UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14A
(RULE 14A-101)
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. ___)
Filed by Registrant [X]
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[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2)).
[X] Definitive Proxy Statement.
[ ] Definitive Additional Materials.
[ ] Soliciting Material Pursuant to Section 240.14a-12.
FIRST AMERICAN INVESTMENT FUNDS, INC.
(Name of Registrant as Specified in its Charter)
________________________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
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FIRST AMERICAN INTERNATIONAL FUND
August 11, 2008
Dear First American Fund Shareholder:
You are cordially invited to attend a Special Meeting of the
shareholders of First American International Fund (the "Fund"), a series of
First American Investment Funds, Inc. ("FAIF"), which will be held on Thursday,
September 18, 2008 at 10:00 a.m., Central time, at the offices of FAF Advisors,
Inc. (the "Advisor"), 800 Nicollet Mall, Minneapolis, Minnesota 55402.
The purpose of the Special Meeting is to ask you to approve (1) a
proposed new investment sub-advisory agreement between the Advisor (the Fund's
investment advisor) and Altrinsic Global Advisors, LLC ("Altrinsic"), (2) a
proposed new investment sub-advisory agreement between the Advisor and
Hansberger Global Investors, Inc. ("HGI"), and (3) a "manager-of-managers"
structure for the Fund whereby the Advisor, under certain circumstances, will be
able to hire and replace sub-advisors to the Fund without obtaining shareholder
approval.
You are being asked to approve investment sub-advisory agreements with
Altrinsic and HGI. As you know from the prospectus supplement dated June 20,
2008, the board of directors of the Fund (the "Board") approved the appointment
of Altrinsic and HGI as sub-advisors to the Fund, subject to the approval of the
Fund's shareholders. At the same time, the Board approved termination of the
previous sub-advisory agreement with J.P. Morgan Investment Management Inc.
("JPMorgan"). The Board is now recommending that you approve the appointment of
Altrinsic and HGI as sub-advisors to the Fund. If you approve both agreements at
the Special Meeting, Altrinsic and HGI are expected to assume management of the
Fund from JPMorgan on or about November 1, 2008.
You are also being asked to approve a "manager-of-managers" structure
for the Fund whereby the Advisor, subject to certain conditions, will be able to
hire and replace sub-advisors to the Fund without obtaining shareholder
approval. Manager-of-managers authority would allow the Advisor, with the
Board's approval, to make changes to Fund sub-advisors or change the terms of
sub-advisory agreements without having to seek shareholder approval. This would
provide the Advisor and the Board with the flexibility to implement sub-advisor
changes or materially modify sub-advisory agreements without incurring the
significant delay and potential expense associated with obtaining shareholder
approval. Within 90 days of hiring any new sub-advisor, you will receive all the
information about the sub-advisor and the sub-advisory agreement that would be
included in a proxy statement. The Advisor may not enter into a sub-advisory
agreement with any affiliated sub-advisor without that agreement being approved
by the Fund's shareholders.
These proposals have been thoroughly reviewed by the Board, whose role
it is to protect your interests as a shareholder. The Board believes that
approval of the Fund's sub-advisory agreements with both Altrinsic and HGI is in
the best interests of the Fund and its shareholders and recommends that you vote
FOR these proposals. The Board has also approved the proposed
manager-of-managers structure and recommends that you vote FOR this proposal.
The proxy statement that accompanies this letter contains detailed
information on the proposals. I encourage you to read it carefully. You will
also find information in a "Question and Answer" format designed to provide
answers to some of the questions we anticipate you will have. After you have
read the accompanying materials, please complete, sign and date the enclosed
proxy card and return it in the enclosed postage-paid return envelope. This will
ensure that your vote is counted, even if you cannot attend
the Special Meeting in person. You may also vote in person at the meeting, or
through other available means, by following the instructions that appear on the
proxy card.
YOUR VOTE IS IMPORTANT. If we do not hear from you after a reasonable
amount of time, you may receive a telephone call reminding you to vote your
shares.
We thank you for your continued support of the Fund and urge you to
cast your vote as soon as possible.
Sincerely,
Thomas S. Schreier, Jr.
President
FIRST AMERICAN INTERNATIONAL FUND SHAREHOLDERS
IMPORTANT INFORMATION
While we encourage you to read the full text of the enclosed Proxy
Statement, we are also providing you with a brief overview of the purposes of
the shareholder meeting to help you understand and vote on the proposals. Your
vote is important.
QUESTIONS & ANSWERS
Q: WHAT AM I BEING ASKED TO VOTE "FOR" ON THIS PROXY?
A: You are being asked to approve two separate investment sub-advisory
agreements for the Fund, one with Altrinsic and the other with HGI. On June
18, 2008, the Board approved the appointment of Altrinsic and HGI as
sub-advisors to the Fund, subject to the approval of the Fund's
shareholders. Assuming shareholder approval is obtained at the Special
Meeting, Altrinsic and HGI are expected to assume management of the Fund
from the Fund's current sub-advisor, JPMorgan, on or about November 1,
2008. You are also being asked to vote on a proposal to approve a
"manager-of-managers" structure for the Fund. This structure would allow
the Advisor, with the Board's approval, to add or replace sub-advisors to
the Fund, or to materially amend existing sub-advisory agreements, without
obtaining shareholder approval.
Q: WHY DID THE BOARD APPOINT ALTRINSIC AND HGI TO ACT AS THE FUND'S INVESTMENT
SUB-ADVISORS?
A: The Board believes that approval of the Fund's sub-advisory agreements with
Altrinsic and HGI is in the best interests of the Fund and its
shareholders. Both the Board and the Advisor have been dissatisfied with
the performance of the Fund's current sub-advisor. Using a multi-manager
approach, the Advisor will allocate the Fund's assets between Altrinsic and
HGI, with each sub-advisor employing its own distinct investment style. The
Board and the Advisor believe that this approach will better position the
Fund to adapt to, and take advantage of, changing market conditions.
Altrinsic and HGI were specifically selected as replacements for the
current sub-advisor because of, among other things, their strong
performance records with respect to similar portfolios they manage, their
respective investment styles and processes, and the depth of experience of
their portfolio management teams.
Q: DO THE AGREEMENTS THAT I'M BEING ASKED TO APPROVE DIFFER FROM MY FUND'S
CURRENT INVESTMENT SUB-ADVISORY AGREEMENT?
A: Yes, in some respects. Although the proposed investment sub-advisory
agreements are substantially similar to the Fund's current investment
sub-advisory agreement with JPMorgan, there are some material differences.
For instance, the current agreement contemplates that all of the Fund's
assets will be managed by one sub-advisor; whereas the proposed agreements
contemplate that the Advisor will allocate the Fund's assets between
multiple sub-advisors. Additionally, the sub-advisory fees payable to
Altrinsic and HGI under the proposed agreements are higher than the fees
currently payable to JPMorgan. This increase in fees will be borne entirely
by the Advisor and paid by the Advisor out of the investment advisory fees
it receives from the Fund, pursuant to the terms of the Investment Advisory
Agreement between FAIF and the Advisor. The Fund will not bear any of the
cost of the increased sub-advisory fees.
Q: WILL MY FUND BE MANAGED ANY DIFFERENTLY IF ALTRINSIC AND HGI ARE APPROVED
AS THE FUND'S INVESTMENT SUB-ADVISORS?
A: Yes. Assuming shareholder approval is obtained, Altrinsic and HGI are
expected to take over as investment sub-advisors to the Fund under their
respective investment sub-advisory agreements on
or about November 1, 2008. Altrinsic and HGI will each be responsible for
separately managing a portion of the Fund's assets, as assigned by the
Advisor. The Advisor will be responsible for allocating the Fund's assets
between Altrinsic and HGI and the Advisor will manage the portion of the
Fund's assets not allocated to a sub-advisor. Teams of portfolio managers
at both Altrinsic and HGI will use their own investment strategies when
managing their respective portion of the Fund's assets, which will differ
from the investment strategy currently used by JPMorgan. Altrinsic will
take a "value" style approach to investing its portion of Fund assets,
similar to JPMorgan; however, Altrinsic looks for value opportunities
across a broader range of market capitalizations. HGI will employ a
"growth" style to investing its portion of the Fund's assets. The
investment strategies utilized by Altrinsic and HGI are further described
in the attached proxy statement. The investment objective of the Fund will
remain the same.
Q: WHAT IS A MANAGER-OF-MANAGERS STRUCTURE?
A: The Advisor uses a sub-advisor to manage the assets of the Fund and has
received approval from the Board to replace the current sub-advisor with
two sub-advisors. Under the Fund's current structure, if the Advisor ever
believes that a sub-advisor should be replaced, or that an additional
sub-advisor should be hired, the Advisor makes a recommendation to the
Board, and the Board is required to convene a shareholder meeting seeking
approval of the new sub-advisor, as is the case with this Special Meeting.
Manager-of-managers authority would allow the Advisor, with the Board's
approval, to make changes to Fund sub-advisors or materially amend existing
sub-advisory agreements without having to seek shareholder approval. Within
90 days of hiring any new sub-advisor, you will receive all the information
about the sub-advisor and the sub-advisory agreement that would be included
in a proxy statement. The Fund would still be required to obtain
shareholder approval of a sub-advisory agreement with any sub-advisor that
is considered an affiliated person (as defined in the Investment Company
Act of 1940, as amended) of the Fund or the Advisor (other than a
sub-advisor that is considered an affiliated person solely by reason of
serving as a sub-advisor to the Fund). The Fund has received an order from
the Securities and Exchange Commission permitting it, as well as the other
funds that are series of FAIF, to operate using a manager-of-managers
structure, subject to the prior approval of the respective fund's
shareholders.
Q: COULD INVESTMENT ADVISORY FEES BE INCREASED WITHOUT A SHAREHOLDER VOTE IF
THE MANAGER-OF-MANAGERS STRUCTURE IS APPROVED?
A: No. Fees paid to sub-advisors are paid directly by the Advisor out of its
investment advisory fee; they are not paid by the Fund. Therefore, any
change in sub-advisory fees will have no impact on the Fund's expenses. Any
increase in the investment advisory fee paid to the Advisor by the Fund
will continue to require shareholder approval.
Q: WHAT ARE THE BENEFITS OF A MANAGER-OF-MANAGERS STRUCTURE?
A: A manager-of-managers structure will provide the Advisor and the Board with
the flexibility to implement sub-advisor changes or materially modify
sub-advisory agreements without incurring the significant delay and
potential expense associated with obtaining shareholder approval.
Q: HOW DOES THE BOARD RECOMMEND THAT I VOTE ON THESE PROPOSALS?
A: The Board believes that each proposal is in the best interests of the Fund
and its shareholders. After careful consideration, the Board recommends
that you vote "FOR" each proposal.
Q: WHEN IS MY PROXY DUE?
A: We would like to receive your vote as soon as possible, preferably before
the date of the Special Meeting on September 18, 2008.
Q: HOW CAN I VOTE MY PROXY?
A: By mail - proxy cards must be marked with your vote and returned in the
business reply envelope included in this package. If you have misplaced
your envelope, please mail your proxy to:
The Altman Group
1200 Wall Street West
Lyndhurst, NJ 07071
In person - you may submit your proxy in person at the Special Meeting to
be held on Thursday, September 18, 2008 at 10:00 a.m., Central time, at the
offices of the Advisor, located at 800 Nicollet Mall, Minneapolis,
Minnesota 55402.
Please see the voting instructions on your proxy card for a description of
these and any other available voting methods.
Q: WILL THE FUND PAY FOR THIS PROXY SOLICITATION?
A: No. FAF Advisors has agreed to pay the costs of this proxy solicitation, as
well as the other costs of the Special Meeting.
Q: WHO SHOULD I CALL FOR ADDITIONAL INFORMATION ABOUT THIS PROXY STATEMENT?
A: Please call First American Investor Services at (800) 677-FUND.
IT IS IMPORTANT THAT YOU VOTE YOUR PROXY PROMPTLY. PLEASE HELP KEEP THE
COSTS OF THIS PROXY SOLICITATION REASONABLE BY VOTING TODAY.
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS OF
FIRST AMERICAN INTERNATIONAL FUND
A SERIES OF
FIRST AMERICAN INVESTMENT FUNDS, INC.
TO BE HELD ON SEPTEMBER 18, 2008
A Special Meeting of shareholders of First American International Fund
(the "Fund"), a series of the First American Investment Funds, Inc., will be
held at the offices of FAF Advisors, Inc. (the "Advisor"), 3rd Floor - Training
Room A, located at 800 Nicollet Mall, Minneapolis, Minnesota, at 10:00 a.m.,
Central time, on Thursday, September 18, 2008. At the Special Meeting,
shareholders will be asked to vote on the following proposals:
1. To approve an investment sub-advisory agreement for the Fund with
Altrinsic Global Advisors, LLC ("Altrinsic"), as detailed in the
attached proxy statement.
2. To approve an investment sub-advisory agreement for the Fund with
Hansberger Global Investors, Inc. ("HGI"), as detailed in the attached
proxy statement.
3. To authorize a "manager-of-managers" structure for the Fund whereby
the Advisor, subject to certain conditions, will be able to add or
replace sub-advisors to the Fund, or materially amend existing
sub-advisory agreements, without obtaining shareholder approval.
4. To transact any other business that properly comes before the Special
Meeting.
Please read the enclosed Proxy Statement carefully for information
concerning the proposals to be placed before the Special Meeting or any
adjournments or postponements thereof.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE
PROPOSALS.
Only shareholders of record as of the close of business on July 31,
2008 may vote at the meeting or any adjournment(s) of the meeting.
You can vote easily and quickly by mail or through other available
means. Just follow the instructions that appear on your enclosed proxy card.
Whether or not you expect to be present at the meeting, please help avoid the
cost of a follow-up mailing by voting as soon as possible.
By order of the Board of Directors,
/s/ Kathleen L. Prudhomme
Kathleen L. Prudhomme
Secretary
August 11, 2008
Minneapolis, Minnesota
FIRST AMERICAN INTERNATIONAL FUND
A SERIES OF
FIRST AMERICAN INVESTMENT FUNDS, INC.
800 NICOLLET MALL
MINNEAPOLIS, MINNESOTA 55402
(800) 677-3863
PROXY STATEMENT
AUGUST 11, 2008
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER 18, 2008
The Board of Directors (the "Board") of First American Investment
Funds, Inc. ("FAIF") is soliciting the enclosed proxy in connection with a
special meeting of shareholders of the First American International Fund (the
"Fund"), a separate mutual fund series issued by FAIF, to be held on Thursday,
September 18, 2008 at 10:00 a.m., and any adjournment of the meeting (the
"Special Meeting").
The Special Meeting is being held to consider the approval of (1) a
proposed new investment sub-advisory agreement between FAF Advisors, Inc., the
Fund's investment advisor (the "Advisor"), and Altrinsic Global Advisors, LLC
("Altrinsic") (the "Altrinsic Agreement"), (2) a proposed new investment
sub-advisory agreement between the Advisor and Hansberger Global Investors, Inc.
("HGI") (the "HGI Agreement"), and (3) a "manager-of-managers" structure for the
Fund whereby the Advisor, under certain circumstances, will be able to hire and
replace sub-advisors to the Fund without obtaining shareholder approval.
Should shareholders approve the sub-advisory agreements with Altrinsic
and HGI, the Fund's investment strategy will change from that employed by the
Fund's current sub-advisor, J.P. Morgan Investment Management Inc. ("JPMorgan").
Altrinsic and HGI will each be responsible for separately managing a portion of
the Fund's assets, as assigned by the Advisor. The Advisor will be responsible
for allocating the Fund's assets between Altrinsic and HGI and the Advisor will
manage the portion of the Fund's assets not allocated to a sub-advisor. Teams of
portfolio managers at both Altrinsic and HGI will use their own investment
strategies when managing their respective portion of the Fund's assets, which
will differ from the investment strategy currently used by JPMorgan. Altrinsic
will take a "value" style approach to investing its portion of Fund assets,
similar to JPMorgan; however, Altrinsic looks for value opportunities across a
broader range of market capitalizations. HGI will employ a "growth" style to
investing its portion of the Fund's assets. The investment strategies utilized
by Altrinsic and HGI, along with information on their respective portfolio
management teams, are further described below under, "Additional Information
about Altrinsic" and "Additional Information about HGI," respectively. The
Fund's investment objective of "long-term growth of capital" will remain the
same.
