[LOGO] FIRST AMERICAN FUNDS(R)
THE POWER OF DISCIPLINED INVESTING(R)
BOND
FUNDS
ANNUAL REPORT
2000
FIRST AMERICAN
INVESTMENT FUNDS, INC.
<PAGE>
FIRST AMERICAN
FAMILY OF FUNDS
INVESTMENTS FOR EVERY GOAL
FIRST AMERICAN FUNDS OFFER A FULL RANGE OF INVESTMENT STRATEGIES TO HELP YOU
CREATE A PERSONALIZED, DIVERSIFIED PORTFOLIO. WITH OUR DISCIPLINED FOCUS ON
CONSISTENT, COMPETITIVE PERFORMANCE AND HIGHLY DEVELOPED TEAM APPROACH TO
INVESTMENT DECISION MAKING, FIRST AMERICAN FUNDS CAN HELP BUILD A WINNING
STRATEGY FOR ANY INVESTOR.
HIGHER RISK (o)
AND RETURN POTENTIAL |
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(*) EQUITY FUNDS
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(*) FUNDS OF FUNDS
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(*) BOND FUNDS
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| CORPORATE BOND
| FIXED INCOME
| INTERMEDIATE TERM INCOME
| LIMITED TERM INCOME
| STRATEGIC INCOME
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(*) TAX FREE BOND FUNDS
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(*) MONEY MARKET FUNDS
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LOWER RISK (o)
AND RETURN POTENTIAL
Mutual fund investing involves risk; principal loss is possible
TABLE OF CONTENTS
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Message to Shareholders 1
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Report of Independent Auditors 15
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Statements of Net Assets 16
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Statements of Assets and Liabilities 36
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Statements of Operations 37
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Statements of Changes in Net Assets 38
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Financial Highlights 40
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Notes to Financial Statements 44
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Notice to Shareholders 52
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NOT FDIC INSURED NO BANK GUARANTEE MAY LOSE VALUE
<PAGE>
MESSAGE TO SHAREHOLDERS NOVEMBER 15, 2000
DEAR SHAREHOLDERS:
On behalf of the entire board of directors and the staff of First American
Asset Management, thank you for the ongoing opportunity you have given us
to manage your investments. As always, we strive to provide you, our fund
shareholders, consistent and competitive investment performance over time.
At times during the past year technology stocks, healthcare stocks,
municipal bonds, and long Treasury bonds have been market leaders. Small-
and mid-cap stocks outperformed large-cap stocks, and in general, market
volatility was the norm. Guessing which sector of the equity market or
which asset class will be the next market leader can be a risky way to
invest. We believe that a well-diversified portfolio of equity and bond
funds is the best way to invest over the long term. Your investment
professional can help you design and implement a portfolio that is right
for you.
The accompanying discussion of investment results, financial statements,
and notes detail the results of fund operations for the fiscal year and
fund holdings as of September 30, 2000. We urge you to review the
discussion of investment results and financial statements at your
convenience.
Again, thank you for investing in the First American family of funds. We
look forward to serving your investment needs next year and beyond.
Sincerely,
/s/ Virginia L. Stringer /s/ Paul A. Dow
VIRGINIA L. STRINGER PAUL A. DOW
Chairperson of the Board Chief Investment Officer and President
First American Investment Funds, First American Asset Management
Inc.
FIRST AMERICAN FUNDS ANNUAL REPORT 2000 1)
<PAGE>
A DRAMATIC YEAR FOR THE MARKETS
Last September, financial markets were on the threshold of a meteoric rally that
would lift the Dow Jones Industrial Average (Dow) and the technology-laden
Nasdaq Composite Index (Nasdaq) to record highs. At the close of 1999, investors
celebrated the fifth consecutive year of double-digit returns fueled by
unprecedented productivity gains--which boosted corporate earnings while helping
to contain inflation--and the lowest unemployment rate in three decades. For a
while, all seemed well with the nation's "Goldilocks" economy (not too hot, not
too cold).
Yet in a comment that would dictate the performance of stocks and bonds over the
ensuing months, Alan Greenspan, Chairman of the Federal Reserve Board, vowed to
continue raising interest rates until the economy cooled. The rate increases
were intended to engineer a soft landing by encouraging consumers and companies
to stop spending so much to purchase new homes, capital equipment, and the like.
STOCKS BOW TO BONDS
The prospect of additional rate hikes and their impact on corporate profits sent
the stock market into a freefall, with the Nasdaq declining 25% during April's
second week. The Dow soon followed suit. The stock market bubble had burst, with
risk returning to the marketplace. The months following April also were subject
to significant levels of market fluctuations. Although the long-term outlook for
equities remains promising, investors can expect to experience more volatility
as the economy continues to slow.
If any clear trends have emerged in the equity market, it's that small-cap
stocks have outperformed large-cap stocks, and value has outperformed growth.
Both are a reversal from the previous two years' trend of a market where
large-cap growth stocks dominated.
(2 FIRST AMERICAN FUNDS ANNUAL REPORT 2000
<PAGE>
A DRAMATIC YEAR FOR THE MARKETS
BONDS GAIN MOMENTUM
An unusual event shaped bond markets during the fiscal year. For the first time
in a decade, the yield on 30-year Treasury bonds dipped below the yield on
two-year Treasury notes, creating an inverted yield curve. This event was
triggered by the Treasury Department's decision to use part of the budget
surplus to retire debt by issuing fewer bonds and repurchasing 30-year Treasury
bonds. The scarcity of Treasury bonds sent prices up and yields down. Along the
way, the 10-year Treasury note replaced the 30-year bond as the U.S. bond
market's benchmark.
In all, U.S. government and municipal securities outperformed stocks to post
their strongest results in years. Indeed, with the exception of high-yield
"junk" bonds, most bonds, including mortgage-backed securities and
investment-grade corporate bonds, performed well during the fiscal year.
In closing, an important message to remember amid today's volatile and
fast-paced markets: Diversification among stocks, bonds, and cash can help you
earn more balanced returns over time and give you peace of mind in changing
markets. To help you achieve your long-term goals, First American Funds offers a
spectrum of mutual funds designed to meet any investor's needs and risk
tolerance.
FIRST AMERICAN FUNDS ANNUAL REPORT 2000 3)
<PAGE>
CORPORATE BOND
INVESTMENT OBJECTIVE: A HIGH LEVEL OF CURRENT INCOME CONSISTENT WITH PRUDENT
RISK TO CAPITAL
The First American Corporate Bond Fund posted a return of 5.32% (Class A shares
were up 5.17% on net asset value) from inception on February 1, 2000, through
the end of the fiscal year. The fund is well ahead of its peer group, the Lipper
BBB Rated Corporate Debt Funds Average, which returned 4.11% for the period from
February 29, 2000. The fund's broad-based benchmark, the Lehman U.S. Credit
Index, was up 5.23% for the same period.
Good security selection contributed to the positive results relative to the
Lipper peer group, as the fund was able to avoid a number of corporate issues
that experienced serious credit quality deterioration during the year. Spreads
have widened significantly (30 to 100-plus basis points, depending on credit
quality) since the fund was launched in February, reflecting the dynamics of the
inverted yield curve, the market's concerns about future Fed actions to engineer
an economic slowdown, and a number of high-profile credit problems. The
management team used this opportunity to increase exposure to mid-grade and
high-yield securities. The resulting portfolio has a strong BBB rated credit
profile (and a significant overweighting in BBB rated issues relative to its
benchmarks). This detracted from performance for the period as higher-quality
issues generally outperformed higher-yielding ones. However, the management team
believes that these securities will contribute positively to future performance,
as BBB rated issues have historically provided the best risk-adjusted return.
Duration is neutral to the Lehman index, but slightly short relative to the
Lipper peer group. Performance relative to the Lehman index can be explained by
the fund's expenses and transaction costs.
Going forward, the management team remains attuned to the effects of a slowing
economy and believes that current market conditions afford corporate bond
investors with attractive yields considering the underlying economic strength.
Furthermore, there should be attractive opportunities to capture future spread
tightening when more traditional spread relationships return.
ANNUALIZED PERFORMANCE(1)
------------------------------------------------------------------
AS OF SEPTEMBER 30, 2000 SINCE INCEPTION(5)
2/1/2000
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Class A NAV 5.17%
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Class A POP 0.74%
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Class B NAV 4.70%
------------------------------------------------------------------
Class B POP -0.30%
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Class C NAV 4.54%
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Class C POP 2.51%
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Class Y 5.32%
------------------------------------------------------------------
Lehman U.S. Credit Index(3) 5.23%
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Lipper BBB-Rated Corporate Debt Funds Average(4) 4.11%
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(4 FIRST AMERICAN FUNDS ANNUAL REPORT 2000
<PAGE>
CORPORATE BOND
VALUE OF A $10,000 INVESTMENT(1),(2) AS OF SEPTEMBER 30, 2000
[PLOT POINTS CHART]
<TABLE>
<CAPTION>
FIRST AMERICAN FIRST AMERICAN FIRST AMERICAN
CORPORATE CORPORATE CORPORATE LEHMAN LIPPER BBB-RATED
BOND FUND, BOND FUND, BOND FUND, U.S. CREDIT CORPORATE DEBT
CLASS A NAV CLASS A POP CLASS Y INDEX(3) FUNDS AVERAGE(4)
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CLASS A
02/2000 10,000 9,575 10,000 10,000
09/2000 10,461 10,016 10,523 10,401
CLASS Y
02/2000 10,000 10,000 10,000
09/2000 10,474 10,523 10,401
</TABLE>
(1) Past performance does not guarantee future results. The principal value of
an investment and investment return will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost. A
significant portion of the fund's portfolio may consist of lower-rated debt
obligations, which are commonly called "high yield" securities or "junk
bonds". High yield securities generally have more volatile prices and carry
more risk to principal than investment grade securities. Performance
reflects voluntary fee waivers in effect. In the absence of such fee
waivers, total returns would be reduced. Indexes are for illustrative
purposes only and are not available for investment.
Total returns at net asset value ("NAV") reflect performance over the time
period indicated without including the fund's maximum sales charge and
assumes reinvestment of all distributions at net asset value.
Total returns at public offering price ("POP") reflect performance over the
time period indicated including maximum sales charges of 4.25% for Class A,
1% for Class C and the maximum CDSC for Class B and Class C shares for the
relevant period. Total returns assume reinvestment of all distributions at
net asset value.
(2) Performance for Class B and Class C shares is not presented. Performance for
these classes is lower due to higher expenses.
(3) An unmanaged index comprised of publicly issued U.S. corporate and certain
foreign debentures and secured notes that must meet specified maturity,
liquidity, and quality requirements. To qualify, bonds must be SEC
registered.
(4) Similar funds as categorized by Lipper, Inc.
(5) The since inception performance of the index for each class is calculated
from the month-end following the inception of the class. Performance of the
fund and the indexes represents cumulative total return as the fund has been
in operation less than one year.
FIRST AMERICAN FUNDS ANNUAL REPORT 2000 5)
<PAGE>
FIXED INCOME
INVESTMENT OBJECTIVE: HIGH CURRENT INCOME CONSISTENT WITH LIMITED RISK TO
CAPITAL
The First American Fixed Income Fund returned 6.59% for the fiscal year (Class A
shares were up 6.33% on net asset value), outpacing its peer group, the Lipper
Corporate Debt A Rated Funds Average, which returned 5.36% for the period. The
fund's broad-based benchmark, the Lehman U.S. Aggregate Bond Index, posted a
return of 6.99%.
The fund's performance relative to the Lipper category can be attributed in part
to its duration strategy. Duration was extended during the first half of the
year, and reduced to neutral to slightly long in the second half. Good security
and sector selection also contributed to performance. Although corporate bonds
typically underperformed, our holdings were concentrated in better-performing
short and intermediate maturity corporate issues. Selective exposure to
mortgaged-backed securities and Treasury Inflation Protected Securities (TIPS)
boosted performance as well. The fund's underperformance relative to the Lehman
Index can be explained by expenses and transaction costs.
The last 12 months saw an inversion of the U.S. Treasury yield curve indicating
that longer maturity yields have traded below those of shorter maturities. Going
forward, the management team anticipates increasing exposure to the corporate
sector and extending the effective duration of the corporate holdings as yields
in these sectors compare favorably to U.S. Treasuries. Overall, duration is
approximately neutral to its benchmarks.
<TABLE>
<CAPTION>
ANNUALIZED PERFORMANCE(1)
--------------------------------------------------------------------------------------------------
AS OF SEPTEMBER 30, 2000 SINCE INCEPTION(5)
--------------------------------
1 YEAR 5 YEARS 10 YEARS 2/4/1994 8/15/1994 2/1/1999
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A NAV 6.33% 5.65% 7.23% -- -- --
--------------------------------------------------------------------------------------------------
Class A POP 1.83% 4.73% 6.77% -- -- --
--------------------------------------------------------------------------------------------------
Class B NAV 5.70% 4.90% -- -- 5.73% --
--------------------------------------------------------------------------------------------------
Class B POP 0.70% 4.58% -- -- 5.73% --
--------------------------------------------------------------------------------------------------
Class C NAV 5.50% -- -- -- -- 1.61%
--------------------------------------------------------------------------------------------------
Class C POP 3.42% -- -- -- -- 1.02%
--------------------------------------------------------------------------------------------------
Class Y 6.59% 5.91% -- 5.80% -- --
--------------------------------------------------------------------------------------------------
Lehman U.S. Aggregate Bond Index(3) 6.99% 6.47% 8.05% 6.52% 7.33% 4.59%
--------------------------------------------------------------------------------------------------
Lipper A-Rated Corporate Debt
Funds Average(4) 5.36% 5.39% 7.78% 5.59% 6.44% 2.96%
--------------------------------------------------------------------------------------------------
</TABLE>
(6 FIRST AMERICAN FUNDS ANNUAL REPORT 2000
<PAGE>
FIXED INCOME
VALUE OF A $10,000 INVESTMENT(1),(2) AS OF SEPTEMBER 30, 2000
[PLOT POINTS CHART]
<TABLE>
<CAPTION>
LIPPER A-RATED
FIRST AMERICAN FIRST AMERICAN FIRST AMERICAN LEHMAN CORPORATE
FIXED INCOME FIXED INCOME FIXED INCOME AGGREGATE DEBT FUNDS
FUND, CLASS A NAV FUND, CLASS A POP FUND, CLASS Y BOND INDEX(3) AVERAGE(4)
----------------- ----------------- ------------- ------------- ----------
<S> <C> <C> <C> <C> <C>
CLASS A
09/1990 10,000 9,575 10,000 10,000
09/1991 11,365 10,882 11,599 11,644
09/1992 12,767 12,225 13,056 13,228
09/1993 13,942 13,350 14,359 14,718
09/1994 13,536 12,961 13,897 13,977
09/1995 15,266 14,618 15,852 15,944
09/1996 15,975 15,296 16,625 16,574
09/1997 17,294 16,559 18,245 18,175
09/1998 19,420 18,594 20,343 20,080
09/1999 18,901 18,098 20,267 19,656
09/2000 20,098 19,243 21,684 20,710
CLASS Y
02/1994 10,000 10,000 10,000
09/1994 9,749 9,713 9,592
09/1995 11,002 11,079 10,942
09/1996 11,541 11,620 11,374
09/1997 12,527 12,752 12,473
09/1998 14,113 14,218 13,780
09/1999 13,769 14,166 13,490
09/2000 14,676 15,156 14,213
</TABLE>
(1) Past performance does not guarantee future results. The principal value of
an investment and investment return will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
Performance reflects voluntary fee waivers in effect. In the absence of such
fee waivers, total returns would be reduced. Indexes are for illustrative
purposes only and are not available for investment.
Total returns at net asset value ("NAV") reflect performance over the time
period indicated without including the fund's maximum sales charge and
assumes reinvestment of all distributions at net asset value.
Total returns at public offering price ("POP") reflect performance over the
time period indicated including maximum sales charges of 4.25% for Class A
shares, 1% for Class C shares and the maximum CDSC for Class B and Class C
shares for the relevant period. Total returns assume reinvestment of all
distributions at net asset value.
(2) Performance for Class B and Class C shares is not presented. Performance for
these classes is lower due to higher expenses.
(3) An unmanaged index composed of the Lehman Government/Credit Bond Index, the
Lehman Mortgage Backed Securities Index and the Lehman Asset Backed
Securities Index. The Lehman Government/Credit Bond Index is comprised of
Treasury securities, other securities issued or guaranteed by the U.S.
government or its agencies or instrumentalities, including U.S. agency
mortgage securities, and investment grade corporate debt securities. The
Lehman Mortgage Backed Securities Index is comprised of mortgage-backed
pass-through securities of Ginnie Mae (GNMA), Fannie Mae (FNMA), and Freddie
Mac (FHLMC). The Lehman Asset Backed Index is comprised of debt securities
backed by credit card, auto and home equity loans that are rated investment
grade or higher.
(4) Similar funds as categorized by Lipper, Inc.
(5) The since inception performance of the index for each class is calculated
from the month-end following the inception of the class.
FIRST AMERICAN FUNDS ANNUAL REPORT 2000 7)
<PAGE>
INTERMEDIATE TERM INCOME
INVESTMENT OBJECTIVE: CURRENT INCOME TO THE EXTENT CONSISTENT WITH PRESERVATION
OF CAPITAL
The First American Intermediate Term Income Fund posted a return of 5.97% (Class
A shares were up 5.69% on net asset value) for the fiscal year. The fund's peer
group, the Lipper Short/Intermediate Investment Grade Debt Funds Average,
returned 5.74% for the period, while its broad-based benchmark, the Lehman
Intermediate U.S. Government/ Credit Index was up 6.23%.
The fund's performance relative to the Lipper category can be attributed to its
exposure to asset-backed and mortgage-backed securities, as these sectors
provided strong relative returns. Good security selection in the corporate
sector and a position in 10-year Treasury Inflation Protected Securities (TIPS)
also provided modest incremental performance. The fund's duration is typically
longer than the Lipper median, which detracted from performance, particularly in
the first half of this year. The fund's underperformance relative to the Lehman
Index can be explained by expenses and transaction costs.
The last 12 months saw an inversion of the U.S. Treasury yield curve indicating
that longer maturity yields have traded below those of shorter maturities. The
fund's duration has been modestly reduced recently, bringing it neutral to the
benchmark index. We anticipate maintaining overweightings in the corporate,
asset-backed, and mortgage-backed sectors as yields in these sectors compare
favorably to U.S. Treasuries.
ANNUALIZED PERFORMANCE(1)
--------------------------------------------------------------------------------
AS OF SEPTEMBER 30, 2000 SINCE INCEPTION(4)
----------------------
1 YEAR 5 YEARS 12/14/1992 2/4/1994
--------------------------------------------------------------------------------
Class A NAV 5.69% 5.68% 5.74% --
--------------------------------------------------------------------------------
Class A POP 3.07% 5.15% 5.39% --
--------------------------------------------------------------------------------
Class Y 5.97% 5.70% -- 5.59%
--------------------------------------------------------------------------------
Lehman Intermediate Gov't/Credit
--------------------------------------------------------------------------------
Bond Index(2) 6.23% 6.07% 6.21% 6.05%
--------------------------------------------------------------------------------
Lipper Short/Intermediate Investment
Grade Debt Funds Average(3) 5.74% 5.42% 5.48% 5.31%
--------------------------------------------------------------------------------
(8 FIRST AMERICAN FUNDS ANNUAL REPORT 2000
<PAGE>
INTERMEDIATE TERM INCOME
VALUE OF A $10,000 INVESTMENT(1) AS OF SEPTEMBER 30, 2000
[PLOT POINTS CHART]
<TABLE>
<CAPTION>
LEHMAN LIPPER
FIRST AMERICAN FIRST AMERICAN FIRST AMERICAN INTERMEDIATE SHORT/INTERMEDIATE
INTERMEDIATE TERM INTERMEDIATE TERM INTERMEDIATE TERM GOVERNMENT/CREDIT INVESTMENT GRADE
FUND, CLASS A NAV FUND, CLASS A POP FUND, CLASS Y BOND INDEX(2) DEBT FUNDS AVERAGE(3)
----------------- ----------------- ----------------- ----------------- ---------------------
<S> <C> <C> <C> <C> <C>
CLASS A
12/1992 10,000 9,750 10,000 10,000
09/1993 10,673 10,406 10,860 10,775
09/1994 10,562 10,298 10,680 10,591
09/1995 11,672 11,380 11,883 11,590
09/1996 12,329 12,021 12,493 12,165
09/1997 13,216 12,885 13,517 13,064
09/1998 14,583 14,219 14,926 14,108
09/1999 14,554 14,190 15,020 14,273
09/2000 15,382 14,998 15,956 15,092
CLASS Y
02/1994 10,000 10,000 10,000
09/1994 9,872 9,856 9,836
09/1995 10,909 10,967 10,765
09/1996 11,523 11,529 11,299
09/1997 12,328 12,475 12,133
09/1998 13,594 13,775 13,103
09/1999 13,586 13,861 13,256
09/2000 14,397 14,725 14,017
</TABLE>
(1) Past performance does not guarantee future results. The principal value of
an investment and investment return will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
Performance reflects voluntary fee waivers in effect. In the absence of such
fee waivers, total returns would be reduced. Indexes are for illustrative
purposes only and are not available for investment.
Total returns at net asset value ("NAV") reflect performance over the time
period indicated without including the fund's maximum sales charge and
assumes reinvestment of all distributions at net asset value.
Total returns at public offering price ("POP") reflect performance over the
time period indicated including maximum sales charges of 2.50% for Class A
shares for the relevant period. Total returns assume reinvestment of all
distributions at net asset value.
(2) An unmanaged index comprised of Treasury securities, other securities issued
or guaranteed by the U.S. government or its agencies or instrumentalities,
including U.S. agency mortgage securities, and investment grade corporate
debt securities.
(3) Similar funds as categorized by Lipper, Inc.
(4) The since inception performance of the index for each class is calculated
from the month-end following the inception of the class.
FIRST AMERICAN FUNDS ANNUAL REPORT 2000 9)
<PAGE>
LIMITED TERM INCOME
INVESTMENT OBJECTIVE: CURRENT INCOME WHILE MAINTAINING A HIGH DEGREE OF
PRINCIPAL STABILITY
The First American Limited Term Income Fund returned 6.29% (Class A shares were
up 6.30% on net asset value) for the fiscal year, outpacing both of its
benchmarks. The fund's peer group, the Lipper Short Investment Grade Debt Funds
Average, returned 5.73% for the period, while the broad-based benchmark, the
Lehman MF Short 1-3 Year Government/Credit Index, posted a return of 5.97%.
The fund's performance relative to its Lipper and Lehman benchmarks can be
attributed in part to its relatively short duration during much of the first
three quarters of the fiscal year when rates were rising, moving to a neutral to
slightly long position in the quarter ended September 30, 2000 when rates moved
down. In addition, some upside performance was garnered by timely overweightings
in spread product and underweightings in governments and agencies. Good security
selection - holding high-quality securities in the short asset-backed sector -
also contributed to results.
