FIRST AMERICAN INVESTMENT FUNDS, INC.
BOND FUNDS
1999 ANNUAL REPORT
[LOGO] FIRST AMERICAN FUNDS(R)
THE POWER OF DISCIPLINED INVESTING(R)
<PAGE>
FIRST AMERICAN FAMILY OF FUNDS INVESTMENTS FOR EVERY GOAL
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HIGHER RETURN FIRST AMERICAN FUNDS OFFER A FULL RANGE OF
POTENTIAL INVESTMENT STRATEGIES TO HELP YOU CREATE A
- ------------------------------- PERSONALIZED, DIVERSIFIED PORTFOLIO.
SUPPORTED BY EXTENSIVE RESEARCH AND A HIGHLY
SECTOR FUNDS DEVELOPED TEAM APPROACH TO INVESTMENT
DECISION MAKING, FIRST AMERICAN FUNDS CAN
INTERNATIONAL FUNDS HELP BUILD A WINNING STRATEGY FOR ANY
INVESTOR.
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 TABLE OF
CONTENTS
MONEY MARKET FUNDS
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- ------------------------------- MESSAGE TO SHAREHOLDERS 1
LOWER RETURN ---------------------------------------------
POTENTIAL WHAT A DIFFERENCE A YEAR MAKES 2
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BOND FUNDS OVERVIEW 4
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Adjustable Rate Mortgage Securities 6
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Fixed Income 7
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Intermediate Government Bond 8
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Intermediate Term Income 9
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Limited Term Income 10
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Strategic Income 11
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REPORT OF INDEPENDENT AUDITORS 13
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STATEMENTS OF NET ASSETS 14
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STATEMENTS OF OPERATIONS 36
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STATEMENTS OF CHANGES IN NET ASSETS 38
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FINANCIAL HIGHLIGHTS 40
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NOTES TO FINANCIAL STATEMENTS 44
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NOTICE TO SHAREHOLDERS 56
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NOT FDIC INSURED NO BANK GUARANTEE MAY LOSE VALUE
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MESSAGE TO SHAREHOLDERS SEPTEMBER 30, 1999
DEAR SHAREHOLDERS:
On behalf of the entire board of directors -- thank you for the ongoing
opportunity you have given us to manage your investments. Each year we are
proud to continue supporting our long-term investors and we are always
pleased to see the new investors that have joined the First American family
of funds.
A QUICK LOOK AT THE YEAR.
The past year was another volatile time for investors. A solid economy,
strong corporate profits plus a recovery in Asian markets combined to send
the stock market upward, with the Dow Jones Industrial Average hitting a
new high. It was also reassuring to see a broader market success beyond the
large-cap growth stocks that dominated 1998, with a resurgence of small-
and mid-cap stocks, as well as international and emerging market stocks.
In contrast, the bond market fared less well. A series of interest rate
hikes intended to keep the economy from overheating depressed bond prices,
sending the yield on the benchmark 30-year Treasury bond to 6% -- an
18-month high.
WHAT DOES IT MEAN FOR INVESTORS?
Those of you who track performance on a day-to-day or week-to-week basis
have witnessed the effect of a changing bond market. This kind of market
volatility is always unnerving -- but mostly to short-term investors.
As a fixed-income investor, your focus should be on the long term, with an
emphasis on diversification. The key message is stick with it -- a message
worth repeating in shifting financial markets. Now more than ever, a
consistent long-term approach should ride out the ups and downs of
short-term volatility. The article on the following page expands on this
idea.
Again, thank you for investing with First American Funds. As we approach
the millennium, we wish you continued success and prosperity.
Sincerely,
/s/ Virginia L. Stringer /s/ Paul A. Dow
VIRGINIA L. STRINGER PAUL A. DOW
Chairperson Chief Investment Officer and President
First American Investment First American Asset Management
Funds, Inc.
1 '99 ANNUAL REPORT FIRST AMERICAN FUNDS
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WHAT A DIFFERENCE A YEAR MAKES
Turn back the clock to September 1998. Newspaper headlines were dominated by the
financial crisis sweeping across Asia, Latin America and Russia. At the height
of the crisis, the Dow Jones Industrial Average (DJIA) shed nearly 20% of its
value. Some predicted that the U.S. economy would slide into a recession,
erasing years of investment gains.
A year later, the DJIA has surged approximately 2,500 points, with some
financial experts alluding to a "New Economy" defined by unprecedented growth.
Yet a host of new challenges could threaten to derail these great expectations.
The Federal Reserve twice raised interest rates to quell the risk of higher
inflation, which turned the bond market bearish and triggered volatility in
equity markets.
All in all, many investors now wonder whether fundamental changes are again
underway in financial markets. Sound familiar?
SEEING THE FOREST FOR THE TREES
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Keep in mind that the same economic fundamentals have been in place in the U.S.
throughout the past year: low unemployment, low inflation and rising
productivity. For the most part, America's Goldilocks economy remains just
right. International markets are also healthy, and Japan is on the rebound.
The point is that when it comes to investing, there's always something to worry
about. Fear of the unknown causes people to lose sight of their long-term goals
as they react to the latest perceived threat.
2 '99 ANNUAL REPORT FIRST AMERICAN FUNDS
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WHAT A DIFFERENCE A YEAR MAKES
ITS BETTER TO ACT THAN REACT
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What's next for the U.S. economy? No one knows for sure. But you can be certain
that today's hot investment may become tomorrow's outcast. Or that interest
rates will rise and fall. That's the natural ebb and flow of financial markets.
With this in mind, it's important to take a long-term perspective backed by a
diversified investment portfolio to weather rapidly changing financial markets.
Asset allocation -- a strategy designed to create diversified portfolios from a
blend of different asset classes -- forms the foundation of any diversification
strategy. That's because different asset classes often move in opposite
directions, with declines in one class offset by increases in another. It's a
tried-and-true approach that may help reduce volatility and generate more
balanced returns.
At the same time, systematic investing can make market volatility beneficial.
While systematic investing does not ensure a profit or avoid a loss, you have
the long-term potential to lower your average cost if you invest regularly
through changing market conditions.
Finally, we would like to reiterate a familiar investment message: It's time in
the market that counts, not market timing. First American adheres to this
philosophy. Across our comprehensive array of stock and bond mutual funds, we
take a long-term perspective to money management while maintaining flexibility
to benefit from short-term fluctuations. In addition, our tradition of
conservative management and innovative products can help build a winning
strategy for any investor.
TAKE TIME TO REVISIT YOUR ASSET ALLOCATION
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From time to time, you may need to refine your asset allocation to reflect your
changing goals or risk tolerance. Should that need arise, please don't hesitate
to contact your investment professional. Your investment professional can offer
a range of First American funds to meet any need, plus the advice to help you
reach your investment goals.
3 '99 ANNUAL REPORT FIRST AMERICAN FUNDS
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BOND FUNDS OVERVIEW
A year that started with positive news in the bond market changed dramatically
in the early part of 1999. By the time the fiscal year ended September 30, 1999,
interest rates had risen dramatically across the board, creating a difficult
environment for bond fund investors.
In the fall of 1998, the world economy was facing the threat of a recession,
possibly mixed with deflationary pressures, all triggered by severe problems in
Asia. In this environment, interest rates reached historic lows. While that was
good news for bonds, there were some underlying problems in the market. Most
notable was the lack of liquidity in the markets for corporate bonds,
mortgage-backed and asset-backed securities.
To deal with the pending economic crisis, the Federal Reserve lowered interest
rates. The result was that liquidity was restored to the bond market and
investors had renewed confidence. The stock markets reacted positively, the U.S.
economy continued on a roll and before long, the threat of inflation had
returned.
The result was that interest rates reversed course and began to rise in rather
dramatic fashion. For instance, the interest rate on the benchmark 30-year U.S.
Treasury bond, which started the fiscal year at less than 5%, climbed well above
6% by July. This was an especially significant increase given the fact that the
rate started at historically low levels.
What's more, similar increases occurred among different types of bonds across
all maturity levels. Even very short-term debt securities couldn't avoid the
trend.
In the first few months of 1999, investors pulled away from U.S. Treasury
securities. Instead, they preferred offerings from corporations, as well as
mortgage-backed and asset-backed securities. These types of bonds had started
the year looking very attractive and performed well relative to Treasury bonds
for a period of time.
By the summer, concerns about an overheated economy were again at the forefront.
The Federal Reserve decided to boost interest rates in an effort to stave off
any inflationary threat. This move appeared to calm the markets a bit, as the
rise in yield on Treasury bonds began to peak. As a result, investors again
flocked to these high-quality bonds.
4 '99 ANNUAL REPORT FIRST AMERICAN FUNDS
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At the same time, there was a flood of new bonds issued by corporations as
asset-backed securities. Bond issuers appeared to be reluctant to conduct a
large issuance of securities close to the end of 1999, due to fears about the
potential for Year 2000 (Y2K) computer problems. Therefore, new issues came into
the market in a big way in the summer and early fall.
As a result, prices on non-Treasury securities once again were driven down and
yield spreads between Treasury and non-Treasury securities widened. Oddly
enough, it was the lower-rated securities that performed the best, as most of
the new issues were of bonds with higher credit quality. While this had a
negative impact on the value of non-Treasury bonds, it did make them much more
attractive to investors, creating the potential for a rebound in the near
future.
In August, the Federal Reserve again bumped up interest rates, which seemed to
have a stabilizing influence on the bond markets. While the upward trend in
interest rates may continue, there seem to be positive signs that U.S. economic
growth could moderate. If that occurs, it is likely the Federal Reserve will not
feel a need to hike interest rates again in the near future and the bond market
should be in better shape.
In addition, we expect the new fiscal year to start off with a significant slow
down in new issuance of bonds until we reach January 1, 2000. Once that critical
date passes and assuming that Y2K problems are minimal, supply should once again
pick up.
Going forward, it is unlikely that we'll experience a repeat scenario of the
previous year. Interest rates should trend more favorably in the months to come
and overall, we have a positive outlook for our bond funds.
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 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 2.50% on Adjustable Rate Mortgage
Securities, Intermediate Government Bond, Intermediate Term Income and Limited
Term Income funds, and 4.25% on Fixed Income and Strategic Income 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 adjusted figures for Class
C shares include the effect of paying the maximum initial sales charge of 1.00%
on Fixed Income and Strategic Income funds.
5 '99 ANNUAL REPORT FIRST AMERICAN FUNDS
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BOND FUNDS
ADJUSTABLE RATE MORTGAGE SECURITIES
INVESTMENT OBJECTIVE
SEEKS CURRENT INCOME ALONG WITH A HIGH DEGREE OF PRINCIPAL STABILITY FROM
A PORTFOLIO OF MORTGAGE-RELATED SECURITIES
With more and more homeowners locking into fixed-rate mortgages, the adjustable
rate mortgage market has been through a difficult period. In the fiscal year
ended September 30, 1999, Adjustable Rate Mortgage Securities Fund generated a
return of 3.74%.
The fund's net asset value remained relatively stable despite significant
increases in interest rates across the board through much of 1999. At the same
time, it maintained a competitive dividend yield for shareholders, although that
was a challenging task in this environment.
The fiscal year began in the fall of 1998, with interest rates trending lower,
leading to a large number of mortgage prepayments and refinancings. With
long-term rates at levels not much higher than short-term adjustable rate
mortgages (ARMs), many homebuyers preferred locking in long-term, fixed-rate
mortgages. This resulted in a decline in the available supply of ARM securities
in the market.
The fund put a greater emphasis on asset-backed securities and collateralized
mortgage obligations (CMOs) in an effort to keep its yield at a competitive
level. As the fiscal year came to a close, the supply of ARMs began to improve,
offering more attractive yields.
The market has the potential for more positive returns in the months ahead.
Higher interest rates have improved the market for ARMs, and other holdings in
the portfolio like asset-backed securities and CMOs seem well positioned to show
improved performance in the near term. All of this adds up to a more favorable
environment for our shareholders.
VALUE OF A $10,000 INVESTMENT
[PLOT POINTS CHART]
<TABLE>
<CAPTION>
FIRST FIRST FIRST
AMERICAN AMERICAN AMERICAN LIPPER
ADJ. RATE MORT. ADJ. RATE MORT. ADJ. RATE MORT. LEHMAN ADJUSTABLE
SEC. FUND, SEC. FUND, SEC. FUND, ARM RATE MORTGAGE
CLASS A CLASS A ADJUSTED CLASS Y INDEX FUNDS AVERAGE
------- ---------------- ------- ----- -------------
<S> <C> <C> <C> <C> <C>
1/1992 $10,000 $ 9,750 $10,000 $10,000 $10,000
9/1992 10,616 10,351 10,616 10,410 10,340
9/1993 11,275 10,993 11,275 11,004 10,758
9/1994 10,839 10,568 10,839 11,045 10,867
9/1995 11,539 11,250 11,539 12,088 11,554
9/1996 12,297 11,989 12,297 12,873 12,268
9/1997 13,177 12,848 13,177 13,907 13,077
9/1998 13,910 13,562 13,914 14,779 13,699
9/1999 14,430 14,069 14,473 15,415 14,255
</TABLE>
PAST PERFORMANCE OF THE FUND IS NOT INDICATIVE OF FUTURE PERFORMANCE.
ANNUALIZED PERFORMANCE SINCE
1 YEAR 3 YEAR 5 YEAR INCEPTION
- --------------------------------------------------------------------------------
Class A 3.74% 5.48% 5.89% 4.90%
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Class A adjusted 1.14% 4.58% 5.35% 4.54%
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Class Y * 4.02% 5.58% 5.95% 4.94%
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Lehman ARM Index 4.30% 6.19% 6.89% 5.81%
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Lipper Adjustable Rate Mortgage 4.06% 5.14% 5.56% 4.69%
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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 since inception return for Class Y shares from
7/31/98, is 4.38%.
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.
6 '99 ANNUAL REPORT FIRST AMERICAN FUNDS
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BOND FUNDS
FIXED INCOME
INVESTMENT OBJECTIVE
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
The sharp increase in interest rates experienced through much of 1999 took its
toll on the Fixed Income Fund during the fiscal year ended September 30, 1999.
For the period, the fund's total return was -2.67%.
The fund was positioned a bit more defensively early in 1999, in anticipation of
the interest rate hike. This meant focusing on bonds with a slightly shorter
maturity as their prices are typically less affected by interest rate movements.
Throughout the year, corporate bonds and mortgage-backed securities became much
more attractive from a yield perspective than U.S. Treasury bonds. In light of
that, greater emphasis was placed on non-Treasury securities, which seem to
offer the best long-term opportunity for the fund.
With the dramatic rise in interest rates in recent months, it appears that the
trend could top out in the near future. Given that, some changes were made to
the portfolio in late summer that will position the fund to benefit from a more
favorable interest rate environment.
As another fiscal year begins, we think there are many reasons for optimism in
the bond market. Interest rate trends should be more favorable and the fund's
increased emphasis on attractively-priced non-Treasury sectors creates the
potential for positive results in the months ahead.
VALUE OF A $10,000 INVESTMENT
[PLOT POINTS CHART]
<TABLE>
<CAPTION>
FIRST
FIRST AMERICAN FIRST LEHMAN LIPPER
AMERICAN FIXED INCOME AMERICAN GOVERNMENT/ LEHMAN CORPORATE
FIXED INCOME FUND, CLASS A FIXED INCOME CORPORATE AGGREGATE DEBT A-RATED
FUND, CLASS A ADJUSTED FUND, CLASS Y BOND INDEX BOND INDEX FUNDS AVERAGE
------------- -------- ------------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
9/1989 $10,000 $ 9,575 $10,000 $10,000 $10,000 $10,000
9/1990 10,680 10,226 10,680 10,675 10,755 10,478
9/1991 12,138 11,622 12,138 12,369 12,475 12,202
9/1992 13,636 13,056 13,636 14,006 14,042 13,859
9/1993 14,890 14,257 14,890 15,611 15,443 15,422
9/1994 14,457 13,842 14,457 14,964 14,946 14,645
9/1995 16,304 15,611 16,316 17,112 17,048 16,674
9/1996 17,061 16,336 17,115 17,883 17,880 17,328
9/1997 18,470 17,685 18,577 19,598 19,622 18,997
9/1998 20,740 19,859 20,929 22,115 21,879 20,980
9/1999 20,186 19,328 20,418 21,757 21,798 20,520
</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 -2.67% 5.77% 6.91% 7.28% 7.57%
- --------------------------------------------------------------------------------
Class A adjusted -6.82% 4.24% 5.98% 6.82% 7.18%
- --------------------------------------------------------------------------------
Class B -3.48% 4.96% 6.07% - 5.73%
- --------------------------------------------------------------------------------
Class B adjusted -8.03% 3.75% 5.76% - 5.58%
- --------------------------------------------------------------------------------
Class C - - - - -2.75%
- --------------------------------------------------------------------------------
Class C adjusted - - - - -4.63%
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Class Y * -2.44% 6.06% 7.15% 7.40% 7.68%
- --------------------------------------------------------------------------------
Lehman Gov't/Corp. Bond -1.62% 6.75% 7.77% 8.08% 8.08%
- --------------------------------------------------------------------------------
Lehman Aggregate Bond -0.37% 6.82% 7.84% 8.10% 8.10%
- --------------------------------------------------------------------------------
Lipper Corporate Debt A-Rtd. -2.19% 5.79% 6.99% 7.65% 8.08%
- --------------------------------------------------------------------------------
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, the inception date of the Class C shares is 2/1/99
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 9/30/89. The performance
reflected in the table begins on the inception date of Class A shares and Class
B shares begin 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 5.68%.
Previously, the fund used the Lehman Government/Corporate Bond Index as a
benchmark. Going forward, the fund will use the Lehman Aggregate 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.
7 '99 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
BOND FUNDS
INTERMEDIATE GOVERNMENT BOND
INVESTMENT OBJECTIVE
SEEKS TO PROVIDE CURRENT INCOME CONSISTENT WITH PRESERVATION OF CAPITAL
FROM A HIGH-QUALITY PORTFOLIO OF U.S. GOVERNMENT SECURITIES
The generally more stable intermediate- and short-term segments of the bond
market saw a dramatic rise in interest rates through much of 1999. That had a
significant impact on Intermediate Government Bond Fund, which finished the
fiscal year ended September 30, 1999, with a return of -0.08%.
The interest rate environment played havoc with the bond market as a whole.
Throughout the year, the yield differential between U.S. Treasury securities and
those issued by government agencies (such as GNMA and FNMA) widened. This made
agency securities a far more attractive value as an investment. To take
advantage of this, the fund's emphasis in agency securities was gradually
expanded. They now make up in excess of half of the fund's portfolio, more than
double the position held at the start of the fiscal year.
The fund's performance can be greatly affected by the maturity of our
securities, and longer-duration holdings tend to be more adversely affected by
rising interest rates. After the significant rate hike of recent months, the
fund is positioned in a neutral way, a sign of our expectation that rates may
both rise and fall a bit in the year ahead.
We're confident that over time, agency securities will be recognized for the
value they currently offer in the market and will perform much better than they
did through most of the previous fiscal year. Given that and the likelihood that
interest rates will stabilize, we believe the fund is well positioned for the
coming months.
VALUE OF A $10,000 INVESTMENT
[PLOT POINTS CHART]
<TABLE>
<CAPTION>
FIRST FIRST FIRST LEHMAN
AMERICAN AMERICAN AMERICAN INTERMEDIATE LIPPER
INTERM. GOVT. INTERM. GOVT. INTERM. GOVT. GOVERNMENT SHORT/INTERMEDIATE
BOND FUND, BOND FUND, BOND FUND, BOND U.S. GOVERNMENT
CLASS A CLASS A ADJUSTED CLASS Y INDEX FUNDS AVERAGE
------- ---------------- ------- ----- -------------
<S> <C> <C> <C> <C> <C>
9/1989 $10,000 $ 9,750 $10,000 $10,000 $10,000
9/1990 10,804 10,534 10,804 10,858 10,856
9/1991 11,914 11,616 11,914 12,333 12,238
9/1992 12,971 12,647 12,971 13,868 13,560
9/1993 13,619 13,278 13,619 14,929 14,509
9/1994 13,465 13,128 13,465 14,705 14,156
9/1995 14,787 14,417 14,787 16,267 15,461
9/1996 15,504 15,117 15,488 17,096 16,168
9/1997 16,599 16,184 16,583 18,435 17,318
9/1998 18,304 17,846 18,270 20,387 18,753
9/1999 18,289 17,832 18,275 20,548 18,883
</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 -0.08% 5.66% 6.32% 6.22% 6.39%
- --------------------------------------------------------------------------------
Class A adjusted -2.59% 4.76% 5.78% 5.95% 6.16%
- --------------------------------------------------------------------------------
Class Y * 0.03% 5.67% 6.30% 6.21% 6.38%
- --------------------------------------------------------------------------------
Lehman Int. Gov.'t Bond 0.79% 6.32% 6.92% 7.47% 7.46%
- --------------------------------------------------------------------------------
Lipper Short Intermediate 0.69% 5.30% 5.94% 6.77% 6.96%
- --------------------------------------------------------------------------------
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 9/30/89. 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 5.24%.