1
The manager-of-managers structure would allow the Advisor, with the
Board's approval, to make changes to Fund sub-advisors or materially amend
existing sub-advisory agreements, without having to seek shareholder approval.
The Fund has received an order from the Securities and Exchange Commission (the
"SEC") permitting it, as well as the other funds that are series of FAIF, to
operate using a manager-of-managers structure, subject to the prior approval of
the respective fund's shareholders.
In addition to serving as the Fund's investment advisor, the Advisor
also serves as the administrator for the Fund and the Advisor's affiliate, U.S.
Bancorp Fund Services, LLC ("USBFS"), serves as the Fund's sub-administrator and
transfer agent. Quasar Distributors, LLC ("Quasar"), also an affiliate of the
Advisor, is the distributor (principal underwriter) of the Fund's shares. The
Advisor is located at 800 Nicollet Mall, Minneapolis, Minnesota 55402. Quasar
and USBFS are located at 615 E. Michigan Street, Milwaukee, Wisconsin 53202.
In order for the Special Meeting to go forward, there must be a
quorum. This means that at least 10% of the Fund's shares must be represented at
the meeting--either in person or by proxy. All returned proxies count toward a
quorum, regardless of how they are voted.
If a quorum is not obtained or if sufficient votes to approve each
proposal are not received, the persons named as proxies may propose one or more
adjournments of the meeting to permit further solicitation of proxies. In
determining whether to adjourn the meeting, the following factors may be
considered: the nature of the proposals, the percentage of votes actually cast,
the percentage of negative votes actually cast, the nature of any further
solicitation, and the information to be provided to shareholders with respect to
the reasons for the solicitation. Any adjournment will require a vote in favor
of the adjournment by the holders of a majority of the shares present in person
or by proxy at the meeting (or any adjournment of the meeting).
Any abstentions and broker non-votes will be counted as shares present
for purposes of determining whether a quorum is present, but will not be voted
for or against any adjournment or proposal. (Broker non-votes are shares for
which (i) the underlying owner has not voted and (ii) the broker holding the
shares does not have discretionary authority to vote on the particular matter.)
This means that abstentions and broker non-votes effectively will be a vote
against adjournment or against any proposal where the required vote is a
percentage of the shares present.
You may revoke your proxy at any time up until voting results are
announced at the shareholder meeting. You can do this by writing to the Fund's
secretary, or by voting in person at the meeting and notifying the election
judge that you are revoking your proxy. In addition, you can revoke a prior
proxy simply by voting again--using your original proxy card or, where
available, by internet or toll-free telephone call. If you return an executed
proxy card without instructions, your shares will be voted "FOR" each proposal.
The Advisor will pay all costs of solicitation, including the cost of
preparing and mailing the notice of special shareholders meeting and this proxy
statement. Representatives of the Advisor, without cost to the Fund, may solicit
proxies by means of mail, telephone, or personal calls.
Only shareholders of record on July 31, 2008 (the "record date"), may
vote at the meeting or any adjournment of the meeting. On that date the Fund had
83,113,078 shares issued and outstanding. Each shareholder is entitled to one
vote for each share owned on the record date. The number of shares that you may
vote is the total number shown on the proxy card accompanying this proxy
statement. The proposals to be presented at the meeting will not entitle any
shareholder to cumulative voting or appraisal rights.
At this point, we know of no other business to be brought before the
Special Meeting. However, if any other matters do come up, the persons named as
proxies will vote upon these matters according to their best judgment.
THE FUND'S MOST RECENT ANNUAL AND SEMI-ANNUAL REPORTS ARE AVAILABLE AT
NO COST. TO REQUEST A REPORT, PLEASE WRITE TO FIRST AMERICAN FUNDS AT 800
NICOLLET MALL, MINNEAPOLIS, MINNESOTA 55402, OR CALL (800) 677-FUND.
2
Please be sure to read the entire proxy statement before casting your
vote. If you need help voting your proxy, you may call First American Investor
Services at (800) 677-FUND.
This proxy statement and proxy card were first mailed to shareholders
on or about August 13, 2008.
PROPOSAL 1: TO APPROVE AN INVESTMENT SUB-ADVISORY AGREEMENT FOR THE FUND
BETWEEN THE ADVISOR AND ALTRINSIC
BACKGROUND
The Board, including a majority of the directors who are not
"interested persons" as defined in the Investment Company Act of 1940, as
amended (the "1940 Act"), of either FAIF, the Advisor or Altrinsic, has
approved, and recommends that shareholders of the Fund approve, the Altrinsic
Agreement. The Altrinsic Agreement is an amendment to a sub-advisory agreement
currently in place between the Advisor and Altrinsic under which Altrinsic acts
as a sub-advisor to First American International Select Fund, another series of
FAIF ("International Select Fund"). Under the Altrinsic Agreement, this
sub-advisory agreement would also apply to the Fund. The form of the Altrinsic
Agreement is attached to this proxy statement as Exhibit A.
JPMorgan currently acts as the Fund's sub-advisor pursuant to a
sub-advisory agreement (the "Current Agreement") that was most recently approved
by the Board at a meeting held June 19, 2008, for the period of July 1, 2008
through June 30, 2009. Both the Board and the Advisor, however, had been
dissatisfied with the Fund's performance under the management of JPMorgan.
Therefore, the Advisor conducted a broad search and review of international fund
investment managers. The Advisor performed extensive research and analysis of
many factors, including performance records, quantitative and qualitative
measures of performance and investment styles, research, technological,
operational and compliance capabilities, and strength and depth of management.
The Advisor selected Altrinsic to be one of the Fund's sub-advisors,
and recommended Altrinsic to the Board, because of, among other things,
Altrinsic's strong performance record with respect to similar portfolios it
manages, the consistency of its "value style" approach and overall investment
process, and the depth of experience of its portfolio management team.
If the shareholders of the Fund approve this proposal at the Special
Meeting, the Altrinsic Agreement is expected to become effective on or about
November 1, 2008, at which time Altrinsic will assume management of a portion of
the Fund's assets from JPMorgan. Until that time, JPMorgan is expected to
continue in its role as sub-advisor to the Fund. THE TERMS AND CONDITIONS OF THE
ALTRINSIC AGREEMENT ARE SUBSTANTIALLY SIMILAR IN ALL MATERIAL RESPECTS TO THE
TERMS AND CONDITIONS OF THE CURRENT AGREEMENT, EXCEPT AS NOTED BELOW.
DIRECTOR ACTION AND BASIS FOR RECOMMENDATION
At a meeting of the Board held on June 18, 2008, the Board reviewed
the Advisor's recommendation to hire Altrinsic as a sub-advisor to the Fund. The
Board met with a member of Altrinsic's proposed portfolio management team, who
reviewed with the Board materials that included, among other things, background
information on Altrinsic, information regarding Altrinsic's investment strategy
and process, composite performance of portfolios managed by Altrinsic using this
investment strategy and process, and information on the proposed portfolio
management team. The Board reviewed Altrinsic's Code of Ethics and other
compliance reports as part of the Board's annual review of Altrinsic's existing
sub-advisory relationship with International Select Fund. The Board also
reviewed the potential impact of increased transaction costs and capital gains
to the Fund and its shareholders associated with the change in sub-advisors and
the corresponding change in the Fund's investment strategy. Finally, the Board
reviewed the terms of the Altrinsic Agreement.
3
The Board unanimously approved the Altrinsic Agreement and concluded
that the terms of the Altrinsic Agreement are fair and reasonable and in the
best interest of shareholders of the Fund. In making this determination, the
Board considered the following factors:
- the performance of Altrinsic with respect to similar portfolios
managed by Altrinsic, including its management of International
Select Fund, which demonstrated historically strong and
consistent performance relative to the Morgan Stanley Capital
International Europe, Australasia, Far East Index, the Fund's
benchmark;
- the nature, quality and extent of the services to be provided by
Altrinsic to the Fund, including Altrinsic's key personnel and
the depth of experience of Altrinsic's portfolio management team;
- the potential impact of increased transaction costs to the Fund,
and increased capital gains to Fund shareholders, resulting from
the shift in investment strategy, with the Board believing that
the benefits of the shift in strategy will outweigh any increase
in transaction costs or capital gains;
- the terms of the Altrinsic Agreement, which the Board believed
are comprehensive in light of the nature of the Fund;
- the structure and rate of the fees charged by Altrinsic to the
Advisor under the Altrinsic Agreement, taking into account the
fact that the increase in fees over those charged by JPMorgan
will be borne entirely by the Advisor and not by the Fund; and
- economies of scale that might result from the growth in the
Fund's assets and from Altrinsic's management of both the Fund
and International Select Fund and any other benefit that
Altrinsic may derive from its relationship with the Fund.
The Board was advised and assisted by counsel to the independent
directors and fund counsel. No single factor or group of factors was deemed to
be determinative by the Board in approving the Altrinsic Agreement. Instead, the
Board based its decisions on the totality of the information which it requested
and reviewed.
The Board recommends that the shareholders of the Fund approve the
Altrinsic Agreement. Approval of the Altrinsic Agreement requires the favorable
vote of a majority of the outstanding shares of the Fund, as defined in the 1940
Act, which means 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 of the Fund
are present in person or by proxy, or (b) more than 50% of the outstanding
shares of the Fund. Unless otherwise instructed, the proxies will vote for the
approval of the Altrinsic Agreement.
THE ALTRINSIC AGREEMENT
Under the Altrinsic Agreement, Altrinsic will act as an investment
sub-advisor for, and will manage the investment of, a portion of the assets of
the Fund allocated to it by the Advisor (the "Altrinsic Portfolio"). Within the
framework of the investment objective and the investment policies and
restrictions of the Fund, and subject to the supervision of the Board and the
Advisor, Altrinsic will have the responsibility for the management of the
Altrinsic Portfolio and the making and execution of all investment decisions for
the Altrinsic Portfolio. The Advisor anticipates that the Altrinsic Agreement
will become effective on or about November 1, 2008, assuming approval by Fund
shareholders at the Special Meeting. The following is a brief summary of the
material terms of the Altrinsic Agreement. These terms, unless otherwise noted,
are substantially similar to the terms of the Current Agreement.
Term. If the Altrinsic Agreement is approved by the Fund's
shareholders, the Advisor anticipates that the agreement will be entered into on
or about November 1, 2008. The Altrinsic Agreement continues automatically for
successive one-year terms so long as its continuance is approved at least
annually by the Board or a majority of the Fund's outstanding voting securities,
provided in either case that the continuance is also approved by the majority of
the Board who are not interested persons. The Altrinsic Agreement can be
terminated, without penalty, on 60 days written notice by the Advisor, by the
Board on behalf of the Fund, by vote of holders of a majority of the Fund's
shares, or by Altrinsic. The Altrinsic Agreement also terminates automatically
if assigned by any party.
4
Duties. Altrinsic is required, subject to the supervision of the
Advisor and the Board, to manage the assets within the Altrinsic Portfolio in
accordance with the Fund's investment objective, policies and restrictions, to
place purchase and sale orders for transactions in the Altrinsic Portfolio, and
to employ professional portfolio managers and securities analysts to provide
research services to the Altrinsic Portfolio.
Brokerage. In selecting brokers or dealers to execute transactions on
behalf of the Fund, Altrinsic will seek the best overall terms available. In
doing so, Altrinsic will consider factors it deems relevant, including, without
limitation, the breadth of the market in the security, the price of the
security, the financial condition and execution capability of the broker or
dealer and the reasonableness of the commission, if any, for the specific
transaction and on a continuing basis. Altrinsic is also authorized to consider
the brokerage and research services provided to the Fund and/or other accounts
over which Altrinsic or its affiliates exercise investment discretion. Altrinsic
may not execute any portfolio transactions with a broker or dealer which is an
"affiliated person" (as defined in the 1940 Act) of Altrinsic or the Advisor,
except pursuant to the Board's approved policies and procedures for affiliated
brokerage transactions.
Standard of Care. Altrinsic will exercise its best judgment in
rendering the services under the Altrinsic Agreement. Altrinsic shall not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Fund in connection with the Altrinsic Agreement, except a loss resulting
from "willful misfeasance, bad faith or gross negligence" on its part in the
performance of its duties or from "reckless disregard" by it of its obligations
and duties under the Altrinsic Agreement.
Indemnification. The Altrinsic Agreement provides that both Altrinsic
and the Advisor will indemnify and hold harmless the other from and against any
and all claims, losses, liabilities or damages (including reasonable attorney's
fees and other related expenses) resulting from a material breach of the
Agreement or as a result of Altrinsic's or the Advisor's willful misfeasance,
bad faith, gross negligence or reckless disregard of its obligations and duties
under the Agreement or violation of applicable law, subject to certain
exceptions.
Fees. The Altrinsic Agreement provides that the Advisor will pay
Altrinsic a sub-advisory fee equal on an annual basis to a percentage of the
aggregate average daily net assets of all funds, or portions thereof,
sub-advised by Altrinsic in the First American fund complex as set forth in the
following table:
Advisory Fee as Percentage
Aggregate Assets of Altrinsic Portfolios of Average Net Assets
- ---------------------------------------- --------------------------
On the first $150 million in assets....... 0.45%
On the next $350 million in assets........ 0.37%
On all assets in excess of $500 million... 0.35%
Under the Current Agreement, the Advisor paid a fee at an annual rate
equal to 0.34% of the average daily net assets of all funds sub-advised by
JPMorgan in the First American fund complex on the first $100 million of
aggregate fund assets, 0.30% of the average daily net assets on the next $250
million of aggregate fund assets, 0.24% of the average daily net assets on the
next $1.25 billion of aggregate fund assets, and 0.22% of the average daily net
assets in excess of $1.6 billion of aggregate fund assets. The investment
advisory fee paid to JPMorgan during the past fiscal year under the Current
Agreement was $4,411,010. If the fees proposed under the Altrinsic Agreement
were in place during the same period, JPMorgan would have received $6,330,697.
However, this increase in fees will be borne entirely by the Advisor and paid by
the Advisor out of the investment advisory fee paid to the Advisor by the Fund.
The advisory fee rate paid by the Fund will not change.
The Fund did not pay any investment advisory fees or make any other
material payments to Altrinsic or its affiliates during the Fund's past fiscal
year. The Fund did not pay any commissions to any affiliated brokers during the
past fiscal year.
5
PROPOSAL 2: TO APPROVE AN INVESTMENT SUB-ADVISORY AGREEMENT FOR THE FUND
BETWEEN THE ADVISOR AND HGI
BACKGROUND
The Board, including a majority of the directors who are not
"interested persons" as defined in the 1940 Act, of either FAIF, the Advisor or
HGI, has approved, and recommends that shareholders of the Fund approve, the HGI
Agreement. The HGI Agreement is an amendment to a sub-advisory agreement
currently in place between the Advisor and HGI under which HGI acts as a
sub-advisor to International Select Fund. Under the HGI Agreement, this
sub-advisory agreement would also apply to the Fund. The form of the HGI
Agreement is attached to this proxy statement as Exhibit B.
As noted under Proposal 1 above, both the Board and the Advisor had
been dissatisfied with the Fund's performance under the management of JPMorgan
and, consequently, conducted a broad search and review of international fund
investment managers.
The Advisor selected HGI to be one of the Fund's sub-advisors, and
recommended HGI to the Board, because of, among other things, HGI's strong
performance record with respect to similar portfolios it manages, the
consistency of its "growth style" approach and overall investment process, and
the depth of experience of its portfolio management team.
