485APOS 1 faif025909_485apos.txt FAIF, INC. FORM 485APOS 1933 Act Registration No. 33-16905 1940 Act Registration No. 811-05309 As filed with the Securities and Exchange Commission on December 16, 2002 FORM N-1A SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |X| Pre-Effective Amendment No. __ | | Post-Effective Amendment No. 65 |X| and/or REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |X| Amendment No. 65 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) 303-1606 (Registrant's Telephone Number, including Area Code) Christopher O. Petersen U.S. Bancorp Center 800 Nicollet Mall Minneapolis, Minnesota 55402 (Name and Address of Agent for Service) It is proposed that this filing shall become effective (check appropriate box): | | immediately upon filing pursuant to paragraph (b) of Rule 485 | | on (date) pursuant to paragraph (b) of Rule 485 | | 60 days after filing pursuant to paragraph (a)(1) of Rule 485 | | on (date) pursuant to paragraph (a)(1) of Rule 485 | | 75 days after filing pursuant to paragraph (a)(2) of Rule 485 |X| on (January 31, 2003) pursuant to paragraph (a)(3) of Rule 485 [LOGO] FIRST AMERICAN FUNDS(TM) JANUARY 31, 2003 PROSPECTUS FIRST AMERICAN INVESTMENT FUNDS, INC. ASSET CLASS - Stock Funds LARGE CAP SELECT FUND Class A, Class B, and Class C Shares Large Cap Select Fund As with all mutual funds, the Securities and Exchange Commission has not approved or disapproved the shares of this fund, or determined if the information in this prospectus is accurate or complete. Any statement to the contrary is a criminal offense. Table of CONTENTS FUND SUMMARY -------------------------------------------------------------------------------- Large Cap Select Fund 2 -------------------------------------------------------------------------------- POLICIES & SERVICES -------------------------------------------------------------------------------- Buying Shares 4 -------------------------------------------------------------------------------- Selling Shares 8 -------------------------------------------------------------------------------- Managing Your Investment 10 -------------------------------------------------------------------------------- ADDITIONAL INFORMATION -------------------------------------------------------------------------------- Management 11 -------------------------------------------------------------------------------- More About The Fund 12 -------------------------------------------------------------------------------- Financial Highlights 13 -------------------------------------------------------------------------------- FOR MORE INFORMATION Back Cover -------------------------------------------------------------------------------- Fund Summary INTRODUCTION This section of the prospectus describes the objective of the First American Large Cap Select Fund, summarizes the main investment strategies used by the fund in trying to achieve its objective, and highlights the risks involved with these strategies. It also provides you with information about the performance, fees, and expenses of the fund. AN INVESTMENT IN THE FUND IS NOT A DEPOSIT OF U.S. BANK NATIONAL ASSOCIATION AND IS NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. THIS PROSPECTUS AND THE RELATED STATEMENT OF ADDITIONAL INFORMATION DO NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY SHARES IN THE FUND, NOR SHALL ANY SUCH SHARES BE OFFERED OR SOLD TO ANY PERSON IN ANY JURISDICTION IN WHICH AN OFFER, SOLICITATION, PURCHASE, OR SALE WOULD BE UNLAWFUL UNDER THE SECURITIES LAWS OF SUCH JURISDICTION. 1 PROSPECTUS - First American Large Cap Select Fund Class A, Class B, and Class C Shares Fund Summary LARGE CAP SELECT FUND -------------------------------------------------------------------------------- OBJECTIVE Large Cap Select Fund's objective is capital appreciation. -------------------------------------------------------------------------------- MAIN INVESTMENT STRATEGIES Under normal market conditions, Large Cap Select invests primarily (at least 80% of net assets, plus the amount of any borrowings for investment purposes) in common stocks of large-capitalization companies, defined as companies that have market capitalizations within the range of market capitalizations of companies constituting the S&P 500 Index. The S&P 500 Index is a market-value weighted index consisting of 500 stocks chosen for market size, liquidity, and industry group representation. As of the date of this prospectus, market capitalizations of companies in the S&P 500 Index ranged from approximately $209 million to $292 billion. The advisor will select companies based on a combination of both value and growth objectives, seeking companies it believes offers market opportunity. In selecting value stocks, the fund's advisor invests in securities that it believes: o are undervalued relative to other securities in the same industry or market, o exhibit good or improving fundamentals, o exhibit an identifiable catalyst that could close the gap between market value and fair value over the next one or two years. In selecting growth stocks, the fund's advisor will select companies that it believes exhibit the potential for superior growth based on factors such as: o above average growth in revenue and earnings, o strong competitive position. o strong management. o sound financial condition. Up to 25% of the fund's total assets may be invested in securities of foreign issuers which are either listed on the United States stock exchange or represented by American Depository Receipts. These securities may be of the same type as the fund's permissible investments in United States domestic securities. -------------------------------------------------------------------------------- MAIN RISKS The value of your investment in this fund will change daily, which means you could lose money. The main risks of investing in this fund include: RISKS OF COMMON STOCKS. Stocks may decline significantly in price over short or extended periods of time. Price changes may occur in the market as a whole, or they may occur in only a particular company, industry, or sector of the market. In addition, growth stocks and/or large-capitalization stocks may underperform the market as a whole. FOREIGN SECURITY RISK. Securities of foreign issuers, even when dollar-denominated and publicly traded in the United States, may involve risks not associated with the securities of domestic issuers, including the risks of adverse currency fluctuations and of political or social instability, or diplomatic developments that could adversely affect the securities. RISKS OF SECURITIES LENDING. To generate additional income, the fund may lend securities representing up to one-third of the value of its total assets to broker-dealers, banks, and other institutions. When the fund engages in this practice, it is subject to the risk that the other party to a securities lending agreement will default on its obligations. RISKS OF DERIVATIVE INSTRUMENTS. The fund will suffer a loss in connection with its use of derivatives such as options, futures contracts, and options on futures contracts if securities prices do not move in the direction anticipated by the fund's advisor when entering into the derivative instruments. -------------------------------------------------------------------------------- FUND PERFORMANCE Because this fund has not been offered for a full calendar year, no performance information is presented. 2 PROSPECTUS - First American Large Cap Select Fund Class A, Class B, and Class C Shares Fund Summary LARGE CAP SELECT 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. Annual fund operating expenses are based on the fund's most recently completed fiscal year.(1)
------------------------------------------------------------------------------------------------------------------------------- SHAREHOLDER FEES (fees paid directly from your investment) CLASS A CLASS B CLASS C ------------------------------------------------------------------------------------------------------------------------------- MAXIMUM SALES CHARGE (LOAD) 5.50% 5.00% 2.00% MAXIMUM SALES CHARGE (LOAD) IMPOSED ON PURCHASES 5.50%(2) 0.00% 1.00% (AS A PERCENTAGE OF OFFERING PRICE) MAXIMUM DEFERRED SALES CHARGE (LOAD) 0.00%(3) 5.00% 1.00% (AS A PERCENTAGE OF ORIGINAL PURCHASE PRICE OR REDEMPTION PROCEEDS, WHICHEVER IS LESS) ANNUAL MAINTENANCE FEE(4) $ 50 $ 50 $ 50 ONLY CHARGED TO ACCOUNTS WITH BALANCES BELOW $500 ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets) (AS A PERCENTAGE OF AVERAGE NET ASSETS) ------------------------------------------------------------------------------------------------------------------------------- Management Fees 0.65% 0.65% 0.65% Distribution and Service (12b-1) Fees 0.75% 1.00% 1.00% Other Expenses(5) % % % Total Annual Fund Operating Expenses % % % -------------------------------------------------------------------------------------------------------------------------------
(1)THE ADVISOR INTENDS TO VOLUNTARILY WAIVE FEES DURING THE CURRENT FISCAL YEAR SO THAT TOTAL OPERATING EXPENSES, AFTER WAIVERS, DO NOT EXCEED 1.15%, 1.90%, AND 1.90%, RESPECTIVELY, FOR CLASS A, CLASS B, AND CLASS C SHARES. FEE WAIVERS MAY BE DISCONTINUED AT ANY TIME.
WAIVER OF FUND EXPENSES ( )% ( )% ( )% NET EXPENSES (AFTER WAIVERS) 1.15% 1.90% 1.90%
(2)Certain investors may qualify for reduced sales charges. See "Policies & Services - Buying Shares, Calculating Your Share Price." (3)Class A share investments of $1 million or more on which no front-end sales charge is paid may be subject to a 1% contingent deferred sales charge. See "Policies & Services - Buying Shares, Calculating Your Share Price." (4)The fund reserves the right to charge your account an annual maintenance fee of $50 if your balance falls below $500 as a result of selling or exchanging shares. See "Policies & Services - Selling Shares, Accounts with Low Balances." (5)"Other Expenses" are estimated for the current fiscal year. -------------------------------------------------------------------------------- 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 B CLASS B CLASS C CLASS C assuming redemption assuming no redemption assuming redemption assuming no redemption Class A at end of each period at end of each period at end of each period at end of each period -------------------------------------------------------------------------------------------------------------------------------- 1 year $ $ $ $ $ 3 years $ $ $ $ $
3 PROSPECTUS - First American Large Cap Select Fund Class A, Class B, and Class C Shares Policies & Services Buying Shares -------------------------------------------------------------------------------- MULTIPLE CLASS INFORMATION The fund offers five different share classes. This prospectus offers Class A, Class B, and Class C shares. Class S and Class Y shares are available through separate prospectuses. There are differences among the fees and expenses for each of the five classes. These differences result from their separate arrangements for shareholder and distribution services, not from any difference in amounts charged by the investment advisor for core investment advisory services. Accordingly, the core investment advisory expenses do not vary by class. Different fees and expenses will affect performance. Not everyone is eligible to buy every class. After determining which classes you are eligible to buy, decide which class best suits your needs. The following describes the features of each class: CLASS A SHARES. Class A shares have: o a front-end sales charge determined by the amount of your purchase. See "Calculating Your Share Price - Class A shares." o annual shareholder servicing (12b-1) fees of 0.25%. See "Fund Summaries - Fees and Expenses." o reduced sales charges for larger purchases. See "Reducing Your Sales Charge." CLASS B SHARES. Class B shares have: o no front-end sales charge. o a contingent deferred sales charge (CDSC) if you redeem your shares within six years of purchase. See "Calculating Your Share Price - Class B Shares." o annual distribution and shareholder servicing (12b-1) fees of 1.00%. See "Fund Summaries - Fees and Expenses." o automatic conversion to Class A shares eight years after purchase which reduces future annual expenses since Class A shares have lower annual expenses than Class B shares. CLASS C SHARES. Class C shares have: o a front-end sales charge of 1.00%. See "Calculating Your Share Price - Class C Shares." o a 1.00% contingent deferred sales charge (CDSC) if you redeem your shares within 18 months of purchase. See "Calculating Your Share Price - Class C Shares." o annual distribution and shareholder servicing (12b-1) fees of 1.00%. See "Fund Summaries - Fees and Expenses." o Class C shares do not convert to Class A shares so they will continue to have higher annual expenses than Class A shares for as long as you hold them. Because Class A shares will normally be the better choice if your investment qualifies for a reduced sales charge: o orders for Class B shares for $250,000 or more will be treated as orders for Class A shares. o orders for Class C shares for $1 million or more will be treated as orders for Class A shares. o orders for Class B or Class C shares by an investor eligible to purchase Class A shares without a front-end sales charge will be treated as orders for Class A shares. CLASS S SHARES. Class S shares: o are sold through banks and other financial institutions that have entered into sales agreements with the funds' distributor. o are available to certain accounts for which the financial institution acts in a fiduciary, agency, or custodial capacity, such as certain trust accounts and investment advisory accounts. o are held in an omnibus account with the transfer agent. o do not have a front-end sales charge or a deferred sales charge. o have an annual shareholder servicing fee of 0.25% and your investment professional or financial institution may receive a commission of up to 1.25% on your purchase. CLASS Y SHARES. Class Y shares: o are sold through banks and other financial institutions that have entered into sales agreements with the funds' distributor. o are available to certain accounts for which the financial institution acts in a fiduciary, agency, or custodial capacity, such as certain trust accounts and investment advisory accounts. o are held in an omnibus account with the transfer agent. o do not have a front-end sales charge, deferred sales charge, or a distribution fee. However, your investment professional or financial institution may receive a commission of up to 1.25% on your purchase. -------------------------------------------------------------------------------- 12b-1 Fees The fund has adopted a plan under Rule 12b-1 of the Investment Company Act that allows it to pay the fund's distributor an annual fee for the distribution and sale of its shares and for services provided to shareholders. For 12B-1 Fees are Equal To: -------------------------------------------------------------------------------- Class a Shares 0.25% of Average Daily Net Assets Class B Shares 1% of Average Daily Net Assets Class C Shares 1% of Average Daily Net Assets Because these fees are paid out of the 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. The Class A share 12b-1 fee is a shareholder servicing fee. For Class B and Class C shares, a portion of the 12b-1 fee equal to 0.25% of average daily net assets is a shareholder servicing fee and 0.75% is a distribution fee. 4 PROSPECTUS - First American Large Cap Select Fund Class A, Class B, and Class C Shares Policies & Services Buying Shares CONTINUED The fund's distributor uses the shareholder servicing fee to compensate investment professionals, participating institutions, and "one-stop" mutual fund networks (institutions) for providing ongoing services to shareholder accounts. These institutions receive shareholder servicing fees equal to 0.25% of a fund's Class A, Class B, and Class C share average daily net assets attributable to shares sold through them. The fund's distributor also pays institutions that sell Class C shares a 0.75% annual distribution fee beginning one year after the shares are sold. The fund's distributor retains the Class B share 0.75% annual distribution fee in order to finance the payment of sales commissions to institutions which sell Class B shares. See "Buying Shares - Class B Shares." The advisor or the distributor may pay additional fees to institutions out of their own assets in exchange for sales and/or administrative services performed on behalf of the institution's customers. -------------------------------------------------------------------------------- CALCULATING YOUR SHARE PRICE Your purchase price will be based on the fund's net asset value (NAV) per share, which is generally calculated as of the close of regular trading on the New York Stock Exchange (usually 3:00 p.m. Central time) every day the exchange is open. The 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. If market prices are not readily available for an investment or if the advisor believes they are unreliable, fair value prices may be determined in good faith using methods approved by the fund's board of directors. CLASS A SHARES. Your purchase price for Class A shares is typically the net asset value of your shares, plus a front-end sales charge. Sales charges vary depending on the amount of your purchase. The fund's distributor receives the sales charge you pay and reallows a portion of the sales charge to your investment professional or participating institution. Maximum Sales Charge Reallowance As a % of As a % of as a % of Purchase Net Amount Purchase Price Invested Price -------------------------------------------------------------------------------- Less than $50,000 5.50% 5.82% 5.00% $ 50,000 - $ 99,999 4.50% 4.71% 4.00% $100,000 - $249,999 3.50% 3.63% 3.25% $250,000 - $499,999 2.50% 2.56% 2.25% $500,000 - $999,999 2.00% 2.04% 1.75% $1 million and over 0.00% 0.00% 0.00% -------------------------------------------------------------------------------- REDUCING YOUR SALES CHARGE. As shown in the preceding tables, larger purchases of Class A shares reduce the percentage sales charge you pay. You also may reduce your sales charge in the following ways: PRIOR PURCHASES. Prior purchases of Class A shares of any First American fund (except a money market fund) will be factored into your sales charge calculation. That is, you will receive credit for either the original purchase price or the current net asset value of the other Class A shares you hold at the time of your purchase, whichever is greater. For example, let's say you're making a $10,000 investment and you already own other First American fund Class A shares that you purchased for $25,000, but are now valued at $45,000. Since the current net asset value of your shares is greater than their purchase price, you will receive credit for their current value and your sales charge will be based on a total purchase amount of $55,000. To receive a reduced sales charge, you must notify the fund of your prior purchases. This must be done at the time of purchase, either directly with the fund in writing or by notifying your investment professional or financial institution. PURCHASES BY RELATED ACCOUNTS. Concurrent and prior purchases of Class A shares of any First American fund by certain other accounts also will be combined with your purchase to determine your sales charge. Each fund will combine purchases made by you, your spouse, and your children when it calculates the sales charge. In addition, the sales charge, if applicable, is reduced for purchases made at one time by a trustee or fiduciary for a single trust estate or a single fiduciary account. To receive a reduced sales charge, you must notify the funds of purchases by any related accounts. This must be done at the time of purchase, either directly with the funds in writing or by notifying your investment professional or financial institution. LETTER OF INTENT. If you plan to invest $50,000 or more over a 13-month period in Class A shares of any First American fund except the money market funds, you may reduce your sales charge by signing a non-binding letter of intent. (If you do not fulfill the letter of intent, you must pay the applicable sales charge.) In addition, if you reduce your sales charge to zero under a letter of intent and then sell your Class A shares within 18 months of their purchase, you may be charged a contingent deferred sales charge of 1%. See "For Investments of Over $1 Million." More information on these ways to reduce your sales charge appears in the Statement of Additional Information (SAI). The SAI also contains information on investors who are eligible to purchase Class A shares without a sales charge. 5 PROSPECTUS - First American Large Cap Select Fund Class A, Class B, and Class C Shares Policies & Services Buying Shares CONTINUED -------------------------------------------------------------------------------- FOR INVESTMENTS OF OVER $1 MILLION There is no initial sales charge on Class A share purchases of $1 million or more. However, your investment professional or financial institution may receive a commission of up to 1% on your purchase. If such a commission is paid, you will be assessed a contingent deferred sales charge (CDSC) of 1% if you sell your shares within 18 months. To find out whether you will be assessed a CDSC, ask your investment professional or financial institution. The funds' distributor receives any CDSC imposed when you sell your Class A shares. The CDSC is based on the value of your shares at the time of purchase or at the time of sale, whichever is less. The charge does not apply to shares you acquired by reinvesting your dividend or capital gain distributions. To help lower your costs, shares that are not subject to a CDSC will be sold first. Other shares will then be sold in an order that minimizes your CDSC. The CDSC for Class A shares will be waived for: o redemptions following the death or disability (as defined in the Internal Revenue Code) of a shareholder. o redemptions that equal the minimum required distribution from an individual retirement account or other retirement plan to a shareholder who has reached the age of 701|M/2. o redemptions through a systematic withdrawal plan, at a rate of up to 12% a year of your account's value. During the first year, the 12% annual limit will be based on the value of your account on the date the plan is established. Thereafter, it will be based on the value of your account on the preceding December 31. o redemptions required as a result of over contribution to an IRA plan. CLASS B SHARES. Your purchase price for Class B shares is their net asset value - there is no front-end sales charge. However, if you redeem your shares within six years of purchase, you will pay a back-end sales charge, called a contingent deferred sales charge (CDSC). Although you pay no front-end sales charge when you buy Class B shares, the fund's distributor pays a sales commission of 4.25% of the amount invested to investment professionals and financial institutions which sell Class B shares. The fund's distributor receives any CDSC imposed when you sell your Class B shares. Your CDSC will be based on the value of your shares at the time of purchase or at the time of sale, whichever is less. The charge does not apply to shares you acquired by reinvesting your dividend or capital gain distributions. Shares will be sold in the order that minimizes your CDSC. Year since purchase of original CDSC as a % of the First American fund shares value of your shares -------------------------------------------------------------------------------- First 5% Second 5% Third 4% Fourth 3% Fifth 2% Sixth 1% Seventh 0% Eighth 0% Your Class B shares and any related shares acquired by reinvesting your dividend or capital gain distributions will automatically convert to Class A shares eight years after the beginning of the month in which you purchased the shares. The CDSC will be waived for: o redemptions following the death or disability (as defined in the Internal Revenue Code) of a shareholder. o redemptions that equal the minimum required distribution from an individual retirement account or other retirement plan to a shareholder who has reached the age of 701|M/2. o redemptions through a systematic withdrawal plan, at a rate of up to 12% a year of your account's value. During the first year, the 12% annual limit will be based on the value of your account on the date the plan is established. Thereafter, it will be based on the value of your account on the preceding December 31. o redemptions required as a result of over contribution to an IRA plan. CLASS C SHARES. Your purchase price for Class C shares is their net asset value plus a front-end sales charge equal to 1% of the purchase price (1.01% of the net amount invested). If you redeem your shares within 18 months of purchase, you will be assessed a contingent deferred sales charge (CDSC) of 1% of the value of your shares at the time of purchase or at the time of sale, whichever is less. The CDSC does not apply to shares you acquired by reinvesting your dividend or capital gain distributions. Shares will be sold in the order that minimizes your CDSC. Even though your sales charge is only 1%, the fund's distributor pays a commission equal to an additional 1% of your purchase price to your investment professional or participating institution. Furthermore, the advisor may pay its affiliated broker-dealers, U.S. Bancorp Piper Jaffray Inc. and U.S. Bancorp Investments, Inc., an additional commission of up to 1% of your purchase price. The distributor receives any CDSC imposed when you sell your Class C shares. The CDSC for Class C shares will be waived in the same circumstances as the Class B share CDSC. See "Class B Shares" above. 6 PROSPECTUS - First American Large Cap Select Fund Class A, Class B, and Class C Shares Policies & Services Buying Shares CONTINUED Unlike Class B shares, Class C shares do not convert to Class A shares after a specified period of time. Therefore, your shares will continue to have higher annual expenses than Class A shares. -------------------------------------------------------------------------------- HOW TO BUY SHARES You may become a shareholder in the fund with an initial investment of $1,000 or more ($500 for a retirement plan or a Uniform Gifts to Minors Act/Uniform Transfers to Minors Act (UGMA/UTMA) account). Additional investments can be made for as little as $100 ($25 for a retirement plan or an UGMA/UTMA account). The fund has the right to waive these minimum investment requirements for employees of the fund's advisor and its affiliates. The fund also has the right to reject any purchase order. You may buy shares on any day the New York Stock Exchange is open. However, purchases of shares may be restricted in the event of an early or unscheduled close of the New York Stock Exchange. Your shares will be priced at the next net asset value calculated after your order is accepted by the fund, plus any applicable sales charge. "Accepted" means that you placed an order with your investment professional or financial institution and it has been processed, or your payment has been received and your application is complete. To make sure that your order is accepted, follow the directions for purchasing shares given below. BY PHONE. You may purchase shares by calling your investment professional or financial institution, if they have a sales agreement with the fund's distributor. In many cases, your order will be effective that day if received by your investment professional or financial institution by the close of regular trading on the New York Stock Exchange. In some cases, however, investment professionals or financial institutions may have different cutoff times for orders to purchase fund shares. In these cases, you will have to transmit your request by an earlier time in order for your purchase request to be effective that day. This allows your investment professional or financial institution time to process your request and transmit it to the fund. Some financial institutions may charge a fee for helping you purchase shares. Contact your investment professional or financial institution for more information. If you are paying by wire, you may purchase shares by calling Investor Services at 800 677-FUND before the close of regular trading on the New York Stock Exchange (usually 3:00 p.m. Central time). All information will be taken over the telephone, and your order will be placed when the fund receives payment by wire. Wire federal funds as follows: U.S. BANK NATIONAL ASSOCIATION ABA NUMBER: 0420-00013 ACCOUNT NUMBER: 112-952-137 CREDIT TO: FIRST AMERICAN (NAME OF FUND, INVESTOR NAME, AND INVESTOR ACCOUNT #) You cannot purchase shares by wire on days when federally chartered banks are closed. BY MAIL. To purchase shares by mail, simply complete and sign a new account form, enclose a check made payable to the fund you wish to invest in, and mail both to: FIRST AMERICAN FUNDS P.O. BOX 3011 MILWAUKEE, WI 53201-3011 OVERNIGHT EXPRESS MAIL MAY BE SENT TO: FIRST AMERICAN FUNDS 615 EAST MICHIGAN STREET MILWAUKEE, WI 53202 After you have established an account, you may purchase shares by mailing your check to First American Funds at the same address. Please note the following: o all purchases must be drawn on a bank located within the United States and payable in U.S. dollars to First American Funds. o third-party checks, credit cards, credit card checks, and cash may not be accepted. o if a check does not clear your bank, the funds reserve the right to cancel the purchase, and you could be liable for any losses or fees incurred. -------------------------------------------------------------------------------- INVESTING AUTOMATICALLY To purchase shares as part of a savings discipline, you may add to your investment on a regular basis: o by having $100 or more ($25 for a retirement plan 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. o 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 investment professional or financial institution or by calling Investor Services at 800 677-FUND. 7 PROSPECTUS - First American Large Cap Select Fund Class A, Class B, and Class C Shares Policies & Services Selling Shares -------------------------------------------------------------------------------- HOW TO SELL SHARES You may sell your shares on any day when the New York Stock Exchange (NYSE) is open. However, redemption of shares may be restricted in the event of an early or unscheduled close of the NYSE. Your shares will be sold at the net asset value determined on the day your redemption is processed, less any applicable contingent deferred sales charge. To make sure that your order is accepted, follow the directions for selling shares given below. The proceeds from your sale normally will be mailed or wired within three days, but in no event more than seven days, after your request is received in proper form. To minimize the effect of large redemption requests, the fund reserves the right to fulfill these redemption requests by distributing readily marketable securities in the fund's portfolio, rather than paying you in cash. See "Policies & Services - Selling Shares, Redemption In Kind." BY PHONE. If you purchased shares through an investment professional or financial institution, simply call them to sell your shares. In many cases, your redemption will be effective that day if received by your investment professional or financial institution by the close of regular trading on the New York Stock Exchange. In some cases, however, investment professionals or financial institutions may have different cutoff times for orders to redeem fund shares. In these cases, you will have to call by an earlier time in order for your redemption to be effective that day. This allows your investment professional or financial institution time to process your request and transmit it to the fund. Contact your investment professional or financial institution directly for more information. If you did not purchase shares through an investment professional or financial institution, you may sell your shares by calling Investor Services at 800 677-FUND. Proceeds can be wired to your bank account (if the proceeds are at least $1,000 and you have previously supplied your bank account information to the fund) or sent to you by check. The funds reserve the right to limit telephone redemptions to $50,000 per day. If you recently purchased your shares by check or through the Automated Clearing House (ACH), proceeds from the sale of those shares may not be available until your check or ACH payment has cleared, which may take up to 15 calendar days from the date of purchase. BY MAIL. To sell shares by mail, send a written request to your investment professional or financial institution, or to the fund at the following address: FIRST AMERICAN FUNDS P.O. BOX 3011 MILWAUKEE, WI 53201-3011 OVERNIGHT EXPRESS MAIL MAY BE SENT TO: FIRST AMERICAN FUNDS 615 EAST MICHIGAN STREET MILWAUKEE, WI 53202 Your request should include the following information: o name of the fund. o account number. o dollar amount or number of shares redeemed. o name on the account. o signatures of all registered account owners. Signatures on a written request must be guaranteed if: o you would like the proceeds from the sale to be paid to anyone other than to the shareholder of record. o you would like the check mailed to an address other than the address on the fund's records. o your redemption request is for $50,000 or more. A signature guarantee assures that a signature is genuine and protects shareholders from unauthorized account transfers. Banks, savings and loan associations, trust companies, credit unions, broker-dealers, and member firms of a national securities exchange may guarantee signatures. Call your financial institution to determine if it has this capability. Proceeds from a written redemption request will be sent to you by check unless another form of payment is requested. -------------------------------------------------------------------------------- SYSTEMATIC WITHDRAWALS If your account has a value of $5,000 or more, you may redeem a specific dollar amount from your account on a regular basis. To set up systematic withdrawals, contact your investment professional or financial institution. You should not make systematic withdrawals if you plan to continue investing in the fund, due to sales charges and tax liabilities. -------------------------------------------------------------------------------- REINVESTING AFTER A SALE If you sell Class A shares of a First American fund (except money market fund shares on which you have not paid a sales charge), you may reinvest in Class A shares of that fund or another First American fund within 180 days without a sales charge. To reinvest in Class A shares at net asset value (without paying a sales charge), you must notify the fund directly in writing or notify your investment professional or financial institution. 