Important 2007 Tax Information

Transcription

1 Important 2007 Information For First American s Shareholders In order to assist you with your 2007 income tax preparation, we have compiled this important tax information pertaining to First American s. Please consult your tax advisor and refer to this information when preparing your 2007 tax returns. If you require further information, please contact your financial advisor or call First American Investor Services at FUND. Investors should carefully consider the fund s investment objectives, risks, charges, and expenses before investing. The prospectus contains this and other information; call FUND or visit firstamericanfunds.com for a copy. Please read it carefully before investing. Mutual fund investing involves risk; principal loss is possible. This information does not represent tax advice. Please consult your tax advisor to determine how it applies to your NOT FDIC INSURED NO BANK GUARANTEE MAY LOSE VALUE First American s 800 Nicollet Mall, Minneapolis, MN Quasar Distributors, LLC, distributor. 1/ OPEN

2 Important 2007 Information Dividends from U.S. Government Obligations dividends derived from holding certain U.S. government obligations may be exempt from state and local income tax. However, some state and local rules specify income and asset thresholds that must be satisfied in order for such dividends to qualify for this benefit. For example, in New York, Connecticut, and California a tax exemption for U.S. government income earned by a fund is only available to its shareholders if at least 50% of the assets of the fund, at the end of each quarter of the fund s fiscal year, were invested in U.S. government securities that are considered exempt under state law. Each state and local jurisdiction typically provides instructions on how to calculate and report this income. Since state and local tax laws vary, please Name Percentage of Ordinary Dividend Income Derived from U.S. Government Obligations Arizona 0.02% Balanced 3.44% Core Bond 9.82% Equity Index 0.32% Government Obligations 13.38% High Income Bond 0.03% Income Builder 0.05% Inflation Protected Securities 85.60% Intermediate Government Bond 98.05% Intermediate Term Bond 13.46% International Select 0.63% Mid Cap Index 0.69% Minnesota 0.03% Quantitative Large Cap Core 0.47% Name Percentage of Ordinary Dividend Income Derived from U.S. Government Obligations Quantitative Large Cap Growth 0.32% Quantitative Large Cap Value 0.25% Short Term Bond 6.24% Small Cap Index 0.61% Strategy Aggressive Growth All. 1.94% Strategy Growth Allocation 4.72% Strategy Growth & Income All. 6.98% Strategy Income Allocation 9.93% 0.01% Obligations 0.03% Total Return Bond 11.18% Treasury Obligations 0.01% U.S. Government Mortgage 0.14% U.S. Treasury Money Market 97.70% Alternative Minimum (AMT) Some taxpayers are subject to the Alternative Minimum (AMT). This tax is applied instead of the regular income tax when a taxpayer has a high enough level of tax-preference items or takes certain deductions (which are allowable in determining your regular taxable income). Some of the more common adjustments include: addition of personal exemptions, addition of the standard deduction (if claimed), or addition of certain itemized deductions such as for state and local income and real estate taxes, and the addition of certain interest. A taxpayer will be subject to the higher of either their regular income tax liability or the AMT. For purposes of computing your AMT, some or all of your tax-exempt dividends may be treated as a tax-preference item. The table below provides percentages of dividends from First American funds that are treated as tax-preference items. Since calculating your overall AMT liability (if any) is a complex process, please Name AMT Arizona 3.11% California Intermediate 2.64% California 6.56% Colorado Intermediate 0.59% Colorado 2.05% Intermediate 4.36% Minnesota Intermediate 4.90% Name AMT Minnesota 11.57% Missouri 6.51% Nebraska 3.37% Ohio 2.50% Oregon Intermediate 0.95% Short 5.04% 12.93%

