FIRST AMERICAN
FUNDS, INC.
MONEY
MARKET FUNDS
[PHOTOS]
[GRAPHIC] 98
1998 ANNUAL REPORT
[LOGO] FIRST AMERICAN
THE POWER OF DISCIPLINED INVESTING(R)
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FIRST AMERICAN FAMILY OF FUNDS
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HIGHER RISK/RETURN
POTENTIAL
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SECTOR FUNDS
INTERNATIONAL FUNDS
SMALL CAP FUNDS
MID CAP FUNDS
LARGE CAP FUNDS
STRATEGY FUNDS
BOND FUNDS
TAX FREE BOND FUNDS
MONEY MARKET FUNDS
Government Obligations
Prime Obligations
Tax Free Obligations
Treasury Obligations
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LOWER RISK/RETURN
POTENTIAL
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INVESTMENTS FOR EVERY GOAL
FIRST AMERICAN FUNDS OFFER A FULL RANGE OF INVESTMENT STRATEGIES TO HELP YOU
CREATE A PERSONALIZED, DIVERSIFIED PORTFOLIO. SUPPORTED BY EXTENSIVE RESEARCH
AND A HIGHLY DEVELOPED TEAM APPROACH TO INVESTMENT DECISION MAKING, FIRST
AMERICAN FUNDS CAN HELP BUILD A WINNING STRATEGY FOR ANY INVESTOR.
TABLE OF CONTENTS
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MESSAGE TO SHAREHOLDERS 1
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MONEY MARKET FUNDS OVERVIEW 2
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Government Obligations 3
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Prime Obligations 4
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Tax Free Obligations 5
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Treasury Obligations 6
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INDEPENDENT AUDITORS' REPORT 7
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STATEMENTS OF NET ASSETS 8
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STATEMENTS OF OPERATIONS 34
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STATEMENTS OF CHANGES IN NET ASSETS 36
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FINANCIAL HIGHLIGHTS 38
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NOTES TO FINANCIAL STATEMENTS 42
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NOTICE TO SHAREHOLDERS 51
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An investment in money market funds is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency. Although the funds
seek to preserve the value of your investment at $1.00 per share, it is possible
to lose money by investing in the funds.
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NOT FDIC INSURED. NO BANK GUARANTEE. MAY LOSE VALUE.
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MESSAGE TO SHAREHOLDERS SEPTEMBER 30, 1998
DEAR SHAREHOLDERS:
On behalf of the board of directors of First American Funds, Inc., I would
like to extend a warm welcome to all new shareholders and express my
appreciation to our long-term shareholders for your continued support.
Investors will remember this past year as one of the most volatile
periods in recent history. During the first half of 1998, the financial
markets staged a remarkable rally that sent the Dow Jones Industrial
Average to record highs.
In mid July, the markets suddenly reversed course, all but erasing the
year's gains. Since then, the markets have fluctuated, with dramatic price
swings becoming commonplace.
In challenging times, it's more important than ever to focus on the
fundamentals, including diversification among equity, bond and money market
mutual funds to create balanced portfolios. To provide further
diversification opportunities, we recently introduced six new funds:
Minnesota Tax Free, Tax Free, Adjustable Rate Mortgage Securities,
Strategic Income, Mid Cap Growth, and Emerging Markets. First American
Funds now offers 38 mutual funds within our fund family to meet the needs
of any investor.
As you review this annual report, you will notice that we start off
with an overview of market conditions, followed by comments from fund
managers explaining how those conditions affected each fund. We hope that
you find this format useful in helping you understand your investment.
Again, the board of directors thanks you for your support and
confidence in the First American family of funds.
Sincerely,
/s/ Virginia L. Stringer
VIRGINIA L. STRINGER
Chairman
First American Funds, Inc.
1 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
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MONEY MARKET
FUNDS OVERVIEW
Compared to bond yields, which dropped sharply amid the global economic crisis,
short-term interest rates held steady as the Federal Reserve (Fed) remained on
full inflation alert until just one day before the end of the funds' fiscal
year. At that time, Fed policymakers lowered the key federal funds rate by .25%
in an attempt to head off a credit crunch that appeared to be developing. About
two weeks later, Fed Chairman Alan Greenspan unilaterally cut rates by another
.25% in a move intended to reassure investors that the American central bank was
sensitive to the need to add liquidity to global markets.
Entering the fiscal year, the funds were managed to reflect our view that
Fed policy would remain stable, with any changes to short-term interest rates
occurring on the downside. Accordingly, our bias was to keep the funds' duration
neutral to modestly longer than the industry benchmark. It is important to note,
however, that it is the policy of the funds to avoid large bets on the direction
of interest rates. Despite the significant loosening of monetary policy in
recent weeks, inflation-adjusted short-term interest rates remain relatively
high by historical standards. As the fiscal year ended, the extreme short-end of
the yield curve appeared to be pricing in a series of additional cuts in the
Federal Funds rate in coming months.
2 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
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MONEY MARKET FUNDS
GOVERNMENT OBLIGATIONS
INVESTMENT OBJECTIVE
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SEEKS MAXIMUM CURRENT INCOME TO THE EXTENT
CONSISTENT WITH LIQUIDITY AND PRESERVATION OF CAPITAL
As of September 30, 1998, Government Obligations Fund's seven-day effective
yield was 4.87% for class A shares.
In these times of global economic uncertainty, it is important to note that
the fund does not attempt to increase yield by taking on credit risk or making
large bets on the direction of interest rates. Instead, our strategy for adding
value is to trade a portion of the excess liquidity that the fund enjoys as a
result of our stable investor base for incremental yield through floating-rate
securities that are of equal or greater credit quality than other investments in
the fund. In that way, the fund strives to provide a competitive yield without
compromising safety.
Also, the fund applies its research capabilities to carefully evaluate and
monitor the credit worthiness of counter-parties to its repurchase agreements.
As a large participant in the money-market industry, the fund is positioned to
negotiate repurchase agreements with broker/ dealers on favorable terms.
Looking to the future, we believe that the domestic economic environment
will remain favorable for short-term government debt. The U.S. economy is among
the strongest in the world, the federal budget is in balance for the first time
in 30 years, and consumers are enjoying a nearly unprecedented level of
prosperity. We are pleased to have the opportunity to continue serving the needs
of investors seeking to generate current income while retaining stability of
principal.
3 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
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MONEY MARKET FUNDS
PRIME OBLIGATIONS
INVESTMENT OBJECTIVE
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SEEKS MAXIMUM CURRENT INCOME TO THE EXTENT CONSISTENT
WITH PRESERVATION OF CAPITAL AND MAINTENANCE OF LIQUIDITY
As of September 30, 1998, Prime Obligations Fund's seven-day effective yield was
5.06% for class A shares.
The year was characterized by a sharp increase in concern over the impact
of the looming economic slowdown on borrowers. However, maintaining credit
quality remains the primary focus of the fund. It is our view that shareholders
are not sufficiently rewarded for taking credit risk.
Also, the fund does not buy second-tier or split-rated securities and has
no plans to do so. Rather than reaching for yield by taking on more risk, our
strategy for adding value is to trade a portion of the excess liquidity that the
fund enjoys as a result of our stable investor base for incremental yield
through floating-rate product that is of equal or greater credit quality than
other investments in the fund. In that way, the fund strives to provide a
competitive yield without compromising safety.
Looking to the future, we believe that the domestic economic environment
will remain favorable for short-term debt securities. The U.S. economy is among
the strongest in the world, the federal budget is in balance for the first time
in 30 years, and consumers are enjoying a nearly unprecedented level of
prosperity. We are pleased to have the opportunity to continue serving the needs
of investors seeking to generate current income while retaining stability of
principal.
4 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
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MONEY MARKET FUNDS
TAX FREE OBLIGATIONS
INVESTMENT OBJECTIVE
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SEEKS MAXIMUM CURRENT INCOME EXEMPT FROM FEDERAL INCOME
TAXES, CONSISTENT WITH LIQUIDITY AND PRESERVATION OF CAPITAL
As of September 30, 1998, Tax Free Obligations Fund's seven-day effective yield
was 3.18% for class A shares. The fund has credit ratings of Aaa by Moody's and
AAAm by Standard & Poor's, the highest ratings available.
During the fiscal year, the global economic crisis and its possible impact
on the U.S. economy caused a sharp increase in the level of investor concern
regarding credit risk. In this environment, it is important to note that
maintaining credit quality remains a primary focus of the fund. It is our view
that shareholders are not sufficiently rewarded for taking credit risk.
Consistent with the industry, the fund holds a significant percentage of
market-determined floating-rate securities. Also, the fund does not intend to
purchase second-tier or split-rated securities and applies its research
capabilities to carefully evaluate and monitor the creditworthiness of
counter-parties to repurchase agreements.
Looking forward, we believe that the domestic economic environment will
remain favorable for short-term municipal debt securities. The U.S. economy is
among the strongest in the world, the federal budget is in balance for the first
time in 30 years, and consumers are enjoying a nearly unprecedented level of
prosperity. We are pleased to have the opportunity to continue serving the needs
of investors seeking to generate current income while retaining stability of
principal.
5 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
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MONEY MARKET FUNDS
TREASURY OBLIGATIONS
INVESTMENT OBJECTIVE
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SEEKS MAXIMUM CURRENT INCOME CONSISTENT WITH
PRESERVATION OF CAPITAL AND MAINTENANCE OF LIQUIDITY
Treasury Obligations Fund's seven-day effective yield for class A shares as of
September 30, 1998, was 4.82%. The fund has credit ratings of Aaa by Moody's and
AAAm by Standard & Poor's, the highest ratings available.
Credit quality remains a primary focus of the fund, which buys only
Treasury securities and repurchase agreements collateralized by Treasury
securities. The fund applies its research capabilities to evaluate and monitor
the credit worthiness of counter-parties to the repurchase agreements. In
addition to working carefully to minimize credit risk, the fund does not make
large bets on the direction of interest rates through its maturity structure.
Rather than reach for yield by extending maturities or taking credit risk, the
fund adds shareholder value by using its position in the money-market industry
to negotiate favorable repurchase agreements with broker/dealers.
Looking forward, we believe that the domestic economic environment will
remain favorable for short-term Treasury debt. The U.S. economy is among the
strongest in the world, the federal budget is in balance for the first time in
30 years, and consumers are enjoying a nearly unprecedented level of prosperity.
We are pleased to have the opportunity to continue serving the needs of
investors seeking to generate current income while retaining stability of
principal.
6 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
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INDEPENDENT
AUDITORS' REPORT SEPTEMBER 30, 1998
The Board of Directors and Shareholders
First American Funds, Inc.
