FIRST AMERICAN
INVESTMENT FUNDS, INC.
BOND
FUNDS
[PHOTOS]
[GRAPHIC] 98
1998 ANNUAL REPORT
[LOGO] FIRST AMERICAN
THE POWER OF DISCIPLINED INVESTING(R)
<PAGE>
FIRST AMERICAN FAMILY OF FUNDS
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HIGHER RETURN
POTENTIAL
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SECTOR FUNDS
INTERNATIONAL FUNDS
SMALL CAP FUNDS
MID CAP FUNDS
LARGE CAP FUNDS
STRATEGY FUNDS
BOND FUNDS
Adjustable Rate Mortgage Securities
Fixed Income
Intermediate Government Bond
Intermediate Term Income
Limited Term Income
Strategic Income
TAX FREE BOND FUNDS
MONEY MARKET FUNDS
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LOWER RETURN
POTENTIAL
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INVESTMENTS FOR EVERY GOAL
FIRST AMERICAN FUNDS OFFER A FULL RANGE OF INVESTMENT STRATEGIES TO HELP YOU
CREATE A PERSONALIZED, DIVERSIFIED PORTFOLIO. SUPPORTED BY EXTENSIVE RESEARCH
AND A HIGHLY DEVELOPED TEAM APPROACH TO INVESTMENT DECISION MAKING, FIRST
AMERICAN FUNDS CAN HELP BUILD A WINNING STRATEGY FOR ANY INVESTOR.
TABLE OF CONTENTS
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MESSAGE TO SHAREHOLDERS 1
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STRATEGIES FOR UNCERTAIN MARKETS 2
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BOND FUNDS OVERVIEW 4
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Adjustable Rate Mortgage Securities 5
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Fixed Income 6
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Intermediate Government Bond 7
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Intermediate Term Income 8
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Limited Term Income 9
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Strategic Income 10
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INDEPENDENT AUDITORS' REPORT 11
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STATEMENTS OF NET ASSETS 12
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STATEMENTS OF OPERATIONS 30
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STATEMENT OF CHANGES IN NET ASSETS 32
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FINANCIAL HIGHLIGHTS 34
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NOTES TO FINANCIAL STATEMENTS 38
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NOTICE TO SHAREHOLDERS 48
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NOT FDIC INSURED. NO BANK GUARANTEE. MAY LOSE VALUE.
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<PAGE>
MESSAGE TO SHAREHOLDERS SEPTEMBER 30, 1998
DEAR SHAREHOLDERS:
On behalf of the board of directors of First American Investment Funds,
Inc., I would like to extend a warm welcome to all new shareholders and
express my appreciation to our long-term shareholders for your continued
support.
Investors will remember this past year as one of the most volatile
periods in recent history. During the first half of 1998, the financial
markets staged a remarkable rally that sent the Dow Jones Industrial Average
to record highs.
In mid July, the markets suddenly reversed course, all but erasing the
year's gains. Since then, the markets have fluctuated, with dramatic price
swings becoming commonplace.
During challenging times, it's more important than ever to focus on the
fundamentals, including diversification among equity, bond and money market
mutual funds to create balanced portfolios. Please take a few moments to
read the article on the next page, "Strategies for Uncertain Markets," to
learn how asset allocation can help tame volatile returns and produce more
consistency in all market environments. You may also want to meet with your
investment professional to review your long-term goals and fine-tune your
portfolio accordingly.
To provide further diversification opportunities, we recently introduced
six new funds: Minnesota Tax Free, Tax Free, Adjustable Rate Mortgage
Securities, Strategic Income, Mid Cap Growth, and Emerging Markets. We
currently offer 38 mutual funds within our fund family to meet the needs of
any investor.
As you review this annual report, you will notice that we start off with
an overview of market conditions, followed by comments from portfolio
managers explaining how those conditions affected each fund. We hope that
you find this format useful in helping you understand your investment.
Again, the board of directors thanks you for your support and confidence
in the First American family of funds.
Sincerely,
/s/ VIRGINIA L. STRINGER
VIRGINIA L. STRINGER
Chairman
First American Investment Funds, Inc.
1 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STRATEGIES FOR UNCERTAIN MARKETS
After eight consecutive years of unprecedented economic growth and prosperity,
the third quarter of 1998 provided investors with a textbook example of market
volatility. A host of bad news, from Russia's default on its debts to Asia's
worsening recession and its potential impact on the U.S. economy, sent equity
markets into a tailspin. Over the span of one month, the Dow plummeted nearly 20
percent from its mid-July high of 9337 to totter on the brink of a bear market.
Even though the Dow rallied early in the fourth quarter, some investors wonder
if the market's golden days are over.
Experienced investors don't attempt to predict how markets will perform in the
coming months. They recognize that markets move in cycles and that an investment
lifetime will include both bull and bear markets--and perhaps several of them
over the decades. Regardless of market volatility, they remind themselves that
stocks and bonds remain the best long-term investments.
DIVERSIFICATION IS THE NAME OF THE GAME
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While it's easy to be tempted by the promise of a single investment based on its
short-term performance, experienced investors also spread their dollars among
several types of investments (stocks, bonds and cash) as well as different
investment styles (large cap stocks, small cap stocks, international, growth,
value, etc.) to limit risk and earn more balanced returns. This diversification
strategy--known as asset allocation--alleviates confusion by helping you ride
out periods of uncertainty more successfully. It's a disciplined investment
approach that allows you to weather changes in the market.
Asset allocation is also one of the most important variables in the performance
of your mutual fund investments. When you diversify among different types of
assets, you benefit from using a range of investments, some of which will
perform better than others in different market conditions. In tandem, these
investments can potentially yield better results over time.
DIVERSIFICATION CAN HELP REDUCE MARKET VOLATILITY IN YOUR PORTFOLIO
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Any particular asset class may perform better--or worse--than another in a given
year. By blending multiple asset classes at the same time, you can limit risk
and improve long-term performance opportunities.
The following is a bar chart depicting annual return percentages for various
asset classes.
[BAR CHART]
Lehman Brothers Standard & Poor's Morgan Stanley
Aggregate 500 Composite Russell 2000 EAFE Index
(Bonds) (Large Cap) (Small Stocks) (Int'l. Stocks)
------- ----------- -------------- ---------------
1987 2.75 5.25 -8.77 23.19
1988 7.89 16.61 24.89 26.90
1989 14.53 31.69 16.24 9.01
1990 8.95 -3.10 -19.51 -24.71
1991 16 30.47 46.05 10.19
1992 7.40 7.62 18.41 -13.89
1993 9.75 10.08 18.91 30.50
1994 -2.92 1.32 -1.82 6.24
1995 18.48 37.58 28.44 9.42
1996 3.61 22.96 16.49 4.4
1997 9.65 33.36 22.36 0.24
Expressed as annual return percentages from 1987 to 1997, Source: Micropal. The
above rankings among fund's investment categories are based on index average
annual total return figures. Past performance does not guarantee future returns.
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<PAGE>
TAKING A SMART STRATEGY ONE STEP FURTHER
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Chances are that you already own a balanced portfolio of mutual funds. Yet you
may want to take a closer look at your holdings to ensure that your portfolio
remains in balance. For example, if large-cap or domestic U.S. stocks formed the
core of your holdings, the gains posted in these sectors over the past several
years may have sent your overall asset allocation out of proportion. You may
want to meet with your investment professional to reallocate funds back to your
intended investment mix.
WHY FOCUS ON ASSET ALLOCATION?
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Selection and combination of asset classes is much more important than the
selection of individual options. Less than 10 percent of your return relates to
a particular investment or the time you decide to buy or sell.
Source: Brinson, Singer and Beebower, "Determinants of Portfolio Performance,"
Financial Analysts Journal, May-June 1991
The following is a pie chart depicting the importance of asset allocation.
[PIE CHART]
92% Asset Allocation
5% Security Selection
2% Market Timing
1% Other
REVISIT YOUR RISK TOLERANCE
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Can you tolerate market fluctuations without undue concern? If not, you may wish
to sit down with your investment professional to review your risk tolerance and
reposition your assets accordingly. You might also reconsider your investment
strategies if you plan to tap your assets within the next year or two to pay for
a child's education, a new home or another significant expense. Simply put, you
wouldn't want to be caught with the market at a low point while having to
withdraw funds at that time.
TIME WILL TELL
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In closing, the past six months reinforce the value of asset allocation. An
asset allocation program can help you build a balanced portfolio and cushion you
against losses you can least afford at critical periods of your life. And keep
the big picture in focus: bull and bear markets will come and go, yet over the
long term, stocks and bonds remain your best bet.
<PAGE>
BOND FUNDS OVERVIEW
The long-term bull market in bonds reached a feverish pitch during the fiscal
year as financial turmoil overseas slowed world growth and sent investors
scurrying for safety. The primary beneficiary of the global flight to quality
was the Treasury sector of the U.S. fixed-income market. Over the fiscal year
ended September 30, 1998, yields on long-term Treasury bonds fell by about 1.6%,
to the lowest level since 1967. During the same period, yields on five-year
Treasury notes also plunged by about 1.6%.
However, not all bonds participated equally in the rally. In fact, prices of
high-yield debt actually tumbled this summer as a severe liquidity crisis
developed in the aftermath of financial turmoil in Russia and Latin America.
Even spreads between Treasuries and government agency securities widened, in
part because of credit concerns and wider spreads in the swap market.
Entering the fiscal year, the funds were positioned to benefit from a
continuation of secular disinflation and an easing of domestic cyclical
inflationary pressure. While we were pleased to participate in the bond rally
that ensued, we now believe that the long-term sector of the market has come too
far, too fast and that prices are in danger of correcting. In time, however, we
expect that global overcapacity will continue to exert downward pressure on
commodity and goods prices, helping to sustain the bull market across the
fixed-income asset class.
We have gradually begun adding higher-yielding bonds to our portfolios as
spreads for asset-backed, mortgage, and corporate issues widened to nearly
historic levels over the final weeks of the fiscal year. While we do not expect
spreads to contract anytime soon, we do believe that the domestic economy will
stabilize and that a degree of liquidity will return to all sectors of the
fixed-income market.
The following graphs compare First American fund performance with unmanaged
indices. Indices do not pay management fees to cover costs of shareholder
services and fund operating costs, or transaction costs to buy and sell
securities. Unlike indices, mutual funds are never 100% invested because they
need cash on hand to redeem shares. In addition, the performance shown for the
funds includes the maximum initial sales charge, all fund expenses and fees. If
operating expenses such as the funds had been applied to the indices, their
performance would have been lower. Please remember that an index is simply a
measure of performance, and one cannot invest in it directly.
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 class A shares
before sales charges. The adjusted figures for class A shares include the effect
of paying the maximum initial sales charge of 2.00% on Adjustable Rate Mortgage
Securities and Limited Term Income funds, 3.00% on the Intermediate Government
Bond Fund, 3.75% on the Fixed Income and Intermediate Term Income Funds, and
4.50% on the Strategic Income Fund. 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.
4 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
BOND FUNDS
ADJUSTABLE RATE MORTGAGE SECURITIES
INVESTMENT OBJECTIVE
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SEEKS CURRENT INCOME ALONG WITH A HIGH DEGREE OF PRINCIPAL STABILITY FROM A
PORTFOLIO OF MORTGAGE-RELATED SECURITIES
During the fiscal year ended September 30, 1998, the Adjustable Rate Mortgage
Securities Fund achieved a total return of 5.56%.
Over the reporting period, the yield on two-year Treasury notes plunged by
more than 1.25% as the economic turmoil overseas reduced inflationary
expectations at home. Also, long-term mortgage rates dropped to the lowest
levels since the 1960s, causing many adjustable-rate mortgage holders to convert
to traditional mortgages. However, the fund was holding about 30% of assets in
fixed-rate securities early in the fiscal year and benefited from the stable
yield and subsequent price appreciation in these issues as interest rates
declined. Later, the fund took profits on a portion of its fixed-rate holdings
and rolled the proceeds into lower-coupon adjustable rate securities.
The fund increased the amount of adjustable rate mortgages it holds that are
tied to the District 11 Cost-of-Funds Index, a benchmark that lags the trend in
short-term rates by a significant amount. This strategy reflects the fund's view
that short-term interest rates will decline further in coming months.
The fund will continue to be managed in a way that recognizes the desire of
shareholders for a consistent income stream and minimal fluctuation in principal
value. We are optimistic that the generally favorable conditions which have
prevailed in most sectors of the domestic fixed-income market over recent years
will continue and believe that the fund will continue to offer solid returns.
VALUE OF A $10,000 INVESTMENT
[PLOT POINTS CHART]
First American First American First American
Adjustable Rate Adjustable Rate Adjustable Rate
Mortgage Mortgage Mortgage Lehman
Securities Fund, Securities Fund, Securities Fund, Adjustable Rate
Class A Class A adjusted Class Y Mortgage Index
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1992 $10,000 $ 9,800 $10,000 $10,000
1992 $10,616 $10,404 $10,616 $10,410
1993 $11,275 $11,049 $11,275 $11,004
1994 $10,839 $10,623 $10,839 $11,045
1995 $11,539 $11,308 $11,539 $12,088
1996 $12,297 $12,051 $12,297 $12,873
1997 $13,177 $12,914 $13,177 $13,907
1998 $13,910 $13,632 $13,914 $14,779
PAST PERFORMANCE OF THE FUND IS NOT INDICATIVE OF FUTURE PERFORMANCE.
ANNUALIZED PERFORMANCE SINCE
1 YEAR 3 YEAR 5 YEAR INCEPTION
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Class A 5.56% 6.43% 4.29% 5.06%
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Class A adjusted 3.41% 5.73% 3.87% 4.74%
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Class Y * 5.59% 6.44% 4.30% 5.06%
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Lehman Adjustable Rate Mortgage 6.27% 6.93% 6.08% 6.03%
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Past performance of the fund is not indicative of future performance.
The inception date of the class A shares is 1/30/92, and the inception date of
the class Y shares is 7/31/98. The performance reflected in the graph begins on
1/31/92. The performance reflected in the table begins on the inception date of
class A shares.
*The performance presented links the performance of class A shares from
inception on 1/30/92 to 7/31/98 with the performance of class Y shares after its
inception on 7/31/98. The cumulative since inception return for class Y shares
from 7/31/98 is 1.04%.
The performance presented is that of a predecessor fund, Piper Adjustable Rate
Mortgage Securities Fund, which merged with First American Adjustable Rate
Mortgage Securities Fund on 7/31/98.
Performance reflects voluntary fee waivers in effect. In absence of such fee
waivers, total returns would be reduced.
5 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
BOND FUNDS
FIXED INCOME
INVESTMENT OBJECTIVE
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SEEKS A HIGH LEVEL OF CURRENT INCOME CONSISTENT WITH LIMITED RISK TO
CAPITAL FROM A PORTFOLIO OF U.S. GOVERNMENT AND INVESTMENT GRADE CORPORATE
DEBT SECURITIES
Over the fiscal year ended September 30, 1998, the Fixed Income Fund achieved a
total return of 12.29%.
The fund lengthened its average maturity in late 1997, a move that had a
beneficial effect on performance as interest rates declined. However, many
investors have become frightened by developments in the global economy and are
confused about the implications for domestic markets.
One of the consequences of this concern was a dramatic widening of credit
spreads, or the yield differential between bonds of equal maturity but different
credit quality. At the end of 1997, the yield spread between 10-year A-rated
corporate bonds and similar-maturity Treasury issues was about .45%. By the end
of the fund's fiscal year, however, that spread had more than doubled,to about
1%. Also, the spread between 10-year BBB and AAA corporates widened from .2% as
recently as July to roughly .6% at the end of September.
The fund used the occasion of the dramatically wider credit spreads to add
selectively to short-term, high-quality corporate, mortgage, and asset-backed
positions. The additional yield captured in these transactions, which reflect
credit spreads that are wider than at any time in the last 15 years, should
contribute measurably to fund performance as markets become more settled.
The overall credit quality of the fund remains quite high. The fund's
duration is somewhat longer than its benchmark, reflecting our view that
interest rates are likely to drop further in coming months. We are optimistic
that the generally positive environment that has prevailed for fixed-income
securities in recent years will continue and that liquidity concerns which
impacted some sectors of the bond market in 1998 will subside.
VALUE OF A $10,000 INVESTMENT
[PLOT POINTS CHART]
Lehman
First American First American First American Government/
Fixed Income Fund, Fixed Income Fund, Fixed Income Fund, Corporate
Class A Class A adjusted Class Y Bond Index
------- ---------------- ------- ----------
1988 $10,000 $ 9,625 $10,000 $10,000
1989 $11,068 $10,653 $11,068 $11,131
1990 $11,821 $11,377 $11,821 $11,882
1991 $13,434 $12,930 $13,434 $13,768
1992 $15,092 $14,526 $15,092 $15,590
1993 $16,480 $15,862 $16,480 $17,376
1994 $16,001 $15,401 $16,001 $16,657
1995 $18,046 $17,369 $18,059 $19,047
1996 $18,883 $18,175 $18,943 $19,906
1997 $20,443 $19,676 $20,561 $21,815
1998 $22,955 $22,094 $23,164 $24,616
PAST PERFORMANCE OF THE FUND IS NOT INDICATIVE OF FUTURE PERFORMANCE.
ANNUALIZED PERFORMANCE SINCE
1 YEAR 3 YEAR 5 YEAR 10 YEAR INCEPTION
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Class A 12.29% 8.35% 6.85% 8.66% 8.56%
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Class A adjusted 8.06% 6.97% 6.04% 8.25% 8.17%
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Class B 11.54% 7.58% N/A N/A 8.10%
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Class B adjusted 6.54% 6.41% N/A N/A 7.72%
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Class Y * 12.66% 8.65% 7.05% 8.76% 8.65%
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Lehman Gov't/Corp. Bond 12.84% 8.92% 7.21% 9.42% 9.43%
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Past performance of the fund is not indicative of future performance.
The inception date of the class A shares is 12/22/87, the inception date of the
class B shares is 8/15/94, and the inception date of the class Y shares is
2/4/94. The 10-year performance reflected in the graph begins for class A and Y
on 9/30/88. The performance reflected in the table for class A and Y shares
begins on the inception date of class A shares and performance for class B
shares begins on 8/15/94.
*The performance presented links the performance of class A shares from
inception on 12/22/87 to 2/4/94 with the performance of class Y shares after its
inception on 2/4/94. The since inception return for class Y shares from 2/4/94,
is 7.52%.
Performance reflects voluntary fee waivers in effect. In absence of such fee
waivers, total returns would be reduced.
6 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
BOND FUNDS
INTERMEDIATE GOVERNMENT BOND
INVESTMENT OBJECTIVE
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SEEKS TO PROVIDE CURRENT INCOME CONSISTENT WITH PRESERVATION OF CAPITAL
FROM A HIGH-QUALITY PORTFOLIO OF U.S. GOVERNMENT SECURITIES
The Intermediate Government Bond Fund achieved a total return of 10.27% over the
fiscal year ended September 30, 1998.
During that period, the fund focused on increasing its duration, searching
for relative value in the government market, and keeping the portfolio
non-callable. Given our view that economic drag from Asia would ultimately slow
the domestic economy and extinguish whatever inflationary embers might have been
burning, extending the fund's duration positioned the fund to benefit from the
drop in rates that typically accompanies a growth slowdown. As the reporting
period ended, the fund's duration was slightly longer than that of its
benchmark, the Lehman Intermediate Government Bond Index.
The fund also took advantage of the exceptional demand for Treasury
securities that developed amid the global flight to quality to take profits in
that sector. Proceeds were rolled into the agency market, where prices remained
cheap relative to Treasuries. As of the end of the fiscal year, the fund's
allocation to agency debt stood at 21%, up from 6% in December 1997. To protect
against refundings as rates fell, the fund held no callable securities as the
reporting period ended.
Looking forward, we are optimistic that the generally favorable environment
which has existed for intermediate-term government securities in recent years
will continue and that the fund will continue to generate solid performance.
VALUE OF A $10,000 INVESTMENT
[PLOT POINTS CHART]
First American First American First American
Intermediate Intermediate Intermediate Lehman
Government Government Government Intermediate
Bond Fund, Bond Fund, Bond Fund, Government
Class A Class A adjusted Class Y Bond Index
------- ---------------- ------- ----------
1988 $10,000 $9,700 $10,000 $10,000
1989 $10,781 $10,458 $10,781 $10,963
1990 $11,648 $11,298 $11,648 $11,904
1991 $12,844 $12,459 $12,844 $13,520
1992 $13,985 $13,565 $13,985 $15,203
1993 $14,682 $14,242 $14,682 $16,367
1994 $14,517 $14,081 $14,517 $16,121
1995 $15,942 $15,464 $15,942 $17,833
1996 $16,715 $16,214 $16,698 $18,743
1997 $17,895 $17,358 $17,878 $20,210
1998 $19,733 $19,141 $19,696 $22,350
PAST PERFORMANCE OF THE FUND IS NOT INDICATIVE OF FUTURE PERFORMANCE.
ANNUALIZED PERFORMANCE SINCE
1 YEAR 3 YEAR 5 YEAR 10 YEAR INCEPTION
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Class A 10.27% 7.37% 6.09% 7.03% 6.99%
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Class A adjusted 6.93% 6.28% 5.46% 6.71% 6.69%
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Class Y * 10.17% 7.30% 6.05% 7.01% 6.98%
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Lehman Int. Gov.'t Bond 10.59% 7.82% 6.43% 8.38% 8.37%
- --------------------------------------------------------------------------------
Past performance of the fund is not indicative of future performance.
The inception date of the class A shares is 12/22/87, and the inception date of
the class Y shares is 2/4/94. The 10-year performance reflected in the graph
begins on 9/30/88. The performance reflected in the table begins on the
inception date of class A shares.
*The performance presented links the performance of class A shares from
inception on 12/22/87 to 2/4/94 with the performance of class Y shares after its
inception on 2/4/94. The since inception return for class Y shares from 2/4/94
is 6.39%.
Performance reflects voluntary fee waivers in effect. In absence of such fee
waivers, total returns would be reduced.
7 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
BOND FUNDS
INTERMEDIATE TERM INCOME
INVESTMENT OBJECTIVE
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SEEKS TO PROVIDE CURRENT INCOME CONSISTENT WITH PRESERVATION OF CAPITAL
FROM A PORTFOLIO OF U.S. GOVERNMENT AND AGENCY SECURITIES AND CORPORATE
DEBT SECURITIES
During the fiscal year ended September 30, 1998, the Intermediate Term Income
Fund achieved a total return of 10.35%.
The fund lengthened its average maturity in late 1997 to capture the impact
on bond prices of the expected decline in interest rates which accompanied the
global economic slowdown. Then, as credit spreads widened late in the fiscal
year, the fund used the opportunity to buy shorter-term, high-quality corporate,
mortgage, and asset-backed bonds. With long-term rates near 30-year lows and
yield spreads at their highest levels in 15 years, we believe that rolling a
portion of assets into solid, shorter-term paper will contribute measurably to
the fund's relative performance as the fixed-income market becomes more settled
in coming months.
Given the magnitude of the global economic crisis, we have made it a
priority to maintain the fund's overall credit quality. Accordingly, the fund
owns no leveraged derivatives or other high-risk investments that could
adversely impact its return during particularly unfavorable market environments.
As the fiscal year ended, the fund's duration was somewhat longer than its
benchmark, reflecting our view that interest rates are likely to drop further in
coming months. We remain optimistic that the generally positive environment that
has prevailed for fixed-income securities in recent years will continue and that
liquidity concerns which impacted some sectors of the bond market during 1998
will subside.
VALUE OF A $10,000 INVESTMENT
[PLOT POINTS CHART]
First American First American First American Lehman
Intermediate Intermediate Intermediate Intermediate
Term Income Fund, Term Income Fund, Term Income Fund, Government/
Class A Class A adjusted Class Y Corporate Index
------- ---------------- ------- ---------------
1992 $10,000 $9,625 $10,000 $10,000
1993 $10,673 $10,273 $10,673 $10,860
1994 $10,562 $10,166 $10,562 $10,680
1995 $11,672 $11,234 $11,672 $11,883
1996 $12,329 $11,867 $12,329 $12,493
1997 $13,216 $12,720 $13,190 $13,517
1998 $14,583 $14,037 $14,544 $14,926
PAST PERFORMANCE OF THE FUND IS NOT INDICATIVE OF FUTURE PERFORMANCE.
ANNUALIZED PERFORMANCE SINCE
1 YEAR 3 YEAR 5 YEAR INCEPTION
- -------------------------------------------------------------------------------
Class A 10.35% 7.71% 6.44% 6.81%
- -------------------------------------------------------------------------------
Class A adjusted 6.21% 6.34% 5.63% 6.11%
- -------------------------------------------------------------------------------
Class Y * 10.27% 7.61% 6.38% 6.76%
- -------------------------------------------------------------------------------
Lehman Int. Gov't/Corp. Bond 10.42% 7.89% 6.57% 7.21%
- -------------------------------------------------------------------------------
Past performance of the fund is not indicative of future performance.
The inception date of the class A shares is 12/14/92, and the inception date of
the class Y shares is 2/4/94. The performance reflected in the graph begins on
12/31/92. The performance reflected in the table begins on the inception date of
class A shares.
*The performance presented links the performance of class A
shares from inception on 12/14/92 to 2/4/94 with the performance of class Y
shares after its inception on 2/4/94. The since inception return for class Y
shares from 2/4/94 is 6.78%.
Performance reflects voluntary fee waivers in effect. In absence of such fee
waivers, total returns would be reduced.
8 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
BOND FUNDS
LIMITED TERM INCOME
INVESTMENT OBJECTIVE
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SEEKS TO PROVIDE CURRENT INCOME ALONG WITH A HIGH DEGREE OF PRINCIPAL
STABILITY FROM A PORTFOLIO OF U.S. GOVERNMENT AND AGENCY SECURITIES AND
CORPORATE DEBT SECURITIES
Over the fiscal year ended September 30, 1998, the Limited Term Income Fund
achieved a total return of 6.55%.
The fund, which consists of a mix of government, mortgage and asset-backed
securities, and investment- grade bonds, continued to closely monitor credit
quality over the fiscal year. Although yields spreads widened sharply, the
fund's emphasis on short-term, high-quality bonds allowed it to weather much of
the turbulence that impacted most non-Treasury sectors of the fixed-income
market.
As of September 30, 1998, the average duration of the fund was 1.3 years, a
level that is long enough to permit participation in any further decline in
interest rates, yet short enough to cushion the effects from any reversal in
rates. At that time, the largest segment of the fund was invested in
shorter-term, asset-backed securities, followed by mortgage securities with
short average lives and short-to-intermediate term corporate bonds.
Looking forward, the fund will focus on holding high-quality, asset-backed,
and corporate securities centered around a two-year maturity. We remain
optimistic that the generally positive environment that has prevailed for
fixed-income securities in recent years will continue, and that liquidity
concerns which impacted some sectors of the bond market during 1998 will
subside.
VALUE OF A $10,000 INVESTMENT
[PLOT POINTS CHART]
First American First American First American Merrill Lynch
Limited Term Limited Term Limited Term 1-Year
Income Fund, Income Fund, Income Fund, U.S. Treasury
Class A Class A adjusted Class Y Index
------- ---------------- ------- ---------------
1992 $10,000 $ 9,800 $10,000 $10,000
1993 $10,344 $10,137 $10,344 $10,293
1994 $10,573 $10,361 $10,573 $10,552
1995 $11,267 $11,042 $11,267 $11,265
1996 $11,935 $11,697 $11,935 $11,906
1997 $12,662 $12,409 $12,662 $12,646
1998 $13,492 $13,222 $13,492 $13,450
PAST PERFORMANCE OF THE FUND IS NOT INDICATIVE OF FUTURE PERFORMANCE.
ANNUALIZED PERFORMANCE SINCE
1 YEAR 3 YEAR 5 YEAR INCEPTION
- --------------------------------------------------------------------------------
Class A 6.55% 6.19% 5.46% 5.33%
- --------------------------------------------------------------------------------
Class A adjusted 4.45% 5.48% 5.02% 4.97%
- --------------------------------------------------------------------------------
Class Y * 6.55% 6.19% 5.46% 5.33%
- --------------------------------------------------------------------------------
Merrill Lynch 1-Year U.S. Treasury 6.36% 6.09% 5.50% 5.29%
- --------------------------------------------------------------------------------
Past performance of the fund is not indicative of future performance.
The inception date of the class A shares is 12/14/92, and the inception date of
the class Y shares is 2/4/94. The performance reflected in the graph begins on
12/31/92. The performance reflected in the table begins on the inception date of
class A shares.
*The performance presented links the performance of class A shares from
inception on 12/14/92 to 2/4/94 with the performance of class Y shares after its
inception on 2/4/94. The since inception return for class Y shares from 2/4/94
is 5.66%.
Performance reflects voluntary fee waivers in effect. In absence of such fee
waivers, total returns would be reduced.
9 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
BOND FUNDS
STRATEGIC INCOME
INVESTMENT OBJECTIVE
- --------------------------------------------------------------------------------
SEEKS A HIGH LEVEL OF CURRENT INCOME FROM A COMBINATION OF U.S.
HIGH QUALITY, HIGH YIELD AND FOREIGN DEBT OBLIGATIONS
Since inception on July 24, 1998, the Strategic Income Fund's cumulative total
return was -6.17%.
During that period, the fund operated in a highly unusual and generally
unfriendly environment for global fixed-income securities. While pockets of
strength were evident, primarily in U.S. and European government bonds, the
high-yield and emerging-market sectors were hurt by fallout from the Russian
debt crisis and its implications for Latin American economies.
The fund used the first weeks of its operation to move toward its goal of
allocating assets nearly equally between each of the domestic high-quality,
domestic high-yield, and international fixed-income markets. Within the
international sector, the fund is in the process of broadening Its exposure to
include bonds from both developed and emerging economies. At the time of the
fund's inception, the portfolio was significantly underweighted in foreign
developed markets. This reallocation process is already well underway. The fund
also was underweighted to its target allocation in domestic high yield, and used
the occasion of the sharp declines in that sector to accumulate what we believe
will prove to be sound investments over a longer-term period.
We are managing the level of prepayment risk in the domestic high-quality
sector by converting a greater share of assets to Treasury securities, by
holding a larger amount of lower-coupon mortgages, and through buying mortgage
securities that offer prepayment protection or yield-maintenance provisions.
The fund intends to make only minimal adjustments to its roughly equal
allocation between the three major sectors of the global fixed-income market.
The fund will, however, focus on targeting those areas within each sector that
we believe offer the best combination of risk and reward.
Despite the generally difficult environment for global fixed-income products
since the fund's inception, we are optimistic that a significant degree of
confidence, stability, and liquidity will return to the market in coming months.
On a longer-term basis, we expect that global overcapacity will continue to keep
inflation in check, allowing interest rates in many countries to remain low.
10 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
INDEPENDENT
AUDITORS' REPORT SEPTEMBER 30, 1998
The Board of Directors and Shareholders
First American Investment Funds, Inc.
We have audited the accompanying statements of net assets of Adjustable
Rate Mortgage Securities Fund, Fixed Income Fund, Intermediate Government
Bond Fund, Intermediate Term Income Fund, Limited Term Income Fund, and
Strategic Income Fund (funds within First American Investment Funds, Inc.)
as of September 30, 1998, and the related statements of operations, the
statements of changes in net assets and the financial highlights for each
of the periods presented. These financial statements and the financial
highlights are the responsibility of the funds' management. Our
responsibility is to express an opinion on these financial statements and
the financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and the
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Investment securities held in
custody are confirmed to us by the custodian. As to securities purchased
and sold but not received or delivered and securities on loan, we request
confirmations from brokers or carry out other appropriate auditing
procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements and the financial highlights
referred to above present fairly, in all material respects, the financial
position of each of the funds listed in the first paragraph above as of
September 30, 1998, and the results of their operations, changes in their
net assets and the financial highlights for each of the periods presented,
in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
November 13, 1998
11 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
NET ASSETS SEPTEMBER 30, 1998
ADJUSTABLE RATE MORTGAGE SECURITIES FUND
DESCRIPTION PAR (000) VALUE (000)
- -----------------------------------------------------------------------
U.S. GOVERNMENT AGENCY
MORTGAGE-BACKED OBLIGATIONS - 86.7%
FHLMC Pool #350022
7.250%, 11/01/16 (A) $5,042 $5,212
FHLMC Pool #350036
7.250%, 01/01/17 (A) 617 630
FHLMC Pool #606505
7.265%, 08/01/20 (A) 5,607 5,750
FHLMC Pool #785781
6.522%, 02/01/27 (A) 4,208 4,295
FHLMC Pool #N96388
5.500%, 04/01/03 1,549 1,546
FHLMC Pool #G40274
6.000%, 06/01/03 3,972 4,010
FNMA 1992-196 FA
5.499%, 11/25/07 (A) 1,383 1,383
FNMA 1993-65 FC
5.799%, 06/25/12 (A) 5,500 5,429
FNMA 1994-12 Cl FB
5.999%, 01/25/09 (A) 3,582 3,576
FNMA 1994-30 F
5.999%, 06/25/23 (A) 5,125 5,116
FNMA 1994-33 Cl FD
5.899%, 03/25/09 (A) 2,000 1,972
FNMA Pool #093872
6.989%, 11/01/17 (A) 5,179 5,231
FNMA Pool #102549
7.409%, 01/01/20 (A) 1,117 1,147
FNMA Pool #176370
7.482%, 02/01/22 (A) 930 956
FNMA Pool #238842
7.043%, 03/01/28 (A) 4,640 4,802
FNMA Pool #325073
7.305%, 10/01/25 (A) 4,462 4,571
FNMA Pool #415285
5.792%, 02/01/28 (A) 8,296 8,436
FNMA Pool #605324
7.565%, 06/01/18 (A) 1,044 1,074
FNMA Pool #785730
6.268%, 12/01/26 (A) 3,856 3,892
GNMA Pool #008006
7.000%, 07/20/22 (A) 4,477 4,577
GNMA Pool #008288
7.000%, 09/20/23 (A) 4,595 4,699
GNMA Pool #080213
5.500%, 07/20/28 (A) 4,933 4,954
GNMA Pool #8191
6.875%, 05/20/23 (A) 5,395 5,507
GNMA Pool #8445
6.875%, 06/20/24 (A) 4,963 5,044
GNMA Pool #158777
9.000%, 05/15/16 750 800
GNMA Pool #780398
9.000%, 04/15/21 1,773 1,902
GNMA Pool #8824
7.000%, 08/20/21 4,195 4,291
GNMA Pool #8855
7.000%, 10/20/21 3,960 4,040
GNMA Pool #780081
10.000%, 02/15/25 1,402 1,549
GNMA Pool #8699
7.000%, 09/20/25 4,711 4,790
ADJUSTABLE RATE MORTGAGE SECURITIES FUND (concluded)
DESCRIPTION PAR (000)/SHARES VALUE (000)
- -----------------------------------------------------------------------
GNMA Pool #008747
6.875%, 11/20/25 $ 729 $ 740
GNMA Pool #80106
6.000%, 08/20/27 3,075 3,121
---------
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-
BACKED OBLIGATIONS
(Cost $114,080) 115,042
---------
OTHER MORTGAGE-BACKED
OBLIGATION - 3.8%
CMC Securities II 1993-2H A1
7.263%, 09/25/23 (A) 5,027 5,099
---------
TOTAL OTHER MORTGAGE-BACKED OBLIGATION
(Cost $5,098) 5,099
---------
RELATED PARTY MONEY MARKET
FUND - 9.2%
First American Prime
Obligations Fund (B) 12,216,237 12,216
---------
TOTAL RELATED PARTY MONEY MARKET FUND
(Cost $12,216) 12,216
---------
TOTAL INVESTMENTS - 99.7%
(Cost $131,394) 132,357
---------
OTHER ASSETS AND LIABILITIES, NET - 0.3% 377
---------
NET ASSETS:
Portfolio Capital--Class A
($.0001 par value-- 2 billion authorized)
based on 16,272,728 outstanding shares 277,537
Portfolio Capital--Class Y
($.0001 par value-- 2 billion authorized)
based on 136 outstanding shares 1
Undistributed net investment income 134
Accumulated net realized loss on investments (145,901)
Net unrealized appreciation of investments 963
---------
TOTAL NET ASSETS--100.0% $ 132,734
---------
Net asset value, offering price, and redemption
price per share--Class Y $ 8.16
---------
Net asset value and redemption
price per share--Class A $ 8.16
---------
Maximum sales charge of 2.00% (1) 0.17
---------
Offering price per share--Class A $ 8.33
---------
(1) The offer price is calculated by dividing the net asset value by 1 minus the
maximum sales charge of 2.00%.
(A) Variable Rate Security--the rate reported on the Statement of Net Assets is
the rate in effect as of September 30, 1998.
(B) This money market fund is advised by U.S. Bank National Association who also
serves as Advisor for this Fund. See also the notes to the financial
statements.
FHLMC--Federal Home Loan Mortgage Corporation
FNMA--Federal National Mortgage Association
GNMA--Government National Mortgage Association
The accompanying notes are an integral part of the financial statements.
12 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
FIXED INCOME FUND
DESCRIPTION PAR (000) VALUE (000)
- -----------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS - 36.2%
U.S. Treasury Bonds
7.250%, 05/15/16 $2,000 $2,483
7.500%, 11/15/16 2,000 2,546
8.125%, 08/15/19 1,000 1,370
7.125%, 02/15/23 159,185 200,992
6.875%, 08/15/25 84,060 104,256
U.S. Treasury Notes
5.625%, 11/30/99 19,270 19,505
6.125%, 09/30/00 1,000 1,033
6.250%, 10/31/01 37,265 39,247
6.250%, 02/15/03 50,905 54,721
6.500%, 08/15/05 60,270 67,804
6.875%, 05/15/06 12,585 14,549
U.S. Treasury STRIPS
0.000%, 11/15/21 35,515 10,301
---------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $464,143) 518,807
---------
U.S. GOVERNMENT AGENCY MORTGAGE-
BACKED OBLIGATIONS - 27.4%
FHLMC 51-VA
7.000%, 04/17/06 12,148 12,750
FHLMC 1339-PZ
8.093%, 07/15/22 (E) 904 1,012
8.197%, 07/15/22 (E) 3,227 3,613
FHLMC 1638-E
6.250%, 04/15/23 5,000 5,340
FHLMC 1643-PK
6.500%, 12/15/23 5,439 5,765
FHLMC 1665-KZ
6.500%, 01/15/24 7,785 8,262
FHLMC 1677-Z
7.600%, 07/15/23 (E) 4,226 4,774
FHLMC 1699-TD
6.000%, 03/15/24 10,000 9,914
FHLMC 1723-PJ
7.000%, 02/15/24 7,133 7,766
FHLMC Pool #A00894
9.500%, 06/01/21 3,046 3,285
FHLMC Pool #A01608
10.000%, 12/01/19 3,399 3,707
FHLMC Pool #C00029
9.000%, 03/01/21 1,326 1,406
FHLMC Pool #C00434
7.000%, 11/01/25 2,392 2,454
FHLMC Pool #C80334
7.500%, 08/01/25 10,587 10,911
FHLMC Pool #C80378
6.500%, 01/01/26 829 845
FHLMC Pool #C80433
6.500%, 08/01/26 3,787 3,859
FHLMC Pool #D65198
6.500%, 11/01/25 2,143 2,184
FHLMC Pool #D66778
6.500%, 01/01/26 2,229 2,271
FHLMC Pool #D69184
6.500%, 03/01/26 106 108
FHLMC Pool #D69402
6.500%, 03/01/26 523 533
FHLMC Pool #D69965
6.500%, 04/01/26 1,266 1,290
FIXED INCOME FUND (continued)
DESCRIPTION PAR (000) VALUE (000)
- -----------------------------------------------------------------------
FHLMC Pool #D70119
6.500%, 04/01/26 $2,348 $2,392
FHLMC Pool #D70229
6.500%, 04/01/26 728 742
FHLMC Pool #D70722
6.500%, 04/01/26 2,895 2,950
FHLMC Pool #D70890
6.500%, 04/01/26 7,077 7,212
FHLMC Pool #D71415
6.500%, 05/01/26 4,651 4,739
FHLMC Pool #E20194
7.000%, 09/01/10 8,039 8,243
FHLMC Pool #E59943
7.500%, 11/01/09 786 810
FHLMC Pool #E61199
7.000%, 09/01/10 1,034 1,060
FHLMC Pool #E61265
7.000%, 09/01/10 3,263 3,346
FHLMC Pool #G00445
6.500%, 02/01/26 3,276 3,339
FHLMC Pool #G10268
7.500%, 10/01/09 1,459 1,504
FHLMC Pool #G10308
7.500%, 12/01/09 1,970 2,031
FHLMC Pool #G10373
7.000%, 08/01/10 1,690 1,733
FNMA 163-F
6.000%, 07/15/21 3,037 3,095
FNMA 1648-LA
6.000%, 05/15/23 4,695 4,756
FNMA 1992-124-PJ
7.000%, 10/25/21 2,000 2,088
FNMA 1992-169-J
6.500%, 03/25/21 10,000 10,145
FNMA 1993-160 ZA
6.650%, 09/25/23 (E) 18 19
FNMA 1993-160-ZA
6.650%, 09/25/23 (E) 964 1,027
FNMA 1996-23
6.500%, 07/25/26 4,250 4,456
FNMA 1996-35-Z
7.139%, 07/25/26 (E) 6,939 7,380
FNMA 1996-53-PG
6.500%, 12/18/11 3,000 3,103
FNMA 1997-1A-B
6.500%, 02/18/04 8,000 8,188
FNMA 1998-M1-A2
6.250%, 01/25/08 7,500 7,784
FNMA Pool #100042
11.000%, 10/15/20 937 1,059
FNMA Pool #124654
7.000%, 12/01/07 4,341 4,453
FNMA Pool #125224
6.500%, 08/01/23 6,507 6,633
FNMA Pool #169164
7.764%, 06/01/22 (A) 42 43
FNMA Pool #198657
7.000%, 01/01/08 612 628
FNMA Pool #238589
6.000%, 10/01/23 671 672
FNMA Pool #250055
7.000%, 05/01/09 1,790 1,836
13 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
NET ASSETS SEPTEMBER 30, 1998
FIXED INCOME FUND (continued)
DESCRIPTION PAR (000) VALUE (000)
- -----------------------------------------------------------------------
FNMA Pool #250113
9.000%, 07/01/24 $ 473 $ 499
FNMA Pool #250359
7.000%, 10/01/25 4,685 4,808
FNMA Pool #250551
7.000%, 05/01/26 11,762 12,071
FNMA Pool #250554
6.500%, 05/01/11 11,466 11,706
FNMA Pool #303675
10.000%, 10/01/17 465 508
FNMA Pool #303850
6.500%, 04/01/11 2,244 2,292
FNMA Pool #326129
6.500%, 09/01/25 4,125 4,200
FNMA Pool #340798
7.000%, 04/01/26 12,974 13,315
FNMA Pool #341863
6.500%, 04/01/11 1,562 1,594
FNMA Pool #342397
6.500%, 04/01/11 3,969 4,053
FNMA Pool #343468
6.500%, 04/01/11 3,671 3,749
FNMA Pool #353997
6.500%, 07/01/26 5,033 5,124
FNMA Pool #361764
7.500%, 10/01/26 4,271 4,404
FNMA Pool #361777
7.500%, 10/01/26 4,156 4,285
FNMA Pool #362480
7.500%, 10/01/26 3,468 3,576
FNMA Pool #395055
6.000%, 03/01/13 964 974
FNMA Pool #396001
6.000%, 03/01/13 971 981
FNMA Pool #405382
6.000%, 04/01/13 960 970
FNMA Pool #417493
6.000%, 03/01/13 969 979
FNMA Pool #417647
6.000%, 03/01/13 972 982
FNMA Pool #419258
6.000%, 04/01/13 2,972 3,002
FNMA Pool #419259
6.000%, 04/01/13 967 977
FNMA Pool #421145
6.000%, 04/01/13 991 1,002
FNMA Pool #421576
6.000%, 04/01/13 2,898 2,931
FNMA Pool #422699
6.000%, 04/01/13 1,955 1,975
FNMA Pool #424656
6.000%, 04/01/13 991 1,002
FNMA Pool #425480
6.000%, 04/01/13 988 998
FNMA Pool #425894
6.000%, 04/01/13 977 987
FNMA Pool #427044
6.000%, 05/01/13 980 990
FNMA
6.000%, 10/19/13 (TBA) (F) 19,500 19,701
6.500%, 10/19/13 (TBA) (F) 24,000 24,495
GNMA Pool #036899
10.000%, 01/15/10 842 927
FIXED INCOME FUND (continued)
DESCRIPTION PAR (000) VALUE (000)
- -----------------------------------------------------------------------
GNMA Pool #364972
7.000%, 03/15/09 $1,086 $1,116
GNMA Pool #366889
9.000%, 10/15/24 356 379
GNMA Pool #377213
8.000%, 07/15/26 3,584 3,727
GNMA Pool #389939
7.000%, 03/15/09 1,597 1,642
GNMA Pool #405482
9.000%, 08/15/25 1,768 1,883
GNMA Pool #412638
8.000%, 07/15/26 2,282 2,372
GNMA Pool #426644
8.000%, 07/15/26 2,543 2,644
GNMA Pool #443774
7.500%, 12/15/27 3,444 3,564
GNMA Pool #443790
7.500%, 12/15/27 1,469 1,520
GNMA Pool #455879
7.500%, 11/15/27 4,187 4,334
GNMA Pool #460996
7.500%, 11/15/27 4,367 4,520
GNMA Pool #780295
7.000%, 12/15/10 5,535 5,689
GNMA Pool #780408
9.000%, 10/15/22 5,359 5,724
Vendee Mortgage Trust 1996-1Z
6.434%, 02/15/26 (E) 12,424 13,798
---------
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-
BACKED OBLIGATIONS
(Cost $370,750) 392,484
---------
CORPORATE OBLIGATIONS - 18.1%
BROKERAGE - 3.7%
Bear Stearns
6.560%, 06/20/00 23,835 24,207
Lehman Brothers Holdings
6.000%, 03/23/00 25,200 24,696
Lehman Brothers Holdings,
Mandatory Put @ 100
7.500%, 08/01/03 (G) 3,000 2,782
Salomon Smith Barney
5.980%, 03/26/01 1,275 1,293
---------
52,978
---------
FINANCIAL SERVICES - 11.0%
Bank America National Trust & Savings
8.375%, 05/01/07 102 102
Chrysler Financial
5.850%, 05/15/00 45,945 46,545
CIT Group Holdings
6.200%, 10/20/00 29,100 29,772
Money Store
7.300%, 12/01/02 41,795 44,816
Santander Financial Issuances
7.250%, 05/30/06 34,945 35,934
---------
157,169
---------
14 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
FIXED INCOME FUND (continued)
DESCRIPTION PAR (000) VALUE (000)
- -----------------------------------------------------------------------
FOOD, BEVERAGE & TOBACCO - 2.5%
Coca-Cola Enterprises
6.700%, 10/15/36 $3,500 $3,739
Nabisco
6.300%, 08/26/99 (D) 32,900 33,043
---------
36,782
---------
GAS/NATURAL GAS - 0.1%
Enron
7.125%, 05/15/07 1,000 1,077
---------
INSURANCE - 0.8%
Cigna
7.400%, 01/15/03 10,726 11,457
---------
TRANSPORTATION - RAILROADS - 0.0%
Conrail
6.760%, 05/25/15 918 1,011
---------
TOTAL CORPORATE OBLIGATIONS
(Cost $256,581) 260,474
---------
OTHER MORTGAGE-BACKED OBLIGATIONS - 7 2%
ADJUSTABLE RATE MORTGAGES - 1.9%
J.P. Morgan Commercial
Mortgage Finance 1995-C1
7.620%, 07/25/10 (A) 10,329 11,849
Merrill Lynch Mortgage 1995-C3
7.062%, 12/26/25 (A) 8,925 9,594
Merrill Lynch Mortgage Investors 1993-A4
6.688%, 03/15/18 (A) 6,000 6,110
---------
27,553
---------
FINANCIAL SERVICES - 5.3%
Banc One Credit Card
7.800%, 12/15/00 8,012 8,036
Collateralized Mortgage
Corporation 88-13 C
8.000%, 09/20/19 57 57
Countrywide Mortgage-Backed
Securities 1994-GA3
6.500%, 04/25/24 2,380 2,398
General Electric Capital
Mortgage 1994-11 A1
6.500%, 03/25/24 3,047 3,069
General Electric Capital
Mortgage 1994-17 A6
7.000%, 05/25/24 7,000 7,434
General Electric Capital
Mortgage 1994-17 A7
7.000%, 05/25/24 5,179 5,443
GMAC Commercial Mortgage
Securities 1997-C1
6.918%, 09/15/07 41,074 43,435
Prudential Home Mortgage
Securities 1994-28
6.755%, 09/25/01 (A) 5,685 5,902
---------
75,774
---------
TOTAL OTHER MORTGAGE-BACKED OBLIGATIONS
(Cost $95,350) 103,327
---------
FIXED INCOME FUND (continued)
DESCRIPTION PAR (000)/SHARES VALUE (000)
- -----------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS - 6.6%
FHLMC
5.750%, 04/15/08 $2,000 $2,119
FNMA
5.560%, 07/24/00 72,125 73,249
5.625%, 03/15/01 15,000 15,364
5.800%, 12/10/03 2,000 2,098
6.625%, 03/21/06 1,000 1,105
---------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $91,960) 93,935
---------
ASSET-BACKED SECURITIES - 6.1%
Asset Securitization 1996-D6
6.880%, 11/13/26 41,340 43,832
Drexel Burnham Lambert Trust S-2
9.000%, 08/01/18 350 350
Team Fleet Financing
6.130%, 10/25/04 (D) 38,700 39,680
Zale Funding 1994-1
7.500%, 05/15/03 (D) 4,100 4,144
---------
TOTAL ASSET-BACKED SECURITIES
(Cost $85,788) 88,006
---------
TAXABLE MUNICIPAL BOND - 0.1%
Minneapolis, Minnesota, Single Family
Mortgages, Callable 10/01/05 @ 100
6.920%, 04/01/09 (RB) 1,025 1,023
---------
TOTAL TAXABLE MUNICIPAL BOND
(Cost $1,025) 1,023
---------
RELATED PARTY MONEY MARKET FUND - 0.5%
First American Prime
Obligations Fund (B) 7,340,4 25 7,340
---------
TOTAL RELATED PARTY MONEY MARKET FUND
(Cost $7,340) 7,340
---------
TOTAL INVESTMENTS - 102.2%
(Cost $1,372,937) 1,465,396
---------
OTHER ASSETS AND LIABILITIES, NET - (2.2%) (C) (32,256)
---------
NET ASSETS:
Portfolio Capital--Class Y
($.0001 par value -- 2 billion authorize d)
based on 103,542,891 outstanding shares 1,123,225
Portfolio Capital--Class A
($.0001 par value -- 2 billion authorize d)
based on 17,553,605 outstanding shares 280,344
Portfolio Capital--Class B
($.0001 par value -- 2 billion authorize d)
based on 1,482,476 outstanding shares 16,181
Undistributed net investment income 291
Accumulated net realized loss on investmen ts (79,360)
Net unrealized appreciation of investments 92,459
----------
TOTAL NET ASSETS--100.0% $1,433,140
----------
15 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
NET ASSETS SEPTEMBER 30, 1998
FIXED INCOME FUND (concluded)
DESCRIPTION VALUE
- -----------------------------------------------------------------------
Net asset value, offering price, and redemption
price per share--Class Y $ 11.69
----------
Net asset value and redemption price
per share--Class A $ 11.69
----------
Maximum sales charge of 3.75% (1) 0.46
----------
Offering price per share--Class A $ 12.15
----------
Net asset value and offering price
per share--Class B (2) $ 11.63
----------
(1) The offer price is calculated by dividing the net asset value by 1 minus the
maximum sales charge of 3.75%.
(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) Variable Rate Security--the rate reported on the Statement of Net Assets is
the rate in effect as of September 30, 1998.
(B) This money market fund is advised by U.S. Bank National Association who also
serves as advisor for this fund. See also the notes to the financial
statements.
(C) Other assets and liabilities representing greater than five percent of total
net assets include the following:
Cash collateral received for securities on loan $ 570,479
Payable upon return of securities on loan $(570,479)
(D) Security sold within the terms of a private placement memorandum, exempt
from registration under section 144A of the Securities Act of 1933, as
amended, and may be sold only to dealers in that program or other "qualified
institutional investors." These securities have been determined to be liquid
under guidelines established by the Board of Directors.
(E) Z-Bond--Represents securities that pay no interest or principal during their
initial accrual periods, but accrue additional principal at specified rates.
Interest rate disclosed represents current yield based upon the cost basis
and estimated timing of future cash flows.
(F) At September 30, 1998, the cost of securities purchased on a when issued
basis was $43,918,000.
(G) Mandatory Put Security--the mandatory put date is shown as the maturity date
in the Statement of Net Assets.
FHLMC--Federal Home Loan Mortgage Corporation
FNMA--Federal National Mortgage Association
GMAC--General Motors Acceptance Corporation
GNMA--Government National Mortgage Association
STRIPS--Separately Traded Registered and Interest Principal Security
TBA--To Be Announced
The accompanying notes are an integral part of the financial statements.
INTERMEDIATE GOVERNMENT BOND FUND
DESCRIPTION PAR (000)/SHARES VALUE (000)
- -----------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS - 76.9%
U.S. Treasury Notes
6.750%, 05/31/99 $12,000 $12,166
6.875%, 07/31/99 4,750 4,837
7.125%, 09/30/99 16,000 16,397
7.750%, 11/30/99 3,000 3,108
6.875%, 03/31/00 3,500 3,619
6.250%, 08/31/00 24,750 25,586
7.875%, 08/15/01 19,500 21,314
7.500%, 11/15/01 10,000 10,901
7.500%, 05/15/02 1,000 1,103
6.500%, 05/31/02 24,000 25,706
7.250%, 05/15/04 12,500 14,269
7.875%, 11/15/04 13,000 15,398
6.500%, 08/15/05 8,500 9,562
7.000%, 07/15/06 18,000 20,985
----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $173,820) 184,951
----------
U.S. GOVERNMENT AGENCY OBLIGATIONS - 21.5%
FFCB
5.600%, 01/14/03 3,600 3,710
6.100%, 11/04/04 6,350 6,796
FHLB
7.280%, 05/18/99 2,000 2,027
6.975%, 07/26/99 1,000 1,016
5.970%, 12/11/00 3,000 3,075
7.440%, 08/10/01 1,000 1,074
5.995%, 11/21/01 7,000 7,261
6.030%, 11/26/02 3,750 3,924
6.050%, 12/03/02 2,500 2,618
5.930%, 03/07/03 1,000 1,044
5.785%, 03/17/03 9,000 9,359
6.030%, 12/23/04 2,500 2,665
5.810%, 01/21/05 3,755 3,948
TVA
6.000%, 11/01/00 3,000 3,090
----------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $49,598) 51,607
----------
RELATED PARTY MONEY MARKET FUND - 0.4%
First American Government
Obligations Fund (A) 991,770 992
----------
TOTAL RELATED PARTY MONEY MARKET FUND
(Cost $992) 992
----------
TOTAL INVESTMENTS - 98.8%
(Cost $224,410) 237,550
----------
OTHER ASSETS AND LIABILITIES, NET - 1.2% 2,982
----------
16 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
INTERMEDIATE GOVERNMENT BOND FUND (concluded)
DESCRIPTION PAR (000)
- -----------------------------------------------------------------------
NET ASSETS:
Portfolio Capital--Class Y
($.0001 par value--2 billion authorized)
based on 24,425,993 outstanding shares $222,996
Portfolio Capital--Class A
($.0001 par value--2 billion authorized)
based on 472,586 outstanding shares 4,429
Undistributed net investment income 11
Accumulated net realized loss on investments (44)
Net unrealized appreciation of investments 13,140
----------
TOTAL NET ASSETS--100.0% $240,532
----------
Net asset value, offering price, and
redemption price per share--Class Y $ 9.66
----------
Net asset value and redemption price
per share--Class A $ 9.68
----------
Maximum sales charge of 3.00% (1) 0.30
----------
Offering price per share--Class A $ 9.98
----------
(1) The offer price is calculated by dividing the net asset value by 1 minus the
maximum sales charge of 3.00%.
(A) This money market fund is advised by U.S. Bank National Association who also
serves as advisor for this fund. See also the notes to the financial
statements.
FFCB--Federal Farm Credit Bank
FHLB--Federal Home Loan Bank
TVA--Tennessee Valley Authority
The accompanying notes are an integral part of the financial statements.
INTERMEDIATE TERM INCOME FUND
DESCRIPTION PAR (000) VALUE (000)
- -----------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS - 45.2%
U.S. Treasury Notes
5.625%, 11/30/99 $21,195 $21,453
6.250%, 10/31/01 47,425 49,948
6.250%, 02/15/03 53,965 58,010
7.250%, 08/15/04 1,300 1,491
6.500%, 08/15/05 17,395 19,569
6.875%, 05/15/06 37,500 43,352
U.S. Treasury STRIPS
0.000%, 05/15/08 36,250 23,138
----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $205,780) 216,961
----------
CORPORATE OBLIGATIONS - 24.0%
AIRCRAFT - 0.2%
Boeing
6.350%, 06/15/03 1,000 1,054
----------
AUTOMOTIVE - 0.4%
Hertz
6.300%, 11/15/06 2,000 2,055
----------
BANKS - 0.5%
ANZ Banking Group
7.550%, 09/15/06 1,000 1,089
Bank America
7.625%, 06/15/04 100 111
Chase Manhattan
6.375%, 02/15/08 125 128
First Chicago
7.625%, 01/15/03 1,000 1,086
Wachovia
6.250%, 08/04/08 125 131
----------
2,545
----------
BROKERAGE - 5.1%
Bear Stearns, Series B
6.238%, 10/03/00 13,000 13,167
Lehman Brothers Holdings
6.000%, 03/23/00 6,050 5,929
Lehman Brothers Holdings,
Mandatory Put @ 100
7.500%, 08/01/03 (D) 2,000 1,854
Morgan Stanley
8.100%, 06/24/02 1,000 1,084
Salomon Smith Barney Holdings
7.000%, 03/15/04 2,000 2,128
----------
24,162
----------
CONSUMER FINANCE - AUTO - 7.3%
Chrysler Financial
5.850%, 05/15/00 19,035 19,284
Ford Motor Credit
7.000%, 09/25/01 2,000 2,107
6.250%, 11/08/00 13,200 13,475
----------
34,866
----------
CONSUMER FINANCE - RETAIL - 0.2%
Nordstrom Credit
6.700%, 07/01/05 1,000 1,078
----------
17 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
NET ASSETS SEPTEMBER 30, 1998
INTERMEDIATE TERM INCOME FUND (continued)
DESCRIPTION PAR (000) VALUE (000)
- -----------------------------------------------------------------------
FINANCIAL SERVICES - 3.3%
American Express
6.500%, 08/01/00 $1,000 $1,030
CIT Group Holdings
6.200%, 10/20/00 12,725 13,019
General Motors Acceptance
8.500%, 01/01/03 1,500 1,677
----------
15,726
----------
FOOD, BEVERAGE & TOBACCO - 0.4%
Coca-Cola Enterprises
6.700%, 10/15/36 2,000 2,136
----------
FOREIGN GOVERNMENT - 0.6%
Hydro-Quebec
9.400%, 02/01/21 2,300 3,092
----------
INSURANCE - 4.2%
Cigna
7.400%, 01/15/03 3,075 3,285
Metropolitan Life Insurance
6.300%, 11/01/03 (C) 15,145 15,847
Safeco
7.875%, 04/01/05 1,000 1,098
----------
20,230
----------
LEASING & RENTING - 1.4%
Comdisco
5.750%, 01/19/99 5,300 5,309
5.780%, 01/19/99 1,150 1,152
----------
6,461
----------
PETROLEUM & FUEL PRODUCTS - 0.4%
Occidental Petroleum
6.410%, 11/30/00 1,000 1,013
Union Oil of California
8.750%, 08/15/01 1,000 1,079
----------
2,092
----------
TOTAL CORPORATE OBLIGATIONS
(Cost $112,363) 115,497
----------
ASSET-BACKED OBLIGATIONS - 14.6%
AUTOMOBILES - 0.3%
Daimler Benz Vehicle Trust 1996-A
5.850%, 07/20/03 564 566
Norwest Auto Trust 1996-A
5.900%, 03/15/00 846 848
----------
1,414
----------
CREDIT CARD - 0.9%
Citibank Credit Card Master
Trust 1997-7 Cl A
6.350%, 08/15/02 2,000 2,047
Standard Credit Card Master
Trust 1991-6A
7.875%, 01/07/00 2,055 2,059
----------
4,106
----------
INTERMEDIATE TERM INCOME FUND (continued)
DESCRIPTION PAR (000) VALUE (000)
- -----------------------------------------------------------------------
OTHER ASSET BACKED SECURITIES - 13.4%
American Southwest Financial
Securities 1995-C1 Cl A1B
7.400%, 11/17/04 $8,595 $9,410
Asset Securitization 1996-D6
6.880%, 11/13/26 18,400 19,509
Drexel Burnham Lambert Trust S-2
9.000%, 08/01/18 40 41
Equicredit Home Equity Loan Trust
7.350%, 06/15/14 1,583 1,604
Merrill Lynch Mortgage 1995-C3
7.062%, 12/26/25 (A) 18,725 20,129
New Century Home Equity Loan
Trust Series Cl A
6.590%, 12/25/19 9,200 9,369
Prudential Home Mortgage
Securities 1994-28
6.755%, 09/25/01 (A) 2,180 2,263
Zale Funding 1994-1
7.500%, 05/15/03 (C) 2,000 2,021
----------
64,346
----------
TOTAL ASSET-BACKED OBLIGATIONS
(Cost $67,249) 69,866
----------
U.S. GOVERNMENT AGENCY OBLIGATIONS - 7.7%
FHLB
7.280%, 05/18/99 2,000 2,027
5.985%, 11/26/02 2,175 2,272
FNMA
8.450%, 07/12/99 1,000 1,026
5.560%, 07/24/00 25,585 25,984
6.180%, 03/15/01 1,000 1,035
6.160%, 04/03/01 1,000 1,036
7.400%, 07/01/04 2,000 2,268
7.350%, 03/28/05 1,000 1,138
----------
TOTAL U.S.GOVERNMENT AGENCY OBLIGATIONS
(Cost $35,856) 36,786
----------
U.S. GOVERNMENT AGENCY
MORTGAGE-BACKED OBLIGATIONS - 7.5%
FHLMC 1606-H
6.000%, 11/15/08 4,925 5,068
FHLMC 1659-TN
5.500%, 01/15/01 1,261 1,266
FHLMC 1902-C
7.000%, 05/15/03 2,550 2,670
FHLMC Pool #E20194
7.000%, 09/01/10 1,704 1,747
FNMA Pool #050145
10.000%, 11/01/18 1,555 1,700
FNMA Pool #050776
6.000%, 08/01/08 1,321 1,340
FNMA 1992-G40-K
7.000%, 06/25/02 3,949 3,954
FNMA 1993-55-J
6.500%, 11/25/07 1,000 1,060
FNMA 1996-57-E
7.000%, 06/25/03 2,278 2,383
FNMA 1996-72-D
6.500%, 01/18/04 4,000 4,095
18 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
INTERMEDIATE TERM INCOME FUND (continued)
DESCRIPTION PAR (000)/SHARES VALUE (000)
- -----------------------------------------------------------------------
FNMA 250387
7.000%, 11/01/10 $1,695 $1,739
FNMA 303357
7.000%, 06/01/10 455 467
FNMA 303753
9.000%, 12/01/20 1,493 1,575
FNMA 341727
9.500%, 06/01/21 1,479 1,597
GMNA 312046
9.000%, 08/15/21 2,275 2,430
GNMA 002007
9.000%, 05/20/25 1,052 1,111
GNMA 002038
8.500%, 07/20/25 1,625 1,707
----------
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-
BACKED OBLIGATIONS
(Cost $35,104) 35,909
----------
RELATED PARTY MONEY MARKET FUND - 0.4%
First American Prime
Obligations Fund (B) 2,016,430 2,016
----------
TOTAL RELATED PARTY MONEY MARKET FUND
(Cost $2,016) 2,016
----------
TOTAL INVESTMENTS - 99.4%
(Cost $458,368) 477,035
----------
OTHER ASSETS AND LIABILITIES, NET - 0.6% (E) 2,767
----------
NET ASSETS:
Portfolio Capital--Class Y
($.0001 par value--2 billion authorized)
based on 41,316,056 outstanding shares 408,726
Portfolio Capital--Class A
($.0001 par value--2 billion authorized)
based on 4,701,917 outstanding shares 60,794
Undistributed net investment income 117
Accumulated net realized loss on investments (8,502)
Net unrealized appreciation of investments 18,667
----------
TOTAL NET ASSETS--100.0% $479,802
----------
Net asset value, offering price, and redemption
price per share--Class Y $ 10.42
----------
Net asset value and redemption price
per share--Class A $ 10.45
----------
Maximum sales charge of 3.75% (1) 0.41
----------
Offering price per share--Class A $ 10.86
----------
INTERMEDIATE TERM INCOME FUND (concluded)
DESCRIPTION
- -------------------------------------------------------------------------------
(1) The offer price is calculated by dividing the net asset value by 1 minus the
maximum sales charge of 3.75%.
(A) Variable Rate Security--the rate reported on the Statement of Net Assets is
the rate in effect as of September 30, 1998.
(B) This money market fund is advised by U.S. Bank National Association who also
serves as advisor for this fund. See also the notes to the financial
statements.
(C) Security sold within the terms of a private placement memorandum, exempt
from registration under the section 144A of the Securities Act of 1933, as
amended, and may be sold only to dealers in that program or other "qualified
institutional investors." These securities have been determined to be liquid
under the guidelines established by the Board of Directors.
(D) Mandatory Put Security--the mandatory put date is shown as the maturity date
on the Statement of Net Assets.
(E) Other assets and liabilities representing greater than five percent of total
net assets include the following:
Cash collateral received for securities on loan $ 237,934
Payable upon return of securities on loan $(237,934)
FHLB--Federal Home Loan Bank
FHLMC--Federal Home Loan Mortgage Corporation
FNMA--Federal National Mortgage Association
GNMA--Government National Mortgage Association
STRIPS-- Separately Traded Registered Interest and Principal Securities
The accompanying notes are an integral part of the financial statements.
19 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
NET ASSETS SEPTEMBER 30, 1998
LIMITED TERM INCOME FUND
DESCRIPTION PAR (000) VALUE (000)
- -----------------------------------------------------------------------
ASSET-BACKED SECURITIES - 41.3%
AUTO COMPANY SUBSIDIARIES - AUTO - 1.6%
General Motors Acceptance 97-A
6.500%, 04/15/02 $ 2,751 $ 2,782
----------
BANKS - AUTO - 1.6%
NAFCO Auto Trust
7.000%, 12/31/01 918 925
Southern Pacific Thrift &
Loan Association 1996-C1 A1
5.998%, 04/25/28 (A) (B) 578 578
Western Financial Grantor Trust 1994-3
6.650%, 12/01/99 182 182
Western Financial Grantor Trust 1994-4 A1
7.100%, 01/01/00 1,094 1,100
----------
2,785
----------
BANKS - CREDIT CARD RECEIVABLES - 16.2%
Discover Card Master Trust, Cl B
8.375%, 10/16/00 4,750 4,762
5.300%, 10/16/01 775 775
Fingerhut Master Trust, Series 1996-1, Cl A
6.450%, 02/20/02 7,145 7,193
First USA Credit Card Master Trust 1996-1
5.931%, 11/15/03 (A) 1,500 1,495
Household Credit Card Master Trust 1995-1
5.991%, 12/15/02 (A)) 6,375 6,391
MBNA Master Credit Card Trust 1994-B
5.313%, 01/15/02 (A) 8,250 8,292
----------
28,908
----------
CONSUMER FINANCE - AUTO - 9.9%
Auto Bond Receivables Trust 1993-1
6.125%, 11/15/98 (A) 131 131
Budget Fleet Finance 1994-A
6.182%, 04/25/00 (A) (B) 6,400 6,403
Fasco Auto Trust Series 1996-1
6.650%, 11/15/01 2,657 2,687
MMCA Automobile Trust 1997-1 A3
6.080%, 05/15/01 6,170 6,220
The Money Store Auto Grantor
Trust 1997-2, Cl A
6.170%, 03/20/01 2,131 2,143
----------
17,584
----------
CONSUMER FINANCE - FIRST MORTGAGE
RELATED - 0.4%
Prudential Home Mortgage
Securities 1992-36 A7
6.500%, 11/25/99 782 784
----------
CONSUMER FINANCE - SECOND MORTGAGE
RELATED - 4.4%
Green Tree Home Improvement
Loan Trust, 1996-F
6.900%, 01/15/28 4,000 4,135
Household Finance Home Equity
1993-2 A3
4.650%, 12/20/08 676 677
Wilshire Mortgage Loan Trust
6.750%, 06/25/15 3,000 3,072
----------
7,884
----------
LIMITED TERM INCOME FUND (continued)
DESCRIPTION PAR (000) VALUE (000)
- -----------------------------------------------------------------------
EQUIPMENT LEASES - 4.1%
Icon Receivables 1997-A1
6.435%, 06/01/05 (B) $ 5,115 $ 5,208
JLC Lease Receivables Trust 1994-1
5.926%, 12/22/99 (A) 2,107 2,108
----------
7,316
----------
MORTGAGE BANKERS & LOANS - SECOND
MORTGAGE RELATED - 2.4%
Amresco Residential Securities 1996-5 A2
6.275%, 04/25/18 (A) 1,624 1,664
BCI Home Equity Loan 1994-1
6.288%, 03/29/44 (A) 1,755 1,770
The Money Store Home Equity
Loan Trust 1993-B A1
5.400%, 08/15/05 562 562
UCFC Home Equity Loan 1995-B1, Cl A2
6.600%, 07/10/09 348 348
----------
4,344
----------
VACATION HOME MORTGAGES - 0.7%
Patten 1995-1A
7.250%, 08/01/11 (A) (B) 1,286 1,273
----------
TOTAL ASSET-BACKED SECURITIES
(Cost $73,153) 73,660
----------
CORPORATE OBLIGATIONS - 30.3%
AUTOMOTIVE - 4.4%
Ford Motor Credit
7.450%, 04/13/00 7,500 7,760
----------
BROKERAGE - 11.4%
Bear Stearns, Series B
6.238%, 10/03/00 7,500 7,596
Lehman Brothers Holding
6.000%, 02/26/01 5,000 4,836
Salomon Smith Barney
5.980%, 03/26/01 7,750 7,860
----------
20,292
----------
FINANCIAL SERVICES - 10.6%
Associates of North America
5.850%, 01/15/01 7,500 7,615
CIT Group Holdings
6.250%, 03/28/01 6,500 6,678
Commercial Credit
5.550%, 02/15/01 4,500 4,533
----------
18,826
----------
LEASING & RENTING - 3.9%
Comdisco
5.760%, 01/19/99 7,000 7,011
----------
TOTAL CORPORATE OBLIGATIONS
(Cost $53,476) 53,889
----------
U.S. TREASURY OBLIGATION - 10.7%
U.S. Treasury Note
5.625%, 02/28/01 18,500 19,024
----------
TOTAL U.S. TREASURY OBLIGATION
(Cost $18,526) 19,024
----------
20 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
LIMITED TERM INCOME FUND (continued)
DESCRIPTION PAR (000)/SHARES VALUE (000)
- -----------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATION - 10.6%
FHLB
5.690%, 08/07/01 $ 18,500 $ 18,982
----------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATION
(Cost $18,500) 18,982
----------
OTHER MORTGAGE-BACKED OBLIGATION - 2.8%
Merrill Lynch Mortgage Investors 1993-C A4
6.688%, 03/15/18 (A) 4,850 4,939
----------
TOTAL OTHER MORTGAGE-BACKED OBLIGATION
(Cost $4,857) 4,939
----------
U.S. GOVERNMENT AGENCY MORTGAGE-
BACKED OBLIGATION - 2.1%
FNMA 1992-152 J
7.000%, 05/25/06 3,659 3,681
----------
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-
Backed Obligation
(Cost $3,665) 3,681
----------
RELATED PARTY MONEY MARKET FUND - 1.5%
First American Prime
Obligations Fund (C) 2,693,965 2,694
----------
TOTAL RELATED PARTY MONEY MARKET FUND
(Cost $2,694) 2,694
----------
TOTAL INVESTMENTS - 99.3%
(Cost $174,871) 176,869
----------
OTHER ASSETS AND LIABILITIES, NET - 0.7% (D) 1,303
----------
NET ASSETS:
Portfolio Capital--Class Y
($.0001 par value--2 billion authorized)
based on 17,247,275 outstanding shares 174,431
Portfolio Capital--Class A
($.0001 par value--2 billion authorized)
based on 501,683 outstanding shares 5,600
Undistributed net investment income 4
Accumulated net realized loss on investments (3,861)
Net unrealized appreciation of investments 1,998
----------
TOTAL NET ASSETS--100.0% $178,172
----------
Net asset value, offering price, and redemption
price per share--Institutional Class $ 10.04
----------
Net Asset Value and Redemption Price
Per Share--Class A $ 10.04
Maximum sales charge of 2.00% (1) 0.20
----------
Maximum Offering Price Per Share--Class A $ 10.24
----------
LIMITED TERM INCOME FUND (continued)
DESCRIPTION
- --------------------------------------------------------------------------------
(1) The offer price is calculated by dividing the net asset value by 1 minus the
maximum sales charge of 2.00%.
(A) Variable Rate Security--the rate reported on the Statement of Net Assets is
the rate in effect as of September 30, 1998.
(B) Security sold within the terms of a private placement memorandum, exempt
from registration under section 144A of the Securities Act of 1933, as
amended, and may be sold only to dealers in that program or other "qualified
institutional investors." These securities have been determined to be liquid
under guidelines established by the Board of Directors.
(C) This money market fund is advised by U.S. Bank National Association who also
serves as advisor for this fund. See also the notes to the financial
statements.
(D) Other assets and liabilities representing greater than five percent of total
net assets include the following (000):
Cash collateral received for securities on loan $ 44,439
Payable upon return of securities on loan $(44,439)
FHLB--Federal Home Loan Bank
FNMA--Federal National Mortgage Association
The accompanying notes are an integral part of the financial statements.
21 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
NET ASSETS SEPTEMBER 30, 1998
STRATEGIC INCOME FUND
DESCRIPTION PAR (000) (F) VALUE (000)
- -----------------------------------------------------------------------
DOMESTIC HIGH YIELD CORPORATE OBLIGATIONS - 33.7%
APPAREL/TEXTILES - 0.4%
Glenoit Callable 04/15/05 @ 100 (E)
11.000%, 04/15/07 100 $ 97
Pillowtex
10.000%, 11/15/06 100 103
Pillowtex, Callable 12/15/02 @ 104.5
9.000%, 12/15/07 200 196
----------
396
----------
APPLIANCES - 2.0%
Advanced Argo Pub (D)
13.000%, 11/15/07 1,000 800
Cumulus Media (E)
Callable 07/01/03 @ 105.188,
Callable 07/01/04 @ 103.458
10.375%, 07/01/08 200 202
JTM Industries (D)
Callable 04/15/03 @ 105,
Callable 04/15/06 @ 100
10.000%, 04/15/08 125 126
Tricom, Callable 09/01/01 @ 105.688
Callable 09/01/03 @ 100
11.375%, 09/01/04 1,000 725
----------
1,853
----------
AUTOMOTIVE - 2.2%
Aftermarket Technology
12.000%, 08/01/04 112 119
Collins & Aikman,
Callable 04/15/01 @ 105.75
11.500%, 04/15/06 300 314
General Motors, Putable 03/01/98 @ 100
8.800%, 03/01/21 1,000 1,237
HDA Parts System (D)
Callable 08/01/02 @ 106,
Callable 08/01/04 @ 100
12.000%, 08/01/05 150 135
Lear, Callable 07/15/01 @ 104.75
9.500%, 07/15/06 75 80
Lear Seating, Callable 02/01/98 @ 101.65,
Callable 02/01/99 @ 100
8.250%, 02/01/02 200 200
Oshkosh Trucking (E)
Callable 03/01/03 @ 104.375
Callable 03/01/06 @ 100
8.750%, 03/01/08 50 47
----------
2,132
----------
BANKING - 1.0%
First Nationwide Holdings
10.625%, 10/01/03 250 291
Golden State Escrow (D)
7.125%, 08/01/05 600 613
----------
904
----------
BROADCAST RADIO & TELEVISION - 5.7%
Acme Television, Step-Bond, (E)
Callable 09/30/01 @ 105.438,
Callable 09/30/03 @ 100.000
09/30/04 (C) 100 78
Big City Radio, Step-Bond,
Callable 03/15/02 @ 105.625,
Callable 03/15/03 @ 102.813
03/15/05 (C) 50 34
STRATEGIC INCOME FUND (continued)
DESCRIPTION PAR (000) (F) VALUE (000)
- -----------------------------------------------------------------------
Capstar Broadcasting,
Callable 07/01/02 @ 104.625
9.250%, 07/01/07 75 $ 75
CBS Radio, Callable 01/15/02 @ 105.688
Callable 01/15/07 @ 100.000
11.375%, 01/15/09 143 164
Chancellor Media
Callable 02/01/00 @ 104.688
9.375%, 10/01/04 50 51
Chancellor Media (E)
Callable 01/15/02 @ 105.25
10.500%, 01/15/07 50 53
Chancellor Media,
Callable 12/15/02 @ 104.063
Callable 12/15/05 @ 100
8.125%, 12/15/07 500 484
Chancellor Media, Series B,
Callable 06/15/02 @ 104.375
8.750%, 06/15/07 100 99
Charter Communications South East,
Callable 03/15/01 @ 105.375
11.250%, 03/15/06 100 110
Comcast, Callable 05/15/00 @ 104.69
9.375%, 05/15/05 75 79
CSC Holdings, Callable 05/15/01 @ 104.94,
Callable 05/15/04 @ 100
9.875%, 05/15/06 50 54
CSC Holdings, Callable 02/15/03 @ 104.80
9.875%, 02/15/13 400 444
Diamond Holdings (E)
Callable 02/01/03 @ 104.562,
Callable 02/01/04 @ 103.042
9.125%, 02/01/08 125 120
Diva Systems, Step-Bond (D)
Callable 03/01/03 @ 106.31
03/01/08 (C) 75 25
Echostar, Callable 07/01/00 @ 106.25,
Callable 07/01/02 @ 100
12.500%, 07/01/02 200 211
Echostar Satellite Broadcast, Step-Bond,
Callable 03/15/00 @ 106.56
03/15/04 (C) 100 90
Fox/Liberty Networks,
Callable 08/15/02 @ 104.438
8.875%, 08/15/07 50 49
Fox/Liberty Networks LLC, Step-Bond,
Callable 08/15/02 @ 104.875,
Callable 08/15/05 @ 100
08/15/07 (C) 575 377
International Cable & Telephone
Step-Bond (E)
Callable 04/01/03 @ 104.875,
Callable 04/01/06 @ 100
04/01/08 (C) 800 484
Lamar Advertising,
Callable 09/15/02 @ 104.313,
Callable 09/15/05 @ 100
8.625%, 09/15/07 400 410
NTL, Step-Bond,
Callable 10/15/98 @ 103.11,
Callable 10/15/00 @ 100.00
10/15/03 (C) 150 150
Outdoor Systems,
Callable 06/15/02 @ 104.44,
Callable 06/15/05 @ 100
8.875%, 06/15/07 475 496
22 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STRATEGIC INCOME FUND (continued)
DESCRIPTION PAR (000) (F) VALUE (000)
- -----------------------------------------------------------------------
Pegasus Communications, Series B
9.625%, 10/15/05 225 $ 217
SFX Broadcasting
10.750%, 05/15/06 150 165
Sinclair Broadcasting,
Callable 12/15/02 @ 104.375,
Callable 12/15/05 @ 100
8.750%, 12/15/07 675 665
UIH Australia/Pacific, Step-Bond,
Callable 05/15/01 @ 107
05/15/06 (C) 150 61
United International Holdings (E)
Step-Bond, Series B,
Callable 02/15/03 @ 105.375
02/15/08 (C) 300 142
----------
5,387
----------
BUILDER - 0.0%
American Builder & Contractors (E)
10.625%, 05/15/07 50 46
----------
BUSINESS SERVICES - 0.6%
Fisher Scientific International,
Callable 02/01/03 @ 104.50
9.000%, 02/01/08 250 240
United Stationer Supply,
Callable 05/01/00 @ 106.375,
Callable 05/01/04 @ 100
12.750%, 05/01/05 83 93
US Office Products (D)
Callable 6/15/03 @ 104.875
9.750%, 06/15/08 250 213
----------
546
----------
CHEMICALS & PLASTICS - 0.9%
Buckeye Cellulose
9.250%, 09/15/08 125 126
ISP Holdings
9.000%, 10/15/03 150 156
Polymer Group, Series B
9.000%, 07/01/07 100 95
Polymer Group,
Callable 03/01/03 @ 104.375
8.750%, 03/01/08 500 472
Sterling Chemical, Step-Bond,
Callable 08/15/01 @ 106.75
08/15/08 (C) 100 45
----------
894
----------
CONGLOMERATE - 0.2%
Eagle-Picher, Callable 03/01/03 @ 104.688 (E)
Callable 03/01/06 @ 100
9.375%, 03/01/08 175 159
----------
CONSUMER HEALTH - 0.0%
Icon Fitness, Step-Bond,
Callable 11/15/01 @ 110,
Callable 11/15/04 @ 100
11/15/06 (C) 100 5
----------
STRATEGIC INCOME FUND (continued)
DESCRIPTION PAR (000) (F) VALUE (000)
- -----------------------------------------------------------------------
CONSUMER NON-DURABLES - 0.5%
Hosiery of America,
Callable 10/01/99 @ 106.875
13.750%, 08/01/02 50 $ 52
Platex Family Products,
Callable 12/15/98 @ 104.25
9.000%, 12/15/03 400 405
----------
457
----------
CONSUMER PRODUCTS - 0.6%
Albecca (D)
Callable 8/15/03 @ 105.375
Callable 08/15/6 @ 100
10.750%, 08/15/08 350 336
Chattem, Callable 04/01/03 @ 104.4375,
Callable 04/01/04 @ 102.958
8.875%, 04/01/08 200 194
Diamond Brands Operating (D)
Callable 04/15/03 @ 105.063,
Callable 04/15/04 @ 103.375
10.125%, 04/15/08 50 46
----------
576
----------
CONTAINERS & PACKAGING - 0.4%
Ball, Callable 08/01/03 @ 104.125 (D)
Callable 08/01/06 @ 100.000
8.250%, 08/01/08 250 257
Tekni-Plex (E)
Callable 03/01/03 @ 104.625,
Callable 03/01/06 @ 100.000
9.250%, 03/01/08 100 97
----------
354
----------
COSMETICS AND TOILETRIES - 0.6%
Revlon Consumer Products (E)
Callable 02/01/03 @ 104.313,
Callable 02/01/06 @ 100
8.625%, 02/01/08 600 585
----------
ECOLOGICAL SERVICES & EQUIPMENT - 0.6%
Allied Waste Industries,
Callable 12/01/01 @ 105.125
10.250%, 12/01/06 350 381
Allied Waste Industries, Step-Bond,
Callable 12/01/01 @ 101.28
06/01/07 (C) 200 148
----------
529
----------
ELECTRICAL SERVICES - 0.5%
El Paso Electric,
Callable 02/01/06 @ 104.7,
Callable 02/01/08 @ 100
9.400%, 05/01/11 150 172
Niagra Mowhawk Power, Step-Bond,
Callable 07/01/03 @ 104.25,
Callable 07/01/06 @ 100.00
07/01/10 (C) 450 333
----------
505
----------
FINANCIAL SERVICES - 1.1%
GMAC-LB, 98-C2 A2 (G)
6.420%, 09/15/30 1,000 1,042
----------
23 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
NET ASSSETS SEPTEMBER 30, 1998
STRATEGIC INCOME FUND (continued)
DESCRIPTION PAR (000) (F) VALUE (000)
- -----------------------------------------------------------------------
FOOD PRODUCTS - 0.1%
Carr-Gottstein, Callable 11/15/00 @ 106,
Callable 11/15/04 @ 100
12.000%, 11/15/05 100 $ 115
----------
FOOD SERVICES - 0.9%
Ameriserve Food,
Callable 07/15/02 @ 106.063
10.125%, 07/15/07 400 356
Aurora Foods Callable 07/01/03 @ 104.375,
Callable 07/01/06 @ 100
8.750%, 07/01/08 100 103
International Home Foods,
Callable 11/01/01 @ 105.19
10.375%, 11/01/06 350 369
----------
828
----------
FOREST PRODUCTS - 0.4%
Four M
12.000%, 06/01/06 100 92
SD Warren, Series B,
Callable 12/15/99 @ 104.5,
Callable 12/15/00 @ 103
12.000%, 12/15/04 100 109
Stone Container,
Callable 10/01/99 @ 104.31,
Callable 10/01/02 @ 100
11.500%, 10/01/04 150 148
----------
349
----------
GAS/NATURAL GAS - 0.1%
Continental Resources (D)
Callable 08/01/03 @ 105.125
10.250%, 08/01/08 125 103
----------
HEALTHCARE SERVICES - 1.3%
Conmed, Callable 03/15/03 @ 104.50,
Callable 03/15/06 @ 100.00
9.000%, 03/15/08 250 230
Dade International
11.125%, 05/01/06 150 161
Everest Healthcare Services (D)
Callable 05/01/03 @ 104.875,
Callable 05/01/06 @ 100
9.750%, 05/01/08 50 48
Genesis Health Ventures,
Callable 10/01/01 @ 104.625,
Callable 10/01/04 @ 100
9.250%, 10/01/06 75 73
Hudson Respiratory Care (D)
Callable 04/15/03 @ 104.563,
Callable 04/15/06 @ 100.000
9.125%, 04/15/08 50 38
Tenet Healthcare
8.000%, 01/15/05 50 51
Tenet Healthcare (D)
Callable 06/01/03 @ 104.063,
Callable 06/01/04 @ 102.708
8.125%, 12/01/08 600 607
----------
1,208
----------
STRATEGIC INCOME FUND (continued)
DESCRIPTION PAR (000) (F) VALUE (000)
- -----------------------------------------------------------------------
HEAVY ELECTRICAL MACHINERY - 0.3%
Alvey Systems,
Callable 01/31/00 @ 105.69
11.375%, 01/31/03 150 $ 152
Tokheim, Series B
11.500%, 08/01/06 91 104
----------
256
----------
HOTELS & LEISURE - 0.5%
Host Marriott,
Callable 08/01/03 @ 103.985,
Callable 08/01/04 @ 102.657
7.875%, 08/01/08 500 494
----------
HOUSEHOLD FURNITURE & FIXTURES - 0.2%
Simmons, Callable 04/15/01 @ 105.375,
Callable 04/15/04 @ 100
10.750%, 04/15/06 150 158
----------
INDUSTRIAL PRODUCTS & EQUIPMENT - 0.7%
Anchor Lamina, Callable 02/01/03 @
104.937,
Callable 02/01/04 @ 103.292
9.875%, 02/01/08 75 61
Cabot Safety
12.500%, 07/15/05 150 162
Continental Global Group,
Callable 04/01/02 @ 105.5,
Callable 04/01/05 @ 100
11.000%, 04/01/07 50 45
Unifrax Investment,
Callable 11/01/00 @ 105.25
10.500%, 11/01/03 100 99
Wesco Distribution (E)
Callable 06/01/03 @ 104.563,
Callable 06/01/06 @ 100.000
9.125%, 06/01/08 325 315
Wesco International, Step-Bond,
Callable 06/01/03 @ 105.563,
Callable 06/01/06 @ 100.000
06/01/08 (C) 50 27
----------
709
----------
LEISURE & ENTERTAINMENT - 2.0%
AMF Bowling Worldwide, Step-Bond,
Callable 03/15/01 @ 106.125
03/15/06 (C) 153 93
Loews Cineplex Entertainment (D)
Callable 08/01/03 @ 104.437,
Callable 08/01/06 @ 100.000
8.875%, 08/01/08 250 247
Premier Parks, Step-Bond,
04/01/08 (C) 500 312
Premier Parks,
Callable 08/15/99 @ 106,
Callable 08/15/02 @ 100
12.000%, 08/15/03 150 162
Premier Parks Six Flags Theme Parks,
Callable 06/15/00 @ 106,
Callable 06/15/03 @ 100
12.250%, 06/15/05 100 108
Regal Cinimas (D)
Callable 06/01/03 @ 104.75,
Callable 06/01/06 @ 100
9.500%, 06/01/08 400 404
Viacom International
8.000%, 07/07/06 600 613
----------
1,939
----------
24 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STRATEGIC INCOME FUND (continued)
DESCRIPTION PAR (000) (F) VALUE (000)
- -----------------------------------------------------------------------
MACHINE TOOL MANUFACTURER - 0.0%
National Equipment (D)
Callable 11/30/01 @ 105,
Callable 11/30/03 @ 100
10.000%, 11/30/04 50 $ 46
----------
MACHINERY - 0.3%
Clark Material,
Callable 11/15/01 @ 105.375
10.750%, 11/15/06 100 101
Grove Worldwide (D)
Callable 05/01/03 @ 104.625,
Callable 05/01/06 @ 100.000
9.250%, 05/01/08 200 174
----------
275
----------
MANUFACTURING - 0.1%
MMI Products
11.250%, 04/15/07 75 82
----------
METAL & MINING - 0.1%
AEI Holding (D)
Callable 11/15/02 @ 105
10.000%, 11/15/07 125 119
----------
OIL & GAS - 0.8%
Chiles Offshore,
Callable 05/01/03 @ 105
10.000%, 05/01/08 100 83
Dailey International, Series B (E)
Callable 02/15/03 @ 104.75,
Callable 02/15/04 @ 103.167
9.500%, 02/15/08 300 180
Forcenergy, Callable 11/01/01 @ 104.75
9.500%, 11/01/06 100 73
Nuevo Energy, Callable 06/01/03 @ 104.438
8.875%, 06/01/08 150 150
Ocean Energy, Callable 10/15/00 @ 105.19
10.375%, 10/15/05 50 53
Pride Petroleum Services,
Callable 05/01/02 @ 104.69
9.375%, 05/01/07 175 164
Universal Compression, Step-Bond, (D)
02/15/08 (C) 150 87
----------
790
----------
PRINTING & PUBLISHING - 1.6%
Affiliated Newspaper, Step-Bond,
Callable 07/01/99 @ 106.75
07/01/06 (C) 200 196
Hollinger International Publishing,
Callable 02/01/01 @ 104.625,
Callable 02/01/04 @ 100.000
9.250%, 02/01/06 1,250 1,281
Hollinger International Publishing,
Callable 3/15/02 @ 104.625
9.250%, 03/15/07 50 52
----------
1,529
----------
STRATEGIC INCOME FUND (continued)
DESCRIPTION PAR (000) (F) VALUE (000)
- -----------------------------------------------------------------------
RETAIL - 0.1%
Jitney-Jungle Stores,
Callable 09/15/02 @ 105.188,
Callable 09/15/05 100
10.375%, 09/15/07 75 $ 75
----------
SEMI-CONDUCTORS/INSTRUMENTS - 0.3%
Amphenol, Callable 05/15/02 @ 104.94
9.875%, 05/15/07 225 221
Electronic Retailing Systems, Step-Bond,
Callable 02/01/01 @ 106.68,
Callable 02/01/03 @ 100
02/01/04 (C) 75 29
----------
250
----------
STEEL & STEEL WORKS - 0.4%
AK Steel, Callable 12/15/01 @ 104.56
9.125%, 12/15/06 150 151
GS Technologies, Callable 09/01/99 @ 106
12.000%, 09/01/04 250 218
----------
369
----------
TELECOMMUNICATIONS & CELLULAR - 6.1%
American Cellular (D)
Callable 05/15/03 @ 105.25,
Callable 05/15/04 @ 103.5
10.500%, 05/15/08 150 146
Call-Net Enterprises Step-Bond, (D)
08/15/03 @ 104.47
08/15/08 (C) 600 348
E.spire Communications,
Callable 07/15/02 @ 106.875,
Callable 07/15/03 @ 105.156
13.750%, 07/15/07 50 54
Highwaymaster Communication, Series B,
Callable 9/15/01 @ 110.313
13.750%, 09/15/05 50 15
ICG Holdings, Step-Bond,
Callable 05/01/01 @ 106.25
05/01/06 (C) 150 107
ICG Services, Step-Bond,
Callable 5/1/03 @ 104.938,
Callable 05/01/06 @ 100
05/01/08 (C) 125 61
Intermedia Communication,
Callable 06/01/03 @ 104.3,
Callable 06/01/04 @ 102.867
8.600%, 06/01/08 250 248
Intermedia Communication, Step-Bond,
Callable 07/15/02 @ 105.625
07/15/07 (C) 100 72
Intermedia Communications
of Florida, Step-Bond,
Callable 05/15/01 @ 106.25
05/15/06 (C) 250 206
IXC Communications,
Callable 04/15/03 @ 104.50
9.000%, 04/15/08 350 348
Level 3 Communications,
Callable 05/01/03 @ 104.563,
Callable 05/01/06 @ 100
9.125%, 05/01/08 750 709
Mcleodusa, Step-Bond,
Callable 03/01/02 @ 105.25,
Callable 03/01/05 @ 100.00
03/01/07 (C) 225 163
25 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
NET ASSETS SEPTEMBER 30, 1998
STRATEGIC INCOME FUND (continued)
DESCRIPTION PAR (000) (F) VALUE (000)
- -----------------------------------------------------------------------
Mcleodusa, Callable 03/15/03 @ 104.188,
Callable 03/15/04 @ 102.792
8.375%, 03/15/08 225 $ 222
Nextel Communications, Step-Bond (E)
02/15/08 (C) 675 405
Nextel Communications, Step-Bond,
Callable 09/15/02 @ 105.325
09/15/07 (C) 125 79
Nextel International, Step-Bond,
Callable 04/15/03 @ 106.063,
Callable 04/15/06 @ 100
04/15/08 (C) 75 35
Nextlink Communications, Step-Bond (E)
Callable 04/15/03 @ 104.725
04/15/08 (C) 50 29
Nextlink Communications,
Callable 03/15/03 @ 104.50,
Callable 03/15/06 @ 100
9.000%, 03/15/08 100 95
Orange PLC, Callable 08/01/03 @ 104,
Callable 08/01/04 @ 102.667
8.000%, 08/01/08 225 219
Paging Network, Callable 10/15/01 @ 105,
Callable 10/15/04 @ 100
10.000%, 10/15/08 350 347
Pathnet (D)
Callable 04/15/03 @ 106.125,
Callable 04/15/06 @ 100.000
12.250%, 04/15/08 75 62
Qwest Communications, Step-Bond (E)
Callable 10/15/02 @ 104.735
10/15/07 (C) 600 464
Sitel, Callable 03/15/02 @ 104.625
9.250%, 03/15/06 250 225
Sygnet Wireless,
Callable 10/01/01 @ 105.75
11.500%, 10/01/06 100 112
Telecommun Techniques,
Callable 05/15/03 @ 104.875,
Callable 05/15/06 @ 100
9.750%, 05/15/08 250 225
Teligent, Callable 12/01/02 @ 105.75
11.500%, 12/01/07 250 193
Triton Communications Step-Bond (D)
Callable 05/01/03 @ 105.50,
Callable 05/01/06 @ 100.00
05/01/08 (C) 350 158
US Xchange (D)
15.000%, 07/01/08 50 50
USA Mobile Communication,
Callable 02/01/99 @ 104.75
9.500%, 02/01/04 100 90
Vanguard Cellular System,
Callable 04/15/01 @ 104.69
9.375%, 04/15/06 200 202
Viatel, Callable 04/15/03 @ 105.625,
Callable 04/15/06 @ 100
11.250%, 04/15/08 75 67
Viatel, Step-Bond,
Callable 04/15/03 @ 106.25
04/15/08 (C) 50 25
----------
5,781
----------
STRATEGIC INCOME FUND (continued)
DESCRIPTION PAR (000) (F) VALUE (000)
- -----------------------------------------------------------------------
TRANSPORTATION - 0.1%
Statia Terminals, Series B,
Callable 11/15/00 @ 105.875
11.750%, 11/15/03 100 $ 100
----------
TOTAL DOMESTIC HIGH YIELD CORPORATE OBLIGATIONS
(Cost $32,325) 31,945
----------
U.S. GOVERNMENT AGENCY MORTGAGE-
Backed Obligations - 19.8%
FHLMC Gold 30 Yr
6.500%, 10/01/28 5,000 5,081
FHLMC TBA 15
6.000%, 12/15/13 2,000 2,022
FHLMC Pool #100042
11.000%, 10/15/20 187 212
FNMA Pool #250113
9.000%, 07/01/24 472 499
FNMA Pool #303675
10.000%, 10/01/17 278 305
FNMA Pool #319002
6.500%, 09/01/25 617 628
FNMA Pool #326580
8.000%, 03/01/08 826 853
FNMA Pool #329569
6.000%, 03/01/11 777 786
FNMA Pool #339194
6.500%, 05/01/26 882 899
FNMA Pool #339839
6.000%, 03/01/26 857 857
FNMA Pool #367977
6.500%, 02/01/04 1,221 1,239
FNMA, Series G93-1 Class H
6.700%, 02/25/21 1,000 1,033
FNMA TBA 10 Year
5.805%, 10/01/08 1,250 1,255
5.850%, 10/25/08 1,000 1,009
FNMA TBA 15 Year
6.500%, 11/17/13 2,000 2,041
FHA/VA Pool #160376
9.000%, 06/15/16 121 130
----------
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-
Backed Obligations
(Cost $18,533) 18,849
----------
U.S. TREASURY OBLIGATIONS - 11.0%
U.S. Treasury Notes
5.875%, 03/31/99 1,000 1,007
8.750%, 08/15/00 750 808
5.750%, 11/15/00 6,000 6,165
6.375%, 03/31/01 1,150 1,203
7.250%, 05/15/16 1,000 1,241
----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $10,084) 10,424
----------
26 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STRATEGIC INCOME FUND (continued)
DESCRIPTION PAR (000) (F) VALUE (000)
- -----------------------------------------------------------------------
FOREIGN BONDS - 40.0%
ARGENTINA - 2.0%
Government of Argentina (H)
11.750%, 02/12/07 AR 1,500 $ 1,030
11.375%, 01/30/17 200 183
Mastellone Hermanos SA (D)(H)
Callable 04/01/03 @ 105.875,
Callable 04/01/06 @ 100.000
11.750%, 04/01/08 AS 1,000 638
----------
1,851
----------
AUSTRIA - 2.1%
Government of Austria
7.625%, 10/18/04 20,000 2,024
----------
BERMUDA - 0.2%
Comcast UK Cable, Step-Bond,
Callable 11/15/00 @ 104.20
11/15/07 (C) (H) 125 101
Gearbulk Holding (H)
Callable 12/01/99 @ 105.625,
Callable 12/01/02 @ 100
11.250%, 12/01/04 75 78
----------
179
----------
BRAZIL - 1.4%
Government of Brazil (H)
9.375%, 04/07/08 1,000 648
8.000%, 04/15/14 970 582
10.125%, 05/15/27 100 61
----------
1,291
----------
BULGARIA - 0.5%
Government of Bulgaria (D)(H)
6.688%, 07/28/11 (A) 800 468
----------
CANADA - 4.5%
Government of Canada
8.000%, 06/01/23 CO 2,000 1,791
International Utility Structures (D)(H)
Callable 02/01/03 @ 105.375,
Callable 02/01/04 @ 103.583
10.750%, 02/01/08 50 44
Metronet Communications, Step-Bond, (D)(H)
Callable 06/15/03 @ 104.975
06/15/08 (C) 450 251
Metronet Communications, (H)
Callable 08/15/02 @ 106,
Callable 08/15/03 @ 104
12.000%, 08/15/07 100 107
Pacalta Resources, Series B, (H)
Callable 06/15/02 @ 105.375,
Callable 06/15/03 @ 100
10.750%, 06/15/04 50 44
Rogers Cablesystem (H)
10.000%, 03/15/05 1,650 1,815
Rogers Cantel, Callable 10/01/02 @ 104.40,
Callable 10/01/05 @ 100
8.800%, 10/01/07 (H) 100 97
Telesystems International Wireless, Step-Bond (E)(H)
Callable 11/01/02 @ 105.50,
Callable 11/01/05 @ 100.00
11/01/07 (C) 50 23
STRATEGIC INCOME FUND (continued)
DESCRIPTION PAR (000) (F) VALUE (000)
- -----------------------------------------------------------------------
Telesystems International Wireless (E)(H)
Step-Bond, Series B,
Callable 06/30/02 @ 106.625
06/30/07 (C) 125 $ 68
Trizec Finance, (H)
Callable 10/15/00 @ 105.44,
Callable 10/15/02 @ 100
10.875%, 10/15/05 50 55
----------
4,295
----------
COLOMBIA - 2.4%
Government of Columbia (D)
7.270%, 06/15/03 1,250 931
7.625%, 02/15/07 1,000 685
8.625%, 04/01/08 1,000 700
----------
2,316
----------
DENMARK - 1.1%
Kingdom of Denmark
7.000%, 11/10/24 DK 5,500 1,052
----------
ECUADOR - 0.7%
Government of Ecuador (H)
11.250%, 04/25/02 1,000 640
----------
GERMANY - 1.1%
Sirona Dental Systems (D) (H)
Callable 7/15/03 @ 104.563,
Callable 7/15/06 @ 100.000
9.125%, 07/15/08 DM 2,000 1,086
----------
JAMAICA - 1.5%
Mechala Group Jamaica, Series B (H)
12.750%, 12/30/99 2,000 1,420
----------
KENYA - 0.5%
Central Bank Kenya, Zero Coupon Bond (H)
11/30/98 KS 28,000 448
----------
KOREA - 1.1%
Republic of Korea (H)
8.875%, 04/15/08 1,200 1,049
----------
LIBERIA - 1.2%
Royal Caribbean
8.125%, 07/28/04 1,000 1,117
----------
LUXEMBOURG - 0.1%
Millicom International,
Step-Bond, Series A,
Callable 06/01/01 @ 106.75
06/01/06 (C) (H) 175 110
MEXICO - 5.2%
Government of Mexico (H)
11.375%, 09/15/16 1,800 1,621
11.500%, 05/15/26 1,250 1,231
Government of Mexico Par/Disc Rights*
06/30/03 5,383 --
Mexican Cetes
08/05/98 MX 22,500 1,696
27 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
NET ASSETS SEPTEMBER 30, 1998
STRATEGIC INCOME FUND (continued)
DESCRIPTION PAR (000) (F) VALUE (000)
- -----------------------------------------------------------------------
Petroleos Mexicanos (H)
9.250%, 03/30/18 500 $ 401
----------
4,949
----------
NETHERLANDS - 2.2%
Government of Netherlands
7.500%, 04/15/10 NL 1,500 1,036
Hermes Europe Railtel, (H)
Callable 08/15/02 @ 105.75
11.500%, 08/15/07 225 239
Voto-Votorantim (D) (H)
Callable 06/27/02 @ 99.50
8.500%, 06/27/05 1,000 770
----------
2,045
----------
PANAMA - 1.3%
Government of Panama
8.250%, 04/22/08 (H) 1,500 1,275
----------
PHILIPPINES - 0.9%
Republic of Philippines
8.875%, 04/15/08 (H) 1,000 825
----------
POLAND - 1.4%
Government of Poland RSTA
3.750%, 10/27/24 (A) 2,000 1,380
----------
RUSSIA - 0.4%
Russian Government (H)
10.000%, 06/26/07 550 126
Russian IAN FRN, Series A (H)
6.625%, 12/15/15 (A) 3,645 283
----------
409
----------
South Africa - 0.9%
Republic of South Africa
12.500%, 01/15/02 (H) ZA 6,000 869
----------
Sweden - 2.7%
Kingdom of Sweden
9.000%, 04/20/09 SE 12,500 2,142
Stena AB, Callable 06/15/02 @ 104.375,
Callable 06/15/05 @ 100
8.750%, 05/15/07 (H) 50 47
Stena AB, Callable 12/15/00 @ 105.25,
Callable 12/15/04 @ 100
10.500%, 12/15/05 (H) 150 155
Stena Line, Callable 06/01/03 @ 105.313,
Callable 06/01/06 @ 100
10.625%, 06/01/08 (H) 200 180
----------
2,524
----------
UNITED KINGDOM - 3.5%
Conversion
9.500%, 04/18/05 UK 700 1,473
Dialog, Callable 11/15/02 @ 105.5 (E)(H)
Callable 11/15/06 @ 100
11.000%, 11/15/07 300 308
Euramax International (H)
11.250%, 10/01/06 125 125
STRATEGIC INCOME FUND (continued)
DESCRIPTION PAR (000) (F) VALUE (000)
- -----------------------------------------------------------------------
Telewest Communications, Step-Bond,
Callable 10/01/00 @ 100
10/01/07 (C) (H) 575 $ 474
Texon International (D) (H)
Callable 02/01/03 @ 105,
Callable 02/01/06 @ 100
10.000%, 02/01/08 DM 2,000 934
----------
3,314
----------
VENEZUELA - 1.1%
Government of Venezuela FRB
6.625%, 12/18/07 (A) (H) 1,809 1,011
----------
TOTAL FOREIGN BONDS
(Cost $44,038) 37,947
----------
COMMON STOCKS - 0.1%
AUSTRALIA - 0.0%
UIH Australia Warrants* 150 1
----------
UNITED STATES - 0.1%
Affiliated Newspaper* 500 60
Bar Technologies Warrants (D)* 50 3
Cellular Communications International* 150 7
CS Wireless Systems (D)* 27 --
Electronic Retailing System Warrants* 75 1
Highwaymaster Communications Inc* 50 --
Hosiery Amer Inc* 50 --
Icf Kaiser Warrants* 120 --
Icon Health & Fitness Capital* 150 --
K-III Communications* 150 --
Metronet* 100 3
Nextel Communications Warrants* 250 --
Pathnet Wts 04/15/08* 75 2
Pegasus Communications* 225 4
Sterling Chemical Warrants* 100 2
Viatel* 62 3
----------
85
----------
TOTAL COMMON STOCKS
(Cost $21) 86
----------
PREFERRED STOCKS - 0.8%
UNITED STATES - 0.8%
Benedek Communications PIK* 50,000 43
Cumulus Media* 50,000 52
Echostar Communications* 56,324 54
Nebco Evans Holdings* 263 17
Nextel Communications* 54,722 56
Pegasus Communications* 113,129 124
Primedia* 1,700 163
SFX Broadcasting 705 84
Sinclair Capital 750 78
Texas Utilities* 2,000 112
----------
783
----------
TOTAL PREFERRED STOCKS
(Cost $752) 783
----------
28 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STRATEGIC INCOME FUND (continued)
DESCRIPTION SHARES VALUE (000)
- -----------------------------------------------------------------------
RELATED PARTY MONEY MARKET FUND - 4.3%
First American Prime
Obligations Fund (B) 4,064,151 $ 4,064
----------
TOTAL RELATED PARTY MONEY MARKET FUND
(Cost $4,064) 4,064
----------
TOTAL INVESTMENTS - 109.7%
(Cost $109,817) 104,098
----------
OTHER ASSETS AND LIABILITIES, NET - (9.7%) (9,223)
----------
NET ASSETS:
Portfolio Capital--Class Y
($.0001 par value--2 billion authorized)
based on 5,875,893 outstanding shares 58,134
Portfolio Capital--Retail Class A
($.0001 par value--2 billion authorized)
based on 4,342,131 outstanding shares 57,819
Portfolio Capital--Retail Class B
($.0001 par value--2 billion authorized)
based on 12,276 outstanding shares 113
Distributions in excess of net investment income (377)
Accumulated net realized loss on investments (15,099)
Net unrealized depreciation of investments (5,719)
Net unrealized appreciation of forward
foreign currency contracts, foreign currency
and transaction of other assets and liabilities
in foreign currency 4
----------
TOTAL NET ASSETS--100.0% $ 94,875
----------
Net asset value, offering price, and redemption
price per share--Class Y $ 9.27
----------
Net asset value and redemption price
per share--Retail Class A $ 9.27
Maximum sales charge of 4.50% (1) 0.44
----------
Offering price per share--Retail Class A (1) $ 9.71
----------
Net asset value and offering price
per share--Retail Class B (2) $ 9.27
----------
*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.