If the shareholders of the Fund approve this proposal at the Special
Meeting, the HGI Agreement is expected to become effective on or about November
1, 2008, at which time HGI will assume management of a portion of the Fund's
assets from JPMorgan. Until that time, JPMorgan is expected to continue in its
role as sub-advisor to the Fund. THE TERMS AND CONDITIONS OF THE HGI AGREEMENT
ARE SUBSTANTIALLY SIMILAR IN ALL MATERIAL RESPECTS TO THE TERMS AND CONDITIONS
OF THE CURRENT AGREEMENT, EXCEPT AS NOTED BELOW.
DIRECTOR ACTION AND BASIS FOR RECOMMENDATION
At a meeting of the Board held on June 18, 2008, the Board reviewed
the Advisor's recommendation to hire HGI as a sub-advisor to the Fund. The Board
met with a member of HGI's proposed portfolio management team, who reviewed with
the Board materials that included, among other things, background information on
HGI, information regarding HGI's investment strategy and process, an analysis of
the portion of International Select Fund managed by HGI which uses this same
strategy and process, an in-depth review of the performance of that portion of
International Select Fund's portfolio, and information on the proposed portfolio
management team. The Board reviewed HGI's Code of Ethics and other compliance
reports as part of the Board's annual review of HGI's existing sub-advisory
relationship with International Select Fund. The Board also reviewed the
potential impact of increased transaction costs and capital gains to the Fund
and its shareholders associated with the change in sub-advisors and the
corresponding change in the Fund's investment strategy. Finally, the Board
reviewed the terms of the HGI Agreement.
The Board unanimously approved the HGI Agreement and concluded that
the terms of the HGI Agreement are fair and reasonable and in the best interest
of shareholders of the Fund. In making this determination, the Board considered
the following factors:
- the performance of HGI with respect to similar portfolios managed
by HGI, including its management of International Select Fund,
which demonstrated historically strong and consistent performance
relative to the Morgan Stanley Capital International All Country
World Index ex U.S., International Select Fund's benchmark;
- the nature, quality and extent of the services to be provided by
HGI to the Fund, including HGI's key personnel and the depth of
experience of HGI's portfolio management team;
6
- the potential impact of increased transaction costs to the Fund,
and increased capital gains to Fund shareholders, resulting from
the shift in investment strategy, with the Board believing that
the benefits of the shift in strategy will outweigh any increase
in transaction costs or capital gains;
- the terms of the HGI Agreement, which the Board believed are
comprehensive in light of the nature of the Fund; and
- the structure and rate of the fees charged by HGI to the Advisor
under the HGI Agreement, taking into account the fact that the
increase in fees over those charged by JPMorgan will be borne
entirely by the Advisor and not by the Fund; and
- economies of scale that might result from the growth in the
Fund's assets and from HGI's management of both the Fund and
International Select Fund and any other benefit that HGI may
derive from its relationship with the Fund.
The Board was advised and assisted by counsel to the independent
directors and fund counsel. No single factor or group of factors was deemed to
be determinative by the Board in approving the HGI Agreement. Instead, the Board
based its decisions on the totality of the information which it requested and
reviewed.
The Board recommends that the shareholders of the Fund approve the HGI
Agreement. Approval of the HGI Agreement requires the favorable vote of a
majority of the outstanding shares of the Fund, as defined in the 1940 Act,
which means 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 of the Fund are
present in person or by proxy, or (b) more than 50% of the outstanding shares of
the Fund. Unless otherwise instructed, the proxies will vote for the approval of
the HGI Agreement.
THE HGI AGREEMENT
Under the HGI Agreement, HGI will act as an investment sub-advisor
for, and will manage the investment of, a portion of the assets of the Fund
allocated to it by the Advisor (the "HGI Portfolio"). Within the framework of
the investment objective and the investment policies and restrictions of the
Fund, and subject to the supervision of the Board and the Advisor, HGI will have
the responsibility for the management of the HGI Portfolio and the making and
execution of all investment decisions for the HGI Portfolio. The Advisor
anticipates that the HGI Agreement will become effective on or about November 1,
2008, assuming approval by Fund shareholders at the Special Meeting. The
following is a brief summary of the material terms of the HGI Agreement. These
terms, unless otherwise noted, are substantially similar to the terms of the
Current Agreement.
Term. If the HGI Agreement is approved by the Fund's shareholders, the
Advisor anticipates that the agreement will be entered into on or about November
1, 2008. The HGI Agreement continues automatically for successive one-year terms
so long as its continuance is approved at least annually by the Board or a
majority of the Fund's outstanding voting securities, provided in either case
that the continuance is also approved by the majority of the Board who are not
interested persons. The HGI Agreement can be terminated, without penalty, on 60
days written notice by the Advisor, by the Board on behalf of the Fund, by vote
of holders of a majority of the Fund's shares, or by HGI. The HGI Agreement also
terminates automatically if assigned by any party.
Duties. HGI is required, subject to the supervision of the Advisor and
the Board, to manage the assets within the HGI Portfolio in accordance with the
Fund's investment objective, policies and restrictions, to place purchase and
sale orders for transactions in the HGI Portfolio, and to employ professional
portfolio managers and securities analysts to provide research services to the
HGI Portfolio.
Brokerage. In selecting brokers or dealers to execute transactions on
behalf of the Fund, HGI will seek the best overall terms available. In doing so,
HGI will consider factors it deems relevant, including, without limitation, the
breadth of the market in the security, the price of the security, the financial
condition and execution capability of the broker or dealer and the
reasonableness of the commission, if any, for the specific transaction and on a
continuing basis. HGI is also authorized to consider the brokerage and research
services provided to the Fund and/or other accounts over which HGI or its
affiliates exercise investment discretion. HGI may not execute any portfolio
7
transactions with a broker or dealer which is an "affiliated person" (as defined
in the 1940 Act) of HGI or the Advisor, except pursuant to the Board's approved
policies and procedures for affiliated brokerage transactions.
Standard of Care. HGI will exercise its best judgment in rendering the
services under the HGI Agreement. HGI shall not be liable for any error of
judgment or mistake of law or for any loss suffered by the Fund in connection
with the HGI Agreement, except a loss resulting from "willful misfeasance, bad
faith or gross negligence" on its part in the performance of its duties or from
"reckless disregard" by it of its obligations and duties under the HGI
Agreement.
Indemnification. The HGI Agreement provides that both HGI and the
Advisor will indemnify and hold harmless the other from and against any and all
claims, losses, liabilities or damages (including reasonable attorney's fees and
other related expenses) resulting from a material breach of the Agreement or as
a result of HGI's or the Advisor's willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations and duties under the
Agreement or violation of applicable law, subject to certain exceptions.
Fees. The HGI Agreement provides that the Advisor will pay HGI a
sub-advisory fee equal on an annual basis to a percentage of the aggregate
average daily net assets of all funds, or portions thereof, sub-advised by HGI
in the First American fund complex as set forth in the following table:
Advisory Fee as Percentage
Aggregate Assets of HGI Portfolios of Average Net Assets
- ---------------------------------- --------------------------
On the first $425 million in assets....... 0.40%
On all assets in excess of $425 million... 0.30%
Under the Current Agreement, the Advisor paid a fee at an annual rate
equal to 0.34% of the average daily net assets of all funds sub-advised by
JPMorgan in the First American fund complex on the first $100 million of
aggregate fund assets, 0.30% of the average daily net assets on the next $250
million of aggregate fund assets, 0.24% of the average daily net assets on the
next $1.25 billion of aggregate fund assets, and 0.22% of the average daily net
assets in excess of $1.6 billion of aggregate fund assets. The investment
advisory fee paid to the JPMorgan during the past fiscal year under the Current
Agreement was $4,411,010. If the fees proposed under the HGI Agreement were in
place during the same period, JPMorgan would have received $5,662,741. However,
this increase in fees will be borne entirely by the Advisor and paid by the
Advisor out of the investment advisory fee paid to the Advisor by the Fund. The
advisory fee rate paid by the Fund will not change.
The Fund did not pay any investment advisory fees or make any other
material payments to HGI or its affiliates during the Fund's past fiscal year.
The Fund did not pay any commissions to any affiliated brokers during the past
fiscal year.
PROPOSAL 3: TO APPROVE THE MANAGER-OF-MANAGERS STRUCTURE
BACKGROUND
The Advisor serves as the investment advisor to the Fund and manages
the Fund's business and investment activities, subject to the authority of the
Board of Directors. Under the Investment Advisory Agreement between the Advisor
and FAIF, the Advisor is authorized to employ, at its own expense, one or more
sub-advisors to manage the assets of any series of FAIF. The Advisor has used a
sub-advisor to manage the Fund since the Fund's inception and, as described
above, has received Board approval to replace the current sub-advisor with two
sub-advisors. Where the Advisor delegates portfolio management duties to a
sub-advisor, the 1940 Act requires that the sub-advisory agreement between the
Advisor and the sub-advisor be approved by Fund shareholders. Specifically,
Section 15 of the 1940 Act makes it unlawful for any person to act as an
investment advisor (including as a sub-advisor) to a mutual fund, except
pursuant to a written contract that has been approved by shareholders.
Therefore, to comply with Section 15 of the 1940 Act, the Fund must obtain
shareholder approval in order to employ a new sub-advisor, replace an existing
sub-advisor with a new sub-advisor, materially amend the terms of a sub-advisory
8
agreement, or continue the employment of an existing sub-advisor when that
sub-advisory agreement terminates because of an assignment (as such term is
defined under the 1940 Act) of the agreement. Proposals 1 and 2 above are being
presented to shareholders at the Special Meeting in order to comply with Section
15.
In order to provide the Advisor and the Board with the flexibility to
implement sub-advisor changes or materially modify sub-advisory agreements
without incurring the significant delay and potential expense associated with
obtaining shareholder approval, the Advisor and FAIF requested and obtained from
the SEC an order, dated May 30, 2007, exempting them from certain requirements
of Section 15 of the 1940 Act and the rules thereunder (the "Order"). Subject to
the conditions delineated in the Order, the Order permits the Advisor to enter
into new sub-advisory agreements with unaffiliated sub-advisors and change the
terms of existing sub-advisory agreements with unaffiliated sub-advisors without
first obtaining shareholder approval. In order for the Fund to rely on the Order
and operate under a manager-of-managers structure, use of the structure must be
approved by a vote of the majority of the Fund's outstanding shares.
DESCRIPTION OF THE MANAGER-OF-MANAGERS STRUCTURE
Use of a manager-of-managers structure would permit the Advisor, as
the Fund's investment manager, to add or replace unaffiliated sub-advisors, and
enter into and amend sub-advisory agreements with unaffiliated sub-advisors on
behalf of the Fund without shareholder approval. The manager-of-managers
arrangement is intended to enable the Fund to operate with greater efficiency
and to help the Fund enhance performance by allowing the Advisor to employ
sub-advisors best suited to the needs of the Fund without incurring the expense
and delays associated with obtaining shareholder approval of sub-advisors and
related sub-advisory agreements. The process of seeking shareholder approval is
administratively expensive, and may cause delays in executing changes that the
Board and the Advisor have determined are necessary or desirable. In addition,
some of the costs of seeking such shareholder approval may be borne by the Fund
(and therefore indirectly by the Fund's shareholders). If shareholders approve
the proposal authorizing a manager-of-managers structure for the Fund, the Board
would be able to act more quickly and with less expense to add or replace
unaffiliated sub-advisors, in instances in which the Board and the Advisor
believe that the addition or replacement would be in the best interests of the
Fund and its shareholders.
If the proposal is approved by shareholders of the Fund, shareholders
will no longer be asked to approve new sub-advisory agreements and amendments to
existing sub-advisory agreements with unaffiliated sub-advisors. For example,
should the Advisor choose to compensate unaffiliated sub-advisors based on a
rate that adjusts upward or downward based upon the Fund's performance relative
to its benchmark index (a "performance-based fee"), rather than the current
fixed rate fee structure, shareholders would not be asked to approve such a
change. However, the Board will continue to oversee the sub-advisor selection
process to help ensure that the interests of shareholders are protected whenever
the Advisor would seek to add or replace a sub-advisor or modify a sub-advisory
agreement. Specifically, the Board will evaluate and approve all sub-advisory
agreements as well as any modification to an existing sub-advisory agreement. In
reviewing new sub-advisory agreements or modifications to existing sub-advisory
agreements, the Board will analyze all factors that it considers to be relevant
to its determination, including the sub-advisory fees, the nature, quality and
scope of services to be provided by the sub-advisor, the investment performance
of the assets managed by the sub-advisor, as well as the sub-advisor's
compliance with federal securities laws and regulations. Furthermore, operation
of the Fund under a manager-of-managers arrangement does not: (i) permit
investment management fees paid by a Fund to the Advisor to be increased without
shareholder approval, or (ii) diminish the Advisor's responsibilities to the
Fund, including the Advisor's overall responsibility for the portfolio
management services furnished by a sub-advisor. If the Advisor negotiates a
decrease in the sub-advisory fee paid to any sub-advisor, such a decrease would
not affect the investment management fee paid by the Fund to the Advisor. The
Advisor would effectively retain more of the investment management fee for
itself.
If the proposal is not approved by the shareholders of the Fund,
shareholder approval will continue to be required for the Advisor to enter into
new or materially amended sub-advisory agreements with respect to the Fund.
9
TERMS OF THE ORDER
Under the terms of the Order, the Advisor and the Fund must comply
with a number of conditions imposed by the SEC in order to operate under a
manager-of-managers structure, including the following:
- The approval of the shareholders of the Fund is required before
the Fund may operate under the manager-of-managers structure.
- Within 90 days of hiring any new sub-advisor, Fund shareholders
must be furnished all information about the new sub-advisor and
sub-advisory contract that would be included in a proxy statement
related to their approval of a new sub-advisory agreement in the
absence of a manager-of-managers arrangement, except that, if the
Fund has more than one sub-advisor, the Fund may disclose the
aggregate compensation to be paid to all sub-advisors, without
disclosing separately the specific fees paid to each sub-advisor.
- A majority of the Board must consist of independent directors,
the nomination of additional independent directors must be at the
discretion of the then existing independent directors, and the
independent directors must be represented by independent legal
counsel (as defined in the rules under the 1940 Act).
- The Advisor may not enter into a sub-advisory agreement with any
affiliated sub-advisor without that sub-advisory agreement,
including the compensation to be paid thereunder, being approved
by the Fund's shareholders.
The Order permits the Fund to disclose in its Statement of Additional
Information ("SAI") the aggregate compensation paid to sub-advisors, without
disclosing separately the specific fees paid to each sub-advisor. Currently,
specific fee information is required to be included both in proxy statements
relating to approval of a new sub-advisory agreement and in the Fund's SAI. Many
sub-advisors charge for advisory services according to a predetermined fee
schedule. While sub-advisors may be willing to negotiate fees lower than the
predetermined fees, particularly with large institutional clients, they are
reluctant to do so where the fees are disclosed to other prospective and
existing customers. The ability to disclose the aggregate amount of sub-advisory
fees paid to all sub-advisors, rather than to each sub-advisor, would encourage
sub-advisors to negotiate lower sub-advisory fees with the Advisor.
PROPOSED MANAGER-OF-MANAGERS RULE
On October 23, 2003, the SEC proposed Rule 15a-5 under the 1940 Act,
which essentially would allow all investment companies to utilize a
manager-of-managers arrangement without obtaining an exemptive order, subject to
a number of conditions substantially similar to those imposed by the Order. The
Order will expire on the effective date of Rule 15a-5, if adopted. Thereafter,
assuming Fund shareholders have approved the manager-of-managers structure, the
Fund will continue to operate under that structure in accordance with Rule
15a-5.
