JANUARY 31, 2000
AS SUPPLEMENTED
MAY 23, 2000
ASSET CLASSES
* EQUITY FUNDS
* FUNDS OF FUNDS
(*) BOND FUNDS
* TAX FREE BOND FUNDS
* MONEY MARKET FUNDS
PROSPECTUS
FIRST AMERICAN INVESTMENT FUNDS, INC.
FIRST AMERICAN
BOND
FUNDS
CLASS Y SHARES
CORPORATE BOND FUND
FIXED INCOME FUND
INTERMEDIATE TERM INCOME FUND
LIMITED TERM INCOME FUND
STRATEGIC INCOME FUND
AS WITH ALL MUTUAL FUNDS, THE SECURITIES AND EXCHANGE COMMISSION HAS NOT
APPROVED OR DISAPPROVED THE SHARES OF THESE FUNDS, OR DETERMINED IF THE
INFORMATION IN THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY STATEMENT TO THE
CONTRARY IS A CRIMINAL OFFENSE.
[LOGO] FIRST AMERICAN FUNDS(R)
THE POWER OF DISCIPLINED INVESTING(R)
<PAGE>
Table of
CONTENTS
FUND SUMMARIES
- --------------------------------------------------------------------------------
Corporate Bond Fund 2
- --------------------------------------------------------------------------------
Fixed Income Fund 4
- --------------------------------------------------------------------------------
Intermediate Term Income Fund 6
- --------------------------------------------------------------------------------
Limited Term Income Fund 8
- --------------------------------------------------------------------------------
Strategic Income Fund 10
- --------------------------------------------------------------------------------
POLICIES & SERVICES
- --------------------------------------------------------------------------------
Buying and Selling Shares 13
- --------------------------------------------------------------------------------
Managing Your Investment 14
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
Management 15
- --------------------------------------------------------------------------------
More About the Funds 17
- --------------------------------------------------------------------------------
Financial Highlights 20
- --------------------------------------------------------------------------------
FOR MORE INFORMATION Back Cover
- --------------------------------------------------------------------------------
<PAGE>
Fund Summaries
INTRODUCTION
This section of the prospectus describes the objectives of the First American
Bond Funds, summarizes the main investment strategies used by each fund in
trying to achieve its objectives, and highlights the risks involved with these
strategies. It also provides you with information about the performance, fees,
and expenses of the funds.
AN INVESTMENT IN THE FUNDS IS NOT A DEPOSIT OF U.S. BANK NATIONAL ASSOCIATION
AND IS NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION
OR ANY OTHER GOVERNMENT AGENCY.
1
PROSPECTUS - First American Bond Funds
Class Y Shares
<PAGE>
Fund Summaries
CORPORATE BOND FUND
- --------------------------------------------------------------------------------
OBJECTIVE
Corporate Bond Fund's objective is to provide investors with a high level of
current income consistent with prudent risk to capital.
- --------------------------------------------------------------------------------
MAIN INVESTMENT STRATEGIES
Under normal market conditions, Corporate Bond Fund will invest primarily (at
least 65% of its total assets) in corporate debt obligations, the Fund will also
invest in a combination of:
* U.S. dollar denominated debt obligations of foreign issuers.
* securities issued or guaranteed by the U.S. government or its agencies and
instrumentalities.
* mortgage- and asset-backed securities.
Fund managers employ a bottom-up approach to investing, evaluating individual
securities before considering the impact of economic trends. Securities are
selected using fundamental credit research to identify relative value in the
market. Positions are sold in anticipation of credit deterioration or when a
security is priced expensively relative to other comparable investments.
The fund invests primarily in securities rated investment grade at the time of
purchase or in unrated securities of comparable quality. However, up to 35% of
the fund's securities may be rated lower than investment grade at the time of
purchase or unrated and of comparable quality (securities commonly referred to
as "junk bonds"). The fund will not invest in securities rated lower than B at
the time of purchase or in unrated securities of equivalent quality. Unrated
securities will not exceed 25% of the fund's total assets. Quality
determinations regarding these securities will be made by the fund's advisor.
The fund may invest up to 25% of its total assets in foreign debt securities
payable in U.S. dollars.
Under normal market conditions the fund attempts to maintain a weighted average
effective maturity for its portfolio securities of 15 years or less and an
average effective duration of four to nine years. The fund's weighted average
effective maturity and effective duration are measures of how the fund may
react to interest rate changes.
To generate additional income, the fund may lend securities representing up to
one-third of the value of its total assets to broker-dealers, banks and other
institutions.
- --------------------------------------------------------------------------------
MAIN RISKS
The price and yield of this fund will change daily due to changes in interest
rates and other factors, which means you could lose money. The main risks of
investing in this fund include:
Interest Rate Risk
Debt securities typically decrease in value when interest rates rise. This risk
is usually greater for longer-term debt securities. One measure of interest rate
risk is effective duration, explained in "More About The Funds -- Investment
Strategies" Section.
Income Risk
The fund's income could decline due to falling market interest rates.
Credit Risk
An issuer of debt securities may not make timely principal or interest payments
on its securities, or the other party to a contract (such as a securities
lending agreement) may default on its obligations.
Call Risk
During periods of falling interest rates, a bond issuer may "call" -- or repay
- -- its high-yielding bonds before their maturity date. The fund would then be
forced to invest the unanticipated proceeds at lower interest rates, resulting
in a decline in the fund's income.
Risks of Mortgage- and Asset-Backed Securities
Falling interest rates could cause faster than expected prepayments of the
obligations underlying mortgage- and asset-backed securities, which the fund
would have to invest at lower interest rates. On the other hand, rising interest
rates could cause prepayments of the obligations to decrease, extending the life
of mortgage- and asset-backed securities with lower payment rates. For
additional explanation, see "Prepayment Risk" and "Extension Risk" in the "More
About The Funds -- Investment Strategies" Section.
Foreign Security Risk
Securities of foreign issuers, even when dollar-denominated and publicly traded
in the United States, may involve risks not associated with the securities of
domestic issuers, including the risks of adverse currency fluctuations and of
political or social instability or diplomatic developments that could adversely
affect the securities.
Risks of High-Yield Securities
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.
- --------------------------------------------------------------------------------
FUND PERFORMANCE
Because Corporate Bond Fund shares were not offered prior to the date of this
prospectus, no performance information is presented for these shares.
2
PROSPECTUS - First American Bond Funds
Class Y Shares
<PAGE>
Fund Summaries
CORPORATE BOND FUND CONTINUED
- --------------------------------------------------------------------------------
FEES AND EXPENSES
As an investor, you pay fees and expenses to buy and hold shares of the fund.
You pay shareholder fees directly when you buy or sell shares. You pay annual
fund operating expenses indirectly since they are deducted from fund assets.
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
- --------------------------------------------------------------------------------
MAXIMUM SALES CHARGE (LOAD) None
MAXIMUM DEFERRED SALES CHARGE (LOAD) None
ANNUAL FUND OPERATING EXPENSES AS A % OF AVERAGE NET ASSETS
- --------------------------------------------------------------------------------
Management Fees 0.70%
Distribution and Service (12b-1) Fees None
Other Expenses(1) 0.19%
TOTAL(2) 0.89%
- --------------------------------------------------------------------------------
(1) Other expenses are based on estimated amounts for the current fiscal year.
(2) THE ADVISOR INTENDS TO WAIVE FEES DURING THE CURRENT FISCAL YEAR SO THAT
TOTAL FUND OPERATING EXPENSES DO NOT EXCEED 0.50%. FEE WAIVERS MAY BE
DISCONTINUED AT ANY TIME.
- --------------------------------------------------------------------------------
EXAMPLE This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes that you
invest $10,000 for the time periods indicated, that your investment has a 5%
return each year, and that the fund's operating expenses remain the same.
Although your actual costs and returns may differ, based on these assumptions
your costs would be:
- --------------------------------------------------------------------------------
1 year $ 91
3 years $284
3
PROSPECTUS - First American Bond Funds
Class Y Shares
<PAGE>
Fund Summaries
FIXED INCOME FUND
- --------------------------------------------------------------------------------
OBJECTIVE
Fixed Income Fund's objective is to provide investors with high current income
consistent with limited risk to capital.
- --------------------------------------------------------------------------------
MAIN INVESTMENT STRATEGIES
Under normal market conditions, Fixed Income Fund invests in investment grade
debt securities, such as:
* U.S. government securities, (securities issued or guaranteed by the U.S.
government or its agencies or instrumentalities), including zero coupon
securities.
* mortgage- and asset-backed securities.
* corporate debt obligations.
Fund managers select securities using a "top-down" approach, which begins with
the formulation of their general economic outlook. Following this, various
sectors and industries are analyzed and selected for investment. Finally, fund
managers select individual securities within these sectors or industries.
Debt securities in the fund will be rated investment grade at the time of
purchase or, if unrated, determined to be of comparable quality by the fund's
advisor. If the rating of a security is reduced or discontinued after purchase,
the fund is not required to sell the security, but may consider doing so. At
least 65% of the fund's debt securities must be either U.S. government
securities or securities that have received at least an A or equivalent rating.
Unrated securities will not exceed 25% of the fund's total assets.
At least 65% of the fund's total assets will be invested in fixed rate
obligations. The fund may invest up to 15% of its total assets in foreign
securities payable in U.S. dollars.