(A) Variable Rate Security--the rate reported on the Statement of Net Assets is
the rate in effect as of September 30, 1998.
(B) This money market fund is advised by the U.S. Bank National Association who
also serves as advisor for this fund. See also the notes to the financial
statements.
(C) Step Bond--The initial coupon on a step bond changes on a specific date, to
a predetermined higher rate.
(D) Security sold within the terms of a private placement memorandum, exempt
from registration under section 144A of the Securities Act of 1933, as
amended, and may be sold only to dealers in that program or other "qualified
institutional investors." These securities have been determined to be liquid
under guidelines established by the Board of Directors.
STRATEGIC INCOME FUND (concluded)
DESCRIPTION
- ------------------------------------------------------------------------------
(E) Securities purchased as part of a private placement which have not been
registered with the Securities and Exchange Commission under the Securities
Act of 1933 and are considered illiquid. On September 30, 1998, the total
market value of these investments was $3,634,000 or 3.83% of total net
assets. Information regarding these securities is as follows:
Date
Security Par Acquired Cost Basis
- -------------------------------------------------------------------------------
Acme Television $100,000 9/97 $ 73,142
Chancellor Media Corp. 50,000 12/97 55,195
American Builders 50,000 5/97 50,000
Glenoit 100,000 3/97-8/97 103,155
Cumulus Media 200,000 6/98-8/98 206,375
International Cable
& Telephone 800,000 3/98-8/98 496,921
Tekni-Plex 100,000 2/98-4/98 101,063
Eagle-Picher Industries 175,000 2/98-8/98 174,168
Revlon Consumer Products 600,000 1/98-8/98 610,432
Wesco Distribution 325,000 5/98-8/98 322,569
Dailey International 300,000 2/98-8/98 290,500
Qwest Communications 600,000 10/97-9/98 424,606
Telesystems International
Wireless 50,000 10/97 29,958
Telesystems International
Wireless 125,000 6/97-10/97 72,696
Dialog 300,000 11/97-8/98 317,500
Oshkosh Trucking 50,000 2/98 50,000
United International Holdings 300,000 2/98-8/98 180,069
NextLink Communications 100,000 2/98 99,798
Diamond Holdings Plc 125,000 1/98 126,250
Nextel Communications 675,000 2/98-8/98 423,425
(F) In U.S. dollars unless otherwise indicated.
(G) Represents a domestic investment grade bond.
(H) Represents a foreign high yield (non-investment grade) bond. On September
30, 1998, the total market value of these investments was $21,920,000 or
23.10% of total net assets.
AR--Argentina Peso
AS--Austrian Schilling
CD--Canadian Dollar
DK--Danish Kroner
DM--German Mark
FHA--Federal Housing Administration
FHLMC--Federal Home Loan Mortgage Corporation
FNMA--Federal National Mortgage Association
FRB--Floating Rate Bond
FRN--Floating Rate Note
IAN--Interest Arrears Note
KS--Kenya Schilling
MX--Mexican Peso
NL--Netherlands Guilder
PIK--Paid In-Kind
RSTA--Revolving Short
Term Agreement
SE--Swedish Krona
TBA--To be announced
UK--British Pound
VA--Veterans Administration
ZA--South African Rand
The accompanying notes are an integral part of the financial statements.
29 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
OPERATIONS FOR THE PERIOD ENDED SEPTEMBER 30, 1998 IN THOUSANDS
<TABLE>
<CAPTION>
ADJUSTABLE INTERMEDIATE
RATE MORTGAGE FIXED GOVERNMENT
SECURITIES FUND INCOME FUND BOND FUND
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $9,905 $ 68,445+ $ 13,744+
Dividends -- -- --
- ------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 9,905 68,445 13,744
============================================================================================================
EXPENSES:
Investment advisory fees 628 7,919 1,532
Less: Waiver of investment advisory fees (82) (1,845) (375)
Administrator fees 138 1,245 241
Transfer agent fees 212 87 31
Custodian fees 24 339 66
Directors' fees 16 17 4
Registration fees 31 26 2
Professional fees 38 39 8
Printing 47 68 10
Distribution fees - Class A 259 89 10
Less: Waiver of distribution fees - Class A (22) -- (10)
Distribution fees - Class B -- 161 --
Other 9 23 13
- ------------------------------------------------------------------------------------------------------------
TOTAL NET EXPENSES 1,298 8,168 1,532
============================================================================================================
INVESTMENT INCOME - NET 8,607 60,277 12,212
============================================================================================================
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS AND FOREIGN
CURRENCY TRANSACTIONS - NET:
Net realized gain (loss) on investments 665 20,003 179
Net realized loss on forward foreign currency contracts
and foreign currency transactions -- -- --
Net change in unrealized appreciation (depreciation) of
investments (766) 57,853 9,274
Net change in unrealized appreciation of forward
foreign currency contracts, foreign currency and
translation of other assets and liabilities denominated
in foreign currency -- -- --
- ------------------------------------------------------------------------------------------------------------
NET GAIN (LOSS) ON INVESTMENTS (101) 77,856 9,453
============================================================================================================
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS $8,506 $ 138,133 $ 21,665
============================================================================================================
</TABLE>
+ Includes income from securities lending program. See the Notes to the
Financial Statements for additional information.
(1) For the period July 24,
1998 (commencement of operations) through September 30, 1998.
The accompanying notes are an integral part of the financial statements.
30 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
INTERMEDIATE TERM LIMITED TERM STRATEGIC
INCOME FUND INCOME FUND INCOME FUND(1)
- --------------------------------------------------------
$ 25,900+ $ 11,157+ $ 1,598
-- -- 5
-------------------------------------------------
25,900 11,157 1,603
=================================================
3,052 1,318 123
(715) (516) (25)
480 207 19
47 34 14
131 57 5
7 3 --
6 7 21
15 7 1
21 9 --
29 13 22
(29) (13) --
-- -- --
8 4 --
-------------------------------------------------
3,052 1,130 180
=================================================
22,848 10,027 1,423
================================================-
5,989 197 101
-- -- (627)
14,591 1,621 (7,227)
-- -- 4
-------------------------------------------------
20,580 1,818 (7,749)
=================================================
$ 43,428 $ 11,845 ($ 6,326)
=================================================
31 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
CHANGES IN NET ASSETS IN THOUSANDS
<TABLE>
<CAPTION>
ADJUSTABLE RATE
MORTGAGE SECURITIES FUND
- ---------------------------------------------------------------------------------------------
10/1/97 9/1/96
to to
9/30/98 9/30/97
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS:
Investment income - net $ 8,607 $ 12,790
Net realized gain (loss) on investments 665 (392)
Net realized loss on forward foreign currency contracts and foreign
currency transactions -- --
Net change in unrealized appreciation
(depreciation) of investments (766) 3,059
Net change in unrealized appreciation of forward foreign currency
contracts, foreign currency and translation of other assets and
liabilities denominated in foreign currency -- --
- ---------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations 8,506 15,457
- ---------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment income - net:
Class Y -- --
Class A (8,473) (12,789)
Class B -- --
Net realized gain on investments:
Class Y -- --
Class A -- --
Class B -- --
- ----------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (8,473) (12,789)
==============================================================================================
CAPITAL SHARE TRANSACTIONS(1):
Class Y:
Proceeds from sales 1 --
Shares issued in connection with acquisition of
Common Trust Fund Assets -- --
Shares issued in connection with acquisition of Qualivest Fund -- --
Shares issued in connection with acquisition of Piper Fund -- --
Reinvestment of distributions -- --
Payments for redemptions -- --
- ----------------------------------------------------------------------------------------------
Increase (decrease) in net assets from
Class Y transactions 1 --
- ----------------------------------------------------------------------------------------------
Class A:
Proceeds from sales 2,317 2,571
Shares issued in connection with acquisition of Qualivest Fund -- --
Shares issued in connection with acquisition of Piper Fund -- --
Reinvestment of distributions 3,652 5,085
Payments for redemptions (57,967) (88,459)
- ----------------------------------------------------------------------------------------------
Increase (decrease) in net assets from
Class A transactions (51,998) (80,803)
- ----------------------------------------------------------------------------------------------
Class B:
Proceeds from sales -- --
Reinvestment of distributions -- --
Payments for redemptions -- --
- ----------------------------------------------------------------------------------------------
Increase (decrease) in net assets from
Class B transactions -- --
- ----------------------------------------------------------------------------------------------
Increase (decrease) in net assets from
capital share transactions (51,997) (80,803)
- ----------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (51,964) (78,135)
NET ASSETS AT BEGINNING OF PERIOD 184,698 262,833
==============================================================================================
NET ASSETS AT END OF PERIOD (2) $ 132,734 $ 184,698
==============================================================================================
(1)CAPITAL SHARE TRANSACTIONS:
Class Y:
Shares issued -- --
Shares issued in connection with acquisition of
Common Trust Fund Assets -- --
Shares issued in connection with acquisition of Qualivest Fund -- --
Shares issued in connection with acquisition of Piper Fund -- --
Shares issued in lieu of cash distributions -- --
Shares redeemed -- --
- ----------------------------------------------------------------------------------------------
TOTAL CLASS Y TRANSACTIONS -- --
==============================================================================================
Class A:
Shares issued 283 317
Shares issued in connection with acquisition of Qualivest Fund -- --
Shares issued in connection with acquisition of Piper Fund -- --
Shares issued in lieu of cash distributions 449 627
Shares redeemed (7,120) (10,899)
- ----------------------------------------------------------------------------------------------
TOTAL CLASS A TRANSACTIONS (6,388) (9,955)
- ----------------------------------------------------------------------------------------------
Class B:
Shares issued -- --
Shares issued in lieu of cash distributions -- --
Shares redeemed -- --
==============================================================================================
TOTAL CLASS B TRANSACTIONS -- --
==============================================================================================
NET INCREASE (DECREASE) FROM SHARE TRANSACTIONS (6,388) (9,955)
==============================================================================================
[WIDE TABLE CONTINUED]
<CAPTION>
FIXED INCOME INTERMEDIATE GOVERNMENT
FUND BOND FUND
- -------------------------------------------------------------------------------------------------------------------------
10/1/97 10/1/96 10/1/97 10/1/96
to to to to
9/30/98 9/30/97 9/30/98 9/30/97
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Investment income - net $ 60,277 $ 33,769 $ 12,212 $ 10,128
Net realized gain (loss) on investments 20,003 58 179 (156)
Net realized loss on forward foreign currency contracts and foreign
currency transactions -- -- -- --
Net change in unrealized appreciation
(depreciation) of investments 57,853 12,465 9,274 1,507
Net change in unrealized appreciation of forward foreign currency
contracts, foreign currency and translation of other assets and
liabilities denominated in foreign currency -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations 138,133 46,292 21,665 11,479
- ---------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment income - net:
Class Y (57,596) (32,617) (11,976) (9,922)
Class A (1,694) (435) (225) (209)
Class B (706) (736) -- --
Net realized gain on investments:
Class Y (874) (2,700) -- --
Class A (11) (56) -- --
Class B (19) (108) -- --
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (60,900) (36,652) (12,201) (10,131)
===========================================================================================================================
CAPITAL SHARE TRANSACTIONS(1):
Class Y:
Proceeds from sales 453,638 210,796 80,734 45,057
Shares issued in connection with acquisition of
Common Trust Fund Assets -- 217,322 -- 31,833
Shares issued in connection with acquisition of Qualivest Fund 266,616 -- -- --
Shares issued in connection with acquisition of Piper Fund -- -- -- --
Reinvestment of distributions 32,294 13,547 792 888
Payments for redemptions (317,426) (136,383) (36,741) (37,431)
- ---------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from
Class Y transactions 435,122 305,282 44,785 40,347
- ---------------------------------------------------------------------------------------------------------------------------
Class A:
Proceeds from sales 8,657 4,803 3,819 1,571
Shares issued in connection with acquisition of Qualivest Fund 526 -- -- --
Shares issued in connection with acquisition of Piper Fund 396,424 -- -- --
Reinvestment of distributions 351 363 137 138
Payments for redemptions (215,619) (5,105) (3,088) (1,539)
- ---------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from
Class A transactions 190,339 61 868 170
- ---------------------------------------------------------------------------------------------------------------------------
Class B:
Proceeds from sales 3,549 2,475 -- --
Reinvestment of distributions 615 723 -- --
Payments for redemptions (3,225) (4,309) -- --
- ---------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from
Class B transactions 939 (1,111) -- --
- ---------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from
capital share transactions 626,400 304,232 45,653 40,517
- ---------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets 703,633 313,872 55,117 41,865
NET ASSETS AT BEGINNING OF PERIOD 729,507 415,635 185,415 143,550
===========================================================================================================================
NET ASSETS AT END OF PERIOD (2) $1,433,140 $ 729,507 $ 240,532 $ 185,415
===========================================================================================================================
(1)CAPITAL SHARE TRANSACTIONS:
Class Y:
Shares issued 40,454 19,428 8,629 4,888
Shares issued in connection with acquisition of
Common Trust Fund Assets -- 19,965 -- 3,423
Shares issued in connection with acquisition of Qualivest Fund 24,078 -- -- --
Shares issued in connection with acquisition of Piper Fund -- -- -- --
Shares issued in lieu of cash distributions 2,880 1,251 85 96
Shares redeemed (28,263) (12,610) (3,914) (4,054)
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL CLASS Y TRANSACTIONS 39,149 28,034 4,800 4,353
===========================================================================================================================
Class A:
Shares issued 782 443 407 170
Shares issued in connection with acquisition of Qualivest Fund 47 -- -- --
Shares issued in connection with acquisition of Piper Fund 34,666 -- -- --
Shares issued in lieu of cash distributions 31 33 15 15
Shares redeemed (18,751) (472) (330) (166)
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL CLASS A TRANSACTIONS 16,775 4 92 19
- ---------------------------------------------------------------------------------------------------------------------------
Class B:
Shares issued 317 229 -- --
Shares issued in lieu of cash distributions 55 67 -- --
Shares redeemed (288) (400) -- --
===========================================================================================================================
TOTAL CLASS B TRANSACTIONS 84 (104) -- --
===========================================================================================================================
NET INCREASE (DECREASE) FROM SHARE TRANSACTIONS 56,008 27,934 4,892 4,372
===========================================================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
32 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
[WIDE TABLE CONTINUED]
INTERMEDIATE TERM LIMITED TERM STRATEGIC
INCOME FUND INCOME FUND INCOME FUND
- ------------------------------------------------------------------------------
10/1/97 10/1/96 10/1/97 10/1/96 7/24/98
to to to to to
9/30/98 9/30/97 9/30/98 9/30/97 9/30/98(3)
- ------------------------------------------------------------------------------
$ 22,848 $ 8,640 $ 10,027 $ 6,613 $ 1,423
5,989 263 197 29 101
-- -- -- -- (627)
14,591 2,441 1,621 508 (7,227)
-- -- -- -- 4
- ------------------------------------------------------------------------------
43,428 11,344 11,845 7,150 (6,326)
- ------------------------------------------------------------------------------
(22,110) (8,507) (9,753) (6,216) (651)
(607) (133) (270) (407) (521)
-- -- -- -- (1)
(624) (620) -- -- --
(6) (15) -- -- --
-- -- -- -- --
- ------------------------------------------------------------------------------
(23,347) (9,275) (10,023) (6,623) (1,173)
==============================================================================
81,887 33,377 59,869 54,226 60,261
-- 241,021 -- 71,476 --
187,587 -- -- -- --
8,844 -- -- -- --
8,673 3,577 4,703 4,328 521
(199,064) (54,475) (77,568) (39,753) (2,648)
- ------------------------------------------------------------------------------
87,927 223,500 (12,996) 90,277 58,134
- ------------------------------------------------------------------------------
5,188 1,309 5,810 1,851 381
814 -- -- -- --
43,926 -- -- -- 86,421
426 111 250 391 344
(5,294) (1,170) (8,234) (2,741) (43,019)
- ------------------------------------------------------------------------------
45,060 250 (2,174) (499) 44,127
- ------------------------------------------------------------------------------
-- -- -- -- 112
-- -- -- -- 1
-- -- -- -- --
- ------------------------------------------------------------------------------
-- -- -- -- 113
- ------------------------------------------------------------------------------
132,987 223,750 (15,170) 89,778 102,374
- ------------------------------------------------------------------------------
153,068 225,819 (13,348) 90,305 94,875
326,734 100,915 191,520 101,215 0
==============================================================================
$ 479,802 $ 326,734 $ 178,172 $ 191,520 $ 94,875
==============================================================================
7,740 3,356 6,008 5,467 6,106
-- 24,298 -- 7,212 --
18,733 -- -- -- --
875 -- -- -- --
859 360 473 437 56
(19,365) (5,483) (7,790) (4,008) (286)
- ------------------------------------------------------------------------------
8,842 22,531 (1,309) 9,108 5,876
==============================================================================
513 132 584 186 39
81 -- -- -- --
4,336 -- -- -- 8,642
41 11 25 40 37
(517) (118) (827) (276) (4,376)
- ------------------------------------------------------------------------------
4,454 25 (218) (50) 4,342
- ------------------------------------------------------------------------------
-- -- -- -- 12
-- -- -- -- --
-- -- -- -- --
==============================================================================
-- -- -- -- 12
==============================================================================
13,296 22,556 (1,527) 9,058 10,230
==============================================================================
(2)Includes undistributed (distributions in excess of) net investment income
(000) of $134 and $0 for Adjustable Rate Mortgage Securities Fund, $291 and
$12 for Fixed Income Fund, $11 and $0 for Intermediate Government Bond Fund,
$117 and $(1) for Intermediate Term Income Fund, $4 and $0 for Limited Term
Income Fund, and $(377) for Strategic Income Fund as September 30, 1998 and
September 30, 1997 respectively.
(3)Commenced operations on July 24, 1998.
33 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
FINANCIAL HIGHLIGHTS FOR THE PERIODS ENDED SEPTEMBER 30
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
REALIZED AND
NET ASSET UNREALIZED DIVIDENDS
VALUE NET GAINS OR FROM NET DISTRIBUTIONS
BEGINNING INVESTMENT (LOSSES) ON INVESTMENT FROM
OF PERIOD INCOME INVESTMENTS INCOME CAPITAL GAINS
- -----------------------------------------------------------------------------------------------
ADJUSTABLE RATE MORTGAGE
SECURITIES FUND
<S> <C> <C> <C> <C> <C>
CLASS Y
1998(1) $ 8.13 $ 0.06 $ 0.02 $ (0.05) $ --
CLASS A(2)
1998 $ 8.15 $ 0.48 $ -- $ (0.47) $ --
1997 8.06 0.47 0.09 (0.47) --
1996(3) 8.03 0.04 0.03 (0.04) --
1996(4) 7.99 0.49 0.01 (0.46) --
1995(4)(5) 8.10 0.47 (0.05) (0.53) --
1994(4) 8.88 0.55 (0.82) (0.51) --
1993(4) 8.95 0.63 (0.09) (0.61) --
FIXED INCOME FUND
CLASS Y
1998 $ 10.96 $ 0.60 $ 0.74 $ (0.60) $ (0.01)
1997 10.76 0.62 0.27 (0.62) (0.07)
1996 10.97 0.63 (0.11) (0.63) (0.10)
1995 10.37 0.66 0.62 (0.65) (0.03)
1994(6) 11.11 0.38 (0.74) (0.38) --
CLASS A
1998 $ 10.97 $ 0.57 $ 0.73 $ (0.57) $ (0.01)
1997 10.77 0.59 0.27 (0.59) (0.07)
1996 10.98 0.61 (0.11) (0.61) (0.10)
1995 10.37 0.66 0.61 (0.63) (0.03)
1994 11.38 0.57 (0.89) (0.57) (0.12)
CLASS B
1998 $ 10.91 $ 0.49 $ 0.73 $ (0.49) $ (0.01)
1997 10.72 0.51 0.26 (0.51) (0.07)
1996 10.94 0.52 (0.11) (0.53) (0.10)
1995 10.35 0.58 0.60 (0.56) (0.03)
1994(7) 10.54 0.08 (0.17) (0.10) --
INTERMEDIATE GOVERNMENT BOND FUND
CLASS Y
1998 $ 9.27 $ 0.52 $ 0.39 $ (0.52) $ --
1997 9.18 0.54 0.09 (0.54) --
1996 9.29 0.54 (0.11) (0.54) --
1995 8.98 0.54 0.31 (0.54) --
1994(6) 9.41 0.27 (0.43) (0.27) --
CLASS A
1998 $ 9.28 $ 0.52 $ 0.40 $ (0.52) $ --
1997 9.19 0.54 0.09 (0.54) --
1996 9.29 0.54 (0.10) (0.54) --
1995 8.98 0.54 0.31 (0.54) --
1994 9.52 0.41 (0.51) (0.39) (0.05)
INTERMEDIATE TERM INCOME FUND
CLASS Y
1998 $ 9.98 $ 0.53 $ 0.46 $ (0.53) $ (0.02)
1997 9.93 0.55 0.13 (0.56) (0.07)
1996 9.94 0.55 -- (0.55) (0.01)
1995 9.55 0.58 0.39 (0.58) --
1994(6) 10.01 0.31 (0.46) (0.31) --
CLASS A
1998 $ 10.00 $ 0.53 $ 0.47 $ (0.53) $ (0.02)
1997 9.93 0.55 0.15 (0.56) (0.07)
1996 9.94 0.55 -- (0.55) (0.01)
1995 9.55 0.59 0.38 (0.58) --
1994 10.22 0.46 (0.56) (0.46) (0.11)
- ----------------------------------------------------------------------------------------------
</TABLE>
+ Returns are for the period indicated and have not been annualized.
* All ratios for the period have been annualized.
(A)Excluding sales charges.
(1)Class Y shares have been offered since July 31, 1998. All ratios for the
period have been annualized.
(2)The financial highlights for the Adjustable Rate Mortgage Securities Fund as
set forth herein include the historical financial highlights of the Piper
Adjustable Rate Mortgage Securities Fund Class A shares. The assets of the
Piper Adjustable Rate Mortgage Securities Fund were acquired by Adjustable
Rate Mortgage Securities Fund on July 31, 1998. In connection with such
acquisition, Class A shares of the Piper Adjustable Rate Mortgage Securities
Fund were exchanged for Class A shares of the Adjustable Rate Mortgage
Securities Fund. On July 31, 1998 the advisor changed from Piper Capital
Management, Inc. to U.S. Bank N.A.
(3)For the one month period September 1, 1996 to September 30, 1996. All ratios
for the period have been annualized.
(4)Period ended August 31.
(5)On September 1, 1995 four closed end funds, American Adjustable Rate Term
Trust 1996, American Adjustable Rate Term Trust 1997, American Adjustable
Rate Term Trust 1998 (DDJ), American Adjustable Rate Term Trust 1999 were
combined to create the fund. DDJ is considered the surviving entity for
financial reporting purposes. The financial highlights presented for the
periods prior to September 1, 1995 are those of DDJ. The per share
information for such periods has been restated to reflect the impact of
additional shares created resulting from the difference in the net asset
value per share of DDJ at the time of the merger ($8.71) and the initial net
asset value per share of the fund ($8.00).
(6)Class Y (formerly Institutional Class C shares) have been offered since
February 4, 1994. All ratios for the period have been annualized.
(7)Class B shares have been offered since August 15, 1994. All ratios for the
period have been annualized.
The accompanying notes are an integral part of the financial statements.
34 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
<TABLE>
<CAPTION>
RATIO OF
RATIO OF NET EXPENSES TO
NET ASSET RATIO OF INVESTMENT AVERAGE
VALUE NET ASSETS EXPENSES TO INCOME TO NET ASSETS PORTFOLIO
END OF TOTAL END OF AVERAGE AVERAGE (EXCLUDING TURNOVER
PERIOD RETURN (A) PERIOD (000) NET ASSETS NET ASSETS WAIVERS) RATE
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 8.16 1.04%+ $ 1 0.65% 5.33% 0.99% 14%
$ 8.16 5.56% $ 132,733 0.80% 5.44% 0.89% 14%
8.15 7.16 184,697 0.81 5.84 0.81 25
8.06 0.85 262,833 0.82 5.28 0.76 2
8.03 6.40 269,948 0.60 5.74 0.60 51
7.99 5.43 409,306 0.63 5.62 0.63 36
8.10 (3.18) 500,062 0.60 6.39 0.60 39
8.88 6.24 551,369 0.58 7.25 0.58 39
$ 11.69 12.66% $1,210,661 0.70% 5.35% 0.86% 147%
10.96 8.54 705,719 0.70 5.71 0.88 130
10.76 4.90 391,211 0.70 5.81 0.87 108
10.97 12.86 289,816 0.70 6.28 0.94 106
10.37 (3.23)+ 90,187 0.61 5.53 0.92 142
$ 11.69 12.29% $ 205,237 0.95% 5.10% 1.11% 147%
10.97 8.26 8,535 0.95 5.44 1.13 130
10.77 4.64 8,332 0.95 5.55 1.12 108
10.98 12.78 7,853 0.86 6.14 1.19 106
10.37 (2.92) 8,028 0.68 3.83 1.06 142
$ 11.63 11.54% $ 17,242 1.70% 4.35% 1.86% 147%
10.91 7.40 15,253 1.70 4.68 1.88 130
10.72 3.93 16,092 1.70 4.81 1.87 108
10.94 11.75 7,280 1.70 5.12 1.94 106
10.35 (0.88)+ 115 1.70 4.89 1.92 142
$ 9.66 10.17% $ 235,959 0.70% 5.58% 0.87% 20%
9.27 7.07 181,889 0.70 5.88 0.87 22
9.18 4.74 140,230 0.70 5.85 0.85 29
9.29 9.82 100,168 0.70 6.13 0.97 17
8.98 (1.66)+ 27,776 0.36 5.32 1.45 74
$ 9.68 10.27% $ 4,573 0.70% 5.58% 1.12% 20%
9.28 7.06 3,525 0.70 5.88 1.12 22
9.19 4.85 3,320 0.70 5.85 1.10 29
9.29 9.82 2,860 0.70 6.10 1.22 17
8.98 (1.13) 1,977 0.53 4.49 2.14 74
$ 10.42 10.27% $ 430,672 0.70% 5.24% 0.86% 166%
9.98 6.98 324,250 0.70 5.51 0.92 165
9.93 5.63 98,702 0.70 5.45 0.88 161
9.94 10.51 88,375 0.70 5.94 0.94 69
9.55 (1.48)+ 68,445 0.58 4.81 1.07 177
$ 10.45 10.35% $ 49,130 0.70% 5.22% 1.11% 166%
10.00 7.19 2,484 0.70 5.51 1.17 165
9.93 5.63 2,213 0.70 5.43 1.13 161
9.94 10.51 2,437 0.70 5.97 1.19 69
9.55 (1.05) 3,208 0.69 2.48 1.24 177
- -------------------------------------------------------------------------------------------------------------
</TABLE>
35 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
FINANCIAL HIGHLIGHTS FOR THE PERIODS ENDED SEPTEMBER 30
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
REALIZED AND
NET ASSET UNREALIZED DIVIDENDS
VALUE NET GAINS OR FROM NET DISTRIBUTIONS
BEGINNING INVESTMENT (LOSSES) ON INVESTMENT FROM
OF PERIOD INCOME INVESTMENTS INCOME CAPITAL GAINS
- -----------------------------------------------------------------------------------------
LIMITED TERM INCOME FUND
<S> <C> <C> <C> <C> <C>
CLASS Y
1998 $ 9.94 $ 0.53 $ 0.10 $ (0.53) $ --
1997 9.91 0.56 0.03 (0.56) --
1996 9.92 0.58 (0.01) (0.58) --
1995 9.85 0.56 0.07 (0.56) --
1994(1) 10.02 0.29 (0.17) (0.29) --
CLASS A
1998 $ 9.94 $ 0.53 $ 0.10 $ (0.53) $ --
1997 9.91 0.56 0.03 (0.56) --
1996 9.92 0.58 (0.01) (0.58) --
1995 9.85 0.56 0.07 (0.56) --
1994 10.06 0.44 (0.22) (0.43) --
STRATEGIC INCOME FUND
CLASS Y
1998(2) $ 10.00 $ 0.14 $ (0.75) $ (0.12) $ --
CLASS A
1998(2) $ 10.00 $ 0.13 $ (0.75) $ (0.11) $ --
CLASS B
1998(2) $ 10.00 $ 0.09 $ (0.71) $ (0.11) $ --
- ----------------------------------------------------------------------------------------
</TABLE>
+ Returns are for the period indicated and have not been annualized.
(A)Excluding sales charges.
(1)Class Y (formerly Institutional Class C shares) have been offered since
February 4, 1994. All ratios for the period have been annualized.
(2)Commenced operations July 24, 1998. All ratios for the period have been
annualized.
The accompanying notes are an integral part of the financial statements.
36 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
<TABLE>
<CAPTION>
RATIO OF
RATIO OF NET EXPENSES TO
NET ASSET RATIO OF INVESTMENT AVERAGE
VALUE NET ASSETS EXPENSES TO INCOME TO NET ASSETS PORTFOLIO
END OF TOTAL END OF AVERAGE AVERAGE (EXCLUDING TURNOVER
PERIOD RETURN (A) PERIOD (000) NET ASSETS NET ASSETS WAIVERS) RATE
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 10.04 6.55% $173,136 0.60% 5.33% 0.87% 112%
9.94 6.09 184,368 0.60 5.60 0.90 147
9.91 5.93 93,588 0.60 5.80 0.84 61
9.92 6.57 111,439 0.60 5.67 0.97 120
9.85 1.24 + 70,266 0.60 4.40 1.03 48
$ 10.04 6.55% $ 5,036 0.60% 5.33% 1.12% 112%
9.94 6.09 7,152 0.60 5.61 1.15 147
9.91 5.93 7,627 0.60 5.80 1.09 61
9.92 6.57 9,977 0.60 5.60 1.22 120
9.85 2.21 9,509 0.60 4.17 1.23 48
$ 9.27 (6.13)%+ $ 54,491 0.90% 8.44% 1.05% 61%
$ 9.27 (6.17)%+ $ 40,270 1.15% 8.19% 1.30% 61%
$ 9.27 (6.19)%+ $ 114 1.90% 7.44% 2.05% 61%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
37 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
NOTES TO
FINANCIAL STATEMENTS SEPTEMBER 30, 1998
1 > ORGANIZATION
The First American Adjustable Rate Mortgage Securities Fund, Fixed Income
Fund, Intermediate Government Bond Fund, Intermediate Term Income Fund,
Limited Term Income Fund, and Strategic Income Fund are funds offered by
First American Investment Funds, Inc. (FAIF) (each a "Fund" collectively,
"the Funds"). Other funds that are offered by FAIF but are not included
in this report are: California Intermediate Tax Free Fund, Colorado
Intermediate Tax Free Fund, Intermediate Tax Free Fund, Minnesota
Intermediate Tax Free Fund (formerly Minnesota Insured Intermediate Tax
Free Fund), Minnesota Tax Free Fund, Oregon Intermediate Tax Free Fund,
Tax Free Fund, Balanced Fund, Equity Income Fund, Equity Index Fund,
Large Cap Value Fund (formerly Stock Fund), Large Cap Growth Fund
(formerly Diversified Growth Fund), Mid Cap Growth Fund, Mid Cap Value
Fund (formerly Special Equity Fund), Regional Equity Fund, Small Cap
Value Fund, Small Cap Growth Fund (formerly Emerging Growth Fund), Micro
Cap Value Fund, Emerging Markets Fund, International Index Fund,
International Fund, Health Sciences Fund, Real Estate Securities Fund and
Technology Fund. FAIF is registered under the Investment Company Act of
1940, as amended, as an open-end management investment company. The FAIF
articles of incorporation permit the Board of Directors to create
additional funds in the future.
FAIF offers Class A, Class B and Class Y (formerly 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 Y shares
have no sales charge and are offered only to qualifying institutional
investors.
The Funds' prospectuses provide a description of each Fund's investment
objectives, policies and strategies. All classes of shares 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 - Security valuations for FAIF Fund 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. Securities for which prices are not available
from an independent pricing service but where an active market exists are
valued using market quotations obtained from one or more dealers that
make markets in the securities or from a widely-used quotation system.
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
38 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
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 - The Funds record 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 - Adjustable Rate Mortgage Securities Fund,
Fixed Income Fund, Intermediate Government Bond Fund, Intermediate Term
Income Fund, Limited Term Income Fund, and Strategic Income Fund, declare
and pay income dividends monthly.
Any net realized capital gains on sales of securities for a fund are
distributed to shareholders at least annually.
FEDERAL TAXES - It is each Fund's intention to continue to qualify as a
regulated investment company and 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 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.
On the Statements of Net Assets the following adjustments were made
(000):
ACCUMULATED UNDISTRIBUTED
NET REALIZED NET INVESTMENT PAID IN
GAIN/LOSS INCOME CAPITAL
------------------------------------------------------------------------
Adjustable Rate Mortgage $ 389 $ -- $ (389)
Fixed Income* 75,001 -- (75,001)
Intermediate Term Income* 261,819 -- (261,819)
Strategic Income 627 (627) --
------------------------------------------------------------------------
*The reclassification adjustment is primarily due to accumulated net
realized losses acquired in merger transactions which the Fund is unable
to utilize for tax purposes due to limitations.
FOREIGN CURRENCY TRANSLATION - The books and records of the Strategic
Income 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.
39 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
NOTES TO
FINANCIAL STATEMENTS SEPTEMBER 30, 1998
The Strategic Income 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 Strategic Income Fund does isolate the effect
of fluctuations in foreign currency rates when determining the gain or
loss upon sale or maturity of foreign currency denominated debt
obligations pursuant to the Federal income tax regulations. Such amounts
are categorized as foreign currency gain or loss for both financial
reporting and income tax reporting purposes.
The Strategic Income 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.
EXPENSES - Expenses that are directly related to one of the Funds are
charged directly to that Fund. Other operating expenses are prorated to
the Funds on the basis of relative net assets. Class specific expenses,
such as the 12b-1 fees, are borne by that class. Income, other expenses
and realized and unrealized gains and losses of a Fund are allocated to
the respective class on the basis of the relative net assets each day.
SECURITIES LENDING - Each Fund may lend up to one-third of the value of
its total assets to broker-dealers, banks or other institutional
borrowers of securities in order to earn additional income. Each Fund's
policy is to maintain collateral in the form of cash, United States
Government securities or other high grade debt obligations equal to at
least 100% of the value of securities loaned. The collateral is then
marked to market daily until the securities are returned.
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.
HISTORICAL FINANCIAL STATEMENT INFORMATION - The financial information
presented for the Adjustable Rate Mortgage Securities Fund prior to July
31, 1998 is that of Piper Adjustable Rate Mortgage Securities Fund. The
historical information of the Piper Fund was carried over to the newly
formed FAIF fund.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS - The
preparation of financial statements, in conformity with generally
accepted accounting principles, requires management to make estimates and
assumptions that affect the reported amount of net assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported results of operations during the
reporting period. Actual results could differ from those estimates.
3 > FEES AND EXPENSES
Pursuant to an investment advisory agreement (the Agreement), U.S. Bank
National Association (the Advisor) manages each Fund's assets and
furnishes related office facilities, equipment, research and personnel.
The Agreement requires each Fund to pay the Advisor a monthly fee based
upon average daily net assets. The fee for each Fund, is equal to an
annual rate of .70% of the average daily net assets. Federated Investment
Counseling and Federated Global Research Corp., both subsidiaries of
Federated Investors, Inc. serve as sub-advisors to the Strategic Income
Fund under an agreement with the
40 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
Advisor (the "Sub-Advisory Agreement"). For their services under the
Sub-Advisory agreement, each Sub-Advisor is paid a monthly fee by the
Advisor calculated on an annual basis equal to 0.20% of the first $25
million of the Fund's average daily net assets, 0.165% of the Fund's
average daily net assets in excess of $25 million up to $50 million,
0.13% of the Fund's average daily net assets in excess of $50 million up
to $100 million and 0.105% of the Fund's average daily net assets in
excess of $100 million.
The Funds may invest in First American Funds, Inc. (FAF), 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 Advisor reimburses each FAIF fund an amount
equal to the investment advisory fee earned by FAF related to such
investments.
Through a separate contractual agreement, U.S. Bank National Association,
an affiliate of the Advisor, serves as the Funds' custodian.
SEI Investments Distribution Co. (SIDCO) and SEI Investments Management
Corporation, (SIMC) serve as distributor and administrator of the Funds,
respectively. Under the distribution plan, each of the Funds pays SIDCO a
monthly distribution fee of .25% of each Fund's average daily net assets
of the Class A shares, and 1.00% of the Class B shares, which may be used
by SIDCO to provide compensation for sales support and distribution
activities. No distribution fees are paid by Class Y shares. SIMC
provides administrative services, including certain accounting, legal and
shareholder services, at an annual rate of .12% of each FAIF fund's
average daily net assets, with a minimum annual fee of $50,000 for
Strategic Income Fund. To the extent that the aggregate net assets of the
First American Family of Funds exceed $8 billion, the annual rate for
each FAIF fund is reduced to .105% of their relative share of the excess
net assets. U.S. Bank assists the Administrator and provides
sub-administration services for the Funds. For these services, the
Administrator compensates the sub-administrator at an annual rate of up
to 0.05% of each Fund's average daily net assets. Under this agreement
SIMC paid $343,000 in aggregate for the funds in this annual report to
U.S. Bank N.A. for the period ended September 30, 1998. The fees for each
fund for the period were approximately 0.022% of average daily net
assets.
In addition to the investment advisory and management fees, custodian
fees, distribution fees, administrator and transfer agent fees, each Fund
is responsible for paying most other operating expenses including
organization costs, fees and expenses of outside directors, registration
fees, printing shareholder reports, legal, auditing, insurance and other
miscellaneous expenses.
For the period ended September 30, 1998, legal fees and expenses were
paid to a law firm of which the Secretary of the Funds is a partner.
DST Systems, Inc. provides transfer agent services for the Funds.
Effective October 1, 1998, FAIF has appointed U.S. Bank as servicing
agent to perform certain transfer agent and dividend disbursing agent
services with respect to the Class A shares and the Class B shares of the
Funds held through accounts at U.S. Bank and its affiliates.
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.
41 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
NOTES TO
FINANCIAL STATEMENTS SEPTEMBER 30, 1998
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 period ended September 30, 1998, sales charges retained by SIDCO
for distributing the First American Family of Funds' shares were
approximately $291,000.
FORMER PIPER FUNDS AGREEMENTS - From October 1, 1997 to July 31, 1998 the
Adjustable Rate Mortgage Securities Fund had an investment management
agreement with Piper Capital Management Incorporated (Piper Capital)
under which Piper Capital managed the Fund's assets and furnished related
office facilities, equipment, research, and personnel. The agreement
required that the Fund pay Piper Capital a monthly fee based on average
daily net assets. The fee for the Adjustable Rate Mortgage Securities
Fund was 0.35% on the first $500 million in net assets and 0.30% of net
assets in excess of $500 million.
From October 1, 1997 to July 31, 1998 the Adjustable Rate Mortgage
Securities Fund also paid distribution and service fees to Piper Jaffray
Inc. The fees were accrued daily and paid quarterly at a rate of 0.15% of
average daily net assets.
Piper Jaffray and Piper Trust Company (Piper Trust) performed various
transfer and dividend disbursing agent services for accounts held at the
respective company. The fees were paid monthly to Piper Jaffray and Piper
Trust for providing these services, and were equal to an annual rate of
$7.50 per active shareholder account and $1.60 per closed account. The
Adjustable Rate Mortgage Securities Fund paid $34,000 in servicing fees
through July 31, 1998 under this agreement.
Investors Fiduciary Trust Company served as custodian, transfer and
dividend disbursing agent, and accounting agent for the Adjustable Rate
Mortgage Securities Fund through July 31, 1998.
Effective August 1, 1998, all FAIF agreements were adopted for the
Adjustable Rate Mortgage Securities Fund.
42 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
4 > INVESTMENT SECURITY TRANSACTIONS
During the period ended September 30, 1998, purchases of securities and
proceeds from sales of securities, other than temporary investments in
short-term securities, were as follows (000):
<TABLE>
<CAPTION>
U.S. GOVERNMENT OTHER INVESTMENT
SECURITIES SECURITIES
-------------------------------------------------------------------------
PURCHASES SALES PURCHASES SALES
-------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Adjustable Rate Mortgage
Securities Fund $ -- $ -- $ 21,676 $30,273
Fixed Income Fund 1,199,690 1,326,938 289,209 71,167
Intermediate Government
Bond Fund 89,162 43,665 -- --
Intermediate Term
Income Fund 465,084 611,737 96,539 36,998
Limited Term Income Fund 57,913 75,014 78,577 67,933
Strategic Income Fund 27,392 39,209 41,465 28,029
-------------------------------------------------------------------------
</TABLE>
At September 30, 1998 the total cost of securities for Federal income tax
purpose 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 September 30, 1998 is as
follows (000):
AGGREGATE GROSS AGGREGATE GROSS
APPRECIATION DEPRECIATION NET
-------------------------------------------------------------------------
Adjustable Rate Mortgage
Securities Fund $ 1,070 $ (107) $ 963
Fixed Income Fund 93,398 (939) 92,459
Intermediate Government
Bond Fund 13,140 -- 13,140
Intermediate Term
Income Fund 19,038 (371) 18,667
Limited Term Income Fund 2,189 (191) 1,998
Strategic Income Fund 2,715 (8,434) (5,719)
-------------------------------------------------------------------------
As of September 30, 1998, the following funds have capital loss carryforwards
(000):
AMOUNT EXPIRATION DATE
-------------------------------------------------------------------------
Adjustable Rate Mortgage Securities Fund $145,901 1999-2006
Fixed Income Fund** 96,149 2000-2004
Intermediate Government Bond 39 2003-2006
Intermediate Term Income** 13,602 2000-2003
Limited Term Income Fund* 3,861 2000-2006
Strategic Income 15,054 2001-2003
-------------------------------------------------------------------------
* Includes carryover acquired in connection with previous merger, the
ability to utilize these losses to offset gains may be limited in the
future.
**In accordance with Section 382 of the Internal Revenue Code,
utilization of the capital loss carryover is limited in the Fixed
Income Fund and Intermediate Term Income Fund to $20,311,000 and
$2,720,000,respectively per year. For Fiscal year ended 9/30/98, the
Fixed Incomea and Intermediate Term Income Fund utilization was limited
to $1,899,000 and $432,000 respectively.
Intermediate Term Income Fund incurred losses in the amount of $185,000
from November 1, 1997 to September 30, 1998. As permitted by tax
regulations, the Fund intends to elect to defer and treat these losses as
arising in the fiscal year ending September 30, 1999.
5 > DEFERRED ORGANIZATIONAL COSTS
Organizational costs have been capitalized by the Funds and are being
amortized over sixty months commencing with operations on a straight-line
basis.
43 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
NOTES TO
FINANCIAL STATEMENTS SEPTEMBER 30, 1998
6 > SECURITIES LENDING TRANSACTIONS
In order to generate additional income, certain Funds may lend portfolio
securities representing up to one-third of the value of total assets
(which includes collateral received for securities on loan) to broker
dealers, banks, or other institutional borrowers of securities. As with
other extensions of credit, there may be risks of delay in recovery of
the securities or even loss of rights in the collateral should the
borrower of the security fail financially. The market value of the
securities on loan at September 30, 1998, the collateral purchased with
cash received and held at September 30, 1998 with respect to such loans,
and income generated during the period from the program were as follows
(000):
<TABLE>
<CAPTION>
MARKET VALUE OF INCOME RECEIVED
FUND LOANED SECURITIES FROM SECURITIES LENDING
-------------------------------------------------------------------------------------
<S> <C> <C>
Fixed Income $549,466 $331
Intermediate Government Bond* -- 12
Intermediate Term Income 229,170 141
Limited Term Income 42,802 30
-------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET VALUE OF COLLATERAL PURCHASED WITH CASH RECEIVED
-------------------------------------------------------------------------------------
REPURCHASE MONEY MARKET OTHER FIXED
FUND AGREEMENTS INSTRUMENT INCOME SECURITIES TOTAL
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fixed Income $460,562 $815 $109,102 $570,479
Intermediate Government Bond* -- -- -- --
Intermediate Term Income 192,090 340 45,504 237,934
Limited Term Income 35,877 63 8,499 44,439
-------------------------------------------------------------------------------------
</TABLE>
*Intermediate Government Bond did not have any securities on loan at
September 30, 1998.
U.S. Bank N.A., an affiliate of the advisor, acts as the securities
lending agent in transactions involving the lending of portfolio
securities on behalf of the Funds. For these services U.S. Bank N.A.
received $357,000 in aggregate for the funds included in this annual
report for the year ended September 30, 1998.
7 > COMMON TRUST FUND CONVERSIONS
On December 6, 1996, certain Common Trust Funds of the Advisor and its
affiliates were converted into FAIF. The Funds that were involved in the
conversion are as follows:
<TABLE>
<CAPTION>
COMMON TRUST FUND FAIF FUNDS
-------------------------------------------------------------------------------------
<S> <C>
First Common Treasury -- Agency/Bond Fund Intermediate Government Bond Fund
First Common Taxable Bond Fund Fixed Income Fund
-------------------------------------------------------------------------------------
</TABLE>
44 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
The assets, which consisted of securities and related receivables, were
converted on a tax-free basis. The number of Class Y shares issued for
each Fund and the net assets of each Fund (including net unrealized
gain/loss) immediately before the conversion were as follows:
NET UNREALIZED GAIN
COMMON TRUST FUND ASSETS (LOSS)
-------------------------------------------------------------------------
First Common Treasury--Agency/Bond Fund $ 31,832,839 $ 560,293
First Common Taxable Bond Fund 123,756,766 (189,895)
FAIF FUNDS NET ASSETS SHARES ISSUED
-------------------------------------------------------------------------
Intermediate Government Bond Fund $143,381,911 3,422,888
Fixed Income Fund 431,289,324 11,333,040
-------------------------------------------------------------------------
On February 21, 1997 a second common trust conversion took place. Certain
Common Trust Funds of the Advisor and its affiliates were converted into
FAIF. The Funds involved in the conversion are as follows:
COMMON TRUST FUND FAIF FUND
-------------------------------------------------------------------------
First Tier Intermediate Bond Fund Intermediate Term Income Fund
First Tier Bond Fund Fixed Income Fund
-------------------------------------------------------------------------
The assets, which consisted of securities and related receivables, were
converted on a tax-free basis. The number of Class Y shares issued for
each Fund and the net assets of each Fund (including net unrealized
gain/loss) immediately before the conversion were as follows:
COMMON TRUST FUND ASSETS NET UNREALIZED GAIN
-------------------------------------------------------------------------
First Tier Intermediate Bond Fund $74,982,089 $105,821
First Tier Bond Fund 93,564,720 263,690
-------------------------------------------------------------------------
FAIF FUND NET ASSETS SHARES ISSUED
-------------------------------------------------------------------------
Intermediate Term Income Fund $ 87,973,493 7,543,470
Fixed Income Fund 555,157,713 8,631,431
-------------------------------------------------------------------------
On August 8, 1997 a third conversion took place. Certain Common Trust
Funds of the Advisor and its affiliates were converted into FAIF. The
Funds involved in the conversion are as follows:
COMMON TRUST FUND ACQUIRING FUND
-------------------------------------------------------------------------
US Bancorp Short Term Limited Term Income Fund
US Bancorp Intermediate Bond Intermediate Term Income Fund
-------------------------------------------------------------------------
The assets which consisted of securities and related receivables were
converted on a tax-free basis. The number of shares issued for each Fund
and the net assets of each Fund (including net unrealized gain/loss)
immediately before the conversion were as follows:
COMMON TRUST FUND ASSETS NET UNREALIZED (LOSS)
-------------------------------------------------------------------------
US Bancorp Short Term $ 71,475,884 $ (196,640)
US Bancorp Intermediate Bond 166,038,761 (723,590)
-------------------------------------------------------------------------
FAIF FUNDS NET ASSETS SHARES ISSUED
-------------------------------------------------------------------------
Intermediate Term Income Fund $158,975,985 16,754,668
Limited Term Income Fund 119,048,345 7,212,501
-------------------------------------------------------------------------
The value and number of shares issued in exchange for each Common Trust
Fund's assets and shares outstanding in the tax-free conversions are
included in the capital share transactions of the Class Y in the
Statement of Changes in Net Assets for each respective Fund.
45 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
NOTES TO
FINANCIAL STATEMENTS SEPTEMBER 30, 1998
8 > QUALIVEST MERGER
On November 21, 1997, the following reorganization of the Qualivest funds
into the First American Family of Funds took place pursuant to a Plan of
Reorganization approved by the Qualivest shareholders on October 31,
1997:
<TABLE>
<CAPTION>
QUALIVEST ACQUIRED FUND FAIF ACQUIRING FUND
----------------------------------------------------------------------------------------------------
<S> <C>
Intermediate Bond Fund Intermediate Term Income Fund
Diversified Bond Fund Fixed Income Fund
---------------------------------------------------------------------------------------------------
</TABLE>
Under the Agreement and Plan of Reorganization, the Qualivest Class A and
Class C shares were exchanged for FAIF Class A shares, and Qualivest
Class Q and Class Y shares were exchanged for FAIF Class Y shares.
The net assets prior to the reorganization and shares issued and redeemed
were as follows:
<TABLE>
<CAPTION>
ACQUIRING FUND'S ACQUIRED FUND'S
FAIF FUND NET ASSETS SHARES ISSUED SHARES REDEEMED
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Intermediate Term Income $320,221,620 18,814,377 18,616,555
Fixed Income 771,254,652 24,125,586 25,678,152
----------------------------------------------------------------------------------------------------
</TABLE>
Included in the net assets from the Qualivest Funds were the following
components:
<TABLE>
<CAPTION>
DISTRIBUTIONS
IN EXCESS OF
NET INVESTMENT ACCUMULATED NET UNREALIZED
QUALIVEST FUND PAID IN CAPITAL INCOME REALIZED (LOSS) APPRECIATION NET ASSETS
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Intermediate Bond $186,768,094 $ (14,028) $ (4,115) $1,651,503 $188,401,454
Diversified Bond 260,222,624 (3,156) -- 6,922,860 267,142,328
----------------------------------------------------------------------------------------------------
</TABLE>
The acquisitions were accounted for by the method of accounting for tax
free mergers of investment companies (sometimes referred to as the
pooling without restatement method).
9 > PIPER FUNDS MERGER
The Board of Directors and shareholders of the Piper Funds approved a
reorganization of certain Piper Funds into the FAIF Funds which took
place at the close of business on July 31, 1998*:
<TABLE>
<CAPTION>
PIPER ACQUIRED FUND FAIF ACQUIRING FUND
---------------------------------------------------------------------------------------------------
<S> <C>
Adjustable Rate Mortgage Securities Adjustable Rate Mortgage Securities
(New FAIF shell)
Intermediate Bond Fund Intermediate Term Income
Government Income Fixed Income
American Government Income Fund (AGF) Fixed Income
American Government Income Portfolio (AAF) Fixed Income
American Opportunities Income Fund (OIF) Fixed Income
The Americas Income Trust (XUS) Strategic Income (New FAIF shell)
Highlander Income (HLA) Strategic Income (New FAIF shell)
----------------------------------------------------------------------------------------------------
</TABLE>
*For American Government Income Fund, American Government Income
Portfolio, and American Opportunities Fund the reorganization was
effective as of August 28, 1998. The Americas Income Trust and
Highlander Income Fund reorganizations were effective as of July 24,
1998.
Under the Agreement and Plan of Reorganization, the Piper Class A shares
were exchanged for FAIF Class A shares, and Piper Class Y shares were
exchanged for FAIF Class Y shares.
46 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
The net assets prior to the reorganization and shares issued and redeemed
were as follows:
<TABLE>
<CAPTION>
ACQUIRING FUND'S ACQUIRED FUND'S
FAIF FUND NET ASSETS SHARES ISSUED SHARES REDEEMED
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Adjustable Rate Mortgage Securities $ -- 17,197,369 17,197,369
Intermediate Term Income 427,535,403 5,211,245 6,857,590
Fixed Income (Government Income) 1,168,413,969 5,137,676 6,252,004
Fixed Income (AGF) 1,250,228,424 8,290,249 16,080,952
Fixed Income (AAF) 1,250,228,424 11,203,772 18,357,910
Fixed Income (OIF) 1,250,228,424 10,034,207 16,990,545
Strategic Income (XUS) -- 5,749,951 6,251,304
Strategic Income (HLA) -- 2,892,106 1,989,467
----------------------------------------------------------------------------------------------------------------
</TABLE>
Included in the net assets from the Piper Funds were the following
components:
<TABLE>
<CAPTION>
DISTRIBUTIONS
IN EXCESS OF ACCUMULATED NET UNREALIZED
NET INVESTMENT REALIZED APPRECIATION/
PIPER FUND PAID IN CAPITAL INCOME GAIN/(LOSS) DEPRECIATION NET ASSETS
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Adjustable Rate Mortgage
Securities $285,449,774 $ (118,528) $ (146,484,460) $1,017,624 $139,864,410
Intermediate Bond 327,628,512 -- (275,850,285) 991,555 52,769,782
Government Income 70,538,606 -- (15,907,522) 3,411,144 58,042,228
American Government
Income Fund 127,321,753 -- (35,900,498) 3,578,713 94,999,968
American Government
Income Portfolio 183,194,571 -- (59,639,228) 4,835,535 128,390,878
American Opportunities
Income Fund 171,770,276 -- (61,997,942) 5,218,444 114,990,778
The Americas Income Trust 72,436,361 -- (15,154,616) 217,766 57,499,511
Highlander Income 27,675,521 -- (44,950) 1,290,492 28,921,063
----------------------------------------------------------------------------------------------------------------
</TABLE>
The acquisitions were accounted for by the method of accounting for tax
free mergers of investment companies (sometimes referred to as the
pooling without restatement method).
10 > CONCENTRATION OF RISKS
The Strategic Income Fund (the "Fund") is subject to special risks
associated with investing in foreign securities and to a decline in net
asset value resulting from changes in exchange rates between the United
States dollar and foreign currencies. The Fund is also subject to risks
associated with investing in securities issued by issuers in emerging
market countries. Because of the special risks associated with foreign
investing, the Fund may be subject to greater volatility than most mutual
funds which invest primarily in domestic securities.
The Fund also invests in lower-rated (i.e., rated Ba or lower by Moody's
or BB or lower by Standard & Poor's) corporate and foreign debt
obligations, which are commonly referred to as "junk bonds". Lower-rated
securities will usually offer higher yields than higher-rated securities.
However, there is more risk associated with these investments. These
lower-rated bonds may be more susceptible to real or perceived adverse
economic conditions than investment grade bonds. Lower-rated securities
tend to have more price volatility and carry more risk to principal than
higher-rated securities.
47 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
NOTICE TO
SHAREHOLDERS SEPTEMBER 30, 1998
THE INFORMATION SET FORTH BELOW IS FOR EACH FUND'S FISCAL YEAR AS
REQUIRED BY FEDERAL LAWS. SHAREHOLDERS, HOWEVER, MUST REPORT
DISTRIBUTIONS ON A CALENDAR YEAR BASIS FOR INCOME TAX PURPOSES WHICH MAY
INCLUDE DISTRIBUTIONS FOR PORTIONS OF TWO FISCAL YEARS OF A FUND.
ACCORDINGLY, THE INFORMATION NEEDED BY SHAREHOLDERS FOR INCOME TAX
PURPOSES WILL BE SENT TO THEM IN EARLY 1999. PLEASE CONSULT YOUR TAX
ADVISER FOR PROPER TREATMENT OF THIS INFORMATION.
Dear First American Investment Fund Shareholders:
For the fiscal year ended September 30, 1998, each Fund designated long
term capital gains and exempt income with regard to distributions paid
during the year as follows:
<TABLE>
<CAPTION>
(A) (B) (C)
LONG TERM MEDIUM TERM ORDINARY (D)
CAPITAL GAINS CAPITAL GAINS INCOME TOTAL
DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS
FUND (TAX BASIS) (TAX BASIS) (TAX BASIS) (TAX BASIS)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Adjustable Rate Mortgage Securities 0% 0% 100% 100%
Fixed Income 0% 0% 100% 100%
Intermediate Government Bond Fund 0% 0% 100% 100%
Intermediate Term Income 0% 0% 100% 100%
Limited Term Income 0% 0% 100% 100%
- ---------------------------------------------------------------------------------------------------------
</TABLE>
* Items (A), (B) and (C) are based on a percentage of the fund's total
distributions.
(1)Strategic Income Fund is not shown due to the fact that the tax year end is
June 30th.
48 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
FIRST AMERICAN INVESTMENT FUNDS, INC.
BOARD OF DIRECTORS
MR. DAVID BENNETT
Director of the First American Investment Funds, Inc.
Of counsel with Gray, Plant, Mooty, Mooty and Bennett,
Owner of three privately-held businesses
- --------------------------------------------------------------------------------
MR. ROBERT DAYTON
Director of the First American Investment Funds, Inc.
Chief Executive Officer of Okabena Company
- --------------------------------------------------------------------------------
MR. ROGER GIBSON
Director of the First American Investment Funds, Inc.
Vice President of North America-Mountain Region for United Airlines
- --------------------------------------------------------------------------------
MR. ANDREW HUNTER III
Director of the First American Investment Funds, Inc.
Chairman of Hunter Keith Industries
- --------------------------------------------------------------------------------
MR. LEONARD KEDROWSKI
Director of the First American Investment Funds, Inc.
Owner and President of Executive Management Consulting, Inc.
- --------------------------------------------------------------------------------
MR. ROBERT SPIES
Director of the First American Investment Funds, Inc.
Retired Vice President, U.S. Bank National Association
- --------------------------------------------------------------------------------
MR. JOSEPH STRAUSS
Director of the First American Investment Funds, Inc.
Former Chairman of First American Funds,
Owner and President of Strauss Management Company
- --------------------------------------------------------------------------------
MS. VIRGINIA STRINGER
Chairman of the First American Investment Funds, Inc.
Owner and President of Strategic Management Resources, Inc.
- --------------------------------------------------------------------------------
<PAGE>
FIRST AMERICAN INVESTMENT FUNDS, INC.
1 Freedom Valley Drive
Oaks, Pennsylvania 19456
INVESTMENT ADVISOR
FIRST AMERICAN ASSET MANAGEMENT,
A DIVISION OF U.S. BANK NATIONAL ASSOCIATION
601 Second Avenue South
Minneapolis, Minnesota 55402
CUSTODIAN
U.S. BANK NATIONAL ASSOCIATION
180 East Fifth Street
St. Paul, Minnesota 55101
ADMINISTRATOR
SEI INVESTMENTS MANAGEMENT
CORPORATION
1 Freedom Valley Drive
Oaks, Pennsylvania 19456
TRANSFER AGENT
DST SYSTEMS, INC.
330 West Ninth Street
Kansas City, Missouri 64105
DISTRIBUTOR
SEI INVESTMENTS DISTRIBUTION CO.
1 Freedom Valley Drive
Oaks, Pennsylvania 19456
INDEPENDENT AUDITORS
KPMG PEAT MARWICK LLP
90 South Seventh Street
Minneapolis, Minnesota 55402
COUNSEL
DORSEY & WHITNEY LLP
220 South Sixth Street
Minneapolis, Minnesota 55402
This report and the financial statements contained herein are submitted for the
general information of the shareholders of the corporation. The report is not
authorized for distribution to prospective investors in the corporation unless
preceded or accompanied by an effective prospectus for each of the funds
included. Shares in the funds are not deposits or obligations of, or guaranteed
or endorsed by, U.S. Bank or any of its affiliates. Such shares are also not
federally insured by the Federal Deposit Insurance Corporation, the Federal
Reserve Board, or any other agency. Investment in the shares involve investment
risk including loss of principal amount invested.
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.
- --------------------------------------------------------------------------------
[LOGO] FIRST AMERICAN
THE POWER OF DISCIPLINED INVESTING(R)
11/1998 114-98
FIRST AMERICAN
INVESTMENT FUNDS, INC.
TAX FREE
BOND
FUNDS
[PHOTOS]
[GRAPHIC] 98
1998 ANNUAL REPORT
[LOGO] FIRST AMERICAN
THE POWER OF DISCIPLINED INVESTING(R)
<PAGE>
FIRST AMERICAN FAMILY OF FUNDS
- ---------------------------------
HIGHER RETURN
POTENTIAL
- ---------------------------------
SECTOR FUNDS
INTERNATIONAL FUNDS
SMALL CAP FUNDS
MID CAP FUNDS
LARGE CAP FUNDS
STRATEGY FUNDS
BOND FUNDS
TAX FREE BOND FUNDS
California Intermediate Tax Free
Colorado Intermediate Tax Free
Intermediate Tax Free
Minnesota Intermediate Tax Free
Minnesota Tax Free
Oregon Tax Free
Tax Free
MONEY MARKET FUNDS
- ---------------------------------
LOWER RETURN
POTENTIAL
- ---------------------------------
INVESTMENTS FOR EVERY GOAL
FIRST AMERICAN FUNDS OFFER A FULL RANGE OF INVESTMENT STRATEGIES TO HELP YOU
CREATE A PERSONALIZED, DIVERSIFIED PORTFOLIO. SUPPORTED BY EXTENSIVE RESEARCH
AND A HIGHLY DEVELOPED TEAM APPROACH TO INVESTMENT DECISION MAKING, FIRST
AMERICAN FUNDS CAN HELP BUILD A WINNING STRATEGY FOR ANY INVESTOR.
TABLE OF CONTENTS
- ------------------------------------------------------------------------------
MESSAGE TO SHAREHOLDERS 1
- ------------------------------------------------------------------------------
STRATEGIES FOR UNCERTAIN MARKETS 2
- ------------------------------------------------------------------------------
Tax Free Bond Funds Overview 4
- ------------------------------------------------------------------------------
California Intermediate Tax Free 5
- ------------------------------------------------------------------------------
Colorado Intermediate Tax Free 6
- ------------------------------------------------------------------------------
Intermediate Tax Free 7
- ------------------------------------------------------------------------------
Minnesota Intermediate Tax Free 8
- ------------------------------------------------------------------------------
Minnesota Tax Free 9
- ------------------------------------------------------------------------------
Oregon Tax Free 10
- ------------------------------------------------------------------------------
Tax Free 11
- ------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT 12
- ------------------------------------------------------------------------------
STATEMENTS OF NET ASSETS 13
- ------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS 44
- ------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS 46
- ------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS 48
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 50
- ------------------------------------------------------------------------------
NOTICE TO SHAREHOLDERS 58
- ------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOT FDIC INSURED. NO BANK GUARANTEE. MAY LOSE VALUE.
- --------------------------------------------------------------------------------
<PAGE>
MESSAGE TO SHAREHOLDERS SEPTEMBER 30, 1998
DEAR SHAREHOLDERS:
On behalf of the board of directors of First American Investment Funds,
Inc., I would like to extend a warm welcome to all new shareholders and
express my appreciation to our long-term shareholders for your continued
support.
Investors will remember this past year as one of the most volatile
periods in recent history. During the first half of 1998, the financial
markets staged a remarkable rally that sent the Dow Jones Industrial
Average to record highs.
In mid July, the markets suddenly reversed course, all but erasing the
year's gains. Since then, the markets have fluctuated, with dramatic price
swings becoming commonplace.
During challenging times, it's more important than ever to focus on
the fundamentals, including diversification among equity, bond and money
market mutual funds to create balanced portfolios. Please take a few
moments to read the article on the next page, "Strategies for Uncertain
Markets," to learn how asset allocation can help tame volatile returns and
produce more consistency in all market environments. You may also want to
meet with your investment professional to review your long-term goals and
fine-tune your portfolio accordingly.
To provide further diversification opportunities, we recently
introduced six new funds: Minnesota Tax Free, Tax Free, Adjustable Rate
Mortgage Securities, Strategic Income, Mid Cap Growth, and Emerging
Markets. We currently offer 38 mutual funds within our fund family to meet
the needs of any investor.
As you review this annual report, you will notice that we start off
with an overview of market conditions, followed by comments from portfolio
managers explaining how those conditions affected each fund. We hope that
you find this format useful in helping you understand your investment.
Again, the board of directors thanks you for your support and
confidence in the First American family of funds.
Sincerely,
/s/ VIRGINIA L. STRINGER
VIRGINIA L. STRINGER
Chairman
First American Investment Funds, Inc.
1 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STRATEGIES FOR UNCERTAIN MARKETS
After eight consecutive years of unprecedented economic growth and prosperity,
the third quarter of 1998 provided investors with a textbook example of market
volatility. A host of bad news, from Russia's default on its debts to Asia's
worsening recession and its potential impact on the U.S. economy, sent equity
markets into a tailspin. Over the span of one month, the Dow plummeted nearly 20
percent from its mid-July high of 9337. Even though the Dow rallied early in the
fourth quarter, some investors wonder if the market's golden days are over.
Experienced investors don't attempt to predict how markets will perform in the
coming months. They recognize that markets move in cycles and that an investment
lifetime will include both bull and bear markets--and perhaps several of them
over the decades. Regardless of market volatility, they remind themselves that
stocks and bonds remain the best long-term investments.
DIVERSIFICATION IS THE NAME OF THE GAME
- --------------------------------------------------------------------------------
While it's easy to be tempted by the promise of a single investment based on its
short-term performance, experienced investors also spread their dollars among
several types of investments (stocks, bonds and cash) as well as different
investment styles (large cap stocks, small cap stocks, international, growth,
value, etc.) to limit risk and earn more balanced returns. This diversification
strategy--known as asset allocation--alleviates confusion by helping you ride
out periods of uncertainty more successfully. It's a disciplined investment
approach that allows you to weather changes in the market.
Asset allocation is also one of the most important variables in the performance
of your mutual fund investments. When you diversify among different types of
assets, you benefit from using a range of investments, some of which will
perform better than others in different market conditions. In tandem, these
investments can potentially yield better results over time.
DIVERSIFICATION CAN HELP REDUCE MARKET VOLATILITY IN YOUR PORTFOLIO
- -------------------------------------------------------------------
Any particular asset class may perform better--or worse--than another in a given
year. By blending multiple asset classes at the same time, you can limit risk
and improve long-term performance opportunities.
The following is a bar chart depicting the annual return percentages of asset
classes.
[BAR CHART]
Lehman Brothers Standard & Poor's Morgan Stanley
Aggregate 500 Composite Russell 2000 EAFE Index
(Bonds) (Large Cap) (Small Stocks) (Int'l. Stocks)
------- ----------- -------------- ---------------
1987 2.75 5.25 -8.77 23.19
1988 7.89 16.61 24.89 26.90
1989 14.53 31.69 16.24 9.01
1990 8.95 -3.10 -19.51 -24.71
1991 16 30.47 46.05 10.19
1992 7.40 7.62 18.41 -13.89
1993 9.75 10.08 18.91 30.50
1994 -2.92 1.32 -1.82 6.24
1995 18.48 37.58 28.44 9.42
1996 3.61 22.96 16.49 4.40
1997 9.65 33.36 22.36 0.24
Expressed as annual return percentages from 1987 to 1997, Source: Micropal. The
above rankings among fund's investment categories are based on index average
annual total return figures. Past performance does not guarantee future returns.
- --------------------------------------------------------------------------------
'98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
TAKING A SMART STRATEGY ONE STEP FURTHER
- ----------------------------------------
Chances are that you already own a balanced portfolio of mutual funds. Yet you
may want to take a closer look at your holdings to ensure that your portfolio
remains in balance. For example, if large cap or domestic U.S. stocks formed the
core of your holdings, the gains posted in these sectors over the past several
years may have sent your overall asset allocation out of proportion. You may
want to meet with your investment professional to reallocate funds back to your
intended investment mix.
WHY FOCUS ON ASSET ALLOCATION?
- -------------------------------
Selection and combination of asset classes is much more important than the
selection of individual options. Less than 10 percent of your return relates to
a particular investment or the time you decide to buy or sell.
Source: Brinson, Singer and Beebower, "Determinants of Portfolio Performance,"
Financial Analysts Journal, May-June 1991
The following is a pie chart depicting the importance of focusing on asset
allocation.
[PIE CHART]
92% Asset Allocation
5% Security Selection
2% Market Timing
1% Other
- --------------------------------------------------------------------------------
REVISIT YOUR RISK TOLERANCE
- --------------------------------------------------------------------------------
Can you tolerate market fluctuations without undue concern? If not, you may wish
to sit down with your investment professional to review your risk tolerance and
reposition your assets accordingly. You might also reconsider your investment
strategies if you plan to tap your assets within the next year or two to pay for
a child's education, a new home or another significant expense. Simply put, you
wouldn't want to be caught with the market at a low point while having to
withdraw funds at that time.
TIME WILL TELL
- --------------------------------------------------------------------------------
In closing, the past six months reinforce the value of asset allocation. An
asset allocation program can help you build a balanced portfolio and cushion you
against losses you can least afford at critical periods of your life. And keep
the big picture in focus: bull and bear markets will come and go, yet over the
long term, stocks and bonds remain your best bet.
'98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
TAX FREE BOND
FUNDS
Bond yields tumbled and prices soared during the fiscal year as the global
financial crisis dampened world economic growth and lowered inflationary
expectations. But while interest rates dropped across the entire fixed-income
market, declines were especially dramatic in the long-term Treasury sector,
reflecting the worldwide flight to quality and the unwinding of hedge-fund
leverage.
By the end of the fiscal year ended September 30, 1998, yields on long-term
Treasury bonds had fallen to the lowest level since 1967. Longer-term issues
were the best performing sector of the municipal market. However, as interest
rates dropped, state and local governments rushed to refund bonds to take
advantage of lower borrowing costs. Because yields on tax-exempt issues declined
less than those of comparable Treasuries, we believe that the municipal sector
is attractively priced relative to taxable bonds.
We will remain especially vigilant to credit quality, given our view that
economic growth in the United States is likely to decelerate significantly in
coming months. Currently, the U.S. economy is among the strongest in the world,
the federal budget is in balance for the first time since 1969, and global
overcapacity is likely to keep domestic inflation in check despite a relatively
tight labor market. Under those circumstances, we expect that municipal bonds
will continue to generate solid performance for investors seeking tax-advantaged
income.
The following graphs compare First American fund performance with unmanaged
indices. Indices do not pay management fees to cover costs of shareholder
services and fund operating costs, or transaction costs to buy and sell
securities. Unlike indices, mutual funds are never 100% invested because they
need cash on hand to redeem shares. In addition, the performance shown for the
funds includes the maximum initial sales charge, all fund expenses and fees. If
operating expenses such as the funds had been applied to the indices, their
performance would have been lower. Please remember that an index is simply a
measure of performance, and one cannot invest in it directly.
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 class A shares
before sales charges with the exception of Oregon Intermediate Tax Free Fund
which quotes class Y shares. The adjusted figures for class A shares include the
effect of paying the maximum initial sales charge of 3.00% on all tax-free bond
funds.
4 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
TAX FREE BOND FUNDS
CALIFORNIA INTERMEDIATE TAX FREE
INVESTMENT OBJECTIVE
- --------------------------------------------------------------------------------
SEEKS CURRENT INCOME EXEMPT FROM FEDERAL AND CALIFORNIA STATE INCOME
TAX, CONSISTENT WITH PRESERVATION OF CAPITAL
Over the fiscal year ended September 30, 1998, the California Intermediate Tax
Free Fund achieved a total return of 7.80%.
The fund focused on increasing its duration and looking for relative value
in the California municipal marketplace. Given our view that economic drag from
Asia would ultimately slow the domestic economy and extinguish whatever
inflationary embers might have been burning, extending the fund's duration
positioned the fund to benefit from the drop in rates that typically accompanies
a growth slowdown.
To offset the impact of lower interest rates on the fund's yield, we
continued to search the California tax-exempt market to find bonds that we
believed to be inefficiently priced, either as a result of a temporary imbalance
between supply and demand or because of a possible misreading of credit
worthiness.
The recovery of the California economy from the severe economic
dislocations that impacted the state during the early 1990s led to increased
demand for California debt. As a result, California municipal issues generally
outperformed those in most other states. Reflecting the improved health of
California's economy and finances, Moody's upgraded the state's bonds from A-1
to AA-3 as the fiscal year ended. Despite the solid gains in the value of
California issues, we believe that the state's bonds continue to be attractively
priced, especially relative to Treasury debt.
We believe that the generally favorable conditions that have existed in the
municipal bond market in recent years will carry through for the foreseeable
future and that municipal bonds will continue to provide solid performance.
VALUE OF A $10,000 INVESTMENT
[PLOT POINTS CHART]
<TABLE>
<CAPTION>
First American First American First American
California California California Lehman
Intermediate Intermediate Intermediate 7-Year General Lehman
Tax Free Fund, Tax Free Fund, Tax Free Fund, Obligation 7-Year Municipal
Class A Class A adjusted Class Y Bond Index Bond Index
------- ---------------- ------- ---------- ----------
<S> <C> <C> <C> <C> <C>
1992 $10,000 $ 9,700 $10,000 $10,000 $10,000
1992 $10,341 $10,031 $10,331 $10,434 $10,439
1993 $11,291 $10,952 $11,291 $11,589 $11,578
1994 $11,275 $10,936 $11,264 $11,480 $11,503
1995 $12,224 $11,857 $12,212 $12,708 $12,686
1996 $12,725 $12,343 $12,713 $13,275 $13,249
1997 $13,653 $13,243 $13,626 $14,347 $14,307
1998 $14,718 $14,276 $14,688 $15,498 $15,433
</TABLE>
PAST PERFORMANCE OF THE FUND IS NOT INDICATIVE OF FUTURE PERFORMANCE.
ANNUALIZED PERFORMANCE SINCE
1 YEAR 3 YEAR 5 YEAR INCEPTION
- --------------------------------------------------------------------------------
Class A 7.80% 6.38% 5.44% 6.29%
- --------------------------------------------------------------------------------
Class A adjusted 4.57% 5.30% 4.81% 5.78%
- --------------------------------------------------------------------------------
Class Y 7.80% 6.35% 5.40% 6.26%
- --------------------------------------------------------------------------------
Lehman 7-Year G.O. Bond 8.02% 6.84% 5.99% 7.16%
- --------------------------------------------------------------------------------
Lehman 7-Year Muni. Bond 7.87% 6.75% 5.92% 7.09%
- --------------------------------------------------------------------------------
Past performance of the fund is not indicative of future performance.
The inception date of the class A shares and the class Y shares is 8/8/97. The
performance reflected in the table begins on 5/31/92, the inception date of the
common trust fund. Actual since inception returns from 8/8/97 for class A shares
is 7.73%, class A shares adjusted is 4.89%, and class Y shares is 7.64%.
The performance reflected in the graph begins on 5/31/92 and represents past
performance of U.S. Bank's internally managed common trust fund, adjusted for
fees and expenses for periods prior to 8/8/97, the inception date of the First
American California Intermediate Tax Free Fund. The common trust fund was not
registered under the 1940 Act and therefore was not subject to certain
investment restrictions that may have adversely affected performance. The
performance reflected in the table begins on 5/31/92, the inception date of the
common trust fund.
Previously, the fund used the Lehman 7 Year G.O. Bond Index as a benchmark.
Going forward, the fund will use the Lehman 7 Year Muni Bond Index as a
comparison, because it is better suited to the fund's objective.
Performance reflects voluntary fee waivers in effect. In absence of such fee
waivers, total returns would be reduced.
5 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
TAX FREE BOND FUNDS
COLORADO INTERMEDIATE TAX FREE
INVESTMENT OBJECTIVE
- --------------------------------------------------------------------------------
SEEKS CURRENT INCOME EXEMPT FROM FEDERAL AND COLORADO STATE INCOME TAX,
CONSISTENT WITH PRESERVATION OF CAPITAL
The Colorado Intermediate Tax Free Fund achieved a total return of 7.43% over
the fiscal year ended September 30, 1998.
During the fiscal year, the fund focused on increasing its duration and
looking for relative value in the Colorado municipal marketplace. Given our view
that economic drag from Asia would ultimately slow the domestic economy and
extinguish whatever inflationary embers might have been burning, extending the
fund's duration positioned the fund to benefit from the drop in rates that
typically accompanies a growth slowdown.
To offset the impact of lower interest rates on the fund's yield, we
continued to search the Colorado tax-exempt market to find issues that we
believed to be inefficiently priced, either as a result of a temporary imbalance
between supply and demand or because of a possible misreading of credit
worthiness.
In Colorado, lower issuance and increased refundings caused a significant
reduction in supply. Coupled with the drop in interest rates, the reduced
availability of Colorado municipal issues sparked a strong rally in the state's
bonds over the fiscal year. Despite the solid gains, we believe that the
Colorado tax-exempt sector continues to be attractively priced, especially
relative to Treasury bonds.
We believe that the generally favorable conditions that have existed in the
municipal bond market in recent years will carry through for the foreseeable
future and that municipal bonds will continue to provide solid performance.
VALUE OF A $10,000 INVESTMENT
[PLOT POINTS CHART]
<TABLE>
<CAPTION>
First American First American First American
Colorado Colorado Colorado Lehman
Intermediate Intermediate Intermediate 7-Year General Lehman
Tax Free Fund, Tax Free Fund, Tax Free Fund, Obligation 7-Year Municipal
Class A Class A adjusted Class Y Bond Index Bond Index
------- ---------------- ------- ---------- ----------
<S> <C> <C> <C> <C> <C>
1994 $10,000 $ 9,700 $10,000 $10,000 $10,000
1994 $10,118 $ 9,815 $10,128 $10,104 $10,127
1995 $10,985 $10,655 $10,986 $11,185 $11,169
1996 $11,467 $11,123 $11,468 $11,684 $11,665
1997 $12,282 $11,914 $12,283 $12,628 $12,596
1998 $13,195 $12,799 $13,183 $13,640 $13,587
</TABLE>
PAST PERFORMANCE OF THE FUND IS NOT INDICATIVE OF FUTURE PERFORMANCE.
ANNUALIZED PERFORMANCE SINCE
1 YEAR 3 YEAR INCEPTION
- --------------------------------------------------------------------------------
Class A 7.43% 6.30% 6.95%
- --------------------------------------------------------------------------------
Class A adjusted 4.19% 5.21% 6.22%
- --------------------------------------------------------------------------------
Class Y 7.33% 6.27% 6.92%
- --------------------------------------------------------------------------------
Lehman 7-Year G.O. Bond 8.02% 6.84% 7.28%
- --------------------------------------------------------------------------------
Lehman 7-Year Muni. Bond 7.87% 6.75% 7.19%
- --------------------------------------------------------------------------------
Past performance of the fund is not indicative of future performance.
The inception date of the class A and class Y shares is 4/4/94. The performance
reflected in the graph begins on 4/30/94. The performance reflected in the table
begins on the inception date of class A and Y shares.
Previously, the fund used the Lehman 7-Year G.O. Bond Index as a benchmark.
Going forward, the fund will use the Lehman 7-Year Muni Bond Index as a
comparison, because it is better suited to the fund's objective.
Performance reflects voluntary fee waivers in effect. In absence of such fee
waivers, total returns would be reduced.
6 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
TAX FREE BOND FUNDS
INTERMEDIATE TAX FREE
INVESTMENT OBJECTIVE
- --------------------------------------------------------------------------------
SEEKS CURRENT INCOME EXEMPT FROM FEDERAL INCOME TAX,
CONSISTENT WITH PRESERVATION OF CAPITAL
The Intermediate Tax Free Fund achieved a total return of 7.04% over the fiscal
year ended September 30, 1998.
During that time, the fund focused on increasing its duration and looking
for relative value in the national municipal marketplace. Given our view that
economic drag from Asia would ultimately slow the domestic economy and
extinguish whatever inflationary embers might have been burning, extending the
fund's duration positioned the fund to benefit from the drop in rates that
typically accompanies a growth slowdown.
To minimize the impact of lower interest rates on the fund's yield, we
continued to search the tax-exempt market to find issues that we believed to be
inefficiently priced, either as a result of a temporary imbalance between supply
and demand or because of a possible misreading of credit worthiness. In general,
municipalities used the occasion of lower interest rates to increase issuance;
the heightened supply, in turn, offset some of the positive impact of falling
rates on bond prices.
On a selective basis, the fund added a small amount (less than 2% of
assets) of BBB and non-rated bonds late in the fiscal year to capitalize on our
increased capability for credit analysis. The positions also reflect
opportunities created by the mild widening of credit spreads that occurred in
some portions of the municipal market during the summer. Despite the solid gains
generated by tax-exempt bonds over the fiscal year, we believe that the
municipal sector continues to be attractively priced, especially relative to
Treasury issues.
We believe that the generally favorable conditions that have existed in the
municipal bond market in recent years will carry through for the foreseeable
future and that municipal bonds will continue to provide solid performance.
VALUE OF A $10,000 INVESTMENT
[PLOT POINTS CHART]
First American First American First American Lehman
Intermediate Intermediate Intermediate 7-Year General
Tax Free Fund, Tax Free Fund, Tax Free Fund, Obligation
Class A Class A Adjusted Class Y Bond Index
------- ---------------- ------- ----------
1988 $10,000 $ 9,700 $10,000 $10,000
1989 $10,487 $10,172 $10,487 $10,666
1990 $11,041 $10,710 $11,041 $11,402
1991 $12,048 $11,686 $12,048 $12,761
1992 $12,919 $12,531 $12,919 $13,976
1993 $14,037 $13,616 $14,037 $15,523
1994 $13,862 $13,446 $13,862 $15,377
1995 $15,130 $14,676 $15,130 $17,023
1996 $15,804 $15,330 $15,789 $17,782
1997 $16,885 $16,378 $16,854 $19,219
1998 $18,073 $17,531 $18,034 $20,760
PAST PERFORMANCE OF THE FUND IS NOT INDICATIVE OF FUTURE PERFORMANCE.
ANNUALIZED PERFORMANCE SINCE
1 YEAR 3 YEAR 5 YEAR 10 YEAR INCEPTION
- --------------------------------------------------------------------------------
Class A 7.04% 6.10% 5.18% 6.10% 6.17%
- --------------------------------------------------------------------------------
Class A adjusted 3.79% 5.04% 4.54% 5.78% 5.87%
- --------------------------------------------------------------------------------
Class Y* 7.05% 6.05% 5.15% 6.08% 6.16%
- --------------------------------------------------------------------------------
Lehman 7-Year G.O. Bond 8.02% 6.84% 5.99% 7.58% 7.58%
- --------------------------------------------------------------------------------
Past performance of the fund is not indicative of future performance.
The inception date of the class A shares is 12/22/87, and the inception date of
the class Y shares is 2/4/94. The 10-year performance reflected in the graph
begins on 9/30/88. The performance reflected in the table begins on the
inception date of class A shares.
*The performance presented links the performance of class A shares from
inception on 12/22/87 to 2/4/94 with the performance of class Y shares after its
inception on 2/4/94. The since inception return for class Y shares from 2/4/94,
is 5.16%.
Performance reflects voluntary fee waivers in effect. In absence of such fee
waivers, total returns would be reduced.
7 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
TAX FREE BOND FUNDS
MINNESOTA INTERMEDIATE TAX FREE
INVESTMENT OBJECTIVE
- --------------------------------------------------------------------------------
SEEKS CURRENT INCOME EXEMPT FROM FEDERAL AND MINNESOTA STATE INCOME TAX,
CONSISTENT WITH PRESERVATION OF CAPITAL
Over the fiscal year ended September 30, 1998, the Minnesota Intermediate Tax
Free Fund achieved a total return of 6.80%.
The fund focused on increasing its duration and looking for relative value
in the Minnesota municipal marketplace. Given our view that economic drag from
Asia would ultimately slow the domestic economy and extinguish whatever
inflationary embers might have been burning, extending the fund's duration
positioned the fund to benefit from the drop in rates that typically accompanies
a growth slowdown.
To offset the impact of lower interest rates on the fund's yield, we
continued to search the Minnesota tax-exempt market to find issues that we
believed to be inefficiently priced, either as a result of a temporary imbalance
between supply and demand or because of a possible misreading of credit
worthiness.
During the fiscal year, the fund removed the requirement that it invest
only in insured issues. This action was taken to expand the supply of quality
bonds available to the fund, which had become constricted in recent years. This
change does not alter the fund's emphasis on maintaining credit quality within
the portfolio.
We believe that the generally favorable conditions that have existed in the
municipal bond market in recent years will carry through for the foreseeable
future and that municipal bonds will continue to provide solid performance.
VALUE OF A $10,000 INVESTMENT
[PLOT POINTS CHART]
<TABLE>
<CAPTION>
First American First American First American
Minnesota Minnesota Minnesota Lehman
Intermediate Intermediate Intermediate 7-Year General Lehman
Tax Free Fund, Tax Free Fund, Tax Free Fund, Obligation 7-Year Municipal
Class A Class A adjusted Class Y Bond Index Bond Index
------- ---------------- ------- ---------- ----------
<S> <C> <C> <C> <C> <C>
1994 $10,000 $9,700 $10,000 $10,000 $10,000
1994 $ 9,852 $ 9,557 $ 9,863 $ 9,919 $ 9,930
1995 $10,686 $10,365 $10,685 $10,980 $10,951
1996 $11,199 $10,863 $11,198 $11,470 $11,438
1997 $11,951 $11,593 $11,917 $12,396 $12,350
1998 $12,764 $12,381 $12,730 $13,390 $13,322
</TABLE>
PAST PERFORMANCE OF THE FUND IS NOT INDICATIVE OF FUTURE PERFORMANCE.
ANNUALIZED PERFORMANCE SINCE
1 YEAR 3 YEAR INCEPTION
- --------------------------------------------------------------------------------
Class A 6.80% 6.10% 5.41%
- --------------------------------------------------------------------------------
Class A adjusted 3.62% 5.02% 4.71%
- --------------------------------------------------------------------------------
Class Y 6.82% 6.01% 5.35%
- --------------------------------------------------------------------------------
Lehman 7-Year G.O.Bond 8.02% 6.84% 6.58%
- --------------------------------------------------------------------------------
Lehman 7-Year Muni. Bond 7.87% 6.75% 6.46%
- --------------------------------------------------------------------------------
Past performance of the fund is not indicative of future performance.
The inception date of class A and Y shares is 2/25/94. The performance reflected
in the graph begins on 2/28/94. The performance reflected in the table begins on
the inception date of class A and Y shares.
Previously, the fund used the Lehman 7-Year G.O. Bond Index as a benchmark.
Going forward, the fund will use the Lehman 7-Year Muni Bond Index as a
comparison, because it is better suited to the fund's objective.
Performance reflects voluntary fee waivers in effect. In absence of such fee
waivers, total returns would be reduced.
8 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
TAX FREE BOND FUNDS
MINNESOTA TAX FREE
INVESTMENT OBJECTIVE
- --------------------------------------------------------------------------------
SEEKS MAXIMUM CURRENT INCOME EXEMPT FROM BOTH FEDERAL AND MINNESOTA
INCOME TAX, CONSISTENT WITH PRUDENT INVESTMENT RISK
Over the fiscal period ended September 30, 1998, the Minnesota Tax Free Fund
achieved a total return of 8.58%.
Entering the fiscal year, the fund was positioned to benefit from an
anticipated decline in long-term interest rates. While it is not the policy of
the fund to take large interest-rate bets, we nonetheless believed that
headwinds from Asia would ultimately slow growth in the United States and dampen
inflationary pressures that had been building in the domestic economy. In that
environment, prices of longer-term issues would outperform as interest rates
declined.
Also, the fund focused on maintaining credit quality, which we view as
exceptionally important in times of economic stress. Where the supply and
quality of bonds allowed, the fund attempted to gain maximum call protection to
guard against refundings as rates fell.
As the reporting period ended, the fund's duration remained somewhat longer
than its benchmark, reflecting our view that interest rates will drift lower in
coming months. On a selective basis, the fund will continue look for
opportunities to swap non-rated debt into similar issues with improved
fundamentals and additional call protection.
We believe that the generally favorable conditions that have existed in the
municipal bond market in recent years will carry through for the foreseeable
future and that municipal bonds will continue to provide solid performance.
VALUE OF A $10,000 INVESTMENT
[PLOT POINTS CHART]
First American First American First American
Minnesota Minnesota Minnesota Lehman
Tax Free Fund, Tax Free Fund, Tax Free Fund, Municipal
Class A Class A Adjusted Class Y Bond Index
------- ---------------- ------- ----------
1988 $10,000 $ 9,700 $10,000 $10,000
1989 $10,823 $10,498 $10,823 $10,868
1990 $11,397 $11,055 $11,397 $11,609
1991 $12,820 $12,436 $12,820 $13,141
1992 $14,046 $13,624 $14,046 $14,515
1993 $15,804 $15,330 $15,804 $16,364
1994 $15,310 $14,850 $15,310 $15,965
1995 $17,052 $16,540 $17,052 $17,751
1996 $18,116 $17,572 $18,116 $18,824
1997 $19,623 $19,034 $19,614 $20,523
1998 $21,307 $20,667 $21,346 $22,313
PAST PERFORMANCE OF THE FUND IS NOT INDICATIVE OF FUTURE PERFORMANCE.
ANNUALIZED PERFORMANCE SINCE
1 YEAR 3 YEAR 5 YEAR 10 YEAR INCEPTION
- --------------------------------------------------------------------------------
Class A 8.58% 7.71% 6.16% 7.86% 7.74%
- --------------------------------------------------------------------------------
Class A adjusted 5.37% 6.63% 5.52% 7.53% 7.42%
- --------------------------------------------------------------------------------
Class Y* 8.83% 7.77% 6.19% 7.88% 7.76%
- --------------------------------------------------------------------------------
Lehman Muni. Bond 8.72% 7.92% 6.40% 8.36% 8.36%
- --------------------------------------------------------------------------------
Past performance of the fund is not indicative of future performance.
The inception date of the class A shares is 7/11/88, and the inception date of
the class Y shares is 8/1/97. The 10-year performance reflected in the graph
begins on 9/30/88. The performance reflected in the table begins on the
inception date of class A shares.
*The performance presented links the performance of class A shares from
inception on 7/11/88 to 8/1/97 with the performance of class Y shares after its
inception on 8/1/97. The since inception return for class Y shares from 8/1/97,
is 8.20%.
The performance presented includes that of a predecessor fund, Piper Minnesota
Tax-Exempt Fund, which merged with First American Minnesota Tax Free Fund on
7/31/98.
Performance reflects voluntary fee waivers in effect. In absence of such fee
waivers, total returns would be reduced.
9 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
TAX FREE BOND FUNDS
OREGON INTERMEDIATE TAX FREE
INVESTMENT OBJECTIVE
- --------------------------------------------------------------------------------
SEEKS CURRENT INCOME EXEMPT FROM FEDERAL AND OREGON STATE INCOME TAX,
CONSISTENT WITH PRESERVATION OF CAPITAL
The Oregon Intermediate Tax Free Fund achieved a return of 6.66% over the fiscal
year ended September 30, 1998.
The fund focused on three major areas during the fiscal year. First, we
extended duration relative to our benchmark, the Lehman 7-Year GO Bond Index.
The purpose of the extension was to position the fund to benefit from an
expected drop in interest rates. Also, the fund attempted to upgrade its
structure to guard against the possibility of refundings as interest rates
declined.
Where the supply and quality of bonds allowed, the fund traded callable
issues for securities that provided better call protection, or were
non-callable. Owning a higher percentage of non-callable bonds affords a greater
degree of yield and price stability to the fund's portfolio. Finally, the fund
placed a priority on upgrading credit quality, given our view that an economic
slowdown was looming.
As the fiscal year ended, a significant imbalance had developed between the
supply and demand for Oregon bonds. As a result, prices of Oregon issues traded
higher than would otherwise be expected. The imbalance was caused by Oregon's
cash-rich position, which has fostered refundings, and the states high marginal
tax rate, which tends to create additional demand. Despite the relatively rich
nature of Oregon bonds, municipal issues in general remain attractive on an
after-tax basis relative to similar-maturity Treasuries.
We believe that the generally favorable conditions that have existed in the
municipal bond market in recent years will carry through for the foreseeable
future and that municipal bonds will continue to provide solid performance.
VALUE OF A $10,000 INVESTMENT
[PLOT POINTS CHART]
First American
Oregon Lehman
Intermediate 7-Year General
Tax Free Fund, Obligation
Class Y Bond Index
------- ----------
1988 $10,000 $10,000
1989 $10,579 $10,666
1990 $11,297 $11,402
1991 $11,625 $12,761
1992 $13,704 $13,976
1993 $14,980 $15,523
1994 $14,848 $15,377
1995 $16,027 $17,023
1996 $16,623 $17,782
1997 $17,832 $19,219
1998 $19,019 $20,760
PAST PERFORMANCE OF THE FUND IS NOT INDICATIVE OF FUTURE PERFORMANCE.
ANNUALIZED PERFORMANCE SINCE
1 YEAR 3 YEAR 5 YEAR 10 YEAR INCEPTION
- --------------------------------------------------------------------------------
Class Y 6.66% 5.87% 4.89% 6.64% 6.33%
- --------------------------------------------------------------------------------
Lehman 7-Year G.O. Bond 8.02% 6.84% 5.99% 7.58% 7.58%
- --------------------------------------------------------------------------------
Past performance of the fund is not indicative of future performance.
The inception date of the class Y shares is 8/8/97.
The 10-year performance reflected in the graph begins on 9/30/88 and represents
past performance of U.S. Bank's internally managed common trust fund, adjusted
for fees and expenses for periods prior to 8/8/97, the inception date of the
First American Oregon Intermediate Tax Free Fund. The common trust fund was not
registered under the 1940 Act and therefore was not subject to certain
investment restrictions that may have adversely affected performance. The
performance reflected in the table begins on 10/31/86, the inception date of the
common trust fund. Actual since inception return from 8/8/97 is 6.87%.
Performance reflects voluntary fee waivers in effect. In absence of such fee
waivers, total returns would be reduced.
10 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
TAX FREE BOND FUNDS
TAX FREE
INVESTMENT OBJECTIVE
- --------------------------------------------------------------------------------
SEEKS CURRENT INCOME EXEMPT FROM FEDERAL INCOME TAX, CONSISTENT
WITH PRUDENT INVESTMENT RISK
The Tax Free Fund achieved a total return of 8.41% for the fiscal year ended
September 30, 1998.
Entering the fiscal year, the fund was positioned to benefit from an
anticipated decline in long-term interest rates. While it is not the policy of
the fund to take large interest-rate bets, we nonetheless believed that
headwinds from Asia would ultimately slow growth in the United States and dampen
inflationary pressures that had been building in the domestic economy. In that
environment, prices of longer-term issues would outperform as interest rates
declined.
Also, the fund focused on maintaining credit quality, which we view as
exceptionally important in times of economic stress. Where the supply and
quality of bonds allowed, the fund attempted to gain maximum call protection to
guard against refundings as rates fell. As the reporting period ended, the
fund's duration remained somewhat longer than its benchmark, reflecting our view
that interest rates will drift lower in coming months. On a selective basis, the
fund will continue look for opportunities to swap non-rated debt into similar
issues with improved fundamentals and additional call protection.
We believe that the generally favorable conditions that have existed in the
municipal bond market in recent years will carry through for the foreseeable
future and that municipal bonds will continue to provide solid performance.
VALUE OF A $10,000 INVESTMENT
[PLOT POINTS CHART]
First American First American First American Lehman
Tax Free Fund, Tax Free Fund, Tax Free Fund, Municipal
Class A Class A, Adjusted Class Y Bond Index
------- ----------------- ------- ----------
1988 $10,000 $ 9,700 $10,000 $10,000
1989 $10,682 $10,362 $10,682 $10,868
1990 $11,339 $10,999 $11,339 $11,609
1991 $12,847 $12,462 $12,847 $13,141
1992 $14,219 $13,793 $14,219 $14,515
1993 $16,318 $15,828 $16,318 $16,364
1994 $15,383 $14,921 $15,383 $15,965
1995 $16,967 $16,458 $16,967 $17,751
1996 $18,057 $17,515 $18,057 $18,824
1997 $19,698 $19,107 $19,698 $20,523
1998 $21,355 $20,714 $21,380 $22,313
PAST PERFORMANCE OF THE FUND IS NOT INDICATIVE OF FUTURE PERFORMANCE.
