[LOGO] FIRST AMERICAN FUNDS(R)
THE POWER OF DISCIPLINED INVESTING(R)
FUNDS OF
FUNDS
ANNUAL REPORT
2000
FIRST AMERICAN
STRATEGY FUNDS, INC.
<PAGE>
FIRST AMERICAN
FAMILY OF FUNDS
INVESTMENTS FOR EVERY GOAL
FIRST AMERICAN FUNDS OFFER A FULL RANGE OF INVESTMENT STRATEGIES TO HELP YOU
CREATE A PERSONALIZED, DIVERSIFIED PORTFOLIO. WITH OUR DISCIPLINED FOCUS ON
CONSISTENT, COMPETITIVE PERFORMANCE AND HIGHLY DEVELOPED TEAM APPROACH TO
INVESTMENT DECISION MAKING, FIRST AMERICAN FUNDS CAN HELP BUILD A WINNING
STRATEGY FOR ANY INVESTOR.
HIGHER RISK (o)
AND RETURN POTENTIAL |
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(*) EQUITY FUNDS
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(*) FUNDS OF FUNDS
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| STRATEGY AGGRESSIVE GROWTH
| STRATEGY GROWTH
| STRATEGY GROWTH AND INCOME
| STRATEGY INCOME
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(*) BOND FUNDS
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(*) TAX FREE BOND FUNDS
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(*) MONEY MARKET FUNDS
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LOWER RISK (o)
AND RETURN POTENTIAL
Funds of funds are comprised of holdings in several different First American
funds, which may include small-cap, mid-cap, large-cap, money market,
international and/or sector funds. The investment advisor allocates and
reallocates the funds' assets among the underlying First American funds within
ranges designed to meet the investment objectives. See the funds' prospectus for
an illustration of these ranges and special risks which may be associated with
the underlying funds.
Mutual fund investing involves risk; principal loss is possible.
TABLE OF CONTENTS
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Message to Shareholders 1
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Report of Independent Auditors 13
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Statements of Net Assets 14
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Statements of Operations 16
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Statements of Changes in Net Assets 18
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Financial Highlights 20
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Notes to Financial Statements 22
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Notice to Shareholders 25
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NOT FDIC INSURED NO BANK GUARANTEE MAY LOSE VALUE
<PAGE>
MESSAGE TO SHAREHOLDERS NOVEMBER 15, 2000
DEAR SHAREHOLDERS:
On behalf of the entire board of directors and the staff of First American
Asset Management, thank you for the ongoing opportunity you have given us
to manage your investments. As always, we strive to provide you, our fund
shareholders, consistent and competitive investment performance over time.
At times during the past year, technology stocks, healthcare stocks,
municipal bonds, and long Treasury bonds have been market leaders. Small-
and mid-cap stocks outperformed large-cap stocks, and in general, market
volatility was the norm. Guessing which sector of the equity market or
which asset class will be the next market leader can be a risky way to
invest. We believe that a well-diversified portfolio of equity and bond
funds is the best way to invest over the long term. By using First American
Strategy Funds you are already choosing a diversified approach to investing
through the fund of funds investment strategy we employ.
The accompanying discussion of investment results, financial statements,
and notes detail the results of fund operations for the fiscal year and
fund holdings as of September 30, 2000. We urge you to review the
discussion of investment results and financial statements at your
convenience.
Again, thank you for investing in the First American family of funds. We
look forward to serving your investment needs next year and beyond.
Sincerely,
/s/ Virginia L. Stringer /s/ Paul A. Dow
VIRGINIA L. STRINGER PAUL A. DOW
Chairperson of the Board Chief Investment Officer and President
First American Strategy Funds, Inc. First American Asset Management
FIRST AMERICAN FUNDS ANNUAL REPORT 2000 1)
<PAGE>
A DRAMATIC YEAR FOR THE MARKETS
Last September, financial markets were on the threshold of a meteoric rally that
would lift the Dow Jones Industrial Average (Dow) and the technology-laden
Nasdaq Composite Index (Nasdaq) to record highs. At the close of 1999, investors
celebrated the fifth consecutive year of double-digit returns fueled by
unprecedented productivity gains--which boosted corporate earnings while helping
to contain inflation--and the lowest unemployment rate in three decades. For a
while, all seemed well with the nation's "Goldilocks" economy (not too hot, not
too cold).
Yet in a comment that would dictate the performance of stocks and bonds over the
ensuing months, Alan Greenspan, Chairman of the Federal Reserve Board, vowed to
continue raising interest rates until the economy cooled. The rate increases
were intended to engineer a soft landing by encouraging consumers and companies
to stop spending so much to purchase new homes, capital equipment, and the like.
STOCKS BOW TO BONDS
The prospect of additional rate hikes and their impact on corporate profits sent
the stock market into a freefall, with the Nasdaq declining 25% during April's
second week. The Dow soon followed suit. The stock market bubble had burst, with
risk returning to the marketplace. The months following April also were subject
to significant levels of market fluctuations. Although the long-term outlook for
equities remains promising, investors can expect to experience more volatility
as the economy continues to slow.
If any clear trends have emerged in the equity market, it's that small-cap
stocks have outperformed large-cap stocks, and value has outperformed growth.
Both are a reversal from the previous two years' trend of a market where
large-cap growth stocks dominated.
(2 FIRST AMERICAN FUNDS ANNUAL REPORT 2000
<PAGE>
A DRAMATIC YEAR FOR THE MARKETS
BONDS GAIN MOMENTUM
An unusual event shaped bond markets during the fiscal year. For the first time
in a decade, the yield on 30-year Treasury bonds dipped below the yield on
two-year Treasury notes, creating an inverted yield curve. This event was
triggered by the Treasury Department's decision to use part of the budget
surplus to retire debt by issuing fewer bonds and repurchasing 30-year Treasury
bonds. The scarcity of Treasury bonds sent prices up and yields down. Along the
way, the 10-year Treasury note replaced the 30-year bond as the U.S. bond
market's benchmark.
In all, U.S. government and municipal securities outperformed stocks to post
their strongest results in years. Indeed, with the exception of high-yield
"junk" bonds, most bonds, including mortgage-backed securities and
investment-grade corporate bonds, performed well during the fiscal year.
In closing, an important message to remember amid today's volatile and
fast-paced markets: Diversification among stocks, bonds, and cash can help you
earn more balanced returns over time and give you peace of mind in changing
markets. To help you achieve your long-term goals, First American Funds offers a
spectrum of mutual funds designed to meet any investor's needs and risk
tolerance.
FIRST AMERICAN FUNDS ANNUAL REPORT 2000 3)
<PAGE>
STRATEGY AGGRESSIVE GROWTH
INVESTMENT OBJECTIVE: A HIGH LEVEL OF CAPITAL GROWTH
The First American Strategy Aggressive Growth Fund delivered market-beating
performance, posting a 23.38% return for the fiscal year ended September 30,
2000. The fund's broad-based benchmarks, the Standard & Poor's 500 Composite
Index and the Lehman U.S. Government/Credit Bond Index, returned 13.28% and
6.72%, respectively, for the same period. Additionally, the fund surpassed its
peer group represented by the Lipper Flexible Portfolio Funds Average, which
returned 12.82% during the fiscal year.
