-Advisory Portfolio in accordance
with (a) the Fund's investment objective(s), policies and restrictions stated in
the Prospectus, the SAI and the Charter Documents (as such terms are defined
below), (b) the Guidelines (as such term is defined below), and (c) applicable
laws and regulations. In managing the Sub-Advisory Portfolio, the Sub-Advisor
will not consider any other securities, cash or other investment the Fund owns.
The duties of the Sub-Advisor with respect to the Sub-Advisory Portfolio shall
be confined to those set forth herein.
The Advisor has furnished to the Sub-Advisor the Fund's compliance procedures pursuant to Rules 10f-3, 17a-7, and 17e-1 under the 1940 Act) (collectively, the "Compliance Procedures"), the Articles of Incorporation and Bylaws of FAIF, each as amended to date (the "Charter Documents"), the currently effective prospectus (the "Prospectus") and statement of additional information (the "SAI") of the Fund, the resolution of the Board approving the form of this Agreement, the resolution of the Board selecting the Advisor as investment advisor to the Fund and approving the form of the Advisory Agreement, the resolution adopted by the initial shareholder of the Fund approving the form of Advisory Agreement, and the Advisory Agreement. The Advisor agrees, on an ongoing basis, to provide to the Sub-Advisor, as promptly as practicable, copies of all amendments and supplements to the Compliance Procedures, the Prospectus and the SAI and amendments to the Charter Documents. The Advisor has furnished to the Sub-Advisor all written guidelines (the "Guidelines") setting forth additional operating policies and procedures, including any limitations on the types of securities
and other investment products in which the Fund is permitted to invest or on
investment activities in which the Fund is permitted to engage. The Advisor
retains the right, on prior written notice to the Sub-Advisor, to modify the
Guidelines at any time and in any manner. The Sub-Advisor shall either comply
with the amended Guidelines in accordance with a reasonable timeline agreed upon
by the Advisor and Sub-Advisor or terminate this Agreement in accordance with
Section 11 below.
3. Brokerage. In selecting brokers or dealers to execute transactions on behalf of the Fund, the Sub-Advisor will seek the best overall terms available. In assessing the best overall terms available for any transaction, the Sub-Advisor will consider factors it deems relevant, including, without limitation, the breadth of the market in the security, the price of the security, the financial condition and execution capability of the broker or dealer and the reasonableness of the commission, if any, for the specific transaction and on a continuing basis. In selecting brokers or dealers to execute a particular transaction, and in evaluating the best overall terms available, the Sub-Advisor is authorized to consider brokerage and research services (within the meaning of Section 28(e) of the Securities Exchange Act of 1934, as amended). The Sub-Advisor will not execute any portfolio transactions with a broker or dealer which is an "affiliated person" (as defined in the 1940 Act) of the Sub-Advisor or the Advisor, except pursuant to the Board's approved 17e-1 Policies and Procedures for affiliated brokerage transactions. The Advisor will provide the Sub-Advisor with a list of brokers and dealers that are "affiliated persons" of the Advisor.
4. Proxy Voting. The Sub-Advisor shall vote all proxies with respect to securities held in the Sub-Advisory Portfolio in accordance with the Sub-Advisor's proxy voting guidelines and procedures in effect from time to time. In the event material changes are made to such proxy voting guidelines, the Sub-Advisor agrees to provide the Advisor with a copy of the revised proxy voting guidelines. The Advisor agrees to instruct the Fund's custodian to forward all proxy materials and related shareholder communications to the Sub-Advisor promptly upon receipt. The Sub-Advisor agrees to promptly inform the Advisor and the Fund of any conflict of interest of which the Sub-Advisor is aware that the Sub-Advisor has in voting proxies with respect to securities held in the Sub-Advisory Portfolio. The Sub-Advisor shall not be liable with regard to voting of proxies or other corporate actions if the proxy materials and related communications are not received in a timely manner.
5. Information Provided to the Advisor.
(a) The Sub-Advisor will keep the Advisor informed of developments materially affecting the Fund and will, on its own initiative, furnish the Advisor from time to time with whatever information the Sub-Advisor believes is appropriate for this purpose.
(b) The Sub-Advisor will confer with the Advisor as the Advisor may reasonably request regarding the investment and management of the Sub-Advisory Portfolio. The Sub-Advisor will not advise the Advisor or act for the Advisor or the Fund in any legal proceedings, including bankruptcies or class actions, involving securities in the Sub-Advisory Portfolio or the issuers of the securities.
(c) The Sub-Advisor agrees to comply with all reporting requirements that the Board or the Advisor reasonably adopt and communicate to the Sub-Advisor in writing, including reporting requirements related to performance of the Sub-Advisory Portfolio, brokerage practices, and proxy voting.
(d) The Sub-Advisor agrees to furnish the information requested of the Sub-Advisor, as set forth in the Fund's Valuation Policies and Procedures, as currently existing or hereafter modified, including, without limitation, advising the Advisor as soon as practicable of any "significant event" (as defined in the Valuation Policies and Procedures) relating to, or affecting the value of, any security or other asset held in the Sub-Advisory Portfolio. A copy of the current Valuation Policies and Procedures is attached as Exhibit A. The Advisor agrees to notify the Sub-Advisor of any modification to the Valuation Policies and Procedures applicable to the Sub-Advisor in a timely manner.
(e) The Sub-Advisor has provided the Advisor with a true and complete copy of its compliance policies and procedures that are reasonably designed to prevent violations of the "federal securities laws" (as such term is defined in Rule 38a-1 under the 1940 Act) and Rule 206(4)-7 under the Investment Advisers Act of 1940, as amended (the "Advisers Act") (the "Sub-Advisor Compliance Policies"). The Sub-Advisor's chief compliance officer (the "Sub-Advisor CCO") shall provide to FAIF's Chief Compliance Officer (the "FAIF CCO") or his or her delegate, promptly (and in no event more than 10 business days) after the occurrence of the triggering event, the following:
(i) a report of any material changes to the Sub-Advisor Compliance Policies;
(ii) a report of any "material compliance matters," as defined by Rule 38a-1 under the 1940 Act, that have occurred in connection with the Sub-Advisor Compliance Policies;
(iii) a copy of a summary of the Sub-Advisor CCO's report with respect to the annual review of the Sub-Advisor Compliance Policies pursuant to Rule 206(4)-7 under the Advisers Act; and
(iv) an annual (or more frequently as the FAIF CCO may request) certification regarding the Sub-Advisor's compliance with Rule 206(4)-7 under the Advisers Act and Section 38a-1 under the 1940 Act as well as the foregoing sub-paragraphs (i) - (iii).
(f) The Sub-Advisor will timely notify the Advisor of any material violations by the Sub-Advisor of the Fund's investment policies or restrictions, the Guidelines, or any applicable law or regulation.
6. Standard of Care. The Sub-Advisor shall exercise its best judgment in rendering the services described in paragraphs 2, 3 and 4 above. The Sub-Advisor shall not be liable for any error of judgment or mistake of law or for any loss suffered by the Fund or the Advisor in connection with the matters to which this Agreement relates, except a loss resulting from willful misfeasance, bad faith or gross negligence on the Sub-Advisor's part in the performance of its duties or from reckless disregard by the Sub-Advisor of its obligations and duties under this Agreement (each such act or omission shall be referred to as "Disqualifying Conduct"). Neither the Sub-Advisor nor its members, partners, officers, employees and agents shall be liable to the
Advisor, the Fund, its shareholders or any other person (a) for the acts, omissions, errors of judgment or mistakes of law of any other fiduciary or other person with respect to the Fund or (b) for any failure or delay in performance of the Sub-Advisor's obligations under this Agreement arising out of or caused, directly or indirectly, by circumstances beyond its reasonable control, including, without limitation, acts of civil or military authority, national emergencies, labor difficulties, fire, mechanical breakdowns, flood or catastrophe, acts of God, insurrection, war, riots or failure of the mails, transportation, communication or power supply.
The Sub-Advisor does not guarantee the future performance of the Sub-Advisory Portfolio or any specific level of performance, the success of any investment decision or strategy that the Sub-Advisor may use, or the success of the Sub-Advisor's overall management of the Sub-Advisory Portfolio. The Advisor understands that investment decisions made for the Fund by the Sub-Advisor are subject to various market, currency, economic, political and business risks, and that those investment decisions will not always be profitable.
7. Compensation.
(a) In consideration of the services rendered pursuant to this Agreement, the Advisor will pay the Sub-Advisor on the fifth business day of each month a fee for the previous month according to the attached Schedule A; provided that, until this Agreement has been approved in accordance with Section 11(a) hereof, such compensation shall be payable to an interest bearing escrow account with the Fund's custodian bank. The fee for the period from the date of this Agreement to the end of the calendar month shall be prorated according to the proportion that such period bears to the full monthly period. Upon any termination of this Agreement before the end of a month, the fee for such part of that month shall be prorated according to the proportion that such period bears to the full monthly period and shall be payable upon the date of termination of this Agreement. For the purpose of determining fees payable to the Sub-Advisor, the value of the net assets of the Sub-Advisory Portfolio shall be computed at the times and in the manner specified in the Prospectus and/or the SAI.
(b) With respect to compensation paid to the escrow account described in
Section 7(a) hereof, if this Agreement is approved in accordance with Section
11(a) hereof, the amount in such escrow account with respect to the Fund shall
be paid to the Sub-Advisor on the date of such approval. If this Agreement is
not approved in accordance with Section 11(a) hereof, the Sub-Advisor shall be
paid, out of such escrow account, the lesser of (i) any costs reasonably
incurred by the Sub-Advisor in performing this Agreement, as approved by the
Board of Directors of FAIF (the "Board"), plus interest earned on that amount
while in escrow, or (ii) the total amount in such escrow account (plus interest
accrued thereon).
8. Expenses. The Sub-Advisor will bear all of its expenses in connection with the performance of its services under this Agreement. All other expenses to be incurred in the operation of the Fund will be borne by the Fund, except to the extent specifically assumed by the Sub-Advisor. The expenses to be borne by the Fund include, without limitation, the following: organizational costs, taxes, interest, brokerage fees and commissions, directors' fees, Securities and Exchange Commission fees and state Blue Sky qualification fees, advisory fees, charges of custodians, transfer and dividend disbursing agents' fees, certain insurance premiums, outside auditing and legal expenses, costs of independent pricing services, costs of maintaining
existence, costs attributable to investor services (including, without limitation, telephone and personnel expenses), costs of preparing and printing prospectuses and SAIs for regulatory purposes and for distribution to existing stockholders, costs of stockholders' reports and meetings, and any extraordinary expenses.
9. Services to Other Companies or Accounts. The Advisor understands that the Sub-Advisor now acts, will continue to act and may act in the future as investment advisor to fiduciary and other managed accounts and as investment advisor to other investment companies, and the Advisor has no objection to the Sub-Advisor so acting, provided that whenever the Sub-Advisory Portfolio and one or more other accounts or investment companies advised by the Sub-Advisor have available funds for investment, investments suitable and appropriate for each will be allocated in accordance with a methodology believed to be equitable to each entity. The Sub-Advisor agrees to similarly allocate opportunities to sell securities. The Advisor recognizes that, in some cases, this procedure may limit the size of the position that may be acquired or sold for the Fund. In addition, the Advisor understands that the persons employed by the Sub-Advisor to assist in the performance of the Sub-Advisor's duties hereunder will not devote their full time to such service and nothing contained herein shall be deemed to limit or restrict the right of the Sub-Advisor or any affiliate of the Sub-Advisor to engage in and devote time and attention to other business or to render services of whatever kind or nature.
10. Books and Records. In compliance with the requirements of Rule 31a-3 under the 1940 Act, the Sub-Advisor hereby agrees that all records which it specifically maintains for the Fund are the property of the Fund and further agrees to surrender promptly to the Fund copies of any of such records upon the Fund's or the Advisor's request. The Sub-Advisor further agrees to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act the records relating to its activities hereunder required to be maintained by Rule 31a-1 under the 1940 Act and to preserve the records relating to its activities hereunder required by Rule 204-2 under the Advisers Act for the period specified in said Rule.
11. Term of Agreement.
(a) This Agreement shall take effect on the Effective Date. In the event
that the Effective Date has not occurred on or before June 1, 2007, this
Agreement shall be void ab initio and neither the Sub-Advisor nor the Advisor
shall have any rights, duties or obligations hereunder. Unless this Agreement
has been approved by a majority of the outstanding voting securities of the Fund
(as defined in the 1940 Act), this Agreement shall terminate one hundred fifty
(150) days after the Effective Date. During this period, this Agreement is
terminable (i) at any time without penalty on 10 days' notice by the Advisor, by
the Sub-Advisor or the Board or (ii) by vote of the lesser of (A) 67% of the
shares of the Fund represented at a meeting if holders of 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.
(b) If this Agreement is approved in accordance with Section 11(a) hereof, then unless sooner terminated, this Agreement shall continue in effect for a period of two years from the Effective Date. Thereafter, this Agreement shall continue automatically for successive annual periods, provided such continuance is specifically approved at least annually by the Board in the manner required by the 1940 Act. This Agreement is terminable, without penalty, on 90
days' written notice (the date of termination may be less than or more than 90 days after the written notice of termination so long as the duration of the notice period is agreed upon by the Advisor and Sub-Advisor) by the Advisor, by the Board, or by the Sub-Advisor, and will immediately terminate upon termination of the Advisory Agreement. This Agreement also will terminate automatically in the event of its assignment (as defined in the 1940 Act).
12. Trade Settlement at Termination. Termination will be without prejudice to the completion of any transaction already initiated. On, or after, the effective date of termination, the Sub-Advisor shall be entitled, without prior notice to the Advisor or the Fund, to direct the Fund's custodian to retain and/or realize any assets of the Fund as may be required to settle transactions already initiated. Following the date of effective termination, any new transactions will only be executed by mutual agreement between the Advisor and the Sub-Advisor.
13. Indemnification. (a) The Advisor agrees to indemnify and hold harmless the Sub-Advisor and its members, partners, officers, employees, agents, successors and assigns (each a "Sub-Advisor Indemnified Person") from and against any and all claims, losses, liabilities or damages (including reasonable attorneys' fees and other related expenses) to which any Sub-Advisor Indemnified Person may become subject as a result of the Advisor's material breach of this Agreement or as a result of the Advisor's willful misfeasance, bad faith, gross negligence or reckless disregard of its obligations and duties hereunder or violation of applicable law; provided, however, that no Sub-Advisor Indemnified Person shall be indemnified for any claim, loss, liability or damage that may be sustained as a result of the Sub-Advisor's Disqualifying Conduct.
(b) The Sub-Advisor agrees to indemnify and hold harmless the Advisor and the Fund and their respective shareholders, members, partners, directors, officers, employees, agents, successors and assigns (each an "Advisor Indemnified Person") from and against any and all claims, losses, liabilities or damages (including reasonable attorney's fees and other related expenses) to which any Advisor Indemnified Person may become subject as a result of the Sub-Advisor's material breach of this Agreement or as a result of the Sub-Advisor's willful misfeasance, bad faith, gross negligence or reckless disregard of its obligations and duties hereunder or violation of applicable law; provided, however, that no Advisor Indemnified Person shall be indemnified for any claim, loss, liability or damage that may be sustained as a result of the Advisor's Disqualifying Conduct.
14. Delegation to Third Parties. Except where prohibited by applicable law or regulation, the Sub-Advisor may delegate or may employ a third party to perform any accounting, administrative, reporting and ancillary services required to enable the Sub-Advisor to perform its functions under this Agreement. Notwithstanding any other provision of the Agreement, the Sub-Advisor may provide information about the Advisor and the Fund to any such third party for the purposes of this paragraph, provided that the third party is subject to a confidentiality agreement that specifically prevents the misuse of any such information, including portfolio holdings. The Sub-Advisor will act in good faith and with due diligence in the selection, use and monitoring of third parties and shall be solely responsible for any loss, mistake, gross negligence or misconduct caused by such third party.
15. Disclosure. (a) Neither the Advisor, on its own behalf or on behalf of the Fund, or the Sub-Advisor shall disclose information of a confidential nature acquired in consequence of this Agreement, except for information that they may be entitled or bound to disclose by law, regulation or that is disclosed to their advisors where reasonably necessary for the performance of their professional services or, in the case of the Sub-Advisor, as permitted in accordance with Section 14 of this Agreement.
(b) Notwithstanding the provisions of Subsection 15(a), to the extent that any market counterparty with whom the Sub-Advisor deals requires information relating to the Fund (including, but not limited to, the identity of the Advisor or the Fund and market value of the Fund), the Sub-Advisor shall be permitted to disclose such information to the extent necessary to effect transactions on behalf of the Fund in accordance with the terms of this Agreement.
(c) Notwithstanding the provisions of Subsections 15(a) and 15(b), the Sub-Advisor acknowledges that the Advisor and the Fund intend to rely on Rule 17a-7, Rule 17a-10, Rule 10f-3, Rule 12d3-1 and Rule 17e-1 under the 1940 Act, and the Sub-Advisor hereby agrees that it (i) shall not consult with any other Sub-Advisor to the Fund with respect to transactions in securities for the Sub-Advisory Portfolio or any other transactions of Fund assets and (ii) will provide advice and otherwise perform services hereunder exclusively with respect to the Sub-Advisory Portfolio of the Fund.
16. Instruction to Custodian. The Sub-Advisor shall not have control of the investments or cash, including the investment of such cash, in the Fund but shall have authority to issue to the Fund's custodian such instructions as it may consider appropriate in connection with the settlement of any transaction relating to the Sub-Advisory Portfolio that it has initiated. In addition, the Fund's custodian shall be responsible for executing all foreign exchange transactions made or required to be made in conjunction with settling the purchase and sale of securities in the Sub-Advisory Portfolio. The Advisor shall ensure that the Fund's custodian is obliged to comply with any instructions of the Sub-Advisor given in accordance with this Agreement. The Sub-Advisor will not be responsible for supervising the Fund's custodian.
17. Anti-Money Laundering. The Advisor, on its own behalf and on behalf of the Fund, confirms that where it is acting as principal or where it is acting on behalf of another person (notwithstanding that it enters into this Agreement and any transactions as principal), it is in compliance with the anti-money laundering regulations that apply to it. The Advisor shall provide any document or information to the Sub-Advisor that the Sub-Advisor may request for complying with its own anti-money laundering regulations.
18. Representations and Warranties. (a) The Advisor represents and warrants to the Sub-Advisor that the Advisor:
(i) has full power and authority to appoint the Sub-Advisor to manage the Fund in accordance with the terms of this Agreement; and
(ii) this Agreement is valid and has been duly authorized by appropriate action of the Advisor, the Board and the Fund's shareholders, does not violate any obligation by which the Advisor is bound, and when so executed and delivered, will be binding upon the
Advisor in accordance with its terms subject to applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally and general principles of equity.
(b) The Sub-Advisor represents and warrants to the Advisor that the Sub-Advisor:
(i) is registered as an "investment adviser" under the Advisers Act;
(ii) is not currently the subject of, and has not been the subject of during the last three (3) years, any enforcement action by a regulator; and
(iii) maintains insurance coverage in an appropriate amount and shall upon request provide to the Advisor any information it may reasonably require concerning the amount of or scope of such insurance.
19. Miscellaneous.
(a) Notices. All notices provided for by this Agreement shall be in writing and shall be deemed given when received, against appropriate receipt, by the President with a copy to the General Counsel in the case of the Sub-Advisor and the Advisor's General Counsel in the case of the Advisor, or such other person as a party shall designate by notice to the other parties.
(b) Amendment. This Agreement may be amended at any time, but only by written agreement between the Advisor and the Sub-Advisor, which amendment must be approved by the Board in the manner required by the 1940 Act.
(c) Entire Agreement. This Agreement constitutes the entire agreement among the parties hereto and supersedes any prior agreement among the parties relating to the subject matter hereof.
(d) Severability. If any provision of this Agreement will be held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement will not be affected thereby.
(e) Headings. The paragraph headings of this Agreement are for convenience of reference and do not constitute a part hereof.
(f) Governing Law. This Agreement shall be governed in accordance with the internal laws of the State of Delaware, without giving effect to principles of conflict of laws.
(g) Use of Sub-Advisor's Name. The Fund and the Advisor agree to submit any proposed sales literature that mentions the Sub-Advisor (other than identifying the Sub-Advisor as Sub-Advisor to the Fund) to the Sub-Advisor for review prior to use and the Sub-Advisor agrees to promptly review such materials by a reasonable and appropriate deadline. The Advisor agrees to cause the Advisor and the Fund's distributor to promptly review all such sales literature for compliance with relevant requirements, to promptly advise the Sub-Advisor of any deficiencies contained in such sales literature, and to promptly file complying sales literature with the relevant regulatory authorities. Neither the Advisor, nor the Fund nor any affiliate of the
foregoing will use the registered trademarks, service marks, logos, names or any other proprietary designations of Sub-Advisor, its subsidiaries and/or affiliates (collectively, "Sub-Advisor Marks") in any advertising or promotional materials without Sub-Advisor's prior written approval, which will not be unreasonably withheld. Advisor and Sub-Advisor will work together to develop mutually agreeable standards and procedures for the review of materials bearing Sub-Advisor Marks to facilitate the efficient creation and use of such advertising or promotional materials.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective duly authorized representatives as of the date first written above.
FAF Advisors, Inc.
By: /s/ Joseph M. Ulrey, III
------------------------------------
Name: Joseph M. Ulrey, III
Title: Chief Financial Officer
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Hansberger Global Investors, Inc.
By: /s/ Ronald W. Holt, Jr.
------------------------------------
Name: Ronald W. Holt, Jr.
Title: President
|
LETTER OF AGREEMENT
FIRST AMERICAN INVESTMENT FUNDS, INC. - INTERNATIONAL SELECT FUND
March 28, 2007
Mr. Ronald W. Holt
Hansberger Global Investors, Inc.
401 East Las Olas Boulevard, Suite 1700
Fort Lauderdale, Florida 33301
Dear Mr. Holt:
Hansberger Global Investors, Inc. (the "Sub-Advisor") currently serves as sub-advisor to the International Select Fund (the "Fund"), a series of First American Investment Funds, Inc. ("FAIF"), pursuant to an Interim Investment Sub-Advisory Agreement between FAF Advisors, Inc. (the "Advisor") and the Sub-Advisor, dated February 22, 2007 (the "Agreement").
Section 11(b) of the Agreement provides that the Agreement is terminable, without penalty, on 90 days' written notice by the Advisor, by FAIF's Board, or by the Sub-Advisor. This section of the Agreement also provides that "the date of termination may be less than or more than 90 days after the written notice of termination so long as the duration of the notice period is agreed upon by the Advisor and Sub-Advisor." As the Advisor and Sub-Advisor desire to allow for a notice period of not more than 60 days, under Section 11(b), the Advisor and Sub-Advisor hereby agree as follows:
The Agreement is terminable, under Section 11(b) of the Agreement, without penalty, on 60 days' written notice (the date of termination may be less than 60 days after the written notice of termination so long as the duration of the notice period is agreed upon by the Advisor and Sub-Advisor) by the Advisor, by FAIF's Board, by vote of a majority of the Fund's outstanding voting securities, or by the Sub-Advisor, and will immediately terminate upon termination of the Advisory Agreement.
If the foregoing accurately sets forth our agreement, kindly indicate your acceptance hereof by signing and returning one of the enclosed copies hereof.
Very truly yours,
FAF ADVISORS, INC.
By: /s/ Joseph M. Ulrey, III
------------------------------------
Name: Joseph M. Ulrey, III
Title: Chief Financial Officer
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Accepted:
HANSBERGER GLOBAL INVESTORS, INC.
By: /s/ Ronald W. Holt
---------------------------------
Name: Ronald W. Holt
Title: President
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LETTER OF AGREEMENT
FIRST AMERICAN INVESTMENT FUNDS, INC. - INTERNATIONAL SELECT FUND
March 28, 2007
Mr. Charles L. Carroll
Lazard Asset Management LLC
30 Rockefeller Plaza
New York, New York 10112
Dear Mr. Carroll:
Lazard Asset Management LLC (the "Sub-Advisor") currently serves as sub-advisor to the International Select Fund (the "Fund"), a series of First American Investment Funds, Inc. ("FAIF"), pursuant to an Investment Sub-Advisory Agreement between FAF Advisors, Inc. (the "Advisor") and the Sub-Advisor, dated November 27, 2006 (the "Agreement").
Section 11 of the Agreement provides that the Agreement is terminable, without penalty, on 90 days' written notice by the Advisor, by FAIF's Board, or by the Sub-Advisor. This section of the Agreement also provides that "the date of termination may be less than or more than 90 days after the written notice of termination so long as the duration of the notice period is agreed upon by the Advisor and Sub-Advisor." As the Advisor and Sub-Advisor desire to allow for a notice period of not more than 60 days, the Advisor and Sub-Advisor hereby agree as follows:
The Agreement is terminable, without penalty, on 60 days' written notice (the date of termination may be less than 60 days after the written notice of termination so long as the duration of the notice period is agreed upon by the Advisor and Sub-Advisor) by the Advisor, by FAIF's Board, by vote of a majority of the Fund's outstanding voting securities, or by the Sub-Advisor, and will immediately terminate upon termination of the Advisory Agreement.
If the foregoing accurately sets forth our agreement, kindly indicate your acceptance hereof by signing and returning one of the enclosed copies hereof.
Very truly yours,
FAF ADVISORS, INC.
By: /s/ Joseph M. Ulrey, III
------------------------------------
Name: Joseph M. Ulrey, III
Title: Chief Financial Officer
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Accepted:
LAZARD ASSET MANAGEMENT LLC
By: /s/ Charles L. Carroll
---------------------------------
Name: Charles L. Carroll
Title: Deputy Chairman
|
FIRST AMERICAN INVESTMENT FUNDS, INC.
DISTRIBUTION AGREEMENT
THIS AGREEMENT is made as of this 1st day of July, 2007, between FIRST AMERICAN INVESTMENT FUNDS, INC., a Maryland corporation (the "Fund"), and QUASAR DISTRIBUTORS, LLC, a Delaware limited liability company (the "Distributor").
WHEREAS, this Agreement replaces and supersedes the Distribution Agreement dated September 19, 2006, between the Fund and the Distributor.
WHEREAS, the Fund is registered as an investment company with the Securities and Exchange Commission ("SEC") under the Investment Company Act of 1940, as amended ("1940 Act"), and its shares are registered with the SEC under the Securities Act of 1933, as amended ("1933 Act"); and
WHEREAS, the Distributor is registered as a broker-dealer with the SEC under the Securities Exchange Act of 1934, as amended;
WHEREAS, the Fund desires to appoint the Distributor to act as distributor and shareholder servicing agent for the shares of the Fund's portfolios, as now in existence or hereinafter created from time to time (the "Shares"), in accordance with the terms and conditions of this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter contained, the Fund and Distributor hereby agree as follows:
ARTICLE 1. Sale of Shares. The Fund grants to the Distributor the exclusive right to sell Shares of each portfolio of the Fund (each a "Portfolio"), at the net asset value per Share plus any applicable sales charge, in accordance with the respective Portfolio's current prospectus, as agent and on behalf of the Fund, during the term of this Agreement and subject to the registration requirements of the 1933 Act, the rules and regulations of the Securities and Exchange Commission ("SEC") and the laws governing the sale of securities in the various states ("Blue Sky Laws").
ARTICLE 2. Solicitation of Sales. In consideration of these rights granted to the Distributor, the Distributor agrees to use all reasonable efforts, consistent with its other business, in connection with the distribution of Shares of the Portfolios; provided, however, that the Distributor shall not be prevented from entering into like arrangements with other issuers. The provisions of this paragraph do not obligate the Distributor to register as a broker or dealer under the Blue Sky Laws of any jurisdiction when it determines it would be uneconomical for it to do so or to maintain its registration in any jurisdiction in which it is now registered nor obligate the Distributor to sell any particular number of Shares.
ARTICLE 3. Authorized Representations. The Distributor is not authorized by the Fund to give any information or to make any representations other than those contained in the current registration statements and prospectuses of the Fund filed with the SEC or contained in Shareholder reports or other material that may be prepared by or on behalf of the Fund for the Distributor's use. The Distributor may prepare and distribute sales literature and other material as it may deem appropriate, provided that such literature and materials have been approved by the Fund prior to their use.
ARTICLE 4. Registration of Shares. The Fund agrees that it will take all action necessary to register Shares under the federal and state securities laws so that there will be available for sale the number of Shares the Distributor may reasonably be expected to sell and to pay all fees associated with said registration. The Fund shall make available to the Distributor such number of copies of its currently
effective prospectus and statement of additional information as the Distributor may reasonably request. The Fund shall furnish to the Distributor copies of all information, financial statements and other papers that the Distributor may reasonably request for use in connection with the distribution of Shares of the Portfolios.