Under normal market conditions the fund attempts to maintain a weighted average
effective maturity for its portfolio securities of 15 years or less and an
average effective duration of three to eight years. The fund's weighted average
effective maturity and effective duration are measures of how the fund may react
to interest rate changes.
To generate additional income, the fund may lend securities representing up to
one-third of the value of its total assets to broker-dealers, banks and other
institutions. It also may invest up to 25% of total assets in dollar roll
transactions. In a dollar roll transaction, the fund sells mortgage-backed
securities for delivery in the current month while contracting with the same
party to repurchase similar securities at a future date.
- --------------------------------------------------------------------------------
MAIN RISKS
The price and yield of this fund will change daily due to changes in interest
rates and other factors, which means you could lose money. The main risks of
investing in this fund include:
Interest Rate Risk
Debt securities typically decrease in value when interest rates rise. This risk
is usually greater for longer-term debt securities. One measure of interest rate
risk is effective duration, explained in the "More About The Funds -- Investment
Strategies" Section.
Income Risk
The fund's income could decline due to falling market interest rates.
Credit Risk
An issuer of debt securities may not make timely principal or interest payments
on its securities, or the other party to a contract (such as a securities
lending agreement) may default on its obligations.
Call Risk
During periods of falling interest rates, a bond issuer may "call" -- or repay
- -- its high-yielding bonds before their maturity date. The fund would then be
forced to invest the unanticipated proceeds at lower interest rates, resulting
in a decline in the fund's income.
Risks of Mortgage- and Asset-Backed Securities
Falling interest rates could cause faster than expected prepayments of the
obligations underlying mortgage- and asset-backed securities, which the fund
would have to invest at lower interest rates. On the other hand, rising interest
rates could cause prepayments of the obligations to decrease, extending the life
of mortgage- and asset-backed securities with lower payment rates. For
additional explanation, see "Prepayment Risk" and "Extension Risk" in the "More
About The Funds -- Investment Strategies" Section.
Foreign Security Risk
Securities of foreign issuers, even when dollar-denominated and publicly traded
in the United States, may involve risks not associated with the securities of
domestic issuers, including the risks of adverse currency fluctuations and of
political or social instability or diplomatic developments that could adversely
affect the securities.
Risks of Dollar Roll Transactions
The use of mortgage dollar rolls could increase the volatility of the fund's
share price. It could also diminish the fund's investment performance if the
advisor does not predict mortgage prepayments and interest rates correctly.
- --------------------------------------------------------------------------------
FUND PERFORMANCE
Illustrations on the next page provide you with information on the fund's
volatility and performance. Of course, past performance does not guarantee
future results.
The bar chart shows you how performance of the fund's shares has varied from
year to year.
The table compares the fund's performance over different time periods to that of
the fund's benchmark index, which is a broad measure of market performance. The
fund's performance reflects fund expenses; the benchmark is unmanaged and has no
expenses.
Both the chart and the table assume that all distributions have been reinvested.
4
PROSPECTUS - First American Bond Funds
Class Y Shares
<PAGE>
Fund Summaries
FIXED INCOME FUND CONTINUED
- --------------------------------------------------------------------------------
FUND PERFORMANCE (CONTINUED)
[BAR CHART]
17.29% 3.46% 8.85% 8.93% -2.76%
- ----------------------------------------------
1995 1996 1997 1998 1999
Best Quarter: Quarter ending June 30, 1995 6.13%
Worst Quarter: Quarter ending March 31, 1996 (1.63)%
AVERAGE ANNUAL TOTAL RETURNS Inception Since
AS OF 12/31/99 Date One Year Five Years Inception
- --------------------------------------------------------------------------------
Fixed Income Fund 2/4/94 (2.76)% 6.95% 5.33%
- --------------------------------------------------------------------------------
Lehman Aggregate Bond Index(1) (0.83)% 7.73% 6.13%
- --------------------------------------------------------------------------------
Lehman Gov't/Corp Bond Index(2) (2.15)% 7.60% 5.96%
- --------------------------------------------------------------------------------
(1) An unmanaged index composed of the Lehman Government/Corporate Bond Index,
the Lehman Mortgage Backed Securities Index and 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 Asset-Backed Index is
composed of debt securities backed by credit card, auto and home equity loans
that are rated investment grade or higher. The since inception performance of
the index is calculated from 2/28/94. Previously, the fund used the Lehman
Government/Corporate Bond Index as a benchmark. Going forward, the fund will use
the Lehman Aggregate Bond Index as a comparison, because it is better suited to
the fund's investment strategies.
(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 securities. The
since inception performance of the index is calculated from 2/28/94.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
As an investor, you pay fees and expenses to buy and hold shares of the fund.
You pay shareholder fees directly when you buy or sell shares. You pay annual
fund operating expenses indirectly since they are deducted from fund assets. The
figures below show fund expenses during the fiscal year ended September 30,
1999.(1)
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
- --------------------------------------------------------------------------------
MAXIMUM SALES CHARGE (LOAD) None
MAXIMUM DEFERRED SALES CHARGE (LOAD) None
ANNUAL FUND OPERATING EXPENSES AS A % OF AVERAGE NET ASSETS
- --------------------------------------------------------------------------------
Management Fees 0.70%
Distribution and Service (12b-1) Fees None
Other Expenses 0.19%
TOTAL 0.89%
- --------------------------------------------------------------------------------
(1) Actual expenses for the fiscal year were lower than those shown in the table
because of voluntary fee waivers by the advisor. See "Additional Information --
Financial Highlights." The net expenses the fund actually paid after waivers for
the fiscal year ended September 30, 1999, were:
Waiver of Fund Expenses (0.19)%
TOTAL ACTUAL ANNUAL OPERATING EXPENSES (AFTER WAIVERS) 0.70%
THE ADVISOR INTENDS TO WAIVE FEES DURING THE CURRENT FISCAL YEAR SO THAT
TOTAL FUND OPERATING EXPENSES DO NOT EXCEED 0.70%. FEE WAIVERS MAY BE
DISCONTINUED AT ANY TIME.
- --------------------------------------------------------------------------------
EXAMPLE This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes that you
invest $10,000 for the time periods indicated, that your investment has a 5%
return each year, and that the fund's operating expenses remain the same.
Although your actual costs and returns may differ, based on these assumptions
your costs would be:
- --------------------------------------------------------------------------------
1 year $ 91
3 years $ 284
5 years $ 493
10 years $1,096
5
PROSPECTUS - First American Bond Funds
Class Y Shares
<PAGE>
Fund Summaries
INTERMEDIATE TERM INCOME FUND
- --------------------------------------------------------------------------------
OBJECTIVE
Intermediate Term Income Fund's objective is to provide investors with current
income to the extent consistent with preservation of capital.
- --------------------------------------------------------------------------------
MAIN INVESTMENT STRATEGIES
Under normal market conditions, Intermediate Term Income Fund invests in
investment grade debt securities, such as:
* U.S. government securities, (securities issued or guaranteed by the U.S.
government or its agencies or instrumentalities), including zero coupon
securities.
* mortgage- and asset-backed securities.
* corporate debt obligations.
Fund managers select securities using a "top-down" approach, which begins with
the formulation of their general economic outlook. Following this, various
sectors and industries are analyzed and selected for investment. Finally, fund
managers select individual securities within these sectors or industries.
Debt securities in the fund will be rated investment grade at the time of
purchase or, if unrated, determined to be of comparable quality by the fund's
advisor. If the rating of a security is reduced or discontinued after purchase,
the fund is not required to sell the security, but may consider doing so. At
least 65% of the fund's debt securities must be either U.S. government
securities or securities that have received at least an A or equivalent rating.
Unrated securities will not exceed 25% of the fund's total assets.
The fund may invest up to 15% of its total assets in foreign securities
payable in U.S. dollars.
Under normal market conditions the fund attempts to maintain a weighted average
effective maturity for its portfolio securities of two to seven years and an
average effective duration of two to six years. The fund's weighted average
effective maturity and effective duration are measures of how the fund may
react to interest rate changes.
To generate additional income, the fund may lend securities representing up to
one-third of the value of its total assets to broker-dealers, banks and other
institutions. It also may invest up to 25% of total assets in dollar roll
transactions. In a dollar roll transaction, the fund sells mortgage-backed
securities for delivery in the current month while contracting with the same
party to repurchase similar securities at a future date.
- --------------------------------------------------------------------------------
MAIN RISKS
The price and yield of this fund will change daily due to changes in interest
rates and other factors, which means you could lose money. The main risks of
investing in this fund include:
Interest Rate Risk
Debt securities typically decrease in value when interest rates rise. This risk
is usually greater for longer-term debt securities. One measure of interest rate
risk is effective duration, explained in the "More About The Funds -- Investment
Strategies" Section.
Income Risk
The fund's income could decline due to falling market interest rates.
Credit Risk
An issuer of debt securities may not make timely principal or interest payments
on its securities, or the other party to a contract (such as a securities
lending agreement) may default on its obligations.
Call Risk
During periods of falling interest rates, a bond issuer may "call" -- or repay
- -- its high-yielding bonds before their maturity date. The fund would then be
forced to invest the unanticipated proceeds at lower interest rates, resulting
in a decline in the fund's income.
