N-30D 1 a2094251zn-30d.txt N-30D [GRAPHIC] [FIRST AMERICAN FUNDS(TM) LOGO] 2002 ANNUAL REPORT STOCK FUNDS OUR STRENGTH WE ARE A PERFORMANCE-DRIVEN, INDEPENDENT-STYLE FIRM, BACKED BY THE RESOURCES AND STABILITY OF A LEADING FINANCIAL ORGANIZATION. OUR GOAL SUPERIOR LONG-TERM PERFORMANCE. OUR PLEDGE WE TAILOR OUR APPROACH TO YOUR INVESTMENT NEEDS AND MEASURE OUR PERFORMANCE AGAINST YOUR GOALS. FIRST AMERICAN FUNDS ON THE COVER OUR CORPORATE CONSTITUTION THIS STATEMENT IS DESIGNED TO CAPTURE THE CHARACTER AND AMBITION OF OUR FIRM. WE ARE FOUNDED ON STRENGTH, FOCUSED ON OUR GOAL, AND COMMITTED TO OUR PLEDGE. OUR IMAGE-GEORGE WASHINGTON HIS RICH LEGACY AS PATRIOT AND LEADER IS WIDELY RECOGNIZED AS EMBODYING THE SOUND JUDGMENT, RELIABILITY, AND STRATEGIC VISION THAT ARE CENTRAL TO OUR BRAND. FASHIONED IN A STYLE REMINISCENT OF AN 18TH CENTURY ENGRAVING, THE ILLUSTRATION CONVEYS THE SYMBOLIC STRENGTH AND VITALITY OF WASHINGTON, WHICH ARE ATTRIBUTES THAT WE VALUE AT FIRST AMERICAN FUNDS. TABLE OF CONTENTS MESSAGE TO SHAREHOLDERS 1 REPORT OF INDEPENDENT AUDITORS 39 SECTOR FUNDS Schedule of Investments 40 Statements of Assets and Liabilities 43 Statements of Operations 44 Statements of Changes in Net Assets 45 Financial Highlights 46 INTERNATIONAL FUNDS Schedule of Investments 50 Statements of Assets and Liabilities 54 Statements of Operations 55 Statements of Changes in Net Assets 56 Financial Highlights 58 SMALL CAP FUNDS Schedule of Investments 60 Statements of Assets and Liabilities 67 Statements of Operations 68 Statements of Changes in Net Assets 70 Financial Highlights 72 MID CAP FUNDS Schedule of Investments 76 Statements of Assets and Liabilities 82 Statements of Operations 83 Statements of Changes in Net Assets 84 Financial Highlights 86 LARGE CAP FUNDS Schedule of Investments 90 Statements of Assets and Liabilities 95 Statements of Operations 96 Statements of Changes in Net Assets 98 Financial Highlights 100 GROWTH & INCOME FUNDS Schedule of Investments 104 Statements of Assets and Liabilities 113 Statements of Operations 114 Statements of Changes in Net Assets 115 Financial Highlights 116 NOTES TO FINANCIAL STATEMENTS 118 NOTICE TO SHAREHOLDERS 137
OUR FUND FAMILY HIGHER RISK AND RETURN POTENTIAL SECTOR FUNDS - Technology - Health Sciences - Real Estate Securities INTERNATIONAL FUNDS - Emerging Markets - International SMALL CAP FUNDS - Micro Cap - Small Cap Growth - Small Cap Core - Small Cap Value MID CAP FUNDS - Mid Cap Growth - Mid Cap Core - Mid Cap Value LARGE CAP FUNDS - Large Cap Growth - Large Cap Core - Large Cap Value GROWTH & INCOME FUNDS - Equity Income - Balanced INDEX FUNDS ASSET ALLOCATION FUNDS INCOME FUNDS TAX FREE INCOME FUNDS MONEY MARKET FUNDS LOWER RISK AND RETURN POTENTIAL MUTUAL FUND INVESTING INVOLVES RISK; PRINCIPAL LOSS IS POSSIBLE. NOT FDIC INSURED NO BANK GUARANTEE MAY LOSE VALUE MESSAGE TO SHAREHOLDERS NOVEMBER 15, 2002 DEAR SHAREHOLDERS: In these times of challenges and uncertainty that affect nearly all investors, we want to thank you for the confidence you've shown in the First American Funds family. Although this past year has been a trying time for many of us, with numerous obstacles thrown in our path, our commitment to your financial success is stronger than ever. We continue to put the full extent of our resources and capabilities to work for your benefit, which includes better focusing those resources to serve your needs. We have made progress toward accomplishing this goal by merging funds with similar investment objectives within our fund family and making changes, in some cases substantial, to our fund portfolio management teams. We also continue to make advancements to our website, firstamericanfunds.com, a valuable tool for your investing needs. The importance of a diversified portfolio is as imperative now as it ever has been. At First American Funds, we provide a wide variety of investment vehicles to fit your investing needs, including the addition of new products to our existing line-up. This past year we added three new funds: the Ohio Tax Free Fund, which has an objective of providing income generally exempt from both state of Ohio and federal income tax; the Short Tax Free Fund, which has an objective of providing current income exempt from federal income tax to the extent consistent with preservation of capital; and the Intermediate Government Bond Fund, which has an objective of providing current income that is exempt from state income tax, to the extent consistent with preservation of capital. In addition, to help those of you working hard to save for college education for yourselves, your children, or your grandchildren, First American funds are now offered in a tax-advantaged 529 college savings plan. By continuing to make improvements such as these, we strive to provide answers to your ever-changing financial needs. We invite you to take a few minutes to review the results of the past year and the associated comments on the performance of the markets and your funds in the pages of this annual report. Once again, thank you for your support of the First American family of funds. Sincerely, /s/ Virginia L. Stringer /s/ Thomas S. Schreier /s/ Mark Jordahl VIRGINIA L. STRINGER THOMAS S. SCHREIER, JR. MARK JORDAHL CHAIRPERSON OF THE BOARD PRESIDENT VICE PRESIDENT, FIRST AMERICAN INVESTMENT FIRST AMERICAN INVESTMENT INVESTMENTS FUNDS, INC. FUNDS, INC. FIRST AMERICAN INVESTMENT FUNDS, INC. 1 A TIME OF CHALLENGE AND UNCERTAINTY [GRAPHIC] Investors may be relieved that the past year is behind us. Rarely have there been periods where the investment markets were more difficult as the bear market environment, which began in early 2000, continued in full force. A wide array of challenges emerged over the past year to disrupt the investing environment. In October 2001, the nation was still reeling from the impact of the unprecedented terrorist attacks of September 11 and subsequent threats. War in Afghanistan was imminent and, later, tensions rose in the Middle East and between India and Pakistan, threatening to broaden the conflict. At home, corporate accounting problems that first came to prominence with the Enron scandal spread to a number of other prominent companies. On the economic front, the recovery that appeared to begin in early 2002 suddenly became less vibrant than many expected. Ultimately, there was little positive news to encourage investors. STOCKS RISE, THEN FALL What began as an optimistic view of the economy caused a brief rally in stocks in the closing months of 2001. However, the optimism faded as bad news overwhelmed the positive signals. This included limited spending by companies on new equipment. While government spending increased, particularly in areas related to defense and homeland security, it was up to consumers to keep the economy afloat. Unfortunately, this wasn't enough to improve corporate profitability to levels that could sustain stock prices. Although large-cap stocks were the hardest hit sector of the market, small- and mid-cap stocks also could not avoid the general weakness that dominated the market. 2 [GRAPHIC] BONDS THE BENEFICIARY AGAIN Interest rates began this past fiscal year at fairly low levels and, surprisingly, continued to decline for much of the year. This was a reflection of both a weaker-than-expected economic recovery and a desire by investors to find less volatile alternatives for their money. Once again, U.S. Treasury securities, as well as tax-exempt bonds issued by government entities, were the biggest beneficiaries of the interest-rate trend. But not all parts of the bond market participated in the rally. Corporate bonds, particularly those from lower-rated issuers, were negatively affected by many of the same factors that plagued the equity markets. POSITIVE FUNDAMENTALS FIGHT FOR CENTER STAGE While the economy is growing and corporate profits are improving, the headlines of the day have proven to be extremely distracting. Still, there are reasons to believe that better times are ahead. The U.S. economy is likely to continue to grow at a moderate level without triggering any serious inflation threat. As a result, the environment should improve for the stock market and still remain viable for bond investors. However, it seems likely that markets will continue to be somewhat volatile for the foreseeable future. Now, more than ever, it is important to be aware of all of the investment options available to you. A valuable lesson of the extended bear market is that an appropriately diversified portfolio is critical to help you both achieve your goals and do so within your comfort level. We're proud to offer you a full range of options in the First American family of funds that can help keep you on the right path in order to meet your financial goals. Thanks to our wide variety of investment choices, we're confident you can find solutions to help fulfill your objectives for years to come. 3 HEALTH SCIENCES Investment Objective: LONG-TERM GROWTH OF CAPITAL Last year, the stock market faced many challenges, and health care stocks were not immune to the maladies of the general market. The First American Health Sciences Fund (the "Fund") Class Y shares lost 19.44% (Class A shares declined 19.61% on net asset value) for the fiscal year. The Fund's benchmark, the S&P Health Care Composite Index, was down 22.38% for the same period*. While health care stocks typically offer stability and protection in a volatile market due to their low correlation with the economy, the sector as a whole was not able to escape the market's challenges in the past year. Issues that affected the broader market, including economic sluggishness and global uncertainties, also played a role in the decline of health care stocks. Notably, pharmaceutical stocks, which make up a majority of the sector on a market capitalization-weighted basis, declined significantly during the period. Many of the larger pharmaceutical companies are dealing with significant fundamental issues (patent risk, inventory management and regulatory compliance) that have hurt their ability to generate acceptable profit growth. While the Fund had exposure in this sector, it was largely underweight in the group and avoided many of the blow-ups, which assisted in the Fund's out-performance in this critical sector. Among the Fund's largest contributors was Pharmacia, which is being acquired by Pfizer at a 40% premium. Pharmacia, the Fund's second largest position, was up 2.10% during the fiscal year. Among the weak performers that dragged down the Fund's performance were King Pharmaceuticals and Pfizer. The three other major sectors represented in the health care marketplace were a mixed bag. Biotechnology stocks, another significant component in the sector, did not fare much better than pharmaceuticals. Many of the Fund's largest losers reside in the biotech sector as the inherent risk in this industry is significant. A bright spot in this difficult market was the health care services area, which includes hospitals and managed care organizations. One stock that worked particularly well for the Fund was Wellpoint Health Networks, a managed care company, which posted a gain of 34.3% during the period. Medical device companies also enjoyed sound performance; the Fund benefited from a core group of holdings including Boston Scientific and Zimmer. In the closing months of the fiscal year, the managers concentrated the number of holdings in the Fund in an effort to improve the quality of the portfolio. While volatility is typical in a sector fund such as this, the long-term outlook for strong companies in the health care market is positive. With an aging population worldwide, demand for medical care is likely to rise. Further, given the decline in valuations, many of these stocks look attractive at levels we have not seen in years. ANNUALIZED PERFORMANCE(1) AS OF SEPTEMBER 30, 2002
SINCE INCEPTION(4) ---------------------------------- 1 YEAR 5 YEARS 1/31/1996 2/1/2000 9/24/2001 --------------------------------------------------------------------------------- Class A NAV -19.61% -3.13% 0.60% -- -- Class A POP -24.02% -4.22% -0.25% -- -- Class B NAV -20.21% -3.83% -0.14% -- -- Class B POP -24.20% -4.12% -0.14% -- -- Class C NAV -20.25% -- -- -4.22% -- Class C POP -21.85% -- -- -4.59% -- Class S -19.72% -- -- -- -12.50% Class Y -19.44% -2.89% 0.84% -- -- S&P Health Care Composite Index(3) -22.38% 4.61% 9.44% -1.58% -22.38%
* Unlike mutual funds, index returns do not reflect any expenses, transaction costs, or cash flow effects. 4 VALUE OF A $10,000 INVESTMENT(1),(2) AS OF SEPTEMBER 30, 2002 [CHART] CLASS A
FIRST AMERICAN FIRST AMERICAN HEALTH SCIENCES FUND, HEALTH SCIENCES FUND, S&P HEALTH CARE CLASS A NAV CLASS A POP COMPOSITE INDEX(3) 1/1996 $ 10,000 $ 9,452 $ 10,000 9/1996 $ 9,868 $ 9,327 $ 10,926 9/1997 $ 12,197 $ 11,528 $ 14,704 9/1998 $ 9,119 $ 8,619 $ 20,030 9/1999 $ 9,673 $ 9,142 $ 19,925 9/2000 $ 15,659 $ 14,801 $ 24,768 9/2001 $ 12,943 $ 12,234 $ 23,720 9/2002 $ 10,405 $ 9,834 $ 18,411
[CHART] CLASS Y
FIRST AMERICAN HEALTH SCIENCES FUND, S&P HEALTH CARE CLASS Y COMPOSITE INDEX(3) 1/1996 $ 10,000 $ 10,000 9/1996 $ 9,880 $ 10,926 9/1997 $ 12,241 $ 14,704 9/1998 $ 9,168 $ 20,030 9/1999 $ 9,772 $ 19,925 9/2000 $ 15,840 $ 24,768 9/2001 $ 13,124 $ 23,720 9/2002 $ 10,573 $ 18,411
(1) Past performance does not guarantee future results and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or redemption of fund shares. The principal value of an investment and investment return will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance reflects voluntary fee waivers in effect. In the absence of such fee waivers, total returns would be reduced. Index is for illustrative purposes only and is not available for investment. Sector funds such as the First American Health Sciences Fund are more vulnerable to price fluctuation as a result of events that may affect the industry in which they focus than are funds that invest in multiple industries. Share prices of sector funds also will fluctuate with changing market conditions, as will share prices of other stock funds. Sector funds should not be treated as a core investment; rather, their role is to round out the growth portion of a well-diversified investment portfolio. Total returns at net asset value ("NAV") reflect performance over the time period indicated without including the Fund's maximum sales charge and assumes reinvestment of all distributions at NAV. Total returns at public offering price ("POP") reflect performance over the time period indicated including maximum sales charges of 5.50% for Class A shares, 1% for Class C shares, and the maximum contingent deferred sales charge ("CDSC") for Class B and Class C shares for the relevant period. Maximum CDSC for Class B shares is 5.00% and 1.00% for Class C shares. Total returns assume reinvestment of all distributions at NAV. The Health Sciences Fund's 2000 returns were higher due in part to its strategy of investing in IPOs in a period favorable for IPO investing. Of course, such favorable returns involve accepting the risk of volatility, and there is no assurance that the Fund's future investment in IPOs will have the same effect on performance as it had in 1999 and 2000. (2) Performance for Class B, Class C, and Class S shares is not presented. Performance for Class B and Class C is lower due to higher expenses. Performance for Class S is substantially similar to Class A due to similar expenses. (3) An unmanaged index comprised of health care stocks in the S&P 500 Composite Index (an unmanaged index of large-capitalization stocks). (4) The performance since inception for the index is calculated from the month end following the inception of the class. 5 REAL ESTATE SECURITIES Investment Objective: ABOVE AVERAGE CURRENT INCOME AND LONG-TERM CAPITAL APPRECIATION While an ongoing bear market continued to send equity markets lower, real estate securities were one of the few areas to generate positive returns. The First American Real Estate Securities Fund (the "Fund") benefited in this environment by generating a gain of 10.40% for Class Y shares for the fiscal year ended September 30, 2002 (Class A shares rose 10.07% on net asset value). Over the same 12-month period, the Fund outpaced its benchmark, the Morgan Stanley REIT (Real Estate Investment Trusts) Index, which returned 8.56%*. In a period that failed to bring an end to the bear market for stocks, real estate found itself in a completely different environment. Specifically, real estate securities managed to generate positive performance. A number of REITs, the focus of the portfolio's investments, drew investor attention due in large part to their ability to generate very attractive dividend yields. This provided a degree of stability that most stocks couldn't match. In addition, many firms involved in the real estate marketplace enjoyed solid profit growth, a benefit that many companies outside the industry had difficulty duplicating. The biggest driver of positive performance in the portfolio was the strength of our holdings in mall and retail-oriented REITs. With consumer spending continuing to drive what growth existed in the U.S. economy, this sector was able to meet and exceed cash flow expectations. Because the Fund had a larger-than-average weighting in this sector, the portfolio was able to fully capitalize on the opportunity. Among the best performing stocks in this sector were Simon Property Group and General Growth Properties, Inc. A number of sectors struggled, including hotel stocks such as Starwood Hotels. This segment continues to be hurt because corporate travel has not returned to pre-September 11 levels. Office property managers such as Equity Office proved to be particularly weak. Likewise, residential property companies such as Equity Residential also lost ground. Throughout the year, the Fund put increasing focus on stocks of retail companies, while de-emphasizing office and apartment REITS. With signs that retail sales may be leveling off a bit, the Fund's position in the retail segment was more broadly diversified as a defensive measure. A factor working in favor of the real estate sector is that more investors are beginning to recognize the favorable dividend levels and consistent, favorable long-term earnings of this group and increasing investment allocations to it. In the coming months, there is reason for a bit more caution, as the retail segment may flatten out after its strong performance in the past year. Industrial REITs might perform better as this sector is less dependent on job growth. Office and apartment securities may have a more difficult time until there is clear and sustained improvement in job growth in the economy. Steps will be taken as needed to help the Fund navigate through what may be a challenging market environment. ANNUALIZED PERFORMANCE(1) AS OF SEPTEMBER 30, 2002