We have audited the accompanying statements of net assets of Government
Obligations Fund, Prime Obligations Fund, Tax Free Obligations Fund, and
Treasury Obligations Fund (funds within First American Funds, Inc.) as of
September 30, 1998, and the related statements of operations, the
statements of changes in net assets and the financial highlights for each
of the periods presented. These financial statements and the financial
highlights are the responsibility of the funds' management. Our
responsibility is to express an opinion on these financial statements and
the financial highlights based on our audits. The statement of changes in
net assets for the year ended July 31, 1997 and the financial highlights
for the periods ended July 31, 1997, July 31, 1996, and July 31, 1995 for
Tax Free Obligations Fund were audited by another auditor whose report
dated September 12, 1997, expressed an unqualified opinion on this
information.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and the
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. Investment securities held in custody are
confirmed to us by the custodian. As to securities purchased and sold but
not received or delivered and securities on loan, we request confirmations
from brokers or carry out other appropriate auditing procedures. 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 financial statements and the financial highlights
referred to above present fairly, in all material respects, the financial
position of the Government Obligations Fund, Prime Obligations Fund, Tax
Free Obligations Fund, and Treasury Obligations Fund as of September 30,
1998, and the results of their operations, changes in their net assets and
the financial highlights for each of the periods described above, in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
November 13, 1998
7 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
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STATEMENTS OF
NET ASSETS SEPTEMBER 30, 1998
GOVERNMENT OBLIGATIONS FUND
DESCRIPTION PAR(000) VALUE(000)
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U.S. GOVERNMENT AGENCY OBLIGATIONS - 67.9%
EXPORT-IMPORT BANK
5.500%, 10/15/98 (A) (B) $ 25,000 $ 25,000
5.520%, 10/15/98 (A) (B) 18,198 18,199
5.560%, 10/15/98 (A) (B) 30,000 29,996
FFCB
5.400%, 10/01/98 50,000 50,000
5.700%, 11/03/98 15,000 14,999
5.700%, 12/01/98 3,690 3,690
5.650%, 01/04/99 22,000 22,000
5.375%, 03/02/99 10,000 9,987
FHLB
4.981%, 10/06/98 (A) 50,000 49,974
4.893%, 10/06/98 (A) 4,000 3,998
5.625%, 10/08/98 18,370 18,370
5.792%, 10/23/98 3,000 3,001
5.775%, 10/30/98 1,745 1,745
5.500%, 03/26/99 15,000 14,991
5.955%, 07/08/99 10,000 10,018
5.540%, 07/15/99 25,000 24,988
FHLMC
5.380%, 10/01/98 200,000 200,000
5.430%, 10/19/98 35,000 34,905
5.170%, 10/30/98 80,000 79,667
5.410%, 10/30/98 50,000 49,782
5.505%, 03/12/99 25,000 24,990
5.490%, 04/30/99 10,000 9,988
FNMA
4.620%, 10/06/98 (A) 3,000 2,993
5.043%, 10/06/98 (A) 50,000 49,998
5.300%, 10/06/98 (A) 5,000 4,994
5.400%, 10/16/98 50,000 49,887
5.300%, 01/25/99 50,000 49,136
5.330%, 02/12/99 15,000 14,992
4.940%, 02/23/99 10,000 9,975
5.650%, 04/09/99 2,135 2,135
5.540%, 07/16/99 10,000 9,996
5.490%, 08/03/99 50,000 49,956
SLMA
4.753%, 10/06/98 (A) 25,000 24,976
4.733%, 10/06/98 (A) 20,000 20,000
5.033%, 10/06/98 (A) 50,000 49,987
4.803%, 10/06/98 (A) 14,000 13,988
5.192%, 10/06/98 (A) 4,000 4,000
5.740%, 11/16/98 30,000 30,006
5.720%, 11/20/98 15,000 14,999
5.740%, 12/17/98 6,000 6,001
5.400%, 02/10/99 25,000 24,992
8 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
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GOVERNMENT OBLIGATIONS FUND (continued)
DESCRIPTION PAR(000) VALUE(000)
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U.S. AID
5.207%, 10/06/98 (A) $ 26,000 $ 26,001
5.257%, 10/06/98 (A) 750 750
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TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $1,160,050) 1,160,050
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OTHER U.S. GOVERNMENT OBLIGATIONS - 4.9%
New Hampshire Higher Educational Commercial Paper
(LOC: SLMA)
5.569%, 10/23/98 32,546 32,437
USA Group Secondary Market Services (LOC: SLMA)
5.497%, 10/06/98 13,740 13,730
5.501%, 10/09/98 30,000 29,963
5.449%, 10/30/98 7,771 7,737
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TOTAL OTHER U.S. GOVERNMENT OBLIGATIONS
(Cost $83,867) 83,867
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U.S. TREASURY OBLIGATION - 0.4%
U.S. Treasury Note
5.125%, 11/30/98 7,000 6,998
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TOTAL U.S. TREASURY OBLIGATION
(Cost $6,998) 6,998
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REPURCHASE AGREEMENTS - 26.8%
Lehman Brothers
5.500%, dated 09/30/98, matures 10/01/98,
repurchase price $188,735,092 (collateralized
by a U.S. Treasury Bond: total market value
$192,457,968) 188,706 188,706
Nomura Securities
5.750%, dated 09/30/98, matures 10/01/98,
repurchase price $200,031,944 (collateralized
by U.S. Government Obligations: total market
value $204,000,000) 200,000 200,000
Salomon Smith Barney
5.250%, dated 09/30/98, matures 10/01/98,
repurchase price $70,010,208 (collateralized
by U.S. Treasury Obligations: total market
value $71,574,073) 70,000 70,000
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TOTAL REPURCHASE AGREEMENTS
(Cost $458,706) 458,706
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TOTAL INVESTMENTS - 100.0%
(Cost $1,709,621) 1,709,621
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OTHER ASSETS AND LIABILITIES, NET - (0.0%) (C) (411)
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9 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
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STATEMENTS OF
NET ASSETS SEPTEMBER 30, 1998
GOVERNMENT OBLIGATIONS FUND (concluded)
DESCRIPTION VALUE(000)
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NET ASSETS:
Portfolio Capital--Class Y
($.01 par value--20 billion authorized)
based on 1,000,284,661 outstanding shares $1,000,285
Portfolio Capital--Class A
($.01 par value--20 billion authorized)
based on 325,012,246 outstanding shares 324,981
Portfolio Capital--Class D
($.01 par value--20 billion authorized)
based on 384,228,904 outstanding shares 384,228
Undistributed net investment income 13
Accumulated net realized loss on investments (297)
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TOTAL NET ASSETS--100.0% $1,709,210
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Net asset value, offering price, and redemption
price per share--Class Y $ 1.00
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Net asset value, offering price, and redemption
price per share--Class A $ 1.00
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Net asset value, offering price, and redemption
price per share--Class D $ 1.00
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(A) Variable Rate Security--the rate reported on the Statement of Net Assets is
the rate in effect as of September 30, 1998. The date shown is the next
reset date.
(B) Security sold within terms of a private placement memorandum, exempt from
registration under Section 4(2) or 144A of the Securities Act of 1933, as
amended, and may be sold only to dealers in the program or other qualified
institutional buyers. These securities have been determined to be liquid
under guidelines established by the Board of Directors.
(C) Other assets and liabilities representing greater than five percent of the
total net assets include the following amounts (000):
Cash collateral received for securities on loan $ 277,204
Payable upon return of securities on loan $(277,204)
AID--Agency for International Development
FFCB--Federal Farm Credit Bank
FHLB--Federal Home Loan Bank
FHLMC--Federal Home Loan Mortgage Corporation
FNMA--Federal National Mortgage Association
LOC--Letter of Credit
SLMA--Student Loan Marketing Association
The accompanying notes are an integral part of the financial statements.
10 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
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PRIME OBLIGATIONS FUND
DESCRIPTION PAR(000) VALUE(000)
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COMMERCIAL PAPER - 61.4%
BROKERAGE - 5.8%
Credit Suisse First Boston
5.589%, 11/18/98 (B) $ 36,200 $ 35,934
Goldman Sachs
5.543%, 10/01/98 80,000 80,000
5.549%, 10/14/98 50,000 49,900
Morgan Stanley
5.341%, 03/26/99 75,000 73,093
J.P. Morgan
5.480%, 11/23/98 30,000 29,757
Salomon Smith Barney Holdings
5.591%, 10/08/98 50,000 49,946
5.596%, 10/08/98 50,000 49,946
5.589%, 10/19/98 100,000 99,723
5.586%, 11/17/98 50,000 49,640
5.633%, 01/20/99 25,000 24,576
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542,515
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COMMERCIAL FUNDING CORPORATIONS - 19.1%
Asset Securitization
5.530%, 10/26/98 (B) 50,000 49,808
5.579%, 10/27/98 (B) 50,000 49,800
5.537%, 10/28/98 (B) 44,000 43,819
5.547%, 10/29/98 (B) 50,000 49,786
5.512%, 11/10/98 (B) 50,000 49,696
5.514%, 11/13/98 (B) 50,000 49,673
5.558%, 11/20/98 (B) 40,000 39,694
Fleet Funding
5.520%, 10/05/98 (B) 38,583 38,559
5.563%, 10/08/98 (B) 50,000 49,946
5.569%, 10/21/98 (B) 26,912 26,829
5.547%, 10/23/98 (B) 29,821 29,721
5.546%, 10/26/98 (B) 22,954 22,866
5.562%, 10/30/98 (B) 50,000 49,778
Pooled Accounts Receivable Capital
5.592%, 10/06/98 (B) 20,708 20,692
5.576%, 10/14/98 (B) 42,197 42,112
5.510%, 10/19/98 (B) 30,848 30,763
5.520%, 11/05/98 (B) 50,000 49,734
5.444%, 12/15/98 (B) 50,000 49,441
Premium Funding E
5.581%, 10/01/98 (B) 43,666 43,666
5.583%, 10/05/98 (B) 39,693 39,669
5.571%, 10/07/98 (B) 33,305 33,274
5.597%, 10/08/98 (B) 20,642 20,620
11 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
NET ASSETS SEPTEMBER 30, 1998
PRIME OBLIGATIONS FUND (continued)
DESCRIPTION PAR(000) VALUE(000)
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5.585%, 10/13/98 (B) $ 40,497 $ 40,422
5.606%, 10/21/98 (B) 31,445 31,348
5.607%, 10/23/98 (B) 31,354 31,247
5.631%, 10/28/98 (B) 41,069 40,897
5.327%, 11/04/98 (B) 50,000 49,750
Quincy Capital
5.579%, 10/02/98 (B) 22,605 22,602
5.567%, 10/09/98 (B) 28,565 28,530
5.593%, 10/16/98 (B) 50,000 49,885
5.567%, 10/19/98 (B) 50,000 49,862
5.568%, 10/19/98 (B) 49,881 49,743
5.590%, 10/26/98 (B) 25,314 25,217
Receivables Capital
5.601%, 10/13/98 (B) 44,000 43,919
5.584%, 10/16/98 (B) 50,350 50,234
5.572%, 10/23/98 (B) 24,943 24,859
Variable Funding Capital
5.578%, 10/05/98 (B) 21,705 21,692
5.574%, 10/08/98 (B) 50,000 49,946
5.584%, 10/09/98 (B) 35,000 34,957
5.589%, 10/09/98 (B) 50,000 49,939
5.588%, 10/14/98 (B) 23,598 23,551
5.572%, 10/15/98 (B) 25,000 24,946
5.589%, 10/16/98 (B) 50,000 49,885
5.591%, 10/20/98 (B) 25,000 24,927
5.552%, 10/22/98 (B) 50,000 49,839
5.553%, 10/26/98 (B) 25,000 24,904
5.575%, 10/27/98 (B) 25,000 24,900
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1,797,947
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DIVERSIFIED FINANCE - 2.0%
Allianz America Finance
5.577%, 10/13/98 (B) 32,320 32,260
5.594%, 11/20/98 (B) 44,390 44,050
Commercial Credit
5.567%, 10/15/98 36,000 35,923
General Electric Capital
5.472%, 01/26/99 75,000 73,693
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185,926
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DOMESTIC BANKS - 10.3%
Cofco Capital (LOC: BankAmerica)
5.496%, 11/23/98 30,000 29,760
Cofco Capital (LOC: BankAmerica)
5.471%, 12/17/98 40,000 39,538
Formosa Plastics (LOC: BankAmerica)
5.475%, 12/18/98 20,000 19,766
12 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