Risks of Mortgage- and Asset-Backed Securities
Falling interest rates could cause faster than expected prepayments of the
obligations underlying mortgage- and asset-backed securities, which the fund
would have to invest at lower interest rates. On the other hand, rising interest
rates could cause prepayments of the obligations to decrease, extending the life
of mortgage- and asset-backed securities with lower payment rates. For
additional explanation, see "Prepayment Risk" and "Extension Risk" in the "More
About The Funds -- Investment Strategies" Section.
Foreign Security Risk
Securities of foreign issuers, even when dollar-denominated and publicly traded
in the United States, may involve risks not associated with the securities of
domestic issuers, including the risks of adverse currency fluctuations and of
political or social instability or diplomatic developments that could adversely
affect the securities.
Risks of Dollar Roll Transactions
The use of mortgage dollar rolls could increase the volatility of the fund's
share price. It could also diminish the fund's investment performance if the
advisor does not predict mortgage prepayments and interest rates correctly.
- --------------------------------------------------------------------------------
FUND PERFORMANCE
Illustrations on the next page provide you with information on the fund's
volatility and performance. Of course, past performance does not guarantee
future results.
The bar chart shows you how performance of the fund's shares has varied from
year to year.
The table compares the fund's performance over different time periods to that of
the fund's benchmark index, which is a broad measure of market performance. The
fund's performance reflects fund expenses; the benchmark is unmanaged and has no
expenses.
Both the chart and the table assume that all distributions have been reinvested.
6
PROSPECTUS - First American Bond Funds
Class Y Shares
<PAGE>
Fund Summaries
INTERMEDIATE TERM INCOME FUND CONTINUED
- --------------------------------------------------------------------------------
FUND PERFORMANCE (CONTINUED)
ANNUAL TOTAL RETURNS AS OF 12/31 EACH YEAR
[BAR CHART]
14.62% 4.22% 7.01% 8.20% -0.48%
- ----------------------------------------------
1995 1996 1997 1998 1999
Best Quarter: Quarter ending June 30, 1995 4.71%
Worst Quarter: Quarter ending March 31, 1999 (0.60)%
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS Inception Since
AS OF 12/31/99 Date One Year Five Years Inception
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Intermediate Term Income Fund 2/4/94 (0.48)% 6.60% 5.76%
- ------------------------------------------------------------------------------------------------
Lehman Intermediate Gov't/Corp Bond Index(1) 0.39% 7.09% 5.77%
- ------------------------------------------------------------------------------------------------
</TABLE>
(1) An unmanaged index of Treasury securities, other securities issued or
guaranteed by the U.S. government or its agencies or instrumentalities, and
investment-grade corporate debt securities. The since inception performance of
the index is calculated from 2/28/94.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
As an investor, you pay fees and expenses to buy and hold shares of the fund.
You pay shareholder fees directly when you buy or sell shares. You pay annual
fund operating expenses indirectly since they are deducted from fund assets. The
figures below show fund expenses during the fiscal year ended September 30,
1999.(1)
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
- --------------------------------------------------------------------------------
MAXIMUM SALES CHARGE (LOAD) None
MAXIMUM DEFERRED SALES CHARGE (LOAD) None
ANNUAL FUND OPERATING EXPENSES AS A % OF AVERAGE NET ASSETS
- --------------------------------------------------------------------------------
Management Fees 0.70%
Distribution and Service (12b-1) Fees None
Other Expenses 0.17%
TOTAL 0.87%
- --------------------------------------------------------------------------------
(1) Actual expenses for the fiscal year were lower than those shown in the table
because of voluntary fee waivers by the advisor. See "Additional Information --
Financial Highlights." The net expenses the fund actually paid after waivers for
the fiscal year ended September 30, 1999, were:
Waiver of Fund Expenses (0.17)%
TOTAL ACTUAL ANNUAL OPERATING EXPENSES (AFTER WAIVERS) 0.70%
THE ADVISOR INTENDS TO WAIVE FEES DURING THE CURRENT FISCAL YEAR SO THAT
TOTAL FUND OPERATING EXPENSES DO NOT EXCEED 0.70%. FEE WAIVERS MAY BE
DISCONTINUED AT ANY TIME.
- --------------------------------------------------------------------------------
EXAMPLE This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes that you
invest $10,000 for the time periods indicated, that your investment has a 5%
return each year, and that the fund's operating expenses remain the same.
Although your actual costs and returns may differ, based on these assumptions
your costs would be:
- --------------------------------------------------------------------------------
1 year $ 89
3 years $ 278
5 years $ 482
10 years $1,073
7
PROSPECTUS - First American Bond Funds
Class Y Shares
<PAGE>
Fund Summaries
LIMITED TERM INCOME FUND
- --------------------------------------------------------------------------------
OBJECTIVE
Limited Term Income Fund's objective is to provide investors with current income
while maintaining a high degree of principal stability.
- --------------------------------------------------------------------------------
MAIN INVESTMENT STRATEGIES
Under normal market conditions, Limited Term Income Fund invests in investment
grade debt securities, such as:
* mortgage- and asset-backed securities;
* corporate debt obligations.
* U.S. government securities, which are securities issued or guaranteed by the
U.S. government or its agencies or instrumentalities.
* commercial paper.
Fund managers select securities using a "top-down" approach, which begins with
the formulation of their general economic outlook. Following this, various
sectors and industries are analyzed and selected for investment. Finally, fund
managers select individual securities within these sectors or industries.
Debt securities in the fund will be rated investment grade at the time of
purchase or, if unrated, determined to be of comparable quality by the fund's
advisor. If the rating of a security is reduced or discontinued after purchase,
the fund is not required to sell the security, but may consider doing so. At
least 65% of the fund's debt securities must be either U.S. government
securities or securities that have received at least an A or equivalent rating.
Unrated securities will not exceed 25% of the fund's total assets.
The fund may invest up to 15% of its total assets in foreign securities
payable in U.S. dollars.
Under normal market conditions the fund attempts to maintain a weighted average
effective maturity and an average effective duration for its portfolio
securities of one to three years. The fund's weighted average effective maturity
and effective duration are measures of how the fund may react to interest rate
changes.
To generate additional income, the fund may lend securities representing up to
one-third of the value of its total assets to broker-dealers, banks and other
institutions.
- --------------------------------------------------------------------------------
MAIN RISKS
The price and yield of this fund will change daily due to changes in interest
rates and other factors, which means you could lose money. The main risks of
investing in this fund include:
Interest Rate Risk
Debt securities typically decrease in value when interest rates rise. This risk
is usually greater for longer-term debt securities. One measure of interest rate
risk is effective duration, explained in the "More About The Funds -- Investment
Strategies" Section.
Income Risk
The fund's income could decline due to falling market interest rates.
Credit Risk
An issuer of debt securities may not make timely principal or interest payments
on its securities, or the other party to a contract (such as a securities
lending agreement) may default on its obligations.
Call Risk
During periods of falling interest rates, a bond issuer may "call" -- or repay
- -- its high-yielding bonds before their maturity date. The fund would then be
forced to invest the unanticipated proceeds at lower interest rates, resulting
in a decline in the fund's income.
Risks of Mortgage- and Asset-Backed Securities
Falling interest rates could cause faster than expected prepayments of the
obligations underlying mortgage- and asset-backed securities, which the fund
would have to invest at lower interest rates. On the other hand, rising interest
rates could cause prepayments of the obligations to decrease, extending the life
of mortgage- and asset-backed securities with lower payment rates. For
additional explanation, see "Prepayment Risk" and "Extension Risk" in the "More
About The Funds -- Investment Strategies" Section.
Foreign Security Risk
Securities of foreign issuers, even when dollar-denominated and publicly traded
in the United States, may involve risks not associated with the securities of
domestic issuers, including the risks of adverse currency fluctuations and of
political or social instability or diplomatic developments that could adversely
affect the securities.
- --------------------------------------------------------------------------------
FUND PERFORMANCE
Illustrations on the next page provide you with information on the fund's
volatility and performance. Of course, past performance does not guarantee
future results.
The bar chart shows you how performance of the fund's shares has varied from
year to year.
The table compares the fund's performance over different time periods to that of
the fund's benchmark index, which is a broad measure of market performance. In
addition, the fund's performance reflects fund expenses; the benchmark is
unmanaged and has no expenses.
Both the chart and the table assume that all distributions have been reinvested.
8
PROSPECTUS - First American Bond Funds
Class Y Shares
<PAGE>
Fund Summaries
LIMITED TERM INCOME FUND CONTINUED
- --------------------------------------------------------------------------------
FUND PERFORMANCE (CONTINUED)
ANNUAL TOTAL RETURNS AS OF 12/31 EACH YEAR
[BAR CHART]
8.23% 5.60% 5.93% 6.08% 3.34%
- ----------------------------------------------
1995 1996 1997 1998 1999
Best Quarter: Quarter ending June 30, 1995 2.47%
Worst Quarter: Quarter ending June 30, 1999 0.60%
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS Inception Since
AS OF 12/31/99 Date One Year Five Years Inception
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Limited Term Income Fund 2/4/94 3.34% 5.83% 5.18%
- -------------------------------------------------------------------------------------------------------
Lehman Gov't/Corporate Index 1-3 Year Bond Index(1) 2.96% 4.62% 5.68%
- -------------------------------------------------------------------------------------------------------
Merrill Lynch 1-Year U.S. Treasury Bill Index(2) 4.03% 5.85% 5.05%
</TABLE>
(1) 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. The since
inception performance of the index is calculated from 2/28/94. Previously, the
fund used the Merrill Lynch 1-Year U.S. Treasury Bill Index as a benchmark.