The First American Adjustable Rate Mortgage Securities Fund merged with the
Limited Term Income Fund in February 2000, and the management team continues to
sell the adjustable rate mortgages held, reinvesting the proceeds into corporate
and asset-backed securities. Going forward, the fund's duration will be
positioned neutral to slightly long to its benchmark.
The team will continue to look for opportunities to selectively add incremental
yield and return through investment in high-quality spread securities and by
managing the duration of the fund based on its forecast for the economy and
interest rates.
ANNUALIZED PERFORMANCE(1)
--------------------------------------------------------------------------------
AS OF SEPTEMBER 30, 2000 SINCE INCEPTION(4)
-----------------------
1 YEAR 5 YEARS 12/14/1992 2/4/1994
--------------------------------------------------------------------------------
Class A NAV 6.30% 5.65% 5.21% --
--------------------------------------------------------------------------------
Class A POP 3.67% 5.13% 4.86% --
--------------------------------------------------------------------------------
Class Y 6.29% 5.67% -- 5.43%
--------------------------------------------------------------------------------
Lehman MF Short 1-3 Year
Gov't/Credit Index(2) 5.97% 5.96% 5.68% 5.85%
--------------------------------------------------------------------------------
Lipper Short Investment Grade
Debt Funds Average(3) 5.73% 5.42% 5.35% 5.30%
--------------------------------------------------------------------------------
(10 FIRST AMERICAN FUNDS ANNUAL REPORT 2000
<PAGE>
LIMITED TERM INCOME
VALUE OF A $10,000 INVESTMENT(1) AS OF SEPTEMBER 30, 2000
[PLOT POINTS CHART]
<TABLE>
<CAPTION>
LEHMAN LIPPER SHORT
FIRST AMERICAN FIRST AMERICAN FIRST AMERICAN MF 1-3 YEAR INVESTMENT GRADE
LIMITED TERM FUND, LIMITED TERM FUND, LIMITED TERM FUND, SHORT GOVERNMENT/ DEBT FUNDS
CLASS A NAV CLASS A POP CLASS Y CREDIT INDEX(2) AVERAGE(3)
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CLASS A
12/1992 10,000 9,750 10,000 10,000
09/1993 10,344 10,085 10,486 10,567
09/1994 10,573 10,308 10,613 10,641
09/1995 11,267 10,986 11,493 11,462
09/1996 11,935 11,637 12,151 12,061
09/1997 12,662 12,346 12,994 12,882
09/1998 13,492 13,154 14,017 13,762
09/1999 13,954 13,606 14,485 14,144
09/2000 14,834 14,463 15,350 14,954
CLASS Y
02/1994 10,000 10,000 10,000
09/1994 10,134 10,052 10,000
09/1995 10,799 10,886 10,771
09/1996 11,440 11,508 11,335
09/1997 12,136 12,307 12,107
09/1998 12,931 13,276 12,933
09/1999 13,388 13,719 13,292
09/2000 14,230 14,538 14,053
</TABLE>
(1) Past performance does not guarantee future results. The principal value of
an investment and investment return will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
Performance reflects voluntary fee waivers in effect. In the absence of such
fee waivers, total returns would be reduced. Indexes are for illustrative
purposes only and are not available for investment.
Total returns at net asset value ("NAV") reflect performance over the time
period indicated without including the fund's maximum sales charge and
assumes reinvestment of all distributions at net asset value.
Total returns at public offering price ("POP") reflect performance over the
time period indicated including maximum sales charges of 2.50% for Class A
shares for the relevant period. Total returns assume reinvestment of all
distributions at net asset value.
(2) An unmanaged index of one to three year Treasury securities, other
securities issued or guaranteed by the U.S. Government or its agencies or
instrumentalities, and investment grade corporate debt securities.
(3) Similar funds as categorized by Lipper, Inc.
(4) The since inception performance of the index for each class is calculated
from the month-end following the inception of the class.
FIRST AMERICAN FUNDS ANNUAL REPORT 2000 11)
<PAGE>
STRATEGIC INCOME
INVESTMENT OBJECTIVE: A HIGH LEVEL OF CURRENT INCOME
The First American Strategic Income Fund posted a return of 5.94% (Class A
shares were up 5.56% on net asset value) for the fiscal year. The fund is well
ahead of its peer group, the Lipper Multi-Sector Income Funds Average, which
returned 2.84% for the year. The fund's broad-based benchmark, the Lehman U.S.
Aggregate Bond Index, was up 6.99% over the same period.
The Strategic Income Fund is composed of three subportfolios that are each
approximately one third of the total fund-a high-quality segment, a high-yield
segment, and an international segment that is subadvised by Federated Investors
in New York. Investing in these three loosely correlated sectors has the
potential to provide attractive returns with reduced volatility.
The fund's performance relative to its peer group can be attributed in part to
the strong performance of the international sector, while the underperformance
relative to the Lehman benchmark is a result of the fund's allocation to
high-yield securities, which are not included in the Lehman Aggregate Index.
The international subportfolio is approximately 80% invested in emerging markets
debt, and the Lehman Emerging Markets Index was up more than 12% year to date.
Russia has been one of the strongest performing contributors to the index,
returning more than 62% year to date through September. The high price of oil
and the success of Russian President Vladimir Putin in implementing reforms in
the tax system and in removing power from the oligarchy that controlled the
private sector have contributed to the country's strong performance. Allocations
have been based in part on the outlook for oil prices, and have resulted in
significant overweightings in major oil-producing countries such as Kazakhstan
and Qutar. The fund recently took profits in Venezuela and Mexico, also
benefactors of high oil prices, and reinvested the proceeds in higher-yielding
names. Although the general quality of emerging markets debt continues to be
strong and further upgrades in Russia, Brazil, Turkey, and Mexico are possible,
the management team believes that most of the return in the coming months will
come from coupon flow. The developed markets debt segment has performed poorly
as a result of the strength of the U.S. dollar and the underperformance of the
Euro, and future performance will be strongly influenced by currency
fluctuations.
In the domestic markets, the Federal Reserve's tightening of monetary policy and
Treasury buyback program led to the dramatic outperformance of long-maturity
Treasury bonds. As a result, the high-quality subportfolio benefited from its
core position in these securities. Its small underweighting in mortgage-backed
securities detracted from performance, but its bias to higher-quality,
shorter-maturity corporate bonds contributed positively. The management team
believes we have seen the initial signs of an economic slowdown, and expects to
see moderate deterioration in inflation in future months, as a result of
continued labor market tightness and the increase in oil prices.
Going forward, the management team will reduce the fund's allocation to
long-maturity Treasuries, with the expectation that the Treasury yield curve
will gradually reverse some of its current inversion. The team expects to add to
mortgage-backed holdings, which should benefit from a more normal-shaped
Treasury curve. Credit-sensitive holdings (such as corporates and asset-backed
securities) will be kept in shorter maturities, with a continued bias to
higher-quality, more liquid positions. Duration will remain neutral to the
benchmark.
The high yield segment of the portfolio was transitioned from Federated
Investors to First American Asset Management on February 1, 2000. The fund
managers consolidated a number of smaller positions and generated a cash
position that was strategically invested throughout the course of the year. The
high-yield market has experienced weak market conditions and a
higher-than-average default rate, causing it to underperform other fixed-income
sectors. As a result, the fund's overweighting to Treasuries reduced its yield
but positively impacted total return. Our relative emphasis on the
higher-quality (BB) spectrum of the high-yield universe also helped performance,
as lower-quality securities have fared the worst.
Looking ahead, the management team will remain a bit conservative with the more
speculative issues until the default rate begins to abate. However, the team
believes there will be attractive opportunities to participate in future spread
tightening and will continue to prudently select securities based on diligent
credit research.
ANNUALIZED PERFORMANCE(1)
--------------------------------------------------------------------------------
AS OF SEPTEMBER 30, 2000 SINCE INCEPTION(5)
--------------------
1 year 7/24/1998 2/1/1999
--------------------------------------------------------------------------------
Class A NAV 5.56% 2.13% --
--------------------------------------------------------------------------------
Class A POP 1.11% 0.14% --
--------------------------------------------------------------------------------
Class B NAV 4.83% 1.43% --
--------------------------------------------------------------------------------
Class B POP -0.07% -0.18% --
--------------------------------------------------------------------------------
Class C NAV 5.16% -- 2.89%
--------------------------------------------------------------------------------
Class C POP 3.14% -- 2.25%
--------------------------------------------------------------------------------
Class Y 5.94% 2.42% --
--------------------------------------------------------------------------------
Lehman U.S.
Aggregate Bond(3) 6.99% 4.87% 4.59%
--------------------------------------------------------------------------------
Lipper Multi-Sector
Income Funds Average(4) 2.84% 0.53% 2.28%
--------------------------------------------------------------------------------
(12 FIRST AMERICAN FUNDS ANNUAL REPORT 2000
<PAGE>
STRATEGIC INCOME
VALUE OF A $10,000 INVESTMENT(1)(2) AS OF SEPTEMBER 30, 2000
[PLOT POINTS CHART]
<TABLE>
<CAPTION>
FIRST AMERICAN FIRST AMERICAN FIRST AMERICAN LIPPER
STRATEGIC STRATEGIC STRATEGIC LEHMAN U.S. MULTI-SECTOR
INCOME FUND, INCOME FUND, INCOME FUND, AGGREGATE INCOME FUNDS
CLASS A NAV CLASS A POP CLASS Y BOND INDEX(3) AVERAGE(4)
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CLASS A
07/1998 10,000 9,575 10,000 10,000
09/1998 9,411 9,011 10,401 9,593
09/1999 9,950 9,528 10,362 9,861
09/2000 10,504 10,057 11,087 10,142
CLASS Y
07/1998 10,000 10,000 10,000
09/1998 9,415 10,401 9,593
09/1999 9,976 10,362 9,861
09/2000 10,569 11,087 10,142
</TABLE>
(1) Past performance does not guarantee future results. The principal value of
an investment and investment return will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost. A
significant portion of the fund's portfolio may consist of lower-rated debt
obligations, which are commonly called high-yield securities or junk bonds.
High-yield securities generally have more volatile prices and carry more
risk to principal than investment grade securities. The fund may invest in
foreign securities including emerging markets. International investing
involves risks not typically associated with domestic investing, including
risks of adverse currency fluctuations, potential political and economic
instability, different accounting standards, foreign government regulations,
currency exchange rates, limited liquidity and volatile prices. The risks of
international investing are particularly significant in emerging markets.
Performance reflects voluntary fee waivers in effect. In the absence of such
fee waivers, total returns would be reduced. Indexes are for illustrative
purposes only and are not available for investment.
Total returns at net asset value ("NAV") reflect performance over the time
period indicated without including the fund's maximum sales charge and
assumes reinvestment of all distributions at net asset value.
Total returns at public offering price ("POP") reflect performance over the
time period indicated including maximum sales charges of 4.25% for Class A
shares, 1% for Class C shares and the maximum CDSC for Class B and Class C
shares for the relevant period. Total returns assume reinvestment of all
distributions at net asset value.
(2) Performance for Class B and Class C shares is not presented. Performance for
these classes is lower due to higher expenses.
(3) An unmanaged index composed of the Lehman Government/Corporate Bond Index,
the Lehman Mortgage Backed Securities Index and the Lehman Asset Backed
Securities Index. The Lehman Government/Corporate Bond Index is comprised of
Treasury securities, other securities issued or guaranteed by the U.S.
government or its agencies or instrumentalities, including U.S. agency
mortgage securities, and investment grade corporate debt securities. The
Lehman Mortgage Backed Securities Index is comprised of the mortgage-backed
pass-through securities of Ginnie Mae, Fannie Mae and Freddie Mac. The
Lehman Asset Backed Index is comprised of debt securities backed by credit
card, auto and home equity loans that are rated investment grade or higher.
(4) Similar funds as categorized by Lipper, Inc.
(5) The since inception performance of the index for each class is calculated
from the month-end following the inception of the class. The First American
Strategic Income Fund posted a return of 5.94% (Class A shares were up 5.56%
on net asset value) for the fiscal year.
FIRST AMERICAN FUNDS ANNUAL REPORT 2000 13)
<PAGE>
(This page has been left blank intentionally.)
<PAGE>
REPORT OF INDEPENDENT AUDITORS SEPTEMBER 30, 2000
To the Shareholders and Board of Directors
First American Investment Funds, Inc.
We have audited the accompanying statements of net assets of the Corporate
Bond, Fixed Income, Intermediate Term Income, Limited Term Income and
Strategic Income Funds (certain funds constituting First American
Investment Funds, Inc.) (the "Funds") as of September 30, 2000, and the
related statements of operations for the period then ended and the
statements of changes in net assets and financial highlights for the
periods ended subsequent to September 30, 1998. These financial statements
and financial highlights are the responsibility of the Funds' management.
Our responsibility is to express an opinion on these financial statements
and financial highlights based on our audits. The financial highlights for
the periods presented through September 30, 1998 were audited by other
auditors whose report dated November 13, 1998 expressed an unqualified
opinion on those financial highlights.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements and
financial highlights. Our procedures included confirmation of securities
owned as of September 30, 2000, by correspondence with the custodian and
brokers. As to certain securities relating to uncompleted transactions, we
performed other auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the 2000 and 1999 financial statements and financial
highlights referred to above present fairly, in all material respects, the
financial position of each of the funds listed above of First American
Investment Funds, Inc. at September 30, 2000, the results of their
operations, changes in their net assets and their financial highlights, in
conformity with accounting principles generally accepted in the United
States.
/s/ Ernst & Young LLP
Minneapolis, Minnesota
November 3, 2000
FIRST AMERICAN FUNDS ANNUAL REPORT 2000 15)
<PAGE>
STATEMENTS OF NET ASSETS SEPTEMBER 30, 2000
CORPORATE BOND FUND
DESCRIPTION PAR (000) VALUE (000)
--------------------------------------------------------------------------------
CORPORATE BONDS -- 75.5%
ENERGY -- 4.5%
Dynegy
6.750%, 12/15/05 $ 1,000 $ 969
Ultramar Credit
8.625%, 07/01/02 1,000 1,020
Valero Energy
8.750%, 06/15/30 2,000 2,096
--------------
4,085
--------------
FINANCE -- 23.7%
Abbey National Capital Trust,
Callable 06/30/30 @ 100
8.963%, 12/29/49 2,000 2,005
Amerco
8.800%, 02/04/05 1,000 964
Bank of America
7.125%, 09/15/06 1,500 1,498
Bank United
8.875%, 05/01/07 2,000 2,034
Bear Stearns
7.625%, 12/07/09 2,000 1,987
Erac USA Finance
8.250%, 05/01/05 (A) 2,000 2,044
Everest Reinsurance Holdings
8.750%, 03/15/10 2,000 2,089
Gatx Capital
8.250%, 09/01/03 2,000 2,008
Heller Financial
8.000%, 06/15/05 2,000 2,054
MBNA America Bank
6.875%, 07/15/04 2,000 1,958
Socgen Real Estate,
Callable 09/30/07 @ 100
7.640%, 12/29/49 (A) 2,000 1,865
Sovereign Bancorp
10.500%, 11/15/06 1,000 1,018
--------------
21,524
--------------
HEALTH CARE -- 1.1%
HCA Healthcare
8.750%, 09/01/10 1,000 1,021
--------------
LEISURE & ENTERTAINMENT -- 2.1%
Royal Caribbean Cruises
8.250%, 04/01/05 2,000 1,932
--------------
MANUFACTURING -- 10.4%
AK Steel, Callable 12/15/01 @ 104.56
9.125%, 12/15/06 1,000 993
D.R. Horton
8.375%, 06/15/04 1,000 965
Equistar Chemicals
8.500%, 02/15/04 1,000 993
Lear Series B
8.110%, 05/15/09 1,000 935
Meritor Automotive
6.800%, 02/15/09 1,000 874
Newport News Shipbuilding,
Callable 12/01/01 @ 104.31
8.625%, 12/01/06 1,000 990
Owens Illinois
7.850%, 05/15/04 1,000 850
Precision Castparts
8.750%, 03/15/05 2,000 2,031
CORPORATE BOND FUND (CONTINUED)
DESCRIPTION PAR (000) VALUE (000)
--------------------------------------------------------------------------------
Thermo Electron,
Callable 01/15/01 @ 100
4.000%, 01/15/05 $ 1,000 $ 879
--------------
9,510
--------------
REAL ESTATE -- 3.1%
Eop Operating
6.763%, 06/15/07 1,000 945
Starwood Financial
7.300%, 05/15/01 1,000 975
Susa Partnership
7.000%, 12/01/07 1,000 927
--------------
2,847
--------------
SERVICES -- 12.7%
British Sky Broadcasting
8.200%, 07/15/09 1,000 937
Earth Grains
8.375%, 08/01/03 2,000 2,005
Federated Department Stores
8.500%, 06/01/10 2,000 2,000
Kmart
8.375%, 12/01/04 1,000 890
Kroger
7.000%, 05/01/18 2,000 1,752
Park Place Entertainment
7.875%, 12/15/05 1,000 960
Time Warner Entertainment
8.375%, 03/15/23 2,000 2,065
Tricon Global Restaurant
7.650%, 05/15/08 1,000 930
--------------
11,539
--------------
TELECOMMUNICATIONS & CELLULAR -- 5.4%
Global Crossing Holding
9.125%, 11/15/06 1,000 990
Level 3 Communications
11.000%, 03/15/08 1,000 955
Qwest Capital Funding
7.900%, 08/15/10 (A) 2,000 2,033
Williams Communications Group,
Callable 10/01/04 @ 105.438
10.875%, 10/01/09 1,000 915
--------------
4,893
--------------
TRANSPORTATION -- 7.1%
Burlington Northern Santa Fe
6.125%, 03/15/09 2,000 1,815
Continental Airlines
7.918%, 05/01/10 2,000 2,032
CSX Series C
6.800%, 12/01/28 2,000 1,670
Stagecoach Holdings
8.625%, 11/15/09 1,000 916
--------------
6,433
--------------
UTILITIES -- 5.4%
AES
9.375%, 09/15/10 1,000 1,015
CMS Energy
7.625%, 11/15/04 1,000 965
Limestone Electron Trust
8.625%, 03/15/03 (A) 1,000 1,020
The accompanying notes are an integral part of the financial statements.
(16 FIRST AMERICAN FUNDS ANNUAL REPORT 2000
<PAGE>
CORPORATE BOND FUND (CONTINUED)
DESCRIPTION PAR (000) VALUE (000)
--------------------------------------------------------------------------------
NRG Northeast Generating
8.842%, 06/15/15 (A) 1,000 $ 1,032
Western Resources
6.250%, 08/15/03 $ 1,000 888
--------------
4,920
--------------
TOTAL CORPORATE BONDS
(Cost $68,549) 68,704
--------------
ASSET-BACKED SECURITIES -- 6.5%
COMMERCIAL -- 1.0%
GMAC Commercial Mortgage Securities
Series 1999-C1 Class-A2
6.175%, 05/15/33 1,000 938
--------------
MANUFACTURING -- 1.1%
Green Tree Financial Series 1996-8 Class-A7
8.050%, 10/15/27 1,000 1,003
--------------
TRANSPORTATION -- 2.2%
United Airlines Series 2000-1 Class-B
8.030%, 07/01/11 2,000 2,009
--------------
OTHER -- 2.2%
Aircraft Finance Trust Series 1999-1A Class-C
8.000%, 05/15/24 (A) 1,000 964
Juniper Series 2000-1 Class-A3
8.220%, 04/15/12 1,000 1,025
--------------
1,989
--------------
TOTAL ASSET-BACKED SECURITIES
(Cost $5,829) 5,939
--------------
U.S. AGENCY MORTGAGE-BACKED SECURITIES -- 8.0%
FNMA Series 1999-32 Class-A
6.000%, 04/25/26 3,141 2,971
FHLMC Gold Pool #C39938
8.000%, 09/01/27 2,325 2,366
FNMA Pool #515959
7.500%, 11/01/29 1,943 1,939
--------------
TOTAL U.S. AGENCY MORTGAGE-BACKED SECURITIES
(Cost $7,257) 7,276
--------------
U.S. GOVERNMENT & AGENCY SECURITIES -- 4.9%
FNMA
6.625%, 09/15/09 2,500 2,470
U.S. Treasury Bonds
6.250%, 08/15/23 2,000 2,039
--------------
TOTAL U.S. GOVERNMENT & AGENCY SECURITIES
(Cost $4,506) 4,509
--------------
COMMERCIAL MORTGAGE-BACKED SECURITIES -- 1.1%
Morgan Stanley Capital Investments
Series 1999-RM1 Class-A2
6.710%, 12/15/31 1,000 974
--------------
TOTAL COMMERCIAL MORTGAGE-BACKED SECURITIES
(Cost $959) 974
--------------
PRIVATE MORTGAGE-BACKED SECURITIES -- 1.4%
Countrywide Funding Series 1993-8 Class-A6
7.000%, 12/25/23 1,274 1,246
--------------
TOTAL PRIVATE MORTGAGE-BACKED SECURITIES
(Cost $1,226) 1,246
--------------
CORPORATE BOND FUND (CONCLUDED)
DESCRIPTION SHARES VALUE (000)
--------------------------------------------------------------------------------
RELATED PARTY MONEY MARKET FUND -- 1.2%
First American Prime Obligations Fund (B) 1,071,486 $ 1,071
--------------
TOTAL RELATED PARTY MONEY MARKET FUND
(Cost $1,071) 1,071
--------------
TOTAL INVESTMENTS -- 98.6%
(Cost $89,397) 89,719
--------------
OTHER ASSETS AND LIABILITIES, NET -- 1.4% (C) 1,288
--------------
NET ASSETS:
Portfolio Capital--Class A ($.0001 par value--
2 billion authorized) based on
76,851 outstanding shares 767
Portfolio Capital--Class B ($0.0001 par value--
2 billion authorized) based on
10,320 outstanding shares 102
Portfolio Capital--Class C ($0.0001 par value--
2 billion authorized) based on
14,327 outstanding shares 141
Portfolio Capital--Class Y ($0.0001 par value--
2 billion authorized) based on
8,976,197 outstanding shares 89,310
Undistributed net investment income 83
Accumulated net realized gain on investments 282
Net unrealized appreciation of investments 322
--------------
TOTAL NET ASSETS -- 100.0% $91,007
--------------
Net asset value and redemption price per share -- Class A $ 10.03
Maximum sales charge of 4.25% (D) 0.45
--------------
Offering price per share -- Class A $ 10.48
--------------
Net asset value and offering price per share -- Class B (E) $ 10.02
--------------
Net asset value per share -- Class C (F) $ 10.01
Maximum sales charge of 1.00% (G) 0.10
--------------
Offering price per share -- Class C $ 10.11
--------------
Net asset value, offering price, and redemption
price per share -- Class Y $ 10.03
--------------
(A) Security sold within the terms of a private placement memorandum, exempt
from registration under section 144A of the Securities Act of 1933, as
amended, and may be sold only to dealers in that program or other "qualified
institutional investors." These securities have been determined to be liquid
under guidelines established by the Board of Directors.
