FIRST AMERICAN FUNDS, INC.
...............................
1998 SEMI ANNUAL REPORT
[GRAPHIC]
THE POWER OF DISCIPLINED INVESTING
<PAGE>
TABLE OF CONTENTS
March 31, 1998
Message To Shareholders...................................................Page 1
Economic and Investment Review............................................Page 2
Statements of Net Assets..................................................Page 7
Statements of Operations.................................................Page 36
Statements of Changes in Net Assets......................................Page 38
Financial Highlights.....................................................Page 40
Notes to Financial Statements............................................Page 44
Notice to Shareholders...................................................Page 52
<PAGE>
1
MESSAGE TO SHAREHOLDERS
March 31, 1998
Dear Fellow Shareholder:
On behalf of the Board of Directors of First American Funds, I am pleased to
report to you that we have experienced solid investment performance and asset
growth in keeping with the ongoing strength of the economy and overall positive
market conditions. As of March 31, 1998, total assets had surpassed $12 billion,
up from $9 billion just six months ago. This growth has not come at the expense
of quality. First American Funds are on track to continue to produce competitive
investment results for our shareholders.
On the following pages is an economic and investment review which will
provide you with a complete analysis of the stock and bond markets. The final
section of this report highlights the financial statements for each fund. In
November, 1997, we introduced the Tax Free Obligations Fund, and for the first
time information on that Fund is included in this report.
The Board of Directors thanks you for your continued support and confidence
in First American Funds. We are confident that the Funds' tradition of
conservative management, competitive results and innovative products will
continue to serve you well.
Sincerely,
/s/ Virginia L. Stringer
Virginia L. Stringer
Chairman
First American Funds, Inc.
<PAGE>
2
ECONOMIC AND INVESTMENT REVIEW
March 31, 1998
STRONG DOMESTIC ECONOMY
One of the major investment themes developing so far this year is the
ongoing strength of the domestic economy and financial markets. Indeed, far from
the slowdown that was widely expected at the end of 1997, business activity
accelerated during the first quarter, while interest rates continued to decline.
This combination, in turn, has improved the earnings outlook and market
valuations for many companies and helped push the major stock market indices to
new records. Although the pace of growth during the first quarter is not likely
to be sustained throughout the year, if the first three months are any guide,
1998 should be another remarkable year for U.S. investors.
As the U.S. economy enters its eighth consecutive year of expansion, these
are truly extraordinary times. Never before has the domestic economy been on
such a sound footing this late in the business cycle. Few, if any, of the
typical imbalances that bring such cycles to an end are currently
present--inventories are at reasonable levels, inflation remains well contained,
household finances and corporate balance sheets are healthy, and there have been
no "supply shocks" or production bottlenecks to disrupt the flow of goods and
services. Although the economic crisis in Asia is a serious concern, and will
likely slow the pace of growth in the U.S. later this year, there is every
reason to believe the domestic economy will continue to grow and that this will
become the longest peacetime expansion on record.
The consumer sector, which accounts for fully two-thirds of the total
economy, continues to benefit from a combination of factors, including a tight
labor market, low inflation and declining interest rates. Consumers are very
optimistic in their outlook and are spending money on everything from cars and
appliances to mutual funds.
<PAGE>
3
ECONOMIC AND INVESTMENT REVIEW
March 31, 1998
[PLOT POINTS CHART]
Line graph depicting the U.S. unemployment rate.
U.S. UNEMPLOYMENT RATE
PERCENT
JAN-90 5.40 JAN-94 6.60
FEB-90 5.30 FEB-94 6.60
MAR-90 5.20 MAR-94 6.50
APR-90 5.40 APR-94 6.40
MAY-90 5.40 MAY-94 6.00
JUN-90 5.20 JUN-94 6.10
JUL-90 5.50 JUL-94 6.10
AUG-90 5.70 AUG-94 6.10
SEP-90 5.90 SEP-94 5.90
OCT-90 5.90 OCT-94 5.80
NOV-90 6.20 NOV-94 5.60
DEC-90 6.30 DEC-94 5.40
JAN-91 6.40 JAN-95 5.60
FEB-91 6.60 FEB-95 5.40
MAR-91 6.80 MAR-95 5.40
APR-91 6.70 APR-95 5.70
MAY-91 6.90 MAY-95 5.60
JUN-91 6.90 JUN-95 5.60
JUL-91 6.80 JUL-95 5.70
AUG-91 6.90 AUG-95 5.70
SEP-91 6.90 SEP-95 5.70
OCT-91 7.00 OCT-95 5.60
NOV-91 7.00 NOV-95 5.60
DEC-91 7.30 DEC-95 5.60
JAN-92 7.30 JAN-96 5.70
FEB-92 7.40 FEB-96 5.50
MAR-92 7.40 MAR-96 5.50
APR-92 7.40 APR-96 5.50
MAY-92 7.60 MAY-96 5.50
JUN-92 7.80 JUN-96 5.30
JUL-92 7.70 JUL-96 5.50
AUG-92 7.60 AUG-96 5.20
SEP-92 7.60 SEP-96 5.20
OCT-92 7.30 OCT-96 5.30
NOV-92 7.40 NOV-96 5.40
DEC-92 7.40 DEC-96 5.30
JAN-93 7.30 JAN-97 5.30
FEB-93 7.10 FEB-97 5.30
MAR-93 7.00 MAR-97 5.20
APR-93 7.10 APR-97 5.00
MAY-93 7.10 MAY-97 4.80
JUN-93 7.00 JUN-97 5.00
JUL-93 6.90 JUL-97 4.90
AUG-93 6.80 AUG-97 4.90
SEP-93 6.70 SEP-97 4.90
OCT-93 6.80 OCT-97 4.80
NOV-93 6.60 NOV-97 4.60
DEC-93 6.50 DEC-97 4.70
JAN-98 4.70
FEB-98 4.60
MAR-98 4.70
Capital investment also continues at a rapid pace, as companies look for new
ways to increase efficiency. Strong growth in labor productivity over recent
years has been an important element in sustaining the economic expansion, by
allowing wages to rise without increasing overall production costs and, thereby,
keeping inflation low. The capital spending boom is likely to slow somewhat in
the months ahead, but will continue to be a source of growth for the overall
economy.
<PAGE>
4
ECONOMIC AND INVESTMENT REVIEW
March 31, 1998
INFLATION
Inflation--or really the lack of it--is another key element in the outlook
for the economy and financial markets. The slowdown in inflation over the past
several quarters has been driven primarily by three factors: strong growth in
labor productivity, reflecting the rapid pace of technological change and
capital investment in the U.S.; intense international competition and the
expansion of global trade, which limits "pricing power" for both domestic and
foreign producers; and steep declines in world prices for most industrial and
agricultural commodities.
[PLOT POINTS GRAPH]
Line graph depicting the Consumer Price Index on
a "year ago percentage change" basis.
CONSUMER PRICE INDEX
YEAR-AGO PERCENT CHANGE
JAN-90 5.19 JAN-94 2.52
FEB-90 5.26 FEB-94 2.44
MAR-90 5.15 MAR-94 2.58
APR-90 4.71 APR-94 2.36
MAY-90 4.36 MAY-94 2.29
JUN-90 4.75 JUN-94 2.56
JUL-90 4.82 JUL-94 2.70
AUG-90 5.70 AUG-94 2.97
SEP-90 6.16 SEP-94 2.96
OCT-90 6.37 OCT-94 2.68
NOV-90 6.27 NOV-94 2.74
DEC-90 6.25 DEC-94 2.60
JAN-91 5.64 JAN-95 2.87
FEB-91 5.31 FEB-95 2.86
MAR-91 4.90 MAR-95 2.79
APR-91 4.81 APR-95 3.05
MAY-91 5.03 MAY-95 3.12
JUN-91 4.69 JUN-95 2.97
JUL-91 4.36 JUL-95 2.83
AUG-91 3.80 AUG-95 2.55
SEP-91 3.39 SEP-95 2.54
OCT-91 2.85 OCT-95 2.74
NOV-91 3.06 NOV-95 2.60
DEC-91 2.98 DEC-95 2.60
JAN-92 2.67 JAN-96 2.72
FEB-92 2.82 FEB-96 2.72
MAR-92 3.19 MAR-96 2.91
APR-92 3.18 APR-96 2.90
MAY-92 3.02 MAY-96 2.89
JUN-92 3.01 JUN-96 2.82
JUL-92 3.15 JUL-96 2.95
AUG-92 3.07 AUG-96 2.88
SEP-92 2.99 SEP-96 3.00
OCT-92 3.28 OCT-96 2.99
NOV-92 3.12 NOV-96 3.18
DEC-92 2.96 DEC-96 3.31
JAN-93 3.18 JAN-97 3.04
FEB-93 3.24 FEB-97 3.03
MAR-93 3.02 MAR-97 2.70
APR-93 3.15 APR-97 2.43
MAY-93 3.22 MAY-97 2.23
JUN-93 3.00 JUN-97 2.30
JUL-93 2.84 JUL-97 2.16
AUG-93 2.84 AUG-97 2.22
SEP-93 2.76 SEP-97 2.22
OCT-93 2.75 OCT-97 2.08
NOV-93 2.67 NOV-97 1.89
DEC-93 2.81 DEC-97 1.70
JAN-98 1.57
FEB-98 1.44
MAR-98 1.38
We believe that the overall trend of "disinflation" in consumer prices
should continue in the months ahead, even though the rate of productivity growth
may slow and the decline in world commodity prices may already be leveling off.
The strong U.S. dollar will keep import prices low, and any slowdown in domestic
demand will further limit pricing power for most companies. In fact, the spread
of deflation from the producer to the consumer level may pose a larger threat to
the overall outlook than the possibility of rising prices. To be sure, if the
U.S. economy slows more dramatically than expected, price cuts will be seen for
a wide variety of goods and services, putting even more pressure on profit
margins for many companies.
<PAGE>
5
ECONOMIC AND INVESTMENT REVIEW
March 31, 1998
THE BOND MARKET
The bond market rally continued during the first weeks of 1998, which
brought some long-term interest rates near their historic lows. As the first
quarter progressed, however, bond yields drifted higher and finished the quarter
at roughly the same level as at the end of last year.