Going forward, the fund will use the Lehman Government/Corporate Index 1-3 Year
Bond Index as a comparison, because it is better suited to the fund's investment
strategies.
(2) An unmanaged index of one-year constant maturity Treasury bills. The since
inception performance of the index is calculated from 2/28/94.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
As an investor, you pay fees and expenses to buy and hold shares of the fund.
You pay shareholder fees directly when you buy or sell shares. You pay annual
fund operating expenses indirectly since they are deducted from fund assets. The
figures below show fund expenses during the fiscal year ended September 30,
1999.(1)
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
- --------------------------------------------------------------------------------
MAXIMUM SALES CHARGE (LOAD) None
MAXIMUM DEFERRED SALES CHARGE (LOAD) None
ANNUAL FUND OPERATING EXPENSES AS A % OF AVERAGE NET ASSETS
- --------------------------------------------------------------------------------
Management Fees 0.70%
Distribution and Service (12b-1) Fees None
Other Expenses 0.17%
TOTAL 0.87%
- --------------------------------------------------------------------------------
(1) Actual expenses for the fiscal year were lower than those shown in the table
because of voluntary fee waivers by the advisor. See "Additional Information --
Financial Highlights." The net expenses the fund actually paid after waivers for
the fiscal year ended September 30, 1999, were:
Waiver of Fund Expenses (0.27)%
TOTAL ACTUAL ANNUAL OPERATING EXPENSES (AFTER WAIVERS) 0.60%
THE ADVISOR INTENDS TO WAIVE FEES DURING THE CURRENT FISCAL YEAR SO THAT
TOTAL FUND OPERATING EXPENSES DO NOT EXCEED 0.45%. FEE WAIVERS MAY BE
DISCONTINUED AT ANY TIME.
- --------------------------------------------------------------------------------
EXAMPLE This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes that you
invest $10,000 for the time periods indicated, that your investment has a 5%
return each year, and that the fund's operating expenses remain the same.
Although your actual costs and returns may differ, based on these assumptions
your costs would be:
- --------------------------------------------------------------------------------
1 year $ 89
3 years $ 278
5 years $ 482
10 years $1,073
9
PROSPECTUS - First American Bond Funds
Class Y Shares
<PAGE>
Fund Summaries
STRATEGIC INCOME FUND
- --------------------------------------------------------------------------------
OBJECTIVE
Strategic Income Fund's objective is to provide investors with a high level of
current income.
- --------------------------------------------------------------------------------
MAIN INVESTMENT STRATEGIES
Under normal market conditions, Strategic Income Fund invests primarily (at
least 65% of its total assets) in a combination of:
* securities issued or guaranteed by the U.S. government or its agencies or
instrumentalities, including mortgage-backed securities, and investment grade
debt obligations issued by domestic issuers.
* high-yield (non-investment grade) debt obligations issued by domestic issuers.
* investment grade and high-yield debt obligations issued by foreign governments
and other foreign issuers.
Based upon historical returns, the fund's advisor expects these three categories
of investments to have different returns and risks under similar market
conditions. The advisor relies on the differences in the expected performance of
each category to manage risks by allocating the fund's portfolio among the three
categories above. The advisor also seeks to enhance the fund's performance by
allocating more of its portfolio to the category that the advisor expects to
offer the best balance between risk and return. Normally, the fund's assets will
be invested in each of these three categories, with no more than 50% invested in
any one category. However, the fund may from time to time invest up to 100% of
its total assets in any one category if the advisor believes it will help the
fund achieve its objective without undue risk to principal.
The fund's foreign investments may include investments in emerging markets.
The fund's investments may include securities which do not pay interest
currently, such as zero coupon securities and delayed interest securities. The
fund also may invest in payment-in-kind bonds, where interest is paid in other
securities rather than cash.
In addition to debt obligations, the fund may invest in preferred stock,
convertible securities and equity securities, including common stock and
warrants. These investments may be denominated in U.S. dollars or foreign
currencies.
There is no minimum rating requirement for securities in which the fund may
invest (which means that the fund may invest in lower-rated securities or
unrated securities of comparable quality, commonly referred to as "junk bonds").
In addition, there is no limitation on the average maturity or average effective
duration of securities held by the fund.
To generate additional income, the fund may lend securities representing up to
one-third of the value of its total assets to broker-dealers, banks and other
institutions. It also may invest up to 25% of total assets in dollar roll
transactions. In a dollar roll transaction, the fund sells mortgage-backed
securities for delivery in the current month while contracting with the same
party to repurchase similar securities at a future date.
- --------------------------------------------------------------------------------
MAIN RISKS
The price and yield of this fund will change daily due to changes in interest
rates and other factors, which means you could lose money. The main risks of
investing in this fund include:
Interest Rate Risk
Debt securities typically decrease in value when interest rates rise. This risk
is usually greater for longer-term debt securities. One measure of interest rate
risk is effective duration, explained in "More About The Funds -- Investment
Strategies" Section.
Risks of Foreign Securities
Investing in foreign securities involves risks not typically associated with
U.S. investing. Risks of foreign investing include adverse currency
fluctuations, potential political and economic instability, limited liquidity
and volatile prices of non-U.S. securities, limited availability of information
regarding non-U.S. companies, investment and repatriation restrictions and
foreign taxation.
Risks of High-Yield Securities
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.
Risks of Emerging Markets
The fund may invest in emerging markets, where the risks of foreign investing
are higher. Investing in emerging markets generally involves exposure to
economic structures that are less diverse and mature, and to political systems
that are less stable, than those of developed countries. In addition, issuers in
emerging markets typically are subject to a greater degree of change in earnings
and business prospects than are companies in developed markets.
10
PROSPECTUS - First American Bond Funds
Class Y Shares
<PAGE>
Fund Summaries
STRATEGIC INCOME FUND CONTINUED
Income Risk
The fund's income could decline due to falling market interest rates.
Credit Risk
An issuer of debt securities may not make timely principal or interest payments
on its securities, or the other party to a contract (such as a securities
lending agreement) may default on its obligations.
Call Risk
During periods of falling interest rates, a bond issuer may "call" -- or repay
- -- its high-yielding bonds before their maturity date. The fund would then be
forced to invest the unanticipated proceeds at lower interest rates, resulting
in a decline in the fund's income.
Risks of Mortgage- and Asset-Backed Securities
Falling interest rates could cause faster than expected prepayments of the
obligations underlying mortgage- and asset-backed securities, which the fund
would have to invest at lower interest rates. On the other hand, rising interest
rates could cause prepayments of the obligations to decrease, extending the life
of mortgage- and asset-backed securities with lower payment rates. For
additional explanation, see "Prepayment Risk" and "Extension Risk" in the "More
About The Funds -- Investment Strategies" Section.
Risks of Common Stocks
The fund's investments may include common stock and warrants to purchase, or
securities convertible into, common stocks. Stocks may decline significantly in
price over short or extended periods of time. Price changes may occur in the
market as a whole, or they may occur in only a particular company, industry or
sector of the market.
Risks of Dollar Roll Transactions
The use of mortgage dollar rolls could increase the volatility of the fund's
share price. It could also diminish the fund's investment performance if the
advisor does not predict mortgage prepayments and interest rates correctly.
- --------------------------------------------------------------------------------
FUND PERFORMANCE
Illustrations on the next page provide you with information on the fund's
volatility and performance. Of course, past performance does not guarantee
future results.
The bar chart is intended to show you how performance of the fund's shares has
varied from year to year. However, because Class Y shares were first offered in
1998, only one calendar year of information is available.
The table compares the fund's performance over different time periods to that of
the fund's benchmark index, which is a broad measure of market performance. The
fund's performance reflects fund expenses; the benchmark is unmanaged and has no
expenses.
Both the chart and the table assume that all distributions have been reinvested.
11
PROSPECTUS - First American Bond Funds
Class Y Shares
<PAGE>
Fund Summaries
STRATEGIC INCOME FUND CONTINUED
- --------------------------------------------------------------------------------
FUND PERFORMANCE (CONTINUED)
ANNUAL TOTAL RETURNS AS OF 12/31 EACH YEAR
[BAR CHART]
3.32%
- ------
1999
Best Quarter: Quarter ending December 31, 1999 2.95%
Worst Quarter: Quarter ending June 30, 1999 (0.56)%
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS Inception Since
AS OF 12/31/99 Date One Year Inception
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Strategic Income Fund 7/24/98 3.32% 1.66%
- --------------------------------------------------------------------------------
Lehman Aggregate Bond Index(1) (0.83)% 0.45%
- --------------------------------------------------------------------------------
</TABLE>
(1) An unmanaged index 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 since inception performance of the index is calculated from
7/31/98.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
As an investor, you pay fees and expenses to buy and hold shares of the fund.