ANNUALIZED PERFORMANCE SINCE
1 YEAR 3 YEAR 5 YEAR 10 YEAR INCEPTION
- --------------------------------------------------------------------------------
Class A 8.41% 7.97% 5.53% 7.88% 7.86%
- --------------------------------------------------------------------------------
Class A adjusted 5.13% 6.88% 4.89% 7.55% 7.54%
- --------------------------------------------------------------------------------
Class Y * 8.54% 8.01% 5.55% 7.89% 7.87%
- --------------------------------------------------------------------------------
Lehman Muni Bond 8.72% 7.92% 6.40% 8.36% 8.36%
- --------------------------------------------------------------------------------
Past performance of the fund is not indicative of future performance.
The inception date of the class A shares is 7/11/88, and the inception date of
the class Y shares is 8/3/98. The 10-year performance reflected in the graph
begins on 9/30/88. The performance reflected in the table begins on the
inception date of class A shares.
*The performance presented links the performance of class A shares from
inception on 7/11/88 to 8/3/98 with the performance of class Y shares after its
inception on 8/3/98. The cumulative since inception return for class Y shares
from 8/3/98, is 2.83%.
The performance presented includes that of a predecessor fund, Piper Tax-Exempt
Fund, which merged with First American Tax Free Fund on 7/31/98.
Performance reflects voluntary fee waivers in effect. In absence of such fee
waivers, total returns would be reduced.
11 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
INDEPENDENT
AUDITORS' REPORT SEPTEMBER 30, 1998
The Board of Directors and Shareholders
First American Investment Funds, Inc.
We have audited the accompanying statements of net assets of California
Intermediate Tax Free Fund, Colorado Intermediate Tax Free Fund,
Intermediate Tax Free Fund, Minnesota Intermediate Tax Free Fund, Minnesota
Tax Free Fund (formerly Piper Minnesota Tax-Exempt Fund), Oregon
Intermediate Tax Free Fund, and Tax Free Fund (formerly Piper National
Tax-Exempt Fund) (funds within First American Investment Funds, Inc.) as of
September 30, 1998, and the related statements of operations, the
statements of changes in net assets and the financial highlights for each
of the periods presented. These financial statements and the financial
highlights are the responsibility of the funds' management. Our
responsibility is to express an opinion on these financial statements and
the financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and the
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Investment securities held in custody are
confirmed to us by the custodian. As to securities purchased and sold but
not received or delivered, we request confirmations from brokers or carry
out other appropriate auditing procedures. An audit also includes assessing
the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and the financial highlights
referred to above present fairly, in all material respects, the financial
position of each of the funds listed above as of September 30, 1998, and
the results of their operations, changes in their net assets and the
financial highlights for each of the periods presented, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
November 13, 1998
12 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
NET ASSETS SEPTEMBER 30, 1998
CALIFORNIA INTERMEDIATE TAX FREE FUND
DESCRIPTION PAR (000) VALUE (000)
- ------------------------------------------------------------------------
MUNICIPAL BONDS - 97.7%
CALIFORNIA - 96.1%
Alisal Unified School District Capital
Appreciation, Zero Coupon Bond,
Series C (GO) (FGIC)
0.000%, 08/01/08 $ 860 $ 569
Anaheim Electric (RB)
4.800%, 10/01/02 500 521
Bakersfield Convention Center Project
(COP) (MLO) (MBIA)
5.500%, 04/01/10 250 275
Burbank Public Service Department
(RB) (AMBAC)
6.100%, 06/01/01 200 213
California State (GO) (AMBAC)
6.300%, 11/01/02 300 331
California State, Housing and Homeless
Authority (GO) (AMT)
5.750%, 10/01/01 300 319
California State Department of Water,
Central Valley Project,
Callable 12/01/05 @ 101 (RB)
5.000%, 12/01/12 500 523
California State Department of Water,
Central Valley Project,
Callable 06/01/06 @ 101 (RB)
5.300%, 12/01/07 750 829
California State Educational Facilities
Authority, Occidental College,
Callable 10/01/07 @ 102
(RB) (MBIA)
5.300%, 10/01/10 500 552
California State Educational Facilities
Authority, Pooled College & University
Projects, Series A (RB)
4.850%, 12/01/01 500 518
California State Health Facilities Authority,
Callable 08/01/08 @ 100 (RB)
5.375%, 08/01/09 250 269
California State Health Facilities Authority,
John C. Fremont Hospital District
(RB) (CMI)
6.000%, 06/01/04 355 386
California State Health Facilities Authority,
Sutter Health (RB) (FSA)
5.500%, 08/15/06 500 552
California State Housing Finance Agency,
Callable 08/01/04 @ 102 (RB)
6.550%, 02/01/05 150 161
California State Housing Finance Agency,
Home Mortgages, Series A (RB) (MBIA)
5.000%, 08/01/03 180 188
California State Housing Finance Agency,
Series E (RB) (MBIA)
5.850%, 08/01/04 150 159
California State Public Works,
Community Colleges (RB) (MLO)
5.250%, 03/01/08 450 491
California State Public Works,
Department of Corrections,
Series A (RB) (MLO) (AMBAC)
6.000%, 01/01/06 545 622
CALIFORNIA INTERMEDIATE TAX FREE FUND
(continued)
DESCRIPTION PAR (000) VALUE (000)
- ------------------------------------------------------------------------
California State Public Works, Various
University Projects (RB)
5.900%, 10/01/01 $ 100 $ 107
5.000%, 06/01/03 150 159
California State Resource Efficiency
Finance Authority, First Resource
Efficiency Project (RB) (AMBAC)
5.200%, 07/01/02 500 529
California Statewide Community
Development Authority, Community
Hospital of Monterey Peninsula,
Callable 08/18/08 @ 101 (COP) (MBIA)
5.250%, 08/15/09 500 548
California Statewide Community
Development Authority,
Health Facilities, Series A,
Callable 08/01/03 @ 102
(COP) (CMI)
5.200%, 08/01/04 200 214
Central Valley School District
Financing Authority (RB) (MBIA)
5.950%, 02/01/05 500 558
Contra Costa Water District,
Series G (RB) (MBIA)
5.400%, 10/01/03 500 541
Escondido Civic Center Project,
Escrowed to Maturity (RB) (AMBAC)
5.800%, 09/01/04 100 111
Fontana School District (GO) (MBIA)
5.550%, 07/01/04 500 549
Fresno Unified School District
(GO) (MBIA)
6.050%, 08/01/11 500 589
Golden West Schools Financing
Authority Refunding Bond,
Zero Coupon Bond (RB)
0.000%, 02/01/12 535 289
Industry, Callable 07/01/02 @ 100.25
(GO) (FGIC)
5.800%, 07/01/04 100 108
Inglewood Public Financing Authority
(RB) (AMBAC)
5.900%, 05/01/01 100 106
Inland Empire Solid Waste Authority,
Landfill Improvements Project,
Series B
(RB) (AMT) (MLO) (FSA)
5.750%, 02/01/04 500 545
Kern County Board of Education,
Callable 05/01/08 @ 102
(COP) (MLO)
5.200%, 05/01/12 905 966
5.250%, 05/01/13 350 374
La Canada Unified School District
(GO) (FGIC)
5.100%, 08/01/03 400 427
Los Angeles, Series A,
Callable 09/01/04 @ 102
(GO) (MBIA)
5.800%, 09/01/07 250 279
Los Angeles County Public Works
Financing Authority,
Callable 03/01/03 @ 102 (RB)
4.800%, 03/01/04 400 421
13 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
NET ASSETS SEPTEMBER 30, 1998
CALIFORNIA INTERMEDIATE TAX FREE FUND (continued)
DESCRIPTION PAR (000) VALUE (000)
- ------------------------------------------------------------------------
Los Angeles County Public Works
Financing Authority,
Regional Park & Open Space
District, Series A,
Callable 10/01/07 @ 101 (RB)
5.000%, 10/01/19 $ 265 $ 266
Los Angeles County Public Works
Financing Authority,
Regional Park & Open Space
District, Series A,
Escrowed to Maturity (RB)
5.500%, 10/01/02 500 537
5.625%, 10/01/03 500 546
Los Angeles County Transportation
Commission, Series B (RB) (FGIC)
5.875%, 07/01/02 250 270
6.000%, 07/01/04 250 280
Los Angeles Department of Water & Power,
Callable 04/15/02 @ 102 (RB)
6.100%, 04/15/03 250 274
Los Angeles Earthquake Rehabilitation,
Series C, Callable 01/01/00 @ 100
(RB) (AMT) (FNMA)
4.850%, 07/01/02 700 706
Los Angeles Sanitation Equipment
(RB) (MLO) (FSA)
6.000%, 02/01/07 500 576
Los Angeles School District,
Callable 07/01/08 @ 102
(GO) (FGIC)
4.900%, 07/01/09 300 321
Martinez County School District,
Callable 08/01/00 @ 102 (GO)
5.750%, 08/01/05 150 158
Marysville Hospital Revenue, Series A,
Callable 01/01/09 @ 102
(RB) (AMBAC)
5.000%, 01/01/10 500 531
Metropolitan Water District,
Southern California,
Series B (RB) (MBIA)
4.875%, 07/01/10 500 528
5.000%, 07/01/14 500 520
Modesto Water Utility System
Refinancing Project
(RB) (FGIC)
5.000%, 10/01/05 740 797
Montebello Community Redevelopment
Agency (RB) (FSA)
4.750%, 09/01/07 270 288
Mount Diablo Unified School District,
Community Facilities Project,
Callable 08/01/02 @ 102
(RB) (AMBAC)
5.800%, 08/01/03 100 109
Northern California Transmission Agency,
Cal-Ore Project (RB) (MBIA)
6.000%, 05/01/02 100 108
Oceanside Water System (COP) (AMBAC)
5.100%, 08/01/02 500 527
Orange County Juvenile Justice Center
Facility (COP) (MLO) (AMBAC)
5.750%, 06/01/01 100 106
CALIFORNIA INTERMEDIATE TAX FREE FUND (continued)
DESCRIPTION PAR (000) VALUE (000)
- ------------------------------------------------------------------------
Orange County Public Finance Authority,
Waste Management Revenue
(RB) (AMBAC) (AMT)
4.700%, 12/01/05 $ 500 $ 523
Orange County Transportation Authority,
Callable 02/15/02 @ 102 (RB)
5.700%, 02/15/03 900 975
Oxnard School District (GO) (MBIA)
5.000%, 08/01/05 600 647
Paradise Unified School District,
Measure M Project, Series A,
Callable 09/01/05 @ 102
(COP) (MLO) (AMBAC)
5.250%, 09/01/07 300 330
Pomona Unified School District,
Callable 08/01/11 @ 103
(GO) (MBIA)
6.150%, 08/01/15 500 600
Pomona Unified School District,
Series A (GO) (MBIA)
5.450%, 02/01/06 250 276
5.500%, 08/01/06 250 279
Rancho Mirage Joint Powers Finance
Authority, Eisenhower Medical Center,
Series A, Callable 07/01/07 @ 102
(COP) (MBIA)
5.125%, 07/01/08 500 543
Redding Joint Powers Finance
Authority, Waste Water Project,
Callable 12/01/02 @ 102 (RB) (FGIC)
5.600%, 12/01/03 100 109
Redondo Beach Redevelopment
Agency, Residential Mortgages,
Series A (RB) (FNMA)
5.150%, 06/01/03 110 113
Rio Linda School District,
Callable 08/01/08 @ 100
(GO) (FSA)
5.000%, 08/01/09 500 539
Roseville High School District,
Callable 08/01/00 @ 102 (GO)
5.750%, 08/01/02 100 106
Sacramento County Multifamily
Housing, Parcwood Apartments,
Mandatory Put @ 100 (RB) (CGLI)
4.800%, 03/01/06 (A) 1,000 1,026
Sacramento Housing Authority, Fairways I
Apartments (RB) (FNMA)
5.875%, 02/01/08 90 90
San Diego County Water Authority,
Callable 05/01/08 @ 101 (COP)
5.000%, 05/01/13 505 530
San Diego County Water Authority,
Series A (COP)
5.250%, 05/01/06 500 548
San Francisco Airport Commission,
Second Series
(RB) (AMT) (FGIC)
5.400%, 05/01/06 500 539
San Francisco Fire Department
Facility Project, Series C (GO) (FGIC)
7.000%, 06/15/03 300 343
14 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
CALIFORNIA INTERMEDIATE TAX FREE FUND (continued)
DESCRIPTION PAR (000) VALUE (000)
- ------------------------------------------------------------------------
San Francisco Library Facilities
Project, Series D,
Callable 06/15/00 @ 102 (GO)
5.700%, 06/15/01 $ 250 $ 264
San Francisco Library Facilities
Project, Series D,
Pre-refunded @ 102 (GO)
5.800%, 06/15/02 (B) 250 265
San Francisco Public Improvements,
Series B, Pre-refunded @ 100 (GO)
6.700%, 12/15/07 (B) 200 214
San Joaquin Hills Transportation
Corridor Agency, Capital Appreciation,
Zero Coupon Bond (RB) (MBIA)
0.000%, 01/15/05 705 548
San Jose Financing Authority, Convention
Center Project, Series C (RB) (MLO)
5.750%, 09/01/01 250 264
Santa Ana Community Redevelopment
Agency, Series A,
Pre-refunded @ 102 (GO)
6.500%, 12/15/14 (B) 860 911
South County Regional Waste
Water Authority (RB) (AMBAC)
5.600%, 08/01/02 100 107
South Pasadena Unified School District,
Capital Appreciation, Zero Coupon
Bond (GO) (FGIC)
0.000%, 11/01/12 740 388
Sulphur Springs Unified School District,
Series B (GO)
5.400%, 03/01/02 500 529
Tulare County Financing Project,
Series A (COP) (MLO) (MBIA)
5.600%, 11/15/02 100 108
Turlock Irrigation District, Series A,
Callable 07/01/02 @ 102 (RB) (MBIA)
6.000%, 01/01/04 100 110
University of California, Various
Capital Projects, Series B,
Callable 09/01/01 @ 102
(COP) (MLO) (MBIA)
5.350%, 09/01/02 300 319
Walnut Valley School District,
Series A (GO) (MBIA)
6.800%, 02/01/07 250 302
6.850%, 08/01/07 250 306
West Covina Civic Center Project
(COP) (MLO) (FSA)
5.250%, 09/01/07 250 275
West Covina Redevelopment Agency,
Community Facilities District (RB)
5.125%, 09/01/05 300 321
William S. Hart Joint School Financing
Authority, Callable 09/01/05 @ 102
(RB) (FSA)
6.100%, 09/01/06 200 231
--------
35,924
--------
CALIFORNIA INTERMEDIATE TAX FREE FUND (concluded)
DESCRIPTION PAR (000)/SHARES VALUE (000)
- ------------------------------------------------------------------------
PUERTO RICO - 1.6%
Commonwealth of Puerto Rico (GO) (MBIA)
6.250%, 07/01/08 $ 500 $ 589
--------
Total Municipal Bonds
(Cost $34,244) 36,513
--------
MONEY MARKET FUND - 1.1%
Provident California Tax Free Fund 400,547 401
--------
TOTAL MONEY MARKET FUND
(Cost $401) 401
--------
TOTAL INVESTMENTS--98.8%
(Cost $34,645) 36,914
--------
OTHER ASSETS AND LIABILITIES, NET - 1.2% 443
--------
NET ASSETS:
Portfolio Capital--Class Y
($.0001 par value--2 billion authorized)
based on 3,597,876 outstanding shares 34,902
Portfolio Capital--Class A
($.0001 par value--2 billion authorized)
based on 7,893 outstanding shares 79
Undistributed net investment income 4
Accumulated net realized gain on investments 103
Net unrealized appreciation of investments 2,269
--------
TOTAL NET ASSETS--100.0% $37,357
--------
Net asset value, offering price, and redemption
price per share--Class Y $ 10.36
--------
Net asset value and redemption price
per share--Class A $ 10.37
Maximum sales charge of 3.00% (1) 0.32
--------
Offering price per share--Class A $ 10.69
--------
(1) The offer price is calculated by dividing the net asset value by 1 minus the
maximum sales charge of 3.00%.
(A) Mandatory Put Security--the mandatory put date is shown as the maturity date
on the Statement of Net Assets.
(B) Pre-refunded Security--Pre-refunded issues are backed by U.S. Government
Obligations. These bonds mature at the call date indicated. The pre-refunded
date is shown as the maturity date on the Statement of Net Assets. See also
the notes to the financial statements.
AMBAC--American Municipal Bond Assurance Company
AMT--Alternative Minimum Tax
CGLI--Connecticut General Life Insurance
CMI--California Mortgage Insurance Program
COP--Certificate of Participation
FGIC--Financial Guaranty Insurance Corporation
FNMA--Federal National Mortgage Association
FSA--Financial Security Assurance
GO--General Obligation
MBIA--Municipal Bond Insurance Association
MLO--Municipal Lease Obligation
RB--Revenue Bond
The accompanying notes are an integral part of the financial statements.
15 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
NET ASSETS SEPTEMBER 30, 1998
COLORADO INTERMEDIATE TAX FREE FUND
DESCRIPTION PAR (000) VALUE (000)
- ------------------------------------------------------------------------
TAX FREE MUNICIPAL FUNDS
MUNICIPAL BONDS - 98.0%
COLORADO - 98.0%
Adams & Arapahoe Counties Joint
School District #28-J,
Callable 12/01/06 @ 102
(GO) (FGIC)
5.750%, 12/01/07 $ 1,000 $ 1,130
Adams County School District #12,
Callable 12/15/03 @ 100
(GO) (FGIC)
6.200%, 12/15/08 455 502
Adams County School District #50,
Callable 12/01/06 @ 100 (GO)
5.250%, 12/01/10 750 799
Arapahoe County, Cherry Creek
School District #5,
Callable 12/15/00 @ 101 (GO)
6.800%, 12/15/01 1,000 1,077
Arapahoe County, Cherry Creek
School District #5,
Callable 12/15/03 @ 100
(GO) (STAID)
5.250%, 12/15/04 500 534
Arapahoe County, Littleton
School District #6,
Callable 12/01/06 @ 102
(GO) (STAID)
5.125%, 12/01/09 1,000 1,082
5.250%, 12/01/10 1,000 1,084
Aurora, Callable 12/01/04 @ 101
(COP) (MLO)
6.000%, 12/01/06 1,000 1,074
Aurora Community College Project
(RB) (MLO) (CLE)
5.750%, 10/15/04 500 550
Boulder County Sales & Use Tax
(RB) (FGIC)
5.750%, 12/15/05 1,000 1,113
Boulder, Larimer, & Weld Counties,
Vrain Valley School District,
Callable 12/15/04 @ 100 (GO) (MBIA)
5.800%, 12/15/07 500 540
Boulder Urban Renewal Tax Allocation
(RB) (MBIA)
5.700%, 03/01/00 1,250 1,286
Boulder Valley School District #RE-2,
Callable 10/15/01 @ 100 (GO)
5.900%, 10/15/02 500 531
5.900%, 10/15/03 500 530
Boulder Valley School District #RE-2
Callable 12/01/04 @ 101
(GO) (STAID)
5.950%, 12/01/07 1,000 1,120
Brighton, Callable 12/01/01 @ 101
(GO) (MBIA)
6.350%, 12/01/05 95 103
Colorado Springs, Callable
09/01/03 @ 100 (GO)
5.000%, 09/01/06 500 523
COLORADO INTERMEDIATE TAX FREE FUND (continued)
DESCRIPTION PAR (000) VALUE (000)
- ------------------------------------------------------------------------
Colorado Springs Memorial Hospital,
Callable 12/15/05 @ 102
(RB) (MBIA)
6.000%, 12/15/15 $ 500 $ 554
Colorado Springs Utilities,
Callable 11/15/01 @ 102 (RB)
6.625%, 11/15/04 1,000 1,099
6.500%, 11/15/15 1,495 1,634
Colorado State Board of Agriculture,
Fort Lewis College Project
(RB) (FGIC)
6.000%, 10/01/02 250 271
Colorado State Board of Agriculture,
Fort Lewis College Project,
Series A (RB) (AMBAC)
4.750%, 10/01/08 845 885
Colorado State Board of Agriculture,
Fort Lewis College Project, Series A,
Callable 10/01/08 @ 100
(RB) (AMBAC)
4.750%, 10/01/09 905 939
Colorado State Board of Agriculture,
Fort Lewis College Project,
Series B (RB) (AMBAC)
4.750%, 10/01/08 450 471
Colorado State Board of Agriculture,
Fort Lewis College Project, Series B,
Callable 10/01/08 @ 100
(RB) (AMBAC)
4.750%, 10/01/09 450 467
Colorado State Health Facilities Authority,
Callable 01/01/18 @ 101 (RB)
5.375%, 01/01/16 1,000 1,012
Colorado State Health Facilities Authority,
Catholic Health Initiatives Project,
Series A (RB)
5.500%, 12/01/06 1,000 1,097
Colorado State Health Facilities Authority,
Retirement Facilities Project,
Zero Coupon Bond (RB)
0.000%, 07/15/20 5,000 1,648
Colorado State Health Facilities Authority,
Sisters of Charity (RB) (MBIA)
5.500%, 12/01/07 1,000 1,096
Colorado State Housing Finance Authority,
Multifamily Housing,
Series A (RB) (FHA)
5.125%, 10/01/03 500 520
Colorado State Housing Finance Authority,
Single Family Mortgages,
Series B-1 (RB) (AMT)
5.875%, 06/01/11 675 717
Colorado State Water Resource & Power
Development Authority (RB) (AMBAC)
5.500%, 09/01/04 1,000 1,086
Colorado State Water Resource & Power
Development Authority,
Callable 09/01/02 @ 101 (RB) (FSA)
5.900%, 09/01/03 250 271
16 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
COLORADO INTERMEDIATE TAX FREE FUND (continued)
DESCRIPTION PAR (000) VALUE (000)
- ------------------------------------------------------------------------
Colorado State Water Resource & Power
Development Authority,
Callable 09/01/08 @ 101 (RB)
5.250%, 09/01/15 $ 1,000 $ 1,057
Colorado State Water Resource & Power
Development Authority,
Clean Water Project,
Callable 09/01/02 @ 102 (RB)
5.800%, 09/01/06 1,000 1,084
Denver, Helen G. Bonfils Foundation,
Callable 12/01/07 @ 100 (RB)
5.125%, 12/01/17 1,000 1,014
Denver Water,
Callable 09/01/01 @ 100 (RB)
5.250%, 09/01/07 500 517
Douglas & Elbert Counties,
School District #1,
Callable 12/15/04 @ 101
(GO) (MBIA) (STAID)
6.400%, 12/15/11 1,000 1,147
E-470 Public Highway Authority,
Zero Coupon Bond (RB) (MBIA)
0.000%, 09/01/22 6,900 2,169
Eagle, Garfield, & Routt Counties,
School District #50-J,
Callable 12/01/04 @ 102
(GO) (FGIC) (STAID)
6.125%, 12/01/09 1,290 1,447
El Paso County School District #2 (GO)
7.050%, 12/01/04 1,000 1,169
El Paso County School District #20,
Series A (GO)
6.100%, 12/15/05 500 566
Fort Collins,
Callable 12/01/02 @ 101 (GO)
6.400%, 12/01/09 575 635
Garfield, Pitkin, & Eagle Counties,
School District #1 (GO) (MBIA)
6.000%, 12/15/04 1,000 1,117
Jefferson County Industrial
Development Authority (RB)
6.625%, 09/01/01 250 266
Jefferson County Metropolitan Y.M.C.A.,
Callable 08/01/04 @ 100 (RB)
7.500%, 08/01/08 1,000 1,091
Jefferson County School District #R-1,
Callable 12/15/02 @ 101
(GO) (AMBAC) (STAID)
5.900%, 12/15/04 1,045 1,141
La Plata County School District #9R,
Durango, Callable 11/01/02 @ 101
(GO) (FGIC)
6.200%, 11/01/05 165 180
La Plata County School District #9R,
Durango, Pre-refunded @ 101 (GO)
6.200%, 11/01/02 (A) 835 920
Larimer County School District #R-1 (GO)
5.400%, 12/15/04 750 809
Larimer County School District #R-1
(GO) (STAID)
5.500%, 12/15/07 1,000 1,100
COLORADO INTERMEDIATE TAX FREE FUND
(continued)
DESCRIPTION PAR (000) VALUE (000)
- ------------------------------------------------------------------------
Larimer County School District #R-1,
Callable 12/15/02 @ 101
(GO) (MBIA)
6.150%, 12/15/16 $ 1,000 $ 1,102
Larimer, Weld, & Boulder Counties,
School District #R-2 Thompson,
Callable 12/15/04 @ 100 (GO)
5.900%, 12/15/06 1,000 1,102
Metex Metropolitan District,
Series A (GO) (MBIA)
5.000%, 12/01/03 500 527
Moffat County Pollution Control
(RB) (AMBAC)
5.500%, 11/01/05 1,000 1,094
Mountain Village Metropolitan District,
Callable 12/01/07 @ 101
(GO) (MBIA)
5.200%, 12/01/17 1,000 1,041
Platte River Power Authority,
Series BB (RB)
5.500%, 06/01/02 500 529
Pueblo County, Single Family Mortgages,
Callable 11/01/04 @ 102
(RB) (FNMA/GNMA)
6.400%, 11/01/13 570 597
Pueblo Urban Renewal Authority,
Callable 12/01/03 @ 101
(RB) (AMBAC)
5.800%, 12/01/09 840 917
Regional Transit District (RB)
5.750%, 11/01/01 1,500 1,591
South Suburban Park & Recreation
District, Zero Coupon Bond
(GO) (MBIA)
0.000%, 12/15/01 1,000 888
Stonegate Village Metropolitan District,
Callable 12/01/02 @ 100 (GO)
6.300%, 12/01/04 500 549
Summit County School District #R-1,
Pre-refunded @ 100 (GO) (FGIC)
6.450%, 12/01/04 (A) 1,250 1,427
Thornton (GO) (FGIC)
5.600%, 12/01/02 1,000 1,071
Thornton, Callable 12/01/02 @ 101
(GO) (FGIC)
5.650%, 12/01/03 1,000 1,080
University of Northern Colorado,
Auxiliary Facility System,
Callable 06/01/07 @ 100
(RB) (MBIA)
5.600%, 06/01/24 1,000 1,069
Weld County School District #6,
Callable 12/01/07 @ 101 (GO)
5.000%, 12/01/08 1,000 1,073
Westminster Sales & Use Tax,
Callable 12/01/07 @ 101
(RB) (FGIC)
5.250%, 12/01/11 500 540
Westminster Sales & Use Tax,
Series B (RB) (FGIC)
6.250%, 12/01/05 500 572
17 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
NET ASSETS SEPTEMBER 30, 1998
COLORADO INTERMEDIATE TAX FREE FUND (concluded)
DESCRIPTION PAR (000)/SHARES VALUE (000)
- ------------------------------------------------------------------------
Westminster Water & Wastewater
Utility Enterprise,
Callable 10/01/04 @ 100
(RB) (AMBAC)
5.800%, 12/01/05 $ 1,000 $ 1,101
---------
62,644
---------
TOTAL MUNICIPAL BONDS
(Cost $58,385) 62,644
---------
RELATED PARTY MONEY MARKET FUND - 0.6%
First American Tax Free
Obligations Fund (B) 405,859 406
---------
TOTAL RELATED PARTY MONEY MARKET FUND
(Cost $406) 406
---------
TOTAL INVESTMENTS - 98.6%
(Cost $58,791) 63,050
---------
OTHER ASSETS AND LIABILITIES, NET - 1.4% 882
---------
NET ASSETS:
Portfolio Capital--Class Y
($.0001 par value--2 billion authorized)
based on 5,482,014 outstanding shares 55,483
Portfolio Capital--Class A
($.0001 par value--2 billion authorized)
based on 395,060 outstanding shares 4,108
Undistributed net investment income 4
Accumulated net realized gain on investments 78
Net unrealized appreciation of investments 4,259
---------
TOTAL NET ASSETS--100.0% $63,932
---------
Net asset value, offering price, and
redemption price per share--Class Y $ 10.88
---------
Net asset value and redemption
price per share--Class A $ 10.89
Maximum sales charge of 3.00% (1) 0.34
---------
Offering price per share--Class A $ 11.23
---------
(1) The offer price is calculated by dividing the net asset value by 1 minus the
maximum sales charge of 3.00%.
(A) Pre-refunded Security--Pre-refunded issues are backed by U.S. Government
Obligations. These bonds mature at the call date indicated. The pre-refunded
date is shown as the maturity date on the Statement of Net Assets. See also
the notes to the financial statements.
(B) This money market fund is advised by U.S. Bank National Association who also
serves as advisor for this fund. See also the notes to the financial
statements.
AMBAC--American Municipal Bond Assurance Company
AMT--Alternative Minimum Tax
CLE--Connie Lee
COP--Certificate of Participation
FGIC--Financial Guaranty Insurance Corporation
FHA--Federal Housing Authority
FNMA--Federal National Mortgage Association
FSA--Financial Security Assurance
GNMA--Government National Mortgage Association
GO--General Obligation
MBIA--Municipal Bond Insurance Association
MLO--Municipal Lease Obligation
RB--Revenue Bond
STAID--State Aid Withholding
The accompanying notes are an integral part of the financial statements.
INTERMEDIATE TAX FREE FUND
DESCRIPTION PAR (000) VALUE (000)
- ------------------------------------------------------------------------
MUNICIPAL BONDS - 98.7%
ALABAMA - 1.0%
Alabama State Docks Department
(RB) (MBIA)
5.250%, 10/01/10 $ 3,000 $ 3,265
Jefferson County Sewer (RB) (FGIC)
5.375%, 02/01/06 1,500 1,630
---------
4,895
---------
ALASKA - 3.0%
Alaska Industrial Development &
Export Authority,
Callable 04/01/03 @ 102 (RB)
5.950%, 04/01/06 955 1,033
Alaska State Housing Finance
Corporation (RB)
5.900%, 12/01/04 700 742
Alaska State Housing Finance
Corporation (RB) (MBIA)
4.950%, 12/01/02 935 962
5.350%, 06/01/06 940 985
Alaska State Housing Finance Corporation,
Callable 06/01/04 @ 102 (RB)
5.400%, 12/01/23 3,000 3,047
Alaska State Housing Finance Corporation,
Callable 12/01/05 @ 102 (RB) (MBIA)
5.400%, 12/01/08 2,000 2,121
Anchorage (GO) (FGIC)
6.000%, 10/01/06 2,250 2,549
Anchorage Electric Utility (RB) (MBIA)
5.500%, 12/01/02 700 745
Anchorage Electric Utility,
Callable 06/01/99 @ 102 (RB) (MBIA)
7.125%, 06/01/06 1,000 1,043
Anchorage Port & Terminal Facilities
(RB) (MBIA)
6.000%, 02/01/01 990 1,040
---------
14,267
---------
ARIZONA - 5.9%
Arizona State Educational Loan Marketing
(RB) (MBIA)
6.850%, 09/01/99 500 515
Arizona State Transportation Board Highway,
Pre-refunded @ 101 (RB)
6.900%, 07/01/02 (A) 300 320
Maricopa County School District #11, Peoria,
Series A, Callable 07/01/07 @ 101
(GO) (AMBAC)
5.000%, 07/01/10 3,000 3,143
Maricopa County School District #4, Mesa
(GO) (FSA)
5.250%, 07/01/04 4,000 4,278
Maricopa County School District #41, Gilbert,
Pre-refunded @ 101 (GO) (FGIC)
6.800%, 07/01/01 (A) 1,000 1,035
7.000%, 07/01/05 (A) 1,000 1,037
Maricopa County School District #69,
Pleasant Valley (GO) (MBIA)
5.300%, 07/01/11 1,000 1,093
18 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
INTERMEDIATE TAX FREE FUND (continued)
DESCRIPTION PAR (000) VALUE (000)
- ------------------------------------------------------------------------
Maricopa County School District #80,
Chandler Project, Series D
(GO) (AMBAC)
4.600%, 07/01/05 $ 4,000 $ 4,155
Maricopa County School District #97,
Deer Valley Project, Series D (GO) (FGIC)
4.900%, 07/01/09 3,000 3,139
Maricopa County School District #97,
Deer Valley Project,
Callable 07/01/07 @ 100 (GO) (FGIC)
4.900%, 07/01/10 4,500 4,675
Phoenix, Callable 07/01/07 @ 102 (GO)
5.000%, 07/01/09 1,300 1,397
Pima County (GO)
6.000%, 07/01/02 800 863
Tempe Unified School District #213,
Series C (GO) (MBIA)
4.000%, 07/01/12 2,060 1,965
---------
27,615
---------
CALIFORNIA - 5.1%
Azusa Redevelopment Agency, Single Family
Mortgages, Escrowed to Maturity,
Series A (RB) (FNMA)
6.400%, 10/01/02 1,000 1,107
Bakersfield Convention Center Expansion
Project, Callable 04/01/07 @ 101
(COP) (MLO) (MBIA)
5.400%, 04/01/09 1,000 1,097
California Educational Facilities
Authority, Stanford,
Callable 12/01/07 @ 101 (RB)
5.350%, 06/01/27 3,000 3,122
California Health Facilities Authority,
Callable 10/01/98 @ 102 (RB) (CMI)
7.250%, 10/01/99 500 512
California State (GO) (AMBAC)
8.000%, 05/01/03 4,000 4,727
Mountain View, Los Altos School District,
Series B, Callable 05/01/07 @ 102 (GO)
6.500%, 05/01/17 3,000 3,523
Orange County Transportation Authority,
Callable 02/15/02 @ 102 (RB)
5.700%, 02/15/03 200 217
5.750%, 02/15/04 1,000 1,083
Rio Linda Unified School District,
Callable 08/01/08 @ 100 (GO) (FSA)
5.200%, 08/01/11 1,000 1,079
San Joaquin Hills Transportation Corridor,
Zero Coupon Bond (RB) (MBIA)
0.000%, 01/15/26 12,000 3,134
San Jose Airport Revenue,
Callable 03/01/03 @ 102 (RB) (MBIA)
6.100%, 03/01/06 1,000 1,109
Tri-City Hospital District, Series B
(RB) (MBIA)
5.750%, 02/15/03 2,870 3,105
---------
23,815
---------
COLORADO - 4.0%
Arapahoe County, Greenwood
Metropolitan District,
Callable 12/01/02 @ 100 (RB) (FSA)
7.300%, 12/01/06 2,000 2,260
INTERMEDIATE TAX FREE FUND (continued)
DESCRIPTION PAR (000) VALUE (000)
- ------------------------------------------------------------------------
Arapahoe County, Greenwood
Metropolitan District,
Callable 12/01/02 @ 100
(RB) (MBIA)
7.250%, 12/01/06 $ 1,500 $ 1,692
Boulder County Open Space Capital,
Callable 12/15/07 @ 101 (RB)
5.250%, 12/15/09 3,000 3,252
Boulder, Larimer, & Weld Counties,
Vrain Valley School District #R-1,
Callable 12/15/04 @ 100 (GO) (MBIA)
5.600%, 12/15/05 1,000 1,073
Colorado State Health Facilities Authority,
Retirement Facilities,
Zero Coupon Bond (RB)
0.000%, 07/15/20 10,000 3,295
Colorado State Housing
Finance Authority, Series A-2,
Callable 05/01/06 @ 105 (RB)
7.150%, 11/01/14 1,495 1,703
Colorado State Housing Finance Authority,
Single Family Mortgages,
Callable 08/01/99 @ 102 (RB) (FHA/VA)
7.400%, 08/01/09 405 419
E-470 Public Highway Authority,
Zero Coupon Bond (MBIA) (RB)
0.000%, 09/01/22 10,000 3,144
Greeley Sales & Use Tax,
Callable 02/01/99 @ 100 (RB) (MBIA)
6.000%, 08/01/99 400 403
Jefferson County, Callable 12/01/04 @ 100
(COP) (MLO) (MBIA)
6.650%, 12/01/08 500 560
University of Colorado,
Callable 11/20/98 @ 100 (RB)
7.625%, 06/01/06 25 25
Westminster Water & Waste
Water Utility Improvements,
Callable 12/01/04 @ 100 (RB) (AMBAC)
6.000%, 12/01/09 1,000 1,108
---------
18,934
---------
CONNECTICUT - 0.9%
Connecticut State Special Tax Obligation,
Transportation Revenue, Series A,
Callable 09/01/03 @ 102 (GO)
5.125%, 09/01/05 4,000 4,287
---------
DELAWARE - 1.1%
Delaware State (GO)
6.250%, 04/01/02 1,000 1,078
Delaware State,
Callable 04/01/01 @ 102 (GO)
6.350%, 04/01/03 1,000 1,078
Delaware Transportation Authority (RB)
7.500%, 07/01/02 1,000 1,018
New Castle County,
Callable 10/01/03 @ 102 (GO)
5.300%, 10/01/05 2,000 2,157
---------
5,331
---------
19 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
NET ASSETS SEPTEMBER 30, 1998
INTERMEDIATE TAX FREE FUND (continued)
DESCRIPTION PAR (000) VALUE (000)
- ------------------------------------------------------------------------
DISTRICT OF COLUMBIA - 0.7%
District of Columbia, Georgetown
University Project, Series A,
Callable 04/01/99 @ 102 (RB)
7.375%, 04/01/08 $ 2,525 $ 2,620
District of Columbia, Series A,
Callable 06/01/00 @ 102 (GO) (MBIA)
6.300%, 06/01/01 500 529
---------
3,149
---------
FLORIDA - 0.5%
Leon County, Refunding Bonds
(RB) (AMBAC)
5.250%, 10/01/07 (B) 2,005 2,128
---------
HAWAII - 1.2%
Hawaii County Public Improvements,
Pre-refunded @ 101 (RB) (FGIC)
7.100%, 06/01/02 (A) 1,000 1,065
Hawaii State (GO) (FGIC)
6.000%, 03/01/05 3,000 3,337
Hawaii State, Series B (GO)
5.750%, 03/01/00 1,000 1,028
---------
5,430
---------
IDAHO - 1.7%
Ada & Canyon Counties Joint
School District #2,
Callable 07/30/07 @ 100 (GO)
5.500%, 07/30/10 1,000 1,088
5.500%, 07/30/11 1,000 1,085
Boise State University Refunding &
Improvements,
Callable 04/01/08 @ 101 (RB) (FSA)
5.000%, 04/01/12 1,225 1,273
Idaho State Health Facilities Authority,
Health Systems (MBIA) (RB)
5.000%, 12/01/09 1,555 1,639
Idaho State Student Loan Revenue,
Series C (RB)
5.000%, 04/01/01 1,000 1,011
5.000%, 10/01/01 2,000 2,026
---------
8,122
---------
ILLINOIS - 6.4%
Chicago, Single Family Mortgages, Series A,
Callable 03/01/06 @ 103 (RB) (AMT)
(GNMA/FNMA/FHLMC)
5.250%, 03/01/13 830 862
Chicago Water Revenue, Zero Coupon Bond
(RB) (FGIC)
0.000%, 11/01/08 5,150 3,343
0.000%, 11/01/09 6,450 3,968
0.000%, 11/01/10 3,980 2,316
Cook County (RB) (MBIA)
7.250%, 11/01/07 2,000 2,466
De Kalb, Single Family Mortgages,
Series A (RB) (AMT) (GNMA)
7.000%, 12/01/01 450 471
Illinois State (GO)
5.000%, 06/01/03 1,000 1,048
INTERMEDIATE TAX FREE FUND (continued)
DESCRIPTION PAR (000) VALUE (000)
- ------------------------------------------------------------------------
Illinois State Educational Facilities
Authority (RB)
4.700%, 03/01/30 $ 4,500 $ 4,634
Illinois State Sales Tax, Series S (RB)
5.000%, 06/15/09 2,500 2,660
5.100%, 06/15/10 2,000 2,142
Melrose Park Water Revenue,
Callable 07/01/08 @ 100 (RB) (MBIA)
4.700%, 07/01/09 1,725 1,761
Metropolitan Pier & Exposition Authority,
Series A, Zero Coupon Bond (RB) (MBIA)
0.000%, 12/15/22 10,000 3,056
Winnebago County School Improvements,
Zero Coupon Bond (GO) (FSA)
0.000%, 01/01/09 1,990 1,270
---------
29,997
---------
INDIANA - 0.3%
Indiana State Housing Finance Authority,
Callable 07/01/05 @ 102 (RB)
6.150%, 07/01/17 1,385 1,478
---------
IOWA - 0.2%
Des Moines, Series C,
Callable 06/01/99 @ 100 (GO)
6.900%, 06/01/00 500 512
Iowa State Finance Authority,
Single Family Mortgages,
Series F (RB) (AMBAC)
5.350%, 07/01/99 325 329
---------
841
---------
KANSAS - 1.1%
Kansas State Development Finance
Authority (RB) (MBIA)
5.000%, 11/15/01 2,270 2,361
Sedgwick & Shawnee Counties,
Single Family Mortgages,
Series A-2 (RB) (GNMA)
5.500%, 06/01/29 2,500 2,854
---------
5,215
---------
LOUISIANA - 0.6%
Jefferson County (GO) (FGIC)
6.150%, 09/01/05 2,500 2,754
---------
MAINE - 0.2%
Maine State Housing Authority, Series A,
Callable 02/01/04 @ 102 (RB)
5.650%, 11/15/20 1,000 1,025
---------
MARYLAND - 0.9%
Maryland State & Local Facilities
Project, Series Z,
Callable 06/01/06 @ 100 (GO)
5.400%, 06/01/07 1,000 1,081
Montgomery County,
Callable 04/01/06 @ 102 (GO)
5.125%, 04/01/08 3,000 3,255
---------
4,336
---------
MASSACHUSETTS - 2.7%
Massachusetts Bay Transportation
Authority (RB)
6.250%, 03/01/12 1,875 2,194
20 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
INTERMEDIATE TAX FREE FUND (continued)
DESCRIPTION PAR (000) VALUE (000)
- ------------------------------------------------------------------------
Massachusetts State Grant
Anticipation Note (RB)
5.500%, 12/15/13 $ 3,000 $ 3,321
Massachusetts State Health & Educational
Facilities Authority,
Pre-refunded @ 102 (RB)
6.750%, 09/01/02 (A) 1,250 1,406
Massachusetts State Health & Educational
Facilities Authority, Series A
(RB) (MBIA)
5.100%, 07/01/10 3,000 3,160
Massachusetts State Housing
Finance Agency (RB)
5.350%, 12/01/02 500 520
6.300%, 10/01/13 1,000 1,065
Massachusetts State Water
Pollution Control (RB)
5.000%, 02/01/02 1,000 1,039
---------
12,705
---------
MICHIGAN - 3.6%
Dexter Community Schools Improvements,
Callable 05/01/08 @ 100 (GO) (FGIC)
4.700%, 05/01/09 2,500 2,579
Jackson County Hospital Finance Authority,
Series A (RB) (AMBAC)
5.000%, 06/01/09 1,000 1,049
Michigan State Building Authority,
Callable 10/01/06 @ 102 (RB) (AMBAC)
5.050%, 10/01/09 585 606
Michigan State Housing
Development Authority,
Callable 07/15/04 @ 102 (RB) (FNMA)
5.125%, 07/15/08 1,980 2,032
Oakland University,
Callable 05/15/07 @ 100
(RB) (MBIA)
5.600%, 05/15/10 1,000 1,092
South Lyon Community Schools,
Callable 05/01/08 @ 100 (GO) (FGIC)
4.750%, 05/01/23 2,000 1,954
Troy School District (GO)
4.650%, 05/01/06 2,000 2,084
Walled Lake Consolidated School District,
School Improvements Project,
Callable 05/01/07 @ 100 (GO) (MBIA)
5.300%, 05/01/08 2,000 2,159
Wayne Charter County Airport Revenue,
Callable 12/01/08 @ 101 (RB) (MBIA)
5.250%, 12/01/09 3,000 3,223
---------
16,778
---------
MINNESOTA - 3.3%
Bloomington, Mall of America
Project, Series A,
Callable 02/01/04 @ 100 (RB) (FSA)
5.450%, 02/01/09 1,000 1,029
Dakota County Housing & Redevelopment
Authority (RB) (MLO)
4.650%, 02/01/00 1,000 1,014
Lakeville Independent School
District #194, Series A,
Callable 02/01/08 @ 100 (GO)
5.125%, 02/01/22 5,000 5,050
INTERMEDIATE TAX FREE FUND (continued)
DESCRIPTION PAR (000) VALUE (000)
- ------------------------------------------------------------------------
Minneapolis & St Paul Housing &
Redevelopment Authority,
Callable 08/15/00 @ 102 (RB) (MBIA)
7.400%, 08/15/05 $ 600 $ 650
Minneapolis, Childrens Medical
Center, Series C,
Pre-refunded @ 102 (RB)
7.000%, 12/01/20 (A) 1,000 1,102
Minneapolis, Hennepin Avenue
Project, Series C (GO)
6.200%, 03/01/02 800 863
Northern Minnesota Municipal Power
Agency, Series A,
Callable 01/01/03 @ 102
(RB) (AMBAC)
5.700%, 01/01/05 2,500 2,725
St. Paul Housing &
Redevelopment Authority,
Callable 08/01/06 @ 102.5
(RB) (AMBAC)
6.450%, 02/01/08 1,240 1,438
6.450%, 08/01/08 1,275 1,478
---------
15,349
---------
MISSISSIPPI - 0.5%
Mississippi State Capital Improvements,
Series B (GO)
6.000%, 08/01/01 2,000 2,125
---------
MISSOURI - 0.7%
Kansas City School District
(RB) (MLO) (FGIC)
6.300%, 02/01/00 1,000 1,035
Kansas City School District,
Callable 02/01/01 @ 102
(RB) (MLO) (FGIC)
6.400%, 02/01/02 2,000 2,149
---------
3,184
---------
NEBRASKA - 7.8%
Buffalo County Hospital Authority #1,
Escrowed to Maturity (RB)
6.375%, 11/01/03 140 149
Douglas County Hospital Authority #1
(RB) (AMBAC)
4.600%, 09/01/04 1,255 1,299
4.800%, 09/01/08 1,500 1,570
4.900%, 09/01/09 1,500 1,576
Douglas County Hospital Authority #2,
Pre-refunded @ 102 (RB)
7.250%, 11/01/21 (A) 5,000 5,597
Douglas County School District #17 Millard,
Series A, Callable 05/15/99 @ 101
(GO) (MBIA)
5.050%, 05/15/01 750 764
Douglas County School District #17 Millard,
Series B, Callable 05/15/99 @ 101
(GO) (MBIA)
5.000%, 05/15/00 500 509
Grand Island Electrical Systems Project,
Callable 09/01/99 @ 101 (RB)
6.050%, 09/01/01 1,000 1,034
Lincoln Electric Systems, Series A (RB)
5.000%, 09/01/00 500 512
21 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
NET ASSETS SEPTEMBER 30, 1998
INTERMEDIATE TAX FREE FUND (continued)
DESCRIPTION PAR (000) VALUE (000)
- ------------------------------------------------------------------------
Lincoln Waterworks Revenue (RB)
4.900%, 08/15/03 $ 1,000 $ 1,049
Municipal Energy Agency of Nebraska,
Series A (RB) (AMBAC)
5.450%, 04/01/02 750 792
Municipal Energy Agency of Nebraska,
Series A, Callable 04/01/02 @ 102
(RB) (AMBAC)
5.600%, 04/01/03 750 806
Nebraska Educational Finance Authority,
Concordia University Project,
Callable 12/15/08 @ 100 (RB)
5.250%, 12/15/15 2,270 2,282
Nebraska Educational Finance Authority,
Creighton University Project,
Callable 01/01/06 @ 101
(RB) (AMBAC)
5.600%, 01/01/07 2,500 2,755
Nebraska Investment Finance Authority,
Catholic Health Initiatives, Series A,
Callable 12/01/07 @ 101 (RB)
5.000%, 12/01/09 3,000 3,152
Nebraska Investment Finance Authority,
Nebraska Methodist (RB) (MBIA)
6.750%, 03/01/01 2,000 2,143
Nebraska Public Power District,
Callable 01/01/03 @ 102 (RB) (MBIA)
4.900%, 01/01/04 1,500 1,571
Nebraska Public Power District,
Nuclear Facility Project,
Callable 01/01/03 @ 102 (RB) (MBIA)
5.200%, 07/01/00 1,000 1,026
Nebraska Public Power District,
Series A (RB)
5.500%, 01/01/01 500 520
Nebraska Public Power District,
Series A (RB) (MBIA)
6.000%, 01/01/04 1,385 1,524
Omaha, Callable 09/01/01 @ 102 (GO)
5.900%, 09/01/02 500 539
Omaha, Northwest Library Facilities,
Callable 08/15/07 @ 102 (RB)
5.250%, 08/15/12 2,475 2,637
Omaha Public Power District,
Series B (RB)
5.000%, 02/01/03 1,000 1,047
Omaha Sewer Systems (RB)
5.200%, 01/15/02 1,000 1,044
Ravenna Industrial Development,
Cargill Project (RB)
5.000%, 09/01/00 810 829
---------
36,726
---------
NEVADA - 0.5%
Clark County School District,
Building & Renovation, Series B,
Callable 06/15/07 @ 101 (GO) (FGIC)
5.750%, 06/15/08 1,000 1,123
Washoe County School District,
Callable 08/01/02 @ 101 (GO) (MBIA)
5.700%, 08/01/03 1,000 1,073
---------
2,196
---------
INTERMEDIATE TAX FREE FUND (continued)
DESCRIPTION PAR (000) VALUE (000)
- ------------------------------------------------------------------------
NEW JERSEY - 1.8%
New Jersey State (GO)
5.000%, 07/15/01 $ 3,000 $ 3,108
5.900%, 08/01/02 1,000 1,077
New Jersey State Housing &
Mortgage Finance Agency,
Callable 10/01/05 @ 100 (RB) (MBIA)
3.750%, 10/01/09 40 40
New Jersey State Transportation
Trust Fund Authority,
Series B (RB) (MBIA)
5.000%, 06/15/04 2,830 2,995
New Jersey State Turnpike Authority,
Series A, Callable 01/01/01 @ 102
(RB) (AMBAC)
6.750%, 01/01/08 1,000 1,078
---------
8,298
---------
NEW MEXICO - 0.2%
Farmington Utility Systems,
Escrowed to Maturity (RB)
10.000%, 01/01/02 450 499
New Mexico Mortgage Finance Authority
(RB) (GNMA/FNMA)
5.650%, 07/01/08 265 270
---------
769
---------
NEW YORK - 3.1%
Hempstead Town Industrial
Development Agency,
Callable 12/01/06 @ 102 (RB)
5.000%, 12/01/08 2,000 2,118
Middletown School District (GO) (FGIC)
5.000%, 11/01/05 3,000 3,201
Nassau County General Improvements,
Series V (GO) (AMBAC)
5.150%, 03/01/04 2,000 2,121
New York City Municipal Assistance
Corporation, Series I (RB)
6.250%, 07/01/05 1,500 1,704
New York City Transitional Finance Authority,
Callable 05/01/08 @ 101 (RB)
4.750%, 05/01/11 1,605 1,630
New York State Dormitory Authority,
Columbia University Project,
Callable 07/01/08 @ 101 (RB)
5.500%, 07/01/09 1,000 1,116
New York State Dormitory Authority,
Manhattan College Project,
Callable 07/01/02 @ 102 (RB)
6.100%, 07/01/04 1,000 1,089
New York State Environmental Facilities
Corporation, Pollution Control Revenue,
Callable 11/15/04 @ 102 (RB)
6.400%, 05/15/06 1,250 1,427
---------
14,406
---------
NORTH DAKOTA - 0.7%
Grand Forks United Hospital Obligated
Group (RB) (MBIA)
6.000%, 12/01/00 1,000 1,047
22 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
INTERMEDIATE TAX FREE FUND (continued)
DESCRIPTION PAR (000) VALUE (000)
- ------------------------------------------------------------------------
North Dakota State Building Authority,
Pre-refunded @ 100
(RB) (MLO) (AMBAC)
7.400%, 06/01/10 (A) $ 1,000 $ 1,061
North Dakota State Industrial Commission,
Lignite Program, Series A (RB)
5.750%, 11/15/05 1,000 1,090
North Dakota State Student Loans (RB)
6.100%, 07/01/01 25 27
North Dakota State Student Loans,
Callable 07/01/99 @ 103
(RB) (AMBAC)
6.900%, 07/01/01 5 5
---------
3,230
---------
NORTH CAROLINA - 0.3%
North Carolina Medical Care Commission,
Duke Unversity Health System,
Series B (RB)
4.500%, 06/01/07 (B) 1,350 1,384
---------
OHIO - 3.5%
Butler County Transportation Improvement
District, Series A (RB) (FSA)
5.500%, 04/01/08 3,000 3,328
Franklin County Health Care,
Friendship Village,
Callable 08/15/08 @ 102 (RB)
5.250%, 08/15/18 2,000 1,959
Lorain County Hospital Revenue,
Callable 09/01/07 @ 102 (RB) (MBIA)
5.375%, 09/01/09 1,000 1,100
Mahoning County Hospital Facilities
Authority, Series A (RB) (MBIA)
4.800%, 11/15/09 2,145 2,213
Ohio State Building Authority, Adult
Correctional Facilities Project
(RB) (MLO) (MBIA)
5.500%, 10/01/04 1,000 1,087
Ohio State Building Authority, Juvenile
Correctional Facilities Project
(RB) (MLO) (AMBAC)
5.900%, 10/01/03 1,000 1,095
Ohio State Infrastructure
Improvements (RB)
5.500%, 08/01/07 1,400 1,559
Ohio State Water Development Authority
(RB) (AMBAC)
5.250%, 06/01/06 2,000 2,165
Ohio State Water Development Authority
(RB) (MBIA)
6.000%, 12/01/00 2,000 2,099
---------
16,605
---------
OKLAHOMA - 1.2%
Oklahoma County Housing Finance
Authority, Zero Coupon Bond,
Pre-refunded @ 56.915 (RB)
0.000%, 03/01/06 (A) 3,690 1,535
Oklahoma Housing Finance Agency
(RB) (FNMA)
5.500%, 11/01/25 3,000 3,176
INTERMEDIATE TAX FREE FUND (continued)
DESCRIPTION PAR (000) VALUE (000)
- ------------------------------------------------------------------------
Tulsa Metropolitan Utility Authority,
Callable 09/01/05 @ 102 (RB)
5.600%, 09/01/06 $ 1,000 $ 1,106
---------
5,817
---------
OREGON - 2.5%
Lane County School
District #19 Springfield,
Callable 10/15/04 @ 101 (GO) (MBIA)
5.900%, 10/15/06 1,000 1,118
Polk, Marion & Benton Counties,
School District #13J (GO) (FGIC)
5.500%, 12/01/04 1,015 1,110
Portland Community College
District, Series A,
Callable 07/01/02 @ 100 (GO)
6.000%, 07/01/12 500 540
Washington County,
Pre-refunded @ 100 (GO)
5.625%, 12/01/04 (A) 900 986
Washington County Unified Sewer
Agency Revenue (RB) (AMBAC)
6.125%, 10/01/12 5,000 5,607
Yamhill County School District #40
(GO) (FGIC)
5.375%, 06/01/04 1,000 1,080
5.375%, 06/01/05 1,350 1,469
---------
11,910
---------
PENNSYLVANIA - 3.3%
Delaware River Port Authority, PA &
NJ Bridges (RB) (AMBAC)
7.375%, 01/01/07 2,000 2,060
Erie County Prison Authority,
Pre-refunded @ 100
(RB) (MLO) (MBIA)
6.600%, 11/01/02 (A) 1,000 1,086
6.700%, 11/01/03 (A) 1,000 1,088
Governor Mifflin School District School,
Improvements Project,
Pre-refunded @ 100
(GO) (AMBAC)
6.500%, 02/01/13 (A) 2,000 2,173
Northumberland County Commonwealth
Lease, Callable 10/15/01 @ 100
(RB) (MLO) (MBIA)
6.600%, 10/15/02 1,000 1,084
Pennsylvania State (GO) (AMBAC)
5.125%, 09/15/03 5,000 5,299
Seneca Valley School District, Series A,
Callable 07/01/08 @ 100 (GO) (FGIC)
4.650%, 07/01/09 2,500 2,569
---------
15,359
---------
PUERTO RICO - 0.7%
Puerto Rico Commonwealth (GO) (MBIA)
6.000%, 07/01/14 1,605 1,882
Puerto Rico Electric Power Authority,
Series Aa (RB) (MBIA)
6.000%, 07/01/06 1,000 1,139
Puerto Rico Housing Finance Corporation,
Single Family Mortgages (RB) (GNMA)
5.800%, 10/15/00 35 36
23 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
NET ASSETS SEPTEMBER 30, 1998
INTERMEDIATE TAX FREE FUND (continued)
DESCRIPTION PAR (000) VALUE (000)
- ------------------------------------------------------------------------
Puerto Rico Housing Finance Corporation,
Single Family Mortgages
(RB) (AMT) (GNMA)
6.000%, 02/01/02 $ 110 $ 115
---------
3,172
---------
RHODE ISLAND - 1.4%
Rhode Island Depositors Economic
Protection Corporation (RB) (FSA)
6.250%, 08/01/03 1,000 1,102
Rhode Island State Consolidated Capital
Development, Series B,
Pre-refunded @ 102 (GO)
6.125%, 05/15/04 (A) 5,200 5,503
---------
6,605
---------
SOUTH CAROLINA - 0.5%
Piedmont Municipal Power Agency,
Electric Revenue (RB) (FGIC)
6.250%, 01/01/04 2,350 2,554
---------
SOUTH DAKOTA - 0.1%
Sioux Falls (COP) (MLO)
6.450%, 08/01/01 500 537
---------
TENNESSEE - 1.4%
Chattanoga Health, Education & Housing
Facilities Authority, Catholic Health
Initiatives Project, Series A (RB)
5.500%, 12/01/07 1,000 1,100
Montgomery County Public
Building Authority,
Callable 12/15/98 @ 100 (RB)
7.500%, 12/15/00 35 35
Nashville & Davidson Counties,
Water & Sewer Revenue (RB) (MBIA)
6.000%, 01/01/04 2,000 2,203
Shelby County Health, Educational &
Housing Facility Board,
Callable 04/01/08 @ 101 (MBIA) (RB)
5.500%, 04/01/09 3,000 3,284
---------
6,622
---------
TEXAS - 6.4%
Abilene Health Facilities, Sears Methodist
Retirement Facility (RB)
5.100%, 11/15/05 1,115 1,123
5.250%, 11/15/06 1,175 1,190
5.350%, 11/15/08 1,300 1,315
Austin Electric, Waterworks & Sewer,
Pre-refunded @ 100 (RB)
6.600%, 10/01/01 (A) 365 377
Dallas (GO)
6.875%, 02/15/99 500 507
6.500%, 02/15/03 3,000 3,323
Dallas County,
Callable 02/15/01 @ 100 (GO)
6.400%, 08/15/03 750 794
Galveston County Special Tax Revenue
(RB) (MBIA)
6.400%, 02/01/05 185 197
Galveston County Special Tax Revenue,
Escrowed to Maturity (RB) (MBIA)
6.400%, 02/01/05 315 358
INTERMEDIATE TAX FREE FUND (continued)
DESCRIPTION PAR (000) VALUE (000)
- ------------------------------------------------------------------------
Garland School District (GO) (PSFG)
8.000%, 02/15/01 $ 1,000 $ 1,095
Houston Housing Finance Corporation (RB)
8.000%, 06/01/14 2,000 2,170
Irving Independent School District,
Series A, Zero Coupon Bond (GO)
0.000%, 02/15/09 6,190 3,953
Katy Independent School District,
Zero Coupon Bond (GO) (PSFG)
0.000%, 08/15/09 1,805 1,128
Liberty & Johnson Counties Correctional
Facilities, Callable 09/15/01 @ 100
(RB) (MBIA)
6.850%, 09/15/04 1,000 1,089
Lubbock Independent School District,
Pre-refunded @ 100 (GO) (PSFG)
6.375%, 08/15/04 (A) 725 761
Richardson Independent School District
(GO) (PSFG)
5.000%, 02/15/03 5,000 5,244
Texas State Finance Authority,
Series A (RB)
6.500%, 10/01/04 5,000 5,698
---------
30,322
---------
UTAH - 1.8%
Intermountain Power Agency (RB)
7.625%, 07/01/08 500 512
Intermountain Power Agency (RB) (FSA)
5.250%, 07/01/03 1,000 1,059
Intermountain Power Agency,
Callable 11/20/98 @ 102 (RB)
7.300%, 07/01/00 500 511
Nebo School District,
Callable 04/01/01 @ 100 (GO) (FGIC)
5.500%, 04/01/04 500 519
Salt Lake County Municipal Building
Authority, Series A (RB) (MLO)
6.000%, 10/01/01 475 504
6.000%, 10/01/03 525 574
Utah State Housing Finance Agency
(RB) (FHA/VA)
5.950%, 07/01/08 2,210 2,347
Utah State Housing Finance Agency,
Single Family Mortgages (RB) (AMBAC)
6.300%, 01/01/18 1,295 1,393
Utah State Housing Finance Agency,
Single Family Mortgages (RB) (FHA/VA)
6.350%, 01/01/02 140 146
5.650%, 07/01/06 680 726
Utah State Housing Finance Agency,
Single Family Mortgages
(RB) (FHA/VA/FMHA)
4.900%, 01/01/99 190 191
---------
8,482
---------
VIRGINIA - 2.2%
Fairfax County Public Improvements,
Callable 06/01/05 @ 102 (GO)
5.000%, 06/01/06 2,000 2,146
Portsmouth, Callable 08/01/07 @ 101
(GO) (FGIC)
4.700%, 08/01/09 2,655 2,754
24 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
INTERMEDIATE TAX FREE FUND (continued)
DESCRIPTION PAR (000) VALUE (000)
- ------------------------------------------------------------------------
Riverside Regional Jail Authority,
Callable 07/01/05 @ 102 (RB) (MBIA)
5.700%, 07/01/08 $ 2,000 $ 2,214
Virginia State Housing Development
Authority, Series D (RB)
6.100%, 01/01/14 1,110 1,191
Virginia State Housing Development
Authority, Series H (RB)
6.200%, 07/01/04 1,000 1,071
Virginia State Peninsula Regional
Jail Authority (RB) (MBIA)
5.300%, 10/01/09 1,000 1,074
---------
10,450
---------
WASHINGTON - 11.8%
Clark County, Pre-refunded @ 100 (GO)
6.850%, 12/01/02 (A) 495 498
Chelan County Public Utility District,
Zero Coupon Bond (RB) (MBIA)
0.000%, 06/01/29 20,000 4,382
Clark County Public Utility District #1,
Callable 01/01/01 @ 102 (RB) (FGIC)
6.100%, 01/01/02 750 801
Clark County School District #37 (GO)
6.600%, 12/01/98 450 452
Clark County School District #37,
Callable 12/01/02 @ 100 (GO)
6.100%, 12/01/04 1,000 1,081
Franklin County Public Utility District,
Callable 03/01/99 @ 100 (RB) (AMBAC)
7.000%, 09/01/00 400 405
Grant County Public Utility District #2 (RB)
5.750%, 01/01/02 670 708
Grays Harbor County Public Utility District #1,
Callable 01/01/99 @ 100 (RB) (AMBAC)
7.000%, 01/01/01 465 469
Island County School District #206,
Callable 12/01/04 @ 100 (GO) (AMBAC)
5.750%, 12/01/06 700 767
King County, Pre-refunded @ 100 (GO)
6.900%, 12/01/02 (A) 500 533
King County Public Hospital District #4 (RB)
5.400%, 06/01/00 500 513
King County Public Hospital District #4,
Callable 12/01/02 @ 100 (RB)
5.800%, 12/01/03 910 972
King County School District #403,
Callable 12/01/02 @ 101 (GO)
6.050%, 12/01/03 875 957
King County School District #408 (GO)
6.200%, 12/01/02 515 561
King County School District #415 (GO)
5.750%, 12/01/01 950 1,007
King County School District #415,
Callable 06/01/04 @ 100 (GO) (AMBAC)
6.450%, 06/01/06 920 1,040
King County, Series B,
Callable 12/01/07 @ 102 (GO)
5.850%, 12/01/13 3,000 3,358
Kitsap County School District #401,
Callable 12/01/02 @ 101 (GO)
6.625%, 12/01/08 750 838
Kitsap County School District #402,
Callable 12/01/98 @ 100 (GO)
7.400%, 12/01/99 115 115
Pierce County School District #320 (GO)
6.000%, 12/01/06 1,000 1,103
INTERMEDIATE TAX FREE FUND (continued)
DESCRIPTION PAR (000) VALUE (000)
- ------------------------------------------------------------------------
Pierce County School District #401,
Series A (GO)
5.950%, 12/01/01 $ 640 $ 681
Pierce County School District #403,
Callable 12/01/01 @ 100 (GO)
6.200%, 12/01/02 1,285 1,373
Pierce County School District #403,
Callable 12/01/02 @ 100 (GO)
6.350%, 12/01/04 500 546
Pierce County Sewer Improvements (RB)
5.000%, 02/01/02 500 502
Port Tacoma, Series A (GO)
6.300%, 06/01/01 790 840
Seattle Solid Waste Management,
Callable 05/01/99 @ 102 (GO)
7.000%, 05/01/00 500 520
Snohomish County Housing Authority,
Callable 04/01/06 @ 100 (RB)
6.300%, 04/01/16 1,035 1,104
Snohomish County Public Utilities
District #1,
Callable 11/01/98 @ 100 (GO)
5.850%, 11/01/17 1,000 1,001
Snohomish County Public Utilities
District #1, Series A (GO)
6.800%, 01/01/05 2,000 2,154
Snohomish County Public Utilities
District #1, Series B (GO)
6.700%, 01/01/03 1,000 1,075
Snohomish County School District #2,
Callable 12/01/03 @ 102 (GO) (MBIA)
6.000%, 12/01/06 1,800 1,993
Snohomish County School District #2,
Series A, Callable 06/01/01 @ 100 (GO)
6.700%, 06/01/02 1,200 1,284
Snohomish County School District #6 (GO)
6.250%, 12/01/01 900 967
Snohomish County School District #6,
Pre-refunded @ 100 (GO)
6.800%, 12/01/04 (A) 900 971
Snohomish County
Solid Waste Management,
Callable 12/01/01 @ 102 (GO) (MBIA)
6.800%, 12/01/03 650 722
South Columbia Basin (GO)
5.800%, 12/01/01 500 531
Spokane, Callable 01/01/99 @ 100 (GO)
6.700%, 01/01/99 500 501
Spokane County Regional
Solid Waste Management,
Callable 12/01/02 @ 102 (RB) (AMBAC)
6.400%, 12/01/03 800 886
Spokane County School District #81 (GO)
5.900%, 12/01/02 1,000 1,083
Spokane County Sewer Revenue,
Callable 06/01/02 @ 100 (RB)
6.150%, 06/01/05 1,470 1,579
Tacoma, Series A,
Callable 07/01/02 @ 100 (GO)
5.900%, 07/01/03 600 641
Tacoma Electric System Revenue,
Callable 01/01/02 @ 102 (RB) (AMBAC)
6.000%, 01/01/06 1,400 1,511
Tacoma Utility Revenue,
Pre-refunded @ 101 (RB) (AMBAC)
6.800%, 12/01/00 (A) 465 488
Tacoma Utility Revenue,
Pre-refunded @ 101 (RB) (MBIA)
6.200%, 12/01/03 (A) 575 623
25 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
NET ASSETS SEPTEMBER 30, 1998
INTERMEDIATE TAX FREE FUND (continued)
DESCRIPTION PAR (000) VALUE (000)
- ------------------------------------------------------------------------
Thurston County School District #111,
Callable 12/01/02 @ 100 (GO)
6.700%, 12/01/03 $ 1,000 $ 1,112
Washington Public Power Supply System,
Nuclear Project #2,
Callable 01/01/01 @ 102 (RB)
7.500%, 07/01/03 3,000 3,299
Washington Public Power Supply System,
Nuclear Project #2, Series A
(RB) (AMBAC)
5.700%, 07/01/11 1,000 1,094
Washington Public Power Supply System,
Nuclear Project #3, Series B (RB)
5.250%, 07/01/03 1,090 1,146
Washington State (GO)
6.200%, 09/01/01 1,000 1,069
5.300%, 10/01/01 1,000 1,046
Washington State,
Callable 04/01/01 @ 102 (COP) (MLO)
6.800%, 04/01/05 705 763
Washington State, Single Family
Mortgages (RB) (GNMA/FNMA)
6.700%, 07/01/02 235 248
Washington State Conservation &
Renewable Energy System (RB)
5.650%, 10/01/03 700 756
Washington State Hearthstone Project,
Callable 01/01/05 @ 102 (RB)
6.000%, 01/01/10 810 898
---------
55,567
---------
WEST VIRGINIA - 0.4%
West Virginia State (GO) (FGIC)
4.400%, 06/01/05 2,000 2,053
---------
WISCONSIN - 1.2%
Milwaukee County,
Callable 09/01/02 @ 100 (GO)
5.550%, 09/01/03 1,700 1,804
Milwaukee County, Series A,
Callable 09/01/02 @ 100 (GO)
5.875%, 09/01/07 500 535
Mount Pleasant,
Callable 10/01/00 @ 100 (GO)
6.300%, 10/01/03 735 770
Racine School District,
Callable 04/01/99 @ 100
(GO) (AMBAC)
6.500%, 04/01/01 250 254
Wisconsin State,
Callable 05/01/00 @ 101 (GO)
6.000%, 05/01/01 500 522
Wisconsin State Housing & Economic
Authority, Series A (GO)
5.000%, 11/01/01 1,585 1,624
---------
5,509
---------
WYOMING - 0.3%
Sweetwater County, Pacific Power & Light
Project, Pre-refunded @ 100 (RB)
6.500%, 12/01/07 (A) 700 759
Wyoming Community Development
Authority, Single Family Mortgages
(RB) (FHA/VA)
6.200%, 06/01/99 500 505
---------
1,264
---------
TOTAL MUNICIPAL BONDS
(Cost $440,896) 463,597
---------
INTERMEDIATE TAX FREE FUND (concluded)
DESCRIPTION SHARES VALUE (000)
- ------------------------------------------------------------------------
RELATED PARTY MONEY MARKET FUND - 0.6%
First American Tax Free
Obligations Fund (C) 2,752,374 $ 2,752
---------
TOTAL RELATED PARTY MONEY MARKET FUND
(Cost $2,752) 2,752
---------
TOTAL INVESTMENTS - 99.3%
(Cost $443,648) 466,349
---------
OTHER ASSETS AND LIABILITIES, NET - 0.7% 3,561
---------
NET ASSETS:
Portfolio Capital--Class Y
($.0001 par value--2 billion authorized)
based on 41,756,941 outstanding shares 435,850
Portfolio Capital--Class A
($.0001 par value--2 billion authorized)
based on 832,191, outstanding shares 8,993
Undistributed net investment income 13
Accumulated net realized gain on investments 2,353
Net unrealized appreciation of investments 22,701
---------
TOTAL NET ASSETS--100.0% $469,910
---------
Net asset value, offering price, and
redemption price per share--Class Y $ 11.03
---------
Net asset value and redemption
price per share--Class A $ 11.05
Maximum sales charge of 3.00% (1) 0.34
---------
Offering price per share--Class A $ 11.39
---------
(1) The offer price is calculated by dividing the net asset value by 1 minus the
maximum sales charge of 3.00%.
(A) Pre-refunded Security--Pre-refunded issues are backed by U.S. Government
Obligations. These bonds mature at the call date indicated. The pre-refunded
date is shown as the maturity date on the Statement of Net Assets. See also
the notes to the financial statements.
(B) At September 30, 1998, the cost of securities purchased on a when issued
basis was: Leon County, Florida $2,045,120, and North Carolina Medical Care
Commission $1,374,111.
(C) This money market fund is advised by U.S. Bank National Association who also
serves as advisor for this fund. See also the notes to the financial
statements.
AMBAC--American Municipal Bond Assurance Company
AMT--Alternative Minimum Tax
CMI--California Mortgage Insurance
COP--Certificate of Participation
FGIC--Financial Guaranty Insurance Corporation
FHA--Federal Housing Authority
FHLMC--Federal Home Loan Mortgage Corporation
FNMA--Federal National Mortgage Association
FSA--Financial Security Assurance
GNMA--Government National Mortgage Association
GO--General Obligation
MBIA--Municipal Bond Insurance Association
MLO--Municipal Lease Obligation
PSFG--Permanent School Fund Guaranty
RB--Revenue Bond
VA--Veterans Administration
The accompanying notes are an integral part of the financial statements.
26 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
MINNESOTA INTERMEDIATE TAX FREE FUND
DESCRIPTION PAR (000) VALUE (000)
- ------------------------------------------------------------------------
MUNICIPAL BONDS - 98.6%
MINNESOTA - 96.8%
Anoka County (GO)
5.550%, 02/01/05 $ 2,000 $ 2,101
Anoka County Resource Recovery,
Northern States Power,
Callable 12/01/99 @ 102 (RB)
6.850%, 12/01/01 1,000 1,054
Anoka-Hennepin School District #11,
Callable 02/01/03 @ 100 (GO) (FGIC)
4.875%, 02/01/07 3,300 3,411
Anoka-Hennepin School District #11,
Series C (GO) (FGIC)
4.600%, 02/01/01 5,000 5,109
Bass Brook, Minnesota Power & Light,
Pollution Control (RB)
6.875%, 12/01/02 2,000 2,071
Becker Tax Increment, Series D,
Callable 08/01/04 @ 100
(GO) (AMT) (MBIA)
6.000%, 08/01/07 3,955 4,313
Bemidji Independent School District #031,
Callable 04/01/07 @ 100 (GO) (FSA)
5.000%, 04/01/19 3,000 3,033
Bloomington Port Authority,
Callable 03/01/00 @ 100 (GO)
6.000%, 03/01/03 1,800 1,855
Bloomington Port Authority, Mall of
America Project, Series A (RB) (FSA)
5.000%, 02/01/01 1,090 1,120
5.000%, 02/01/02 1,585 1,642
Bloomington Port Authority, Mall of
America Project, Series A,
Callable 02/01/04 @ 100 (RB) (FSA)
5.450%, 02/01/09 3,850 3,962
Burnsville Independent School
District #191, Callable 02/01/08 @ 100
(MSDCEP)
5.000%, 02/01/09 1,225 1,298
Burnsville Independent School
District #191, (MSDCEP)
5.000%, 02/01/08 1,355 1,445
Chaska Independent School District #112
(GO) (MSDCEP)
4.800%, 02/01/10 2,220 2,313
Chaska Independent School District #112,
Series A (GO) (MSDCEP)
4.600%, 02/01/07 1,835 1,902
Coon Rapids Multifamily Housing,
Woodland North Apartments,
Callable 12/01/03 @ 100 (RB) (FHA)
5.625%, 12/01/09 435 451
Coon Rapids Single Family Mortgages,
Callable 09/01/04 @ 102 (RB)
5.900%, 09/01/06 805 848
Dakota County Housing & Redevelopment
Authority (RB) (MLO)
4.950%, 02/01/02 1,000 1,037
Dakota County Housing & Redevelopment
Authority, Callable 04/01/05 @ 102
(RB) (AMT) (FNMA/GNMA)
6.000%, 10/01/14 1,275 1,327
Dakota County Housing & Redevelopment
Authority, Callable 10/01/07 @ 101.5
(RB) (GNMA)
5.125%, 10/01/20 1,368 1,410
MINNESOTA INTERMEDIATE TAX FREE FUND (continued)
DESCRIPTION PAR (000) VALUE (000)
- ------------------------------------------------------------------------
Dakota County Housing & Redevelopment
Authority, Single Family Mortgages,
Callable 04/01/04 @ 102
(RB) (AMT) (FNMA)
6.250%, 10/01/04 $ 840 $ 886
Dakota County Housing & Redevelopment
Authority, Single Family Mortgages,
Callable 09/01/98 @ 103
(RB) (FHA/GNMA/VA)
7.250%, 03/01/06 400 411
Dakota, Washington, and Stearns Counties,
Housing & Redevelopment Authority,
Single Family Mortgages,
Callable 03/01/04 @ 102
(RB) (AMT) (FNMA)
6.000%, 09/01/04 415 438
6.500%, 09/01/10 565 604
Duluth Economic Development Authority,
Health Care Facility,
Callable 11/01/02 @ 102
(RB) (AMBAC)
6.100%, 11/01/04 650 712
Duluth Economic Development Authority,
Health Care Facility (RB) (AMBAC)
6.100%, 11/01/04 250 280
Eden Prairie Water and Sewer, Series A,
Zero Coupon Bond
0.000%, 12/01/06 2,090 1,504
Faribault Independent School
District #656 (GO) (FSA)
4.625%, 06/01/07 1,525 1,592
Forest Lake Independent
School District #831,
Callable 02/01/08 @ 100
5.000%, 02/01/09 1,500 1,591
Fridley School District #14,
Callable 02/01/05 @ 100 (GO) (FSA)
5.350%, 02/01/26 5,000 5,140
Hastings Health Care Facility,
Callable 09/15/08 @ 100 (RB) (ACA)
5.000%, 09/15/13 500 503
Hastings Independent School District #200,
Callable 02/01/08 @ 100 (MSDCEP)
5.000%, 02/01/11 1,095 1,146
Hastings School District #200, Series A,
Callable 02/01/08 @ 100 (GO)
5.000%, 02/01/10 1,625 1,713
Hennepin County Lease Revenue
(COP) (MLO)
4.650%, 11/12/08 1,275 1,323
Hennepin County Lease Revenue,
Callable 11/15/08 @ 100
(COP) (MLO)
5.375%, 11/15/09 2,280 2,493
Hopkins Independent School District #270,
Series A, Callable 02/01/03 @ 100
(GO) (MBIA)
4.800%, 02/01/05 2,000 2,069
Lakeville Independent School District #194,
Callable 02/01/09 @ 100 (GO)
5.000%, 02/01/16 2,500 2,555
Lakeville Independent School
District #194, Series A,
Callable 02/01/08 @ 100
(GO) (MSDCEP)
5.125%, 02/01/22 6,000 6,059
27 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
NET ASSETS SEPTEMBER 30, 1998
MINNESOTA INTERMEDIATE TAX FREE FUND (continued)
DESCRIPTION PAR (000) VALUE (000)
- ------------------------------------------------------------------------
Mankato Independent School
District #77, Series A,
Callable 02/01/04 @ 100 (GO) (FSA)
5.100%, 02/01/07 $ 1,000 $ 1,050
Minneapolis & St. Paul Housing Finance
Board, Callable 11/01/04 @ 102
(RB) (AMT) (FNMA/GNMA)
6.800%, 11/01/08 295 310
Minneapolis & St. Paul Housing Finance
Board, Single Family Mortgages,
Phase VI, Series A,
Callable 08/01/98 @ 102 (RB)
7.700%, 08/01/00 135 138
Minneapolis & St. Paul Housing Finance
Board, Single Family Mortgages,
Series A, Callable 06/01/99 @ 102
(RB) (AMT) (FHA/GNMA/VA)
7.875%, 12/01/12 285 293
Minneapolis & St. Paul Housing &
Redevelopment Authority,
Health One Obligated Group,
Callable 08/15/00 @ 102 (RB) (MBIA)
7.300%, 08/15/01 1,000 1,081
Minneapolis & St. Paul Housing &
Redevelopment Authority, Healthspan,
Series A, Callable 11/15/03 @ 102
(RB) (AMBAC)
5.000%, 11/15/07 2,000 2,094
5.000%, 11/15/13 2,000 2,029
Minneapolis & St. Paul Metropolitan
Airports Commission
(RB) (AMT) (AMBAC)
5.500%, 01/01/07 2,140 2,328
Minneapolis & St. Paul Metropolitan
Airports Commission,
Callable 01/01/08 (RB) (AMBAC)
5.500%, 01/01/09 2,500 2,730
Minneapolis & St. Paul Metropolitan
Airports Commission, Series 8,
Callable 01/01/02 @ 100 (RB) (AMT)
6.100%, 01/01/03 1,500 1,598
6.350%, 01/01/04 2,500 2,678
Minneapolis & St. Paul Metropolitan
Airports Commission, Series 10,
Callable 01/01/03 @ 100 (RB)
5.000%, 01/01/05 1,000 1,043
Minneapolis Community Development
Agency (RB) (MBIA)
7.000%, 03/01/01 2,000 2,150
Minneapolis Community Development
Agency, Capital Appreciation,
Zero Coupon Bond (RB) (MBIA)
0.000%, 03/01/02 5,000 4,402
Minneapolis, Escrowed to Maturity (GO)
5.300%, 11/01/99 1,500 1,520
Minneapolis Health Care Facilities Authority,
Fairview Hospital & Healthcare,
Callable 11/15/03 @ 102
(RB) (MBIA)
5.100%, 11/15/05 1,000 1,069
Minneapolis Health Care Facilities Authority,
Fairview Hospital & Healthcare,
Series A (RB) (MBIA)
4.800%, 11/15/02 1,000 1,038
MINNESOTA INTERMEDIATE TAX FREE FUND (continued)
DESCRIPTION PAR (000) VALUE (000)
- ------------------------------------------------------------------------
Minneapolis Mortgage Revenue, Capital
Appreciation, Zero Coupon Bond,
Callable 10/01/05 @ 100 (RB)
0.000%, 10/01/12 $ 2,950 $ 1,251
Minneapolis, Pre-refunded @ 100 (GO)
6.250%, 03/01/03 (A) 1,000 1,080
6.350%, 03/01/04 (A) 1,200 1,300
Minneapolis, Sales Tax,
Callable 04/01/02 @ 102 (RB)
6.150%, 10/01/05 2,400 2,621
Minneapolis, Series B,
Callable 09/01/05 @ 100 (GO)
5.050%, 03/01/06 6,000 6,404
Minneapolis Special School District #1
(GO) (MSDCEP)
5.000%, 02/01/04 3,375 3,564
Minneapolis Special School District #1,
Series A (COP) (MLO)
4.375%, 02/01/07 1,400 1,431
Minneapolis Special School District #1,
Series A, Callable 02/01/06 @ 100
(COP) (MBIA) (MLO)
5.900%, 02/01/11 2,150 2,365
Minneapolis Special School District #1,
Series B, Callable 02/01/03 @ 100
(COP) (MLO) (AMBAC)
5.400%, 02/01/04 2,000 2,121
5.500%, 02/01/05 2,000 2,125
Minnesota State (GO)
5.000%, 04/01/03 1,000 1,051
Minnesota State Agricultural and
Economic Development Board,
Fairview Hospital Project
(RB) (MBIA)
5.400%, 11/15/08 1,000 1,089
5.750%, 11/15/26 2,000 2,182
Minnesota State Agricultural and
Economic Development Board,
Fairview Hospital Project, Series A,
Callable 11/15/07 @ 102 (RB) (MBIA)
5.500%, 11/15/17 1,500 1,621
Minnesota State Higher Educational
Facilities Authority, St. Benedict College,
Callable 03/01/07 @ 100 (GO)
4.875%, 03/01/08 1,000 1,026
5.100%, 03/01/11 2,885 2,944
Minnesota State Housing Finance Agency,
Rental Housing, Series D (RB) (MBIA)
4.650%, 02/01/00 1,770 1,788
5.050%, 08/01/03 880 913
5.150%, 08/01/04 870 910
Minnesota State Housing Finance Agency,
Rental Housing, Series D,
Callable 02/01/05 @ 102 (RB) (MBIA)
5.450%, 08/01/07 2,655 2,814
Minnesota State Housing Finance Agency,
Single Family Mortgages, Series C
(RB) (FHA)
7.700%, 01/01/99 35 35
Minnesota State Housing Finance Agency,
Single Family Mortgages, Series C,
Callable 01/01/01 @ 102
(RB) (FHA/VA)
6.600%, 07/01/02 735 776
28 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
MINNESOTA INTERMEDIATE TAX FREE FUND (continued)
DESCRIPTION PAR (000) VALUE (000)
- ------------------------------------------------------------------------
Minnesota State Housing Finance Agency,
Single Family Mortgages, Series D
(RB) (AMBAC)
4.500%, 07/01/01 $ 1,990 $ 2,020
Minnesota State Housing Finance Agency,
Single Family Mortgages, Series D,
Callable 01/01/04 @ 102 (RB) (AMBAC)
4.800%, 07/01/04 3,385 3,479
Minnesota State Public Facilities Authority,
Water Pollution Control (RB)
5.000%, 03/01/06 1,490 1,592
Minnesota State Public Facilities Authority,
Water Pollution Control,
Callable 03/01/08 @ 100, Series A (RB)
4.500%, 03/01/10 5,000 5,084
Minnesota State Public Facilities Authority,
Water Pollution Control, Series B,
Callable 03/01/01 @ 102 (RB)
6.350%, 03/01/03 500 538
Minnesota State Public Facilities Authority,
Water Pollution Control, Series B,
Pre-refunded @ 102 (RB)
6.700%, 03/01/13 (A) 3,000 3,265
Minnesota State Tax-Exempt Mortgage
Trust, Series C (RB) (MLO) (NN)
4.362%, 01/15/99 (A) 57 57
Minnesota State,
Callable 08/01/07 @ 100 (GO)
4.800%, 08/01/11 2,710 2,795
4.850%, 08/01/12 5,420 5,572
Minnesota State,
Pre-refunded @ 100 (GO)
5.750%, 08/01/03 (A) 5,000 5,355
New Prague School District #721,
Callable 02/01/06 @ 100 (GO) (MBIA)
5.000%, 02/01/16 2,000 2,034
North Branch Independent School
District #138, Callable 02/01/05 @ 100
GO) (FGIC)
5.400%, 02/01/09 1,000 1,068
Northern Minnesota Municipal
Power Agency, Electric Systems
(RB) (FSA)
5.500%, 01/01/07 3,000 3,296
Northern Minnesota Municipal
Power Agency, Series A
(RB) (AMBAC)
5.500%, 01/01/03 2,500 2,668
Northern Minnesota Municipal
Power Agency, Series A,
Callable 01/01/03 @ 102
(RB) (AMBAC)
5.600%, 01/01/04 1,900 2,064
Northern Minnesota Municipal
Power Agency, Series A,
Callable 01/01/05 @ 100
(RB) (AMBAC)
5.900%, 01/01/07 1,800 1,976
Northern Minnesota Municipal
Power Agency, Series B,
Callable 01/01/09 @ 101 (RB) (AMBAC)
4.750%, 01/01/20 (B) 1,000 985
MINNESOTA INTERMEDIATE TAX FREE FUND (continued)
DESCRIPTION PAR (000) VALUE (000)
- ------------------------------------------------------------------------
Olmsted County Housing &
Redevelopment Authority,
Pre-refunded @ 100 (RB) (MLO)
7.000%, 02/01/05 (A) $ 1,025 $ 1,101
Olmsted County Resource
Recovery, Series A,
Callable 02/01/02 @ 100 (RB)
5.800%, 02/01/04 1,850 1,963
Osseo Independent School District #279,
Callable 02/01/03 @ 100 (GO) (FGIC)
5.400%, 02/01/05 2,525 2,675
Osseo Independent School District, Series A,
Callable 02/01/00 @ 100 (GO)
5.500%, 02/01/01 1,300 1,331
Pipestone Industrial Development,
Cargill Project (RB)
5.000%, 09/01/00 1,890 1,936
Plymouth Health Facilities,
Callable 06/01/04 @ 102 (RB) (CGIC)
6.200%, 06/01/11 1,360 1,513
Princeton Independent School District #477,
Callable 02/01/07 @ 100 (GO) (FSA)
5.125%, 02/01/24 2,000 2,022
Ramsey & Washington Counties, Resource
Recovery, Northern States Power,
Series A, Callable 12/01/97 @ 103 (RB)
6.200%, 12/01/00 1,000 1,028
Red Wing Independent School District #256,
Callable 02/01/08 @ 100 (MSDCEP)
5.000%, 02/01/10 2,015 2,124
Red Wing Independent School
District #256, Series A,
Callable 02/01/03 @ 100 (GO)
5.250%, 02/01/05 1,010 1,065
Richfield Independent School District #280
(GO) (FGIC)
4.550%, 02/01/03 7,180 7,390
Robbinsdale, North Memorial Medical
Center, Series A (RB) (AMBAC)
5.100%, 05/15/03 1,000 1,053
Robbinsdale, North Memorial Medical
Center, Series B (RB) (AMBAC)
5.000%, 05/15/02 1,250 1,302
5.100%, 05/15/03 1,000 1,053
Rochester Independent School District #535,
Series A,
Callable 02/01/00 @ 100 (GO)
5.600%, 02/01/03 1,500 1,535
Rochester, St. Mary's Hospital,
Escrowed to Maturity (RB)
5.750%, 10/01/07 2,735 2,913
Rosemount Independent School
District, Series A,
Callable 06/01/04 @ 100 (GO)
5.625%, 06/01/07 1,400 1,511
Savage (GO) (FGIC)
5.200%, 02/01/05 1,000 1,072
Savage, Callable 02/01/06 @ 100
(GO) (FGIC)
5.350%, 02/01/07 1,000 1,084
5.500%, 02/01/08 1,000 1,089
29 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
NET ASSETS SEPTEMBER 30, 1998
MINNESOTA INTERMEDIATE TAX FREE FUND (continued)
DESCRIPTION PAR (000) VALUE (000)
- ------------------------------------------------------------------------
South St. Paul Housing &
Redevelopment Authority,
Single Family Mortgages,
Callable 09/01/05 @ 100
(RB) (FNMA)
5.100%, 09/01/07 $ 1,045 $ 1,082
4.500%, 09/01/11 115 116
Southern Minnesota Municipal Power
Agency, Callable 01/01/03 @ 102
(RB) (FGIC)
5.000%, 01/01/06 2,500 2,634
Southern Minnesota Municipal Power
Agency, Capital Appreciation,
Zero Coupon Bond (RB) (MBIA)
0.000%, 01/01/20 3,500 1,264
Southern Minnesota Municipal Power
Agency, Power Supply System,
Series A (RB) (FGIC)
5.300%, 01/01/01 1,275 1,319
Southern Minnesota Municipal Power
Agency, Power Supply System,
Series B, Escrowed to Maturity (RB)
5.300%, 01/01/01 1,000 1,035
Southern Minnesota Municipal Power
Agency, Series A, Capital Appreciation,
Zero Coupon Bond (RB) (MBIA)
0.000%, 01/01/21 5,000 1,718
Southern Minnesota Municipal Power
Agency, Series B (RB) (MBIA)
4.850%, 01/01/07 1,875 1,964
St. Cloud Hospital Facilities, Series A
(RB) (AMBAC)
5.500%, 07/01/06 1,000 1,098
St. Cloud Hospital Facilities, Series B,
Pre-refunded @ 102 (GO) (AMBAC)
7.000%, 07/01/20 (A) 2,000 2,209
St. Cloud Law Enforcement Center,
Callable 02/01/01 @ 100 (RB) (MLO)
5.750%, 02/01/02 1,000 1,043
St. Cloud, Series A (GO)
6.000%, 08/01/02 1,000 1,071
St. Cloud, Series B,
Callable 08/01/08 @ 100
(GO) (FGIC)
5.000%, 08/01/09 1,780 1,894
St. Louis Park Health Care Facilities,
Callable 07/01/03 @ 102
(RB) (AMBAC)
4.600%, 07/01/05 6,000 6,164
St. Louis Park Housing & Redevelopment
Authority, Single Family Mortgages,
Callable 04/20/03 @ 100 (RB) (GNMA)
6.500%, 10/20/03 311 328
St. Louis Park Independent School District
#283, Callable 02/01/01 @ 100 (RB)
5.900%, 02/01/04 1,000 1,049
St. Paul, Callable 02/01/01 @ 100 (GO)
5.250%, 02/01/03 1,500 1,549
St. Paul Housing & Redevelopment Authority,
Callable 03/01/05 @ 102 (RB) (FNMA)
6.125%, 03/01/17 1,060 1,121
St. Paul Housing & Redevelopment
Authority, Civic Center Project (RB)
4.700%, 11/01/02 1,420 1,468
MINNESOTA INTERMEDIATE TAX FREE FUND (continued)
DESCRIPTION PAR (000) VALUE (000)
- ------------------------------------------------------------------------
St. Paul Housing & Redevelopment Authority,
Downtown & Seventh Place Project,
Escrowed to Maturity (RB) (AMBAC)
4.850%, 09/01/01 $ 2,000 $ 2,065
St. Paul Housing & Redevelopment
Authority, Downtown & Seventh
Place Project, Escrowed to Maturity,
Callable 09/01/03 @ 101
(RB) (AMBAC)
5.200%, 09/01/04 4,000 4,246
St. Paul Housing & Redevelopment
Authority, Downtown & Seventh
Place Project, Escrowed to Maturity,
Callable 09/01/04 @ 100
(RB) (AMBAC)
5.350%, 09/01/07 1,500 1,602
St. Paul Housing & Redevelopment Authority,
St. Paul Heart and Lung Center,
Mandatory Put @ 100 (RB) (NBM)
4.700%, 12/01/15 (C) 3,030 3,068
St. Paul Housing & Redevelopment Authority,
Tax Increment Revenue (RB) (AMBAC)
6.250%, 08/01/05 1,110 1,253
St. Paul Housing & Redevelopment
Authority, Tax Increment Revenue,
Callable 08/01/06 @ 102.5
(RB) (AMBAC)
6.400%, 02/01/07 1,195 1,375
6.400%, 08/01/07 1,205 1,395
6.500%, 02/01/09 1,315 1,523
St. Paul Independent School District #625,
Callable 02/01/04 @ 100 (GO)
5.800%, 02/01/07 1,000 1,085
St. Paul Independent School District #625,
Series C (COP) (MLO)
5.850%, 02/01/07 1,000 1,087
St. Paul Port Authority Energy Park,
Tax Increment (RB) (FSA)
5.000%, 02/01/08 2,100 2,217
St. Paul Port Authority Industrial
Development, Escrowed
to Maturity (RB)
8.250%, 11/01/99 220 231
St. Paul Science Museum,
Escrowed to Maturity (COP)
7.500%, 12/15/01 486 513
St. Paul Sewer Revenue,
Callable 06/01/03 @ 100
(RB) (AMBAC)
5.350%, 12/01/04 3,000 3,188
5.450%, 12/01/05 5,000 5,323
Stearns County Housing & Redevelopment
Authority (FSA) (MLO)
4.950%, 02/01/09 (B) 1,540 1,597
Stearns County Housing & Redevelopment
Authority, Callable 02/01/99 @ 102
(RB) (MLO) (AMBAC)
6.750%, 02/01/04 1,665 1,716
Stillwater Independent School District #834,
Callable 02/01/02 @ 100 (GO) (FGIC)
5.200%, 02/01/03 2,500 2,611
Stillwater Independent School District #834,
Callable 02/01/09 @100 (MSDCEP)
4.750%, 02/01/11 2,140 2,189
30 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
MINNESOTA INTERMEDIATE TAX FREE FUND (continued)
DESCRIPTION PAR (000) VALUE (000)
- ------------------------------------------------------------------------
Vadnais Heights, Single Family
Mortgages (RB)
5.500%, 11/01/04 $ 790 $ 831
6.000%, 11/01/09 455 487
Washington County Housing &
Redevelopment Authority,
Jail Facility (RB) (MLO)
5.000%, 02/01/03 2,755 2,881
Washington County Housing &
Redevelopment Authority, Jail
Facility, Callable 02/01/03 @ 100
(RB) (MBIA) (MLO)
5.400%, 02/01/08 1,580 1,656
Washington County Housing &
Redevelopment Authority, Jail Facility,
Escrowed to Maturity (RB) (MLO)
6.500%, 02/01/01 1,000 1,063
Washington County Housing &
Redevelopment Authority, Jail Facility,
Pre-refunded @ 100 (RB) (MLO)
6.800%, 02/01/04 (A) 1,500 1,643
Washington County, Raymie Johnson
Apartments, Series C (GO) (FGIC)
6.000%, 01/01/10 1,340 1,455
West St. Paul Independent School
District #197, Capital Appreciation,
Zero Coupon Bond (GO) (MBIA)
0.000%, 02/01/05 2,000 1,562
Western Minnesota Municipal Power
Agency, Callable 01/01/03 @ 100
(RB) (AMBAC)
6.500%, 01/01/04 1,980 2,128
Western Minnesota Municipal Power
Agency, Callable 01/01/06 @ 102
(RB) (AMBAC)
5.500%, 01/01/11 5,000 5,453
Western Minnesota Municipal Power Agency,
Series A, Callable 01/01/06 @ 102
(RB) (AMBAC)
5.500%, 01/01/13 2,000 2,164
Western Minnesota Municipal Power Agency,
Series B (RB) (AMBAC)
6.000%, 01/01/03 1,500 1,628
Willmar Independent School District #347,
Callable 02/01/06 @ 100 (GO) (MSDCEP)
5.150%, 02/01/09 1,610 1,706
Willmar Independent School District #347
(GO) (MSDCEP)
4.950%, 02/01/06 1,000 1,062
Willmar Independent School District #347,
Series C, Callable 02/01/02 @ 100
(GO) (AMBAC)
6.150%, 02/01/09 1,000 1,073
---------
317,493
---------
PUERTO RICO - 1.7%
Puerto Rico Commonwealth Infrastructure
Financing Authority,
Callable 01/01/08 @ 101
(RB) (AMBAC)
5.000%, 07/01/28 5,310 5,346
Puerto Rico Housing Finance Agency,
Single Family Mortgages, Portfolio 1,
Series B (RB) (GNMA)
6.800%, 10/15/99 170 173
---------
5,519
---------
MINNESOTA INTERMEDIATE TAX FREE FUND (concluded)
DESCRIPTION PAR (000)/SHARES VALUE (000)
- ------------------------------------------------------------------------
VIRGIN ISLANDS - 0.1%
Virgin Islands Special Tax,
Callable 10/01/03 @ 100 (RB)
7.750%, 10/01/06 $ 360 $ 396
---------
TOTAL MUNICIPAL BONDS
(Cost $306,649) 323,408
---------
MONEY MARKET FUND - 1.4%
Federated Minnesota Municipal
Cash Trust 4,419,380 4,419
---------
TOTAL MONEY MARKET FUND
(Cost $4,419) 4,419
---------
TOTAL INVESTMENTS - 100.0%
(Cost $311,068) 327,827
---------
OTHER ASSETS AND LIABILITIES, NET - 0.0% 101
---------
NET ASSETS:
Portfolio Capital--Class Y
($.0001 par value--2 billion authorized)
based on 30,969,142 outstanding shares 300,324
Portfolio Capital--Class A
($.0001 par value--2 billion authorized)
based on 1,004,307 outstanding shares 9,990
Undistributed net investment income 26
Accumulated net realized gain on investments 829
Net unrealized appreciation of investments 16,759
---------
TOTAL NET ASSETS--100.0% $327,928
---------
Net asset value, offering price, and
redemption price per share--Class Y $ 10.26
---------
Net asset value and redemption
price per share--Class A $ 10.29
Maximum sales charge of 3.00% (1) 0.32
---------
Offering price per share--Class A $ 10.61
---------
(1) The offer price is calculated by dividing the net asset value by 1 minus the
maximum sales charge of 3.00%.
(A) Pre-refunded Security--Pre-refunded issues are backed by U.S. Government
Obligations. These bonds mature at the call date indicated. The pre-refunded
date is shown as the maturity date on the Statement of Net Assets. See also
the notes to the financial statements.
(B) At September 30, 1998, the cost of securities purchased on a when issued
basis was: Northern Minnesota Municipal Power Agency $964,900, and Stearns
County Housing & Redevelopment Authority $1,540,000.
ACA--American Capital Access
AMBAC--American Municipal Bond Assurance Company
AMT--Alternative Minimum Tax
CGIC--Capital Guaranty Insurance Company
COP--Certificate of Participation
FGIC--Financial Guaranty Insurance Corporation
FHA--Federal Housing Authority
FNMA--Federal National Mortgage Association
FSA--Financial Security Assurance
GNMA--Government National Mortgage Association
GO--General Obligation
MBIA--Municipal Bond Insurance Association
MLO--Municipal Lease Obligation
MSDCEP--Minnesota School District Credit Enhancement Program
NBM--Norwest Bank Minnesota
NN--Northwestern National
RB--Revenue Bond
VA--Veterans Administration
The accompanying notes are an integral part of the financial statements.