BOARD APPROVAL OF MANAGER-OF-MANAGERS ARRANGEMENT
At a meeting held February 22, 2006, the Board, including the
independent directors, unanimously approved the filing by FAIF and the Advisor
of the application for the Order. The Board determined that (i) it would be in
the best interest of Fund shareholders for the Board to have the ability,
without seeking shareholder approval, to approve the Advisor's entering into and
materially amending sub-advisory agreements, inasmuch as this would avoid the
expense and delay otherwise associated with adding or changing sub-advisors and
with changing contractual arrangements with sub-advisors, and (ii) it would be
in the best interest of Fund shareholders for the Fund not to provide specific
disclosure to shareholders and prospective shareholders concerning the
sub-advisory fees which are paid to individual sub-advisors which are not
affiliated with the Advisor, inasmuch as this might enable the Advisor to
negotiate discounts from such sub-advisors' "posted" fee rates which would not
be available if such disclosure were required. At that same meeting, the Board
recommended that shareholders approve the use of a manager-of-managers structure
and called a meeting, which was held on September 27, 2007, for the purposes of
voting on that proposal. Although shareholder approval of the
manager-of-managers structure was not obtained at that meeting, the Board
continues to believe that operating under such a structure would be in the best
interest of
10
Fund shareholders. Consequently, at a meeting of the Board held on June 18,
2008, the Board concluded that the manager-of-managers structure should be
presented to shareholders again for their approval, and recommended that
shareholders approve such structure.
BOARD RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS OF THE FUND VOTE
"FOR" APPROVAL OF THE MANAGER-OF-MANAGERS STRUCTURE.
VOTE REQUIRED FOR APPROVAL
Approval of the proposal requires the favorable vote of a majority of
the outstanding shares of the Fund, as defined in the 1940 Act, which means the
lesser of the vote of (i) 67% of the shares of the Fund present at a meeting
where more than 50% of the outstanding shares of the Fund are present in person
or by proxy, or (ii) more than 50% of the outstanding shares of the Fund.
ADDITIONAL INFORMATION ABOUT THE FUND
As of June 30, 2008, the officers and directors of the Fund, as a
group, owned less than 1% of each class of shares of the Fund. As of that date,
the following persons were known to Fund management to be the beneficial owners
of 5% or more of any class of shares of the Fund.
Name and Address Number of
of Beneficial Owner Class Shares Owned Percent of Class
- ------------------- ----- -------------- ----------------
ORCHARD TRUST CO LLC TRUSTEE/C A 186,523.790 6.29%
FBO RETIREMENT PLANS
8515 E ORCHARD RD 2T2
GREENWOOD VLG CO 80111-5002
ORCHARD TRUST CO LLC TRUSTEE/C C 25,217.877 6.02%
FBO RETIREMENT PLANS
8515 E ORCHARD RD 2T2
GREENWOOD VLG CO 80111-5002
RONNIE D BUBAR FBO R 228.647 97.17%
SUBARU OF GRAND JUNCTION 401K
2496 HIGHWAY 6 AND 50
GRAND JCT CO 81505-1108
CAPINCO Y 44,347,109.860 54.57%
C/O US BANK
P.O. BOX 1787
MILWAUKEE WI 53201-1787
BAND & CO Y 23,331,126.401 28.71%
C/O US BANK
P.O. BOX 1787
MILWAUKEE WI 53201-1787
11
Name and Address Number of
of Beneficial Owner Class Shares Owned Percent of Class
- ------------------- ----- -------------- ----------------
WASHINGTON & CO Y 11,898,054.947 14.64%
C/O US BANK
P.O. BOX 1787
MILWAUKEE WI 53201-1787
ADDITIONAL INFORMATION ABOUT THE ADVISOR
The Advisor provides investment management services to individuals and
institutions, including corporations, foundations, pensions, and retirement
plans. As of June 30, 2008, the Advisor had more than $105 billion in assets
under management, including investment company assets of more than $91 billion.
The Advisor is a wholly owned subsidiary of U.S. Bank National Association
("U.S. Bank"), 800 Nicollet Mall, Minneapolis, Minnesota 55402, a national
banking association that has professionally managed accounts for individuals,
insurance companies, foundations, commingled accounts, trust funds, and others
for over 75 years. U.S. Bank is a subsidiary of U.S. Bancorp, 800 Nicollet Mall,
Minneapolis, Minnesota 55402, which is a regional multi-state bank holding
company headquartered in Minneapolis, Minnesota that primarily serves the
Midwestern, Rocky Mountain and Northwestern states. U.S. Bancorp also has
various other subsidiaries engaged in financial services. At June 30, 2008, U.S.
Bancorp and its consolidated subsidiaries had consolidated assets of more than
$246.5 billion, consolidated deposits of more than $135.1 billion and
shareholders' equity of $21.8 billion.
ADDITIONAL INFORMATION ABOUT ALTRINSIC
Altrinsic is located at 100 First Stamford Place, 6th Floor East,
Stamford, Connecticut 06902. As of June 30, 2008, Altrinsic had approximately
$6.8 billion in assets under management. The name and principal occupation of
the principal executive officer and each other principal of Altrinsic are set
forth below. The address of each such individual is that of Altrinsic. None of
the officers or directors of the Fund are officers, directors or employees of
Altrinsic or any of its affiliates.
Name Principal Occupation
- ---- ------------------------------------------------------
John Hock, CFA Founder, Chief Executive Officer, and Chief Investment
Officer of Altrinsic
John DeVita, CFA, CPA Principal and Portfolio Manager of Altrinsic
Rehan Chaudhri Principal and Portfolio Manager of Altrinsic
The table below sets forth information regarding funds for which
Altrinsic acts as investment advisor or sub-advisor that have investment
objectives similar to the investment objectives of the Fund.
Contractual Annual Rates of
Compensation to Altrinsic
Net Assets of the Fund (based on each Fund's Advisor or
Fund as of June 30, 2008 average daily net assets) Sub-Advisor
- ---- ---------------------- --------------------------------- -----------
First American International $100.6 million 0.45% of the first $150 million Sub-Advisor
Select Fund 0.37% of the next $325 million
0.35% of assets over $475 million
12
Contractual Annual Rates of
Compensation to Altrinsic
Net Assets of the Fund (based on each Fund's Advisor or
Fund as of June 30, 2008 average daily net assets) Sub-Advisor
- ---- ---------------------- --------------------------------- -----------
Northern Trust Multi-Manager $366.5 million * Sub-Advisor
International Equity Fund
Russell International Fund $186.0 million * Sub-Advisor
Russell International $398.3 million * Sub-Advisor
Securities Fund
* Pursuant to an exemptive order issued to the fund by the SEC, the fund is
not required to disclose fees paid to a sub-advisor.
ALTRINSIC INVESTMENT STRATEGY
Altrinsic's investment philosophy is based on value creation and the
belief that a company's valuation is a function of its future financial
productivity (i.e., sustainable returns-on-capital relative to cost of capital)
adjusted for associated risk. In implementing its philosophy, Altrinsic's team
capitalizes on inefficiencies (i.e., mispriced securities) in the world's equity
markets by taking a long-term view and leveraging proprietary individual-company
analysis, global industry knowledge, and a distinctive cross-border frame of
reference. Predicated on the time-tested principles of fundamental value
investing, Altrinsic's investment approach is bottom-up, fundamentally driven,
internationally focused, and all-cap.
PORTFOLIO MANAGERS
The following team of individuals will be primarily responsible for
the day-to-day management of the Altrinsic Portfolio: John Hock, CFA; John
Devita, CFA; and Rehan Chaudhri.
- Mr. Hock founded Altrinsic in 2000 and has been its Chief Investment
Officer since inception. Prior to Altrinsic, Mr. Hock was a portfolio
manager with HGI. He began his global equity career in 1990.
- Mr. DeVita, Principal, has been a portfolio manager for Altrinsic
since its founding in 2000. Prior to Altrinsic, Mr. DeVita was an
equity analyst with Arnhold & S. Bleichroeder Advisors and Societe
Generale Asset Management. He began his global equity career in 1991.
- Mr. Chaudhri, Principal, has been a portfolio manager for Altrinsic
since 2003. Prior to Altrinsic, Mr. Chaudhri was a portfolio manager
with Lazard Asset Management. He began his global equity career in
1993.
ADDITIONAL INFORMATION ABOUT HGI
HGI, located at 401 East Las Olas Boulevard, Suite 1700, Fort
Lauderdale, Florida 33301, is a wholly-owned subsidiary of Hansberger Group,
Inc. ("Hansberger"), which is a subsidiary of Natixis Global Asset Management.
As of June 30, 2008, HGI and its affiliates had approximately $8.3 billion in
assets under management. The name and principal occupation of the principal
executive officer and each director of HGI are set forth below. The address of
each such individual is that of HGI. None of the officers or directors of the
Fund are officers, directors or employees of HGI or any of its affiliates.
13
Name Principal Occupation
- ---- --------------------
Ronald W. Holt, Jr. President and Chief Executive Officer of HGI
Byron F. Bowman Senior Vice President, General Counsel, and Director of HGI
The table below sets forth information regarding funds for which HGI acts as
investment advisor or sub-advisor that have investment objectives similar to the
investment objectives of the Fund.
Contractual Annual Rates
of Compensation to HGI
Net Assets of the Fund (based on each Fund's Advisor or
Fund as of June 30, 2008 average daily net assets) Sub-Advisor
- ---- ---------------------- ---------------------------------------- -----------
Hansberger Institutional Series - $136.4 million 1.00% on all assets(1) Advisor
Emerging Markets Fund
Hansberger Institutional Series - $86.3 million 0.75% on all assets (1) Advisor
International Core Fund
Hansberger Institutional Series - $993.5 million 0.75% on all assets (1) (2) Advisor
International Growth Fund
Hansberger Institutional Series - $198.9 million 0.75% on all assets (1) Advisor
International Value Fund
First American International Select $114.2 million 0.45% of the first $100 million(3) Sub-Advisor
Fund 0.40% of the next $325 million
0.35% of the next $112.5 million
0.30% of assets over $537.5 million
Natixis Funds Trust I -Hansberger $158.1 million 0.45% of the first $200 million Sub-Advisor
International Fund 0.40% of amounts over $200 million
ING Mutual Funds - ING $122.8 million 0.45% of the first $500 million Sub-Advisor
International Capital 0.40% of the next $500 million
Appreciation Fund 0.35% of assets in excess of $1 billion
Pacific Capital Funds - $208.0 million 0.60% of the first $75 million Sub-Advisor
International Stock Fund 0.35% of assets in excess of $75 million
MTB Group of Funds / MTB $68.6 million 0.60% on all assets(3) Sub-Advisor
International Equity Fund
14
Contractual Annual Rates
of Compensation to HGI
Net Assets of the Fund (based on each Fund's Advisor or
Fund as of June 30, 2008 average daily net assets) Sub-Advisor
- ---- ---------------------- ---------------------------------------- -----------
Vanguard Trustees' Equity Fund - $1.6 billion 0.475% of the first $50 million(3) Sub-Advisor
Vanguard International Value 0.15% of the next $450 million
Fund 0.12% of the next $500 million
0.11% of assets over $1 billion
The above "basic" fee is adjusted up or
down depending on the cumulative
investment performance of the fund
relative to its benchmark
Active Passive Funds - Emerging $5.5 million 0.60% of the first $50 million(3) Sub-Advisor
Market Equity Fund 0.50% of the next $200 million
0.40% of assets over $250 million
(1) HGI has provided a letter agreement to Hansberger International Series
("HIS") under which HGI will voluntarily waive a portion of its management
fee (and, to the extent necessary, bear other expenses) if total expenses,
not including brokerage, interest, taxes, deferred organizational and
extraordinary expenses, exceed 1.00% and 1.15% (1.25% and 1.40% for the
Emerging Markets Fund) for the Institutional and Advisor Class shares of
each HIS Fund, respectively. HGI may recoup the waived fees within one year
following the waiver.
(2) HGI has voluntarily agreed to provide a breakpoint in the advisory fee of
the HIS International Growth Fund such that HGI will reduce its management
fee from 0.75% to 0.70% on the combined assets of the HIS International
Growth Fund and the ING International Capital Appreciation Fund (a
registered fund that is sub-advised by HGI). This breakpoint may be
discontinued at any time. HGI does not have a present intent of
discontinuing the breakpoint.
(3) HGI only manages a portion of this Fund's assets and other sub-advisors
manage the remaining portions of the Fund's assets. This amount reflects
the net assets of the portfolio that are managed by HGI.
HGI INVESTMENT STRATEGY
HGI's investment process begins with a series of quantitative screens
that identify those companies with superior growth characteristics, including
superior profitability, secular growth, sustainable competitive advantage, and
strong capital structure. These screens are intended to identify those companies
that have consistently been industry and market leaders. The result is HGI's
"Star List" of companies. The Star List companies are then rated based on their
relative valuation and relative price momentum. Securities are then selected
from the Star List on the basis of fundamental company-by-company analysis
conducted on the top 100 to 125 stocks in the Star List. This fundamental
analysis is meant to identify factors overlooked in the quantitative process,
including the company's product line, management, market share, product
distribution and other elements that are prerequisites to the company's success
and staying power within its market.
PORTFOLIO MANAGERS
The following team of individuals will be primarily responsible for
the day-to-day management of the portion of the fund managed by HGI: Thomas R.H.
Tibbles, CFA; Barry A. Lockhart, CFA; Trevor Graham, CFA; and Patrick Tan.
- Mr. Tibbles joined HGI in 1999 as Managing Director of Canada. Prior
to joining HGI, he was head of the Global Equity Team at Indago
Capital Management in Toronto, Canada, which was an affiliate of
Canada Life. He began his career in the investment industry in 1986.
15
- Mr. Lockhart joined HGI in 1999 and serves as Senior Vice President.
Prior to joining HGI, he was a portfolio manager of foreign equity
securities for Indago Capital Management. He began his career in the
investment industry in 1989.
- Mr. Graham joined HGI in 2004 and serves as Vice President, Research.
Prior to joining HGI, he maintained several different positions,
including portfolio management and fundamental analyst for Phillips,
Hager & North Investment Management Ltd., where he was employed from
1996 to 2004.
- Mr. Tan, Research Analyst, joined HGI in 1999. Prior to joining HGI,
he was an analyst at Indago Capital Management from July 1997 to March
1999.
Mr. Tibbles, as team leader, has ultimate authority and veto power
over all buy and sell decisions. All team members are responsible for research
coverage which is assigned by global industry sectors, recommending stocks and
recommending subsequent buy and sell decisions.
SHAREHOLDER PROPOSALS
The Fund is not required to hold annual shareholder meetings. Since
the Fund does not hold regular meetings of shareholders, the anticipated date of
the next shareholder meeting cannot be provided. To be considered for inclusion
in the proxy statement for any subsequent meeting of shareholders, a shareholder
proposal must be submitted a reasonable time before the proxy statement for the
meeting is mailed. Whether a proposal is included in the proxy statement will be
determined in accordance with applicable federal and state laws. The timely
submission of a proposal does not guarantee its inclusion.
By order of the Board of Directors,
Kathleen L. Prudhomme
Secretary
August 11, 2008
16
AMENDMENT TO INVESTMENT SUB-ADVISORY AGREEMENT
DATED AS OF ______, 2008
WHEREAS, FAF Advisors, Inc. (the "Advisor") acts as the Investment
Advisor for International Fund (the "Fund"), a series of First American
Investment Funds, Inc. ("FAIF"), pursuant to an investment advisory agreement
between the Advisor and FAIF; and
WHEREAS, the Advisor is responsible for the day-to-day management of
the Fund and for the coordination of the investment of the Fund's assets in
portfolio securities; and
WHEREAS, specific portfolio purchases and sales for all or a portion
of the Fund's assets may be made by one or more sub-advisors selected and
appointed by the Advisor, subject to the pre-approval of the Board of Directors
of FAIF (the "Board") and, to the extent required under Section 15(a) of the
Investment Company Act of 1940 (the "1940 Act") and any rules thereunder, the
approval of the Fund's shareholders; and
WHEREAS, Altrinsic Global Advisors, LLC (the "Sub-Advisor") currently
acts as a sub-advisor for International Select Fund, a series of FAIF, pursuant
to an Investment Sub-Advisory Agreement dated November 27, 2006 between the
Advisor and the Sub-Advisor (the "Sub-Advisory Agreement"); and
WHEREAS, the Sub-Advisor provides to International Select Fund the
services described in Section 2 of the Sub-Advisory Agreement and the Board has
determined that it would be in the best interests of the Fund and its
shareholders to have the Sub-Advisor provide such services to the Fund; and
WHEREAS, the Fund's shareholders have approved the Sub-Advisor's
provision of such services to the Fund; and
WHEREAS, the Sub-Advisor is willing to provide such services upon the
terms and conditions set forth herein.