SINCE INCEPTION(4) ----------------------------------------------- 1 YEAR 5 YEARS 6/30/1995 9/29/1995 2/1/2000 9/24/2001 ----------------------------------------------------------------------------------------- Class A NAV 10.07% 4.56% -- 10.56% -- -- Class A POP 4.12% 3.39% -- 9.68% -- -- Class B NAV 9.21% 3.79% -- 9.71% -- -- Class B POP 4.29% 3.47% -- 9.71% -- -- Class C NAV 9.27% -- -- -- 15.88% -- Class C POP 7.21% -- -- -- 15.44% -- Class S 10.13% -- -- -- -- 15.14% Class Y 10.40% 4.83% 11.23% -- -- -- Morgan Stanley REIT Index(3) 8.56% 3.46% 10.46% 10.21% 16.84% 8.56%
* Unlike mutual funds, index returns do not reflect any expenses, transaction costs, or cash flow effects. 6 VALUE OF A $10,000 INVESTMENT(1),(2) AS OF SEPTEMBER 30, 2002 [CHART] CLASS A
FIRST AMERICAN REAL FIRST AMERICAN REAL ESTATE SECURITIES FUND, ESTATE SECURITIES FUND, MORGAN STANLEY CLASS A NAV CLASS A POP REIT INDEX(3) 9/1995 $ 10,000 $ 9,452 $ 10,000 9/1996 $ 11,817 $ 11,171 $ 11,827 9/1997 $ 16,163 $ 15,279 $ 16,661 9/1998 $ 14,155 $ 13,381 $ 14,285 9/1999 $ 13,321 $ 12,592 $ 13,445 9/2000 $ 16,875 $ 15,952 $ 16,302 9/2001 $ 18,341 $ 17,338 $ 18,197 9/2002 $ 20,203 $ 19,098 $ 19,755
[CHART] CLASS Y
FIRST AMERICAN REAL ESTATE SECURITIES FUND, MORGAN STANLEY CLASS Y REIT INDEX(3) 6/1995 $ 10,000 $ 10,000 9/1995 $ 10,519 $ 10,411 9/1996 $ 12,468 $ 12,313 9/1997 $ 17,091 $ 17,346 9/1998 $ 15,009 $ 14,872 9/1999 $ 14,163 $ 13,998 9/2000 $ 17,980 $ 16,972 9/2001 $ 19,601 $ 18,945 9/2002 $ 21,639 $ 20,567
(1) Past performance does not guarantee future results and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or redemption of fund shares. The principal value of an investment and investment return will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance reflects voluntary fee waivers in effect. In the absence of such fee waivers, total returns would be reduced. Index is for illustrative purposes only and is not available for investment. Sector funds such as the First American Real Estate Securities Fund are more vulnerable to price fluctuation as a result of events that may affect the industry in which they focus than are funds that invest in multiple industries. Share prices of sector funds also will fluctuate with changing market conditions, as will share prices of other stock funds. Sector funds should not be treated as a core investment; rather, their role is to round out the growth portion of a well-diversified investment portfolio. Total returns at net asset value ("NAV") reflect performance over the time period indicated without including the Fund's maximum sales charge and assumes reinvestment of all distributions at NAV. Total returns at public offering price ("POP") reflect performance over the time period indicated including maximum sales charges of 5.50% for Class A shares, 1% for Class C shares, and the maximum contingent deferred sales charge ("CDSC") for Class B and Class C shares for the relevant period. Maximum CDSC for Class B shares is 5.00% and 1.00% for Class C shares. Total returns assume reinvestment of all distributions at NAV. (2) Performance for Class B, Class C, and Class S shares is not presented. Performance for Class B and Class C is lower due to higher expenses. Performance for Class S is substantially similar to Class A due to similar expenses. (3) An unmanaged index of the most actively traded real estate investment trusts. (4) The performance since inception for the index is calculated from the month end following the inception of the class. 7 TECHNOLOGY Investment Objective: LONG-TERM GROWTH OF CAPITAL There was no relief for technology stocks in what proved to be the continuation of a long and severe bear market. The First American Technology Fund (the "Fund") Class Y shares declined by 32.31% for the fiscal year ended September 30, 2002 (Class A shares declined 32.55% on net asset value). Over the same timeframe, the Fund's benchmark, the Merrill Lynch 100 Technology Index, lost 34.42%*. After being hard-hit for more than a year, technology stocks opened the period with a rally. This came on the heels of the September 11 terrorist attacks, as investors began to prepare for an economic recovery. Technology stocks performed well through the closing months of 2001, but the new year brought with it additional concerns about the fundamental strength of a number of technology companies. For example, sales of personal computers did not dramatically recover, which had a negative impact on a broad range of technology issues, most notably the semiconductor industry. In addition, there were no new product applications to provide a significant sales boost to the marketplace. These factors caused serious concern on the part of investors, and expectations were suddenly lowered. The result was a significant downturn in the fortunes of most technology stocks. The current management of the Fund was put in place in February, and made several adjustments to the portfolio. Some of these proved beneficial to performance, including a decision to add a position in healthcare issues. This area performed reasonably well, including important contributions from United Surgical Partners and Health Management Associates. The Fund's weighting in telecommunications stocks was also dramatically reduced, a move that helped the Fund's return as that area suffered substantial losses. During the year, the Fund lost ground due to weakness among its semiconductor holdings, including Intel, Texas Instruments, and Taiwan Semiconductor. Small-company software stocks, including Logic Vision, also declined, as demand for software applications failed to meet expectations. Although there was confidence early in the 12-month period that technology stocks were on the verge of a turnaround, that hasn't proven to be the case. The U.S. economy hasn't experienced the level of growth that was enjoyed in the 1990s and, as a result, many technology companies are failing to match the levels of profitability they enjoyed during that decade. Therefore, a measure of caution seems appropriate going forward, with a focus on stocks of companies with the ability to generate positive cash flow even through difficult times. ANNUALIZED PERFORMANCE(1) AS OF SEPTEMBER 30, 2002
SINCE INCEPTION(5) ----------------------------------------------- 1 YEAR 5 YEARS 4/4/1994 8/15/1994 2/1/2000 9/24/2001 ----------------------------------------------------------------------------------------------- Class A NAV -32.55% -17.31% 0.04% -- -- -- Class A POP -36.26% -18.25% -0.62% -- -- -- Class B NAV -33.10% -17.91% -- -0.54% -- -- Class B POP -36.45% -18.08% -- -0.54% -- -- Class C NAV -33.12% -- -- -- -57.16% -- Class C POP -34.42% -- -- -- -57.32% -- Class S -32.55% -- -- -- -- -37.79% Class Y -32.31% -17.05% 0.28% -- -- -- Merrill Lynch 100 Technology Index(3) -34.42% -8.02% 6.44% 6.02% -51.26% -34.42% S&P Information Technology Index(4) -31.07% -- 9.47% 8.40% -45.01% -31.07%
* Unlike mutual funds, index returns do not reflect any expenses, transaction costs, or cash flow effects. 8 VALUE OF A $10,000 INVESTMENT(1),(2) AS OF SEPTEMBER 30, 2002 [CHART] CLASS A
FIRST AMERICAN TECHNOLOGY FIRST AMERICAN TECHNOLOGY MERRILL LYNCH 100 FUND, CLASS A NAV FUND, CLASS A POP TECHNOLOGY INDEX(3) 4/1994 $ 10,000 $ 9,452 $ 10,000 9/1994 $ 11,190 $ 10,577 $ 10,739 9/1995 $ 18,600 $ 17,580 $ 16,929 9/1996 $ 22,060 $ 20,851 $ 19,600 9/1997 $ 25,966 $ 24,542 $ 25,694 9/1998 $ 21,632 $ 20,446 $ 24,509 9/1999 $ 49,474 $ 46,762 $ 51,920 9/2000 $ 89,108 $ 84,223 $ 88,894 9/2001 $ 14,879 $ 14,063 $ 25,790 9/2002 $ 10,036 $ 9,486 $ 17,013
[CHART] CLASS Y
FIRST AMERICAN TECHNOLOGY MERRILL LYNCH 100 FUND, CLASS Y TECHNOLOGY INDEX(3) 4/1994 $ 10,000 $ 10,000 9/1994 $ 11,190 $ 10,739 9/1995 $ 18,600 $ 16,929 9/1996 $ 22,106 $ 19,600 9/1997 $ 26,074 $ 25,694 9/1998 $ 21,794 $ 24,509 9/1999 $ 50,022 $ 51,920 9/2000 $ 90,393 $ 88,894 9/2001 $ 15,131 $ 25,790 9/2002 $ 10,252 $ 17,013
(1) Past performance does not guarantee future results and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or redemption of fund shares. The principal value of an investment and investment return will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance reflects voluntary fee waivers in effect. In the absence of such fee waivers, total returns would be reduced. Index is for illustrative purposes only and is not available for investment. Sector funds such as the First American Technology Fund are more vulnerable to price fluctuation as a result of events that may affect the industry in which they focus than are funds that invest in multiple industries. Share prices of sector funds also will fluctuate with changing market conditions, as will share prices of other stock funds. Sector funds should not be treated as a core investment; rather, their role is to round out the growth portion of a well diversified investment portfolio. Total returns at net asset value ("NAV") reflect performance over the time period indicated without including the Fund's maximum sales charge and assumes reinvestment of all distributions at NAV. Total returns at public offering price ("POP") reflect performance over the time period indicated including maximum sales charges of 5.50% for Class A shares, 1% for Class C shares, and the maximum contingent deferred sales charge ("CDSC") for Class B and Class C shares for the relevant period. Maximum CDSC for Class B shares is 5.00% and 1.00% for Class C shares. Total returns assume reinvestment of all distributions at NAV. The Technology Fund's 1999 returns were higher due in part to its strategy of investing in IPOs and technology-related stocks in a period favorable for IPO investing. Of course, such favorable returns involve accepting the risk of volatility, and there is no assurance that the Fund's future investment in IPOs and technology stocks will have the same effect on performance as it did in 1999. Investments in the First American Technology Fund are more vulnerable to price fluctuation as a result of the narrow focus of technology investing and the fact that the products of companies in which the Fund invests may be subject to rapid obsolescence. (2) Performance for Class B, Class C, and Class S shares is not presented. Performance for Class B and Class C is lower due to higher expenses. Performance for Class S is substantially similar to Class A due to similar expenses. (3) An equally weighted index of the 100 largest technology companies, as measured by market capitalization. (4) An unmanaged index comprised of information technology stocks in the Standard & Poor's 500 Index (an unmanaged index of large-capitalization stocks). (5) The performance since inception for the index is calculated from the month end following the inception of the class. 9 EMERGING MARKETS Investment Objective: LONG-TERM GROWTH OF CAPITAL Typically, volatile emerging markets actually provided a source of refuge from a bear market environment in the 12-month period ended September 30, 2002. The First American Emerging Markets Fund (the "Fund") Class Y shares gained 6.10% for the fiscal year (Class A shares returned 5.96% at net asset value). By comparison, the Fund's benchmark index, the MSCI Emerging Markets Free Index, earned 8.15%*. The period began in October 2001 as a globally felt recession was nearing an end. Investors appeared to give, what had been hard-hit emerging markets, the early benefit of what was expected to become a more favorable environment in 2002. While economic results turned out to be a bit mixed around the world, a number of developing markets were able to capitalize on some favorable trends. Asian markets in particular performed quite well. These nations not only benefited from increased manufacturing activity for export markets, but also saw very strong domestic consumer demand. Eastern European markets also generated positive results. The clear weak link in the emerging market universe were Latin American countries, where economic and political issues had an overriding impact. The Fund began the fiscal year with a fairly balanced portfolio from a regional perspective. However, the emphasis was quickly shifted to favor Asian and Eastern European markets. This included a particular focus on South Korea, Thailand, and Russia. Among the prominent contributors to the Fund's performance were Hite Brewery and Hyundai Motors in Korea, Bangkok Bank, and Land and Houses in Thailand, and two oil companies, Lukoil Holdings and Yukos in Russia. Detracting from performance were weak returns from stocks in Latin America, most notably, Brazil, which is in the midst of political upheaval. As a result, the Fund reduced its position in this region. The Fund utilizes a "top-down" investment style, determining first which regions and markets are best positioned to benefit from current economic and market trends. From that point, individual stock selections are made within the most attractive emerging market nations. Stock selection is based on fundamental research and an assessment of the company's earnings growth prospects. Going forward, we expect that the Pacific Basin will continue to provide investment opportunities. While there has been some disappointment about the strength of the global economic recovery, it seems likely that trends should continue to move in a positive direction. In this environment, we believe emerging markets should continue to provide attractive return opportunities for investors. ANNUALIZED PERFORMANCE(1) AS OF SEPTEMBER 30, 2002
SINCE INCEPTION(4) -------------------------------------------- 1 YEAR 5 YEARS 11/9/1993 8/7/1998 2/1/2000 9/24/2001 ------------------------------------------------------------------------------------------- Class A NAV 5.96% -10.75% -5.17% -- -- -- Class A POP 0.16% -11.75% -5.77% -- -- -- Class B NAV 5.06% -- -- -4.45% -- -- Class B POP 0.06% -- -- -4.91% -- -- Class C NAV 5.17% -- -- -- -16.82% -- Class C POP 3.11% -- -- -- -17.13% -- Class S 5.77% -- -- -- -- 8.40% Class Y 6.10% -- -- -3.46% -- -- MSCI Emerging Markets Free Index(3) 8.15% -9.92% -4.11% 4.74% -19.68% 8.15%
* Unlike mutual funds, index returns do not reflect any expenses, transaction costs, or cash flow effects. 10 VALUE OF A $10,000 INVESTMENT(1),(2) AS OF SEPTEMBER 30, 2002 [CHART] CLASS A
FIRST AMERICAN EMERGING MARKETS FUND, FIRST AMERICAN EMERGING MSCI EMERGING MARKETS CLASS A NA MARKETS FUND, CLASS A POP FREE INDEX(3) 11/1993 $ 10,000 $ 9,452 $ 10,000 9/1994 $ 11,920 $ 11,267 $ 12,615 9/1995 $ 7,300 $ 6,900 $ 10,380 9/1996 $ 8,850 $ 8,365 $ 10,922 9/1997 $ 11,016 $ 10,412 $ 11,638 9/1998 $ 5,628 $ 5,319 $ 6,075 9/1999 $ 6,791 $ 6,419 $ 9,508 9/2000 $ 8,527 $ 8,059 $ 9,547 9/2001 $ 5,888 $ 5,566 $ 6,382 9/2002 $ 6,240 $ 5,898 $ 6,902
[CHART] CLASS Y
FIRST AMERICAN EMERGING MARKETS FUND, MSCI EMERGING MARKETS CLASS Y FREE INDEX(3) 8/1998 $ 10,000 $ 10,000 9/1998 $ 7,730 $ 10,634 9/1999 $ 9,354 $ 16,645 9/2000 $ 11,774 $ 16,714 9/2001 $ 8,143 $ 11,172 9/2002 $ 8,640 $ 12,083