31 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
NET ASSETS SEPTEMBER 30, 1998
MINNESOTA TAX FREE FUND
DESCRIPTION PAR (000) VALUE (000)
- ------------------------------------------------------------------------
MUNICIPAL BONDS - 98.0%
MINNESOTA - 98.0%
Austin Housing & Redevelopment Authority,
Callable 01/01/06 @ 102 (RB)
7.250%, 01/01/26 $ 500 $ 542
Big Lake Independent School District,
Callable 02/01/07 @ 100 (GO) (MBIA)
5.600%, 02/01/15 1,000 1,077
Brooklyn Center Health Care Facilities,
Callable 12/01/03 @ 102 (RB)
7.600%, 12/01/18 900 981
Burnsville Independent School District #191,
Series A, Callable 02/01/06 @ 100 (GO)
4.875%, 02/01/13 1,450 1,473
Chaska Independent School District #112,
Series B, Callable 02/01/06 @ 100 (GO)
5.875%, 02/01/11 1,965 2,194
5.875%, 02/01/12 2,200 2,457
6.000%, 02/01/16 5,525 6,214
Chicago Health Facilities,
Callable 07/01/05 @ 102 (RB)
7.300%, 07/01/25 400 441
Columbia Heights Independent
School District #013,
Callable 02/01/07 @ 100 (GO)
5.250%, 02/01/15 1,000 1,047
Coon Rapids Multifamily Housing,
Callable 02/01/02 @ 102 (RB)
6.750%, 08/01/23 680 720
Coon Rapids Multifamily Housing,
Callable 12/01/03 @ 100 (RB) (FHA)
5.625%, 12/01/09 915 948
Coon Rapids Multifamily Housing,
Callable 11/01/07 @ 102 (RB)
6.250%, 05/01/18 500 516
Coon Rapids Nursing Home Revenue (RB)
6.000%, 05/01/03 775 818
Dakota County Housing & Redevelopment
Authority, Callable 09/01/99 @ 103
(RB) (GNMA)
8.100%, 09/01/12 395 407
Duluth Economic Development
Authority (COP)
8.000%, 08/01/08 325 393
Duluth Economic Development Authority,
Health Care Facilities,
Callable 11/01/02 @ 102 (RB) (AMBAC)
6.300%, 11/01/22 145 159
Eden Prairie Independent
School District #272,
Callable 02/01/08 @ 100 (GO)
5.100%, 02/01/12 1,150 1,212
Fairmont Housing Mortgage,
Callable 07/01/02 @ 102 (RB)
8.500%, 07/01/15 900 988
Fergus Falls Health Care Facilities, Series A,
Callable 11/01/04 @ 102 (RB)
7.000%, 11/01/19 1,000 1,074
Glencoe Health Care Facilities (RB)
8.500%, 12/01/15 575 631
Glencoe Hospital,
Callable 08/01/04 @ 102 (RB)
6.750%, 04/01/16 1,100 1,160
MINNESOTA TAX FREE FUND (continued)
DESCRIPTION PAR (000) VALUE (000)
- ------------------------------------------------------------------------
Hastings Housing &
Redevelopment Authority,
Callable 02/01/03 @ 100 (RB)
6.500%, 02/01/14 $ 1,000 $ 1,100
Hawley Independent School
District #150, Series A,
Callable 02/01/06 @ 100
(GO) (FSA)
5.750%, 02/01/14 1,500 1,626
Hennepin County, Series A,
Pre-refunded @ 100 (COP)
6.650%, 11/15/01 (A) 1,000 1,087
6.750%, 11/15/01 (A) 875 954
6.800%, 11/15/01 (A) 1,750 1,910
Hopkins, Elderly Housing, Series A,
Callable 11/01/07 @ 102 (RB) (GNMA)
5.600%, 11/20/17 500 520
Hopkins Multifamily Housing,
Callable 04/01/07 @ 102 (RB)
6.250%, 04/01/15 500 538
Lakeville Independent School District #194,
Callable 02/01/09 @ 100 (GO)
5.000%, 02/01/17 1,000 1,018
Litchfield Health Care Facilities,
Callable 08/01/01 @ 102 (RB)
8.750%, 08/01/20 500 575
Little Canada Commercial Development,
Callable 04/01/03 @ 100 (COP)
7.100%, 04/01/13 1,715 1,805
Little Canada Presbyterian Homes,
Callable 07/01/00 @ 102 (RB)
7.000%, 07/01/07 700 727
Maplewood Care Centers,
Callable 10/01/04 @ 102 (RB)
7.500%, 10/01/24 1,000 1,103
Maplewood, Mounds Park Academy,
Callable 09/01/03 @ 102 (RB)
7.000%, 09/01/23 1,500 1,617
Melrose, Pre-refunded @ 101 (COP)
7.800%, 02/01/99 (A) 120 121
7.900%, 02/01/99 (A) 75 77
8.000%, 02/01/99 (A) 75 77
Minneapolis, Callable 09/01/05 @ 100 (GO)
5.200%, 03/01/13 400 417
Minneapolis, Minnesota University,
Callable 12/01/07 @ 100 (RB)
5.250%, 12/01/17 1,000 1,030
Minneapolis, Nursing Home Revenue,
Pre-refunded @ 100 (RB)
8.000%, 05/01/01 (A) 250 276
Minneapolis, Refunding Housing Project,
Callable 10/01/11 @ 102 (RB) (FHA)
7.050%, 10/01/22 750 812
Minneapolis, Seward Towers Project,
Callable 12//00 @ 102 (RB) (GNMA)
7.375%, 12/20/30 1,370 1,446
Minneapolis, Trinity Housing Project,
Callable 02/01/01 @ 102 (RB)
7.875%, 02/01/06 185 195
8.250%, 02/01/18 2,625 2,739
Minneapolis & St. Paul Housing &
Redevelopment Authority,
Series A (RB) (FSA)
5.600%, 08/15/12 250 271
32 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
MINNESOTA TAX FREE FUND (continued)
DESCRIPTION PAR (000) VALUE (000)
- ------------------------------------------------------------------------
Minneapolis Sports Arena,
Callable 04/01/08 @ 100 (GO)
5.100%, 04/01/13 $ 500 $ 523
5.100%, 10/01/13 250 261
5.125%, 10/01/20 1,000 1,019
Minnesota State Agricultural &
Economic Development Board,
Fairview Hospital Project,
Callable 11/15/07 @ 102
(RB) (MBIA)
5.500%, 11/15/11 500 545
Minnesota State Agricultural & Economic
Development Board, Fairview
Hospital Project, Series A,
Callable 11/15/07 @ 102
(RB) (MBIA)
5.500%, 11/15/17 1,000 1,080
Minnesota State Higher Education
Facilities Authority, Augsburg
College, Series 4-F1,
Callable 05/01/06 @ 102 (RB)
6.250%, 05/01/23 1,500 1,639
Minnesota State Higher Education
Facilities Authority,
Callable 03/01/04 @ 100 (RB)
6.375%, 03/01/20 500 549
Minnesota State Higher Education Facilities
Authority, Carleton College,
Callable 05/01/06 @ 100 (RB)
5.750%, 11/01/12 1,050 1,143
Minnesota State Higher Education Facilities
Authority, Carleton College,
Callable 11/01/07 @ 100 (RB)
5.250%, 11/01/11 500 533
5.400%, 11/01/15 1,500 1,593
Minnesota State Higher Education
Facilities Authority, St. Benedict
College, Series 3-W,
Callable 03/01/04 @ 100 (RB)
6.200%, 03/01/14 900 983
Minnesota State Higher Education
Facilities Authority, University of
St. Thomas, Series 4-A1,
Callable 10/01/06 @ 100 (RB)
5.625%, 10/01/16 1,500 1,599
5.625%, 10/01/21 500 528
Minnesota State Higher Education
Facilities Authority, University of
St. Thomas, Series 4-M,
Callable 04/01/07 @ 100 (RB)
5.375%, 04/01/12 500 524
5.350%, 04/01/17 500 518
Minnesota State Higher Education
Facilities Authority, Vermilion
Community College,
Callable 01/01/04 @ 102 (RB)
6.000%, 01/01/13 825 889
Minnesota State Housing Development
Service, Callable 02/01/02 @ 102 (RB)
7.050%, 08/01/27 500 538
Minnesota State Improvements,
Callable 11/01/06 @ 100 (GO)
5.250%, 11/01/13 1,500 1,582
MINNESOTA TAX FREE FUND (continued)
DESCRIPTION PAR (000) VALUE (000)
- ------------------------------------------------------------------------
Minnesota State Public
Facilities Authority,
Water Pollution Control,
Callable 03/01/08 @ 100 (RB)
4.750%, 03/01/18 $ 1,000 $ 995
Minnesota State, Single Family
Mortgage Service,
Callable 07/01/00 @ 102
(RB) (FHA)
7.650%, 07/01/08 285 285
Minnesota State,
St. John's University Project,
Callable 10/01/07 @ 100 (RB)
5.350%, 10/01/17 1,000 1,038
Minnetonka, Cedar Hills East Project,
Callable 12/01/99 @ 103 (RB)
7.500%, 12/01/27 500 522
Monticello, Big Lake Community Hospital,
Callable 12/01/09 @ 100 (RB)
5.750%, 12/01/19 1,000 1,021
Moorehead, Series A,
Pre-refunded @ 100 (RB)
7.750%, 12/01/01 (A) 1,165 1,303
New Prague Queen of Peace
Hospital Project,
Callable 12/01/06 @ 100 (RB)
6.500%, 06/01/12 500 528
North Beach Independent
School District #138,
Callable 02/01/05 @ 100 (GO)
5.600%, 02/01/13 1,500 1,601
North St. Paul Independent
School District #622,
Callable 05/01/06 @ 100 (GO)
5.850%, 05/01/17 500 537
Northern Itasca Hospital District
Health Facilities (RB)
7.500%, 07/01/03 50 52
7.750%, 07/01/05 70 73
7.750%, 07/01/06 75 79
7.800%, 07/01/07 85 89
7.900%, 07/01/08 90 94
8.000%, 07/01/09 100 105
8.000%, 07/01/10 105 110
8.000%, 07/01/11 255 268
Northfield Hospital Revenue, Series C,
Callable 12/01/01 @ 100 (RB)
7.000%, 12/01/05 185 196
7.000%, 12/01/06 370 392
7.000%, 12/01/07 405 429
7.000%, 12/01/08 730 773
Olmsted County, Hiawatha Homes Project,
Callable 07/01/03 @ 102 (RB)
6.500%, 07/01/16 205 216
Osseo Independent School District #279,
Series A, Callable 02/01/03 @ 103 (GO)
8.250%, 02/01/14 (C) 3,195 3,582
Plymouth, Mission Farms
Nursing Home Project,
Callable 08/01/04 @ 102 (RB)
7.500%, 08/01/14 1,000 1,102
7.500%, 08/01/24 100 110
Red Wing River Region, Group B,
Callable 09/01/03 @ 102 (RB)
6.400%, 09/01/12 1,000 1,078
33 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
NET ASSETS SEPTEMBER 30, 1998
MINNESOTA TAX FREE FUND (continued)
DESCRIPTION PAR (000) VALUE (000)
- ------------------------------------------------------------------------
Rochester Independent
School District #535,
Callable 02/01/06 @ 100 (GO)
5.250%, 02/01/14 $ 1,000 $ 1,044
Rochester, Mayo Foundation, Series A,
Callable 05/15/08 @ 101 (RB)
5.500%, 11/15/27 3,000 3,170
Roseau Area Hospital District,
Callable 10/01/01 @ 100 (RB)
7.200%, 10/01/11 230 243
7.200%, 10/01/12 250 264
7.200%, 10/01/13 250 264
Roseville, Pre-refunded @ 102 (RB)
7.125%, 10/01/03 (A) 2,000 2,315
Rushford, Good Sheperd Lutheran Home,
Callable 11/01/98 @ 100 (RB)
9.000%, 11/01/06 200 201
Shakopee Commercial Development (RB)
6.250%, 12/01/98 15 15
6.500%, 06/01/99 10 10
6.500%, 12/01/99 15 15
6.750%, 06/01/00 10 10
6.750%, 12/01/00 15 16
7.000%, 06/01/01 15 16
7.000%, 12/01/01 15 16
7.500%, 12/01/07 25 26
Shakopee Commercial Development,
Callable 12/01/00 @ 101 (RB)
7.250%, 06/01/02 15 16
7.250%, 12/01/02 15 16
7.350%, 06/01/03 15 16
7.350%, 12/01/03 15 16
7.350%, 06/01/04 15 16
7.350%, 12/01/04 20 21
7.500%, 06/01/05 15 16
7.500%, 12/01/05 20 21
7.500%, 06/01/06 20 21
7.500%, 12/01/06 20 21
7.500%, 06/01/07 20 21
7.500%, 06/01/08 20 21
7.500%, 12/01/08 25 26
Shakopee Independent School District #7,
Callable 02/01/08 @ 100 (GO)
4.625%, 02/01/15 1,920 1,900
4.625%, 02/01/16 2,250 2,219
South St. Paul Housing & Redevelopment
Authority, Healtheast Project,
Callable 11/01/04 @ 102 (RB)
6.750%, 11/01/09 2,000 2,194
South Washington County Independent
School District #833,
Callable 06/01/05 @ 100 (GO)
5.850%, 06/01/15 500 536
South Washington County Independent
School District #833,
Callable 12/01/06 @ 100 (COP)
5.250%, 12/01/14 500 517
Southern Minnesota
Municipal Power Agency,
Callable 01/01/03 @ 102
(RB) (MBIA)
5.000%, 01/01/12 1,000 1,024
5.750%, 01/01/18 850 925
MINNESOTA TAX FREE FUND (continued)
DESCRIPTION PAR (000) VALUE (000)
- ------------------------------------------------------------------------
Springfield Health Care,
St. John Lutheran Project,
Callable 11/01/99 @ 103 (RB)
8.500%, 11/01/19 $ 250 $ 265
St. Anthony Housing Development
Authority, Callable 05/20/06 @ 102
(RB) (GNMA) (FHA)
6.250%, 11/20/25 1,500 1,604
St. Cloud Hospital Facilities Revenue,
Callable 07/01/06 @ 101
(RB) (AMBAC)
5.000%, 07/01/12 1,000 1,035
5.000%, 07/01/15 3,000 3,063
St. Cloud Housing & Redevelopment
Authority, Pre-refunded @ 102 (RB)
7.500%, 12/01/00 (A) 500 548
St. Cloud, Series A,
Callable 02/01/02 @ 100 (RB)
8.550%, 12/01/98 (C) 5,200 5,915
St. Louis Park Mortgage Loans,
Callable 12/01/05 @ 102 (RB) (FHA)
6.250%, 12/01/28 500 538
St. Paul Housing & Redevelopment
Authority, Como Lake Project,
Series B (RB) (FHA)
7.500%, 03/01/26 (B) 1,500 1,485
St. Paul Independent School District #625,
Callable 02/01/05 @ 100 (COP)
5.250%, 02/01/15 1,000 1,034
St. Paul Metropolitan Council,
Callable 06/01/05 @ 100 (GO)
5.600%, 06/01/15 1,000 1,065
Wayzata Independent School District #284,
Callable 02/01/05 @ 100 (GO)
6.000%, 02/01/16 2,000 2,214
Wayzata Independent School District #284,
Callable 02/01/05 @ 100 (GO) (FSA)
5.950%, 02/01/13 1,000 1,087
Wayzata Independent
School District, Series A,
Callable 02/01/07 @ 100 (GO)
5.500%, 02/01/17 1,000 1,052
Western Minnesota
Municipal Power Agency,
Callable 07/30/99 @ 100
(RB) (MBIA)
9.750%, 01/01/16 410 638
Western Minnesota
Municipal Power Agency,
Callable 01/01/06 @ 102
(RB) (AMBAC)
5.400%, 01/01/09 1,000 1,090
5.500%, 01/01/12 1,000 1,086
White Bear Lake Care Center,
Callable 11/01/03 @ 102 (RB)
8.250%, 11/01/12 1,000 1,126
White Bear Lake, Lake Square Hosing,
Series A, Callable 02/01/07 @ 102
(RB) (FHA)
6.000%, 08/01/20 1,020 1,089
34 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
MINNESOTA TAX FREE FUND (concluded)
DESCRIPTION PAR (000)/SHARES VALUE (000)
- ------------------------------------------------------------------------
Worthington, Series A,
Callable 12/01/02 @ 100 (RB)
6.500%, 12/01/10 $ 380 $ 397
6.500%, 12/01/11 410 427
6.500%, 12/01/12 440 458
---------
124,521
---------
TOTAL MUNICIPAL BONDS
(Cost $114,399) 124,521
---------
MONEY MARKET FUND - 0.5%
Federated Minnesota
Municipal Cash Trust 611,592 612
---------
TOTAL MONEY MARKET FUND
(Cost $612) 612
---------
TOTAL INVESTMENTS - 98.5%
(Cost $115,011) 125,133
---------
OTHER ASSETS AND LIABILITIES, NET - 1.5% 1,959
---------
NET ASSETS:
Portfolio Capital--Class Y
($.0001 par value--2 billion authorized)
based on 712,462 outstanding shares 7,947
Portfolio Capital--Class A
($.0001 par value--2 billion authorized)
based on 10,381,812 outstanding shares 108,137
Undistributed net investment income 211
Accumulated net realized gain on investments 675
Net unrealized appreciation of investments 10,122
---------
TOTAL NET ASSETS--100.0% $127,092
---------
Net asset value, offering price, and
redemption price per share--Class Y $ 11.45
---------
Net asset value and redemption price
per share--Class A $ 11.46
Maximum sales charge of 3.00% (1) 0.35
---------
Offering price per share--Class A $ 11.81
---------
(1) The offer price is calculated by dividing the net asset value by 1 minus the
maximum sales charge of 3.00%.
(A) Pre-refunded Security--Pre-refunded issues are backed by U.S. Government
Obligations. These bonds mature at the call date indi cated. The
pre-refunded date is shown as the maturity date on the Statement of Net
Assets. See also the notes to the financial statements.
(B) Security currently in partial default and is only 93.5% guaranteed. The
effective interest rate is 7.013%.
(C) Inverse Floating Rate Security--security pays interest at rates that
increase (decrease) in the same magnitude as, or in a multiple of, a
decrease (increase) in the market rate paid on a related floating rate
security. The interest rate shown is the rate in effect as of September 30,
1998.
AMBAC--American Municipal Bond Assurance Company
COP--Certificate of Participation
FHA--Federal Housing Authority
FSA--Financial Security Assurance
GNMA--Government National Mortgage Association
GO--General Obligation
MBIA--Municipal Bond Insurance Association
RB--Revenue Bond
The accompanying notes are an integral part of the financial statements.
OREGON INTERMEDIATE TAX FREE FUND
DESCRIPTION PAR (000) VALUE (000)
- ------------------------------------------------------------------------
MUNICIPAL BONDS - 98.3%
OREGON - 97.5%
Baker County Pollution Control Revenue,
Callable 01/01/99 @ 101 (RB) (SBA)
5.850%, 07/01/01 $ 300 $ 304
5.950%, 07/01/02 315 319
6.050%, 07/01/03 335 340
Baker County Pollution Control Revenue,
Callable 04/01/99 @ 102 (RB)
5.750%, 07/01/00 285 289
Bear Creek Valley Sanitation Authority,
Callable 04/01/99 @ 100 (GO)
7.000%, 10/01/98 330 330
7.200%, 10/01/00 215 219
Beaverton (GO)
5.750%, 04/01/01 860 903
Beaverton Limited Tax, Series B,
Callable 04/01/02 @ 100 (GO)
5.000%, 04/01/03 900 937
Beaverton Water Revenue (RB) (FSA)
6.125%, 06/01/14 1,000 1,109
Chemeketa Community College,
Pre-refunded @ 100 (GO) (FGIC)
5.650%, 06/01/06 (A) 1,000 1,112
Clackamas & Washington Counties,
School District #3,
Callable 10/01/02 @ 101 (GO)
5.650%, 10/01/05 235 252
Clackamas & Washington Counties,
School District #3,
Callable 06/01/07 @ 100 (GO) (FGIC)
5.000%, 06/01/15 1,000 1,028
Clackamas & Washington Counties,
School District #3,
Pre-refunded @ 100 (GO)
5.600%, 08/01/02 (A) 1,000 1,066
Clackamas County Health Facilities
Authority, Series A,
Callable 03/01/02 @ 102
(RB) (MBIA)
5.900%, 03/01/03 885 961
Clackamas County Hospital Revenue,
Sisters Providence, Series A,
Callable 04/01/02 @ 102 (RB)
6.200%, 10/01/02 680 740
Clackamas County School District #7 (GO)
6.600%, 06/15/99 500 512
5.200%, 06/15/04 600 643
Clackamas County School District #12,
Callable 06/01/03 @ 101 (GO)
4.650%, 06/01/04 750 779
4.650%, 06/01/05 1,025 1,066
Clackamas County Service District #1,
Callable 04/01/99 @ 100 (GO)
6.600%, 10/01/99 370 375
Clackamas County Service District #1,
Sewer Revenue,
Callable 10/01/06 @ 100 (RB)
6.200%, 10/01/09 700 789
Columbia River Peoples Utility District,
Callable 06/01/06 @ 100
(GO) (AMBAC)
4.375%, 06/01/07 1,245 1,278
35 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
NET ASSETS SEPTEMBER 30, 1998
OREGON INTERMEDIATE TAX FREE FUND (continued)
DESCRIPTION PAR (000) VALUE (000)
- ------------------------------------------------------------------------
Deschutes & Jefferson Counties,
School District #2 Redmond,
Callable 06/01/03 @ 100
(GO) (MBIA)
5.400%, 06/01/05 $ 1,000 $ 1,065
Deschutes County,
Callable 12/01/06 @ 100
(GO) (MBIA)
5.250%, 12/01/09 1,000 1,078
Douglas County Hospital
Facilities Authority,
Catholic Health,
Series B, (RB) (MBIA)
5.500%, 11/15/04 505 550
Emerald Peoples Utility
District (RB) (FGIC)
7.200%, 11/01/02 1,235 1,395
Emerald Peoples Utility District,
Series B, Escrowed To Maturity
(RB) (AMBAC)
7.000%, 11/01/99 630 654
Eugene Electric Utility Revenue,
Callable 08/01/07 @ 100 (RB) (FSA)
5.000%, 08/01/11 1,305 1,369
Eugene Electric Utility Revenue,
Callable 08/01/08 @ 100 (RB) (FSA)
4.800%, 08/01/13 1,190 1,212
Eugene Electric Utility Revenue,
Continuously Callable @ 100 (RB)
6.650%, 09/01/00 1,200 1,203
Eugene Public Safety Facilities,
Callable 06/01/06 @ 100 (GO) (FGIC)
5.700%, 06/01/16 1,295 1,400
Grants Pass, Callable 06/01/99 @ 100
(GO) (AMBAC)
5.850%, 06/01/00 1,000 1,004
Gresham Sewer Revenue (RB)
4.950%, 06/01/02 615 639
Gresham Sewer Revenue,
Callable 06/01/02 @ 102 (RB)
5.250%, 06/01/05 500 531
Jackson County School District #549-C
(GO) (FSA)
6.000%, 06/01/05 1,125 1,265
Josephine County School District #7
(GO) (FGIC)
5.750%, 06/01/06 1,525 1,708
Lane County Community College (GO)
5.000%, 06/01/01 1,000 1,035
Lane County Metropolitan Waste &
Water Service (GO)
5.100%, 09/01/00 660 678
Lincoln City, Callable 01/01/99 @ 100
(GO) (AMBAC)
5.750%, 07/01/01 500 503
Lincoln City, Series A,
Callable 02/01/99 @ 100
(GO) (AMBAC)
5.000%, 02/01/03 305 306
Lincoln City School District (GO) (FGIC)
5.500%, 06/15/04 2,095 2,277
6.000%, 06/15/06 1,055 1,200
OREGON INTERMEDIATE TAX FREE FUND (continued)
DESCRIPTION PAR (000) VALUE (000)
- ------------------------------------------------------------------------
Marion & Polk Counties,
School District #24-J,
Pre-refunded @ 100 (GO)
5.600%, 10/01/02 (A) $ 635 $ 679
5.700%, 10/01/02 (A) 660 708
5.800%, 10/01/02 (A) 715 770
Marion County Office Building Facility,
Callable 11/01/98 @ 100.5
(COP) (MLO)
10.000%, 05/01/05 365 368
Marion County School District #7-J,
Callable 06/01/04 @ 101 (GO) (FSA)
5.600%, 06/01/06 860 940
Marion County Solid Waste &
Electric Revenue, Ogden Martin
System Project (RB) (AMBAC)
5.100%, 10/01/02 1,000 1,049
5.500%, 10/01/06 1,400 1,545
Medford Hospital Facilities Authority,
Escrowed to Maturity (RB) (MBIA)
6.300%, 12/01/99 400 413
Medford Hospital Facilities Authority,
Pre-refunded @ 102 (RB) (MBIA)
6.600%, 12/01/00 (A) 300 324
Medford Hospital Facilities Revenue,
Asante Health Systems,
Callable 08/15/09 @ 100 (RB) (MBIA)
5.250%, 08/15/11 1,000 1,065
5.375%, 08/15/12 1,000 1,074
Metropolitan Open Spaces Program,
Series A, Callable 09/01/03 @ 102 (GO)
5.000%, 09/01/04 1,275 1,356
Metropolitan Open Spaces Program,
Series C, Callable 09/01/03 @ 102 (GO)
5.250%, 09/01/13 1,000 1,046
Metropolitan Service District,
Oregon Convention Center,
Callable 01/01/00 @ 102 (GO)
6.000%, 07/01/02 1,300 1,361
Metropolitan Service District,
Oregon Convention Center, Series A,
Callable 01/01/00 @ 102 (GO)
5.750%, 07/01/00 1,100 1,141
6.250%, 01/01/13 500 526
Metropolitan Service District,
Waste Disposal (RB)
6.850%, 07/01/99 540 554
Metropolitan Service District,
Waste Disposal,
Continuously Callable (RB)
6.950%, 01/01/00 935 973
Metropolitan, Washington Park Zoo,
Series A (GO)
5.000%, 01/15/02 1,040 1,081
5.000%, 01/15/03 1,095 1,149
6.000%, 01/15/05 1,215 1,359
Metropolitan, Washington
Park Zoo, Series A,
Callable 01/15/07 @ 100 (GO)
5.250%, 01/15/10 1,000 1,074
Morrow County (GO) (MBIA)
5.500%, 06/01/04 795 864
5.500%, 06/01/05 835 915
Multnomah County,
Callable 08/01/08 @ 101 (COP)
4.750%, 08/01/11 2,200 2,264
36 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
OREGON INTERMEDIATE TAX FREE FUND (continued)
DESCRIPTION PAR (000) VALUE (000)
- ------------------------------------------------------------------------
Multnomah County Health
Facilities Lease, Series A,
Callable 07/01/03 @ 101
(COP) (MLO)
5.100%, 07/01/04 $ 925 $ 984
Multnomah County Juvenile Justice
Project, Series A, Pre-refunded @ 101
(COP) (MLO)
5.700%, 08/01/03 (A) 675 728
Multnomah County School District #1 (GO)
4.500%, 06/01/01 1,000 1,022
4.250%, 06/01/03 1,000 1,022
Multnomah County School District #1,
Callable 12/15/98 @ 100 (GO)
6.300%, 12/15/99 1,025 1,031
6.500%, 12/15/00 1,470 1,479
6.700%, 12/15/02 500 503
6.750%, 12/15/03 1,165 1,173
Multnomah County School District #3,
Callable 12/01/05 @ 100 (GO) (FGIC)
5.600%, 12/01/07 780 859
Multnomah County School District #4 (GO)
5.500%, 01/01/02 910 959
5.250%, 06/01/04 1,000 1,073
Multnomah County School District #4,
Callable 01/01/02 @ 100 (GO)
5.800%, 01/01/04 1,400 1,487
Multnomah County School District #7
(GO) (AMBAC)
5.875%, 06/01/02 1,000 1,074
5.500%, 06/01/06 1,000 1,104
Multnomah County, University of
Portland Educational Facilities,
Callable 04/01/07 @ 102
(RB) (AMBAC)
5.750%, 04/01/10 2,245 2,534
Northern Wasco County Hydroelectric
Utility, McNary Dam Fishway Project,
Callable 12/01/03 @ 102 (RB)
4.750%, 12/01/06 470 493
Oregon State (GO)
6.000%, 08/01/02 2,100 2,272
6.000%, 02/01/03 1,000 1,090
Oregon State Administrative Services,
Callable 11/01/05 @ 101
(COP) (MLO) (MBIA)
5.000%, 11/01/06 1,350 1,446
Oregon State Alternative Energy, Private Act,
Callable 07/01/04 @ 100 (GO)
5.300%, 07/01/05 900 967
Oregon State Board of Higher Education,
Series B, Callable 10/15/02 @ 100 (GO)
6.250%, 10/15/12 1,375 1,495
Oregon State Department of
Administrative Services,
Callable 11/01/07 @ 101
(COP) (AMBAC)
5.000%, 11/01/11 840 882
Oregon State Department of Administrative
Services, Series C (COP) (MLO) (MBIA)
4.800%, 05/01/02 1,145 1,185
OREGON INTERMEDIATE TAX FREE FUND (continued)
DESCRIPTION PAR (000) VALUE (000)
- ------------------------------------------------------------------------
Oregon State Department of
Administrative Services,
Series C, Callable 05/01/06 @ 101
(COP) (MLO) (MBIA)
5.750%, 05/01/07 $ 1,635 $ 1,830
Oregon State Department of
General Services, Series F,
Escrowed to Maturity
(COP) (MLO) (AMBAC)
6.800%, 09/01/99 1,000 1,031
Oregon State Department of
Transportation, Regional Light
Rail Fund, Callable 06/01/04 @ 102
(RB) (MBIA)
6.000%, 06/01/05 2,000 2,246
Oregon State Economic
Development Department,
Callable 01/01/02 @ 102 (RB)
4.850%, 01/01/04 555 582
Oregon State Economic
Development Department,
Series A, Callable 01/01/06 @ 102
(RB) (MBIA)
5.000%, 01/01/11 500 525
Oregon State Equipment Finance Program,
Series I (COP) (MLO) (MBIA)
5.050%, 11/01/99 735 748
Oregon State Fair & Exposition Center,
Callable 10/01/01 @ 103 (RB)
5.400%, 10/01/06 1,010 1,073
Oregon State Health, Housing,
Educational, & Cultural Facilities,
George Fox University, Series A,
Callable 03/01/07 @ 102 (RB)
5.400%, 03/01/09 395 430
5.450%, 03/01/10 415 451
Oregon State Health, Housing,
Educational, & Cultural Facilities,
Lewis & Clark College (RB) (MBIA)
5.250%, 10/01/02 550 581
5.300%, 10/01/03 630 674
Oregon State Health, Housing,
Educational, & Cultural Facilities,
Reed College, Series A,
Callable 07/01/06 @ 102 (RB)
5.375%, 07/01/15 2,000 2,092
Oregon State Health Sciences,
Zero Coupon Bond (RB) (MBIA)
0.000%, 07/01/21 12,065 4,017
Oregon State Housing &
Community Services,
Callable 07/01/03 @ 102 (RB)
5.750%, 07/01/12 1,500 1,559
Oregon State Housing & Community
Services, Series A,
Callable 07/01/04 @ 102 (RB)
6.400%, 07/01/18 1,280 1,374
Oregon State Housing & Community
Services, Single Family Mortgages,
Series A, Callable 07/01/03 @ 102 (RB)
4.900%, 07/01/05 1,075 1,109
37 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
NET ASSETS SEPTEMBER 30, 1998
OREGON INTERMEDIATE TAX FREE FUND (continued)
DESCRIPTION PAR (000) VALUE (000)
- ------------------------------------------------------------------------
Oregon State Housing & Community
Services, Single Family
Mortgages, Series A,
Callable 07/01/06 @ 102 (RB)
6.000%, 07/01/16 $ 1,200 $ 1,295
Oregon State Housing & Community
Services, Single Family
Mortgages, Series B,
Callable 07/01/03 @ 102 (RB)
5.100%, 07/01/07 465 480
Oregon State Pollution Control,
Callable 11/01/07 @ 100 (GO)
4.875%, 11/01/11 455 473
Oregon State Pollution Control, Series C,
Callable 06/01/03 @ 100 (GO)
5.625%, 06/01/13 870 904
Polk, Marion & Benton Counties, School
District #13-J (GO) (FGIC)
5.500%, 12/01/03 955 1,033
Polk, Marion & Benton Counties,
School District #13-J,
Callable 12/01/04 @ 101
(GO) (FGIC)
5.500%, 12/01/05 570 625
Port Morrow Pollution Control,
Pre-refunded @ 100 (RB)
6.375%, 04/01/08 (A) 1,050 1,141
Port of St. Helens Pollution Control
Authority, Portland General Electric,
Series A (RB)
4.800%, 04/01/10 2,500 2,561
Port Portland International Airport,
Series 7A (RB) (MBIA)
6.125%, 07/01/00 800 834
6.200%, 07/01/01 500 533
Port Portland International Airport,
Series 7A, Callable 07/01/01 @ 101
(RB) (MBIA)
6.500%, 07/01/04 500 539
Port Portland International Airport,
Series 9A, Callable 07/01/01 @ 102
(RB) (FGIC)
5.400%, 07/01/04 1,775 1,880
Port Portland, Series A (GO)
4.500%, 03/01/06 1,000 1,037
Port Portland Unlimited Tax, Series A (GO)
4.300%, 03/01/03 1,005 1,028
Portland, Pre-refunded @ 102 (GO)
6.600%, 10/01/98 (A) 565 576
Portland, Series C,
Callable 12/01/98 @ 100 (GO)
5.500%, 12/01/00 250 251
Portland Community College District,
Callable 07/01/07 @ 101
(GO) (AMBAC)
5.500%, 07/01/10 2,850 3,152
Portland Community College District,
Series A, Pre-refunded @ 100 (GO)
6.000%, 07/01/02 (A) 1,500 1,619
Portland Housing Authority,
Callable 01/01/09 @ 100 (RB)
5.000%, 01/01/19 2,000 1,987
5.100%, 01/01/27 1,000 1,005
OREGON INTERMEDIATE TAX FREE FUND (continued)
DESCRIPTION PAR (000) VALUE (000)
- ------------------------------------------------------------------------
Portland Housing Authority,
Riverwood Project,
Pre-refunded @ 100 (RB)
6.000%, 01/01/06 (A) $ 1,170 $ 1,316
Portland Sewer Systems Revenue,
Callable 06/01/07 @ 100
(RB) (FGIC)
5.000%, 06/01/09 2,250 2,390
Portland Sewer Systems Revenue,
Pre-refunded @ 101 (RB)
6.150%, 06/01/04 (A) 1,000 1,125
Portland Sewer Systems Revenue,
Series A (RB)
5.550%, 06/01/04 1,085 1,178
Portland Sewer Systems Revenue,
Series B, Callable 04/01/02 @ 102 (RB)
5.500%, 04/01/04 600 644
Portland Sewer Systems,
Callable 06/01/07 @ 100 (RB) (FGIC)
5.000%, 06/01/08 2,000 2,136
5.000%, 06/01/15 2,000 2,055
Salem (GO)
6.750%, 11/01/98 600 602
Salem, Series A,
Callable 01/01/01 @ 101 (GO)
5.600%, 01/01/03 1,410 1,477
Salem Education Facilities,
Willamette University (RB)
5.500%, 04/01/04 500 542
Salem Education Facilities,
Willamette University,
Callable 04/01/04 @ 101 (RB)
5.700%, 04/01/05 500 549
Salem-Keizer School District #24-J,
Callable 06/01/08 @ 100 (GO) (FSA)
5.100%, 06/01/12 2,000 2,110
Salem Water & Sewer,
Callable 06/01/06 @ 100
(RB) (MBIA)
5.500%, 06/01/11 1,000 1,084
Salem Water & Sewer Revenue
(RB) (MBIA)
6.000%, 06/01/06 1,135 1,291
Tri-County Metropolitan Transportation
District, Series A,
Callable 07/01/02 @ 101 (GO)
5.600%, 07/01/03 2,000 2,146
5.700%, 07/01/04 1,450 1,559
5.800%, 07/01/05 1,310 1,410
Tri-County Metropolitan
Transportation District, Series A,
Callable 08/01/02 @ 101 (RB)
5.450%, 08/01/04 1,000 1,064
Tri-County Service District (GO)
5.000%, 09/01/02 1,570 1,629
Tualatin Hills, Ore Park & Recreational
District (GO) (FGIC)
5.750%, 03/01/13 870 987
Tualatin Valley Water District,
Water Revenue,
Callable 06/01/08 @ 100
(RB) (FSA)
5.000%, 06/01/12 1,000 1,045
38 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
OREGON INTERMEDIATE TAX FREE FUND (continued)
DESCRIPTION PAR (000) VALUE (000)
- ------------------------------------------------------------------------
Tualatin Valley Water District,
Wolf Creek, Series A,
Callable 12/01/03 @ 100 (RB)
4.700%, 12/01/04 $ 1,140 $ 1,188
Umatilla County School District
(GO) (FSA)
4.450%, 12/01/12 1,075 1,091
Washington & Clackamas Counties,
School District #23-J (GO) (FGIC)
5.750%, 06/01/06 1,055 1,182
Washington County (GO)
5.850%, 12/01/01 685 730
Washington County Criminal Justice
Facilities, Pre-refunded @ 100 (GO)
5.625%, 12/01/04 (A) 850 931
6.000%, 12/01/04 (A) 1,000 1,116
Washington County
School District #1-J (GO)
5.000%, 11/01/13 1,375 1,454
5.000%, 11/01/14 1,000 1,051
Washington County School District #3
(GO) (MBIA)
5.750%, 11/01/04 800 884
Washington County School District #15,
Pre-refunded @ 101 (GO) (FGIC)
5.800%, 12/01/04 (A) 575 637
Washington County School
District #48-J (GO)
5.900%, 09/01/01 1,065 1,132
Washington County School District #48-J,
Series B,
Callable 06/01/00 @ 100 (GO)
5.700%, 06/01/02 780 805
Washington County
School District #88-J,
Callable 06/01/05 @ 100
(GO) (FSA)
5.700%, 06/01/06 1,000 1,104
Washington County Unified
Sewerage Agency
(RB) (FGIC)
5.750%, 10/01/08 1,000 1,139
Washington County Unified
Sewerage Agency,
Callable 10/01/06 @ 101
(RB) (FGIC)
5.200%, 10/01/09 1,300 1,404
Washington County Unified
Sewerage Agency,
Series 1 (RB) (AMBAC)
5.700%, 10/01/04 1,250 1,376
Washington County Unified
Sewerage Agency,
Series 1, Pre-refunded @ 100
(RB) (AMBAC)
5.800%, 10/01/04 (A) 2,000 2,208
Wilsonville (GO)
6.900%, 01/01/99 175 177
Wilsonville, Callable 01/01/99 @ 100 (GO)
7.000%, 01/01/00 190 192
7.100%, 01/01/01 200 202
7.200%, 01/01/02 215 217
7.300%, 01/01/03 235 237
Wilsonville, Callable 06/01/08 @ 100 (GO)
5.000%, 12/01/10 1,325 1,378
OREGON INTERMEDIATE TAX FREE FUND (concluded)
DESCRIPTION PAR (000)/SHARES VALUE (000)
- ------------------------------------------------------------------------
Yamhill County School District #29-J,
Callable 06/01/04 @ 101 (GO) (FSA)
5.600%, 06/01/06 $ 630 $ 688
Yamhill County School District #40
(GO) (FGIC)
6.000%, 06/01/08 600 690
---------
182,710
---------
PUERTO RICO - 0.8%
Commonwealth of Puerto Rico (GO) (MBIA)
6.250%, 07/01/08 1,250 1,472
---------
TOTAL MUNICIPAL BONDS
(Cost $174,958) 184,182
---------
RELATED PARTY MONEY MARKET FUND - 0.8%
First American Tax Free
Obligations Fund (B) 1,432,861 1,433
---------
TOTAL RELATED PARTY MONEY MARKET FUND
(Cost $1,433) 1,433
---------
TOTAL INVESTMENTS - 99.1%
(Cost $176,391) 185,615
---------
OTHER ASSETS AND LIABILITIES, NET - 0.9% 1,768
---------
NET ASSETS:
Portfolio Capital--Class Y
($.0001 par value--2 billion authorized)
based on 18,304,165 outstanding shares 177,676
Undistributed net investment income 3
Accumulated net realized gain on investments 480
Net unrealized appreciation of investments 9,224
---------
TOTAL NET ASSETS--100.0% $187,383
---------
Net asset value, offering price, and
redemption price per share--Class Y $ 10.24
---------
(A) Pre-refunded Security--Pre-refunded issues are backed by U.S. Government
Obligations. These bonds mature at the call date indicated. The pre-refunded
date is shown as the maturity date on the Statement of Net Assets. See also
the notes to the financial statements.
(B) This money market fund is advised by U.S. Bank National Association who also
serves as advisor for this fund. See also the notes to the financial
statements.
AMBAC--American Municipal Bond Assurance Company
COP--Certificate of Participation
FGIC--Financial Guaranty Insurance Corporation
FSA--Financial Security Assurance
GO--General Obligation
MBIA--Municipal Bond Insurance Association
MLO--Municipal Lease Obligation
RB--Revenue Bond
SBA--Small Business Administration
The accompanying notes are an integral part of the financial statements.
39 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
NET ASSETS SEPTEMBER 30, 1998
TAX FREE FUND
DESCRIPTION PAR (000) VALUE (000)
- ------------------------------------------------------------------------
MUNICIPAL BONDS - 96.9%
ALASKA - 2.6%
Alaska State Housing Finance Authority,
Series A, Callable 06/01/07 @ 102
(RB) (MBIA)
5.900%, 12/01/19 $ 1,000 $ 1,063
---------
COLORADO - 2.9%
Montrose County Health Care,
Callable 11/01/02 @ 102 (RB)
8.250%, 11/01/19 1,000 1,181
---------
FLORIDA - 0.8%
Clay County Development
Authority, Cargill Project,
Callable 03/01/02 @ 102 (GO)
6.400%, 03/01/11 300 326
---------
ILLINOIS - 13.7%
Illinois State Development Finance
Authority, Pollution Control, Series A,
Callable 07/01/06 @ 102 (RB)
7.375%, 07/01/21 500 582
Illinois State Education Facilities
Authority, Augustana College,
Callable 10/01/07 @ 100 (RB) (CLE)
5.875%, 10/01/17 500 538
Illinois State Health Facilities
Authority, Series A,
Callable 06/01/02 @ 104 (MBIA)
9.517%, 06/19/15 (C) 1,000 1,208
Illinois State Toll Highway Authority,
Series A (RB)
6.300%, 01/01/12 1,000 1,164
Illinois State University Improvements,
Callable 02/01/02 @ 100 (COP)
7.550%, 02/01/16 110 121
7.600%, 02/01/17 115 126
7.700%, 02/01/20 100 110
7.700%, 02/01/22 100 109
Rock Island, Friendship Manor Project (RB)
7.000%, 06/01/06 1,100 1,185
Rock Island, Friendship Manor Project,
Callable 06/01/03 @ 102 (RB)
7.200%, 06/01/13 400 430
---------
5,573
---------
INDIANA - 10.7%
Hammond Multi School Building
First Mortgage, Series B,
Callable 07/15/03 @ 102 (RB)
6.000%, 01/15/13 1,000 1,138
Indiana State Municipal Power Agency,
Power Supply (RB) (MBIA)
6.000%, 01/01/11 1,000 1,154
Indiana State Municipal Power Agency,
Power Supply, Series B (RB) (MBIA)
6.000%, 01/01/12 1,000 1,156
TAX FREE FUND (continued)
DESCRIPTION PAR (000) VALUE (000)
- ------------------------------------------------------------------------
Lake County Redevelopment Authority
(RB) (MBIA)
6.500%, 02/01/16 $ 800 $ 906
---------
4,354
---------
MICHIGAN - 5.2%
Detroit Tax Increment, Series A,
Callable 05/01/07 @ 101.5
5.375%, 05/01/18 1,500 1,561
Lakeview Community Schools (GO) (FGIC)
5.750%, 05/01/16 500 545
---------
2,106
---------
MINNESOTA - 18.6%
Brooklyn Center Health Care Facilities
Authority, Callable 12/01/03 @ 102 (RB)
7.600%, 12/01/18 400 436
Fergus Falls Health Care Facilities Authority,
Series A, Callable 11/01/04 @ 102 (RB)
7.000%, 11/01/19 500 537
Glencoe Hospital Revenue Board,
Callable 08/01/04 @ 102 (RB)
6.750%, 04/01/16 485 512
Hopkins Multifamily Housing, Hopkins
Renaissance Project,
Callable 04/01/07 @102 (RB)
6.250%, 04/01/15 500 538
Maplewood Care Centers Project,
Callable 10/01/04 @ 102 (RB)
7.500%, 10/01/24 500 551
Plymouth, Mission Farms Nursing
Home Project,
Callable 08/01/04 @ 102 (RB)
7.500%, 08/01/24 500 550
Rochester Health Care Facilities
Authority, Series A,
Callable 11/15/02 @ 104
7.915%, 11/15/15 (C) 1,000 1,178
Roseville Housing Facilities Authority,
Pre-refunded @ 102 (RB)
7.125%, 10/01/03 (A) 1,000 1,157
St. Anthony Housing Development
Authority, Callable 05/20/06 @ 102
(RB) (GNMA) (FHA)
6.250%, 11/20/25 1,000 1,069
St. Paul Housing & Redevelopment
Authority, Como Lake Project,
Series B (RB) (FHA)
7.500%, 03/01/26 (B) 500 495
White Bear Lake Care Center,
Callable 11/01/03 @ 102 (RB)
8.250%, 11/01/12 500 563
---------
7,586
---------
MONTANA - 0.7%
Sidney Nursing Home,
Callable 06/01/00 @ 102 (RB)
9.000%, 06/01/11 250 267
---------
40 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
TAX FREE FUND (continued)
DESCRIPTION PAR (000) VALUE (000)
- ------------------------------------------------------------------------
NEW MEXICO - 8.8%
New Mexico Finance Authority,
Mortgage Backed
Securities (RB) (GNMA)
6.400%, 07/01/15 $ 1,175 $ 1,260
New Mexico Finance Authority,
Mortgage Backed
Securities, Series D (RB)
6.200%, 07/01/15 2,150 2,335
---------
3,595
---------
NORTH DAKOTA - 10.2%
Mercer County Pollution Control,
Antelope Valley Station
(RB) (AMBAC)
7.200%, 06/30/13 3,300 4,168
---------
SOUTH DAKOTA - 2.7%
South Dakota Health & Education
Facilities Authority,
Callable 07/01/06 @ 102
(RB) (MBIA)
6.000%, 07/01/14 1,000 1,106
---------
TEXAS - 5.9%
Fort Bend Independent School District,
Callable 02/15/05 @ 100 (GO)
5.000%, 02/15/14 500 509
Harts Bluff School District (COP)
8.600%, 11/15/98 50 50
8.800%, 11/15/00 50 50
Houston Employment Community
(RB) (COP)
8.100%, 08/01/01 25 26
8.150%, 02/01/02 35 36
8.150%, 08/01/02 35 36
8.200%, 02/01/03 35 36
8.200%, 08/01/03 35 36
8.250%, 08/01/04 40 41
8.300%, 02/01/05 40 41
8.300%, 08/01/05 45 47
8.350%, 02/01/06 20 21
8.350%, 08/01/06 50 52
8.400%, 08/01/07 25 26
8.450%, 08/01/08 55 57
Houston Employment Community,
Emnora Lane Project (COP)
7.850%, 05/01/04 10 10
7.850%, 11/01/04 25 25
7.900%, 05/01/05 25 25
7.900%, 11/01/05 25 25
8.000%, 11/01/06 30 30
8.050%, 05/01/07 20 20
North Central Health Facility, Series A,
Pre-refunded @ 102 (RB) (MBIA)
9.720%, 06/01/01 (A) (C) 1,000 1,181
---------
2,380
---------
TAX FREE FUND (continued)
DESCRIPTION PAR (000)/SHARES VALUE (000)
- ------------------------------------------------------------------------
UTAH - 3.7%
Carbon County Roads Project (RB)
7.900%, 08/01/04 $ 300 $ 311
Utah State Intermountain Power Agency,
Power Supply, Series A
(RB) (AMBAC)
6.500%, 07/01/11 1,000 1,203
---------
1,514
---------
WASHINGTON - 1.9%
Washington State Public Power Supply (RB)
7.125%, 07/01/16 600 762
---------
WEST VIRGINIA - 3.0%
West Virginia State, Series D (GO) (FGIC)
6.500%, 11/01/26 1,000 1,208
---------
WISCONSIN - 5.5%
Dallas, Nursing Home Project,
Callable 05/01/03 @ 102 (RB) (FHA)
6.250%, 05/01/19 1,015 1,054
Watertown Community
Development Authority,
Callable 03/01/00 @ 103 (RB)
8.500%, 03/01/19 95 101
Wisconsin State Health &
Education Facilities, Franciscan
Skemp Medical Center (RB)
6.125%, 11/15/15 1,000 1,105
---------
2,260
---------
TOTAL MUNICIPAL BONDS
(Cost $35,413) 39,449
---------
RELATED PARTY MONEY MARKET FUND - 1.6%
First American Tax Free
Obligations Fund (D) 642,670 643
---------
TOTAL RELATED PARTY MONEY MARKET FUND
(Cost $643) 643
---------
TOTAL INVESTMENTS - 98.5%
(Cost $36,056) 40,092
---------
OTHER ASSETS AND LIABILITIES, NET - 1.5% 614
---------
NET ASSETS:
Portfolio Capital--Class Y
($.0001 par value--2 billion authorized)
based on 30,774 outstanding shares 351
Portfolio Capital--Class A
($.0001 par value--2 billion authorized)
based on 3,499,824 outstanding shares 35,836
Undistributed net investment income 28
Accumulated net realized gain on investments 455
Net unrealized appreciation of investments 4,036
---------
TOTAL NET ASSETS--100.0% $ 40,706
---------
41 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
NET ASSETS SEPTEMBER 30, 1998
TAX FREE FUND (concluded)
DESCRIPTION VALUE
- ------------------------------------------------------------------------
Net asset value, offering price, and
redemption price per share--Class Y $ 11.54
---------
Net asset value and redemption price
per share--Class A $ 11.53
Maximum sales charge of 3.00% (1) 0.36
---------
Offering price per share--Class A $ 11.89
---------
(1) The offer price is calculated by dividing the net asset value by 1 minus the
maximum sales charge of 3.00%.
(A) Pre-refunded Security--Pre-refunded issues are backed by U.S. Government
Obligations. These bonds mature at the call date indicated. The pre-refunded
date is shown as the maturity date on the Statement of Net Assets. See also
the notes to the financial statements.
(B) Security currently in partial default and is only 93.5% guaranteed. The
effective interest rate is 7.013%.
(C) Inverse Floating Rate Security--security pays interest at rates that
increase (decrease) in the same magnitude as, or in a multiple of, a
decrease (increase) in the market rate paid on a floating rate security. The
interest rate shown is the rate in effect as of September 30, 1998.
(D) This money market fund is advised by U.S. Bank National Association who also
serves as advisor for this fund. See also the notes to the financial
statements.
AMBAC--American Municipal Bond Assurance Company
CLE--Connie Lee
COP--Certificate of Participation
FGIC--Financial Guaranty Insurance Corporation
FHA--Federal Housing Authority
GNMA--Government National Mortgage Association
GO--General Obligation
MBIA--Municipal Bond Insurance Association
RB--Revenue Bond
The accompanying notes are an integral part of the financial statements.
42 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
(This page has been left blank intentionally.)
43 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
OPERATIONS FOR THE PERIOD ENDED SEPTEMBER 30, 1998 IN THOUSANDS
<TABLE>
<CAPTION>
CALIFORNIA INTERMEDIATE COLORADO INTERMEDIATE INTERMEDIATE
TAX FREE FUND TAX FREE FUND TAX FREE FUND
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 1,733 $ 3,091 $ 22,587
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 1,733 3,091 22,587
==============================================================================================================================
EXPENSES:
Investment advisory fees 244 422 3,150
Less: Waiver of investment advisory fees (91) (133) (723)
Administrator fees 38 66 496
Transfer agent fees 29 37 39
Amortization of organizational costs 1 2 --
Custodian fees 10 18 135
Directors' fees 1 1 7
Registration fees 9 2 --
Professional fees 1 2 16
Printing 2 3 22
Distribution fees - Class A -- 10 17
Less: Waiver of distribution fees - Class A -- (10) (17)
Other -- 2 8
- ------------------------------------------------------------------------------------------------------------------------------
NET EXPENSES BEFORE EXPENSES PAID INDIRECTLY 244 422 3,150
Less: Expenses paid indirectly -- -- --
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL NET EXPENSES 244 422 3,150
==============================================================================================================================
INVESTMENT INCOME - NET 1,489 2,669 19,437
==============================================================================================================================
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS - NET:
Net realized gain on investments 103 79 2,358
Net change in unrealized appreciation of investments 1,040 1,563 9,075
- ------------------------------------------------------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS 1,143 1,642 11,433
==============================================================================================================================
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS 2,632 4,311 30,870
==============================================================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
44 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
<TABLE>
<CAPTION>
MINNESOTA
INTERMEDIATE MINNESOTA OREGON INTERMEDIATE
TAX FREE FUND TAX FREE FUND TAX FREE FUND TAX FREE FUND
- ----------------------------------------------------------------------------------
15,730 7,810 9,307 2,692
- ----------------------------------------------------------------------------------
15,730 7,810 9,307 2,692
==================================================================================
<S> <C> <C> <C>
2,205 688 1,271 240
(518) (50) (316) (32)
347 107 200 41
34 44 29 29
3 -- 1 1
94 21 55 10
5 9 3 8
2 37 9 31
11 34 6 32
15 30 8 19
22 354 -- 133
(22) (71) -- (27)
7 8 5 7
- ----------------------------------------------------------------------------------
2,205 1,211 1,271 492
-- (2) -- (3)
- ----------------------------------------------------------------------------------
2,205 1,209 1,271 489
==================================================================================
13,525 6,601 8,036 2,203
==================================================================================
940 829 570 526
6,149 3,157 3,153 897
- ----------------------------------------------------------------------------------
7,089 3,986 3,723 1,423
==================================================================================
20,614 10,587 11,759 3,626
==================================================================================
</TABLE>
45 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
CHANGES IN NET ASSETS IN THOUSANDS
<TABLE>
<CAPTION>
CALIFORNIA INTERMEDIATE COLORADO INTERMEDIATE INTERMEDIATE
TAX FREE FUND TAX FREE FUND TAX FREE FUND
- ----------------------------------------------------------------------------------------------------------------------------------
10/1/97 8/8/97 10/1/97 10/1/96 10/1/97 10/1/96
to to to to to to
9/30/98 9/30/97(3) 9/30/98 9/30/97 9/30/98 9/30/97
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Investment income - net $ 1,489 $ 196 $ 2,669 $ 2,478 $ 19,437 $ 10,029
Net realized gain on investments 103 10 79 90 2,358 2,619
Net change in unrealized appreciation of investments 1,040 103 1,563 1,193 9,075 1,523
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 2,632 309 4,311 3,761 30,870 14,171
- ----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment income - net:
Class Y (1,484) (196) (2,484) (2,308) (19,134) (9,897)
Class A -- -- (181) (174) (301) (138)
Net realized gain on investments:
Class Y (6) (5) (84) (256) (2,516) (412)
Class A -- -- (7) (20) (31) (17)
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (1,490) (201) (2,756) (2,758) (21,982) (10,464)
==================================================================================================================================
CAPITAL SHARE TRANSACTIONS (1):
Class Y:
Proceeds from sales 8,085 1,910 12,182 11,557 85,034 35,896
Shares issued in connection with acquisition of
Common Trust Fund Assets -- 32,213 -- -- -- 369,839
Reinvestment of distributions 24 5 20 6 2,792 607
Payments for redemptions (5,260) (949) (8,391) (7,051) (66,846) (45,984)
- ----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from
Class Y transactions 2,849 33,179 3,811 4,512 20,980 360,358
- ----------------------------------------------------------------------------------------------------------------------------------
Class A:
Proceeds from sales 78 1 2,052 3,124 8,876 2,642
Reinvestment of distributions -- -- 114 116 152 78
Payments for redemptions -- -- (2,165) (1,978) (3,834) (1,549)
- ----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from
class A transactions 78 1 1 1,262 5,194 1,171
- ----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from
capital share transactions 2,927 33,180 3,812 5,774 26,174 361,529
- ----------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets 4,069 33,288 5,367 6,777 35,062 365,236
NET ASSETS AT BEGINNING OF PERIOD 33,288 -- 58,565 51,788 434,848 69,612
==================================================================================================================================
NET ASSETS AT END OF PERIOD(2) $ 37,357 $ 33,288 $ 63,932 $ 58,565 $ 469,910 $ 434,848
==================================================================================================================================
(1)CAPITAL SHARE TRANSACTIONS:
Class Y:
Shares issued 799 191 1,141 1,102 7,826 3,359
Shares issued in connection with acquisition of
Common Trust Fund Assets -- 3,221 -- -- -- 34,393
Shares issued in lieu of cash distributions 2 1 2 -- 257 56
Shares redeemed (521) (95) (787) (673) (6,165) (4,259)
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL CLASS Y TRANSACTIONS 280 3,318 356 429 1,918 33,549
==================================================================================================================================
Class A:
Shares issued 8 -- 193 298 816 247
Shares issued in lieu of cash distributions -- -- 10 11 14 7
Shares redeemed -- -- (203) (189) (353) (145)
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL CLASS A TRANSACTIONS 8 -- -- 120 477 109
==================================================================================================================================
NET INCREASE (DECREASE) FROM SHARE TRANSACTIONS 288 3,318 356 549 2,395 33,658
==================================================================================================================================
</TABLE>
46 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
<TABLE>
<CAPTION>
MINNESOTA INTERMEDIATE MINNESOTA OREGON INTERMEDIATE
TAX FREE FUND TAX FREE FUND TAX FREE FUND TAX FREE FUND
- -----------------------------------------------------------------------------------------------------
10/1/97 10/1/96 10/1/97 10/1/96 10/1/97 8/8/97 10/1/97 10/1/96
to to to to to to to to
9/30/98 9/30/97 9/30/98 9/30/97 9/30/98 9/30/97(3) 9/30/98 9/30/97
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 13,525 $ 11,836 $ 6,601 $ 6,688 $ 8,036 $ 1,199 $ 2,203 $ 2,395
940 956 829 1,170 570 183 526 192
6,149 1,670 3,157 2,527 3,153 678 897 1,643
- -----------------------------------------------------------------------------------------------------
20,614 14,462 10,587 10,385 11,759 2,060 3,626 4,230
- -----------------------------------------------------------------------------------------------------
(13,130) (11,553) (426) (80) (8,033) (1,199) (2) --
(369) (287) (5,936) (6,588) -- -- (2,173) (2,386)
(1,041) (310) (51) -- (273) -- -- --
(26) (14) (754) (602) -- -- (237) (83)
- -----------------------------------------------------------------------------------------------------
(14,566) (12,164) (7,167) (7,270) (8,306) (1,199) (2,412) (2,469)
=====================================================================================================
51,692 41,072 1,242 8,983 20,945 2,652 351 --
-- 201,901 -- -- -- 180,293 -- --
367 241 309 39 397 87 -- --
(37,457) (41,655) (2,626) -- (19,481) (1,824) -- --
- -----------------------------------------------------------------------------------------------------
14,602 201,559 (1,075) 9,022 1,861 181,208 351 --
- -----------------------------------------------------------------------------------------------------
4,768 4,643 10,848 25,338 -- -- 1,327 14,202
206 104 5,175 4,792 -- -- 1,738 1,581
(2,271) (1,339) (25,945) (33,275) -- -- (13,562) (13,841)
- -----------------------------------------------------------------------------------------------------
2,703 3,408 (9,922) (3,145) -- -- (10,497) 1,942
- -----------------------------------------------------------------------------------------------------
17,305 204,967 (10,997) 5,877 1,861 181,208 (10,146) 1,942
- -----------------------------------------------------------------------------------------------------
23,353 207,265 (7,577) 8,992 5,314 182,069 (8,932) 3,703
304,575 97,310 134,669 125,677 182,069 -- 49,638 45,935
=====================================================================================================
$ 327,928 $ 304,575 $ 127,092 $ 134,669 $ 187,383 $ 182,069 $ 40,706 $ 49,638
=====================================================================================================
5,109 3,981 111 805 2,079 264 31 --
-- 20,251 -- -- -- 18,029 -- --
36 24 28 3 39 9 -- --
(3,705) (4,155) (234) -- (1,934) (182) -- --
- -----------------------------------------------------------------------------------------------------
1,440 20,101 (95) 808 184 18,120 31 --
=====================================================================================================
470 467 964 2,314 -- -- 117 1,302
20 10 460 438 -- -- 154 144
(224) (133) (2,310) (3,021) -- -- (1,199) (1,266)
- -----------------------------------------------------------------------------------------------------
266 344 (886) (269) -- -- (928) 180
=====================================================================================================
1,706 20,445 (981) 539 184 18,120 (897) 180
=====================================================================================================
</TABLE>
(2) Includes undistributed net investment income (000) of $4 and $0 for
California Intermediate Tax Free Fund, $4 and $0 for Colorado Intermediate
Tax Free Fund, $12 and $11 for Intermediate Tax Free Income Fund, $26 and $0
for Minnesota Intermediate Tax Free Fund, $211 and $0 for Minnesota Tax Free
Fund, $3 and $0 for Oregon Tax Free Fund, and $28 and $0 for Tax Free Fund,
at September 30, 1998 and September 30, 1997, respectively.
(3) The California Intermediate Tax Free Fund and Oregon Intermediate Tax Free
Fund commenced operations on August 8, 1997.
47 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
FINANCIAL HIGHLIGHTS FOR THE PERIODS ENDED SEPTEMBER 30
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
REALIZED AND
NET ASSET UNREALIZED DIVIDENDS
VALUE NET GAINS OR FROM NET DISTRIBUTIONS
BEGINNING INVESTMENT (LOSSES) ON INVESTMENT FROM
OF PERIOD INCOME INVESTMENTS INCOME CAPITAL GAINS
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CALIFORNIA INTERMEDIATE TAX FREE FUND
CLASS Y
1998 $ 10.03 $ 0.43 $ 0.33 $ (0.43) $ --
1997(1) 10.00 0.06 0.03 (0.06) --
CLASS A
1998 $ 10.04 $ 0.43 $ 0.33 $ (0.43) $ --
1997(1) 10.00 0.06 0.04 (0.06) --
COLORADO INTERMEDIATE TAX FREE FUND
CLASS Y
1998 $ 10.61 $ 0.47 $ 0.29 $ (0.47) $ (0.02)
1997 10.42 0.48 0.24 (0.48) (0.05)
1996 10.51 0.49 (0.04) (0.49) (0.05)
1995 10.16 0.48 0.36 (0.49) --
1994(2) 10.00 0.22 0.16 (0.22) --
CLASS A
1998 $ 10.61 $ 0.47 $ 0.30 $ (0.47) $ (0.02)
1997 10.42 0.48 0.24 (0.48) (0.05)
1996 10.51 0.49 (0.04) (0.49) (0.05)
1995 10.15 0.49 0.36 (0.49) --
1994(2) 10.00 0.21 0.16 (0.22) --
INTERMEDIATE TAX FREE FUND
CLASS Y
1998 $ 10.82 $ 0.47 $ 0.27 $ (0.47) $ (0.06)
1997 10.65 0.47 0.23 (0.47) (0.06)
1996 10.72 0.46 -- (0.46) (0.07)
1995 10.28 0.49 0.43 (0.48) --
1994(3) 10.89 0.29 (0.61) (0.29) --
CLASS A
1998 $ 10.84 $ 0.47 $ 0.27 $ (0.47) $ (0.06)
1997 10.66 0.47 0.24 (0.47) (0.06)
1996 10.72 0.46 0.01 (0.46) (0.07)
1995 10.28 0.49 0.43 (0.48) --
1994 10.92 0.44 (0.57) (0.44) (0.07)
MINNESOTA INTERMEDIATE TAX FREE FUND (FORMERLY MINNESOTA INSURED INTERMEDIATE TAX FREE FUND)
CLASS Y
1998 $ 10.06 $ 0.43 $ 0.24 $ (0.43) $ (0.04)
1997 9.91 0.44 0.18 (0.44) (0.03)
1996 9.92 0.45 0.02 (0.45) (0.03)
1995 9.59 0.45 0.33 (0.45) --
1994(4) 10.00 0.25 (0.41) (0.25) --
CLASS A
1998 $ 10.09 $ 0.43 $ 0.24 $ (0.43) $ (0.04)
1997 9.91 0.44 0.21 (0.44) (0.03)
1996 9.92 0.45 0.02 (0.45) (0.03)
1995 9.58 0.46 0.33 (0.45) --
1994(4) 10.00 0.25 (0.42) (0.25) --
MINNESOTA TAX FREE FUND (B)
CLASS Y
1998 $ 11.14 $ 0.60 $ 0.36 $ (0.59) $ (0.06)
1997(5) 11.16 0.10 (0.02) (0.10) --
CLASS A
1998 $ 11.15 $ 0.57 $ 0.36 $ (0.56) $ (0.06)
1997 10.89 0.57 0.31 (0.57) (0.05)
1996 10.81 0.59 0.07 (0.58) --
1995 10.28 0.66 0.53 (0.66) --
1994 11.43 0.61 (0.95) (0.61) (0.20)
OREGON INTERMEDIATE TAX FREE FUND
CLASS Y
1998 $ 10.05 $ 0.45 $ 0.21 $ (0.45) $ (0.02)
1997(1) 10.00 0.07 0.05 (0.07) --
TAX FREE FUND (B)
CLASS Y
1998(6) $ 11.31 $ 0.10 $ 0.22 $ (0.09) $ --
CLASS A
1998 $ 11.21 $ 0.55 $ 0.36 $ (0.54) $ (0.05)
1997 10.81 0.54 0.42 (0.54) (0.02)
1996 10.69 0.56 0.12 (0.56) --
1995 10.22 0.60 0.47 (0.60) --
1994 11.76 0.57 (1.21) (0.57) (0.33)
- --------------------------------------------------------------------------------------
</TABLE>
+ Returns are for the period indicated and have not been annualized.
(A) Excluding sales charges.
(B) The financial highlights for the Minnesota Tax Free Fund and Tax Free Fund
as set forth herein include the historical financial highlights of the Piper
Minnesota Tax-Exempt Fund Class A shares and Class Y shares, and the Piper
National Tax-Exempt Fund Class A shares. The assets of the Piper Minnesota
Tax-Exempt Fund and Piper National Tax-Exempt Fund were acquired by
Minnesota Tax Free Fund and Tax Free Fund on July 31, 1998. In connection
with such acquisition, (i) Class A shares of the Piper Minnesota Tax-Exempt
Fund and Piper National Tax-Exempt Fund were exchanged for Class A shares of
the Minnesota Tax Free Fund and Tax Free Fund, respectively, (ii) Class Y
shares of the Piper Minnesota Tax-Exempt Fund were exchanged for Class Y
shares of the Minnesota Tax Free Fund. On July 31, 1998 the fund's advisor
changed from Piper Capital Management, Inc. to U.S. Bank N.A.
The accompanying notes are an integral part of the financial statements.
48 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
<TABLE>
<CAPTION>
RATIO OF
RATIO OF NET EXPENSES TO
NET ASSET RATIO OF INVESTMENT AVERAGE
VALUE NET ASSETS EXPENSES TO INCOME TO NET ASSETS PORTFOLIO
END OF TOTAL END OF AVERAGE AVERAGE (EXCLUDING TURNOVER
PERIOD RETURN (A) PERIOD (000) NET ASSETS NET ASSETS WAIVERS) RATE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 10.36 7.80% $ 37,275 0.70% 4.27% 0.96% 22%
10.03 0.92 + 33,287 0.69 4.14 1.11 3
$ 10.37 7.80% $ 82 0.70% 4.22% 1.21% 22%
10.04 1.02 + 1 0.69 4.48 1.36 3
$ 10.88 7.33% $ 59,631 0.70% 4.43% 0.92% 19%
10.61 7.11 54,378 0.70 4.55 0.91 11
10.42 4.39 48,927 0.70 4.69 0.93 20
10.51 8.47 50,071 0.70 4.84 1.02 19
10.16 3.76 + 7,281 0.69 4.51 4.71 4
$ 10.89 7.43% $ 4,301 0.70% 4.43% 1.17% 19%
10.61 7.11 4,187 0.70 4.55 1.16 11
10.42 4.39 2,861 0.70 4.69 1.18 20
10.51 8.57 2,189 0.70 4.83 1.27 19
10.15 3.66 + 693 0.69 4.51 4.96 4
$ 11.03 7.05% $460,714 0.70% 4.32% 0.86% 27%
10.82 6.75 431,000 0.67 4.40 0.93 66
10.65 4.35 66,994 0.66 4.35 0.92 53
10.72 9.15 46,025 0.67 4.73 1.05 68
10.28 (2.91)+ 6,168 0.45 4.48 2.20 52
$ 11.05 7.04% $ 9,196 0.70% 4.31% 1.11% 27%
10.84 6.84 3,849 0.67 4.41 1.18 66
10.66 4.45 2,618 0.66 4.35 1.17 53
10.72 9.15 983 0.67 4.71 1.30 68
10.28 (1.25) 1,128 0.59 4.13 2.78 52
$ 10.26 6.82% $317,598 0.70% 4.30% 0.86% 24%
10.06 6.42 297,122 0.70 4.47 0.90 20
9.91 4.80 93,394 0.70 4.53 0.93 19
9.92 8.34 61,693 0.70 4.76 1.00 38
9.59 (1.58)+ 20,272 0.67 4.57 1.59 22
$ 10.29 6.80% $ 10,330 0.70% 4.30% 1.11% 24%
10.09 6.72 7,453 0.70 4.49 1.15 20
9.91 4.80 3,916 0.70 4.52 1.18 19
9.92 8.46 2,219 0.70 4.74 1.25 38
9.58 (1.68)+ 1,508 0.67 4.57 1.84 22
$ 11.45 $ 8.83%+ $ 8,155 0.78% 5.79% 0.82% 16%
11.14 0.72 + 9,010 0.75 5.73 0.75 17
$ 11.46 8.58% $118,937 0.95% 5.05% 1.01% 16%
11.15 8.32 125,659 0.95 5.17 1.01 17
10.89 6.24 125,677 0.90 5.38 0.99 35
10.81 11.38 133,857 0.91 5.80 0.99 30
10.28 (3.14) 162,468 0.89 5.61 0.99 44
$ 10.24 6.66% $187,383 0.70% 4.43% 0.87% 20%
10.05 1.17 + 182,069 0.70 4.55 1.09 4
$ 11.54 2.83%+ $ 355 0.85% 5.61% 0.91% 7%
$ 11.53 8.41% $ 40,351 1.10% 4.84% 1.16% 7%
11.21 9.09 49,638 1.11 4.91 1.17 28
10.81 6.42 45,935 1.03 5.15 1.13 43
10.69 10.30 57,061 1.01 5.37 1.09 28
10.22 (5.72) 67,949 0.93 5.25 1.03 65
- ---------------------------------------------------------------------------------------------------------
</TABLE>
(1) Commenced operations on August 8, 1997. All ratios for the period have been
annualized.
(2) Commenced operations on April 4, 1994. All ratios for the period have been
annualized.
(3) Class Y (formerly Institutional Class C) shares have been offered since
February 4, 1994. All ratios for the period have been annualized.
(4) Commenced operations on February 25, 1994. All ratios for the period have
been annualized.
(5) Class Y (formerly Institutional Class C) shares have been offered since
August 1, 1997. All ratios for the period have been annualized.
(6) Class Y shares have been offered since July 31, 1998. All ratios for the
period have been annualized.
49 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
NOTES TO
FINANCIAL STATEMENTS SEPTEMBER 30, 1998
1 ORGANIZATION
The First American California Intermediate Tax Free Fund, Colorado
Intermediate Tax Free Fund, Intermediate Tax Free Fund, Minnesota
Intermediate Tax Free Fund (formerly Minnesota Insured Intermediate Tax
Free Fund), Minnesota Tax Free Fund, Oregon Intermediate Tax Free Fund,
and Tax Free Fund (collectively, the "Funds") are mutual funds offered by
First American Investment Funds, Inc. ("FAIF"). The First American Limited
Term Income Fund, Intermediate Term Income Fund, Intermediate Government
Bond Fund, Fixed Income Fund, Adjustable Rate Mortgage Securities Fund,
Strategic Income Fund, Balanced Fund, Real Estate Securities Fund, Equity
Income Fund, Equity Index Fund, Large Cap Value Fund (formerly Stock
Fund), Large Cap Growth Fund (formerly Diversified Growth Fund), Mid Cap
Value Fund (formerly Special Equity Fund), Regional Equity Fund, Small Cap
Value Fund, Small Cap Growth Fund (formerly Emerging Growth Fund), Micro
Cap Value Fund, International Index Fund, International Fund, Health
Sciences Fund, Technology Fund, Emerging Markets Fund, and Mid Cap Growth
Fund are also funds offered by FAIF but are not included in this report.
FAIF is registered under the Investment Company Act of 1940, as amended,
as an open-end investment management company. FAIF's articles of
incorporation permit the board of directors to create additional funds in
the future.
These FAIF Funds offer Class A and Class Y (formerly Class C) shares.
Class A shares are sold with a front-end sales charge. Class Y shares have
no sales charge and are offered only to qualifying institutional
investors.
The Funds' prospectuses provide a description of each Fund's investment
objectives, policies and strategies. All classes of shares 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 - Security valuations for FAIF Fund investments are
furnished by an independent pricing service that has been approved by the
board of directors. 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.
SECURITY TRANSACTIONS AND INVESTMENT INCOME - The Funds record security
transactions on the trade date of the security purchase or sale. Interest
income, including amortization of bond premium and discount is recorded on
the accrual basis. Security gains and losses are determined on the basis
of identified cost, which is the same basis used for federal income tax
purposes.
50 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
California Intermediate Tax Free Fund, Colorado Intermediate Tax Free
Fund, Intermediate Tax Free Fund, Minnesota Intermediate Tax Free Fund,
Minnesota Tax Free Fund, Oregon Intermediate Tax Free Fund, and Tax Free
Fund declare and pay income dividends monthly.
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. These differences are primarily
due to wash sales. The character of distributions made during the year
from net investment income or net realized gains and timing of
distributions 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.
EXPENSES - Expenses that are directly related to one of the Funds are
charged directly to that Fund. Other operating expenses are prorated to
the Funds on the basis of relative net assets. Class specific expenses,
such as the 12b-1 fees, are borne by that class. Income, other expenses
and realized and unrealized gains and losses of a Fund are allocated to
the respective class on the basis of the relative net assets each day.
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.
HISTORICAL FINANCIAL STATEMENT INFORMATION - The financial information
presented for Minnesota Tax Free Fund and Tax Free Fund prior to July 31,
1998 is that of Piper Minnesota Tax-Exempt Fund and Piper National
Tax-Exempt Fund respectively. The historical financial information of the
Piper Funds was carried over to the newly formed FAF Funds.
3 FEES AND EXPENSES
Pursuant to an investment advisory agreement (the Agreement), U.S. Bank
National Association (the Advisor) manages each Fund's assets and
furnishes related office facilities, equipment, research and personnel.
The Agreement requires each Fund to pay the Adviser a monthly fee based
upon average daily net assets. The fee for each of the FAIF funds is equal
to an annual rate of .70% of the average daily net assets.
51 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
NOTES TO
FINANCIAL STATEMENTS SEPTEMBER 30, 1998
The Funds may invest in First American Funds, Inc. (FAF), 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 Advisor reimburses each FAIF fund an amount equal to
the investment advisory fee earned by FAF related to such investments.
Through a separate contractual agreement, U.S. Bank National Association,
an affiliate of the Advisor, serves as the Funds' custodian.
SEI Investments Distribution Co. (SIDCO) and SEI Investments Management
Corporation, (SIMC) serve as distributor and administrator of the Funds,
respectively. Under the distribution plan, each of the Funds pay SIDCO a
monthly distribution fee of .25% of each Fund's average daily net assets
of the Class A shares which may be used by SIDCO to provide compensation
for sales support and distribution activities. No distribution fees are
paid by Class Y shares. SIMC provides administrative services, including
certain accounting, legal and shareholder services, at an annual rate of
.12% of each FAIF fund's average daily net assets, with a minimum annual
fee of $50,000 for the Minnesota Tax Free Fund and Tax Free Fund. To the
extent that the aggregate net assets of the First American Family of Funds
exceed $8 billion, the annual rate of each FAIF fund is reduced to .105%
for their relative share of the excess net assets. U.S. Bank N.A. assists
the Administrator and provides sub-administration services for the Funds.
For these services, the Administrator compensates the sub-administrator at
an annual rate of up to 0.05% of each Fund's average daily net assets. The
fees for the year ended September 30, 1998 were approximately 0.022% of
average daily net assets. Under this agreement, SIMC paid $173,000 to U.S.
Bank N.A. for the period ended September 30, 1998 for the Funds included
in this annual report.
In addition to the investment advisory and management fees, custodian
fees, distribution fees, administrator and transfer agent fees, each Fund
is responsible for paying most other operating expenses including
organization costs, fees and expenses of outside directors, registration
fees, printing shareholder reports, legal, auditing, insurance and other
miscellaneous expenses.
For the period ended September 30, 1998, legal fees and expenses were paid
to a law firm of which the Secretary of the Funds is a partner.
DST Systems, Inc. provides transfer agent services for the Funds.
Effective October 1, 1998, FAF has appointed U.S. Bank N.A. as servicing
agent to perform certain transfer agent and dividend disbursing agent
services with respect to the Class A shares of the Funds held through
accounts at U.S. Bank and its affiliates.
For the period ended September 30, 1998, sales charges retained by SIDCO
for distributing the First American Family of Funds' shares were
approximately $291,000.
From October 1, 1997 to July 31, 1998 the Minnesota Tax Free Fund
(formerly Piper Minnesota Tax-Exempt Fund) and Tax Free Fund (formerly
Piper National Tax-Exempt Fund) had an investment management agreement
with Piper Capital Management Incorporated (Piper Capital) under which
Piper Capital managed the Funds' assets and furnished related office
facilities, equipment, research, and personnel. The agreement required
that the funds pay Piper Capital a monthly fee based on average daily net
assets. The fee for each fund was equal to an annual rate of 0.50% of the
first $250 million in net assets, 0.45% of the next $250 million and 0.40%
of net assets in excess of $500 million.
52 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
FORMER PIPER FUND AGREEMENTS - From October 1, 1997 to July 31, 1998
Minnesota Tax Free Fund (formerly Piper Minnesota Tax-Exempt Fund) and Tax
Free Fund (formerly Piper National Tax-Exempt Fund) paid distribution and
service fees to Piper Jaffray Inc. The fees were accrued daily and paid
quarterly at an annual rate of 0.24% of average daily net assets on Class
A shares after voluntary waivers. No distribution fees were paid by
Minnesota Tax-Exempt Fund Class Y shares.
Piper Jaffray and Piper Trust Company (Piper Trust) performed various
transfer and dividend disbursing agent services for accounts held at the
respective company. The fees were paid monthly to Piper Jaffray and Piper
Trust for providing these services, were equal to an annual rate of $7.50
per active shareholder account and $1.60 per closed account. The Tax Free
Fund and Minnesota Tax Free Fund paid $9,000 and $19,000 respectively
under this agreement.
Investors Fiduciary Trust Company served as custodian, transfer and
dividend disbursing agent, and accounting agent for the Tax Free Fund and
Minnesota Tax Free Fund through July 31, 1998.
Effective August 1, 1998, all FAIF agreements were adopted for the Funds.
4 INVESTMENT SECURITY TRANSACTIONS
During the period ended September 30, 1998, 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
California Intermediate Tax Free Fund $ 10,122 $ 7,341
Colorado Intermediate Tax Free Fund 16,477 10,587
Intermediate Tax Free Fund 150,772 113,751
Minnesota Intermediate Tax Free Fund 90,613 72,817
Minnesota Tax Free Fund 20,184 32,042
Oregon Intermediate Tax Free Fund 35,904 37,731
Tax Free Fund 2,943 12,804
--------------------------------------------------------------------------
At September 30, 1998 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 September 30, 1998 is as
follows (000):
AGGREGATE GROSS AGGREGATE GROSS
APPRECIATION DEPRECIATION NET
--------------------------------------------------------------------------
California Intermediate Tax Free Fund $ 2,268 $ -- $ 2,268
Colorado Intermediate Tax Free Fund 4,259 -- 4,259
Intermediate Tax Free Fund 22,836 (135) 22,701
Minnesota Intermediate Tax Free Fund 16,759 -- 16,759
Minnesota Tax Free Fund 10,137 (15) 10,122
Oregon Intermediate Tax Free Fund 9,238 (14) 9,224
Tax Free Fund 4,038 -- 4,038
--------------------------------------------------------------------------
53 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
NOTES TO
FINANCIAL STATEMENTS SEPTEMBER 30, 1998
5 CONCENTRATION OF CREDIT RISK
The California Intermediate Tax Free Fund, Colorado Intermediate Tax Free
Fund, Intermediate Tax Free Fund, Minnesota Intermediate Tax Free Fund,
Minnesota Tax Free Fund, Oregon Intermediate Tax Free Fund, and Tax Free
Fund invest in debt instruments of municipal issuers. Although these funds
monitor investment concentration, the issuers' ability to meet their
obligations may be affected by economic developments in a specific state
or region.
The Funds invest in securities which include revenue bonds, tax and
revenue anticipation notes, and general obligation bonds. At September 30,
1998, the percentage of portfolio investments by each revenue source was
as follows (unaudited):
<TABLE>
<CAPTION>
CALIFORNIA COLORADO MINNESOTA OREGON
INTERMEDIATE INTERMEDIATE INTERMEDIATE INTERMEDIATE MINNESOTA INTERMEDIATE
TAX FREE TAX FREE TAX FREE TAX FREE TAX FREE TAX FREE TAX FREE
FUND FUND FUND FUND FUND FUND FUND
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue Bonds:
Education 7% 7% 7% 2% 14% 3% 4%
Hospital Bonds 5 8 9 11 16 6 15
Nursing Home Bonds -- -- -- -- 9 -- 17
Transportation Bonds 4 6 5 2 -- 5 3
Utility Bonds 18 12 15 12 4 17 10
Pollution Control Bonds -- 3 1 -- -- 1 12
Public Facility Bonds 11 2 4 3 3 1 3
Housing Bonds 7 3 10 16 18 4 13
Other 13 11 7 14 3 4 16
General Obligation: 34 48 40 39 33 59 6
Anticipation Notes 1 -- 2 1 -- -- 1
----------------------------------------------------------------------------------------------
100% 100% 100% 100% 100% 100% 100%
----------------------------------------------------------------------------------------------------------------------
</TABLE>
The rating of long-term debt as a percentage of total value of investments
at September 30, 1998 is as follows (unaudited):
<TABLE>
<CAPTION>
STANDARD & CALIFORNIA COLORADO MINNESOTA OREGON
POOR'S/ INTERMEDIATE INTERMEDIATE INTERMEDIATE INTERMEDIATE MINNESOTA INTERMEDIATE
MOODY'S TAX FREE TAX FREE TAX FREE TAX FREE TAX FREE TAX FREE TAX FREE
RATINGS: FUND FUND FUND FUND FUND FUND FUND
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
AAA/Aaa 66% 54% 63% 72% 31% 51% 61%
AA/Aa 22 34 25 20 37 29 8
A/A 11 8 9 4 5 19 8
BBB/Baa -- 2 -- -- 6 -- 2
D -- -- -- -- 1 -- 1
NR -- 2 3 4 20 1 21
---------------------------------------------------------------------------------------------------------
100% 100% 100% 100% 100% 100% 100%
-------------------------------------------------------------------------------------------------------------------------
</TABLE>
Securities rated by only one agency are shown in that category. Securities
rated by both agencies are shown with their lowest rating.
54 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
6 COMMON TRUST FUND CONVERSIONS
On December 6, 1996, certain common trust funds of the Advisor and its
affiliates were converted into FAIF. The funds that were involved in the
conversion are as follows:
<TABLE>
<CAPTION>
COMMON TRUST FUND FAIF FUND
----------------------------------------------------------------------------------
<S> <C>
First Common Tax-Free National Bond Fund Intermediate Tax Free Fund
First Common Tax-Free Minnesota Bond Fund Minnesota Intermediate Tax Free Fund
----------------------------------------------------------------------------------
</TABLE>
The assets, which consisted of securities and related receivables, were
converted on a tax-free basis. The number of Class Y shares issued for
each Fund and the net assets of each Fund (including net unrealized gains
and losses) prior to reorganization were as follows:
<TABLE>
<CAPTION>
COMMON TRUST FUND ASSETS NET UNREALIZED GAIN
-------------------------------------------------------------------------------
<S> <C> <C>
First Common Tax Free National Bond Fund $105,222,994 $3,002,948
First Common Tax Free Minnesota Bond Fund 201,900,453 6,992,690
-------------------------------------------------------------------------------
<CAPTION>
FAIF FUND NET ASSETS SHARES ISSUED
-------------------------------------------------------------------------------
Intermediate Tax Free Fund $ 70,908,408 9,833,928
Minnesota Intermediate Tax Free Fund 105,299,568 20,250,804
-------------------------------------------------------------------------------
</TABLE>
On February 21, 1997 a second common trust fund conversion took place
where the First Tier Tax-Exempt Income Fund was converted into the
Intermediate Tax Free Fund. The assets, which consisted of securities and
related receivables, were converted on a tax-free basis. 7,428,033 Class Y
shares of the Intermediate Tax Free Fund were issued at the time of
conversion. The net assets of the common trust fund were $80,284,045.
Included in this amount was $2,176,951 of unrealized gains. The net assets
of the Intermediate Tax Free Fund prior to reorganization were
$176,465,910.
On August 8, 1997 a third conversion took place. Certain common trust
funds of the Advisor and its affiliates were converted into FAIF. The
Funds involved in the conversion are as follows:
<TABLE>
<CAPTION>
COMMON TRUST FUND FAIF FUND
------------------------------------------------------------------------------
<S> <C>
First Tier California Bond California Intermediate Tax Free Fund
US Bancorp California Municipal Bond California Intermediate Tax Free Fund
US Bancorp Oregon Municipal Oregon Intermediate Tax Free Fund
US Bancorp National Municipal Intermediate Tax Free Fund
------------------------------------------------------------------------------
</TABLE>
The assets which consisted of securities, and related receivable were
converted on a tax-free basis. The number of shares issued for each Fund
and the net assets of each Fund (including net unrealized gains and
losses) prior to reorganization were as follows:
<TABLE>
<CAPTION>
COMMON TRUST FUND ASSETS NET UNREALIZED GAIN
----------------------------------------------------------------------------
<S> <C> <C>
US Bancorp California Municipal Bond $ 10,891,465 $ 387,008
First Tier California Bond 21,321,364 738,717
US Bancorp Oregon Municipal 180,293,091 5,392,729
US Bancorp National Municipal 184,332,386 6,237,844
----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FAIF FUND NET ASSETS SHARES ISSUED
----------------------------------------------------------------------------
<S> <C> <C>
California Intermediate Tax Free Fund $ -- 3,221,283
Oregon Intermediate Tax Free Fund -- 18,029,309
Intermediate Tax Free Fund 253,893,940 17,131,263
----------------------------------------------------------------------------
</TABLE>
The value and number of shares issued in exchange for each common trust
fund's assets and shares outstanding in the tax-free conversions are
included in the capital share transactions of Class Y in the Statement of
Changes in Net Assets for each respective Fund.
55 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
NOTES TO
FINANCIAL STATEMENTS SEPTEMBER 30, 1998
7 PIPER MERGER
The Board of Directors and shareholders of the Piper Funds approved a
reorganization of certain Piper Funds into FAIF which took place at the
close of business on July 31, 1998:
<TABLE>
<CAPTION>
PIPER ACQUIRED FUND FAIF ACQUIRING FUND
-------------------------------------------------------------------------------
<S> <C>
National Tax Exempt Tax Free (New FAIF Fund)
Minnesota Tax Exempt Minnesota Tax Free (New FAIF Fund)
-------------------------------------------------------------------------------
</TABLE>
Under the Agreement and Plan of Reorganization the Piper Class A shares
were exchanged for Class A shares of FAIF, and Piper Class Y shares were
exchanged for Class Y shares of FAIF.
The net assets prior to reorganization and shares issued and redeemed were
as follows:
<TABLE>
<CAPTION>
ACQUIRING FUND'S ACQUIRED FUND'S
FAIF FUND NET ASSETS SHARES ISSUED SHARES REDEEMED
-------------------------------------------------------------------------------
<S> <C> <C> <C>
Tax Free $ -- 3,635,037 3,635,037
Minnesota Tax Free -- 11,152,396 11,152,396
-------------------------------------------------------------------------------
</TABLE>
Included in the net assets from the Piper Funds were the following
components:
<TABLE>
<CAPTION>
UNDISTRIBUTED
(DISTRIBUTIONS IN
EXCESS OF) NET ACCUMULATED NET UNREALIZED
PIPER FUND PAID IN CAPITAL INVESTMENT INCOME NET REALIZED GAIN APPRECIATION NET ASSETS
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
National Tax-Exempt $ 37,374,741 $ (2,106) $397,386 $3,315,331 $41,085,352
Minnesota Tax-Exempt 116,743,329 85,000 823,340 7,829,650 125,481,319
-------------------------------------------------------------------------------------------------------------
</TABLE>
56 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
NOTES TO
FINANCIAL STATEMENTS SEPTEMBER 30, 1998
THE INFORMATION SET FORTH BELOW IS FOR EACH FUND'S FISCAL YEAR AS REQUIRED
BY FEDERAL LAWS. SHAREHOLDERS, HOWEVER, MUST REPORT DISTRIBUTIONS ON A
CALENDAR YEAR BASIS FOR INCOME TAX PURPOSES, WHICH MAY INCLUDE
DISTRIBUTIONS FOR PORTIONS OF TWO FISCAL YEARS OF A FUND. ACCORDINGLY, THE
INFORMATION NEEDED BY SHAREHOLDERS FOR INCOME TAX PURPOSES WILL BE SENT TO
THEM IN EARLY 1999. PLEASE CONSULT YOUR TAX ADVISOR FOR PROPER TREATMENT
OF THIS INFORMATION.
Dear First American Shareholders:
For the fiscal year ended September 30, 1998, each Fund has designated
long term capital gains and exempt income with regard to distributions
paid during the year as follows:
<TABLE>
<CAPTION>
LONG TERM MEDIUM TERM ORDINARY
CAPITAL GAINS CAPITAL GAINS INCOME TAX TOTAL
DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS EXEMPT DISTRIBUTIONS
FUND (TAX BASIS) (TAX BASIS) (TAX BASIS) INTEREST (TAX BASIS)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
California Intermediate Tax Free 1% 0% 0% 99% 100%
Colorado Intermediate Tax Free 1 2 1 96 100
Intermediate Tax Free 6 3 3 88 100
Minnesota Intermediate Tax Free 4 3 0 93 100
Minnesota Tax Free 8 0 2 90 100
Oregon Tax Free 3 0 0 97 100
Tax Free 8 0 1 91 100
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
57 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
(This page has been left blank intentionally.)
58 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
(This page has been left blank intentionally.)
59 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
FIRST AMERICAN INVESTMENT FUNDS, INC.
BOARD OF DIRECTORS
MR. DAVID BENNETT
Director of the First American Investment Funds, Inc.
Of counsel with Gray, Plant, Mooty, Mooty and Bennett,
Owner of three privately-held businesses
- -----------------------------------------------------------------------------
MR. ROBERT DAYTON
Director of the First American Investment Funds, Inc.
Chief Executive Officer of Okabena Company
- -----------------------------------------------------------------------------
MR. ROGER GIBSON
Director of the First American Investment Funds, Inc.
Vice President of North America-Mountain Region for United Airlines
- -----------------------------------------------------------------------------
MR. ANDREW HUNTER III
Director of the First American Investment Funds, Inc.
Chairman of Hunter Keith Industries
- -----------------------------------------------------------------------------
MR. LEONARD KEDROWSKI
Director of the First American Investment Funds, Inc.
Owner and President of Executive Management Consulting, Inc.
- -----------------------------------------------------------------------------
MR. ROBERT SPIES
Director of the First American Investment Funds, Inc.
Retired Vice President, U.S. Bank National Association
- -----------------------------------------------------------------------------
MR. JOSEPH STRAUSS
Director of the First American Investment Funds, Inc.
Former Chairman of First American Funds,
Owner and President of Strauss Management Company
- -----------------------------------------------------------------------------
MS. VIRGINIA STRINGER
Chairman of the First American Investment Funds, Inc.
Owner and President of Strategic Management Resources, Inc.
- -----------------------------------------------------------------------------
<PAGE>
FIRST AMERICAN INVESTMENT FUNDS, INC.
1 Freedom Valley Drive
Oaks, Pennsylvania 19456
INVESTMENT ADVISOR
FIRST AMERICAN ASSET MANAGEMENT,
A DIVISION OF U.S. BANK NATIONAL ASSOCIATION
601 Second Avenue South
Minneapolis, Minnesota 55402
CUSTODIAN
U.S. BANK NATIONAL ASSOCIATION
180 East Fifth Street
St. Paul, Minnesota 55101
ADMINISTRATOR
SEI INVESTMENTS MANAGEMENT
CORPORATION
1 Freedom Valley Drive
Oaks, Pennsylvania 19456
TRANSFER AGENT
DST SYSTEMS, INC.
330 West Ninth Street
Kansas City, Missouri 64105
DISTRIBUTOR
SEI INVESTMENTS DISTRIBUTION CO.
1 Freedom Valley Drive
Oaks, Pennsylvania 19456
INDEPENDENT AUDITORS
KPMG PEAT MARWICK LLP
90 South Seventh Street
Minneapolis, Minnesota 55402
COUNSEL
DORSEY & WHITNEY LLP
220 South Sixth Street
Minneapolis, Minnesota 55402
This report and the financial statements contained herein are submitted for the
general information of the shareholders of the corporation. The report is not
authorized for distribution to prospective investors in the corporation unless
preceded or accompanied by an effective prospectus for each of the funds
included. Shares in the funds are not deposits or obligations of, or guaranteed
or endorsed by, U.S. Bank or any of its affiliates. Such shares are also not
federally insured by the Federal Deposit Insurance Corporation, the Federal
Reserve Board, or any other agency. Investment in the shares involve investment
risk including loss of principal amount invested.
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.
- --------------------------------------------------------------------------------
[LOGO] FIRST AMERICAN
THE POWER OF DISCIPLINED INVESTING(R)
11/1998 115-99
FIRST AMERICAN
INVESTMENT FUNDS, INC.
EQUITY
FUNDS
[PHOTOS]
[GRAPHIC] 98
1998 ANNUAL REPORT
[LOGO] FIRST AMERICAN
THE POWER OF DISCIPLINED INVESTING(R)
<PAGE>
FIRST AMERICAN FAMILY OF FUNDS INVESTMENTS FOR EVERY GOAL
HIGHER RISK/RETURN First American Funds offer a full range
POTENTIAL of investment strategies to help you
create a personalized, diversified
portfolio. Supported by extensive
research and a highly developed team
approach to investment decision making,
First American Funds can help build a
winning strategy for any investor.
SECTOR FUNDS
HEALTH SCIENCES
REAL ESTATE SECURITIES
TECHNOLOGY
INTERNATIONAL FUNDS
EMERGING MARKETS
INTERNATIONAL
INTERNATIONAL INDEX
SMALL CAP FUNDS
MICRO CAP VALUE
REGIONAL EQUITY
SMALL CAP GROWTH
SMALL CAP VALUE
MID CAP FUNDS
MID CAP GROWTH
MID CAP VALUE
LARGE CAP FUNDS
BALANCED
EQUITY INCOME
EQUITY INDEX
LARGE CAP GROWTH
LARGE CAP VALUE
STRATEGY FUNDS
BOND FUNDS
TAX FREE BOND FUNDS
MONEY MARKET FUNDS
LOWER RISK/RETURN
POTENTIAL
TABLE OF CONTENTS
- --------------------------------------------
MESSAGE TO SHAREHOLDERS 1
- --------------------------------------------
STRATEGIES FOR UNCERTAIN MARKETS 2
- --------------------------------------------
INDEPENDENT AUDITORS' REPORT 4
- --------------------------------------------
LARGE CAP FUNDS OVERVIEW
- --------------------------------------------
ECONOMIC REVIEW 6
- --------------------------------------------
FINANCIAL REVIEW 13
- --------------------------------------------
MID CAP FUNDS OVERVIEW
- --------------------------------------------
ECONOMIC REVIEW 36
- --------------------------------------------
FINANCIAL REVIEW 40
- --------------------------------------------
SMALL CAP FUNDS OVERVIEW
- --------------------------------------------
ECONOMIC REVIEW 48
- --------------------------------------------
FINANCIAL REVIEW 54
- --------------------------------------------
INTERNATIONAL FUNDS OVERVIEW
- --------------------------------------------
ECONOMIC REVIEW 70
- --------------------------------------------
FINANCIAL REVIEW 75
- --------------------------------------------
SECTOR FUNDS OVERVIEW
- --------------------------------------------
ECONOMIC REVIEW 90
- --------------------------------------------
FINANCIAL REVIEW 95
- --------------------------------------------
NOTES TO FINANCIAL STATEMENTS 104
- --------------------------------------------
NOTICE TO SHAREHOLDERS 118
- --------------------------------------------
NOT FDIC INSURED. NO BANK GUARANTEE. MAY LOSE VALUE.
<PAGE>
MESSAGE TO SHAREHOLDERS SEPTEMBER 30, 1998
DEAR SHAREHOLDERS:
On behalf of the board of directors of First American Investment Funds,
Inc., I would like to extend a warm welcome to all new shareholders and
express my appreciation to our long-term shareholders for your
continued support.
Investors will remember this past year as one of the most volatile
periods in recent history. During the first half of 1998, the financial
markets staged a remarkable rally that sent the Dow Jones Industrial
Average to record highs.
In mid-July, the markets suddenly reversed course, all but erasing
the year's gains. Since then, the markets have fluctuated, with
dramatic price swings becoming commonplace.
During challenging times, it's more important than ever to focus
on the fundamentals, including diversification among equity, bond and
money market mutual funds to create balanced portfolios. Please take a
few moments to read the article on the next page, "Strategies for
Uncertain Markets," to learn how asset allocation can help tame
volatile returns and produce more consistency in all market
environments. You may also want to meet with your investment
professional to review your long-term goals and fine-tune your
portfolio accordingly.
To provide further diversification opportunities, we recently
introduced six new funds: Minnesota Tax Free, Tax Free, Adjustable Rate
Mortgage Securities, Strategic Income, Mid Cap Growth, and Emerging
Markets. We currently offer 38 mutual funds within our fund family to
meet the needs of any investor.
As you review this annual report, you will notice that we have
organized our funds into their appropriate asset class: Large Cap, Mid
Cap, Small Cap, International and Sector. We introduce each asset class
with an overview of market conditions followed by comments from
portfolio managers regarding how those conditions affected each fund.
We hope that this format will prove useful in helping you understand
your investment.
Again, the board of directors thanks you for your support and
confidence in the First American family of funds.
Sincerely,
/s/ VIRGINIA L. STRINGER
VIRGINIA L. STRINGER
Chairman
First American Investment Funds, Inc.
1 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STRATEGIES FOR UNCERTAIN MARKETS
- --------------------------------------------------------------------------------
After eight consecutive years of unprecedented economic growth and prosperity,
the third quarter of 1998 provided investors with a textbook example of market
volatility. A host of bad news, from Russia's default on its debts to Asia's
worsening recession and its potential impact on the U.S. economy, sent equity
markets into a tailspin. Over the span of one month, the Dow plummeted nearly 20
percent from its mid-July high of 9337. Even though the Dow rallied early in the
fourth quarter, some investors wonder if the market's golden days are over.
Experienced investors don't attempt to predict how markets will perform in the
coming months. They recognize that markets move in cycles and that an investment
lifetime will include both bull and bear markets--and perhaps several of them
over the decades. Regardless of market volatility, they remind themselves that
stocks and bonds remain the best long-term investments.
DIVERSIFICATION IS THE NAME OF THE GAME
- --------------------------------------------------------------------------------
While it's easy to be tempted by the promise of a single investment based on its
short-term performance, experienced investors also spread their dollars among
several types of investments (stocks, bonds and cash) as well as different
investment styles (large cap stocks, small cap stocks, international, growth,
value, etc.) to limit risk and earn more balanced returns. This diversification
strategy--known as asset allocation--alleviates confusion by helping you ride
out periods of uncertainty more successfully. It's a disciplined investment
approach that allows you to weather changes in the market.
Asset allocation is also one of the most important variables in the performance
of your mutual fund investments. When you diversify among different types of
assets, you benefit from using a range of investments, some of which will
perform better than others in different market conditions. In tandem, these
investments can potentially yield better results over time.
DIVERSIFICATION CAN HELP REDUCE MARKET VOLATILITY IN YOUR PORTFOLIO
- -------------------------------------------------------------------
Any particular asset class may perform better-or worse-than another in a given
year. By blending multiple asset classes at the same time, you can limit risk
and improve long-term performance opportunities.
The following is a bar chart depicting the annual return percentages of asset
classes.
[BAR CHART]
Lehman Brothers Standard & Poor's Morgan Stanley
Aggregate 500 Composite Russell 2000 EAFE Index
(Bonds) (Large Cap) (Small Stocks) (Int'l. Stocks)
------- ----------- -------------- ---------------
1987 2.75 5.25 -8.77 23.19
1988 7.89 16.61 24.89 26.90
1989 14.53 31.69 16.24 9.01
1990 8.95 -3.10 -19.51 -24.71
1991 16 30.47 46.05 10.19
1992 7.40 7.62 18.41 -13.89
1993 9.75 10.08 18.91 30.50
1994 -2.92 1.32 -1.82 6.24
1995 18.48 37.58 28.44 9.42
1996 3.61 22.96 16.49 4.4
1997 9.65 33.36 22.36 0.24
Expressed as annual return percentages from 1987 to 1997, Source: Micropal. The
above rankings among fund's investment categories are based on index average
annual total return figures. Past performance does not guarantee future returns.
- --------------------------------------------------------------------------------
<PAGE>
STRATEGIES FOR UNCERTAIN MARKETS
- --------------------------------------------------------------------------------
TAKING A SMART STRATEGY ONE STEP FURTHER
- --------------------------------------------------------------------------------
Chances are that you already own a balanced portfolio of mutual funds. Yet you
may want to take a closer look at your holdings to ensure that your portfolio
remains in balance. For example, if large cap or domestic U.S. stocks formed the
core of your holdings, the gains posted in these sectors over the past several
years may have sent your overall asset allocation out of proportion. You may
want to meet with your investment professional to reallocate funds back to your
intended investment mix.
WHY FOCUS ON ASSET ALLOCATION?