(B) This money market fund is advised by U.S. Bank National Association who also
serves as Advisor for this Fund. See also the notes to the financial
statements.
(C) Other assets and liabilities representing greater than five percent of the
total net assets include the following amounts (000):
Collateral for securities loaned, at value $19,710
Payable upon return of securities loaned ($19,710)
(D) The offering price is calculated by dividing the net asset value by 1 minus
the maximum sales charge of 4.25%.
(E) Class B has a contingent deferred sales charge. For a description of a
possible redemption charge, see the notes to the financial statements.
(F) Class C has a contingent deferred sales charge. For a description of a
possible redemption charge, see the notes to the financial statements.
(G) The offering price is calculated by dividing the net asset value by 1 minus
the maximum sales charge of 1.00%
FHLMC--Federal Home Loan Mortgage Corporation
FNMA--Federal National Mortgage Association
FIRST AMERICAN FUNDS ANNUAL REPORT 2000 17)
<PAGE>
STATEMENTS OF NET ASSETS SEPTEMBER 30, 2000
FIXED INCOME FUND
DESCRIPTION PAR (000) VALUE (000)
--------------------------------------------------------------------------------
CORPORATE BONDS -- 38.0%
CONSUMER GOODS -- 0.2%
Coca-Cola Enterprises
6.700%, 10/15/36 $ 3,500 $ 3,465
--------------
ENERGY -- 3.3%
Conoco
6.950%, 04/15/29 5,000 4,612
Consolidated Natural Gas
7.250%, 10/01/04 20,000 19,975
Dynegy
6.875%, 07/15/02 20,000 19,793
Enron
7.125%, 05/15/07 2,750 2,698
--------------
47,078
--------------
FINANCE -- 18.6%
ABN AMRO
7.550%, 06/28/06 20,000 20,405
Associates
5.800%, 04/20/04 25,000 24,125
Bank of America
7.125%, 09/15/06 27,000 26,959
Bear Stearns
7.800%, 08/15/07 25,250 25,566
Cigna
7.400%, 01/15/03 10,726 10,658
GE Global Insurance
7.750%, 06/15/30 10,000 10,050
General Electric Capital Series A
6.650%, 09/03/02 15,000 14,981
Goldman Sachs
6.650%, 05/15/09 15,000 14,194
Household Finance
7.200%, 07/15/06 25,000 24,844
MBNA America Bank
6.875%, 07/15/04 15,000 14,681
Money Store
7.300%, 12/01/02 41,795 41,842
Newcourt Credit Series B
6.875%, 02/16/05 20,000 19,750
Wells Fargo Series J
6.550%, 12/01/06 17,000 16,452
--------------
264,507
--------------
MANUFACTURING -- 10.0%
Boeing
7.250%, 06/15/25 20,000 19,785
Ford Motor Credit
7.750%, 03/15/05 20,000 20,325
5.800%, 01/12/09 25,000 22,069
General Motors Acceptance
6.150%, 04/05/07 20,000 18,534
FIXED INCOME FUND (CONTINUED)
DESCRIPTION PAR (000) VALUE (000)
--------------------------------------------------------------------------------
Honeywell International
7.000%, 03/15/07 $ 15,000 $ 14,962
IBM
7.250%, 11/01/02 10,000 10,112
PPG Industries
7.400%, 08/15/19 18,000 17,574
Xerox Cap Europe
5.750%, 05/15/02 20,000 19,267
--------------
142,628
--------------
SERVICES -- 1.5%
Hertz
6.250%, 03/15/09 23,000 20,871
--------------
TRANSPORTATION -- 0.8%
Continental Airlines Series 99-2
7.056%, 09/15/09 11,500 11,145
--------------
TELECOMMUNICATIONS & CELLULAR -- 2.9%
Alltel
6.750%, 09/15/05 10,000 9,757
Deutsche Telekom
8.250%, 06/15/30 10,000 10,353
Vodafone Group
7.875%, 02/15/30 (A) 10,000 10,126
Worldcom
7.875%, 05/15/03 10,000 10,234
--------------
40,470
--------------
OTHER -- 0.7%
Quebec Province Yankee
7.000%, 01/30/07 10,000 9,976
--------------
TOTAL CORPORATE BONDS
(Cost $548,888) 540,140
--------------
U.S. AGENCY MORTGAGE-BACKED SECURITIES -- 24.9%
FIXED RATE -- 21.5%
FHLMC Gold Pool #A00894
9.500%, 06/01/21 1,570 1,631
FHLMC Gold Pool #A01608
10.000%, 12/01/19 1,502 1,574
FHLMC Gold Pool #C00742
6.500%, 04/01/29 15,500 14,899
FHLMC Gold Pool #D70890
6.500%, 04/01/26 4,989 4,821
FHLMC Gold Pool #D71415
6.500%, 05/01/26 3,177 3,070
FHLMC Gold Pool #E20194
7.000%, 09/01/10 4,753 4,742
FHLMC Gold Pool #G01091
7.000%, 12/01/29 9,731 9,537
FHLMC Gold Pool #L90187
6.000%, 10/01/00 9 8
The accompanying notes are an integral part of the financial statements.
(18 FIRST AMERICAN FUNDS ANNUAL REPORT 2000
<PAGE>
FIXED INCOME FUND (CONTINUED)
DESCRIPTION PAR (000) VALUE (000)
--------------------------------------------------------------------------------
FHLMC Series 163 Class-F
6.000%, 07/15/21 $ 3,037 $ 2,966
FHLMC Series 1638 Class-E
6.250%, 04/15/23 5,000 4,901
FHLMC Series 1643 Class-PK
6.500%, 12/15/23 5,439 5,093
FHLMC Series 1648 Class-LA
6.000%, 05/15/23 4,695 4,030
FHLMC Series 1699 Class-TD
6.000%, 03/15/24 10,000 8,998
FHLMC Series 1723 Class-PJ
7.000%, 02/15/24 7,133 6,875
FHLMC Series 2115 Class-BJ
6.000%, 03/15/28 5,020 4,505
FHLMC Series 51 Class-VA
7.000%, 04/17/06 9,502 9,500
FNMA TBA
8.000%, 01/01/23 (B) 24,000 24,307
FNMA Pool #535206
7.000%, 02/01/15 9,505 9,451
FNMA Pool #124654
7.000%, 12/01/07 2,580 2,570
FNMA Pool #125224
6.500%, 08/01/23 5,028 4,876
FNMA Pool #250055
7.000%, 05/01/09 1,132 1,130
FNMA Pool #250113
9.000%, 07/01/24 254 262
FNMA Pool #250359
7.000%, 10/01/25 3,074 3,027
FNMA Pool #250551
7.000%, 05/01/26 8,042 7,917
FNMA Pool #252570
6.500%, 07/01/29 16,424 15,772
FNMA Pool #323715
6.000%, 05/01/29 18,941 17,704
FNMA Pool #340798
7.000%, 04/01/26 8,468 8,336
FNMA Pool #353997
6.500%, 07/01/26 3,318 3,203
FNMA Pool #440780
5.500%, 02/01/14 26,403 24,922
FNMA Pool #456276
6.000%, 12/01/28 13,521 12,667
FNMA Pool #493235
6.000%, 04/01/29 19,090 17,850
FNMA Pool #496026
6.000%, 01/01/29 15,491 14,484
FNMA Series 1992-169 Class-J
6.500%, 03/25/21 5,171 5,109
FNMA Series 1996-23 Class-G
6.500%, 07/25/26 4,250 3,833
FNMA Series 1996-53 Class-PG
6.500%, 12/18/11 3,000 2,904
FNMA Series 1997-1 Class-B
6.500%, 02/18/04 4,997 4,958
FNMA Series 1998-M1 Class-A2
6.250%, 01/25/08 7,500 7,120
FNMA Series 1999-1 Class-PG
6.500%, 04/25/28 15,343 14,251
FIXED INCOME FUND (CONTINUED)
DESCRIPTION PAR (000) VALUE (000)
--------------------------------------------------------------------------------
GNMA Pool #8259
6.750%, 08/20/23 $ 21 $ 21
GNMA Pool #488997
7.000%, 04/15/29 3,632 3,576
GNMA Pool #506455
7.000%, 04/15/29 4,330 4,264
GNMA Pool #506639
7.000%, 04/15/29 4,735 4,662
--------------
306,326
--------------
Z-BONDS (C) -- 3.4%
FHLMC Series 1665 Class-KZ
6.500%, 01/15/24 8,912 8,271
FHLMC Series 1677 Class-Z
7.635%, 07/15/23 4,908 4,640
FHLMC Series 1822 Class-Z
6.900%, 03/15/26 8,177 7,434
FHLMC Series 2177 Class-CZ
6.000%, 08/15/29 8,253 6,381
FNMA Series 1993-160 Class-ZA
6.818%, 09/25/23 1,110 1,023
6.885%, 09/25/23 20 19
FNMA Series 1996-35 Class-Z
7.777%, 07/25/26 8,025 7,463
Vendee Mortgage Trust Series 1996-1 Class-Z
6.814%, 02/15/26 14,295 12,523
--------------
47,754
--------------
TOTAL U.S. AGENCY MORTGAGE-BACKED SECURITIES
(Cost $355,911) 354,080
--------------
U.S. GOVERNMENT & AGENCY SECURITIES -- 27.2%
U.S. AGENCY DEBENTURES -- 10.3%
FHLB
6.090%, 06/02/06 20,000 19,505
6.375%, 08/15/06 11,500 11,314
FHLMC
5.000%, 02/15/01 50,000 49,688
6.250%, 10/15/02 35,000 34,839
5.950%, 01/19/06 30,000 29,139
5.750%, 04/15/08 2,000 1,881
--------------
146,366
--------------
U.S. TREASURIES -- 16.9%
U.S. Treasury Bonds
7.125%, 02/15/23 50,000 56,189
6.875%, 08/15/25 40,000 44,038
U.S. Treasury Bonds (TIPS)
3.875%, 04/15/29 42,046 41,769
U.S. Treasury Notes
6.500%, 10/15/06 65,000 66,788
U.S. Treasury Notes (TIPS)
4.250%, 01/15/10 30,812 31,476
--------------
240,260
--------------
TOTAL U.S. GOVERNMENT & AGENCY SECURITIES
(Cost $388,454) 386,626
--------------
FIRST AMERICAN FUNDS ANNUAL REPORT 2000 19)
<PAGE>
STATEMENTS OF NET ASSETS SEPTEMBER 30, 2000
FIXED INCOME FUND (CONTINUED)
DESCRIPTION PAR (000) VALUE (000)
--------------------------------------------------------------------------------
ASSET-BACKED SECURITIES -- 2.8%
AUTOMOBILES -- 0.4%
Daimler Chrysler Auto Trust Series 2000-C Class-A3
6.820%, 09/06/04 $ 7,000 $ 7,018
--------------
CREDIT CARDS -- 1.4%
Sears Credit Account Master Trust
Series 1992-2 Class-A
6.350%, 02/16/07 20,000 19,857
--------------
MANUFACTURED HOMES -- 1.0%
Green Tree Financial Series 1993-4 Class-A4
6.600%, 01/15/19 13,945 13,842
--------------
TOTAL ASSET-BACKED SECURITIES
(Cost $40,831) 40,717
--------------
PRIVATE MORTGAGE-BACKED SECURITIES -- 6.8%
ADJUSTABLE RATE (D) -- 2.2%
Prudential Home Mortgage Securities
Series 1994-28 Class-M
6.745%, 09/25/01 5,520 5,465
J.P. Morgan Commercial Mortgage Finance
Series 1995-C1 Class-B
7.655%, 07/25/10 10,329 10,379
Merrill Lynch Mortgage Investors
Series 1995-C3 Class-A3
7.070%, 12/26/25 15,335 15,345
--------------
31,189
--------------
FIXED RATE -- 4.6%
Asset Securitization Series 1996-MD6 Class-A1B
6.875%, 11/13/26 18,600 18,568
Bank America National Trust & Savings
8.375%, 05/01/07 54 54
Countrywide Mortgage-Backed Securities
Series 1994-G Class-A3
6.500%, 04/25/24 2,120 2,106
First Nationwide Mortgage Corporation
6.000%, 09/01/28 13,459 12,609
General Electric Capital Mortgage
Series 1994-17 Class-A6
7.000%, 05/25/24 7,000 6,900
General Electric Capital Mortgage
Series 1994-17 Class-A7
7.000%, 05/25/24 5,179 4,952
Merrill Lynch Mortgage Investors
Series 1993-C Class-A4
7.625%, 03/15/18 6,000 6,005
FIXED INCOME FUND (CONTINUED)
DESCRIPTION PAR (000)/SHARES VALUE (000)
--------------------------------------------------------------------------------
Morgan Stanley Capital Investments
Series 1999-FNV1 Class-A1
6.120%, 03/15/31 $ 11,080 $ 10,745
Nomura Asset Securities
Series 1996-MD5 Class-A1B
7.120%, 04/13/36 3,400 3,402
--------------
65,341
--------------
TOTAL PRIVATE MORTGAGE-BACKED SECURITIES
(Cost $95,948) 96,530
--------------
RELATED PARTY MONEY MARKET FUND -- 0.8%
First American Prime Obligations Fund (E) 12,153,434 12,153
--------------
TOTAL RELATED PARTY MONEY MARKET FUND
(Cost $12,153) 12,153
--------------
TOTAL INVESTMENTS -- 100.5%
(Cost $1,442,185) 1,430,246
--------------
OTHER ASSETS AND LIABILITIES, NET -- (0.5%) (F) (7,699)
--------------
NET ASSETS:
Portfolio Capital--Class A ($0.0001 par value--
2 billion authorized) based on
10,335,445 outstanding shares 201,197
Portfolio Capital--Class B ($0.0001 par value--
2 billion authorized) based on
1,086,415 outstanding shares 12,055
Portfolio Capital--Class C ($0.0001 par value--
2 billion authorized) based on
53,077 outstanding shares 586
Portfolio Capital--Class Y ($0.0001 par value--
2 billion authorized) based on
121,639,240 outstanding shares 1,320,899
Undistributed net investment income 1,012
Accumulated net realized loss on investments (101,263)
Net unrealized depreciation of investments (11,939)
--------------
TOTAL NET ASSETS -- 100.0% $1,422,547
--------------
Net asset value and redemption price per share -- Class A $ 10.69
Maximum sales charge of 4.25% (G) 0.47
--------------
Offering price per share -- Class A $ 11.16
--------------
Net asset value and offering price per share -- Class B (H) $ 10.63
--------------
Net asset value per share -- Class C (I) $ 10.66
Maximum sales charge of 1.00% (J) 0.11
--------------
Offering price per share -- Class C $ 10.77
--------------
Net asset value, offering price, and redemption
price per share -- Class Y $ 10.69
--------------
The accompanying notes are an integral part of the financial statements.
(20 FIRST AMERICAN FUNDS ANNUAL REPORT 2000
<PAGE>
FIXED INCOME FUND (CONCLUDED)
--------------------------------------------------------------------------------
(A) Security sold within terms of a private placement memorandum, exempt from
registration under section 144A of the Securities Act of 1933, as amended,
and may be sold only to dealers in that program or other "qualified
institutional investors." These securities have been determined to be liquid
under guidelines established by the Board of Directors.
(B) On September 30, 2000, the total cost of investments purchased on a
when-issued basis was $24,232,500.
(C) Z-Bonds -- Represents securities that pay no interest or principal during
their accrual periods, but accrue additional principal at specified rates.
Interest rate disclosed represents current yield based upon the cost basis
and estimated future cash flows.
(D) Variable Rate Security -- the rate reported on the Statement of Net Assets
is the rate in effect as of September 30, 2000.
(E) This money market fund is advised by U.S. Bank National Association who also
serves as Advisor for this Fund. See also the notes to the financial
statements.
(F) Other assets and liabilities representing greater than five percent of total
net assets include the following (000):
Collateral for securities loaned, at value $724,409
Payable upon return of securities loaned (724,409)
(G) The offering price is calculated by dividing the net asset value by 1 minus
the maximum sales charge of 4.25%.
(H) Class B has a contingent deferred sales charge. For a description of a
possible redemption charge, see the notes to the financial statements.
(I) Class C has a contingent deferred sales charge. For a description of a
possible redemption charge, see the notes to the financial statements.
(J) The offering price is calculated by dividing the net asset value by 1 minus
the maximum sales charge of 1.00%.
FHLB--Federal Home Loan Bank
FHLMC--Federal Home Loan Mortgage Corporation
FNMA--Federal National Mortgage Association
GNMA--Government National Mortgage Association
TBA--To Be Announced
TIPS--Treasury Inflation Protection Security
INTERMEDIATE TERM INCOME FUND
DESCRIPTION PAR (000) VALUE (000)
--------------------------------------------------------------------------------
CORPORATE BONDS -- 40.5%
CONSUMER GOODS -- 1.6%
Coca-Cola Enterprises
6.700%, 10/15/36 $ 2,000 $ 1,980
Dayton Hudson
5.875%, 11/01/08 5,000 4,544
--------------
6,524
--------------
ENERGY -- 2.7%
Conoco
5.900%, 04/15/04 6,500 6,300
Dynegy
6.875%, 07/15/02 5,000 4,948
--------------
11,248
--------------
FINANCE -- 17.7%
ABN AMRO
7.550%, 06/28/06 5,000 5,101
Associates
5.800%, 04/20/04 5,000 4,825
Bank of America
7.125%, 09/15/06 10,000 9,985
Bear Stearns
6.875%, 10/01/05 5,000 4,898
Cigna
7.400%, 01/15/03 3,075 3,056
First Chicago
7.625%, 01/15/03 5,000 5,047
Heller Financial
7.875%, 05/15/03 7,000 7,105
Household Finance
7.000%, 08/01/03 10,000 9,940
Lehman Brothers Holdings, Optional
Put @ 100 on 08/01/03
7.500%, 08/01/26 5,000 5,005
Newcourt Credit Series B
6.875%, 02/16/05 10,000 9,875
Safeco
7.875%, 04/01/05 1,000 1,005
Salomon Smith Barney Holdings
7.000%, 03/15/04 2,000 1,989
Sprint Capital
5.700%, 11/15/03 5,000 4,812
--------------
72,643
--------------
MANUFACTURING -- 9.7%
Ford Motor Credit
7.500%, 06/15/03 5,000 5,035
General Motors Acceptance
6.150%, 04/05/07 10,000 9,267
Honeywell International
7.000%, 03/15/07 6,250 6,234
McDonnell Douglas
6.875%, 11/01/06 10,000 9,875
Xerox Cap Europe
5.750%, 05/15/02 10,000 9,633
--------------
40,044
--------------
FIRST AMERICAN FUNDS ANNUAL REPORT 2000 21)
<PAGE>
STATEMENTS OF NET ASSETS SEPTEMBER 30, 2000
INTERMEDIATE TERM INCOME FUND (CONTINUED)
DESCRIPTION PAR (000) VALUE (000)
--------------------------------------------------------------------------------
SERVICES -- 7.3%
Electronic Data Systems
7.125%, 10/15/09 $ 10,000 $ 9,875
Hertz
6.300%, 11/15/06 10,000 9,836
Vodafone Airtouch
7.625%, 02/15/05 (A) 10,000 10,193
--------------
29,904
--------------
TRANSPORTATION -- 0.8%
Continental Airlines Series 99-2
7.056%, 09/15/09 3,500 3,392
--------------
OTHER -- 0.7%
Hydro-Quebec
9.400%, 02/01/21 2,369 2,843
--------------
TOTAL CORPORATE BONDS
(Cost $167,806) 166,598
--------------
U.S. GOVERNMENT & AGENCY SECURITIES -- 31.7%
U.S. AGENCY DEBENTURES -- 19.8%
FFCB
6.100%, 11/04/04 6,350 6,234
FHLB
5.620%, 01/12/01 5,000 4,986
5.875%, 08/15/01 5,000 4,975
5.995%, 11/21/01 5,000 4,966
5.785%, 03/17/03 7,950 7,812
5.125%, 09/15/03 5,000 4,814
6.250%, 08/13/04 7,500 7,425
6.060%, 05/24/06 5,000 4,837
6.090%, 06/02/06 5,000 4,876
6.375%, 08/15/06 6,000 5,903
5.540%, 01/08/09 4,500 4,135
FHLMC
5.950%, 01/19/06 6,000 5,828
TVA
6.000%, 11/01/00 5,000 4,997
6.000%, 09/24/02 5,000 4,948
6.375%, 06/15/05 5,000 4,938
--------------
81,674
--------------
U.S. TREASURIES -- 11.9%
U.S. Treasury Notes
7.875%, 08/15/01 5,000 5,065
11.625%, 11/15/02 5,000 5,552
5.250%, 08/15/03 3,145 3,086
7.250%, 05/15/04 5,000 5,211
7.000%, 07/15/06 8,000 8,413
6.125%, 08/15/07 5,000 5,053
5.625%, 05/15/08 3,000 2,945
U.S. Treasury Notes (TIPS)
4.250%, 01/15/10 13,352 13,640
--------------
48,965
--------------
TOTAL U.S. GOVERNMENT & AGENCY SECURITIES
(Cost $131,145) 130,639
--------------
INTERMEDIATE TERM INCOME FUND (CONTINUED)
DESCRIPTION PAR (000) VALUE (000)
--------------------------------------------------------------------------------
ASSET-BACKED SECURITIES -- 5.2%
HOME EQUITY -- 5.2%
American Southwest Financial Securities
Series 1995-C1 Class-A1B
7.400%, 11/17/04 $ 7,805 $ 7,862
Equicredit Home Equity Loan Trust
Series 1994-2 Class-A2
7.350%, 06/15/14 284 284
Green Tree Financial Series 1996-9 Class-A5
7.200%, 01/15/28 5,000 5,017
New Century Home Equity Loan Trust
Series1997-NC6 Class-A3
6.590%, 12/25/19 8,405 8,361
--------------
TOTAL ASSET-BACKED SECURITIES
(Cost $21,611) 21,524
--------------
U.S. AGENCY MORTGAGE-BACKED SECURITIES -- 12.3%
FIXED RATE -- 12.3%
FHLMC Gold Pool #E20194
7.000%, 09/01/10 1,007 1,005
FHLMC Series 1606 Class-H
6.000%, 11/15/08 5,085 4,945
FHLMC Series 1659 Class-TN
5.500%, 01/15/01 144 143
FHLMC Series 1902 Class-C
7.000%, 05/15/03 1,539 1,539
FHLMC Series 2166 Class-AC
6.500%, 03/15/26 8,033 7,852
FNMA Pool #050145
10.000%, 11/01/18 758 795
FNMA Pool #050776
6.000%, 08/01/08 901 870
FNMA Pool #250387
7.000%, 11/01/10 1,005 1,002
FNMA Pool #252632
6.000%, 07/01/06 7,172 6,974
FNMA Pool #303753
9.000%, 12/01/20 826 846
FNMA Pool #323715
6.000%, 05/01/29 4,735 4,426
FNMA Pool #341727
9.500%, 06/01/21 703 734
FNMA Pool #440780
5.500%, 02/01/14 7,712 7,279
FNMA Pool #G40394
5.500%, 09/01/06 7,759 7,413
FNMA Series 1993-55 Class-J
6.500%, 11/25/07 1,000 989
FNMA Series 1996-57 Class-E
7.000%, 06/25/03 1,378 1,375
GNMA Pool #2007
9.000%, 05/20/25 392 404
The accompanying notes are an integral part of the financial statements.
