JANUARY 31, 2000
AS SUPPLEMENTED
FEBRUARY 1, 2000
ASSET CLASSES
(*) EQUITY FUNDS
* FUNDS OF FUNDS
* BOND FUNDS
* TAX FREE BOND FUNDS
* MONEY MARKET FUNDS
PROSPECTUS
FIRST AMERICAN INVESTMENT FUNDS, INC.
FIRST AMERICAN
LARGE CAP
FUNDS
CLASS A, CLASS B,
AND CLASS C SHARES
BALANCED FUND
EQUITY INCOME FUND
EQUITY INDEX FUND
LARGE CAP GROWTH FUND
LARGE CAP VALUE FUND
AS WITH ALL MUTUAL FUNDS, THE SECURITIES AND EXCHANGE COMMISSION HAS NOT
APPROVED OR DISAPPROVED THE SHARES OF THESE FUNDS, OR DETERMINED IF THE
INFORMATION IN THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY STATEMENT TO THE
CONTRARY IS A CRIMINAL OFFENSE.
[LOGO] FIRST AMERICAN FUNDS(R)
THE POWER OF DISCIPLINED INVESTING(R)
<PAGE>
Table of
CONTENTS
FUND SUMMARIES
- --------------------------------------------------------------------------------
Balanced Fund 2
- --------------------------------------------------------------------------------
Equity Income Fund 5
- --------------------------------------------------------------------------------
Equity Index Fund 7
- --------------------------------------------------------------------------------
Large Cap Growth Fund 9
- --------------------------------------------------------------------------------
Large Cap Value Fund 11
- --------------------------------------------------------------------------------
POLICIES & SERVICES
- --------------------------------------------------------------------------------
Buying and Selling Shares 13
- --------------------------------------------------------------------------------
Managing Your Investment 18
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
Management 20
- --------------------------------------------------------------------------------
More About The Funds 21
- --------------------------------------------------------------------------------
Financial Highlights 23
- --------------------------------------------------------------------------------
FOR MORE INFORMATION Back Cover
- --------------------------------------------------------------------------------
<PAGE>
Fund Summaries
INTRODUCTION
This section of the prospectus describes the objectives of the First American
Large Cap Funds, summarizes the main investment strategies used by each fund in
trying to achieve its objectives, and highlights the risks involved with these
strategies. It also provides you with information about the performance, fees,
and expenses of the funds.
AN INVESTMENT IN THE FUNDS IS NOT A DEPOSIT OF U.S. BANK NATIONAL ASSOCIATION
AND IS NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION
OR ANY OTHER GOVERNMENT AGENCY.
1
PROSPECTUS - First American Large Cap Funds
Class A, Class B, and Class C Shares
<PAGE>
Fund Summaries
BALANCED FUND
- --------------------------------------------------------------------------------
OBJECTIVE
Balanced Fund's objective is to maximize total return (capital appreciation plus
income).
- --------------------------------------------------------------------------------
MAIN INVESTMENT STRATEGIES
Balanced Fund invests in a balanced portfolio of stocks and bonds. The mix of
securities will change based on existing and anticipated market conditions.
Over the long term, the fund's asset mix is likely to average approximately 60%
equity securities and 40% debt securities.
Under normal market conditions, the equity securities portion of the fund's
portfolio will be invested primarily (at least 75% of the total assets) in
common stocks of companies that cover a broad range of industries and that have
market capitalizations of at least $5 billion at the time of purchase. The
fund's advisor will utilize separate value and growth strategies in selecting
securities for this portion of the fund. Although no limits will be placed on
the fund's equity holdings invested in the value strategy versus the growth
strategy, the advisor expects that, over the long-term, the fund will be
invested in an equal mix of value and growth securities.
In implementing the value strategy for this portion of the fund, the advisor
will select securities that it believes:
* are undervalued relative to other securities in the same industry or market.
* exhibit good or improving fundamentals.
* exhibit an identifiable catalyst that could close the gap between market
value and fair value over the next one to two years.
In implementing the growth strategy for this portion of the fund, the advisor
will select securities that exhibit the potential for superior growth based on
factors such as:
* Above average growth in revenue and earnings
* Strong competitive position
* Strong management
* Sound financial condition
Up to 25% of the equity portion of the fund may be invested in securities of
foreign issuers that are either listed on a U.S. stock exchange or represented
by American Depositary Receipts.
Under normal market conditions, the debt securities portion of the fund's
portfolio will be comprised of securities such as: U.S. government securities
(securities issued or guaranteed by the U.S. government or its agencies or
instrumentalities) including zero coupon bonds; mortgage- and asset-backed
securities; and corporate debt obligations.
In selecting debt securities for the fund, the advisor uses a "top-down"
approach, which begins with the formulation of a general economic outlook.
Following this, various sectors and industries are analyzed and selected for
investment. This is followed by the selection of individual securities.
The fund's debt securities will be rated investment grade at the time or
purchase or, if unrated, determined to be of comparable quality by the fund's
advisor. At least 65% of these securities will be either U.S. government
securities or securities that have received at least an A or equivalent rating.
The fund may invest up to 15% of the debt portion of its portfolio in foreign
securities payable in United States dollars. Under normal market conditions the
fund attempts to maintain a weighted average maturity for the debt securities in
its portfolio of 15 years or less and an average effective duration of three to
eight years.
To generate additional income, the fund may lend securities representing up to
one-third of the value of its total assets to broker-dealers, banks and other
institutions. It also may invest up to 25% of total assets in dollar roll
transactions. In a dollar roll transaction, the fund sells mortgage-backed
securities for delivery in the current month while contracting with the same
party to repurchase similar securities at a future date.
- --------------------------------------------------------------------------------
MAIN RISKS
The value of your investment in this fund will change daily, which means you
could lose money. The main risks of investing in this fund include:
Risk of Common Stocks
Stocks may decline significantly in price over short or extended periods of
time. Price changes may occur in the market as a whole, or they may occur in
only a particular company, industry or sector of the market. In addition, value
stocks, growth stocks, and/or large-capitalization stocks may underperform the
market as a whole.
Foreign Security Risk
Securities of foreign issuers, even when dollar-denominated and publicly traded
in the United States, may involve risks not associated with the securities of
domestic issuers, including the risks of adverse currency fluctuations and of
political or social instability or diplomatic developments that could adversely
affect the securities.
Interest Rate Risk
Debt securities typically decrease in value when interest rates rise. This risk
is usually greater for longer-term debt securities. One measure of interest rate
risk is effective duration, explained in the "More About the Funds -- Investment
Strategies" section.
Income Risk
The fund's income could decline due to falling market interest rates.
2
PROSPECTUS - First American Large Cap Funds
Class A, Class B, and Class C Shares
<PAGE>
Fund Summaries
BALANCED FUND CONTINUED
Credit Risk
An issuer of debt securities may not make timely principal or interest payments
on its securities, or the other party to a contract (such as a securities
lending agreement) may default on its obligations.
Call Risk
During periods of falling interest rates, a bond issuer may "call" -- or repay
- -- its high-yielding bonds before their maturity date. The fund would then be
forced to invest the unanticipated proceeds at lower interest rates, resulting
in a decline in the fund's income.
Risks of Mortgage- and Asset-Backed Securities
Falling interest rates could cause faster than expected prepayments of the
obligations underlying mortgage- and asset-backed securities, which the fund
would have to invest at lower interest rates. On the other hand, rising interest
rates could cause prepayments of the obligations to decrease, extending the life
of mortgage- and asset-backed securities with lower interest rates.
Risks of Dollar Roll Transactions
The use of mortgage dollar rolls could increase the volatility of the fund's
share price. It could also diminish the fund's investment performance if the
advisor does not predict mortgage prepayments and interest rates correctly.
- --------------------------------------------------------------------------------
FUND PERFORMANCE
The illustrations on the next page provide you with information on the fund's
volatility and performance. Of course, past performance does not guarantee
future results.
The bar chart shows you how performance of the fund's Class A shares has varied
from year to year. The performance of Class B and Class C shares will be lower
due to their higher expenses. Sales charges are not reflected in the chart; if
they had been, returns would be lower.
The table compares the fund's performance for Class A and Class B shares over
different time periods to that of the fund's benchmark index, which is a broad
measures of market performance. However, because Class C shares have not been
offered for a full calendar year, no information is presented for these shares.
The fund's performance reflects sales charges and fund expenses; the benchmark
is unmanaged and has no expenses.
Both the chart and the table assume that all distributions have been reinvested.
3
PROSPECTUS - First American Large Cap Funds
Class A, Class B, and Class C Shares
<PAGE>
Fund Summaries
BALANCED FUND CONTINUED
- --------------------------------------------------------------------------------
FUND PERFORMANCE (CONTINUED)
ANNUAL TOTAL RETURNS AS OF 12/31 EACH YEAR
[BAR CHART]
12.31% 0.79% 26.51% 17.76% 16.98% 10.47% 3.10%
- --------------------------------------------------------------------
1993 1994 1995 1996 1997 1998 1999
Best Quarter: Quarter ending June 30, 1997 10.08%
Worst Quarter: Quarter ending September 30, 1998 (5.78)%
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS Inception Since Inception Since Inception
AS OF 12/31/99 Date One Year Five Years (Class A) (Class B)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balanced Fund (Class A) 12/14/92 (2.31)% 13.47% 11.41% N/A
- -----------------------------------------------------------------------------------------------------------------
Balanced Fund (Class B) 8/15/94 (2.19)% 13.61% N/A 12.56%
- -----------------------------------------------------------------------------------------------------------------
Standard & Poor's 500 Composite Index(1) 21.04% 28.55% 21.52% 25.95%
- -----------------------------------------------------------------------------------------------------------------
Lehman Gov't/Corp Bond Index(2) (2.15)% 7.60% 6.42% 6.88%
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) An unmanaged index of large capitalization stocks. The since inception
performance of the indexes for Class A and Class B shares is calculated from
12/31/92 and 8/31/94, respectively.
(2) An unmanaged index of Treasury securities, other securities issued or
guaranteed by the U.S. government or its agencies or instrumentalities, and
investment grade corporate debt securities. The since inception performance of
the indexes for Class A and Class B shares is calculated from 12/31/92 and
8/31/94, respectively.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
As an investor, you pay fees and expenses to buy and hold shares of the fund.
You pay shareholder fees directly when you buy or sell shares. You pay annual
fund operating expenses indirectly since they are deducted from fund assets. The
figures below show fund expenses during the fiscal year ended September 30,
1999.(1)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
SHAREHOLDER FEES CLASS A CLASS B CLASS C
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MAXIMUM SALES CHARGE (LOAD)
AS A % OF OFFERING PRICE 5.25%(2) 0.00% 1.00%
MAXIMUM DEFERRED SALES CHARGE (LOAD)
AS A % OF ORIGINAL PURCHASE PRICE OR REDEMPTION PROCEEDS, WHICHEVER IS LESS 0.00%(3) 5.00% 1.00%
ANNUAL MAINTENANCE FEE(4)
ONLY CHARGED TO ACCOUNTS WITH BALANCES BELOW $500 $ 25 $ 25 $ 25
ANNUAL FUND OPERATING EXPENSES AS A % OF AVERAGE NET ASSETS
- ---------------------------------------------------------------------------------------------------------------
Management Fees 0.70% 0.70% 0.70%
Distribution and Service (12b-1) Fees 0.25% 1.00% 1.00%
Other Expenses 0.21% 0.21% 0.21%
TOTAL 1.16% 1.91% 1.91%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Actual expenses for the fiscal year were lower than those shown in the table
because of voluntary fee waivers by the advisor. See "Additional Information --
Management." The net expenses the fund actually paid after waivers for the
fiscal year ended September 30, 1999, were:
<TABLE>
<S> <C> <C> <C>
Waiver of Fund Expenses (0.09)% (0.11)% (0.10)%
TOTAL ACTUAL ANNUAL OPERATING EXPENSES (AFTER WAIVERS) 1.05% 1.80% 1.81%
</TABLE>
THE ADVISOR INTENDS TO WAIVE FEES DURING THE CURRENT FISCAL YEAR SO THAT TOTAL
FUND OPERATING EXPENSES DO NOT EXCEED 1.05%, 1.80% AND 1.80%, RESPECTIVELY, FOR
CLASS A, CLASS B AND CLASS C SHARES. FEE WAIVERS MAY BE DISCONTINUED AT ANY
TIME.
(2) Certain investors may qualify for reduced sales charges. See "Buying Shares
- -- Calculating Your Share Price."
(3) Class A share investments of $1 million or more on which no front-end sales
charge is paid may be subject to a contingent deferred sales charge. See "Buying
Shares -- Calculating Your Share Price."
(4) The fund reserves the right to charge your account an annual maintenance fee
of $25 if your balance falls below $500 as a result of selling or exchanging
shares. See "Policies & Services -- Selling Shares, Accounts with Low Balances."
- --------------------------------------------------------------------------------
EXAMPLE This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes that you
invest $10,000 for the time periods indicated, that your investment has a 5%
return each year, and that the fund's operating expenses remain the same.
Although your actual costs and returns may differ, based on these assumptions
your costs would be:
<TABLE>
<CAPTION>
CLASS B CLASS B CLASS C CLASS C
assuming redemption assuming no redemption assuming redemption assuming no redemption
CLASS A at end of each period at end of each period at end of each period at end of each period
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 year $ 637 $ 694 $ 194 $ 392 $ 292
3 years $ 874 $1,000 $ 600 $ 694 $ 694
5 years $1,130 $1,232 $1,032 $1,121 $1,121
10 years $1,860 $2,038 $2,038 $2,310 $2,310
</TABLE>
4
PROSPECTUS - First American Large Cap Funds
Class A, Class B, and Class C Shares
<PAGE>
Fund Summaries
EQUITY INCOME FUND
- --------------------------------------------------------------------------------
OBJECTIVE
Equity Income Fund's objective is long-term growth of capital and income.
- --------------------------------------------------------------------------------
MAIN INVESTMENT STRATEGIES
Under normal market conditions, Equity Income Fund invests primarily (at least
65% of its total assets) in equity securities of companies which the fund's
investment advisor believes are characterized by:
* the ability to pay above average dividends.
* the ability to finance expected growth.
* strong management.
The fund will attempt to maintain a dividend that will grow quickly enough to
keep pace with inflation. As a result, higher-yielding equity securities will
generally represent the core holdings of the fund. However, the fund also may
invest in lower-yielding, higher growth equity securities if the advisor
believes they will help balance the portfolio. The fund's equity securities
include common stocks and preferred stocks, and corporate debt securities which
are convertible into common stocks. All securities held by the fund will provide
current income at the time of purchase.
The fund invests in convertible debt securities in pursuit of both long-term
growth of capital and income. The securities' conversion features provide
long-term growth potential, while interest payments on the securities provide
income. The fund may invest in convertible debt securities without regard to
their ratings, and therefore may hold convertible debt securities which are
rated lower than investment grade.
Up to 25% of the fund's total assets may be invested in securities of foreign
issuers which are either listed on a United States stock exchange or represented
by American Depositary Receipts.
To generate additional income, the fund may lend securities representing up to
one-third of the value of its total assets to broker-dealers, banks, and other
institutions.
- --------------------------------------------------------------------------------
MAIN RISKS
The value of your investment in this fund will change daily, which means you
could lose money. The main risks of investing in this fund include:
Risks of Common Stocks
Stocks may decline significantly in price over short or extended periods of
time. Price changes may occur in the market as a whole, or they may occur in
only a particular company, industry, or sector of the market.
Interest Rate Risk
Debt securities typically decrease in value when interest rates rise. This risk
is usually greater for longer-term debt securities.
Credit Risk
An issuer of debt securities may not make timely principal or interest payments
on its securities, or the other party to a contract (such as a securities
lending agreement) may default on its obligations.
Risks of Non-Investment Grade Securities
The fund may invest in securities which are rated lower than investment grade.
These securities, which are commonly called "high-yield" securities or "junk
bonds," generally have more volatile prices and carry more risk to principal
than investment grade securities. High yield securities may be more susceptible
to real or perceived adverse economic conditions than investment grade
securities. In addition, the secondary trading market may be less liquid.
Foreign Security Risk
Securities of foreign issuers, even when dollar-denominated and publicly traded
in the United States, may involve risks not associated with the securities of
domestic issuers, including the risks of adverse currency fluctuations and of
political or social instability or diplomatic developments that could adversely
affect the securities.
- --------------------------------------------------------------------------------
FUND PERFORMANCE
The illustrations on the next page provide you with information on the fund's
volatility and performance. Of course, past performance does not guarantee
future results.
The bar chart shows you how performance of the fund's Class A shares has varied
from year to year. The performance of Class B and Class C shares will be lower
due to their higher expenses.
Sales charges are not reflected in the chart; if they had been, returns would be
lower.
The table compares the fund's performance for Class A and Class B shares over
different time periods to that of the fund's benchmark index, which is a broad
measures of market performance. However, because Class C shares have not been
offered for a full calendar year, no information is presented for these shares.
The fund's performance reflects sales charges and fund expenses; the benchmark
is unmanaged and has no expenses.
Both the chart and the table assume that all distributions have been reinvested.
5
PROSPECTUS - First American Large Cap Funds
Class A, Class B, and Class C Shares
<PAGE>
Fund Summaries
EQUITY INCOME FUND CONTINUED
- --------------------------------------------------------------------------------
FUND PERFORMANCE (CONTINUED)
ANNUAL TOTAL RETURNS AS OF 12/31 EACH YEAR(1)
[BAR CHART]
4.70% 3.85% 22.73% 19.80% 27.53% 15.68% 3.86%
- -------------------------------------------------------------------
1993 1994 1995 1996 1997 1998 1999
Best Quarter: Quarter ending June 30, 1997 11.95%
Worst Quarter: Quarter ending September 30, 1999 (8.67)%
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS Inception Since Inception Since Inception
AS OF 12/31/99 Date One Year Five Years (Class A) (Class B)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Equity Income Fund (Class A) 12/18/92 (1.59)% 16.38% 12.78% N/A
- -----------------------------------------------------------------------------------------------------------------
Equity Income Fund (Class B) 8/15/94 (1.53)% 16.63% N/A 15.60%
- -----------------------------------------------------------------------------------------------------------------
Standard & Poor's 500 Composite Index(2) 21.04% 28.55% 21.52% 25.95%
- -----------------------------------------------------------------------------------------------------------------
Lehman Gov't/Corp Bond Index(3) (2.15)% 7.60% 6.42% 6.88%
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) First American Asset Management became the investment advisor of the Equity
Income Fund on 3/25/94. Prior to the change, Boulevard Bank was the investment
advisor of the fund.
(2) An unmanaged index of large capitalization stocks. The since inception
performance of the indexes for Class A and Class B shares is calculated from
3/31/94 and 8/31/94, respectively.
(3) An unmanaged index of Treasury securities, other securities issued or
guaranteed by the U.S. government or its agencies or instrumentalities, and
investment grade corporate debt securities. The since inception performance of
the indexes for Class A and Class B shares is calculated from 12/31/92 and
8/31/94, respectively.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
As an investor, you pay fees and expenses to buy and hold shares of the fund.
You pay shareholder fees directly when you buy or sell shares. You pay annual
fund operating expenses indirectly since they are deducted from fund assets. The
figures below show fund expenses during the fiscal year ended September 30,
1999.(1)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
SHAREHOLDER FEES CLASS A CLASS B CLASS C
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MAXIMUM SALES CHARGE (LOAD)
AS A % OF OFFERING PRICE 5.25%(2) 0.00% 1.00%
MAXIMUM DEFERRED SALES CHARGE (LOAD)
AS A % OF ORIGINAL PURCHASE PRICE OR REDEMPTION PROCEEDS, WHICHEVER IS LESS 0.00%(3) 5.00% 1.00%
ANNUAL MAINTENANCE FEE(4)
ONLY CHARGED TO ACCOUNTS WITH BALANCES BELOW $500 $ 25 $ 25 $ 25
ANNUAL FUND OPERATING EXPENSES AS A % OF AVERAGE NET ASSETS
- ---------------------------------------------------------------------------------------------------------------
Management Fees 0.70% 0.70% 0.70%
Distribution and Service (12b-1) Fees 0.25% 1.00% 1.00%
Other Expenses 0.18% 0.18% 0.18%
TOTAL 1.13% 1.88% 1.88%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Actual expenses for the fiscal year were lower than those shown in the table
because of voluntary fee waivers by the advisor. See "Additional Information --
Financial Highlights." The net expenses the fund actually paid after waivers for
the fiscal year ended September 30, 1999, were:
<TABLE>
<S> <C> <C> <C>
Waiver of Fund Expenses (0.13)% (0.13)% (0.12)%
TOTAL ACTUAL ANNUAL OPERATING EXPENSES (AFTER WAIVERS) 1.00% 1.75% 1.76%
</TABLE>
THE ADVISOR INTENDS TO WAIVE FEES DURING THE CURRENT FISCAL YEAR SO THAT TOTAL
FUND OPERATING EXPENSES DO NOT EXCEED 1.00%, 1.75% AND 1.75%, RESPECTIVELY, FOR
CLASS A, CLASS B AND CLASS C SHARES. FEE WAIVERS MAY BE DISCONTINUED AT ANY
TIME.
(2) Certain investors may qualify for reduced sales charges. See "Buying Shares
- -- Calculating Your Share Price."
(3)Class A share investments of $1 million or more on which no front-end sales
charge is paid may be subject to a contingent deferred sales charge. See "Buying
Shares -- Calculating Your Share Price."
(4) The fund reserves the right to charge your account an annual maintenance fee
of $25 if your balance falls below $500 as a result of selling or exchanging
shares. See "Policies & Services -- Selling Shares, Accounts with Low Balances."
- --------------------------------------------------------------------------------
EXAMPLE This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes that you
invest $10,000 for the time periods indicated, that your investment has a 5%
return each year, and that the fund's operating expenses remain the same.
Although your actual costs and returns may differ, based on these assumptions
your costs would be:
<TABLE>
<CAPTION>
CLASS B CLASS B CLASS C CLASS C
assuming redemption assuming no redemption assuming redemption assuming no redemption
CLASS A at end of each period at end of each period at end of each period at end of each period
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 year $ 634 $ 691 $ 191 $ 389 $ 289
3 years $ 865 $ 991 $ 591 $ 685 $ 685
5 years $1,115 $1,216 $1,016 $1,106 $1,106
10 years $1,827 $2,005 $2,005 $2,279 $2,279
</TABLE>
6
PROSPECTUS - First American Large Cap Funds
Class A, Class B, and Class C Shares
<PAGE>
Fund Summaries
EQUITY INDEX FUND
- --------------------------------------------------------------------------------
OBJECTIVE
Equity Index Fund's objective is to provide investment results that correspond
to the performance of the Standard & Poor's 500 Composite Index (S&P 500).
- --------------------------------------------------------------------------------
MAIN INVESTMENT STRATEGIES
Under normal market conditions, Equity Index Fund invests at least 90% of its
total assets in common stocks included in the S&P 500. The S&P 500 is a
market-value weighted index consisting of 500 stocks chosen for market size,
liquidity and industry group representation.
The fund's advisor believes that the fund's objective can best be achieved by
investing in common stocks of approximately 90% to 100% of the issues included
in the S&P 500, depending on the size of the fund. A computer program is used to
identify which stocks should be purchased or sold in order to replicate, as
closely as possible, the composition of the S&P 500.
Because the fund may not always hold all of the stocks included in the S&P 500,
and because the fund has expenses and the index does not, the fund will not
duplicate the index's performance precisely. However, the fund's advisor
believes there should be a close correlation between the fund's performance and
that of the S&P 500 in both rising and falling markets.
The fund will attempt to achieve a correlation between the performance of its
portfolio and that of the S&P 500 of at least 95%, without taking into account
expenses of the fund. A perfect correlation would be indicated by a figure of
100%, which would be achieved if the fund's net asset value, including the value
of its dividends and capital gains distributions, increased or decreased in
exact proportion to changes in the S&P 500. If the fund is unable to achieve a
correlation of 95% over time, the fund's board of directors will consider
alternative strategies for the fund.
The fund also may invest up to 10% of its total assets in stock index futures
contracts, options on stock indices, options on stock index futures and index
participation contracts based on the S&P 500. The fund makes these investments
to maintain the liquidity needed to meet redemption requests, to increase the
level of fund assets devoted to replicating the composition of the S&P 500 and
to reduce transaction costs.
To generate additional income, the fund may lend securities representing up to
one-third of the value of its total assets to broker-dealers, banks and other
institutions.
- --------------------------------------------------------------------------------
MAIN RISKS
The value of your investment in this fund will change daily, which means you
could lose money. The main risks of investing in this fund include:
Risks of Common Stocks
Stocks may decline significantly in price over short or extended periods of
time. Price changes may affect the market as a whole, or they may affect only a
particular company, industry or sector of the market.
Failure to Match Performance of S&P 500
The fund's ability to replicate the performance of the S&P 500 may be affected
by, among other things, changes in securities markets, the manner in which
Standard & Poor's calculates the performance of the S&P 500, the amount and
timing of cash flows into and out of the fund, commissions, sales charges (if
any) and other expenses.
Risks of Options and Futures
The fund will suffer a loss in connection with its use of options, futures
contracts and options on futures contracts if securities prices do not move in
the direction anticipated by the fund's advisor when entering into the options
or the futures contracts.
Risks of Securities Lending
The fund is subject to the risk that the other party to a securities lending
agreement will default on its obligations.
- --------------------------------------------------------------------------------
FUND PERFORMANCE
The illustrations on the next page provide you with information on the fund's
volatility and performance. Of course, past performance does not guarantee
future results.
The bar chart shows you how performance of the fund's Class A shares has varied
from year to year. The performance of Class B and Class C shares will be lower
due to their higher expenses. Sales charges are not reflected in the chart; if
they had been, returns would be lower.
The table compares the fund's performance for Class A and Class B shares over
different time periods to that of the fund's benchmark index, which is a broad
measures of market performance. However, because Class C shares have not been
offered for a full calendar year, no information is presented for these shares.
The fund's performance reflects sales charges and fund expenses; the benchmark
is unmanaged and has no expenses.
Both the chart and the table assume that all distributions have been reinvested.
7
PROSPECTUS - First American Large Cap Funds
Class A, Class B, and Class C Shares
<PAGE>
Fund Summaries
EQUITY INDEX FUND CONTINUED
- --------------------------------------------------------------------------------
FUND PERFORMANCE (CONTINUED)
ANNUAL TOTAL RETURNS AS OF 12/31 EACH YEAR
[BAR CHART]
9.80% 1.02% 36.63% 22.13% 32.51% 28.24% 20.12%
- --------------------------------------------------------------------
1993 1994 1995 1996 1997 1998 1999
Best Quarter: Quarter ending December 31, 1998 21.30%
Worst Quarter: Quarter ending September 30, 1998 (9.96)%
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS Inception Since Inception Since Inception
AS OF 12/31/99 Date One Year Five Years (Class A) (Class B)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Equity Index Fund (Class A) 12/14/92 13.79% 26.41% 19.92% N/A
- -------------------------------------------------------------------------------------------------------------------
Equity Index Fund (Class B) 8/15/94 14.21% 26.69% N/A 24.69%
- -------------------------------------------------------------------------------------------------------------------
Standard & Poor's 500 Composite Index(1) 21.04% 28.55% 21.52% 25.95%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) An unmanaged index of large capitalization stocks. The since inception
performance of the index is calculated from the month end following the
inception of the respective class of shares. The since inception performance of
the index for Class A and Class B shares is calculated from 12/31/92 and
8/31/94, respectively.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
As an investor, you pay fees and expenses to buy and hold shares of the fund.
You pay shareholder fees directly when you buy or sell shares. You pay annual
fund operating expenses indirectly since they are deducted from fund assets. The
figures below show fund expenses during the fiscal year ended September 30,
1999.(1)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
SHAREHOLDER FEES CLASS A CLASS B CLASS C
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MAXIMUM SALES CHARGE (LOAD)
AS A % OF OFFERING PRICE 5.25%(2) 0.00% 1.00%
MAXIMUM DEFERRED SALES CHARGE (LOAD)
AS A % OF ORIGINAL PURCHASE PRICE OR REDEMPTION PROCEEDS, WHICHEVER IS LESS 0.00%(3) 5.00% 1.00%
ANNUAL MAINTENANCE FEE(4)
ONLY CHARGED TO ACCOUNTS WITH BALANCES BELOW $500 $ 25 $ 25 $ 25
ANNUAL FUND OPERATING EXPENSES AS A % OF AVERAGE NET ASSETS
- ---------------------------------------------------------------------------------------------------------------
Management Fees 0.70% 0.70% 0.70%
Distribution and Service (12b-1) Fees 0.25% 1.00% 1.00%
Other Expenses 0.19% 0.19% 0.19%
TOTAL 1.14% 1.89% 1.89%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Actual expenses for the fiscal year were lower than those shown in the table
because of voluntary fee waivers by the advisor. See "Additional Information --
Management." The net expenses the fund actually paid after waivers for the
fiscal year ended September 30, 1999, were:
<TABLE>
<S> <C> <C> <C>
Waiver of Fund Expenses (0.54)% (0.54)% (0.54)%
TOTAL ACTUAL ANNUAL OPERATING EXPENSES (AFTER WAIVERS) 0.60% 1.35% 1.35%
</TABLE>
THE ADVISOR INTENDS TO WAIVE FEES DURING THE CURRENT FISCAL YEAR SO THAT TOTAL
FUND OPERATING EXPENSES DO NOT EXCEED 0.60%, 1.35% AND 1.35%, RESPECTIVELY, FOR
CLASS A, CLASS B AND CLASS C SHARES. FEE WAIVERS MAY BE DISCONTINUED AT ANY
TIME.
(2) Certain investors may qualify for reduced sales charges. See "Buying Shares
- -- Calculating Your Share Price."
(3) Class A share investments of $1 million or more on which no front-end sales
charge is paid may be subject to a contingent deferred sales charge. See "Buying
Shares -- Calculating Your Share Price."
(4) The fund reserves the right to charge your account an annual maintenance fee
of $25 if your balance falls below $500 as a result of selling or exchanging
shares. See "Policies & Services -- Selling Shares, Accounts with Low Balances."
- --------------------------------------------------------------------------------
EXAMPLE This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes that you
invest $10,000 for the time periods indicated, that your investment has a 5%
return each year, and that the fund's operating expenses remain the same.
Although your actual costs and returns may differ, based on these assumptions
your costs would be:
<TABLE>
<CAPTION>
CLASS B CLASS B CLASS C CLASS C
assuming redemption assuming no redemption assuming redemption assuming no redemption
CLASS A at end of each period at end of each period at end of each period at end of each period
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 year $ 635 $ 692 $ 192 $ 390 $ 290
3 years $ 868 $ 994 $ 594 $ 688 $ 688
5 years $1,120 $1,221 $1,021 $1,111 $1,111
10 years $1,838 $2,016 $2,016 $2,289 $2,289
</TABLE>
8
PROSPECTUS - First American Large Cap Funds
Class A, Class B, and Class C Shares
<PAGE>
Fund Summaries
LARGE CAP GROWTH FUND
- --------------------------------------------------------------------------------
OBJECTIVE
Large Cap Growth Fund's objective is long-term growth of capital.
- --------------------------------------------------------------------------------
MAIN INVESTMENT STRATEGIES
Under normal market conditions, Large Cap Growth Fund invests primarily (at
least 75% of its total assets) in common stocks of companies that have market
capitalizations of at least $5 billion at the time of purchase. The advisor will
select companies that it believes exhibit the potential for superior growth
based on factors such as:
* Above average growth in revenue and earnings
* Strong competitive position
* Strong management
* Sound financial condition
Up to 25% of the fund's total assets may be invested in securities of foreign
issuers which are either listed on a United States stock exchange or represented
by American Depositary Receipts.
To generate additional income, the fund may lend securities representing up to
one-third of the value of its total assets to broker-dealers, banks, and other
institutions.
- --------------------------------------------------------------------------------
MAIN RISKS
The value of your investment in this fund will change daily, which means you
could lose money. The main risks of investing in this fund include:
Risks of Common Stock
Stocks may decline significantly in price over short or extended periods of
time. Price changes may occur in the market as a whole, or they may occur in
only a particular company, industry, or sector of the market. In addition,
growth stocks and/or large-capitalization stocks may underperform the market as
a whole.
Foreign Security Risk
Securities of foreign issuers, even when dollar-denominated and publicly traded
in the United States, may involve risks not associated with the securities of
domestic issuers, including the risks of adverse currency fluctuations and of
political or social instability or diplomatic developments that could adversely
affect the securities.
Risks of Securities Lending
The fund is subject to the risk that the other party to a securities lending
agreement will default on its obligations.
- --------------------------------------------------------------------------------
FUND PERFORMANCE
The illustrations on the next page provide you with information on the fund's
volatility and performance. Of course, past performance does not guarantee
future results.
The bar chart shows you how performance of the fund's Class A shares has varied
from year to year. The performance of Class B and Class C shares will be lower
due to their higher expenses. Sales charges are not reflected in the chart; if
they had been, returns would be lower.
The table compares the fund's performance for Class A and Class B shares over
different time periods to that of the fund's benchmark index, which is a broad
measures of market performance. However, because Class C shares have not been
offered for a full calendar year, no information is presented for these shares.
The fund's performance reflects sales charges and fund expenses; the benchmark
is unmanaged and has no expenses.
Both the chart and the table assume that all distributions have been reinvested.
9
PROSPECTUS - First American Large Cap Funds
Class A, Class B, and Class C Shares
<PAGE>
Fund Summaries
LARGE CAP GROWTH FUND CONTINUED
- --------------------------------------------------------------------------------
FUND PERFORMANCE (CONTINUED)
ANNUAL TOTAL RETURNS AS OF 12/31 EACH YEAR(1)
[BAR CHART]
- -2.15% -1.00% 32.43% 22.93% 21.42% 23.56% 37.76%
- ---------------------------------------------------------------------
1993 1994 1995 1996 1997 1998 1999
Best Quarter: Quarter ending December 31, 1999 22.65%
Worst Quarter: Quarter ending September 30, 1998 (14.22)%
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS Inception Since Inception Since Inception
AS OF 12/31/99 Date One Year Five Years (Class A) (Class B)
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
Large Cap Growth Fund (Class A) 12/18/92 30.50% 26.10% 17.00% N/A
- ------------------------------------------------------------------------------------------------------------------
Large Cap Growth Fund (Class B) 8/15/94 31.64% 26.37% N/A 25.38%
- ------------------------------------------------------------------------------------------------------------------
Standard & Poor's 500 Composite Index(2) 21.04% 28.55% 21.52% 25.95%
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) First American Asset Management became the investment advisor of the Large
Cap Growth Fund on 3/25/94. Prior to the change, Boulevard Bank was the
investment advisor of the fund.
(2) An unmanaged index of large capitalization stocks. The since inception
performance of the index is calculated from the month end following the
inception of the respective class of shares. The since inception performance of
the index for Class A and Class B shares is calculated from 12/31/92 and
8/31/94, respectively.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
As an investor, you pay fees and expenses to buy and hold shares of the fund.
You pay shareholder fees directly when you buy or sell shares. You pay annual
fund operating expenses indirectly since they are deducted from fund assets. The
figures below show fund expenses during the fiscal year ended September 30,
1999.(1)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
SHAREHOLDER FEES CLASS A CLASS B CLASS C
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MAXIMUM SALES CHARGE (LOAD)
AS A % OF OFFERING PRICE 5.25%(2) 0.00% 1.00%
MAXIMUM DEFERRED SALES CHARGE (LOAD)
AS A % OF ORIGINAL PURCHASE PRICE OR REDEMPTION PROCEEDS, WHICHEVER IS LESS 0.00%(3) 5.00% 1.00%
ANNUAL MAINTENANCE FEE(4)
ONLY CHARGED TO ACCOUNTS WITH BALANCES BELOW $500 $ 25 $ 25 $ 25
ANNUAL FUND OPERATING EXPENSES AS A % OF AVERAGE NET ASSETS
- ---------------------------------------------------------------------------------------------------------------
Management Fees 0.70% 0.70% 0.70%
Distribution and Service (12b-1) Fees 0.25% 1.00% 1.00%
Other Expenses 0.19% 0.19% 0.19%
TOTAL 1.14% 1.89% 1.89%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Actual expenses for the fiscal year were lower than those shown in the table
because of voluntary fee waivers by the advisor. See "Additional Information --
Financial Highlights." The net expenses the fund actually paid after waivers for
the fiscal year ended September 30, 1999, were:
<TABLE>
<S> <C> <C> <C>
Waiver of Fund Expenses (0.09)% (0.09)% (0.09)%
TOTAL ACTUAL ANNUAL OPERATING EXPENSES (AFTER WAIVERS) 1.05% 1.80% 1.80%
</TABLE>
THE ADVISOR INTENDS TO WAIVE FEES DURING THE CURRENT FISCAL YEAR SO THAT TOTAL
FUND OPERATING EXPENSES DO NOT EXCEED 1.05%, 1.80% AND 1.80%, RESPECTIVELY, FOR
CLASS A, CLASS B AND CLASS C SHARES. FEE WAIVERS MAY BE DISCONTINUED AT ANY
TIME.
(2) Certain investors may qualify for reduced sales charges. See "Buying Shares
- -- Calculating Your Share Price."
(3) Class A share investments of $1 million or more on which no front-end sales
charge is paid may be subject to a contingent deferred sales charge. See "Buying
Shares -- Calculating Your Share Price."
(4) The fund reserves the right to charge your account an annual maintenance fee
of $25 if your balance falls below $500 as a result of selling or exchanging
shares. See "Policies & Services -- Selling Shares, Accounts with Low Balances."
- --------------------------------------------------------------------------------
EXAMPLE This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes that you
invest $10,000 for the time periods indicated, that your investment has a 5%
return each year, and that the fund's operating expenses remain the same.
Although your actual costs and returns may differ, based on these assumptions
your costs would be:
<TABLE>
<CAPTION>
CLASS B CLASS B CLASS C CLASS C
assuming redemption assuming no redemption assuming redemption assuming no redemption
CLASS A at end of each period at end of each period at end of each period at end of each period
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 year $ 635 $ 692 $ 192 $ 390 $ 290
3 years $ 868 $ 994 $ 594 $ 688 $ 688
5 years $1,120 $1,221 $1,021 $1,111 $1,111
10 years $1,838 $2,016 $2,016 $2,289 $2,289
</TABLE>
10
PROSPECTUS - First American Large Cap Funds
Class A, Class B, and Class C Shares
<PAGE>
Fund Summaries
LARGE CAP VALUE FUND
- --------------------------------------------------------------------------------
OBJECTIVE
Large Cap Value Fund's primary objective is capital appreciation. Current income
is a secondary objective of the fund.
- --------------------------------------------------------------------------------
MAIN INVESTMENT STRATEGIES
Under normal market conditions, Large Cap Value Fund invests primarily (at least
75% of its total assets) in common stocks of companies that cover a broad range
of industries and that have market capitalizations of at least $5 billion at the
time of purchase. In selecting stocks, the fund's advisor invests in securities
that it believes:
* are undervalued relative to other securities in the same industry or market.
* exhibit good or improving fundamentals.
* exhibit an identifiable catalyst that could close the gap between market value
and fair value over the next one to two years.
Up to 25% of the fund's total assets may be invested in securities of foreign
issuers which are either listed on a United States stock exchange or represented
by American Depositary Receipts.
To generate additional income, the fund may lend securities representing up to
one-third of the value of its total assets to broker-dealers, banks, and other
institutions.
- --------------------------------------------------------------------------------
MAIN RISKS
The value of your investment in this fund will change daily, which means you
could lose money. The main risks of investing in this fund include:
Risks of Common Stocks
Stocks may decline significantly in price over short or extended periods of
time. Price changes may occur in the market as a whole, or they may occur in
only a particular company, industry, or sector of the market. In addition, value
stocks and/or large-capitalization stocks may underperform the market as a
whole.
Foreign Security Risk
Securities of foreign issuers, even when dollar-denominated and publicly traded
in the United States, may involve risks not associated with the securities of
domestic issuers, including the risks of adverse currency fluctuations and of
political or social instability or diplomatic developments that could adversely
affect the securities.
Risks of Securities Lending
The fund is subject to the risk that the other party to a securities lending
agreement will default on its obligations.
- --------------------------------------------------------------------------------
FUND PERFORMANCE
The illustrations on the next page provide you with information on the fund's
volatility and performance. Of course, past performance does not guarantee
future results.
The bar chart shows you how performance of the fund's Class A shares has varied
from year to year. The performance of Class B and Class C shares will be lower
due to their higher expenses. Sales charges are not reflected in the chart; if
they had been, returns would be lower.
The table compares the fund's performance for Class A and Class B shares over
different time periods to that of the fund's benchmark index, which is a broad
measures of market performance. However, because Class C shares have not been
offered for a full calendar year, no information is presented for these shares.
The fund's performance reflects sales charges and fund expenses; the benchmark
is unmanaged and has no expenses.
Both the chart and the table assume that all distributions have been reinvested.
11
PROSPECTUS - First American Large Cap Funds
Class A, Class B, and Class C Shares
<PAGE>
Fund Summaries
LARGE CAP VALUE FUND CONTINUED
- --------------------------------------------------------------------------------
FUND PERFORMANCE (CONTINUED)
ANNUAL TOTAL RETURNS AS OF 12/31 EACH YEAR
[BAR CHART]
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -2.01% 21.46% 7.98% 15.10% 4.12% 31.94% 29.10% 22.41% 9.71% 7.91%
- ------------------------------------------------------------------------------------------
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
</TABLE>
Best Quarter: Quarter ending December 31, 1998 16.55%
Worst Quarter: Quarter ending September 30, 1998 (13.91)%
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS Inception Ten Years Since Inception
AS OF 12/31/99 Date One Year Five Years (Class A) (Class B)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Large Cap Value Fund (Class A) 12/22/87 2.26% 18.52% 13.67% N/A
- ---------------------------------------------------------------------------------------------------------------
Large Cap Value Fund (Class B) 8/15/94 2.35% 18.71% N/A 17.27%
- ---------------------------------------------------------------------------------------------------------------
Standard & Poor's 500 Composite Index(1) 21.04% 28.55% 18.20% 25.95%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(1) An unmanaged index of large capitalization stocks. The since inception
performance of the index is calculated from the month end following the
inception of the Class B shares. The since inception performance of the index
for Class B shares is calculated from 8/31/94.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
As an investor, you pay fees and expenses to buy and hold shares of the fund.
You pay shareholder fees directly when you buy or sell shares. You pay annual
fund operating expenses indirectly since they are deducted from fund assets. The
figures below show fund expenses during the fiscal year ended September 30,
1999.(1)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
SHAREHOLDER FEES CLASS A CLASS B CLASS C
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MAXIMUM SALES CHARGE (LOAD)
AS A % OF OFFERING PRICE 5.25%(2) 0.00% 1.00%
MAXIMUM DEFERRED SALES CHARGE (LOAD)
AS A % OF ORIGINAL PURCHASE PRICE OR REDEMPTION PROCEEDS, WHICHEVER IS LESS 0.00%(3) 5.00% 1.00%
ANNUAL MAINTENANCE FEE(4)
ONLY CHARGED TO ACCOUNTS WITH BALANCES BELOW $500 $ 25 $ 25 $ 25
ANNUAL FUND OPERATING EXPENSES AS A % OF AVERAGE NET ASSETS
- ---------------------------------------------------------------------------------------------------------------
Management Fees 0.70% 0.70% 0.70%
Distribution and Service (12b-1) Fees 0.25% 1.00% 1.00%
Other Expenses 0.20% 0.20% 0.20%
TOTAL 1.15% 1.90% 1.90%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Actual expenses for the fiscal year were lower than those shown in the table
because of voluntary fee waivers by the advisor. See "Additional Information --
Financial Highlights." The net expenses the fund actually paid after waivers for
the fiscal year ended September 30, 1999, were:
<TABLE>
<S> <C> <C> <C>
Waiver of Fund Expenses (0.10)% (0.10)% (0.10)%
TOTAL ACTUAL ANNUAL OPERATING EXPENSES (AFTER WAIVERS) 1.05% 1.80% 1.80%
</TABLE>
THE ADVISOR INTENDS TO WAIVE FEES DURING THE CURRENT FISCAL YEAR SO THAT TOTAL
FUND OPERATING EXPENSES DO NOT EXCEED 1.05%, 1.80% AND 1.80%, RESPECTIVELY, FOR
CLASS A, CLASS B AND CLASS C SHARES. FEE WAIVERS MAY BE DISCONTINUED AT ANY
TIME.
(2) Certain investors may qualify for reduced sales charges. See "Buying Shares
- -- Calculating Your Share Price."
(3) Class A share investments of $1 million or more on which no front-end sales
charge is paid may be subject to a contingent deferred sales charge. See "Buying
Shares -- Calculating Your Share Price."
(4) The fund reserves the right to charge your account an annual maintenance fee
of $25 if your balance falls below $500 as a result of selling or exchanging
shares. See "Policies & Services -- Selling Shares, Accounts with Low Balances."
- --------------------------------------------------------------------------------
EXAMPLE This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes that you
invest $10,000 for the time periods indicated, that your investment has a 5%
return each year, and that the fund's operating expenses remain the same.
Although your actual costs and returns may differ, based on these assumptions
your costs would be:
<TABLE>
<CAPTION>
CLASS B CLASS B CLASS C CLASS C
assuming redemption assuming no redemption assuming redemption assuming no redemption
CLASS A at end of each period at end of each period at end of each period at end of each period
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 year $ 636 $ 693 $ 193 $ 391 $ 291
3 years $ 871 $ 997 $ 597 $ 691 $ 691
5 years $1,125 $1,226 $1,026 $1,116 $1,116
10 years $1,849 $2,027 $2,027 $2,300 $2,300
</TABLE>
12
PROSPECTUS - First American Large Cap Funds
Class A, Class B, and Class C Shares
<PAGE>
Policies & Services
BUYING AND SELLING SHARES
You may become a shareholder in any of the funds with an initial investment of
$1,000 or more ($250 for a retirement plan or a Uniform Gifts to Minors
Act/Uniform Transfers to Minors Act (UGMA/UTMA) account). Additional investments
can be made for as little as $100 ($25 for a retirement plan or an UGMA/UTMA
account). The funds have the right to waive these minimum investment
requirements for employees of the funds' advisor and its affiliates. The funds
also have the right to reject any purchase order.
- --------------------------------------------------------------------------------
CHOOSING A SHARE CLASS
All funds in this prospectus offer Class A, Class B, and Class C shares.
Each class has its own cost structure. The amount of your purchase and the
length of time you expect to hold your shares will be factors in determining
which class of shares is best for you.
Class A Shares
If you are making an investment that qualifies for a reduced sales charge, Class
A shares may be best for you. Class A shares feature:
* a front-end sales charge, described below.
* lower annual expenses than Class B and Class C shares. See "Fund Summaries"
for more information on fees and expenses.
Because Class A shares will normally be the better choice if your investment
qualifies for a reduced sales charge:
* orders for Class B shares for $250,000 or more normally will be treated as
orders for Class A shares.
* orders for Class C shares for $1 million or more normally will be treated as
orders for Class A shares.
* orders for Class B or Class C shares by an investor eligible to purchase Class
A shares without a front-end sales charge normally will be treated as orders
for Class A shares.
Class B Shares
If you want all your money to go to work for you immediately, you may prefer
Class B shares. Class B shares have no front-end sales charge; however they do
have:
* higher annual expenses than Class A shares. (See "Fees and Expenses" in the
"Fund Summaries" section.)
* a back-end sales charge, called a "contingent deferred sales charge," if you
redeem your shares within six years of purchase.
* automatic conversion to Class A shares approximately eight years after
purchase, thereby reducing future annual expenses.
Class C Shares
These shares combine some of the characteristics of Class A and Class B shares.
Class C shares have a low front-end sales charge of 1%, so more of your
investment goes to work immediately than if you had purchased Class A shares.
However, Class C shares also feature:
* a 1% contingent deferred sales charge if you redeem your shares within 18
months of purchase.
* higher annual expenses than Class A shares. (See "Fees and Expenses" in the
"Fund Summaries" section.)
* no conversion to Class A shares.
Because Class C shares do not convert to Class A shares, they will continue to
have higher annual expenses than Class A shares for as long as you hold them.
- --------------------------------------------------------------------------------
12b-1 FEES
Each fund has adopted a plan under Rule 12b-1 of the Investment Company Act that
allows it to pay the fund's distributor an annual fee for the distribution and
sale of its shares and for services provided to shareholders.
For 12b-1 fees are equal to:
- --------------------------------------------------------------------------------
Class A shares 0.25% of average daily net assets
Class B shares 1% of average daily net assets
Class C shares 1% of average daily net assets
Because these fees are paid out of a fund's assets on an ongoing basis, over
time these fees will increase the cost of your investment and may cost you more
than paying other types of sales charges.
The Class A share 12b-1 fee is a shareholder servicing fee. For Class B and
Class C shares, a portion of the 12b-1 fee equal to 0.25% of average daily net
assets is a shareholder servicing fee and the rest is a distribution fee.
The funds' distributor uses the shareholder servicing fee to compensate
investment professionals, participating institutions and "one-stop" mutual fund
networks for providing ongoing services to shareholder accounts. These
institutions receive annual fees equal to 0.25% of a fund's Class A, Class B,
and Class C share average daily net assets attributable to shares sold through
them. For Class B shares, and for net asset value sales of Class A shares on
which the institution receives a commission, the institution does not begin to
receive its annual fee until one year after the shares are sold. The fund's
distributor also pays institutions that sell Class C shares a 0.75% annual
distribution fee beginning one year after the shares are sold. The distributor
may pay additional fees to institutions, using the sales charges it receives, in
exchange for sales and/or administrative services performed on behalf of the
institution's customers.
- --------------------------------------------------------------------------------
CALCULATING YOUR SHARE PRICE
Your purchase price will be based on the fund's net asset value (NAV) per share,
which is generally calculated as of the close of regular trading on the New York
Stock Exchange (usually 3 p.m. Central time) every day the exchange is open.
13
PROSPECTUS - First American Large Cap Funds
Class A, Class B, and Class C Shares
<PAGE>
Policies & Services
BUYING AND SELLING SHARES CONTINUED
A fund's NAV is equal to the market value of its investments and other assets,
less any liabilities, divided by the number of fund shares. If market prices are
not readily available for an investment or if the advisor believes they are
unreliable, fair value prices may be determined in good faith using methods
approved by the funds' board of directors.
Class A Shares
Your purchase price is typically the net asset value of your shares plus a
front-end sales charge. Sales charges vary depending on the amount of your
purchase. The funds' distributor receives the sales charge you pay and reallows
a portion of the sales charge to your investment professional or participating
institution.
Maximum
Sales Charge Reallowance
as a % of as a % of as a % of
Purchase Net Amount Purchase
Price Invested Price
- --------------------------------------------------------------------------------
Less than $ 50,000 5.25% 5.54% 5.00%
$ 50,000 - $ 99,999 4.25% 4.44% 4.00%
$100,000 - $249,999 3.25% 3.36% 3.00%
$250,000 - $499,999 2.25% 2.30% 2.00%
$500,000 - $999,999 1.75% 1.78% 1.50%
$1 million and over 0% 0% 0%
Reducing Your Sales Charge
As shown in the preceding tables, larger purchases of Class A shares reduce the
percentage sales charge you pay. You also may reduce your sales charge in the
following ways:
PRIOR PURCHASES. Prior purchases of Class A shares of any First American fund
(except a money market fund) will be factored into your sales charge
calculation. For example, let's say you're making a $10,000 investment. If the
current value of all other First American fund Class A shares that you hold is
$40,000 or more, your current sales charge is reduced. To receive a reduced
sales charge, you must notify the funds' transfer agent of your prior purchases.
This must be done at the time of purchase, either directly to the transfer agent
in writing or by notifying your investment professional or financial
institution.
PURCHASES BY RELATED ACCOUNTS. Concurrent and prior purchases of Class A shares
by certain other accounts also will be combined with your purchase to determine
your sales charge. For example, purchases made by your spouse or children under
age 21 will reduce your sales charge. To receive a reduced sales charge, you
must notify the funds' transfer agent of purchases by any related accounts. This
must be done at the time of purchase, either directly to the transfer agent in
writing or by notifying your investment professional or financial institution.
LETTER OF INTENT. If you plan to invest $50,000 or more over a 13-month period
in Class A shares of any First American fund except the money market funds, you
may reduce your sales charge by signing a non-binding letter of intent. (If you
do not fulfill the letter of intent, you must pay the applicable sales charge.
In addition, if you reduce your sales charge to zero under a letter of intent
and then sell your Class A shares within 18 months of their purchase, you may be
charged a contingent deferred sales charge of 1%. See "For Investments of Over
$1 Million.")
More information on these ways to reduce your sales charge appears in the
Statement of Additional Information (SAI). The SAI also contains information on
investors who are eligible to purchase Class A shares without a sales charge.
- --------------------------------------------------------------------------------
FOR INVESTMENTS OF OVER $1 MILLION
There is no initial sales charge on Class A share purchases of $1 millon or
more. However, your investment professional or financial institution may
receive a commission of up to 1% on your purchase except in the case of Equity
Index Fund. If such a commission is paid, you will be assessed a contingent
deferred sales charge (CDSC) of 1% if you sell your shares within 18 months.
To find out whether you will be assessed a CDSC, ask your investment
professional or financial institution. The funds' distributor receives any
CDSC imposed when you sell your Class A shares. The CDSC is based on the value
of your shares at the time of purchase or at the time of sale, whichever is
less. The charge does not apply to shares you acquired by reinvesting your
dividend or capital gain distributions.
To help lower your costs, shares that are not subject to a CDSC will be sold
first. Other shares will then be sold in an order that minimizes your CDSC.
The CDSC for Class A shares will be waived for:
* redemptions following the death or disability (as defined in the Internal
Revenue Code) of a shareholder.
* redemptions that equal the minimum required distribution from an individual
retirement account or other retirement plan to a shareholder who has reached
the age of 70 1/2.
Class B Shares
Your purchase price for Class B shares is their net asset value -- there is no
front-end sales charge. However, if you redeem your shares within six years of
purchase, you will pay a back-end sales charge, called a contingent deferred
sales charge (CDSC). Although you pay no front-end sales charge when you buy
Class B shares, the funds' distributor pays a sales commission of 4.25% of the
amount invested to investment professionals and financial institutions which
sell Class B shares. The funds' distributor receives any CDSC imposed when you
sell your Class B shares.
14
PROSPECTUS - First American Large Cap Funds
Class A, Class B, and Class C Shares
<PAGE>
Policies & Services
BUYING AND SELLING SHARES CONTINUED
Your CDSC will be based on the value of your shares at the time of purchase or
at the time of sale, whichever is less. The charge does not apply to shares you
acquired by reinvesting your dividend or capital gain distributions. Shares will
be sold in the order that minimizes your CDSC.
CDSC as a % of the
Year since purchase value of your shares
- --------------------------------------------------------------------------------
First 5%
Second 5%
Third 4%
Fourth 3%
Fifth 2%
Sixth 1%
Seventh 0%
Eighth 0%
Your Class B shares will automatically convert to Class A shares eight years
after the first day of the month you purchased the shares. For example, if you
purchase Class B shares on June 15, 2000, they will convert to Class A shares on
June 1, 2008.
The CDSC will be waived for:
* redemptions following the death or disability (as defined in the Internal
Revenue Code) of a shareholder.
* redemptions that equal the minimum required distribution from an individual
retirement account or other retirement plan to a shareholder who has reached
the age of 70 1/2.
* redemptions through a systematic withdrawal plan, at a rate of up to 12% a
year of your account's value. During the first year, the 12% annual limit will
be based on the value of your account on the date the plan is established.
Thereafter, it will be based on the value of your account on the preceding
December 31.
Class C Shares
Your purchase price for Class C shares is their net asset value plus a front-end
sales charge equal to 1% of the purchase price (1.01% of the net amount
invested). If you redeem your shares within 18 months of purchase, you will be
assessed a contingent deferred sales charge (CDSC) of 1% of the value of your
shares at the time of purchase or at the time of sale, whichever is less. The
CDSC does not apply to shares you acquired by reinvesting your dividend or
capital gain distributions. Shares will be sold in the order that minimizes your
CDSC.
Even though your sales charge is only 1%, the funds' distributor pays a
commission equal to 2% of your purchase price to your investment professional or
participating institution. The distributor receives any CDSC imposed when you
sell your Class C shares.
The CDSC for Class C shares will be waived in the same circumstances as the
Class B share CDSC. See "Class B Shares" above.
Unlike Class B shares, Class C shares do not convert to Class A shares after a
specified period of time. Therefore, your shares will continue to have higher
annual expenses than Class A shares.
- --------------------------------------------------------------------------------
HOW TO BUY SHARES
You may buy shares on any day the New York Stock Exchange is open. However
purchases of shares may be restricted in the event of an early or unscheduled
close of the New York Stock Exchange. Your shares will be priced at the next NAV
calculated after your order is accepted by the fund, plus any applicable sales
charge. To make sure that your order is accepted, follow the directions for
purchasing shares given below.
By Phone
You may purchase shares by calling your investment professional or financial
institution, if they have a sales agreement with the funds' distributor. In many
cases, your order will be effective that day if received by your investment
professional or financial institution by the close of regular trading on the New
York Stock Exchange. In some cases, however, you will have to transmit your
request by an earlier time in order for your purchase request to be effective
that day. This allows your investment professional or financial institution time
to process your request and transmit it to the fund. Some financial institutions
may charge a fee for helping you purchase shares. Contact your investment
professional or financial institution for more information.
If you are paying by wire, you may purchase shares by calling 1-800-637-2548
before 3 p.m. Central time. All information will be taken over the telephone,
and your order will be placed when the funds' custodian receives payment by
wire. Wire federal funds as follows:
U.S. Bank National Association, Minneapolis, MN
ABA Number 091000022
For Credit to: DST Systems, Inc.:
Account Number 160234580266
For Further Credit to (investor name and fund name)
You cannot purchase shares by wire on days when federally chartered banks are
closed.
By Mail
To purchase shares by mail, simply complete and sign a new account form, enclose
a check made payable to the fund you wish to invest in, and mail both to:
First American Funds
c/o DST Systems, Inc.
P.O. Box 219382
Kansas City, Missouri 64121-9382
After you have established an account, you may continue to purchase shares by
mailing your check to First American Funds at the same address.
15
PROSPECTUS - First American Large Cap Funds
Class A, Class B, and Class C Shares
<PAGE>
Policies & Services
BUYING AND SELLING SHARES CONTINUED
Please note the following:
* All purchases must be made in U.S. dollars.
* Third-party checks, credit cards, credit card checks, and cash are not
accepted.
* If a check does not clear your bank, the funds reserve the right to cancel the
purchase, and you could be liable for any losses or fees incurred.
- --------------------------------------------------------------------------------
INVESTING AUTOMATICALLY
To purchase shares as part of a savings discipline, you may add to your
investment on a regular basis:
* by having $100 or more ($25 for a retirement plan or an UGMA/UTMA account)
automatically withdrawn from your bank account on a periodic basis and
invested in fund shares.
* through automatic monthly exchanges of your shares of Prime Obligations Fund,
a money market fund in the First American family of funds. Exchanges must be
made into the same Class of shares that you hold in Prime Obligations Fund.
You may apply for participation in either of these programs through your
investment professional or financial institution or by calling 1-800-637-2548.
- --------------------------------------------------------------------------------
HOW TO SELL SHARES
You may sell your shares on any day when the New York Stock Exchange is open.
However redemption of shares may be restricted in the event of an early or
unscheduled close of the New York Stock Exchange. Your shares will be sold at
the next NAV calculated after your order is accepted by the fund, less any
applicable contingent deferred sales charge. To make sure that your order is
accepted, follow the directions for selling shares given below.
The proceeds from your sale normally will be mailed or wired within one day, but
in no event more than seven days, after your request is received in proper form.
By Phone
If you purchased shares through a investment professional or financial
institution, simply call them to sell your shares. In many cases, your
redemption will be effective that day if received by your investment
professional or financial institution by the close of regular trading on the New
York Stock Exchange. In some cases, however, you will have to call by an earlier
time in order for your redemption to be effective that day. This allows your
investment professional or financial institution time to process your request
and transmit it to the fund. Contact your investment professional or financial
institution directly for more information.
If you did not purchase shares through a investment professional or financial
institution, you may sell your shares by calling 1-800-637-2548. Proceeds can be
wired to your bank account (if the proceeds are at least $1,000 and you have
previously supplied your bank account information to the transfer agent) or sent
to you by check. The funds reserve the right to limit telephone exchanges to
$50,000 per day.
If you recently purchased your shares by check or through the Automated Clearing
House (ACH), proceeds from the sale of those shares may not be available until
your check or ACH payment has cleared, which may take up to 10 calendar days
from the date of purchase.
By Mail
To sell shares by mail, send a written request to your investment professional
or financial institution, or to the funds' transfer agent at the following
address:
First American Funds
c/o DST Systems, Inc.
P.O. Box 219382
Kansas City, Missouri 64121-9382
Your request should include the following information:
* Name of the fund
* Account number
* Dollar amount or number of shares redeemed
* Name on the account
* Signatures of all registered account owners
Signatures on a written request must be guaranteed if:
* you would like the proceeds from the sale to be paid to anyone other than to
the shareholder of record.
* you would like the check mailed to an address other than the address on the
funds' records.
* your redemption request is for $50,000 or more.
A signature guarantee assures that a signature is genuine and protects
shareholders from unauthorized account transfers. Banks, savings and loan
associations, trust companies, credit unions, broker-dealers, and member firms
of a national securities exchange may guarantee signatures. Call your financial
institution to determine if it has this capability.
Proceeds from a written redemption request will be sent to you by check.
16
PROSPECTUS - First American Large Cap Funds
Class A, Class B, and Class C Shares
<PAGE>
Policies & Services
BUYING AND SELLING SHARES CONTINUED
- --------------------------------------------------------------------------------
SYSTEMATIC WITHDRAWALS
If your account has a value of $5,000 or more, you may redeem a specific dollar
amount from your account on a regular basis. To set up systematic withdrawals,
contact your investment professional or financial institution.
You should not make systematic withdrawals if you plan to continue investing in
the fund, due to sales charges and tax liabilities.
- --------------------------------------------------------------------------------
REINVESTING AFTER A SALE
If you sell Class A shares, you may reinvest in Class A shares of that fund or
another First American fund within 180 days without a sales charge. To reinvest
in Class A shares at net asset value (without paying a sales charge), you must
notify the transfer agent directly in writing or notify your investment
professional or financial institution.
- --------------------------------------------------------------------------------
ACCOUNTS WITH LOW BALANCES
Except for retirement plans and UGMA/UTMA accounts, if your account balance
falls below $500 as a result of selling or exchanging shares, the fund
reserves the right to either:
* Deduct a $25 annual account maintenance fee, which is intended to allocate
the costs of maintaining accounts more equitably among shareholders, or
* Close your account and send you the proceeds, less any applicable contingent
deferred sales charge.
Before taking any action, however, the fund will send you written notice of
the action it intends to take and give you 30 days to re-establish a minimum
account balance of $500.
17
PROSPECTUS - First American Large Cap Funds
Class A, Class B, and Class C Shares
<PAGE>
Policies & Services
MANAGING YOUR INVESTMENT
- --------------------------------------------------------------------------------
EXCHANGING SHARES
If your investment goals or your financial needs change, you may move from one
First American fund to another. There is no fee to exchange shares.
Generally, you may exchange your shares only for shares of the same class.
However, you may exchange your Class A shares for Class Y shares of the same or
another First American fund if you subsequently become eligible to participate
in that class (for example, by opening a fiduciary, custody or agency account
with a financial institution which invests in Class Y shares).
Exchanges are made based on the net asset value per share of each fund at the
time of the exchange. When you exchange your Class A shares of one of the funds
for Class A shares of another First American fund, you do not have to pay a
sales charge. When you exchange your Class B or Class C shares for Class B or
Class C shares of another First American fund, the time you held the shares of
the "old" fund will be added to the time you hold the shares of the "new" fund
for purposes of determining your CDSC or, in the case of Class B shares,
calculating when your shares convert to Class A shares.
Before exchanging into any fund, be sure to read its prospectus carefully. A
fund may change or cancel its exchange policies at any time. You will be
notified of any changes. The funds have the right to limit exchanges to four
times per year.
By Phone
You may exchange shares by calling your investment professional, your financial
institution, or the funds' transfer agent, provided that both funds have
identical shareholder registrations. To request an exchange through the funds'
transfer agent, call 1-800-637-2548. Your instructions must be received by the
funds' transfer agent before 3 p.m. Central time, or by the time specified by
your investment professional or financial institution, in order for shares to be
exchanged the same day.
By Mail
To exchange shares by written request, please follow the procedures under
"Selling Shares." Be sure to include the names of both funds involved in the
exchange.
- --------------------------------------------------------------------------------
TELEPHONE TRANSACTIONS
You may buy, sell, or exchange shares by telephone, unless you elected on your
new account form to restrict this privilege. If you wish to reinstate this
option on an existing account, please call Investor Services at 1-800-637-2548
to request the appropriate form.
The funds and their agents will not be responsible for any losses that may
result from acting on wire or telephone instructions that they reasonably
believe to be genuine. The funds and their agents will each follow reasonable
procedures to confirm that instructions received by telephone are genuine,
which may include taping telephone conversations.
It may be difficult to reach the funds by telephone during periods of unusual
market activity. If you are unable to reach the funds or their agents by
telephone, please consider sending written instructions.
- --------------------------------------------------------------------------------
STAYING INFORMED
Shareholder Reports
Shareholder reports are mailed twice a year, in November and May. They include
financial statements, performance information, a message from your portfolio
managers, and, on an annual basis, the auditors' report.
In an attempt to reduce shareholder costs and help eliminate duplication, the
funds will try to limit their mailings 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 1-800-637-2548.
Statements and Confirmations
Statements summarizing activity in your account are mailed at least quarterly.
Confirmations are mailed following each purchase or sale of fund shares.
18
PROSPECTUS - First American Large Cap Funds
Class A, Class B, and Class C Shares
<PAGE>
Policies & Services
MANAGING YOUR INVESTMENT CONTINUED
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS
Dividends from a fund's net investment income are declared and paid monthly. Any
capital gains are distributed at least once each year.
On the ex-dividend date for a distribution, a fund's share price is reduced by
the amount of the distribution. If you buy shares just before the ex-dividend
date, in effect, you "buy the dividend." You will pay the full price for the
shares and then receive a portion of that price back as a taxable distribution.
Dividend and capital gain distributions will be reinvested in additional shares
of the fund paying the distribution, unless you request that distributions be
reinvested in another First American fund or paid in cash. This request may be
made on your new account form or by writing to the fund. If you request that
your distributions be paid in cash but those distributions cannot be delivered
because of an incorrect mailing address, the undelivered distributions and all
future distributions will be reinvested in fund shares.
- --------------------------------------------------------------------------------
TAXES
Some of the tax consequences of investing in the funds are discussed below. More
information about taxes is in the Statement of Additional Information. However,
because everyone's tax situation is unique, always consult your tax professional
about federal, state, and local tax consequences.
Taxes on Distributions
Each fund pays its shareholders dividends from its net investment income and any
net capital gains that it has realized. For most investors, fund dividends and
distributions are considered taxable whether they are reinvested or taken in
cash (unless your investment is in an IRA or other tax-advantaged account).
Dividends from a fund's net investment income and short-term capital gains are
taxable as ordinary income. Distributions of a fund's long-term capital gains
are taxable as long-term capital gains, regardless of how long you have held
your shares. Because of their investment objectives and strategies,
distributions for Large Cap Growth Fund and Large Cap Value Fund are expected to
consist primarily of capital gains.
Taxes on Transactions
The sale of fund shares, or the exchange of one fund's shares for shares of
another fund, will be a taxable event and may result in a capital gain or loss.
The gain or loss will be considered long-term if you have held your shares for
more than one year. A gain or loss on shares held for one year or less is
considered short-term and is taxed at the same rates as ordinary income.
The exchange of one class of shares for another class of shares in the same fund
will not be taxable.
19
PROSPECTUS - First American Large Cap Funds
Class A, Class B, and Class C Shares
<PAGE>
Additional Information
MANAGEMENT
U.S. Bank National Association (U.S. Bank), acting through its First American
Asset Management division, is the funds' investment advisor. First American
Asset Management provides investment management services to individuals and
institutions, including corporations, foundations, pensions and retirement
plans. As of December 31, 1999, it had more than $78 billion in assets under
management, including investment company assets of more than $33 billion. As
investment advisor, First American Asset Management manages the funds' business
and investment activities, subject to the authority of the board of directors.
Each fund pays the investment advisor a monthly fee for providing investment
advisory services. During the fiscal year ended September 30, 1999, after taking
into account any fee waivers, the funds paid the following investment advisory
fees to First American Asset Management:
Advisory fee
as a % of
average daily
net assets
- --------------------------------------------------------------------------------
BALANCED FUND 0.59%
EQUITY INCOME FUND 0.57%
EQUITY INDEX FUND 0.16%
LARGE CAP GROWTH FUND 0.61%
LARGE CAP VALUE FUND 0.80%
- --------------------------------------------------------------------------------
Investment Advisor
First American Asset Management
601 Second Avenue South
Minneapolis, Minnesota 55402
Distributor
SEI Investments Distribution Co.
Oaks, Pennsylvania 19456
Direct Fund Correspondence to:
First American Funds
P.O. Box 1330
Minneapolis, MN 55440-1330
Additional Compensation
U.S. Bank and other affiliates of U.S. Bancorp may act as fiduciary with
respect to plans subject to the Employee Retirement Income Security Act of 1974
(ERISA) and other trust and agency accounts that invest in the funds. As
described above, U.S. Bank receives compensation for acting as the funds'
investment advisor. U.S. Bank and its affiliates also receive compensation in
connection with the following:
CUSTODY SERVICES. U.S. Bank provides or compensates others to provide custody
services to the funds. U.S. Bank is paid monthly fees equal, on an annual
basis, to 0.03% of a fund's average daily net assets. In addition, U.S. Bank is
reimbursed for its out-of-pocket expenses incurred while providing custody
services to the funds.
ADMINISTRATION SERVICES. U.S. Bank provides or compensates others to provide
administrative services to all open-end funds in the First American family of
funds. These services include general administrative and accounting services,
transfer agency and dividend disbursing services, and shareholder services. U.S.
Bank receives total fees equal, on an annual basis, to 0.12% of the aggregate
average daily net assets of all open-end mutual funds in the First American fund
family up to $8 billion and 0.105% of the aggregate average daily net assets of
all open-end mutual funds in the First American fund family in excess of $8
billion. These fees are allocated among the funds in the First American family
of funds on the basis of their relative net asset values. Additionally, the
funds pay U.S. Bank fees based upon the number of funds and accounts maintained.
SECURITIES LENDING SERVICES. In connection with lending their portfolio
securities, the funds pay administrative and custodial fees to U.S. Bank which
are equal to 40% of the funds' income from these securities lending
transactions.
BROKERAGE TRANSACTIONS. When purchasing and selling portfolio securities for
the funds, the funds' investment advisor may place trades through its
affiliates, U.S. Bancorp Investments, Inc. and U.S. Bancorp Piper Jaffray Inc.,
which will earn commissions on these transactions.
SHAREHOLDER SERVICING FEES. To the extent that fund shares are held through U.S.
Bank or its broker-dealer affiliates, U.S., Bancorp Investments, Inc. and U.S.
Bancorp Piper Jaffray Inc., those entities may receive shareholder servicing
fees from the funds' distributor.
Portfolio Management
Each fund's investments are managed by a team of persons associated with First
American Asset Management.
20
PROSPECTUS - First American Large Cap Funds
Class A, Class B, and Class C Shares
<PAGE>
Additional Information
MORE ABOUT THE FUNDS
- --------------------------------------------------------------------------------
OBJECTIVES
The funds' objectives, which are described in the "Fund Summaries" section, may
be changed without shareholder approval. If a fund's objectives change, you will
be notified at least 30 days in advance. Please remember: There is no guarantee
that any fund will achieve its objectives.
- --------------------------------------------------------------------------------
INVESTMENT STRATEGIES
The funds' main investment strategies are discussed in the "Fund Summaries"
section. These are the strategies that the funds' investment advisor believes
are most likely to be important in trying to achieve the funds' objectives. You
should be aware that each fund may also use strategies and invest in securities
that are not described in this prospectus, but that are described in the
Statement of Additional Information (SAI). For a copy of the SAI, call Investor
Services at 1-800-637-2548.
Temporary Investments
In an attempt to respond to adverse market, economic, political or other
conditions, each fund may temporarily invest without limit in cash and in U.S.
dollar-denominated high-quality money market instruments and other short-term
securities, including money market funds advised by the funds' advisor. Being
invested in these securities may keep a fund from participating in a market
upswing and prevent the fund from achieving its investment objectives.
Effective Duration
Balanced Fund normally attempts to maintain an average effective duration of
three to eight years for the debt securities portion of its portfolio. Effective
duration, one measure of interest rate risk, measures how much the value of a
security is expected to change with a given change in interest rates. The longer
a security's effective duration, the more sensitive its price to changes in
interest rates. For example, if interest rates were to increase by one
percentage point, the market value of a bond with an effective duration of five
years would decrease by 5%, with all other factors being constant. However, all
other factors are rarely constant. Effective duration is based on assumptions
and subject to a number of limitations. It is most useful when interest rate
changes are small, rapid and occur equally in short-term and long-term
securities. In addition, it is difficult to calculate precisely for bonds with
prepayment options, such as mortgage- and asset-backed securities, because the
calculation requires assumptions about prepayment rates.
Portfolio Turnover
Portfolio managers for the funds other than Equity Index Fund may trade
securities frequently, resulting, from time to time, in an annual portfolio
turnover rate of over 100%. Trading of securities may produce capital gains,
which are taxable to shareholders when distributed. Active trading may also
increase the amount of commissions or mark-ups to broker-dealers that the fund
pays when it buys and sells securities. Portfolio turnover for Equity Index Fund
is expected to be well below that of actively managed mutual funds. The
"Financial Highlights" section of this prospectus shows each fund's historical
portfolio turnover rate.
- --------------------------------------------------------------------------------
RISKS
The main risks of investing in the funds are summarized in the "Fund Summaries"
section. More information about fund risks is presented below.
Market Risk
All stocks are subject to price movements due to changes in general economic
conditions, the level of prevailing interest rates or investor perceptions of
the market. Prices also are affected by the outlook for overall corporate
profitability.
Sector Risk
The stocks of companies within specific industries or sectors of the economy can
periodically perform differently than the overall stock market. This can be due
to changes in such things as the regulatory or competitive environment or to
changes in investor perceptions of a particular industry or sector.
Company Risk
Individual stocks can perform differently than the overall market. This may be a
result of specific factors such as changes in corporate profitability due to the
success or failure of specific products or management strategies, or it may be
due to changes in investor perceptions regarding a company.
Foreign Security Risk
Each fund other than Equity Index Fund may invest up to 25% of its total assets
(25% of the equity securities portion of its portfolio for Balanced Fund) in
securities of foreign issuers which are either listed on a United States stock
exchange or represented by American Depositary Receipts. In addition, Balanced
Fund may invest up to 15% of the debt portion of its portfolio in foreign
securities payable in United States dollars. Securities of foreign issuers, even
when dollar-denominated and publicly traded in the United States, may involve
risks not associated with the securities of domestic issuers. For certain
foreign countries, political or social instability or diplomatic developments
could adversely affect the securities. There is also the risk of loss due to
governmental actions such as a change in tax statutes or the modification of
individual property rights. In addition, individual foreign economies may differ
favorably or unfavorably from the U.S. economy.
Risks of Active Management
Each fund other than Equity Index Fund is actively managed and its performance
therefore will reflect in part the advisor's ability to make investment
decisions which are suited to achieving the fund's investment objectives. Due to
their active management, the funds could underperform other mutual funds with
similar investment objectives.
21
PROSPECTUS - First American Large Cap Funds
Class A, Class B, and Class C Shares
<PAGE>
Additional Information
MORE ABOUT THE FUNDS CONTINUED
Risks of Securities Lending
When a fund loans its portfolio securities, it will receive collateral equal to
at least 100% of the value of the loaned securities. Nevertheless, the fund
risks a delay in the recovery of the loaned securities, or even the loss of
rights in the collateral deposited by the borrower if the borrower should fail
financially. To reduce these risks, the funds enter into loan arrangements only
with institutions which the funds' advisor has determined are creditworthy under
guidelines established by the funds' board of directors.
- --------------------------------------------------------------------------------
ADDITIONAL RISKS OF BALANCED FUND AND EQUITY INCOME FUND
Interest Rate Risk
Debt securities in Balanced Fund and Equity Income Fund will fluctuate in value
with changes in interest rates. In general, debt securities will increase in
value when interest rates fall and decrease in value when interest rates rise.
Longer-term debt securities are generally more sensitive to interest rate
changes.
Credit Risk
Balanced Fund and Equity Income Fund are subject to the risk that the issuers of
debt securities held by a fund will not make payments on the securities. There
is also the risk that an issuer could suffer adverse changes in financial
condition that could lower the credit quality of a security. This could lead to
greater volatility in the price of the security and in shares of the fund. Also,
a change in the credit quality rating of a bond could affect the bond's
liquidity and make it more difficult for the fund to sell.
Balanced Fund attempts to minimize credit risk by investing in securities
considered at least investment grade at the time of purchase. However, all of
these securities, especially those in the lower investment grade rating
categories, have credit risk. In adverse economic or other circumstances,
issuers of these lower rated securities are more likely to have difficulty
making principal and interest payments than issuers of higher rated securities.
