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###### Securities and Exchange Commission

          - [Investment Company Act Release No. 24645]

# AGENCY:

Securities and Exchange Commission (“Commission”).

# ACTION:

Notice of an application under section 17(b) of the Investment Company Act of 1940 (the “Act”) for an exemption from section 17(a) of the Act. 

# SUMMARY OF APPLICATION:

Applicants request an order to permit a series of a registered open-end management investment company to acquire all of the assets, subject to the liabilities, of another series of the investment company. Because of certain affiliations, applicants may not rely on rule 17a-8 under the Act.

# APPLICANTS:

First American Investment Funds, Inc. (“FAIF”) and U.S. Bank National Association (“U.S. Bank”).

# FILING DATES:

The application was filed on September 11, 2000. Applicants have agreed to file an amendment during the notice period, the substance of which is reflected in this notice.

# HEARING OR NOTIFICATION OF HEARING:

An order granting the application will be issued unless the Commission orders a hearing. Interested persons may request a hearing by writing to the Commission's Secretary and serving applicants with a copy of the request, personally or by mail. Hearing requests should be received by the Commission by 5:30 p.m. on October 10, 2000 and should be accompanied by proof of service on applicants, in the form of an affidavit, or, for lawyers, a certificate of service. Hearing request should state the nature of the writer's interest, the reason for the request, and the issues contested. Persons who wish to be notified of a hearing may request notification by writing to the Commission's Secretary.

# ADDRESSES:

Secretary, Commission, 450 Fifth Street, N.W., Washington, D.C. 20549-0609; Applicants: c/o Thomas A. Berreman, Esq., U.S. Bank National Association, U.S. Bank Place, MPFP 2016, 601 Second Avenue South, Minneapolis, MN 55402.

# FOR FURTHER INFORMATION CONTACT:

                        Deeptak T. Pai, Senior Counsel, at (202) 942-0574 or Janet M. Grossnickle, Branch Chief, at (202) 942-0564, (Division of Investment Management, Office of Investment Company Regulation).                              ( print page 57632)    

# SUPPLEMENTARY INFORMATION:

The following is a summary of the application. The complete application may be obtained for a fee at the Commission's Public Reference Branch, 450 Fifth Street, N.W., Washington, D.C. 20549-0102 (telephone (202) 942-8090).

## Applicants' Representation

1. FAIF, a Maryland corporation, is registered under the Act as an open-end management investment company and is currently comprised of thirty series, including the International Index Fund (the “Acquired Fund”) and the International Fund (the “Acquiring Fund” and together with the Acquired Fund, the “Funds”).

2. U.S. Bank is the investment adviser for the Funds. U.S. Bank is a national banking association and currently is exempt from registration as an investment adviser under the Investment Advisers Act of 1940 (the “Advisers Act”). The Acquiring Fund is subadvised by Marvin & Palmer Associates, Inc. (the “Subadviser”) which is a registered investment adviser under the Advisers Act. The Subadviser is not an affiliated person of U.S. Bank.

3. U.S. Bank is a wholly-owned subsidiary of U.S.  Bankcorp, a publicly-owned multistate bank holding company. U.S. Bank Trust National Association (“U.S. Bank Trust” and together with U.S. Bank and any entity controlling, controlled by, or under common control (within the meaning of section 2(a)(9) of the Act) with U.S. Bank, “U.S. Bancorp Affiliates”) is also a wholly-owned subsidiary of U.S. Bancorp. U.S. Bancorp Affiliates, directly or through a nominee, are record holders of more than 5% (and in the case of the Acquiring Fund, more than 25%) of the outstanding shares of each of the Funds, and they hold or share voting power and/or investment discretion with respect to a portion of these shares, or have a funding obligation to defined benefit plans which own 25% or more of the outstanding shares of the Acquired Fund. The Fund shares held of record by U.S. Bancorp Affiliates are held for the benefit of others in a trust, agency, custodial or other fiduciary or representative capacity.

4. On May 18, 2000, the board of directors of FAIf (the “Board”), including all of the directors who are not “interested persons” as defined in section 2(a)(19) of the Act (“Independent Directors”), unanimously approved the proposed reorganization of the Acquired Fund with and into the Acquiring Fund (the “Reorganization Agreement” and the transaction, the “Reorganization”). The Reorganization is expected to occur on or about October 13, 2000. The Reorganizaion Agreement provides for: (a) the transfer of all of the assets and liabilities of the Acquired fund to the Acquiring Fund in exchange for shares of designated classes of the Acquiring Fund; and (b) the distribution of these Acquiring Fund shares to the shareholders of the Acquired Fund in liquidation of the Acquired Fund. In the Reorganization, Acquired fund shareholders will receive Acquiring Fund shares of the class which corresponds to that  of their class of Acquired Fund shares, and which have an aggregate net asset value equal, at the effective time of the Reorganization (the “Effective Time”), to the aggregate net asset value of their Acquired Fund shares. As soon as practicable after the Effective Time, the Acquired Fund will distribute these shares pro rata to its share holders of record, determined as of the Effective Time, and will liquidate. The value of the assets of the Funds will be determined in the manner set forth in the Funds' then current prospectuses and statements of additional information.