(22 FIRST AMERICAN FUNDS ANNUAL REPORT 2000
<PAGE>
INTERMEDIATE TERM INCOME FUND (CONTINUED)
DESCRIPTION PAR (000)/SHARES VALUE (000)
--------------------------------------------------------------------------------
GNMA Pool #2038
8.500%, 07/20/25 $ 694 $ 710
GNMA Pool #312046
9.000%, 08/15/21 1,189 1,240
--------------
TOTAL U.S. AGENCY MORTGAGE-BACKED SECURITIES
(Cost $50,417) 50,541
--------------
PRIVATE MORTGAGE-BACKED SECURITIES -- 5.1%
ADJUSTABLE RATE -- 2.0%
Merrill Lynch Mortgage Investors
Series 1995-C3 Class-A3
7.070%, 12/26/25 (B) 6,000 6,004
Prudential Home Mortgage Securities
Series 1994-28 Class-M
6.745%, 09/25/01 (B) 2,102 2,081
--------------
8,085
--------------
FIXED RATE -- 3.1%
Asset Securitization Series 1996-MD6 Class-A1B
6.880%, 11/13/26 7,500 7,487
Morgan Stanley Capital Investments
Series 1999-FNV1 Class-A1
6.120%, 03/15/31 5,427 5,263
--------------
12,750
--------------
TOTAL PRIVATE MORTGAGE-BACKED SECURITIES
(Cost $20,952) 20,835
--------------
RELATED PARTY MONEY MARKET FUND -- 2.5%
First American Prime Obligations Fund (C) 10,277,176 10,277
--------------
TOTAL RELATED PARTY MONEY MARKET FUND
(Cost $10,277) 10,277
--------------
TOTAL INVESTMENTS -- 97.3%
(Cost $402,208) 400,414
--------------
OTHER ASSETS AND LIABILITIES, NET -- 2.7% (D) 10,950
--------------
INTERMEDIATE TERM INCOME FUND (CONCLUDED)
DESCRIPTION VALUE (000)
--------------------------------------------------------------------------------
NET ASSETS:
Portfolio Capital--Class A ($0.0001 par value--
2 billion authorized) based on
3,027,459 outstanding shares $ 44,384
Portfolio Capital--Class Y ($0.0001 par value--
2 billion authorized) based on
39,070,794 outstanding shares 387,288
Undistributed net investment income 513
Accumulated net realized loss on investments (19,027)
Net unrealized depreciation of investments (1,794)
--------------
TOTAL NET ASSETS -- 100.0% $ 411,364
--------------
Net asset value and redemption price per share -- Class A $ 9.79
Maximum sales charge of 2.50% (E) 0.25
--------------
Offering price per share -- Class A $ 10.04
--------------
Net asset value, offering price, and redemption
price per share -- Class Y $ 9.77
--------------
(A) Security sold within terms of a private placement memorandum, exempt from
registration under section 144A of the Securities Act of 1933, as amended,
and may be sold only to dealers in that program or other "qualified
institutional investors." These securities have been determined to be liquid
under guidelines established by the Board of Directors.
(B) Variable Rate Security-the rate reported on the Statement of Net Assets is
the rate in effect as of September 30, 2000.
(C) This money market fund is advised by U.S. Bank National Association who also
serves as Advisor for this Fund. See also the notes to the financial
statements.
(D) Other assets and liabilities representing greater than five percent of the
total net assets include the following amounts (000):
Collateral for securities loaned, at value $182,177
Payable upon return of securities loaned (182,177)
(E) The offering price is calculated by dividing the net asset value by 1 minus
the maximum sales charge of 2.50%.
FFCB--Federal Farm Credit Bank
FHLB--Federal Home Loan Bank
FHLMC--Federal Home Loan Mortgage Corporation
FNMA--Federal National Mortgage Association
GNMA--Government National Mortgage Association
TIPS--Treasury Inflation Protection Security
TVA--Tennessee Valley Authority
FIRST AMERICAN FUNDS ANNUAL REPORT 2000 23)
<PAGE>
STATEMENTS OF NET ASSETS SEPTEMBER 30, 2000
LIMITED TERM INCOME FUND
DESCRIPTION PAR (000) VALUE (000)
--------------------------------------------------------------------------------
CORPORATE BONDS -- 33.9%
FINANCE -- 26.7%
American General Finance
5.750%, 11/01/03 $ 2,887 $ 2,794
AT&T Capital Series F
6.750%, 02/04/02 4,000 3,972
Bear Stearns
6.150%, 03/02/04 3,000 2,906
Countrywide Funding
6.875%, 09/15/05 1,500 1,458
First Chicago
6.875%, 06/15/03 3,000 2,977
Goldman Sachs
6.625%, 12/01/04 1,500 1,473
Heller Financial
7.875%, 05/15/03 4,000 4,060
Household Finance
6.000%, 05/01/04 5,000 4,812
Lehman Brothers Holdings Series E
6.625%, 12/27/02 4,000 3,970
MBNA America Bank
6.875%, 07/15/04 4,000 3,915
Merrill Lynch Series B
5.710%, 01/15/02 700 689
Morgan Stanley Dean Witter Series C
7.125%, 08/15/03 2,000 2,017
Nationsbank Series B
6.200%, 08/15/03 2,775 2,724
Society
8.125%, 06/15/02 4,750 4,821
Westpac Banking
7.875%, 10/15/02 3,500 3,566
--------------
46,154
--------------
MANUFACTURING -- 3.8%
Ford Motor Credit
7.500%, 06/15/03 3,000 3,021
General Motors Acceptance
6.625%, 01/10/02 3,500 3,478
--------------
6,499
--------------
TELECOMMUNICATIONS & CELLULAR -- 3.4%
AT&T
6.500%, 09/15/02 3,000 2,990
Worldcom
6.125%, 08/15/01 3,000 2,981
--------------
5,971
--------------
TOTAL CORPORATE BONDS
(Cost $58,176) 58,624
--------------
LIMITED TERM INCOME FUND (CONTINUED)
DESCRIPTION PAR (000) VALUE (000)
--------------------------------------------------------------------------------
U.S. AGENCY MORTGAGE-BACKED SECURITIES -- 11.6%
ADJUSTABLE RATE -- 9.6%
FNMA Pool #415285
5.751%, 02/01/28 (A) $ 4,385 $ 4,387
GNMA Pool #8006
6.750%, 07/20/22 (A) 2,846 2,874
GNMA Pool #8699
6.750%, 09/20/25 (A) 2,265 2,286
GNMA Pool #8824
6.750%, 08/20/21 (A) 2,613 2,638
GNMA Pool #8847
6.375%, 04/20/26 (A) 2,102 2,107
GNMA Pool #80106
6.750%, 08/20/27 (A) 1,164 1,172
GNMA Pool #80154
7.375%, 01/20/28 (A) 1,162 1,168
--------------
16,632
--------------
FIXED RATE -- 2.0%
FHLMC Series 1655 Class-E
6.000%, 01/15/07 1,249 1,241
GNMA Pool #158777
9.000%, 05/15/16 415 431
GNMA Pool #780081
10.000%, 02/15/25 739 779
GNMA Pool #780398
9.000%, 04/15/21 983 1,033
--------------
3,484
--------------
TOTAL U.S. AGENCY MORTGAGE-BACKED SECURITIES
(Cost $20,228) 20,116
--------------
ASSET-BACKED SECURITIES -- 32.8%
AUTOMOBILES -- 6.3%
Auto Bond Receivables Trust
Series 1993-I Class-A
6.125%, 11/15/21 (A) (B) 106 105
Capital Auto Receivables Asset Trust
Series 2000-1 Class-A5
7.070%, 09/15/05 3,000 3,026
Chase Manhattan Auto Owner Trust
Series 1997-A Class-A5
6.500%, 12/17/01 2,560 2,558
Fasco Auto Trust Series 1996-1 Class-A
6.650%, 11/15/01 343 342
Westo, Series 1999-A Class-A4
5.700%, 11/20/03 5,000 4,907
--------------
10,938
--------------
The accompanying notes are an integral part of the financial statements.
(24 FIRST AMERICAN FUNDS ANNUAL REPORT 2000
<PAGE>
LIMITED TERM INCOME FUND (CONTINUED)
DESCRIPTION PAR (000) VALUE (000)
--------------------------------------------------------------------------------
CREDIT CARDS -- 6.4%
Chemical Master Credit Card Trust
Series 1995-3 Class-A
6.230%, 04/15/05 $ 3,100 $ 3,079
Sears Credit Account Master Trust
Series 1999-2 Class-A
6.350%, 02/16/07 3,100 3,078
Standard Credit Card Master Trust
Series 1993-2 Class-A
5.950%, 09/07/03 5,100 4,974
--------------
11,131
--------------
EQUIPMENT LEASING & RENTALS -- 6.5%
Caterpillar Financial Asset
Series 1998-A Class-A3
5.850%, 04/25/03 4,005 3,986
First Sierra Receivables
Series 2000-2 Class-A3
7.490%, 12/18/03 3,000 3,026
Icon Receivables
Series 1997-A Class-A1
6.435%, 06/01/05 (A) 1,260 1,231
MMCA Automobile Trust
Series 2000-1 Class-A3
7.000%, 06/15/04 3,000 3,015
--------------
11,258
--------------
HOME EQUITY -- 13.3%
Banc One Home Equity Trust
Series 1999-2 Class-A3
6.940%, 06/25/29 4,000 3,982
EQCC Home Equity Loan Trust
Series 1998-1 Class-A6F
6.252%, 12/15/07 2,000 1,964
Green Tree Financial
Series 1997-2 Class-A6
7.240%, 06/15/28 2,984 2,962
Green Tree Home Equity Loan Trust
Series 1999-C Class-A3
6.770%, 07/15/30 4,500 4,486
Residential Asset Securities
Series 2000-KS1 Class-AI2
7.700%, 05/25/21 5,000 5,030
The Money Store Home Equity Trust
Series 1994-A Class-A4
6.275%, 12/15/22 2,750 2,718
The Money Store Home Equity Trust
Series 1996-D Class-A6
6.830%, 06/15/21 1,833 1,828
--------------
22,970
--------------
VACATION PROPERTIES -- 0.3%
Patten Series 1995-1A
7.250%, 09/01/13 (A) (G) 494 463
--------------
TOTAL ASSET-BACKED SECURITIES
(Cost $56,770) 56,760
--------------
LIMITED TERM INCOME FUND (CONTINUED)
DESCRIPTION PAR (000)/SHARES VALUE (000)
--------------------------------------------------------------------------------
U.S. GOVERNMENT & AGENCY SECURITIES -- 8.6%
U.S. AGENCY DEBENTURES -- 8.6%
FHLB
5.400%, 01/15/03 $ 2,000 $ 1,954
6.750%, 02/01/02 3,000 3,008
FHLMC
7.000%, 02/15/03 5,000 5,056
FNMA
5.750%, 04/15/03 5,000 4,912
--------------
TOTAL U.S. GOVERNMENT & AGENCY SECURITIES
(Cost $14,785) 14,930
--------------
PRIVATE MORTGAGE-BACKED SECURITIES -- 11.8%
ADJUSTABLE RATE -- 2.8%
Merrill Lynch Mortgage Investors
Series 1993-C Class-A4
7.625%, 03/15/18 (A) 4,850 4,854
--------------
FIXED RATE -- 9.0%
Advanta Mortgage Loan Trust
Series 1998-2 Class-A12
6.330%, 08/25/19 3,000 2,916
Countrywide Mortgage-Backed Securities
Series 1993-B Class-A4
6.750%, 11/25/23 1,463 1,445
Morserv Series 1994-1 Class-1A5
7.000%, 10/25/25 4,000 3,975
PNC Mortgage Securities
Series 1999-5 Class-1A1
6.150%, 06/25/29 2,231 2,204
Residential Asset Mortgage Program
Series 2000-RS3 Class-AI2
7.540%, 09/25/19 3,000 3,006
Residential Funding
Series 1999-S5 Class-A1
6.000%, 02/25/29 2,000 1,978
--------------
15,524
--------------
TOTAL PRIVATE MORTGAGE-BACKED SECURITIES
(Cost $20,475) 20,378
--------------
RELATED PARTY MONEY MARKET FUND -- 0.6%
First American Prime Obligations Fund (F) 992,024 992
--------------
TOTAL RELATED PARTY MONEY MARKET FUND
(Cost $992) 992
--------------
TOTAL INVESTMENTS -- 99.3%
(Cost $171,426) 171,800
--------------
OTHER ASSETS AND LIABILITIES, NET -- 0.7% (E) 1,284
--------------
FIRST AMERICAN FUNDS ANNUAL REPORT 2000 25)
<PAGE>
STATEMENTS OF NET ASSETS SEPTEMBER 30, 2000
LIMITED TERM INCOME FUND (CONCLUDED)
DESCRIPTION VALUE (000)
--------------------------------------------------------------------------------
NET ASSETS:
Portfolio Capital--Class A ($0.0001 par value--
2 billion authorized) based on
8,172,083 outstanding shares $ 140,723
Portfolio Capital--Class Y ($0.0001 par value--
2 billion authorized) based on
9,290,577 outstanding shares 45,139
Undistributed net investment income 558
Accumulated net realized loss on investments (13,710)
Net unrealized appreciation of investments 374
--------------
TOTAL NET ASSETS -- 100.0% $ 173,084
--------------
Net asset value and redemption price per share -- Class A $ 9.91
Maximum sales charge of 2.50% (F) 0.25
--------------
Offering price per share -- Class A $ 10.16
--------------
Net asset value, offering price, and redemption
price per share -- Class Y $ 9.91
--------------
(A) Variable Rate Security-the rate reported on the Statement of Net Assets is
the rate in effect as of September 30, 2000.
(B) Interest payments are infrequent.
(C) Security sold within terms of a private placement memorandum, exempt from
registration under section 144A of the Securities Act of 1933, as amended,
and may be sold only to dealers in that program or other "qualified
institutional investors." These securities have been determined to be liquid
under guidelines established by the Board of Directors.
(D) This money market fund is advised by the U.S. Bank National Association who
also serves as Advisor for this Fund. See also the notes to the financial
statements.
(E) Other assets and liabilities representing greater than five percent of total
net assets include the following (000):
Collateral for securities loaned, at value $23,694
Payable upon return of securities loaned (23,694)
(F) The offering price is calculated by dividing the net asset value by 1 minus
the maximum sales charge of 2.50%.
(G) Security sold within terms of a private placement memorandum, exempt from
registration under section 144A of the Securities Act of 1933, as amended,
and may be sold only to dealers in that program or other "qualified
institutional investors."
FHLB--Federal Home Loan Bank
FHLMC--Federal Home Loan Mortgage Corporation
FNMA--Federal National Mortgage Association
GNMA--Government National Mortgage Association
STRATEGIC INCOME FUND
DESCRIPTION PAR (000) (H) VALUE (000)
--------------------------------------------------------------------------------
HIGH YIELD CORPORATE OBLIGATIONS -- 39.5%
AEROSPACE & DEFENSE -- 0.4%
Sequa
9.000%, 08/01/09 $ 1,000 $ 982
--------------
APPAREL/TEXTILES -- 0.0%
Glenoit, Callable 04/15/02 @ 105.50
11.000%, 04/15/07 (A) (E) 100 14
--------------
AUTOMOTIVE -- 1.3%
Accuride Series B,
Callable 02/01/03 @ 104.625
9.250%, 02/01/08 200 164
Aftermarket Technology,
Callable 11/01/00 @ 104.000
12.000%, 08/01/04 412 412
American Axle & Manufacturing,
Callable 03/01/04 @ 104.875
9.750%, 03/01/09 500 485
Collins & Aikman Products,
Callable 04/15/01 @ 105.750
11.500%, 04/15/06 425 408
Federal-Mogul
7.500%, 01/15/09 1,000 380
JL French Auto Casting Series B,
Callable 06/01/04 @ 105.750
11.500%, 06/01/09 500 370
Lear Series B
8.110%, 05/15/09 1,000 935
Transportation Manufacturing Operations,
Callable 05/01/04 @ 105.625
11.250%, 05/01/09 350 255
--------------
3,409
--------------
BROADCAST RADIO & TELEVISION -- 2.3%
Acme Television Series B,
Callable 09/30/01 @ 105.438
11.678%, 09/30/04 (B) (E) 500 475
AMFM Operating, Callable 01/15/02 @ 106.313
12.625%, 10/31/06 80 90
Charter Communications,
Callable 01/15/05 @ 105.875
11.919%, 01/15/10 (B) 3,000 1,740
Chancellor Media, Callable 12/15/02 @ 104.063*
8.125%, 12/15/07 1,475 1,490
Fox Sports Networks, Callable 8/15/02 @ 104.875
9.595%, 08/15/07 (B) 575 486
Lamar Media, Callable 09/15/02 @ 104.313
8.625%, 09/15/07 500 493
SFX Broadcasting Series B,
Callable 05/15/01 @ 105.375
10.750%, 05/15/06 150 158
Sinclair Broadcast Group,
Callable 07/15/02 @ 104.500
9.000%, 07/15/07 300 283
Sinclair Broadcast Group,
Callable 12/15/02 @ 104.375*
8.750%, 12/15/07 1,000 940
--------------
6,155
--------------
The accompanying notes are an integral part of the financial statements.