Performance reflects voluntary fee waivers in effect. In absence of such fee
waivers, total returns would be reduced.
8 '99 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
BOND FUNDS
INTERMEDIATE TERM INCOME
INVESTMENT OBJECTIVE
SEEKS TO PROVIDE CURRENT INCOME CONSISTENT WITH PRESERVATION OF CAPITAL
FROM A PORTFOLIO OF U.S. GOVERNMENT AND AGENCY SECURITIES AND CORPORATE
DEBT SECURITIES
Even in a challenging environment where interest rates rose dramatically,
Intermediate Term Income Fund generated a return of -0.20% for the fiscal year
ended September 30, 1999.
After a positive start in late 1998, interest rates took a decided turn upward
in 1999. Even rates on somewhat stable five-year Treasury notes rose by more
than 1.5% in a matter of months. Early in 1999, the fund was positioned a bit
more defensively in an effort to dampen the impact of increasing interest rates,
which result in lower bond prices.
For much of the year, corporate bonds and mortgage-backed securities took the
sharpest hits. As the investment value of these bonds became more attractive, a
greater percentage of the portfolio was concentrated in non-U.S. Treasury
sectors. It is likely that the market will soon recognize the inherent value in
these bonds, which currently offer higher yields than Treasury securities.
There are plenty of reasons to be encouraged about the bond market in the months
ahead. The dramatic rise in interest rates is likely to taper off. In
anticipation of that, we've positioned the fund a bit more aggressively in order
to take advantage of a more positive interest rate environment. That, combined
with the attractive value of non-Treasury securities, offers positive momentum
for the fund going forward.
VALUE OF A $10,000 INVESTMENT
[PLOT POINTS CHART]
<TABLE>
<CAPTION>
FIRST FIRST FIRST LEHMAN
AMERICAN AMERICAN AMERICAN INTERMEDIATE LIPPER
INTERM. TERM INTERM. TERM INTERM. TERM GOVERNMENT/ SHORT/INTERMEDIATE
INCOME FUND, INCOME FUND, INCOME FUND, CORPORATE INVESTMENT GRADE
CLASS A CLASS A ADJUSTED CLASS Y INDEX DEBT FUNDS AVG.
------- ---------------- ------- ----- ---------------
<S> <C> <C> <C> <C> <C>
12/1992 $10,000 $ 9,750 $10,000 $10,000 $10,000
9/1993 10,673 10,406 10,673 10,860 10,777
9/1994 10,562 10,298 10,562 10,680 10,585
9/1995 11,672 11,380 11,672 11,883 11,585
9/1996 12,329 12,021 12,329 12,493 12,159
9/1997 13,216 12,885 13,190 13,517 13,059
9/1998 14,583 14,219 14,544 14,926 14,099
9/1999 14,554 14,190 14,536 15,020 14,261
</TABLE>
PAST PERFORMANCE OF THE FUND IS NOT INDICATIVE OF FUTURE PERFORMANCE.
ANNUALIZED PERFORMANCE SINCE
1 YEAR 3 YEAR 5 YEAR INCEPTION
- --------------------------------------------------------------------------------
Class A -0.20% 5.69% 6.62% 5.75%
- --------------------------------------------------------------------------------
Class A adjusted -2.72% 4.81% 6.10% 5.35%
- --------------------------------------------------------------------------------
Class Y * -0.06% 5.64% 6.59% 5.73%
- --------------------------------------------------------------------------------
Lehman Int. Gov't/Corp. Bond 0.63% 6.33% 7.06% 6.21%
- --------------------------------------------------------------------------------
Lipper Short/Intermediate 0.69% 5.30% 5.94% 6.96%
- --------------------------------------------------------------------------------
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 5.53%
Performance reflects voluntary fee waivers in effect. In absence of such fee
waivers, total returns would be reduced.
9 '99 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
BOND FUNDS
LIMITED TERM INCOME
INVESTMENT OBJECTIVE
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
Through a difficult bond market environment, Limited Term Income Fund generated
an exceptional return of 3.43% for the fiscal year ended September 30, 1999.
With interest rates climbing at a rapid clip, especially through most of 1999,
the fund spent much of the year in a defensive mode. The fund was focused more
on shorter-term securities, which typically are not as adversely affected as
longer-term bonds.
While shorter-term securities may require a sacrifice in yield, the fund had an
advantage in that many of its holdings paid a combination of principal and
interest. These are asset-backed securities and collateralized mortgage
obligations (CMOs). The cash they generated for the fund was then reinvested in
newly-issued securities that, thanks to higher interest rates, offered more
attractive yields.
The majority of the fund is invested in a combination of asset-backed
securities, CMOs and corporate debt. Each of these segments currently provides
attractive yields relative to U.S. Treasury securities. We expect that these
non-Treasury securities will offer the greatest near term potential. This,
combined with favorable interest rate trends, will likely prove beneficial for
shareholders in the year ahead.
VALUE OF A $10,000 INVESTMENT
[PLOT POINTS CHART]
<TABLE>
<CAPTION>
FIRST FIRST FIRST LEHMAN
AMERICAN AMERICAN AMERICAN MF 1-3 YEAR MERRILL LYNCH LIPPER
LIMITED TERM LIMITED TERM LIMITED TERM GOVERNMENT/ 1-YEAR SHORT INVESTMENT
INCOME FUND, INCOME FUND, INCOME FUND, CORPORATE TREASURY GRADE DEBT
CLASS A CLASS A ADJUSTED CLASS Y INDEX INDEX FUNDS AVERAGE
------- ---------------- ------- ----- ----- --------------
<S> <C> <C> <C> <C> <C> <C>
12/1992 $10,000 $ 9,750 $10,000 $10,000 $10,000 $10,000
9/1993 10,344 10,085 10,344 10,486 10,293 10,576
9/1994 10,573 10,308 10,573 10,613 10,552 10,636
9/1995 11,267 10,986 11,267 11,493 11,265 11,469
9/1996 11,935 11,637 11,935 12,151 11,906 12,073
9/1997 12,662 12,346 12,662 12,994 12,646 12,897
9/1998 13,492 13,154 13,492 14,017 13,450 13,758
9/1999 13,954 13,606 13,968 14,485 14,023 14,128
</TABLE>
PAST PERFORMANCE OF THE FUND IS NOT INDICATIVE OF FUTURE PERFORMANCE.
ANNUALIZED PERFORMANCE SINCE
1 YEAR 3 YEAR 5 YEAR INCEPTION
- --------------------------------------------------------------------------------
Class A 3.43% 5.34% 5.71% 5.05%
- --------------------------------------------------------------------------------
Class A adjusted 0.82% 4.47% 5.18% 4.65%
- --------------------------------------------------------------------------------
Class Y * 3.53% 5.38% 5.73% 5.06%
- --------------------------------------------------------------------------------
Lehman MF 1-3 Year Gov't/Corporate 3.34% 6.03% 6.41% 5.64%
- --------------------------------------------------------------------------------
Merrill Lynch 1-Year U.S. Treasury 4.26% 5.61% 5.85% 5.14%
- --------------------------------------------------------------------------------
Lipper Short Investment Grade Debt 2.69% 5.32% 5.79% 5.28%
- --------------------------------------------------------------------------------
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 5.28%.
Previously, the fund used the Merrill Lynch 1-Year U.S. Treasury Index as a
benchmark. Going forward, the fund will use the Lehman 1-3 Year
Government/Corporate 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.
10 '99 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
In a difficult period for high-quality U.S. bonds, the high-yield and global
segments of Strategic Income Fund performed relatively well. As a result, the
fund generated a return of 5.73% for the fiscal year ended September 30, 1999.
This fund is made up of three separate segments. One is focused on high-quality
domestic bonds, one on lower-rated U.S. debt securities and the third on bonds
issued from overseas markets.
Through most of 1999, performance in all three sectors of the fund has been
somewhat volatile. High-quality bonds have generally been the weakest performers
in the rising interest-rate environment.
In the fall of 1998, both the high-yield and global sectors were extremely
undervalued due to significant problems with emerging market economies. Shortly
after that, both of those sectors began to perform much better, as the global
economic crisis subsided and economies in the U.S. and overseas stabilized.
Going forward, we expect interest rates to level off, creating an improved
market for high-quality bonds. High-yield and global bonds also seem to offer
attractive possibilities for the period ahead, barring any major economic
problems.
VALUE OF A $10,000 INVESTMENT
[PLOT POINTS CHART]
<TABLE>
<CAPTION>
FIRST FIRST FIRST
AMERICAN AMERICAN AMERICAN
STRATEGIC STRATEGIC STRATEGIC LEHMAN LIPPER
INCOME FUND, INCOME FUND, INCOME FUND, AGGREGATE MULTI SECTOR
CLASS A CLASS A ADJUSTED CLASS Y BOND INCOME
------- ---------------- ------- ---- ------
<S> <C> <C> <C> <C> <C>
7/1998 $10,000 $9,575 $10,000 $10,000 $10,000
9/1998 9,411 9,011 9,415 10,401 9,603
9/1999 9,950 9,528 9,976 10,362 9,871
</TABLE>
PAST PERFORMANCE OF THE FUND IS NOT INDICATIVE OF FUTURE PERFORMANCE.
ANNUALIZED PERFORMANCE SINCE
1 YEAR INCEPTION
- --------------------------------------------------------------------------------
Class A 5.73% -0.66%
- --------------------------------------------------------------------------------
Class A adjusted 1.25% -4.21%
- --------------------------------------------------------------------------------
Class B 4.90% -1.34%
- --------------------------------------------------------------------------------
Class B adjusted 0.00% -5.19%
- --------------------------------------------------------------------------------
Class C - -0.28%
- --------------------------------------------------------------------------------
Class C adjusted - -2.26%
- --------------------------------------------------------------------------------
Class Y 5.96% -0.45%
- --------------------------------------------------------------------------------
Lehman Aggregate Bond -0.37% 3.09%
- --------------------------------------------------------------------------------
Lipper Multi Sector Income 2.79% -0.01%
- --------------------------------------------------------------------------------
Past performance of the fund is not indicative of future performance.
The inception date of the Class A, B and Y shares is 7/24/98 and the inception
date of the Class C shares is 2/1/99. The performance reflected in the graph
begins on 7/31/98.
Performance reflects voluntary fee waivers in effect. In absence of such fee
waivers, total returns would be reduced.
11 '99 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
THIS PAGE WAS INTENTIONALLY LEFT BLANK.
12 '99 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
REPORT OF INDEPENDENT
AUDITORS SEPTEMBER 30, 1999
To the Shareholders and Board of Directors
First American Investment Funds, Inc.
We have audited the accompanying statements of net assets of the
Adjustable Rate Mortgage Securities, Fixed Income, Intermediate
Government Bond, Intermediate Term Income, Limited Term Income and
Strategic Income Funds (certain funds constituting First American
Investment Funds, Inc.) (the "Funds") as of September 30, 1999, and the
related statements of operations, statements of changes in net assets and
financial highlights for the year then ended. These financial statements
and financial highlights are the responsibility of the Funds' management.
Our responsibility is to express an opinion on these financial statements
and financial highlights based on our audits. The statements of changes
in net assets for the year ended September 30, 1998 and the financial
highlights for the periods presented through September 30, 1998 were
audited by other auditors whose report dated November 13, 1998 expressed
an unqualified opinion on those statements and financial highlights.
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
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements and financial highlights. Our
procedures included confirmation of securities owned as of September 30,
1999, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of each of the above listed funds of First American Investment
Funds, Inc. at September 30, 1999, and the results of their operations,
changes in their net assets, and their financial highlights for the year
then ended, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Minneapolis, Minnesota
November 2, 1999
13 '99 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
NET ASSETS SEPTEMBER 30, 1999
ADJUSTABLE RATE MORTGAGE
SECURITIES FUND
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------------------------
U.S. AGENCY MORTGAGE-BACKED SECURITIES -- 88.3%
ADJUSTABLE RATE -- 78.9%
FHLMC Pool #N96388
5.500%, 04/01/03 (A) $1,135 $ 1,103
FHLMC Pool #350022
7.000%, 11/01/16 (A) 3,568 3,600
FHLMC Pool #350036
7.250%, 01/01/17 (A) 468 476
FHLMC Pool #785781
6.481%, 02/01/27 (A) 3,161 3,140
FHLMC Series 1364 Class-A
5.890%, 09/15/07 (A) 3,616 3,628
FNMA Pool #093872
6.195%, 11/01/17 (A) 4,089 4,138
FNMA Pool #102549
6.863%, 01/01/20 (A) 834 857
FNMA Pool #176370
6.956%, 02/01/22 (A) 689 706
FNMA Pool #238842
6.946%, 03/01/28 (A) 2,969 2,974
FNMA Pool #325073
7.295%, 10/01/25 (A) 2,625 2,656
FNMA Pool #415285
5.782%, 02/01/28 (A) 6,117 6,128
FNMA Pool #508522
6.013%, 06/01/29 (A) 2,993 2,931
FNMA Pool #605324
6.835%, 06/01/18 (A) 777 797
FNMA Pool #785730
6.273%, 12/01/26 (A) 2,516 2,500
FNMA Series 1993-65 Class-FC
5.400%, 06/25/12 (A) 5,500 5,444
FNMA Series 1993-170 Class-FC
5.350%, 09/25/08 (A) 1,000 984
FNMA Series 1994-12 Class-FB
5.600%, 01/25/09 (A) 1,684 1,673
FNMA Series 1994-30 Class-F
5.600%, 06/25/23 (A) 1,549 1,543
FNMA Series 1994-33 Class-FD
5.500%, 03/25/09 (A) 2,000 1,947
GNMA Pool #8006
6.625%, 07/20/22 (A) 3,397 3,438
GNMA Pool #8191
6.375%, 05/20/23 (A) 3,940 3,977
GNMA Pool #8445
6.375%, 06/20/24 (A) 3,615 3,658
GNMA Pool #8699
6.625%, 09/20/25 (A) 2,881 2,905
GNMA Pool #8747
6.125%, 11/20/25 (A) 452 455
GNMA Pool #8824
6.625%, 08/20/21 (A) 3,180 3,218
GNMA Pool #8847
6.375%, 04/20/26 (A) 2,731 2,745
GNMA Pool #8855
6.125%, 10/20/21 (A) 3,084 3,116
GNMA Pool #80106
6.650%, 08/20/27 (A) 1,584 1,596
GNMA Pool #80154
6.625%, 01/20/28 (A) 1,694 1,703
GNMA Pool #80184
5.500%, 04/20/28 (A) 1,765 1,752
ADJUSTABLE RATE MORTGAGE
SECURITIES FUND (CONTINUED)
DESCRIPTION PAR (000)/SHARES VALUE (000)
- --------------------------------------------------------------------------
GNMA Pool #80213
5.500%, 07/20/28 (A) $ 4,042 $ 4,048
----------
79,836
----------
FIXED RATE -- 9.4%
FHLMC Pool #G10735
7.500%, 09/01/12 2,114 2,145
FHLMC Pool #G40274
6.000%, 06/01/03 2,655 2,626
GNMA Pool #80298
5.000%, 07/20/29 1,992 1,946
GNMA Pool #158777
9.000%, 05/15/16 504 529
GNMA Pool #780081
10.000%, 02/15/25 937 1,028
GNMA Pool #780398
9.000%, 04/15/21 1,201 1,272
----------
9,546
----------
TOTAL U.S. AGENCY MORTGAGE-BACKED SECURITIES
(Cost $89,604) 89,382
----------
PRIVATE MORTGAGE-BACKED SECURITIES -- 6.6%
ADJUSTABLE RATE -- 3.2%
CMC Securities II Series 1993-2H Class-A1
6.950%, 09/25/23 (A) 3,229 3,225
----------
FIXED RATE -- 3.4%
Countrywide Mortgage-Backed
Securities Series 1993-B Class-A4
6.750%, 11/25/23 1,463 1,446
Residential Funding Series 1999-S5 Class-A1
6.000%, 02/25/29 2,000 1,979
----------
3,425
----------
TOTAL PRIVATE MORTGAGE-BACKED SECURITIES
(Cost $6,759) 6,650
----------
ASSET-BACKED OBLIGATIONS -- 1.9%
HOME EQUITY -- 1.9%
EQCC Home Equity Loan Trust Series 1998-1 Class-A6F
6.252%, 12/15/07 2,000 1,948
----------
TOTAL ASSET-BACKED OBLIGATIONS
(Cost $2,022) 1,948
----------
RELATED PARTY MONEY MARKET FUND -- 4.0%
First American Prime Obligations Fund (B) 4,009,705 4,010
----------
TOTAL RELATED PARTY MONEY MARKET FUND
(Cost $4,010) 4,010
----------
TOTAL INVESTMENTS -- 100.8%
(Cost $102,395) 101,990
----------
OTHER ASSETS AND LIABILITIES, NET -- (0.8%) (795)
----------
14 '99 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
ADJUSTABLE RATE MORTGAGE
SECURITIES FUND (CONCLUDED)
DESCRIPTION VALUE (000)
- --------------------------------------------------------------------------
NET ASSETS:
Portfolio Capital--Class A ($.0001 par value -
2 billion authorized) based on 12,509,625
outstanding shares $ 242,117
Portfolio Capital--Class Y ($.0001 par value -
2 billion authorized) based on 61,543
outstanding shares 502
Undistributed net investment income 98
Accumulated net realized loss on investments (141,117)
Net unrealized depreciation of investments (405)
----------
NET ASSETS -- 100.0% $ 101,195
----------
Net asset value and redemption price
per share--Class A $ 8.05
Maximum sales charge of 2.50% (C) 0.21
----------
Offering price per share--Class A $ 8.26
----------
Net asset value, offering price, and
redemption price per share--Class Y $ 8.06
----------
(A) Variable Rate Security--the rate reported on the Statement of Net Assets is
the rate in effect as of September 30, 1999.
(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) The offering price is calculated by dividing the net asset value by 1 minus
the maximum sales charge of 2.50%.
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.