8 PROSPECTUS - First American Large Cap Select Fund Class A, Class B, and Class C Shares Policies & Services Buying Shares CONTINUED -------------------------------------------------------------------------------- ACCOUNTS WITH LOW BALANCES If your account balance falls below $500 as a result of selling or exchanging shares, the fund reserves the right to either: o deduct a $50 annual account maintenance fee, or o close your account and send you the proceeds, less any applicable contingent deferred sales charge. Before taking any action, however, the fund will send you written notice of the action it intends to take and give you 30 days to re-establish a minimum account balance of $500. -------------------------------------------------------------------------------- HOW TO EXCHANGE 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. You may exchange your shares on any day when the New York Stock Exchange is open. However, exchanges of shares may be restricted in the event of an early or unscheduled close of the New York Stock Exchange. Generally, you may exchange your shares only for shares of the same class. However, you may exchange your Class A shares for Class Y shares or Class S shares of the same or another First American fund if you subsequently become eligible to participate in that class (for example, by opening a fiduciary, custody, or agency account with a financial institution which invests in Class Y shares or Class S shares). Exchanges are made based on the net asset value per share of each fund at the time of the exchange. When you exchange your Class A shares of the fund for Class A shares of another First American fund, you do not have to pay a sales charge. When you exchange your Class B or Class C shares for Class B or 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 or, in the case of Class B shares, calculating when your shares convert to Class A shares. 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 to four times per year. BY PHONE. If both funds have identical shareholder registrations, you may exchange shares by calling your investment professional, your financial institution, or by calling the funds directly. To request an exchange through the funds, call Investor Services at 800 677-FUND. Your instructions must be received before 3:00 p.m. Central time, or by the time specified by your investment professional or financial institution, in order for shares to be exchanged the same day. BY MAIL. To exchange shares by written request, please follow the procedures under "Selling Shares." Be sure to include the names of both funds involved in the exchange. -------------------------------------------------------------------------------- TELEPHONE TRANSACTIONS You may buy, sell, or exchange shares by telephone, unless you elected on your new account form to restrict this privilege. If you wish to reinstate this option on an existing account, please call Investor Services at 800 677-FUND to request the appropriate form. The 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. -------------------------------------------------------------------------------- REDEMPTION IN KIND Generally, proceeds from redemption requests will be paid in cash. However, to minimize the effect of large redemption requests on the fund and its remaining shareholders, the fund reserves the right to pay part or all of the proceeds from a redemption request in a proportionate share of readily marketable securities in the fund instead of cash. In selecting securities for a redemption in kind, the advisor will consider the best interests of the fund and the remaining fund shareholders, and will value these securities in accordance with the pricing methods employed to calculate the 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. 9 PROSPECTUS - First American Large Cap Select Fund Class A, Class B, and Class C Shares Policies & Services Managing Your Investment -------------------------------------------------------------------------------- STAYING INFORMED SHAREHOLDER REPORTS. Shareholder reports are mailed twice a year, in November and May. They include financial statements and performance information, and, on an annual basis, a message from your portfolio managers and the auditors' report. In an attempt to reduce shareholder costs and help eliminate duplication, the 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 are mailed following each purchase or sale of fund shares. -------------------------------------------------------------------------------- DIVIDENDS AND DISTRIBUTIONS Dividends from the fund's net investment income are declared and paid monthly. Any capital gains are distributed at least once each year. On the ex-dividend date for a distribution, the 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 paying the distribution, unless you request that distributions be reinvested in another First American fund or paid in cash. This request may be made on your new account form or by contacting your financial institution. If you request that your distributions be paid in cash but those distributions cannot be delivered because of an incorrect mailing address, the undelivered distributions and all future distributions will be reinvested in fund shares at the current NAV. -------------------------------------------------------------------------------- TAXES Some of the tax consequences of investing in the fund are discussed below. More information about taxes is in the Statement of Additional Information. However, because everyone's tax situation is unique, always consult your tax professional about federal, state, and local tax consequences. TAXES ON DISTRIBUTIONS. The fund pays its shareholders dividends from its net investment income and any net capital gains that it has realized. For most investors, fund dividends and distributions are considered taxable whether they are reinvested or taken in cash (unless your investment is in an IRA or other tax-advantaged account). Dividends from the fund's net investment income and short-term capital gains are taxable as ordinary income. Distributions of the fund's long-term capital gains are taxable as long-term gains, regardless of how long you have held your shares. Because of its investment objectives and strategies, distributions for the fund are expected to consist primarily of capital gains. TAXES ON TRANSACTIONS. The sale of fund shares, or the exchange of the 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. If in redemption of his or her shares a shareholder receives a distribution of readily marketable securities instead of cash, the shareholder will be treated as receiving an amount equal to the fair market value of the securities at the time of the distribution for purposes of determining capital gain or loss on the redemption, and will also acquire a basis in the shares for federal income tax purposes equal to their fair market value. The exchange of one class of shares for another class of shares in the same fund will not be taxable. 10 PROSPECTUS - First American Large Cap Select Fund Class A, Class B, and Class C Shares Additional Information Management U.S. Bancorp Asset Management, Inc., is the fund's investment advisor. U.S. Bancorp Asset Management provides investment management services to individuals and institutions, including corporations, foundations, pensions, and retirement plans. As of September 30, 2002, U.S. Bancorp Asset Management had more than $111 billion in assets under management, including investment company assets of more than $51 billion. As investment advisor, U.S. Bancorp Asset Management manages the fund's business and investment activities, subject to the authority of the fund's board of directors. The fund pays the investment advisor a monthly fee for providing investment advisory services. The table below reflects the fund's contractual investment advisory fee for the current fiscal year. Advisory Fee as a % of Average Daily Net Assets -------------------------------------------------------------------------------- LARGE CAP SELECT FUND 0.65% -------------------------------------------------------------------------------- DIRECT CORRESPONDENCE TO: FIRST AMERICAN FUNDS P.O. BOX 1330 MINNEAPOLIS, MN 55440-1330 INVESTMENT ADVISOR U.S. BANCORP ASSET MANAGEMENT, INC. 800 NICOLLET MALL MINNEAPOLIS, MN 55402 DISTRIBUTOR QUASAR DISTRIBUTORS, LLC 615 E. MICHIGAN STREET MILWAUKEE, WI 53202 ADDITIONAL COMPENSATION U.S. Bancorp Asset Management and other affiliates of U.S. Bancorp may act as fiduciary with respect to plans subject to the Employee Retirement Income Security Act of 1974 (ERISA) and other trust and agency accounts that invest in the funds. As described above, U.S. Bancorp Asset Management receives compensation for acting as the fund's investment advisor. U.S. Bancorp Asset Management and its affiliates also receive compensation in connection with the following: CUSTODY SERVICES. U.S. Bank National Association (U.S. Bank) provides or compensates others to provide custody services to the fund. U.S. Bank is paid monthly fees equal, on an annual basis, to 0.01% of the fund's average daily net assets. In addition, U.S. Bank is reimbursed for its out-of-pocket expenses incurred while providing custody services to the fund. ADMINISTRATION SERVICES. U.S. Bancorp Asset Management and its affiliate, U.S. Bancorp Fund Services, LLC (Co-Administrators), provide or compensate others to provide administrative services to the First American family of funds. These services include general administrative and accounting services, transfer agency and dividend disbursing services, blue sky services, and shareholder services. With respect to the First American open-end mutual funds, the Co-Administrators receive total fees, on an annual basis of up to 0.25% of the aggregate average daily net assets of First American Investment Funds, Inc., First American Strategy Funds, Inc., and First American Insurance Portfolios, Inc., and up to 0.20% of the aggregate average daily net assets of First American Funds, Inc. The funds also pay the Co-Administrators fees based upon the number of funds and shareholder accounts maintained. In addition, the Co-Administrators are reimbursed for their out-of-pocket expenses incurred while providing administration services to the funds. DISTRIBUTION SERVICES. Quasar Distributors, LLC, an affiliate of U.S. Bancorp Asset Management, serves as distributor of the fund and receives shareholder servicing fees, and out of pocket expenses incurred while providing distribution and other sub-administrative services for the fund. SECURITIES LENDING SERVICES. In connection with lending its portfolio securities, the fund pays administrative and custodial fees to U.S. Bancorp Asset Management which are equal to 40% of the fund's income from these securities lending transactions. BROKERAGE TRANSACTIONS. When purchasing and selling portfolio securities for the fund, the fund's investment advisor may place trades through its affiliates, U.S. Bancorp Investments, Inc. and U.S. Bancorp Piper Jaffray Inc., which will earn commissions on these transactions. PORTFOLIO MANAGEMENT The fund is managed by a team of persons associated with U.S. Bancorp Asset Management. 11 PROSPECTUS - First American Large Cap Select Fund Class A, Class B, and Class C Shares Additional Information More About The Fund -------------------------------------------------------------------------------- OBJECTIVE The fund's objective, which is described in the "Fund Summary" section, may be changed without shareholder approval. If the fund's objective changes, you will be notified at least 60 days in advance. Please remember: There is no guarantee that the fund will achieve its objective. -------------------------------------------------------------------------------- INVESTMENT STRATEGIES The fund's main investment strategies are discussed in the "Fund Summary" section. These are the strategies that the fund's investment advisor believes are most likely to be important in trying to achieve the fund's objective. You should be aware that the fund may also use strategies and invest in securities that are not described in this prospectus, but that are described in the Statement of Additional Information (SAI). For a copy of the SAI, call Investor Services at 800 677-FUND. TEMPORARY INVESTMENTS. In an attempt to respond to adverse market, economic, political, or other conditions, the fund may temporarily invest without limit in cash and in U.S. dollar-denominated high-quality money market instruments and other short-term securities, including money market funds advised by the fund's advisor. Being invested in these securities may keep the 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. -------------------------------------------------------------------------------- RISKS The main risks of investing in the fund are summarized in the "Fund Summary" section. More information about fund risks is presented below. MARKET RISK. All stocks are subject to price movements due to changes in general economic conditions, changes in the level of prevailing interest rates, changes in investor perceptions of the market, or the outlook for overall corporate profitability. SECTOR RISK. The stocks of companies within specific industries or sectors of the economy can periodically perform differently than the overall stock market. This can be due to changes in such things as the regulatory or competitive environment or to changes in investor perceptions of a particular industry or sector. COMPANY RISK. Individual stocks can perform differently than the overall market. This may be a result of specific factors such as changes in corporate profitability due to the success or failure of specific products or management strategies, or it may be due to changes in investor perceptions regarding a company. FOREIGN SECURITY RISK. The fund may invest up to 25% of its total assets in securities of foreign issuers which are either listed on a United States stock exchange or represented by American Depositary Receipts. 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. For certain foreign countries, political or social instability, or diplomatic developments could adversely affect the securities. There is also the risk of loss due to governmental actions such as a change in tax statutes or the modification of individual property rights. In addition, individual foreign economies may differ favorably or unfavorably from the U.S. economy. RISKS OF ACTIVE MANAGEMENT. The fund is actively managed and its performance therefore will reflect in part the advisor's ability to make investment decisions which are suited to achieving the fund's investment objectives. Due to its active management, the fund could underperform other mutual funds with similar investment objectives. RISKS OF SECURITIES LENDING. When the fund loans its portfolio securities, it will receive collateral equal to at least 100% of the value of the loaned securities. Nevertheless, the fund risks a delay in the recovery of the loaned securities, or even the loss of rights in the collateral deposited by the borrower if the borrower should fail financially. To reduce these risks, the fund enters into loan arrangements only with institutions which the fund's advisor has determined are creditworthy under guidelines established by the fund's board of directors. RISKS OF DERIVATIVE INSTRUMENTS. The use of derivative instruments exposes a fund to additional risks and transaction costs. Risks inherent in the use of derivative instruments include: the risk that securities prices will not move in the direction that the advisor anticipates; an imperfect correlation between the price of derivative instruments and movements in the prices of the securities being hedged; the possible absence of a liquid secondary market for any particular instrument and possible exchange imposed price fluctuation limits, either of which may make it difficult or impossible to close out a position when desired; leverage risk, which is the risk that adverse price movements in an instrument can result in a loss substantially greater than the fund's initial investment in that instrument; and, particularly, in the case of privately negotiated instruments, the risk that the counterparty will fail to perform its obligations, which could leave the fund worse off than if it had not entered into the position. If the fund uses derivative instruments and the advisor's judgment proves incorrect, the fund's performance could be worse than if it had not used these instruments. 12 PROSPECTUS - First American Large Cap Select Fund Class A, Class B, and Class C Shares Additional Information Financial Highlights -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS Because the fund was not offered prior to the date of this prospectus, financial highlights are not available. 13 PROSPECTUS - First American Large Cap Select Fund Class A, Class B, and Class C Shares -------------------------------------------------------------------------------- FOR MORE INFORMATION More information about the fund is available in the fund's Statement of Additional Information and annual and semiannual reports, and on the First American funds' Internet Web site. -------------------------------------------------------------------------------- FIRST AMERICAN FUNDS WEB SITE Information about the First American funds may be viewed on the funds' Internet Web site at http://www.firstamericanfunds.com. -------------------------------------------------------------------------------- STATEMENT OF ADDITIONAL INFORMATION (SAI) The SAI provides more details about the fund and its policies. A current SAI is on file with the Securities and Exchange Commission (SEC) and is incorporated into this prospectus by reference (which means that it is legally considered part of this prospectus). -------------------------------------------------------------------------------- ANNUAL AND SEMIANNUAL REPORTS Additional information about the fund's investments is available in the fund's annual and semiannual reports to shareholders. In the fund's annual report, you will find a discussion of the market conditions and investment strategies that significantly affected the fund's performance during its last fiscal year. You can obtain a free copy of the fund's SAI and/or free copies of the fund's most recent annual or semiannual reports by calling Investor Services at 800 677-FUND. The material you request will be sent by first-class mail or other means designed to ensure equally prompt delivery, within three business days of receipt of the request. You can also obtain copies of this information, after paying a duplicating fee, by electronic request at the following email address: publicinfo@sec.gov, or by writing the SEC's Public Reference Section, Washington, D.C. 20549-0102. For more information, call 1-202-942-8090. Information about the fund is also available on the Internet. Text-only versions of fund documents can be viewed online or downloaded from the EDGAR Database on the SEC's Internet site at http://www.sec.gov. FIRST AMERICAN FUNDS P.O. Box 1330, Minneapolis, Mn 55440-1330 U.S. Bancorp Asset Management, Inc., serves as the investment advisor to the First American Funds. First American Funds are distributed by Quasar Distributors, LLC, which is located in Milwaukee, WI 53202, and is an affiliate of the investment advisor. Sec File Number: 811-05309 [LOGO] FIRST AMERICAN FUNDS(TM) [LOGO] FIRST AMERICAN FUNDS(TM) JANUARY 31, 2003 PROSPECTUS FIRST AMERICAN INVESTMENT FUNDS, INC. ASSET CLASS - Stock Funds LARGE CAP SELECT FUND Class S Shares Large Cap Select Fund As with all mutual funds, the Securities and Exchange Commission has not approved or disapproved the shares of this fund, or determined if the information in this prospectus is accurate or complete. Any statement to the contrary is a criminal offense. Table of CONTENTS FUND SUMMARY -------------------------------------------------------------------------------- Large Cap Select Fund 2 -------------------------------------------------------------------------------- POLICIES & SERVICES -------------------------------------------------------------------------------- Buying and Selling Shares 4 -------------------------------------------------------------------------------- Managing Your Investment 6 -------------------------------------------------------------------------------- ADDITIONAL INFORMATION -------------------------------------------------------------------------------- Management 7 -------------------------------------------------------------------------------- More About The Fund 8 -------------------------------------------------------------------------------- Financial Highlights 9 -------------------------------------------------------------------------------- FOR MORE INFORMATION Back Cover -------------------------------------------------------------------------------- Fund Summary INTRODUCTION This section of the prospectus describes the objective of the First American Large Cap Select Fund, summarizes the main investment strategies used by the fund in trying to achieve its objective, and highlights the risks involved with these strategies. It also provides you with information about the performance, fees, and expenses of the fund. AN INVESTMENT IN THE FUND IS NOT A DEPOSIT OF U.S. BANK NATIONAL ASSOCIATION AND IS NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. THIS PROSPECTUS AND THE RELATED STATEMENT OF ADDITIONAL INFORMATION DO NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY SHARES IN THE FUND, NOR SHALL ANY SUCH SHARES BE OFFERED OR SOLD TO ANY PERSON IN ANY JURISDICTION IN WHICH AN OFFER, SOLICITATION, PURCHASE, OR SALE WOULD BE UNLAWFUL UNDER THE SECURITIES LAWS OF SUCH JURISDICTION. 1 PROSPECTUS - First American Large Cap Select Fund Class S Shares Fund Summary LARGE CAP SELECT FUND -------------------------------------------------------------------------------- OBJECTIVE Large Cap Select Fund's objective is capital appreciation. -------------------------------------------------------------------------------- MAIN INVESTMENT STRATEGIES Under normal market conditions, Large Cap Select invests primarily (at least 80% of net assets, plus the amount of any borrowings for investment purposes) in common stocks of large-capitalization companies, defined as companies that have market capitalizations within the range of market capitalizations of companies constituting the S&P 500 Index. The S&P 500 Index is a market-value weighted index consisting of 500 stocks chosen for market size, liquidity, and industry group representation. As of the date of this prospectus, market capitalizations of companies in the S&P 500 Index ranged from approximately $209 million to $292 billion. The advisor will select companies based on a combination of both value and growth objectives, seeking companies it believes offers market opportunity. In selecting value stocks, the fund's advisor invests in securities that it believes: o are undervalued relative to other securities in the same industry or market, o exhibit good or improving fundamentals, o exhibit an identifiable catalyst that could close the gap between market value and fair value over the next one or two years. In selecting growth stocks, the fund's advisor will select companies that it believes exhibit the potential for superior growth based on factors such as: o above average growth in revenue and earnings, o strong competitive position. o strong management. o sound financial condition. Up to 25% of the fund's total assets may be invested in securities of foreign issuers which are either listed on the United States stock exchange or represented by American Depository Receipts. These securities may be of the same type as the fund's permissible investments in United States domestic securities. -------------------------------------------------------------------------------- MAIN RISKS The value of your investment in this fund will change daily, which means you could lose money. The main risks of investing in this fund include: RISKS OF COMMON STOCKS. Stocks may decline significantly in price over short or extended periods of time. Price changes may occur in the market as a whole, or they may occur in only a particular company, industry, or sector of the market. In addition, growth stocks and/or large-capitalization stocks may underperform the market as a whole. FOREIGN SECURITY RISK. Securities of foreign issuers, even when dollar-denominated and publicly traded in the United States, may involve risks not associated with the securities of domestic issuers, including the risks of adverse currency fluctuations and of political or social instability, or diplomatic developments that could adversely affect the securities. RISKS OF SECURITIES LENDING. To generate additional income, the fund may lend securities representing up to one-third of the value of its total assets to broker-dealers, banks, and other institutions. When the fund engages in this practice, it is subject to the risk that the other party to a securities lending agreement will default on its obligations. RISKS OF DERIVATIVE INSTRUMENTS. The fund will suffer a loss in connection with its use of derivatives such as options, futures contracts, and options on futures contracts if securities prices do not move in the direction anticipated by the fund's advisor when entering into the derivative instruments. -------------------------------------------------------------------------------- FUND PERFORMANCE Because this fund has not been offered for a full calendar year, no performance information is presented. 2 PROSPECTUS - First American Large Cap Select Fund Class S Shares Fund Summary LARGE CAP SELECT FUND CONTINUED -------------------------------------------------------------------------------- FEES AND EXPENSES The fund does not impose any sales charges (loads) or other fees when you buy, sell, or exchange shares. However, when you hold shares of the fund you indirectly pay a portion of the fund's operating expenses. These expenses are deducted from fund assets. Annual fund operating expenses are based on the fund's most recently completed fiscal year.(1)
--------------------------------------------------------------------------------------------------- SHAREHOLDER FEES (fees paid directly from your investment) --------------------------------------------------------------------------------------------------- MAXIMUM SALES CHARGE (LOAD) IMPOSED ON PURCHASES NONE (AS A PERCENTAGE OF OFFERING PRICE) MAXIMUM DEFERRED SALES CHARGE (LOAD) NONE (AS A PERCENTAGE OF ORIGINAL PURCHASE PRICE OR REDEMPTION PROCEEDS, WHICHEVER IS LESS) ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets) (AS A PERCENTAGE OF AVERAGE NET ASSETS) --------------------------------------------------------------------------------------------------- Management Fees 0.65% Distribution and Service (12b-1) Fees None Other Expenses(2) Shareholder Servicing Fee % Miscellaneous % Total Annual Fund Operating Expenses % ---------------------------------------------------------------------------------------------------
(1)THE ADVISOR INTENDS TO VOLUNTARILY WAIVE FEES DURING THE CURRENT FISCAL YEAR SO THAT TOTAL OPERATING EXPENSES, AFTER WAIVERS, DO NOT EXCEED %. FEE WAIVERS MAY BE DISCONTINUED AT ANY TIME.