NOW, THEREFORE, the Advisor and Sub-Advisor, intending to be legally
bound, agree as follows:
1. The Sub-Advisory Agreement is hereby amended to appoint the Sub-Advisor
as investment sub-advisor for that portion of the assets of the Fund that the
Advisor determines to allocate to the Sub-Advisor from time to time.
2. All references to "Fund" in the Sub-Advisory Agreement shall be deemed
to apply to International Fund and International Select Fund, either
individually or collectively, as the context requires.
3. All references to "Sub-Advisory Portfolio" in the Sub-Advisory Agreement
shall be deemed to refer to that portion of International Fund's assets managed
by the Sub-Advisor and that portion of International Select Fund's assets
managed by the Sub-Advisor, either individually or collectively, as the context
requires.
4. Schedule A to the Sub-Advisory Agreement is replaced in its entirety
with the following:
SCHEDULE A
Pursuant to Section 7, the Advisor shall pay the Sub-Advisor
compensation for services rendered to the Funds, calculated daily and
paid monthly, at the annual rates set forth in the following table.
Such rates are based on the aggregate average daily net assets of the
Sub-Advisory Portfolios.
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AGGREGATE ASSETS OF
SUB-ADVISORY PORTFOLIOS FEE PER ANNUM
- ----------------------- -------------
First $150 million 0.45%
Next $350 million 0.37%
Over $500 million 0.35%
5. All other terms and conditions of the Sub-Advisory Agreement shall
continue in full force and effect.
IN WITNESS WHEREOF, the Advisor and Sub-Advisor have caused this
instrument to be executed as of the date first above written by their duly
authorized officers.
FAF ADVISORS, INC. ALTRINSIC GLOBAL ADVISORS, LLC
By: By:
--------------------------------- ------------------------------------
Name: Joseph M. Ulrey, III Name: John D. Hock
Title: Chief Financial Officer Title: Managing Member
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INVESTMENT SUB-ADVISORY AGREEMENT
FIRST AMERICAN INVESTMENT FUNDS, INC.
THIS AGREEMENT is made as of the 27th day of November, 2006, between
FAF Advisors, Inc., a Delaware corporation (the "Advisor") and Altrinsic Global
Advisors, LLC, a Delaware limited liability company (the "Sub-Advisor").
WHEREAS, the Advisor acts as the investment advisor for International
Select Fund (the "Fund"), a series of First American Investment Funds, Inc.
("FAIF"), pursuant to an investment advisory agreement between the Advisor and
FAIF (the "Advisory Agreement").
WHEREAS, the Advisor is responsible for the day-to-day management of
the Fund and for the coordination of the investment of the Fund's assets in
portfolio securities.
WHEREAS, specific portfolio purchases and sales for all or a portion
of the Fund's assets may be made by one or more sub-advisors selected and
appointed by the Advisor, subject to the pre-approval of the Board of Directors
of FAIF (the "Board").
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants contained herein, the parties agree as follows:
1. Appointment of Sub-Advisor. The Advisor desires to engage and
hereby appoints the Sub-Advisor to act as investment sub-advisor for that
portion of the assets of the Fund that the Advisor determines to allocate to the
Sub-Advisor from time to time (referred to herein as the "Sub-Advisory
Portfolio"). The Sub-Advisor accepts the appointment and agrees to furnish the
services described herein for the compensation set forth below.
2. Duties of Sub-Advisor.
The Sub-Advisor is hereby employed and authorized to conduct a
continual program of investment, evaluation and, if appropriate, sale and
reinvestment of the assets in the Sub-Advisory Portfolio. In connection
therewith, the Sub-Advisor will (a) make investment decisions for the
Sub-Advisory Portfolio; (b) place purchase and sale orders for portfolio
transactions in the Sub-Advisory Portfolio; and (c) employ professional
portfolio managers and securities analysts to provide research services relating
to the Sub-Advisory Portfolio. Subject to the supervision of the Board and the
Advisor, the Sub-Advisor will manage the assets in the Sub-Advisory Portfolio in
accordance with (a) the Fund's investment objective(s), policies and
restrictions stated in the Prospectus, the SAI and the Charter Documents (as
such terms are defined below), (b) the Guidelines (as such term is defined
below), and (c) applicable laws and regulations. In managing the Sub-Advisory
Portfolio, the Sub-Advisor will not consider any other securities, cash or other
investment the Fund owns. The duties of the Sub-Advisor with respect to the
Sub-Advisory Portfolio shall be confined to those set forth herein.
The Advisor has furnished to the Sub-Advisor the Fund's compliance
procedures pursuant to Rules 10f-3, 17a-7, and 17e-1 under the Investment
Company Act of 1940, as amended (the "1940 Act") (collectively, the "Compliance
Procedures"), the Articles of Incorporation and Bylaws of FAIF, each as amended
to date (the "Charter Documents"), the currently effective prospectus (the
"Prospectus") and statement of additional information (the "SAI") of the Fund,
the resolution of the Board approving the form of this Agreement, the resolution
of the Board selecting the Advisor as investment advisor to the Fund and
approving the form of the Advisory Agreement, the resolution adopted by the
initial shareholder of the Fund approving the form of Advisory Agreement, and
the Advisory Agreement. The Advisor agrees, on an ongoing basis, to provide to
the Sub-Advisor, as promptly as practicable, copies of all amendments and
supplements to the Compliance Procedures, the Prospectus and the SAI and
amendments to the Charter Documents. The Advisor has furnished to the
Sub-Advisor all written guidelines (the "Guidelines") setting forth additional
operating policies and procedures, including any limitations on the types of
securities and other investment products in which the Fund is permitted to
invest or on investment activities in which the
A-3
Fund is permitted to engage. The Advisor retains the right, on prior written
notice to the Sub-Advisor, to modify the Guidelines at any time and in any
manner. The Sub-Advisor shall either comply with the amended Guidelines in
accordance with a reasonable timeline agreed upon by the Advisor and Sub-Advisor
or terminate this Agreement in accordance with Section 11 below.
3. Brokerage. In selecting brokers or dealers to execute transactions
on behalf of the Fund, the Sub-Advisor will seek the best overall terms
available. In assessing the best overall terms available for any transaction,
the Sub-Advisor will consider factors it deems relevant, including, without
limitation, the breadth of the market in the security, the price of the
security, the financial condition and execution capability of the broker or
dealer and the reasonableness of the commission, if any, for the specific
transaction and on a continuing basis. In selecting brokers or dealers to
execute a particular transaction, and in evaluating the best overall terms
available, the Sub-Advisor is authorized to consider brokerage and research
services (within the meaning of Section 28(e) of the Securities Exchange Act of
1934, as amended). The Sub-Advisor will not execute any portfolio transactions
with a broker or dealer which is an "affiliated person" (as defined in the 1940
Act) of the Sub-Advisor or the Advisor, except pursuant to the Board's approved
17e-1 Policies and Procedures for affiliated brokerage transactions. The Advisor
will provide the Sub-Advisor with a list of brokers and dealers that are
"affiliated persons" of the Advisor.
4. Proxy Voting. The Sub-Advisor shall vote all proxies with respect
to securities held in the Sub-Advisory Portfolio in accordance with the
Sub-Advisor's proxy voting guidelines and procedures in effect from time to
time. In the event material changes are made to such proxy voting guidelines,
the Sub-Advisor agrees to provide the Advisor with a copy of the revised proxy
voting guidelines. The Advisor agrees to instruct the Fund's custodian to
forward all proxy materials and related shareholder communications to the
Sub-Advisor promptly upon receipt. The Sub-Advisor agrees to promptly inform the
Advisor and the Fund of any conflict of interest of which the Sub-Advisor is
aware that the Sub-Advisor has in voting proxies with respect to securities held
in the Sub-Advisory Portfolio. The Sub-Advisor shall not be liable with regard
to voting of proxies or other corporate actions if the proxy materials and
related communications are not received in a timely manner.
5. Information Provided to the Advisor.
(a) The Sub-Advisor will keep the Advisor informed of developments
materially affecting the Fund and will, on its own initiative, furnish the
Advisor from time to time with whatever information the Sub-Advisor believes is
appropriate for this purpose.
(b) The Sub-Advisor will confer with the Advisor as the Advisor may
reasonably request regarding the investment and management of the Sub-Advisory
Portfolio. The Sub-Advisor will not advise the Advisor or act for the Advisor or
the Fund in any legal proceedings, including bankruptcies or class actions,
involving securities in the Sub-Advisory Portfolio or the issuers of the
securities.
(c) The Sub-Advisor agrees to comply with all reporting requirements
that the Board or the Advisor reasonably adopt and communicate to the
Sub-Advisor in writing, including reporting requirements related to performance
of the Sub-Advisory Portfolio, brokerage practices, and proxy voting.
(d) The Sub-Advisor agrees to furnish the information requested by the
Advisor, consistent with the Advisor's duties and obligations under the Fund's
Valuation Policies and Procedures as currently existing or hereafter modified,
including, without limitation, advising the Advisor as soon as practicable of
any "significant event" (as defined in the Valuation Policies and Procedures) of
which the Sub-Advisor becomes aware relating to, or affecting the value of, any
security or other asset held in the Sub-Advisory Portfolio. A copy of the
current Valuation Policies and Procedures is attached as Exhibit A. The Advisor
agrees to notify the Sub-Advisor of any modification to the Valuation Policies
and Procedures applicable to the Sub-Advisor in a timely manner.
(e) The Sub-Advisor has provided the Advisor with a true and complete
copy of its compliance policies and procedures that are reasonably designed to
prevent violations of the "federal securities laws"
A-4
(as such term is defined in Rule 38a-1 under the 1940 Act) and Rule 206(4)-7
under the Investment Advisers Act of 1940, as amended (the "Advisers Act") (the
"Sub-Advisor Compliance Policies"). The Sub-Advisor's chief compliance officer
(the "Sub-Advisor CCO") shall provide to FAIF's Chief Compliance Officer (the
"FAIF CCO") or his or her delegate, promptly (and in no event more than 10
business days) after the occurrence of the triggering event, the following:
(i) a report of any material changes to the Sub-Advisor Compliance
Policies;
(ii) a report of any "material compliance matters," as defined by Rule
38a-1 under the 1940 Act, that have occurred in connection with the
Sub-Advisor Compliance Policies;
(iii) a copy of a summary of the Sub-Advisor CCO's report with respect to
the annual review of the Sub-Advisor Compliance Policies pursuant to Rule
206(4)-7 under the Advisers Act; and
(iv) an annual (or more frequently as the FAIF CCO may request)
certification regarding the Sub-Advisor's compliance with Rule 206(4)-7
under the Advisers Act and Section 38a-1 under the 1940 Act as well as the
foregoing sub-paragraphs (i) - (iii).
(f) The Sub-Advisor will timely notify the Advisor of any material
violations by the Sub-Advisor of the Fund's investment policies or restrictions,
the Guidelines, or any applicable law or regulation.
6. Standard of Care. The Sub-Advisor shall exercise its best judgment
in rendering the services described in paragraphs 2, 3 and 4 above. The
Sub-Advisor shall not be liable for any error of judgment or mistake of law or
for any loss suffered by the Fund or the Advisor in connection with the matters
to which this Agreement relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on the Sub-Advisor's part in the
performance of its duties or from reckless disregard by the Sub-Advisor of its
obligations and duties under this Agreement (each such act or omission shall be
referred to as "Disqualifying Conduct"). Neither the Sub-Advisor nor its
members, partners, officers, employees and agents shall be liable to the
Advisor, the Fund, its shareholders or any other person (a) for the acts,
omissions, errors of judgment or mistakes of law of any other fiduciary or other
person with respect to the Fund or (b) for any failure or delay in performance
of the Sub-Advisor's obligations under this Agreement arising out of or caused,
directly or indirectly, by circumstances beyond its reasonable control,
including, without limitation, acts of civil or military authority, national
emergencies, labor difficulties, fire, mechanical breakdowns, flood or
catastrophe, acts of God, insurrection, war, riots or failure of the mails,
transportation, communication or power supply.
The Sub-Advisor does not guarantee the future performance of the
Sub-Advisory Portfolio or any specific level of performance, the success of any
investment decision or strategy that the Sub-Advisor may use, or the success of
the Sub-Advisor's overall management of the Sub-Advisory Portfolio. The Advisor
understands that investment decisions made for the Fund by the Sub-Advisor are
subject to various market, currency, economic, political and business risks, and
that those investment decisions will not always be profitable.
7. Compensation. In consideration of the services rendered pursuant to
this Agreement, the Advisor will pay the Sub-Advisor on the fifth business day
of each month a fee for the previous month according to the attached Schedule A.
The fee for the period from the date of this Agreement to the end of the
calendar month shall be prorated according to the proportion that such period
bears to the full monthly period. Upon any termination of this Agreement before
the end of a month, the fee for such part of that month shall be prorated
according to the proportion that such period bears to the full monthly period
and shall be payable upon the date of termination of this Agreement. For the
purpose of determining fees payable to the Sub-Advisor, the value of the net
assets of the Sub-Advisory Portfolio shall be computed at the times and in the
manner specified in the Prospectus and/or the SAI.
8. Expenses. The Sub-Advisor will bear all of its expenses in
connection with the performance of its services under this Agreement. All other
expenses to be incurred in the operation of the Fund will be borne by the Fund,
except to the extent specifically assumed by the Sub-Advisor. The expenses to be
borne
A-5
by the Fund include, without limitation, the following: organizational costs,
taxes, interest, brokerage fees and commissions, directors' fees, Securities and
Exchange Commission fees and state Blue Sky qualification fees, advisory fees,
charges of custodians, transfer and dividend disbursing agents' fees, certain
insurance premiums, outside auditing and legal expenses, costs of independent
pricing services, costs of maintaining existence, costs attributable to investor
services (including, without limitation, telephone and personnel expenses),
costs of preparing and printing prospectuses and SAIs for regulatory purposes
and for distribution to existing stockholders, costs of stockholders' reports
and meetings, and any extraordinary expenses.
9. Services to Other Companies or Accounts. The Advisor understands
that the Sub-Advisor now acts, will continue to act and may act in the future as
investment advisor to fiduciary and other managed accounts and as investment
advisor to other investment companies, and the Advisor has no objection to the
Sub-Advisor so acting, provided that whenever the Sub-Advisory Portfolio and one
or more other accounts or investment companies advised by the Sub-Advisor have
available funds for investment, investments suitable and appropriate for each
will be allocated in accordance with a methodology believed to be equitable to
each entity. The Sub-Advisor agrees to similarly allocate opportunities to sell
securities. The Advisor recognizes that, in some cases, this procedure may limit
the size of the position that may be acquired or sold for the Fund. In addition,
the Advisor understands that the persons employed by the Sub-Advisor to assist
in the performance of the Sub-Advisor's duties hereunder will not devote their
full time to such service and nothing contained herein shall be deemed to limit
or restrict the right of the Sub-Advisor or any affiliate of the Sub-Advisor to
engage in and devote time and attention to other business or to render services
of whatever kind or nature.
10. Books and Records. In compliance with the requirements of Rule
31a-3 under the 1940 Act, the Sub-Advisor hereby agrees that all records which
it specifically maintains for the Fund are the property of the Fund and further
agrees to surrender promptly to the Fund copies of any of such records upon the
Fund's or the Advisor's request. The Sub-Advisor further agrees to preserve for
the periods prescribed by Rule 31a-2 under the 1940 Act the records relating to
its activities hereunder required to be maintained by Rule 31a-1 under the 1940
Act and to preserve the records relating to its activities hereunder required by
Rule 204-2 under the Advisers Act for the period specified in said Rule.