FIXED INCOME FUND
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------------------------
CORPORATE BONDS -- 37.2%
CONSUMER GOODS -- 0.3%
Coca-Cola Enterprises
6.700%, 10/15/36 $ 3,500 $ 3,486
----------
ENERGY -- 3.1%
Consolidated Natural Gas
7.250%, 10/01/04 20,000 19,975
Dynegy
6.875%, 07/15/02 20,000 19,836
Enron
7.125%, 05/15/07 2,750 2,690
----------
42,501
----------
FINANCE -- 18.3%
Associates
5.800%, 04/20/04 25,000 23,906
Bank America National Trust & Savings
8.375%, 05/01/07 73 73
Bear Stearns
6.150%, 03/02/04 25,000 24,062
Chase Manhattan
5.750%, 04/15/04 25,775 24,616
Cigna
7.400%, 01/15/03 10,726 10,728
CIT Group Holdings
6.200%, 10/20/00 29,100 29,028
General Electric Capital
6.650%, 09/03/02 30,000 30,150
Goldman Sachs
6.650%, 05/15/09 15,000 14,269
Green Tree Financial
6.600%, 01/15/19 18,000 18,028
Household Finance
7.200%, 07/15/06 15,000 14,925
Lehman Brothers Holdings,
Mandatory Put @ 100
7.500%, 08/01/26 (C) 3,000 3,031
Money Store
7.300%, 12/01/02 41,795 42,228
Norwest
6.550%, 12/01/06 17,000 16,486
Salomon Smith Barney
5.980%, 03/26/01 3,750 3,721
----------
255,251
----------
MANUFACTURING -- 10.4%
Boeing
7.250%, 06/15/25 20,000 19,359
Ford Motor Credit
7.750%, 03/15/05 20,000 20,725
7.450%, 07/16/31 10,000 9,876
General Motors Acceptance
6.150%, 04/05/07 34,200 32,405
Honeywell
7.000%, 03/15/07 15,000 15,000
International Business Machines
7.250%, 11/01/02 10,000 10,225
PPG Industries
7.400%, 08/15/19 18,000 17,810
Xerox Cap Europe
5.750%, 05/15/02 20,000 19,529
----------
144,929
----------
15 '99 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
NET ASSETS SEPTEMBER 30, 1999
FIXED INCOME FUND (CONTINUED)
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------------------------
SERVICES -- 1.5%
Hertz
6.250%, 03/15/09 $22,500 $ 20,772
Time Warner
8.875%, 10/01/12 25 28
----------
20,800
----------
TRANSPORTATION -- 0.8%
Conrail
6.760%, 05/25/15 874 858
Continental Airlines
7.056%, 09/15/09 10,000 9,686
Norfolk Southern
7.050%, 05/01/37 150 149
----------
10,693
----------
UTILITIES -- 2.1%
Alltel
6.750%, 09/15/05 10,000 9,786
AT&T
5.625%, 03/15/04 20,000 19,167
----------
28,953
----------
OTHER -- 0.7%
Hydro-Quebec
9.400%, 02/01/21 69 83
Quebec Province Yankee
7.000%, 01/30/07 10,000 10,042
----------
10,125
----------
TOTAL CORPORATE BONDS
(Cost $528,969) 516,738
----------
U.S. AGENCY MORTGAGE-BACKED SECURITIES -- 28.9%
FIXED RATE -- 27.5%
FHLMC Series 51 Class-VA
7.000%, 04/17/06 10,870 10,950
FHLMC Series 163 Class-F
6.000%, 07/15/21 3,037 2,940
FHLMC Series 1638 Class-E
6.250%, 04/15/23 5,000 4,862
FHLMC Series 1643 Class- PK
6.500%, 12/15/23 5,439 5,030
FHLMC Series 1648 Class-LA
6.000%, 05/15/23 4,695 4,109
FHLMC Series 1699 Class-TD
6.000%, 03/15/24 10,000 8,999
FHLMC Series 1723 Class-PJ
7.000%, 02/15/24 7,133 7,037
FHLMC Series 2115 Class-BJ
6.000%, 03/15/28 5,020 4,525
FHLMC Pool #A00894
9.500%, 06/01/21 2,020 2,154
FHLMC Pool #A01608
10.000%, 12/01/19 2,015 2,178
FHLMC Pool #C00029
9.000%, 03/01/21 820 863
FHLMC Pool #C00434
7.000%, 11/01/25 1,762 1,733
FHLMC Pool #C80378
6.500%, 01/01/26 698 672
FIXED INCOME FUND (CONTINUED)
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------------------------
FHLMC Pool #C80379
7.000%, 02/01/26 $ 57 $ 56
FHLMC Pool #C80433
6.500%, 08/01/26 3,267 3,141
FHLMC Pool #D65198
6.500%, 11/01/25 1,745 1,681
FHLMC Pool #D65792
6.500%, 11/01/25 69 67
FHLMC Pool #D66778
6.500%, 01/01/26 1,803 1,734
FHLMC Pool #D69184
6.500%, 03/01/26 84 81
FHLMC Pool #D69402
6.500%, 03/01/26 402 387
FHLMC Pool #D69965
6.500%, 04/01/26 944 908
FHLMC Pool #D70119
6.500%, 04/01/26 1,790 1,721
FHLMC Pool #D70229
6.500%, 04/01/26 552 531
FHLMC Pool #D70722
6.500%, 04/01/26 2,369 2,278
FHLMC Pool #D70890
6.500%, 04/01/26 5,613 5,396
FHLMC Pool #D71415
6.500%, 05/01/26 3,674 3,532
FHLMC Pool #E00505
6.500%, 09/01/12 143 140
FHLMC Pool #E20194
7.000%, 09/01/10 5,733 5,739
FHLMC Pool #E59943
7.500%, 11/01/09 471 479
FHLMC Pool #E61199
7.000%, 09/01/10 830 831
FHLMC Pool #E61265
7.000%, 09/01/10 2,710 2,713
FHLMC Pool #G00445
6.500%, 02/01/26 2,604 2,503
FHLMC Pool #G10268
7.500%, 10/01/09 1,002 1,017
FHLMC Pool #G10308
7.500%, 12/01/09 1,329 1,350
FHLMC Pool #G10373
7.000%, 08/01/10 1,122 1,123
FHLMC Pool #l90187
6.000%, 10/01/00 16 17
FNMA Series 1992 Class-169-J
6.500%, 03/25/21 7,398 7,371
FNMA Series 1996 Class-23
6.500%, 07/25/26 4,250 3,925
FNMA Series 1996 Class-53-PG
6.500%, 12/18/11 3,000 2,949
FNMA Series 1997 Class-1A-B
6.500%, 02/18/04 6,370 6,333
FNMA Series 1998 Class-M1-A2
6.250%, 01/25/08 7,500 7,230
FNMA Series 1999 Class-1-PG
6.500%, 04/25/28 15,343 14,229
FNMA Pool #100042
11.000%, 10/15/20 649 729
FNMA Pool #124654
7.000%, 12/01/07 3,168 3,173
16 '99 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
FIXED INCOME FUND (CONTINUED)
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------------------------
FNMA Pool #125224
6.500%, 08/01/23 $ 5,502 $ 5,310
FNMA Pool #198657
7.000%, 01/01/08 398 399
FNMA Pool #238589
6.000%, 10/01/23 654 616
FNMA Pool #250055
7.000%, 05/01/09 1,352 1,353
FNMA Pool #250113
9.000%, 07/01/24 309 325
FNMA Pool #250359
7.000%, 10/01/25 3,452 3,394
FNMA Pool #250551
7.000%, 05/01/26 9,088 8,935
FNMA Pool #250554
6.500%, 05/01/11 9,100 8,958
FNMA Pool #252570
6.500%, 07/01/29 17,241 16,530
FNMA Pool #290144
7.000%, 07/01/09 33 34
FNMA Pool #303483
6.500%, 08/01/02 16 17
FNMA Pool #303675
10.000%, 10/01/17 315 341
FNMA Pool #303850
6.500%, 04/01/11 1,739 1,712
FNMA Pool #326129
6.500%, 09/01/25 2,860 2,753
FNMA Pool #328160
6.500%, 12/01/25 60 58
FNMA Pool #340798
7.000%, 04/01/26 9,536 9,376
FNMA Pool #341863
6.500%, 04/01/11 1,246 1,225
FNMA Pool #342397
6.500%, 04/01/11 2,995 2,949
FNMA Pool #343468
6.500%, 04/01/11 2,959 2,914
FNMA Pool #353997
6.500%, 07/01/26 3,622 3,480
FNMA Pool #361764
7.500%, 10/01/26 2,856 2,866
FNMA Pool #361777
7.500%, 10/01/26 2,697 2,706
FNMA Pool #362480
7.500%, 10/01/26 2,077 2,085
FNMA Pool #397381
7.500%, 08/01/17 75 77
FNMA Pool #397835
6.500%, 09/01/12 64 63
FNMA Pool #419258
6.000%, 04/01/13 2,602 2,504
FNMA Pool #421576
6.000%, 04/01/13 2,548 2,451
FNMA Pool #422699
6.000%, 04/01/13 1,802 1,734
FNMA Pool #440780
5.500%, 02/01/14 29,263 27,590
FNMA Pool #456276
6.000%, 12/01/28 27,726 25,866
FNMA Pool #493914
6.500%, 04/01/29 97 94
FIXED INCOME FUND (CONTINUED)
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------------------------
FNMA Pool #496026
6.000%, 01/01/29 $16,361 $ 15,252
FNMA (TBA)
6.000%, 01/15/14 (A) 19,500 18,744
7.500%, 09/01/29 (A) 24,000 24,052
GNMA Pool #8259
6.625%, 08/20/23 25 25
GNMA Pool #455516
7.500%, 09/15/27 80 81
GNMA Pool #036899
10.000%, 01/15/10 627 685
GNMA Pool #364972
7.000%, 03/15/09 961 964
GNMA Pool #389939
7.000%, 03/15/09 1,129 1,132
GNMA Pool #405482
9.000%, 08/15/25 1,162 1,219
GNMA Pool #413130
7.000%, 09/15/25 54 54
GNMA Pool #443774
7.500%, 12/15/27 160 161
GNMA Pool #488997
7.000%, 04/15/29 3,983 3,907
GNMA Pool #497638
6.000%, 02/15/29 19,754 18,334
GNMA Pool #506455
7.000%, 04/15/29 4,688 4,600
GNMA Pool #506480
7.000%, 04/15/29 5,878 5,766
GNMA Pool #506639
7.000%, 04/15/29 5,202 5,103
GNMA Pool #780295
7.000%, 12/15/10 4,229 4,235
GNMA Pool #780398
9.000%, 04/15/21 40 42
----------
382,487
----------
Z-BONDS (B) -- 1.4%
FHLMC Series 1665 Class-KZ
6.500%, 01/15/24 8,352 7,738
FHLMC Series 1677 Class-Z
7.619%, 07/15/23 4,554 4,528
FNMA Series 1993 Class-160-ZA
6.764%, 09/25/23 18 18
6.764%, 09/25/23 1,034 963
FNMA Series 1996 Class-35-Z
7.629%, 07/25/26 7,440 6,914
----------
20,161
----------
TOTAL U.S. AGENCY MORTGAGE-BACKED SECURITIES
(Cost $406,757) 402,648
----------
U.S. GOVERNMENT & AGENCY SECURITIES -- 24.3%
U.S. AGENCY DEBENTURES -- 6.8%
FHLMC
5.000%, 02/15/01 50,000 49,391
5.950%, 01/19/06 30,000 28,975
5.750%, 04/15/08 2,000 1,877
FNMA
5.625%, 03/15/01 15,000 14,928
----------
95,171
----------
17 '99 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
NET ASSETS SEPTEMBER 30, 1999
FIXED INCOME FUND (CONTINUED)
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------------------------
U.S. TREASURIES -- 17.5%
U.S. Treasury Bonds
7.125%, 02/15/23 $50,000 $ 54,262
6.875%, 08/15/25 50,000 53,079
U.S. Treasury Notes
5.625%, 11/30/00 25,000 25,024
6.500%, 10/15/06 85,000 86,914
U.S. Treasury Notes (TIPS)
3.875%, 04/15/29 25,367 24,503
----------
243,782
----------
TOTAL U.S. GOVERNMENT & AGENCY SECURITIES
(Cost $351,107) 338,953
----------
ASSET-BACKED SECURITIES -- 6.6%
CREDIT CARDS -- 1.5%
Citibank Credit Card Master Trust
Series 1997-7 Class A
6.350%, 08/15/02 100 100
Sears Credit Account Master Trust
Series 1992-2 Class A
6.350%, 02/15/07 20,000 20,003
----------
20,103
----------
HOME EQUITY -- 5.1%
Asset Securitization Series 1996-MD6
Class A1B
6.880%, 11/13/26 41,540 41,493
J.P. Morgan Commercial Mortgage
Finance Series 1995 Class C1-B
7.633%, 07/25/10 (D) 10,329 10,514
Merrill Lynch Mortgage Series 1995
Class C3-A3
7.060%, 12/26/25 (D) 9,835 9,829
Merrill Lynch Mortgage Investors
Series 1993 Class A4-C
6.381%, 03/15/18 (D) 6,000 6,122
Nomura Asset Securities Series 1996
Class-MD5 A1B
7.120%, 04/13/36 3,400 3,376
----------
71,334
----------
TOTAL ASSET-BACKED SECURITIES
(Cost $92,671) 91,437
----------
PRIVATE MORTGAGE-BACKED SECURITIES -- 2.3%
ADJUSTABLE RATE -- 0.4%
Prudential Home Mortgage Securities
Series 1994 Class-28-M
6.723%, 09/25/01 (D) 5,635 5,654
----------
FIXED RATE -- 1.0%
Countrywide Mortgage-Backed
Securities Series 1994 Class-GA3
6.500%, 04/25/24 2,380 2,356
Drexel Burnham Lambert Trust S-2
9.000%, 08/01/18 252 264
General Electric Capital Mortgage
Series 1994 Class-17 A6
7.000%, 05/25/24 7,000 6,904
General Electric Capital Mortgage
Series 1994 Class-17 A7
7.000%, 05/25/24 5,179 4,878
----------
14,402
----------
FIXED INCOME FUND (CONTINUED)
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------------------------
Z-BONDS (B) -- 0.9%
Vendee Mortgage Trust Series 1996 Class-1Z
6.698%, 02/15/26 $13,215 $ 12,612
----------
TOTAL PRIVATE MORTGAGE-BACKED SECURITIES
(Cost $30,276) 32,668
----------
RELATED PARTY MONEY MARKET FUND -- 2.4%
First American Prime Obligations
Fund (E) 33,989,780 33,990
----------
TOTAL RELATED PARTY MONEY MARKET FUND
(Cost $33,990) 33,990
----------
TOTAL INVESTMENTS -- 101.7%
(Cost $1,443,770) 1,416,434
----------
OTHER ASSETS AND LABILITIES, NET -- (1.7%) (F) (24,043)
----------
NET ASSETS:
Portfolio Capital--Class A ($.0001 par value--
2 billion authorized) based on
12,875,689 outstanding shares 227,900
Portfolio Capital--Class B ($.0001 par value--
2 billion authorized) based on 1,383,121
outstanding shares 15,160
Portfolio Capital--Class C ($.0001 par value--
2 billion authorized) based on 67,641
outstanding shares 735
Portfolio Capital--Class Y ($.0001 par value--
2 billion authorized) based on 116,450,017
outstanding shares 1,266,884
Undistributed net investment income 528
Accumulated net realized loss on investments (91,480)
Net unrealized depreciation of investments (27,336)
-----------
NET ASSETS -- 100.0% $1,392,391
-----------
Net asset value and redemption
price per share--Class A $ 10.65
Maximum sales charge of 4.25% (G) 0.47
-----------
Offering price per share--Class A $ 11.12
-----------
Net asset value and offering
price per share--Class B (H) $ 10.58
-----------
Net asset value price per share--Class C (I) $ 10.64
Maximum sales charge of 1.00% (J) 0.11
-----------
Offering price per share--Class C $ 10.75
-----------
Net asset value, offering price, and
redemption price per share--Class Y $ 10.65
-----------
18 '99 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
FIXED INCOME FUND (CONCLUDED)
DESCRIPTION
- --------------------------------------------------------------------------
(A) On September 30, 1999, the total cost of investments purchased on a
when-issued basis was $42,384,844.
(B) 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 estimate of future cash flows.
(C) Mandatory Put Security--the mandatory put date is shown as the maturity date
in the Statement of Net Assets.
(D) Variable Rate Security--the rate reported on the Statement of Net Assets is
the rate in effect as of September 30, 1999.
(E) 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.
(F) Other assets and liabilities representing greater than five percent of total
net assets include the following (000):
Cash collateral received for securities lending $565,329
Payable upon return of securities on loan ($565,329)
Payable for securities purchased ($ 88,025)
(G) The offering price is calculated by dividing the net asset value by 1 minus
the maximum sales charge of 4.25%
(H) Class B has a contingent deferred sales charge. For a description of a
possible redemption charge, see the notes to the financial statements.
(I) Class C has a contingent deferred sales charge. For a description of a
possible redemption charge, see the notes to the financial statements.
(J) The offering price is calculated by dividing the net asset value by 1 minus
the maximum sales charge of 1.00%.
FHLMC--Federal Home Loan Mortgage Corporation
FNMA--Federal National Mortgage Association
GNMA--Government National Mortgage Association
TBA--To Be Announced
TIPS--Treasury Inflation Protection Security
The accompanying notes are an integral part of the financial statements.
INTERMEDIATE GOVERNMENT BOND FUND
DESCRIPTION PAR (000)/SHARES VALUE (000)
- --------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS -- 98.4%
U.S. AGENCY DEBENTURES -- 58.5%
FFCB
5.600%, 01/14/03 $ 3,600 $ 3,513
5.625%, 09/02/03 2,000 1,948
6.100%, 11/04/04 6,350 6,259
FHLB
5.260%, 05/26/00 5,000 4,989
5.970%, 12/11/00 3,000 3,004
5.620%, 01/12/01 5,000 4,975
5.125%, 04/17/01 5,000 4,937
7.440%, 08/10/01 1,000 1,025
5.875%, 08/15/01 5,000 4,986
5.995%, 11/21/01 7,000 6,989
6.030%, 11/26/02 3,750 3,725
6.050%, 12/03/02 2,500 2,485
5.930%, 03/07/03 1,000 985
5.785%, 03/17/03 9,000 8,835
5.125%, 09/15/03 5,000 4,786
6.030%, 12/23/04 2,500 2,456
5.810%, 01/21/05 3,755 3,649
6.060%, 05/24/06 5,000 4,855
6.090%, 06/02/06 5,000 4,856
5.540%, 01/08/09 5,500 5,045
TVA
6.000%, 11/01/00 5,000 5,007
6.000%, 09/24/02 5,000 4,969
6.375%, 06/15/05 5,000 4,900
----------
99,178
----------
U.S. TREASURIES -- 39.9%
U.S. Treasury Bond
11.625%, 11/15/02 5,000 5,811
U.S. Treasury Notes
7.750%, 11/30/99 2,500 2,511
7.875%, 08/15/01 9,000 9,347
7.500%, 11/15/01 9,000 9,322
6.500%, 05/31/02 2,000 2,037
7.250%, 05/15/04 12,100 12,758
7.875%, 11/15/04 8,000 8,671
6.500%, 08/15/05 8,500 8,702
7.000%, 07/15/06 8,000 8,399
----------
67,558
----------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(Cost $166,839) 166,736
----------
RELATED PARTY MONEY MARKET FUND -- 0.1%
First American Government Obligations
Fund (A) 197,150 197
----------
TOTAL RELATED PARTY MONEY MARKET FUND
(Cost $197) 197
----------
TOTAL INVESTMENTS -- 98.5%
(Cost $167,036) 166,933
----------
OTHER ASSETS AND LIABILITIES, NET -- 1.5% 2,580
----------
19 '99 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
NET ASSETS SEPTEMBER 30, 1999
INTERMEDIATE GOVERNMENT BOND FUND
(CONCLUDED)
DESCRIPTION VALUE (000)
- --------------------------------------------------------------------------
NET ASSETS:
Portfolio Capital--Class A
($.0001 par value--2 billion authorized)
based on 597,812 outstanding shares $ 5,615
Portfolio Capital--Class Y
($.0001 par value--2 billion authorized)
based on 17,930,970 outstanding shares 162,263
Undistributed net investment income 6
Accumulated net realized gain on investments 1,732
Net unrealized depreciation of investments (103)
----------
NET ASSETS -- 100.0% $ 169,513
----------
Net asset value and redemption
price per share--Class A $ 9.16
Maximum sales charge of 2.50% (B) 0.23
----------
Offering price per share--Class A $ 9.39
----------
Net asset value, offering price, and redemption
price per share--Class Y $ 9.15
----------
(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) The offering price is calculated by dividing the net asset value by 1 minus
the maximum sales charge of 2.50%.