While the stunning and dramatic rise and fall of technology stocks dominated the
news over the last fiscal year, volatility in the world equity markets kept
investors scrambling for so-called safe havens. Aggressive sector rotation and
severe performance spikes became the overriding investment theme.
If any clear trends have emerged from the first nine months of calendar year
2000, it's that small-cap stocks have outperformed large-cap stocks, and value
has outperformed growth. Both are a reversal from the previous two years' trend
of a market where large-cap growth stocks dominated.
With strategic exposure to each of the major asset classes, and a balance of
approximately 85% equity securities and 15% fixed-income securities, the fund,
in this type of investment environment, will tend to weather market gyrations
with less volatility.
During the fiscal year, the most significant change that occurred within the
allocation strategy of the fund was to add, in February of 2000, the First
American Equity Index Fund. Using the Equity Index Fund provides additional
broad exposure to the market and enables the management team to more accurately
achieve its strategic target weights. The Equity Index Fund is currently
approximately 10% of the Strategy Aggressive Growth Fund.
In the short term, the management team sees ongoing volatility and uncertainty
in the market, as investors continue their retreat from the exuberance that
lifted the market to record highs during the first several months of the fiscal
year. Long term, with a current backdrop of stable interest rates and a
moderating economy, a return to a more rational investment environment should
take hold.
ANNUALIZED PERFORMANCE(1)
----------------------------------------------------------------------
AS OF SEPTEMBER 30, 2000 SINCE INCEPTION(5)
1 YEAR 10/1/1996
----------------------------------------------------------------------
Strategy Aggressive Growth Fund 23.38% 14.25%
----------------------------------------------------------------------
S&P 500 Composite Index(2) 13.28% 21.70%
----------------------------------------------------------------------
Lehman U.S. Government/Credit Bond Index(3) 6.72% 6.26%
----------------------------------------------------------------------
Lipper Flexible Portfolio Funds Average(4) 12.82% 13.02%
----------------------------------------------------------------------
(4 FIRST AMERICAN FUNDS ANNUAL REPORT 2000
<PAGE>
STRATEGY AGGRESSIVE GROWTH
VALUE OF A $10,000 INVESTMENT(1) AS OF SEPTEMBER 30, 2000
[PLOT POINTS CHART]
FIRST AMERICAN S&P 500 Lehman Lipper Flexible
STRATEGY AGGRESSIVE Composite U.S. Government/ Portfolio Funds
GROWTH FUND Index(2) Credit Bond Index(3) Average(4)
-----------------------------------------------------------------------
1996 10,000 10,000 10,000 10,000
1997 12,713 13,663 10,709 12,211
1998 11,461 14,901 12,084 12,537
1999 13,815 19,043 11,889 14,510
2000 17,045 21,572 12,688 16,364
(1) Past performance does not guarantee future results. The principal value of
an investment and investment return will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
Performance reflects voluntary fee waivers in effect. In the absence of such
fee waivers, total returns would be reduced. Indexes are for illustrative
purposes only and are not available for investment.
(2) An unmanaged index of large capitalization stocks.
(3) An unmanaged index comprised of Treasury securities, other securities issued
or guaranteed by the U.S. government or its agencies or instrumentalities,
including U.S. agency mortgage securities, and investment grade corporate
debt securities.
(4) Similar funds as categorized by Lipper, Inc.
(5) The since-inception performance for each index is calculated from the month
end following the inception of the fund.
FIRST AMERICAN FUNDS ANNUAL REPORT 2000 5)
<PAGE>
STRATEGY GROWTH
INVESTMENT OBJECTIVE: CAPITAL GROWTH WITH A MODERATE LEVEL OF CURRENT INCOME
With nearly 20% exposure to small- and mid-cap stocks, the First American
Strategy Growth Fund was able to deliver market-beating performance, generating
a return of 19.66% for the fiscal year ended September 30, 2000. The fund's
broad-based benchmarks, the Standard & Poor's 500 Composite Index and the Lehman
U.S. Government/Credit Bond Index, returned 13.28% and 6.72%, respectively, for
the same 12-month period. Additionally, the fund surpassed its peer group
represented by the Lipper Multi-Cap Value Funds Average, which returned 11.94%
during the fiscal year.
With dramatic volatility and aggressive sector rotation being the overriding
theme for the market this fiscal year, the fund's exposure to all major asset
classes, including approximately 30% to fixed income, provided a tempering
effect that also helped drive performance.
During the fiscal year, the most significant change that occurred within the
allocation strategy of the fund was to add, in February of 2000, the First
American Equity Index Fund. Using the Equity Index Fund provides additional
broad exposure to the market and enables the management team to more accurately
achieve its strategic target weights. The Equity Index Fund is currently
approximately 10% of the Strategy Growth Fund.
In the short term, the management team sees ongoing volatility and uncertainty
in the market, as investors continue their retreat from the exuberance that
lifted the market to record highs during the first several months of the fiscal
year. Long term, with a current backdrop of stable interest rates and a
moderating economy, a return to a more rational investment environment should
take hold.
ANNUALIZED PERFORMANCE(1)
------------------------------------------------------------------------
AS OF SEPTEMBER 30, 2000 SINCE INCEPTION(5)
1 YEAR 10/1/1996
------------------------------------------------------------------------
Strategy Growth Fund 19.66% 12.70%
------------------------------------------------------------------------
S&P 500 Composite Index(2) 13.28% 21.70%
------------------------------------------------------------------------
Lehman U.S. Government/Credit Bond Index(3) 6.72% 6.26%
------------------------------------------------------------------------
Lipper Multi-Cap Value Funds Average(4) 11.94% 12.90%
------------------------------------------------------------------------
(6 FIRST AMERICAN FUNDS ANNUAL REPORT 2000
<PAGE>
STRATEGY GROWTH
VALUE OF A $10,000 INVESTMENT(1) AS OF SEPTEMBER 30, 2000
[PLOT POINTS CHART]
FIRST AMERICAN S&P 500 Lehman Lipper Multi-Cap
STRATEGY Composite U.S. Government/ Value Funds
GROWTH FUND Index(2) Credit Bond Index(3) Average(4)
--------------------------------------------------------------------
1996 10,000 10,000 10,000 10,000
1997 12,267 13,663 10,709 13,395
1998 11,537 14,901 12,084 12,577
1999 13,419 19,043 11,889 14,572
2000 16,057 21,572 12,688 16,311
(1) Past performance does not guarantee future results. The principal value of
an investment and investment return will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
Performance reflects voluntary fee waivers in effect. In the absence of such
fee waivers, total returns would be reduced. Indexes are for illustrative
purposes only and are not available for investment.
(2) An unmanaged index of large capitalization stocks.
(3) An unmanaged index comprised of Treasury securities, other securities issued
or guaranteed by the U.S. government or its agencies or instrumentalities,
including U.S. agency mortgage securities, and investment grade corporate
debt securities.
(4) Similar funds as categorized by Lipper, Inc.
(5) The since-inception performance for each index is calculated from the month
end following the inception of the fund.