11. Term of Agreement. This Agreement shall become effective as of the
date of its execution and shall continue in effect for a period of two years
from the date of execution. Thereafter, this Agreement shall continue
automatically for successive annual periods, provided such continuance is
specifically approved at least annually by the Board in the manner required by
the 1940 Act. This Agreement is terminable, without penalty, on 90 days' written
notice (the date of termination may be less than or more than 90 days after the
written notice of termination so long as the duration of the notice period is
agreed upon by the Advisor and Sub-Advisor) by the Advisor, by the Board, or by
the Sub-Advisor, and will immediately terminate upon termination of the Advisory
Agreement. This Agreement also will terminate automatically in the event of its
assignment (as defined in the 1940 Act).
12. Trade Settlement at Termination. Termination will be without
prejudice to the completion of any transaction already initiated. On, or after,
the effective date of termination, the Sub-Advisor shall be entitled, without
prior notice to the Advisor or the Fund, to direct the Fund's custodian to
retain and/or realize any assets of the Fund as may be required to settle
transactions already initiated. Following the date of effective termination, any
new transactions will only be executed by mutual agreement between the Advisor
and the Sub-Advisor.
13. Indemnification. (a) The Advisor agrees to indemnify and hold
harmless the Sub-Advisor and its members, partners, officers, employees, agents,
successors and assigns (each a "Sub-Advisor Indemnified Person") from and
against any and all claims, losses, liabilities or damages (including reasonable
attorneys' fees and other related expenses) to which any Sub-Advisor Indemnified
Person may become subject as a result of the Advisor's material breach of this
Agreement or as a result of the Advisor's willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations and duties hereunder or
violation of applicable law; provided, however, that no Sub-Advisor Indemnified
Person shall be
A-6
indemnified for any claim, loss, liability or damage that may be sustained as a
result of the Sub-Advisor Indemnified Person's negligence.
(b) The Sub-Advisor agrees to indemnify and hold harmless the Advisor
and the Fund and their respective shareholders, members, partners, directors,
officers, employees, agents, successors and assigns (each an "Advisor
Indemnified Person") from and against any and all claims, losses, liabilities or
damages (including reasonable attorney's fees and other related expenses) to
which any Advisor Indemnified Person may become subject as a result of the
Sub-Advisor's material breach of this Agreement or as a result of the
Sub-Advisor's willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations and duties hereunder or violation of applicable
law; provided, however, that no Advisor Indemnified Person shall be indemnified
for any claim, loss, liability or damage that may be sustained as a result of
the Advisor Indemnified Person's negligence.
14. Delegation to Third Parties. Except where prohibited by applicable
law or regulation, the Sub-Advisor may delegate or may employ a third party to
perform any accounting, administrative, reporting and ancillary services
required to enable the Sub-Advisor to perform its functions under this
Agreement. Notwithstanding any other provision of the Agreement, the Sub-Advisor
may provide information about the Advisor and the Fund to any such third party
for the purposes of this paragraph, provided that the third party is subject to
a confidentiality agreement that specifically prevents the misuse of any such
information, including portfolio holdings. The Sub-Advisor will act in good
faith and with due diligence in the selection, use and monitoring of third
parties and shall be solely responsible for any loss, mistake, gross negligence
or misconduct caused by such third party.
15. Disclosure. (a) Neither the Advisor, on its own behalf or on
behalf of the Fund, or the Sub-Advisor shall disclose information of a
confidential nature acquired in consequence of this Agreement, except for
information that they may be entitled or bound to disclose by law, regulation or
that is disclosed to their advisors where reasonably necessary for the
performance of their professional services or, in the case of the Sub-Advisor,
as permitted in accordance with Section 14 of this Agreement.
(b) Notwithstanding the provisions of Subsection 15(a), to the extent
that any market counterparty with whom the Sub-Advisor deals requires
information relating to the Fund (including, but not limited to, the identity of
the Advisor or the Fund and market value of the Fund), the Sub-Advisor shall be
permitted to disclose such information to the extent necessary to effect
transactions on behalf of the Fund in accordance with the terms of this
Agreement.
(c) Notwithstanding the provisions of Subsections 15(a) and 15(b), the
Sub-Advisor acknowledges that the Advisor and the Fund intend to rely on Rule
17a-7, Rule 17a-10, Rule 10f-3, Rule 12d3-1 and Rule 17e-1 under the 1940 Act,
and the Sub-Advisor hereby agrees that it (i) shall not consult with any other
Sub-Advisor to the Fund with respect to transactions in securities for the
Sub-Advisory Portfolio or any other transactions of Fund assets and (ii) will
provide advice and otherwise perform services hereunder exclusively with respect
to the Sub-Advisory Portfolio of the Fund.
16. Instruction to Custodian. The Sub-Advisor shall not have control
of the investments or cash, including the investment of such cash, in the Fund
but shall have authority to issue to the Fund's custodian such instructions as
it may consider appropriate in connection with the settlement of any transaction
relating to the Sub-Advisory Portfolio that it has initiated. In addition, the
Fund's custodian shall be responsible for executing all foreign exchange
transactions made or required to be made in conjunction with settling the
purchase and sale of securities in the Sub-Advisory Portfolio. The Advisor shall
ensure that the Fund's custodian is obliged to comply with any instructions of
the Sub-Advisor given in accordance with this Agreement. The Sub-Advisor will
not be responsible for supervising the Fund's custodian.
17. Money Laundering. The Advisor, on its own behalf and on behalf of
the Fund, confirms that where it is acting as principal or where it is acting on
behalf of another person (notwithstanding that it enters into this Agreement and
any transactions as principal), it is in compliance with the anti-money
A-7
laundering regulations that apply to it. The Advisor shall provide any document
or information to the Sub-Advisor that the Sub-Advisor may request for complying
with its own anti-money laundering regulations.
18. Representations and Warranties. (a) The Advisor represents and
warrants to the Sub-Advisor that the Advisor:
(i) has full power and authority to appoint the Sub-Advisor to manage
the Fund in accordance with the terms of this Agreement; and
(ii) this Agreement is valid and has been duly authorized by
appropriate action of the Advisor, the Board and the Fund's shareholders, does
not violate any obligation by which the Advisor is bound, and when so executed
and delivered, will be binding upon the Advisor in accordance with its terms
subject to applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally and general principles of equity.
(b) The Sub-Advisor represents and warrants to the Advisor that the
Sub-Advisor:
(i) is registered as an "investment adviser" under the Advisers Act;
(ii) is not currently the subject of, and has not been the subject of
during the last three (3) years, any enforcement action by a regulator; and
(iii) maintains insurance coverage in an appropriate amount and shall
upon request provide to the Advisor any information it may reasonably require
concerning the amount of or scope of such insurance.
19. Miscellaneous.
(a) Notices. All notices provided for by this Agreement shall be in
writing and shall be deemed given when received, against appropriate receipt, by
John Hock, Chief Investment Officer, or Deborah Judd, Chief Operating Officer,
in the case of the Sub-Advisor and the Advisor's General Counsel in the case of
the Advisor, or such other person as a party shall designate by notice to the
other parties.
(b) Amendment. This Agreement may be amended at any time, but only by
written agreement between the Advisor and the Sub-Advisor, which amendment must
be approved by the Board in the manner required by the 1940 Act.
(c) Entire Agreement. This Agreement constitutes the entire agreement
among the parties hereto and supersedes any prior agreement among the parties
relating to the subject matter hereof.
(d) Severability. If any provision of this Agreement will be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement will not be affected thereby.
(e) Headings. The paragraph headings of this Agreement are for
convenience of reference and do not constitute a part hereof.
(f) Governing Law. This Agreement shall be governed in accordance with
the internal laws of the State of Delaware, without giving effect to principles
of conflict of laws.
(g) Use of Sub-Advisor's Name. Neither the Advisor, the Fund nor any
affiliate of the foregoing will use the Sub-Advisor's name or the registered
trademarks, service marks, logos, names or any other proprietary designations of
the Sub-Advisor, its subsidiaries and/or affiliates (collectively, "Sub-Advisor
Marks") in any advertising or promotional material without the Sub-Advisor's
prior written approval, which will not be unreasonably withheld. Notwithstanding
the foregoing, the Advisor may identify the Sub-Advisor as a sub-advisor to the
Fund in any advertising and promotional materials that contain a list of the
Fund's sub-advisors. The Advisor and the Sub-Advisor will work together to
develop mutually
A-8
agreeable standards and procedures for the review of materials bearing
Sub-Advisor Marks to facilitate the efficient creation and use of such
advertising or promotional materials.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective duly authorized representatives as of the date
first written above.
FAF Advisors, Inc.
By: /s/ Joseph M. Ulrey, III
------------------------------------
Name: Joseph M. Ulrey, III
Title: Chief Financial Officer
Altrinsic Global Advisors, LLC
By: /s/ John D. Hock
------------------------------------
Name: John D. Hock
Title: Managing Member
A-9
AMENDMENT TO INVESTMENT SUB-ADVISORY AGREEMENT
DATED AS OF MAY 3, 2007
WHEREAS, Altrinsic Global Advisors, LLC (the "Sub-Advisor") acts as
one of the sub-advisors for International Select Fund (the "Fund"), a series of
First American Investment Funds, Inc. ("FAIF"), pursuant to an Investment
Sub-Advisory Agreement dated November 27, 2006 (the "Effective Date"), between
FAF Advisors, Inc. (the "Advisor") and the Sub-Advisor (the "Sub-Advisory
Agreement"); and
WHEREAS, on the Effective Date, Section 11 of the Sub-Advisory
Agreement provided that the Sub-Advisory Agreement would be terminable, without
penalty, on 90-days' written notice (the date of termination could be less than
or more than 90 days after the written notice of termination so long as the
duration of the notice period was agreed upon by the Advisor and Sub-Advisor) by
the Advisor, by FAIF's board of directors (the "Board"), or by the Sub-Advisor,
and would immediately terminate upon termination of the Investment Advisory
Agreement between FAIF and the Advisor (the "Advisory Agreement"); and
WHEREAS, after such Effective Date, the Advisor and Sub-Advisor
entered into a Letter of Agreement, dated March 28, 2007 (the "Letter
Agreement"), which provided that the Sub-Advisory Agreement would be terminable,
under Section 11, without penalty, on 60-days' written notice (the date of
termination to be less than 60 days after the written notice of termination so
long as the duration of the notice period was agreed upon by the Advisor and
Sub-Advisor) by the Advisor, by the Board, by vote of a majority of the Fund's
outstanding voting securities, or by the Sub-Advisor, and would immediately
terminate upon termination of the Advisory Agreement; and
WHEREAS, the Board has approved and authorized that the terms of
Section 11 of the Sub-Advisory Agreement be modified to the extent necessary to
reflect the terms of the Letter Agreement.
NOW, THEREFORE, the Advisor and Sub-Advisor, intending to be legally
bound, agree that Section 11 of the Sub-Advisory Agreement shall be replaced, in
its entirety, with the following:
This Agreement shall become effective as of the date of its execution
and shall continue in effect for a period of two years from the date
of execution. Thereafter, this Agreement shall continue automatically
for successive annual periods, provided such continuance is
specifically approved at least annually by the Board in the manner
required by the 1940 Act. This Agreement is terminable, without
penalty, on 60 days' written notice (the date of termination may be
less than 60 days after the written notice of termination so long as
the duration of the notice period is agreed upon by the Advisor and
Sub-Advisor) by the Advisor, by FAIF's Board, by vote of a majority of
the Fund's outstanding voting securities, or by the Sub-Advisor, and
will immediately terminate upon termination of the Advisory Agreement.
This Agreement also will terminate automatically in the event of its
assignment (as defined in the 1940 Act).
IN WITNESS WHEREOF, the Advisor and Sub-Advisor have caused this
instrument to be executed as of the date first above written by their duly
authorized officers.
FAF ADVISORS, INC. ALTRINSIC GLOBAL ADVISORS, LLC
By: /s/ Joseph M. Ulrey, III By: /s/ John D. Hock
--------------------------------- ------------------------------------
Name: Joseph M. Ulrey, III Name: John D. Hock
Title: Chief Financial Officer Title: Managing Member
A-10
AMENDMENT TO INVESTMENT SUB-ADVISORY AGREEMENT
DATED AS OF ______, 2008
WHEREAS, FAF Advisors, Inc. (the "Advisor") acts as the Investment
Advisor for International Fund (the "Fund"), a series of First American
Investment Funds, Inc. ("FAIF"), pursuant to an investment advisory agreement
between the Advisor and FAIF; and
WHEREAS, the Advisor is responsible for the day-to-day management of
the Fund and for the coordination of the investment of the Fund's assets in
portfolio securities; and
WHEREAS, specific portfolio purchases and sales for all or a portion
of the Fund's assets may be made by one or more sub-advisors selected and
appointed by the Advisor, subject to the pre-approval of the Board of Directors
of FAIF (the "Board") and, to the extent required under Section 15(a) of the
Investment Company Act of 1940 (the "1940 Act") and any rules thereunder, the
approval of the Fund's shareholders; and
WHEREAS, Hansberger Global Investors, LLC (the "Sub-Advisor")
currently acts as a sub-advisor for International Select Fund, a series of FAIF,
pursuant to an Investment Sub-Advisory Agreement dated February 22, 2007 between
the Advisor and the Sub-Advisor (the "Sub-Advisory Agreement"); and
WHEREAS, the Sub-Advisor provides to International Select Fund the
services described in Section 2 of the Sub-Advisory Agreement and the Board has
determined that it would be in the best interests of the Fund and its
shareholders to have the Sub-Advisor provide such services to the Fund; and
WHEREAS, the Fund's shareholders have approved the Sub-Advisor's
provision of such services to the Fund; and
WHEREAS, the Sub-Advisor is willing to provide such services upon the
terms and conditions set forth herein.
NOW, THEREFORE, the Advisor and Sub-Advisor, intending to be legally
bound, agree as follows:
1. The Sub-Advisory Agreement is hereby amended to appoint the Sub-Advisor
as investment sub-advisor for that portion of the assets of the Fund that the
Advisor determines to allocate to the Sub-Advisor from time to time.
2. All references to "Fund" in the Sub-Advisory Agreement shall be deemed
to apply to International Fund and International Select Fund, either
individually or collectively, as the context requires.
3. All references to "Sub-Advisory Portfolio" in the Sub-Advisory Agreement
shall be deemed to refer to that portion of International Fund's assets managed
by the Sub-Advisor and that portion of International Select Fund's assets
managed by the Sub-Advisor, either individually or collectively, as the context
requires.
4. The conditions described under paragraph (a) of Section 11 of the
Sub-Advisory Agreement having been previously satisfied, the term of the
Sub-Advisory Agreement shall be governed exclusively by the provisions of
paragraph (b) of Section 11, as amended May 3, 2007.
5. Schedule A to the Sub-Advisory Agreement is replaced in its entirety
with the following:
SCHEDULE A
Pursuant to Section 7, the Advisor shall pay the Sub-Advisor
compensation for services rendered to the Funds, calculated daily
and paid monthly, at the annual rates set forth in the
B-1
following table. Such rates are based on the aggregate average
daily net assets of the Sub-Advisory Portfolios.
AGGREGATE ASSETS OF
SUB-ADVISORY PORTFOLIOS FEE PER ANNUM
- ----------------------- -------------
First $425 million 0.40%
Over $425 million 0.30%
6. All other terms and conditions of the Sub-Advisory Agreement shall
continue in full force and effect.
IN WITNESS WHEREOF, the Advisor and Sub-Advisor have caused this
instrument to be executed as of the date first above written by their duly
authorized officers.
FAF ADVISORS, INC. HANSBERGER GLOBAL INVESTORS, INC.
