FIRST AMERICAN INVESTMENT FUNDS, INC.
FIRST AMERICAN FUNDS, INC. 1997 ANNUAL REPORT
THE POWER OF DISCIPLINED INVESTING
<PAGE>
TABLE OF CONTENTS
November 30, 1997
Message To Shareholders .......................... Page 1
Portfolio Performance Discussion ................. Page 2
Independent Auditors' Report ..................... Page 5
Statements of Net Assets ......................... Page 6
Statements of Operations ......................... Page 21
Statements of Changes in Net Assets .............. Page 22
Financial Highlights ............................. Page 23
Notes to Financial Statements .................... Page 24
Notice to Shareholders ........................... Page 29
<PAGE>
1
MESSAGE TO SHAREHOLDERS
November 30, 1997
Dear Shareholder:
On behalf of the Board of Directors of First American Funds, I would like to
welcome you as new shareholders. As previously communicated, you joined the
First American family of funds as a result of the merger of Qualivest Funds into
First American Funds in late November. You now are part of a family of funds
with 32 fund offerings and fund assets in excess of $21 billion. I invite you to
speak with your financial advisor to learn more about the new investment options
available to you.
This is the last financial report that you will receive which is dedicated to
the fund options carried over from the Qualivest Funds. Beginning with the
financial report issued for the period ending March 31, 1998, it is the
intention that your funds will be included with all other First American Funds.
It is also intended from that period forward you will receive a semi-annual and
annual report for the periods ending March 31 and September 30, which is the
normal First American cycle.
Returns produced by the equity markets during the past three years are
unprecedented. It is important to remember that the returns for the equity
markets for the past three years have been well in excess of historical returns.
Chances are that returns for the next several years will be closer to historical
levels and the possibility exists that equity returns could even be negative in
the near future. It is important that you maintain realistic investment
expectations based upon past history and also remember that a portfolio
diversified across asset classes (cash, bond and equity funds) is a sound
investment approach. I would urge you to visit with your financial advisor at
least annually to review your investment portfolio to make sure your investment
portfolio still meets your long-term objectives and risk parameters.
The Board of Directors thanks you for your support and confidence in First
American Funds. We are confident that the Funds' tradition of conservative
management, competitive results and innovative products will serve you well.
Sincerely,
/s/ Virginia L. Stringer
Virginia L. Stringer
Chairman
First American Investment Funds, Inc.
First American Funds, Inc.
<PAGE>
2
PORTFOLIO PERFORMANCE DISCUSSION
November 30, 1997
TAX FREE OBLIGATIONS FUND
INVESTMENT OBJECTIVE: TO PROVIDE MAXIMUM CURRENT INCOME EXEMPT FROM FEDERAL
INCOME TAXES WHILE PRESERVING CAPITAL AND MAINTAINING LIQUIDITY.
The Tax Free Obligations Fund invests at least 80% of its total assets in
municipal obligations, the income from which is exempt from federal income tax,
and repurchase agreements related to such securities. As of November 30, 1997,
the Institutional Class C shares seven-day effective yield was 3.45% and the
average weighted maturity was 51 days.
INTERNATIONAL INDEX FUND
INVESTMENT OBJECTIVE: TO PROVIDE INVESTMENT RESULTS THAT CORRESPOND TO THE
PERFORMANCE OF THE MORGAN STANLEY EUROPE, AUSTRALIA, FAR EAST COMPOSITE INDEX
(THE "EAFE INDEX").
The International Index Fund is designed to attempt to replicate the returns
of the MSCI EAFE Index. For the four months ended November 30, 1997, the Fund
produced a total return of -11.03% as compared to the total return of -10.71%
for the MSCI EAFE Index. The ability to replicate the returns of the index are
dependent upon factors such as the Fund expense ratio, size of the Fund, cash
inflows and outflows and cash required for liquidity purposes. For the last four
months the Fund has tracked the index very closely. The Fund's performance
during the period was aided by a larger than normal cash position that was
required to meet redemption requests during the period.
VALUE OF A $10,000 INVESTMENT
(1) FIRST AMERICAN INTERNATIONAL INDEX FUND (CLASS A)
(2) FIRST AMERICAN INTERNATIONAL INDEX FUND (CLASS C)
(3) MORGAN STANLEY MSCI EAFE INDEX
[GRAPH]
(1) (2) (3)
7/31/95 9,550 10,000 10,000
11/95 9,352 9,801 9,807
11/96 10,312 10,839 10,961
11/97 10,169 10,683 10,917
PAST PERFORMANCE OF THE FUND IS NOT INDICATIVE OF FUTURE PERFORMANCE.
Class A Class A Class B Class B Class C MS
Adjusted Adjusted EAFE
4 months -11.03% -15.03% N/A N/A -10.93% -10.71%
1 year -1.38% -5.78% N/A N/A -1.19% -0.40%
Inception 4.54% 2.56% -0.36%* -5.34%* 4.90% N/A
The inception date of the Class A and C shares is 7/3/95 and the inception date
of the Class B shares is 11/24/97.
The performance reflected in the graph begins on 7/31/95. On November 21, 1997,
the International Index Fund became the successor by merger to the Qualivest
International Opportunities Fund.
* Cumulative since inception
<PAGE>
3
PORTFOLIO PERFORMANCE DISCUSSION
November 30, 1997
SMALL CAP VALUE FUND
INVESTMENT OBJECTIVE: TO PROVIDE CAPITAL APPRECIATION.
The Fund invests primarily in common stocks and securities convertible into
common stocks of small companies with a market capitalization below $1.0 billion
at the time of purchase. Investment decisions are made using a bottom up
approach, focusing on stocks that are fundamentally sound, attractively valued
and/or inefficiently priced as a result of low recognition and awareness by the
investment community.
From August 1 to November 30, 1997, the Fund produced a total return of
1.90%, compared to a return of 4.27% for the Frank Russell 2000 Index and 0.70%
for the S&P 500. For the three years ending November 30, 1997, the average
annual return was 30.57%, compared to 22.71% for the Frank Russell 2000 Index
and 31.03% for the S&P 500.
Strongest performers from August 1 to November 30, 1997 were: Gatefield,
Inc., a developer of software for improving engineering productivity and design
of integrated circuits; Cholestech Corporation, which develops and manufactures
screening tests for diseases; Concurrent Computer, a supplier of high
performance real time computer systems, software and services; Truevision, a
developer and manufacturer of professional high quality digital video products;
and Eagle Financial, a bank holding company based in Connecticut.
VALUE OF A $10,000 INVESTMENT
(1) FIRST AMERICAN SMALL CAP VALUE FUND (INSTITUTIONAL)
(2) FIRST AMERICAN SMALL CAP VALUE FUND (RETAIL A)
(3) FRANK RUSSELL 2000 INDEX
[GRAPH]
(1) (2) (3)
1/31/88 10,000 9,550 10,000
11/88 11,817 11,225 11,519
11/89 14,763 14,016 13,859
11/90 12,381 11,695 10,777
11/91 18,869 17,807 15,146
11/92 24,543 23,096 18,718
11/93 31,094 29,179 22,270
11/94 31,430 29,434 22,023
11/95 45,648 42,727 28,297
11/96 56,157 52,405 32,975
11/97 70,314 65,496 40,694
PAST PERFORMANCE OF THE FUND IS NOT INDICATIVE OF FUTURE PERFORMANCE.
Class A Class A Class B Class B Class C Russell
Adjusted Adjusted 2000
4 months 1.90% -2.67% N/A N/A 2.01% 4.27%
1 year 24.98% 19.33% N/A N/A 25.21% 23.41%
3 years 30.57% 28.58% N/A N/A 30.79% 22.71%
5 years 23.18% 22.05% N/A N/A 23.43% 16.80%
Inception 21.16% 21.06% 0.05%* -4.95%* 21.94% N/A
The inception date of the Class A and C shares is 1/1/88 and the inception date
of the Class B shares is 11/24/97.
The performance reflected in the graph begins on 1/31/88 and represents past
performance of US Bancorp's internally managed common trust fund, adjusted for
fees and expenses for periods prior to August 1, 1994 (the inception date of the
Qualivest Small Companies Fund). The common trust fund was not registered under
the 1940 Act and therefore was not subject to certain investment restrictions
which may have adversely affected performance. On November 21, 1997, the Small
Cap Value Fund became the successor by merger to the Qualivest Small Companies
Fund.
* Cumulative since inception
<PAGE>
4
PORTFOLIO PERFORMANCE DISCUSSION
November 30, 1997
FIRST AMERICAN FUNDS FOOTNOTES
A few notes and definitions are needed for a complete understanding of the
performance figures. 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. Money
Market investments are neither insured nor guaranteed by the U.S. Government.
There can be no assurance that the Money Market Funds will be able to maintain a
stable Net Asset Value of $1.00 per share. Total return measures performance,
assuming that all dividends and capital gains distributions were reinvested.
Total return, both with and without a sales charge, has been presented. All
total returns are quoted for the Class A shares before sales charges. For
shareholders who have not bought or sold shares during the period quoted, the
non-adjusted figures are probably more meaningful to you than the adjusted
figures. The adjusted figures for Class A shares include the effect of paying
the maximum initial sales charge of 4.5% for all equity funds.The adjusted
figures for Class B shares include the effect of paying the 5% contingent
deferred sales charge (CDSC), which declines from 5% in the first year to 0% at
the beginning of the seventh year.
The First American International Index Fund invests primarily in foreign
securities, which can involve special risks due to foreign economic and
political developments. The Small Cap Value Fund generally invests in small-cap
stocks, which can be riskier than the overall stock market.
Line graphs have been included so an investor can compare a fund's historical
performance to that of an appropriate broad-based index. The index does not
reflect the deduction of expenses associated with mutual funds, such as
investment management, fund accounting, legal, registration, SEC and transfer
agent expenses.The fund's performance reflects the deduction of fees for these
value-added services.
<PAGE>
5
INDEPENDENT AUDITORS' REPORT
November 30, 1997
The Board of Directors and Shareholders
First American Funds, Inc.