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)
- --------------------------------------------------------------------------
CORPORATE BONDS -- 38.7%
CONSUMER GOODS -- 1.7%
Coca-Cola Enterprises
6.700%, 10/15/36 $ 2,000 $ 1,992
Dayton Hudson Corp
5.875%, 11/01/08 5,000 4,607
----------
6,599
----------
ENERGY -- 3.5%
Conoco
5.900%, 04/15/04 6,500 6,273
Dynegy
6.875%, 07/15/02 5,000 4,959
Occidental Petroleum
6.410%, 11/30/00 1,000 996
Union Oil of California
8.750%, 08/15/01 1,000 1,033
----------
13,261
----------
FINANCE -- 21.0%
American Express
6.500%, 08/01/00 1,000 1,003
Associates
5.800%, 04/20/04 5,000 4,781
Bear Stearns, Series B
6.238%, 10/03/00 13,000 12,981
Chase Manhattan
5.750%, 04/15/04 10,000 9,551
Cigna
7.400%, 01/15/03 3,075 3,076
CIT Group Holdings
6.200%, 10/20/00 12,725 12,693
First Chicago
7.625%, 01/15/03 5,000 5,113
General Motors Acceptance
6.150%, 04/05/07 10,000 9,475
Lehman Brothers Holdings,
Mandatory Put @ 100
7.500%, 08/01/26 (B) 2,000 2,021
Metropolitan Life Insurance
6.300%, 11/01/03 (C) 15,145 14,788
Morgan Stanley Group
8.100%, 06/24/02 1,000 1,032
Nordstrom Credit
6.700%, 07/01/05 1,000 988
Safeco
7.875%, 04/01/05 1,000 1,018
Salomon Smith Barney Holdings
7.000%, 03/15/04 2,000 1,998
----------
80,518
----------
20 '99 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
INTERMEDIATE TERM INCOME FUND
(CONTINUED)
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------------------------
MANUFACTURING -- 10.4%
Ford Motor Credit
6.250%, 11/08/00 $13,200 $ 13,190
7.000%, 09/25/01 2,000 2,014
Honeywell
7.000%, 03/15/07 5,000 5,000
McDonnell Douglas
6.875%, 11/01/06 10,000 10,013
Xerox Cap Europe
5.750%, 05/15/02 10,000 9,764
----------
39,981
----------
SERVICES -- 0.5%
Hertz
6.300%, 11/15/06 2,000 1,968
----------
TRANSPORTATION -- 0.9%
Continental Airlines
7.056%, 09/15/09 3,500 3,390
----------
OTHER -- 0.7%
Hydro-Quebec
9.400%, 02/01/21 2,300 2,766
----------
TOTAL CORPORATE BONDS
(Cost $150,407) 148,483
----------
U.S. GOVERNMENT & AGENCY SECURITIES -- 34.0%
U.S. AGENCY DEBENTURES -- 9.0%
FHLB
5.985%, 11/26/02 2,175 2,158
FHLMC
5.000%, 02/15/01 20,000 19,756
5.950%, 01/19/06 11,000 10,624
FNMA
6.180%, 03/15/01 1,000 1,002
6.160%, 04/03/01 1,000 1,002
----------
34,542
----------
U.S. TREASURIES -- 25.0%
U.S. Treasury Notes
6.250%, 10/31/01 15,000 15,168
6.250%, 02/15/03 33,000 33,430
6.875%, 05/15/06 10,000 10,442
6.500%, 10/15/06 19,000 19,428
6.125%, 08/15/07 15,000 15,016
U.S. Treasury STRIPS
5.460%, 05/15/08 (A) 3,720 2,175
----------
95,659
----------
TOTAL U.S. GOVERNMENT & AGENCY SECURITIES
(Cost $133,252) 130,201
----------
ASSET-BACKED SECURITIES -- 17.0%
CREDIT CARDS -- 2.3%
Circuit City Credit Card Master Trust
Series 1995-1 Class A
6.375%, 08/15/05 6,670 6,689
Citibank Credit Card Master Trust
Series 1997-7 Class A
6.350%, 08/15/02 2,000 2,007
----------
8,696
----------
INTERMEDIATE TERM INCOME FUND
(CONTINUED)
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------------------------
HOME EQUITY -- 14.7%
American Southwest Financial Securities
Series 1995-C1 Class A1B
7.400%, 11/17/04 $ 9,045 $ 9,162
Asset Securitization Series 1996-MD6
Class A1B
6.880%, 11/13/26 18,400 18,379
Equicredit Home Equity Loan Trust
Series 1994-2 Class A2
7.350%, 06/15/14 780 785
Merrill Lynch Mortgage Series 1995
Class C3-A3
7.060%, 12/26/25 (D) 18,725 18,713
New Century Home Equity Loan Trust
Series 1997-NC6 Class A3
6.590%, 12/25/19 9,200 9,187
----------
56,226
----------
TOTAL ASSET-BACKED SECURITIES
(Cost $65,773) 64,922
----------
U.S. AGENCY MORTGAGE-BACKED SECURITIES -- 8.6%
FIXED RATE -- 8.6%
FHLMC Pool #E20194
7.000%, 09/01/10 1,215 1,216
FHLMC Series 1606 Class-H
6.000%, 11/15/08 5,085 4,900
FHLMC Series 1659 Class-TN
5.500%, 01/15/01 616 613
FHLMC Series 1902 Class C
7.000%, 05/15/03 2,061 2,080
FNMA Pool #050145
10.000%, 11/01/18 977 1,057
FNMA Pool #050776
6.000%, 08/01/08 1,069 1,039
FNMA Pool #250387
7.000%, 11/01/10 1,189 1,189
FNMA Pool #303357
7.000%, 06/01/10 328 329
FNMA Pool #303753
9.000%, 12/01/20 1,050 1,097
FNMA Pool #341727
9.500%, 06/01/21 937 997
FNMA Pool #440780
5.500%, 02/01/14 8,574 8,085
FNMA Series 1993-55 Class-J
6.500%, 11/25/07 1,000 995
FNMA Series 1996-57 Class-E
7.000%, 06/25/03 1,843 1,857
GNMA Pool #002007
9.000%, 05/20/25 539 566
GNMA Pool #002038
8.500%, 07/20/25 912 949
GMNA Pool #312046
9.000%, 08/15/21 1,398 1,475
GNMA Pool #497638
6.000%, 02/15/29 4,933 4,579
----------
33,023
----------
TOTAL U.S. AGENCY MORTGAGE-BACKED SECURITIES
(Cost $33,577) 33,023
----------
21 '99 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
NET ASSETS SEPTEMBER 30, 1999
INTERMEDIATE TERM INCOME FUND
(CONTINUED)
DESCRIPTION PAR (000)/SHARES VALUE (000)
- --------------------------------------------------------------------------
PRIVATE MORTGAGE-BACKED SECURITIES -- 0.6%
FIXED RATE -- 0.0%
Drexel Burnham Lambert CMO Trust S-2
9.000%, 08/01/18 $ 28 $ 30
----------
ADJUSTABLE RATE -- 0.6%
Prudential Home Mortgage Securities
Series 1994 Class-28-M
6.723%, 09/25/01 (D) 2,145 2,153
----------
TOTAL PRIVATE MORTGAGE-BACKED SECURITIES
(Cost $2,158) 2,183
----------
RELATED PARTY MONEY MARKET FUND -- 0.1%
First American Prime Obligations Fund (E) 542,955 543
----------
TOTAL RELATED PARTY MONEY MARKET FUND
(Cost $543) 543
----------
TOTAL INVESTMENTS -- 99.0%
(Cost $385,710) 379,355
----------
OTHER ASSETS AND LIABILITIES, NET (F) -- 1.0% 3,874
----------
NET ASSETS:
Portfolio Capital--Class A ($.0001 par value--
2 billion authorized) based on 3,506,994
outstanding shares 48,752
Portfolio Capital--Class Y ($.0001 par value--
2 billion authorized) based on 35,692,781
outstanding shares 352,602
Undistributed net investment income 242
Accumulated net realized loss on investments (12,012)
Net unrealized depreciation of investments (6,355)
----------
NET ASSETS -- 100.0% $ 383,229
----------
Net asset value and redemption
price per share--Class A $ 9.80
Maximum sales charge of 2.50% (G) 0.25
----------
Offering price per share--Class A $ 10.05
----------
Net asset value, offering price, and redemption
price per share--Class Y $ 9.77
----------
INTERMEDIATE TERM INCOME FUND
(CONCLUDED)
DESCRIPTION
- --------------------------------------------------------------------------
(A) The rate shown is the effective yield at date of purchase.
(B) Mandatory Put Security--the mandatory put date is shown as the maturity on
the Statement of Net Assets.
(C) Security sold within the terms of a private placement memorandum, exempt
from registration under section 144A of the Securities Act of 1933, as
amended, and may be sold only to dealers in that program or other "qualified
institutional investors". These securities have been determined to be liquid
under guidelines established by the Board of Directors.
(D) Variable Rate Security--the rate reported on the Statement of Net Assets is
the rate in effect as of September 30, 1999.
(E) 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.
(F) Other assets and liabilities representing greater than five percent of the
total net assets include the following amounts (000):
Cash collateral received for securities on loan $153,567
Payable upon receipt of securities on loan ($153,567)
(G) The offering price is calculated by dividing the net asset value by 1 minus
the maximum sales charge of 2.50%.
CMO--Collateralized Mortgage Obligation
FHLB--Federal Home Loan Bank
FHLMC--Federal Home Loan Mortgage Corporation
FNMA--Federal National Mortgage Association
GNMA--Government National Mortgage Association
STRIPS--Separate Trading of Registered Interest and Principal of Securities
The accompanying notes are an integral part of the financial statements.
22 '99 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
LIMITED TERM INCOME FUND
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------------------------
CORPORATE OBLIGATIONS -- 40.2%
FINANCE -- 29.7%
American Express
6.500%, 08/01/00 $ 3,000 $ 3,010
Associates of North America
5.850%, 01/15/01 5,000 4,966
Bear Stearns, Series B
6.238%, 10/03/00 7,500 7,489
CIT Group Holdings
6.250%, 03/28/01 2,500 2,485
Commercial Credit
5.550%, 02/15/01 4,500 4,445
General Electric
5.760%, 04/24/00 2,000 1,999
Lehman Brothers Holdings
6.900%, 03/30/01 5,000 4,997
Salomon Smith Barney
5.980%, 03/26/01 7,750 7,689
----------
37,080
----------
MANUFACTURING -- 8.1%
Ford Credit Auto Loan Master Trust
Series 1995-1 Class-A
6.500%, 08/15/02 3,660 3,678
Ford Motor Credit
6.550%, 09/10/02 3,000 2,974
General Motors Acceptance
6.625%, 01/10/02 3,500 3,493
----------
10,145
----------
UTILITIES -- 2.4%
Worldcom
6.125%, 08/15/01 3,000 2,978
----------
TOTAL CORPORATE OBLIGATIONS
(Cost $50,639) 50,203
----------
ASSET-BACKED SECURITIES -- 31.3%
AUTOMOBILES -- 4.5%
Auto Bond Receivables Trust
Series 1993-1 Class-A
6.125%, 02/15/00 (A) (F) 106 105
Fasco Auto Trust Series 1996-1 Class-A
6.650%, 11/15/01 1,216 1,217
General Motors Acceptance
Series 1997 Class-A
6.500%, 04/15/02 1,136 1,141
MMCA Automobile Trust
Series 1997-1 Class-A3
6.080%, 05/15/01 3,179 3,182
----------
5,645
----------
CREDIT CARDS -- 10.1%
Chemical Master Credit Card Trust
Series 1995-3 Class-A
6.230%, 04/15/05 3,100 3,075
Circuit City Credit Card Master Trust
Series 1995-1 Class-A
6.375%, 08/15/05 2,525 2,532
Fingerhut Master Trust
Series 1996-1 Class-A
6.450%, 02/20/02 1,087 1,088
LIMITED TERM INCOME FUND (CONTINUED)
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------------------------
Sears Credit Account Master Trust
Series 1999-2 Class-A
6.350%, 02/16/07 $3,100 $ 3,100
Standard Credit Card Master Trust
Series 1995-3 Class-A
7.850%, 02/07/02 2,800 2,823
----------
12,618
----------
EQUIPMENT LEASING & RENTALS -- 2.2%
Icon Receivables Series 1997-A
Class-A1
6.435%, 06/01/05 (B) 2,702 2,711
----------
HOME EQUITY -- 13.9%
BCI Home Equity Loan
Series 1994-1 Class-B
5.960%, 03/29/44 (A) (B) 945 947
Banc One Home Equity Trust
Series 1999-2 Class-A3
6.940%, 06/25/29 4,000 3,982
Green Tree Financial
Series 1997-2 Class-A6
7.240%, 06/15/28 3,000 3,011
Green Tree Home Improvement
Loan Trust Series 1996-F
Class-HEA3
6.900%, 01/15/28 2,497 2,506
The Money Store Home Equity Trust
Series 1994-A Class-A4
6.275%, 12/15/22 2,750 2,724
The Money Store Home Equity Trust
Series 1996-D Class-A6
6.830%, 06/15/21 3,440 3,448
Wilshire Mortgage Loan Trust
Series 1996-4 Class-A2
6.750%, 06/25/15 796 797
----------
17,415
----------
VACATION PROPERTIES -- 0.6%
Patten Series 1995-1A
7.081%, 09/01/13 (A) (B) 749 702
----------
TOTAL ASSET-BACKED SECURITIES
(Cost $39,186) 39,091
----------
U.S. GOVERNMENT & AGENCY SECURITIES -- 13.2%
U.S. AGENCY DEBENTURES -- 6.8%
FHLB
5.690%, 08/07/01 5,500 5,463
6.000%, 08/15/02 3,000 2,983
----------
8,446
----------
U.S. TREASURY OBLIGATION -- 6.4%
U.S. Treasury Note
5.625%, 02/28/01 8,000 8,003
----------
TOTAL U.S. GOVERNMENT & AGENCY SECURITIES
(Cost $16,482) 16,449
----------
23 '99 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
NET ASSETS SEPTEMBER 30, 1999
LIMITED TERM INCOME FUND (CONTINUED)
DESCRIPTION PAR (000)/SHARES VALUE (000)
- --------------------------------------------------------------------------
PRIVATE MORTGAGE-BACKED SECURITIES -- 8.4%
ADJUSTABLE RATE -- 4.3%
JLC Lease Receivables Trust
Series 1994-1 Class-A
5.590%, 12/22/99 (A) $ 387 $ 388
Merrill Lynch Mortgage Investors
Series 1993 Class-A4-C
6.381%, 03/15/18 (A) 4,850 4,949
----------
5,337
----------
FIXED RATE -- 4.1%
Advanta Mortgage Loan Trust
Series 1998-2 Class-A12
6.330%, 08/25/19 3,000 2,929
PNC Mortgage Securities
Series 1999-5 Class-1A1
6.150%, 06/25/29 2,231 2,204
----------
5,133
----------
TOTAL PRIVATE MORTGAGE-BACKED SECURITIES
(Cost $10,389) 10,470
----------
U.S. AGENCY MORTGAGE-BACKED SECURITIES -- 2.7%
FHLMC Series 1655 Class-E
6.000%, 01/15/07 2,975 2,970
FNMA Series 1992-152 Class-J
7.000%, 05/25/06 339 338
----------
TOTAL U.S. AGENCY MORTGAGE-BACKED SECURITIES
(Cost $3,322) 3,308
----------
RELATED PARTY MONEY MARKET FUND -- 3.6%
First American Prime Obligations
Fund (C) 4,533,323 4,533
----------
TOTAL RELATED PARTY MONEY MARKET FUND
(Cost $4,533) 4,533
----------
TOTAL INVESTMENTS -- 99.4%
(Cost $124,551) 124,054
----------
OTHER ASSETS AND LIABILITIES, NET -- 0.6% (D) 786
----------
NET ASSETS:
Portfolio Capital--Class A ($.0001 par value--
2 billion authorized) based on 539,126
outstanding shares 5,969
Portfolio Capital--Class Y ($.0001 par value--
2 billion authorized) based on 12,115,154
outstanding shares 123,327
Undistributed net investment income 36
Accumulated net realized loss on investments (3,995)
Net unrealized depreciation of investments (497)
----------
NET ASSETS -- 100.0% $ 124,840
----------
Net asset value and redemption price
per share--Class A $ 9.86
Maximum sales charge of 2.50% (E) 0.25
----------
Offering price per share--Class A $ 10.11
----------
Net asset value, offering price, and
redemption price per share--Class Y $ 9.87
----------
LIMITED TERM INCOME FUND (CONCLUDED)
DESCRIPTION
- --------------------------------------------------------------------------
(A) Variable Rate Security--the rate reported on the Statement of Net Assets is
the rate in effect as of September 30,1999.
(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 the 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 $19,959
Payable upon return of securities on loan ($19,959)
(E) The offering price is calculated by dividing the net asset value by 1 minus
the maximum sales charge of 2.50%.
(F) Interest payments are infrequent.
FHLB--Federal Home Loan Bank
FHLMC--Federal Home Loan Mortgage Corporation
FNMA--Federal National Mortgage Association
The accompanying notes are an integral part of the financial statements.
24 '99 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STRATEGIC INCOME FUND
DESCRIPTION PAR (000) (F) VALUE (000)
- --------------------------------------------------------------------------
HIGH YIELD CORPORATE OBLIGATIONS -- 45.0%
AEROSPACE & DEFENSE -- 0.1%
Anteon, Callable 05/15/04 @ 106.000
12.000%, 05/15/09 (D) $ 175 $ 170
----------
APPAREL/TEXTILES -- 0.3%
GFSI, Callable 03/01/02 @ 104.810
9.625%, 03/01/07 250 175
Glenoit, Callable 04/15/02 @ 105.50
11.000%, 04/15/07 (E) 100 60
Pillowtex, Callable 11/15/01 @ 105.00
10.000%, 11/15/06 100 68
Pillowtex, Callable 12/15/02 @ 104.50
9.000%, 12/15/07 450 290
----------
593
----------
AUTOMOTIVE -- 1.3%
Accuride, Callable 02/01/03 @ 104.625
9.250%, 02/01/08 200 188
Aftermarket Technology, Callable
08/01/99 @ 106.000
12.000%, 08/01/04 412 418
American Axle & Manufacturing,
Callable 03/01/04 @ 104.875
9.750%, 03/01/09 300 296
Collins & Aikman Products,
Callable 04/15/01 @ 105.750
11.500%, 04/15/06 425 405
HDA Parts System, Callable
08/01/02 @ 106.000
12.000%, 08/01/05 (D) 150 144
JL French Auto Casting, Callable
06/01/04 @ 105.750
11.500%, 06/01/09 (D) 250 251
Lear, Callable 07/15/01 @ 104.750
9.500%, 07/15/06 75 75
Lear
8.110%, 05/15/09 (D) 400 387
Oxford Automotive, Series D,
Callable 06/15/02 @ 105.063
10.125%, 06/15/07 350 322
Transportation Manufacturing Operations,
Callable 05/01/04 @ 105.625
11.250%, 05/01/09 (D) 350 347
----------
2,833
----------
BROADCAST RADIO & TELEVISION -- 3.1%
Acme Television, Callable
09/30/01 @ 105.438
11.666%, 09/30/04 (C) (E) 500 440
Big City Radio, Callable
03/15/02 @ 105.625
15.688%, 03/15/05 (C) 400 274
Capstar Broadcasting, Callable
07/01/02 @ 104.625
9.250%, 07/01/07 75 76
Chancellor Media, Callable
02/01/00 @ 104.688
9.375%, 10/01/04 50 51
Chancellor Media, Callable
01/15/02 @ 105.250
10.500%, 01/15/07 (E) 50 54
STRATEGIC INCOME FUND (CONTINUED)
DESCRIPTION PAR (000) (F) VALUE (000)
- --------------------------------------------------------------------------
Chancellor Media, Series B,
Callable 06/15/02 @ 104.375
8.750%, 06/15/07 $ 100 $ 99
Chancellor Media,
Callable 12/15/02 @ 104.063
8.125%, 12/15/07 1,475 1,438
Cumulus Media,
Callable 07/01/03 @ 105.188
10.375%, 07/01/08 (E) 200 205
Fox/Liberty Networks,
Callable 08/15/02 @ 104.875
9.601%, 08/15/07 (C) 575 450
Grupo Televisa,
Callable 05/15/01 @ 106.625
14.605%, 05/15/08 (C) (D) (G) 1,500 1,260
Lamar Media,
Callable 09/15/02 @ 104.313
8.625%, 09/15/07 400 394
Orion Network Systems,
Callable 01/15/02 @ 105.625
11.250%, 01/15/07 225 168
Outdoor Systems,
Callable 06/15/02 @ 104.440
8.875%, 06/15/07 375 385
SFX Broadcasting,
Callable 05/15/01 @ 105.375
10.750%, 05/15/06 150 167
Sinclair Broadcast Group,
Callable 07/15/02 @ 104.500
9.000%, 07/15/07 300 286
Sinclair Broadcast Group,
Callable 12/15/02 @ 104.375
8.750%, 12/15/07 975 912
----------
6,659
----------
BUILDING & CONSTRUCTION PRODUCTS -- 0.5%
American Builders & Contractors,
Series B, Callable 05/15/02 @ 105.310