FIRST AMERICAN FUNDS ANNUAL REPORT 2000 7)
<PAGE>
STRATEGY GROWTH AND INCOME
INVESTMENT OBJECTIVE: CAPITAL GROWTH AND CURRENT INCOME
Having over 10% of its assets exposed to small- and mid-cap stocks, the First
American Strategy Growth & Income Fund was able to outperform the market,
generating a return of 14.88% for the fiscal year ended September 30, 2000. The
fund's broad-based benchmarks, the Standard & Poor's 500 Composite Index and the
Lehman U.S. Government/Credit Bond Index, returned 13.28% and 6.72%,
respectively, for the same 12-month period. The fund surpassed its peer group
represented by the Lipper Balanced Funds Average, which returned 11.31% during
the fiscal year.
In a change from 1998 and 1999, when large-cap growth stocks led the market,
small-cap stocks have outperformed large-cap, and value has outperformed growth.
Additionally, with dramatic volatility and aggressive sector rotation being the
overriding theme for the market this fiscal year, the fund's participation in
most asset classes and sectors helped to promote relative stability.
During the fiscal year, the most significant change that occurred within the
allocation strategy of the fund was to add, in February of 2000, the First
American Equity Index Fund. Using the Equity Index Fund provides additional
broad exposure to the market and enables the management team to more accurately
achieve its strategic target weights. The Equity Index Fund is currently
approximately 11% of the Strategy Growth & Income Fund.
Short term, the management team sees ongoing volatility and uncertainty in the
market, as investors continue their retreat from the exuberance that lifted the
market to record highs during the first several months of the fiscal year. Long
term, with a current backdrop of stable interest rates and a moderating economy,
a return to a more rational investment environment should take hold.
ANNUALIZED PERFORMANCE(1)
-----------------------------------------------------------------------
AS OF SEPTEMBER 30, 2000 SINCE INCEPTION(5)
1 YEAR 10/1/1996
-----------------------------------------------------------------------
Strategy Growth and Income Fund 14.88% 11.17%
-----------------------------------------------------------------------
S&P 500 Composite Index(2) 13.28% 21.70%
-----------------------------------------------------------------------
Lehman U.S. Government/Credit Bond Index(3) 6.72% 6.26%
-----------------------------------------------------------------------
Lipper Balanced Funds Average(4) 11.31% 12.33%
-----------------------------------------------------------------------
(8 FIRST AMERICAN FUNDS ANNUAL REPORT 2000
<PAGE>
STRATEGY GROWTH AND INCOME
VALUE OF A $10,000 INVESTMENT(1) AS OF SEPTEMBER 30, 2000
[PLOT POINTS CHART]
FIRST AMERICAN S&P 500 Lehman Lipper
STRATEGY GROWTH Composite U.S. Government/ Balanced Funds
AND INCOME FUND Index(2) Credit Bond Index(3) Average(4)
--------------------------------------------------------------------
1996 10,000 10,000 10,000 10,000
1997 11,924 13,663 10,709 12,208
1998 11,664 14,901 12,084 12,629
1999 13,159 19,043 11,889 14,233
2000 15,117 21,572 12,688 15,843
(1) Past performance does not guarantee future results. The principal value of
an investment and investment return will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
Performance reflects voluntary fee waivers in effect. In the absence of such
fee waivers, total returns would be reduced. Indexes are for illustrative
purposes only and are not available for investment.
(2) An unmanaged index of large capitalization stocks.
(3) An unmanaged index comprised of Treasury securities, other securities issued
or guaranteed by the U.S. government or its agencies or instrumentalities,
including U.S. agency mortgage securities, and investment grade corporate
debt securities.
(4) Similar funds as categorized by Lipper, Inc.
(5) The since-inception performance for each index is calculated from the month
end following the inception of the fund.
FIRST AMERICAN FUNDS ANNUAL REPORT 2000 9)
<PAGE>
STRATEGY INCOME
INVESTMENT OBJECTIVE: A HIGH LEVEL OF CURRENT INCOME CONSISTENT WITH LIMITED
RISK TO CAPITAL
For the fiscal year ending September 30, 2000, the First American Strategy
Income Fund outpaced its broad-based benchmark, returning 7.18% to the Lehman
U.S. Government/Credit Bond Index's return of 6.72%. Elevated by the run in
technology stocks during the quarter ended December 31, 1999, the Standard and
Poor's 500 Composite Index (the fund's other broad-based benchmark) returned
13.28% during the same period. The fund lost some ground to its peer group as
represented by the Lipper Income Funds Average, which posted a return of 8.84%.
For the most part, this peer group, which on average has more exposure to equity
assets, benefited from the booming equity market.
As the equity market turned from exuberance during the fourth quarter of 1999,
to more volatility and sector rotation during the first nine months of 2000, the
fund's broad-based bond benchmark quietly generated a 6.72% return. With 70%
weighting in fixed income, the fund was able to sustain a relatively stable
course throughout the fiscal year.
Bond funds suffered only minor casualties as the Federal Reserve continued its
tightening policy by raising rates four times during the fiscal year. Buoyed by
the U.S. Treasury's repurchase plan of its 30-year debt instruments, bond funds
rallied during the second quarter. The fund's fixed income exposure was further
helped by the strong performance of the international and emerging debt portion
of the fund.
During the fiscal year, the most significant change that occurred within the
allocation strategy of the fund was to add, in February of 2000, the First
American Equity Index Fund. Using the Equity Index Fund provides additional
broad exposure to the market and enables the management team to more accurately
achieve its strategic target weights. The Equity Index Fund is currently
approximately 15% of the Strategy Income Fund.
Going forward, the management team expects a moderating economy and stable
interest rates. While volatility will continue to define the equity market
during the short-term, mid- to long-term a more rational investment environment
should take hold.
ANNUALIZED PERFORMANCE(1)
----------------------------------------------------------------------
AS OF SEPTEMBER 30, 2000 SINCE INCEPTION(5)
1 YEAR 10/1/1996
----------------------------------------------------------------------
Strategy Income Fund 7.18% 7.31%
----------------------------------------------------------------------
S&P 500 Composite Index(2) 13.28% 21.70%
----------------------------------------------------------------------
Lehman U.S. Government/Credit Bond Index(3) 6.72% 6.26%
----------------------------------------------------------------------
Lipper Income Funds Average(4) 8.84% 9.16%
----------------------------------------------------------------------
(10 FIRST AMERICAN FUNDS ANNUAL REPORT 2000
<PAGE>
STRATEGY INCOME
VALUE OF A $10,000 INVESTMENT(1) AS OF SEPTEMBER 30, 2000
[PLOT POINTS CHART]
FIRST AMERICAN S&P 500 Lehman Lipper
STRATEGY Composite U.S. Government/ Income Funds
INCOME FUND Index(2) Credit Bond Index(3) Average(4)
--------------------------------------------------------------------
1996 10,000 10,000 10,000 10,000
1997 11,077 13,663 10,709 11,728
1998 12,043 14,901 12,084 12,162
1999 12,179 19,043 11,889 13,040
2000 13,054 21,572 12,688 14,193
(1) Past performance does not guarantee future results. The principal value of
an investment and investment return will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
Performance reflects voluntary fee waivers in effect. In the absence of such
fee waivers, total returns would be reduced. Indexes are for illustrative
purposes only and are not available for investment.