Selection and combination of
asset classes is much more
important that the selection of The following is a pie chart depicting
individual options. Less than the importance of focusing on asset
10 percent of your return allocation.
relates to a particular [PIE CHART]
investment or the time you
decide to buy or sell. 92% Asset Allocation
5% Security Selection
SOURCE: BRINSON, SINGER AND 2% Market Timing
BEEBOWER, "DETERMINANTS OF 1% Other
PORTFOLIO PERFORMANCE,"
FINANCIAL ANALYSTS JOURNAL,
MAY-JUNE 1991
REVISIT YOUR RISK TOLERANCE
- --------------------------------------------------------------------------------
Can you tolerate market fluctuations without undue concern? If not, you may wish
to sit down with your investment professional to review your risk tolerance and
reposition your assets accordingly. You might also reconsider your investment
strategies if you plan to tap your assets within the next year or two to pay for
a child's education, a new home or another significant expense. Simply put, you
wouldn't want to be caught with the market at a low point while having to
withdraw funds at that time.
TIME WILL TELL
- --------------------------------------------------------------------------------
In closing, the past six months reinforce the value of asset allocation. An
asset allocation program can help you build a balanced portfolio and cushion you
against losses you can least afford at critical periods of your life. And keep
the big picture in focus: bull and bear markets will come and go, yet over the
long term, stocks and bonds remain your best bet.
<PAGE>
INDEPENDENT
AUDITORS' REPORT SEPTEMBER 30, 1998
The Board of Directors and Shareholders
First American Investment Funds, Inc.
We have audited the accompanying statements of net assets of Balanced
Fund, Equity Income Fund, Equity Index Fund, Large Cap Growth Fund, Large
Cap Value Fund, Mid Cap Growth Fund (formerly Piper Emerging Growth
Fund), Mid Cap Value Fund, Micro Cap Value Fund, Regional Equity Fund,
Small Cap Growth Fund, Small Cap Value Fund, Emerging Markets Fund
(formerly Piper Emerging Markets Growth Fund), International Fund,
International Index Fund, Health Sciences Fund, Real Estate Securities
Fund and Technology Fund (funds within First American Investment Funds,
Inc.) as of September 30, 1998, and the related statements of operations,
the statements of changes in net assets and the financial highlights for
each of the periods presented. These financial statements and the
financial highlights are the responsibility of the funds' management. Our
responsibility is to express an opinion on these financial statements and
the financial highlights based on our audits. The statements of changes
in net assets for the year ended July 31, 1997, and the financial
highlights for the periods ended July 31, 1997, July 31, 1996, and July
31, 1995, for the Small Cap Value Fund and International Index Fund 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 and securities on loan, we request
confirmations from brokers or carry out other appropriate auditing
procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements and the financial highlights
referred to above present fairly, in all material respects, the financial
position of each of the funds listed in the first paragraph above as of
September 30, 1998, and the results of their operations, changes in their
net assets and the financial highlights for each of the periods described
in the first paragraph above, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
November 13, 1998
4 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
(This page has been left blank intentionally.)
5 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
EQUITY FUNDS
LARGE CAP FUNDS
After several years of substantial returns, the final results for large cap
stocks in the fiscal year ended September 30, 1998, were more subdued. But the
numbers were no indication of the kind of volatility experienced throughout the
period.
It all started late in 1997, when the economic crisis in Japan and other
Asian economies began to reverberate throughout the world. Stocks sustained a
serious decline at that time, and even as they rallied, investors had already
become more wary. For much of the rest of the fiscal year, investors emphasized
a select group of large-cap growth stocks.
In July 1998, the markets, as measured by the Dow Jones Industrial Average
and Standard & Poor's 500 Index, celebrated record highs. But the party ended
shortly after that, as international economic crises again came into focus.
Along with Asia's problems, Russia defaulted on a large debt, and its currency
bottomed out. Many Latin American markets also suffered severe declines. Concern
spread that the U.S. economy would not be able to withstand the pressure and
would fall into a recession itself.
That concern sent stocks reeling, especially in August and the early part of
September 1998. The markets moved in dramatic fashion almost on a daily basis.
The markets, as measured by the indices, came perilously close to reaching bear
market proportions. In fact, many stocks within the S&P 500 Index and some not
represented in the index had been through a bear market cycle. In particular,
stocks that are considered to be value-oriented suffered greatly,
underperforming the growth stock segment of the market through every stage of
the 12-month period.
GROWTH OUTPERFORMS VALUE
TOTAL RETURNS OF SELECTED STOCK INDICES FOR PERIOD ENDED 9/30/98
[BAR CHART]
S&P 500 BARRA 500 BARRA 500
LARGE STOCK VALUE STOCK GROWTH STOCK
INDEX INDEX INDEX
3 Month -9.95 -12.91 -7.24
6 Month -6.97 -12.46 -1.81
9 Month 6.01 -2.35 14.16
12 Month 9.05 -0.19 18.17
6 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
Companies that rely on overseas sales were most seriously affected. Their
profit margins suffered, which had a direct impact on their stock prices. Some
of the market's favored growth stocks were able to withstand the downturn better
than most, retaining much of their value by the end of September.
Entering the new fiscal year, a number of questions remain. Foreign economies
continue to struggle. Corporate profit growth for U.S. stocks will clearly be
difficult to come by in the current, slowing economic environment. But the
market seems reassured by signs that efforts are being made to prevent a
recession in the U.S. and to correct the problems overseas.
Most notably, the Federal Reserve has recently stepped in and trimmed
short-term interest rates. This is a sign that the Fed is determined to keep the
U.S. economy moving on at least a path of slow growth. While the risk of a
recession in 1999 has not disappeared, the markets appear to be more optimistic
about the outlook. That may help stabilize stock prices in the coming year, but
we clearly remain in an environment where volatility can be anticipated. Our
expectations for large-cap stocks in the coming year are limited, but we
continue to position the funds for strong, long-term appreciation.
The following graphs compare First American fund performance with unmanaged
indices. Indices do not pay management fees to cover costs of shareholder
services and fund operating costs, or transaction costs to buy and sell
securities. Unlike indices, mutual funds are never 100% invested, because they
need cash on hand to redeem shares. In addition, the performance shown for the
funds includes the maximum initial sales charge, all fund expenses and fees. If
operating expenses such as the funds had been applied to the indices, their
performance would have been lower. Please remember that an index is simply a
measure of performance, and one cannot invest in it directly.
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 class A shares
before sales charges. The adjusted figures for class A shares include the effect
of paying the maximum initial sales charge of 4.5% on 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.
7 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
LARGE CAP FUNDS
BALANCED
INVESTMENT OBJECTIVE
- --------------------------------------------------------------------------------
TO MAXIMIZE TOTAL RETURN BY INVESTING IN A COMBINATION
OF EQUITY AND FIXED INCOME SECURITIES
During a period where stocks suffered dramatic declines, particularly in the
latter months, and U.S. government bonds enjoyed strong gains, Balanced Fund
generated a return of 0.72% for the fiscal year ended September 30, 1998.
As the U.S. stock market approached new records early in 1998, we made a
shift in the fund, slightly decreasing its weighting in stocks, and increasing
the percentage of bonds. For the rest of the period, these two major asset
groups each represented about 50% of the fund's holdings.
While stocks peaked in mid-summer, investors, worried about global economic
problems, began to seek safety in U.S. Treasury bonds. The interest rate on
30-year bonds reached near-historic lows, sending bond values higher. That
helped to offset losses in the fund's equity portfolio.
Looking ahead, we think the stock market shows more attractive opportunities
in comparison to the bond market, which is likely to level off a bit. We will
continue to closely examine markets and determine if a shift to a heavier stock
emphasis is appropriate given the environment. The fund will continue a
generally balanced approach to the markets, using a mix of bonds and stocks
designed to generate solid, consistent returns.
VALUE OF A $10,000 INVESTMENT
[PLOT POINTS CHART]
<TABLE>
<CAPTION>
First American First American First American Lehman
Balanced Fund, Balanced Fund, Balanced Fund, Standard & Poor's Government/
Class A Class A adjusted Class Y 500 Index Corporate Index
------- ---------------- ------- --------- ---------------
<S> <C> <C> <C> <C> <C>
1992 $10,000 $ 9,550 $10,000 $10,000 $10,000
1993 $10,978 $10,484 $10,978 $10,755 $11,138
1994 $11,311 $10,802 $11,318 $11,152 $10,677
1995 $13,637 $13,024 $13,683 $14,464 $12,209
1996 $15,766 $15,057 $15,857 $17,403 $12,760
1997 $19,834 $18,941 $20,007 $24,439 $13,983
1998 $19,976 $19,078 $20,213 $26,653 $15,779
</TABLE>
PAST PERFORMANCE OF THE FUND IS NOT INDICATIVE OF FUTURE PERFORMANCE.
ANNUALIZED PERFORMANCE SINCE
1 YEAR 3 YEAR 5 YEAR INCEPTION
- --------------------------------------------------------------------------------
Class A 0.72% 13.57% 12.72% 12.79%
- --------------------------------------------------------------------------------
Class A adjusted -3.84% 11.85% 11.68% 11.90%
- --------------------------------------------------------------------------------
Class B -0.02% 12.76% N/A 13.80%
- --------------------------------------------------------------------------------
Class B adjusted -4.55% 11.70% N/A 13.48%
- --------------------------------------------------------------------------------
Class Y* 1.03% 13.89% 12.98% 13.02%
- --------------------------------------------------------------------------------
S&P 500 9.06% 22.60% 19.90% 18.59%
- --------------------------------------------------------------------------------
Lehman Gov't/Corp. Bond 12.84% 8.92% 7.21% 8.25%
- --------------------------------------------------------------------------------
Past performance of the fund is not indicative of future performance.
The inception date of the class A shares is 12/14/92, the inception date of the
class B shares is 8/15/94, and the inception date of the class Y shares is
2/4/94. The performance reflected in the graph begins on 12/31/92. The
performance reflected in the table for class A and class Y shares begins on the
inception date of class A shares, and performance for class B shares begins on
8/15/94.
*The performance presented links the performance of class A shares from
inception on 12/14/92 to 2/4/94 with the performance of class Y shares after its
inception on 2/4/94. The since inception return for class Y shares from 2/4/94,
is 13.12%.
Performance reflects voluntary fee waivers in effect. In absence of such fee
waivers, total returns would be reduced.
8 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
LARGE CAP FUNDS
EQUITY INCOME
INVESTMENT OBJECTIVE
- --------------------------------------------------------------------------------
SEEKS LONG-TERM GROWTH OF CAPITAL AND INCOME BY INVESTING PRIMARILY IN
EQUITY SECURITIES THAT ARE EXPECTED TO PAY ABOVE-AVERAGE DIVIDENDS
Equity Income Fund generated a return of 8.38% for the fiscal year
ended September 30, 1998, keeping pace with the market as a whole. The fund
benefited from its emphasis on stocks of companies that are expected to pay
above-average dividends.
Areas of concentration that performed well for the fund included several
financial company stocks which received favorable buy-out bids as well as
convertible security holdings in the telecommunications service sector. The
fund's performance was also buoyed by a number of prominent large-cap stocks,
including Pfizer, Schering-Plough, Ford Motor Company and Amoco. In addition,
the fund owned a number of what we call "broken convertibles," that is,
securities that have been marked down from their initial offering price and are
attractively valued. Many performed well for the fund.
The fund remains positioned much as it was in recent months, including a
strong emphasis on oil company and financial services stocks and a healthy
complement of REITs. If the markets remain volatile, income-oriented stocks
should continue to provide a safe haven for investors due to the contribution of
dividends to the fund's total return. We also believe that many of the stocks
held in the portfolio are positioned to perform well in the current market
environment.
VALUE OF A $10,000 INVESTMENT
[PLOT POINTS CHART]
<TABLE>
<CAPTION>
First American First American First American
Equity Income Fund, Equity Income Fund, Equity Income Fund, Standard & Poor's Lehman Government/
Class A Class A adjusted Class Y 500 Index Corporate Index
------- ---------------- ------- --------- ---------------
<S> <C> <C> <C> <C> <C>
1994 $10,000 $ 9,550 $10,000 $10,000 $10,000
1994 $10,355 $ 9,889 $10,355 $10,532 $ 9,926
1995 $12,225 $11,675 $12,244 $13,660 $11,350
1996 $14,232 $13,591 $14,300 $16,436 $11,862
1997 $18,666 $17,826 $18,797 $23,081 $13,000
1998 $20,230 $19,320 $20,461 $25,172 $14,669
</TABLE>
PAST PERFORMANCE OF THE FUND IS NOT INDICATIVE OF FUTURE PERFORMANCE.
ANNUALIZED PERFORMANCE SINCE
1 YEAR 3 YEAR INCEPTION
- --------------------------------------------------------------------------------
Class A 8.38% 18.28% 16.69%
- --------------------------------------------------------------------------------
Class A adjusted 3.50% 16.48% 15.52%
- --------------------------------------------------------------------------------
Class B 7.77% 17.47% 16.97%
- --------------------------------------------------------------------------------
Class B adjusted 2.77% 16.50% 16.67%
- --------------------------------------------------------------------------------
Class Y* 8.85% 18.67% 16.99%
- --------------------------------------------------------------------------------
S&P 500 9.06% 22.60% 22.77%
- --------------------------------------------------------------------------------
Lehman Gov't/Corp. Bond 12.84% 8.92% 8.89%
- --------------------------------------------------------------------------------
Past performance of the fund is not indicative of future performance.
The inception date of the class A shares is 3/25/94, the inception date of the
class B shares is 8/15/94, and the inception date of the class Y shares is
8/2/94. The performance reflected in the graph begins on 3/31/94. The
performance reflected in the table for class A and class Y shares begins on the
inception date of class A shares and performance for class B shares begins on
8/15/94.
Performance is presented for the period beginning 3/25/94, the date U.S. Bank
National Association, formerly First Bank National Association, became the
advisor of the Equity Income Fund. The inception date of the fund was 12/18/92.
The average annual total return figures for one-, five- and 10-year periods (or
from inception) are available upon request.
*The performance presented links the performance of class A shares from
inception on 3/25/94 to 8/2/94 with the performance of class Y shares after its
inception on 2/4/94. The since inception return for class Y shares from 8/2/94,
is 17.91%.
Performance reflects voluntary fee waivers in effect. In absence of such fee
waivers, total returns would be reduced.
9 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
LARGE CAP FUNDS
EQUITY INDEX
INVESTMENT OBJECTIVE
- --------------------------------------------------------------------------------
SEEKS TO PROVIDE INVESTMENT RESULTS THAT CORRESPOND
WITH THE PERFORMANCE OF THE STANDARD & POOR'S 500 INDEX
It was an extremely volatile year for stocks, but by the end of the fiscal year
ended September 30, 1998, Equity Index Fund achieved a return of 8.50%.
The fund imitates the Standard & Poor's 500 stock index and therefore
performs closely in line with that common measure of stocks. The fund owns all
500 stocks, generally matching the weighting of each stock in the index.
The year ahead is likely to bring continued volatility in the equity
markets. However, a number of stocks have already weathered significant
corrections in value, and as long as the U.S. economy can retain its steady
growth pattern with low inflation, the outlook for stocks remains generally
positive.
VALUE OF A $10,000 INVESTMENT
[PLOT POINTS CHART]
<TABLE>
<CAPTION>
First American First American First American
Equity Index Fund, Equity Index Fund, Equity Index Fund, Standard & Poor's
Class A Class A adjusted Class Y 500 Index
------- ---------------- ------- ---------
<S> <C> <C> <C> <C>
1992 $10,000 $ 9,550 $10,000 $10,000
1993 $10,751 $10,267 $10,751 $10,755
1994 $11,100 $10,601 $11,102 $11,152
1995 $14,308 $13,664 $14,341 $14,464
1996 $17,134 $16,363 $17,206 $17,403
1997 $23,897 $22,821 $24,063 $24,439
1998 $25,928 $24,761 $26,185 $26,653
</TABLE>
PAST PERFORMANCE OF THE FUND IS NOT INDICATIVE OF FUTURE PERFORMANCE.
ANNUALIZED PERFORMANCE SINCE
1 YEAR 3 YEAR 5 YEAR INCEPTION
- --------------------------------------------------------------------------------
Class A 8.50% 21.92% 19.25% 17.97%
- --------------------------------------------------------------------------------
Class A adjusted 3.61% 20.06% 18.16% 17.04%
- --------------------------------------------------------------------------------
Class B 7.66% 21.03% N/A 22.09%
- --------------------------------------------------------------------------------
Class B adjusted 2.71% 20.12% N/A 21.82%
- --------------------------------------------------------------------------------
Class Y* 8.82% 22.22% 19.49% 18.17%
- --------------------------------------------------------------------------------
S&P 500 9.06% 22.60% 19.90% 18.59%
- --------------------------------------------------------------------------------
Past performance of the fund is not indicative of future performance.
The inception date of the class A shares is 12/14/92, the inception date of the
class B shares is 8/15/94, and the inception date of the class Y shares is
2/4/94. The performance reflected in the graph begins on 12/31/92. The
performance reflected in the table for class A and Y shares begins on the
inception date of class A shares and performance for class B shares begins on
8/15/94.
*The performance presented links the performance of class A shares from
inception on 12/14/92 to 2/4/94 with the performance of class Y shares after its
inception on 2/4/94. The since inception return for class Y shares from 2/4/94,
is 20.30%.
Performance reflects voluntary fee waivers in effect. In absence of such fee
waivers, total returns would be reduced.
10 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
LARGE CAP FUNDS
LARGE CAP GROWTH
INVESTMENT OBJECTIVE
- --------------------------------------------------------------------------------
SEEKS LONG-TERM CAPITAL GROWTH WITH A SECONDARY OBJECTIVE OF CURRENT INCOME
BY INVESTING IN STOCKS WITH MARKET CAPITALIZATIONS OF $1 BILLION OR MORE
THAT ARE BELIEVED TO PROVIDE OUTSTANDING POTENTIAL FOR SUPERIOR GROWTH
The fiscal year ended September 30, 1998, turned out to be a tale of two
periods. In the first six months, Large Cap Growth Fund's emphasis on financial
and technology stocks was beneficial, as the markets soared. But in the final
months of the period, these stocks suffered along with the market as a whole,
and the fund ended the year with a gain of 0.61%.
Growing concerns about the impact of overseas economic problems on the U.S.
took a toll on a number of stocks in the portfolio. In particular, the apparent
increased risk of a domestic recession hurt our holdings of financial stocks,
which are susceptible to economic trends. Additionally, a number of technology
stocks in the portfolio that continue to demonstrate long-term fundamental
strength were affected in the short run by negative market psychology. Still,
some prominent large-cap stock names, such as Ford, Amoco and General Electric,
performed well for the fund.
While the short-term direction of the market is always unpredictable, we're
very encouraged by the attractive stock values that resulted from the recent
correction. That allowed the fund to add a number of high-quality stocks at
reasonable prices. As a result, the portfolio should be in a strong position to
benefit from a rebound in stocks, continuing to offer excellent long-term return
potential to shareholders.
VALUE OF A $10,000 INVESTMENT
[PLOT POINTS CHART]
<TABLE>
<CAPTION>
First American First American First American
Large Cap Growth Large Cap Growth Large Cap Growth Standard & Poor's
Fund, Class A Fund, Class A adjusted Fund, Class Y 500 Index
------------- ---------------------- ------------- ---------
<S> <C> <C> <C> <C>
1994 $10,000 $ 9,550 $10,000 $10,000
1994 $10,276 $ 9,814 $10,288 $10,532
1995 $13,484 $12,877 $13,536 $13,660
1996 $15,827 $15,115 $15,916 $16,436
1997 $21,001 $20,056 $21,128 $23,081
1998 $21,129 $20,178 $21,354 $25,172
</TABLE>
PAST PERFORMANCE OF THE FUND IS NOT INDICATIVE OF FUTURE PERFORMANCE.
ANNUALIZED PERFORMANCE SINCE
1 YEAR 3 YEAR INCEPTION
- --------------------------------------------------------------------------------
Class A 0.61% 16.15% 17.40%
- --------------------------------------------------------------------------------
Class A adjusted -3.91% 14.39% 16.21%
- --------------------------------------------------------------------------------
Class B 0.09% 15.26% 19.00%
- --------------------------------------------------------------------------------
Class B adjusted -4.51% 14.25% 18.72%
- --------------------------------------------------------------------------------
Class Y* 1.07% 16.41% 17.68%
- --------------------------------------------------------------------------------
S&P 500 9.06% 22.60% 22.77%
- --------------------------------------------------------------------------------
Past performance of the fund is not indicative of future performance.
The inception date of the class A shares is 3/25/94, the inception date of the
class B shares is 8/15/94, and the inception date of the class Y shares is
8/2/94. The performance reflected in the graph begins on 3/31/94. The
performance reflected in the table for class A and Y shares begins on the
inception date of class A shares and performance for class B shares begins on
8/15/94.
Performance is presented for the period beginning 3/25/94, the date U.S. Bank
National Association, formerly First Bank National Association, became the
advisor of the Equity Income Fund. The inception date of the fund was 12/18/92.
The per-share income and capital changes for this fund since 12/18/92, can be
found in the financial highlights and the prospectus. The average annual total
return figures for one-, five- and 10-year periods (or from inception) are
available upon request.
*The performance presented links the performance of class A shares from
inception on 3/25/94 to 8/2/94 with the performance of class Y shares after its
inception on 2/4/94. The since inception return for class Y shares from 8/2/94,
is 19.85%.
Performance reflects voluntary fee waivers in effect. In absence of such fee
waivers, total returns would be reduced.
11 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
LARGE CAP FUNDS
LARGE CAP VALUE
INVESTMENT OBJECTIVE
- --------------------------------------------------------------------------------
SEEKS CAPITAL APPRECIATION WITH A SECONDARY OBJECTIVE OF CURRENT INCOME BY
INVESTING IN A BROADLY DIVERSIFIED EQUITY PORTFOLIO OF STOCKS WITH MARKET
CAPITALIZATIONS OF $1 BILLION OR MORE BELIEVED TO BE UNDERVALUED
The fiscal year ended September 30, 1998, proved to be a difficult one for
investors focused on the value end of the stock market. Large Cap Value Fund
ended the period with a return of -8.77%.
For much of the period, stocks continued their long, bullish run. It became
increasingly challenging to find stocks that represented attractive values. That
situation continued until the markets peaked in mid-July. Through much of that
time, we found it profitable to sell a number of stocks that had achieved high
price levels, rather than to buy other stocks that appeared to be overvalued.
Once the market began its correction, value stocks were among the most affected.
Within the fund, our holdings in financial services, banking and agricultural
companies experienced significant declines. On the other hand, many sectors that
struggled in the better times, such as energy and utilities, weathered the
market's downturn relatively well. Among the stocks that continued to perform
well was the fund's largest holding, IBM. Its fast-growing and profitable
service business continues to expand, improving the stock's attractiveness.
Toys 'R Us was an example of a company that saw its fundamental business
position weaken due to competition from major discount retailers. That stock
proved to be a disappointment, and the fund's position in it was sold.
By the end of the quarter, value stocks were well positioned for future
growth in the current economic environment, particularly when you compare their
valuations to those of some large-cap growth stocks. The fund should benefit if
positive trends in the U.S. economy prevail in the months to come.
VALUE OF A $10,000 INVESTMENT
[PLOT POINTS CHART]
<TABLE>
<CAPTION>
First American First American First American
Large Cap Value Large Cap Value Large Cap Value Standard & Poor's
Fund, Class A Fund, Class A adjusted Fund, Class Y 500 Index
------------- ---------------------- ------------- ---------
<S> <C> <C> <C> <C>
1988 $10,000 $ 9,550 $10,000 $10,000
1989 $12,481 $11,919 $12,481 $13,294
1990 $11,551 $11,031 $11,551 $12,067
1991 $14,514 $13,861 $14,514 $15,820
1992 $15,658 $14,953 $15,658 $17,574
1993 $18,135 $17,319 $18,135 $19,848
1994 $19,651 $18,767 $19,651 $20,581
1995 $24,615 $23,507 $24,662 $26,693
1996 $30,498 $29,125 $30,660 $32,117
1997 $42,337 $40,432 $42,657 $45,102
1998 $38,624 $36,886 $39,044 $49,189
</TABLE>
PAST PERFORMANCE OF THE FUND IS NOT INDICATIVE OF FUTURE PERFORMANCE.
ANNUALIZED PERFORMANCE SINCE
1 YEAR 3 YEAR 5 YEAR 10 YEAR INCEPTION
- --------------------------------------------------------------------------------
Class A -8.77% 16.20% 16.32% 14.47% 13.94%
- --------------------------------------------------------------------------------
Class A adjusted -12.87% 14.44% 15.26% 13.94% 13.46%
- --------------------------------------------------------------------------------
Class B -9.37% 15.38% N/A N/A 16.83%
- --------------------------------------------------------------------------------
Class B adjusted -13.26% 14.37% N/A N/A 16.53%
- --------------------------------------------------------------------------------
Class Y* -8.47% 16.55% 16.58% 14.59% 14.06%
- --------------------------------------------------------------------------------
S&P 500 9.06% 22.60% 19.90% 17.27% 17.27%
- --------------------------------------------------------------------------------
Past performance of the fund is not indicative of future performance.
The inception date of the class A shares is 12/22/87, the inception date of the
class B shares is 8/15/94, and the inception date of the class Y shares is
2/4/94. The 10-year performance reflected in the graph begins on 9/30/88. The
performance reflected in the table for class A and Y shares begins on the
inception date of class A shares and performance for class B begins on 8/15/94.
*The performance presented links the performance of class A shares from
inception on 12/22/87 to 2/4/94 with the performance of class Y shares after its
inception on 2/4/94. The since inception return for class Y shares from 2/4/94,
is 16.32%.
Performance reflects voluntary fee waivers in effect. In absence of such fee
waivers, total returns would be reduced.
12 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
NET ASSETS SEPTEMBER 30, 1998
LARGE CAP FUNDS
Balanced Fund
DESCRIPTION SHARES VALUE (000)
- -----------------------------------------------------------------------------
COMMON STOCKS - 49.6%
AEROSPACE & DEFENSE - 2.3%
Boeing 202,900 $ 6,962
Raytheon, Cl A 125,555 6,505
-----------
13,467
-----------
AUTOMOTIVE - 0.1%
Ford Motor 10,000 469
-----------
BANKS - 4.9%
BankAmerica 7,000 421
BankBoston 160,000 5,280
Chase Manhattan 122,300 5,289
Citicorp 51,700 4,805
KeyCorp 210,800 6,087
Mellon Bank 134,000 7,378
-----------
29,260
-----------
CHEMICALS - 3.4%
E.I. du Pont de Nemours 131,500 7,380
PPG Industries 97,900 5,342
Praxair 229,500 7,502
-----------
20,224
-----------
COMPUTERS & SERVICES - 5.8%
Electronic Data Systems 247,700 8,221
IBM 77,900 9,971
Seagate Technology* 312,700 7,837
Sun Microsystems* 168,700 8,403
-----------
34,432
-----------
COMPUTER COMMUNICATION - 1.4%
3Com* 271,600 8,165
-----------
CONTAINERS & PACKAGING - 0.7%
Bemis 119,300 4,183
-----------
DIVERSIFIED INDUSTRY - 0.1%
Allied Signal 18,000 637
-----------
DRUGS - 3.1%
American Home Products 156,700 8,207
Merck 7,000 907
Pharmacia & Upjohn 181,200 9,094
-----------
18,208
-----------
ELECTRICAL EQUIPMENT - 0.7%
General Electric 8,500 676
W.W. Grainger 79,900 3,366
-----------
4,042
-----------
ELECTRICAL SERVICES - 0.7%
Southern 131,200 3,862
-----------
ELECTRONICS - 1.3%
Motorola 178,100 7,603
-----------
Balanced Fund (continued)
DESCRIPTION SHARES VALUE (000)
- -----------------------------------------------------------------------------
FINANCIAL SERVICES - 2.4%
American Express 102,700 $ 7,972
Associates First Capital 7,193 469
FNMA 11,000 707
Household International 129,100 4,841
-----------
13,989
-----------
FOOD PRODUCERS - 3.8%
ConAgra 183,700 4,948
General Mills 140,100 9,807
Sara Lee 147,400 7,960
-----------
22,715
-----------
GAS/NATURAL GAS - 0.1%
Enron 11,500 607
-----------
HOUSEHOLD PRODUCTS - 1.3%
Kimberly-Clark 188,200 7,622
-----------
INSURANCE - 3.4%
Aetna 80,900 5,623
AMBAC 133,600 6,413
American International Group 5,325 410
Cigna 115,100 7,611
-----------
20,057
-----------
MACHINERY - 0.4%
Case Equipment 115,200 2,506
-----------
MEDICAL PRODUCTS & SERVICES - 2.2%
Columbia/HCA Healthcare 311,005 6,240
United Healthcare 206,000 7,210
-----------
13,450
-----------
MULTI-INDUSTRY - 0.9%
Minnesota Mining & Manufacturing 70,400 5,188
-----------
OIL-INTERNATIONAL - 4.7%
Elf Aquitaine, ADR 128,200 7,972
Exxon 74,700 5,243
Mobil 63,800 4,845
Royal Dutch Petroleum 86,800 4,134
Texaco 92,100 5,774
-----------
27,968
-----------
RAILROADS - 1.0%
Union Pacific 134,300 5,725
-----------
REAL ESTATE INVESTMENT TRUSTS - 0.6%
Meditrust 222,000 3,788
-----------
RETAIL - 0.7%
McDonald's 9,500 567
Sears Roebuck 79,900 3,531
-----------
4,098
-----------
SPECIALTY CONSTRUCTION - 0.0%
Masco 12,400 305
-----------
13 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
NET ASSETS SEPTEMBER 30, 1998
Balanced Fund (continued)
DESCRIPTION SHARES/PAR (000) VALUE (000)
- -----------------------------------------------------------------------------
TELEPHONES & TELECOMMUNICATION - 3.6%
AT&T 86,100 $ 5,031
Bell Atlantic 195,000 9,445
BellSouth 6,700 504
Deutsche Telekom, ADR 207,900 6,120
GTE 5,700 314
-----------
21,414
-----------
TOTAL COMMON STOCKS
(Cost $280,889) 293,984
-----------
U.S. TREASURY OBLIGATIONS - 19.6%
U.S. Treasury Bonds
8.500%, 02/15/20 $ 1,500 2,136
7.125%, 02/15/23 41,205 52,027
6.875%, 08/15/25 15,185 18,833
U.S. Treasury Notes
5.625%, 11/30/99 3,880 3,927
6.250%, 02/15/03 24,910 26,777
6.500%, 08/15/05 7,855 8,837
U.S. Treasury STRIPS
0.000%, 02/15/06 4,400 3,160
0.000%, 02/15/15 1,500 640
-----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $103,852) 116,337
-----------
CORPORATE OBLIGATIONS - 9.4%
Aon
6.875%, 10/01/99 450 457
Bankamerica
8.375%, 03/15/02 480 526
Bear Stearns
6.560%, 06/20/00 6,780 6,886
Boeing
8.750%, 09/15/31 500 675
Chrysler Financial
5.850%, 05/15/00 10,185 10,318
Cigna
7.400%, 01/15/03 2,825 3,017
CIT Group Holdings
6.200%, 10/20/00 8,250 8,441
Comdisco
5.780%, 01/19/99 6,850 6,861
Ford Holdings
9.250%, 03/01/00 400 424
General Motors
8.500%, 01/01/03 500 558
GTE South
6.125%, 06/15/07 400 423
Heller Financial
9.125%, 08/01/99 300 309
Lehman Brothers
7.360%, 12/15/03 650 666
Lehman Brothers Holding
6.000%, 02/26/01 3,750 3,745
MCI Communications
7.125%, 06/15/27 500 553
Morgan Stanley
8.100%, 06/24/02 500 549
Balanced Fund (continued)
DESCRIPTION PAR (000) VALUE (000)
- -----------------------------------------------------------------------------
NationsBank
5.375%, 04/15/00 $ 400 $ 403
PP&L Resources
7.700%, 10/01/09 500 594
Santander Financial Issuances
7.250%, 05/30/06 9,335 9,599
Time Warner
8.875%, 10/01/12 500 649
-----------
TOTAL CORPORATE OBLIGATIONS
(Cost $54,216) 55,653
-----------
OTHER MORTGAGE-BACKED OBLIGATIONS - 11.0%
Circuit City Credit Card Master
Trust Series 1995-1, Cl A
6.375%, 08/15/05 8,600 8,792
Cmc Securities 1993-D
6.400%, 07/25/23 148 149
Drexel Burnham Lambert Trust
CMO Trust S2
9.000%, 08/01/18 211 211
Fingerhut Master Trust 1998-1B
6.290%, 02/15/05 11,411 11,697
General Electric Capital Mortgage
1994-11 A1
6.500%, 03/25/24 642 647
General Electric Capital
Mortgage 1994-17 A6
7.000%, 05/25/24 2,675 2,841
GMAC Commercial Mortgage
6.910%, 12/15/07 5,000 5,128
GMAC Commercial Mortgage
Securities 1997-C1
6.898%, 09/15/07 6,700 6,974
Merrill Lynch Mortgage Investors 1995-C3
7.062%, 12/26/25 (A) 12,600 13,545
NAFCO Auto Trust
7.000%, 12/31/01 660 666
Prudential Home Loan Mortgage
1992-36 A8
6.500%, 11/25/99 3,351 3,357
Residential Fund Mortgage 1992-S26
8.500%, 06/25/09 900 909
Union Acceptance Series 1998-B, Cl A5
6.020%, 01/09/06 10,000 10,213
-----------
TOTAL OTHER MORTGAGE-BACKED OBLIGATIONS
(Cost $63,231) 65,129
-----------
U.S. GOVERNMENT AGENCY MORTGAGE-
BACKED OBLIGATIONS - 4.9%
FHLMC
6.930%, 10/15/98 586 595
5.940%, 09/21/99 1,000 1,008
6.500%, 01/01/01 372 379
6.000%, 11/15/08 (CMO) 2,700 2,778
6.500%, 09/01/12 450 460
8.000%, 11/01/24 582 604
6.500%, 09/01/25 365 372
14 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
LARGE CAP FUNDS
Balanced Fund (continued)
DESCRIPTION PAR (000)/SHARES VALUE (000)
- -----------------------------------------------------------------------------
FNMA
7.236%, 10/01/98 $ 326 $ 335
5.560%, 07/24/00 15,955 16,204
6.000%, 03/01/03 274 277
7.400%, 07/01/04 500 564
6.625%, 03/21/06 1,000 1,105
6.000%, 04/01/09 625 631
6.000%, 05/01/13 331 334
5.450%, 10/25/18 (CMO) 2,700 2,698
GNMA
7.500%, 09/15/27 748 776
-----------
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-
Backed Obligations
(Cost $28,386) 29,120
-----------
OTHER GOVERNMENT SECURITY - 0.0%
Government Trust Certificates Series 1C
9.250%, 11/15/01 228 240
-----------
TOTAL OTHER GOVERNMENT SECURITY
(Cost $228) 240
-----------
RELATED PARTY MONEY MARKET FUND - 5.4%
First American Prime
Obligations Fund (B) 31,863,951 31,864
-----------
TOTAL RELATED PARTY MONEY MARKET FUND
(Cost $31,864) 31,864
-----------
TOTAL INVESTMENTS - 99.9%
(Cost $562,666) 592,327
-----------
OTHER ASSETS AND LIABILITIES, NET - 0.1% (C) 691
-----------
NET ASSETS:
Portfolio Capital--Class Y
($.0001 par value--2 billion authorized)
based on 32,503,175 outstanding shares 375,215
Portfolio Capital--Class A
($.0001 par value--2 billion authorized)
based on 5,598,043 outstanding shares 65,201
Portfolio Capital--Class B
($.0001 par value--2 billion authorized)
based on 4,259,393 outstanding shares 58,591
Undistributed net investment income 366
Accumulated net realized gain on investments 63,984
Net unrealized appreciation of investments 29,661
-----------
TOTAL NET ASSETS - 100.0% $593,018
-----------
Net asset value, offering price, and redemption
price per share--Class Y $ 14.01
-----------
Net asset value and redemption
price per share--Class A $ 13.98
Maximum sales charge of 4.50% (1) 0.66
-----------
Offering price per share--Class A $ 14.64
-----------
Net asset value and offering
price per share--Class B (2) $ 13.93
-----------
Balanced Fund (concluded)
DESCRIPTION
- -----------------------------------------------------------------------------
* 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) Class B has a contingent deferred sales charge. For a description of a
possible redemption charge, see the notes to the financial statements.
(A) Variable Rate Security--the rate reported on the Statement of Net Assets is
the rate in effect as of September 30, 1998.
(B) This money market fund is advised by U.S. Bank National Association who also
serves as Adviser for this Fund. See also the notes to the financial
statements.
(C) Other assets and liabilities representing greater than five percent of total
net assets include the following (000):
Cash collateral received for securities on loan $ 195,528
Payable upon return of securities on loan $ (195,528)
ADR--American Depository Receipt
AMBAC--American Municipal Bond Assurance Company
Cl--Class
CMO--Collateralized Mortgage Obligation
FHLMC--Federal Home Loan Mortgage Corporation
FNMA--Federal National Mortgage Association
GMAC--General Motors Acceptance Corporation
GNMA--Government National Mortgage Association
STRIPS--Separately Trading of Registered Interest and Principal of Securities
The accompanying notes are an integral part of the financial statements.
15 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
NET ASSETS SEPTEMBER 30, 1998
Equity Income Fund
DESCRIPTION SHARES VALUE (000)
- -----------------------------------------------------------------------------
COMMON STOCKS - 81.5%
AUTOMOTIVE - 2.7%
Ford Motor 218,000 $ 10,232
-----------
BANKS - 9.5%
Bank of New York 240,000 6,570
First Union 149,224 7,638
Mellon Bank 98,000 5,396
National City 155,800 10,273
NationsBank 77,424 4,142
Summit Bancorp 52,500 1,969
-----------
35,988
-----------
BEAUTY PRODUCTS - 0.9%
Colgate-Palmolive 50,000 3,425
-----------
CHEMICALS - 2.3%
E.I. du Pont de Nemours 98,600 5,534
Lyondell Petrochemical 142,168 3,163
-----------
8,697
-----------
DRUGS - 7.9%
American Home Products 108,000 5,657
Johnson & Johnson 75,800 5,931
Pfizer 47,400 5,021
Pharmacia & Upjohn 88,000 4,417
Schering Plough 86,000 8,906
-----------
29,932
-----------
ELECTRICAL SERVICES - 5.6%
Cinergy 141,300 5,405
FPL Group 64,300 4,481
Houston Industries 71,200 2,216
Minnesota Power & Light 35,900 1,582
Texas Utilities 161,900 7,538
-----------
21,222
-----------
FINANCIAL SERVICES - 6.6%
American Express 88,300 6,854
Associates First Capital 71,804 4,685
FNMA 45,000 2,891
Household International 110,397 4,140
Meditrust 60,080 1,025
Simon Property Group 184,000 5,474
-----------
25,069
-----------
FOOD, BEVERAGE & TOBACCO - 5.0%
ConAgra 101,772 2,742
PepsiCo 101,000 2,973
Philip Morris 180,000 8,291
RJR Nabisco 34,300 864
Sara Lee 77,700 4,196
-----------
19,066
-----------
GAS/NATURAL GAS - 0.8%
Enron 56,700 2,994
-----------
HOUSEHOLD PRODUCTS - 2.9%
Kimberly-Clark 121,000 4,901
Newell 130,000 5,988
-----------
10,889
-----------
Equity Income Fund (continued)
DESCRIPTION SHARES VALUE (000)
- -----------------------------------------------------------------------------
INSURANCE - 1.7%
Exel Limited, Cl A 56,182 $ 3,540
IPC Holdings 131,300 3,020
-----------
6,560
-----------
MACHINERY - 2.7%
Emerson Electric 75,000 4,669
General Electric 68,000 5,410
-----------
10,079
-----------
MARINE TRANSPORTATION - 0.9%
Knightsbridge Tankers Limited 152,000 3,268
-----------
MINING - 0.6%
Great Northern Iron Ore Properties 40,200 2,322
-----------
MISCELLANEOUS BUSINESS SERVICES - 1.5%
Ecolab 198,000 5,631
-----------
OIL-DOMESTIC - 1.4%
Ashland Oil 75,000 3,469
Atlantic Richfield 24,000 1,703
-----------
5,172
-----------
OIL-INTERNATIONAL - 9.9%
Amoco 203,000 10,937
Chevron 99,000 8,322
Exxon 118,000 8,282
Mobil 132,600 10,069
-----------
37,610
-----------
PETROLEUM & FUEL PRODUCTS - 0.3%
Occidental Petroleum 59,000 1,269
-----------
PETROLEUM REFINING - 0.8%
Royal Dutch Petroleum 64,000 3,048
-----------
PROFESSIONAL SERVICES - 1.3%
ServiceMaster 222,000 4,856
-----------
RAILROADS - 1.3%
Union Pacific 116,700 4,974
-----------
REAL ESTATE INVESTMENT TRUSTS - 4.4%
Crescent Real Estate Equities 137,600 3,474
Healthcare Realty Trust 178,400 4,549
Manufactured Home Communities 176,100 4,480
Weeks 144,400 4,314
-----------
16,817
-----------
RETAIL - 3.3%
Intimate Brands 410,000 7,764
J.C. Penney 110,300 4,957
-----------
12,721
-----------
16 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
LARGE CAP FUNDS
Equity Income Fund (continued)
DESCRIPTION SHARES/PAR (000) VALUE (000)
- -----------------------------------------------------------------------------
TELEPHONES & TELECOMMUNICATION - 7.2%
AT&T 193,000 $ 11,278
Deutsche Telecom, ADR 425,000 12,511
Sprint 50,000 3,600
-----------
27,389
-----------
TOTAL COMMON STOCKS
(Cost $186,252) 309,230
-----------
PREFERRED CONVERTIBLE STOCKS - 8.5%
ENTERTAINMENT - 1.4%
Houston Industries 70,000 5,342
-----------
FINANCIAL SERVICES - 0.6%
FirstPlus Financial Group 130,000 2,080
-----------
HOUSEHOLD PRODUCTS - 1.0%
Newell Financial 65,000 3,640
-----------
INSURANCE - 0.8%
Aetna 45,000 3,153
-----------
RAILROADS - 1.3%
Union Pacific Capital Trust 110,000 4,950
-----------
TELEPHONES & TELECOMMUNICATION - 3.4%
Air-Touch Communications 211,500 13,066
-----------
TOTAL PREFERRED CONVERTIBLE STOCKS
(Cost $29,730) 32,231
-----------
CONVERTIBLE BONDS - 4.2%
Danka Business, 34.3348 Shares
6.750%, 04/01/02 $ 3,185 2,066
Hometown Buffet, 73.2600 Shares
7.000%, 12/01/02 4,000 3,679
Medical Care International,
14.5815 Shares
6.750%, 10/01/06 (A) 6,800 6,120
Tenet Healthcare, 25.9403 Shares
6.000%, 12/01/05 750 641
6.000%, 12/01/05 3,920 3,274
-----------
TOTAL CONVERTIBLE BONDS
(Cost $17,034) 15,780
-----------
RELATED PARTY MONEY MARKET FUND - 5.5%
First American Prime
Obligations Fund (B) 20,758,471 20,759
-----------
TOTAL RELATED PARTY MONEY MARKET FUND
(COST $20,759) 20,759
-----------
TOTAL INVESTMENTS - 99.7%
(Cost $253,775) 378,000
-----------
OTHER ASSETS AND LIABILITIES, NET - 0.3% (C) 1,176
-----------
Equity Income Fund (continued)
DESCRIPTION VALUE (000)
- -----------------------------------------------------------------------------
NET ASSETS:
Portfolio Capital--Class Y
($.0001 par value--2 billion authorized)
based on 22,844,358 outstanding shares $ 216,240
Portfolio Capital--Class A
($.0001 par value--2 billion authorized)
based on 701,999 outstanding shares 9,814
Portfolio Capital--Class B
($.0001 par value--2 billion authorized)
based on 547,565 outstanding shares 7,115
Undistributed net investment income 414
Accumulated net realized gain on investments 21,368
Net unrealized appreciation of investments 124,225
-----------
TOTAL NET ASSETS - 100.0% $ 379,176
-----------
Net asset value, offering price, and redemption
price per share--Class Y $ 15.74
-----------
Net asset value and redemption price
per share--Class A $ 15.70
Maximum sales charge of 4.50% (1) 0.74
-----------
Offering price per share--Class A $ 16.44
-----------
Net asset value and offering
price per share--Class B (2) $ 15.65
-----------
(1) The offer price is calculated by dividing the net asset value by 1 minus the
maximum sales charge of 4.50%.
(2) Class B has a contingent deferred sales charge. For a description of a
possible redemption charge, see the notes to the financial statements.
(A) Security sold within the terms of a private placement memorandum, exempt
from registration under section 144A of the Securities Act of 1933, as
amended, and may be sold only to dealers in that program or other "qualified
institutional investors."
(B) This money market fund is advised by U.S. Bank National Association who also
serves as advisor for this fund. See also the notes to the financial
statements.
(C) Other assets and liabilities representing greater than five percent of total
net assets include the following (000):
Cash collateral received for securities on loan $ 86,193
Payable upon return of securities on loan $ (86,193)
ADR--American Depository Receipt
Cl--Class
FNMA--Federal National Mortgage Association
The accompanying notes are an integral part of the financial statements.
17 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
NET ASSETS SEPTEMBER 30, 1998
Equity Index Fund
DESCRIPTION SHARES VALUE (000)
- -----------------------------------------------------------------------------
COMMON STOCKS - 96.6%
AEROSPACE & DEFENSE - 0.9%
Boeing 130,500 $ 4,478
Lockheed Martin 25,300 2,551
Raytheon Company, Cl B 43,800 2,362
-----------
9,391
-----------
AGRICULTURE - 0.1%
Pioneer Hi-Bred International 31,500 827
-----------
AIR TRANSPORTATION - 0.4%
AMR* 23,600 1,308
Delta Air Lines 9,800 953
Federal Express* 19,000 857
Southwest Airlines 43,200 864
U.S. Air Group* 13,000 658
-----------
4,640
-----------
AIRCRAFT - 0.7%
Allied Signal 73,000 2,582
General Dynamics 16,300 818
Northrop 8,700 635
Textron 21,100 1,279
United Technologies 29,600 2,263
-----------
7,577
-----------
APPAREL/TEXTILES - 0.1%
Fruit of the Loom, Cl A* 9,300 140
Liz Claiborne 8,500 223
Reebok International* 7,300 99
Russell 4,700 123
Springs Industries, Cl A 2,500 87
V.F 15,700 583
-----------
1,255
-----------
AUTOMOTIVE - 1.7%
Chrysler 83,400 3,993
Dana 21,300 795
Eaton 9,200 577
Fleetwood Enterprises 5,000 151
Ford Motor 156,700 7,355
General Motors 86,300 4,720
Navistar International* 8,900 201
Paccar 10,100 416
TRW 15,800 701
-----------
18,909
-----------
BANKS - 7.6%
Banc One 90,600 3,862
Bank of New York 97,100 2,658
BankAmerica 88,200 5,303
BankBoston 37,900 1,251
Bankers Trust New York 12,700 749
BB&T 36,500 1,093
Chase Manhattan 110,200 4,766
Citicorp 58,300 5,418
Equity Index Fund (continued)
DESCRIPTION SHARES VALUE (000)
- -----------------------------------------------------------------------------
Comerica 20,200 $ 1,107
Fifth Third Bancorp 34,000 1,955
First Chicago NBD 37,100 2,541
First Union 125,200 6,409
Fleet Financial Group 36,700 2,695
Golden West Financial 7,400 605
H.F. Ahmanson 14,200 788
Huntington Bancshares 27,300 686
J.P. Morgan 23,000 1,946
KeyCorp 56,800 1,640
MBNA 64,700 1,852
Mellon Bank 33,600 1,850
Mercantile Bancorp 19,600 948
National City 42,400 2,796
NationsBank 123,700 6,618
Northern Trust 14,400 983
Norwest 97,700 3,499
PNC Bank 38,900 1,750
Regions Financial 27,600 1,000
Republic New York 14,000 553
State Street 20,800 1,135
Summit Bancorp 22,900 859
Suntrust Banks 27,300 1,693
Synovus Financial 34,000 671
U.S. Bancorp 95,900 3,410
Wachovia 26,600 2,268
Washington Mutual 50,000 1,687
Wells Fargo 11,000 3,905
-----------
82,949
-----------
BEAUTY PRODUCTS - 1.6%
Alberto-Culver, Cl B 7,300 171
Avon Products 34,000 954
Colgate-Palmolive 38,200 2,617
International Flavors & Fragrances 13,900 459
Procter & Gamble 173,200 12,286
-----------
16,487
-----------
BROADCASTING, NEWSPAPERS &
ADVERTISING - 1.3%
Clear Channel Communications* 32,000 1,520
Comcast, Cl A 47,600 2,234
Interpublic Group 17,600 949
Mediaone Group* 78,600 3,493
Omnicom Group 22,000 990
Tele-Communications, Cl A* 65,500 2,563
Viacom, Cl B* 46,100 2,674
-----------
14,423
-----------
BUILDING & CONSTRUCTION - 0.3%
Centex 7,700 266
Fluor 10,600 435
Foster Wheeler 5,300 73
Halliburton 56,700 1,619
Kaufman & Broad Home 5,100 120
Owens Corning 7,000 228
Pulte 5,500 135
-----------
2,876
-----------
18 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
LARGE CAP FUNDS
Equity Index Fund (continued)
DESCRIPTION SHARES VALUE (000)
- -----------------------------------------------------------------------------
CHEMICALS - 1.9%
Air Products & Chemicals 30,300 $ 901
B.F. Goodrich* 9,400 307
Dow Chemical 29,100 2,486
E.I. du Pont de Nemours 145,800 8,183
Eastman Chemical 10,200 514
FMC* 4,500 232
Great Lakes Chemical 7,600 295
Hercules 12,300 370
Monsanto 77,400 4,363
Morton International 16,800 367
Nalco Chemical 8,500 251
Praxair 20,400 667
Rohm & Haas 23,500 654
Union Carbide 17,600 759
W.R. Grace* 9,800 122
-----------
20,471
-----------
COMMUNICATIONS EQUIPMENT - 0.9%
Andrew* 11,400 151
Ascend Communications* 24,900 1,133
General Instrument* 19,400 420
Harris 10,300 330
ITT Industries 15,300 518
Motorola 77,200 3,295
Northern Telecom 84,400 2,701
Scientific-Atlanta 10,200 215
Tellabs* 25,000 995
-----------
9,758
-----------
COMPUTERS & SERVICES - 5.1%
Apple Computer* 17,200 656
Cabletron Systems* 20,400 230
Ceridian* 9,400 539
Compaq Computer 213,500 6,752
Data General* 6,300 69
Dell Computer* 166,400 10,941
Electronic Data Systems 63,500 2,107
EMC* 64,300 3,677
Gateway 2000* 20,100 1,048
Hewlett Packard 133,800 7,083
IBM 121,800 15,590
Pitney Bowes 35,300 1,926
Seagate Technology* 31,400 787
Silicon Graphics* 24,400 229
Sun Microsystems* 48,900 2,436
Tandy 13,100 701
Unisys* 32,500 739
-----------
55,510
-----------
CONSUMER PRODUCTS - 0.0%
Tupperware 8,100 95
-----------
CONTAINERS & PACKAGING - 0.2%
Ball 3,900 137
Crown Cork & Seal 16,100 431
Owens-Illinois* 19,900 498
-----------
1,066
-----------
DRUGS - 10.1%
Allergan 8,500 496
Alza, Cl A* 11,200 486
American Home Products 169,500 8,878
Amgen* 32,800 2,478
Equity Index Fund (continued)
DESCRIPTION SHARES VALUE (000)
- -----------------------------------------------------------------------------
Bristol-Myers Squibb 128,500 $ 13,348
Eli Lilly* 143,000 11,199
Johnson & Johnson 173,700 13,592
Merck 154,400 20,004
Pfizer 168,600 17,861
Pharmacia & Upjohn 65,600 3,292
Schering Plough 94,800 9,818
Warner Lambert 105,800 7,988
-----------
109,440
-----------
ELECTRICAL SERVICES - 2.7%
Ameren 17,700 742
American Electric Power 24,600 1,201
Baltimore Gas & Electric 19,100 637
Carolina Power & Light 19,500 901
Central & South West 27,400 783
Cinergy 20,400 780
Consolidated Edison 30,400 1,585
Dominion Resources of Virginia 25,300 1,129
DTE Energy 18,700 845
Duke Power 46,500 3,078
Edison International 46,800 1,202
Entergy 31,800 978
FirstEnergy 29,800 926
FPL Group 23,400 1,631
GPU 16,500 701
Houston Industries 38,200 1,189
Niagara Mohawk Power* 24,200 372
Northern States Power 19,500 547
Pacificorp 38,400 737
PECO Energy 28,700 1,049
PG&E 49,300 1,575
PP&L Resources 19,400 502
Public Service Enterprise Group 30,000 1,179
Southern 90,100 2,652
Texas Utilities 36,100 1,681
Unicom 28,000 1,047
-----------
29,649
-----------
ENTERTAINMENT - 0.7%
Harrah's Entertainment* 13,100 174
King World Productions* 9,400 246
Mirage Resorts* 23,200 389
Walt Disney 264,100 6,685
-----------
7,494
-----------
ENVIRONMENTAL SERVICES - 0.4%
Browning Ferris Industries 23,800 720
Waste Management Inc* 73,000 3,509
-----------
4,229
-----------
FINANCIAL SERVICES - 3.4%
American Express 59,600 4,626
Associates First Capital 44,800 2,923
Bear Stearns 14,700 455
Capital One Financial 8,500 880
Charles Schwab 34,500 1,358
Countrywide Credit Industries 14,000 583
Equifax 19,100 682
FHLMC 87,600 4,331
FNMA 133,900 8,603
Franklin Resources 32,700 981
Household International 63,300 2,374
Lehman Brothers Holding 15,300 432
Merrill Lynch 44,700 2,118
19 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
NET ASSETS SEPTEMBER 30, 1998
Equity Index Fund (continued)
DESCRIPTION SHARES VALUE (000)
- -----------------------------------------------------------------------------
Morgan Stanley, Dean Witter, Discover 77,500 $ 3,337
Providian Financial* 12,300 1,043
SLM Holding 22,000 714
Transamerica 8,100 859
-----------
36,299
-----------
FOOD, BEVERAGE & TOBACCO - 6.6%
Adolph Coors, Cl B 4,700 216
Anheuser Busch 62,800 3,391
Archer Daniels Midland 81,045 1,358
Bestfoods 37,300 1,807
Brown Forman, Cl B 8,900 534
Campbell Soup 58,700 2,946
Coca-Cola 318,900 18,377
ConAgra 62,000 1,670
Fortune Brands 22,300 661
General Mills 20,400 1,428
H.J. Heinz 47,200 2,413
Hershey Foods 18,500 1,266
Kellogg 52,800 1,739
PepsiCo 192,600 5,670
Philip Morris 313,800 14,454
Quaker Oats 17,900 1,056
Ralston-Ralston Purina Group 40,900 1,196
Sara Lee 60,300 3,256
Seagram 44,700 1,282
Unilever 82,700 5,065
UST 24,000 710
William Wrigley Jr 15,000 1,139
-----------
71,634
-----------
GAS/NATURAL GAS - 0.8%
Coastal 27,400 925
Columbia Gas Systems 10,800 633
Consolidated Natural Gas 12,400 676
Eastern Enterprises 2,600 110
Enron 42,400 2,239
Nicor 6,200 257
Oneok 4,100 139
Peoples Energy 4,600 166
Sempra Energy* 30,899 805
Sonat 14,200 424
Williams 54,800 1,576
-----------
7,950
-----------
GLASS PRODUCTS - 0.1%
Corning 30,000 883
-----------
HOME APPLIANCES - 0.3%
Maytag 12,100 578
National Service Industries 5,500 175
PPG Industries 22,900 1,249
Raychem 10,800 263
Sherwin Williams 22,400 484
Snap-On Tools 7,600 234
Thomas & Betts 7,100 270
Whirlpool 9,800 461
-----------
3,714
-----------
HOTELS & LODGING - 0.1%
Hilton Hotels 31,900 544
Marriott International, Cl A* 33,000 788
-----------
1,332
-----------
HOUSEHOLD FURNITURE & FIXTURES - 0.1%
Masco 43,900 1,081
-----------
Equity Index Fund (continued)
DESCRIPTION SHARES VALUE (000)
- -----------------------------------------------------------------------------
HOUSEHOLD PRODUCTS - 0.6%
Clorox 13,400 $ 1,106
Gillette 145,100 5,550
Newell 20,600 949
Stanley Works 11,500 342
-----------
7,947
-----------
INSURANCE - 4.3%
Aetna 18,800 1,307
Allstate 108,400 4,519
American General 32,800 2,095
American International Group 135,500 10,434
Aon 21,800 1,406
Chubb 21,700 1,367
Cigna 27,800 1,838
Cincinnati Financial 21,500 661
Conseco 40,000 1,223
General Re 9,900 2,010
Hartford Financial Services Group 30,400 1,442
Jefferson-Pilot 13,700 829
Lincoln National 13,000 1,069
Loew's 14,900 1,257
Marsh & McLennan 33,100 1,647
MBIA 12,600 676
MGIC Investment 14,700 542
Progressive 9,400 1,060
Provident 17,500 591
Safeco 18,200 759
St. Paul 30,300 985
Sunamerica 25,200 1,537
Torchmark 18,100 650
Travelers Group 148,500 5,569
United Healthcare 24,900 872
Unum 17,900 889
-----------
47,234
-----------
LEISURE - 0.0%
Brunswick 12,800 166
Jostens 4,800 100
-----------
266
-----------
LUMBER & WOOD PRODUCTS - 0.0%
Louisiana Pacific 14,200 289
-----------
MACHINERY - 4.8%
Aeroquip-Vickers 3,600 104
Applied Materials* 47,300 1,194
Baker Hughes 41,000 858
Black & Decker 12,300 512
Briggs & Stratton 3,100 127
Case Equipment 9,600 209
Caterpillar 47,300 2,108
Cincinnati Milacron 5,100 79
Crane 8,900 209
Cummins Engine 5,000 149
Deere 32,000 968
Dover 28,800 889
Emerson Electric 57,200 3,561
General Electric 420,800 33,480
General Signal 5,600 190
Harnischfeger Industries 6,200 70
Ingersoll Rand 21,400 812
McDermott International 7,800 210
Nacco Industries, Cl A 1,100 110
Pall 16,000 355
Parker Hannifin 14,300 425
20 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
LARGE CAP FUNDS
Equity Index Fund (continued)
DESCRIPTION SHARES VALUE (000)
- -----------------------------------------------------------------------------
Tenneco 21,900 $ 720
Timken 8,000 121
Tyco International 75,300 4,160
-----------
51,620
-----------
MEASURING DEVICES - 0.3%
Honeywell 16,300 1,044
Johnson Controls 10,900 507
KLA Instruments* 11,200 279
Millipore 5,700 109
Perkin Elmer 6,300 433
Tektronix 6,500 101
Thermo Electron* 20,600 310
-----------
2,783
-----------
MEDICAL PRODUCTS & SERVICES - 2.2%
Abbott Laboratories 199,440 8,661
Bausch & Lomb 7,200 284
Baxter International 36,300 2,160
Becton Dickinson 31,800 1,308
Biomet* 14,500 503
Boston Scientific* 25,100 1,290
C.R. Bard 7,300 269
Columbia/HCA Healthcare 83,100 1,667
Guidant 19,500 1,448
HCR Manor Care* 8,200 240
Healthsouth Rehabilitation* 54,400 575
Humana* 21,500 352
Mallinckrodt 9,400 191
Medtronic 60,600 3,507
St. Jude Medical 10,800 250
Tenet Healthcare* 39,800 1,144
United States Surgical 9,900 413
-----------
24,262
-----------
METALS & MINING - 0.1%
Aluminum Company of America 24,100 1,711
Cyprus AMAX Minerals 12,100 160
Freeport-McMoran Copper & Gold, Cl B 23,400 278
-----------
2,149
-----------
MISCELLANEOUS BUSINESS SERVICES - 6.0%
3Com* 45,900 1,380
Adobe Systems 8,600 298
Autodesk 6,000 158
Automatic Data Processing 38,900 2,908
Cendant* 109,900 1,278
Cisco Systems* 198,200 12,251
Computer Associates International 70,500 2,609
Computer Sciences* 20,100 1,095
Ecolab 16,600 472
First Data 57,700 1,356
HBO & Company* 55,500 1,603
Microsoft* 318,200 35,022
Novell* 45,400 556
Oracle Systems* 125,700 3,661
Parametric Technology* 34,900 351
Shared Medical Systems 3,400 181
-----------
65,179
-----------
MISCELLANEOUS CONSUMER SERVICES - 0.1%
H&R Block 13,500 559
Service International 33,100 1,055
-----------
1,614
-----------
Equity Index Fund (continued)
DESCRIPTION SHARES VALUE (000)
- -----------------------------------------------------------------------------
OFFICE PRODUCTS & SUPPLIES - 0.0%
Ikon Office Solutions 17,500 $ 126
-----------
OIL-DOMESTIC - 0.8%
Ashland Oil 9,800 453
Atlantic Richfield 41,400 2,937
Pennzoil 6,200 217
Phillips Petroleum 33,700 1,521
Sun 12,100 387
Unocal 31,200 1,131
USX-Marathon Group 37,400 1,325
-----------
7,971
-----------
OIL-INTERNATIONAL - 4.5%
Amerada Hess 11,800 681
Amoco 123,900 6,675
Chevron 84,500 7,103
Exxon 316,000 22,179
Mobil 100,900 7,662
Texaco 69,900 4,382
-----------
48,682
-----------
PAPER & PAPER PRODUCTS - 1.4%
Avery Dennison 15,100 660
Bemis 6,900 242
Boise Cascade 7,300 185
Champion International 12,400 388
Fort James 28,500 935
Georgia Pacific 11,900 543
International Paper 39,700 1,851
Kimberly-Clark 72,000 2,916
Mead 13,400 394
Minnesota Mining & Manufacturing 52,200 3,846
Potlatch 3,700 126
Stone Container 13,500 116
Temple Inland 7,200 345
Union Camp 8,900 350
Westvaco 13,100 314
Weyerhaeuser 25,700 1,084
Willamette Industries 14,400 413
-----------
14,708
-----------
PETROLEUM & FUEL PRODUCTS - 0.7%
Anadarko Petroleum 15,500 609
Apache 12,700 341
Burlington Resources 22,900 856
Helmerich & Payne 6,500 137
Kerr-McGee 6,200 282
Occidental Petroleum 47,400 1,019
Oryx Energy* 13,700 177
Rowan* 11,200 125
Schlumberger 70,200 3,532
Union Pacific Resources Group 32,400 399
-----------
7,477
-----------
PETROLEUM REFINING - 1.2%
Royal Dutch Petroleum 276,900 13,187
-----------
PHOTOGRAPHIC EQUIPMENT & SUPPLIES - 0.6%
Eastman Kodak 41,700 3,224
Polaroid 5,700 140
Xerox 42,400 3,593
-----------
6,957
-----------
21 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
NET ASSETS SEPTEMBER 30, 1998
Equity Index Fund (continued)
DESCRIPTION SHARES VALUE (000)
- -----------------------------------------------------------------------------
PRECIOUS METALS - 0.2%
Barrick Gold 48,200 $ 964
Battle Mountain Gold 29,700 180
Homestake Mining 27,300 331
Newmont Mining 20,200 490
Placer Dome Group 32,300 446
-----------
2,411
-----------
PRINTING & PUBLISHING - 1.3%
American Greetings, Cl A 9,400 372
Deluxe 10,400 296
Dow Jones 12,000 558
Gannett 36,700 1,966
Knight-Ridder 10,100 449
McGraw-Hill 12,900 1,022
Meredith 6,800 218
Moore 11,400 120
New York Times, Cl A 24,800 682
R.R. Donnelley & Sons 18,300 644
Time Warner 76,300 6,681
Times Mirror, Cl A 11,500 611
Tribune 15,800 795
-----------
14,414
-----------
PROFESSIONAL SERVICES - 0.2%
Dun & Bradstreet* 22,200 599
EG&G 5,900 133
Ims Health* 21,000 1,301
-----------
2,033
-----------
RAILROADS - 0.5%
Burlington Northern Santa Fe 61,100 1,955
CSX 28,300 1,190
Norfolk Southern 48,900 1,421
Union Pacific 31,900 1,360
-----------
5,926
-----------
REPAIR SERVICES - 0.0%
Ryder System 9,600 239
-----------
RETAIL - 6.0%
Albertson's 31,700 1,716
American Stores 35,300 1,136
Autozone* 19,700 485
Circuit City Stores 12,800 426
Consolidated Stores* 13,900 273
Costco* 27,900 1,322
CVS 49,600 2,173
Darden Restaurants 18,400 294
Dayton Hudson 56,500 2,020
Dillards Incorporated, Cl A 13,900 394
Dollar General 23,250 619
Federated Department Stores* 27,200 989
Fred Meyer* 19,800 770
Gap 50,800 2,680
Great Atlantic & Pacific Tea 4,900 119
Harcourt General 9,200 445
Hasbro 17,200 507
Home Depot 189,800 7,497
J.C. Penney 32,400 1,456
Kmart* 63,000 752
Kohls* 20,400 796
Kroger* 33,100 1,655
Limited 29,300 643
Longs Drug Stores 5,000 201
Lowe's 45,200 1,438
Equity Index Fund (continued)
DESCRIPTION SHARES VALUE (000)
- -----------------------------------------------------------------------------
Mattel 37,900 $ 1,061
May Department Stores 29,800 1,535
McDonald's 88,800 5,300
Nordstrom 19,700 488
Pep Boys-Manny, Moe & Jack 8,200 110
Rite Aid 33,300 1,182
Sears Roebuck 50,500 2,231
TJX 41,300 736
Toys `R' Us* 36,000 583
Tricon Global Restaurants* 19,700 768
Venator Group* 17,400 151
Wal-Mart Stores 290,100 15,847
Walgreen 64,100 2,824
Wendy's International 17,000 377
Winn Dixie Stores 19,200 714
-----------
64,713
-----------
RUBBER & PLASTIC - 0.5%
Armstrong World Industries 5,200 278
Cooper Tire & Rubber 10,200 184
Goodyear Tire & Rubber 20,300 1,043
Illinois Tool Works 32,300 1,760
Nike, Cl B 37,200 1,369
Rubbermaid 19,300 462
Sealed Air* 10,800 344
-----------
5,440
-----------
SEMICONDUCTORS/INSTRUMENTS - 2.3%
Advanced Micro Devices* 18,500 343
AMP 28,000 1,001
Intel 219,000 18,779
LSI Logic* 18,200 230
Micron Technology* 27,500 837
National Semiconductor* 21,200 205
Rockwell International 25,400 918
Texas Instruments 50,400 2,659
-----------
24,972
-----------
SPECIALTY MACHINERY - 0.3%
CBS* 92,700 2,248
Cooper Industries 15,600 636
-----------
2,884
-----------
STEEL & STEEL WORKS - 0.4%
Alcan Aluminium 29,400 689
Allegheny Teledyne 25,400 452
Armco* 13,900 70
Asarco 5,100 98
Bethlehem Steel* 16,600 137
Engelhard 18,700 331
Inco 21,400 219
Nucor 11,400 463
Phelps Dodge 7,600 397
Reynolds Metals 9,300 473
USX-U.S. Steel Group 11,200 267
Worthington Industries 12,500 156
-----------
3,752
-----------
TELEPHONES & TELECOMMUNICATION - 8.8%
Air-Touch Communications* 73,900 4,212
Alltel 35,400 1,677
Ameritech 142,100 6,732
AT&T 234,100 13,680
Bell Atlantic 200,500 9,712
BellSouth 127,900 9,624
Frontier 22,100 605
22 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
LARGE CAP FUNDS
Equity Index Fund (continued)
DESCRIPTION SHARES/PAR (000) VALUE (000)
- -----------------------------------------------------------------------------
GTE 124,300 $ 6,837
Lucent Technologies* 169,400 11,699
MCI WorldCom* 248,360 12,139
Nextel Communications, Cl A* 35,300 713
SBC Communications 237,500 10,554
Sprint 55,600 4,003
US West 64,800 3,398
-----------
95,585
-----------
TRANSPORTATION - 0.0%
Laidlaw 42,400 400
-----------
WHOLESALE - 0.4%
Cardinal Health 17,200 1,776
Genuine Parts 23,100 694
Sigma Aldrich 13,000 375
SUPERVALU 15,500 361
Sysco 43,600 1,027
W.W. Grainger 12,600 531
-----------
4,764
-----------
TOTAL COMMON STOCKS
(Cost $721,508) 1,049,923
-----------
U.S. TREASURY OBLIGATION - 0.3%
U.S. Treasury Bill
4.350%, 12/10/98 (A) $ 3,200 3,174
-----------
TOTAL U.S. TREASURY OBLIGATION
(Cost $3,172) 3,174
-----------
RELATED PARTY MONEY MARKET FUND - 3.0%
First American Prime
Obligations Fund (B) 32,172,808 32,173
-----------
TOTAL RELATED PARTY MONEY MARKET FUND
(Cost $32,173) 32,173
-----------
TOTAL INVESTMENTS - 99.9%
(Cost $756,853) 1,085,270
-----------
OTHER ASSETS AND LIABILITIES, NET - 0.1% (C) 1,390
-----------
NET ASSETS:
Portfolio Capital--Class Y
($.0001 par value--2 billion authorized)
based on 48,379,124 outstanding shares 655,397
Portfolio Capital--Class A
($.0001 par value--2 billion authorized)
based on 2,232,798 outstanding shares 42,516
Portfolio Capital--Class B
($.0001 par value--2 billion authorized)
based on 2,153,175 outstanding shares 40,143
Undistributed net investment income 397
Accumulated net realized gain on investments 19,985
Net unrealized appreciation of investments and
open futures contracts 328,222
-----------
TOTAL NET ASSETS - 100.0% $ 1,086,660
-----------
Equity Index Fund (concluded)
DESCRIPTION VALUE
- -----------------------------------------------------------------------------
Net asset value, offering price, and redemption
price per share--Class Y $ 20.60
-----------
Net asset value and redemption
price per share--Class A $ 20.61
Maximum sales charge of 4.50% (1) 0.97
-----------
Offering price per share--Class A $ 21.58
-----------
Net asset value and offering
price per share--Class B (2) $ 20.49
-----------
* 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) Class B has a contingent deferred sales charge. For a description of a
possible redemption charge, see the notes to the financial statements.
(A) Security has been deposited as initial margin on open futures contracts.
(B) This money market fund is advised by U.S. Bank National Association who also
serves as advisor for this fund. See also the notes to the financial
statements.
(C) Other assets and liabilities representing greater than five percent of total
net assets include the following (000):
Cash collateral received for securities on loan $ 438,811
Payable upon return of securities on loan $ (438,811)
Cl--Class
FNMA--Federal National Mortgage Association
The accompanying notes are an integral part of the financial statements.
23 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
NET ASSETS SEPTEMBER 30, 1998
Large Cap Growth Fund
DESCRIPTION SHARES VALUE (000)
- -----------------------------------------------------------------------------
COMMON STOCKS - 96.0%
AEROSPACE & DEFENSE - 1.1%
Boeing 260,000 $ 8,921
-----------
AUTOMOTIVE - 1.5%
Ford Motor 271,000 12,720
-----------
BANKS - 8.9%
Bank of New York 286,000 7,829
BankAmerica 200,000 12,025
Citicorp 81,200 7,546
First Union 275,000 14,077
Mellon Bank 240,000 13,215
National City 159,420 10,512
Washington Mutual 257,000 8,674
-----------
73,878
-----------
BEAUTY PRODUCTS - 1.8%
Procter & Gamble 209,000 14,826
-----------
CHEMICALS - 5.0%
E.I. du Pont de Nemours 309,000 17,343
Monsanto 435,000 24,523
-----------
41,866
-----------
COMMUNICATIONS EQUIPMENT - 5.9%
Ascend Communications* 226,100 10,288
Lucent Technologies 145,000 10,014
Nokia, ADR 286,000 22,433
Tellabs* 151,000 6,012
-----------
48,747
-----------
COMPUTERS & SERVICES - 7.3%
Cisco Systems* 540,000 33,379
Compaq Computer 75,000 2,372
Electronic Data Systems 558,000 18,519
EMC* 125,000 7,148
-----------
61,418
-----------
DRUGS - 7.2%
Johnson & Johnson 242,150 18,948
Merck 105,000 13,604
Pfizer 260,000 27,544
-----------
60,096
-----------
ENTERTAINMENT - 1.6%
Cox Communications* 247,000 13,492
-----------
FINANCIAL SERVICES - 8.3%
American Express 163,400 12,684
Associates First Capital 124,000 8,091
FNMA 416,700 26,773
Franklin Resources 80,000 2,400
Morgan Stanley, Dean Witter, Discover 132,550 5,708
Simon Property Group 451,260 13,425
-----------
69,081
-----------
FOOD, BEVERAGE & TOBACCO - 4.0%
PepsiCo 276,000 8,125
Philip Morris 312,000 14,371
Sara Lee 194,000 10,476
-----------
32,972
-----------
Large Cap Growth Fund (continued)
DESCRIPTION SHARES VALUE (000)
- -----------------------------------------------------------------------------
GAS/NATURAL GAS - 3.0%
Enron 470,000 $ 24,822
-----------
HOUSEHOLD PRODUCTS - 2.8%
Kimberly-Clark 225,000 9,112
Newell 310,000 14,279
-----------
23,391
-----------
INSURANCE - 0.8%
American International Group 90,000 6,930
-----------
INTERNET SOFTWARE - 1.3%
America Online* 95,000 10,569
-----------
MACHINERY - 1.4%
General Electric 147,000 11,696
-----------
MEDICAL PRODUCTS & SERVICES - 6.4%
Boston Scientific* 171,800 8,826
Medtronic 287,000 16,610
St. Jude Medical 348,000 8,047
United Healthcare 563,000 19,705
-----------
53,188
-----------
MISCELLANEOUS BUSINESS SERVICES - 5.8%
Ecolab 440,000 12,512
HBO & Company* 315,000 9,096
Microsoft* 163,600 18,006
Sungard Data Systems* 267,700 8,433
-----------
48,047
-----------
MISCELLANEOUS CONSUMER SERVICES - 1.8%
Service International 467,000 14,886
-----------
OIL-INTERNATIONAL - 5.0%
Amoco 252,000 13,576
Exxon 210,340 14,763
Mobil 171,400 13,016
-----------
41,355
-----------
PETROLEUM & FUEL PRODUCTS - 2.6%
Anadarko Petroleum 100,000 3,931
Schlumberger 223,200 11,230
Transocean Offshore 180,000 6,244
-----------
21,405
-----------
PHARMACEUTICAL - 0.9%
Biochem Pharmaceuticals* 435,000 7,993
-----------
PROFESSIONAL SERVICES - 1.5%
ServiceMaster 568,500 12,436
-----------
RAILROADS - 1.1%
Union Pacific 218,900 9,331
-----------
RETAIL - 1.9%
Autozone* 265,000 6,526
Gap 100,000 5,275
McDonald's 70,000 4,178
-----------
15,979
-----------
24 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
LARGE CAP FUNDS
Large Cap Growth Fund (continued)
DESCRIPTION SHARES VALUE (000)
- -----------------------------------------------------------------------------
SERVICES-PREPACKAGED SOFTWARE - 2.1%
Peoplesoft* 538,000 $ 17,552
-----------
TELEPHONES & TELECOMMUNICATION - 5.0%
Air-Touch Communications* 200,000 11,400
MCI WorldCom* 413,000 20,185
Nextel Communications, Cl A* 505,000 10,195
-----------
41,780
-----------
TOTAL COMMON STOCKS
(Cost $558,379) 799,377
-----------
PREFERRED CONVERTIBLE STOCKS - 2.2%
Air-Touch Communications, Cl B 141,700 11,549
Air-Touch Communications, Cl C 143,100 6,726
-----------
TOTAL PREFERRED CONVERTIBLE STOCKS
(Cost $11,640) 18,275
-----------
CONVERTIBLE BOND - 0.4%
Danka Business, 34.3348 Shares
6.750%, 04/01/02 $ 4,615 2,994
-----------
TOTAL CONVERTIBLE BOND
(Cost $5,944) 2,994
-----------
RELATED PARTY MONEY MARKET FUND - 1.4%
First American Prime
Obligations Fund (A) 11,748,417 11,748
-----------
TOTAL RELATED PARTY MONEY MARKET FUND
(COST $11,748) 11,748
-----------
TOTAL INVESTMENTS - 100.0%
(COST $587,711) 832,394
-----------
OTHER ASSETS AND LIABILITIES, NET - 0.0% (B) (126)
-----------
NET ASSETS:
Portfolio Capital--Class Y
($.0001 par value--2 billion authorized)
based on 41,736,470 outstanding shares 396,967
Portfolio Capital--Class A
($.0001 par value--2 billion authorized)
based on 8,675,536 outstanding shares 85,783
Portfolio Capital--Class B
($.0001 par value--2 billion authorized)
based on 696,127 outstanding shares 9,573
Undistributed net investment income 806
Accumulated net realized gain on investments 94,456
Net unrealized appreciation of investments 244,683
-----------
TOTAL NET ASSETS - 100.0% $ 832,268
-----------
Large Cap Growth Fund (concluded)
DESCRIPTION VALUE
- -----------------------------------------------------------------------------
Net asset value, offering price, and redemption
price per share--Class Y $ 16.30
-----------
Net asset value and redemption
price per share--Class A $ 16.25
Maximum sales charge of 4.50% (1) 0.77
-----------
Offering price per share--Class A $ 17.02
-----------
Net asset value and offering price
per share--Class B (2) $ 16.06
-----------
* 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) Class B has a contingent deferred sales charge. For a description of a
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 advisor for this fund. See also the notes to the financial
statements.
(B) Other assets and liabilities representing greater than five percent of total
net assets include the following (000):
Cash collateral received for securities on loan $ 275,471
Payable upon return of securities on loan $ (275,471)
ADR--American Depository Receipt
Cl--Class
FNMA--Federal National Mortgage Association
The accompanying notes are an integral part of the financial statements.
25 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
NET ASSETS SEPTEMBER 30, 1998
Large Cap Value Fund
DESCRIPTION SHARES VALUE (000)
- -----------------------------------------------------------------------------
COMMON STOCKS - 95.7%
AEROSPACE & DEFENSE - 4.3%
Raytheon, Cl A 607,640 $ 31,483
Boeing 927,100 31,811
-----------
63,294
-----------
AUTOMOTIVE - 0.3%
Ford Motor 85,000 3,990
-----------
BANKS - 9.5%
BankAmerica 40,000 2,405
BankBoston 653,800 21,575
Chase Manhattan 474,800 20,535
Citicorp 245,700 22,835
First Union 188,416 9,645
KeyCorp 962,600 27,795
Mellon Bank 641,800 35,339
-----------
140,129
-----------
CHEMICALS - 6.3%
Air Products & Chemicals 42,400 1,261
E.I. du Pont de Nemours 601,000 33,731
PPG Industries 465,600 25,404
Praxair 992,500 32,442
-----------
92,838
-----------
COMPUTER COMMUNICATIONS
EQUIPMENT - 2.5%
3Com* 1,239,400 37,259
-----------
COMPUTERS & SERVICES - 10.6%
Electronic Data Systems 1,131,100 37,538
IBM 354,878 45,424
Seagate Technology* 1,426,500 35,752
Sun Microsystems* 769,500 38,331
-----------
157,045
-----------
CONTAINERS & PACKAGING - 1.0%
Bemis 408,600 14,327
-----------
COSMETICS/TOILETRIES - 0.1%
Procter & Gamble 25,000 1,773
-----------
DIVERSIFIED INDUSTRY - 0.2%
Allied Signal 90,000 3,184
-----------
DRUGS - 6.2%
American Home Products 818,500 42,869
Johnson & Johnson 45,000 3,521
Merck 40,000 5,182
Pharmacia & Upjohn 789,200 39,608
-----------
91,180
-----------
ELECTRICAL SERVICES - 1.2%
Southern 615,700 18,125
-----------
Large Cap Value Fund (continued)
DESCRIPTION SHARES VALUE (000)
- -----------------------------------------------------------------------------
ELECTRICAL SERVICES - 0.3%
FPL Group 60,000 $ 4,181
-----------
ELECTRICAL EQUIPMENT - 1.3%
General Electric 60,000 4,774
W.W. Grainger 349,400 14,718
-----------
19,492
-----------
ELECTRONICS - 2.3%
Motorola 812,500 34,684
-----------
EXPLORATION / DRILLING - 1.9%
Global Marine* 192,100 2,125
Newfield Exploration* 157,300 3,539
R&B Falcon* 164,020 1,968
Royal Dutch Petroleum 429,900 20,474
-----------
28,106
-----------
FINANCIAL SERVICES - 4.6%
American Express 469,600 36,453
Associates First Capital 42,277 2,759
Bear Stearns 86,610 2,679
FNMA 162,300 10,428
Household International 406,500 15,244
-----------
67,563
-----------
FOOD, BEVERAGE & TOBACCO - 0.2%
Philip Morris 70,000 3,224
-----------
FOOD PRODUCERS - 6.6%
ConAgra 867,100 23,358
General Mills 623,300 43,631
Sara Lee 579,100 31,271
-----------
98,260
-----------
GAS/NATURAL GAS - 0.2%
Enron 60,000 3,169
-----------
HOUSEHOLD PRODUCTS - 2.4%
Kimberly-Clark 862,300 34,923
-----------
INSURANCE - 6.2%
Aetna 352,500 24,499
AMBAC 495,700 23,794
Chubb 40,000 2,520
Cigna 516,000 34,121
Travelers Group 167,299 6,274
-----------
91,208
-----------
MACHINERY - 0.9%
Case Equipment 580,400 12,624
-----------
MEDICAL PRODUCTS & SERVICES - 4.5%
Abbott Laboratories 102,800 4,465
Columbia/HCA Healthcare 1,486,400 29,821
United Healthcare 940,200 32,907
-----------
67,193
-----------
26 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
LARGE CAP FUNDS
Large Cap Value Fund (continued)
DESCRIPTION SHARES VALUE (000)
- -----------------------------------------------------------------------------
METALS & MINING - 0.1%
Aluminum Company of America 20,000 $ 1,420
-----------
MULTI-INDUSTRY - 1.6%
Minnesota Mining & Manufacturing 322,700 23,779
-----------
OIL-INTERNATIONAL - 7.8%
Elf Aquitaine, ADR 575,000 35,758
Exxon 392,100 27,521
Mobil 303,800 23,070
Texaco 470,200 29,476
-----------
115,825
-----------
RAILROADS - 1.9%
Union Pacific 655,700 27,949
-----------
REAL ESTATE INVESTMENT TRUSTS - 1.2%
Meditrust 1,061,629 18,114
-----------
RETAIL - 1.4%
Federated Department Stores* 98,600 3,587
Sears Roebuck 389,000 17,189
-----------
20,776
-----------
TELEPHONES & TELECOMMUNICATION - 8.2%
AirTouch Communications* 70,000 3,990
AT&T 418,300 24,444
Bell Atlantic 907,912 43,977
BellSouth 47,000 3,537
Deutsche Telekom, ADR 1,015,100 29,882
GTE 60,000 3,300
SBC Communications 262,800 11,678
-----------
120,808
-----------
TOTAL COMMON STOCKS
(Cost $1,324,486) 1,416,442
-----------
RELATED PARTY MONEY MARKET FUND - 3.8%
First American Prime
Obligations Fund (A) 56,525,483 56,525
-----------
TOTAL RELATED PARTY MONEY MARKET FUND
(Cost $56,525) 56,525
-----------
TOTAL INVESTMENTS - 99.5%
(Cost $1,381,011) 1,472,967
-----------
OTHER ASSETS AND LIABILITIES, NET - 0.5% (B) 7,666
-----------
Large Cap Value Fund (concluded)
DESCRIPTION VALUE (000)
- -----------------------------------------------------------------------------
NET ASSETS:
Portfolio Capital--Class Y
($.0001 par value--2 billion authorized)
based on 55,915,016 outstanding shares $ 987,077
Portfolio Capital--Class A
($.0001 par value--2 billion authorized)
based on 7,616,405 outstanding shares 129,496
Portfolio Capital--Class B
($.0001 par value--2 billion authorized)
based on 2,532,580 outstanding shares 57,316
Undistributed net investment income 491
Accumulated net realized gain on investments 214,297
Net unrealized appreciation of investments 91,956
-----------
TOTAL NET ASSETS - 100.0% $ 1,480,633
-----------
Net asset value, offering price, and redemption
price per share--Class Y $ 22.42
-----------
Net asset value and redemption price
per share--Class A $ 22.39
Maximum sales charge of 4.50% (1) 1.06
-----------
Offering price per share--Class A $ 23.45
-----------
Net asset value and offering price
per share--Class B (2) $ 22.21
-----------
*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) Class B has a contingent deferred sales charge. For a description of a
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 advisor for this fund. See also the notes to the financial
statements.
(B) Other assets and liabilities representing greater than five percent of total
net assets include the following (000):
Cash collateral received for securities on loan $ 432,766
Payable upon return of securities on loan $ (432,766)
ADR--American Depository Receipt
AMBAC--American Municipal Bond Assurance
Company Cl--Class
FNMA--Federal National Mortgage Association
The accompanying notes are an integral part of the financial statements.
27 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
OPERATIONS FOR THE PERIOD ENDED SEPTEMBER 30, 1998 IN THOUSANDS
<TABLE>
<CAPTION>
BALANCED EQUITY INCOME EQUITY INDEX
FUND FUND FUND
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 17,249+ $ 3,182+ $ 2,248+
Dividends 5,538 11,100 14,762
- ------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 22,787 14,282 17,010
======================================================================================================
EXPENSES:
Investment advisory fees 4,181 2,808 6,945
Less: Waiver of investment advisory fees (575) (467) (5,216)
Administrator fees 658 442 1,092
Transfer agent fees 245 54 203
Amortization of organizational costs 1 2 --
Custodian fees 179 120 298
Directors' fees 10 7 15
Registration fees 20 3 35
Professional fees 21 14 34
Printing 27 18 47
Distribution fees - Class A 122 25 91
Distribution fees - Class B 570 79 352
Other 11 8 20
- ------------------------------------------------------------------------------------------------------
TOTAL NET EXPENSES 5,470 3,113 3,916
======================================================================================================
Investment income - net 17,317 11,169 13,094
- ------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAINS (LOSSES)
ON INVESTMENTS - NET:
Net realized gain on investments 64,326 21,440 45,838
Net realized loss on futures contracts -- -- (1,079)
Net change in unrealized appreciation (depreciation) of
investments (76,426) 1,279 10,202
Net change in unrealized depreciation
of futures contracts -- -- (147)
- ------------------------------------------------------------------------------------------------------
NET GAIN (LOSS) ON INVESTMENTS (12,100) 22,719 54,814
======================================================================================================
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ 5,217 $ 33,888 $ 67,908
======================================================================================================
</TABLE>
+ Includes income from securities lending program. See the Notes to the
Financial Statements for additional information.
The accompanying notes are an integral part of the financial statements.
28 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
LARGE CAP FUNDS
<TABLE>
<CAPTION>
LARGE CAP LARGE CAP
GROWTH FUND VALUE FUND
- -----------------------------
<S> <C>
$ 2,499+ $ 7,498+
9,893 25,727
- -----------------------------
12,392 33,225
=============================
5,350 10,558
(501) (1,177)
842 1,661
87 350
1 --
230 453
12 25
16 15
27 52
35 101
102 219
109 613
17 31
- -----------------------------
6,327 12,901
=============================
6,065 20,324
- -----------------------------
95,953 214,528
-- --
(113,637) (372,822)
-- --
- -----------------------------
(17,684) (158,294)
=============================
$ (11,619) (137,970)
=============================
</TABLE>
29 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
CHANGES IN NET ASSETS IN THOUSANDS
<TABLE>
<CAPTION>
BALANCED EQUITY
FUND INCOME FUND
- ------------------------------------------------------------------------------------------------------------------------
10/1/97 10/1/96 10/1/97 10/1/96
to to to to
9/30/98 9/30/97 9/30/98 9/30/97
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Investment income - net $ 17,317 $ 12,335 $ 11,169 $ 6,502
Net realized gain on investments 64,326 41,325 21,440 21,119
Net realized gain (loss) on futures contracts -- -- -- --
Net change in unrealized appreciation (depreciation) of investments (76,426) 44,532 1,279 27,751
Net change in unrealized depreciation of futures contracts -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations 5,217 98,192 33,888 55,372
- ------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment income - net:
Class Y (14,657) (11,095) (10,657) (6,071)
Class A (1,407) (721) (268) (120)
Class B (1,183) (589) (143) (111)
Net realized gain on investments:
Class Y (31,658) (14,766) (20,162) (1,790)
Class A (2,532) (962) (524) (68)
Class B (3,406) (854) (372) (106)
- ------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (54,843) (28,987) (32,126) (8,266)
========================================================================================================================
CAPITAL SHARE TRANSACTIONS(1):
Class Y
Proceeds from sales 126,347 94,094 47,160 25,317
Shares issued in connection with the acquisition
of Common Trust Fund Assets -- -- -- 265,585
Shares issued in connection with acquisition
of Qualivest Fund (FAIF Asset Allocation for Balanced Fund) 94,226 -- -- --
Shares issued in connection with acquisition of Piper Fund -- -- -- --
Reinvestment of distributions 44,419 25,618 3,510 358
Payments for redemptions (188,151) (94,297) (63,003) (30,860)
- ------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from Class Y transactions 76,841 25,415 (12,333) 260,400
- ------------------------------------------------------------------------------------------------------------------------
Class A:
Proceeds from sales 17,972 10,369 18,729 7,046
Shares issued in connection with acquisition of Qualivest Fund
(FAIF Asset Allocation for Balanced Fund) 2,346 -- -- --
Shares issued in connection with acquisition of Piper Fund 43,884 -- -- --
Reinvestment of distributions 3,794 1,632 554 154
Payments for redemptions (16,652) (4,969) (15,324) (3,548)
- ------------------------------------------------------------------------------------------------------------------------
Increase in net assets from Class A transactions 51,344 7,032 3,959 3,652
- ------------------------------------------------------------------------------------------------------------------------
Class B:
Proceeds from sales 18,038 24,636 2,710 2,145
Shares issued in connection with acquisition of Qualivest Fund
(FAIF Asset Allocation for Balanced Fund) 5,078 -- -- --
Reinvestment of distributions 4,414 1,396 492 206
Payments for redemptions (7,174) (2,836) (1,228) (636)
- ------------------------------------------------------------------------------------------------------------------------
Increase in net assets from Class B transactions 20,356 23,196 1,974 1,715
- ------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital share
transactions 148,541 55,643 (6,400) 265,767
- ------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets 98,915 124,848 (4,638) 312,873
NET ASSETS AT BEGINNING OF PERIOD 494,103 369,255 383,814 70,941
========================================================================================================================
NET ASSETS AT END OF PERIOD (2) $ 593,018 $ 494,103 $ 379,176 $ 383,814
========================================================================================================================
(1)CAPITAL SHARE TRANSACTIONS:
Class Y:
Shares issued 8,578 6,716 2,946 1,790
Shares issued in connection with the acquisition
of Common Trust Fund Assets -- -- -- 18,802
Shares issued in connection with acquisition of Qualivest Fund
(FAIF Asset Allocation for Balanced Fund) 6,642 -- -- --
Shares issued in connection with acquisition of Piper Fund -- -- -- --
Shares issued in lieu of cash distributions 3,127 1,874 228 25
Shares redeemed (12,936) (6,796) (3,892) (2,157)
- ------------------------------------------------------------------------------------------------------------------------
TOTAL CLASS Y TRANSACTIONS 5,411 1,794 (718) 18,460
========================================================================================================================
Class A:
Shares issued 1,223 729 1,181 497
Shares issued in connection with acquisition of Qualivest Fund
(FAIF Asset Allocation for Balanced Fund) 166 -- -- --
Shares issued in connection with acquisition of Piper Fund 3,018 -- -- --
Shares issued in lieu of cash distributions 267 119 36 11
Shares redeemed (1,172) (344) (979) (248)
- ------------------------------------------------------------------------------------------------------------------------
TOTAL CLASS A TRANSACTIONS 3,502 504 238 260
========================================================================================================================
Class B:
Shares issued 1,233 1,759 169 155
Shares issued in connection with acquisition of Qualivest Fund
(FAIF Asset Allocation for Balanced Fund) 360 -- -- --
Shares issued in lieu of cash distributions 313 102 32 15
Shares redeemed (492) (202) (77) (45)
- ------------------------------------------------------------------------------------------------------------------------
TOTAL CLASS B TRANSACTIONS 1,414 1,659 124 125
========================================================================================================================
NET INCREASE (DECREASE) IN CAPITAL SHARES 10,327 3,957 (356) 18,845
========================================================================================================================
[WIDE TABLE CONTINUED FROM ABOVE]
<CAPTION>
EQUITY
INDEX FUND
----------------------------------------------------------------------------------------------
10/1/97 10/1/96
to to
9/30/98 9/30/97
----------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS:
Investment income - net $ 13,094 $ 7,408
Net realized gain on investments 45,838 16,563
Net realized gain (loss) on futures contracts (1,079) 2,759
Net change in unrealized appreciation (depreciation) of investments 10,202 129,164
Net change in unrealized depreciation of futures contracts (147) (48)
- -----------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations 67,908 155,846
- -----------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment income - net:
Class Y (12,321) (7,188)
Class A (402) (138)
Class B (155) (92)
Net realized gain on investments:
Class Y (39,689) (9,833)
Class A (1,395) (187)
Class B (1,890) (245)
- -----------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (55,852) (17,683)
===============================================================================================
CAPITAL SHARE TRANSACTIONS(1):
Class Y
Proceeds from sales 294,141 134,912
Shares issued in connection with the acquisition
of Common Trust Fund Assets -- --
Shares issued in connection with acquisition
of Qualivest Fund (FAIF Asset Allocation for Balanced Fund) 345,903 --
Shares issued in connection with acquisition of Piper Fund -- --
Reinvestment of distributions 46,426 15,628
Payments for redemptions (261,290) (72,939)
- -----------------------------------------------------------------------------------------------
Increase (decrease) in net assets from Class Y transactions 425,180 77,601
- -----------------------------------------------------------------------------------------------
Class A:
Proceeds from sales 86,010 10,915
Shares issued in connection with acquisition of Qualivest Fund
(FAIF Asset Allocation for Balanced Fund) 5,782 --
Shares issued in connection with acquisition of Piper Fund -- --
Reinvestment of distributions 1,588 299
Payments for redemptions (62,121) (4,435)
- -----------------------------------------------------------------------------------------------
Increase in net assets from Class A transactions 31,259 6,779
- -----------------------------------------------------------------------------------------------
Class B:
Proceeds from sales 22,783 12,706
Shares issued in connection with acquisition of Qualivest Fund
(FAIF Asset Allocation for Balanced Fund) -- --
Reinvestment of distributions 1,990 333
Payments for redemptions (3,576) (1,626)
- -----------------------------------------------------------------------------------------------
Increase in net assets from Class B transactions 21,197 11,413
- -----------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital share
transactions 477,636 95,793
- -----------------------------------------------------------------------------------------------
Total increase (decrease) in net assets 489,692 233,956
NET ASSETS AT BEGINNING OF PERIOD 596,968 363,012
===============================================================================================
NET ASSETS AT END OF PERIOD (2) $1,086,660 $ 596,968
===============================================================================================
(1)CAPITAL SHARE TRANSACTIONS:
Class Y:
Shares issued 13,918 7,433
Shares issued in connection with the acquisition
of Common Trust Fund Assets -- --
Shares issued in connection with acquisition of Qualivest Fund
(FAIF Asset Allocation for Balanced Fund) 17,735 --
Shares issued in connection with acquisition of Piper Fund -- --
Shares issued in lieu of cash distributions 2,375 917
Shares redeemed (12,513) (4,009)
- -----------------------------------------------------------------------------------------------
TOTAL CLASS Y TRANSACTIONS 21,515 4,341
===============================================================================================
Class A:
Shares issued 4,002 607
Shares issued in connection with acquisition of Qualivest Fund
(FAIF Asset Allocation for Balanced Fund) 296 --
Shares issued in connection with acquisition of Piper Fund -- --
Shares issued in lieu of cash distributions 81 18
Shares redeemed (2,916) (257)
- -----------------------------------------------------------------------------------------------
TOTAL CLASS A TRANSACTIONS 1,463 368
===============================================================================================
Class B:
Shares issued 1,068 687
Shares issued in connection with acquisition of Qualivest Fund
(FAIF Asset Allocation for Balanced Fund) -- --
Shares issued in lieu of cash distributions 104 20
Shares redeemed (167) (93)
- -----------------------------------------------------------------------------------------------
TOTAL CLASS B TRANSACTIONS 1,005 614
===============================================================================================
NET INCREASE (DECREASE) IN CAPITAL SHARES 23,983 5,323
===============================================================================================
</TABLE>
30 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
LARGE CAP FUNDS
<TABLE>
<CAPTION>
LARGE CAP LARGE CAP
GROWTH FUND VALUE FUND
------------------------------------------------------------
10/1/97 10/1/96 10/1/97 10/1/96
to to to to
9/30/98 9/30/97 9/30/98 9/30/97
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 6,065 $ 3,987 $ 20,324 $ 11,503
95,953 56,183 214,528 166,898
-- -- -- --
(113,637) 83,459 (372,822) 104,252
-- -- -- --
------------------------------------------------------------
(11,619) 143,629 (137,970) 282,653
------------------------------------------------------------
(5,203) (4,005) (18,581) (11,699)
(150) (57) (1,171) (419)
(16) (12) (318) (253)
(53,851) (4,541) (143,987) (36,144)
(1,066) (113) (5,825) (1,898)
(757) (123) (7,436) (2,030)
------------------------------------------------------------
(61,043) (8,851) (177,318) (52,443)
===========================================================
176,400 54,925 377,320 369,573
-- 360,927 265,740 177,039
-- -- 161,636 --
-- -- 14,861 --
11,815 2,499 96,891 30,785
(137,884) (93,542) (482,975) (165,426)
------------------------------------------------------------
50,331 324,809 433,473 411,971
------------------------------------------------------------
44,694 17,452 37,943 35,133 (2)Includes undistributed
-- -- 9,139 -- (distribution in excess of) net
170,289 -- 122,208 -- investment income (000) of $366
833 139 7,470 2,180 and $296 for Balanced Fund,
(66,502) (13,295) (29,938) (18,329) $414 and $311 for Equity Income
------------------------------------------------------------ Fund, $397 and $185 for Equity
149,314 4,296 146,822 18,984 Index Fund, $806 and $109 for
------------------------------------------------------------ Large Cap Growth Fund, $491
and $245 for Large Cap Value
3,504 2,391 16,274 22,592 Fund, at September 30, 1998 and
-- -- -- -- September 30, 1997, respectively.
759 130 7,540 2,232
(1,633) (742) (7,250) (4,414)
------------------------------------------------------------
2,630 1,779 16,564 20,410
------------------------------------------------------------
202,275 330,884 596,859 451,365
------------------------------------------------------------
129,613 465,662 281,571 681,575
702,655 236,993 1,199,062 517,487
===========================================================
$ 832,268 $ 702,655 $1,480,633 $1,199,062
===========================================================
10,313 3,578 15,252 15,111
-- 24,454 10,794 7,432
-- -- 6,653 --
-- -- 595 --
740 172 4,041 1,318
(7,929) (6,125) (19,513) (6,620)
------------------------------------------------------------
3,124 22,079 17,822 17,241
===========================================================
2,551 1,125 1,492 1,344
-- -- 376 --
9,268 -- 4,904 --
52 10 312 94
(3,877) (843) (1,222) (702)
------------------------------------------------------------
7,994 292 5,862 736
===========================================================
199 157 637 916
-- -- -- --
49 9 318 97
(95) (49) (294) (178)
------------------------------------------------------------
153 117 661 835
11,271 22,488 24,345 18,812
==========================================================
</TABLE>
31 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
FINANCIAL HIGHLIGHTS FOR THE PERIOD ENDED SEPTEMBER 30, 1998
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
REALIZED AND
NET ASSET UNREALIZED DIVIDENDS
VALUE NET GAINS OR FROM NET DISTRIBUTIONS
BEGINNING INVESTMENT (LOSSES) ON INVESTMENT FROM
OF PERIOD INCOME INVESTMENTS INCOME CAPITAL GAINS
- -----------------------------------------------------------------------------------------------
BALANCED FUND
<S> <C> <C> <C> <C> <C>
Class Y
1998 $ 15.43 $ 0.44 $ (0.30) $ (0.44) $ (1.12)
1997 13.15 0.42 2.86 (0.42) (0.58)
1996 12.13 0.42 1.43 (0.42) (0.41)
1995 10.54 0.40 1.73 (0.39) (0.15)
1994(1) 10.86 0.25 (0.32) (0.25) --
Class A
1998 $ 15.41 $ 0.40 $ (0.30) $ (0.41) $ (1.12)
1997 13.14 0.39 2.85 (0.39) (0.58)
1996 12.12 0.39 1.43 (0.39) (0.41)
1995 10.54 0.38 1.72 (0.37) (0.15)
1994 10.73 0.34 (0.02) (0.34) (0.17)
Class B
1998 $ 15.36 $ 0.30 $ (0.31) $ (0.30) $ (1.12)
1997 13.10 0.29 2.84 (0.29) (0.58)
1996 12.09 0.31 1.42 (0.31) (0.41)
1995 10.53 0.29 1.71 (0.29) (0.15)
1994(2) 10.66 0.06 (0.12) (0.07) --
- -----------------------------------------------------------------------------------------------
EQUITY INCOME FUND
Class Y
1998 $ 15.70 $ 0.46 $ 0.88 $ (0.45) $ (0.85)
1997 12.66 0.43 3.40 (0.44) (0.35)
1996 11.24 0.42 1.43 (0.42) (0.01)
1995 9.89 0.41 1.35 (0.41) --
1994(3) 9.90 0.07 (0.03) (0.05) --
Class A
1998 $ 15.69 $ 0.41 $ 0.86 $ (0.41) $ (0.85)
1997 12.65 0.40 3.40 (0.41) (0.35)
1996 11.24 0.39 1.42 (0.39) (0.01)
1995 9.89 0.41 1.33 (0.39) --
1994(4) 9.87 0.41 -- (0.39) --
1993(5)(6) 10.00 0.57 (0.14) (0.56) --
Class B
1998 $ 15.62 $ 0.30 $ 0.87 $ (0.29) $ (0.85)
1997 12.61 0.29 3.37 (0.30) (0.35)
1996 11.20 0.31 1.42 (0.31) (0.01)
1995 9.88 0.33 1.32 (0.33) --
1994(2) 9.87 0.04 0.02 (0.05) --
- -----------------------------------------------------------------------------------------------
EQUITY INDEX FUND
Class Y
1998 $ 20.74 $ 0.29 $ 1.40 $ (0.29) $ (1.54)
1997 15.47 0.29 5.70 (0.29) (0.43)
1996 13.34 0.31 2.31 (0.31) (0.18)
1995 10.67 0.28 2.75 (0.27) (0.09)
1994(1) 10.85 0.20 (0.18) (0.20) --
Class A
1998 $ 20.76 $ 0.24 $ 1.39 $ (0.24) $ (1.54)
1997 15.49 0.12 5.70 (0.12) (0.43)
1996 13.35 0.27 2.32 (0.27) (0.18)
1995 10.68 0.25 2.76 (0.25) (0.09)
1994 10.60 0.25 0.09 (0.25) (0.01)
Class B
1998 $ 20.67 $ 0.09 $ 1.36 $ (0.09) $ (1.54)
1997 15.43 0.12 5.67 (0.12) (0.43)
1996 13.30 0.17 2.31 (0.17) (0.18)
1995 10.66 0.23 2.68 (0.18) (0.09)
1994(2) 10.68 0.01 0.04 (0.07) --
- -----------------------------------------------------------------------------------------------
</TABLE>
+ Returns are for the period indicated and have not been annualized.