(26 FIRST AMERICAN FUNDS ANNUAL REPORT 2000
<PAGE>
STRATEGIC INCOME FUND (CONTINUED)
DESCRIPTION PAR (000) (H) VALUE (000)
--------------------------------------------------------------------------------
BUILDING & CONSTRUCTION PRODUCTS -- 0.4%
D.R. Horton
8.375%, 06/15/04 $ 1,000 $ 965
--------------
CABLE TELEVISION -- 3.2%
Adelphia Communications Series B
9.875%, 03/01/07 1,500 1,414
CSC Holdings, Callable 02/15/03 @ 104.800
9.875%, 02/15/13 750 765
CSC Holdings, Callable 11/01/00 @ 104.625
9.250%, 11/01/05 550 554
Echostar DBS, Callable 02/01/04 @ 104.688
9.375%, 02/01/09 1,000 980
NTL Communications Series B,
Callable 10/01/03 @ 105.750
11.500%, 10/01/08 150 145
NTL Communications Series B,
Callable 10/01/03 @ 106.188
11.577%, 10/01/08 (B) 1,100 682
NTL Series B, Callable 04/01/03 @ 104.875
10.242%, 04/01/08 (B) 1,475 900
Pegasus Communications Series B,
Callable 10/15/01 @ 104.813
9.625%, 10/15/05 225 219
Pegasus Communications Series B,
Callable 12/01/02 @ 104.875
9.750%, 12/01/06 300 292
RCN, Callable 10/15/02 @ 105.562
12.698%, 10/15/07 (B) 525 278
Telewest Communication,
Callable 04/15/04 @ 104.625
9.815%, 04/15/09 (B) (C) 575 312
Telewest Communication,
Callable 11/01/00 @ 100.000
11.510%, 10/01/07 (B) 575 555
United International Holdings Series B,
Callable 02/15/03 @ 105.375
11.394%, 02/15/08 (B) (E) 1,050 719
United Pan-Europe Communication Series B,
Callable 11/01/04 @ 106.688
12.987%, 08/01/09 (B) 1,200 567
--------------
8,382
--------------
CHEMICALS & PLASTICS -- 1.5%
Buckeye Technologies,
Callable 09/15/01 @ 104.625
9.250%, 09/15/08 500 512
Huntsman, Callable 07/1/02 @ 104.750
9.500%, 07/01/07 (C) 800 640
Huntsman ICI Chemicals,
Callable 07/01/04 @ 105.063
10.125%, 07/01/09 (D) EU 1,400 1,239
Lyondell Chemical,
Callable 05/01/04 @ 105.438
10.875%, 05/01/09 1,000 969
Polymer Group Series B,
Callable 03/01/03 @ 104.375
8.750%, 03/01/08 500 395
Polymer Group Series B,
Callable 07/01/02 @ 104.625
9.000%, 07/01/07 200 160
--------------
3,915
--------------
STRATEGIC INCOME FUND (CONTINUED)
DESCRIPTION PAR (000) (H) VALUE (000)
--------------------------------------------------------------------------------
CONSUMER PRODUCTS -- 0.4%
Chattem Series B, Callable 04/01/03 @ 104.4375
8.875%, 04/01/08 $ 500 $ 395
Diamond Brands Operating,
Callable 04/15/03 @ 105.063
10.125%, 04/15/08 50 17
Playtex Family Products,
Callable 11/01/00 @ 103.000
9.000%, 12/15/03 500 495
Sealy Mattress Series B,
Callable 12/15/02 @ 105.437
12.167%, 12/15/07 (B) 300 223
--------------
1,130
--------------
ELECTRONIC EQUIPMENT -- 0.6%
Hyundai Semiconductor
8.250%, 05/15/04 (C) (E) 1,000 900
Telecommunications Techniques,
Callable 05/15/03 @ 104.875
9.750%, 05/15/08 725 681
--------------
1,581
--------------
ENVIRONMENTAL SERVICES -- 0.7%
Allied Waste North America Series B,
Callable 01/01/04 @ 103.9375
7.875%, 01/01/09 1,000 872
Allied Waste North America Series B,
Callable 08/01/04 @ 105.000
10.000%, 08/01/09 1,000 872
--------------
1,744
--------------
FINANCIAL SERVICES -- 1.7%
Cellco Finance, Callable 08/01/02 @ 107.500 (D)
15.000%, 08/01/05 900 927
Golden State Holdings
7.125%, 08/01/05 1,000 931
Kappa Beheer, Callable 07/15/04 @ 105.313*
10.625%, 07/15/09 EU 1,800 1,624
Sovereign Bancorp
10.500%, 11/15/06 1,000 1,017
--------------
4,499
--------------
FOOD WHOLESALERS, RETAILERS & SERVICES -- 0.2%
Dominos Series B, Callable 01/15/04 @ 105.1875
10.375%, 01/15/09 600 568
--------------
FOOD, BEVERAGE & TOBACCO -- 1.2%
Agrilink Foods, Callable 11/01/03 @ 105.938
11.875%, 11/01/08 500 380
Canandiagua Brands,
Callable 03/01/04 @104.250
8.500%, 03/01/09 500 489
International Home Foods,
Callable 11/01/01 @ 105.188
10.375%, 11/01/06 475 508
Premier International Food,
Callable 09/01/04 @ 106.000
12.000%, 09/01/09 1,500 1,252
Triarc Consumer, Callable 02/15/04 @ 105.125
10.250%, 02/15/09 500 556
--------------
3,185
--------------
FIRST AMERICAN FUNDS ANNUAL REPORT 2000 27)
<PAGE>
STATEMENTS OF NET ASSETS SEPTEMBER 30, 2000
STRATEGIC INCOME FUND (CONTINUED)
DESCRIPTION PAR (000) (H) VALUE (000)
--------------------------------------------------------------------------------
HEALTH CARE -- 2.3%
Dade International Series B,
Callable 05/01/01 @ 105.563
11.125%, 05/01/06 $ 350 $ 91
Fisher Scientific International,
Callable 02/01/03 @ 104.500
9.000%, 02/01/08 550 511
9.000%, 02/01/08 450 418
Hanger Orthopedic Group,
Callable 06/15/04 @ 105.625
11.250%, 06/15/09 200 177
HCA Healthcare
6.910%, 06/15/05 2,000 1,886
Healthsouth, Callable 10/01/04 @ 105.375 (C)
10.750%, 10/01/08 500 501
Tenet Healthcare Series B,
Callable 6/01/03 @ 104.063
8.125%, 12/01/08 2,000 1,915
Triad Hospital Holdings Series B,
Callable 05/15/04 @ 105.5
11.000%, 05/15/09 500 512
--------------
6,011
--------------
HOTELS -- 1.5%
Florida Panthers Holdings,
Callable 04/15/04 @ 104.938
9.875%, 04/15/09 1,000 965
Harrahs Operating
7.875%, 12/15/05 1,000 962
Host Marriott Series B,
Callable 08/01/03 @ 103.985
7.875%, 08/01/08 1,025 943
Park Place Entertainment
7.875%, 12/15/05 1,000 960
--------------
3,830
--------------
INDUSTRIAL PRODUCTS -- 0.5%
Owens-Illinois
7.850%, 05/15/04 1,000 850
Wesco Distribution Series B,
Callable 06/01/03 @ 104.563
9.125%, 06/01/08 (E) 475 443
--------------
1,293
--------------
LEISURE & ENTERTAINMENT -- 1.2%
Isle of Capri Casinos,
Callable 04/15/04 @ 104.375
8.750%, 04/15/09 1,000 930
Mohegan Tribal Gaming
8.125%, 01/01/06 1,000 976
Premier Parks,
Callable 04/01/03 @ 105.000
10.247%, 04/01/08 (B) 1,850 1,235
--------------
3,141
--------------
STRATEGIC INCOME FUND (CONTINUED)
DESCRIPTION PAR (000) (H) VALUE (000)
--------------------------------------------------------------------------------
MACHINERY & EQUIPMENT -- 0.3%
United Rentals Series B,
Callable 01/15/04 @ 104.625
9.250%, 01/15/09 $ 1,000 $ 905
--------------
METALS & MINING -- 0.9%
AEI Holdings,
Callable 12/15/02 @ 105.250
10.500%, 12/15/05 (C) (E) 550 82
AEI Resources,
Callable 12/15/02 @ 105.750
11.500%, 12/15/06 (C) (E) 150 9
CSN Iron
9.125%, 06/01/07 2,650 2,293
Republic Technologies,
Callable 07/15/04 @ 106.875
13.750%, 07/15/09 (C) (E) 250 46
--------------
2,430
--------------
PETROLEUM & FUEL PRODUCTS -- 3.0%
Companhia Petrolifera Marlim
12.250%, 09/26/08 (C) 2,400 2,366
Ocean Energy Series B,
Callable 07/15/02 @ 104.438
8.875%, 07/15/07 1,000 1,019
Pogo Producing Series B,
Callable 02/15/04 @ 105.188
10.375%, 02/15/09 100 105
Pogo Producing Series B,
Callable 05/15/02 @ 104.375
8.750%, 05/15/07 500 482
Ras Laffan Liq Natural Gas
8.294%, 03/15/14 2,000 1,898
R&B Falcon
12.250%, 03/15/06 250 288
RBF Finance, Callable 03/15/04 @ 105.688
11.375%, 03/15/09 100 115
Triton Energy
8.750%, 04/15/02 1,000 1,005
Vintage Petroleum, Callable 02/01/02 @ 104.313
8.625%, 02/01/09 500 498
--------------
7,776
--------------
PRINTING & PUBLISHING -- 0.3%
Hollinger International Publishing,
Callable 02/01/01 @ 104.625*
9.250%, 02/01/06 700 699
--------------
REAL ESTATE INVESTMENT TRUSTS -- 0.4%
Trinet Realty Trust
7.300%, 05/15/01 1,000 975
--------------
RESTAURANTS -- 0.3%
Tricon Global Restaurant
7.650%, 05/15/08 1,000 930
--------------
The accompanying notes are an integral part of the financial statements.
(28 FIRST AMERICAN FUNDS ANNUAL REPORT 2000
<PAGE>
STRATEGIC INCOME FUND (CONTINUED)
DESCRIPTION PAR (000) (H) VALUE (000)
--------------------------------------------------------------------------------
SERVICES -- 0.3%
Crown Castle International,
Callable 05/15/04 @ 105.187
10.649%, 05/15/11 (B) $ 625 $ 403
Crown Castle International,
Callable 08/01/04 @ 105.625
11.517%, 08/01/11 (B) 700 455
--------------
858
--------------
STEEL & STEEL WORKS -- 0.4%
AK Steel, Callable 12/15/01 @ 104.560
9.125%, 12/15/06 1,000 993
--------------
SURFACE TRANSPORTATION -- 0.9%
Gearbulk Holding, Callable 11/01/00 @ 105.625
11.250%, 12/01/04 400 402
Newport News Shipbuilding,
Callable 12/01/01 @ 104.3125
8.625%, 12/01/06 1,000 990
Railworks, Callable 04/15/04 @ 105.750
11.500%, 04/15/09 500 175
Stena, Callable 06/15/02 @ 104.375
8.750%, 06/15/07 525 452
Stena, Callable 12/15/00 @ 105.250
10.500%, 12/15/05 150 145
Stena Line, Callable 06/01/03 @ 105.313
10.625%, 06/01/08 200 112
--------------
2,276
--------------
TELECOMMUNICATIONS & CELLULAR -- 10.4%
Alestra, Callable 05/15/04 @ 106.313
12.625%, 05/15/09 3,250 3,100
Allegiance Telecom Series B,
Callable 02/15/03 @ 105.875
12.595%, 02/15/08 (B) 1,000 670
Call-Net Enterprises,
Callable 08/15/03 @ 104.470
9.055%, 08/15/08 (B) 600 189
Call-Net Enterprises,
Callable 05/15/04 @ 105.400
12.770%, 05/15/09 (B) 525 147
Call-Net Enterprises,
Callable 08/15/02 @ 104.635
9.388%, 08/15/07 (B) 375 146
Enitel ASA, Callable 10/15/05@ 106.250
12.500%, 04/15/10 EU 1,000 735
Global Crossing Holdings,
Callable 11/01/04 @ 104.75
9.500%, 11/15/09 1,500 1,493
Hermes Europe Railtel,
Callable 01/15/04 @ 105.188
10.375%, 01/15/09 100 50
Hermes Europe Railtel,
Callable 08/15/02 @ 105.750
11.500%, 08/15/07 475 223
Intermedia Communications,
Callable 05/15/01 @ 106.250
12.004%, 05/15/06 (B) 250 234
Intermedia Communications Series B,
Callable 03/01/04 @ 106.125
13.192%, 03/01/09 (B) 500 335
STRATEGIC INCOME FUND (CONTINUED)
DESCRIPTION PAR (000) (H) VALUE (000)
--------------------------------------------------------------------------------
Intermedia Communications Series B,
Callable 06/01/03 @ 104.300
8.600%, 06/01/08 $ 250 $ 238
Intermedia Communications Series B,
Callable 7/15/02 @ 105.625
11.694%, 07/15/07 (B) 600 498
Jazztel, Callable 04/01/04 @ 107.000
14.000%, 04/01/09 EU 2,000 1,496
Level 3 Communications,
Callable 05/01/03 @ 104.563
9.125%, 05/01/08 750 649
Level 3 Communications,
Callable 12/01/03 @ 105.250
10.993%, 12/01/08 (B) 2,000 1,180
Maxcom Telecommunicaciones
13.750%, 04/01/07 (C) 2,000 1,100
McLeodusa, Callable 02/15/04 @ 104.063
8.125%, 02/15/09 325 284
McLeodusa, Callable 03/01/02 @ 105.250
8.054%, 03/01/07 (B) 1,000 830
McLeodusa, Callable 03/15/03 @ 104.188
8.375%, 03/15/08 225 203
Millicom International Cellular,
Callable 06/01/01 @ 106.750
14.429%, 06/01/06 (B) 625 538
Netia Holdings Series B,
Callable 11/01/02 @ 105.625
15.076%, 11/01/07 (B) 2,600 1,703
Nextel Communications,
Callable 02/15/03 @ 104.975
11.455%, 02/15/08 (B) (E) 1,400 1,078
Nextel Communications,
Callable 11/15/04 @ 104.688
9.375%, 11/15/09 1,000 980
Nextel International,
Callable 04/15/03 @ 106.063
12.348%, 04/15/08 (B) 75 48
Nextlink Communications,
Callable 03/15/03 @ 104.500
9.000%, 03/15/08 (E) 100 85
Nextlink Communications,
Callable 04/15/03 @ 104.725
11.067%, 04/15/08 (B) 775 453
Nextlink Communications,
Callable 06/01/04 @ 105.375
10.750%, 06/01/09 325 301
Nextlink Communications,
Callable 06/01/04 @ 106.125
11.898%, 06/01/09 (B) 800 448
Nextlink Communications,
Callable 12/01/04 @ 106.063
12.638%, 12/01/09 (B) 300 156
Nuevo Grupo Iusa
14.250%, 12/01/06 (E) 1,000 1,060
Partner Commmunications Series DTC,
Callable 08/15/05 @ 106.5
13.000%, 08/15/10 1,000 985
PSINet Series B, Callable 02/15/02 @ 105.000
10.000%, 02/15/05 1,000 650
Qwest Communications,
Callable 10/15/02 @ 104.735
8.890%, 10/15/07 (B) 600 522
FIRST AMERICAN FUNDS ANNUAL REPORT 2000 29)
<PAGE>
STATEMENTS OF NET ASSETS SEPTEMBER 30, 2000
STRATEGIC INCOME FUND (CONTINUED)
DESCRIPTION PAR (000) (H) VALUE (000)
--------------------------------------------------------------------------------
Sprint Capital
5.700%, 11/15/03 $ 1,000 $ 963
Viatel
12.750%, 04/15/08 (C) EU 1,000 600
Viatel,
Callable 03/15/04 @ 105.750
11.500%, 03/15/09 100 46
Viatel,
Callable 04/15/03 @ 105.625
11.250%, 04/15/08 75 35
Viatel,
Callable 4/15/03 @ 106.250
14.110%, 04/15/08 (B) 950 238
Voicestream Wireless,
Callable 11/15/04 @ 105.938
11.336%, 11/15/09 (B) 1,000 720
Williams Communications Group,
Callable 10/01/04 @ 105.438
10.875%, 10/01/09 2,000 1,830
--------------
27,239
--------------
TRANSPORTATION -- 0.7%
CHC Helicopter, Callable 07/15/04 @ 105.875
11.750%, 07/15/07 EU 2,000 1,827
--------------
UTILITIES -- 2.2%
AES
9.375%, 09/15/10 1,000 1,015
Calpine
7.625%, 04/15/06 1,000 974
CMS Energy
7.500%, 01/15/09 1,000 892
Empresa Nacional Electricidad Series B
8.500%, 04/01/09 (D) 2,000 1,978
Western Resources
6.250%, 08/15/03 1,000 888
--------------
5,747
--------------
TOTAL HIGH YIELD CORPORATE OBLIGATIONS
(Cost $114,419) 103,459
--------------
FOREIGN GOVERNMENT BONDS -- 20.5%
ARGENTINA -- 4.5%
Republic of Argentina
11.750%, 06/15/15 (D) 3,000 2,745
9.750%, 09/19/27 (D) 3,100 2,458
10.250%, 07/21/30 (D) 3,500 2,849
Republic of Argentina,
Callable 03/30/01 @ 100
7.375%, 03/31/05 (F) 2,400 2,203
Republic of Argentina Series BGL5
11.375%, 01/30/17 1,800 1,613
--------------
11,868
--------------
BRAZIL -- 4.2%
Republic of Brazil
14.500%, 10/15/09 3,000 3,300
10.125%, 05/15/27 1,000 775
STRATEGIC INCOME FUND (CONTINUED)
DESCRIPTION PAR (000) (H) VALUE (000)
--------------------------------------------------------------------------------
Republic of Brazil
8.000%, 04/15/14 (A) $ 6,188 $ 4,730
Republic of Brazil,
Callable 08/17/15 @ 100
11.000%, 08/17/40 2,785 2,218
--------------
11,023
--------------
CANADA -- 0.3%
Government of Canada, Series A55
8.000%, 06/01/23 CD 1,000 844
--------------
DENMARK -- 0.3%
Kingdom of Denmark
7.000%, 11/10/24 DK 5,500 748
--------------
DOMINICAN REPUBLIC -- 0.5%
Dominican Republic
7.938%, 08/30/24 (F) 1,700 1,322
--------------
HUNGARY -- 0.6%
Government of Hungary
13.000%, 07/24/03 HF 225,000 811
Government of Hungary Series 2
12.500%, 09/24/02 HF 250,000 875
--------------
1,686
--------------
KAZAKHSTAN -- 1.2%
Republic of Kazakhstan
11.125%, 05/11/07 400 430
Republic of Kazakhstan
11.125%, 05/11/07 (C) 2,500 2,689
--------------
3,119
--------------
MEXICO -- 1.5%
United Mexican States Series W-B,
Callable 10/23/00 @ 100
6.250%, 12/31/19 4,500 4,016
--------------
QATAR -- 0.8%
State of Qatar
9.750%, 06/15/30 (C) (D) 2,100 2,153
--------------
RUSSIA -- 3.2%
Russian Federation
10.000%, 06/26/07 (C) 500 386
8.250%, 03/31/10 (C) 1,991 1,314
12.750%, 06/24/28 (C) 7,550 6,569
--------------
8,269
--------------
SOUTH AFRICA -- 0.7%
Republic of South Africa Series 157
13.500%, 09/15/15 ZR 13,000 1,797
--------------
TURKEY -- 1.4%
Republic of Turkey
11.750%, 06/15/10 1,500 1,493
Republic of Turkey
12.375%, 06/15/09 (D) 2,000 2,052
--------------
3,545
--------------
The accompanying notes are an integral part of the financial statements.
(30 FIRST AMERICAN FUNDS ANNUAL REPORT 2000
<PAGE>
STRATEGIC INCOME FUND (CONTINUED)
DESCRIPTION PAR (000) (H) VALUE (000)
--------------------------------------------------------------------------------
VENEZUELA -- 1.3%
Republic of Venezuela
9.250%, 09/15/27 $ 2,000 $ 1,354
Republic of Venezuela Series DL
7.875%, 12/18/07 (F) 2,321 1,985
--------------
3,339
--------------
TOTAL FOREIGN GOVERNMENT BONDS
(Cost $54,198) 53,729
--------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED
OBLIGATIONS -- 9.0%
ADJUSTABLE RATE -- 0.4%
FNMA Series 1993-220 Class-FD*
7.125%, 11/25/13 (F) 994 999
--------------
FIXED RATE -- 8.6%
FHLMC Gold Pool #C18204
7.500%, 11/01/28 967 968
FHLMC Gold Pool #E65045
7.500%, 08/01/11 575 582
FHLMC Gold Pool #E69977
5.500%, 04/01/13 1,005 951
FHLMC, Series 2126 Class-C
6.000%, 02/15/29 1,500 1,265
FNMA Pool #109031
6.695%, 08/01/05 2,000 1,986
FNMA Pool #250113
9.000%, 07/01/24 231 239
FNMA Pool #252334
6.500%, 02/01/29 1,394 1,329
FNMA Pool #323681
7.000%, 04/01/29 1,851 1,814
FNMA Pool #326580
8.000%, 03/01/08 471 477
FNMA Pool #329569
6.000%, 03/01/11 532 515
FNMA Pool #339839
6.000%, 03/01/26 677 637
FNMA Pool #367977
6.500%, 02/01/04 670 665
FNMA Pool #380781
5.805%, 10/01/08 1,208 1,137
FNMA Pool #380791
5.850%, 10/01/08 978 920
FNMA Pool #380859
6.095%, 12/01/08 981 936
FNMA Pool #381517
5.950%, 04/01/07 1,500 1,434
FNMA Pool #535006
7.000%, 11/01/14 1,832 1,823
FNMA Pool #535143
7.500%, 02/01/30 965 964
FNMA Pool #535256
6.000%, 12/01/13 1,875 1,806
FNMA TBA
8.000%, 01/01/23 (I) 2,000 2,026
STRATEGIC INCOME FUND (CONTINUED)
DESCRIPTION PAR (000) (H) VALUE (000)
--------------------------------------------------------------------------------
GNMA Pool #160376
9.000%, 06/15/16 $ 64 $ 67
--------------
22,541
--------------
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED OBLIGATIONS
(Cost $23,957) 23,540
--------------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 5.0%
FHLB
5.125%, 02/26/02 1,000 982
6.500%, 11/13/09 1,000 977
FHLMC
7.000%, 07/15/05 2,000 2,035
FNMA
5.125%, 02/13/04 1,000 957
6.250%, 05/15/29 2,000 1,858
7.250%, 05/15/30 2,000 2,096
FNMA Series 1993-50 Class-PY
5.500%, 10/25/22 2,000 1,772
FNMA Series 1999-11 Class-C
5.500%, 10/25/12 2,000 1,807
FNMA Series G93-1 Class-H
6.700%, 02/25/21 692 685
--------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $13,264) 13,169
--------------
ASSET-BACKED OBLIGATIONS -- 4.8%
CREDIT CARDS -- 2.1%
American Express Credit Account Master Trust
Series 1997-1 Class-A
6.400%, 04/15/05 2,000 1,991
Discover Card Master Trust
Series 1999-1 Class-A
5.300%, 08/15/04 1,500 1,467
MBNA Master Credit Card Trust
Series 1999-G Class-A
6.350%, 12/15/06 2,000 1,975
--------------
5,433
--------------
HOME EQUITY -- 2.3%
EQCC Home Equity Loan Trust
Series 1998-1 Class-A6F
6.252%, 12/15/07 2,000 1,964
Green Tree Financial Series 1998-1 Class-A4
6.040%, 11/01/29 2,120 2,094
The Money Store Home Equity Trust
Series 1994-A Class-A4,
Callable 02/15/04 @ 100
6.275%, 12/15/22 2,000 1,977
--------------
6,035
--------------
OTHER -- 0.4%
Aircraft Finance Trust Series 1999 Series 1A Class-C,
Callable 07/15/16 @ 100
8.000%, 05/15/24 (C) (E) 1,000 964
--------------
TOTAL ASSET-BACKED OBLIGATIONS
(Cost $12,485) 12,432
--------------
FIRST AMERICAN FUNDS ANNUAL REPORT 2000 31)
<PAGE>
STATEMENTS OF NET ASSETS SEPTEMBER 30, 2000
STRATEGIC INCOME FUND (CONTINUED)
DESCRIPTION PAR (000) (H) VALUE (000)
--------------------------------------------------------------------------------
CORPORATE OBLIGATIONS -- 9.5%
AEROSPACE & DEFENSE -- 0.4%
Boeing
8.100%, 11/15/06 $ 1,000 $ 1,050
--------------
AUTOMOTIVE -- 1.1%
DaimlerChrysler
7.400%, 01/20/05 1,000 1,009
Ford Motor Credit
5.800%, 01/12/09 2,000 1,766
--------------
2,775
--------------
BUILDING & CONSTRUCTION PRODUCTS -- 0.4%
American Standard
7.375%, 02/01/08 1,000 932
--------------
CABLE TELEVISION -- 0.2%
Lenfest Communications,
Callable 02/15/03 @ 104.125
8.250%, 02/15/08 525 526
--------------
FINANCIAL SERVICES -- 3.4%
AT&T Capital
6.250%, 05/15/01 1,000 993
Gatx Capital
8.250%, 09/01/03 1,000 1,004
Heller Financial
7.875%, 05/15/03 1,000 1,015
Inter-American Development Bank
7.375%, 01/15/10 2,000 2,080
Lehman Brothers Holdings
7.375%, 05/15/04 1,000 1,003
MBNA America Bank
7.750%, 09/15/05 2,000 2,016
Merrill Lynch
6.000%, 02/17/09 1,000 911
--------------
9,022
--------------
HOTELS -- 0.4%
ITT
6.750%, 11/15/05 1,000 940
--------------
INDUSTRIAL PRODUCTS -- 0.3%
Thermo Electron, Callable 01/15/01 @ 100
4.000%, 01/15/05 1,000 879
--------------
LEISURE & ENTERTAINMENT -- 0.4%
Royal Caribbean
8.125%, 07/28/04 1,000 966
--------------
RETAIL-OTHER -- 1.6%
Grupo Elektra, Callable 04/01/04 @ 106.000
12.000%, 04/01/08 1,600 1,564
Grupo Elektra, Callable 04/01/04 @ 106.000
12.000%, 04/01/08 (C) 2,700 2,612
--------------
4,176
--------------
STRATEGIC INCOME FUND (CONTINUED)
DESCRIPTION PAR (000) (H) VALUE (000)
--------------------------------------------------------------------------------
TRANSPORTATION -- 0.8%
American Airlines Series 99-1
7.024%, 10/15/09 $ 1,250 $ 1,216
Continental Airlines Series 99-2
7.056%, 09/15/09 1,000 969
--------------
2,185
--------------
UTILITIES -- 0.5%
Enron Series A
8.375%, 05/23/05 1,000 1,046
Niagra Mowhawk Power Series H,
Callable 07/01/03 @ 104.250*
8.464%, 07/01/10 (B) 450 362
--------------
1,408
--------------
TOTAL CORPORATE OBLIGATIONS
(Cost $24,937) 24,859
--------------
U.S. TREASURY OBLIGATION -- 4.3%
U.S. Treasury Bonds
7.500%, 11/15/16 2,000 2,281
8.750%, 05/15/17 1,250 1,590
8.500%, 02/15/20 1,500 1,901
6.250%, 08/15/23 1,000 1,019
6.125%, 08/15/29 2,000 2,043
U.S. Treasury Notes
7.500%, 05/15/02 500 511
5.875%, 11/15/04 2,000 1,997
--------------
TOTAL U.S. TREASURY OBLIGATION
(Cost $11,117) 11,342
--------------
PRIVATE MORTGAGE-BACKED OBLIGATIONS -- 3.5%
FIXED RATE -- 3.5%
Advanta Mortgage Loan Trust
Series 1998-2 Class-A12
6.330%, 08/25/19 2,000 1,944
Countrywide Mortgage Backed Securities
Series 1993-B Class-A4
6.750%, 11/25/23 1,463 1,445
GMAC Commercial Mortgage Securities
Series 1998-C2 Class-A2
6.420%, 08/15/08 1,000 951
Morgan Stanley Capital Invstments
Series 1999-RM1 Class-A2
6.710%, 12/15/31 2,000 1,948
Residential Funding Mortgage Securities
Series 1999-S5 Class-A1
6.000%, 02/25/29 1,000 989
Wells Fargo Mortgage Backed Securities
Series 2000-1 Class-2A-1,
Callable 07/25/12 @ 100
7.000%, 05/25/30 1,912 1,881
--------------
TOTAL PRIVATE MORTGAGE-BACKED OBLIGATIONS
(Cost $9,154) 9,158
--------------
The accompanying notes are an integral part of the financial statements.