You pay shareholder fees directly when you buy or sell shares. You pay annual
fund operating expenses indirectly since they are deducted from fund assets. The
figures below show fund expenses during the fiscal year ended September 30,
1999.(1)
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
- --------------------------------------------------------------------------------
MAXIMUM SALES CHARGE (LOAD) None
MAXIMUM DEFERRED SALES CHARGE (LOAD) None
ANNUAL FUND OPERATING EXPENSES AS A % OF AVERAGE NET ASSETS
- --------------------------------------------------------------------------------
Management Fees 0.70%
Distribution and Service (12b-1) Fees None
Other Expenses 0.23%
TOTAL 0.93%
- --------------------------------------------------------------------------------
(1) Actual expenses for the fiscal year were lower than those shown in the table
because of voluntary fee waivers by the advisor. See "Additional Information --
Management." The net expenses the fund actually paid after waivers for the
fiscal year ended September 30, 1999, were:
Waiver of Fund Expenses (0.03)%
TOTAL ACTUAL ANNUAL OPERATING EXPENSES (AFTER WAIVERS) 0.90%
THE ADVISOR INTENDS TO WAIVE FEES DURING THE CURRENT FISCAL YEAR SO THAT
TOTAL FUND OPERATING EXPENSES DO NOT EXCEED 0.90%. FEE WAIVERS MAY BE
DISCONTINUED AT ANY TIME.
- --------------------------------------------------------------------------------
EXAMPLE This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes that you
invest $10,000 for the time periods indicated, that your investment has a 5%
return each year, and that the fund's operating expenses remain the same.
Although your actual costs and returns may differ, based on these assumptions
your costs would be:
- --------------------------------------------------------------------------------
1 year $ 95
3 years $ 296
5 years $ 515
10 years $1,143
12
PROSPECTUS - First American Bond Funds
Class Y Shares
<PAGE>
Policies & Services
MANAGING YOUR INVESTMENT
- --------------------------------------------------------------------------------
BUYING AND SELLING SHARES
Class Y shares are offered through banks and other financial institutions that
have entered into sales agreements with the funds' distributor and that hold the
shares in an omnibus account with the transfer agent. Class Y shares are
available to certain accounts for which the financial institution acts in a
fiduciary, agency or custodial capacity, such as certain trust accounts and
investment advisory accounts. To find out whether you may purchase Class Y
shares, contact your financial institution.
There is no initial or deferred sales charge on your purchase of Class Y shares.
However, your investment professional or financial institution may receive a
commission of up to 1.25% on your purchase.
- --------------------------------------------------------------------------------
CALCULATING YOUR SHARE PRICE
Your purchase price will be equal to the fund's net asset value (NAV) per share,
which is generally calculated as of the close of regular trading on the New York
Stock Exchange (usually 3 p.m. Central time) every day the exchange is open.
A fund's NAV is equal to the market value of its investments and other assets,
less any liabilities, divided by the number of fund shares. If market prices are
not readily available for an investment or if the advisor believes they are
unreliable, fair value prices may be determined in good faith using methods
approved by the funds' board of directors.
Strategic Income Fund may hold portfolio securities that trade on weekends or
other days when the fund does not price its shares. Therefore, the net asset
value of Strategic Income Fund's shares may change on days when shareholders
will not be able to purchase or redeem their shares.
- --------------------------------------------------------------------------------
HOW TO BUY AND SELL SHARES
You may purchase or sell shares by calling your financial institution.
When purchasing shares, payment must be made by wire transfer, which can be
arranged by your financial institution. Because purchases must be paid for by
wire transfer, you can purchase shares only on days when both the New York Stock
Exchange and federally chartered banks are open. You may sell your shares on any
day when the New York Stock Exchange is open.
Purchase orders and redemption requests must be received by your financial
institution by the time specified by the institution to be assured same day
processing. In order for shares to be purchased at that day's price, the funds
must receive your purchase order by 3:00 p.m. Central time and the funds'
custodian must receive federal funds before the close of business. In order for
shares to be sold at that day's price, the funds must receive your redemption
request by 3:00 p.m. Central time. It is the responsibility of your financial
institution to promptly transmit orders to the funds. Purchase orders and
redemption requests may be restricted in the event of an early or unscheduled
close of the New York Stock Exchange.
If the funds receive your redemption request by 3:00 p.m. Central time, payment
of your redemption proceeds will ordinarily be made by wire on the next business
day. It is possible, however, that payment could be delayed by up to seven days.
- --------------------------------------------------------------------------------
HOW TO EXCHANGE SHARES
If your investment goals or your financial needs change, you may exchange your
shares for Class Y shares of another First American fund. Exchange will be made
at the net asset value per share of each fund at the time of the exchange. There
is no fee to exchange shares. If you are no longer eligible to hold Class Y
shares, for example, if you decide to discontinue your fiduciary, agency or
custodian account, you may exchange your shares for Class A shares at net asset
value. Class A shares have higher expenses than Class Y shares.
To exchange your shares, call your financial institution. In order for your
shares to be exchanged the same day, you must call your financial institution by
the time specified by the institution and your exchange order must be received
by the funds by 3:00 p.m. Central time. It is the responsibility of your
financial institution to promptly transmit your exchange order to the funds.
Before exchanging into any fund, be sure to read its prospectus carefully. A
fund may change or cancel its exchange policies at any time. You will be
notified of any changes. The funds have the right to limit exchanges to four
times per year.
13
PROSPECTUS - First American Bond Funds
Class Y Shares
<PAGE>
Policies & Services
MANAGING YOUR INVESTMENT
- --------------------------------------------------------------------------------
STAYING INFORMED
Shareholder Reports
Shareholder reports are mailed twice a year, in November and May. They include
financial statements, performance information, a message from your portfolio
managers, and, on an annual basis, the auditors' report.
In an attempt to reduce shareholder costs and help eliminate duplication, the
funds will try to limit their mailings to one report for each address that lists
one or more shareholders with the same last name. If you would like additional
copies, please call 1-800-637-2548.
Statements and Confirmations
Statements summarizing activity in your account are mailed at least quarterly.
Confirmations are mailed following each purchase or sale of fund shares.
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS
Dividends from a fund's net investment income are declared and paid monthly. Any
capital gains are distributed at least once each year.
On the ex-dividend date for a distribution, a fund's share price is reduced by
the amount of the distribution. If you buy shares just before the ex-dividend
date, in effect, you 'buy the dividend.' You will pay the full price for the
shares and then receive a portion of that price back as a taxable distribution.
Dividend and capital gain distributions will be reinvested in additional shares
of the fund paying the distribution, unless you request that distributions be
reinvested in another First American fund or paid in cash. This request may be
made on your new account form or by writing to the fund. If you request that
your distributions be paid in cash but those distributions cannot be delivered
because of an incorrect mailing address, the undelivered distributions and all
future distributions will be reinvested in fund shares.
Strategic Income Fund may realize foreign currency losses that will reduce the
amount of ordinary income that the fund has available to distribute to
shareholders. As a result, some of the distributions made by the fund may be
characterized as a return of capital rather than as taxable dividends. Strategic
Income Fund will report to shareholders after the close of the calendar year the
portion of distributions made during the year that constituted a return of
capital and the portion that constituted taxable dividends.
- --------------------------------------------------------------------------------
TAXES
Some of the tax consequences of investing in the funds are discussed below. More
information about taxes is in the Statement of Additional Information. However,
because everyone's tax situation is unique, always consult your tax professional
about federal, state and local tax consequences.
- --------------------------------------------------------------------------------
TAXES ON DISTRIBUTIONS
Each fund pays its shareholders dividends from its net investment income and any
net capital gains that it has realized. For most investors, fund dividends and
distributions are considered taxable whether they are reinvested or taken in
cash (unless your investment is in an IRA or other tax-advantaged account).
Dividends from a fund's net investment income and short-term capital gains are
taxable as ordinary income. Distributions of a fund's long-term capital gains
are taxable as long-term gains, regardless of how long you have held your
shares. The funds expect that, as a result of their investment objectives and
strategies, their distributions will consist primarily of ordinary income.
- --------------------------------------------------------------------------------
TAXES ON TRANSACTIONS
The sale of fund shares, or the exchange of one fund's shares for shares of
another fund, will be a taxable event and may result in a capital gain or loss.
The gain or loss will be considered long-term if you have held your shares for
more than one year. A gain or loss on shares held for one year or less is
considered short-term and is taxed at the same rates as ordinary income.
The exchange of one class of shares for another class of shares in the same fund
will not be taxable.
14
PROSPECTUS - First American Bond Funds
Class Y Shares
<PAGE>
Additional Information
MANAGEMENT
U.S. Bank National Association (U.S. Bank), acting through its First American
Asset Management division, is the funds' investment advisor. First American
Asset Management provides investment management services to individuals and
institutions, including corporations, foundations, pensions and retirement
plans. As of December 31, 1999, it had more than $78 billion in assets under
management, including investment company assets of more than $33 billion. As
investment advisor, First American Asset Management manages the funds' business
and investment activities, subject to the authority of the board of directors.
Each fund pays the investment advisor a monthly fee for providing investment
advisory services. During the fiscal year ended September 30, 1999, after taking
into account fee waivers, the funds paid the following investment advisory fees
to First American Asset Management:
Advisory Fee
as a % of
Average Daily
Net Assets
- --------------------------------------------------------------------------------
CORPORATE BOND FUND(1) 0.70%
FIXED INCOME FUND 0.51%
INTERMEDIATE TERM INCOME FUND 0.53%
LIMITED TERM INCOME FUND 0.43%
STRATEGIC INCOME FUND 0.67%
- --------------------------------------------------------------------------------
(1) Corporate Bond Fund commenced operations as of the date of this Prospectus.
The contractual fee rate is shown in the table.
Investment Advisor
First American Asset Management
601 Second Avenue South
Minneapolis, Minnesota 55402
Sub-Advisor
Federated Global Investment Management Corp.