By: By:
--------------------------------- ------------------------------------
Name: Joseph M. Ulrey, III Name: Ronald W. Holt
Title: Chief Financial Officer Title: President
B-2
INVESTMENT SUB-ADVISORY AGREEMENT
FIRST AMERICAN INVESTMENT FUNDS, INC.
THIS AGREEMENT is made as of the 22nd day of February, 2007, between
FAF Advisors, Inc., a Delaware corporation (the "Advisor") and Hansberger Global
Investors, Inc., a Delaware corporation (the "Sub-Advisor").
WHEREAS, the Advisor acts as the investment advisor for International
Select Fund (the "Fund"), a series of First American Investment Funds, Inc.
("FAIF"), pursuant to an investment advisory agreement between the Advisor and
FAIF (the "Advisory Agreement");
WHEREAS, the Advisor is responsible for the day-to-day management of
the Fund and for the coordination of the investment of the Fund's assets in
portfolio securities;
WHEREAS, specific portfolio purchases and sales for all or a portion
of the Fund's assets may be made by one or more sub-advisors selected and
appointed by the Advisor, subject to the pre-approval of the Board of Directors
of FAIF (the "Board");
WHEREAS, the Advisor and the Sub-Advisor entered into an Investment
Sub-Advisory Agreement, dated as of November 27, 2006, (the "Prior Agreement"),
whereby the Advisor retained the Sub-Advisor to act as investment sub-advisor
for that portion of the Fund's assets that the Advisor has determined to
allocate to the Sub-Advisor, and the Sub-Advisor has been rendering such
services to the Fund pursuant to the terms and conditions set forth in the Prior
Agreement;
WHEREAS, Hansberger Group, Inc. ("Hansberger"), the parent company of
the Sub-Advisor, is a party to a certain Stock Purchase Agreement, dated as of
November 15, 2006 (the "Stock Purchase Agreement"), by and between Hansberger,
certain stockholders of Hansberger and IXIS Asset Management US Group, L.P
("IXIS");
WHEREAS, pursuant to the Stock Purchase Agreement, IXIS, currently a
minority stockholder of Hansberger, will acquire a majority of the issued and
outstanding capital stock of Hansberger;
WHEREAS, the closing of the proposed transactions contemplated by the
Stock Purchase Agreement will result in an assignment of the Prior Agreement for
purposes of the Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, pursuant to the terms of the Prior Agreement, the Prior
Agreement will terminate upon an assignment of the Prior Agreement for purposes
of the 1940 Act;
WHEREAS, effective upon the closing of the transactions contemplated
by the Stock Purchase Agreement (the "Effective Date"), the Prior Agreement will
terminate and be of no further force and effect and this Agreement will become
effective;
WHEREAS, in the event that this Agreement has not been approved by a
majority of the outstanding voting securities of the Fund (as defined in the
1940 Act) before the assignment, Rule 15a-4 permits the Sub-Advisor to continue
to provide services to the Fund for a period of 150 days after the Effective
Date, subject to certain conditions; and
WHEREAS, the Board of Directors of FAIF has approved this Agreement
and the Sub-Advisor is willing to furnish such services upon the terms and
conditions herein set forth.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants contained herein, the parties agree as follows:
1. Appointment of Sub-Advisor. The Advisor desires to engage and
hereby appoints the Sub-Advisor to act as investment sub-advisor for that
portion of the assets of the Fund that the Advisor
B-3
determines to allocate to the Sub-Advisor from time to time (referred to herein
as the "Sub-Advisory Portfolio"). The Sub-Advisor accepts the appointment and
agrees to furnish the services described herein for the compensation set forth
below.
2. Duties of Sub-Advisor.
The Sub-Advisor is hereby employed and authorized to conduct a
continual program of investment, evaluation and, if appropriate, sale and
reinvestment of the assets in the Sub-Advisory Portfolio. In connection
therewith, the Sub-Advisor will (a) make investment decisions for the
Sub-Advisory Portfolio; (b) place purchase and sale orders for portfolio
transactions in the Sub-Advisory Portfolio; and (c) employ professional
portfolio managers and securities analysts to provide research services relating
to the Sub-Advisory Portfolio. Subject to the supervision of the Board and the
Advisor, the Sub-Advisor will manage the assets in the Sub-Advisory Portfolio in
accordance with (a) the Fund's investment objective(s), policies and
restrictions stated in the Prospectus, the SAI and the Charter Documents (as
such terms are defined below), (b) the Guidelines (as such term is defined
below), and (c) applicable laws and regulations. In managing the Sub-Advisory
Portfolio, the Sub-Advisor will not consider any other securities, cash or other
investment the Fund owns. The duties of the Sub-Advisor with respect to the
Sub-Advisory Portfolio shall be confined to those set forth herein.
The Advisor has furnished to the Sub-Advisor the Fund's compliance
procedures pursuant to Rules 10f-3, 17a-7, and 17e-1 under the 1940 Act)
(collectively, the "Compliance Procedures"), the Articles of Incorporation and
Bylaws of FAIF, each as amended to date (the "Charter Documents"), the currently
effective prospectus (the "Prospectus") and statement of additional information
(the "SAI") of the Fund, the resolution of the Board approving the form of this
Agreement, the resolution of the Board selecting the Advisor as investment
advisor to the Fund and approving the form of the Advisory Agreement, the
resolution adopted by the initial shareholder of the Fund approving the form of
Advisory Agreement, and the Advisory Agreement. The Advisor agrees, on an
ongoing basis, to provide to the Sub-Advisor, as promptly as practicable, copies
of all amendments and supplements to the Compliance Procedures, the Prospectus
and the SAI and amendments to the Charter Documents. The Advisor has furnished
to the Sub-Advisor all written guidelines (the "Guidelines") setting forth
additional operating policies and procedures, including any limitations on the
types of securities and other investment products in which the Fund is permitted
to invest or on investment activities in which the Fund is permitted to engage.
The Advisor retains the right, on prior written notice to the Sub-Advisor, to
modify the Guidelines at any time and in any manner. The Sub-Advisor shall
either comply with the amended Guidelines in accordance with a reasonable
timeline agreed upon by the Advisor and Sub-Advisor or terminate this Agreement
in accordance with Section 11 below.
3. Brokerage. In selecting brokers or dealers to execute transactions
on behalf of the Fund, the Sub-Advisor will seek the best overall terms
available. In assessing the best overall terms available for any transaction,
the Sub-Advisor will consider factors it deems relevant, including, without
limitation, the breadth of the market in the security, the price of the
security, the financial condition and execution capability of the broker or
dealer and the reasonableness of the commission, if any, for the specific
transaction and on a continuing basis. In selecting brokers or dealers to
execute a particular transaction, and in evaluating the best overall terms
available, the Sub-Advisor is authorized to consider brokerage and research
services (within the meaning of Section 28(e) of the Securities Exchange Act of
1934, as amended). The Sub-Advisor will not execute any portfolio transactions
with a broker or dealer which is an "affiliated person" (as defined in the 1940
Act) of the Sub-Advisor or the Advisor, except pursuant to the Board's approved
17e-1 Policies and Procedures for affiliated brokerage transactions. The Advisor
will provide the Sub-Advisor with a list of brokers and dealers that are
"affiliated persons" of the Advisor.
4. Proxy Voting. The Sub-Advisor shall vote all proxies with respect
to securities held in the Sub-Advisory Portfolio in accordance with the
Sub-Advisor's proxy voting guidelines and procedures in effect from time to
time. In the event material changes are made to such proxy voting guidelines,
the Sub-Advisor agrees to provide the Advisor with a copy of the revised proxy
voting guidelines. The Advisor agrees to instruct the Fund's custodian to
forward all proxy materials and related shareholder communications to the
Sub-Advisor promptly upon receipt. The Sub-Advisor agrees to promptly inform
B-4
the Advisor and the Fund of any conflict of interest of which the Sub-Advisor is
aware that the Sub-Advisor has in voting proxies with respect to securities held
in the Sub-Advisory Portfolio. The Sub-Advisor shall not be liable with regard
to voting of proxies or other corporate actions if the proxy materials and
related communications are not received in a timely manner.
5. Information Provided to the Advisor.
(a) The Sub-Advisor will keep the Advisor informed of developments
materially affecting the Fund and will, on its own initiative, furnish the
Advisor from time to time with whatever information the Sub-Advisor believes is
appropriate for this purpose.
(b) The Sub-Advisor will confer with the Advisor as the Advisor may
reasonably request regarding the investment and management of the Sub-Advisory
Portfolio. The Sub-Advisor will not advise the Advisor or act for the Advisor or
the Fund in any legal proceedings, including bankruptcies or class actions,
involving securities in the Sub-Advisory Portfolio or the issuers of the
securities.
(c) The Sub-Advisor agrees to comply with all reporting requirements
that the Board or the Advisor reasonably adopt and communicate to the
Sub-Advisor in writing, including reporting requirements related to performance
of the Sub-Advisory Portfolio, brokerage practices, and proxy voting.
(d) The Sub-Advisor agrees to furnish the information requested of the
Sub-Advisor, as set forth in the Fund's Valuation Policies and Procedures, as
currently existing or hereafter modified, including, without limitation,
advising the Advisor as soon as practicable of any "significant event" (as
defined in the Valuation Policies and Procedures) relating to, or affecting the
value of, any security or other asset held in the Sub-Advisory Portfolio. A copy
of the current Valuation Policies and Procedures is attached as Exhibit A. The
Advisor agrees to notify the Sub-Advisor of any modification to the Valuation
Policies and Procedures applicable to the Sub-Advisor in a timely manner.
(e) The Sub-Advisor has provided the Advisor with a true and complete
copy of its compliance policies and procedures that are reasonably designed to
prevent violations of the "federal securities laws" (as such term is defined in
Rule 38a-1 under the 1940 Act) and Rule 206(4)-7 under the Investment Advisers
Act of 1940, as amended (the "Advisers Act") (the "Sub-Advisor Compliance
Policies"). The Sub-Advisor's chief compliance officer (the "Sub-Advisor CCO")
shall provide to FAIF's Chief Compliance Officer (the "FAIF CCO") or his or her
delegate, promptly (and in no event more than 10 business days) after the
occurrence of the triggering event, the following:
(i) a report of any material changes to the Sub-Advisor Compliance
Policies;
(ii) a report of any "material compliance matters," as defined by Rule
38a-1 under the 1940 Act, that have occurred in connection with the
Sub-Advisor Compliance Policies;
(iii) a copy of a summary of the Sub-Advisor CCO's report with respect
to the annual review of the Sub-Advisor Compliance Policies pursuant
to Rule 206(4)-7 under the Advisers Act; and
(iv) an annual (or more frequently as the FAIF CCO may request)
certification regarding the Sub-Advisor's compliance with Rule
206(4)-7 under the Advisers Act and Section 38a-1 under the 1940 Act
as well as the foregoing sub-paragraphs (i) - (iii).
(f) The Sub-Advisor will timely notify the Advisor of any material
violations by the Sub-Advisor of the Fund's investment policies or
restrictions, the Guidelines, or any applicable law or regulation.
6. Standard of Care. The Sub-Advisor shall exercise its best judgment
in rendering the services described in paragraphs 2, 3 and 4 above. The
Sub-Advisor shall not be liable for any error of judgment or mistake of law or
for any loss suffered by the Fund or the Advisor in connection with the
B-5
matters to which this Agreement relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on the Sub-Advisor's part in the
performance of its duties or from reckless disregard by the Sub-Advisor of its
obligations and duties under this Agreement (each such act or omission shall be
referred to as "Disqualifying Conduct"). Neither the Sub-Advisor nor its
members, partners, officers, employees and agents shall be liable to the
Advisor, the Fund, its shareholders or any other person (a) for the acts,
omissions, errors of judgment or mistakes of law of any other fiduciary or other
person with respect to the Fund or (b) for any failure or delay in performance
of the Sub-Advisor's obligations under this Agreement arising out of or caused,
directly or indirectly, by circumstances beyond its reasonable control,
including, without limitation, acts of civil or military authority, national
emergencies, labor difficulties, fire, mechanical breakdowns, flood or
catastrophe, acts of God, insurrection, war, riots or failure of the mails,
transportation, communication or power supply.
The Sub-Advisor does not guarantee the future performance of the
Sub-Advisory Portfolio or any specific level of performance, the success of any
investment decision or strategy that the Sub-Advisor may use, or the success of
the Sub-Advisor's overall management of the Sub-Advisory Portfolio. The Advisor
understands that investment decisions made for the Fund by the Sub-Advisor are
subject to various market, currency, economic, political and business risks, and
that those investment decisions will not always be profitable.
7. Compensation.
(a) In consideration of the services rendered pursuant to this
Agreement, the Advisor will pay the Sub-Advisor on the fifth business day of
each month a fee for the previous month according to the attached Schedule A;
provided that, until this Agreement has been approved in accordance with Section
11(a) hereof, such compensation shall be payable to an interest bearing escrow
account with the Fund's custodian bank. The fee for the period from the date of
this Agreement to the end of the calendar month shall be prorated according to
the proportion that such period bears to the full monthly period. Upon any
termination of this Agreement before the end of a month, the fee for such part
of that month shall be prorated according to the proportion that such period
bears to the full monthly period and shall be payable upon the date of
termination of this Agreement. For the purpose of determining fees payable to
the Sub-Advisor, the value of the net assets of the Sub-Advisory Portfolio shall
be computed at the times and in the manner specified in the Prospectus and/or
the SAI.
(b) With respect to compensation paid to the escrow account described
in Section 7(a) hereof, if this Agreement is approved in accordance with Section
11(a) hereof, the amount in such escrow account with respect to the Fund shall
be paid to the Sub-Advisor on the date of such approval. If this Agreement is
not approved in accordance with Section 11(a) hereof, the Sub-Advisor shall be
paid, out of such escrow account, the lesser of (i) any costs reasonably
incurred by the Sub-Advisor in performing this Agreement, as approved by the
Board of Directors of FAIF (the "Board"), plus interest earned on that amount
while in escrow, or (ii) the total amount in such escrow account (plus interest
accrued thereon).
8. Expenses. The Sub-Advisor will bear all of its expenses in
connection with the performance of its services under this Agreement. All other
expenses to be incurred in the operation of the Fund will be borne by the Fund,
except to the extent specifically assumed by the Sub-Advisor. The expenses to be
borne by the Fund include, without limitation, the following: organizational
costs, taxes, interest, brokerage fees and commissions, directors' fees,
Securities and Exchange Commission fees and state Blue Sky qualification fees,
advisory fees, charges of custodians, transfer and dividend disbursing agents'
fees, certain insurance premiums, outside auditing and legal expenses, costs of
independent pricing services, costs of maintaining existence, costs attributable
to investor services (including, without limitation, telephone and personnel
expenses), costs of preparing and printing prospectuses and SAIs for regulatory
purposes and for distribution to existing stockholders, costs of stockholders'
reports and meetings, and any extraordinary expenses.
9. Services to Other Companies or Accounts. The Advisor understands
that the Sub-Advisor now acts, will continue to act and may act in the future as
investment advisor to fiduciary and other managed accounts and as investment
advisor to other investment companies, and the Advisor has no
B-6
objection to the Sub-Advisor so acting, provided that whenever the Sub-Advisory
Portfolio and one or more other accounts or investment companies advised by the
Sub-Advisor have available funds for investment, investments suitable and
appropriate for each will be allocated in accordance with a methodology believed
to be equitable to each entity. The Sub-Advisor agrees to similarly allocate
opportunities to sell securities. The Advisor recognizes that, in some cases,
this procedure may limit the size of the position that may be acquired or sold
for the Fund. In addition, the Advisor understands that the persons employed by
the Sub-Advisor to assist in the performance of the Sub-Advisor's duties
hereunder will not devote their full time to such service and nothing contained
herein shall be deemed to limit or restrict the right of the Sub-Advisor or any
affiliate of the Sub-Advisor to engage in and devote time and attention to other
business or to render services of whatever kind or nature.