3 Important 2007 Information es Paid Use the following percentages to compute foreign-source income and foreign taxes paid with respect to distributions paid by the First American International and First American International Select. The first column in the table below and to the right discloses, by country, the percentage of your ordinary dividend income that is foreign-source income. The second column of the table discloses the percentage of your foreign taxes paid attributable to each of the specified countries. The rules for computing foreign tax credits are complex. Please consult your tax advisor. First American International Country Source Income Paid Australia 1.03% - Belgium 3.00% 4.92% Brazil 2.09% 2.54% Britain 22.19% - Egypt 0.09% 0.01% Finland 1.36% 2.23% France 17.60% 28.81% Germany 3.66% 4.07% Greece 0.30% - Hong Kong 7.12% - Ireland 1.32% - Italy 9.74% 15.92% Japan 10.05% 7.68% Mexico 2.28% 3.56% Netherlands 4.89% 8.01% South Korea 0.27% 0.49% Spain 0.80% 1.31% Sweden 1.08% 1.76% Switzerland 10.26% 16.79% Taiwan 0.87% 1.90% Totals % % Kansas Intangibles Kansas has a county-option intangibles tax. This county-specific Kansas intangibles tax is levied on gross earnings received from intangible property. Intangible property includes: savings accounts, stocks, bonds, accounts receivable, and mortgages. Gross earnings from Kansas obligations and U.S. government obligations are exempt from the tax whether these obligations are held directly or indirectly. The table below discloses the percentage of gross earnings of each First American fund derived from Kansas obligations or U.S. government obligations. Please consult your tax advisor or your county office to determine if you are subject to the Kansas intangibles tax. First American International Select Country Source Income Paid Austria 0.33% 0.51% Australia 1.65% - Bermuda 0.21% - Brazil 5.11% 3.86% Britain 13.79% - Canada 0.79% 1.22% China 0.22% - Egypt 0.83% - Finland 0.65% 1.03% France 5.62% 9.37% Germany 3.37% 5.33% Greece 0.45% - Guernsey 0.09% - Hong Kong 1.60% - Hungary 0.31% - India 29.17% 32.97% Indonesia 0.90% 1.42% Ireland 0.06% - Isle of Man 0.48% - Israel 1.56% 3.16% Italy 6.68% 10.11% Japan 6.27% 4.55% Luxembourg 0.53% 0.53% Malaysia 0.21% - Mexico 0.93% - Netherlands 2.52% 3.91% Philippines 0.98% 1.60% Portugal 0.24% 0.24% Russia 0.62% 0.86% Singapore 0.66% - South Africa 1.48% - South Korea 1.26% 2.14% Spain 2.65% 4.16% Sweden 1.22% 2.13% Switzerland 2.68% 4.09% Taiwan 2.65% 6.30% Thailand 0.40% 0.40% Turkey 0.83% 0.11% Totals % % Percentage Invested in Kansas Obligations or U.S. Name Government Obligations Arizona 0.02% Balanced 3.44% Core Bond 9.82% Equity Index 0.32% Government Obligations 13.38% High Income Bond 0.03% Income Builder 0.05% Inflation Protected Securities 85.60% Intermediate Government Bond 98.05% Intermediate 2.72% Intermediate Term Bond 13.46% International Select 0.63% Mid Cap Index 0.69% Minnesota 0.03% Quantitative Large Cap Core 0.47% Percentage Invested in Kansas Obligations or U.S. Name Government Obligations Quantitative Large Cap Growth 0.32% Quantitative Large Cap Value 0.25% Short 1.30% Short Term Bond 6.24% Small Cap Index 0.61% Strategy Aggressive Growth All. 1.94% Strategy Growth Allocation 4.72% Strategy Growth & Income All. 6.98% Strategy Income Allocation 9.93% 0.43% Obligations 0.89% Total Return Bond 11.18% Treasury Obligations 0.01% U.S. Government Mortgage 0.14% U.S. Treasury Money Market 97.70%