When Balanced Fund purchases unrated securities, it will depend on the advisor's
analysis of credit risk more heavily than usual.
As discussed in the "Fund Summaries" section, Equity Income Fund invests in
convertible debt securities that are rated below investment grade and are
therefore subject to additional credit risk.
- --------------------------------------------------------------------------------
ADDITIONAL RISKS OF BALANCED FUND
Call Risk
Many corporate bonds may be redeemed at the option of the issuer, or "called,"
before their stated maturity date. In general, an issuer will call its bonds if
they can be refinanced by issuing new bonds which bear a lower interest rate.
Balanced Fund is subject to the possibility that during periods of falling
interest rates, a bond issuer will call its high-yielding bonds. The fund would
then be forced to invest the unanticipated proceeds at lower interest rates,
resulting in a decline in the fund's income.
Extension Risk
Mortgage-backed securities are secured by and payable from pools of mortgage
loans. Similarly, asset-backed securities are supported by obligations such as
automobile loans or home equity loans. These mortgages and other obligations
generally can be prepaid at any time without penalty. As a result, mortgage- and
asset-backed securities are subject to extension risk, which is the risk that
rising interest rates could cause the mortgages or other obligations underlying
the securities to be prepaid more slowly than expected, resulting in slower
prepayments of the securities. This would, in effect, convert a short-or
medium-duration mortgage- or asset-backed security into a longer-duration
security, increasing its sensitivity to interest rate changes and causing its
price to decline.
Prepayment Risk
Mortgage- and asset-backed securities also are subject to prepayment risk, which
is the risk that falling interest rates could cause prepayments of the
securities to occur more quickly than expected. This occurs because, as interest
rates fall, more homeowners refinance the mortgages underlying mortgage-related
securities or prepay the debt obligations underlying asset-backed securities.
Balanced Fund must reinvest the prepayments at a time when interest rates are
falling, reducing the income of the fund. In addition, when interest rates fall,
prices on mortgage- and asset-backed securities may not rise as much as for
other types of comparable debt securities because investors may anticipate an
increase in prepayments.
Risks of Dollar Roll Transactions
In a dollar roll transaction, Balanced Fund sells mortgage-backed securities for
delivery in the current month while contracting with the same party to
repurchase similar securities at a future date. Because the fund gives up the
right to receive principal and interest paid on the securities sold, a mortgage
dollar roll transaction will diminish the investment performance of the fund
unless the difference between the price received for the securities sold and the
price to be paid for the securities to be purchased in the future, plus any fee
income received, exceeds any income, principal payments and appreciation on the
securities sold as part of the mortgage dollar roll. Whether mortgage dollar
rolls will benefit Balanced Fund may depend upon the advisor's ability to
predict mortgage prepayments and interest rates. In addition, the use of
mortgage dollar rolls by the fund increases the amount of the fund's assets that
are subject to market risk, which could increase the volatility of the price of
the fund's shares.
22
PROSPECTUS - First American Large Cap Funds
Class A, Class B, and Class C Shares
<PAGE>
Additional Information
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The tables that follow present performance information about the Class A, Class
B and Class C shares of each fund. This information is intended to help you
understand each fund's financial performance for the past five years or, if
shorter, the period of the fund's operations. Some of this information reflects
financial results for a single fund share. Total returns in the tables represent
the rate that you would have earned or lost on an investment in a fund,
excluding sales charges and assuming you reinvested all of your dividends and
distributions.
The information for the fiscal year ended September 30, 1999 has been audited by
Ernst & Young LLP, independent auditors, whose report, along with the funds'
financial statements, is included in the funds' annual report, which is
available upon request. The information for the fiscal years ended on or before
September 30, 1998, has been audited by other auditors.
BALANCED FUND
<TABLE>
<CAPTION>
Fiscal year ended September 30,
CLASS A SHARES 1999 1998 1997 1996 1995
- --------------------------------------------------------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value, Beginning of Period 13.98 $ 15.41 $ 13.14 $ 12.12 $ 10.54
------- ------- ------- ------- -------
Investment Operations:
Net Investment Income 0.38 0.40 0.39 0.39 0.38
Net Gains (Losses) on Investments
(both realized and unrealized) 1.07 (0.30) 2.85 1.43 1.72
------- ------- ------- ------- -------
Total From Investment Operations 1.45 0.10 3.24 1.82 2.10
------- ------- ------- ------- -------
Less Distributions:
Dividends (from Net Investment Income) (0.38) (0.41) (0.39) (0.39) (0.37)
Distributions (from Capital Gains) (1.59) (1.12) (0.58) (0.41) (0.15)
------- ------- ------- ------- -------
Total Distributions (1.97) (1.53) (0.97) (0.80) (0.52)
------- ------- ------- ------- -------
Net Asset Value, End of Period 13.46 $ 13.98 $ 15.41 $ 13.14 $ 12.12
======= ======= ======= ======= =======
Total Return 10.75% 0.72% 25.80% 15.61% 20.57%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $69,753 $78,269 $32,309 $20,927 $15,288
Ratio of Expenses to Average Net Assets 1.05% 1.05% 1.05% 1.05% 0.99%
Ratio of Net Income to Average Net Assets 2.69% 2.82% 2.74% 3.05% 3.41%
Ratio of Expenses to Average Net Assets (excluding waivers) 1.16% 1.15% 1.13% 1.14% 1.19%
Ratio of Net Income to Average Net Assets (excluding waivers) 2.58% 2.72% 2.66% 2.96% 3.21%
Portfolio Turnover Rate 77% 103% 84% 73% 77%
- --------------------------------------------------------------- ------- ------- ------- ------- -------
</TABLE>
23
PROSPECTUS - First American Large Cap Funds
Class A, Class B, and Class C Shares
<PAGE>
Additional Information
FINANCIAL HIGHLIGHTS CONTINUED
BALANCED FUND (CONTINUED)
<TABLE>
<CAPTION>
Fiscal year ended September 30,
CLASS B SHARES 1999 1998 1997 1996 1995
- --------------------------------------------------------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value, Beginning of Period $ 13.93 $ 15.36 $ 13.10 $ 12.09 $ 10.53
------- ------- ------- ------- -------
Investment Operations:
Net Investment Income 0.28 0.30 0.29 0.31 0.29
Net Gains (Losses) on Investments
(both realized and unrealized) 1.06 (0.31) 2.84 1.42 1.71
------- ------- ------- ------- -------
Total From Investment Operations 1.34 (0.01) 3.13 1.73 2.00
------- ------- ------- ------- -------
Less Distributions:
Dividends (from Net Investment Income) (0.28) (0.30) (0.29) (0.31) (0.29)
Distributions (from Capital Gains) (1.59) (1.12) (0.58) (0.41) (0.15)
------- ------- ------- ------- -------
Total Distributions (1.87) (1.42) (0.87) (0.72) (0.44)
------- ------- ------- ------- -------
Net Asset Value, End of Period $ 13.40 $ 13.93 $ 15.36 $ 13.10 $ 12.09
======= ======= ======= ======= =======
Total Return 9.94% (0.02)% 24.93% 14.78% 19.58%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $60,623 $59,323 $43,707 $15,542 $ 3,120
Ratio of Expenses to Average Net Assets 1.80% 1.80% 1.80% 1.80% 1.79%
Ratio of Net Income to Average Net Assets 1.94% 2.02% 1.99% 2.32% 2.60%
Ratio of Expenses to Average Net Assets (excluding waivers) 1.91% 1.90% 1.88% 1.89% 1.94%
Ratio of Net Income to Average Net Assets (excluding waivers) 1.83% 1.92% 1.91% 2.23% 2.45%
Portfolio Turnover Rate 77% 103% 84% 73% 77%
- --------------------------------------------------------------- ------- ------- ------- ------- -------
</TABLE>
<TABLE>
<CAPTION>
Period ended
September 30,
CLASS C SHARES 1999(1)
- ------------------------------------------------------------------- ------------
<S> <C>
PER SHARE DATA
Net Asset Value, Beginning of Period $ 13.69
-------
Investment Operations:
Net Investment Income 0.23
Net Gains (Losses) on Investments (both realized and unrealized) (0.25)
-------
Total From Investment Operations (0.02)
-------
Less Distributions:
Dividends (from Net Investment Income) (0.22)
-------
Total Distributions (0.22)
-------
Net Asset Value, End of Period $ 13.45
=======
Total Return (0.21)%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $ 1,388
Ratio of Expenses to Average Net Assets 1.81%(2)
Ratio of Net Income to Average Net Assets 2.05%(2)
Ratios of Expenses to Average Net Assets (excluding waivers) 1.91%(2)
Ratio of Net Income to Average Net Assets (excluding waivers) 1.95%(2)
Portfolio Turnover Rate 77%
- ------------------------------------------------------------------- ------------
</TABLE>
(1) Class C shares have been offered since February 1, 1999.
(2) Annualized.
24
PROSPECTUS - First American Large Cap Funds
Class A, Class B, and Class C Shares
<PAGE>
Additional Information
FINANCIAL HIGHLIGHTS CONTINUED
EQUITY INCOME FUND
<TABLE>
<CAPTION>
Fiscal year ended September 30,
CLASS A SHARES 1999 1998 1997 1996 1995
- --------------------------------------------------------------- ------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value, Beginning of Period $ 15.70 $ 15.69 $ 12.65 $ 11.24 $ 9.89
------- ------- ------- ------- -------
Investment Operations:
Net Investment Income 0.36 0.41 0.40 0.39 0.41
Net Gains (Losses) on Investments
(both realized and unrealized) 1.15 0.86 3.40 1.42 1.33
------- ------- ------- ------- -------
Total From Investment Operations 1.51 1.27 3.80 1.81 1.74
------- ------- ------- ------- -------
Less Distributions:
Dividends (from Net Investment Income) (0.37) (0.41) (0.41) (0.39) (0.39)
Distributions (from Capital Gains) (0.90) (0.85) (0.35) (0.01) --
------- ------- ------- ------- -------
Total Distributions (1.27) (1.26) (0.76) (0.40) (0.39)
------- ------- ------- ------- -------
Net Asset Value, End of Period $ 15.94 $ 15.70 $ 15.69 $ 12.65 $ 11.24
======= ======= ======= ======= =======
Total Return 9.74% 8.38% 31.16% 16.41% 18.06%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $18,970 $11,018 $ 7,276 $ 2,581 $ 1,995
Ratio of Expenses to Average Net Assets 1.00% 1.00% 1.00% 1.00% 0.92%
Ratio of Net Income to Average Net Assets 2.01% 2.58% 2.96% 3.25% 3.91%
Ratio of Expenses to Average Net Assets (excluding waivers) 1.13% 1.12% 1.17% 1.20% 1.31%
Ratio of Net Income to Average Net Assets (excluding waivers) 1.88% 2.46% 2.79% 3.05% 3.52%
Portfolio Turnover Rate 35% 14% 39% 23% 23%
- --------------------------------------------------------------- ------- ------- ------- ------- ------
</TABLE>
<TABLE>
<CAPTION>
Fiscal year ended September 30,
CLASS B SHARES 1999 1998 1997 1996 1995
- --------------------------------------------------------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value, Beginning of Period $ 15.65 $ 15.62 $ 12.61 $ 11.20 $ 9.88
------- ------- ------- ------- -------
Investment Operations:
Net Investment Income 0.24 0.30 0.29 0.31 0.33
Net Gains (Losses) on Investments
(both realized and unrealized) 1.16 0.87 3.37 1.42 1.32
------- ------- ------- ------- -------
Total From Investment Operations 1.40 1.17 3.66 1.73 1.65
------- ------- ------- ------- -------
Less Distributions:
Dividends (from Net Investment Income) (0.25) (0.29) (0.30) (0.31) (0.33)
Distributions (from Capital Gains) (0.90) (0.85) (0.35) (0.01) --
------- ------- ------- ------- -------
Total Distributions (1.15) (1.14) (0.65) (0.32) (0.33)
------- ------- ------- ------- -------
Net Asset Value, End of Period $ 15.90 $ 15.65 $ 15.62 $ 12.61 $ 11.20
======= ======= ======= ======= =======
Total Return 9.10% 7.77% 30.06% 15.66% 17.10%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $10,971 $ 8,570 $ 6,619 $ 3,770 $ 1,233
Ratio of Expenses to Average Net Assets 1.75% 1.75% 1.75% 1.75% 1.75%
Ratio of Net Income to Average Net Assets 1.34% 1.81% 2.19% 2.49% 3.05%
Ratio of Expenses to Average Net Assets (excluding waivers) 1.88% 1.87% 1.92% 1.95% 2.06%
Ratio of Net Income to Average Net Assets (excluding waivers) 1.21% 1.69% 2.02% 2.29% 2.74%
Portfolio Turnover Rate 35% 14% 39% 23% 23%
- --------------------------------------------------------------- ------- ------- ------- ------- -------
</TABLE>
25
PROSPECTUS - First American Large Cap Funds
Class A, Class B, and Class C Shares
<PAGE>
Additional Information
FINANCIAL HIGHLIGHTS CONTINUED
EQUITY INCOME FUND (CONTINUED)
<TABLE>
<CAPTION>
Period ended
September 30,
CLASS C SHARES 1999(1)
- --------------------------------------------------------------- --------------
<S> <C>
PER SHARE DATA
Net Asset Value, Beginning of Period $ 16.62
-------
Investment Operations:
Net Investment Income 0.21
Net Gains (Losses) on Investments
(both realized and unrealized) (0.70)
-------
Total From Investment Operations (0.49)
-------
Less Distributions:
Dividends (from Net Investment Income) (0.20)
-------
Total Distributions (0.20)
-------
Net Asset Value, End of Period $ 15.93
=======
Total Return (3.02)%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $ 1,700
Ratio of Expenses to Average Net Assets 1.76%(2)
Ratio of Net Income to Average Net Assets 0.65%(2)
Ratios of Expenses to Average Net Assets (excluding waivers) 1.88%(2)
Ratio of Net Income to Average Net Assets (excluding waivers) 0.53%(2)
Portfolio Turnover Rate 35%
- --------------------------------------------------------------- ----------
</TABLE>
(1) Class C shares have been offered since February 1, 1999.
(2) Annualized.
26
PROSPECTUS - First American Large Cap Funds
Class A, Class B, and Class C Shares
<PAGE>
Additional Information
FINANCIAL HIGHLIGHTS CONTINUED
EQUITY INDEX FUND
<TABLE>
<CAPTION>
Fiscal year ended September 30,
CLASS A SHARES 1999 1998 1997 1996 1995
- --------------------------------------------------------------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value, Beginning of Period $ 20.61 $ 20.76 $ 15.49 $ 13.35 $ 10.68
-------- ------- ------- ------- -------
Investment Operations:
Net Investment Income 0.21 0.24 0.12 0.27 0.25
Net Gains (Losses) on Investments
(both realized and unrealized) 5.36 1.39 5.70 2.32 2.76
-------- ------- ------- ------- -------
Total From Investment Operations 5.57 1.63 5.82 2.59 3.01
-------- ------- ------- ------- -------
Less Distributions:
Dividends (from Net Investment Income) (0.22) (0.24) (0.12) (0.27) (0.25)
Distributions (from Capital Gains) (0.44) (1.54) (0.43) (0.18) (0.09)
-------- ------- ------- ------- -------
Total Distributions (0.66) (1.78) (0.55) (0.45) (0.34)
-------- ------- ------- ------- -------
Net Asset Value, End of Period $ 25.52 $ 20.61 $ 20.76 $ 15.49 $ 13.35
======== ======= ======= ======= =======
Total Return 27.30% 8.50% 39.47% 19.75% 28.90%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $110,439 $46,010 $15,977 $ 6,221 $ 2,140
Ratio of Expenses to Average Net Assets 0.60% 0.60% 0.60% 0.60% 0.57%
Ratio of Net Income to Average Net Assets 0.85% 1.11% 1.36% 1.87% 2.16%
Ratio of Expenses to Average Net Assets (excluding waivers) 1.14% 1.13% 1.13% 1.15% 1.20%
Ratio of Net Income to Average Net Assets (excluding waivers) 0.31% 0.58% 0.83% 1.32% 1.53%
Portfolio Turnover Rate 7% 14% 8% 10% 9%
- --------------------------------------------------------------- -------- ------- ------- ------- -------
</TABLE>
<TABLE>
<CAPTION>
Fiscal year ended September 30,
CLASS B SHARES 1999 1998 1997 1996 1995
- --------------------------------------------------------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value, Beginning of Period $ 20.49 $ 20.67 $ 15.43 $ 13.30 $ 10.66
------- ------- ------- ------- -------
Investment Operations:
Net Investment Income 0.05 0.09 0.12 0.17 0.23
Net Gains (Losses) on Investments
(both realized and unrealized) 5.30 1.36 5.67 2.31 2.68
------- ------- ------- ------- -------
Total From Investment Operations 5.35 1.45 5.79 2.48 2.91
------- ------- ------- ------- -------
Less Distributions:
Dividends (from Net Investment Income) (0.06) (0.09) (0.12) (0.17) (0.18)
Distributions (from Capital Gains) (0.44) (1.54) (0.43) (0.18) (0.09)
------- ------- ------- ------- -------
Total Distributions (0.50) (1.63) (0.55) (0.35) (0.27)
------- ------- ------- ------- -------
Net Asset Value, End of Period $ 25.34 $ 20.49 $ 20.67 $ 15.43 $ 13.30
======= ======= ======= ======= =======
Total Return 26.38% 7.66% 38.45% 18.95% 27.87%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $99,054 $44,122 $23,733 $ 8,252 $ 1,197
Ratio of Expenses to Average Net Assets 1.35% 1.35% 1.35% 1.35% 1.35%
Ratio of Net Income to Average Net Assets 0.10% 0.37% 0.61% 1.11% 1.34%
Ratio of Expenses to Average Net Assets (excluding waivers) 1.89% 1.88% 1.88% 1.90% 1.95%
Ratio of Net Income (Loss) to Average Net Assets
(excluding waivers) (0.44)% (0.16)% 0.08% 0.56% 0.74%
Portfolio Turnover Rate 7% 14% 8% 10% 9%
- --------------------------------------------------------------- ------- ------- ------- ------- -------
</TABLE>
27
PROSPECTUS - First American Large Cap Funds
Class A, Class B, and Class C Shares
<PAGE>
Additional Information
FINANCIAL HIGHLIGHTS CONTINUED
EQUITY INDEX FUND (CONTINUED)
<TABLE>
<CAPTION>
Period ended
September 30,
CLASS C SHARES 1999(1)
- ---------------------------------------------------------------------- --------------
<S> <C>
PER SHARE DATA
Net Asset Value, Beginning of Period $ 25.35
-------
Investment Operations:
Net Investment Income 0.06
Net Gains (Losses) on Investments
(both realized and unrealized) 0.13
-------
Total From Investment Operations 0.19
-------
Less Distributions:
Dividends (from Net Investment Income) (0.06)
-------
Total Distributions (0.06)
-------
Net Asset Value, End of Period $ 25.48
=======
Total Return 0.76%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $16,861
Ratio of Expenses to Average Net Assets 1.35%(2)
Ratio of Net Income to Average Net Assets 0.07%(2)
Ratios of Expenses to Average Net Assets (excluding waivers) 1.89%(2)
Ratio of Net Income (Loss) to Average Net Assets (excluding waivers) (0.47)%(2)
Portfolio Turnover Rate 7%
- ---------------------------------------------------------------------- ------------
</TABLE>
(1) Class C shares have been offered since February 1, 1999.
(2) Annualized.
28
PROSPECTUS - First American Large Cap Funds
Class A, Class B, and Class C Shares
<PAGE>
Additional Information
FINANCIAL HIGHLIGHTS CONTINUED
LARGE CAP GROWTH FUND
<TABLE>
<CAPTION>
Fiscal year ended September 30,
CLASS A SHARES 1999 1998 1997 1996 1995
- ------------------------------------------------------------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value, Beginning of Period $ 16.25 $ 17.63 $ 13.63 $ 11.75 $ 9.09
-------- -------- ------- ------- -------
Investment Operations:
Net Investment Income 0.02 0.09 0.09 0.15 0.15
Net Gains (Losses) on Investments
(both realized and unrealized) 5.39 (0.02) 4.28 1.88 2.66
-------- -------- ------- ------- -------
Total From Investment Operations 5.41 0.07 4.37 2.03 2.81
-------- -------- ------- ------- -------
Less Distributions:
Dividends (from Net Investment Income) (0.03) (0.09) (0.10) (0.15) (0.15)
Distributions (from Capital Gains) (1.88) (1.36) (0.27) -- --
-------- -------- ------- ------- -------
Total Distributions (1.91) (1.45) (0.37) (0.15) (0.15)
-------- -------- ------- ------- -------
Net Asset Value, End of Period $ 19.75 $ 16.25 $ 17.63 $ 13.63 $ 11.75
======== ======== ======= ======= =======
Total Return 36.00% 0.61% 32.69% 17.38% 31.21%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $168,153 $140,948 $12,017 $ 5,318 $ 2,710
Ratio of Expenses to Average Net Assets 1.05% 1.05% 1.05% 1.04% 0.92%
Ratio of Net Income (Loss) to Average Net Assets (0.05)% 0.56% 0.57% 1.13% 1.52%
Ratio of Expenses to Average Net Assets (excluding waivers) 1.14% 1.11% 1.14% 1.17% 1.26%
Ratio of Net Income (Loss) to Average Net Assets
(excluding waivers) (0.14)% 0.50% 0.48% 1.00% 1.18%
Portfolio Turnover Rate 57% 38% 34% 21% 28%
- ------------------------------------------------------------- -------- -------- ------- ------- -------
</TABLE>
<TABLE>
<CAPTION>
Fiscal year ended September 30,
CLASS B SHARES 1999 1998 1997 1996 1995
- ------------------------------------------------------------- ------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value, Beginning of Period $ 16.06 $ 17.47 $ 13.57 $ 11.73 $ 9.09
------- ------- ------- ------- ------
Investment Operations:
Net Investment Income 0.07 0.03 0.01 0.08 0.09
Net Gains (Losses) on Investments
(both realized and unrealized) 5.13 (0.05) 4.18 1.84 2.65
------- ------- ------- ------- ------
Total From Investment Operations 5.20 (0.02) 4.19 1.92 2.74
------- ------- ------- ------- ------
Less Distributions:
Dividends (from Net Investment Income) -- (0.03) (0.02) (0.08) (0.10)
Distributions (from capital gains) (1.88) (1.36) (0.27) -- --
------- ------- ------- ------- -------
Total Distributions (1.88) (1.39) (0.29) (0.08) (0.10)
------- ------- ------- ------- -------
Net Asset Value, End of Period $ 19.38 $ 16.06 $ 17.47 $ 13.57 $ 11.73
======= ======= ======= ======= =======
Total Return 34.99% 0.09% 31.42% 16.41% 30.29%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $19,011 $11,177 $ 9,487 $ 5,775 $ 819
Ratio of Expenses to Average Net Assets 1.80% 1.80% 1.80% 1.79% 1.75%
Ratio of Net Income (Loss) to Average Net Assets (0.83)% (0.20)% (0.18)% 0.36% 0.58%
Ratio of Expenses to Average Net Assets (excluding waivers) 1.89% 1.86% 1.89% 1.92% 2.01%
Ratio of Net Income (Loss) to Average Net Assets
(excluding waivers) (0.92)% (0.26)% (0.27)% 0.23% 0.32%
Portfolio Turnover Rate 57% 38% 34% 21% 28%
- ------------------------------------------------------------- ------- ------- ------- ------- ------
</TABLE>
29
PROSPECTUS - First American Large Cap Funds
Class A, Class B, and Class C Shares
<PAGE>
Additional Information
FINANCIAL HIGHLIGHTS CONTINUED
LARGE CAP GROWTH FUND (CONTINUED)
<TABLE>
<CAPTION>
Period ended
September 30,
CLASS C SHARES 1999(1)
- -------------------------------------------------------------- -------------
<S> <C>
PER SHARE DATA
Net Asset Value, Beginning of Period $ 18.56
-------
Investment Operations:
Net Investment Income 0.01
Net Gains (Losses) on Investments
(both realized and unrealized) 1.11
-------
Total From Investment Operations 1.12
-------
Less Distributions:
Dividends (from Net Investment Income) (0.01)
-------
Total Distributions (0.01)
-------
Net Asset Value, End of Period $ 19.67
=======
Total Return 6.04%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $ 962
Ratio of Expenses to Average Net Assets 1.80%(2)
Ratio of Net Loss to Average Net Assets (1.09)%(2)
Ratios of Expenses to Average Net Assets (excluding waivers) 1.89%(2)
Ratio of Net Loss to Average Net Assets (excluding waivers) (1.18)%(2)
Portfolio Turnover Rate 57%
- -------------------------------------------------------------- ------------
</TABLE>
(1) Class C shares have been offered since February 1, 1999.
(2) Annualized.
30
PROSPECTUS - First American Large Cap Funds
Class A, Class B, and Class C Shares
<PAGE>
Additional Information
FINANCIAL HIGHLIGHTS CONTINUED
LARGE CAP VALUE FUND
<TABLE>
<CAPTION>
Fiscal year ended September 30,
CLASS A SHARES 1999 1998 1997 1996 1995
- --------------------------------------------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value, Beginning of Period $ 22.39 $ 28.74 $ 22.59 $ 19.57 $ 16.51
-------- -------- -------- -------- --------
Investment Operations:
Net Investment Income 0.19 0.29 0.33 0.36 0.33
Net Gains (Losses) on Investments
(both realized and unrealized) 4.44 (2.59) 7.90 4.07 3.64
-------- -------- -------- -------- --------
Total From Investment Operations 4.63 (2.30) 8.23 4.43 3.97
-------- -------- -------- -------- --------
Less Distributions:
Dividends (from Net Investment Income) (0.20) (0.29) (0.32) (0.36) (0.32)
Distributions (from Capital Gains) (3.70) (3.76) (1.76) (1.05) (0.59)
-------- -------- -------- -------- --------
Total Distributions (3.90) (4.05) (2.08) (1.41) (0.91)
-------- -------- -------- -------- --------
Net Asset Value, End of Period $ 23.12 $ 22.39 $ 28.74 $ 22.59 $ 19.57
======== ======== ======== ======== ========
Total Return 21.93% (8.77)% 38.82% 23.90% 25.26%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $177,251 $170,529 $ 50,381 $ 22,965 $ 13,076
Ratio of Expenses to Average Net Assets 1.05% 1.05% 1.05% 1.05% 1.00%
Ratio of Net Income to Average Net Assets 0.82% 1.21% 1.14% 1.64% 1.89%
Ratio of Expenses to Average Net Assets (excluding waivers) 1.15% 1.13% 1.14% 1.13% 1.19%
Ratio of Net Income to Average Net Assets (excluding waivers) 0.72% 1.13% 1.05% 1.56% 1.70%
Portfolio Turnover Rate 61% 74% 57% 40% 52%
- --------------------------------------------------------------- -------- -------- -------- -------- --------
</TABLE>
<TABLE>
<CAPTION>
Fiscal year ended September 30,
CLASS B SHARES 1999 1998 1997 1996 1995
- --------------------------------------------------------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value, Beginning of Period $ 22.21 $ 28.55 $ 22.50 $ 19.49 $ 16.49
------- ------- ------- ------- -------
Investment Operations:
Net Investment Income 0.07 0.13 0.18 0.22 0.26
Net Gains (Losses) on Investments
(both realized and unrealized) 4.36 (2.58) 7.81 4.06 3.55
------- ------- ------- ------- -------
Total From Investment Operations 4.43 (2.45) 7.99 4.28 3.81
------- ------- ------- ------- -------
Less Distributions:
Dividends (from Net Investment Income) (0.07) (0.13) (0.18) (0.22) (0.22)
Distributions (from Capital Gains) (3.70) (3.76) (1.76) (1.05) (0.59)
------- ------- ------- ------- -------
Total Distributions (3.77) (3.89) (1.94) (1.27) (0.81)
------- ------- ------- ------- -------
Net Asset Value, End of Period $ 22.87 $ 22.21 $ 28.55 $ 22.50 $ 19.49
======= ======= ======= ======= =======
Total Return 21.07% (9.37)% 37.71% 23.08% 24.20%
RATIO/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $61,711 $56,259 $53,420 $23,316 $ 7,051
Ratio of Expenses to Average Net Assets 1.80% 1.80% 1.80% 1.80% 1.79%
Ratio of Net Income to Average Net Assets 0.07% 0.41% 0.39% 0.89% 1.10%
Ratio of Expenses to Average Net Assets (excluding waivers) 1.90% 1.88% 1.89% 1.88% 1.94%
Ratio of Net Income (Loss) to Average Net Assets
(excluding waivers) (0.03) 0.33% 0.30% 0.81% 0.95%
Portfolio Turnover Rate 61% 74% 57% 40% 52%
- --------------------------------------------------------------- ------- ------- ------- ------- -------
</TABLE>
31
PROSPECTUS - First American Large Cap Funds
Class A, Class B, and Class C Shares
<PAGE>
Additional Information
FINANCIAL HIGHLIGHTS CONTINUED
LARGE CAP VALUE FUND (CONTINUED)
<TABLE>
<CAPTION>
Period ended
September 30,
CLASS C SHARES 1999(1)
- -------------------------------------------------------------- -------------
<S> <C>
PER SHARE DATA
Net Asset Value, Beginning of Period $ 22.79
-------
Investment Operations:
Net Investment Income 0.08
Net Gains (Losses) on Investments
(both realized and unrealized) 0.30
-------
Total From Investment Operations 0.38
-------
Less Distributions:
Dividends (from Net Investment Income) (0.08)
-------
Total Distributions (0.08)
-------
Net Asset Value, End of Period $ 23.09
=======
Total Return 1.65%
RATIO/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $ 1,398
Ratio of Expenses to Average Net Assets 1.80%(2)
Ratio of Net Income to Average Net Assets 0.00%(2)
Ratios of Expenses to Average Net Assets (excluding waivers) 1.90%(2)
Ratio of Net Loss to Average Net Assets (excluding waivers) (0.10)%(2)
Portfolio Turnover Rate 61%
- -------------------------------------------------------------- ------------
</TABLE>
(1) Class C shares have been offered since February 1, 1999.
(2) Annualized.
32
PROSPECTUS - First American Large Cap Funds
Class A, Class B, and Class C Shares
<PAGE>
- --------------------------------------------------------------------------------
FOR MORE INFORMATION
More information about the funds is available in the funds' Statement of
Additional Information and annual and semiannual reports.
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI provides more details about the funds and their policies. A current SAI
is on file with the Securities and Exchange Commission (SEC) and is incorporated
into this prospectus by reference (which means that it is legally considered
part of this prospectus).
- --------------------------------------------------------------------------------
ANNUAL AND SEMIANNUAL REPORTS
Additional information about the funds' investments is available in the funds'
annual and semiannual reports to shareholders. In the funds' annual report, you
will find a discussion of the market conditions and investment strategies that
significantly affected the funds' performance during their last fiscal year.
You can obtain a free copy of the funds' SAI and/or free copies of the funds'
most recent annual or semiannual reports by calling Investor Services at
1-800-637-2548. The material you request will be sent by first-class mail or
other means designed to ensure equally prompt delivery, within three business
days of receipt of the request.
You can also obtain copies of this information, after paying a duplicating fee,
by electronic request at the following email address: [email protected], or by
writing the SEC's Public Reference Section, Washington, D.C. 20549-0102. For
more information, call 1-202-942-8090.
Information about the funds is also available on the Internet. Text-only
versions of fund documents can be viewed online or downloaded from the EDGAR
Database on the SEC's Internet site at http://www.sec.gov.
FIRST AMERICAN FUNDS P.O. Box 1330, Minneapolis, MN 55440-1330
First American Asset Management, a division of U.S. Bank National Association,
serves as the investment advisor to the First American Funds.
First American Funds are distributed by SEI Investments Distribution Co. which
is located in Oaks, PA 19456 and is not an affiliate of U.S. Bank.
1/2000 3017-99
SEC file number: 811-05309
FAIF-1000R
[LOGO] FIRST AMERICAN FUNDS(R)
THE POWER OF DISCIPLINED INVESTING(R)
<PAGE>
JANUARY 31, 2000
AS SUPPLEMENTED
FEBRUARY 1, 2000
ASSET CLASSES
(*) EQUITY FUNDS
* FUNDS OF FUNDS
* BOND FUNDS
* TAX FREE BOND FUNDS
* MONEY MARKET FUNDS
PROSPECTUS
FIRST AMERICAN INVESTMENT FUNDS, INC.
FIRST AMERICAN
LARGE CAP
FUNDS
CLASS Y SHARES
BALANCED FUND
EQUITY INCOME FUND
EQUITY INDEX FUND
LARGE CAP GROWTH FUND
LARGE CAP VALUE FUND
AS WITH ALL MUTUAL FUNDS, THE SECURITIES AND EXCHANGE COMMISSION HAS NOT
APPROVED OR DISAPPROVED THE SHARES OF THESE FUNDS, OR DETERMINED IF THE
INFORMATION IN THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY STATEMENT TO THE
CONTRARY IS A CRIMINAL OFFENSE.
[LOGO] FIRST AMERICAN FUNDS(R)
THE POWER OF DISCIPLINED INVESTING(R)
<PAGE>
Table of
CONTENTS
FUND SUMMARIES
- --------------------------------------------------------------------------------
Balanced Fund 2
- --------------------------------------------------------------------------------
Equity Income Fund 5
- --------------------------------------------------------------------------------
Equity Index Fund 7
- --------------------------------------------------------------------------------
Large Cap Growth Fund 9
- --------------------------------------------------------------------------------
Large Cap Value Fund 11
- --------------------------------------------------------------------------------
POLICIES & SERVICES
- --------------------------------------------------------------------------------
Buying and Selling Shares 13
- --------------------------------------------------------------------------------
Managing Your Investment 14
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
Management 15
- --------------------------------------------------------------------------------
More About The Funds 16
- --------------------------------------------------------------------------------
Financial Highlights 19
- --------------------------------------------------------------------------------
FOR MORE INFORMATION Back Cover
- --------------------------------------------------------------------------------
<PAGE>
Fund Summaries
INTRODUCTION
This section of the prospectus describes the objectives of the First American
Large Cap Funds, summarizes the main investment strategies used by each fund in
trying to achieve its objectives, and highlights the risks involved with these
strategies. It also provides you with information about the performance, fees,
and expenses of the funds.
AN INVESTMENT IN THE FUNDS IS NOT A DEPOSIT OF U.S. BANK NATIONAL ASSOCIATION
AND IS NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION
OR ANY OTHER GOVERNMENT AGENCY.
1
PROSPECTUS - First American Large Cap Funds
Class Y Shares
<PAGE>
Fund Summaries
BALANCED FUND
- --------------------------------------------------------------------------------
OBJECTIVE
Balanced Fund's objective is to maximize total return (capital appreciation plus
income).
- --------------------------------------------------------------------------------
MAIN INVESTMENT STRATEGIES
Balanced Fund invests in a balanced portfolio of stocks and bonds. The mix of
securities will change based on existing and anticipated market conditions.
Over the long term, the fund's asset mix is likely to average approximately 60%
equity securities and 40% debt securities.
Under normal market conditions, the equity securities portion of the fund's
portfolio will be invested primarily (at least 75% of the total assets) in
common stocks of companies that cover a broad range of industries and that have
market capitalizations of at least $5 billion at the time of purchase. The
fund's advisor will utilize separate value and growth strategies in selecting
securities for this portion of the fund. Although no limits will be placed on
the fund's equity holdings invested in the value strategy versus the growth
strategy, the advisor expects that, over the long-term, the fund will be
invested in an equal mix of value and growth securities.
In implementing the value strategy for this portion of the fund, the advisor
will select securities that it believes:
* are undervalued relative to other securities in the same industry or market.
* exhibit good or improving fundamentals.
* exhibit an identifiable catalyst that could close the gap between market
value and fair value over the next one to two years.
In implementing the growth strategy for this portion of the fund, the advisor
will select securities that exhibit the potential for superior growth based on
factors such as:
* Above average growth in revenue and earnings
* Strong competitive position
* Strong management
* Sound financial condition
Up to 25% of the equity portion of the fund may be invested in securities of
foreign issuers that are either listed on a U.S. stock exchange or represented
by American Depositary Receipts.
Under normal market conditions, the debt securities portion of the fund's
portfolio will be comprised of securities such as: U.S. government securities
(securities issued or guaranteed by the U.S. government or its agencies or
instrumentalities) including zero coupon bonds; mortgage- and asset-backed
securities; and corporate debt obligations.
In selecting debt securities for the fund, the advisor uses a "top-down"
approach, which begins with the formulation of a general economic outlook.
Following this, various sectors and industries are analyzed and selected for
investment. This is followed by the selection of individual securities.
The fund's debt securities will be rated investment grade at the time or
purchase or, if unrated, determined to be of comparable quality by the fund's
advisor. At least 65% of these securities will be either U.S. government
securities or securities that have received at least an A or equivalent rating.
The fund may invest up to 15% of the debt portion of its portfolio in foreign
securities payable in United States dollars. Under normal market conditions the
fund attempts to maintain a weighted average maturity for the debt securities in
its portfolio of 15 years or less and an average effective duration of three to
eight years.
To generate additional income, the fund may lend securities representing up to
one-third of the value of its total assets to broker-dealers, banks and other
institutions. It also may invest up to 25% of total assets in dollar roll
transactions. In a dollar roll transaction, the fund sells mortgage-backed
securities for delivery in the current month while contracting with the same
party to repurchase similar securities at a future date.
2
PROSPECTUS - First American Large Cap Funds
Class Y Shares
<PAGE>
Fund Summaries
BALANCED FUND CONTINUED
- --------------------------------------------------------------------------------
MAIN RISKS
The value of your investment in this fund will change daily, which means you
could lose money. The main risks of investing in this fund include:
Risks of Common Stocks
Stocks may decline significantly in price over short or extended periods of
time. Price changes may occur in the market as a whole, or they may occur in
only a particular company, industry, or sector of the market. In addition, value
stocks, growth stocks, and/or large-capitalization stocks may underperform the
market as a whole.
Foreign Security Risk
Securities of foreign issuers, even when dollar-denominated and publicly traded
in the United States, may involve risks not associated with the securities of
domestic issuers, including the risks of adverse currency fluctuations and of
political or social instability or diplomatic developments that could adversely
affect the securities.
Interest Rate Risk
Debt securities typically decrease in value when interest rates rise. This risk
is usually greater for longer-term debt securities. One measure of interest rate
risk is effective duration, explained in the "More About the Funds -- Investment
Strategies" section.
Income Risk
The fund's income could decline due to falling market interest rates.
Credit Risk
An issuer of debt securities may not make timely principal or interest payments
on its securities, or the other party to a contract (such as a securities
lending agreement) may default on its obligations.
Call Risk
During periods of falling interest rates, a bond issuer may "call" -- or repay
- ---its high-yielding bonds before their maturity date. The fund would then be
forced to invest the unanticipated proceeds at lower interest rates, resulting
in a decline in the fund's income.
Risks of Mortgage- and Asset-Backed Securities
Falling interest rates could cause faster than expected prepayments of the
obligations underlying mortgage- and asset-backed securities, which the fund
would have to invest at lower interest rates. On the other hand, rising interest
rates could cause prepayments of the obligations to decrease, extending the life
of mortgage- and asset-backed securities with lower interest rates.
Risks of Dollar Roll Transactions
The use of mortgage dollar rolls could increase the volatility of the fund's
share price. It could also diminish the fund's investment performance if the
advisor does not predict mortgage prepayments and interest rates correctly.
- --------------------------------------------------------------------------------
FUND PERFORMANCE
The illustrations on the next page provide you with information on the fund's
volatility and performance. Of course, past performance does not guarantee
future results.
The bar chart shows you how performance of the fund's shares has varied from
year to year.
The table compares the fund's performance over different time periods to that of
the fund's benchmark indices, which are broad measures of market performance.
The fund's performance reflects fund expenses; the benchmark is unmanaged and
has no expenses.
Both the chart and the table assume that all distributions have been reinvested.
3
PROSPECTUS - First American Large Cap Funds
Class Y Shares
<PAGE>
Fund Summaries
BALANCED FUND CONTINUED
- --------------------------------------------------------------------------------
FUND PERFORMANCE (CONTINUED)
ANNUAL TOTAL RETURNS AS OF 12/31 EACH YEAR
[BAR CHART]
26.77% 18.12% 17.33% 10.72% 3.42%
- ---------------------------------------------
1995 1996 1997 1998 1999
Best Quarter: Quarter ending June 30, 1997 10.22%
Worst Quarter: Quarter ending September 30, 1998 (5.78)%
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS Inception Since
AS OF 12/31/99 Date One Year Five Years Inception
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balanced Fund 2/4/94 3.42% 15.00% 12.48%
- ------------------------------------------------------------------------------------------
Standard & Poor's 500 Composite Index(1) 21.04% 28.55% 24.17%
- ------------------------------------------------------------------------------------------
Lehman Gov't/Corp Bond Index(2) (2.15)% 7.60% 5.96%
- ------------------------------------------------------------------------------------------
</TABLE>
(1) An unmanaged index of large capitalization stocks. The since inception
performance for the index is calculated from 2/28/94.
(2) An unmanaged index of Treasury securities, other securities issued or
guaranteed by the U.S. government or its agencies or instrumentalities, and
investment grade corporate debt securities. The since inception performance for
the index is calculated from 2/28/94.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
As an investor, you pay fees and expenses to buy and hold shares of the fund.
You pay shareholder fees directly when you buy or sell shares. You pay annual
fund operating expenses indirectly since they are deducted from fund assets. The
figures below show fund expenses during the fiscal year ended September 30,
1999.(1)
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
- --------------------------------------------------------------------------------
MAXIMUM SALES CHARGE (LOAD) None
MAXIMUM DEFERRED SALES CHARGE (LOAD) None
ANNUAL FUND OPERATING EXPENSES AS A % OF AVERAGE NET ASSETS
- --------------------------------------------------------------------------------
Management Fees 0.70%
Distribution and Service (12b-1) Fees None
Other Expenses 0.21%
TOTAL 0.91%
- --------------------------------------------------------------------------------
(1) Actual expenses for the fiscal year were lower than those shown in the table
because of voluntary fee waivers by the advisor. See "Additional Information --
Financial Highlights." The net expenses the fund actually paid after waivers for
the fiscal year ended September 30, 1999, were:
Waiver of Fund Expenses (0.11)%
TOTAL ACTUAL ANNUAL OPERATING EXPENSES (AFTER WAIVERS) 0.80%
THE ADVISOR INTENDS TO WAIVE FEES DURING THE CURRENT FISCAL YEAR SO THAT TOTAL
FUND OPERATING EXPENSES DO NOT EXCEED 0.80%. FEE WAIVERS MAY BE DISCONTINUED AT
ANY TIME.
- --------------------------------------------------------------------------------
EXAMPLE This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes that you
invest $10,000 for the time periods indicated, that your investment has a 5%
return each year, and that the fund's operating expenses remain the same.
Although your actual costs and returns may differ, based on these assumptions
your costs would be:
- --------------------------------------------------------------------------------
1 year $ 93
3 years $ 290
5 years $ 504
10 years $1,120
4
PROSPECTUS - First American Large Cap Funds
Class Y Shares
<PAGE>
Fund Summaries
EQUITY INCOME FUND
- --------------------------------------------------------------------------------
OBJECTIVE
Equity Income Fund's objective is long-term growth of capital and income.
- --------------------------------------------------------------------------------
MAIN INVESTMENT STRATEGIES
Under normal market conditions, Equity Income Fund invests primarily (at least
65% of its total assets) in equity securities of companies which the fund's
investment advisor believes are characterized by:
* the ability to pay above average dividends.
* the ability to finance expected growth.
* strong management.
The fund will attempt to maintain a dividend that will grow quickly enough to
keep pace with inflation. As a result, higher-yielding equity securities will
generally represent the core holdings of the fund. However, the fund also may
invest in lower-yielding, higher growth equity securities if the advisor
believes they will help balance the portfolio. The fund's equity securities
include common stocks and preferred stocks, and corporate debt securities which
are convertible into common stocks. All securities held by the fund will provide
current income at the time of purchase.
The fund invests in convertible debt securities in pursuit of both long-term
growth of capital and income. The securities' conversion features provide
long-term growth potential, while interest payments on the securities provide
income. The fund may invest in convertible debt securities without regard to
their ratings, and therefore may hold convertible debt securities which are
rated lower than investment grade.
Up to 25% of the fund's total assets may be invested in securities of foreign
issuers which are either listed on a United States stock exchange or represented
by American Depositary Receipts.
To generate additional income, the fund may lend securities representing up to
one-third of the value of its total assets to broker-dealers, banks, and other
institutions.
- --------------------------------------------------------------------------------
MAIN RISKS
The value of your investment in this fund will change daily, which means you
could lose money. The main risks of investing in this fund include:
Risks of Common Stocks
Stocks may decline significantly in price over short or extended periods of
time. Price changes may occur in the market as a whole, or they may occur in
only a particular company, industry, or sector of the market.
Interest Rate Risk
Debt securities typically decrease in value when interest rates rise. This risk
is usually greater for longer-term debt securities.
Credit Risk
An issuer of debt securities may not make timely principal or interest payments
on its securities, or the other party to a contract (such as a securities
lending agreement) may default on its obligations.
Risks of Non-Investment Grade Securities
The fund may invest in securities which are rated lower than investment grade.
These securities, which are commonly called "high-yield" securities or "junk
bonds," generally have more volatile prices and carry more risk to principal
than investment grade securities. High yield securities may be more susceptible
to real or perceived adverse economic conditions than investment grade
securities. In addition, the secondary trading market may be less liquid.
Foreign Security Risk
Securities of foreign issuers, even when dollar-denominated and publicly traded
in the United States, may involve risks not associated with the securities of
domestic issuers, including the risks of adverse currency fluctuations and of
political or social instability or diplomatic developments that could adversely
affect the securities.
Fund Performance
The illustrations on the next page provide you with information on the fund's
volatility and performance. Of course, past performance does not guarantee
future results.
The bar chart shows you how performance of the fund's shares has varied from
year to year.
The table compares the fund's performance over different time periods to that of
the fund's benchmark indices, which are broad measures of market performance.
The fund's performance reflects fund expenses; the benchmark is unmanaged and
has no expenses.
Both the chart and the table assume that all distributions have been reinvested.
5
PROSPECTUS - First American Large Cap Funds
Class Y Shares
<PAGE>
Fund Summaries
EQUITY INCOME FUND CONTINUED
- --------------------------------------------------------------------------------
FUND PERFORMANCE (CONTINUED)
ANNUAL TOTAL RETURNS AS OF 12/31 EACH YEAR
[BAR CHART]
23.00% 20.28% 27.72% 16.22% 4.21%
- ---------------------------------------------
1995 1996 1997 1998 1999
Best Quarter: Quarter ending June 30, 1997 11.99%
Worst Quarter: Quarter ending September 30, 1999 (8.59)%
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS Inception Since
AS OF 12/31/99 Date One Year Five Years Inception
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Equity Income Fund 8/2/94 4.21% 18.01% 16.67%
- -------------------------------------------------------------------------------------------
Standard & Poor's 500 Composite Index(1) 21.04% 28.55% 25.95%
- -------------------------------------------------------------------------------------------
Lehman Gov't/Corp Bond Index(2) (2.15)% 7.60% 6.88%
- -------------------------------------------------------------------------------------------
</TABLE>
(1) An unmanaged index of large capitalization stocks. The since inception
performance of each index is calculated from 8/31/94.
(2) An unmanaged index of Treasury securities, other securities issued or
guaranteed by the U.S. government or its agencies or instrumentalities, and
investment grade corporate debt securities. The since inception performance of
each index is calculated from 8/31/94.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
As an investor, you pay fees and expenses to buy and hold shares of the fund.
You pay shareholder fees directly when you buy or sell shares. You pay annual
fund operating expenses indirectly since they are deducted from fund assets. The
figures below show fund expenses during the fiscal year ended September 30,
1999.(1)
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
- --------------------------------------------------------------------------------
MAXIMUM SALES CHARGE (LOAD) None
MAXIMUM DEFERRED SALES CHARGE (LOAD) None
ANNUAL FUND OPERATING EXPENSES AS A % OF AVERAGE NET ASSETS
- --------------------------------------------------------------------------------
Management Fees 0.70%
Distribution and Service (12b-1) Fees None
Other Expenses 0.18%
TOTAL 0.88%
- --------------------------------------------------------------------------------
(1) Actual expenses for the fiscal year were lower than those shown in the table
because of voluntary fee waivers by the advisor. See "Additional Information --
Financial Highlights." The net expenses the fund actually paid after waivers for
the fiscal year ended September 30, 1999, were:
Waiver of Fund Expenses (0.13)%
TOTAL ACTUAL ANNUAL OPERATING EXPENSES (AFTER WAIVERS) 0.75%
THE ADVISOR INTENDS TO WAIVE FEES DURING THE CURRENT FISCAL YEAR SO THAT TOTAL
FUND OPERATING EXPENSES DO NOT EXCEED 0.75%. FEE WAIVERS MAY BE DISCONTINUED AT
ANY TIME.
- --------------------------------------------------------------------------------
EXAMPLE This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes that you
invest $10,000 for the time periods indicated, that your investment has a 5%
return each year, and that the fund's operating expenses remain the same.
Although your actual costs and returns may differ, based on these assumptions
your costs would be:
- --------------------------------------------------------------------------------
1 year $ 90
3 years $ 281
5 years $ 488
10 years $1,084
6
PROSPECTUS - First American Large Cap Funds
Class Y Shares
<PAGE>
Fund Summaries
EQUITY INDEX FUND
- --------------------------------------------------------------------------------
OBJECTIVE
Equity Index Fund's objective is to provide investment results that correspond
to the performance of the Standard & Poor's 500 Composite Index (S&P 500).
- --------------------------------------------------------------------------------
MAIN INVESTMENT STRATEGIES
Under normal market conditions, Equity Index Fund invests at least 90% of its
total assets in common stocks included in the S&P 500. The S&P 500 is a
market-value weighted index consisting of 500 stocks chosen for market size,
liquidity, and industry representation.
The fund's advisor believes that the fund's objective can best be achieved by
investing in common stocks of approximately 90% to 100% of the issues included
in the S&P 500, depending on the size of the fund. A computer program is used to
identify which stocks should be purchased or sold in order to replicate, as
closely as possible, the composition of the S&P 500.
Because the fund may not always hold all of the stocks included in the S&P 500,
and because the fund has expenses and the index does not, the fund will not
duplicate the index's performance precisely. However, the fund's advisor
believes there should be a close correlation between the fund's performance and
that of the S&P 500 in both rising and falling markets.
The fund will attempt to achieve a correlation between the performance of its
portfolio and that of the S&P 500 of at least 95%, without taking into account
expenses of the fund. A perfect correlation would be indicated by a figure of
100%, which would be achieved if the fund's net asset value, including the value
of its dividends and capital gains distributions, increased or decreased in
exact proportion to changes in the S&P 500. If the fund is unable to achieve a
correlation of 95% over time, the fund's board of directors will consider
alternative strategies for the fund.
The fund also may invest up to 10% of its total assets in stock index futures
contracts, options on stock indices, options on stock index futures, and index
participation contracts based on the S&P 500. The fund makes these investments
to maintain the liquidity needed to meet redemption requests, to increase the
level of fund assets devoted to replicating the composition of the S&P 500 and
to reduce transaction costs.
To generate additional income, the fund may lend securities representing up to
one-third of the value of its total assets to broker-dealers, banks, and other
institutions.
- --------------------------------------------------------------------------------
MAIN RISKS
The value of your investment in this fund will change daily, which means you
could lose money. The main risks of investing in this fund include:
Risks of Common Stocks
Stocks may decline significantly in price over short or extended periods of
time. Price changes may affect the market as a whole, or they may affect only a
particular company, industry, or sector of the market.
Failure to Match Performance of S&P 500
The fund's ability to replicate the performance of the S&P 500 may be affected
by, among other things, changes in securities markets, the manner in which
Standard & Poor's calculates the performance of the S&P 500, the amount and
timing of cash flows into and out of the fund, commissions, sales charges (if
any), and other expenses.
Risks of Options and Futures
The fund will suffer a loss in connection with its use of options, futures
contracts, and options on futures contracts if securities prices do not move in
the direction anticipated by the fund's advisor when entering into the options
or the futures contracts.
Risks of Securities Lending
The fund is subject to the risk that the other party to a securities lending
agreement will default on its obligations.
- --------------------------------------------------------------------------------
FUND PERFORMANCE
The illustrations on the next page provide you with information on the fund's
volatility and performance. Of course, past performance does not guarantee
future results.
The bar chart shows you how performance of the fund's shares has varied from
year to year.
The table compares the fund's performance over different time periods to that of
the fund's benchmark index, which is a broad measure of market performance. The
fund's performance reflects fund expenses; the benchmark is unmanaged and has no
expenses.
Both the chart and the table assume that all distributions have been reinvested.
7
PROSPECTUS - First American Large Cap Funds
Class Y Shares
<PAGE>
Fund Summaries
EQUITY INDEX FUND
- --------------------------------------------------------------------------------
FUND PERFORMANCE (CONTINUED)
[BAR CHART]
36.97% 22.44% 32.84% 28.56% 20.41%
- ---------------------------------------------
1995 1996 1997 1998 1999
Best Quarter: Quarter ending December 31, 1998 21.39%
Worst Quarter: Quarter ending September 30, 1998 (9.91)%
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS Inception Since
AS OF 12/31/99 Date One Year Five Years Inception
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Equity Index Fund 2/4/94 20.41% 28.09% 23.34%
- -----------------------------------------------------------------------------------------
Standard & Poor's 500 Composite Index(1) 21.04% 28.55% 24.17%
- -----------------------------------------------------------------------------------------
</TABLE>
(1) An unmanaged index of large capitalization stocks. The since inception
performance of the index is calculated from 2/28/94.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
As an investor, you pay fees and expenses to buy and hold shares of the fund.
You pay shareholder fees directly when you buy or sell shares. You pay annual
fund operating expenses indirectly since they are deducted from fund assets. The
figures below show fund expenses during the fiscal year ended September 30,
1999.(1)
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
- --------------------------------------------------------------------------------
MAXIMUM SALES CHARGE (LOAD) None
MAXIMUM DEFERRED SALES CHARGE (LOAD) None
ANNUAL FUND OPERATING EXPENSES AS A % OF AVERAGE NET ASSETS
- --------------------------------------------------------------------------------
Management Fees 0.70%
Distribution and Service (12b-1) Fees None
Other Expenses 0.19%
TOTAL 0.89%
- --------------------------------------------------------------------------------
(1) Actual expenses for the fiscal year were lower than those shown in the table
because of voluntary fee waivers by the advisor. See "Additional Information --
Financial Highlights." The net expenses the fund actually paid after waivers for
the fiscal year ended September 30, 1999, were:
Waiver of Fund Expenses (0.54)%
TOTAL ACTUAL ANNUAL OPERATING EXPENSES (AFTER WAIVERS) 0.35%
THE ADVISOR INTENDS TO WAIVE FEES DURING THE CURRENT FISCAL YEAR SO THAT TOTAL
FUND OPERATING EXPENSES DO NOT EXCEED 0.35%. FEE WAIVERS MAY BE DISCONTINUED AT
ANY TIME.
- --------------------------------------------------------------------------------
EXAMPLE This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes that you
invest $10,000 for the time periods indicated, that your investment has a 5%
return each year, and that the fund's operating expenses remain the same.
Although your actual costs and returns may differ, based on these assumptions
your costs would be:
- --------------------------------------------------------------------------------
1 year $ 91
3 years $ 284
5 years $ 493
10 years $1,096
8
PROSPECTUS - First American Large Cap Funds
Class Y Shares
<PAGE>
Fund Summaries
LARGE CAP GROWTH FUND
- --------------------------------------------------------------------------------
OBJECTIVE
Large Cap Growth Fund's objective is long-term growth of capital.
- --------------------------------------------------------------------------------
MAIN INVESTMENT STRATEGIES
Under normal market conditions, Large Cap Growth Fund invests primarily (at
least 75% of its total assets) in common stocks of companies that have market
capitalizations of at least $5 billion at the time of purchase. The advisor will
select companies that it believes exhibit the potential for superior growth
based on factors such as:
* Above average growth in revenue and earnings
* Strong competitive position
* Strong management
* Sound financial condition
Up to 25% of the fund's total assets may be invested in securities of foreign
issuers which are either listed on a United States stock exchange or represented
by American Depositary Receipts.
To generate additional income, the fund may lend securities representing up to
one-third of the value of its total assets to broker-dealers, banks, and other
institutions.
- --------------------------------------------------------------------------------
MAIN RISKS
The value of your investment in this fund will change daily, which means you
could lose money. The main risks of investing in this fund include:
Risks of Common Stocks
Stocks may decline significantly in price over short or extended periods of
time. Price changes may occur in the market as a whole, or they may occur in
only a particular company, industry, or sector of the market. In addition,
growth stocks and/or large-capitalization stocks may underperform the market as
a whole.
Foreign Security Risk
Securities of foreign issuers, even when dollar-denominated and publicly traded
in the United States, may involve risks not associated with the securities of
domestic issuers, including the risks of adverse currency fluctuations and of
political or social instability or diplomatic developments that could adversely
affect the securities.
Risks of Securities Lending
The fund is subject to the risk that the other party to a securities lending
agreement will default on its obligations.
- --------------------------------------------------------------------------------
FUND PERFORMANCE
The illustrations on the next page provide you with information on the fund's
volatility and performance. Of course, past performance does not guarantee
future results.
The bar chart shows you how performance of the fund's shares has varied from
year to year.
The table compares the fund's performance over different time periods to that of
the fund's benchmark index, which is a broad measure of market performance. The
fund's performance reflects fund expenses; the benchmark is unmanaged and has no
expenses.
Both the chart and the table assume that all distributions have been reinvested.
9
PROSPECTUS - First American Large Cap Funds
Class Y Shares
<PAGE>
Fund Summaries
LARGE CAP GROWTH FUND CONTINUED
- --------------------------------------------------------------------------------
FUND PERFORMANCE (CONTINUED)
ANNUAL TOTAL RETURNS AS OF 12/31 EACH YEAR
[BAR CHART]
32.78% 23.23% 21.61% 24.05% 38.04%
- ---------------------------------------------
1995 1996 1997 1998 1999
Best Quarter: Quarter ending December 31, 1999 22.71%
Worst Quarter: Quarter ending September 30, 1998 (14.09)%
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS Inception Since
AS OF 12/31/99 Date One Year Five Years Inception
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Large Cap Growth Fund 8/2/94 38.04% 27.79% 26.38%
- -----------------------------------------------------------------------------------------
Standard & Poor's 500 Composite Index(1) 21.04% 28.55% 25.95%
- -----------------------------------------------------------------------------------------
</TABLE>
(1) An unmanaged index of large capitalization stocks. The since inception
performance of each index is calculated from 8/31/94.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
As an investor, you pay fees and expenses to buy and hold shares of the fund.
You pay shareholder fees directly when you buy or sell shares. You pay annual
fund operating expenses indirectly since they are deducted from fund assets. The
figures below show fund expenses during the fiscal year ended September 30,
1999.(1)
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
- --------------------------------------------------------------------------------
MAXIMUM SALES CHARGE (LOAD) None
MAXIMUM DEFERRED SALES CHARGE (LOAD) None
ANNUAL FUND OPERATING EXPENSES AS A % OF AVERAGE NET ASSETS
- --------------------------------------------------------------------------------
Management Fees 0.70%
Distribution and Service (12b-1) Fees None
Other Expenses 0.19%
TOTAL 0.89%
- --------------------------------------------------------------------------------
(1) Actual expenses for the fiscal year were lower than those shown in the table
because of voluntary fee waivers by the advisor. See "Additional Information --
Financial Highlights." The net expenses the fund actually paid after waivers for
the fiscal year ended September 30, 1999, were:
Waiver of Fund Expenses (0.09)%
TOTAL ACTUAL ANNUAL OPERATING EXPENSES (AFTER WAIVERS) 0.80%
THE ADVISOR INTENDS TO WAIVE FEES DURING THE CURRENT FISCAL YEAR SO THAT TOTAL
FUND OPERATING EXPENSES DO NOT EXCEED 0.80%. FEE WAIVERS MAY BE DISCONTINUED AT
ANY TIME.
- --------------------------------------------------------------------------------
EXAMPLE This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes that you
invest $10,000 for the time periods indicated, that your investment has a 5%
return each year, and that the fund's operating expenses remain the same.
Although your actual costs and returns may differ, based on these assumptions
your costs would be:
- --------------------------------------------------------------------------------
1 year $ 91
3 years $ 284
5 years $ 493
10 years $1,096
10
PROSPECTUS - First American Large Cap Funds
Class Y Shares
<PAGE>
Fund Summaries
LARGE CAP VALUE FUND
- --------------------------------------------------------------------------------
OBJECTIVE
Large Cap Value Fund's primary objective is capital appreciation. Current income
is a secondary objective of the fund.
- --------------------------------------------------------------------------------
MAIN INVESTMENT STRATEGIES
Under normal market conditions, Large Cap Value Fund invests primarily (at least
75% of its total assets) in common stocks of companies that cover a broad range
of industries and that have market capitalizations of at least $5 billion at the
time of purchase. In selecting stocks, the fund's advisor invests in securities
that it believes:
* are undervalued relative to other securities in the same industry or market.
* exhibit good or improving fundamentals.
* exhibit an identifiable catalyst that could close the gap between market value
and fair value over the next one to two years.
Up to 25% of the fund's total assets may be invested in securities of foreign
issuers which are either listed on a United States stock exchange or represented
by American Depositary Receipts.
To generate additional income, the fund may lend securities representing up to
one-third of the value of its total assets to broker-dealers, banks, and other
institutions.
- --------------------------------------------------------------------------------
MAIN RISKS
The value of your investment in this fund will change daily, which means you
could lose money. The main risks of investing in this fund include:
Risks of Common Stocks
Stocks may decline significantly in price over short or extended periods of
time. Price changes may occur in the market as a whole, or they may occur in
only a particular company, industry, or sector of the market. In addition, value
stocks and/or large-capitalization stocks may underperform the market as a
whole.
Foreign Security Risk
Securities of foreign issuers, even when dollar-denominated and publicly traded
in the United States, may involve risks not associated with the securities of
domestic issuers, including the risks of adverse currency fluctuations and of
political or social instability or diplomatic developments that could adversely
affect the securities.
Risks of Securities Lending
The fund is subject to the risk that the other party to a securities lending
agreement will default on its obligations.
- --------------------------------------------------------------------------------
FUND PERFORMANCE
The illustrations on the next page provide you with information on the fund's
volatility and performance. Of course, past performance does not guarantee
future results.
The bar chart shows you how performance of the fund's shares has varied from
year to year.
The table compares the fund's performance over different time periods to that of
the fund's benchmark index, which is a broad measure of market performance. The
fund's performance reflects fund expenses; the benchmark is unmanaged and has no
expenses.
Both the chart and the table assume that all distributions have been reinvested.
11
PROSPECTUS - First American Large Cap Funds
Class Y Shares
<PAGE>
Fund Summaries
LARGE CAP VALUE FUND CONTINUED
- --------------------------------------------------------------------------------
FUND PERFORMANCE (CONTINUED)
ANNUAL TOTAL RETURNS AS OF 12/31 EACH YEAR
[BAR CHART]
32.23% 29.47% 22.80% 9.99% 8.20%
- ----------------------------------------------
1995 1996 1997 1998 1999
Best Quarter: Quarter ending December 31, 1998 16.64%
Worst Quarter: Quarter ending September 30, 1998 (13.85)%
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS Inception Since
AS OF 12/31/99 Date One Year Five Years Inception
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Large Cap Value Fund 2/4/94 8.20% 20.13% 17.17%
- -----------------------------------------------------------------------------------------
Standard & Poor's 500 Composite Index(1) 21.04% 28.55% 24.17%
- -----------------------------------------------------------------------------------------
</TABLE>
(1) An unmanaged index of large capitalization stocks. The since inception
performance of each index is calculated from 2/28/94.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
As an investor, you pay fees and expenses to buy and hold shares of the fund.
You pay shareholder fees directly when you buy or sell shares. You pay annual
fund operating expenses indirectly since they are deducted from fund assets. The
figures below show fund expenses during the fiscal year ended September 30,
1999.(1)
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
- --------------------------------------------------------------------------------
MAXIMUM SALES CHARGE (LOAD) None
MAXIMUM DEFERRED SALES CHARGE (LOAD) None
ANNUAL FUND OPERATING EXPENSES AS A % OF AVERAGE NET ASSETS
- --------------------------------------------------------------------------------
Management Fees 0.70%
Distribution and Service (12b-1) Fees None
Other Expenses 0.20%
TOTAL 0.90%
- --------------------------------------------------------------------------------
(1) Actual expenses for the fiscal year were lower than those shown in the table
because of voluntary fee waivers by the advisor. See "Additional Information --
Financial Highlights." The net expenses the fund actually paid after waivers for
the fiscal year ended September 30, 1999, were:
Waiver of Fund Expenses (0.10)%
TOTAL ACTUAL ANNUAL OPERATING EXPENSES (AFTER WAIVERS) 0.80%
THE ADVISOR INTENDS TO WAIVE FEES DURING THE CURRENT FISCAL YEAR SO THAT TOTAL
FUND OPERATING EXPENSES DO NOT EXCEED 0.80%. FEE WAIVERS MAY BE DISCONTINUED AT
ANY TIME.
- --------------------------------------------------------------------------------
EXAMPLE This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes that you
invest $10,000 for the time periods indicated, that your investment has a 5%
return each year, and that the fund's operating expenses remain the same.
Although your actual costs and returns may differ, based on these assumptions
your costs would be:
- --------------------------------------------------------------------------------
1 year $ 92
3 years $ 287
5 years $ 498
10 years $1,108
12
PROSPECTUS - First American Large Cap Funds
Class Y Shares
<PAGE>
Policies & Services
BUYING AND SELLING SHARES
Class Y shares are offered through banks and other financial institutions that
have entered into sales agreements with the funds' distributor and that hold the
shares in an omnibus account with the transfer agent. Class Y shares are
available to certain accounts for which the financial institution acts in a
fiduciary, agency, or custodial capacity, such as certain trust accounts and
investment advisory accounts. To find out whether you may purchase Class Y
shares, contact your financial institution.
There is no initial or deferred sales charge on your purchase of Class Y shares.
However, your investment professional or financial institution may receive a
commission of up to 1.25% on your purchase.
- --------------------------------------------------------------------------------
CALCULATING YOUR SHARE PRICE
Your purchase price will be equal to the fund's net asset value (NAV) per share,
which is generally calculated as of the close of regular trading on the New York
Stock Exchange (usually 3 p.m. Central time) every day the exchange is open.
A fund's NAV is equal to the market value of its investments and other assets,
less any liabilities, divided by the number of fund shares. If market prices are
not readily available for an investment or if the advisor believes they are
unreliable, fair value prices may be determined in good faith using methods
approved by the funds' board of directors.
- --------------------------------------------------------------------------------
HOW TO BUY AND SELL SHARES
You may purchase or sell shares by calling your financial institution.
When purchasing shares, payment must be made by wire transfer, which can be
arranged by your financial institution. Because purchases must be paid for by
wire transfer, you can purchase shares only on days when both the New York Stock
Exchange and federally chartered banks are open. You may sell your shares on any
day when the New York Stock Exchange is open.
Purchase orders and redemption requests must be received by your financial
institution by the time specified by the institution to be assured same day
processing. In order for shares to be purchased at that day's price, the funds
must receive your purchase order by 3:00 p.m. Central time and the funds'
custodian must receive federal funds before the close of business. In order for
shares to be sold at that day's price, the funds must receive your redemption
request by 3:00 p.m. Central time. It is the responsibility of your financial
institution to promptly transmit orders to the funds. Purchase orders and
redemption requests may be restricted in the event of an early or unscheduled
close of the New York Stock Exchange.
If the funds receive your redemption request by 3:00 p.m. Central time, payment
of your redemption proceeds will ordinarily be made by wire on the next business
day. It is possible, however, that payment could be delayed by up to seven days.
- --------------------------------------------------------------------------------
HOW TO EXCHANGE SHARES
If your investment goals or your financial needs change, you may exchange your
shares for Class Y shares of another First American fund. Exchanges will be made
at the net asset value per share of each fund at the time of the exchange.
There is no fee to exchange shares. If you are no longer eligible to hold Class
Y shares, for example, if you decide to discontinue your fiduciary, agency, or
custodian account, you may exchange your shares for Class A shares at net asset
value. Class A shares have higher expenses than Class Y shares.
To exchange your shares, call your financial institution. In order for your
shares to be exchanged the same day, you must call your financial institution by
the time specified by the institution and your exchange order must be received
by the funds by 3:00 p.m. Central time. It is the responsibility of your
financial institution to promptly transmit your exchange order to the funds.
Before exchanging into any fund, be sure to read its prospectus carefully. A
fund may change or cancel its exchange policies at any time. You will be
notified of any changes. The funds have the right to limit exchanges to four
times per year.
13
PROSPECTUS - First American Large Cap Funds
Class Y Shares
<PAGE>
Policies & Services
MANAGING YOUR INVESTMENT
- --------------------------------------------------------------------------------
STAYING INFORMED
Shareholder Reports
Shareholder reports are mailed twice a year, in November and May. They include
financial statements, performance information, a message from your portfolio
managers, and, on an annual basis, the auditors' report.
In an attempt to reduce shareholder costs and help eliminate duplication, the
funds will try to limit their mailings 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 1-800-637-2548.
Statements and Confirmations
Statements summarizing activity in your account are mailed at least quarterly.
Confirmations are mailed following each purchase or sale of fund shares.
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS
Dividends from a fund's net investment income are declared and paid monthly. Any
capital gains are distributed at least once each year.
On the ex-dividend date for a distribution, a fund's share price is reduced by
the amount of the distribution. If you buy shares just before the ex-dividend
date, in effect, you "buy the dividend." You will pay the full price for the
shares and then receive a portion of that price back as a taxable distribution.
Dividend and capital gain distributions will be reinvested in additional shares
of the fund paying the distribution, unless you request that distributions be
reinvested in another First American fund or paid in cash. This request may be
made on your new account form or by writing to the fund. If you request that
your distributions be paid in cash but those distributions cannot be delivered
because of an incorrect mailing address, the undelivered distributions and all
future distributions will be reinvested in fund shares.
- --------------------------------------------------------------------------------
TAXES
Some of the tax consequences of investing in the funds are discussed below. More
information about taxes is in the Statement of Additional Information. However,
because everyone's tax situation is unique, always consult your tax professional
about federal, state, and local tax consequences.
Taxes on Distributions
Each fund pays its shareholders dividends from its net investment income and any
net capital gains that it has realized. For most investors, fund dividends and
distributions are considered taxable whether they are reinvested or taken in
cash (unless your investment is in an IRA or other tax-advantaged account).
Dividends from a fund's net investment income and short-term capital gains are
taxable as ordinary income. Distributions of a fund's long-term capital gains
are taxable as long-term gains, regardless of how long you have held your
shares. Because of their investment objectives and strategies, distributions for
Large Cap Growth Fund and Large Cap Value Fund are expected to consist primarily
of capital gains.
Taxes on Transactions
The sale of fund shares, or the exchange of one fund's shares for shares of
another fund, will be a taxable event and may result in a capital gain or loss.
The gain or loss will be considered long-term if you have held your shares for
more than one year. A gain or loss on shares held for one year or less is
considered short-term and is taxed at the same rates as ordinary income.
The exchange of one class of shares for another class of shares in the same fund
will not be taxable.
14
PROSPECTUS - First American Large Cap Funds
Class Y Shares
<PAGE>
Additional Information
MANAGEMENT
U.S. Bank National Association (U.S. Bank), acting through its First American
Asset Management division, is the funds' investment advisor. First American
Asset Management provides investment management services to individuals and
institutions, including corporations, foundations, pensions and retirement
plans. As of December 31, 1999, it had more than $78 billion in assets under
management, including investment company assets of more than $33 billion. As
investment advisor, First American Asset Management manages the funds' business
and investment activities, subject to the authority of the board of directors.
Each fund pays the investment advisor a monthly fee for providing investment
advisory services. During the fiscal year ended September 30, 1999, after taking
into account any fee waivers, the funds paid the following investment advisory
fees to First American Asset Management:
Advisory fee
as a % of
average daily
net assets
- --------------------------------------------------------------------------------
BALANCED FUND 0.59%
EQUITY INCOME FUND 0.57%
EQUITY INDEX FUND 0.16%
LARGE CAP GROWTH FUND 0.61%
LARGE CAP VALUE FUND 0.80%
- --------------------------------------------------------------------------------
Investment Advisor
First American Asset Management
601 Second Avenue South
Minneapolis, Minnesota 55402
Distributor
SEI Investments Distribution Co.
Oaks, Pennsylvania 19456
Direct Fund Correspondence to:
First American Funds
P.O. Box 1330
Minneapolis, MN 55440-1330
Additional Compensation
U.S. Bank and other affiliates of U.S. Bancorp may act as fiduciary with
respect to plans subject to the Employee Retirement Income Security Act of 1974
(ERISA) and other trust and agency accounts that invest in the funds. As
described above, U.S. Bank receives compensation for acting as the funds'
investment advisor. U.S. Bank and its affiliates also receive compensation in
connection with the following:
CUSTODY SERVICES. U.S. Bank provides or compensates others to provide custody
services to the funds. U.S. Bank is paid monthly fees equal, on an annual
basis, to 0.03% of a fund's average daily net assets. In addition, U.S. Bank is
reimbursed for its out-of-pocket expenses incurred while providing custody
services to the funds.
ADMINISTRATION SERVICES. U.S. Bank provides or compensates others to provide
administrative services to all open-end funds in the First American family of
funds. These services include general administrative and accounting services,
transfer agency, and dividend disbursing services, and shareholder services.
U.S. Bank receives total fees equal, on an annual basis, to 0.12% of the
aggregate average daily net assets of all open-end mutual funds in the First
American fund family up to $8 billion and 0.105% of the aggregate average daily
net assets of all open-end mutual funds in the First American fund family in
excess of $8 billion. These fees are allocated among the funds in the First
American family of funds on the basis of their relative net asset values.
Additionally, the funds pay U.S. Bank fees based upon the number of funds and
accounts maintained.
SECURITIES LENDING SERVICES. In connection with lending their portfolio
securities, the funds pay administrative and custodial fees to U.S. Bank which
are equal to 40% of the funds' income from these securities lending
transactions.
BROKERAGE TRANSACTIONS. When purchasing and selling portfolio securities for
the funds, the funds' investment advisor may place trades through its
affiliates, U.S. Bancorp Investments, Inc. and U.S. Bancorp Piper Jaffray Inc.,
which will earn commissions on these transactions.
SHAREHOLDER SERVICING FEES. To the extent that fund shares are held through U.S.
Bank or its broker-dealer affiliates, U.S. Bancorp Investments, Inc. and U.S.
Bancorp Piper Jaffray Inc. those entities may receive shareholder servicing fees
from the funds' distributor.
Portfolio Management
Each fund's investments are managed by a team of persons associated with First
American Asset Management.
15
PROSPECTUS - First American Large Cap Funds
Class Y Shares
<PAGE>
Additional Information
MORE ABOUT THE FUNDS
- --------------------------------------------------------------------------------
OBJECTIVES
The funds' objectives, which are described in the "Fund Summaries" section, may
be changed without shareholder approval. If a fund's objectives change, you will
be notified at least 30 days in advance. Please remember: There is no guarantee
that any fund will achieve its objectives.
- --------------------------------------------------------------------------------
INVESTMENT STRATEGIES
The funds' main investment strategies are discussed in the "Fund Summaries"
section. These are the strategies that the funds' investment advisor believes
are most likely to be important in trying to achieve the funds' objectives. You
should be aware that each fund may also use strategies and invest in securities
that are not described in this prospectus, but that are described in the
Statement of Additional Information (SAI). For a copy of the SAI, call Investor
Services at 1-800-637-2548.
Temporary Investments
In an attempt to respond to adverse market, economic, political, or other
conditions, each fund may temporarily invest without limit in cash and in U.S.
dollar-denominated high-quality money market instruments and other short-term
securities, including money market funds advised by the funds' advisor. Being
invested in these securities may keep a fund from participating in a market
upswing and prevent the fund from achieving its investment objectives.
Effective Duration
Balanced Fund normally attempts to maintain an average effective duration of
three to eight years for the debt securities portion of its portfolio. Effective
duration, one measure of interest rate risk, measures how much the value of a
security is expected to change with a given change in interest rates. The longer
a security's effective duration, the more sensitive its price to changes in
interest rates. For example, if interest rates were to increase by one
percentage point, the market value of a bond with an effective duration of five
years would decrease by 5%, with all other factors being constant. However, all
other factors are rarely constant. Effective duration is based on assumptions
and subject to a number of limitations. It is most useful when interest rate
changes are small, rapid and occur equally in short-term and long-term
securities. In addition, it is difficult to calculate precisely for bonds with
prepayment options, such as mortgage-and asset-backed securities, because the
calculation requires assumptions about prepayment rates.
Portfolio Turnover
Portfolio managers for the funds other than Equity Index Fund may trade
securities frequently, resulting, from time to time, in an annual portfolio
turnover rate of over 100%. Trading of securities may produce capital gains,
which are taxable to shareholders when distributed. Active trading may also
increase the amount of commissions or mark-ups to broker-dealers that the fund
pays when it buys and sells securities. Portfolio turnover for Equity Index Fund
is expected to be well below that of actively managed mutual funds. The
"Financial Highlights" section of this prospectus shows each fund's historical
portfolio turnover rate.