WAIVER OF FUND EXPENSES ( )% NET EXPENSES (AFTER WAIVERS) %
(2)"Other Expenses" are estimated for the current fiscal year. -------------------------------------------------------------------------------- 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:
--------------------------------------------------------------------------------------------------- 1 year $ 3 years $
3 PROSPECTUS - First American Large Cap Select Fund Class S Shares Policies & Services Buying and Selling Shares -------------------------------------------------------------------------------- MULTIPLE CLASS INFORMATION The fund offers five different share classes. This prospectus offers Class S shares. Class A, Class B, Class C, and Class Y shares are available through separate prospectuses. There are differences among the fees and expenses for each of the five classes. These differences result from their separate arrangements for shareholder and distribution services, not from any difference in amounts charged by the investment advisor for core investment advisory services. Accordingly, the core investment advisory expenses do not vary by class. Different fees and expenses will affect performance. Not everyone is eligible to buy every class. After determining which classes you are eligible to buy, decide which class best suits your needs. The following describes the features of each class: CLASS A SHARES. Class A shares have: o a front-end sales charge determined by the amount of your purchase. o annual shareholder servicing (12b-1) fees of 0.25%. o reduced sales charges for larger purchases. CLASS B SHARES. Class B shares have: o no front-end sales charge. o a contingent deferred sales charge (CDSC) if you redeem your shares within six years of purchase. o annual distribution and shareholder servicing (12b-1) fees of 1.00%. o automatic conversion to Class A shares eight years after purchase which reduces future annual expenses since Class A shares have lower annual expenses than Class B shares. CLASS C SHARES. Class C shares have: o a front-end sales charge of 1.00%. o a 1.00% contingent deferred sales charge (CDSC) if you redeem your shares within 18 months of purchase. o annual distribution and shareholder servicing (12b-1) fees of 1.00%. CLASS S SHARES. Class S shares: o are sold through banks and other financial institutions that have entered into sales agreements with the funds' distributor. o are available to certain accounts for which the financial institution acts in a fiduciary, agency, or custodial capacity, such as certain trust accounts and investment advisory accounts. o are held in an omnibus account with the transfer agent. o do not have a front-end sales charge or a deferred sales charge. o have an annual shareholder servicing fee of 0.25% and your investment professional or financial institution may receive a commission of up to 1.25% on your purchase. See "Fund Summaries - Fees and Expenses" and "Compensation Paid to Financial Institutions." CLASS Y SHARES. Class Y shares: o are sold through banks and other financial institutions that have entered into sales agreements with the funds' distributor. o are available to certain accounts for which the financial institution acts in a fiduciary, agency, or custodial capacity, such as certain trust accounts and investment advisory accounts. o are held in an omnibus account with the transfer agent. o do not have a front-end sales charge, deferred sales charge, or a distribution fee. However, your investment professional or financial institution may receive a commission of up to 1.25% on your purchase. -------------------------------------------------------------------------------- CALCULATING YOUR SHARE PRICE Your purchase price will be equal to the fund's net asset value (NAV) per share, which is generally calculated as of the close of regular trading on the New York Stock Exchange (usually 3:00 p.m. Central time) every day the exchange is open. The 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. If market prices are not readily available for an investment or if the advisor believes they are unreliable, fair value prices may be determined in good faith using methods approved by the fund's board of directors. -------------------------------------------------------------------------------- HOW TO BUY AND SELL SHARES You may purchase or sell shares by calling your financial institution. When purchasing shares, payment must be made by wire transfer, which can be arranged by your financial institution. Shares may be purchased or sold on any day when the New York Stock Exchange is open. U.S. BANK NATIONAL ASSOCIATION ABA NUMBER: 0420-00013 ACCOUNT NUMBER: 112-952-137 CREDIT TO: FIRST AMERICAN (NAME OF FUND, INVESTOR NAME, AND INVESTOR ACCOUNT #) Purchase orders and redemption requests must be received by your financial institution by the time specified by the institution to be assured same day processing. In order for shares to be purchased at that day's price, the fund must receive your purchase order by 3:00 p.m. Central time. In order for shares to be sold at that day's price, the fund must receive your redemption request by 3:00 p.m. Central time. It is the responsibility of your financial institution to promptly transmit orders to the fund. Purchase orders and redemption requests may be restricted in the event of an early or unscheduled close of the New York Stock Exchange. 4 PROSPECTUS - First American Large Cap Select Fund Class S Shares Policies & Services Buying and Selling Shares CONTINUED If the fund receives your redemption request by 3:00 p.m. Central time, payment of your redemption proceeds will ordinarily be made by wire on the next business day. It is possible, however, that payment could be delayed by up to seven days. To minimize the effect of large redemption requests, the fund reserves the right to fulfill these redemption requests by distributing readily marketable securities in the fund's portfolio, rather than paying you in cash. See "Redemption In Kind" below. -------------------------------------------------------------------------------- COMPENSATION PAID TO FINANCIAL INSTITUTIONS The fund pays the distributor an annual shareholder servicing fee equal to 0.25% of the fund's average daily net assets to compensate the distributor for providing services to shareholders. The distributor may use this fee to compensate your financial institution for providing ongoing services to your account. The advisor, the administrator, or the distributor may pay additional fees to financial institutions, using their own assets, in exchange for sales and/or administrative services performed on behalf of the financial institution's customers. -------------------------------------------------------------------------------- HOW TO EXCHANGE SHARES If your investment goals or your financial needs change, you may exchange your shares for Class S shares of another First American fund. Exchanges are made at the net asset value per share of each fund at the time of the exchange. There is no fee to exchange shares. If you are no longer eligible to hold Class S shares, for example, if you decide to discontinue your fiduciary, agency, or custodian account, you may exchange your shares for Class A shares at net asset value. To exchange your shares, call your financial institution. In order for your shares to be exchanged the same day, you must call your financial institution by the time specified by the 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 institution 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 at any time. You will be notified of any changes. The funds have the right to limit exchanges to four times per year. -------------------------------------------------------------------------------- REDEMPTION IN KIND Generally, proceeds from redemption requests will be paid in cash. However, to minimize the effect of large redemption requests on the fund and its remaining shareholders, the fund reserves the right to pay part or all of the proceeds from a redemption request in a proportionate share of readily marketable securities in the fund instead of cash. In selecting securities for a redemption in kind, the advisor will consider the best interests of the fund and the remaining fund shareholders, and will value these securities in accordance with the pricing methods employed to calculate the 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. 5 PROSPECTUS - First American Large Cap Select Fund Class S Shares Policies & Services Managing Your Investment -------------------------------------------------------------------------------- STAYING INFORMED SHAREHOLDER REPORTS. Shareholder reports are mailed twice a year, in November and May. They include financial statements and performance information, and, on an annual basis, a message from your portfolio managers and the auditors' report. In an attempt to reduce shareholder costs and help eliminate duplication, the 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 are mailed following each purchase or sale of fund shares. -------------------------------------------------------------------------------- DIVIDENDS AND DISTRIBUTIONS Dividends from the fund's net investment income are declared and paid monthly. Any capital gains are distributed at least once each year. On the ex-dividend date for a distribution, the 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 paying the distribution, unless you request that distributions be reinvested in another First American fund or paid in cash. This request may be made on your new account form or by contacting your financial institution. If you request that your distributions be paid in cash but those distributions cannot be delivered because of an incorrect mailing address, the undelivered distributions and all future distributions will be reinvested in fund shares at the current NAV. -------------------------------------------------------------------------------- TAXES Some of the tax consequences of investing in the fund are discussed below. More information about taxes is in the Statement of Additional Information. However, because everyone's tax situation is unique, always consult your tax professional about federal, state, and local tax consequences. TAXES ON DISTRIBUTIONS. The fund pays its shareholders dividends from its net investment income and any net capital gains that it has realized. For most investors, fund dividends and distributions are considered taxable whether they are reinvested or taken in cash (unless your investment is in an IRA or other tax-advantaged account). Dividends from the fund's net investment income and short-term capital gains are taxable as ordinary income. Distributions of the fund's long-term capital gains are taxable as long-term gains, regardless of how long you have held your shares. Because of its investment objectives and strategies, distributions for the fund are expected to consist primarily of capital gains. TAXES ON TRANSACTIONS. The sale of fund shares, or the exchange of the 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. If in redemption of his or her shares a shareholder receives a distribution of readily marketable securities instead of cash, the shareholder will be treated as receiving an amount equal to the fair market value of the securities at the time of the distribution for purposes of determining capital gain or loss on the redemption, and will also acquire a basis in the shares for federal income tax purposes equal to their fair market value. The exchange of one class of shares for another class of shares in the same fund will not be taxable. 6 PROSPECTUS - First American Large Cap Select Fund Class S Shares Additional Information Management U.S. Bancorp Asset Management, Inc., is the fund's investment advisor. U.S. Bancorp Asset Management provides investment management services to individuals and institutions, including corporations, foundations, pensions, and retirement plans. As of September 30, 2002, U.S. Bancorp Asset Management had more than $111 billion in assets under management, including investment company assets of more than $51 billion. As investment advisor, U.S. Bancorp Asset Management manages the fund's business and investment activities, subject to the authority of the fund's board of directors. The fund pays the investment advisor a monthly fee for providing investment advisory services. The table below reflects the fund's contractual investment advisory fee for the current fiscal year. Advisory fee as a % of average daily net assets -------------------------------------------------------------------------------- LARGE CAP SELECT FUND 0.65% -------------------------------------------------------------------------------- DIRECT CORRESPONDENCE TO: FIRST AMERICAN FUNDS P.O. BOX 1330 MINNEAPOLIS, MN 55440-1330 INVESTMENT ADVISOR U.S. BANCORP ASSET MANAGEMENT, INC. 800 NICOLLET MALL MINNEAPOLIS, MN 55402 DISTRIBUTOR QUASAR DISTRIBUTORS, LLC 615 E. MICHIGAN STREET MILWAUKEE, WI 53202 ADDITIONAL COMPENSATION U.S. Bancorp Asset Management and other affiliates of U.S. Bancorp may act as fiduciary with respect to plans subject to the Employee Retirement Income Security Act of 1974 (ERISA) and other trust and agency accounts that invest in the funds. As described above, U.S. Bancorp Asset Management receives compensation for acting as the fund's investment advisor. U.S. Bancorp Asset Management and its affiliates also receive compensation in connection with the following: CUSTODY SERVICES. U.S. Bank National Association (U.S. Bank) provides or compensates others to provide custody services to the fund. U.S. Bank is paid monthly fees equal, on an annual basis, to 0.01% of the fund's average daily net assets. In addition, U.S. Bank is reimbursed for its out-of-pocket expenses incurred while providing custody services to the fund. ADMINISTRATION SERVICES. U.S. Bancorp Asset Management and its affiliate, U.S. Bancorp Fund Services, LLC (Co-Administrators), provide or compensate others to provide administrative services to the First American family of funds. These services include general administrative and accounting services, transfer agency and dividend disbursing services, blue sky services, and shareholder services. With respect to the First American open-end mutual funds, the Co-Administrators receive total fees, on an annual basis of up to 0.25% of the aggregate average daily net assets of First American Investment Funds, Inc., First American Strategy Funds, Inc., and First American Insurance Portfolios, Inc., and up to 0.20% of the aggregate average daily net assets of First American Funds, Inc. The funds also pay the Co-Administrators fees based upon the number of funds and shareholder accounts maintained. In addition, the Co-Administrators are reimbursed for their out-of-pocket expenses incurred while providing administration services to the funds. DISTRIBUTION SERVICES. Quasar Distributors, LLC, an affiliate of U.S. Bancorp Asset Management, serves as distributor of the fund and receives shareholder servicing fees, and out of pocket expenses incurred while providing distribution and other sub-administrative services for the fund. SECURITIES LENDING SERVICES. In connection with lending its portfolio securities, the fund pays administrative and custodial fees to U.S. Bancorp Asset Management which are equal to 40% of the fund's income from these securities lending transactions. BROKERAGE TRANSACTIONS. When purchasing and selling portfolio securities for the fund, the fund's investment advisor may place trades through its affiliates, U.S. Bancorp Investments, Inc. and U.S. Bancorp Piper Jaffray Inc., which will earn commissions on these transactions. PORTFOLIO MANAGEMENT The fund is managed by a team of persons associated with U.S. Bancorp Asset Management. 7 PROSPECTUS - First American Large Cap Select Fund Class S Shares Additional Information More About The Fund -------------------------------------------------------------------------------- OBJECTIVE The fund's objective, which is described in the "Fund Summary" section, may be changed without shareholder approval. If the fund's objective changes, you will be notified at least 60 days in advance. Please remember: There is no guarantee that the fund will achieve its objective. -------------------------------------------------------------------------------- INVESTMENT STRATEGIES The fund's main investment strategies are discussed in the "Fund Summary" section. These are the strategies that the fund's investment advisor believes are most likely to be important in trying to achieve the fund's objective. You should be aware that the fund may also use strategies and invest in securities that are not described in this prospectus, but that are described in the Statement of Additional Information (SAI). For a copy of the SAI, call Investor Services at 800 677-FUND. TEMPORARY INVESTMENTS. In an attempt to respond to adverse market, economic, political, or other conditions, the fund may temporarily invest without limit in cash and in U.S. dollar-denominated high-quality money market instruments and other short-term securities, including money market funds advised by the fund's advisor. Being invested in these securities may keep the 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. -------------------------------------------------------------------------------- RISKS The main risks of investing in the fund are summarized in the "Fund Summary" section. More information about fund risks is presented below. MARKET RISK. All stocks are subject to price movements due to changes in general economic conditions, changes in the level of prevailing interest rates, changes in investor perceptions of the market, or the outlook for overall corporate profitability. SECTOR RISK. The stocks of companies within specific industries or sectors of the economy can periodically perform differently than the overall stock market. This can be due to changes in such things as the regulatory or competitive environment or to changes in investor perceptions of a particular industry or sector. COMPANY RISK. Individual stocks can perform differently than the overall market. This may be a result of specific factors such as changes in corporate profitability due to the success or failure of specific products or management strategies, or it may be due to changes in investor perceptions regarding a company. FOREIGN SECURITY RISK. The fund may invest up to 25% of its total assets in securities of foreign issuers which are either listed on a United States stock exchange or represented by American Depositary Receipts. 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. For certain foreign countries, political or social instability, or diplomatic developments could adversely affect the securities. There is also the risk of loss due to governmental actions such as a change in tax statutes or the modification of individual property rights. In addition, individual foreign economies may differ favorably or unfavorably from the U.S. economy. RISKS OF ACTIVE MANAGEMENT. The fund is actively managed and its performance therefore will reflect in part the advisor's ability to make investment decisions which are suited to achieving the fund's investment objectives. Due to its active management, the fund could underperform other mutual funds with similar investment objectives. RISKS OF SECURITIES LENDING. When the fund loans its portfolio securities, it will receive collateral equal to at least 100% of the value of the loaned securities. Nevertheless, the fund risks a delay in the recovery of the loaned securities, or even the loss of rights in the collateral deposited by the borrower if the borrower should fail financially. To reduce these risks, the fund enters into loan arrangements only with institutions which the fund's advisor has determined are creditworthy under guidelines established by the fund's board of directors. RISKS OF DERIVATIVE INSTRUMENTS. The use of derivative instruments exposes a fund to additional risks and transaction costs. Risks inherent in the use of derivative instruments include: the risk that securities prices will not move in the direction that the advisor anticipates; an imperfect correlation between the price of derivative instruments and movements in the prices of the securities being hedged; the possible absence of a liquid secondary market for any particular instrument and possible exchange imposed price fluctuation limits, either of which may make it difficult or impossible to close out a position when desired; leverage risk, which is the risk that adverse price movements in an instrument can result in a loss substantially greater than the fund's initial investment in that instrument; and, particularly, in the case of privately negotiated instruments, the risk that the counterparty will fail to perform its obligations, which could leave the fund worse off than if it had not entered into the position. If the fund uses derivative instruments and the advisor's judgment proves incorrect, the fund's performance could be worse than if it had not used these instruments. 8 PROSPECTUS - First American Large Cap Select Fund Class S Shares Additional Information Financial Highlights -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS Because the fund was not offered prior to the date of this prospectus, financial highlights are not available. 9 PROSPECTUS - First American Large Cap Select Fund Class S Shares -------------------------------------------------------------------------------- FOR MORE INFORMATION More information about the fund is available in the fund's Statement of Additional Information and annual and semiannual reports, and on the First American funds' Internet Web site. -------------------------------------------------------------------------------- FIRST AMERICAN FUNDS WEB SITE Information about the First American funds may be viewed on the funds' Internet Web site at http://www.firstamericanfunds.com. -------------------------------------------------------------------------------- STATEMENT OF ADDITIONAL INFORMATION (SAI) The SAI provides more details about the fund and its policies. A current SAI is on file with the Securities and Exchange Commission (SEC) and is incorporated into this prospectus by reference (which means that it is legally considered part of this prospectus). -------------------------------------------------------------------------------- ANNUAL AND SEMIANNUAL REPORTS Additional information about the fund's investments is available in the fund's annual and semiannual reports to shareholders. In the fund's annual report, you will find a discussion of the market conditions and investment strategies that significantly affected the fund's performance during its last fiscal year. You can obtain a free copy of the fund's SAI and/or free copies of the fund's most recent annual or semiannual reports by calling Investor Services at 800 677-FUND. The material you request will be sent by first-class mail or other means designed to ensure equally prompt delivery, within three business days of receipt of the request. You can also obtain copies of this information, after paying a duplicating fee, by electronic request at the following email address: publicinfo@sec.gov, or by writing the SEC's Public Reference Section, Washington, D.C. 20549-0102. For more information, call 1-202-942-8090. Information about the fund is also available on the Internet. Text-only versions of fund documents can be viewed online or downloaded from the EDGAR Database on the SEC's Internet site at http://www.sec.gov. FIRST AMERICAN FUNDS P.O. Box 1330, Minneapolis, Mn 55440-1330 U.S. Bancorp Asset Management, Inc., Serves as the investment advisor to the First American Funds. First American Funds are distributed by Quasar Distributors, LLC, which is located in Milwaukee, WI 53202, and is an affiliate of the investment advisor. Sec File Number: 811-05309 [LOGO] FIRST AMERICAN FUNDS(TM) [LOGO] FIRST AMERICAN FUNDS(TM) JANUARY 31, 2003 PROSPECTUS FIRST AMERICAN INVESTMENT FUNDS, INC. ASSET CLASS - Stock Funds LARGE CAP SELECT FUND Class Y Shares Large Cap Select Fund As with all mutual funds, the Securities and Exchange Commission has not approved or disapproved the shares of this fund, or determined if the information in this prospectus is accurate or complete. Any statement to the contrary is a criminal offense. Table of CONTENTS FUND SUMMARY -------------------------------------------------------------------------------- Large Cap Select Fund 2 -------------------------------------------------------------------------------- POLICIES & SERVICES -------------------------------------------------------------------------------- Buying and Selling Shares 4 -------------------------------------------------------------------------------- Managing Your Investment 6 -------------------------------------------------------------------------------- ADDITIONAL INFORMATION -------------------------------------------------------------------------------- Management 7 -------------------------------------------------------------------------------- More About The Fund 8 -------------------------------------------------------------------------------- Financial Highlights 9 -------------------------------------------------------------------------------- FOR MORE INFORMATION Back Cover -------------------------------------------------------------------------------- Fund Summary INTRODUCTION This section of the prospectus describes the objective of the First American Large Cap Select Fund, summarizes the main investment strategies used by the fund in trying to achieve its objective, and highlights the risks involved with these strategies. It also provides you with information about the performance, fees, and expenses of the fund. AN INVESTMENT IN THE FUND IS NOT A DEPOSIT OF U.S. BANK NATIONAL ASSOCIATION AND IS NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. THIS PROSPECTUS AND THE RELATED STATEMENT OF ADDITIONAL INFORMATION DO NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY SHARES IN THE FUND, NOR SHALL ANY SUCH SHARES BE OFFERED OR SOLD TO ANY PERSON IN ANY JURISDICTION IN WHICH AN OFFER, SOLICITATION, PURCHASE, OR SALE WOULD BE UNLAWFUL UNDER THE SECURITIES LAWS OF SUCH JURISDICTION. 1 PROSPECTUS - First American Large Cap Select Fund Class Y Shares Fund Summary LARGE CAP SELECT FUND -------------------------------------------------------------------------------- OBJECTIVE Large Cap Select Fund's objective is capital appreciation. -------------------------------------------------------------------------------- MAIN INVESTMENT STRATEGIES Under normal market conditions, Large Cap Select invests primarily (at least 80% of net assets, plus the amount of any borrowings for investment purposes) in common stocks of large-capitalization companies, defined as companies that have market capitalizations within the range of market capitalizations of companies constituting the S&P 500 Index. The S&P 500 Index is a market-value weighted index consisting of 500 stocks chosen for market size, liquidity, and industry group representation. As of the date of this prospectus, market capitalizations of companies in the S&P 500 Index ranged from approximately $209 million to $292 billion. The advisor will select companies based on a combination of both value and growth objectives, seeking companies it believes offers market opportunity. In selecting value stocks, the fund's advisor invests in securities that it believes: o are undervalued relative to other securities in the same industry or market, o exhibit good or improving fundamentals, o exhibit an identifiable catalyst that could close the gap between market value and fair value over the next one or two years. In selecting growth stocks, the fund's advisor will select companies that it believes exhibit the potential for superior growth based on factors such as: o above average growth in revenue and earnings, o strong competitive position. o strong management. o sound financial condition. Up to 25% of the fund's total assets may be invested in securities of foreign issuers which are either listed on the United States stock exchange or represented by American Depository Receipts. These securities may be of the same type as the fund's permissible investments in United States domestic securities. -------------------------------------------------------------------------------- MAIN RISKS The value of your investment in this fund will change daily, which means you could lose money. The main risks of investing in this fund include: RISKS OF COMMON STOCKS. Stocks may decline significantly in price over short or extended periods of time. Price changes may occur in the market as a whole, or they may occur in only a particular company, industry, or sector of the market. In addition, growth stocks and/or large-capitalization stocks may underperform the market as a whole. FOREIGN SECURITY RISK. Securities of foreign issuers, even when dollar-denominated and publicly traded in the United States, may involve risks not associated with the securities of domestic issuers, including the risks of adverse currency fluctuations and of political or social instability, or diplomatic developments that could adversely affect the securities. RISKS OF SECURITIES LENDING. To generate additional income, the fund may lend securities representing up to one-third of the value of its total assets to broker-dealers, banks, and other institutions. When the fund engages in this practice, it is subject to the risk that the other party to a securities lending agreement will default on its obligations. RISKS OF DERIVATIVE INSTRUMENTS. The fund will suffer a loss in connection with its use of derivatives such as options, futures contracts, and options on futures contracts if securities prices do not move in the direction anticipated by the fund's advisor when entering into the derivative instruments. -------------------------------------------------------------------------------- FUND PERFORMANCE Because this fund has not been offered for a full calendar year, no performance information is presented. 2 PROSPECTUS - First American Large Cap Select Fund Class Y Shares Fund Summary LARGE CAP SELECT FUND CONTINUED -------------------------------------------------------------------------------- FEES AND EXPENSES The fund does not impose any sales charges (loads) or other fees when you buy, sell, or exchange shares. However, when you hold shares of the fund you indirectly pay a portion of the fund's operating expenses. These expenses are deducted from fund assets. Annual fund operating expenses are based on the fund's most recently completed fiscal year.(1)