(2) An unmanaged index of large capitalization stocks.
(3) An unmanaged index comprised of Treasury securities, other securities issued
or guaranteed by the U.S. government or its agencies or instrumentalities,
including U.S. agency mortgage securities, and investment grade corporate
debt securities.
(4) Similar funds as categorized by Lipper, Inc.
(5) The since-inception performance for each index is calculated from the month
end following the inception of the fund.
FIRST AMERICAN FUNDS ANNUAL REPORT 2000 11)
<PAGE>
(This page has been left blank intentionally.)
<PAGE>
REPORT OF INDEPENDENT AUDITORS SEPTEMBER 30, 2000
To the Shareholders and Board of Directors
First American Strategy Funds, Inc.
We have audited the accompanying statements of net assets of First American
Strategy Funds, Inc. (comprising, respectively, the Aggressive Growth,
Growth, Growth & Income and Income Funds) (the "Funds") as of September 30,
2000, and the related statements of operations for the year then ended and
the statements of changes in net assets and financial highlights for each
of the two years in the period then ended. These financial statements and
financial highlights are the responsibility of the Funds' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits. The financial highlights for the
periods presented through September 30, 1998, were audited by other
auditors whose report dated November 13, 1998, expressed an unqualified
opinion on those financial highlights.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements and
financial highlights. Our procedures included confirmation of securities
owned as of September 30, 2000, by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the 2000 and 1999 financial statements and financial
highlights referred to above present fairly, in all material respects, the
financial position of each of the respective funds constituting First
American Strategy Funds, Inc. at September 30, 2000, the results of their
operations for the year then ended and the changes in their net assets and
their financial highlights for each of the two years in the period then
ended, in conformity with accounting principles generally accepted in the
United States.
/s/ Ernst & Young LLP
Minneapolis, Minnesota
November 3, 2000
FIRST AMERICAN FUNDS ANNUAL REPORT 2000 13)
<PAGE>
STATEMENTS OF NET ASSETS SEPTEMBER 30, 2000
AGGRESSIVE GROWTH FUND
DESCRIPTION SHARES VALUE (000)
-------------------------------------------------------------------
EQUITY FUNDS - 84.2%
First American Investment Funds, Inc.
Emerging Markets Fund* 448,372 $ 3,838
Equity Index Fund 331,041 9,183
International Fund 585,846 10,885
Large Cap Growth Fund 548,968 11,929
Large Cap Value Fund 860,326 17,757
Mid Cap Growth Fund 399,285 7,642
Mid Cap Value Fund 533,588 7,833
Small Cap Growth Fund 113,750 2,820
Small Cap Value Fund 167,877 2,887
--------
TOTAL EQUITY FUNDS
(Cost $68,168) 74,774
--------
FIXED INCOME FUNDS - 14.4%
First American Investment Funds, Inc.
Fixed Income Fund 952,331 10,171
Strategic Income Fund 296,204 2,642
--------
TOTAL FIXED INCOME FUNDS
(Cost $13,191) 12,813
--------
MONEY MARKET FUND - 1.4%
First American Funds, Inc.
Prime Obligations Fund 1,244,912 1,245
--------
TOTAL MONEY MARKET FUND
(Cost $1,245) 1,245
--------
TOTAL INVESTMENTS - 100.0%
(Cost $82,604) 88,832
--------
OTHER ASSETS AND LIABILITIES, NET - 0.0% 5
--------
NET ASSETS:
Portfolio Capital - ($0.01 par value -
2 billion authorized) based on
6,379,018 outstanding shares $ 77,496
Distributions in excess of net
investment income (1)
Accumulated net realized gain on
investments 5,114
Net unrealized appreciation of
investments 6,228
--------
TOTAL NET ASSETS - 100.0% $ 88,837
--------
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION
PRICE PER SHARE $ 13.93
--------
*Non-income producing.
GROWTH FUND
DESCRIPTION SHARES VALUE (000)
-------------------------------------------------------------------
EQUITY FUNDS - 69.4%
First American Investment Funds, Inc.
Emerging Markets Fund* 176,170 $ 1,508
Equity Index Fund 390,804 10,841
International Fund 430,579 8,000
Large Cap Growth Fund 646,434 14,047
Large Cap Value Fund 1,011,129 20,870
Mid Cap Growth Fund 409,911 7,846
Mid Cap Value Fund 545,643 8,010
Small Cap Growth Fund 91,985 2,280
Small Cap Value Fund 127,713 2,195
--------
TOTAL EQUITY FUNDS
(Cost $69,219) 75,597
--------
FIXED INCOME FUNDS - 29.4%
First American Investment Funds, Inc.
Fixed Income Fund 2,400,479 25,637
Strategic Income Fund 724,247 6,461
--------
TOTAL FIXED INCOME FUNDS
(Cost $33,086) 32,098
--------
MONEY MARKET FUND - 1.4%
First American Funds, Inc.
Prime Obligations Fund 1,551,782 1,552
--------
TOTAL MONEY MARKET FUND
(Cost $1,552) 1,552
--------
TOTAL INVESTMENTS - 100.2%
(Cost $103,857) 109,247
--------
OTHER ASSETS AND LIABILITIES, NET - (0.2)% (243)
--------
NET ASSETS:
Portfolio Capital - ($0.01 par value -
2 billion authorized) based on
8,249,583 outstanding shares $ 96,162
Accumulated net realized gain on
investments 7,452
Net unrealized appreciation of
investments 5,390
--------
TOTAL NET ASSETS - 100.0% $109,004
--------
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION
PRICE PER SHARE $ 13.21
--------
*Non-income producing.
The accompanying notes are an integral part of the financial statements.
(14 FIRST AMERICAN FUNDS ANNUAL REPORT 2000
<PAGE>
GROWTH & INCOME FUND
DESCRIPTION SHARES VALUE (000)
-------------------------------------------------------------------
EQUITY FUNDS - 54.1%
First American Investment Funds, Inc.
Emerging Markets Fund* 248,979 $ 2,131
Equity Index Fund 911,581 25,287
International Fund 452,557 8,409
Large Cap Growth Fund 1,174,063 25,512
Large Cap Value Fund 1,799,208 37,136
Mid Cap Growth Fund 519,802 9,949
Mid Cap Value Fund 686,468 10,077
Small Cap Growth Fund 160,332 3,975
Small Cap Value Fund 221,517 3,808
--------
TOTAL EQUITY FUNDS
(Cost $117,545) 126,284
--------
FIXED INCOME FUNDS - 45.1%
First American Investment Funds, Inc.
Fixed Income Fund 7,838,064 83,710
Strategic Income Fund 2,416,273 21,553
--------
TOTAL FIXED INCOME FUNDS
(Cost $108,190) 105,263
--------
MONEY MARKET FUND - 1.3%
First American Funds, Inc.