(1) Past performance does not guarantee future results and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or redemption of fund shares. The principal value of an investment and investment return will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance reflects voluntary fee waivers in effect. In the absence of such fee waivers, total returns would be reduced. Index is for illustrative purposes only and is not available for investment. International investing involves risks not typically associated with domestic investing, including risks of adverse currency fluctuations, potential political and economic instability, different accounting standards, foreign government regulations, currency exchange rates, limited liquidity, and volatile prices. The risks of international investing are particularly significant in emerging markets. Total returns at net asset value ("NAV") reflect performance over the time period indicated without including the Fund's maximum sales charge and assumes reinvestment of all distributions at NAV. Total returns at public offering price ("POP") reflect performance over the time period indicated including maximum sales charges of 5.50% for Class A shares, 1% for Class C shares, and the maximum contingent deferred sales charge ("CDSC") for Class B and Class C shares for the relevant period. Maximum CDSC for Class B shares is 5.00% and 1.00% for Class C shares. Total returns assume reinvestment of all distributions at NAV. On August 7, 1998, the Emerging Markets Fund became the successor by merger to the Piper Emerging Markets Growth Fund, a series of Piper Global Funds Inc. Prior to the merger, the First American Fund had no assets or liabilities. Performance presented from June 21, 1996, to August 7, 1998, is that of Piper Emerging Markets Growth Fund for which Edinburgh Fund Managers acted as subadvisor. Performance prior to June 21, 1996, is that of the Hercules Latin American Value Fund, a series of Hercules Funds Inc. for which Bankers Trust company acted as subadvisor. (2) Performance for Class B, Class C, and Class S shares is not presented. Performance for Class B and Class C is lower due to higher expenses. Performance for Class S is substantially similar to Class A due to similar expenses. (3) An unmanaged index of securities from emerging markets that are open to foreign investors. (4) The performance since inception for the index is calculated from the month end following the inception of the class. 11 INTERNATIONAL Investment Objective: LONG-TERM GROWTH OF CAPITAL A volatile investment environment proved to be challenging for global investors for the 12-month period ended September 30, 2002. As a result, the First American International Fund (the "Fund") Class Y shares declined 18.05% (Class A shares declined 18.19% on net asset value). By comparison, the Fund's benchmark, the MSCI EAFE Index, lost 15.26% over the same timeframe*. The early months of the period were among the most productive overall. In the aftermath of the tragic terrorist attacks of September 11, 2001, signs of recovery in global economies gave world markets a boost. European stocks performed particularly well. However, the new year brought about increasing concerns about the strength of any recovery, and stocks resumed the struggles that began two years ago. One of the more favorable surprises during the past year was the performance of Japan's market. Stocks in Japan have generally been in decline for more than a decade. However, signs that much-needed economic reforms might be making some headway created a more encouraging environment for investors, and the Japanese market managed to hold up better than most during the 12-month period. The Fund maintained a strong position in Japan, and its weighting in that market actually increased by the end of the fiscal year. Among the most notable contributors to performance in this area were Brother Industries and Shiseido Pharmaceuticals. Other Pacific Basin markets, such as Australia and Hong Kong, performed relatively well. Australia benefited, in large part, from favorable price trends on commodities, an important aspect of business in that nation. However, the Fund's exposure to Australian stocks was more limited than that of the benchmark. The biggest disappointment over the 12 months was the European markets. Within the region, the Fund's leaning toward growth-oriented stocks proved to be a disadvantage for much of the year, as investors appeared to favor issues that offered more attractive valuations. Europe's economic sluggishness took a toll on corporate earnings, and that had a particularly negative impact on the Fund's return. Industrial stocks and health care issues struggled most significantly. While the effort to achieve a full-fledged economic recovery seems to have stalled in the past year, we expect the global economic environment to improve in the months ahead. Japan and other Asian nations, as well as emerging market countries, appear to be positioned to benefit from a global economic turnaround. Eventually, European markets may respond more favorably as well. The Fund is putting greater emphasis on stocks of companies that appear to be well-positioned to benefit from an economic recovery. Once economic activity increases, these companies should see better profit improvement, which is likely to be reflected in improving stock prices. ANNUALIZED PERFORMANCE(1) AS OF SEPTEMBER 30, 2002
SINCE INCEPTION(4) ----------------------------------------------------- 1 YEAR 5 YEARS 4/4/1994 4/24/1994 5/2/1994 3/6/1995 9/24/2001 ------------------------------------------------------------------------------------------------------ Class A NAV -18.19% -3.88% -- -- 1.05% -- -- Class A POP -22.76% -4.96% -- -- 0.38% -- -- Class B NAV -18.94% -4.59% -- -- -- 1.16% -- Class B POP -22.99% -4.87% -- -- -- 1.16% -- Class C NAV -18.97% -- -- -- -- -- -14.46% Class C POP -20.60% -- -- -- -- -- -16.10% Class S -18.42% -3.95% -- 1.22% -- -- -- Class Y -18.05% -3.61% 1.47% -- -- -- -- MSCI EAFE Index(3) -15.26% -5.37% -0.04% -0.04% 0.03% -0.31% -15.26%
* Unlike mutual funds, index returns do not reflect any expenses, transaction costs, or cash flow effects. 12 VALUE OF A $10,000 INVESTMENT(1),(2) AS OF SEPTEMBER 30, 2002 [CHART] CLASS A
FIRST AMERICAN FIRST AMERICAN INTERNATIONAL FUND, INTERNATIONAL FUND, CLASS A NAV CLASS A POP MSCI EAFE INDEX(3) 5/1994 $ 10,000 $ 9,452 $ 10,000 11/1994 $ 9,778 $ 9,242 $ 9,998 11/1995 $ 10,641 $ 10,058 $ 10,788 11/1996 $ 11,920 $ 11,266 $ 12,092 11/1997 $ 12,220 $ 11,550 $ 12,076 11/1998 $ 14,097 $ 13,324 $ 14,103 11/1999 $ 19,260 $ 18,204 $ 17,127 10/2000 $ 18,562 $ 17,545 $ 16,107 9/2001 $ 13,365 $ 12,632 $ 11,830 9/2002 $ 10,921 $ 10,322 $ 10,024
[CHART] CLASS Y
FIRST AMERICAN INTERNATIONAL FUND, CLASS Y MSCI EAFE INDEX(3) 4/1994 $ 10,000 $ 10,000 11/1994 $ 9,924 $ 9,943 11/1995 $ 10,807 $ 10,729 11/1996 $ 12,147 $ 12,025 11/1997 $ 12,497 $ 12,010 11/1998 $ 14,458 $ 14,025 11/1999 $ 19,817 $ 17,032 10/2000 $ 19,167 $ 16,017 9/2001 $ 13,813 $ 11,764 9/2002 $ 11,320 $ 9,968
(1) Past performance does not guarantee future results and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or redemption of fund shares. The principal value of an investment and investment return will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance reflects voluntary fee waivers in effect. In the absence of such fee waivers, total returns would be reduced. Index is for illustrative purposes only and is not available for investment. International investing involves risks not typically associated with domestic investing, including risks of adverse currency fluctuations, potential political and economic instability, different accounting standards, foreign government regulations, currency exchange rates, limited liquidity, and volatile prices. Total returns at net asset value ("NAV") reflect performance over the time period indicated without including the Fund's maximum sales charge and assumes reinvestment of all distributions at NAV. Total returns at public offering price ("POP") reflect performance over the time period indicated including maximum sales charges of 5.50% for Class A shares, 1% for Class C shares, and the maximum contingent deferred sales charge ("CDSC") for Class B and Class C shares for the relevant period. Maximum CDSC for Class B shares is 5.00% and 1.00% for Class C shares. Total returns assume reinvestment of all distributions at NAV. On July 1, 2001, Clay Finlay Inc. was hired as subadvisor to manage the Fund's assets. On September 24, 2001, the First American International Fund merged with Firstar International Growth Fund and Firstar International Value Fund, both subadvised by Clay Finlay Inc. Performance history prior to September 24, 2001, represents that of the Firstar International Growth Fund. (2) Performance for Class B, Class C, and Class S shares is not presented. Performance for Class B and Class C is lower due to higher expenses. Performance for Class S is substantially similar to Class A due to similar expenses. (3) An unmanaged index including approximately 1,100 companies representing stock markets of 20 European countries, Australia, New Zealand, Japan, Hong Kong, and Singapore. (4) The performance since inception for the index is calculated from the month end following the inception of the class. 13 MICRO CAP Investment Objective: GROWTH OF CAPITAL Smaller stocks were hard hit, but managed to weather a negative market environment better than stocks of larger companies for the 12-month period ended September 30, 2002. The First American Micro Cap Fund (the "Fund") Class Y shares declined 17.62% for its fiscal year (Class A shares declined 17.84% on net asset value). The Fund's benchmark, the Russell 2000 Growth Index, declined 18.16% over the same period*. The Fund was positioned to capitalize on what was expected to be an improving economy as 2001 came to a close, which included placing an increased emphasis on stocks of companies that were expected to benefit from a cyclical upturn. In the final months of 2001, stocks enjoyed a solid recovery, which boosted the Fund's performance. Most notably, holdings in the technology, transportation, and industrial sectors, which became a bigger focus in the portfolio in late 2001, performed quite well. However, early in 2002, the economic environment took a turn for the worse. Investors became concerned that the economic rebound wouldn't be as strong as first expected. While corporate profits were showing signs of improvement, they weren't living up to investor expectations. Cyclical stocks started to give back some of their gains. In addition, investors seemed to show less appreciation for stocks of smaller companies, the investment mandate of this portfolio. Generally, throughout the remainder of 2002, the bear market environment that began in early 2000, continued. A mix of stocks contributed positively to performance over the period. These included the entertainment software company Take Two Interactive, Career Education, an education firm, Gymboree in the children's retail market, and Landstar and Yellow Corporation in the trucking industry. A number of technology stocks detracted from the Fund's return, including Aeroflex, Diamond Technology Partners, and ChipPAC. Various health care stocks, such as First Horizon Pharmaceutical and Lifecore Biomedical, also suffered through the bear market. In response to what was happening in the market, more of the portfolio was positioned in energy stocks, and technology issues were added as stocks became more attractively priced. Looking ahead, the outlook is starting to improve for micro cap stocks. Prices of many stocks have reached extremely low levels, creating positive buying opportunities. Once the U.S. economy finds itself on more solid ground, it seems likely that stocks in this part of the market may perform better and generate more attractive returns for shareholders. ANNUALIZED PERFORMANCE(1) AS OF SEPTEMBER 30, 2002
SINCE INCEPTION(4) ---------------------------------------------- 1 YEAR 5 YEARS 8/1/1995 3/1/1999 12/11/2000 9/24/2001 ------------------------------------------------------------------------------------------------ Class A NAV -17.84% 10.49% 20.10% -- -- -- Class A POP -22.34% 9.25% 19.16% -- -- -- Class B NAV -18.45% -- -- 19.04% -- -- Class B POP -22.52% -- -- 18.52% -- -- Class C NAV -18.42% -- -- -- -- -15.39% Class C POP -20.04% -- -- -- -- -17.07% Class S -17.84% -- -- -- -18.37% -- Class Y -17.62% 10.79% 20.42% -- -- -- Russell 2000 Growth Index(3) -18.16% -9.49% -2.09% -11.01% -26.14% -18.16%
* Unlike mutual funds, index returns do not reflect any expenses, transaction costs, or cash flow effects. 14 VALUE OF A $10,000 INVESTMENT(1),(2) AS OF SEPTEMBER 30, 2002 [CHART] CLASS A
FIRST AMERICAN FIRST AMERICAN MICRO CAP FUND, MICRO CAP FUND, RUSSELL 2000 CLASS A NAV CLASS A POP GROWTH INDEX(3) 8/1995 $ 10,000 $ 9,452 $ 10,000 10/1995 $ 11,100 $ 10,492 $ 9,704 10/1996 $ 17,137 $ 16,197 $ 10,997 10/1997 $ 22,240 $ 21,021 $ 13,325 10/1998 $ 17,411 $ 16,456 $ 11,212 10/1999 $ 30,736 $ 29,051 $ 14,495 10/2000 $ 57,608 $ 54,450 $ 16,838 9/2001 $ 45,215 $ 42,736 $ 10,521 9/2002 $ 37,151 $ 35,114 $ 8,611
[CHART] CLASS Y
FIRST AMERICAN MICRO CAP FUND, RUSSELL 2000 CLASS Y GROWTH INDEX(3) 8/1995 $ 10,000 $ 10,000 10/1995 $ 11,110 $ 9,704 10/1996 $ 17,189 $ 10,997 10/1997 $ 22,366 $ 13,325 10/1998 $ 17,555 $ 11,212 10/1999 $ 31,083 $ 14,495 10/2000 $ 58,403 $ 16,838 9/2001 $ 45,943 $ 10,521 9/2002 $ 37,848 $ 8,611
(1) Past performance does not guarantee future results and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or redemption of fund shares. The principal value of an investment and investment return will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance reflects voluntary fee waivers in effect. In the absence of such fee waivers, total returns would be reduced. Indexes are for illustrative purposes only and are not available for investment. Stocks of micro-capitalization companies involve substantial risk. These stocks historically have experienced greater price volatility than stocks of larger companies, and they may be expected to do so in the future. Total returns at net asset value ("NAV") reflect performance over the time period indicated without including the Fund's maximum sales charge and assumes reinvestment of all distributions at NAV. Total returns at public offering price ("POP") reflect performance over the time period indicated including maximum sales charges of 5.50% for Class A shares, 1% for Class C shares, and the maximum contingent deferred sales charge ("CDSC") for Class B and Class C shares for the relevant period. Maximum CDSC for Class B shares is 5.00% and 1.00% for Class C shares. Total returns assume reinvestment of all distributions at NAV. On September 24, 2001, the Micro Cap Fund became the successor by merger to the Firstar MicroCap Fund, a series of Firstar Funds, Inc. Prior to the merger, the First American Fund had no assets or liabilities. Performance presented prior to September 24, 2001, represents that of the Firstar MicroCap Fund. The Micro Cap Fund's 1999 returns were higher due in substantial part to its strategy of investing in IPOs in a period favorable for IPO investing. Of course, such favorable returns involve accepting the risk of volatility, and there is no assurance that the Fund's future investment in IPOs will have the same effect on performance as it did in 1999. (2) Performance for Class B, Class C, and Class S shares is not presented. Performance for Class B and Class C is lower due to higher expenses. Performance for Class S is substantially similar to Class A due to similar expenses. (3) An unmanaged index that measures the performance of those companies in the Russell 2000 Index with higher price-to-book ratios and higher forecasted growth values. The Russell 2000 Index is an unmanaged index that measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which represents approximately 8% of the total market capitalization of the Russell 3000 Index. The Russell 3000 Index measures the performance of the 3,000 largest U.S. companies based on total market capitalization, which represents approximately 98% of the investable U.S. equity market. (4) The performance since inception for the index is calculated from the month end following the inception of the class. 15 SMALL CAP CORE Investment Objective: CAPITAL APPRECIATION As the bear market continued throughout the fiscal year, small stocks managed to avoid many of the problems, but still lost ground. The First American Small Cap Core Fund (the "Fund") Class Y shares declined 4.19% for the fiscal year ended September 30, 2002 (Class A shares declined 4.56% on net asset value). Over the same 12 months, the Fund's benchmark, the S&P SmallCap 600 Index, declined 1.79%*. Small-cap stocks appeared attractively valued in comparison to larger stocks as the fiscal year began, and that was borne out in an early rally that favored this segment of the market. The Fund enjoyed solid gains in the first half of its fiscal year. However, the environment changed in April 2002 as investors became concerned that the U.S. economy was not meeting expectations for recovery. Other issues also hampered investor psychology, including concerns about global conflicts and credibility over corporate accounting problems. Investors began to pull money out of what were viewed as more risky areas of the market. As a result, a major sell-off in small-cap stocks occurred for much of the rest of the period. A number of stocks performed well, particularly in the earlier part of the year. Among the Fund's biggest contributors was Performance Food Group, a fast-growing food distribution company. Hospital firms such as Community Health Systems and Triad Hospitals generated positive results, as did retail companies Gymboree and Advanced Auto Parts. Among the detractors from Fund performance were two semiconductor stocks, Entegris and ATMI, that started the year well, but lost ground as sales of semiconductor chips turned disappointing. Weakness in consumer stocks also took a toll, including poor returns from cable TV providers Insight Communications and Rogers Communications. Although the Fund cut back on holdings in the weak telecommunications sector, one holding that had a particularly negative impact on the Fund was the wireless firm Airgate PCS. The downturn that plagued the market in recent months created positive buying opportunities for the Fund. In particular, positions have been increased in the hard-hit energy sector, which appears well-positioned for a rebound. The number of stocks in the Fund has been reduced, allowing the portfolio to own larger positions in favored issues. This could prove effective for the Fund, as the portfolio has been able to build its holdings in high-quality companies with strong franchises and a dominant position in their marketplace. While we anticipate a volatile market in the near term, we expect to see an improving environment over the next year. ANNUALIZED PERFORMANCE(1) AS OF SEPTEMBER 30, 2002