------------------------------------------------------------------------------------------------------ SHAREHOLDER FEES (fees paid directly from your investment) ------------------------------------------------------------------------------------------------------ MAXIMUM SALES CHARGE (LOAD) IMPOSED ON PURCHASES NONE (AS A PERCENTAGE OF OFFERING PRICE) MAXIMUM DEFERRED SALES CHARGE (LOAD) NONE (AS A PERCENTAGE OF ORIGINAL PURCHASE PRICE OR REDEMPTION PROCEEDS, WHICHEVER IS LESS) ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets) (AS A PERCENTAGE OF AVERAGE NET ASSETS) ------------------------------------------------------------------------------------------------------ Management Fees 0.65% Distribution and Service (12b-1) Fees None Other Expenses(2) % Total Annual Fund Operating Expenses % ------------------------------------------------------------------------------------------------------
(1)THE ADVISOR INTENDS TO VOLUNTARILY WAIVE FEES DURING THE CURRENT FISCAL YEAR SO THAT TOTAL OPERATING EXPENSES, AFTER WAIVERS, DO NOT EXCEED %. FEE WAIVERS MAY BE DISCONTINUED AT ANY TIME. WAIVER OF FUND EXPENSES ( )% NET EXPENSES (AFTER WAIVERS) %
(2)"Other Expenses" are estimated for the current fiscal year. -------------------------------------------------------------------------------- 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:
------------------------------------------------------------------------------------------------------ 1 year $ 3 years $
3 PROSPECTUS - First American Large Cap Select Fund Class Y Shares Policies & Services Buying and Selling Shares -------------------------------------------------------------------------------- MULTIPLE CLASS INFORMATION The fund offers five different share classes. This prospectus offers Class Y shares. Class A, Class B, Class C, and Class S shares are available through separate prospectuses. There are differences among the fees and expenses for each of the five classes. These differences result from their separate arrangements for shareholder and distribution services, not from any difference in amounts charged by the investment advisor for core investment advisory services. Accordingly, the core investment advisory expenses do not vary by class. Different fees and expenses will affect performance. Not everyone is eligible to buy every class. After determining which classes you are eligible to buy, decide which class best suits your needs. The following describes the features of each class: CLASS A SHARES. Class A shares have: o a front-end sales charge determined by the amount of your purchase. o annual shareholder servicing (12b-1) fees of 0.25%. o reduced sales charges for larger purchases. CLASS B SHARES. Class B shares have: o no front-end sales charge. o a contingent deferred sales charge (CDSC) if you redeem your shares within six years of purchase. o annual distribution and shareholder servicing (12b-1) fees of 1.00%. o automatic conversion to Class A shares eight years after purchase which reduces future annual expenses since Class A shares have lower annual expenses than Class B shares. CLASS C SHARES. Class C shares have: o a front-end sales charge of 1.00%. o a 1.00% contingent deferred sales charge (CDSC) if you redeem your shares within 18 months of purchase. o annual distribution and shareholder servicing (12b-1) fees of 1.00%. CLASS S SHARES. Class S shares: o are sold through banks and other financial institutions that have entered into sales agreements with the funds' distributor. o are available to certain accounts for which the financial institution acts in a fiduciary, agency, or custodial capacity, such as certain trust accounts and investment advisory accounts. o are held in an omnibus account with the transfer agent. o do not have a front-end sales charge or a deferred sales charge. o have an annual shareholder servicing fee of 0.25% and your investment professional or financial institution may receive a commission of up to 1.25% on your purchase. CLASS Y SHARES. Class Y shares: o are sold through banks and other financial institutions that have entered into sales agreements with the funds' distributor. o are available to certain accounts for which the financial institution acts in a fiduciary, agency, or custodial capacity, such as certain trust accounts and investment advisory accounts. o are held in an omnibus account with the transfer agent. o do not have a front-end sales charge, deferred sales charge, or a distribution fee. However, your investment professional or financial institution may receive a commission of up to 1.25% on your purchase. -------------------------------------------------------------------------------- CALCULATING YOUR SHARE PRICE Your purchase price will be equal to the fund's net asset value (NAV) per share, which is generally calculated as of the close of regular trading on the New York Stock Exchange (usually 3:00 p.m. Central time) every day the exchange is open. The 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. If market prices are not readily available for an investment or if the advisor believes they are unreliable, fair value prices may be determined in good faith using methods approved by the fund's board of directors. -------------------------------------------------------------------------------- HOW TO BUY AND SELL SHARES You may purchase or sell shares by calling your financial institution. When purchasing shares, payment must be made by wire transfer, which can be arranged by your financial institution. Shares may be purchased or sold on any day when the New York Stock Exchange is open. U.S. BANK NATIONAL ASSOCIATION ABA NUMBER: 0420-00013 ACCOUNT NUMBER: 112-952-137 CREDIT TO: FIRST AMERICAN (NAME OF FUND, INVESTOR NAME, AND INVESTOR ACCOUNT #) Purchase orders and redemption requests must be received by your financial institution by the time specified by the institution to be assured same day processing. In order for shares to be purchased at that day's price, the fund must receive your purchase order by 3:00 p.m. Central time. In order for shares to be sold at that day's price, the fund must receive your redemption request by 3:00 p.m. Central time. It is the responsibility of your financial institution to promptly transmit orders to the fund. Purchase orders and redemption requests may be restricted in the event of an early or unscheduled close of the New York Stock Exchange. If the fund receives your redemption request by 3:00 p.m. Central time, payment of your redemption proceeds will 4 PROSPECTUS - First American Large Cap Select Fund Class Y Shares Policies & Services Buying and Selling Shares CONTINUED ordinarily be made by wire on the next business day. It is possible, however, that payment could be delayed by up to seven days. To minimize the effect of large redemption requests, the fund reserves the right to fulfill these redemption requests by distributing readily marketable securities in the fund's portfolio, rather than paying you in cash. See "Redemption In Kind" below. -------------------------------------------------------------------------------- HOW TO EXCHANGE SHARES If your investment goals or your financial needs change, you may exchange your shares for Class Y shares of another First American fund. Exchanges are made at the net asset value per share of each fund at the time of the exchange. There is no fee to exchange shares. If you are no longer eligible to hold Class Y shares, for example, if you decide to discontinue your fiduciary, agency, or custodian account, you may exchange your shares for Class A shares at net asset value. Class A shares have higher expenses than Class Y shares. To exchange your shares, call your financial institution. In order for your shares to be exchanged the same day, you must call your financial institution by the time specified by the 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 institution 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 at any time. You will be notified of any changes. The funds have the right to limit exchanges to four times per year. -------------------------------------------------------------------------------- REDEMPTION IN KIND Generally, proceeds from redemption requests will be paid in cash. However, to minimize the effect of large redemption requests on the fund and its remaining shareholders, the fund reserves the right to pay part or all of the proceeds from a redemption request in a proportionate share of readily marketable securities in the fund instead of cash. In selecting securities for a redemption in kind, the advisor will consider the best interests of the fund and the remaining fund shareholders, and will value these securities in accordance with the pricing methods employed to calculate the 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. 5 PROSPECTUS - First American Large Cap Select Fund Class Y Shares Policies & Services Managing Your Investment -------------------------------------------------------------------------------- STAYING INFORMED SHAREHOLDER REPORTS. Shareholder reports are mailed twice a year, in November and May. They include financial statements and performance information, and, on an annual basis, a message from your portfolio managers and the auditors' report. In an attempt to reduce shareholder costs and help eliminate duplication, the 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 are mailed following each purchase or sale of fund shares. -------------------------------------------------------------------------------- DIVIDENDS AND DISTRIBUTIONS Dividends from the fund's net investment income are declared and paid monthly. Any capital gains are distributed at least once each year. On the ex-dividend date for a distribution, the 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 paying the distribution, unless you request that distributions be reinvested in another First American fund or paid in cash. This request may be made on your new account form or by contacting your financial institution. If you request that your distributions be paid in cash but those distributions cannot be delivered because of an incorrect mailing address, the undelivered distributions and all future distributions will be reinvested in fund shares at the current NAV. -------------------------------------------------------------------------------- TAXES Some of the tax consequences of investing in the fund are discussed below. More information about taxes is in the Statement of Additional Information. However, because everyone's tax situation is unique, always consult your tax professional about federal, state, and local tax consequences. TAXES ON DISTRIBUTIONS. The fund pays its shareholders dividends from its net investment income and any net capital gains that it has realized. For most investors, fund dividends and distributions are considered taxable whether they are reinvested or taken in cash (unless your investment is in an IRA or other tax-advantaged account). Dividends from the fund's net investment income and short-term capital gains are taxable as ordinary income. Distributions of the fund's long-term capital gains are taxable as long-term gains, regardless of how long you have held your shares. Because of its investment objectives and strategies, distributions for the fund are expected to consist primarily of capital gains. TAXES ON TRANSACTIONS. The sale of fund shares, or the exchange of the 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. If in redemption of his or her shares a shareholder receives a distribution of readily marketable securities instead of cash, the shareholder will be treated as receiving an amount equal to the fair market value of the securities at the time of the distribution for purposes of determining capital gain or loss on the redemption, and will also acquire a basis in the shares for federal income tax purposes equal to their fair market value. The exchange of one class of shares for another class of shares in the same fund will not be taxable. 6 PROSPECTUS - First American Large Cap Select Fund Class Y Shares Additional Information Management U.S. Bancorp Asset Management, Inc., is the fund's investment advisor. U.S. Bancorp Asset Management provides investment management services to individuals and institutions, including corporations, foundations, pensions, and retirement plans. As of September 30, 2002, U.S. Bancorp Asset Management had more than $111 billion in assets under management, including investment company assets of more than $51 billion. As investment advisor, U.S. Bancorp Asset Management manages the fund's business and investment activities, subject to the authority of the fund's board of directors. The fund pays the investment advisor a monthly fee for providing investment advisory services. The table below reflects the fund's contractual investment advisory fee for the current fiscal year. Advisory fee as a % of average daily net assets -------------------------------------------------------------------------------- LARGE CAP SELECT FUND 0.65% -------------------------------------------------------------------------------- DIRECT CORRESPONDENCE TO: FIRST AMERICAN FUNDS P.O. BOX 1330 MINNEAPOLIS, MN 55440-1330 INVESTMENT ADVISOR U.S. BANCORP ASSET MANAGEMENT, INC. 800 NICOLLET MALL MINNEAPOLIS, MN 55402 DISTRIBUTOR QUASAR DISTRIBUTORS, LLC 615 E. MICHIGAN STREET MILWAUKEE, WI 53202 ADDITIONAL COMPENSATION U.S. Bancorp Asset Management and other affiliates of U.S. Bancorp may act as fiduciary with respect to plans subject to the Employee Retirement Income Security Act of 1974 (ERISA) and other trust and agency accounts that invest in the funds. As described above, U.S. Bancorp Asset Management receives compensation for acting as the fund's investment advisor. U.S. Bancorp Asset Management and its affiliates also receive compensation in connection with the following: CUSTODY SERVICES. U.S. Bank National Association (U.S. Bank) provides or compensates others to provide custody services to the fund. U.S. Bank is paid monthly fees equal, on an annual basis, to 0.01% of the fund's average daily net assets. In addition, U.S. Bank is reimbursed for its out-of-pocket expenses incurred while providing custody services to the fund. ADMINISTRATION SERVICES. U.S. Bancorp Asset Management and its affiliate, U.S. Bancorp Fund Services, LLC (Co-Administrators), provide or compensate others to provide administrative services to the First American family of funds. These services include general administrative and accounting services, transfer agency and dividend disbursing services, blue sky services, and shareholder services. With respect to the First American open-end mutual funds, the Co-Administrators receive total fees, on an annual basis of up to 0.25% of the aggregate average daily net assets of First American Investment Funds, Inc., First American Strategy Funds, Inc., and First American Insurance Portfolios, Inc., and up to 0.20% of the aggregate average daily net assets of First American Funds, Inc. The funds also pay the Co-Administrators fees based upon the number of funds and shareholder accounts maintained. In addition, the Co-Administrators are reimbursed for their out-of-pocket expenses incurred while providing administration services to the funds. DISTRIBUTION SERVICES. Quasar Distributors, LLC, an affiliate of U.S. Bancorp Asset Management, serves as distributor of the fund and receives shareholder servicing fees, and out of pocket expenses incurred while providing distribution and other sub-administrative services for the fund. SECURITIES LENDING SERVICES. In connection with lending its portfolio securities, the fund pays administrative and custodial fees to U.S. Bancorp Asset Management which are equal to 40% of the fund's income from these securities lending transactions. BROKERAGE TRANSACTIONS. When purchasing and selling portfolio securities for the fund, the fund's investment advisor may place trades through its affiliates, U.S. Bancorp Investments, Inc. and U.S. Bancorp Piper Jaffray Inc., which will earn commissions on these transactions. PORTFOLIO MANAGEMENT The fund is managed by a team of persons associated with U.S. Bancorp Asset Management. 7 PROSPECTUS - First American Large Cap Select Fund Class Y Shares Additional Information More About The Fund -------------------------------------------------------------------------------- OBJECTIVE The fund's objective, which is described in the "Fund Summary" section, may be changed without shareholder approval. If the fund's objective changes, you will be notified at least 60 days in advance. Please remember: There is no guarantee that the fund will achieve its objective. -------------------------------------------------------------------------------- INVESTMENT STRATEGIES The fund's main investment strategies are discussed in the "Fund Summary" section. These are the strategies that the fund's investment advisor believes are most likely to be important in trying to achieve the fund's objective. You should be aware that the fund may also use strategies and invest in securities that are not described in this prospectus, but that are described in the Statement of Additional Information (SAI). For a copy of the SAI, call Investor Services at 800 677-FUND. TEMPORARY INVESTMENTS. In an attempt to respond to adverse market, economic, political, or other conditions, the fund may temporarily invest without limit in cash and in U.S. dollar-denominated high-quality money market instruments and other short-term securities, including money market funds advised by the fund's advisor. Being invested in these securities may keep the 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. -------------------------------------------------------------------------------- RISKS The main risks of investing in the fund are summarized in the "Fund Summary" section. More information about fund risks is presented below. MARKET RISK. All stocks are subject to price movements due to changes in general economic conditions, changes in the level of prevailing interest rates, changes in investor perceptions of the market, or the outlook for overall corporate profitability. SECTOR RISK. The stocks of companies within specific industries or sectors of the economy can periodically perform differently than the overall stock market. This can be due to changes in such things as the regulatory or competitive environment or to changes in investor perceptions of a particular industry or sector. COMPANY RISK. Individual stocks can perform differently than the overall market. This may be a result of specific factors such as changes in corporate profitability due to the success or failure of specific products or management strategies, or it may be due to changes in investor perceptions regarding a company. FOREIGN SECURITY RISK. The fund may invest up to 25% of its total assets in securities of foreign issuers which are either listed on a United States stock exchange or represented by American Depositary Receipts. 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. For certain foreign countries, political or social instability, or diplomatic developments could adversely affect the securities. There is also the risk of loss due to governmental actions such as a change in tax statutes or the modification of individual property rights. In addition, individual foreign economies may differ favorably or unfavorably from the U.S. economy. RISKS OF ACTIVE MANAGEMENT. The fund is actively managed and its performance therefore will reflect in part the advisor's ability to make investment decisions which are suited to achieving the fund's investment objectives. Due to its active management, the fund could underperform other mutual funds with similar investment objectives. RISKS OF SECURITIES LENDING. When the fund loans its portfolio securities, it will receive collateral equal to at least 100% of the value of the loaned securities. Nevertheless, the fund risks a delay in the recovery of the loaned securities, or even the loss of rights in the collateral deposited by the borrower if the borrower should fail financially. To reduce these risks, the fund enters into loan arrangements only with institutions which the fund's advisor has determined are creditworthy under guidelines established by the fund's board of directors. RISKS OF DERIVATIVE INSTRUMENTS. The use of derivative instruments exposes a fund to additional risks and transaction costs. Risks inherent in the use of derivative instruments include: the risk that securities prices will not move in the direction that the advisor anticipates; an imperfect correlation between the price of derivative instruments and movements in the prices of the securities being hedged; the possible absence of a liquid secondary market for any particular instrument and possible exchange imposed price fluctuation limits, either of which may make it difficult or impossible to close out a position when desired; leverage risk, which is the risk that adverse price movements in an instrument can result in a loss substantially greater than the fund's initial investment in that instrument; and, particularly, in the case of privately negotiated instruments, the risk that the counterparty will fail to perform its obligations, which could leave the fund worse off than if it had not entered into the position. If the fund uses derivative instruments and the advisor's judgment proves incorrect, the fund's performance could be worse than if it had not used these instruments. 8 PROSPECTUS - First American Large Cap Select Fund Class Y Shares Additional Information Financial Highlights -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS Because the fund was not offered prior to the date of this prospectus, financial highlights are not available. 9 PROSPECTUS - First American Large Cap Select Fund Class Y Shares -------------------------------------------------------------------------------- FOR MORE INFORMATION More information about the fund is available in the fund's Statement of Additional Information and annual and semiannual reports, and on the First American funds' Internet Web site. -------------------------------------------------------------------------------- FIRST AMERICAN FUNDS WEB SITE Information about the First American funds may be viewed on the funds' Internet Web site at http://www.firstamericanfunds.com. -------------------------------------------------------------------------------- STATEMENT OF ADDITIONAL INFORMATION (SAI) The SAI provides more details about the fund and its policies. A current SAI is on file with the Securities and Exchange Commission (SEC) and is incorporated into this prospectus by reference (which means that it is legally considered part of this prospectus). -------------------------------------------------------------------------------- ANNUAL AND SEMIANNUAL REPORTS Additional information about the fund's investments is available in the fund's annual and semiannual reports to shareholders. In the fund's annual report, you will find a discussion of the market conditions and investment strategies that significantly affected the fund's performance during its last fiscal year. You can obtain a free copy of the fund's SAI and/or free copies of the fund's most recent annual or semiannual reports by calling Investor Services at 800 677-FUND. The material you request will be sent by first-class mail or other means designed to ensure equally prompt delivery, within three business days of receipt of the request. You can also obtain copies of this information, after paying a duplicating fee, by electronic request at the following email address: publicinfo@sec.gov, or by writing the SEC's Public Reference Section, Washington, D.C. 20549-0102. For more information, call 1-202-942-8090. Information about the fund is also available on the Internet. Text-only versions of fund documents can be viewed online or downloaded from the EDGAR Database on the SEC's Internet site at http://www.sec.gov. FIRST AMERICAN FUNDS P.O. Box 1330, Minneapolis, Mn 55440-1330 U.S. Bancorp Asset Management, Inc., serves as the investment advisor to the First American Funds. First American Funds are distributed by Quasar Distributors, LLC, which is located in Milwaukee, WI 53202, and is an affiliate of the investment advisor. Sec File Number: 811-05309 [LOGO] FIRST AMERICAN FUNDS(TM) FIRST AMERICAN INVESTMENT FUNDS, INC. STATEMENT OF ADDITIONAL INFORMATION DATED JANUARY 31, 2003 LARGE CAP SELECT FUND This Statement of Additional Information relates to the Class A, Class B, Class C, Class S and Class Y Shares of the Large Cap Select Fund, a series of First American Investment Funds, Inc. ("FAIF"). This Statement of Additional Information is not a prospectus, but should be read in conjunction with the Fund's current Prospectuses dated January 31, 2003. This Statement of Additional Information is incorporated into the Fund's Prospectuses by reference. To obtain copies of Prospectuses at no charge, write the Fund's distributor, Quasar Distributors, LLC, 615 East Michigan Street, Milwaukee, WI 53202, or call Investor Services at (800) 677-FUND. Please retain this Statement of Additional Information for future reference. TABLE OF CONTENTS PAGE ---- GENERAL INFORMATION......................................................... ADDITIONAL INFORMATION CONCERNING FUND INVESTMENTS.......................... Short-Term Investments............................................. U.S. Government Securities......................................... Repurchase Agreements.............................................. When-Issued and Delayed Delivery Transactions...................... Lending of Portfolio Securities.................................... Options Transactions............................................... Futures and Options on Futures..................................... Fixed Income Securities............................................ Foreign Securities................................................. Preferred Stock.................................................... U.S. Treasury Inflation-Protection Securities...................... CFTC Information................................................... INVESTMENT RESTRICTIONS..................................................... FUND NAME................................................................... DIRECTORS AND EXECUTIVE OFFICERS............................................ Directors.......................................................... Executive Officers................................................. Compensation....................................................... CODE OF ETHICS.............................................................. INVESTMENT ADVISORY AND OTHER SERVICES FOR THE FUND......................... Investment Advisor................................................. Administrator...................................................... Distributor........................................................ Custodian and Auditors............................................. PORTFOLIO TRANSACTIONS AND ALLOCATION OF BROKERAGE.......................... CAPITAL STOCK............................................................... NET ASSET VALUE AND PUBLIC OFFERING PRICE................................... FUND PERFORMANCE............................................................ TAXATION.................................................................... REDUCING SALES CHARGES...................................................... Class A Sales Charge............................................... Sales of Class A Shares and Class C Shares at Net Asset Value...... ADDITIONAL INFORMATION ABOUT SELLING SHARES................................. By Telephone....................................................... By Mail............................................................ Redemptions Before Purchase Instruments Clear...................... RATINGS..................................................................... 