- --------------------------------------------------------------------------------
RISKS
The main risks of investing in the funds are summarized in the "Fund Summaries"
section. More information about fund risks is presented below.
Market Risk
All stocks are subject to price movements due to changes in general economic
conditions, the level of prevailing interest rates, or investor perceptions of
the market. Prices also are affected by the outlook for overall corporate
profitability.
Sector Risk
The stocks of companies within specific industries or sectors of the economy can
periodically perform differently than the overall stock market. This can be due
to changes in such things as the regulatory or competitive environment or to
changes in investor perceptions of a particular industry or sector.
Company Risk
Individual stocks can perform differently than the overall market. This may be a
result of specific factors such as changes in corporate profitability due to the
success or failure of specific products or management strategies, or it may be
due to changes in investor perceptions regarding a company.
Foreign Security Risk
Each fund other than Equity Index Fund may invest up to 25% of its total assets
(25% of the equity portion of its portfolio for Balanced Fund) in securities of
foreign issuers which are either listed on a United States stock exchange or
represented by American Depositary Receipts. In addition, Balanced Fund may
invest up to 15% of the debt portion of its portfolio in foreign securities
payable in United States dollars. Securities of foreign issuers, even when
dollar-denominated and publicly traded in the United States, may involve risks
not associated with the securities of domestic issuers. For certain foreign
countries, political or social instability, or diplomatic developments could
adversely affect the securities. There is also the risk of loss due to
governmental actions such as a change in tax statutes or the modification of
individual property rights. In addition, individual foreign economies may differ
favorably or unfavorably from the U.S. economy.
16
PROSPECTUS - First American Large Cap Funds
Class Y Shares
<PAGE>
Additional Information
MORE ABOUT THE FUNDS CONTINUED
Risks of Active Management
Each fund other than Equity Index Fund is actively managed and its performance
therefore will reflect in part the advisor's ability to make investment
decisions which are suited to achieving the fund's investment objectives. Due to
their active management, the funds could underperform other mutual funds with
similar investment objectives.
Risks of Securities Lending
When a fund loans its portfolio securities, it will receive collateral equal to
at least 100% of the value of the loaned securities. Nevertheless, the fund
risks a delay in the recovery of the loaned securities, or even the loss of
rights in the collateral deposited by the borrower if the borrower should fail
financially. To reduce these risks, the funds enter into loan arrangements only
with institutions which the funds' advisor has determined are creditworthy under
guidelines established by the funds' board of directors.
- --------------------------------------------------------------------------------
ADDITIONAL RISKS OF BALANCED FUND AND EQUITY INCOME FUND
Interest Rate Risk
Debt securities in Balanced Fund and Equity Income Fund will fluctuate in value
with changes in interest rates. In general, debt securities will increase in
value when interest rates fall and decrease in value when interest rates rise.
Longer-term debt securities are generally more sensitive to interest rate
changes.
Credit Risk
Balanced Fund and Equity Income Fund are subject to the risk that the issuers of
debt securities held by a fund will not make payments on the securities. There
is also the risk that an issuer could suffer adverse changes in financial
condition that could lower the credit quality of a security. This could lead to
greater volatility in the price of the security and in shares of the fund. Also,
a change in the credit quality rating of a bond could affect the bond's
liquidity and make it more difficult for the fund to sell.
Balanced Fund attempts to minimize credit risk by investing in securities
considered at least investment grade at the time of purchase. However, all of
these securities, especially those in the lower investment grade rating
categories, have credit risk. In adverse economic or other circumstances,
issuers of these lower rated securities are more likely to have difficulty
making principal and interest payments than issuers of higher rated securities.
When Balanced Fund purchases unrated securities, it will depend on the advisor's
analysis of credit risk more heavily than usual.
As discussed in the "Fund Summaries" section, Equity Income Fund invests in
convertible debt securities that are rated below investment grade and are
therefore subject to additional credit risk.
- --------------------------------------------------------------------------------
ADDITIONAL RISKS OF BALANCED FUND
Call Risk
Many corporate bonds may be redeemed at the option of the issuer, or "called,"
before their stated maturity date. In general, an issuer will call its bonds if
they can be refinanced by issuing new bonds which bear a lower interest rate.
Balanced Fund is subject to the possibility that during periods of falling
interest rates, a bond issuer will call its high-yielding bonds. The fund would
then be forced to invest the unanticipated proceeds at lower interest rates,
resulting in a decline in the fund's income.
Extension Risk
Mortgage-backed securities are secured by and payable from pools of mortgage
loans. Similarly, asset-backed securities are supported by obligations such as
automobile loans or home equity loans. These mortgages and other obligations
generally can be prepaid at any time without penalty. As a result, mortgage- and
asset-backed securities are subject to extension risk, which is the risk that
rising interest rates could cause the mortgages or other obligations underlying
the securities to be prepaid more slowly than expected, resulting in slower
prepayments of the securities. This would, in effect, convert a short-or
medium-duration mortgage- or asset-backed security into a longer-duration
security, increasing its sensitivity to interest rate changes and causing its
price to decline.
Prepayment Risk
Mortgage- and asset-backed securities also are subject to prepayment risk, which
is the risk that falling interest rates could cause prepayments of the
securities to occur more quickly than expected. This occurs because, as interest
rates fall, more homeowners refinance the mortgages underlying mortgage-related
securities or prepay the debt obligations underlying asset-backed securities.
Balanced Fund must reinvest the prepayments at a time when interest rates are
falling, reducing the income of the fund. In addition, when interest rates fall,
prices on mortgage- and asset-backed securities may not rise as much as for
other types of comparable debt securities because investors may anticipate an
increase in prepayments.
17
PROSPECTUS - First American Large Cap Funds
Class Y Shares
<PAGE>
Additional Information
MORE ABOUT THE FUNDS CONTINUED
Risks of Dollar Roll Transactions
In a dollar roll transaction, Balanced Fund sells mortgage-backed securities for
delivery in the current month while contracting with the same party to
repurchase similar securities at a future date. Because the fund gives up the
right to receive principal and interest paid on the securities sold, a mortgage
dollar roll transaction will diminish the investment performance of the fund
unless the difference between the price received for the securities sold and the
price to be paid for the securities to be purchased in the future, plus any fee
income received, exceeds any income, principal payments and appreciation on the
securities sold as part of the mortgage dollar roll. Whether mortgage dollar
rolls will benefit Balanced Fund may depend upon the advisor's ability to
predict mortgage prepayments and interest rates. In addition, the use of
mortgage dollar rolls by the fund increases the amount of the fund's assets that
are subject to market risk, which could increase the volatility of the price of
the fund's shares.
18
PROSPECTUS - First American Large Cap Funds
Class Y Shares
<PAGE>
Additional Information
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The tables that follow present performance information about the Class Y shares
of each fund. This information is intended to help you understand each fund's
financial performance for the past five years or, if shorter, the period of the
fund's Class Y share operations. Some of this information reflects financial
results for a single fund share. Total returns in the tables represent the rate
that you would have earned or lost on an investment in a fund, assuming you
reinvested all of your dividends and distributions.
The information for the fiscal year ended September 30, 1999 has been audited by
Ernst & Young LLP, independent auditors, whose report, along with the funds'
financial statements, is included in the funds' annual report, which is
available upon request. The information for the fiscal years ended on or before
September 30, 1998, has been audited by other auditors.
BALANCED FUND
<TABLE>
<CAPTION>
Fiscal year ended September 30,
1999 1998 1997 1996 1995
- --------------------------------------------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value, Beginning of Period $ 14.01 $ 15.43 $ 13.15 $ 12.13 $ 10.54
-------- -------- -------- -------- --------
Investment Operations:
Net Investment Income 0.41 0.44 0.42 0.42 0.40
Net Gains (Losses) on Investments
(both realized and unrealized) 1.08 (0.30) 2.86 1.43 1.73
-------- -------- -------- -------- --------
Total From Investment Operations 1.49 0.14 3.28 1.85 2.13
-------- -------- -------- -------- --------
Less Distributions:
Dividends (from Net Investment Income) (0.41) (0.44) (0.42) (0.42) (0.39)
Distributions (from Capital Gains) (1.59) (1.12) (0.58) (0.41) (0.15)
-------- -------- -------- -------- --------
Total Distributions (2.00) (1.56) (1.00) (0.83) (0.54)
-------- -------- -------- -------- --------
Net Asset Value, End of Period $ 13.50 $ 14.01 $ 15.43 $ 13.15 $ 12.13
======== ======== ======== ======== ========
Total Return 11.07% 1.03% 26.17% 15.89% 20.89%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $350,229 $455,426 $418,087 $332,786 $192,145
Ratio of Expenses to Average Net Assets 0.80% 0.80% 0.80% 0.80% 0.79%
Ratio of Net Income to Average Net Assets 2.93% 3.01% 2.99% 3.31% 3.61%
Ratio of Expenses to Average Net Assets (excluding waivers) 0.91% 0.90% 0.88% 0.89% 0.94%
Ratio of Net Income to Average Net Assets (excluding waivers) 2.82% 2.91% 2.91% 3.22% 3.46%
Portfolio Turnover Rate 77% 103% 84% 73% 77%
- --------------------------------------------------------------- -------- -------- -------- -------- --------
</TABLE>
19
PROSPECTUS - First American Large Cap Funds
Class Y Shares
<PAGE>
Additional Information
FINANCIAL HIGHLIGHTS CONTINUED
EQUITY INCOME FUND
<TABLE>
<CAPTION>
Fiscal year ended September 30,
1999 1998 1997 1996 1995
- --------------------------------------------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value, Beginning of Period $ 15.74 $ 15.70 $ 12.66 $ 11.24 $ 9.89
-------- -------- -------- -------- --------
Investment Operations:
Net Investment Income 0.40 0.46 0.43 0.42 0.41
Net Gains (Losses) on Investments
(both realized and unrealized) 1.17 0.88 3.40 1.43 1.35
-------- -------- -------- -------- --------
Total From Investment Operations 1.57 1.34 3.83 1.85 1.76
-------- -------- -------- -------- --------
Less Distributions:
Dividends (from Net Investment Income) (0.41) (0.45) (0.44) (0.42) (0.41)
Distributions (from Capital Gains) (0.90) (0.85) (0.35) (0.01) --
-------- -------- -------- -------- --------
Total Distributions (1.31) (1.30) (0.79) (0.43) (0.41)
-------- -------- -------- -------- --------
Net Asset Value, End of Period $ 16.00 $ 15.74 $ 15.70 $ 12.66 $ 11.24
======== ======== ======== ======== ========
Total Return 10.10% 8.85% 31.45% 16.79% 18.24%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $350,775 $359,588 $369,919 $ 64,590 $ 52,126
Ratio of Expenses to Average Net Assets 0.75% 0.75% 0.75% 0.75% 0.75%
Ratio of Net Income to Average Net Assets 2.38% 2.81% 3.12% 3.50% 4.11%
Ratio of Expenses to Average Net Assets (excluding waivers) 0.88% 0.87% 0.92% 0.95% 1.06%
Ratio of Net Income to Average Net Assets (excluding waivers) 2.25% 2.69% 2.95% 3.30% 3.80%
Portfolio Turnover Rate 35% 14% 39% 23% 23%
- --------------------------------------------------------------- -------- -------- -------- -------- --------
</TABLE>
EQUITY INDEX FUND
<TABLE>
<CAPTION>
Fiscal year ended September 30,
1999 1998 1997 1996 1995
- --------------------------------------------------------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value, Beginning of Period $ 20.60 $ 20.74 $ 15.47 $ 13.34 $ 10.67
--------- --------- --------- --------- ---------
Investment Operations:
Net Investment Income 0.28 0.29 0.29 0.31 0.28
Net Gains (Losses) on Investments
(both realized and unrealized) 5.35 1.40 5.70 2.31 2.75
--------- --------- --------- --------- ---------
Total From Investment Operations 5.63 1.69 5.99 2.62 3.03
--------- --------- --------- --------- ---------
Less Distributions:
Dividends (from Net Investment Income) (0.28) (0.29) (0.29) (0.31) (0.27)
Distributions (from Capital Gains) (0.44) (1.54) (0.43) (0.18) (0.09)
--------- --------- --------- --------- ---------
Total Distributions (0.72) (1.83) (0.72) (0.49) (0.36)
--------- --------- --------- --------- ---------
Net Asset Value, End of Period $ 25.51 $ 20.60 $ 20.74 $ 15.47 $ 13.34
========= ========= ========= ========= =========
Total Return 27.61% 8.82% 39.85% 19.98% 29.17%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $1,206,072 $ 996,528 $ 557,258 $ 348,539 $ 218,932
Ratio of Expenses to Average Net Assets 0.35% 0.35% 0.35% 0.35% 0.35%
Ratio of Net Income to Average Net Assets 1.11% 1.36% 1.62% 2.14% 2.41%
Ratio of Expenses to Average Net Assets (excluding waivers) 0.89% 0.88% 0.88% 0.90% 0.95%
Ratio of Net Income to Average Net Assets (excluding waivers) 0.57% 0.83% 1.09% 1.59% 1.81%
Portfolio Turnover Rate 7% 14% 8% 10% 9%
- --------------------------------------------------------------- --------- --------- --------- --------- ---------
</TABLE>
20
PROSPECTUS - First American Large Cap Funds
Class Y Shares
<PAGE>
Additional Information
FINANCIAL HIGHLIGHTS CONTINUED
LARGE CAP GROWTH FUND
<TABLE>
<CAPTION>
Fiscal year ended September 30,
1999 1998 1997 1996 1995
- --------------------------------------------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value, Beginning of Period $ 16.30 $ 17.64 $ 13.66 $ 11.78 $ 9.10
-------- -------- -------- -------- --------
Investment Operations:
Net Investment Income 0.02 0.13 0.12 0.18 0.17
Net Gains (Losses) on Investments
(both realized and unrealized) 5.46 0.02 4.26 1.88 2.67
-------- -------- -------- -------- --------
Total From Investment Operations 5.48 0.15 4.38 2.06 2.84
-------- -------- -------- -------- --------
Less Distributions:
Dividends (from Net Investment Income) (0.06) (0.13) (0.13) (0.18) (0.16)
Distributions (from Capital Gains) (1.88) (1.36) (0.27) -- --
-------- -------- -------- -------- --------
Total Distributions (1.94) (1.49) (0.40) (0.18) (0.16)
-------- -------- -------- -------- --------
Net Asset Value, End of Period $ 19.84 $ 16.30 $ 17.64 $ 13.66 $ 11.78
======== ======== ======== ======== ========
Total Return 36.36% 1.07% 32.75% 17.58% 31.57%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $854,819 $680,143 $681,151 $225,900 $132,854
Ratio of Expenses to Average Net Assets 0.80% 0.80% 0.80% 0.79% 0.75%
Ratio of Net Income to Average Net Assets 0.20% 0.82% 0.77% 1.39% 1.69%
Ratio of Expenses to Average Net Assets (excluding waivers) 0.89% 0.86% 0.89% 0.92% 1.01%
Ratio of Net Income to Average Net Assets (excluding waivers) 0.11% 0.76% 0.68% 1.26% 1.43%
Portfolio Turnover Rate 57% 38% 34% 21% 28%
- --------------------------------------------------------------- -------- -------- -------- -------- --------
</TABLE>
LARGE CAP VALUE FUND
<TABLE>
<CAPTION>
Fiscal year ended September 30,
1999 1998 1997 1996 1995
- ------------------------------------------------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value, Beginning of Period $ 22.42 $ 28.75 $ 22.60 $ 19.56 $ 16.50
---------- ---------- ---------- ---------- ----------
Investment Operations:
Net Investment Income 0.25 0.35 0.39 0.42 0.36
Net Gains (Losses) on Investments
(both realized and unrealized) 4.46 (2.57) 7.90 4.09 3.64
---------- ---------- ---------- ---------- ----------
Total From Investment Operations 4.71 (2.22) 8.29 4.51 4.00
---------- ---------- ---------- ---------- ----------
Less Distributions:
Dividends (from net investment income) (0.26) (0.35) (0.38) (0.42) (0.35)
Distributions (from Capital Gains) (3.70) (3.76) (1.76) (1.05) (0.59)
---------- ---------- ---------- ---------- ----------
Total Distributions (3.96) (4.11) (2.14) (1.47) (0.94)
---------- ---------- ---------- ---------- ----------
Net Asset Value, End of Period $ 23.17 $ 22.42 $ 28.75 $ 22.60 $ 19.56
========== ========== ========== ========== ==========
Total Return 22.28% (8.47)% 39.13% 24.32% 25.50%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $1,343,207 $1,253,845 $1,095,262 $ 471,206 $ 312,559
Ratio of Expenses to Average Net Assets 0.80% 0.80% 0.80% 0.80% 0.79%
Ratio of Net Income to Average Net Assets 1.07% 1.40% 1.39% 1.90% 2.10%
Ratio of Expenses to Average Net Assets (excluding waivers) 0.90% 0.88% 0.89% 0.88% 0.94%
Ratio of Net Income to Average Net Assets (excluding waivers) 0.97% 1.32% 1.30% 1.82% 1.95%
Portfolio Turnover Rate 61% 74% 57% 40% 52%
- ------------------------------------------------------------- ---------- ---------- ---------- ---------- ----------
</TABLE>
21
PROSPECTUS - First American Large Cap Funds
Class Y Shares
<PAGE>
- --------------------------------------------------------------------------------
FOR MORE INFORMATION
More information about the funds is available in the funds' Statement of
Additional Information and annual and semiannual reports.
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI provides more details about the funds and their policies. A current SAI
is on file with the Securities and Exchange Commission (SEC) and is incorporated
into this prospectus by reference (which means that it is legally considered
part of this prospectus).
- --------------------------------------------------------------------------------
ANNUAL AND SEMIANNUAL REPORTS
Additional information about the funds' investments is available in the funds'
annual and semiannual reports to shareholders. In the funds' annual report, you
will find a discussion of the market conditions and investment strategies that
significantly affected the funds' performance during their last fiscal year.
You can obtain a free copy of the funds' SAI and/or free copies of the funds'
most recent annual or semiannual reports by calling Investor Services at
1-800-637-2548. The material you request will be sent by first-class mail or
other means designed to ensure equally prompt delivery, within three business
days of receipt of the request.
You can also obtain copies of this information, after paying a duplicating fee,
by electronic request at the following email address: [email protected], or by
writing the SEC's Public Reference Section, Washington, D.C. 20549-0102. For
more information, call 1-202-942-8090.
Information about the funds is also available on the Internet. Text-only
versions of fund documents can be viewed online or downloaded from the EDGAR
Database on the SEC's Internet site at http://www.sec.gov.
FIRST AMERICAN FUNDS P.O. Box 1330, Minneapolis, MN 55440-1330
First American Asset Management, a division of U.S. Bank National Association,
serves as the investment advisor to the First American Funds.
First American Funds are distributed by SEI Investments Distribution Co. which
is located in Oaks, PA 19456 and is not an affiliate of U.S. Bank.
1/2000 3017-99
SEC file number: 811-05309
FAIF1200Y
[LOGO] FIRST AMERICAN FUNDS(R)
THE POWER OF DISCIPLINED INVESTING(R)
<PAGE>
JANUARY 31, 2000
AS SUPPLEMENTED
FEBRUARY 1, 2000
ASSET CLASSES
(*) EQUITY FUNDS
* FUNDS OF FUNDS
* BOND FUNDS
* TAX FREE BOND FUNDS
* MONEY MARKET FUNDS
PROSPECTUS
FIRST AMERICAN INVESTMENT FUNDS, INC.
FIRST AMERICAN
MID CAP AND
SMALL CAP
FUNDS
CLASS A, CLASS B,
AND CLASS C SHARES
MID CAP GROWTH FUND
MID CAP VALUE FUND
SMALL CAP GROWTH FUND
SMALL CAP VALUE FUND
AS WITH ALL MUTUAL FUNDS, THE SECURITIES AND EXCHANGE COMMISSION HAS NOT
APPROVED OR DISAPPROVED THE SHARES OF THESE FUNDS, OR DETERMINED IF THE
INFORMATION IN THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY STATEMENT TO THE
CONTRARY IS A CRIMINAL OFFENSE.
[LOGO] FIRST AMERICAN FUNDS(R)
THE POWER OF DISCIPLINED INVESTING(R)
<PAGE>
Table of
CONTENTS
FUND SUMMARIES
- --------------------------------------------------------------------------------
Mid Cap Growth Fund 2
- --------------------------------------------------------------------------------
Mid Cap Value Fund 4
- --------------------------------------------------------------------------------
Small Cap Growth Fund 6
- --------------------------------------------------------------------------------
Small Cap Value Fund 8
- --------------------------------------------------------------------------------
POLICIES & SERVICES
- --------------------------------------------------------------------------------
Buying Shares 10
- --------------------------------------------------------------------------------
Selling Shares 14
- --------------------------------------------------------------------------------
Managing Your Investment 15
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
Management 17
- --------------------------------------------------------------------------------
More About The Funds 18
- --------------------------------------------------------------------------------
Financial Highlights 20
- --------------------------------------------------------------------------------
FOR MORE INFORMATION Back Cover
- --------------------------------------------------------------------------------
<PAGE>
Fund Summaries
INTRODUCTION
This section of the prospectus describes the objectives of the First American
Mid Cap and Small Cap Funds, summarizes the main investment strategies used by
each fund in trying to achieve its objectives, and highlights the risks involved
with these strategies. It also provides you with information about the
performance, fees, and expenses of the funds.
AN INVESTMENT IN THE FUNDS IS NOT A DEPOSIT OF U.S. BANK NATIONAL ASSOCIATION
AND IS NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION
OR ANY OTHER GOVERNMENT AGENCY.
1
PROSPECTUS - First American Mid Cap Funds and Small Cap Funds
Class A, Class B, and Class C Shares
<PAGE>
Fund Summaries
MID CAP GROWTH FUND
- --------------------------------------------------------------------------------
OBJECTIVE
Mid Cap Growth Fund has an objective of growth of capital.
- --------------------------------------------------------------------------------
MAIN INVESTMENT STRATEGIES
Under normal market conditions, Mid Cap Growth Fund invests primarily (at least
75% of total assets) in common stocks of mid capitalization companies, defined
as companies that have market capitalizations at the time of purchase within the
range of market capitalizations of companies constituting the Russell Midcap
Index. This index measures the performance of the 800 smallest companies in the
Russell 1000 Index (which is made up of the 1,000 largest U.S. companies based
on total market capitalization). As of the date of this prospectus, market
capitalizations of companies in the Russell Midcap Index ranged from
approximately $223 million to $37 billion.
The advisor will select companies that it believes exhibit the potential for
superior growth based on factors such as:
* Above average growth in revenue and earnings
* Strong competitive position
* Strong management
* Sound financial condition
Up to 25% of the fund's total assets may be invested in securities of foreign
issuers which are either listed on a United States stock exchange or represented
by American Depositary Receipts.
To generate additional income, the fund may lend securities representing up to
one-third of the value of its total assets to broker-dealers, banks, and other
institutions.
- --------------------------------------------------------------------------------
MAIN RISKS
The value of your investment in this fund will change daily, which means you
could lose money. The main risks of investing in this fund include:
Risks of Common Stocks
Stocks may decline significantly in price over short or extended periods of
time. Price changes may occur in the market as a whole, or they may occur in
only a particular company, industry, or sector of the market. In addition,
growth stocks and/or mid-cap stocks may underperform the market as a whole.
Risks of Mid-Cap Stocks
While stocks of mid-cap companies may be slightly less volatile than those of
small-cap companies, they still involve substantial risk and their prices may be
subject to more abrupt or erratic movements than those of larger, more
established companies or the market averages in general.
Foreign Security Risk
Securities of foreign issuers, even when dollar-denominated and publicly traded
in the United States, may involve risks not associated with the securities of
domestic issuers, including the risks of adverse currency fluctuations and of
political or social instability, or diplomatic developments that could adversely
affect the securities.
Risks of Securities Lending
The fund is subject to the risk that the other party to a securities lending
agreement will default on its obligations.
- --------------------------------------------------------------------------------
FUND PERFORMANCE
Illustrations on the next page provide you with information on the fund's
volatility and performance. Of course, past performance does not guarantee
future results.
The bar chart shows you how performance of the fund's Class A shares has varied
from year to year. The performance of Class B and Class C shares will be lower
due to their higher expenses. Sales charges are not reflected in the chart; if
they had been, returns would be lower.
The table compares the fund's performance for Class A and Class B shares over
different time periods to that of the fund's benchmark index, which is a broad
measure of market performance. However, because Class C shares have not been
offered for a full calendar year, no information is presented for these shares.
The fund's performance reflects sales charges and fund expenses; the benchmark
is unmanaged and has no expenses.
Both the chart and the table assume that all distributions have been reinvested.
2
PROSPECTUS - First American Mid Cap Funds and Small Cap Funds
Class A, Class B, and Class C Shares
<PAGE>
Fund Summaries
MID CAP GROWTH FUND CONTINUED
- --------------------------------------------------------------------------------
FUND PERFORMANCE (CONTINUED)
ANNUAL TOTAL RETURNS AS OF 12/31 EACH YEAR(1)
[BAR CHART]
65.53% 7.23% 18.46% -4.90% 39.35% 11.84% 23.40% 10.58% 54.59%
- ------------------------------------------------------------------------------
1991 1992 1993 1994 1995 1996 1997 1998 1999
Best Quarter: Quarter ending December 31, 1999 47.75%
Worst Quarter: Quarter ending September 30, 1998 (19.34)%
<TABLE>
<CAPTION>
Since Since
AVERAGE ANNUAL TOTAL RETURNS Inception Inception Inception
AS OF 12/31/99(1) Date One Year Five Years (Class A) (Class B)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Mid Cap Growth Fund (Class A) 4/23/90 46.50% 25.51% 20.26% N/A
- -----------------------------------------------------------------------------------------------
Mid Cap Growth Fund (Class B) 8/7/98 48.41% N/A N/A 39.15%
- -----------------------------------------------------------------------------------------------
Russell Midcap Index(2) 18.23% 21.86% 17.52% 34.92%
- -----------------------------------------------------------------------------------------------
</TABLE>
(1) On 8/7/98, the Mid Cap Growth Fund became the successor by merger to the
Piper Emerging Growth Fund, a series of Piper Funds Inc. Prior to the merger,
the Mid Cap Growth Fund had no assets or liabilities. Performance presented
prior to 8/7/98, represents that of the Piper Emerging Growth Fund.
(2) An ummanaged index comprised of the 800 smallest securities in the Russell
1000 Index, which represent approximately 35% of the total market capitalization
of the investable U.S. equity market. The since inception performance of the
index for Class A and Class B shares is calculated from 4/30/90 and 8/31/98,
respectively.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
As an investor, you pay fees and expenses to buy and hold shares of the fund.
You pay shareholder fees directly when you buy or sell shares. You pay annual
fund operating expenses indirectly since they are deducted from fund assets. The
figures below show fund expenses during the fiscal year ended September 30,
1999.(1)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
SHAREHOLDER FEES CLASS A CLASS B CLASS C
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MAXIMUM SALES CHARGE (LOAD) AS A % OF OFFERING PRICE 5.25%(2) 0.00% 1.00%
MAXIMUM DEFERRED SALES CHARGE (LOAD) AS A % OF ORIGINAL PURCHASE PRICE OR
REDEMPTION PROCEEDS, WHICHEVER IS LESS 0.00%(3) 5.00% 1.00%
ANNUAL MAINTENANCE FEE(4)
ONLY CHARGED TO ACCOUNTS WITH BALANCES BELOW $500 $ 25 $ 25 $ 25
ANNUAL FUND OPERATING EXPENSES AS A % OF AVERAGE NET ASSETS
- -----------------------------------------------------------------------------------------------------------
Management Fees 0.70% 0.70% 0.70%
Distribution and Service (12b-1) Fees 0.25% 1.00% 1.00%
Other Expenses 0.24% 0.28% 0.28%
TOTAL 1.19% 1.98% 1.98%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Actual expenses for the fiscal year were lower than those shown because of
voluntary fee waivers by the fund's distributor. See "Information -- Financial
Highlights." The net expenses the fund actually paid after waivers for the
fiscal year ended September 30, 1999, were:
<TABLE>
<S> <C> <C> <C>
Waiver of Fund Expenses (0.05)% (0.09)% (0.09)%
TOTAL ACTUAL ANNUAL OPERATING EXPENSES (AFTER WAIVERS) 1.14% 1.89% 1.89%
</TABLE>
THE ADVISOR INTENDS TO WAIVE FEES DURING THE CURRENT FISCAL YEAR SO THAT TOTAL
FUND OPERATING EXPENSES DO NOT EXCEED 1.15%, 1.90% AND 1.90%, RESPECTIVELY, FOR
CLASS A, CLASS B AND CLASS C SHARES. FEE WAIVERS MAY BE DISCONTINUED AT ANY
TIME.
(2) Certain investors may qualify for reduced sales charges. See "Buying Shares
- -- Calculating Your Share Price."
(3) Class A share investments of $1 million or more on which no front-end sales
charge is paid may be subject to a contingent deferred sales charge. See
"Buying Shares -- Calculating Your Share Price."
(4) The fund reserves the right to charge your account an annual maintenance fee
of $25 if your balance falls below $500 as a result of selling or exchanging
shares. See "Policies & Services -- Selling Shares, Accounts with Low
Balances."
- --------------------------------------------------------------------------------
EXAMPLE This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes that you
invest $10,000 for the time periods indicated, that your investment has a 5%
return each year, and that the fund's operating expenses remain the same.
Although your actual costs and returns may differ, based on these assumptions
your costs would be:
<TABLE>
<CAPTION>
CLASS B CLASS B CLASS C CLASS C
assuming redemption assuming no redemption assuming redemption assuming no redemption
CLASS A at end of each period at end of each period at end of each period at end of each period
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 year $ 640 $ 701 $ 201 $ 399 $ 299
3 years $ 883 $1,021 $ 621 $ 715 $ 715
5 years $1,145 $1,268 $1,068 $1,157 $1,157
10 years $1,892 $2,102 $2,102 $2,383 $2,383
</TABLE>
3
PROSPECTUS - First American Mid Cap Funds and Small Cap Funds
Class A, Class B, and Class C Shares
<PAGE>
Fund Summaries
MID CAP VALUE FUND
- --------------------------------------------------------------------------------
OBJECTIVE
Mid Cap Value Fund has an objective of capital appreciation.
- --------------------------------------------------------------------------------
MAIN INVESTMENT STRATEGIES
Under normal market conditions, Mid Cap Value Fund invests primarily (at least
75% of total assets) in common stocks of mid-capitalization companies, defined
as companies that have market capitalizations at the time of purchase within the
range of market capitalizations of companies constituting the Russell Midcap
Index. This index measures the performance of the 800 smallest companies in the
Russell 1000 Index (which is made up of the 1,000 largest U.S. companies based
on total market capitalization). As of the date of this prospectus, market
capitalizations of companies in the Russell Midcap Index ranged from
approximately $223 million to $37 billion.
In selecting stocks, the fund's advisor invests in securities it believes:
* are undervalued relative to other securities in the same industry or market.
* exhibit good or improving fundamentals.
* exhibit an identifiable catalyst that could close the gap between market value
and fair value over the next one to two years.
To generate additional income, the fund may lend securities representing up to
one-third of the value of its total assets to broker-dealers, banks, and other
institutions.
- --------------------------------------------------------------------------------
MAIN RISKS
The value of your investment in this fund will change daily, which means you
could lose money. The main risks of investing in this fund include:
Risks of Common Stocks
Stocks may decline significantly in price over short or extended periods of
time. Price changes may occur in the market as a whole, or they may occur in
only a particular company, industry or sector of the market. In addition, value
stocks and/or mid-cap stocks may underperform the market as a whole.
Risks of Mid-Cap Stocks
While stocks of mid-cap companies may be slightly less volatile than those of
small-cap companies, they still involve substantial risk and their prices may be
subject to more abrupt or erratic movements than those of larger, more
established companies or the market averages in general.
Risks of Securities Lending
The fund is subject to the risk that the other party to a securities lending
agreement will default on its obligations.
- --------------------------------------------------------------------------------
FUND PERFORMANCE
Illustrations on the next page provide you with information on the fund's
volatility and performance. Of course, past performance does not guarantee
future results.
The bar chart shows you how performance of the fund's Class A shares has varied
from year to year. The performance of Class B and Class C shares will be lower
due to their higher expenses. Sales charges are not reflected in the chart; if
they had been, returns would be lower.
The table compares the fund's performance for Class A and Class B shares over
different time periods to that of the fund's benchmark index, which is a broad
measure of market performance. However, because Class C shares have not been
offered for a full calendar year, no information is presented for these shares.
The fund's performance reflects sales charges and fund expenses; the benchmark
is unmanaged and has no expenses.
Both the chart and the table assume that all distributions have been reinvested.
4
PROSPECTUS - First American Mid Cap Funds and Small Cap Funds
Class A, Class B, and Class C Shares
<PAGE>
Fund Summaries
MID CAP VALUE FUND CONTINUED
- --------------------------------------------------------------------------------
FUND PERFORMANCE (CONTINUED)
ANNUAL TOTAL RETURNS AS OF 12/31 EACH YEAR
[BAR CHART]
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -6.82% 18.70% 19.33% 19.01% 6.72% 20.02% 31.94% 24.21% -13.24% -6.29%
- ----------------------------------------------------------------------------------------
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
</TABLE>
Best Quarter: Quarter ending June 30, 1997 17.97%
Worst Quarter: Quarter ending September 30, 1998 (30.80)%
<TABLE>
<CAPTION>
Since
AVERAGE ANNUAL TOTAL RETURNS Inception Ten Years Inception
AS OF 12/31/99 Date One Year Five Years (Class A) (Class B)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Mid Cap Value Fund (Class A) 12/22/87 (11.23)% 8.67% 9.77% N/A
- ---------------------------------------------------------------------------------------------------
Mid Cap Value Fund (Class B) 8/15/94 (11.62)% 8.80% N/A 8.33%
- ---------------------------------------------------------------------------------------------------
Russell Midcap Index(1) 18.23% 21.86% 15.92% 19.25%
- ---------------------------------------------------------------------------------------------------
</TABLE>
(1) An ummanaged index comprised of the 800 smallest securities in the Russell
1000 Index, which represent approximately 35% of the total market capitalization
of the investable U.S. equity market. The since inception performance of the
index for Class B shares is calculated from 8/31/94.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
As an investor, you pay fees and expenses to buy and hold shares of the fund.
You pay shareholder fees directly when you buy or sell shares. You pay annual
fund operating expenses indirectly since they are deducted from fund assets. The
figures below show fund expenses during the fiscal year ended September 30,
1999.(1)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
SHAREHOLDER FEES CLASS A CLASS B CLASS C
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MAXIMUM SALES CHARGE (LOAD) AS A % OF OFFERING PRICE 5.25%(2) 0.00% 1.00%
MAXIMUM DEFERRED SALES CHARGE (LOAD) AS A % OF ORIGINAL PURCHASE PRICE OR
REDEMPTION PROCEEDS, WHICHEVER IS LESS 0.00%(3) 5.00% 1.00%
ANNUAL MAINTENANCE FEE(4)
ONLY CHARGED TO ACCOUNTS WITH BALANCES BELOW $500 $ 25 $ 25 $ 25
ANNUAL FUND OPERATING EXPENSES AS A % OF AVERAGE NET ASSETS
- ----------------------------------------------------------------------------------------------------------
Management Fees 0.70% 0.70% 0.70%
Distribution and Service (12b-1) Fees 0.25% 1.00% 1.00%
Other Expenses 0.23% 0.23% 0.23%
TOTAL 1.18% 1.93% 1.93%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(1) The net expenses the fund actually paid after waivers for the fiscal year
ended September 30, 1999, were:
<TABLE>
<S> <C> <C> <C>
Waiver of Fund Expenses (0.03)% (0.03)% (0.03)%
TOTAL ACTUAL ANNUAL OPERATING EXPENSES (AFTER WAIVERS) 1.15% 1.90% 1.90%
</TABLE>
THE ADVISOR INTENDS TO WAIVE FEES DURING THE CURRENT FISCAL YEAR SO THAT TOTAL
FUND OPERATING EXPENSES DO NOT EXCEED 1.15%, 1.90% AND 1.90%, RESPECTIVELY, FOR
CLASS A, CLASS B AND CLASS C SHARES. FEE WAIVERS MAY BE DISCONTINUED AT ANY
TIME.
(2) Certain investors may qualify for reduced sales charges. See "Buying Shares
- -- Calculating Your Share Price."
(3) Class A share investments of $1 million or more on which no front-end sales
charge is paid may be subject to a contingent deferred sales charge. See "Buying
Shares -- Calculating Your Share Price."
(4) The fund reserves the right to charge your account an annual maintenance fee
of $25 if your balance falls below $500 as a result of selling or exchanging
shares. See "Policies & Services -- Selling Shares, Accounts with Low Balances."
- --------------------------------------------------------------------------------
EXAMPLE This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes that you
invest $10,000 for the time periods indicated, that your investment has a 5%
return each year, and that the fund's operating expenses remain the same.
Although your actual costs and returns may differ, based on these assumptions
your costs would be:
<TABLE>
<CAPTION>
CLASS B CLASS B CLASS C CLASS C
assuming redemption assuming no redemption assuming redemption assuming no redemption
CLASS A at end of each period at end of each period at end of each period at end of each period
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 year $ 639 $ 696 $ 196 $ 394 $ 294
3 years $ 880 $1,006 $ 596 $ 700 $ 700
5 years $1,140 $1,242 $1,042 $1,131 $1,131
10 years $1,882 $2,059 $2,059 $2,331 $2,331
</TABLE>
5
PROSPECTUS - First American Mid Cap Funds and Small Cap Funds
Class A, Class B, and Class C Shares
<PAGE>
Fund Summaries
SMALL CAP GROWTH FUND
- --------------------------------------------------------------------------------
OBJECTIVE
Small Cap Growth Fund has an objective of growth of capital.
- --------------------------------------------------------------------------------
MAIN INVESTMENT STRATEGIES
Under normal market conditions, Small Cap Growth Fund invests primarily (at
least 75% of total assets) in common stocks of small capitalization companies,
defined as companies that have market capitalizations at the time of purchase
within the range of market capitalizations of companies constituting the Russell
2000 Index. This index measures the performance of the 2,000 smallest companies
in the Russell 3000 Index (which is made up of the 3,000 largest U.S. companies
based on total market capitalization). As of the date of this prospectus, market
capitalizations of companies in the Russell 2000 Index ranged from approximately
$11 million to $13 billion.
The advisor will select companies that it believes exhibit the potential for
superior growth based on factors such as:
* Above average growth in revenue and earnings
* Strong competitive position
* Strong management
* Sound financial condition
Up to 25% of the fund's total assets may be invested in securities of foreign
issuers which are either listed on a United States stock exchange or represented
by American Depositary Receipts.
To generate additional income, the fund may lend securities representing up to
one-third of the value of its total assets to broker-dealers, banks, and other
institutions.
- --------------------------------------------------------------------------------
MAIN RISKS
The value of your investment in this fund will change daily, which means you
could lose money. The main risks of investing in this fund include:
Risks of Common Stocks
Stocks may decline significantly in price over short or extended periods of
time. Price changes may occur in the market as a whole, or they may occur in
only a particular company, industry or sector of the market. In addition, growth
stocks and/or stocks of small-capitalization companies may underperform the
market as a whole.
Risks of Small-Cap Stocks
Stocks of small-capitalization companies involve substantial risk. These stocks
historically have experienced greater price volatility than stocks of
larger-capitalization companies, and they may be expected to do so in the
future.
Foreign Security Risk
Securities of foreign issuers, even when dollar-denominated and publicly traded
in the United States, may involve risks not associated with the securities of
domestic issuers, including the risks of adverse currency fluctuations and of
political or social instability, or diplomatic developments that could adversely
affect the securities.
Risks of Securities Lending
The fund is subject to the risk that the other party to a securities lending
agreement will default on its obligations.
- --------------------------------------------------------------------------------
FUND PERFORMANCE
Illustrations on the next page provide you with information on the fund's
volatility and performance. Of course, past performance does not guarantee
future results.
The bar chart shows you how performance of the fund's Class A shares has varied
from year to year. The performance of Class B and Class C shares will be lower
due to their higher expenses. Sales charges are not reflected in the chart; if
they had been, returns would be lower.
The table compares the fund's performance for Class A and Class B shares over
different time periods to that of the fund's benchmark index, which is a broad
measure of market performance. However, because Class C shares have not been
offered for a full calendar year, no information is presented for these shares.
The fund's performance reflects sales charges and fund expenses; the benchmark
is unmanaged and has no expenses.
Both the chart and the table assume that all distributions have been reinvested.
6
PROSPECTUS - First American Mid Cap Funds and Small Cap Funds
Class A, Class B, and Class C Shares
<PAGE>
Fund Summaries
SMALL CAP GROWTH FUND CONTINUED
- --------------------------------------------------------------------------------
FUND PERFORMANCE (CONTINUED)
ANNUAL TOTAL RETURNS AS OF 12/31 EACH YEAR(1)
[BAR CHART]
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -0.42% 40.55% 11.47% 10.98% -2.44% 20.20% 11.68% 29.23% 7.73% 66.76%
- ---------------------------------------------------------------------------------------
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
</TABLE>
Best Quarter: Quarter ending December 31, 1999 51.34%
Worst Quarter: Quarter ending September 30, 1998 (22.14)%
<TABLE>
<CAPTION>
Since
AVERAGE ANNUAL TOTAL RETURNS Inception Ten Years Inception
AS OF 12/31/99(1) Date One Year Five Years (Class A) (Class B)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Small Cap Growth Fund (Class A) 3/16/87 58.04% 24.18% 17.43% N/A
- --------------------------------------------------------------------------------------------------
Small Cap Growth Fund (Class B) 7/31/98 60.39% N/A N/A 46.51%
- --------------------------------------------------------------------------------------------------
Russell 2000 Index(2) 21.26% 16.69% 13.40% 15.43%
- --------------------------------------------------------------------------------------------------
</TABLE>
(1) On 7/31/98, the Small Cap Growth Fund became the successor by merger to the
Piper Small Company Growth Fund, a series of Piper Funds Inc. Prior to the
merger, the Small Cap Growth Fund had no assets or liabilities. Performance
presented prior to 7/31/98 represents that of the Piper Small Company Growth
Fund. On 9/21/96, shareholders approved a change in the Fund's investment
objective from high total investment return consistent with prudent investment
risk to long-term capital appreciation. In connection with this change, the
Fund's investment policies were revised.
(2) An ummanaged index comprised of the smallest 2000 companies in the Russell
3000 Index. The latter index is composed of 3000 large U.S. companies
representing approximately 98% of the investable U.S. equity market. The since
inception performance of the index for Class B shares is calculated from
7/31/98.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
As an investor, you pay fees and expenses to buy and hold shares of the fund.
You pay shareholder fees directly when you buy or sell shares. You pay annual
fund operating expenses indirectly since they are deducted from fund assets. The
figures below show fund expenses during the fiscal year ended September 30,
1999.(1)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
SHAREHOLDER FEES CLASS A CLASS B CLASS C
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MAXIMUM SALES CHARGE (LOAD) AS A % OF OFFERING PRICE 5.25%(2) 0.00% 1.00%
MAXIMUM DEFERRED SALES CHARGE (LOAD) AS A % OF ORIGINAL PURCHASE PRICE OR
REDEMPTION PROCEEDS, WHICHEVER IS LESS 0.00%(3) 5.00% 1.00%
ANNUAL MAINTENANCE FEE(4)
ONLY CHARGED TO ACCOUNTS WITH BALANCES BELOW $500 $ 25 $ 25 $ 25
ANNUAL FUND OPERATING EXPENSES AS A % OF AVERAGE NET ASSETS
- ------------------------------------------------------------------------------------------------------------
Management Fees 0.70 % 0.70% 0.70%
Distribution and Service (12b-1) Fees 0.25 % 1.00% 1.00%
Other Expenses 0.20 % 0.21% 0.21%
TOTAL 1.15 % 1.91% 1.91%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Actual expenses for the fiscal year were lower than those shown because of
voluntary fee waivers by the fund's distributor. See "Additional Information --
Financial Highlights." The net expenses the fund actually paid after waivers for
the fiscal year ended September 30, 1999, were:
<TABLE>
<S> <C> <C> <C>
Waiver of Fund Expenses (0.01)% (0.01)% (0.01)%
TOTAL ACTUAL ANNUAL OPERATING EXPENSES (AFTER WAIVERS) 1.14% 1.90% 1.90%
</TABLE>
THE ADVISOR INTENDS TO WAIVE FEES DURING THE CURRENT FISCAL YEAR SO THAT TOTAL
FUND OPERATING EXPENSES DO NOT EXCEED 1.15%, 1.90% AND 1.90%, RESPECTIVELY, FOR
CLASS A, CLASS B AND CLASS C SHARES. FEE WAIVERS MAY BE DISCONTINUED AT ANY
TIME.
(2) Certain investors may qualify for reduced sales charges. See "Buying Shares
- -- Calculating Your Share Price."
(3) Class A share investments of $1 million or more on which no front-end sales
charge is paid may be subject to a contingent deferred sales charge. See
"Buying Shares -- Calculating Your Share Price."
(4) The fund reserves the right to charge your account an annual maintenance fee
of $25 if your balance falls below $500 as a result of selling or exchanging
shares. See "Policies & Services -- Selling Shares, Accounts with Low Balances."
- --------------------------------------------------------------------------------
EXAMPLE This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes that you
invest $10,000 for the time periods indicated, that your investment has a 5%
return each year, and that the fund's operating expenses remain the same.
Although your actual costs and returns may differ, based on these assumptions
your costs would be:
<TABLE>
<CAPTION>
CLASS B CLASS B CLASS C CLASS C
assuming redemption assuming no redemption assuming redemption assuming no redemption
CLASS A at end of each period at end of each period at end of each period at end of each period
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 year $ 636 $ 694 $ 194 $ 392 $ 292
3 years $ 871 $1,000 $ 600 $ 694 $ 694
5 years $1,125 $1,232 $1,032 $1,121 $1,121
10 years $1,849 $2,035 $2,035 $2,310 $2,310
</TABLE>
7
PROSPECTUS - First American Mid Cap Funds and Small Cap Funds
Class A, Class B, and Class C Shares
<PAGE>
Fund Summaries
SMALL CAP VALUE FUND
- --------------------------------------------------------------------------------
OBJECTIVE
Small Cap Value Fund has an objective of capital appreciation.
- --------------------------------------------------------------------------------
MAIN INVESTMENT STRATEGIES
Under normal market conditions, Small Cap Value Fund invests primarily (at least
75% of total assets) in common stocks of small capitalization companies, defined
as companies that have market capitalizations at the time of purchase within the
range of market capitalizations of companies constituting the Russell 2000
Index. This index measures the performance of the 2,000 smallest companies in
the Russell 3000 Index (which is made up of the 3,000 largest U.S. companies
based on total market capitalization). As of the date of this prospectus, market
capitalizations of companies in the Russell 2000 Index ranged from approximately
$11 million to $13 billion.
In selecting stocks, the fund's advisor invests in securities it believes:
* are undervalued relative to other securities in the same industry or market.
* exhibit good or improving fundamentals.
* exhibit an identifiable catalyst that could close the gap between market value
and fair value over the next one to two years.
To generate additional income, the fund may lend securities representing up to
one-third of the value of its total assets to broker-dealers, banks, and other
institutions.
- --------------------------------------------------------------------------------
MAIN RISKS
The value of your investment in this fund will change daily, which means you
could lose money. The main risks of investing in this fund include:
Risks of Common Stocks
Stocks may decline significantly in price over short or extended periods of
time. Price changes may occur in the market as a whole, or they may occur in
only a particular company, industry or sector of the market. In addition, value
stocks and/or stocks of small-capitalization companies may underperform the
market as a whole.
Risks of Small-Cap Stocks
Stocks of small-capitalization companies involve substantial risk. These stocks
historically have experienced greater price volatility than stocks of
larger-capitalization companies, and they may be expected to do so in the
future.
Risks of Securities Lending
The fund is subject to the risk that the other party to a securities lending
agreement will default on its obligations.
- --------------------------------------------------------------------------------
FUND PERFORMANCE
Illustrations on the next page provide you with information on the fund's
volatility and performance. Of course, past performance does not guarantee
future results.
The bar chart shows you how performance of the fund's Class A shares has varied
from year to year. The performance of Class B and Class C shares will be lower
due to their higher expenses. Sales charges are not reflected in the chart; if
they had been, returns would be lower.
The table compares the fund's performance for Class A and Class B shares over
different time periods to that of the fund's benchmark index, which is a broad
measure of market performance. However, because Class C shares have not been
offered for a full calendar year, no information is presented for these shares.
The fund's performance reflects sales charges and fund expenses; the benchmark
is unmanaged and has no expenses.
Both the chart and the table assume that all distributions have been reinvested.
8
PROSPECTUS - First American Mid Cap Funds and Small Cap Funds
Class A, Class B, and Class C Shares
<PAGE>
Fund Summaries
SMALL CAP VALUE FUND CONTINUED
- --------------------------------------------------------------------------------
FUND PERFORMANCE (CONTINUED)
ANNUAL TOTAL RETURNS AS OF 12/31 EACH YEAR(1)
[BAR CHART]
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -13.72% 60.96% 26.50% 22.60% -0.33% 47.30% 20.07% 20.07% -8.47% 5.93%
- ------------------------------------------------------------------------------------------------
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
</TABLE>
Best Quarter: Quarter ending March 31, 1991 33.49%
Worst Quarter: Quarter ending September 30, 1998 (23.21)%
<TABLE>
<CAPTION>
Ten Since
AVERAGE ANNUAL TOTAL RETURNS Inception Years Inception
AS OF 12/31/99(1) Date One Year Five Years (Class A) (Class B)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Small Cap Value Fund (Class A) 1/1/88 0.35% 14.29% 15.39% N/A
- -----------------------------------------------------------------------------------------------
Small Cap Value Fund (Class B) 11/24/97 0.10% N/A N/A (4.52)%
- -----------------------------------------------------------------------------------------------
Russell 2000 Index(2) 21.26% 16.69% 13.40% 9.25 %
- -----------------------------------------------------------------------------------------------
</TABLE>
(1) Performance prior to 8/1/94 is that of Small Company Value Trust Fund, a
predecessor collective trust fund. On 8/1/94, substantially all of the assets of
Small Company Value Trust Fund were transferred into Qualivest Small Companies
Value Fund, a mutual fund registered under the Investment Company Act of 1940.
On 11/21/97, First American Small Cap Value Fund became the successor by merger
to Qualivest Small Companies Value Fund. The objectives, policies, and
guidelines of the predecessor funds were, in all material respects, identical to
those of Small Cap Value Fund. Performance is adjusted to reflect Small Cap
Value Fund's Class A share fees and expenses, before any fee waivers. Small
Company Value Trust Fund was not registered under the Investment Company Act of
1940 and therefore was not subject to certain investment restrictions that might
have adversely affected performance.
(2) An ummanaged index comprised of the smallest 2000 companies in the Russell
3000 Index. The latter index is composed of 3000 large U.S. companies
representing approximately 98% of the investable U.S. equity market. The since
inception performance of the index for Class B shares is calculated from
11/30/97.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
As an investor, you pay fees and expenses to buy and hold shares of the fund.
You pay shareholder fees directly when you buy or sell shares. You pay annual
fund operating expenses indirectly since they are deducted from fund assets. The
figures below show fund expenses during the fiscal year ended September 30,
1999.(1)
<TABLE>
<CAPTION>
SHAREHOLDER FEES CLASS A CLASS B CLASS C
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MAXIMUM SALES CHARGE (LOAD) AS A % OF OFFERING PRICE 5.25%(2) 0.00% 1.00%
MAXIMUM DEFERRED SALES CHARGE (LOAD) AS A % OF ORIGINAL PURCHASE PRICE OR
REDEMPTION PROCEEDS, WHICHEVER IS LESS 0.00%(3) 5.00% 1.00%
ANNUAL MAINTENANCE FEE(4)
ONLY CHARGED TO ACCOUNTS WITH BALANCES BELOW $500 $ 25 $ 25 $ 25
ANNUAL FUND OPERATING EXPENSES AS A % OF AVERAGE NET ASSETS
- ----------------------------------------------------------------------------------------------------------
Management Fees 0.70 % 0.70% 0.70%
Distribution and Service (12b-1) Fees 0.25 % 1.00% 1.00%
Other Expenses 0.19 % 0.19% 0.19%
TOTAL 1.14 % 1.89% 1.89%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(1) The net expenses the fund actually paid after waivers for the fiscal year
ended September 30, 1999, were:
<TABLE>
<S> <C> <C> <C>
Waiver of Fund Expenses (0.00)% (0.00)% (0.00)%
TOTAL ACTUAL ANNUAL OPERATING EXPENSES (AFTER WAIVERS) 1.14% 1.89% 1.89%
</TABLE>
THE ADVISOR INTENDS TO WAIVE FEES DURING THE CURRENT FISCAL YEAR SO THAT TOTAL
FUND OPERATING EXPENSES DO NOT EXCEED 1.15%, 1.90% AND 1.90%, RESPECTIVELY, FOR
CLASS A, CLASS B AND CLASS C SHARES. FEE WAIVERS MAY BE DISCONTINUED AT ANY
TIME.
(2) Certain investors may qualify for reduced sales charges. See "Buying Shares
- -- Calculating Your Share Price."
(3) Class A share investments of $1 million or more on which no front-end sales
charge is paid may be subject to a contingent deferred sales charge. See
"Buying Shares -- Calculating Your Share Price."
(4) The fund reserves the right to charge your account an annual maintenance fee
of $25 if your balance falls below $500 as a result of selling or exchanging
shares. See "Policies & Services -- Selling Shares, Accounts with Low Balances."
- --------------------------------------------------------------------------------
EXAMPLE This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes that you
invest $10,000 for the time periods indicated, that your investment has a 5%
return each year, and that the fund's operating expenses remain the same.
Although your actual costs and returns may differ, based on these assumptions
your costs would be:
<TABLE>
<CAPTION>
CLASS B CLASS B CLASS C CLASS C
assuming redemption assuming no redemption assuming redemption assuming no redemption
CLASS A at end of each period at end of each period at end of each period at end of each period
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 year $ 635 $ 692 $ 192 $ 390 $ 290
3 years $ 868 $ 994 $ 594 $ 688 $ 688
5 years $1,120 $1,221 $1,021 $1,111 $1,111
10 years $1,838 $2,016 $2,016 $2,289 $2,289
</TABLE>
9
PROSPECTUS - First American Mid Cap Funds and Small Cap Funds
Class A, Class B, and Class C Shares
<PAGE>
Policies & Services
BUYING SHARES
You may become a shareholder in any of the funds with an initial investment of
$1,000 or more ($250 for a retirement plan or a Uniform Gifts to Minors
Act/Uniform Transfers to Minors Act (UGMA/UTMA) account). Additional investments
can be made for as little as $100 ($25 for a retirement plan or an UGMA/UTMA
account). The funds have the right to waive these minimum investment
requirements for employees of the funds' advisor and its affiliates. The funds
also have the right to reject any purchase order.
- --------------------------------------------------------------------------------
CHOOSING A SHARE CLASS
All funds in this prospectus offer Class A, Class B, and Class C shares.
Each class has its own cost structure. The amount of your purchase and the
length of time you expect to hold your shares will be factors in determining
which class of shares is best for you.
Class A Shares
If you are making an investment that qualifies for a reduced sales charge, Class
A shares may be best for you. Class A shares feature:
* a front-end sales charge, described below.
* lower annual expenses than Class B or Class C shares. See "Fund Summaries" for
more information on fees and expenses.
Because Class A shares will normally be the better choice if your investment
qualifies for a reduced sales charge:
* orders for Class B shares for $250,000 or more normally will be treated as
orders for Class A shares.
* orders for Class C shares for $1 million or more normally will be treated as
orders for Class A shares.
* orders for Class B or Class C shares by an investor eligible to purchase Class
A shares without a front-end sales charge normally will be treated as orders
for Class A shares.
Class B Shares
If you want all your money to go to work for you immediately, you may prefer
Class B shares. Class B shares have no front-end sales charge. However they do
have:
* higher annual expenses than Class A shares. (See "Fees and Expenses" in the
"Fund Summaries" section.)
* a back-end sales charge, called a "contingent deferred sales charge," if you
redeem your shares within six years of purchase.
* automatic conversion to Class A shares approximately eight years after
purchase, thereby reducing future annual expenses.
Class C Shares
These shares combine some of the characteristics of Class A and Class B shares.
Class C shares have a low front-end sales charge of 1%, so more of your
investment goes to work immediately than if you had purchased Class A shares.
However, Class C shares also feature:
* a 1% contingent deferred sales charge if you redeem your shares within 18
months of purchase.
* higher annual expenses than Class A shares. (See "Fees and Expenses" in the
"Fund Summaries" section.)
* no conversion to Class A shares.
Because Class C shares do not convert to Class A shares, they will continue to
have higher annual expenses than Class A shares for as long as you hold them.
- --------------------------------------------------------------------------------
12b-1 FEES
Each fund has adopted a plan under rule 12b-1 of the Investment Company Act to
pay the fund's distributor an annual fee for the distribution and sale of its
shares and for services provided to shareholders.
For 12b-1 fees are equal to:
- --------------------------------------------------------------------------------
Class A shares 0.25% of average daily net assets
Class B shares 1% of average daily net assets
Class C shares 1% of average daily net assets
Because these fees are paid out of a fund's assets on an ongoing basis, over
time these fees will increase the cost of your investment and may cost you more
than paying other types of sales charges.
The Class A share 12b-1 fee is a shareholder servicing fee. For Class B and
Class C shares, a portion of the 12b-1 fee equal to 0.25% of average daily net
assets is a shareholder servicing fee and the rest is a distribution fee.
The funds' distributor uses the shareholder servicing fee to compensate
investment professionals, participating institutions and "one-stop" mutual fund
networks for providing ongoing services to shareholder accounts. These
institutions receive annual fees equal to 0.25% of a fund's Class A, Class B,
and Class C share average daily net assets attributable to shares sold through
them. For Class B shares, and for net asset value sales of Class A shares on
which the institution receives a commission, the institution does not begin to
receive its annual fee until one year after the shares are sold. The funds'
distributor also pays institutions that sell Class C shares a 0.75% annual
distribution fee beginning one year after the shares are sold. The distributor
may pay additional fees to institutions, using the sales charges it receives, in
exchange for sales and/or administrative services performed on behalf of the
institution's customers.
10
PROSPECTUS - First American Mid Cap Funds and Small Cap Funds
Class A, Class B, and Class C Shares
<PAGE>
Policies & Services
BUYING SHARES CONTINUED
- --------------------------------------------------------------------------------
CALCULATING YOUR SHARE PRICE
Your purchase price will be based on the fund's net asset value (NAV) per share,
which is generally calculated as of the close of regular trading on the New York
Stock Exchange (usually 3 p.m. Central time) every day the exchange is open.
A fund's NAV is equal to the market value of its investments and other assets,
less any liabilities, divided by the number of fund shares. If market prices are
not readily available for an investment or if the advisor believes they are
unreliable, fair value prices may be determined in good faith using methods
approved by the funds' board of directors.
Class A Shares
Your purchase price is typically the net asset value of your
shares, plus a front-end sales charge. Sales charges vary depending on the
amount of your purchase. The funds' distributor
receives the sales charge you pay and reallows a portion of the
sales charge to your investment professional or participating
institution.
Maximum
Sales Charge Reallowance
as a % of as a % of as a % of
Purchase Net Amount Purchase
Price Invested Price
- --------------------------------------------------------------------------------
Less than $50,000 5.25% 5.54% 5.00%
$ 50,000 - $ 99,999 4.25% 4.44% 4.00%
$100,000 - $249,999 3.25% 3.36% 3.00%
$250,000 - $499,999 2.25% 2.30% 2.00%
$500,000 - $999,999 1.75% 1.78% 1.50%
$1 million and over 0% 0% 0%
Reducing Your Sales Charge
As shown in the preceding tables, larger purchases of Class A shares reduce the
percentage sales charge you pay. You also may reduce your sales charge in the
following ways:
PRIOR PURCHASES. Prior purchases of Class A shares of any First American fund
(except a money market fund) will be factored into your sales charge
calculation. For example, let's say you're making a $10,000 investment. If the
current value of all other First American fund Class A shares that you hold is
$40,000 or more, your current sales charge is reduced. To receive a reduced
sales charge, you must notify the funds' transfer agent of your prior purchases.
This must be done at the time of purchase, either directly to the transfer agent
in writing or by notifying your investment professional or financial
institution.
PURCHASES BY RELATED ACCOUNTS. Concurrent and prior purchases of Class A shares
by certain other accounts also will be combined with your purchase to determine
your sales charge. For example, purchases made by your spouse or children under
age 21 will reduce your sales charge. To receive a reduced sales charge, you
must notify the funds' transfer agent of purchases by any related accounts. This
must be done at the time of purchase, either directly to the transfer agent in
writing or by notifying your investment professional or financial institution.
LETTER OF INTENT. If you plan to invest $50,000 or more over a 13-month period
in Class A shares of any First American fund except the money market funds, you
may reduce your sales charge by signing a non-binding letter of intent. (If you
do not fulfill the letter of intent, you must pay the applicable sales charge.
In addition, if you reduce your sales charge to zero under a letter of intent
and then sell your Class A shares within 18 months of their purchase, you may be
charged a contingent deferred sales charge of 1%. See "For Investments of Over
$1 Million.")
More information on these ways to reduce your sales charge appears in the
Statement of Additional Information (SAI). The SAI also contains information on
investors who are eligible to purchase Class A shares without a sales charge.
- --------------------------------------------------------------------------------
FOR INVESTMENTS OF OVER $1 MILLION
There is no initial sales charge on Class A share purchases of $1 million or
more. However, your investment professional or financial institution may
receive a commission of up to 1% on your purchase. If such a commission is
paid, you will be assessed a contingent deferred sales charge (CDSC) of 1% if
you sell your shares within 18 months. To find out whether you will be
assessed a CDSC, ask your investment professional or financial institution.
The funds' distributor receives any CDSC imposed when you sell your Class A
shares. The CDSC is based on the value of your shares at the time of purchase
or at the time of sale, whichever is less. The charge does not apply to shares
you acquired by reinvesting your dividend or capital gain distributions.
To help lower your costs, shares that are not subject to a CDSC will be sold
first. Other shares will then be sold in an order that minimizes your CDSC.
The CDSC for Class A shares will be waived for:
* redemptions following the death or disability (as defined in the Internal
Revenue Code) of a shareholder, and
* redemptions that equal the minimum required distribution from an individual
retirement account or other retirement plan to a shareholder who has reached
the age of 70 1/2.
Class B Shares
Your purchase price for Class B shares is their net asset value -- there is no
front-end sales charge. However, if you redeem your shares within six years of
purchase, you will pay a back-end sales charge, called a contingent deferred
sales charge (CDSC). Although you pay no front-end sales charge when you buy
Class B shares, the funds' distributor pays a sales commission of 4.25% of the
amount invested to investment professionals and financial institutions which
sell Class B shares. The funds' distributor receives any CDSC imposed when you
sell your Class B shares.
11
PROSPECTUS - First American Mid Cap Funds and Small Cap Funds
Class A, Class B, and Class C Shares
<PAGE>
Policies & Services
BUYING SHARES CONTINUED
Your CDSC will be based on the value of your shares at the time of purchase or
at the time of sale, whichever is less. The charge does not apply to shares you
acquired by reinvesting your dividend or capital gain distributions. Shares will
be sold in the order that minimizes your CDSC.
CDSC as a % of the
Year since purchase value of your shares
- --------------------------------------------------------------------------------
First 5%
Second 5%
Third 4%
Fourth 3%
Fifth 2%
Sixth 1%
Seventh 0%
Eighth 0%
Your Class B shares will automatically convert to Class A shares eight years
after the first day of the month you purchased the shares. For example, if you
purchase Class B shares on June 15, 2000, they will convert to Class A shares on
June 1, 2008.
The CDSC will be waived for:
* redemptions following the death or disability (as defined in the Internal
Revenue Code) of a shareholder.
* redemptions that equal the minimum required distribution from an individual
retirement account or other retirement plan to a shareholder who has reached
the age of 70 1/2.
* redemptions through a systematic withdrawal plan, at a rate of up to 12% a
year of your account's value. During the first year, the 12% annual limit will
be based on the value of your account on the date the plan is established.
Thereafter, it will be based on the value of your account on the preceding
December 31.
Class C Shares
Your purchase price for Class C shares is their net asset value plus a front-end
sales charge equal to 1% of the purchase price (1.01% of the net amount
invested). If you redeem your shares within 18 months of purchase, you will be
assessed a contingent deferred sales charge (CDSC) of 1% of the value of your
shares at the time of purchase or at the time of sale, whichever is less. The
CDSC does not apply to shares you acquired by reinvesting your dividend or
capital gain distributions. Shares will be sold in the order that minimizes your
CDSC.
Even though your sales charge is only 1%, the funds' distributor pays a
commission equal to 2% of your purchase price to your investment professional or
participating institution. The distributor receives any CDSC imposed when you
sell your Class C shares.
The CDSC for Class C shares will be waived in the same circumstances as the
Class B share CDSC. See "Class B Shares" above.
Unlike Class B shares, Class C shares do not convert to Class A shares after a
specified period of time. Therefore, your shares will continue to have higher
annual expenses than Class A shares.
- --------------------------------------------------------------------------------
HOW TO BUY SHARES
You may buy shares on any day the New York Stock Exchange is open. However
purchases of shares may be restricted in the event of an early or unscheduled
close of the New York Stock Exchange. Your shares will be priced at the next NAV
calculated after your order is accepted by the fund, plus any applicable sales
charge. To make sure that your order is accepted, follow the directions for
purchasing shares given below.
By Phone
You may purchase shares by calling your investment professional or financial
institution, if they have a sales agreement with the funds' distributor. In many
cases, your order will be effective that day if received by your investment
professional or financial institution by the close of regular trading on the New
York Stock Exchange. In some cases, however, you will have to transmit your
request by an earlier time in order for your purchase request to be effective
that day. This allows your investment professional or financial institution time
to process your request and transmit it to the fund. Some financial institutions
may charge a fee for helping you purchase shares. Contact your investment
professional or financial institution for more information.
If you are paying by wire, you may purchase shares by calling 1-800-637-2548
before 3 p.m. Central time. All information will be taken over the telephone,
and your order will be placed when the funds' custodian receives payment by
wire. Wire federal funds as follows:
U.S. Bank National Association, Minneapolis, MN
ABA Number 091000022
For Credit to: DST Systems, Inc.:
Account Number 160234580266
For Further Credit to (investor name and fund name)
You cannot purchase shares by wire on days when federally chartered banks are
closed.
By Mail
To purchase shares by mail, simply complete and sign a new account form, enclose
a check made payable to the fund you wish to invest in, and mail both to:
First American Funds
c/o DST Systems, Inc.
P.O. Box 219382
Kansas City, Missouri 64121-9382
After you have established an account, you may continue to purchase shares by
mailing your check to First American Funds at the same address. Please note the
following:
* All purchases must be made in U.S. dollars.
* Third-party checks, credit cards, credit card checks, and cash are not
accepted.
* If a check does not clear your bank, the funds reserve the right to cancel the
purchase, and you could be liable for any losses or fees incurred.
12
PROSPECTUS - First American Mid Cap Funds and Small Cap Funds
Class A, Class B, and Class C Shares
<PAGE>
Policies & Services
BUYING SHARES CONTINUED
- --------------------------------------------------------------------------------
INVESTING AUTOMATICALLY
To purchase shares as part of a savings discipline, you may add to your
investment on a regular basis:
* by having $100 or more ($25 for a retirement plan or an UGMA/UTMA account)
automatically withdrawn from your bank account on a periodic basis and
invested in fund shares.
* through automatic monthly exchanges of your shares of Prime Obligations Fund,
a money market fund in the First American family of funds. Exchanges must be
made into the same class of shares that you hold in Prime Obligations Fund.
You may apply for participation in either of these programs through your
investment professional or financial institution or by calling 1-800-637-2548.
13
PROSPECTUS - First American Mid Cap Funds and Small Cap Funds
Class A, Class B, and Class C Shares
<PAGE>
Policies & Services
SELLING SHARES
- --------------------------------------------------------------------------------
HOW TO SELL SHARES
You may sell your shares on any day when the New York Stock Exchange is open.
However redemption of shares may be restricted in the event of an early or
unscheduled close of the New York Stock Exchange. Your shares will be sold at
the next NAV calculated after your order is accepted by the fund, less any
applicable contingent deferred sales charge. To make sure that your order is
accepted, follow the directions for selling shares given below.
The proceeds from your sale normally will be mailed or wired within one day, but
in no event more than seven days, after your request is received in proper form.
By Phone
If you purchased shares through a investment professional or financial
institution, simply call them to sell your shares. In many cases, your
redemption will be effective that day if received by your investment
professional or financial institution by the close of regular trading on the New
York Stock Exchange. In some cases, however, you will have to call by an earlier
time in order for your redemption to be effective that day. This allows your
investment professional or financial institution time to process your request
and transmit it to the fund. Contact your investment professional or financial
institution directly for more information.
If you did not purchase shares through a investment professional or financial
institution, you may sell your shares by calling 1-800-637-2548. Proceeds can be
wired to your bank account (if the proceeds are at least $1,000 and you have
previously supplied your bank account information to the transfer agent) or sent
to you by check. The funds reserve the right to limit telephone exchanges to
$50,000 per day.
If you recently purchased your shares by check or through the Automated Clearing
House (ACH), proceeds from the sale of those shares may not be available until
your check or ACH payment has cleared, which may take up to 10 calendar days
from the date of purchase.
By Mail
To sell shares by mail, send a written request to your investment professional
or financial institution, or to the funds' transfer agent at the following
address:
First American Funds
c/o DST Systems, Inc.
P.O. Box 219382
Kansas City, Missouri 64121-9382
Your request should include the following information:
* Name of the fund
* Account number
* Dollar amount or number of shares redeemed
* Name on the account
* Signatures of all registered account owners
Signatures on a written request must be guaranteed if:
* you would like the proceeds from the sale to be paid to anyone other than to
the shareholder of record.
* you would like the check mailed to an address other than the address on the
funds' records.
* your redemption request is for $50,000 or more.
A signature guarantee assures that a signature is genuine and protects
shareholders from unauthorized account transfers. Banks, savings and loan
associations, trust companies, credit unions, broker-dealers, and member firms
of a national securities exchange may guarantee signatures. Call your financial
institution to determine if it has this capability.
Proceeds from a written redemption request will be sent to you by check.
- --------------------------------------------------------------------------------
SYSTEMATIC WITHDRAWALS
If your account has a value of $5,000 or more, you may redeem a specific dollar
amount from your account on a regular basis. To set up systematic withdrawals,
contact your investment professional or financial institution.
You should not make systematic withdrawals if you plan to continue investing in
the fund, due to sales charges and tax liabilities.
- --------------------------------------------------------------------------------
REINVESTING AFTER A SALE
If you sell Class A shares, you may reinvest in Class A shares of that fund or
another First American fund within 180 days without a sales charge. To reinvest
in Class A shares at net asset value (without paying a sales charge), you must
notify the transfer agent directly in writing or notify your investment
professional or financial institution.
- --------------------------------------------------------------------------------
ACCOUNTS WITH LOW BALANCES
Except for retirement plans and UGMA/UTMA accounts, if your account balance
falls below $500 as a result of selling or exchanging shares, the fund
reserves the right to either:
* Deduct a $25 annual account maintenance fee, which is intended to allocate
the costs of maintaining accounts more equitably among shareholders, or
* Close your account and send you the proceeds, less any applicable contingent
deferred sales charge.
Before taking any action, however, the fund will send you written notice of
the action it intends to take and give you 30 days to re-establish a minimum
account balance of $500.
14
PROSPECTUS - First American Mid Cap Funds and Small Cap Funds
Class A, Class B, and Class C Shares
<PAGE>
Policies & Services
MANAGING YOUR INVESTMENT
- --------------------------------------------------------------------------------
EXCHANGING SHARES
If your investment goals or your financial needs change, you may move from one
First American fund to another. There is no fee to exchange shares.
Generally, you may exchange your shares only for shares of the same class.
However, you may exchange your Class A shares for Class Y shares of the same or
another First American fund if you subsequently become eligible to participate
in that class (for example, by opening a fiduciary, custody, or agency account
with a financial institution which invests in Class Y shares).
Exchanges are made based on the net asset value per share of each fund at the
time of the exchange. When you exchange your Class A shares of one of the funds
for Class A shares of another First American fund, you do not have to pay a
sales charge. When you exchange your Class B or Class C shares for Class B or
Class C shares of another First American fund, the time you held the shares of
the "old" fund will be added to the time you hold the shares of the "new" fund
for purposes of determining your CDSC or, in the case of Class B shares,
calculating when your shares convert to Class A shares.
Before exchanging into any fund, be sure to read its prospectus carefully. A
fund may change or cancel its exchange policies at any time. You will be
notified of any changes. The funds have the right to limit exchanges to four
times per year.
By Phone
You may exchange shares by calling your investment professional, your financial
institution, or the funds' transfer agent, provided that both funds have
identical shareholder registrations. To request an exchange through the funds'
transfer agent, call 1-800-637-2548. Your instructions must be received by the
funds' transfer agent before 3 p.m. Central time, or by the time specified by
your investment professional or financial institution, in order for shares to be
exchanged the same day.
By Mail
To exchange shares by written request, please follow the procedures under
"Selling Shares." Be sure to include the names of both funds involved in the
exchange.
- --------------------------------------------------------------------------------
TELEPHONE TRANSACTIONS
You may buy, sell, or exchange shares by telephone, unless you elected on your
new account form to restrict this privilege. If you wish to reinstate this
option on an existing account, please call Investor Services at 1-800-637-2548
to request the appropriate form.
The funds and their agents will not be responsible for any losses that may
result from acting on wire or telephone instructions that they reasonably
believe to be genuine. The funds and their agents will each follow reasonable
procedures to confirm that instructions received by telephone are genuine,
which may include taping telephone conversations.
It may be difficult to reach the funds by telephone during periods of unusual
market activity. If you are unable to reach the funds or their agents by
telephone, please consider sending written instructions.
- --------------------------------------------------------------------------------
STAYING INFORMED
Shareholder Reports
Shareholder reports are mailed twice a year, in November and May. They include
financial statements, performance information, a message from your portfolio
managers, and, on an annual basis, the auditors' report.
In an attempt to reduce shareholder costs and help eliminate duplication, the
funds will try to limit their mailings 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 1-800-637-2548.
15
PROSPECTUS - First American Mid Cap Funds and Small Cap Funds
Class A, Class B, and Class C Shares
<PAGE>
Policies & Services
MANAGING YOUR INVESTMENT CONTINUED
- --------------------------------------------------------------------------------
STATEMENTS AND CONFIRMATIONS
Statements summarizing activity in your account are mailed at least quarterly.
Confirmations are mailed following each purchase or sale of fund shares.
Dividends and Distributions
Dividends from Mid Cap Growth Fund and Mid Cap Value Fund net investment income
are declared and paid monthly. Dividends from Small Cap Growth Fund and Small
Cap Value Fund net investment income are declared and paid quarterly. Any
capital gains are distributed at least once each year.
On the ex-dividend date for a distribution, a fund's share price is reduced by
the amount of the distribution. If you buy shares just before the ex-dividend
date, in effect, you "buy the dividend." You will pay the full price for the
shares and then receive a portion of that price back as a taxable distribution.
Dividend and capital gain distributions will be reinvested in additional shares
of the fund paying the distribution, unless you request that distributions be
reinvested in another First American fund or paid in cash. This request may be
made on your new account form or by writing to the fund. If you request that
your distributions be paid in cash but those distributions cannot be delivered
because of an incorrect mailing address, the undelivered distributions and all
future distributions will be reinvested in fund shares.
- --------------------------------------------------------------------------------
TAXES
Some of the tax consequences of investing in the funds are discussed below. More
information about taxes is in the Statement of Additional Information. However,
because everyone's tax situation is unique, always consult your tax professional
about federal, state and local tax consequences.
Taxes on Distributions
Each fund pays its shareholders dividends from its net investment income and any
net capital gains that it has realized. For most investors, fund dividends and
distributions are considered taxable whether they are reinvested or taken in
cash (unless your investment is in an IRA or other tax-advantaged account).
Dividends from a fund's net investment income and short-term capital gains are
taxable as ordinary income. Distributions of a fund's long-term capital gains
are taxable as long-term capital gains, regardless of how long you have held
your shares. The funds expect that, as a result of their investment objectives
and strategies, their distributions will consist primarily of capital gains.
Taxes on Transactions
The sale of fund shares, or the exchange of one fund's shares for shares of
another fund, will be a taxable event and may result in a capital gain or loss.
The gain or loss will be considered long-term if you have held your shares for
more than one year. A gain or loss on shares held for one year or less is
considered short-term and is taxed at the same rates as ordinary income.
The exchange of one class of shares for another class of shares in the same fund
will not be taxable.
16
PROSPECTUS - First American Mid Cap Funds and Small Cap Funds
Class A, Class B, and Class C Shares
<PAGE>
Additional Information
MANAGEMENT
U.S. Bank National Association (U.S. Bank), acting through its First American
Asset Management division, is the funds' investment advisor. First American
Asset Management provides investment management services to individuals and
institutions, including corporations, foundations, pensions and retirement
plans. As of December 31, 1999, it had more than $78 billion in assets under
management, including investment company assets of more than $33 billion. As
investment advisor, First American Asset Management manages the funds' business
and investment activities, subject to the authority of the board of directors.