Long-term interest rates should continue to decline if, as expected, the
pace of growth weakens and inflation continues to slow in the months ahead. As
long as the Federal Reserve keeps monetary policy on hold, however, short-term
interest rates will remain near their current levels. Under this scenario, it is
possible that the yield curve could invert temporarily in the weeks or months
ahead, with long-term interest rates falling below the level of short-term
rates. If this scenario does unfold, the Fed would likely ease policy fairly
quickly; thus, sending short-term rates lower and allowing the yield curve to
resume its more normal positive slope.
Capital investment also continues at a rapid pace, as companies look for new
ways to increase efficiency. Strong growth in labor productivity over recent
years has been an important element in sustaining the economic expansion, by
allowing wages to rise without increasing overall production costs and, thereby,
keeping inflation low. The capital spending boom is likely to slow somewhat in
the months ahead, but will continue to be a source of growth for the overall
economy.
THE STOCK MARKET
As the current U.S. economic expansion enters its eighth year, the trend in
domestic stock prices remains positive, although occasionally volatile. All
major domestic indices experienced double-digit gains during the first quarter
of 1998, with larger growth companies leading the way. This advance leaves large
segments of the market, including many blue chips, fully valued or overvalued
and therefore vulnerable to correction. A correction could occur in response to
bad news, the most likely source of which is probably weak corporate earnings.
<PAGE>
6
ECONOMIC AND INVESTMENT REVIEW
March 31, 1998
However, because we are unable to forecast the end of the expansion, and
because the environment for equities remains generally favorable, we expect the
long-term positive trend to remain intact. Outside the U.S., European stocks are
making impressive gains this year amid continuing economic recovery and
corporate restructuring. The Asian Pacific markets are mixed, with some enjoying
a rebound and others still reflecting significant investor concern.
We are pleased to fulfill your unique investment needs through the distinct
investment disciplines represented by the First American Funds. Our twin focus
on competitive investment return and control of risk will help you achieve your
long term investment goals. We appreciate your confidence and look forward to
serving you in the coming year.
Sincerely,
/s/ John M. Murphy, Jr.
John M. Murphy, Jr.
Chairman and Chief Investment Officer
First American Asset Management
<PAGE>
7
STATEMENTS OF NET ASSETS
March 31, 1998
Unaudited
PRIME OBLIGATIONS FUND
DESCRIPTION PAR (000) VALUE (000)
- ----------------------------------------------------------------------------
COMMERCIAL PAPER -- 61.5%
BROKERAGE -- 4.0%
Goldman Sachs Group L P
5.816%, 04/17/98 $ 50,000 $ 49,873
5.599%, 05/27/98 75,000 74,361
0.000%, 08/14/98 20,000 19,579
Merrill Lynch & Company
5.587%, 04/06/98 50,000 49,961
5.590%, 04/06/98 10,000 9,992
Salomon Smith Barney Holdings
5.580%, 04/21/98 50,000 49,846
-----------
253,612
-----------
CAPTIVE FINANCE -- 4.4%
Ford Motor Credit
5.556%, 04/08/98 25,000 24,973
5.450%, 04/09/98 100,000 99,879
General Electric Capital
5.539%, 05/12/98 50,000 49,689
5.539%, 05/13/98 50,000 49,681
Providian Master Trust
5.584%, 05/11/98 50,000 49,693
-----------
273,915
-----------
COMMERCIAL FUNDING CORPORATIONS -- 17.4%
Asset Securitization Coop
5.581%, 04/24/98 (B) 15,000 14,947
Distribution Funding
5.594%, 04/13/98 (B) 35,000 34,935
5.560%, 04/14/98 (B) 17,500 17,465
5.574%, 04/15/98 (B) 49,840 49,732
5.577%, 04/17/98 (B) 40,160 40,061
Equipment Intermediation Partnership
5.606%, 04/02/98 (B) 24,960 24,956
Fleet Funding
5.562%, 04/01/98 (B) 14,000 14,000
The accompanying notes are an integral part of the financial statements.
<PAGE>
8
STATEMENTS OF NET ASSETS
March 31, 1998
Unaudited
PRIME OBLIGATIONS FUND (CONTINUED)
DESCRIPTION PAR (000) VALUE (000)
- ----------------------------------------------------------------------------
5.595%, 04/22/98 (B) $ 50,000 $ 49,838
5.586%, 04/29/98 (B) 47,596 47,391
Pooled Accounts Receivable Capital
5.580%, 04/14/98 (B) 27,840 27,784
5.597%, 04/16/98 (B) 50,000 49,884
5.601%, 04/17/98 (B) 50,284 50,160
5.587%, 04/20/98 (B) 37,474 37,364
5.576%, 04/23/98 (B) 30,000 29,898
5.598%, 04/27/98 (B) 65,507 65,244
Premium Funding E
5.552%, 04/02/98 (B) 28,936 28,932
5.594%, 04/06/98 (B) 31,492 31,468
5.580%, 04/13/98 (B) 41,115 41,039
5.593%, 04/17/98 (B) 45,000 44,889
5.606%, 04/20/98 (B) 20,000 19,941
5.606%, 04/24/98 (B) 35,303 35,177
5.605%, 04/29/98 (B) 20,000 19,913
5.603%, 05/01/98 (B) 35,000 34,838
Receivables Capital
5.531%, 04/14/98 (B) 44,000 43,913
5.542%, 04/22/98 (B) 60,000 59,808
5.574%, 04/22/98 (B) 25,000 24,919
5.535%, 04/24/98 (B) 35,353 35,229
5.545%, 04/24/98 (B) 34,000 33,881
5.579%, 04/24/98 (B) 35,286 35,161
5.540%, 05/01/98 (B) 45,000 44,792
-----------
1,087,559
-----------
COMMERCIAL/INDUSTRIAL -- 0.7%
McGraw Hill
5.520%, 05/05/98 22,500 22,383
5.822%, 05/27/98 20,000 19,823
-----------
42,206
-----------
The accompanying notes are an integral part of the financial statements.
<PAGE>
9
STATEMENTS OF NET ASSETS
March 31, 1998
Unaudited
PRIME OBLIGATIONS FUND (CONTINUED)
DESCRIPTION PAR (000) VALUE (000)
- ----------------------------------------------------------------------------
DIVERSIFIED FINANCE -- 2.0%
General Electric Capital
5.450%, 04/08/98 $ 100,000 $ 99,894
5.543%, 05/22/98 25,000 24,806
-----------
124,700
-----------
DOMESTIC BANK -- 13.0%
Cibinong International Finance B V
(LOC: Bank America)
5.616%, 04/08/98 15,500 15,483
5.626%, 04/08/98 19,906 19,884
Hahn Issuing II (LOC: Citibank)
5.598%, 04/29/98 23,321 23,220
International Securitization
(Guarantor: FNB Chicago)
5.524%, 04/09/98 (B) 20,000 19,976
5.539%, 04/16/98 (B) 20,000 19,954
5.757%, 04/16/98 (B) 5,146 5,134
5.760%, 04/20/98 (B) 11,848 11,813
5.570%, 04/22/98 (B) 26,800 26,713
5.539%, 04/23/98 (B) 47,380 47,221
5.539%, 04/23/98 (B) 27,000 26,910
5.573%, 04/27/98 (B) 20,125 20,045
5.584%, 05/07/98 (B) 50,000 49,724
5.592%, 07/09/98 (B) 10,000 9,849
5.598%, 07/16/98 (B) 20,350 20,021
Kzh Crescent (LOC: Chase Manhattan)
5.538%, 04/07/98 (B) 5,044 5,039
5.577%, 04/30/98 (B) 15,545 15,476
5.552%, 05/19/98 (B) 10,123 10,049
The accompanying notes are an integral part of the financial statements.
<PAGE>
10
STATEMENTS OF NET ASSETS
March 31, 1998
Unaudited
PRIME OBLIGATIONS FUND (CONTINUED)
DESCRIPTION PAR (000) VALUE (000)
- ----------------------------------------------------------------------------
Kzh Holding III (LOC: Chase Manhattan)
5.646%, 04/03/98 (B) $ 11,068 $ 11,065
5.538%, 04/07/98 (B) 8,081 8,074
5.506%, 04/14/98 (B) 24,719 24,671
5.629%, 04/14/98 (B) 8,500 8,483
5.626%, 04/15/98 (B) 18,000 17,961
5.546%, 04/16/98 (B) 16,530 16,492
5.551%, 04/16/98 (B) 10,000 9,977
5.553%, 04/16/98 (B) 25,000 24,943
5.627%, 04/17/98 (B) 20,000 19,950
5.577%, 04/30/98 (B) 28,679 28,552
5.635%, 05/06/98 (B) 35,305 35,113
5.795%, 05/07/98 (B) 14,147 14,067
5.623%, 06/12/98 (B) 25,000 24,723
5.587%, 07/22/98 (B) 16,690 16,407
Kzh Soleil (LOC: Chase Manhattan)
5.762%, 04/08/98 (B) 8,006 7,997
5.506%, 04/14/98 (B) 9,119 9,101
5.552%, 04/16/98 (B) 5,769 5,756
5.555%, 04/20/98 (B) 9,269 9,242
5.577%, 04/30/98 (B) 16,672 16,598
5.552%, 05/19/98 (B) 15,184 15,073
5.623%, 05/26/98 (B) 10,123 10,037
Kzh-Ing-1 (LOC: Chase Manhattan)
5.551%, 04/14/98 (B) 6,803 6,790
5.577%, 05/18/98 (B) 12,645 12,554
Kzh-Ing-2 (LOC: Chase Manhattan)
5.627%, 04/09/98 (B) 15,173 15,154
5.506%, 04/14/98 (B) 10,215 10,195
5.552%, 04/16/98 (B) 6,578 6,563
5.577%, 05/18/98 (B) 15,174 15,065
5.620%, 05/22/98 (B) 14,078 13,967
The accompanying notes are an integral part of the financial statements.