SINCE INCEPTION(4) ---------------------------------------------- 1 YEAR 5 YEARS 10 YEAR 12/31/1993 3/6/1995 9/24/2001 ------------------------------------------------------------------------------------------------- Class A NAV -4.56% 0.44% 9.69% -- -- -- Class A POP -9.83% -0.69% 9.07% -- -- -- Class B NAV -5.23% -0.24% -- -- 5.76% -- Class B POP -9.64% -0.50% -- -- 5.76% -- Class C NAV -5.09% -- -- -- -- -3.02% Class C POP -6.91% -- -- -- -- -4.87% Class S -4.48% 0.49% -- 6.41% -- -- Class Y -4.19% 0.74% 9.96% -- -- -- S&P SmallCap 600 Index(3) -1.79% 0.83% 10.93% 8.41% 9.92% -1.79%
* Unlike mutual funds, index returns do not reflect any expenses, transaction costs, or cash flow effects. 16 VALUE OF A $10,000 INVESTMENT(1),(2) AS OF SEPTEMBER 30, 2002 [CHART] CLASS A
FIRST AMERICAN FIRST AMERICAN SMALL CAP CORE FUND, SMALL CAP CORE FUND, S&P SMALL CAP CLASS A NAV CLASS A POP 600 INDEX(3) 11/1992 $ 10,000 $ 9,452 $ 10,000 11/1993 $ 11,975 $ 11,320 $ 11,871 11/1994 $ 12,858 $ 12,155 $ 11,436 11/1995 $ 15,619 $ 14,764 $ 14,977 11/1996 $ 16,924 $ 15,998 $ 18,255 11/1997 $ 20,216 $ 19,110 $ 22,735 11/1998 $ 17,347 $ 16,399 $ 21,516 11/1999 $ 20,334 $ 19,221 $ 23,776 10/2000 $ 26,362 $ 24,920 $ 28,589 9/2001 $ 23,033 $ 21,773 $ 25,396 9/2002 $ 21,983 $ 20,780 $ 24,940
[CHART] CLASS Y
FIRST AMERICAN SMALL CAP CORE FUND, S&P SMALL CAP CLASS Y 600 INDEX(3) 11/1992 $ 10,000 $ 10,000 11/1993 $ 11,971 $ 11,871 11/1994 $ 12,876 $ 11,436 11/1995 $ 15,670 $ 14,977 11/1996 $ 17,046 $ 18,255 11/1997 $ 20,416 $ 22,735 11/1998 $ 17,578 $ 21,516 11/1999 $ 20,665 $ 23,776 10/2000 $ 26,866 $ 28,589 9/2001 $ 23,510 $ 25,396 9/2002 $ 22,526 $ 24,940
(1) Past performance does not guarantee future results and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or redemption of fund shares. The principal value of an investment and investment return will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance reflects voluntary fee waivers in effect. In the absence of such fee waivers, total returns would be reduced. Indexes are for illustrative purposes only and are not available for investment. Stocks of small-capitalization companies involve substantial risk. These stocks historically have experienced greater price volatility than stocks of larger companies, and they may be expected to do so in the future. Total returns at net asset value ("NAV") reflect performance over the time period indicated without including the Fund's maximum sales charge and assumes reinvestment of all distributions at NAV. Total returns at public offering price ("POP") reflect performance over the time period indicated including maximum sales charges of 5.50% for Class A shares, 1% for Class C shares, and the maximum contingent deferred sales charge ("CDSC") for Class B and Class C shares for the relevant period. Maximum CDSC for Class B shares is 5.00% and 1.00% for Class C shares. Total returns assume reinvestment of all distributions at NAV. On September 24, 2001, the Small Cap Core Fund became the successor by merger to the Firstar SmallCap Core Equity Fund, a series of Firstar Funds, Inc. Prior to the merger, the First American Fund had no assets or liabilities. Performance presented prior to September 24, 2001, represents that of the Firstar SmallCap Core Equity Fund. The Firstar SmallCap Core Equity Fund was organized on November 27, 2000, and prior to that, was a separate series of Mercantile Funds, Inc. (2) Performance for Class B, Class C, and Class S shares is not presented. Performance for Class B and Class C is lower due to higher expenses. Performance for Class S is substantially similar to Class A due to similar expenses. (3) An unmanaged, capitalization-weighted index that measures the performance of selected U.S. stocks with small market capitalizations. (4) The performance since inception for the index is calculated from the month end following the inception of the class. 17 SMALL CAP GROWTH Investment Objective: GROWTH OF CAPITAL Growth stocks continued to struggle in the ongoing bear market environment throughout the fiscal year. As a result, the First American Small Cap Growth Fund (the "Fund") Class Y shares declined 22.00% during the period (Class A shares declined 22.07% on net asset value). For the same period, the Fund's benchmark, the Russell 2000 Growth Index, was down 18.16%*. The fiscal year began on the heels of a significantly difficult year that was capped by the terrorist attacks of September 11, 2001. In the closing months of 2001, there seemed to be reason for optimism. All indications pointed to an economy in recovery, fueling expectations that improved corporate profits wouldn't be far behind. This was a particularly important trend for growth stocks, which generally move higher on good earnings news. Unfortunately, the optimism began to fade near the onset of 2002. A number of large companies became embroiled in accounting irregularities, events that shook investor confidence throughout the equity market. In addition, investors became wary of some economic signals, which lowered expectations for corporate earnings. As a result, growth stocks resumed their downward trend and reached extremely low levels in July and, then again, in September, the closing month of the Fund's fiscal year. In such a negative environment, an extra premium was placed on analysis and individual stock selection. The Fund took a fairly neutral approach to the market, avoiding significant commitments to any particular sector. Most notably, the portfolio de-emphasized technology and telecommunications issues, which continued to be among the hardest hit areas of the market. Cash levels were also slightly higher than is usually the case, contributing to the Fund's defensive posture. Stocks of companies that managed to generate solid results helped the Fund's performance. Among the contributors were Take Two Interactive Software, a computer game maker, and two health care related stocks, Amylin Pharmaceuticals and Techne Corporation. On the downside, two stocks related to the struggling broadband communications industry hurt the Fund's returns, including Centillium Corporation and Microtune Inc. The bear market has lasted for more than two-and-one-half years, but it appears to be close to wearing down. Stock valuations have been hard hit, and investors may begin to recognize long-term growth opportunities. Small-cap growth stocks have sometimes performed well coming out of such an environment, and this could potentially happen again. As more encouraging economic signals appear, the Fund will position itself to take advantage of any opportunities. ANNUALIZED PERFORMANCE(1) AS OF SEPTEMBER 30, 2002
SINCE INCEPTION(4) ----------------------------------- 1 YEAR 5 YEARS 10 YEARS 7/31/1998 2/1/1999 9/24/2001 ------------------------------------------------------------------------------------------------- Class A NAV -22.07% -3.31% 6.51% -- -- -- Class A POP -26.38% -4.40% 5.91% -- -- Class B NAV -22.70% -- -- -4.02% -- -- Class B POP -26.57% -- -- -4.34% -- -- Class C NAV -22.69% -- -- -- -6.68% -- Class C POP -24.22% -- -- -- -6.94% -- Class S -22.07% -- -- -- -- -21.00% Class Y -22.00% -- -- -3.05% -- -- Russell 2000 Growth Index(3) -18.16% -9.49% 3.49% -8.69% -9.89% -18.16%
* Unlike mutual funds, index returns do not reflect any expenses, transaction costs, or cash flow effects. 18 VALUE OF A $10,000 INVESTMENT(1),(2) AS OF SEPTEMBER 30, 2002 [CHART] CLASS A
FIRST AMERICAN FIRST AMERICAN SMALL CAP GROWTH FUND, SMALL CAP GROWTH FUND, RUSSELL 2000 CLASS A NAV CLASS A POP GROWTH INDEX(3) 9/1992 $ 10,000 $ 9,452 $ 10,000 9/1993 $ 12,453 $ 11,766 $ 12,920 9/1994 $ 12,717 $ 12,016 $ 13,031 9/1995 $ 14,480 $ 13,682 $ 16,706 9/1996 $ 15,260 $ 14,419 $ 18,813 9/1997 $ 22,229 $ 21,004 $ 23,206 9/1998 $ 18,084 $ 17,087 $ 17,443 9/1999 $ 25,517 $ 24,110 $ 23,134 9/2000 $ 41,356 $ 39,076 $ 29,997 9/2001 $ 24,107 $ 22,778 $ 17,223 9/2002 $ 18,786 $ 17,750 $ 14,095
[CHART] CLASS Y
FIRST AMERICAN SMALL CAP GROWTH FUND, RUSSELL 2000 CLASS Y GROWTH INDEX(3) 7/1998 $ 10,000 $ 10,000 9/1998 $ 8,383 $ 8,471 9/1999 $ 11,856 $ 11,235 9/2000 $ 19,275 $ 14,568 9/2001 $ 11,267 $ 8,364 9/2002 $ 8,788 $ 6,845
(1) Past performance does not guarantee future results and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or redemption of fund shares. The principal value of an investment and investment return will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance reflects voluntary fee waivers in effect. In the absence of such fee waivers, total returns would be reduced. Index is for illustrative purposes only and is not available for investment. Stocks of small-capitalization companies involve substantial risk. These stocks historically have experienced greater volatility than stocks of larger companies and they may be expected to do so in the future. Total returns at net asset value ("NAV") reflect performance over the time period indicated without including the Fund's maximum sales charge and assumes reinvestment of all distributions at NAV. Total returns at public offering price ("POP") reflect performance over the time period indicated including maximum sales charges of 5.50% for Class A shares, 1% for Class C shares, and the maximum contingent deferred sales charge ("CDSC") for Class B and Class C shares for the relevant period. Maximum CDSC for Class B shares is 5.00% and 1.00% for Class C shares. Total returns assume reinvestment of all distributions at NAV. On July 31, 1998, the Small Cap Growth Fund became the successor by merger to the Piper Small Company Growth Fund, a series of Piper Funds Inc. Performance presented prior to July 31, 1998, is that of the Piper Small Companies Growth Fund. On September 21, 1996, shareholders approved a change in the Fund's investment objective from high total investment return consistent with prudent investment risk to long-term capital appreciation. In connection with this change, the Fund's investment policies were revised. The Small Cap Growth Fund's 1999 returns were higher due in part to its strategy of investing in IPOs in a period favorable for IPO investing. Of course, such favorable returns involve accepting the risk of volatility, and there is no assurance that the Fund's future investment in IPOs will have the same effect on performance as it did in 1999. (2) Performance for Class B, Class C, and Class S shares is not presented. Performance for Class B and Class C is lower due to higher expenses. Performance for Class S is substantially similar to Class A due to similar expenses. (3) An unmanaged index that measures the performance of those Russell 2000 Index companies with higher price-to-book ratios and higher forecasted growth values. The Russell 2000 Index is an unmanaged index comprised of the smallest 2,000 companies in the Russell 3000 index, which represent approximately 8% of the total market capitalization of the Russell 3000 Index. The Russell 3000 Index is composed of 3,000 large U.S. companies based on total market capitalization, representing approximately 98% of the investable U.S. equity market. (4) The performance since inception for the index is calculated from the month end following the inception of the class. 19 SMALL CAP VALUE Investment Objective: CAPITAL APPRECIATION Though the broader equity market declined significantly over the past 12 months, small cap value stocks held up better than most. The First American Small Cap Value Fund (the "Fund") Class Y shares declined 1.83% for the fiscal year ended September 30, 2002 (Class A shares declined 2.19% on net asset value), while the Fund's benchmark, the Russell 2000 Value Index, fell 1.47%*. The period began on an optimistic note. Following a brief recession in 2001, equity markets rallied during the first part of the fiscal year in anticipation of a robust economic recovery. Small-cap stocks performed quite well, particularly those companies most sensitive to overall economic growth. However, midway through the fiscal year concerns over the timing and magnitude of an economic rebound began to weigh heavily on the market, and small-cap stocks struggled. Despite the unusual volatility, the Fund remained focused on investing in quality small-cap value companies with management teams that have proved their ability to manage through various economic environments. For example, some of the stocks that performed well were health care companies with solid management and dominant market positions such as Mentor and CYTYC Corp. Other contributors to the Fund included JDA Software (technology), Chelsea Property Group (real estate), and consumer stocks D.R. Horton (homebuilding) and Regis Corporation (retail). These stocks offered a solid business outlook and attractive valuation when they were added to the portfolio. On the negative side, management underestimated the dramatic impact that the softer economic environment would have on some of the consumer- and business-oriented companies. Among the stocks that suffered were Steiner Leisure Limited (markets services to cruise ships) and Lodgenet (serves the hospitality market). The Fund also missed out on some positive performance generated by the commodity-oriented basic materials sector. In terms of risk management, the Fund reduced its exposure to some issues that were fully discounting a continuation of the favorable trends. Notwithstanding the extreme volatility in the equity markets, the Fund remains true to its discipline of identifying and investing in stocks of companies with defensible business models and capable management teams that are trading at attractive valuations. Looking ahead, the market is expected to remain choppy, but the extended bear market has provided compelling opportunities in companies that meet the Fund's disciplined investment approach. In addition, value stocks should be attractively positioned to benefit if the market recovers in the months ahead. We believe total return potentials over the long term are more favorable now than was true over most of the past five years. ANNUALIZED PERFORMANCE(1) AS OF SEPTEMBER 30, 2002
SINCE INCEPTION(4) ----------------------------------------------- 1 YEAR 5 YEARS 10 YEARS 8/01/1994 11/24/1997 2/1/1999 9/24/2001 ------------------------------------------------------------------------------------------------------------- Class A NAV -2.19% -1.31% 12.37% -- -- -- -- Class A POP -7.57% -2.42% 11.73% -- -- -- -- Class B NAV -2.91% -- -- -- -0.57% -- -- Class B POP -7.06% -- -- -- -0.83% -- -- Class C NAV -2.88% -- -- -- -- 3.53% -- Class C POP -4.65% -- -- -- -- 3.24% -- Class S -2.19% -- -- -- -- -- 2.04% Class Y -1.83% -1.05% 12.58% -- -- -- -- Russell 2000 Value Index(3) -1.47% 2.07% 11.70% 9.64% 2.50% 7.10% -1.46%