175 Water Street
New York, New York 10038-4964
The sub-advisor has been retained by the fund's investment advisor and is paid a
portion of the advisory fee.
Federated Global Investment Management Corp. is a sub-advisor to the fund.
The sub-advisor has been retained by the fund's investment advisor and is
paid a portion of the advisory fee. Federated Global Investment Management
Corp. manages the fund's investments in investment grade and high-yield
foreign government and foreign corporate debt obligations.
First American Asset Management manages the fund's investments in U.S.
government obligations, investment grade and domestic debt obligations and U.S.
dollar denominated foreign corporate debt obligations, and determines how the
fund's assets will be allocated among the three sectors in which the fund
invests. The sub-advisor and other subsidiaries of Federated Investors serve as
investment advisors to a number of investment companies and private accounts.
The sub-advisor and other subsidiaries of Federated Investors serve as
investment advisors to a number of investment companies and private accounts.
Distributor
SEI Investments Distribution Co.
Oaks, Pennsylvania 19456
Direct Fund Correspondence to:
First American Funds
P.O. Box 1330
Minneapolis, MN 55440-1330
15
PROSPECTUS - First American Bond Funds
Class Y Shares
<PAGE>
Additional Information
MANAGEMENT CONTINUED
Additional Compensation
U.S. Bank and other affiliates of U.S. Bancorp may act as fiduciary with
respect to plans subject to the Employee Retirement Income Security Act of
1974 (ERISA) and other trust and agency accounts that invest in the funds. As
described above, U.S. Bank receives compensation for acting as the funds'
investment advisor. U.S. Bank and its affiliates also receive compensation in
connection with the following:
CUSTODY SERVICES. U.S. Bank provides or compensates others to provide custody
services to the funds. U.S. Bank is paid monthly fees equal, on an annual
basis, to 0.03% of a fund's average daily net assets. In addition, U.S. Bank
is reimbursed for its out-of-pocket expenses incurred while providing custody
services to the funds.
ADMINISTRATION SERVICES. U.S. Bank provides or compensates others to provide
administrative services to all open-end funds in the First American family of
funds. These services include general administrative and accounting services,
transfer agency and dividend disbursing services, and shareholder services. U.S.
Bank receives total fees equal, on an annual basis, to 0.12% of the aggregate
average daily net assets of all open-end mutual funds in the First American fund
family up to $8 billion and 0.105% of the aggregate average daily net assets of
all open-end mutual funds in the First American fund family in excess of $8
billion. These fees are allocated among the funds in the First American family
of funds on the basis of their relative net asset values. Additionally, the
funds pay U.S. Bank fees based upon the number of funds and accounts maintained.
SECURITIES LENDING SERVICES. In connection with lending their portfolio
securities, the funds pay administrative and custodial fees to U.S. Bank which
are equal to 40% of the funds' income from these securities lending
transactions.
BROKERAGE TRANSACTIONS. When purchasing and selling portfolio securities for
the funds, the funds' investment advisor may place trades through its
affiliates, U.S. Bancorp Investments, Inc. and U.S. Bancorp Piper Jaffray
Inc., which will earn commissions on these transactions.
SHAREHOLDER SERVICING FEES. To the extent that fund shares are held through
U.S. Bank or its broker-dealer affiliates, U.S. Bancorp Investments, Inc. and
U.S. Bancorp Piper Jaffray Inc., those entities may receive shareholder
servicing fees from the funds' distributor.
Portfolio Management
Each fund's investments are managed by a team of persons associated with First
American Asset Management or, in the case of Strategic Income Fund, the
sub-advisor.
16
PROSPECTUS - First American Bond Funds
Class Y Shares
<PAGE>
Additional Information
MORE ABOUT THE FUNDS
- --------------------------------------------------------------------------------
OBJECTIVES
The funds' objectives, which are described in the "Fund Summaries" section, may
be changed without shareholder approval. If a fund's objectives change, you will
be notified at least 30 days in advance. Please remember: There is no guarantee
that any fund will achieve its objectives.
- --------------------------------------------------------------------------------
INVESTMENT STRATEGIES
The funds' main investment strategies are discussed in the "Fund Summaries"
section. These are the strategies that the funds' investment advisor believes
are most likely to be important in trying to achieve the funds' objectives. You
should be aware that each fund may also use strategies and invest in securities
that are not described in this prospectus, but that are described in the
Statement of Additional Information (SAI). For a copy of the SAI, call Investor
Services at 1-800-637-2548.
Investment Approach
For funds other than Strategic Income Fund and Corporate Bond Fund, fund
managers generally employ a "top-down" approach in selecting securities for the
funds. First, they determine their economic outlook and the direction in which
inflation and interest rates are expected to move. Then they choose certain
sectors or industries within the overall market. Last, they select individual
securities within those sectors for the funds. Fund managers also analyze
expected changes to the yield curve under multiple market conditions to help
define maturity and duration selection. For the Corporate Bond Fund, fund
managers employ a "bottom-up" approach to identify relative value in the
corporate bond market.
For Strategic Income Fund, the advisor is responsible for allocating the fund's
portfolio among the three categories of securities in which the fund invests, as
discussed above in the "Fund Summaries" section. After making this allocation,
the advisor uses the top-down approach discussed above to select the fund's
investments in U.S. government and investment grade domestic debt obligations.
In selecting domestic high-yield securities, the advisor focuses on individual
security selection, analyzing the business, competitive position and financial
condition of each issuer to assess whether the security's risk is commensurate
with its potential return. With regard to the fund's investments in foreign
securities, the fund's sub-advisor looks primarily for securities offering
higher interest rates. The sub-advisor attempts to manage the risks of these
securities by investing the foreign security portion of the fund's portfolio in
a large number of securities from a wide range of foreign countries, and by
allocating this portion of the portfolio among countries whose markets, based on
historical analysis, respond differently to changes in the global economy.
Effective Maturity
Effective maturity differs from actual stated or final maturity, which may be
substantially longer. In calculating effective maturity, the advisor estimates
the effect of expected principal payments and call provisions on securities held
in the portfolio. Effective maturity provides the advisor with a better estimate
of interest rate risk under normal market conditions, but could result in more
volatility in an environment of adverse (rising) interest rates, rather than if
the fund calculated average weighted maturity based on the portfolio securities'
actual stated or final maturity.
Effective Duration
Each fund, other than Strategic Income Fund, attempts to maintain the effective
duration of its portfolio securities within a specified range. Effective
duration, one measure of interest rate risk, measures how much the value of a
security is expected to change with a given change in interest rates. The longer
a security's effective duration, the more sensitive its price to changes in
interest rates. For example, if interest rates were to increase by one
percentage point, the market value of a bond with an effective duration of five
years would decrease by 5%, with all other factors being constant. However, all
other factors are rarely constant. Effective duration is based on assumptions
and subject to a number of limitations. It is most useful when interest rate
changes are small, rapid and occur equally in short-term and long-term
securities. In addition, it is difficult to calculate precisely for bonds with
prepayment options, such as mortgage- and asset-backed securities, because the
calculation requires assumptions about prepayment rates. For these reasons, the
effective durations of funds which invest a significant portion of their assets
in these securities can be greatly affected by changes in interest rates.
Temporary Investments
In an attempt to respond to adverse market, economic, political or other
conditions, each fund may temporarily invest without limit in cash and in U.S.
dollar-denominated high-quality money market instruments and other short-term
securities, including money market funds advised by the funds' advisor. These
investments may result in a lower yield than would be available from investments
with a lower quality or longer term and may prevent a fund from achieving its
investment objectives.
Portfolio Turnover
Portfolio turnover for Corporate Bond Fund is expected to be low under normal
market conditions. Other funds may trade securities frequently, resulting, from
time to time, in an annual portfolio turnover rate of over 100%. Trading of
securities may produce capital gains, which are taxable to shareholders when
distributed. Active trading may also increase the amount of commissions or
mark-ups to broker-dealers that the fund pays when it buys and sells securities.
The "Financial Highlights" section of this prospectus shows each fund's
historical portfolio turnover rate (except for Corporate Bond Fund, which just
began operations).
- --------------------------------------------------------------------------------
RISKS
The main risks of investing in the funds are summarized in the "Fund Summaries"
section. More information about fund risks is presented below.
Interest Rate Risk
Debt securities in the funds will fluctuate in value with changes in interest
rates. In general, debt securities will increase in value when interest rates
fall and decrease in value when interest rates rise. Longer-term debt securities
are generally more sensitive to interest rate changes. ARMS are generally less
sensitive to interest rate changes because their interest rates move with market
rates. Securities which do not pay interest on a current basis, such as zero
coupon securities and delayed interest
17
PROSPECTUS - First American Bond Funds
Class Y Shares
<PAGE>
Additional Information
MORE ABOUT THE FUNDS CONTINUED
securities, may be highly volatile as interest rates rise or fall.
Payment-in-kind bonds, which pay interest in other securities rather than in
cash, also may be highly volatile.
Income Risk
The fund's income could decline due to falling market interest rates. This is
because, in a falling interest rate environment, the fund generally will have to
invest the proceeds from sales of fund shares, as well as the proceeds from
maturing portfolio securities (or portfolio securities that have been called,
see "Call Risk," or prepaid, see "Prepayment Risk") in lower-yielding
securities.