PRIME OBLIGATIONS FUND (continued)
DESCRIPTION PAR(000) VALUE(000)
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International Securitization (Guarantor: FNB Chicago)
5.582%, 10/05/98 (B) $ 34,190 $ 34,169
5.550%, 10/08/98 (B) 30,000 29,968
5.568%, 10/08/98 (B) 50,000 49,946
5.588%, 10/14/98 (B) 50,000 49,900
5.589%, 10/15/98 (B) 27,331 27,272
5.590%, 10/15/98 (B) 70,000 69,849
5.596%, 10/20/98 (B) 18,610 18,555
5.588%, 11/19/98 (B) 50,000 49,625
Kittyhawk Funding (Guarantor: NationsBank)
5.555%, 10/02/98 (B) 45,000 44,993
5.576%, 10/09/98 (B) 30,000 29,963
5.597%, 10/09/98 (B) 50,000 49,938
5.580%, 10/14/98 (B) 45,145 45,055
5.582%, 10/20/98 (B) 26,887 26,809
5.592%, 10/20/98 (B) 21,436 21,373
5.578%, 10/22/98 (B) 31,774 31,671
5.600%, 10/23/98 (B) 35,290 35,170
5.632%, 01/15/99 (B) 40,000 39,351
Kzh Crescent (Guarantor: Chase Manhattan)
5.651%, 02/12/99 (B) 13,339 13,066
Kzh Holdings III (Guarantor: Chase Manhattan)
5.570%, 10/02/98 (B) 10,120 10,118
5.649%, 10/28/98 (B) 10,163 10,121
5.640%, 10/29/98 (B) 28,387 28,264
5.680%, 02/01/99 (B) 49,013 48,087
Kzh Soleil (Guarantor: Chase Manhattan)
5.625%, 10/08/98 (B) 19,240 19,219
5.650%, 10/29/98 (B) 10,138 10,094
Kzh-Ing-2 (Guarantor: Chase Manhattan)
5.624%, 10/06/98 (B) 21,030 21,014
Kzh-Soleil-2 (Guarantor: Chase Manhattan)
5.624%, 10/06/98 (B) 13,176 13,166
5.670%, 01/25/99 25,655 25,198
Minmetals Caps (LOC: BankAmerica)
5.598%, 10/23/98 25,000 24,916
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965,934
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FOREIGN BANKS - 8.4%
Abbey National North America
5.500%, 10/05/98 75,000 74,954
Alfa-Russia Finance B V (LOC: Societe Generale)
5.608%, 10/30/98 30,000 29,866
5.613%, 10/30/98 17,000 16,924
5.625%, 10/30/98 30,000 29,866
Banca Serfin S A Institution de Banca Multiple Grupo
(LOC: Barclays Bank)
5.598%, 08/26/99 25,000 23,789
13 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
NET ASSETS SEPTEMBER 30, 1998
PRIME OBLIGATIONS FUND (continued)
DESCRIPTION PAR(000) VALUE(000)
- ---------------------------------------------------------------------
Banco Bozano Simonsen (LOC: Banco Santander)
5.750%, 03/19/99 $ 50,000 $ 48,704
Banco Bradesco S A Grand Cayman
(LOC: Barclays Bank)
5.675%, 11/19/98 36,045 35,773
5.461%, 12/14/98 43,000 42,524
Banco Nacional de Comercio Exterior
(LOC: Barclays Bank)
5.578%, 11/06/98 37,500 37,293
Csn Overseas (LOC: Barclays Bank)
5.490%, 11/03/98 38,650 38,455
5.525%, 03/02/99 39,350 38,456
Four Winds Funding (Guarantor: Commerzbank)
5.577%, 10/05/98 (B) 25,000 24,985
5.594%, 10/05/98 (B) 30,000 29,982
5.594%, 10/13/98 (B) 45,944 45,859
5.597%, 10/14/98 (B) 30,000 29,940
5.567%, 10/22/98 (B) 50,000 49,838
5.553%, 10/30/98 (B) 50,000 49,778
5.500%, 11/13/98 (B) 15,000 14,901
5.512%, 11/16/98 (B) 28,000 27,805
Louis Dreyfus (LOC: Dresdner)
5.550%, 10/21/98 26,739 26,657
Petroleo Brasileiro S A Petrobras (LOC: Barclays Bank)
5.530%, 03/29/99 40,000 38,934
Svenska Handelsbank
5.490%, 11/17/98 30,453 30,233
-----------
785,516
-----------
FOREIGN FUNDING CORPORATIONS - 3.1%
Beta Finance
5.590%, 10/15/98 (B) 37,780 37,699
Sigma Finance
5.636%, 10/07/98 (B) 50,000 49,954
5.530%, 10/13/98 (B) 50,000 49,908
5.615%, 10/28/98 (B) 50,000 49,793
5.630%, 11/09/98 (B) 50,000 49,700
5.652%, 02/24/99 (B) 15,000 14,666
5.648%, 03/01/99 (B) 29,000 28,333
5.399%, 04/14/99 (B) 7,000 6,802
-----------
286,855
-----------
FOREIGN OTHER - 0.8%
BTR Dunlop Finance
5.503%, 11/20/98 (B) 25,000 24,811
UBS Finance
5.751%, 10/01/98 50,000 50,000
-----------
74,811
-----------
14 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
PRIME OBLIGATIONS FUND (continued)
DESCRIPTION PAR(000) VALUE(000)
- ---------------------------------------------------------------------
RETAIL FUNDING CORPORATIONS - 11.9%
Enterprise Funding
5.579%, 10/08/98 (B) $ 25,000 $ 24,973
5.576%, 10/15/98 (B) 39,025 38,941
5.584%, 10/16/98 (B) 33,347 33,270
5.561%, 10/20/98 (B) 23,128 23,061
5.554%, 10/21/98 (B) 50,000 49,847
5.591%, 10/26/98 (B) 26,922 26,818
5.568%, 10/27/98 (B) 50,000 49,801
5.568%, 10/30/98 (B) 20,000 19,911
5.519%, 11/04/98 (B) 60,000 59,689
5.327%, 11/04/98 (B) 49,447 49,199
Providian Master Trust Series 1993-3
5.578%, 10/07/98 (B) 26,000 25,976
5.578%, 10/13/98 (B) 75,000 74,862
5.591%, 10/14/98 (B) 33,500 33,433
5.589%, 10/15/98 (B) 50,000 49,892
5.577%, 10/16/98 (B) 30,549 30,478
5.593%, 10/16/98 (B) 76,274 76,098
5.569%, 11/13/98 (B) 82,000 81,460
Standard Credit
5.582%, 10/07/98 (B) 50,000 49,954
5.586%, 10/09/98 (B) 50,000 49,939
5.591%, 10/09/98 (B) 50,000 49,939
5.589%, 10/13/98 (B) 25,000 24,954
5.590%, 10/13/98 (B) 50,000 49,908
5.599%, 11/05/98 (B) 50,000 49,732
5.559%, 11/06/98 (B) 50,000 49,724
5.600%, 11/06/98 (B) 50,000 49,724
-----------
1,121,583
-----------
TOTAL COMMERCIAL PAPER
(Cost $5,761,087) 5,761,087
-----------
CORPORATE OBLIGATIONS - 26.1%
BROKERAGE - 6.7%
Bear Stearns
5.730%, 10/01/98 (A) 75,000 75,000
Goldman Sachs
5.614%, 10/08/98 (A) 150,000 150,000
5.606%, 10/15/98 (A) 88,000 88,000
Morgan Stanley
5.640%, 10/15/98 (A) 75,000 75,000
Structured Enhanced Return Trust
Series 1997 A-32
(Guarantor: Merrill Lynch)
5.624%, 10/23/98 (A) (B) 107,000 107,000
15 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
NET ASSETS SEPTEMBER 30, 1998
PRIME OBLIGATIONS FUND (continued)
DESCRIPTION PAR(000) VALUE(000)
- ---------------------------------------------------------------------
Structured Enhanced Return Trust
Series 1998 (Guarantor: Merrill Lynch)
5.621%, 10/23/98 (A) (B) $ 52,000 $ 52,000
WFP Tower B Finance Short Term Trust
(Guarantor: Merrill Lynch)
5.655%, 10/08/98 (A) (B) 83,439 83,436
-----------
630,436
-----------
CAPTIVE FINANCE - 0.2%
Ford Motor Credit
5.625%, 12/15/98 14,525 14,526
8.000%, 01/15/99 3,000 3,019
-----------
17,545
-----------
DIVERSIFIED FINANCE - 2.3%
Cit Group Holdings
5.600%, 10/01/98 (A) 200,000 199,921
International Lease Finance
8.350%, 10/01/98 6,469 6,469
5.990%, 01/15/99 6,675 6,682
-----------
213,072
-----------
DOMESTIC BANKS - 1.6%
Short Term Repackaged Asset Trust 98-C
(Guarantor: Morgan Guaranty)
5.686%, 10/13/98 (A) (B) 150,000 150,000
-----------
FOREIGN BANKS - 2.7%
Structured Products Asset Return Trust Certificate
Trust Series 98-4 (Credit Support: CS Financial
Products)
5.640%, 10/18/98 (A) (B) 250,000 250,000
-----------
FOREIGN FUNDING CORPORATIONS - 7.0%
Beta Finance
5.362%, 10/01/98 (A) (B) 200,000 199,955
5.377%, 10/01/98 (A) (B) 100,000 100,000
Centauri
5.427%, 10/06/98 (A) (B) 100,000 100,000
Salts III Cayman Island (Gurantor: Bankers Trust)
5.787%, 01/25/99 (B) 68,200 68,200
5.850%, 01/25/99 (B) 60,000 60,000
16 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
PRIME OBLIGATIONS FUND (continued)
DESCRIPTION PAR(000) VALUE(000)
- ---------------------------------------------------------------------
Sigma Finance
5.940%, 11/17/98 (B) $ 50,000 $ 50,007
5.710%, 03/24/99 (B) 5,000 4,996
5.760%, 03/31/99 (B) 50,000 50,000
5.750%, 08/02/99 (B) 25,000 25,000
-----------
658,158
-----------
INSURANCE - 5.6%
Anchor National Life Insurance
5.670%, 10/01/98 (A) (C) 75,000 75,000
Commonwealth Life Insurance
5.795%, 10/01/98 (A) (C) 225,000 225,000
Sun Life Insurance of America
5.810%, 10/01/98 (A) (C) 75,000 75,000
6.000%, 10/01/98 (A) (C) 75,000 75,000
Transamerica Occidental Life Insurance
5.656%, 10/08/98 (A) 75,000 75,000
-----------
525,000
-----------
TOTAL CORPORATE OBLIGATIONS
(Cost $2,444,211) 2,444,211
-----------
CERTIFICATES OF DEPOSIT - 8.6%
Bank of Nova Scotia NY
5.750%, 04/27/99 25,000 24,993
Bankers Trust
5.700%, 03/05/99 25,000 24,995
5.745%, 07/23/99 50,000 49,981
Barclays Bank NY
5.895%, 10/22/98 20,000 20,000
Bayerische Vereinsbank NY
5.850%, 12/18/98 25,500 25,501
Canadian Imperial Bank NY
5.750%, 04/01/99 25,000 24,994
Deutsche Bank NY
5.700%, 03/30/99 25,000 24,992
5.750%, 04/27/99 50,000 49,986
5.820%, 05/03/99 25,000 24,992
J.P. Morgan
5.750%, 03/10/99 25,000 25,000
Mercantile Safe Deposit & Trust
5.323%, 10/28/98 (A) 20,000 20,000
Royal Bank Canada NY
5.720%, 04/19/99 50,000 49,984
17 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
NET ASSETS SEPTEMBER 30, 1998
PRIME OBLIGATIONS FUND (continued)
DESCRIPTION PAR(000) VALUE(000)
- ---------------------------------------------------------------------
Societe Generale NY
5.970%, 10/27/98 $ 15,000 $ 15,001
5.580%, 01/22/99 15,000 14,998
5.580%, 02/10/99 40,000 39,996
5.680%, 03/22/99 25,000 24,994
5.750%, 04/14/99 25,000 24,994
5.740%, 06/08/99 25,000 24,990
5.690%, 07/16/99 35,000 34,984
5.700%, 08/03/99 30,000 29,986
Swiss Bank NY
5.740%, 06/11/99 50,000 49,980
Westpac Banking NY
5.905%, 11/19/98 10,000 10,001
5.640%, 04/09/99 65,500 65,451
5.730%, 04/23/99 50,000 49,984
5.775%, 05/14/99 50,000 49,984
-----------
TOTAL CERTIFICATES OF DEPOSIT
(Cost $800,761) 800,761
-----------
U.S. GOVERNMENT AGENCY OBLIGATIONS - 2.1%
FHLB
5.013%, 10/06/98 (A) 25,000 25,000
Export-Import Bank
5.520%, 10/15/98 (A) (B) 36,162 36,163
5.560%, 10/15/98 (A) (B) 59,729 59,722
FNMA
4.620%, 10/06/98 (A) 20,000 19,956
SLMA
4.803%, 10/06/98 (A) 38,400 38,252
5.192%, 10/06/98 (A) 20,000 20,000
U.S. AID
5.191%, 10/06/98 (A) 1,208 1,207
-----------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $200,300) 200,300
-----------
LOAN PARTICIPATION CERTIFICATES - 1.1%
Toronto Dominion Bank (National Rural Utilities)
5.570%, 10/06/98 55,000 55,000
5.560%, 10/19/98 50,000 50,000
-----------
TOTAL LOAN PARTICIPATION CERTIFICATES
(Cost $105,000) 105,000
-----------
18 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
PRIME OBLIGATIONS FUND (continued)
DESCRIPTION PAR(000) VALUE(000)
- ---------------------------------------------------------------------
EURO TIME DEPOSITS - 0.2%
Wachovia
5.750%, 10/01/98 $ 18,206 $ 18,206
-----------
TOTAL EURO TIME DEPOSITS
(Cost $18,206) 18,206
-----------
REPURCHASE AGREEMENT - 0.4%
Lehman Brothers
5.500%, dated 09/30/98, matures 10/01/98,
repurchase price $37,522,784 (collateralized by
U.S. Treasury Obligations: total market
value $37,893,782) 37,517 37,517
-----------
TOTAL REPURCHASE AGREEMENT
(Cost $37,517) 37,517
-----------
TOTAL INVESTMENTS - 99.9%
(Cost $9,367,082) 9,367,082
-----------
OTHER ASSETS AND LIABILITIES, NET - 0.1% 13,872
-----------
NET ASSETS:
Portfolio Capital--Class Y
($.01 par value--20 billion authorized)
based on 5,445,625,713 outstanding shares 5,445,579
Portfolio Capital--Class A
($.01 par value--20 billion authorized)
based on 3,699,164,085 outstanding shares 3,699,139
Portfolio Capital--Class B
($.01 par value--20 billion authorized)
based on 2,398,582 outstanding shares 2,398
Portfolio Capital--Class D
($.01 par value--20 billion authorized)
based on 233,677,271 outstanding shares 233,677
Undistributed net investment income 180
Accumulated net realized loss on investments (19)
-----------
TOTAL NET ASSETS--100.0% $9,380,954
-----------
19 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
NET ASSETS SEPTEMBER 30, 1998
PRIME OBLIGATIONS FUND (concluded)
DESCRIPTION VALUE
- ---------------------------------------------------------------------
Net asset value, offering price, and redemption
price per share--Class Y $ 1.00
-----------
Net asset value, offering price, and redemption
price per share--Class A $ 1.00
-----------
Net asset value, offering price, and redemption
price per share--Class B (1) $ 1.00
-----------
Net asset value, offering price, and redemption
price per share--Class D $ 1.00
-----------
(1) Class B has a contingent deferred sales charge. For a description of
possible redemption charge, see the notes to the financial statements.