(A)Excluding sales charges.
(1)Class Y (formerly Institutional Class C shares) have been offered since
February 4, 1994. All ratios for the period have been annualized.
(2)Class B shares have been offered since August 15, 1994. All ratios for the
period have been annualized.
(3)Class Y (formerly Institutional Class C shares) have been offered since
August 2, 1994. All ratios for the period have been annualized.
(4)On April 28, 1994 the board of directors approved a change in this fund's
fiscal year end from November 30 to September 30, effective September 30,
1994. On April 28, 1994 the shareholders of the fund approved a change in
the advisor from Boulevard National Bank to U.S. National Bank Association,
formerly First Bank N.A. All ratios have been annualized.
(5)For the period ended November 30.
(6)Commenced operations on December 18, 1992. All ratios for the period have
been annualized.
32 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
LARGE CAP FUNDS
<TABLE>
<CAPTION>
RATIO OF
RATIO OF NET EXPENSES TO
NET ASSET RATIO OF INVESTMENT AVERAGE
VALUE NET ASSETS EXPENSES TO INCOME TO NET ASSETS PORTFOLIO
END OF TOTAL END OF AVERAGE AVERAGE (EXCLUDING TURNOVER
PERIOD RETURN (A) PERIOD (000) NET ASSETS NET ASSETS WAIVERS) RATE
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 14.01 1.03% $455,426 0.80% 3.01% 0.90% 103%
15.43 26.17 418,087 0.80 2.99 0.88 84
13.15 15.89 332,786 0.80 3.31 0.89 73
12.13 20.89 192,145 0.79 3.61 0.94 77
10.54 (0.64)+ 125,285 0.75 3.51 1.05 98
$ 13.98 0.72% $ 78,269 1.05% 2.82% 1.15% 103%
15.41 25.80 32,309 1.05 2.74 1.13 84
13.14 15.61 20,927 1.05 3.05 1.14 73
12.12 20.57 15,288 0.99 3.41 1.19 77
10.54 3.02 13,734 0.77 2.63 1.24 98
$ 13.93 (0.02)% $ 59,323 1.80% 2.02% 1.90% 103%
15.36 24.93 43,707 1.80 1.99 1.88 84
13.10 14.78 15,542 1.80 2.32 1.89 73
12.09 19.58 3,120 1.79 2.60 1.94 77
10.53 (0.55)+ 270 1.75 2.80 2.05 98
- -------------------------------------------------------------------------------------------------------------
$ 15.74 8.85% $359,588 0.75% 2.81% 0.87% 14%
15.70 31.45 369,919 0.75 3.12 0.92 39
12.66 16.79 64,590 0.75 3.50 0.95 23
11.24 18.24 52,126 0.75 4.11 1.06 23
9.89 0.45+ 17,489 0.75 5.61 1.14 108
$ 15.70 8.38% $ 11,018 1.00% 2.58% 1.12% 14%
15.69 31.16 7,276 1.00 2.96 1.17 39
12.65 16.41 2,581 1.00 3.25 1.20 23
11.24 18.06 1,995 0.92 3.91 1.31 23
9.89 4.22+ 1,852 0.88 4.88 1.39 108
9.87 4.44+ 28,786 0.75 6.09 1.36 68
$ 15.65 7.77% $ 8,570 1.75% 1.81% 1.87% 14%
15.62 30.06 6,619 1.75 2.19 1.92 39
12.61 15.66 3,770 1.75 2.49 1.95 23
11.20 17.10 1,233 1.75 3.05 2.06 23
9.88 0.57+ 1 1.75 4.39 2.14 108
- -------------------------------------------------------------------------------------------------------------
$ 20.60 8.82% $996,528 0.35% 1.36% 0.88% 14%
20.74 39.85 557,258 0.35 1.62 0.88 8
15.47 19.98 348,539 0.35 2.14 0.90 10
13.34 29.17 218,932 0.35 2.41 0.95 9
10.67 0.18+ 163,688 0.35 2.59 1.03 11
$ 20.61 8.50% $ 46,010 0.60% 1.11% 1.13% 14%
20.76 39.47 15,977 0.60 1.36 1.13 8
15.49 19.75 6,221 0.60 1.87 1.15 10
13.35 28.90 2,140 0.57 2.16 1.20 9
10.68 3.25 758 0.35 2.23 1.23 11
$ 20.49 7.66% $ 44,122 1.35% 0.37% 1.88% 14%
20.67 38.45 23,733 1.35 0.61 1.88 8
15.43 18.95 8,252 1.35 1.11 1.90 10
13.30 27.87 1,197 1.35 1.34 1.95 9
10.66 0.48+ 29 1.35 1.68 2.03 11
- -------------------------------------------------------------------------------------------------------------
</TABLE>
33 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
FINANCIAL HIGHLIGHTS FOR THE PERIOD ENDED SEPTEMBER 30, 1998
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
REALIZED AND
NET ASSET UNREALIZED DIVIDENDS
VALUE NET GAINS OR FROM NET DISTRIBUTIONS
BEGINNING INVESTMENT (LOSSES) ON INVESTMENT FROM
OF PERIOD INCOME INVESTMENTS INCOME CAPITAL GAINS
- -----------------------------------------------------------------------------------------------
LARGE CAP GROWTH FUND (FORMERLY DIVERSIFIED GROWTH FUND)
<S> <C> <C> <C> <C> <C>
Class Y
1998 $ 17.64 $ 0.13 $ 0.02 $ (0.13) $ (1.36)
1997 13.66 0.12 4.26 (0.13) (0.27)
1996 11.78 0.18 1.88 (0.18) --
1995 9.10 0.17 2.67 (0.16) --
1994(1) 8.92 0.03 0.18 (0.03) --
Class A
1998 $ 17.63 $ 0.09 $ (0.02) $ (0.09) $ (1.36)
1997 13.63 0.09 4.28 (0.10) (0.27)
1996 11.75 0.15 1.88 (0.15) --
1995 9.09 0.15 2.66 (0.15) --
1994(2) 9.39 0.10 (0.29) (0.11) --
1993(3)(4) 10.00 0.11 (0.63) (0.09) --
Class B
1998 $ 17.47 $ 0.03 $ (0.05) $ (0.03) $ (1.36)
1997 13.57 0.01 4.18 (0.02) (0.27)
1996 11.73 0.08 1.84 (0.08) --
1995 9.09 0.09 2.65 (0.10) --
1994(5) 8.87 0.01 0.23 (0.02) --
- -----------------------------------------------------------------------------------------------
LARGE CAP VALUE FUND (FORMERLY STOCK FUND)
Class Y
1998 $ 28.75 $ 0.35 $ (2.57) $ (0.35) $ (3.76)
1997 22.60 0.39 7.90 (0.38) (1.76)
1996 19.56 0.42 4.09 (0.42) (1.05)
1995 16.50 0.36 3.64 (0.35) (0.59)
1994(6) 16.47 0.25 0.03 (0.25) --
Class A
1998 $ 28.74 $ 0.29 $ (2.59) $ (0.29) $ (3.76)
1997 22.59 0.33 7.90 (0.32) (1.76)
1996 19.57 0.36 4.07 (0.36) (1.05)
1995 16.51 0.33 3.64 (0.32) (0.59)
1994 16.00 0.31 1.00 (0.30) (0.50)
Class B
1998 $ 28.55 $ 0.13 $ (2.58) $ (0.13) $ (3.76)
1997 22.50 0.18 7.81 (0.18) (1.76)
1996 19.49 0.22 4.06 (0.22) (1.05)
1995 16.49 0.26 3.55 (0.22) (0.59)
1994(5) 16.65 0.03 (0.10) (0.09) --
- -----------------------------------------------------------------------------------------------
</TABLE>
+ Returns are for the period indicated and have not been annualized.
(A)Excluding sales charges.
(1)Class Y (formerly Institutional Class C shares) have been offered since
August 2, 1994. All ratios for the period have been annualized.
(2)On April 28, 1994 the board of directors approved a change in this fund's
fiscal year end from November 30 to September 30, effective September 30,
1994. On April 28, 1994 the shareholders of the fund approved a change in
the advisor from Boulevard National Bank to U.S. National Bank Association,
formerly First Bank N.A. All ratios have been annualized.
(3)For the period ended November 30.
(4)Commenced operations on December 18, 1992. All ratios for the period have
been annualized.
(5)Class B shares have been offered since August 15, 1994. All ratios for the
period have been annualized.
(6)Class Y shares (formerly Institutional Class C shares) have been offered
since February 4, 1994. All ratios for the period have been annualized.
34 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
LARGE CAP FUNDS
<TABLE>
<CAPTION>
RATIO OF
RATIO OF NET EXPENSES TO
NET ASSET RATIO OF INVESTMENT AVERAGE
VALUE NET ASSETS EXPENSES TO INCOME TO NET ASSETS PORTFOLIO
END OF TOTAL END OF AVERAGE AVERAGE (EXCLUDING TURNOVER
PERIOD RETURN (A) PERIOD (000) NET ASSETS NET ASSETS WAIVERS) RATE
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 16.30 1.07% $ 680,143 0.80% 0.82% 0.86% 38%
17.64 32.75 681,151 0.80 0.77 0.89 34
13.66 17.58 225,900 0.79 1.39 0.92 21
11.78 31.57 132,854 0.75 1.69 1.01 28
9.10 2.36+ 31,875 0.75 2.37 1.08 101
$ 16.25 0.61% $ 140,948 1.05% 0.56% 1.11% 38%
17.63 32.69 12,017 1.05 0.57 1.14 34
13.63 17.38 5,318 1.04 1.13 1.17 21
11.75 31.21 2,710 0.92 1.52 1.26 28
9.09 (2.07)+ 1,900 0.90 1.15 1.33 101
9.39 (5.18)+ 31,084 0.78 1.26 1.25 5
$ 16.06 0.09% $ 11,177 1.80% (0.20)% 1.86% 38%
17.47 31.42 9,487 1.80 (0.18) 1.89 34
13.57 16.41 5,775 1.79 0.36 1.92 21
11.73 30.29 819 1.75 0.58 2.01 28
9.09 2.75+ 12 1.75 1.20 2.08 101
- -------------------------------------------------------------------------------------------------------------
$ 22.42 (8.47)% $1,253,845 0.80% 1.40% 0.88% 74%
28.75 39.13 1,095,262 0.80 1.39 0.89 57
22.60 24.32 471,206 0.80 1.90 0.88 40
19.56 25.50 312,559 0.79 2.10 0.94 52
16.50 1.70+ 154,949 0.75 2.28 1.01 65
$ 22.39 (8.77)% $ 170,529 1.05% 1.21% 1.13% 74%
28.74 38.82 50,381 1.05 1.14 1.14 57
22.59 23.90 22,965 1.05 1.64 1.13 40
19.57 25.26 13,076 1.00 1.89 1.19 52
16.51 8.35 8,421 0.76 1.51 1.20 65
$ 22.21 (9.37)% $ 56,259 1.80% 0.41% 1.88% 74%
28.55 37.71 53,420 1.80 0.39 1.89 57
22.50 23.08 23,316 1.80 0.89 1.88 40
19.49 24.20 7,051 1.79 1.10 1.94 52
16.49 (0.43)+ 346 1.75 1.58 2.01 65
- -------------------------------------------------------------------------------------------------------------
</TABLE>
35 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
EQUITY FUNDS
MID CAP FUNDS
It was a year of varied performance in the equity markets. The fiscal year began
in October, 1997, with a major market decline, as the first tremors of economic
problems in Asia began to spread to domestic markets. However, U.S. stock
markets recovered. In early 1998, it looked as if the bull market would extend
its long run.
Mid-cap stocks moved up along with the rest of the market. But in April,
those stocks peaked in value. By this time, it was becoming apparent that
economic problems plaguing Japan and other Asian economies were spreading to
markets in Russia and Latin America.
In this uncertain environment, investors shied away from smaller and mid-cap
stocks. Even though these stocks generally have little business exposure to
overseas economies, investors, as they traditionally do in times of perceived
problems, shifted to larger cap stocks. They preferred the stability and
financial clout of large-cap companies. As the chart indicates, mid-cap stocks,
measured by the S&P Mid-Cap 400 Index and large-cap stocks, represented by the
S&P 500 Stock Index, performed at different levels.
MID-CAP STOCKS UNDERPERFORMED LARGE-CAP STOCKS
- ----------------------------------------------
MONTHLY YEAR-TO-DATE TOTAL RETURNS FOR THE FISCAL YEAR ENDED 9/30/98
[PLOT POINTS CHART]
S&P 500 S&P 400
Index Index
(large-cap) (mid-cap)
----------- ---------
1997 25.31 25.45
1997 31.90 27.30
1997 33.35 32.23
1998 1.10 -1.90
1998 8.39 6.22
1998 13.94 11.01
1998 15.08 13.03
1998 13.11 7.95
1998 17.70 8.62
1998 16.45 4.41
1998 0.37 -15.01
1998 6.02 -7.08
Indices are not available for investment, nor are they illustrative of First
American funds' performance.
Source: SEI Investments
36 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
MID CAP FUNDS
As a result, mid-cap stocks began a long and deep decline that continued
through much of the remainder of the fiscal year ended September 30, 1998. If
there was any news about stocks that could be perceived to be negative, such as
a disappointing quarter of earnings, the implicated stocks were affected in a
disproportionate manner to the nature of the news.
This created a challenging environment in trying to identify stocks that
could weather the storm. In many cases, the solid fundamentals of companies did
not change, and their earnings forecasts were not altered. Nevertheless, the
market's decided preference for larger cap issues resulted in weak performance
for a large and indiscriminate number of mid-cap stocks.
There is encouraging news as we embark on another fiscal year. Despite the
uncertainties of some global economies, efforts are underway to stabilize the
situation. Japan has taken a more aggressive posture toward rectifying its
problems. The U.S. and other nations are beginning to work together to shore up
weakness in emerging markets. Finally, and perhaps most important, the Federal
Reserve has lowered interest rates, its first move coming in late September.
It's a sign that the Fed is determined to keep the U.S. economy on track,
critical to at least the short-term success of stocks.
If concerns about global economic weakness subside, mid-cap stocks should
begin to be more attractive to investors. As the economic outlook becomes more
clear, investors will be less concerned about short-term risks and more focused
on the long-term rewards that are available from mid-cap stocks. We have
positioned our funds to benefit from a recovery in stocks, although there is an
expectation that uneven markets are likely to persist for at least a few more
months.
The following graphs compare First American fund performance with unmanaged
indices. Indices do not pay management fees to cover costs of shareholder
services and fund operating costs, or transaction costs to buy and sell
securities. Unlike indices, mutual funds are never 100% invested, because they
need cash on hand to redeem shares. In addition, the performance shown for the
funds includes the maximum initial sales charge, all fund expenses and fees. If
operating expenses such as the funds had been applied to the indices, their
performance would have been lower. Please remember that an index is simply a
measure of performance, and one cannot invest in it directly.
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 class A shares
before sales charges. The adjusted figures for class A shares include the effect
of paying the maximum initial sales charge of 4.5% on 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 Mid Cap Growth and Mid Cap Value funds primarily invest in equity securities
with market capitalizations from $1 billion to $5 billion at the time of
purchase. Stocks of mid-cap companies are more volatile than stocks of larger
companies.
37 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
MID CAP FUNDS
MID CAP GROWTH
INVESTMENT OBJECTIVE
- --------------------------------------------------------------------------------
SEEKS CAPITAL GROWTH BY INVESTING IN STOCKS WITH MARKET CAPITALIZATIONS
BETWEEN $1 AND $5 BILLION BELIEVED TO PROVIDE OUTSTANDING POTENTIAL FOR
SUPERIOR GROWTH.
Until summer, stocks were performing rather well. But as investor concern heated
up over global economic issues, mid-cap stocks fell out of favor, and prices
dropped dramatically. With investors moving their emphasis away from all but a
select group of large-cap stocks, Mid Cap Growth Fund ended the fiscal year on
September 30, 1998, with a total return of -13.05%.
There were few stocks or market sectors that offered refuge from the market's
onslaught. However, the fund benefited from its strong weightings in financial
services and health care stocks, which fared better than most. Some selected
technology issues in the portfolio also did well relative to the market as a
whole. The fund suffered from its underemphasis on stocks of companies that
produce consumer products, which tend to do well regardless of the economic
environment.
The market's correction has given us the opportunity to beef up the portfolio
even further with some extremely attractive stocks available at very reasonable
prices. We've added stocks from a variety of sectors, including Ceridian and
Vitesse Semiconductor in the technology area and Dollar Tree Stores and Bed Bath
and Beyond in the retail segment. While it is likely that the market will remain
choppy in the near term, investors should reap long-term rewards from the fund's
strategy of being fully invested in stocks like these with strong growth
potential.
VALUE OF A $10,000 INVESTMENT
[PLOT POINTS CHART]
<TABLE>
<CAPTION>
First American First American First American Standard & Poor's
Mid Cap Growth Fund, Mid Cap Growth Fund, Mid Cap Growth Fund, 400 Mid Cap Russell Mid
Class A Class A adjusted Class Y Index Cap Index
------- ---------------- ------- ----- ---------
<S> <C> <C> <C> <C> <C>
1990 $10,000 $ 9,550 $10,000 $10,000 $10,000
1990 $ 8,599 $ 8,213 $ 8,599 $ 9,062 $ 8,687
1991 $13,914 $13,288 $13,914 $13,621 $12,513
1992 $14,547 $13,892 $14,547 $15,321 $14,333
1993 $19,918 $19,022 $19,918 $18,997 $17,870
1994 $19,444 $18,569 $19,444 $19,295 $18,165
1995 $26,187 $25,008 $26,187 $24,269 $23,086
1996 $30,859 $29,470 $30,859 $27,667 $26,789
1997 $37,351 $35,670 $37,450 $38,482 $36,179
1998 $32,477 $31,015 $32,660 $36,053 $34,004
</TABLE>
PAST PERFORMANCE OF THE FUND IS NOT INDICATIVE OF FUTURE PERFORMANCE.
ANNUALIZED PERFORMANCE SINCE
1 YEAR 3 YEAR 5 YEAR INCEPTION
- --------------------------------------------------------------------------------
Class A -13.05% 7.44% 10.27% 14.98%
- --------------------------------------------------------------------------------
Class A adjusted -16.97% 5.81% 9.26% 14.34%
- --------------------------------------------------------------------------------
Class B N/A N/A N/A -15.01%+
- --------------------------------------------------------------------------------
Class B adjusted N/A N/A N/A -19.26%+
- --------------------------------------------------------------------------------
Class Y* -12.79% 7.64% 10.40% 15.06%
- --------------------------------------------------------------------------------
S&P 400 Mid-Cap -6.31% 14.10% 13.67% 16.46%
- --------------------------------------------------------------------------------
Russell Mid-Cap -6.01% 13.78% 13.73% 15.65%
- --------------------------------------------------------------------------------
Past performance of the fund is not indicative of future performance.
The inception date of the class A shares is 4/23/90, the inception date of the
class B shares is 8/7/98, and the inception date of the class Y shares is
2/18/97. The performance reflected in the graph begins on 4/30/90. The
performance reflected in the table for class A and Y shares begins on the
inception date of class A shares, and performance for class B shares begins on
8/7/98.
Previously, the fund used the S&P 400 Mid Cap Index as a benchmark. Going
forward, the fund will use the Frank Russell Mid Cap Index as a comparison,
because it is better suited to the fund's objective.
+Cumulative since inception.
*The performance presented links the performance of class A shares from
inception on 4/23/90 to 2/18/97 with the performance of class Y shares after its
inception on 2/18/97. The since inception return for class Y shares from
2/18/97, is 3.88%.
The performance presented includes that of a predecessor fund, Piper Emerging
Growth Fund, which merged with First American Mid Cap Growth Fund on 8/7/98.
Performance reflects voluntary fee waivers in effect. In absence of such fee
waivers, total returns would be reduced.
38 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
MID CAP FUNDS
MID CAP VALUE
INVESTMENT OBJECTIVE
- --------------------------------------------------------------------------------
SEEKS CAPITAL APPRECIATION BY INVESTING IN STOCKS WITH MARKET
CAPITALIZATIONS BETWEEN $1 AND $5 BILLION BELIEVED TO BE UNDERVALUED
As world economic problems worsened and an increased threat of recession hung
over the U. S. economy, mid-cap stocks and value stocks both suffered. The
result was a return of -28.83% for Mid Cap Value Fund for the fiscal year ended
September 30, 1998.
The 12-month period started with a downturn in the 4th quarter of 1997, but
markets rebounded in the early part of 1998. By April, investor concerns over
the foreign economic crises again began to cripple both the mid-cap and value
sectors, eventually leading to a serious decline in the summer months. Although
we emphasize companies with strong investment fundamentals, that was of little
help in a market environment that drove down the vast majority of stocks.
Much of the fund's focus is on companies that represent leaders in their
industries. This includes Brinker International in the restaurant business,
recreational supplier Brunswick Corporation and Furniture Brands in the home
furnishings arena. All are solid companies, but their share prices declined
dramatically in what appeared to be an exaggerated correction.
By September 1998, the markets began to recover, as fears about the impact of
foreign problems on the U.S. economy began to subside. Improved investor
psychology should generate better results for companies that demonstrate the
most attractive fundamental value. Such an environment will be a strong positive
one for investors in the fund.
VALUE OF A $10,000 INVESTMENT
[PLOT POINTS CHART]
<TABLE>
<CAPTION>
First American First American First American
Mid Cap Value Fund, Mid Cap Value Fund, Mid Cap Value Fund, Standard & Poor's Russel Mid
Class A Class A adjusted Class Y 400 Mid Cap Index Cap Index
------- ---------------- ------- ----------------- ---------
<S> <C> <C> <C> <C> <C>
1988 $10,000 $ 9,550 $10,000 $10,000 $10,000
1989 $11,828 $11,296 $11,828 $13,727 $12,909
1990 $10,641 $10,162 $10,641 $11,746 $10,140
1991 $13,212 $12,618 $13,212 $17,656 $14,607
1992 $15,217 $14,532 $15,217 $19,859 $16,731
1993 $18,094 $17,280 $18,094 $24,623 $20,860
1994 $21,483 $20,516 $21,494 $25,010 $21,204
1995 $24,196 $23,108 $24,254 $31,458 $26,948
1996 $30,301 $28,938 $30,465 $35,862 $31,270
1997 $42,400 $40,492 $42,727 $49,880 $42,231
1998 $30,176 $28,818 $30,486 $46,732 $39,693
</TABLE>
PAST PERFORMANCE OF THE FUND IS NOT INDICATIVE OF FUTURE PERFORMANCE.
ANNUALIZED PERFORMANCE SINCE
1 YEAR 3 YEAR 5 YEAR 10 YEAR INCEPTION
- --------------------------------------------------------------------------------
Class A -28.83% 7.64% 10.77% 11.68% 12.54%
- --------------------------------------------------------------------------------
Class A adjusted -32.03% 6.01% 9.76% 11.16% 12.06%
- --------------------------------------------------------------------------------
Class B -29.40% 6.81% N/A N/A 9.08%
- --------------------------------------------------------------------------------
Class B adjusted -32.48% 5.84% N/A N/A 8.75%
- --------------------------------------------------------------------------------
Class Y* -28.65% 7.92% 11.00% 11.79% 12.65%
- --------------------------------------------------------------------------------
S&P 400 Mid-Cap -6.31% 14.10% 13.67% 16.67% 16.67%
- --------------------------------------------------------------------------------
Russell Mid-Cap -6.01% 13.78% 13.73% 14.78% 14.78%
- --------------------------------------------------------------------------------
Past performance of the fund is not indicative of future performance.
The inception date of the class A shares is 12/22/87, the inception date of the
class B shares is 8/15/94, and the inception date of the class Y shares is
2/4/94. The 10-year performance reflected in the graph begins on 9/30/88. The
performance reflected in the table for class A and Y shares begins on the
inception date of class A shares, and performance for class B shares begins on
8/15/94.
Previously, the fund used the S&P 400 Mid Cap Index as a benchmark. Going
forward, the fund will use the Frank Russell Mid Cap Index as a comparison,
because it is better suited to the fund's objective.
*The performance presented links the performance of class A shares from
inception on 12/22/87 to 2/4/94 with the performance of class Y shares after its
inception on 2/4/94. The since inception return for class Y shares from 2/4/94,
is 9.45%.
Performance reflects voluntary fee waivers in effect. In absence of such fee
waivers, total returns would be reduced.
39 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
NET ASSETS SEPTEMBER 30, 1998
Mid Cap Growth Fund
DESCRIPTION SHARES VALUE (000)
- -----------------------------------------------------------------------------
COMMON STOCKS - 94.1%
APPAREL/TEXTILES - 1.8%
Cintas 95,000 $ 4,762
-----------
BANKS - 4.3%
Charter One Financial 168,000 4,179
Star Bank 106,110 7,017
-----------
11,196
-----------
BROADCASTING, NEWSPAPERS &
ADVERTISING - 4.5%
Chancellor Media, Cl A* 140,000 4,672
Clear Channel Communications* 152,000 7,220
-----------
11,892
-----------
COMMUNICATIONS EQUIPMENT - 6.2%
ADC Telecommunications 130,000 2,746
Ascend Communications* 120,100 5,465
Molex Incorporated, Cl A 119,100 3,231
Qualcomm* 26,525 1,272
Tellabs* 90,000 3,583
-----------
16,297
-----------
COMPUTERS & SERVICES - 3.6%
Cambridge Technology Partners* 108,000 2,410
CBT Group PLC, ADR* 88,450 1,194
EMC* 100,000 5,719
-----------
9,323
-----------
DRUGS - 8.1%
Biochem Pharmaceuticals* 137,650 2,529
Elan, ADR* 130,000 9,368
Genzyme* 100,000 3,612
Mylan Laboratories 135,000 3,982
Rexall Sundown* 115,000 1,775
-----------
21,266
-----------
ENVIRONMENTAL SERVICES - 1.4%
Allied Waste Industries* 152,500 3,565
-----------
FINANCIAL SERVICES - 6.7%
Charles Schwab 100,000 3,937
Equifax 65,000 2,320
Fiserv* 120,000 5,528
FINOVA Group 115,000 5,743
-----------
17,528
-----------
HOUSEHOLD PRODUCTS - 5.7%
Danaher 200,000 6,000
Newell 110,000 5,067
Valspar 128,000 3,832
-----------
14,899
-----------
INSURANCE - 3.5%
MGIC Investment 80,000 2,950
Reliastar Financial 87,500 3,412
Sunamerica 46,325 2,826
-----------
9,188
-----------
Mid Cap Growth Fund (continued)
DESCRIPTION SHARES VALUE (000)
- -----------------------------------------------------------------------------
MACHINERY - 2.3%
Aptar Group 120,000 $ 2,730
Pentair 100,000 3,225
-----------
5,955
-----------
MEDICAL PRODUCTS & SERVICES - 3.1%
Guidant 50,000 3,713
Health Management Associates, Cl A 225,000 4,106
Sofamor/Danek Group* 4,800 427
-----------
8,246
-----------
MISCELLANEOUS BUSINESS SERVICES - 6.8%
Ceridian* 64,700 3,712
Compuware* 81,000 4,769
Ecolab 154,000 4,379
Sungard Data Systems* 155,000 4,883
-----------
17,743
-----------
MISCELLANEOUS CONSUMER SERVICES - 3.0%
Stewart Enterprises, Cl A 290,000 4,858
ServiceMaster 139,537 3,052
-----------
7,910
-----------
OFFICE FURNITURE & FIXTURES - 1.2%
Herman Miller 162,000 3,200
-----------
PETROLEUM & FUEL PRODUCTS - 1.0%
Noble Affiliates 80,000 2,550
-----------
PROFESSIONAL SERVICES - 3.9%
Apollo Group, Cl A* 165,000 4,599
Devry* 240,000 5,625
-----------
10,224
-----------
RETAIL - 7.4%
Bed Bath & Beyond* 124,100 2,901
Consolidated Stores* 120,000 2,355
Dollar General 175,781 4,680
Dollar Tree Stores* 65,300 2,045
Kohls* 90,000 3,510
Rite Aid 60,100 2,134
TJX 105,000 1,870
-----------
19,495
-----------
SEMICONDUCTORS/INSTRUMENTS - 2.7%
Analog Devices* 100,000 1,606
Level One Communications* 144,000 2,898
Vitesse Semiconductor* 103,400 2,443
-----------
6,947
-----------
SOFTWARE - 4.7%
J.D. Edwards & Company* 72,900 3,499
Legato Systems* 107,570 5,526
Peoplesoft* 104,225 3,400
-----------
12,425
-----------
TELEPHONES & TELECOMMUNICATION - 3.4%
Advanced Fibre Communication* 286,800 1,972
Comverse Technology* 123,100 5,032
Global Crossing* 85,000 1,774
Leap Wireless International* 6,631 31
-----------
8,809
-----------
40 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
MID CAP FUNDS
Mid Cap Growth Fund (concluded)
DESCRIPTION SHARES VALUE (000)
- -----------------------------------------------------------------------------
TESTING LABORATORIES - 1.7%
Quintiles Transnational* 103,250 $ 4,517
-----------
WHOLESALE - 7.1%
Cardinal Health 42,600 4,398
Omnicare 84,150 2,966
PSS World Medical* 215,000 3,978
Tower Automotive* 147,600 2,915
U.S. Foodservice* 105,000 4,371
-----------
18,628
-----------
TOTAL COMMON STOCKS
(Cost $189,404) 246,565
-----------
RELATED PARTY MONEY MARKET FUND - 6.8%
First American Prime
Obligations Fund (A) 17,795,391 17,795
-----------
TOTAL RELATED PARTY MONEY MARKET FUND
(Cost $17,795) 17,795
-----------
TOTAL INVESTMENTS - 100.9%
(Cost $207,199) 264,360
-----------
OTHER ASSETS AND LIABILITIES, NET - (0.9%) (2,224)
-----------
NET ASSETS:
Portfolio Capital--Class Y
($.0001 par value--2 billion authorized)
based on 6,181,745 outstanding shares 79,730
Portfolio Capital--Class A
($.0001 par value--2 billion authorized)
based on 15,997,425 outstanding shares 81,314
Portfolio Capital--Class B
($.0001 par value--2 billion authorized)
based on 1,457 outstanding shares 19
Accumulated net realized gain on investments 43,912
Net unrealized appreciation of investments 57,161
-----------
TOTAL NET ASSETS - 100.0% $ 262,136
-----------
Net asset value, offering price, and redemption
price per share--Class Y $ 11.87
-----------
Net asset value and redemption price
per share--Class A $ 11.80
Maximum sales charge of 4.50% (1) 0.56
-----------
Offering price per share--Class A $ 12.36
-----------
Net asset value and offering price
per share--Class B (2) $ 11.78
-----------
* 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) Class B has a contingent deferred sales charge. For a description of a
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 advisor for this fund. See also the notes to the financial
statements.
ADR--American Depository Receipt
Cl--Class
The accompanying notes are an integral part of the financial statements.
Mid Cap Value Fund
DESCRIPTION SHARES VALUE (000)
- -----------------------------------------------------------------------------
COMMON STOCKS - 99.7%
AIR TRANSPORTATION - 1.7%
Northwest Airlines, Cl A* 331,800 $ 8,316
-----------
APPAREL/TEXTILES - 1.9%
Fruit of the Loom, Cl A* 615,800 9,275
-----------
BANKS - 4.7%
First American of Tennesse 379,000 14,544
Golden West Financial 94,600 7,739
-----------
22,283
-----------
CHEMICALS - 5.5%
Airgas* 662,900 8,038
Crompton & Knowles 663,400 9,661
Lyondell Petrochemical 189,600 4,219
Millenium Chemicals 236,900 4,412
-----------
26,330
-----------
COMMUNICATIONS EQUIPMENT - 2.0%
Vishay Intertechnology 806,175 9,724
-----------
COMPUTERS & SERVICES - 4.6%
Adaptec* 758,300 7,204
Quantum* 928,600 14,742
-----------
21,946
-----------
CONSUMER PRODUCTS - 2.7%
Premark International 454,700 12,760
-----------
DRUGS - 1.4%
ICN Pharmaceuticals 379,100 6,634
-----------
ELECTRICAL SERVICES - 3.7%
DPL 378,900 7,436
LG&E Energy 189,600 5,285
Teco 170,500 4,870
-----------
17,591
-----------
ENVIRONMENTAL SERVICES - 2.5%
U.S. Filter* 757,700 12,123
-----------
FINANCIAL SERVICES - 5.2%
CIT Group, Cl A 166,800 4,274
Firstplus Financial Group* 587,200 6,716
Heller Financial* 284,500 6,828
Waddell & Reed Financial, Cl A 378,400 7,190
-----------
25,008
-----------
FOOD, BEVERAGE & TOBACCO - 2.5%
Canandaigua Brands, Cl A* 208,400 8,232
International Multifoods 218,100 3,585
-----------
11,817
-----------
41 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
NET ASSETS SEPTEMBER 30, 1998
Mid Cap Value Fund (continued)
DESCRIPTION SHARES VALUE (000)
- -----------------------------------------------------------------------------
GAS/NATURAL GAS - 2.0%
MCN Energy (A) 569,000 $ 9,709
-----------
HOME APPLIANCES - 2.8%
American Standard* 502,100 13,243
-----------
HOUSEHOLD FURNITURE & FIXTURES - 1.3%
Furniture Brands International* 312,800 6,100
-----------
INSURANCE - 1.2%
Foundation Health Systems, Cl A* 615,800 5,773
-----------
LEISURE - 5.0%
Brunswick 1,293,600 16,736
Callaway Golf 663,000 7,169
-----------
23,905
-----------
MACHINERY - 2.9%
Case Equipment 379,000 8,243
Howmet International Inc* 472,600 5,494
-----------
13,737
-----------
MEDICAL PRODUCTS & SERVICES - 4.6%
Arterial Vascular* 151,600 5,609
Integrated Health Services 483,100 8,122
Med Partners* 2,558,600 8,315
-----------
22,046
-----------
METALS & MINING - 1.5%
IMC Global 379,100 7,345
-----------
MISCELLANEOUS BUSINESS SERVICES - 4.8%
Avis Rent-A-Car* 492,800 10,626
Budget Group, Cl A* 303,100 6,914
Olsten 919,000 5,227
-----------
22,767
-----------
PETROLEUM & FUEL PRODUCTS - 8.9%
Kerr-McGee 142,600 6,488
Newpark Resources* 947,600 6,515
Rowan* 948,200 10,608
Santa Fe International 578,200 8,890
Varco International* 1,184,600 9,921
-----------
42,422
-----------
PRINTING & PUBLISHING - 2.6%
American Greetings, Cl A 312,800 12,375
-----------
Mid Cap Value Fund (continued)
DESCRIPTION SHARES VALUE (000)
- -----------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS - 9.9%
Glimcher Realty Trust 425,300 $ 7,283
Meditrust 509,758 8,698
Patriot American Hospitality 1,042,400 13,291
Simon Property Group 379,100 11,278
Trizec Hahn 379,000 7,059
-----------
47,609
-----------
RETAIL - 7.2%
Brinker International* 569,000 10,669
CompUSA* 443,400 7,676
Cracker Barrel Old Country Stores 417,000 9,487
Lone Star Steakhouse & Saloon* 853,200 6,506
-----------
34,338
-----------
SEMI-CONDUCTORS/INSTRUMENTS - 2.2%
Amkor Technology* 758,600 3,698
Etec Systems* 37,400 975
VLSI Technology* 759,400 5,790
-----------
10,463
-----------
TELEPHONES &
TELECOMMUNICATION - 1.3%
Advanced Fibre Communication* 924,000 6,353
-----------
TRUCKING - 3.1%
CNF Transportation 511,600 14,900
-----------
TOTAL COMMON STOCKS
(Cost $665,006) 476,892
-----------
RELATED PARTY MONEY MARKET FUND - 0.2%
First American Prime
Obligations Fund (B) 1,184,844 1,185
-----------
TOTAL RELATED PARTY MONEY MARKET FUND
(Cost $1,185) 1,185
-----------
TOTAL INVESTMENTS - 99.9%
(Cost $666,191) 478,077
-----------
OTHER ASSETS AND LIABILITIES, NET - 0.1% (C) 501
-----------
42 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
MID CAP FUNDS
Mid Cap Value Fund (concluded)
DESCRIPTION SHARES VALUE (000)
- -----------------------------------------------------------------------------
NET ASSETS:
Portfolio Capital--Class Y
($.0001 par value--2 billion authorized)
based on 27,771,321 outstanding shares $ 502,380
Portfolio Capital--Class A
($.0001 par value--2 billion authorized)
based on 1,945,969 outstanding shares 36,775
Portfolio Capital--Class B
($.0001 par value--2 billion authorized)
based on 2,112,680 outstanding shares 42,202
Undistributed net investment income 429
Accumulated net realized gain on investments 84,906
Net unrealized depreciation of investments (188,114)
-----------
TOTAL NET ASSETS - 100.0% $ 478,578
-----------
Net asset value, offering price, and redemption
price per share--Class Y $ 15.05
-----------
Net asset value and redemption
price per share--Class A $ 15.04
Maximum sales charge of 4.50% (1) 0.71
-----------
Offering price per share--Class A $ 15.75
-----------
Net asset value and offering
price per share--Class B (2) $ 14.80
-----------
* 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) Class B has a contingent deferred sales charge. For a description of a
possible redemption charge, see the notes to the financial statements.
(A) Security sold within the terms of a private placement memorandum, exempt
from registration under section 144A of the Securities Act of 1933, as
amended, and may be sold only to dealers in that program or other "qualified
institutional investors."
(B) This money market fund is advised by U.S. Bank National Association who also
serves as advisor for this fund. See also the notes to the financial
statements.
(C) Other assets and liabilities representing greater than five percent of total
net assets include the following (000):
Cash collateral received for securities on loan $ 100,021
Payable upon return of securities on loan $ (100,021)
Cl--Class
The accompanying notes are an integral part of the financial statements.
43 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
OPERATIONS FOR THE PERIOD ENDED SEPTEMBER 30, 1998 IN THOUSANDS
<TABLE>
<CAPTION>
MID CAP MID CAP
GROWTH FUND VALUE FUND
- ----------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME:
Interest $ 869 $ 1,740+
Dividends 962 8,456
- ----------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 1,831 10,196
==================================================================================
EXPENSES:
Investment advisory fees 2,121 4,519
Less: Waiver of investment advisory fees (22) (20)
Administrator fees 210 711
Transfer agent fees 188 258
Custodian fees 43 194
Directors' fees 8 10
Registration fees 71 7
Professional fees 37 23
Printing 41 39
Distribution fees - Class A 1,182 99
Less: Waiver of distribution fees - Class A (379) --
Distribution fees - Class B 7 416
Other 10 15
- ----------------------------------------------------------------------------------
TOTAL NET EXPENSES 3,517 6,271
==================================================================================
Investment income (loss) - net (1,686) 3,925
- ----------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAINS (LOSSES)
ON INVESTMENTS - NET:
Net realized gain on investments 46,099 97,245
Net realized gain on closing and expiration
of options written and purchased -- 2,981
Net change in unrealized depreciation of investments (82,457) (302,434)
- ----------------------------------------------------------------------------------
NET LOSS ON INVESTMENTS (36,358) (202,208)
==================================================================================
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (38,044) $ (198,283)
==================================================================================
</TABLE>
+ Includes income from securities lending program. See the Notes to the
Financial Statements for additional information.
The accompanying notes are an integral part of the financial statements.
44 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
CHANGES IN NET ASSETS IN THOUSANDS
MID CAP FUNDS
<TABLE>
<CAPTION>
MID CAP
GROWTH FUND
- ---------------------------------------------------------------------------------------------------------------
10/1/97 10/1/96
to to
9/30/98 9/30/97
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS:
Investment income (loss) - net $ (1,686) $ (1,509)
Net realized gain on investments 46,099 34,831
Net realized gain (loss) on closing and expiration of options written and purchased -- --
Net change in unrealized appreciation (depreciation) of investments (82,457) 25,683
Net change in unrealized depreciation of purchased options contracts -- --
- ---------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations (38,044) 59,005
- ---------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment income - net:
Class Y -- --
Class A -- --
Class B -- --
Net realized gain on investments:
Class Y (5,981) --
Class A (27,994) (27,378)
Class B -- Piper (120) --
Class B -- FAIF -- --
- ---------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (34,095) (27,378)
===============================================================================================================
CAPITAL SHARE TRANSACTIONS(1):
Class Y
Proceeds from sales 110,039 62,077
Shares issued in connection with the acquisition
of Common Trust Fund Assets -- --
Reinvestment of distributions 5,724 --
Payments for redemptions (84,799) (12,946)
- ---------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from Class Y transactions 30,964 49,131
- ---------------------------------------------------------------------------------------------------------------
Class A:
Proceeds from sales 23,463 52,588
Reinvestment of distributions 27,318 26,934
Payments for redemptions (81,673) (129,708)
- ---------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from Class A transactions (30,892) (50,186)
- ---------------------------------------------------------------------------------------------------------------
Class B:
Proceeds from sales -- Piper 612 1,045
Proceeds from sales -- FAIF 19 --
Reinvestment of distributions -- Piper 120 --
Reinvestment of distribution -- FAIF -- --
Payments for redemptions -- Piper (1,748) (185)
Payment for redemptions -- FAIF -- --
- ---------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from Class B transactions (997) 860
- ---------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital share
transactions (925) (195)
- ---------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (73,064) 31,432
NET ASSETS AT BEGINNING OF PERIOD 335,200 303,768
===============================================================================================================
NET ASSETS AT END OF PERIOD (2) $ 262,136 $ 335,200
===============================================================================================================
(1)CAPITAL SHARE TRANSACTIONS:
Class Y
Shares issued 7,967 907
Shares issued in connection with the acquisition
of Common Trust Fund Assets -- --
Shares issued in lieu of cash distributions 501 3,914
Shares redeemed (6,171) (936)
- ---------------------------------------------------------------------------------------------------------------
TOTAL CLASS Y TRANSACTIONS 2,297 3,885
===============================================================================================================
Class A:
Shares issued 1,675 4,214
Shares issued in lieu of cash distributions 2,165 2,160
Shares redeemed (5,863) (10,266)
- ---------------------------------------------------------------------------------------------------------------
TOTAL CLASS A TRANSACTIONS (2,023) (3,892)
===============================================================================================================
Class B:
Shares issued -- Piper 45 81
Shares issued -- FAIF 1 --
Shares issued in lieu of cash distributions -- Piper 10 --
Shares issued in lieu of cash distributions -- FAIF -- --
Shares redeemed -- Piper (122) (14)
Shares redeemed -- FAIF -- --
- ---------------------------------------------------------------------------------------------------------------
TOTAL CLASS B TRANSACTIONS (66) 67
===============================================================================================================
NET INCREASE IN CAPITAL SHARES 208 60
===============================================================================================================
MID CAP FUNDS
<CAPTION>
MID CAP
VALUE FUND
-------------------------------------------------------------------------------------------------------------
10/1/97 10/1/96
to to
9/30/98 9/30/97
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS:
Investment income (loss) - net $ 3,925 $ 3,247
Net realized gain on investments 97,245 85,750
Net realized gain (loss) on closing and expiration of options written and purchased 2,981 (25,947)
Net change in unrealized appreciation (depreciation) of investments (302,434) 83,135
Net change in unrealized depreciation of purchased options contracts -- (375)
- --------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations (198,283) 145,810
- --------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment income - net:
Class Y (3,504) (3,102)
Class A (127) (123)
Class B (15) (20)
Net realized gain on investments: -- --
Class Y (63,590) (39,325)
Class A (4,144) (2,868)
Class B -- Piper -- --
Class B -- FAIF (4,617) (2,274)
- --------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (75,997) (47,712)
==============================================================================================================
CAPITAL SHARE TRANSACTIONS(1):
Class Y
Proceeds from sales 258,693 110,674
Shares issued in connection with the acquisition
of Common Trust Fund Assets -- 80,933
Reinvestment of distributions 46,245 35,430
Payments for redemptions (156,153) (53,232)
- --------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from Class Y transactions 148,785 173,805
- --------------------------------------------------------------------------------------------------------------
Class A:
Proceeds from sales 63,542 50,140
Reinvestment of distributions 4,045 2,873
Payments for redemptions (57,261) (40,915)
- --------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from Class A transactions 10,326 12,098
- --------------------------------------------------------------------------------------------------------------
Class B:
Proceeds from sales -- Piper -- --
Proceeds from sales -- FAIF 13,479 18,981
Reinvestment of distributions -- Piper -- --
Reinvestment of distribution -- FAIF 4,481 2,246
Payments for redemptions -- Piper -- --
Payment for redemptions -- FAIF (5,377) (2,726)
- --------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from Class B transactions 12,583 18,501
- --------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital share
transactions 171,694 204,404
- --------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (102,586) 302,502
NET ASSETS AT BEGINNING OF PERIOD 581,164 278,662
==============================================================================================================
NET ASSETS AT END OF PERIOD (2) $ 478,578 $ 581,164
==============================================================================================================
(1)CAPITAL SHARE TRANSACTIONS:
Class Y
Shares issued 12,176 5,214
Shares issued in connection with the acquisition
of Common Trust Fund Assets -- 4,323
Shares issued in lieu of cash distributions 2,368 1,921
Shares redeemed (7,809) (2,555)
- --------------------------------------------------------------------------------------------------------------
TOTAL CLASS Y TRANSACTIONS 6,735 8,903
==============================================================================================================
Class A:
Shares issued 2,920 2,393
Shares issued in lieu of cash distributions 207 156
Shares redeemed (2,636) (1,975)
- --------------------------------------------------------------------------------------------------------------
TOTAL CLASS A TRANSACTIONS 491 574
==============================================================================================================
Class B:
Shares issued -- Piper -- --
Shares issued -- FAIF 621 910
Shares issued in lieu of cash distributions -- Piper -- --
Shares issued in lieu of cash distributions -- FAIF 233 123
Shares redeemed -- Piper -- --
Shares redeemed -- FAIF (271) (136)
- --------------------------------------------------------------------------------------------------------------
TOTAL CLASS B TRANSACTIONS 583 897
==============================================================================================================
NET INCREASE IN CAPITAL SHARES 7,809 10,374
==============================================================================================================
</TABLE>
(2)Includes undistributed net investment income (000) of: $0 and $0 for Mid Cap
Growth Fund and $429 and $150 for Mid Cap Value Fund at September 30, 1998
and September 30, 1997 respectively.
45 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
FINANCIAL HIGHLIGHTS FOR THE PERIOD ENDED SEPTEMBER 30, 1998
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
REALIZED AND
NET ASSET UNREALIZED DIVIDENDS
VALUE NET GAINS OR FROM NET DISTRIBUTIONS
BEGINNING INVESTMENT (LOSSES) ON INVESTMENT FROM
OF PERIOD INCOME (LOSS) INVESTMENTS INCOME CAPITAL GAINS
- --------------------------------------------------------------------------------------------
MID CAP GROWTH FUND(1)
<S> <C> <C> <C> <C> <C>
Class Y
1998 $ 15.29 $ (0.04) $ (1.82) $ -- $ (1.56)
1997(2) 12.54 (0.01) 2.76 -- --
Class A(3)
1998 $ 15.25 $ (0.09) $ (1.80) $ -- $ (1.56)
1997 13.86 (0.08) 2.72 -- (1.25)
1996 12.97 (0.05) 2.18 -- (1.24)
1995 9.63 (0.06) 3.40 -- --
1994 9.87 (0.04) (0.20) -- --
1993 7.21 (0.03) 2.69 -- --
Class B -- FAIF
1998(4) $ 13.86 $ (0.01) $ (2.07) $ -- $ --
Class B -- Piper
1998(5) $ 15.20 $ (0.09) $ 1.02 $ -- $ (1.56)
1997(2) 12.54 (0.10) 2.76 -- --
- --------------------------------------------------------------------------------------------
MID CAP VALUE FUND (FORMERLY SPECIAL EQUITY FUND)
Class Y
1998 $ 24.21 $ 0.14 $ (6.43) $ (0.13) $ (2.74)
1997 20.43 0.16 6.98 (0.16) (3.20)
1996 17.89 0.25 3.95 (0.24) (1.42)
1995 17.30 0.38 1.61 (0.38) (1.02)
1994(6) 16.34 0.22 0.96 (0.22) --
Class A
1998 $ 24.19 $ 0.07 $ (6.41) $ (0.07) $ (2.74)
1997 20.41 0.11 6.98 (0.11) (3.20)
1996 17.89 0.20 3.94 (0.20) (1.42)
1995 17.30 0.35 1.60 (0.34) (1.02)
1994 15.81 0.28 2.52 (0.28) (1.03)
Class B
1998 $ 23.96 $ (0.01) $ (6.41) $ -- $ (2.74)
1997 20.31 0.02 6.85 (0.02) (3.20)
1996 17.83 0.09 3.91 (0.10) (1.42)
1995 17.29 0.29 1.51 (0.24) (1.02)
1994(7) 16.51 0.01 0.85 (0.08) --
- --------------------------------------------------------------------------------------------
</TABLE>
+ Returns are for the period indicated and have not been annualized.
(A)Excluding sales charges.
(1)The financial highlights for the Mid Cap Growth Fund as set forth herein
include the historical financial highlights of the Piper Emerging Growth Fund
Class A shares and Class Y shares. The assets of the Piper Emerging Growth
Fund were acquired by Mid Cap Growth Fund on August 7, 1998. In connection
with such acquisition, (i) Class A shares of the Piper Emerging Growth Fund
were exchanged for Class A shares of the Mid Cap Growth Fund, (ii) Class Y
shares of the Piper Emerging Growth Fund were exchanged for Class Y shares of
the Mid Cap Growth Fund. On August 7, 1998 the funds advisor changed from
Piper Capital Management, Inc. to U.S. Bank N.A.
(2)Class B and Y shares have been offered since February 18, 1997. All ratios
for the period have been annualized.
(3)Per share amounts have been adjusted to reflect the effect of the stock
dividend declared on December 23, 1995.
(4)Class B shares for FAIF have been offered since August 7, 1998. All ratios
for the period have been annualized.
(5)Effective April 28, 1998 all shareholders were exchanged into Class A. Class
B share activity was discontinued. All ratios for the period have been
annualized.
(6)Class Y Shares (formerly Institutional Class C) have been offered since
February 4, 1994. All ratios for the period have been annualized.
(7)Class B Shares have been offered since August 15, 1994. All ratios for the
period have been annualized.
46 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
MID CAP FUNDS
<TABLE>
<CAPTION>
RATIO OF
RATIO OF NET EXPENSES TO
NET ASSET RATIO OF INVESTMENT AVERAGE
VALUE NET ASSETS EXPENSES TO INCOME TO NET ASSETS PORTFOLIO
END OF TOTAL END OF AVERAGE AVERAGE (EXCLUDING TURNOVER
PERIOD RETURN (A) PERIOD (000) NET ASSETS NET ASSETS WAIVERS) RATE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 11.87 (12.79)% $ 73,356 0.87% (0.27)% 0.87% 39%
15.29 21.93+ 59,393 0.87 (0.16) 0.87 51
$ 11.80 (13.05)% $188,763 1.18% (0.60)% 1.34% 39%
15.25 21.04 274,799 1.23 (0.55) 1.39 51
13.86 17.84 303,769 1.18 (0.41) 1.37 44
12.97 34.68 252,632 1.24 (0.51) 1.42 33
9.63 ( 2.38) 224,188 1.24 (0.38) 1.44 31
9.87 36.92 190,610 1.29 (0.34) 1.49 30
$ 11.78 (15.01)%+ $ 17 1.87 (1.12)% 1.87% 39%
$ 14.57 7.77+ $ -- 1.85% (1.33)% 1.85% 29%
15.20 21.21+ 1,028 1.85 (1.16) 1.85 51
- ----------------------------------------------------------------------------------------------------------------
$ 15.05 (28.65)% $418,041 0.89% 0.69% 0.89% 135%
24.21 40.25 509,308 0.89 0.82 0.90 82
20.43 25.61 247,828 0.88 1.35 0.88 143
17.89 12.84 201,786 0.88 2.30 0.95 72
17.30 7.31+ 128,806 0.79 1.93 1.03 116
$ 15.04 (28.83)% $ 29,261 1.14% 0.43% 1.14% 135%
24.19 39.93 35,207 1.14 0.58 1.15 82
20.41 25.23 17,987 1.13 1.06 1.13 143
17.89 12.63 11,609 1.09 2.08 1.20 72
17.30 18.70 7,333 0.81 1.88 1.23 116
$ 14.80 (29.40)% $ 31,276 1.89% (0.31)% 1.89% 135%
23.96 38.81 36,649 1.90 (0.18) 1.90 82
20.31 24.35 12,847 1.88 0.25 1.88 143
17.83 11.64 4,847 1.88 1.22 1.95 72
17.29 5.22+ 370 1.68 0.47 2.03 116
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
47 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
EQUITY FUNDS
SMALL CAP FUNDS
There was a popular notion among investors through much of the fiscal year ended
September 30, 1998 - there was little to like about small-cap stocks. As a
result, there were few places where successful stocks could be found in this
segment of the domestic stock market for much of the year.
Things got off to a rocky start in the fall of 1997. The market stumbled
severely in October, as investors began to notice the problems in Asian
economies. But eventually, the markets bounced back, appearing unconcerned about
problems in other countries and focused instead on continued strong economic
growth in the United States.
The market's strength held until April. At that time, problems in Japan, many
of Asia's emerging markets, Russia and Latin America created a greater sense of
concern in the investment community. Sensing a higher-risk environment, much of
the money that had been pouring into smaller stocks, propelling their share
prices, deserted the market. Instead, most equity dollars found their way into
large-cap stocks.
The result was the beginning of a true bear market for most small-cap stocks.
The damage was widespread. In fact, by the end of the fiscal year, about half of
the stocks that make up the Russell 2000 index, a common measure of small-cap
stock performance, had lost 40% or more of their value from their 52-week high
share price. The summer of 1998 was particularly bad for the index. August
proved to be the second worst month ever in the 20-year history of the Russell
2000 index (only October 1987 was worse).
SMALL-CAP STOCKS UNDERPERFORMED LARGE-CAP STOCKS
- ------------------------------------------------
MONTHLY YEAR-TO-DATE TOTAL RETURNS FOR THE FISCAL YEAR ENDED 9/30/98
[PLOT POINTS CHART]
S&P 500 Russell 2000
Index Index
(large-cap) (small-cap)
----------- -----------
1997 25.31 21.04
1997 31.9O 20.26
1997 33.35 22.36
1998 1.10 -1.58
1998 8.39 5.70
1998 13.94 10.06
1998 15.08 10.67
1998 13.11 4.71
1998 17.70 4.93
1998 16.45 -3.57
1998 0.37 -22.29
1998 6.02 -16.21
Indices are not available for investment, nor are they illustrative of First
American funds' performance.
Source: SEI Investments
48 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
SMALL CAP FUNDS
In this environment, investors were willing, for a time, to pay high prices
for what were perceived to be more stable large-cap stocks, flocking away from
smaller stocks in droves. In particular, value stocks in the small-cap
marketplace suffered even more than small-cap growth stocks, although both areas
were severely affected by the environment.
By the end of September 1998, small stocks looked very attractively price
compared to their larger counterparts. Will that mean a sudden turnaround for
small stocks? Not necessarily. There are still a number of issues that need to
be resolved in the global economy that will continue to cast a shadow over the
markets for some time. Ironically, the weakness in foreign markets tends to have
little real impact on most small companies, which don't tend to rely on overseas
sales for much of their business. However, the environment of uncertainty does
take a toll on stocks which have little relative liquidity compared to big
stocks like Microsoft and General Electric.
But there is reason for encouragement. In particular, the recent attention
the Federal Reserve appears to be paying to the world's economic concerns has
created a more positive environment for equity investors. The Fed's actions
indicate that it intends to do all it can to prevent the economic problems in
other countries from creating a recession in the United States. As 1998 comes to
a close, the Fed appears to have a good chance to succeed in avoiding a
recession over the next year, or at worst, providing for one that is not
dramatic or long lasting.
This should give the market more confidence. The current state of small-cap
stocks has provided for some tremendous values. Over the long run, this segment
appears to be well-positioned to perform well relative to other areas of the
market. The key is for investors to remain patient and maintain a long-term
perspective, which is absolutely vital in such a volatile market segment.
The following graphs compare First American fund performance with unmanaged
indices. Indices do not pay management fees to cover costs of shareholder
services and fund operating costs, or transaction costs to buy and sell
securities. Unlike indices, mutual funds are never 100% invested because they
need cash on hand to redeem shares. In addition, the performance shown for the
funds includes the maximum initial sales charge, all fund expenses and fees. If
operating expenses such as the funds had been applied to the indices, their
performance would have been lower. Please remember that an index is simply a
measure of performance, and one cannot invest in it directly.
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 class A shares
before sales charges. The adjusted figures for class A shares include the effect
of paying the maximum initial sales charge of 4.5% on 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 Micro Cap Value, Regional Equity, Small Cap Growth, and Small Cap Value
funds primarily invest in equity securities with market capitalizations of less
than $500 million to $1 billion at the time of purchase. Stocks of small
companies are more volatile than stocks of large companies.
49 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
SMALL CAP FUNDS
MICRO CAP VALUE
INVESTMENT OBJECTIVE
- --------------------------------------------------------------------------------
SEEKS CAPITAL APPRECIATION BY INVESTING IN A BROADLY DIVERSIFIED PORTFOLIO
OF VERY SMALL COMPANY STOCKS WITH MARKET CAPITALIZATIONS OF $500 MILLION
OR LESS AND BELIEVED TO BE UNDERVALUED
Generally speaking, the smaller the stock, the more investors shied away from it
during the major market correction that took place beginning in the summer. That
held true for Micro Cap Value Fund, as it turned in a return of -22.77% for the
fiscal year ended September 30, 1998.
With the fund's emphasis on stocks with some of the smallest capitalizations
in the market, the year proved to be extremely challenging. There were no
particular sectors of the market that offered relief. But stocks in the
technology and financial services area were particularly hard hit. Stocks such
as Applied Magnetics and MagneTek lost a large percentage of their value.
The fund did benefit from a small group of stocks that turned in strong
performances despite the market's correction. Among those were Tarrant Apparel,
a retail apparel manufacturer, and Roberts Pharmaceutical, a specialty drug
supplier.
Small stock valuations are extremely attractive compared to the rest of the
market, creating strong upside potential. As always, the exact timing of a
sustained rebound can't be predicted, but at some point, small stocks should be
better recognized by the market. We're positioning the fund with a narrower,
more focused group of stocks in an effort to capitalize on potential positive
developments.
VALUE OF A $10,000 INVESTMENT
[PLOT POINTS CHART]
<TABLE>
<CAPTION>
First American First American First American
Micro Cap Value Fund, Micro Cap Value Fund, Micro Cap Value Fund, Russell 2000
Class A Class A adjusted Class Y Index
------- ---------------- ------- -----
<S> <C> <C> <C> <C>
1988 $12,420 $11,861 $12,468 $12,149
1989 $ 9,232 $ 8,816 $ 9,332 $ 8,851
1990 $14,828 $14,161 $15,035 $12,840
1991 $17,021 $16,255 $17,285 $13,988
1992 $23,350 $22,299 $23,723 $18,627
1993 $25,678 $24,522 $26,167 $19,124
1994 $35,615 $34,012 $36,387 $23,592
1995 $42,047 $40,155 $43,057 $26,694
1996 $60,951 $58,208 $62,454 $35,554
1997 $47,073 $44,954 $48,240 $28,791
1998 $47,073 $44,954 $48,240 $28,791
</TABLE>
PAST PERFORMANCE OF THE FUND IS NOT INDICATIVE OF FUTURE PERFORMANCE.
ANNUALIZED PERFORMANCE SINCE
1 YEAR 3 YEAR 5 YEAR 10 YEAR INCEPTION
- --------------------------------------------------------------------------------
Class A -22.77% 9.74% 15.05% 16.76% 14.52%
- --------------------------------------------------------------------------------
Class A adjusted -26.27% 8.05% 14.01% 16.21% 14.04%
- --------------------------------------------------------------------------------
Class B -23.78% N/A N/A N/A -14.60%
- --------------------------------------------------------------------------------
Class B adjusted -27.36% N/A N/A N/A -18.11%
- --------------------------------------------------------------------------------
Class Y -22.76% 9.85% 15.25% 17.04% 14.82%
- --------------------------------------------------------------------------------
Russell 2000 -19.02% 6.87% 9.10% 11.15% 11.15%
- --------------------------------------------------------------------------------
Past performance of the fund is not indicative of future performance.
The inception date of the class A shares, B shares, and Y shares is 8/8/97. The
performance reflected in the table for class A and Y shares begins on 9/30/87,
the inception date of the common trust fund and class B shares begins on 8/8/97.
Actual since inception returns from 8/8/97 for class A shares is -13.55%, class
A shares adjusted is -16.95%, and class Y shares is -13.61%.
The 10-year performance reflected in the graph begins on 9/30/88 and represents
past performance of U.S. Bank's internally managed common trust fund, adjusted
for fees and expenses for periods prior to 8/8/97, the inception date of the
First American Micro Cap Value Fund. The common trust fund was not registered
under the 1940 Act and therefore was not subject to certain investment
restrictions that may have adversely affected performance.
Performance reflects voluntary fee waivers in effect. In absence of such fee
waivers, total returns would be reduced.
50 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
SMALL CAP FUNDS
REGIONAL EQUITY
INVESTMENT OBJECTIVE
- --------------------------------------------------------------------------------
SEEKS CAPITAL APPRECIATION BY INVESTING PRIMARILY IN SMALL CAP COMPANIES
HEADQUARTERED IN MINNESOTA, NORTH AND SOUTH DAKOTA, MONTANA, WISCONSIN,
MICHIGAN, IOWA, NEBRASKA, COLORADO AND ILLINOIS
The Regional Equity Fund's focus on smaller-company stocks made for a difficult
year. The fund recorded a return of -24.54% for the fiscal year ended September
30, 1998.
The market for small stocks based in the 11-state region covered by the fund
offered little refuge. A number of stocks suffered significant declines,
particularly our holdings in the financial services and utilities sectors. On
the other hand, stocks in the energy and consumer goods areas performed much
better than the market as a whole.
Specific issues offering strong returns included two technology names -
National Computer Systems, which makes educational testing products, and Mapics,
a software developer. Consumer marketers Regis Corp. and Fingerhut were also
stellar performers in this challenging environment.
The strength of the economy during the coming year probably holds the key in
determining how well stocks in this fund will perform. But there are many
reasons to be encouraged by the Federal Reserve's efforts to keep the economy
growing. What's more, small company stock valuations became extremely attractive
after the selloff of the summer of 1998. That value should become recognized by
the markets, and there's good reason to anticipate a rebound in the near future.
VALUE OF A $10,000 INVESTMENT
[PLOT POINTS CHART]
<TABLE>
<CAPTION>
First American First American First American
Regional Equity Fund, Regional Equity Fund, Regional Equity Fund, Russell 2000
Class A Class A adjusted Class Y Index
------- ---------------- ------- -----
<S> <C> <C> <C> <C>
1992 $10,000 $ 9,550 $10,000 $10,000
1993 $11,667 $11,142 $11,667 $11,585
1994 $12,457 $11,896 $12,464 $11,894
1995 $17,585 $16,794 $17,624 $14,673
1996 $19,514 $18,636 $19,610 $16,602
1997 $26,565 $25,369 $26,766 $22,112
1998 $20,046 $19,144 $20,251 $17,907
</TABLE>
PAST PERFORMANCE OF THE FUND IS NOT INDICATIVE OF FUTURE PERFORMANCE.
ANNUALIZED PERFORMANCE SINCE
1 YEAR 3 YEAR 5 YEAR INCEPTION
- --------------------------------------------------------------------------------
Class A -24.54% 4.46% 11.43% 13.33%
- --------------------------------------------------------------------------------
Class A adjusted -27.94% 2.87% 10.42% 12.43%
- --------------------------------------------------------------------------------
Class B -25.12% 3.69% N /A 12.12%
- --------------------------------------------------------------------------------
Class B adjusted -28.70% 2.49% N /A 11.78%
- --------------------------------------------------------------------------------
Class Y* -24.34% 4.74% 11.66% 13.53%
- --------------------------------------------------------------------------------
Russell 2000 -19.02% 6.87% 9.10% 10.66%
- --------------------------------------------------------------------------------
Past performance of the fund is not indicative of future performance.
The inception date of the class A shares is 12/14/92, the inception date of the
class B shares is 8/15/94, and the inception date of the class Y shares is
2/4/94. The performance reflected in the graph begins on 12/31/92. The
performance reflected in the table for class A and Y shares begins on the
inception date of class A shares, and performance for class B shares begins on
8/15/94.
*The performance presented links the performance of class A shares from
inception on 12/14/92 to 2/4/94 with the performance of class Y shares after its
inception on 2/4/94. The since inception return for class Y shares from 2/4/94,
is 11.34%.
Performance reflects voluntary fee waivers in effect. In absence of such fee
waivers, total returns would be reduced.
51 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
SMALL CAP FUNDS
SMALL CAP GROWTH
INVESTMENT OBJECTIVE
- --------------------------------------------------------------------------------
SEEKS CAPITAL GROWTH BY INVESTING IN A DIVERSIFIED PORTFOLIO OF STOCKS
WITH MARKET CAPITALIZATIONS OF $1 BILLION OR LESS WITH OUTSTANDING
POTENTIAL FOR SUPERIOR GROWTH
In broad terms, Small Cap Growth Fund's performance followed that of the small
company stock market as a whole during the fund's fiscal year. For many months,
performance was strong. But after reaching a peak in the spring, small stocks
dropped dramatically, particularly in July and August. For the fiscal year ended
September 30, 1998, the fund registered a return of -18.66%.
Although the total return for the period was negative, the fund still managed
to perform better than similar funds on average.
In what was clearly a bear market for smaller stocks, the fund benefited from
its diversified approach. While the fund remained fully invested it avoided
heavy weightings in any single sector, an important factor in volatile times.
The area of the fund's greatest concentration is in retail stocks, and
relatively speaking the fund fared well with that group, led by Duane Reade, the
New York drug store chain. Other strong performers in our portfolio included L-3
Communications, Sipex and U.S. Foodservice. We underemphasized energy stocks,
which represented one of the poorest-performing sectors.
While we can expect continued volatility at least in the short run,
valuations in small stocks look extremely attractive, which should bode well for
the fund over the long term. We have positioned the fund in securities across a
broad range of sectors and are focusing on identifying specific stocks that have
the best chance of responding when markets undertake a sustained recovery. The
timing of such a recovery is difficult to predict, but clearly, these stocks
offer long-term upside potential for patient investors.
VALUE OF A $10,000 INVESTMENT
[PLOT POINTS CHART]
<TABLE>
<CAPTION>
First American First American First American
Small Cap Growth Fund, Small Cap Growth Fund, Small Cap Growth Fund, Russell 2000
Class A Class A adjusted Class Y Index
------- ---------------- ------- -----
<S> <C> <C> <C> <C>
1988 $10,000 $ 9,555 $10,000 $10,000
1989 $12,226 $11,682 $12,226 $12,149
1990 $11,431 $10,923 $11,431 $ 8,851
1991 $16,068 $15,353 $16,068 $12,840
1992 $17,061 $16,302 $17,061 $13,988
1993 $21,251 $20,306 $21,251 $18,627
1994 $21,702 $20,736 $21,702 $19,124
1995 $24,714 $23,615 $24,714 $23,592
1996 $26,043 $24,885 $26,043 $26,694
1997 $37,935 $36,248 $37,935 $35,554
1998 $30,856 $29,484 $31,061 $28,791
</TABLE>
PAST PERFORMANCE OF THE FUND IS NOT INDICATIVE OF FUTURE PERFORMANCE.
ANNUALIZED PERFORMANCE
SINCE
1 YEAR 3 YEAR 5 YEAR 10 YEAR INCEPTION
- --------------------------------------------------------------------------------
Class A -18.66% 7.68% 7.74% 11.93% 8.83%
- --------------------------------------------------------------------------------
Class A adjusted -22.31% 6.03% 6.76% 11.41% 8.39%
- --------------------------------------------------------------------------------
Class B N/A N/A N/A N/A -16.30%+
- --------------------------------------------------------------------------------
Class B adjusted N/A N/A N/A N/A -20.49%+
- --------------------------------------------------------------------------------
Class Y* -18.12% 7.92% 7.89% 12.00% 8.89%
- --------------------------------------------------------------------------------
Russell 2000 -19.02% 6.87% 9.10% 11.15% 11.15%
- --------------------------------------------------------------------------------
Past performance of the fund is not indicative of future performance.
The inception date of the class A shares is 3/16/87, the inception date of the
class B shares is 7/31/98, and the inception date of the class Y shares is
7/31/98. The 10-year performance reflected in the graph begins on 9/30/88. The
performance reflected in the table for class A and Y shares begins on the
inception date of class A shares and performance for class B shares begins on
7/31/98.
*The performance presented links the performance of class A shares from
inception on 3/16/87 to 7/31/98 with the performance of class Y shares after its
inception on 7/31/98. The cumulative since inception return for class Y shares
from 7/31/98, is -16.17%.
The performance presented is that of a predecessor fund, Piper Small Company
Growth Fund, which merged with First American Small Cap Growth Fund on 7/31/98.
Performance reflects voluntary fee waivers in effect. In absence of such fee
waivers, total returns would be reduced.
+Cumulative since inception.
52 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
SMALL CAP FUNDS
SMALL CAP VALUE
INVESTMENT OBJECTIVE
- --------------------------------------------------------------------------------
SEEKS CAPITAL APPRECIATION BY INVESTING IN A DIVERSIFIED PORTFOLIO OF
STOCKS WITH MARKET CAPITALIZATIONS OF $1 BILLION OR LESS AND BELIEVED TO
BE UNDERVALUED
In an unforgiving market for both small-cap and value stock investors, Small Cap
Value Fund returned -19.48% for the 10-month period ended September 30, 1998.
Although there was weakness in the last months of 1997, the most significant
challenges occurred from May until August, as growing concerns about worldwide
economic problems drew investors away from smaller stocks.
Most detrimental to the fund were its holdings in financial stocks, which
severely underperformed the markets. An increasing credit crunch took its toll
on many specialty finance companies that were part of the portfolio. Selected
technology stocks in the portfolio also suffered dramatic losses. During the
period, we shifted money out of some technology holdings that were particularly
out of favor.
There were positives, including Tarrant Apparel Group, an apparel
manufacturer, which more than doubled in value during the year, and Superior
Telecom, which produces copper wire for the telecommunications industry.
However, the reality was that most small-cap stocks went through a major
correction. On the plus side, it has created some of the best value
opportunities in the market in many years. In fact, it's the kind of environment
that can greatly reward investors with a long-term perspective, because
small-cap stocks will again gain favor with the markets at some point. In
keeping with that perspective, many of the fund's positions have been maintained
and a number of attractive new stocks have been added to the portfolio from a
wide range of industries.
VALUE OF A $10,000 INVESTMENT
[PLOT POINTS CHART]
<TABLE>
<CAPTION>
First American First American First American
Small Cap Value Fund, Small Cap Value Fund, Small Cap Value Fund, Russell 2000
Class A Class A adjusted Class Y Index
------- ---------------- ------- -----
<S> <C> <C> <C> <C>
1988 $10,000 $ 9,549 $10,000 $10,000
1989 $12,289 $11,735 $12,323 $12,149
1990 $9,503 $ 9,074 $ 9,570 $ 8,851
1991 $15,200 $14,514 $15,327 $12,840
1992 $17,439 $16,652 $17,600 $13,988
1993 $23,784 $22,710 $24,090 $18,627
1994 $25,798 $24,634 $26,186 $19,124
1995 $36,447 $34,803 $36,825 $23,592
1996 $42,159 $40,257 $42,963 $26,694
1997 $59,777 $57,080 $61,017 $35,554
1998 $44,647 $42,633 $45,701 $28,791
</TABLE>
PAST PERFORMANCE OF THE FUND IS NOT INDICATIVE OF FUTURE PERFORMANCE.
ANNUALIZED PERFORMANCE SINCE
10 MONTH* 1 YEAR 3 YEAR 5 YEAR 10 YEAR INCEPTION
- --------------------------------------------------------------------------------
Class A -19.48% -25.31% 7.00% 13.42% 16.14% 17.40%
- --------------------------------------------------------------------------------
Class A adjusted -23.11% -28.65% 5.37% 12.39% 15.60% 16.90%
- --------------------------------------------------------------------------------
Class B -19.91% N/A N/A N/A N/A -19.87%+
- --------------------------------------------------------------------------------
Class B adjusted -23.62% N/A N/A N/A N/A -23.58%+
- --------------------------------------------------------------------------------
Class Y -19.31% -25.10% 7.46% 13.66% 16.41% 17.70%
- --------------------------------------------------------------------------------
Russell 2000 -14.75% -19.02% 6.87% 9.10% 11.15% 11.15%
- --------------------------------------------------------------------------------
Past performance of the fund is not indicative of future performance.
The inception date of the class A shares is 8/1/94, the inception date of the
class B shares is 11/24/97, and the inception date of the class Y shares is
8/1/94. Actual since inception return from 8/1/94 for class A shares is 15.08%,
class A shares adjusted is 13.81%, and class Y shares since inception from
8/1/94 is 15.31%.
The 10-year performance reflected in the graph begins on 9/30/88, and represents
past performance of U.S. Bank's internally managed common trust fund, adjusted
for fees and expenses for periods prior to 8/1/94, 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
that may have adversely affected performance. The performance reflected in the
table begins on 9/30/88, the inception date of the common trust fund.
The performance presented includes that of a predecessor fund, Qualivest Small
Companies Value Fund, which merged with First American Small Cap Value Fund on
11/21/97.
*Returns are for the period indicated and are not annualized.
+Cumulative since inception.
Performance reflects voluntary fee waivers in effect. In absence of such fee
waivers, total returns would be reduced.
53 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
NET ASSETS SEPTEMBER 30, 1998
Micro Cap Value Fund
DESCRIPTION SHARES VALUE (000)
- -----------------------------------------------------------------------------
COMMON STOCKS - 94.3%
AEROSPACE - 3.3%
LMI Aerospace* 105,000 $ 814
Moog, Cl A* 135,500 3,921
-----------
4,735
-----------
AIR TRANSPORTATION - 0.0%
World Airways* 38,500 38
-----------
APPAREL/TEXTILES - 3.3%
Deckers Outdoors* 54,100 271
Gildan Activewear* 150,000 1,144
Hampshire Group Limited* 44,100 750
Quaker Fabric 102,450 480
Tarrant Apparel Group* 86,600 2,100
-----------
4,745
-----------
AUTOMOTIVE - 0.9%
Bonded Motors* 77,600 514
Edelbrock* 55,700 815
-----------
1,329
-----------
BANKS - 5.5%
First Republic Bank* 70,000 2,135
TR Financial 100,000 2,662
UST 35,400 748
Webster Financial 103,544 2,524
-----------
8,069
-----------
BATTERIES AND BATTERY SYSTEMS - 0.2%
BOLDER Technologies* 32,000 314
-----------
CHEMICALS - 0.5%
CPAC* 74,900 665
-----------
COMMUNICATIONS EQUIPMENT - 0.6%
Comdial* 89,600 739
Transcrypt International* 38,900 102
-----------
841
-----------
COMPUTERS & SERVICES - 13.5%
Bell & Howell* 64,000 1,660
BrightStar Information Technology Group* 67,400 413
Cimatron* 213,442 347
Ciprico* 120,000 877
Consilium* 285,163 517
Fieldworks* 160,000 580
Fourth Shift* 135,700 433
Gatefield* 318,350 95
General Scanning* 53,700 295
Government Technology Services* 182,700 731
GSE Systems* 55,000 165
Inprise* 185,000 1,145
Kentek Information Systems 97,242 626
Kofax Image Products* 200,000 1,325
Kronos* 33,100 1,225
Micro Cap Value Fund (continued)
DESCRIPTION SHARES VALUE (000)
- -----------------------------------------------------------------------------
MacNeal-Schwendler* 78,100 $ 483
Micrografx* 100,000 950
National Computer Systems 42,100 1,242
Olicom A/S* 116,900 1,600
Pomeroy Computer Resources* 115,100 1,914
Sapiens International* 78,800 384
Triple P N.V.* 213,500 694
TRO Learning* 157,700 1,202
TrueVision* 250,000 312
Wall Data* 25,000 381
-----------
19,596
-----------
CONTAINERS & PACKAGING - 0.5%
BWay* 59,400 754
-----------
ELECTRICAL SERVICES - 0.5%
Trigen Energy 62,000 802
-----------
ENVIRONMENTAL SERVICES - 0.7%
Arcadis NV* 30,000 218
Walbro 94,500 762
-----------
980
-----------
FINANCIAL SERVICES - 2.6%
Aames Financial 48,200 292
Medallion Financial 54,400 857
Rockford Industries* 106,700 907
United PanAm Financial* 200,000 1,125
WFS Financial* 100,100 601
-----------
3,782
-----------
GAS/NATURAL GAS - 0.3%
Midcoast Energy Resources 21,010 383
-----------
GLASS PRODUCTS - 0.8%
Libbey 40,000 1,180
-----------
HAZARDOUS WASTE MANAGEMENT - 0.4%
Air & Water Technologies* 275,000 550
-----------
HEALTHCARE MANAGEMENT - 0.0%
Complete Management* 53,300 57
-----------
HOUSEHOLD FURNITURE & FIXTURES - 2.9%
Stanley Furniture* 117,800 2,047
Thomas Industries 100,950 2,164
-----------
4,211
-----------
HOUSING CONSTRUCTION - 1.2%
Morgan Products Limited* 82,400 216
Simpson Manufacturing* 20,000 585
Synthetic Industries* 61,700 1,003
-----------
1,804
-----------
54 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
SMALL CAP FUNDS
Micro Cap Value Fund (continued)
DESCRIPTION SHARES VALUE (000)
- -----------------------------------------------------------------------------
INSURANCE - 7.1%
Chandler Insurance* 170,125 $ 1,276
Delphi Financial Group, Cl A* 18,699 736
Farm Family Holdings* 27,300 833
LaSalle Re Holdings 45,300 1,206
Penn Treaty American* 118,550 2,860
Philadelphia Consolidated Holding 112,200 2,482
SCPIE Holdings 29,900 931
-----------
10,324
-----------
LEASING & RENTING - 1.0%
Leasing Solutions* 24,500 671
Willis Lease Finance* 43,200 718
-----------
1,389
-----------
LEISURE - 0.4%
TearDrop Golf* 100,600 578
-----------
MACHINERY - 1.6%
Bridgeport Machines* 111,500 962
Foster (LB), Cl A* 160,000 700
Scotsman Industries 30,800 697
-----------
2,359
-----------
MARINE TRANSPORTATION - 1.0%
Nordic American Tanker Shipping 112,900 1,439
-----------
MEASURING DEVICES - 0.8%
Brown & Sharpe Manufacturing, Cl A* 126,800 951
EnviroSource* 30,042 244
-----------
1,195
-----------
MEDICAL PRODUCTS & SERVICES - 3.0%
America Service Group* 105,000 971
Bacou USA* 26,500 457
Cholestech* 120,800 566
Diagnostic Health Services* 224,500 996
PolyMedica* 79,000 726
Spacelabs Medical* 46,800 725
Unison HealthCare* 56,500 1
-----------
4,442
-----------
METALS & MINING - 0.5%
Lindberg 60,000 758
-----------
MISCELLANEOUS BUSINESS SERVICES - 3.1%
Acxiom* 69,760 1,731
American Bank Note Holographics* 136,400 1,074
ImageMax* 67,500 160
InteliData Technologies* 39,300 36
NOVA* 49,456 1,518
-----------
4,519
-----------
MISCELLANEOUS CONSUMER SERVICES - 1.5%
Racing Champions* 81,000 896
Regis 41,300 1,301
-----------
2,197
-----------
Micro Cap Value Fund (continued)
DESCRIPTION SHARES VALUE (000)
- -----------------------------------------------------------------------------
MISCELLANEOUS MANUFACTURING - 6.9%
AFC Cable Systems 90,750 $ 2,155
Dayton Superior* 75,500 1,331
Excel Industries 75,900 949
FiberMark* 42,150 598
MagneTek* 192,262 2,103
Matthews International, Cl A 70,800 1,770
Park-Ohio Holdings* 84,535 1,152
-----------
10,058
-----------
MOTORCYCLES, BICYCLES & PARTS - 0.5%
Huffy 48,300 682
-----------
OFFICE FURNITURE & FIXTURES - 0.5%
Shelby Williams Industries 62,800 722
-----------
PETROLEUM & FUEL PRODUCTS - 1.5%
Bellwether Exploration* 94,500 573
Comstock Resources* 76,200 448
Forest Oil* 77,620 805
Titan Exploration* 60,400 366
-----------
2,192
-----------
PHARMACEUTICAL - 3.9%
Catalytica* 262,600 3,709
Roberts Pharmaceutical* 99,700 1,907
-----------
5,616
-----------
PROFESSIONAL SERVICES - 2.3%
Borg Warner Security* 210,000 2,940
Total Containment* 60,455 382
-----------
3,322
-----------
REAL ESTATE - 4.7%
Chelsea GCA Realty 27,100 928
Lexington Corporate Properties 53,000 666
OMEGA Healthcare Investors 76,000 2,484
Omega Worldwide* 29,840 153
RFS Hotel Investors 33,200 398
Shurgard Storage Centers 50,100 1,299
Walden Residential Properties 34,000 782
Winston Hotels 12,900 112
-----------
6,822
-----------
RETAIL - 4.0%
Apple South 40,000 445
Drug Emporium* 331,600 1,326
Finish Line, Cl A* 46,100 429
Finlay Enterprises* 55,900 468
Friedman's, Cl A* 40,600 264
Genovese Drug Stores, Cl A 40,500 780
K-Swiss, Cl A 38,200 888
Marks Bros. Jewelers* 28,400 380
Piercing Pagoda* 58,650 674
Video Update, Cl A* 175,125 186
-----------
5,840
-----------
55 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
NET ASSETS SEPTEMBER 30, 1998
Micro Cap Value Fund (continued)
DESCRIPTION SHARES/PAR (000) VALUE (000)
- -----------------------------------------------------------------------------
SECURITY BROKERS - 0.3%
Ragen Mackenzie Group* 42,000 $ 425
-----------
SEMI-CONDUCTORS/INSTRUMENTS - 0.8%
FEI* 100,000 800
Unit Instruments* 76,320 353
-----------
1,153
-----------
SINGLE FAMILY HOUSING CONSTRUCTION - 0.6%
D.R. Horton 53,750 860
-----------
STEEL & STEEL WORKS - 1.3%
Northwest Pipe* 100,100 1,852
-----------
TELEPHONES & TELECOMMUNICATION - 1.0%
Corsair Communications* 70,000 214
Evolving Systems* 200,000 563
Periophonics* 83,000 685
-----------
1,462
-----------
TESTING LABORATORIES - 0.4%
Collaborative Clinical Research* 200,000 563
-----------
TRANSPORTATION - 1.7%
American Aircarriers Support* 100,000 613
Budget Group, Cl A* 48,800 1,113
Supreme Industries 73,091 704
-----------
2,430
-----------
UTILITIES - 5.0%
El Paso Electric* 126,800 1,228
TNP Enterprises 42,900 1,499
Unisource Energy* 300,000 4,594
-----------
7,321
-----------
WHOLESALE - 1.2%
Performance Food Group* 50,700 1,128
Pioneer-Standard Electronics 95,400 602
-----------
1,730
-----------
TOTAL COMMON STOCKS
(Cost $125,429) 137,085
-----------
CONVERTIBLE BONDS - 1.6%
Aames Financial, 53.5619 Shares
5.500%, 03/15/06 $ 200 104
Complete Management, 71.4286 Shares
8.000%, 08/15/03 590 123
Complete Management, 62.5000 Shares
8.000%, 12/15/03 300 63
Drug Emporium, 65.1466 Shares
7.750%, 10/01/14 921 730
Leasing Solutions, 28.6533 Shares
6.875%, 10/01/03 250 240
Micro Cap Value Fund (concluded)
DESCRIPTION PAR (000)/SHARES VALUE (000)
- -----------------------------------------------------------------------------
MacNeal-Schwendler, 66.0066 Shares
7.875%, 08/18/04 $ 630 $ 592
Titan, 285.7143 Shares
8.250%, 11/01/03 360 521
-----------
TOTAL CONVERTIBLE BONDS
(Cost $2,983) 2,373
-----------
RELATED PARTY MONEY MARKET FUND - 3.1%
First American Prime
Obligations Fund (A) 4,558,142 4,558
-----------
TOTAL RELATED PARTY MONEY MARKET FUND
(Cost $4,558) 4,558
-----------
TOTAL INVESTMENTS - 99.0%
(Cost $132,970) 144,016
-----------
OTHER ASSETS AND LIABILITIES, NET - 1.0% (B) 1,428
-----------
NET ASSETS:
Portfolio Capital--Class Y
($.0001 par value--2 billion authorized)
based on 18,166,876 outstanding shares 106,161
Portfolio Capital--Class A
($.0001 par value--2 billion authorized)
based on 139,712 outstanding shares 1,439
Portfolio Capital--Class B
($.0001 par value--2 billion authorized)
based on 26,216 outstanding shares 263
Undistributed net investment income 52
Accumulated net realized gain on investments 26,483
Net unrealized appreciation of investments 11,046
-----------
TOTAL NET ASSETS - 100.0% $ 145,444
-----------
Net asset value, offering price, and redemption
price per share--Class Y $ 7.93
-----------
Net asset value and redemption
price per share--Class A $ 7.95
Maximum sales charge of 4.50% (1) 0.37
-----------
Offering price per share--Class A $ 8.32
-----------
Net asset value and offering price
per share--Class B (2) $ 7.84
-----------
*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) Class B has a contingent deferred sales charge. For a description of a
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 advisor for this fund. See also the notes to the financial
statements.
(B) Other assets and liabilities representing greater than five percent of total
net assets include the following (000):
Cash collateral received for securities on loan $ 9,293
Payable upon return of securities on loan $ (9,293)
Cl--Class
The accompanying notes are an integral part of the financial statements.
56 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
SMALL CAP FUNDS
Regional Equity Fund
DESCRIPTION SHARES VALUE (000)
- -----------------------------------------------------------------------------
COMMON STOCKS - 93.7%
APPAREL/TEXTILES - 2.0%
Ashworth* 375,000 $ 2,531
Sport-Haley (B)* 313,000 3,130
-----------
5,661
-----------
AUTOMOTIVE - 6.9%
Dura Automotive Systems* (B) 214,000 5,537
SPX 65,000 2,685
Tower Automotive* 557,400 11,009
-----------
19,231
-----------
BANKS - 6.1%
Community First Bankshares 620,000 11,005
TCF Financial 300,000 5,962
-----------
16,967
-----------
BATTERIES & BATTERY SYSTEMS - 0.6%
BOLDER Technologies* 170,200 1,670
-----------
CHEMICALS - 0.9%
W.H. Brady 121,900 2,529
-----------
COMMUNICATIONS EQUIPMENT - 1.9%
Communications Systems 435,200 5,005
Premis* (B) 58,400 65
Transcrypt International* 134,400 352
-----------
5,422
-----------
COMPUTERS & SERVICES - 10.3%
Bell & Howell* 105,000 2,723
Digi International* 284,500 3,485
Evolving Systems Inc* 328,400 924
Inacom* 230,000 4,341
Innovex 200,000 2,425
JPM* 49,800 299
National Computer Systems 387,000 11,417
System Software Associates* 642,100 3,251
-----------
28,865
-----------
ENTERTAINMENT - 1.8%
Grand Casinos* 290,000 2,302
Lodgenet Entertainment* 400,000 2,825
-----------
5,127
-----------
FINANCIAL SERVICES - 2.3%
Metris* 135,320 6,309
-----------
FOOD, BEVERAGE & TOBACCO - 3.7%
International Multifoods 200,000 3,287
Michael Foods 302,600 7,187
-----------
10,474
-----------
GAS/NATURAL GAS - 0.7%
Western Gas Resources 220,800 1,822
-----------
Regional Equity Fund (continued)
DESCRIPTION SHARES VALUE (000)
- -----------------------------------------------------------------------------
INSURANCE - 5.1%
Amerin* 460,800 $ 8,698
ARM Financial Group, Cl A 159,900 2,838
MMI 158,900 2,850
-----------
14,386
-----------
MACHINERY - 4.7%
Alliant Techsystems* 84,200 5,578
Donaldson 472,600 7,562
-----------
13,140
-----------
MEDICAL PRODUCTS & SERVICES - 6.6%
Angeion* 96,800 203
ATS Medical* 255,600 1,502
CNS* 339,000 1,292
Dynamic Healthcare Techologies* 163,300 163
Empi* 307,300 4,917
Lifecore Biomedical* 483,500 3,626
Orphan Medical* 162,800 1,252
Rehabilicare (B)* 240,000 570
TSI (B) 669,300 4,936
-----------
18,461
-----------
METALS & MINING - 5.6%
A.M. Castle 169,900 2,559
Titanium Metals* 200,000 2,825
Varlen 369,000 10,332
-----------
15,716
-----------
MISCELLANEOUS BUSINESS SERVICES - 0.6%
Alternate Postal Delivery (B)* 210,000 210
Alternative Resources* 225,000 1,434
-----------
1,644
-----------
MISCELLANEOUS CONSUMER
SERVICES - 4.4%
Regis 394,400 12,424
-----------
MISCELLANEOUS MANUFACTURING - 12.8%
Applied Power 460,200 12,569
Ballantyne of Omaha* 447,750 3,666
BMC Industries 187,100 1,123
Idex 200,000 5,312
Pentair 250,000 8,063
Valmont Industries 421,200 5,160
-----------
35,893
-----------
PETROLEUM & FUEL PRODUCTS - 1.0%
Basin Exploration* 115,700 1,916
Forest Oil* 89,000 923
-----------
2,839
-----------
PRINTING & PUBLISHING - 3.1%
Merrill 562,000 8,816
-----------
RETAIL - 6.3%
Buffets* 535,000 5,785
Department 56* 270,000 7,290
Fingerhut 425,000 4,675
-----------
17,750
-----------
57 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
NET ASSETS SEPTEMBER 30, 1998
Regional Equity Fund (continued
DESCRIPTION SHARES VALUE (000)
- -----------------------------------------------------------------------------
SEMICONDUCTORS/INSTRUMENTS - 1.1%
Aetrium (B)* 686,000 $ 3,001
-----------
TELEPHONES/TELECOMMUNICATIONS - 4.4%
Mosaix* (B) 535,800 2,579
Norstan (B)* 551,300 9,648
-----------
12,227
-----------
WHOLESALE - 0.8%
Hawkins Chemical 220,000 2,200
-----------
TOTAL COMMON STOCKS
(Cost $234,827) 262,574
-----------
RELATED PARTY MONEY MARKET FUND - 7.1%
First American Prime
Obligations Fund (A) 19,970,071 19,970
-----------
TOTAL RELATED PARTY MONEY MARKET FUND
(Cost $19,970) 19,970
-----------
TOTAL INVESTMENTS - 100.8%
(Cost $254,797) 282,544
-----------
OTHER ASSETS AND LIABILITIES, NET - (0.8%) (C) (2,296)
-----------
NET ASSETS:
Portfolio Capital--Class Y
($.0001 par value--2 billion authorized)
based on 13,442,457 outstanding shares 179,963
Portfolio Capital--Class A
($.0001 par value--2 billion authorized)
based on 1,540,879 outstanding shares 22,407
Portfolio Capital--Class B
($.0001 par value--2 billion authorized)
based on 1,814,030 outstanding shares 30,612
Accumulated net realized gain on investments 19,519
Net unrealized appreciation of investments 27,747
-----------
TOTAL NET ASSETS - 100.0% $ 280,248
-----------
Net asset value, offering price, and redemption
price per share--Class Y $ 16.74
-----------
Net asset value and redemption price
per share--Class A $ 16.68
Maximum sales charge of 4.50% (1) 0.79
-----------
Offering price per share--Class A $ 17.47
-----------
Net asset value and offering price
per share--Class B (2) $ 16.25
-----------
Regional Equity Fund (concluded)
DESCRIPTION
- -----------------------------------------------------------------------------
* 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) Class B has a contingent deferred sales charge. For a description of a
possible redemption charge, see the notes to the financial statements.
(A) This money market fund is advised by US Bank National Association who also
serves as advisor for this fund. See also the notes to the financial
statements.
(B) Investments represent 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 September 30,
1998. See activity below.
(C) Other assets and liabilities representing greater than five percent of total
net assets include the following (000):
Cash collateral received for securities on loan $ 15,641
Payable upon return of securities on loan $ (15,641)
Cl--Class
The activity for investments in Common Stocks of Affiliates is as follows:
<TABLE>
<CAPTION>
Net
Shares at Shares at Realized
Description 09/30/97 09/30/98 Difference Dividends Gains/Losses
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Aetrium 686,000 686,000 -- $ -- $ --
Alternate Postal
Delivery 236,500 210,000 (26,500) -- (103,720)
Dura Automotive
Systems 163,900 214,000(+) 50,100 -- --
Onelink
Communications 328,900 --(+) (328,900) -- (833,708)
Mosaix 604,800 535,800(+) (69,000) -- (610,832)
Norstan 536,300 551,300 15,000 -- --
Premis 152,200 58,400(+) (93,800) -- (380,804)
Rehabilicare 259,300 240,000(+) (19,300) -- (4,027)
Sport-Haley 298,000 313,000 15,000 -- --
TSI 715,200 669,300 (45,900) 85,824 227,205
----------- ----------- ----------- ----------- -----------
3,981,100 3,477,800 (503,300) $ 85,824 $(1,705,886)
</TABLE>
(+) At September 30, 1998 these securities were not considered affiliates.
The accompanying notes are an integral part of the financial statements.
58 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
SMALL CAP FUNDS
Small Cap Growth Fund
DESCRIPTION SHARES VALUE (000)
- -----------------------------------------------------------------------------
COMMON STOCKS - 92.0%
AIRCRAFT - 1.4%
BE Aerospace* 94,000 $ 2,068
-----------
APPAREL/TEXTILES - 1.3%
Columbia Sportswear* 109,000 1,785
-----------
AUTOMOTIVE - 2.2%
Tower Automotive* 156,000 3,081
-----------
BANKS - 3.2%
Commerce Bancorp New Jersey 61,207 2,422
Community First Bankshares 95,000 1,686
Westamerica Bancorporation 15,900 460
-----------
4,568
-----------
BATTERIES & BATTERY SYSTEMS - 0.8%
BOLDER Technologies* 115,000 1,128
-----------
BROADCASTING, NEWSPAPERS &
ADVERTISING - 2.5%
Capstar Broadcasting Partners* 113,000 1,744
Getty Images Inc* 105,000 1,824
-----------
3,568
-----------
CHEMICALS - 2.3%
Cambrex 80,000 1,885
OM Group 52,000 1,466
-----------
3,351
-----------
COMMUNICATIONS EQUIPMENT - 4.2%
Excel Switching* 79,500 1,878
Medialink Worldwide* 160,000 2,680
Tekelec* 96,500 1,472
-----------
6,030
-----------
COMPUTERS & SERVICES - 4.5%
Apex PC Solutions* 60,000 1,177
National Computer Systems 80,500 2,375
Technology Solutions* 91,500 1,029
Tier Technologies Inc* 115,000 1,897
-----------
6,478
-----------
ENVIRONMENTAL SERVICES - 2.2%
American Disposal Services* 39,000 1,519
CUNO* 95,300 1,596
-----------
3,115
-----------
FINANCIAL SERVICES - 1.9%
Affiliated Managers Group* 55,000 990
Financial Federal* 71,100 1,560
Heller Financial* 7,000 168
-----------
2,718
-----------
HEALTH CARE - 1.4%
Medical Manager* 60,000 1,372
QuadraMed* 33,700 678
-----------
2,050
-----------
Small Cap Growth Fund (continued)
DESCRIPTION SHARES VALUE (000)
- -----------------------------------------------------------------------------
INSURANCE - 4.2%
ARM Financial Group, Cl A 96,000 $ 1,704
CMAC Investment 54,000 2,349
United Payors & United Providers* 98,500 1,921
-----------
5,974
-----------
LEISURE - 0.4%
Adams Golf* 125,000 516
-----------
MACHINERY - 1.5%
Kuhlman 65,200 2,115
-----------
MEDICAL PRODUCTS & SERVICES - 6.6%
ATS Medical* 209,400 1,230
Cyberonics* 100,000 600
Express Scripts, Cl A* 29,000 2,385
Osteotech* 29,800 790
Perclose* 80,000 1,320
Qiagen* 40,900 2,229
Quorum Health Group* 55,000 894
-----------
9,448
-----------
MISCELLANEOUS BUSINESS SERVICES - 2.8%
ABM Industries 65,000 1,901
Computer Learning Centers* 119,000 945
Whittman-Hart* 63,300 1,163
-----------
4,009
-----------
MISCELLANEOUS CONSUMER SERVICES - 5.4%
Carriage Services* 85,000 2,098
G. & K. Services 73,500 3,445
Wackenhut Corrections* 101,000 2,241
-----------
7,784
-----------
PETROLEUM & FUEL PRODUCTS - 1.9%
Evergreen Resources* 40,000 880
Newfield Exploration* 80,000 1,800
-----------
2,680
-----------
PHARMACEUTICAL - 1.8%
Algos Pharmaceuticals* 45,000 1,041
ICON PLC, ADR* 25,000 816
Barr Laboratories* 25,000 759
-----------
2,616
-----------
PROFESSIONAL SERVICES - 2.0%
ABR Information Services* 78,000 1,068
Strayer Education 71,500 1,868
-----------
2,936
-----------
REAL ESTATE INVESTMENT TRUSTS - 1.0%
Alexandria Real Estate Equities 54,600 1,481
-----------
RETAIL - 10.5%
99 Cents Only Stores* 54,250 2,146
Consolidated Products* 114,000 2,002
Duane Reade* 97,500 3,699
59 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
NET ASSETS SEPTEMBER 30, 1998
Small Cap Growth Fund (continued)
DESCRIPTION SHARES VALUE (000)
- -----------------------------------------------------------------------------
Fred's Incorporated, Cl A 150,000 $ 1,987
Garden Fresh Restaurant* 115,000 1,696
Linens N Things* 67,000 1,843
O'Reilly Automotive* 45,700 1,657
-----------
15,030
-----------
SEMICONDUCTORS/INSTRUMENTS - 10.1%
Applied Micro Circuits* 100,000 1,488
Micrel* 64,000 1,696
Mips Technologies* 149,000 2,961
PMC-Sierra* 53,300 1,699
Sanmina* 99,800 2,807
SIPEX* 92,000 2,335
Transwitch* 100,000 1,494
-----------
14,480
-----------
SERVICES-PREPACKAGED SOFTWARE - 1.4%
H.T.E.* 170,000 2,083
-----------
SOFTWARE - 5.9%
Aspect Development* 65,500 2,579
Bindview Development* 40,000 805
Engineering Software* 28,800 1,375
Evolving Systems Inc* 100,000 281
Hyperion Solutions* 50,350 1,092
Mercury Interactive* 58,000 2,302
-----------
8,434
-----------
SPECIALTY CONSTRUCTION - 0.2%
Quanta Services* 20,000 246
-----------
TELECOMMUNICATION SERVICES - 1.7%
International Telecommunications
Data Systems* 84,500 2,451
-----------
TELEPHONES & TELECOMMUNICATION - 2.8%
Com21* 79,000 1,412
L-3 Communications* 20,000 794
NTL* 42,800 1,840
-----------
4,046
-----------
TRANSPORTATION SERVICES - 1.2%
C.H. Robinson Worldwide 83,500 1,680
-----------
WHOLESALE - 2.7%
U.S. Foodservice* 92,000 3,830
-----------
TOTAL COMMON STOCKS
(Cost $132,482) 131,779
-----------
RELATED PARTY MONEY MARKET FUND - 6.4%
First American Prime
Obligations Fund (A) 9,174,778 9,175
-----------
TOTAL RELATED PARTY MONEY MARKET FUND
(Cost $9,175) 9,175
-----------
Small Cap Growth Fund (concluded)
DESCRIPTION VALUE (000)
- -----------------------------------------------------------------------------
TOTAL INVESTMENTS - 98.4%
(Cost $141,657) $ 140,954
-----------
OTHER ASSETS AND LIABILITIES, NET - 1.6% (B) 2,276
-----------
NET ASSETS:
Portfolio Capital--Class Y
($.0001 par value--2 billion authorized)
based on 9,504,882 outstanding shares 117,742
Portfolio Capital--Class A
($.0001 par value--2 billion authorized)
based on 2,375,098 outstanding shares 26,702
Portfolio Capital--Class B
($.0001 par value--2 billion authorized)
based on 96,040 outstanding shares 1,334
Accumulated net investment loss (1)
Accumulated net realized loss on investments (1,844)
Net unrealized depreciation of investments (703)
-----------
TOTAL NET ASSETS - 100.0% $ 143,230
-----------
Net asset value, offering price, and redemption
price per share--Class Y $ 11.98
-----------
Net asset value and redemption price
per share--Class A $ 11.90
Maximum sales charge of 4.50% (1) 0.56
-----------
Offering price per share--Class A $ 12.46
-----------
Net asset value and offering price
per share--Class B (2) $ 11.50
-----------
* 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) Class B has a contingent deferred sales charge. For a description of a
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 advisor for this fund. See also the notes to the financial
statements.