Each fund pays the investment advisor a monthly fee for providing investment
advisory services. During the fiscal year ended September 30, 1999, the funds
paid the following investment advisory fees to First American Asset Management:
Advisory fee
as a % of
average daily
net assets
- --------------------------------------------------------------------------------
MID CAP GROWTH FUND 0.63%
MID CAP VALUE FUND 0.67%
SMALL CAP GROWTH FUND 0.69%
SMALL CAP VALUE FUND 0.70%
- --------------------------------------------------------------------------------
Investment Advisor
First American Asset Management
601 Second Avenue South
Minneapolis, Minnesota 55402
Distributor
SEI Investments Distribution Co.
Oaks, Pennsylvania 19456
Direct Fund Correspondence to:
First American Funds
P.O. Box 1330
Minneapolis, MN 55440-1330
Additional Compensation
U.S. Bank and other affiliates of U.S. Bancorp may act as fiduciary with
respect to plans subject to the Employee Retirement Income Security Act of 1974
(ERISA) and other trust and agency accounts that invest in the funds. As
described above, U.S. Bank receives compensation for acting as the funds'
investment adviser. U.S. Bank and its affiliates also receive compensation in
connection with the following:
CUSTODY SERVICES. U.S. Bank provides or compensates others to provide custody
services to the funds. U.S. Bank is paid monthly fees equal, on an annual
basis, to 0.03% of a fund's average daily net assets. In addition, U.S. Bank is
reimbursed for its out-of-pocket expenses incurred while providing custody
services to the funds.
ADMINISTRATION SERVICES. U.S. Bank provides or compensates others to provide
administrative services to all open-end funds in the First American family of
funds. These services include general administrative and accounting services,
transfer agency and dividend disbursing services, and shareholder services. U.S.
Bank receives fees equal, on an annual basis, to 0.12% of the aggregate average
daily net assets of all open-end mutual funds in the First American fund family
up to $8 billion and 0.105% of the aggregate average daily net assets of all
open-end mutual funds in the First American fund family in excess of $8 billion.
These fees are allocated among the funds in the First American family of funds
on the basis of their relative net asset values. Additionally, the funds pay
U.S. Bank fees based upon the number of funds and accounts maintained.
SECURITIES LENDING SERVICES. In connection with lending their portfolio
securities, the funds pay administrative and custodial fees to U.S. Bank which
are equal to 40% of the funds' income from these securities lending
transactions.
BROKERAGE TRANSACTIONS. When purchasing and selling portfolio securities for
the funds, the funds' investment advisor may place trades through its
affiliates, U.S. Bancorp Investments, Inc. and U.S. Bancorp Piper Jaffray Inc.,
which will earn commissions on these transactions.
SHAREHOLDER SERVICING FEES. To the extent that fund shares are held through U.S.
Bank or its broker-dealer affiliates, U.S. Bancorp Investments, Inc. and U.S.
Bancorp Piper Jaffray Inc., those entities may receive shareholder servicing
fees from the funds' distributor.
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT
Each fund's investments are managed by a team of persons associated with First
American Asset Management.
17
PROSPECTUS - First American Mid Cap Funds and Small Cap Funds
Class A, Class B, and Class C Shares
<PAGE>
Additional Information
MORE ABOUT THE FUNDS
- --------------------------------------------------------------------------------
OBJECTIVES
The funds' objectives, which are described in the "Fund Summaries" section, may
be changed without shareholder approval. If a fund's objectives change, you will
be notified at least 30 days in advance. Please remember: There is no guarantee
that any fund will achieve its objectives.
- --------------------------------------------------------------------------------
INVESTMENT STRATEGIES
The funds' main investment strategies are discussed in the "Fund Summaries"
section. These are the strategies that the funds' investment advisor believes
are most likely to be important in trying to achieve the funds' objectives. You
should be aware that each fund may also use strategies and invest in securities
that are not described in this prospectus, but that are described in the
Statement of Additional Information (SAI). For a copy of the SAI, call Investor
Services at 1-800-637-2548.
Temporary Investments
In an attempt to respond to adverse market, economic, political, or other
conditions, each fund may temporarily invest without limit in cash and in U.S.
dollar-denominated high-quality money market instruments, and other short-term
securities, including money market funds advised by the funds' advisor. Being
invested in these securities may keep a fund from participating in a market
upswing and prevent the fund from achieving its investment objectives.
Portfolio Turnover
Fund managers may trade securities frequently, resulting, from time to time, in
an annual portfolio turnover rate of over 100%. For the fiscal year ended
September 30, 1999, Mid Cap Value Fund and Small Cap Growth Fund had portfolio
turnover sales in excess of 100%. Trading of securities may produce capital
gains, which are taxable to shareholders when distributed. Active trading may
also increase the amount of commissions or mark-ups to broker-dealers that the
fund pays when it buys and sells securities. The "Financial Highlights" section
of this prospectus shows each fund's historical portfolio turnover rate.
- --------------------------------------------------------------------------------
RISKS
The main risks of investing in the funds are summarized in the "Fund Summaries"
section. More information about fund risks is presented below.
Market Risk
All stocks are subject to price movements due to changes in general economic
conditions, changes in the level of prevailing interest rates, changes in
investor perceptions of the market, or the outlook for overall corporate
profitability.
Sector Risk
The stocks of companies within specific industries or sectors of the economy can
periodically perform differently than the overall stock market. This can be due
to changes in such things as the regulatory or competitive environment or to
changes in investor perceptions of a particular industry or sector.
Company Risk
Individual stocks can perform differently than the overall market. This may be a
result of specific factors such as changes in corporate profitability due to the
success or failure of specific products or management strategies, or it may be
due to changes in investor perceptions regarding a company.
Risks of Small-Cap Stocks
Stocks of small-cap companies involve substantial risk. These companies may lack
the management expertise, financial resources, product diversification and
competitive strengths of larger companies. Prices of small-cap stocks may be
subject to more abrupt or erratic movements than stock prices of larger, more
established companies or the market averages in general. In addition, the
frequency and volume of their trading may be less than is typical of larger
companies, making them subject to wider price fluctuations. In some cases, there
could be difficulties in selling the stocks of small-cap companies at the
desired time and price.
18
PROSPECTUS - First American Mid Cap Funds and Small Cap Funds
Class A, Class B, and Class C Shares
<PAGE>
Additional Information
MORE ABOUT THE FUNDS CONTINUED
Risks of Mid-Cap Stocks
While stocks of mid-cap companies may be slightly less volatile than those of
small-cap companies, they still involve substantial risk. Mid-cap companies may
have limited product lines, markets or financial resources, and they may be
dependent on a limited management group. Stocks of mid-cap companies may be
subject to more abrupt or erratic market movements than those of larger, more
established companies or the market averages in general.
Foreign Security Risk
Up to 25% of each fund's total assets may be invested in securities of foreign
issuers which are either listed on a United States stock exchange or represented
by American Depositary Receipts. Securities of foreign issuers, even when
dollar-denominated and publicly traded in the United States, may involve risks
not associated with the securities of domestic issuers. For certain foreign
countries, political or social instability, or diplomatic developments could
adversely affect the securities. There is also the risk of loss due to
governmental actions such as a change in tax statutes or the modification of
individual property rights. In addition, individual foreign economies may differ
favorably or unfavorably from the U.S. economy.
Risks of Active Management
Each fund is actively managed and its performance therefore will reflect in part
the advisor's ability to make investment decisions which are suited to achieving
the fund's investment objectives. Due to their active management, the funds
could underperform other mutual funds with similar investment objectives.
Risks of Securities Lending
When a fund loans its portfolio securities, it will receive collateral equal to
at least 100% of the value of the loaned securities. Nevertheless, the fund
risks a delay in the recovery of the loaned securities, or even the loss of
rights in the collateral deposited by the borrower if the borrower should fail
financially. To reduce these risks, the funds enter into loan arrangements only
with institutions which the funds' advisor has determined are creditworthy under
guidelines established by the funds' board of directors.
19
PROSPECTUS - First American Mid Cap Funds and Small Cap Funds
Class A, Class B, and Class C Shares
<PAGE>
Additional Information
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The tables that follow present performance information about the Class A, Class
B and Class C shares of each fund. This information is intended to help you
understand each fund's financial performance for the past five years or, if
shorter, the period of the fund's operations. Some of this information reflects
financial results for a single fund share. Total returns in the tables represent
the rate that you would have earned or lost on an investment in a fund,
excluding sales charges and assuming you reinvested all of your dividends and
distributions.
The information for the fiscal year ended September 30, 1999, has been audited
by Ernst & Young LLP, independent auditors, whose report, along with the funds'
financial statements, is included in the funds' annual report, which is
available upon request. The information for the fiscal years ended on or before
September 30, 1998, has been audited by other auditors.
MID CAP GROWTH FUND(1)
<TABLE>
<CAPTION>
Fiscal year ended September 30,
CLASS A SHARES 1999 1998 1997 1996 1995(2)
- ------------------------------------------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value, Beginning of Period $ 11.80 $ 15.25 $ 13.86 $ 12.97 $ 9.63
-------- -------- -------- -------- --------
Investment Operations:
Net Investment Loss (0.07) (0.09) (0.08) (0.05) (0.06)
Net Gains (Losses) on Investments
(both realized and unrealized) 3.40 (1.80) 2.72 2.18 3.40
-------- -------- -------- -------- --------
Total From Investment Operations 3.33 (1.89) 2.64 2.13 3.34
-------- -------- -------- -------- --------
Less Distributions:
Dividends (from Net Investment Income) -- -- -- -- --
Distributions (from Capital Gains) (2.26) (1.56) (1.25) (1.24) --
-------- -------- -------- -------- --------
Total Distributions (2.26) (1.56) (1.25) (1.24) --
-------- -------- -------- -------- --------
Net Asset Value, End of Period $ 12.87 $ 11.80 $ 15.25 $ 13.86 $ 12.97
======== ======== ======== ======== ========
Total Return 31.69% (13.05)% 21.04% 17.84% 34.68%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $165,072 $188,763 $274,799 $303,769 $252,632
Ratio of Expenses to Average Net Assets 1.14% 1.18% 1.23% 1.18% 1.24%
Ratio of Net Loss to Average Net Assets (0.48)% (0.60)% (0.55)% (0.41)% (0.51)%
Ratio of Expenses to Average Net Assets (excluding waivers) 1.19% 1.34% 1.39% 1.37% 1.42%
Ratio of Net Loss to Average Net Assets (excluding waivers) (0.53)% (0.76)% (0.71)% (0.60)% (0.69)%
Portfolio Turnover Rate 94% 39% 51% 44% 33%
- ------------------------------------------------------------- -------- -------- -------- -------- --------
</TABLE>
(1) The financial highlights for Mid Cap Growth Fund include the historical
financial highlights of Piper Emerging Growth Fund Class A and Class B shares.
The assets of Piper Emerging Growth Fund were acquired by Mid Cap Growth Fund
effective August 7, 1998.
(2) Per share amounts have been adjusted to reflect the effect of the stock
dividend declared on December 23, 1995.
20
PROSPECTUS - First American Mid Cap Funds and Small Cap Funds
Class A, Class B, and Class C Shares
<PAGE>
Additional Information
FINANCIAL HIGHLIGHTS CONTINUED
MID CAP GROWTH FUND(1) (CONTINUED)
<TABLE>
<CAPTION>
Period from
Period from Period from February 18, 1997 to
Fiscal year ended August 7, 1998 to October 1, 1997 to September 30,
CLASS B SHARES September 30, 1999 September 30, 1998(2) April 28, 1998(3) 1997(4)
- ------------------------------------------ -------------------- --------------------- -------------------- ---------------------
<S> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value, Beginning of Period $11.78 $13.86 $15.20 $12.54
------ ------ ------ ------
Investment Operations:
Net Investment Loss (0.10) (0.01) (0.09) (0.10)
Net Gains (Losses) on Investments
(both realized and unrealized) 3.33 (2.07) 1.02 2.76
------ ------ ------ ------
Total From Investment Operations 3.23 (2.08) 0.93 2.66
------ ------ ------ ------
Less Distributions:
Dividends (from Net Investment Income) -- -- -- --
Distributions (from Capital Gains) (2.26) -- (1.56) --
------ ------ ------ ------
Total Distributions (2.26) -- (1.56) --
------ ------ ------ ------
Net Asset Value, End of Period $12.75 $11.78 $14.57 $15.20
====== ====== ====== ======
Total Return 30.66% (15.01)% 7.77% 21.21%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $ 360 $ 17 $ -- $1,028
Ratio of Expenses to Average Net Assets 1.89% 1.87%(5) 1.85%(5) 1.85%(5)
Ratio of Net Loss to Average Net Assets (1.26)% (1.12)%(5) (1.33)%(5) (1.16)%(5)
Ratio of Expenses to Average Net Assets
(excluding waivers) 1.98% 1.87%(5) 1.85%(5) 1.85%(5)
Ratio of Net Loss to Average Net Assets
(excluding waivers) (1.35)% (1.12)%(5) (1.33)%(5) (1.16)%(5)
Portfolio Turnover Rate 94% 39% 29% 51%
- ------------------------------------------ ------ ------ ------ ------
</TABLE>
(1) The financial highlights for Mid Cap Growth Fund include the historical
financial highlights of Piper Emerging Growth Fund Class A and Class B shares.
The assets of Piper Emerging Growth Fund were acquired by Mid Cap Growth Fund
effective August 7, 1998.
(2) Class B shares of Mid Cap Growth Fund have been offered since August 7,
1998.
(3) Effective April 28, 1998, all outstanding Class B shares of Piper Emerging
Growth Fund were exchanged for Class A shares of such fund and Class B share
activity was discontinued.
(4) Class B shares of Piper Emerging Growth Fund were offered beginning February
18, 1997.
(5) Annualized.
<TABLE>
<CAPTION>
Period ended
CLASS C SHARES September 30, 1999(1)
- --------------------------------------------------------------- ---------------------
PER SHARE DATA
<S> <C>
Net Asset Value, Beginning of Period $12.43
-------
Investment Operations:
Net Investment Income (0.06)
Net Gains (Losses) on Investments
(both realized and unrealized) 0.43
-------
Total From Investment Operations 0.37
-------
Less Distributions:
Dividends (from Net Investment Income) --
-------
Total Distributions --
-------
Net Asset Value, End of Period $12.80
=======
Total Return 3.06%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $ 466
Ratio of Expenses to Average Net Assets 1.89%(2)
Ratio of Net Income to Average Net Assets 1.27%(2)
Ratios of Expenses to Average Net Assets (excluding waivers) 1.98%(2)
Ratio of Net Income to Average Net Assets (excluding waivers) 1.18%(2)
Portfolio Turnover Rate 94%
- --------------------------------------------------------------- ----------
</TABLE>
(1) Class C shares have been offered since February 1, 1999.
(2) Annualized.
21
PROSPECTUS - First American Mid Cap Funds and Small Cap Funds
Class A, Class B, and Class C Shares
<PAGE>
Additional Information
FINANCIAL HIGHLIGHTS CONTINUED
MID CAP VALUE FUND
<TABLE>
<CAPTION>
Fiscal year ended September 30,
CLASS A SHARES 1999 1998 1997 1996 1995
- --------------------------------------------------------------- ----------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value, Beginning of Period $15.04 $24.19 $20.41 $17.89 $17.30
------ ------ ------ ------ ------
Investment Operations:
Net Investment Income 0.10 0.07 0.11 0.20 0.35
Net Gains (Losses) on Investments
(both realized and unrealized) 1.26 (6.41) 6.98 3.94 1.60
------ ------ ------ ------ ------
Total From Investment Operations 1.36 (6.34) 7.09 4.14 1.95
------ ------ ------ ------ ------
Less Distributions:
Dividends (from Net Investment Income) (0.10) (0.07) (0.11) (0.20) (0.34)
Distributions (from Capital Gains) (3.35) (2.74) (3.20) (1.42) (1.02)
------ ------ ------ ------ ------
Total Distributions (3.45) (2.81) (3.31) (1.62) (1.36)
------ ------ ------ ------ ------
Net Asset Value, End of Period $12.95 $15.04 $24.19 $20.41 $17.89
====== ====== ====== ====== ======
Total Return 8.03% (28.83)% 39.93% 25.23% 12.63%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $20,148 $29,261 $35,207 $17,987 $11,609
Ratio of Expenses to Average Net Assets 1.15% 1.14% 1.14% 1.13% 1.09%
Ratio of Net Income to Average Net Assets 0.63% 0.43% 0.58% 1.06% 2.08%
Ratio of Expenses to Average Net Assets (excluding waivers) 1.18% 1.14% 1.15% 1.13% 1.20%
Ratio of Net Income to Average Net Assets (excluding waivers) 0.60% 0.43% 0.57% 1.06% 1.97%
Portfolio Turnover Rate 121% 135% 82% 143% 72%
- --------------------------------------------------------------- ------ ------ ------ ------ ------
</TABLE>
<TABLE>
<CAPTION>
Fiscal year ended September 30,
CLASS B SHARES 1999 1998 1997 1996 1995
- ------------------------------------------------------------- ------------ ------------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value, Beginning of Period $14.80 $23.96 $20.31 $17.83 $17.29
------ ------ ------ ------ ------
Investment Operations:
Net Investment Income (Loss) 0.04 (0.01) 0.02 0.09 0.29
Net Gains (Losses) on Investments
(both realized and unrealized) 1.22 (6.41) 6.85 3.91 1.51
------ ------ ------ ------ ------
Total From Investment Operations 1.26 (6.42) 6.87 4.00 1.80
------ ------ ------ ------ ------
Less Distributions:
Dividends (from Net Investment Income) (0.04) -- (0.02) (0.10) (0.24)
Distributions (from Capital Gains) (3.35) (2.74) (3.20) (1.42) (1.02)
------ ------ ------ ------ ------
Total Distributions (3.39) (2.74) (3.22) (1.52) (1.26)
------ ------ ------ ------ ------
Net Asset Value, End of Period $12.67 $14.80 $23.96 $20.31 $17.83
====== ====== ====== ====== ======
Total Return 7.38% (29.40)% 38.81% 24.35% 11.64%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $19,072 $31,276 $36,649 $12,847 $4,847
Ratio of Expenses to Average Net Assets 1.90% 1.89% 1.90% 1.88% 1.88%
Ratio of Net Income (Loss) to Average Net Assets (0.13)% (0.31)% (0.18)% 0.25% 1.22%
Ratio of Expenses to Average Net Assets (excluding waivers) 1.93% 1.89% 1.90% 1.88% 1.95%
Ratio of Net Income (Loss) to Average Net Assets (excluding
waivers) (0.16)% (0.31)% (0.18)% 0.25% 1.15%
Portfolio Turnover Rate 121% 135% 82% 143% 72%
- ------------------------------------------------------------- ------ ------ ------ ------ ------
</TABLE>
22
PROSPECTUS - First American Mid Cap Funds and Small Cap Funds
Class A, Class B, and Class C Shares
<PAGE>
Additional Information
FINANCIAL HIGHLIGHTS CONTINUED
MID CAP VALUE FUND (CONTINUED)
<TABLE>
<CAPTION>
Period ended
September 30,
CLASS C SHARES 1999(1)
- --------------------------------------------------------------- --------------
<S> <C>
PER SHARE DATA
Net Asset Value, Beginning of Period $ 13.69
-------
Investment Operations:
Net Investment Income 0.06
Net Gains (Losses) on Investments
(both realized and unrealized) (0.78)
-------
Total From Investment Operations (0.72)
-------
Less Distributions:
Dividends (from Net Investment Income) (0.05)
-------
Total Distributions (0.05)
-------
Net Asset Value, End of Period $ 12.92
=======
Total Return (5.25)%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $ 164
Ratio of Expenses to Average Net Assets 1.90%(2)
Ratio of Net Income to Average Net Assets 0.29%(2)
Ratios of Expenses to Average Net Assets (excluding waivers) 1.93%(2)
Ratio of Net Income to Average Net Assets (excluding waivers) 0.26%(2)
Portfolio Turnover Rate 121%
- --------------------------------------------------------------- -------
</TABLE>
(1) Class C shares have been offered since February 1, 1999.
(2) Annualized.
23
PROSPECTUS - First American Mid Cap Funds and Small Cap Funds
Class A, Class B, and Class C Shares
<PAGE>
Additional Information
FINANCIAL HIGHLIGHTS CONTINUED
SMALL CAP GROWTH FUND
<TABLE>
<CAPTION>
Fiscal year ended September 30,
CLASS A SHARES1 1999 1998 1997(3) 1996(2) 1995
- ----------------------------------------------------- ------------ ------------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value, Beginning of Period $11.90 $17.41 $17.11 $17.68 $15.61
------ ------ ------ ------ ------
Investment Operations:
Net Investment Income (Loss) (0.06) (0.09) (0.16) 0.06 0.09
Net Gains (Losses) on Investments
(both realized and unrealized) 4.95 (2.67) 5.66 0.87 2.07
------ ------ ------ ------ ------
Total From Investment Operations 4.89 (2.76) 5.50 0.93 2.16
------ ------ ------ ------ ------
Less Distributions:
Dividends (from Net Investment Income) -- -- (0.04) (0.07) (0.09)
Distributions (from Capital Gains) (0.02) (2.64) (5.16) (1.43) --
Tax Return of Capital -- (0.11) -- -- --
------ ------ ------ ------ ------
Total Distributions (0.02) (2.75) (5.20) (1.50) (0.09)
------ ------ ------ ------ ------
Net Asset Value, End of Period $16.77 $11.90 $17.41 $17.11 $17.68
====== ====== ====== ====== ======
Total Return 41.11% (18.66)% 45.66% 5.38% 13.88%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $32,203 $28,252 $35,647 $30,968 $48,421
Ratio of Expenses to Average Net Assets 1.14% 1.29% 1.34% 1.32% 1.40%
Ratio of Net Income (Loss) to Average Net Assets (0.39)% (0.61)% (0.75)% 0.20% 0.43%
Ratio of Expenses to Average Net Assets (excluding
waivers) 1.15% 1.43% 1.98% 1.79% 1.63%
Ratio of Net Income (Loss) to Average Net Assets
(excluding waivers) (0.40)% (0.75)% (1.39)% (0.27)% 0.20%
Portfolio Turnover Rate 110% 92% 109% 125% 182%
- ----------------------------------------------------- ------ ------ ------ ------ ------
</TABLE>
See footnotes under Small Cap Growth Fund Class B Shares.
24
PROSPECTUS - First American Mid Cap Funds and Small Cap Funds
Class A, Class B, and Class C Shares
<PAGE>
Additional Information
FINANCIAL HIGHLIGHTS CONTINUED
SMALL CAP GROWTH FUND (CONTINUED)
<TABLE>
<CAPTION>
Period from
Fiscal year Period from Period from February 18, 1997
ended July 31, 1998 to October 1, 1997 to to September 30,
CLASS B SHARES September 30, 1999 September 30, 1998(6) April 28, 1998(5) 1997(4)
- ------------------------------------------- -------------------- --------------------- -------------------- ------------------
<S> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value, Beginning of Period $11.50 $13.74 $ 9.54 $ 7.24
------ ------ ------ ------
Investment Operations:
Net Investment Loss (0.14) (0.02) (0.09) (0.03)
Net Gains (Losses) on Investments
(both realized and unrealized) 4.73 (2.22) 0.42 2.33
------ ------ ------ ------
Total From Investment Operations 4.59 (2.24) 0.33 2.30
------ ------ ------ ------
Less Distributions:
Dividends (from Net Investment Income) -- -- -- --
Distributions (from Capital Gains) (0.02) -- (0.15) --
Tax Return of Capital -- -- (0.01) --
------ ------ ------ ------
Total Distributions (0.02) -- (0.16) --
------ ------ ------ ------
Net Asset Value, End of Period $16.07 $11.50 $ 9.71 $ 9.54
====== ====== ====== ======
Total Return 39.92% (16.30)% 3.61% 31.77%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $2,217 $1,104 $ -- $ 480
Ratio of Expenses to Average Net Assets 1.90% 1.90%(7) 2.03%(7) 1.98%(7)
Ratio of Net Loss to Average Net Assets (1.16)% (1.20)%(7) (1.30)%(7) (1.49)%(7)
Ratio of Expenses to Average Net Assets
(excluding waivers) 1.91% 1.90%(7) 2.40%(7) 2.15%(7)
Ratio of Net Loss to Average Net Assets
(excluding waivers) (1.17)% (1.20)%(7) (1.67)%(7) (1.66)%(7)
Portfolio Turnover Rate 110% 92% 56% 109%
- ------------------------------------------- ------ ------ ------ ------
</TABLE>
(1) Per share amounts for Small Cap Growth Fund Class A have been adjusted to
reflect the conversion ratios utilized for the reorganization of Piper Small
Company Growth Fund and Small Cap Growth Fund that occurred on July 31, 1998.
Piper Small Company Growth Fund is the financial reporting survivor. Therefore,
the financial highlights for Small Cap Growth Fund include the financial
highlights of Piper Small Company Growth Fund prior to July 31, 1998.
(2) On September 12, 1996, shareholders of the fund approved a change in the
fund's investment objective from high total investment return consistent with
prudent investment risk to long-term capital appreciation. In connection with
this change in investment objective, the fund's investment policies were
revised.
(3) Per share amounts have been adjusted to reflect the effect of the stock
dividend declared on October 21, 1996.
(4) Class B shares of Piper Small Company Growth Fund were offered beginning
February 18, 1997.
(5) Effective April 28, 1998, all outstanding Class B shares of Piper Small
Company Growth Fund were exchanged for Class A shares of such fund and Class B
share activity was discontinued.
(6) Class B shares of Small Cap Growth Fund have been offered since July 31,
1998.
(7) Annualized.
25
PROSPECTUS - First American Mid Cap Funds and Small Cap Funds
Class A, Class B, and Class C Shares
<PAGE>
Additional Information
FINANCIAL HIGHLIGHTS CONTINUED
SMALL CAP GROWTH FUND (CONTINUED)
Period ended
September 30,
CLASS C SHARES 1999(1)
- -------------------------------------------------------------- --------------
PER SHARE DATA
Net Asset Value, Beginning of Period $ 15.48
-------
Investment Operations:
Net Investment Income (0.08)
Net Gains (Losses) on Investments
(both realized and unrealized) 1.28
-------
Total From Investment Operations 1.20
-------
Less Distributions:
Dividends (from Net Investment Income) --
-------
Total Distributions --
-------
Net Asset Value, End of Period $ 16.68
=======
Total Return 7.75%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $ 309
Ratio of Expenses to Average Net Assets 1.90%(2)
Ratio of Net Loss to Average Net Assets (1.18)%(2)
Ratios of Expenses to Average Net Assets (excluding waivers) 1.91%(2)
Ratio of Net Loss to Average Net Assets (excluding waivers) (1.19)%(2)
Portfolio Turnover Rate 110%
- -------------------------------------------------------------- -------
(1) Class C shares have been offered since February 1, 1999.
(2) Annualized.
26
PROSPECTUS - First American Mid Cap Funds and Small Cap Funds
Class A, Class B, and Class C Shares
<PAGE>
Additional Information
FINANCIAL HIGHLIGHTS CONTINUED
SMALL CAP VALUE FUND
<TABLE>
<CAPTION>
Fiscal Year Ten months Four months
ended ended ended Fiscal year
September 30, September 30, November 30, ended July 31,
CLASS A SHARES(1) 1999 1998 1997 1997 1996 1995(4)
- -------------------------------------------------- ------------- --------------- -------------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value, Beginning of Period $13.58 $18.20 $17.86 $13.95 $13.23 $10.00
------ ------ ------ ------ ------ ------
Investment Operations:
Net Investment Income (Loss) 0.01 0.04 (0.03) 0.01 0.04 0.09
Net Gains (Losses) on Investments
(both realized and unrealized) 1.47 (3.38) 0.37 5.43 1.83 3.29
------ ------ ------ ------ ------ ------
Total From Investment Operations 1.48 (3.34) 0.34 5.44 1.87 3.38
------ ------ ------ ------ ------ ------
Less Distributions:
Dividends (from Net Investment Income) (0.01) (0.01) -- (0.01) (0.04) (0.10)
Distributions (from Capital Gains) (1.11) (1.27) -- (1.52) (1.11) (0.05)
------ ------ ------ ------ ------ ------
Total Distributions (1.12) (1.28) -- (1.53) (1.15) (0.15)
------ ------ ------ ------ ------ ------
Net Asset Value, End of Period $13.94 $13.58 $18.20 $17.86 $13.95 $13.23
====== ====== ====== ====== ====== ======
Total Return 11.12% (19.48)% 1.90% 41.71% 14.93% 34.29%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $11,567 $13,551 $19,194 $22,429 $10,247 $1,569
Ratio of Expenses to Average Net Assets 1.14% 1.13%(3) 1.37%(3) 1.31% 1.33% 1.11%(3)
Ratio of Net Income (Loss) to Average Net Assets (0.17)% 0.15%(3) (0.38)%(3) 0.01% 0.14% 0.63%(3)
Ratio of Expenses to Average Net Assets (excluding
waivers) 1.14% 1.13%(3) 1.37%(3) 1.31% 1.33% 1.38%(3)
Ratio of Net Income (Loss) to Average Net Assets
(excluding waivers) (0.17)% 0.15%(3) (0.38)%(3) 0.01% 0.14% 0.36%(3)
Portfolio Turnover Rate 44% 21% 3% 29% 34% 37%
- -------------------------------------------------- ------ ------ ------ ------ ------ ------
</TABLE>
<TABLE>
<CAPTION>
Fiscal Year Ended Ten months ended Period ended
September 30, September 30, November 30,
CLASS B SHARES 1999 1998 1997(2)
- ------------------------------------------------------------- ------------------- ------------------ -------------
<S> <C> <C> <C>
PER SHARE DATA
Net Asset Value, Beginning of Period $13.53 $18.23 $18.22
------ ------ ------
Investment Operations:
Net Investment Income 0.02 0.01 --
Net Gains (Losses) on Investments
(both realized and unrealized) 1.33 (3.43) 0.01
------ ------ ------
Total From Investment Operations 1.35 (3.42) 0.01
------ ------ ------
Less Distributions:
Dividends (from Net Investment Income) -- (0.01) --
Distributions (from Capital Gains) (1.11) (1.27) --
------ ------ ------
Total Distributions (1.11) (1.28) --
------ ------ ------
Net Asset Value, End of Period $13.77 $13.53 $18.23
====== ====== ======
Total Return 10.16% (19.91)% 0.05%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $1,005 $ 618 $ 1
Ratio of Expenses to Average Net Assets 1.89% 1.88%(3) 1.90%(3)
Ratio of Net Loss to Average Net Assets (0.93)% (0.53)%(3) (1.53)%(3)
Ratio of Expenses to Average Net Assets (excluding waivers 1.89% 1.88%(3) 1.90%(3)
Ratio of Net Loss to Average Net Assets (excluding waivers) (0.93)% (0.53)%(3) (1.53)%(3)
Portfolio Turnover Rate 44% 21% 3%
- ------------------------------------------------------------- ------ ------ ------
</TABLE>
(1) The financial highlights for Small Cap Value Fund include the historical
financial highlights of the Qualivest Small Companies Value Fund (Class A
shares). The assets of the Qualivest Small Companies Value Fund were acquired by
Small Cap Value Fund on November 21, 1997. In connection with such acquisition,
Class A and Class C shares of the Qualivest Small Companies Value Fund were
exchanged for Class A shares of Small Cap Value Fund.
(2) Class B shares have been offered since November 24, 1997.
(3) Annualized.
(4) Class A shares have been offered since August 1, 1994.
27
PROSPECTUS - First American Mid Cap Funds and Small Cap Funds
Class A, Class B, and Class C Shares
<PAGE>
Additional Information
FINANCIAL HIGHLIGHTS CONTINUED
SMALL CAP VALUE FUND (CONTINUED)
<TABLE>
<CAPTION>
Period ended
September 30,
CLASS C SHARES 1999(1)
- -------------------------------------------------------------- --------------
<S> <C>
PER SHARE DATA
Net Asset Value, Beginning of Period $ 13.48
-------
Investment Operations:
Net Investment Income 0.01
Net Gains (Losses) on Investments
(both realized and unrealized) 0.38
-------
Total From Investment Operations 0.39
-------
Less Distributions:
Dividends (from Net Investment Income) --
-------
Total Distributions --
-------
Net Asset Value, End of Period $ 13.87
=======
Total Return 2.89%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $ 116
Ratio of Expenses to Average Net Assets 1.89%(2)
Ratio of Net Loss to Average Net Assets (1.04)%(2)
Ratios of Expenses to Average Net Assets (excluding waivers) 1.89%(2)
Ratio of Net Loss to Average Net Assets (excluding waivers) (1.04)%(2)
Portfolio Turnover Rate 44%
- -------------------------------------------------------------- -------
</TABLE>
(1) Class C Shares have been offered since February 1, 1999.
(2) Annualized.
28
PROSPECTUS - First American Mid Cap Funds and Small Cap Funds
Class A, Class B, and Class C Shares
<PAGE>
- --------------------------------------------------------------------------------
FOR MORE INFORMATION
More information about the funds is available in the funds' Statement of
Additional Information and annual and semiannual reports.
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI provides more details about the funds and their policies. A current SAI
is on file with the Securities and Exchange Commission (SEC) and is incorporated
into this prospectus by reference (which means that it is legally considered
part of this prospectus).
- --------------------------------------------------------------------------------
ANNUAL AND SEMIANNUAL REPORTS
Additional information about the funds' investments is available in the funds'
annual and semiannual reports to shareholders. In the funds' annual report, you
will find a discussion of the market conditions and investment strategies that
significantly affected the funds' performance during their last fiscal year.
You can obtain a free copy of the funds' SAI and/or free copies of the funds'
most recent annual or semiannual reports by calling Investor Services at
1-800-637-2548. The material you request will be sent by first-class mail or
other means designed to ensure equally prompt delivery, within three business
days of receipt of the request.
You can also obtain copies of this information, after paying a duplicating fee,
by electronic request at the following email address: [email protected], or by
writing the SEC's Public Reference Section, Washington, D.C. 20549-0102. For
more information, call 1-202-942-8090.
Information about the funds is also available on the Internet. Text-only
versions of fund documents can be viewed online or downloaded from the EDGAR
Database on the SEC's Internet site at http://www.sec.gov.
FIRST AMERICAN FUNDS P.O. Box 1330, Minneapolis, MN 55440-1330
First American Asset Management, a division of U.S. Bank National Association,
serves as the investment advisor to the First American Funds.
First American Funds are distributed by SEI Investments Distribution Co. which
is located in Oaks, PA 19456 and is not an affiliate of U.S. Bank.
1/2000 3017-99
SEC file number: 811-05309
FAIF2000R
[LOGO] FIRST AMERICAN FUNDS(R)
THE POWER OF DISCIPLINED INVESTING(R)
<PAGE>
JANUARY 31, 2000
AS SUPPLEMENTED
FEBRUARY 1, 2000
ASSET CLASSES
(*) EQUITY FUNDS
* FUNDS OF FUNDS
* BOND FUNDS
* TAX FREE BOND FUNDS
* MONEY MARKET FUNDS
PROSPECTUS
FIRST AMERICAN INVESTMENT FUNDS, INC.
FIRST AMERICAN
MID CAP AND
SMALL CAP
FUNDS
CLASS Y SHARES
MID CAP GROWTH FUND
MID CAP VALUE FUND
SMALL CAP GROWTH FUND
SMALL CAP VALUE FUND
AS WITH ALL MUTUAL FUNDS, THE SECURITIES AND EXCHANGE COMMISSION HAS NOT
APPROVED OR DISAPPROVED THE SHARES OF THESE FUNDS, OR DETERMINED IF THE
INFORMATION IN THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY STATEMENT TO THE
CONTRARY IS A CRIMINAL OFFENSE.
[LOGO] FIRST AMERICAN FUNDS(R)
THE POWER OF DISCIPLINED INVESTING(R)
<PAGE>
Table of
CONTENTS
FUND SUMMARIES
- --------------------------------------------------------------------------------
Mid Cap Growth Fund 2
- --------------------------------------------------------------------------------
Mid Cap Value Fund 4
- --------------------------------------------------------------------------------
Small Cap Growth Fund 6
- --------------------------------------------------------------------------------
Small Cap Value Fund 8
- --------------------------------------------------------------------------------
POLICIES & SERVICES
- --------------------------------------------------------------------------------
Buying and Selling Shares 10
- --------------------------------------------------------------------------------
Managing Your Investment 11
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
Management 12
- --------------------------------------------------------------------------------
More About The Funds 13
- --------------------------------------------------------------------------------
Financial Highlights 15
- --------------------------------------------------------------------------------
FOR MORE INFORMATION Back Cover
- --------------------------------------------------------------------------------
<PAGE>
Fund Summaries
INTRODUCTION
This section of the prospectus describes the objectives of the First American
Mid Cap and Small Cap Funds, summarizes the main investment strategies used by
each fund in trying to achieve its objectives, and highlights the risks involved
with these strategies. It also provides you with information about the
performance, fees, and expenses of the funds.
AN INVESTMENT IN THE FUNDS IS NOT A DEPOSIT OF U.S. BANK NATIONAL ASSOCIATION
AND IS NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION
OR ANY OTHER GOVERNMENT AGENCY.
1
PROSPECTUS - First American Mid Cap and Small Cap Funds
Class Y Shares
<PAGE>
Fund Summaries
MID CAP GROWTH FUND
- --------------------------------------------------------------------------------
OBJECTIVE
Mid Cap Growth Fund has an objective of growth of capital.
- --------------------------------------------------------------------------------
MAIN INVESTMENT STRATEGIES
Under normal market conditions, Mid Cap Growth Fund invests primarily (at least
75% of total assets) in common stocks of mid capitalization companies, defined
as companies that have market capitalizations at the time of purchase within the
range of market capitalizations of companies constituting the Russell Midcap
Index. This index measures the performance of the 800 smallest companies in the
Russell 1000 Index (which is made up of the 1,000 largest U.S. companies based
on total market capitalization). As of the date of this prospectus, market
capitalizations of companies in the Russell Midcap Index ranged from
approximately $223 million to $37 billion.
The advisor will select companies that it believes exhibit the potential for
superior growth based on factors such as:
* Above average growth in revenue and earnings
* Strong competitive position
* Strong management
* Sound financial condition
Up to 25% of the fund's total assets may be invested in securities of foreign
issuers which are either listed on a United States stock exchange or represented
by American Depositary Receipts.
To generate additional income, the fund may lend securities representing up to
one-third of the value of its total assets to broker-dealers, banks, and other
institutions.
- --------------------------------------------------------------------------------
MAIN RISKS
The value of your investment in this fund will change daily, which means you
could lose money. The main risks of investing in this fund include:
Risks of Common Stocks
Stocks may decline significantly in price over short or extended periods of
time. Price changes may occur in the market as a whole, or they may occur in
only a particular company, industry, or sector of the market. In addition,
growth stocks and/or mid-cap stocks may underperform the market as a whole.
Risks of Mid-Cap Stocks
While stocks of mid-cap companies may be slightly less volatile than those of
small-cap companies, they still involve substantial risk and their prices may be
subject to more abrupt or erratic movements than those of larger, more
established companies or the market averages in general.
Foreign Security Risk
Securities of foreign issuers, even when dollar-denominated and publicly traded
in the United States, may involve risks not associated with the securities of
domestic issuers, including the risks of adverse currency fluctuations and of
political or social instability, or diplomatic developments that could adversely
affect the securities.
Risks of Securities Lending
The fund is subject to the risk that the other party to a securities lending
agreement will default on its obligations.
- --------------------------------------------------------------------------------
FUND PERFORMANCE
Illustrations on the next page provide you with information on the fund's
volatility and performance. Of course, past performance does not guarantee
future results.
The bar chart shows you how performance of the fund's shares has varied from
year to year.
The table compares the fund's performance over different time periods to that of
the fund's benchmark index, which is a broad measure of market performance. The
fund's performance reflects fund expenses; the benchmark is unmanaged and has no
expenses.
Both the chart and the table assume that all distributions have been reinvested.
2
PROSPECTUS - First American Mid Cap and Small Cap Funds
Class Y Shares
<PAGE>
Fund Summaries
MID CAP GROWTH FUND CONTINUED
- --------------------------------------------------------------------------------
FUND PERFORMANCE (CONTINUED)
ANNUAL TOTAL RETURNS AS OF 12/31 EACH YEAR(1)
[BAR CHART]
10.84% 55.02%
- ------------------
1998 1999
Best Quarter: Quarter ending December 31, 1999 47.87%
Worst Quarter: Quarter ending September 30, 1998 (19.31)%
AVERAGE ANNUAL TOTAL RETURNS Inception Since
AS OF 12/31/99(1) Date One Year Inception
- --------------------------------------------------------------------------------
Mid Cap Growth Fund 2/18/97 55.02% 29.01%
- --------------------------------------------------------------------------------
Russell Midcap Index(2) 18.23% 18.59%
- --------------------------------------------------------------------------------
(1) On 8/7/98, the Mid Cap Growth Fund became the successor by merger to the
Piper Emerging Growth Fund, a series of Piper Funds, Inc. Prior to the merger,
the First American Fund had no assets or liabilities. Performance presented
prior to 8/7/98 represents that of the Piper Emerging Growth Fund.
(2) An unmanaged index comprised of the 800 smallest securities in the Russell
1000 Index, which represent approximately 35% of the total market
capitalization. The since inception performance of the index is calculated from
2/28/97.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
As an investor, you pay fees and expenses to buy and hold shares of the fund.
You pay shareholder fees directly when you buy or sell shares. You pay annual
fund operating expenses indirectly since they are deducted from fund assets. The
figures below show fund expenses during the fiscal year ended September 30,
1999.(1)
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
- --------------------------------------------------------------------------------
MAXIMUM SALES CHARGE (LOAD) None
MAXIMUM DEFERRED SALES CHARGE (LOAD) None
ANNUAL FUND OPERATING EXPENSES AS A % OF AVERAGE NET ASSETS
- --------------------------------------------------------------------------------
Management Fees 0.70%
Distribution and Service (12b-1) Fees None
Other Expenses 0.26%
TOTAL 0.96%
- --------------------------------------------------------------------------------
(1) The net expenses the fund actually paid after waivers for the fiscal year
ended September 30, 1999, were:
Waiver of Fund Expenses (0.07)%
TOTAL ACTUAL ANNUAL OPERATING EXPENSES (AFTER WAIVERS) 0.89%
THE ADVISOR INTENDS TO WAIVE FEES DURING THE CURRENT FISCAL YEAR SO THAT TOTAL
FUND OPERATING EXPENSES DO NOT EXCEED 0.90%. FEE WAIVERS MAY BE DISCONTINUED AT
ANY TIME.
- --------------------------------------------------------------------------------
EXAMPLE This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes that you
invest $10,000 for the time periods indicated, that your investment has a 5%
return each year, and that the fund's operating expenses remain the same.
Although your actual costs and returns may differ, based on these assumptions
your costs would be:
- --------------------------------------------------------------------------------
1 year $ 98
3 years $ 306
5 years $ 531
10 years $1,178
3
PROSPECTUS - First American Mid Cap and Small Cap Funds
Class Y Shares
<PAGE>
Fund Summaries
MID CAP VALUE FUND
- --------------------------------------------------------------------------------
OBJECTIVE
Mid Cap Value Fund has an objective of capital appreciation.
- --------------------------------------------------------------------------------
MAIN INVESTMENT STRATEGIES
Under normal market conditions, Mid Cap Value Fund invests primarily (at least
75% of total assets) in common stocks of mid-capitalization companies, defined
as companies that have market capitalizations at the time of purchase within the
range of market capitalizations of companies constituting the Russell Midcap
Index. This index measures the performance of the 800 smallest companies in the
Russell 1000 Index (which is made up of the 1,000 largest U.S. companies based
on total market capitalization). As of the date of this prospectus, market
capitalizations of companies in the Russell Midcap Index ranged from
approximately $223 million to $37 billion.
In selecting stocks, the fund's advisor invests in securities it believes:
* are undervalued relative to other securities in the same industry or market.
* exhibit good or improving fundamentals.
* exhibit an identifiable catalyst that could close the gap between market value
and fair value over the next one to two years.
To generate additional income, the fund may lend securities representing up to
one-third of the value of its total assets to broker-dealers, banks, and other
institutions.
- --------------------------------------------------------------------------------
MAIN RISKS
The value of your investment in this fund will change daily, which means you
could lose money. The main risks of investing in this fund include:
Risks of Common Stocks
Stocks may decline significantly in price over short or extended periods of
time. Price changes may occur in the market as a whole, or they may occur in
only a particular company, industry or sector of the market. In addition, value
stocks and/or mid-cap stocks may underperform the market as a whole.
Risks of Mid-Cap Stocks
While stocks of mid-cap companies may be slightly less volatile than those of
small-cap companies, they still involve substantial risk and their prices may be
subject to more abrupt or erratic movements than those of larger, more
established companies or the market averages in general.
Risks of Securities Lending
The fund is subject to the risk that the other party to a securities lending
agreement will default on its obligations.
- --------------------------------------------------------------------------------
FUND PERFORMANCE
Illustrations on the next page provide you with information on the fund's
volatility and performance. Of course, past performance does not guarantee
future results.
The bar chart shows you how performance of the fund's shares has varied from
year to year.
The table compares the fund's performance over different time periods to that of
the fund's benchmark index, which is a broad measure of market performance. The
fund's performance reflects fund expenses; the benchmark is unmanaged and has no
expenses.
Both the chart and the table assume that all distributions have been reinvested.
4
PROSPECTUS - First American Mid Cap and Small Cap Funds
Class Y Shares
<PAGE>
Fund Summaries
MID CAP VALUE FUND CONTINUED
- --------------------------------------------------------------------------------
FUND PERFORMANCE (CONTINUED)
ANNUAL TOTAL RETURNS AS OF 12/31 EACH YEAR
[BAR CHART]
20.30% 32.34% 24.53% -12.96% -6.00%
- ------------------------------------------------
1995 1996 1997 1998 1999
Best Quarter: Quarter ending June 30, 1997 17.97%
Worst Quarter: Quarter ending September 30, 1998 (30.80)%
AVERAGE ANNUAL TOTAL RETURNS Inception Since
AS OF 12/31/99 Date One Year Five Years Inception
- --------------------------------------------------------------------------------
Mid Cap Value Fund 2/4/94 (6.00)% 10.16% 9.01%
- --------------------------------------------------------------------------------
Russell Midcap Index(1) 18.23% 21.86% 17.76%
- --------------------------------------------------------------------------------
(1) An unmanaged index comprised of the 800 smallest securities in the Russell
1000 Index, which represent approximately 35% of the total market capitalization
of investable U.S. equity markets. The since inception performance of the index
is calculated from 2/28/94.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
As an investor, you pay fees and expenses to buy and hold shares of the fund.
You pay shareholder fees directly when you buy or sell shares. You pay annual
fund operating expenses indirectly since they are deducted from fund assets. The
figures below show fund expenses during the fiscal year ended September 30,
1999.(1)
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
- --------------------------------------------------------------------------------
MAXIMUM SALES CHARGE (LOAD) None
MAXIMUM DEFERRED SALES CHARGE (LOAD) None
ANNUAL FUND OPERATING EXPENSES AS A % OF AVERAGE NET ASSETS
- --------------------------------------------------------------------------------
Management Fees 0.70%
Distribution and Service (12b-1) Fees None
Other Expenses 0.23%
TOTAL 0.93%
- --------------------------------------------------------------------------------
(1) The net expenses the fund actually paid after waivers for the fiscal year
ended September 30, 1999, were:
Waiver of Fund Expenses (0.03)%
TOTAL ACTUAL ANNUAL OPERATING EXPENSES (AFTER WAIVERS) 0.90%
THE ADVISOR INTENDS TO WAIVE FEES DURING THE CURRENT FISCAL YEAR SO THAT TOTAL
FUND OPERATING EXPENSES DO NOT EXCEED 0.90%. FEE WAIVERS MAY BE DISCONTINUED AT
ANY TIME.
- --------------------------------------------------------------------------------
EXAMPLE This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes that you
invest $10,000 for the time periods indicated, that your investment has a 5%
return each year, and that the fund's operating expenses remain the same.
Although your actual costs and returns may differ, based on these assumptions
your costs would be:
- --------------------------------------------------------------------------------
1 year $ 95
3 years $ 296
5 years $ 515
10 years $1,143
5
PROSPECTUS - First American Mid Cap and Small Cap Funds
Class Y Shares
<PAGE>
Fund Summaries
SMALL CAP GROWTH FUND
- --------------------------------------------------------------------------------
OBJECTIVE
Small Cap Growth Fund has an objective of growth of capital.
- --------------------------------------------------------------------------------
MAIN INVESTMENT STRATEGIES
Under normal market conditions, Small Cap Growth Fund invests primarily (at
least 75% of total assets) in common stocks of small capitalization companies,
defined as companies that have market capitalizations at the time of purchase
within the range of market capitalizations of companies constituting the Russell
2000 Index. This index measures the performance of the 2,000 smallest companies
in the Russell 3000 Index (which is made up of the 3,000 largest U.S. companies
based on total market capitalization). As of the date of this prospectus, market
capitalizations of companies in the Russell 2000 Index ranged from approximately
$11 million to $13 billion.
The advisor will select companies that it believes exhibit the potential for
superior growth based on factors such as:
* Above average growth in revenue and earnings
* Strong competitive position
* Strong management
* Sound financial condition
Up to 25% of the fund's total assets may be invested in securities of foreign
issuers which are either listed on a United States stock exchange or represented
by American Depositary Receipts.
To generate additional income, the fund may lend securities representing up to
one-third of the value of its total assets to broker-dealers, banks, and other
institutions.
- --------------------------------------------------------------------------------
MAIN RISKS
The value of your investment in this fund will change daily, which means you
could lose money. The main risks of investing in this fund include:
Risks of Common Stocks
Stocks may decline significantly in price over short or extended periods of
time. Price changes may occur in the market as a whole, or they may occur in
only a particular company, industry or sector of the market. In addition, growth
stocks and/or stocks of small-capitalization companies may underperform the
market as a whole.
Risks of Small-Cap Stocks
Stocks of small-capitalization companies involve substantial risk. These stocks
historically have experienced greater price volatility than stocks of
larger-capitalization companies, and they may be expected to do so in the
future.
Foreign Security Risk
Securities of foreign issuers, even when dollar-denominated and publicly traded
in the United States, may involve risks not associated with the securities of
domestic issuers, including the risks of adverse currency fluctuations and of
political or social instability, or diplomatic developments that could adversely
affect the securities.
Risks of Securities Lending
The fund is subject to the risk that the other party to a securities lending
agreement will default on its obligations.
- --------------------------------------------------------------------------------
FUND PERFORMANCE
Illustrations on the next page provide you with information on the fund's
volatility and performance. Of course, past performance does not guarantee
future results.
The bar chart is intended to show you how performance of the fund's shares has
varied from year to year. However, because Class Y shares were first offered in
1998, only one calendar year of information is available.
The table compares the fund's performance over different time periods to that of
the fund's benchmark index, which is a broad measure of market performance. The
fund's performance reflects fund expenses; the benchmark is unmanaged and has no
expenses.
Both the chart and the table assume that all distributions have been reinvested.
6
PROSPECTUS - First American Mid Cap and Small Cap Funds
Class Y Shares
<PAGE>
Fund Summaries
SMALL CAP GROWTH FUND CONTINUED
- --------------------------------------------------------------------------------
FUND PERFORMANCE (CONTINUED)
ANNUAL TOTAL RETURNS AS OF 12/31 EACH YEAR
[BAR CHART]
67.21%
- ---------
1999
Best Quarter: Quarter ending December 31, 1999 51.50%
Worst Quarter: Quarter ending September 30, 1998 (22.14)%
AVERAGE ANNUAL TOTAL RETURNS Inception Since
AS OF 12/31/99 Date One Year Inception
- --------------------------------------------------------------------------------
Small Cap Growth Fund 7/31/98 67.21% 51.08%
- --------------------------------------------------------------------------------
Russell 2000 Index(1) 21.26% 15.43%
- --------------------------------------------------------------------------------
(1) An unmanaged index comprised of the smallest 2000 companies in the Russell
3000 Index. The latter index is composed of 3000 large U.S. companies
representing approximately 98% of the investable U.S. equity market. The since
inception performance for the index is calculated from 7/31/98.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
As an investor, you pay fees and expenses to buy and hold shares of the fund.
You pay shareholder fees directly when you buy or sell shares. You pay annual
fund operating expenses indirectly since they are deducted from fund assets. The
figures below show fund expenses during the fiscal year ended September 30,
1999.(1)
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
- --------------------------------------------------------------------------------
MAXIMUM SALES CHARGE (LOAD) None
MAXIMUM DEFERRED SALES CHARGE (LOAD) None
ANNUAL FUND OPERATING EXPENSES AS A % OF AVERAGE NET ASSETS
- --------------------------------------------------------------------------------
Management Fees 0.70%
Distribution and Service (12b-1) Fees None
Other Expenses 0.21%
TOTAL 0.91%
- --------------------------------------------------------------------------------
(1) The net expenses the fund actually paid after waivers for the fiscal year
ended September 30, 1999, were:
Waiver of Fund Expenses (0.01)%
TOTAL ACTUAL ANNUAL OPERATING EXPENSES (AFTER WAIVERS) 0.90%
THE ADVISOR INTENDS TO WAIVE FEES DURING THE CURRENT FISCAL YEAR SO THAT TOTAL
FUND OPERATING EXPENSES DO NOT EXCEED 0.90%. FEE WAIVERS MAY BE DISCONTINUED AT
ANY TIME.
- --------------------------------------------------------------------------------
EXAMPLE This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes that you
invest $10,000 for the time periods indicated, that your investment has a 5%
return each year, and that the fund's operating expenses remain the same.
Although your actual costs and returns may differ, based on these assumptions
your costs would be:
- --------------------------------------------------------------------------------
1 year $ 93
3 years $ 290
5 years $ 504
10 years $1,120
7
PROSPECTUS - First American Mid Cap and Small Cap Funds
Class Y Shares
<PAGE>
Fund Summaries
SMALL CAP VALUE FUND
- --------------------------------------------------------------------------------
OBJECTIVE
Small Cap Value Fund has an objective of capital appreciation.
- --------------------------------------------------------------------------------
MAIN INVESTMENT STRATEGIES
Under normal market conditions, Small Cap Value Fund invests primarily (at least
75% of total assets) in common stocks of small capitalization companies, defined
as companies that have market capitalizations at the time of purchase within the
range of market capitalizations of companies constituting the Russell 2000
Index. This index measures the performance of the 2,000 smallest companies in
the Russell 3000 Index (which is made up of the 3,000 largest U.S. companies
based on total market capitalization). As of the date of this prospectus, market
capitalizations of companies in the Russell 2000 Index ranged from approximately
$11 million to $13 billion.
In selecting stocks, the fund's advisor invests in securities it believes:
* are undervalued relative to other securities in the same industry or market.
* exhibit good or improving fundamentals.
* exhibit an identifiable catalyst that could close the gap between market value
and fair value over the next one to two years.
To generate additional income, the fund may lend securities representing up to
one-third of the value of its total assets to broker-dealers, banks, and other
institutions.
- --------------------------------------------------------------------------------
MAIN RISKS
The value of your investment in this fund will change daily, which means you
could lose money. The main risks of investing in this fund include:
Risks of Common Stocks
Stocks may decline significantly in price over short or extended periods of
time. Price changes may occur in the market as a whole, or they may occur in
only a particular company, industry or sector of the market. In addition, value
stocks and/or stocks of small-capitalization companies may underperform the
market as a whole.
Risks of Small-Cap Stocks
Stocks of small-capitalization companies involve substantial risk. These stocks
historically have experienced greater price volatility than stocks of
larger-capitalization companies, and they may be expected to do so in the
future.
Risks of Securities Lending
The fund is subject to the risk that the other party to a securities lending
agreement will default on its obligations.
- --------------------------------------------------------------------------------
FUND PERFORMANCE
Illustrations on the next page provide you with information on the fund's
volatility and performance. Of course, past performance does not guarantee
future results.
The bar chart shows you how performance of the fund's shares has varied from
year to year.
The table compares the fund's performance over different time periods to that of
the fund's benchmark index, which is a broad measure of market performance. The
fund's performance reflects fund expenses; the benchmark is unmanaged and has no
expenses.
Both the chart and the table assume that all distributions have been reinvested.
8
PROSPECTUS - First American Mid Cap and Small Cap Funds
Class Y Shares
<PAGE>
Fund Summaries
SMALL CAP VALUE FUND CONTINUED
- --------------------------------------------------------------------------------
FUND PERFORMANCE (CONTINUED)
ANNUAL TOTAL RETURNS AS OF 12/31 EACH YEAR(1)
[BAR CHART]
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -13.26% 61.17% 26.81% 22.80% 0.01% 47.33% 20.36% 20.37% -8.26% 6.24%
- -------------------------------------------------------------------------------------------
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
</TABLE>
Best Quarter: Quarter ending March 31, 1991 33.25%
Worst Quarter: Quarter ending September 30, 1998 (23.17)%
AVERAGE ANNUAL TOTAL RETURNS Inception Ten
AS OF 12/31/99(1) Date One Year Five Years Years
- --------------------------------------------------------------------------------
Small Cap Value Fund 1/1/88 6.24% 15.78% 16.31%
- --------------------------------------------------------------------------------
Russell 2000 Index(2) 21.26% 16.69% 13.40%
- --------------------------------------------------------------------------------
(1) Performance prior to 8/1/94 is that of Small Company Value Trust Fund, a
predecessor collective trust fund. On 8/1/94, substantially all of the assets of
Small Company Value Trust Fund were transferred into Qualivest Small Companies
Value Fund, a mutual fund registered under the Investment Company Act of 1940.
On 11/21/97, First American Small Cap Value Fund became the successor by merger
to Qualivest Small Companies Value Fund. The objectives, policies, and
guidelines of the predecessor funds were, in all material respects, identical to
those of Small Cap Value Fund. Performance is adjusted to reflect Small Cap
Value Fund's Class A share fees and expenses, before any fee waivers. Small
Company Value Trust Fund was not registered under the Investment Company Act of
1940 and therefore was not subject to certain investment restrictions that might
have adversely affected performance.
(2) An unmanaged index comprised of the smallest 2000 companies in the Russell
3000 Index. The latter index is composed of 3000 large U.S. companies
representing approximately 98% of the investable U.S. equity market. The since
inception performance for the index is calculated from 8/31/94.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
As an investor, you pay fees and expenses to buy and hold shares of the fund.
You pay shareholder fees directly when you buy or sell shares. You pay annual
fund operating expenses indirectly since they are deducted from fund assets. The
figures below show fund expenses during the fiscal year ended September 30,
1999.(1)
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
- --------------------------------------------------------------------------------
MAXIMUM SALES CHARGE (LOAD) None
MAXIMUM DEFERRED SALES CHARGE (LOAD) None
ANNUAL FUND OPERATING EXPENSES AS A % OF AVERAGE NET ASSETS
- --------------------------------------------------------------------------------
Management Fees 0.70%
Distribution and Service (12b-1) Fees None
Other Expenses 0.19%
TOTAL 0.89%
- --------------------------------------------------------------------------------
(1) The net expenses the fund actually paid after waivers for the fiscal year
ended September 30, 1999, were:
Waiver of Fund Expenses 0.00%
TOTAL ACTUAL ANNUAL OPERATING EXPENSES (AFTER WAIVERS) 0.89%
THE ADVISOR INTENDS TO WAIVE FEES DURING THE CURRENT FISCAL YEAR SO THAT TOTAL
FUND OPERATING EXPENSES DO NOT EXCEED 0.90%. FEE WAIVERS MAY BE DISCONTINUED AT
ANY TIME.
- --------------------------------------------------------------------------------
EXAMPLE This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes that you
invest $10,000 for the time periods indicated, that your investment has a 5%
return each year, and that the fund's operating expenses remain the same.
Although your actual costs and returns may differ, based on these assumptions
your costs would be:
- --------------------------------------------------------------------------------
1 year $ 91
3 years $ 284
5 years $ 493
10 years $1,096
9
PROSPECTUS - First American Mid Cap and Small Cap Funds
Class Y Shares
<PAGE>
Policies & Services
BUYING AND SELLING SHARES
Class Y shares are offered through banks and other financial institutions that
have entered into sales agreements with the funds' distributor and that hold the
shares in an omnibus account with the transfer agent. Class Y shares are
available to certain accounts for which the financial institution acts in a
fiduciary, agency or custodial capacity, such as certain trust accounts and
investment advisory accounts. To find out whether you may purchase Class Y
shares, contact your financial institution.
There is no initial or deferred sales charge on your purchase of Class Y shares.
However, your investment professional or financial institution may receive a
commission of up to 1.25% on your purchase.
- --------------------------------------------------------------------------------
CALCULATING YOUR SHARE PRICE
Your purchase price will be equal to the fund's net asset value (NAV) per share,
which is generally calculated as of the close of regular trading on the New York
Stock Exchange (usually 3 p.m. Central time) every day the exchange is open.
A fund's NAV is equal to the market value of its investments and other assets,
less any liabilities, divided by the number of fund shares. If market prices are
not readily available for an investment or if the advisor believes they are
unreliable, fair value prices may be determined in good faith using methods
approved by the funds' board of directors.
- --------------------------------------------------------------------------------
HOW TO BUY AND SELL SHARES
You may purchase or sell shares by calling your financial institution.
When purchasing shares, payment must be made by wire transfer, which can be
arranged by your financial institution. Because purchases must be paid for by
wire transfer, you can purchase shares only on days when both the New York Stock
Exchange and federally chartered banks are open. You may sell your shares on any
day when the New York Stock Exchange is open.
Purchase orders and redemption requests must be received by your financial
institution by the time specified by the institution to be assured same day
processing. In order for shares to be purchased at that day's price, the funds
must receive your purchase order by 3:00 p.m. Central time and the funds'
custodian must receive federal funds before the close of business. In order for
shares to be sold at that day's price, the funds must receive your redemption
request by 3:00 p.m. Central time. It is the responsibility of your financial
institution to promptly transmit orders to the funds. Purchase orders and
redemption requests may be restricted in the event of an early or unscheduled
close of the New York Stock Exchange.
If the funds receive your redemption request by 3:00 p.m. Central time, payment
of your redemption proceeds will ordinarily be made by wire on the next business
day. It is possible, however, that payment could be delayed by up to seven days.
- --------------------------------------------------------------------------------
HOW TO EXCHANGE SHARES
If your investment goals or your financial needs change, you may exchange your
shares for Class Y shares of another First American fund. Exchanges will be made
at the net asset value per share of each fund at the time of the exchange. There
is no fee to exchange shares. If you are no longer eligible to hold Class Y
shares, for example, if you decide to discontinue your fiduciary, agency, or
custodian account, you may exchange your shares for Class A shares at net asset
value. Class A shares have higher expenses than Class Y shares.
To exchange your shares, call your financial institution. In order for your
shares to be exchanged the same day, you must call your financial institution by
the time specified by the institution and your exchange order must be received
by the funds by 3:00 p.m. Central time. It is the responsibility of your
financial institution to promptly transmit your exchange order to the funds.
Before exchanging into any fund, be sure to read its prospectus carefully. A
fund may change or cancel its exchange policies at any time. You will be
notified of any changes. The funds have the right to limit exchanges to four
times per year.
10
PROSPECTUS - First American Mid Cap and Small Cap Funds
Class Y Shares
<PAGE>
Policies & Services
MANAGING YOUR INVESTMENT
- --------------------------------------------------------------------------------
STAYING INFORMED
Shareholder Reports
Shareholder reports are mailed twice a year, in November and May. They include
financial statements, performance information, a message from your portfolio
managers, and, on an annual basis, the auditors' report.
In an attempt to reduce shareholder costs and help eliminate duplication, the
funds will try to limit their mailings 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 1-800-637-2548.
Statements and Confirmations
Statements summarizing activity in your account are mailed at least quarterly.
Confirmations are mailed following each purchase or sale of fund shares.
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS
Dividends from Mid Cap Growth Fund and Mid Cap Value Fund net investment income
are declared and paid monthly. Dividends from Small Cap Growth Fund and Small
Cap Value Fund net investment income are declared and paid quarterly. Any
capital gains are distributed at least once each year.
On the ex-dividend date for a distribution, a fund's share price is reduced by
the amount of the distribution. If you buy shares just before the ex-dividend
date, in effect, you "buy the dividend." You will pay the full price for the
shares and then receive a portion of that price back as a taxable distribution.
Dividend and capital gain distributions will be reinvested in additional shares
of the fund paying the distribution, unless you request that distributions be
reinvested in another First American fund or paid in cash. This request may be
made on your new account form or by writing to the fund. If you request that
your distributions be paid in cash but those distributions cannot be delivered
because of an incorrect mailing address, the undelivered distributions and all
future distributions will be reinvested in fund shares.
- --------------------------------------------------------------------------------
TAXES
Some of the tax consequences of investing in the funds are discussed below. More
information about taxes is in the Statement of Additional Information. However,
because everyone's tax situation is unique, always consult your tax professional
about federal, state and local tax consequences.
Taxes on Distributions
Each fund pays its shareholders dividends from its net investment income and any
net capital gains that it has realized. For most investors, fund dividends and
distributions are considered taxable whether they are reinvested or taken in
cash (unless your investment is in an IRA or other tax-advantaged account).
Dividends from a fund's net investment income and short-term capital gains are
taxable as ordinary income. Distributions of a fund's long-term capital gains
are taxable as long-term gains, regardless of how long you have held your
shares. The funds expect that, as a result of their investment objectives and
strategies, their distributions will consist primarily of capital gains.
Taxes on Transactions
The sale of fund shares, or the exchange of one fund's shares for shares of
another fund, will be a taxable event and may result in a capital gain or loss.
The gain or loss will be considered long-term if you have held your shares for
more than one year. A gain or loss on shares held for one year or less is
considered short-term and is taxed at the same rates as ordinary income.
The exchange of one class of shares for another class of shares in the same fund
will not be taxable.
11
PROSPECTUS - First American Mid Cap and Small Cap Funds
Class Y Shares
<PAGE>
Additional Information
MANAGEMENT
U.S. Bank National Association (U.S. Bank), acting through its First American
Asset Management division, is the funds' investment advisor. First American
Asset Management provides investment management services to individuals and
institutions, including corporations, foundations, pensions and retirement
plans. As of December 31, 1999, it had more than $78 billion in assets under
management, including investment company assets of more than $33 billion. As
investment advisor, First American Asset Management manages the funds' business
and investment activities, subject to the authority of the board of directors.
Each fund pays the investment advisor a monthly fee for providing investment
advisory services. During the fiscal year ended September 30, 1999, the funds
paid the following investment advisory fees to First American Asset Management:
Advisory fee
as a % of
average daily
net assets
- --------------------------------------------------------------------------------
MID CAP GROWTH FUND 0.63%
MID CAP VALUE FUND 0.67%
SMALL CAP GROWTH FUND 0.69%
SMALL CAP VALUE FUND 0.70%
- --------------------------------------------------------------------------------
Investment Advisor
First American Asset Management
601 Second Avenue South
Minneapolis, Minnesota 55402
Distributor
SEI Investments Distribution Co.
Oaks, Pennsylvania 19456
Direct Fund Correspondence to:
First American Funds
P.O. Box 1330
Minneapolis, MN 55440-1330
Additional Compensation
U.S. Bank and other affiliates of U.S. Bancorp may act as fiduciary with
respect to plans subject to the Employee Retirement Income Security Act of 1974
(ERISA) and other trust and agency accounts that invest in the funds. As
described above, U.S. Bank receives compensation for acting as the funds'
investment advisor. U.S. Bank and its affiliates also receive compensation in
connection with the following:
CUSTODY SERVICES. U.S. Bank provides or compensates others to provide custody
services to the funds. U.S. Bank is paid monthly fees equal, on an annual
basis, to 0.03% of a fund's average daily net assets. In addition, U.S. Bank is
reimbursed for its out-of-pocket expenses incurred while providing custody
services to the funds.
ADMINISTRATION SERVICES. U.S. Bank provides or compensates others to provide
administrative services to all open-end funds in the First American family of
funds. These services include general administrative and accounting services,
transfer agency and dividend disbursing services, and shareholder services. U.S.
Bank receives total fees equal, on an annual basis, to 0.12% of the aggregate
average daily net assets of all open-end mutual funds in the First American fund
family up to $8 billion and 0.105% of the aggregate average daily net assets of
all open-end mutual funds in the First American fund family in excess of $8
billion. These fees are allocated among the funds in the First American family
of funds on the basis of their relative net asset values. Additionally, the
funds pay U.S. Bank fees based upon the number of funds and accounts maintained.
SECURITIES LENDING SERVICES. In connection with lending their portfolio
securities, the funds pay administrative and custodial fees to U.S. Bank which
are equal to 40% of the funds' income from these securities lending
transactions.
BROKERAGE TRANSACTIONS. When purchasing and selling portfolio securities for
the funds, the funds' investment advisor may place trades through its
affiliates, U.S. Bancorp Investments, Inc. and U.S. Bancorp Piper Jaffray Inc.,
which will earn commissions on these transactions.
SHAREHOLDER SERVICING FEES. To the extent that fund shares are held through U.S.
Bank or its broker-dealer affiliates, U.S. Bancorp Investments, Inc. and U.S.
Bancorp Piper Jaffray Inc., those entities may receive shareholder servicing
fees from the funds' distributor.
Portfolio Management
Each fund's investments are managed by a team of persons associated with First
American Asset Management.
12
PROSPECTUS - First American Mid Cap and Small Cap Funds
Class Y Shares
<PAGE>
Additional Information
MORE ABOUT THE FUNDS
- --------------------------------------------------------------------------------
OBJECTIVES
The funds' objectives, which are described in the "Fund Summaries" section, may
be changed without shareholder approval. If a fund's objectives change, you will
be notified at least 30 days in advance. Please remember: There is no guarantee
that any fund will achieve its objectives.
- --------------------------------------------------------------------------------
INVESTMENT STRATEGIES
The funds' main investment strategies are discussed in the "Fund Summaries"
section. These are the strategies that the funds' investment advisor believes
are most likely to be important in trying to achieve the funds' objectives. You
should be aware that each fund may also use strategies and invest in securities
that are not described in this prospectus, but that are described in the
Statement of Additional Information (SAI). For a copy of the SAI, call Investor
Services at 1-800-637-2548.
Temporary Investments
In an attempt to respond to adverse market, economic, political, or other
conditions, each fund may temporarily invest without limit in cash and in U.S.
dollar-denominated high-quality money market instruments, and other short-term
securities, including money market funds advised by the funds' advisor. Being
invested in these securities may keep a fund from participating in a market
upswing and prevent the fund from achieving its investment objectives.
Portfolio Turnover
Fund managers may trade securities frequently, resulting, from time to time, in
an annual portfolio turnover rate of over 100%. For the fiscal year ended
September 30, 1999, Mid Cap Value Fund and Small Cap Growth Fund had portfolio
turnover rates in excess of 100%. Trading of securities may produce capital
gains, which are taxable to shareholders when distributed. Active trading may
also increase the amount of commissions or mark-ups to broker-dealers that the
fund pays when it buys and sells securities. The "Financial Highlights" section
of this prospectus shows each fund's historical portfolio turnover rate.
- --------------------------------------------------------------------------------
RISKS
The main risks of investing in the funds are summarized in the "Fund Summaries"
section. More information about fund risks is presented below.
Market Risk
All stocks are subject to price movements due to changes in general economic
conditions, changes in the level of prevailing interest rates, changes in
investor perceptions of the market, or the outlook for overall corporate
profitability.
Sector Risk
The stocks of companies within specific industries or sectors of the economy can
periodically perform differently than the overall stock market. This can be due
to changes in such things as the regulatory or competitive environment or to
changes in investor perceptions of a particular industry or sector.
Company Risk
Individual stocks can perform differently than the overall market. This may be a
result of specific factors such as changes in corporate profitability due to the
success or failure of specific products or management strategies, or it may be
due to changes in investor perceptions regarding a company.
Risks of Small-Cap Stocks
Stocks of small-cap companies involve substantial risk. These companies may lack
the management expertise, financial resources, product diversification and
competitive strengths of larger companies. Prices of small-cap stocks may be
subject to more abrupt or erratic movements than stock prices of larger, more
established companies or the market averages in general. In addition, the
frequency and volume of their trading may be less than is typical of larger
companies, making them subject to wider price fluctuations. In some cases, there
could be difficulties in selling the stocks of small-cap companies at the
desired time and price.
13
PROSPECTUS - First American Mid Cap and Small Cap Funds
Class Y Shares
<PAGE>
Additional Information
MORE ABOUT THE FUNDS CONTINUED
Risks of Mid-Cap Stocks
While stocks of mid-cap companies may be slightly less volatile than those of
small-cap companies, they still involve substantial risk. Mid-cap companies may
have limited product lines, markets or financial resources, and they may be
dependent on a limited management group. Stocks of mid-cap companies may be
subject to more abrupt or erratic market movements than those of larger, more
established companies or the market averages in general.
Foreign Security Risk
Up to 25% of each fund's total assets may be invested in securities of foreign
issuers which are either listed on a United States stock exchange or represented
by American Depositary Receipts. Securities of foreign issuers, even when
dollar-denominated and publicly traded in the United States, may involve risks
not associated with the securities of domestic issuers. For certain foreign
countries, political or social instability, or diplomatic developments could
adversely affect the securities. There is also the risk of loss due to
governmental actions such as a change in tax statutes or the modification of
individual property rights. In addition, individual foreign economies may differ
favorably or unfavorably from the U.S. economy.
Risks of Active Management
Each fund is actively managed and its performance therefore will reflect in part
the advisor's ability to make investment decisions which are suited to achieving
the fund's investment objectives. Due to their active management, the funds
could underperform other mutual funds with similar investment objectives.
Risks of Securities Lending
When a fund loans its portfolio securities, it will receive collateral equal to
at least 100% of the value of the loaned securities. Nevertheless, the fund
risks a delay in the recovery of the loaned securities, or even the loss of
rights in the collateral deposited by the borrower if the borrower should fail
financially. To reduce these risks, the funds enter into loan arrangements only
with institutions which the funds' advisor has determined are creditworthy under
guidelines established by the funds' board of directors.
14
PROSPECTUS - First American Mid Cap and Small Cap Funds
Class Y Shares
<PAGE>
Additional Information
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The tables that follow present performance information about the Class Y shares
of each fund. This information is intended to help you understand each fund's
financial performance for the past five years or, if shorter, the period of the
fund's Class Y share operations. Some of this information reflects financial
results for a single fund share. Total returns in the tables represent the rate
that you would have earned or lost on an investment in a fund, assuming you
reinvested all of your dividends and distributions.
The information for the fiscal year ended September 30, 1999, has been audited
by Ernst & Young LLP, independent auditors, whose report, along with the funds'
financial statements, is included in the funds' annual report, which is
available upon request. The information for the fiscal years ended on or before
September 30, 1998, has been audited by other auditors.
MID CAP GROWTH FUND(1)
<TABLE>
<CAPTION>
Fiscal year ended Fiscal year ended Fiscal year ended
September 30, September 30, September 30,
1999 1998 1997(2)
- ------------------------------------------------------------- ----------------- ----------------- -----------------
<S> <C> <C> <C>
PER SHARE DATA
Net Asset Value, Beginning of Period $ 11.87 $ 15.29 $ 12.54
------- ------- -------
Investment Operations:
Net Investment Loss (0.03) (0.04) (0.01)
Net Gains (Losses) on Investments
(both realized and unrealized) 3.41 (1.82) 2.76
------- ------- -------
Total From Investment Operations 3.38 (1.86) 2.75
------- ------- -------
Less Distributions:
Dividends (from Net Investment Income) -- -- --
Distributions (from Capital Gains) (2.26) (1.56) --
------- ------- -------
Total Distributions (2.26) (1.56) --
------- ------- -------
Net Asset Value, End of Period $ 12.99 $ 11.87 $ 15.29
======= ======= =======
Total Return 31.97% (12.79)% 21.93%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $211,527 $73,356 $59,393
Ratio of Expenses to Average Net Assets 0.89% 0.87% 0.87%(3)
Ratio of Net Loss to Average Net Assets (0.25)% (0.27)% (0.16)%(3)
Ratio of Expenses to Average Net Assets (excluding waivers) 0.96% 0.87% 0.87%(3)
Ratio of Net Loss to Average Net Assets (excluding waivers) (0.32)% (0.27)% (0.16)%(3)
Portfolio Turnover Rate 94% 39% 51%
- ------------------------------------------------------------- ------- ------- -------
</TABLE>
(1) The financial highlights for Mid Cap Growth Fund include the historical
financial highlights of Piper Emerging Growth Fund Class Y shares. The assets of
Piper Emerging Growth Fund were acquired by Mid Cap Growth Fund effective August
7, 1998.
(2) Class Y shares of Piper Emerging Growth Fund were offered beginning February
18, 1997.
(3) Annualized.