1 GENERAL INFORMATION First American Investment Funds, Inc. ("FAIF") was incorporated in the State of Maryland on August 20, 1987 under the name "SECURAL Mutual Funds, Inc." The Board of Directors and shareholders, at meetings held January 10, 1991, and April 2, 1991, respectively, approved amendments to the Articles of Incorporation providing that the name "SECURAL Mutual Funds, Inc." be changed to "First American Investment Funds, Inc." FAIF is organized as a series fund and currently issues its shares in ____ series. Each series of shares represents a separate investment portfolio with its own investment objective and policies (in essence, a separate mutual fund). The series 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 as the "Funds." Large Cap Select Fund is a diversified open-end management investment company. Shareholders may purchase shares of the Fund through five separate classes, Class A, Class B, Class C, Class S and Class Y, which provide for variations in distribution costs, shareholder servicing fees, voting rights and dividends. To the extent permitted by the 1940 Act, the Fund may also provide for variations in other costs among the classes although they have no present intention to do so. In addition, a sales load is imposed on the sale of Class A, Class B and Class C Shares of the Fund. Except for differences among the classes pertaining to distribution costs and shareholder servicing fees, each share of the Fund represents an equal proportionate interest in 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 all investment advisory contracts and amendments thereto, and for all amendments to Rule 12b-1 distribution plans. This Statement of Additional Information may also refer to affiliated investment companies, including: First American Funds, Inc. ("FAF"); First American Strategy Funds, Inc. ("FASF"); First American Insurance Portfolios, Inc. ("FAIP"); and ten 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., Minnesota Municipal Income Fund Inc. II, American Select Portfolio Inc., American Municipal Term Trust Inc. III., Minnesota Municipal Term Trust Inc. II, and American Income Fund, Inc.), collectively referred to as the First American Closed-End Funds ("FACEF"). 2 ADDITIONAL INFORMATION CONCERNING FUND INVESTMENTS The main investment strategies of the Fund are set forth in the Fund's Prospectuses. Additional information concerning main investment strategies of the Fund, and other investment strategies which may be used by the Fund, is set forth below. The Fund has attempted to identify investment strategies that will be employed in pursuing the Fund's investment objective. However, in the absence of an affirmative limitation, the Fund may utilize any strategy or technique that is consistent with its investment objective. The Fund does not anticipate that any such strategy or technique would exceed 5% of its assets absent specific identification of that practice. Additional information concerning the Fund's investment restrictions is set forth below under "Investment Restrictions." If a percentage limitation on investments by a Fund stated in this section or in "Investment Restrictions" below is adhered to at the time of an investment, a later increase or decrease in percentage resulting from changes in asset value will not be deemed to violate the limitation except in the case of the limitations on borrowing. The Fund which is limited to investing in securities with specified ratings or of a certain credit quality 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. However, in no event will more than 5% of the Fund's net be invested in non-investment grade securities. Descriptions of the rating categories of Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. and Moody's Investors Service, Inc. are contained in "Ratings" below. SHORT-TERM INVESTMENTS The Fund can invest in a variety of short-term instruments such as rated commercial paper and variable amount master demand notes; United States dollar-denominated time and savings deposits (including certificates of deposit); bankers' acceptances; obligations of the United States 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 the advisory fee); and other similar high-quality short-term United States dollar-denominated obligations. The other mutual funds in which the Fund may so invest include money market funds advised by U.S. Bancorp Asset Management, Inc., the Funds' investment advisor ("U.S. Bancorp Asset Management" or the "Advisor"), subject to certain restrictions contained in an exemptive order issued by the Securities and Exchange Commission ("SEC") with respect thereto. Short-term investments and repurchase agreements may be entered into on a joint basis by the Fund and other funds advised by the Advisor to the extent permitted by an exemptive order issued by the Securities and Exchange Commission with respect to the Fund. 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 Prospectuses, the Fund may purchase commercial paper consisting of issues rated at the time of purchase within the two highest rating categories by Standard & Poor's Rating Services, a division of the McGraw-Hill Companies, Inc. ("Standard & Poor's") or Moody's Investors Service, Inc. ("Moody's"), or which have been assigned an equivalent rating by another nationally recognized statistical rating organization. The Fund 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 and Moody's, see "Ratings." 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 the Fund and the issuer, they are not normally traded. Although there is no secondary market in the notes, the 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, 3 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. U.S. GOVERNMENT SECURITIES The U.S. government securities in which the Fund 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 Fund 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. See "-- Mortgage-Backed Securities" below for a description of these securities and the Fund that may invest in such securities. REPURCHASE AGREEMENTS The Fund may invest in repurchase agreements. A repurchase agreement involves the purchase by the 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 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 entering into the repurchase agreement) will at all times be maintained in an amount equal to the repurchase price under the agreement (including accrued interest), the 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 Fund enters into repurchase agreements. The Fund's 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 Fund will promptly receive additional collateral (so the total collateral is an amount at least equal to the repurchase price plus accrued interest). WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS 4 The Fund may purchase securities on a when-issued or delayed delivery basis. 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. The 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, the Fund will maintain in a segregated account cash or liquid high-grade securities in an amount sufficient to meet its purchase commitments. The purchase of securities on a when-issued or delayed delivery basis exposes the Fund to risk because the securities may decrease in value prior to delivery. In addition, the 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 the Fund could prevent the Fund from realizing a price or yield considered to be advantageous. LENDING OF PORTFOLIO SECURITIES In order to generate additional income, the Fund 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 Fund will only enter into loan arrangements with broker-dealers, banks, or other institutions which the has determined are creditworthy under guidelines established by the Board of Directors. The Fund 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. The Advisor may act as securities lending agent for the Fund and receive 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 currently receives fees equal to 25% of the Fund's income from securities lending transactions, plus a fee up to 0.025% of the Fund's total assets on loan. In these loan arrangements, the Fund will receive collateral in the form of cash, United States 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 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 Fund any dividends or interest paid on the securities. Loans are subject to termination at any time by the Fund or the borrower. While the 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. OPTIONS TRANSACTIONS To the extent set forth below, the Fund may purchase put and call options on equity securities, stock indices, interest rate indices and/or foreign currencies on securities that they own or have the right to acquire. These transactions will be undertaken for the purpose of reducing risk to the Fund; that is, for "hedging" purposes. Options on futures contracts are discussed below under "-- Futures and Options on Futures." OPTIONS ON SECURITIES. The Fund may purchase put and call options on securities they own or have the right to acquire. A put option on a security gives the purchaser of the option the right (but not the obligation) to sell, and the writer of the option the obligation to buy, the underlying security at a stated price (the "exercise price") at any time before the option expires. A call option on a security gives the purchaser the right (but not the obligation) to buy, and the writer the obligation to sell, the underlying security at the exercise price at any time before the option expires. The purchase price for a put or call option is the "premium" paid by the purchaser for the right to sell or buy. The Fund may purchase put options to hedge against a decline in the value of its portfolio. By using put options in this way, the Fund would reduce any profit it might otherwise have realized in the underlying security by the amount of the premium paid for the put option and by transaction costs. In similar fashion, the Fund may purchase call options to hedge against an increase in the price of securities that the Fund anticipates purchasing in the future. The premium paid for the call option plus any transaction costs will reduce the benefit, if any, realized by the Fund upon 5 exercise of the option, and, unless the price of the underlying security rises sufficiently, the option may expire unexercised. OPTIONS ON STOCK INDICES. The Fund may purchase put and call options on stock indices. Options on stock indices are similar to options on individual stocks except that, rather than the right to take or make delivery of stock at a specified price, an option on a stock index gives the holder the right to receive, upon exercise of the option, an amount of cash if the closing value of the stock index upon which the option is based is greater than, in the case of a call, or lesser 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, in return for the premium received, to make delivery of this amount. Unlike stock options, all settlements for stock index options are in cash, and gain or loss depends on price movements in the stock market generally (or in a particular industry or segment of the market) rather than price movements in individual stocks. The multiplier for an index option performs a function similar to the unit of trading for a stock option. It determines the total dollar value per contract of each point in the difference between the underlying stock index. A multiplier of 100 means that a one-point difference will yield $100. Options on different stock indices may have different multipliers. WRITING OF CALL OPTIONS. The Fund may write (sell) covered call options. These transactions would be undertaken principally to produce additional income. These transactions may include the writing of covered call options on equity securities. The Fund may write (sell) covered call options covering up to 25% of the equity securities owned by the Fund. When the Fund sells a covered call option, it is paid a premium by the purchaser. If the market price of the security covered by the option does not increase above the exercise price before the option expires, the option generally will expire without being exercised, and the Fund will retain both the premium paid for the option and the security. If the market price of the security covered by the option does increase above the exercise price before the option expires, however, the option is likely to be exercised by the purchaser. In that case the Fund will be required to sell the security at the exercise price, and it will not realize the benefit of increases in the market price of the security above the exercise price of the option. The Fund may also write call options on stock indices the movements of which generally correlate with those of the respective Fund's portfolio holdings. These transactions, which would be undertaken principally to produce additional income, entail the risk of an imperfect correlation between movements of the index covered by the option and movements in the price of the Fund's portfolio securities. The writer (seller) of a call option has no control over when the underlying securities must be sold; the writer may be assigned an exercise notice at any time prior to the termination of the option. If a call option is exercised, the writer experiences a profit or loss from the sale of the underlying security. The writer of a call option that wishes to terminate its obligation may effect a "closing purchase transaction." This is accomplished by buying an option on the same security as the option previously written. If the Fund was unable to effect a closing purchase transaction in a secondary market, it would not be able to sell the underlying security until the option expires or it delivers the underlying security upon exercise. LIMITATIONS. The Fund will not 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. The 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. The use of purchased put and call options involves certain risks. These include the risk of an imperfect correlation between market prices of securities held by the Fund and the prices of options, and the risk of limited liquidity in the event that a Fund seeks to close out an options position before expiration by entering into an offsetting transaction. FUTURES AND OPTIONS ON FUTURES 6 The Fund may engage in futures transactions and options on futures, including stock and interest rate index futures contracts and options thereon. A futures contract on a security obligates one party to purchase, and the other to sell, a specified security at a specified price on a date certain in the future. A futures contract on an index obligates the seller to deliver, and entitles the purchaser to receive, an amount of cash equal to a specific dollar amount times the difference between the value of the index at the expiration date of the contract and the index value specified in the contract. The acquisition of put and call options on futures contracts will, respectively, give the Fund the right (but not the obligation), for a specified exercise price, to sell or to purchase the underlying futures contract at any time during the option period. At the same time a futures contract is purchased or sold, the Fund generally must allocate cash or securities as a deposit payment ("initial deposit"). It is expected that the initial deposit would be approximately 1-1/2% to 5% of a contract's face value. Daily thereafter, the futures contract is valued and the payment of "variation margin" may be required, since each day the Fund would provide or receive cash that reflects any decline or increase in the contract's value. Futures transactions also involve brokerage costs and require the Fund to segregate liquid assets, such as cash, United States Government securities or other liquid high grade debt obligations equal to at least 100% of its performance under such contracts. The Fund may use futures contracts and options on futures in an effort to hedge against market risks. Aggregate initial margin deposits for futures contracts, and premiums paid for related options, may not exceed 5% of the Fund's total assets, and the value of securities that are the subject of such futures and options (both for receipt and delivery) may not exceed 1/3 of the market value of the Fund's total assets. Futures transactions will be limited to the extent necessary to maintain the Fund's qualification as a regulated investment company under the Code. Where the Fund is permitted to purchase options on futures, its potential loss is limited to the amount of the premiums paid for the options. As stated above, this amount may not exceed 5% of the Fund's total assets. Where the Fund is permitted to enter into futures contracts obligating it to purchase securities, currency or an index in the future at a specified price, the Fund could lose 100% of its net assets in connection therewith if it engaged extensively in such transactions and if the market value or index value of the subject securities, currency or index at the delivery or settlement date fell to zero for all contracts into which the Fund was permitted to enter. Where the Fund is permitted to enter into futures contracts obligating it to sell securities its potential losses are unlimited if it does not own the securities or currencies covered by the contracts and it is unable to close out the contracts prior to the settlement date. Futures transactions involve brokerage costs and require the Fund to segregate assets to cover contracts that would require it to purchase securities or currencies. The Fund may lose the expected benefit of futures transactions if interest rates, exchange rates or securities prices move in an unanticipated manner. Such unanticipated changes may also result in poorer overall performance than if the Fund had not entered into any futures transactions. In addition, the value of the Fund's futures positions may not prove to be perfectly or even highly correlated with the value of its portfolio securities or foreign currencies, limiting the Fund's ability to hedge effectively against interest rate, exchange rate and/or market risk and giving rise to additional risks. There is no assurance of liquidity in the secondary market for purposes of closing out futures positions. FIXED INCOME SECURITIES -- EQUITY FUNDS The fixed income securities in which the Fund may invest include securities issued or guaranteed by the United States Government or its agencies or instrumentalities, nonconvertible preferred stocks, nonconvertible corporate debt securities, and short-term obligations of the kinds described above. Investments in nonconvertible preferred stocks and nonconvertible corporate debt securities will be limited to securities which are rated at the time of purchase not less than BBB by Standard & Poor's or Baa by Moody's (or equivalent short-term ratings), or which have been assigned an equivalent rating by another nationally recognized statistical rating organization, or which are of comparable quality in the judgment of the Advisor. Obligations rated BBB, Baa or their equivalent, although investment grade, have speculative characteristics and carry a somewhat higher risk of default than obligations rated in the higher investment grade categories. 7 The fixed income securities specified above are subject to (i) interest rate risk (the risk that increases in market interest rates will cause declines in the value of debt securities held by the Fund); (ii) credit risk (the risk that the issuers of debt securities held by the 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 the Fund to reinvest the prepayment at a lower interest rate). FOREIGN SECURITIES GENERAL. Under normal market conditions The Fund may invest up to 25% of its total assets in securities of foreign issuers which are either listed on a United States securities exchange or represented by American Depositary Receipts. Investment in foreign securities is subject to special investment risks that differ in some respects from those related to investments in securities of United States 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 United States 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 United States. In addition, there may be less publicly available information about a foreign company than about a United States domiciled company. Foreign companies generally are not subject to uniform accounting, auditing and financial reporting standards comparable to those applicable to United States domestic companies. There is also generally less government regulation of securities exchanges, brokers and listed companies abroad than in the United States. Confiscatory taxation or diplomatic developments could also affect investment in those countries. In addition, foreign branches of United States banks, foreign banks and foreign issuers may be subject to less stringent reserve requirements and to different accounting, auditing, reporting, and recordkeeping standards than those applicable to domestic branches of United States banks and United States domestic issuers. AMERICAN DEPOSITARY RECEIPTS AND EUROPEAN DEPOSITARY RECEIPTS. For many foreign securities, United States dollar-denominated American Depositary Receipts, which are traded in the United States on exchanges or over-the-counter, are issued by domestic banks. American Depositary Receipts represent the right to receive securities of foreign issuers deposited in a domestic bank or a correspondent bank. American Depositary Receipts do not eliminate all the risk inherent in investing in the securities of foreign issuers. However, by investing in American Depositary Receipts rather than directly in foreign issuers' stock, the Fund can avoid currency risks during the settlement period for either purchases or sales. In general, there is a large, liquid market in the United States for many American Depositary Receipts. The information available for American Depositary Receipts is subject to the accounting, auditing and financial reporting standards of the domestic market or exchange on which they are traded, which standards are more uniform and more exacting than those to which many foreign issuers may be subject. Certain American Depositary Receipts and European Depositary Receipts, typically those denominated as unsponsored, require the holders thereof to bear most of the costs of the facilities while issuers of sponsored facilities normally pay more of the costs thereof. The depository of an unsponsored facility frequently is under no obligation to distribute shareholder communications received from the issuer of the deposited securities or to pass through the voting rights to facility holders in respect to the deposited securities, whereas the depository of a sponsored facility typically distributes shareholder communications and passes through voting rights. PREFERRED STOCK The Fund may invest in 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. 8 U.S. TREASURY INFLATION-PROTECTION SECURITIES To the extent they may invest in fixed-income securities, the Fund may invest in U.S. Treasury inflation-protection securities, which are issued by the United States Department of Treasury ("Treasury") with a nominal return linked to the inflation rate in prices. The index used to measure inflation is the non-seasonally adjusted U.S. City Average All Items Consumer Price Index for All Urban Consumers ("CPI-U"). The value of the principal is adjusted for inflation, and pays interest every six months. The interest payment is equal to a fixed percentage of the inflation-adjusted value of the principal. The final payment of principal of the security will not be less than the original par amount of the security at issuance. The principal of the inflation-protection security is indexed to the non-seasonally adjusted CPI-U. To calculate the inflation-adjusted principal value for a particular valuation date, the value of the principal at issuance is multiplied by the index ratio applicable to that valuation date. The index ratio for any date is the ratio of the reference CPI applicable to such date to the reference CPI applicable to the original issue date. Semiannual coupon interest is determined by multiplying the inflation-adjusted principal amount by one-half of the stated rate of interest on each interest payment date. Inflation-adjusted principal or the original par amount, whichever is larger, is paid on the maturity date as specified in the applicable offering announcement. If at maturity the inflation-adjusted principal is less than the original principal value of the security, an additional amount is paid at maturity so that the additional amount plus the inflation-adjusted principal equals the original principal amount. Some inflation-protection securities may be stripped into principal and interest components. In the case of a stripped security, the holder of the stripped principal component would receive this additional amount. The final interest payment, however, will be based on the final inflation-adjusted principal value, not the original par amount. CFTC INFORMATION The Commodity Futures Trading Commission (the "CFTC"), a federal agency, regulates trading activity pursuant to the Commodity Exchange Act, as amended. The CFTC requires the registration of "commodity pool operators," which are 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 (i) will use commodity futures or commodity options contracts solely for bona fide hedging purposes (provided, however, that in the alternative, with respect to each long position in a commodity future or commodity option contract, an investment company may meet certain other tests set forth in Rule 4.5); (ii) will not enter into commodity futures and commodity options contracts for which the aggregate initial margin and premiums exceed 5% of its assets; (iii) will not be marketed to the public as a commodity pool or as a vehicle for investing in commodity interests; (iv) will disclose to its investors the purposes of and limitations on its commodity interest trading; and (v) will submit to special calls of the CFTC for information. Any investment company desiring to claim this exclusion must file a notice of eligibility with both the CFTC and the National Futures Association. INVESTMENT RESTRICTIONS In addition to the investment objectives and policies set forth in the Prospectus and under the caption "Additional Information Concerning Fund Investments" above, the Fund is subject to the investment restrictions set forth below. The investment restrictions set forth in paragraphs 1 through 6 below are fundamental and cannot be changed with respect to the Fund without approval by the holders of a majority of the outstanding shares of 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. The Fund will not: 9 1. Concentrate its investments in a particular industry, except that the Fund with one or more industry concentrations implied by its name shall, in normal market conditions, concentrate in securities of issues within that industry or industries. For purposes of this limitation, the U.S. Government, and state or municipal governments and their political subdivisions are not considered members of any industry. Whether a 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. Purchase physical commodities or contracts relating to physical commodities. 4. Purchase or sell real estate unless as a result of ownership of securities or other instruments, but this shall not prevent the Fund from investing in securities or other instruments backed by real estate or interests therein or in securities of companies that deal in real estate or mortgages. 5. 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. 6. Make loans except as permitted under the 1940 Act, as interpreted or modified from time to time by any regulatory authority having jurisdiction. The following restrictions are non-fundamental and may be changed by FAIF's Board of Directors without a shareholder vote: The Fund will not: 1. Invest more than 15% of its net assets in all forms of illiquid investments. 2. Borrow money in an amount exceeding 10% of the borrowing Fund's total assets except that Strategic Income Fund may borrow up to one-third of its total assets and pledge up to 15% of its total assets to secure such borrowings. 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. ---------------------------------------------------- * According to the present interpretation by the Securities and Exchange Commission, the Fund would be concentrated in an industry if more than 25% of its total assets, based on current market value at the time of purchase, were invested in that industry. The Board of Directors has adopted guidelines and procedures under which the Fund's investment advisor is to determine whether the following types of securities which may be held by the Funds is "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 floaters 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 Fund classifies asset-backed securities in its portfolio in separate industries based upon a combination of the industry of the 10 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. FUND NAME To the extent applicable, the Fund that has adopted an investment strategy pursuant to Rule 35d-1 of the 1940 Act, whereby at least 80% of the Fund's net assets (plus the amount of any borrowings for investment purposes) must be invested in a strategy suggested by the Fund's name, a policy has been adopted by FAIF to provide shareholders with at least 60 days notice in the event of a planned change to the investment strategy. Such notice to shareholders will meet the requirements of Rule 35d-1(c). 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. Directors who are "interested persons" (as that term is defined in the 1940 Act) of FAIF are identified with an asterisk.