(A) Variable Rate Security--the rate reported on the Statement of Net Assets is
the rate in effect as of September 30,1998. The date shown is the next reset
rate.
(B) Security sold within the terms of a private placement memorandum, exempt
from registration under section 144A of the Securities Act of 1933, as
amended, and may be sold only to dealers in that program or other qualified
institutional buyers. These securities have been determined to be liquid
under guidelines established by the Board of Directors.
(C) Private Placement Securities considered illiquid investments.
AID--Agency for International Development
FHLB--Federal Home Loan Bank
FNMA--Federal National Mortgage Association
LOC--Letter of Credit
SLMA--Student Loan Marketing Association
The accompanying notes are an integral part of the financial statements.
20 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
TAX FREE OBLIGATIONS FUND
DESCRIPTION PAR(000) VALUE(000)
- ---------------------------------------------------------------------
MUNICIPAL BONDS - 96.1%
ALABAMA - 2.7%
Birmingham Baptist Medical Center,
Living County Project, Series A
(LOC: Banco Santander) (RB)
3.600%, 10/07/98 (A) $ 11,600 $ 11,600
Jefferson County Sewer Revenue,
Series 7 (RB) (FGIC)
3.800%, 10/07/98 (A) 3,000 3,000
-----------
14,600
-----------
ALASKA - 0.6%
Alaska State Industrial Development Authority
(LOC: KredietBank) (RB)
3.250%, 10/07/98 (A) 3,400 3,400
-----------
COLORADO - 2.4%
Colorado Springs Utilities Revenue, Series 19 (RB)
3.850%, 10/07/98 (A) 8,100 8,100
Colorado State Health Facilities Authority
(RB) (MBIA)
3.900%, 10/07/98 (A) 5,350 5,350
-----------
13,450
-----------
FLORIDA - 3.3%
Florida State Housing Finance Agency,
Multifamily Revenue
(LOC: NationsBank) (RB)
3.550%, 10/07/98 (A) 1,500 1,500
Jacksonville Electric Authority (TECP)
3.550%, 10/14/98 3,000 3,000
3.500%, 11/10/98 4,850 4,850
Orlando Special Assessment,
Republic Drive Interchange-A
(LOC: Morgan Guaranty) (RB)
3.500%, 10/07/98 (A) 9,000 9,000
-----------
18,350
-----------
IDAHO - 2.5%
Idaho State Health Facilities Authority,
St. Luke's Medical Center
(LOC: Bayerische Landesbank) (RB)
4.100%, 10/01/98 (A) 13,825 13,825
-----------
21 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
NET ASSETS SEPTEMBER 30, 1998
TAX FREE OBLIGATIONS FUND (continued)
DESCRIPTION PAR(000) VALUE(000)
- ---------------------------------------------------------------------
ILLINOIS - 8.7%
Chicago Equipment Notes (LOC: Harris Trust)
3.800%, 12/04/98 ABN AMRO $ 4,000 $ 4,003
City of Chicago, ABN AMRO Munitops 1998-3 (GO)
4.130%, 10/07/98 (A) 10,000 10,000
Cook, Kane, Lake & McHenry Counties (GO)
4.500%, 12/01/98 755 756
Illinois State Development Finance Authority
(LOC: Harris Trust) (TRAN)
4.050%, 10/07/98 (A) 2,000 2,000
Illinois State Development Finance Authority, American
College of Surgeons Project (LOC: Northern Trust
Exp: 08/31/01) (RB)
4.050%, 10/07/98 (A) 4,000 4,000
Illinois State Development Finance Authority,
Illinois Power Project, Series B
(LOC: Canadian Imperial Bank) (RB)
3.500%, 10/07/98 (A) 3,900 3,900
Illinois State Health Facilities Authority, Dupage
Healthcare Project (LOC: Rabobank) (RB)
4.100%, 10/01/98 (A) 9,900 9,900
Illinois State Health Facilities Authority, Franciscan
Eldercare Project, Series B (LOC: LaSalle National Bank
Exp: 12/31/01) (RB)
3.700%, 10/07/98 (A) 1,150 1,150
Illinois State Metropolitan Pier & Exposition Authority
(RB) (AMBAC)
3.800%, 10/07/98 (A) 3,000 3,000
Schaumburg, Multifamily Housing (RB)
(Merrill Lynch & Co.)
4.190%, 10/07/98 (A) 9,000 9,000
-----------
47,709
-----------
INDIANA - 5.4%
Allen County Economic Development, Golden Years
Homestead Project (LOC: Norwest) (RB)
3.950%, 10/07/98 (A) 1,400 1,400
Evansville Economic Development Authority
(LOC: Bank of Nova Scotia) (RB)
3.800%, 10/07/98 (A) 2,500 2,500
Indiana State Health Facilities Financing Authority
(RB) (Comerica Bank)
3.650%, 10/07/98 (A) 4,200 4,200
22 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
TAX FREE OBLIGATIONS FUND (continued)
DESCRIPTION PAR(000) VALUE(000)
- ---------------------------------------------------------------------
Indiana State Health Facilities Financing Authority,
Pathfinder Services Project (LOC: Norwest Bank
Exp: 12/01/01) (RB)
3.950%, 10/07/98 (A) $ 2,585 $ 2,585
Indiana State Hospital Equipment Financing Authority,
Series 1985-A (RB) (MBIA)
3.650%, 10/07/98 (A) 4,800 4,800
Indianapolis (FSA)
4.140%, 10/07/98 (A) 14,325 14,325
-----------
29,810
-----------
KANSAS - 0.4%
Shawnee County, Series 1 (GO)
4.000%, 02/01/99 328 328
Shawnee Industrial Development Revenue,
Shawnee Village Association
(LOC: Texas Commerce Bank N.A.) (RB)
3.950%, 10/07/98 (A) 1,900 1,900
-----------
2,228
-----------
KENTUCKY - 3.1%
Kentucky State Hospital Finance Authority,
Pre-refunded @ 102 (RB) (BIG)
7.000%, 09/01/99 (C) 3,000 3,147
Pendleton County (LOC: Commonwealth
Bank Australia) (TECP)
3.650%, 10/16/98 2,390 2,390
3.700%, 10/16/98 6,500 6,500
3.550%, 11/10/98 5,000 5,000
-----------
17,037
-----------
LOUISIANA - 0.2%
East Baton Rouge Pollution Control, Georgia Pacific
(LOC:Toronto Dominion Exp:11/30/98) (RB)
3.900%, 10/07/98 (A) 1,000 1,000
-----------
MARYLAND - 1.0%
Anne Arundel County, Series A19
4.200%, 10/07/98 (A) 4,175 4,175
Fredrick County Retirement Community,
Buckinghams Choice, Series E
(LOC: LaSalle National Bank) (RB)
4.050%, 10/07/98 (A) 1,500 1,500
-----------
5,675
-----------
23 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
NET ASSETS SEPTEMBER 30, 1998
TAX FREE OBLIGATIONS FUND (continued)
DESCRIPTION PAR(000) VALUE(000)
- ---------------------------------------------------------------------
MASSACHUSETTS - 2.4%
Natick (BAN)
4.000%, 08/06/99 $ 13,055 $ 13,094
-----------
MICHIGAN - 3.5%
Hannahville Indian Community Finance & Building
Authority, Building Program, Series A
(LOC: First of America) (RB)
4.000%, 10/07/98 (A) 4,000 4,000
Michigan State Hospital Financing Authority
(LOC: First of America) (RB)
3.550%, 10/07/98 (A) 9,700 9,700
Michigan State Hospital Financing Authority, Series A
(LOC: First of America) (RB)
3.550%, 10/07/98 (A) 1,800 1,800
Michigan University (TECP)
3.450%, 10/01/98 3,800 3,800
-----------
19,300
-----------
MINNESOTA - 3.7%
Bloomington Multifamily Housing Authority,
Rental Housing, Crow/Bloomington Project
(LOC: Credit Suisse) (RB)
4.050%, 10/07/98 (A) 10,700 10,700
Eden Prairie, Multifamily Housing
(LOC: Barclays Bank) (RB)
4.100%, 10/07/98 (A) 1,900 1,900
Litchfield Independent School District #465 (TRAN)
3.680%, 03/31/99 970 970
Minnesota State Agriculture & Economic Development
Board, Evangelical Lutheran Project
(LOC: Rabobank) (RB)
4.020%, 10/07/98 (A) 2,000 2,000
Minnesota State Housing Finance Agency,
Single Family Mortgages, Series G,
Mandatory Put @ 100 (RB)
4.150%, 12/01/98 (B) 2,000 2,001
Western Minnesota Municipal Power Agency (RB)
4.250%, 01/04/99 3,000 3,000
-----------
20,571
-----------
24 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
TAX FREE OBLIGATIONS FUND (continued)
DESCRIPTION PAR(000) VALUE(000)
- ---------------------------------------------------------------------
MISSISSIPPI - 1.6%
Mississippi State, Mississippi College Project
(LOC: NationsBank) (RB)
4.000%, 10/07/98 (A) $ 8,700 $ 8,700
-----------
MISSOURI - 1.1%
Missouri State Environmental Improvements
(LOC: Union Bank of Switzerland) (TECP)
3.550%, 11/09/98 3,000 3,000
Missouri State Health & Educational Revenue,
Drury College, Series B (RB)
4.250%, 04/07/99 3,120 3,129
-----------
6,129
-----------
NEVADA - 1.2%
Nevada State (GO) (A)
4.120%, 10/07/98 4,000 4,000
State of Nevada, ABN AMRO Munitops (GO)
4.130%, 10/07/98 (A) 2,500 2,500
-----------
6,500
-----------
NEW HAMPSHIRE - 0.8%
New Hampshire State Higher Educational & Health
Authority, Alice Peck Day Lifecare Project
(LOC: CoreStates) (RB)
3.800%, 10/07/98 (A) 4,500 4,500
-----------
NEW YORK - 0.5%
New York State Dormitory Authority, Founding
Charitable Project (LOC: Allied Irish) (RB)
3.300%, 10/07/98 (A) 2,700 2,700
-----------
NORTH CAROLINA - 0.6%
New Hanover County, Gang Nail Systems Project
(LOC: Harris Trust) (RB)
3.800%, 10/07/98 (A) 3,500 3,500
-----------
OHIO - 2.0%
Ohio State (GO)
4.700%, 05/15/99 (A) 3,075 3,096
Warren County Industrial Development Authority,
Cincinnati Electric Project
(LOC: Royal Bank of Canada) (RB)
4.300%, 10/07/98 (A) 7,650 7,650
-----------
10,746
-----------
25 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
NET ASSETS SEPTEMBER 30, 1998
TAX FREE OBLIGATIONS FUND (continued)
DESCRIPTION PAR(000) VALUE(000)
- ---------------------------------------------------------------------
OKLAHOMA - 4.8%
Garfield County Pollution Control, Oklahoma
Gas & Electric (RB)
3.550%, 10/07/98 (A) $ 2,300 $ 2,300
Muskogee, Oklahoma Gas & Electric
Pollution Control (RB)
3.550%, 10/07/98 (A) 12,000 12,000
Tulsa Airport Improvement Trust, Tulsa International
Airport Project (RB) (FGIC)
4.000%, 10/07/98 (A) 4,000 4,000
Tulsa Industrial Authority (RB) (MBIA)
4.120%, 10/07/98 (A) 7,970 7,970
-----------
26,270
-----------
PENNSYLVANIA - 3.0%
Delaware County, Catholic Health East, Series A (RB)
4.500%, 11/15/98 2,275 2,277
Harrisburg (Anchor National Life Insurance) (RB)
4.080%, 10/07/98 (A) 14,000 14,000
-----------
16,277
-----------
SOUTH CAROLINA - 3.7%
South Carolina, Public Service Authority (RB) (FGIC)
4.120%, 10/07/98 (A) 2,000 2,000
York County (Guaranty: Duke Power) (TECP)
3.375%, 12/07/98 10,400 10,400
York County Pollution Control, Saluda River Project,
National Rural CFC (RB)
3.450%, 02/15/99 (A) 1,955 1,955
York County Pollution Control, Series N3
(National Rural) (RB)
3.300%, 03/15/99 (A) 5,950 5,950
-----------
20,305
-----------
SOUTH DAKOTA - 1.9%
South Dakota Health Facility, Pre-refunded @ 102
(RB) (MBIA)
7.000%, 09/01/99 (C) 2,645 2,775
Yankton Industrial Development, Alumax Project
(LOC: Bank of America) (RB)
4.000%, 10/07/98 (A) 7,700 7,700
-----------
10,475
-----------
26 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
TAX FREE OBLIGATIONS FUND (continued)
DESCRIPTION PAR(000) VALUE(000)
- ---------------------------------------------------------------------
TENNESSEE - 4.4%
Clarksville Building Authority (RB)
(Nationsbank of Florida)