15
PROSPECTUS - First American Mid Cap and Small Cap Funds
Class Y Shares
<PAGE>
Additional Information
FINANCIAL HIGHLIGHTS CONTINUED
MID CAP VALUE FUND
<TABLE>
<CAPTION>
Fiscal year ended September 30,
1999 1998 1997 1996 1995
- --------------------------------------------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value, Beginning of Period $ 15.05 $ 24.21 $ 20.43 $ 17.89 $ 17.30
-------- -------- -------- -------- --------
Investment Operations:
Net Investment Income 0.12 0.14 0.16 0.25 0.38
Net Gains (Losses) on Investments
(both realized and unrealized) 1.30 (6.43) 6.98 3.95 1.61
-------- -------- -------- -------- --------
Total From Investment Operations 1.42 (6.29) 7.14 4.20 1.99
-------- -------- -------- -------- --------
Less Distributions:
Dividends (from Net Investment Income) (0.13) (0.13) (0.16) (0.24) (0.38)
Distributions (from Capital Gains) (3.35) (2.74) (3.20) (1.42) (1.02)
-------- -------- -------- -------- --------
Total Distributions (3.48) (2.87) (3.36) (1.66) (1.40)
-------- -------- -------- -------- --------
Net Asset Value, End of Period $ 12.99 $ 15.05 $ 24.21 $ 20.43 $ 17.89
======== ======== ======== ======== ========
Total Return 8.47% (28.65)% 40.25% 25.61% 12.84%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $304,492 $418,041 $509,308 $247,828 $201,786
Ratio of Expenses to Average Net Assets 0.90% 0.89% 0.89% 0.88% 0.88%
Ratio of Net Income to Average Net Assets 0.89% 0.69% 0.82% 1.35% 2.30%
Ratio of Expenses to Average Net Assets (excluding waivers) 0.93% 0.89% 0.90% 0.88% 0.95%
Ratio of Net Income to Average Net Assets (excluding waivers) 0.86% 0.69% 0.81% 1.35% 2.23%
Portfolio Turnover Rate 121% 135% 82% 143% 72%
- --------------------------------------------------------------- -------- -------- -------- -------- --------
</TABLE>
SMALL CAP GROWTH FUND
<TABLE>
<CAPTION>
Fiscal year ended Fiscal year ended
September 30, 1999 September 30, 1998(1)
- ------------------------------------------------------------- ------------------ ---------------------
<S> <C> <C>
PER SHARE DATA
Net Asset Value, Beginning of Period $ 11.98 $ 14.29
-------- --------
Investment Operations:
Net Investment Income (0.02) --
Net Gains (Losses) on Investments
(both realized and unrealized) 4.98 (2.31)
-------- --------
Total From Investment Operations 4.96 (2.31)
-------- --------
Less Distributions:
Dividends (from Net Investment Income) -- --
Distributions (from Capital Gains) (0.02) --
-------- --------
Total Distributions (0.02) --
-------- --------
Net Asset Value, End of Period $ 16.92 $ 11.98
======== ========
Total Return 41.42% (16.17)%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $248,679 $113,874
Ratio of Expenses to Average Net Assets 0.90% 0.90%(2)
Ratio of Net Loss to Average Net Assets (0.16)% (0.20)%(2)
Ratio of Expenses to Average Net Assets (excluding waivers) 0.91% 0.90%(2)
Ratio of Net Loss to Average Net Assets (excluding waivers) (0.17)% (0.20)%(2)
Portfolio Turnover Rate 110% 92%
- ------------------------------------------------------------- -------- --------
</TABLE>
(1) Class Y shares have been offered since July 31, 1998.
(2) Annualized.
16
PROSPECTUS - First American Mid Cap and Small Cap Funds
Class Y Shares
<PAGE>
Additional Information
FINANCIAL HIGHLIGHTS CONTINUED
SMALL CAP VALUE FUND(1)
<TABLE>
<CAPTION>
Fiscal Year Ten months Four Months
Ended ended ended
September 30, September 30, November 30, Fiscal year ended July 31,
1999 1998 1997 1997 1996 1995(3)
- ------------------------------------------------ ------------- ------------- ------------ ------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value, Beginning of Period $ 13.60 $ 18.23 $ 17.87 $ 13.96 $ 13.26 $ 10.00
-------- -------- -------- -------- -------- --------
Investment Operations:
Net Investment Income (Loss) 0.01 0.06 (0.01) 0.04 0.06 0.13
Net Gains (Losses) on Investments
(both realized and unrealized) 1.50 (3.38) 0.37 5.43 1.81 3.30
-------- -------- -------- -------- -------- --------
Total From Investment Operations 1.51 (3.32) 0.36 5.47 1.87 3.43
-------- -------- -------- -------- -------- --------
Less Distributions:
Dividends (from Net Investment Income) (0.02) (0.04) -- (0.04) (0.06) (0.12)
Distributions (from Capital Gains) (1.11) (1.27) -- (1.52) (1.11) (0.05)
-------- -------- -------- -------- -------- --------
Total Distributions (1.13) (1.31) -- (1.56) (1.17) (0.17)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period 13.98 $ 13.60 $ 18.23 $ 17.87 $ 13.96 $ 13.26
======== ======== ======== ======== ======== ========
Total Return 11.36 (19.31)% 2.01% 41.96% 14.94% 34.76%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $319,752 $367,035 $461,046 $449,988 $297,793 $209,626
Ratio of Expenses to Average Net Assets 0.89% 0.88%(2) 1.06%(2) 1.06% 1.08% 0.60%(2)
Ratio of Net Income (Loss) to Average Net Assets 0.08% 0.40%(2) (0.06)%(2) 0.25% 0.41% 1.20%(2)
Ratio of Expenses to Average Net Assets
(excluding waivers) 0.89% 0.88%(2) 1.06%(2) 1.06% 1.08% 1.17%(2)
Ratio of Net Income (Loss) to Average Net Assets
(excluding waivers) 0.08% 0.40%(2) (0.06)%(2) 0.25% 0.41% 0.63%(2)
Portfolio Turnover Rate 44% 21% 3% 29% 34% 37%
- ------------------------------------------------- -------- -------- -------- -------- -------- --------
</TABLE>
(1) The financial highlights for Small Cap Value Fund include the historical
financial highlights of the Qualivest Small Companies Value Fund (Class Y
shares). The assets of the Qualivest Small Companies Value Fund were acquired by
Small Cap Value Fund on November 21, 1997. In connection with such acquisition,
Class Y shares of the Qualivest Small Companies Value Fund were exchanged for
Class Y shares of Small Cap Value Fund.
(2) Annualized.
(3) Class Y shares have been offered since August 1, 1994.
17
PROSPECTUS - First American Mid Cap and Small Cap Funds
Class Y Shares
<PAGE>
- --------------------------------------------------------------------------------
FOR MORE INFORMATION
More information about the funds is available in the funds' Statement of
Additional Information and annual and semiannual reports.
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI provides more details about the funds and their policies. A current SAI
is on file with the Securities and Exchange Commission (SEC) and is incorporated
into this prospectus by reference (which means that it is legally considered
part of this prospectus).
- --------------------------------------------------------------------------------
ANNUAL AND SEMIANNUAL REPORTS
Additional information about the funds' investments is available in the funds'
annual and semiannual reports to shareholders. In the funds' annual report, you
will find a discussion of the market conditions and investment strategies that
significantly affected the funds' performance during their last fiscal year.
You can obtain a free copy of the funds' SAI and/or free copies of the funds'
most recent annual or semiannual reports by calling Investor Services at
1-800-637-2548. The material you request will be sent by first-class mail or
other means designed to ensure equally prompt delivery, within three business
days of receipt of the request.
You can also obtain copies of this information, after paying a duplicating fee,
by electronic request at the following email address: [email protected], or by
writing the SEC's Public Reference Section, Washington, D.C. 20549-0102. For
more information, call 1-202-942-8090.
Information about the funds is also available on the Internet. Text-only
versions of fund documents can be viewed online or downloaded from the EDGAR
Database on the SEC's Internet site at http://www.sec.gov.
FIRST AMERICAN FUNDS P.O. Box 1330, Minneapolis, MN 55440-1330
First American Asset Management, a division of U.S. Bank National Association,
serves as the investment advisor to the First American Funds.
First American Funds are distributed by SEI Investments Distribution Co. which
is located in Oaks, PA 19456 and is not an affiliate of U.S. Bank.
1/2000 3017-99
SEC file number: 811-05309
FAIF2200Y
[LOGO] FIRST AMERICAN FUNDS(R)
THE POWER OF DISCIPLINED INVESTING(R)
<PAGE>
JANUARY 31, 2000
AS SUPPLEMENTED
FEBRUARY 1, 2000
ASSET CLASSES
* EQUITY FUNDS
* FUNDS OF FUNDS
* BOND FUNDS
(*) TAX FREE BOND FUNDS
* MONEY MARKET FUNDS
PROSPECTUS
FIRST AMERICAN INVESTMENT FUNDS, INC.
FIRST AMERICAN
INTERMEDIATE
TAX FREE
FUNDS
CLASS A SHARES
CALIFORNIA INTERMEDIATE TAX FREE FUND
COLORADO INTERMEDIATE TAX FREE FUND
INTERMEDIATE TAX FREE FUND
MINNESOTA INTERMEDIATE TAX FREE FUND
OREGON INTERMEDIATE TAX FREE FUND
AS WITH ALL MUTUAL FUNDS, THE SECURITIES AND EXCHANGE COMMISSION HAS NOT
APPROVED OR DISAPPROVED THE SHARES OF THESE FUNDS, OR DETERMINED IF THE
INFORMATION IN THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY STATEMENT TO THE
CONTRARY IS A CRIMINAL OFFENSE.
[LOGO] FIRST AMERICAN FUNDS(R)
THE POWER OF DISCIPLINED INVESTING(R)
<PAGE>
Table of
CONTENTS
FUND SUMMARIES
- --------------------------------------------------------------------------------
California Intermediate Tax Free Fund 2
- --------------------------------------------------------------------------------
Colorado Intermediate Tax Free Fund 5
- --------------------------------------------------------------------------------
Intermediate Tax Free Fund 8
- --------------------------------------------------------------------------------
Minnesota Intermediate Tax Free Fund 10
- --------------------------------------------------------------------------------
Oregon Intermediate Tax Free Fund 13
- --------------------------------------------------------------------------------
POLICIES & SERVICES
- --------------------------------------------------------------------------------
Buying Shares 16
- --------------------------------------------------------------------------------
Selling Shares 18
- --------------------------------------------------------------------------------
Managing Your Investment 19
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
Management 21
- --------------------------------------------------------------------------------
More About The Funds 22
- --------------------------------------------------------------------------------
Financial Highlights 24
- --------------------------------------------------------------------------------
FOR MORE INFORMATION Back Cover
- --------------------------------------------------------------------------------
<PAGE>
Fund Summaries
INTRODUCTION
This section of the prospectus describes the objectives of the First American
Intermediate Tax Free Bond Funds, summarizes the main investment strategies used
by each fund in trying to achieve its objectives, and highlights the risks
involved with these strategies. It also provides you with information about the
performance, fees, and expenses of the funds.
AN INVESTMENT IN THE FUNDS IS NOT A DEPOSIT OF U.S. BANK NATIONAL ASSOCIATION
AND IS NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION
OR ANY OTHER GOVERNMENT AGENCY.
1
PROSPECTUS - First American Intermediate Tax Free Bond Funds
Class A Shares
<PAGE>
Fund Summaries
CALIFORNIA INTERMEDIATE TAX FREE FUND
- --------------------------------------------------------------------------------
OBJECTIVE
California Intermediate Tax Free Fund has an objective of providing current
income that is exempt from both federal income tax and California state income
tax to the extent consistent with preservation of capital.
- --------------------------------------------------------------------------------
MAIN INVESTMENT STRATEGIES
Under normal market conditions, California Intermediate Tax Free Fund invests at
least 80% of its total assets in municipal securities that pay interest that is
exempt from federal and California income tax, including the federal alternative
minimum tax. The fund normally may invest up to 20% of its net assets in taxable
obligations, including obligations the interest on which is subject to the
federal alternative minimum tax. The fund may invest in:
* "general obligation" bonds, which are backed by the full faith, credit and
taxing power of the issuer.
* "revenue" bonds, which are payable only from the revenues generated by a
specific project or from another specific revenue source.
* participation interests in municipal leases.
* zero coupon municipal securities, which pay no cash income to their holders
until they mature.
* inverse floating rate municipal securities (up to 10% of the fund's total
assets).
In selecting securities for the fund, fund managers first determine their
economic outlook and the direction in which inflation and interest rates are
expected to move. In selecting individual securities consistent with this
outlook, fund managers evaluate factors such as credit quality, yield, maturity,
liquidity, and portfolio diversification.
The fund only invests in securities that, at the time of purchase, are either
rated investment grade or are unrated and determined to be of comparable quality
by the fund's advisor. If the rating of a security is reduced or discontinued
after purchase, the fund is not required to sell the security, but may consider
doing so. Unrated securities will not exceed 25% of the fund's total assets (not
including unrated securities that have been pre-refunded with U.S. Government
securities and U.S. Government agency securities).
The fund will attempt to maintain the weighted average maturity of its portfolio
securities at three to 10 years under normal market conditions.
- --------------------------------------------------------------------------------
MAIN RISKS
The price and yield of this fund will change daily due to changes in interest
rates and other factors, which means you could lose money. The main risks of
investing in this fund include:
Interest Rate Risk
Debt securities typically decrease in value when interest rates rise. This risk
is usually greater for longer-term debt securities. Inverse floating rate
municipal securities may be highly volatile as interest rates rise or fall. For
additional explanation about inverse floating rate securities, see the "More
About The Funds -- Risks" section.
Income Risk
The fund's income could decline due to falling market interest rates.
Credit Risk
An issuer of debt securities may not make timely principal or interest payments
on its securities. The revenue bonds and municipal lease obligations in which
the fund invests may entail greater credit risk than the fund's investments in
general obligation bonds.
Call Risk
Some municipal securities held by the fund may be redeemed by the issuer, or
"called," prior to their stated maturity dates. If a security is redeemed during
a time of declining interest rates, the fund may be unable to reinvest in
securities providing as high a level of income.
Risks of Municipal Lease Obligations
Many municipal leases and contracts contain "non- appropriation" clauses that
provide that the governmental issuer has no obligation to make future payments
under the lease or contract unless money is appropriated for this purpose by the
appropriate legislative body.
Political and Economic Risk
Because the fund invests primarily in municipal securities issued by the state
of California and its political subdivisions, the fund will be particularly
affected by political and economic conditions and developments in that state.
See the Statement of Additional Information for details. The value of municipal
securities owned by the fund also may be adversely affected by future changes in
federal or state income tax laws, including rate reductions or the imposition of
a flat tax.
Risks of Non-Diversification
The fund is non-diversified. This means that it may invest a larger portion of
its assets in a limited number of issuers than a diversified fund. Because a
relatively high percentage of the fund's assets may be invested in the
securities of a limited number of issuers, the fund may be more susceptible to
any single economic, political, or regulatory occurrence than a diversified
fund.
2
PROSPECTUS - First American Intermediate Tax Free Bond Funds
Class A Shares
<PAGE>
Fund Summaries
CALIFORNIA INTERMEDIATE TAX FREE FUND CONTINUED
- --------------------------------------------------------------------------------
FUND PERFORMANCE
Illustrations on the next page provide you with information on the fund's
volatility and performance. Of course, past performance does not guarantee
future results.
The bar chart shows you how performance of the fund's shares has varied from
year to year. Sales charges are not reflected in the chart; if they had been,
returns would be lower.
The table compares the fund's performance over different time periods to that of
the fund's benchmark index, which is a broad measure of market performance. The
fund's performance reflects sales charges and fund expenses; the benchmark is
unmanaged and has no expenses.
Both the chart and the table assume that all distributions have been reinvested.
3
PROSPECTUS - First American Intermediate Tax Free Bond Funds
Class A Shares
<PAGE>
Fund Summaries
CALIFORNIA INTERMEDIATE TAX FREE FUND CONTINUED
- --------------------------------------------------------------------------------
FUND PERFORMANCE (CONTINUED)
ANNUAL TOTAL RETURNS AS OF 12/31 EACH YEAR(1)
[BAR CHART]
5.82% -0.90%
- ----------------
1998 1999
Best Quarter: Quarter ending September 30, 1998 3.77%
Worst Quarter: Quarter ending June 30, 1999 (1.86)%
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS Inception Since
AS OF 12/31/99 Date One Year Inception
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
California Intermediate Tax Free Fund 8/8/97 (3.36)% 2.11%
- ------------------------------------------------------------------------------------
Lehman Brothers 7-Year Municipal Bond Index(2) (0.14)% 3.98%
- ------------------------------------------------------------------------------------
</TABLE>
(1) The fund has previously presented the performance history of an unregistered
predecessor common trust fund for periods prior to the fund's registration under
the Investment Company Act of 1940 on 8/8/97. The fund has determined that,
going forward, it will present performance information only for periods
subsequent to the fund's registration.
(2) An unmanaged index comprised of fixed rate, investment grade tax-exempt
bonds with maturities between six and eight years. The since inception
performance for the index is calculated from 8/31/97.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
As an investor, you pay fees and expenses to buy and hold shares of the fund.
You pay shareholder fees directly when you buy or sell shares. You pay annual
fund operating expenses indirectly since they are deducted from fund assets. The
figures below show fund expenses during the fiscal year ended September 30,
1999.(1)
- ------------------------------------------------------------- ------------
SHAREHOLDER FEES CLASS A
- ------------------------------------------------------------- ------------
MAXIMUM SALES CHARGE (LOAD)
AS A % OF OFFERING PRICE 2.50%(2)
ANNUAL MAINTENANCE FEE(3)
ONLY CHARGED TO ACCOUNTS WITH BALANCES BELOW $500 $ 25
ANNUAL FUND OPERATING EXPENSES AS A % OF AVERAGE NET ASSETS
- ------------------------------------------------------------- ------------
Management Fees 0.70%
Distribution and Service (12b-1) Fees 0.25%
Other Expenses 0.22%
TOTAL 1.17%
- ------------------------------------------------------------- ------------
(1) Actual expenses for the fiscal year were lower than those shown in the table
because of voluntary fee waivers by the advisor and the distributor. See
"Additional Information -- Financial Highlights." The net expenses the fund
actually paid after waivers for the fiscal year ended September 30, 1999, were:
Waiver of Fund Expenses (0.47)%
TOTAL ACTUAL ANNUAL OPERATING EXPENSES (AFTER WAIVERS) 0.70%
THE DISTRIBUTOR INTENDS TO WAIVE PAYMENT OF ALL 12b-1 FEES DURING THE CURRENT
FISCAL YEAR. IN ADDITION, THE ADVISOR INTENDS TO WAIVE FEES DURING THE CURRENT
FISCAL YEAR SO THAT TOTAL FUND OPERATING EXPENSES DO NOT EXCEED 0.70%. FEE
WAIVERS MAY BE DISCONTINUED AT ANY TIME.
(2) Certain investors may qualify for reduced sales charges. Investments of $1
million or more on which no front-end sales charge is paid may be subject to a
contingent deferred sales charge. See "Buying Shares -- Calculating Your Share
Price."
(3) The fund reserves the right to charge your account an annual maintenance fee
of $25 if your balance falls below $500 as a result of selling or exchanging
shares. See "Policies & Services -- Selling Shares, Accounts with Low Balances."
- --------------------------------------------------------------------------------
EXAMPLE This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes that you
invest $10,000 for the time periods indicated, that your investment has a 5%
return each year, and that the fund's operating expenses remain the same.
Although your actual costs and returns may differ, based on these assumptions
your costs would be:
1 year $ 366
3 years $ 612
5 years $ 878
10 years $1,635
4
PROSPECTUS - First American Intermediate Tax Free Bond Funds
Class A Shares
<PAGE>
Fund Summaries
COLORADO INTERMEDIATE TAX FREE FUND
- --------------------------------------------------------------------------------
OBJECTIVE
Colorado Intermediate Tax Free Fund has an objective of providing current income
that is exempt from both federal income tax and Colorado state income tax to the
extent consistent with preservation of capital.
- --------------------------------------------------------------------------------
MAIN INVESTMENT STRATEGIES
Under normal market conditions, Colorado Intermediate Tax Free Fund invests at
least 80% of its total assets in municipal securities that pay interest that is
exempt from federal and Colorado income tax, including the federal alternative
minimum tax. The fund normally may invest up to 20% of its net assets in taxable
obligations, including obligations the interest on which is subject to the
federal alternative minimum tax. The fund may invest in:
* "general obligation" bonds, which are backed by the full faith, credit and
taxing power of the issuer.
* "revenue" bonds, which are payable only from the revenues generated by a
specific project or from another specific revenue source.
* participation interests in municipal leases.
* zero coupon municipal securities, which pay no cash income to their holders
until they mature.
* inverse floating rate municipal securities (up to 10% of the fund's total
assets).
In selecting securities for the fund, fund managers first determine their
economic outlook and the direction in which inflation and interest rates are
expected to move. In selecting individual securities consistent with this
outlook, fund managers evaluate factors such as credit quality, yield, maturity,
liquidity, and portfolio diversification.
The fund only invests in securities that, at the time of purchase, are either
rated investment grade or are unrated and determined to be of comparable quality
by the fund's advisor. If the rating of a security is reduced or discontinued
after purchase, the fund is not required to sell the security, but may consider
doing so. Unrated securities will not exceed 25% of the fund's total assets (not
including unrated securities that have been pre-refunded with U.S. Government
securities and U.S. Government agency securities).
The fund will attempt to maintain the weighted average maturity of its portfolio
securities at three to 10 years under normal market conditions.
- --------------------------------------------------------------------------------
MAIN RISKS
The price and yield of this fund will change daily due to changes in interest
rates and other factors, which means you could lose money. The main risks of
investing in this fund include:
Interest Rate Risk
Debt securities typically decrease in value when interest rates rise. This risk
is usually greater for longer-term debt securities. Inverse floating rate
securities may be highly volatile as interest rates rise or fall. For additional
explanation about inverse floating rate securities, see the "More About The
Funds -- Risks" section.
Income Risk
The fund's income could decline due to falling market interest rates.
Credit Risk
An issuer of debt securities may not make timely principal or interest payments
on its securities. The revenue bonds and municipal lease obligations in which
the fund invests may entail greater credit risk than the fund's investments in
general obligation bonds.
Call Risk
Some municipal securities held by the fund may be redeemed by the issuer, or
"called," prior to their stated maturity dates. If a security is redeemed during
a time of declining interest rates, the fund may be unable to reinvest in
securities providing as high a level of income.
Risks of Municipal Lease Obligations
Many municipal leases and contracts contain "non- appropriation" clauses that
provide that the governmental issuer has no obligation to make future payments
under the lease or contract unless money is appropriated for this purpose by the
appropriate legislative body.
Political and Economic Risk
Because the fund invests primarily in municipal securities issued by the state
of Colorado and its political subdivisions, the fund will be particularly
affected by political and economic conditions and developments in that state.
See the Statement of Additional Information for details. The value of municipal
securities owned by the fund also may be adversely affected by future changes in
federal or state income tax laws, including rate reductions or the imposition of
a flat tax.
Risks of Non-Diversification
The fund is non-diversified. This means that it may invest a larger portion of
its assets in a limited number of issuers than a diversified fund. Because a
relatively high percentage of the fund's assets may be invested in the
securities of a limited number of issuers, the fund may be more susceptible to
any single economic, political or regulatory occurrence than a diversified fund.
5
PROSPECTUS - First American Intermediate Tax Free Bond Funds
Class A Shares
<PAGE>
Fund Summaries
COLORADO INTERMEDIATE TAX FREE FUND CONTINUED
- --------------------------------------------------------------------------------
FUND PERFORMANCE
Illustrations on the next page provide you with information on the fund's
volatility and performance. Of course, past performance does not guarantee
future results.
The bar chart shows you how performance of the fund's shares has varied from
year to year. Sales charges are not reflected in the chart; if they had been,
returns would be lower.
The table compares the fund's performance over different time periods to that of
the fund's benchmark index, which is a broad measure of market performance. The
fund's performance reflects sales charges and fund expenses; the benchmark is
unmanaged and has no expenses.
Both the chart and the table assume that all distributions have been reinvested.
6
PROSPECTUS - First American Intermediate Tax Free Bond Funds
Class A Shares
<PAGE>
Fund Summaries
COLORADO INTERMEDIATE TAX FREE FUND CONTINUED
- --------------------------------------------------------------------------------
FUND PERFORMANCE (CONTINUED)
ANNUAL TOTAL RETURNS AS OF 12/31 EACH YEAR
[BAR CHART]
12.33% 3.86% 7.07% 5.44% -1.58%
- ----------------------------------------------
1995 1996 1997 1998 1999
Best Quarter: Quarter ending March 31, 1995 5.18%
Worst Quarter: Quarter ending June 30, 1999 (1.85)%
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS Inception Since
AS OF 12/31/99 Date One Year Five Years Inception
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Colorado Intermediate Tax Free Fund 4/4/94 (4.08)% 4.78% 4.66%
- ---------------------------------------------------------------------------------------------------
Lehman Brothers 7-Year Municipal Bond Index(1) (0.14)% 6.36% 5.65%
- ---------------------------------------------------------------------------------------------------
</TABLE>
(1) An unmanaged index comprised of fixed rate, investment grade tax-exempt
bonds with maturities between six and eight years. The since inception
performance for the index is calculated from 4/30/94.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
As an investor, you pay fees and expenses to buy and hold shares of the fund.
You pay shareholder fees directly when you buy or sell shares. You pay annual
fund operating expenses indirectly since they are deducted from fund assets. The
figures below show fund expenses during the fiscal year ended September 30,
1999.(1)
- ---------------------------------------------------- ------------
SHAREHOLDER FEES CLASS A
- ---------------------------------------------------- ------------
MAXIMUM SALES CHARGE (LOAD)
AS A % OF OFFERING PRICE 2.50%(2)
ANNUAL MAINTENANCE FEE(3)
ONLY CHARGED TO ACCOUNTS WITH BALANCES BELOW $500 $ 25
ANNUAL FUND OPERATING EXPENSES AS A % OF AVERAGE NET ASSETS
- ---------------------------------------------------- ------------
Management Fees 0.70%
Distribution and Service (12b-1) Fees 0.25%
Other Expenses 0.20%
TOTAL 1.15%
- ---------------------------------------------------- ------------
(1) Actual expenses for the fiscal year were lower than those shown in the table
because of voluntary fee waivers by the advisor and the distributor. See
"Additional Information -- Financial Highlights." The net expenses the fund
actually paid after waivers for the fiscal year ended September 30, 1999, were:
Waiver of Fund Expenses (0.45)%
TOTAL ACTUAL ANNUAL OPERATING EXPENSES (AFTER WAIVERS) 0.70%
THE DISTRIBUTOR INTENDS TO WAIVE PAYMENT OF ALL 12b-1 FEES DURING THE CURRENT
FISCAL YEAR. IN ADDITION, THE ADVISOR INTENDS TO WAIVE FEES DURING THE CURRENT
FISCAL YEAR SO THAT TOTAL OPERATING EXPENSES DO NOT EXCEED 0.70%. FEE WAIVERS
MAY BE DISCONTINUED AT ANY TIME.
(2) Certain investors may qualify for reduced sales charges. Investments of $1
million or more on which no front-end sales charge is paid may be subject to a
contingent deferred sales charge. See "Buying Shares -- Calculating Your Share
Price."
(3) The fund reserves the right to charge your account an annual maintenance fee
of $25 if your balance falls below $500 as a result of selling or exchanging
shares. See "Policies & Services -- Selling Shares, Accounts with Low Balances."
- --------------------------------------------------------------------------------
EXAMPLE This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes that you
invest $10,000 for the time periods indicated, that your investment has a 5%
return each year, and that the fund's operating expenses remain the same.
Although your actual costs and returns may differ, based on these assumptions
your costs would be:
1 year $ 364
3 years $ 606
5 years $ 867
10 years $1,613
7
PROSPECTUS - First American Intermediate Tax Free Bond Funds
Class A Shares
<PAGE>
Fund Summaries
INTERMEDIATE TAX FREE FUND
- --------------------------------------------------------------------------------
OBJECTIVE
Intermediate Tax Free Fund has an objective of providing current income that is
exempt from federal income tax to the extent consistent with preservation of
capital.
- --------------------------------------------------------------------------------
MAIN INVESTMENT STRATEGIES
Under normal market conditions, Intermediate Tax Free Fund invests at least 80%
of its total assets in municipal securities that pay interest that is exempt
from federal income tax, including the federal alternative minimum tax. The fund
normally may invest up to 20% of its net assets in taxable obligations,
including obligations the interest on which is subject to the federal
alternative minimum tax. The fund may invest in:
* "general obligation" bonds, which are backed by the full faith, credit and
taxing power of the issuer.
* "revenue" bonds, which are payable only from the revenues generated by a
specific project or from another specific revenue source.
* participation interests in municipal leases.
* zero coupon municipal securities, which pay no cash income to their holders
until they mature.
* inverse floating rate municipal securities (up to 10% of the fund's total
assets).
In selecting securities for the fund, fund managers first determine their
economic outlook and the direction in which inflation and interest rates are
expected to move. In selecting individual securities consistent with this
outlook, fund managers evaluate factors such as credit quality, yield, maturity,
liquidity, and portfolio and geographical diversification.
The fund only invests in securities that, at the time of purchase, are either
rated investment grade or are unrated and determined to be of comparable quality
by the fund's advisor. If the rating of a security is reduced or discontinued
after purchase, the fund is not required to sell the security, but may consider
doing so. Unrated securities will not exceed 25% of the fund's total assets (not
including unrated securities that have been pre-refunded with U.S. Government
securities and U.S. Government agency securities).
The fund will attempt to maintain the weighted average maturity of its portfolio
securities at 3 to 10 years under normal market conditions.
- --------------------------------------------------------------------------------
MAIN RISKS
The price and yield of this fund will change daily due to changes in interest
rates and other factors, which means you could lose money. The main risks of
investing in this fund include:
Interest Rate Risk
Debt securities typically decrease in value when interest rates rise. This risk
is usually greater for longer-term debt securities. Inverse floating rate
securities may be highly volatile as interest rates rise or fall. For additional
explanation about inverse floating rate securities, see the "More About The
Funds -- Risks" section.
Income Risk
The fund's income could decline due to falling market interest rates.
Credit Risk
An issuer of debt securities may not make timely principal or interest payments
on its securities. The revenue bonds and municipal lease obligations in which
the fund invests may entail greater credit risk than the fund's investments in
general obligation bonds.
Call Risk
Some municipal securities held by the fund may be redeemed by the issuer, or
"called," prior to their stated maturity dates. If a security is redeemed during
a time of declining interest rates, the fund may be unable to reinvest in
securities providing as high a level of income.
Risks of Municipal Lease Obligations
Many municipal leases and contracts contain "non-appropriation" clauses that
provide that the governmental issuer has no obligation to make future payments
under the lease or contract unless money is appropriated for this purpose by the
appropriate legislative body.
Political and Economic Risk
The value of municipal securities owned by the fund may be adversely affected by
state and local political and economic conditions and developments, or by future
changes in federal or state income tax laws, including rate reductions or the
imposition of a flat tax.
- --------------------------------------------------------------------------------
FUND PERFORMANCE
Illustrations on the next page provide you with information on the fund's
volatility and performance. Of course, past performance does not guarantee
future results.
The bar chart shows you how performance of the fund's shares has varied from
year to year. Sales charges are not reflected in the chart; if they had been,
returns would be lower.
The table compares the fund's performance over different time periods to that of
the fund's benchmark index, which is a broad measure of market performance. The
fund's performance reflects sales charges and fund expenses; the benchmark is
unmanaged and has no expenses.
Both the chart and the table assume that all distributions have been reinvested.
8
PROSPECTUS - First American Intermediate Tax Free Bond Funds
Class A Shares
<PAGE>
Fund Summaries
INTERMEDIATE TAX FREE FUND CONTINUED
- --------------------------------------------------------------------------------
FUND PERFORMANCE (CONTINUED)
ANNUAL TOTAL RETURNS AS OF 12/31 EACH YEAR
[BAR CHART]
5.54% 8.44% 6.49% 8.20% -2.95% 12.89% 3.72% 6.79% 5.38% -1.46%
- ------------------------------------------------------------------------------
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Best Quarter: Quarter ending March 31, 1995 5.10%
Worst Quarter: Quarter ending March 31, 1994 (4.10)%
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS Inception
AS OF 12/31/99 Date One Year Five Years Ten Years
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Intermediate Tax Free Fund 12/22/87 (3.93)% 4.83% 4.94%
- -----------------------------------------------------------------------------------------
Lehman 7-Year Municipal Bond Index(1) (0.14)% 6.36% 6.60%
- -----------------------------------------------------------------------------------------
Lehman Brothers 7-Year G.O. Index(2) (0.17)% 6.50% 6.56%
- -----------------------------------------------------------------------------------------
</TABLE>
(1) An unmanaged index comprised of fixed rate, investment grade tax-exempt
bonds with maturities between six and eight years. Previously, the fund used the
Lehman 7-Year G.O. Index as a benchmark. Going forward, the fund will use the
Lehman 7-Year Municipal Bond Index as a comparison, because it is better suited
to the fund's investment strategies.
(2) An unmanaged index comprised of fixed rate, investment grade, general
obligation tax-exempt bonds with maturities between six and eight years.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
As an investor, you pay fees and expenses to buy and hold shares of the fund.
You pay shareholder fees directly when you buy or sell shares. You pay annual
fund operating expenses indirectly since they are deducted from fund assets. The
figures below show fund expenses during the fiscal year ended September 30,
1999.(1)
- ---------------------------------------------------- ------------
SHAREHOLDER FEES CLASS A
- ---------------------------------------------------- ------------
MAXIMUM SALES CHARGE (LOAD)
AS A % OF OFFERING PRICE 2.50%(2)
ANNUAL MAINTENANCE FEE(3)
ONLY CHARGED TO ACCOUNTS WITH BALANCES BELOW $500 $ 25
ANNUAL FUND OPERATING EXPENSES AS A % OF AVERAGE NET ASSETS
- ---------------------------------------------------- ------------
Management Fees 0.70%
Distribution and Service (12b-1) Fees 0.25%
Other Expenses 0.17%
TOTAL 1.12%
- ---------------------------------------------------- ------------
(1) Actual expenses for the fiscal year were lower than those shown in the table
because of voluntary fee waivers by the advisor and the distributor. See
"Additional Information -- Financial Highlights." The net expenses the fund
actually paid after waivers for the fiscal year ended September 30, 1999, were:
Waiver of Fund Expenses (0.42)%
TOTAL ACTUAL ANNUAL OPERATING EXPENSES (AFTER WAIVERS) 0.70%
THE DISTRIBUTOR INTENDS TO WAIVE PAYMENT OF ALL 12b-1 FEES DURING THE CURRENT
FISCAL YEAR. IN ADDITION, THE ADVISOR INTENDS TO WAIVE FEES DURING THE CURRENT
FISCAL YEAR SO THAT TOTAL FUND OPERATING EXPENSES DO NOT EXCEED 0.70%. FEE
WAIVERS MAY BE DISCONTINUED AT ANY TIME.
(2) Certain investors may qualify for reduced sales charges. Investments of $1
million or more on which no front-end sales charge is paid may be subject to a
contingent deferred sales charge. See "Buying Shares -- Calculating Your Share
Price."
(3) The fund reserves the right to charge your account an annual maintenance fee
of $25 if your balance falls below $500 as a result of selling or exchanging
shares. See "Policies & Services -- Selling Shares, Accounts with Low Balances."
- --------------------------------------------------------------------------------
EXAMPLE This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes that you
invest $10,000 for the time periods indicated, that your investment has a 5%
return each year, and that the fund's operating expenses remain the same.
Although your actual costs and returns may differ, based on these assumptions
your costs would be:
1 year $ 361
3 years $ 597
5 years $ 851
10 years $1,579
9
PROSPECTUS - First American Intermediate Tax Free Bond Funds
Class A Shares
<PAGE>
Fund Summaries
MINNESOTA INTERMEDIATE TAX FREE FUND
- --------------------------------------------------------------------------------
OBJECTIVE
Minnesota Intermediate Tax Free Fund has an objective of providing current
income that is exempt from both federal income tax and Minnesota state income
tax to the extent consistent with preservation of capital.
- --------------------------------------------------------------------------------
MAIN INVESTMENT STRATEGIES
Under normal market conditions, Minnesota Intermediate Tax Free Fund invests at
least 80% of its total assets in municipal securities that pay interest that is
exempt from federal and Minnesota income tax, including federal and state of
Minnesota alternative minimum tax. The fund normally may invest up to 20% of its
net assets in taxable obligations, including obligations the interest on which
is subject to federal and state of Minnesota alternative minimum tax. The fund
may invest in:
* "general obligation" bonds, which are backed by the full faith, credit and
taxing power of the issuer.
* "revenue" bonds, which are payable only from the revenues generated by a
specific project or from another specific revenue source.
* participation interests in municipal leases.
* zero coupon municipal securities, which pay no cash income to their holders
until they mature.
* inverse floating rate municipal securities (up to 10% of the fund's total
assets).
In selecting securities for the fund, fund managers first determine their
economic outlook and the direction in which inflation and interest rates are
expected to move. In selecting individual securities consistent with this
outlook, fund managers evaluate factors such as credit quality, yield, maturity,
liquidity, and portfolio diversification.
The fund only invests in securities that, at the time of purchase, are either
rated investment grade or are unrated and determined to be of comparable quality
by the fund's advisor. If the rating of a security is reduced or discontinued
after purchase, the fund is not required to sell the security, but may consider
doing so. Unrated securities will not exceed 25% of the fund's total assets (not
including unrated securities that have been pre-refunded with U.S. Government
securities and U.S. Government agency securities).
The fund will attempt to maintain the weighted average maturity of its portfolio
securities at three to 10 years under normal market conditions.
- --------------------------------------------------------------------------------
MAIN RISKS
The price and yield of this fund will change daily due to changes in interest
rates and other factors, which means you could lose money. The main risks of
investing in this fund include:
Interest Rate Risk
Debt securities typically decrease in value when interest rates rise. This risk
is usually greater for longer-term debt securities. Inverse floating rate
municipal securities may be highly volatile as interest rates rise or fall. For
additional explanation about inverse floating rate securities, see the "More
About The Funds -- Risks" section.
Income Risk
The fund's income could decline due to falling market interest rates.
Credit Risk
An issuer of debt securities may not make timely principal or interest payments
on its securities. The revenue bonds and municipal lease obligations in which
the fund invests may entail greater credit risk than the fund's investments in
general obligation bonds.
Call Risk
Some municipal securities held by the fund may be redeemed by the issuer, or
"called," prior to their stated maturity dates. If a security is redeemed during
a time of declining interest rates, the fund may be unable to reinvest in
securities providing as high a level of income.
Risks of Municipal Lease Obligations
Many municipal leases and contracts contain "non- appropriation" clauses that
provide that the governmental issuer has no obligation to make future payments
under the lease or contract unless money is appropriated for this purpose by the
appropriate legislative body.
Political and Economic Risk
Because the fund invests primarily in municipal securities issued by the state
of Minnesota and its political subdivisions, the fund will be particularly
affected by political and economic conditions and developments in that state.
See the Statement of Additional Information for details. The value of municipal
securities owned by the fund also may be adversely affected by future changes in
federal or state income tax laws, including rate reductions or the imposition of
a flat tax.
Risks of Non-Diversification
The fund is non-diversified. This means that it may invest a larger portion of
its assets in a limited number of issuers than a diversified fund. Because a
relatively high percentage of the fund's assets may be invested in the
securities of a limited number of issuers, the fund may be more susceptible to
any single economic, political or regulatory occurrence than a diversified fund.
10
PROSPECTUS - First American Intermediate Tax Free Bond Funds
Class A Shares
<PAGE>
Fund Summaries
MINNESOTA INTERMEDIATE TAX FREE FUND CONTINUED
- --------------------------------------------------------------------------------
FUND PERFORMANCE
Illustrations on the next page provide you with information on the fund's
volatility and performance. Of course, past performance does not guarantee
future results.
The bar chart shows you how performance of the fund's shares has varied from
year to year. Sales charges are not reflected in the chart; if they had been,
returns would be lower.
The table compares the fund's performance over different time periods to that of
the fund's benchmark index, which is a broad measure of market performance. The
fund's performance reflects sales charges and fund expenses; the benchmark is
unmanaged and has no expenses.
Both the chart and the table assume that all distributions have been reinvested.
11
PROSPECTUS - First American Intermediate Tax Free Bond Funds
Class A Shares
<PAGE>
Fund Summaries
MINNESOTA INTERMEDIATE TAX FREE FUND CONTINUED
- --------------------------------------------------------------------------------
FUND PERFORMANCE (CONTINUED)
ANNUAL TOTAL RETURNS AS OF 12/31 EACH YEAR
[BAR CHART]
12.67% 3.82% 6.74% 5.34% -1.26%
- ----------------------------------------------
1995 1996 1997 1998 1999
Best Quarter: Quarter ending March 31, 1995 5.30%
Worst Quarter: Quarter ending June 30, 1999 (1.62)%
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS Inception Since
AS OF 12/31/99 Date One Year Five Years Inception
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Minnesota Intermediate Tax Free Fund 2/25/94 (3.72)% 4.84% 3.64%
- ---------------------------------------------------------------------------------------------------
Lehman Brothers 7-Year Municipal Bond Index(1) (0.14)% 6.36% 5.13%
- ---------------------------------------------------------------------------------------------------
</TABLE>
(1) An unmanaged index comprised of fixed rate, investment grade tax-exempt
bonds with maturities between six and eight years. The since inception
performance for the index is calculated from 2/28/94.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
As an investor, you pay fees and expenses to buy and hold shares of the fund.
You pay shareholder fees directly when you buy or sell shares. You pay annual
fund operating expenses indirectly since they are deducted from fund assets. The
figures below show fund expenses during the fiscal year ended September 30,
1999.(1)
- ---------------------------------------------------- ------------
SHAREHOLDER FEES CLASS A
- ---------------------------------------------------- ------------
MAXIMUM SALES CHARGE (LOAD)
AS A % OF OFFERING PRICE 2.50%(2)
ANNUAL MAINTENANCE FEE(3)
ONLY CHARGED TO ACCOUNTS WITH BALANCES BELOW $500 $ 25
ANNUAL FUND OPERATING EXPENSES AS A % OF AVERAGE NET ASSETS
- ---------------------------------------------------- ------------
Management Fees 0.70%
Distribution and Service (12b-1) Fees 0.25%
Other Expenses 0.17%
TOTAL 1.12%
- ---------------------------------------------------- ------------
(1) Actual expenses for the fiscal year were lower than those shown in the table
because of voluntary fee waivers by the advisor and the distributor. See
"Additional Information -- Financial Highlights." The net expenses the fund
actually paid after waivers for the fiscal year ended September 30, 1999, were:
Waiver of Fund Expenses (0.42)%
TOTAL ACTUAL ANNUAL OPERATING EXPENSES (AFTER WAIVERS) 0.70%
THE DISTRIBUTOR INTENDS TO WAIVE PAYMENT OF ALL 12b-1 FEES DURING THE CURRENT
FISCAL YEAR. IN ADDITION, THE ADVISOR INTENDS TO WAIVE FEES DURING THE CURRENT
FISCAL YEAR SO THAT TOTAL FUND OPERATING EXPENSES DO NOT EXCEED 0.70%. FEE
WAIVERS MAY BE DISCONTINUED AT ANY TIME.
(2) Certain investors may qualify for reduced sales charges. Investments of $1
million or more on which no front-end sales charge is paid may be subject to a
contingent deferred sales charge. See "Buying Shares -- Calculating Your Share
Price."
(3) The fund reserves the right to charge your account an annual maintenance fee
of $25 if your balance falls below $500 as a result of selling or exchanging
shares. See "Policies & Services -- Selling Shares, Accounts with Low Balances."
- --------------------------------------------------------------------------------
EXAMPLE This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes that you
invest $10,000 for the time periods indicated, that your investment has a 5%
return each year, and that the fund's operating expenses remain the same.
Although your actual costs and returns may differ, based on these assumptions
your costs would be:
1 year $ 361
3 years $ 597
5 years $ 851
10 years $1,579
12
PROSPECTUS - First American Intermediate Tax Free Bond Funds
Class A Shares
<PAGE>
Fund Summaries
OREGON INTERMEDIATE TAX FREE FUND
- --------------------------------------------------------------------------------
OBJECTIVE
Oregon Intermediate Tax Free Fund has an objective of providing current income
that is exempt from both federal income tax and Oregon state income tax to the
extent consistent with preservation of capital.
- --------------------------------------------------------------------------------
MAIN INVESTMENT STRATEGIES
Under normal market conditions, Oregon Intermediate Tax Free Fund invests at
least 80% of its total assets in municipal securities that pay interest that is
exempt from federal and Oregon ncome tax, including the federal alternative
minimum tax. The fund normally may invest up to 20% of its net assets in taxable
obligations, including obligations the interest on which is subject to the
federal alternative minimum tax. The fund may invest in:
* "general obligation" bonds, which are backed by the full faith, credit and
taxing power of the issuer.
* "revenue" bonds, which are payable only from the revenues generated by a
specific project or from another specific revenue source.
* participation interests in municipal leases.
* zero coupon municipal securities, which pay no cash income to their holders
until they mature.
* inverse floating rate municipal securities (up to 10% of the fund's total
assets).
In selecting securities for the fund, fund managers first determine their
economic outlook and the direction in which inflation and interest rates are
expected to move. In selecting individual securities consistent with this
outlook, fund managers evaluate factors such as credit quality, yield, maturity,
liquidity, and portfolio diversification.
The fund only invests in securities that, at the time of purchase, are either
rated investment grade or are unrated and determined to be of comparable quality
by the fund's advisor. If the rating of a security is reduced or discontinued
after purchase, the fund is not required to sell the security, but may consider
doing so. Unrated securities will not exceed 25% of the fund's total assets (not
including unrated securities that have been pre-refunded with U.S. Government
securities and U.S. Government agency securities).
The fund will attempt to maintain the weighted average maturity of its portfolio
securities at three to 10 years under normal market conditions.
- --------------------------------------------------------------------------------
MAIN RISKS
The price and yield of this fund will change daily due to changes in interest
rates and other factors, which means you could lose money. The main risks of
investing in this fund include:
Interest Rate Risk
Debt securities typically decrease in value when interest rates rise. This risk
is usually greater for longer-term debt securities. Inverse floating rate
municipal securities may be highly volatile as interest rates rise or fall. For
additional explanation about inverse floating rate securities, see the "More
About The Funds -- Risks" section.
Income Risk
The fund's income could decline due to falling market interest rates.
Credit Risk
An issuer of debt securities may not make timely principal or interest payments
on its securities. The revenue bonds and municipal lease obligations in which
the fund invests may entail greater credit risk than the fund's investments in
general obligation bonds.
Call Risk
Some municipal securities held by the fund may be redeemed by the issuer, or
"called," prior to their stated maturity dates. If a security is redeemed during
a time of declining interest rates, the fund may be unable to reinvest in
securities providing as high a level of income.
Risks of Municipal Lease Obligations
Many municipal leases and contracts contain "non- appropriation" clauses that
provide that the governmental issuer has no obligation to make future payments
under the lease or contract unless money is appropriated for this purpose by the
appropriate legislative body.
Political and Economic Risk
Because the fund invests primarily in municipal securities issued by the state
of Oregon and its political subdivisions, the fund will be particularly affected
by political and economic conditions and developments in that state. See the
Statement of Additional Information for details. The value of municipal
securities owned by the fund also may be adversely affected by future changes in
federal or state income tax laws, including rate reductions or the imposition of
a flat tax.
Risks of Non-Diversification
The fund is non-diversified. This means that it may invest a larger portion of
its assets in a limited number of issuers than a diversified fund. Because a
relatively high percentage of the fund's assets may be invested in the
securities of a limited number of issuers, the fund may be more susceptible to
any single economic, political or regulatory occurrence than a diversified fund.
13
PROSPECTUS - First American Intermediate Tax Free Bond Funds
Class A Shares
<PAGE>
Fund Summaries
OREGON INTERMEDIATE TAX FREE FUND CONTINUED
- --------------------------------------------------------------------------------
FUND PERFORMANCE
Illustrations on the next page provide you with information on the fund's
volatility and performance. Of course, past performance does not guarantee
future results.
The bar chart shows you how performance of the fund's shares has varied from
year to year. Sales charges are not reflected in the chart; if they had been,
returns would be lower.
The table compares the fund's performance over different time periods to that of
the fund's benchmark index, which is a broad measure of market performance. The
fund's performance reflects fund expenses; the benchmark is unmanaged and has no
expenses.
Information in the bar chart and the table is for the fund's Class Y shares,
which are offered through another prospectus. Information for Class A shares is
not presented because those shares have not been offered for a full calendar
year. The Class A and Class Y shares will have substantially similar returns,
because they are invested in the same portfolio of securities. However, Class A
share returns will be lower because these shares have higher expenses.
Both the chart and the table assume that all distributions have been reinvested.
14
PROSPECTUS - First American Intermediate Tax Free Bond Funds
Class A Shares
<PAGE>
Fund Summaries
OREGON INTERMEDIATE TAX FREE FUND CONTINUED
- --------------------------------------------------------------------------------
FUND PERFORMANCE (CONTINUED)
ANNUAL TOTAL RETURNS AS OF 12/31 EACH YEAR(1)
[BAR CHART]
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
7.63% 9.89% 7.19% 8.96% -2.66% 11.27% 3.31% 7.06% 5.36% -1.50%
- -----------------------------------------------------------------------------------------
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
</TABLE>
Best Quarter: Quarter ending December 31, 1990 4.49%
Worst Quarter: Quarter ending March 31, 1994 (3.41)%
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS(1) One Five Ten
AS OF 12/31/99 Year Years Years
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Oregon Intermediate Tax Free Fund (Class Y)(1) (1.50)% 5.01% 5.56%
- -----------------------------------------------------------------------------------
Lehman Brothers 7-Year Municipal Bond Index(2) (0.14)% 6.36% 6.60%
- -----------------------------------------------------------------------------------
</TABLE>
(1) Performance prior to 8/8/97 is that of Oregon Municipal Bond Trust Fund, a
predecessor common trust fund. On 8/8/97, substantially all of the assets of
Oregon Municipal Bond Trust Fund were transferred into Micro Cap Value Fund. The
objectives, policies, and guidelines of the two funds were, in all material
respects, identical. Oregon Municipal Bond Trust Fund's performance is adjusted
to reflect Oregon Intermediate Tax Free Fund's Class Y share fees and expenses,
before any fee waivers. Oregon Municipal Bond Trust Fund was not registered
under the Investment Company Act of 1940 and therefore was not subject to
certain investment restrictions that might have adversely affected performance.
(2) Class Y share returns have been adjusted to reflect the 2.50% front-end
sales charge imposed on Class A shares. Class Y shares have no sales charges.
Class A share inception date is 2/1/99.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
As an investor, you pay fees and expenses to buy and hold shares of the fund.
You pay shareholder fees directly when you buy or sell shares. You pay annual
fund operating expenses indirectly since they are deducted from fund assets. The
figures below show fund expenses during the fiscal year ended September 30,
1999.(1)
- ---------------------------------------------------- ------------
SHAREHOLDER FEES CLASS A
- ---------------------------------------------------- ------------
MAXIMUM SALES CHARGE (LOAD)
AS A % OF OFFERING PRICE 2.50%(2)
ANNUAL MAINTENANCE FEE(3)
ONLY CHARGED TO ACCOUNTS WITH BALANCES BELOW $500 $ 25
ANNUAL FUND OPERATING EXPENSES AS A % OF AVERAGE NET ASSETS
- ---------------------------------------------------- ------------
Management Fees 0.70%
Distribution and Service (12b-1) Fees 0.25%
Other Expenses 0.17%
TOTAL 1.12%
- ---------------------------------------------------- ------------
(1) Actual expenses for the fiscal year were lower than those shown in the table
because of voluntary fee waivers by the advisor and the distributor. See
"Additional Information -- Financial Highlights." The net expenses the fund
actually paid after waivers for the fiscal year ended September 30, 1999, were:
Waiver of Fund Expenses (0.42)%
TOTAL ACTUAL ANNUAL OPERATING EXPENSES (AFTER WAIVERS) 0.70%
THE DISTRIBUTOR INTENDS TO WAIVE PAYMENT OF ALL 12b-1 FEES DURING THE CURRENT
FISCAL YEAR. IN ADDITION, THE ADVISOR INTENDS TO WAIVE FEES DURING THE CURRENT
FISCAL YEAR SO THAT TOTAL FUND OPERATING EXPENSES DO NOT EXCEED 0.70%. FEE
WAIVERS MAY BE DISCONTINUED AT ANY TIME.
(2) Certain investors may qualify for reduced sales charges. Investments of $1
million or more on which no front-end sales charge is paid may be subject to a
contingent deferred sales charge. See "Buying Shares -- Calculating Your Share
Price."
(3) The fund reserves the right to charge your account an annual maintenance fee
of $25 if your balance falls below $500 as a result of selling or exchanging
shares. See "Policies & Services -- Selling Shares, Accounts with Low Balances."
- --------------------------------------------------------------------------------
EXAMPLE This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes that you
invest $10,000 for the time periods indicated, that your investment has a 5%
return each year, and that the fund's operating expenses remain the same.
Although your actual costs and returns may differ, based on these assumptions
your costs would be:
1 year $ 361
3 years $ 597
5 years $ 851
10 years $1,579
15
PROSPECTUS - First American Intermediate Tax Free Bond Funds
Class A Shares
<PAGE>
Policies & Services
BUYING SHARES
You may become a shareholder in any of the funds with an initial investment of
$1,000 or more ($250 for a retirement plan or a Uniform Gifts to Minors
Act/Uniform Transfers to Minors Act (UGMA/UTMA) account). Additional investments
can be made for as little as $100 ($25 for a retirement plan or an UGMA/UTMA
account). The funds have the right to waive these minimum investment
requirements for employees of the funds' advisor and its affiliates. The funds
also have the right to reject any purchase order.
- --------------------------------------------------------------------------------
12B-1 FEES
Each fund has adopted a plan under rule 12b-1 of the Investment Company Act that
allows it to pay the fund's distributor an annual fee for the distribution and
sale of its shares and for services provided to shareholders. Class A shares of
the funds pay shareholder servicing fees equal, on an annual basis to 0.25% of
average daily net assets.
The funds' distributor uses the shareholder servicing fee to compensate
investment professionals, participating institutions and "one-stop" mutual fund
networks for providing ongoing services to shareholder accounts. These
institutions receive annual fees equal to 0.25% of a fund's Class A share
average daily net assets. However, if an institution sells Class A shares at net
asset value and receives a commission on that sale, the institution does not
begin to receive its annual fee until one year after the shares are sold. The
distributor may pay additional fees to institutions using the sales charges it
receives, in exchange for sales and/or administrative services performed on
behalf of the institution's customers.
The distributor is currently waiving its Class A share 12b-1 fee for each fund.
Therefore, the distributor will not pay institutions the annual fee referred to
above in connection with their sales of Class A shares of the funds.
- --------------------------------------------------------------------------------
CALCULATING YOUR SHARE PRICE
Your purchase price will be based on the fund's net asset value (NAV) per share,
which is generally calculated as of the close of regular trading on the New York
Stock Exchange (usually 3 p.m. Central time) every day the exchange is open.
A fund's NAV is equal to the market value of its investments and other assets,
less any liabilities, divided by the number of fund shares. If market prices are
not readily available for an investment or if the advisor believes they are
unreliable, fair value prices may be determined in good faith using methods
approved by the funds' board of directors.
Your purchase price is typically the net asset value of your shares, plus a
front-end sales charge. Sales charges vary depending on the amount of your
purchase. The funds' distributor receives the sales charge you pay and reallows
a portion of the sales charge to your investment professional or participating
institution.
Maximum
Sales Charge Reallowance
As a % of As a % of as a % of
Offering Net Asset Purchase
Price Value Price
----------- ----------- ------------
Less than $ 50,000 2.50% 2.56% 2.25%
$ 50,000 - $ 99,999 2.00% 2.04% 1.75%
$100,000 - $249,999 1.50% 1.52% 1.25%
$250,000 - $499,999 1.00% 1.01% 0.75%
$500,000 - $999,999 0.75% 0.76% 0.50%
$1 million and over 0.00% 0.00% 0.00%
- --------------------------------------------------------------------------------
REDUCING YOUR SALES CHARGE
As shown in the preceding tables, larger purchases of Class A shares reduce the
percentage sales charge you pay. You also may reduce your sales charge in the
following ways:
PRIOR PURCHASES. Prior purchases of Class A shares of any First American fund
(except a money market fund) will be factored into your sales charge
calculation. For example, let's say you're making a $10,000 investment. If the
current value of all other First American fund Class A shares that you hold is
$40,000 or more, your current sales charge is reduced. To receive a reduced
sales charge, you must notify the funds' transfer agent of your prior purchases.
This must be done at the time of purchase, either directly to the transfer agent
in writing or by notifying your investment professional or financial
institution.
PURCHASES BY RELATED ACCOUNTS. Concurrent and prior purchases of Class A shares
by certain other accounts also will be combined to determine your sales charge.
For example, purchases made by your spouse or children under age 21 will reduce
your sales charge. To receive a reduced sales charge, you must notify the funds'
transfer agent of purchases by any related accounts. This must be done at the
time of purchase, either directly to the transfer agent in writing or by
notifying your investment professional or financial institution.
LETTER OF INTENT. If you plan to invest $50,000 or more over a 13-month period
in Class A shares of any First American fund except the money market funds, you
may reduce your sales charge by signing a non-binding letter of intent. (If you
do not fulfill the letter of intent, you must pay the applicable sales charge.
In addition, if you reduce your sales charge to zero under a letter of intent
and then sell your Class A shares within 18 months of their purchase, you may be
charged a contingent deferred sales charge of 1%. (See "For Investments of Over
$1 Million.")
16
PROSPECTUS - First American Intermediate Tax Free Bond Funds
Class A Shares
<PAGE>
Policies & Services
BUYING SHARES CONTINUED
More information on these ways to reduce your sales charge appears in the
Statement of Additional Information (SAI). The SAI also contains information on
investors who are eligible to purchase Class A shares without a sales charge.
- --------------------------------------------------------------------------------
FOR INVESTMENTS OF OVER $1 MILLION
There is no initial sales charge on Class A share purchases of $1 million or
more. However, your investment professional or financial institution may
receive a commission of up to 1% on your purchase. If such a commission of up
to 1% on your purchase. If such a commission is paid, you will be assessed a
contingent deferred sales charge (CDSC) of 1% if you sell your shares within
18 months. To find out whether you will be assessed a CDSC, ask your
investment professional or financial institution. The funds' distributor
receives any CDSC imposed when you sell your Class A shares. The CDSC is
based on the value of your shares at the time of purchase or at the time of
sale, whichever is less. The charge does not apply to shares you acquired by
reinvesting your dividend or capital gain distributions.
To help lower your costs, shares that are not subject to a CDSC will be sold
first. Other shares will then be sold in an order that minimizes your CDSC.
The CDSC for Class A shares will be waived for:
* redemptions following the death or disability of a shareholder.
* redemptions that equal the minimum required distribution from an
individual retirement account or other retirement plan to a shareholder
who has reached the age of 70 1/2.
- --------------------------------------------------------------------------------
HOW TO BUY SHARES
You may buy shares on any day the New York Stock Exchange is open. However
purchases of shares may be restricted in the event of an early or unscheduled
close of the New York Stock Exchange. Your shares will be priced at the next NAV
calculated after your order is accepted by the fund, plus any applicable sales
charge. To make sure that your order is accepted, follow the directions for
purchasing shares given below.
By Phone
You may purchase shares by calling your investment professional or financial
institution, if they have a sales agreement with the funds' distributor. In many
cases, your order will be effective that day if received by your investment
professional or financial institution by the close of regular trading on the New
York Stock Exchange. In some cases, however, you will have to transmit your
request by an earlier time in order for your purchase request to be effective
that day. This allows your investment professional or financial institution time
to process your request and transmit it to the fund. Some financial institutions
may charge a fee for helping you purchase shares. Contact your investment
professinal or financial institution for more information.
If you are paying by wire, you may purchase shares by calling 1-800-637-2548
before 3 p.m. Central time. All information will be taken over the telephone,
and your order will be placed when the funds' custodian receives payment by
wire. Wire federal funds as follows:
U.S. Bank National Association, Minneapolis, MN
ABA Number 091000022
For Credit to: DST Systems, Inc.:
Account Number 160234580266
For Further Credit to (investor name and fund name)
You cannot purchase shares by wire on days when federally chartered banks are
closed.
By Mail
To purchase shares by mail, simply complete and sign a new account form, enclose
a check made payable to the fund you wish to invest in, and mail both to:
First American Funds
c/o DST Systems, Inc.
P.O. Box 219382
Kansas City, Missouri 64121-9382
After you have established an account, you may continue to purchase shares by
mailing your check to First American Funds at the same address.
Please note the following:
* all purchases must be made in U.S. dollars.
* third-party checks, credit cards, credit card checks and cash are not
accepted.
* if a check does not clear your bank, the funds reserve the right to cancel
the purchase, and you could be liable for any losses or fees incurred.
- --------------------------------------------------------------------------------
INVESTING AUTOMATICALLY
To purchase shares as part of a savings discipline, you may add to your
investment on a regular basis:
* by having $100 or more ($25 for a retirement plan or an UGMA/UTMA account)
automatically withdrawn from your checking account on a periodic basis and
invested in fund shares.
* through automatic monthly exchanges of your shares of Prime Obligations Fund,
a money market fund in the First American family of funds. Exchanges must be
made into the same class of shares that you hold in Prime Obligations Fund.
You may apply for participation in either of these programs through your
investment professional or financial institution or by calling 1-800-637-2548.
17
PROSPECTUS - First American Intermediate Tax Free Bond Funds
Class A Shares
<PAGE>
Policies & Services
SELLING SHARES
- --------------------------------------------------------------------------------
HOW TO SELL SHARES
You may sell your shares on any day when the New York Stock Exchange is open.
However redemption of shares may be restricted in the event of an early or
unscheduled close of the New York Stock Exchange. Your shares will be sold at
the next NAV calculated after your order is accepted by the fund, less any
applicable contingent deferred sales charge. To make sure that your order is
accepted, follow the directions for selling shares given below.
The proceeds from your sale normally will be mailed or wired within one day, but
in no event more than seven days, after your request is received in proper form.
By Phone
If you purchased shares through a investment professional or financial
institution, simply call them to sell your shares. In many cases, your
redemption will be effective that day if received by your investment
professional or financial institution by the close of regular trading on the New
York Stock Exchange. In some cases, however, you will have to call by an earlier
time in order for your redemption to be effective that day. This allows your
investment professional or financial institution time to process your request
and transmit it to the fund. Contact your investment professional or financial
institution directly for more information.
If you did not purchase shares through a investment professsional or financial
institution, you may sell your shares by calling 1-800-637-2548. Proceeds can be
wired to your bank account (if the proceeds are at least $1,000 and you have
previously supplied your bank account information to the transfer agent) or sent
to you by check. The funds reserve the right to limit telephone exchanges to
$50,000 per day.
If you recently purchased your shares by check or through the Automated Clearing
House (ACH), proceeds from the sale of those shares may not be available until
your check or ACH payment has cleared, which may take up to 10 calendar days
from the date of purchase.
By Mail
To sell shares by mail, send a written request to your investment professional
or financial institution, or to the funds' transfer agent at the following
address:
First American Funds
c/o DST Systems, Inc.
P.O. Box 219382
Kansas City, Missouri 64121-9382
Your request should include the following information:
* Name of the fund
* Account number
* Dollar amount or number of shares redeemed
* Name on the account
* Signatures of all registered account owners
Signatures on a written request must be guaranteed if:
* you would like the proceeds from the sale to be paid to anyone other than to
the shareholder of record.
* you would like the check mailed to an address other than the address on the
funds' records.
* your redemption request is for $50,000 or more.
A signature guarantee assures that a signature is genuine and protects
shareholders from unauthorized account transfers. Banks, savings and loan
associations, trust companies, credit unions, broker-dealers and member firms of
a national securities exchange may guarantee signatures. Call your financial
institution to determine if it has this capability.
Proceeds from a written redemption request will be sent to you by check.
- --------------------------------------------------------------------------------
SYSTEMATIC WITHDRAWALS
If your account has a value of $5,000 or more, you may redeem a specific dollar
amount from your account on a regular basis. To set up systematic withdrawals,
contact your investment professional or financial institution.
You should not make systematic withdrawals if you plan to continue investing in
the fund, due to sales charges and tax liabilities.
- --------------------------------------------------------------------------------
REINVESTING AFTER A SALE
If you sell Class A shares, you may reinvest in Class A shares of that fund or
another First American fund within 180 days without a sales charge. To reinvest
in Class A shares at net asset value (without paying a sales charge), you must
notify the transfer agent directly in writing or notify your investment
professional or financial institution.
- --------------------------------------------------------------------------------
ACCOUNTS WITH LOW BALANCES
Except for retirement plans and UGMA/UTMA accounts, if your account balance
falls below $500 as a result of selling or exchanging shares, the fund
reserves the right to either:
* Deduct a $25 annual account maintenance fee, which is intended to allocate
the costs of maintaining accounts more equitably among shareholders, or
* Close your account and send you the proceeds, less any applicable
contingent deferred sales charge.
Before taking any action, however, the fund will send you written notice of
the action it intends to take and give you 30 days to re-establish a minimum
account balance of $500.
18
PROSPECTUS - First American Intermediate Tax Free Bond Funds
Class A Shares
<PAGE>
Policies & Services
MANAGING YOUR INVESTMENT
- --------------------------------------------------------------------------------
EXCHANGING SHARES
If your investment goals or your financial needs change, you may move from one
First American fund to another. There is no fee to exchange shares.
Generally, you may exchange your shares only for shares of the same class.
However, you may exchange your Class A shares for Class Y shares of the same or
another First American fund if you subsequently become eligible to participate
in that class (for example, by opening a fiduciary, custody or agency account
with a financial institution which invests in Class Y shares.
Exchanges are made based on the net asset value per share of each fund at the
time of the exchange. When you exchange your Class A shares of one of the funds
for Class A shares of another First American fund, you do not have to pay a
sales charge.
Before exchanging into any fund, be sure to read its prospectus carefully. A
fund may change or cancel its exchange policies at any time. You will be
notified of any changes. The funds have the right to limit exchanges to four
times per year.
By Phone
You may exchange shares by calling your investment professional, your financial
institution, or the funds' transfer agent, provided that both funds have
identical shareholder registrations. To request an exchange through the funds'
transfer agent, call 1-800-637-2548. Your instructions must be received by the
funds' transfer agent before 3 p.m. Central time, or by the time specified by
your investment professional or financial institution, in order for shares to be
exchanged the same day.
By Mail
To exchange shares by written request, please follow the procedures under
"Selling Shares." Be sure to include the names of both funds involved in the
exchange.
- --------------------------------------------------------------------------------
STAYING INFORMED
Shareholder Reports
Shareholder reports are mailed twice a year, in November and May. They include
financial statements, performance information, a message from your portfolio
managers, and, on an annual basis, the auditors' report.
In an attempt to reduce shareholder costs and help eliminate duplication, the
funds will try to limit their mailings 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 1-800-637-2548.
Statements and Confirmations
Statements summarizing activity in your account are mailed at least quarterly.
Confirmations are mailed following each purchase or sale of fund shares.
- --------------------------------------------------------------------
TELEPHONE TRANSACTIONS
You may buy, sell, or exchange shares by telephone, unless you elected on
your new account form to restrict this privilege. If you wish to reinstate
this option on an existing account, please call Investor Services at
1-800-637-2548 to request the appropriate form.
The funds and their agents will not be responsible for any losses that may
result from acting on wire or telephone instructions that they reasonably
believe to be genuine. The funds and their agents will each follow reasonable
procedures to confirm that instructions received by telephone are genuine,
which may include taping telephone conversations.
It may be difficult to reach the funds by telephone during periods of unusual
market activity. If you are unable to reach the funds or their agents by
telephone, please consider sending written instructions.
Dividends and Distributions
Dividends from a fund's net investment income are declared and paid monthly. Any
capital gains are distributed at least once each year.
On the ex-dividend date for a distribution, a fund's share price is reduced by
the amount of the distribution. If you buy shares just before the ex-dividend
date, in effect, you "buy the dividend." You will pay the full price for the
shares and then receive a portion of that price back as a distribution, all or a
portion of which may be taxable (to the same extent the distribution is
otherwise taxable to fund shareholders).
Dividend and capital gain distributions will be reinvested in additional shares
of the fund paying the distribution, unless you request that distributions be
reinvested in another First American fund or paid in cash. This request may be
made on your new account form or by writing to the fund. If you request that
your distributions be paid in cash but those distributions cannot be delivered
because of an incorrect mailing address, the undelivered distributions and all
future distributions will be reinvested in fund shares.
19
PROSPECTUS - First American Intermediate Tax Free Bond Funds
Class A Shares
<PAGE>
Policies & Services
MANAGING YOUR INVESTMENT CONTINUED
- --------------------------------------------------------------------------------
TAXES
Some of the tax consequences of investing in the funds are discussed below. More
information about taxes is in the Statement of Additional Information. However,
because everyone's tax situation is unique, always consult your tax professional
about federal, state and local tax consequences.
Taxes on Distributions
Each fund intends to meet certain federal tax requirements so that distributions
of tax-exempt interest income may be treated as "exempt-interest dividends."
These dividends are not subject to regular federal income tax. However, each
fund may invest up to 20% of its net assets in municipal securities the interest
on which is subject to the alternative minimum tax. Any portion of
exempt-interest dividends attributable to interest on these securities may
increase some shareholders' alternative minimum tax. The funds expect that their
distributions will consist primarily of exempt-interest dividends. Intermediate
Tax Free Fund's exempt-interest dividends may be subject to state or local
taxes.
Distributions paid from any interest income that is not tax-exempt and from any
net realized capital gains will be taxable whether you reinvest those
distributions or take them in cash. Distributions of a fund's net capital gains
are taxable as long-term capital gains, regardless of how long you have held
your shares.
Taxes on Transactions
The sale of fund shares, or the exchange of one fund's shares for shares of
another fund, will be a taxable event and may result in a capital gain or loss.
The gain or loss will be considered long-term if you have held your shares for
more than one year. A gain or loss on shares held for one year or less is
considered short-term and is taxed at the same rates as ordinary income.
The exchange of one class of shares for another class of shares in the same fund
will not be taxable.
California Income Taxation
California Intermediate Tax Free Fund intends to comply with certain state tax
requirements so that dividends it pays that are attributable to interest on
California municipal securities will be excluded from the California taxable
income of individuals, trusts and estates. To meet these requirements, at least
50% of the value of the fund's total assets must consist of obligations which
pay interest that is exempt from California personal income tax. Exempt-interest
dividends are not excluded from the California taxable income of corporations
and financial institutions. In addition, dividends derived from interest paid on
California municipal bonds (including securities treated for federal purposes as
private activity bonds) will not be subject to the alternative minimum tax that
California imposes on individuals, trusts, and estates.
Colorado Income Taxation
Dividends paid by Colorado Intermediate Tax Free Fund will be exempt from
Colorado income taxes for individuals, trusts, estates and corporations to the
extent that they are derived from interest on Colorado municipal securities. In
addition, dividends derived from interest on Colorado municipal securities
(including securities treated for federal purposes as private activity bonds)
will not be subject to the alternative minimum tax that Colorado imposes on
individuals, trusts, and estates.
Minnesota Income Taxation
Minnesota Intermediate Tax Free Fund intends to comply with certain state tax
requirements so that dividends it pays that are attributable to interest on
Minnesota municipal securities will be excluded from the Minnesota taxable net
income of individuals, estates, and trusts. To meet these requirements, at least
95% of the exempt-interest dividends paid by the fund must be derived from
interest income on Minnesota municipal securities. A portion of the fund's
dividends may be subject to the Minnesota alternative minimum tax.
Exempt-interest dividends are not excluded from the Minnesota taxable income of
corporations and financial institutions.
Oregon Income Taxation
Dividends paid by Oregon Intermediate Tax Free Fund will
be exempt from Oregon income taxes for individuals, trusts, and estates to the
extent that they are derived from interest on Oregon municipal securities. Such
dividends will not be excluded from the Oregon taxable income of corporations.
20
PROSPECTUS - First American Intermediate Tax Free Bond Funds
Class A Shares
<PAGE>
Additional Information
MANAGEMENT
U.S. Bank National Association (U.S. Bank), acting through
its First American Asset Management division, is the funds' investment advisor.
First American Asset Management provides investment management services to
individuals and institutions, including corporations, foundations, pensions and
retirement plans. As of December 31, 1999, it had more than $78 billion in
assets under management, including investment company assets of more than $33
billion. As investment advisor, First American Asset Management manages the
funds' business and investment activities, subject to the authority of the board
of directors. Each fund pays the investment advisor a monthly fee for providing
investment advisory services. During the fiscal year ended September 30, 1999,
after taking into account fee waivers, the funds paid the following investment
advisory fees to First American Asset Management:
Advisory fee
as a % of
average daily
net assets
- --------------------------------------------------------------------------------
CALIFORNIA INTERMEDIATE TAX FREE FUND 0.48%
COLORADO INTERMEDIATE TAX FREE FUND 0.50%
INTERMEDIATE TAX FREE FUND 0.53%
MINNESOTA INTERMEDIATE TAX FREE FUND 0.53%
OREGON INTERMEDIATE TAX FREE FUND 0.53%
- --------------------------------------------------------------------------------
Investment Advisor
First American Asset Management
601 Second Avenue South
Minneapolis, Minnesota 55402
Distributor
SEI Investments Distribution Co.
Oaks, Pennsylvania 19456
Direct Fund Correspondence to:
First American Funds
P.O. Box 1330
Minneapolis, MN 55440-1330
Additional Compensation
U.S. Bank and other affiliates of U.S. Bancorp may act as fiduciary with
respect to plans subject to the Employee Retirement Income Security Act of 1974
(ERISA) and other trust and agency accounts that invest in the funds. As
described above, U.S. Bank receives compensation for acting as the funds'
investment advisor. U.S. Bank and its affiliates also receive compensation in
connection with the following:
CUSTODY SERVICES. U.S. Bank provides or compensates others to provide custody
services to the funds. U.S. Bank is paid monthly fees equal, on an annual
basis, to 0.03% of a fund's average daily net assets. In addition, U.S. Bank is
reimbursed for its out-of-pocket expenses incurred while providing custody
services to the funds.
ADMINISTRATION SERVICES. U.S. Bank provides or compensates others to provide
administrative services to all open-end funds in the First American family of
funds. These services include general administrative and accounting services,
transfer agency and dividend disbursing services, and shareholder services. U.S.
Bank receives total fees equal, on an annual basis, to 0.12% of the aggregate
average daily net assets of all open-end mutual funds in the First American fund
family up to $8 billion and 0.105% of the aggregate average daily net assets of
all open-end mutual funds in the First American fund family in excess of $8
billion. These fees are allocated among the funds in the First American family
of funds on the basis of their relative net asset values. Additionally, the
funds pay U.S. Bank fees based upon the number of funds and accounts maintained.
SECURITIES LENDING SERVICES. In connection with lending their portfolio
securities, the funds pay administrative and custodial fees to U.S. Bank which
are equal to 40% of the funds' income from these securities lending
transactions.
BROKERAGE TRANSACTIONS. When purchasing and selling portfolio securities for
the funds, the fund's investment advisor may place trades through its
affiliates, U.S. Bancorp Investments, Inc. and U.S. Bancorp Piper Jaffray Inc.,
which will earn commissions on these transactions.
SHAREHOLDER SERVICING FEES. To the extent that fund shares are held through
U.S. Bank or its broker-dealer affiliates, U.S. Bancorp Investments, Inc. and
U.S. Bancorp Piper Jaffray Inc., those entities may receive shareholder
servicing fees from the funds' distributor.
Portfolio Management
Each fund's investments are managed by a team of persons associated with First
American Asset Management.
21
PROSPECTUS - First American Intermediate Tax Free Bond Funds
Class A Shares
<PAGE>
Additional Information
MORE ABOUT THE FUNDS
- --------------------------------------------------------------------------------
OBJECTIVES
The funds' objectives, which are described in the "Fund Summaries" section, may
be changed without shareholder approval. If a fund's objectives change, you will
be notified at least 30 days in advance. Please remember: There is no guarantee
that any fund will achieve its objectives.
- --------------------------------------------------------------------------------
INVESTMENT STRATEGIES
The funds' main investment strategies are discussed in the "Fund Summaries"
section. These are the strategies that the funds' investment advisor believes
are most likely to be important in trying to achieve the funds' objectives. You
should be aware that each fund may also use strategies and invest in securities
that are not described in this prospectus, but that are described in the
Statement of Additional Information (SAI). For a copy of the SAI, call Investor
Services at 1-800-637-2548.
Investment Approach
In selecting securities for the funds, fund managers first determine their
economic outlook and the direction in which inflation and interest rates are
expected to move. In selecting individual securities consistent with this
outlook, the fund managers evaluate factors such as credit quality, yield,
maturity, liquidity and portfolio diversification. In the case of Intermediate
Tax Free Fund, geographical diversification is also a factor. Fund managers
conduct research on potential and current holdings in the funds to determine
whether a fund should purchase or retain a security. This is a continuing
process the focus of which changes according to market conditions, the
availability of various permitted investments, and cash flows into and out of
the funds.
Municipal Securities
Municipal securities are issued to finance public infrastructure projects such
as streets and highways, schools, water and sewer systems, hospitals, and
airports. They also may be issued to refinance outstanding obligations as well
as to obtain funds for general operating expenses and for loans to other public
institutions and facilities.
The funds may invest in "general obligation" bonds, which are backed by the full
faith, credit and taxing power of the issuer, and in "revenue" bonds, which are
payable only from the revenues generated by a specific project or from another
specific revenue source. Each fund also may purchase participation interests in
municipal leases. Participation interests in municipal leases are undivided
interests in a lease, installment purchase contract or conditional sale contract
entered into by a state or local government unit to acquire equipment or
facilities. Municipal leases frequently have special risks which generally are
not associated with general obligation bonds or revenue bonds.