4 Important 2007 Information s A fund may pay tax-exempt dividends to its shareholders if it meets certain requirements. Generally, the income dividends paid by all of the First American municipal bond funds are exempt from federal income tax. However, such dividends must still be reported on your income tax return (Form 1040, Line 8b). This is an information-only requirement (unless you re also receiving social security benefits or may be subject to the AMT, as discussed previously). Please note, under certain circumstances taxable ordinary income and capital gains may also be distributed by municipal bond funds and will be reported as such in Box 1a or Box 2a of your Form 1099-DIV. In general, most states do not impose income tax on interest derived from their own municipal obligations, as well as on certain obligations of U.S. territories (e.g., Puerto Rico). However, each state has its own rules that must be satisfied in order to obtain this state tax-exempt treatment. For example, in California at least 50% of a mutual fund s assets must consist of obligations, the interest on which is exempt from taxation by California. The table below lists the percentage of tax-exempt dividends that were derived from state and local obligations held by the First American municipal bond funds during 2007, as well as any taxable distributions. Each state and local jurisdiction typically provides specific instructions on how to calculate and report this income. Since state and local laws vary, please State/ U.S Territory AZ CA CA CO CO MN MN MO NE OH OR Short Oblig. Alabama % 1.23% % % 0.75% 1.61% Alaska 0.30% % 0.06% % 0.35% % 1.33% 0.13% Arizona 87.65% % % % 2.42% 0.99% Arkansas % % 0.28% California 0.34% 95.49% 96.42% % % 10.17% 0.97% Colorado % 87.11% 8.73% % % % 3.81% 3.30% Connecticut % % Delaware % 0.06% District of Columbia % % Florida 1.34% % 0.73% % % 2.58% 6.10% Georgia % % 2.50% 3.70% Hawaii Idaho % % % 0.16% Illinois 1.77% % % 17.92% % 1.34% 1.29% 0.98% 1.02% 5.75% 8.21% 16.12% Indiana 3.68% % 1.91% % % 2.16% 3.51% Iowa 1.44% 0.47% % 1.42% 2.36% % % 2.55% 1.45% Kansas % % 0.42% 0.86% Kentucky % % - - Louisiana % % 1.41% 2.21% Maine % Maryland % % Massachusetts % % 2.59% Michigan % % 0.54% 4.11% Minnesota % 3.32% 96.95% 97.17% % % 7.80% 1.32% Mississippi % % % Missouri % % % 2.13% 1.35% Montana % % 0.26% Nebraska % % % 3.38% 0.50% Nevada % % 3.14% 0.26% New Hampshire % 0.56% % % 0.36% New Jersey % % 0.78% 1.23% New Mexico % % New York % % 1.38% 1.65% North Carolina 0.64% % 1.63% % % 3.07% 2.23% North Dakota % % 0.16% Ohio % % % 2.01% 4.96% Oklahoma % % 0.64% 0.11% Oregon % % 9.07% 3.13% 1.61% Pennsylvania % % 2.22% 6.98% Rhode Island % South Carolina % % 2.17% 0.36% South Dakota 1.43% % 1.23% % 0.80% % 1.71% - Tennessee 0.54% % % 2.98% 1.93% Texas % % % 10.91% 9.55% Utah % % 0.22% 0.17% Vermont % - Virginia % % 0.69% 2.49% Washington % % 1.13% 2.96% West Virginia 0.33% % % 0.22% % % % Wisconsin % % 2.72% 2.73% Wyoming % % 0.23% Puerto Rico 0.23% 4.04% 2.47% 0.06% 0.15% 0.01% 2.95% 1.76% 2.84% 0.29% 1.30% 1.84% 2.34% 2.21% 0.54% Virgin Islands Other -Exempt % 1.73% 0.51% % 0.89% 1.68% 0.63% 1.91% 1.69% 3.78% able 0.31% % 0.49% 0.04% 0.10% 0.04% % % 0.03%

5 Important 2007 Information Utah on -Exempt Dividends -exempt interest dividends paid by a fund to a shareholder who is a Utah taxpayer may be subject to Utah s income tax. -exempt interest dividends are subject to Utah s income tax unless: (1) the fund paying the tax-exempt dividends received tax-exempt interest from Utah obligations; (2) the fund paying the tax-exempt dividends acquired the non-utah municipal obligation before January 1, 2003; or (3) the non-utah obligation was issued by a state that does not impose tax on Utah municipal obligations. The table below shows the percentage of your fund s income distributions that should be treated as exempt from Utah s income tax. Please consult your tax advisor to determine whether you are subject to Utah s income tax. Name Percentage of Income Distributions Exempt from Utah Income Arizona 33.98% California Intermediate 45.09% California 51.59% Colorado Intermediate 52.69% Colorado 45.04% Intermediate 44.56% Minnesota Intermediate 57.04% Minnesota 48.06% Missouri 49.81% Nebraska 48.45% Ohio 41.02% Oregon Intermediate 54.95% Short 14.79% 39.99% Obligations 9.15%