(32 FIRST AMERICAN FUNDS ANNUAL REPORT 2000
<PAGE>
STRATEGIC INCOME FUND (CONTINUED)
DESCRIPTION SHARES VALUE (000)
--------------------------------------------------------------------------------
PREFERRED STOCK -- 0.6%
UNITED STATES -- 0.6%
Nebco Evans Holding PIK (A)* 300 $ --
Nextel Communications PIK Series D* 64,000 68
Pegasus Communications PIK Series A* 143,000 149
Primedia Series D* 3,000 281
Primedia Series F* 2,350 209
Primedia Series H* 2,150 181
R&B Falcon PIK* 4,080 522
Sinclair Capital 750 71
--------------
TOTAL PREFERRED STOCK
(Cost $1,367) 1,481
--------------
COMMON STOCKS -- 0.0%
UNITED STATES -- 0.0%
CS Wireless Systems* 27 --
Medianews Group* (E) 500 63
--------------
TOTAL COMMON STOCKS
(Cost $0) 63
--------------
WARRANTS -- 0.0%
UNITED STATES -- 0.0%
Bar Technologies, Expires 04/01/01* 50 --
Electronic Retailing System International,
Expires 02/01/04* 75 --
Enino Warrant, Expires 04/03/05* 1,000 --
Maxcom Telecommunications, Expires 04/01/07* 2,000 --
Metronet, Expires 08/15/07* 100 10
R&B Falcon, Expires 05/01/09* 150 102
Republic Technolgy Warrants, Expires 07/15/09* 250 --
Sterling Chemical Holdings, Expires 08/15/08* 100 1
UIH Australia/Pacific, Expires 05/15/06* 150 2
--------------
TOTAL WARRANTS
(Cost $9) 115
--------------
RIGHTS -- 0.0%
United Mexican States VRR* 5,383,000 --
--------------
TOTAL RIGHTS
(Cost $0) --
--------------
STRATEGIC INCOME FUND (CONTINUED)
DESCRIPTION SHARES VALUE (000)
--------------------------------------------------------------------------------
RELATED PARTY MONEY MARKET FUND -- 2.7%
First American Prime Obligations Fund (G) 7,193,252 $ 7,193
--------------
TOTAL RELATED PARTY MONEY MARKET FUND
(Cost $7,193) 7,193
--------------
TOTAL INVESTMENTS -- 99.4%
(Cost $272,100) 260,540
--------------
OTHER ASSETS AND LIABILITIES, NET -- 0.6% (J) 1,569
--------------
NET ASSETS:
Portfolio Capital--Class A ($0.0001 par value--
2 billion authorized) based on
2,437,921 outstanding shares 40,062
Portfolio Capital--Class B ($0.0001 par value--
2 billion authorized) based on
157,639 outstanding shares 1,449
Portfolio Capital--Class C ($0.0001 par value--
2 billion authorized) based on
139,472 outstanding shares 1,289
Portfolio Capital--Class Y ($0.0001 par value--
2 billion authorized) based on
26,652,785 outstanding shares 252,505
Distributions in excess of net investment income (608)
Accumulated net realized loss on investments (21,002)
Net unrealized depreciation of investments (11,560)
Net unrealized depreciation of forward foreign currency
contracts, foreign currency and translation of
other assets and liabilities in foreign currency (26)
--------------
TOTAL NET ASSETS -- 100.0% $ 262,109
--------------
Net asset value and redemption price per share -- Class A $ 8.91
Maximum sales charge of 4.25% (K) 0.40
--------------
Offering price per share -- Class A $ 9.31
--------------
Net asset value and offering price per share -- Class B (L) $ 8.89
--------------
Net asset value per share -- Class C (M) $ 8.90
Maximum sales charge of 1.00% (N) 0.09
--------------
Offering price per share -- Class C $ 8.99
--------------
Net asset value, offering price, and redemption
price per share -- Class Y $ 8.92
--------------
FIRST AMERICAN FUNDS ANNUAL REPORT 2000 33)
<PAGE>
STATEMENTS OF NET ASSETS SEPTEMBER 30, 2000
STRATEGIC INCOME FUND (CONCLUDED)
--------------------------------------------------------------------------------
* Non-income producing security.
(A) Bond currently in default
(B) Delayed Interest (Step-Bonds) -- Represents securities that remain
zero-coupon securities until a predetermined date at which time the stated
coupon rate becomes effective and interest becomes payable at regular
intervals. The interest rates disclosed represent current yields at
September 30, 2000, based upon the estimated timing and amount of future
interest and principal payments.
(C) Security sold within terms of a private placement memorandum, exempt from
registration under section 144A of the Securities Act of 1933, as amended,
and may be sold only to dealers in that program or other "qualified
institutional investors." These securities have been determined to be liquid
under guidelines established by the Board of Directors.
(D) Represents a foreign high yield (non-investment grade) bond. On September
30, 2000, the total market value of these investments was $16,400,471 or
6.26% of total net assets.
(E) Securities considered illiquid or restricted. See also the notes to the
financial statements.
(F) Variable Rate Security -- the rate reported on the Statement of Net Assets
is the rate in effect as of September 30, 2000.
(G) This money market fund is advised by the U.S. Bank National Association who
also serves as advisor for this fund. See also the notes to the financial
statements.
(H) In U.S. dollars unless otherwise indicated.
(I) On September 30, 2000, the total cost of investments purchased on a
when-issued basis was $2,019,375.
(J) Other assets and liabilities representing greater than five percent of total
assets include the following (000):
Collateral for securities loaned, at value $35,643
Payable upon return of securities loaned (35,643)
(K) The offering price is calculated by dividing the net asset value by 1 minus
the maximum sales charge of 4.25%.
(L) Class B has a contingent deferred sales charge. For a description of a
possible redemption charge, see the notes to the financial statements.
(M) Class C has a contingent deferred sales charge. For a description of a
possible redemption charge, see the notes to the financial statements.
(N) The offering price is calculated by dividing the net asset value by 1 minus
the maximum sales charge of 1.00%.
--------------------------------------------------------------------------------
CD--Canadian Dollar
DK--Danish Kroner
EU--Euro
FFCB--Federal Farm Credit Bank
FHLB--Federal Home Loan Bank
FHLMC--Federal Home Loan Mortgage Corporation
FNMA--Federal National Mortgage Association
GNMA--Government National Mortgage Association
HF--Hungarian Forint
PIK--Payment-in-Kind interest is generally paid by issuing additional par of the
security rather than paying cash.
TBA--To Be Announced
VRR--Value Recovery Right
ZR--South African Rand
The accompanying notes are an integral part of the financial statements.
(34 FIRST AMERICAN FUNDS ANNUAL REPORT 2000
<PAGE>
(This page has been left blank intentionally.)
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES September 30, 2000, in thousands, except
outstanding shares
<TABLE>
<CAPTION>
CORPORATE
BOND FUND
--------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS:
Investment securities, at value (cost $89,397) $ 89,719
RECEIVABLES:
Accrued income 1,654
Investment securities sold 4,811
Capital shares sold 145
Collateral for securities loaned, at value 19,710
Other assets 214
--------------------------------------------------------------------------------------------------------
TOTAL ASSETS 116,253
========================================================================================================
LIABILITIES:
PAYABLES:
Securities purchased 5,320
Capital shares redeemed 15
Payable upon return of securities loaned 19,710
Other liabilities 201
--------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 25,246
========================================================================================================
TOTAL NET ASSETS 91,007
========================================================================================================
COMPOSITION OF NET ASSETS:
Portfolio capital -- Class A ($0.0001 par value - 2 billion authorized) based on 76,851
outstanding shares 767
Portfolio capital - Class B ($0.001 par value - 2 billion authorized) based on 10,320
outstanding shares 102
Portfolio capital - Class C ($0.0001 par value - 2 billion authorized) based on 14,327
outstanding shares 141
Portfolio capital - Class Y ($0.0001 par value - 2 billion authorized) based on 8,976,197
outstanding shares 89,310
Undistributed net investment income 83
Accumulated net realized gain on investments 282
Net unrealized appreciation of investments 322
--------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS $ 91,007
========================================================================================================
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE - CLASS A $ 10.03
========================================================================================================
MAXIMUM SALES CHARGE OF 4.25% 0.45
========================================================================================================
OFFERING PRICE PER SHARE - CLASS A (1) $ 10.48
========================================================================================================
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE - CLASS B (2) $ 10.02
========================================================================================================
NET ASSET VALUE PER SHARE - CLASS C (3) $ 10.01
========================================================================================================
MAXIMUM SALES CHARGE OF 1.00% 0.10
========================================================================================================
OFFERING PRICE PER SHARE - CLASS C (4) $ 10.11
========================================================================================================
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - CLASS Y $ 10.03
========================================================================================================
</TABLE>
(1)The offering price is calculated by dividing the net asset value by 1 minus
the maximum sales charge of 4.25%.
(2)Class B has a contingent deferred sales charge. For a description of a
possible redemption charge, see the notes to the financial statements.
(3)Class C has a contingent deferred sales charge. For a description of a
possible redemption charge, see the notes to the financial statements.
(4)The offering price is calculated by dividing the net asset value by 1 minus
the maximum sales charge of 1.00%.
The accompanying notes are an integral part of the financial statements.
(36 FIRST AMERICAN FUNDS ANNUAL REPORT 2000
<PAGE>
STATEMENTS OF OPERATIONS for the year ended September 30, 2000, in thousands
<TABLE>
<CAPTION>
CORPORATE FIXED INCOME INTERMEDIATE TERM LIMITED TERM STRATEGIC
BOND FUND(1) FUND INCOME FUND INCOME FUND INCOME FUND
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 3,505+ $93,047+ $26,625+ $10,597+ $22,574+
Fee Income -- 499 -- -- 33
Dividends -- -- -- -- 78
-----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 3,505 93,546 26,625 10,597 22,685
===================================================================================================================================
EXPENSES:
Investment advisory fees 297 9,725 2,860 1,133 1,706
Less: Waiver of investment advisory fees (208) (2,615) (707) (797) (33)
Administrator fees 46 1,510 444 175 265
Transfer agent fees 47 415 65 200 129
Custodian fees 13 417 123 48 73
Directors' fees 1 22 6 2 4
Registration fees 10 54 13 6 15
Professional fees 1 34 10 4 6
Printing 3 92 27 11 16
Distribution fees - Class A 1 299 79 135 53
Less: Waiver of distribution fees - Class A -- -- (32) (56) --
Distribution fees - Class B -- 127 -- -- 11
Distribution fees - Class C 1 7 -- -- 8
Less: Waiver of distribution fees - Class C -- (1) -- -- --
Other 2 66 20 8 11
-----------------------------------------------------------------------------------------------------------------------------------
TOTAL NET EXPENSES 214 10,152 2,908 869 2,264
===================================================================================================================================
INVESTMENT INCOME - NET 3,291 83,394 23,717 9,728 20,421
===================================================================================================================================
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS AND FOREIGN
CURRENCY TRANSACTIONS - NET:
Net realized gain (loss) on investments 282 (9,783) (6,783) (965) (3,432)
Net realized loss on forward foreign currency contracts
and foreign currency transactions -- -- -- -- (2,751)
Net change in unrealized appreciation or depreciation
of investments 322 15,397 7,301 1,545 (558)
Net change in unrealized appreciation or depreciation
of forward foreign currency contracts, foreign
currency and translation of other assets and liabilities
denominated in foreign currency -- -- -- -- (28)
-----------------------------------------------------------------------------------------------------------------------------------
NET GAIN (LOSS) ON INVESTMENTS 604 5,614 518 580 (6,769)
===================================================================================================================================
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 3,895 $89,008 $24,235 $10,308 $13,652
===================================================================================================================================
</TABLE>
+Includes income from securities lending program. See the Notes to the
Financial Statements for additional information.
(1)Commenced operations on February 1, 2000.
The accompanying notes are an integral part of the financial statements.
FIRST AMERICAN FUNDS ANNUAL REPORT 2000 37)
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS in thousands
<TABLE>
<CAPTION>
CORPORATE FIXED
BOND FUND(3) INCOME FUND
-------------------------------------------------------------------------------------------------------------------
2/1/00 10/1/99 10/1/98
to to to
9/30/00 9/30/00 9/30/99
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATIONS:
Investment income - net $ 3,291 $ 83,394 $ 77,815
Net realized gain (loss) on investments 282 (9,783) 6,020
Net realized loss on forward foreign currency contracts and foreign
currency transactions -- -- --
Net change in unrealized appreciation or depreciation
of investments 322 15,397 (119,762)
Net change in unrealized appreciation or depreciation of forward
foreign currency contracts, foreign currency and translation of
other assets and liabilities denominated in foreign currency -- -- --
-------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations 3,895 89,008 (35,927)
-------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment income - net:
Class A (28) (6,839) (8,415)
Class B (1) (641) (757)
Class C (3) (28) (12)
Class Y (3,176) (75,402) (68,379)
Net realized gain on investments:
Class A -- -- (2,343)
Class B -- -- (215)
Class C -- -- --
Class Y -- -- (15,597)
-------------------------------------------------------------------------------------------------------------------
Total distributions (3,208) (82,910) (95,718)
-------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS(1):
Class A:
Proceeds from sales 806 38,076 19,270
Shares issued in connection with the acquisition of the
Intermediate Government Bond Fund and Adjustable
Rate Mortgage Securities Fund, respectively -- -- --
Reinvestment of distributions 27 4,779 5,331
Payments for redemptions (66) (69,558) (77,045)
-------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from
Class A transactions 767 (26,703) (52,444)
-------------------------------------------------------------------------------------------------------------------
Class B:
Proceeds from sales 103 1,910 4,356
Reinvestment of distributions 1 546 851
Payments for redemptions (2) (5,561) (6,228)
-------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from
Class B transactions 102 (3,105) (1,021)
-------------------------------------------------------------------------------------------------------------------
Class C:
Proceeds from sales 139 268 747
Reinvestment of distributions 2 20 10
Payment for redemptions -- (437) (22)
-------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from
Class C transactions 141 (149) 735
-------------------------------------------------------------------------------------------------------------------
Class Y:
Proceeds from sales 90,427 357,222 422,896
Shares issued in connection with the acquisition of the
Intermediate Government Bond Fund and Adjustable
Rate Mortgage Fund respectively -- -- --
Shares issued in connection with acquisition of Piper Common
Trust Fund -- -- 3,300
Reinvestment of distributions 130 23,873 45,723
Payments for redemptions (1,247) (327,080) (328,293)
-------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from Class Y transactions 89,310 54,015 143,626
-------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital share transactions 90,320 24,058 90,896
-------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets 91,007 30,156 (40,749)
NET ASSETS AT BEGINNING OF PERIOD -- 1,392,391 1,433,140
===================================================================================================================
NET ASSETS AT END OF PERIOD (2) $ 91,007 $1,422,547 $1,392,391
===================================================================================================================
</TABLE>
(1)See Note 4 in Notes to Financial Statements for additional information.
(2)Includes undistributed (distributions in excess of) net investment income
(000) of $83 and $0 for Corporate Bond Fund, $1,012 and $528 for Fixed Income
Fund, $485 and $242 for Intermediate Term Income Fund, $558 and $36 for
Limited Term Income Fund, and $(608) and $252 for Strategic Income Fund at
September 30, 2000, and September 30, 1999, respectively.
(3)Commenced operations on February 1, 2000.
The accompanying notes are an integral part of the financial statements.
(38 FIRST AMERICAN FUNDS ANNUAL REPORT 2000
<PAGE>
<TABLE>
<CAPTION>
INTERMEDIATE TERM LIMITED TERM STRATEGIC
INCOME FUND INCOME FUND INCOME FUND
--------------------------------------------------------------------------------
10/1/99 10/1/98 10/1/99 10/1/98 10/1/99 10/1/98
to to to to to to
9/30/00 9/30/99 9/30/00 9/30/99 9/30/00 9/30/99
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 23,717 $ 22,250 $ 9,728 $ 7,695 $ 20,421 $ 13,597
(6,783) 2,086 (965) (134) (3,432) (2,471)
-- -- -- -- (2,751) (179)
7,301 (25,022) 1,545 (2,495) (558) (5,283)
-- -- -- -- (28) (2)
--------------------------------------------------------------------------------
24,235 (686) 10,308 5,066 13,652 5,662
--------------------------------------------------------------------------------
(1,766) (2,015) (3,039) (261) (1,808) (2,478)
-- -- -- -- (77) (28)
-- -- -- -- (88) (20)
(21,680) (20,109) (6,167) (7,402) (16,557) (10,263)
-- (564) -- -- -- --
-- -- -- -- -- --
-- -- -- -- -- --
-- (5,033) -- -- -- --
--------------------------------------------------------------------------------
(23,446) (27,721) (9,206) (7,663) (18,530) (12,789)
--------------------------------------------------------------------------------
8,716 3,890 2,397 2,074 1,888 1,712
4,887 -- 86,234 -- -- --
1,502 1,494 1,759 240 788 1,135
(19,764) (17,426) (15,468) (1,945) (8,259) (15,021)
--------------------------------------------------------------------------------
(4,659) (12,042) 74,922 369 (5,583) (12,174)
--------------------------------------------------------------------------------
-- -- -- -- 846 737
-- -- -- -- 50 21
-- -- -- -- (258) (60)
--------------------------------------------------------------------------------
-- -- -- -- 638 698
--------------------------------------------------------------------------------
-- -- -- -- 474 1,077
-- -- -- -- 71 12
-- -- -- -- (334) (11)
--------------------------------------------------------------------------------
-- -- -- -- 211 1,078
--------------------------------------------------------------------------------
72,208 74,471 24,674 29,463 82,437 149,128
128,403 -- 430 -- -- --
-- -- -- -- -- --
8,953 11,328 1,978 2,715 3,762 6,602
(177,559) (141,923) (54,862) (83,282) (28,758) (18,800)
--------------------------------------------------------------------------------
32,005 (56,124) (27,780) (51,104) 57,441 136,930
--------------------------------------------------------------------------------
27,346 (68,166) 47,142 (50,735) 52,707 126,532
--------------------------------------------------------------------------------
28,135 (96,573) 48,244 (53,332) 47,829 119,405
383,229 479,802 124,840 178,172 214,280 94,875
================================================================================
$ 411,364 $ 383,229 $ 173,084 $ 124,840 $ 262,109 $214,280
================================================================================
</TABLE>
FIRST AMERICAN FUNDS ANNUAL REPORT 2000 39)
<PAGE>
FINANCIAL HIGHLIGHTS For a share outstanding, throughout the periods ended
September 30, unless otherwise indicated.
<TABLE>
<CAPTION>
REALIZED AND
NET ASSET UNREALIZED DIVIDENDS
VALUE NET GAINS OR FROM NET DISTRIBUTIONS
BEGINNING INVESTMENT (LOSSES) ON INVESTMENT FROM
OF PERIOD INCOME INVESTMENTS INCOME CAPITAL GAINS
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CORPORATE BOND FUND(1)
Class A
2000 $ 10.00 $ 0.48 $ 0.02 $ (0.47) $ --
Class B
2000 $ 10.00 $ 0.45 $ 0.01 $ (0.44) $ --
Class C
2000 $ 10.00 $ 0.45 $ (0.01) $ (0.43) $ --
Class Y
2000 $ 10.00 $ 0.49 $ 0.02 $ (0.48) $ --
FIXED INCOME FUND
Class A
2000 $ 10.65 $ 0.61 $ 0.04 $ (0.61) $ --
1999 11.69 0.59 (0.89) (0.59) (0.15)
1998 10.97 0.57 0.73 (0.57) (0.01)
1997 10.77 0.59 0.27 (0.59) (0.07)
1996 10.98 0.61 (0.11) (0.61) (0.10)
Class B
2000 $ 10.58 $ 0.53 $ 0.05 $ (0.53) $ --
1999 11.63 0.51 (0.90) (0.51) (0.15)
1998 10.91 0.49 0.73 (0.49) (0.01)
1997 10.72 0.51 0.26 (0.51) (0.07)
1996 10.94 0.52 (0.11) (0.53) (0.10)
Class C
2000 $ 10.64 $ 0.52 $ 0.04 $ (0.54) $ --
1999(2) 11.33 0.38 (0.69) (0.38) --
Class Y
2000 $ 10.65 $ 0.63 $ 0.04 $ (0.63) $ --
1999 11.69 0.61 (0.89) (0.61) (0.15)
1998 10.96 0.60 0.74 (0.60) (0.01)
1997 10.76 0.62 0.27 (0.62) (0.07)
1996 10.97 0.63 (0.11) (0.63) (0.10)
INTERMEDIATE TERM INCOME
FUND
Class A
2000 $ 9.80 $ 0.54 $ -- $ (0.55) $ --
1999 10.45 0.51 (0.54) (0.50) (0.12)
1998 10.00 0.53 0.47 (0.53) (0.02)
1997 9.93 0.55 0.15 (0.56) (0.07)
1996 9.94 0.55 -- (0.55) (0.01)
Class Y
2000 $ 9.77 $ 0.56 $ -- $ (0.56) $ --
1999 10.42 0.52 (0.53) (0.52) (0.12)
1998 9.98 0.53 0.46 (0.53) (0.02)
1997 9.93 0.55 0.13 (0.56) (0.07)
1996 9.94 0.55 -- (0.55) (0.01)
------------------------------------------------------------------------------------
</TABLE>
+Returns are for the period indicated and have not been annualized.