Risks of High-Yield Securities
A significant portion of the portfolios of Strategic Income Fund and Corporate
Bond Fund may consist of lower-rated corporate debt obligations, which are
commonly referred to as "high yield" securities or "junk bonds." Although these
securities usually offer higher yields than investment grade securities, they
also involve more risk. High yield bonds may be more susceptible to real or
perceived adverse economic conditions than investment grade bonds. In addition,
the secondary trading market may be less liquid. High yield securities generally
have more volatile prices and carry more risk to principal than investment grade
securities.
Liquidity Risk
Strategic Income Fund and Corporate Bond Fund are exposed to liquidity risk
because of their investments in high yield bonds. Strategic Income Fund's
investment in emerging markets also exposes it to liquidity risk. Trading
opportunities are more limited for debt securities that have received ratings
below investment grade or are issued by companies located in emerging markets.
These features may make it more difficult to sell or buy a security at a
favorable price or time. Consequently, these funds may have to accept a lower
price to sell a security, sell other securities to raise cash or give up an
investment opportunity, any of which could have a negative effect on a fund's
performance. Infrequent trading may also lead to greater price volatility.
Credit Risk
Each fund is subject to the risk that the issuers of debt securities held by the
fund will not make payments on the securities, or that the other party to a
contract (such as a securities lending agreement or repurchase agreement) will
default on its obligations. There is also the risk that an issuer could suffer
adverse changes in financial condition that could lower the credit quality of a
security. This could lead to greater volatility in the price of the security and
in shares of the fund. Also, a change in the credit quality rating of a bond
could affect the bond's liquidity and make it more difficult for the fund to
sell. When a fund purchases unrated securities, it will depend on the advisor's
analysis of credit risk more heavily than usual.
Each fund other than Strategic Income Fund and Corporate Bond Fund attempts to
minimize credit risk by investing in securities considered at least investment
grade at the time of purchase. However, all of these securities, especially
those in the lower investment grade rating categories, have credit risk. In
adverse economic or other circumstances, issuers of these lower rated securities
are more likely to have difficulty making principal and interest payments than
issuers of higher rated securities.
Call Risk
Many corporate bonds may be redeemed at the option of the issuer, or "called,"
before their stated maturity date. In general, an issuer will call its bonds if
they can be refinanced by issuing new bonds which bear a lower interest rate.
The funds are subject to the possibility that during periods of falling interest
rates, a bond issuer will call its high-yielding bonds. A fund would then be
forced to invest the unanticipated proceeds at lower interest rates, resulting
in a decline in the fund's income.
Prepayment Risk
Mortgage-backed securities are secured by and payable from pools of mortgage
loans. Similarly, asset-backed securities are supported by obligations such as
automobile loans or home equity loans. These mortgages and other obligations
generally can be prepaid at any time without penalty. As a result, mortgage- and
asset-backed securities are subject to prepayment risk, which is the risk that
falling interest rates could cause prepayments of the securities to occur more
quickly than expected. This occurs because, as interest rates fall, more
homeowners refinance the mortgages underlying mortgage-related securities or
prepay the debt obligations underlying asset-backed securities. A fund holding
these securities must reinvest the prepayments at a time when interest rates are
falling, reducing the income of the fund. In addition, when interest rates fall,
prices on mortgage- and asset-backed securities may not rise as much as for
other types of comparable debt securities because investors may anticipate an
increase in prepayments.
Extension Risk
Mortgage- and asset-backed securities also are subject to extension risk, which
is the risk that rising interest rates could cause mortgages or other
obligations underlying the securities to be prepaid more slowly than expected,
resulting in slower prepayments of the securities. This would, in effect,
convert a short -or medium-duration mortgage- or asset-backed security into a
longer-duration security, increasing its sensitivity to interest rate changes
and causing its price to decline.
Risks of Dollar Roll Transactions
In a dollar roll transaction, a fund sells mortgage-backed securities for
delivery in the current month while contracting with the same party to
repurchase similar securities at a future date. Because the fund gives up the
right to receive principal and interest paid on the securities sold, a mortgage
dollar roll transaction will diminish the investment performance of a fund
unless the difference between the price received for the securities sold and the
price to be paid for the securities to be
18
PROSPECTUS - First American Bond Funds
Class Y Shares
<PAGE>
Additional Information
MORE ABOUT THE FUNDS CONTINUED
purchased in the future, plus any fee income received, exceeds any income,
principal payments and appreciation on the securities sold as part of the
mortgage dollar roll. Whether mortgage dollar rolls will benefit a fund may
depend upon the advisor's ability to predict mortgage prepayments and interest
rates. In addition, the use of mortgage dollar rolls by a fund increases the
amount of the fund's assets that are subject to market risk, which could
increase the volatility of the price of the fund's shares.
Risks of Securities Lending
When a fund loans its portfolio securities, it will receive collateral equal to
at least 100% of the value of the loaned securities. Nevertheless, the fund
risks a delay in the recovery of the loaned securities, or even the loss of
rights in the collateral deposited by the borrower if the borrower should fail
financially. To reduce these risks, the funds enter into loan arrangements only
with institutions which the funds' advisor has determined are creditworthy under
guidelines established by the funds' board of directors.
Risks of Active Management
Each fund is actively managed and its performance therefore will reflect in part
the advisor's ability to make investment decisions which are suited to achieving
the fund's investment objectives. Due to their active management, the funds
could underperform other mutual funds with similar investment objectives.
- --------------------------------------------------------------------------------
ADDITIONAL RISKS OF STRATEGIC INCOME FUND
Risks of Foreign Investing
Foreign investing involves risks not typically associated with U.S. investing.
These risks include:
CURRENCY RISK. Because foreign securities often trade in currencies other
than the U.S. dollar, changes in currency exchange rates will affect the
fund's net asset value, the value of dividends and interest earned, and gains
and losses realized on the sale of securities. A strong U.S. dollar relative
to these other currencies will adversely affect the value of the fund.
POLITICAL AND ECONOMIC RISKS. Foreign investing is subject to the risk of
political, social or economic instability in the country of the issuer of a
security, the difficulty of predicting international trade patterns, the
possibility of the imposition of exchange controls, expropriation, limits on
removal of currency or other assets and nationalization of assets.
FOREIGN TAX RISK. The fund's income from foreign issuers may be subject to
non-U.S. withholding taxes. In some countries, the fund also may be subject
to taxes on trading profits and, on certain securities transactions, transfer
or stamp duties tax. To the extent foreign income taxes are paid by the fund,
U.S. shareholders may be entitled to a credit or deduction for U.S. tax
purposes. See the Statement of Additional Information for details.
RISK OF INVESTMENT RESTRICTIONS. Some countries, particularly emerging markets,
restrict varying degrees foreign investment in their securities markets. In some
circumstances, these restrictions may limit or preclude investment in certain
countries or may increase the cost of investing in securities of particular
companies.
FOREIGN SECURITIES MARKET RISK. Securities of many non-U.S. companies may be
less liquid and their prices more volatile than securities of comparable U.S.
companies. Securities of companies traded in many countries outside the U.S.,
particularly emerging markets countries, may be subject to further risks due to
the inexperience of local investment professionals and financial institutions,
the possibility of permanent or temporary termination of trading, and greater
spreads between bid and asked prices for securities. In addition, non-U.S. stock
exchanges and investment professionals are subjectto less governmental
regulation, and commissions may be higher than in the United States. Also, there
may be delays in the settlement of non-U.S. stock exchange transactions.
INFORMATION RISK. Non-U.S. companies generally are not subject to uniform
accounting, auditing and financial reporting standards or to other regulatory
requirements that apply to U.S. companies. As a result, less information may
be available to investors concerning non-U.S. issuers. Accounting and
financial reporting standards in emerging markets may be especially lacking.
Risks of Emerging Markets
Investing in securities of issuers in emerging markets involves exposure to
economic infrastructures that are generally less diverse and mature than
political systems that can be expected to have less stability than, and to those
of developed countries. Other characteristics of emerging market countries that
may affect investment in their markets include certain governmental policies
that may restrict investment by foreigners and the absence of developed legal
structures governing private and foreign investments and private property. The
typical small size of the markets for securities issued by issuers located in
emerging markets and the possibility of low or nonexistent volume of trading in
those securities may also result in a lack of liquidity and in price volatility
of those securities. In addition, issuers in emerging markets typically are
subject to a greater degree of change in earnings and business prospects than
are companies in developed markets.
Sector Risk
A substantial part of Strategic Income Fund's portfolio may be comprised of
securities issued or credit enhanced by companies in similar businesses, or with
similar characteristics. As a result, the fund will be more susceptible to any
economic, business, political or other developments which generally affect these
issuers.
19
PROSPECTUS - First American Bond Funds
Class Y Shares
<PAGE>
Additional Information
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The tables that follow present performance information about the Class Y shares
of each fund. No information is presented for the Corporate Bond Fund as that
fund was not offered prior to the date of this prospectus. This information is
intended to help you understand each fund's financial performance for the past
five years or, if shorter, the period of the fund's operations. Some of this
information reflects financial results for a single fund share. Total returns in
the tables represent the rate that you would have earned or lost on an
investment in a fund, assuming you reinvested all of your dividends and
distributions.
The information for the fiscal year ended September 30, 1999, has been audited
by Ernst & Young LLP, independent auditors, whose report, along with the funds'
financial statements, is included in the funds' annual report, which is
available upon request. The information for the fiscal years ended on or before
September 30, 1998, has been audited by other auditors.