10.625%, 05/15/07 (E) 175 157
Cemex
9.625%, 10/01/09 (D) (G) 500 499
Falcon Building Products,
Callable 06/15/02 @ 105.250
12.759%, 06/15/07 (C) 575 417
Juno Lighting,
Callable 07/01/04 @ 105.938
11.875%, 07/01/09 (D) 100 97
----------
1,170
----------
BUSINESS PRODUCTS & SERVICES -- 0.5%
Avis Rent A Car,
Callable 05/01/04 @ 105.500
11.000%, 05/01/09 (D) 175 179
Dialog, Series A,
Callable 11/15/02 @ 105.500
11.000%, 11/15/07 (E) 400 349
Formica,
Callable 03/01/04 @ 105.438
10.875%, 03/01/09 (D) 350 318
25 '99 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
NET ASSETS SEPTEMBER 30, 1999
STRATEGIC INCOME FUND (CONTINUED)
DESCRIPTION PAR (000) (F) VALUE (000)
- --------------------------------------------------------------------------
United Stationers Supply,
Callable 05/01/00 @ 106.375
12.750%, 05/01/05 $ 83 $ 90
US Office Products,
Callable 06/15/03 @ 104.875
9.750%, 06/15/08 400 219
----------
1,155
----------
CABLE TELEVISION -- 3.3%
Charter Communications,
Callable 04/01/04 @ 104.960
15.159%, 04/01/11 (C) (D) 500 298
CSC Holdings,
Callable 11/01/00 @ 104.625
9.250%, 11/01/05 550 567
CSC Holdings,
Callable 05/15/01 @ 104.938
9.875%, 05/15/06 50 52
CSC Holdings,
Callable 02/15/03 @ 104.800
9.875%, 02/15/13 400 420
Diamond Holdings,
Callable 02/01/03 @ 104.563
9.125%, 02/01/08 (E) 125 124
Diva Systems,
Callable 03/01/03 @ 106.310
12.635%, 03/01/08 (C) 75 23
Echostar DBS,
Callable 02/01/04 @ 104.688
9.375%, 02/01/09 950 941
International Cabletel,
Callable 02/01/01 @ 105.750
13.018%, 02/01/06 (C) 100 87
Lenfest Communications,
Callable 02/15/03 @ 104.125
8.250%, 02/15/08 525 525
NTL, Series B,
Callable 04/01/03 @ 104.875
11.230%, 04/01/08 (C) 1,475 981
NTL Communications, Series B,
Callable 10/01/03 @ 105.750
11.500%, 10/01/08 150 162
NTL Communications, Series B,
Callable 10/01/03 @ 106.188
11.987%, 10/01/08 (C) 1,100 745
Pegasus Communications, Series B,
Callable 10/15/01 @ 104.813
9.625%, 10/15/05 225 215
Pegasus Communications, Series B,
Callable 12/01/02 @ 104.875
9.750%, 12/01/06 300 288
RCN, Callable 10/15/02 @ 105.562
14.183%, 10/15/07 (C) 525 339
Telewest Communications,
Callable 10/01/00 @ 100.000
12.474%, 10/01/07 (C) 575 517
Telewest Communications,
Callable 04/15/04 @ 104.625
10.726%, 04/15/09 (C) (D) 575 349
STRATEGIC INCOME FUND (CONTINUED)
DESCRIPTION PAR (000) (F) VALUE (000)
- --------------------------------------------------------------------------
UIH Australia/Pacific, Series B,
Callable 05/15/01 @ 107.000
14.573%, 05/15/06 (C) $ 150 $ 114
United International Holdings, Series B,
Callable 02/15/03@ 105.375
11.947%, 02/15/08 (C) (E) 550 335
----------
7,082
----------
CHEMICALS & PLASTICS -- 2.0%
Buckeye Cellulose,
Callable 09/15/01 @ 104.625
9.250%, 09/15/08 125 127
General Chemical Industrial Products,
Callable 05/01/04 @ 105.313
10.625%, 05/01/09 (D) 300 294
Huntsman, Callable 07/01/02 @ 104.750
9.500%, 07/01/07 (D) 800 738
Huntsman ICI Chemicals,
Callable 07/01/04 @ 105.063
10.125%, 07/01/09 (D) (G) EU 1,000 1,047
ISP Holdings,
Callable 10/15/99 @ 104.500
9.000%, 10/15/03 150 146
Lyondell Chemical,
Callable 05/01/04 @ 105.438
10.875%, 05/01/09 775 779
Polymer Group, Series B,
Callable 07/01/02 @ 104.625
9.000%, 07/01/07 200 190
Polymer Group,
Callable 03/01/03 @ 104.375
8.750%, 03/01/08 500 469
Sterling Chemical Holdings,
Callable 08/15/01 @ 106.750
15.484%, 08/15/08 (C) 100 17
Sterling Chemicals,
Callable 07/15/03 @ 106.188
12.375%, 07/15/06 (D) 50 47
Sterling Chemicals,
Callable 08/15/01 @ 105.875
11.750%, 08/15/06 300 180
Texas Petrochemical,
Callable 07/01/01 @ 105.560
11.125%, 07/01/06 200 168
----------
4,202
----------
CONSUMER PRODUCTS -- 1.3%
Albecca, Callable 08/15/03 @ 105.375
10.750%, 08/15/08 350 276
Amscan Holdings,
Callable 12/15/02 @ 104.937
9.875%, 12/15/07 250 195
Chattem, Callable 04/01/03
@ 104.438
8.875%, 04/01/08 325 307
Diamond Brands Operating,
Callable 04/15/03 @ 105.063
10.125%, 04/15/08 50 39
26 '99 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STRATEGIC INCOME FUND (CONTINUED)
DESCRIPTION PAR (000) (F) VALUE (000)
- --------------------------------------------------------------------------
Playtex Family Products,
Callable 12/15/99 @ 103.000
9.000%, 12/15/03 $ 400 $ 400
Revlon Consumer Products,
Callable 02/01/03 @ 104.313
8.625%, 02/01/08 (E) 950 774
Sealy Mattress,
Callable 12/15/02 @ 105.437
12.998%, 12/15/07 (C) 300 198
Simmons, Callable 03/15/04 @ 105.125
10.250%, 03/15/09 150 148
Sleepmaster,
Callable 05/15/04 @ 105.500
11.000%, 05/15/09 (D) 75 75
United Industries,
Callable 04/01/04 @ 104.938
9.875%, 04/01/09 (D) 150 129
Volume Services America,
Callable 03/01/04 @ 105.625
11.250%, 03/01/09 (D) 200 199
----------
2,740
----------
CONTAINER & GLASS PRODUCTS -- 0.1%
Russell-Stanley Holdings,
Callable 02/15/04 @ 105.438
10.875%, 02/15/09 200 202
Tekni-Plex, Series B,
Callable 03/01/03 @ 104.625
9.250%, 03/01/08 (E) 100 95
----------
297
----------
DIVERSIFIED OPERATIONS -- 0.9%
Eagle-Picher,
Callable 03/01/03 @ 104.688
9.375%, 03/01/08 (E) 375 330
Mechala Group Jamaica,
Series B
12.750%, 12/30/99 (G) (J) 2,000 780
Voto-Votorantim Overseas,
Callable 06/27/02 @ 99.500
8.500%, 06/27/05 (G) 1,000 885
----------
1,995
----------
ELECTRONIC EQUIPMENT -- 1.2%
Electronic Retailing Systems,
Callable 02/01/01 @ 106.680
15.435%, 02/01/04 (C) 75 18
Fairchild Semiconductor,
Callable 04/01/03 @ 105.188
10.375%, 10/01/07 (D) 200 198
Samsung Electronic America
9.750%, 05/01/03 (G) 1,500 1,480
SCG Holding & Semiconductor,
Callable 08/01/04 @ 106.000
12.000%, 08/01/09 (D) 175 180
Telecommunications Techniques,
Callable 05/15/03 @ 104.875
9.750%, 05/15/08 725 683
----------
2,559
----------
STRATEGIC INCOME FUND (CONTINUED)
DESCRIPTION PAR (000) (F) VALUE (000)
- --------------------------------------------------------------------------
ENVIRONMENTAL SERVICES -- 0.7%
Allied Waste North America,
Callable 01/01/04 @ 103.938
7.875%, 01/01/09 (D) $ 1,000 $ 875
Allied Waste North America,
Callable 08/01/04 @ 105.00
10.000%, 08/01/09 (D) 725 662
----------
1,537
----------
FINANCIAL SERVICES -- 2.4%
Bancomext Trust
11.250%, 05/30/06 (G) 1,250 1,284
Cellco Finance,
Callable 08/01/02 @ 107.500
15.000%, 08/01/05 (G) 900 936
China Development Bank
8.250%, 05/15/09 (G) 1,000 978
Golden State Escrow
7.125%, 08/01/05 600 556
L-Bank
13.500%, 06/22/01 CK 40,000 1,305
----------
5,059
----------
FOOD, BEVERAGE & TOBACCO PRODUCTS -- 1.9%
Agrilink Foods,
Callable 11/01/03 @ 105.938
11.875%, 11/01/08 375 344
Aurora Foods,
Callable 02/15/02 @ 104.940
9.875%, 02/15/07 75 75
Canandaigua Brands,
Callable 03/01/04 @104.250
8.500%, 03/01/09 150 141
Eagle Family Foods,
Callable 01/15/03 @ 104.375
8.750%, 01/15/08 125 95
International Home Foods,
Callable 11/01/01 @ 105.190
10.375%, 11/01/06 475 483
National Wine & Spirits,
Callable 01/15/04 @ 105.063
10.125%, 01/15/09 350 350
Premier International Food,
Callable 09/01/04 @ 106.000
12.000%, 09/01/09 (D) (G) 1,500 1,500
Sampoerna International
8.375%, 06/15/06 (D) (G) 1,000 693
Triarc Consumer Products,
Callable 02/15/04 @ 105.125
10.250%, 02/15/09 (D) 400 382
----------
4,063
----------
FOOD WHOLESALERS, RETAILERS & SERVICES -- 0.7%
Advantica Restaurant Group,
Callable 01/15/03 @ 105.625
11.250%, 01/15/08 200 174
Ameriserve Food,
Callable 07/15/02 @ 105.063
10.125%, 07/15/07 825 552
Carrols, Callable 12/01/03
@ 104.750
9.500%, 12/01/08 175 149
27 '99 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
NET ASSETS SEPTEMBER 30, 1999
STRATEGIC INCOME FUND (CONTINUED)
DESCRIPTION PAR (000) (F) VALUE (000)
- --------------------------------------------------------------------------
Dominos, Callable 01/15/04 @ 105.188
10.375%, 01/15/09 $ 600 $ 564
Jitney-Jungle Stores,
Callable 09/15/02 @ 105.188
10.375%, 09/15/07 75 15
----------
1,454
----------
HEALTH CARE -- 2.3%
Alliance Imaging,
Callable 12/15/99 @ 103.000
9.540%, 12/15/05 (A) 175 177
Alliance Imaging,
Callable 12/15/01 @ 104.813
9.625%, 12/15/05 100 101
Columbia/HCA Healthcare
6.910%, 06/15/05 750 669
Conmed,
Callable 03/15/03 @ 104.500
9.000%, 03/15/08 250 230
Dade International,
Callable 05/01/01 @ 105.560
11.125%, 05/01/06 350 360
Everest Healthcare Services,
Callable 05/01/03 @ 104.875
9.750%, 05/01/08 100 90
Fisher Scientific International,
Callable 02/01/03 @ 104.500
9.000%, 02/01/08 550 514
9.000%, 02/01/08 450 421
Genesis Health Ventures,
Callable 01/15/04 @ 104.937
9.875%, 01/15/09 600 310
Hanger Orthopedic Group,
Callable 06/15/04 @ 105.625
11.250%, 06/15/09 (D) 100 101
Hudson Respiratory Care,
Callable 04/15/03 @ 104.563
9.125%, 04/15/08 175 137
Kinetic Concepts,
Callable 11/01/02 @ 104.813
9.625%, 11/01/07 400 292
Tenet Healthcare
8.000%, 01/15/05 50 48
Tenet Healthcare, Series B,
Callable 6/01/03 @ 104.063
8.125%, 12/01/08 1,500 1,369
Unilab Finance,
Callable 10/01/04 @ 106.375
12.750%, 10/01/09 (D) 100 99
----------
4,918
----------
HOTELS -- 0.6%
Florida Panthers Holdings,
Callable 04/15/04 @ 104.938
9.875%, 04/15/09 475 439
Host Marriott,
Callable 08/01/03 @ 103.985
7.875%, 08/01/08 850 761
----------
1,200
----------
STRATEGIC INCOME FUND (CONTINUED)
DESCRIPTION PAR (000) (F) VALUE (000)
- --------------------------------------------------------------------------
INDUSTRIAL PRODUCTS -- 1.2%
Amphenol,
Callable 05/15/02 @ 104.940
9.875%, 05/15/07 $ 225 $ 225
Blount, Callable 08/01/04 @ 106.500
13.000%, 08/01/09 (D) 250 258
Cabot Safety,
Callable 07/15/00 @ 106.250
12.500%, 07/15/05 150 160
Continental Global Group,
Callable 04/01/02@ 105.500
11.000%, 04/01/07 50 30
Euramax International,
Callable 10/01/01 @ 105.625
11.250%, 10/01/06 225 227
Hexcel, Callable 01/15/04 @ 104.875
9.750%, 01/15/09 250 220
International Utility Structures,
Callable 02/01/03 @ 105.375
10.750%, 02/01/08 (D) 50 46
ISG Resources,
Callable 04/15/03 @ 105.000
10.000%, 04/15/08 125 120
Johnstown America,
Callable 08/15/00 @ 105.875
11.750%, 08/15/05 150 153
MMI Products, Series B,
Callable 04/15/02 @ 105.625
11.250%, 04/15/07 300 304
Neenah, Series F,
Callable 05/01/02 @ 105.563
11.125%, 05/01/07 300 277
Unifrax Investment,
Callable 11/01/00 @ 105.250
10.500%, 11/01/03 100 100
Wesco Distribution,
Callable 06/01/03 @ 104.563
9.125%, 06/01/08 (E) 475 444
----------
2,564
----------
LEISURE & ENTERTAINMENT -- 1.0%
AMF Bowling Worldwide,
Callable 03/15/01 @ 106.125
15.723%, 03/15/06 (C) 378 221
Loews Cineplex Entertainment,
Callable 08/01/03 @ 104.437
8.875%, 08/01/08 600 537
Premier Parks,
Callable 04/01/03 @ 105.000
10.447%, 04/01/08 (C) 1,450 921
Regal Cinemas,
Callable 06/01/03 @ 104.750
9.500%, 06/01/08 675 459
----------
2,138
----------
MACHINERY & EQUIPMENT -- 1.3%
Alvey Systems, Callable 01/31/00 @ 105.690
11.375%, 01/31/03 104 106
Clark Material Handling, Series D,
Callable 11/15/01 @ 105.375
10.750%, 11/15/06 100 80
28 '99 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STRATEGIC INCOME FUND (CONTINUED)
DESCRIPTION PAR (000) (F) VALUE (000)
- --------------------------------------------------------------------------
Fairchild, Callable 04/15/04 @ 105.375
10.750%, 04/15/09 $ 225 $ 191
National Equipment Services,
Series B, Callable 11/30/01 @ 105.000
10.000%, 11/30/04 50 50
National Equipment Services, Series D,
Callable 11/30/01 @ 105.000
10.000%, 11/30/04 200 199
NationsRent, Callable 12/15/03 @ 105.188
10.375%, 12/15/08 175 173
Sirona Dental Systems, Callable
07/15/03 @ 104.563
9.125%, 07/15/08 (D) (G) DM 2,000 1,079
United Rentals, Series B, Callable
01/15/04 @ 104.625
9.250%, 01/15/09 700 670
WEC, Callable 07/15/04 @ 106.000
12.000%, 07/15/09 (D) 150 146
----------
2,694
----------
METALS & MINING -- 0.3%
AEI Holdings,
Callable 12/15/02 @ 105.250
10.500%, 12/15/05 (D) 550 503
AEI Resources,
Callable 12/15/02 @ 105.750
11.500%, 12/15/06 (D) 150 132
----------
635
----------
PAPER & RELATED PRODUCTS -- 1.3%
Advance Agro Capital
13.000%, 11/15/07 (G) 1,000 728
Grupo Industrial Durango
12.625%, 08/01/03 (G) 1,500 1,470
Packaging Corp of America,
Callable 04/01/04 @ 104.813
9.625%, 04/01/09 300 302
SD Warren, Series B,
Callable 12/15/99 @ 104.500
12.000%, 12/15/04 100 105
Stone Container,
Callable 10/01/99 @ 104.310
11.500%, 10/01/04 150 156
----------
2,761
----------
PETROLEUM & FUEL PRODUCTS -- 2.3%
Chiles Offshore,
Callable 05/01/03 @ 105.000
10.000%, 05/01/08 100 84
Continental Resources,
Callable 08/01/03 @ 105.125
10.250%, 08/01/08 175 139
Forcenergy, Callable 11/01/01
@104.750
9.500%, 11/01/06 (J) 100 87
Houston Exploration,
Callable 01/01/03 @ 104.313
8.625%, 01/01/08 125 121
Perez
9.000%, 05/01/06 (G) 1,000 889
Petro Mexicanos
9.250%, 03/30/18 (G) 2,850 2,364
STRATEGIC INCOME FUND (CONTINUED)
DESCRIPTION PAR (000) (F) VALUE (000)
- --------------------------------------------------------------------------
Pogo Producing, Series B,
Callable 02/15/04 @ 105.188
10.375%, 02/15/09 $ 100 $ 104
Pride Petroleum Services,
Callable 05/01/02 @ 104.688
9.375%, 05/01/07 275 275
RBF Finance,
Callable 03/15/04 @ 105.688
11.375%, 03/15/09 100 106
R&B Falcon
12.250%, 03/15/06 250 264
Triton Energy
8.750%, 04/15/02 175 172
Universal Compression,
Callable 02/15/03 @ 104.938
11.713%, 02/15/08 (C) 400 238
----------
4,843
----------
PRINTING & PUBLISHING -- 0.3%
Hollinger International Publishing,
Callable 02/01/01 @ 104.625
9.250%, 02/01/06 700 695
----------
SERVICES -- 0.5%
Crown Castle International,
Callable 05/15/04 @ 105.187
10.788%, 05/15/11 (C) 625 353
Crown Castle International,
Callable 08/01/04 @ 105.625
11.490%, 08/01/11 (C) (D) 250 143
Sitel, Callable 03/15/02 @ 105.625
9.250%, 03/15/06 350 294
URS, Series B, Callable 05/01/04
@ 106.125
12.250%, 05/01/09 (D) 200 200
----------
990
----------
STEEL & STEEL WORKS -- 0.3%
Metals USA,
Callable 02/15/03 @ 104.313
8.625%, 02/15/08 225 203
National Steel,
Callable 03/01/04 @ 104.938
9.875%, 03/01/09 300 296
Republic Technologies,
Callable 07/15/04 @ 106.875
13.750%, 07/15/09 (D) 250 238
----------
737
----------
SURFACE TRANSPORTATION -- 0.5%
Gearbulk Holding,
Callable 12/01/99 @ 105.625
11.250%, 12/01/04 150 151
Railworks, Callable
04/15/04 @ 105.750
11.500%, 04/15/09 100 101
Stena Line, Callable
06/01/03 @ 105.313
10.625%, 06/01/08 200 140
Stena, Callable 12/15/00 @ 105.250
10.500%, 12/15/05 150 148
Stena, Callable 06/15/02 @ 104.375
8.750%, 06/15/07 525 473
----------
1,013
----------
29 '99 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
NET ASSETS SEPTEMBER 30, 1999
STRATEGIC INCOME FUND (CONTINUED)
DESCRIPTION PAR (000) (F) VALUE (000)
- --------------------------------------------------------------------------
TELECOMMUNICATIONS & CELLULAR -- 11.3%
Airgate PCS,
Callable 10/01/04 @ 106.750
13.761%, 10/01/09 (C) $ 125 $ 68
American Cellular,
Callable 05/15/03 @ 105.250
10.500%, 05/15/08 450 466
Call-Net Enterprises,
Callable 08/15/02 @ 104.635
9.703%, 08/15/07 (C) 375 231
Call-Net Enterprises,
Callable 08/15/03 @ 104.470
9.362%, 08/15/08 (C) 600 321
Call-Net Enterprises,
Callable 05/15/04 @ 105.400
12.579%, 05/15/09 (C) 250 131
Centennial Cellular,
Callable 12/15/03 @ 105.375
10.750%, 12/15/08 350 364
Dolphin Telecom,
Callable 05/15/04 @ 107.000
14.434%, 05/15/09 (C) (D) 350 142
E.Spire Communications,
Callable 11/01/00 @ 110.000
9.549%, 11/01/05 (C) 150 88
Hermes Europe Railtel,
Callable 08/15/02 @ 105.750
11.500%, 08/15/07 475 477
Hermes Europe Railtel,
Callable 01/15/04 @ 105.188
10.375%, 01/15/09 100 98
ICG Holdings,
Callable 05/01/01 @ 106.250
13.101%, 05/01/06 (C) 400 304
ICG Services,
Callable 05/01/03 @ 104.938
10.419%, 05/01/08 (C) 125 68
Intermedia Communications,
Callable 05/15/01 @ 106.250
12.010%, 05/15/06 (C) 250 204
Intermedia Communications,
Callable 07/15/02 @ 105.625
11.703%, 07/15/07 (C) 600 408
Intermedia Communications,
Callable 06/01/03 @ 104.300
8.600%, 06/01/08 250 216
Intermedia Communications,
Series B, Callable 03/01/04 @ 106.125
15.135%, 03/01/09 (C) 500 247
IXC Communications,
Callable 04/15/03 @ 104.500
9.000%, 04/15/08 300 296
Jazztel, Callable 04/01/04 @
107.000
14.000%, 04/01/09 (D) (G) EU 2,000 2,147
KPNQwest, Callable 06/01/04 @
103.563
7.125%, 06/01/09 (D) (G) EU 1,000 1,021
Level 3 Communications,
Callable 05/01/03 @ 104.563
9.125%, 05/01/08 750 679
Level 3 Communications,
Callable 12/01/03 @ 105.250
11.242%, 12/01/08 (C) 1,950 1,094
STRATEGIC INCOME FUND (CONTINUED)
DESCRIPTION PAR (000) (F) VALUE (000)
- --------------------------------------------------------------------------
McLeodusa, Callable
03/01/02 @ 105.250
8.669%, 03/01/07 (C) $ 525 $ 420
McLeodusa, Callable
03/15/03 @ 104.188
8.375%, 03/15/08 225 210
McLeodusa, Callable
02/15/04 @ 104.063
8.125%, 02/15/09 325 301
Metronet Communications,
Callable 08/15/02 @ 106.000
12.000%, 08/15/07 100 116
Metronet Communications,
Callable 06/15/03 @ 104.975