First American Investment Funds, Inc.:
We have audited the accompanying statements of net assets of Tax Free
Obligations Fund (formerly Qualivest Tax-Free Money Market Fund), International
Index Fund (formerly Qualivest International Opportunities Fund) and Small Cap
Value Fund (formerly Qualivest Small Companies Value Fund), and the related
statements of operations, changes in net assets and the financial highlights for
the four month period ended November 30, 1997. 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 statements of operations for the
year ended July 31, 1997, the statements of changes for each of the years in the
two year period ended July 31, 1997 and the financial highlights for the periods
ended July 31, 1997, July 31,1996, and July 31, 1995, for each of the funds were
audited by other auditors 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 also 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, we request confirmations from brokers and where replies are not
received, we 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 Tax Free Obligations Fund, International Index Fund and Small Cap
Value Fund, as of November 30, 1997, and the results of their operations,
changes in their net assets and the financial highlights for the four month
period ended November 30, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
January 9, 1998
<PAGE>
6
STATEMENTS OF NET ASSETS
November 30, 1997
TAX FREE OBLIGATIONS FUND
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------------------------------
MUNICIPAL BONDS--99.8%
ALABAMA--2.5%
Birmingham, Baptist Medical Center, Living
County Project, Series A, LOC: Banco
Santander (RB)
3.900%, 12/03/97 (A) $1,000 $1,000
-----
COLORADO--4.9%
Adams County, School District #14 (GO) (FSA)
0.000%, 12/01/97 715 715
Platte River Authority, (MBIA) (RB)
3.650%, 06/01/98 1,200 1,199
-----
1,914
-----
FLORIDA--6.4%
Capital Projects Finance Authority, Loan Project
Series 1997 (RB) (FSA)
3.900%, 12/04/97 (A) 1,000 1,000
Florida State, Housing Finance Agency, Multifamily
Revenue, LOC: Barnett Banks (RB)
3.900%, 12/03/97 (A) 1,500 1,500
-----
2,500
-----
IDAHO--2.5%
Idaho State, Tax Anticipation Notes (GO)
4.625%, 06/30/98 1,000 1,004
-----
ILLINOIS--6.9%
Illinois State, Development Finance Authority,
Illinois Power Project, Series B, LOC: Canadian
Imperial Bank (RB)
3.850%, 12/03/97 (A) 1,000 1,000
Illinois State, Development Finance Authority,
Presbyterian Home Lake, LOC:
LaSalle National (RB)
3.900%, 12/03/97 (A) 700 700
Illinois State, Health Facilities Authority, Decatur
Memorial Hospital (RB) (MBIA)
3.880%, 12/03/97 (A) 1,000 1,000
-----
2,700
-----
KANSAS--4.7%
Shawnee, Industrial Development Revenue,
Shawnee Village Association, LOC:
Chase Manhattan (RB)
4.000%, 12/03/97 (A) 1,000 1,000
Leavenworth County, Unlimited Tax (GO) (AMBAC)
3.700%, 12/01/97 855 855
-----
1,855
-----
<PAGE>
TAX FREE OBLIGATIONS FUND (CONTINUED)
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------------------------------
MICHIGAN--3.8%
Michigan State, Hospital Financial Authority,
Series A, LOC: First of America (RB)
3.900%, 12/03/97 (A) $1,500 $1,500
------
MINNESOTA--2.5%
St. Cloud, Health Care Facilities, Series A,
LOC: RaboBank Nederland (RB)
3.850%, 12/05/97 (A) 1,000 1,000
-----
MISSOURI--7.6%
Columbia, Series A, LOC: Toronto
Dominion (RB)
3.850%, 12/03/97 (A) 1,500 1,500
St. Charles County, Sun River Village
Apartments, LOC:Bank of America (RB)
3.900%, 12/04/97 (A) 1,500 1,500
-----
3,000
-----
NORTH CAROLINA--2.5%
New Hanover County, Gang Nail Systems
Project, LOC: Harris Trust (RB)
4.000%, 12/02/97 (A) (C) 1,000 1,000
-----
OKLAHOMA--3.8%
Garfield County, Pollution Control Revenue,
Oklahoma Gas & Electric (RB)
3.900%, 12/03/97 (A) 1,500 1,500
-----
OREGON--4.5%
Hillsboro, Graduate Institute, LOC:
Bank of America (RB)
4.050%, 12/04/97 (A) 1,400 1,400
Oregon State, George Fox University
Project, Series A, LOC: Bank of America (RB)
5.500%, 03/01/98 355 356
-----
1,756
-----
SOUTH CAROLINA--9.0%
Rock Hill, School District #3 (GO) (FGIC)
7.750%, 02/01/98 500 503
Rock Hill, Tax Increment Revenue,
Pre-refunded @ 102 (RB) (FGIC)
7.600%, 01/01/98 (B) 500 512
South Carolina State, Series A (GO)
7.000%, 03/01/98 1,500 1,512
York County (TECP)
3.650%, 12/01/97 1,000 1,000
-----
3,527
-----
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
7
STATEMENTS OF NET ASSETS
November 30, 1997
TAX FREE OBLIGATIONS FUND (CONTINUED)
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------------------------------
TENNESSEE--1.3%
Tennessee State, Series A (GO)
4.400%, 03/01/98 $ 500 $ 501
-----
TEXAS--11.5%
Hunt County, Industrial Development Authority,
Trico Industries Project, LOC: ABN AMRO (RB)
4.000%, 12/02/97 (A) 1,030 1,030
Plano, School District (GO)
3.750%, 02/15/98 1,000 999
Texas A&M (TECP)
3.650%, 12/08/97 1,500 1,500
Texas State (TECP)
3.700%, 02/05/98 1,000 1,000
-----
4,529
-----
UTAH--3.8%
Salt Lake County, Housing Authority, Multifamily
Revenue, Santa Fe Apartments Project,
LOC: Dresdner (RB)
4.000%, 12/03/97 (A) 1,500 1,500
-----
VERMONT--3.8%
Vermont State, Student Loan Revenue,
LOC: National Westminster (RB)
3.750%, 12/01/97 (A) 1,500 1,500
-----
VIRGINIA--3.6%
Fairfax County, Industrial Development Authority,
Fairfax Hospital Association, Series A (RB)
3.900%, 12/03/97 (A) 1,400 1,400
-----
WASHINGTON--5.1%
Tacoma, Electric Systems Revenue,
Pre-refunded @ 102 (RB) (AMBAC)
8.000%, 01/01/98 (B) 1,000 1,023
Washington State, Series C (GO)
5.000%, 01/01/98 1,000 1,001
-----
2,024
-----
WISCONSIN--9.1%
Milwaukee, Series J (GO)
4.000%, 12/01/98 (D) 1,825 1,827
Wisconsin State (GO)
4.700%, 11/01/98 750 756
Wisconsin State, Health Facilities Authority
Revenue, Alverno College Project,
LOC:Allied Irish (RB)
3.900%, 12/01/97 (A) 1,000 1,000
-----
3,583
-----
TOTAL MUNICIPAL BONDS
(Cost $39,293) 39,293
------
<PAGE>
TAX FREE OBLIGATIONS FUND (CONCLUDED)
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
MONEY MARKET FUND--2.6%
Federated Tax Free Money Market 1,035,586 $ 1,036
-----
TOTAL MONEY MARKET FUND
(Cost $1,036) 1,036
-----
TOTAL INVESTMENTS--102.4%
(Cost $40,329) 40,329
------
OTHER ASSETS AND LIABILITIES, NET---(2.4)% (963)
------
NET ASSETS:
Portfolio Shares -- Institutional Class
($.0001 par value--20 billion authorized) based
on 10,704,539 outstanding shares 10,703
Portfolio Shares -- Retail Class A
($.0001 par value--20 billion authorized) based
on 28,664,406 outstanding shares 28,661
Portfolio Shares-- Corporate Trust Class
($.0001 par value--20 billion authorized) based
on 1,000 outstanding shares 1
Undistributed net investment income 2
Accumulated net realized loss on investments (1)
-----
TOTAL NET ASSETS--100.0% $39,366
-------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE-- INSTITUTIONAL CLASS $ 1.00
-------
NET ASSET VALUE AND REDEMPTION PRICE
PER SHARE-- RETAIL CLASS A $ 1.00
-------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE-- CORPORATE TRUST CLASS $ 1.00
-------
(A) Variable Rate Security--the rate reported on the Statement of Net Assets is
the rate in effect as of November 30, 1997. The date shown is the next
reset date.
(B) Pre-refunded Security--the pre-refunded date is shown as the maturity date
on the Statement of Net Assets.
(C) 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." This security has been determined to be in liquid
under guidelines established by the Board of Directors.
(D) At November 30, 1997, the cost of securities purchased on a when issued
basis was $1,827,099.
AMBAC--American Municipal Bond Assurance Corporation
FGIC--Financial Guaranty Insurance Corporation
FSA--Financial Security Assurance
GO--General Obligation
LOC--Letter of Credit
MBIA--Municipal Bond Insurance Association
RB--Revenue Bond
TECP--Tax Exempt Commercial Paper
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
8
STATEMENTS OF NET ASSETS
November 30, 1997
INTERNATIONAL INDEX FUND
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
FOREIGN COMMON STOCKS--95.5%
AUSTRALIA--2.3%
Amcor 18,082 $ 81
Boral 41,227 104
Brambles 6,892 132
Broken Hill Proprietary 49,247 451
Burns Philip & Co 15,097 3
Coca-Cola Amatil 23,618 176
Coles Myer 34,917 172
CRA 7,547 83
CSR 26,547 87
Fosters Brewing 84,722 157
Goodman Fielder 41,964 63
ICI Australia 12,107 83
Lend Lease 6,297 129
M.I.M. Holdings 2,632 2
National Australia Bank 45,106 596
Newcrest Mining* 21,543 21
Newscorp 55,493 296
Norths Limited 18,526 48
Pacific Dunlop 34,457 71
Pioneer International 29,492 78
Santos 22,425 93
Southcorp Holdings 21,973 68
Western Mining 34,033 109
Westfield Trust Units 56,978 112
Westpac Banking 53,367 335
------
3,550
------
AUSTRIA--0.4%
Austrian Airlines* 1,410 30
Creditanstalt Bankverein 674 35
EA Generali 586 138
Flughafen Wien 772 31
Oest Elektrizatswits, Cl A 367 29
Oesterreichische 1,785 86
OMV 340 44
VA Technologie 539 81
Wienerberger Baust 256 50
Bank Austria 1,386 65
------
589
------
BELGIUM--1.5%
Almanij 799 35
Bekaert 87 54
Cimenteries CBR Cement 1,285 115
Cobepa 799 34
Delhaize Freres 1,220 62
Ebell* 300 --
<PAGE>
INTERNATIONAL INDEX FUND (CONTINUED)
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
Electrabel 1,624 $ 363
Fortis 1,132 225
Fortis Strip VVPR* 20 --
Group Bruxelles Lambert 641 97
Generale Banque 638 264
Kredietbank 335 135
Kredietbank VVPR 7 3
Petrofina 762 294
Royale Belgian 584 154
Solvay 2,620 157
Tractabel 3,120 268
Tractebel Put 11/99* 329 2
Union Miniere* 1,128 81
-----
2,343
-----
DENMARK--1.0%
Carlsberg, Cl B 736 41
Carlsberg 562 31
D/S 1912, Cl B 5 201
D/S Svendborg, Cl B 4 235
Danisco 1,829 99
Den Danske Bank 1,599 190
FLS Industries 1,605 41
ISS International* 1,240 42
Novo Nordisk, Cl B 2,011 246
Radiometer, Cl B 417 17
Sophus Berendsen, Cl B 670 105
Tele Danmark, Cl B 4,086 244
Unidanmark, Cl A 1,348 95
------
1,587
------
FINLAND--0.8%
Kesko 4,400 64
Kone, Cl B 200 23
Merita Bank, Cl A 28,033 142
Metra, Cl B 1,300 32
Nokia AB, Cl K 2,600 209
Nokia AB, Cl A 5,300 427
Outokumpu, Cl A 3,500 48
Sampo Insurance 2,000 63
Stockmann 400 25
UPM Kymmene 8,340 179
------
1,212
------
FRANCE--8.7%
Sefimeg 2,550 143
Accor 2,076 393
Air Liquide 2,570 405
Alcatel Alsthom 5,070 636