<PAGE>
11
STATEMENTS OF NET ASSETS
March 31, 1998
Unaudited
PRIME OBLIGATIONS FUND (CONTINUED)
DESCRIPTION PAR (000) VALUE (000)
- ----------------------------------------------------------------------------
Minmetals Caps & Securities (LOC: Bancamerica)
5.838%, 04/09/98 $ 30,000 $ 29,962
5.533%, 07/23/98 20,000 19,661
5.577%, 07/23/98 5,000 4,915
-----------
815,619
-----------
DOMESTIC BRANCH OF FOREIGN BANK -- 0.8%
Alfa Russia Finance B V (LOC: Societe Generale NY)
0.000%, 07/31/98 10,000 9,809
5.670%, 07/31/98 10,000 9,809
Banco del Istmo S A (LOC: Barclays Bank NY)
5.604%, 04/28/98 10,000 9,958
5.602%, 04/29/98 10,000 9,957
5.607%, 04/30/98 10,000 9,955
-----------
49,488
-----------
FOREIGN BANKS -- 8.2%
Banca Serfin S A Institucion de Banca Multiple
Grupo (LOC: Barclays Bank)
5.879%, 06/12/98 15,000 14,829
Banco Nacional de Comercio Exterior S N
(LOC: Societe Generale)
5.536%, 05/06/98 42,500 42,274
Banco Real S A (LOC: Barclays Bank)
5.690%, 04/21/98 40,000 39,877
China Merchants Cayman
(LOC: Credit Suisse)
5.560%, 04/28/98 15,000 14,938
5.557%, 05/14/98 20,000 19,869
Chinatex Caps (LOC: Credit Suisse)
5.588%, 04/14/98 20,200 20,159
5.580%, 05/28/98 16,200 16,059
Cofco Capital (LOC: Credit Suisse)
5.556%, 04/28/98 30,000 29,877
5.569%, 05/22/98 15,000 14,883
5.598%, 05/28/98 20,122 19,946
The accompanying notes are an integral part of the financial statements.
<PAGE>
12
STATEMENTS OF NET ASSETS
March 31, 1998
Unaudited
PRIME OBLIGATIONS FUND (CONTINUED)
DESCRIPTION PAR (000) VALUE (000)
- ----------------------------------------------------------------------------
Cofco Capital (LOC: Credit Suisse)
5.545%, 04/22/98 $ 10,000 $ 9,968
Cofco Capital (LOC: Credit Suisse)
5.617%, 06/24/98 20,000 19,741
Corporacion Andina de Fomento
(LOC: Barclays Bank)
5.591%, 05/05/98 11,000 10,942
5.593%, 05/07/98 20,000 19,889
Cosco Cayman Limited
(LOC: Credit Suisse)
5.600%, 05/06/98 20,000 19,892
Grupo Financiero Bancomer S A Grand
Cayman Branch (LOC: Bank of Montreal)
5.576%, 04/06/98 25,000 24,981
5.589%, 04/21/98 50,000 49,847
Pemex Capital (LOC: Swiss Bank)
5.717%, 05/14/98 23,607 23,449
5.568%, 05/20/98 35,000 34,737
5.823%, 06/11/98 20,000 19,777
Sinochem American (LOC: Credit Suisse)
5.610%, 04/13/98 5,000 4,991
5.613%, 04/13/98 14,325 14,298
5.553%, 04/20/98 20,000 19,942
5.604%, 05/04/98 9,000 8,954
-----------
514,119
-----------
FOREIGN FUNDING CORPORATIONS -- 3.6%
Sigma Finance
5.565%, 04/28/98 (B) 50,000 49,794
5.581%, 04/29/98 (B) 50,000 49,784
5.589%, 05/20/98 (B) 45,500 45,157
5.581%, 05/29/98 (B) 50,000 49,555
5.609%, 07/15/98 (B) 30,000 29,523
-----------
223,813
-----------
The accompanying notes are an integral part of the financial statements.
<PAGE>
13
STATEMENTS OF NET ASSETS
March 31, 1998
Unaudited
PRIME OBLIGATIONS FUND (CONTINUED)
DESCRIPTION PAR (000) VALUE (000)
- ----------------------------------------------------------------------------
RETAIL FUNDING CORPORATIONS -- 7.4%
Enterprise Funding
5.551%, 04/01/98 (B) $ 35,116 $ 35,116
5.529%, 04/06/98 (B) 17,000 16,987
5.460%, 04/07/98 (B) 62,272 62,215
5.522%, 04/07/98 (B) 30,093 30,066
5.580%, 04/09/98 (B) 11,047 11,033
5.534%, 04/13/98 (B) 16,240 16,210
5.585%, 04/15/98 (B) 10,162 10,140
5.544%, 04/16/98 (B) 25,294 25,236
5.621%, 04/27/98 (B) 20,000 19,920
5.553%, 05/26/98 (B) 13,448 13,336
5.582%, 05/29/98 (B) 20,000 19,822
First Deposit Master Trust
5.544%, 04/03/98 (B) 50,000 49,985
5.548%, 04/08/98 (B) 50,000 49,947
5.533%, 04/20/98 (B) 20,900 20,840
5.607%, 06/08/98 (B) 23,000 22,760
5.609%, 06/11/98 (B) 24,388 24,123
Providian Master Trust
5.605%, 05/08/98 (B) 13,000 12,926
5.581%, 05/12/98 (B) 24,500 24,346
-----------
465,008
-----------
TOTAL COMMERCIAL PAPER
(Cost $3,850,039) 3,850,039
-----------
CORPORATE OBLIGATIONS -- 24.5%
BROKERAGE -- 9.4%
Bear Stearns
5.730%, 04/01/98 (A) 75,000 75,000
5.740%, 04/15/98 (A) 100,000 100,000
J.P. Morgan & Company
5.750%, 03/10/99 25,000 25,000
Morgan Stanley
5.758%, 04/15/98 (A) 75,000 75,000
The accompanying notes are an integral part of the financial statements.
<PAGE>
14
STATEMENTS OF NET ASSETS
March 31, 1998
Unaudited
PRIME OBLIGATIONS FUND (CONTINUED)
DESCRIPTION PAR (000) VALUE (000)
- -----------------------------------------------------------------------------
Structured Enhanced Return Trust 1997 A-32
(Guarantor: Merrill Lynch)
6.019%, 04/23/98 (A) (B) $ 107,000 $ 107,000
Structured Products Asset Return
Certificate Tr Series 98-1 (Credit Support:
CS Financial Products)
5.744%, 05/27/98 (B) 125,000 125,000
WFP Tower B Finance Short Term Steers Trust
(Guarantor: Merrill Lynch)
5.718%, 04/08/98 (A) 84,000 83,989
-----------
590,989
-----------
CAPTIVE FINANCE -- 0.5%
Ford Motor Credit
9.250%, 06/15/98 14,415 14,508
5.625%, 12/15/98 14,525 14,530
8.000%, 01/15/99 3,000 3,053
-----------
32,091
-----------
DIVERSIFIED FINANCE -- 0.8%
Associates of North America
7.250%, 05/15/98 3,660 3,666
5.250%, 09/01/98 5,000 4,988
6.500%, 09/09/98 18,650 18,697
Beneficial Corp
8.220%, 06/15/98 11,865 11,920
International Lease Finance
8.350%, 10/01/98 6,469 6,546
5.990%, 01/15/99 6,675 6,695
-----------
52,512
-----------
DOMESTIC BANKS -- 1.5%
Credit Suisse First Boston
5.468%, 04/02/98 (B) 25,000 24,994
6.148%, 06/02/98 (B) 8,000 8,004
The accompanying notes are an integral part of the financial statements.
<PAGE>
15
STATEMENTS OF NET ASSETS
March 31, 1998
Unaudited
PRIME OBLIGATIONS FUND (CONTINUED)
DESCRIPTION PAR (000) VALUE (000)
- -----------------------------------------------------------------------------
Dpm Trust Series 1 (Credit Support:
Morgan Guaranty)
5.635%, 07/15/98 (B) $ 59,000 $ 58,953
------------
91,951
------------
FINANCIAL SERVICES -- 0.1%
Goldman Sachs
6.100%, 04/15/98 3,000 3,000
------------
FOREIGN FUNDING CORPORATIONS -- 5.0%
Salts III Cayman Island Ser. 97-10
(Guarantor: Bankers Trust)
6.100%, 06/12/98 (B) 40,000 40,000
Salts III Cayman Island
(Guarantor: Bankers Trust)
6.037%, 06/18/98 (B) 100,000 100,000
5.725%, 07/23/98 (B) 100,000 100,000
Sigma Finance
5.870%, 07/30/98 (B) 21,000 20,990
5.760%, 03/31/99 (B) 50,000 50,000
------------
310,990
------------
INSURANCE -- 7.2%
Anchor National Life Insurance Investment
5.670%, 04/01/98 (A) (C) 75,000 75,000
Commonwealth Life Insurance
5.873%, 04/01/98 (A) (C) 225,000 225,000
Sun Life Insurance of America
6.000%, 04/01/98 (A) (C) 75,000 75,000
5.730%, 04/01/98 (A) (C) 75,000 75,000
------------
450,000
------------
TOTAL CORPORATE OBLIGATIONS
(Cost $1,531,533) 1,531,533
------------
The accompanying notes are an integral part of the financial statements.
<PAGE>
16
STATEMENTS OF NET ASSETS
March 31, 1998
Unaudited
PRIME OBLIGATIONS FUND (CONTINUED)
DESCRIPTION PAR (000) VALUE (000)
- ----------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT -- 5.0%
Bankers Trust NY
6.000%, 09/10/98 $ 35,000 $ 34,991
5.700%, 03/05/99 25,000 24,989
Deutsche Bank NY
5.700%, 03/30/99 25,000 24,983
Mercantile Safe Deposit & Trust
5.667%, 04/01/98 (A) 20,000 20,000
Societe Generale NY
6.210%, 04/01/98 (A) 100,000 99,970
6.340%, 04/16/98 20,000 20,000
6.105%, 05/26/98 10,000 10,001
5.580%, 01/22/99 15,000 14,995
5.580%, 02/10/99 40,000 39,991
5.680%, 03/22/99 25,000 24,988
-----------
TOTAL CERTIFICATES OF DEPOSIT
(Cost $314,908) 314,908
-----------
LOAN PARTICIPATION CERTIFICATES -- 4.7%
Barclays Bank PLC
5.550%, 04/21/98 50,000 50,000
5.550%, 04/23/98 50,000 50,000
Toronto Dominion Bank
5.540%, 04/15/98 50,000 50,000
5.590%, 04/15/98 20,000 20,000
5.590%, 04/16/98 20,000 20,000
5.540%, 04/17/98 50,000 50,000
5.590%, 05/05/98 25,000 25,000
5.580%, 05/07/98 30,000 30,000
-----------
TOTAL LOAN PARTICIPATION CERTIFICATES
(Cost $295,000) 295,000
-----------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 2.3%
Export-Import Bank
5.748%, 04/15/98 (A) (B) 70,455 70,446
The accompanying notes are an integral part of the financial statements.