11.641%, 06/15/08 (C) 450 350
Metronet Communications,
Callable 11/01/03 @ 105.313
10.625%, 11/01/08 125 142
Millicom International Cellular,
Callable 06/01/01 @ 106.750
14.877%, 06/01/06 (C) 625 441
Netia Holdings, Series B,
Callable 11/01/02 @105.125
10.250%, 11/01/07 (G) 1,500 1,279
Nextel Communications,
Callable 09/15/02 @ 105.325
11.635%, 09/15/07 (C) 175 129
Nextel Communications,
Callable 02/15/03 @ 104.975
12.297%, 02/15/08 (C) (E) 2,025 1,412
Nextel International,
Callable 04/15/03 @ 106.063
13.410%, 04/15/08 (C) 75 39
Nextel Partners,
Callable 02/01/04 @ 107.000
14.040%, 02/01/09 (C) 150 88
Nextlink Communications,
Callable 03/15/03 @ 104.500
9.000%, 03/15/08 (E) 100 93
Nextlink Communications,
Callable 04/15/03 @ 104.725
12.646%, 04/15/08 (C) 775 465
Nextlink Communications,
Callable 06/01/04 @ 105.375
10.750%, 06/01/09 325 327
Nextlink Communications,
Callable 06/01/04 @ 106.125
12.056%, 06/01/09 (C) 800 460
Orange, Callable 08/01/03 @ 104.000
8.000%, 08/01/08 225 217
Paging Network,
Callable 10/15/01 @ 105.000
10.000%, 10/15/08 350 93
Pathnet, Callable 04/15/03 @ 106.125
12.250%, 04/15/08 75 39
PSINet, Series B,
Callable 02/15/02 @ 105.000
10.000%, 02/15/05 550 528
PSINet, Callable 08/01/04
@ 105.500
11.000%, 08/01/09 (D) 150 148
Qwest Communications,
Callable 10/15/02 @ 104.735
9.370%, 10/15/07 (C) (E) 600 465
30 '99 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STRATEGIC INCOME FUND (CONTINUED)
DESCRIPTION PAR (000) (F) VALUE (000)
- --------------------------------------------------------------------------
Rogers Cantel,
Callable 10/01/02 @ 104.400
8.800%, 10/01/07 $ 100 $ 102
Tele1 Europe, Callable 05/15/04
@ 106.500
13.000%, 05/15/09 (D) 75 73
Telefonica de Argentina
9.875%, 07/01/02 (G) 1,000 995
Telesystem International Wireless,
Series B, Callable 06/30/02 @ 106.625
16.573%, 06/30/07 (C) (E) 525 252
Telesystem International Wireless,
Callable 11/01/02 @ 105.500
11.139%, 11/01/07 (C) (E) 50 21
Teligent, Callable 03/01/03 @ 105.75
17.523%, 03/01/08 (C) 100 53
Teligent, Callable 12/01/02 @ 105.750
11.500%, 12/01/07 550 506
Tricom, Callable 09/01/01 @ 105.688
11.375%, 09/01/04 (G) 1,000 900
Tritel PCS, Callable 05/15/04
@ 106.375
13.988%, 05/15/09 (C) (D) 300 172
Triton Communications,
Callable 05/01/03 @ 105.500
15.252%, 05/01/08 (C) 350 235
United Pan-Europe Communications,
Callable 08/01/04 @ 106.250
13.526%, 08/01/09 (C) (D) 1,000 563
US Xchange
15.000%, 07/01/08 250 255
USA Mobile Communications,
Callable 02/01/99 @ 104.750
9.500%, 02/01/04 100 75
Verio, Callable 12/01/03 @ 105.625
11.250%, 12/01/08 275 281
Viatel, Callable 04/15/03 @ 105.575
11.150%, 04/15/08 (G) DM 3,250 1,706
Viatel, Callable 04/15/03 @ 105.625
11.250%, 04/15/08 75 69
Viatel, Callable 04/15/03 @ 106.250
13.174%, 04/15/08 (C) 525 289
Viatel, Callable 03/15/04 @ 105.750
11.500%, 03/15/09 100 96
Williams Communications Group,
Callable 10/01/04 @ 105.438
10.875%, 10/01/09 525 521
Winstar Communication,
Callable 03/15/03 @ 105.500
6.880%, 03/15/08 (C) 350 308
----------
24,304
----------
UTILITIES -- 1.5%
Caithness Coso
9.050%, 12/15/09 (D) 350 344
CMS Energy
7.500%, 01/15/09 500 458
El Paso Electric, Callable 02/01/06
@ 104.700
9.400%, 05/01/11 150 164
Empresa Nacional Electricidad,
Series B
8.500%, 04/01/09 (G) 2,000 1,969
STRATEGIC INCOME FUND (CONTINUED)
DESCRIPTION PAR (000) (F) VALUE (000)
- --------------------------------------------------------------------------
Niagra Mowhawk Power,
Callable 07/01/03 @ 104.250
8.455%, 07/01/10 (C) $ 450 $ 335
----------
3,270
----------
TOTAL HIGH YIELD CORPORATE OBLIGATIONS
(Cost $103,396) 96,330
----------
FOREIGN GOVERNMENT BONDS -- 20.0%
ARGENTINA -- 1.4%
Republic of Argentina
11.375%, 01/30/17 (G) 600 564
12.125%, 02/25/19 (G) 2,500 2,472
----------
3,036
----------
AUSTRALIA -- 0.5%
New South Wales Treasury
6.500%, 05/01/06 AD 1,500 982
----------
AUSTRIA -- 1.0%
Republic of Austria
7.625%, 10/18/04 EU 727 871
5.625%, 07/15/07 EU 1,100 1,204
----------
2,075
----------
BRAZIL -- 2.5%
Republic of Brazil
9.375%, 04/07/08 (G) 2,000 1,570
8.000%, 04/15/14 (G) 3,424 2,119
10.125%, 05/15/27 (G) 2,350 1,730
----------
5,419
----------
BULGARIA -- 0.2%
Bulgaria Government
6.500%, 07/28/24 (A) (G) 600 413
----------
CANADA -- 1.0%
Government of Canada
8.000%, 06/01/23 CD 1,000 862
Province of British Columbia
5.250%, 12/01/06 CD 2,000 1,301
----------
2,163
----------
COLOMBIA -- 0.8%
Republic of Columbia
10.875%, 03/09/04 1,000 974
8.625%, 04/01/08 1,000 808
----------
1,782
----------
CROATIA -- 0.4%
Government of Croatia
6.456%, 07/31/06 (A) 1,125 931
----------
DENMARK -- 0.4%
Kingdom of Denmark
7.000%, 11/10/24 DK 5,500 864
----------
EL SALVADOR -- 0.5%
Republic of El Salvador
9.500%, 08/15/06 (D) (G) 1,000 986
----------
31 '99 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
NET ASSETS SEPTEMBER 30, 1999
STRATEGIC INCOME FUND (CONTINUED)
DESCRIPTION PAR (000) (F) VALUE (000)
- --------------------------------------------------------------------------
GREECE -- 1.0%
Hellenic Republic
13.100%, 10/23/03 (A) GD $130,000 $ 441
Hellenic Republic
8.600%, 03/26/08 GD 480,000 1,736
----------
2,177
----------
HUNGARY -- 0.4%
Government of Hungary
13.000%, 07/24/03 HF 225,000 937
----------
KAZAKHSTAN -- 0.9%
Republic of Kazakstan
13.625%, 10/18/04 (D) (G) 2,000 1,980
----------
MEXICO -- 0.9%
United Mexican States
11.375 %, 09/15/16 (G) 1,800 1,900
----------
NETHERLANDS -- 0.4%
Government of the Netherlands
7.500%, 04/15/10 EU 681 857
----------
PANAMA -- 0.6%
Republic of Panama
8.250%, 04/22/08 (G) 1,500 1,298
----------
PHILIPPINES -- 1.3%
Philippines Republic
9.875%, 01/15/19 (G) 3,000 2,839
----------
QATAR -- 0.5%
State of Qatar
9.500%, 05/21/09 1,000 1,036
----------
SOUTH AFRICA -- 1.5%
Republic of South Africa
12.500%, 01/15/02 ZR 6,000 982
9.125%, 05/19/09 1,250 1,255
13.500%, 09/15/15 ZR 6,500 984
----------
3,221
----------
SWEDEN -- 0.5%
Kingdom of Sweden, Series 1034
9.000%, 04/20/09 SK 6,500 986
----------
TURKEY -- 1.4%
Republic of Turkey
12.375%, 06/15/09 (G) 2,000 1,989
Turkey Treasury Bill
08/23/00 (G) TL 900,000 1,070
----------
3,059
----------
UNITED KINGDOM -- 0.6%
United Kingdom Conversion Stock
9.500%, 04/18/05 GBP 700 1,328
----------
VENEZUELA -- 1.3%
Republic of Venezuela, Series DL
6.209%, 12/18/07 (A) (G) 1,619 1,228
Republic of Venezuela
9.250%, 09/15/27 (G) 2,250 1,453
----------
2,681
----------
TOTAL FOREIGN GOVERNMENT BONDS
(Cost $44,999) 42,950
----------
STRATEGIC INCOME FUND (CONTINUED)
DESCRIPTION PAR (000) (F) VALUE (000)
- --------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY
MORTGAGE-BACKED OBLIGATIONS -- 13.4%
ADJUSTABLE RATE -- 0.5%
FNMA Series 1993-220, Cl FD
5.906%, 11/25/13 (A) $ 994 $ 995
----------
FIXED RATE -- 12.9%
FHLMC Gold Pool #C2-3507
6.000%, 03/01/29 1,987 1,856
FHLMC Gold Pool #CL-8204
7.500%, 11/01/28 979 985
FHLMC Gold Pool #E6-5045
7.500%, 08/01/11 752 765
FHLMC Gold Pool #E6-9977
5.500%, 04/01/13 1,098 1,036
FHLMC Series 2126
6.000%, 02/15/29 1,500 1,289
FHLMC TBA 15 Year
6.000%, 12/15/13 (H) 2,000 1,925
FHLMC TBA 30 Year
6.500%, 11/01/28 (H) 2,000 1,919
FNMA Pool #100042
11.000%, 10/15/20 129 146
FNMA Pool #250113
9.000%, 07/01/24 281 295
FNMA Pool #252334
6.500%, 02/01/29 1,484 1,404
FNMA Pool #303675
10.000%, 10/01/17 189 205
FNMA Pool #326580
8.000%, 03/01/08 591 606
FNMA Pool #329569
6.000%, 03/01/11 621 601
FNMA Pool #339839
6.000%, 03/01/26 737 690
FNMA Pool #367977
6.500%, 02/01/04 783 781
FNMA Pool #380781
5.805%, 10/01/08 1,230 1,157
FNMA Pool #380791
5.850%, 10/01/08 989 931
FNMA Pool #380859
6.095%, 12/01/08 992 948
FNMA Pool #380896
5.890%, 12/01/08 992 935
FNMA Pool #381419
5.950%, 03/01/09 1,243 1,174
FNMA Pool #381517
5.950%, 04/01/07 1,500 1,432
FNMA Series 1993-50, Cl PY
5.500%, 10/25/22 2,000 1,763
FNMA Series 1999-11, Cl C
5.500%, 10/25/12 2,000 1,801
FNMA Series G93-1, Cl H
6.700%, 02/25/21 976 970
FNMA TBA 30 Year
7.500%, 09/01/29 (H) 2,000 2,004
GNMA Pool #160376X
9.000%, 06/15/16 72 76
----------
27,694
----------
TOTAL U.S. GOVERNMENT AGENCY
MORTGAGE-BACKED OBLIGATIONS
(Cost $29,678) 28,689
----------
32 '99 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STRATEGIC INCOME FUND (CONTINUED)
DESCRIPTION PAR (000) (F) VALUE (000)
- --------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 6.8%
FFCB
5.020%, 03/01/00 $ 2,000 $ 1,995
FHLB
5.035%, 02/25/00 2,000 1,995
5.125%, 02/26/02 2,000 1,954
FHLMC
5.750%, 03/15/09 2,000 1,869
FNMA
5.125%, 02/13/04 3,000 2,857
6.375%, 06/15/09 4,052 3,963
----------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $15,015) 14,633
----------
ASSET-BACKED OBLIGATIONS -- 4.9%
AUTOMOTIVE -- 0.5%
GMAC Commercial Mortgage Securities,
Series 1998-C2, Class-A2
6.420%, 09/15/30 1,000 957
----------
CREDIT CARDS -- 0.7%
Discover Card Master Trust,
Series 1999-1, Class-A
5.300%, 08/15/04 1,500 1,463
----------
HOME EQUITY -- 3.7%
Advanta Mortgage Loan Trust,
Series 1998-2, Cl A12
6.330%, 08/25/19 2,000 1,953
EQCC Home Equity Loan Trust,
Series 1998-1, Class-A6F
6.252%, 12/15/07 2,000 1,948
Green Tree Financial,
Series 1998-1, Class-A4
6.040%, 11/01/29 2,120 2,084
The Money Store Home Equity Trust,
Series 1994-A, Class-A4
6.275%, 12/15/22 2,000 1,981
----------
7,966
----------
TOTAL ASSET-BACKED OBLIGATIONS
(Cost $10,619) 10,386
----------
CORPORATE OBLIGATIONS -- 3.3%
FINANCIAL SERVICES -- 1.4%
AT&T Capital
6.250%, 05/15/01 1,000 990
Lehman Brothers Holdings
7.375%, 05/15/04 1,000 1,002
Merrill Lynch
6.000%, 02/17/09 1,000 916
----------
2,908
----------
MANUFACTURING/INDUSTRIAL -- 0.4%
Ford Motor Credit
5.800%, 01/12/09 1,000 908
----------
LEISURE & ENTERTAINMENT -- 0.5%
Royal Caribbean
8.125%, 07/28/04 1,000 1,019
----------
STRATEGIC INCOME FUND (CONTINUED)
DESCRIPTION PAR (000)/SHARES(F) VALUE (000)
- --------------------------------------------------------------------------
TRANSPORTATION -- 1.0%
American Airlines, Series 99-1
7.024%, 10/15/09 $ 1,250 $ 1,250
Continental Airlines
7.056%, 09/15/09 1,000 968
----------
2,218
----------
TOTAL CORPORATE OBLIGATIONS
(Cost $7,236) 7,053
----------
U.S. TREASURY OBLIGATIONS -- 2.2%
U.S. Treasury Notes
6.375%, 03/31/01 1,150 1,162
5.625%, 05/15/08 2,700 2,621
6.250%, 08/15/23 1,000 984
----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $4,877) 4,767
----------
PRIVATE MORTGAGE-BACKED OBLIGATIONS -- 1.1%
FIXED RATE -- 1.1%
Countrywide Mortgage Backed Securities,
Series 1993-B, Class-A4
6.750%, 11/25/23 1,463 1,446
Residential Funding Mortgage Securities,
Series 1999-S5, Class-A1
6.000%, 02/25/29 1,000 989
----------
2,435
----------
TOTAL PRIVATE MORTGAGE-BACKED OBLIGATIONS
(Cost $2,474) 2,435
----------
PREFERRED STOCKS -- 0.7%
UNITED STATES -- 0.7%
Benedek Communications PIK* 50 37
Capstar Communications PIK, Series E* 796 94
Cumulus Media, Series A* 55 59
Nebco Evans Holding PIK* 291 11
Nextel Communications PIK, Series D* 59 62
Pegasus Communications PIK, Series A* 126 125
Primedia, Series D 3,000 297
Primedia, Series F 2,350 219
Primedia, Series H 2,150 194
R&B Falcon PIK* 3,557 338
Sinclair Capital 750 75
----------
1,511
----------
TOTAL PREFERRED STOCKS
(Cost $1,541) 1,511
----------
COMMON STOCKS -- 0.0%
UNITED STATES -- 0.0%
Affiliated Newspapers Investments, Cl B* 500 53
CS Wireless Systems* (D) 27 --
Pegasus Communications, Cl A* 225 10
----------
63
----------
TOTAL COMMON STOCKS
(Cost $3) 63
----------
33 '99 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
NET ASSETS SEPTEMBER 30, 1999
STRATEGIC INCOME FUND (CONTINUED)
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------
WARRANTS -- 0.0%
ARGENTINA -- 0.0%
Republic of Argentina* 1,000 $ 10
----------
CANADA -- 0.0%
Metronet Communications* (D) 100 1
----------
MEXICO -- 0.0%
United Mexican States VRR* 5,383,000 --
----------
NETHERLANDS -- 0.0%
Tele1 Europe* (D) 75 1
----------
UNITED KINGDOM -- 0.0%
Jazztel* (G) EU 10,000 --
----------
UNITED STATES -- 0.0%
Bar Technologies* (D) 50 1
Diva Systems* 225 --
Electronic Retailing System International* (D) 75 --
IHFCapital* (D) 150 --
Pathnet* (D) 75 1
Sterling Chemical Holdings* 100 2
Wireless One* 150 --
R&B Falcon* (D) 150 41
UIH Australia/Pacific* 150 4
----------
49
----------
TOTAL WARRANTS
(Cost $42) 61
----------
RELATED PARTY MONEY MARKET FUND -- 4.2%
First American Prime
Obligations Fund (B) 8,926,060 8,926
----------
TOTAL RELATED PARTY MONEY MARKET FUND
(Cost $8,926) 8,926
----------
TOTAL INVESTMENTS -- 101.6%
(Cost $228,806) 217,804
----------
OTHER ASSETS AND LIABILITIES, NET -- (1.6%) (I) (3,524)
----------
NET ASSETS:
Portfolio Capital--Class A ($.0001 par value--
2 billion authorized) based on 3,055,655
outstanding shares 45,645
Portfolio Capital--Class B ($.0001 par value--
2 billion authorized) based on 86,909
outstanding shares 811
Portfolio Capital--Class C ($.0001 par value--
2 billion authorized) based on 116,453
outstanding shares 1,078
STRATEGIC INCOME FUND (CONTINUED)
DESCRIPTION VALUE (000)
- --------------------------------------------------------------------------
Portfolio Capital--Class Y ($.0001 par value--
2 billion authorized) based on 20,311,960
outstanding shares $ 195,064
Undistributed net investment income 252
Accumulated net realized loss on investments (17,570)
Net unrealized depreciation of investments (11,002)
Net unrealized appreciation of forward foreign
currency contracts, foreign currency and
translation of other assets and liabilities in
foreign currency 2
----------
TOTAL NET ASSETS -- 100.0% $ 214,280
----------
Net asset value and redemption
price per share--Class A $ 9.09
Maximum sales charge of 4.25% (K) 0.40
----------
Offering price per share--Class A $ 9.49
----------
Net asset value and offering price
per share--Class B (L) $ 9.07
----------
Net asset value per share---Class C (M) $ 9.08
Maximum sales charge of 1.00% (N) 0.09
----------
Offering price per share--Class C $ 9.17
----------
Net asset value, offering price, and redemption
price per share--Class Y $ 9.09
----------
* Non-income producing security.
(A) Variable Rate Security--the rate reported on the Statement of Net Assets is
the rate in effect as of September 30, 1999.
(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) Delayed Interest (Step-Bonds)--Represents securities that remain zero-coupon
securities until a predetermined date at which time the stated coupon rate
becomes effective and interest becomes payable at regular intervals. The
interest rates disclosed represent yields at September 30, 1999, based upon
the estimated timing and amount of future interest and principal payments.
(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) Securities considered illiquid or restricted. See also the notes to the
financial statements.
(F) In U.S. dollars unless otherwise indicated.
(G) Represents a foreign high yield (non-investment grade) bond. On September
30, 1999, the total market value of these investments was $51,500,000 or
24.03% of total net assets.
34 '99 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STRATEGIC INCOME FUND (CONCLUDED)
DESCRIPTION
- --------------------------------------------------------------------------
(H) On September 30, 1999, the total cost of investments purchased on a
when-issued basis was $5,793,281.
(I) Other assets and liabilitites representing greater than five percent of
total assets include the following (000):
Cash collateral received for secuities on loan $47,921
Payable upon receipt of securities on loan ($47,921)
(J) Bond currently in default.
(K) The offering price is calculated by dividing the net asset value by 1 minus
the maximum sales charge of 4.25%.
(L) Retail Class B has a contingent deferred sales charge. For a description of
a possible redemption charge, see the notes to the financial statements.
(M) Retail Class C has a contingent deferred sales charge. For a description of
a possible redemption charge, see the notes to the financial statements.
(N) The offering price is calculated by dividing the net asset value by 1 minus
the maximum sales charge of 1.00%
AD--Australian Dollar
CD--Canadian Dollar
CK--Czech Republic Koruna
Cl--Class
DK--Danish Kroner
DM--German Mark
EU--Euro
FFCB--Federal Farm Credit Bank
FHLB--Federal Home Loan Bank
FHLMC--Federal Home Loan Mortgage Corporation
FNMA--Federal National Mortgage Association
GBP--Great British Pound
GD--Greek Drachma
GNMA--Government National Mortgage Association
HF--Hungarian Forint
PIK--Payment-in-Kind interest is generally paid by issuing additional par of the
security rather than paying cash.
SK--Swedish Krona
TBA--To Be Announced
TL--Turkish Lira
VRR--Value Recovery Right
ZR--South African Rand
The accompanying notes are an integral part of the financial statements.