4.000%, 10/07/98 (A) $ 10,000 $ 10,000
Montgomery County Public Building Authority,
Pooled Financing Revenue, Montgomery
County Loan (LOC: NationsBank) (RB)
4.000%, 10/07/98 (A) 7,000 7,000
Nashville & Davidson Counties, Metropolitan
Government Industrial Development
(LOC: Barclays Bank) (RB)
4.100%, 10/07/98 (A) 7,035 7,035
-----------
24,035
-----------
TEXAS - 8.0%
Dallas, Denton & Collin Counties (GO)
4.450%, 02/15/99 6,225 6,245
Houston Water & Sewer Revenue (RB) (FGIC)
4.120%, 10/07/98 (A) 7,000 7,000
Hunt County Industrial Development Authority,
Trico Industries Project (LOC: ABN AMRO) (RB)
3.800%, 10/07/98 (A) 5,730 5,730
San Antonio Electric & Gas (RB) (MBIA)
4.120%, 10/07/98 (A) 7,455 7,455
Texas PFA (TECP) (State of Texas)
3.500%, 11/12/98 9,000 9,000
3.375%, 01/22/99 8,500 8,500
-----------
43,930
-----------
UTAH - 5.6%
Intermountain Power Agency (MBIA) (RB)
3.500%, 02/01/99 (A) 20,000 20,000
Salt Lake County Housing Authority, Multifamily
Revenue, Santa Fe Apartments Project
(LOC: Dresdner) (RB)
3.650%, 10/07/98 (A) 1,900 1,900
Utah Highway (TECP) (State of Utah)
3.300%, 02/04/99 9,000 9,000
-----------
30,900
-----------
VERMONT - 0.3%
Vermont State Student Loan Revenue
(LOC: Natwest) (RB)
3.500%, 10/07/98 (A) 1,565 1,565
-----------
27 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
NET ASSETS SEPTEMBER 30, 1998
TAX FREE OBLIGATIONS FUND (continued)
DESCRIPTION PAR(000) VALUE(000)
- ---------------------------------------------------------------------
VIRGINIA - 1.3%
Alexandria Industrial Development Authority, American
Red Cross Project (LOC: First Union) (RB)
3.600%, 10/07/98 (A) $ 6,980 $ 6,980
-----------
WASHINGTON - 4.8%
King County Public Hospital (AMBAC) (RB)
4.140%, 10/07/98 (A) 5,995 5,995
Port Seattle, Alaska Airlines Project
(LOC: Bank of New York) (RB)
3.800%, 10/07/98 (A) 5,000 5,000
State of Washington (GO)
3.450%, 10/07/98 (A) 4,000 4,000
Washington Health Care Facilities Authority,
Fred Hutchinson Cancer Research Center,
Series 1996 (LOC: Morgan Guaranty) (RB)
4.100%, 10/01/98 (A) 4,755 4,755
Washington State Public Power Supply Systems,
Nuclear Project #3 (RB)
4.120%, 10/07/98 (A) 6,590 6,590
-----------
26,340
-----------
WISCONSIN - 5.7%
Milwaukee, Series J (GO)
4.000%, 12/01/98 1,825 1,824
Milwaukee, Series A (RAN)
5.000%, 02/25/99 8,000 8,044
Wisconsin State (GO)
4.700%, 11/01/98 750 751
Wisconsin State (TECP)
3.350%, 11/19/98 3,029 3,029
Wisconsin State Health & Education Facilities Authority
(LOC: Toronto Dominion) (RB)
3.920%, 10/01/98 (A) 625 625
Wisconsin State Health & Education Facilities Authority,
Blood Center Project, Series A
(LOC: M&I Exp: 04/15/02) (RB)
3.650%, 10/07/98 (A) 7,695 7,695
Wisconsin State Health & Education Facilities Authority,
Franciscan Health Care, Series A-2
(LOC: Toronto Dominion) (RB)
3.500%, 10/07/98 (A) 7,320 7,320
Wisconsin State Health & Education Facilities Authority,
Froedtert Memorial Hospital Project
(LOC: M&I Exp: 04/15/02) (RB)
4.050%, 10/07/98 (A) 2,300 2,300
-----------
31,588
-----------
28 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
TAX FREE OBLIGATIONS FUND (continued)
DESCRIPTION PAR(000)/SHARES VALUE(000)
- ---------------------------------------------------------------------
WYOMING - 3.3%
Converse County (LOC: Deutsche Bank) (TECP)
3.500%, 11/09/98 $ 7,600 $ 7,600
3.450%, 12/11/98 3,800 3,800
Sweetwater (LOC: Union Bank of Switzerland) (TECP)
3.300%, 12/07/98 7,000 7,000
-----------
18,400
-----------
MULTISTATE - 1.6%
Clipper Tax Exempt Trust 1998-2 (RB)
4.220%, 10/07/98 (A) 8,800 8,800
-----------
TOTAL MUNICIPAL BONDS
(Cost $528,689) 528,689
-----------
MONEY MARKET FUND - 3.7%
Federated Tax Free Money Market 20,247,000 20,247
-----------
TOTAL MONEY MARKET FUND
(Cost $20,247) 20,247
-----------
TOTAL INVESTMENTS - 99.8%
(Cost $548,936) 548,936
-----------
OTHER ASSETS AND LIABILITIES, NET - 0.2% 1,308
-----------
NET ASSETS:
Portfolio Capital--Class Y
($.01 par value--20 billion authorized)
based on 272,984,165 outstanding shares 272,982
Portfolio Capital--Class A
($.01 par value--20 billion authorized)
based on 247,186,862 outstanding shares 247,152
Portfolio Capital--Class D
($.01 par value--20 billion authorized)
based on 30,095,359 outstanding shares 30,095
Undistributed net investment income 16
Accumulated net realized loss on investments (1)
-----------
TOTAL NET ASSETS--100.0% $ 550,244
-----------
29 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
NET ASSETS SEPTEMBER 30, 1998
TAX FREE OBLIGATIONS FUND (concluded)
DESCRIPTION VALUE
- ---------------------------------------------------------------------
Net asset value, offering price, and
redemption price per share--Class Y $ 1.00
-----------
Net Asset Value and Redemption
Price Per Share--Class A $ 1.00
-----------
Net Asset Value and Redemption
Price Per Share--Class D $ 1.00
-----------
(A) Variable Rate Security--the rate reported on the Statement of Net Assets is
the rate in effect as of September 30, 1998. The date shown is the reset
date.
(B) Mandatory Put Security--the mandatory put date is shown as the maturity date
on the Statement of Net Assets.
(C) Pre-refunded Security--the prerefunded date is shown as the maturity date on
the Statement of Net Assets.
AMBAC--American Municipal Bond Assurance Company
BAN--Bond Anticipation Note
BIG--Bond Investors Guaranty Insurance Company
FGIC--Financial Guaranty Insurance Corporation
FSA--Financial Security Assurance
GO--General Obligation
LOC--Letter of Credit
M&I--Marshall and Ilsley
MBIA--Municipal Bond Insurance Association
RAN--Revenue Anticipation Note
RB--Revenue Bond
TECP--Tax Exempt Commercial Paper
TRAN--Tax and Revenue Anticipation Note
The accompanying notes are an integral part of the financial statements.
30 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
TREASURY OBLIGATIONS FUND
DESCRIPTION PAR(000) VALUE(000)
- ---------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS - 18.3%
U.S. Treasury Bills
5.526%, 11/12/98 (A) $ 50,000 $ 49,693
5.523%, 12/10/98 (A) 50,000 49,491
U.S. Treasury Notes
7.125%, 10/15/98 50,000 50,027
5.875%, 10/31/98 25,000 25,004
5.125%, 11/30/98 50,000 49,980
5.625%, 11/30/98 100,000 99,997
5.750%, 12/31/98 50,000 50,019
6.375%, 01/15/99 75,000 75,198
6.250%, 03/31/99 125,000 125,421
7.000%, 04/15/99 50,000 50,363
6.375%, 04/30/99 125,000 125,560
6.000%, 06/30/99 50,000 50,167
6.750%, 06/30/99 75,000 75,659
6.375%, 07/15/99 50,000 50,349
5.875%, 08/31/99 125,000 125,818
-----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $1,052,746) 1,052,746
-----------
REPURCHASE AGREEMENTS - 81.9%
Bear Stearns
5.570%, dated 09/30/98, matures 10/01/98,
repurchase price $280,043,322 (collateralized
by U.S. Treasury STRIPS: total market
value $285,621,000) 280,000 280,000
C S First Boston
5.580%, dated 09/30/98, matures 10/01/98,
repurchase price $800,124,000 (collateralized
by U.S. Treasury STRIPS: total market
value $820,921,889) 800,000 800,000
Donaldson Lufkin & Jenrette
5.500%, dated 09/30/98, matures 10/01/98,
repurchase price $950,145,139 (collateralized
by U.S. Treasury STRIPS: total market
value $969,000,147) 950,000 950,000
Goldman Sachs
5.450%, dated 09/30/98, matures 10/01/98,
repurchase price $280,042,389 (collateralized
by U.S. Treasury Notes: total market
value $285,600,857) 280,000 280,000
Lehman Brothers
5.500%, dated 09/30/98, matures 10/01/98,
repurchase price $274,179,263 (collateralized
by U.S. Treasury Obligations: total market
value $279,589,753) 274,137 274,137
31 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
NET ASSETS SEPTEMBER 30, 1998
TREASURY OBLIGATIONS FUND (continued)
DESCRIPTION PAR(000) VALUE(000)
- ---------------------------------------------------------------------
Merrill Lynch
5.200%, dated 09/30/98, matures 10/01/98,
repurchase price $270,039,000 (collateralized
by U.S. Treasury Obligations: total market
value $275,712,000) $ 270,000 $ 270,000
Nomura Securities
5.625%, dated 09/30/98, matures 10/01/98,
repurchase price $200,031,250 (collateralized
by U.S. Treasury Obligations: total market
value $204,000,129) 200,000 200,000
Prudential Securities
5.500%, dated 09/30/98, matures 10/01/98,
repurchase price $280,043,167 (collateralized
by U.S. Treasury Obligations: total market
value $285,600,866) 280,000 280,000
Salomon Smith Barney
5.250%, dated 09/30/98, matures 10/01/98,
repurchase price $280,040,833 (collateralized
by U.S. Treasury Obligations: total market
value $285,629,229) 280,000 280,000
Societe Generale
5.550%, dated 09/30/98, matures 10/01/98,
repurchase price $825,127,187 (collateralized
by U.S. Treasury Obligations: total market
value $842,659,281) 825,000 825,000
UBS Securities
5.520%, dated 09/30/98, matures 10/01/98,
repurchase price $280,042,933 (collateralized
by U.S. Treasury Obligations: total market
value $285,714,081) 280,000 280,000
-----------
TOTAL REPURCHASE AGREEMENTS
(COST $4,719,137) 4,719,137
-----------
TOTAL INVESTMENTS - 100.2%
(COST $5,771,883) 5,771,883
-----------
OTHER ASSETS AND LIABILITIES, NET - (0.2%) (11,593)
-----------
32 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
TREASURY OBLIGATIONS FUND (concluded)
DESCRIPTION VALUE(000)
- ---------------------------------------------------------------------
NET ASSETS:
Portfolio Capital--Class Y
($.01 par value--20 billion authorized)
based on--1,803,602,872 outstanding shares $1,803,604
Portfolio Capital--Class A
($.01 par value--20 billion authorized)
based on 101,735,188 outstanding shares 101,735
Portfolio Capital--Class D
($.01 par value--20 billion authorized)
based on 3,854,914,179 outstanding shares 3,854,917
Undistributed net investment income 8
Accumulated net realized gain on investments 26
-----------
TOTAL NET ASSETS--100.0% $5,760,290
-----------
Net asset value, offering price, and
redemption price per share--Class Y $ 1.00
-----------
Net asset value, offering price, and
redemption price per share--Class A $ 1.00
-----------
Net asset value, offering price, and
redemption price per share--Class D $ 1.00
-----------
(A) The rate shown is the effective yield at time of purchase.
STRIPS--Separately Trading of Registered Interest and Principal of Securities.
The accompanying notes are an integral part of the financial statements.