See "Risks -- Risks of Municipal Lease Obligations."
Up to 10% of each fund's total assets may be invested in inverse floating rate
municipal securities. The values of these securities may be highly volatile as
interest rates rise or fall. See "Risks -- Risks of Inverse Floating Rate
Securities."
Refunded Bonds
Refunded bonds may have originally been issued as general obligation or revenue
bonds, but become refunded when they are secured by an escrow fund, usually
consisting entirely of direct U.S. government obligations and/or U.S.
government agency obligations.
Temporary Investments
In an attempt to respond to adverse market, economic, political or other
conditions, each fund may temporarily invest without limit in cash and in U.S.
dollar-denominated high-quality money market instruments and other short-term
securities, including securities which pay income that is subject to federal and
state income tax. These investments may include money market funds advised by
the funds' advisor. Because these investments may be taxable, and may result in
a lower yield than would be available from investments with a lower quality or
longer term, they may prevent a fund from achieving its investment objective.
Portfolio Turnover
Fund managers may trade securities frequently, resulting, from time to time, in
an annual portfolio turnover rate of over 100%. Trading of securities may
produce capital gains, which are taxable to shareholders when distributed.
Active trading may also increase the amount of commissions or mark-ups to
broker-dealers that the fund pays when it buys and sells securities. The
"Financial Highlights" section of this prospectus shows each fund's historical
portfolio turnover rate.
- --------------------------------------------------------------------------------
RISKS
The main risks of investing in the funds are summarized in the "Fund Summaries"
section. More information about fund risks is presented below.
Interest Rate Risk
Debt securities in the funds will fluctuate in value with changes in interest
rates. In general, debt securities will increase in value when interest rates
fall and decrease in value when interest rates rise. Longer-term debt securities
are generally more sensitive to interest rate changes. Each fund may invest in
zero coupon securities, which do not pay interest on a current basis and which
may be highly volatile as interest rates rise or fall. The funds' investments in
inverse floating rate municipal securities also may be highly volatile with
changing interest rates. See "Risks of Inverse Floating Rate Securities."
22
PROSPECTUS - First American Intermediate Tax Free Bond Funds
Class A Shares
<PAGE>
Additional Information
MORE ABOUT THE FUNDS CONTINUED
Income Risk
The fund's income could decline due to falling market interest rates. This is
because, in a falling interest rate environment, the fund generally will have to
invest the proceeds from sales of fund shares, as well as the proceeds from
maturing portfolio securities (or portfolio securities that have been called,
see "Call Risk") in lower-yielding securities.
Credit Risk
Each fund is subject to the risk that the issuers of debt securities held by the
fund will not make payments on the securities, or that the other party to a
contract (such as a repurchase agreement) will default on its obligations. There
is also the risk that an issuer could suffer adverse changes in financial
condition that could lower the credit quality of a security. This could lead to
greater volatility in the price of the security and in shares of the fund. Also,
a change in the credit quality rating of a bond could affect the bond's
liquidity and make it more difficult for the fund to sell.
Each fund attempts to minimize credit risk by investing in securities considered
at least investment grade at the time of purchase. However, all of these
securities, especially those in the lower investment grade rating categories,
have credit risk. In adverse economic or other circumstances, issuers of these
lower rated securities are more likely to have difficulty making principal and
interest payments than issuers of higher rated securities. When a fund purchases
unrated securities, it will depend on the advisor's analysis of credit risk more
heavily than usual.
Call Risk
Many municipal bonds may be redeemed at the option of the issuer, or "called,"
before their stated maturity date. In general, an issuer will call its bonds if
they can be refinanced by issuing new bonds which bear a lower interest rate.
The funds are subject to the possibility that during periods of falling interest
rates, a municipal bond issuer will call its high-yielding bonds. A fund would
then be forced to invest the unanticipated proceeds at lower interest rates,
resulting in a decline in the fund's income.
Political and Economic Risk
The values of municipal securities may be adversely affected by local political
and economic conditions and developments. Adverse conditions in an industry
significant to a local economy could have a correspondingly adverse effect on
the financial condition of local issuers. Other factors that could affect
municipal securities include a change in the local, state or national economy,
demographic factors, ecological or environmental concerns, statutory limitations
on the issuer's ability to increase taxes and other developments generally
affecting the revenue of issuers (for example, legislation or court decisions
reducing state aid to local governments or mandating additional services). To
the extent a fund invests in the securities of issuers located in a single
state, it will be disproportionately affected by political and economic
conditions and developments in that state. The value of municipal securities
also may be adversely affected by future changes in federal or state income tax
laws, including rate reductions or the imposition of a flat tax.
Risks of Inverse Floating Rate Securities
Each fund may invest up to 10% of its total assets in inverse floating rate
municipal securities. These securities pay interest at a rate that varies
inversely to changes in the interest rate of specified municipal securities or a
specified index. The interest rate on this type of security will generally
change at a multiple of any change in the reference interest rate. As a result,
the values of these securities may be highly volatile as interest rates rise or
fall.
Risks of Municipal Lease Obligations
Each fund may purchase participation interests in municipal leases. These are
undivided interests in a lease, installment purchase contract or conditional
sale contract entered into by a state or local government unit to acquire
equipment or facilities. Participation interests in municipal leases pose
special risks because many leases and contracts contain "non-appropriation"
clauses that provide that the governmental issuer has no obligation to make
future payments under the lease or contract unless money is appropriated for
this purpose by the appropriate legislative body. Although these kinds of
obligations are secured by the leased equipment or facilities, it might be
difficult and time consuming to dispose of the equipment or facilities in the
event of non-appropriation, and the fund might not recover the full principal
amount of the obligation.
Risks of Active Management
Each fund is actively managed and its performance therefore will reflect in part
the advisor's ability to make investment decisions which are suited to achieving
the fund's investment objectives. Due to their active management, the funds
could underperform other mutual funds with similar investment objectives.
23
PROSPECTUS - First American Intermediate Tax Free Bond Funds
Class A Shares
<PAGE>
Additional Information
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The tables that follow present performance information about the Class A shares
of the funds. This information is intended to help you understand each fund's
financial performance for the past five years or, if shorter, the period of the
fund's operations. Some of this information reflects financial results for a
single fund share. Total returns in the tables represent the rate that you would
have earned or lost on an investment in a fund, excluding sales charges and
assuming you reinvested all of your dividends and distributions.
The information for the fiscal year ended September 30, 1999, has been audited
by Ernst & Young LLP, independent auditors, whose report, along with the funds'
financial statements, is included in the funds' annual report, which is
available upon request. The information for the fiscal years ended on or before
September 30, 1998, has been audited by other auditors.
CALIFORNIA INTERMEDIATE TAX FREE FUND
<TABLE>
<CAPTION>
Fiscal year ended September 30,
1999 1998 1997(1)
----------- ----------- -----------
<S> <C> <C> <C>
PER SHARE DATA
Net Asset Value, Beginning of Period $ 10.37 $ 10.04 $10.00
------- ------- ------
Investment Operations:
Net Investment Income 0.42 0.43 0.06
Net Gains (Losses) on Investments
(both realized and unrealized) (0.46) 0.33 0.04
------- ------- ------
Total From Investment Operations (0.04) 0.76 0.10
------- ------- ------
Less Distributions:
Dividends (from Net Investment Income) (0.41) (0.43) (0.06)
Distributions (from Capital Gains) (0.03) -- --
------- ------- ------
Total Distributions (0.44) (0.43) (0.06)
------- ------- ------
Net Asset Value, End of Period $ 9.89 $ 10.37 $10.04
======= ======= ======
Total Return (0.40)% 7.80% 1.02%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $ 2,042 $ 82 $ 1
Ratio of Expenses to Average Net Assets 0.70% 0.70% 0.69%(2)
Ratio of Net Investment Income to Average Net Assets 4.19% 4.22% 4.48%(2)
Ratio of Expenses to Average Net Assets (excluding waivers) 1.17% 1.21% 1.36%(2)
Ratio of Net Investment Income to Average Net Assets (excluding waivers) 3.72% 3.71% 3.81%(2)
Portfolio Turnover Rate 9% 22% 3%
- -------------------------------------------------------------------------- ------- -------- ------
</TABLE>
(1) The fund commenced operations on August 8, 1997.
(2) Annualized.
24
PROSPECTUS - First American Intermediate Tax Free Bond Funds
Class A Shares
<PAGE>
Additional Information
FINANCIAL HIGHLIGHTS CONTINUED
COLORADO INTERMEDIATE TAX FREE FUND
<TABLE>
<CAPTION>
Fiscal year ended September 30,
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value, Beginning of Period $10.89 $10.61 $10.42 $10.51 $10.15
------ ------ ------ ------ ------
Investment Operations:
Net Investment Income 0.46 0.47 0.48 0.49 0.49
Net Gains (Losses) on Investments
(both realized and unrealized) (0.55) 0.30 0.24 (0.04) 0.36
------ ------ ------ ------ ------
Total From Investment Operations (0.09) 0.77 0.72 0.45 0.85
------ ------ ------ ------ ------
Less Distributions:
Dividends (from Net Investment Income) (0.46) (0.47) (0.48) (0.49) (0.49)
Distributions (from Capital Gains) (0.02) (0.02) (0.05) (0.05) --
------ ------ ------ ------ ------
Total Distributions (0.48) (0.49) (0.53) (0.54) (0.49)
------ ------ ------ ------ ------
Net Asset Value, End of Period $10.32 $10.89 $10.61 $10.42 $10.51
====== ====== ====== ====== ======
Total Return (0.88)% 7.43% 7.11% 4.39% 8.57%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $4,733 $4,301 $4,187 $2,861 $2,189
Ratio of Expenses to Average Net Assets 0.70% 0.70% 0.70% 0.70% 0.70%
Ratio of Net Investment Income to Average Net Assets 4.32% 4.43% 4.55% 4.69% 4.83%
Ratio of Expenses to Average Net Assets (excluding
waivers) 1.15% 1.17% 1.16% 1.18% 1.27%
Ratio of Net Investment Income to Average Net Assets
(excluding waivers) 3.87% 3.96% 4.09% 4.21% 4.26%
Portfolio Turnover Rate 33% 19% 11% 20% 19%
- ------------------------------------------------------- ------ ------ ------ ------ ------
</TABLE>
INTERMEDIATE TAX FREE FUND FUND
<TABLE>
<CAPTION>
Fiscal year ended September 30,
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value, Beginning of Period $ 11.05 $ 10.84 $ 10.66 $ 10.72 $ 10.28
------- ------- ------- ------- -------
Investment Operations:
Net Investment Income 0.46 0.47 0.47 0.46 0.49
Net Gains (Losses) on Investments
(both realized and unrealized) (0.55) 0.27 0.24 0.01 0.43
------- ------- ------- ------- -------
Total From Investment Operations (0.09) 0.74 0.71 0.47 0.92
------- ------- ------- ------- -------
Less Distributions:
Dividends (from Net Investment Income) (0.46) (0.47) (0.47) (0.46) (0.48)
Distributions (from Capital Gains) (0.05) (0.06) (0.06) (0.07) --
------- ------- ------- ------- -------
Total Distributions (0.51) (0.53) (0.53) (0.53) (0.48)
------- ------- ------- ------- -------
Net Asset Value, End of Period $ 10.45 $ 11.05 $ 10.84 $ 10.66 $ 10.72
======= ======= ======= ======= =======
Total Return (0.78)% 7.04% 6.84% 4.45% 9.15%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $10,713 $ 9,196 $ 3,849 $ 2,618 $ 983
Ratio of Expenses to Average Net Assets 0.70% 0.70% 0.67% 0.66% 0.67%
Ratio of Net Investment Income to Average Net Assets 4.31% 4.31% 4.41% 4.35% 4.71%
Ratio of Expenses to Average Net Assets (excluding
waivers) 1.12% 1.11% 1.18% 1.17% 1.30%
Ratio of Net Investment Income to Average Net Assets
(excluding waivers) 3.89% 3.90% 3.90% 3.84% 4.08%
Portfolio Turnover Rate 23% 27% 66% 53% 68%
- ------------------------------------------------------- ------- ------- ------- ------- -------
</TABLE>
25
PROSPECTUS - First American Intermediate Tax Free Bond Funds
Class A Shares
<PAGE>
Additional Information
FINANCIAL HIGHLIGHTS CONTINUED
MINNESOTA INTERMEDIATE TAX FREE FUND
<TABLE>
<CAPTION>
Fiscal year ended September 30,
1999 1998 1997 1996 1995
----------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value, Beginning of Period $ 10.29 $ 10.09 $ 9.91 $ 9.92 $ 9.58
------- ------- ------- ------- -------
Investment Operations:
Net Investment Income 0.43 0.43 0.44 0.45 0.46
Net Gains (Losses) on Investments
(both realized and unrealized) (0.47) 0.24 0.21 0.02 0.33
------- ------- ------- ------- -------
Total From Investment Operations (0.04) 0.67 0.65 0.47 0.79
------- ------- ------- ------- -------
Less Distributions:
Dividends (from Net Investment Income) (0.43) (0.43) (0.44) (0.45) (0.45)
Distributions (from Capital Gains) (0.03) (0.04) (0.03) (0.03) --
------- ------- ------- ------- -------
Total Distributions (0.46) (0.47) (0.47) (0.48) (0.45)
------- ------- ------- ------- -------
Net Asset Value, End of Period $ 9.79 $ 10.29 $ 10.09 $ 9.91 $ 9.92
======= ======= ======= ======= =======
Total Return (0.43)% 6.80% 6.72% 4.80% 8.46%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $14,629 $10,330 $ 7,453 $ 3,916 $ 2,219
Ratio of Expenses to Average Net Assets 0.70% 0.70% 0.70% 0.70% 0.70%
Ratio of Net Investment Income to Average Net Assets 4.30% 4.30% 4.49% 4.52% 4.74%
Ratio of Expenses to Average Net Assets (excluding
waivers) 1.12% 1.11% 1.15% 1.18% 1.25%
Ratio of Net Investment Income to Average Net Assets
(excluding waivers) 3.88% 3.89% 4.04% 4.04% 4.19%
Portfolio Turnover Rate 12% 24% 20% 19% 38%
- ------------------------------------------------------- ------- ------- ------- ------- -------
</TABLE>
OREGON INTERMEDIATE TAX FREE FUND
<TABLE>
<CAPTION>
Fiscal year ended
September 30,
1999(1)
-----------
<S> <C>
PER SHARE DATA
Net Asset Value, Beginning of Period $ 10.23
-------
Investment Operations:
Net Investment Income 0.29
Net Gains (Losses) on Investments
(both realized and unrealized) ( 0.51)
-------
Total From Investment Operations ( 0.22)
-------
Less Distributions:
Dividends (from Net Investment Income) ( 0.29)
Distributions (from Capital Gains) --
-------
Total Distributions ( 0.29)
-------
Net Asset Value, End of Period $ 9.72
=======
Total Return ( 2.22)%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $ 2,005
Ratio of Expenses to Average Net Assets 0.70%(2)
Ratio of Net Investment Income to Average Net Assets 4.37%(2)
Ratio of Expenses to Average Net Assets (excluding waivers) 1.12%(2)
Ratio of Net Investment Income to Average Net Assets (excluding waivers) 3.95%(2)
Portfolio Turnover Rate 13%
- -------------------------------------------------------------------------- ----------
</TABLE>
(1) Class A Shares have been offered since February 1, 1999.
(2) Annualized.
26
PROSPECTUS - First American Intermediate Tax Free Bond Funds
Class A Shares
<PAGE>
- --------------------------------------------------------------------------------
FOR MORE INFORMATION
More information about the funds is available in the funds' Statement of
Additional Information and annual and semiannual reports.
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI provides more details about the funds and their policies. A current SAI
is on file with the Securities and Exchange Commission (SEC) and is incorporated
into this prospectus by reference (which means that it is legally considered
part of this prospectus).
- --------------------------------------------------------------------------------
ANNUAL AND SEMIANNUAL REPORTS
Additional information about the funds' investments is available in the funds'
annual and semiannual reports to shareholders. In the funds' annual report, you
will find a discussion of the market conditions and investment strategies that
significantly affected the funds' performance during their last fiscal year.
You can obtain a free copy of the funds' SAI and/or free copies of the funds'
most recent annual or semiannual reports by calling Investor Services at
1-800-637-2548. The material you request will be sent by first-class mail or
other means designed to ensure equally prompt delivery, within three business
days of receipt of the request.
You can also obtain copies of this information, after paying a duplicating fee,
by electronic request at the following email address: [email protected], or by
writing the SEC's Public Reference Section, Washington, D.C. 20549-0102. For
more information, call 1-202-942-8090.
Information about the funds is also available on the Internet. Text-only
versions of fund documents can be viewed online or downloaded from the EDGAR
Database on the SEC's Internet site at http://www.sec.gov.
FIRST AMERICAN FUNDS P.O. Box 1330, Minneapolis, MN 55440-1330
First American Asset Management, a division of U.S. Bank National Association,
serves as the investment advisor to the First American Funds.
First American Funds are distributed by SEI Investments Distribution Co. which
is located in Oaks, PA 19456 and is not an affiliate of U.S. Bank.
1/2000 3017-99
SEC file number: 811-05309
FAIF10026R
[LOGO] FIRST AMERICAN FUNDS (R)
THE POWER OF DISCIPLINED INVESTING (R)
<PAGE>
JANUARY 31, 2000
AS SUPPLEMENTED
FEBRUARY 1, 2000
ASSET CLASSES
* EQUITY FUNDS
* FUNDS OF FUNDS
* BOND FUNDS
(*) TAX FREE BOND FUNDS
* MONEY MARKET FUNDS
PROSPECTUS
FIRST AMERICAN INVESTMENT FUNDS, INC.
FIRST AMERICAN
INTERMEDIATE
TAX FREE
FUNDS
CLASS Y SHARES
CALIFORNIA INTERMEDIATE TAX FREE FUND
COLORADO INTERMEDIATE TAX FREE FUND
INTERMEDIATE TAX FREE FUND
MINNESOTA INTERMEDIATE TAX FREE FUND
OREGON INTERMEDIATE TAX FREE FUND
AS WITH ALL MUTUAL FUNDS, THE SECURITIES AND EXCHANGE COMMISSION HAS NOT
APPROVED OR DISAPPROVED THE SHARES OF THESE FUNDS, OR DETERMINED IF THE
INFORMATION IN THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY STATEMENT TO THE
CONTRARY IS A CRIMINAL OFFENSE.
[LOGO] FIRST AMERICAN FUNDS(R)
THE POWER OF DISCIPLINED INVESTING(R)
<PAGE>
Table of
CONTENTS
FUND SUMMARIES
- --------------------------------------------------------------------------------
California Intermediate Tax Free Fund 2
- --------------------------------------------------------------------------------
Colorado Intermediate Tax Free Fund 4
- --------------------------------------------------------------------------------
Intermediate Tax Free Fund 6
- --------------------------------------------------------------------------------
Minnesota Intermediate Tax Free Fund 8
- --------------------------------------------------------------------------------
Oregon Intermediate Tax Free Fund 10
- --------------------------------------------------------------------------------
POLICIES & SERVICES
- --------------------------------------------------------------------------------
Buying and Selling Shares 12
- --------------------------------------------------------------------------------
Managing Your Investment 13
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
Management 15
- --------------------------------------------------------------------------------
More About The Funds 16
- --------------------------------------------------------------------------------
Financial Highlights 18
- --------------------------------------------------------------------------------
FOR MORE INFORMATION Back Cover
- --------------------------------------------------------------------------------
<PAGE>
Fund Summaries
INTRODUCTION
This section of the prospectus describes the objectives of the First American
Intermediate Tax Free Bond Funds, summarizes the main investment strategies used
by each fund in trying to achieve its objectives, and highlights the risks
involved with these strategies. It also provides you with information about the
performance, fees, and expenses of the funds.
AN INVESTMENT IN THE FUNDS IS NOT A DEPOSIT OF U.S. BANK NATIONAL ASSOCIATION
AND IS NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION
OR ANY OTHER GOVERNMENT AGENCY.
1
PROSPECTUS - First American Intermediate Tax Free Bond Funds
Class Y Shares
<PAGE>
Fund Summaries
CALIFORNIA INTERMEDIATE TAX FREE FUND
- --------------------------------------------------------------------------------
OBJECTIVE
California Intermediate Tax Free Fund has an objective of providing current
income that is exempt from both federal income tax and California state income
tax to the extent consistent with preservation of capital.
- --------------------------------------------------------------------------------
MAIN INVESTMENT STRATEGIES
Under normal market conditions, California Intermediate Tax Free Fund invests at
least 80% of its total assets in municipal securities that pay interest that is
exempt from federal and California income tax, including the federal alternative
minimum tax. The fund normally may invest up to 20% of its net assets in taxable
obligations, including obligations the interest on which is subject to the
federal alternative minimum tax. The fund may invest in:
* "general obligation" bonds, which are backed by the full faith, credit and
taxing power of the issuer.
* "revenue" bonds, which are payable only from the revenues generated by a
specific project or from another specific revenue source.
* participation interests in municipal leases.
* zero coupon municipal securities, which pay no cash income to their holders
until they mature.
* inverse floating rate municipal securities (up to 10% of the fund's total
assets).
In selecting securities for the fund, fund managers first determine their
economic outlook and the direction in which inflation and interest rates are
expected to move. In selecting individual securities consistent with this
outlook, fund managers evaluate factors such as credit quality, yield, maturity,
liquidity, and portfolio diversification.
The fund only invests in securities that, at the time of purchase, are either
rated investment grade or are unrated and determined to be of comparable quality
by the fund's advisor. If the rating of a security is reduced or discontinued
after purchase, the fund is not required to sell the security, but may consider
doing so. Unrated securities will not exceed 25% of the fund's total assets (not
including unrated securities that have been pre-refunded with U.S. Government
securities and U.S. Government agency securities).
The fund will attempt to maintain the weighted average maturity of its portfolio
securities at three to 10 years under normal market conditions.
- --------------------------------------------------------------------------------
MAIN RISKS
The price and yield of this fund will change daily due to changes in interest
rates and other factors, which means you could lose money. The main risks of
investing in this fund include:
Interest Rate Risk
Debt securities typically decrease in value when interest rates rise. This risk
is usually greater for longer-term debt securities. Inverse floating rate
municipal securities may be highly volatile as interest rates rise or fall. For
additional explanation about inverse floating rate securities, see the "More
About The Funds -- Risks" section.
Income Risk
The fund's income could decline due to falling market interest rates.
Credit Risk
An issuer of debt securities may not make timely principal or interest payments
on its securities. The revenue bonds and municipal lease obligations in which
the fund invests may entail greater credit risk than the fund's investments in
general obligation bonds.
Call Risk
Some municipal securities held by the fund may be redeemed by the issuer, or
"called," prior to their stated maturity dates. If a security is redeemed during
a time of declining interest rates, the fund may be unable to reinvest in
securities providing as high a level of income.
Risks of Municipal Lease Obligations
Many municipal leases and contracts contain "non-appropriation" clauses that
provide that the governmental issuer has no obligation to make future payments
under the lease or contract unless money is appropriated for this purpose by the
appropriate legislative body.
Political and Economic Risk
Because the fund invests primarily in municipal securities issued by the state
of California and its political subdivisions, the fund will be particularly
affected by political and economic conditions and developments in that state.
See the Statement of Additional Information for details. The value of municipal
securities owned by the fund also may be adversely affected by future changes in
federal or state income tax laws, including rate reductions or the imposition of
a flat tax.
Risks of Non-Diversification
The fund is non-diversified. This means that it may invest a larger portion of
its assets in a limited number of issuers than a diversified fund. Because a
relatively high percentage of the fund's assets may be invested in the
securities of a limited number of issuers, the fund may be more susceptible to
any single economic, political, or regulatory occurrence than a diversified
fund.
- --------------------------------------------------------------------------------
FUND PERFORMANCE
Illustrations on the next page provide you with information on the fund's
volatility and performance. Of course, past performance does not guarantee
future results. The bar chart shows you how performance of the fund's shares has
varied from year to year. The table compares the fund's performance over
different time periods to that of the fund's benchmark index, which is a broad
measure of market performance. The fund's performance reflects fund expenses;
the benchmark is unmanaged and has no expenses.
Both the chart and the table assume that all distributions have been reinvested.
2
PROSPECTUS - First American Intermediate Tax Free Bond Funds
Class Y Shares
<PAGE>
Fund Summaries
CALIFORNIA INTERMEDIATE TAX FREE FUND CONTINUED
- --------------------------------------------------------------------------------
FUND PERFORMANCE (CONTINUED)
ANNUAL TOTAL RETURNS AS OF 12/31 EACH YEAR(1)
[BAR CHART]
5.93% -0.80%
- ----------------
1998 1999
Best Quarter: Quarter ending September 30, 1998 3.67%
Worst Quarter: Quarter ending June 30, 1999 (1.76)%
AVERAGE ANNUAL TOTAL RETURNS(1) Inception Since
AS OF 12/31/99 Date One Year Inception
- -------------------------------------------------------------------------------
California Intermediate Tax Free Fund 8/8/97 (0.80)% 3.25%
- -------------------------------------------------------------------------------
Lehman Brothers 7-Year Municipal Bond Index(2) (0.14)% 3.98%
- -------------------------------------------------------------------------------
(1) The fund has previously presented the performance history of an unregistered
predecessor common trust fund for periods prior to the fund's registration under
the Investment Company Act of 1940 on 8/8/97. The fund has determined that,
going forward, it will present performance information only for periods
subsequent to the fund's registration.
(2) An unmanaged index comprised of fixed rate, investment grade tax-exempt
bonds with maturities between six and eight years. The since inception
performance for the index is calculated from 8/31/97.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
As an investor, you pay fees and expenses to buy and hold shares of the fund.
You pay shareholder fees directly when you buy or sell shares. You pay annual
fund operating expenses indirectly since they are deducted from fund assets. The
figures below show fund expenses during the fiscal year ended September 30,
1999.(1)
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
- --------------------------------------------------------------------------------
MAXIMUM DEFERRED SALES CHARGE (LOAD) None
MAXIMUM DEFERRED SALES CHARGE (LOAD) None
ANNUAL FUND OPERATING EXPENSES AS A % OF AVERAGE NET ASSETS
- --------------------------------------------------------------------------------
Management Fees 0.70%
Distribution and Service (12b-1) Fees None
Other Expenses 0.22%
TOTAL 0.92%
- --------------------------------------------------------------------------------
(1) Actual expenses for the fiscal year were lower than those shown in the table
because of voluntary fee waivers by the advisor. See "Additional Information --
Financial Highlights." The net expenses the fund actually paid after waivers for
the fiscal year ended September 30, 1999, were:
Waiver of Fund Expenses (0.22)%
TOTAL ACTUAL ANNUAL OPERATING EXPENSES (AFTER WAIVERS) 0.70%
THE ADVISOR INTENDS TO WAIVE FEES DURING THE CURRENT FISCAL YEAR SO THAT TOTAL
FUND OPERATING EXPENSES DO NOT EXCEED 0.70%. FEE WAIVERS MAY BE DISCONTINUED AT
ANY TIME.
- --------------------------------------------------------------------------------
EXAMPLE This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes that you
invest $10,000 for the time periods indicated, that your investment has a 5%
return each year, and that the fund's operating expenses remain the same.
Although your actual costs and returns may differ, based on these assumptions
your costs would be:
- --------------------------------------------------------------------------------
1 year $ 94
3 years $ 293
5 years $ 509
10 years $1,131
3
PROSPECTUS - First American Intermediate Tax Free Bond Funds
Class Y Shares
<PAGE>
Fund Summaries
COLORADO INTERMEDIATE TAX FREE FUND
- --------------------------------------------------------------------------------
OBJECTIVE
Colorado Intermediate Tax Free Fund has an objective of providing current income
that is exempt from both federal income tax and Colorado state income tax to the
extent consistent with preservation of capital.
- --------------------------------------------------------------------------------
MAIN INVESTMENT STRATEGIES
Under normal market conditions, Colorado Intermediate Tax Free Fund invests at
least 80% of its total assets in municipal securities that pay interest that is
exempt from federal and Colorado income tax, including the federal alternative
minimum tax. The fund normally may invest up to 20% of its net assets in taxable
obligations, including obligations the interst on which is subject to the
federal alternative minimum tax. The fund may invest in:
* "general obligations" bonds, which are backed by the full faith, credit and
taxing power of the issuer.
* "revenue" bonds, which are payable only from the revenue generated by a
specific project or from another specific revenue source.
* participation interests in municipal leases.
* zero coupon municipal securities, which pay no cash income to their holders
until they mature.
* inverse floating rate municipal securities (up to 10% of the fund's total
assets).
In selecting securities for the fund, fund managers first determine their rated
investment grade or are unrated and determined to be of comparable quality by
the fund's advisor. If the rating of a security is reduced or discontinued after
purchase, the fund is not required to sell the security, but may consider doing
so. Unrated securities will not exceed 25% of the fund's total assets (not
including unrated securities that have been pre-refunded with U.S. Government
securities and U.S. Government agency securities.)
The fund only invests in securities that, at the time of purchase, are either
rated investment grade or are unrated and determined to be of comparable quality
by the fund's advisor. Unrated securities will not exceed 25% of the fund's
total assets (not including unrated securities that have been pre-refunded with
U.S. Government securities and U.S. Government agency securities).
The fund will attempt to maintain the weighted average maturity of its portfolio
securities at three to 10 years under normal market conditions.
- --------------------------------------------------------------------------------
MAIN RISKS
The price and yield of this fund will change daily due to changes in interest
rates and other factors, which means you could lose money. The main risks of
investing in this fund include:
Interest Rate Risk
Debt securities typically decrease in value when interest rates rise. This risk
is usally greater for longer-term debt securities. Inverse floating rate
municipal securitiesmay be highly volatile as interest rates rise or fall. For
additional explanation about inverse floating rate securities, see the "More
About The Funds -- Risks" section.
Income Risk
The fund's income could decline due to falling market interest rates.
Credit Risk
An issuer of debt securities may not make timely principal or interest payments
on its securities. The revenue bonds and municipal lease obligations in which
the fund invests may entail greater credit risk than the fund's investments in
general obligation bonds.
Call Risk
Some municipal securities held by the fund may be redeemed by the issuer, or
"called," prior to their stated maturity dates. If a security is redeemed during
a time of declining interest rates, the fund may be unable to reinvest in
securities providing as high a level of income.
Risks of Municipal Lease Obligations
Many municipal leases and contracts contain "non-appropriation" clauses that
provide that the governmental issuer has no obligation to make future payments
under the lease or contract unless money is appropriated for this purpose by the
appropriate legislative body.
Political and Economic Risk
Because the fund invests primarily in municipal securities issued by the state
of Colorado and its political subdivisions, the fund will be particularly
affected by political and economic conditions and developments in that state.
See the Statement of Additional Information for details. The value of municipal
securities owned by the fund also may be adversely affected by future changes in
federal or state income tax laws, including rate reductions or the imposition of
a flat tax.
Risks of Non-Diversification
The fund is non-diversified. This means that it may invest a larger portion of
its assets in a limited number of issuers than a diversified fund. Because a
relatively high percentage of the fund's assets may be invested in the
securities of a limited number of issuers, the fund may be more susceptible to
any single economic, political, or regulatory occurrence than a diversified
fund.
- --------------------------------------------------------------------------------
FUND PERFORMANCE
Illustrations on the next page provide you with information on the fund's
volatility and performance. Of course, past performance does not guarantee
future results.
The bar chart shows you how performance of the fund's shares has varied from
year to year.
The table compares the fund's performance over different time periods to that of
the fund's benchmark index, which is a broad measure of market performance. The
fund's performance reflects fund expenses; the benchmark is unmanaged and has no
expenses.
Both the chart and the table assume that all distributions have been reinvested.
4
PROSPECTUS - First American Intermediate Tax Free Bond Funds
Class Y Shares
<PAGE>
Fund Summaries
COLORADO INTERMEDIATE TAX FREE FUND CONTINUED
- --------------------------------------------------------------------------------
FUND PERFORMANCE (CONTINUED)
ANNUAL TOTAL RETURNS AS OF 12/31 EACH YEAR
[BAR CHART]
12.33% 3.86% 7.07% 5.25% -1.59%
- ----------------------------------------------
1995 1996 1997 1998 1999
Best Quarter: Quarter ending March 31, 1995 5.18%
Worst Quarter: Quarter ending June 30, 1999 (1.86)%
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS Inception Since
AS OF 12/31/99 Date One Year Five Years Inception
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------
Colorado Intermediate Tax Free Fund 4/4/94 (1.59)% 5.29% 5.09%
- ---------------------------------------------------------------------------------------------------
Lehman Brothers 7-Year Municipal Bond Index(1) (0.14)% 6.36% 5.65%
- ---------------------------------------------------------------------------------------------------
</TABLE>
(1) An unmanaged index comprised of fixed rate, investment grade tax-exempt
bonds with maturities between six and eight years. The since inception
performance for the index is calculated from 4/30/94.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
As an investor, you pay fees and expenses to buy and hold shares of the fund.
You pay shareholder fees directly when you buy or sell shares. You pay annual
fund operating expenses indirectly since they are deducted from fund assets. The
figures below show fund expenses during the fiscal year ended September 30,
1999.(1)
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
- --------------------------------------------------------------------------------
MAXIMUM SALES CHARGE (LOAD) None
MAXIMUM DEFERRED SALES CHARGE (LOAD) None
ANNUAL FUND OPERATING EXPENSES AS A % OF AVERAGE NET ASSETS
- --------------------------------------------------------------------------------
Management Fees 0.70%
Distribution and Service (12b-1) Fees None
Other Expenses 0.20%
TOTAL 0.90%
- --------------------------------------------------------------------------------
(1) Actual expenses for the fiscal year were lower than those shown in the table
because of voluntary fee waivers by the advisor. See "Additional Information --
Financial Highlights." The net expenses the fund actually paid after waivers for
the fiscal year ended September 30, 1999, were:
Waiver of Fund Expenses (0.20)%
TOTAL ACTUAL ANNUAL OPERATING EXPENSES (AFTER WAIVERS) 0.70%
THE ADVISOR INTENDS TO WAIVE FEES DURING THE CURRENT FISCAL YEAR SO THAT TOTAL
FUND OPERATING EXPENSES DO NOT EXCEED 0.70%. FEE WAIVERS MAY BE DISCONTINUED AT
ANY TIME.
- --------------------------------------------------------------------------------
EXAMPLE This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes that you
invest $10,000 for the time periods indicated, that your investment has a 5%
return each year, and that the fund's operating expenses remain the same.
Although your actual costs and returns may differ, based on these assumptions
your costs would be:
- --------------------------------------------------------------------------------
1 year $ 92
3 years $ 287
5 years $ 498
10 years $1,108
5
PROSPECTUS - First American Intermediate Tax Free Bond Funds
Class Y Shares
<PAGE>
Fund Summaries
INTERMEDIATE TAX FREE FUND
- --------------------------------------------------------------------------------
OBJECTIVE
Intermediate Tax Free Fund has an objective of providing current income that is
exempt from federal income tax to the extent consistent with preservation of
capital.
- --------------------------------------------------------------------------------
MAIN INVESTMENT STRATEGIES
Under normal market conditions, Intermediate Tax Free Fund invests at least 80%
of its total assets in municipal securities that pay interest that is exempt
from federal income tax, including the federal alternative minimum tax. The fund
normally may invest up to 20% of its net assets in taxable obligations,
including obligations the interest on which is subject to the federal
alternative minimum tax. The fund may invest in:
* "general obligation" bonds, which are backed by the full faith, credit and
taxing power of the issuer.
* "revenue" bonds, which are payable only from the revenues generated by a
specific project or from another specific revenue source.
* participation interests in municipal leases.
* zero coupon municipal securities, which pay no cash income to their holders
until they mature.
* inverse floating rate municipal securities (up to 10% of the fund's total
assets).
In selecting securities for the fund, fund managers first determine their
economic outlook and the direction in which inflation and interest rates are
expected to move. In selecting individual securities consistent with this
outlook, fund managers evaluate factors such as credit quality, yield, maturity,
liquidity, and portfolio and geographical diversification.
The fund only invests in securities that, at the time of purchase, are either
rated investment grade or are unrated and determined to be of comparable quality
by the fund's advisor. If the rating of a security is reduced or discontinued
after purchase, the fund is not required to sell the security, but may consider
doing so. Unrated securities will not exceed 25% of the fund's total assets (not
including unrated securities that have been pre-refunded with U.S. Government
securities and U.S. Government agency securities).
The fund will attempt to maintain the weighted average maturity of its portfolio
securities at three to 10 years under normal market conditions.
- --------------------------------------------------------------------------------
MAIN RISKS
The price and yield of this fund will change daily due to changes in interest
rates and other factors, which means you could lose money. The main risks of
investing in this fund include:
Interest Rate Risk
Debt securities typically decrease in value with interest rates rise. This risk
is usually greater for longer-term debt securities. Inverse floating rate
municipal securities may be highly volatile as interest rates rise or fall. For
additional explanation about inverse floating rate securities, see the "More
About The Funds -- Risks" section.
Income Risk
The fund's income could decline due to falling market interest rates.
Credit Risk
An issuer of debt securities may not make timely principal or interest payments
on its securities. The revenue bonds and municipal lease obligations in which
the fund invests may entail greater credit risk than the fund's investments in
general obligation bonds.
Call Risk
Some municipal securities held by the fund may be redeemed by the issuer, or
"called," prior to their stated maturity dates. If a security is redeemed during
a time of declining interest rates, the fund may be unable to reinvest in
securities providing as high a level of income.
Risks of Municipal Lease Obligations
Many municipal leases and contracts contain "non-appropriation" clauses that
provide that the governmental issuer has no obligation to make future payments
under the lease or contract unless money is appropriated for this purpose by the
appropriate legislative body.
Political and Economic Risk
The value of municipal securities owned by the fund may be adversely affected by
state and local political and economic coniditons and developments, or by future
changes in federal or state income tax laws, including rate reductions or the
imposition of a flat tax.
- --------------------------------------------------------------------------------
FUND PERFORMANCE
Illustrations on the next page provide you with information on the fund's
volatility and performance. Of course, past performance does not guarantee
future results.
The bar chart shows you how performance of the fund's shares has varied from
year to year.
The table compares the fund's performance over different time periods to that of
the fund's benchmark index, which is a broad measure of market performance. The
fund's performance reflects fund expenses; the benchmark is unmanaged and has no
expenses.
Both the chart and the table assume that all distributions have been reinvested.
6
PROSPECTUS - First American Intermediate Tax Free Bond Funds
Class Y Shares
<PAGE>
Fund Summaries
INTERMEDIATE TAX FREE FUND CONTINUED
- --------------------------------------------------------------------------------
FUND PERFORMANCE (CONTINUED)
ANNUAL TOTAL RETURNS AS OF 12/31 EACH YEAR
[BAR CHART]
12.79% 3.72% 6.80% 5.39% -1.46%
- ----------------------------------------------
1995 1996 1997 1998 1999
Best Quarter: Quarter ending March 31, 1995 5.00%
Worst Quarter: Quarter ending June 30, 1999 (1.92)%
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS Inception Since
AS OF 12/31/99 Date One Year Five Years Inception
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------
Intermediate Tax Free Fund 2/4/94 (1.46)% 5.35% 3.87%
- --------------------------------------------------------------------------------------------------
Lehman Brother 7-Year Municipal Bond Index(1) (0.14)% 6.36% 5.13%
- --------------------------------------------------------------------------------------------------
Lehman Brothers 7-Year G.O. Index(2) (0.17)% 6.50% 5.21%
- --------------------------------------------------------------------------------------------------
</TABLE>
(1) An unmanaged index comprised of fixed rate, investment grade tax-exempt
bonds with maturities between six and eight years. The since inception
performance for the index is calculated from 2/28/94. Previously, the fund used
the Lehman 7-Year G.O. Index as a benchmark. Going forward, the fund will use
the Lehman 7-Year Municipal Bond Index as a comparison, because it is better
suited to the fund's investment strategies.
(2) An unmanaged index comprised of fixed rate, investment grade, general
obligation tax-exempt bonds with maturities between six and eight years. The
since inception performance for the index is calculated from 2/28/94.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
As an investor, you pay fees and expenses to buy and hold shares of the fund.
You pay shareholder fees directly when you buy or sell shares. You pay annual
fund operating expenses indirectly since they are deducted from fund assets. The
figures below show fund expenses during the fiscal year ended September 30,
1999.(1)
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
- --------------------------------------------------------------------------------
MAXIMUM SALES CHARGE (LOAD) None
MAXIMUM DEFERRED SALES CHARGE (LOAD) None
ANNUAL FUND OPERATING EXPENSES AS A % OF AVERAGE NET ASSETS
- --------------------------------------------------------------------------------
Management Fees 0.70%
Distribution and Service (12b-1) Fees None
Other Expenses 0.17%
TOTAL 0.87%
- --------------------------------------------------------------------------------
(1) Actual expenses for the fiscal year were lower than those shown in the table
because of voluntary fee waivers by the advisor. See "Additional Information --
Financial Highlights." The net expenses the fund actually paid after waivers for
the fiscal year ended September 30, 1999, were:
Waiver of Fund Expenses (0.17)%
TOTAL ACTUAL ANNUAL OPERATING EXPENSES (AFTER WAIVERS) 0.70%
THE ADVISOR INTENDS TO WAIVE FEES DURING THE CURRENT FISCAL YEAR SO THAT TOTAL
FUND OPERATING EXPENSES DO NOT EXCEED 0.70%. FEE WAIVERS MAY BE DISCONTINUED AT
ANY TIME.
- --------------------------------------------------------------------------------
EXAMPLE This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes that you
invest $10,000 for the time periods indicated, that your investment has a 5%
return each year, and that the fund's operating expenses remain the same.
Although your actual costs and returns may differ, based on these assumptions
your costs would be:
- --------------------------------------------------------------------------------
1 year $ 89
3 years $ 278
5 years $ 482
10 years $1,073
7
PROSPECTUS - First American Intermediate Tax Free Bond Funds
Class Y Shares
<PAGE>
Fund Summaries
MINNESOTA INTERMEDIATE TAX FREE FUND
- --------------------------------------------------------------------------------
OBJECTIVE
Minnesota Intermediate Tax Free Fund has an objective of providing current
income that is exempt from both federal income tax and Minnesota state income
tax to the extent consistent with preservation of capital.
- --------------------------------------------------------------------------------
MAIN INVESTMENT STRATEGIES
Under normal market conditions, Minnesota Intermediate Tax Free Fund invests at
least 80% of its total assets in municipal securities that pay interest that is
exempt from federal and Minnesota income tax, including federal and state of
Minnesota alternative minimum tax. The fund normally may invest up to 20% of its
net assets in taxable obligations, including obligations the interest on which
is subject to federal and state of Minnesota alternative minimum tax. The fund
may invest in:
* "general obligations" bonds, which are backed by the full faith, credit and
taxing power of the issuer.
* "revenue" bonds, which are payable only from the revenues generated bya
specific project or from another specific revenue source.
* participation interests in municipal leases.
* zero coupon municipal securities, which pay no cash income to their holders
until they mature.
* inverse floating rate municipal securities (up to 10% of the fund's total
assets).
In selecting securities for the fund, fund managers first determine their
economic outlook and the direction in which inflation and interest rates are
expected to move. In selecting individual securities consistent with this
outlook, fund managers evaluate factors such as credit quality, yield, maturity,
liquidity, and portfolio diversifications.
The fund only invests in securities that, at the time of purchase, are either
rated investment grade or are unrated and determined to be of comparable
quality by the fund's advisor. If the rating of a security is reduced or
discontinued after purchase, the fund is not required to sell the security, but
may consider doing so. Unrated securities will not exceed 25% of the fund's
total assets (not including unrated securities that have been pre-refunded with
U.S. Government securities and U.S. Government agency securities).
The fund will attempt to maintain the weighted average maturity of its portfolio
securities at three to 10 years under normal market conditions.
- --------------------------------------------------------------------------------
MAIN RISKS
The price and yield of this fund will change daily due to changes in interest
rates and other factors, which means you could lose money. The main risks of
investing in this fund include:
Interest Rate Risk
Debt securities typically decrease in value when interest rates rise. This risk
is usually greater for longer-term debt securities. Inverse floating rate
municipal securities may be highly volatile as interest rates rise or fall. For
additional explanation about inverse floating rate securities, see the "More
About The Funds -- Risks" section.
Income Risk
The fund's income could decline due to falling market interest rates.
Credit Risk
An issuer of debt securites may not make timely principal or interest payments
on its securities. The revenue bonds and municipal lease obligations in which
the fund invests may entail greater credit risk than the fund's investments in
general obligation bonds.
Call Risk
Some municipal securities held by the fund may be redeemed by the issuer, or
"called," prior to their stated maturity dates. If a security is redeemed during
a time of declining interest rates, the fund may be unable to reinvest in
securities providing as high a level of income.
Risks of Municipal Lease Obligations
Many municipal leases and contracts contain "non-appropriation" clauses that
provide that the governmental issuer has no obligation to make future payments
under the lease or contract unless money is appropriated for this purpose by the
appropriate legislative body.
Political and Economic Risk
Because the fund invests primarily in municipal securities issued by the state
of Minnesota and its political subdivisions, the fund will be particularly
affected by political and economic conditions and developments in that state.
See the Statement of Additional Information for details. The value of municipal
securities owned by the fund also may be adversely affected by future changes in
federal or state income tax laws, including rate reductions or the imposition of
a flat tax.
Risks of Non-Diversification
The fund is non-diversified. This means that it may invest a larger portion of
its assets in a limited number of issuers than a diversified fund. Because a
relatively high percentage of the fund's assets may be invested in the
relatively high percentage of the fund's assets may be invested in the
securities of a limited number of issuers, the fund may be more susceptible to
any single economic, political, or regulatory occurrence than a diversified
fund.
- --------------------------------------------------------------------------------
FUND PERFORMANCE
Illustrations on the next page provide you with information on the fund's
volatility and performance. Of course, past performance does not guarantee
future results.
The bar chart shows you how performance of the fund's shares has varied from
year to year.
The table compares the fund's performance over different time periods to that of
the fund's benchmark index, which is a broad measure of market performance. The
fund's performance reflects fund expenses; the benchmark is unmanaged and has no
expenses.
Both the chart and the table assume that all distributions have been reinvested.
8
PROSPECTUS - First American Intermediate Tax Free Bond Funds
Class Y Shares
<PAGE>
Fund Summaries
MINNESOTA INTERMEDIATE TAX FREE FUND CONTINUED
- --------------------------------------------------------------------------------
FUND PERFORMANCE (CONTINUED)
ANNUAL TOTAL RETURNS AS OF 12/31 EACH YEAR
[BAR CHART]
12.66% 3.51% 6.65% 5.25% -1.27%
- ----------------------------------------------
1995 1996 1997 1998 1999
Best Quarter: Quarter ending March 31, 1995 5.19%
Worst Quarter: Quarter ending June 30, 1999 (1.62)%
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS Inception Since
AS OF 12/31/99 Date One Year Five Years Inception
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------
Minnesota Intermediate Tax Free Fund 2/25/94 (1.27)% 5.26% 4.03%
- ---------------------------------------------------------------------------------------------------
Lehman Brothers 7-Year Municipal Bond Index(1) (0.14)% 6.36% 5.13%
- ---------------------------------------------------------------------------------------------------
</TABLE>
(1) An unmanaged index comprised of fixed rate, investment grade tax-exempt
bonds with maturities between six and eight years. The since inception
performance for the index is calculated from 2/28/94.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
As an investor, you pay fees and expenses to buy and hold shares of the fund.
You pay shareholder fees directly when you buy or sell shares. You pay annual
fund operating expenses indirectly since they are deducted from fund assets. The
figures below show fund expenses during the fiscal year ended September 30,
1999.(1)
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
- --------------------------------------------------------------------------------
MAXIMUM SALES CHARGE (LOAD) None
MAXIMUM DEFERRED SALES CHARGE (LOAD) None
ANNUAL FUND OPERATING EXPENSES AS A % OF AVERAGE NET ASSETS
- --------------------------------------------------------------------------------
Management Fees 0.70%
Distribution and Service (12b-1) Fees None
Other Expenses 0.17%
TOTAL 0.87%
- --------------------------------------------------------------------------------
(1) Actual expenses for the fiscal year were lower than those shown in the table
because of voluntary fee waivers by the advisor. See "Additional Information --
Financial Highlights." The net expenses the fund actually paid after waivers for
the fiscal year ended September 30, 1999, were:
Waiver of Fund Expenses (0.17)%
TOTAL ACTUAL ANNUAL OPERATING EXPENSES (AFTER WAIVERS) 0.70%
THE ADVISOR INTENDS TO WAIVE FEES DURING THE CURRENT FISCAL YEAR SO THAT TOTAL
FUND OPERATING EXPENSES DO NOT EXCEED 0.70%. FEE WAIVERS MAY BE DISCONTINUED AT
ANY TIME.
- --------------------------------------------------------------------------------
EXAMPLE This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes that you
invest $10,000 for the time periods indicated, that your investment has a 5%
return each year, and that the fund's operating expenses remain the same.
Although your actual costs and returns may differ, based on these assumptions
your costs would be:
- --------------------------------------------------------------------------------
1 year $ 89
3 years $ 278
5 years $ 482
10 years $1,073
9
PROSPECTUS - First American Intermediate Tax Free Bond Funds
Class Y Shares
<PAGE>
Fund Summaries
OREGON INTERMEDIATE TAX FREE FUND
- --------------------------------------------------------------------------------
OBJECTIVE
Oregon Intermediate Tax Free Fund has an objective of providing current income
that is exempt from both federal income tax and Oregon state income tax to the
extent consistent with preservation of capital.
- --------------------------------------------------------------------------------
MAIN INVESTMENT STRATEGIES
Under normal market conditions, Oregon Intermediate Tax Free Fund invests at
least 80% of its total assets in municipal securities that pay interest that is
exempt from federal income tax, including the federal alternative minimum tax.
The fund normally may invest up to 20% of its net assets in taxable obligations,
including obligations the interest on which is subject to the federal
alternative minimum tax. The fund may invest in:
* "general obligations" bonds, which are backed by the full faith, credit and
taxing power of the issuer.
* "revenue" bonds, which are payable only from the revenues generated by a
specific project or from another specific revenue source.
* participation interests in municipal leases.
* zero coupon municipal securities, which pay no cash income to their holders
until they mature.
* inverse floating rate municipal securities (up to 10% of the fund's total
assets).
In selecting securities for the fund, fund managers first determine their
economic outlook and the direction in which inflation and interest rates are
expected to move. In selecting individual securities consistent with this
outlook, fund managers evaluate factors such as credit quality, yield, maturity,
liquidity, and portfolio diversification.
The fund only invests in securities that, at the time of purchase, are either
rated investment grade or are unrated and determined to be of comparable quality
by the fund's advisor. If the rating of a security is reduced or discontinued
after purchase, the fund is not required to sell the security, but may consider
doing so. Unrated securities will not exceed 25% of the fund's total assets (not
including unrated securities that have been pre-refunded with U.S. Government
securities and U.S. Government agency securities).
The fund will attempt to maintain the weighted average maturity of its portfolio
securities at three to 10 years under normal market conditions.
- --------------------------------------------------------------------------------
MAIN RISKS
The price and yield of this fund will change daily due to changes in interest
rates and other factors, which means you could lose money. The main risks of
investing in this fund include:
Interest Rate Risk
Debt securities typically decrease in value when interest rates rise. This risk
is usually greater for longer-term debt securities. Inverse floating rate
municipal securities may be highly volatile as interest rates rise or fall. For
additional explanation about inverse floating rate securities, see the "More
About The Funds -- Risks" section.
Income Risk
The fund's income could decline due to falling marketing interest rates.
Credit Risk
An issuer of debt securities may not make timely principal or interest payments
on its securities. The revenue bonds and municipal lease obligations in which
the fund ivnests may entail greater credit risk than the fund's investments in
general obligations bonds.
Call Risk
Some municipal securities held by the fund may be redeemed by the issuer, or
"called," prior to their stated maturity dates. If a security is redeemed during
a time of declining interest rates, the fund may be unable to reinvest in
securities providing as high a level of income.
Risks of Municipal Lease Obligations
Many municipal leases and contracts contain "non-appropriation" clauses that
provide that the governmental issuer has no obligation to make future payments
under the lease or contract unless money is appropriated for this purpose by the
appropriate legislative body.
Political and Economic Risk
Because the fund invests primarily in municipal securities issued by the state
of Oregon and its political subdivisions, the fund will be particularly affected
by political and economic conditions and developments in that state. See the
Statement of Additional Information for details. The value of municipal
securities owned by the fund also may be adversely affected by future changes in
federal or state income tax laws, including rate reductions or the imposition of
a flat tax.
Risks of Non-Diversification
The fund is non-diversified. This means that it may invest a larger portion of
its assets in a limited number of issuers than a diversified fund. Because a
relatively high percentage of the fund's assets may be invested in the
securities of a limited number of issuers, the fund may be more susceptible to
any single economic, political, or regulatory occurrence than a diversified
fund.
- --------------------------------------------------------------------------------
FUND PERFORMANCE
Illustrations on the next page provide you with information on the fund's
volatility and performance. Of course, past performance does not guarantee
future results.
The bar chart shows you how performance of the fund's shares has varied from
year to year.
The table compares the fund's performance over different time periods to that of
the fund's benchmark index, which is a broad measure of market performance. The
fund's performance reflects fund expenses; the benchmark is unmanaged and has no
expenses.
Both the chart and the table assume that all distributions have been reinvested.
10
PROSPECTUS - First American Intermediate Tax Free Bond Funds
Class Y Shares
<PAGE>
Fund Summaries
OREGON INTERMEDIATE TAX FREE FUND CONTINUED
- --------------------------------------------------------------------------------
FUND PERFORMANCE (CONTINUED)
ANNUAL TOTAL RETURNS AS OF 12/31 EACH YEAR(1)
[BAR CHART]
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
7.63% 9.89% 7.19% 8.96% -2.66% 11.27% 3.31% 7.06% 5.36% -1.50%
- --------------------------------------------------------------------------------------------
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
</TABLE>
Best Quarter: Quarter ending December 31, 1990 4.49%
Worst Quarter: Quarter ending March 31, 1999 (3.41)%
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS One Five Ten
AS OF 12/31/99(1) Year Years Years
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Oregon Intermediate Tax Free Fund (1.50)% 5.01% 5.56%
- ------------------------------------------------------------------------------------
Lehman Brothers 7-Year Municipal Bond Index(2) (0.14)% 6.36% 6.60%
- ------------------------------------------------------------------------------------
</TABLE>
(1) Performance prior to 8/8/97 is that of Oregon Municipal Bond Trust Fund, a
predecessor common trust fund. On 8/8/97, substantially all of the assets of
Oregon Municipal Bond Trust Fund were transferred into Micro Cap Value Fund. The
objectives, policies, and guidelines of the two funds were, in all respects,
identical. Oregon Municipal Bond Trust Fund's performance is adjusted to reflect
Oregon Intermediate Tax Free Fund's Class A share fees and expenses, before any
fee waivers. Oregon Municipal Bond Trust Fund was not registered under the
Investment Company Act of 1940 and therefore was not subject to certain
investment restrictions that might have adversely affected performance.
(2) An unmanaged index comprised of fixed rate, investment grade tax-exempt
bonds with maturities between six and eight years. The since inception
performance for the index is calculated from 8/31/97.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
As an investor, you pay fees and expenses to buy and hold shares of the fund.
You pay shareholder fees directly when you buy or sell shares. You pay annual
fund operating expenses indirectly since they are deducted from fund assets. The
figures below show fund expenses during the fiscal year ended September 30,
1999.(1)
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
- --------------------------------------------------------------------------------
MAXIMUM SALES CHARGE (LOAD) None
MAXIMUM DEFERRED SALES CHARGE (LOAD) None
ANNUAL FUND OPERATING EXPENSES AS A % OF AVERAGE NET ASSETS
- --------------------------------------------------------------------------------
Management Fees 0.70%
Distribution and Service (12b-1) Fees None
Other Expenses 0.17%
TOTAL 0.87%
- --------------------------------------------------------------------------------
(1) Actual expenses for the fiscal year were lower than those shown in the table
because of voluntary fee waivers by the advisor. See "Additional Information --
Financial Highlights." The net expenses the fund actually paid after waivers for
the fiscal year ended September 30, 1999, were:
Waiver of Fund Expenses (0.17)%
TOTAL ACTUAL ANNUAL OPERATING EXPENSES (AFTER WAIVERS) 0.70%
THE ADVISOR INTENDS TO WAIVE FEES DURING THE CURRENT FISCAL YEAR SO THAT TOTAL
FUND OPERATING EXPENSES DO NOT EXCEED 0.70%. FEE WAIVERS MAY BE DISCONTINUED AT
ANY TIME.
- --------------------------------------------------------------------------------
EXAMPLE This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes that you
invest $10,000 for the time periods indicated, that your investment has a 5%
return each year, and that the fund's operating expenses remain the same.
Although your actual costs and returns may differ, based on these assumptions
your costs would be:
- --------------------------------------------------------------------------------
1 year $ 89
3 years $ 278
5 years $ 482
10 years $1,073
11
PROSPECTUS - First American Intermediate Tax Free Bond Funds
Class Y Shares
<PAGE>
Policies & Services
BUYING AND SELLING SHARES
Class Y shares are offered through banks and other financial institutions that
have entered into sales agreements with the funds' distributor and that hold the
shares in an omnibus account with the transfer agent. Class Y shares are
available to certain accounts for which the financial institution acts in a
fiduciary, agency or custodial capacity, such as certain trust accounts and
investment advisory accounts. To find out whether you may purchase Class Y
shares, contact your financial institution.
There is no initial or deferred sales charge on your purchase of Class Y shares.
However, your investment professional or financial institution may receive a
commission of up to 1.25% on your purchase.
- --------------------------------------------------------------------------------
CALCULATING YOUR SHARE PRICE
Your purchase price will be equal to the fund's net asset value (NAV) per share,
which is generally calculated as of the close of regular trading on the New York
Stock Exchange (usually 3 p.m. Central time) every day the exchange is open.
A fund's NAV is equal to the market value of its investments and other assets,
less any liabilities, divided by the number of fund shares. If market prices are
not readily available for an investment or if the advisor believes they are
unreliable, fair value prices may be determined in good faith using methods
approved by the funds' board of directors.
- --------------------------------------------------------------------------------
HOW TO BUY AND SELL SHARES
You may purchase or sell shares by calling your financial institution.
When purchasing shares, payment must be made by wire transfer, which can be
arranged by your financial institution. Because purchases must be paid for by
wire transfer, you can purchase shares only on days when both the New York Stock
Exchange and federally chartered banks are open. You may sell your shares on any
day when the New York Stock Exchange is open.
Purchase orders and redemption requests must be received by your financial
institution by the time specified by the institution to be assured same day
processing. In order for shares to be purchased at that day's price, the funds
must receive your purchase order by 3:00 p.m. Central time and the funds'
custodian must receive federal funds before the close of business. In order for
shares to be sold at that day's price, the funds must receive your redemption
request by 3:00 p.m. Central time. It is the responsibility of your financial
institution to promptly transmit orders to the funds. Purchase orders and
redemption requests may be restricted in the event of an early or unscheduled
close of the New York Stock Exchange.
If the funds receive your redemption request by 3:00 p.m. Central time, payment
of your redemption proceeds will ordinarily be made by wire on the next business
day. It is possible, however, that payment could be delayed by up to seven days.
- --------------------------------------------------------------------------------
HOW TO EXCHANGE SHARES
If your investment goals or your financial needs change, you may exchange your
shares for Class Y shares of another First American fund. Exchanges will be made
at the net asset value per share of each fund at the time of the exchange. There
is no fee to exchange shares. If you are no longer eligible to hold Class Y
shares, for example, if you decide to discontinue your fiduciary, agency or
custodian account, you may exchange your shares for Class A shares at net asset
value. Class A shares have higher expenses than Class Y shares.
To exchange your shares, call your financial institution. In order for your
shares to be exchanged the same day, you must call your financial institution by
the time specified by the institution and your exchange order must be received
by the funds by 3:00 p.m. Central time. It is the responsibility of your
financial institution to promptly transmit your exchange order to the funds.
Before exchanging into any fund, be sure to read its prospectus carefully. A
fund may change or cancel its exchange policies at any time. You will be
notified of any changes. The funds have the right to limit exchanges to four
times per year.
12
PROSPECTUS - First American Intermediate Tax Free Bond Funds
Class Y Shares
<PAGE>
Policies & Services
MANAGING YOUR INVESTMENT
- --------------------------------------------------------------------------------
STAYING INFORMED
Shareholder Reports
Shareholder reports are mailed twice a year, in November and May. They include
financial statements, performance information, a message from your portfolio
managers, and, on an annual basis, the auditors' report.
In an attempt to reduce shareholder costs and help eliminate duplication, the
funds will try to limit their mailings 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 1-800-637-2548.
Statements and Confirmations
Statements summarizing activity in your account are mailed at least quarterly.
Confirmations are mailed following each purchase or sale of fund shares.
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS
Dividends from a fund's net investment income are declared and paid monthly. Any
capital gains are distributed at least once each year.
On the ex-dividend date for a distribution, a fund's share price is reduced by
the amount of the distribution. If you buy shares just before the ex-dividend
date, in effect, you "buy the dividend." You will pay the full price for the
shares and then receive a portion of that price back as a distribution, all or a
portion of which may be taxable (to the same extent the distribution is
otherwise taxable to fund shareholders).
Dividend and capital gain distributions will be reinvested in additional shares
of the fund paying the distribution, unless you request that distributions be
reinvested in another First American fund or paid in cash. This request may be
made on your new account form or by writing to the fund. If you request that
your distributions be paid in cash but those distributions cannot be delivered
because of an incorrect mailing address, the undelivered distributions and all
future distributions will be reinvested in fund shares.
- --------------------------------------------------------------------------------
TAXES
Some of the tax consequences of investing in the funds are discussed below. More
information about taxes is in the Statement of Additional Information. However,
because everyone's tax situation is unique, always consult your tax professional
about federal, state and local tax consequences.
Taxes on Distributions
Each fund intends to meet certain federal tax requirements so that distributions
of tax-exempt interest income may be treated as "exempt-interest dividends."
These dividends are not subject to regular federal income tax. However, each
fund may invest up to 20% of its net assets in municipal securities the interest
on which is subject to the alternative minimum tax. Any portion of
exempt-interest dividends attributable to interest on these securities may
increase some shareholders' alternative minimum tax. The funds expect that their
distributions will consist primarily of exempt-interest dividends. Intermediate
Tax Free Fund's exempt-interest dividends may be subject to state or local
taxes.
Distributions paid from any interest income that is not tax-exempt and from any
net realized capital gains will be taxable whether you reinvest those
distributions or take them in cash. Distributions of a fund's long-term capital
gains are taxable as long-term gains, regardless of how long you have held your
shares.
Taxes on Transactions
The sale of fund shares, or the exchange of one fund's shares for shares of
another fund, will be a taxable event and may result in a capital gain or loss.
The gain or loss will be considered long-term if you have held your shares for
more than one year. A gain or loss on shares held for one year or less is
considered short-term and is taxed at the same rates as ordinary income.
The exchange of one class of shares for another class of shares in the same fund
will not be taxable.
13
PROSPECTUS - First American Intermediate Tax Free Bond Funds
Class Y Shares
<PAGE>
Policies & Services
MANAGING YOUR INVESTMENT CONTINUED
California Income Taxation
California Intermediate Tax Free Fund intends to comply with certain state tax
requirements so that dividends it pays that are attributable to interest on
California municipal securities will be excluded from the California taxable
income of individuals, trusts and estates. To meet these requirements, at least
50% of the value of the fund's total assets must consist of obligations which
pay interest that is exempt from California personal income tax. Exempt-interest
dividends are not excluded from the California taxable income of corporations
and financial institutions. In addition, dividends derived from interest paid on
California municipal bonds (including securities treated for federal purposes as
private activity bonds) will not be subject to the alternative minimum tax that
California imposes on individuals, trusts, and estates.
Colorado Income Taxation
Dividends paid by Colorado Intermediate Tax Free Fund will be exempt from
Colorado income taxes for individuals, trusts, estates and corporations to the
extent that they are derived from interest on Colorado municipal securities. In
addition, dividends derived from interest on Colorado municipal securities
(including securities treated for federal purposes as private activity bonds)
will not be subject to the alternative minimum tax that Colorado imposes on
individuals, trusts, and estates.
Minnesota Income Taxation
Minnesota Intermediate Tax Free Fund intends to comply with certain state tax
requirements so that dividends it pays that are attributable to interest on
Minnesota municipal securities will be excluded from the Minnesota taxable net
income of individuals, estates, and trusts. To meet these requirements, at least
95% of the exempt-interest dividends paid by the fund must be derived from
interest income on Minnesota municipal securities. A portion of the fund's
dividends may be subject to the Minnesota alternative minimum tax.
Exempt-interest dividends are not excluded from the Minnesota taxable income of
corporations and financial institutions.
Oregon Income Taxation
Dividends paid by Oregon Intermediate Tax Free Fund will be exempt from Oregon
income taxes for individuals, trusts and estates to the extent that they are
derived from interest on Oregon municipal securities. Such dividends will not be
excluded from the Oregon taxable income of corporations.
14
PROSPECTUS - First American Intermediate Tax Free Bond Funds
Class Y Shares
<PAGE>
Additional Information
MANAGEMENT
U.S. Bank National Association (U.S. Bank), acting through its First American
Asset Management division, is the funds' investment advisor. First American
Asset Management provides investment management services to individuals and
institutions, including corporations, foundations, pensions and retirement
plans. As of December 31, 1999, it had more than $78 billion in assets under
management, including investment company assets of more than $33 billion. As
investment advisor, First American Asset Management manages the funds' business
and investment activities, subject to the authority of the board of directors.
Each fund pays the investment advisor a monthly fee for providing investment
advisory services. During the fiscal year ended September 30, 1999, after taking
into account fee waivers, the funds paid the following investment advisory fees
to First American Asset Management:
Advisory fee
as a % of
average daily
net assets
- --------------------------------------------------------------------------------
CALIFORNIA INTERMEDIATE TAX FREE FUND 0.48%
COLORADO INTERMEDIATE TAX FREE FUND 0.50%
INTERMEDIATE TAX FREE FUND 0.53%
MINNESOTA INTERMEDIATE TAX FREE FUND 0.53%
OREGON INTERMEDIATE TAX FREE FUND 0.53%
- --------------------------------------------------------------------------------
Investment Advisor
First American Asset Management
601 Second Avenue South
Minneapolis, Minnesota 55402
Distributor
SEI Investments Distribution Co.
Oaks, Pennsylvania 19456
Direct Fund Correspondence to:
First American Funds
P.O. Box 1330
Minneapolis, MN 55440-1330
Additional Compensation
U.S. Bank and other affiliates of U.S. Bancorp may act as fiduciary with
respect to plans subject to the Employee Retirement Income Security Act of 1974
(ERISA) and other trust and agency accounts that invest in the funds. As
described above, U.S. Bank receives compensation for acting as the funds'
investment advisor. U.S. Bank and its affiliates also receive compensation in
connection with the following:
CUSTODY SERVICES. U.S. Bank provides or compensates others to provide custody
services to the funds. U.S. Bank is paid monthly fees equal, on an annual
basis, to 0.03% of a fund's average daily net assets. In addition, U.S. Bank is
reimbursed for its out-of-pocket expenses incurred while providing custody
services to the funds.
ADMINISTRATION SERVICES. U.S. Bank provides or compensates others to provide
administrative services to all open-end funds in the First American family of
funds. These services include general administrative and accounting services,
transfer agency and dividend disbursing services, and shareholder services. U.S.
Bank receives total fees equal, on an annual basis, to 0.12% of the aggregate
average daily net assets of all open-end mutual funds in the First American fund
family up to $8 billion and 0.105% of the aggregate average daily net assets of
all open-end mutual funds in the First American fund family in excess of $8
billion. These fees are allocated among the funds in the First American family
of funds on the basis of relative net asset value. Additionally, the funds pay
U.S. Bank fees based upon the number of funds and accounts maintained.
SECURITIES LENDING SERVICES. In connection with lending their portfolio
securities, the funds pay administrative and custodial fees to U.S. Bank which
are equal to 40% of the funds' income from these securities lending
transactions.
BROKERAGE TRANSACTIONS. When purchasing and selling portfolio securities for
the funds, the funds' investment advisor may place trades through its
affiliates, U.S. Bancorp Investments, Inc. and U.S. Bancorp Piper Jaffray Inc.,
which will earn commissions on these transactions.
SHAREHOLDER SERVICING FEES. To the extent that fund shares are held through U.S.
Bank or its broker-dealer affiliates, U.S. Bancorp Investments, Inc. and U.S.
Bancorp Piper Jaffray Inc., those entities may receive shareholder servicing
fees from the funds' distributor.
Portfolio Management
Each fund's investments are managed by a team of persons associated with First
American Asset Management.
15
PROSPECTUS - First American Intermediate Tax Free Bond Funds
Class Y Shares
<PAGE>
Additional Information
MORE ABOUT THE FUNDS
- --------------------------------------------------------------------------------
OBJECTIVES
The funds' objectives, which are described in the "Fund Summaries" section, may
be changed without shareholder approval. If a fund's objectives change, you will
be notified at least 30 days in advance. Please remember: There is no guarantee
that any fund will achieve its objectives.
- --------------------------------------------------------------------------------
INVESTMENT STRATEGIES
The funds' main investment strategies are discussed in the "Fund Summaries"
section. These are the strategies that the funds' investment advisor believes
are most likely to be important in trying to achieve the funds' objectives. You
should be aware that each fund may also use strategies and invest in securities
that are not described in this prospectus, but that are described in the
Statement of Additional Information (SAI). For a copy of the SAI, call Investor
Services at 1-800-637-2548.
Investment Approach
In selecting securities for the funds, fund managers first determine their
economic outlook and the direction in which inflation and interest rates are
expected to move. In selecting individual securities consistent with this
outlook, the fund managers evaluate factors such as credit quality, yield,
maturity, liquidity and portfolio diversification. In the case of Intermediate
Tax Free Fund, geographical diversification is also a factor. Fund managers
conduct research on potential and current holdings in the funds to determine
whether a fund should purchase or retain a security. This is a continuing
process the focus of which changes according to market conditions, the
availability of various permitted investments, and cash flows into and out of
the funds.
Municipal Securities
Municipal securities are issued to finance public infrastructure projects such
as streets and highways, schools, water and sewer systems, hospitals, and
airports. They also may be issued to refinance outstanding obligations as well
as to obtain funds for general operating expenses and for loans to other public
institutions and facilities.
The funds may invest in "general obligation" bonds, which are backed by the full
faith, credit and taxing power of the issuer, and in "revenue" bonds, which are
payable only from the revenues generated by a specific project or from another
specific revenue source. Each fund also may purchase participation interests in
municipal leases. Participation interests in municipal leases are undivided
interests in a lease, installment purchase contract or conditional sale contract
entered into by a state or local government unit to acquire equipment or
facilities. Municipal leases frequently have special risks which generally are
not associated with general obligation bonds or revenue bonds.
See "Risks -- Risks of Municipal Lease Obligations."
Up to 10% of each fund's total assets may be invested in inverse floating rate
municipal securities. The values of these securities may be highly volatile as
interest rates rise or fall. See "Risks -- Risks of Inverse Floating Rate
Securities."
Refunded Bonds
Refunded bonds may have originally been issued as general obligation or revenue
bonds, but become refunded when they are secured by an escrow fund, usually
consisting entirely of direct U.S. government obligations and/or U.S.
government agency obligations.
Temporary Investments
In an attempt to respond to adverse market, economic, political or other
conditions, each fund may temporarily invest without limit in cash and in U.S.
dollar-denominated high-quality money market instruments and other short-term
securities, including securities which pay income that is subject to federal and
state income tax. These investments may include money market funds advised by
the funds' advisor. Because these investments may be taxable, and may result in
a lower yield than would be available from investments with a lower quality or
longer term, they may prevent a fund from achieving its investment objective.
Portfolio Turnover
Fund managers may trade securities frequently, resulting, from time to time, in
an annual portfolio turnover rate of over 100%. Trading of securities may
produce capital gains, which are taxable to shareholders when distributed.
Active trading may also increase the amount of commissions or mark-ups to
broker-dealers that the fund pays when it buys and sells securities. The
"Financial Highlights" section of this prospectus shows each fund's historical
portfolio turnover rate.
16
PROSPECTUS - First American Intermediate Tax Free Bond Funds
Class Y Shares
<PAGE>
Additional Information
MORE ABOUT THE FUNDS CONTINUED
- --------------------------------------------------------------------------------
RISKS
The main risks of investing in the funds are summarized in the "Fund Summaries"
section. More information about fund risks is presented below.
Interest Rate Risk
Debt securities in the funds will fluctuate in value with changes in interest
rates. In general, debt securities will increase in value when interest rates
fall and decrease in value when interest rates rise. Longer-term debt securities
are generally more sensitive to interest rate changes. Each fund may invest in
zero coupon securities, which do not pay interest on a current basis and which
may be highly volatile as interest rates rise or fall. The funds' investments in
inverse floating rate municipal securities also may be highly volatile with
changing interest rates. See "Risks of Inverse Floating Rate Securities."
Income Risk
The fund's income could decline due to falling market interest rates. This is
because, in a falling interest rate environment, the fund generally will have to
invest the proceeds from sales of fund shares, as well as the proceeds from
maturing portfolio securities (or portfolio securities that have been called,
see "Call Risk") in lower-yielding securities.
Credit Risk
Each fund is subject to the risk that the issuers of debt securities held by the
fund will not make payments on the securities, or that the other party to a
contract (such as a repurchase agreement) will default on its obligations. There
is also the risk that an issuer could suffer adverse changes in financial
condition that could lower the credit quality of a security. This could lead to
greater volatility in the price of the security and in shares of the fund. Also,
a change in the credit quality rating of a bond could affect the bond's
liquidity and make it more difficult for the fund to sell.
Each fund attempts to minimize credit risk by investing in securities considered
at least investment grade at the time of purchase. However, all of these
securities, especially those in the lower investment grade rating categories,
have credit risk. In adverse economic or other circumstances, issuers of these
lower rated securities are more likely to have difficulty making principal and
interest payments than issuers of higher rated securities. When a fund purchases
unrated securities, it will depend on the advisor's analysis of credit risk more
heavily than usual.
Call Risk
Many municipal bonds may be redeemed at the option of the issuer, or "called,"
before their stated maturity date. In general, an issuer will call its bonds if
they can be refinanced by issuing new bonds which bear a lower interest rate.
The funds are subject to the possibility that during periods of falling interest
rates, a municipal bond issuer will call its high-yielding bonds. A fund would
then be forced to invest the unanticipated proceeds at lower interest rates,
resulting in a decline in the fund's income.
Political and Economic Risk
The values of municipal securities may be adversely affected by local political
and economic conditions and developments. Adverse conditions in an industry
significant to a local economy could have a correspondingly adverse effect on
the financial condition of local issuers. Other factors that could affect
municipal securities include a change in the local, state or national economy,
demographic factors, ecological or environmental concerns, statutory limitations
on the issuer's ability to increase taxes and other developments generally
affecting the revenue of issuers (for example, legislation or court decisions
reducing state aid to local governments or mandating additional services). To
the extent a fund invests in the securities of issuers located in a single
state, it will be disproportionately affected by political and economic
conditions and developments in that state. The value of municipal securities
also may be adversely affected by future changes in federal or state income tax
laws, including rate reductions or the imposition of a flat tax.
Risks of Inverse Floating Rate Securities
Each fund may invest up to 10% of its total assets in inverse floating rate
municipal securities. These securities pay interest at a rate that varies
inversely to changes in the interest rate of specified municipal securities or a
specified index. The interest rate on this type of security will generally
change at a multiple of any change in the reference interest rate. As a result,
the values of these securities may be highly volatile as interest rates rise or
fall.
Risks of Municipal Lease Obligations
Each fund may purchase participation interests in municipal leases. These are
undivided interests in a lease, installment purchase contract or conditional
sale contract entered into by a state or local government unit to acquire
equipment or facilities. Participation interests in municipal leases pose
special risks because many leases and contracts contain "non-appropriation"
clauses that provide that the governmental issuer has no obligation to make
future payments under the lease or contract unless money is appropriated for
this purpose by the appropriate legislative body. Although these kinds of
obligations are secured by the leased equipment or facilities, it might be
difficult and time consuming to dispose of the equipment or facilities in the
event of non-appropriation, and the fund might not recover the full principal
amount of the obligation.
Risks of Active Management
Each fund is actively managed and its performance therefore will reflect in part
the advisor's ability to make investment decisions which are suited to achieving
the fund's investment objectives. Due to their active management, the funds
could underperform other mutual funds with similar investment objectives.
17
PROSPECTUS - First American Intermediate Tax Free Bond Funds
Class Y Shares
<PAGE>
Additional Information
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The tables that follow present performance information about the Class Y shares
of the funds. This information is intended to help you understand each fund's
financial performance for the past five years or, if shorter, the period of the
fund's Class Y share operations. Some of this information reflects financial
results for a single fund share. Total returns in the tables represent the rate
that you would have earned or lost on an investment in a fund, assuming you
reinvested all of your dividends and distributions.
The information for the fiscal year ended September 30, 1999, has been audited
by Ernst & Young LLP, independent auditors, whose report, along with the funds'
financial statements, is included in the funds' annual report, which is
available upon request. The information for the fiscal years ended on or before
September 30, 1998, has been audited by other auditors.