<PAGE>
17
STATEMENTS OF NET ASSETS
March 31, 1998
Unaudited
PRIME OBLIGATIONS FUND (CONTINUED)
DESCRIPTION PAR (000) VALUE (000)
- ----------------------------------------------------------------------------
Export-Import Bank/KA Leasing
5.708%, 04/15/98 (A) (B) $ 36,162 $ 36,163
SLMA
5.448%, 04/07/98 (A) 38,400 38,222
U.S. AID
5.682%, 04/01/98 (A) 1,250 1,248
-----------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $146,079) 146,079
-----------
TIME DEPOSIT -- 1.4%
Mercantile Bank St. Louis
5.875%, 04/01/98 87,000 87,000
-----------
TOTAL TIME DEPOSIT
(Cost $87,000) 87,000
-----------
REPURCHASE AGREEMENT -- 0.7%
Donaldson Lufkin & Jenrette
5.900%, dated 03/31/98, matures
04/01/98, repurchase price $46,694,651
(collateralized by U.S. Treasury Instruments:
total market value $47,620,814) 46,687 46,687
-----------
TOTAL REPURCHASE AGREEMENT
(Cost $46,687) 46,687
-----------
TOTAL INVESTMENTS -- 100.1%
(Cost $6,271,246) 6,271,246
-----------
OTHER ASSETS AND LIABILITIES, NET-- (0.1%) (7,842)
-----------
NET ASSETS:
Portfolio Shares -- Class Y
($.01 par value -- 20 billion authorized)
based on 4,916,963,736 outstanding shares 4,916,963
Portfolio Shares -- Retail Class A
($.01 par value -- 20 billion authorized)
based on 888,107,172 outstanding shares 888,110
The accompanying notes are an integral part of the financial statements.
<PAGE>
18
STATEMENTS OF NET ASSETS
March 31, 1998
Unaudited
PRIME OBLIGATIONS FUND (CONCLUDED)
DESCRIPTION VALUE (000)
- ----------------------------------------------------------------------------
Portfolio Shares -- Retail Class B
($.01 par value -- 20 billion authorized)
based on 1,913,167 outstanding shares $ 1,913
Portfolio Shares -- Class D
($.01 par value -- 20 billion authorized)
based on 456,252,149 outstanding shares 456,252
Undistributed net investment income 171
Accumulated net realized loss on investments (5)
-----------
TOTAL NET ASSETS-- 100.0% $6,263,404
-----------
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION
PRICE PER SHARE-- CLASS Y $ 1.00
-----------
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION
PRICE PER SHARE-- RETAIL CLASS A $ 1.00
-----------
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION
PRICE PER SHARE-- RETAIL CLASS B (1) $ 1.00
-----------
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION
PRICE PER SHARE-- CLASS D $ 1.00
-----------
(1) Retail 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 March 31, 1998. The date shown is the next reset
date.
(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
"accredited investors." These securities have been determined to be liquid
under the guidelines established by the Board of Directors.
(C) Private Placement Securities considered illiquid investments.
AID--Agency for International Development
LOC--Letter of Credit
SLMA--Student Loan Marketing Association
The accompanying notes are an integral part of the financial statements.
<PAGE>
19
STATEMENTS OF NET ASSETS
March 31, 1998
Unaudited
GOVERNMENT OBLIGATIONS FUND
DESCRIPTION PAR (000) VALUE (000)
- ----------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 50.9%
Export-Import Bank
5.688%, 04/15/98 (A) (B) $ 25,000 $ 25,000
5.708%, 04/15/98 (A) (B) 18,198 18,199
5.748%, 04/15/98 (A) (B) 30,000 29,996
FFCB
5.620%, 04/01/98 33,000 33,000
5.790%, 04/01/98 (A) 20,000 20,016
5.900%, 06/02/98 20,000 20,003
5.750%, 07/01/98 7,000 7,000
5.700%, 11/03/98 15,000 14,997
FHLB
5.500%, 03/26/99 15,000 14,982
6.000%, 04/01/98 (A) 25,000 25,007
5.790%, 04/01/98 (A) 13,000 12,989
5.960%, 06/09/98 3,000 3,001
5.760%, 07/08/98 8,440 8,440
5.755%, 09/30/98 14,750 14,750
5.625%, 10/08/98 5,000 5,003
5.792%, 10/23/98 3,000 3,005
FHLMC
5.450%, 04/03/98 75,000 74,977
5.509%, 04/07/98 31,000 30,972
5.530%, 04/15/98 50,000 49,892
5.505%, 03/12/99 25,000 24,978
FNMA
5.718%, 04/07/98 (A) 50,000 49,991
6.080%, 05/06/98 15,000 15,002
5.630%, 08/14/98 15,000 14,990
5.710%, 09/09/98 10,000 10,003
5.870%, 09/25/98 10,000 10,013
5.330%, 02/12/99 15,000 14,981
4.940%, 02/23/99 10,000 9,943
The accompanying notes are an integral part of the financial statements.
<PAGE>
20
STATEMENTS OF NET ASSETS
March 31, 1998
Unaudited
GOVERNMENT OBLIGATIONS FUND (CONTINUED)
DESCRIPTION PAR (000) VALUE (000)
- ----------------------------------------------------------------------------
SLMA
5.378%, 04/07/98 (A) $ 20,000 $ 20,000
5.378%, 04/07/98 (A) 10,000 10,000
5.400%, 04/07/98 (A) 25,000 24,943
5.448%, 04/07/98 (A) 14,000 13,986
5.850%, 06/10/98 10,000 10,001
6.250%, 06/30/98 10,000 10,016
5.600%, 08/11/98 15,000 14,990
5.790%, 09/16/98 15,000 15,001
5.820%, 09/16/98 14,400 14,404
5.740%, 11/16/98 25,000 25,031
5.720%, 11/20/98 15,000 14,995
5.400%, 02/10/99 25,000 24,980
U.S. AID
5.568%, 04/07/98 (A) 13,000 13,000
5.568%, 04/07/98 (A) 4,000 4,003
5.568%, 04/07/98 (A) 11,000 11,000
5.618%, 04/07/98 (A) 800 800
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $788,280) 788,280
-----------
OTHER U.S. GOVERNMENT OBLIGATIONS -- 10.0%
Downey Savings & Loan (LOC: FHLB
of San Francisco)
5.560%, 07/06/98 20,000 19,711
Secondary Market Services (LOC: SLMA
of San Francisco)
5.524%, 04/08/98 50,000 49,947
5.509%, 04/09/98 17,903 17,881
5.503%, 04/14/98 17,522 17,487
5.505%, 04/17/98 25,150 25,089
5.512%, 04/20/98 25,000 24,928
-----------
TOTAL OTHER U.S. GOVERNMENT OBLIGATIONS
(Cost $155,043) 155,043
-----------
The accompanying notes are an integral part of the financial statements.
<PAGE>
21
STATEMENTS OF NET ASSETS
March 31, 1998
Unaudited
GOVERNMENT OBLIGATIONS FUND (CONTINUED)
DESCRIPTION PAR (000) VALUE (000)
- ----------------------------------------------------------------------------
REPURCHASE AGREEMENTS -- 39.1%
C S First Boston
5.950%, dated 03/31/98, matures
04/01/98, repurchase price $70,011,569
(collateralized by U.S. Treasury Note:
total market value $71,590,631) $ 70,000 $ 70,000
Donaldson Lufkin & Jenrette
5.950%, dated 03/31/98, matures
04/01/98, repurchase price $256,567,398
(collateralized by U.S. Treasury Instruments:
total market value $261,656,167) 256,525 256,525
Prudential Securities
5.950%, dated 03/31/98, matures
04/01/98, repurchase price $70,011,569
(collateralized by U.S. Treasury Instruments:
total market value $71,400,573) 70,000 70,000
Salomon Smith Barney
5.940%, dated 03/31/98, matures
04/01/98, repurchase price $70,011,550
(collateralized by U.S. Treasury Notes:
total market value $71,455,632) 70,000 70,000
Societe Generale
5.950%, dated 03/31/98, matures
04/01/98, repurchase price $70,011,569
(collateralized by U.S. Treasury Instruments:
total market value $71,452,000) 70,000 70,000
UBS Securities
5.960%, dated 03/31/98, matures
04/01/98, repurchase price $70,011,589
(collateralized by U.S. Treasury Bills:
total market value $71,401,825) 70,000 70,000
-----------
TOTAL REPURCHASE AGREEMENTS
(Cost $606,525) 606,525
-----------
The accompanying notes are an integral part of the financial statements.
<PAGE>
22
STATEMENTS OF NET ASSETS
March 31, 1998
Unaudited
GOVERNMENT OBLIGATIONS FUND (CONCLUDED)
DESCRIPTION VALUE (000)
- ----------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.0%
(Cost $1,549,848) $ 1,549,848
-----------
OTHER ASSETS AND LIABILITIES, NET-- 0.0% (C) (562)
-----------
NET ASSETS:
Portfolio Shares -- Class Y
($.01 par value -- 20 billion authorized)
based on 1,121,875,334 outstanding shares 1,121,876
Portfolio Shares -- Class D
($.01 par value -- 20 billion authorized)
based on 427,807,233 outstanding shares 427,806
Accumulated net realized loss on investments (396)
-----------
TOTAL NET ASSETS-- 100.0% $ 1,549,286
-----------
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 D $ 1.00
-----------
(A) Variable Rate Security--the rate reported on the Statement of Net Assets is
the rate in effect as of March 31, 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 that program or other
"accredited investors." These securities have been determined to be liquid
under guidelines established be the Board of Directors.
(C) Other assets and liabilities representing greater than five percent of total
net assets include the following (000):
Cash collateral received for securities on loan $ 375,979
Payable upon return of securities on loan $(375,979)
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.
