SEC Division of Investment Management staff letter: First American Funds, Inc. – Prime Obligation Fund

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON. D.C. 20549
DIVISION OF l NVESTMENT MANAGEMENT
December 3,2007
Charles R. Manzoni, Jr.
General Counsel
FAF Advisors
U.S. Bancorp Center
800 Nicollet Mall
BC-MN-HOSF
Minneapolis, MN 55402
Re: First American Funds, 1nc.-Prime Obligations Fund (File No. 81 1-033 13) Dear Mr. Manzoni:
Based on the facts and representations contained in your November 26,2007 letter, we will not recommend enforcement action to the Securities and Exchange Commission against First American Funds, 1nc.-Prime Obligations Fund (the "Fund") and U.S. Bancorp. (the "Affiliate") under Section 17(a) of the Investment Company Act of 1940, or the rules thereunder, if the Affiliate purchases from the Fund the securities specified in your letter at the amortized cost (including any accrued and unpaid interest) of the securities. Because our position is based on the facts and representations in your letter, you should note that any different facts or representations may require a different conclusion. This response expresses our views on enforcement action only and does not express any legal conclusion on the issues presented.1 We have considered your request for confidential treatment of your letter and our response for a period of 120 days from the date of our response. We have determined that your request is reasonable and appropriate under 17 CFR 200.8 1 (b). Accordingly, your letter and our response will not be made public until March 3 1,2008. Senior Counsel I This letter confirms oral no-action relief provided by the undersigned to Charles Manzoni, General Counsel of FAF Advisors, Inc., on November 26,2007.

Charles R. Manzoni. Jr.
General Counsel
Direct line: (612) 303A241
Fax: (612) 303-4223

FAF ADVISORS~
U.S. Bancorp Center
800 Nicollet Mall
BC-MN-H05F
Minneapolis, MN 55402
Charles R. Manzoni, Jr.
General Counsel
Direct line: (612) 303-4241
Fax: (612) 303-4223
CONFIDENTIAL TREATMENT REQUESTED BY FAF ADVISORS. INC.
November 26,2007 ,,-
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Investm~n~Company A~>o! 1940-
Sectionsi17(a)(1),and Rule17a-9
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Mr. RobertE. Plaze....:. ,,\ \
:~·Associate Director
U.s. Securities and Exchange Commission (SEC)
100 F Street, N.E.:~.· -'-
Washipgt?ll, D~ 20549.-:-~ ~
Re: --~irst.AmeriC<in Funds, InC.-Prime Obligations Fund ."/ .:
Dear Mr. Plaze:
<' - ,F AF~dvisor-s;' Inc:::("FAF Advisors") is_writing on behalf of its parent company, U.S -Bancorp. "(the-"Affiliate"),;atfaffiliated per-son of the First American Funds, Inc.-- Prime Obligatiohs-Furid-(the~"Fund").We seek assurance from the staff of the Division oflnvestment Management ("Division") that it will not recommend enforcement action to the Securities and -,-.Exchange Commission (the "Commission") ~nder Section 17(a) of the Investment Company Act .';< of1940 (':.1940 Act"), or~the rules then5under, if the Fund and the Affiliate enter into the transacti6ndescribed'below. - ::---' -- .~