Prime Obligations Fund 3,034,605 3,035
--------
TOTAL MONEY MARKET FUND
(Cost $3,035) 3,035
--------
TOTAL INVESTMENTS - 100.5%
(Cost $228,770) 234,582
--------
OTHER ASSETS AND LIABILITIES, NET - (0.5)% (1,155)
--------
NET ASSETS:
Portfolio Capital - ($0.01 par value -
2 billion authorized) based on
19,423,592 outstanding shares $217,539
Distributions in excess of net
investment income (2)
Accumulated net realized gain on
investments 10,078
Net unrealized appreciation of
investments 5,812
--------
TOTAL NET ASSETS - 100.0% $233,427
--------
NET ASSET VALUE, OFFERING PRICE, AND
REDEMPTION PRICE PER SHARE $ 12.02
--------
*Non-income producing.
INCOME FUND
DESCRIPTION SHARES VALUE (000)
-------------------------------------------------------------------
EQUITY FUNDS - 30.2%
First American Investment Funds, Inc.
Equity Income Fund 413,756 $ 6,773
Equity Index Fund 283,310 7,859
Real Estate Securities Fund 133,630 1,701
--------
TOTAL EQUITY FUNDS
(Cost $15,350) 16,333
--------
FIXED INCOME FUNDS - 70.2%
First American Investment Funds, Inc.
Fixed Income Fund 2,842,226 30,355
Strategic Income Fund 859,843 7,670
--------
TOTAL FIXED INCOME FUNDS
(Cost $38,145) 38,025
--------
MONEY MARKET FUND - 1.2%
First American Funds, Inc.
Prime Obligations Fund 657
--------
TOTAL MONEY MARKET FUND
(Cost $657) 657
--------
TOTAL INVESTMENTS - 101.6%
(Cost $54,152) 55,015
--------
OTHER ASSETS AND LIABILITIES, NET - (1.6)% (877)
--------
NET ASSETS:
Portfolio Capital - ($0.01 par value -
2 billion authorized) based on
5,165,065 outstanding shares $ 57,537
Undistributed net investment income 47
Accumulated net realized loss on
investments (4,309)
Net unrealized appreciation of
investments 863
--------
TOTAL NET ASSETS - 100.0% $ 54,138
--------
NET ASSET VALUE, OFFERING PRICE, AND
REDEMPTION PRICE PER SHARE $ 10.48
--------
The accompanying notes are an integral part of the financial statements.
FIRST AMERICAN FUNDS ANNUAL REPORT 2000 15)
<PAGE>
STATEMENTS OF OPERATIONS for the year ended September 30, 2000, in thousands
<TABLE>
<CAPTION>
AGGRESSIVE GROWTH &
GROWTH FUND GROWTH FUND INCOME FUND INCOME FUND
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Income distributions received from
underlying funds $ 1,117 $ 2,248 $ 7,078 $ 3,655
--------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 1,117 2,248 7,078 3,655
========================================================================================================
EXPENSES:
Investment advisory fees 208 247 558 178
Less: Waiver of investment advisory fees (208) (247) (558) (178)
Less: Reimbursement of expenses by adviser (132) (146) (236) (135)
Shareholder servicing fee 208 247 558 178
Administrator fees 90 108 243 77
Transfer agent fees 60 66 65 68
Custodian fees 25 30 67 21
Directors' fees 2 2 4 1
Registration fees 8 8 8 5
Professional fees 14 17 39 12
Printing 4 5 10 3
Other 7 4 9 7
--------------------------------------------------------------------------------------------------------
TOTAL EXPENSES AFTER WAIVERS
AND REIMBURSEMENTS 286 341 767 237
========================================================================================================
Investment income - net 831 1,907 6,311 3,418
--------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS - NET:
Capital gain distributions received
from underlying funds 5,217 6,068 11,557 1,220
Net realized gain (loss) on investments 3,283 3,667 5,275 (5,006)
Net change in unrealized appreciation
of investments 6,358 5,370 6,845 5,387
--------------------------------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS 14,858 15,105 23,677 1,601
========================================================================================================
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $15,689 $17,012 $29,988 $ 5,019
========================================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
(16 FIRST AMERICAN FUNDS ANNUAL REPORT 2000
<PAGE>
(This page has been left blank intentionally.)
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS in thousands
<TABLE>
<CAPTION>
AGGRESSIVE GROWTH FUND GROWTH FUND
-----------------------------------------------------------------------------------------------------------------------------
10/1/99 10/1/98 10/1/99 10/1/98
to to to to
9/30/00 9/30/99 9/30/00 9/30/99
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Investment income - net $ 831 $ 821 $ 1,907 $ 1,711
Capital gain distributions received from underlying funds 5,217 5,874 6,068 5,504
Net realized gain (loss) on investments 3,283 (1,748) 3,667 (1,330)
Net change in unrealized appreciation/depreciation of investments 6,358 7,465 5,370 5,640
-----------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 15,689 12,412 17,012 11,525
-----------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment Income - net (838) (834) (1,915) (1,722)
Net realized gain on investments and capital gain distributions received
from underlying funds (5,651) (4,389) (4,765) (4,142)
-----------------------------------------------------------------------------------------------------------------------------
Total Distributions (6,489) (5,223) (6,680) (5,864)
=============================================================================================================================
CAPITAL SHARE TRANSACTIONS(1):
Proceeds from sales 40,022 30,697 37,556 52,026
Reinvestment of distributions 6,513 5,204 6,656 5,495
Payments for redemptions (33,911) (38,712) (33,753) (40,625)
-----------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital share transactions 12,624 (2,811) 10,459 16,896
-----------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets 21,824 4,378 20,791 22,557
NET ASSETS AT BEGINNING OF PERIOD 67,013 62,635 88,213 65,656
=============================================================================================================================
NET ASSETS AT END OF PERIOD(2) $ 88,837 $ 67,013 $ 109,004 $ 88,213
=============================================================================================================================
(1)CAPITAL SHARE TRANSACTIONS:
Shares issued 2,937 2,567 2,912 4,481
Shares issued in lieu of cash distributions 512 455 538 485
Shares redeemed (2,493) (3,239) (2,645) (3,462)
-----------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CAPITAL SHARES 956 (217) 805 1,504
=============================================================================================================================
</TABLE>
(2)Includes (distributions in excess of net investment income) undistributed net
investment income (000) of $(1) and $0 for Aggressive Growth Fund, $0 and
$(1) for Growth Fund, $(2) and $0 for Growth & Income Fund, and $47 and $49
for Income Fund for the years ended September 30, 2000, and September 30,
1999, respectively.
The accompanying notes are an integral part of the financial statements.