10. Books and Records. In compliance with the requirements of Rule
31a-3 under the 1940 Act, the Sub-Advisor hereby agrees that all records which
it specifically maintains for the Fund are the property of the Fund and further
agrees to surrender promptly to the Fund copies of any of such records upon the
Fund's or the Advisor's request. The Sub-Advisor further agrees to preserve for
the periods prescribed by Rule 31a-2 under the 1940 Act the records relating to
its activities hereunder required to be maintained by Rule 31a-1 under the 1940
Act and to preserve the records relating to its activities hereunder required by
Rule 204-2 under the Advisers Act for the period specified in said Rule.
11. Term of Agreement.
(a) This Agreement shall take effect on the Effective Date. In the
event that the Effective Date has not occurred on or before June 1, 2007, this
Agreement shall be void ab initio and neither the Sub-Advisor nor the Advisor
shall have any rights, duties or obligations hereunder. Unless this Agreement
has been approved by a majority of the outstanding voting securities of the Fund
(as defined in the 1940 Act), this Agreement shall terminate one hundred fifty
(150) days after the Effective Date. During this period, this Agreement is
terminable (i) at any time without penalty on 10 days' notice by the Advisor, by
the Sub-Advisor or the Board or (ii) by vote of the lesser of (A) 67% of the
shares of the Fund represented at a meeting if holders of more than 50% of the
outstanding shares are present in person or by proxy, or (B) more than 50% of
the outstanding shares of the Fund.
(b) If this Agreement is approved in accordance with Section 11(a)
hereof, then unless sooner terminated, this Agreement shall continue in effect
for a period of two years from the Effective Date. Thereafter, this Agreement
shall continue automatically for successive annual periods, provided such
continuance is specifically approved at least annually by the Board in the
manner required by the 1940 Act. This Agreement is terminable, without penalty,
on 90 days' written notice (the date of termination may be less than or more
than 90 days after the written notice of termination so long as the duration of
the notice period is agreed upon by the Advisor and Sub-Advisor) by the Advisor,
by the Board, or by the Sub-Advisor, and will immediately terminate upon
termination of the Advisory Agreement. This Agreement also will terminate
automatically in the event of its assignment (as defined in the 1940 Act).
12. Trade Settlement at Termination. Termination will be without
prejudice to the completion of any transaction already initiated. On, or after,
the effective date of termination, the Sub-Advisor shall be entitled, without
prior notice to the Advisor or the Fund, to direct the Fund's custodian to
retain and/or realize any assets of the Fund as may be required to settle
transactions already initiated. Following the date of effective termination, any
new transactions will only be executed by mutual agreement between the Advisor
and the Sub-Advisor.
13. Indemnification. (a) The Advisor agrees to indemnify and hold
harmless the Sub-Advisor and its members, partners, officers, employees, agents,
successors and assigns (each a "Sub-Advisor Indemnified Person") from and
against any and all claims, losses, liabilities or damages (including reasonable
attorneys' fees and other related expenses) to which any Sub-Advisor Indemnified
Person may become subject as a result of the Advisor's material breach of this
Agreement or as a result of the Advisor's willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations and duties hereunder or
violation of applicable law; provided, however, that no Sub-Advisor Indemnified
Person shall be
B-7
indemnified for any claim, loss, liability or damage that may be sustained as a
result of the Sub-Advisor's Disqualifying Conduct.
(b) The Sub-Advisor agrees to indemnify and hold harmless the Advisor
and the Fund and their respective shareholders, members, partners, directors,
officers, employees, agents, successors and assigns (each an "Advisor
Indemnified Person") from and against any and all claims, losses, liabilities or
damages (including reasonable attorney's fees and other related expenses) to
which any Advisor Indemnified Person may become subject as a result of the
Sub-Advisor's material breach of this Agreement or as a result of the
Sub-Advisor's willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations and duties hereunder or violation of applicable
law; provided, however, that no Advisor Indemnified Person shall be indemnified
for any claim, loss, liability or damage that may be sustained as a result of
the Advisor's Disqualifying Conduct.
14. Delegation to Third Parties. Except where prohibited by applicable
law or regulation, the Sub-Advisor may delegate or may employ a third party to
perform any accounting, administrative, reporting and ancillary services
required to enable the Sub-Advisor to perform its functions under this
Agreement. Notwithstanding any other provision of the Agreement, the Sub-Advisor
may provide information about the Advisor and the Fund to any such third party
for the purposes of this paragraph, provided that the third party is subject to
a confidentiality agreement that specifically prevents the misuse of any such
information, including portfolio holdings. The Sub-Advisor will act in good
faith and with due diligence in the selection, use and monitoring of third
parties and shall be solely responsible for any loss, mistake, gross negligence
or misconduct caused by such third party.
15. Disclosure. (a) Neither the Advisor, on its own behalf or on
behalf of the Fund, or the Sub-Advisor shall disclose information of a
confidential nature acquired in consequence of this Agreement, except for
information that they may be entitled or bound to disclose by law, regulation or
that is disclosed to their advisors where reasonably necessary for the
performance of their professional services or, in the case of the Sub-Advisor,
as permitted in accordance with Section 14 of this Agreement.
(b) Notwithstanding the provisions of Subsection 15(a), to the extent
that any market counterparty with whom the Sub-Advisor deals requires
information relating to the Fund (including, but not limited to, the identity of
the Advisor or the Fund and market value of the Fund), the Sub-Advisor shall be
permitted to disclose such information to the extent necessary to effect
transactions on behalf of the Fund in accordance with the terms of this
Agreement.
(c) Notwithstanding the provisions of Subsections 15(a) and 15(b), the
Sub-Advisor acknowledges that the Advisor and the Fund intend to rely on Rule
17a-7, Rule 17a-10, Rule 10f-3, Rule 12d3-1 and Rule 17e-1 under the 1940 Act,
and the Sub-Advisor hereby agrees that it (i) shall not consult with any other
Sub-Advisor to the Fund with respect to transactions in securities for the
Sub-Advisory Portfolio or any other transactions of Fund assets and (ii) will
provide advice and otherwise perform services hereunder exclusively with respect
to the Sub-Advisory Portfolio of the Fund.
16. Instruction to Custodian. The Sub-Advisor shall not have control
of the investments or cash, including the investment of such cash, in the Fund
but shall have authority to issue to the Fund's custodian such instructions as
it may consider appropriate in connection with the settlement of any transaction
relating to the Sub-Advisory Portfolio that it has initiated. In addition, the
Fund's custodian shall be responsible for executing all foreign exchange
transactions made or required to be made in conjunction with settling the
purchase and sale of securities in the Sub-Advisory Portfolio. The Advisor shall
ensure that the Fund's custodian is obliged to comply with any instructions of
the Sub-Advisor given in accordance with this Agreement. The Sub-Advisor will
not be responsible for supervising the Fund's custodian.
17. Anti-Money Laundering. The Advisor, on its own behalf and on
behalf of the Fund, confirms that where it is acting as principal or where it is
acting on behalf of another person (notwithstanding that it enters into this
Agreement and any transactions as principal), it is in compliance with the
anti-money laundering regulations that apply to it. The Advisor shall provide
any document or
B-8
information to the Sub-Advisor that the Sub-Advisor may request for complying
with its own anti-money laundering regulations.
18. Representations and Warranties. (a) The Advisor represents and
warrants to the Sub-Advisor that the Advisor:
(i) has full power and authority to appoint the Sub-Advisor to manage
the Fund in accordance with the terms of this Agreement; and
(ii) this Agreement is valid and has been duly authorized by
appropriate action of the Advisor, the Board and the Fund's
shareholders, does not violate any obligation by which the Advisor is
bound, and when so executed and delivered, will be binding upon the
Advisor in accordance with its terms subject to applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally and general principles of equity.
(b) The Sub-Advisor represents and warrants to the Advisor that the
Sub-Advisor:
(i) is registered as an "investment adviser" under the Advisers Act;
(ii) is not currently the subject of, and has not been the subject of
during the last three (3) years, any enforcement action by a
regulator; and
(iii) maintains insurance coverage in an appropriate amount and shall
upon request provide to the Advisor any information it may reasonably
require concerning the amount of or scope of such insurance.
19. Miscellaneous.
(a) Notices. All notices provided for by this Agreement shall be in
writing and shall be deemed given when received, against appropriate receipt, by
the President with a copy to the General Counsel in the case of the Sub-Advisor
and the Advisor's General Counsel in the case of the Advisor, or such other
person as a party shall designate by notice to the other parties.
(b) Amendment. This Agreement may be amended at any time, but only by
written agreement between the Advisor and the Sub-Advisor, which amendment must
be approved by the Board in the manner required by the 1940 Act.
(c) Entire Agreement. This Agreement constitutes the entire agreement
among the parties hereto and supersedes any prior agreement among the parties
relating to the subject matter hereof.
(d) Severability. If any provision of this Agreement will be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement will not be affected thereby.
(e) Headings. The paragraph headings of this Agreement are for
convenience of reference and do not constitute a part hereof.
(f) Governing Law. This Agreement shall be governed in accordance with
the internal laws of the State of Delaware, without giving effect to principles
of conflict of laws.
(g) Use of Sub-Advisor's Name. The Fund and the Advisor agree to
submit any proposed sales literature that mentions the Sub-Advisor (other than
identifying the Sub-Advisor as Sub-Advisor to the Fund) to the Sub-Advisor for
review prior to use and the Sub-Advisor agrees to promptly review such materials
by a reasonable and appropriate deadline. The Advisor agrees to cause the
Advisor and the Fund's distributor to promptly review all such sales literature
for compliance with relevant requirements, to promptly advise the Sub-Advisor of
any deficiencies contained in such sales literature, and to promptly file
B-9
complying sales literature with the relevant regulatory authorities. Neither the
Advisor, nor the Fund nor any affiliate of the foregoing will use the registered
trademarks, service marks, logos, names or any other proprietary designations of
Sub-Advisor, its subsidiaries and/or affiliates (collectively, "Sub-Advisor
Marks") in any advertising or promotional materials without Sub-Advisor's prior
written approval, which will not be unreasonably withheld. Advisor and
Sub-Advisor will work together to develop mutually agreeable standards and
procedures for the review of materials bearing Sub-Advisor Marks to facilitate
the efficient creation and use of such advertising or promotional materials.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective duly authorized representatives as of the date
first written above.
FAF Advisors, Inc.
By: /s/ Joseph M. Ulrey, III
------------------------------------
Name: Joseph M. Ulrey, III
Title: Chief Financial Officer
Hansberger Global Investors, Inc.
By: /s/ Ronald W. Holt, Jr.
------------------------------------
Name: Ronald W. Holt, Jr.
Title: President
B-10
AMENDMENT TO INVESTMENT SUB-ADVISORY AGREEMENT
DATED AS OF MAY 3, 2007
WHEREAS, Hansberger Global Investors, Inc. (the "Sub-Advisor") acts as
one of the sub-advisors for International Select Fund (the "Fund"), a series of
First American Investment Funds, Inc. ("FAIF"), pursuant to an Investment
Sub-Advisory Agreement dated February 22, 2007 (the "Effective Date"), between
FAF Advisors, Inc. (the "Advisor") and the Sub-Advisor (the "Sub-Advisory
Agreement"); and
WHEREAS, on the Effective Date, Section 11(b) of the Sub-Advisory
Agreement provided that the Sub-Advisory Agreement would be terminable, without
penalty, on 90-days' written notice (the date of termination could be less than
or more than 90 days after the written notice of termination so long as the
duration of the notice period was agreed upon by the Advisor and Sub-Advisor) by
the Advisor, by FAIF's board of directors (the "Board"), or by the Sub-Advisor,
and would immediately terminate upon termination of the Investment Advisory
Agreement between FAIF and the Advisor (the "Advisory Agreement"); and
WHEREAS, after such Effective Date, the Advisor and Sub-Advisor
entered into a Letter of Agreement, dated March 28, 2007 (the "Letter
Agreement"), which provided that the Sub-Advisory Agreement would be terminable,
under Section 11(b), without penalty, on 60-days' written notice (the date of
termination to be less than 60 days after the written notice of termination so
long as the duration of the notice period was agreed upon by the Advisor and
Sub-Advisor) by the Advisor, by the Board, by vote of a majority of the Fund's
outstanding voting securities, or by the Sub-Advisor, and would immediately
terminate upon termination of the Advisory Agreement; and
WHEREAS, the Board has approved and authorized that the terms of
Section 11(b) of the Sub-Advisory Agreement be modified to the extent necessary
to reflect the terms of the Letter Agreement.
NOW, THEREFORE, the Advisor and Sub-Advisor, intending to be legally
bound, agree that Section 11(b) of the Sub-Advisory Agreement shall be replaced,
in its entirety, with the following:
If this Agreement is approved in accordance with Section 11(a) hereof,
then unless sooner terminated, this Agreement shall continue in effect
for a period of two years from the Effective Date. Thereafter, this
Agreement shall continue automatically for successive annual periods,
provided such continuance is specifically approved at least annually
by the Board in the manner required by the 1940 Act. This Agreement is
terminable, without penalty, on 60 days' written notice (the date of
termination may be less than 60 days after the written notice of
termination so long as the duration of the notice period is agreed
upon by the Advisor and Sub-Advisor) by the Advisor, by FAIF's Board,
by vote of a majority of the Fund's outstanding voting securities, or
by the Sub-Advisor, and will immediately terminate upon termination of
the Advisory Agreement. This Agreement also will terminate
automatically in the event of its assignment (as defined in the 1940
Act).
IN WITNESS WHEREOF, the Advisor and Sub-Advisor have caused this
instrument to be executed as of the date first above written by their duly
authorized officers.
FAF ADVISORS, INC. HANSBERGER GLOBAL INVESTORS, INC.
By: /s/ Joseph M. Ulrey, III By: /s/ Ronald W. Holt
--------------------------------- ------------------------------------
Name: Joseph M. Ulrey, III Name: Ronald W. Holt
Title: Chief Financial Officer Title: President
B-11
FIRST AMERICAN INVESTMENT FUNDS, INC.
800 Nicollet Mall
Minneapolis, Minnesota 55402
THIS PROXY IS SOLICITED ON
BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints Charles D. Gariboldi, Jr., Kathleen L. Prudhomme,
Jeffery M. Wilson, and Richard J. Ertel or any one of them, as proxies of the
undersigned, with full power of substitution, to vote all shares of
International Fund (the "Fund") held by the undersigned on July 31, 2008, at a
special shareholder meeting of the Fund, to be held at the offices of FAF
Advisors, Inc., located at 800 Nicollet Mall, Minneapolis, Minnesota 55402, on
September 18, 2008, at 10:00 a.m., Central time, and at any adjournment thereof,
with all powers the undersigned would possess if present in person. All previous
proxies given with respect to the meeting are revoked. Receipt of the notice of
special meeting and the accompanying proxy statement is hereby acknowledged.
This proxy will be voted as instructed on the matters set forth below. It is
understood that if no choice is specified, this proxy will be voted "FOR" such
item. Upon all other matters the proxies shall vote as they deem in the best
interests of the Fund.
1. To approve the Investment Sub-Advisory Agreement between FAF Advisors
and Altrinsic, as described in the proxy statement.
_____ FOR _____ AGAINST _____ ABSTAIN
2. To approve the Investment Sub-Advisory Agreement between FAF Advisors
and HGI, as described in the proxy statement.
_____ FOR _____ AGAINST _____ ABSTAIN
3. To authorize a "manager-of-managers" structure for the Fund whereby
FAF Advisors will be able to add and replace sub-advisors to the Fund,
or materially amend existing sub-advisory agreements, without
obtaining shareholder approval.
_____ FOR _____ AGAINST _____ ABSTAIN
Please sign, date and return promptly in the enclosed envelope.
Note: Please sign exactly as your name appears on this proxy. When signing in a
fiduciary capacity, such as executor, administrator, trustee, attorney,
guardian, etc., please so indicate. Corporate and partnership proxies should be
signed by an authorized person indicating the person's title.
Dated: _____________________, 2008
- ----------------------------------------
Signature(s) (Title(s), if applicable)