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  ~ --=- ... /fhe Fundis~registerea>with th{80rmriission under)he 1940 Act as an open-end m~mageITlentinves,t!TIent'c6riipany. The'Fu-nd;'~s Clmoney_marketfurid,seeks to maintain a stable net asset value per share of$I~OO, and uses the amortized. cost method of valuation in valuing its portfoliosecurities.:'FAF,AdYisors,serves as investment adviser to the Fund. The Affiliate is a financial holding company~thatis:theu1timate parent o(ilieFund's investment adviser.
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  ;~'" The:Fund curre1).tly~holdsmediurh'term.notes issued·by Beta Finance, Inc. and medium teril1notes issued by_Sigl11'f.Financ~,lnc. (col~ectively, the ."Securities"). Schedule A to this letter sets forth the principal amounCand',final maturity of each:Security, and the approximate percentage pf the Fun<!'stotal assetsrepreserited by the ,-Securities. i ,:,'.:",,'.,\~:~:<,, ,.c--:.<~ :- .•~-:::';--~~.--~ .;.~~. _ •• _ ,r. __ "':~Tiie'is§uers-oqhe~S~curiti~s~a~estI)lS;tured~iiivestment vehicles, commonly referred to as "SIVs;~;~As'h~'s)een reported in the generatpress, securities issued by SIVs continue to be subjectt()~li~ite(rliqui4i£y;~,!s.thesecondary market for such securities is esseI1tiallYnonexistent, except afdistr,esse~'P!iCes;~FAF~Ac<Jvis()Jshas obtained evaluations from independent pricing sources and'market·qtlOiations from dealers confirming that the market values of securities held .b)'tp~li~!1,d";tB~L~7X~~~l.!~2?y~SIVs'(includiI]-gth~ Securities)' are.below the amortized cost v~ll1esus~(jct()'calcul~telthe;Flmd' s net asset value m accordance WIth Rule 2a- 7 under the 1940 AcLAIth6i1gh the'resulting deviation betwd;in'the Fund's market-based net asset value and its amortized cost value is still within the range permitted by Rule 2a-7, the Fund's Board of / --~ ~.- "" , ,,..-~ - \ '~.:- '" " '\"'.

November 26,2007
Confidential Treatment Requested by FAF Advisors, lnc Trustees has expressed concern with respect to the stress such securities could place on the Fund. To assist in reducing .this stress, subject to obtaining the no-action assurance requested in this letter, the Affiliate is prepared to purchase the Securities in their entirety from the Fund for cash at the Securities' amortized cost (including accrued and unpaid interest). The Fund's Board of Directors has authorized the proposed transaction as being in the best interests of the Fund and its shareholders. The Affiliate is an "affiliated person" or an "affiliated person of an affiliated person" under Section 2(a)(3) of the 1940 Act because it is the ultimate parent company of the investment adviser to the Fund. The purchase of the Securities by the Affiliate under the proposed arrangement falls within Section 17(a)(2) of the 1940 Act, which makes it unlawful for any affiliated person of a registered investment company or any affiliated person of such person acting as principal to knowingly purchase any security or other property from the investment company. The proposed purchase of Securities from the Fund would satisfy the requirements of Rule 17a-9 of the 1940 Act except that the Securities continue to constitute Eligible Securities as that term is defined in Rule 2a- 7 under the 1940 Act. The Fund, FAF Advisors and the Affiliate believe it would be in the best interest of the Fund's shareholders if the Affiliate is allowed to purchase the Securities from the Fund as above contemplated. On behalf of the Fund and the Affiliate, we hereby request that the Division staff give its assurance that it will not recommend the Commission take enforcement action against the Fund or the Affiliate under Section 17(a) of the 1940 Act if the Affiliate purchases the Securities from the Fund at their amortized cost value (including accrued and unpaid interest). If you have any questions or other communications concerning this matter, please call the undersigned at (612) 303-4241. Very truly yours, {f:f{~ General Counsel FAF Advisors, Inc.

November 26,2007
Confidential Treatment Requested by FAF Advisors, Inc
Page 3.
Schedule A
NAME OF CUSIP PRINCIPAL MATURUTY
SECURITY AMOUNT
Beta Finance MTN 0865APH2 $90 million 04/09/08 Beta Finance MTN 0865APS8 $100 million 5/27/08 Si ma Finance MTN $100 million 1/15/08 Si ma Finance MTN $100 million 4/14/08 Si ma Finance MTN $100 million 8/08/08 As of November 23,2007, the $190 million of Beta Finance MTNs and the $300 million of Sigma Finance MTNs represented 0.96% and 1.44%, respectively, of the total assets of the Fund.