<PAGE>
23
STATEMENTS OF NET ASSETS
March 31, 1998
Unaudited
TREASURY OBLIGATIONS FUND
DESCRIPTION PAR (000) VALUE (000)
- ----------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 22.4%
U.S. Treasury Bills
5.940%, 04/02/98 $ 50,000 $ 49,992
5.880%, 04/30/98 25,000 24,888
5.590%, 05/28/98 25,000 24,790
5.570%, 08/20/98 25,000 24,483
5.530%, 11/12/98 50,000 48,353
5.520%, 12/10/98 50,000 48,159
U.S. Treasury Notes
7.875%, 04/15/98 50,000 50,037
5.875%, 04/30/98 25,000 24,999
6.125%, 05/15/98 50,000 50,011
8.250%, 07/15/98 50,000 50,347
5.250%, 07/31/98 50,000 49,933
6.125%, 08/31/98 75,000 75,134
4.750%, 09/30/98 50,000 49,803
7.125%, 10/15/98 50,000 50,388
5.875%, 10/31/98 25,000 25,030
5.125%, 11/30/98 50,000 49,918
5.625%, 11/30/98 100,000 99,989
5.750%, 12/31/98 50,000 50,057
6.375%, 01/15/99 75,000 75,541
6.250%, 03/31/99 125,000 125,847
7.000%, 04/15/99 50,000 50,701
-----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $1,098,400) 1,098,400
-----------
REPURCHASE AGREEMENTS -- 77.8%
Bear Stearns
5.950%, dated 03/31/98, matures
04/01/98, repurchase price $450,074,375
(collateralized by U.S. Treasury STRIPS:
total market value $459,014,000) 450,000 450,000
CS First Boston
5.950%, dated 03/31/98, matures
04/01/98, repurchase price $220,036,361
(collateralized by U.S. Treasury Notes:
total market value $226,593,838) 220,000 220,000
The accompanying notes are an integral part of the financial statements.
<PAGE>
24
STATEMENTS OF NET ASSETS
March 31, 1998
Unaudited
TREASURY OBLIGATIONS FUND (CONTINUED)
DESCRIPTION PAR (000) VALUE (000)
- ----------------------------------------------------------------------------
Donaldson Lufkin & Jenrette
5.950%, dated 03/31/98, matures
04/01/98, repurchase price $237,041,171
(collateralized by U.S. Treasury Instruments:
total market value $241,742,597) $ 237,002 $ 237,002
First Union Capital
5.900%, dated 03/31/98, matures
04/01/98, repurchase price $220,036,056
(collateralized by U.S. Treasury Instruments:
total market value $224,698,697) 220,000 220,000
Goldman Sachs
5.550%, dated 03/27/98, matures
04/01/98, repurchase price $200,154,1667
(collateralized by U.S. Treasury Bonds:
total market value $203,946,000) 200,000 200,000
Merrill Lynch
5.625%, dated 03/30/98, matures
04/01/98, repurchase price $200,062,500
(collateralized by U.S. Treasury Instruments:
total market value $204,229,000) 200,000 200,000
Nomura Securities
5.930%, dated 03/31/98, matures
04/01/98, repurchase price $400,065,889
(collateralized by U.S. Treasury Instruments:
total market value $408,000,593) 400,000 400,000
Prudential Securities
5.950%, dated 03/31/98, matures
04/01/98, repurchase price $220,036,361
(collateralized by U.S. Treasury Instruments:
total market value $224,400,016) 220,000 220,000
Salomon Smith Barney
5.940%, dated 03/31/98, matures
04/01/98, repurchase price $930,153,450
(collateralized by U.S. Treasury Instruments:
total market value $949,053,133) 930,000 930,000
The accompanying notes are an integral part of the financial statements.
<PAGE>
25
STATEMENTS OF NET ASSETS
March 31, 1998
Unaudited
TREASURY OBLIGATIONS FUND (CONTINUED)
DESCRIPTION PAR (000) VALUE (000)
- ----------------------------------------------------------------------------
Societe Generale
5.850%, dated 03/31/98, matures
04/01/98, repurchase price $130,021,125
(collateralized by U.S. Treasury Instruments:
total market value $132,604,000) $ 130,000 $ 130,000
Societe Generale
5.950, dated 03/31/98, matures 04/01/98,
repurchase price $400,066,111
(collateralized by U.S. Treasury Instruments:
total market value $408,052,000) 400,000 400,000
UBS Securities
5.960%, dated 03/31/98, matures
04/01/98, repurchase price $220,036,422
(collateralized by U.S. Treasury Instruments:
total market value $224,401,574) 220,000 220,000
-----------
TOTAL REPURCHASE AGREEMENTS
(Cost $3,827,002) 3,827,002
-----------
TOTAL INVESTMENTS -- 100.2%
(Cost $4,925,402) 4,925,402
-----------
OTHER ASSETS AND LIABILITIES, NET-- (0.2%) (7,770)
-----------
NET ASSETS:
Portfolio Shares -- Class Y
($.01 par value -- 20 billion authorized)
based on 1,465,154,707 outstanding shares 1,465,155
Portfolio Shares -- Retail Class A
($.01 par value -- 20 billion authorized)
based on 80,345,392 outstanding shares 80,346
Portfolio Shares -- Class D
($.01 par value -- 20 billion authorized)
based on 3,372,096,712 outstanding shares 3,372,096
Undistributed net investment income 7
Accumulated net realized gain on investments 28
-----------
TOTAL NET ASSETS-- 100.0% $ 4,917,632
-----------
The accompanying notes are an integral part of the financial statements.
<PAGE>
26
STATEMENTS OF NET ASSETS
March 31, 1998
Unaudited
TREASURY OBLIGATIONS FUND (CONCLUDED)
DESCRIPTION VALUE (000)
- ----------------------------------------------------------------------------
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION
PRICE PER SHARE-- CLASS Y $ 1.00
-----------
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION
PRICE PER SHARE-- RETAIL CLASS A $ 1.00
-----------
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION
PRICE PER SHARE-- CLASS D $ 1.00
-----------
STRIPS--Separately Trading of Registered Interest and Principal of Securities
The accompanying notes are an integral part of the financial statements.
<PAGE>
27
STATEMENTS OF NET ASSETS
March 31, 1998
Unaudited
TAX FREE OBLIGATIONS FUND
DESCRIPTION PAR (000) VALUE (000)
- ----------------------------------------------------------------------------
MUNICIPAL BONDS -- 100.4%
ALABAMA -- 5.9%
Birmingham, Baptist Medical Center, Living
County Project, Series A (RB)
(LOC: Banco Santander)
3.800%, 04/07/98 (A) $ 9,100 $ 9,100
Jefferson County, Sewer Revenue, Series 7
(RB) (FGIC)
3.800%, 04/07/98 (A) 3,000 3,000
-----------
12,100
-----------
ARIZONA -- 1.3%
Maricopa County, School District #4, Mesa
University, Capital Appreciation (GO) (FGIC)
0.000%, 07/01/98 2,675 2,650
-----------
ARKANSAS -- 0.5%
Jonesboro, Sales & Use Tax (RB) (FSA)
3.800%, 05/15/98 1,000 1,000
-----------
CALIFORNIA -- 1.5%
California State, School Cash Reserve
Program,Tax Anticipation Notes
(RB) (AMBAC)
4.750%, 07/02/98 3,000 3,009
-----------
COLORADO -- 1.9%
Colorado Springs, Utilities Revenue,
Series 19 (RB)
3.800%, 04/07/98 (A) 2,600 2,600
Platte River Authority (RB) (MBIA)
3.650%, 06/01/98 1,200 1,199
-----------
3,799
-----------
DISTRICT OF COLUMBIA -- 0.5%
District of Columbia, Series B,
Pre-refunded @ 101.5 (GO) (MBIA)
6.750%, 06/01/98 (B) 1,000 1,020
-----------
The accompanying notes are an integral part of the financial statements.
<PAGE>
28
STATEMENTS OF NET ASSETS
March 31, 1998
Unaudited
TAX FREE OBLIGATIONS FUND (CONTINUED)
DESCRIPTION PAR (000) VALUE (000)
- ----------------------------------------------------------------------------
FLORIDA -- 3.2%
Florida State, Housing Finance Agency,
Multifamily Revenue (LOC: Nationsbank) (RB)
3.750%, 04/07/98 (A) (B) $ 1,500 $ 1,500
Sunshine State (TECP) (AMBAC)
3.450%, 05/13/98 4,000 4,000
West Orange (LOC: Rabobank) (TECP)
3.400%, 04/09/98 1,100 1,100
-----------
6,600
-----------
GEORGIA -- 1.5%
Georgia State, Series D,
Pre-refunded @ 102 (GO)
7.450%, 06/01/98 (B) 1,100 1,128
Whitfield County, Residential Care Facility
Authority, Royal Oaks Senior Living
Community Project (LOC: First Union
National Bank) (RB)
3.700%, 04/07/98 (A) 2,000 2,000
-----------
3,128
-----------
IDAHO -- 0.5%
Idaho State, Tax Anticipation Notes (GO)
4.625%, 06/30/98 1,000 1,002
-----------
ILLINOIS -- 2.5%
Illinois State, Development Finance Authority
Revenue (LOC: Harris Trust) (RB)
3.750%, 04/07/98 (A) 2,000 2,000
Illinois State, Metropolitan Pier & Exposition
Authority (RB) (AMBAC)
3.800%, 04/07/98 (A) 3,000 3,000
-----------
5,000
-----------
KANSAS -- 3.2%
Burlington (LOC: Toronto
Dominion Bank) (TECP)
3.500%, 05/08/98 2,000 2,000
The accompanying notes are an integral part of the financial statements.
<PAGE>
29
STATEMENTS OF NET ASSETS
March 31, 1998
Unaudited
TAX FREE OBLIGATIONS FUND (CONTINUED)
DESCRIPTION PAR (000) VALUE (000)
- ----------------------------------------------------------------------------
Shawnee County, Series 1,
Callable 05/01/98 @ 100 (GO)
4.000%, 02/01/99 $ 2,628 $ 2,629
Shawnee, Industrial Development Revenue,
Shawnee Village Association (LOC: Texas
Commerce Bank N.A.) (RB)
3.450%, 04/07/98 (A) 1,900 1,900
-----------
6,529
-----------
MARYLAND -- 2.2%
Baltimore, Port Facilities (LOC:
Wachovia) (RB)
3.250%, 04/07/98 (A) 1,000 1,000
Fredrick County, Retirement Community
Revenue, Buckinghams Choice, Series E
(LOC: LaSalle National Bank) (RB)
3.700%, 04/07/98 (A) 1,500 1,500
Maryland State, Washington Suburban
Sanitation District, Water Supply (RB)
5.750%, 06/01/98 1,900 1,906
-----------
4,406
-----------
MICHIGAN -- 8.8%
Hannahville, Indian Community Finance &
Building Authority, Building Program,
Series A (LOC: First of America) (RB)
3.750%, 04/07/98 (A) 4,000 4,000
Michigan State, Hospital Financial Authority
(LOC: First of America) (RB)
3.750%, 04/07/98 (A) 4,900 4,900
Michigan State, Hospital Financial Authority,
Series A (LOC: First of America) (RB)
3.750%, 04/07/98 (A) 1,800 1,800
Regents of University of Michigan (TECP)
3.200%, 04/09/98 4,300 4,300
3.450%, 04/09/98 3,000 3,000
-----------
18,000
-----------
The accompanying notes are an integral part of the financial statements.