33 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
OPERATIONS FOR THE PERIOD ENDED SEPTEMBER 30, 1998, IN THOUSANDS
GOVERNMENT PRIME
OBLIGATIONS OBLIGATIONS
FUND FUND
- ------------------------------------------------------------------------
INVESTMENT INCOME:
Interest $ 84,563+ $368,041
- ------------------------------------------------------------------------
EXPENSES:
Investment advisory fees 6,013 25,710
Less: Waiver of investment advisory fees (982) (5,242)
Administrator fees 915 3,868
Distribution fees - Class A 167 3,215
Distribution fees - Class B -- 21
Distribution fees - Class D 621 393
Custodian fees 451 1,930
Registration fees 101 1,529
Professional fees 53 226
Transfer agent fees 74 248
Printing 81 476
Directors' fees 25 103
Accounting fees -- --
Amortization of organizational costs -- --
Other 31 70
- ------------------------------------------------------------------------
TOTAL NET EXPENSES 7,550 32,547
=======================================================================
Investment income - net 77,013 335,494
- ------------------------------------------------------------------------
NET REALIZED GAIN (LOSS) ON INVESTMENTS (260) (19)
=======================================================================
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 76,753 $335,475
=======================================================================
+ Includes income from securities lending program. See the Notes to the
Financial Statements for additional information.
(A) The Statement of Operations for the Tax Free Obligations Fund reflects the
change of the Fund's year end from November 30th to September 30th.
(1) For the ten-month period December 1, 1997 to September 30, 1998.
(2) For the four-month period August 1, 1997 to November 30, 1997.
The accompanying notes are an integral part of the financial statements.
34 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
TAX FREE TREASURY
OBLIGATIONS FUND(A) OBLIGATIONS
(1) (2) FUND
- -----------------------------------
$8,949 $ 488 $269,095
- -----------------------------------
1,003 46 19,285
(328) (45) (3,045)
150 17 2,904
204 44 176
-- -- --
22 -- 5,046
75 1 1,446
127 7 352
8 2 152
38 13 180
51 3 234
4 1 79
-- 20 --
-- -- 2
-- -- 97
- -----------------------------------
1,354 109 26,908
===================================
7,595 379 242,187
- -----------------------------------
-- -- 26
===================================
$7,595 $ 379 $ 242,213
===================================
35 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
CHANGES IN NET ASSETS IN THOUSANDS
<TABLE>
<CAPTION>
GOVERNMENT
OBLIGATIONS FUND
- ----------------------------------------------------------------------------------------------------
10/1/97 10/1/96
to to
9/30/98 9/30/97
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS:
Investment income - net $ 77,013 $ 61,132
Net realized gain (loss) on investments (260) (6)
- ----------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 76,753 61,126
- ----------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment income - net:
Class Y (52,935) (45,205)
Class A (3,226) --
Class B -- --
Class D (20,839) (15,962)
Net realized gain on investments
Class Y -- --
Class A -- --
Class B -- --
Class D -- --
- ----------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (77,000) (61,167)
====================================================================================================
CAPITAL SHARE TRANSACTIONS
AT NET ASSET VALUE OF $1.00 PER SHARE:
Class Y:
Proceeds from sales 3,130,459 5,674,757
Shares issued in connection with acquisition of Qualivest Fund -- --
Shares issued in connection with acquisition of Common
Trust Fund Assets -- --
Reinvestment of distributions 29,035 24,252
Payments for redemptions (3,105,431) (5,530,377)
- ----------------------------------------------------------------------------------------------------
Increase in net assets from
Class Y transactions 54,063 168,632
- ----------------------------------------------------------------------------------------------------
Class A:
Proceeds from sales 560,552 --
Shares issued in connection with acquisition of Qualivest Fund -- --
Reinvestment of distributions 1,907 --
Payments for redemptions (237,478) --
- ----------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from
Class A transactions 324,981 --
- ----------------------------------------------------------------------------------------------------
Class B:
Proceeds from sales -- --
Reinvestment of distributions -- --
Payments for redemptions -- --
- ----------------------------------------------------------------------------------------------------
Increase in net assets from
Class B transactions -- --
- ----------------------------------------------------------------------------------------------------
Class D:
Proceeds from sales 2,648,770 1,115,568
Payments for redemptions (2,601,752) (1,047,740)
- ----------------------------------------------------------------------------------------------------
Increase in net assets from Class D transactions 47,018 67,828
- ----------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from
capital share transactions 426,062 236,460
- ----------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets 425,815 236,419
NET ASSETS AT BEGINNING OF PERIOD 1,283,395 1,046,976
====================================================================================================
NET ASSETS AT END OF PERIOD (1) $ 1,709,210 $ 1,283,395
====================================================================================================
</TABLE>
(A) The Statements of Changes in Net Assets for the Tax Free Obligations Fund
reflect the change of the Fund's year end from July 31st to November 30th,
and then to September 30th.
(1) Includes undistributed net investment income (000) of $13 and $0 for
Government Obligations Fund, $180 and $0 for Prime Obligations Fund, and $8
and $0 for Treasury Obligations Fund at September 30, 1998 and September 30,
1997, respectively. Includes undistributed net investment income of $16, $2,
$4 for Tax Free Obligations Fund for September 30, 1998, November 30, 1997
and July 31, 1997, respectively.
The accompanying notes are an integral part of the financial statements.
36 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
<TABLE>
<CAPTION>
PRIME TAX FREE TREASURY
OBLIGATIONS FUND OBLIGATIONS FUND(A) OBLIGATIONS FUND
- -------------------------------------------------------------------------------------------------------------------------------
10/1/97 10/1/96 12/1/97 8/1/97 8/1/96 10/1/97 10/1/96
to to to to to to to
9/30/98 9/30/97 9/30/98 11/30/97 7/31/97 9/30/98 9/30/97
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 335,494 $ 192,633 $ 7,595 $ 379 $ 1,062 $ 242,187 $ 152,825
(19) -- -- -- (1) 26 19
- -------------------------------------------------------------------------------------------------------------------------------
335,475 192,633 7,595 379 1,061 242,213 152,844
- -------------------------------------------------------------------------------------------------------------------------------
(257,527) (176,476) (4,823) (94) (186) (71,113) (35,311)
(64,277) (8,570) (2,317) (287) (876) (3,426) --
(88) (131) -- -- -- -- --
(13,417) (7,465) (441) -- -- (167,637) (117,545)
-- -- -- -- -- (4) --
-- -- -- -- -- -- --
-- -- -- -- -- -- --
-- -- -- -- -- (9) --
- -------------------------------------------------------------------------------------------------------------------------------
(335,309) (192,642) (7,581) (381) (1,062) (242,189) (152,856)
===============================================================================================================================
9,928,887 14,572,560 500,926 13,113 40,937 8,698,622 5,288,369
257,499 -- -- -- -- 11,790 --
-- 140,497 -- -- -- -- 6,884
98,240 60,409 129 62 112 12,681 4,510
(8,454,911) (14,323,805) (238,776) (11,608) (35,807) (7,817,288) (4,719,356)
- -------------------------------------------------------------------------------------------------------------------------------
1,829,715 449,661 262,279 1,567 5,242 905,805 580,407
- -------------------------------------------------------------------------------------------------------------------------------
7,409,332 620,931 574,201 13,623 53,776 267,966 --
226,201 -- -- -- -- 86,624 --
48,974 8,075 1,714 295 854 3,024 --
(4,203,635) (545,891) (357,424) (16,923) (53,104) (255,879) --
- -------------------------------------------------------------------------------------------------------------------------------
3,480,872 83,115 218,491 (3,005) 1,526 101,735 --
- -------------------------------------------------------------------------------------------------------------------------------
3,185 7,242 -- -- -- -- --
81 121 -- -- -- -- --
(2,888) (7,107) -- -- -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
378 256 -- -- -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
1,278,512 714,714 59,995 1 -- 10,374,909 6,989,426
(1,157,905) (710,856) (29,901) -- -- (9,367,195) (5,758,331)
- -------------------------------------------------------------------------------------------------------------------------------
120,607 3,858 30,094 1 -- 1,007,714 1,231,095
- -------------------------------------------------------------------------------------------------------------------------------
5,431,572 536,890 510,864 (1,437) 6,768 2,015,254 1,811,502
- -------------------------------------------------------------------------------------------------------------------------------
5,431,738 536,881 510,878 (1,439) 6,767 2,015,278 1,811,490
3,949,216 3,412,335 39,366 40,805 34,038 3,745,012 1,933,522
===============================================================================================================================
$ 9,380,954 $ 3,949,216 $ 550,244 $ 39,366 $ 40,805 $ 5,760,290 $ 3,745,012
===============================================================================================================================
</TABLE>
37 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
FINANCIAL HIGHLIGHTS
FOR THE PERIODS ENDED SEPTEMBER 30, 1998
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
NET ASSET DIVIDENDS NET ASSET
VALUE NET FROM NET VALUE
BEGINNING INVESTMENT INVESTMENT END OF
OF PERIOD INCOME INCOME PERIOD
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
GOVERNMENT OBLIGATIONS FUND
CLASS Y
1998 $ 1.00 $ 0.052 $ (0.052) $ 1.00
1997 1.00 0.051 (0.051) 1.00
1996 1.00 0.051 (0.051) 1.00
1995 1.00 0.054 (0.054) 1.00
1994 1.00 0.034 (0.034) 1.00
1993 1.00 0.028 (0.028) 1.00
1992 1.00 0.038 (0.038) 1.00
1991 1.00 0.060 (0.060) 1.00
1990(1) 1.00 0.045 (0.045) 1.00
CLASS A
1998(5) $ 1.00 $ 0.021 $ (0.021) $ 1.00
CLASS D
1998 $ 1.00 $ 0.050 $ (0.050) $ 1.00
1997 1.00 0.049 (0.049) 1.00
1996 1.00 0.050 (0.050) 1.00
1995(2) 1.00 0.038 (0.038) 1.00
PRIME OBLIGATIONS FUND
CLASS Y
1998 $ 1.00 $ 0.053 $ (0.053) $ 1.00
1997 1.00 0.052 (0.052) 1.00
1996 1.00 0.052 (0.052) 1.00
1995 1.00 0.055 (0.055) 1.00
1994 1.00 0.035 (0.035) 1.00
1993 1.00 0.030 (0.030) 1.00
1992 1.00 0.039 (0.039) 1.00
1991 1.00 0.064 (0.064) 1.00
1990(1) 1.00 0.046 (0.046) 1.00
CLASS A
1998 $ 1.00 $ 0.050 $ (0.050) $ 1.00
1997 1.00 0.049 (0.049) 1.00
1996 1.00 0.050 (0.050) 1.00
1995(2) 1.00 0.038 (0.038) 1.00
CLASS B
1998 $ 1.00 $ 0.042 $ (0.042) $ 1.00
1997 1.00 0.042 (0.042) 1.00
1996 1.00 0.042 (0.042) 1.00
1995(3) 1.00 0.032 (0.032) 1.00
CLASS D
1998 $ 1.00 $ 0.051 $ (0.051) $ 1.00
1997 1.00 0.050 (0.050) 1.00
1996 1.00 0.051 (0.051) 1.00
1995(4) 1.00 0.038 (0.038) 1.00
- -----------------------------------------------------------------------------------
</TABLE>
+ Returns are for the period indicated and have not been annualized.
(1) Commenced operations on March 1, 1990. All ratios for the period have been
annualized.
(2) Commenced operations on January 21, 1995. All ratios for the period have
been annualized.
(3) Commenced operations on January 23, 1995. All ratios for the period have
been annualized.
(4) Commenced operations on January 24, 1995. All ratios for the period have
been annualized.
(5) Commenced operations on April 29, 1998. All ratios for the period have been
annualized.
The accompanying notes are an integral part of the financial statements.