(A)Excluding sales charges.
(1)Commenced operations on February 1, 2000. All ratios for the period have
been annualized.
(2)Shares have been offered since February 1, 1999. All ratios for the period
have been annualized.
The accompanying notes are an integral part of the financial statements.
(40 FIRST AMERICAN FUNDS ANNUAL REPORT 2000
<PAGE>
<TABLE>
<CAPTION>
RATIO OF NET
RATIO OF INVESTMENT
RATIO OF NET EXPENSES TO INCOME TO
NET ASSET RATIO OF INVESTMENT AVERAGE AVERAGE
VALUE NET ASSETS EXPENSES TO INCOME TO NET ASSETS NET ASSETS PORTFOLIO
END OF TOTAL END OF AVERAGE AVERAGE (EXCLUDING (EXCLUDING TURNOVER
PERIOD RETURN (A) PERIOD (000) NET ASSETS NET ASSETS WAIVERS) WAIVERS) RATE
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 10.03 5.17%+ $ 771 0.72% 7.52% 1.24% 7.00% 124%
$ 10.02 4.70%+ $ 103 1.48% 6.86% 1.99% 6.35% 124%
$ 10.01 4.54%+ $ 143 1.48% 6.79% 1.99% 6.28% 124%
$ 10.03 5.32%+ $ 89,990 0.48% 7.75% 0.99% 7.24% 124%
$ 10.69 6.33% $ 110,490 0.95% 5.76% 1.14% 5.57% 54%
10.65 (2.67) 137,133 0.95 5.29 1.14 5.10 90
11.69 12.29 205,237 0.95 5.10 1.11 4.94 147
10.97 8.26 8,535 0.95 5.44 1.13 5.26 130
10.77 4.64 8,332 0.95 5.55 1.12 5.38 108
$ 10.63 5.70% $ 11,550 1.70% 5.02% 1.89% 4.83% 54%
10.58 (3.48) 14,639 1.70 4.53 1.89 4.34 90
11.63 11.54 17,242 1.70 4.35 1.86 4.19 147
10.91 7.40 15,253 1.70 4.68 1.88 4.50 130
10.72 3.93 16,092 1.70 4.81 1.87 4.64 108
$ 10.66 5.50% $ 566 1.70% 5.02% 1.89% 4.83% 54%
10.64 (2.75)+ 719 1.35 5.09 1.89 4.55 90
$ 10.69 6.59% $1,299,941 0.70% 6.03% 0.89% 5.84% 54%
10.65 (2.44) 1,239,900 0.70 5.57 0.89 5.38 90
11.69 12.66 1,210,661 0.70 5.35 0.86 5.19 147
10.96 8.54 705,719 0.70 5.71 0.88 5.53 130
10.76 4.90 391,211 0.70 5.81 0.87 5.64 108
$ 9.79 5.69% $ 29,645 0.85% 5.21% 1.01% 5.05% 83%
9.80 (0.20) 34,365 0.85 5.01 1.12 4.74 65
10.45 10.35 49,130 0.70 5.22 1.11 4.81 166
10.00 7.19 2,484 0.70 5.51 1.17 5.04 165
9.93 5.63 2,213 0.70 5.43 1.13 5.00 161
$ 9.77 5.97% $ 381,719 0.70% 5.85% 0.87% 5.68% 83%
9.77 (0.06) 348,864 0.70 5.17 0.87 5.00 65
10.42 10.27 430,672 0.70 5.24 0.86 5.08 166
9.98 6.98 324,250 0.70 5.51 0.92 5.29 165
9.93 5.63 98,702 0.70 5.45 0.88 5.27 161
------------------------------------------------------------------------------------------------------------------
</TABLE>
FIRST AMERICAN FUNDS ANNUAL REPORT 2000 41)
<PAGE>
FINANCIAL HIGHLIGHTS For a share outstanding, throughout the periods ended
September 30, unless otherwise indicated.
<TABLE>
<CAPTION>
REALIZED AND
NET ASSET UNREALIZED DIVIDENDS
VALUE NET GAINS OR FROM NET DISTRIBUTIONS
BEGINNING INVESTMENT (LOSSES) ON INVESTMENT FROM
OF PERIOD INCOME INVESTMENTS INCOME CAPITAL GAINS
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
LIMITED TERM INCOME FUND
Class A
2000 $ 9.86 $ 0.58 $ 0.02 $ (0.55) $ --
1999 10.04 0.52 (0.18) (0.52) --
1998 9.94 0.53 0.10 (0.53) --
1997 9.91 0.56 0.03 (0.56) --
1996 9.92 0.58 (0.01) (0.58) --
Class Y
2000 $ 9.87 $ 0.59 $ 0.01 $ (0.56) $ --
1999 10.04 0.52 (0.17) (0.52) --
1998 9.94 0.53 0.10 (0.53) --
1997 9.91 0.56 0.03 (0.56) --
1996 9.92 0.58 (0.01) (0.58) --
STRATEGIC INCOME FUND
Class A
2000(3) $ 9.09 $ 0.64 $ (0.15) $ (0.67) $ --
1999(3) 9.27 0.78 (0.25) (0.71) --
1998(1) 10.00 0.13 (0.75) (0.11) --
Class B
2000(3) $ 9.07 $ 0.56 $ (0.14) $ (0.60) $ --
1999(3) 9.27 0.71 (0.26) (0.65) --
1998(1) 10.00 0.09 (0.71) (0.11) --
Class C
2000(3) $ 9.08 $ 0.59 $ (0.14) $ (0.63) $ --
1999(2)(3) 9.57 0.45 (0.47) (0.47) --
Class Y
2000(3) $ 9.09 $ 0.66 $ (0.14) $ (0.69) $ --
1999(3) 9.27 0.80 (0.25) (0.73) --
1998(1) 10.00 0.14 (0.75) (0.12) --
------------------------------------------------------------------------------------------
</TABLE>
+Returns are for the period indicated and have not been annualized.
(A)Excluding sales charges.
(1)Commenced operations July 24, 1998. All ratios for the period have been
annualized.
(2)Class C shares have been offered since February 1, 1999. All ratios for the
period have been annualized.
(3)Per share data calculated using average shares outstanding method.
The accompanying notes are an integral part of the financial statements.
(42 FIRST AMERICAN FUNDS ANNUAL REPORT 2000
<PAGE>
<TABLE>
<CAPTION>
RATIO OF NET
RATIO OF INVESTMENT
RATIO OF NET EXPENSES TO INCOME TO
NET ASSET RATIO OF INVESTMENT AVERAGE AVERAGE
VALUE NET ASSETS EXPENSES TO INCOME TO NET ASSETS NET ASSETS PORTFOLIO
END OF TOTAL END OF AVERAGE AVERAGE (EXCLUDING (EXCLUDING TURNOVER
PERIOD RETURN (A) PERIOD (000) NET ASSETS NET ASSETS WAIVERS) WAIVERS) RATE
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 9.91 6.30% $ 80,992 0.60% 6.12% 1.13% 5.59% 95%
9.86 3.43 5,318 0.60 5.16 1.12 4.64 65
10.04 6.55 5,036 0.60 5.33 1.12 4.81 112
9.94 6.09 7,152 0.60 5.61 1.15 5.06 147
9.91 5.93 7,627 0.60 5.80 1.09 5.31 61
$ 9.91 6.29% $ 92,092 0.51% 5.94% 0.98% 5.47% 95%
9.87 3.53 119,522 0.60 5.15 0.87 4.88 65
10.04 6.55 173,136 0.60 5.33 0.87 5.06 112
9.94 6.09 184,368 0.60 5.60 0.90 5.30 147
9.91 5.93 93,588 0.60 5.80 0.84 5.56 61
$ 8.91 5.56% $ 21,737 1.15% 7.08% 1.17% 7.06% 90%
9.09 5.73 27,768 1.15 8.30 1.21 8.24 40
9.27 (6.17)+ 40,270 1.15 8.19 1.30 8.04 61
$ 8.89 4.83% $ 1,401 1.90% 6.20% 1.91% 6.19% 90%
9.07 4.90 788 1.90 7.56 1.96 7.50 40
9.27 (6.19)+ 114 1.90 7.44 2.05 7.29 61
$ 8.90 5.16% $ 1,241 1.65% 6.46% 1.73% 6.38% 90%
9.08 (0.28)+ 1,058 1.55 7.34 1.90 6.99 40
$ 8.92 5.94% $237,730 0.90% 7.26% 0.91% 7.25% 90%
9.09 5.96 184,666 0.90 8.56 0.93 8.53 40
9.27 (6.13)+ 54,491 0.90 8.44 1.05 8.29 61
-----------------------------------------------------------------------------------------------------------------
</TABLE>
FIRST AMERICAN FUNDS ANNUAL REPORT 2000 43)
<PAGE>
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2000
1 > ORGANIZATION
The First American Corporate Bond Fund, Fixed Income Fund, Intermediate
Term Income Fund, Limited Term Income Fund, and Strategic Income Fund are
mutual funds offered by First American Investment Funds, Inc. ("FAIF")
(each a "Fund" collectively, "the Funds"). Other mutual funds that are
offered by FAIF but are not included in this report are: Arizona Tax Free
Fund, California Intermediate Tax Free Fund, California Tax Free Fund,
Colorado Intermediate Tax Free Fund, Colorado Tax Free Fund, Intermediate
Tax Free Fund, Minnesota Intermediate Tax Free Fund, Minnesota Tax Free
Fund, Oregon Intermediate Tax Free Fund, Tax Free Fund, Balanced Fund,
Equity Income Fund, Equity Index Fund, Large Cap Value Fund, Large Cap
Growth Fund, Mid Cap Growth Fund, Mid Cap Value Fund, Small Cap Value Fund,
Small Cap Growth Fund, Emerging Markets Fund, International Index Fund,
International Fund, Health Sciences Fund, Real Estate Securities Fund and
Technology Fund. FAIF is registered under the Investment Company Act of
1940, as amended, as an open-end management investment company. The FAIF
articles of incorporation permit the Board of Directors to create
additional funds in the future.
These Funds offer Class A and Class Y shares. Corporate Bond Fund, Fixed
Income Fund and Strategic Income Fund also offer Class B and Class C
shares. Class A shares are sold with a front-end sales charge. Class B
shares are subject to a contingent deferred sales charge for six years and
automatically convert to Class A shares after eight years. Class C shares
are sold with a front-end sales charge and are subject to a contingent
deferred sales charge for 18 months. Class Y shares have no sales charge
and are offered only to qualifying institutional investors.
The Funds' prospectuses provide a description of each Fund's investment
objectives, policies and strategies. All classes of shares have identical
voting, dividend, liquidation and other rights, and the same terms and
conditions, except that the level of distribution fees charged may differ
among classes.
2 > SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies followed by the Funds are as follows:
SECURITY VALUATION - Security valuations for the Funds' investments are
furnished by an independent pricing service that has been approved by the
Board of Directors. Investments in equity securities that are traded on a
national securities exchange (or reported on the NASDAQ national market
system) are stated at the last quoted sales price if readily available for
such securities on each business day. Other equity securities traded in the
over-the-counter market and listed equity securities for which no sale was
reported on that date are stated at the last quoted bid price. Debt
obligations exceeding sixty days to maturity are valued by an independent
pricing service. The pricing service may employ methodologies that utilize
actual market transactions, broker-dealer supplied valuations, or other
electronic data processing techniques. These techniques generally consider
such factors as yields or prices of bonds of comparable quality, type of
issue, coupon, maturity, ratings and general market conditions. Securities
for which prices are not available from an independent pricing service but
where an active market exists are valued using market quotations obtained
from one or more dealers that make markets in the securities or from a
widely-used quotation system. When market quotations are not readily
available, securities are valued at fair value as determined in good faith
by procedures established and approved by the Board of Directors. Debt
obligations with sixty days or less remaining until maturity may be valued
at their amortized cost. Foreign securities are valued at the closing
prices on the principal exchanges on which they trade. The prices for
foreign securities are reported in local currency and converted to U.S.
dollars using currency exchange rates. Exchange rates are provided daily by
recognized independent pricing agents.
SECURITY TRANSACTIONS AND INVESTMENT INCOME - The Funds record security
transactions on the trade date of the security purchase or sale. Dividend
income is recorded on the ex-dividend date. Interest income, including
amortization of bond premium and discount, is recorded on the accrual
basis. Security gains and losses are determined on the basis of identified
cost, which is the same basis used for Federal income tax purposes.
(44 FIRST AMERICAN FUNDS ANNUAL REPORT 2000
<PAGE>
DISTRIBUTIONS TO SHAREHOLDERS - The Funds declare and pay income dividends
monthly.
Any net realized capital gains on sales of securities for a Fund are
distributed to shareholders at least annually.
FEDERAL TAXES - It is each Fund's intention to continue to qualify as a
regulated investment company and distribute all of its taxable income.
Accordingly, no provision for Federal income taxes is required. For Federal
income tax purposes, required distributions related to realized gains from
security transactions are computed as of September 30th and October 31st.
Net investment income and net realized gains or losses may differ for
financial statement and tax purposes because of temporary or permanent
book/tax differences. These differences are primarily due to losses
deferred due to wash sales and foreign currency gains and losses.
The character of distributions made during the year from net investment
income or net realized gains may differ from its ultimate characterization
for Federal income tax purposes. In addition, due to the timing of dividend
distributions, the fiscal year in which the amounts are distributed may
differ from the year that the income or realized gains or losses were
recorded by the Fund. To the extent these differences are permanent,
adjustments are made to the appropriate equity accounts in the period that
the difference arises.
As of September 30, 2000, the Strategic Income Fund reclassified (000)
($2,751) from accumulated net realized foreign exchange loss to
undistributed net investment income. The Limited Term Income Fund
reclassified (000) $94,747 from accumulated net realized capital loss to
additional paid-in capital to reflect the expiration or limitation on the
use of capital loss carryovers for tax purposes. The reclassification had
no effect on net assets or net asset values per share.
As of September 30, 2000, the following funds have capital loss
carryforwards (CLC) (000):
POST CLC
OCTOBER AMOUNT EXPIRATION DATE
---------------------------------------------------------------------------
Fixed Income Fund* $9,451 $91,517 2001-2008
Intermediate Term Income Fund* 6,815 12,212 2002-2008
Limited Term Income Fund* 1,403 12,284 2001-2008
Strategic Income Fund 3,084 17,847 2001-2008
---------------------------------------------------------------------------
*In accordance with Section 382 of the Internal Revenue Code, utilization
of the capital loss carryover is limited in the Fixed Income Fund,
Intermediate Term Income Fund and Limited Term Income Fund to $20,311,000,
$2,720,000 and $4,966,000, respectively per year.
FOREIGN CURRENCY TRANSLATION - The books and records of the Strategic
Income Fund are maintained in U.S. dollars on the following bases:
* market value of investment securities, assets and liabilities at the
current rate of exchange; and
* purchases and sales of investment securities, income and expenses at
the relevant rates of exchange prevailing on the respective dates of
such transactions.
The Strategic Income Fund does not isolate the portion of gains and losses
on investments in equity securities that is due to changes in the foreign
exchange rates from that which is due to changes in market prices of equity
securities. The Strategic Income Fund does isolate the effect of
fluctuations in foreign currency rates when determining the gain or loss
upon sale or maturity of foreign currency denominated debt obligations
pursuant to the Federal income tax regulations. Such amounts are
categorized as foreign currency gain or loss for both financial reporting
and income tax reporting purposes.
The Strategic Income Fund reports certain foreign currency related
transactions as components of realized gains for financial reporting
purposes, whereas such components are treated as ordinary income for
Federal income tax purposes.
EXPENSES - Expenses that are directly related to one of the Funds are
charged directly to that Fund. Other operating expenses are allocated to
the Funds on the basis of relative net assets. Class specific expenses,
such as the 12b-1 fees, are borne by that class. Income, other expenses and
realized and unrealized gains and losses of a Fund are allocated to the
respective class on the basis of the relative net assets each day.
SECURITIES LENDING - Each Fund may lend up to one-third of the value of its
total assets to broker-dealers, banks or other institutional borrowers of
securities in order to earn additional income. Each Fund's policy is to
maintain collateral in the form of cash, United States Government
securities or other high grade debt obligations equal to at least 100% of
the value of securities loaned. The collateral is then marked to market
daily until the securities are returned.
SECURITIES PURCHASED ON A WHEN-ISSUED BASIS - Delivery and payment for
securities which have been purchased by a Fund on a forward commitment or
when-issued basis can take place up to a month or more after the
transaction date. During this period, such securities are subject to market
fluctuations and the portfolio maintains, in a segregated account with its
custodian, assets with a market
FIRST AMERICAN FUNDS ANNUAL REPORT 2000 45)
<PAGE>
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2000
value equal to or greater than the amount of its purchase commitments. The
purchase of securities on a when-issued or forward commitment basis may
increase the volatility of the Fund's net asset value if the Fund makes
such purchases while remaining substantially fully invested. At September
30, 2000, Fixed Income Fund and Strategic Income Fund had outstanding
when-issued commitments of $24,232,500 and $2,019,375, respectively.
In connection with the ability to purchase securities on a when-issued
basis, the Fixed Income, Intermediate Term Income and Strategic Income
Funds may enter into dollar rolls in which the Fund sells securities
purchased on a forward commitment basis and simultaneously contracts with a
counterparty to repurchase similar (same type, coupon, and maturity) but
not identical securities on a specified future date. Dollar rolls are
considered a form of leverage. As an inducement to "roll over" its purchase
commitments, the Fund receives negotiated fees. For the year ended
September 30, 2000, the fees earned by each Fund are as follows:
FEE INCOME EARNED
---------------------------------------------------------------------------
Fixed Income Fund $499,125
Strategic Income Fund 32,791
---------------------------------------------------------------------------
ILLIQUID OR RESTRICTED SECURITIES - As of September 30, 2000, investments
in securities in the Strategic Income Fund included issues that are
illiquid or restricted. Restricted securities are often purchased in
private placement transactions, are not registered under the Securities Act
of 1933, may have contractual restrictions on resale, and are valued under
methods approved by the Board of Directors as reflecting fair value. A
security may also be considered illiquid if it lacks a readily available
market or if its valuation has not changed for a certain period of time.
The Fund intends to invest no more than 10% of its net assets (determined
at the time of purchase and reviewed periodically) in illiquid or
restricted securities. Certain restricted securities, eligible for resale
to qualified institutional investors, are not subject to that limitation.
The aggregate value of illiquid or restricted securities subject to this
limitation as of September 30, 2000 was $5,938,000, which represents 2.27%
of the Fund's net assets. Information concerning restricted securities is
as follows:
DATES
SECURITY PAR ACQUIRED COST BASIS
---------------------------------------------------------------------------
Acme Television $ 500,000 9/97-3/99 $ 410,892
AEI Holdings 550,000 9/98-3/99 533,813
AEI Resources 150,000 12/98 150,000
Aircraft Finance Trust 1,000,000 2/00 917,422
Glenoit 100,000 3/97-8/97 103,155
Hyundai Semiconductor 1,000,000 2/00 900,625
Medianews Group 500 1/00 --
Nextel Communications 1,400,000 2/98-6/99 874,707
Nextlink Communications 100,000 2/98 99,798
Nuevo Grupo Lusacell 1,000,000 2/00 1,065,000
Republic Technologies 250,000 8/99 246,775
United International Holdings 1,050,000 2/98-10/99 656,444
Wesco Distribution 475,000 5/98-7/99 470,694
---------------------------------------------------------------------------
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS - The
preparation of financial statements, in conformity with accounting
principles generally accepted in the United States, requires management to
make estimates and assumptions that affect the reported amount of net
assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported results of
operations during the reporting period. Actual results could differ from
those estimates.
3 > FEES AND EXPENSES
ADVISORY FEES - Pursuant to an investment advisory agreement (the
"Agreement"), First American Asset Management (the "Advisor"), a division
of U.S. Bank National Association ("U.S. Bank") manages each Fund's assets
and furnishes related office facilities, equipment, research and personnel.
The Agreement requires each Fund to pay the Advisor a monthly fee based
upon average daily net assets. The fee for each Fund is equal to an annual
rate of 0.70% of the average daily net assets. The Advisor intends to waive
fees during the current fiscal year so that total fund operating expenses
do not exceed expense limitations described in the Funds' prospectuses. Fee
waivers may be discontinued at any time.
The Funds may invest in First American Funds, Inc. ("FAF"), subject to
certain limitations. The terms of such transactions are identical to those
of non-related entities except that, to avoid duplicative investment
advisory fees, the Advisor reimburses each FAIF Fund an amount equal to the
investment advisory fee earned by FAF related to such investments.
(46 FIRST AMERICAN FUNDS ANNUAL REPORT 2000
<PAGE>
SUB-ADVISOR FEES - Federated Global Research Corp., a subsidiary of
Federated Investors, Inc. serves as sub-advisor to the Strategic Income
Fund under an agreement with the Advisor (the "Sub-Advisory Agreement").
For their services under the Sub-Advisory agreement, they are paid a
monthly fee by the Advisor calculated on an annual basis equal to 0.20% of
the first $25 million of the Fund's average daily net assets, 0.165% of the
Fund's average daily net assets in excess of $25 million up to $50 million,
0.13% of the Fund's average daily net assets in excess of $50 million up to
$100 million and 0.105% of the Fund's average daily net assets in excess of
$100 million.
ADMINISTRATION FEES - SEI Investments Mutual Funds Services ("SIMFS")
provided administrative services, including certain accounting, legal, and
shareholder services to the First American Family of Funds from October 1,
1999 through December 31, 1999. Effective January 1, 2000 U.S. Bank was
appointed as the administrator and began providing administrative services
to the First American Family of Funds. Under both arrangements, the Funds
are charged an annual rate of 0.12% of each FAIF Fund's average daily net
assets, with a minimum annual fee of $50,000. To the extent that aggregate
net assets of the First American Family of Funds exceed $8 billion, the
annual rate for each FAIF Fund is reduced to 0.105% of its relative share
of excess net assets. Fees are computed daily and paid monthly.
SUB-ADMINISTRATION FEES - U.S. Bank assisted SIMFS and provided
sub-administration services for the Funds from October 1, 1999 through
December 31, 1999. For these services SIMFS compensated U.S. Bank, as
sub-administrator, monthly at an annual rate of up to 0.05% of each Fund's
average daily net assets. The fees for each Fund from October 1, 1999
through December 31, 1999 were approximately 0.017% of average daily net
assets. Under this arrangement, SIMFS paid U.S. Bank $2,646,000 in
aggregate for this three month period for the First American Family of
Funds.
Effective January 1, 2000 SIMFS was appointed sub-administrator and began
assisting U.S. Bank in providing sub-administration services for the Funds.