<PAGE>
30
STATEMENTS OF NET ASSETS
March 31, 1998
Unaudited
TAX FREE OBLIGATIONS FUND (CONTINUED)
DESCRIPTION PAR (000) VALUE (000)
- ----------------------------------------------------------------------------
MINNESOTA -- 2.4%
Eden Prairie, Multifamily Housing
(LOC: Barclays Bank) (RB)
3.750%, 04/07/98 (A) $ 1,900 $ 1,900
Western Minnesota, Municipal Power
Agency (RB)
4.250%, 01/01/99 3,000 3,000
-----------
4,900
-----------
MISSISSIPPI -- 1.5%
Mississippi State, Mississippi College Project
(LOC: Nationsbank) (RB)
3.700%, 04/07/98 (A) 3,000 3,000
-----------
MISSOURI -- 5.7%
Missouri State Health & Educational Revenue,
Drury College, Series B (RB)
4.250%, 04/07/99 3,120 3,137
Missouri State (LOC: UBS) (TECP)
3.250%, 04/03/98 3,000 3,000
St. Charles County, Sun River Village
Apartments (LOC: Bank of America) (RB)
3.750%, 04/07/98 (A) 5,400 5,400
-----------
11,537
-----------
NEVADA -- 2.0%
Nevada (GO)
3.800%, 04/07/98 (A) 4,000 4,000
-----------
NEW HAMPSHIRE -- 2.2%
New Hampshire State Higher Educational &
Health Authority, Alice Peck Day Lifecare
Project (LOC: Corestates) (RB)
3.650%, 04/07/98 (A) 4,500 4,500
-----------
The accompanying notes are an integral part of the financial statements.
<PAGE>
31
STATEMENTS OF NET ASSETS
March 31, 1998
Unaudited
TAX FREE OBLIGATIONS FUND (CONTINUED)
DESCRIPTION PAR (000) VALUE (000)
- ----------------------------------------------------------------------------
NORTH CAROLINA -- 1.7%
New Hanover County, Gang Nail Systems
Project (LOC: Harris Trust) (RB)
3.750%, 04/07/98 (A) $ 3,500 $ 3,500
-----------
OKLAHOMA -- 5.0%
Garfield County, Pollution Control Revenue,
Oklahoma Gas & Electric (RB)
3.700%, 04/07/98 (A) 2,300 2,300
Tulsa, Industrial Authority Revenue (RB) (MBIA)
3.800%, 04/07/98 (A) 7,970 7,970
-----------
10,270
-----------
PENNSYLVANIA -- 1.7%
Delaware County, Catholic Health East,
Series A (RB)
4.500%, 11/15/98 2,275 2,285
Pennsylvania State (COP)
4.800%, 06/01/98 1,285 1,287
-----------
3,572
-----------
SOUTH CAROLINA -- 4.3%
South Carolina, Public Service Authority
Revenue (RB) (FGIC)
3.800%, 04/07/98 (A) 2,000 2,000
York County (TECP) (DP)
3.150%, 04/07/98 2,000 2,000
3.500%, 04/07/98 2,000 2,000
3.550%, 04/07/98 2,700 2,700
-----------
8,700
-----------
SOUTH DAKOTA -- 3.8%
Yankton, Industrial Development Revenue,
Alumax Project (LOC: Bank of America) (RB)
3.750%, 04/07/98 (A) 7,700 7,700
-----------
The accompanying notes are an integral part of the financial statements.
<PAGE>
32
STATEMENTS OF NET ASSETS
March 31, 1998
Unaudited
TAX FREE OBLIGATIONS FUND (CONTINUED)
DESCRIPTION PAR (000) VALUE (000)
- ----------------------------------------------------------------------------
TENNESSEE -- 7.9%
Hamilton County (GO)
5.000%, 07/01/98 $ 1,000 $ 1,003
Hamilton County, Industrial Development
Board, Tennessee Aquarium
(LOC: Nationsbank) (RB)
3.700%, 04/07/98 (A) 4,000 4,000
Montgomery County, Public Building
Authority Pooled Financing Revenue,
Montgomery County Loan
(LOC: Nationsbank) (RB)
3.700%, 04/07/98 (A) 3,085 3,085
Nashville & Davidson Counties, Metro
Government Industrial Development
(LOC: Barclays Bank) (RB)
3.750%, 04/07/98 (A) 7,035 7,035
Nashville & Davidson Counties, Metro
Government YMCA Projects (LOC:
Nationsbank of Georgia) (RB)
3.700%, 04/07/98 (A) 1,000 1,000
-----------
16,123
-----------
TEXAS -- 14.8%
Austin, LOC: Morgan Guaranty (TECP)
3.500%, 05/13/98 4,000 4,000
Harris County, Hospital (RB) (FSA)
3.800%, 04/07/98 (A) 2,775 2,775
Houston, Water & Sewer Revenue
(RB) (FGIC)
3.800%, 04/07/98 (A) 7,000 7,000
Hunt County, Industrial Development
Authority, Trico Industries Project
(LOC: ABN Amro) (RB)
3.500%, 04/07/98 (A) 1,030 1,030
San Antonio, Electric & Gas (RB) (MBIA)
3.800%, 04/07/98 (A) 7,455 7,455
Texas A&M University (TECP)
3.150%, 04/03/98 5,000 5,000
The accompanying notes are an integral part of the financial statements.
<PAGE>
33
STATEMENTS OF NET ASSETS
March 31, 1998
Unaudited
TAX FREE OBLIGATIONS FUND (CONTINUED)
DESCRIPTION PAR (000) VALUE (000)
- ----------------------------------------------------------------------------
Texas State (TECP)
3.400%, 06/08/98 $ 3,000 $ 3,000
-----------
30,260
-----------
UTAH -- 0.9%
Salt Lake County, Housing Authority
Multifamily Revenue, Santa Fe Apartments
Project (LOC: Dresdner) (RB)
3.750%, 04/07/98 (A) 1,900 1,900
-----------
VERMONT -- 0.8%
Vermont State, Student Loan Revenue
(LOC: Natwest) (RB)
3.400%, 04/07/98 (A) 1,565 1,565
WASHINGTON-- 6.2%
Port Seattle, Alaska Airlines Project,
(RB) (LOC: Bank of New York)
3.500%, 04/07/98 (A) 5,000 5,000
Washington State, Public Power Supply
Systems, Nuclear Project #3 (RB)
3.800%, 04/07/98 (A) 6,590 6,590
Washington State, Series A (GO)
6.500%, 07/01/98 1,000 1,007
-----------
12,597
-----------
WISCONSIN -- 6.0%
Milwaukee, Series A (RAN)
5.000%, 02/25/99 5,000 5,064
Milwaukee, Series J (GO)
4.000%, 12/01/98 1,825 1,826
Waupon, School District (GO)
4.350%, 12/01/98 3,750 3,758
Wisconsin State (GO)
4.700%, 11/01/98 750 754
Wisconsin State,
Pre-refunded @ 100 (GO)
7.100%, 05/01/98 (B) 745 747
-----------
12,149
-----------
The accompanying notes are an integral part of the financial statements.
<PAGE>
34
STATEMENTS OF NET ASSETS
March 31, 1998
Unaudited
TAX FREE OBLIGATIONS FUND (CONTINUED)
DESCRIPTION PAR (000) SHARES VALUE (000)
- ------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(Cost $204,516) $ $ 204,516
------------
MONEY MARKET FUNDS -- 4.4%
Federated Tax Free Money Market 2,985,590 2,986
SEI Institutional Tax Free Portfolio 6,000,000 6,000
------------
TOTAL MONEY MARKET FUNDS
(Cost $8,986) 8,986
------------
TOTAL INVESTMENTS -- 104.8%
(Cost $213,502) 213,502
------------
OTHER ASSETS AND LIABILITIES, NET-- (4.8%) (9,703)
------------
NET ASSETS:
Portfolio Shares -- Class Y
($.0001 par value -- 2 billion authorized)
based on 157,783,451 outstanding shares 157,782
Portfolio Shares -- Retail Class A
($.0001 par value -- 2 billion authorized)
based on 41,762,841 outstanding shares 41,761
Portfolio Shares -- Class D
($.01 par value -- 20 billion authorized)
based on 4,256,198 outstanding shares 4,256
Undistributed net investment income 1
Accumulated net realized loss on investments (1)
------------
TOTAL NET ASSETS-- 100.0% $ 203,799
------------
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION
PRICE PER SHARE-- CLASS Y $ 1.00
------------
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION
PRICE PER SHARE-- RETAIL CLASS A $ 1.00
------------
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION
PRICE PER SHARE-- CLASS D $ 1.00
------------
The accompanying notes are an integral part of the financial statements.
<PAGE>
35
STATEMENTS OF NET ASSETS
March 31, 1998
Unaudited
TAX FREE OBLIGATIONS FUND (CONCLUDED)
DESCRIPTION
- --------------------------------------------------------------------------------
(A) Variable Rate Security--the rate reported on the Statement of Net Assets is
the rate in effect as of March 31, 1998. The date shown is the reset date.
(B) Pre-refunded Security--the pre-refunded date is shown as the maturity date
on the Statement of Net Assets.
AMBAC--American Municipal Bond Assurance Company
COP--Certificate of Participation
DP--Duke Power
FGIC--Financial Guaranty Insurance Corporation
FSA--Financial Security Assurance
GO--General Obligation
LOC--Letter of Credit
MBIA--Municipal Bond Insurance Association
RAN--Revenue Anticipation Note
RB--Revenue Bond
TECP--Tax Exempt Commercial Paper
The accompanying notes are an integral part of the financial statements.