ARTICLE 5. Allocation of Expenses. During the period of this Agreement, the Fund shall pay or cause to be paid all expenses, costs and fees incurred by the Fund which are not assumed by the Distributor or U.S. Bancorp Asset Management, Inc. (the "Adviser"). The Distributor agrees to provide, and shall pay costs which it incurs in connection with, ongoing servicing and/or maintenance of shareholder accounts with respect to each Portfolio (such costs are referred to as "Shareholder Servicing Costs"). Shareholder Servicing Costs include, but are not limited to, an allocation of the Distributor's overhead and payments made to persons, including employees of the Distributor, who respond to inquiries of shareholders regarding their ownership of Portfolio shares or their accounts with a Portfolio, or who provide other administrative services not otherwise required to be provided by the applicable Portfolio's investment adviser, administrator or transfer agent. The Distributor also shall pay all of its own costs incurred in connection with the distribution of shares of the Portfolios ("Distribution Expenses"). Distribution Expenses include, but are not limited to, the following expenses incurred by the Distributor: initial and ongoing sales compensation (in addition to sales loads) paid to investment executives of the Distributor and to other broker-dealers and participating financial institutions which the Distributor has agreed to pay; expenses incurred in the printing of prospectuses, statements of additional information and reports used for sales purposes; expenses of preparation and distribution of sales literature; expenses of advertising of any type; an allocation of the Distributor's overhead; payments to and expenses of persons who provide support services in connection with the distribution of Portfolio shares; and other distribution-related expenses.
ARTICLE 6. Compensation of Distributor.
(a) The Distributor shall be entitled to receive or retain any front-end sales charge imposed in connection with sales of shares of each Portfolio, as set forth in the applicable current Prospectus.
(b) The Distributor shall be entitled to receive or retain any contingent deferred sales charge imposed in connection with any redemption of shares of each Portfolio, as set forth in the applicable current Prospectus.
(c) Pursuant to the Fund's Amended and Restated Distribution and Service Plan (the "Plan") adopted by the Board of Directors of the Fund in accordance with Rule 12b-1 under the 1940 Act:
(i) The Class A shares of each Portfolio will pay the Distributor a total fee in connection with the servicing of shareholder accounts of such class and in connection with distribution-related services provided in respect of such class, calculated and payable monthly, at the annual rate of .25% of the value of the average daily net assets of such class. All or any portion of such total fee may be payable as a Shareholder Servicing Fee designed to cover Shareholder Servicing Costs, and all or any portion of such total fee may be payable as a Distribution Fee designed to cover Distributions Expenses, as determined from time to time by the Fund's Board of Directors. Until further action by the Board of Directors, all of such fee shall be designated and payable as a Shareholder Servicing Fee.
(ii) The Class B shares of each Portfolio offering such shares are authorized to pay the Distributor a total fee in connection with the servicing of shareholder accounts of such class and in connection with distribution-related services provided in respect of such class, calculated and payable monthly, at the annual rate of 1.00% of the value of the average daily net assets of such class. A portion of such total fee will be payable as a Shareholder Servicing Fee and a portion of
such total fee will be payable as a Distribution Fee, as determined from time to time by the Fund's Board of Directors. Until further action by the Board of Directors, a portion of such total fee equal to .25% of the value of the average daily net assets of such class shall be designated and payable as a Shareholder Servicing Fee and the remainder of such fee shall be designated as a Distribution Fee.
(iii) The Class C shares of each Portfolio offering such shares are authorized to pay the Distributor a total fee in connection with the servicing of shareholder accounts of such class and in connection with distribution-related services provided in respect of such class, calculated and payable monthly, at the annual rate of .65% of the value of the average daily net assets of such class for the Portfolios set forth in Exhibit A hereto (the "Tax-Free Portfolios") and 1.00% for each other Portfolio offering such shares. A portion of such total fee will be payable as a Shareholder Servicing Fee and a portion of such total fee will be payable as a Distribution Fee, as determined from time to time by the Fund's Board of Directors. Until further action by the Board of Directors, a portion of such total fee equal to .25% for each Portfolio shall be designated and payable as a Shareholder Servicing Fee and the remainder of such fee shall be designated as a Distribution Fee.
(iv) The Class R shares of each Portfolio offering such shares are authorized to pay the Distributor a total fee in connection with the servicing of shareholder accounts of such class and in connection with distribution-related services provided in respect of such class, calculated and payable monthly, at the annual rate of .50% of the value of the average daily net assets of such class. A portion of such total fee may be payable as a Shareholder Servicing Fee and all or any portion of such total fee may be payable as a Distribution Fee, as determined from time to time by the Fund's Board of Directors. Until further action by the Board of Directors, a portion of such total fee equal to .25% of the value of the average daily net assets of such class shall be designated and payable as a Shareholder Servicing Fee and the remainder of such fee shall be designated as a Distribution Fee.
(v) Amounts payable to the Distributor under the Plan may exceed or be less than the Distributor's actual Distribution Expenses and Shareholder Servicing Costs. In the event such Distribution Expenses and Shareholder Servicing Costs exceed amounts payable to the Distributor under the Plan, the Distributor shall not be entitled to reimbursement by the Fund.
(vi) In each year during which this Agreement remains in effect, the Distributor will prepare and furnish to the Board of Directors of the Fund, on a quarterly basis, written reports complying with the requirements of Rule 12b-1 under the 1940 Act that set forth the amounts expended under this Agreement and the Plan and the purposes for which those expenditures were made.
(d) The Distributor may reallow any or all of the sales charges that it is paid under this Agreement to such dealers as the Distributor may from time to time determine.
(e) The Distributor may transfer its right to all or a portion of the payments described above in Article 6, Section (c)(ii) to third persons who provide funding to the Distributor, provided that any such transfer shall not be deemed a transfer of the Distributor's obligations under this Agreement. Upon receipt of direction from the Distributor to pay such fees to a transferee, the Fund shall make payment in accordance with such direction.
ARTICLE 7. Indemnification of Distributor. The Fund agrees to indemnify and hold harmless the Distributor and each of its directors and officers and each person, if any, who controls the Distributor
within the meaning of Section 15 of the 1933 Act against any loss, liability, claim, damages or expense (including the reasonable cost of investigating or defending any alleged loss, liability, claim, damages, or expense and reasonable counsel fees and disbursements incurred in connection therewith), arising by reason of any person acquiring any Shares, based upon the ground that the registration statement, prospectus, shareholder reports or other information filed or made public by the Fund (as from time to time amended) included an untrue statement of a material fact or omitted to state a material fact required to be stated or necessary in order to make the statements made not misleading. However, the Fund does not agree to indemnify the Distributor or hold it harmless to the extent that the statements or omission was made in reliance upon, and in conformity with, information furnished to the Fund by or on behalf of the Distributor.
In no case (i) is the indemnity of the Fund to be deemed to protect the Distributor against any liability to the Fund or its shareholders to which the Distributor or such person otherwise would be subject by reason of willful misfeasance, bad faith or negligence in the performance of its duties or by reason of its reckless disregard of its obligations and duties under this Agreement, or (ii) is the Fund to be liable to the Distributor under the indemnity agreement contained in this paragraph with respect to any claim made against the Distributor or any person indemnified unless the Distributor or other person shall have notified the Fund in writing of the claim within a reasonable time after the summons or other first written notification giving information of the nature of the claim shall have been served upon the Distributor or such other person (or after the Distributor or the person shall have received notice of service on any designated agent). However, failure to notify the Fund of any claim shall not relieve the Fund from any liability which it may have to the Distributor or any person against whom such action is brought otherwise than on account of its indemnity agreement contained in this paragraph.
The Fund shall be entitled to participate at its own expense in the defense or, if it so elects, to assume the defense of any suit brought to enforce any claims subject to this indemnity provision. If the Fund elects to assume the defense of any such claim, the defense shall be conducted by counsel chosen by the Fund and satisfactory to the indemnified defendants in the suit whose approval shall not be unreasonably withheld. In the event that the Fund elects to assume the defense of any suit and retain counsel, the indemnified defendants shall bear the fees and expenses of any additional counsel retained by them. If the Fund does not elect to assume the defense of a suit, it will reimburse the indemnified defendants for the reasonable fees and expenses of any counsel retained by the indemnified defendants.
The Fund agrees to notify the Distributor promptly of the commencement of any litigation or proceedings against it or any of its officers or Directors in connection with the issuance or sale of any of its Shares.
ARTICLE 8. Anti-Money Laundering Compliance Program. The USA PATRIOT Act imposes certain obligations on Broker-Dealers through new anti-money laundering provisions and amendments to the Bank Secrecy Act. Distributor agrees to adopt appropriate policies and procedures sufficient to ensure compliance with federal anti-money laundering laws and regulations, including the following:
(a) Filing of Forms and Reports. The Distributor's exclusive business purpose is to provide mutual fund underwriting and distribution services, and it does not receive customer funds. However, any funds received by the Distributor, including funds received by the Distributor's registered representatives, will be processed in accordance with applicable law, including filing of Forms 8300, filing of Suspicious Activity Reports, and filing of any other forms required by applicable regulations.
(b) Employee Awareness and NASD Training. The Distributor has implemented a program to educated employees with respect to its anti-money laundering program and applicable anti-money
laundering regulations. To comply with the National Association of Securities Dealers training requirements, all of the Distributor's registered representatives are required to complete an anti-money laundering course as part of the Distributor's Firm Element Continuing Education. The course concludes with a test on the subject as per the NASD Rule.
(c) Quarterly Reports. The Distributor (i) will report to the Fund's Board of Directors, at least quarterly, any forms filed and any compliance exceptions of its anti-money laundering policy, including resolution of such exceptions, or certify that there were no such forms filed and no such compliance exceptions to its anti-money laundering program; and (ii) will, on an annual basis, provide to the Board of Directors a copy of any policies created as part of its anti-money laundering program.
(d) Inspection. The Distributor agrees that federal, state and other self-regulatory organizations' examiners shall have access to information and records relating to any anti-money laundering activities performed by the Distributor for the Fund, and the Distributor consents to any inspection authorized by law or regulation in connection thereof.
(e) Annual Audit. The Distributor agrees to an annual independent audit of its anti-money laundering program and also agrees to respond to the Fund's Board of Directors with respect to each recommendation made pursuant to such audit.
ARTICLE 9. Indemnification of Fund. The Distributor covenants and agrees
that it will indemnify and hold harmless the Fund and each of its Directors and
officers and each person, if any, who controls the Fund within the meaning of
Section 15 of the Act, against any loss, liability, damages, claim or expense
(including the reasonable cost of investigating or defending any alleged loss,
liability, damages, claim or expense and reasonable counsel fees incurred in
connection therewith) based upon the 1933 Act or any other statute or common law
and arising by reason of any person acquiring any Shares, and alleging a
wrongful act of the Distributor or any of its employees or alleging that the
registration statement, prospectus, Shareholder reports or other information
filed or made public by the Fund (as from time to time amended) included an
untrue statement of a material fact or omitted to state a material fact required
to be stated or necessary in order to make the statements not misleading,
insofar as the statement or omission was made in reliance upon and in conformity
with information furnished to the Fund by or on behalf of the Distributor.
In no case (i) is the indemnity of the Distributor in favor of the Fund or any other person indemnified to be deemed to protect the Fund or any other person against any liability to which the Fund or such other person would otherwise be subject by reason of willful misfeasance, bad faith or gross negligence in the performance of its duties or by reason of its reckless disregard of its obligations and duties under this Agreement, or (ii) is the Distributor to be liable under its indemnity agreement contained in this paragraph with respect to any claim made against the Fund or any person indemnified unless the Fund or person, as the case may be, shall have notified the Distributor in writing of the claim within a reasonable time after the summons or other first written notification giving information of the nature of the claim shall have been served upon the Fund or upon any person (or after the Fund or such person shall have received notice of service on any designated agent). However, failure to notify the Distributor of any claim shall not relieve the Distributor from any liability which it may have to the Fund or any person against whom the action is brought otherwise than on account of its indemnity agreement contained in this paragraph.
The Distributor shall be entitled to participate, at its own expense, in the defense or, if it so elects, to assume the defense of any suit brought to enforce the claim, but if the Distributor elects to assume the defense, the defense shall be conducted by counsel chosen by the Distributor and satisfactory to the indemnified defendants whose approval shall not be unreasonably withheld. In the event that the
Distributor elects to assume the defense of any suit and retain counsel, the defendants in the suit shall bear the fees and expenses of any additional counsel retained by them. If the Distributor does not elect to assume the defense of any suit, it will reimburse the indemnified defendants in the suit for the reasonable fees and expenses of any counsel retained by them.
The Distributor agrees to notify the Fund promptly of the commencement of any litigation or proceedings against it in connection with the issue and sale of any of the Fund's Shares.
ARTICLE 10. Proprietary and Confidential Information. The Distributor agrees on behalf of itself and its managers, officers, and employees to treat confidentially and as proprietary information of the Fund, all records and other information relative to the Fund and prior, present or potential shareholders of the Fund (and clients of said shareholders), and not to use such records and information for any purpose other than the performance of its responsibilities and duties hereunder, except (i) after prior notification to and approval in writing by the Fund, which approval shall not be unreasonably withheld and may not be withheld where the Distributor may be exposed to civil or criminal contempt proceedings for failure to comply, (ii) when requested to divulge such information by duly constituted authorities, or (iii) when so requested by the Fund. Records and other information which have become known to the public through no wrongful act of the Distributor or any of its employees, agents or representatives, and information that was already in the possession of the Distributor prior to receipt thereof from the Fund or its agent, shall not be subject to this paragraph.
Further, the Distributor will adhere to the privacy policies adopted by the Fund pursuant to Title V of the Gramm-Leach-Bliley Act, as may be modified from time to time. In this regard, the Distributor shall have in place and maintain physical, electronic and procedural safeguards reasonably designed to protect the security, confidentiality and integrity of, and to prevent unauthorized access to or use of, records and information relating to the Fund and its shareholders.
ARTICLE 11. Effective Date . This Agreement shall be effective upon its execution, and unless terminated as provided, shall continue in force for one year from the effective date and thereafter from year to year, provided that such annual continuance is approved by (i) either the vote of a majority of the Directors of the Fund, or the vote of a majority of the outstanding voting securities of the Fund, and (ii) the vote of a majority of those Directors of the Fund who are not parties to this Agreement or the Plans or interested persons of any such party ("Qualified Directors"), cast in person at a meeting called for the purpose of voting on the approval. This Agreement shall automatically terminate in the event of its assignment. As used in this paragraph the terms "vote of a majority of the outstanding voting securities", "assignment" and "interested person" shall have the respective meanings specified in the 1940 Act. In addition, this Agreement may at any time be terminated without penalty by The Distributor, by a vote of a majority of Qualified Directors or by vote of a majority of the outstanding voting securities of the Fund upon not less than sixty days prior written notice to the other party.
ARTICLE 12. Notices. Any notice required or permitted to be given by either party to the other shall be deemed sufficient if sent by registered or certified mail, postage prepaid, addressed by the party giving notice to the other party at the last address furnished by the other party to the party giving notice: if to the Fund, attn: Jeffery Wilson, 800 Nicollet Mall, Minneapolis, MN 55402; and to its Secretary at the following address: Kathleen Prudhomme, 800 Nicollet Mall, Minneapolis, MN 55402; and if to the Distributor, attn: James Schoenike, 615 East Michigan Street, Milwaukee, WI 53202.
ARTICLE 13. Governing Law. This Agreement shall be construed in accordance with the laws of the State of Minnesota and the applicable provisions of the 1940 Act. To the extent that the applicable laws of the State of Minnesota, or any of the provisions herein, conflict with the applicable provisions of the 1940 Act, the latter shall control.
ARTICLE 14. Multiple Originals. This Agreement may be executed in two or more counterparts, each of which when so executed shall be deemed to be an original, but such counterparts shall together constitute but one and the same instrument.
IN WITNESS, the Fund and Distributor have each duly executed this Agreement, as of the day and year above written.
FIRST AMERICAN INVESTMENT FUNDS, INC.
By: /s/ Jeffery M. Wilson
------------------------------------
Jeffery M. Wilson
Its: Vice President - Administration
|
QUASAR DISTRIBUTORS, LLC
By: /s/ James R. Schoenike
------------------------------------
James R. Schoenike
Its: President
|
EXHIBIT A
Arizona Tax Free Fund
California Tax Free Fund
Colorado Tax Free Fund
Minnesota Tax Free Fund
Missouri Tax Free Fund
Nebraska Tax Free Fund
Ohio Tax Free Fund
Tax Free Fund
QUASAR DISTRIBUTORS, LLC
615 EAST MICHIGAN STREET
MILWAUKEE, WI 53202
DEALER AGREEMENT
This Agreement is made and effective as of this ____ day of __________, 20__, between Quasar Distributors, LLC ("Quasar"), a Delaware limited liability company, and___ ("Dealer"), a _____ .
WHEREAS, First American Strategy Funds, Inc., First American Funds, Inc. and First American Investment Funds, Inc. (collectively, the "Fund Companies") are registered under the Investment Company Act of 1940, as amended ("1940 Act"), as open-end investment companies and currently offer for public sale shares of common stock or beneficial interest ("Shares") in the separate series of the Fund Companies listed on Schedule A, as may be amended from time to time (each, a "Fund");
WHEREAS, Quasar serves as principal underwriter in connection with the offering and sale of the Shares of each Fund pursuant to a Distribution Agreement; and
WHEREAS, Dealer desires to serve as a selected dealer for the Shares of the Funds.
NOW, THEREFORE, in consideration of the promises and the mutual covenants contained herein, Quasar and Dealer agree as follows:
1. OFFERS AND SALES OF SHARES.
(a) Dealer agrees to offer and sell Shares only at the public offering price currently in effect, in accordance with the terms of the then-current prospectus(es), including any supplements or amendments thereto, of each Fund ("Prospectus"). Dealer agrees to act only as agent on behalf of its customers ("Customers") in such transactions and shall not have authority to act as agent for the Funds, for Quasar, or for any other dealer in any respect. All purchase orders are subject to acceptance by Quasar and the relevant Fund and become effective only upon confirmation by Quasar or an agent of the Fund. In its sole discretion, either the Fund or Quasar may reject any purchase order and may, provided notice is given to Dealer, suspend sales or withdraw the offering of Shares entirely.
(b) Dealer understands and acknowledges that each Fund offers its Shares in multiple classes, each subject to differing sales charges and financing structures. Dealer hereby represents and warrants that it has established compliance procedures designed to ensure that customers are made aware of the terms of each available class of the applicable Fund's Shares, to ensure that each customer is offered only Shares that are suitable investments of that customer and to ensure proper supervision of Dealer's registered representatives in recommending and offering multiple classes of Shares to it customers.
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(c) Dealer understands and acknowledges that certain Shares may be subject to a contingent deferred sales charge when such Shares are redeemed. As to such Shares which are not networked, Dealer agrees either (i) to refrain from issuing such Shares in street name, or (ii) to monitor the time period during which the applicable contingent deferred sales charge remains in effect, to deduct from any redemption proceeds the applicable contingent deferred sales charge and to promptly remit to Quasar any such contingent deferred sales charge.
(d) Dealer agrees that, if requested by Quasar, it will undertake from time
to time certain shareholder servicing activities ("shareholder services") as
requested by Quasar, for Customers who have purchased Shares. Dealer may perform
these duties itself or subcontract them to a third party of its choice. These
shareholder services may include, but are not limited to, one or more of the
following services as determined by Quasar: (i) maintaining accounts relating to
Customers that invest in Shares; (ii) providing information periodically to
Customers showing their positions in Shares; (iii) arranging for bank wires;
(iv) responding to Customer inquiries relating to the services performed by
Dealer; (v) responding to routine inquiries from Customers concerning their
investments in Shares; (vi) forwarding shareholder communications from the Funds
(such as proxies, shareholder reports, annual and semi-annual financial
statements and dividend, distribution and tax notices) to Customers; (vii)
processing purchase, exchange and redemption requests from Customers and placing
such orders with the Funds' service providers; (viii) assisting Customers in
changing dividend options, account designations, and addresses; (ix) providing
subaccounting with respect to Shares beneficially owned by Customers; (x)
processing dividend payments from the Funds on behalf of Customers; and (xi)
providing such other similar services as Quasar may reasonably request to the
extent Dealer is permitted to do so under applicable laws or regulations.
2. PROCEDURES FOR PURCHASES. The procedures relating to all orders and the handling of them shall be made in accordance with the procedures set forth in each Fund's Prospectus, and to the extent consistent with the Prospectus, written instructions forwarded to Dealer by Quasar from time to time.
Dealer shall be permitted to accept orders for the purchase, exchange or redemption of Shares of the Funds on each business day that the New York Stock Exchange is open for business and a Fund's net asset value is determined ("Business Day"). Dealer shall not be required to accept orders on any Business Day on which Dealer is not open for business. If orders are accepted by Dealer prior to the latest time at which a Fund's net asset value is to be calculated as determined by its Board of Directors/Trustees, which is typically as of the close of the New York Stock Exchange on that Business Day ("Close of Trading"), such orders shall be treated as having been received on that Business Day. If such orders are received after Close of Trading on a Business Day, they shall not be treated as having been accepted by Dealer on such Business Day.
All purchase orders shall be placed at, and in accordance with the applicable discount schedules set forth in the Fund's Prospectus.
3. SETTLEMENT AND DELIVERY FOR PURCHASES. Transactions shall be settled by Dealer by payment in federal funds of the full purchase price to the Fund's transfer agent in accordance
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with applicable procedures. Payment for Shares shall be received by the Fund's transfer agent by the later of (a) the end of the third business day following Dealer's receipt of the Customer's order to purchase such Shares or (b) the end of one business day following Dealer's receipt of the Customer's payment for such Shares, but in no event later than the end of the sixth business day following Dealer's receipt of the Customer's order. If such payment is not received within the time specified, the sale may be canceled forthwith without any responsibility or liability on Quasar's part or on the part of the Funds to Dealer or its Customers. In addition, Dealer will be responsible to the Fund and/or Quasar for any losses suffered on the transaction.
4. PROCEDURES FOR REDEMPTION, REPURCHASE AND EXCHANGE. Redemptions or repurchases of Shares as well as exchange requests shall be made in accordance with the procedures set forth in each Fund's Prospectus, and to the extent consistent with the Prospectus, written instructions forwarded to Dealer by Quasar from time to time.
5. COMPENSATION. On each purchase of Shares by Dealer from Quasar, Dealer shall be entitled to receive such dealer allowances, concessions, finder's fees, sales charges, discounts and other compensation, if any, as described and set forth in each Fund's Prospectus. Sales charges and discounts to dealers, if any, may be subject to reductions under a variety of circumstances if described in each Fund's Prospectus. To obtain any such reductions, Quasar must be notified when a sale takes place that would qualify for the reduced charge. If any Shares sold by Dealer under the terms of this Agreement are redeemed by a Fund or tendered for redemption or repurchased by a Fund or by Quasar as agent within seven business days after the date Dealer purchased such Shares, Dealer shall notify Quasar in writing and shall forfeit its right to any discount or commission received by or allowed to Dealer from the original sale. Dealer shall not be entitled to any compensation for its services under any 12b-1 plan in effect for a Fund unless Dealer has signed a related agreement.
6. EXPENSES. Dealer agrees that it will bear all expenses incurred in connection with its performance of this Agreement.
7. DEALER REGISTRATION.
(a) Dealer represents and warrants that it (i) is registered as a broker-dealer under the Securities Exchange Act of 1934 (the "1934 Act") or is exempt from registration as a broker-dealer under the 1934 Act, (ii) is qualified as a broker-dealer in all states or other jurisdictions in which it sells Fund Shares or is exempt from registration as a broker-dealer in all states or other jurisdictions in which it sells Fund Shares, and, (iii) if it sells Shares in additional states or jurisdictions in the future, will become qualified to act as a broker-dealer in each such state or jurisdiction prior to selling any Fund Shares or will confirm an exemption from registration as a broker-dealer in each such state or jurisdiction prior to selling any Fund Shares.
(b) Dealer shall maintain any filings and licenses required by federal and state laws to conduct the business contemplated under this Agreement. Dealer agrees to notify Quasar immediately in the event of any finding that it violated any applicable federal or state law, rule or regulation arising out of its activities as a broker-dealer or in connection with this Agreement, or
7/31/2007 3
which may otherwise affect in any material way its ability to act in accordance with the terms of this Agreement.
(c) If Dealer is registered as a "bank," as such term is defined in Section 3(a)(6) of the 1934 Act, Dealer further represents and warrants that it is a member of the Federal Deposit Insurance Corporation ("FDIC") in good standing and agrees to notify Quasar immediately of any changes in Dealer's status with the FDIC.
(d) If Dealer is registered as a broker-dealer under the 1934 Act, Dealer represents and warrants that it is a member in good standing of the National Association of Securities Dealers, Inc. ("NASD") and that it agrees to abide by the Conduct Rules of the NASD. Dealer agrees to notify Quasar immediately in the event of its expulsion or suspension from the NASD.
(e) If Dealer is registered as a broker-dealer under the 1934 Act, Dealer further represents and warrants that it is a member of the Securities Investor Protection Corporation ("SIPC") in good standing and agrees to notify Quasar immediately of any changes in Dealer's status with SIPC.
8. COMPLIANCE WITH FEDERAL AND STATE LAWS.
(a) Dealer will not sell any of the Shares except in compliance with all applicable federal and state securities and banking laws. In connection with sales and offers to sell Shares, Dealer will furnish or cause to be furnished to each person to whom any such sale or offer is made, at or prior to the time of offering or sale, a copy of the Prospectus and, if requested, the related Statement of Additional Information ("SAI"). Quasar shall be under no liability to Dealer except for lack of good faith and for obligations expressly assumed by Quasar herein. Nothing herein contained, however, shall be deemed to be a condition, stipulation or provision binding any persons acquiring any security to waive compliance with, or to relieve the parties hereto from any liability arising under, the federal securities laws.
(b) Quasar shall, from time to time, inform Dealer as to the states and jurisdictions in which Quasar believes the Shares have been qualified for sale under, or are exempt from the requirements of, the respective securities laws of such states and jurisdictions. Dealer agrees that it will not knowingly offer or sell Shares in any state or jurisdiction in which such Shares are not qualified, unless any such offer or sale is made in a transaction that qualifies for an exemption from registration.
(c) Quasar assumes no responsibility in connection with the registration of Dealer under the laws of the various states or under federal law or Dealer's qualification under any such law to offer or sell Shares.
9. UNAUTHORIZED REPRESENTATIONS. No person is authorized to make any representations concerning Shares of the Funds except those contained in the Prospectus, SAI and printed information issued by each Fund or by Quasar as information supplemental to each Prospectus. Quasar shall, upon request, supply Dealer with reasonable quantities of Prospectuses and SAIs. Dealer agrees not to use other advertising or sales material relating to the Funds
7/31/2007 4
unless approved by Quasar in advance of such use. Neither party shall use the name of the other party in any manner without the other party's written consent, except as required by any applicable federal or state law, rule or regulation, and except pursuant to any mutually agreed upon promotional programs.
10. CONFIRMATIONS. Dealer agrees to send confirmations of orders to its Customers as required by Rule 10b-10 of the 1934 Act and applicable banking laws and regulations. In the event the Customers of Dealer place orders directly with the Fund or any of its agents, confirmations will be sent to such Customers, as required, by the Fund's transfer agent.
11. RECORDS. Dealer agrees to maintain all records required by applicable state and federal laws and regulations relating to the offer and sale of Shares to its Customers, and upon the reasonable request of Quasar, or of the Funds, to make these records available to Quasar or the Fund's administrator as reasonably requested. On orders placed directly with the Fund or its agents, the Fund's transfer agent will maintain all records required by state and federal laws and regulations relating to the offer and sale of Shares.
12. TAXPAYER IDENTIFICATION NUMBERS. Dealer agrees to obtain any taxpayer identification number certification from its Customers required under the Internal Revenue Code and any applicable Treasury regulations, and to provide Quasar or its designee with timely written notice of any failure to obtain such taxpayer identification number certification in order to enable the implementation of any required backup withholding.
13. INDEMNIFICATION.
(a) Dealer shall indemnify and hold harmless Quasar, each Fund, the transfer agent and administrator of the Funds, and their respective affiliates, officers, directors, agents, employees and controlling persons from all direct or indirect liabilities, losses or costs (including reasonable attorneys' fees) arising from, related to or otherwise connected with any breach by Dealer of any provision of this Agreement.