35 '99 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
OPERATIONS FOR THE YEAR ENDED SEPTEMBER 30, 1999, IN THOUSANDS
<TABLE>
<CAPTION>
ADJUSTABLE INTERMEDIATE
RATE MORTGAGE FIXED GOVERNMENT
SECURITIES FUND INCOME FUND BOND FUND
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 6,681 $ 88,266 $ 12,365
Dividends -- -- --
- ---------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 6,681 88,266 12,365
=========================================================================================================
EXPENSES:
Investment advisory fees 808 9,864 1,438
Less: Waiver of investment advisory fees (457) (2,676) (354)
Administrator fees 126 1,534 223
Transfer agent fees 216 472 32
Custodian fees 35 423 58
Directors' fees 2 24 3
Registration fees 5 58 8
Professional fees 4 49 7
Printing 7 87 13
Distribution fees - Class A 285 404 13
Less: Waiver of distribution fees - Class A (114) -- (13)
Distribution fees - Class B -- 165 --
Distribution fees - Class C -- 2 --
Less: Waiver of distribution fees - Class C -- (1) --
Other 4 46 7
- ---------------------------------------------------------------------------------------------------------
TOTAL NET EXPENSES 921 10,451 1,435
=========================================================================================================
INVESTMENT INCOME - NET 5,760 77,815 10,930
=========================================================================================================
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS AND FOREIGN
CURRENCY TRANSACTIONS - NET:
Net realized gain (loss) on investments (139) 6,020 1,977
Net realized loss on forward foreign currency contracts
and foreign currency transactions -- -- --
Net change in unrealized appreciation/depreciation of
investments (1,368) (119,762) (13,243)
Net change in unrealized appreciation/depreciation of
forward foreign currency contracts, foreign currency
and translation of other assets and liabilities
denominated in foreign currency -- -- --
- ---------------------------------------------------------------------------------------------------------
NET LOSS ON INVESTMENTS (1,507) (113,742) (11,266)
=========================================================================================================
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS $ 4,253 $ (35,927) $ (336)
=========================================================================================================
</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.
36 '99 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
<TABLE>
<CAPTION>
INTERMEDIATE TERM LIMITED TERM STRATEGIC
INCOME FUND INCOME FUND INCOME FUND
- -----------------------------------------------------
<S> <C> <C>
$ 25,331+ $ 8,594+ $ 15,094+
-- -- 59
- -----------------------------------------------------
25,331 8,594 15,153
=====================================================
3,020 1,047 1,143
(729) (409) (57)
470 163 178
49 25 123
129 45 49
7 2 2
18 6 7
15 5 6
26 9 10
102 13 84
(41) (13) --
-- -- 4
-- -- 3
-- -- (1)
15 6 5
- -----------------------------------------------------
3,081 899 1,556
=====================================================
22,250 7,695 13,597
=====================================================
2,086 (134) (2,471)
-- -- (179)
(25,022) (2,495) (5,283)
-- -- (2)
- -----------------------------------------------------
(22,936) (2,629) (7,935)
=====================================================
$ (686) $ 5,066 $ 5,662
=====================================================
</TABLE>
37 '99 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
STATEMENTS OF
CHANGES IN NET ASSETS IN THOUSANDS
<TABLE>
<CAPTION>
INTERMEDIATE
ADJUSTABLE RATE FIXED INCOME GOVERNMENT
MORTGAGE SECURITIES FUND FUND BOND FUND
- ------------------------------------------------------------------------------------------------------------------------------------
10/1/98 10/1/97 10/1/98 10/1/97 10/1/98 10/1/97
to to to to to to
9/30/99 9/30/98 9/30/99 9/30/98 9/30/99 9/30/98
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Investment income - net $ 5,760 $ 8,607 $ 77,815 $ 60,277 $ 10,930 $ 12,212
Net realized gain (loss) on investments (139) 665 6,020 20,003 1,977 179
Net realized loss on forward foreign currency contracts and
foreign currency transactions -- -- -- -- -- --
Net change in unrealized appreciation/depreciation
of investments (1,368) (766) (119,762) 57,853 (13,243) 9,274
Net change in unrealized appreciation/depreciation 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 4,253 8,506 (35,927) 138,133 (336) 21,665
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment income - net:
Class A (5,760) (8,473) (8,415) (1,694) (283) (225)
Class B -- -- (757) (706) -- --
Class C -- -- (12) -- -- --
Class Y (36) -- (68,379) (57,596) (10,652) (11,976)
Net realized gain on investments:
Class A -- -- (2,343) (11) (4) --
Class B -- -- (215) (19) -- --
Class C -- -- -- -- -- --
Class Y -- -- (15,597) (874) (197) --
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (5,796) (8,473) (95,718) (60,900) (11,136) (12,201)
====================================================================================================================================
CAPITAL SHARE TRANSACTIONS(1):
Class A:
Proceeds from sales 1,839 2,317 19,270 8,657 5,603 3,819
Shares issued in connection with acquisition of Qualivest Fund -- -- -- 526 -- --
Shares issued in connection with acquisition of Piper Fund -- -- -- 396,424 -- --
Reinvestment of distributions 1,278 3,652 5,331 351 186 137
Payments for redemptions (33,614) (57,967) (77,045) (215,619) (4,603) (3,088)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from
Class A transactions (30,497) (51,998) (52,444) 190,339 1,186 868
- ------------------------------------------------------------------------------------------------------------------------------------
Class B:
Proceeds from sales -- -- 4,356 3,549 -- --
Reinvestment of distributions -- -- 851 615 -- --
Payments for redemptions -- -- (6,228) (3,225) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from
Class B transactions -- -- (1,021) 939 -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Class C:
Proceeds from sales -- -- 747 -- -- --
Reinvestment of distributions -- -- 10 -- -- --
Payment for redemptions -- -- (22) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from
Class C transactions -- -- 735 -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Class Y:
Proceeds from sales 1,106 1 422,896 453,638 33,128 80,734
Shares issued in connection with acquisition of Qualivest Fund -- -- -- 266,616 -- --
Shares issued in connection with acquisition of Piper Fund -- -- -- -- -- --
Shares issued in connection with acquisition of Piper Common
Trust Fund -- -- 3,300 -- -- --
Reinvestment of distributions 6 -- 45,723 32,294 950 792
Payments for redemptions (611) -- (328,293) (317,426) (94,811) (36,741)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from
Class Y transactions 501 1 143,626 435,122 (60,733) 44,785
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from
capital share transactions (29,996) (51,997) 90,896 626,400 (59,547) 45,653
- ------------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (31,539) (51,964) (40,749) 703,633 (71,019) 55,117
NET ASSETS AT BEGINNING OF PERIOD 132,734 184,698 1,433,140 729,507 240,532 185,415
====================================================================================================================================
NET ASSETS AT END OF PERIOD (2) $101,195 $132,734 $1,392,391 $1,433,140 $169,513 $240,532
====================================================================================================================================
</TABLE>
(1) See Note 4 in Notes to Financial Statements for additional information.
(2) Includes undistributed (distributions in excess of) net investment income
(000) of $98 and $134 for Adjustable Rate Mortgage Securities Fund, $528 and
$291 for Fixed Income Fund, $6 and $11 for Intermediate Government Bond
Fund, $242 and $117 for Intermediate Term Income Fund, $36 and $4 for
Limited Term Income Fund, and $252 and $(377) for Strategic Income Fund at
September 30, 1999, and September 30, 1998, respectively.
(3) Commenced operations on July 24, 1998.
The accompanying notes are an integral part of the financial statements.
38 '99 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
<TABLE>
<CAPTION>
INTERMEDIATE TERM LIMITED TERM STRATEGIC
INCOME FUND INCOME FUND INCOME FUND
- ------------------------------------------------------------------------------------
10/1/98 10/1/97 10/1/98 10/1/97 10/1/98 7/24/98
to to to to to to
9/30/99 9/30/98 9/30/99 9/30/98 9/30/99 9/30/98(3)
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 22,250 $ 22,848 $ 7,695 $ 10,027 $ 13,597 $ 1,423
2,086 5,989 (134) 197 (2,471) 101
-- -- -- -- (179) (627)
(25,022) 14,591 (2,495) 1,621 (5,283) (7,227)
-- -- -- -- (2) 4
- ------------------------------------------------------------------------------------
(686) 43,428 5,066 11,845 5,662 (6,326)
- ------------------------------------------------------------------------------------
(2,015) (607) (261) (270) (2,478) (521)
-- -- -- -- (28) (1)
-- -- -- -- (20) --
(20,109) (22,110) (7,402) (9,753) (10,263) (651)
(564) (6) -- -- -- --
-- -- -- -- -- --
-- -- -- -- -- --
(5,033) (624) -- -- -- --
- ------------------------------------------------------------------------------------
(27,721) (23,347) (7,663) (10,023) (12,789) (1,173)
====================================================================================
3,890 5,188 2,074 5,810 1,712 381
-- 814 -- -- -- --
-- 43,926 -- -- -- 86,421
1,494 426 240 250 1,135 344
(17,426) (5,294) (1,945) (8,234) (15,021) (43,019)
- ------------------------------------------------------------------------------------
(12,042) 45,060 369 (2,174) (12,174) 44,127
- ------------------------------------------------------------------------------------
-- -- -- -- 737 112
-- -- -- -- 21 1
-- -- -- -- (60) --
- ------------------------------------------------------------------------------------
-- -- -- -- 698 113
- ------------------------------------------------------------------------------------
-- -- -- -- 1,077 --
-- -- -- -- 12 --
-- -- -- -- (11) --
- ------------------------------------------------------------------------------------
-- -- -- -- 1,078 --
- ------------------------------------------------------------------------------------
74,471 81,887 29,463 59,869 149,128 60,261
-- 187,587 -- -- -- --
-- 8,844 -- -- -- --
-- -- -- -- -- --
11,328 8,673 2,715 4,703 6,602 521
(141,923) (199,064) (83,282) (77,568) (18,800) (2,648)
- ------------------------------------------------------------------------------------
(56,124) 87,927 (51,104) (12,996) 136,930 58,134
- ------------------------------------------------------------------------------------
(68,166) 132,987 (50,735) (15,170) 126,532 102,374
- ------------------------------------------------------------------------------------
(96,573) 153,068 (53,332) (13,348) 119,405 94,875
479,802 326,734 178,172 191,520 94,875 0
====================================================================================
$ 383,229 $ 479,802 $ 124,840 $ 178,172 $ 214,280 $ 94,875
====================================================================================
</TABLE>
39 '99 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
FINANCIAL HIGHLIGHTS FOR A SHARE OUTSTANDING, THROUGHOUT THE PERIODS ENDED
SEPTEMBER 30, UNLESS OTHERWISE INDICATED.
<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>
ADJUSTABLE RATE MORTGAGE SECURITIES FUND
Class A(1)
1999 $ 8.16 $ 0.41 $ (0.11) $ (0.41) $ --
1998 8.15 0.48 -- (0.47) --
1997 8.06 0.47 0.09 (0.47) --
1996(2) 8.03 0.04 0.03 (0.04) --
1996(3) 7.99 0.49 0.01 (0.46) --
1995(3)(4) 8.10 0.47 (0.05) (0.53) --
Class Y
1999 $ 8.16 $ 0.42 $ (0.10) $ (0.42) $ --
1998(5) 8.13 0.06 0.02 (0.05) --
FIXED INCOME FUND
Class A
1999 $ 11.69 $ 0.59 $ (0.89) $ (0.59) $ (0.15)
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)
Class B
1999 $ 11.63 $ 0.51 $ (0.90) $ (0.51) $ (0.15)
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)
Class C
1999(6) $ 11.33 $ 0.38 $ (0.69) $ (0.38) $ --
Class Y
1999 $ 11.69 $ 0.61 $ (0.89) $ (0.61) $ (0.15)
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)
INTERMEDIATE GOVERNMENT BOND FUND
Class A
1999 $ 9.68 $ 0.50 $ (0.51) $ (0.50) $ (0.01)
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) --
Class Y
1999 $ 9.66 $ 0.50 $ (0.50) $ (0.50) $ (0.01)
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) --
INTERMEDIATE TERM INCOME FUND
Class A
1999 $ 10.45 $ 0.51 $ (0.54) $ (0.50) $ (0.12)
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) --
Class Y
1999 $ 10.42 $ 0.52 $ (0.53) $ (0.52) $ (0.12)
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) --
- ---------------------------------------------------------------------------------------------
</TABLE>
+ Returns are for the period indicated and have not been annualized.
(A) Excluding sales charges.
(1) 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.
(2) For the one month period ended September 30, 1996. All ratios for the period
have been annualized.
The accompanying notes are an integral part of the financial statements.
40 '99 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>
$ 8.05 3.74% $ 100,699 0.80% 4.99% 1.30% 62%
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
$ 8.06 4.02% $ 496 0.65% 5.07% 1.05% 62%
8.16 1.04 + 1 0.65 5.33 0.99 14
$ 10.65 (2.67)% $ 137,133 0.95% 5.29% 1.14% 90%
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
$ 10.58 (3.48)% $ 14,639 1.70% 4.53% 1.89% 90%
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
$ 10.64 (2.75)%+ $ 719 1.35% 5.09% 1.89% 90%
$ 10.65 (2.44)% $1,239,900 0.70% 5.57% 0.89% 90%
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
$ 9.16 (0.08)% $ 5,478 0.70% 5.33% 1.12% 38%
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
$ 9.15 0.03% $ 164,035 0.70% 5.32% 0.87% 38%
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
$ 9.80 (0.20)% $ 34,365 0.85% 5.01% 1.12% 65%
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
$ 9.77 (0.06)% $ 348,864 0.70% 5.17% 0.87% 65%
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
- ---------------------------------------------------------------------------------------------------------
</TABLE>
(3) For the period ended August 31.
(4) 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
years prior to September 1, 1995, are those of DDJ. The per share
information for such years 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).
(5) Class Y shares have been offered since July 31, 1998. All ratios for the
period have been annualized.
(6) Class C shares have been offered since February 1, 1999. All ratios for the
period have been annualized.
41 '99 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
FINANCIAL HIGHLIGHTS FOR A SHARE OUTSTANDING, THROUGHOUT THE PERIODS ENDED
SEPTEMBER 30, UNLESS OTHERWISE INDICATED.
<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>
LIMITED TERM INCOME FUND
Class A
1999 $ 10.04 $ 0.52 $ (0.18) $ (0.52) --
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) --
Class Y
1999 $ 10.04 $ 0.52 $ (0.17) $ (0.52)
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) --
STRATEGIC INCOME FUND
Class A
1999(3) $ 9.27 $ 0.78 $ (0.25) $ (0.71) --
1998(1) 10.00 0.13 (0.75) (0.11) --
Class B
1999(3) $ 9.27 $ 0.71 $ (0.26) $ (0.65) --
1998(1) 10.00 0.09 (0.71) (0.11) --
Class C
1999(2)(3) $ 9.57 $ 0.45 $ (0.47) $ (0.47) --
Class Y
1999(3) $ 9.27 $ 0.80 $ (0.25) $ (0.73) --
1998(1) 10.00 0.14 (0.75) (0.12) --
- ---------------------------------------------------------------------------------------------
</TABLE>
+ Returns are for the period indicated and have not been annualized.
(A) Excluding sales charges.
(1) Commenced operations July 24, 1998. All ratios for the period have been
annualized.
(2) Class C shares have been offered since February 1, 1999. All ratios for the
period have been annualized.
(3) Per share data calculated using average shares outstanding method.
The accompanying notes are an integral part of the financial statements.
42 '99 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>
$ 9.86 3.43% $ 5,318 0.60% 5.16% 1.12% 65%
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
$ 9.87 3.53% $119,522 0.60% 5.15% 0.87% 65%
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
$ 9.09 5.73% $ 27,768 1.15% 8.30% 1.21% 40%
9.27 (6.17)+ 40,270 1.15 8.19 1.30 61
$ 9.07 4.90% $ 788 1.90% 7.56% 1.96% 40%
9.27 (6.19)+ 114 1.90 7.44 2.05 61
$ 9.08 (0.28)%+ $ 1,058 1.55% 7.34% 1.90% 40%
$ 9.09 5.96% $184,666 0.90% 8.56% 0.93% 40%
9.27 (6.13)+ 54,491 0.90 8.44 1.05 61
------- ------ -------- ---- ---- ---- ---
</TABLE>
43 '99 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
NOTES TO
FINANCIAL STATEMENTS SEPTEMBER 30, 1999
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, Minnesota Tax Free Fund, Oregon Intermediate
Tax Free Fund, Tax Free Fund, Balanced Fund, Equity Income Fund, Equity
Index Fund, Large Cap Value Fund, Large Cap Growth Fund, Mid Cap Growth
Fund, Mid Cap Value Fund, Regional Equity Fund, Small Cap Value Fund,
Small Cap 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.
These FAIF Funds offer Class A and Class Y shares. Fixed Income Fund and
Strategic Income Fund also offer Class B and Class C shares. Class A
shares are sold with a front-end sales charge. Class B shares are subject
to a contingent deferred sales charge for six years and automatically
convert to Class A shares after eight years. Class C shares are sold with
a front-end sales charge and are subject to a contingent deferred sales
charge for 18 months. 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 that 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
44 '99 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 exchanges 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 - The Funds 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 September 30th or
October 31st.
Net investment income and net realized gains (losses) may differ for
financial statement and tax purposes because of temporary or permanent
book/tax differences. These differences are primarily due to losses
deferred due to wash sales and foreign currency gains and losses.
The character of distributions made during the year from net investment
income or net realized gains may differ from its ultimate
characterization for Federal income tax purposes. In addition, due to the
timing of dividend distributions, the fiscal year in which the amounts
are distributed may differ from the year that the income or realized
gains (losses) were recorded by the Fund. To the extent these differences
are permanent, adjustments are made to the appropriate equity accounts in
the period that the difference arises.
As of September 30, 1999, the Strategic Income Fund reclassified
($179,000) from accumulated net realized foreign exchange loss to
undistributed net investment income. The reclassification had no effect
on net assets or net asset values per share.
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
Securities Fund $4,923 $ -- $ (4,923)
Fixed Income Fund 15 (15) --
Intermediate Term Income Fund 1 (1) --
Strategic Income Fund 179 (179) --
------------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION - The books and records of the Strategic
Income Fund are maintained in U.S. dollars on the following bases:
o market value of investment securities, assets and liabilities at the
current rate of exchange; and
45 '99 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
NOTES TO
FINANCIAL STATEMENTS SEPTEMBER 30, 1999
o purchases and sales of investment securities, income and expenses at
the relevant rates of exchange prevailing on the respective dates of
such transactions.
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 changes 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 allocated 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. The purchase of securities on a
when-issued or forward commitment basis may increase the volatility of
the Fund's net asset value if the Fund makes such purchases while
remaining substantially fully invested. At September 30, 1999, Fixed
Income Fund and Strategic Income Fund had outstanding when-issued
commitments of $42,384,844 and $5,793,281, respectively.
In connection with the ability to purchase securities on a when-issued
basis, the Fixed Income, Intermediate Government Bond, Intermediate Term
Income and Strategic Income Funds may enter into dollar rolls in which
the Fund sells securities purchased on a forward commitment basis and
simultaneously contracts with a counterparty to repurchase similar (same
type, coupon, and maturity) but not identical securities on a specified
future date. Dollar rolls are considered a form of leverage. As an
inducement to "roll over" its purchase commitments, the Fund receives
negotiated fees. For the year ended September 30, 1999, the fees earned
by each Fund are as follows:
FEE INCOME EARNED
-------------------------------------------------------------------------
Fixed Income Fund $406,668
Strategic Income Fund 62,539
-------------------------------------------------------------------------
ILLIQUID OR RESTRICTED SECURITIES - As of September 30, 1999, investments
in securities included issues that are illiquid or restricted. Restricted
securities are often
46 '99 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
purchased in private placement transactions, are not registered under the
Securities Act of 1933, may have contractual restrictions on resale, and
are valued under methods approved by the Board of Trustees as reflecting
fair value. A security may also be considered illiquid if it lacks a
readily available market or if its valuation has not changed for a
certain period of time. The Fund intends to invest no more than 10% of
its net assets (determined at the time of purchase and reviewed
periodically) in illiquid or restricted securities. Certain restricted
securities, eligible for resale to qualified institutional investors, are
not subject to that limitation. The aggregate value of illiquid or
restricted securities subject to this limitation as of September 30, 1999
was $5,818,000, which represents 2.72% of the Fund's net assets.
Information concerning restricted securities is as follows:
DATES
SECURITY PAR ACQUIRED OST BASIS
-------------------------------------------------------------------------
Acme Television $ 500,000 9/97-3/99 $ 410,892
American Builders 175,000 5/97-3/99 161,875
Chancellor Media 50,000 12/97 55,313
Cumulus Media 200,000 6/98-8/98 206,375
Dialog 400,000 11/97-5/99 413,000
Diamond Holdings 125,000 1/98 126,250
Eagle-Picher Industries 375,000 2/98-3/99 366,168
Glenoit 100,000 3/97-8/97 103,155
Nextel Communications 2,025,000 2/98-6/99 1,286,925
NextLink Communications 100,000 2/98 99,798
Qwest Communications 600,000 10/97-9/98 424,606
Revlon Consumer Products 950,000 1/98-9/99 917,057
Tekni-Plex 100,000 2/98-4/98 101,063
Telesystems International Wireless 50,000 10/97 29,958
Telesystems International Wireless 525,000 6/97-4/99 293,696
United International Holdings 550,000 2/98-7/99 350,819
Wesco Distribution 475,000 5/98-7/99 470,694
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
ADVISORY FEES - Pursuant to an investment advisory agreement (the
"Agreement"), First American Asset Management (the "Advisor"), a division
of U.S. Bank National Association ("U.S. Bank") manages each Fund's
assets and furnishes related office facilities, equipment, research and
personnel. The Agreement requires each Fund to pay the Advisor a monthly
fee based upon average daily net assets. The fee for each Fund is equal
to an annual rate of 0.70% of the average daily net assets. The Advisor
intends to waive fees during the current fiscal year so that total fund
operating expenses do not exceed expense limitations. Fee waivers may be
discontinued at any time.