<PAGE>
36
STATEMENTS OF OPERATIONS (000)
For the six month period ended March 31, 1998
Unaudited
<TABLE>
<CAPTION>
PRIME GOVERNMENT
OBLIGATIONS OBLIGATIONS
FUND FUND
........... ...........
<S> <C> <C>
INVESTMENT INCOME:
Interest $149,157 $ 41,915+
-------- ---------
EXPENSES:
Investment advisory fees 10,328 2,962
Less: Waiver of investment advisory fees (1,665) (479)
Administrator fees 1,576 451
Distribution fees - Retail Class A 721 --
Distribution fees - Retail Class B 11 --
Distribution fees - Class D 171 320
Custodian fees 775 222
Registration fees 232 59
Professional fees 102 30
Transfer agent fees 68 22
Printing 129 37
Directors' fees 26 7
Amortization of organizational costs -- --
Other 44 20
-------- ---------
TOTAL NET EXPENSES 12,518 3,651
======== =========
Investment income - net 136,639 38,264
-------- ---------
NET REALIZED GAIN (LOSS) ON INVESTMENTS (5) (359)
======== =========
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $136,634 $ 37,905
======== ========
</TABLE>
+ Includes income from securities lending program. See the Notes to the
Financial Statements for additional information.
(1) For the four month period December 1, 1997 to March 31, 1998.
The accompanying notes are an integral part of the financial statements.
<PAGE>
37
<TABLE>
<CAPTION>
TREASURY TAX FREE
OBLIGATIONS OBLIGATIONS
FUND FUND (1)
............. .............
<S> <C> <C>
$118,969 $1,878
-------- ------
8,480 215
(1,299) (69)
1,292 32
74 32
-- --
2,247 --
636 16
125 27
83 5
35 10
106 3
20 1
2 --
56 2
-------- ------
11,857 274
======== ======
107,112 1,604
-------- ------
15 --
======== ======
$107,127 $1,604
======== ======
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
38
STATEMENTS OF CHANGES IN NET ASSETS (000)
Unaudited
<TABLE>
<CAPTION>
PRIME
OBLIGATIONS FUND
.........................
10/1/97 10/1/96
to to
3/31/98 9/30/97
----------- -----------
<S> <C> <C>
OPERATIONS:
Investment income - net $ 136,639 $ 192,633
Net realized gain (loss) on investments (5) --
----------- -----------
Net increase in net assets resulting from operations 136,634 192,633
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment income - net:
Class Y (115,955) (176,476)
Retail Class A (14,566) (8,570)
Retail Class B (44) (131)
Class D (5,903) (7,465)
----------- -----------
TOTAL DISTRIBUTIONS (136,468) (192,642)
=========== ===========
CAPITAL SHARE TRANSACTIONS
AT NET ASSET VALUE OF $1.00 PER SHARE(1):
Class Y:
Proceeds from sales 5,103,851 14,572,560
Shares issued in connection with acquisition of Qualivest Fund 257,499 --
Shares issued in connection with acquisition of Common
Trust Fund Assets -- 140,497
Reinvestment of distributions 40,477 60,409
Payments for redemptions (4,100,728) (14,323,805)
----------- -----------
Increase in net assets from
Class Y transactions 1,301,099 449,661
----------- -----------
Retail Class A:
Proceeds from sales 1,191,638 620,931
Shares issued in connection with acquisition of Qualivest Fund 226,201 --
Reinvestment of distributions 11,679 8,075
Payments for redemptions (759,670) (545,891)
----------- -----------
Increase (decrease) in net assets from
Retail Class A transactions 669,848 83,115
----------- -----------
Retail Class B:
Proceeds from sales 1,424 7,242
Reinvestment of distributions 41 121
Payments for redemptions (1,572) (7,107)
----------- -----------
Increase (decrease) in net assets from
Retail Class B transactions (107) 256
----------- -----------
Class D:
Proceeds from sales 829,973 714,714
Payments for redemptions (486,791) (710,856)
----------- -----------
Increase (Decrease) in net assets from Class D transactions 343,182 3,858
----------- -----------
Increase in net assets from
capital share transactions 2,314,022 536,890
----------- -----------
Total increase (decrease) in net assets 2,314,188 536,881
NET ASSETS AT BEGINNING OF PERIOD 3,949,216 3,412,335
=========== ===========
NET ASSETS AT END OF PERIOD (2) $ 6,263,404 $ 3,949,216
=========== ===========
</TABLE>
(2) Includes undistributed net investment income (000) of $171 and $0 for Prime
Obligations Fund, $0 and $0 for Government Obligations Fund, and $7 and $0
for Treasury Obligations Fund at March 31, 1998 and September 30, 1997,
respectively. Includes undistributed net investment income of $1, $2, $4 for
Tax Free Obligations Fund for March 31, 1998, November 30, 1997 and July 31,
1997, respectively.
The accompanying notes are an integral part of the financial statements.
<PAGE>
39
<TABLE>
<CAPTION>
GOVERNMENT TREASURY TAX FREE
OBLIGATIONS FUND OBLIGATIONS FUND OBLIGATIONS FUND
........................... ............................ ...........................................
10/1/97 10/1/96 10/1/97 10/1/96 12/1/97 8/1/97 8/1/96
to to to to to to to
3/31/98 9/30/97 3/31/98 9/30/97 3/31/98 11/30/97 7/31/97
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 38,264 $ 61,132 $ 107,112 $ 152,825 $ 1,604 $ 379 $ 1,062
(359) (6) 15 19 -- -- (1)
----------- ----------- ----------- ----------- ----------- ----------- -----------
37,905 61,126 107,127 152,844 1,604 379 1,061
----------- ----------- ----------- ----------- ----------- ----------- -----------
(27,459) (45,205) (30,555) (35,311) (1,242) (94) (186)
-- -- (1,443) -- (359) (287) (876)
-- -- -- -- -- -- --
(10,805) (15,962) (75,107) (117,545) (4) -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
(38,264) (61,167) (107,105) (152,856) (1,605) (381) (1,062)
=========== =========== =========== =========== =========== =========== ===========
1,772,656 5,674,757 3,797,663 5,288,369 225,045 13,113 40,937
-- -- 11,790 -- -- -- --
-- -- -- 6,884 -- -- --
14,520 24,252 3,911 4,510 44 62 112
(1,611,523) (5,530,377) (3,246,008) (4,719,356) (78,010) (11,608) (35,807)
----------- ----------- ----------- ----------- ----------- ----------- -----------
175,653 168,632 567,356 580,407 147,079 1,567 5,242
----------- ----------- ----------- ----------- ----------- ----------- -----------
-- -- 151,771 -- 57,207 13,623 53,776
-- -- 86,624 -- -- -- --
-- -- 1,113 -- 277 295 854
-- -- (159,162) -- (44,384) (16,923) (53,104)
----------- ----------- ----------- ----------- ----------- ----------- -----------
-- -- 80,346 -- 13,100 (3,005) 1,526
----------- ----------- ----------- ----------- ----------- ----------- -----------
-- -- -- -- -- -- --
-- -- -- -- -- -- --
-- -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
-- -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
1,202,632 1,115,568 4,494,550 6,989,426 4,266 1 --
(1,112,035) (1,047,740) (3,969,654) (5,758,331) (11) -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
90,597 67,828 524,896 1,231,095 4,255 1 --
----------- ----------- ----------- ----------- ----------- ----------- -----------
266,250 236,460 1,172,598 1,811,502 164,434 (1,437) 6,768
----------- ----------- ----------- ----------- ----------- ----------- -----------
265,891 236,419 1,172,620 1,811,490 164,433 (1,439) 6,767
1,283,395 1,046,976 3,745,012 1,933,522 39,366 40,805 34,038
=========== =========== =========== =========== =========== =========== ===========
$ 1,549,286 $ 1,283,395 $ 4,917,632 $ 3,745,012 $ 203,799 $ 39,366 $ 40,805
=========== =========== =========== =========== =========== =========== ===========
</TABLE>
<PAGE>
40
FINANCIAL HIGHLIGHTS
For the period ended March 31, 1998 (unaudited)
and for the periods ended September 30.
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>
PRIME OBLIGATIONS FUND
CLASS Y
1998* $ 1.00 $ 0.027 $ (0.027) $ 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
RETAIL CLASS A
1998* $ 1.00 $ 0.025 $ (0.025) $ 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
RETAIL CLASS B
1998* $ 1.00 $ 0.022 $ (0.022) $ 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 $ 0.026 $ (0.026) $ 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
GOVERNMENT OBLIGATIONS FUND
CLASS Y
1998* $ 1.00 $ 0.026 $ (0.026) $ 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 D
1998* $ 1.00 $ 0.025 $ (0.025) $ 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
</TABLE>
* All ratios for the period have been annualized.
+ 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.
The accompanying notes are an integral part of the financial statements.
<PAGE>
41
<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> <C>
2.69%+ $4,917,074 0.45% 5.30% 0.51%
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
2.56%+ $ 888,170 0.70% 5.04% 0.76%
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
2.18%+ $ 1,912 1.45% 4.29% 1.51%
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
2.61%+ $ 456,248 0.60% 5.14% 0.66%
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
2.63%+ $1,121,584 0.45% 5.18% 0.51%
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
2.55%+ $ 427,702 0.60% 5.04% 0.66%
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
</TABLE>
<PAGE>
42
FINANCIAL HIGHLIGHTS
For the period ended March 31, 1998 (unaudited)
and for the periods ended September 30.
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>
TREASURY OBLIGATIONS FUND
CLASS Y
1998* $ 1.00 $ 0.026 $ (0.026) $ 1.00
1997 1.00 0.050 (0.050) 1.00
1996 1.00 0.050 (0.050) 1.00
1995(4) 1.00 0.038 (0.038) 1.00
RETAIL CLASS A
1998(5) $ 1.00 $ 0.014 $ (0.014) $ 1.00
CLASS D
1998* $ 1.00 $ 0.025 $ (0.025) $ 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(6) 1.00 0.031 (0.031) 1.00
TAX FREE OBLIGATIONS FUND(A)
CLASS Y
1998*(7) $ 1.00 $ 0.016 $ (0.016) $ 1.00
1997(8) 1.00 0.011 (0.011) 1.00
1997(9) 1.00 0.031 (0.031) 1.00
1996(9) 1.00 0.032 (0.032) 1.00
1995(9)(10) 1.00 0.019 (0.019) 1.00
RETAIL CLASS A
1998*(7) $ 1.00 $ 0.014 $ (0.014) $ 1.00
1997(8) 1.00 0.010 (0.010) 1.00
1997(9) 1.00 0.027 (0.027) 1.00
1996(9) 1.00 0.028 (0.028) 1.00
1995(9)(10) 1.00 0.017 (0.017) 1.00
CLASS D
1998*(7) $ 1.00 $ 0.010 $ (0.010) $ 1.00
1997(11) 1.00 0.00 (0.000) 1.00
</TABLE>
* All ratios for the period have been annualized.