CALIFORNIA INTERMEDIATE TAX FREE FUND
<TABLE>
<CAPTION>
Fiscal year ended September 30,
1999 1998 1997(1)
- -------------------------------------------------------------------------- ------- ------- -------
<S> <C> <C> <C>
PER SHARE DATA
Net Asset Value, Beginning of Period $ 10.36 $ 10.03 $ 10.00
------- ------- -------
Investment Operations:
Net Investment Income 0.42 0.43 0.06
Net Gains (Losses) on Investments
(both realized and unrealized) (0.45) 0.33 0.03
------- ------- -------
Total From Investment Operations (0.03) 0.76 0.09
------- ------- -------
Less Distributions:
Dividends (from Net Investment Income) (0.41) (0.43) (0.06)
Distributions (from Capital Gains) (0.03) -- --
------- ------- -------
Total Distributions (0.44) (0.43) (0.06)
------- ------- -------
Net Asset Value, End of Period $ 9.89 $ 10.36 $ 10.03
======= ======= =======
Total Return (0.30)% 7.80% 0.92%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $41,469 $37,275 $33,287
Ratio of Expenses to Average Net Assets 0.70% 0.70% 0.69%(2)
Ratio of Net Investment Income to Average Net Assets 4.11% 4.27% 4.14%(2)
Ratio of Expenses to Average Net Assets (excluding waivers) 0.92% 0.96% 1.11%(2)
Ratio of Net Investment Income to Average Net Assets (excluding waivers) 3.89% 4.01% 3.72%(2)
Portfolio Turnover Rate 9% 22% 3%
- -------------------------------------------------------------------------- ------- ------- -------
</TABLE>
(1) Class Y shares have been offered since August 8, 1997.
(2) Annualized.
18
PROSPECTUS - First American Intermediate Tax Free Bond Funds
Class Y Shares
<PAGE>
Additional Information
FINANCIAL HIGHLIGHTS CONTINUED
COLORADO INTERMEDIATE TAX FREE FUND
<TABLE>
<CAPTION>
Fiscal year ended September 30,
1999 1998 1997 1996 1995
- -------------------------------------------------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value, Beginning of Period $ 10.88 $ 10.61 $ 10.42 $ 10.51 $ 10.16
------- ------- ------- ------- -------
Investment Operations:
Net Investment Income 0.46 0.47 0.48 0.49 0.48
Net Gains (Losses) on Investments
(both realized and unrealized) (0.57) 0.29 0.24 (0.04) 0.36
------- ------- ------- ------- -------
Total From Investment Operations (0.11) 0.76 0.72 0.45 0.84
------- ------- ------- ------- -------
Less Distributions:
Dividends (from Net Investment Income) (0.46) (0.47) (0.48) (0.49) (0.49)
Distributions (from Capital Gains) (0.02) (0.02) (0.05) (0.05) --
------- ------- ------- ------- -------
Total Distributions (0.48) (0.49) (0.53) (0.54) (0.49)
------- ------- ------- ------- -------
Net Asset Value, End of Period $ 10.29 $ 10.88 $ 10.61 $ 10.42 $ 10.51
======= ======= ======= ======= =======
Total Return (1.07)% 7.33% 7.11% 4.39% 8.47%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $57,236 $59,631 $54,378 $48,927 $50,071
Ratio of Expenses to Average Net Assets 0.70% 0.70% 0.70% 0.70% 0.70%
Ratio of Net Investment Income to Average Net Assets 4.31% 4.43% 4.55% 4.69% 4.84%
Ratio of Expenses to Average Net Assets (excluding
waivers) 0.90% 0.92% 0.91% 0.93% 1.02%
Ratio of Net Investment Income to Average Net Assets
(excluding waivers) 4.11% 4.21% 4.34% 4.46% 4.52%
Portfolio Turnover Rate 33% 19% 11% 20% 19%
- -------------------------------------------------------- ------- ------- ------- ------- -------
</TABLE>
INTERMEDIATE TAX FREE FUND
<TABLE>
<CAPTION>
Fiscal year ended September 30,
1999 1998 1997 1996 1995
- ------------------------------------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value, Beginning of Period $ 11.03 $ 10.82 $ 10.65 $ 10.72 $ 10.28
-------- -------- -------- -------- --------
Investment Operations:
Net Investment Income 0.46 0.47 0.47 0.46 0.49
Net Gains (Losses) on Investments
(both realized and unrealized) (0.55) 0.27 0.23 -- 0.43
-------- -------- -------- -------- --------
Total From Investment Operations (0.09) 0.74 0.70 0.46 0.92
-------- -------- -------- -------- --------
Less Distributions:
Dividends (from Net Investment Income) (0.46) (0.47) (0.47) (0.46) (0.48)
Distributions (from Capital Gains) (0.05) (0.06) (0.06) (0.07) --
-------- -------- -------- -------- --------
Total Distributions (0.51) (0.53) (0.53) (0.53) (0.48)
-------- -------- -------- -------- --------
Net Asset Value, End of Period $ 10.43 $ 11.03 $ 10.82 $ 10.65 $ 10.72
======== ======== ======== ======== ========
Total Return (0.79)% 7.05% 6.75% 4.35% 9.15%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $442,464 $460,714 $431,000 $ 66,994 $ 46,025
Ratio of Expenses to Average Net Assets 0.70% 0.70% 0.67% 0.66% 0.67%
Ratio of Net Investment Income to Average Net Assets 4.31% 4.32% 4.40% 4.35% 4.73%
Ratio of Expenses to Average Net Assets (excluding
waivers) 0.87% 0.86% 0.93% 0.92% 1.05%
Ratio of Net Investment Income to Average Net Assets
(excluding waivers) 4.14% 4.16% 4.14% 4.09% 4.35%
Portfolio Turnover Rate 23% 27% 66% 53% 68%
- ------------------------------------------------------- -------- -------- -------- -------- --------
</TABLE>
19
PROSPECTUS - First American Intermediate Tax Free Bond Funds
Class Y Shares
<PAGE>
Additional Information
FINANCIAL HIGHLIGHTS CONTINUED
MINNESOTA INTERMEDIATE TAX FREE FUND
<TABLE>
<CAPTION>
Fiscal year ended September 30,
1999 1998 1997 1996 1995
- --------------------------------------------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value, Beginning of Period $ 10.26 $ 10.06 $ 9.91 $ 9.92 $ 9.59
-------- -------- -------- -------- --------
Investment Operations:
Net Investment Income 0.43 0.43 0.44 0.45 0.45
Net Gains (Losses) on Investments
(both realized and unrealized) (0.47) 0.24 0.18 0.02 0.33
-------- -------- -------- -------- --------
Total From Investment Operations (0.04) 0.67 0.62 0.47 0.78
-------- -------- -------- -------- --------
Less Distributions:
Dividends (from Net Investment Income) (0.43) (0.43) (0.44) (0.45) (0.45)
Distributions (from Capital Gains) (0.03) (0.04) (0.03) (0.03) --
-------- -------- -------- -------- --------
Total Distributions (0.46) (0.47) (0.47) (0.48) (0.45)
-------- -------- -------- -------- --------
Net Asset Value, End of Period $ 9.76 $ 10.26 $ 10.06 $ 9.91 $ 9.92
======== ======== ======== ======== ========
Total Return (0.44)% 6.82% 6.42% 4.80% 8.34%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $279,776 $317,598 $297,122 $ 93,394 $ 61,693
Ratio of Expenses to Average Net Assets 0.70% 0.70% 0.70% 0.70% 0.70%
Ratio of Net Income to Average Net Assets 4.28% 4.30% 4.47% 4.53% 4.76%
Ratio of Expenses to Average Net Assets (excluding waivers) 0.87% 0.86% 0.90% 0.93% 1.00%
Ratio of Net Income to Average Net Assets (excluding waivers) 4.11% 4.14% 4.27% 4.30% 4.46%
Portfolio Turnover Rate 12% 24% 20% 19% 38%
- --------------------------------------------------------------- -------- -------- -------- -------- --------
</TABLE>
OREGON INTERMEDIATE TAX FREE FUND
<TABLE>
<CAPTION>
Fiscal year ended September 30,
1999 1998 1997(1)
- -------------------------------------------------------------------------- -------- -------- --------
<S> <C> <C> <C>
PER SHARE DATA
Net Asset Value, Beginning of Period $ 10.24 $ 10.05 $ 10.00
-------- -------- --------
Income From Investment Operations:
Net Investment Income 0.43 0.45 0.07
Net Gains or Losses on Investments (both realized and unrealized) (0.49) 0.21 0.05
-------- -------- --------
Total From Investment Operations (0.06) 0.66 0.12
-------- -------- --------
Less Distributions:
Dividends (from Net Investment Income) (0.43) (0.45) (0.07)
Distributions (from Capital Gains) (0.03) (0.02) --
-------- -------- --------
Total Distributions (0.46) (0.47) (0.07)
-------- -------- --------
Net Asset Value, End of Period $ 9.72 $ 10.24 $ 10.05
======== ======== ========
Total Return (0.66)% 6.66% 1.17%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $178,411 $187,383 $182,069
Ratio of Expenses to Average Net Assets 0.70% 0.70% 0.70%(2)
Ratio of Net Investment Income to Average Net Assets 4.30% 4.43% 4.55%(2)
Ratio of Expenses to Average Net Assets (excluding waivers) 0.87% 0.87% 1.09%(2)
Ratio of Net Investment Income to Average Net Assets (excluding waivers) 4.13% 4.26% 4.16%(2)
Portfolio Turnover Rate 13% 20% 4%
- -------------------------------------------------------------------------- -------- -------- --------
</TABLE>
(1) Class Y shares have been offered since August 8, 1997.
(2) Annualized.
20
PROSPECTUS - First American Intermediate Tax Free Bond Funds
Class Y Shares
<PAGE>
- --------------------------------------------------------------------------------
FOR MORE INFORMATION
More information about the funds is available in the funds' Statement of
Additional Information and annual and semiannual reports.
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI provides more details about the funds and their policies. A current SAI
is on file with the Securities and Exchange Commission (SEC) and is incorporated
into this prospectus by reference (which means that it is legally considered
part of this prospectus).
- --------------------------------------------------------------------------------
ANNUAL AND SEMIANNUAL REPORTS
Additional information about the funds' investments is available in the funds'
annual and semiannual reports to shareholders. In the funds' annual report, you
will find a discussion of the market conditions and investment strategies that
significantly affected the funds' performance during their last fiscal year.
You can obtain a free copy of the funds' SAI and/or free copies of the funds'
most recent annual or semiannual reports by calling Investor Services at
1-800-637-2548. The material you request will be sent by first-class mail or
other means designed to ensure equally prompt delivery, within three business
days of receipt of the request.
You can also obtain copies of this information, after paying a duplicating fee,
by electronic request at the following email address: [email protected], or by
writing the SEC's Public Reference Section, Washington, D.C. 20549-0102. For
more information, call 1-202-942-8090.
Information about the funds is also available on the Internet. Text-only
versions of fund documents can be viewed online or downloaded from the EDGAR
Database on the SEC's Internet site at http://www.sec.gov.
FIRST AMERICAN FUNDS P.O. Box 1330, Minneapolis, MN 55440-1330
First American Asset Management, a division of U.S. Bank National Association,
serves as the investment advisor to the First American Funds.
First American Funds are distributed by SEI Investments Distribution Co. which
is located in Oaks, PA 19456 and is not an affiliate of U.S. Bank.
1/2000 3017-99
SEC file number: 811-05309
FAIF15026Y
[LOGO] FIRST AMERICAN FUNDS(R)
THE POWER OF DISCIPLINED INVESTING(R)
<PAGE>
JANUARY 31, 2000
AS SUPPLEMENTED
FEBRUARY 1, 2000
ASSET CLASSES
(*) EQUITY FUNDS
* FUNDS OF FUNDS
(*) BOND FUNDS
* TAX FREE BOND FUNDS
* MONEY MARKET FUNDS
PROSPECTUS
FIRST AMERICAN INVESTMENT FUNDS, INC.
FIRST AMERICAN
SMALL CAP
FUNDS
AND BOND
FUNDS
CLASS A AND CLASS B SHARES
MICRO CAP VALUE FUND
REGIONAL EQUITY FUND
ADJUSTABLE RATE MORTGAGE SECURITIES FUND
INTERMEDIATE GOVERNMENT BOND FUND
*IMPORTANT FUND MERGER INFORMATION CONTAINED ON INSIDE COVER.
AS WITH ALL MUTUAL FUNDS, THE SECURITIES AND EXCHANGE COMMISSION HAS NOT
APPROVED OR DISAPPROVED THE SHARES OF THESE FUNDS, OR DETERMINED IF THE
INFORMATION IN THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY STATEMENT TO THE
CONTRARY IS A CRIMINAL OFFENSE.
[LOGO] FIRST AMERICAN FUND
THE POWER OF DISCIPLINED INVESTING(R)
<PAGE>
Note to Shareholders and Prospective Shareholders
First American Fund Mergers
On January 14, 2000, shareholders of Micro Cap Value Fund approved a merger of
the fund into Small Cap Value Fund; shareholders of Intermediate Government Bond
Fund approved a merger of the fund into Intermediate Term Income Fund.
These mergers are effective February 25, 2000.
Pending shareholder approval, Regional Equity Fund will merge into Small Cap
Value Fund and Adjustable Rate Mortgage Securities Fund will merge into Limited
Term Income Fund. A shareholder meeting is scheduled for February 4, 2000, for
shareholders to vote on these proposed mergers. The effective date of these
proposed mergers is February 25, 2000.
Registration Statements on Form N-14, for each of the mergers, were filed with
the Securities and Exchange Commission and became effective on November 19,
1999. Proxy materials providing information about the proposed mergers were sent
to those shareholders holding shares of the funds as of November 16, 1999.
In recommending each of the mergers to shareholders, the First American Board of
Directors determined that combining funds with similar investment objectives may
create efficiencies that would lead to a reduction in overall operating expenses
for the combined, larger fund. However, the funds do implement different
investment strategies to achieve their investment objectives. The similarities
and differences between the funds are more fully discussed in the proxy
materials.
To receive proxy materials or obtain other information, including additional
prospectuses, contact First American Investor Services at 1-800-637-2548.
PROSPECTUS - First American Small Cap Funds and Bond Funds
Class A and Class B Shares
<PAGE>
Table of
CONTENTS
FUND SUMMARIES
- --------------------------------------------------------------------------------
Micro Cap Value Fund 2
- --------------------------------------------------------------------------------
Regional Equity Fund 4
- --------------------------------------------------------------------------------
Adjustable Rate Mortgage Securities Fund 6
- --------------------------------------------------------------------------------
Intermediate Government Bond Fund 8
- --------------------------------------------------------------------------------
POLICIES & SERVICES
- --------------------------------------------------------------------------------
Buying Shares 10
- --------------------------------------------------------------------------------
Selling Shares 13
- --------------------------------------------------------------------------------
Managing Your Investment 14
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
Management 16
- --------------------------------------------------------------------------------
More About The Funds 17
- --------------------------------------------------------------------------------
Financial Highlights 20
- --------------------------------------------------------------------------------
FOR MORE INFORMATION Back Cover
- --------------------------------------------------------------------------------
<PAGE>
Fund Summaries
INTRODUCTION
This section of the prospectus describes the objectives of certain First
American Small Cap and Bond Funds, summarizes the main investment strategies
used by each fund in trying to achieve its objectives, and highlights the risks
involved with these strategies. It also provides you with information about the
performance, fees, and expenses of the funds.
AN INVESTMENT IN THE FUNDS IS NOT A DEPOSIT OF U.S. BANK NATIONAL ASSOCIATION
AND IS NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION
OR ANY OTHER GOVERNMENT AGENCY.
1
PROSPECTUS - First American Small Cap Funds and Bond Funds
Class A and Class B Shares
<PAGE>
Fund Summaries
MICRO CAP VALUE FUND
- --------------------------------------------------------------------------------
OBJECTIVE
Micro Cap Value Fund has an objective of capital appreciation.
- --------------------------------------------------------------------------------
MAIN INVESTMENT STRATEGIES
Under normal market conditions, Micro Cap Value Fund invests primarily (at least
65% of its total assets) in common stocks of very small capitalization
companies, defined as companies that have market capitalizations of less than
$500 million at the time of purchase. In selecting stocks, the fund's advisor
invests in securities it believes:
* are undervalued relative to other securities in the same industry or market.
* exhibit good or improving fundamentals.
* exhibit an identifiable catalyst that could close the gap between market
value and fair value over the next one to
two years.
To generate additional income, the fund may lend securities representing up to
one-third of the value of its total assets to broker-dealers, banks, and other
institutions.
- --------------------------------------------------------------------------------
MAIN RISKS
The value of your investment in this fund will change daily, which means you
could lose money. The main risks of investing in this fund include:
Risks of Common Stocks
Stocks may decline significantly in price over short or extended periods of
time. Price changes may occur in the market as a whole, or they may occur in
only a particular company, industry, or sector of the market. In addition, value
stocks and/or stocks of very small capitalization companies may underperform the
market as a whole.
Risks of Micro Cap Stocks
Stocks of very small capitalization companies involve substantial risk. These
stocks historically have experienced greater price volatility than stocks of
larger-capitalization companies, and they may be expected to do so in the
future.
Risks of Securities Lending
The fund is subject to the risk that the other party to a securities lending
agreement will default on its obligations.
- --------------------------------------------------------------------------------
FUND PERFORMANCE
Illustrations on the next page provide you with information on the fund's
volatility and performance. Of course, past performance does not guarantee
future results.
The bar chart shows you how performance of the fund's Class A shares has varied
from year to year. Sales charges are not reflected in the chart; if they had
been, returns would be lower.
The table compares the fund's performance over different time periods to that of
the fund's benchmark index, which is a broad measure of market performance. The
fund's performance reflects sales charges and fund expenses; the benchmark is
unmanaged and has no expenses.
Both the chart and the table assume that all distributions have been reinvested.
2
PROSPECTUS - First American Small Cap Funds and Bond Funds
Class A and Class B Shares
<PAGE>
Fund Summaries
MICRO CAP VALUE FUND CONTINUED
- --------------------------------------------------------------------------------
FUND PERFORMANCE (CONTINUED)
ANNUAL TOTAL RETURNS AS OF 12/31 EACH YEAR(1)
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -14.60% 62.34% 28.40% 20.81% -0.02% 47.36% 20.75% 23.06% -7.13% 10.24%
- ------------------------------------------------------------------------------------------------
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
</TABLE>
Best Quarter: Quarter ending March 31, 1991 35.79%
Worst Quarter: Quarter ending September 30, 1990 (21.58)%
AVERAGE ANNUAL TOTAL RETURNS
AS OF 12/31/99(1) One Year Five Years Ten Years
- --------------------------------------------------------------------------------
Micro Cap Value Fund (Class A) 4.47% 16.28% 16.40%
- --------------------------------------------------------------------------------
Russell 2000 Index(2) 21.26% 16.69% 13.40%
- --------------------------------------------------------------------------------
(1) Performance prior to 8/8/97 is that of Small Company Value Trust Fund, a
predecessor common trust fund. On 8/8/97, substantially all of the assets of
Small Company Value Trust Fund were transferred into Micro Cap Value Fund. The
objectives, policies, and guidelines of the two funds were, in all material
respects, identical. Small Company Value Trust Fund's performance is adjusted to
reflect Micro Cap Value Fund's Class A share fees and expenses, before any fee
waivers. Small Company Value Trust Fund was not registered under the Investment
Company Act of 1940 and therefore was not subject to certain investment
restrictions that might have adversely affected performance.
(2) An unmanaged index comprised of the smallest 2000 companies in the Russell
3000 Index. The latter index is composed of 3000 large U.S. companies
representing approximately 98% of the investable U.S. equity market.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
As an investor, you pay fees and expenses to buy and hold shares of the fund.
You pay shareholder fees directly when you buy or sell shares. You pay annual
fund operating expenses indirectly since they are deducted from fund assets. The
figures below are based on fund expenses during the fiscal year ended September
30, 1999.(1)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
SHAREHOLDER FEES CLASS A
- ---------------------------------------------------------------------------------------------
<S> <C>
MAXIMUM SALES CHARGE (LOAD)
AS A % OF OFFERING PRICE 5.25%(2)
MAXIMUM DEFERRED SALES CHARGE (LOAD)
AS A % OF ORIGINAL PURCHASE PRICE OR REDEMPTION PROCEEDS, WHICHEVER IS LESS 0.00%(3)
ANNUAL MAINTENANCE FEE(4)
ONLY CHARGED TO ACCOUNTS WITH BALANCES BELOW $500 $ 25
ANNUAL FUND OPERATING EXPENSES AS A % OF AVERAGE NET ASSETS
- ------------------------------------------------------------------------------------------------
Management Fees 0.70%
Distribution and Service (12b-1) Fees 0.25%
Other Expenses 0.20%
TOTAL 1.15%
- ------------------------------------------------------------------------------------------------
</TABLE>
(1) THE ADVISOR INTENDS TO WAIVE FEES DURING THE CURRENT FISCAL YEAR SO THAT
TOTAL FUND OPERATING EXPENSES DO NOT EXCEED 1.15%. FEE WAIVERS MAY BE
DISCONTINUED AT ANY TIME.
(2) Certain investors may qualify for reduced sales charges. See "Buying Shares
- -- Calculating Your Share Price."
(3) Class A share investments of $1 million or more on which no front-end sales
charge is paid may be subject to a contingent deferred sales charge. See "Buying
Shares -- Calculating Your Share Price."
(4) The fund reserves the right to charge your account an annual maintenance fee
of $25 if your balance falls below $500 as a result of selling or exchanging
shares.
See "Policies & Services -- Selling Shares, Accounts with Low Balances."
- --------------------------------------------------------------------------------
EXAMPLE This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes that you
invest $10,000 for the time periods indicated, that your investment has a 5%
return each year, and that the fund's operating expenses remain the same.
Although your actual costs and returns may differ, based on these assumptions
your costs would be:
- --------------------------------------------------------------------------------
1 year $ 636
3 years $ 871
5 years $1,125
10 years $1,849
3
PROSPECTUS - First American Small Cap Funds and Bond Funds
Class A and Class B Shares
<PAGE>
Fund Summaries
REGIONAL EQUITY FUND
- --------------------------------------------------------------------------------
OBJECTIVE
Regional Equity Fund has an objective of capital appreciation.
- --------------------------------------------------------------------------------
MAIN INVESTMENT STRATEGIES
Under normal market conditions, Regional Equity Fund invests primarily (at least
65% of its total assets) in common stocks of small capitalization companies
headquartered in Minnesota, North and South Dakota, Montana, Wisconsin,
Michigan, Iowa, Nebraska, Colorado and Illinois. Small capitalization companies
are defined as companies that have market capitalizations of less than $1
billion at the time of purchase.
In selecting stocks, the fund's advisor invests in securities it believes:
* are undervalued relative to other securities in the same industry or market.
* exhibit good or improving fundamentals.
* exhibit an identifiable catalyst that could close the gap between market
value and fair value over the next one to
two years.
To generate additional income, the fund may lend securities representing up to
one-third of the value of its total assets to broker-dealers, banks, and other
institutions.
- --------------------------------------------------------------------------------
MAIN RISKS
The value of your investment in this fund will change daily, which means you
could lose money. The main risks of investing in this fund include:
Risks of Common Stocks
Stocks may decline significantly in price over short or extended periods of
time. Price changes may occur in the market as a whole, or they may occur in
only a particular company, industry, or sector of the market. In addition, value
stocks and/or stocks of small capitalization companies may underperform the
market as a whole.
Risks of Small-Cap Stocks
Stocks of small-capitalization companies involve substantial risk. These stocks
historically have experienced greater price volatility than stocks of
larger-capitalization companies, and they may be expected to do so in the
future.
Risks of Regional Concentration
The fund's policy of concentrating its investments in a geographic region means
that it will be subject to adverse economic, political or other developments in
that region.
Risks of Securities Lending
The fund is subject to the risk that the other party to a securities lending
agreement will default on its obligations.
- --------------------------------------------------------------------------------
FUND PERFORMANCE
Illustrations on the next page provide you with information on the fund's
volatility and performance. Of course, past performance does not guarantee
future results.
The bar chart shows you how performance of the fund's Class A shares has varied
from year to year. The performance of Class B shares will be lower due to their
higher expenses. Sales charges are not reflected in the chart; if they had been,
returns would be lower.
The table compares the fund's performance over different time periods to that of
the fund's benchmark index, which is a broad measure of market performance. The
fund's performance reflects sales charges and fund expenses; the benchmark is
unmanaged and has no expenses.
Both the chart and the table assume that all distributions have been reinvested.
4
PROSPECTUS - First American Small Cap Funds and Bond Funds
Class A and Class B Shares
<PAGE>
Fund Summaries
REGIONAL EQUITY FUND CONTINUED
- --------------------------------------------------------------------------------
FUND PERFORMANCE (CONTINUED)
ANNUAL TOTAL RETURNS AS OF 12/31 EACH YEAR
21.06% 1.69% 48.73% 13.77% 22.59% -5.71% -1.84%
- --------------------------------------------------------------------------------
1993 1994 1995 1996 1997 1998 1999
Best Quarter: Quarter ending June 30, 1999 23.99%
Worst Quarter: Quarter ending September 30, 1998 (22.49)%
<TABLE>
<CAPTION>
Since Since
AVERAGE ANNUAL TOTAL RETURNS Inception Inception Inception
AS OF 12/31/99 Date One Year Five Years (Class A) (Class B)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Regional Equity Fund (Class A) 12/14/92 (7.00)% 12.71% 12.60% N/A
- --------------------------------------------------------------------------------------------------------
Regional Equity Fund (Class B) 8/15/94 (6.95)% 12.83% N/A 12.23%
- --------------------------------------------------------------------------------------------------------
Russell 2000 Index(1) 21.26% 16.69% 14.15% 15.09%
- --------------------------------------------------------------------------------------------------------
</TABLE>
(1) An unmanaged index comprised of the smallest 2000 companies in the Russell
3000 Index. The latter index is composed of 3000 large U.S. companies
representing approximately 98% of the investable U.S. equity market. The since
inception performance of the index is calculated from 12/31/92 and 8/31/94,
respectively, for Class A and Class B shares.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
As an investor, you pay fees and expenses to buy and hold shares of the fund.
You pay shareholder fees directly when you buy or sell shares. You pay annual
fund operating expenses indirectly since they are deducted from fund assets. The
figures below are based on fund expenses during the fiscal year ended September
30, 1999.(1)
<TABLE>
<CAPTION>
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------
SHAREHOLDER FEES CLASS A CLASS B
- ----------------------------------------------------------------------------------------------------
MAXIMUM SALES CHARGE (LOAD)
AS A % OF OFFERING PRICE 5.25%(2) 0.00%
MAXIMUM DEFERRED SALES CHARGE (LOAD)
AS A % OF ORIGINAL PURCHASE PRICE OR REDEMPTION PROCEEDS, WHICHEVER IS LESS 0.00%(3) 5.00%
ANNUAL MAINTENANCE FEE(4)
ONLY CHARGED TO ACCOUNTS WITH BALANCES BELOW $500 $ 25 $ 25
ANNUAL FUND OPERATING EXPENSES AS A % OF AVERAGE NET ASSETS
- ----------------------------------------------------------------------------------------------------
Management Fees 0.70% 0.70%
Distribution and Service (12b-1) Fees 0.25% 1.00%
Other Expenses 0.26% 0.26%
TOTAL 1.21% 1.96%
- ----------------------------------------------------------------------------------------------------
</TABLE>
(1) Actual expenses for the fiscal year were lower than those shown in the table
because of voluntary fee waivers by the advisor. See "Additional Information --
Financial Highlights." The net expenses the fund actually paid after waivers for
the fiscal year ended September 30, 1999, were:
Waiver of Fund Expenses (0.06)% (0.06)%
TOTAL ACTUAL ANNUAL OPERATING EXPENSES (AFTER WAIVERS) 1.15% 1.90%
THE ADVISOR INTENDS TO WAIVE FEES DURING THE CURRENT FISCAL YEAR SO THAT TOTAL
FUND OPERATING EXPENSES DO NOT EXCEED 1.15% AND 1.90%, RESPECTIVELY, FOR CLASS
A AND CLASS B SHARES. FEE WAIVERS MAY BE DISCONTINUED AT ANY TIME.
(2) Certain investors may qualify for reduced sales charges. See "Buying Shares
- -- Calculating Your Share Price."
(3) Class A share investments of $1 million or more on which no front-end sales
charge is paid may be subject to a contingent deferred sales charge. See
"Buying Shares -- Calculating Your Share Price." Fee waivers may be
discontinued at any time.
(4) The fund reserves the right to charge your account an annual maintenance fee
of $25 if your balance falls below $500 as a result of selling or exchanging
shares. See "Policies & Services -- Selling Shares, Accounts with Low Balances."
- --------------------------------------------------------------------------------
EXAMPLE This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes that you
invest $10,000 for the time periods indicated, that your investment has a 5%
return each year, and that the fund's operating expenses remain the same.
Although your actual costs and returns may differ, based on these assumptions
your costs would be:
CLASS B CLASS B
assuming redemption assuming no redemption
CLASS A at end of each period at end of each period
- --------------------------------------------------------------------------------
1 year $ 642 $ 699 $ 199
3 years $ 889 $1,015 $ 615
5 years $1,155 $1,257 $1,057
10 years $1,914 $2,091 $2,091
5
PROSPECTUS - First American Small Cap Funds and Bond Funds
Class A and Class B Shares
<PAGE>
Fund Summaries
ADJUSTABLE RATE MORTGAGE SECURITIES FUND
- --------------------------------------------------------------------------------
OBJECTIVE
Adjustable Rate Mortgage Securities Fund's objective is to provide investors
with current income while maintaining a high degree of principal stability.
- --------------------------------------------------------------------------------
MAIN INVESTMENT STRATEGIES
Under normal market conditions, Adjustable Rate Mortgage Securities Fund invests
primarily (at least 65% of its total assets) in adjustable rate mortgage
securities (ARMS). ARMS have interest rates that reset periodically in response
to changes in the current interest rate environment.
The fund may also invest in other debt securities, including:
* fixed-rate mortgage-backed securities.
* U.S. government securities, which are securities issued or guaranteed by the
U.S. government or its agencies or instrumentalities.
* asset-backed securities.
* corporate debt obligations.
Fund managers select securities using a "top-down" approach, which begins with
the formulation of their general economic outlook. Following this, various
sectors and industries are analyzed and selected for investment. Finally, fund
managers select individual securities within these sectors or industries.
Debt securities in the fund will be rated investment grade at the time of
purchase or, if unrated, determined to be of comparable quality by the fund's
advisor. At least 65% of the fund's debt securities must be either U.S.
government securities or securities that have received at least an A or
equivalent rating. Unrated securities will not exceed 25% of the fund's total
assets.
Under normal market conditions the fund attempts to maintain an average
effective duration for its portfolio securities of zero to four years.
To generate additional income, the fund may lend securities representing up to
one-third of the value of its total assets to broker-dealers, banks, and other
institutions.
- --------------------------------------------------------------------------------
MAIN RISKS
The price and yield of this fund will change daily due to changes in interest
rates and other factors, which means you could lose money. The main risks of
investing in this fund include:
Interest Rate Risk
Debt securities typically decrease in value when interest rates rise. This risk
is usually greater for longer-term debt securities. ARMS are generally less
sensitive to interest rate changes because their interest rates move with market
rates. One measure of interest rate risk is effective duration, explained under
"More About The Funds -- Investment Strategies."
Income Risk
The fund's income could decline due to falling market interest rates.
Credit Risk
An issuer of debt securities may not make timely principal or interest payments
on its securities, or the other party to a contract (such as a securities
lending agreement) may default on its obligations.
Call Risk
During periods of falling interest rates, a bond issuer may "call" -- or repay
- -- its high-yielding bonds before their maturity date. The fund would then be
forced to invest the unanticipated proceeds at lower interest rates, resulting
in a decline in the fund's income.
Risks of Mortgage- and Asset-Backed Securities
Falling interest rates could cause faster than expected prepayments of the
obligations underlying mortgage- and asset-backed securities, which the fund
would have to invest at lower interest rates. On the other hand, rising interest
rates could cause prepayments of the obligations to decrease, extending the life
of mortgage- and asset-backed securities with lower interest rates.
- --------------------------------------------------------------------------------
FUND PERFORMANCE
Illustrations on the next page provide you with information on the fund's
volatility and performance. Of course, past performance does not guarantee
future results.
The bar chart shows you how performance of the fund's shares has varied from
year to year. Sales charges are not reflected in the chart; if they had been,
returns would be lower.
The table compares the fund's performance over different time periods to that of
the fund's benchmark index, which is a broad measure of market performance. The
fund's performance reflects sales charges and fund expenses; the benchmark is
unmanaged and has no expenses.
Both the chart and the table assume that all distributions have been reinvested.
6
PROSPECTUS - First American Small Cap Funds and Bond Funds
Class A and Class B Shares
<PAGE>
Fund Summaries
ADJUSTABLE RATE MORTGAGE SECURITIES FUND CONTINUED
- --------------------------------------------------------------------------------
FUND PERFORMANCE (CONTINUED)
ANNUAL TOTAL RETURNS AS OF 12/31 EACH YEAR
8.10% -6.56% 10.53% 6.76% 6.31% 4.80% 4.22%
- --------------------------------------------------------------------------------
1993 1994 1995 1996 1997 1998 1999
Best Quarter: Quarter ending March 31, 1995 4.48%
Worst Quarter: Quarter ending March 31, 1994 (3.29)%
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS Inception Since
AS OF 12/31/99(1) Date One Year Five Years Inception
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Adjustable Rate Mortgage Securities Fund (Class A) 1/30/92 1.59% 5.96% 4.53%
- -----------------------------------------------------------------------------------------------------------
Lehman Adjustable Rate Mortgage Index(2) 4.89% 7.14% 5.79%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Performance from 9/1/95 to 7/31/98 is that of Adjustable Rate Mortgage
Securities Fund, a series of Piper Funds Inc. -- II. Performance prior to 9/1/95
is that of American Adjustable Rate Term Trust Inc. -- 1998, a closed-end
investment company.
(2) An unmanaged index of U.S. agency adjustable rate mortgage securities. The
since inception performance of the index is calculated from 1/31/92.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
As an investor, you pay fees and expenses to buy and hold shares of the fund.
You pay shareholder fees directly when you buy or sell shares. You pay annual
fund operating expenses indirectly since they are deducted from fund assets. The
figures below are based on fund expenses during the fiscal year ended September
30, 1999.(1)
<TABLE>
<CAPTION>
SHAREHOLDER FEES CLASS A
- --------------------------------------------------------------------------------
<S> <C>
MAXIMUM SALES CHARGE (LOAD)
AS A % OF OFFERING PRICE 2.50%(2)
ANNUAL MAINTENANCE FEE(3)
ONLY CHARGED TO ACCOUNTS WITH BALANCES BELOW $500 $ 25
ANNUAL FUND OPERATING EXPENSES AS A % OF AVERAGE NET ASSETS
- --------------------------------------------------------------------------------
Management Fees 0.70%
Distribution and Service (12b-1) Fees 0.25%
Other Expenses 0.35%
TOTAL 1.30%
- --------------------------------------------------------------------------------
</TABLE>
(1) Actual expenses for the fiscal year were lower than those shown in the table
because of voluntary fee waivers by the advisor and the distributor. See
"Additional Information -- Financial Highlights." The net expenses the fund
actually paid after waivers for the fiscal year ended September 30, 1999, were:
Waiver of Fund Expenses (0.50)%
TOTAL ACTUAL ANNUAL OPERATING EXPENSES (AFTER WAIVERS) 0.80%
THE DISTRIBUTOR INTENDS TO LIMIT ITS 12b-1 FEE DURING THE CURRENT FISCAL YEAR.
IN ADDITION, THE ADVISOR INTENDS TO WAIVE FEES DURING THE CURRENT FISCAL YEAR
SO THAT TOTAL FUND OPERATING EXPENSES DO NOT EXCEED 0.80%. FEE WAIVERS MAY BE
DISCONTINUED AT ANY TIME.
(2) Certain investors may qualify for reduced sales charges. Investments of $1
million or more on which no front-end sales charge is paid may be subject to a
contingent deferred sales charge. See "Buying Shares -- Calculating Your Share
Price."
(3) The fund reserves the right to charge your account an annual maintenance fee
of $25 if your balance falls below $500 as a result of selling or exchanging
shares. See "Policies & Services -- Selling Shares, Accounts with Low Balances."
- --------------------------------------------------------------------------------
EXAMPLE This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes that you
invest $10,000 for the time periods indicated, that your investment has a 5%
return each year, and that the fund's operating expenses remain the same.
Although your actual costs and returns may differ, based on these assumptions
your costs would be:
- --------------------------------------------------------------------------------
1 year $ 379
3 years $ 652
5 years $ 945
10 years $1,779
7
PROSPECTUS - First American Small Cap Funds and Bond Funds
Class A and Class B Shares
<PAGE>
Fund Summaries
INTERMEDIATE GOVERNMENT BOND FUND
- --------------------------------------------------------------------------------
OBJECTIVE
Intermediate Government Bond Fund's objective is to provide investors with
current income to the extent consistent with preservation of capital.
- --------------------------------------------------------------------------------
MAIN INVESTMENT STRATEGIES
Under normal market conditions, Intermediate Government Bond Fund invests
primarily in U.S. government securities, which are securities issued or
guaranteed by the U.S. government or its agencies or instrumentalities. The Fund
invests only in securities which generate interest that is excluded from state
taxable income. For example, the fund may invest in U.S. Treasury obligations
and in obligations issued or guaranteed by the following:
* Farm Credit System Financial Assistance Corporation.
* Federal Home Loan Banks System.
* Student Loan Marketing Association.
* Tennessee Valley Authority.
Fund managers select securities using a "top-down" approach, which begins with
the formulation of their general economic outlook. Following this, the
managers determine the allocation of assets between Treasury and agency or
instrumentality securities. Finally, fund managers select individual Treasury,
agency or instrumentality securities.
The fund's investments in Treasury, agency and instrumentality securities may
include zero coupon securities, adjustable rate securities and U.S. Treasury
inflation-indexed securities.
Under normal market conditions the fund attempts to maintain a weighted
average maturity for its portfolio securities of two to seven years and an
average effective duration of one to five years.
To generate additional income, the fund may lend securities representing up to
one-third of the value of its total assets to broker-dealers, banks and other
institutions. It also may invest up to 25% of total assets in dollar roll
transactions. In a dollar roll transaction, the fund sells mortgage-backed
securities for delivery in the current month while contracting with the same
party to repurchase similar securities at a future date.
- --------------------------------------------------------------------------------
MAIN RISKS
The price and yield of this fund will change daily due to changes in interest
rates and other factors, which means you could lose money. The main risks of
investing in this fund include:
Interest Rate Risk
Debt securities typically decrease in value when interest rates rise. This risk
is usually greater for longer-term debt securities. One measure of interest rate
risk is effective duration, explained under "More About The Funds -- Investment
Strategies."
Income Risk
The fund's income could decline due to falling market interest rates.
Credit Risk
An issuer of debt securities may not make timely principal or interest payments
on its securities, or the other party to a contract (such as a securities
lending agreement) may default on its obligations.
Call Risk
During periods of falling interest rates, a bond issuer may "call" -- or repay
- -- its high-yielding bonds before their maturity date. The fund would then be
forced to invest the unanticipated proceeds at lower interest rates, resulting
in a decline in the fund's income.
Risks of Dollar Roll Transactions
The use of mortgage dollar rolls could increase the volatility of the fund's
share price. It could also diminish the fund's investment performance if the
advisor does not predict mortgage prepayments and interest rates correctly.
- --------------------------------------------------------------------------------
FUND PERFORMANCE
Illustrations on the next page provide you with information on the fund's
volatility and performance. Of course, past performance does not guarantee
future results.
The bar chart shows you how performance of the fund's shares has varied from
year to year. Sales charges are not reflected in the chart; if they had been,
returns would be lower.
The table compares the fund's performance over different time periods to that of
the fund's benchmark index, which is a broad measure of market performance. The
fund's performance reflects sales charges and fund expenses; the benchmark is
unmanaged and has no expenses.
Both the chart and the table assume that all distributions have been reinvested.
8
PROSPECTUS - First American Small Cap Funds and Bond Funds
Class A and Class B Shares
<PAGE>
Fund Summaries
INTERMEDIATE GOVERNMENT BOND FUND CONTINUED
- --------------------------------------------------------------------------------
FUND PERFORMANCE (CONTINUED)
ANNUAL TOTAL RETURNS AS OF 12/31 EACH YEAR
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
8.39% 10.91% 4.54% 5.79% -1.72% 13.55% 3.82% 6.93% 8.08% -0.08%
- ------------------------------------------------------------------------------------------------
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
</TABLE>
Best Quarter: Quarter ending September 30, 1998 4.84%
Worst Quarter: Quarter ending March 31, 1994 (1.42)%
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS Inception
AS OF 12/31/99 Date One Year Five Years Ten Years
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Intermediate Government Bond Fund
(Class A) 12/22/87 (2.53)% 5.82% 5.66%
Lehman Intermediate U.S. Government
Bond Index(1) 0.50% 6.93% 7.10%
</TABLE>
(1) An unmanaged index of Treasury securities and other securities issued by the
U.S. government or its agencies or instrumentalities, in each case with
maturities of one to 10 years.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
As an investor, you pay fees and expenses to buy and hold shares of the fund.
You pay shareholder fees directly when you buy or sell shares. You pay annual
fund operating expenses indirectly since they are deducted from fund assets. The
figures below are based on fund expenses during the fiscal year ended September
30, 1999.(1)
- --------------------------------------------------------------------------------
SHAREHOLDER FEES CLASS A
- --------------------------------------------------------------------------------
MAXIMUM SALES CHARGE (LOAD)
AS A % OF OFFERING PRICE 2.50%(2)
ANNUAL MAINTENANCE FEE(3)
ONLY CHARGED TO ACCOUNTS WITH BALANCES BELOW $500 $ 25
ANNUAL FUND OPERATING EXPENSES AS A % OF AVERAGE NET ASSETS
- --------------------------------------------------------------------------------
Management Fees 0.70%
Distribution and Service (12b-1) Fees 0.25%
Other Expenses 0.17%
TOTAL 1.12%
- --------------------------------------------------------------------------------
(1) Actual expenses for the fiscal year were lower than those shown in the table
because of voluntary fee waivers by the advisor. See "Additional Information --
Financial Highlights." The net expenses the fund actually paid after waivers for
the fiscal year ended September 30, 1999, were:
Waiver of Fund Expenses (0.42)%
TOTAL ACTUAL ANNUAL OPERATING EXPENSES (AFTER WAIVERS) 0.70%
THE DISTRIBUTOR INTENDS TO WAIVE PAYMENT OF ALL 12b-1 FEES DURING THE FISCAL
YEAR. IN ADDITION, THE ADVISOR INTENDS TO WAIVE FEES DURING THE CURRENT FISCAL
YEAR SO THAT TOTAL FUND OPERATING EXPENSES DO NOT EXCEED 0.70%. FEE WAIVERS MAY
BE DISCONTINUED AT ANY TIME.
(2) Certain investors may qualify for reduced sales charges. Investments of $1
million or more on which no front-end sales charge is paid may be subject to a
contingent deferred sales charge. See "Buying Shares -- Calculating Your Share
Price."
(3) The fund reserves the right to charge your account an annual maintenance fee
of $25 if your balance falls below $500 as a result of selling or exchanging
shares. See "Policies & Services -- Selling Shares, Accounts with Low Balances."
- --------------------------------------------------------------------------------
EXAMPLE This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes that you
invest $10,000 for the time periods indicated, that your investment has a 5%
return each year, and that the fund's operating expenses remain the same.
Although your actual costs and returns may differ, based on these assumptions
your costs would be:
- --------------------------------------------------------------------------------
1 year $ 361
3 years $ 597
5 years $ 851
10 years $1,579
9
PROSPECTUS - First American Small Cap Funds and Bond Funds
Class A and Class B Shares
<PAGE>
Policies & Services
BUYING SHARES
- --------------------------------------------------------------------------------
BUYING SHARES
You may become a shareholder in any of the funds with an initial investment of
$1,000 or more ($250 for a retirement plan or a Uniform Gifts to Minors
Act/Uniform Transfers to Minors Act (UGMA/UTMA) account). Additional investments
can be made for as little as $100 ($25 for a retirement plan or an UGMA/UTMA
account). The funds have the right to waive these minimum investment
requirements for employees of the funds' advisor and its affiliates. The funds
also have the right to reject any purchase order.
- --------------------------------------------------------------------------------
CHOOSING A SHARE CLASS
All funds in this prospectus offer Class A shares. Regional Equity Fund also
offers Class B shares. Each class has its own cost structure. The amount of your
purchase and the length of time you expect to hold your shares will be factors
in determining which class of shares is best for you.
Class A Shares
If you are making an investment that qualifies for a reduced sales charge, Class
A shares may be best for you. Class A shares feature:
* a front-end sales charge, described below.
* lower annual expenses than Class B shares. See "Fund Summaries" for more
information on fees and expenses.
Because Class A shares will normally be the better choice if your investment
qualifies for a reduced sales charge:
* orders for Class B shares for $250,000 or more normally will be treated as
orders for Class A shares.
* orders for Class B shares by an investor eligible to purchase Class A shares
without a front-end sales charge normally will be treated as orders for Class
A shares.
Class B Shares
If you want all your money to go to work for you immediately, you may prefer
Class B shares. Class B shares have no front-end sales charge, however they do
have:
* higher annual expenses than Class A shares. (See "Fees and Expenses" in the
"Fund Summaries" section.)
* a back-end sales charge, called a "contingent deferred sales charge," if you
redeem your shares within six years of purchase.
* automatic conversion to Class A shares approximately eight years after
purchase, thereby reducing future annual expenses.
- --------------------------------------------------------------------------------
12b-1 FEES
Each fund has adopted a plan under rule 12b-1 of the Investment Company Act that
allows it to pay the fund's distributor an annual fee for the distribution and
sale of its shares and for services provided to shareholders.
For 12b-1 fees are equal to:
- --------------------------------------------------
Class A shares 0.25% of average daily net assets
Class B shares 1% of average daily net assets
Because these fees are paid out of a fund's assets on an ongoing basis, over
time these fees will increase the cost of your investment and may cost you more
than paying other types of sales charges.
The Class A share 12b-1 fee is a shareholder servicing fee. For Class B shares,
a portion of the 12b-1 fee equal to 0.25% of average daily net assets is a
shareholder servicing fee and the rest is a distribution fee.
The funds' distributor uses the shareholder servicing fee to compensate
investment professionals, participating institutions and "one-stop" mutual fund
networks for providing ongoing services to shareholder accounts. These
institutions receive annual fees equal to 0.25% of a fund's Class A and Class B
share average daily net assets attributable to shares sold through such
institutions. For Class B shares, and for net asset value sales of Class A
shares on which the institution receives a commission, the institution does not
begin to receive its annual fee until one year after the shares are sold. The
distributor may pay additional fees to institutions using the sales charges it
receives, in exchange for sales and/or administrative services performed on
behalf of the institution's customers.
The distributor is currently waiving its Class A share 12b-1 fee to 0% for
Intermediate Government Bond Fund and 0.15% for Adjustable Rate Mortgage
Securities Fund. Therefore, the distributor will proportionately reduce the
annual fee referred to above that it pays to institutions in connection with
their sales of Class a shares of those funds.
- --------------------------------------------------------------------------------
CALCULATING YOUR SHARE PRICE
Your purchase price will be based on the fund's net asset value (NAV) per share,
which is generally calculated as of the close of regular trading on the New York
Stock Exchange (usually 3 p.m. Central time) every day the exchange is open.
A fund's NAV is equal to the market value of its investments and other assets,
less any liabilities, divided by the number of fund shares. If market prices are
not readily available for an investment or if the advisor believes they are
unreliable, fair value prices may be determined in good faith using methods
approved by the funds' board of directors.
10
PROSPECTUS - First American Small Cap Funds and Bond Funds
Class A and Class B Shares
<PAGE>
Policies & Services
BUYING SHARES CONTINUED
Class A Shares
Your purchase price is typically the net asset value of your shares, plus a
front-end sales charge. Sales charges vary depending on the amount of your
purchase. The funds' distributor receives the sales charge you pay and reallows
a portion of the sales charge to your investment professional or participating
institution.
MICRO CAP VALUE FUND
REGIONAL EQUITY FUND
Maximum
Sales Charge Reallowance
as a % of as a % of as a % of
Purchase Net Amount Purchase
Price Invested Price
- --------------------------------------------------------------------------------
Less than $ 50,000 5.25% 5.54% 5.00%
$ 50,000 - $ 99,999 4.25% 4.44% 4.00%
$100,000 - $249,999 3.25% 3.36% 3.00%
$250,000 - $499,999 2.25% 2.30% 2.00%
$500,000 - $999,999 1.75% 1.78% 1.50%
$1 million and over 0% 0% 0%
ADJUSTABLE RATE MORTGAGE SECURITIES FUND
INTERMEDIATE GOVERNMENT BOND FUND
<TABLE>
<CAPTION>
Maximum
Sales Charge Reallowance
as a % of as a % of as a % of
Offering Net Asset Purchase
Price Value Price
----------- ----------- ------------
<S> <C> <C> <C>
Less than $ 50,000 2.50% 2.56% 2.25%
$ 50,000 - $ 99,999 2.00% 2.04% 1.75%
$100,000 - $249,999 1.50% 1.52% 1.25%
$250,000 - $499,999 1.00% 1.01% 0.75%
$500,000 - $999,999 0.75% 0.76% 0.50%
$1 million and over 0% 0% 0%
</TABLE>
Reducing Your Sales Charge
As shown in the preceding tables, larger purchases of Class A shares reduce the
percentage sales charge you pay. You also may reduce your sales charge in the
following ways:
PRIOR PURCHASES. Prior purchases of Class A shares of any First American fund
(except a money market fund) will be factored into your sales charge
calculation. For example, let's say you're making a $10,000 investment. If the
current value of all other First American fund Class A shares that you hold is
$40,000 or more, your current sales charge is reduced. To receive a reduced
sales charge, you must notify the funds' transfer agent of your prior purchases.
This must be done at the time of purchase, either directly to the transfer agent
in writing or by notifying your investment professional or financial
institution.
PURCHASES BY RELATED ACCOUNTS. Concurrent and prior purchases of Class A shares
by certain other accounts also will be combined with your purchase to determine
your sales charge. For example, purchases made by your spouse or children under
age 21 will reduce your sales charge. To receive a reduced sales charge, you
must notify the funds' transfer agent of purchases by any related accounts. This
must be done at the time of purchase, either directly to the transfer agent in
writing or by notifying your investment professional or financial institution.
LETTER OF INTENT. If you plan to invest $50,000 or more over a 13-month period
in Class A shares of any First American fund except the money market funds, you
may reduce your sales charge by signing a non-binding letter of intent. (If you
do not fulfill the letter of intent, you must pay the applicable sales charge.
In addition, if you reduce your sales charge to zero under a letter of intent
and then sell your Class A shares within 18 months of their purchase, you may be
charged a contingent deferred sales charge of 1%. See "For Investments of Over
$1 Million.")
More information on these ways to reduce your sales charge appears in the
Statement of Additional Information (SAI). The SAI also contains information on
investors who are eligible to purchase Class A shares without a sales charge.
FOR INVESTMENTS OF OVER $1 MILLION
There is no initial sales charge on Class A share purchases of $1 millon or
more. However, your investment professional or financial institution may receive
a commission of up to 1% on your purchase. If such a commission is paid, you
will be assessed a contingent deferred sales charge (CDSC) of 1% if you sell
your shares within 18 months. To find out whether you will be assessed a CDSC,
ask your broker or financial institution. The funds' distributor receives any
CDSC imposed when you sell your Class A shares. The CDSC is based on the value
of your shares at the time of purchase or at the time of sale, whichever is
less. The charge does not apply to shares you acquired by reinvesting your
dividend or capital gain distributions.
To help lower your costs, shares that are not subject to a CDSC will be sold
first. Other shares will then be sold in an order that minimizes your CDSC. The
CDSC for Class A shares will be waived for (i) redemptions following the death
or disability (as defined in the Internal Revenue Code) of a shareholder and
(ii) redemptions that equal the minimum required distribution from an individual
retirement account or other retirement plan to a shareholder who has reached the
age of 70 1/2.
Class B Shares
Your purchase price for Class B shares is their net asset value -- there is no
front-end sales charge. However, if you redeem your shares within six years of
purchase, you will pay a back-end sales charge, called a contingent deferred
sales charge (CDSC). Although you pay no front-end sales charge when you buy
Class B shares, the funds' distributor pays a sales commission of 4.25% of the
amount invested to brokers and financial institutions which sell Class B shares.
The funds' distributor receives any CDSC imposed when you sell your Class B
shares.
11
PROSPECTUS - First American Small Cap Funds and Bond Funds
Class A and Class B Shares
<PAGE>
Policies & Services
BUYING SHARES CONTINUED
Your CDSC will be based on the value of your shares at the time of purchase or
at the time of sale, whichever is less. The charge does not apply to shares you
acquired by reinvesting your dividend or capital gain distributions. Shares will
be sold in the order that minimizes your CDSC.
CDSC as a % of the
Year since purchase value of your shares
- --------------------------------------------------------------------------------
First 5%
Second 5%
Third 4%
Fourth 3%
Fifth 2%
Sixth 1%
Seventh 0%
Eighth 0%
Your Class B shares will automatically convert to Class A shares eight years
after the first day of the month you purchased the shares. For example, if you
purchase Class B shares on June 15, 2000, they will convert to Class A shares on
June 1, 2008.
The CDSC will be waived for:
* redemptions following the death or disability (as defined in the Internal
Revenue Code) of a shareholder.
* redemptions that equal the minimum required distribution from an individual
retirement account or other retirement plan to a shareholder who has reached
the age of 70 1/2.
* redemptions through a systematic withdrawal plan, at a rate of up to 12% a
year of your account's value. During the first year, the 12% annual limit
will be based on the value of your account on the date the plan is
established. Thereafter, it will be based on the value of your account on the
preceeding December 31.
- --------------------------------------------------------------------------------
HOW TO BUY SHARES
You may buy shares on any day the New York Stock Exchange is open. However,
purchases of shares may be restricted in the event of an early or unscheduled
close of the New York Stock Exchange. Your shares will be priced at the next NAV
calculated after your order is accepted by the fund, plus any applicable sales
charge. To make sure that your order is accepted, follow the directions for
purchasing shares given below.
By Phone
You may purchase shares by calling your investment professional or financial
institution, if they have a sales agreement with the funds' distributor. In many
cases, your order will be effective that day if received by your investment
professional or financial institution by the close of regular trading on the New
York Stock Exchange. In some cases, however, you will have to transmit your
request by an earlier time in order for your purchase request to be effective
that day. This allows your investment professional or financial institution time
to process your request and transmit it to the fund. Some financial institutions
may charge a fee for helping you purchase shares. Contact your investment
professional or financial institution for more information.
If you are paying by wire, you may purchase shares by calling 1-800-637-2548
before 3 p.m. Central time. All information will be taken over the telephone,
and your order will be placed when the funds' custodian receives payment by
wire. Wire federal funds as follows:
U.S. Bank National Association, Minneapolis, MN
ABA Number 091000022
For Credit to: DST Systems, Inc.:
Account Number 160234580266
For Further Credit to (investor name and fund name)
You cannot purchase shares by wire on days when federally chartered banks are
closed.
By Mail
To purchase shares by mail, simply complete and sign a new account form, enclose
a check made payable to the fund you wish to invest in, and mail both to:
First American Funds
c/o DST Systems, Inc.
P.O. Box 219382
Kansas City, Missouri 64121-9382
After you have established an account, you may continue to purchase shares by
mailing your check to First American Funds at the same address.
Please note the following:
* All purchases must be made in U.S. dollars.
* Third-Party checks, credit cards, credit card checks and cash are not
Accepted.
* If a check does not clear your bank, the funds reserve the right to cancel
the purchase, and you could be liable for any losses or fees incurred.
- --------------------------------------------------------------------------------
INVESTING AUTOMATICALLY
To purchase shares as part of a savings discipline, you may add to your
investment on a regular basis:
* by having $100 or more ($25 for retirement and UGMA/UTMA) automatically
withdrawn from your bank account on a periodic basis and invested in fund
shares.
* through automatic monthly exchanges of your shares of Prime Obligations Fund,
a money market fund in the
First American family of funds. Exchanges must be made into the same class of
shares that you hold in Prime Obligations Fund.
You may apply for participation in either of these programs through your
investment professional or financial institution or by calling 1-800-637-2548.
12
PROSPECTUS - First American Small Cap Funds and Bond Funds
Class A and Class B Shares
<PAGE>
Policies & Services
SELLING SHARES
- --------------------------------------------------------------------------------
HOW TO SELL SHARES
You may sell your shares on any day when the New York Stock Exchange is open.
However, redemption of shares may be restricted in the event of an early or
unscheduled close of the New York Stock Exchange. Your shares will be sold at
the next NAV calculated after your order is accepted by the fund, less any
applicable contingent deferred sales charge. To make sure that your order is
accepted, follow the directions for selling shares given below.
The proceeds from your sale normally will be mailed or wired within one day, but
in no event more than seven days, after your request is received in proper form.
By Phone
If you purchased shares through a investment professional or financial
institution, simply call them to sell your shares. In many cases, your
redemption will be effective that day if received by your investment
professional or financial institution by the close of regular trading on the New
York Stock Exchange. In some cases, however, you will have to call by an earlier
time in order for your redemption to be effective that day. This allows your
investment professional or financial institution time to process your request
and transmit it to the fund. Contact your investment professional or financial
institution directly for more information.
If you did not purchase shares through a investment professional or financial
institution, you may sell your shares by calling 1-800-637-2548. Proceeds can be
wired to your bank account (if the proceeds are at least $1,000 and you have
previously supplied your bank account information to the transfer agent) or sent
to you by check.
If you recently purchased your shares by check or through the Automated Clearing
House (ACH), proceeds from the sale of those shares may not be available until
your check or ACH payment has cleared, which may take up to 10 calendar
days from the date of purchase.
By Mail
To sell shares by mail, send a written request to your investment
professional or financial institution, or to the funds' transfer agent at the
following address:
First American Funds
c/o DST Systems, Inc.
P.O. Box 219382
Kansas City, Missouri 64121-9382
Your request should include the following information:
* name of the fund;
* account number;
* dollar amount or number of shares redeemed;
* name on the account; and
* signatures of all registered account owners.
Signatures on a written request must be guaranteed if:
* you would like the proceeds from the sale to be paid to anyone other than to
the shareholder of record.
* you would like the check mailed to an address other than the address on the
funds' records.
* your redemption request is for $50,000 or more.
A signature guarantee assures that a signature is genuine and protects
shareholders from unauthorized account transfers. Banks, savings and loan
associations, trust companies, credit unions, broker-dealers and member firms of
a national securities exchange may guarantee signatures. Call your financial
institution to determine if it has this capability.
Proceeds from a written redemption request will be sent to you by check.
- --------------------------------------------------------------------------------
SYSTEMATIC WITHDRAWALS
If your account has a value of $5,000 or more, you may redeem a specific dollar
amount from your account on a regular basis. To set up systematic withdrawals,
contact your investment professional or financial institution.
You should not make systematic withdrawals if you plan to continue investing in
the fund, due to sales charges and tax liabilities.
- --------------------------------------------------------------------------------
REINVESTING AFTER A SALE
If you sell Class A shares, you may reinvest in Class A shares of that fund or
another First American fund within 180 days without a sales charge. To reinvest
in Class A shares at net asset value (without paying a sales charge), you must
notify the transfer agent directly in writing or notify your investment
professional or financial institution.
ACCOUNTS WITH LOW BALANCES
Except for retirement plans and UGMA/UTMA accounts, if your account balance
falls below $500 as a result of selling or exchanging shares, the fund reserves
the right to either:
* Deduct a $25 annual account maintenance fee, which is intended to allocate
the costs of maintaining accounts more equitably among shareholders, or
* Close your account and send you the proceeds, less any applicable
contingent deferred sales charge.
Before taking any action, however, the fund will send you written notice of the
action it intends to take and give you 30 days to re-establish a minimum account
balance of $500.
13
PROSPECTUS - First American Small Cap Funds and Bond Funds
Class A and Class B Shares
<PAGE>
Policies & Services
MANAGING YOUR INVESTMENT
- --------------------------------------------------------------------------------
EXCHANGING SHARES
If your investment goals or your financial needs change, you may move from one
First American fund to another. There is no fee to exchange shares.
Generally, you may exchange your shares only for shares of the same class.
However, you may exchange your Class A shares for Class Y shares of the same or
another First American fund if you subsequently become eligible to participate
in that class (for example, by opening a fiduciary, custody or agency account
with a financial institution which invests in Class Y shares).
Exchanges are made based on the net asset value per share of each fund at the
time of the exchange. When you exchange your Class A shares of one of the funds
for Class A shares of another First American fund, you do not have to pay a
sales charge. When you exchange your Class B shares for Class B shares of
another First American fund, the time you held the shares of the "old" fund will
be added to the time you hold the shares of the "new" fund for purposes of
determining your CDSC or calculating when your shares convert to Class A shares.
Before exchanging into any fund, be sure to read its prospectus carefully. A
fund may change or cancel its exchange policies at any time. You will be
notified of any changes. The funds have the right to limit exchanges to four
times per year.
By Phone
You may exchange shares by calling your investment professional, your financial
institution, or the funds' transfer agent, provided that both funds have
identical shareholder registrations. To request an exchange through the funds'
transfer agent, call 1-800-637-2548. Your instructions must be received by the
funds' transfer agent before 3 p.m. Central time, or by the time specified by
your investment professional or financial institution, in order for shares to be
exchanged the same day.
By Mail
To exchange shares by written request, please follow the procedures under
"Selling Shares." Be sure to include the names of both funds involved in the
exchange.
TELEPHONE TRANSACTIONS
You may buy, sell or exchange shares by telephone, unless you elected on your
new account form to restrict this privilege. If you wish to reinstate this
option on an existing account, please call Investor Services at 1-800-637-2548
to request the appropriate form.
The funds and their agents will not be responsible for any losses that may
result from acting on wire or telephone instructions that they reasonably
believe to be genuine. The funds and their agents will each follow reasonable
procedures to confirm that instructions received by telephone are genuine, which
may include taping telephone conversations.
It may be difficult to reach the funds by telephone during periods of unusual
market activity. If you are unable to reach the funds or their agents by
telephone, please consider sending written instructions.
- --------------------------------------------------------------------------------
STAYING INFORMED
Shareholder Reports
Shareholder reports are mailed twice a year, in November
and May. They include financial statements, performance information, a message
from your portfolio managers, and, on an annual basis, the auditors' report.
In an attempt to reduce shareholder costs and help eliminate duplication, the
funds will try to limit their mailings 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 1-800-637-2548.
Statements and Confirmations
Statements summarizing activity in your account are mailed
at least quarterly. Confirmations are mailed following each purchase or sale of
fund shares.
14
PROSPECTUS - First American Small Cap Funds and Bond Funds
Class A and Class B Shares
<PAGE>
Policies & Services
MANAGING YOUR INVESTMENT CONTINUED
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS
Dividends from Micro Cap Value Fund's and Regional Equity Fund's net investment
income, if any, are declared and paid quarterly. Dividends from Adjustable Rate
Mortgage Securities Fund's and Intermediate Government Bond Fund's net
investment income, if any, are declared and paid monthly. Any capital gains are
distributed at least once each year.
On the ex-dividend date for a distribution, a fund's share price is reduced by
the amount of the distribution. If you buy shares just before the ex-dividend
date, in effect, you "buy the dividend."
You will pay the full price for the shares and then receive a portion of that
price back as a taxable distribution.
Dividend and capital gain distributions will be reinvested in additional shares
of the fund paying the distribution, unless you request that distributions be
reinvested in another First American fund or paid in cash. This request may be
made on your new account form or by writing to the fund. If you request that
your distributions be paid in cash but those distributions cannot be delivered
because of an incorrect mailing address, the undelivered distributions and all
future distributions will be reinvested in fund shares.
- --------------------------------------------------------------------------------
TAXES
Some of the tax consequences of investing in the funds are discussed below. More
information about taxes is in the Statement of Additional Information. However,
because everyone's tax situation is unique, always consult your tax professional
about federal, state and local tax consequences.
Taxes on Distributions
Each fund pays its shareholders dividends from its net investment income and any
net capital gains that it has realized. For most investors, fund dividends and
distributions are considered taxable whether they are reinvested or taken in
cash (unless your investment is in an IRA or other tax-advantaged account).
Dividends from a fund's net investment income and short-term capital gains are
taxable as ordinary income. Distributions of a fund's long-term capital gains
are taxable as long-term capital gains, regardless of how long you have held
your shares. Micro Cap Value Fund and Regional Equity Fund expect that, as a
result of their investment objectives and strategies, their distributions will
consist primarily of capital gains. Adjustable Rate Mortgage Securities Fund and
Intermediate Government Bond Fund expect that, as a result of their investment
objectives and strategies, their distributions will consist primarily of net
investment income.
- --------------------------------------------------------------------------------
TAXES ON TRANSACTIONS
The sale of fund shares or the exchange of one fund's shares for shares of
another fund, will be a taxable event for you and may result in a capital gain
or loss. The gain or loss will be considered long-term if you have held your
shares for more than one year. A gain or loss on shares held for one year or
less is considered short-term and is taxed at the same rates as ordinary income.
The exchange of one class of shares for another class of shares in the same fund
will not be taxable.
15
PROSPECTUS - First American Small Cap Funds and Bond Funds
Class A and Class B Shares
<PAGE>
Additional Information
MANAGEMENT
U.S. Bank National Association (U.S. Bank), acting through its First American
Asset Management division, is the funds' investment advisor. First American
Asset Management provides investment management services to individuals and
institutions, including corporations, foundations, pensions and retirement
plans. As of December 31, 1999, it had more than $78 billion in assets under
management, including investment company assets of more than $33 billion. As
investment advisor, First American Asset Management manages the funds' business
and investment activities, subject to the authority of the board of directors.
Each fund pays the investment advisor a monthly fee for providing investment
advisory services. During the fiscal year ended September 30, 1999, after taking
into account any fee waivers, the funds paid the following investment advisory
fees to First American Asset Management:
Advisory fee
as a % of
average daily
net assets
- --------------------------------------------------------------------------------
MICRO CAP VALUE FUND 0.70%
REGIONAL EQUITY FUND 0.64%
ADJUSTABLE RATE MORTGAGE SECURITIES FUND 0.30%
INTERMEDIATE GOVERNMENT BOND FUND 0.53%
- --------------------------------------------------------------------------------
Investment Advisor
First American Asset Management
601 Second Avenue South
Minneapolis, Minnesota 55402
Distributor
SEI Investments Distribution Co.
Oaks, Pennsylvania 19456
Direct Fund Correspondence to:
First American Funds
P.O. Box 1330
Minneapolis, MN 55440-1330
Additional Compensation
U.S. Bank and other affiliates of U.S. Bancorp may act as fiduciary with
respect to plans subject to the Employee Retirement Income Security Act of 1974
(ERISA) and other trust and agency accounts that invest in the funds. As
described above, U.S. Bank receives compensation for acting as the funds'
investment advisor. U.S. Bank and its affiliates also receive compensation in
connection with the following:
CUSTODY SERVICES.U.S. Bank provides or compensates others to provide custody
services to the funds. U.S. Bank is paid monthly fees equal, on an annual
basis, to 0.03% of a fund's average daily net assets. In addition, U.S. Bank is
reimbursed for its out-of-pocket expenses incurred while providing custody
services to the funds.
ADMINISTRATION SERVICES.U.S. Bank provides or compensates others to provide
administrative services to all open-end funds in the First American family of
funds. These services include general administrative and accounting services,
transfer agency and dividend disbursing services, and shareholder services. U.S.
Bank receives total fees equal, on an annual basis, to 0.12% of the aggregate
average daily net assets of all open-end mutual funds in the First American fund
family up to $8 billion and 0.105% of the aggregate average daily net assets of
all open-end mutual funds in the First American fund family in excess of $8
billion. These fees are allocated among the funds in the First American family
of funds on the basis of their relative net asset values. Additionally, the
funds pay U.S. Bank fees based upon the number of funds and accounts maintained.
SECURITIES LENDING SERVICES. In connection with lending their portfolio
securities, the funds pay administrative and custodial fees to U.S. Bank which
are equal to 40% of the funds' income from these securities lending
transactions.
BROKERAGE TRANSACTIONS. When purchasing and selling portfolio securities for
the funds, the funds' investment advisor may place trades through its
affiliates, U.S. Bancorp Investments, Inc. and U.S. Bancorp Piper Jaffray Inc.,
which will earn commissions on these transactions.
SHAREHOLDER SERVICING FEES. To the extent that fund shares
are held through U.S. Bank or its broker-dealer affiliates,
U.S. Bancorp Investments, Inc. and U.S. Bancorp Piper
Jaffray Inc., those entities may receive shareholder servicing fees from the
funds' distributor.
Portfolio Management
Each fund's investments are managed by a team of persons associated with First
American Asset Management.
16
PROSPECTUS - First American Small Cap Funds and Bond Funds
Class A and Class B Shares
<PAGE>
Additional Information
MORE ABOUT THE FUNDS
- --------------------------------------------------------------------------------
OBJECTIVES
The funds' objectives, which are described in the "Fund Summaries" section, may
be changed without shareholder approval. If a fund's objectives change, you will
be notified at least 30 days in advance. Please remember: There is no guarantee
that any fund will achieve its objectives.
- --------------------------------------------------------------------------------
INVESTMENT STRATEGIES
The funds' main investment strategies are discussed in the "Fund Summaries"
section. These are the strategies that the funds' investment advisor believes
are most likely to be important in trying to achieve the funds' objectives. You
should be aware that each fund may also use strategies and invest in securities
that are not described in this prospectus, but that are described in the
Statement of Additional Information (SAI). For a copy of the SAI, call Investor
Services at 1-800-637-2548.
Effective Duration
Adjustable Rate Mortgage Securities Fund and Intermediate Government Bond Fund
attempt to maintain the effective duration of their respective portfolio
securities within a specified range. Effective duration, one measure of interest
rate risk, measures how much the value of a security is expected to change with
a given change in interest rates. The longer a security's effective duration,
the more sensitive its price to changes in interest rates. For example, if
interest rates were to increase by one percentage point, the market value of a
bond with an effective duration of five years would decrease by 5%, with all
other factors being constant. However, all other factors are rarely constant.
Effective duration is based on assumptions and subject to a number of
limitations. It is most useful when interest rate changes are small, rapid and
occur equally in short-term and long-term securities. In addition, it is
difficult to calculate precisely for bonds with prepayment options, such as
mortgage- and asset-backed securities, because the calculation requires
assumptions about prepayment rates. For these reasons, the effective durations
of funds which invest a significant portion of their assets in these securities
can be greatly affected by changes in interest rates.
Temporary Investments
In an attempt to respond to adverse market, economic, political or other
conditions, each fund may temporarily invest without limit in cash and in U.S.
dollar-denominated high-quality money market instruments and other short-term
securities, including money market funds advised by the funds' advisor. Being
invested in these securities may result in a lower yield than would be available
from investments with a lower quality or longer term, may keep the fund from
participating in a market upswing, and may prevent a fund from achieving its
investment objectives.
Portfolio Turnover
Fund managers may trade securities frequently, resulting, from time to time, in
an annual portfolio turnover rate of over 100%. Trading of securities may
produce capital gains, which are taxable to shareholders when distributed.
Active trading may also increase the amount of commissions or mark-ups to
broker-dealers that the fund pays when it buys and sells securities. The
"Financial Highlights" section of this prospectus shows each fund's historical
portfolio turnover rate.
- --------------------------------------------------------------------------------
RISKS
Risk of Active Management
Each fund is actively managed and its performance therefore will reflect in part
the advisor's ability to make investment decisions which are suited to achieving
the fund's investment objectives. Due to their active management, the funds
could underperform other mutual funds with similar investment objectives.
Risks of Securities Lending
When a fund loans its portfolio securities, it will receive collateral equal to
at least 100% of the value of the loaned securities. Nevertheless, the fund
risks a delay in the recovery of the loaned securities, or even the loss of
rights in the collateral deposited by the borrower if the borrower should fail
financially. To reduce these risks, the funds enter into loan arrangements only
with institutions which the funds' advisor has determined are creditworthy under
guidelines established by the funds' board of directors.
Risks of Micro Cap Value Fund and
Regional Equity Fund
The main risks of investing in the funds are summarized in the "Fund Summaries"
section. More information about fund risks is presented below.
MARKET RISK. All stocks are subject to price movements due to changes in general
economic conditions, changes in the level of prevailing interest rates, changes
in investor perceptions of the market, or the outlook for overall corporate
profitability.
SECTOR RISK. The stocks of companies within specific industries or sectors of
the economy can periodically perform differently than the overall stock market.
This can be due to changes in such things as the regulatory or competitive
environment or to changes in investor perceptions of a particular industry or
sector.
17
PROSPECTUS - First American Small Cap Funds and Bond Funds
Class A and Class B Shares
<PAGE>
Additional Information
MORE ABOUT THE FUNDS CONTINUED
COMPANY RISK. Individual stocks can perform differently than the overall market.
This may be a result of specific factors such as changes in corporate
profitability due to the success or failure of specific products or management
strategies, or it may be due to changes in investor perceptions regarding a
company.
RISKS OF SMALL AND MICRO CAP STOCKS. Stocks of small and very small
capitalization companies involve substantial risk. These companies may lack the
management expertise, financial resources, product diversification and
competitive strengths of larger companies. Prices of small and micro cap stocks
may be subject to more abrupt or erratic movements than stock prices of larger,
more established companies or the market averages in general. In addition, the
frequency and volume of their trading may be less than is typical of larger
companies, making them subject to wider price fluctuations. In some cases, there
could be difficulties in selling the stocks of small and very small
capitalization companies at the desired time and price.
RISKS OF REGIONAL CONCENTRATION. Regional Equity Fund invests primarily in
common stocks of companies headquartered in Minnesota, North and South Dakota,
Montana, Wisconsin, Michigan, Iowa, Nebraska, Colorado and Illinois. The fund's
policy of concentrating its equity investments in a geographic region means that
it will be subject to adverse economic, political or other developments in that
region. Although the region in which the fund principally invests has a diverse
industrial base (including agriculture, mining, retail, transportation,
utilities, heavy and light manufacturing, financial services, insurance,
computer technology and medical technology), this industrial base is not as
diverse as that of the country as a whole. The fund therefore may be less
diversified by industry and company than other funds with a similar investment
objective and no geographic limitation.
FOREIGN SECURITY RISK. Up to 25% of each fund's total assets may be invested in
securities of foreign issuers which are either listed on a United States stock
exchange or represented by American Depositary Receipts.
Securities of foreign issuers, even when dollar-denominated and publicly traded
in the United States, may involve risks not associated with the securities of
domestic issuers. For certain foreign countries, political or social instability
or diplomatic developments could adversely affect the securities. There is also
the risk of loss due to governmental actions such as a change in tax statutes or
the modification of individual property rights. In addition, individual foreign
economies may differ favorably or unfavorably from the U.S.
economy.
Risks of Adjustable Rate Mortgage Securities Fund
and Intermediate Government Bond Fund
INTEREST RATE RISK. Debt securities in the funds will fluctuate in value with
changes in interest rates. In general, debt securities will increase in value
when interest rates fall and decrease in value when interest rates rise.
Longer-term debt securities are generally more sensitive to interest rate
changes. ARMS are generally less sensitive to interest rate changes because
their interest rates move with market rates. Securities which do not pay
interest on a current basis, such as zero coupon securities and delayed interest
securities, may be highly volatile as interest rates rise or fall.
Payment-in-kind bonds, which pay interest in other securities rather than in
cash, also may be highly volatile.
INCOME RISK. The fund's income could decline due to falling market interest
rates. This is because, in a falling interest rate environment, the fund
generally will have to invest the proceeds from sales of fund shares, as well as
the proceeds from maturing portfolio securities (or portfolio securities that
have been called, see "Call Risk," or prepaid, see "Prepayment Risk") in
lower-yielding securities.
CREDIT RISK. Each fund is subject to the risk that the issuers of debt
securities held by the fund will not make payments on the securities, or that
the other party to a contract (such as a securities lending agreement or
repurchase agreement) will default on its obligations. There is also the risk
that an issuer could suffer adverse changes in financial condition that could
lower the credit quality of a security. This could lead to greater volatility in
the price of the security and in shares of the fund. Also, a change in the
credit quality rating of a bond could affect the bond's liquidity and make it
more difficult for the fund to sell. When a fund purchases unrated securities,
it will depend on the advisor's analysis of credit risk more heavily than usual.
Each fund attempts to minimize credit risk by investing in securities considered
at least investment grade at the time of purchase. However, all of these
securities, especially those in the lower investment grade rating categories,
have credit risk. In adverse economic or other circumstances, issuers of these
lower rated securities are more likely to have difficulty making principal and
interest payments than issuers of higher rated securities.
CALL RISK. Many corporate bonds may be redeemed at the option of the issuer, or
"called," before their stated maturity date. In general, an issuer will call its
bonds if they can be refinanced by issuing new bonds which bear a lower interest
rate. The funds are subject to the possibility that during periods of falling
interest rates, a bond issuer will call its high-yielding bonds. A fund would
then be forced to invest the unanticipated proceeds at lower interest rates,
resulting in a decline in the fund's income.