(b) Quasar shall indemnify and hold harmless Dealer and its affiliates, officers, directors, agents, employees and controlling persons from and against any and all direct or indirect liabilities, losses or costs (including reasonable attorneys' fees) arising from, related to or otherwise connected with any breach by Quasar of any provision of this Agreement.
(c) The agreement of the parties in this Paragraph to indemnify each other
is conditioned upon the party entitled to indemnification (the "Indemnified
Party") notifying the other party (the "Indemnifying Party") promptly after the
summons or other first legal process for any claim as to which indemnity may be
sought is served on the Indemnified Party, unless failure to give such notice
does not prejudice the Indemnifying Party. The Indemnified Party shall permit
the Indemnifying Party to assume the defense of any such claim or any litigation
resulting from it, provided that counsel for the Indemnifying Party who shall
conduct the defense of such claim or litigation shall be approved by the
Indemnified Party (which approval shall not unreasonably be withheld), and that
the Indemnified Party may participate in such defense at its expense. The
failure of the Indemnified Party to give notice as provided in this subparagraph
(c) shall not
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relieve the Indemnifying Party from any liability other than its indemnity obligation under this Paragraph. No Indemnifying Party, in the defense of any such claim or litigation, shall, without the written consent of the Indemnified Party, consent to entry of any judgment or enter into any settlement that does not include as an unconditional term the giving by the claimant or plaintiff to the Indemnified Party of a release from all liability in respect to such claim or litigation.
14. NO AGENCY CREATED. Nothing in this Agreement shall be deemed or construed to make Dealer an employee, agent, representative or partner of any of the Funds or of Quasar, and Dealer is not authorized to act for Quasar or for any Fund or to make any representations on Quasar's or the Funds' behalf. Dealer acknowledges that this Agreement is not exclusive and that Quasar may enter into similar arrangements with other institutions.
15. TERM, TERMINATION, ASSIGNMENT AND AMENDMENT.
(a) This Agreement shall commence on the date first set forth above and shall continue in effect with respect to a Fund for more than one year only so long as such continuance is specifically approved by such Fund at least annually in conformity with the requirements of the 1940 Act.
(b) Either party to this Agreement may terminate this Agreement by giving ten days' written notice to the other.
(c) This Agreement shall terminate automatically with respect to any Fund if (i) any bankruptcy, insolvency or receivership proceedings, or an assignment for the benefit of creditors, is brought under any federal or state law by or against Dealer, (ii) Dealer's registration, if any, as a broker-dealer with the Securities and Exchange Commission is suspended or revoked, (iii) Dealer's NASD membership, if any, is suspended or revoked, (iv) Dealer is not registered as a broker-dealer under the 1934 Act or in a state or other jurisdiction in which it sells Fund Shares and there is not an applicable exemption from registration as a broker-dealer under the 1934 Act or in the state or other jurisdiction in which it sells Fund Shares, (v) an application for a protective decree under the provisions of the Securities Investor Protection Act of 1970 is filed against Dealer, or (vi) the Distribution Agreement between Quasar and such Fund is terminated (including as a result of an assignment). This Agreement also shall terminate automatically in the event of its "assignment," within the meaning of the 1940 Act.
(d) Termination of this Agreement by operation of this Paragraph 15 shall not affect any unpaid obligations under Paragraphs 3, 5 or 6 of this Agreement or the liability, legal and indemnity obligations set forth under Paragraphs 7, 8, 9 or 13 of this Agreement.
(e) This Agreement may be amended by Quasar upon written notice to Dealer, and Dealer shall be deemed to have consented to such amendment upon effecting any purchases of shares for its own account or on behalf of any Customer's accounts following Dealer's receipt of such notice.
16. NOTICES. Except as otherwise specifically provided in this Agreement, any notice required or permitted to be given by either party to the other shall be in writing and shall be
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deemed to have been given on the date delivered personally or by courier service or 3 days after sent by registered or certified mail, postage prepaid, return receipt requested or on the date sent and confirmed received by facsimile transmission to the other party's address set forth below:
Notice to Quasar shall be sent to:
Quasar Distributors, LLC
Attn: Dealer Agreement Department
615 East Michigan Street
Milwaukee, WI 53202
notice to Dealer shall be sent to:
17. MISCELLANEOUS. The captions in this Agreement are included for convenience of reference only and in no way define or delimit any of the provisions hereof or otherwise affect their construction or effect. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors.
18. GOVERNING LAW. This Agreement shall be construed in accordance with the laws (without regard, however, to conflicts of law principles) of the State of Wisconsin, provided that no provision shall be construed in a manner not consistent with the 1940 Act or any rule or regulation thereunder.
19. ARBITRATION. Any controversy or claim arising out of or relating to this Agreement, or any breach thereof, shall be settled by arbitration in accordance with the then existing NASD Code of Arbitration Procedure. Any arbitration shall be conducted in Milwaukee, Wisconsin, and each arbitrator shall be from the securities industry. Judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof.
20. CONFIDENTIALITY. Quasar and Dealer agree to preserve the confidentiality of any and all materials and information furnished by either party in connection with this Agreement. The provisions of this Paragraph shall not apply to any information which is: (a) independently developed by the receiving party, provided the receiving party can satisfactorily demonstrate such independent development with appropriate documentation; (b) known to the receiving party prior to disclosure by the disclosing party; (c) lawfully disclosed to the receiving party by a third party not under a separate duty of confidentiality with respect thereto to the disclosing party; or (d) otherwise publicly available through no fault or breach by the receiving party.
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In accordance with Regulation S-P, the parties hereto will not disclose any non-public personal information, as defined in Regulation S-P, regarding any Customer; provided, however, that Dealer or Quasar may disclose such information to any party as necessary in the ordinary course of business to carry out the purposes for which such information was disclosed to Dealer or Quasar, or as may be required by law. Both parties agree to use reasonable precautions to protect and prevent the unintentional disclosure of such non-public personal information.
21. ANTI-MONEY LAUNDERING PROGRAM. Dealer represents and warrants that it
has adopted an anti-money laundering program ("AML Program") that complies with
the Bank Secrecy Act, as amended by the USA PATRIOT Act, and any future
amendments (the "PATRIOT Act," and together with the Bank Secrecy Act, the
"Act"), the rules and regulations under the Act, and the rules, regulations and
regulatory guidance of the SEC, the NASD or any other applicable self-regulatory
organization (collectively, "AML Rules and Regulations"). Dealer further
represents that its AML Program, at a minimum, (1) designates a compliance
officer to administer and oversee the AML Program, (2) provides ongoing employee
training, (3) includes an independent audit function to test the effectiveness
of the AML Program, (4) establishes internal policies, procedures, and controls
that are tailored to its particular business, (5) will include a customer
identification program consistent with the rules under section 326 of the Act,
(6) provides for the filing of all necessary anti-money laundering reports
including, but not limited to, currency transaction reports and suspicious
activity reports, (7) provides for screening all new and existing customers
against the Office of Foreign Asset Control ("OFAC") list and any other
government list that is or becomes required under the Act, and (8) allows for
appropriate regulators to examine Dealer's AML books and records.
22. MARKET TIMING. Dealer represents that it has and will maintain policies and procedures to detect and prevent any market timing transaction that contravenes the restrictions or prohibitions on market timing, if any, as found in the Funds' Prospectus and/or SAI. Dealer acknowledges that it is responsible for the sales activities of its licensed representatives including, among other things, improper trading activity in violation of the terms and conditions of the Funds' Prospectus.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their officers designated as of the day and year first written above.
QUASAR DISTRIBUTORS, LLC
[DEALER]
7/31/2007 8
SCHEDULE A
First American Funds
FIRST AMERICAN INVESTMENT FUNDS, INC. (available share classes)
Arizona Tax Free Fund (A, C, Y)
Balanced Fund (A, B, C, R, Y)
California Intermediate Tax Free Fund (A, Y)
California Tax Free Fund (A, C, Y)
Colorado Intermediate Tax Free Fund (A, Y)
Colorado Tax Free Fund (A, C, Y)
Core Bond Fund (A, B, C, R, Y)
Equity Income Fund (A, B, C, R, Y)
Equity Index Fund (A, B, C, R, Y)
High Income Bond Fund (A, B, C, R, Y)
Inflation Protected Securities Fund (A, C, R, Y)
Intermediate Government Bond Fund (A, Y)
Intermediate Tax Free Fund (A, Y)
Intermediate Term Bond Fund (A, Y)
International Fund (A, B, C, R, Y)
International Select Fund (A, B, C, R, Y)
Large Cap Growth Opportunities Fund (A, B, C, R, Y)
Large Cap Select Fund (A, B, C, R, Y)
Large Cap Value Fund (A, B, C, R, Y)
Mid Cap Growth Opportunities Fund (A, B, C, R, Y)
Mid Cap Index Fund (A, B, C, R, Y)
Mid Cap Value Fund (A, B, C, R, Y)
Minnesota Intermediate Tax Free Fund (A, Y)
Minnesota Tax Free Fund (A, C, Y)
Missouri Tax Free Fund (A, C, Y)
Nebraska Tax Free Fund (A, C, Y)
Ohio Tax Free Fund (A, C, Y)
Oregon Intermediate Tax Free Fund (A, Y)
Quantitative Large Cap Core Fund (A, C, R, Y) Quantitative Large Cap Value Fund (A, C, R, Y) Quantitative Large Cap Growth Fund (A, C, R, Y) |
Real Estate Securities Fund (A, B, C, R, Y)
Short Tax Free Fund (A, Y)
Short Term Bond Fund (A, Y)
Small Cap Growth Opportunities Fund (A, B, C, R, Y)
Small Cap Index Fund (A, B, C, R, Y)
Small Cap Select Fund (A, B, C, R, Y)
Small Cap Value Fund (A, B, C, R, Y)
Small-Mid Cap Core Fund (A, B, C, Y)
Tax Free Fund (A, C, Y)
Total Return Bond Fund (A, B, C, R, Y)
U.S. Government Mortgage Fund (A, B, C, R, Y)
FIRST AMERICAN FUNDS, INC. (available share classes)
Prime Obligations Fund (A, B, C, Y)
Tax Free Obligations Fund (A, Y)
FIRST AMERICAN STRATEGY FUNDS, INC. (available share classes)
Strategy Income Allocation Fund (A, B, C, R, Y)
Strategy Growth Allocation Fund (A, B, C, R, Y)
Income Builder Fund (A, B, C, R, Y)
Strategy Growth and Income Allocation Fund (A, B, C, R, Y)
Strategy Aggressive Growth Allocation Fund (A, B, C, R, Y)
7/31/2007 9
FIRST AMERICAN INVESTMENT FUNDS, INC.
AMENDMENT TO CUSTODY AGREEMENT
DATED AS OF JULY 1, 2007
WHEREAS, First American Investment Funds, Inc., a Maryland corporation (the "Fund"), and U.S. Bank National Association, a national banking association organized and existing under the laws of the United States of America (the "Custodian"), previously entered into a Custody Agreement dated July 1, 2006 (the "Custody Agreement"); and
WHEREAS, the Fund consists of separate series (each a "Series"), with each such Series representing interests in a separate portfolio of securities and other assets; and
WHEREAS, the Custodian invests cash balances held in the Custody Account daily in certain temporary investment vehicles pursuant to procedures adopted by the Custodian and approved by the Fund ("Sweep Procedures"); and
WHEREAS, Paragraph 4.6 of Article 4 of the Custody Agreement contemplates the Custodian making advances for overdrafts and the Fund repaying such overdrafts; and
WHEREAS, the Fund and the Custodian wish to amend the Custody Agreement in order to clarify the Fund's payment obligations with respect to overdrafts and the Custodian's payment obligations with respect to cash balances in the Custody Account that the Custodian fails to invest as required by the Sweep Procedures.
NOW, THEREFORE, the Fund and the Custodian agree as follows:
1.) Paragraph 4.6 of Article 4 of the Custody Agreement is hereby replaced in its entirety by the following:
Advances by Custodian for Settlement. The Custodian may, in its sole discretion and from time to time, advance funds to the Fund to facilitate the settlement of a Series' transactions in the Series Custody Account. In the event that any advance of funds is made by Custodian on behalf of the Fund, including overdrafts, the Fund agrees to repay the Custodian the amount of the advance plus accrued interest at the prime rate (as published in the Wall Street Journal) minus 100 basis points.
2.) The following Paragraph 4.7 is added under Article 4 of the Custody Agreement:
Investment of Cash Balances by Custodian. If the Custodian fails to invest cash balances held in the Custodian Account as required by procedures adopted by the Custodian and approved by the Fund's administrator, the Custodian shall be liable to the Fund for interest to be calculated at the Fed Funds Effective Rate (as published daily by the Federal Reserve) net of the applicable reserve requirement.
IN WITNESS WHEREOF, the Fund and the Custodian have caused this instrument to be executed in duplicate as of the date first above written by their duly authorized officers.
FIRST AMERICAN INVESTMENT FUNDS, INC.
/s/ Jeffery M. Wilson
------------------------------------
By: Jeffery M. Wilson
Its: Vice President - Administration
|
U.S. BANK NATIONAL ASSOCIATION
/s/ Joe D. Redwine
------------------------------------
By: Joe D. Redwine
Its: Senior Vice President
|
EXHIBIT C
TO CUSTODIAN AGREEMENT
EFFECTIVE JUNE 20, 2007
SERIES NAMES
Separate Series of First American Investment Funds, Inc.
Name of Series Date Added -------------- ---------- Balanced Fund 7/1/2006 Equity Income Fund 7/1/2006 Equity Index Fund 7/1/2006 Large Cap Growth Opportunities Fund 7/1/2006 Large Cap Select Fund 7/1/2006 Large Cap Value Fund 7/1/2006 Mid Cap Growth Opportunities Fund 7/1/2006 Mid Cap Index Fund 7/1/2006 Mid Cap Value Fund 7/1/2006 Real Estate Securities Fund 7/1/2006 Small Cap Growth Opportunities Fund 7/1/2006 Small Cap Index Fund 7/1/2006 Small Cap Select Fund 7/1/2006 Small Cap Value Fund 7/1/2006 Small-Mid Cap Core Fund 7/1/2006 Core Bond Fund 7/1/2006 High Income Bond Fund 7/1/2006 Inflation Protected Securities Fund 7/1/2006 Intermediate Government Bond Fund 7/1/2006 Intermediate Term Bond Fund 7/1/2006 Short Term Bond Fund 7/1/2006 Total Return Bond Fund 7/1/2006 U.S. Government Mortgage Fund 7/1/2006 Arizona Tax Free Fund 7/1/2006 California Intermediate Tax Free Fund 7/1/2006 California Tax Free Fund 7/1/2006 Colorado Intermediate Tax Free Fund 7/1/2006 Colorado Tax Free Fund 7/1/2006 Intermediate Tax Free Fund 7/1/2006 Minnesota Intermediate Tax Free Fund 7/1/2006 Minnesota Tax Free Fund 7/1/2006 Missouri Tax Free Fund 7/1/2006 Nebraska Tax Free Fund 7/1/2006 Ohio Tax Free Fund 7/1/2006 Oregon Intermediate Tax Free Fund 7/1/2006 Short Tax Free Fund 7/1/2006 Tax Free Fund 7/1/2006 Quantitative Large Cap Core Fund 6/20/2007 Quantitative Large Cap Growth Fund 6/20/2007 Quantitative Large Cap Value Fund 6/20/2007 |
EXHIBIT D
TO CUSTODIAN AGREEMENT
EFFECTIVE DECEMBER 5, 2006
FEE SCHEDULE
Each series of the First American Investment Funds, Inc., as now in existence or hereafter created from time to time, other than International Fund and International Select Fund, shall pay to the Custodian a monthly fee at an annual rate of 0.005% of the average daily net assets of such series.
TRANSFER AGENT AND SHAREHOLDER SERVICING AGREEMENT
THIS AGREEMENT is made and entered into as of September 19, 2006, by and among First American Investment Funds, Inc., a Maryland corporation (the "Fund"), U.S. Bancorp Fund Services, LLC, a Wisconsin limited liability company ("USBFS") and, only with respect to Section 6 hereof, FAF Advisors, Inc., a Delaware corporation ("FAF Advisors").
WHEREAS, the Fund is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company consisting of several series of shares of Common Stock;
WHEREAS, USBFS is, among other things, in the business of administering transfer and dividend disbursing agent functions for the benefit of its customers; and
WHEREAS, the Fund desires to retain USBFS to provide transfer and dividend disbursing agent services to all portfolios of the Fund now and hereafter created ("Portfolios"), on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the promises and mutual covenants herein contained, and other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto, intending to be legally bound, do hereby agree as follows:
1. APPOINTMENT OF USBFS AS TRANSFER AGENT
The Fund hereby appoints USBFS as transfer agent of the Fund on the terms and conditions set forth in this Agreement, and USBFS hereby accepts such appointment and agrees to perform the services and duties set forth in this Agreement. The Fund hereby also authorizes USBFS to contract with qualifying financial institutions for the establishment and maintenance of omnibus accounts and for the provision of customary services related to such omnibus accounts.
2. SERVICES AND DUTIES OF USBFS
A. USBFS shall perform all of the customary services of a transfer agent and dividend disbursing agent for the Fund, and as relevant, agent in connection with accumulation, open account or similar plans (including without limitation any periodic investment plan or periodic withdrawal program), including but not limited to:
1) Receive and process all orders for the purchase, exchange, and/or redemption of shares in accordance with Rule 22c-1 of the 1940 Act, including the calculation and collection of any applicable sales charges.
2) Process purchase orders with prompt delivery, where appropriate, of payment
and supporting documentation to the Fund's custodian, and issue the appropriate number of uncertificated shares with such uncertificated shares being held in the appropriate shareholder account.
3) Arrange for issuance of shares obtained through transfers of funds from Fund shareholders' accounts at financial institutions and arrange for the exchange of shares for shares of other eligible investment companies, when permitted by the Fund's current prospectuses ("Prospectuses").
4) Process redemption requests received in good order and, where relevant, deliver appropriate documentation to the Fund's custodian.
5) Pay monies upon receipt from the Fund's custodian, where relevant, in accordance with the instructions of redeeming shareholders.
6) Process transfers of shares in accordance with the shareholder's instructions.
7) Process exchanges between Portfolios and/or classes of shares of Portfolios and between a Portfolio and any other investment company or series thereof for which FAF Advisors, Inc. ("FAF Advisors") acts as investment adviser.
8) Prepare and transmit payments for dividends and distributions declared by the Fund, after deducting any amount required to be withheld by any applicable laws, rules and regulations and in accordance with shareholder instructions.
9) Serve as agent of the Fund in connection with accumulation, open account or similar plans (e.g., periodic investment plans and periodic withdrawal plans.
10) Make changes to shareholder records, including, but not limited to, address changes in plans (e.g., systematic withdrawal, automatic investment, dividend reinvestment).
11) Handle load and multi-class processing, including rights of accumulation and purchases by letters of intent.
12) Record the issuance of shares of the Fund and maintain, pursuant to Rule 17Ad-10(e) promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), a record of the total number of shares of the Fund which are authorized, issued and outstanding.
13) Prepare shareholder meeting lists and, if applicable, mail, receive and tabulate proxies.
14) Mail shareholder reports and Prospectuses to current shareholders.
15) Prepare and file U.S. Treasury Department Forms 1099 and other appropriate information returns required with respect to dividends and distributions for shareholders.
16) Provide shareholder account information upon request and prepare and mail confirmations and statements of account to shareholders for purchases, redemptions and other confirmable transactions as agreed upon with the Fund.
17) Mail requests for shareholders' certifications under penalties of perjury and pay on a timely basis to the appropriate federal authorities any taxes to be withheld on dividends and distributions paid by the Fund, all as required by applicable federal tax laws and regulations.
18) Provide a Blue Sky system that will enable the Fund to monitor the total number of shares of the Fund sold in each state. In addition, the Fund or its agent shall identify to USBFS in writing those classes of shares or transactions to be treated as exempt from the Blue Sky reporting for each state.
19) Answer correspondence from shareholders, securities brokers and others relating to USBFS's duties hereunder and such other correspondence as may from time to time be mutually agreed upon between USBFS and the Fund.
20) Reimburse the Fund each month for all material losses resulting from "as of" processing errors for which USBFS is responsible in accordance with the "as of" processing guidelines agreed to by USBFS and FAF Advisors.
3. REPRESENTATIONS OF USBFS
USBFS represents and warrants to the Fund, which representations and warranties shall be deemed to be continuing throughout the term of this Agreement, that:
A. It is a limited liability corporation duly organized, existing and in good standing under the laws of Wisconsin;
B. It is a registered transfer agent under the Exchange Act.
C. It is duly qualified to carry on its business in the State of Wisconsin;
D. It is empowered under applicable laws and by its charter and bylaws to enter into and perform this Agreement;
E. All requisite corporate proceedings have been taken to authorize it to enter and perform this Agreement;
F. It has and will continue to have access to the necessary facilities, equipment and personnel to perform its duties and obligations under this Agreement; and
G. It is conducting its business in compliance in all material respects with all applicable laws and regulations, both state and federal, and has obtained all regulatory approvals necessary to carry on its business as now conducted; there is no statute, rule, regulation, order or judgment binding on it and no provision of its charter, bylaws or any contract binding it or affecting its property which would prohibit its execution or performance of this Agreement.
H. This Agreement has been duly authorized, executed and delivered by USBFS in accordance with all requisite action and constitutes a valid and legally binding obligation of USBFS, enforceable in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting the rights and remedies of creditors and secured parties.
4. REPRESENTATIONS OF THE FUND
The Fund represents and warrants to USBFS, which representations and warranties shall be deemed to be continuing throughout the term of this Agreement, that:
A. The Fund is an open-end investment company under the 1940 Act;
B. The Fund is a corporation organized, existing, and in good standing under the laws of the State of Maryland;
C. The Fund is empowered under applicable laws and by its Articles of Incorporation and Bylaws to enter into and perform this Agreement;
D. The Fund will comply with all applicable requirements of the Securities Act of 1933, as amended, the Exchange Act, the 1940 Act, and any laws, rules and regulations of governmental authorities having jurisdiction;
E. The Fund is conducting its business in compliance in all material respects with all applicable laws and regulations, both state and federal, and has obtained all regulatory approvals necessary to carry on its business as now conducted; there is no statute, rule, regulation, order or judgment binding on it and no provision of its charter, bylaws or any contract binding it or affecting its property which would prohibit its execution or performance of this Agreement;
F. A registration statement under the 1940 Act and the Securities Act of 1933, as amended, is made effective and will remain effective, and appropriate state securities law filings have been made and will continue to be made, with respect to all shares of the Fund being offered for sale; and
G. This Agreement has been duly authorized, executed and delivered by the Fund in
accordance with all requisite action and constitutes a valid and legally binding obligation of the Fund, enforceable in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting the rights and remedies of creditors and secured parties.
5. SERVICE STANDARDS
On a monthly basis, USBFS shall submit a written report to FAF Advisors concerning the performance of its obligations under this Agreement, including the accuracy and timeliness of the various services provided pursuant to this Agreement (the "Service Standards Report"). The Service Standards Report shall include such measures as are agreed to by the parties from time to time. In addition, USBFS agrees to make such reports and presentations to the Board of Directors as may be reasonably requested from time to time.
6. COMPENSATION
The Fund shall compensate USBFS for providing the services set forth in this Agreement and for such out-of-pocket expenses as are reasonably incurred by USBFS in performing its duties hereunder in accordance with the fee schedule set forth on Exhibit A hereto (as amended from time to time), provided that FAF Advisors agrees to pay certain of the fees and out-of-pocket expenses set forth on Exhibit A, as indicated thereon, out of its own assets.
The Fund and/or FAF Advisors, as applicable, shall pay all fees and
reimbursable expenses within thirty (30) calendar days following receipt of
the billing notice, except for any fee or expense subject to a good faith
dispute. Either the Fund or FAF Advisors, as applicable, shall notify USBFS
in writing within thirty (30) calendar days following receipt of each
invoice if such party is disputing any amounts in good faith. The Fund or
FAF Advisors, as applicable, shall settle such disputed amounts within ten
(10) calendar days of the day on which the parties agree to the amount to
be paid.
7. STANDARD OF CARE; INDEMNIFICATION; LIMITATION OF LIABILITY
The duties of the USBFS shall be confined to those expressly set forth herein, and no implied duties are assumed by or may be asserted against USBFS hereunder. USBFS shall not be liable for any error of judgment or mistake of law or for any loss arising out of any act or omission in carrying out its duties hereunder, except a loss resulting from willful misfeasance, bad faith or negligence in the performance of its duties, or by reason of reckless disregard of its obligations and duties hereunder, except as may otherwise be provided under provisions of applicable law which cannot be waived or modified hereby. (As used in this Section 7, the term "USBFS" shall include directors, officers, employees and other corporate agents of USBFS as well as that corporation itself.)
So long as USBFS acts in good faith and with due diligence and without negligence, the Fund assumes full responsibility and shall indemnify USBFS and hold it harmless from
and against any and all actions, suits and claims, whether groundless or otherwise, and from and against any and all losses, damages, costs, charges, reasonable counsel fees and disbursements, payments, expenses and liabilities (including reasonable investigation expenses) arising directly or indirectly out of USBFS' relationship with the Fund, including USBFS' actions taken or nonactions with respect to the performance of services hereunder. The indemnity and defense provisions set forth herein shall survive the termination of this Agreement.
The rights hereunder shall include the right to reasonable advances of defense expenses in the event of any pending or threatened litigation with respect to which indemnification hereunder may ultimately be merited; provided, however, that in the event that it is ultimately determined that indemnification is not warranted, any such amounts advanced hereunder shall be repaid. In order that the indemnification provision contained herein shall apply, however, it is understood that if in any case the Fund may be asked to indemnify or hold USBFS harmless, the Fund shall be fully and promptly advised of all pertinent facts concerning the situation in question, and it is further understood that USBFS will use all reasonable care to identify and notify the Fund promptly concerning any situation which presents or appears likely to present the probability of such a claim for indemnification against the Fund.
The Fund shall be entitled to participate at its own expense or, if it so elects, to assume the defense of any suit brought to enforce any claims subject to this indemnity provision. If the Fund elects to assume the defense of any such claim, the defense shall be conducted by counsel chosen by the Fund and satisfactory to USBFS, whose approval shall not be unreasonably withheld. In the event that the Fund elects to assume the defense of any suit and retain counsel, USBFS shall bear the fees and expenses of any additional counsel retained by it. If the Fund does not elect to assume the defense of a suit, it will reimburse USBFS for the reasonable fees and expenses of any counsel retained by USBFS.
USBFS may apply to the Fund at any time for instructions and may consult outside counsel for the Fund or its own counsel and with accountants and other experts with respect to any matter arising in connection with USBFS' duties, and, except for such actions or omissions constituting negligence, USBFS shall not be liable or accountable for any action taken or omitted by it in good faith and in accordance with such instruction or with the opinion of such counsel, accountants or other experts.
8. PROPRIETARY AND CONFIDENTIAL INFORMATION
USBFS agrees on behalf of itself and its directors, officers, and employees to treat confidentially and as proprietary information of the Fund all records and other information relative to the Fund and prior, present, or potential shareholders (and clients of said shareholders) and not to use such records and information for any purpose other than the performance of its responsibilities and duties hereunder, except after prior notification to and approval in writing by the Fund, which approval shall not be unreasonably withheld and may not be withheld where USBFS may be exposed to civil
or criminal contempt proceedings for failure to comply after being requested to divulge such information by duly constituted authorities, or when so requested by the Fund.
Further, USBFS will adhere to the privacy policies adopted by the Fund pursuant to Title V of the Gramm-Leach-Bliley Act, as may be modified from time to time (the "Act"). Notwithstanding the foregoing, USBFS will not share any nonpublic personal information concerning any of the Fund's shareholders with any third party unless specifically directed by the Fund or allowed under one of the exceptions noted under the Act. USBFS shall have in place and maintain physical, electronic, and procedural safeguards reasonably designed to protect the security, confidentiality and integrity of, and to prevent unauthorized access to or use of, records and information relating to the Fund or its shareholders.
9. ANTI-MONEY LAUNDERING PROGRAM
USBFS, as named transfer agent for the Fund, has established and implemented an anti-money laundering program reasonably designed to prevent the Fund from being used to launder money.