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
9
STATEMENTS OF NET ASSETS
November 30, 1997
INTERNATIONAL INDEX FUND (CONTINUED)
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
Axa 9,114 $ 662
Bancaire 777 116
Banque Natl Paris, Cl A 5,364 262
Bic 1,500 104
Bouygues 751 76
Canal Plus 977 170
Carrefour Supermarkets 1,350 723
Casino 1,550 86
Chargeurs International 200 12
CIE de Saint Gobain 2,428 330
CIE Generale des Eaux Warrants* 4,019 2
CIE Generale des Eaux 4,090 541
Compagnie de Suez* 5 --
Comptoirs Modernes 150 73
Danone 2,990 477
Elf Aquitaine 8,400 975
Eridania Beghin Say 650 101
Eurafrance 100 40
Havas 2,436 159
L'Oreal 2,375 910
Lafarge 2,963 196
Lagardere Groupe 5,628 162
Legrand 872 166
LVMH Moet Hennessy 2,950 509
Lyonnaise des Eaux 5,476 589
Michelin, Cl B 3,273 176
Moulinex* 1,050 25
Paribas 4,402 318
Pathe 200 39
Pernod Ricard 3,048 155
Peugeot 1,250 141
Pinault Printemps 700 358
Promodes 659 242
Rhone Poulenc, Cl A 9,055 407
Sodexho Alliance 250 133
Sagem 150 68
Sanofi 4,369 438
Schneider 4,413 236
Sidel 800 46
Simco 841 60
Societe Generale 2,559 337
Sodexho Rights* 250 3
Thomson 3,217 93
Total Compaigne, Cl B 8,111 852
UAP 7,902 228
Union Bail 250 24
Usinor Sacilor 9,450 149
Valeo 1,778 118
<PAGE>
INTERNATIONAL INDEX FUND (CONTINUED)
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
Worms Et Compagnie 1,000 $ 78
------
13,742
------
GERMANY--8.4%
Aach Und Muench 1,000 98
Adidas 1,300 184
Agiv* 880 18
Allianz 4,800 1,135
AMB Aachener & Muench 150 154
BASF 13,100 463
Bayer 15,250 563
Bayerische Hypotheken 5,050 219
Bayerische Vereinsbank 6,000 356
Beiersdorf 2,600 109
Bilfinger & Berger 1,200 44
Brau Und Brunnen* 1,050 86
Ckag Colonia Konzern 1,150 96
Continental 3,100 77
Daimler Benz 13,420 942
Degussa 3,950 183
Deutsche Bank 10,700 690
Deutsche Telekom 50,900 1,029
Dresdner Bank 11,250 437
Heidelberger 2,255 178
Hochtief 2,600 110
Karstadt 600 208
Kloeckner Humboldt* 3,400 23
Linde 250 156
Lufthansa 13,600 258
Man 400 119
Mannesmann 1,150 534
Merck Kgaa 4,900 179
Metro 4,784 221
Munchener Ruckvers 3,450 1,077
Preussag 450 127
Papierwerke Waldhof 200 38
RWE* 6,480 318
SAP 1,320 385
Schering 2,150 211
Siemens 12,470 739
Strabag* 100 7
Thyssen 750 179
Veba 10,332 612
Viag 700 356
Volkswagen 550 312
------
13,230
------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
10
STATEMENTS OF NET ASSETS
November 30, 1997
INTERNATIONAL INDEX FUND (CONTINUED)
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
HONG KONG--2.7%
Bank of East Asia 33,886 $ 71
Cathay Pacific Airways 89,000 78
Cheung Kong Holdings 58,000 409
China Light & Power 64,000 323
Chinese Estates 104,296 50
Hang Lung Development 63,000 96
Hang Seng Bank 48,700 428
Hong Kong & China Gas 95,106 171
Hong Kong & Shanghai Hotels 51,000 44
Hong Kong Telecommunications 299,239 569
Hopewell Holdings 131,139 35
Hutchison Whampoa 98,000 653
Hysan Development 25,000 50
Hysan Development Warrants* 1,250 --
Miramar Hotel & Investment 19,000 32
New World Development 47,489 176
Peregrine Investment Holdings 13,000 13
Shangri-La Asia 38,000 30
Shuntak 75,146 23
Sino Land 20,000 12
South China Morning Post Holdings 80,000 60
Sun Hung Kai Properties 60,000 458
Swire Pacific, Cl A 40,500 203
Television Broadcasts 10,000 25
Wharf Holdings 71,000 145
Wing Lung Bank 10,700 46
------
4,200
------
IRELAND--0.4%
Allied Irish Bank 22,032 193
CRH 10,134 119
Greencore Group 5,342 24
Independant Newspapers 9,315 55
Irish Life 8,272 42
Jefferson Smurfit 29,615 86
Kerry Group 4,102 45
Waterford Wedgewood 22,471 27
------
591
------
ITALY--3.5%
Assicurazioni Generali 22,875 513
Banca Commerciale Italiana 56,000 161
Banco Amb Conv Bond Rights* 12,000 6
Banco Amb Stock/Warrant Rights* 12,000 39
Banco Ambrosiano Veneto 12,000 39
Benetton 5,340 81
Burgo 4,000 24
Credito Italiano 57,500 158
<PAGE>
INTERNATIONAL INDEX FUND (CONTINUED)
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
Edison 16,000 $ 87
ENI SPA 204,725 1,196
Fiat 98,100 284
Fiat Rinascente 26,400 42
Istituto Banca San Paolo 20,800 172
Istituto Mobiliare 16,084 168
Istituto Nazionale 123,794 216
Italcementi 11,232 72
Italgas 19,000 73
Mediaset 33,484 165
Mediobanca 8,000 56
Mondadori 3,099 25
Montedison 154,500 128
Olivetti* 52,800 30
Parmalat Finanziaria 23,400 34
Pirelli 61,000 152
RAS 9,075 85
Ras Di Risp 7,075 45
Sai Sta Assicuratric 5,000 51
SIRTI 3,500 21
SNIA 20,000 20
Telecom Italia 92,888 579
Telecom Italia di Risp 39,394 86
Telecom Italia Mobile 170,107 689
Telecom Italia Rinascente 19,884 78
------
5,575
------
JAPAN--25.7%
77th Bank 13,000 102
Advantest 2,600 180
Ajinomoto 19,000 173
Alps Electric 8,000 85
Amada 10,000 50
AOKI 22,000 5
Aoyama Trading 2,800 71
Asahi Bank 66,000 279
Asahi Breweries 9,000 126
Asahi Chemical Industries 38,000 164
Asahi Glass 26,000 166
Ashikaga Bank 18,000 24
Bank of Tokyo-Mitsubishi 125,000 1,813
Bank of Yokohama 42,000 130
Bridgestone 22,000 478
Canon 22,000 531
Chiba Bank 22,000 86
Chichibu Onoda Cement 13,000 33
Citizen Watch 1,000 6
Cosmo Oil 28,000 58
Credit Saison 6,400 161
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
11
STATEMENTS OF NET ASSETS
November 30, 1997
INTERNATIONAL INDEX FUND (CONTINUED)
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
Cugai Pharmaceutical 8,000 $ 50
Dai Ichi Pharmaceutical 10,000 120
Dai Nippon Ink & Chemical 21,000 74
Dai Nippon Printing 21,000 416
Dai Nippon Screen 7,000 41
Daicel Chemical 18,000 35
Daido Steel 24,000 35
Daiei 16,000 69
Daikin Industries 9,000 47
Daito Trust Construction 7,500 48
Daiwa House Industries 14,000 113
Daiwa Securities 34,000 119
Denki Kagaku Kogyo 33,000 62
Denso 24,000 438
East Japan Railway 111 505
Ebara 10,000 111
Eisai 10,000 146
Fanuc 6,700 252
Fuji Bank 74,000 397
Fuji Photo Film 14,000 504
Fujita 40,000 15
Fujita Tourist 4,000 43
Fujitsu 48,000 538
Furukawa Electric 20,000 98
Gunma Bank 13,000 98
Hankyu 27,000 129
Hankyu Department 7,000 47
Haseko* 52,000 33
Hitachi 96,000 681
Hokuriko Bank 2,000 3
Honda Motor 26,000 942
House Food Industry 7,000 93
Hoya 4,000 122
Industrial Bank of Japan 71,000 634
Isetan 6,000 34
Ito Yokado 11,000 497
Itochu 48,000 125
Jaccs 5,000 28
Japan Airlines* 52,000 162
Japan Energy 39,000 58
Joyo Bank 26,000 104
Jusco 9,000 151
Kajima 25,000 82
Kandenko 5,000 31
Kaneka 13,000 75
Kansai Electric Power 23,300 396
Kao 19,000 253
Kawasaki Kisen 24,000 31
<PAGE>
INTERNATIONAL INDEX FUND (CONTINUED)
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
Kawasaki Steel 96,000 $ 158
Kinden 12,000 136
Kinki Nippon Railway 46,000 255
Kirin Brewery 27,000 208
Komatsu 28,000 168
Konica 16,000 85
Kubota 43,000 149
Kumagai Gumi 46,000 31
Kurita Water Industries 4,000 61
Kyocera 5,200 251
Kyowa Hakko Kogyo 23,000 115
Makita 6,000 71
Marubeni 45,000 113
Marui 10,000 157
Matsushita Electric 59,000 920
Meiji Milk Products 10,000 28
Meiji Seika 15,000 57
Misawa Homes 4,000 12
Mitsubishi 48,000 375
Mitsubishi Chemical 64,000 125
Mitsubishi Electric 73,000 202
Mitsubishi Estate 34,000 394
Mitsubishi Heavy Industries 104,000 409
Mitsubishi Materials 34,000 77
Mitsubishi Oil 17,000 38
Mitsubishi Trust & Banking 35,000 466
Mitsui 46,000 320
Mitsui Engineering & Shipbuilding 44,000 39
Mitsui Fudosan 24,000 254
Mitsui Marine & Fire Insurance 22,000 109
Mitsui Osk Lines* 31,000 47
Mitsui Petrochem 15,000 41
Mitsui Trust & Banking 34,000 57
Mitsukoshi 14,000 40
Mori Seiki 6,000 65
Murata Manufacturing 6,000 180
Nagase 17,000 69
Nagoya Railroad 18,000 63
Nankai Electric 35,000 156
NEC 43,000 455
New Oji Paper 33,000 137
Ngk Insulators 8,000 75
NGK Spark Plugs 11,000 72
Nichido Fire & Marine 9,000 47
Nichii 16,000 132
Nichirei 11,000 33
Nihon Cement 10,000 27
Nippon Express 30,000 157
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
12
STATEMENTS OF NET ASSETS
November 30, 1997
INTERNATIONAL INDEX FUND (CONTINUED)
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
Nippon Fire & Marine 23,000 $ 71
Nippon Light Metal 35,000 66
Nippon Oil 36,000 126
Nippon Paper 25,000 122
Nippon Sheet Glass 22,000 43
Nippon Shokubai 11,000 55
Nippon Steel 182,000 337
Nippon Telegraph & Telephone 179 1,473
Nippon Yusen Kabushik 35,000 107
Nissan Motors 66,000 287
Nissin Food Products 3,000 67
Nitto Denko 3,000 55
NKK 114,000 115
Nomura Securities 53,000 656
NSK 19,000 79
NTN 25,000 86
Obayashi 25,000 118
Odakyu Railway 27,000 130
Okamato Industries 13,000 31
Olympus Optical 13,000 95
Omron 6,000 103
Orix 2,000 134
Osaka Gas 82,000 183
Penta Ocean Construct 21,000 36
Pioneer Electronics 5,000 87
Rohm Company 4,000 395
Sakura Bank 93,000 325
Sanawa Shutter 9,000 52
Sankyo 12,000 383
Sanyo Electric 68,000 192
Saporo Breweries 12,000 64
Secom 3,000 188
Sega Enterprises 3,400 76
Seiyu 8,000 33
Sekisui Chemical 16,000 117
Sekisui House 17,000 122
Sharp 37,000 248
Shimano 5,000 114
Shimizu 19,000 61
Shin Etsu Chemical 11,000 261
Shiseido 11,000 149
Shizuoka Bank 24,000 222
Showa Denko 37,000 55
Sony 10,500 897
Sumitomo 29,000 183
Sumitomo Bank 83,000 1,054
Sumitomo Chemical 45,000 150
Sumitomo Electric 20,000 268
<PAGE>
INTERNATIONAL INDEX FUND (CONTINUED)
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
Sumitomo Forestry 7,000 $ 47
Sumitomo Marine & Fire Insurance 24,000 121
Sumitomo Metal 81,000 165
Sumitomo Metal Mining 20,000 80
Taisei 36,000 83
Taisho Pharmaceutical 9,000 226
Takara Shuzo 5,000 21
Takashimaya 11,000 88
Takeda Chemical 28,000 819
Teijin 26,000 68
Toa 9,000 14
Tobu Railway 33,000 115
Toho 770 85
Tohoku Electric Power 15,600 236
Tokai Bank 58,000 311
Tokio Marine & Fire Insurance 46,000 436
Tokyo Broadcasting System 5,000 76
Tokyo Dome 7,000 52
Tokyo Electric Power 31,900 573
Tokyo Electronics 3,000 115
Tokyo Gas 100,000 239
Tokyu 32,000 137
Toppan Printing 20,000 271
Toray 43,000 196
Tosho 35,000 75
Tostem 7,000 80
Toto 13,000 119
Toyo Seikan Kaisha 6,000 100
Toyobo 31,000 47
Toyoda Auto Loom 6,000 112
Toyota Motor 100,000 2,884
Ube Industries 39,000 70
Uniden Corportation 2,000 20
Yamaguchi Bank 4,000 51
Yamaichi Securities* 70,000 1
Yamanouchi Pharmaceutical 10,000 243
Yamato Transportation 16,000 197
Yamazaki Baking 5,000 58
Yasuda Trust & Banking 28,000 24
Yokogawa Electric 15,000 99