PREPAYMENT RISK. Mortgage-backed securities are secured by and payable from
pools of mortgage loans. Similarly, asset-backed securities are supported by
obligations such as automobile loans or home equity loans. These mortgages and
other obligations generally can be prepaid at any time without penalty. As a
result, mortgage- and asset-backed securities are subject to prepayment risk,
which is the risk that falling interest rates could cause prepayments of the
securities to occur more quickly than expected. This occurs because, as interest
rates fall, more homeowners refinance the mortgages underlying mortgage-related
securities or prepay the debt obligations
18
PROSPECTUS - First American Small Cap Funds and Bond Funds
Class A and Class B Shares
<PAGE>
Additional Information
MORE ABOUT THE FUNDS CONTINUED
underlying asset-backed securities. A fund holding these securities must
reinvest the prepayments at a time when interest rates are falling, reducing the
income of the fund. In addition, when interest rates fall, prices on mortgage-
and asset-backed securities may not rise as much as for other types of
comparable debt securities because investors may anticipate an increase in
prepayments.
EXTENSION RISK. Mortgage- and asset-backed securities also are subject to
extension risk, which is the risk that rising interest rates could cause
mortgages or other obligations underlying the securities to be prepaid more
slowly than expected, resulting in slower prepayments of the securities. This
would, in effect, convert a short- or medium-duration mortgage- or asset-backed
security into a longer-duration security, increasing its sensitivity to interest
rate changes and causing its price to decline.
RISKS OF DOLLAR ROLL TRANSACTIONS. In a dollar roll transaction, a fund sells
mortgage-backed securities for delivery in the current month while contracting
with the same party to repurchase similar securities at a future date. Because
the fund gives up the right to receive principal and interest paid on the
securities sold, a mortgage dollar roll transaction will diminish the investment
performance of a fund unless the difference between the price received for the
securities sold and the price to be paid for the securities to be purchased in
the future, plus any fee income received, exceeds any income, principal payments
and appreciation on the securities sold as part of the mortgage dollar roll.
Whether mortgage dollar rolls will benefit a fund may depend upon the advisor's
ability to predict mortgage prepayments and interest rates. In addition, the use
of mortgage dollar rolls by a fund increases the amount of the fund's assets
that are subject to market risk, which could increase the volatility of the
price of the fund's shares.
19
PROSPECTUS - First American Small Cap Funds and Bond Funds
Class A and Class B Shares
<PAGE>
Additional Information
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The tables that follow present performance information about the Class A shares
of each fund, and Class B shares of Regional Equity Fund. This information is
intended to help you understand each fund's financial performance for the past
five years or, if shorter, the period of the fund's operations. Some of this
information reflects financial results for a single fund share. Total returns in
the tables represent the rate that you would have earned or lost on an
investment in a fund, excluding sales charges and assuming you reinvested all of
your dividends and distributions.
The information for the fiscal year ended September 30, 1999, has been audited
by Ernst & Young LLP, independent auditors, whose report, along with the funds'
financial statements, is included in the funds' annual report, which is
available upon request. The information for the fiscal years ended on or before
September 30, 1998, has been audited by other auditors.
MICRO CAP VALUE FUND
<TABLE>
<CAPTION>
Fiscal year ended September 30,
CLASS A SHARES 1999 1998 1997(1)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE DATA
Net Asset Value, Beginning of Period $ 7.95 $ 10.96 $ 10.00
------- ------- -------
Investment Operations:
Net Investment Income -- -- --
Net Gains (Losses) on Investments (both realized and unrealized) 0.86 (2.42) 0.96
------- ------- -------
Total From Investment Operations 0.86 (2.42) 0.96
------- ------- -------
Less Distributions:
Dividends (from Net Investment Income) -- -- --
Distributions (from Capital Gains) (1.79) (0.59) --
------- ------- -------
Total Distributions (1.79) (0.59) --
------- ------- -------
Net Asset Value, End of Period $ 7.02 $ 7.95 $ 10.96
======= ======= =======
Total Return 12.05% (22.77)% 9.60%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $ 1,401 $ 1,110 $ 44
Ratio of Expenses to Average Net Assets 1.15% 1.13% 1.15%(2)
Ratio of Net Loss to Average Net Assets (0.33)% (0.09)% (0.25)%(2)
Ratio of Expenses to Average Net Assets (excluding waivers) 1.15% 1.13% 1.32%(2)
Ratio of Net Loss to Average Net Assets (excluding waivers) (0.33)% (0.09)% (0.42)%(2)
Portfolio Turnover Rate 21% 16% 0%
- --------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Period ended
September 24, Fiscal year ended September 30,
CLASS B SHARES 1999(3) 1998 1997(1)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE DATA
Net Asset Value, Beginning of Period $ 7.84 $ 10.95 $ 10.00
------ -------- -------
Investment Operations:
Net Investment Loss (0.01) (0.01) --
Net Gains (Losses) on Investments (both realized and unrealized) (0.74) (2.51) 0.95
------- -------- -------
Total From Investment Operations (0.75) (2.52) 0.95
------- -------- -------
Less Distributions:
Dividends (from Net Investment Income) -- -- --
Distributions (from Capital Gains) (1.79) (0.59) --
------- -------- -------
Total Distributions (1.79) (0.59) --
------- -------- -------
Net Asset Value, End of Period $ 6.78 $ 7.84 $ 10.95
======= ======== =======
Total Return 10.06% (23.78)% 9.50%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $ -- $ 206 $ 50
Ratio of Expenses to Average Net Assets 1.90%(2) 1.88% 1.90%(2)
Ratio of Net Loss to Average Net Assets 0.68%(2) (0.78)% (1.04)%(2)
Ratio of Expenses to Average Net Assets (excluding waivers) 1.90%(2) 1.88% 2.07%(2)
Ratio of Net Loss to Average Net Assets (excluding waivers) 0.68%(2) (0.78)% (1.21)%(2)
Portfolio Turnover Rate 21% 16% 0%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Class A shares and Class B shares have been offered since August 9, 1997.
(2) Annualized.
(3) Effective September 24, 1999, all Class B shares were exchanged into Class A
shares.
20
PROSPECTUS - First American Small Cap Funds and Bond Funds
Class A and Class B Shares
<PAGE>
Additional Information
FINANCIAL HIGHLIGHTS CONTINUED
REGIONAL EQUITY FUND
<TABLE>
<CAPTION>
Fiscal year ended September 30,
CLASS A SHARES 1999 1998
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE DATA
Net Asset Value, Beginning of Period $ 16.68 $ 23.12
------- ---------
Investment Operations:
Net Investment Income (0.05) --
Net Gains (Losses) on Investments (both realized and unrealized) 3.34 (5.49)
------- ---------
Total From Investment Operations 3.29 (5.49)
------- ---------
Less Distributions:
Dividends (from Net Investment Income) -- --
Distributions (from Capital Gains) (1.23) (0.95)
------- ---------
Total Distributions (1.23) (0.95)
------- ---------
Net Asset Value, End of Period $ 18.74 $ 16.68
======= =========
Total Return 20.12% (24.54)%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $29,702 $ 25,706
Ratio of Expenses to Average Net Assets 1.15% 1.15%
Ratio of Net Income (Loss) to Average Net Assets (0.26)% (0.08)%
Ratio of Expenses to Average Net Assets (excluding waivers) 1.21% 1.16%
Ratio of Net Income (Loss) to Average Net Assets
(excluding waivers) (0.32)% (0.09)%
Portfolio Turnover Rate 19% 15%
- -----------------------------------------------------------------------------------------------
</TABLE>
[WIDE TABLE CONTINUED FROM ABOVE]
<TABLE>
<CAPTION>
Fiscal year ended September 30,
CLASS A SHARES 1997 1997 1995
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE DATA
Net Asset Value, Beginning of Period $ 17.71 $ 17.12 $ 12.52
------- ------- -------
Investment Operations:
Net Investment Income 0.03 0.04 0.08
Net Gains (Losses) on Investments (both realized and unrealized) 6.14 1.70 4.90
------- ------- -------
Total From Investment Operations 6.17 1.74 4.98
------- ------- -------
Less Distributions:
Dividends (from Net Investment Income) (0.07) (0.04) (0.06)
Distributions (from Capital Gains) (0.69) (1.11) (0.32)
------- ------- -------
Total Distributions (0.76) (1.15) (0.38)
------- ------- -------
Net Asset Value, End of Period $ 23.12 $ 17.71 $ 17.12
======= ======= =======
Total Return 36.13% 10.97% 41.17%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $37,677 $25,325 $14,917
Ratio of Expenses to Average Net Assets 1.15% 1.13% 1.05%
Ratio of Net Income (Loss) to Average Net Assets 0.11% 0.24% 0.58%
Ratio of Expenses to Average Net Assets (excluding waivers) 1.15% 1.15% 1.20%
Ratio of Net Income (Loss) to Average Net Assets
(excluding waivers) 0.11% 0.22% 0.43%
Portfolio Turnover Rate 17% 36% 42%
- -----------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Fiscal year ended September 30,
CLASS B SHARES 1999 1998
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE DATA
Net Asset Value, Beginning of Period $ 16.25 $ 22.72
Investment Operations:
Net Investment Income (Loss) (0.23) (0.04)
Net Gains (Losses) on Investments (both realized and unrealized) 3.29 (5.48)
------- ---------
Total From Investment Operations 3.06 (5.52)
------- ---------
Less Distributions:
Dividends (from Net Investment Income) -- --
Distributions (from Capital Gains) (1.23) (0.95)
------- ---------
Total Distributions (1.23) (0.95)
------- ---------
Net Asset Value, End of Period $ 18.08 $ 16.25
======= =========
Total Return 19.19% (25.12)%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $20,922 $ 29,481
Ratio of Expenses to Average Net Assets 1.90% 1.90%
Ratio of Net Loss to Average Net Assets (1.03)% (0.83)%
Ratio of Expenses to Average Net Assets (excluding waivers) 1.96% 1.91%
Ratio of Net Loss to Average Net Assets (excluding waivers) (1.09)% (0.84)%
Portfolio Turnover Rate 19% 15%
- -----------------------------------------------------------------------------------------------
</TABLE>
[WIDE TABLE CONTINUED FROM ABOVE]
<TABLE>
<CAPTION>
Fiscal year ended September 30,
CLASS B SHARES 1997 1996 1995
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE DATA
Net Asset Value, Beginning of Period $ 17.47 $ 16.99 $ 12.50
Investment Operations:
Net Investment Income (Loss) (0.03) (0.04) 0.04
Net Gains (Losses) on Investments (both realized and unrealized) 5.97 1.64 4.80
------- ------- --------
Total From Investment Operations 5.94 1.60 4.84
------- ------- --------
Less Distributions:
Dividends (from Net Investment Income) -- (0.01) (0.03)
Distributions (from Capital Gains) (0.69) (1.11) (0.32)
------- ------- --------
Total Distributions (0.69) (1.12) (0.35)
------- ------- --------
Net Asset Value, End of Period $ 22.72 $ 17.47 $ 16.99
======= ======= ========
Total Return 35.18% 10.14% 39.98%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $39,683 $27,671 $ 7,630
Ratio of Expenses to Average Net Assets 1.90% 1.88% 1.84%
Ratio of Net Loss to Average Net Assets (0.65)% (0.52)% (0.25)%
Ratio of Expenses to Average Net Assets (excluding waivers) 1.90% 1.90% 1.95%
Ratio of Net Loss to Average Net Assets (excluding waivers) (0.65)% (0.54)% (0.36)%
Portfolio Turnover Rate 17% 36% 42%
- -------------------------------------------------------------------------------------------------------
</TABLE>
21
PROSPECTUS - First American Small Cap Funds and Bond Funds
Class A and Class B Shares
<PAGE>
Additional Information
FINANCIAL HIGHLIGHTS CONTINUED
ADJUSTABLE RATE MORTGAGE SECURITIES FUND
<TABLE>
<CAPTION>
Fiscal year ended September 30,
CLASS A SHARES 1999 1998 1997 1996(3)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE DATA(1)
Net Asset Value, Beginning of Period $ 8.16 $ 8.15 $ 8.06 $ 8.03
-------- -------- -------- --------
Investment Operations:
Net Investment Income 0.41 0.48 0.47 0.04
Net Gains (Losses) on investments (both realized and unrealized) (0.11) -- 0.09 0.03
-------- -------- -------- --------
Total From Investment Operations 0.30 0.48 0.56 0.07
-------- -------- -------- --------
Less Distributions:
Dividends (from Net Investment Income) (0.41) (0.47) (0.47) (0.04)
-------- -------- -------- --------
Total Distributions (0.41) (0.47) (0.47) (0.04)
-------- -------- -------- --------
Net asset value, End of Period $ 8.05 $ 8.16 $ 8.15 $ 8.06
======== ======= ======= =======
Total Return 3.74% 5.56% 7.16% 0.85%
RATIOS/SUPPLEMENTAL DATA(1)
Net Assets, End of Period (000) $100,699 $132,733 $184,697 $262,833
Ratio of Expenses to Average Net Assets 0.80% 0.80% 0.81% 0.82%(4)
Ratio of Net Income to Average Net Assets 4.99% 5.44% 5.84% 5.82%(4)
Ratio of Expenses to Average Net Assets (excluding waivers) 1.30% 0.89% 0.81% 0.82%(4)
Ratio of Net Income to Average Net Assets (excluding waivers) 4.49% 5.35% 5.84% 5.82%(4)
Portfolio Turnover Rate (excluding short-term securities) 62% 14% 25% 2%
Amount of Borrowings Outstanding at End of Period (000)(2) N/A N/A N/A N/A
Average Amount of Borrowings Outstanding During the Period (000)(2) N/A N/A N/A N/A
Average Number of Shares Outstanding During the Period (000) N/A N/A N/A N/A
Average Per-Share Amount of Borrowings Outstanding
During the Period (000)(2) N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
[WIDE TABLE CONTINUED FROM ABOVE]
<TABLE>
<CAPTION>
Fiscal year ended
August 31,
CLASS A SHARES 1996 1995
- -------------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE DATA(1)
Net Asset Value, Beginning of Period $ 7.99 $ 8.10
------- -------
Investment Operations:
Net Investment Income 0.49 0.47
Net Gains (Losses) on investments (both realized and unrealized) 0.01 (0.05)
------- -------
Total From Investment Operations 0.50 0.42
------- -------
Less Distributions:
Dividends (from Net Investment Income) (0.46) (0.53)
------- -------
Total Distributions (0.46) (0.53)
------- -------
Net asset value, End of Period $ 8.03 $ 7.99
======== =======
Total Return 6.40% 5.43%
RATIOS/SUPPLEMENTAL DATA(1)
Net Assets, End of Period (000) $269,948 $409,306
Ratio of Expenses to Average Net Assets 0.60% 0.63%
Ratio of Net Income to Average Net Assets 5.74% 5.62%
Ratio of Expenses to Average Net Assets (excluding waivers) 0.60% 0.63%
Ratio of Net Income to Average Net Assets (excluding waivers) 5.74% 5.62%
Portfolio Turnover Rate (excluding short-term securities) 51% 36%
Amount of Borrowings Outstanding at End of Period (000(2) N/A N/A
Average Amount of Borrowings Outstanding During the Period (000)(2) N/A $ 57,041
Average Number of Shares Outstanding During the Period (000) N/A 52,208
Average Per-Share Amount of Borrowings Outstanding
During the Period (000)(2) N/A $ 1.09
- -------------------------------------------------------------------------------------------
</TABLE>
(1) The financial highlights for the period from 9/1/95 to 8/3/98 are those of
Adjustable Rate Mortgage Securities Fund, a series of Piper Funds Inc. -- II.
This predecessor fund was reorganized into the fund as of the close of business
on 7/31/98. The financial highlights for periods prior to 9/1/95 are those of
American Adjustable Rate Term Trust 1998. On 9/1/95, four closed-end funds,
American Adjustable Rate Term Trusts 1996, 1997, 1998 and 1999 (BDJ, CDJ, DDJ
and EDJ) were combined to create the Piper fund. DDJ was considered the
surviving entity for financial reporting purposes. The per share historical
information for periods prior to 9/1/95 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 Piper fund ($8.00).
(2) DDJ was a closed-end investment company and was permitted to enter into
borrowings for other than temporary or emergency purposes.
(3) For the one month period ended September 30, 1996.
(4) Annualized.
22
PROSPECTUS - First American Small Cap Funds and Bond Funds
Class A and Class B Shares
<PAGE>
Additional Information
FINANCIAL HIGHLIGHTS CONTINUED
INTERMEDIATE GOVERNMENT BOND FUND
<TABLE>
<CAPTION>
Fiscal year ended September 30,
CLASS A SHARES 1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value, Beginning of Period $ 9.68 $ 9.28 $ 9.19 $ 9.29 $ 8.98
------- ------ ------ ------ ------
Investment Operations:
Net Investment Income 0.50 0.52 0.54 0.54 0.54
Net Gains (Losses) on Investments (both realized and unrealized) (0.51) 0.40 0.09 (0.10) 0.31
------- ------ ------ ------ ------
Total From Investment Operations (0.01) 0.92 0.63 0.44 0.85
------- ------ ------ ------ ------
Less Distributions:
Dividends (from Net Investment Income) (0.50) (0.52) (0.54) (0.54) (0.54)
Distributions (from Capital Gains) (0.01) -- -- -- --
------- ------ ------- ------- ------
Total Distributions (0.51) (0.52) (0.54) (0.54) (0.54)
------- ------ ------- ------- ------
Net Asset Value, End of Period $ 9.16 $ 9.68 $ 9.28 $ 9.19 $ 9.29
======= ====== ======= ======= ======
Total Return (0.08)% 10.27% 7.06% 4.85% 9.82%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $ 5,478 $ 4,573 $ 3,525 $ 3,320 $ 2,860
Ratio of Expenses to Average Net Assets 0.70% 0.70% 0.70% 0.70% 0.70%
Ratio of Net Income to Average Net Assets 5.33% 5.58% 5.88% 5.85% 6.10%
Ratio of Expenses to Average Net Assets (excluding waivers) 1.12% 1.12% 1.12% 1.10% 1.22%
Ratio of Net Income to Average Net Assets (excluding waivers) 4.91% 5.16% 5.46% 5.45% 5.58%
Portfolio Turnover Rate 38% 20% 22% 29% 17%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
23
PROSPECTUS - First American Small Cap Funds and Bond Funds
Class A and Class B Shares
<PAGE>
- --------------------------------------------------------------------------------
FOR MORE INFORMATION
More information about the funds is available in the funds' Statement of
Additional Information and annual and semiannual reports.
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI provides more details about the funds and their policies. A current SAI
is on file with the Securities and Exchange Commission (SEC) and is incorporated
into this prospectus by reference (which means that it is legally considered
part of this prospectus).
- --------------------------------------------------------------------------------
ANNUAL AND SEMIANNUAL REPORTS
Additional information about the funds' investments is available in the funds'
annual and semiannual reports to shareholders. In the funds' annual report, you
will find a discussion of the market conditions and investment strategies that
significantly affected the funds' performance during their last fiscal year.
You can obtain a free copy of the funds' SAI and/or free copies of the funds'
most recent annual or semiannual reports by calling Investor Services at
1-800-637-2548. The material you request will be sent by first-class mail or
other means designed to ensure equally prompt delivery, within three business
days of receipt of the request.
You can also obtain copies of this information, after paying a duplicating fee,
by electronic request at the following email address: [email protected], or by
writing the SEC's Public Reference Section, Washington, D.C. 20549-0102. For
more information, call 1-202-942-8090.
Information about the funds is also available on the Internet. Text-only
versions of fund documents can be viewed online or downloaded from the EDGAR
Database on the SEC's Internet site at http://www.sec.gov.
FIRST AMERICAN FUNDS P.O. Box 1330, Minneapolis, MN 55440-1330
First American Asset Management, a division of U.S. Bank National Association,
serves as the investment advisor to the First American Funds.
First American Funds are distributed by SEI Investments Distribution Co. which
is located in Oaks, PA 19456 and is not an affiliate of U.S. Bank.
FAIF-3022-99MR (2/2000) R
SEC file number: 811-05309
[LOGO] FIRST AMERICAN FUND
THE POWER OF DISCIPLINED INVESTING(R)
<PAGE>
JANUARY 31, 2000
AS SUPPLEMENTED
FEBRUARY 1, 2000
ASSET CLASSES
(*) EQUITY FUNDS
* FUNDS OF FUNDS
(*) BOND FUNDS
* TAX FREE BOND FUNDS
* MONEY MARKET FUNDS
PROSPECTUS
FIRST AMERICAN INVESTMENT FUNDS, INC.
FIRST AMERICAN
SMALL CAP
FUNDS
AND BOND
FUNDS
CLASS Y SHARES
MICRO CAP VALUE FUND
REGIONAL EQUITY FUND
ADJUSTABLE RATE MORTGAGE SECURITIES FUND
INTERMEDIATE GOVERNMENT BOND FUND
*Important Fund Merger Information Contained on Inside Cover.
AS WITH ALL MUTUAL FUNDS, THE SECURITIES AND EXCHANGE COMMISSION HAS NOT
APPROVED OR DISAPPROVED THE SHARES OF THESE FUNDS, OR DETERMINED IF THE
INFORMATION IN THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY STATEMENT TO THE
CONTRARY IS A CRIMINAL OFFENSE.
[LOGO] FIRST AMERICAN FUNDS(R)
THE POWER OF DISCIPLINED INVESTING (R)
<PAGE>
Note to Shareholders and Prospective Shareholders
First American Fund Mergers
On January 14, 2000, shareholders of Micro Cap Value Fund approved a merger of
the fund into Small Cap Value Fund; shareholders of Intermediate Government Bond
Fund approved a merger of the fund into Intermediate Term Income Fund. These
mergers are effective February 25, 2000.
Pending shareholder approval, Regional Equity Fund will merge into Small Cap
Value Fund and Adjustable Rate Mortgage Securities Fund will merge into Limited
Term Income Fund. A shareholder meeting is scheduled for February 4, 2000, for
shareholders to vote on these proposed mergers. The effective date of these
proposed mergers is February 25, 2000.
Registration Statements on Form N-14, for each of the mergers, were filed with
the Securities and Exchange Commission and became effective on November 19,
1999. Proxy materials providing information about the proposed mergers were sent
to those shareholders holding shares of the funds as of November 16, 1999.
In recommending each of the mergers to shareholders, the First American Board of
Directors determined that combining funds with similar investment objectives may
create efficiencies that would lead to a reduction in overall operating expenses
for the combined, larger fund. However, the funds do implement different
investment strategies to achieve their investment objectives. The similarities
and differences between the funds are more fully discussed in the proxy
materials.
To receive proxy materials or obtain other information, including additional
prospectuses, contact First American Investor Services at 1-800-637-2548.
PROSPECTUS - First American Small Cap Funds and Bond Funds
Class Y Shares
<PAGE>
Table of
CONTENTS
FUND SUMMARIES
- --------------------------------------------------------------------------------
Micro Cap Value Fund 2
- --------------------------------------------------------------------------------
Regional Equity Fund 4
- --------------------------------------------------------------------------------
Adjustable Rate Mortgage Securities Fund 6
- --------------------------------------------------------------------------------
Intermediate Government Bond Fund 8
- --------------------------------------------------------------------------------
POLICIES & SERVICES
- --------------------------------------------------------------------------------
Buying and Selling Shares 10
- --------------------------------------------------------------------------------
Managing Your Investment 11
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
Management 12
- --------------------------------------------------------------------------------
More About The Funds 13
- --------------------------------------------------------------------------------
Financial Highlights 16
- --------------------------------------------------------------------------------
FOR MORE INFORMATION Back Cover
- --------------------------------------------------------------------------------
<PAGE>
Fund Summaries
INTRODUCTION
This section of the prospectus describes the objectives of certain First
American Small Cap and Bond Funds, summarizes the main investment strategies
used by each fund in trying to achieve its objectives, and highlights the risks
involved with these strategies. It also provides you with information about the
performance, fees, and expenses of the funds.
AN INVESTMENT IN THE FUNDS IS NOT A DEPOSIT OF U.S. BANK NATIONAL ASSOCIATION
AND IS NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION
OR ANY OTHER GOVERNMENT AGENCY.
1
PROSPECTUS - First American Small Cap Funds and Bond Funds
Class Y Shares
<PAGE>
Fund Summaries
MICRO CAP VALUE FUND
- --------------------------------------------------------------------------------
OBJECTIVE
Micro Cap Value Fund has an objective of capital appreciation.
- --------------------------------------------------------------------------------
MAIN INVESTMENT STRATEGIES
Under normal market conditions, Micro Cap Value Fund invests primarily (at least
65% of its total assets) in common stocks of very small capitalization
companies, defined as companies that have market capitalizations of less than
$500 million at the time of purchase. In selecting stocks, the fund's advisor
invests in securities it believes:
* are undervalued relative to other securities in the same industry or market.
* exhibit good or improving fundamentals.
* exhibit an identifiable catalyst that could close the gap between market
value and fair value over the next one to two years.
To generate additional income, the fund may lend securities representing up to
one-third of the value of its total assets to broker-dealers, banks, and other
institutions.
- --------------------------------------------------------------------------------
MAIN RISKS
The value of your investment in this fund will change daily, which means you
could lose money. The main risks of investing in this fund include:
Risks of Common Stocks
Stocks may decline significantly in price over short or extended periods of
time. Price changes may occur in the market as a whole, or they may occur in
only a particular company, industry, or sector of the market. In addition, value
stocks and/or stocks of very small capitalization companies may underperform the
market as a whole.
Risks of Micro Cap Stocks
Stocks of very small capitalization companies involve substantial risk. These
stocks historically have experienced greater price volatility than stocks of
larger-capitalization companies, and they may be expected to do so in the
future.
Risks of Securities Lending
The fund is subject to the risk that the other party to a securities lending
agreement will default on its obligations.
- --------------------------------------------------------------------------------
FUND PERFORMANCE
Illustrations on the next page provide you with information on the fund's
volatility and performance. Of course, how the fund has performed in the past
does not necessarily indicate how it will perform in the future.
The bar chart shows you how performance of the fund's shares has varied from
year to year.
The table compares the fund's performance over different time periods to that of
the fund's benchmark index, which is a broad measure of market performance. The
fund's performance reflects fund expenses; the benchmark is unmanaged and has no
expenses.
Both the chart and the table assume that all distributions have been reinvested.
2
PROSPECTUS - First American Small Cap Funds and Bond Funds
Class Y Shares
<PAGE>
Fund Summaries
MICRO CAP VALUE FUND CONTINUED
- --------------------------------------------------------------------------------
FUND PERFORMANCE (CONTINUED)
ANNUAL TOTAL RETURNS AS OF 12/31 EACH YEAR
[BAR CHART]
- -13.66% 61.95% 28.39% 21.32% 0.43% 47.26% 21.24% 22.81% -6.90% 10.83%
- --------------------------------------------------------------------------------
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Best Quarter: Quarter ending March 31, 1991 35.26%
Worst Quarter: Quarter ending September 30, 1990 (21.72)%
AVERAGE ANNUAL TOTAL RETURNS
AS OF 12/31/99(1) One Year Five Years Ten Years
- ------------------------------------------------------------------
Micro Cap Value Fund 10.83% 17.74% 17.34%
- ------------------------------------------------------------------
Russell 2000 Index(2) 21.26% 16.69% 13.40%
- ------------------------------------------------------------------
(1) Performance prior to 8/9/97 is that of Small Company Value Trust Fund, a
predecessor common trust fund. On 8/9/97, substantially all of the assets of
Small Company Value Trust Fund were transferred into Micro Cap Value Fund. The
objectives, policies, and guidelines of the two funds were, in all material
respects, identical. Small Company Value Trust Fund's performance is adjusted to
reflect Micro Cap Value Fund's Class A share fees and expenses, before any fee
waivers. Small Company Value Trust Fund was not registered under the Investment
Company Act of 1940 and therefore was not subject to certain investment
restrictions that might have adversely affected performance.
(2) An unmanaged index composed of the smallest 2000 companies in the Russell
3000 Index. The latter index is composed of 3000 large U.S. companies
representing approximately 98% of the investable U.S. equity market.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
As an investor, you pay fees and expenses to buy and hold shares of the fund.
You pay shareholder fees directly when you buy or sell shares. You pay annual
fund operating expenses indirectly since they are deducted from fund assets. The
figures below are based on fund expenses during the fiscal year ended September
30, 1999.(1)
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
- --------------------------------------------------------------------------------
MAXIMUM SALES CHARGE (LOAD) None
MAXIMUM DEFERRED SALES CHARGE (LOAD) None
ANNUAL FUND OPERATING EXPENSES AS A % OF AVERAGE NET ASSETS
- --------------------------------------------------------------------------------
Management Fees 0.70%
Distribution and Service (12b-1) Fees None
Other Expenses 0.20%
TOTAL 0.90%
- --------------------------------------------------------------------------------
(1) THE ADVISOR INTENDS TO WAIVE FEES DURING THE CURRENT FISCAL YEAR SO THAT
TOTAL FUND OPERATING EXPENSES DO NOT EXCEED 0.90%. FEE WAIVERS MAY BE
DISCONTINUED AT ANY TIME.
- --------------------------------------------------------------------------------
EXAMPLE This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes that you
invest $10,000 for the time periods indicated, that your investment has a 5%
return each year, and that the fund's operating expenses remain the same.
Although your actual costs and returns may differ, based on these assumptions
your costs would be:
- --------------------------------------------------------------------------------
1 year $ 92
3 years $ 287
5 years $ 498
10 years $1,108
3
PROSPECTUS - First American Small Cap Funds and Bond Funds
Class Y Shares
<PAGE>
Fund Summaries
REGIONAL EQUITY FUND
- --------------------------------------------------------------------------------
OBJECTIVE
Regional Equity Fund has an objective of capital appreciation.
- --------------------------------------------------------------------------------
MAIN INVESTMENT STRATEGIES
Under normal market conditions, Regional Equity Fund invests primarily (at least
65% of its total assets) in common stocks of small capitalization companies
headquartered in Minnesota, North and South Dakota, Montana, Wisconsin,
Michigan, Iowa, Nebraska, Colorado and Illinois. Small capitalization companies
are defined as companies that have market capitalizations of less than $1
billion at the time of purchase.
In selecting stocks, the fund's advisor invests in securities it believes:
* are undervalued relative to other securities in the same industry or market.
* exhibit good or improving fundamentals.
* exhibit an identifiable catalyst that could close the gap between market
value and fair value over the next one to two years.
To generate additional income, the fund may lend securities representing up to
one-third of the value of its total assets to broker-dealers, banks, and other
institutions.
- --------------------------------------------------------------------------------
MAIN RISKS
The value of your investment in this fund will change daily, which means you
could lose money. The main risks of investing in this fund include:
Risks of Common Stocks
Stocks may decline significantly in price over short or extended periods of
time. Price changes may occur in the market as a whole, or they may occur in
only a particular company, industry, or sector of the market. In addition, value
stocks and/or stocks of small capitalization companies may underperform the
market as a whole.
Risks of Small-Cap Stocks
Stocks of small-capitalization companies involve substantial risk. These stocks
historically have experienced greater price volatility than stocks of
larger-capitalization companies, and they may be expected to do so in the
future.
Risks of Regional Concentration
The fund's policy of concentrating its investments in a geographic region means
that it will be subject to adverse economic, political or other developments in
that region.
Risks of Securities Lending
The fund is subject to the risk that the other party to a securities lending
agreement will default on its obligations.
- --------------------------------------------------------------------------------
FUND PERFORMANCE
Illustrations on the next page provide you with information on the fund's
volatility and performance. Of course, how the fund has performed in the past
does not necessarily indicate how it will perform in the future.
The bar chart shows you how performance of the fund's shares has varied from
year to year.
The table compares the fund's performance over different time periods to that of
the fund's benchmark index, which is a broad measure of market performance. The
fund's performance reflects fund expenses; the benchmark is unmanaged and has no
expenses.
Both the chart and the table assume that all distributions have been reinvested.
4
PROSPECTUS - First American Small Cap Funds and Bond Funds
Class Y Shares
<PAGE>
Fund Summaries
REGIONAL EQUITY FUND CONTINUED
- --------------------------------------------------------------------------------
FUND PERFORMANCE (CONTINUED)
ANNUAL TOTAL RETURNS AS OF 12/31 EACH YEAR
[BAR CHART]
49.12% 14.07% 22.87% -5.52% -1.63%
- ----------------------------------------------
1995 1996 1997 1998 1999
Best Quarter: Quarter ending June 30, 1999 24.14%
Worst Quarter: Quarter ending September 30, 1998 (22.43)%
AVERAGE ANNUAL TOTAL RETURNS Inception Since
AS OF 12/31/99 Date One Year Five Years Inception
- --------------------------------------------------------------------------------
Regional Equity Fund 2/4/94 (1.63)% 14.20% 11.95%
- --------------------------------------------------------------------------------
Russell 2000 Index(1) 21.26% 16.69% 13.26%
- --------------------------------------------------------------------------------
(1) An unmanaged index comprised of the smallest 2000 companies in the Russell
3000 Index. The latter index is composed of 3000 large U.S. companies
representing approximately 98% of the investable U.S. equity market. The since
inception performance of the index is calculated from 2/28/94.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
As an investor, you pay fees and expenses to buy and hold shares of the fund.
You pay shareholder fees directly when you buy or sell shares. You pay annual
fund operating expenses indirectly since they are deducted from fund assets. The
figures below are based on actual expenses during the fiscal year ended
September 30, 1999.(1)
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
- --------------------------------------------------------------------------------
MAXIMUM SALES CHARGE (LOAD) None
MAXIMUM DEFERRED SALES CHARGE (LOAD) None
ANNUAL FUND OPERATING EXPENSES AS A % OF AVERAGE NET ASSETS
- --------------------------------------------------------------------------------
Management Fees 0.70%
Distribution and Service (12b-1) Fees None
Other Expenses 0.26%
TOTAL 0.96%
- --------------------------------------------------------------------------------
(1) Actual expenses for the fiscal year were lower than those shown in the table
because of voluntary fee waivers by the advisor. See "Additional Information --
Financial Highlights." The net expenses the fund actually paid after waivers for
the fiscal year ended September 30, 1999, were:
Waiver of Fund Expenses (0.06)%
TOTAL ACTUAL ANNUAL OPERATING EXPENSES (AFTER WAIVERS) 0.90%
THE ADVISOR INTENDS TO WAIVE FEES DURING THE CURRENT FISCAL YEAR SO THAT TOTAL
FUND OPERATING EXPENSES DO NOT EXCEED 0.90%. FEE WAIVERS MAY BE DISCONTINUED AT
ANY TIME.
- --------------------------------------------------------------------------------
EXAMPLE This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes that you
invest $10,000 for the time periods indicated, that your investment has a 5%
return each year, and that the fund's operating expenses remain the same.
Although your actual costs and returns may differ, based on these assumptions
your costs would be:
- --------------------------------------------------------------------------------
1 year $ 98
3 years $ 306
5 years $ 531
10 years $1,178
5
PROSPECTUS - First American Small Cap Funds and Bond Funds
Class Y Shares
<PAGE>
Fund Summaries
ADJUSTABLE RATE MORTGAGE SECURITIES FUND
- --------------------------------------------------------------------------------
OBJECTIVE
Adjustable Rate Mortgage Securities Fund's objective is to provide investors
with current income while maintaining a high degree of principal stability.
- --------------------------------------------------------------------------------
MAIN INVESTMENT STRATEGIES
Under normal market conditions, Adjustable Rate Mortgage Securities Fund invests
primarily (at least 65% of its total assets) in adjustable rate mortgage
securities (ARMS). ARMS have interest rates that reset periodically in response
to changes in the current interest rate environment.
The fund may also invest in other debt securities, including:
* fixed-rate mortgage-backed securities.
* U.S. government securities, which are securities issued or guaranteed by the
U.S. government or its agencies or instrumentalities.
* asset-backed securities.
* corporate debt obligations.
Fund managers select securities using a "top-down" approach, which begins with
the formulation of their general economic outlook. Following this, various
sectors and industries are analyzed and selected for investment. Finally, fund
managers select individual securities within these sectors or industries.
Debt securities in the fund will be rated investment grade at the time of
purchase or, if unrated, determined to be of comparable quality by the fund's
advisor. At least 65% of the fund's debt securities must be either U.S.
government securities or securities that have received at least an A or
equivalent rating. Unrated securities will not exceed 25% of the fund's total
assets.
Under normal market conditions the fund attempts to maintain an average
effective duration for its portfolio securities of zero to four years.
To generate additional income, the fund may lend securities representing up to
one-third of the value of its total assets to broker-dealers, banks, and other
institutions.
- --------------------------------------------------------------------------------
MAIN RISKS
The price and yield of this fund will change daily due to changes in interest
rates and other factors, which means you could lose money. The main risks of
investing in this fund include:
Interest Rate Risk
Debt securities typically decrease in value when interest rates rise. This risk
is usually greater for longer-term debt securities. ARMS are generally less
sensitive to interest rate changes because their interest rates move with market
rates. One measure of interest rate risk is effective duration, explained under
"More About The Funds -- Investment Strategies."
Income Risk
The fund's income could decline due to falling market interest rates.
Credit Risk
An issuer of debt securities may not make timely principal or interest payments
on its securities, or the other party to a contract (such as a securities
lending agreement) may default on its obligations.
Call Risk
During periods of falling interest rates, a bond issuer may "call" -- or repay
- ---its high-yielding bonds before their maturity date. The fund would then be
forced to invest the unanticipated proceeds at lower interest rates, resulting
in a decline in the fund's income.
Risks of Mortgage- and Asset-Backed Securities
Falling interest rates could cause faster than expected prepayments of the
obligations underlying mortgage- and asset-backed securities, which the fund
would have to invest at lower interest rates. On the other hand, rising interest
rates could cause prepayments of the obligations to decrease, extending the life
of mortgage- and asset-backed securities with lower interest rates.
- --------------------------------------------------------------------------------
FUND PERFORMANCE
Illustrations on the next page provide you with information on the fund's
volatility and performance. Of course, how the fund has performed in the past
does not necessarily indicate how it will perform in the future.
The bar chart is intended to show you how performance of the fund's shares has
varied from year to year. However, because Class Y shares were first offered in
1998, only one calendar year of performance is presented.
The table compares the fund's performance over different time periods to that of
the fund's benchmark index, which is a broad measure of market performance. The
fund's performance reflects sales charges and fund expenses; the benchmark is
unmanaged and has no expenses.
Both the chart and the table assume that all distributions have been reinvested.
6
PROSPECTUS - First American Small Cap Funds and Bond Funds
Class Y Shares
<PAGE>
Fund Summaries
ADJUSTABLE RATE MORTGAGE SECURITIES FUND CONTINUED
- --------------------------------------------------------------------------------
FUND PERFORMANCE (CONTINUED)
ANNUAL TOTAL RETURNS AS OF 12/31 EACH YEAR
[BAR CHART]
4.37%
- -----
1999
Best Quarter: Quarter ending March 31, 1999 1.41%
Worst Quarter: Quarter ending June 30, 1999 0.69%
AVERAGE ANNUAL TOTAL RETURNS Inception Since
AS OF 12/31/99 Date One Year Inception
- --------------------------------------------------------------------------------
Adjustable Rate Mortgage Securities Fund 8/3/98 4.37% 4.38%
- --------------------------------------------------------------------------------
Lehman Adjustable Rate Mortgage(1) 4.89% 4.64%
- --------------------------------------------------------------------------------
(1) An unmanaged index of U.S. agency adjustable rate mortgage securities. The
since inception performance of the index is calculated from 8/31/98.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
As an investor, you pay fees and expenses to buy and hold shares of the fund.
You pay shareholder fees directly when you buy or sell shares. You pay annual
fund operating expenses indirectly since they are deducted from fund assets. The
figures below are based on fund expenses during the fiscal year ended September
30, 1999.(1)
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
- --------------------------------------------------------------------------------
MAXIMUM SALES CHARGE (LOAD) None
MAXIMUM DEFERRED SALES CHARGE (LOAD) None
ANNUAL FUND OPERATING EXPENSES AS A % OF AVERAGE NET ASSETS
- --------------------------------------------------------------------------------
Management Fees 0.70%
Distribution and Service (12b-1) Fees None
Other Expenses 0.35%
TOTAL 1.05%
- --------------------------------------------------------------------------------
(1) Actual expenses for the fiscal year were lower than those shown in the table
because of voluntary fee waivers by the advisor. See "Additional Information --
Financial Highlights." The net expenses the fund actually paid after waivers for
the fiscal year ended September 30, 1999, were:
Waiver of Fund Expenses (0.40)%
TOTAL ACTUAL ANNUAL OPERATING EXPENSES (AFTER WAIVERS) 0.65%
THE ADVISOR INTENDS TO WAIVE FEES DURING THE CURRENT FISCAL YEAR SO THAT TOTAL
FUND OPERATING EXPENSES DO NOT EXCEED 0.65%. FEE WAIVERS MAY BE DISCONTINUED AT
ANY TIME.
- --------------------------------------------------------------------------------
EXAMPLE This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes that you
invest $10,000 for the time periods indicated, that your investment has a 5%
return each year, and that the fund's operating expenses remain the same.
Although your actual costs and returns may differ, based on these assumptions
your costs would be:
- --------------------------------------------------------------------------------
1 year $ 107
3 years $ 334
5 years $ 579
10 years $1,283
7
PROSPECTUS - First American Small Cap Funds and Bond Funds
Class Y Shares
<PAGE>
Fund Summaries
INTERMEDIATE GOVERNMENT BOND FUND
- --------------------------------------------------------------------------------
OBJECTIVE
Intermediate Government Bond Fund's objective is to provide investors with
current income to the extent consistent with preservation of capital.
- --------------------------------------------------------------------------------
MAIN INVESTMENT STRATEGIES
Under normal market conditions, Intermediate Government Bond Fund invests
primarily in U.S. government securities, which are securities issued or
guaranteed by the U.S. government or its agencies or instrumentalities. The Fund
invests only in securities which generate interest that is excluded from state
taxable income. For example, the fund may invest in U.S. Treasury obligations
and in obligations issued or guaranteed by the following:
* Farm Credit System Financial Assistance Corporation.
* Federal Home Loan Banks System.
* Student Loan Marketing Association.
* Tennessee Valley Authority.
Fund managers select securities using a "top-down" approach, which begins with
the formulation of their general economic outlook. Following this, the managers
determine the allocation of assets between Treasury and agency or
instrumentality securities. Finally, fund managers select individual Treasury,
agency or instrumentality securities.
The fund's investments in Treasury, agency and instrumentality securities may
include zero coupon securities, adjustable rate securities and U.S. Treasury
inflation-indexed securities.
Under normal market conditions the fund attempts to maintain a weighted average
maturity for its portfolio securities of two to seven years and an average
effective duration of one to five years.
To generate additional income, the fund may lend securities representing up to
one-third of the value of its total assets to broker-dealers, banks, and other
institutions. It also may invest up to 25% of total assets in dollar roll
transactions. In a dollar roll transaction, the fund sells mortgage-backed
securities for delivery in the current month while contracting with the same
party to repurchase similar securities at a future date.
- --------------------------------------------------------------------------------
MAIN RISKS
The price and yield of this fund will change daily due to changes in interest
rates and other factors, which means you could lose money. The main risks of
investing in this fund include:
Interest Rate Risk
Debt securities typically decrease in value when interest rates rise. This risk
is usually greater for longer-term debt securities. One measure of interest rate
risk is effective duration, explained under "More About The Funds -- Investment
Strategies."
Income Risk
The fund's income could decline due to falling market interest rates.
Credit Risk
An issuer of debt securities may not make timely principal or interest payments
on its securities, or the other party to a contract (such as a securities
lending agreement) may default on its obligations.
Call Risk
During periods of falling interest rates, a bond issuer may "call" -- or repay
- -- its high-yielding bonds before their maturity date. The fund would then be
forced to invest the unanticipated proceeds at lower interest rates, resulting
in a decline in the fund's income.
Risks of Dollar Roll Transactions
The use of mortgage dollar rolls could increase the volatility of the fund's
share price. It could also diminish the fund's investment performance if the
advisor does not predict mortgage prepayments and interest rates correctly.
- --------------------------------------------------------------------------------
FUND PERFORMANCE
Illustrations on the next page provide you with information on the fund's
volatility and performance. Of course, how the fund has performed in the past
does not necessarily indicate how it will perform in the future.
The bar chart shows you how performance of the fund's shares has varied from
year to year.
The table compares the fund's performance over different time periods to that of
the fund's benchmark index, which is a broad measure of market performance. The
fund's performance reflects fund expenses; the benchmark is unmanaged and has no
expenses.
Both the chart and the table assume that all distributions have been reinvested.
8
PROSPECTUS - First American Small Cap Funds and Bond Funds
Class Y Shares
<PAGE>
Fund Summaries
INTERMEDIATE GOVERNMENT BOND FUND CONTINUED
- --------------------------------------------------------------------------------
FUND PERFORMANCE (CONTINUED)
ANNUAL TOTAL RETURNS AS OF 12/31 EACH YEAR
[BAR CHART]
13.56% 3.82% 6.94% 8.09% -0.18%
- ----------------------------------------------
1995 1996 1997 1998 1999
Best Quarter: Quarter ending September 30, 1998 4.73%
Worst Quarter: Quarter ending March 31, 1996 (0.50)%
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS Inception Since
AS OF 12/31/99 Date One Year Five Years Inception
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
Intermediate Government Bond Fund 2/4/94 (0.18)% 6.35% 4.98%
- ------------------------------------------------------------------------------------------------------
Lehman Intermediate U.S. Government Bond Index(1) 0.50% 6.93% 5.67%
- ------------------------------------------------------------------------------------------------------
</TABLE>
(1) An unmanaged index of Treasury securities, other securities issued or
guaranteed by the U.S. government or its agencies or instrumentalities, and
investment-grade corporate debt securities. The since inception performance of
the index is calculated from 2/28/94.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
As an investor, you pay fees and expenses to buy and hold shares of the fund.
You pay shareholder fees directly when you buy or sell shares. You pay annual
fund operating expenses indirectly since they are deducted from fund assets. The
figures below show fund expenses before any waivers during the fiscal year ended
September 30, 1999.(1)
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
- --------------------------------------------------------------------------------
MAXIMUM SALES CHARGE (LOAD) None
MAXIMUM DEFERRED SALES CHARGE (LOAD) None
ANNUAL FUND OPERATING EXPENSES AS A % OF AVERAGE NET ASSETS
- --------------------------------------------------------------------------------
Management Fees 0.70%
Distribution and Service (12b-1) Fees None
Other Expenses 0.17%
TOTAL 0.87%
- --------------------------------------------------------------------------------
(1) Actual expenses for the fiscal year were lower than those shown in the table
because of voluntary fee waivers by the advisor. See "Additional Information --
Financial Highlights." The net expenses the fund actually paid after waivers for
the fiscal year ended September 30, 1999, were:
Waiver of Fund Expenses (0.17)%
TOTAL ACTUAL ANNUAL OPERATING EXPENSES (AFTER WAIVERS) 0.70%
THE ADVISOR INTENDS TO WAIVE FEES DURING THE CURRENT FISCAL YEAR SO THAT TOTAL
FUND OPERATING EXPENSES DO NOT EXCEED 0.70%. FEE WAIVERS MAY BE DISCONTINUED AT
ANY TIME.
- --------------------------------------------------------------------------------
EXAMPLE This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes that you
invest $10,000 for the time periods indicated, that your investment has a 5%
return each year, and that the fund's operating expenses remain the same.
Although your actual costs and returns may differ, based on these assumptions
your costs would be:
- --------------------------------------------------------------------------------
1 year $ 89
3 years $ 278
5 years $ 482
10 years $1,073
9
PROSPECTUS - First American Small Cap Funds and Bond Funds
Class Y Shares
<PAGE>
Policies & Services
BUYING AND SELLING SHARES
Class Y shares are offered through banks and other financial institutions that
have entered into sales agreements with the funds' distributor and that hold the
shares in an omnibus account with the transfer agent. Class Y shares are
available to certain accounts for which the financial institution acts in a
fiduciary, agency or custodial capacity, such as certain trust accounts and
investment advisory accounts. To find out whether you may purchase Class Y
shares, contact your financial institution.
There is no initial or deferred sales charge on your purchase of Class Y shares.
However, your investment professional or financial institution may receive a
commission of up to 1.25% on your purchase.
- --------------------------------------------------------------------------------
CALCULATING YOUR SHARE PRICE
Your purchase price will be equal to the fund's net asset value (NAV) per share,
which is generally calculated as of the close of regular trading on the New York
Stock Exchange (usually 3 p.m. Central time) every day the exchange is open.
A fund's NAV is equal to the market value of its investments and other assets,
less any liabilities, divided by the number of fund shares. If market prices are
not readily available for an investment or if the advisor believes they are
unreliable, fair value prices may be determined in good faith using methods
approved by the funds' board of directors.
- --------------------------------------------------------------------------------
HOW TO BUY AND SELL SHARES
You may purchase or sell shares by calling your financial institution.
When purchasing shares, payment must be made by wire transfer, which can be
arranged by your financial institution. Because purchases must be paid for by
wire transfer, you can purchase shares only on days when both the New York Stock
Exchange and federally chartered banks are open. You may sell your shares on any
day when the New York Stock Exchange is open.
Purchase orders and redemption requests must be received by your financial
institution by the time specified by the institution to be assured same day
processing. In order for shares to be purchased at that day's price, the funds
must receive your purchase order by 3:00 p.m. Central time and the funds'
custodian must receive federal funds before the close of business. In order for
shares to be sold at that day's price, the funds must receive your redemption
request by 3:00 p.m. Central time. It is the responsibility of your financial
institution to promptly transmit orders to the funds. Purchase orders and
redemption requests may be restricted in the event of an early or unscheduled
close of the New York Stock Exchange.
If the funds receive your redemption request by 3:00 p.m. Central time, payment
of your redemption proceeds will ordinarily be made by wire on the next business
day. It is possible, however, that payment could be delayed by up to seven days.
- --------------------------------------------------------------------------------
HOW TO EXCHANGE SHARES
If your investment goals or your financial needs change, you may exchange your
shares for Class Y shares of another First American fund. Exchange will be made
at the net asset value per share of each fund at the time of the exchange. There
is no fee to exchange shares. If you are no longer eligible to hold Class Y
shares, for example, if you decide to discontinue your fiduciary, agency or
custodian account, you may exchange your shares for Class A shares at net asset
value. Class A shares have higher expenses than Class Y shares.
To exchange your shares, call your financial institution. In order for your
shares to be exchanged the same day, you must call your financial institution by
the time specified by the institution and your exchange order must be received
by the funds by 3:00 p.m. Central time. It is the responsibility of your
financial institution to promptly transmit your exchange order to the funds.
Before exchanging into any fund, be sure to read its prospectus carefully. A
fund may change or cancel its exchange policies at any time. You will be
notified of any changes. The funds have the right to limit exchanges to four
times per year.
10
PROSPECTUS - First American Small Cap Funds and Bond Funds
Class Y Shares
<PAGE>
Policies & Services
MANAGING YOUR INVESTMENT
- --------------------------------------------------------------------------------
STAYING INFORMED
Shareholder Reports
Shareholder reports are mailed twice a year, in November and May. They include
financial statements, performance information, a message from your portfolio
managers, and, on an annual basis, the auditors' report.
In an attempt to reduce shareholder costs and help eliminate duplication, the
funds will try to limit their mailings 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 1-800-637-2548.
Statements and Confirmations
Statements summarizing activity in your account are mailed at least quarterly.
Confirmations are mailed following each purchase or sale of fund shares.
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS
Dividends from Micro Cap Value Fund's and Regional Equity Fund's net investment
income, if any, are declared and paid quarterly. Dividends from Adjustable Rate
Mortgage Securities Fund's and Intermediate Government Bond Fund's net
investment income, if any, are declared and paid monthly. Any capital gains are
distributed at least once each year.
On the ex-dividend date for a distribution, a fund's share price is reduced by
the amount of the distribution. If you buy shares just before the ex-dividend
date, in effect, you "buy the dividend." You will pay the full price for the
shares and then receive a portion of that price back as a taxable distribution.
Dividend and capital gain distributions will be reinvested in additional shares
of the fund paying the distribution, unless you request that distributions be
reinvested in another First American fund or paid in cash. This request may be
made on your new account form or by writing to the fund. If you request that
your distributions be paid in cash but those distributions cannot be delivered
because of an incorrect mailing address, the undelivered distributions and all
future distributions will be reinvested in fund shares.
- --------------------------------------------------------------------------------
TAXES
Some of the tax consequences of investing in the funds are discussed below. More
information about taxes is in the Statement of Additional Information. However,
because everyone's tax situation is unique, always consult your tax professional
about federal, state and local tax consequences.
Taxes on Distributions
Each fund pays its shareholders dividends from its net investment income and any
net capital gains that it has realized. For most investors, fund dividends and
distributions are considered taxable whether they are reinvested or taken in
cash (unless your investment is in an IRA or other tax-advantaged account).
Dividends from a fund's net investment income and short-term capital gains are
taxable as ordinary income. Distributions of a fund's long-term capital gains
are taxable as long-term gains, regardless of how long you have held your
shares. Micro Cap Value Fund and Regional Equity Fund expect that, as a result
of their investment objectives and strategies, their distributions will consist
primarily of capital gains. Adjustable Rate Mortgage Securities Fund and
Intermediate Government Bond Fund expect that, as a result of their investment
objectives and strategies, their distributions will consist primarily of net
investment income.
Taxes on Transactions
The sale of fund shares, or the exchange of one fund's shares for shares of
another fund, will be a taxable event and may result in a capital gain or loss.
The gain or loss will be considered long-term if you have held your shares for
more than one year. A gain or loss on shares held for one year or less is
considered short-term and is taxed at the same rates as ordinary income.
The exchange of one class of shares for another class of shares in the same fund
will not be taxable.
11
PROSPECTUS - First American Small Cap Funds and Bond Funds
Class Y Shares
<PAGE>
Additional Information
MANAGEMENT
U.S. Bank National Association (U.S. Bank), acting through its First American
Asset Management division, is the funds' investment advisor. First American
Asset Management provides investment management services to individuals and
institutions, including corporations, foundations, pensions and retirement
plans. As of December 31, 1999, it had more than $78 billion in assets under
management, including investment company assets of more than $33 billion. As
investment advisor, First American Asset Management manages the funds' business
and investment activities, subject to the authority of the board of directors.
Each fund pays the investment advisor a monthly fee for providing investment
advisory services. During the fiscal year ended September 30, 1999, after taking
into account any fee waivers, the funds paid the following investment advisory
fees to First American Asset Management:
Advisory fee
as a % of
average daily
net assets
- --------------------------------------------------------------------------------
MICRO CAP VALUE FUND 0.70%
REGIONAL EQUITY FUND 0.64%
ADJUSTABLE RATE MORTGAGE SECURITIES FUND 0.30%
INTERMEDIATE GOVERNMENT BOND FUND 0.53%
- --------------------------------------------------------------------------------
Investment Advisor
First American Asset Management
601 Second Avenue South
Minneapolis, Minnesota 55402
Distributor
SEI Investments Distribution Co.
Oaks, Pennsylvania 19456
Direct Fund Correspondence to:
First American Funds
P.O. Box 1330
Minneapolis, MN 55440-1330
- --------------------------------------------------------------------------------
ADDITIONAL COMPENSATION
U.S. Bank and other affiliates of U.S. Bancorp may act as fiduciary with
respect to plans subject to the Employee Retirement Income Security Act of 1974
(ERISA) and other trust and agency accounts that invest in the funds. As
described above, U.S. Bank receives compensation for acting as the funds'
investment advisor. U.S. Bank and its affiliates also receive compensation in
connection with the following:
CUSTODY SERVICES. U.S. Bank provides or compensates others to provide custody
services to the funds. U.S. Bank is paid monthly fees equal, on an annual
basis, to 0.03% of a fund's average daily net assets. In addition, U.S. Bank is
reimbursed for its out-of-pocket expenses incurred while providing custody
services to the funds.
ADMINISTRATION SERVICES. U.S. Bank provides or compensates others to provide
administrative services to all open-end funds in the First American family of
funds. These services include general administrative and accounting services,
transfer agency and dividend disbursing services, and shareholder services. U.S.
Bank receives total fees equal, on an annual basis, to 0.12% of the aggregate
average daily net assets of all open-end mutual funds in the First American fund
family up to $8 billion and 0.105% of the aggregate average daily net assets of
all open-end mutual funds in the First American fund family in excess of $8
billion. These fees are allocated among the funds in the First American family
of funds on the basis of their relative net asset values. Additionally, the
funds pay U.S. Bank fees based upon the number of funds and accounts maintained.
SECURITIES LENDING SERVICES. In connection with lending their portfolio
securities, the funds pay administrative and custodial fees to U.S. Bank which
are equal to 40% of the funds' income from these securities lending
transactions.
BROKERAGE TRANSACTIONS. When purchasing and selling portfolio securities for
the funds, the funds' investment advisor may place trades through its
affiliates, U.S. Bancorp Investments, Inc. and U.S. Bancorp Piper Jaffray Inc.,
which will earn commissions on these transactions.
SHAREHOLDER SERVICING FEES. To the extent that fund shares
are held through U.S. Bank or its broker-dealer affiliates, U.S. Bancorp
Investments, Inc. and U.S. Bancorp Piper
Jaffray Inc., those entities may receive shareholder servicing
fees from the funds' distributor.
Portfolio Management
Each fund's investments are managed by a team of persons associated with First
American Asset Management.
12
PROSPECTUS - First American Small Cap Funds and Bond Funds
Class Y Shares
<PAGE>
Additional Information
MORE ABOUT THE FUNDS
- --------------------------------------------------------------------------------
OBJECTIVES
The funds' objectives, which are described in the "Fund Summaries" section, may
be changed without shareholder approval. If a fund's objectives change, you will
be notified at least 30 days in advance. Please remember: There is no guarantee
that any fund will achieve its objectives.
- --------------------------------------------------------------------------------
INVESTMENT STRATEGIES
The funds' main investment strategies are discussed in the "Fund Summaries"
section. These are the strategies that the funds' investment advisor believes
are most likely to be important in trying to achieve the funds' objectives. You
should be aware that each fund may also use strategies and invest in securities
that are not described in this prospectus, but that are described in the
Statement of Additional Information (SAI). For a copy of the SAI, call Investor
Services at 1-800-637-2548.
Effective Duration
Adjustable Rate Mortgage Securities Fund and Intermediate Government Bond Fund
attempt to maintain the effective duration of their respective portfolio
securities within a specified range. Effective duration, one measure of interest
rate risk, measures how much the value of a security is expected to change with
a given change in interest rates. The longer a security's effective duration,
the more sensitive its price to changes in interest rates. For example, if
interest rates were to increase by one percentage point, the market value of a
bond with an effective duration of five years would decrease by 5%, with all
other factors being constant. However, all other factors are rarely constant.
Effective duration is based on assumptions and subject to a number of
limitations. It is most useful when interest rate changes are small, rapid and
occur equally in short-term and long-term securities. In addition, it is
difficult to calculate precisely for bonds with prepayment options, such as
mortgage- and asset-backed securities, because the calculation requires
assumptions about prepayment rates. For these reasons, the effective durations
of funds which invest a significant portion of their assets in these securities
can be greatly affected by changes in interest rates.
Temporary Investments
In an attempt to respond to adverse market, economic, political or other
conditions, each fund may temporarily invest without limit in cash and in U.S.
dollar-denominated high-quality money market instruments and other short-term
securities, including money market funds advised by the funds' advisor. Being
invested in these securities may result in a lower yield than would be available
from investments with a lower quality or longer term, may keep the fund from
participating in a market upswing, and may prevent a fund from achieving its
investment objectives.
Portfolio Turnover
Fund managers may trade securities frequently, resulting, from time to time, in
an annual portfolio turnover rate of over 100%. Trading of securities may
produce capital gains, which are taxable to shareholders when distributed.
Active trading may also increase the amount of commissions or mark-ups to
broker-dealers that the fund pays when it buys and sells securities. The
"Financial Highlights" section of this prospectus shows each fund's historical
portfolio turnover rate.
- --------------------------------------------------------------------------------
RISKS
Risk of Active Management
Each fund is actively managed and its performance therefore will reflect in part
the advisor's ability to make investment decisions which are suited to achieving
the fund's investment objectives. Due to their active management, the funds
could underperform other mutual funds with similar investment objectives.
Risks of Securities Lending
When a fund loans its portfolio securities, it will receive collateral equal to
at least 100% of the value of the loaned securities. Nevertheless, the fund
risks a delay in the recovery of the loaned securities, or even the loss of
rights in the collateral deposited by the borrower if the borrower should fail
financially. To reduce these risks, the funds enter into loan arrangements only
with institutions which the funds' advisor has determined are creditworthy under
guidelines established by the funds' board of directors.
- --------------------------------------------------------------------------------
RISKS OF MICRO CAP VALUE FUND AND REGIONAL EQUITY FUND
The main risks of investing in the funds are summarized in the "Fund Summaries"
section. More information about fund risks is presented below.
Market Risk
All stocks are subject to price movements due to changes in general economic
conditions, changes in the level of prevailing interest rates, changes in
investor perceptions of the market, or the outlook for overall corporate
profitability.
Sector Risk
The stocks of companies within specific industries or sectors of the economy can
periodically perform differently than the overall stock market. This can be due
to changes in such things as the regulatory or competitive environment or to
changes in investor perceptions of a particular industry or sector.
13
PROSPECTUS - First American Small Cap Funds and Bond Funds
Class Y Shares
<PAGE>
Additional Information
MORE ABOUT THE FUNDS CONTINUED
Company Risk
Individual stocks can perform differently than the overall market. This may be a
result of specific factors such as changes in corporate profitability due to the
success or failure of specific products or management strategies, or it may be
due to changes in investor perceptions regarding a company.
Risks of Small- and Micro-Cap Stocks
Stocks of small and very small-capitalization companies involve substantial
risk. These companies may lack the management expertise, financial resources,
product diversification and competitive strengths of larger companies. Prices of
small- and micro-cap stocks may be subject to more abrupt or erratic movements
than stock prices of larger, more established companies or the market averages
in general. In addition, the frequency and volume of their trading may be less
than is typical of larger companies, making them subject to wider price
fluctuations. In some cases, there could be difficulties in selling the stocks
of small and very small capitalization companies at the desired time and price.
Risks of Regional Concentration
Regional Equity Fund invests primarily in common stocks of companies
headquartered in Minnesota, North and South Dakota, Montana, Wisconsin,
Michigan, Iowa, Nebraska, Colorado and Illinois. The fund's policy of
concentrating its equity investments in a geographic region means that it will
be subject to adverse economic, political or other developments in that region.
Although the region in which the fund principally invests has a diverse
industrial base (including agriculture, mining, retail, transportation,
utilities, heavy and light manufacturing, financial services, insurance,
computer technology and medical technology), this industrial base is not as
diverse as that of the country as a whole. The fund therefore may be less
diversified by industry and company than other funds with a similar investment
objective and no geographic limitation.
Foreign Security Risk
Up to 25% of each fund's total assets may be invested in securities of foreign
issuers which are either listed on a United States stock exchange or represented
by American Depositary Receipts.
Securities of foreign issuers, even when dollar-denominated and publicly traded
in the United States, may involve risks not associated with the securities of
domestic issuers. For certain foreign countries, political or social instability
or diplomatic developments could adversely affect the securities. There is also
the risk of loss due to governmental actions such as a change in tax statutes or
the modification of individual property rights. In addition, individual foreign
economies may differ favorably or unfavorably from the U.S. economy.
- --------------------------------------------------------------------------------
RISKS OF ADJUSTABLE RATE MORTGAGE SECURITIES FUND AND INTERMEDIATE GOVERNMENT
BOND FUND
Interest Rate Risk
Debt securities in the funds will fluctuate in value with changes in interest
rates. In general, debt securities will increase in value when interest rates
fall and decrease in value when interest rates rise. Longer-term debt securities
are generally more sensitive to interest rate changes. ARMS are generally less
sensitive to interest rate changes because their interest rates move with market
rates. Securities which do not pay interest on a current basis, such as zero
coupon securities and delayed interest securities, may be highly volatile as
interest rates rise or fall. Payment-in-kind bonds, which pay interest in other
securities rather than in cash, also may be highly volatile.
Income Risk
The fund's income could decline due to falling market interest rates. This is
because, in a falling interest rate environment, the fund generally will have to
invest the proceeds from sales of fund shares, as well as the proceeds from
maturing portfolio securities (or portfolio securities that have been called,
see "Call Risk," or prepaid, see "Prepayment Risk") in lower-yielding
securities.
Credit Risk
Each fund is subject to the risk that the issuers of debt securities held by the
fund will not make payments on the securities, or that the other party to a
contract (such as a securities lending agreement or repurchase agreement) will
default on its obligations. There is also the risk that an issuer could suffer
adverse changes in financial condition that could lower the credit quality of a
security. This could lead to greater volatility in the price of the security and
in shares of the fund. Also, a change in the credit quality rating of a bond
could affect the bond's liquidity and make it more difficult for the fund to
sell. When a fund purchases unrated securities, it will depend on the advisor's
analysis of credit risk more heavily than usual.
Each fund attempts to minimize credit risk by investing in securities considered
at least investment grade at the time of purchase. However, all of these
securities, especially those in the lower investment grade rating categories,
have credit risk. In adverse economic or other circumstances, issuers of these
lower rated securities are more likely to have difficulty making principal and
interest payments than issuers of higher rated securities.
14
PROSPECTUS - First American Small Cap Funds and Bond Funds
Class Y Shares
<PAGE>
Additional Information
MORE ABOUT THE FUNDS CONTINUED
Call Risk
Many corporate bonds may be redeemed at the option of the issuer, or "called,"
before their stated maturity date. In general, an issuer will call its bonds if
they can be refinanced by issuing new bonds which bear a lower interest rate.
The funds are subject to the possibility that during periods of falling interest
rates, a bond issuer will call its high-yielding bonds. A fund would then be
forced to invest the unanticipated proceeds at lower interest rates, resulting
in a decline in the fund's income.
Prepayment Risk
Mortgage-backed securities are secured by and payable from pools of mortgage
loans. Similarly, asset-backed securities are supported by obligations such as
automobile loans or home equity loans. These mortgages and other obligations
generally can be prepaid at any time without penalty. As a result, mortgage- and
asset-backed securities are subject to prepayment risk, which is the risk that
falling interest rates could cause prepayments of the securities to occur more
quickly than expected. This occurs because, as interest rates fall, more
homeowners refinance the mortgages underlying mortgage-related securities or
prepay the debt obligations underlying asset-backed securities. A fund holding
these securities must reinvest the prepayments at a time when interest rates are
falling, reducing the income of the fund. In addition, when interest rates fall,
prices on mortgage- and asset-backed securities may not rise as much as for
other types of comparable debt securities because investors may anticipate an
increase in prepayments.
Extension Risk
Mortgage- and asset-backed securities also are subject to extension risk, which
is the risk that rising interest rates could cause mortgages or other
obligations underlying the securities to be prepaid more slowly than expected,
resulting in slower prepayments of the securities. This would, in effect,
convert a short- or medium-duration mortgage- or asset-backed security into a
longer-duration security, increasing its sensitivity to interest rate changes
and causing its price to decline.
Risks of Dollar Roll Transactions
In a dollar roll transaction, a fund sells mortgage-backed securities for
delivery in the current month while contracting with the same party to
repurchase similar securities at a future date. Because the fund gives up the
right to receive principal and interest paid on the securities sold, a mortgage
dollar roll transaction will diminish the investment performance of a fund
unless the difference between the price received for the securities sold and the
price to be paid for the securities to be purchased in the future, plus any fee
income received, exceeds any income, principal payments and appreciation on the
securities sold as part of the mortgage dollar roll.
Whether mortgage dollar rolls will benefit a fund may depend upon the advisor's
ability to predict mortgage prepayments and interest rates. In addition, the use
of mortgage dollar rolls by a fund increases the amount of the fund's assets
that are subject to market risk, which could increase the volatility of the
price of the fund's shares.
15
PROSPECTUS - First American Small Cap Funds and Bond Funds
Class Y Shares
<PAGE>
Additional Information
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The tables that follow present performance information about the Class Y shares
of each fund. This information is intended to help you understand each fund's
financial performance for the past five years or, if shorter, the period of the
fund's operations. Some of this information reflects financial results for a
single fund share. Total returns in the tables represent the rate that you would
have earned or lost on an investment in a fund, assuming you reinvested all of
your dividends and distributions.
The information for the fiscal year ended September 30, 1999 has been audited by
Ernst & Young LLP, independent auditors, whose report, along with the funds'
financial statements, is included in the funds' annual report, which is
available upon request. The information for the fiscal years ended on or before
September 30, 1998, has been audited by other auditors.
MICRO CAP VALUE FUND
<TABLE>
<CAPTION>
Fiscal year ended September 30,
1999 1998 1997(1)
- ----------------------------------------------------- ------- ------- -------
<S> <C> <C> <C>
PER SHARE DATA
Net Asset Value, Beginning of Period $ 7.93 $ 10.95 $ 10.00
------- ------- -------
Investment Operations:
Net Investment Income 0.01 0.02 --
Net Gains (Losses) on Investments
(both realized and unrealized) 0.88 (2.43) 0.95
------- ------- -------
Total From Investment Operations 0.89 (2.41) 0.95
------- ------- -------
Less Distributions:
Dividends (from Net Investment Income) (0.01) (0.02) --
Distributions (from Capital Gains) (1.79) (0.59) --
------- ------- -------
Total Distributions (1.80) (0.61) --
------- ------- -------
Net Asset Value, End of Period $ 7.02 $ 7.93 $ 10.95
======= ======= =======
Total Return 12.55% (22.76)% 9.50%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $64,729 $144,128 $246,601
Ratio of Expenses to Average Net Assets 0.90% 0.88% 0.90%(2)
Ratio of Net Income (Loss) to Average Net Assets 0.17% 0.21% (0.02)%(2)
Ratio of Expenses to Average Net Assets (excluding
waivers) 0.90% 0.88% 1.07%(2)
Ratio of Net Income (Loss) to Average Net Assets
(excluding waivers) 0.17% 0.21% (0.19)%(2)
Portfolio Turnover Rate 21% 16% 0%
- ----------------------------------------------------- ------- ------- -------
</TABLE>
(1) Class Y shares have been offered since August 8, 1997.
(2) Annualized.
16
PROSPECTUS - First American Small Cap Funds and Bond Funds
Class Y Shares
<PAGE>
Additional Information
FINANCIAL HIGHLIGHTS CONTINUED
REGIONAL EQUITY FUND
<TABLE>
<CAPTION>
Fiscal year ended September 30,
1999 1998 1997 1996 1995
- --------------------------------------------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value, Beginning of Period $ 16.74 $ 23.16 $ 17.75 $ 17.13 $ 12.52
-------- -------- -------- -------- --------
Investment Operations:
Net Investment Income (0.01) 0.01 0.05 0.09 0.11
Net Gains (Losses) on Investments
(both realized and unrealized) 3.36 (5.46) 6.18 1.70 4.90
-------- -------- -------- -------- --------
Total From Investment Operations 3.35 (5.45) 6.23 1.79 5.01
-------- -------- -------- -------- --------
Less Distributions:
Dividends (from Net Investment Income) -- (0.02) (0.13) (0.06) (0.08)
Distributions (from Capital Gains) (1.23) (0.95) (0.69) (1.11) (0.32)
-------- -------- -------- -------- --------
Total Distributions (1.23) (0.97) (0.82) (1.17) (0.40)
-------- -------- -------- -------- --------
Net Asset Value, End of Period $ 18.86 $ 16.74 $ 23.16 $ 17.75 $ 17.13
======== ======== ======== ======== ========
Total Return 20.42% (24.34)% 36.49% 11.27% 41.40%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $139,572 $225,061 $351,007 $259,138 $188,583
Ratio of Expenses to Average Net Assets 0.90% 0.90% 0.90% 0.88% 0.84%
Ratio of Net Income to Average Net Assets (0.03)% 0.17% 0.35% 0.49% 0.78%
Ratio of Expenses to Average Net Assets (excluding waivers) 0.96% 0.91% 0.90% 0.90% 0.95%
Ratio of Net Income to Average Net Assets (excluding waivers) (0.09)% 0.16% 0.35% 0.47% 0.67%
Portfolio Turnover Rate 19% 15% 17% 36% 42%
- --------------------------------------------------------------- -------- -------- -------- -------- --------
</TABLE>
ADJUSTABLE RATE MORTGAGE SECURITIES FUND
<TABLE>
<CAPTION>
Fiscal year ended
September
30, 1999
1999 1998(1)
- --------------------------------------------------------------- ------- -------
<S> <C> <C>
PER SHARE DATA
Net Asset Value, Beginning of Period $ 8.16 $ 8.13
------- -------
Investment Operations:
Net Investment Income 0.42 0.06
Net Gains (Losses) on Investments
(both realized and unrealized) (0.10) 0.02
------- -------
Total From Investment Operations 0.32 0.08
------- -------
Less Distributions:
Dividends (from Net Investment Income) (0.42) (0.05)
------- -------
Total Distributions (0.42) (0.05)
------- -------
Net Asset Value, End of Period 8.06 $ 8.16
======= =======
Total Return 4.02% 1.04%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $ 496 $ 1
Ratio of Expenses to Average Net Assets 0.65% 0.65%(2)
Ratio of Net Income to Average Net Assets 5.07% 5.33%(2)
Ratio of Expenses to Average Net Assets (excluding waivers) 1.05% 0.99%(2)
Ratio of Net Income to Average Net Assets (excluding waivers) 4.67% 4.99%(2)
Portfolio Turnover Rate (excluding short-term securities) 62% 14%
- --------------------------------------------------------------- ------- -------
</TABLE>
(1) Class Y shares have been offered since July 31, 1998.
(2) Annualized.
17
PROSPECTUS - First American Small Cap Funds and Bond Funds
Class Y Shares
<PAGE>
Additional Information
FINANCIAL HIGHLIGHTS CONTINUED
INTERMEDIATE GOVERNMENT BOND FUND
<TABLE>
<CAPTION>
Fiscal year ended September 30,
1999 1998 1997 1996 1995
- --------------------------------------------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value, Beginning of Period $ 9.66 $ 9.27 $ 9.18 $ 9.29 $ 8.98
-------- -------- -------- -------- --------
Investment Operations:
Net Investment Income 0.50 0.52 0.54 0.54 0.54
Net Gains (Losses) on Investments
(both realized and unrealized) (0.50) 0.39 0.09 (0.11) 0.31
-------- -------- -------- -------- --------
Total From Investment Operations 0.00 0.91 0.63 0.43 0.85
-------- -------- -------- -------- --------
Less Distributions:
Dividends (from Net Investment Income) (0.50) (0.52) (0.54) (0.54) (0.54)
-------- -------- -------- -------- --------
Distribution (from Capital Gains) (0.01) -- -- -- --
-------- -------- -------- -------- --------
Total Distributions (0.51) (0.52) (0.54) (0.54) (0.54)
-------- -------- -------- -------- --------
Net Asset Value, End of Period $ 9.15 $ 9.66 $ 9.27 $ 9.18 $ 9.29
======== ======== ======== ======== ========
Total Return 0.03% 10.17% 7.07% 4.74% 9.82%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $164,035 $235,959 $181,889 $140,230 $100,168
Ratio of Expenses to Average Net Assets 0.70% 0.70% 0.70% 0.70% 0.70%
Ratio of Net Income to Average Net Assets 5.32% 5.58% 5.88% 5.85% 6.13%
Ratio of Expenses to Average Net Assets (excluding waivers) 0.87% 0.87% 0.87% 0.85% 0.97%
Ratio of Net Income to Average Net Assets (excluding waivers) 5.15% 5.41% 5.71% 5.70% 5.86%
Portfolio Turnover Rate 38% 20% 22% 29% 17%
- --------------------------------------------------------------- -------- -------- -------- -------- --------
</TABLE>
18
PROSPECTUS - First American Small Cap Funds and Bond Funds
Class Y Shares
<PAGE>
- --------------------------------------------------------------------------------
FOR MORE INFORMATION
More information about the funds is available in the funds' Statement of
Additional Information and annual and semiannual reports.
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI provides more details about the funds and their policies. A current SAI
is on file with the Securities and Exchange Commission (SEC) and is incorporated
into this prospectus by reference (which means that it is legally considered
part of this prospectus).
- --------------------------------------------------------------------------------
ANNUAL AND SEMIANNUAL REPORTS
Additional information about the funds' investments is available in the funds'
annual and semiannual reports to shareholders. In the funds' annual report, you
will find a discussion of the market conditions and investment strategies that
significantly affected the funds' performance during their last fiscal year.
You can obtain a free copy of the funds' SAI and/or free copies of the funds'
most recent annual or semiannual reports by calling Investor Services at
1-800-637-2548. The material you request will be sent by first-class mail or
other means designed to ensure equally prompt delivery, within three business
days of receipt of the request.
You can also obtain copies of this information, after paying a duplicating fee,
by electronic request at the following email address: [email protected], or by
writing the SEC's Public Reference Section, Washington, D.C. 20549-0102. For
more information, call 1-202-942-8090.
Information about the funds is also available on the Internet. Text-only
versions of fund documents can be viewed online or downloaded from the EDGAR
Database on the SEC's Internet site at http://www.sec.gov.
FIRST AMERICAN FUNDS P.O. Box 1330, Minneapolis, MN 55440-1330
First American Asset Management, a division of U.S. Bank National Association,
serves as the investment advisor to the First American Funds.
First American Funds are distributed by SEI Investments Distribution Co. which
is located in Oaks, PA 19456 and is not an affiliate of U.S. Bank.
2/2000 3022-99MR
SEC file number: 811-05309
[LOGO] FIRST AMERICAN FUNDS(R)
THE POWER OF DISCIPLINED INVESTING(R)