(B) Other assets and liabilities representing greater than five percent of total
net assets include the following (000):
Cash collateral received for securities on loan $ 29,510
Payable upon return of securities on loan $ (29,510)
ADR--American Depository Receipt
Cl--Class
The accompanying notes are an integral part of the financial statements.
60 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
SMALL CAP FUNDS
Small Cap Value Fund
DESCRIPTION SHARES VALUE (000)
- -----------------------------------------------------------------------------
COMMON STOCKS - 91.5%
AEROSPACE - 2.2%
Moog, Cl A* 289,000 $ 8,363
-----------
AIR TRANSPORTATION - 0.0%
World Airways* 143,700 144
-----------
APPAREL/TEXTILES - 2.2%
Deckers Outdoor* 95,700 478
Hampshire Group Limited* 55,100 937
Quaker Fabric* 256,900 1,204
Tarrant Apparel Group* 229,200 5,558
-----------
8,177
-----------
AUTOMOTIVE - 0.6%
Bonded Motors* 84,800 562
Edelbrock* 106,200 1,553
-----------
2,115
-----------
BANKS - 5.6%
Astoria Financial 34,400 1,449
First Republic Bank* 183,000 5,581
TR Financial 218,800 5,826
UST 69,530 1,469
Webster Financial 290,704 7,086
-----------
21,411
-----------
CHEMICALS - 0.4%
CPAC* 162,100 1,439
-----------
COMMUNICATIONS EQUIPMENT - 0.5%
Comdial* 225,300 1,859
-----------
COMPUTERS & SERVICES - 11.9%
BancTec* 228,262 3,253
Bell & Howell* 195,600 5,073
Gatefield* 547,200 164
General Scanning* 137,400 756
GSE Systems* 189,900 570
Inprise* 462,300 2,860
Kronos* 65,600 2,427
MacNeal-Schwendler* 151,600 938
Mentor Graphics* 206,200 1,431
Micrografx* 236,500 2,247
National Computer Systems 107,200 3,162
Olicom A/S* 295,300 4,042
Pomeroy Computer Resources* 245,825 4,087
Radisys* 130,900 1,767
Sapiens International* 194,500 948
Sybase* 555,300 3,349
System Software Associates* 811,900 4,110
Triple P N.V.* 801,760 2,606
TRO Learning* 212,200 1,618
-----------
45,408
-----------
CONTAINERS & PACKAGING - 0.6%
BWay* 177,000 2,246
-----------
ELECTRICAL SERVICES - 0.4%
Trigen Energy 130,100 1,683
-----------
Small Cap Value Fund (continued)
DESCRIPTION SHARES VALUE (000)
- -----------------------------------------------------------------------------
ENVIRONMENTAL SERVICES - 0.6%
Arcadis N.V.* 6,456 $ 47
Arcadis N.V.* 178,100 1,291
Walbro 118,500 955
-----------
2,293
-----------
FINANCIAL SERVICES - 2.3%
Aames Financial 94,400 572
Franchise Mortgage Acceptance* 414,600 2,747
Medallion Financial 146,400 2,306
Rockford Industries* 207,000 1,759
WFS Financial* 197,700 1,186
-----------
8,570
-----------
GAS/NATURAL GAS - 0.2%
Midcoast Energy Resources 42,020 767
-----------
GLASS PRODUCTS - 0.4%
Libbey 51,400 1,516
-----------
HAZARDOUS WASTE MANAGEMENT - 0.7%
Air & Water Technologies* 1,362,300 2,725
-----------
HEALTHCARE MANAGEMENT - 0.0%
Complete Management* 127,200 135
-----------
HOUSEHOLD FURNITURE & FIXTURES - 1.8%
Stanley Furniture* 233,400 4,055
Thomas Industries 139,650 2,994
-----------
7,049
-----------
HOUSEHOLD PRODUCTS - 0.2%
Global Tech Appliances* 204,900 960
-----------
HOUSING CONSTRUCTION - 1.3%
Morgan Products* 164,300 431
Simpson Manufacturing* 82,200 2,404
Synthetic Industries* 120,400 1,956
-----------
4,791
-----------
INSURANCE - 12.1%
Amerin* 187,600 3,541
Amerus Life Holdings, Cl A 55,105 1,209
ARM Financial Group Cl A 182,800 3,245
Delphi Financial Group, Cl A* 112,811 4,442
Enhance Financial Services Group 322,600 9,537
Farm Family Holdings* 59,900 1,827
Fremont General 161,000 7,728
LaSalle Re Holdings 128,400 3,419
Penn Treaty American* 193,900 4,678
Philadelphia Consolidated Holding* 206,700 4,573
SCPIE Holdings 60,200 1,874
-----------
46,073
-----------
LEASING & RENTING - 0.8%
Leasing Solutions* 47,600 1,303
Willis Lease Finance* 107,100 1,781
-----------
3,084
-----------
61 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
NET ASSETS SEPTEMBER 30, 1998
Small Cap Value Fund (continued)
DESCRIPTION SHARES VALUE (000)
- -----------------------------------------------------------------------------
MACHINERY - 1.9%
Bridgeport Machines* 176,100 $ 1,519
Brown & Sharpe Manufacturing, Cl A* 343,300 2,575
Foster (LB), Cl A* 253,800 1,110
Scotsman Industries 91,100 2,061
-----------
7,265
-----------
MARINE TRANSPORTATION - 1.1%
Nordic American Tanker Shipping 321,900 4,104
-----------
MEASURING DEVICES - 0.1%
EnviroSource* 46,557 378
-----------
MEDICAL PRODUCTS & SERVICES - 3.6%
Bacou USA* 130,300 2,248
Cholestech* 303,300 1,422
Diagnostic Health Services* 329,200 1,461
Mentor 111,200 1,265
PolyMedica* 288,600 2,652
Respironics* 248,400 2,794
Spacelabs Medical* 115,600 1,792
-----------
13,634
-----------
MISCELLANEOUS BUSINESS SERVICES - 2.2%
Acxiom* 139,040 3,450
Cross (A.T.), Cl A 95,600 681
NOVA* 140,475 4,311
-----------
8,442
-----------
MISCELLANEOUS CONSUMER SERVICES - 1.4%
Regis 174,800 5,506
-----------
MISCELLANEOUS MANUFACTURING - 5.5%
AFC Cable Systems* 186,850 4,438
Dayton Superior* 164,300 2,896
MagneTek* 428,650 4,688
Matthews International, Cl A 188,000 4,700
Park-Ohio Holdings* 182,300 2,484
Tredegar Industries 90,000 1,648
-----------
20,854
-----------
MOTORCYCLES, BICYCLES & PARTS - 0.4%
Huffy 106,000 1,497
-----------
OFFICE FURNITURE & FIXTURES - 0.4%
Shelby Williams Industries 122,800 1,412
-----------
OIL SERVICES - 0.6%
Newpark Resources* 328,700 2,260
-----------
PAPER COATED & LAMINATED - 0.2%
FiberMark* 54,750 777
-----------
Small Cap Value Fund (continued)
DESCRIPTION SHARES VALUE (000)
- -----------------------------------------------------------------------------
PETROLEUM & FUEL PRODUCTS - 1.4%
Chesapeake Energy 442,610 $ 526
Comstock Resources* 198,700 1,167
Forest Oil* 260,360 2,701
Titan Exploration* 162,500 985
-----------
5,379
-----------
PHARMACEUTICAL - 3.8%
Catalytica* 682,033 9,634
Roberts Pharmaceutical* 263,200 5,034
-----------
14,668
-----------
PRINTING & PUBLISHING - 0.6%
Applied Graphics Technologies* 65,500 819
Topps* 497,000 1,398
-----------
2,217
-----------
PROFESSIONAL SERVICES - 1.7%
Borg Warner Security* 461,200 6,457
-----------
REAL ESTATE - 5.4%
Chelsea GCA Realty 98,900 3,387
Highwoods Properties 92,700 2,572
Lexington Corporate Properties 178,600 2,244
OMEGA Healthcare Investors 129,300 4,226
Omega Worldwide* 42,877 220
RFS Hotel Investors 121,900 1,463
Shurgard Storage Centers 117,200 3,040
Walden Residential Properties 109,200 2,512
Winston Hotels 123,500 1,073
-----------
20,737
-----------
RETAIL - 5.1%
Apple South 105,700 1,176
Buffets* 176,800 1,912
Drug Emporium* 582,500 2,330
Finish Line, Cl A* 119,000 1,108
Finlay Enterprises* 213,800 1,791
Friedman's, Cl A* 83,200 541
Genovese Drug Stores, Cl A 171,020 3,292
K-Swiss, Cl A 75,200 1,748
Landry's Seafood Restaurants* 186,400 1,258
Marks Bros. Jewelers* 56,200 752
Piercing Pagoda* 122,250 1,406
Stage Stores* 139,600 1,701
Video Update, Cl A* 379,250 403
-----------
19,418
-----------
SEMI-CONDUCTORS/INSTRUMENTS - 0.9%
FEI* 131,600 1,053
Unit Instruments* 112,850 522
Unitrode* 186,300 1,979
-----------
3,554
-----------
SINGLE FAMILY HOUSING CONSTRUCTION - 0.7%
D.R. Horton 173,475 2,776
-----------
STEEL & STEEL WORKS - 1.0%
Northwest Pipe* 199,000 3,681
-----------
62 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
SMALL CAP FUNDS
Small Cap Value Fund (continued)
DESCRIPTION SHARES/PAR (000) VALUE (000)
- -----------------------------------------------------------------------------
TELEPHONES & TELECOMMUNICATION - 0.0%
InteliData Technologies* 109,700 $ 99
-----------
TRANSPORTATION - 2.3%
Budget Group, Cl A* 256,600 5,854
Excel Industries 148,600 1,857
Supreme Industries* 102,889 990
-----------
8,701
-----------
UTILITIES - 5.0%
El Paso Electric* 250,000 2,422
TNP Enterprises 82,300 2,875
Unisource Energy* 900,000 13,781
-----------
19,078
-----------
WHOLESALE - 1.4%
Performance Food Group* 96,800 2,154
Pioneer-Standard Electronics 187,600 1,184
Suiza Foods* 59,900 1,872
-----------
5,210
-----------
TOTAL COMMON STOCKS
(Cost $324,303) 348,912
-----------
CONVERTIBLE BONDS - 1.5%
Aames Financial, 53.5619 Shares
5.500%, 03/15/06 $ 1,301 679
Complete Management, 62.5000 Shares
8.000%, 12/15/03 595 125
Complete Management, 71.4286 Shares
8.000%, 08/15/03 1,170 243
Drug Emporium, 65.1466 Shares
7.750%, 10/01/14 740 586
Leasing Solutions, 28.6533 Shares
6.875%, 10/01/03 455 437
MacNeal-Schwendler, 66.0066 Shares
7.875%, 08/18/04 1,025 964
Titan, 285.7143 Shares
8.250%, 11/01/03 1,935 2,803
-----------
TOTAL CONVERTIBLE BONDS
(Cost $6,891) 5,837
-----------
RELATED PARTY MONEY MARKET FUND - 6.0%
First American Prime
Obligations Fund (A) 22,702,170 22,702
-----------
TOTAL RELATED PARTY MONEY MARKET FUND
(Cost $22,702) 22,702
-----------
TOTAL INVESTMENTS - 99.0%
(Cost $353,896) 377,451
-----------
OTHER ASSETS AND LIABILITIES, NET - 1.0% (B) 3,753
-----------
Small Cap Value Fund (concluded)
DESCRIPTION VALUE (000)
- -----------------------------------------------------------------------------
NET ASSETS:
Portfolio Capital--Class Y
($.0001 par value--2 billion authorized)
based on 26,984,944 outstanding shares $ 317,478
Portfolio Capital--Class A
($.0001 par value--2 billion authorized)
based on 997,782 outstanding shares 12,489
Portfolio Capital--Class B
($.0001 par value--2 billion authorized)
based 45,659 onoutstanding shares 754
Undistributed net investment income 231
Accumulated net realized gain on investments 26,697
Net unrealized appreciation of investments 23,555
-----------
TOTAL NET ASSETS - 100.0% $ 381,204
-----------
Net asset value, offering price, and redemption
price per share--Class Y $ 13.60
-----------
Net asset value and redemption price per
share--Class A $ 13.58
Maximum sales charge of 4.50% (1) 0.64
-----------
Offering price per share--Class A $ 14.22
-----------
Net asset value and offering price
per share--Class B (2) $ 13.53
-----------
*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) Class B has a contingent deferred sales charge. For a description of a
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 advisor for this fund. See also the notes to the financial
statements.
(B) Other assets and liabilities representing greater than five percent of total
net assets include the following (000):
Cash collateral received for securities on loan $ 24,747
Payable upon return of securities on loan $ (24,747)
Cl--Class
The accompanying notes are an integral part of the financial statements.
63 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
OPERATIONS FOR THE PERIOD ENDED SEPTEMBER 30, 1998 IN THOUSANDS
<TABLE>
<CAPTION>
MICRO CAP REGIONAL SMALL CAP SMALL CAP SMALL CAP
VALUE FUND EQUITY FUND GROWTH FUND VALUE FUND(1) VALUE FUND(2)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 723+ $ 2,310+ $ 238+ $ 1,917+ $ 456
Dividends 1,469 1,853* 139 3,312 1,169
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 2,192 4,163 377 5,229 1,625
========================================================================================================================
EXPENSES:
Investment advisory fees 1,401 2,715 398 2,861 1,289
Less: Waiver of investment advisory fees (1) (41) (126) (66) (1)
Administrator fees 221 427 61 449 256
Transfer agent fees 44 228 72 87 49
Amortization of organizational costs 1 -- -- -- --
Custodian fees 60 117 14 123 49
Directors' fees 3 6 8 7 5
Registration fees 15 9 27 106 38
Professional fees 7 13 39 15 1
Printing 9 17 5 17 30
Distribution fees - Class A 2 84 158 38 23
Less: Waiver of Distribution Fees - Class A -- -- (50) -- --
Distribution fees - Class B 2 394 6 2 --
Other 5 9 26 7 --
- ------------------------------------------------------------------------------------------------------------------------
TOTAL NET EXPENSES BEFORE EXPENSES
PAID INDIRECTLY 1,769 3,978 638 3,646 1,739
========================================================================================================================
Less: Expenses paid indirectly -- -- (1) -- --
TOTAL NET EXPENSES 1,769 3,978 637 3,646 1,739
========================================================================================================================
Investment income (loss) - net 423 185 (260) 1,583 (114)
- ------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS - NET:
Net realized gain (loss) on investments 27,875 20,276* (5,101) 25,057 2,299
Net change in unrealized appreciation
(depreciation) of investments (77,385) (117,589)* (24,055) (116,183) 8,373
- ------------------------------------------------------------------------------------------------------------------------
NET GAIN (LOSS) ON INVESTMENTS (49,510) (97,313) (29,156) (91,126) 10,672
========================================================================================================================
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $(49,087) $ (97,128) $(29,416) $ (89,543) $ 10,558
========================================================================================================================
</TABLE>
+ Includes income from securities lending program. See the Notes to the
Financial Statements for additional information.
* Includes the following amounts due to investments in Common Stock of
Affiliates (000): $86 of dividend income, $1,706 of realized gains, and
$20,875 of unrealized depreciation of investments.
(1) For the ten month period December 1, 1997 to September 30, 1998.
(2) For the four month period August 1, 1997 to November 30, 1997.
The accompanying notes are an integral part of the financial statements.
64 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
SMALL CAP FUNDS
(This page has been left blank intentionally.)
65 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
CHANGES IN NET ASSETS IN THOUSANDS
<TABLE>
<CAPTION>
MICRO CAP REGIONAL
VALUE FUND EQUITY FUND
- ----------------------------------------------------------------------------------------------------------------------------
10/1/97 8/8/97 10/1/97 10/1/96
to to to to
9/30/98 9/30/97(3) 9/30/98 9/30/97
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Investment income (loss) - net $ 423 $ (7) $ 185 $ 825
Net realized gain (loss) on investments 27,875 11,421 20,276 19,934
Net change in unrealized appreciation (depreciation) of investments (77,385) 10,789 (117,589) 92,092
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations (49,087) 22,203 (97,128) 112,851
- ----------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment income -- net:
Class Y (371) -- (184) (1,903)
Class A -- -- -- (99)
Class B -- -- -- --
Net realized gain on investments:
Class Y (12,784) -- (12,883) (9,965)
Class A (15) -- (1,388) (992)
Class B -- FAIF (7) -- (1,723) (1,103)
Class B -- Piper -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (13,177) -- (16,178) (14,062)
============================================================================================================================
CAPITAL SHARE TRANSACTIONS(1):
Class Y
Proceeds from sales 13,564 3,788 92,606 82,313
Shares issued in connection with the acquisition
of Common Trust Fund Assets -- 239,118 -- --
Shares issued in connection with acquisition
of Piper Fund -- -- -- --
Reinvestment of distributions 6,055 -- 9,959 9,670
Payments for redemptions (60,217) (18,504) (137,313) (81,950)
- ----------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from Class Y transactions (40,598) 224,402 (34,748) 10,033
- ----------------------------------------------------------------------------------------------------------------------------
Class A:
Proceeds from sales 5,879 41 11,530 15,573
Shares issued in connection with acquisition of Piper Fund -- -- -- --
Reinvestment of distributions 9 -- 1,324 1,069
Payments for redemptions (4,491) -- (14,563) (12,175)
- ----------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from Class A
transactions 1,397 41 (1,709) 4,467
- ----------------------------------------------------------------------------------------------------------------------------
Class B:
Proceeds from sales -- FAIF 215 49 5,492 7,413
Proceeds from sales -- Piper -- -- -- --
Shares issued in connection with acquisition of Piper Fund -- -- -- --
Reinvestment of distributions -- FAIF 7 -- 1,684 1,083
Reinvestment of distributions -- Piper -- -- -- --
Payments for redemptions -- FAIF (8) -- (5,532) (5,552)
Payment for redemptions -- Piper -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------
Increase in net assets from Class B transactions 214 49 1,644 2,944
- ----------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital share
transactions (38,987) 224,492 (34,813) 17,444
- ----------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (101,251) 246,695 (148,119) 116,233
NET ASSETS AT BEGINNING OF PERIOD 246,695 -- 428,367 312,134
============================================================================================================================
NET ASSETS AT END OF PERIOD (2) $ 145,444 $ 246,695 $ 280,248 $ 428,367
============================================================================================================================
(1)CAPITAL SHARE TRANSACTIONS:
Class Y
Shares issued 1,372 367 4,280 4,368
Shares issued in connection with the acquisition
of Common Trust Fund Assets -- 23,912 -- --
Shares issued in connection with acquisition of Piper Fund -- -- -- --
Shares issued in lieu of cash distributions 661 -- 481 541
Shares redeemed (6,377) (1,768) (6,472) (4,353)
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL CLASS Y TRANSACTIONS (4,344) 22,511 (1,711) 556
============================================================================================================================
Class A:
Shares issued 595 4 509 737
Shares issued in connection with acquisition of Piper Fund -- -- -- --
Shares issued in lieu of cash distributions 1 -- 64 60
Shares redeemed (460) -- (661) (598)
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL CLASS A TRANSACTIONS 136 4 (88) 199
============================================================================================================================
Class B:
Shares issued -- FAIF 21 5 258 407
Shares issued in connection with acquisition of Piper Fund -- -- -- --
Shares issued -- Piper -- -- -- --
Shares issued in lieu of cash distributions -- FAIF 1 -- 83 62
Shares issued in lieu of cash distributions -- Piper -- -- -- --
Shares redeemed -- FAIF (1) -- (274) (305)
Shares redeemed -- Piper -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL CLASS B TRANSACTIONS 21 5 67 164
============================================================================================================================
NET INCREASE (DECREASE) IN CAPITAL SHARES (4,187) 22,520 (1,732) 919
============================================================================================================================
[WIDE TABLE CONTINUED FROM ABOVE]
<CAPTION>
SMALL CAP
GROWTH FUND
- ---------------------------------------------------------------------------------------------------
10/1/97 10/1/96
to to
9/30/98 9/30/97
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS:
Investment income (loss) - net $ (260) $ (224)
Net realized gain (loss) on investments (5,101) 3,716
Net change in unrealized appreciation (depreciation) of investments (24,055) 8,022
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations (29,416) 11,514
- ---------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment income -- net:
Class Y -- --
Class A -- (82)
Class B -- --
Net realized gain on investments:
Class Y -- --
Class A (5,302)(A) (8,847)
Class B -- FAIF -- --
Class B -- Piper (10)(A) --
- ---------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (5,312) (8,929)
===================================================================================================
CAPITAL SHARE TRANSACTIONS(1):
Class Y
Proceeds from sales 7,699 --
Shares issued in connection with the acquisition
of Common Trust Fund Assets -- --
Shares issued in connection with acquisition
of Piper Fund 146,984 --
Reinvestment of distributions -- --
Payments for redemptions (18,021) --
- ---------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from Class Y transactions 136,662 --
- ---------------------------------------------------------------------------------------------------
Class A:
Proceeds from sales 24,836 7,678
Shares issued in connection with acquisition of Piper Fund 5,802 --
Reinvestment of distributions 5,164 8,637
Payments for redemptions (31,425) (14,140)
- ---------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from Class A
transactions 4,377 2,175
- ---------------------------------------------------------------------------------------------------
Class B:
Proceeds from sales -- FAIF 62 --
Proceeds from sales -- Piper 586 423
Shares issued in connection with acquisition of Piper Fund 1,306 --
Reinvestment of distributions -- FAIF -- --
Reinvestment of distributions -- Piper 10 --
Payments for redemptions -- FAIF (47) --
Payment for redemptions -- Piper (1,125) (24)
- ---------------------------------------------------------------------------------------------------
Increase in net assets from Class B transactions 792 399
- ---------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital share
transactions 141,831 2,574
- ---------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets 107,103 5,159
NET ASSETS AT BEGINNING OF PERIOD 36,127 30,968
===================================================================================================
NET ASSETS AT END OF PERIOD (2) $ 143,230 $ 36,127
===================================================================================================
(1)CAPITAL SHARE TRANSACTIONS:
Class Y
Shares issued 610 --
Shares issued in connection with the acquisition
of Common Trust Fund Assets -- --
Shares issued in connection with acquisition of Piper Fund 10,283 --
Shares issued in lieu of cash distributions -- --
Shares redeemed (1,388) --
- ---------------------------------------------------------------------------------------------------
TOTAL CLASS Y TRANSACTIONS 9,505 --
===================================================================================================
Class A:
Shares issued 1,883 1,030
Shares issued in connection with acquisition of Piper Fund 409 --
Shares issued in lieu of cash distributions 351 2,854
Shares redeemed (2,314) (1,806)
- ---------------------------------------------------------------------------------------------------
TOTAL CLASS A TRANSACTIONS 329 2,078
===================================================================================================
Class B:
Shares issued -- FAIF 5 --
Shares issued in connection with acquisition of Piper Fund 95 --
Shares issued -- Piper 65 54
Shares issued in lieu of cash distributions -- FAIF -- --
Shares issued in lieu of cash distributions -- Piper 1 --
Shares redeemed -- FAIF (4) --
Shares redeemed -- Piper (116) (4)
- ---------------------------------------------------------------------------------------------------
TOTAL CLASS B TRANSACTIONS 46 50
===================================================================================================
NET INCREASE (DECREASE) IN CAPITAL SHARES 9,880 2,128
===================================================================================================
</TABLE>
66 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
SMALL CAP FUNDS
<TABLE>
<CAPTION>
SMALL CAP
VALUE FUND
- ------------------------------------------
12/1/97 8/1/97 8/1/96
to to to
9/30/98 11/30/97 7/31/97
- ------------------------------------------
<S> <C> <C>
$ 1,583 $ (114) 906
25,057 2,299 40,605
(116,183) 8,373 94,682
- ------------------------------------------
(89,543) 10,558 136,193
- ------------------------------------------
(1,188) (93) (1,010)
(14) -- (13)
-- -- --
(33,301) -- (33,661)
(1,320) -- (1,347)
(4) -- --
-- -- --
- ------------------------------------------
(35,827) (93) (36,031)
==========================================
213,258 117,751 173,955
-- -- --
-- -- --
32,778 82 32,450
(219,000) (116,562) (150,179)
- ------------------------------------------
27,036 1,271 56,226
- ------------------------------------------
39,216 18,971 52,025
-- -- -- (2)Includes undistributed
1,335 -- 1,289 (distribution in excess of) net
(42,007) (22,884) (45,325) investment income (000) of $52
- ------------------------------------------ and $0 for Micro Cap Value Fund,
(1,456) (3,913) 7,989 $0 and $0 for Regional Equity
- ------------------------------------------ Fund, $(1) and $0 for Small Cap
Growth Fund, $231, $(150)* and
799 1 -- $57+ for Small Cap Value Fund, at
September 30, 1998 and
-- -- -- September 30, 1997, respectively.
4 -- -- *November 30, 1997
+July 31, 1997
(50) -- --
-- (3)Commenced operations August 7,
- ------------------------------------------ 1997
753 1 --
- ------------------------------------------ (A)Included in the distributions for
the Small Cap Growth is a return
26,333 (2,641) 64,215 of capital distribution in the
- ------------------------------------------ amount of $5,311,630 for Class A
(99,037) 7,824 164,377 and $370 for Class B - Piper.
480,241 472,417 308,040
==========================================
$ 381,204 $ 480,241 472,417
==========================================
12,604 6,328 11,349
-- -- --
-- -- --
2,024 4 2,252
(12,922) (6,230) (9,756)
- ------------------------------------------
1,706 102 3,845
==========================================
2,286 1,021 3,332
-- -- --
83 -- 90
(2,426) (1,225) (2,899)
- ------------------------------------------
(57) (204) 523
==========================================
49 -- --
-- -- --
(3) -- --
--
- ------------------------------------------
46 -- --
==========================================
1,695 (102) 4,368
==========================================
</TABLE>
67 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
FINANCIAL HIGHLIGHTS FOR THE PERIOD ENDED SEPTEMBER 30, 1998
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
REALIZED AND
NET ASSET UNREALIZED DIVIDENDS DISTRIBUTIONS
VALUE NET GAINS OR FROM NET DISTRIBUTIONS FROM
BEGINNING INVESTMENT (LOSSES) ON INVESTMENT FROM RETURN OF
OF PERIOD INCOME (LOSS) INVESTMENTS INCOME CAPITAL GAINS CAPITAL
- ------------------------------------------------------------------------------------------------------------------------
MICRO CAP VALUE FUND
<S> <C> <C> <C> <C> <C> <C>
Class Y
1998 $ 10.95 $ 0.02 $ (2.43) $ (0.02) $ (0.59) $ --
1997(1) 10.00 -- 0.95 -- -- --
Class A
1998 $ 10.96 -- $ (2.42) $ -- $ (0.59) $ --
1997(1) 10.00 -- 0.96 -- -- --
Class B
1998 $ 10.95 $ (0.01) $ (2.51) $ -- $ (0.59) $ --
1997(1) 10.00 -- 0.95 -- -- --
- ------------------------------------------------------------------------------------------------------------------------
REGIONAL EQUITY FUND
Class Y
1998 $ 23.16 $ 0.01 $ (5.46) $ (0.02) $ (0.95) $ --
1997 17.75 0.05 6.18 (0.13) (0.69) --
1996 17.13 0.09 1.70 (0.06) (1.11) --
1995 12.52 0.11 4.90 (0.08) (0.32) --
1994(2) 12.41 0.07 0.11 (0.07) -- --
Class A
1998 $ 23.12 -- $ (5.49) $ -- $ (0.95) $ --
1997 17.71 0.03 6.14 (0.07) (0.69) --
1996 17.12 0.04 1.70 (0.04) (1.11) --
1995 12.52 0.08 4.90 (0.06) (0.32) --
1994 11.96 0.08 0.71 (0.07) (0.16) --
Class B
1998 $ 22.72 $ (0.04) $ (5.48) $ -- $ (0.95) $ --
1997 17.47 (0.03) 5.97 -- (0.69) --
1996 16.99 (0.04) 1.64 (0.01) (1.11) --
1995 12.50 0.04 4.80 (0.03) (0.32) --
1994(3) 12.19 -- 0.33 (0.02) -- --
- ------------------------------------------------------------------------------------------------------------------------
SMALL CAP GROWTH FUND
(FORMERLY PIPER SMALL COMPANY GROWTH
FUND)
Class Y
1998(4) $ 14.29 $ -- $ (2.31) $ -- $ -- $ --
Class A(5)
1998 $ 17.41 $ (0.09) $ (2.67) $ -- $ (2.64) $ (0.11)
1997 17.11 (0.16) 5.66 (0.04) (5.16) --
1996(6) 17.68 0.06 0.87 (0.07) (1.43) --
1995 15.61 0.09 2.07 (0.09) -- --
1994 15.30 0.07 0.27 (0.03) -- --
Class B -- FAIF
1998(4) $ 13.74 $ (0.02) $ (2.22) $ -- $ -- $ --
Class B -- Piper
1998(7) $ 9.54 $ (0.09) $ 0.42 $ -- $ (0.15) $ (0.01)
1997(8) 7.24 (0.03) 2.33 -- -- --
- ------------------------------------------------------------------------------------------------------------------------
SMALL CAP VALUE FUND(B)
Class Y
1998(9) $ 18.23 $ 0.06 $ (3.38) $ (0.04) $ (1.27) $ --
1997(10) 17.87 (0.01) 0.37 -- -- --
1997(11) 13.96 0.04 5.43 (0.04) (1.52) --
1996(11) 13.26 0.06 1.81 (0.06) (1.11) --
1995(11)(12) 10.00 0.13 3.30 (0.12) (0.05) --
Class A
1998(9) $ 18.20 $ 0.04 $ (3.38) $ (0.01) $ (1.27) $ --
1997(10) 17.86 (0.03) 0.37 -- -- --
1997(11) 13.95 0.01 5.43 (0.01) (1.52) --
1996(11) 13.23 0.04 1.83 (0.04) (1.11) --
1995(11)(12) 10.00 0.09 3.29 (0.10) (0.05) --
Class B
1998(9) $ 18.23 $ 0.01 $ (3.43) $ (0.01) $ (1.27) $ --
1997(13)(14) 18.22 -- 0.01 -- -- --
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Returns are for the period indicated and have not been annualized.
(A)Excluding sales charges.
(B)The financial highlights for Small Cap Value Fund as set forth herein
include the historical financial highlights of the Qualivest Small
Companies Fund Class A and Y shares. The assets of the Small Companies
Fund were acquired by Small Cap Value Fund on November 21, 1997. In
connection with such acquisition, (i) Class A and Class C shares of the
Qualivest Small Companies Value Fund were exchanged for Class A shares of
Small Cap Value Fund; and (ii) Qualivest Class Y shares were exchanged for
Class Y shares of Small Cap Value Fund.
(1)Commenced operations August 9, 1997. All ratios for the period have been
annualized.
(2)Class Y shares (formerly Institutional Class C) have been offered since
February 4, 1994. All ratios for the period have been annualized.
(3)Class B shares have been offered since August 15, 1994. All ratios for the
period have been annualized.
(4)Class Y and Class B shares have been offered since July 31, 1998. There is
no historical information for these Classes of Piper Small Company Growth
Fund prior to the reorganization on July 31, 1998. All ratios for the
period have been annualized.
(5)Historical per-share amounts have been adjusted to reflect the conversion
ratios utilized for the reorganization of the FAIF Small Cap Growth Fund
and the Piper Small Company Growth Fund, that occurred on July 31, 1998.
Piper Small Companies Growth Fund is the financial reporting survivor.
Therefore, the financial highlights for the Small Cap Growth Fund
represent the financial highlights of the Piper Small Company Growth Fund.
On July 31, 1998 the fund's advisor changed from Piper Capital Management,
Inc. to U.S. Bank N.A.
68 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
SMALL CAP FUNDS
<TABLE>
<CAPTION>
RATIO OF
RATIO OF NET EXPENSES TO
NET ASSET RATIO OF INVESTMENT AVERAGE
VALUE NET ASSETS EXPENSES TO INCOME (LOSS) NET ASSETS PORTFOLIO
END OF TOTAL END OF AVERAGE TO AVERAGE (EXCLUDING TURNOVER
PERIOD RETURN (A) PERIOD (000) NET ASSETS NET ASSETS WAIVERS) RATE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 7.93 (22.76)% $ 144,128 0.88% 0.21% 0.88% 16%
10.95 9.50+ 246,601 0.90 (0.02) 1.07 0
$ 7.95 (22.77)% $ 1,110 1.13% (0.09)% 1.13% 16%
10.96 9.60+ 44 1.15 (0.25) 1.32 0
$ 7.84 (23.78)% $ 206 1.88% (0.78)% 1.88% 16%
10.95 9.50+ 50 1.90 (1.04) 2.07 0
- ----------------------------------------------------------------------------------------------------------------
$ 16.74 (24.34)% $ 225,061 0.90% 0.17% 0.91% 15%
23.16 36.49 351,007 0.90 0.35 0.90 17
17.75 11.27 259,138 0.88 0.49 0.90 36
17.13 41.40 188,583 0.84 0.78 0.95 42
12.52 1.46+ 96,045 0.80 0.82 1.05 41
$ 16.68 (24.54)% $ 25,706 1.15% (0.08)% 1.16% 15%
23.12 36.13 37,677 1.15 0.11 1.15 17
17.71 10.97 25,325 1.13 0.24 1.15 36
17.12 41.17 14,917 1.05 0.58 1.20 42
12.52 6.76 8,345 0.82 0.59 1.25 41
$ 16.25 (25.12)% $ 29,481 1.90% (0.83)% 1.91% 15%
22.72 35.18 39,683 1.90 (0.65) 1.90 17
17.47 10.14 27,671 1.88 (0.52) 1.90 36
16.99 39.98 7,630 1.84 (0.25) 1.95 42
12.50 2.73+ 185 1.80 (0.41) 2.05 41
- ----------------------------------------------------------------------------------------------------------------
$ 11.98 (16.17)%+ $ 113,874 0.90% (0.20)% 0.90% 92%
$ 11.90 (18.66)% $ 28,252 1.29% (0.61)% 1.43% 92%
17.41 45.66% 35.647 1.34% (0.75)% 1.98% 109
17.11 5.38% 30,968 1.32% 0.20% 1.79% 125
17.68 13.88% 48,421 1.40% 0.43% 1.63% 182
15.61 2.12% 78,376 1.32% 0.37% 1.54% 177
11.50 (16.30)%+ $ 1,104 1.90% (1.20)% 1.90% 92%
9.71 3.61%+ -- 2.03% (1.30)% 2.40% 56%
9.54 31.77%+ 480 1.98% (1.49)% 2.15% 109%
- ----------------------------------------------------------------------------------------------------------------
$ 13.60 (19.31)%+ $ 367,035 0.88% 0.40% 0.88% 21%
18.23 2.01+ 461,046 1.06 (0.06) 1.06 3
17.87 41.96 449,988 1.06 0.25 1.06 29
13.96 14.94 297,793 1.08 0.41 1.08 34
13.26 34.76+ 209,626 0.60 1.20 1.17 37
$ 13.58 (19.48)%+ $ 13,551 1.13% 0.15% 1.13% 21%
18.20 1.90+ 19,194 1.37 (0.38) 1.37 3
17.86 41.71 22,429 1.31 0.01 1.31 29
13.95 14.93 10,247 1.33 0.14 1.33 34
13.23 34.29+ 1,569 1.11 0.63 1.38 37
$ 13.53 (19.91)%+ $ 618 1.88% (0.53)% 1.88% 21%
18.23 0.05+ 1 1.90 (1.53) 1.90 3
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
(6) On September 12, 1996, shareholders of the Fund approved a change in the
Fund's investment objective from high total investment return consistent
with prudent investment risk to long-term capital appreciation. In
connection with this change in investment objective, the Fund's investment
policies were revised.
(7 Effective April 28, 1998, all shareholders were exchanged into Class A.
Class B share activity was discontinued. All ratios for the period have
been annualized.
(8) Class B Piper Shares have been offered since February 18, 1997. All ratios
for the period have been annualized.
(9) For the period December 1, 1997 to September 30, 1998. All ratios for the
period have been annualized. The First American board of directors
approved a change in the fund's fiscal year end from November 30 to
September 30, effective September 30, 1998.
(10)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 fund's fiscal year end from July 31 to November
30, effective November 30, 1997.
(11)For the period ended July 31.
(12)Commenced operations August 1, 1994. All ratios for the period have been
annualized.
(13)Class B shares have been offered since November 24, 1997. All ratios for
the period have been annualized.
(14)For the period November 24, 1997 to November 30, 1997.
69 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
EQUITY FUNDS
INTERNATIONAL
FUNDS
With only a few exceptions, the world was not a friendly place for investors
during most of the fiscal year ended September 30, 1998. Triggered by
significant economic weakness in Japan that spread to other Asian markets,
economic and political instability in Russia, ongoing struggles in Eastern
Europe and a slowdown in Latin American markets, the environment was extremely
challenging for the funds.
Only the U.S. and European markets were able to withstand the onslaught. And
in Europe, most of the gains occurred in the larger markets.
Around the world, emerging markets sustained a major correction. A
combination of sudden economic weakness and struggling currencies resulted in a
dramatic decline in these developing markets. By most measures, emerging markets
lost about half of their value during the 12-month period. More and more,
investors were looking to reduce their risk in an uncertain environment, which
took a serious toll on emerging market stocks.
Performance of mutual funds was closely tied to where their money was
invested. Europe offered the best opportunities, both in traditional, larger
markets and in emerging markets. Among the major economies, Italy, Germany,
Spain and France turned in the best performance, while Finland, Portugal and
Ireland led the pack among emerging markets.
The most visible weak market in the past year was Japan. The once thriving
economy of this nation continues to struggle. An important factor in turning
things around will be the Japanese government's own determination to implement
significant reforms. By the end of September 1998, it appeared that some changes
were taking place, but the process will be long, and many investors will remain
skeptical about the market until those changes are firmly in place.
70 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
INTERNATIONAL FUNDS
A major event to watch in the coming year is the introduction of the Euro on
January 1, 1999. The new European currency is generally viewed as a positive for
European markets, but it also adds a bit of uncertainty to the investment
forecast. Its reception will be closely monitored.
There are signs that the troubles plaguing many emerging markets may have
bottomed out, including increased determination among developed countries to
provide a helping hand. If world economies begin to stabilize, it is likely that
investors will become more confident in these young economies, and money will
flow back into them.
Despite the tumultuous times of the past year for world markets, it seems as
if better days are on the horizon, highlighted by Japan's reforms and determined
efforts to help emerging markets. A more stable world economy should create new
opportunities for investors seeking to diversify their domestic stock portfolio
with a foreign stock component.
The following graphs compare First American fund performance with unmanaged
indices. Indices do not pay management fees to cover costs of shareholder
services and fund operating costs, or transaction costs to buy and sell
securities. Unlike indices, mutual funds are never 100% invested because they
need cash on hand to redeem shares. In addition, the performance shown for the
funds includes the maximum initial sales charge, all fund expenses and fees. If
operating expenses such as the funds had been applied to the indices, their
performance would have been lower. Please remember that an index is simply a
measure of performance, and one cannot invest in it directly.
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 class A shares
before sales charges. The adjusted figures for class A shares include the effect
of paying the maximum initial sales charge of 4.5% on 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 Emerging Markets, International and International Index funds
invest primarily in foreign securities, which can involve special risks due to
foreign economic and political developments and different accounting standards.
71 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
INTERNATIONAL FUNDS
EMERGING MARKETS
INVESTMENT OBJECTIVE
- --------------------------------------------------------------------------------
SEEKS LONG-TERM CAPITAL GROWTH BY INVESTING PRIMARILY IN AN INTERNATIONALLY
DIVERSIFIED PORTFOLIO OF EQUITY SECURITIES TRADING IN EMERGING MARKETS
The risk inherent in small overseas stock markets was in full view in the fiscal
year ended September 30, 1998. For the period, Emerging Markets Fund generated a
return of -48.91%, which was very much in line with emerging markets as a whole.
Problems for emerging markets started in the previous star performing
countries in Asia, including Hong Kong and Malaysia. With a weakened Japanese
economy beginning to take a toll on these markets, investment capital quickly
moved out of these and other small market countries in Asia. Currencies
struggled dramatically, hurting returns even more.
Eventually, the problems in Asia spread to other emerging markets in Latin
America and even Europe. Our holdings in European nations such as Poland,
Greece, Hungary, Portugal and Ireland held up the best during that period. The
fund benefited from the fact that we added emphasis to the European portion of
our portfolio and trimmed our Far East exposure.
Going forward, there appear to be good opportunities on the horizon. In fact,
we are beginning to shift more assets into the battered markets of the Far East,
including Hong Kong, Taiwan, South Korea and Singapore, taking advantage of
exceptional stock values. Many currencies have stabilized, and there is good
reason to believe that the worst is over, and a rebound opportunity is at hand
for the fund.
VALUE OF A $10,000 INVESTMENT
[PLOT POINTS CHART]
<TABLE>
<CAPTION>
First American First American First American Morgan Stanley
Emerging Markets Fund, Emerging Markets Fund, Emerging Markets Fund, MSCI Emerging Markets
Class A Class A adjusted Class Y Free Index
------- ---------------- ------- ----------
<S> <C> <C> <C> <C>
1993 $10,000 $ 9,550 $10,000 $10,000
1994 $11,944 $11,407 $11,944 $12,466
1995 $ 7,315 $ 6,985 $ 7,315 $10,071
1996 $ 8,867 $ 8,468 $ 8,867 $10,378
1997 $11,038 $10,541 $11,038 $10,841
1998 $ 5,639 $ 5,386 $ 5,649 $ 5,504
</TABLE>
PAST PERFORMANCE OF THE FUND IS NOT INDICATIVE OF FUTURE PERFORMANCE.
ANNUALIZED PERFORMANCE SINCE
1 YEAR 3 YEAR INCEPTION
- --------------------------------------------------------------------------------
Class A -48.91% -8.31% -11.09%
- --------------------------------------------------------------------------------
Class A adjusted -51.22% -9.69% -11.92%
- --------------------------------------------------------------------------------
Class B N/A N/A -22.97%+
- --------------------------------------------------------------------------------
Class B adjusted+ N/A N/A -26.82%+
- --------------------------------------------------------------------------------
Class Y* -48.82% -8.25% -11.06%
- --------------------------------------------------------------------------------
Morgan Stanley MSCI Emerging Mkts -49.23% -18.24% -11.62%
- --------------------------------------------------------------------------------
Past performance of the fund is not indicative of future performance.
The inception date of the class A shares is 11/9/93, the inception date of the
class B shares is 8/7/98, and the inception date of the class Y shares is
8/7/98. The performance reflected in the graph begins on 11/30/93. The
performance reflected in the table for class A and Y begins on the inception
date of class A shares, and performance for class B shares begins on 8/7/98.
*The performance presented links the performance of class A shares from
inception on 11/9/93 to 8/7/98 with the performance of class Y shares after its
inception on 8/7/98. The cumulative since inception return for class Y shares
from 8/7/98, is -22.70%.
+Cumulative since inception.
The performance presented includes that of a predecessor fund, Piper Emerging
Markets Growth Fund, which merged with First American Emerging Markets Fund on
8/7/98.
72 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
INTERNATIONAL FUNDS
INTERNATIONAL
INVESTMENT OBJECTIVE
- --------------------------------------------------------------------------------
SEEKS LONG-TERM CAPITAL GROWTH BY INVESTING IN AN INTERNATIONALLY
DIVERSE PORTFOLIO OF EQUITY SECURITIES TRADING OUTSIDE OF U.S. MARKETS
The fiscal year ended September 30, 1998, was not an easy year to make money in
foreign markets. Still, International Fund managed to earn a return of 1.11% for
the 12 months, which was well ahead of many measures of world market
performance.
There were two keys to survival for the fund in this period of volatility.
One was to keep most of the fund's assets out of Japan, where the weakened
economy continued to affect the performance of Japanese stocks. Second was to
concentrate the bulk of the fund's assets in Europe, the strongest region during
the 12-month period.
The performance of markets like Italy, Germany, France and Spain remained
very strong for most of the year, until the summer of 1998. At that time, the
problems of many world economies spilled over to even the strongest markets, and
there were few opportunities for the fund to avoid a setback as the fiscal year
came to a close.
In the coming year, we'll be looking for opportunities to expand the fund's
Asian exposure. There are encouraging signs that Japan's economy may be primed
for a turnaround, and we are seeking new opportunities in that market. Also in
the Pacific region, Hong Kong and Australia present attractive possibilities.
While some volatility can be expected in the near term, many foreign markets
that have struggled in recent months should offer better return potential in the
long run. The fund will continue to emphasize markets that offer the best
opportunity for investors.
VALUE OF A $10,000 INVESTMENT
[PLOT POINTS CHART]
<TABLE>
<CAPTION>
First American First American First American
International Fund, International Fund, International Fund, Morgan Stanley
Class A Class A adjusted Class Y MSCI EAFE Index
------- ---------------- ------- ---------------
<S> <C> <C> <C> <C>
1993 $10,000 $ 9,550 $10,000 $10,000
1994 $10,039 $ 9,587 $10,049 $10,094
1995 $10,108 $ 9,653 $10,128 $10,679
1996 $10,294 $ 9,831 $10,341 $11,600
1997 $13,386 $12,783 $13,483 $13,014
1998 $13,534 $12,925 $13,638 $11,929
</TABLE>
PAST PERFORMANCE OF THE FUND IS NOT INDICATIVE OF FUTURE PERFORMANCE.
ANNUALIZED PERFORMANCE SINCE
1 YEAR 3 YEAR INCEPTION
- --------------------------------------------------------------------------------
Class A 1.11% 10.22% 7.44%
- --------------------------------------------------------------------------------
Class A adjusted -3.43% 8.55% 6.34%
- --------------------------------------------------------------------------------
Class B 0.13% 9.31% 6.61%
- --------------------------------------------------------------------------------
Class B adjusted -4.60% 8.19% 6.21%
- --------------------------------------------------------------------------------
Class Y 1.15% 10.43% 7.56%
- --------------------------------------------------------------------------------
Morgan Stanley MSCI EAFE -8.34% 3.76% 4.07%
- --------------------------------------------------------------------------------
Past performance of the fund is not indicative of future performance.
The inception date of the class A shares is 4/7/94, the inception date of the
class B shares is 8/15/94, and the inception date for the class Y shares is
4/4/94. The performance reflected in the graph begins on 4/30/94. The
performance reflected in the table for class A and Y shares begins on the
inception date of class A shares and performance for class B shares begins on
8/15/94.
Performance reflects voluntary fee waivers in effect. In absence of such fee
waivers, total returns would be reduced.
73 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
INTERNATIONAL FUNDS
INTERNATIONAL INDEX
INVESTMENT OBJECTIVE
- --------------------------------------------------------------------------------
SEEKS TO PROVIDE INVESTMENT RESULTS THAT CORRESPOND WITH
THE PERFORMANCE OF THE MORGAN STANLEY MSCI EAFE INDEX
In a challenging overseas investment environment, International Index Fund
generated a return of -1.05% for the 10-month period ended September 30, 1998.
The fund is comprised of stocks contained in Morgan Stanley Capital's Europe,
Australia, Far East (EAFE) index. The fund holds about half of the stocks in the
index -- typically, the highest-quality companies in each country.
Through the entire period, the fund's performance tracked closely with the
EAFE index. While weakness in Japan and a number of emerging markets had a
negative impact on the fund, we did benefit from strong returns in Europe.
Going into the next year, a number of questions still hang over foreign
economies. However, with the price declines that have already occurred in a
number of markets, there are reasons to believe that better return opportunities
are on the horizon.
VALUE OF A $10,000 INVESTMENT
[PLOT POINTS CHART]
First American First American First American
International International International
Index Fund, Index Fund, Index Fund, Morgan Stanley
Class A Class A adjusted Class Y MSCI EAFE Index
------- ---------------- ------- ---------------
1994 $10,000 $ 9,550 $10,000 $10,000
1995 $ 9,801 $ 9,360 $ 9,802 $ 9,806
1996 $10,516 $10,043 $10,539 $10,651
1997 $11,653 $11,128 $11,715 $11,949
1998 $10,539 $10,064 $10,632 $10,953
PAST PERFORMANCE OF THE FUND IS NOT INDICATIVE OF FUTURE PERFORMANCE.
ANNUALIZED PERFORMANCE SINCE
10 MONTH* 1 YEAR 3 YEAR INCEPTION
- --------------------------------------------------------------------------------
Class A -1.05% -9.56% 2.45% 3.02%
- --------------------------------------------------------------------------------
Class A adjusted -5.54% -13.60% 0.89% 1.57%
- --------------------------------------------------------------------------------
Class B -1.53% N/A N/A -1.89%+
- --------------------------------------------------------------------------------
Class B adjusted -6.39% N/A N/A -6.73%+
- --------------------------------------------------------------------------------
Class Y -0.73% -9.24% 2.75% 3.39%
- --------------------------------------------------------------------------------
Morgan Stanley MSCI EAFE 0.32% -8.34% 3.76% 2.91%
- --------------------------------------------------------------------------------
Past performance of the fund is not indicative of future performance.
The inception date of the class A and Y 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. The performance reflected in the table for class A and Y shares
begins on 7/3/95, and performance for class B shares begins on 11/24/97.
*Returns are for the period indicated and are not annualized.
+Cumulative since inception.
The performance presented is that of a predecessor fund, Qualivest International
Opportunities Fund, which merged with First American International Index Fund on
11/21/97.
Performance reflects voluntary fee waivers in effect. In absence of such fee
waivers, total returns would be reduced.
74 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
NET ASSETS SEPTEMBER 30, 1998
INTERNATIONAL FUNDS
Emerging Markets Fund
DESCRIPTION SHARES VALUE (000)
- -----------------------------------------------------------------------------
FOREIGN COMMON STOCKS - 86.7%
ARGENTINA - 0.8%
Banco Galicia y Buenos Aires 26,226 $ 104
-----------
BERMUDA - 4.1%
Ace Limited 4,400 132
Exel 4,000 252
Partnerre Holdings 3,500 140
-----------
524
-----------
BRAZIL - 7.6%
Cemig CIA Energy 7,234,137 104
Centrais Geradoras Do Sul Br* 6,332,909 6
CIA Electric Est Rio* 325,500,000 115
CIA Paranaense de Energia 21,390,000 103
Electrolux do Brasil 700 --
Eletrobras 6,332,909 131
Itausa Investimentos** 165,155 91
Telebras 3,020,919 129
Telebras ADR * 4,209 295
-----------
974
-----------
CHILE - 1.2%
Distribucion y Sevicio ADR 15,000 150
-----------
CHINA - 1.5%
China Telecom ADR* 6,500 195
-----------
GHANA - 4.0%
Guinness Ghana* 354,889 138
Pioneer Tobacco* 1,500,000 369
-----------
507
-----------
GREECE - 13.6%
Alpha Credit Bank 2,900 216
Chipita Intermational 1,800 48
Ergo Bank 3,700 299
Goody's 13,470 327
Hellenic Telecomm Organization 16,400 394
Stet Hellas Telecomm ADR* 14,800 459
-----------
1,743
-----------
HONG KONG - 8.0%
Asia Satellite 66,000 82
Cheung Kong Holdings 14,000 65
CLP 13,000 63
HSBC Holdings 3,600 66
Hutchison Whampoa 51,000 269
Johnson Electric Holdings 130,000 247
Television Broadcasts 13,000 33
VTech Holdings 50,000 199
-----------
1,024
-----------
HUNGARY - 5.1%
Matav RT ADR 24,350 528
OTP Bank GDR 4,500 126
-----------
654
-----------
Emerging Markets Fund (continued)
DESCRIPTION SHARES VALUE (000)
- -----------------------------------------------------------------------------
INDIA - 2.6%
ITC GDR (A) 2,800 $ 53
Mahanagar Telephone Nigam Ltd GDR* 9,430 107
State Bank of India GDR (A) 5,300 56
Videsh Senchar (A) 10,400 114
-----------
330
-----------
ISRAEL - 2.3%
ECI Telecommunications 12,000 294
-----------
LEBANON - 2.0%
Solidere GDR 25,000 260
-----------
MEXICO - 12.2%
Empresas LA Moderna ADR* 23,000 559
Grupo Modelo, Series C 70,000 618
Grupo Posadas, Series A* 500,000 181
Telefonos de Mexico ADR 4,800 211
-----------
1,569
-----------
POLAND - 2.3%
Prokom Software GDR (A) 17,200 298
-----------
PORTUGAL - 12.3%
Banco Comercial ADR 16,300 448
Banco Espirito Santo 4,200 115
Electricidade de Portugal 21,500 495
Jeronimo Martins 3,800 129
Portugal Telecom 8,000 292
Telecel 800 105
-----------
1,584
-----------
SOUTH AFRICA - 3.4%
Dimension Data Holdings 51,600 209
Nedcor 5,300 85
Persetel Q Data 8,600 71
South Africa Breweries 4,400 66
-----------
431
-----------
SOUTH KOREA - 1.8%
Korea Electric Power ADR 25,300 228
-----------
UNITED STATES - 1.9%
Global Telesystems* 7,400 250
-----------
TOTAL FOREIGN COMMON STOCKS
(Cost $12,258) 11,119
-----------
FOREIGN PREFERRED STOCKS - 1.6%
BRAZIL - 1.6%
Mesbla 1,300,000 --
Petrobras 1,503,345 155
Telec de Sao Paulo 276,533 40
Telesp Celular, Class B* 264,120 11
-----------
206
-----------
TOTAL FOREIGN PREFERRED STOCKS
(Cost $503) 206
-----------
75 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
NET ASSETS SEPTEMBER 30, 1998
Emerging Markets Fund (concluded)
DESCRIPTION SHARES VALUE (000)
- -----------------------------------------------------------------------------
RELATED PARTY MONEY MARKET FUND - 10.9%
First American Prime
Obligations Fund (B) 1,404,476 $ 1,404
-----------
TOTAL RELATED PARTY MONEY MARKET FUND
(Cost $1,404) 1,404
-----------
TOTAL INVESTMENTS - 99.2%
(Cost $14,165) 12,729
-----------
OTHER ASSETS AND LIABILITIES, NET - 0.8% 100
-----------
NET ASSETS:
Portfolio Capital--Class Y
($.0001 par value--2 billion authorized)
based on 1,325,686 outstanding shares 8,714
Portfolio Capital--Class A
($.0001 par value--2 billion authorized)
based on 960,014 outstanding shares 14,654
Portfolio Capital--Class B
($.0001 par value--2 billion authorized)
based on 151 outstanding shares 1
Accumulated net investment loss (54)
Accumulated net realized loss on investments (9,051)
Net unrealized depreciation of investments (1,436)
Net unrealized appreciation of forward foreign currency
contracts, foreign currency and translation of
other assets and liabilities in foreign currency 1
-----------
TOTAL NET ASSETS - 100.0% $ 12,829
-----------
Net asset value, offering price, and redemption
price per share--Class Y $ 5.62
-----------
Net asset value and redemption price
per share--Class A $ 5.61
Maximum sales charge of 4.50% 0.26
-----------
Offering price per share--Class A (1) $ 5.87
-----------
Net asset value and offering price
per share--Class B (2) $ 5.60
-----------
* 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) Class B has a contingent deferred sales charge. For a description of a
possible redemption charge, see the notes to the financial statements.
(A) Security sold within the terms of a private placement memorandum, exempt
from registration under section 144A of the Securities Act of 1933, as
amended, and may be sold only to dealers in that program or other "qualified
institutional investors." These securities have been determined to be liquid
under guidelines established by the board of directors.
(B) This money market fund is advised by U.S. Bank National Association who also
serves as advisor for this fund. See also the notes to the financial
statements.
ADR--American Depository Receipt
GDR--Global Depository Receipt
The accompanying notes are an integral part of the financial statements.
International Fund
DESCRIPTION SHARES VALUE (000)
- -----------------------------------------------------------------------------
FOREIGN COMMON STOCKS - 88.0%
AUSTRALIA - 0.9%
AMP Limited 169,200 $ 2,048
News Corporation 257,400 1,658
-----------
3,706
-----------
ARGENTINA - 0.0%
Telecom Argentina ADR 6,000 178
-----------
DENMARK - 0.2%
Novo-Nordisk, Cl B 6,300 759
-----------
FRANCE - 17.3%
AXA 104,500 9,571
Canal Plus 9,000 2,187
Cap Gemini 102,433 15,691
BSN Gervais Danone 38,400 10,099
Dexia France 16,200 2,045
Eridania Beghin-Say 7,500 1,402
France Telecom* 27,300 1,616
L'Oreal 7,775 3,616
Pinault-Printemps-Redoute 7,675 1,110
Promodes 14,700 8,960
Rhone Poulenc, Cl A 82,400 3,457
Sanofi 21,100 3,104
Schneider 18,800 980
Synthelabo 4,900 904
Valeo 34,200 2,442
Valeo Warrants* 18,700 91
Vivendi 9,500 1,893
-----------
69,168
-----------
GERMANY - 6.8%
Allianz AG Holding 39,570 12,272
Hoechst 24,700 1,020
Mannesmann 103,600 9,490
Munchener Ruckvers 7,800 3,442
Munchener Ruckvers Warrants* 300 12
Viag 1,250 859
-----------
27,095
-----------
IRELAND - 3.6%
Bank of Ireland 360,000 6,400
CRH 90,800 1,146
Elan ADR* 77,200 5,563
Irish Life 154,800 1,143
-----------
14,252
-----------
ITALY - 5.3%
Assicurazioni Generali 100,900 3,284
Banca Di Roma 550,000 983
Credito Italiano 582,300 2,428
Istituto Mobiliare Italiano 93,800 1,239
Italgas 375,000 1,612
Rinascente 102,400 899
Telecom Italia SPA 172,600 1,190
Telecom Italia Mobile SPA 1,623,300 9,474
-----------
21,109
-----------
JAPAN - 8.2%
Bridgestone Corporation 195,000 3,922
Fuji Photo Film 43,000 1,478
Honda Motor 18,000 546
Kao Corporation 415,000 6,617
Minebea 81,000 658
Nippon Telegraph & Telephone 250 1,819
Nippon Television 510 143
NTT Data Corporation 420 1,530
Rohm 10,000 951
76 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
INTERNATIONAL FUNDS
International Fund (continued)
DESCRIPTION SHARES VALUE (000)
- -----------------------------------------------------------------------------
Sony Corporation 98,900 $ 6,865
Takeda Chemical Industry 305,000 8,143
-----------
32,672
-----------
MEXICO - 0.1%
Fomento Economico Mexicano ADR 8,000 157
Grupo Posadas, Cl A* 825,000 299
-----------
456
-----------
NETHERLANDS - 13.6%
Aegon 107,800 8,547
Ahold 47,900 1,432
Benckiser, Cl B* 33,500 1,672
De Boer Unigro 17,400 1,035
Fortis Amev 18,300 1,028
Getronics 148,000 6,720
Heineken 166,200 8,032
ING Groep NV 126,800 5,717
Randstad Holdings 19,200 994
Unilever 80,900 5,095
VNU Ver Bez 157,300 6,499
Wolters Kluwer 39,400 7,568
-----------
54,339
-----------
SINGAPORE - 0.0%
Development Bank of Singapore 18,000 73
-----------
SPAIN - 2.4%
Banco Popular Espanol 51,300 3,253
Iberdrola 149,300 2,488
Telefonica de Espana 111,018 4,052
-----------
9,793
-----------
SWEDEN - 1.9%
Ericsson Telephone ADR 189,400 3,480
Hennes & Mauritz, Cl B 15,400 1,119
Nordbanken Holding AB 196,000 1,125
Securitas, Cl B 36,300 1,861
-----------
7,585
-----------
SWITZERLAND - 8.8%
Adecco 4,300 1,599
Nestle, Registered 5,755 11,490
Novartis, Registered 3,709 5,967
Roche Holding 1,109 11,979
Swiss Reinsurance, Registered 2,200 4,378
-----------
35,413
-----------
UNITED KINGDOM - 18.9%
British Gas 358,400 2,489
Boots 150,000 2,590
British Telecommunications 401,100 5,401
Cadbury Schweppes 170,900 2,211
Colt Telecom 514,700 4,366
Diageo 181,000 1,721
Glaxo Wellcome 605,300 17,854
Legal & General 47,800 536
Lloyds TSB 59,700 668
Logica 132,700 4,856
Powergen 74,900 1,112
Sainsbury (J) 169,500 1,622
Sema Group 126,600 1,253
Smithkline Beecham 624,500 6,861
Unilever 450,000 3,847
United Utilities 146,900 2,372
Vodafone Group 920,800 10,679
Zeneca Group 152,200 5,376
-----------
75,814
-----------
TOTAL FOREIGN COMMON STOCKS
(Cost $327,766) 352,412
-----------
International Fund (concluded)
DESCRIPTION SHARES VALUE (000)
- -----------------------------------------------------------------------------
FOREIGN PREFERRED STOCKS - 5.8%
GERMANY - 2.0%
SAP 9,700 $ 4,605
Henkel KGAA 43,500 3,296
-----------
7,901
-----------
FINLAND - 3.8%
Nokia, Series A 190,700 15,343
-----------
TOTAL FOREIGN PREFERRED STOCKS
(Cost $19,940) 23,244
-----------
RELATED PARTY MONEY MARKET FUND- 2.9%
First American Prime
Obligations Fund (A) 11,576,335 11,576
-----------
TOTAL RELATED PARTY MONEY MARKET FUND
(Cost $11,576) 11,576
-----------
TOTAL INVESTMENTS - 96.7%
(Cost $359,282) 387,232
-----------
OTHER ASSETS AND LIABILITIES, NET - 3.3% 13,339
-----------
NET ASSETS:
Portfolio Capital--Class Y
($.0001 par value--2 billion authorized)
based on 28,475,544 outstanding shares 322,954
Portfolio Capital--Class A
($.0001 par value--2 billion authorized)
based on 3,202,251 outstanding shares 35,417
Portfolio Capital--Class B
($.0001 par value--2 billion authorized)
based on 235,688 outstanding shares 2,638
Accuumulated net investment loss (10,519)
Accumulated net realized gain on investments
and foreign currency transactions 22,061
Net unrealized appreciation of investments 27,950
Net unrealized appreciation of forward foreign currency
contracts, foreign currency and transaction of
other assets and liabilities in foreign currency 70
-----------
TOTAL NET ASSETS - 100.0% $ 400,571
-----------
Net asset value, offering price, and redemption
price per share--Class Y $ 12.55
-----------
Net asset value and redemption price
per share--Class A $ 12.55
Maximum sales charge of 4.50% 0.59
-----------
Offering price per share--Class A (1) $ 13.14
-----------
Net asset value and offering price
per share--Class B (2) $ 12.27
-----------
* 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) Class B has a contingent deferred sales charge. For a description of a
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 advisor for this fund. See also the notes to the financial
statements.
ADR--American Depository Receipt
Cl--Class
The accompanying notes are an integral part of the financial statements.
77 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
NET ASSETS SEPTEMBER 30, 1998
International Index Fund
DESCRIPTION SHARES VALUE (000)
- -----------------------------------------------------------------------------
FOREIGN COMMON STOCKS - 97.0%
AUSTRALIA - 2.2%
Amcor 18,082 $ 63
Boral 26,427 37
Brambles 5,692 123
Broken Hill Proprietary 26,847 192
Burns Philip & Co 15,097 1
Coca-Cola Amatil 21,218 56
Coca-Cola Beverage* 21,218 50
Coles Myer 26,617 113
CSR 26,547 56
Fosters Brewing 46,622 102
Goodman Fielder 41,964 55
ICI Australia 7,707 37
Lend Lease 6,297 134
M.I.M. Holdings 2,632 1
National Australia Bank 29,706 359
Newcrest Mining* 21,543 28
News Corporation 39,293 253
North Limited 18,526 35
Pacific Dunlop 34,457 58
Pioneer International 22,792 43
Rio Tinto 7,547 91
Santos 14,125 39
Southcorp Holdings 16,425 46
Western Mining 28,033 84
Westfield Trust Units 32,821 65
Westpac Banking 41,367 227
-----------
2,348
-----------
AUSTRIA - 0.4%
Austrian Airlines 1,410 44
Bank Austria 1,386 59
EA Generali 269 52
Flughafen Wien 772 31
Oest Elektrizatswits, Cl A 367 58
Oesterreichische 885 46
OMV 340 30
VA Technologie 539 49
Wienerberger Baust 256 49
-----------
418
-----------
BELGIUM - 1.9%
Bekaert 87 47
Cimenteries CBR Cement 185 14
Delhaize Freres - Le Lion 1,220 92
Electrabel 1,224 483
Electrabel Strip VVPR* 300 --
Fortis 932 230
Fortis Strip VVPR 20 --
Generale Banque 438 153
Group Bruxelles Lambert 641 107
KBC Strip VVPR* 70 --
Kredietbank 3,420 221
Petrofina 462 170
Royale Belgian 384 103
Solvay 1,720 115
Tractebel 1,520 247
Tractebel Put Warrants* 329 --
Union Miniere 428 17
-----------
1,999
-----------
International Index Fund (continued)
DESCRIPTION SHARES VALUE (000)
- -----------------------------------------------------------------------------
DENMARK - 1.0%
Carlsberg, Cl A 562 $ 33
Carlsberg, Cl B 36 2
D/S 1912, Cl B 20 131
D/S Svendborg, Cl B 15 139
Danisco 1,429 97
Den Danske Bank 999 113
FLS Industries, Cl B 1,105 23
International Service System 840 44
Novo-Nordisk, Cl B 1,311 158
Radiometer, Cl B 417 18
Tele Danmark, Cl B 1,986 197
Unidanmark, Cl A 1,148 83
-----------
1,038
-----------
FINLAND - 1.2%
Kesko 1,700 22
Kone, Cl B 100 10
Merita, Cl A 18,733 95
Metra, Cl B 700 14
Nokia Oyj, Cl A 8,900 716
Nokia, Cl K 2,400 190
Outokumpu, Cl A 3,500 29
Sampo Insurance 1,350 39
Stockmann 1,200 26
UPM Kymmene 5,740 132
-----------
1,273
-----------
FRANCE - 9.4%
Accor 887 186
Air Liquide 2,059 326
Alcatel Alsthom 2,878 256
AXA 6,677 612
Banque Nationale Paris, Cl A 3,994 214
Bic 1,500 84
Bouygues 751 136
Canal Plus 671 163
Carrefour Supermarkets 710 450
Casino Guichard Perrachon 1,550 156
Chargeurs 200 10
Comptoirs Modernes 165 103
Danone 1,362 358
Elf Aquitaine 5,831 719
Eridania Beghin Say 650 122
Eurafrance 100 49
Generale des Eaux 2,961 590
Generale des Eaux Warrants* 4,019 6
Havas 1,857 145
L'Oreal 1,143 532
Lafarge 1,934 171
Lagardere Groupe 2,819 80
Legrand 480 122
Lyonnaise des Eaux 2,492 424
Michelin, Cl B 3,273 129
Moet-Hennessy Louis Vuitton 1,609 220
Paribas 3,363 181
Pathe 200 37
Pernod Ricard 1,302 96
Peugeot Citroen 956 163
Pinault-Printemps 2,391 346
Promodes 353 215
Rhone-Poulenc, Cl A 6,987 293
Sagem 150 95
Saint Gobain 1,939 257
Sanofi 2,446 360
78 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
INTERNATIONAL FUNDS
International Index Fund (continued)
DESCRIPTION SHARES VALUE (000)
- -----------------------------------------------------------------------------
Schneider 2,781 $ 145
Sefimeg 431 28
Sidel 800 55
Simco 841 66
Societe Generale, Cl A 1,557 172
Sodexho Alliance 900 157
Thomson 3,217 98
Total, Cl B 3,710 468
UAP 7,902 281
Unibail 250 35
Usinor 2,568 29
Valeo 1,778 127
-----------
10,067
-----------
GERMANY - 10.7%
Adidas-Salomon 900 103
Agiv 880 20
Allianz 4,250 1,318
Allianz Rights* 4,800 26
AMB Aachener & Muenchener, Registered 800 124
AMB Aachener & Muenchener, Bearer 50 6
Axa Colonia Konzern 450 50
BASF 13,100 496
Bayer 14,050 531
Bayerische Vereinsbank 9,037 666
Beiersdorf 1,250 70
Bilfinger & Berger 1,200 23
Brau und Brunnen* 150 16
Continental 3,100 74
Daimler-Benz 9,870 826
Daimler-Benz Rights* 9,870 12
Degussa 1,350 58
Deutsche Bank 10,700 553
Deutsche Lufthansa, Registered 6,000 119
Deutsche Telekom 37,950 1,179
Dresdner Bank 9,850 367
Heidelberger Zement 905 60
Hochtief 1,900 55
Karstadt 100 49
Kloeckner Humboldt* 550 6
Linde 150 87
Man 250 80
Mannesmann 7,100 650
Merck KGAA 3,850 156
Metro 4,184 291
Munchener Ruckvers 1,350 596
Preussag 200 69
RWE 6,230 289
SAP 970 411
Schering 1,500 155
Siemens 9,920 548
Strabag* 100 7
Thyssen 750 128
Veba 8,682 452
Viag 400 275
Volkswagen 5,500 397
Volkswagen Rights* 550 13
-----------
11,411
-----------
HONG KONG - 2.0%
Bank of East Asia 15,886 22
Cathay Pacific Airways 54,000 51
Cheung Kong Holdings 43,000 199
Chinese Estates 104,296 12
CLP 44,500 217
International Index Fund (continued)
DESCRIPTION SHARES VALUE (000)
- -----------------------------------------------------------------------------
Hang Lung Development 49,000 $ 43
Hang Seng Bank 35,200 223
Hong Kong & China Gas 104,616 128
Hong Kong & China Gas Warrants* 95,106 4
Hong Kong Telecommunications 210,039 413
Hongkong & Shanghai Hotels 29,000 16
Hopewell Holdings 131,139 13
Hutchison Whampoa 66,000 348
Hysan Development 25,000 17
Hysan Development Warrants* 1,250 --
Miramar Hotel & Investment 19,000 13
New World Development 33,489 45
Peregrine Investments Holdings 13,000 --
Shangri-La Asia 38,000 25
Shun Tak Holdings 75,146 5
Sino Land 20,657 5
South China Morning Post 24,000 9
Sun Hung Kai Properties 46,000 163
Swire Pacific, Cl A 26,000 82
Television Broadcasts 10,000 26
Wharf Holdings 43,000 46
Wharf Holdings Warrants* 2,150 --
Wing Lung Bank 3,500 7
-----------
2,132
-----------
IRELAND - 0.5%
Allied Irish Banks 15,732 230
CRH 10,134 128
Greencore Group 5,342 20
Independant Newspapers 2,515 9
Irish Life 8,360 62
Jefferson Smurfit 29,615 44
Kerry Group, Cl A 4,102 48
Waterford Wedgewood 22,614 21
-----------
562
-----------
ITALY - 4.7%
Assicurazioni Generali 19,875 647
Banca Commerciale Italiana 36,000 217
Banca Intesa 12,000 51
Benetton Group SPA 33,400 50
Burgo (Cartierre) 2,000 11
Credito Italiano 57,500 240
Edison 10,000 76
ENI SPA 141,725 869
Fiat 67,100 172
Fiat RNC 26,400 43
INA 75,794 193
Istituto Banca San Paolo 16,300 205
Istituto Mobiliare Italiano 8,084 107
Italcementi 11,232 84
Italgas 14,000 60
Mediaset 16,984 114
Mediobanca 8,000 74
Mediobanca Rights* 8,000 20
Mondadori 3,099 36
Montedison 99,500 95
Olivetti* 52,800 112
Parmalat Finanziaria 23,400 35
Pirelli 31,000 82
RAS 9,075 96
RAS RNC 3,075 24
SAI 3,000 29
Sirti 3,500 17
Snia 20,000 26
79 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
NET ASSETS SEPTEMBER 30, 1998
International Index Fund (continued)
DESCRIPTION SHARES VALUE (000)
- -----------------------------------------------------------------------------
Telecom Italia 62,888 $ 434
Telecom Italia RNC 9,883 47
TIM 120,107 700
TIM RNC 31,894 103
-----------
5,069
-----------
JAPAN - 20.0%
77 Bank 8,000 65
Advantest 2,200 93
Ajinomoto 14,000 112
Alps Electric 3,000 36
Amada 5,000 23
Aoki* 22,000 6
Aoyama Trading 1,100 23
Asahi Bank 35,000 97
Asahi Breweries 7,000 83
Asahi Chemical Industry 28,000 85
Asahi Glass 16,000 77
Ashikaga Bank 2,000 3
Bank of Tokyo-Mitsubishi 81,000 518
Bank of Yokohama 25,000 46
Bridgestone 14,000 282
Canon 14,000 284
Chiba Bank 2,000 6
Chichibu Onoda Cement 13,000 26
Chugai Pharmaceutical 8,000 55
Citizen Watch 1,000 7
Cosmo Oil 28,000 35
Credit Saison 3,900 75
Dai Nippon Printing 13,000 167
Daicel Chemical Industries 1,000 2
Daido Steel 24,000 25
Daiei 16,000 36
Daiichi Pharmaceutical 7,000 93
Daikin Industry 9,000 63
Dainippon Ink & Chemicals 5,000 10
Dainippon Screen 7,000 13
Daito Trust Construction 3,000 19
Daiwa House Industries 14,000 127
Daiwa Securities 19,000 44
Denki Kagaku Kogyo Kabushiki Kaisha 33,000 49
Denso 17,000 247
East Japan Railway 71 353
Ebara 10,000 66
Eisai 7,000 85
Fanuc 3,700 110
Fuji Bank 55,000 111
Fuji Photo Film 10,000 344
Fujita Kanko 4,000 32
Fujitsu 34,000 293
Furukawa Electric 20,000 57
Gunma Bank 13,000 87
Hankyu 17,000 58
Hankyu Department Stores 7,000 35
Haseko* 15,000 5
Hitachi 63,000 276
Hokuriku Bank 2,000 2
Honda Motor 16,000 486
House Foods 3,000 38
Hoya 3,000 108
Industrial Bank of Japan 52,000 190
Isetan 2,000 16
Ito Yokado 9,000 428
Itochu 40,000 50
Japan Airlines* 42,000 97
Japan Energy 39,000 37
International Index Fund (continued)
DESCRIPTION SHARES VALUE (000)
- -----------------------------------------------------------------------------
Joyo Bank 26,000 $ 92
Jusco 6,000 84
Kajima 25,000 60
Kandenko 5,000 27
Kaneka 6,000 34
Kansai Electric Power 16,600 286
Kao 11,000 175
Kawasaki Kisen 24,000 35
Kawasaki Steel 69,000 81
Kinden 12,000 133
Kinki Nippon Railway 29,000 125
Kirin Brewery 24,000 192
Komatsu 23,000 107
Konica 8,000 30
Kubota 26,000 50
Kumagai Gumi 46,000 25
Kurita Water Industries 4,000 42
Kyocera 3,200 139
Kyowa Hakko Kogyo 14,000 54
Makita 4,000 46
Marubeni 24,000 28
Marui 7,000 101
Matsushita Electric 37,000 502
Meiji Milk Products 10,000 23
Meiji Seika 15,000 43
Misawa Homes 4,000 10
Mitsubishi 33,000 159
Mitsubishi Chemical 13,000 25
Mitsubishi Electric 45,000 69
Mitsubishi Estate 28,000 183
Mitsubishi Heavy Industries 67,000 229
Mitsubishi Materials 34,000 61
Mitsubishi Oil 17,000 20
Mitsubishi Trust & Banking 29,000 102
Mitsui 40,000 164
Mitsui Engineering & Shipbuilding 44,000 31
Mitsui Fudosan 7,000 36
Mitsui Marine & Fire Insurance 22,000 90
Mitsui Osk Lines 31,000 45
Mitsui Trust & Banking 17,000 15
Mitsukoshi 14,000 29
Mori Seiki 2,000 20
Murata Manufacturing 5,000 169
Nagase 2,000 7
Nagoya Railroad 18,000 54
Nankai Electric 14,000 56
NEC 28,000 181
Ngk Insulators 8,000 76
NGK Spark Plugs 4,000 32
Nichido Fire & Marine 9,000 40
Nichii 5,000 29
Nichirei 11,000 19
Nihon Cement 10,000 17
Nippon Express 22,000 95
Nippon Fire & Marine 8,000 25
Nippon Light Metal 35,000 32
Nippon Oil 26,000 68
Nippon Paper 13,000 40
Nippon Sheet Glass 22,000 35
Nippon Shokubai 2,000 9
Nippon Steel 103,000 148
Nippon Yusen Kabushik 35,000 103
Nissan Motors 17,000 47
Nissin Food Products 3,000 46
Nitto Denko 3,000 35
NKK 80,000 40
80 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
INTERNATIONAL FUNDS
International Index Fund (continued)
DESCRIPTION SHARES VALUE (000)
- -----------------------------------------------------------------------------
Nomura Securities 35,000 $ 251
NSK 7,000 24
NTN 2,000 5
NTT 179 1,303
Obayashi 17,000 60
Odakyu Railway 19,000 53
Oji Paper 23,000 78
Okamato Industries 13,000 22
Olympus Optical 7,000 77
Omron 6,000 59
Orix 1,400 97
Osaka Gas 41,000 104
Penta Ocean Construct 1,000 2
Pioneer Electronics 3,000 49
Rohm 3,000 285
Sakura Bank 76,000 111
Sankyo 7,000 155
Sanwa Shutter 9,000 34
Sanyo Electric 36,000 94
Sapporo Breweries 12,000 37
Secom 3,000 187
Sega Enterprises 2,000 34
Sekisui Chemical 13,000 49
Sekisui House 17,000 138
Sharp 24,000 143
Shimano 3,000 68
Shimizu 19,000 50
Shin-Etsu Chemical 9,000 143
Shiseido 8,000 71
Shizuoka Bank 14,000 128
Showa Denko 37,000 24
Sony 7,100 493
Sumitomo 21,000 84
Sumitomo Bank 55,000 382
Sumitomo Chemical 16,000 48
Sumitomo Electric 16,000 155
Sumitomo Forestry 3,000 15
Sumitomo Marine & Fire Insurance 15,000 72
Sumitomo Metal 65,000 61
Sumitomo Metal Mining 11,000 35
Taisei 12,000 20
Taisho Pharmaceutical 7,000 147
Takara Shuzo 5,000 20
Takashimaya 7,000 45
Takeda Chemical 19,000 507
Teijin 26,000 68
Toa 9,000 12
Tobu Railway 1,000 2
Toho 470 48
Tohoku Electric Power 10,600 157
Tokai Bank 32,000 114
Tokio Marine & Fire Insurance 27,000 241
Tokyo Broadcasting System 5,000 45
Tokyo Dome 7,000 28
Tokyo Electric Power 21,000 401
Tokyo Electronics 3,000 73
Tokyo Gas 43,000 90
Tokyu 24,000 53
Toppan Printing 16,000 164
Toray 31,000 126
Tosoh 35,000 49
Tostem 5,000 68
Toto 10,000 55
Toyo Seikan Kaisha 3,000 39
Toyobo 31,000 34
Toyoda Auto Loom 6,000 92
International Index Fund (continued)
DESCRIPTION SHARES VALUE (000)
- -----------------------------------------------------------------------------
Toyota Motor 66,000 $ 1,472
Ube Industries 39,000 47
Uniden Corportation 2,000 16
Yamaguchi Bank 4,000 36
Yamanouchi Pharmaceutical 7,000 151
Yamato Transportation 8,000 87
Yamazaki Baking 5,000 47
Yasuda Trust & Banking 28,000 14
Yokogawa Electric 7,000 28
-----------
21,377
-----------
MALAYSIA - 0.5% (B)
Amsteel 95,000 10
Arab Malaysian Merchant Bank 20,000 11
DCB Holdings 20,000 8
Edaran Otomobil Nasional 11,000 12
Gloden Hope Plant 54,000 34
Highlands & Lowlands 30,000 15
Hong Leong 80,000 11
Hume Industries 16,000 8
Magnum 60,500 17
Malayan Banking 80,000 83
Malaysian Airline System 25,000 10
Malaysian International Shipping 17,000 17
Malaysian Resources 44,000 10
Multi Purpose Holdings 66,000 11
Pan Malaysia Cement Works 55,000 9
Perusahaan Otomobil 4,000 3
Public Bank 89,199 22
Resorts World Berhad 27,000 24
Rothmans of Pall Mall 8,000 35
Silverstone* 3,325 --
Sime Darby 10,000 7
Technology Resources Industries 30,000 10
Telekom Malaysia 62,500 99
Tenaga Nasional Berhad 66,000 64
United Engineers 28,000 16
YTL 15,750 12
YTL Warrants* 3,050 1
-----------
559
-----------
NETHERLANDS - 5.5%
ABN-Amro Holding 24,956 425
Ahold 9,917 296
Akzo Nobel 5,564 198
Buhrmann 1,776 33
Elsevier 13,457 200
Getronics 1,811 82
Heineken 6,143 297
Hoogovens 754 21
Ing Groep 16,419 740
KLM 1,613 41
Koninklijke KPN 8,193 253
Pakhoed 867 20
Phillips Electronics 6,224 335
Royal Dutch Petroleum 36,924 1,833
TNT Post Group 9,193 234
Unilever 11,092 699
Wolters Kluwer 1,261 242
-----------
5,949
-----------
81 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
NET ASSETS SEPTEMBER 30, 1998
International Index Fund (continued)
DESCRIPTION SHARES VALUE (000)
- -----------------------------------------------------------------------------
NEW ZEALAND - 0.2%
Brierley Investment 66,325 $ 12
Carter Holt Harvey 49,289 33
Fletcher Challenge Building 3,165 3
Fletcher Challenge Energy 4,794 7
Fletcher Challenge Forests 19,179 4
Fletcher Challenge Paper 5,163 3
Lion Nathan 13,326 32
Telecom Corporation of New Zealand 33,302 127
-----------
221
-----------
NORWAY - 0.4%
Bergesen, Cl A 2,400 34
Dyno Industrier 1,200 16
Hafslund, Cl A 3,850 23
Hafslund, Cl B 1,600 6
Kvaerner 1,450 18
Norsk Hydro 5,650 206
Norske Skogindustrier 700 18
Orkla AS, Cl A 5,000 68
Petroleum Geo Service* 1,000 16
Storebrand, Cl A* 9,124 63
-----------
468
-----------
SINGAPORE - 0.6%
Asia Food & Property* 666 --
Asia Food & Property Warrants* 2,900 --
City Developments 15,000 33
Cycle & Carriage 7,000 11
DBS Land 20,000 14
Development Bank of Singapore 10,500 42
Fraser and Neave 3,000 6
Keppel 39,750 47
Natsteel 16,000 12
Neptune Orient Lines 47,000 10
OCBC 20,135 51
Singapore Airlines 24,000 132
Singapore Press Holdings 8,932 74
Singapore Telecommunications 111,000 186
United Industrial 77,000 22
United Overseas Bank 19,000 55
-----------
695
-----------
SPAIN - 3.1%
Acerinox SA 745 14
Argentaria 9,104 181
Autopistas Concensionaria 4,672 71
Autopistas Concensionaria Rights* 4,672 4
Banco Bilbao Vizcaya 40,155 430
Banco Central Hispanoamericano 21,150 196
Banco Central Hispanoamericano Rights* 7,050 6
Banco Santander 21,426 331
Banco Santander Rights* 21,426 6
Banco Santander Rights* 21,426 --
Endesa 17,984 405
Financiera Alba 179 22
Fomento de Construcciones 860 40
Gas Natural 2,456 174
Iberdrola 15,705 262
Mapfre 94 2
Metrovacesa 2,124 55
Repsol 5,148 218
International Index Fund (continued)
DESCRIPTION SHARES VALUE (000)
- -----------------------------------------------------------------------------
Tabacalera, Cl A 3,315 $ 73
Telefonica de Espana 18,302 668
Telefonica de Espana Rights* 19,802 14
Union Electrica Fenosa 4,413 66
Vallehermoso 2,745 31
Zardoya-Otis 2,020 56
-----------
3,325
-----------
SWEDEN - 2.8%
ABB, Cl A 12,950 117
ABB, Cl B 5,500 49
AGA, Cl A 3,958 51
AGA, Cl B 3,450 43
Astra, Cl A 26,652 455
Astra, Cl B 7,933 131
Atlas Copco, Cl A 3,220 68
Drott, Cl B* 2,459 20
Electrolux AB 8,955 118
Ericsson, Cl B 36,354 686
Hennes & Mauritz, Cl B 4,085 297
Skandia Forsakrings 10,330 134
Skandinaviska Enskilda Bank, Cl A 11,059 97
Skanska, Cl B 2,459 81
SKF, Cl B 3,000 37
STORA, Cl A 5,916 56
Svenska Cellulosa, Cl B 4,410 87
Svenska Handlesbanken, Cl A 4,451 167
Swedish Match 20,354 63
Trelleborg, Cl B 2,000 17
Volvo, Cl A 3,737 89
Volvo, Cl B 6,415 157
-----------
3,020
-----------
SWITZERLAND - 7.5%
Adecco 321 119
Alusuisse Lonza, Registered 120 115
Asea Brown Boveri Group 170 173
Credit Suisse, Registered 4,774 530
Holderbank Financiere Glarus 141 145
Nestle, Registered 650 1,298
Novartis, Bearer 119 192
Novartis, Registered 1,086 1,747
Roche Holdings 116 1,253
Roche Holdings, Bearer 24 416
Sairgroup 350 72
Schindler, PC 25 29
Schindler, Registered 25 31
Schweizerische Bankverein 195 2
SGS Societe Generale de Surveillance,
Registered 116 22
SGS Societe Generale de Surveillance, Bearer 29 21
SMH, Bearer 56 34
SMH, Registered 273 41
Swiss Reinsurance, Registered 262 521
UBS AG, Registered 3,773 739
Valora Holdings 70 16
Zuerich Versicherungs, Registered 930 485
-----------
8,001
-----------
UNITED KINGDOM - 22.4%
Abbey National 24,886 429
Allied Zurich* 31,245 319
Anglian Water 6,437 104
Arjo Wiggins Appleton 21,135 36
82 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
INTERNATIONAL FUNDS
International Index Fund (continued)
DESCRIPTION SHARES VALUE (000)
- -----------------------------------------------------------------------------
Associated British Foods 15,765 $ 160
Barclays 24,874 406
Bass 16,415 197
BBA Group 9,021 46
BG PLC 74,915 520
BICC 10,071 10
Blue Circle Industries 21,510 100
BOC 11,781 146
Boots 17,913 309
BPB 11,171 45
British Aerospace 34,024 206
British Airways 22,634 138
British American Tobacco* 31,245 233
British Petroleum 106,003 1,620
British Sky Broadcasting 35,649 303
British Steel 38,008 69
British Telecommunications 115,904 1,561
BTR* 69,395 125
Burmah Castrol 4,461 63
Cable & Wireless 40,002 381
Cadbury Schweppes 22,324 289
Caradon 15,828 33
Carlton Communications 13,900 93
Centrica* 75,604 146
Coats Viyella 22,869 14
Commercial Union 12,556 194
De La Rue 6,583 17
Diageo 69,489 661
Electrocomponents 9,618 54
Elementis 8,335 11
EMI Group 14,007 86
English China Clays 7,955 20
General Electric 56,794 415
General Electric Warrants* 1,132 2
GKN 9,305 95
Glaxo Wellcome 63,458 1,872
Granada 17,687 222
Great Universal Stores 20,164 229
Guardian Royal Exchange 16,467 71
Hammerson 10,193 68
Hanson 16,883 107
HSBC Holdings 33,552 600
HSBC Holdings (75p) 16,136 302
IMI 4,909 21
Imperial Chemical Industries 11,818 93
Johnson Matthey 4,897 26
Kingfisher 23,084 214
Ladbroke 33,285 124
Land Securities 2,531 39
Lasmo 21,742 64
Legal & General 25,307 284
Lloyds TSB 98,822 1,106
Lonrho 4,890 26
LucasVarity 29,589 91
Marks & Spencer 52,234 401
MEPC 12,784 103
National Grid Group 31,901 237
National Power 21,756 198
Next 6,829 49
Pearson 13,897 258
Peninsular & Oriental 10,802 104
Pilkington 29,405 29
Provident Financial 5,269 70
Prudential 38,852 567
Racal Electronics 6,572 38
Rank Group 16,954 66
International Index Fund (continued)
DESCRIPTION SHARES VALUE (000)
- -----------------------------------------------------------------------------
Reed International 22,618 $ 191
Reuters 28,619 240
Rexam 16,437 51
Rio Tinto 20,309 242
RMC 6,560 71
Rolls Royce 33,703 116
Royal & Sun Alliance Insurance 32,523 282
Royal Bank of Scotland 17,283 197
Safeway 23,210 109
Sainsbury 34,011 325
Schroders 5,194 85
Scottish & Newcastle 13,226 160
Scottish Power 22,765 220
Sears 2,797 7
Sedgwick 17,952 60
Selfridges* 2,797 10
Slough Estates 9,571 48
SmithKline Beecham 97,428 1,070
Smiths Industries 6,601 75
Southern Electric 10,510 117
Tate & Lyle 10,382 57
Tesco 126,894 360
Thames Water 8,323 166
Thames Water, Cl B* 9,079 12
Thorn 9,403 40
TI Group 10,548 64
Unilever 66,736 571
United Biscuits 15,174 53
United Utilities 11,993 194
Vodafone 60,184 698
Williams 16,025 94
Williams, Cl B* 17,360 10
Wolseley 12,805 65
Zeneca 17,854 632
-----------
24,027
-----------
TOTAL FOREIGN COMMON STOCKS
(Cost $103,697) 103,959
-----------
FOREIGN PREFERRED STOCKS - 0.6%
AUSTRALIA - 0.2%
Newscorp* 35,455 197
-----------
GERMANY - 0.4%
RWE 250 8
SAP 710 337
Volkswagen 2,000 91
-----------
436
-----------
ITALY - 0.0%
Fiat 31,900 50
-----------
TOTAL FOREIGN PREFERRED STOCKS
(Cost $435) 683
-----------
RELATED PARTY MONEY MARKET FUND - 1.7%
First American Prime
Obligations Fund (A) 1,796,842 1,797
-----------
TOTAL RELATED PARTY MONEY MARKET FUND
(Cost $1,797) 1,797
-----------
TOTAL INVESTMENTS - 99.3%
(Cost $105,929) 106,439
-----------
83 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
NET ASSETS SEPTEMBER 30, 1998
International Index Fund (concluded)
DESCRIPTION VALUE (000)
- -----------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET - 0.7% $ 703
-----------
NET ASSETS:
Portfolio Capital--Class Y
($.0001 par value--2 billion authorized)
based on 9,819,867 outstanding shares 96,446
Portfolio Capital--Class A
($.0001 par value--2 billion authorized)
based on 175,213 outstanding shares 1,851
Portfolio Capital--Class B
($.0001 par value--2 billion authorized)
based on 11,082 outstanding shares 135
Accumulated net investment loss (47)
Accumulated net realized gain on investments 8,219
Net unrealized appreciation of investments 510
Net unrealized appreciation of forward foreign
currency contracts, foreign currency and
translation of other assets and liabilities
in foreign currency 28
-----------
TOTAL NET ASSETS - 100.0% $ 107,142
-----------
Net asset value, offering price, and redemption
price per share--Class Y $ 10.71
-----------
Net asset value and redemption price
per share--Class A $ 10.69
Maximum sales charge of 4.50% 0.50
-----------
Offering price per share--Class A (1) $ 11.19
-----------
Net asset value and offering price
per share--Class B (2) $ 10.68
-----------
* 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) Class B has a contingent deferred sales charge. For a description of a
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 advisor for this fund. See also the notes to the financial
statements.
(B) As of September 1, 1998, the repatriation of proceeds received from the sale
of these securities has been blocked until at least September 1, 1999.
Therefore, these securities are being treated as illiquid.
Cl--Class
PC--Participating Certificate
Ser--Series
The accompanying notes are an integral part of the financial statements.
84 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
OPERATIONS FOR THE PERIOD ENDED SEPTEMBER 30, 1998 IN THOUSANDS
INTERNATIONAL FUNDS
<TABLE>
<CAPTION>
EMERGING INTERNATIONAL INTERNATIONAL INTERNATIONAL
MARKETS FUND FUND INDEX FUND(1) INDEX FUND(2)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 18 $ 342 $ 99 $ 110
Dividends 173 5,987 2,632 1,325
Less: Foreign taxes withheld (16) (211) (262) (164)
- --------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 175 6,118 2,469 1,271
==========================================================================================================================
EXPENSES:
Investment advisory fees 123 4,152 799 408
Less: Waiver of investment advisory fees (123) (392) (255) (198)
Less: Reimbursement of expenses by adviser (49) -- -- --
Administrator fees 43 368 126 87
Accounting Fees -- -- -- 62
Transfer agent fees 38 45 22 19
Amortization of organizational costs 18 3 -- --
Custodian fees 6 490 114 36
Directors' fees 9 4 1 2
Registration fees 41 16 15 17
Professional fees 36 12 7 3
Printing 43 12 4 4
Pricing fees -- 20 11 --
Distribution fees - Class A 52 34 3 1
Less: Waiver of Distribution Fees - Class A (18) -- -- --
Distribution fees - Class B 2 26 1 --
Other 9 8 5 2
- --------------------------------------------------------------------------------------------------------------------------
TOTAL NET EXPENSES BEFORE EXPENSES
PAID INDIRECTLY 230 4,798 853 443
==========================================================================================================================
Less: Expenses paid indirectly (2) -- -- --
- --------------------------------------------------------------------------------------------------------------------------
TOTAL NET EXPENSES 228 4,798 853 443
==========================================================================================================================
Investment income (loss) - net (53) 1,320 1,616 828
- --------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAINS (LOSSES)
ON INVESTMENTS AND FOREIGN CURRENCY
TRANSACTIONS - NET:
Net realized gain (loss) on investments (3,379) 28,363 5,074 3,662
Net realized loss on forward foreign currency contracts
and foreign currency transactions (66) (12,864) (108) (142)
Net change in unrealized depreciation of investments (4,319) (24,639) (3,880) (28,010)
Net change in unrealized appreciation (depreciation) of
forward foreign currency contracts, foreign currency
and translation of other assets and liabilities in
foreign currency 1 1,430 36 5
- --------------------------------------------------------------------------------------------------------------------------
NET GAIN (LOSS) ON INVESTMENTS (7,763) (7,710) 1,122 (24,485)
==========================================================================================================================
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $(7,816) $ (6,390) $ 2,738 (23,657)
==========================================================================================================================
</TABLE>
(1)For the ten month period December 1, 1998 to September 30, 1998.
(2)For the four month period August 1, 1997 to November 30, 1997.
The accompanying notes are an integral part of the financial statements.
85 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
CHANGES IN NET ASSETS IN THOUSANDS
<TABLE>
<CAPTION>
EMERGING INTERNATIONAL
MARKETS FUND FUND
- ----------------------------------------------------------------------------------------------------------------------
10/1/97 10/1/96 10/1/97 10/1/96
to to to to
9/30/98 9/30/97 9/30/98 9/30/97
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Investment income (loss) - net $ (53) $ 27 $ 1,320 $ 75
Net realized gain (loss) on investments (3,379) 1,105 28,363 5,280
Net realized gain (loss) on forward foreign currency
contracts and foreign currency transactions (66) -- (12,864) 11,283
Net change in unrealized appreciation (depreciation) of
investments (4,319) 2,201 (24,639) 33,294
Net change in unrealized appreciation (depreciation) of
purchased options contracts, forward foreign currency
contracts, foreign currency and translation of other
assets and liabilities in foreign currency 1 -- 1,430 (1,826)
- ----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations (7,816) 3,333 (6,390) 48,106
- ----------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment income - net:
Class Y -- -- (9,364)(A) (2,226)(A)
Class A (32) (8) (107)(A) (30)(A)
Class B (1) -- (74)(A) (12)(A)
Net realized gain on investments:
Class Y -- -- (4,550) --
Class A -- -- (56) --
Class B -- -- (44) --
Distributions in excess of realized capital gains:
Class Y -- -- -- --
Class A -- -- -- --
Class B -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (33) (8) (14,195) (2,268)
======================================================================================================================
CAPITAL SHARE TRANSACTIONS(1):
Class Y
Proceeds from sales 8,789 -- 244,177 56,808
Shares issued in connection with acquisition
of Piper Fund -- -- 3,757 --
Reinvestment of distributions -- -- 7,847 1,223
Payments for redemptions (26) -- (100,556) (19,454)
- ----------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from Class Y
transactions 8,763 -- 155,225 38,577
- ----------------------------------------------------------------------------------------------------------------------
Class A:
Proceeds from sales 778 211 217,153 87,168
Shares issued in connection with acquisition of
Piper Fund -- -- 47,464 --
Reinvestment of distributions 32 -- 156 23
Payments for redemptions (5,929) -- (227,336) (82,983)
- ----------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from class A
transactions (5,119) 211 37,437 4,208
- ----------------------------------------------------------------------------------------------------------------------
Class B:
Proceeds from sales -- FAIF 1 -- 1,142 899
Proceeds from sales -- Piper 28 -- -- --
Reinvestment of distributions -- FAIF -- -- 114 12
Reinvestment of distributions -- Piper 1 -- -- --
Payments for redemptions -- FAIF -- -- (367) (306)
Payments for redemptions -- Piper (304) -- -- --
- ----------------------------------------------------------------------------------------------------------------------
Increase in net assets from class B transactions (274) -- 889 605
- ----------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital share
transactions 3,370 211 193,551 43,390
- ----------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (4,479) 3,536 172,966 89,228
NET ASSETS AT BEGINNING OF PERIOD 17,308 13,772 227,605 138,377
======================================================================================================================
NET ASSETS AT END OF PERIOD (2) $12,829 $17,308 $ 400,571 $ 227,605
======================================================================================================================
(1)CAPITAL SHARE TRANSACTIONS:
Class Y
Shares issued 1,331 -- 18,643 4,877
Shares issued in connection with acquisition of
Piper Fund -- -- 248 --
Shares issued in lieu of cash distributions -- -- 680 118
Shares redeemed (5) -- (7,532) (1,681)
- ----------------------------------------------------------------------------------------------------------------------
TOTAL CLASS Y TRANSACTIONS 1,326 -- 12,039 3,314
======================================================================================================================
Class A:
Shares issued 83 668 16,428 7,347
Shares issued in connection with acquisition of
Piper Fund -- -- 3,127 --
Shares issued in lieu of cash distributions 4 1 13 2
Shares redeemed (678) (673) (16,973) (6,933)
- ----------------------------------------------------------------------------------------------------------------------
TOTAL CLASS A TRANSACTIONS (591) (4) 2,595 416
======================================================================================================================
Class B:
Shares issued -- FAIF -- -- 85 79
Shares issued -- Piper 3 -- -- --
Shares issued in lieu of cash distributions -- FAIF -- -- 10 1
Shares issued in lieu of cash distributions -- Piper -- -- -- --
Shares redeemed -- FAIF -- -- (28) (27)
Shares redeemed -- Piper (32) -- -- --
- ----------------------------------------------------------------------------------------------------------------------
TOTAL CLASS B TRANSACTIONS (29) -- 67 53
======================================================================================================================
NET INCREASE (DECREASE) IN CAPITAL SHARES 706 (4) 14,701 3,783
======================================================================================================================
[WIDE TABLE CONTINUED FROM ABOVE]
<CAPTION>
INTERNATIONAL
INDEX FUND
- --------------------------------------------------------------------------------------------------
12/1/97 8/1/97 8/1/96
to to to
9/30/98 11/30/97 7/31/97
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATIONS:
Investment income (loss) - net $ 1,616 $ 828 $ 1,979
Net realized gain (loss) on investments 5,074 3,662 (315)
Net realized gain (loss) on forward foreign currency
contracts and foreign currency transactions (108) (142) (97)
Net change in unrealized appreciation (depreciation) of
investments (3,880) (28,010) 28,681
Net change in unrealized appreciation (depreciation) of
purchased options contracts, forward foreign currency
contracts, foreign currency and translation of other
assets and liabilities in foreign currency 36 5 (5)
- --------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 2,738 (23,657) 30,243
- --------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment income - net:
Class Y (2,609) (512) (1,705)
Class A (23) (3) (14)
Class B (1) -- --
Net realized gain on investments:
Class Y -- -- (310)
Class A -- -- (4)
Class B -- -- --
Distributions in excess of realized capital gains:
Class Y -- -- (120)
Class A -- -- (2)
Class B -- -- --
- --------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (2,633) (515) (2,155)
==================================================================================================
CAPITAL SHARE TRANSACTIONS(1):
Class Y
Proceeds from sales 26,388 34,854 80,334
Shares issued in connection with acquisition
of Piper Fund -- -- --
Reinvestment of distributions 2,039 333 1,523
Payments for redemptions (79,475) (65,749) (41,656)
- --------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from Class Y
transactions (51,048) (30,562) 40,201
- --------------------------------------------------------------------------------------------------
Class A:
Proceeds from sales 1,057 49 400
Shares issued in connection with acquisition of
Piper Fund -- -- --
Reinvestment of distributions 22 3 19
Payments for redemptions (375) (215) (1,047)
- --------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from class A
transactions 704 (163) (628)
- --------------------------------------------------------------------------------------------------
Class B:
Proceeds from sales -- FAIF 151 1 --
Proceeds from sales -- Piper -- -- --
Reinvestment of distributions -- FAIF 1 -- --
Reinvestment of distributions -- Piper -- -- --
Payments for redemptions -- FAIF (18) -- --
Payments for redemptions -- Piper -- -- --
- --------------------------------------------------------------------------------------------------
Increase in net assets from class B transactions 134 1 --
- --------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital share
transactions (50,210) (30,724) 39,573
- --------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (50,105) (54,896) 67,661
NET ASSETS AT BEGINNING OF PERIOD 157,247 212,143 144,482
==================================================================================================
NET ASSETS AT END OF PERIOD (2) $107,142 $157,247 $212,143
==================================================================================================
(1)CAPITAL SHARE TRANSACTIONS:
Class Y
Shares issued 2,283 3,022 7,211
Shares issued in connection with acquisition of
Piper Fund -- -- --
Shares issued in lieu of cash distributions 184 28 137
Shares redeemed (6,842) (5,882) (3,656)
- --------------------------------------------------------------------------------------------------
TOTAL CLASS Y TRANSACTIONS (4,375) (2,832) 3,692
==================================================================================================
Class A:
Shares issued 88 4 36
Shares issued in connection with acquisition of
Piper Fund -- -- --
Shares issued in lieu of cash distributions 2 -- 2
Shares redeemed (30) (18) (96)
- --------------------------------------------------------------------------------------------------
TOTAL CLASS A TRANSACTIONS 60 (14) (58)
==================================================================================================
Class B:
Shares issued -- FAIF 13 -- --
Shares issued -- Piper -- -- --
Shares issued in lieu of cash distributions -- FAIF -- -- --
Shares issued in lieu of cash distributions -- Piper -- -- --
Shares redeemed -- FAIF (2) -- --
Shares redeemed -- Piper -- -- --
- --------------------------------------------------------------------------------------------------
TOTAL CLASS B TRANSACTIONS 11 -- --
==================================================================================================
NET INCREASE (DECREASE) IN CAPITAL SHARES (4,304) (2,846) 3,634
==================================================================================================
</TABLE>
(2)Includes undistributed (distributions in excess of) net investment income
(000) of: $(54) and $(34) for Emerging Markets Fund, $(10,519) and $9,906
for International Fund, and $(47), $1,019+ and $706* for International
Index Fund as of September 30, 1998 and September 30, 1997, respectively.