5. Applicants state that the investment objectives, policies, and restrictions of the Acquired Fund are similar to those of the Acquiring Fund. Each of the Funds ha four classes of shares. The classes of shares of the Acquiring Fund to be issued in the Reorganization are subject to the identical distribution fees and charges as the Acquired Fund. For purposes of calculating any contingent deferred sales charges, the Acquired Fund shareholders will be deemed to have held shares of the Acquiring Fund since the date the shareholders initially purchased the shares of the Acquired Fund. No sales charge will be imposed upon the Acquired Fund shareholders in connection with the Reorganization.

6. The Board found that the Reorganization is in the best interests of each of the Funds and their shareholders and that the interests of existing shareholders of the Funds will not be diluted as a result of the Reorganization. The Board considered among other things: (a) The advantages which may be realized by the Acquired Fund, consisting of the potential for enhanced investment performance; (b) the Reorganization is a way to avoid significant adverse tax consequences to the Acquired Fund shareholders in the event that the defined benefit plans exchanged acquired Fund shares for Acquiring Fund shares; (c) the tax-free nature of the Reorganization; (d) the terms and conditions of the Reorganization Agreement; and (e) the agreement of U.S. Bank to bear the costs associated with the Reorganization.

7. The Reorganization is subject to a number of conditions precedent, including: (a) approval of the Reorganization Agreement by the shareholders of the Acquired Fund; (b) the receipt of an opinion of counsel with respect to the tax-free nature of the Reorganization; (c) the receipt of certain certificates from the parties concerning the continuing accuracy of the representations and warranties in the Reorganization Agreement; (d) the receipt of exemptive relief from the Commission; and (e) the parties' performance in all material respects of their respective agreements and undertaking in the Reorganization Agreement. The Reorganization Agreement provides that the Reorganization may be abandoned at any time prior to the Effective Time upon the mutual consent of the Funds, or if determined by the Board that proceeding with the Reorganization is inadvisable. Applicants agree not to make any material changes to the Reorganization Agreement without prior approval of the Commission.

8. A registration statement on Form N-14, containing a combined prospectus/proxy statement, was filed with the Commission on July 3, 2000 and was mailed to shareholders of the Acquired Fund on August 10, 2000. The Reorganization was approved by the shareholders on September 15, 2000.

## Applicants' Legal Analysis

1. Section 17(a) of the Act generally prohibits an affiliated person of a registered investment company, or an affiliated person of such a person, acting as principal, form selling any security to, or purchasing any security from, the company. Section 2(a)(3) for the Act defines an “affiliated person” of another person to include (a) any person directly or indirectly owning, controlling, or holding with power to vote 5% or more of the outstanding voting securities of the other person; (b) any person 5% or more of whose securities are directly or indirectly owned, controlled, or held with power to vote by the other person; (c) any person directly or indirectly controlling, controlled by, or under common control with the other person; and (d) if the other person is an investment company, any investment adviser of that company. Applicants state that the Funds may be deemed affiliated persons and thus the Reorganization may be prohibited by section 17(a).

                    2. Rule 17a-8 under the Act exempts from the prohibitions of section 17(a) mergers, consolidations, or purchases or                           ( print page 57633)                        sales of substantially all of the assets of registered investment companies that are affiliated persons, or affiliated persons of an affiliated person, solely by reason of having a common investment adviser, common directors, and/or common officers, provided that certain conditions are satisfied.                

3. Applicants state that they may not rely on rule 17a-8 because the Funds may be deemed to be affiliated for reasons other than those set forth in the rule. U.S. Bancorp Affiliates hold a record 5% or more of the outstanding shares of each of the Funds, and hold or share voting power and/or investment discretion with respect to a portion of these shares, or have a funding obligation to defined benefit plans which own 5% or more of the outstanding shares of the Acquired Fund.

4. Section 17(b) of the Act provides that the Commission may exempt a transaction from the provisions of section 17(a) if the evidence establishes that the terms of the proposed transaction, including the consideration to be paid, are reasonable and fair and do not involve overreaching on the part of any person concerned, and that the proposed transaction is consistent with the policy of each registered investment company concerned and with the general purposes of the Act.

5. Applicants request an order under section 17(b) of the Act exempting them from section 17(a) of the Act to the extent necessary to permit applicants to complete the Reorganization. Applicants submit that the Reorganization satisfies the standards of section 17(b) of the Act. Applicants state that the Board has found that participation in the Reorganization Agreement is in the best interests of each Fund and its shareholders, and that the interests of the existing shareholders will not be diluted as a result of the Reorganization. In addition, applicants state that the exchange of Acquired Fund shares for Acquiring Fund shares will be based on net asset value.

For the Commission, by the Division of Investment Management, under delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00-24546  Filed 9-22-00; 8:45 am]

BILLING CODE 8010-01-M