------
40,467
------
MALAYSIA--0.8%
Amsteel 95,000 24
Arab Malaysian Merchant Bank 20,000 17
DCB Holdings 74,000 43
Edaran Otomobil Nasional 11,000 25
Golden Hope Plant 54,000 62
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
13
STATEMENTS OF NET ASSETS
November 30, 1997
INTERNATIONAL INDEX FUND (CONTINUED)
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
Highlands & Lowlands 30,000 $ 33
Hong Leong 80,000 23
Hume Industries 16,000 18
Land and General 85,000 27
Magnum 60,500 39
Malayan Banking 40,000 102
Malaysian Airline System 25,000 18
Malaysian International Shipping 36,000 42
Malaysian Resources 44,000 18
Multi Purpose Holdings 66,000 26
Multi Purpose Iculs 39,000 14
Pan Malaysia Cement 55,000 26
Perusahaan Otomobil 25,000 34
Public Bank 74,333 43
Resorts World Berhad 39,000 56
Rothmans of Pall Mall 8,000 71
Sime Darby 67,000 67
Technology Resources 30,000 24
Telekom Malaysia 76,500 170
Tenaga Nasional Berhad 78,000 145
United Engineers 28,000 26
Ytl 30,500 30
Ytl, Cl A* 250 --
Ytl Warrants* 3,050 1
------
1,224
------
NETHERLANDS--5.2%
ABN-Amro Holding 34,456 657
Ahold 13,017 347
Akzo 2,066 363
Elsevier 20,357 344
Getronics 2,211 76
Heineken 1,383 234
Hoogovens 754 34
Ing Groep 21,219 863
KLM 2,713 98
Koninklijke KNP 3,119 67
Koninklijke Pakhoed Holdings 1,867 51
KPN 12,293 494
Phillips Electronics 8,824 583
Royal Dutch Petroleum 54,524 2,840
Unilever 16,192 942
Wolters Kluwer 1,761 233
------
8,226
------
NEW ZEALAND--0.3%
Brierley Investment 66,325 47
Carter Holt Harvey 49,289 71
Fletcher Challenge Building 3,165 9
<PAGE>
INTERNATIONAL INDEX FUND (CONTINUED)
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
Fletcher Challenge Energy 4,794 $ 20
Fletcher Challenge Forest 19,179 18
Fletcher Challenge Paper 5,163 7
Lion Nathan 13,326 32
Telekom Corporation of New Zealand 56,102 288
------
492
------
NORWAY--0.5%
Bergesen, Cl A 2,400 62
Dyno Industrier 1,200 23
Hafslund ASA, Cl B 1,600 8
Hafslund Nycomed 3,850 23
Kvaerner 1,450 72
Norsk Hydro 6,650 343
Norske Skogindustrier ASA 700 21
Orkla AS, Cl A 1,250 108
Petroleum Geo Service* 1,200 77
Uni-Storebrand, Cl A* 9,124 62
------
799
------
SINGAPORE--0.9%
Neptune Orient 47,000 28
Asia Food & Property* 666 --
Asia Food & Property Warrants* 2,900 --
City Developments 15,000 74
Cycle & Carriage 7,000 30
DBS Land 20,000 34
Development Bank of Singapore 15,000 141
Fraser and Neave 10,000 50
Keppel 50,750 172
Natsteel 16,000 34
Overseas Chinese Banking 20,135 121
Shangri La Hotel 13,200 25
Singapore International Airlines 24,000 157
Singapore Press 7,000 96
Singapore Telecommunications 187,000 361
United Industrial 77,000 36
United Overseas Bank 19,000 113
------
1,472
------
SPAIN--2.5%
Zardoya Otis 404 47
Acerinox 389 61
Argentaria 3,226 200
Autopistas Cesa 8,972 120
Banco Bilbao Vizcaya 17,585 532
Banco Central Hispano 7,850 151
Banco de Santander 12,413 376
Empresa Nacional de Electricidad 26,984 508
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
14
STATEMENTS OF NET ASSETS
November 30, 1997
INTERNATIONAL INDEX FUND (CONTINUED)
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
Financiera Alba 579 $ 63
Fomento de Construction 2,560 102
Gas Natural 3,756 186
Iberdola 19,705 252
Inmobiliaria Metro 1,062 46
Mapfre 1,047 51
Repsol 7,648 331
Tabacalera, Cl A 1,063 81
Telefonica de Espana 23,902 690
Union Electrica Fenosa 6,913 69
Vallehermoso 1,915 56
------
3,922
------
SWEDEN--2.5%
ABB, Cl A 19,850 253
AGA, Cl A 3,958 53
AGA Free, Cl B 3,450 43
Asea, Cl B 5,500 68
Astra, Cl A 32,952 572
Astra, Cl B 7,933 133
Atlas, Cl A 4,120 127
Electrolux, Cl B 1,791 141
Ericsson, Cl B 24,227 989
Hennes & Mauritz 5,185 240
Scancem 1,200 46
Skandia Forrestry 2,566 135
Skandinaviska Enskilda Bank 13,659 161
Skanska Free, Cl B 3,259 134
SKF, Cl B 3,000 70
Stora Kopparberg, Cl A 7,916 105
Svenska Cellulosa, Cl B 5,710 125
Svenska Handlesbanken 5,551 196
Swedish Match 20,354 69
Trelleborg, Cl B 2,000 28
Volvo, Cl A 3,737 98
Volvo Free, Cl B 7,915 211
------
3,997
------
SWITZERLAND--7.2%
Schindler 25 28
Asea Brown Boveri Group 260 346
Adecco 550 162
Alusuisse Lonza 120 110
CS Holdings, Registered 5,974 875
Holderbank Fin Glarus 201 175
Nestle, Registered 1,020 1,503
Novartis 1,591 2,545
Novartis Bearer 164 262
Roche Holdings 178 1,595
<PAGE>
INTERNATIONAL INDEX FUND (CONTINUED)
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
Roche Holdling, Bearer 40 $ 609
Roche Warrants* 209 14
Sairgroup* 70 92
Schindler Holding 25 29
Schweiz Ruckversicherung 382 625
Schweizerischer Bkver 195 2
SMH, Registered 673 87
SMH Bearer 106 58
Societe Generale de Surveillance, Cl B 116 44
Societe Generale de Surveillance, Registered 49 92
Swiss Bank 2,046 588
Union Bank of Switzerland, Bearer 548 698
Union Bank of Switzerland, Registered 695 176
Valora Holdings 280 59
Zurich Insurance 1,200 506
------
11,280
------
UNITED KINGDOM--20.2%
Abbey National 36,083 576
Amersham International* 50 2
Anglian Water 6,437 88
Argos 9,590 100
Associated British Foods 30,765 284
Barclays Bank 37,844 913
Bass 23,385 336
BAT Industries 78,155 702
BBA Group 18,021 114
BICC 9,855 25
Blue Circle Industries 24,518 141
Boc Group 11,781 188
Boots 24,913 367
BPB Industries 17,071 98
Bg PLC 81,815 393
Thorn PLC 9,401 24
British Aerospace 12,447 340
British Airways 26,134 237
British Petroleum 145,382 1,989
British Sky Broadcasting 42,649 317
British Steel 66,108 154
British Telecommunications 160,470 1,239
BTR 104,410 362
Burmah Castrol 6,361 106
Cable & Wireless 57,387 522
Cadbury Schweppes 24,924 259
Caradon 15,830 50
Carlton Communications 13,900 107
Centrica * 100,004 145
Coats Viyella 22,869 39
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
15
STATEMENTS OF NET ASSETS
November 30, 1997
INTERNATIONAL INDEX FUND (CONTINUED)
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
Commercial Union 17,556 $ 242
Cortaulds 13,327 62
De La Rue 6,583 44
Electrocomponents 9,618 68
EMI Group 21,007 158
English China Clay 16,714 72
General Electric 72,094 469
GKN 8,161 177
Glaxo Wellcome 88,266 1,938
Granada Group 22,687 325
Grand Metropolitan 52,092 474
Great Universal Stores 27,164 319
Guardian Royal Exchange 22,490 108
Guinness 48,937 444
Hammerson, Cl A 10,107 79
Hanson 16,883 86
Harrison & Crossfield 28,536 57
HSBC Holdings 21,759 555
Hsbc Holdings Hk$10 44,728 1,090
IMI 11,909 72
Imperial Chemical 19,118 283
Sainsbury J 48,242 397
Johnson Matthey 4,897 45
Kingfisher 18,353 253
Ladbroke 32,996 150
Land Securities 23,205 380
Lasmo 30,742 137
Legal & General Group 29,407 251
Lloyds TSB Group 133,478 1,522
Lonrho 19,560 30
Lucasvarity 37,089 119
Marks & Spencer 72,513 746
MEPC 19,576 177
Mercury Asset Management 4,495 128
National Grid Group 43,884 218
National Power 31,856 304
Next 11,029 138
Pearson 17,897 249
Peninsular & Oriental 15,181 164
Pilkington 29,405 64
Provident 10,461 126
Prudential 50,752 547
Racal Electronics 13,747 51
Rank Group 24,954 146
Redland 15,199 88
Reed International 29,618 315
Reuters Holdings 44,023 497
Rexam 16,437 80
<PAGE>
INTERNATIONAL INDEX FUND (CONTINUED)
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
RMC Group 6,560 $ 99
Rolls Royce 41,604 167
Royal Bank of Scotland Group 23,283 268
RTZ 30,309 366
Safeway 28,310 155
Schroder 6,463 200
Scottish & Newcastle 17,126 203
Scottish Power 35,765 290
Sears 63,876 53
Sedgwick Group 17,952 38
Slough Estates 15,750 92
Smithkline Beecham 138,696 1,289
Smiths Industries 6,467 85
Southern Electric 14,910 113
Sun Alliance Group 38,751 349
T & N 14,489 61
Tate & Lyle 10,382 83
Tesco 55,777 451
Thames Water 9,079 137
TI Group 10,548 85
Unilever PLC 82,736 652
United Biscuits 14,913 54
United Utilities 14,193 182
Vodafone Group 78,284 524
Wiggins Appleton 26,162 75
Williams Holdings 17,360 94
Wolseley 12,805 110
Zeneca Group 23,908 763
------
31,699
------
TOTAL FOREIGN COMMON STOCKS
(Cost $146,061) 150,197
------
FOREIGN PREFERRED STOCKS--0.8%
AUSTRALIA--0.2%
Newscorp 49,655 241
------
GERMANY--0.6%
RWE 10,800 437
SAP 910 280
Volkswagen 350 161
------
878
------
ITALY--0.0%
Fiat 31,900 49
------
TOTAL FOREIGN PREFERRED STOCKS
(Cost $914) 1,168
------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
16
STATEMENTS OF NET ASSETS
November 30, 1997
INTERNATIONAL INDEX FUND (CONCLUDED)
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
RELATED PARTY MONEY MARKET FUND--3.5%
First American Prime Obligations Fund (A) 5,516,351 $5,516
------
TOTAL RELATED PARTY MONEY MARKET FUND
(Cost $5,516) 5,516
------
TOTAL INVESTMENTS--99.8%
(Cost $152,491) 156,881
------
OTHER ASSETS AND LIABILITIES, NET--0.2% 366
------
NET ASSETS:
Portfolio Shares -- Institutional Class
($.0001 par value--2 billion authorized) based
on 14,194,328 outstanding shares 147,613
Portfolio Shares -- Retail Class A
($.0001 par value--2 billion authorized) based
on 116,143 outstanding shares 1,149
Portfolio Shares -- Retail Class B
($.0001 par value--2 billion authorized) based
on 91 outstanding shares 1
Undistributed net investment income 1,019
Accumulated net realized gain on investments and
forward foreign currency contracts 3,083
Net unrealized appreciation on investments 4,390
Net unrealized depreciation of forward foreign
currency contracts, foreign currency and translation
of other assets and liabilities in foreign currency (8)
------
TOTAL NET ASSETS--100.0% $157,247
------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE-- INSTITUTIONAL CLASS $ 10.99
------
NET ASSET VALUE AND REDEMPTION PRICE
PER SHARE-- RETAIL CLASS A $ 10.94
MAXIMUM SALES CHARGE OF 4.50% (1) 0.52
------
OFFERING PRICE PER SHARE-- RETAIL CLASS A $ 11.46
------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE-- RETAIL CLASS B (2) $ 10.99
------
* Non-income producing security
(1) The offer price is calculated by dividing the net asset value by 1 minus the
maximum sales charge of 4.5%
(2) Retail Class B has a contingent deferred sales charge. For a description of
possible redemption charge, see the notes to the financial statements.
(A) This money market fund is advised by U.S. Bank National Association who also
serves as Adviser for this Fund. See the Notes to the Financial Statements
for additional information.