INDEPENDENT DIRECTORS ----------------- ----------- ------------------------ ------------------------------ ------------------- ------------- NUMBER OF PORTFOLIOS IN OTHER NAME, ADDRESS, POSITION(S) TERM OF OFFICE FUND COMPLEX DIRECTORSHIPS AND AGE HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN BY HELD BY WITH FUND TIME SERVED DURING PAST 5 YEARS DIRECTOR DIRECTOR* ----------------- ----------- ------------------------ ------------------------------ ------------------- ------------- Roger A. Director Term expiring earlier Vice President, Cargo - First American None Gibson, 1200 of death, resignation, United Airlines, since July Funds Complex: Algonquin Road, removal, 2001; Vice President, North Fifteen Elk Grove disqualification, or America-Mountain Region for registered Village, IL successor duly elected United Airlines (1995-2001) investment 60007 (56) and qualified. companies, Director of FAIF since including 70 October 1997 portfolios ----------------- ----------- ------------------------ ------------------------------ ------------------- ------------- ----------------- ----------- ------------------------ ------------------------------ ------------------- ------------- Andrew M. Director Term expiring earlier Chairman, Hunter, Keith First American None Hunter III, 537 of death, resignation, Industries, a diversified Funds Complex: Harrington removal, manufacturing and services Fifteen Road, Wayzata, disqualification, or management company, since registered Minnesota 55391 successor duly elected 1975 investment (55) and qualified. companies, Director of FAIF since including 70 January 1997 portfolios ----------------- ----------- ------------------------ ------------------------------ ------------------- ------------- ----------------- ----------- ------------------------ ------------------------------ ------------------- ------------- Leonard W. Director Term expiring earlier Owner, Executive and First American None Kedrowski, 16 of death, resignation, Management Consulting, Inc., Funds Complex: Dellwood removal, a management consulting Fifteen Avenue, disqualification, or firm, since 1992; Chief registered Dellwood, successor duly elected Executive Officer, Creative investment Minnesota 55110 and qualified. Promotions International, companies, (61) Director of FAIF since LLC, a promotional award including 70 November 1993 programs and products portfolios company, since 1999; Board member, GC McGuiggan Corporation (DBA Smyth Companies), manufacturer of designer doors; acted as CEO of Graphics Unlimited from 1996-1998 ----------------- ----------- ------------------------ ------------------------------ ------------------- ------------- ----------------- ----------- ------------------------ ------------------------------ ------------------- ------------- Richard K. Director Term expiring earlier Retired; President and Chief First American None Riederer, 741 of death, resignation, Executive Officer, Weirton Funds Complex: Chestnut Road, removal, Steel (1995-2001); Director, Fifteen Sewickley, disqualification, or Weirton Steel (1993-2001) registered Pennsylvania successor duly elected investment 15143 (58) and qualified. companies, Director of FAIF since including 70 August 2001 portfolios ----------------- ----------- ------------------------ ------------------------------ ------------------- -------------
11
----------------- ----------- ------------------------ ------------------------------ ------------------- ------------- NUMBER OF PORTFOLIOS IN OTHER NAME, ADDRESS, POSITION(S) TERM OF OFFICE FUND COMPLEX DIRECTORSHIPS AND AGE HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN BY HELD BY WITH FUND TIME SERVED DURING PAST 5 YEARS DIRECTOR DIRECTOR* ----------------- ----------- ------------------------ ------------------------------ ------------------- ------------- Joseph D. Director Term expiring earlier Chairman of FAF's and FAIF's First American None Strauss, 8525 of death, resignation, Boards from 1993 to Funds Complex: Edinbrook removal, September 1997 and of FASF's Fifteen Crossing, Suite disqualification, or Board from June 1996 to registered 5, Brooklyn successor duly elected September 1997; President of investment Park, Minnesota and qualified. FAF and FAIF from June 1989 companies, 55443 (62) Director of FAIF since to November 1989; Owner and including 70 September 1991 Executive Officer, Excensus portfolios TM LLC, a consulting firm, since 2001; Owner and President, Strauss Management Company, a Minnesota holding company for various organizational management business ventures, since 1993; Owner, Chairman and Chief Executive Officer, Community Resource Partnerships, Inc., a strategic planning, operations management, government relations, transportation planning and public relations organization, since 1993; attorney at law ----------------- ----------- ------------------------ ------------------------------ ------------------- ------------- ----------------- ----------- ------------------------ ------------------------------ ------------------- ------------- Virginia L. Chair; Chair Term three Owner and President, First American None Stringer, 712 Director years. Directors Term Strategic Management Funds Complex: Linwood Avenue, expiring earlier of Resources, Inc., a Fifteen registered St. Paul, death, resignation, management consulting firm, investment Minnesota 55105 removal, since 1993; Executive companies, (58) disqualification, or Consultant for State Farm including 70 successor duly elected Insurance Company since portfolios and qualified. Chair 1997; formerly President and of FAIF's Board since Director, The Inventure September 1997; Director Group, a management consulting of FAIF since September and training company; 1987 President, Scott's, Inc., a transportation company, and Vice President of Human Resources, The Pillsbury Company ----------------- ----------- ------------------------ ------------------------------ ------------------- ------------- ----------------- ----------- ------------------------ ------------------------------ ------------------- ------------- James M. Wade, Director Term expiring earlier Owner and President, Jim First American None 2802 Wind Bluff of death, resignation, Wade Homes, a homebuilding Funds Complex: Circle, removal, company, since 1999 thirteen Wilmington, disqualification, or registered North Carolina successor duly elected investment 28409 (59) and qualified. companies, Director of FAIF since including 70 August 2001 portfolios ----------------- ----------- ------------------------ ------------------------------ ------------------- -------------
* 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.
INTERESTED DIRECTOR(S) ----------------- ----------- ------------------------ ------------------------------ ------------------- ------------- NAME, ADDRESS, POSITION(S) TERM OF OFFICE PRINCIPAL OCCUPATION(S) NUMBER OF OTHER AND AGE HELD AND LENGTH OF DURING PAST 5 YEARS PORTFOLIOS IN DIRECTORSHIPS WITH FUND TIME SERVED FUND COMPLEX HELD BY OVERSEEN BY DIRECTOR* DIRECTOR ----------------- ----------- ------------------------ ------------------------------ ------------------- ------------- John M. Murphy, Director Term expiring earlier Executive Vice President, First American None Jr., 800 of death, resignation, U.S. Bancorp since January Funds Complex: Nicollet Mall, removal, 1999; Minnesota State thirteen Minneapolis, disqualification, or Chairman - U.S. Bancorp registered Minnesota 55402 successor duly elected since 2000; Chairman and investment (61) ** and qualified. Chief Investment Officer, companies, Director of FAIF since First American Asset including 70 June 1999 Management and U.S. Bank portfolios Trust, N.A., and Executive Vice President, U.S. Bancorp (1991-1999). ----------------- ----------- ------------------------ ------------------------------ ------------------- -------------
12 * 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. ** Mr. Murphy is considered an "interested" Director because of his employment with U.S. Bancorp, U.S. Bancorp Asset Management (and its predecessor, First American Asset Management) and U.S. Bank Trust National Association, and his ownership of securities issued by U.S. Bancorp.
OFFICERS ----------------------- ----------------- -------------------- -------------------------------------------------------- NAME, ADDRESS, AND POSITION(S) HELD TERM OF OFFICE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS AGE WITH FUND AND LENGTH OF TIME SERVED ----------------------- ----------------- -------------------- -------------------------------------------------------- Thomas S. Schreier, President Re-elected by the Chief Executive Officer of U.S. Bancorp Asset Jr., U.S. Bancorp Board annually; Management, Inc. since May 2001; Chief Executive Asset Management, President of FAIF Officer of First American Asset Management from Inc., 800 Nicollet since February December 2000 through May 2001 and of Firstar Mall, Minneapolis, 2001 Investment & Research Management Company from February Minnesota 55402 (40) * 2001 through May 2001; Senior Managing Director and Head of Equity Research of U.S. Bancorp Piper Jaffray from October 1998 through December 2000; Senior Airline Analyst and Director of Equity Research of Credit Suisse First Boston through 1998 ----------------------- ----------------- -------------------- -------------------------------------------------------- ----------------------- ----------------- -------------------- -------------------------------------------------------- Mark S. Jordahl, U.S. Vice President Re-elected by the Chief Investment Officer of U.S. Bancorp Asset Bancorp Asset - Investments Board annually; Management, Inc. since September 2001; President and Management, Inc. 800 Vice President - Chief Investment Officer, ING Investment Management - Nicollet Mall, Investments of Americas (September 2000 to June 2001); Senior Vice Minneapolis, FAIF since President and Chief Investment Officer, ReliaStar Minnesota 55402 (42) * September 2001 Financial Corp. (January 1998 to September 2000); Executive Vice President and Managing Director, Washington Square Advisers (January 1996 to December 1997) ----------------------- ----------------- -------------------- -------------------------------------------------------- ----------------------- ----------------- -------------------- -------------------------------------------------------- Jeffery M. Wilson, Vice President Re-elected by the Senior Vice President of U.S. Bancorp Asset Management U.S. Bancorp Asset - Administration Board annually; since May 2001; Senior Vice President of First Management, Inc. 800 Vice President - American Asset Management through May 2001 Nicollet Mall, Administration of Minneapolis, FAIF since March Minnesota 55402 (46) * 2000 ----------------------- ----------------- -------------------- -------------------------------------------------------- ----------------------- ----------------- -------------------- -------------------------------------------------------- Robert H. Nelson, Treasurer Re-elected by the Senior Vice President of U.S. Bancorp Asset Management U.S. Bancorp Asset Board annually; since May 2001; Senior Vice President of First Management, Inc. 800 Treasurer of FAIF American Asset Management from 1998 through May 2001 Nicollet Mall, since March 2000 and of Firstar Investment & Research Management Minneapolis, Company from February 2001 through May 2001; Senior Minnesota 55402 (39) * Vice President of Piper Capital Management Inc. through 1998 ----------------------- ----------------- -------------------- -------------------------------------------------------- ----------------------- ----------------- -------------------- -------------------------------------------------------- James D. Alt, 50 Secretary Re-elected by the Partner, Dorsey & Whitney LLP, a Minneapolis- based South Sixth Street, Board annually; law firm Suite 1500, Assistant Minneapolis, Secretary of FAIF Minnesota 55402 (51) from September 1998 through June 2002. Secretary of FAIF since June 2002. ----------------------- ----------------- -------------------- -------------------------------------------------------- ----------------------- ----------------- -------------------- -------------------------------------------------------- Michael J. Radmer, 50 Assistant Re-elected by the Partner, Dorsey & Whitney LLP, a Minneapolis- based South Sixth Street, Secretary Board annually; law firm Suite 1500, Assistant Minneapolis, Secretary of FAIF Minnesota 55402 (57) since March 2000; Secretary of FAIF from September 1999 through March 2000 ----------------------- ----------------- -------------------- -------------------------------------------------------- ----------------------- ----------------- -------------------- -------------------------------------------------------- Kathleen L. Assistant Re-elected by the Partner, Dorsey & Whitney LLP, a Minneapolis- based Prudhomme, 50 South Secretary Board annually; law firm Sixth Street, Suite Assistant 1500, Minneapolis, Secretary of FAIF Minnesota 55402 (49) since September 1998 ----------------------- ----------------- -------------------- --------------------------------------------------------
13
----------------------- ----------------- -------------------- -------------------------------------------------------- NAME, ADDRESS, AND POSITION(S) HELD TERM OF OFFICE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS AGE WITH FUND AND LENGTH OF TIME SERVED ----------------------- ----------------- -------------------- -------------------------------------------------------- ----------------------- ----------------- -------------------- -------------------------------------------------------- Douglas G. Hess, 612 Assistant Re-elected by the Assistant Vice President, Fund Compliance E. Michigan Street, Secretary Board annually; Administrator, U.S. Bancorp Fund Services, LLC (FKA Milwaukee, WI 53202 Assistant Firstar Mutual Fund Services, LLC) since March 1997 (35) * Secretary of FAIF since September 2001 ----------------------- ----------------- -------------------- --------------------------------------------------------
* Messrs. Schreier, Jordahl, Wilson, and Nelson are each officers of U.S. Bancorp Asset Management, Inc., which serves as investment adviser for FAIF. Mr. Hess is an officer of U.S. Bancorp Fund Services, LLC, which is a subsidiary of U.S. Bancorp and which serves as Co-Administrator 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 Nominating Committee.
---------------- ------------------------------------------------ ---------------------------- ------------------------ COMMITTEE FUNCTION COMMITTEE MEMBERS NUMBER OF FUND COMPLEX COMMITTEE MEETINGS HELD DURING LAST FISCAL YEAR ---------------- ------------------------------------------------ ---------------------------- ------------------------ Audit Committee The Committee will recommend annually to the Leonard Kedrowski (Chair) 8 Board of Directors a firm of independent Roger Gibson certified public accountants to audit the Richard Riederer books and records of the funds for the ensuing Virginia Stringer year. In connection therewith, the Committee (ex-officio) will monitor that firm's performance, including a review of each audit and review of fees paid, confer with that firm as to the funds' financial statements and internal controls, evaluate the firm's independence, review procedures to safeguard portfolio securities, review the purchase by the funds from the firm of nonaudit services, facilitate communications with management and service providers and review funds' back-up procedures and disaster recovery plans. ---------------- ------------------------------------------------ ---------------------------- ------------------------ ---------------- ------------------------------------------------ ---------------------------- ------------------------ Pricing The Committee is responsible for valuing Joseph Strauss (Chair) 8 Committee portfolio securities for which market Andrew Hunter quotations are not readily available, pursuant John Murphy to procedures established by the Board of Virginia Stringer Directors. (ex-officio) ---------------- ------------------------------------------------ ---------------------------- ------------------------ ---------------- ------------------------------------------------ ---------------------------- ------------------------ Nominating The Committee is responsible for recommending to Andrew Hunter (Chair) 2 Committee the Board of Directors (1) nominees for election Roger Gibson as directors, (2) a successor to the Chair when Richard Riederer a vacancy occurs, and (3) compensation plans and Virginia Stringer arrangements for the directors; and reviewing (ex-officio) with the Chair, the Chair's recommended Committee assignments. ---------------- ------------------------------------------------ ---------------------------- ------------------------
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.
-------------------------- ------------------------------------------- ------------------------------------------------ NAME OF DIRECTOR DOLLAR RANGE OF EQUITY SECURITIES IN FAIF AGGREGATE DOLLAR RANGE OF EQUITY SECURITIES IN THE FIRST AMERICAN FUNDS COMPLEX* -------------------------- ------------------------------------------- ------------------------------------------------ VIRGINIA STRINGER Over $100,000 Over $100,000 -------------------------- ------------------------------------------- ------------------------------------------------ LEONARD KEDROWSKI Over $100,000 Over $100,000 -------------------------- ------------------------------------------- ------------------------------------------------ ROGER GIBSON $10,001-$50,000 $10,001-$50,000 -------------------------- ------------------------------------------- ------------------------------------------------ ANDREW HUNTER None Over $100,000 -------------------------- ------------------------------------------- ------------------------------------------------ JOSEPH STRAUSS Over $100,000 Over $100,000 -------------------------- ------------------------------------------- ------------------------------------------------ RICHARD RIEDERER $50,001-$100,000 $50,001-$100,000 -------------------------- ------------------------------------------- ------------------------------------------------ JAMES WADE Over $100,000 Over $100,000 -------------------------- ------------------------------------------- ------------------------------------------------ JOHN MURPHY $1 - $10,000 Over $100,000 -------------------------- ------------------------------------------- ------------------------------------------------
14 * The dollar range disclosed is based on the value of the securities as of October 1, 2002. As of October 1, 2002, 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 Fund 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 Fund. APPROVAL OF INVESTMENT ADVISORY CONTRACT The Board of Directors approved the Advisory Agreement on December 4, 2002. In connection with its approval, the Board of Directors reviewed and considered the following factors: * the terms of the Advisory Agreement, including the nature and scope of services to be provided by the Advisor to the Fund; * the structure and rate of the fees proposed to be charged by the Advisor under the Advisory Agreement (both before and after fee waivers by the Advisor), as compared to the advisory fees paid by similar funds managed by other investment advisors; * the other benefits that may be received by the Advisor or its affiliates in providing services to the Fund (including soft dollar benefits received by the Advisor in addition to its investment advisory fee); * the total fees and expenses anticipated to be paid by the Fund, as compared to the total fees and expenses paid by similar funds managed by other investment advisors; * the nature and scope of the investment advisory services that historically have been provided by the Advisor to other funds advised by the Advisor, and the ability of the Advisor to continue to provide the same level and quality of investment advisory services to the Fund in light of the experience and qualifications of the Advisor and its personnel, the Advisor's financial condition, and the terms of the Advisory Agreement. The "similar funds managed by other investment advisors" referred to above were selected by Lipper Inc., an organization which is not affiliated with the Advisor. The information concerning such funds was compiled and provided to the Board of Directors by Lipper Inc. The Board of Directors was led in its review and deliberations by James M. Wade, a "disinterested" director of FAIF whom the Board has designated as Fund Review Liaison. The Board was advised and assisted by counsel to the Independent Directors and Fund Counsel. On the basis of the Board's review and analysis of the foregoing information, the Board found in the exercise of its business judgment that the terms of the Advisory Agreement are fair and reasonable and in the best interest of shareholders of the Fund. No single factor or group of factors was deemed to be determinative by the Board in making these judgments. Instead, the Board based its decisions on the totality of the information which it requested and reviewed. COMPENSATION The First American Family of Funds, which includes FAIF, FAF, FASF, FAIP and the FACEF, currently pays only directors of the funds who are not paid employees or affiliates of the funds, a fee of $40,000 per year ($60,000 in the case of the Chair) plus $10,000 ($15,000 in the case of the Chair) per meeting of the Board attended and $2,500 per Nominating Committee or Audit Committee meeting attended ($3,750 in the case of a committee chair) and reimburses travel expenses of directors and officers to attend Board meetings. In the event of telephonic Board meetings, each participating director receives a fee of $5,000 ($7,500 in the case of the Chair), and in the event of telephonic Nominating or Audit Committee meetings, each participating director receives a fee of $1,250 ($1,875 in the case of the committee chair). In addition, directors may receive a per diem fee of $2,500 per day, plus travel expenses when directors travel out of town on Fund business. However, directors do not receive the $2,500 per diem amount plus the foregoing Board or committee fee for an out-of-town committee or Board meeting but instead receive the greater of the total per diem fee or meeting fee. Legal fees and expenses are also paid to Dorsey & Whitney LLP, the law firm of 15 which James D. Alt, Secretary, and Michael J. Radmer, and Kathleen L. Prudhomme, Assistant Secretaries of FAIF, FAF, FASF, FAIP and FACEF, are partners. 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, FAIP and FACEF collectively (column 5) during the fiscal year ended September 30, 2002. No executive officer or affiliated person of FAIF received any compensation from FAIF in excess of $60,000 during such fiscal year:
----------------------------------- ---------------- ------------------- ----------------- ------------------- PENSION OR TOTAL AGGREGATE RETIREMENT COMPENSATION FROM NAME OF PERSON, POSITION COMPENSATION BENEFITS ACCRUED ESTIMATED REGISTRANT AND FROM AS PART OF FUND ANNUAL BENEFITS FUND COMPLEX PAID REGISTRANT(1) EXPENSES UPON RETIREMENT TO DIRECTORS(2) ----------------------------------- ---------------- ------------------- ----------------- ------------------- Robert J. Dayton(3) $16,073 -0- -0- $58,616 ----------------------------------- ---------------- ------------------- ----------------- ------------------- Andrew S. Duff(4) -0- N/A N/A -0- ----------------------------------- ---------------- ------------------- ----------------- ------------------- Roger A. Gibson, Director 27,210 -0- -0- 104,350 ----------------------------------- ---------------- ------------------- ----------------- ------------------- Andrew M. Hunter III, Director 21,640 -0- -0- 87,500 ----------------------------------- ---------------- ------------------- ----------------- ------------------- Leonard W. Kedrowski, Director 38,043 -0- -0- 153,825 ----------------------------------- ---------------- ------------------- ----------------- ------------------- John M. Murphy, Jr., Director(5) -0- N/A N/A -0- ----------------------------------- ---------------- ------------------- ----------------- ------------------- Richard K. Riederer, Director 36,469 -0- -0- 133,000 ----------------------------------- ---------------- ------------------- ----------------- ------------------- Joseph D. Strauss, Director 28,130 -0- -0- 102,875 ----------------------------------- ---------------- ------------------- ----------------- ------------------- Virginia L. Stringer, Director & 47,599 -0- -0- 176,125 Chair ----------------------------------- ---------------- ------------------- ----------------- ------------------- James M. Wade, Director 26,392 -0- -0- 96,250 ----------------------------------- ---------------- ------------------- ----------------- -------------------