A. Policies and Procedures. USBFS has implemented policies, procedures, and internal controls that achieve compliance with the applicable provisions of the Bank Secrecy Act ("BSA") and are reasonably designed to detect activities indicative of money laundering, including but not limited to detection of the following transactions:
1) An investment in a fund by check or checks drawn on the account of a third party or parties unrelated to the investor;
2) An investment in a fund by one or more wire transfers from an account of a third party or parties unrelated to the investor;
3) Frequent wire transfer activity to and from a cash reserve account, coming from or sent to the same bank;
4) Payments that indicate structuring occurring at another financial institution, such as large amounts of sequentially numbered money orders or travelers checks or cashiers checks in amounts under the $10,000 currency reporting threshold;
5) Large deposits with relatively small fund investments;
6) Frequent purchases of Fund shares followed by large redemptions; and
7) Transfers to accounts in countries where drugs are known to be produced or other high-risk countries.
USBFS will file all reports that are required by law or regulation in order to report certain types of transactions. USBFS will also analyze the money laundering risks posed by particular omnibus accounts based on a risk-based evaluation of relevant factors. In addition, USBFS will follow its procedures to prohibit transactions with individuals, entities or jurisdictions identified on any list of known or suspected terrorists or on the Treasury's Office of Foreign Assets Control ("OFAC") List.
USBFS agrees that federal examiners will have access to information and records relating to its anti-money laundering program and consents to any inspection authorized by law or regulation in connection thereof.
USBFS will amend its anti-money laundering program as necessary to reflect future implementing regulations applicable to the Fund.
B. Customer Identification Program ("CIP"). USBFS has implemented risk-based procedures designed to ensure that the Fund verifies the identity of new customers to the extent reasonable and practicable, including but not limited to:
1) Procedures for opening an account that specify the identifying information that will be obtained with respect to each customer prior to opening an account;
2) Procedures for verifying the identity of the customer within a reasonable time after the account is opened;
3) Procedures for making and maintaining certain records relating to the identification and verification of customers;
4) Procedures for determining whether the customer appears on certain lists of known or suspected terrorists or terrorist organizations; and
5) Procedures for providing mutual fund customers with adequate notice that the mutual fund is requesting information to verify their identities.
USBFS will certify annually to the Fund that it has implemented an anti-money laundering program and will perform the specified requirements of the Fund's CIP.
C. Training. USBFS will provide ongoing training to employees that is relevant to their functions, including but not limited to BSA requirements. The level, frequency, and focus of the training will be determined according to the responsibilities of the employees. Training will be provided whenever employees, including new employees, assume duties that bring them in contact with BSA requirements or potential money laundering activities. The ongoing training program will include periodic updates and refresher courses regarding the anti-money laundering program.
D. Quarterly Reports. USBFS will report to the Fund Board of Directors, at least quarterly, any anti-money laundering compliance exceptions, including the resolution of such exceptions. Summary reports will include but not be limited to "OFAC hits" and any Suspicious Activity Report filings.
E. Inspection. USBFS agrees that federal, state and other self-regulatory organization examiners will have access to information and records relating to any anti-money laundering activities performed by USBFS for the Fund, and USBFS consents to any inspection authorized by law or regulation in connection thereof.
F. Annual Audit. USBFS agrees to an annual independent audit of its anti-money laundering program. Any recommendation resulting from such review will be
promptly implemented or submitted to the Fund's Board of Directors for consideration.
10. TERM OF AGREEMENT; AMENDMENT
This Agreement shall become effective as of the date first written above and will continue in effect for a period of one year. This Agreement shall continue in effect from year to year thereafter, but only so long as such continuance is specifically approved at least annually by the Fund's Board of Directors, including the specific approval of a majority of the directors who are not interested persons of the Fund. Subsequent to the initial one-year term, this Agreement may be terminated by the Fund or USBFS upon giving ninety (90) days' prior written notice to the other party or such shorter period as is mutually agreed upon by the parties. Notwithstanding the foregoing, this Agreement may be terminated by either the Fund or USBFS upon a material breach of this Agreement by the other party if such breach is not cured within 15 days of notice of such material breach to the breaching party. This Agreement may not be amended or modified in any manner except by written agreement executed by USBFS and the Fund, and authorized or approved by the Board of Directors.
11. DUTIES IN THE EVENT OF TERMINATION
In the event that, in connection with termination, a successor to any of USBFS's duties or responsibilities hereunder is designated by the Fund by written notice to USBFS, USBFS will promptly, upon such termination and at the expense of the Fund, transfer to such successor all relevant books, records, correspondence, and other data established or maintained by USBFS under this Agreement in a form reasonably acceptable to the Fund (if such form differs from the form in which USBFS has maintained, the Fund shall pay any expenses associated with transferring the data to such form), and will cooperate in the transfer of such duties and responsibilities, including provision for assistance from USBFS's personnel in the establishment of books, records, and other data by such successor. If no successor is designated, such books, records, and other data will be returned to the Fund.
12. RECORDS
USBFS shall keep records relating to the services to be performed hereunder in the form and manner, and for such period, as it may deem advisable and is agreeable to the Fund, but not inconsistent with the rules and regulations of appropriate government authorities, in particular, Section 31 of the 1940 Act and the rules thereunder. USBFS agrees that all such records prepared or maintained by USBFS relating to the services to be performed by USBFS hereunder are the property of the Fund and will be preserved, maintained, and made available in accordance with such applicable sections and rules of the 1940 Act and will be promptly surrendered to the Fund on and in accordance with its request. Further, federal examiners shall have access to information and records relating to anti-money laundering activities performed by USBFS hereunder and USBFS consents to any inspection authorized by law or regulation in connection thereof.
13. GOVERNING LAW
This Agreement shall be construed in accordance with the laws of the State of Minnesota, without regard to conflicts of law principles. To the extent that the applicable laws of the State of Minnesota, or any of the provisions herein, conflict with the applicable provisions of the 1940 Act, the latter shall control, and nothing herein shall be construed in a manner inconsistent with the 1940 Act or any rule or order of the Securities and Exchange Commission thereunder.
14. DATA NECESSARY TO PERFORM SERVICES
The Fund or its agent shall furnish to USBFS the data necessary to perform the services described herein at such times and in such form as mutually agreed upon.
15. ASSIGNMENT
This Agreement may not be assigned by the Fund without the written consent of USBFS, or by USBFS without the written consent of the Fund accompanied by the authorization or approval of the Board of Directors.
16. SERVICES NOT EXCLUSIVE
Nothing in this Agreement shall limit or restrict USBFS from providing services to other parties that are similar or identical to some or all of the services provided hereunder.
17. INVALIDITY
Any provision of this Agreement which may be determined by competent authority to be prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. In such case, the parties shall in good faith modify or substitute such provision consistent with the original intent of the parties.
18. NOTICES
Any notice required or permitted to be given by either party to the other shall be in writing and shall be deemed to have been given on the date delivered personally or by courier service, or three (3) days after sent by registered or certified mail, postage prepaid, return receipt requested, or on the date sent and confirmed received by facsimile transmission to the other party's address set forth below: Notice to USBFS shall be sent to:
U.S. Bancorp Fund Services, LLC
615 East Michigan Street
Milwaukee, WI 53202
and notice to the Fund or FAF Advisors shall be sent to:
Chuck Gariboldi, Fund Treasurer
First American Funds
BC-MN-H05O
US Bancorp Center
800 Nicollet Mall
Minneapolis, MN 55402
19. MULTIPLE ORIGINALS
This Agreement may be executed on two or more counterparts, each of which when so executed shall be deemed to be an original, but such counterparts shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by a duly authorized officer on one or more counterparts as of the date first above written.
FIRST AMERICAN INVESTMENT FUNDS, INC.
By: /s/ Jeffery M. Wilson
------------------------------------
Name: Jeffery M. Wilson
Title: Vice President - Administration
|
U.S. BANCORP FUND SERVICES, LLC
By: /s/ Joe D. Redwine
------------------------------------
Name: Joe D. Redwine
Title: President
|
FAF ADVISORS, INC.
By: /s/ Joseph M. Ulrey, III
------------------------------------
Name: Joseph M. Ulrey, III
Title: Chief Financial Officer
|
(U.S. BANCORP(R) FUND SERVICES, LLC LOGO)
TRANSFER AGENT & SHAREHOLDER SERVICES
ANNUAL FEE SCHEDULE
SERVICE CHARGES TO THE FUND
Shareholder Account Fee (Subject to Minimum)
- No-Load - $15.00 /account
- Load Fund - $16.00 /account
- Daily Accrual Fund - $21.00 /account (money market funds); $18.00/account (bond funds)
- Closed Accounts - $2.50 /account
Annual Minimum
- $30,000 per no-load fund
- $36,000 per load or daily accrual fund
- $18,000 each additional class
ACTIVITY CHARGES
- Telephone Calls - $1.00 /minute
- Voice Response Call - $.35/call
- E-mail Services
$200 /month administration
$3.00 /e-mail received
- Draft Check Processing - $3.00 /draft
- Daily Valuation Trades - $10.00 /trade
- Lost Shareholder Search - $5.00 /search
- AML New Account Service - $1.00/new domestic accounts and $2.00/new foreign account
- AML Annual Base fee $5,000 (per Fund complex)
- ACH/EFT Shareholder Services:
$125.00 /month/fund group
$ .50 /ACH item, setup, change
$5.00 /correction, reversal
OUT-OF-POCKET COSTS
- Telephone toll-free lines, call transfers, etc.
- Mailing, sorting and postage
- Stationery
- Programming, special reports
- Insurance, record retention, microfilm/fiche
- NSCC charges
- Any additional expenses, agreed to in advance by the Fund, reasonable incurred by USBFS in the performance of its duties and obligations under this Agreement.
Fees are billed monthly.
SERVICE CHARGES TO INVESTORS
Qualified Plan Fees (Billed to Investors)
- $25.00 /transfer to successor trustee
- $25.00 /participant distribution (Excluding SWPs)
- $25.00 /refund of excess contribution
Additional Shareholder Fees (Billed to Investors)
- $15.00 /outgoing wire transfer
- $15.00 /overnight delivery
- $ 5.00 /telephone exchange
- $25.00 /return check or ACH
- $25.00 /stop payment
- $ 5.00 /research request per account (Cap at $25.00/request) (For requested items of the second calendar year [or previous] to the request)
TECHNOLOGY CHARGES
1. Fund Setup - $750 /cusip
2. NSCC Service Interface - All NSCC Services
- Annual - $1,400 /cusip/year
3. Telecommunications and Voice Services
- Service Setup - $1,650 ATT transfer connect
- VRU Setup - $500 /fund group
- VRU Maintenance - $100 /cusip/month (Class A shares); $75/cusip/month
(Class B shares); $50/cusip/month (Class C shares)
- $.35 /voice response call
- $.40 /voice recognition call
4. 12b-1 Aging - $1.50 /account/year
5. Average Cost - $.36 /account/year
6. Development/Programming - $150 /hour
7. File Transmissions - subject to requirements
8. Selects - $300 per select
9. Extraordinary services - charged as incurred
- Conversion of Records (if necessary) - Estimate to be provided.
- Custom processing, re-processing
All other extraordinary services
U.S. BANCORP FUND SERVICES, LLC
(CONFIDENTIAL - PRICING VALID FOR 45 DAYS)
(U.S. BANCORP(R) FUND SERVICES, LLC LOGO)
INTERNET SERVICES
ANNUAL FEE SCHEDULE (TO BE PAID BY FAF ADVISORS)
FAN WEB - Shareholder internet access to account information and transaction capabilities. Internet service is connected directly to the fund group's web site through a transparent hyperlink. Shareholders can access account information, portfolio listing within a fund family, view transaction history, purchase additional shares through ACH, etc.
Implementation - $15,000 per management company - includes up to 10 hours of assistance from BSAs and technical staff (additional assistance - $150/hour)
Annual Base Fee - $36,000 per year
Activity (Session) Fees:
- Inquiry - $.15 per event
- Account Maintenance - $.25 per event
- Transaction - financial transactions, reorder statements, etc. - $.50 per event
- New Account Set-up - $3.00 per event
VISION MUTUAL FUND GATEWAY - Permits broker/dealers, financial planners, and RIAs to us a web-based system to perform order and account inquiry, execute trades, print applications, review prospectuses, and establish new accounts.
Inquiry Only
- Inquiry - $.05 per event
- Per broker ID - $5.00 per month per ID
Transaction Processing
- Implementation - $5,000 per management company
- Transaction - purchase, redeem, exchange, literature order - $.50 per event
- New Account Set-up - may contain multiple fund/accounts - $3.00 per event
- Monthly Minimum Charge - $500.00 per month
FAN MAIL - Financial planner mailbox provides transaction, account and price information to financial planners and small broker/dealers for import into a variety of financial planning software packages.
Base Fee Per Management Company - file generation and delivery - $6,000 per year Per Record Charge
- Rep/Branch/ID - $.018
- Dealer - $.012
- Price Files - $.002 or $1.75/user/month, whichever is less
IMAGE AND/OR COLD ON-LINE ACCESS - On-line internet access to U.S. Bancorp shareholder document images, statements and tax advices (COLD)
Setup -- $1,500 initial setup per concurrent connection (up to 5 workstations each)
Service -- $325/month/concurrent connection
U.S. BANCORP FUND SERVICES, LLC
EXHIBIT 99(h)(6)
SECURITIES LENDING AGREEMENT
SECURITIES LENDING AGREEMENT
CUSTOMER AGREEMENT
This Securities Lending Agreement, made as of this 1st day of January, 2007 including all exhibits attached hereto, all of the terms of which are incorporated herein by reference, in each case, as amended and/or supplemented from time to time in accordance with the terms hereof (this "Agreement"), by and between U.S. Bank National Association (the "Bank") and First American Investment Funds, Inc. (the "Customer").
WITNESSETH:
WHEREAS, Customer is an open-end management investment company registered under the Investment Company Act of 1940 (the "1940 Act") which offers its shares in one or more separate series, with each such series representing a separate and distinct pool of cash, securities, and other assets (collectively "Property"); and
WHEREAS, the Customer desires to have the Bank engage in securities lending as Customer's agent with respect to certain Securities; and
WHEREAS, the Bank and the Customer desire to specify the terms and conditions under which such securities lending will be performed.
NOW, THEREFORE, in consideration of the mutual premises, covenants and undertakings set forth herein, the parties hereto agree as follows:
1. Definitions: For purposes hereof:
"Borrower" shall be, subject to the other provisions of this Agreement, one or more (i) broker-dealers registered under the Securities Exchange Act of 1934 (the "1934 Act"); (ii) broker-dealers exempt from registration under 15(a)(1) of the 1934 Act as a dealer in exempted Government Securities, or (iii) bank(s), with which the Bank or one of its agents has established a securities lending agreement whereby Borrower may borrow Securities and which the Customer has expressly approved in accordance with the last sentence of this paragraph. Such potential Borrowers are listed in Exhibit A attached hereto. Borrowers may be added to or deleted from Exhibit A by (i) the Customer by means of written notice delivered by the Customer to the Bank, or (ii) written notice delivered by the Bank to the Customer which is confirmed by the Customer via letter, fax or e-mail.
"Borrower Agreement" shall have the meaning provided such term in Section 3(a) hereof.
"Business Day" shall mean, with respect to any Loan hereunder, a day on which regular trading occurs in the principal market for the Loaned Securities subject to such Loan, provided, however, that for purposes of determining the Market Value of any Securities hereunder, such term shall mean a day on which regular trading occurs in the
principal market for the Securities whose value is being determined. Notwithstanding the foregoing, in no event shall a Saturday or Sunday be considered a Business Day.
"Close of Trading" shall mean, with respect to any Security, the end of the primary trading session established by the principal market for such Security on a Business Day.
"Collateral" shall be collateral which the Bank shall receive
from Borrower(s) to secure Loans on behalf of a Customer in the form of
(i) cash denominated in United States dollars ("Cash Collateral"), (ii)
securities issued or guaranteed by the United States Government or its
agencies, or (iii) irrevocable bank letters of credit issued by a
person other than the Borrower or an affiliate thereof, or equivalent
obligation denominated in United States dollars..
"Government Securities" shall mean government securities as defined in Section 3(a)(42)(A)-(C) of the 1934 Act, as amended.
"Loans" shall be the lending of Securities to Borrower(s).
"Loaned Securities" shall be those Securities which are loaned to the Borrower(s) by the Bank, securities identical to such Securities, or securities equivalent to such loaned securities in the event of a reorganization, recapitalization or merger affecting the originally loaned securities.
"Margin Percentage" shall mean, with respect to any Loan as of any date, a percentage agreed to by the Borrower and the Bank, provided that in no event shall the Margin Percentage be less than 100% of the Market Value of the Loaned Securities.
"Mark to Market" shall be the procedure whereby the Bank determines the Market Value of securities Collateral and Loaned Securities.
"Market Value" shall be:
(i) If the principal market for the securities to be valued is a national securities exchange in the United States, their Market Value shall be determined by their last sale price on such exchange at the most recent Close of Trading or, if there was no sale on the Business Day of the most recent Close of Trading, by the last sale price at the Close of Trading on the next preceding Business Day on which there was a sale on such exchange, all as quoted on the Consolidated Tape or, if not quoted on the Consolidated Tape, then as quoted by such exchange, including where applicable, accrued interest to the extent not already included therein, unless market practice with respect to the valuation of such securities in connection with securities loans is to the contrary.
(ii) If the principal market for the securities to be valued is the over-the-counter market, and the securities are quoted on The Nasdaq Stock Market ("Nasdaq"), their Market Value shall be the last sale price on Nasdaq at the most recent Close of Trading or, if the securities are issues for which last sale prices are
not quoted on Nasdaq, the last bid price at such Close of Trading. If the relevant quotation did not exist at such Close of Trading, then the Market Value shall be the relevant quotation on the next preceding Close of Trading at which there was such a quotation, including where applicable, accrued interest to the extent not already included therein, unless market practice with respect to the valuation of such securities in connection with securities loans is to the contrary.
(iii) Except as provided in Subsection (iv) of this definition, if the principal market for the securities to be valued is the over-the-counter market, and the securities are not quoted on Nasdaq, their Market Value shall be determined in accordance with market practice for such securities, based on the price for such securities as of the most recent Close of Trading obtained from a generally recognized source agreed to by the Bank and the Borrower(s) or the closing bid quotation at the most recent Close of Trading obtained from such a source. If the relevant quotation did not exist at such Close of Trading, then the Market Value shall be the relevant quotation on the next preceding Close of Trading at which there was such a quotation, including where applicable, accrued interest to the extent not already included therein, unless market practice with respect to the valuation of such securities in connection with securities loans is to the contrary.
(iv) The Market Value of a letter of credit shall be the outstanding amount thereof.
"Offering Memorandum" shall mean the offering memorandum dated on or about March 31, 2006 relating to the Selected Series.
"Person" shall be any natural person, corporation, partnership, limited partnership, joint venture, firm, association, trust, unincorporated organization, government or governmental agency or political subdivision or any other entity, whether acting in an individual, fiduciary or other capacity.
"RIC" shall be the Mount Vernon Securities Lending Trust.
"Securities" shall be securities, of any type, that are owned or controlled by the Customer and that have been hereby approved for use in securities lending by the Customer.
"Selected Series" shall be the series of the RIC that is selected by the Customer for investment of Cash Collateral, as identified on the Customer Information Sheet attached hereto. The Selected Series may be changed by the Customer upon thirty (30) days written notice to the Bank.
"Substitute Payments" shall mean payments in amounts equal to all distributions made to holders of Loaned Securities during the term of the loan, including, but not limited to, cash dividends, interest payments, shares of stock as a result of stock splits, and rights to purchase additional securities.
2. Appointment and Acceptance. The Customer hereby appoints the Bank as its agent for the purpose of lending Securities; and the Bank hereby agrees to accept such appointment and act in such capacity.
3. Delivery of Securities; Receipt of Collateral; Return of Collateral. Until given written notice of termination pursuant to Section 15, the Customer hereby authorizes the Bank, and the Bank agrees, to undertake the following:
(a) To enter into and maintain securities loan agreements with Borrower(s) which set forth terms consistent with this Agreement. The Customer acknowledges that the standard form(s) of Borrower Agreement(s) entered or to be entered with Borrowers will be substantially in the form of the most current Master Securities Loan Agreement produced by the Bond Market Association and the Customer authorizes the Bank to lend Securities to Borrowers pursuant to agreements substantially in the form thereof (each such agreement referred to herein as a "Borrower Agreement"). The Customer may from time to time direct the Bank not to enter into loans with a Borrower, as the Customer specifies by written notice to the Bank, in each case notwithstanding the Customer's prior approval of such Borrower in accordance with the terms contained herein.
(b) To negotiate fees with Borrowers in connection with securities lending, subject to the following requirements. In the case of a Loan for which the Collateral is Cash Collateral, the Bank shall negotiate a fee (the "Borrower Rebate Fee") to be paid by the Bank to the Borrower on behalf of the Customer. In the case of a Loan for which the Collateral is non-cash, the Bank shall negotiate a loan fee to be paid by the Borrower.
(c) To deliver to Borrowers, from time to time, such Securities as the Bank may in its discretion select for securities lending in accordance with this Agreement.
(d) To use the securities lending services of other financial institutions, including, without limitation, FAF Advisors, Inc. ("FAF Advisors") and other financial institutions that are affiliates of the Bank, as agents of the Bank, for the benefit of the Customer, as the Bank in its discretion shall determine to be necessary or desirable to perform securities lending on behalf of the Customer.
(e) In connection with each Loan, to receive from the Borrower, at the time the Securities are loaned, Collateral of a value at least equal to 102% of the then current Market Value of the Loaned Securities. Such Collateral shall be held as security by the Bank on behalf of the Customer for the due and punctual performance by the Borrower of any and all of the Borrower's obligations under the Borrower Agreement.
(f) To hold and safekeep the Collateral on behalf of the Customer with other securities lending collateral held by the Bank, provided that the Customer's specific interest in the Customer's Collateral shall at all times be noted in the records of the Bank, provided further, however, that all Collateral shall be held separate from any other securities held by the Bank on behalf of an other person or entity.
(g) To invest Cash Collateral for the benefit of the Customer in the Selected Series.
(h) Upon termination of any Loan, to liquidate Cash Collateral investments made with the Collateral and to return the Collateral to the Borrower in accordance with the Borrower Agreement so long as the Borrower is not in default and the Bank receives the Loaned Securities from the Borrower.
(i) To receive from the Borrower Substitute Payments and to forward such Substitute Payments to the Customer.
(j) To pay to the Borrower all interest and dividend payments, including Substitute Payments, received on Securities which are held as Collateral, provided that there is no material default by the Borrower of the terms and conditions of the Borrower Agreement, in cases where the Borrower has provided non-cash Collateral in the form of securities, in whole or in part.
(k) To originate or terminate any Loan at any time as the Bank may in its discretion determine pursuant to the terms of this Agreement, without prior notice to the Customer.
(l) In connection with the Customer's Loaned Securities, to collect loan fees owed by Borrowers and income earned on Cash Collateral investments, and to dispose of such monies pursuant to Sections 3(b) and 8 of this Agreement.
(m) To disclose to any Borrower, the name of the Customer and such other information required by such Borrower or such Person to enable such Borrower or such Person to comply with applicable federal or state law, as the Bank may in its discretion deem necessary.
(n) To group the Customer's securities together with the securities of other securities lending customers for the purposes of facilitating Loans to Borrowers. The Customer acknowledges that whether particular securities are loaned depends on many variables, including, but not limited to, the demand for a particular security by Borrowers, the Bank's automated queuing system for equitable utilization of all available securities for lending transactions, and the quantity of a particular security that is held in the lendable pool, and that the Bank cannot ensure that the Customer's Securities will become the subject of any particular Loan or that the Customer's Securities will be loaned.
4. Voting Rights. Customer shall not retain voting rights of Loaned Securities while loaned to any Borrower.
5. Mark to Market. The Bank shall on a daily basis (a) Mark to Market Loaned Securities and Collateral. If the Market Value of the Collateral at the close of trading on a Business Day is less than the Margin Percentage of the Market Value of the Loaned Securities at the close of trading on that day, the Borrower shall deliver, by the close of business on the following Business Day, an additional amount of Collateral the Market Value of which, together with the Market Value of all previously delivered collateral, equals at least the Margin Percentage of the Market Value of
the Loaned Securities as of such preceding day. In the event that the Market Value of the Collateral exceeds the Margin Percentage of the Market Value of the Loaned Securities, part of the Collateral may be returned to the Borrower as long as the Market Value of the remaining Collateral equals at least the Margin Percentage of the Market Value of the Loaned Securities.
6. Accountings. The Bank shall include in a monthly report to the Customer daily information concerning all securities loans outstanding, including an accounting of all securities lending transactions.
7. Loan Termination by Customer.
(a) Unless otherwise agreed in writing, the Customer may, in its discretion, elect to terminate a Loan on a termination date established by notice given to the Bank prior to the close of business on a Business Day. The termination date established by a termination notice shall be a date no earlier than the standard settlement date that would apply to a purchase or sale of the Loaned Securities, which date shall be determined in accordance with the terms of the Borrower Agreement. Upon receipt of such notice, the Bank shall notify the appropriate Borrower for return of the Loaned Securities in accordance with the terms of the Borrower Agreement.
(b) The Bank shall be deemed to have received appropriate notice as required by this Section 7 upon receipt of written or oral directions (i) signed or given by any person whose name and signature is listed on the most recent certificate delivered by the Customer to the Bank which lists those persons authorized to give directions in the name and on behalf of the Customer or (ii) signed or given by any other person(s), duly authorized by the Customer to give directions to the Bank hereunder or whom the Bank reasonably believes to be so authorized. Appropriate notice as required by this Section 7 shall include notice sent to the Bank by letter, memorandum, telegram, cable, telex, telecopy facsimile, video (CRT) terminal or other "on-line" system, or similar means of communication, or given over the telephone or in person.
8. Fees.
(a) The Customer shall pay fees to the Bank in the amount and at such times set forth on Exhibit B attached hereto and made a part hereof as though fully set forth herein. The provisions of Exhibit B may be renegotiated at any time upon five days written notice by either party hereto and may be amended by a separate writing between the Bank and the Customer. The Bank shall charge such fees against the net income received as proceeds from securities lending transactions (after payment of any applicable Borrower Rebate Fees) ("Net Income"); provided, however, that if not so charged, the Customer shall pay such fees.
(b) Any Borrower Rebate Fee incurred by a Customer arising from the receipt of cash as Collateral for Loaned Securities shall be charged against the gross income received by the Customer as proceeds from securities lending transactions and the Bank shall pay such Borrower Rebate Fee to the appropriate Borrower on behalf of the Customer; provided, however, that if not so charged, the Customer shall pay such Borrower Rebate Fee.
9. Customer Representations and Warranties.
(a) The Customer represents and warrants that: (i) the Customer has the legal right, power and authority to execute, deliver and perform this Agreement and to carry out all of the transactions contemplated hereby; (ii) the execution and delivery of this Agreement by the Customer will not violate any provision of its charter, bylaws or any other governing documents, or any law, or any regulation, interpretation or order or any court or other government agency, or judgment, applicable to the Customer; (iii) the Customer has obtained all necessary authorizations, including those from any persons who may have an interest in the Securities, including the consent or approval of any governmental agency or instrumentality; (iv) the execution, delivery and performance of this Agreement and the carrying out of any of the transactions contemplated hereby will not be in conflict with, result in a breach of or constitute a default under any agreement or other instrument to which the Customer is a party or which is otherwise known to the Customer, including but not limited to, liens against and/or pledges of Securities; and (v) all persons executing this Agreement on behalf of the Customer and carrying out the transactions contemplated hereby on behalf of the Customer are duly authorized to do so.
(b) The Customer represents and warrants that it is an "investment company" as that term is defined in the Investment Company Act of 1940 (the "1940 Act") and that it will indicate each Borrower that is an "affiliate," as that term is defined in the 1940 Act by instructing the Bank not to lend the Customer's Securities to such Borrower, such instruction to be given by completion of Exhibit A hereto.
(c) The Customer is aware that it is possible to loan portfolio securities without incurring the loan fees payable pursuant hereto by administering such a program itself, rather than hiring the Bank.
(d) The Customer represents and warrants that each Person who owns, controls or possesses securities which may be lent pursuant to this agreement is identified in the Customer Information Sheet attached hereto and made a part hereof as though fully set forth herein, such Customer Information Sheet to be updated from time to time upon written notice to the Bank from the Customer (the "Customer Information Sheet") and that the tax identification number of such Person is set forth opposite such Person's name on such Customer Information Sheet.
(e) The Customer represents and warrants (i) that the information contained in the attached Customer Information Sheet is complete and accurate in all respects as of the date hereof and the Customer acknowledges and affirms that the Bank may rely upon the accuracy and completeness of the information contained in the Customer Information Sheet in complying with its obligations under applicable laws and regulations and (ii) that the Customer has reviewed and understands the Offering Memorandum.