* Unlike mutual funds, index returns do not reflect any expenses, transaction costs, or cash flow effects. 20 VALUE OF A $10,000 INVESTMENT(1),(2) AS OF SEPTEMBER 30, 2002 [CHART] CLASS A
FIRST AMERICAN FIRST AMERICAN SMALL CAP VALUE FUND, SMALL CAP VALUE FUND, RUSSELL 2000 CLASS A NAV CLASS A POP VALUE INDEX(3) 9/1992 $ 10,000 $ 9,452 $ 10,000 9/1993 $ 13,638 $ 12,884 $ 13,659 9/1994 $ 14,793 $ 13,976 $ 14,211 9/1995 $ 20,899 $ 19,744 $ 16,851 9/1996 $ 24,172 $ 22,836 $ 19,123 9/1997 $ 34,271 $ 32,378 $ 27,279 9/1998 $ 25,595 $ 24,181 $ 23,790 9/1999 $ 28,442 $ 26,870 $ 25,176 9/2000 $ 35,037 $ 33,101 $ 29,043 9/2001 $ 32,809 $ 30,996 $ 30,672 9/2002 $ 32,090 $ 30,317 $ 30,222
[CHART] CLASS Y
FIRST AMERICAN SMALL CAP VALUE FUND, RUSSELL 2000 CLASS Y VALUE INDEX(3) 9/1992 $ 10,000 $ 10,000 9/1993 $ 13,638 $ 13,659 9/1994 $ 14,793 $ 14,211 9/1995 $ 20,804 $ 16,851 9/1996 $ 24,268 $ 19,123 9/1997 $ 34,473 $ 27,279 9/1998 $ 25,819 $ 23,790 9/1999 $ 28,752 $ 25,176 9/2000 $ 35,527 $ 29,043 9/2001 $ 33,306 $ 30,672 9/2002 $ 32,697 $ 30,222
(1) Past performance does not guarantee future results and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or redemption of fund shares. The principal value of an investment and investment return will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance reflects voluntary fee waivers in effect. In the absence of such fee waivers, total returns would be reduced. Index is for illustrative purposes only and is not available for investment. Stocks of small-capitalization companies involve substantial risk. These stocks have historically experienced greater price volatility than stocks of larger companies, and they may be expected to do so in the future. Total returns at net asset value ("NAV") reflect performance over the time period indicated without including the Fund's maximum sales charge and assumes reinvestment of all distributions at NAV. Total returns at public offering price ("POP") reflect performance over the time period indicated including maximum sales charges of 5.50% for Class A shares, 1% for Class C shares, and the maximum contingent deferred sales charge ("CDSC") for Class B and Class C shares for the relevant period. Maximum CDSC for Class B shares is 5.00% and 1.00% for Class C shares. Total returns assume reinvestment of all distributions at NAV. Performance prior to August 1, 1994, is that of the Small Company Value Trust Fund, a predecessor collective trust fund. On August 1, 1994, substantially all of the assets of the Small Company Value Trust Fund were transferred into Qualivest Small Companies Value Fund, a mutual fund registered under the Investment Company Act of 1940. On November 21, 1997, the First American Small Cap Value Fund became the successor by merger to Qualivest Small Companies Value Fund. The objectives, policies, and guidelines of the predecessor funds were, in all material respects, identical to those of the Small Cap Value Fund. Small Company Value Trust Fund was not registered under the Investment Company Act of 1940 and therefore was not subject to certain investment restrictions that might have adversely affected performance. (2) Performance for Class B, Class C, and Class S shares is not presented. Performance for Class B and Class C is lower due to higher expenses. Performance for Class S is substantially similar to Class A due to similar expenses. (3) An unmanaged index that measures the performance of those Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values. The Russell 2000 Index is an unmanaged index comprised of the smallest 2,000 companies in the Russell 3000 index, which represent approximately 8% of the total market capitalization of the Russell 3000 Index. The Russell 3000 Index is composed of 3,000 large U.S. companies based on total market capitalization, representing approximately 98% of the investable U.S. equity market. (4) The performance since inception for the index is calculated from the month end following the inception of the class. 21 MID CAP CORE Investment Objective: CAPITAL APPRECIATION With investor confidence sagging through much of 2002, mid-cap stocks moved in a negative direction, though they generally fared better than the stock market as a whole. For its fiscal year ending September 30, 2002, the First American Mid Cap Core Fund (the "Fund") Class Y shares fell by 6.39% (Class A shares lost 6.64% on net asset value). The Fund's benchmark, the S&P 400 MidCap Index, declined 4.70% for the period*. A trend that began in earlier years continued for much of the past fiscal year, as mid-cap stocks tended to outpace their blue-chip counterparts. With issues such as corporate accounting scandals taking a major toll on a number of well-known companies, many of the firms in the mid-cap universe escaped those problems as few concerns surfaced about accounting problems at smaller companies. In addition, earnings on mid-cap stocks generally held up better than for the market as a whole. In the closing months of the Fund's fiscal year, damage from the bear market broadened, and mid-cap stocks declined comparably to the rest of the equity market. Although the environment presented serious challenges, several stocks performed well for the Fund during the year. One area of strength was the education market, where two post-secondary education companies, Corinthian Colleges and Career Education, generated solid returns. The food company Dreyer's Grand Ice Cream turned in positive results and accepted a buyout from Nestle's, boosting its stock price. USA Interactive and Westwood One, both media companies, also performed well. Among the stocks detracting from performance was King Pharmaceuticals, which struggled due to a number of issues that arose from some of its high-profit drugs. Polycom, a video-conferencing company that experienced disappointing business, and Health South, which saw Medicare payments for its rehabilitation services decline, also hurt portfolio performance. The Fund remains well-diversified with a broad mix of stocks from the mid-cap universe, including a mild preference for growth-oriented stocks. A rebound in stock performance will likely hinge on faster economic growth, which may be dependent in large part on increasing corporate expenditures-something that has been lacking in recent years. As the year progresses, we anticipate that business spending will pick up, which should give a number of stocks a reasonable boost. Given the current low valuations of many stocks, the Fund is seeking to position itself to benefit from a more favorable economic environment in the months to come. ANNUALIZED PERFORMANCE(1) AS OF SEPTEMBER 30, 2002
SINCE INCEPTION(4) --------------------------------------------- 1 YEAR 5 YEARS 10 YEARS 1/9/1995 3/01/1999 12/11/2000 9/24/2001 --------------------------------------------------------------------------------------------------------- Class A NAV -6.64% -0.02% -- 8.30% -- -- -- Class A POP -11.77% -1.15% -- 7.51% -- -- -- Class B NAV -7.36% -- -- -- 2.08% -- -- Class B POP -11.99% -- -- -- 1.54% -- -- Class C NAV -7.20% -- -- -- -- -- -3.99% Class C POP -9.06% -- -- -- -- -- -5.88% Class S -6.58% -- -- -- -- -15.43% -- Class Y -6.39% 0.22% 8.57% -- -- -- -- S&P MidCap 400 Index(3) -4.70% 5.39% 12.57% 13.47% 4.23% -11.80% -4.70%
* Unlike mutual funds, index returns do not reflect any expenses, transaction costs, or cash flow effects. 22 VALUE OF A $10,000 INVESTMENT(1),(2) AS OF SEPTEMBER 30, 2002 [CHART] CLASS A
FIRST AMERICAN FIRST AMERICAN MID CAP CORE FUND, MID CAP CORE FUND, S&P MIDCAP 400 CLASS A NAV CLASS A POP INDEX(3) 1/1995 $ 10,000 $ 9,452 $ 10,000 10/1995 $ 12,873 $ 12,166 $ 12,449 10/1996 $ 14,453 $ 13,658 $ 14,608 10/1997 $ 17,658 $ 16,688 $ 19,381 10/1998 $ 16,615 $ 15,702 $ 20,681 10/1999 $ 16,832 $ 15,907 $ 25,038 10/2000 $ 24,783 $ 23,421 $ 32,962 9/2001 $ 19,826 $ 18,736 $ 27,636 9/2002 $ 18,510 $ 17,493 $ 26,338
[CHART] CLASS Y
FIRST AMERICAN MID CAP CORE FUND, S&P MIDCAP CLASS Y 400 INDEX(3) 10/1992 $ 10,000 $ 10,000 10/1993 $ 11,615 $ 12,153 10/1994 $ 11,937 $ 12,443 10/1995 $ 15,015 $ 15,082 10/1996 $ 16,905 $ 17,698 10/1997 $ 20,699 $ 23,480 10/1998 $ 19,526 $ 25,055 10/1999 $ 19,831 $ 30,334 10/2000 $ 29,268 $ 39,935 9/2001 $ 23,462 $ 34,963 9/2002 $ 21,954 $ 31,909
(1) Past performance does not guarantee future results and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or redemption of fund shares. The principal value of an investment and investment return will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance reflects voluntary fee waivers in effect. In the absence of such fee waivers, total returns would be reduced. Index is for illustrative purposes only and is not available for investment. Stocks of mid-capitalization companies may be slightly less volatile than those of small-capitalization companies, but they still involve substantial risk and may be subject to more abrupt or erratic price fluctuations than large-capitalization companies. Total returns at net asset value ("NAV") reflect performance over the time period indicated without including the Fund's maximum sales charge and assumes reinvestment of all distributions at NAV. Total returns at public offering price ("POP") reflect performance over the time period indicated including maximum sales charges of 5.50% for Class A shares, 1% for Class C shares, and the maximum contingent deferred sales charge ("CDSC") for Class B and Class C shares for the relevant period. Maximum CDSC for Class B shares is 5.00% and 1.00% for Class C shares. Total returns assume reinvestment of all distributions at NAV. On September 24, 2001, the Mid Cap Core Fund became the successor by merger to the Firstar MidCap Core Equity Fund, a series of Firstar Funds, Inc. Prior to the merger, the First American Fund had no assets or liabilities. Performance presented prior to September 24, 2001, represents that of the Firstar MidCap Core Equity Fund. (2) Performance for Class B, Class C, and Class S shares is not presented. Performance for Class B and Class C is lower due to higher expenses. Performance for Class S is substantially similar to Class A due to similar expenses. (3) An unmanaged, capitalization-weighted index that represents the aggregate market value of the common equity of 400 companies chosen by Standard & Poor's with a median capitalization of approximately $700 million and measures the performance of the mid-range sector of the U.S. stock market. (4) The performance since inception for the index is calculated from the month end following the inception of the class. 23 MID CAP GROWTH Investment Objective: GROWTH OF CAPITAL Growth stocks continued to find themselves in the midst of a serious bear market during the fiscal year ended September 30, 2002. The First American Mid Cap Growth Fund (the "Fund") was hard hit, with Class Y shares declining 22.63% (Class A shares declined 22.74% at net asset value). The Fund lagged its benchmark, the Russell MidCap Growth Index, which declined 15.50% over the same period*. As has been the case since the bear market began in early 2000, growth stocks have borne the brunt of investors' wrath. During the past 12 months, many companies continued to struggle to meet profit expectations. This fact proved to be particularly damaging to prospects for growth stocks, and the issues owned in the Fund were no exception. There was some positive movement in the first few months of the period, which occurred on the heels of a major selloff in stocks triggered by the events of September 11, 2001. After the immediate impact of the terrorist attacks faded, investors were initially encouraged about prospects for a better profit environment, and the Fund benefited as a result through the end of 2001, into the early months of 2002. The environment quickly changed as investors became unsettled about the inability of many companies to meet profit expectations.From early 2002 forward, mid-cap growth stocks as a whole generally declined. As has been the case for much of the bear market cycle, technology stocks proved to be a particularly weak sector. Given the challenges of the market, the Fund took a somewhat more defensive approach, which included holding more cash than is typical, and avoiding any significant concentration in any specific sector of the market. In particular, throughout most of the period, the Fund had a below-average position in technology and telecommunications stocks, which continued to lag the market as a whole. The Fund benefited during the year from contributions among some retail stocks such as Michael's Stores, and a variety of other issues. Among the best performers were the gaming software company International Gaming Technology and the medical firm Zimmer Holdings. Among the stocks that were most detrimental were the software company Siebel Systems and financial provider Bisys Group. Despite the troubles of recent years, mid-cap growth stocks may be attractively positioned going forward. Given current valuations and the extent of the market's downturn, there is reason to be optimistic that the next year will be more productive for investors in this segment of the market, and the Fund will be positioned accordingly. ANNUALIZED PERFORMANCE(1) AS OF SEPTEMBER 30, 2002
SINCE INCEPTION(4) -------------------------------------------- 1 YEAR 5 YEARS 10 YEARS 2/18/1997 8/7/1998 2/01/1999 9/24/2001 ------------------------------------------------------------------------------------------------------------ Class A NAV -22.74% -4.60% 7.32% -- -- -- -- Class A POP -27.01% -5.68% 6.72% -- -- -- -- Class B NAV -23.47% -- -- -- -6.72% -- -- Class B POP -27.30% -- -- -- -6.90% -- -- Class C NAV -23.44% -- -- -- -- -9.44% -- Class C POP -24.90% -- -- -- -- -9.69% -- Class S -22.74% -- -- -- -- -- -21.03% Class Y -22.63% -4.34% -- -0.41% -- -- -- Russell MidCap Growth Index(3) -15.50% -4.06% 6.95% 0.05% -0.88% -8.62% -15.50%
* Unlike mutual funds, index returns do not reflect any expenses, transaction costs, or cash flow effects. 24 VALUE OF A $10,000 INVESTMENT(1),(2) AS OF SEPTEMBER 30, 2002 [CHART] CLASS A
FIRST AMERICAN FIRST AMERICAN MID CAP GROWTH FUND, MID CAP GROWTH FUND, RUSSELL MIDCAP CLASS A NAV CLASS A POP GROWTH INDEX(3) 9/1992 $ 10,000 $ 9,452 $ 10,000 9/1993 $ 13,689 $ 12,936 $ 12,023 9/1994 $ 13,356 $ 12,621 $ 12,315 9/1995 $ 17,989 $ 16,999 $ 15,968 9/1996 $ 21,198 $ 20,031 $ 18,576 9/1997 $ 25,658 $ 24,245 $ 24,082 9/1998 $ 22,309 $ 21,081 $ 21,826 9/1999 $ 29,378 $ 27,761 $ 29,943 9/2000 $ 51,836 $ 48,982 $ 48,020 9/2001 $ 26,240 $ 24,796 $ 23,161 9/2002 $ 20,274 $ 19,158 $ 19,571
[CHART] CLASS Y
FIRST AMERICAN MID CAP GROWTH FUND, RUSSELL MIDCAP CLASS Y GROWTH INDEX(3) 2/1997 $ 10,000 $ 10,000 9/1997 $ 12,193 $ 12,338 9/1998 $ 10,633 $ 11,182 9/1999 $ 14,032 $ 15,341 9/2000 $ 24,820 $ 24,603 9/2001 $ 12,604 $ 11,867 9/2002 $ 9,769 $ 10,027