38 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
<TABLE>
<CAPTION>
RATIO OF
RATIO OF NET EXPENSES TO
RATIO OF INVESTMENT AVERAGE
NET ASSETS EXPENSES TO INCOME TO NET ASSETS
TOTAL END OF AVERAGE AVERAGE (EXCLUDING
RETURN PERIOD (000) NET ASSETS NET ASSETS WAIVERS)
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C>
5.30% $1,000,043 0.45% 5.18% 0.52%
5.20 946,196 0.45 5.07 0.52
5.24 777,594 0.45 5.10 0.54
5.55 551,286 0.45 5.44 0.60
3.48 455,869 0.45 3.61 0.61
2.87 237,331 0.45 2.83 0.65
3.85 93,770 0.45 3.71 0.64
6.22 72,824 0.45 5.90 0.68
4.56+ 29,704 0.45 7.60 0.98
2.10%+ $ 325,024 0.70% 4.93% 0.76%
5.15% $ 384,143 0.60% 5.03% 0.67%
5.04 337,199 0.60 4.92 0.67
5.08 269,382 0.60 4.96 0.69
3.85+ 198,859 0.60 5.45 0.70
5.42% $5,445,685 0.45% 5.28% 0.53%
5.32 3,615,873 0.45 5.19 0.52
5.34 3,166,213 0.45 5.20 0.54
5.64 2,911,055 0.45 5.53 0.60
3.56 1,307,347 0.45 3.58 0.60
3.02 682,988 0.45 2.97 0.62
4.02 203,765 0.45 3.90 0.59
6.60 193,650 0.45 6.43 0.57
4.73+ 239,231 0.45 7.90 0.55
5.15% $3,699,197 0.70% 5.00% 0.79%
5.06 218,261 0.70 4.95 0.77
5.08 135,146 0.70 4.94 0.79
3.84+ 96,083 0.70 5.43 0.82
4.37% $ 2,397 1.45% 4.29% 1.53%
4.27 2,018 1.45 4.17 1.52
4.29 1,763 1.45 4.15 1.54
3.28+ 14 1.45 4.70 1.57
5.26% $ 233,675 0.60% 5.13% 0.68%
5.16 113,064 0.60 5.02 0.67
5.18 109,213 0.60 4.98 0.69
3.86+ 9,735 0.60 5.51 0.72
- ----------------------------------------------------------------------------
</TABLE>
39 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
FINANCIAL HIGHLIGHTS
FOR THE PERIODS ENDED SEPTEMBER 30, 1998
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
NET ASSET DIVIDENDS NET ASSET
VALUE NET FROM NET VALUE
BEGINNING INVESTMENT INVESTMENT END OF
OF PERIOD INCOME INCOME PERIOD
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TAX FREE OBLIGATIONS FUND(A)
CLASS Y
1998(4) $ 1.00 $ 0.026 $ (0.026) $ 1.00
1997(5) 1.00 0.011 (0.011) 1.00
1997(6) 1.00 0.031 (0.031) 1.00
1996(6) 1.00 0.032 (0.032) 1.00
1995(6)(7) 1.00 0.019 (0.019) 1.00
CLASS A
1998(4) $ 1.00 $ 0.024 $ (0.024) $ 1.00
1997(5) 1.00 0.010 (0.010) 1.00
1997(6) 1.00 0.027 (0.027) 1.00
1996(6) 1.00 0.028 (0.028) 1.00
1995(6)(7) 1.00 0.017 (0.017) 1.00
CLASS D
1998(4) $ 1.00 $ 0.025 $ (0.025) $ 1.00
1997(8) 1.00 0.000 (0.000) 1.00
TREASURY OBLIGATIONS FUND
CLASS Y
1998 $ 1.00 $ 0.051 $ (0.051) $ 1.00
1997 1.00 0.050 (0.050) 1.00
1996 1.00 0.050 (0.050) 1.00
1995(1) 1.00 0.038 (0.038) 1.00
CLASS A
1998(2) $ 1.00 $ 0.045 $ (0.045) $ 1.00
CLASS D
1998 $ 1.00 $ 0.050 $ (0.050) $ 1.00
1997 1.00 0.049 (0.049) 1.00
1996 1.00 0.049 (0.049) 1.00
1995 1.00 0.051 (0.051) 1.00
1994(3) 1.00 0.031 (0.031) 1.00
- ------------------------------------------------------------------------------------------
</TABLE>
+ Returns are for the period indicated and have not been annualized.
(A) The financial highlights for Tax Free Obligations Fund as set forth herein
include the historical financial highlights of the Qualivest Tax-Free Money
Market Fund Class A and Y shares. The assets of Qualivest Tax Free Money
Market Fund were acquired by Tax Free Obligations Fund on November 25, 1997.
In connection with such acquisition, (i) Class A shares of the Qualivest
Tax-Free Money Market Fund were exchanged for Class A shares of Tax Free
Obligations Fund; and (ii) Qualivest Class Y and Class Q shares were
exchanged for Class Y shares of Tax Free Obligations Fund.
(1) Commenced operations on January 24, 1995. All ratios for the period have
been annualized.
(2) Commenced operations on November 3, 1997. All ratios for the period have
been annualized.
(3) Commenced operations on October 4, 1993. All ratios for the period have been
annualized.
(4) For the period December 1, 1997 to September 30, 1998. All ratios for the
period have been annualized. The First American Board of Directors approved
a change in the funds' fiscal year end from November 30 to September 30,
effective September 30, 1998.
(5) For the period August 1, 1997 to November 30, 1997. All ratios for the
period have been annualized. The First American Board of Directors approved
a change in the funds' fiscal year end from July 31 to November 30,
effective November 30, 1997.
(6) For the period ended July 31.
(7) Commenced operations January 9, 1995. All ratios for the period have been
annualized.
(8) Commenced operations November 26, 1997. All ratios for the period have been
annualized. For the period ended November 30.
The accompanying notes are an integral part of the financial statements.
40 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
<TABLE>
<CAPTION>
RATIO OF
RATIO OF NET EXPENSES TO
RATIO OF INVESTMENT AVERAGE
NET ASSETS EXPENSES TO INCOME TO NET ASSETS
TOTAL END OF AVERAGE AVERAGE (EXCLUDING
RETURN PERIOD (000) NET ASSETS NET ASSETS WAIVERS)
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
2.67%+ $ 272,995 0.45% 3.13% 0.58%
1.08+ 10,703 0.64 3.09 0.97
3.17 9,137 0.48 3.13 0.83
3.22 3,895 0.41 2.92 0.79
1.88+ 1,264 0.59 3.38 0.94
2.45%+ $ 247,154 0.70% 2.84% 0.83%
0.96+ 28,662 0.89 2.83 1.23
2.76 31,668 0.88 2.73 1.23
2.81 30,143 0.89 2.78 1.25
1.66+ 33,569 1.00 2.98 1.36
2.51%+ $ 30,095 0.60% 3.02% 0.73%
0.04+ 1 0.60 3.20 9.07
5.26% $1,803,608 0.45% 5.13% 0.51%
5.14 897,797 0.45 5.03 0.53
5.15 317,392 0.45 5.00 0.55
3.83+ 117,171 0.45 5.50 0.55
4.54%+ $ 101,749 0.70% 4.88% 0.76%
5.10% $3,854,933 0.60% 4.98% 0.66%
4.98 2,847,215 0.60 4.88 0.68
5.00 1,616,130 0.60 4.86 0.70
5.22 1,038,818 0.60 5.13 0.70
3.12+ 746,090 0.58 3.19 0.68
- ----------------------------------------------------------------------
</TABLE>
41 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
NOTES TO
FINANCIAL STATEMENTS SEPTEMBER 30, 1998
1 ORGANIZATION
The First American Government Obligations Fund, Prime Obligations Fund,
Tax Free Obligations Fund, and Treasury Obligations Fund (collectively,
the "Funds") are funds offered by First American Funds, Inc. ("FAF"). FAF
is registered under the Investment Company Act of 1940, as amended, as an
open-end investment management company. FAF's articles of incorporation
permit the Board of Directors to create additional funds in the future.
FAF offers Class A, Class B, Class Y and Class D shares. Class B shares
are only available pursuant to an exchange for Class B shares of another
fund in the First American Family of Funds. Class B shares may also be
subject to a contingent deferred sales charge for six years and
automatically convert to Class A shares after eight years. Class Y and D
shares are offered only to qualifying institutional investors. Class B
shares are not offered by the Government Obligations Fund, Tax Free
Obligations Fund, or Treasury Obligations Fund.
The Funds' prospectus provides a description of each Fund's investment
objectives, policies and strategies. All classes of shares in FAF have
identical voting, dividend, liquidation and other rights, and the same
terms and conditions, except that the level of distribution fees charged
may differ among classes.
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies followed by the Funds are as follows:
SECURITY VALUATION - Investment securities held are stated at amortized
cost, which approximates market value. Under the amortized cost method,
any discount or premium is amortized ratably to the maturity of the
security and is included in interest income.
42 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
SECURITY TRANSACTIONS AND INVESTMENT INCOME - The Funds record security
transactions on the trade date of the security purchase or sale. Interest
income, including amortization of bond premium and discount, is recorded
on the accrual basis.
DISTRIBUTIONS TO SHAREHOLDERS - Distributions from net investment income
are declared on a daily basis and are payable on the first business day of
the following month.
EXPENSES - Expenses that are directly related to one of the Funds are
charged directly to that Fund. Other operating expenses are prorated to
the Funds on the basis of relative net assets. Class specific expenses,
such as the 12b-1 fees, are borne by that class. Income, other expenses
and realized and unrealized gains and losses of a Fund are allocated to
the respective class on the basis of the relative net assets each day.
FEDERAL TAXES - It is each Fund's intention to continue to qualify as a
regulated investment company and 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 October 31st. The
amounts of distributions from net investment income and net realized
capital gains are determined in accordance with federal income tax
regulations, which may differ from those amounts determined under
generally accepted accounting principles. These book/tax differences are
either temporary or permanent in nature.
As of September 30, 1998, the following funds had capital loss
carryforwards (000):
AMOUNT EXPIRATION DATE
---------------------------------------------------------
Government Obligations $37 2003-2006
Tax Free Money Market 1 2004-2005
---------------------------------------------------------
The Government Obligations Fund and Prime Obligations Fund incurred losses
in the amount of $260,000 and $20,000
43 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
NOTES TO
FINANCIAL STATEMENTS SEPTEMBER 30, 1998
from November 1, 1997 to September 30, 1998. As permitted by tax
regulations, the funds intend to elect to defer and treat these losses as
arising in the fiscal year ending September 30, 1999.
REPURCHASE AGREEMENTS - Each Fund may enter into repurchase agreements
with member banks of the Federal Deposit Insurance Corporation or
registered broker dealers whom the Advisor deems creditworthy under
guidelines approved by the Board of Directors, subject to the seller's
agreement to repurchase such securities at a mutually agreed upon date and
price. The repurchase price would generally equal the price paid by the
Fund plus interest negotiated on the basis of current short-term rates.
Securities pledged as collateral for repurchase agreements are held by the
custodian bank until the respective agreements mature. Each Fund may also
invest in tri-party repurchase agreements. Securities held as collateral
for tri-party repurchase agreements are maintained in a segregated account
by the broker's custodian bank until the maturity of the repurchase
agreement. Provisions of the repurchase agreements ensure that the market
value of the collateral, including accrued interest thereon, is sufficient
in the event of default of the counterparty. If the counterparty defaults
and the value of the collateral declines or if the counterparty enters an
insolvency proceeding, realization of the collateral by the Fund may be
delayed or limited.
SECURITIES LENDING - Each Fund may lend up to one-third of the value of
its total assets to broker-dealers, banks or other institutional borrowers
of securities in order to earn additional income. Each Fund's policy is to
maintain collateral in the form of cash, United States' Government
securities or other high grade debt obligations equal to at least 100% of
the value of securities loaned. The collateral is then marked to market
daily until the securities are returned.
44 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
HISTORICAL FINANCIAL STATEMENT INFORMATION - The financial information
presented for Tax Free Obligations Fund prior to November 25, 1997 is that
of Qualivest Tax Free Money Market Fund. The historical financial
information of the Qualivest Fund was carried over to the newly formed FAF
Fund.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS - The
preparation of financial statements, in conformity with generally accepted
accounting principles, 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.
3 FEES AND EXPENSES
Pursuant to an investment advisory agreement (the Agreement), U.S. Bank
National Association (the Advisor) 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
upon average daily net assets. The fee for each of the Funds is equal to
an annual rate of .40% of the average daily net assets.
Through a separate contractual agreement, U.S. Bank National Association,
an affiliate of the Advisor, serves as the Funds' custodian.
SEI Investments Distribution Co. (SIDCO) and SEI Investments Management
Corporation (SIMC) serve as distributor and administrator of the Funds,
respectively. Under the distribution plan, each Fund pays SIDCO a monthly
distribution fee of .25% of each Fund's average daily net assets of the
Class A shares, 1.00% of the Class B shares, and .15% of the Class D
shares, which may be used by SIDCO to provide compensation
45 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
NOTES TO
FINANCIAL STATEMENTS SEPTEMBER 30, 1998
for sales support and distribution activities. No distribution fees are
paid by Class Y shares. Under the agreement, SIDCO paid $6,082,000 to Var
& Company, an affiliate of U.S. Bank, for the year ended September 30,
1998. SIMC provides administrative services, including certain accounting,
legal and shareholder services, at an annual rate of .07% of each Fund's
average daily net assets. To the extent that the aggregate net assets of
the First American Family of Funds exceed $8 billion, the annual rate for
each FAF Fund is reduced to .055% for their relative share of the excess
net assets. U.S. Bank assists the Administrator and provides
sub-administration services for the Funds. For these services, the
Administrator compensates the sub-administrator at an annual rate of up to
0.05% of each Fund's average daily net assets. The fees for the year ended
September 30, 1998 were approximately 0.022% of average daily net assets.