(f) The Customer represents and warrants that all recitals contained herein are true and correct in all respects.
10. The Bank's Responsibilities. The Bank's duties and responsibilities shall only be those expressly set forth in this Agreement. The Bank hereby agrees that it shall at all times during the term of this Agreement exercise its reasonable care and efforts in performing its obligations hereunder. The Bank will perform such obligations and responsibilities in accordance with all applicable laws, including, but not limited to Securities and Exchange Commission (SEC") rules and regulations. The Bank intends to rely on previously obtained exemptive relief orders issued by SEC in performing its responsibilities under this Agreement. Neither the Bank nor its agents shall be responsible for any loss or liability arising from their performance of the Bank's duties under this Agreement, except for direct loss or liability (but not consequential or punitive damages) arising from the Bank's, or its agent's, willful misfeasance, bad faith or negligence in the performance of the Bank's duties under this Agreement. In no event shall the Bank be liable for special, indirect or consequential damages, or lost profits or loss of business, arising under or in connection with this Agreement, even if previously informed of the possibility of such damages and regardless of the form of action.
11. Customer Responsibilities.
(a) The Customer agrees to (i) promptly notify the Bank of any change that the Customer wishes to make to Exhibit A, (ii) promptly notify the Bank if any information contained in the Customer Information Sheet becomes inaccurate or untrue and (iii) indemnify the Bank for any losses resulting from the Customer's failure to adhere to the provisions of Subsection (a) of this Section 11.
(b) The Customer agrees that, to the extent any loss arising out of investments of Cash Collateral in the Selected Series results in a deficiency in the amount of Collateral available for return to a Borrower, the Customer shall pay to the Bank, on demand, cash in an amount equal to such deficiency.
(c) The Customer acknowledges that the Bank is acting as an agent on the Customer's behalf in connection with the lending of the Customer's assets and the investment of cash received as Collateral for such Loans. The Customer understands that it bears the risks of investment loss, including any decline in value of Cash Collateral investment and loss resulting from any securities lending default by a Borrower.
(d) The Customer acknowledges that it is responsible for paying any taxes that are incurred as a result of Loans made on behalf of the Customer, and the Customer agrees that it shall reimburse the Bank for any taxes paid on Customer's behalf by the Bank.
(e) The Customer agrees to reimburse the Bank and to hold the Bank harmless from and against any and all costs, expenses, damages, liabilities or claims, including reasonable fees and expenses of counsel incurred by the Bank which the Bank may sustain or incur or which may be asserted against the Bank by reason of or as a result of any action taken or omitted by the Bank in connection with operating under this Agreement (including, but not limited to, actions or omissions related to the lending of Securities to Borrowers or the holding or investment of Collateral or resulting from the Customer's failure to comply with its obligations under Section 11(a) hereof) other than those costs, expenses, damages, liabilities or claims arising out of the Bank's negligence,
bad faith or willful misfeasance, as adjudicated by a court of competent jurisdiction. The foregoing shall be a continuing obligation of the Customer and the Customer's successors and assigns, notwithstanding the termination of any Loans hereunder or of this Agreement. The Bank may charge any amounts to which it is entitled hereunder against the account in which the Customer's Securities are held.
12. Indemnification.
(a) In the event of a Borrower's material default of the terms and conditions of the Borrower Agreement, the Bank shall:
(i) take all actions the Bank deems appropriate, in its discretion, to liquidate the Collateral,
(ii) at its own expense, but subject to the Customer's obligations pursuant to Section 11(c) hereto, replace as soon as reasonably practicable such Loaned Securities with identical securities or the equivalent thereof in the event of a reorganization, recapitalization or merger of the issuer of the Loaned Securities, or
(iii) if the Bank is unable to obtain replacement securities, the Bank shall provide the Customer with immediately available funds in an amount equal to the Market Value of such Loaned Securities. The Market Value shall be calculated (1) in the case of a Borrower insolvency, on the date of such insolvency, or (2) in the case of a Borrower's failure to return Loaned Securities, on the date that the Bank deposits funds to the Customer's account.
(b) If the Market Value of the Collateral on the date of such replacement or credit is less than that which is required to purchase replacement securities or to provide equivalent funds to the Customer as a result of a decrease in the Market Value of investments of Cash Collateral, the Bank will not be responsible for such decrease. In such event, the Bank shall purchase and deposit replacement securities, or deposit cash to the Customer's account, in an amount equal to the then current Market Value of Cash Collateral investments. If the Market Value of the Collateral on the date of such replacement or credit is less than that which is required to purchase replacement securities or to credit equivalent funds to Customer's account as a result of any reason other than a decrease in the Market Value of investments of Cash Collateral, Bank shall pay such additional amounts as are necessary to purchase replacement securities in an amount equal to the Market Value of such Loaned Securities or credit equivalent funds to Customer's account as of the date of such replacement. The Bank shall not be liable for any appreciation in the Market Value of the Loaned Securities subsequent to such date.
(c) The Customer agrees that the Bank shall be subrogated to the rights of the Customer in the Collateral and against the Borrower to the extent of any amount paid by the Bank to the Customer hereunder.
(d) Except as provided for herein, the Bank shall have no additional liability to the Customer relating to any Borrower's failure to return Loaned Securities and no duty or obligation to take action to effect payment by a Borrower of any amounts owed by such Borrower pursuant to the Borrower Agreement.
(e) Notwithstanding the foregoing, the Bank shall not be required to act inconsistently with (i) any court or government agency order regarding such Collateral or (ii) the Borrower Agreement.
(f) With respect to its use in this Section 12, a Borrower's
"insolvency" is defined to mean any of the following: (i) the Borrower
shall commence any case or proceeding under any bankruptcy, insolvency,
reorganization, liquidation, dissolution or similar law, or seek the
appointment of a receiver, conservator, trustee, custodian or similar
official for such party or any substantial part of its property; (ii)
any case, proceeding or appointment referred to in the preceding Clause
(i) shall be commenced against the Borrower, or any application shall
be filed against the Borrower for a protective decree under the
provisions of the Securities Investor Protection Act of 1970 as
amended, any of which (aa) is consented to or not timely contested by
the Borrower, (bb) results in the entry of any order for relief, such
an appointment, the issuance of such a protective decree or the entry
of any order having a similar effect, or (cc) is not dismissed within
15 days; (iii) the Borrower shall make a general assignment for the
benefit of creditors; or (iv) the Borrower shall admit in writing its
inability to pay its debts as they become due.
13. Agreement Modification. This Agreement, together with the Exhibits
hereto, contains a complete statement of the parties with respect to its subject
matter, supersedes all existing agreements between them concerning the subject
and cannot be amended or modified in any manner except by a written agreement
executed by all parties hereto. Notwithstanding the foregoing, Exhibit A may be
amended in the manner set forth in the definition of "Borrower" contained in
Section 1 and the fee schedule set forth in Exhibit B may be renegotiated and
amended in the manner set forth in Section 8(a).
14. Notice. Any notice required to be given in writing under this Agreement shall be delivered by hand or mailed by registered mail, postage prepaid, to FAF Advisors, Inc., 800 Nicollet Mall, Minneapolis, Minnesota 55402, Attention: Securities Lending, or such other address provided by the Bank, and to the Customer at the most recent address of such party provided to the Bank.
15. Termination. This Agreement may be terminated at any time by the Bank or the Customer upon thirty (30) days prior written notice to the other party. All outstanding Loans, unless a Customer shall specify otherwise, shall remain outstanding until such Loans terminate pursuant to the securities loan agreement with Borrower, even if such date is past the termination date established by either party pursuant to this Section 15 (but subject to Section 7 and to any other agreement between the Customer and the Bank).
16. Assignment. This Agreement shall not be assignable by the Bank or the Customer without the written consent of the other party, except that the Bank may assign this Agreement to an affiliate of the Bank. Subject to the preceding sentence hereof, this Agreement shall be
binding upon and shall inure to the benefit of the parties and their respective successors and assigns.
17. Governing Law. This Agreement shall be construed and enforced in accordance with the laws of the State of Minnesota without reference to its conflicts or choice of law principles.
[The remainder of this page is intentionally left blank]
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands as of the day and year first above written.
FIRST AMERICAN INVESTMENT
FUNDS, INC.
By: /s/ Charles D. Gariboldi, Jr.
-------------------------------------
Name: Charles D. Gariboldi, Jr.
-------------------------------------
Its: Treasurer
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[Customer Signature Page]
U.S. BANK NATIONAL ASSOCIATION
By: /s/ Kenneth L. Delecki
-------------------------------------
Name: Kenneth L. Delecki
-------------------------------------
Its: Product Manager, Securities Lending
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[U.S. Bank Signature Page]
EXHIBIT A
APPROVED BORROWERS
THE FOLLOWING ENTITIES ARE PRE-APPROVED AS "BORROWERS" PURSUANT TO SECTION 1 OF THE AGREEMENT UNLESS THE CUSTOMER PLACES AN "X" ON THE LINE ACROSS FROM A BORROWER NAME.
ABN Amro Bank N.V. New York Branch ______________________ ABN Amro Incorporated ______________________ Ameritrade Clearing ______________________ Bank of America Securities, LLC ______________________ Barclays Capital Inc. ______________________ Bear, Stearns and Co. Inc. ______________________ Bear, Stearns Securities Corp. ______________________ BNP Paribas Securities Corp. ______________________ Calyon Securities (USA) Inc. ______________________ Cantor Fitzgerald Securities ______________________ CIBC World Markets ______________________ Citadel Trading Group, LLC ______________________ Citigroup Global Markets, Inc. ______________________ Credit Suisse Securities (USA) LLC ______________________ Deutsche Bank NA ______________________ Deutsche Bank Securities, Inc. ______________________ Dresdner Kleinwort Wasserstein Securities, LLC ______________________ Edwards, A.G. Inc. ______________________ First Clearing, LLC (Wachovia Corp.) ______________________ Fortis Securities, LLC ______________________ Goldman Sachs & Co., Incorporated ______________________ RBS Greenwich Capital, Inc. ______________________ HSBC Securities (USA), Inc. ______________________ ING Financial Markets, LLC ______________________ Jefferies & Company, Inc. ______________________ Lehman Brothers, Inc. ______________________ Merrill Lynch Government Securities Inc. ______________________ Merrill Lynch, Pierce, Fenner & Smith, Inc. ______________________ Morgan Stanley & Co., Inc. ______________________ J.P. Morgan Securities, Inc. ______________________ J.P. Morgan Chase Bank ______________________ Paloma Securities, LLC ______________________ Raymond James & Associates, Incorporated ______________________ RBC Dain Rauscher ______________________ RBC Capital Markets Corporation ______________________ SG Americas Securities, LLC ______________________ Societe Generale, New York Branch ______________________ Swiss American Securities, Incorporated ______________________ UBS Securities LLC ______________________ Wachovia Bank NA ______________________ Wachovia Securities, Inc. ______________________ |
PLEASE INITIAL HERE TO APPROVE BORROWERS __________
Exh. A-1
Exh. B-4
EXHIBIT B
SECURITIES LENDING FEE
The Customer shall pay to the Bank, on behalf of each series of the Customer participating in the securities lending program pursuant to the Agreement, monthly fees for administering the securities lending program for such series. For each series, the monthly fee shall equal 25% of the series' Net Income during such month; provided, however, that if the series' Cash Collateral was invested during such month in the RIC, the fee for such month will be reduced, if necessary, so that the sum of (a) that portion of the administration fee (.02% per annum) earned by FAF Advisors from the RIC during such month that is allocable to such series, plus (b) the monthly fee paid by such series to the Bank under this Agreement, does not exceed 32% of the sum of (i) the series' Net Income for such month plus (ii) that portion of the administration fee earned by FAF Advisors from the RIC during such month that is allocable to such series. The monthly fee for each series shall be calculated and retained by the Bank out of such series' aggregate Net Income for such month; provided, however, that if the fee is not so retained, the Customer, on behalf of such series, shall pay such fee upon request from the Bank.
CUSTOMER INFORMATION SHEET
Please provide the Bank with the following information:
Name: ____________________________________________________
Tax identification number: _______________________________
Principal place of business: _____________________________
State and nation of incorporation or organization: _____________________________
Address (or the address of
your registered agent) within
state of incorporation or organization: ________________________________________
Please select ONE (and only one) of the following two series of the Mount Vernon Securities Lending Trust in which you wish the Bank to invest Cash Collateral (each series is described more fully in such series' respective Offering Memorandum):
[ ] Short-Term Bond Portfolio [ ] Prime Portfolio
(IF YOU FAIL TO SELECT EITHER OF THE SERIES ABOVE, OR IF YOU SELECT BOTH OF THE
SERIES ABOVE, THE BANK WILL BE UNABLE TO LEND YOUR SECURITIES.)
Please set forth below the name of each entity which owns, controls or possesses securities which may be lent pursuant to the Customer Agreement and the tax identification number of such entity (attach additional pages if necessary):
NAME TAX ID ---- ------ ______________________________________ ______________________________________ ______________________________________ ______________________________________ ______________________________________ ______________________________________ ______________________________________ ______________________________________ ______________________________________ ______________________________________ ______________________________________ ______________________________________ ______________________________________ ______________________________________ ______________________________________ ______________________________________ ______________________________________ ______________________________________ ______________________________________ ______________________________________ |
DORSEY & WHITNEY LLP
SUITE 1500
50 SOUTH SIXTH STREET
MINNEAPOLIS, MINNESOTA 55402
July 31, 2007
First American Investment Funds, Inc.
800 Nicollet Mall
Minneapolis, Minnesota 55402
Ladies and Gentlemen:
We have acted as counsel to First American Investment Funds, Inc., a Maryland corporation (the "Company"), in rendering the opinion hereinafter set forth with respect to the authorization of the classes and series of the Company's common shares, par value $0.0001 per share, which are identified in Exhibit A to this opinion letter, which are also known by the names set forth opposite their respective class and series designations in Exhibit A. The shares of the Company identified in Exhibit A are referred to herein collectively as the "Shares."
We understand that the Shares are being registered under the Securities Act of 1933, as amended, and the Investment Company Act of 1940, as amended, pursuant to the Company's Registration Statement on Form N-1A (File No. 33-16905) relating to such shares (the "Registration Statement"). In rendering the opinion hereinafter expressed, we have reviewed the corporate proceedings taken by the Company in connection with the authorization and issuance of the Shares, and we have reviewed such questions of law and examined copies of such corporate records of the Company, certificates of public officials and of responsible officers of the Company, and other documents as we have deemed necessary as a basis for such opinion. As to the various matters of fact material to such opinion, we have, when such facts were not independently established, relied to the extent we deemed proper on certificates of public officials and of responsible officers of the Company. In connection with such review and examination, we have assumed that all copies of documents provided to us conform to the originals and that all signatures are genuine.
In addition, in rendering the opinion hereinafter expressed, we have assumed, with the concurrence of the Company, that all of the Shares will be issued and sold upon the terms and in the manner set forth in the Registration Statement; that the Company will not issue Shares in excess of the numbers authorized in the Company's articles of incorporation as in effect at the respective dates of issuance; and that the Company will maintain its corporate existence and good standing under the laws of the State of Maryland in effect at all times after the date of this opinion.
Based on the foregoing, it is our opinion that the Shares issued from and after the date hereof, when issued and delivered by the Company as described in the Registration Statement, will be legally issued and fully paid and non-assessable.
In rendering the foregoing opinion, we express no opinion as to the laws of any jurisdiction other than the State of Maryland. We hereby consent to the filing of this opinion letter as an exhibit to the Registration Statement.
Very truly yours,
/s/ Dorsey & Whitney LLP
JDA
|
Exhibit A to July 31, 2007 Dorsey & Whitney Opinion Letter to First American Investment Funds, Inc.
Designation of Shares in Articles of Incorporation or Articles Supplementary Name ------------------------- ---- Class HHH Common Shares ................ Quantitative Large Cap Core Fund, Class A Class HHH, Series 2 Common Shares ...... Quantitative Large Cap Core Fund, Class C Class HHH, Series 3 Common Shares ...... Quantitative Large Cap Core Fund, Class R Class HHH, Series 4 Common Shares ...... Quantitative Large Cap Core Fund, Class Y Class I I I Common Shares .............. Quantitative Large Cap Value Fund, Class A Class I I I, Series 2 Common Shares .... Quantitative Large Cap Value Fund, Class C Class I I I, Series 3 Common Shares .... Quantitative Large Cap Value Fund, Class R Class I I I, Series 4 Common Shares .... Quantitative Large Cap Value Fund, Class Y Class JJJ Common Shares ................ Quantitative Large Cap Growth Fund, Class A Class JJJ, Series 2 Common Shares ...... Quantitative Large Cap Growth Fund, Class C Class JJJ, Series 3 Common Shares ...... Quantitative Large Cap Growth Fund, Class R Class JJJ, Series 4 Common Shares ...... Quantitative Large Cap Growth Fund, Class Y |
FIRST AMERICAN INVESTMENT FUNDS, INC.
AMENDED AND RESTATED DISTRIBUTION AND SERVICE PLAN
Effective September 19, 2006
WHEREAS, FIRST AMERICAN INVESTMENT FUNDS, INC. (the "Company") is engaged in business as an open-end investment company registered under the Investment Company Act of 1940, as amended ("1940 Act"); and
WHEREAS, the Directors of the Company have determined that there is a reasonable likelihood that the following Amended and Restated Distribution and Service Plan ("Plan") will benefit the portfolios of the Company in existence as of the date hereof (the "Portfolios") and the shareholders of the Class A, Class B, Class C and Class R shares of each Portfolio offering the respective class of shares ("Shareholders");
NOW, THEREFORE, the Directors of the Company hereby adopt this Plan for the Portfolios pursuant to Rule 12b-1 under the 1940 Act. (To the extent the Directors of the Company adopt this Plan for newly formed portfolios of the Company in accordance with Section 7 hereof, all references in this Plan to a "Portfolio" or "Portfolios" also refer to such newly formed portfolios.)
SECTION 1. The Directors of the Company have adopted this Plan to enable each Portfolio to directly or indirectly bear expenses relating to the distribution and/or shareholder servicing of the Class A, Class B, Class C and Class R shares of such Portfolio.
SECTION 2. The Class A shares of each Portfolio are authorized to pay the principal underwriter of the Fund's shares (the "Distributor") a total fee in connection with the servicing of shareholder accounts of such class and in connection with distribution-related services provided in respect of such class, calculated and payable monthly, at the annual rate of .25% of the value of the average daily net assets of such class. All or any portion of such total fee may be payable as a Shareholder Servicing Fee, and all or any portion of such total fee may be payable as a Distribution Fee, as determined from time to time by the Fund's Board of Directors. Until further action by the Board of Directors, all of such fee shall be designated and payable as a Shareholder Servicing Fee.
SECTION 3. The Class B shares of each Portfolio offering such shares are authorized to pay the Distributor a total fee in connection with the servicing of shareholder accounts of such class and in connection with distribution-related services provided in respect of such class, calculated and payable monthly, at the annual rate of 1.00% of the value of the average daily net assets of such class. A portion of such total fee will be payable as a Shareholder Servicing Fee and a portion of such total fee will be payable as a Distribution Fee, as determined from time to time by the Fund's Board of Directors. Until further action by the Board of Directors, a portion of such total fee equal to .25% of the value of the average daily net assets of such class shall be designated and payable as a Shareholder Servicing Fee and the remainder of such fee shall be designated as a Distribution Fee.
SECTION 4. The Class C shares of each Portfolio offering such shares are authorized to pay the Distributor a total fee in connection with the servicing of shareholder accounts of such class and in connection with distribution-related services provided in respect of such class, calculated and payable monthly, at the annual rate of .65% of the value of the average daily net assets of such class for the Portfolios set forth in Exhibit A hereto (the "Tax-Free Portfolios") and 1.00% for each other Portfolio offering such shares. A portion of such total fee will be payable as a Shareholder Servicing Fee and a portion of such total fee will be payable as a Distribution Fee, as determined from time to time by the
Fund's Board of Directors. Until further action by the Board of Directors, a portion of such total fee equal to .25% for each Portfolio shall be designated and payable as a Shareholder Servicing Fee and the remainder of such fee shall be designated as a Distribution Fee.
SECTION 5. The Class R shares of each Portfolio offering such shares are authorized to pay the Distributor a total fee in connection with the servicing of shareholder accounts of such class and in connection with distribution-related services provided in respect of such class, calculated and payable monthly, at the annual rate of .50% of the value of the average daily net assets of such class. A portion of such total fee may be payable as a Shareholder Servicing Fee and all or any portion of such total fee may be payable as a Distribution Fee, as determined from time to time by the Fund's Board of Directors. Until further action by the Board of Directors, a portion of such total fee equal to .25% of the value of the average daily net assets of such class shall be designated and payable as a Shareholder Servicing Fee and the remainder of such fee shall be designated as a Distribution Fee.
SECTION 6.
(a) With respect to each Portfolio, the Shareholder Servicing Fee may be used by the Distributor to provide compensation for ongoing servicing and/or maintenance of shareholder accounts of the respective class of shares of such Portfolio. Compensation may be paid by the Distributor to persons, including employees of the Distributor, and institutions who respond to inquiries of holders of such shares regarding their ownership of shares or their accounts with the Company or who provide other administrative or accounting services not otherwise required to be provided by the Company's investment adviser, transfer agent or other agent of the Company.
(b) With respect to each Portfolio, the Distribution Fee may be used by the Distributor to provide initial and ongoing sales compensation to its investment executives and to other broker-dealers in respect of sales of the respective class of such Portfolio and to pay for other advertising and promotional expenses in connection with the distribution of such shares. These advertising and promotional expenses include, by way of example but not by way of limitation, costs of printing and mailing prospectuses, statements of additional information and shareholder reports to prospective investors; preparation and distribution of sales literature; advertising of any type; an allocation of overhead and other expenses of the Distributor related to the distribution of such shares; and payments to, and expenses of, officers, employees or representatives of the Distributor, of other broker-dealers, banks or other financial institutions, and of any other persons who provide support services in connection with the distribution of such shares, including travel, entertainment, and telephone expenses.
(c) Payments under the Plan are not tied exclusively to the expenses for shareholder servicing and distribution related activities actually incurred by the Distributor, so that such payments may exceed expenses actually incurred by the Distributor. The Company's Board of Directors will evaluate the appropriateness of the Plan and its payment terms on a continuing basis and in doing so will consider all relevant factors, including expenses borne by the Distributor and amounts it receives under the Plan.
(d) The Company's investment adviser and the Distributor may, at their option and in their sole discretion, make payments from their own resources to cover costs of additional distribution and shareholder servicing activities.
SECTION 7. This Plan shall not take effect with respect to any class of shares of a Portfolio, or any class of shares of a newly formed portfolio of the Company, until it has been approved (a) by a vote of at least a majority of the outstanding voting securities of such class of shares, but only if such approval is required by the Investment Company Act of 1940 and the rules and regulations thereunder; and (b) together with any related agreements, by votes of the majority of both (i) the Directors of the Company and (ii) the Qualified Directors, cast in person at a Board of Directors meeting called for the purpose of voting on this Plan or such agreement.
SECTION 8. This Plan shall continue in effect for a period of more than one year after it takes effect only for so long as such continuance is specifically approved at least annually in the manner provided in Part (b) of Section 7 herein for the approval of this Plan.
SECTION 9. Any person authorized to direct the disposition of monies paid or payable by the Company pursuant to this Plan or any related agreement shall provide to the Directors of the Company, at least quarterly, a written report of the amounts so expended and the purposes for which such expenditures were made.
SECTION 10. This Plan may be terminated at any time with respect to any class of shares of any Portfolio by the vote of a majority of the Qualified Directors or by vote of a majority of the outstanding voting securities of such class.
SECTION 11. All agreements with any person relating to implementation of this Plan shall be in writing, and any agreement related to this Plan shall provide (a) that such agreement may be terminated at any time with respect to any class of shares of any Portfolio, without payment of any penalty, by the vote of a majority of the Qualified Directors or by the vote of Shareholders holding a majority of such class's outstanding voting securities, on not more than 60 days written notice to any other party to the agreement; and (b) that such agreement shall terminate automatically in the event of its assignment.
SECTION 12. This Plan may not be amended to increase materially the amount of fees payable pursuant hereto by any class of shares of any Portfolio without the approval of the majority of the outstanding voting securities of that class, and all material amendments to this Plan shall be approved in the manner provided in Part (b) of Section 7 herein for the approval of this Plan.
SECTION 13. As used in this Plan, (a) the term "Qualified Directors" shall mean those Directors of the Company who are not interested persons of the Company, and have no direct or indirect financial interest in the operation of this Plan or any agreements related to it, and (b) the terms "assignment" and "interested person" shall have the respective meanings specified in the 1940 Act and the rules and regulations thereunder, subject to such exemptions as may be granted by the Securities and Exchange Commission.
SECTION 14. While this Plan is in effect, the Board of Directors of the Company shall satisfy the fund governance standards as defined in Rule 0-1(a)(7) under the 1940 Act.
SECTION 15. This Plan shall not obligate the Company or any other party to enter into an agreement with any particular person.
Exhibit A
Arizona Tax Free Fund
California Tax Free Fund
Colorado Tax Free Fund
Minnesota Tax Free Fund
Missouri Tax Free Fund
Nebraska Tax Free Fund
Ohio Tax Free Fund
Tax Free Fund
FIRST AMERICAN INVESTMENT FUNDS, INC.
Amended and Restated Multiple Class Plan Pursuant to Rule 18f-3
Effective June 20, 2007
I. PREAMBLE.
Each of the funds listed below (each a "Fund," and collectively the "Funds"), each a portfolio of First American Investment Funds, Inc. (the "Company"), has elected to rely on Rule 18f-3 under the Investment Company Act of 1940, as amended (the "1940 Act") in offering multiple classes of shares in each Fund:
Balanced Fund
Equity Income Fund
Large Cap Growth Opportunities Fund
Large Cap Value Fund
Large Cap Select Fund
Equity Index Fund
Mid Cap Index Fund
Small Cap Index Fund
Small Cap Growth Opportunities Fund
Mid Cap Growth Opportunities Fund
Mid Cap Value Fund
Small Cap Select Fund
Small Cap Value Fund
International Fund
Real Estate Securities Fund
Small-Mid Cap Core Fund
Total Return Bond Fund
Core Bond Fund
Intermediate Term Bond Fund
International Select Fund
Quantitative Large Cap Core Fund
Quantitative Large Cap Growth Fund
Quantitative Large Cap Value Fund
Short Term Bond Fund
High Income Bond Fund
U.S. Government Mortgage Fund
Intermediate Government Bond Fund
Inflation Protected Securities Fund
Arizona Tax Free Fund
California Intermediate Tax Free Fund
California Tax Free Fund
Colorado Intermediate Tax Free Fund
Colorado Tax Free Fund
Intermediate Tax Free Fund
Minnesota Intermediate Tax Free Fund
Minnesota Tax Free Fund
Missouri Tax Free Fund
Nebraska Tax Free Fund
Oregon Intermediate Tax Free Fund
Tax Free Fund
Ohio Tax Free Fund
Short Tax Free Fund
This Plan sets forth the differences among classes of shares of the Funds, including distribution arrangements, shareholder services, expense allocations, conversion and exchange options, and voting rights.
II. ATTRIBUTES OF SHARE CLASSES.
The attributes of each existing class of the existing Funds (i.e. Class A, Class B, Class C, Class R and Class Y shares), with respect to distribution arrangements, shareholder services,
transfer agency services, recordkeeping services, and conversion and exchange options shall be as set forth in the following materials:
A. The Prospectuses of the various share classes of the respective Funds in the forms most recently filed with the Securities and Exchange Commission (the "SEC") prior to the date of this Plan as amended.
B. Statements of Additional Information of the respective Funds in the forms most recently filed with the SEC prior to the date of this Plan as amended
C. First American Investment Funds, Inc. Amended and Restated Distribution and Service Plan effective September 19, 2006.
D. Administration Agreement with FAF Advisors, Inc. dated July 1, 2006.
E. Transfer Agency Agreement with U.S. Bancorp Fund Services and FAF Advisors dated September 19, 2006.
Expenses of such existing classes of the Funds shall continue to be allocated in the manner set forth in III below. Each such existing class shall have exclusive voting rights on any matter submitted to shareholders that relates solely to its arrangement and shall have separate voting rights on any matter submitted to shareholders in which the interests of one class differ from the interests of any other class.