Cl--Class
<PAGE>
SMALL CAP VALUE FUND
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
COMMON STOCKS--93.9%
AIR TRANSPORTATION--0.2%
World Airways* 143,700 $ 1,132
------
APPAREL/TEXTILES--1.1%
Hampshire Group Limited* 53,800 995
Quaker Fabric* 134,300 2,636
Tarrant Apparel Group* 126,900 1,904
------
5,535
------
BANKS--6.7%
Astoria Financial 36,000 1,985
Eagle Financial 69,900 3,617
First Republic Bank* 180,700 4,992
ONBANCorp 106,500 7,162
TR Financial 218,400 7,180
UST 69,530 1,847
Webster Financial 85,300 5,345
------
32,128
------
CHEMICALS--2.3%
Borg Warner Security* 436,600 7,804
Cambrex 34,300 1,556
CPAC* 151,500 1,610
------
10,970
------
COMMUNICATIONS EQUIPMENT--1.1%
California Micro Devices* 58,600 359
Comdial* 225,300 2,366
Nimbus CD International* 254,800 2,516
------
5,241
------
COMPUTERS & SERVICES--7.5%
BancTec* 123,805 3,064
Bell & Howell* 138,400 3,287
Concurrent Computer* 303,700 873
Dataflex* 278,200 1,165
Gatefield* 547,200 872
Government Technology Services* 131,200 689
GSE Systems* 189,900 855
Kentek Information Systems 81,000 628
Kofax Image Products* 50,000 425
National Computer Systems 72,200 2,635
Olicom A/S* 291,700 8,386
Pioneer-Standard Electronics 187,600 3,084
Plaintree Systems* 13,000 37
Pomeroy Computer Resources* 269,825 6,746
Trigen Energy 129,600 2,973
TrueVision* 76,700 259
------
35,978
------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
17
STATEMENTS OF NET ASSETS
November 30, 1997
SMALL CAP VALUE FUND (CONTINUED)
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
CONTAINERS & PACKAGING--0.7%
BWay* 152,700 $ 3,293
------
ELECTRICAL SERVICES--4 3%
El Paso Electric* 248,799 1,679
TNP Enterprises 81,900 2,252
Tucson Electric Power* 968,020 16,819
------
20,750
------
ENVIRONMENTAL SERVICES--0.4%
Heidemij N.V 178,100 1,959
------
FINANCIAL SERVICES--2.3%
Aames Financial 94,400 1,274
Franchise Mortgage Acceptance* 234,900 4,111
Medallion Financial 44,200 950
Pacific Crest Capital* 1,000 16
Rockford Industries* (A) 207,000 1,772
WFS Financial* 227,000 2,696
------
10,819
------
FOOTWEAR--0.3%
K-Swiss, Cl A 75,200 1,231
------
GAS/NATURAL GAS--0.2%
Midcoast Energy Resources 38,000 831
------
GLASS PRODUCTS--1.4%
Excel Industries 147,800 2,873
Libbey 99,800 3,942
------
6,815
------
HAZARDOUS WASTE MANAGEMENT--0.4%
Air & Water Technologies* 1,362,300 1,703
------
HOUSEHOLD FURNITURE & FIXTURES--0.7%
Stanley Furniture* 116,300 3,169
------
HOUSEHOLD PRODUCTS--0.7%
Acorn Products* 24,100 280
Thomas Industries 91,900 2,918
------
3,198
------
HOUSING CONSTRUCTION--0.3%
Centex Construction Products 44,500 1,363
Triad Park LLC* 100,400 127
------
1,490
------
INSURANCE--12.1%
ACMAT, Cl A* 85,800 1,459
American Eagle Group* 139,300 4
Amvestors Financial 81,400 1,786
<PAGE>
SMALL CAP VALUE FUND (CONTINUED)
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
Chandler Insurance* 88,200 $ 452
Conseco 15,000 698
Delphi Financial Group, Cl A* 146,144 5,864
Enhance Financial Services Group 161,100 9,001
Farm Family Holdings* 64,400 1,908
Fremont General 281,309 12,940
John Alden Financial 165,500 4,458
LaSalle Re Holdings 127,000 4,175
Orion Capital 105,824 4,769
Penn Treaty American* 162,250 5,273
Philadelphia Consolidated Holding* 186,200 3,049
SCPIE Holdings 59,700 1,664
Symons International Group* 36,900 687
Westbridge Capital* 105,900 73
------
58,260
------
LEASING & RENTING--0.6%
Leasing Solutions* 47,600 1,139
Willis Lease Finance* 80,700 1,594
------
2,733
------
LEISURE--0.2%
Cross (A.T.), Cl A 95,600 1,034
------
LUMBER & WOOD PRODUCTS--0.7%
Synthetic Industries* 119,800 3,474
------
MACHINERY--9.7%
Bridgeport Machines* 174,600 2,095
Brown & Sharpe Manufacturing, Cl A* 333,300 3,416
Catalytica* 916,133 9,276
Central Sprinkler* 25,200 441
Dayton Superior* 152,600 2,594
Edelbrock* 105,400 1,686
MagneTek* 425,850 8,890
Moog, Cl A* 286,700 10,429
Park-Ohio Industries* 182,300 3,304
Scotsman Industries 46,700 1,188
Unit Instruments* 131,300 1,379
Walbro 117,300 1,708
------
46,406
------
MACHINERY, EXCEPT ELECTRICAL--0.3%
Foster (LB), Cl A* 252,500 1,341
------
MARINE TRANSPORTATION--0.2%
Anangel American Shipholdings, ADR 101,200 1,012
------
MEASURING DEVICES--0.9%
Envirosource* 325,900 917
General Scanning* 138,200 3,628
------
4,545
------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
18
STATEMENTS OF NET ASSETS
November 30, 1997
SMALL CAP FUND VALUE (CONTINUED)
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
MEDICAL PRODUCTS & SERVICES--2.8%
Cholestech* 299,300 3,966
Diagnostic Health Services* 236,800 2,782
Maxxim Medical * 7,388 162
PolyMedica* 288,600 2,670
Spacelabs Medical* 160,900 3,459
Unison HealthCare* 171,100 299
------
13,338
------
MISCELLANEOUS BUSINESS SERVICES--8.0%
American Software, Cl A* 354,500 3,279
Borland International* 458,800 4,645
Cimatron* 136,100 800
Coinmach Laundry* 110,100 2,230
Consilium* 169,600 551
Fourth Shift* 284,000 834
InteliData Technologies* 162,800 356
Kronos* 69,500 2,172
Learmonth & Burchett Management
Systems, ADR* 203,300 864
MacNeal-Schwendler* 196,000 1,997
May & Speh* 176,300 2,380
Mentor Graphics* 31,800 302
Micrografx* 235,600 2,224
Number Nine Visual Technology* 74,700 196
PMT Services* 198,800 3,131
Sapiens International* 245,600 1,857
Suiza Foods* 84,300 4,905
Triple P N.V.* 843,240 2,003
TRO Learning* 211,200 1,320
Wonderware* 128,500 2,345
------
38,391
------
MISCELLANEOUS CONSUMER SERVICES--0.5%
Regis 97,400 2,301
------
MISCELLANEOUS MANUFACTURING--4.0%
AFC Cable Systems* 183,750 4,915
Bonded Motors* 84,200 674
Commercial Metals 53,700 1,769
Matthews International, Cl A 93,500 3,985
Morgan Products* 226,200 1,386
Simpson Manufacturing* 66,400 2,283
Superior TeleCom* 62,700 2,402
Tredegar Industries 30,000 1,976
------
19,390
------
MOTORCYCLES, BICYCLES & PARTS--0.6%
Cannondale* 59,100 1,230
Huffy 105,100 1,583
------
2,813
------
<PAGE>
SMALL CAP FUND VALUE (CONTINUED)
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
OFFICE FURNITURE & FIXTURES--0.4%
Shelby Williams Industries 122,500 $ 1,991
------
PAPER COATED AND LAMINATED--0.2%
FiberMark* 54,750 1,160
------
PETROLEUM & FUEL PRODUCTS--2.7%
Forest Oil* 259,760 4,140
Meridian Resources* 116,424 1,244
Nordic American Tanker Shipping 321,900 5,633
Titan Exploration* 162,500 1,930
------
12,947
------
PETROLEUM REFINING--0.4%
Abacan Resource* 407,900 943
Hugoton Energy* 121,400 1,176
------
2,119
------
PRINTING & PUBLISHING--0.8%
Devon Group* 58,800 2,440
Topps* 628,200 1,610
------
4,050
------
PROFESSIONAL SERVICES--0.6%
Complete Management* 148,900 2,475
Guy F. Atkinson* 135,600 483
------
2,958
------
REAL ESTATE INVESTMENT TRUST--3.7%
Chelsea GCA Realty 69,000 2,622
Highwoods Properties 92,000 3,306
Lexington Corporate Properties 104,600 1,523
OMEGA Healthcare Investors 127,900 4,628
RFS Hotel Investors 61,600 1,170
Shurgard Storage Centers 95,600 2,635
Walden Residential Properties 63,300 1,543
Winston Hotels 33,300 466
------
17,893
------
RETAIL--4.9%
Apple South 255,300 4,691
Bacou USA* 84,800 1,442
Deckers Outdoor* 95,300 792
Drug Emporium* 581,800 2,255
Finish Line, Cl A* 47,100 895
Finlay Enterprises* 212,100 4,560
Friedman's, Cl A* 83,200 1,217
Genovese Drug Stores, Cl A 154,770 2,825
Marks Brothers Jewelers* 56,200 843
Moovies* 145,800 191
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
19
STATEMENTS OF NET ASSETS
November 30, 1997
SMALL CAP VALUE FUND (CONTINUED)
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
Piercing Pagoda* 81,400 $ 2,157
Sound Advice* 141,100 229
Strouds* 238,800 463
Video Update, Cl A* 269,900 709
West Coast Entertainment* 97,700 165
------
23,434
------
SEMI-CONDUCTORS/INSTRUMENTS--3.8%
Applied Magnetics* 599,975 10,125
Continental Circuits* 77,500 1,414
FEI* 130,000 2,145
IEC Electronics* 85,900 1,289
Planar Systems* 178,000 2,114
Praegitzer Industries* 91,300 1,141
------
18,228
------
SINGLE FAMILY HOUSING CONSTRUCTION--0.5%
Continental Homes Holding 76,100 2,478
------
STEEL & STEEL WORKS--1 3%
Kentucky Electric Steel* 105,900 728
Northwest Pipe* 198,300 4,511
Republic Engineered Steels* 558,700 838
------
6,077
------
TESTING LABORATORIES--0.5%
Roberts Pharmaceutical* 224,200 2,326
------
TRUCKING--2.0%
Budget Group, Cl A* 254,600 9,038
Simon Transportation Services* 1,500 35
Supreme Industries* 82,290 735
------
9,808
------
WHOLESALE--0.9%
Performance Food Group* 96,800 2,033
Rykoff-Sexton 97,500 2,188
------
4,221
------
TOTAL COMMON STOCKS
(Cost $313,764) 450,970
------
WARRANTS--0.0%
CONSUMER PRODUCTS--0.0%
Sound Advice* 505 --
------
TOTAL WARRANTS
(Cost $0) --
------
<PAGE>
SMALL CAP VALUE FUND (CONTINUED)
DESCRIPTION PAR (000)/SHARES VALUE (000)
- --------------------------------------------------------------------------------
CONVERTIBLE BONDS--2.1%
Aames Financial, 53.5619 Shares
5.500%, 03/15/06 $ 390 $ 348
Complete Management, 62.5000 Shares
8.000%, 12/15/03 595 656
Complete Management, 71.4286 Shares
8.000%, 08/15/03 1,170 1,430
Drug Emporium, 65.1466 Shares
7.750%, 10/01/14 740 629
Leasing Solutions, 28.6533 Shares
6.875%, 10/01/03 455 446
MacNeal-Schwendler, 66 0066 Shares
7.875%, 08/18/04 1,025 1,033
Maxxim Medical, 55.5555 Shares
6.750%, 03/01/03 249 303
Recognition International, 35.2236 Shares
7.250%, 04/15/11 1,695 1,712
Titan, 285.7143 Shares
8.250%, 11/01/03 1,935 3,616
------
TOTAL CONVERTIBLE BONDS
(Cost $7,641) 10,173
------
RELATED PARTY MONEY MARKET FUNDS--4.9%
First American Government
Obligations Fund (B) 3,350,160 3,350
First American Prime
Obligations Fund (B) 20,000,000 20,000
------
TOTAL RELATED PARTY MONEY MARKET FUNDS
(Cost $23,350) 23,350
------
TOTAL INVESTMENTS--100.9%
(Cost $344,755) 484,493
------
OTHER ASSETS AND LIABILITIES, NET--(0.9%) (4,252)
------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
20
STATEMENTS OF NET ASSETS
November 30, 1997
SMALL CAP VALUE FUND (CONCLUDED)
DESCRIPTION VALUE (000)
- --------------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares -- Institutional Class
($.0001 par value -- 2 billion authorized) based
on 25,279,446 outstanding shares $290,442
Portfolio Shares -- Retail Class A
($.0001 par value -- 2 billion authorized) based
on 1,054,515 outstanding shares 13,945
Portfolio Shares-- Retail Class B
($.0001 par value-- 2 billion authorized) based
on 55 outstanding shares 1
Accumulated net investment loss (150)
Accumulated net realized gain on investments 36,265
Net unrealized appreciation of investments 139,738
------
TOTAL NET ASSETS--100.0% $480,241
------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE-- INSTITUTIONAL CLASS $ 18.23
------
NET ASSET VALUE AND REDEMPTION PRICE
PER SHARE-- RETAIL CLASS A $ 18.20
MAXIMUM SALES CHARGE OF 4.50% (1) 0.86
------
OFFERING PRICE PER SHARE-- RETAIL CLASS A $ 19.06
------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE-- RETAIL CLASS B (2) $ 18.23
------
* Non-income producing security
(1) The offer price is calculated by dividing the net asset value by 1 minus the
maximum sales charge of 4.50%
(2) Retail Class B has a contingent deferred sales charge. For a description of
possible redemption charge, see the notes to the financial statements.
ADR--American Depository Receipt
Cl--Class
(A) Investment represents five percent or more of the outstanding voting
securities of the issuer, and is or was an affiliate, as defined in the
Investment Company Act of 1940 at or during the period ended November 30,
1997. The number of shares held at July 31, 1997 was 204,000. 3,000
additional shares were purchased during the four month period ending
November 30, 1997. No dividends, realized gains or losses were recognized
throughout the period.