(18 FIRST AMERICAN FUNDS ANNUAL REPORT 2000
<PAGE>
<TABLE>
<CAPTION>
GROWTH & INCOME FUND INCOME FUND
-----------------------------------------------------
10/1/99 10/1/98 10/1/99 10/1/98
to to to to
9/30/00 9/30/99 9/30/00 9/30/99
-----------------------------------------------------
<S> <C> <C> <C>
$ 6,311 $ 5,845 $ 3,418 $ 5,196
11,557 14,153 1,220 2,214
5,275 (3,117) (5,006) (185)
6,845 8,888 5,387 (5,311)
-----------------------------------------------------
29,988 25,769 5,019 1,914
-----------------------------------------------------
(6,326) (5,891) (3,425) (5,194)
(14,069) (11,500) (1,695) (3,732)
-----------------------------------------------------
(20,395) (17,391) (5,120) (8,926)
=====================================================
80,038 89,303 42,367 46,294
20,225 15,268 4,910 8,507
(85,658) (111,627) (76,340) (81,266)
-----------------------------------------------------
14,605 (7,056) (29,063) (26,465)
-----------------------------------------------------
24,198 1,322 (29,164) (33,477)
209,229 207,907 83,302 116,779
=====================================================
$ 233,427 $ 209,229 $ 54,138 $ 83,302
=====================================================
6,724 7,800 4,147 4,206
1,754 1,362 475 781
(7,231) (9,742) (7,405) (7,435)
-----------------------------------------------------
1,247 (580) (2,783) (2,448)
=====================================================
</TABLE>
FIRST AMERICAN FUNDS ANNUAL REPORT 2000 19)
<PAGE>
FINANCIAL HIGHLIGHTS For a share outstanding throughout the periods ended
September 30, unless otherwise indicated.
<TABLE>
<CAPTION>
NET ASSET REALIZED AND DIVIDENDS
VALUE NET UNREALIZED FROM NET DISTRIBUTIONS
BEGINNING INVESTMENT GAINS (LOSSES) INVESTMENT FROM CAPITAL
OF PERIOD INCOME ON INVESTMENTS INCOME GAINS
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AGGRESSIVE GROWTH FUND
2000 $ 12.36 $ 0.14 $ 2.62 $ (0.14) $ (1.05)
1999 11.11 0.14 2.05 (0.14) (0.80)
1998 12.58 0.20 (1.42) (0.20) (0.05)
1997(1) 10.00 0.11 2.58 (0.11) --
GROWTH FUND
2000 $ 11.85 $ 0.25 $ 2.00 $ (0.25) $ (0.64)
1999 11.05 0.25 1.49 (0.25) (0.69)
1998 12.12 0.28 (0.98) (0.28) (0.09)
1997(1) 10.00 0.18 2.12 (0.18) --
GROWTH & INCOME FUND
2000 $ 11.51 $ 0.33 $ 1.31 $ (0.34) $ (0.79)
1999 11.08 0.32 1.05 (0.32) (0.62)
1998 11.76 0.35 (0.59) (0.35) (0.09)
1997(1) 10.00 0.26 1.76 (0.26) --
INCOME FUND
2000 $ 10.48 $ 0.50 $ 0.22 $ (0.49) $ (0.23)
1999 11.23 0.53 (0.40) (0.53) (0.35)
1998 10.82 0.50 0.43 (0.50) (0.02)
1997(1) 10.00 0.41 0.82 (0.41) --
---------------------------------------------------------------------------------------------------
</TABLE>
+Returns are for the period indicated and have not been annualized.
(1)Commenced operations on October 1, 1996. All ratios for the period, except
as noted, have been annualized.
(2)Expense ratios do not include expenses of the underlying Funds.
The accompanying notes are an integral part of the financial statements.
(20 FIRST AMERICAN FUNDS ANNUAL REPORT 2000
<PAGE>
<TABLE>
<CAPTION>
RATIO OF RATIO OF NET
EXPENSES TO INVESTMENT
RATIO OF RATIO OF NET AVERAGE INCOME (LOSS)
NET ASSET EXPENSES TO INVESTMENT NET ASSETS TO AVERAGE NET
VALUE NET ASSETS AVERAGE INCOME TO (EXCLUDING ASSETS (EXCLUDING
END OF TOTAL END OF NET AVERAGE WAIVERS AND WAIVERS AND PORTFOLIO
PERIOD RETURN PERIOD (000) ASSETS(2) NET ASSETS REIMBURSEMENTS)(2) REIMBURSEMENTS)(2) TURNOVER
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 13.93 23.38% $ 88,837 0.34% 1.00% 0.75% 0.59% 43%
12.36 20.54 67,013 0.28 1.20 0.86 0.62 39
11.11 (9.85) 62,635 0.25 1.66 0.87 1.04 152
12.58 27.06+ 13,725 0.60 0.76 2.85 (1.49) 7
$ 13.21 19.66% $109,004 0.34% 1.93% 0.74% 1.53% 42%
11.85 16.31 88,213 0.28 2.05 0.85 1.48 34
11.05 (5.95) 65,656 0.25 2.33 0.89 1.69 143
12.12 23.23+ 15,676 0.60 1.61 2.62 (0.41) 6
$ 12.02 14.88% $233,427 0.34% 2.83% 0.70% 2.47% 46%
11.51 12.81 209,229 0.28 2.83 0.79 2.32 41
11.08 (2.18) 207,907 0.25 3.05 0.82 2.48 158
11.76 20.47+ 27,565 0.60 2.59 2.10 1.09 37
$ 10.48 7.18% $ 54,138 0.33% 4.81% 0.77% 4.37% 69%
10.48 1.13 83,302 0.28 4.83 0.83 4.28 21
11.23 8.72 116,779 0.25 4.63 0.84 4.04 106
10.82 12.51+ 36,119 0.60 4.39 2.00 2.99 29
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>
FIRST AMERICAN FUNDS ANNUAL REPORT 2000 21)
<PAGE>
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2000
1 > ORGANIZATION
The Aggressive Growth Fund, Growth Fund, Growth & Income Fund, and Income
Fund (collectively, the "Funds") are mutual funds offered by First American
Strategy Funds, Inc. ("FASF"). FASF is registered under the Investment
Company Act of 1940, as amended, as an open-end investment management
company. The Funds invest in First American Funds, Inc. and First American
Investment Funds, Inc. mutual funds in a "Fund of Funds" structure. FASF's
articles of incorporation permit the Board of Directors to create
additional funds and classes in the future. The Funds' prospectus provides
a description of each Fund's, and each underlying Fund's, investment
objectives, policies, and strategies. Financial statements for the
underlying mutual funds may be obtained by calling 1-800-637-2548.
2 > SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies followed by the funds are as follows:
SECURITY VALUATION - Investments are valued at the respective net asset
value of each underlying Fund, determined at the close of the New York
Stock Exchange (generally 3:00 pm central time) on the valuation date.
DISTRIBUTIONS TO SHAREHOLDERS - The Funds declare and pay income dividends
monthly. Any net realized capital gains on sales of securities and any
capital gain distributions on underlying Funds for each Fund are
distributed to shareholders at least annually.
FEDERAL TAXES - It is each Fund's intention to continue to qualify as a
regulated investment company and to distribute all of its taxable income.
Accordingly, no provision for Federal income taxes is required. For Federal
income tax purposes, required distributions related to realized gains from
security transactions are computed as of September 30th and October 31st.
Net investment income and net realized gains (losses) may differ for
financial statement and tax purposes because of temporary or permanent
book/tax differences. These differences are primarily due to losses
deferred due to wash sales.
The character of distributions made during the year from net investment
income or net realized gains may differ from its ultimate characterization
for federal income tax purposes. In addition, due to the timing of dividend
distributions, the fiscal year in which the amounts are distributed may
differ from the year that the income or realized gains (losses) were
recorded by the Fund. To the extent these differences are permanent,
adjustments are made to the appropriate equity accounts in the period that
the difference arises.