Under this agreement, SIMC paid U.S. Bank N.A. $2,282,000 in aggregate for
the year ended September 30, 1998 for the Funds included in this annual
report.
In addition to the investment advisory and management fees, custodian
fees, distribution 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 shareholder reports, legal, auditing, insurance and other
miscellaneous expenses.
For the period ended September 30, 1998, legal fees and expenses were paid
to a law firm of which the Secretary of the Funds is a partner.
DST Systems, Inc. provides transfer agent services for the Funds.
Effective October 1, 1998, FAF has appointed U.S. Bank as servicing agent
to perform certain transfer agent and dividend disbursing agent services
with respect to the Class A and Class B shares of the Funds held through
accounts at U.S. Bank and its affiliates.
46 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
Class B shares are subject to a Contingent Deferred Sales Charge (CDSC),
imposed on redemptions, for the first six years, and automatically convert
to Class A shares after eight years. The CDSC varies depending on the
number of years from time of payment for the purchase of Class B shares
until the redemption of such shares.
CONTINGENT DEFERRED SALES CHARGE
AS A PERCENTAGE OF DOLLAR
YEAR SINCE PURCHASE AMOUNT SUBJECT TO CHARGE
---------------------------------------------------------
First 5.00%
Second 5.00%
Third 4.00%
Fourth 3.00%
Fifth 2.00%
Sixth 1.00%
Seventh 0.00%
Eighth 0.00%
---------------------------------------------------------
4 SECURITIES LENDING TRANSACTIONS
In order to generate additional income, certain Funds may lend portfolio
securities representing up to one-third of the value of total assets
(which includes collateral received for securities on loan) to broker
dealers, banks, or other institutional borrowers of securities. As with
other extensions of credit, there may be risks of delay in recovery of the
securities or even loss of rights in the collateral should the borrower of
the security fail financially. The market value of the securities on loan
at September 30, 1998, the collateral held at September 30, 1998 with
respect to such loans, and income generated during the period ended
September 30, 1998 from the program were as follows (000):
MARKET VALUE OF INCOME RECEIVED FROM
FUND LOANED SECURITIES SECURITIES LENDING
--------------------------------------------------------------------------
Government Obligations $274,871 $84
--------------------------------------------------------------------------
47 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
NOTES TO
FINANCIAL STATEMENTS SEPTEMBER 30, 1998
MARKET VALUE OF COLLATERAL PURCHASED WITH CASH RECEIVED
-------------------------------------------------------
REPURCHASE MONEY MARKET FIXED INCOME
FUND AGREEMENTS INSTRUMENTS SECURITIES TOTAL
--------------------------------------------------------------------------
Government Obligations $274,423 $2,781 $ -- $277,204
--------------------------------------------------------------------------
U.S. Bank NA, an affiliate of the Advisor, acts as the securities lending
agent in transactions involving the lending of portfolio securities on
behalf of the Funds. For these services, U.S. Bank NA received $60,000 for
the year ended September 30, 1998.
5 COMMON TRUST FUND CONVERSIONS
On August 8, 1997 certain Common Trust Funds of the Advisor and its
affiliates were converted into FAF. The Funds involved in the conversion
are as follows:
COMMON TRUST FUND FAF FUND
--------------------------------------------------------------------------
US Bancorp Daily Intermediate Trust Prime Obligations Fund
US Bancorp Daily Intermediate Trust Treasury Treasury Obligations Fund
--------------------------------------------------------------------------
The assets which consisted of securities and related receivables were
converted on a tax-free basis. The number of shares issued for each Fund
and the net assets of each Fund (including net unrealized gains and
losses) immediately before the conversion were as follows:
NET UNREALIZED
COMMON TRUST FUND ASSETS GAIN/(LOSS)
--------------------------------------------------------------------------
US Bancorp Daily Intermediate Trust $140,497,316 $ --
US Bancorp Daily Intermediate Trust
Treasury 6,884,236 --
--------------------------------------------------------------------------
FAF FUND NET ASSETS SHARES ISSUED
--------------------------------------------------------------------------
Prime Obligations Fund $3,851,371,412 140,497,316
Treasury Obligations Fund 3,574,473,062 6,884,236
--------------------------------------------------------------------------
48 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
The value and number of shares issued in exchange for each Common Trust
Fund's assets and shares outstanding in the tax-free conversions are
included in the capital share transactions of Class Y in the Statement of
Changes in Net Assets for each respective Fund.
6 MERGERS
On November 21, 1997 (November 25, 1997 for Tax Free Obligations Fund),
the following reorganization of certain Qualivest Funds into certain FAF
Funds took place pursuant to a Plan of Reorganization approved by the
Qualivest shareholders on October 31, 1997:
QUALIVEST ACQUIRED FUND FAF ACQUIRING FUND
--------------------------------------------------------------------------
Money Market Fund Prime Obligations Fund
U.S. Treasury Money Market Fund Treasury Obligations Fund
Tax Free Money Market Fund Tax Free Obligations Fund
(New FAF Fund)
--------------------------------------------------------------------------
Under the Agreement and Plan of Reorganization, Qualivest Class A and
Class C shares were exchanged for FAF Class A shares and Qualivest Class Q
and Class Y shares were exchanged for FAF Class Y shares.
Net assets prior to reorganization and shares issued by the corresponding
FAF funds were as follows:
FAF ACQUIRING FUND NET ASSETS SHARES ISSUED
--------------------------------------------------------------------------
Prime Obligations Fund $4,178,199,365 483,699,838
Treasury Obligations Fund 3,798,925,742 98,413,424
Tax Free Obligations Fund -- 38,183,594
--------------------------------------------------------------------------
The shares redeemed by the corresponding Qualivest Funds were as follows:
QUALIVEST ACQUIRED FUND SHARES REDEEMED
--------------------------------------------------------------------------
Money Market Fund 483,699,838
U.S. Treasury Money Market Fund 98,413,424
Tax Free Money Market Fund 38,183,594
--------------------------------------------------------------------------
49 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
NOTES TO
FINANCIAL STATEMENTS SEPTEMBER 30, 1998
Included in the net assets from the Qualivest Funds were the
following components:
<TABLE>
<CAPTION>
DISTRIBUTIONS IN EXCESS OF ACCUMULATED NET NET
QUALIVEST ACQUIRED FUND NET INVESTMENT INCOME REALIZED GAIN ASSETS
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Money Market Fund $ (5,261) $191 $483,699,838
U.S. Treasury Money Market Fund (3,183) -- 98,413,424
Tax Free Money Market Fund -- 470 38,183,594
- ---------------------------------------------------------------------------------------
</TABLE>
7 SIGNIFICANT EVENTS
On May 1, 1998, U.S. Bancorp acquired Piper Jaffray Companies, Inc. As a
result of this acquisition, all shares of the Piper Money Market Funds
were redeemed, the Funds discontinued operations, and the sweep vehicles
used by Piper Jaffray Inc. in its brokerage accounts were changed to
corresponding FAF Funds.
In connection with this acquisition, the Prime Obligations Fund purchased
the assets of the Piper Institutional Money Market Fund through a purchase
in kind transaction on June 29, 1998. The assets received totaled
$372,875,000, which represented a 5.6% increase to the total net assets of
the Fund.
On July 20, 1998, the Prime Obligations Fund, Government Obligations Fund,
and Tax Free Obligations Fund purchased the assets of the Piper Money
Market Fund, Piper U.S. Government Money Market Fund, and Piper Tax-Exempt
Money Market Fund, respectively, through a second purchase in kind
transaction. The assets purchased by Prime Obligations Fund totaled
$2,890,315,000, which represented a 44.7% increase to the total net assets
of that Fund. The assets purchased by the Government Obligations Fund
totaled $332,369,000, which represented a 24.7% increase to the total net
assets of that Fund. The assets purchased by the Tax Free Obligations Fund
totaled $223,954,000, which represented a 65.1% increase to the total net
assets of that Fund.
50 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
NOTICE TO
SHAREHOLDERS SEPTEMBER 30, 1998
THE INFORMATION SET FORTH BELOW IS FOR EACH FUND'S FISCAL YEAR AS REQUIRED
BY FEDERAL LAWS. SHAREHOLDERS, HOWEVER, MUST REPORT DISTRIBUTIONS ON A
CALENDAR YEAR BASIS FOR INCOME TAX PURPOSES WHICH MAY INCLUDE
DISTRIBUTIONS FOR PORTIONS OF TWO FISCAL YEARS OF A FUND. ACCORDINGLY, THE
INFORMATION NEEDED BY SHAREHOLDERS FOR INCOME TAX PURPOSES WILL BE SENT TO
THEM IN EARLY 1999. PLEASE CONSULT YOUR TAX ADVISOR FOR PROPER TREATMENT
OF THIS INFORMATION.
Dear First American Fund Shareholders:
For the fiscal year ended September 30, 1998, each Fund designated long
term capital gains and exempt income with regard to distributions paid
during the year as follows:
<TABLE>
<CAPTION>
LONG TERM MEDIUM TERM ORDINARY
CAPITAL GAINS CAPITAL GAINS INCOME TAX TOTAL
DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS EXEMPT DISTRIBUTIONS
FUND (TAX BASIS) (TAX BASIS) (TAX BASIS) INTEREST (TAX BASIS)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Government
Obligations 0% 0% 100% 0% 100%
Prime
Obligations 0 0 100 0 100
Tax Free
Obligations 0 0 0 100 100
Treasury
Obligations 0 0 100 0 100
- ------------------------------------------------------------------------------------------------
</TABLE>
51 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
<TABLE>
<S> <C>
FIRST AMERICAN FUNDS, INC.
1 Freedom Valley Drive
Oaks, Pennsylvania 19456
INVESTMENT ADVISOR BOARD OF DIRECTORS
FIRST AMERICAN ASSET MR. DAVID BENNETT
MANAGEMENT, A DIVISION OF Director of the First American Funds, Inc.
U.S. BANK NATIONAL ASSOCIATION Of counsel with Gray, Plant, Mooty,
601 Second Avenue South Mooty and Bennett,
Minneapolis, Minnesota 55402 Owner of three privately-held businesses
CUSTODIAN MR. ROBERT DAYTON
U.S. BANK NATIONAL ASSOCIATION Director of the First American Funds, Inc.
180 East Fifth Street Chief Executive Officer of
St. Paul, Minnesota 55101 Okabena Company
ADMINISTRATOR MR. ROGER GIBSON
SEI INVESTMENTS MANAGEMENT Director of the First American Funds, Inc.
CORPORATION Vice President of North America-Mountain
1 Freedom Valley Drive Region for United Airlines
Oaks, Pennsylvania 19456
MR. ANDREW HUNTER III
TRANSFER AGENT Director of the First American Funds, Inc.
DST SYSTEMS, INC. Chairman of Hunter Keith Industries
330 West Ninth Street
Kansas City, Missouri 64105 MR. LEONARD KEDROWSKI
Director of the First American Funds, Inc.
DISTRIBUTOR Owner and President of Executive
SEI INVESTMENTS DISTRIBUTION CO. Management Consulting, Inc.
1 Freedom Valley Drive
Oaks, Pennsylvania 19456 MR. ROBERT SPIES
Director of the First American Funds, Inc.
INDEPENDENT AUDITORS Retired Vice President, U.S. Bank
KPMG PEAT MARWICK LLP National Association
90 South Seventh Street
Minneapolis, Minnesota 55402 MR. JOSEPH STRAUSS
Director of the First American Funds, Inc.
COUNSEL Former Chairman of First
DORSEY & WHITNEY LLP American Funds,
220 South Sixth Street Owner and President of Strauss
Minneapolis, Minnesota 55402 Management Company
MS. VIRGINIA STRINGER
Chairman of the First American Funds, Inc.
Owner and President of Strategic
Management Resources, Inc.
</TABLE>
52 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
[LOGO] FIRST AMERICAN Bulk Rate
THE POWER OF DISCIPLINED INVESTING(R) U.S. Postage
PAID
Mpls., MN
First American Funds Permit No. 26388
601 Second Avenue South
Minneapolis, MN 55402-3804
Address Service Requested
11/1998 116-99
This report and the financial statements contained herein are submitted for the
general information of the shareholders of the corporation. The report is not
authorized for distribution to prospective investors in the corporation unless
preceded or accompanied by an effective prospectus for each of the funds
included. Shares in the funds are not deposits or obligations of, or guaranteed
or endorsed by, U.S. Bank or any of its affiliates. Such shares are also not
federally insured by the Federal Deposit Insurance Corporation, the Federal
Reserve Board, or any other agency. Investment in the shares involves investment
risk including loss of principal amount invested.
The performance data quoted represents past performance. The principal value of
an investment will fluctuate so that an investor's shares, when redeemed, may be
worth more or less than their original cost.