(B) These money market funds are advised by U.S. Bank National Association who
also serves as Adviser for this Fund. See the Notes to the Financial
Statements for additional information.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
21
STATEMENTS OF OPERATIONS (000)
<TABLE>
<CAPTION>
TAX FREE INTERNATIONAL
OBLIGATIONS FUND INDEX FUND
..................... ...................
8/1/97 8/1/96 8/1/97 8/1/96
to to to to
11/30/97 7/31/97 11/30/97 7/31/97
-------- ------- -------- -------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 488 $1,387 $ 110 $ --
Dividends -- -- 1,325 3,784
Less: Foreign taxes withheld -- -- (164) (546)
----- ------ -------- -------
TOTAL INVESTMENT INCOME 488 1,387 1,271 3,238
===== ====== ======== =======
EXPENSES:
Investment advisory fees 46 134 408 1,036
Waiver of investment advisory fees (45) (134) (198) (518)
Administrator fees 17 50 87 224
Accounting fees 20 62 62 188
Transfer agent fees 13 48 19 59
Custodian fees 1 12 36 130
Directors' fees 1 2 2 8
Registration fees 7 1 17 39
Professional fees 2 9 3 25
Printing 3 1 4 60
Distribution fees 44 138 1 4
Other -- 2 2 4
----- ------ -------- -------
TOTAL NET EXPENSES 109 325 443 1,259
===== ====== ======== =======
Investment income (loss) -- net 379 1,062 828 1,979
----- ------ -------- -------
REALIZED AND UNREALIZED GAINS (LOSSES)
ON INVESTMENTS AND
FOREIGN CURRENCY TRANSACTIONS -- NET:
Net realized gain (loss) on investments -- (1) 3,662 (315)
Net realized loss on forward foreign currency contracts
and foreign currency transactions -- -- (142) (97)
Net change in unrealized appreciation (depreciation) of
investments -- -- (28,010) 28,681
Net change in unrealized appreciation (depreciation) on
forward foreign currency contracts, foreign currency and
translation of other assets and liabilities in foreign
currency -- -- 5 (5)
----- ------ -------- -------
NET GAIN (LOSS) ON INVESTMENTS -- (1) (24,485) 28,264
===== ====== ======== =======
NET INCREASE (DECREASE) NET ASSETS RESULTING FROM
OPERATIONS $ 379 $1,061 $(23,657) $30,243
===== ====== ======== =======
</TABLE>
<PAGE>
WIDE TABLE CONTINUED FROM ABOVE
SMALL CAP
VALUE FUND
......................
8/1/97 8/1/96
to to
11/30/97 7/31/97
------- --------
INVESTMENT INCOME:
Interest $ 456 $ 1,698
Dividends 1,169 3,342
Less: Foreign taxes withheld -- (13)
------- --------
TOTAL INVESTMENT INCOME 1,625 5,027
======= ========
EXPENSES:
Investment advisory fees 1,289 3,063
Waiver of investment advisory fees (1) --
Administrator fees 209 498
Accounting fees 47 130
Transfer agent fees 49 109
Custodian fees 49 115
Directors' fees 5 17
Registration fees 38 42
Professional fees 1 61
Printing 30 26
Distribution fees 23 52
Other -- 8
------- --------
TOTAL NET EXPENSES 1,739 4,121
======= ========
Investment income (loss) -- net (114) 906
------- --------
REALIZED AND UNREALIZED GAINS (LOSSES)
ON INVESTMENTS AND
FOREIGN CURRENCY TRANSACTIONS -- NET:
Net realized gain (loss) on investments 2,299 40,605
Net realized loss on forward foreign currency contracts
and foreign currency transactions -- --
Net change in unrealized appreciation (depreciation) of
investments 8,373 94,682
Net change in unrealized appreciation (depreciation) on
forward foreign currency contracts, foreign currency and
translation of other assets and liabilities in foreign
currency -- --
------- --------
NET GAIN (LOSS) ON INVESTMENTS 10,672 135,287
======= ========
NET INCREASE (DECREASE) NET ASSETS RESULTING FROM
OPERATIONS $10,558 $136,193
======= ========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
22
STATEMENTS OF CHANGES IN NET ASSETS (000)
<TABLE>
<CAPTION>
TAX FREE INTERNATIONAL
OBLIGATIONS FUND INDEX FUND
................................ ......................
8/1/97 8/1/96 8/1/95 8/1/97 8/1/96
to to to to to
11/30/97 7/31/97 7/31/96 11/30/97 7/31/97
-------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Investment income (loss) -- net $ 379 $ 1,062 $ 1,042 $ 828 $ 1,979
Net realized gain (loss) on investments -- (1) 1 3,662 (315)
Net realized loss on forward foreign currency contracts and
foreign currency transactions -- -- -- (142) (97)
Net change in unrealized appreciation (depreciation) of
investments -- -- -- (28,010) 28,681
Net change unrealized appreciation (depreciation) on
forward foreign currency contracts, foreign currency and
translation of other assets and liabilities in foreign
currency -- -- -- 5 (5)
-------- -------- -------- --------- ---------
Net increase (decrease) in net assets resulting from
operations 379 1,061 1,043 (23,657) 30,243
-------- -------- -------- --------- ---------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment Income -- net:
Institutional Class (94) (186) (74) (512) (1,705)
Retail Class A (287) (876) (968) (3) (14)
Retail Class B -- -- -- -- --
Corporate Trust class -- -- -- -- --
Net realized gain on investments:
Institutional Class -- -- -- -- (310)
Retail Class A -- -- -- -- (4)
Retail Class B -- -- -- -- --
Corporate Trust class -- -- -- -- --
Distributions in excess of realized capital gains:
Institutional Class -- -- -- -- (120)
Retail Class A -- -- -- -- (2)
Retail Class B -- -- -- -- --
Corporate Trust Class -- -- -- -- --
-------- -------- -------- --------- ---------
TOTAL DISTRIBUTIONS (381) (1,062) (1,042) (515) (2,155)
======== ======== ======== ========= =========
CAPITAL SHARE TRANSACTIONS(1):
Institutional Class:
Proceeds from sales 13,113 40,937 30,632 34,854 80,334
Reinvestment of distributions 62 112 62 333 1,523
Payments for redemptions (11,608) (35,807) (28,062) (65,749) (41,656)
-------- -------- -------- --------- ---------
Increase (decrease) in net assets from Institutional class
transactions 1,567 5,242 2,632 (30,562) 40,201
-------- -------- -------- --------- ---------
Retail Class A:
Proceeds from sales 13,623 53,776 64,493 49 400
Reinvestment of distributions 295 854 991 3 19
Payments for redemptions (16,923) (53,104) (68,911) (215) (1,047)
-------- -------- -------- --------- ---------
Increase (decrease) in net assets from Retail class A
transactions (3,005) 1,526 (3,427) (163) (628)
-------- -------- -------- --------- ---------
Retail Class B:
Proceeds from sales 1 -- -- 1 --
Reinvestment of distributions -- -- -- -- --
Payments for redemptions -- -- -- -- --
-------- -------- -------- --------- ---------
Increase in net assets from Retail class B transactions 1 -- -- 1 --
-------- -------- -------- --------- ---------
Increase (decrease) in net assets from capital share
transactions (1,437) 6,768 (795) (30,724) 39,573
-------- -------- -------- --------- ---------
Total increase (decrease) in net assets (1,439) 6,767 (794) (54,896) 67,661
NET ASSETS AT BEGINNING OF PERIOD 40,805 34,038 34,832 212,143 144,482
======== ======== ======== ========= =========
NET ASSETS AT END OF PERIOD $ 39,366 $ 40,805 $ 34,038 $ 157,247 $ 212,143
======== ======== ======== ========= =========
(1)CAPITAL SHARE TRANSACTIONS:
Institutional class:
Shares issued 13,113 40,937 30,632 3,022 7,211
Shares issued in lieu of cash distributions 62 112 62 28 137
Shares redeemed (11,608) (35,807) (28,062) (5,882) (3,656)
-------- -------- -------- --------- ---------
TOTAL INSTITUTIONAL CLASS TRANSACTIONS 1,567 5,242 2,632 (2,832) 3,692
======== ======== ======== ========= =========
Retail Class A:
Shares issued 13,624 53,776 64,493 4 36
Shares issued in lieu of cash distributions 295 854 991 -- 2
Shares redeemed (16,922) (53,104) (68,911) (18) (96)
-------- -------- -------- --------- ---------
TOTAL RETAIL CLASS A TRANSACTIONS (3,003) 1,526 (3,427) (14) (58)
======== ======== ======== ========= =========
Retail Class B:
Shares issued 1 -- -- -- --
Shares issued in lieu of cash distributions -- -- -- -- --
Shares redeemed -- -- -- -- --
-------- -------- -------- --------- ---------
TOTAL RETAIL CLASS B TRANSACTIONS 1 -- -- -- --
======== ======== ======== ========= =========
NET INCREASE (DECREASE) IN CAPITAL SHARES (1,435) 6,768 (795) (2,846) 3,634
======== ======== ======== ========= =========
<PAGE>
[WIDE TABLE CONTINUED FROM ABOVE]
INTERNATIONAL SMALL CAP
INDEX FUND VALUE FUND
......... ...................................
8/1/95 8/1/97 8/1/96 8/1/95
to to to to
7/31/96 11/30/97 7/31/97 7/31/96
--------- --------- ---------- ---------
<S> <C> <C> <C> <C>
OPERATIONS:
Investment income (loss) -- net $ 1,277 $ (114) $ 906 $ 1,063
Net realized gain (loss) on investments 315 2,299 40,605 34,452
Net realized loss on forward foreign currency contracts and
foreign currency transactions (231) -- -- --
Net change in unrealized appreciation (depreciation) of
investments 1,149 8,373 94,682 (2,468)
Net change unrealized appreciation (depreciation) on
forward foreign currency contracts, foreign currency and
translation of other assets and liabilities in foreign
currency 3 -- -- --
--------- --------- --------- ---------
Net increase (decrease) in net assets resulting from
operations 2,513 10,558 136,193 33,047
--------- --------- --------- ---------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment Income -- net:
Institutional Class (542) (93) (1,010) (1,050)
Retail Class A (9) -- (13) (13)
Retail Class B -- -- -- --
Corporate Trust class -- -- -- --
Net realized gain on investments:
Institutional Class (2) -- (33,661) (28)
Retail Class A -- -- (1,347) --
Retail Class B -- -- -- --
Corporate Trust class -- -- -- --
Distributions in excess of realized capital gains:
Institutional Class -- -- -- (17,879)
Retail Class A -- -- -- (320)
Retail Class B -- -- -- --
Corporate Trust Class -- -- -- --
--------- --------- --------- ---------
TOTAL DISTRIBUTIONS (553) (93) (36,031) (19,290)
========= ========= ========= =========
CAPITAL SHARE TRANSACTIONS(1):
Institutional Class:
Proceeds from sales 90,542 117,751 173,955 117,311
Reinvestment of distributions 461 82 32,450 18,872
Payments for redemptions (10,495) (116,562) (150,179) (61,656)
--------- --------- --------- ---------
Increase (decrease) in net assets from Institutional class
transactions 80,508 1,271 56,226 74,527
--------- --------- --------- ---------
Retail Class A:
Proceeds from sales 2,834 18,971 52,025 9,667
Reinvestment of distributions 7 -- 1,289 331
Payments for redemptions (920) (22,884) (45,325) (1,437)
--------- --------- --------- ---------
Increase (decrease) in net assets from Retail class A
transactions 1,921 (3,913) 7,989 8,561
--------- --------- --------- ---------
Retail Class B:
Proceeds from sales -- 1 -- --
Reinvestment of distributions -- -- -- --
Payments for redemptions -- -- -- --
--------- --------- --------- ---------
Increase in net assets from Retail class B transactions -- 1 -- --
--------- --------- --------- ---------
Increase (decrease) in net assets from capital share
transactions 82,429 (2,641) 64,215 83,088
--------- --------- --------- ---------
Total increase (decrease) in net assets 84,389 7,824 164,377 96,845
NET ASSETS AT BEGINNING OF PERIOD 60,093 472,417 308,040 211,195
========= ========= ========= =========
NET ASSETS AT END OF PERIOD $ 144,482 $ 480,241 $ 472,417 $ 308,040
========= ========= ========= =========
(1)CAPITAL SHARE TRANSACTIONS:
Institutional class:
Shares issued 8,542 6,328 11,349 8,469
Shares issued in lieu of cash distributions 44 4 2,252 1,469
Shares redeemed (984) (6,230) (9,756) (4,421)
--------- --------- --------- ---------
TOTAL INSTITUTIONAL CLASS TRANSACTIONS 7,602 102 3,845 5,517
========= ========= ========= =========
Retail Class A:
Shares issued 275 1,021 3,332 696
Shares issued in lieu of cash distributions -- -- 90 26
Shares redeemed (89) (1,225) (2,899) (105)
--------- --------- --------- ---------
TOTAL RETAIL CLASS A TRANSACTIONS 186 (204) 523 617
========= ========= ========= =========
Retail Class B:
Shares issued -- -- -- --
Shares issued in lieu of cash distributions -- -- -- --
Shares redeemed -- -- -- --
--------- --------- --------- ---------
TOTAL RETAIL CLASS B TRANSACTIONS -- -- -- --
========= ========= ========= =========
NET INCREASE (DECREASE) IN CAPITAL SHARES 7,788 (102) 4,368 6,134
========= ========= ========= =========
</TABLE>
Includes undistributed net investment income (000) of $2, $4, and $0 for Tax
Free Obligations, $1,019, $706 and $543 for International Index Fund and
accumulated net investment loss of $(150) and undistributed net investment
income of $57 and $175 for Small Cap Value Fund for November 30, 1997, July 31,
1997, and July 31, 1996, respectively.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
23
FINANCIAL HIGHLIGHTS
For the periods ended November 30, 1997 and
For a share outstanding throughout the period
<TABLE>
<CAPTION>
REALIZED AND
NET ASSET UNREALIZED DIVIDENDS DISTRIBUTIONS
VALUE NET GAINS OR FROM NET DISTRIBUTIONS IN EXCESS
BEGINNING INVESTMENT (LOSSES) ON INVESTMENT FROM OF REALIZED
OF PERIOD INCOME INVESTMENT INCOME CAPITAL GAINS GAINS
...................................................................................