+ November 30, 1997. *July 31, 1997.
(A)Represents a distribution in excess of net investment income due to the tax
treatment of foreign currency related transactions.
86 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
INTERNATIONAL FUNDS
(This page has been left blank intentionally.)
87 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
FINANCIAL HIGHLIGHTS FOR THE PERIOD ENDED SEPTEMBER 30, 1998
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
REALIZED AND
NET ASSET UNREALIZED DIVIDENDS DISTRIBUTIONS
VALUE NET GAINS OR FROM NET DISTRIBUTIONS FROM
BEGINNING INVESTMENT (LOSSES) ON INVESTMENT FROM RETURN OF
OF PERIOD INCOME INVESTMENTS INCOME CAPITAL GAINS CAPITAL
- --------------------------------------------------------------------------------------------------------------------------
EMERGING MARKETS FUND
<S> <C> <C> <C> <C> <C> <C>
Class Y
1998(1) $ 7.27 $ 0.01 $ (1.66) $ -- $ -- $ --
Class A(2)
1998 $ 10.96 $ (0.15) $ (5.18) $ (0.02) $ -- $ --
1997 8.85 0.02 2.10 (0.01) -- --
1996(3) 8.84 0.01 -- -- -- --
1996(4) 7.20 0.01 1.63 -- -- --
1995(5) 9.14 -- (1.94) -- -- --
1994(5)(6) 10.00 0.01 (0.87) -- -- --
Class B -- FAIF
1998(1) $ 7.27 $ -- $ (1.67) $ -- $ -- $ --
Class B -- Piper
1998(7) $ 10.86 $ (0.08) $ (1.07) $ (0.02) $ -- $ --
1997(8) 10.13 0.00 0.73 -- -- --
- -------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL FUND
Class Y
1998 $ 13.23 $ 0.07 $ 0.01 $ (0.51)(C) $ (0.25) --
1997 10.31 0.03 3.06 (0.17)(C) -- --
1996 10.30 (0.01) 0.22 (0.20)(C) -- --
1995 10.22 0.01 0.07 -- -- --
1994(10) 10.00 (0.01) 0.23 -- -- --
Class A
1998 $ 13.18 $ 0.06 $ 0.02 $ (0.46)(C) $ (0.25) --
1997 10.28 0.01 3.04 (0.15)(C) -- --
1996 10.28 (0.02) 0.20 (0.18)(C) -- --
1995 10.21 -- 0.07 -- -- --
1994(9) 9.98 (0.01) 0.24 -- -- --
Class B
1998 $ 12.97 $ (0.07) $ 0.03 $ (0.41)(C) $ (0.25) --
1997 10.14 (0.08) 3.01 (0.10)(C) -- --
1996 10.20 (0.07) 0.17 (0.16)(C) -- --
1995 10.21 (0.03) 0.02 -- -- --
1994(11) 10.23 (0.01) (0.01) -- -- --
- -------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL INDEX FUND(B)
Class Y
1998(12) $ 10.99 $ 0.14 $ (0.20) $ (0.22) $ -- $ --
1997(13) 12.37 0.06 (1.41) (0.03) -- --
1997(14) 10.69 0.13 1.70 (0.12) (0.02) (0.01)
1996(14) 10.48 0.09 0.18 (0.06) -- --
1995(14)(15) 10.00 0.01 0.47 -- -- --
Class A
1998(12) $ 10.94 $ 0.11 $ (0.20) $ (0.16) $ -- $ --
1997(13) 12.32 0.05 (1.41) (0.02) -- --
1997(14) 10.64 0.10 1.70 (0.09) (0.02) (0.01)
1996(14) 10.45 0.07 0.17 (0.05) -- --
1995(14)(15) 10.00 -- 0.45 -- -- --
Class B
1998(12) $ 10.99 $ 0.05 $ (0.21) $ (0.15) $ -- $ --
1997(16)(17) 11.08 0.00 (0.09) -- -- --
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Returns are for the period indicated and have not been annualized.
(A)Excluding sales charges.
(B)The financial highlights for International Index Fund as set forth herein
include the historical financial highlights of the Qualivest International
Opportunities Fund Class A and Y shares. The assets of the International
Opportunities Fund were acquired by International Index Fund on November
21, 1997. In connection with such acquisition, (i) Class A and Class C
shares of the Qualivest International Opportunities Fund were exchanged
for Class A shares of International Index Fund; and (ii) Qualivest Class Y
shares were exchanged for Class Y shares of International Index Fund.
(C)Includes distributions in excess of net investment income due to tax
treatment of foreign currency related transactions.
(1)Class Y and Class B shares have been offered since August 10, 1998. All
ratios for the period have been annualized.
(2)The financial highlights for Emerging Markets Fund as set forth herein
include the historical financial highlights of the Piper Emerging Markets
Growth Fund Class A shares. The assets of the Piper Emerging Markets
Growth Fund were acquired by Emerging Markets Fund on August 7, 1998. In
connection with such acquisition, Class A shares of the Piper Emerging
Markets Growth Fund were exchanged for Class A shares of the Emerging
Markets Fund. On August 7, 1998 the fund's advisor changed from Piper
Capital Management, Inc. to U.S. Bank N.A.
(3)For the three month period July 1, 1996 to September 30, 1996. All ratios
for the period have been annualized.
(4)Emerging Markets Growth Fund commenced operations and acquired the net
assets of Hercules Latin American Value Fund on June 21, 1996, via a
tax-free reorganization. Emerging Markets Growth Fund had no assets or
liabilities prior to the acquisition. Consequently, the information
presented for Emerging Markets Growth Fund prior to June 21, 1996,
represents the financial history of Hercules Latin American Value Fund. As
a result of the reorganization, the fund's subadvisor changed from Bankers
Trust Company to Edinburgh Fund Managers plc. On July 18, 1995,
shareholders of Hercules Latin American Value Fund approved a change in
the fund's advisor from Hercules International Management LLC to Piper
Capital Management Incorporated.
88 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
INTERNATIONAL FUNDS
<TABLE>
<CAPTION>
RATIO OF
RATIO OF NET EXPENSES TO
NET ASSET RATIO OF INVESTMENT AVERAGE
VALUE NET ASSETS EXPENSES TO INCOME TO NET ASSETS PORTFOLIO
END OF TOTAL END OF AVERAGE AVERAGE (EXCLUDING TURNOVER
PERIOD RETURN (A) PERIOD (000) NET ASSETS NET ASSETS WAIVERS) RATE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 5.62 (22.70)%+ $ 7,444 1.46% 0.83% 3.30% 48%
$ 5.61 (48.91)%+ $ 5,384 1.96% (1.09)% 3.43% 48%
10.96 23.91 16,998 2.00 0.17 3.34 105
8.85 0.11+ 13,772 2.00 0.26 4.09 0
8.84 22.78 13,936 2.00 0.26 3.54 140
7.20 (21.23) 22,624 2.00 0.15 3.47 161
9.14 ( 8.60) 27,750 2.00 (0.03) 3.10 78
$ 5.60 (22.97)%+ $ 1 2.46% (0.43)% 4.30% 48%
$ 9.69 (10.59)%+ $ -- 2.76% (2.24)% 4.12% 34%
10.86 7.21 310 2.64 0.03 3.39 105
- -----------------------------------------------------------------------------------------------------------------
$ 12.55 1.15% $357,475 1.44% 0.42% 1.56% 102%
13.23 30.38 217,414 1.67 0.06 1.67 96
10.31 2.11 135,238 1.72 (0.06) 1.72 100
10.30 0.78 94,400 1.74 0.12 1.81 57
10.22 2.20+ 47,963 1.75 (0.19) 2.05 16
$ 12.55 1.11% $ 40,204 1.69% 0.13% 1.81% 102%
13.18 30.03 8,003 1.92 (0.09) 1.92 96
10.28 1.84 1,964 1.97 (0.28) 1.97 100
10.28 0.69 876 1.93 (0.13) 2.06 57
10.21 2.30+ 464 1.75 (0.26) 2.30 16
$ 12.27 0.13% $ 2,892 2.44% (0.64)% 2.56% 102%
12.97 29.13 2,188 2.67 (0.94) 2.67 96
10.14 1.02 1,175 2.72 (0.96) 2.72 100
10.20 ( 0.10) 306 2.76 (0.95) 2.81 57
10.21 ( 0.20)+ 22 2.75 (0.71) 3.05 16
- -----------------------------------------------------------------------------------------------------------------
$ 10.71 ( 0.73)%+ $105,151 0.74% 1.42% 0.97% 0%
10.99 (10.93)+ 155,976 0.66 1.23 0.95 0
12.37 17.24 210,538 0.73 1.15 1.03 3
10.69 2.56 142,478 0.81 1.18 1.10 6
10.48 4.80+ 60,073 1.18 1.32 1.39 0
$ 10.69 ( 1.05)%+ $ 1,873 0.99% 1.21% 1.22% 0%
10.94 (11.03)+ 1,270 0.92 0.98 1.21 0
12.32 17.03 1,605 0.98 0.90 1.28 3
10.64 2.29 2,005 1.06 0.84 1.35 6
10.45 4.50+ 20 1.40 0.23 1.54 0
10.68 ( 1.53)%+ $ 118 1.74% 0.72% 1.97% 0%
10.99 ( 0.36)+ 1 1.29 0.00 1.29 0
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
(5)For the period ended June 30.
(6)Commenced operations of Hercules Latin American Value Fund on November 9,
1993. All ratios for the period have been annualized.
(7)Effective April 28, 1998 all shareholders were exchanged into Class A.
Class B share activity was discontinued. All ratios for the period have
been annualized.
(8)Class B shares have been offered since February 18, 1997. All ratios for
the period have been annualized.
(9)Class A shares have been offered since April 7, 1994. All ratios for the
period have been annualized.
(10)Commenced operations on April 4, 1994. All ratios for the period have been
annualized.
(11)Class B shares have been offered since August 15, 1994. All ratios for the
period have been annualized.
(12)For the period December 1, 1997 to September 30, 1998. All ratios for the
period have been annualized. The First American board of directors
approved a change in the fund's fiscal year end from November 30 to
September 30, effective September 30, 1998.
(13)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 fund's fiscal year end from July 31 to November
30, effective November 30, 1997.
(14)For the period ended July 31.
(15)Commenced operations on July 3, 1995. All ratios for the period have been
annualized.
(16)Class B shares have been offered since November 24, 1997. All ratios for
the period have been annualized.
(17)For the period November 24, 1997 to November 30, 1997.
89 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
EQUITY FUNDS
SECTOR
FUNDS
In a period of volatile markets and economic uncertainties, many investors shied
away from stocks of smaller companies, which tend to be the foundation of our
sector funds. Rather than being positioned for the long-term growth opportunity
offered by specialized companies in the sectors we emphasize (health sciences,
real estate and technology), much of the market's money was directed into
investments that offered a sense of short-term security.
This created a difficult environment for the funds for much of the fiscal
year ended September 30, 1998. Shaken by a number of problems in overseas
economies, ranging from Japan's faltering economy to Russia's currency
devaluation and sudden weakness in many emerging markets, investors became wary
of most stocks with which they weren't familiar. Only select large-cap growth
stocks and U.S. Treasury bonds seemed to appeal to investors as the year
progressed.
That left many of the stocks represented in these funds in a tailspin. These
portfolios emphasize smaller company issues in order to provide opportunity for
long-term capital appreciation and added diversification value with our other
funds, which usually emphasize larger, more established companies.
In both the health care and technology areas, the general aversion to smaller
companies occurred regardless of how a company was performing or the outlook for
its product line for the future. Rather than invest in companies involved in
exciting new product developments and innovations, investors sought refuge in
firms with more predictable stories that likely offered less future growth
potential.
These past months have been difficult for investors, as only a select group
of stocks seemed to benefit. Even those have seen valuations rise to excessive
levels. It appears that everyone could benefit from a more stable economic
environment that cools investor fears. On the plus
90 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
SECTOR FUNDS
side, many stocks are very attractively valued now and have greater upside
potential than they did previously. At some point, the markets should recognize
this value, and many of the quality stocks in the health care and technology
areas should recover.
The real estate market faces different issues, most notably, tremendous
weakness in Real Estate Investment Trusts (REITs). This area, which in the past
performed well in periods when the markets faltered, has been struggling, due in
part to increasing regulatory concerns and an unstable supply and demand
environment.
While there is still uncertainty about the direction of the U.S. economy, the
Federal Reserve's recent rate cuts are a sign that it intends to do what it can
to prevent a recession. If successful, many sectors should respond well,
particularly those undervalued stocks represented in our fund portfolios.
The following graphs compare First American fund performance with unmanaged
indices. Indices do not pay management fees to cover costs of shareholder
services and fund operating costs, or transaction costs to buy and sell
securities. Unlike indices, mutual funds are never 100% invested because they
need cash on hand to redeem shares. In addition, the performance shown for the
funds includes the maximum initial sales charge, all fund expenses and fees. If
operating expenses such as the funds had been applied to the indices, their
performance would have been lower. Please remember that an index is simply a
measure of performance, and one cannot invest in it directly.
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 class A shares
before sales charges. The adjusted figures for class A shares include the effect
of paying the maximum initial sales charge of 4.5% on 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 Health Sciences, Real Estate Securities and Technology funds
primarily invest in sector specific stocks, which is riskier than investing in
more diversified funds.
91 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
SECTOR FUNDS
HEALTH SCIENCES
INVESTMENT OBJECTIVE
- --------------------------------------------------------------------------------
SEEKS LONG-TERM CAPITAL GROWTH BY INVESTING PRIMARILY IN
EQUITY SECURITIES OF HEALTH CARE RELATED COMPANIES
A number of economic and business-related uncertainties resulted in a
significant downturn for Health Sciences Fund in the fiscal year ended September
30, 1998. For the period, the fund generated a return of -25.24%.
Our emphasis on smaller stocks in the health care marketplace was a
detriment. Small stocks as a whole suffered dramatically, particularly from
April 1998 to the end of the fiscal year. Investors became shaky about possible
economic weakness during that time and avoided small stocks in droves. Health
care stocks seemed to be particularly susceptible to that trend, including
biotech firms and service providers.
While we added some large-cap stock names to the fund in an effort to
stabilize performance, the major correction of recent months has also created
new opportunities. Small health-care stocks, including biotech firms in the
process of developing new medicines or technologies, and service providers such
as clinic, hospital and nursing home firms, are very attractively priced in the
current market.
Going forward, we anticipate many stocks in the portfolio will rebound, as
product advancements developed by these companies become better recognized.
Taking a longer view, the aging baby boomer market should continue to generate
strong growth opportunities for companies in the health care field, which puts
the fund in a strong position for long-term growth.
VALUE OF A $10,000 INVESTMENT
[PLOT POINTS CHART]
<TABLE>
<CAPTION>
First American First American First American
Health Sciences Fund, Health Sciences Fund, Health Sciences Fund, Russell 2000
Class A Class A adjusted Class Y Index
------- ---------------- ------- -----
<S> <C> <C> <C> <C>
1995 $10,000 $ 9,550 $10,000 $10,000
1996 $ 9,868 $ 9,424 $ 9,879 $11,087
1997 $12,197 $11,648 $12,239 $14,767
1998 $ 9,118 $ 8,708 $ 9,167 $11,958
</TABLE>
PAST PERFORMANCE OF THE FUND IS NOT INDICATIVE OF FUTURE PERFORMANCE.
ANNUALIZED PERFORMANCE SINCE
1 YEAR INCEPTION
- --------------------------------------------------------------------------------
Class A -25.24% -3.40%
- --------------------------------------------------------------------------------
Class A adjusted -28.61% -5.05%
- --------------------------------------------------------------------------------
Class B -25.80% -4.14%
- --------------------------------------------------------------------------------
Class B adjusted -29.02% -5.39%
- --------------------------------------------------------------------------------
Class Y -25.10% -3.21%
- --------------------------------------------------------------------------------
Russell 2000 -19.02% 6.94%
- --------------------------------------------------------------------------------
Past performance of the fund is not indicative of future performance.
The inception date of the class A, B and Y shares is 1/31/96. The performance
reflected in the graph begins on 1/31/96. The performance reflected in the table
begins on the inception date of class A, B and Y shares.
Performance reflects voluntary fee waivers in effect. In absence of such fee
waivers, total returns would be reduced.
92 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
SECTOR FUNDS
REAL ESTATE SECURITIES
INVESTMENT OBJECTIVE
- --------------------------------------------------------------------------------
SEEKS A COMBINATION OF ABOVE-AVERAGE CURRENT INCOME
AND LONG-TERM CAPITAL APPRECIATION
Hampered by a difficult period for Real Estate Investment Trusts (REITs), Real
Estate Securities Fund registered a return of -12.42% for the fiscal period
ended September 30, 1998.
The market's downturn occurred after strong performance in the previous two
years and was based on several factors. They included fears of excess supply,
coupled with increased recession fears and new regulations that affected a
limited number of REITs. While these factors had a negative impact for much of
the year, they seemed to stabilize in late summer, and a rebound began in the
last few weeks of the fiscal year.
Several REITs in our portfolio benefited from merger activity, most notably
Excel Realty, which merged with New Plan, and Merry Land, which merged with
Equity Residential. Other strong performers included Bradley Real Estate Trust
and Colonial Properties.
Going forward, there appear to be more positive signs for the real estate
market. In particular, demand seems to be picking up relative to the available
supply, in large part because of reduced construction. That should help drive up
property values, which will make many REITs more profitable. Combined with the
fact that the market's correction made prices for REITs more attractive, there's
plenty of reason for optimism. What's more, there are encouraging signs that the
economy can maintain its slow growth pace, a good environment for REITs, which
are the primary focus of the fund.
VALUE OF A $10,000 INVESTMENT
[PLOT POINTS CHART]
First American First American First American
Real Estate Real Estate Real Estate
Securities Fund, Securities Fund, Securities Fund, Morgan Stanley
Class A Class A adjusted Class Y REIT Index
------- ---------------- ------- ----------
1995 $10,000 $9,550 $10,000 $10,000
1995 $10,519 $10,046 $10,519 $10,411
1996 $12,431 $11,871 $12,469 $12,313
1997 $17,002 $16,237 $17,091 $17,347
1998 $14,890 $14,220 $15,009 $14,868
PAST PERFORMANCE OF THE FUND IS NOT INDICATIVE OF FUTURE PERFORMANCE.
ANNUALIZED PERFORMANCE SINCE
1 YEAR 3 YEAR INCEPTION
- --------------------------------------------------------------------------------
Class A -12.42% 12.28% 12.27%
- --------------------------------------------------------------------------------
Class A adjusted -16.39% 10.57% 10.56%
- --------------------------------------------------------------------------------
Class B -13.04% 11.37% 11.36%
- --------------------------------------------------------------------------------
Class B adjusted -17.10% 10.29% 10.28%
- --------------------------------------------------------------------------------
Class Y -12.18% 12.58% 13.30%
- --------------------------------------------------------------------------------
Morgan Stanley REIT -14.29% 12.61% 12.98%
- --------------------------------------------------------------------------------
Past performance of the fund is not indicative of future performance.
The inception date of the class A and B shares is 9/29/95, and the inception
date for the class Y shares is 6/30/95. The performance reflected in the graph
begins on 6/30/95 which links class A shares with the performance of class Y
shares after its inception on 6/30/95, not adjusted for fees and expenses. The
performance reflected in the table for class A and B shares begins on 9/29/95,
performance reflected for class Y shares begins on 6/30/95.
Performance reflects voluntary fee waivers in effect. In absence of such fee
waivers, total returns would be reduced.
93 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
SECTOR FUNDS
TECHNOLOGY
INVESTMENT OBJECTIVE
- --------------------------------------------------------------------------------
SEEKS LONG-TERM CAPITAL GROWTH BY INVESTING PRIMARILY
IN TECHNOLOGY-RELATED EQUITY SECURITIES
In trying times for technology stocks, particularly smaller-cap issues, the
Technology Fund earned a total return of -16.69% for the fiscal year ended
September 30, 1998.
Small-cap stocks, the focus of this fund, were out of favor for much of the
year, particularly from April 1998, forward. In addition, investors in
technology stocks generally rewarded a limited group of premier, large-cap
technology stocks and few others. The situation became so drastic that
valuations in some top technology names were wildly out of sync with historical
norms.
Within the fund, some of the biggest companies we held, namely America
Online, BMC Software and Cisco Systems, were our top performers. Investors
showed a preference for market leaders, such as these technology firms. We
shifted money out of a number of software companies during the year and put
increased focus on hardware and semiconductor companies.
The year ahead is likely to hold continued volatility for technology stocks.
Valuations of a wide range of successful smaller companies that lost ground in
the recent market turmoil are quite attractive. Even as stock prices declined,
most companies in the portfolio remained fundamentally strong, with encouraging
prospects for the future. That creates an attractive long-term outlook for
investors in the fund.
VALUE OF A $10,000 INVESTMENT
[PLOT POINTS CHART]
First American First American First American
Technology Fund, Technology Fund, Technology Fund, Russell 2000
Class A Class A adjusted Class Y Index
------- ---------------- ------- -----
1994 $10,000 $9,550 $10,000 $10,000
1994 $11,572 $11,051 $11,584 $10,217
1995 $19,235 $18,370 $19,255 $12,603
1996 $22,813 $21,786 $22,885 $14,260
1997 $26,853 $25,645 $26,993 $18,993
1998 $22,371 $21,365 $22,563 $15,381
PAST PERFORMANCE OF THE FUND IS NOT INDICATIVE OF FUTURE PERFORMANCE.
ANNUALIZED PERFORMANCE SINCE
1 YEAR 3 YEAR INCEPTION
- --------------------------------------------------------------------------------
Class A -16.69% 5.16% 18.75%
- --------------------------------------------------------------------------------
Class A adjusted -20.43% 3.56% 17.54%
- --------------------------------------------------------------------------------
Class B -17.21% 4.43% 20.04%
- --------------------------------------------------------------------------------
Class B adjusted -21.03% 3.40% 19.77%
- --------------------------------------------------------------------------------
Class Y -16.41% 5.42% 18.95%
- --------------------------------------------------------------------------------
Russell 2000 -19.02% 6.87% 10.24%
- --------------------------------------------------------------------------------
Past performance of the fund is not indicative of future performance.
The inception date of the class A and Y shares is 4/4/94, and the inception date
for the class B shares is 8/15/94. The performance reflected in the graph begins
on 4/30/94. The performance reflected in the table for class A and Y shares
begins on 4/4/94, and performance for class B shares begins on 8/15/94.
Performance reflects voluntary fee waivers in effect. In absence of such fee
waivers, total returns would be reduced.
94 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
SECTOR FUNDS
Health Sciences Fund
DESCRIPTION SHARES VALUE (000)
- -----------------------------------------------------------------------------
COMMON STOCKS - 87.3%
CHEMICALS - 3.1%
Monsanto 13,500 $ 761
-----------
DRUGS - 6.8%
Avecor Cardiovascular* 10,000 95
Nanogen* 45,000 165
Pfizer 10,000 1,059
Protein Design Laboratories* 15,000 360
-----------
1,679
-----------
HEALTH & ALLIED SERVICES - 16.7%
Curative Technologies* 20,000 612
Genesis Health Ventures* 29,200 358
Health Management Associates, Cl A 54,000 986
Integrated Health Services 25,000 420
Medpartners* 102,500 333
Quorum Health Group* 50,000 813
United Healthcare 17,000 595
-----------
4,117
-----------
MEDICAL DEVICES - 6.7%
Arrow International 15,000 418
Medtronic 5,600 324
Micro Therapeutics* 50,000 372
Nitinol Medical Technologies* 9,800 42
Novoste* 10,000 129
Perclose* 22,000 363
-----------
1,648
-----------
MEDICAL PRODUCTS & SERVICES - 16.7%
American Oncology Resources* 34,000 344
ATS Medical* 83,475 490
Boston Biomedical* 35,000 88
Boston Scientific* 18,000 925
Columbia/HCA Healthcare 25,000 502
Cyberonics* 26,900 161
Heska* 46,000 259
Lifecore Biomedical* 58,000 435
Photoelectron* 43,000 172
Ventana Medical Systems* 41,400 745
-----------
4,121
-----------
MISCELLANEOUS BUSINESS - 1.9%
HBO & Company 15,932 460
-----------
PHARMACEUTICAL - 24.4%
Algos Pharmaceuticals* 25,000 578
Biochem Pharmaceuticals* 30,000 551
Celgene* 30,000 294
Centocor* 23,000 911
Chirex* 35,000 418
Elan, ADR* 19,000 1,369
Guilford Pharmaceuticals* 11,000 154
King Pharmaceuticals* 26,700 367
Sepracor* 21,100 1,387
-----------
6,029
-----------
REAL ESTATE - 11.0%
Healthcare Realty Trust 37,300 951
National Health Investors 26,600 825
Nationwide Health Properties 41,400 932
-----------
2,708
-----------
TOTAL COMMON STOCKS
(Cost $21,374) 21,523
-----------
Health Sciences Fund (concluded)
DESCRIPTION SHARES VALUE (000)
- -----------------------------------------------------------------------------
RELATED PARTY MONEY MARKET FUND - 8.6%
First American Prime
Obligations Fund (A) 2,116,252 $ 2,116
-----------
TOTAL RELATED PARTY MONEY MARKET FUND
(Cost $2,116) 2,116
-----------
TOTAL INVESTMENTS - 95.9%
(Cost $23,490) 23,639
-----------
OTHER ASSETS AND LIABILITIES, NET - 4.1% (B) 1,000
-----------
NET ASSETS:
Portfolio Capital--Class Y
($.0001 par value--2 billion authorized)
based on 2,802,344 outstanding shares 21,773
Portfolio Capital--Class A
($.0001 par value--2 billion authorized)
based on 258,086 outstanding shares 2,823
Portfolio Capital--Class B
($.0001 par value--2 billion authorized)
based on 84,317 outstanding shares 832
Undistributed net investment income 9
Accumulated net realized loss on investments (947)
Net unrealized appreciation of investments 149
-----------
TOTAL NET ASSETS - 100.0% $ 24,639
-----------
Net asset value, offering price, and redemption
price per share--Class Y $ 7.84
-----------
Net asset value and redemption price
per share--Class A $ 7.82
Maximum sales charge of 4.50% (1) 0.37
-----------
Offering price per share--Class A $ 8.19
-----------
Net asset value and offering price
per share--Class B (2) $ 7.65
-----------
* 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) Class B has a contingent deferred sales charge. For a description of a
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 advisor for this fund. See also the notes to the financial
statements.
(B) Other assets and liabilities representing greater than five percent of total
net assets include the following (000):
Cash collateral received for securities on loan $ 6,831
Payable upon return of securities on loan $ (6,831)
ADR--American Depository Receipt
Cl--Class
The accompanying notes are an integral part of the financial statements.
95 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
NET ASSETS SEPTEMBER 30, 1998
Real Estate Securities Fund
DESCRIPTION SHARES VALUE (000)
- -----------------------------------------------------------------------------
COMMON STOCKS - 93.1%
REAL ESTATE INVESTMENT TRUSTS - 93.1%
DIVERSIFIED - 11.5%
Amb Property 55,000 $ 1,420
Colonial Properties Trust 50,700 1,435
Crescent Operating* 2,500 17
Crescent Real Estate Equities 68,000 1,717
Glenborough Realty Trust 53,000 1,126
Reckson Service Industries* 12,000 28
Vornado Realty Trust 47,000 1,557
-----------
7,300
-----------
HEALTH CARE FACILITIES - 2.3%
Health Care 30,000 799
HRPT Properties Trust 40,000 645
-----------
1,444
-----------
HOTELS - 9.0%
Felcor Lodging Trust 42,000 1,021
Hospitality Properties Trust 41,000 1,220
Innkeepers USA Trust 60,000 712
LaSalle Hotel Properties 28,300 368
Patriot American Hospitality 65,000 829
Starwood Lodging 51,200 1,562
-----------
5,712
-----------
OFFICE/INDUSTRIAL - 27.7%
Arden Realty Group 50,000 1,116
Beacon Capital Partnership* (A) 33,750 675
Bedford Property Investors 34,000 612
Boston Properties 32,000 912
Brandywine Realty Trust 35,000 669
Cabot Industrial Trust 55,000 1,162
Duke Realty Investments 38,000 881
Equity Office Properties Trust 130,000 3,185
Great Lakes Real Estate 45,000 748
Liberty Property Trust 53,600 1,276
Mack Cali Realty 40,000 1,200
Prologis Trust 48,000 1,086
Reckson Associates 25,000 587
SL Green Realty 35,000 735
Spieker Properties 45,000 1,654
Weeks 35,000 1,046
-----------
17,544
-----------
RESIDENTIAL - 16.0%
Apartment Investment & Management 32,000 1,208
Archstone Community Trust 85,000 1,732
Avalon Bay Communities 20,000 681
Chateau Communities 32,000 894
Equity Residential Properties Trust 40,000 1,687
Gables Residential Trust 35,000 938
Home Properties of New York 32,000 840
Merry Land & Investment 55,000 1,231
Post Properties 22,100 852
Wellsford Real Properties* 6,100 57
-----------
10,120
-----------
Real Estate Securities Fund (continued)
DESCRIPTION SHARES/PAR (000) VALUE (000)
- -----------------------------------------------------------------------------
RETAIL - 18.3%
Bradley Real Estate 50,000 $ 1,050
CBL & Associates Properties 44,000 1,133
Chelsea GCA Realty 30,000 1,028
Excel Legacy Corp* 27,100 79
Federal Realty Investment Trust 55,000 1,244
JDN Realty 30,000 690
Macerich 25,000 672
Mills 42,000 977
New Plan Excel Realty Trust 54,000 1,259
Pennsylvania 50,000 1,025
Simon Property Group 70,000 2,082
Taubman Centers 26,000 364
-----------
11,603
-----------
SPECIALTY REAL ESTATE - 8.3%
Alexandria Real Estate Equities 30,000 814
Capital Automotive 65,000 760
CCA Prison Realty Trust 18,000 324
Correctional Properties Trust 14,700 263
Fortress Investment* (A) 35,000 630
Golf Trust of America 24,100 717
Storage Trust 27,600 649
Storage USA 31,000 1,073
-----------
5,230
-----------
TOTAL COMMON STOCKS
(Cost $61,628) 58,953
-----------
PREFERRED STOCKS - 1.0%
Bradley, Series A 16,338 380
Walden Residential Properties 10,000 234
-----------
TOTAL PREFERRED STOCKS
(Cost $527) 614
-----------
CONVERTIBLE BOND - 1.4%
Avatar Holdings, 31.4465 shares
7.000%, 04/01/05 $ 1,000 901
-----------
TOTAL CONVERTIBLE BOND
(Cost $1,011) 901
-----------
WARRANTS - 0.0%
Walden Residential Properties* 10,000 10
-----------
TOTAL WARRANTS
(Cost $12) 10
-----------
RELATED PARTY MONEY MARKET FUND - 3.3%
First American Prime
Obligations Fund (B) 2,100,292 2,100
-----------
TOTAL RELATED PARTY MONEY MARKET FUND
(Cost $2,100) 2,100
-----------
TOTAL INVESTMENTS - 98.8%
(Cost $65,278) 62,578
-----------
OTHER ASSETS AND LIABILITIES, NET - 1.2% (C) 750
-----------
96 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
SECTOR FUNDS
Real Estate Securities Fund (concluded)
DESCRIPTION VALUE (000)
- -----------------------------------------------------------------------------
NET ASSETS:
Portfolio Capital--Class Y
($.0001 par value--2 billion authorized)
based on 4,778,873 outstanding shares $ 61,593
Portfolio Capital--Class A
($.0001 par value--2 billion authorized)
based on 166,504 outstanding shares 2,170
Portfolio Capital--Class B
($.0001 par value--2 billion authorized)
based on 250,558 outstanding shares 3,268
Distribution in excess of net investment income (232)
Accumulated net realized loss on investments (771)
Net unrealized depreciation of investments (2,700)
-----------
TOTAL NET ASSETS - 100.0% $ 63,328
-----------
Net asset value, offering price, and redemption
price per share--Class Y $ 12.19
-----------
Net asset value and redemption price
per share--Class A $ 12.17
Maximum sales charge of 4.50% (1) 0.57
-----------
Offering price per share--Class A $ 12.74
-----------
Net asset value and offering price
per share--Class B (2) $ 12.08
-----------
* 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) Class B has a contingent deferred sales charge. For a description of a
possible redemption charge, see the notes to the financial statements.
(A) Security sold within the terms of a private placement memorandum, exempt
from registration under section 144A of the Securities Act of 1933, as
amended, and may be sold only to dealers in that program or other "qualified
institutional investors."
(B) This money market fund is advised by U.S. Bank National Association who also
serves as advisor for this fund. See also the notes to the financial
statements.
(C) Other assets and liabilities representing greater than five percent of total
net assets include the following (000):
Cash collateral received for securities on loan $ 8,445
Payable upon return of securities on loan $ (8,445)
Cl--Class
The accompanying notes are an integral part of the financial statements.
Technology Fund
DESCRIPTION SHARES VALUE (000)
- -----------------------------------------------------------------------------
COMMON STOCKS - 98.8%
BANKS - 0.3%
Telebanc Financial Group* 20,000 $ 322
-----------
COMMUNICATIONS EQUIPMENT - 18.9%
Ascend Communications* 100,000 4,550
General Instrument* 120,000 2,595
Nokia, ADR 70,000 5,491
Novatel* 175,000 612
Orckit Communications* 100,000 1,300
Pairgain Technologies* 50,000 406
Tekelec* 120,000 1,830
Tellabs* 85,000 3,384
Uniphase* 30,000 1,230
Viasat* 75,000 619
-----------
22,017
-----------
COMPUTER COMMUNICATIONS
EQUIPMENT - 14.4%
3Com* 100,000 3,006
Cisco Systems* 82,500 5,100
Concord Communications* 70,000 2,782
Entrust Technologies* 66,700 988
Micromuse* 75,000 1,341
Networks Associates* 69,150 2,455
Visual Networks* 40,000 1,090
-----------
16,762
-----------
COMPUTERS & SERVICES - 13.7%
Compaq Computer 100,000 3,162
Electronic Data Systems 100,000 3,319
Seagate Technology* 130,000 3,258
Sun Microsystems* 125,000 6,226
-----------
15,965
-----------
FINANCIAL SERVICES - 0.4%
Knight/Trimark Group, Cl A* 51,000 421
-----------
MISCELLANEOUS BUSINESS SERVICES - 3.3%
America Online 12,000 1,335
CSG Systems International* 5,000 221
Giga Information Group* 35,000 140
ISS Group* 50,000 1,594
VDI Media* 60,000 532
-----------
3,822
-----------
SEMI-CONDUCTORS/INSTRUMENTS - 11.3%
American Xtal Technology* 35,000 289
Atmi* 40,000 555
Linear Technology 30,000 1,500
Maxim Integrated Products* 45,000 1,254
Micron Technology* 90,000 2,739
Mips Technologies* 81,500 1,620
97 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
NET ASSETS SEPTEMBER 30, 1998
Techology Fund (continued)
DESCRIPTION SHARES VALUE (000)
- -----------------------------------------------------------------------------
Pericom Semiconductor* 120,000 $ 615
PMC-Sierra* 36,000 1,147
Transwitch* 50,000 747
Xilinx* 75,000 2,625
-----------
13,091
-----------
SERVICES-PREPACKAGED SOFTWARE - 17.0%
Electronic Arts* 60,000 2,632
HNC Software* 40,000 1,625
Intelligroup* 115,000 1,955
Legato Systems* 60,000 3,083
Mechanical Dynamics* 40,000 290
Meta Group* 60,000 1,961
Microsoft* 20,000 2,201
Peoplesoft* 95,000 3,099
Sapient* 85,000 2,901
-----------
19,747
-----------
SOFTWARE - 18.5%
Bea Systems* 90,000 1,946
BMC Software* 60,000 3,604
Cadence Design Systems* 60,000 1,534
Cats Software* 250,000 1,156
Clarus Corp* 175,000 618
Engineering Animation* 33,000 1,576
Hyperion Solutions* 75,000 1,627
Information Advantage* 145,000 671
Information Management Associates* 77,000 568
Information Management Resources* 60,000 1,485
J.D. Edwards & Company* 80,000 3,840
Manhattan Associates* 2,900 38
Seer Technologies* 76,000 57
Softworks* 200,000 1,000
Symix Systems* 95,000 1,734
-----------
21,454
-----------
TELEPHONES & TELECOMMUNICATION - 1.0%
Amdocs Ltd.* 100,000 1,131
Global Crossing* 5,000 104
-----------
1,235
-----------
TOTAL COMMON STOCKS
(Cost $102,315) 114,836
-----------
WARRANTS - 0.1%
Optisystems Warrants* 100,000 119
-----------
TOTAL WARRANTS
(Cost $71) 119
-----------
RELATED PARTY MONEY MARKET FUND - 3.4%
First American Prime
Obligations Fund (A) 3,907,844 3,908
-----------
TOTAL RELATED PARTY MONEY MARKET FUND
(Cost $3,908) 3,908
-----------
TOTAL INVESTMENTS - 102.3%
(Cost $106,294) 118,863
-----------
OTHER ASSETS AND LIABILITIES, NET - (2.3%) (B) (2,676)
-----------
Techology Fund (concluded)
DESCRIPTION VALUE (000)
- -----------------------------------------------------------------------------
NET ASSETS:
Portfolio Capital--Class Y
($.0001 par value--2 billion authorized)
based on 6,418,481 outstanding shares $ 85,127
Portfolio Capital--Class A
($.0001 par value--2 billion authorized)
based on 493,718 outstanding shares 7,141
Portfolio Capital--Class B
($.0001 par value--2 billion authorized)
based on 500,342 outstanding shares 8,074
Accumulated net investment loss (1)
Accumulated net realized gain on investments 3,277
Net unrealized appreciation of investments 12,569
-----------
TOTAL NET ASSETS - 100.0% $ 116,187
-----------
Net asset value, offering price, and redemption
price per share--Class Y $ 15.73
-----------
Net asset value and redemption price
per share--Class A $ 15.60
Maximum sales charge of 4.50% (1) 0.74
-----------
Offering price per share--Class A $ 16.34
-----------
Net asset value and offering price
per share--Class B (2) $ 14.99
-----------
* Non-income producing security
(1) The offer price is calculated by dividing the net asset value by 1 minus the
maximum sales charge of 4.50%.
(2) Class B has a contingent deferred sales charge. For a description of a
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 advisor for this fund. See the notes to the financial statements.
(B) Other assets and liabilities representing greater than five percent of total
net assets include the following (000):
Cash collateral received for securities on loan $ 49,884
Payable upon return of securities on loan $ (49,884)
ADR--American Depository Receipt
Cl--Class
The accompanying notes are an integral part of the financial statements.
98 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
OPERATIONS FOR THE PERIOD ENDED SEPTEMBER 30, 1998 IN THOUSANDS
SECTOR FUNDS
<TABLE>
<CAPTION>
HEALTH SCIENCES REAL ESTATE TECHNOLOGY
FUND SECURITIES FUND FUND
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 172+ $ 257+ $ 543+
Dividends 269 3,493 219
- --------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 441 3,750 762
========================================================================================================
EXPENSES:
Investment advisory fees 263 448 1,023
Less: Waiver of investment advisory fees (20) (80) (6)
Administrator fees 42 71 161
Transfer agent fees 37 41 73
Amortization of organizational costs -- 2 2
Custodian fees 11 19 44
Directors' fees 1 1 2
Registration fees -- 4 2
Professional fees 1 2 5
Printing 2 3 6
Distribution fees - Class A 5 6 25
Distribution fees - Class B 7 35 85
Other 1 1 3
- --------------------------------------------------------------------------------------------------------
TOTAL NET EXPENSES 350 553 1,425
========================================================================================================
Investment income (loss) - net 91 3,197 (663)
- --------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAINS (LOSSES)
ON INVESTMENTS - NET:
Net realized gain (loss) on investments (247) (155) 6,144
Net change in unrealized depreciation of investments (8,895) (11,911) (30,511)
- --------------------------------------------------------------------------------------------------------
NET LOSS ON INVESTMENTS (9,142) (12,066) (24,367)
========================================================================================================
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ (9,051) $ (8,869) $(25,030)
========================================================================================================
</TABLE>
+Includes income from securities lending program. See the Notes to the
Financial Statements for additional information.
The accompanying notes are an integral part of the financial statements.
99 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
CHANGES IN NET ASSETS IN THOUSANDS
<TABLE>
<CAPTION>
HEALTH
SCIENCES FUND
- -----------------------------------------------------------------------------------------------
10/1/97 10/1/96
to to
9/30/98 9/30/97
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS:
Investment income (loss) - net $ 91 $ 15
Net realized gain (loss) on investments (247) 4,727
Net change in unrealized appreciation (depreciation) of investments (8,895) 4,407
- -----------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations (9,051) 9,149
- -----------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM :
Investment income - net:
Class Y (82) (34)
Class A (1) --
Class B -- --
Net realized gain on investments:
Class Y (5,049) (128)
Class A (287) (5)
Class B (74) (3)
Tax return of capital:
Class Y -- --
Class A -- --
Class B -- --
- -----------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (5,493) (170)
===============================================================================================
CAPITAL SHARE TRANSACTIONS(1):
Class Y
Proceeds from sales 6,410 2,588
Shares issued in connection with the acquisition
of Common Trust Fund Assets -- 26,179
Reinvestment of distributions 592 38
Payments for redemptions (12,987) (8,779)
- -----------------------------------------------------------------------------------------------
Increase (decrease) in net assets from Class Y transactions (5,985) 20,026
- -----------------------------------------------------------------------------------------------
Class A:
Proceeds from sales 2,193 471
Reinvestment of distributions 99 6
Payments for redemptions (146) (414)
- -----------------------------------------------------------------------------------------------
Increase (decrease) in net assets from Class A
transactions 2,146 63
- -----------------------------------------------------------------------------------------------
Class B:
Proceeds from sales 405 247
Reinvestment of distributions 74 3
Payments for redemptions (65) (105)
- -----------------------------------------------------------------------------------------------
Increase in net assets from Class B transactions 414 145
- -----------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital share transactions (3,425) 20,234
- -----------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (17,969) 29,213
NET ASSETS AT BEGINNING OF PERIOD 42,608 13,395
===============================================================================================
NET ASSETS AT END OF PERIOD (2) $ 24,639 $42,608
===============================================================================================
(1)CAPITAL SHARE TRANSACTIONS:
Class Y
Shares issued 600 253
Shares issued in connection with the acquisition
of Common Trust Fund Assets -- 2,753
Shares issued in lieu of cash distributions 61 4
Shares redeemed (1,273) (860)
- -----------------------------------------------------------------------------------------------
TOTAL CLASS Y TRANSACTIONS (612) 2,150
===============================================================================================
Class A:
Shares issued 193 45
Shares issued in lieu of cash distributions 10 1
Shares redeemed (15) (40)
- -----------------------------------------------------------------------------------------------
TOTAL CLASS A TRANSACTIONS 188 6
===============================================================================================
Class B:
Shares issued 40 24
Shares issued in lieu of cash distributions 8 --
Shares redeemed (7) (10)
- -----------------------------------------------------------------------------------------------
TOTAL CLASS B TRANSACTIONS 41 14
===============================================================================================
NET INCREASE (DECREASE) IN CAPITAL SHARES (383) 2,170
===============================================================================================
[WIDE TABLE CONTINUED FROM ABOVE]
<CAPTION>
REAL ESTATE TECHNOLOGY
SECURITIES FUND FUND
- --------------------------------------------------------------------------------------------------------------------------------
10/1/97 10/1/96 10/1/97 10/1/96
to to to to
9/30/98 9/30/97 9/30/98 9/30/97
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Investment income (loss) - net $ 3,197 $ 1,396 $ (663) $ (583)
Net realized gain (loss) on investments (155) 822 6,144 9,979
Net change in unrealized appreciation (depreciation) of investments (11,911) 7,510 (30,511) 15,172
- --------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations (8,869) 9,728 (25,030) 24,568
- --------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM :
Investment income - net:
Class Y (3,266)(A) (1,132) -- --
Class A (113)(A) (46) -- --
Class B (150)(A) (52) -- --
Net realized gain on investments:
Class Y (1,126) (433) (8,701) (6,933)
Class A (52) (21) (492) (379)
Class B (78) (32) (562) (555)
Tax return of capital:
Class Y (17) (9) -- --
Class A (1) -- -- --
Class B (1) (1) -- --
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (4,804) (1,726) (9,755) (7,867)
================================================================================================================================
CAPITAL SHARE TRANSACTIONS(1):
Class Y
Proceeds from sales 46,805 18,012 48,376 51,459
Shares issued in connection with the acquisition
of Common Trust Fund Assets -- -- -- 67,009
Reinvestment of distributions 954 79 1,656 1,962
Payments for redemptions (17,466) (2,773) (66,206) (51,305)
- --------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from Class Y transactions 30,293 15,318 (16,174) 69,125
- --------------------------------------------------------------------------------------------------------------------------------
Class A:
Proceeds from sales 990 1,850 129,853 82,163
Reinvestment of distributions 137 51 341 354
Payments for redemptions (753) (306) (126,833) (82,711)
- --------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from Class A
transactions 374 1,595 3,361 (194)
- --------------------------------------------------------------------------------------------------------------------------------
Class B:
Proceeds from sales 820 2,731 1,974 3,349
Reinvestment of distributions 205 76 551 550
Payments for redemptions (615) (182) (1,426) (1,127)
- --------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from Class B transactions 410 2,625 1,099 2,772
- --------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital share transactions 31,077 19,538 (11,714) 71,703
- --------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets 17,404 27,540 (46,499) 88,404
NET ASSETS AT BEGINNING OF PERIOD 45,924 18,384 162,686 74,282
================================================================================================================================
NET ASSETS AT END OF PERIOD (2) $ 63,328 $45,924 $ 116,187 $ 162,686
================================================================================================================================
(1)CAPITAL SHARE TRANSACTIONS:
Class Y
Shares issued 3,327 1,356 2,692 3,046
Shares issued in connection with the acquisition
of Common Trust Fund Assets -- -- -- 3,862
Shares issued in lieu of cash distributions 69 6 107 116
Shares redeemed (1,318) (213) (3,708) (3,046)
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL CLASS Y TRANSACTIONS 2,078 1,149 (909) 3,978
================================================================================================================================
Class A:
Shares issued 71 140 7,345 4,834
Shares issued in lieu of cash distributions 10 4 22 21
Shares redeemed (55) (23) (7,148) (4,829)
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL CLASS A TRANSACTIONS 26 121 219 26
================================================================================================================================
Class B:
Shares issued 59 208 114 209
Shares issued in lieu of cash distributions 15 6 37 33
Shares redeemed (46) (14) (83) (69)
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL CLASS B TRANSACTIONS 28 200 68 173
================================================================================================================================
NET INCREASE (DECREASE) IN CAPITAL SHARES 2,132 1,470 (622) 4,177
================================================================================================================================
</TABLE>
(2)Includes undistributed net investment income (excess of distributions) of $9
and $1 for Health Sciences Fund, $(232) and $0 for Real Estate Securities
Fund and accumulated net investment loss of $(1) and $(4) for Technology
Fund at September 30, 1998 and September 30, 1997, respectively.
(A)Includes a distribution in excess of net investment income.
100 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
SECTOR FUNDS
(This page has been left blank intentionally.)
101 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
FINANCIAL HIGHLIGHTS FOR THE PERIOD ENDED SEPTEMBER 30, 1998
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
REALIZED AND
NET ASSET UNREALIZED DIVIDENDS DISTRIBUTIONS
VALUE NET GAINS OR FROM NET DISTRIBUTIONS FROM
BEGINNING INVESTMENT (LOSSES) ON INVESTMENT FROM RETURN OF
OF PERIOD INCOME INVESTMENTS INCOME CAPITAL GAINS CAPITAL
- -------------------------------------------------------------------------------------------------------------
HEALTH SCIENCES FUND
<S> <C> <C> <C> <C> <C> <C>
Class Y
1998 $ 12.08 $ 0.03 $ (2.78) $ (0.03) $ (1.46)(B) --
1997 9.87 (0.01) 2.33 (0.01) (0.10) --
1996(1) 10.00 0.03 (0.15) (0.01) -- --
Class A
1998 $ 12.05 $ 0.01 $ (2.78) $ -- $ (1.46)(B) --
1997 9.86 (0.01) 2.30 -- (0.10) --
1996(1) 10.00 0.01 (0.14) (0.01) -- --
Class B
1998 $ 11.90 $ (0.02) $ (2.77) $ -- $ (1.46)(B) --
1997 9.81 (0.01) 2.20 -- (0.10) --
1996(1) 10.00 (0.02) (0.16) (0.01) -- --
- -------------------------------------------------------------------------------------------------------------
REAL ESTATE SECURITIES FUND
Class Y
1998 $ 14.99 $ 0.67 $ (2.40) $ (0.74) $ (0.33) $ --
1997 11.53 0.74 3.43 (0.67) (0.03) (0.01)
1996 10.37 0.57 1.29 (0.53) -- (0.17)
1995(2) 10.00 0.13 0.39 (0.11) -- (0.04)
Class A
1998 $ 14.97 $ 0.63 $ (2.40) $ (0.70) $ (0.33) $ --
1997 11.52 0.72 3.42 (0.65) (0.03) (0.01)
1996 10.38 0.52 1.30 (0.51) -- (0.17)
1995(3) 10.37 -- 0.01 -- -- --
Class B
1998 $ 14.86 $ 0.52 $ (2.37) $ (0.60) $ (0.33) $ --
1997 11.46 0.63 3.38 (0.57) (0.03) (0.01)
1996 10.37 0.44 1.27 (0.45) -- (0.17)
1995(3) 10.37 -- -- -- -- --
- -------------------------------------------------------------------------------------------------------------
TECHNOLOGY FUND
Class Y
1998 $ 20.29 $ (0.08) $ (3.27) $ -- $ (1.21) --
1997 19.29 (0.06) 3.12 -- (2.06) --
1996 18.24 (0.04) 2.98 -- (1.89) --
1995 11.19 (0.03) 7.31 -- (0.23) --
1994(4) 10.00 (0.01) 1.20 -- -- --
Class A
1998 $ 20.20 $ (0.13) $ (3.26) $ -- $ (1.21) --
1997 19.25 (0.11) 3.12 -- (2.06) --
1996 18.24 (0.05) 2.95 -- (1.89) --
1995 11.19 (0.03) 7.31 -- (0.23) --
1994(4) 10.00 (0.01) 1.20 -- -- --
Class B
1998 $ 19.58 $ (0.24) $ (3.14) $ -- $ (1.21) --
1997 18.85 (0.20) 2.99 -- (2.06) --
1996 18.02 (0.14) 2.86 -- (1.89) --
1995 11.17 (0.04) 7.12 -- (0.23) --
1994(5) 9.85 (0.02) 1.34 -- -- --
- -------------------------------------------------------------------------------------------------------------
</TABLE>
+ Returns are for the period indicated and have not been annualized.
(A)Excluding sales charges.
(B)Includes distributions in excess of net investment income.
(1)Commenced operations on January 31, 1996. All ratios for the period have
been annualized.
(2)Commenced operations on June 30, 1995. All ratios for the period have been
annualized.
(3)Class A and Class B shares have been offered since September 29, 1995. All
ratios for the period have been annualized.
(4)Commenced operations April 4, 1994. All ratios for the period have been
annualized.
(5)Class B shares have been offered since August 15, 1994. All ratios for the
period have been annualized.
102 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
SECTOR FUNDS
<TABLE>
<CAPTION>
RATIO OF
RATIO OF NET EXPENSES TO
NET ASSET RATIO OF INVESTMENT AVERAGE
VALUE NET ASSETS EXPENSES TO INCOME TO NET ASSETS PORTFOLIO
END OF TOTAL END OF AVERAGE AVERAGE (EXCLUDING TURNOVER
PERIOD RETURN (A) PERIOD (000) NET ASSETS NET ASSETS WAIVERS) RATE
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 7.84 (25.10)% $ 21,977 0.90% 0.27% 0.95% 45%
12.08 23.89 41,243 0.90 0.06 1.04 54
9.87 (1.20)+ 12,485 0.90 0.43 1.87 19
$ 7.82 (25.24)% $ 2,017 1.15% 0.04% 1.20% 45%
12.05 23.60 849 1.15 (0.20) 1.29 54
9.86 (1.32)+ 629 1.15 0.18 2.12 19
$ 7.65 (25.80)% $ 645 1.90% (0.73)% 1.95% 45%
11.90 22.69 516 1.90 (0.94) 2.04 54
9.81 (1.86)+ 281 1.90 (0.61) 2.87 19
- ---------------------------------------------------------------------------------------------------------------
$ 12.19 (12.18)% $ 58,275 0.80% 5.06% 0.93% 36%
14.99 37.07 40,501 0.80 4.57 1.05 14
11.53 18.53 17,895 0.80 5.13 1.51 8
10.37 5.19+ 5,756 0.80 6.01 2.34 0
$ 12.17 (12.42)% $ 2,027 1.05% 4.71% 1.18% 36%
14.97 36.77 2,105 1.05 4.46 1.30 14
11.52 18.17 226 1.05 4.36 1.76 8
10.38 0.00+ 1 1.05 0.00 2.59 0
$ 12.08 (13.04)% $ 3,026 1.80% 3.98% 1.93% 36%
14.86 35.77 3,318 1.80 3.61 2.00 14
11.46 17.00 263 1.80 4.29 2.51 8
10.37 0.00+ 1 1.80 0.00 3.34 0
- ---------------------------------------------------------------------------------------------------------------
$ 15.73 (16.41)% $100,985 0.90% (0.38)% 0.90% 124%
20.29 17.95 148,659 0.90 (0.41) 0.92 150
19.29 18.85 64,602 0.90 (0.60) 1.01 119
18.24 66.22 29,272 0.88 (0.35) 1.30 74
11.19 11.90+ 6,491 0.80 (0.21) 3.12 43
$ 15.60 (16.69)% $ 7,703 1.15% (0.60)% 1.15% 124%
20.20 17.71 5,564 1.15 (0.59) 1.17 150
19.25 18.60 4,799 1.15 (0.85) 1.26 119
18.24 66.22 1,464 1.13 (0.61) 1.55 74
11.19 11.90+ 61 0.80 (0.21) 3.37 43
$ 14.99 (17.21)% $ 7,499 1.90% (1.38)% 1.90% 124%
19.58 16.82 8,463 1.90 (1.41) 1.92 150
18.85 17.75 4,881 1.90 (1.60) 2.01 119
18.02 64.52 2,031 1.88 (1.41) 2.30 74
11.17 13.40+ 2 1.80 (1.44) 4.12 43
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
103 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
NOTES TO
FINANCIAL STATEMENTS SEPTEMBER 30, 1998
1 ORGANIZATION
The First American Balanced Fund, Equity Income Fund, Equity Index Fund,
Large Cap Value Fund (formerly Stock Fund), Large Cap Growth Fund
(formerly Diversified Growth Fund), Mid Cap Growth Fund, Mid Cap Value
Fund (formerly Special Equity Fund), Regional Equity Fund, Small Cap
Value Fund, Small Cap Growth Fund (formerly Emerging Growth Fund), Micro
Cap Value Fund, Emerging Markets Fund, International Fund, International
Index Fund, Health Sciences Fund, Real Estate Securities Fund, and
Technology Fund (each "Fund" collectively, the "Funds") are mutual funds
offered by First American Investment Funds, Inc. (FAIF). Other funds
that are offered by FAIF but are not included in this report are First
American Adjustable Rate Mortgage Securities Fund, Limited Term Income
Fund, Intermediate Term Income Fund, Intermediate Government Bond Fund,
Fixed Income Fund, California Intermediate Tax Free Fund, Colorado
Intermediate Tax Free Fund, Intermediate Tax Free Fund, Minnesota
Intermediate Tax Free Fund (formerly Minnesota Insured Intermediate Tax
Free Fund), Minnesota Tax Free Fund, Tax Free Fund, and Oregon
Intermediate Tax Free Fund. FAIF is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment
company. FAIF's articles of incorporation permit the Board of Directors
to create additional funds in the future.
FAIF offers Class A, Class B and Class Y (formerly 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 Y
shares have no sales charge and are offered only to qualifying
institutional investors.
The Funds' prospectuses provides a description of each Fund's investment
objectives, policies and strategies. All classes of shares in 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 - Security valuations for FAIF Fund 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. Securities for which
prices are not available from an independent pricing service but where
an active market exists are valued using market quotations obtained from
one or more dealers that make markets in the securities or from a
widely-used quotation system. 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
104 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
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 - The Funds record 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 - Balanced Fund, Equity Income Fund,
Equity Index Fund, Large Cap Value Fund, Large Cap Growth Fund, Mid Cap
Growth and Mid Cap Value Fund declare and pay income dividends monthly.
Real Estate Securities Fund, Regional Equity Fund, Small Cap Value Fund,
Small Cap Growth Fund, Micro Cap Value Fund, International Index Fund,
Health Sciences Fund and Technology Fund declare and pay income
dividends quarterly.
A portion of the quarterly distributions of the Real Estate Securities
Fund may be a return of capital. Emerging Markets Fund and International
Fund declare and pay dividends annually. Any net realized capital gains
on sales of securities for a fund are distributed to shareholders at
least annually.
FEDERAL TAXES - It is each Fund's intention to continue to qualify as a
regulated investment company and 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. These differences are primarily
due to wash sales, foreign currency gains and losses, the
"market-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.
105 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
NOTES TO
FINANCIAL STATEMENTS SEPTEMBER 30, 1998
On the Statement of Net Assets the following adjustments were made
(000):
<TABLE>
<CAPTION>
ACCUMULATED UNDISTRIBUTED
NET REALIZED NET INVESTMENT
FUND GAIN (LOSS) INCOME PAID-IN CAPITAL
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Equity Income -- 2 (2)
Large Cap Growth -- 1 (1)
Mid Cap Growth (488) 1,686 (1,198)
Small Cap Growth 1 196 (197)
Emerging Markets 66 66 (132)
International 12,199 (12,199) --
International Index 170 (49) (121)
Real Estate Securities 242 99 (341)
Technology (826) 666 160
- ------------------------------------------------------------------------------------
</TABLE>
FUTURES TRANSACTIONS - In order to gain exposure to or protect against
changes in the market, certain Funds may enter into S&P Stock Index
futures contracts and other stock futures contracts.
Upon entering into a futures contract, the fund is required to deposit
cash or pledge U.S. government securities in an amount equal to five
percent of the purchase price indicated in the futures contract (initial
margin). Subsequent payments, which are dependent on the daily
fluctuations in the value of the underlying security or securities, are
made or received by the fund each day (daily variation margin) and are
recorded as unrealized gains or losses until the contracts are closed.
When the contracts are closed, the fund records a realized gain or loss
equal to the difference between the proceeds from (or cost of) the
closing transaction and the fund's basis in the contracts.
FOREIGN CURRENCY TRANSLATION - The books and records of the Emerging
Markets Fund, International Index Fund and International 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 Emerging Markets Fund, International Index Fund and International
Fund do 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 Emerging Markets Fund, International Index Fund and International
Fund report 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 Emerging Markets Fund,
International Fund and International Index Fund may enter 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 Emerging Markets Fund, International
Fund and 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 Emerging Markets Fund, International
Index Fund and International Fund realizes gains or losses at the time
the forward contracts are extinguished. Unrealized gains or losses on
outstanding
106 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
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.
EXPENSES - Expenses that are directly related to one of the Funds are
charged directly to that Fund. Other operating expenses are prorated to
the Funds on the basis of relative net assets. Class specific expenses,
such as the 12b-1 fees, are borne by that class. Income, other expenses
and realized and unrealized gains and losses of a Fund are allocated to
the respective class on the basis of the relative net assets each day.
OPTIONS TRANSACTIONS - In order to hedge against market risks certain
Funds may write covered call options and purchase put options on stock
indices. Options are valued daily based upon the last sales price on the
principal exchange on which the option is traded, and the fund records
the unrealized gain or loss. A fund will realize a gain or loss upon the
expiration or closing of the options contract.
SECURITIES LENDING - Each Fund may lend up to one-third of the value of
its total assets to broker-dealers, banks or other institutional
borrowers of securities in order to earn additional income. Each Fund's
policy is to maintain collateral in the form of cash, United States
Government securities or other high grade debt obligations equal to at
least 100% of the value of securities loaned. The collateral is then
marked to market daily until the securities are returned.
USE OF ESTIMATES IN PREPARATION OF FINANCIAL STATEMENTS - The
preparation of financial statements, in conformity with generally
accepted accounting principles, requires management to make estimates
and assumptions that affect the reported amount of net assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported results of operations
during the reporting period. Actual results could differ from those
estimates.
3 FEES AND EXPENSES
Pursuant to an investment advisory agreement (the Agreement), U.S. Bank
National Association (the Advisor) manages each Fund's assets and
furnishes related office facilities, equipment, research and personnel.
The Agreement requires each Fund to pay the Advisor a monthly fee based
upon average daily net assets. The fee for each Fund, other than the
International Fund and Emerging Markets Fund, is equal to an annual rate
of .70% of the average daily net assets. Marvin & Palmer Associates,
Inc., serves as Sub-Advisor to the International Fund and Emerging
Markets Fund pursuant to a Sub-Advisory Agreement with the Advisor. The
fee for the International Fund and Emerging Markets Fund is equal to an
annual rate of 1.25% of average daily net assets.
Funds may invest in First American Funds, Inc. (FAF), 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 Advisor reimburses each FAIF fund an amount equal to
the investment advisory fee earned by FAF related to such investments.
Through a separate contractual agreement, U.S. Bank National
Association, an affiliate of the Advisor, serves as the Funds'
custodian. In the Statement of Operations, expenses paid indirectly
represent a reduction of custodian fees for earning on cash balances.
SEI Investments Distribution Co. (SIDCO) and SEI Investments Management
Corporation, (SIMC) serve as distributor and administrator of the Funds,
respectively. Under the distribution plan, each of the Funds pay SIDCO a
monthly distribution fee of .25% of
107 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
NOTES TO
Financial Statements SEPTEMBER 30, 1998
each Fund's average daily net assets of the Class A shares and 1.00% of
the Class B shares which may be used by SIDCO to provide compensation
for sales support and distribution activities. No distribution fees are
paid by Class Y shares. SIMC provides administrative services, including
certain accounting, legal and shareholder services, at an annual rate
.12% of each Fund's average daily net assets with a minimum annual fee
of $50,000 per fund. To the extent that the aggregate net assets of the
First American Family of Funds exceed $8 billion, each Fund is reduced
to .105% for their relative shares of the excess net assets. The Mid Cap
Growth and Emerging Markets Fund are eligible for the $50,000 minimum.
U.S. Bank assists the Administrator and provides sub-administration
services for the Funds. For these services, the Administrator
compensates the sub-administrator at an annual rate of up to 0.05% of
each Fund's average daily net assets. Under the agreement SIMC paid U.S.
Bank N.A. $1,151,000 in aggregate for the period ended September 30,
1998 for the funds included in this annual report. The fees for each
fund for the period were approximately 0.022% of average daily net
assets.
In addition to the investment advisory and management fees, custodian
fees, distribution fees, administrator and transfer agent fees, each
Fund is responsible for paying most other operating expenses including
organization costs, fees and expenses of outside directors, registration
fees, printing shareholder reports, legal, auditing, insurance and other
miscellaneous expenses.
For the period ended September 30, 1998, legal fees and expenses were
paid to a law firm of which the Secretary of the Funds is a partner.
DST Systems, Inc. provides transfer agent services for the Funds.
Effective October 1, 1998, FAIF has appointed U.S. Bank as servicing
agent to perform certain transfer agent and dividend disbursing agent
services with respect to the Class A Shares and the Class B Shares of
the Funds held through accounts at U.S. Bank and its affiliates.
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 period ended September 30, 1998, sales charges retained by SIDCO
for distributing the First American Family of Funds' shares were
approximately $291,000.
FORMER PIPER FUND AGREEMENTS - From October 1, 1997 to July 31, 1998 the
Small Cap Growth Fund (formerly Piper Small Company Growth Fund), and
from October 1, 1997 to August 7, 1998 for Emerging Markets Fund
(formerly Emerging Markets Growth Fund), and Mid Cap Growth Fund
(formerly Piper Emerging Growth Fund) had an investment management
agreement with Piper Capital Management Incorporated
108 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
(Piper Capital) under which Piper Capital managed the Fund's assets and
furnished related office facilities, equipment, research and personnel.
The agreement required that the Fund pay Piper Capital a monthly fee
based on average daily net assets. The fee for the Small Cap Growth Fund
and Mid Cap Growth Fund was equal to an annual rate of 0.75% of the first
$100 million in net assets, 0.65% of the next $200 million and decreasing
percentages to 0.50% of net assets in excess of $500 million. Emerging
Markets Fund fee was 1.00% of the fund's average daily net assets on the
first $500 million in net assets and 0.30% of net assets in excess of
$500 million.
From October 1, 1997 to July 31, 1998 for Small Cap Growth Fund and
August 7, 1998 for Emerging Markets Fund and Mid Cap Growth Fund paid
distribution and service fees to Piper Jaffray. The fees were accrued
daily and paid quarterly at a rate of 0.50% of average daily net assets
on Class A shares and 1.00% on Class B shares. A portion of these fees
were waived for the period ended July 31, 1998 for Class A shares. The
net fees as a percentage of average net assets were 0.34% for Mid Cap
Growth and Small Cap Growth Fund, and 0.33% for Emerging Markets Fund.
Piper Jaffray and Piper Trust Company (Piper Trust) performed various
transfer and dividend disbursing agent services for accounts held at the
respective company. The fees were paid monthly to Piper Jaffray and
Piper Trust for providing these services, were equal to an annual rate
of $6.00 per active shareholder account and $1.60 per closed account.
From October 1, 1997 to July 31, 1998 for Small Cap Growth Fund and
August 7, 1998 for Emerging Markets Fund and Mid Cap Growth Fund paid
$27,000, $13,000, and $117,000 respectively under this agreement.
Investors Fiduciary Trust Company served as custodian, transfer and
dividend disbursing agent and accounting agent for the Small Cap Growth
Fund through July 31, 1998 for Emerging Markets Fund and Mid Cap Growth
Fund through August 7, 1998.
Effective August 1, 1998, all FAIF agreements were adopted for the Small
Cap Growth Fund. For Emerging Markets Fund and Mid Cap Growth Fund all
FAIF agreements were adopted as of August 8, 1998.
109 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
NOTES TO
FINANCIAL STATEMENTS SEPTEMBER 30, 1998
4 INVESTMENT SECURITY TRANSACTIONS
During the period ended September 30, 1998, purchases of securities and
proceeds from sales of securities, other than temporary investments in
short-term securities, were as follows (000):
<TABLE>
<CAPTION>
U.S. GOVERNMENT OTHER INVESTMENT
SECURITIES SECURITIES
- ----------------------------------------------------------------------------------------
PURCHASES SALES PURCHASES SALES
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balanced Fund 278,949 300,064 295,119 240,379
Equity Income Fund -- -- 49,468 71,501
Equity Index Fund -- -- 199,639 94,597
Large Cap Growth Fund -- -- 290,426 296,501
Large Cap Value Fund -- -- 1,060,506 933,570
Mid Cap Growth Fund -- -- 136,201 116,279
Mid Cap Value Fund -- -- 944,970 828,444
Micro Cap Value Fund -- -- 30,218 80,980
Regional Equity Fund -- -- 54,879 78,778
Small Cap Growth Fund -- -- 43,840 46,469
Small Cap Value Fund -- -- 95,498 110,394
Emerging Markets Fund -- -- 14,807 13,645
International Fund -- -- 455,179 311,181
International Index Fund -- -- 95 47,753
Health Sciences Fund -- -- 15,291 23,195
Real Estate Securities Fund -- -- 51,376 21,928
Technology Fund -- -- 169,485 189,671
- ----------------------------------------------------------------------------------------
</TABLE>
As of September 30, 1998, the following funds have capital loss
carryforwards:
FUND AMOUNT EXPIRATION DATE
------------------------------------------------------
Small Cap Value $4,083 2006
Emerging Markets 4,957 2001-2003
International 1,373 2003
Real Estate Securities 771 2006
------------------------------------------------------
The amount for the Real Estate Securities Fund is an estimate because
its tax year end is December 31.
The Small Cap Growth Fund, Emerging Markets Fund and Health Sciences
Fund incurred losses in the amount of $2,034,000, $4,081,000 and
$1,059,000 from November 1, 1997 to September 30, 1998. As permitted by
tax regulations, the funds intend to elect to defer and treat these
losses as arising in the fiscal year ending September 30, 1999.
The International Fund's capital loss carryover was acquired from the
Piper Pacific- European Growth Fund. The utilization of the capital loss
carryover was limited to $178,000 for fiscal 1998 and $1,065,000 for
subsequent years pursuant to Section 383 of the Internal Revenue Code.
110 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
At September 30, 1998, 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 September 30, 1998
is as follows (000):
<TABLE>
<CAPTION>
AGGREGATE GROSS AGGREGATE GROSS
APPRECIATION DEPRECIATION NET
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balanced Fund $ 58,873 $ (29,212) $ 29,661
Equity Income Fund 135,661 (11,436) 124,225
Equity Index Fund 372,265 (44,043) 328,222
Large Cap Growth Fund 294,576 (49,893) 244,683
Large Cap Value Fund 232,041 (140,085) 91,956
Mid Cap Growth Fund 72,640 (15,479) 57,161
Mid Cap Value Fund 19,903 (208,017) (188,114)
Micro Cap Value Fund 38,422 (27,376) 11,046
Regional Equity Fund 68,759 (41,012) 27,747
Small Cap Growth Fund 19,721 (20,424) (703)
Small Cap Value Fund 98,797 (75,242) 23,555
Emerging Markets Fund 805 (2,241) (1,436)
International Fund 44,489 (16,539) 27,950
International Index Fund 26,358 (25,848) 510
Health Sciences Fund 4,030 (3,881) 149
Real Estate Securities Fund 4,013 (6,713) (2,700)
Technology Fund 22,226 (9,657) 12,569
- ------------------------------------------------------------------------------------------
</TABLE>
5 DEFERRED ORGANIZATIONAL COSTS
Organizational costs have been capitalized by the Funds and are being
amortized over 60 months commencing with operations on a straight-line
basis.
6 FORWARD FOREIGN CURRENCY CONTRACTS
The International Fund enters into forward foreign currency exchange
contracts as hedges against portfolio positions and in connection with
portfolio purchases and sales of securities denominated in a foreign
currency. Such contracts, which protect the value of the fund's
investment securities against a decline in the value of the hedged
currency, do not eliminate fluctuations in the underlying prices of the
securities. They simply establish an exchange rate at a future date.
Although such contracts tend to minimize the risk of loss due to a
decline in the value of a hedged currency, at the same time they tend to
limit any potential gain that might be realized should the value of such
foreign currency increase.
111 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
NOTES TO
FINANCIAL STATEMENTS SEPTEMBER 30, 1998
The following forward foreign currency contracts were outstanding at
September 30, 1998 for the International Fund.
<TABLE>
<CAPTION>
SETTLEMENT CONTRACTS TO IN EXCHANGE NET UNREALIZED/APPRECIATION
DATES DELIVER (000) FOR (000) (DEPRECIATION) (000)
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FOREIGN CURRENCY SALES:
10/1/98 IT 2,575,356 $1,551 $ (5)
10/1/98 DM 1,484 884 (9)
10/2/98 DM 2,898 1,729 (6)
------ -----
$4,164 $ (20)
------ -----
FOREIGN CURRENCY PURCHASES:
10/30/98 FF 5,246 $ 937 $ 2
10/30/98 FF 2,527 450 1
------ -----
1,387 $ 3
-----
CURRENCY LEGEND
---------------
DM German Mark
FF French Franc $ (17)
IT Italian Lira =====
</TABLE>
7 FUTURES CONTRACTS
The Equity Index Fund's investment in S&P 500 Index futures contracts is
designed to maintain sufficient liquidity to meet redemption requests
and to increase the level of fund assets devoted to replicating the
composition of the S&P 500 Index while reducing transaction costs. Risks
of entering into futures contracts, in general, include the possibility
that there will not be a perfect price correlation between the futures
contracts and the underlying securities. Second, it is possible that a
lack of liquidity for futures contracts could exist in the secondary
market, resulting in an inability to close a futures position prior to
its maturity date. Third, the purchase of a futures contract involves
the risk that a fund could lose more than the original margin deposit
required to initiate a futures transaction. Unrealized gains or losses
on outstanding positions in futures contracts held at the close of the
year will be recognized as capital gains or losses for Federal income
tax purposes. At September 30, 1998, open long S&P 500 Index futures
contracts were as follows:
MARKET VALUE
NUMBER OF COVERED BY SETTLEMENT UNREALIZED
CONTRACTS CONTRACTS (000) MONTH GAIN/(LOSS) (000)
-------------------------------------------------------------------
71 $18,212 Dec. 98 $ (72)
50 12,825 Dec. 98 (51)
3 769 Dec. 98 (20)
2 513 Dec. 98 (19)
3 769 Dec. 98 (18)
1 257 Dec. 98 (9)
1 257 Dec. 98 (6)
-------------------------------------------------------------------
$ (195)
-------------------------------------------------------------------
8 OPTIONS TRANSACTIONS
The Mid Cap Value Fund wrote covered call options and pur chased put
options during the period. These transactions, which were undertaken
principally to hedge against market risk, entail certain risks. These
risks include the risk of imperfect correlation between movements of the
index covered by the option and movement in the price of the fund's
securities, and the risk of limited liquidity in the event the fund
seeks to close out an options position before expiration by entering
into an offsetting transaction. These transactions give the holder the
right to receive upon exercise of the option a defined
112 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
amount of cash if the closing value of the index upon which the option is
based is greater than, in the case of a call, or less than, in the case
of a put, the exercise price of the option. Written options activity for
Mid Cap Value Fund for the year ended September 30, 1998 is as follows:
CALL OPTIONS (000)
---------------------------
NUMBER OF AMOUNT OF
OPTIONS PREMIUMS
---------------------------------------------------------
Options outstanding at
September 30, 1997 -- $ --
Options written 17,300 $ 68,547
Options expired or closed (17,300) $ (68,547)
---------------------------
Options outstanding at
September 30, 1998 -- $ --
---------------------------------------------------------
The fund realized losses of approximately $1,969,000 on written options
during the period. The fund also realized gains of $4,950,000 on options
purchased during the period.
9 SECURITIES LENDING TRANSACTIONS
In order to generate additional income, certain Funds may lend portfolio
securities representing up to one-third of the value of total assets
(which includes collateral received for securities on loan) to broker
dealers, banks, or other institutional borrowers of securities. As with
other extensions of credit, there may be risks of delay in recovery of
the securities or even loss of rights in the collateral should the
borrower of the security fail financially. The market value of the
securities on loan at September 30, 1998, the collateral purchased with
cash received and held at September 30, 1998 with respect to such loans,
and income generated during the period from the program were as follows
(000):
MARKET VALUE OF INCOME RECEIVED
FUND LOANED SECURITIES FROM SECURITIES LENDING
---------------------------------------------------------------------
Balanced $188,327 $147
Equity Income 83,019 73
Equity Index 422,648 259
Large Cap Growth 265,325 190
Large Cap Value 416,826 301
Mid Cap Value 96,337 353
Micro Cap Value 8,952 77
Regional Equity 15,065 59
Small Cap Growth 28,423 15
Small Cap Value 23,836 132
Health Sciences 6,580 15
Real Estate Securities 8,135 26
Technology 48,047 67
---------------------------------------------------------------------
113 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
NOTES TO
FINANCIAL STATEMENTS SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
MARKET VALUE OF COLLATERAL PURCHASED WITH CASH RECEIVED
----------------------------------------------------------
OTHER FIXED
REPURCHASE MONEY MARKET INCOME
FUND AGREEMENTS INSTRUMENTS SECURITIES TOTAL
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balanced $157,855 $279 $37,394 $195,528
Equity Income 69,586 123 16,484 86,193
Equity Index 354,263 627 83,921 438,811
Large Cap Growth 222,395 393 52,683 275,471
Large Cap Value 349,383 618 82,765 432,766
Mid Cap Value 80,750 142 19,129 100,021
Micro Cap Value 7,503 13 1,777 9,293
Regional Equity 12,628 22 2,991 15,641
Small Cap Growth 23,824 42 5,644 29,510
Small Cap Value 19,979 35 4,733 24,747
Health Sciences 5,515 10 1,306 6,831
Real Estate Securities 6,818 12 1,615 8,445
Technology 40,273 71 9,540 49,884
--------------------------------------------------------------------------------
</TABLE>
U.S. Bank N.A., an affiliate of the advisory, acts as the securities
lending agent in transactions involving the lending of portfolio
securities on behalf of the funds. For these services U.S. Bank N.A.
received $1,268,000 in aggregate for the year ended September 30, 1998
for the funds included in this annual report.
10 COMMON TRUST FUND CONVERSIONS
On December 6, 1996, certain Common Trust Funds of the Advisor and its
affiliates were converted into FAIF. The Funds that were involved in the
conversion are as follows:
COMMON TRUST FUND FAIF FUND
-------------------------------------------------------------------------
First Bank Milwaukee Personal Balanced Fund Asset Allocation Fund
First Common Equity - Yield Fund Equity Income Fund
First Common Equity Fund Large Cap Growth Fund
First Common Special Equity Fund Mid Cap Value Fund
First Common Emerging Growth Fund Small Cap Growth Fund
First Common Equity - Health Care Fund Health Sciences Fund
First Common Equity - Technology Fund Technology Fund
-------------------------------------------------------------------------
The assets, which consisted of securities and related receivables, were
converted on a tax-free basis. The number of Class Y shares issued for
each Fund and the net assets of each Fund (including net unrealized
gain/loss) immediately before the conversion were as follows:
COMMON TRUST FUND ASSETS NET UNREALIZED GAIN
-------------------------------------------------------------------------
First Common Equity Yield Fund $ 70,993,105 $ 22,378,356
First Common Equity Fund 297,403,308 135,858,681
First Common Special Equity Fund 80,932,553 10,524,327
First Common Emerging Growth Fund 46,861,111 8,364,231
First Common Equity - Health Care Fund 26,178,613 4,711,292
First Common Equity - Technology Fund 67,008,994 15,928,190
-------------------------------------------------------------------------
FAIF FUNDS NET ASSETS SHARES ISSUED
-------------------------------------------------------------------------
Asset Allocation Fund $ 59,749,411 5,655,093
Equity Income Fund 73,036,893 5,520,460
Large Cap Growth Fund 248,697,158 20,826,561
Mid Cap Value Fund 301,197,052 4,323,320
Small Cap Growth Fund 74,220,124 3,471,194
Health Sciences Fund 12,082,880 2,752,745
Technology Fund 69,931,430 3,862,189
--------------------------------------------------------------------------
114 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
On February 21, 1997 a second common trust conversion took place. Certain
Common Trust Funds of the Advisor and its affiliates were converted into
FAIF. The Funds involved in the conversion are as follows:
COMMON TRUST FUND FAIF FUND
-------------------------------------------------------------------------
First Tier Equity Income Fund Equity Income Fund
First Tier Common Stock Fund Large Cap Value Fund
-------------------------------------------------------------------------
The assets, which consisted of securities and related receivables, were
converted on a tax-free basis. The number of Class Y shares issued for
each Fund and the net assets of each Fund (including net unrealized
gain/loss) immediately before the conversion were as follows:
COMMON TRUST FUND ASSETS NET UNREALIZED GAIN
-------------------------------------------------------------------------
First Tier Equity Income Fund $ 76,626,806 $26,423,113
First Tier Common Stock Fund 177,038,746 77,659,640
-------------------------------------------------------------------------
FAIF FUND NET ASSETS SHARES ISSUED
-------------------------------------------------------------------------
Equity Income Fund $158,422,856 5,580,976
Large Cap Value Fund 768,278,353 7,432,357
-------------------------------------------------------------------------
On August 8, 1997 a third conversion took place. Certain Common Trust
Funds of the Advisor and its affiliates were converted into FAIF. The
Funds involved in the conversion are as follows:
COMMON TRUST FUND ACQUIRING FUND
-------------------------------------------------------------------------
US Bancorp Income Equity Equity Income Fund
US Bancorp Large Company Growth Large Cap Growth Fund
US Bancorp Small Companies Value Micro Cap Fund
-------------------------------------------------------------------------
The assets which consisted of securities, and related receivable were
converted on a tax-free basis. The number of shares issued for each Fund
and the net assets of each Fund (including net unrealized gain/loss)
immediately before the conversion were as follows:
NET UNREALIZED
COMMON TRUST FUND ASSETS GAIN/(LOSS)
-------------------------------------------------------------------------
US Bancorp Income Equity $117,965,140 $34,934,500
US Bancorp Large Company Growth 63,523,615 21,052,510
US Bancorp Small Companies Value 239,117,775 77,642,865
-------------------------------------------------------------------------
MUTUAL FUNDS NET ASSETS SHARES ISSUED
-------------------------------------------------------------------------
Equity Income Fund $260,221,997 7,700,074
Large Cap Growth Fund 639,938,121 3,627,848
Micro Cap Fund -- 23,911,778
-------------------------------------------------------------------------
The value and number of shares issued in exchange for each Common Trust
Fund's assets and shares outstanding in the tax-free conversions are
included in the capital share transactions of the Class Y in the
Statement of Changes in Net Assets for each respective fund.
On December 6, 1997 the Large Companies Value Trust Fund of the Advisor
was converted into the Large Cap Value Fund. The assets, which consisted
of securities and related receivables, were converted on a tax-free
basis. 10,793,662 of Class Y shares of the Large Cap Value Fund were
issued at the time of conversion. The net assets of the Common Trust
Fund and Large Cap Value Fund immediately before the conversion were
$265,739,968 and $1,574,696,070 respectively. Included in this amount
was $86,510,389 of unrealized gains.
115 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
NOTES TO
FINANCIAL STATEMENTS SEPTEMBER 30, 1998
11 QUALIVEST MERGER
On November 21, 1997, the following reorganization of the Qualivest
Funds into the FAIF Funds took place pursuant to a Plan of
Reorganization approved by the Qualivest shareholders on October 31,
1997:
QUALIVEST ACQUIRED FUND FAIF ACQUIRING FUND
-------------------------------------------------------------------------
Optimized Stock Fund Equity Index Fund
Large Companies Values Fund Large Cap Value Fund
International Opportunities Fund International Index Fund
(New FAIF Fund)
Small Companies Value Small Cap Value
(New FAIF Fund)
-------------------------------------------------------------------------
Under the Agreement and Plan of Reorganization, the Qualivest Class A
and Class C shares were exchanged for FAIF Class A shares of Qualivest
Class Q and Class Y shares were exchanged for shares of FAIF Class Y.
The financial information presented for Small Cap Value Fund and
International Index Fund prior to November 21, 1997 is that of the
Qualivest Small Companies Value Fund and International Opportunities
Fund, respectively. The historical financial information was carried
over to the newly formed FAIF fund.
The net assets before the reorganization and shares issued and redeemed
were as follows:
ACQUIRING FUND'S ACQUIRED FUND'S
FAIF FUND NET ASSETS SHARES ISSUED SHARES REDEEMED
-------------------------------------------------------------------------
Equity Index $ 588,178,511 18,031,329 22,037,539
Large Cap Value 1,118,968,409 7,029,057 12,142,680
International Index -- 17,489,227 17,489,234
Small Cap Value -- 25,553,735 25,556,824
-------------------------------------------------------------------------
Included in the net assets from the Qualivest Funds were the following
components:
<TABLE>
<CAPTION>
UNDISTRIBUTED
(DISTRIBUTIONS IN ACCUMULATED
EXCESS OF) NET REALIZED NET UNREALIZED
QUALIVEST FUND PAID IN CAPITAL INVESTMENT INCOME GAIN (LOSS) APPRECIATION NET ASSETS
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Optimized Stock $244,963,207 $ (3,653) $ (46,158) $106,772,181 $351,685,577
Large Companies Value 127,578,224 (7,466) (56,214) 43,260,898 170,775,442
International Opportunities 183,254,306 866,770 3,224,763 7,354,218 194,700,057
Small Companies Value 289,976,520 (113,306) 36,052,451 144,053,739 469,969,404
----------------------------------------------------------------------------------------------------------------------
</TABLE>
12 FAIF ASSET ALLOCATION MERGER
On November 21, 1997, the assets of FAIF Asset Allocation Fund were
reorganized into the FAIF Balanced Fund. Under the Agreement and Plan of
Reorganization, the Asset Allocation Class A, B, and Y shares were
exchanged for Class A, B, and Y shares of Balanced Fund.
The acquisition was accompanied by a tax-free exchange in which
9,475,207 shares of the Asset Allocation Fund were exchanged for
7,167,873 shares of the Balanced Fund. The total net assets of the
Balanced Fund prior to the conversion were $514,997,252. Asset
Allocation net assets on November 21, 1997 were combined with those of
the Balanced Fund. Included in the net assets of $101,649,757 were
$89,550,476 of paid in capital, $110 of excess of distribution over net
investment income, $145,003 of accumulated net realized losses and
$12,244,394 of net unrealized appreciation.
116 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
13 PIPER MERGER
The Board of Directors and shareholders of the Piper Funds approved a
reorganization of certain Piper Funds into FAIF which took place at the
close of business on July 31, 1998:
<TABLE>
<CAPTION>
PIPER ACQUIRED FUND FAIF ACQUIRING FUND
-------------------------------------------------------------------------------
<S> <C>
Balanced Balanced
Growth Large Cap Growth (formerly Diversified Growth Fund)
Growth and Income Large Cap Value (formerly Stock Fund)
Emerging Growth Mid Cap Growth (New FAIF shell)
Small Companies Growth Small Cap Growth (formerly Emerging Growth)
Pacific-European Growth International
Emerging Markets Growth Emerging Markets (New FAIF shell)
-------------------------------------------------------------------------------
</TABLE>
Under the Agreement and Plan of Reorganization the Piper Class A shares
were exchanged for FAIF Class A shares, and Piper Class Y shares were
exchanged for FAIF Class Y shares.
The financial information presented for Small Cap Growth Fund prior to
July 31, 1998 and for Mid Cap Growth and Emerging Markets prior to
August 7, 1998 is that of the Piper Small Company Growth Fund, Piper
Emerging Growth, and Piper Emerging Markets Growth, respectively. The
historical financial information of the Piper Funds were carried over to
the newly formed FAIF funds.
The net assets before the reorganization shares issued and redeemed by
the corresponding FAIF funds were as follows:
ACQUIRING FUND'S ACQUIRED FUND'S
FAIF FUND NET ASSETS SHARES ISSUED SHARES REDEEMED
-------------------------------------------------------------------------
Balanced $ 585,905,723 3,017,680 3,150,040
Large Cap Growth 786,895,792 9,268,056 16,443,730
Large Cap Value 1,533,335,392 5,499,970 7,909,764
Mid Cap Growth -- 21,069,733 21,069,733
International 445,542,928 3,374,185 3,752,849
Emerging Markets -- 1,014,036 1,014,036
-------------------------------------------------------------------------
Included in the net assets from the Piper Funds were the following
components:
<TABLE>
<CAPTION>
(DISTRIBUTIONS IN ACCUMULATED NET UNREALIZED
EXCESS OF) NET REALIZED APPRECIATION/
PIPER FUND PAID IN CAPITAL INVESTMENT INCOME GAIN (LOSS) DEPRECIATION NET ASSETS
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balanced $ 33,376,466 $ -- $ -- $10,507,084 $ 43,883,550
Growth 98,020,791 -- -- 72,267,759 170,288,550
Growth & Income 83,543,993 -- (1,112) 53,525,337 137,068,218
Emerging Growth 146,516,915 (1,559,461) 55,342,876 92,043,362 292,343,692
Pacific-European Growth 42,458,135 (30) (1,605,538) 10,368,460 51,221,027
Emerging Markets Growth 15,062,390 (202,028) (7,144,878) (342,930) 7,372,554
-------------------------------------------------------------------------------------------------------------------
</TABLE>
On July 31, 1998 the First American Small Cap Growth Fund acquired the
Piper Small Company Growth Fund. The Piper Small Company Growth Fund is
the financial reporting survivor. Therefore, Small Cap Growth Fund net
assets were combined with those of the Piper Small Company Growth Fund.
Prior to the conversion the Piper Small Company Growth Fund net assets
were $31,790,965. Included in the net assets of $154,094,291 of Small
Cap Growth Fund were $133,865,910 of paid in capital, $65,299 of
undistributed net investment income, $8,286,188 of accumulated net
realized gains, and $11,876,894 of net unrealized appreciation. At the
time of conversion the shares outstanding of the Piper Small Company
Growth Fund were adjusted to reflect the conversion ratios utilized for
the reorganization.
117 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
NOTICE TO
SHAREHOLDERS SEPTEMBER 30, 1998
THE INFORMATION SET FORTH BELOW IS FOR EACH FUND'S FISCAL YEAR AS
REQUIRED BY FEDERAL LAWS. SHAREHOLDERS, HOWEVER, MUST REPORT
DISTRIBUTIONS ON A CALENDAR YEAR BASIS FOR INCOME TAX PURPOSES, WHICH
MAY INCLUDE DISTRIBUTIONS FOR PORTIONS OF TWO FISCAL YEARS OF A FUND.
ACCORDINGLY, THE INFORMATION NEEDED BY SHAREHOLDERS FOR INCOME TAX
PURPOSES WILL BE SENT TO THEM IN EARLY 1999. PLEASE CONSULT YOUR TAX
ADVISOR FOR PROPER TREATMENT OF THIS INFORMATION.
Dear First American Investment Funds Shareholders:
For the fiscal year ended September 30, 1998, each fund designated long
term capital gains and exempt income with regard to distributions paid
during the year as follows:
<TABLE>
<CAPTION>
(A) (B) (C)
LONG TERM MEDIUM TERM ORDINARY (D)
CAPITAL GAINS CAPITAL GAINS INCOME TOTAL (E)
DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS QUALIFYING
FUND (TAX BASIS) (TAX BASIS) (TAX BASIS) (TAX BASIS) DIVIDENDS(1)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balanced 20% 33% 47% 100% 24%
Equity Income 37 19 44 100 92
Equity Index 72 2 26 100 99
Large Cap Growth 63 28 9 100 81
Large Cap Value 14 55 31 100 50
Mid Cap Growth 27 73 0 100 0
Mid Cap Value 5 11 84 100 12
Micro Cap Value 93 1 6 100 100
Regional Equity 65 13 22 100 41
Small Cap Growth 35 36 29 100 10
Small Cap Value 0 0 100 100 100
Emerging Markets 0 0 100 100 0
International 32 0 68 100 0
International Index(3) 0 0 100 100 0
Health Sciences 46 33 21 100 39
Technology 54 46 0 100 0
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
*Items (A), (B) and (C) are based on a percentage of the fund's total
distributions.
**Item (E) is based on a percentage of ordinary income distributions of the
fund.
(1)Qualifying dividends represent dividends which qualify for the corporate
dividends received deduction.
(2)Real Estate Securities Fund is not shown due to the fact that the tax year
end is December 31st.
(3)International Index information represents dividends paid for the period
8/1/98-9/30/98. Dividends and foreign taxes paid prior to 7/31/98 were mailed
previously.
(4)The percentages for the Small Cap Growth Fund are based upon the
distributions made by the FAIF Small Cap Growth (formerly Emerging Growth).
The distributions are different from the amounts shown in the financial
statements because the accounting and legal survivors are different.
118 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
FOR TAXPAYERS FILING ON A CALENDAR YEAR BASIS, THIS NOTICE IS FOR
INFORMATIONAL PURPOSES ONLY.
Dear First American International Index Fund Shareholder:
The following is important information regarding foreign tax credits.
The First American International Index Fund has made an election under
Section 853 of the Internal Revenue Code to pass through the benefit of
foreign tax credits to its shareholders. The information provided below
is pertinent to taxpayers who meet the following criteria:
1) File a U.S. Federal Income Tax Return on the basis of fiscal year
ended September 30, 1998, and
2) Held shares of the Fund on the dividend record date of September 22,
1998.
The amount per share of income from the foreign taxes paid to each
country is listed in the following schedule:
<TABLE>
<CAPTION>
CLASS Y CLASS A CLASS B
--------------------------------------------------------------------------------
GROSS FOREIGN GROSS FOREIGN GROSS FOREIGN
COUNTRY DIVIDEND TAXES PAID DIVIDEND TAXES PAID DIVIDEND TAXES PAID
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Australia 0.0037 0.0003 0.0034 0.0003 0.0025 0.0003
Belgium 0.0003 -- 0.0003 -- 0.0002 --
Denmark 0.0003 -- 0.0003 -- 0.0002 --
Hong Kong 0.0029 -- 0.0027 -- 0.0019 --
Ireland 0.0003 0.0001 0.0003 0.0001 0.0003 0.0001
Japan 0.0130 0.0013 0.0121 0.0013 0.0089 0.0013
Malaysia 0.0007 0.0002 0.0007 0.0002 0.0005 0.0002
Netherlands 0.0060 0.0008 0.0056 0.0008 0.0042 0.0008
New Zealand 0.0005 0.0001 0.0005 0.0001 0.0004 0.0001
Singapore 0.0007 0.0001 0.0006 0.0001 0.0005 0.0001
Spain 0.0007 -- 0.0007 -- 0.0005 --
United Kingdom 0.0268 0.0031 0.0250 0.0031 0.0185 0.0031
United States 0.0031 -- 0.0028 -- 0.0020 --
--------------------------------------------------------------------------------
0.0590 0.0060 0.0550 0.0060 0.0406 0.0060
- ---------------------------------------------------------------------------------------------------
</TABLE>
119 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
NOTICE TO
SHAREHOLDERS SEPTEMBER 30, 1998
FOR TAXPAYERS FILING ON A CALENDAR YEAR BASIS, THIS NOTICE IS FOR
INFORMATIONAL PURPOSES ONLY.
Dear First American International Fund Shareholder:
The following is important information regarding foreign tax credits.
The First American International Fund has made an election under Section
853 of the Internal Revenue Code to pass through the benefit of foreign
tax credits to its shareholders. The information provided below is
pertinent to taxpayers who meet the following criteria:
1) File a U. S. Federal Income Tax Return on the basis of fiscal year
ended September 30, 1998, and
2) Held shares of the Fund on the dividend record date of December 22,
1997.
The amount per share of income from and foreign taxes paid to each
country is listed in the following schedule:
<TABLE>
<CAPTION>
CLASS Y CLASS A CLASS B
-------------------------------------------------------------------------------
GROSS FOREIGN GROSS FOREIGN GROSS FOREIGN
COUNTRY DIVIDEND TAXES PAID DIVIDEND TAXES PAID DIVIDEND TAXES PAID
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Brazil 0.0404 0.0000 0.0365 0.0000 0.0326 0.0000
Canada 0.0117 0.0004 0.0106 0.0004 0.0095 0.0004
Chile 0.0006 0.0000 0.0006 0.0000 0.0005 0.0000
Denmark 0.0010 0.0000 0.0009 0.0000 0.0008 0.0000
Finland 0.0092 0.0004 0.0083 0.0004 0.0075 0.0004
France 0.0505 0.0006 0.0457 0.0006 0.0409 0.0006
Germany 0.0560 0.0015 0.0507 0.0015 0.0454 0.0015
Great Britain 0.0781 0.0024 0.0708 0.0024 0.0634 0.0024
Hong Kong 0.0423 0.0000 0.0383 0.0000 0.0341 0.0000
Israel 0.0005 0.0000 0.0005 0.0000 0.0005 0.0000
Italy 0.0068 0.0003 0.0061 0.0003 0.0055 0.0003
Japan 0.0333 0.0012 0.0302 0.0012 0.0270 0.0012
Mexico 0.0088 0.0000 0.0079 0.0000 0.0071 0.0000
Malaysia 0.0038 0.0003 0.0035 0.0003 0.0031 0.0003
Netherlands 0.0947 0.0036 0.0859 0.0036 0.0770 0.0036
Portugal 0.0046 0.0001 0.0041 0.0001 0.0037 0.0001
Spain 0.0123 0.0005 0.0112 0.0005 0.0100 0.0005
Switzerland 0.0396 0.0015 0.0360 0.0015 0.0322 0.0015
Sweden 0.0267 0.0010 0.0242 0.0010 0.0217 0.0010
-------------------------------------------------------------------------------
0.5209 0.0138 0.4720 0.0138 0.4225 0.0138
- -------------------------------------------------------------------------------------------------
</TABLE>
120 '98 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
FIRST AMERICAN INVESTMENT FUNDS, INC.
BOARD OF DIRECTORS
MR. DAVID BENNETT
Director of the First American Investment Funds, Inc.
Of counsel with Gray, Plant, Mooty, Mooty and Bennett,
Owner of three privately-held businesses
- --------------------------------------------------------------------------------
MR. ROBERT DAYTON
Director of the First American Investment Funds, Inc.
Chief Executive Officer of Okabena Company
- --------------------------------------------------------------------------------
MR. ROGER GIBSON
Director of the First American Investment Funds, Inc.
Vice President of North America-Mountain Region for United Airlines
- --------------------------------------------------------------------------------
MR. ANDREW HUNTER III
Director of the First American Investment Funds, Inc.
Chairman of Hunter Keith Industries
- --------------------------------------------------------------------------------
MR. LEONARD KEDROWSKI
Director of the First American Investment Funds, Inc.
Owner and President of Executive Management Consulting, Inc.
- --------------------------------------------------------------------------------
MR. ROBERT SPIES
Director of the First American Investment Funds, Inc.
Retired Vice President, U.S. Bank National Association
- --------------------------------------------------------------------------------
MR. JOSEPH STRAUSS
Director of the First American Investment Funds, Inc.
Former Chairman of First American Funds,
Owner and President of Strauss Management Company
- --------------------------------------------------------------------------------
MS. VIRGINIA STRINGER
Chairman of the First American Investment Funds, Inc.
Owner and President of Strategic Management Resources, Inc.
- --------------------------------------------------------------------------------
<PAGE>
FIRST AMERICAN INVESTMENT FUNDS, INC.
1 Freedom Valley Drive
Oaks, Pennsylvania 19456
INVESTMENT ADVISOR
FIRST AMERICAN ASSET MANAGEMENT,
A DIVISION OF U.S. BANK NATIONAL ASSOCIATION
601 Second Avenue South
Minneapolis, Minnesota 55402
CUSTODIAN
U.S. BANK NATIONAL ASSOCIATION
180 East Fifth Street
St. Paul, Minnesota 55101
ADMINISTRATOR
SEI INVESTMENTS MANAGEMENT
CORPORATION
1 Freedom Valley Drive
Oaks, Pennsylvania 19456
TRANSFER AGENT
DST SYSTEMS, INC.
330 West Ninth Street
Kansas City, Missouri 64105
DISTRIBUTOR
SEI INVESTMENTS DISTRIBUTION CO.
1 Freedom Valley Drive
Oaks, Pennsylvania 19456
INDEPENDENT AUDITORS
KPMG PEAT MARWICK LLP
90 South Seventh Street
Minneapolis, Minnesota 55402
COUNSEL
DORSEY & WHITNEY LLP
220 South Sixth Street
Minneapolis, Minnesota 55402
This report and the financial statements contained herein are submitted for the
general information of the shareholders of the corporation. The report is not
authorized for distribution to prospective investors in the corporation unless
preceded or accompanied by an effective prospectus for each of the funds
included. Shares in the funds are not deposits or obligations of, or guaranteed
or endorsed by, U.S. Bank or any of its affiliates. Such shares are also not
federally insured by the Federal Deposit Insurance Corporation, the Federal
Reserve Board, or any other agency. Investment in the shares involve investment
risk including loss of principal amount invested.
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.
- --------------------------------------------------------------------------------
[LOGO] FIRST AMERICAN
THE POWER OF DISCIPLINED INVESTING(R)
11/1998 200-98