III. EXPENSE ALLOCATIONS.
Expenses of the existing classes of the existing Funds shall be allocated as follows:
A. Distribution fees, service fees, transfer agency fees and recordkeeping fees relating to the respective classes of shares, as set forth in the materials referred to in II above, shall be borne exclusively by the classes of shares to which they relate.
B. Except as set forth in A above, expenses of the Funds shall be borne at the Fund level and shall not be allocated on a class basis.
Unless and until this Plan is amended to provide otherwise, the methodology and procedures for allocating income, realized gains and losses, unrealized appreciation and depreciation, and Fund-wide expenses shall be based on the net assets of each class in relation to the net assets of the company ("relative net assets") as set forth in Rule 18f-3(c)(1)(i).
The foregoing allocations shall in all cases be made in a manner consistent with Revenue Procedure 96-47 (Internal Revenue Code, Section 562) of the Internal Revenue Service.
IV. AMENDMENT OF PLAN; PERIODIC REVIEW.
A. New Funds and New Classes. With respect to any new portfolio of the Company created after the date of this Plan and any new class of shares of the existing Funds created after the date of this Plan, the Board of Directors of the Company shall approve amendments to this Plan setting forth the attributes of the classes of shares of such new portfolio or of such new class of shares.
B. Material Amendments and Periodic Reviews. The Board of Directors of the Company, including a majority of the independent directors, shall periodically review this Plan for its continued appropriateness and shall approve any material amendment of this Plan as it relates to any class of any Fund covered by this Plan.
(FAF ADVISORS (TM) LOGO)
FAF ADVISORS
CODE OF ETHICS
APPROVED BY THE FIRST AMERICAN FUNDS
BOARD OF DIRECTORS PENDING
TABLE OF CONTENTS
INTRODUCTION............................................................... 1
PERSONAL SECURITIES TRANSACTIONS........................................... 2
A. Who Is Covered by this Section?.................................... 4
B. Which Securities and Accounts Are Covered?......................... 4
C. What Types of Transactions Require Reporting but not
Pre-clearing?................................................... 6
D. What Are the Restrictions on Trading Shares of the First
American Funds?................................................. 7
E. What Are Blackout Periods?......................................... 7
F. Are There any Restrictions on Short-Term Trading?.................. 8
G. Are There Any Prohibitions for Personal Trading in Small-Mid
Cap Stocks?..................................................... 8
H. What Reports and Disclosures Do Access Persons Need to Make?....... 8
I. Special Discretion................................................. 9
INSIDER TRADING POLICY AND PROCEDURES...................................... 10
OTHER CONFLICTS OF INTEREST................................................ 19
A. May I Provide Investment Advice to Others?......................... 19
B. May I Serve as a Director of Another Company?...................... 19
C. When May I Disclose Confidential Information?...................... 19
D. May I Give or Receive Gifts?....................................... 19
E. May I Make Political and Charitable Contributions?................. 20
ENFORCEMENT OF THE CODE AND SANCTIONS...................................... 21
GLOSSARY................................................................... 23
EXHIBIT 1.................................................................. 27
ACKNOWLEDGMENT AND AGREEMENT TO COMPLY.................................. 27
EXHIBIT 2.................................................................. 28
CODE OF ETHICS CONTACT LIST............................................. 28
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INTRODUCTION
WHY DO WE NEED THE CODE OF ETHICS?
As an investment adviser, client and fund shareholder trust is our most valuable asset. Our success largely depends on the degree of trust our clients and fund investors bestow upon us. All of us at FAF Advisors, Inc. ("FAF Advisors") are responsible for maintaining that trust, and must conduct ourselves in the very highest ethics standards. We must always place the interests of clients and fund shareholders ahead of our own and avoid actual and apparent conflicts of interest. Under Rule 204A-1 of the Investment Advisers Act of 1940, FAF Advisors is required to establish a Code of Ethics outlining standards of conduct and compliance with federal securities laws. However, it is not enough for us to simply comply with the letter of the law. We must observe exemplary standards of honesty and integrity above and beyond the minimal legal requirements. To that end, we have adopted this Code of Ethics to help guide our conduct when the interests of our clients may not be aligned with our individual interests or the interests of FAF Advisors. In particular, this Code deals with:
- Our commitment to honest and ethical conduct;
- Individual accountability;
- Personal securities transactions;
- Trading on inside or confidential information;
- Safeguarding client and fund confidential information;
- Giving and receiving gifts;
- Outside professional opportunities; and
- Adherence to the laws, rules, and regulations that govern our business.
This Code does not attempt to identify all possible conflicts of interest, and literal compliance with each of its specific provisions will not shield you from liability for personal trading or other conduct that violates a fiduciary duty to clients and shareholders. Violations of this Code and federal securities laws may result in sanctions, fines, suspension and/or termination of employment, SEC administrative actions, and in some cases civil or criminal penalties.
This Code is an expression of our commitment to an ethical work place and is an integral element of the control environment required under federal law. If you are aware of any violation or suspected violation of the Code, you must promptly report it to the Compliance Department. You may also report it to the CEO, General Counsel or any other officer of FAF Advisors. The officers of FAF Advisors and the FUNDS are required to report any violation or suspected violation to the Chief Compliance Officer. It is a violation of the Code to retaliate against or harass, in any manner, any person who reports any violation or suspected violation of the Code. In addition to this Code, you are subject to U.S. Bank's Code of Ethics and may be subject to the Code of Ethics Conduct adopted by the First American Funds (the "FUNDS"). Copies of these
Codes may be obtained from the Compliance Department. While these codes of conduct are designed to address differing business environments and legal obligations, they are all designed to promote honest and ethical conduct. IF YOU BELIEVE THAT THESE OR OTHER CODES OF CONDUCT IMPOSE CONFLICTING OBLIGATIONS ON YOU, YOU SHOULD CONTACT THE COMPLIANCE DEPARTMENT IMMEDIATELY.
The Code applies to all FAF Advisors ACCESS PERSONS, and you must certify annually that you have received a copy of the Code, that you have been in compliance, and that you will continue to comply with its terms. (Exhibit 1)
This Code applies to temporary or contract workers and consultants whose assignments exceed four weeks or whose cumulative assignments exceed eight weeks over a twelve-month period.
This Code is divided into five sections:
1. Personal transactions in securities and related financial instruments by ACCESS PERSONS;
2. Access to and the use of confidential and non-public information when trading for client or personal accounts;
3. Safeguarding client and fund confidential information;
4. Other types of conduct that may impact or appear to impact our objectivity in dealing with our clients, suppliers, and business partners; and
5. Sanctions for violation of the Code.
IF YOU HAVE ANY QUESTIONS ABOUT FAF ADVISORS' POLICIES ON PERSONAL SECURITIES TRANSACTIONS, INSIDER TRADING, CONFLICTS OF INTEREST OR ANY OTHER ASPECT OF THE CODE, PLEASE REFER TO THE CONTACT LIST (EXHIBIT 2).
PERSONAL SECURITIES TRANSACTIONS
Buying and selling SECURITIES for accounts in which you have a BENEFICIAL INTEREST may conflict (or appear to conflict) with the interests of our clients for many reasons, including buying or selling a SECURITY close in time to a client transaction, or buying or selling a SECURITY for yourself instead of our clients. This section of the Code establishes rules for minimizing and managing these conflicts.
Typically, you have a BENEFICIAL INTEREST in accounts maintained in your own name, joint accounts and accounts of your spouse or registered domestic partner, dependents, and other immediate family members sharing the same household. IF YOU HAVE ANY DOUBT ABOUT THE STATUS OF AN ACCOUNT, PLEASE CONTACT THE COMPLIANCE DEPARTMENT.
In the sections that follow, we will explain whether you (including your immediate family and possible others who are closely connected to you, see "BENEFICIAL INTEREST") are covered by these personal transaction rules and describe the types of accounts, SECURITIES, and transactions that are subject to these rules. If you are covered by these rules and are involved in a covered transaction you must take the following steps:
1. Annually, you must disclose to FAF Advisors each account (other than bank checking or other deposit account) that you maintain for holding, buying or selling SECURITIES and related financial instruments.
2. Annually, you must disclose to FAF Advisors all of your personal holdings in SECURITIES and related financial instruments.
3. Quarterly, you must disclose to FAF Advisors all of your transactions in SECURITIES and related financial instruments.
4. Before buying or selling any covered SECURITY, you may be required to pre-clear that purchase or sale.
5. Following each purchase or sale of a SECURITY, your broker-dealer (or other agent) must send to FAF Advisors a duplicate confirmation of the terms of the transaction.
Many of these rules use complex, technically defined terms. To make these rules easier to understand, we have capitalized defined terms and included a hyperlink to the definition if you need more detail. Printed versions of the Code include a table of defined terms.
SECURITIES include exchange- and OTC-traded instruments, as well as financial futures, derivatives and other related instruments. See Glossary.
There are certain times when you may not buy or sell for your own account, and there are certain types of transactions that you may not enter into. Detailed information on these restrictions is provided below.
In addition, to streamline our monitoring process, FAF Advisors requires you (and accounts in which you hold SECURITIES) to effect transactions through accounts maintained at:
- E*Trade;
- Fidelity Investments;
- Merrill Lynch;
- UBS Financial Services;
- Schwab;
- TD Waterhouse;
- Ameritrade;
- U.S. Bancorp Investments;
- U.S. Bancorp Private Client Group; or
- Salomon Smith Barney for the holding of USB Stock Options.
An exception to this requirement may only be granted under very limited circumstances, must be specifically authorized by the Compliance Department, a signed copy of the exception must be kept in your file, and you must submit reports of personal transactions.
AS AN FAF ADVISORS ACCESS PERSON, YOUR ABILITY TO CONDUCT PERSONAL SECURITIES TRANSACTIONS IS A PRIVILEGE NOT A RIGHT. AT FAF ADVISORS WE MUST PUT OUR FUNDS' AND CLIENTS' INTERESTS FIRST. PLEASE NOTE THAT THERE MAY BE TIMES WHEN YOU ARE UNABLE TO PRE-CLEAR OR EFFECT TRANSACTIONS BECAUSE THE SYSTEM IS UNAVAILABLE (OR FOR ANY OTHER REASON).
A. WHO IS COVERED BY THIS SECTION?
The potential for a conflict of interest arises if you have access to non-public information about our clients' or FUNDS' transactions or holdings or about securities research and recommendations. This Code refers to employees with access to this kind of information as ACCESS PERSONS. ACCESS PERSONS generally include any employees who are in a position to exploit information about client securities transactions or holdings. All FAF Advisors employees are deemed ACCESS PERSONS, with certain employees being classified as RESTRICTED ACCESS PERSONS. If you are actually involved in making investment recommendations to our clients, participate in the determination of which investment recommendations will be made, have the power to influence management of the Funds, execute trades for any Fund or client accounts, this Code refers to you as a RESTRICTED ACCESS PERSON. RESTRICTED ACCESS PERSONS are subject to all the requirements imposed on ACCESS PERSONS. RESTRICTED ACCESS PERSONS are also subject to certain other requirements.
ACCESS PERSONS typically include trading and portfolio management assistants, sales and marketing, product, operations and IT employees. RESTRICTED ACCESS PERSONS include research analysts, traders, portfolio/fund managers, executive management, members of the Legal and Compliance Departments, and their executive or departmental assistants. EACH EMPLOYEE WILL BE ADVISED WITH RESPECT TO THEIR STATUS AS AN ACCESS PERSON OR RESTRICTED ACCESS PERSON.
Employees of Private Asset Management ("PAM") are also considered Restricted Access Persons under the FAF Advisors Code of Ethics, and all monitoring of personal trading is done by FAF Advisors Compliance. However, as PAM Employees are U.S. Bancorp employees, they are covered by their own Code of Ethics.
B. WHICH SECURITIES AND ACCOUNTS ARE COVERED?
This Code applies to SECURITIES and accounts in which you have a BENEFICIAL INTEREST. Generally, you have a BENEFICIAL INTEREST in any SECURITY or account in which you have a financial interest or have or share investment discretion. There may be accounts in which you have a financial interest but do not have investment discretion. Because these accounts involve lower risks of a conflict with our clients, FAF Advisors may exempt them from the
pre-clearance or reporting obligations of the Code. These ACCOUNTS may include trust accounts and accounts over which you have given investment discretion to a third party. If you believe an exemption should apply to an ACCOUNT in which you have an interest, please contact the Compliance Department. Exceptions will be granted under very limited circumstances, must be specifically authorized by the Compliance Department, a signed copy of the exception must be kept in your file, and you must submit reports of personal transactions.
Approval for INITIAL PUBLIC OFFERINGS and PRIVATE PLACEMENTS will take into account, among other factors, whether the investment opportunity should be reserved for clients and whether the opportunity is being offered to the ACCESS PERSON by virtue of his or her relationship to FAF Advisors or any fund sponsored or managed by FAF Advisors.
Transactions and holdings in client accounts of Portfolio Managers are exempt from reporting and preclearance requirements under the Code.
ACCESS PERSONS must pre-clear transactions in SECURITIES, with the Compliance Department:
1. Publicly traded SECURITIES (including options and futures on SECURITIES);
2. Privately placed SECURITIES (including options on SECURITIES);
3. INITIAL PUBLIC OFFERINGS; and
4. Debt New Issue Offerings, corporate and municipal bonds.
Transactions, except those involving PRIVATE PLACEMENTS, must be executed by THE CLOSE OF THE NYSE THE SAME DAY APPROVAL IS GIVEN. If a transaction is not executed that day, a new approval must be obtained from the Compliance Department.
Only day orders will be approved. Good until cancelled ("GTC"), stop loss, and similar orders are not permitted. Limit orders must be executed the day approved.
TRANSACTIONS IN THE FOLLOWING EXEMPT SECURITIES DO NOT REQUIRE REPORTING OR
PRE-CLEARANCE:
1. Direct obligations of the Government of the United States;
2. Bankers' acceptance, bank certificates of deposit, commercial paper;
3. High-quality short-term debt instruments including repurchase agreements;
4. Shares of open-end mutual funds for which FAF Advisors does not serve as investment adviser or sub-adviser; and
5. First American Money-Market Funds.
In addition, while the transactions in the securities listed below require pre-clearance, they will normally be approved in the absence of special circumstances. Pre-clearance is essential for compliance with federal securities laws. Failure to pre-clear these or any
other transaction under the Code will be treated as a serious violation of the Code. In addition, transactions in these securities are not subject to a BLACKOUT PERIOD.
1. SECURITIES whose performance are directly tied to a broad-based, publicly traded market basket or index of stocks (e.g., SPDRS, QQQ, Diamonds);
2. U.S. Bancorp stock, except during a blackout period when trading of U.S. Bancorp stock by its employees is restricted;
3. Shares of issuers included in the S&P 100;
4. Shares of issuers included in the S&P 500 stocks by ACCESS PERSONS WHO ARE NOT RESTRICTED ACCESS PERSONS in amounts less than $25,000 in any single trading day; and
5. SHARES of issuers included in the Russell 1000 stocks by ACCESS PERSONS WHO ARE NOT RESTRICTED ACCESS PERSONS in amounts less than $10,000 in any single trading day.
C. WHAT TYPES OF TRANSACTIONS REQUIRE REPORTING BUT NOT PRE-CLEARING?
PRE-CLEARANCE and BLACKOUT PERIODS do not apply to the following transactions:
BLACKOUT PERIODS are periods when you may not be permitted to buy or sell a SECURITY. See Section E, below.
1. Purchases of an employer's stock under an employer-sponsored plan (including the employer of a spouse or registered domestic partner);
2. Purchases effected upon the exercise of rights issued by an issuer pro rata to all holders of a class of its securities, to the extent the rights were acquired from the issuer; and any sales of these rights;
3. Purchases or sales that are non-volitional on the part of the ACCESS PERSON, including purchases or sales upon exercise of puts or calls written by the person (please note that you are prohibited from engaging in short-term trading), non-volitional sales from a margin account pursuant to a bona fide margin call; purchases or sales as part of divorce settlement or decree, and any other purchases or sales as determined by the Compliance Department upon request;
4. Purchases or sales of units of common/collective trust funds;
5. Transactions in derivative SECURITIES linked to physical commodities, such as exchange-trade futures contracts on physical commodities, options on
such contracts and over-the-counter derivatives related to physical commodities; and
6. Purchases and sales of First American Funds that are not through an automatic investment plan, and that are not otherwise reported electronically, must be reported to the Compliance Department in writing.
D. WHAT ARE THE RESTRICTIONS ON TRADING SHARES OF THE FIRST AMERICAN FUNDS?
FAF Advisors discourages excessive trading of any non-money market series of the FUNDS. As described in the FUNDS' prospectuses, the FUNDS' Board of Directors has adopted policies and procedures designed to detect and deter trading in the FUNDS' shares that may disadvantage long-term FUND shareholders. As a part of these policies and procedures, FAF Advisors monitors all employees' trading of non-money market series of the FUNDS, including trading that occurs in your 401(k) account.
E. WHAT ARE BLACKOUT PERIODS?
Because of the potential for a conflict of interest, FAF Advisors has established certain BLACKOUT PERIODS when ACCESS PERSONS are not permitted to effect transactions in certain SECURITIES:
1 ACCESS PERSONS who are members of IAG may not buy or sell any SECURITY on the same business day as any IAG client of FAF Advisors or FUNDS.
2. RESTRICTED ACCESS PERSONS of IAG may not buy or sell any SECURITY for a period of 5 business days before or after any client account or the FUNDS (i) for which the RESTRICTED ACCESS PERSON is the portfolio/fund manager or has the power to influence management; or (ii) for which the RESTRICTED ACCESS PERSON is involved in making investment recommendations, participates in determining which investment recommendations will be made, or executes trades.
In the event that a client trade takes place within 5 business days after you have received preclearance approval, Compliance will send you a form asking if you had any knowledge of the client trade to help detect front running.
Transactions for the accounts of our clients are confidential and may contain market sensitive data. Portfolio managers, trading personnel and others shall maintain the confidentiality of such information and should only disclose transactional and holdings information on a need-to-know basis.
F. ARE THERE ANY RESTRICTIONS ON SHORT-TERM TRADING?
RESTRICTED ACCESS PERSONS are prohibited from profiting from a purchase and sale, or sale and purchase, of the same SECURITY (other than EXEMPT SECURITIES and derivative SECURITIES linked to physical commodities) WITHIN 60 CALENDAR DAYS. The restriction may be waived by the Compliance Department in special circumstances provided that the transaction would not be inconsistent with the expressed purpose of this Code and any client transaction.
This prohibition may limit your ability to use options and futures strategies. In addition, special rules apply to roll transactions. Prior to engaging in these types of transactions you should consult with the Compliance Department.
G. ARE THERE ANY PROHIBITIONS FOR PERSONAL TRADING IN SMALL-MID CAP STOCKS?
No, unless you are a Fund Manager, Analyst or Trader for any series of the equity FUNDS. Fund Managers, Analysts and Traders of the equity FUNDS are prohibited from buying SECURITIES of companies with a market capitalization of $10 billion or less, except as may be approved by the CIO (or the Head of Equities). In addition to approval from the CIO (or the Head of Equities), the employee must still pre-clear through regular Compliance pre-clearance procedures, all purchases and sales of such securities prior to trading.
H. WHAT REPORTS AND DISCLOSURES DO ACCESS PERSONS NEED TO MAKE?
In order to ensure that the provisions of this Code are being observed, each ACCESS PERSON is required to make the following disclosures to FAF Advisors:
1. ACCOUNTS DISCLOSURE. Within 10 calendar days of hire date, and within 45 days of the end of each calendar year, you must disclose all accounts in which you have a BENEFICIAL INTEREST.
2. INITIAL HOLDINGS DISCLOSURE. Within 10 calendar days of hire date, you must disclose all personal holdings of SECURITIES in which you have a BENEFICIAL INTEREST to the Compliance Department in writing.
3. ANNUAL HOLDINGS DISCLOSURE. If you maintain your accounts at an approved broker you must certify within 45 days of the end of each calendar year that the electronic record of your holdings provided by your broker is complete and accurate. If you do not maintain your account with an approved broker you must within 45 days of the end of each calendar year, disclose all personal holdings of SECURITIES in which you have a BENEFICIAL INTEREST to the Compliance Department in writing.
Account and holdings disclosure requirements may be satisfied electronically. You will be asked to certify electronically your account/holdings disclosures annually.
Annual reporting requirements include holdings in DRIP programs, purchases of stock under an employer-sponsored plan, purchases affected upon the exercise of rights and non-volitional purchases or sales, such as the exercise of options.
4. DUPLICATE CONFIRMATIONS. Each ACCESS PERSON must instruct each broker-dealer carrying an account in which he or she has a BENEFICIAL INTEREST to send to FAF Advisors a duplicate copy of all transaction confirmations generated for the account. We have arranged to receive electronic copies of trade confirmations from the approved brokers.
5. QUARTERLY TRANSACTION STATEMENTS. You must certify quarterly all SECURITIES transactions other than transactions in exempt securities for accounts in which you have BENEFICIAL INTEREST during the previous quarter. (In the event no reportable transactions occurred during the quarter, the report should be so noted.) Quarterly reports must be made no later than 30 days after the end of the calendar quarter and will be completed electronically through the CTI iTrade application.
If an Access person is on leave during the certification period and does not have access to the applicable applications, they will be asked to complete the certifications upon their return.
I. SPECIAL DISCRETION
The Chief Compliance Officer shall have the authority to exempt any person or class of persons from all or a portion of the Code provided that:
1. The Chief Compliance Officer determines, that the particular application of all or a portion of the Code is not legally required;
2. The Chief Compliance Officer determines that the likelihood of any abuse of the Code by such exempted person(s) is remote; and
3. The terms or conditions upon which any such exemption is granted is evidenced in a written instrument.
The Chief Compliance Officer shall also have the authority to impose such additional requirements or restrictions as it, in its sole discretion, determines appropriate or necessary. Any exemption, and any additional requirement or restriction, may be withdrawn by the Chief Compliance Officer at any time.
INSIDER TRADING POLICY AND PROCEDURES
The purpose of this section of the Code is to provide reasonable assurance that material nonpublic information possessed by persons employed with FAF Advisors is: (a) not used in connection with the purchase or sale of securities, (b) not revealed to inappropriate persons, and (c) not used improperly.
Federal law requires FAF Advisors, Inc. ("FAF Advisors") to establish and maintain effective policies and supervisory procedures to both detect and prevent insider trading violations. FAF Advisors Compliance implements what are commonly referred to as "Information Barriers". Information Barriers are designed to fulfill two roles: 1) segregate and prevent the improper dissemination of material nonpublic information that may be possessed by certain employees of FAF Advisors; and 2) detect illegal transactions or violations of insider trading. This section is intended to protect FAF Advisors and its employees from insider trading violations from allegations of such violations and from the appearance of impropriety.
FAF Advisors has implemented the following policies and procedures to prevent the misuse and the appearance of misuse of material nonpublic information concerning publicly traded companies. FAF Advisors is committed to conducting its business activities within the letter and spirit of all applicable laws and regulations and in accordance with the highest ethical standards.
STATUTORY PROVISIONS AND REGULATIONS REGARDING INSIDER TRADING
Congress amended the Securities Exchange Act of 1934 (the "Exchange Act") in 1988 with the Insider Trading and Securities Fraud Enforcement Act of 1988. In doing so, Congress explicitly mandated closer securities industry supervision of its employees.
Furthermore, under Section 204A of the Investment Advisers Act of 1940, as amended, investment advisers are required to "establish, maintain, and enforce written policies and procedures reasonably designed," taking into consideration the nature of the entity's business, "to prevent the misuse of material, nonpublic information."
The misuse of material nonpublic information constitutes fraud; a term broadly defined under the federal securities laws. Rule 10b-5 under the Exchange Act provides that it is unlawful for any person, in connection with the purchase or sale of any security:
- To employ any device, scheme, or artifice to defraud;
- To make any untrue statement of a material fact or to omit to state a material fact necessary to make the statements made, in light of the circumstances under which they were made, not misleading; or
- To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person.
It is a violation of insider trading laws to trade on the basis of material nonpublic information when one owes a duty of trust or confidence to the source of the information or when one has misappropriated the information in breach of a duty of trust or confidence. Rule 10b5-1 under
the Exchange Act provides that a trade is "on the basis of" material nonpublic information if the trader was aware of the material, non-public information when the person made the purchase or sale. While it is not necessarily a violation of Rule 10b-5 merely to trade on the basis of material nonpublic information, as a matter of FAF Advisors policy its employees are directed not to trade on, or to tip others with respect to, material nonpublic information, whether or not the information has been obtained under circumstances that give rise to a duty of trust or confidence or claim of misappropriation.
Persons who fraudulently misuse material nonpublic information are subject to individual civil and criminal penalties (including imprisonment), U.S. Securities and Exchange Commission ("SEC") administrative actions and discipline including fines and suspension from the industry and FAF Advisors disciplinary sanctions that may include fines or dismissal from employment. In addition, FAF Advisors employees who fraudulently misuse material nonpublic information subject FAF Advisors to potential civil and criminal penalties as well as regulatory sanctions.
DEFINITION OF MATERIAL NONPUBLIC INFORMATION
Information is "material" if it has "market significance" in the sense that disseminating the information is likely to affect the market price of any outstanding securities, or is likely to be considered important by reasonable investors in deciding whether to trade the securities. Information is not considered "public" unless it has been reported in the news media, revealed by the issuer in a public forum, discussed in a publicly disseminated research report or otherwise made publicly available.
Materiality is a legal concept that involves an objective test based upon what a hypothetical reasonable investor would consider to be material. Therefore, for example, an analyst -- through some combination of persistence, knowledge and insight -- may consider a particular piece of information to be material to him because it completes his mosaic of information on a company as a whole, while the significance of that discrete piece of information would not be apparent to a reasonable investor. The law generally does not consider such "mosaic" information to be material.
Examples of potentially "material" information that should be reviewed carefully to determine whether they are material in the context of a particular situation include:
- Earnings information, including new or changed earnings estimates;
- Mergers, acquisitions, tender offers, joint ventures, or changes in assets;
- New products or discoveries, or developments regarding customers or suppliers (e.g., the acquisition or loss of a contract);
- Significant corporate developments, such as results of tests regarding safety or effectiveness of products that may impact regulatory approvals (e.g., Federal Drug Administration testing);
- Changes in control or in management;
- Auditor resignation, change in auditors or auditor notification that the issuer may no longer rely on an auditor's audit report;
- Events regarding the issuer's securities (e.g., defaults on senior securities, calls of securities for redemption, repurchase plans, stock splits or changes in dividends, changes to the rights of security holders, changes in debt ratings, advanced re-fundings, public or private sales of additional securities, including Private Investments in Public Entities;
- Bankruptcies or receiverships;
- Status of union or other significant contract negotiations;
- Confidential government information relating to government-issued securities;
- Major litigation; and
- Any other significant information that would have an impact on the price of a company's securities.
In addition, material nonpublic information possessed by FAF Advisors employees could be material to a particular class of a company's securities, all of that company's securities, the securities of another company, or the securities of several companies. The law against "insider" trading does not exempt any type of security; in other words, it is unlawful to trade, or recommend the trading of, any security (whether taxable or tax-exempt fixed income, equity or commercial paper) based on "inside" information that is material to the market value of that security. For example, nonpublic information that a company will redeem or tender a class of its debt securities may be "material" to the market value of those securities. If so, trading those debt securities on the basis of the nonpublic information is prohibited. A recapitalization, merger or leveraged buyout may be "material" to all the equity and debt securities of the company. An acquisition may be material to the securities of both the acquirer and the acquiree. Material nonpublic information is also not limited to "company" or "corporate" information; it can relate to confidential government information relating to government-issued securities.
If there is ever a question with respect to whether information is material or public, employees are expected to contact Jason Mitchell in Compliance for advice.
TIPPEES MAY BE INSIDERS
FAF Advisors personnel may, depending on the circumstances, also become "insiders" or "tippees" when they obtain apparently material nonpublic information through "tips" from "insiders," consultants, research providers, broker-dealer personnel, family members, or even by happenstance, including information derived from social situations, business gatherings, overheard conversations, or third parties. In these situations, FAF Advisors personnel who receive such information must treat the information as material nonpublic information and must fully comply with the procedures set forth herein to prevent the misuse of that information. Under such circumstances, and as provided more specifically below, employees must immediately contact Jason Mitchell in Compliance.