<S> <C> <C> <C> <C> <C> <C>
TAX FREE OBLIGATIONS FUND(A)
INSTITUTIONAL CLASS
1997(1) $ 1.00 $ 0.011 $ -- $ (0.011) $ -- $ --
1997(2) 1.00 0.031 -- (0.031) -- --
1996(2) 1.00 0.032 -- (0.032) -- --
1995(2)(3) 1.00 0.019 -- (0.019) -- --
RETAIL CLASS A
1997(1) $ 1.00 $ 0.010 $ -- $ (0.010) $ -- $ --
1997(2) 1.00 0.027 -- (0.027) -- --
1996(2) 1.00 0.028 -- (0.028) -- --
1995(2)(3) 1.00 0.017 -- (0.017) -- --
CORPORATE TRUST CLASS
1997(4) $ 1.00 $ 0.00 $ -- $ (0.000) $ -- $ --
INTERNATIONAL INDEX FUND(B)
INSTITUTIONAL CLASS
1997(1) $ 12.37 $ 0.06 $ (1.41) $ (0.03) $ -- $ --
1997(2) 10.69 0.13 1.70 (0.12) (0.02) (0.01)
1996(2) 10.48 0.09 0.18 (0.06) -- --
1995(2)(5) 10.00 0.01 0.47 -- -- --
RETAIL CLASS A
1997(1) $ 12.32 $ 0.05 $ (1.41) $ (0.02) $ -- $ --
1997(2) 10.64 0.10 1.70 (0.09) (0.02) (0.01)
1996(2) 10.45 0.07 0.17 (0.05) -- --
1995(2)(5) 10.00 -- 0.45 -- -- --
RETAIL CLASS B
1997(6) $ 11.08 $ 0.00 $ (0.09) $ -- $ -- $ --
SMALL CAP VALUE FUND(B)
INSTITUTIONAL CLASS
1997(1) $ 17.87 $ (0.01) $ 0.37 $ -- $ -- $ --
1997(2) 13.96 0.04 5.43 (0.04) (1.52) --
1996(2) 13.26 0.06 1.81 (0.06) (1.11) --
1995(2)(7) 10.00 0.13 3.30 (0.12) (0.05) --
RETAIL CLASS A
1997(1) $ 17.86 $ (0.03) $ 0.37 $ -- $ -- $ --
1997(2) 13.95 0.01 5.43 (0.01) (1.52) --
1996(2) 13.23 0.04 1.83 (0.04) (1.11) --
1995(2)(7) 10.00 0.09 3.29 (0.10) (0.05) --
RETAIL CLASS B
1997(6) $ 18.36 $ (0.00) $ (0.13) $ -- $ -- $ --
<PAGE>
WIDE TABLE CONTINUED FROM ABOVE
RATIO OF
RATIO OF NET EXPENSES TO
NET ASSET RATIO OF INVESTMENT AVERAGE
VALUE NET ASSETS EXPENSES TO INCOME TO NET ASSETS PORTFOLIO AVERAGE
END OF TOTAL END OF AVERAGE AVERAGE (EXCLUDING TURNOVER COMMISSION
PERIOD RETURN(C) PERIOD (000) NET ASSETS NET ASSETS WAIVERS) RATE RATE(D)
...........................................................................................................
<S> <C> <C> <C> <C> <C> <C> <C> <C>
TAX FREE OBLIGATIONS FUND(A)
INSTITUTIONAL CLASS
1997(1) $ 1.00 1.08%+ $ 10,703 0.64% 3.09% 0.97% N/A N/A
1997(2) 1.00 3.17 9,137 0.48 3.13 0.83 N/A N/A
1996(2) 1.00 3.22 3,895 0.41 2.92 0.79 N/A N/A
1995(2)(3) 1.00 1.88 + 1,264 0.59 3.38 0.94 N/A N/A
RETAIL CLASS A
1997(1) $ 1.00 0.96%+ $ 28,662 0.89% 2.83% 1.23% N/A N/A
1997(2) 1.00 2.76 31,668 0.88 2.73 1.23 N/A N/A
1996(2) 1.00 2.81 30,143 0.89 2.78 1.25 N/A N/A
1995(2)(3) 1.00 1.66 + 33,569 1.00 2.98 1.36 N/A N/A
CORPORATE TRUST CLASS
1997(4) $ 1.00 0.04%+ $ 1 0.60% 3.20% 9.07% N/A N/A
INTERNATIONAL INDEX FUND(B)
INSTITUTIONAL CLASS
1997(1) $ 10.99 (10.93)%+ $155,976 0.66% 1.23% 0.95% 0% $0.0207
1997(2) 12.37 17.24 210,538 0.73 1.15 1.03 3 0.0241
1996(2) 10.69 2.56 142,478 0.81 1.18 1.10 6 0.0221
1995(2)(5) 10.48 4.80 + 60,073 1.18 1.32 1.39 0 N/A
RETAIL CLASS A
1997(1) $ 10.94 (11.03)%+ $ 1,270 0.92% 0.98% 1.21% 0% $0.0207
1997(2) 12.32 17.03 1,605 0.98 0.90 1.28 3 0.0241
1996(2) 10.64 2.29 2,005 1.06 0.84 1.35 6 0.0221
1995(2)(5) 10.45 4.50 + 20 1.40 0.23 1.54 0 N/A
RETAIL CLASS B
1997(6) $ 10.99 ( 0.36)%+ $ 1 1.29% 0.00% 1.29% 0% $0.0207
SMALL CAP VALUE FUND(B)
INSTITUTIONAL CLASS
1997(1) $ 18.23 2.01%+ $461,046 1.06% (0.06)% 1.06% 3% $0.0638
1997(2) 17.87 41.96 449,988 1.06 0.25 1.06 29 0.0519
1996(2) 13.96 14.94 297,793 1.08 0.41 1.08 34 0.0398
1995(2)(7) 13.26 34.76 + 209,626 0.60 1.20 1.17 37 N/A
RETAIL CLASS A
1997(1) $ 18.20 1.90%+ $ 19,194 1.37% (0.38)% 1.37% 3% $0.0638
1997(2) 17.86 41.71 22,429 1.31 0.01 1.31 29 0.0519
1996(2) 13.95 14.93 10,247 1.33 0.14 1.33 34 0.0398
1995(2)(7) 13.23 34.29 + 1,569 1.11 0.63 1.38 37 N/A
RETAIL CLASS B
1997(6) $ 18.23 ( 0.70)%+ $ 1 1.90% (1.53)% 1.90% 3% $0.0638
</TABLE>
+ Returns are for the periods 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 C shares of Tax Free Obligations Fund.
(B) The financial highlights for International Index Fund and Small Cap Value
Fund as set forth herein include the historical financial highlights of the
Qualivest International Opportunities Fund and Qualivest Small Companies
Fund Class A and Y shares. The assets of International Opportunities Fund
and Small Companies Fund were acquired by International Index Fund and Small
Cap Value Fund on November 21, 1997. In connection with such acquisition,
(i) Class A and Class C shares of the Qualivest International Opportunities
Fund and Qualivest Small Companies Fund were exchanged for Class A shares of
International Index Fund and Small Cap Value Fund; and (ii) Qualivest Class
Y shares were exchanged for Class C shares of International Index Fund and
Small Cap Value Fund.
(C) Excluding sales charges.
(D) Beginning in 1996, average commission rate paid per share is disclosed for
all applicable security purchases and sales subject to commissions. The
comparability of this information may be affected by the fact that
commission rates per share vary significantly among foreign countries.
(1) 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.
(2) For the period ended July 31.
(3) Commenced operations January 9, 1995. All ratios for the period have been
annualized.
(4) Commenced operations November 26, 1997. All ratios for the period have been
annualized.
(5) Commenced operations July 3, 1995. All ratios for the period have been
annualized.
(6) Commenced operations November 24, 1997. All ratios for the period have been
annualized.
(7) Commenced operations August 1, 1994. All ratios for the period have been
annualized.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
24
NOTES TO FINANCIAL STATEMENTS
November 30, 1997
1 ORGANIZATION
The Tax Free Obligations Fund (formerly the Qualivest Tax Free Money Market
Fund) is a fund offered by First American Funds, Inc. (FAF). The International
Index Fund (formerly the Qualivest International Opportunities Fund) and Small
Cap Value Fund (formerly the Qualivest Small Companies Value Fund) are funds
offered by First American Investment Funds, Inc. (FAIF). FAF and FAIF
(collectively the "Funds") are registered under the Investment Company Act of
1940, as amended, as open end, management investment companies. The Funds'
articles of incorporation permit the Board of Directors to create additional
funds in the future. The creation of these funds is the result of the
reorganization of the Qualivest Funds into First American Family of Funds.
FAF offers Class A, Class B (Class B shares are not offered by the Tax Free
Obligations Fund), Class C and Class D shares. Class C and D shares are offered
only to qualifying institutional investors.
FAIF offers Class A, Class B and Class C shares. Class A shares are sold with a
front-end sales charge. Class B shares may be subject to a contingent deferred
sales charge for six years and automatically convert to Class A shares after
eight years. Class C shares have no sales charge and are offered only to
qualifying institutional investors.
Each Fund's prospectuses provide a description of each Fund's investment
objectives, policies and strategies. All classes of shares in FAF and FAIF 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 by FAF 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.
Security valuations for FAIF investments are furnished by an independent pricing
service that has been approved by the Board of Directors. Investments in equity
securities which are traded on a national securities exchange (or reported on
the NASDAQ national market system) are stated at the last quoted sales price if
readily available for such securities on each business day. Other equity
securities traded in the over-the-counter market and listed equity securities
for which no sale was reported on that date are stated at the last quoted bid
price. Debt obligations exceeding sixty days to maturity are valued by an
independent pricing service. The pricing service may employ methodologies that
utilize actual market transactions, broker-dealer supplied valuations, or other
electronic data processing techniques. These techniques generally consider such
factors as yields or prices of bonds of comparable quality, type of issue,
coupon, maturity, ratings and general market conditions. When market quotations
are not readily available, securities are valued at fair value as determined in
good faith by procedures established and approved by the Board of Directors.
Debt obligations with sixty days or less remaining until maturity may be valued
at their amortized cost. Foreign securities are valued at the closing prices on
the principal exchange on which they trade. The prices for foreign securities
are reported in local currency and converted to U.S. dollars using currency
exchange rates. Exchange rates are provided daily by recognized independent
pricing agents.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Each Fund records security
transactions on the trade date of the security purchase or sale. Dividend income
is recorded on the ex-dividend date. Interest income, including amortization of
bond premium and discount is recorded on the accrual basis. Security gains and
losses are determined on the basis of identified cost, which is the same basis
used for Federal income tax purposes.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income for
FAF Tax Free Obligations Fund are declared on a daily basis and are payable on
the first business day of the following month.
International Index Fund and Small Cap Value Fund declare and pay dividends from
income quarterly, if any.