For these services, U.S. Bank compensates SIMFS monthly at an annual rate
equal to 0.05% of aggregate average daily net assets of FAIF. In addition,
SIMFS also receives 0.015% on assets up to $34.5 billion, 0.0075% on the
next $25.5 billion and 0.005% on assets over $60 billion for all Funds.
There is a minimum fee of $50,000 per Fund (the oldest 38 Funds are
excluded). U.S. Bank paid SIMFS $8,501,000 in aggregate from January 1,
2000 through September 30, 2000 for the First American Family of Funds. For
the Funds included in this annual report the amounts paid to U.S. Bank and
SIMFS for their respective periods were as follows (000):
U.S. BANK SIMFS
---------------------------------------------------------------------------
Corporate Bond Fund $ -- $28
Fixed Income Fund 114 674
Intermediate Term Income Fund 44 204
Limited Term Income Fund 18 85
Strategic Income Fund 18 122
---------------------------------------------------------------------------
CUSTODIAN FEES - Through a separate contractual agreement, U.S. Bank serves
as the Funds' custodian. The fee for each Fund is equal to an annual rate
of 0.03% of average daily net assets.
DISTRIBUTION FEES - SEI Investments Distribution Co. ("SIDCO") serves as
distributor of the Funds. Under the distribution plan, each of the Funds
pays SIDCO a monthly distribution fee equal to an annual rate of 0.25% of
each Fund's average daily net assets of the Class A shares, 1.00% of the
Class B shares, and 1.00% of the Class C shares, which may be used by SIDCO
to provide compensation for sales support and distribution activities.
Intermediate Term Income Fund waives 0.10% of Class A distribution fees.
Limited Term Income Fund waived 0.25% of Class A distribution fees through
January 31, 2000. Effective February 1, 2000, Limited Term Income Fund
began waiving 0.10% of Class A distribution fees. Fixed Income Fund and
Strategic Income Fund waived 0.35% of Class C distribution fees through
January 31, 2000. No distribution fees are paid by Class Y shares. Under
the agreement, SIDCO paid to U.S. Bank and its affiliates the following
amounts for the funds included in this annual report for the year ended
September 30, 2000 (000):
U.S. BANK
NATIONAL U.S. BANCORP U.S. BANK
ASSOCIATION PIPER JAFFRAY TRUST
---------------------------------------------------------------------------
Corporate Bond Fund $ -- $ -- $ --
Fixed Income Fund 39 139 4
Intermediate Term
Income Fund 3 25 --
Limited Term Income Fund 2 17 --
Strategic Income Fund 2 20 --
---------------------------------------------------------------------------
TRANSFER AGENT FEES - From October 1, 1999 to December 31, 1999 DST
Systems, Inc. provided transfer agency services for the Funds. Effective
January 1, 2000 U.S. Bank was appointed as transfer agent and dividend
disbursement agent. As the servicing agent U.S. Bank was paid $9,862,000 in
aggregate for the year ended September 30, 2000 for the First American
Family of
FIRST AMERICAN FUNDS ANNUAL REPORT 2000 47)
<PAGE>
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2000
Funds. For the year ended September 30, 2000 fees paid to U.S. Bank for
the funds included in this report were as follows (000):
---------------------------------------------------------------------------
Corporate Bond Fund $ 28
Fixed Income Fund 298
Intermediate Term Income Fund 52
Limited Term Income Fund 164
Strategic Income Fund 80
---------------------------------------------------------------------------
OTHER FEES - In addition to the investment advisory and management fees,
custodian fees, distribution fees, administrator and transfer agent fees,
each Fund is responsible for paying most other operating expenses including
organization costs, fees and expenses of outside directors, registration
fees, printing shareholder reports, legal, auditing, insurance and other
miscellaneous expenses.
For the year ended September 30, 2000, legal fees and expenses were paid to
a law firm of which the Assistant Secretaries of the Funds are partners.
SALES CHARGES - A contingent deferred sales charge ("CDSC") is imposed on
redemptions made in Class B shares. The CDSC varies depending on the number
of years from time of payment for the purchase of Class B shares until the
redemption of such shares.
CONTINGENT DEFERRED SALES CHARGE
AS A PERCENTAGE OF DOLLAR
YEAR SINCE PURCHASE AMOUNT SUBJECT TO CHARGE
---------------------------------------------------------------------------
First 5.00%
Second 5.00%
Third 4.00%
Fourth 3.00%
Fifth 2.00%
Sixth 1.00%
Seventh 0.00%
Eighth 0.00%
---------------------------------------------------------------------------
Class B shares will automatically convert to Class A shares eight years
after the first day of the month shares are purchased.
A CDSC of 1.00% is imposed on redemptions made in Class C shares for the
first eighteen months.
The CDSC for Class B and Class C shares is imposed on the value of the
purchased shares, or the value at the time of redemption, whichever is
less.
For the year ended September 30, 2000, sales charges retained by SIDCO for
distributing the First American Family of Funds' shares were approximately
$238,000.
(48 FIRST AMERICAN FUNDS ANNUAL REPORT 2000
<PAGE>
4 > CAPITAL SHARE TRANSACTIONS
Capital share transactions for the Funds were as follows (000):
<TABLE>
<CAPTION>
CORPORATE FIXED INCOME
BOND FUND(1) FUND
-------------------------------------------------------------------------------------------
2/1/00 10/1/99 10/1/98
to to to
9/30/00 9/30/00 9/30/99
-------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Class A:
Shares issued 81 3,611 1,748
Shares issued in lieu of cash distributions 3 456 478
Shares redeemed (7) (6,608) (6,904)
-------------------------------------------------------------------------------------------
TOTAL CLASS A TRANSACTIONS 77 (2,541) (4,678)
===========================================================================================
Class B:
Shares issued 10 183 394
Shares issued in lieu of cash distributions -- 52 77
Shares redeemed -- (532) (570)
-------------------------------------------------------------------------------------------
TOTAL CLASS B TRANSACTIONS 10 (297) (99)
===========================================================================================
Class C:
Shares issued 14 25 69
Shares issued in lieu of cash distributions -- 2 1
Shares redeemed -- (42) (2)
-------------------------------------------------------------------------------------------
TOTAL CLASS C TRANSACTIONS 14 (15) 68
===========================================================================================
Class Y:
Shares issued 9,088 34,068 38,033
Shares issued in connection with acquisition of
Piper Common Trust Fund -- -- 308
Shares issued in lieu of cash distributions 13 2,278 4,134
Shares redeemed (125) (31,157) (29,568)
-------------------------------------------------------------------------------------------
TOTAL CLASS Y TRANSACTIONS 8,976 5,189 12,907
===========================================================================================
NET INCREASE FROM SHARE TRANSACTIONS 9,077 2,336 8,198
===========================================================================================
</TABLE>
<TABLE>
<CAPTION>
INTERMEDIATE TERM LIMITED TERM STRATEGIC
INCOME FUND INCOME FUND INCOME FUND
-----------------------------------------------------------------------------------------------------------------------------
10/1/99 10/1/98 10/1/99 10/1/98 10/1/99 10/1/98
to to to to to to
9/30/00 9/30/99 9/30/00 9/30/99 9/30/00 9/30/99
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Class A:
Shares issued 901 388 227 208 208 183
Shares issued in connection with the acquisition of
Intermediate Government Bond Fund and Adjustable
Rate Mortgage Fund, respectively 493 -- 8,781 -- -- --
Shares issued in lieu of cash distributions 155 149 179 24 88 121
Shares redeemed (2,029) (1,732) (1,554) (195) (914) (1,590)
-----------------------------------------------------------------------------------------------------------------------------
TOTAL CLASS A TRANSACTIONS (480) (1,195) 7,633 37 (618) (1,286)
=============================================================================================================================
Class B:
Shares issued -- -- -- -- 94 79
Shares issued in lieu of cash distributions -- -- -- -- 6 2
Shares redeemed -- -- -- -- (29) (6)
-----------------------------------------------------------------------------------------------------------------------------
TOTAL CLASS B TRANSACTIONS -- -- -- -- 71 75
=============================================================================================================================
Class C:
Shares issued -- -- -- -- 52 116
Shares issued in lieu of cash distributions -- -- -- -- 8 1
Shares redeemed -- -- -- -- (37) (1)
-----------------------------------------------------------------------------------------------------------------------------
TOTAL CLASS C TRANSACTIONS -- -- -- -- 23 116
=============================================================================================================================
Class Y:
Shares issued 7,483 7,415 2,511 2,958 9,124 15,739
Shares issued in connection with the acquisition of
Intermediate Government Bond Fund and Adjustable
Rate Mortgage Securities Fund, respectively 13,376 -- 44 -- -- --
Shares issued in lieu of cash distributions 931 1,131 202 273 419 707
Shares redeemed (18,412) (14,170) (5,581) (8,363) (3,202) (2,010)
-----------------------------------------------------------------------------------------------------------------------------
TOTAL CLASS Y TRANSACTIONS 3,378 (5,624) (2,824) (5,132) 6,341 14,436
=============================================================================================================================
NET INCREASE (DECREASE) FROM SHARE TRANSACTIONS 2,898 (6,819) 4,809 (5,095) 5,817 13,341
=============================================================================================================================
</TABLE>
(1)Commenced operations on February 1, 2000.
FIRST AMERICAN FUNDS ANNUAL REPORT 2000 49)
<PAGE>
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2000
5 > INVESTMENT SECURITY TRANSACTIONS
During the year ended September 30, 2000, purchases of securities and
proceeds from sales of securities, other than temporary investments in
short-term securities, were as follows (000):
U.S. GOVERNMENT OTHER INVESTMENT
SECURITIES SECURITIES
---------------------------------------------------------------------------
PURCHASES SALES PURCHASES SALES
---------------------------------------------------------------------------
Corporate Bond Fund $ 49,045 $ 37,337 $118,686 $ 43,468
Fixed Income Fund 275,237 222,226 255,008 210,449
Intermediate Term
Income Fund 215,706 196,230 125,645 119,231
Limited Term
Income Fund 115,614 66,336 104,536 64,931
Strategic Income Fund 39,126 33,592 184,326 133,550
---------------------------------------------------------------------------
Including dollar rolls, purchases and sales of U.S. government securities
aggregated (000) $493,326 and $497,166 for Fixed Income Fund, respectively,
and $62,789 and $61,038 for Strategic Income Fund, respectively.
At September 30, 2000, the total cost of securities for Federal income tax
purposes was not materially different from amounts reported for financial
reporting purposes. The aggregate gross unrealized appreciation and
depreciation for securities held by the Funds at September 30, 2000, is as
follows (000):
AGGREGATE GROSS AGGREGATE GROSS
APPRECIATION (DEPRECIATION) NET
--------------------------------------------------------------------------
Corporate Bond Fund $ 934 $ (612) $ 322
Fixed Income Fund 11,637 (23,576) (11,939)
Intermediate Term
Income Fund 2,297 (4,091) (1,794)
Limited Term Income Fund 954 (580) 374
Strategic Income Fund 3,164 (14,724) (11,560)
--------------------------------------------------------------------------
6 > SECURITIES LENDING TRANSACTIONS
In order to generate additional income, each Fund may lend portfolio
securities representing up to one-third of the value of total assets (which
includes collateral received for securities on loan) to broker dealers,
banks, or other institutional borrowers of securities. As with other
extensions of credit, there may be risks of delay in recovery of the
securities or even loss of rights in the collateral should the borrower of
the security fail financially. The market value of the securities on loan
at September 30, 2000, the collateral purchased with cash received and held
at September 30, 2000, with respect to such loans, and income generated
during the period from the program were as follows (000):
MARKET VALUE OF INCOME RECEIVED
LOANED SECURITIES FROM SECURITIES LENDING
---------------------------------------------------------------------------
Corporate Bond Fund $ 19,008 $ 7
Fixed Income Fund 698,602 665
Intermediate Term Income Fund 175,687 191
Limited Term Income Fund 22,850 30
Strategic Income Fund 34,373 40
---------------------------------------------------------------------------
MARKET VALUE OF COLLATERAL PURCHASED WITH CASH RECEIVED
---------------------------------------------------------------------------
REPURCHASE MONEY MARKET OTHER FIXED
AGREEMENTS INSTRUMENT INCOME SECURITIES TOTAL
---------------------------------------------------------------------------
Corporate Bond
Fund $ 12,971 $ 66 $ 6,673 $ 19,710
Fixed Income Fund 476,711 2,433 245,265 724,409
Intermediate Term
Income Fund 119,885 612 61,680 182,177
Limited Term
Income Fund 15,592 80 8,022 23,694
Strategic Income
Fund 23,455 120 12,068 35,643
---------------------------------------------------------------------------
U.S. Bank acts as the securities lending agent in transactions involving
the lending of portfolio securities on behalf of the Funds. For these
services U.S. Bank received $2,580,000 in aggregate for the First American
Family of Funds. For the year ended September 30, 2000, securities lending
fees for the funds included in this report were as follows (000):
---------------------------------------------------------------------------
Corporate Bond Fund $ 5
Fixed Income Fund 454
Intermediate Term Income Fund 131
Limited Term Income Fund 23
Strategic Income Fund 1
---------------------------------------------------------------------------
7 > COMMON TRUST FUND CONVERSIONS
On July 23, 1999, the Piper Common Bond Fund was converted into the Fixed
Income Fund. The assets, which consisted of securities and related
receivables, were converted on a tax free basis. 308,392 shares of Class Y
of the Fixed Income Fund were issued at the time of conversion. The net
assets of the Piper Common Bond Fund and Fixed Income Fund immediately
before the conversion were $3,299,801 and $1,399,655,638, respectively.
Included in the net assets of the Piper Common Bond Fund were $32,848 of
unrealized losses.
8 > FUND MERGER
The Board of Directors and shareholders of Intermediate Government Bond and
Adjustable Rate Mortgage Funds approved a reorganization into Intermediate
Term Income and Limited Term Income Funds, respectively, at the close of
business on February 25, 2000.
(50 FIRST AMERICAN FUNDS ANNUAL REPORT 2000
<PAGE>
Under the Agreement and Plan of Reorganization, Class A and Class Y shares
of Intermediate Government Bond and Adjustable Rate Mortgage Funds were
exchanged for shares of the Class A and Class Y shares of the Intermediate
Term Income and Limited Term Income Funds, respectively on a tax free
basis.
The net assets before the reorganization and shares issued and redeemed
were as follows:
SHARES SHARES
NET ASSETS ISSUED REDEEMED
---------------------------------------------------------------------------
Intermediate Term Income Fund $345,964,510 13,868,921 15,017,432
Limited Term Income Fund 119,910,324 8,824,931 10,868,460
---------------------------------------------------------------------------
Included in the net assets of the redeeming funds were the following
components:
<TABLE>
<CAPTION>
UNDISTRIBUTED
(DISTRIBUTIONS
IN EXCESS OF) ACCUMULATED
PAID IN NET INVESTMENT REALIZED NET UNREALIZED NET
CAPITAL INCOME LOSS DEPRECIATION ASSETS
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Intermediate
Government
Bond Fund $136,308,868 $ -- $ (232,384) $(2,740,353) $133,331,131
Adjustable Rate
Mortgage
Securities
Fund 190,834,661 -- (103,496,635) (674,084) 86,663,942
------------------------------------------------------------------------------------------------
</TABLE>
9 > CONCENTRATION OF RISKS
The Strategic Income Fund is subject to special risks associated with
investing in foreign securities and to a decline in net asset value
resulting from changes in exchange rates between the United States dollar
and foreign currencies. Strategic Income Fund is also subject to risks
associated with investing in securities issued by issuers in emerging
market countries. Because of the special risks associated with foreign
investing, the Strategic Income Fund may be subject to greater volatility
than most mutual funds which invest primarily in domestic securities.
Strategic Income Fund also invests in lower-rated (i.e., rated Ba or lower
by Moody's or BB or lower by Standard & Poor's) corporate and foreign debt
obligations, which are commonly referred to as "junk bonds". Lower-rated
securities will usually offer higher yields than higher-rated securities.
However, there is more risk associated with these investments. These
lower-rated bonds may be more susceptible to real or perceived adverse
economic conditions than investment grade bonds. Lower-rated securities
tend to have more price volatility and carry more risk to principal than
higher-rated securities.
The summary of credit quality ratings for the securities held by the
Strategic Income Fund as of September 30, 2000, are as follows:
STANDARD & POORS': MOODY'S:
---------------------------------------------------------------------------
AAA 22.99% Aaa 26.34%
AA 1.13% Aa 1.05%
A 3.63% A 3.43%
BBB 6.82% Baa 8.29%
BB 20.62% Ba 12.85%
B 20.37% B 41.44%
CCC 4.05% Caa 0.88%
Not Rated 10.39% Not Rated 5.72%
------- -------
100.00% 100.00%
10 > LINE OF CREDIT
Pursuant to a commitment letter dated September 7, 1999, Citibank N.A.
provides a revolving line of credit to FAIF for short term or emergency
purposes. The loans are for the respective benefit of and repayable from
the respective assets of each Fund. The aggregate principal amount of all
borrowings may not exceed $100,000,000 and borrowings must be in the
minimum principal amount of $1,000,000 and integral multiple amounts of
$1,000,000 for each Fund. At the Fund's option, Citibank is paid either a
base rate or the Federal Funds rate on the amount out on loan. There is a
commitment fee on the unused portion of the line of credit. The commitment
fee is calculated at 8.0 basis points on the unutilized portion of the
facility. Fees are accrued daily and paid quarterly to Citibank N.A. There
were no borrowings under the line of credit during the year ended September
30, 2000. Effective October 11, 2000, the line of credit was discontinued.
11 > PENDING ACQUISITION
On October 4, 2000, U.S. Bancorp, the parent company of the Funds'
investment advisor, announced that it had entered into an agreement to be
acquired by Firstar Corporation. It is anticipated that this acquisition
will be completed in the first quarter of 2001, subject to regulatory
approval, the approval of U.S. Bancorp shareholders and the satisfaction of
customary closing conditions.
FIRST AMERICAN FUNDS ANNUAL REPORT 2000 51)
<PAGE>
NOTICE TO SHAREHOLDERS SEPTEMBER 30, 2000 (UNAUDITED)
THE INFORMATION SET FORTH BELOW IS FOR EACH FUND'S FISCAL YEAR AS REQUIRED
BY FEDERAL LAWS. MOST SHAREHOLDERS, HOWEVER, MUST REPORT DISTRIBUTIONS ON A
CALENDAR YEAR BASIS FOR INCOME TAX PURPOSES WHICH MAY INCLUDE DISTRIBUTIONS
FOR PORTIONS OF TWO FISCAL YEARS OF A FUND. ACCORDINGLY, THE INFORMATION
NEEDED FOR INCOME TAX PURPOSES WILL BE SENT IN EARLY 2001. PLEASE CONSULT
YOUR TAX ADVISER FOR PROPER TREATMENT OF THIS INFORMATION.
Dear First American Investment Fund Shareholders:
For the fiscal year ended September 30, 2000, each Fund designated long
term capital gains and ordinary income with regard to distributions paid
during the year as follows:
(A) (B)
LONG TERM ORDINARY (C)
CAPITAL GAINS INCOME TOTAL
DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS
FUND (TAX BASIS) (TAX BASIS) (TAX BASIS)
---------------------------------------------------------------------------
Corporate Bond 0% 100% 100%
Fixed Income 0% 100% 100%
Intermediate Term Income 0% 100% 100%
Limited Term Income 0% 100% 100%
Strategic Income 0% 100% 100%
---------------------------------------------------------------------------
Based on a percentage of the fund's total distributions.
(52 FIRST AMERICAN FUNDS ANNUAL REPORT 2000
<PAGE>
BOARD OF DIRECTORS FIRST AMERICAN INVESTMENT FUNDS, INC.
MR. ROBERT DAYTON
Director of First American Investment Funds, Inc.
Chief Executive Officer of Okabena Company
MR. ROGER GIBSON
Director of First American Investment Funds, Inc.
Vice President of North America-Mountain Region for United Airlines
MR. ANDREW HUNTER III
Director of First American Investment Funds, Inc.
Chairman of Hunter Keith Industries
MR. LEONARD KEDROWSKI
Director of First American Investment Funds, Inc.
Owner and President of Executive Management Consulting, Inc.
MR. JOHN MURPHY JR.
Director of First American Investment Funds, Inc.
Executive Vice President, U.S. Bancorp
MR. ROBERT SPIES
Director of First American Investment Funds, Inc.
Retired Vice President, U.S. Bank National Association
MR. JOSEPH STRAUSS
Director of First American Investment Funds, Inc.
Former Chairman of First American Investment Funds, Inc.
Owner and President of Strauss Management Company
MS. VIRGINIA STRINGER
Chairperson of First American Investment Funds, Inc.
Owner and President of Strategic Management Resources, Inc.
<PAGE>
[LOGO] FIRST AMERICAN FUNDS(R)
THE POWER OF DISCIPLINED INVESTING(R)
DIRECT FUND CORRESPONDENCE TO:
FIRST AMERICAN FUNDS
P.O. Box 1330
Minneapolis, MN 55440-1330
This report and the financial statements contained herein are submitted
for the general information of the shareholders of the corporation and
are not intended to be a forecast of future events, a guarantee of future
results, nor investment advice. Further, there is no assurance that
certain securities will remain in or out of each fund's portfolio.
For a prospectus or fund profile containing more information on First
American Funds, including investment policies, fees and expenses, please
contact your investment professional, call Investor Services at
1-800-637-2548, or visit us on the web at www.firstamericanfunds.com.
Please read the prospectus or profile carefully before you invest or send
money.
INVESTMENT ADVISOR AND ADMINISTRATOR
First American Asset Management,
a division of U.S. Bank National Association
601 Second Avenue South
Minneapolis, Minnesota 55402
CUSTODIAN
U.S. Bank National Association
180 East Fifth Street
St. Paul, Minnesota 55101
DISTRIBUTOR
SEI Investments Distribution Co.
1 Freedom Valley Drive
Oaks, Pennsylvania 19456
SEI IS NOT AN AFFILIATE OF U.S. BANK
INDEPENDENT AUDITORS
Ernst & Young LLP
1400 Pillsbury Center
200 South Sixth Street
Minneapolis, Minnesota 55402
COUNSEL
Dorsey & Whitney LLP
220 South Sixth Street
Minneapolis, Minnesota 55402
--------------------------------------------------------------------------------
FIRST AMERICAN FUNDS Bulk Rate
c/o American Financial Printing Inc. U.S. Postage
404 Industrial Boulevard, N.E. PAID
Minneapolis, MN 55413 Mpls, MN
Permit No. 26388
In an attempt to reduce shareholder costs and help eliminate duplication, the
funds will try to limit their mailing to one report for each address that lists
one or more shareholders with the same last name. If you would like additional
copies, please call Investor Services at 1-800-637-2548.
3111-00 11/2000
AR-BOND-00