(1) Past performance does not guarantee future results and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or redemption of fund shares. The principal value of an investment and investment return will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance reflects voluntary fee waivers in effect. In the absence of such fee waivers, total returns would be reduced. Indexes are for illustrative purposes only and are not available for investment. Stocks of mid-capitalization companies may be slightly less volatile than those of small-capitalization companies, but they still involve substantial risk and may be subject to more abrupt or erratic price fluctuations than large-capitalization companies. Total returns at net asset value ("NAV") reflect performance over the time period indicated without including the Fund's maximum sales charge and assumes reinvestment of all distributions at NAV. Total returns at public offering price ("POP") reflect performance over the time period indicated including maximum sales charges of 5.50% for Class A shares, 1% for Class C shares, and the maximum contingent deferred sales charge ("CDSC") for Class B and Class C shares for the relevant period. Maximum CDSC for Class B shares is 5.00% and 1.00% for Class C shares. Total returns assume reinvestment of all distributions at NAV. On August 7, 1998, the Mid Cap Growth Fund became the successor by merger to the Piper Emerging Growth Fund, a series of Piper Funds Inc. Prior to the merger, the First American Fund had no assets or liabilities. Performance prior to August 7, 1998, is that of the Piper Emerging Growth Fund. The Mid Cap Growth Fund's 1999 returns were higher due in part to its strategy of investing in IPOs in a period favorable for IPO investing. Of course, such favorable returns involve accepting the risk of volatility, and there is no assurance that the Fund's future investment in IPOs will have the same effect on performance as it had in 1999 and 2000. (2) Performance for Class B, Class C, and Class S shares is not presented. Performance for Class B and Class C is lower due to higher expenses. Performance for Class S is substantially similar to Class A due to similar expenses. (3) An unmanaged index that measures the performance of those Russell MidCap Index companies with higher price-to-book ratios and higher forecasted growth values. (4) The performance since inception for the index is calculated from the month end following the inception of the class. 25 MID CAP VALUE Investment Objective: CAPITAL APPRECIATION As the bear market continued to haunt stock investors, value stocks managed to avoid the worst of the market's problems. The First American Mid Cap Value Fund (the "Fund") Class Y shares declined 2.12% for the fiscal year ended September 30, 2002 (Class A shares lost 2.41% on net asset value). The Fund's benchmark, the Russell MidCap Value Index, declined 5.46% in the same period*. Equity markets were challenged throughout the fiscal year. Initially, stocks moved higher, though value stocks lagged the market in the early months of the period. However, as concerns surfaced about the strength of the U.S. economic recovery, investors began seeking out value stocks as a measure of protection against continued profit concerns for companies. A number of stocks in the mid-cap sector performed particularly well for the Fund during the year, including food companies such as Dean Foods and Hershey. Other consumer stocks such as the restaurant company Yum! Brands (formerly Tricon Global) and Hilton Hotels also turned in good performance. Even selected technology stocks, namely Intuit, generated solid returns. However, a careful stock selection process was critical in this environment, as most stocks faced significant pressure. Several of the Fund's holdings performed poorly, including semiconductor stocks such as Fairchild Semiconductor and travel-related issues, among them Delta Airlines. The Fund avoided most of the poorest performing stocks in two of the weakest sectors, technology and telecommunications, and that helped the portfolio's relative performance as the year progressed. While value stocks performed better than growth stocks for most of the fiscal year, the two groups struggled somewhat equally in the closing months of the period. Mid-cap stocks have generally held up better in this environment than have stocks of larger companies. The market's difficulties did not alter the Fund's investment strategy, which is to focus on identifying individual securities that offer solid potential for the portfolio. In the current environment, this strategy seems most likely to boost the Fund's potential for competitive returns. Given the market's extended weakness, it appears that the environment may be poised for a recovery. While a significant upturn may not be realistic, the potential for positive returns in the coming months seems like a reasonable expectation. With interest rates at very low levels and inflation remaining under control, investors are likely to become more positive about stocks in the months ahead. The Fund will continue to invest in mid-cap stocks that offer attractive valuations and present the potential for favorable returns. ANNUALIZED PERFORMANCE(1) AS OF SEPTEMBER 30, 2002
SINCE INCEPTION(4) ---------------------------------- 1 YEAR 5 YEARS 10 YEARS 8/15/1994 2/01/1999 9/24/2001 ------------------------------------------------------------------------------------------------- Class A NAV -2.41% -4.22% 8.43% -- -- -- Class A POP -7.78% -5.30% 7.82% -- -- -- Class B NAV -3.07% -4.90% -- 5.77% -- -- Class B POP -7.90% -5.17% -- 5.77% -- -- Class C NAV -3.09% -- -- -- -0.77% -- Class C POP -5.03% -- -- -- -1.05% -- Class S -2.40% -- -- -- -- 0.74% Class Y -2.12% -3.97% -- -- -- -- Russell MidCap Value Index(3) -5.46% 2.37% 11.33% 10.28% 2.07% -5.46%
* Unlike mutual funds, index returns do not reflect any expenses, transaction costs, or cash flow effects. 26 VALUE OF A $10,000 INVESTMENT(1),(2) AS OF SEPTEMBER 30, 2002 [CHART] CLASS A
FIRST AMERICAN FIRST AMERICAN MID CAP VALUE FUND, MID CAP VALUE FUND, RUSSELL MIDCAP CLASS A NAV CLASS A POP VALUE INDEX(3) 9/1992 $ 10,000 $ 9,452 $ 10,000 9/1993 $ 11,885 $ 11,233 $ 12,723 9/1994 $ 14,116 $ 13,341 $ 12,853 9/1995 $ 15,899 $ 15,026 $ 16,035 9/1996 $ 19,910 $ 18,818 $ 18,560 9/1997 $ 27,860 $ 26,332 $ 26,029 9/1998 $ 19,828 $ 18,741 $ 25,064 9/1999 $ 21,420 $ 20,245 $ 27,401 9/2000 $ 24,329 $ 22,994 $ 30,963 9/2001 $ 23,013 $ 21,751 $ 30,952 9/2002 $ 22,459 $ 21,227 $ 29,263
[CHART] CLASS Y
FIRST AMERICAN MID CAP VALUE FUND, RUSSELL MIDCAP CLASS Y VALUE INDEX(3) 2/1994 $ 10,000 $ 10,000 9/1994 $ 10,731 $ 10,017 9/1995 $ 12,108 $ 12,497 9/1996 $ 15,209 $ 14,464 9/1997 $ 21,331 $ 20,286 9/1998 $ 15,220 $ 19,533 9/1999 $ 16,508 $ 21,354 9/2000 $ 18,810 $ 24,130 9/2001 $ 17,800 $ 24,122 9/2002 $ 17,423 $ 22,806
(1) Past performance does not guarantee future results and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or redemption of fund shares. The principal value of an investment and investment return will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance reflects voluntary fee waivers in effect. In the absence of such fee waivers, total returns would be reduced. Indexes are for illustrative purposes only and are not available for investment. Stocks of mid-capitalization companies may be slightly less volatile than those of small-capitalization companies, but they still involve substantial risk and may be subject to more abrupt or erratic price fluctuations than large-capitalization companies. Total returns at net asset value ("NAV") reflect performance over the time period indicated without including the Fund's maximum sales charge and assumes reinvestment of all distributions at NAV. Total returns at public offering price ("POP") reflect performance over the time period indicated including maximum sales charges of 5.50% for Class A shares, 1% for Class C shares, and the maximum contingent deferred sales charge ("CDSC") for Class B and Class C shares for the relevant period. Maximum CDSC for Class B shares is 5.00% and 1.00% for Class C shares. Total returns assume reinvestment of all distributions at NAV. (2) Performance for Class B, Class C, and Class S shares is not presented. Performance for Class B and Class C is lower due to higher expenses. Performance for Class S is substantially similar to Class A due to similar expenses. (3) An unmanaged index that measures the performance of those Russell mid-cap companies with lower price-to-book ratios and lower forecasted growth values. (4) The performance since inception for the index is calculated from the month end following the inception of the class. 27 LARGE CAP CORE Investment Objective: LONG-TERM GROWTH OF CAPITAL A general market decline took a significant toll on stocks, including those of the largest companies. The First American Large Cap Core Fund (the "Fund") Class Y shares declined 21.23% for the fiscal year ended September 30, 2002 (Class A shares declined 21.46% on net asset value). Over the same 12-month period, the Fund's benchmark, the S&P 500 Composite Index, declined 20.49%*. The period began in a very positive way, as the Federal Reserve responded to the economic setback of the September 11, 2001 terrorist attacks with additional cuts of short-term interest rates. The stock market performed solidly in the first few months of the Fund's fiscal year as investors anticipated an economic recovery. However, the market remained volatile, and a number of issues came to the forefront in early 2002, which obscured the positive economic trends, including ongoing terrorist concerns, rising global tensions, and corporate accounting scandals. As a result, stocks reversed course and declined significantly for much of the rest of the fiscal year. While it was a challenging environment in which to find productive stocks, a few areas generated reasonable returns. Several consumer stocks, including retailers such as Kohl's and Lowe's performed well, as did auto parts retailer Autozone. The Fund also added stock of Carnival Cruise Line after it was driven down in the wake of the terrorist attack, and the stock rebounded nicely. Cash levels in the Fund were also relatively high due to the market's volatility. A number of areas detracted from performance, including stocks of companies caught up in some of the corporate governance issues, Enron and Tyco. Large pharmaceutical stocks such as Bristol-Myers, Merck, and Baxter International also declined significantly, hurting the Fund's performance. The bear market has created a number of attractive buying opportunities in high-quality stocks. The Fund has begun to add positions in companies that are in a strong financial position and seem well-positioned for a rebound. Some of these opportunities can be found in the health care, technology, and telecommunications sectors. Given the extent of the market's decline in recent months, it seems reasonable to expect that a recovery is in order. Good stocks are available at reasonable valuations, which may create the potential for gains in the months ahead. While the markets are likely to remain volatile on a day-to-day basis, stocks may begin to look fairly attractive when compared to other assets in the current investment environment. ANNUALIZED PERFORMANCE(1) AS OF SEPTEMBER 30, 2002
SINCE INCEPTION(4) --------------------------------------------------------- 1 YEAR 5 YEARS 12/29/1992 1/9/1995 3/1/1999 11/27/2000 9/24/2001 --------------------------------------------------------------------------------------------------------------- Class A NAV -21.46% -4.30% -- 5.40% -- -- -- Class A POP -25.76% -5.38% -- 4.62% -- -- -- Class B NAV -22.06% -- -- -- -13.09% -- -- Class B POP -25.95% -- -- -- -13.71% -- -- Class C NAV -22.03% -- -- -- -- -- -19.48% Class C POP -23.62% -- -- -- -- -- -21.05% Class S -21.45% -- -- -- -- -28.47% -- Class Y -21.23% -4.06% 4.92% -- -- -- -- S&P 500 Composite Index(3) -20.49% -1.63% 8.69% 9.25% -11.06% -21.87% -20.49%
* Unlike mutual funds, index returns do not reflect any expenses, transaction costs, or cash flow effects. 28 VALUE OF A $10,000 INVESTMENT(1),(2) AS OF SEPTEMBER 30, 2002 [CHART] CLASS A
FIRST AMERICAN LARGE FIRST AMERICAN LARGE CAP CORE FUND, CAP CORE FUND, CLASS A NAV CLASS A POP S&P 500 COMPOSITE INDEX(3) 1/1995 $ 10,000 $ 9,452 $ 10,000 10/1995 $ 12,347 $ 11,666 $ 12,603 10/1996 $ 14,635 $ 13,828 $ 15,640 10/1997 $ 17,753 $ 16,774 $ 20,663 10/1998 $ 21,051 $ 19,890 $ 25,204 10/1999 $ 24,823 $ 23,453 $ 31,671 10/2000 $ 29,768 $ 28,126 $ 33,599 9/2001 $ 19,103 $ 18,049 $ 24,760 9/2002 $ 15,006 $ 14,178 $ 19,691
[CHART] CLASS Y
FIRST AMERICAN LARGE CAP CORE FUND, CLASS Y S&P 500 COMPOSITE INDEX(3) 12/1992 $ 10,000 $ 10,000 10/1993 $ 10,753 $ 10,981 10/1994 $ 10,813 $ 11,406 10/1995 $ 12,927 $ 14,422 10/1996 $ 15,360 $ 17,897 10/1997 $ 18,675 $ 23,644 10/1998 $ 22,203 $ 28,840 10/1999 $ 26,241 $ 36,241 10/2000 $ 31,552 $ 38,447 10/2001 $ 20,288 $ 28,332 10/2002 $ 15,981 $ 22,531
(1) Past performance does not guarantee future results and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or redemption of fund shares. The principal value of an investment and investment return will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance reflects voluntary fee waivers in effect. In the absence of such fee waivers, total returns would be reduced. Index is for illustrative purposes only and is not available for investment. Total returns at net asset value ("NAV") reflect performance over the time period indicated without including the Fund's maximum sales charge and assumes reinvestment of all distributions at NAV. Total returns at public offering price ("POP") reflect performance over the time period indicated including maximum sales charges of 5.50% for Class A shares, 1% for Class C shares, and the maximum contingent deferred sales charge ("CDSC") for Class B and Class C shares for the relevant period. Maximum CDSC for Class B shares is 5.00% and 1.00% for Class C shares. Total returns assume reinvestment of all distributions at NAV. On September 24, 2001, the Large Cap Core Fund became the successor by merger to the Firstar LargeCap Core Equity Fund, a series of Firstar Funds, Inc. Prior to the merger, the First American Fund had no assets or liabilities. Performance presented prior to September 24, 2001, represents that of the Firstar LargeCap Core Equity Fund. Prior to January 10, 1995, the Firstar Fund offered one class of shares to investors without a distribution or shareholder servicing fee. Performance presented prior to January 10, 1995, does not reflect these fees. (2) Performance for Class B, Class C, and Class S shares is not presented. Performance for Class B and Class C is lower due to higher expenses. Performance for Class S is substantially similar to Class A due to similar expenses. (3) An unmanaged index of large-capitalization stocks. (4) The performance since inception for the index is calculated from the month end following the inception of the class. 29 LARGE CAP GROWTH Investment Objective: LONG-TERM GROWTH OF CAPITAL In a challenging environment for growth-oriented stocks, the First American Large Cap Growth Fund (the "Fund") Class Y shares declined 26.87% for the fiscal year ended September 30, 2002 (Class A shares declined 27.08% on net asset value). Similarly, the Fund's benchmark, the Russell 1000 Growth Index, declined 22.51% over the same timeframe*. The period began in October 2001 shortly after the terrorist attacks of September 11. In the initial months, the Federal Reserve continued to reduce interest rates in order to boost prospects for the U.S. economy. Investors anticipated an economic recovery and improved corporate earnings. As a result, growth stocks enjoyed a solid rebound, which lasted through the end of 2001. Early in the new year, the environment began to change. Investors received troubling news of accounting problems involving a number of major companies, including Enron and Global Crossing. Later in the year, more companies were caught up in the scandals, including Worldcom. The onslaught of bad news took a toll on investor confidence and, at the same time, the economy, while moving in a positive direction, proved to be disappointing to the markets. Once again, growth stocks bore the brunt of the damage, and declined for much of the rest of the Fund's fiscal year. Every key industry segment in the broad market moved lower over the fiscal year. However, the Fund's holdings in basic materials stocks, Ecolab, energy issues such as Apache Corporation, and retail issues such as Kohl's held up better than most. Among the weakest performing stocks were utilities issues such as Enron and Mirant, and technology issues such as Texas Instruments and EDS. Throughout the year, the Fund's technology position was reduced as this area of the market continued to face severe challenges. It seems clear that prospects for growth stocks aren't likely to dramatically improve until the U.S. economy shows more consistent growth. Given the number of uncertainties in the market, ranging from corporate accounting issues to growing global tensions, a fair amount of volatility is likely to remain in the near term. At current valuations, investors may find large-cap growth issues attractive, which could create some positive opportunities for the Fund in the year ahead. Efforts will continue to be made to actively position the portfolio to take advantage of opportunities that may arise. ANNUALIZED PERFORMANCE(1) AS OF SEPTEMBER 30, 2002
SINCE INCEPTION(4) ----------------------------------------------------------- 1 YEAR 5 YEARS 12/11/1994 8/18/1997 3/31/2000 12/11/2000 9/24/2001 -------------------------------------------------------------------------------------------------------------- Class A NAV -27.08% -- -- -- -30.00% -- -- Class A POP -31.09% -- -- -- -31.57% -- -- Class B NAV -27.64% -7.13% 4.35% -- -- -- -- Class B POP -31.26% -7.47% 4.35% -- -- -- -- Class C NAV -27.48% -- -- -- -- -- -25.32% Class C POP -28.99% -- -- -- -- -- -26.79% Class S -27.08% -- -- -- -- -36.09% -- Class Y -26.87% -6.63% -- -5.71% -- -- -- Russell 1000 Growth Index(3) -22.51% -4.87% 7.01% -3.89% -31.52% -30.04% -22.51%
* Unlike mutual funds, index returns do not reflect any expenses, transaction costs, or cash flow effects. 30 VALUE OF A $10,000 INVESTMENT(1),(2) AS OF SEPTEMBER 30, 2002 [CHART] CLASS B
FIRST AMERICAN LARGE FIRST AMERICAN LARGE CAP GROWTH FUND, CAP GROWTH FUND, CLASS B NAV CLASS B POP RUSSELL 1000 GROWTH INDEX(3) 12/1992 $ 10,000 $ 10,000 $ 10,000 11/1995 $ 12,949 $ 12,949 $ 13,639 11/1996 $ 16,487 $ 16,487 $ 17,227 11/1997 $ 20,215 $ 20,215 $ 21,795 11/1998 $ 24,426 $ 24,426 $ 28,041 11/1999 $ 30,583 $ 30,583 $ 36,871 10/2000 $ 33,185 $ 33,185 $ 38,247 9/2001 $ 19,259 $ 19,259 $ 21,824 9/2002 $ 13,936 $ 13,936 $ 16,912