DUTY OF CONFIDENTIALITY
Just as FAF Advisors and its personnel are prohibited from trading while in possession of material nonpublic information, they are likewise required to maintain the confidentiality of such information and not disclose, or "tip," that information to others. In this regard, it is important to note that except as expressly provided in the following sections, this duty of confidentiality prohibits FAF Advisors personnel from disclosing material nonpublic information to other FAF Advisors personnel. The prohibition against disclosure or misuse of material nonpublic information also applies fully to FAF Advisors and its employees even though FAF Advisors (or any affiliate) is not requested or engaged to provide any services in connection with the transaction or development underlying the material nonpublic information.
MATERIAL NONPUBLIC INFORMATION ABOUT U.S. BANCORP
FAF Advisors personnel are "insiders" when they possess material nonpublic information about the business or activities of U.S. Bancorp (such as unannounced results of operations, the proposed issuance of U.S. Bancorp securities or other major developments or transactions by U.S. Bancorp or its affiliates) that, when publicly disclosed, may affect the market values of U.S. Bancorp securities or securities of other companies. FAF Advisors personnel who possess "inside" information about U.S. Bancorp must comply with all of the policies set forth herein against misuses of that information. See also the U.S. Bancorp Code of Ethics and Business Conduct.
MATERIAL NONPUBLIC INFORMATION ABOUT MUTUAL FUNDS
FAF Advisors personnel are "insiders" when they possess material nonpublic information about the business or activities of any of the open-end or closed-end funds for which FAF Advisors is an investment adviser or sub-adviser. With respect to the closed-end funds public disclosure of this information could affect the market values of the shares in any of such funds. FAF Advisors personnel who possess "inside" information about any of the funds must comply with all of the policies set forth herein against misuses of that information. This includes the following prohibitions:
- FAF Advisors personnel may not disclose the portfolio holdings of the funds to an outside party without formal approval from the FAF Advisors Investment Policy Committee; and
- FAF Advisors personnel may not buy or sell shares of the funds for personal accounts, or recommend that anyone else do so, in a manner that is designed to profit from inside information.
CONTACTS WITH MANAGEMENT
In nonpublic meetings with management or any insider, whether formal or informal, it is important for FAF Advisors personnel to remember:
- FAF Advisors personnel may not attempt to force or prompt a corporate spokesperson to selectively disclose material nonpublic information. If selective disclosure does occur as a result of such actions it is possible that the FAF Advisors personnel involved and FAF Advisors itself could be charged with aiding and abetting or causing a selective disclosure violation by the company;
- Extreme care must be taken in seeking to have a corporate
spokesperson comment on an analyst's financial model or comment
on the issuer's earnings forecast. Depending on the
circumstances, such comments can be deemed to be "material." The
SEC has recognized that such comments are not always material,
but their materiality will be determined in hindsight. Key
considerations identified by the SEC staff include the amount of
time that has elapsed since the company's last public comment
(comments late in the quarter are more likely to be material) and
whether there have been intervening events (confirmation of a
forecast despite the loss of a key customer may be material). The
staff has also cautioned that reference to a forecast, without
more, could be considered a confirmation of the forecast that
might "entangle" FAF Advisors in the company's selective
disclosure. An issuer can comment on an analyst's financial model
without disclosing material nonpublic information. For example,
an issuer ordinarily would not be conveying material nonpublic
information if it corrected historical facts that were a matter
of public record. An issuer also would not be conveying inside
information if it shared seemingly inconsequential data, which,
pieced together with public information by a skilled analyst with
knowledge of the issuer and the industry, helps form a mosaic
that reveals material nonpublic information. Further, an issuer
may reveal this type of data even if, when added to the analyst's
own fund of knowledge, it is used to construct her ultimate
judgments about the issuer. An issuer may not use the discussion
of an analyst's model as a vehicle for selectively communicating
- either expressly or in code - material nonpublic information;
- If, in a meeting with management, FAF Advisors personnel receive selectively disclosed material nonpublic information, FAF Advisors personnel must comply with all of the policies and procedures set forth herein, including the prohibition against trading on the inside information.
PRIVATE INVESTMENTS IN PUBLIC ENTITIES ("PIPES")
The fact that a company is planning to make an offering of a PIPE may be material nonpublic information. This is especially true with small or early stage companies for which this additional capital may have a significant impact on the prospects of the company. In dealing with PIPES (and other private placement transactions) FAF Advisors personnel should remember:
- Ordinarily in such transactions the issuer will require the potential investor to sign agreements that include a disclosure that the offering is material nonpublic information and a representation by the potential investor that they will keep the information confidential. Such agreements must be reviewed by the FAF
Advisors Legal and/or Compliance Departments before they can be executed on behalf of FAF Advisors;
- Once FAF Advisors personnel become aware of a PIPE transaction that is material and nonpublic they are required to immediately notify Jason Mitchell in the Compliance Department to have the issuer placed on the Insider List described below; and
- To the extent FAF Advisors personnel involved in the transaction hold the issuer's publicly traded securities in their personal accounts or the issuer's securities are held in FAF Advisors advisory or proprietary accounts (including mutual funds), such FAF Advisors personnel may not make additional purchases or sales of the issuer's securities in those accounts or in any other accounts until the PIPE transaction has been completed, publicly disclosed and the market has had sufficient time to respond to such disclosure.
CONSULTANTS
Neither FAF Advisors nor FAF Advisors personnel may retain consultant (including research providers) to obtain material nonpublic information. Extreme caution should be exercised with regard to any consultant that claims they can obtain information before the media or promises the "first call" on investment issues. In dealing with consultants FAF Advisors personnel should remember:
- FAF Advisors personnel are responsible for assessing all information received from consultants to determine if it constitutes, or may constitute, material nonpublic information. If material nonpublic information is received from a consultant the Procedures set forth below must be followed.
CREDITORS' COMMITTEES
In connection with high yield and distressed debt investment strategies, FAF Advisors personnel may serve on an insolvent issuer's creditors' committee, or similar group, which provides FAF Advisors with access to material nonpublic information (e.g., internal financial projections, validity of claims, likelihood of reorganization, etc.) In such situations you must notify, Jason Mitchell in the Compliance Department before you agree to participate in creditors' committees or similar groups. These situations generally require special controls beyond those contained in these Policies and Procedures. The Legal and Compliance Departments will determine the controls that should be implemented on a case by case basis.
FAF ADVISORS POLICY ON INSIDER TRADING
FAF Advisors' policy on insider trading is that any FAF Advisors employee in possession of material nonpublic information must preserve the confidentiality of such information and abstain from trading until the inside information is publicly disclosed. It is fundamental to this policy
that:
- No FAF Advisors employee, while in possession of material nonpublic information relevant to a security, shall purchase or sell or recommend or direct the purchase or sale of such security for the account of an advisory client (including mutual funds), proprietary account or anyone else.
- No FAF Advisors employee shall utilize or take advantage of material nonpublic information to purchase or sell securities for his or her own account, any account in which he or she has a direct or indirect beneficial interest (including accounts for family members), or any other account over which the employee has discretionary authority, a power of attorney or otherwise an ability to control.
- No FAF Advisors employee shall disclose material nonpublic information to any person outside the company, except for privileged discussions with FAF Advisors' legal counsel (in-house or outside counsel) as authorized by the Chief Compliance Officer or the Legal Department.
- Any FAF Advisors employee who obtains material nonpublic information that is later disclosed to the general public must allow sufficient time to elapse for the investing public to assimilate and evaluate the information before taking any action for an advisory account or his/her personal account on the basis of the disclosed facts.
- The foregoing prohibitions apply not only to the securities of the issuers to which the material nonpublic information is directly related but also to any other securities (for example, securities of companies in the same industry) that may reasonably be expected to be affected by the public disclosure of the material nonpublic information.
PLACING COMPANIES ON THE INSIDER LIST
All FAF Advisors employees who believe they may have come into possession of material nonpublic information should contact Jason Mitchell in the Compliance Department immediately to discuss adding a company to the Insider List. The following is the information that is generally needed when adding a company to the Insider List, although further information may be required:
- Company name
- Trading symbol ("ticker")
- The nature of material nonpublic information and how it was obtained
- Who reported the item
- All people who have knowledge of the information
Compliance is responsible for the adding and deleting of securities on the Insider List. The Chief Compliance Officer or Legal Department shall take appropriate action, which may include consultation with counsel (in-house or outside), for the placing or removal of the subject company on or from the Insider List. The procedures require that the Compliance Department monitor the trading of securities of companies identified on the List. This trading review covers activity affected by FAF Advisors, its customers and employees for an appropriate period of time as mandated either by policy, rule or special circumstances. The Insider List restricts trading within the security. If suspicious activity is detected, the Compliance Department will determine the most appropriate course of action. If a client directed trade is requested for a security on the Insider List and the trade is denied, Mark Corns in Portfolio Compliance must be contacted to discuss the situation.
REFERENCE SECURITIES ALSO INCLUDED
Trading restrictions and monitoring activity for the period in which companies are included on the Insider List will apply to the securities of such companies and to any reference securities. Reference securities are any securities into which the security of a listed company may be converted, exchanged, exercised or which may determine the value of such security.
NO COMMUNICATION OF THE INSIDER LIST
The contents of the Insider List are highly confidential and known only by certain personnel in senior management, the Compliance Department, the Legal Department and others who are directly involved with the situation at hand. Under no circumstances is it permissible for an employee to indicate to any other person (including employees or clients) that a company is on the Insider List.
BRINGING ADDITIONAL PERSONS "OVER THE WALL"
Senior management, the Chief Compliance Officer or the Legal Department, depending on the circumstances and at their discretion, may bring some or all of FAF Advisors' portfolio managers, traders or research analysts "over the Wall" (effectively limiting their trading and recommendations) to help avoid the appearance of impropriety. Such an action may be warranted, for example, where a concern exists that certain material nonpublic information known to some FAF Advisors individuals may be attributed to others. For instance, in a case where material nonpublic information is known by one of two portfolio managers who co-manage a fund, it may, depending on the circumstances, help in avoiding the appearance of impropriety to bring the other portfolio manager "over the Wall."
MANAGEMENT/CONSULTANT MEETING LOG
Each time FAF Advisors research analysts and/or portfolio managers participate in a nonpublic
meeting within FAF Advisors with corporate management or an outside consultant (including research providers) to discuss the fundamentals or other aspects of one or more publicly traded companies, the employees of the company or consultant participating in the meeting are required to be recorded in the FAF Advisors conference room scheduler, maintained by Pam Bowler. The scheduler will include the following information:
- Date and time of the meeting;
- Participants in the meeting, including all FAF Advisors personnel and outside parties, including their names and titles; and
- Identity of the company(ies) discussed during the meeting, including ticker symbol(s), if applicable.
The scheduler will be periodically monitored by FAF Advisors Compliance. FAF Advisors research analysts and/or portfolio managers participating in nonpublic meetings outside of FAF Advisors shall provide the same information contained in the scheduler directly to Jason Mitchell in the Compliance department as soon as possible upon return to FAF Advisors. Quarterly, the Compliance department will compare the information recorded from the meeting scheduler with personal trades through the CTI Examiner system.
MONITORING TRADING ACTIVITY IN CONNECTION WITH AFFILIATES
Periodically, the Compliance department may provide the FAF Advisors Insider List with the compliance or legal personnel of U.S. Bancorp affiliates. The Compliance department may also compare, in whole or in part, the lists of companies on the insider lists of affiliates with the trading records of FAF Advisors client, proprietary and personal accounts from the CTI Examiner system for personal trades and the Charles River Management System for client and proprietary account trades.
FAILURE TO COMPLY
Any violation of this section of the Code may result in disciplinary action, and, when appropriate, termination of employment and/or referral to appropriate governmental agencies.
EDUCATION AND TRAINING OF EMPLOYEES
FAF Advisors requires all employees to attest to their understanding of the Code of Ethics and the Insider Trading Policy. This policy may be implemented through the use of training sessions, memos, educational articles and the following:
- All employees are required to initially sign an Acknowledgement and Agreement to Comply with FAF Advisors' Insider Trading Policy and Procedures. Thereafter, additional sign-offs are received on a quarterly basis.
- Annual Code of Ethics training will be conducted for all FAF Advisors employees, which will incorporate the Insider Trading Policy.
- Training will be held on a monthly basis for all new FAF Advisors employees for the Code of Ethics, which will include training on the Insider Trading Policy.
RECORD RETENTION
The Compliance Department will retain all documents and records created in accordance with these Policies and Procedures. These records will be retained for at least six years, the first two years in the principal office of FAF Advisors
OTHER CONFLICTS OF INTEREST
A. MAY I PROVIDE INVESTMENT ADVICE TO OTHERS?
You are prohibited from engaging in outside business or investment activities that may interfere with your duties with FAF Advisors or potentially impair FAF Advisors' reputation. For these reasons, you may not provide investment advice to anyone other than FAF Advisors clients (including the FUNDS) without prior written authorization from the Legal or Compliance Department.
B. MAY I SERVE AS A DIRECTOR OF ANOTHER COMPANY?
You are prohibited from serving as a member of the board of directors (or other advisory board) of any publicly traded company absent prior authorization by the ICCC and the FUNDS' Board of Directors. Authorization, when granted, will only be given if (i) the FUNDS' Board determines that service on a board is consistent with the interests of the FUNDS, and the FUNDS' shareholders; (ii) the ICCC determines that service of a board is consistent with the interest of FAF Advisors and its clients; and (iii) both the FUNDS' Board and the ICCC determine that service on a board presents a limited potential for any conflict of interest (at the time of the determination or in the future). In addition, U.S. Bancorp has developed additional limitations on service on a board of directors by employees of FAF Advisors. For additional information see U.S. Bancorp's Code of Ethics or FAF Advisors' Compliance Department.
C. WHEN MAY I DISCLOSE CONFIDENTIAL INFORMATION?
Information about our clients (including former clients) and fund shareholders, for example, their identities, financial circumstances and holdings, is highly confidential. So is information about our securities recommendations, pending transactions for a client or Fund, and Fund portfolio holdings. All of us at FAF Advisors must keep confidential information in strict confidence. Confidential information must not be disclosed to anyone outside FAF Advisors, including family members, except as required to effect securities transactions on behalf of a client or Fund or for other legitimate business purposes. You must observe FAF Advisors' procedures to safeguard the security of any confidential information.
D. MAY I GIVE OR RECEIVE GIFTS?
FAF Advisors, as a policy, follows U.S. Bank's policy regarding gifts. As a general rule, you must not solicit, allow yourself to be solicited, or accept gifts, entertainment, or other gratuities intended to or appearing to influence decisions or favors toward FAF Advisors' business to or from any client, potential client, FAF Advisors vendor or potential vendor.
The Compliance Department shall periodically review such records and provide Department heads with exceptions.
Non-NASD Registered Employees of FAF Advisors: You may not give and should refrain from accepting individual gifts with a value exceeding $100, even if the gift is not intended to influence your behavior, or to influence another. In isolated circumstances, when a gift is received with a value in excess of $100 and returning the gift would offend the giver, you may accept the gift only if you disgorge an amount equal to the value of the gift (less the $100 amount you are allowed) to a charitable organization of your choice. Such an exception to the Gift Policy will only be allowed upon your receipt of the written consent of the Compliance Department. Contact the Compliance Department for more details on charitable donations.
NASD Registered Employees of FAF Advisors: You may not give or accept individual gifts with a value exceeding $100 from any entity either doing business with FAF Advisors or intending to influence business with FAF Advisors in a calendar year.
You may accept or provide reasonable business meals and entertainment if the client, potential client FAF Advisors vendor or potential vendor is physically present at the business meal or entertainment. In the event that any such business meal, entertainment, or gift has a value exceeding $100 per person you must promptly report the meal or entertainment or gift in the FAF Advisors Gift, Entertainment and MealsTracking database. Compliance will review all reported gifts/entertainment on a quarterly basis and provide Department heads with exceptions to the policy.
A waiver to accept gifts, entertainment or other gratuities, and to attend events that fall outside this gift policy may be granted if a significant benefit would accrue to FAF Advisors. A waiver may be granted by the Compliance Department and should be reported using the FAF Advisors Gift Tracking database.
Every quarter you must certify that you have been in compliance and will continue to comply with the FAF Advisors' and U.S. Bank's policies regarding gifts. The quarterly certification can be completed electronically at the same time you certify your personal securities transactions.
A copy of the Bank's policy is available on the intranet.
E. MAY I MAKE POLITICAL AND CHARITABLE CONTRIBUTIONS?
You must not make political contributions for the purposes of obtaining or retaining advisory contracts with government entities. In soliciting political or charitable donations from various people in the business community, you must never allow the present or anticipated business relationships with FAF Advisors or any of its affiliates to be a factor in soliciting any contributions.
ENFORCEMENT OF THE CODE AND SANCTIONS
This Code has been adopted by FAF Advisors and is administered by the Compliance Department under the authority of the Internal Compliance Control Committee ("ICCC"). FAF Advisors' Chief Compliance Officer regularly reports on the operation of the Code and any changes he or she believes appropriate. In addition, the Chief Compliance Officer will promptly report any material violations of the Code, the results of any investigation he or she has conducted, and recommend sanctions to the ICCC. The ICCC may delegate the enforcement of immaterial breaches of the Code to the Chief Compliance Officer subject to his or her making a report of those violations and the actions at the next quarterly meeting of the ICCC
In considering actions to enforce the Code, the ICCC will consider all of the relevant facts and circumstances of the incident and the employee's prior record of compliance with the Code. Following its review, the ICCC may impose sanctions as it deems appropriate, including oral reprimand, a letter of censure, a fine, a reduction in salary or position, suspension without pay, termination of personal trading privileges, and/or termination of the employment of the violator. A violator will be obligated to pay any sums due resulting from a violation by a member of his/her immediate family.
While the Code of Ethics will be monitored by the FAF Advisors Compliance group, enforcement of the Code for PAM employees will be done by the Trust Compliance group.
Transaction costs associated with an action and any loss realized on the transaction must be borne by the responsible employee. Gains from an ICCC sanction must be transferred to an account maintained by FAF Advisors, for distribution to charity.
The imposition of sanctions under this Code does not preclude the imposition of additional sanctions by the FUNDS' Board of Directors and cannot be deemed a waiver of any rights by any FUND or client. In addition to sanctions that may be imposed, persons who violate this Code may be subject to various penalties and sanctions including, for example, injunctions, treble damages, disgorgement of profits, fines of up to three times the profit gained or loss avoided (whether or not the violator actually benefited), and jail sentences.
REPORTING TO THE BOARD
No less than annually, the Chief Compliance Officer shall submit to the Board of Directors a written report that describes any issues that have arisen under the Code (including procedures implementing the Code) since the last report to the Board of Directors, including, but not limited to, information about any material violations of the Code or procedures and sanctions imposed in response to any material violations. The Chief Compliance Officer shall also certify, in writing to the Board of Directors, that FAF Advisors has adopted procedures reasonably necessary to prevent Access Persons and Restricted Access Persons from violating the Code.
WHISTLEBLOWING PROVISION
Any FAF Advisors employee who receives a complaint regarding (i) accounting, internal accounting controls, and auditing matters with respect to FAF Advisors or its clients, or (ii) information regarding any other matter that could reasonably be expected to require disclosure to
FAF Advisors' Internal Compliance Control Committee shall promptly forward the complaint or information to the Chief Compliance Officer. If complaints or information are received by any FAF Advisors employee which allege wrongdoing affecting FAF Advisors in other than those noted above, those complaints or information shall also be forwarded to the Chief Compliance Officer.
RECORD RETENTION
The Compliance Department will retain all documents and records created in accordance with the Code of Ethics. These records will be retained for at least six years, the first two years in the principal office of FAF Advisors.
GLOSSARY
A. ACCESS PERSONS means any directors or officer of FAF Advisors, as well as any employee who has access to nonpublic information regarding any clients' purchase or sale of securities, or nonpublic information regarding the portfolio holdings of any Fund. See also RESTRICTED ACCESS PERSON..
B, BENEFICIAL OWNERSHIP of a Security is to be determined generally in the same manner as it would be under Rule 16a-1(a)(2) of the Securities Exchange Act of 1934 ("1934 Act"). This means that persons should generally consider themselves the "Beneficial Owner" of any Security in which they have a direct or indirect financial interest. In addition, persons should consider themselves the "Beneficial Owner" of any Security held by their spouse, minor children, relatives who share their home, or other persons by reason of any contract, arrangement, understanding, or relationship that provides them with sole or shared voting or investment power over that SECURITY.
Although the following list is not exhaustive, under the 1934 Act and this Code, a person generally would be regarded to be the "Beneficial Owner" of the following SECURITIES:
2. SECURITIES held in the person's own name;
3. SECURITIES held with another in joint tenancy, community property, or other joint ownership;
4. SECURITIES held by a bank or broker as nominee or custodian on such person's behalf or pledged as collateral for a loan;
5. SECURITIES held by members of the person's immediate family sharing the same household ("immediate family" means any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law, including adoptive relationships and also includes a registered domestic partner);
6. SECURITIES held by a relative not residing in the person's home if the person is a custodian, guardian or otherwise has or shares control over the purchase, sale, or voting of the SECURITIES;
7. SECURITIES held by a trust in which the person is a beneficiary and has or shares the power to make purchase or sale decisions;
8. SECURITIES held by a trust for which the person serves as a trustee (other than an administrative trustee with no investment discretion);
9. SECURITIES held by a general partnership or limited partnership in which the person is a general partner;
10. SECURITIES owned by a corporation in which the person has a control position or in which the person has or shares investment control over the portfolio Securities (other than a registered investment company);
11. SECURITIES in a portfolio giving the person certain performance-related fees; and
12. SECURITIES held by another person or entity pursuant to any agreement, understanding, relationship or other arrangement giving the person any direct or indirect pecuniary interest.
C. BLACKOUT PERIODS means the time period during which buying or selling a security is prohibited. See Section E under Personal Securities Transactions.
D. CONTROL shall have the meaning as set forth in Section 2(a)(9) of the 1940 Act. For example, "control" means the power to exercise a controlling influence over the management or policies of a company. Beneficial Ownership of more than 25% of the voting securities of a company is presumed to be "control" of that company.
E. EXEMPT SECURITY includes:
1. Direct obligations of the Government of the United States;
2. Bankers' acceptances, bank certificates of deposit, commercial paper;
3. High-quality short-term debt instruments including repurchase agreements;
4. Shares issued by registered open-end investment companies for which FAF Advisors does not serve as investment adviser or subadviser; and
5. Shares of any money market series of the FUNDS.
F. FUNDS means the First American Funds, Inc.
G. IAG means the Institutional Advisory Group of FAF Advisors, which is responsible for the management of separate accounts for instititional clients as well as funds registered with the SEC.
H. INITIAL PUBLIC OFFERING means an offering of Securities registered under the 1933 Act, the issuer of which, immediately before the registration, was not subject to the reporting requirements of Section 13 or 15(d) of the 1934 Act.
I. MATERIAL NON-PUBLIC INFORMATION
Information is "material" if it has "market significance" in the sense that disseminating the information is substantially likely to affect the market price of any outstanding securities, or is substantially likely to be considered important by reasonable investors in deciding whether to trade the securities. Information is not considered "public" unless it has been reported in the news media, revealed by the issuer in a public forum, discussed in a publicly disseminated research report, or otherwise made publicly available.
Examples of potentially "material" information that should be reviewed carefully to determine whether they are material in the context of a particular situation include:
1. Information about any First American Fund's or client account's portfolio holdings, trading strategies, and securities transactions;
2. Earnings information, including new or changed earnings estimates;
3. Mergers, acquisitions, tender offers, joint ventures, or changes in assets;
4. New products or discoveries, or developments regarding customers or suppliers (e.g., the acquisition or loss of a contract);
5. Significant corporate developments, such as results of tests regarding safety or effectiveness of products that may impact regulatory approvals (e.g., FDA testing);
6. Changes in control or in management;
7. Auditor resignation, change in auditors, or auditor notification that the issuer may no longer rely on an auditor's audit report;
8. Events regarding the issuer's securities (e.g., defaults on senior securities, calls of securities for redemption, repurchase plans, stock splits or changes in dividends, changes to the rights of security holders, changes in debt ratings, advanced refundings, public or private sales of additional securities, including Private Investments in Public Entities - "PIPES";
9. Bankruptcies or receiverships;
10. Status of union or other significant contract negotiations;
11. Confidential government information relating to government-issued securities;
12. Major litigation; and
13. Any other significant information that would have an impact on the price of a company's securities.
J. PRIVATE PLACEMENT means an offering that is exempt from registration under the Securities Act of 1933 ("1933 Act") pursuant to Section 4(2) or Section 4(6), or pursuant to rule 504, rule 505 or rule 506 under the 1933 Act.
K. PAM means the Private Asset Management Group of U.S. Bancorp, which, generally, is responsible for the management of client assets for U.S. Bank's Institutional Trust and Custody group as subadviser (PAM may also manage separate accounts for high net worth clients).
L. RESTRICTED ACCESS PERSON means any ACCESS PERSON who is actually involved in making investment recommendations to FAF Advisors clients, participate in the determination of which investment recommendations will be made, or has the power to influence management of the FUNDS, or execute trades for any FUND or client accounts. RESTRICTED ACCESS PERSONS generally include research analysts, traders, portfolio/fund managers, executive management of FAF Advisors, members of the Legal and Compliance Departments, and their executive or departmental assistants.
M. "SECURITY" or "SECURITIES" shall include all the instruments set forth in
Section 2(a)(36) of the 1940 Act, i.e., any note, stock, treasury stock,
security future, bond, debenture, evidence of indebtedness, certificate of
interest or participation in any profit-sharing agreement, collateral-trust
certificate, reorganization certificate or subscription, transferable
share, investment contract, voting-trust certificate, certificate of
deposit for a
security, fractional undivided interest in oil, gas, or other mineral rights, any put, call, straddle, option, or privilege on any security (including a certificate of deposit) or on any group or index of securities (including any interest therein or based on the value thereof), or any put, call, straddle, option, or privilege entered into on a national securities exchange relating to foreign currency, or, in general, any interest or instrument commonly known as a 'Security' or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing. For purposes of this Code, "SECURITY" or "SECURITIES" shall also include any futures contract, option on a futures contract, forward agreement, SWAP agreement (including caps, floors, and collars), and any other derivative instrument. "SECURITY" or "SECURITIES" shall not include checking and other demand or time deposits maintained at a bank or similar financial institution.
EXHIBIT 1
ACKNOWLEDGMENT AND AGREEMENT TO COMPLY
By signing this Acknowledgement and Agreement to Comply I certify the following:
- I have also read and understand the Code of Ethics, (the "Code") and have had an opportunity to ask any questions that I may have had concerning the Code.
- I understand that I am responsible for complying with the Code and agree to comply.
- I agree that I will not execute any prohibited transactions or trade without obtaining the necessary pre-clearance.
- I agree that I will not trade on the basis of insider information.
- I agree to comply with FAF Advisors' policies regarding other conflicts of interest, including its Gift Policy.
- I also understand that the Legal and Compliance Departments can assist me with questions I may have concerning the Code. I agree to contact them if I have any questions concerning the Code or the interpretation or application of the Code to a particular situation.
- I understand that my compliance with this Code and all applicable laws is a condition of my involvement with FAF Advisors.
- I have reported all material violations of the Code within the scope of my knowledge to the appropriate officer of FAF Advisors.
- I understand that my violation of the Code may subject me to personal civil and criminal liability, regulatory fines and/or suspensions. I also understand that my violation of the Code subject FAF Advisors to civil and criminal liability as well as regulatory discipline.
EXHIBIT 2
CODE OF ETHICS CONTACT LIST
If you think you or any other employee has violated the Code of Ethics, please call:
Chief Compliance Officer: ___________________ General Counsel, Legal: ___________________ CEO, FAF Advisors: ___________________
Please contact the following people with any questions concerning:
Code of Ethics Policy and Procedures: ___________________
Director of Compliance, Advisory: ___________________
Compliance Manager: ___________________
Code of Ethics Analyst: ___________________
fafcodeofethics@fafadvisors.com
Insider Trading:
Compliance Manager: ___________________
Portfolio Compliance:
Fixed Income Manager: ___________________
Equity Manager: ___________________
HANSBERGER GLOBAL INVESTORS, INC.
AMENDED CODE OF ETHICS
This Amended Code of Ethics (the "Code") has been adopted by Hansberger Global Investors, Inc. ("HGII"). The Code is based on the principle that the officers, directors and employees of HGII owe a fiduciary duty to their advisory clients to conduct personal securities transactions in a manner that does not interfere with client transactions or otherwise take unfair advantage of their relationship with HGII and its clients. Persons covered by this Code must adhere to this general principle as well as comply with the Code's specific provisions. Technical compliance with the Code's procedures will not automatically insulate from scrutiny trades that show a pattern of abuse of the individual's fiduciary duties to HGII's advisory clients. The Code has been adopted pursuant to Rule 17j-1 under the 1940 Act and Section 204A of the Advisers Act, including 204A-1 thereof, and to comply with the recordkeeping requirements of Rule 204-2 under the Advisers Act.