(1) Included in the Aggregate Compensation From Registrant under column 2 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, $12,904; Andrew M. Hunter III, $21,640; Leonard W. Kedrowski, $38,043; Joseph D. Strauss, $730; and Virginia L. Stringer, $6,399. (2) Deferred compensation is included in the Total Compensation under column 5 for the following directors: Roger A. Gibson, $52,175; Andrew M. Hunter III, $87,500; Leonard W. Kedrowski, $153,825; Joseph D. Strauss, $2,950; and Virginia L. Stringer, $25,875. (3) On May 15, 2002, Robert J. Dayton tendered his resignation from the Board of Directors of the Funds, effective September 30, 2002. (4) At the August 30, 2001 shareholder meeting, Andrew S. Duff was elected to the Board of Directors. Mr. Duff, who was an "interested person," did not receive any compensation and resigned from the Board of Directors on December 5, 2001. (5) As an "interested person," John M. Murphy do not receive compensation from FAIF, FAF, FASF, FAIP or FACEF for his position on the Board of Directors. ---------------------- 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 the 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 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. SALES LOADS Purchases of the Fund's Class A Shares by the Advisor, any of its affiliates, or any of its or FAIF's officers, directors, employees, retirees, sales representatives and partners, registered representatives of any broker-dealer authorized to sell Fund shares, and full-time employees of FAIF's counsel, and members of their immediate families (i.e., parent, child, spouse, sibling, step or adopted relationships, grandparent, grandchild and UTMA accounts naming qualifying persons), may be made at net asset value without a sales charge. CODE OF ETHICS First American Investment Funds, Inc., U.S. Bancorp Asset Management, 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 16 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 Securities and Exchange Commission. INVESTMENT ADVISORY AND OTHER SERVICES FOR THE FUND INVESTMENT ADVISOR U.S. Bancorp Asset Management, 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, 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, in turn, 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 operates four banks and eleven trust companies with banking offices in twenty-four contiguous states. U.S. Bancorp also has various other subsidiaries engaged in financial services. At September 30, 2002, U.S. Bancorp and its consolidated subsidiaries had consolidated assets of approximately $167.8 billion, consolidated deposits of $107.4 billion and shareholders' equity of $17.5 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 the Fund's average daily net assets (before any waivers), as set forth in the table below: NAME OF FUND GROSS ADVISORY FEE Large Cap Select Fund 0.65 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 Fund 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 Fund within the framework of the Fund's 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 Fund, including the Fund's 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 Fund with the necessary personnel, office facilities, and equipment to service the Fund's investments and to discharge its duties as investment advisor of the Fund. In addition to the investment advisory fee, the 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. The 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 Fund 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 Fund. The Advisor has agreed to indemnify the Fund with respect to any loss, liability, judgment, cost or penalty that a Fund may suffer due to a breach of the Advisory Agreement by the Advisor. The Advisor has agreed to a voluntary fee waiver for each of the Fund, which is set forth in the Fund's Prospectuses. Any such fee waiver (or reimbursement) may be discontinued at any time. The Advisor also may absorb or reimburse expenses of the Fund from time to time, in its discretion, while retaining the ability to be reimbursed by the Fund for such amounts prior to the end of the fiscal year. This practice would have the effect of lowering the 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. ADMINISTRATOR 17 U.S. Bancorp Asset Management, Inc. and U.S. Bancorp Fund Services, LLC ("UBFS"), 615 East Michigan Street, Milwaukee, WI 53202 (collectively the "Administrators"), serve as Co-Administrators pursuant to a Co-Administration Agreement between the Administrators and the FAIF, dated as of October 1, 2001 ("Co-Administration Agreement"). The Administrators will provide administration services to the Fund and serve as the Fund's Administrators. U.S. Bancorp Fund Services is a subsidiary of U.S. Bancorp. Under the Co-Administration Agreement, the Administrators provide, or compensate others to provide, services to the Fund. These services include various oversight and legal services, accounting services, dividend disbursing services and shareholder services. Pursuant to the Co-Administration Agreement, UBFS will also serve as the Fund's transfer agent. The Fund pays the Administrators fees which are calculated daily and paid monthly, equal to the Fund's pro rata share of an amount equal, on an annual basis, to 0.25% of the aggregate average daily assets of all open-end mutual funds in the First American fund family up to $8 billion, 0.235% on the next $17 billion of aggregate average daily assets, 0.22% on the next $25 billion of aggregate average daily assets, and 0.20% of the aggregate average daily net assets of all open-end mutual funds in the First American fund family in excess of $50 billion. (For the purposes of this Agreement, the First American fund family includes all series of FAF, FASF, FAIF and FAIP.) In addition, the Fund pays annual fees of $18,500 per CUSIP, shareholder account maintenance fees of $9 to $15 per account, closed account fees of $3.50 per account, and Individual Retirement Account fees of $15 per account. DISTRIBUTOR Quasar Distributors, LLC ("Quasar" or the "Distributor") serves as the distributor for the Fund's shares. The Distributor is a wholly-owned subsidiary of U.S. Bancorp. The Distributor serves as distributor for the Class A, Class S and Class Y Shares pursuant to a Distribution Agreement dated October 1, 2001 (the "Distribution Agreement") between itself and the FAIF, as distributor for the Class B Shares pursuant to a Distribution and Service Agreement dated October 1, 2001, (the "Class B Distribution and Service Agreement") between itself and the FAIF, and as distributor for the Class C Shares pursuant to a Distribution and Service Agreement dated October 1, 2001 ("Class C Distribution and Service Agreement") between itself and the FAIF. These agreements are referred to collectively as the "Distribution Agreements." 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 Agreements, the Distributor has agreed to perform all distribution services and functions of the Fund to the extent such services and functions are not provided to the Fund pursuant to another agreement. The Distribution Agreements provide that shares of the Fund are distributed through the Distributor and, with respect to Class A, Class B, Class C and Class S Shares, through securities firms, financial institutions (including, without limitation, banks) and other industry professionals (the "Participating Institutions") which enter into sales agreements with the Distributor to perform share distribution or shareholder support services. Participating Institutions that enter into sales agreements with the Fund's Distributor to perform share distribution services may receive a commission on such sales of the Fund equal to 1.00% of the first $3 million, 0.75% of shares purchased in excess of $3 million up to $5 million, and 0.50% of shares purchased in excess of $5 million. U.S. Bancorp Investment Services, Inc. ("USBI") and U.S. Bancorp Piper Jaffray Inc. ("Piper"), broker-dealers affiliated with the Advisor, are Participating Institutions. The Advisor pays FIS, USBI and Piper up to 0.25% of the portion of the Fund's average daily net assets attributable to Class Y Shares for which USBI or Piper are responsible, respectively, in connection with USBI's or Piper's provision of shareholder support services. Such amounts paid to USBI and Piper, by the Advisor, will not affect any agreement by the Advisor to limit expenses of the Fund. 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 institutions through which 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. 18 The Class B 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 B Shares. The fee may be used by the Distributor to provide compensation for shareholder servicing activities with respect to the Class B Shares beginning one year after purchase. The Class B 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 B Shares. The distribution fee is intended to compensate the distributor for advancing a commission to institutions purchasing Class B Shares. 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 institutions through which shareholders hold their shares beginning one year after purchase. The Class S Shares pay to the Distributor a shareholder servicing fee at the annual rate of 0.25% of the average daily net assets of Class S Shares. The fee may be used by the Distributor to provide compensation for shareholder servicing activities with respect to the Class S Shares. This fee is calculated and paid each month based on average daily net assets of the Class S Shares. The Distributor receives no compensation for distribution of the Class Y Shares. The Distribution Agreements provide that they will continue in effect for a period of more than one year from the date of their 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 Plans of Distribution or in any agreement related to such plans. FAIF has entered into a Shareholder Service Plan and Agreement with the Distributor, under which the Distributor has agreed to provide FAIF, or will enter into written agreements with other service providers pursuant to which the service providers will provide FAIF, one or more specified shareholder services to beneficial owners of Class S Shares. The Distributor has agreed that the services provided pursuant to the Shareholder Service Plan and Agreement will in no event be primarily intended to result in the sale of Class S Shares. Pursuant to the Shareholder Service Plan and Agreement, the Fund has agreed to pay the Distributor a fee at an annual rate of 0.25% of the average net asset value of the Class S Shares, computed daily and paid monthly. The Distributor is to pay any shareholder service providers with which it enters into written agreements out of this amount. FAIF has also adopted Plans of Distribution with respect to the Class A, Class B and Class C Shares of the Fund, respectively, pursuant to Rule 12b-1 under the 1940 Act (collectively, the "Plans"). 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 Plans authorize the Distributor to retain the sales charges paid upon purchase of Class A, Class B and Class C Shares. Each of the Plans is a "compensation-type" plan under which the Distributor is entitled to receive the distribution fee regardless of whether its actual distribution expenses are more or less than the amount of the fee. The distribution fees under each of the plans are used for sole-primary purpose of compensating broker-dealers for their sales of the Fund. The Class B and C Plans authorize the Distributor to retain the contingent deferred sales charge applied on redemptions of Class B and C Shares, respectively, except that portion which is reallowed to Participating Institutions. The Plans recognize that the Distributor, any Participating Institution, the Administrator, 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 B and Class C Shares. Any such arrangements to pay such additional costs may be commenced or discontinued by the Distributor, any Participating Institution, the Administrator, or the Advisor at any time. CUSTODIAN AND AUDITORS CUSTODIAN. The custodian of the Fund's assets is U.S. Bank (the "Custodian"), 415 Walnut Street, Cincinnati, OH 45202. The Custodian is a subsidiary of U.S. Bancorp. The Custodian takes no part in determining the investment policies of the Fund or in deciding which securities are purchased or sold by the Fund. All of the instruments 19 representing the investments of the Fund 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 to the Fund, the Custodian is paid a monthly fee calculated on an annual basis equal to 0.01%. In addition, the Custodian is reimbursed for its out-of-pocket expenses incurred while providing its services to the Fund. 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. AUDITORS. Ernst & Young LLP, 1400 Pillsbury Center, Minneapolis, Minnesota 55402, serves as the FAIF independent auditors, providing audit services, including audits of the annual financial statements and assistance and consultation in connection with SEC filings. 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 a variety of factors, including the execution capability, financial responsibility and responsiveness of the broker-dealer in seeking best price and execution. However, in the case of the Advisor, a predominant factor in selecting a broker-dealer to execute securities transactions is often the nature and quality of any brokerage and research services provided by the broker-dealer. The Fund may pay a broker-dealer a commission in excess of that which another broker-dealer might have charged for effecting the same transaction (a practice commonly referred to as "paying up"). The Fund may pay up in recognition of the value of brokerage and research services provided to the Advisor by the broker-dealer. In such cases, the Fund is in effect paying for the brokerage and research services in so-called "soft-dollars". However, the Advisor and Subadvisors would authorize the Fund to pay an amount of commission for effecting a securities transaction in excess of the amount of commission another broker or dealer would have charged only if the Advisor determined in good faith that the amount of such commission was reasonable in relation to the value of the brokerage and research services provided by such broker or dealer, viewed in terms of either that particular transaction or the overall responsibilities of the Advisor with respect to the Fund. The types of brokerage services the Advisor receive from broker-dealers include automated equity trade order entry and execution systems and systems which provide an automated DTC interface to facilitate securities trading, clearance and settlement. Such brokerage services may be provided as a part of a product that bundles many separate and distinct brokerage, execution, investment management, custodial and record-keeping services into one package. The types of research services the Advisor receive 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 hardware and software and related consulting services and other services that assist in the investment decisionmaking process. Research 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 with corporate and industry spokespersons or may be generated by third parties but are provided to the Adviser by, or through, broker-dealers. The research products and services the Advisor receive from broker-dealers are supplemental to, and do not necessarily reduce, the Advisor's own normal research activities. As a practical matter, however, it would be impossible for the Advisor to generate all of the information presently provided by broker-dealers. The expenses of the Advisor would be materially increased if they attempted to generate such additional information through their own staffs. To the extent that the Advisor could use cash to purchase many of the brokerage and research products and services received for allocating securities transactions to broker-dealers, the Advisor are relieved of expenses that they might otherwise bear when such services are provided by broker-dealers. 20 As a general matter, the brokerage and research products and services the Advisor receive from broker-dealers are used to service all of their respective accounts. However, any particular brokerage and research product or service may not be used to service each and every client account, and may not benefit the particular accounts that generated the brokerage commissions. In some cases, the Advisor may receive brokerage or research products or services that are used for both brokerage or research purposes and other purposes, such as accounting, record-keeping, administration or marketing. In such cases, the respective Advisor will make a good faith effort to decide the relative proportion of the cost of such products or services used for non-brokerage or research purposes and will pay for such portion from its own funds. In such circumstance, the Advisor has a conflict of interest in making such decisions. Subject to their best price and execution responsibilities, the Advisor may consider the placement of orders by securities firms for the purchase of Fund shares as a factor in allocating portfolio transactions. The Advisor effects equity securities transactions on behalf of the Fund through its trading desks in Minneapolis. The trading desk makes its own determinations regarding allocation of brokerage among the various broker-dealers it uses to execute trades, including evaluations of the quality of execution, the research products and services received and the commissions paid. The trading desks communicate with each other, and each has access to the trade blotter of the other, but they otherwise operate independently. One trading desk may therefore be selling a given security at the same time that the other trading desk is buying the security. The Fund's portfolio transactions involve payment of a brokerage commission by the Fund directly. 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 Fund typically deal with market makers unless it appears that better price and execution are available elsewhere. Foreign equity securities may be held in the form of American Depositary Receipts, or ADRs, European Depositary Receipts, or EDRs, or securities convertible into foreign equity securities. ADRs and EDRs may be listed on stock exchanges or traded in the over-the-counter markets in the United States or overseas. The foreign and domestic debt securities and money market instruments in which the Fund may invest are generally traded in the over-the-counter markets. The Fund does not effect any brokerage transactions in their portfolio securities with any broker or dealer affiliated directly or indirectly with the Advisor or the 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 Fund, 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 Fund as the Fund 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 accordance with a formula 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 the Fund's $.0001 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 Fund have no preemptive or conversion rights. Each share of the Fund has one vote. On some issues, such as the election of directors, all shares of the Fund vote together as one series. The shares do not have cumulative voting rights. Consequently, the holders of more than 50% of the shares voting for the election of directors are able to elect all of the directors if they choose to do so. On 21 issues affecting only a particular Fund or class of shares, the shares of the Fund or class will vote as a separate series. Examples of such issues would be proposals to alter a fundamental investment restriction pertaining to the Fund or to approve, disapprove or alter a distribution plan pertaining to a class of shares. Under the laws of the state of Maryland and FAIF's Bylaws, FAIF is not required to hold shareholder meetings unless they (i) are required by the 1940 Act, or (ii) are requested in writing by the holders of 10% or more of the outstanding shares of FAIF. 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 Fund's Prospectuses. The public offering price of the Fund's Class A and Class C Shares as of the inception of the Fund was $10 per share. Please note that the public offering prices of Class B, Class Y and Class S Shares are the same as net asset value since no sales charges are imposed on the purchase of such shares. The net asset value of the 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, the 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 the Fund holds securities which are traded in foreign markets. FUND PERFORMANCE LINKED PERFORMANCE. Advertisements and other sales literature for the Fund's Class Y shares may include linked performance where there is a performance history of less than five years. That is, in situations where a Fund has a share class with an inception date reflecting a performance history longer than five years, but that same Fund's Class Y shares have an inception date reflecting a shorter performance history, the Fund may advertise Class Y share performance "linked" to the inception date of the older share class. This performance presentation will not be adjusted to reflect actual Class Y share fees and expenses, and the Fund will (additionally) provide performance based on the Fund's actual Class Y share inception date. Fund prospectuses and annual report(s) will continue to reflect actual share class performance from actual inception dates. PERFORMANCE PRESENTATION. Advertisements and other sales literature for the Fund may refer to a Fund's "average annual total return" and "cumulative total return." In addition, the Fund may provide yield calculations in advertisements and other sales literature. All such yield and total return quotations are based on historical earnings and are not intended to indicate future performance. The return on and principal value of an investment in any of the Funds will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. AVERAGE ANNUAL TOTAL RETURN. Average annual total return is the average annual compounded rate of return on a hypothetical $1,000 investment made at the beginning of the advertised period. Average annual total return figures are computed according to the following formula: P(1 + T)(n) = ERV Where: P = a hypothetical initial payment of $1,000 T = average annual total return n = number of years ERV = ending redeemable value at the end of the period of a hypothetical $1,000 payment made at the beginning of such period 22 This calculation deducts the maximum sales charge from the initial hypothetical $1,000 investment, assumes all dividends and capital gains distributions are reinvested at net asset value on the appropriate reinvestment dates as described in the applicable Prospectus, and includes all recurring fees, such as investment advisory and management fees, charged to all shareholder accounts. For Class B and Class C Shares, the calculation assumes the maximum deferred sales load is deducted at the times, in the amounts and under the terms disclosed in the applicable Prospectus. Average annual total return quotations may be accompanied by quotations that do not reflect the sales charges, and therefore will be higher. The Advisor and Distributor have waived a portion of their fees on a voluntary basis, thereby increasing total return and yield. These fees may or may not be waived in the future in the Advisor's or Distributor's discretion. CUMULATIVE TOTAL RETURN. Cumulative total return is calculated by subtracting a hypothetical $1,000 investment in a Fund from the redeemable value of such investment at the end of the advertised period, dividing such difference by $1,000 and multiplying the quotient by 100. Cumulative total return is computed according to the following formula: CTR = (ERV-P) 100 ----- P Where: CTR = Cumulative total return; ERV = ending redeemable value at the end of the period of a hypothetical $1,000 payment made at the beginning of such period; and P = initial payment of $1,000. This calculation assumes all dividends and capital gain distributions are reinvested at net asset value on the appropriate reinvestment dates as described in the applicable Prospectus and includes all recurring fees, such as investment advisory and management fees, charged to all shareholder accounts. YIELD. Yield is computed by dividing the net investment income per share (as defined under Securities and Exchange Commission rules and regulations) earned during the advertised period by the offering price per share (including the maximum sales charge) on the last day of the period. The result will then be "annualized" using a formula that provides for semi-annual compounding of income. Yield is computed according to the following formula: YIELD = 2[(a-b + 1)(6) - 1] --- cd Where: a = dividends and interest earned during the period; b = expenses accrued for the period (net of reimbursements); c = the average daily number of shares outstanding during the period that were entitled to receive dividends; and d = the maximum offering price per share on the last day of the period. CERTAIN PERFORMANCE COMPARISONS. In addition to advertising total return and yield, comparative performance information may be used from time to time in advertising the Fund's shares, including data from Lipper, Inc. ("Lipper"), Morningstar, other industry publications and other entities or organizations which track the performance of investment companies. The performance of the Fund may be compared to that of its unmanaged benchmark index and to the performance of similar funds as reported by Lipper or such other database services. HISTORICAL DISTRIBUTION RATES. The Fund's historical annualized distribution rates are computed by dividing the income dividends of the Fund for a stated period by the maximum offering price on the last day of such period. ANNUALIZED CURRENT DISTRIBUTION RATES. The Fund's annualized current distribution rates are computed by dividing the Fund's income dividends for a specified three-month period by the number of days in that three-month period and multiplying by 365, and dividing the resulting figure by the maximum offering price on the last day of the specified period. TAXATION 23 The 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, the Fund will not be liable for federal income taxes to the extent it distributes its taxable income to its shareholders. If the Fund invests in U.S. Treasury inflation-protection securities, it will be required to treat as original issue discount any increase in the principal amount of the securities that occurs during the course of its taxable year. If a Fund purchases such inflation-protection securities that are issued in stripped form either as stripped bonds or coupons, it will be treated as if it had purchased a newly issued debt instrument having original issue discount. Generally, the original issue discount equals the difference between the "stated redemption price at maturity" of the obligation and its "issue price" as those terms are defined in the Code. A Fund holding an obligation with original issue discount is required to accrue as ordinary income a portion of such original issue discount even though it receives no cash currently as interest payment corresponding to the amount of the original issue discount. Because the Fund is required to distribute substantially all of its net investment income (including accrued original issue discount) in order to be taxed as a regulated investment company, it may be required to distribute an amount greater than the total cash income it actually receives. Accordingly, in order to make the required distributions, the Fund may be required to borrow or liquidate securities. Some of the investment practices that may be employed by the Fund will be subject to special provisions that, among other things, may defer the use of certain losses of the Fund, affect the holding period of the securities held by the Fund 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 Fund to mark-to-market some of the positions in its portfolio (i.e., treat them as closed out) or to accrue original discount, both of which may cause the Fund 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, the 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 Fund as regulated investments companies. 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 90% of gross income from qualified sources requirement, as discussed above. Any loss on the sale or exchange of shares of the Fund generally will be disallowed to the extent that a shareholder acquires or contracts to acquire shares of the the 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 "Managing Your Investment -- Exchanging Shares" in the Prospectuses), such exchange will be considered a taxable sale of the shares being exchanged. Furthermore, if a shareholder of Class A Class B 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 the 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 24 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. The 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 Untied States or a political subdivision thereof, (iii) an estate whose income is includible in gross income for U.S. federal income tax purposes of (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 The sales charge can be reduced on the purchase of Class A Shares through (i) quantity discounts and accumulated purchases, or (ii) signing a 13-month letter of intent. QUANTITY DISCOUNTS AND ACCUMULATED PURCHASES: The Fund will combine purchases made by an investor, the investor's spouse, and the investor's children when it calculates the sales charge. In addition, the sales charge, if applicable, is reduced for purchases made at one time by a trustee or fiduciary for a single trust estate or a single fiduciary account. 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 shares of any other First American fund (other than a money market fund) that you are concurrently purchasing, plus (iii) the higher of the current net asset value or the original purchase price of Class A shares of the Fund or any other First American fund (other than a money market fund) that your 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. LETTER OF INTENT: If an investor intends to purchase, in the aggregate, at least $50,000 of Class A shares in the Fund and 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 Fund's 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. SALES OF CLASS A SHARES AND CLASS C SHARES AT NET ASSET VALUE Purchases of the Fund's Class A Shares by the Advisor, any of its affiliates, or any of its or FAIF's officers, directors, employees, retirees, sales representatives and partners, registered representatives of any broker-dealer authorized to sell Fund shares, and full-time employees of FAIF's counsel, and members of their immediate families (i.e., parent, child, spouse, sibling, step or adopted relationships, grandparent, grandchild and UTMA accounts naming qualifying persons), may be made at net asset value without a sales charge. A Fund's Class A Shares also may be purchased at net asset value without a sales charge by fee-based registered investment advisors, financial planners and registered broker-dealers who are purchasing shares on behalf of their customers and by purchasers through "one-stop" 25 mutual fund networks through which the Fund is made available. Class A Shares may be purchased at net asset value without a sales charge by investors participating in asset allocation "wrap" accounts offered by the Advisor or any of its affiliates, and by retirement and deferred compensation plans and the trusts used to fund such plans (including, but not limited to, those defined in Sections 401(k), 403(b) and 457 of the Internal Revenue Code and "rabbi trusts"), which plans and trusts purchase through "one-stop" mutual fund networks. In addition, purchases of Class A Shares for an investor's medical savings account for which U.S. Bank or an affiliate serves in a custodian capacity may be made at net asset value without a sales charge. The Advisor may pay its affiliated Broker-Dealers, U.S. Bancorp Piper Jaffray Inc. and U.S. Bancorp Investments, Inc., a commission of up to 2% of your purchase price in connection with net asset value purchases of Class A shares made pursuant to this paragraph. Class A shares may be purchased without a sales charge by non-retirement accounts if they total $1 million or more. Your investment professional or financial institution may receive a commission equal to 1.00% of the first $3 million, 0.75% of shares purchased in excess of $3 million up to $5 million, and 0.50% of shares purchased in excess of $5 million. Equity Index Fund, Mid Cap Index Fund, and Small Cap Index Fund (the "Index Funds") may be used in the calculation to reach purchases of $1 million or more, but a commission is paid only on Class A shares of First American Funds other than the Index funds. 