FIXED INCOME FUND
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30,
1999 1998 1997 1996 1995
- ------------------------------------------ ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value, Beginning of Period $ 11.69 $ 10.96 $ 10.76 $ 10.97 $ 10.37
---------- ---------- ---------- ---------- ----------
Investment Operations:
Net Investment Income 0.61 0.60 0.62 0.63 0.66
Net Gains (Losses) on Investments
(both realized and unrealized) (0.89) 0.74 0.27 (0.11) 0.62
---------- ---------- ---------- ---------- ----------
Total From Investment Operations (0.28) 1.34 0.89 0.52 1.28
---------- ---------- ---------- ---------- ----------
Less Distributions:
Dividends (from Net Investment Income) (0.61) (0.60) (0.62) (0.63) (0.65)
Distributions (from Capital Gains) (0.15) (0.01) (0.07) (0.10) (0.03)
---------- ---------- ---------- ---------- ----------
Total Distributions (0.76) (0.61) (0.69) (0.73) (0.68)
---------- ---------- ---------- ---------- ----------
Net Asset Value, End of Period $ 10.65 $ 11.69 $ 10.96 $ 10.76 $ 10.97
========== ========== ========== ========== ==========
Total Return (2.44)% 12.66% 8.54% 4.90% 12.86%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $1,239,900 $1,210,661 $ 705,719 $ 391,211 $ 289,816
Ratio of Expenses to Average Net Assets 0.70% 0.70% 0.70% 0.70% 0.70%
Ratio of Net Income to Average Net Assets 5.57% 5.35% 5.71% 5.81% 6.28%
Ratio of Expenses to Average Net Assets
(excluding waivers) 0.89% 0.86% 0.88% 0.87% 0.94%
Ratio of Net Income to Average Net Assets
(excluding waivers) 5.38% 5.19% 5.53% 5.64% 6.04%
Portfolio Turnover Rate 90% 147% 130% 108% 106%
- ------------------------------------------ ---------- ---------- ---------- ---------- ----------
</TABLE>
20
PROSPECTUS - First American Bond Funds
Class Y Shares
<PAGE>
Additional Information
FINANCIAL HIGHLIGHTS CONTINUED
INTERMEDIATE TERM INCOME FUND
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30,
1999 1998 1997 1996 1995
- ------------------------------------------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value, Beginning of Period $ 10.42 $ 9.98 $ 9.93 $ 9.94 $ 9.55
-------- -------- -------- -------- --------
Investment Operations:
Net Investment Income 0.52 0.53 0.55 0.55 0.58
Net Gains (Losses) on Investments
(both realized and unrealized) (0.53) 0.46 0.13 -- 0.39
-------- -------- -------- -------- --------
Total From Investment Operations (0.01) 0.99 0.68 0.55 0.97
-------- -------- -------- -------- --------
Less Distributions:
Dividends (from Net Investment Income) (0.52) (0.53) (0.56) (0.55) (0.58)
Distributions (from Capital Gains) (0.12) (0.02) (0.07) (0.01) --
-------- -------- -------- -------- --------
Total Distributions (0.64) (0.55) (0.63) (0.56) (0.58)
-------- -------- -------- -------- --------
Net Asset Value, End of Period $ 9.77 $ 10.42 $ 9.98 $ 9.93 $ 9.94
======== ======== ======== ======== ========
Total Return (0.06)% 10.27% 6.98% 5.63% 10.51%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $348,864 $430,672 $324,250 $ 98,702 $ 88,375
Ratio of Expenses to Average Net Assets 0.70% 0.70% 0.70% 0.70% 0.70%
Ratio of Net Income to Average Net Assets 5.17% 5.24% 5.51% 5.45% 5.94%
Ratio of Expenses to Average Net Assets (excluding waivers) 0.87% 0.86% 0.92% 0.88% 0.94%
Ratio of Net Income to Average Net Assets (excluding waivers) 5.00% 5.08% 5.29% 5.27% 5.70%
Portfolio Turnover Rate 65% 166% 165% 161% 69%
- ------------------------------------------------------------- -------- -------- -------- -------- --------
</TABLE>
LIMITED TERM INCOME FUND
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30,
1999 1998 1997 1996 1995
- -------------------------------------------------------------- -------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value, Beginning of Period $ 10.04 $ 9.94 $ 9.91 $ 9.92 $ 9.85
-------- -------- -------- ------- --------
Investment Operations:
Net Investment Income 0.52 0.53 0.56 0.58 0.56
Net Gains (Losses) on Investments
(both realized and unrealized) (0.17) 0.10 0.03 (0.01) 0.07
-------- -------- -------- ------- --------
Total From Investment Operations 0.35 0.63 0.59 0.57 0.63
-------- -------- -------- ------- --------
Less Distributions:
Dividends (from Net Investment Income) (0.52) (0.53) (0.56) (0.58) (0.56)
-------- -------- -------- ------- --------
Total Distributions (0.52) (0.53) (0.56) (0.58) (0.56)
-------- -------- -------- ------- --------
Net Asset Value, End of Period $ 9.87 $ 10.04 $ 9.94 $ 9.91 $ 9.92
======== ======== ======== ======= ========
Total Return 3.53% 6.55% 6.09% 5.93% 6.57%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $119,522 $173,136 $184,368 $93,588 $111,439
Ratio of Expenses to Average Net Assets 0.60% 0.60% 0.60% 0.60% 0.60%
Ratio of Net Income to Average Net Assets 5.15% 5.33% 5.60% 5.80% 5.67%
Ratio of Expenses to Average Net Assets (excluding waivers) 0.87% 0.87% 0.90% 0.84% 0.97%
Ratio of Net Income to Average Net Assets (excluding waivers) 4.88% 5.06% 5.30% 5.56% 5.30%
Portfolio Turnover Rate 65% 112% 147% 61% 120%
- -------------------------------------------------------------- -------- -------- -------- ------- --------
</TABLE>
21
PROSPECTUS - First American Bond Funds
Class Y Shares
<PAGE>
Additional Information
FINANCIAL HIGHLIGHTS CONTINUED
STRATEGIC INCOME FUND
<TABLE>
<CAPTION>
FISCAL YEAR ENDED PERIOD ENDED
SEPTEMBER 30, SEPTEMBER 30,
1999(3) 1998(1)
- ------------------------------------------------------------- ----------------- -------------
<S> <C> <C>
PER SHARE DATA
Net Asset Value, Beginning of Period $ 9.27 $ 10.00
-------- -------
Investment Operations:
Net Investment Income 0.80 0.14
Net Gains (Losses) on Investments
(both realized and unrealized) (0.25) (0.75)
-------- -------
Total From Investment Operations 0.55 (0.61)
-------- -------
Less Distributions:
Dividends (from Net Investment Income) (0.73) (0.12)
-------- -------
Total Distributions (0.73) (0.12)
-------- -------
Net Asset Value, End of Period $ 9.09 $ 9.27
======== =======
Total Return 5.96% (6.13)%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $184,666 $54,491
Ratio of Expenses to Average Net Assets 0.90% 0.90%(2)
Ratio of Net Income to Average Net Assets 8.56% 8.44%(2)
Ratios of Expenses to Average Net Assets (excluding waivers) 0.93% 1.05%(2)
Ratio of Net Income to Average Net Assets (excluding waivers) 8.53% 8.29%(2)
Portfolio Turnover Rate 40% 61%
- ------------------------------------------------------------- -------- -------
</TABLE>
(1) Class Y shares have been offered since July 24, 1998.
(2) Annualized.
(3) Per share data for 1999 was calculated using the average shares outstanding
method.
22
PROSPECTUS - First American Bond Funds
Class Y Shares
<PAGE>
- --------------------------------------------------------------------------------
FOR MORE INFORMATION
More information about the funds is available in the funds' Statement of
Additional Information and annual and semiannual reports.
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI provides more details about the funds and their policies. A current SAI
is on file with the Securities and Exchange Commission (SEC) and is incorporated
into this prospectus by reference (which means that it is legally considered
part of this prospectus).
- --------------------------------------------------------------------------------
ANNUAL AND SEMIANNUAL REPORTS
Additional information about the funds' investments is available in the funds'
annual and semiannual reports to shareholders. In the funds' annual report, you
will find a discussion of the market conditions and investment strategies that
significantly affected the funds' performance during their last fiscal year.
You can obtain a free copy of the funds' SAI and/or free copies of the funds'
most recent annual or semiannual reports by calling Investor Services at
1-800-637-2548. The material you request will be sent by first-class mail or
other means designed to ensure equally prompt delivery, within three business
days of receipt of the request.
You can also obtain copies of this information, after paying a duplicating fee,
by electronic request at the following email address: publicinfosec.gov, or by
writing the SEC's Public Reference Section, Washington, D.C. 20549-0102. For
more information, call 1-202-942-8090.
Information about the funds is also available on the Internet. Text-only
versions of fund documents can be viewed online or downloaded from the EDGAR
Database on the SEC's Internet site at http://www.sec.gov.
FIRST AMERICAN FUNDS P.O. BOX 1330, MINNEAPOLIS, MN 55440-1330
First American Asset Management, a division of U.S. Bank National Association,
serves as the investment advisor to the First American Funds.
First American Funds are distributed by SEI Investments Distribution Co. which
is located in Oaks, PA 19456 and is not an affiliate of U.S. Bank.
1/2000 3017-99
SEC file number: 811-05309
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