L. DEFINITIONS
A. "1940 Act" means the U.S. Investment Company Act of 1940, as amended.
B. "Access Person" means any director or officer of the Company. The term also means: (i) any of HGII's Supervised Persons: (A) who has access to nonpublic information regarding any clients' purchase or sale of securities, or nonpublic information regarding the portfolio holdings of any reportable fund, or (B) who is involved in making securities recommendations to clients, or who has access to such recommendations that are nonpublic. The term also includes any supervised person who has access to nonpublic information regarding the portfolio holdings of a Reportable Fund.
C. "Advisers Act" means the U.S. Investment Advisers Act of 1940, as amended.
D. "Automatic Investment Plan" means a program in which regular periodic purchases (or withdrawals) are made automatically in (or from) investment accounts in accordance with a predetermined schedule and allocation, including, but not limited to a dividend reinvestment plan.
E. A Security is "being considered for purchase or sale" when a recommendation to purchase a Security has been made and communicated to the HGII research group or posted on the Company's research bulletin board.
F. "Beneficial Account" means all accounts in the name of or for the benefit of an Employee, his or her spouse, dependent children or any person living with an Employee or to whom an Employee contributes economic support, as well as any other non-Company client account with respect to which an Employee exercises investment discretion or provides investment advice.
G. "Beneficial Ownership" shall be interpreted in the same manner as it would be in determining whether a person is subject to the provisions of Section 16 of the U.S. Securities Exchange Act of 1934, as amended (the "1934 Act") and Rule 16a-1(a)(2) thereunder, except that the determination of direct or indirect beneficial ownership shall apply to all securities that an Access Person owns or acquires. In addition, a person should consider himself or herself the beneficial owner of securities held by his or her spouse, his or her minor children, a relative who shares his or her home, or other persons by reason of any contract, arrangement, understanding or relationship that provides him or her with sole or shared voting or investment power.
H. "Chief Compliance Officer" or "CCO" means Susan Moore-Wester or her successor.
Amended May 17, 2007
I. "Company" means HGII and its subsidiaries.
J. "Compliance Department" means the Company's compliance department located in Fort Lauderdale, Florida or its successor.
K. "Control" shall have the same meaning as that set forth in Section 2(a)(9) of the 1940 Act.
L. "Employee" means any officer or employee of the Company, but does not mean any Outside Director.
M. "Exchange-traded Fund or "ETF" means a registered investment company that operates pursuant to an order from the U.S. Securities and Exchange Commission (the "Commission") exempting the ETF from certain provisions of the 1940 Act so that the ETF may issue securities that trade in a secondary market, and which are redeemable only in large aggregations called creation units. An ETF issues and redeems its shares in creation units, at their net asset value. Individual ETF shares are purchased or sold in secondary market transactions at negotiated prices, i.e., at prices that are determined by that market. An ETF registers with the Commission under the 1940 Act either as an open-end management company or as a unit investment trust. Solely for the purposes of this Code of Ethics, also included in the definition of an ETF are securities that operate in a substantially similar manner as a traditional ETF (e.g., the iShares COMEX Gold Trust). Any questions regarding this definition should be directed to the Chief Compliance Officer or the General Counsel.
N. "Federal Securities Laws" means the U.S. Securities Act of 1933, the 1934 Act, U.S. Sarbanes-Oxley Act of 2002, the 1940 Act, the Advisers Act, Title V of the U.S. Gramm-Leach-Bliley Act, rules adopted under these acts, the U.S. Bank Secrecy Act as it applies to registered U.S. investment companies and registered U.S. investment advisers and rules promulgated thereunder. Each of the aforementioned acts shall include amendments made from time-to-time.
O. "General Counsel" means J. Christopher Jackson or his successor.
P. "Initial public offering" means an offering of securities registered under the U.S. Securities Act of 1933, as amended (the "1933 Act"), the issuer who, immediately before registration, was not subject to the reporting requirements of Section 13 or Section 15(d) of the 1934 Act.
Q. "Legal Department" means the Company's legal department located in Fort Lauderdale, Florida or its successor.
R. "Outside Director" means a director of the Company who is not an "interested person" of the Company within the meaning of Section 2(a)(19)(B) of the 1940 Act.
S. "Private Placement" means an offering that is exempt from registration under the 1933 Act pursuant to Section 4(2), Section 4(6), Rule 504, Rule 505 or Rule 506.
T. "Purchase or sale of a Security" includes, among other things, the writing of an option to purchase or sell a Security.
U. "Security" shall have the meaning set forth in Section 202(a)(18) of the Advisers Act and, for purposes of this Code of Ethics, shall include ETFs, options and depositary receipts on Securities and transactions in related futures contracts, closed-end investment companies, private investment funds, hedge funds and any other foreign or offshore funds, unit investment trusts and all Reportable Funds. It shall not include Registered
Amended May 17, 2007
Open-End Investment Companies, unit investment trusts that are invested exclusively in one or more Registered Open-End Investment Companies, direct obligations of the Government of the United States, high quality short-term debt securities (including repurchase agreements), bankers' acceptances, bank certificates of deposit, and commercial paper.
V. "Supervised Person" shall have the meaning set forth in Section 202(a)(25) of the Advisers Act. For purposes of the Code, all Employees shall be deemed to be Supervised Persons.
W. "Registered Open-End Investment Company" means any U.S. open-end investment company (mutual fund) other than a Reportable Fund and ETFs.
X. "Reportable Fund" means any open-end investment company (mutual fund) and closed-end investment company (collectively, "funds"), other than funds that rely on Rule 2a-7 under the 1940 Act, i.e. money market funds, for which HGII serves as an investment adviser or investment sub-adviser or any funds whose investment adviser or principal underwriter controls, is controlled by, or is under common control with, HGII. For purposes of this definition, "control" has the same meaning as set forth in Section 2 (a) (9) of the 1940 Act. A list of such funds is attached to this Code as Schedule 1, which Schedule will be amended from time-to-time.
Y. "Security held or to be acquired" means: (a) any Security which,
within the most recent 15 calendar days (i) is or has been held by a
client or (ii) is being or has been considered for purchase by the
Company for a client; and (b) any option to purchase or sell, and any
security convertible into or exchangeable for, a Security described in
(a) above.
II. STANDARDS OF CONDUCT
All Access Persons shall comply with all applicable provisions of the Federal Securities Laws, including those provisions addressed in the Code as well as the Company's compliance policies and procedures.
No Access Person shall in connection with the direct or indirect purchase or sale of a Security held or to be acquired by a Company client (including an investment company managed or advised by the Company):
A. employ any device, scheme or artifice to defraud a client;
B. make to a client any untrue statement of a material fact or omit to state to a client a material fact necessary in order to make the statements made, in light of the circumstances under which they are made, not misleading;
C. engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon a client; or
D. engage in any manipulative practice with respect to a client.
III. EXEMPTED TRANSACTIONS
A. The prohibitions of Section IV, E., F. and G. of this Code shall not apply to:
1. Purchases that are part of an Automatic Investment Plan;
2. Purchases effected upon the exercise of rights issued by an issuer pro-rata to all holders of a class of its securities, to the extent such rights were acquired from
Amended May 17, 2007
such issuer, and sales of such rights so acquired;
3. Purchases or sales effected in any account over which the person has no direct or indirect influence or control;
4. Purchases or sales through any profit sharing, pension or other benefit plan of the Company; and
5. Purchases or sales of ETFs, closed-end investment companies, private investment funds, hedge funds, foreign or off-shore funds, unit investment trusts or Reportable Funds.
B. The prohibitions of Section IV. A. 5 of this Code shall not apply to:
1. Purchases or sales that are nonvolitional on the part of the person;
2. Purchases that are part of an Automatic Investment Plan;
3. Purchases or sales effected in any account over which the person has no direct or indirect influence or control; and
4. Purchases or sales through any profit sharing, pension or other benefit plan of the Company.
C. In addition, the pre-clearance requirements of Section V. A. of this Code shall not apply to:
1. Purchases or sales that are nonvolitional on the part of the person;
2. Purchases that are part of an Automatic Investment Plan;
3. Purchases effected upon the exercise of rights issued by an issuer pro-rata to all holders of a class of its securities, to the extent such rights were acquired from such issuer, and sales of such rights so acquired;
4. Purchases or sales effected in any account over which the person has no direct or indirect influence or control; and
5. Purchases and sales of ETFs, closed-end investment companies, private investment funds, hedge funds, foreign or off-shore funds or unit investment trusts.
D. The Chief Compliance Officer or General Counsel may pre-approve a purchase or sale of a Security that would otherwise violate the provisions set forth in Section IV below if he or she determines after appropriate inquiry that the transaction is consistent with the fiduciary duty owed to the Company's clients and is not potentially harmful to clients because: (a) it does not conflict with any Security being considered for purchase by any current advisory client and (b) the decision to purchase or sell the Security is not the result of information obtained in the course of a person's relationship with an advisory client or the Company.
IV. PROHIBITED CONDUCT; REQUIRED ACTIONS
A. Employees are prohibited from engaging in the following activities unless they have obtained prior written approval from the Chief Compliance Officer or the Legal Department:
Amended May 17, 2007
1. Employees may not join an investment club or enter into an investment partnership;
2. Employees may not purchase any security in a Private Placement;
3. Employees may not serve on a board of directors of either a publicly traded or a privately held company nor may they serve as a member of any creditor committee;
4. Employees may not purchase any security in an initial public offering; and
5. Employees may not profit from the purchase and sale, or sale and purchase, of the same or equivalent Securities within 60 calendar days. Any profits realized on such trades shall be disgorged to a charitable organization.
In addition to the above, Access Persons who are not Employees must obtain prior written permission of the Chief Compliance Officer or the Legal Department before they directly or indirectly acquire Beneficial Ownership in any security in an initial public offering or in a Private Placement.
B. Every Employee shall direct his or her broker(s) (if any) to provide duplicate confirmations and monthly account statements to the Compliance Department regarding his or her own accounts and for any account in which securities were held for his or her direct or indirect benefit (together, "Beneficial Accounts"). If a broker does not provide confirmations and monthly account statements to the Compliance Department, it shall be the Employee's responsibility to do so.
C. For the purpose of purchasing Reportable Funds at net asset value, Employees may have joint accounts only with spouses, their children, parents, step-parents, parents-in-law, brothers, sisters, grandchildren or grandparents and a trustee or custodian of any qualified pension or profit sharing plan or IRA established for the benefit of such persons.
D. Employees may not speak in or to the media, on or off the record, regarding any client or security without the prior authorization of the Chief Compliance Officer or the Legal Department.
E. All Employees are prohibited from purchasing or selling any Security for ten (10) calendar days from the date that: (a) the Company first approves an initial recommendation for the Buy, Hold, Watch or Sell List; or (b) a Security already on the research database is moved from the Hold or Watch List to the Buy List or from the Hold List to the Sell List.
F. No Employee Account shall execute a Securities transaction on a day during which a Company client has a pending "buy" or "sell" order in such Security.
G. No Employee shall execute a Securities transaction within three (3) business days after a Company client has traded in the same Security.
H. No Employee shall accept a gift of more than de minimis value from any person or entity that does business with, or on behalf of the Company. For purposes of this prohibition, de minimis value is considered to be a value of $300 or less.
I. No Employee shall, by use of futures, options, options on futures, other types of derivatives or otherwise seek to indirectly accomplish any conduct expressly prohibited by the provisions set forth in this Code,
Amended May 17, 2007
J. Each Supervised Person must report, promptly, to the Chief Compliance Officer, any violations of the Code of which he or she becomes aware, even if such violations involve another Supervised Person. Supervised Persons may submit such reports anonymously to the Chief Compliance Officer. Retaliation against any Supervised Person for reporting a violation of this Code shall be treated as a further violation of this Code subjecting the violator to further sanctions under the Code.
V. PRE-CLEARANCE REQUIREMENT AND PROCEDURES; INITIAL AND ANNUAL REPORTING
A. No Access Person shall purchase or sell any Security for any of his or her Beneficial Accounts, unless the proposed purchase or sale has been reported to and pre-cleared by the Compliance Department or the Legal Department.
1. All proposed personal securities transactions shall be documented either on a Personal Security Trade Authorization Form (a copy of which is attached as Exhibit A) or on an electronic form provided on the Access Person's personal computer and forwarded to the Compliance Department.
2. Subject to the further provisions set forth herein, the Compliance Department or the Legal Department, shall pre-clear any requests to purchase or sell a Security if the proposed transaction does not violate this Code of Ethics or the Federal Securities Laws. Such determination shall be made by:
a. Reviewing the holdings of the portfolios managed by the Company, including the holdings of Reportable Funds; and
b. Determining if the Security is currently on the Company's then current research database or is then currently under consideration for adding to the Company's database pending review by the Company's research committee.
3. After review, if the Compliance Department or the Legal Department, determines to pre-clear a proposed trade, the Compliance Department (or Legal Department) will authorize the Access Person to execute the trade as follows.
a. The Compliance Department shall execute a Trade Authorization Form.
b. The Compliance Department shall communicate authorization of the trade to the Access Person.
c. The time at which the trade authorization is communicated to the Access Person shall be documented on the Trade Authorization Form.
4. The trade authorization is effective for two (2) business days after the pre-clearance is granted, unless otherwise indicated by the Compliance Department.
5. The Compliance Department shall maintain the originally executed Trade Authorization Form. A copy of the executed Trade Authorization Form will be available to the Access Person upon request.
B. All Access Persons shall disclose all Securities holdings for which they have Beneficial Ownership, as well as certain information regarding Beneficial Accounts, on holdings reports requesting the information set forth in Section VI. B., below upon commencement of employment or association as an Access Person, but in no event, later than ten (10) calendar days of commencement of employment or association as an Access Person
Amended May 17, 2007
and thereafter on an annual basis. Information contained in holdings reports submitted in accordance with this Code must be current as of a date no more than 45 days prior to the date of such report, which must be timely submitted to the Chief Compliance Officer. Access Persons that do not have any Securities holdings or Beneficial Account information to report must submit a report certifying that the Access Person does not have any reportable information as of the date of the report. Any such report may contain a statement that the report shall not be construed as an admission by the person making such report that he or she has any direct or indirect Beneficial Ownership in the Security to which the report relates. The Company shall provide to each Access Person a copy of the Code as well as any amendments to the Code. All Access Persons must complete an acknowledgment upon commencement of employment or association as an Access Person, and thereafter on (i) receipt of any amendment to the Code and (ii) an annual basis (a copy of which is attached as Exhibit B).
VI. QUARTERLY REPORTING
A. Every Access Person shall submit a quarterly report to the Chief Compliance Officer with the information described in paragraph B. below with respect to any Beneficial Accounts opened during the quarter and all transactions in any Security in which such Access Person had, or by reason of such transaction acquired, any direct or indirect Beneficial Ownership in the Security during such quarter. Access Persons need not, however, report on the following transactions:
1. Purchases or sales that are non-volitional on the part of the person;
2. Purchases that are part of an Automatic Investment Plan; and
3. Purchases or sales effected in any account over which the person has no direct or indirect influence or control.
B. Quarterly reports shall be submitted to the Chief Compliance Officer no later than 30 calendar days after the end of each calendar quarter, and shall contain the following information:
1. The date of the transaction, the title and the number of shares, the exchange ticker symbol, SEDOL or CUSIP number and the principal amount, interest rate and maturity date of each Security involved;
2. The nature of the transaction (i.e., purchase, sale or any other type of acquisition or disposition);
3. The price at which the transaction was effected;
4. The name of the broker, dealer or bank with or through whom the transaction was effected;
5. With respect to any Beneficial Account established during the quarter, the name of the broker, dealer or bank with whom the account was established and the date the account was established; and
6. The date the report was submitted.
C. Any such report may contain a statement that the report shall not be construed as an admission by the person making such report that he or she has any direct or indirect beneficial ownership in the security to which the report relates.
Amended May 17, 2007
D. In accordance with sections IV.A. and B. above, all Access Persons are required to provide duplicate confirmations and account statements for each account over which the Access Person has Beneficial Ownership. Access Persons that do not have any brokerage accounts or Beneficial Ownership of Securities must submit a quarterly transaction report to certify that the Access Person has no transactions to report.
VII. INSIDER TRADING PROCEDURES UNDER ADVISERS ACT SECTION 204A
The following rules apply to all Access Persons:
A. Identifying Inside Information
Before trading for yourself, a Beneficial Account, Employee Account or Company clients (including investment companies or private accounts managed by the Company) in the securities of a company about which you may have potential inside information, ask yourself the following questions:
Is the information material? Is this information that an investor would consider important in making his or her investment decisions? Is this information that would substantially affect the market price of the securities if generally disclosed?
Common, but by no means exclusive, examples of what may be "material" include the following:
- Dividend changes
- Declarations of stock splits and stock dividends
- Financial forecasts, especially earnings estimates
- Changes in previously disclosed financial information
- Mergers, acquisitions, or tender offers
- Proposed issuances of new securities
- Stock repurchase programs
- Major litigation
- Significant changes in management or operations
- Significant increases or declines in backlog orders or the award of a significant contract
- Significant new products to be introduced and significant discoveries of oil and gas, minerals, or the like
- Extraordinary borrowings or liquidity problems
- Purchase or sale of substantial assets
- Governmental investigations, criminal actions, or indictments and any collateral consequences, including potential debarment from government contracts
Is the information non-public? To whom has this information been provided? Has the information been effectively communicated to the marketplace? (For example, published in Reuters, The Wall Street Journal or other publications of general circulation.)
If, after consideration of the above, you believe that the information may be material and non-public, you should take the steps listed below. If you have any doubts as to whether information may be material and non-public, you should assume that the information is material and non-public.
1. Report the matter immediately to the Chief Compliance Officer.
Amended May 17, 2007
2. Do not purchase or sell the securities on behalf of yourself or others (including investment companies or private accounts managed by the Company).
3. Do not communicate the information inside or outside the Company, other than to the Chief Compliance Officer.
4. After the Chief Compliance Officer has reviewed the issue, you will be instructed either to continue the prohibitions against trading and communication noted in paragraphs 2 and 3 above, or you will be allowed to trade and communicate the information.
B. Restricting Access to Material Non-Public Information
Information in your possession that is identified, as material and non-public may not be communicated to anyone, including persons within the Company, except to the Chief Compliance Officer. In addition, care should be taken so that such information is secure. For example, files containing material non-public information should be sealed; access to computer files containing material non-public information should be restricted.
To implement the proper restriction of access to material non-public information, various Company employees and/or departments are responsible for the following:
1. General Access Control Procedures
The Company has established a process by which access to sensitive company files that may contain non-public information is limited. Since most of the Company's files that might have insider-trading implications are stored in computers, personal identification numbers, passwords and/or code access numbers are distributed to specified individuals only. The limitations on access are monitored on an ongoing basis. In addition, access to certain physical areas of the Company's offices that are likely to contain sensitive information is restricted through the use of access codes.
Access Persons are made aware of their duties with respect to information being stored in non-accessible file cabinets. Access Persons are reminded that they should log off of their computers once having completed a task so as to limit information availability; places within the Company where any non-public information would be accessible are limited; specific fax machines are used to relay sensitive, potentially non-public information; access to all areas of the Company are limited through one main reception area so that outsiders are immediately identified and escorted to their proper destinations; and draft memoranda that may contain insider information are destroyed immediately after their use.
2. Confidentiality Agreements
From time to time, the Company may enter into a confidentiality agreement with third parties as a condition to receiving material, nonpublic or other confidential information. All such requests should be referred to the Compliance Department, which, in consultation with the Legal Department, as appropriate, will ensure that the form of confidentiality agreement adequately addresses the circumstances in which the Company may share such information. No Employee is authorized to enter into any written or oral confidentiality agreement, on behalf of the Company without the express prior approval of the Compliance Department.
Amended May 17, 2007
Where an Employee wishes to share material, nonpublic or other confidential information outside of the Company, prior to sharing the information, the Legal Department will obtain from the third party, an agreement whereby the third party (i) represents that it, together with its representatives, will not divulge the information to any other person, or trade in the securities as to which the information relates, without the approval of the Compliance Department; and, as appropriate (ii) indemnifies the Company against any liability arising from the improper use or disclosure of such information by the third party or its representatives.
3. Personnel Department Procedures
Prior to an individual's formal offer of employment, the Personnel Department provides the individual with the Company's Insider Trading Procedures and clarifies that the Company views that the person's willingness to adhere to these policies and procedures to be a condition precedent to accepting employment with the Company.
The Chief Compliance Officer assists the Personnel Department by responding to insider policy questions from prospective Access Persons so that it is clear what they can or cannot do with respect to insider trading as an Access Person of the Company.
New Access Persons are provided with an acknowledgment form to execute before formally commencing employment in which the individual represents that he or she has received the Company's Insider Trading Procedures, has read and understands them, and that he or she understands that continued employment with the Company is dependent upon compliance with those procedures.
Annually, the Personnel Department elicits a written statement from all Company Access Persons that they have not violated any of the Company's Insider Trading Procedures.
C. Supervisory Procedures for Effectuating Compliance
The roles of the Compliance Department and the Legal Department are critical to the implementation and maintenance of HGII's Insider Trading Procedures. Supervisory procedures can be divided into three categories - Prevention of Insider Trading, Detection of Insider Trading and Control of Inside Information.
1. Prevention of Insider Trading
To prevent insider trading, the Compliance and/or Legal Departments:
a. provide, on a regular basis, an educational program to familiarize Access Persons with, and meet on a selective basis with newly hired personnel to inform them of, the Company's Insider Trading Procedures;
b. answer questions regarding the Company's Insider Trading Procedures;
c. resolve issues of whether information received by an Access Person of the Company is material and non-public; and
d. review on a regular basis and update as necessary the Company's Insider Trading Procedures.
Amended May 17, 2007
2. Detection of Insider Trading
To detect insider trading, the Compliance Department is responsible for:
a. reviewing the trading activity reports filed by each Access Person with particular emphasis on Access Persons that have access to non-public information and sample testing of all Access Persons;
b. reviewing the trading activity of investment companies and private accounts managed by the Company;
c. reviewing the trading activity of the Company's own account;
d. coordinating the review of such reports with other appropriate Access Persons of the Company; and
e. periodically generating reports for management on those tests.
3. Control of Inside Information
When it has been determined that an Access Person of the Company has material non-public information, measures will be implemented to prevent dissemination of such information. For example:
a. All Access Persons of the Company will be notified that they are prohibited from disclosing to other persons ("tippees") inside information about the issuer in question and from trading in the securities in question in "personal securities transactions" or for the accounts of clients (notwithstanding the inclusion of such securities on any Buy, Alt-Buy or Hold Lists compiled by the Company), until further notice.
b. Following receipt of notice prohibiting certain trades and
until receipt of further notice, every Access Person with
material non-public information shall file with the Chief
Compliance Officer a weekly written report of all personal
securities transactions effected during the prior week. This
weekly report is in addition to the standard Form (Exhibit
A) filed with the Chief Compliance Officer.
c. The Compliance Department will review such reports weekly as well as the Company's records of trades for client's accounts in order to determine if these procedures or any provision in this Code of Ethics have been violated.
d. The Compliance Department will maintain and regularly update a list of every Access Person who has indicated or about whom it has been indicated that he or she has come into contact with material non-public information so that it can better monitor these particular Insiders.
e. The Compliance Department will place any written materials containing the inside information in a confidential file.
4. Special Reports to Management
Promptly upon learning of a violation of the Company's Insider Trading Procedures, the Compliance Department should determine whether a written
Amended May 17, 2007
report to senior management, the Company Executive Committee, and/or the appropriate Board of Directors is warranted taking into consideration the nature of the violation in light of all relevant facts and circumstances.
5. Annual Reports to Management and Investment Companies
On an annual basis, the Compliance Department shall prepare a written report to the Management of the Company (a) setting forth a summary of existing procedures to detect and prevent insider trading and recommendations for improvement, if any, and a description of HGII's continuing educational program regarding insider trading, (b) describing any issues arising under the Code or such procedures since the last such report, including but not limited to information about material violations of the Code or procedures and sanctions imposed in response to such violations, and (c) certifying that the Company has adopted procedures reasonably necessary to prevent Access Persons from violating the Code; and a copy of such report shall promptly be furnished to the board of directors of any investment company registered under the 1940 Act for which the Company serves as investment adviser or sub-adviser.
VIII. SANCTIONS
The Chief Compliance Officer shall report any material code violations to the Management of the Company, which may then impose such sanctions, as it deems appropriate, up to and including termination of employment.
Amended May 17, 2007
HANSBERGER GLOBAL INVESTORS, INC. AMENDED CODE OF ETHICS
SCHEDULE 1
REPORTABLE FUNDS
AS OF JANUARY 2, 2007
1) Hansberger Institutional Series - U.S. Registered Investment Companies
- International Value Fund (Adviser)
- Emerging Markets Fund (Adviser)
- International Growth Fund (Adviser)
- International Core Fund (Adviser)
- All Countries Fund (currently inactive)
2) Vanguard Trustees' Equity Fund - U.S. Registered Investment Company
- Vanguard International Value Fund (Sub-Adviser)
3) IXIS Asset Management North America, LP
- Hansberger International Fund - U.S. Registered Investment Company
(Sub-Adviser)
- IXIS Moderate Diversified Portfolio - U.S. Registered Investment Company (Sub-Adviser)
- IXIS Equity Diversified Portfolio - U.S. Registered Investment Company
(Sub-Adviser)
- IXIS Hansberger Emerging Latin America Fund - Societe d'Investissement a Capital Variable (Sub-Adviser)
- IXIS Hansberger Global Emerging Markets Fund - Societe d'Investissement a Capital Variable (Sub-Adviser)
4) Pacific Capital - U.S. Registered Investment Company
- Pacific Capital International Stock Fund (Sub-Adviser)
5) MTB Group of Funds -- U.S. Registered Investment Company
- MTB International Equity Fund (Sub-Adviser)
6) ING - U.S. Registered Investment Company
- ING International Capital Appreciation Fund (Sub-Adviser)
7) First American Funds, Inc. - U.S. Registered Investment Company
- International Select Fund (Sub-Adviser)
Amended May 17, 2007
Exhibit A
HANSBERGER GLOBAL INVESTORS
PERSONAL SECURITIES TRADE AUTHORIZATION FORM
NAME:___________________________________________________________________________
LEGAL NAME OF ACCOUNT:__________________________________________________________
TRANSACTION DATE:____________________ TIME REQUESTED:_________________________
BUY_____________ SELL______________ SECURITY:_______________________________
SEDOL NO.:______________________________
|
NUMBER OF SHARES AND APPROX. PRICE: ____________________________________________
- OR -
TOTAL US DOLLAR AMOUNT: _____________
BROKER:______________________________ ACCOUNT #:______________________________
CONTACT IN COMPLIANCE DEPARTMENT: Susan Moore-Wester
To the best of my knowledge this proposed transaction does not violate the provisions of the HGI Amended Code of Ethics.
SIGNATURE:___________________________ DATE:___________________________________
FOR COMPLIANCE USE ONLY
CONTACT IN TRADING:_____________________________________________________________
CONTACT IN RESEARCH:____________________________________________________________
COMMENTS: This security has no pending trade tickets and the security is not currently under consideration for purchase or sale by HGI.
COMPLIANCE COMPLETED/CHECKED BY:________________________________________________
CHIEF COMPLIANCE OFFICER:_______________________________________________________
NOTIFICATION OF APPROVAL OR DENIAL
DATE:________________________________ TIME RESPONDED:_________________________
APPROVED:__________ DENIED:_______
COMMENTS:_______________________________________________________________________
FORM COMPLETED BY:______________________________________________________________
Amended May 17, 2007
EXHIBIT B
HANSBERGER GLOBAL INVESTORS, INC.
AMENDED CODE OF ETHICS
ACKNOWLEDGMENT
I have received and reviewed the Hansberger Global Investors, Inc. Amended Code of Ethics. I understand its provisions and their applicability to me and agree to comply with them.
NAME: __________________________________________________________________________
(Please Print)
POSITION: ______________________________________________________________________
DATE: __________________________________________________________________________
COMPANY: _______________________________________________________________________
SIGNATURE: _____________________________________________________________________
DETACH AND RETURN THIS ACKNOWLEDGMENT TO:
SUSAN MOORE-WESTER, 401 EAST LAS OLAS BLVD., SUITE 1700, FORT LAUDERDALE, FL
33301.
Amended May 17, 2007