+ 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 wre 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.
(4) Commenced operations on January 24, 1995. All ratios for the period have
been annualized.
(5) Commenced operations on November 3, 1997. All ratios for the period have
been annualized.
(6) Commenced operations on October 4, 1993. All ratios for the period have been
annualized.
(7) For the period December 1, 1997 to March 31, 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.
(8) 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.
(9) For the period ended July 31.
(10) Commenced operations January 9, 1995. All ratios for the period have been
annualized.
(11) 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.
<PAGE>
43
<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> <C>
2.60%+ $1,465,155 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
1.21%+ $ 80,368 0.70% 4.92% 0.76%
2.53%+ $3,372,109 0.60% 4.99% 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
1.59%+ $ 157,779 0.45% 3.07% 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
1.44%+ $ 41,764 0.70% 2.82% 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
0.70%+ $ 4,256 0.60% 3.03% 0.73%
0.04+ 1 0.60 3.20 9.07
</TABLE>
<PAGE>
44
NOTES TO FINANCIAL STATEMENTS
March 31, 1998
Unaudited
1 Organization
The First American Prime Obligations Fund, Government Obligations Fund,
Treasury Obligations Fund, and Tax Free 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 company. The Funds' articles of incorporation permit the Board of
Directors to create additional funds in the future.
FAF offers Class A, Class B, Class C 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 Investment Funds, Inc. 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 C and D shares are offered only to
qualifying institutional investors. Class A shares were not offered by
Government Obligations Fund at March 31, 1998. Class B shares are not offered by
the Government Obligations Fund, Treasury Obligations Fund, or Tax Free
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.
<PAGE>
45
NOTES TO FINANCIAL STATEMENTS
March 31, 1998
Unaudited
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 for each of the funds within the First
American Family of Funds (First American Funds, Inc., First American Investment
Funds, Inc., and First American Strategy Funds, Inc.). 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 asset value 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.
REPURCHASE AGREEMENTS -- The Funds may enter into repurchase agreements with
member banks of the Federal Deposit Insurance Corporation or registered broker
dealers whom the Adviser or Sub-Adviser deems creditworthy under guidelines
approved by the
<PAGE>
46
NOTES TO FINANCIAL STATEMENTS
March 31, 1998
Unaudited
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. The 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 Funds 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. The Funds' 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.
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.
<PAGE>
47
NOTES TO FINANCIAL STATEMENTS
March 31, 1998
Unaudited
3 Fees and Expenses
Pursuant to an investment advisory agreement (the Agreement), U.S. Bank
National Association (the Adviser) manages each Fund's assets and furnishes
related office facilities, equipment, research and personnel. The Agreement
requires each Fund to pay the Adviser a monthly fee based upon average daily net
assets. The fee for each of the FAF Funds is equal to an annual rate of .40% of
the average daily net assets.
Through a separate contractual agreement, U.S. Bank Trust National
Association, an affiliate of the Adviser, serves as the Funds' custodian. In the
Statement of Operations, expenses paid indirectly represent a reduction of
custodian fees for earnings on cash balances.
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 of the Funds pay SIDCO a monthly
distribution fee of .25% of each Fund's average daily net assets of the Retail
Class A shares, 1.00% of the Retail Class B shares and .15% of the Corporate
Trust Class D shares, which may be used by SIDCO to provide compensation for
sales support and distribution activities. No distribution fees are paid by
Institutional Class C shares. SIMC provides administrative services, including
certain accounting, legal and shareholder services, at an annual rate of .07% of
each FAF Fund's a minimum annual fee of $50,000 per Fund. To the extent that the
aggregate net assets of FAF, First American Investment Funds, Inc. and First
American Strategy Funds, Inc. exceed $8 billion, the annual rate of each FAF
fund is reduced to .055%. 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.
<PAGE>
48
NOTES TO FINANCIAL STATEMENTS
March 31, 1998
Unaudited
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 March 31, 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.
A Contingent Deferred Sales Charge (CDSC) is imposed on redemptions made in
the Retail Class B. 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 March 31, 1998, the
collateral purchased
<PAGE>
49
NOTES TO FINANCIAL STATEMENTS
March 31, 1998
Unaudited
with cash received and held at March 31, 1998 with respect to such loans, and
income generated during the period ended March 31, 1998 from the program were as
follows (000):
INCOME RECEIVED
MARKET VALUE OF FROM SECURITIES
FUND LOANED SECURITIES LENDING
...................... ................... .................
Government Obligations $375,979 $38
MARKET VALUE OF
COLLATERAL PURCHASED
WITH CASH RECEIVED
...................................................
REPURCHASE MONEY MARKET FIXED INCOME
FUND AGREEMENTS INSTRUMENT SECURITIES TOTAL
- ---------------------- ---------- ------------ ------------ --------
Government Obligations $375,756 $223 $ -- $375,979
5 Common Trust Fund Conversions
On August 8, 1997 a common trust fund conversion took place. Certain Common
Trust Funds of the Adviser and its affiliates were converted into FAF. The Funds
involved in the conversion are as follows:
COMMON TRUST FUND ACQUIRING 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 receivable 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 gain/loss) 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 --
MUTUAL 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
<PAGE>
50
NOTES TO FINANCIAL STATEMENTS
March 31, 1998
Unaudited
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 reoganization of the Qualivest funds into the First American family of
Funds took place pursuant to a Plan of Reorganization approved by the Qualivset
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 Retail Class A shares of FAF and Qualivest Class Q
and Class Y shares were exchanged for Class Y shares of FAF.
<PAGE>
51
NOTES TO FINANCIAL STATEMENTS
March 31, 1998
Unaudited
Net assets acquired and shares issued by the corresponding FAF funds were as
follows:
FUND NET ASSETS SHARES ISSUED
.................... .............. ...............
Prime Obligations Fund $483,699,838 483,699,838
Treasury Obligations Fund 98,413,424 98,413,424
Tax Free Obligations Fund 38,181,457 38,183,594
On November 21, 1997 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 98,413,423
Tax Free Money Market Fund 38,183,595
Included in the net assets from the Qualivest Funds was the following
component:
REALIZED
FUND GAIN/(LOSS)
............................ .............
Money Market Fund $191
U.S. Treasury Money Market Fund --
Tax Free Money Market Fund 470
<PAGE>
52
NOTICE TO SHAREHOLDERS
March 31, 1998
Unaudited
Shareholder Voting Results
A special meeting of shareholders was called for October 31, 1997, at which
the shareholders of FAF and FAIF voted on the election of the Company's Board of
Directors. The results of the voting were as follows:
ROBERT J. DAYTON
FOR 3,695,763,249
AGAINST 35,662,367
ABSTAIN 0
ANDREW M. HUNTER
FOR 3,695,763,249
AGAINST 35,662,367
ABSTAIN 0
LEONARD W. KEDROWSKI
FOR 3,695,763,249
AGAINST 35,662,367
ABSTAIN 0
ROBERT L. SPIES
FOR 3,695,763,249
AGAINST 35,662,367
ABSTAIN 0
JOSEPH D. STRAUSS
FOR 3,695,760,459
AGAINST 35,665,157
ABSTAIN 0
VIRGINIA L. STRINGER
FOR 3,695,763,249
AGAINST 35,662,367
ABSTAIN 0
ROGER A. GIBSON
FOR 3,695,763,245
AGAINST 35,662,371
ABSTAIN 0
A second vote took place to ratify KPMG Peat Marwick as independent public
accountants for the Company for the fiscal year ended September 30, 1997. The
results of the vote were as follows:
FOR 3,669,897,686
AGAINST 30,390,696
ABSTAIN 31,137,233
<PAGE>
53
FIRST AMERICAN FUNDS BOARD OF DIRECTORS
MR. ROBERT J. DAYTON
Director of the First American Funds, Chief Executive Officer
of Okabena Company.
MR. ROGER GIBSON
Director of the First American Funds, Vice President of North
America-Mountain Region for United Airlines.
MR. ANDREW M. HUNTER III
Director of the First American Funds, Chairman of Hunter,
Keith Industries.
MR. LEONARD W. KEDROWSKI
Director of the First American Funds, Owner and President
of Executive Management Consulting, Inc.
MR. ROBERT SPIES
Director of the First American Funds, Retired Vice President,
U.S. Bank National Association.
MR. JOSEPH D. STRAUSS
Director of the First American Funds, Former Chairman of
First American Funds, Owner and President of Strauss
Management Company.
MS. VIRGINIA L. STRINGER
Chairman of the First American Funds, Owner and President
of Strategic Management Resources, Inc.
<PAGE>
FIRST AMERICAN FUNDS, INC.
1 Freedom Valley Drive
Oaks, Pennsylvania 19456
INVESTMENT ADVISOR
U.S. BANK NATIONAL ASSOCIATION
180 East Fifth Street
St. Paul, Minnesota 55101
CUSTODIAN
U.S. BANK NATIONAL ASSOCIATION
180 East Fifth Street
St. Paul, Minnesota 55101
ADMINISTRATOR
SEI INVESTMENTS MANAGEMENT CORPORATION
1 Freedom Valley Drive
Oaks, Pennsylvania 19456
TRANSFER AGENT
DST SYSTEMS, INC.
330 West 9th Street
Kansas City, Missouri 64105
DISTRIBUTOR
SEI INVESTMENTS DISTRIBUTION CO.
1 Freedom Valley Drive
Oaks, Pennsylvania 19456
INDEPENDENT AUDITORS
KPMG PEAT MARWICK LLP
90 South Seventh Street
Minneapolis, Minnesota 55402
COUNSEL
DORSEY & WHITNEY LLP
220 South Sixth Street
Minneapolis, Minnesota 55402
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 involve investment
risk including loss of principal amount
invested.
[LOGO] FIRST AMERICAN
THE POWER OF DISCIPLINED INVESTING(R) FAF-1303 5/98