[CHART] CLASS Y
FIRST AMERICAN LARGE CAP GROWTH FUND, CLASS Y RUSSELL 1000 GROWTH INDEX(3) 8/1997 $ 10,000 $ 10,000 11/1997 $ 10,462 $ 10,533 11/1998 $ 12,649 $ 13,552 11/1999 $ 15,891 $ 17,820 10/2000 $ 17,293 $ 18,485 9/2001 $ 10,122 $ 10,548 9/2002 $ 7,403 $ 8,174
(1) Past performance does not guarantee future results and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or redemption of fund shares. The principal value of an investment and investment return will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance reflects voluntary fee waivers in effect. In the absence of such fee waivers, total returns would be reduced. Index is for illustrative purposes only and is not available for investment. Total returns at net asset value ("NAV") reflect performance over the time period indicated without including the Fund's maximum sales charge and assumes reinvestment of all distributions at NAV. Total returns at public offering price ("POP") reflect performance over the time period indicated including maximum sales charges of 5.50% for Class A shares, 1% for Class C shares, and the maximum contingent deferred sales charge ("CDSC") for Class B and Class C shares for the relevant period. Maximum CDSC for Class B shares is 5.00% and 1.00% for Class C shares. Total returns assume reinvestment of all distributions at NAV. On May 17, 2002, Capital Growth Fund merged into Large Cap Growth Fund, each a series of First American Investment Funds, Inc. Performance presented prior to May 17, 2002 represents that of Capital Growth Fund. On September 24, 2001, Capital Growth Fund became the successor by merger to Firstar Large Cap Growth Fund, a series of Firstar Funds, Inc. Prior to the merger, the First American Fund had no assets or liabilities. Performance presented prior to September 24, 2001 represents that of the Firstar Large Cap Growth Fund. The Firstar Large Cap Growth Fund was organized on December 11, 2000 and, prior to that, was a separate series of Firstar Stellar Funds, inc. Performance presented prior to December 11, 2000 represents that of the Firstar Stellar Growth Equity Fund. (2) Performance for Class A, Class C, and Class S shares is not presented. Performance for Class A and Class S is higher due to lower expenses. Performance for Class C is substantially similar to Class B due to similar expenses. (3) An unmanaged index that measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values. Russell 1000 companies include the 1,000 largest companies in the Russell 3000 Index, which represents approximately 92% of the total market capitalization of the Russell 3000 Index. The Russell 3000 Index measures the performance of the 3,000 largest U.S. companies based on total market capitalization, which represents approximately 98% of the investable U.S. equity market. (4) The performance since inception for the index is calculated from the month end following the inception of the class. 31 LARGE CAP VALUE Investment Objective: PRIMARY-CAPITAL APPRECIATION; SECONDARY-CURRENT INCOME In what proved to be another difficult environment for equity investors, the First American Large Cap Value Fund (the "Fund") Class Y shares declined 19.22% during the fiscal year ended September 30, 2002 (Class A shares declined 19.37% on net asset value). In that same period of time, the Fund's benchmark, the Russell 1000 Value Index, declined 16.95%*. For much of the period, value stocks managed to weather the storm of a challenging investment environment more effectively than their growth-oriented counterparts. In the closing months of 2001, value stocks lagged the growth side, but performed better in the first half of 2002. Still, opportunities for gains were somewhat limited. In the last three months of the fiscal year, investors started to pull money out of value stocks, and the Fund suffered significantly as the period came to a close. The difficulties occurred despite some encouraging signs. The U.S. economy recovered from the brief and mild recession of 2001, although growth subsided a bit as the period progressed. Interest rates remained low and inflation was very modest. However, other issues came to the forefront, including corporate governance problems, increasing world tensions, and the inability of many companies to gain momentum in terms of profit growth. The positive direction of the economy boosted stocks of companies that tend to benefit in an improving economic environment. Within the Fund, favorable returns were generated by the home improvement firm Lowe's Companies and the tax preparation leader H&R Block. Basic materials stocks such as Praxair and International Paper also performed well. Given the economy's less than stellar growth, more stable consumer companies held up well, including Proctor & Gamble and the restaurant operator Yum! Brands (formerly Tricon Global). Two of the weakest segments of the market included technology and telecommunications stocks, though modest weightings and effective stock selection muted some of the impact of their problems on the portfolio. Significant weakness among financial companies such as Morgan Stanley and Citigroup, as well as declines among media holdings including AOL/Time Warner and Liberty Media hurt the Fund's performance. Energy stocks such as Halliburton and British Petroleum also detracted from the Fund's return. Despite the market's volatility, the Fund's approach continues to center on a long-term strategy of buying stocks of companies with solid and improving fundamentals, attractive valuations, and a near-term catalyst to drive the price toward its higher fair value level. The portfolio continues to be broadly diversified to help cope with a shaky market environment. Once the economy shows more stability, we believe stocks are likely to offer better opportunities for appreciation in the months ahead. ANNUALIZED PERFORMANCE(1) AS OF SEPTEMBER 30, 2002
SINCE INCEPTION(4) ---------------------------------------------- 1 YEAR 5 YEARS 10 YEARS 2/4/1994 8/15/1994 2/1/1999 9/24/2001 ------------------------------------------------------------------------------------------------------------- Class A NAV -19.37% -4.83% 7.76% -- -- -- -- Class A POP -23.81% -5.90% 7.15% -- -- -- -- Class B NAV -19.96% -5.52% -- -- 5.77% -- -- Class B POP -23.96% -5.74% -- -- 5.77% -- -- Class C NAV -19.97% -- -- -- -- -9.36% -- Class C POP -21.56% -- -- -- -- -9.61% -- Class S -19.36% -- -- -- -- -- -15.64% Class Y -19.22% -4.57% -- 6.66% -- -- -- Russell 1000 Value Index(3) -16.95% 0.27% 10.46% 9.37% 9.62% -4.61% -16.95%
* Unlike mutual funds, index returns do not reflect any expenses, transaction costs, or cash flow effects. 32 VALUE OF A $10,000 INVESTMENT(1),(2) AS OF SEPTEMBER 30, 2002 [CHART] CLASS A
FIRST AMERICAN LARGE FIRST AMERICAN LARGE CAP VALUE FUND, CAP VALUE FUND, CLASS A NAV CLASS A POP RUSSELL 1000 VALUE INDEX(3) 9/1992 $ 10,000 $ 9,452 $ 10,000 9/1993 $ 11,582 $ 10,943 $ 12,534 9/1994 $ 12,550 $ 11,858 $ 12,445 9/1995 $ 15,721 $ 14,853 $ 15,895 9/1996 $ 19,478 $ 18,403 $ 18,747 9/1997 $ 27,039 $ 25,547 $ 26,680 9/1998 $ 24,667 $ 23,306 $ 27,639 9/1999 $ 30,076 $ 28,417 $ 32,812 9/2000 $ 30,352 $ 28,677 $ 35,738 9/2001 $ 26,187 $ 24,742 $ 32,553 9/2002 $ 21,115 $ 19,949 $ 27,036
[CHART] CLASS Y
FIRST AMERICAN LARGE CAP VALUE FUND, CLASS Y RUSSELL 1000 VALUE INDEX(3) 2/1994 $ 10,000 $ 10,000 9/1994 $ 10,170 $ 9,935 9/1995 $ 12,763 $ 12,686 9/1996 $ 15,867 $ 14,963 9/1997 $ 22,076 $ 21,294 9/1998 $ 20,206 $ 22,059 9/1999 $ 24,707 $ 26,188 9/2000 $ 24,995 $ 28,523 9/2001 $ 21,614 $ 25,980 9/2002 $ 17,471 $ 21,585
(1) Past performance does not guarantee future results and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or redemption of fund shares. The principal value of an investment and investment return will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance reflects voluntary fee waivers in effect. In the absence of such fee waivers, total returns would be reduced. Index is for illustrative purposes only and is not available for investment. Total returns at net asset value ("NAV") reflect performance over the time period indicated without including the Fund's maximum sales charge and assumes reinvestment of all distributions at NAV. Total returns at public offering price ("POP") reflect performance over the time period indicated including maximum sales charges of 5.50% for Class A shares, 1% for Class C shares, and the maximum contingent deferred sales charge ("CDSC") for Class B and Class C shares for the relevant period. Maximum CDSC for Class B shares is 5.00% and 1.00% for Class C shares. Total returns assume reinvestment of all distributions at NAV. (2) Performance for Class B, Class C, and Class S shares is not presented. Performance for Class B and Class C is lower due to higher expenses. Performance for Class S is substantially similar to Class A due to similar expenses. (3) An unmanaged index that measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values. Russell 1000 companies include the 1,000 largest companies in the Russell 3000 Index, which represents approximately 92% of the total market capitalization of the Russell 3000 Index. The Russell 3000 Index measures the performance of the 3,000 largest U.S. companies based on total market capitalization, which represents approximately 98% of the investable U.S. equity market. (4) The performance since inception for the index is calculated from the month end following the inception of the class. 33 BALANCED Investment Objective: MAXIMIZE TOTAL RETURN (CAPITAL APPRECIATION PLUS INCOME) Equity investors continued to confront a long-standing bear market, while bond markets benefited from an environment where interest rates moved lower. The First American Balanced Fund (the "Fund") Class Y shares posted a decline of 9.74% for the fiscal year (Class A shares declined 9.90% on net asset value). For the same period, the Fund's benchmarks had varying performance. The S&P 500 Composite Index declined 20.49% while the Lehman Aggregate Bond Index gained 8.60%*. The Fund's equity component, representing about 65% of the portfolio, was faced with yet another challenging environment as a number of issues, from corporate governance problems to ongoing threats on the world stage, turned investor psychology negative. After an initial period in the fiscal year when stocks performed well, most of the period was spent dealing with declining stock prices. About one-quarter of the Fund's equity portfolio was positioned in mid- and small-cap stocks, areas of the market that held up better than large-cap stocks during the year. Sectors that generated reasonable performance for the equity portfolio included consumer discretionary stocks, financial companies, and selected energy firms. The Fund also benefited by de-emphasizing the troubled telecommunications sector, one of the biggest detractors in the equity markets. Industrial stocks were also weak. The Fund's fixed-income portfolio took advantage of an environment where interest rates generally trended lower. The Fund's Treasury bond holdings benefited the most from this trend. Mortgage-backed securities also enjoyed periods of solid performance. However, the market was not as favorable for corporate bonds. Securities from lower-quality corporate issuers struggled as economic concerns grew. During the year, the Fund shifted some of its emphasis from corporate bonds to mortgage-backed securities, a strategic, long-term strategy shift designed to give the Fund a mix that provides better representation of the broad, fixed-income market. For the year ahead, equity markets may be positioned to begin to recover from the extended bear market, although the market is generally expected to remain quite volatile. Investor expectations seem more realistic now and corporate profits are likely to improve in line with a better economy. The bond market may remain fairly stable in the short term, with the likelihood that interest rates on Treasury bonds will begin to rise, though not dramatically. Non-Treasury securities may offer the best opportunities in the year ahead. The Fund is designed to provide investors with the ability to participate in a broad range of asset classes within the investment markets. Depending on the economy, this approach may generate positive results in the months to come. ANNUALIZED PERFORMANCE(1) AS OF SEPTEMBER 30, 2002
SINCE INCEPTION(5) ---------------------------------------------- 1 YEAR 5 YEARS 10 YEARS 1/9/1995 3/1/1999 11/27/2000 9/24/2001 ------------------------------------------------------------------------------------------------------------- Class A NAV -9.90% 0.08% -- 6.75% -- -- -- Class A POP -14.83% -1.05% -- 5.97% -- -- -- Class B NAV -10.64% -- -- -- -3.61% -- -- Class B POP -15.05% -- -- -- -4.24% -- -- Class C NAV -10.66% -- -- -- -- -- -8.60% Class C POP -12.46% -- -- -- -- -- -10.34% Class S -9.90% -- -- -- -- -12.95% -- Class Y -9.74% 0.36% 6.55% -- -- -- -- S&P 500 Composite Index(3) -20.49% -1.63% 9.00% -- -11.06% -20.49% -21.87% Lehman Aggregate Bond Index(4) 8.60% 7.83% 8.74% 8.01% 10.41% 8.60% --
* Unlike mutual funds, index returns do not reflect any expenses, transaction costs, or cash flow effects. 34 VALUE OF A $10,000 INVESTMENT(1),(2) AS OF SEPTEMBER 30, 2002 [CHART] CLASS A
FIRST AMERICAN FIRST AMERICAN BALANCED FUND, BALANCED FUND, S&P 500 LEHMAN AGGREGATE CLASS A NAV CLASS A POP COMPOSITE INDEX(3) BOND INDEX(4) 1/1995 $ 10,000 $ 9,452 $ 10,000 $ 10,000 10/1995 $ 12,197 $ 11,522 $ 12,054 $ 11,288 10/1996 $ 13,707 $ 12,949 $ 13,723 $ 11,948 10/1997 $ 16,182 $ 15,287 $ 16,411 $ 13,010 10/1998 $ 17,578 $ 16,606 $ 19,287 $ 14,225 10/1999 $ 18,541 $ 17,516 $ 22,489 $ 14,300 10/2000 $ 22,152 $ 20,926 $ 24,509 $ 15,345 9/2001 $ 18,380 $ 17,363 $ 19,933 $ 17,218 9/2002 $ 16,561 $ 15,645 $ 18,427 $ 18,699
[CHART] CLASS Y
FIRST AMERICAN BALANCED FUND, S&P 500 LEHMAN AGGREGATE CLASS Y COMPOSITE INDEX(3) BOND INDEX(4) 10/1992 $ 10,000 $ 10,000 $ 10,000 10/1993 $ 11,340 $ 10,970 $ 11,187 10/1994 $ 11,238 $ 11,062 $ 10,776 10/1995 $ 13,464 $ 13,534 $ 12,463 10/1996 $ 15,151 $ 15,407 $ 13,191 10/1997 $ 17,939 $ 18,425 $ 14,364 10/1998 $ 19,527 $ 21,654 $ 15,706 10/1999 $ 20,676 $ 25,249 $ 15,789 10/2000 $ 24,790 $ 27,517 $ 16,942 9/2001 $ 20,618 $ 22,379 $ 19,011 9/2002 $ 18,610 $ 20,689 $ 20,645