47 '99 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
NOTES TO
FINANCIAL STATEMENTS SEPTEMBER 30, 1999
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.
SUB-ADVISOR FEES - 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
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.
ADMINISTRATION FEES - SEI Investments Management Corporation ("SIMC")
provides administrative services, including certain accounting, legal and
shareholder services, at an annual rate of 0.12% of each FAIF Fund's
average daily net assets, with a minimum annual fee of $50,000. 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
0.105% of their relative share of the excess net assets. Fees are
computed daily and paid monthly.
SUB-ADMINISTRATION FEES - The Advisor assists SIMC and provides
sub-administration services for the Funds. For these services, SIMC
compensates the sub-administrator at an annual rate of up to 0.05% of
each Fund's average daily net assets. The fees for each Fund for the year
were approximately 0.028% of average daily net assets. Under this
agreement, SIMC paid U.S. Bank National Association $8,411,000 in
aggregate for the year ended September 30, 1999 for the First American
Family of Funds. For the Funds included in this annual report for the
year ended September 30, 1999 the amounts paid were as follows (000):
--------------------------------------------------
Adjustable Rate Mortgage Securities Fund $ 31
Fixed Income Fund 383
Intermediate Government Bond Fund 55
Intermediate Term Income Fund 117
Limited Term Income Fund 40
Strategic Income Fund 45
--------------------------------------------------
CUSTODIAN FEES - Through a separate contractual agreement, U.S. Bank
serves as the Funds' custodian. The fee for each Fund is equal to an
annual rate of 0.03% of average daily net assets.
DISTRIBUTION FEES - SEI Investments Distribution Co. ("SIDCO") serves as
distributor of the Funds. Under the distribution plan, each of the Funds
pays SIDCO a monthly distribution fee equal to an annual rate of 0.25% of
each Fund's average daily net assets of the Class A shares, 1.00% of the
Class B shares, and 1.00% of the Class C shares, which may be used by
SIDCO to provide compensation for sales support and distribution
activities. Adjustable Rate Mortgage Securities Fund and Intermediate
Term Income Fund waive 0.10% of Class A distribution fees. Intermediate
Government Bond Fund and Limited Term Income Fund waives 0.25% of Class A
distribution fees. Fixed Income Fund and Strategic Income Fund waives
0.35% of Class C distribution fees. No distribution
48 '99 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
fees are paid by Class Y shares. Under the agreement, SIDCO paid to U.S
Bank and its affiliates the following amounts for the funds included in
this annual report for the year ended September 30, 1999 (000):
U.S. BANK U.S. BANCORP U.S. BANK
NATIONAL ASSOCIATION PIPER JAFFRAY TRUST
-------------------------------------------------------------------------
Adjustable Rate Mortgage Securities Fund $ 8 $ 57 $ 3
Fixed Income Fund 78 155 5
Intermediate Term Income Fund 10 37 1
Strategic Income Fund 4 22 --
-------------------------------------------------------------------------
TRANSFER AGENT FEES - DST Systems, Inc. provides transfer agency services
for the Funds. Effective October 1, 1998, FAIF appointed U.S. Bank 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. As the servicing agent
U.S. Bank was paid $4,921,000 in aggregate for the year ended September
30, 1999. For the year ended September 30, 1999, fees paid to U.S. Bank
for the Funds included in this report were as follows (000):
--------------------------------------------------
Adjustable Rate Mortgage Securities Fund $ 48
Fixed Income Fund 118
Intermediate Term Income Fund 15
Strategic Income Fund 22
--------------------------------------------------
OTHER FEES - 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 year ended September 30, 1999, legal fees and expenses were paid
to a law firm of which the Secretary of the Funds is a partner.
SALES CHARGES - A Contingent Deferred Sales Charge ("CDSC") is imposed on
redemptions made in Class B shares. 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%
------------------------------------------------------
Class B shares will automatically convert to Class A shares eight years
after the first day of the month shares are purchased.
A CDSC of 1.00% is imposed on redemptions made in Class C shares for the
first eighteen months.
The CDSC for Class B and Class C shares is imposed on the value of the
purchased shares, or the value at the time of redemption, whichever is
less.
49 '99 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
NOTES TO
FINANCIAL STATEMENTS SEPTEMBER 30, 1999
For the year ended September 30, 1999, sales charges retained by SIDCO
for distributing the First American Family of Funds' shares were
approximately $159,000.
4 > CAPITAL SHARE TRANSACTIONS
Capital share transactions for the funds were as follows (000):
<TABLE>
<CAPTION>
INTERMEDIATE
ADJUSTABLE RATE FIXED INCOME GOVERNMENT
MORTGAGE SECURITIES FUND FUND BOND FUND
- -------------------------------------------------------------------------------------------------------------------------------
10/1/98 10/1/97 10/1/98 10/1/97 10/1/98 10/1/97
to to to to to to
9/30/99 9/30/98 9/30/99 9/30/98 9/30/99 9/30/98
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Class A:
Shares issued 228 283 1,748 782 601 407
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 159 449 478 31 20 15
Shares redeemed (4,150) (7,120) (6,904) (18,751) (496) (330)
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL CLASS A TRANSACTIONS (3,763) (6,388) (4,678) 16,775 125 92
===============================================================================================================================
Class B:
Shares issued -- -- 394 317 -- --
Shares issued in lieu of cash distributions -- -- 77 55 -- --
Shares redeemed -- -- (570) (288) -- --
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL CLASS B TRANSACTIONS -- -- (99) 84 -- --
===============================================================================================================================
Class C:
Shares issued -- -- 69 -- -- --
Shares issued in lieu of cash distributions -- -- 1 -- -- --
Shares redeemed -- -- (2) -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL CLASS C TRANSACTIONS -- -- 68 -- -- --
===============================================================================================================================
Class Y:
Shares issued 136 -- 38,033 40,454 3,529 8,629
Shares issued in connection with acquisition of Qualivest
Fund -- -- -- 24,078 -- --
Shares issued in connection with acquisition of Piper Fund -- -- 308 -- -- --
Shares issued in lieu of cash distributions 1 -- 4,134 2,880 102 85
Shares redeemed (76) -- (29,568) (28,263) (10,126) (3,914)
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL CLASS Y TRANSACTIONS 61 -- 12,907 39,149 (6,495) 4,800
===============================================================================================================================
NET INCREASE (DECREASE) FROM SHARE TRANSACTIONS (3,702) (6,388) 8,198 56,008 (6,370) 4,892
===============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
INTERMEDIATE TERM LIMITED TERM STRATEGIC
INCOME FUND INCOME FUND INCOME FUND
- -------------------------------------------------------------------------------------------------------------------------------
10/1/98 10/1/97 10/1/98 10/1/97 10/1/98 7/24/98
to to to to to to
9/30/99 9/30/98 9/30/99 9/30/98 9/30/99 9/30/98(1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Class A:
Shares issued 388 513 208 584 183 39
Shares issued in connection with acquisition of Qualivest
Fund -- 81 -- -- -- --
Shares issued in connection with acquisition of Piper Fund -- 4,336 -- -- -- 8,642
Shares issued in lieu of cash distributions 149 41 24 25 121 37
Shares redeemed (1,732) (517) (195) (827) (1,590) (4,376)
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL CLASS A TRANSACTIONS (1,195) 4,454 37 (218) (1,286) 4,342
===============================================================================================================================
Class B:
Shares issued -- -- -- -- 79 12
Shares issued in lieu of cash distributions -- -- -- -- 2 --
Shares redeemed -- -- -- -- (6) --
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL CLASS B TRANSACTIONS -- -- -- -- 75 12
===============================================================================================================================
Class C:
Shares issued -- -- -- -- 116 --
Shares issued in lieu of cash distributions -- -- -- -- 1 --
Shares redeemed -- -- -- -- (1) --
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL CLASS C TRANSACTIONS -- -- -- -- 116 --
===============================================================================================================================
Class Y:
Shares issued 7,415 7,740 2,958 6,008 15,739 6,106
Shares issued in connection with acquisition of Qualivest
Fund -- 18,733 -- -- -- --
Shares issued in connection with acquisition of Piper Fund -- 875 -- -- -- --
Shares issued in lieu of cash distributions 1,131 859 273 473 707 56
Shares redeemed (14,170) (19,365) (8,363) (7,790) (2,010) (286)
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL CLASS Y TRANSACTIONS (5,624) 8,842 (5,132) (1,309) 14,436 5,876
===============================================================================================================================
NET INCREASE (DECREASE) FROM SHARE TRANSACTIONS (6,819) 13,296 (5,095) (1,527) 13,341 10,230
===============================================================================================================================
</TABLE>
(1) Commenced operations on July 24, 1998.
50 '99 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
5 > INVESTMENT SECURITY TRANSACTIONS
During the year ended September 30, 1999, purchases of securities and
proceeds from sales of securities, other than temporary investments in
short-term securities, were as follows (000):
U.S. GOVERNMENT OTHER INVESTMENT
SECURITIES SECURITIES
-------------------------------------------------------------------------
PURCHASES SALES PURCHASES SALES
-------------------------------------------------------------------------
Adjustable Rate Mortgage
Securities Fund $ 10,627 $ 14,869 $ 6,469 $ 972
Fixed Income Fund 238,275 378,547 490,692 292,253
Intermediate Government
Bond Fund 59,075 127,603 4,972 --
Intermediate Term
Income Fund 136,831 248,632 94,331 55,873
Limited Term
Income Fund 8,784 32,623 50,389 68,839
Strategic Income Fund 36,573 16,414 132,113 39,223
-------------------------------------------------------------------------
Including dollar rolls for Fixed Income Fund and Strategic Income Fund,
purchases of U.S. government securities aggregated (000) $396,867 and
$217,218, and sales of U.S. government securities aggregated (000)
$396,110 and $107,157, respectively.
At September 30, 1999, 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, 1999,
is as follows (000):
AGGREGATE GROSS AGGREGATE GROSS
APPRECIATION DEPRECIATION NET
-------------------------------------------------------------------------
Adjustable Rate Mortgage
Securities Fund $ 132 $ (537) $ (405)
Fixed Income Fund 6,725 (34,061) (27,336)
Intermediate Government
Bond Fund 1,505 (1,608) (103)
Intermediate Term
Income Fund 497 (6,852) (6,355)
Limited Term Income Fund 155 (652) (497)
Strategic Income Fund 1,551 (12,553) (11,002)
-------------------------------------------------------------------------
As of September 30, 1999, the following funds have capital loss
carryforwards (000):
AMOUNT EXPIRATION DATE
-------------------------------------------------------------------------
Adjustable Rate Mortgage
Securities Fund $140,978 2000-2004
Fixed Income Fund** 90,697 2001-2004
Intermediate Term Income
Fund** 11,944 2002-2003
Limited Term Income Fund* 3,861 2000-2005
Strategic Income Fund 17,515 2001-2007
-------------------------------------------------------------------------
* 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.
Adjustable Rate Mortgage Securities Fund and Limited Term Income Fund
incurred losses in the amount of $139,000 and $134,000 from November 1,
1998 to September 30, 1999. 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, 2000.
51 '99 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
NOTES TO
FINANCIAL STATEMENTS SEPTEMBER 30, 1999
6 > SECURITIES LENDING TRANSACTIONS
In order to generate additional income, each Fund 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, 1999, the collateral purchased with
cash received and held at September 30, 1999, 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
-------------------------------------------------------------------------
Fixed Income $553,837 $756
Intermediate Term Income 150,445 270
Limited Term Income 19,553 43
Strategic Income 46,947 9
-------------------------------------------------------------------------
MARKET VALUE OF COLLATERAL PURCHASED WITH CASH RECEIVED
-------------------------------------------------------------------------
OTHER FIXED
REPURCHASE MONEY MARKET INCOME
FUND AGREEMENTS INSTRUMENT SECURITIES TOTAL
-------------------------------------------------------------------------
Fixed Income $397,100 $4,578 $163,651 $565,329
Intermediate Term Income 107,869 1,244 44,454 153,567
Limited Term Income 14,019 162 5,778 19,959
Strategic Income 33,661 388 13,872 47,921
-------------------------------------------------------------------------
U.S. Bank 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 received $2,270,000 in aggregate for the Funds
included in this report for the year ended September 30, 1999, securities
lending fees were as follows (000):
------------------------------------------------------
Fixed Income Fund $495
Intermediate Term Income Fund 178
Limited Term Income Fund 28
Strategic Income Fund 1
------------------------------------------------------
7 > COMMON TRUST FUND CONVERSIONS
On July 23, 1999, the Piper Common Bond Fund was converted into the Fixed
Income Fund. The assets, which consisted of securities and related
receivables, were converted on a tax free basis. 308,392 shares of Class
Y of the Fixed Income Fund were issued at the time of conversion. The net
assets of the Piper Common Bond Fund and Fixed Income Fund immediately
before the conversion were $3,299,801 and $1,399,655,638 respectively.
Included in the net assets of the Piper Common Bond Fund were ($32,848)
of unrealized losses.
52 '99 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
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:
QUALIVEST ACQUIRED FAIF ACQUIRING
-------------------------------------------------------------------------
Intermediate Bond Fund Intermediate Term Income Fund
Diversified Bond Fund Fixed Income Fund
-------------------------------------------------------------------------
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:
ACQUIRING
FUND'S ACQUIRED FUND'S
FAIF FUND NET ASSETS SHARES ISSUED SHARES REDEEMED
-------------------------------------------------------------------------
Intermediate Term Income $320,221,620 18,814,377 18,616,555
Fixed Income 771,254,652 24,125,586 25,678,152
-------------------------------------------------------------------------
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 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 Fund Adjustable Rate Mortgage Securities
Intermediate Bond Fund Intermediate Term Income
Government Income Fund Fixed Income
American Government Income Fund NYSE Symbol: (AGF) Fixed Income
American Government Income Portfolio NYSE Symbol: (AAF) Fixed Income
American Opportunity Income Fund NYSE Symbol: (OIF) Fixed Income
The Americas Income Trust AMEX Symbol: (XUS) Strategic Income
Highlander Income AMEX Fund Symbol: (HLA) Strategic Income
-----------------------------------------------------------------------------------------------
</TABLE>
*For American Government Income Fund, American Government Income
Portfolio, and American Opportunity Income 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.
53 '99 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
NOTES TO
FINANCIAL STATEMENTS SEPTEMBER 30, 1999
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 Fund $285,449,774 $ (118,528) $ (146,484,460) $1,017,624 $139,864,410
Intermediate Bond Fund 327,628,512 -- (275,850,285) 991,555 52,769,782
Government Income Fund 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 Fund 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 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. Strategic Income 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 Strategic Income Fund may be subject to greater volatility
than most mutual funds which invest primarily in domestic securities.
Strategic Income 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.
54 '99 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
The summary of credit quality ratings for the securities held by the
Strategic Income Fund as of September 30, 1999, are as follows:
STANDARD & POORS: MOODY'S:
------------------------------------------------------
AAA 23.63% Aaa 31.63%
AA 1.47% Aa 1.87%
A 2.23% A 1.89%
BBB 5.38% Baa 6.35%
BB 15.85% Ba 12.89%
B 29.92% B 34.09%
CCC 2.78% Caa 3.57%
CC 0.34% Ca 0.05%
D 0.40% Not Rated 7.66%
Not Rated 18.00% ------
------ 100.00%
100.00%
------------------------------------------------------
11 > FUND REORGANIZATION
Subject to shareholder approval, the Board of Directors of the First
American Investment Funds, Inc. has approved the reorganization of the
Adjustable Rate Mortgage Securities Fund into the Limited Term Income
Fund and the Intermediate Government Bond Fund into Intermediate Term
Income Fund.
Under the proposed Agreement and Plan of Reorganization the Class A and Y
shares of Adjustable Rate Mortgage Securities Fund and Intermediate
Government Bond Fund will be exchanged for Class A and Y shares of
Limited Term Income Fund and Intermediate Term Income Fund, respectively.
55 '99 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
NOTICE TO
SHAREHOLDERS SEPTEMBER 30, 1999 (UNAUDITED)
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 2000. PLEASE CONSULT YOUR TAX
ADVISER FOR PROPER TREATMENT OF THIS INFORMATION.
Dear First American Investment Fund Shareholders:
For the fiscal year ended September 30, 1999, each Fund designated long
term capital gains and exempt income with regard to distributions paid
during the year as follows:
(A) (B)
LONG TERM ORDINARY (C)
CAPITAL GAINS INCOME TOTAL
DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS
FUND (TAX BASIS) (TAX BASIS) (TAX BASIS)
- --------------------------------------------------------------------------------
Adjustable Rate Mortgage Securities 0% 100% 100%
Fixed Income 7% 93% 100%
Intermediate Government Bond 1% 99% 100%
Intermediate Term Income 0% 100% 100%
Limited Term Income 0% 100% 100%
Strategic Income 0% 100% 100%
- --------------------------------------------------------------------------------
* Items (A) and (B) are based on a percentage of the fund's total
distributions.
56 '99 ANNUAL REPORT FIRST AMERICAN FUNDS
<PAGE>
FIRST AMERICAN INVESTMENT FUNDS, INC.
BOARD OF DIRECTORS
MR. ROBERT DAYTON
Director of First American Investment Funds, Inc.
Chief Executive Officer of Okabena Company
- -----------------------------------------------------------------------------
MR. ROGER GIBSON
Director of First American Investment Funds, Inc.
Vice President of North America-Mountain Region for United Airlines
- -----------------------------------------------------------------------------
MR. ANDREW HUNTER III
Director of First American Investment Funds, Inc.
Chairman of Hunter Keith Industries
- -----------------------------------------------------------------------------
MR. LEONARD KEDROWSKI
Director of First American Investment Funds, Inc.
Owner and President of Executive Management Consulting, Inc.
- -----------------------------------------------------------------------------
MR. JOHN MURPHY JR.
Director of First American Investment Funds, Inc.
Executive Vice President, U.S. Bancorp
- -----------------------------------------------------------------------------
MR. ROBERT SPIES
Director of First American Investment Funds, Inc.
Retired Vice President, U.S. Bank National Association
- -----------------------------------------------------------------------------
MR. JOSEPH STRAUSS
Director of First American Investment Funds, Inc.
Former Chairman of First American Investment Funds, Inc.
Owner and President of Strauss Management Company
- -----------------------------------------------------------------------------
MS. VIRGINIA STRINGER
Chairperson of First American Investment Funds, Inc.
Owner and President of Strategic Management Resources, Inc.
- -----------------------------------------------------------------------------
<PAGE>
This report and the financial statements contained herein are submitted for the
general information of the shareholders of the corporation. The report is not
authorized for distribution to prospective investors in the corporation unless
preceded or accompanied by an effective prospectus for each of the funds
included. Shares in the funds are not deposits or obligations of, or guaranteed
or endorsed by, U.S. Bank or any of its affiliates. Such shares are also not
federally insured by the Federal Deposit Insurance Corporation, the Federal
Reserve Board, or any other agency. Investment in the shares involves investment
risk including loss of principal amount invested.
Past performance does not guarantee future results. 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.
FIRST AMERICAN INVESTMENT FUNDS, INC.
1 Freedom Valley Drive
Oaks, Pennsylvania 19456
INVESTMENT ADVISOR AND ADMINISTRATOR
FIRST AMERICAN ASSET MANAGEMENT,
A DIVISION OF U.S. BANK NATIONAL ASSOCIATION
601 Second Avenue South
Minneapolis, Minnesota 55402
CUSTODIAN
U.S. BANK NATIONAL ASSOCIATION
180 East Fifth Street
St. Paul, Minnesota 55101
DISTRIBUTOR
SEI INVESTMENTS DISTRIBUTION CO.
1 Freedom Valley Drive
Oaks, Pennsylvania 19456
INDEPENDENT AUDITORS
ERNST & YOUNG LLP
1400 Pillsbury Center
200 South Sixth Street
Minneapolis, Minnesota 55402
COUNSEL
DORSEY & WHITNEY LLP
220 South Sixth Street
Minneapolis, Minnesota 55402
- --------------------------------------------------------------------------------
FIRST AMERICAN FUNDS Bulk Rate
c/o Fulfillment Agent, American Financial Printing Inc. U.S. Postage
404 Industrial Boulevard, N.E. PAID
Minneapolis, MN 55413 Mpls, MN
Permit No. 26388
In an attempt to reduce shareholder costs and help eliminate duplication, the
funds will try to limit their mailing to one report for each address that lists
one or more shareholders with the same last name. If you would like additional
copies, please call Investor Services at 1-800-637-2548.
11/1999 332-99