Any net realized capital gains on sales of securities for a fund are distributed
to shareholders at least annually.
<PAGE>
25
NOTES TO FINANCIAL STATEMENTS
November 30, 1997
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. The differences are primarily due to wash sales, foreign currency gains
and losses, the "marked-to-market" of certain Passive Foreign Investment
Companies (PFICs) for tax purposes, the character of distributions made during
the year from net investment income or net realized gains, and the timing of
distributions where the fiscal year in which the amounts are distributed may
differ from the year that the income or realized gains (losses) were recorded by
the fund. To the extent these differences are permanent, adjustments are made to
the appropriate equity accounts in the period that the difference arises.
SECURITIES PURCHASED ON A WHEN-ISSUED BASIS -- Delivery and payment for
securities which have been purchased by a Fund on a forward commitment or
when-issued basis can take place up to a month or more after the transaction
date. During this period, such securities are subject to market fluctuations and
the portfolio maintains, in a segregated account with its custodian, assets with
a market value equal to or greater than the amount of its purchase commitments.
FOREIGN CURRENCY TRANSLATION -- The books and records of FAIF's International
Index Fund are maintained in U.S. dollars on the following bases:
(I) market value of investment securities, assets and liabilities at
the current rate of exchange; and
(II) purchases and sales of investment securities, income and expenses
at the relevant rates of exchange prevailing on the respective
dates of such transactions.
The International Index Fund does not isolate the portion of gains and losses on
investments in equity securities that is due to changes in the foreign exchange
rates from that which is due to change in market prices of equity securities.
The International Index Fund reports certain foreign currency related
transactions as components of realized gains for financial reporting purposes,
whereas such components are treated as ordinary income for Federal income tax
purposes.
FORWARD FOREIGN CURRENCY CONTRACTS -- The International Index Fund enters into
forward foreign currency contracts as hedges against either specific
transactions or fund positions. The aggregate principal amount of the contracts
are not recorded as the International Index Fund intends to settle the contracts
prior to delivery. All commitments are "marked-to-market" daily at the
applicable foreign exchange rate and any resulting unrealized gains or losses
are recorded currently. The International Index Fund realizes gains or losses at
the time the forward contracts are extinguished. Unrealized gains or losses on
outstanding positions in forward foreign currency contracts held at the close of
the year are recognized as ordinary income or loss for Federal income tax
purposes. There were no forward foreign currency contracts outstanding at
November 30, 1997.
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 distribution 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.
RECLASSIFICATIONS -- Certain prior year amounts have been reclassified to
conform to the current year presentation.
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>
26
NOTES TO FINANCIAL STATEMENTS
November 30, 1997
3 FEES AND EXPENSES
On August 1, 1997, U.S. Bancorp, the parent company of Qualivest, merged with
First Bank System, Inc., which then changed its name to U.S. Bancorp. From
August 1, 1997 to November 21, 1997 and November 25, 1997, with respect to Tax
Free Obligations Fund, the funds operated under an interim investment advisory
agreement, which was approved by each Fund's Board of Directors, whereby the
Adviser, U.S. Bank National Association, received fees based on the following
contractual rates: Tax Free Obligations Fund 0.35%, International Index Fund
0.60%, and Small Cap Value Fund 0.80%.
Effective November 21, 1997 and November 25, 1997, with respect to Tax Free
Obligations Fund, the date of the reorganization of the Qualivest Funds into the
First American Family of Funds, the investment advisory agreement of the First
American Funds went into effect.
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 Tax Free Obligations Fund is equal to an annual rate of .40% of the
average daily net assets. The fee for International Index Fund and Small Cap
Value Fund is equal to an annual rate of .70% of the average daily net assets.
FAIF Funds may invest in FAF Funds, subject to certain limitations. The terms of
such transactions are identical to those of non-related entities except that, to
avoid duplicative investment advisory fees, the Adviser reimburses to each FAIF
Fund an amount equal to the investment advisory fee earned by FAF related to
such investments.
Through a separate contractual agreement, First Trust National Association, an
affiliate of the Adviser, serves as each Fund's custodian.
From August 1, 1997 to November 21, 1997 and November 25, 1997 for FAF's Tax
Free Obligations Fund, BISYS Fund Services Limited Partnership d/b/a BISYS Fund
Services (BISYS), served the Funds as Administrator. Under terms of the
administration agreement, BISYS received a fee at an annual rate of 0.13% of
each fund's daily net assets.
BISYS also served as the funds distributor.
The Qualivest Funds formerly had adopted a Class A Distribution and Shareholder
Service Plan (the "Class A Plan"), a Class Q Distribution and Shareholder
Service Plan (the "Class Q Plan") and a Class C Distribution and Shareholder
Service Plan (the "Class C Plan"), pursuant to Rule 12b-1 under the 1940 Act.
BISYS entered into agreements with banks and their affiliates, and other
institutions, including broker-dealers (each a "Participating Organization") for
providing shareholder services with respect to the Class Y shares. Under the
Class A Plan, the Funds paid or reimbursed BISYS, as distributor, a fee not to
exceed 0.40% of the average daily net assets of Class A shares of the Tax Free
Obligations Fund and not to exceed 0.25% of the average daily net assets of
Class A shares of the International Index Fund and Small Cap Value Fund. Under
the Class Q Plan, the Tax Free Obligations Fund paid or reimbursed BISYS, as
distributor, a fee not to exceed 0.25% of the average daily net assets of Class
Q shares of a Fund. Under the Class C Plan, the International Index Fund and
Small Cap Value Fund paid or reimbursed BISYS, as distributor, (a) a
distribution fee in an amount not to exceed on an annual basis 0.75% of the
average daily net assets of Class C shares of a Fund, and (b) a service fee in
an amount not to exceed on an annual basis 0.25% of the average daily net assets
of the Class C shares of a Fund. These fees were used by BISYS to pay banks,
including affiliates of the investment adviser, broker-dealers and other
institutions, or to reimburse BISYS or its affiliates for administration,
distribution and shareholder service assistance in connection with the
distribution of Fund shares. Under a shareholder service plan for Class Y
Shares, a Participating Organization may have been compensated at the annual
rate of up to 0.25% of the average daily net assets of the Class Y shares held
of record or beneficially by customers the Participating Organization who were
record or beneficial owners of Class Y Shares. As of November 21, 1997, there
were no Class Y shareholder service fees charged to the Funds. Effective the
close of business on November 21, 1997, SEI Investments Management Corporation
(SIMC) and
<PAGE>
27
NOTES TO FINANCIAL STATEMENTS
November 30, 1997
SEI Investments Distribution Co (SIDCO) took over as administrator and
distributor, respectively.
Under the distribution plan, each of the funds pays 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, and .12% of each FAIF 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 of each FAF Fund is reduced to .055% and each
FAIF Fund is reduced to .105%.
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 four month period ended November 30, 1997, legal fees and expenses were
paid to a law firm of which the Secretary of the Funds is a partner.
Effective November 10, 1997 DST Systems, Inc. provides transfer agency services
for the Funds. Prior to this date BISYS Fund Services Ohio served as the Funds'
transfer agent.
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%
For the four month period ended November 30, 1997, sales charges retained by
BISYS and SIDCO for distributing the Funds' shares were approximately $1,000.
4 INVESTMENT SECURITY TRANSACTIONS
During the four month period ended November 30, 1997, purchases of securities
and proceeds from sales of securities, other than temporary investments in
short-term securities, were as follows (000):
INVESTMENT
SECURITIES
.....................
PURCHASES SALES
----------- ----------
International Index Fund $ 335 $34,441
Small Cap Value Fund 19,620 15,288
At November 30, 1997 the total cost of securities for Federal income tax
purposes, was not materially different from amounts reported for financial
reporting purposes. The aggregate gross unrealized appreciation and depreciation
for securities held by the funds at November 30, 1997 is as follows (000):
AGGREGATE AGGREGATE
GROSS GROSS
APPRECIATION DEPRECIATION NET
.............. .............. .............
International Index
Fund $28,975 $(24,585) $ 4,390
Small Cap Value Fund 171,567 (31,829) 139,738
<PAGE>
28
NOTES TO FINANCIAL STATEMENTS
November 30, 1997
5 CONCENTRATION OF CREDIT RISK
The Tax Free Obligations Fund invests in debt instruments of municipal issuers.
Although the Fund monitors investment concentration, the issuers' ability to
meet their obligations may be affected by economic developments in a specific
state or region.
The Tax Free Obligations Fund invests in securities which include revenue bonds,
tax and revenue anticipation notes, and general obligation bonds. At November
30, 1997, the percentage of portfolio investments by each revenue source was as
follows (unaudited):
TAX FREE
OBLIGATIONS
FUND
.............
Revenue Bonds:
Education 9%
Health Care Bonds 15
Utility Bonds 22
Pollution Control Bonds 4
Public Facility Bonds 10
Other 13
General Obligations: 27
--
100%
===
6 FUND MERGERS
On November 21, 1997 The FAIF International Index Fund and the Small Cap Value
Fund acquired all of the net assets of the Qualivest International Opportunities
Fund and Small Companies Value Fund, respectively. The acquisition was pursuant
to an Agreement and Plan of Reorganization approved by the Qualivest
shareholders on October 31, 1997 which was adjourned until November 14, 1997
with respect to the Tax Free Obligations Fund. The acquisition of International
Opportunities Fund was accompanied by a tax free exchange of 113,210 Class A
Qualivest shares and 2,004 Class C Qualivest shares for 115,207 shares of FAIF
Class A, and 17,374,020 Class Y Qualivest shares for 17,374,020 shares of FAIF
Class C. The acquisition of Small Companies Value Fund was accompanied by a tax
free exchange of 988,854 Class A Qualivest shares and 127,192 Class C Qualivest
shares for 1,112,957 shares of FAIF Class A shares and 24,440,778 Class Y
Qualivest shares for 24,440,778 shares of FAIF Class C.
On November 25, 1997 the FAF Tax Free Obligations Fund acquired all the net
assets of the Qualivest Tax-Free Money Market Fund. The acquisition was pursuant
to an Agreement and Plan of Reorganization approved by the Qualivest
shareholders and Board of Directors on October 31, 1997. The acquisition of Tax
Free Money Market Fund was accompanied by a tax free exchange of 28,744,382
Class A Qualivest shares for 28,744,382 shares of FAF Class A, 3,776,956 Class Y
Qualivest shares and 5,662,256 Class Q Qualivest shares for 9,439,212 shares of
FAF Class C.
For the purpose of presenting historical information for periods prior to the
reorganization described above, Qualivest Class Y and Q shares are combined with
Class C shares and Qualivest Class A shares are combined with Class A shares for
the Tax Free Obligations Fund; and Qualivest Class Y shares are combined with
Class C shares and Qualivest Class A and C shares are combined with Class A
shares for the International Index Fund and Small Cap Value Fund.
<PAGE>
29
NOTICE TO SHAREHOLDERS
November 30, 1997
SHAREHOLDERS VOTING RESULTS
A special meeting of shareholders was called for October 31, 1997 and adjourned
until November 14, 1997 with respect to the Qualivest Tax Free Money Market
Fund, at which the shareholders of the following Qualivest Funds voted on a
proposal to approve an agreement and plan for reorganization. The plan provided
for the acquisition of all the assets and the assumption of all liabilities of
the Qualivest Fund to a corresponding FAF or FAIF fund. The results of the
voting were as follows:
TAX FREE INTERNATIONAL SMALL COMPANIES
MONEY MARKET OPPORTUNITIES VALUE
FUND FUND FUND
.............. ............... .................
For 17,882,516 14,787,631 26,419,411
Against 313,550 38,898 1,507,379
Abstained 3,744,539 36,370 109,405
A vote also took place to ratify and approve an interim advisory agreement
between Qualivest, on behalf of the fund, and U.S. Bank National Association,
formerly First Bank National Association for the period August 1, 1997 forward.
The voting results were as follows:
TAX FREE INTERNATIONAL SMALL COMPANIES
MONEY MARKET OPPORTUNITIES VALUE
FUND FUND FUND
.............. ............... .................
For 18,033,776 14,787,696 20,443,439
Against 264,046 38,975 1,490,171
Abstained 3,642,784 36,420 112,970
There were no other proposals voted on at such meeting.
<PAGE>
FIRST AMERICAN INVESTMENT FUNDS, INC.
FIRST AMERICAN FUNDS, INC.
1 Freedom Valley Drive
Oaks, Pennsylvania 19456
INVESTMENT ADVISER
FIRST ASSET MANAGEMENT
601 Second Avenue South
Minneapolis, Minnesota 55402
CUSTODIAN
FIRST TRUST 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.
210 West Tenth Street
Seventh Floor Tower
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.
FAIF-1303 11/97