On the Statement of Net Assets the following adjustments were made (000):
ACCUMULATED UNDISTRIBUTED ADDITIONAL
NET REALIZED NET INVESTMENT PAID IN
GAIN (LOSS) INCOME CAPITAL
--------------------------------------------------------------------------
Aggressive Growth Fund $ (6) $ 6 $ --
Growth Fund (9) 9 --
Growth & Income Fund (13) 13 --
Income Fund 1 5 (6)
--------------------------------------------------------------------------
As of September 30, 2000, the following fund has capital loss carryforwards
(000):
AMOUNT EXPIRATION DATE
--------------------------------------------------------------------------
Income Fund $70 2008
--------------------------------------------------------------------------
The Income Fund incurred losses in the amount of $2,168,000 from November
1, 1999 to September 30, 2000. As permitted by tax regulations, the Fund
intends to elect to defer and treat these losses as arising in the fiscal
year ending September 30, 2001.
SECURITY TRANSACTIONS AND RELATED INCOME - The Funds record security
transactions on the trade date of the security purchase or sale. Income and
capital gain distributions from underlying funds are recorded on the
ex-dividend date. Security gains and losses are determined on the basis of
identified cost, which is the same basis used for Federal income tax
purposes.
EXPENSES - Expenses that are directly related to one of the Funds are
charged directly to that Fund. Other operating expenses of the Funds are
allocated to the Funds on the basis of relative net assets.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS - The
preparation of financial statements, in conformity with accounting
principles generally accepted in the United States, requires management to
make estimates and assumptions that affect the reported amount of net
assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported results of
operations during the reporting period. Actual results could differ from
those estimates.
(22 FIRST AMERICAN FUNDS ANNUAL REPORT 2000
<PAGE>
3 > FEES AND EXPENSES
ADVISORY FEES - Pursuant to an investment advisory agreement (the
"Agreement"), First American Asset Management (the "Advisor"), a division
of U.S. Bank National Association ("U.S. Bank"), manages each Fund's assets
and furnishes related office facilities, equipment, research and personnel.
The Agreement requires each Fund to pay the Advisor a monthly fee based on
average daily net assets. The fee for each of the Funds is equal to an
annual rate of 0.25% of the average daily net assets. The Advisor waived
its entire fee, and reimbursed the Funds for additional expenses, during
the year ended September 30, 2000. Such waivers and reimbursements are
voluntary and may be discontinued at any time.
ADMINISTRATION FEES - SEI Investments Mutual Fund Services ("SIMFS")
provided administrative services, including certain accounting, legal, and
shareholder services to the First American Family of Funds from October 1,
1999 through December 31, 1999. Effective January 1, 2000, U.S. Bank was
appointed as the administrator and began providing administrative services
to the First American Family of Funds. Under both arrangements, the Funds
are charged an annual rate of 0.12% of each FASF Fund's average daily net
assets, with a minimum annual fee of $50,000. To the extent that aggregate
net assets of the First American Family of Funds exceed $8 billion, the
annual rate for each FASF Fund is reduced to 0.105% of its relative share
of excess net assets. Fees are computed daily and paid monthly.
SUB-ADMINISTRATION FEES - U.S. Bank assisted SIMFS and provided
sub-administration services for the Funds from October 1, 1999 through
December 31, 1999. For these services SIMFS compensated U.S. Bank, as
sub-administrator, monthly at an annual rate of up to 0.05% of each Fund's
average daily net assets. The fees for each Fund from October 1, 1999
through December 31, 1999, were approximately 0.03% of average daily net
assets. Under this arrangement, SIMFS paid U.S. Bank $2,646,000 in
aggregate for this three month period for the First American Family of
Funds. Effective January 1, 2000, SIMFS was appointed sub-administrator and
began assisting U.S. Bank in providing sub-administration services for the
Funds. For these services, U.S. Bank compensates SIMFS monthly at an annual
rate equal to 0.05% of aggregate average daily net assets of FASF. In
addition, SIMFS also receives 0.015% on assets up to $34.5 billion, 0.0075%
on the next $25.5 billion and 0.005% on assets over $60 billion for all
Funds. There is a minimum fee of $50,000 per Fund (the oldest 38 Funds are
excluded). U.S. Bank paid SIMFS $8,501,000 in aggregate from January 1,
2000 through September 30, 2000 for the First American Family of Funds. For
the Funds included in this annual report the amounts paid to U.S. Bank and
SIMFS for their respective periods were as follows (000):
U.S. BANK SIMFS
---------------------------------------------------------------------------
Aggressive Growth Fund $ 6 $38
Growth Fund 8 44
Growth & Income Fund 18 99
Income Fund 6 29
---------------------------------------------------------------------------
CUSTODIAN FEES - Through a separate contractual agreement, U.S. Bank serves
as the Funds' custodian. The fee for each Fund is equal to an annual rate
of 0.03% of average daily net assets which is computed daily and paid
monthly.
SHAREHOLDER SERVICE FEES - SEI Investments Distribution Co. ("SIDCO"),
serves as distributor of the Funds. FASF has adopted and entered into a
shareholder service plan and agreement with SIDCO. Each Fund pays to SIDCO
a shareholder servicing fee at an annual rate of 0.25% of the average daily
net asset value of the shares of each Fund, which is computed daily and
paid monthly. Under this agreement, SIDCO paid the following amounts to
affiliates of U.S. Bank for the year ended September 30, 2000 (000):
U.S. BANCORP
U.S. BANK PIPER JAFFRAY U.S. BANK TRUST
---------------------------------------------------------------------------
Aggressive Growth Fund $142 $12 $25
Growth Fund 166 20 36
Growth & Income Fund 244 25 76
Income Fund 121 20 25
---------------------------------------------------------------------------
REDEMPTION FEES - Each Fund imposes a redemption fee of 1% on redemptions
made within 12 months of purchase. The fee, which is intended to discourage
short-term trading, is paid to the Fund. For the year ended September 30,
2000, redemption fees paid to the Funds were as follows (000):
---------------------------------------------------------------------------
Aggressive Growth Fund $ 5
Growth Fund 7
Growth & Income Fund 10
Income Fund 34
---------------------------------------------------------------------------
FIRST AMERICAN FUNDS ANNUAL REPORT 2000 23)
<PAGE>
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2000
TRANSFER AGENT FEES - From October 1, 1999 to December 31, 1999, DST
Systems, Inc. provided transfer agency services for the Funds. Effective
January 1, 2000, U.S. Bank was appointed as transfer agent and dividend
disbursement agent. As the servicing agent, U.S. Bank was paid $9,862,000
in aggregate for the year ended September 30, 2000 for the First American
Family of Funds. For the year ended September 30, 2000 transfer agent fees
paid to U.S. Bank for the funds included in this report were as follows
(000):
---------------------------------------------------------------------------
Aggressive Growth Fund $43
Growth Fund 48
Growth & Income Fund 49
Income Fund 39
---------------------------------------------------------------------------
OTHER FEES - In addition to the investment advisory and management fees,
custodian fees, service fees, administrator and transfer agent fees, each
Fund is responsible for paying most other operating expenses including
organization costs, fees and expenses of outside directors, registration
fees, printing of shareholder reports, legal, auditing, insurance and other
miscellaneous expenses. In addition to the Fund's direct expenses as
described above, Fund shareholders also bear a proportionate share of the
underlying Funds' expenses.