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 have 200 or more eligible participants. 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 Fund's distributor to perform share distribution services may receive a commission on such sales of the Fund (except from sales of the Index Funds) equal to 1.00% of the first $3 million, 0.75% of shares purchased in excess of $3 million up to $5 million, and 0.50% of shares purchased in excess of $5 million. 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 institution 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. Class C Shares may be purchased without a sales charge by the web-based 401(k) plan product offered by U.S. Bank. ADDITIONAL INFORMATION ABOUT SELLING SHARES BY TELEPHONE A shareholder may redeem shares of the Fund, if he or she elects the privilege on the initial shareholder application, by calling his or her financial institution 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 institution (less the amount of any applicable contingent deferred sales charge). Redemption requests must be received by the financial institution by the time specified by the institution 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 Fund 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 institution has been authorized to accept redemption requests on behalf of the Fund. Pursuant to instructions received from the financial institution, redemptions will be made by check or by wire transfer. It is the financial institution's responsibility to transmit redemption requests promptly. Certain financial institutions are authorized to act as the Fund's agent for the purpose of accepting redemption requests, and the Fund 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 institution 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 26 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 Fund determines it necessary to terminate or modify this method of redemption, shareholders will be promptly notified. The Fund may limit telephone redemption requests to $50,000 per day. 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 Administrators nor any Fund 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 Administrators and the Fund 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 Administrators examine each shareholder request by verifying the account number and/or tax identification number at the time such request is made. The Administrators subsequently send confirmation of both exchange sales and exchange purchases to the shareholder for verification. If reasonable procedures are not employed, the Administrators and the Fund 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 Administrators, shareholder servicing agent, or financial institution. 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 Fund does not accept signatures guaranteed by a notary public. The Fund and the Administrators have adopted standards for accepting signature from the above institutions. The Fund may elect in the future to limit eligible signature guarantees to institutions that are members of a signature guarantee program. The Fund and the Administrators 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 Administrators are reasonably certain that the purchase payment has cleared, which could take up to fifteen calendar days from the purchase date. RATINGS 27 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 Fund is 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. 28 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 which 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 which 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 which 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 which 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 which 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 which 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 which 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 which are rated Ca represent obligations which are speculative in a high degree. Such issues are often in default or have other marked shortcomings. C: Bonds and preferred stock which 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. RATINGS OF COMMERCIAL PAPER 29 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. 30 FIRST AMERICAN INVESTMENT FUNDS, INC. PART C -- OTHER INFORMATION ITEM 23. EXHIBITS (a)(1) Amended and Restated Articles of Incorporation, as amended through April 2, 1998 (Incorporated by reference to Exhibit (1) to Post-Effective Amendment No. 36, Filed on April 15, 1998 (File Nos. 33-16905, 811-05309)). (a)(2) 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. 33-16905, 811-05309)). (a)(3) 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. 33-16905, 811-05309)). (a)(4) 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. 33-16905, 811-05309)). *(a)(5) 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, as amended and supplemented through August 1994, and assigned to U.S. Bancorp Asset Management, Inc. on May 2, 2001 (Incorporated by reference to Exhibit (5)(a) to Post-Effective Amendment No. 21, Filed on May 15, 1995 (File Nos. 33-16905, 811-05309)). *(d)(2) Exhibit A to Investment Advisory Agreement (series and advisory fees). (d)(3) Supplement to Advisory Agreement Relating to International Fund dated December 31, 1993 (Incorporated by reference to Exhibit (d)(3) to Post-Effective Amendment No. 46, Filed on December 28, 2000 (File Nos. 33-16905, 811-05309)). (d)(4) Supplement to Advisory Agreement Relating to Emerging Markets Fund dated July 23, 1998 (Incorporated by reference to Exhibit (d)(4) to Post-Effective Amendment No. 46, Filed on December 28, 2000 (File Nos. 33-16905, 811-05309)). (d)(5) Supplement to Advisory Agreement Relating to Strategic Income Fund dated July 24, 1998 (Incorporated by reference to Exhibit (d)(5) to Post-Effective Amendment No. 46, Filed on December 28, 2000 (File Nos. 33-16905, 811-05309)). (d)(6) Sub-Advisory Agreement dated July 1, 2001, between U.S. Bancorp Asset Management, Inc. and Clay Finlay Inc. with respect to International Fund (Incorporated by reference to Exhibit (d)(6) to Post-Effective Amendment No. 54, Filed on June 27, 2001 (File Nos. 33-16905, 811-05309)). (d)(7) Sub-Advisory Agreement dated July 23, 1998, between U.S. Bank National Association, as assigned to U.S. Bancorp Asset Management, Inc. on May 2, 2001, and Marvin & Palmer Associates, Inc., with respect to Emerging Markets Fund (Incorporated by reference to Exhibit 5(f) to Post-Effective Amendment No. 39, Filed on July 31, 1998 (File Nos. 33-16905, 811-05309)). (d)(8) Sub-Advisory Agreement dated July 24, 1998, between U.S. Bank National Association, as assigned to U.S. Bancorp Asset Management, Inc. on May 2, 2001, and Federated Global Investment Management -1- Corp., with respect to Strategic Income Fund (Incorporated by reference to Exhibit 5(g) to Post-Effective Amendment No. 39, Filed on July 31, 1998 (File Nos. 33-16905, 811-05309)). (e)(1) Distribution Agreement [Class A and Class Y Shares,] between the Registrant and Quasar Distributors, LLC (Incorporated by reference to Exhibit e(1) to Post-Effective Amendment No. 58, Filed on September 21, 2001 (File Nos. 33-16905, 811-05309)). (e)(2) Distribution and Service Agreement [Class B] between the Registrant and Quasar Distributors, LLC (Incorporated by reference to Exhibit e(2) to Post-Effective Amendment No. 58, Filed on September 21, 2001 (File Nos. 33-16905, 811-05309)). (e)(3) Distribution and Service Agreement [Class C] between the Registrant and Quasar Distributors, LLC (Incorporated by reference to Exhibit e(3) to Post-Effective Amendment No. 58, Filed on September 21, 2001 (File Nos. 33-16905, 811-05309)). (e)(4) Shareholder Service Plan and Agreement [Class S] between Registrant and Quasar Distributors, LLC (Incorporated by reference to Exhibit e(4) to Post-Effective Amendment No. 58, Filed on September 21, 2001 (File Nos. 33-16905, 811-05309)). (e)(5) Dealer Agreement (Incorporated by reference to Exhibit e(5) to Post-Effective Amendment No. 58, Filed on September 21, 2001 (File Nos. 33-16905, 811- 05309)). (f) Deferred Compensation Plan for Directors Trust Agreement dated January 1, 2000 (Incorporated by reference to Exhibit (f) to Post-Effective Amendment No. 46, Filed on December 28, 2000 (File Nos. 33-16905, 811-05309)). (g)(1) Custodian Agreement dated September 20, 1993, between the Registrant and First Trust National Association, as supplemented through August 1994 (Incorporated by reference to Exhibit (8) to Post-Effective Amendment No. 18 (File Nos. 33-16905, 811-05309)). (g)(2) Supplement dated March 15, 1994, to Custodian Agreement dated September 20, 1993 (File Nos. 33-16905, 811-05309). (g)(3) Further Supplement dated November 21, 1997, with respect to International Index Fund, and July 23, 1998, with respect to Strategic Income Fund and Emerging Markets Fund, to Custodian Agreement dated September 20, 1993 (Incorporated by reference to Exhibit 8(c) to Post-Effective Amendment No. 39, Filed on July 31, 1998 (File Nos. 33-16905, 811-05309)). (g)(4) Compensation Agreement pursuant to Custodian Agreement dated September 20, 1993, as amended (Incorporated by reference to Exhibit (g)(4) to Post-Effective Amendment No. 54, Filed on June 27, 2001 (File Nos. 33-16905, 811-05309)). (g)(5) Compensation Agreement dated as of September 19, 2001, pursuant to Custodian Agreement dated September 20, 1993, as amended (Incorporated by reference to Exhibit (g)(5) to Post-Effective Amendment No. 59, Filed on January 28, 2002 (File Nos. 33-16905, 811-05309)). (g)(6) Assignment of Custodian Agreements and Security Lending Agency Agreement to U.S. Bank National Association, dated May 1, 1998 (Incorporated by reference to Exhibit (g)(5) to Post-Effective Amendment No. 41, Filed on December 2, 1998 (File Nos. 33-16905, 811-05309)). (g)(7) Further Supplement to Custodian Agreement dated December 8, 1999 (Incorporated by reference to Exhibit (g)(6) to Post-Effective Amendment No. 44, Filed on January 28, 2000 (File Nos. 33-16905, 811-05309)). -2- *(g)(8) Compensation Agreement dated as of December 4, 2002, pursuant to Custodian Agreement dated September 20, 1993, as amended. (h)(1) Co-Administration Agreement dated by and between U.S. Bancorp Asset Management, U. S. Bancorp Fund Services, LLC, and First American Investment Funds, Inc., as amended (Incorporated by reference to Exhibit (h)(1) to Post-Effective Amendment No. 65, Filed on October 24, 2002 (File Nos. 33-16905, 811-05309)). (i)(1) Opinion and Consent of Dorsey & Whitney (Incorporated by reference to Exhibit (10)(a) to Post-Effective Amendment No. 15 (File Nos. 33-16905, 811-05309)). (i)(2) Opinion and Consent of Dorsey & Whitney, LLP with respect to Strategic Income Fund, Class HH, dated July 24, 1998 (Incorporated by reference to Exhibit (10)(c) to Post-Effective Amendment No. 38, Filed on July 24, 1998 (File Nos. 33-16905, 811-05309)). (i)(3) Opinion and Consent of Dorsey & Whitney, LLP with respect to Adjustable Rate Mortgage Securities Fund (Class CC), Tax Free Fund (Class DD), Minnesota Tax Free Fund (Class EE), Mid Cap Growth Fund (Class FF) and Emerging Markets Fund (Class GG), dated July 31, 1998 (Incorporated by reference to Exhibit 10(d) to Post-Effective Amendment No. 39, Filed on July 31, 1998 (File Nos. 33-16905, 811-05309)). (i)(4) Opinion and Consent of Dorsey & Whitney, LLP with respect to Arizona Tax Free Fund (II), California Tax Free Fund (JJ), Colorado Tax Free Fund (KK) and Corporate Bond Fund (LL) (Incorporated by reference to Exhibit (i)(5) to Post-Effective Amendment No. 44, Filed on January 28, 2000 (File Nos. 33-16905, 811-05309)). (i)(5) Opinion and Consent of Dorsey & Whitney, LLP with respect to Nebraska Tax Free Fund and High Yield Bond Fund (Incorporated by reference to Exhibit (i)(6) to Post-Effective Amendment No. 47, Filed on January 18, 2001 (File Nos. 33-16905, 811-05309)). (i)(6) Opinion and Consent of Dorsey & Whitney, LLP with respect to new shell funds and share classes (Incorporated by reference to Exhibit i(6) to Post-Effective Amendment No. 58, Filed on September 21, 2001 (File Nos. 33-16905, 811-05309)). (i)(7) Opinion and Consent of Dorsey & Whitney, LLP with respect to Ohio Tax Free Fund (BBB) (Incorporated by reference to Exhibit i(7) to Post-Effective Amendment No. 61, Filed on April 30, 2002 (File Nos. 33-16905, 811-05309)). (i)(8) Opinion and Consent of Dorsey & Whitney, LLP with respect to Short Term Tax Free Fund (CCC) and Intermediate Government Bond Fund (DDD) (Incorporated by reference to Exhibit (i)(8) to Post-Effective Amendment No. 65, Filed on October 24, 2002 (File Nos. 33-16905, 811-05309)). *(i)(9) Opinion and Consent of Dorsey & Whitney, LLP with respect to Large Cap Select Fund (EEE). (j)(1) Opinion and Consent of Dorsey & Whitney, dated November 25, 1991 (Incorporated by reference to Exhibit (11)(b) to Post-Effective Amendment No. 21, Filed on May 15, 1995 (File Nos. 33-16905, 811-05309)). (j)(2) Consent of KPMG Peat Marwick LLP (Incorporated by reference to Exhibit (j)(3) to Post-Effective Amendment No. 44 on January 28, 2000 (File No. 33-16905, 811-0530). (j)(3) Consent of PriceWaterhouseCoopers LP (Incorporated by reference to Exhibit j(4) to Post-Effective Amendment No. 58, Filed on September 21, 2001 (File Nos. 33-16905, 811-05309)). -3- (k) Not applicable. (l) Not applicable. (m)(1) Distribution Plan [Class A], Retail Class (Incorporated by reference to Exhibit (m)(1) to Post-Effective Amendment No. 46, Filed on December 28, 2000 (File Nos. 33-16905, 811-05309)). (m)(2) Distribution Plan [Class B] Contingent Deferred Sales Change Class. (Incorporated by reference to Exhibit 15(b) to Post-Effective Amendment No. 21, Filed on May 15, 1995 (File Nos. 33-16905, 811-05309)). (m)(3) Service Plan [Class B] (Incorporated by reference to Exhibit (15)(c) to Post-Effective Amendment No. 21, Filed on May 15, 1995 (File Nos. 33-16905, 811-05309)). (m)(4) Distribution Plan [Class C] Level-Load Class (Incorporated by reference to Exhibit (m)(4) to Post-Effective Amendment No. 42, Filed on February 1, 1999 (File Nos. 33-16905, 811-05309)). (m)(5) Service Plan [Class C] (Incorporated by reference to Exhibit (m)(5) to Post-Effective Amendment No. 42, Filed on February 1, 1999 (File Nos. 33-16905, 811-05309)). (n)(1) Multiple Class Plan Pursuant to Rule 18f-3, dated June 1, 2001 (Incorporated by reference to Exhibit (n)(1) to Post-Effective Amendment No. 54, Filed on June 27, 2001 (File Nos. 33-16905, 811-05309)). (n)(2) Multiple Class Plan Pursuant to Rule 18f-3, as amended February 21, 2002 (Incorporated by reference to Exhibit (n)(2) to Post-Effective Amendment No. 61, Filed on April 30, 2002 (File Nos. 33-16905, 811-05309)). (o) Reserved. (p)(1) First American Funds Code of Ethics (Incorporated by reference to Exhibit p(1) to Post-Effective Amendment No. 58, Filed on September 21, 2001 (File Nos. 33-16905, 811-05309)). (p)(2) U.S. Bancorp Asset Management, Inc. Code of Ethics (Incorporated by reference to Exhibit p(2) to Post-Effective Amendment No. 58, Filed on September 21, 2001 (File Nos. 33-16905, 811-05309)). (p)(3) Marvin & Palmer Associates, Inc. Code of Ethics (Incorporated by reference to Exhibit p(3) to Post-Effective Amendment No. 58, Filed on September 21, 2001 (File Nos. 33-16905, 811-05309)). (p)(4) Clay Finlay Inc. Code of Ethics (Incorporated by reference to Exhibit p(4) to Post-Effective Amendment No. 58, Filed on September 21, 2001 (File Nos. 33-16905, 811-05309)). (p)(5) Federated Investors, Inc. Code of Ethics, as amended (Incorporated by reference to Exhibit (p)(4) to Post-Effective Amendment No. 46, Filed on December 28, 2000 (File Nos. 33-16905, 811-05309)). (p)(6) Quasar Distributors, LLC Code of Ethics (Incorporated by reference to Exhibit p(6) to Post-Effective Amendment No. 58, Filed on September 21, 2001 (File Nos. 33-16905, 811-05309)). * To be filed by amendment. ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE FUND Not applicable. ITEM 25. INDEMNIFICATION -4- The first four paragraphs of Item 27 of Part C of Pre-Effective Amendment No. 1 to the Registrant's Registration Statement on Form N-1A, dated November 27, 1987, are incorporated herein by reference. On February 18, 1988 the indemnification provisions of the Maryland General Corporation Law (the "Law") were amended to permit, among other things, corporations to indemnify directors and officers unless it is proved that the individual (1) acted in bad faith or with active and deliberate dishonesty, (2) actually received an improper personal benefit in money, property or services, or (3) in the case of a criminal proceeding, had reasonable cause to believe that his act or omission was unlawful. The Law was also amended to permit corporations to indemnify directors and officers for amounts paid in settlement of stockholders' derivative suits. The Registrant undertakes that no indemnification or advance will be made unless it is consistent with Sections 17(h) or 17(i) of the Investment Company Act of 1940, as now enacted or hereafter amended, and Securities and Exchange Commission rules, regulations, and releases (including, without limitation, Investment Company Act of 1940 Release No. 11330, September 2, 1980). Insofar as the indemnification for liability arising under the Securities Act of 1933, as amended, may be permitted to directors, officers, and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in such Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer, or controlling person of the Registrant in the successful defense of any action, suit, or proceeding) is asserted by such director, officer, or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933, as amended, and will be governed by the final adjudication of such issue. The Registrant maintains officers' and directors' liability insurance providing coverage, with certain exceptions, for acts and omissions in the course of the covered persons' duties as officers and directors. ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER Information on the business of the Registrant's investment adviser, U.S. Bancorp Asset Management (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., Chief Executive Officer and chair of Board of Directors, USBAM, Minneapolis, MN (May 2001 to present); President, First American Investment Funds, Inc. ("FAIF"), First American Funds, Inc. ("FAF"), First American Strategy Funds, Inc. ("FASF"), First American Insurance Portfolios, Inc. ("FAIP"), and nine closed-end funds advised by USBAM, 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., American Municipal Term Trust Inc. - III, Minnesota Municipal Term Trust Inc. - II, and American Income Fund, collectively referred to as the First American Closed-End Funds ("FACEF"), Minneapolis, MN (February 2001 to present); CEO, First American Asset Management, Minneapolis, MN (January 2001 to May 2001); CEO and President, Firstar Investment & Research Management Company ("FIRMCO"), Minneapolis, MN (March 2001 to May 2001); Senior Managing Director, Equity Research, U.S. Bancorp Piper Jaffray Inc., Minneapolis, MN (October 1998 to December 2000). Mark S. Jordahl, Chief Investment Officer and director on Board of Directors, USBAM, Minneapolis, MN (July 2001 to present); Vice President, FAIF, FAF, FASF, FAIP and FACEF, Minneapolis, MN (September 2001 to present); President and Chief Investment Officer, ING Investment Management - Americas (September 2000 to June 2001); Senior Vice President and Chief Investment Officer, ReliaStar Financial Corp. (January 1998 to September 2000). -5- Kenneth L. Delecki, Chief Financial Officer and director on Board of Directors, USBAM, Minneapolis, MN (May 2001 to present); CFO and Treasurer, First American Asset Management, Minneapolis, MN (March 2001 to May 2001); Director, Business Performance, U.S. Bancorp Piper Jaffray Inc., Minneapolis, MN (September 2000 to March 2001); Independent Consultant, Edina, MN (May 1999 to September 2000). John J. Gibas, Senior Managing Director, Institutional Advisory Group, and director on Board of Directors, USBAM, Minneapolis, MN (May 2001 to present); Managing Director, Institutional Advisory Group, FAAM, Minneapolis, MN (September 1998 to May 2001). Kimberly F. Kaul, Communications Director, USBAM, Minneapolis, MN (May 2001 to present); Communications Director, FAAM, Minneapolis, MN (September 1998 to May 2001). Robert H. Nelson, Chief Operating Officer and director on Board of Directors, USBAM, Minneapolis, MN (May 2001 to present); Senior Vice President, FAAM, Minneapolis, MN (September 1998 to May 2001); Treasurer, FAF, FAIF, FASF, FAIP, and FACEF, Minneapolis, MN (March 2000 to present). Tony Rodriguez, Senior Managing Director, Head of Fixed Income, USBAM, Minneapolis, MN (August 2002 to present); Director and Head of Corporate Bonds, Credit Suisse Asset Management, New York, NY (1999 to August 2002). Jon M. Stevens, Senior Managing Director, Private Asset Management, USBAM, Minneapolis, MN (January 2002 to present); Senior Managing Director, Private Asset Management, U.S. Bank, Minneapolis, MN (July 2001 to January 2002); Managing Director, private asset management, Minneapolis, MN (September 1998 to July 2001). ITEM 27. PRINCIPAL UNDERWRITERS: a) State the name of the investment company (other than the Fund) for which each principal underwriter currently distributing the Fund's securities also acts as a principal underwriter, depositor, or investment adviser. Registrant's distributor, Quasar Distributors, LLC (the "Distributor") acts as principal underwriter and distributor for Cullen Funds Trust, Country Mutual Funds Trust, The Hennessy Mutual Funds, Inc., The Hennessy Funds, Inc., Kit Cole Investment Trust, Everest Funds , Brandywine Advisors Fund, Light Revolution Fund, Inc., The Jensen Portfolio, First American Insurance Portfolios, Inc., The Lindner Funds, AHA Investment Funds, Wexford Trust, The Muhlenkamp Fund, Mutuals.com, The Generation Wave Funds, VICE Fund, First American Funds, Inc., First American Strategy Funds, Inc., Zodiac Trust, Conning Money Market Portfolio, CCMA Select Investment Trust, CCM ADVISORS FUNDS, Glenmede Fund, Inc., DAL Investment Company, Fort Pitt Capital Funds, MW Capital Management Funds, Quintara Funds, Jacob Internet Fund, The Teberg Fund, Alpine Series Trust, Alpine Equity Trust, LKCM Funds, Monetta Fund, Inc., Monetta Trust, Kenwood Funds, Thompson Plumb Funds, Inc., Alpha Analytics Investment Trust, Alternative Investment Advisors, Alpha Strategies 1 Fund, Blue & White Fund (Blue and White Investment Management, LLC), Al Frank Fund (PART OF AST MST), Dow Jones Islamic Index, Optimum Q Funds (MDT Advisers, Inc.), Matrix Asset Advisor Value Fund, Inc. Brazos Mutual Funds, Prudent Bear Mutual Funds, Hollencrest (AST), Advisor Series Trust, Brandes Investment Trust, Brandes Institutional International Equity Fund, Builders Fixed Income Fund, Inc., Dessauer Fund Group, The Dessauer Global Equity Fund, Investec Funds, PIC Investment Trust Funds [Provident Investment Counsel], Professionally Managed Portfolios (PMP), Purisma Funds, Rainier Funds, TT International, SEIX Funds, Inc. TIFF Investment Program, Inc., FFTW Funds, Inc., Harding Loevner Funds, Inc. b) Provide the information required by the following table for each director, officer, or partner of each principal underwriter named in the response to Item 20. Unless otherwise noted, the business address for each Quasar Distributors, LLC Board Member or Officer is 615 East Michigan Street, Milwaukee, WI 53202. -6- Name Position and Offices with Position and Offices with Underwriter Registrant ------------------------------------------------------------------------------- James Schoenike President, Board Member None Donna Berth Treasurer None Suzanne Riley Secretary None Joe Redwine Board Member None Bob Kern Board Member None Eric Falkeis Board Member 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 U.S. Bancorp Asset Management, Inc. 800 Nicollet Mall, Minneapolis, Minnesota, 55402. 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(a) of the Securities Act of 1933, as amended, and has duly caused this Post-Effective Amendment to its Registration Statement Nos. 33-16905 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 16thth day of December, 2002. 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 capacity and on the dates indicated. SIGNATURE TITLE DATE --------- ----- ---- /s/ Thomas S. Schreier, Jr. President ** --------------------------- Thomas S. Schreier, Jr. /s/ Robert H. Nelson Treasurer (principal ** --------------------------- financial/accounting Robert H. Nelson officer) * Director ** --------------------------- John M. Murphy, Jr. -7- * Director ** --------------------------- Andrew M. Hunter III * Director ** --------------------------- Leonard W. Kedrowski * Director ** --------------------------- Richard K. Riederer * Director ** --------------------------- Joseph D. Strauss * Director ** --------------------------- Virginia L. Stringer * Director ** --------------------------- Roger A. Gibson * Director ** --------------------------- James M. Wade * By: /s/ Christopher O. Petersen --------------------------- Christopher O. Petersen Attorney-in-Fact ** December 16, 2002 FIRST AMERICAN FUNDS, INC. FIRST AMERICAN INVESTMENT FUNDS, INC. FIRST AMERICAN STRATEGY FUNDS, INC. FIRST AMERICAN INSURANCE PORTFOLIOS, INC. POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned persons hereby constitute and appoint Robert H. Nelson, Jeffery M. Wilson, James D. Alt, and Christopher O. Petersen and each of them, his or her true and lawful attorneys-in-fact and agents, each acting alone, with full power of substitution and re-substitution, for him or her and in his or her name, place and stead, in any and all -8- capacities, to sign Registration Statements on Form N-1A of First American Funds, Inc., First American Investment Funds, Inc., First American Strategy Funds, Inc., and First American Insurance Portfolios, Inc., and any and all amendments thereto, including post-effective amendments, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, each acting alone, with full power and authority to do and perform to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, each acting alone, or the substitutes for such attorneys-in-fact and agents, may lawfully do or cause to be done by virtue hereof. SIGNATURE TITLE DATE /s/ John M. Murphy, Jr. Director September 18, 2002 --------------------------- John M. Murphy, Jr. /s/ Roger A. Gibson Director September 18, 2002 --------------------------- Roger A. Gibson /s/ Andrew M. Hunter III Director September 18, 2002 --------------------------- Andrew M. Hunter III /s/ Leonard W. Kedrowski Director September 18, 2002 --------------------------- Leonard W. Kedrowski /s/ Richard K. Riederer Director September 18, 2002 --------------------------- Richard K. Riederer /s/ Joseph D. Strauss Director September 18, 2002 --------------------------- Joseph D. Strauss /s/ Virginia L. Stringer Chair September 18, 2002 --------------------------- Virginia L. Stringer /s/ James M. Wade Director September 18, 2002 --------------------------- James M. Wade -9-