For the year ended September 30, 2000, legal fees and expenses were paid to
a law firm of which the Assistant Secretaries of the Funds are partners.
4 > INVESTMENT SECURITY TRANSACTIONS
During the year ended September 30, 2000, purchases of securities and
proceeds from sales of securities, other than temporary investments in
short-term securities, were as follows (000):
PURCHASES SALES
---------------------------------------------------------------------------
Aggressive Growth Fund $ 47,179 $ 35,215
Growth Fund 52,488 40,800
Growth & Income Fund 124,857 100,802
Income Fund 49,226 77,842
---------------------------------------------------------------------------
The aggregate gross unrealized appreciation and depreciation for securities
held by the Funds and the total cost of securities for federal income tax
purposes at September 30, 2000, are as follows (000):
AGGREGATE AGGREGATE FEDERAL
GROSS GROSS INCOME
APPRECIATION DEPRECIATION NET TAX COST
---------------------------------------------------------------------------
Aggressive Growth Fund $ 4,908 $ (2,477) $ 2,431 $ 86,401
Growth Fund 5,620 (3,095) 2,525 106,722
Growth & Income Fund 12,835 (15,176) (2,341) 236,923
Income Fund 1,582 (2,790) (1,208) 56,223
---------------------------------------------------------------------------
5 > PENDING ACQUISITION
On October 4, 2000, U.S. Bancorp, the parent company of the Funds'
investment advisor, announced that it had entered into an agreement to be
acquired by Firstar Corporation. It is anticipated that this acquisition
will be completed in the first quarter of 2001, subject to regulatory
approval, the approval of U.S. Bancorp shareholders and the satisfaction of
customary closing conditions.
(24 FIRST AMERICAN FUNDS ANNUAL REPORT 2000
<PAGE>
NOTICE TO SHAREHOLDERS SEPTEMBER 30, 2000 (UNAUDITED)
THE INFORMATION SET FORTH BELOW IS FOR EACH FUND'S FISCAL YEAR AS REQUIRED
BY FEDERAL LAW. MOST SHAREHOLDERS, HOWEVER, MUST REPORT DISTRIBUTIONS ON A
CALENDAR YEAR BASIS FOR INCOME TAX PURPOSES THAT MAY INCLUDE DISTRIBUTIONS
FOR PORTIONS OF TWO FISCAL YEARS OF A FUND. ACCORDINGLY, THE INFORMATION
NEEDED FOR INCOME TAX PURPOSES WILL BE SENT IN EARLY 2001 ON FORM 1099.
PLEASE CONSULT YOUR TAX ADVISER FOR PROPER TREATMENT OF THIS INFORMATION.
Dear First American Strategy Fund Shareholders:
For the fiscal year ended September 30, 2000, each fund has designated
long-term capital gains and exempt income with regard to distributions paid
during the year as follows:
<TABLE>
<CAPTION>
LONG TERM ORDINARY
CAPITAL GAINS INCOME TOTAL
DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS QUALIFYING
(TAX BASIS) (TAX BASIS) (TAX BASIS) DIVIDENDS
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aggressive Growth Fund 82% 18% 100% 14%
Growth Fund 68 32 100 12
Growth & Income Fund 67 33 100 7
Income Fund 33 67 100 8
---------------------------------------------------------------------------------
</TABLE>
FIRST AMERICAN FUNDS ANNUAL REPORT 2000 25)
<PAGE>
(This page has been left blank intentionally.)
<PAGE>
(This page has been left blank intentionally.)
<PAGE>
(This page has been left blank intentionally.)
<PAGE>
BOARD OF DIRECTORS First American Investment Funds, Inc.
MR. ROBERT DAYTON
Director of First American Investment Funds, Inc.
Chief Executive Officer of Okabena Company
MR. ROGER GIBSON
Director of First American Investment Funds, Inc.
Vice President of North America-Mountain Region for United Airlines
MR. ANDREW HUNTER III
Director of First American Investment Funds, Inc.
Chairman of Hunter Keith Industries
MR. LEONARD KEDROWSKI
Director of First American Investment Funds, Inc.
Owner and President of Executive Management Consulting, Inc.
MR. JOHN MURPHY JR.
Director of First American Investment Funds, Inc.
Executive Vice President, U.S. Bancorp
MR. ROBERT SPIES
Director of First American Investment Funds, Inc.
Retired Vice President, U.S. Bank National Association
MR. JOSEPH STRAUSS
Director of First American Investment Funds, Inc.
Former Chairman of First American Investment Funds, Inc.
Owner and President of Strauss Management Company
MS. VIRGINIA STRINGER
Chairperson of First American Investment Funds, Inc.
Owner and President of Strategic Management Resources, Inc.
<PAGE>
[LOGO] FIRST AMERICAN FUNDS(R)
THE POWER OF DISCIPLINED INVESTING(R)
DIRECT FUND CORRESPONDENCE TO:
FIRST AMERICAN FUNDS
P.O. Box 1330
Minneapolis, MN 55440-1330
This report and the financial statements contained herein are submitted
for the general information of the shareholders of the corporation and
are not intended to be a forecast of future events, a guarantee of future
results, nor investment advice. Further, there is no assurance that
certain securities will remain in or out of each fund's portfolio.
For a prospectus or fund profile containing more information on First
American Funds, including investment policies, fees and expenses, please
contact your investment professional, call Investor Services at
1-800-637-2548, or visit us on the web at www.firstamericanfunds.com.
Please read the prospectus or profile carefully before you invest or send
money.
INVESTMENT ADVISOR AND ADMINISTRATOR
FIRST AMERICAN ASSET MANAGEMENT,
A DIVISION OF U.S. BANK NATIONAL ASSOCIATION
601 Second Avenue South
Minneapolis, Minnesota 55402
CUSTODIAN
U.S. BANK NATIONAL ASSOCIATION
180 East Fifth Street
St. Paul, Minnesota 55101
DISTRIBUTOR
SEI INVESTMENTS DISTRIBUTION CO.
1 Freedom Valley Drive
Oaks, Pennsylvania 19456
SEI IS NOT AN AFFILIATE OF U.S. BANK
INDEPENDENT AUDITORS
ERNST & YOUNG LLP
1400 Pillsbury Center
200 South Sixth Street
Minneapolis, Minnesota 55402
COUNSEL
DORSEY & WHITNEY LLP
220 South Sixth Street
Minneapolis, Minnesota 55402
--------------------------------------------------------------------------------
FIRST AMERICAN FUNDS Bulk Rate
c/o American Financial Printing Inc. U.S. Postage
404 Industrial Boulevard, N.E. PAID
Minneapolis, MN 55413 Mpls, MN
Permit No. 26388
In an attempt to reduce shareholder costs and help eliminate duplication, the
funds will try to limit their mailing to one report for each address that lists
one or more shareholders with the same last name. If you would like additional
copies, please call Investor Services at 1-800-637-2548.
3112-00 11/2000
AR-STRAT-00