(1) Past performance does not guarantee future results and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or redemption of fund shares. The principal value of an investment and investment return will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance reflects voluntary fee waivers in effect. In the absence of such fee waivers, total returns would be reduced. Indexes are for illustrative purposes only and are not available for investment. Total returns at net asset value ("NAV") reflect performance over the time period indicated without including the Fund's maximum sales charge and assumes reinvestment of all distributions at NAV. Total returns at public offering price ("POP") reflect performance over the time period indicated including maximum sales charges of 5.50% for Class A shares, 1% for Class C shares, and the maximum contingent deferred sales charge ("CDSC") for Class B and Class C shares for the relevant period. Maximum CDSC for Class B shares is 5.00% and 1.00% for Class C shares. Total returns assume reinvestment of all distributions at NAV. On September 24, 2001, the First American Balanced Fund combined with Firstar Balanced Growth Fund and Firstar Balanced Income Fund. Performance history prior to September 24, 2001, represents that of Firstar Balanced Growth Fund. (2) Performance for Class B, Class C, and Class S shares is not presented. Performance for Class B and Class C is lower due to higher expenses. Performance for Class S is substantially similar to Class A due to similar expenses. (3) An unmanaged index of large-capitalization stocks. (4) An unmanaged index composed of the Lehman Government/Credit Bond Index, the Lehman Mortgage Backed Securities Index, and the Lehman Asset Backed Securities Index. The Lehman Government/Credit Bond Index is comprised of Treasury securities, other securities issued or guaranteed by the U.S. government or its agencies or instrumentalities, including U.S. agency mortgage securities and investment-grade corporate debt securities. The Lehman Mortgage Backed Securities Index is comprised of the mortgage-backed pass-through securities of Ginnie Mae, Fannie Mae, and Freddie Mac. The Lehman Asset Backed Securities Index is comprised of debt securities rated investment grade or higher that are backed by credit card, auto, and home equity loans. (5) The performance since inception for the indexes is calculated from the month end following the inception of the class. 35 EQUITY INCOME Investment Objective: LONG-TERM GROWTH OF CAPITAL AND INCOME Equity markets continued their struggles that began in early 2000. The First American Equity Income Fund (the "Fund") Class Y shares finished with a decline of 19.30% for the fiscal year ended September 30, 2002 (Class A shares declined 19.51% on net asset value). The Fund's benchmark, the S&P 500 Composite Index, declined 20.49% over the same period*. The past year proved to be particularly challenging for investor psychology. With uncertainties created by issues such as ongoing terroristic threats, corporate accounting problems, and talk of global conflicts, stocks proved to be a risky proposition. After starting the fiscal year on fairly solid ground in late 2001 and early 2002, the situation quickly reversed itself. Economic growth began to slow, dampening investor enthusiasm, and for the remainder of the Fund's fiscal year, stocks found themselves in a tailspin that became so severe, few stocks were able to avoid the damage. The Fund is heavily focused on stocks of companies that pay dividends, an area of the market that has proved to be increasingly attractive in these volatile times. Among the issues that performed well for the portfolio in the period were consumer stocks, including Avon and Budweiser. Other strong performers came from a variety of companies, including 3M, Ecolab, and UPS. Unfortunately, the Fund gave back much of this positive performance through the serious setbacks suffered among its telecommunications holdings, including Verizon and SBC, two regional Bell operating companies that suffered significantly in the very troubled marketplace. Additionally, the Fund's limited holdings in the struggling technology sector also hurt performance. For much of the period, changes implemented in the Fund were aimed at trying to provide more balance, reducing some sectors that were previously heavily emphasized while adding more holdings to underweighted sectors. As always, the Fund is strongly focused on stocks that generate attractive dividends. Among the sectors that contribute strongly to this investment objective are energy, utilities, industrial, materials, and financial stocks. While it is impossible to predict if the stock market will begin a sustained rally, it appeared that the markets may be near a bottom as the fiscal year came to an end. The Fund is sticking with its discipline of primarily owning stocks that offer attractive dividends, which should lessen risk for the Fund in a volatile investment environment. ANNUALIZED PERFORMANCE(1) AS OF SEPTEMBER 30, 2002
SINCE INCEPTION(4) ----------------------------------------------------------- 1 YEAR 5 YEARS 12/18/1992 8/2/1994 8/15/1994 2/1/1999 9/24/2001 -------------------------------------------------------------------------------------------------------------- Class A NAV -19.51% 0.43% 7.37% -- -- -- -- Class A POP -23.99% -0.69% 6.75% -- -- -- -- Class B NAV -20.10% -0.23% -- -- 7.14% -- -- Class B POP -24.04% -0.47% -- -- 7.14% -- -- Class C NAV -20.08% -- -- -- -- -5.42% -- Class C POP -21.62% -- -- -- -- -5.68% -- Class S -19.47% -- -- -- -- -- -15.40% Class Y -19.30% 0.75% -- 8.13% -- -- -- S&P 500 Composite Index(3) -20.49% -1.63% 8.69% 8.75% 8.75% -10.40% -20.49%
* Unlike mutual funds, index returns do not reflect any expenses, transaction costs, or cash flow effects. 36 VALUE OF A $10,000 INVESTMENT(1),(2) AS OF SEPTEMBER 30, 2002 [CHART] CLASS A
FIRST AMERICAN FIRST AMERICAN EQUITY INCOME FUND, EQUITY INCOME FUND, CLASS A NAV CLASS A POP S&P 500 COMPOSITE INDEX(3) 12/1992 $ 10,000 $ 9,452 $ 10,000 9/1993 $ 10,377 $ 9,808 $ 10,759 9/1994 $ 10,885 $ 10,288 $ 11,155 9/1995 $ 12,851 $ 12,146 $ 14,474 9/1996 $ 14,960 $ 14,140 $ 17,416 9/1997 $ 19,622 $ 18,546 $ 24,461 9/1998 $ 21,265 $ 20,100 $ 26,672 9/1999 $ 23,337 $ 22,057 $ 34,083 9/2000 $ 25,929 $ 24,507 $ 38,611 9/2001 $ 24,919 $ 23,553 $ 28,332 9/2002 $ 20,048 $ 18,949 $ 22,531
[CHART] CLASS Y
FIRST AMERICAN EQUITY INCOME FUND, CLASS Y S&P 500 COMPOSITE INDEX(3) 8/1994 $ 10,000 $ 10,000 9/1994 $ 10,045 $ 9,756 9/1995 $ 11,877 $ 12,657 9/1996 $ 13,871 $ 15,231 9/1997 $ 18,234 $ 21,391 9/1998 $ 19,848 $ 23,325 9/1999 $ 21,853 $ 29,806 9/2000 $ 24,358 $ 33,765 9/2001 $ 23,455 $ 24,777 9/2002 $ 18,924 $ 19,704
(1) Past performance does not guarantee future results and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or redemption of fund shares. The principal value of an investment and investment return will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance reflects voluntary fee waivers in effect. In the absence of such fee waivers, total returns would be reduced. Indexes are for illustrative purposes only and are not available for investment. Total returns at net asset value ("NAV") reflect performance over the time period indicated without including the Fund's maximum sales charge and assumes reinvestment of all distributions at NAV. Total returns at public offering price ("POP") reflect performance over the time period indicated including maximum sales charges of 5.50% for Class A shares, 1% for Class C shares, and the maximum contingent deferred sales charge ("CDSC") for Class B and Class C shares for the relevant period. Maximum CDSC for Class B shares is 5.00% and 1.00% for Class C shares. Total returns assume reinvestment of all distributions at NAV. On May 18, 1994, the Equity Income Fund became the successor by merger to the Boulevard Strategic Balance Fund. Prior to the merger, the First American Fund had no assets or liabilities. Performance prior to May 18, 1994, is that of the Boulevard Strategic Balance Fund. (2) Performance for Class B, Class C, and Class S shares is not presented. Performance for Class B and Class C is lower due to higher expenses. Performance for Class S is substantially similar to Class A due to similar expenses. (3) An unmanaged index of large-capitalization stocks. (4) The performance since inception for the index is calculated from the month end following the inception of the class. 37 REPORT OF INDEPENDENT AUDITORS SEPTEMBER 30, 2002 To the Shareholders and Board of Directors First American Investment Funds, Inc. We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of the Health Sciences, Real Estate Securities, Technology, Emerging Markets, International, Micro Cap, Small Cap Core, Small Cap Growth, Small Cap Value, Mid Cap Core, Mid Cap Growth, Mid Cap Value, Large Cap Core, Large Cap Growth, Large Cap Value, Balanced, and Equity Income Funds (certain funds constituting First American Investment Funds, Inc.) (the "Funds") as of September 30, 2002, and the related statements of operations for the year then ended and the statements of changes in net assets and financial highlights for each of the periods indicated herein, except as noted below which were audited by other auditors. These financial statements and the financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights of the Large Cap Growth, Large Cap Value, Equity Income, Balanced, Mid Cap Growth, Mid Cap Value, Small Cap Growth, Small Cap Value, Emerging Markets, International, Health Sciences, Real Estate Securities and Technology Funds for the period ended September 30, 1998, were audited by other auditors whose report dated November 13, 1998, expressed an unqualified opinion on those financial highlights. The statements of operations and changes in net assets and financial highlights of the Large Cap Core, Equity Income, Large Cap Value, Large Cap Growth, Mid Cap Core, Micro Cap, Small Cap Core, and Technology Funds for the periods presented through October 31, 2000, were audited by other auditors whose reports dated December 29, 2000 and January 21, 2000, expressed unqualified opinions on those financial statements and financial highlights. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of September 30, 2002, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights audited by us as referred to above present fairly, in all material respects, the financial position of each of the respective funds constituting First American Investment Funds, Inc. at September 30, 2002, and the results of their operations for the year then ended, the changes in their net assets and their financial highlights for each of the periods indicated herein, in conformity with accounting principles generally accepted in the United States. /s/ Ernst & Young LLP Minneapolis, Minnesota November 8, 2002 39 SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2002 HEALTH SCIENCES FUND
DESCRIPTION SHARES VALUE (000) --------------------------------------------------------------------------------------- COMMON STOCKS - 96.4% COMMERCIAL SERVICES & SUPPLIES - 0.8% IMS Health 12,300 $ 184 ---------- HEALTH CARE EQUIPMENT & SERVICES - 32.4% Advance PCS* (A) 12,300 277 AmerisourceBergen (A) 5,072 362 Apria Healthcare Group* 14,830 349 Baxter International 19,500 596 Biomet 3,700 98 Cardinal Health (A) 5,475 341 Caremark Rx* (A) 10,800 184 Community Health Systems* (A) 10,600 282 Covance* 12,200 239 CTI Molecular Imaging * 6,900 175 First Health Group* (A) 5,200 141 First Horizon Pharmaceutical* 53,500 289 HCA - Healthcare (A) 6,000 286 HealthSouth* 29,450 122 Laboratory Corporation of America* (A) 8,600 290 Lifecore Biomedical* 16,500 102 Lincare Holdings* 4,900 152 Manor Care* (A) 5,900 133 McKesson HBOC 10,100 286 Medtronic (A) 14,900 628 Omnicare (A) 14,775 312 Pharmaceutical Product Development* (A) 10,600 205 Priority Healthcare, Cl B* (A) 8,700 219 Province Healthcare* 9,400 161 Quest Diagnostics* (A) 3,000 185 Select Medical* 14,475 207 Triad Hospitals* (A) 8,600 326 Universal Health Services* (A) 7,000 358 Varian Medical Systems* 4,500 193 Wellpoint Health Networks* (A) 1,800 132 Zimmer Holdings* 6,770 260 ---------- 7,890 ---------- PHARMACEUTICALS & BIOTECHNOLOGY - 61.1% Abbott Laboratories 31,700 1,281 Amgen* (A) 20,260 845 Amylin Pharmaceuticals* (A) 10,000 166 Andrx Group* (A) 6,600 146 Array Biopharma* 27,800 217 Biogen* (A) 7,200 211 BioMarin Pharmaceutical* 24,100 140 Celgene* (A) 33,900 571 Cephalon* (A) 10,600 433 Charles River Laboratories International* (A) 11,660 458 CV Therapeutics* 6,400 134 Exact Sciences* 12,700 170 Forest Laboratories, Cl A* (A) 3,700 303 Gilead Sciences* (A) 20,500 687 Harvard Bioscience* 11,900 36 ICOS* 5,800 122 IDEC Pharmaceuticals* (A) 14,500 602 Invitrogen* (A) 12,415 423 Johnson & Johnson 14,500 784 King Pharmaceuticals* 37,466 681 Medicis, Cl A* (A) 6,300 $ 257 Neurocrine Biosciences* (A) 4,100 168 Novartis, ADR 3,300 131 Noven Pharmaceuticals* 10,005 122 NPS Pharmaceuticals* (A) 11,000 226 Pfizer (A) 58,900 1,709 Pharmaceutical Resources* 5,200 145 Pharmacia 17,067 664 POZEN* 13,015 66 Regeneration Technologies* 35,200 282 Sanofi-Synthelabo, ADR* 4,700 134 Techne* (A) 14,070 461 Telik* 28,520 353 Teva Pharmaceutical Industries, ADR 7,700 516 Third Wave Technologies* 105,500 142 Wyeth 33,600 1,068 ---------- 14,854 ---------- SOFTWARE & SERVICES - 1.6% Cerner* 5,100 180 TriZetto Group* 41,520 207 ---------- 387 ---------- TECHNOLOGY HARDWARE & EQUIPMENT - 0.5% Waters* 4,800 116 ---------- TOTAL COMMON STOCKS 23,431 ---------- RELATED PARTY MONEY MARKET FUND - 4.4% First American Prime Obligations Fund (B) 1,077,744 1,078 ---------- TOTAL RELATED PARTY MONEY MARKET FUND 1,078 ---------- TOTAL INVESTMENTS - 100.8% (Cost $28,249) 24,509 ---------- OTHER ASSETS AND LIABILITIES, NET - (0.8)% (185) ---------- TOTAL NET ASSETS - 100.0% $ 24,324 ----------
* Non-income producing security (A) This security or a portion of this security is out on loan at September 30, 2002. Total loaned securities had a market value of $10,720,830 at September 30, 2002. (Note 6) (B) This money market fund is advised by U.S. Bancorp Asset Management, Inc., which also serves as advisor for this Fund. See also the notes to the financial statements. ADR - American Depositary Receipt Cl - Class The accompanying notes are an integral part of the financial statements. 40 REAL ESTATE SECURITIES FUND
DESCRIPTION SHARES VALUE (000) ---------------------------------------------------------------------------------------- COMMON STOCKS - 87.5% REAL ESTATE INVESTMENT TRUSTS - 87.5% DIVERSIFIED - 8.1% Glenborough Realty Trust 70,000 $ 1,421 Rouse (A) 116,200 3,713 St. Joe 43,900 1,212 Vornado Realty Trust (A) 100,600 3,969 Washington Real Estate Investment Trust 40,700 1,033 ---------- 11,348 ---------- FINANCIAL SERVICES - 0.3% Newcastle Investment (C) 35,000 433 ---------- HOTELS - 7.1% Hilton Hotels (A) 212,800 2,422 Host Marriott* (A) 129,500 1,202 Innkeepers USA Trust 83,200 665 Marriott International, Cl A 48,500 1,406 MeriStar Hospitality 115,200 990 RFS Hotel Investors 49,600 545 Starwood Hotels & Resorts Worldwide 120,200 2,680 ---------- 9,910 ---------- OFFICE/INDUSTRIAL - 29.2% Alexandria Real Estate Equities 35,100 1,491 AMB Property 55,300 1,598 Boston Properties 129,400 4,814 CarrAmerica Realty Trust 52,450 1,320 Centerpoint Properties Trust (A) 39,900 2,214 Corporate Office Properties 133,800 1,813 Crescent Real Estate 93,600 1,470 Duke Realty Investments 124,300 3,060 Eastgroup Properties 23,200 574 Equity Office Properties Trust 141,323 3,649 Keystone Property Trust 66,800 1,112 Liberty Property Trust (A) 95,750 2,968 Mission West Properties 45,800 507 Parkway Properties 19,300 653 Prentiss Properties Trust 97,000 2,807 Prologis Trust 258,000 6,427 PS Business Parks 71,000 2,414 Reckson Associates Realty (A) 43,800 997 SL Green Realty 34,000 1,045 ---------- 40,933 ---------- RESIDENTIAL - 17.0% Apartment Investment & Management (A) 80,800 3,139 Archstone Smith 167,812 4,007 Avalonbay Communities 48,912 2,045 Beazer Homes U.S.A* (A) 11,200 684 Boardwalk Equities 144,600 1,359 Bre Properties (A) 38,400 1,181 Camden Property Trust 31,900 1,057 Equity Residential Properties Trust (A) 123,400 2,954 Essex Property Trust 19,000 939 Home Properties of New York 29,200 949 KB HOME (A) 14,900 728 Lennar (A) 13,300 742 Manufactured Home Communities 39,200 1,250 Standard Pacific 27,400 $ 641 Sun Communities 23,100 848 United Dominion Realty Trust 82,500 1,313 ---------- 23,836 ---------- RETAIL/MALLS - 22.3% CBL & Associates Properties 45,400 1,759 Chelsea Property Group 87,600 2,956 Developers Diversified (A) 44,500 979 Equity One 139,800 1,845 General Growth Properties (A) 115,200 5,933 JDN Realty 58,500 707 Kimco Realty 74,455 2,316 Mills 46,500 1,379 Pan Pacific Retail Properties 64,500 2,224 Regency Centers 50,100 1,553 Simon Property Group (A) 182,040 6,504 Taubman Centers 52,000 740 Urstadt Biddle Properties 50,000 593 Weingarten Realty Investors 51,100 1,870 ---------- 31,358 ---------- SPECIALTY REAL ESTATE - 3.5% Capital Automotive 82,600 2,063 Commercial Net Lease Realty 40,700 656 Hospitality Properties Trust 68,400 2,265 ---------- 4,984 ---------- TOTAL REAL ESTATE INVESTMENT TRUSTS 122,802 ---------- TOTAL COMMON STOCKS 122,802 ---------- PREFERRED STOCKS - 0.5% Beacon Capital Partnership* (C) 33,750 384 Wyndham International* (C) (D) 1,848 185 Wyndham Voting Trust* (C) (D) 1,058 106 ---------- TOTAL PREFERRED STOCKS 675 ---------- RELATED PARTY MONEY MARKET FUND - 3.8% First American Prime Obligations Fund (B) 5,386,493 5,386 ---------- TOTAL RELATED PARTY MONEY MARKET FUND 5,386 ---------- TOTAL INVESTMENTS - 91.8% (Cost $123,235) 128,863 ---------- OTHER ASSETS AND LIABILITIES, NET - 8.2% 11,437 ---------- TOTAL NET ASSETS - 100.0% $ 140,300 ----------
* Non-income producing security (A) This security or a portion of this security is out on loan at September 30, 2002. Total loaned securities had a market value of $31,391,733 at September 30, 2002. (Note 6) (B) This money market fund is advised by U.S. Bancorp Asset Management, Inc., which also serves as advisor for this Fund. See also the notes to the financial statements. (C) Private placement security considered illiquid investment under guidelines established by the board of directors. As of September 30, 2002, the market value of these investments is $1,107,594 or 0.8% of total net assets. (D) Security is valued at fair value under guidelines established and approved by the board of directors. Total fair valued securities had a value of $290,563, which represents 0.2% of total net assets at September 30, 2002. (Note 2) Cl - Class 41 SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2002 TECHNOLOGY FUND
DESCRIPTION SHARES VALUE (000) ---------------------------------------------------------------------------------------- COMMON STOCKS - 92.2% CAPITAL GOODS - 2.6% Aeroflex* 150,200 $ 757 Molex (A) 55,250 1,299 ---------- 2,056 ---------- COMMERCIAL SERVICES & SUPPLIES - 1.8% Kroll* 52,500 1,041 MKS Instruments* 38,825 424 ---------- 1,465 ---------- FINANCIAL SERVICES - 2.8% First Data 41,600 1,163 Fiserv* 39,450 1,108 ---------- 2,271 ---------- MEDIA - 5.1% AOL Time Warner* (A) 81,450 953 Clear Channel Communications* (A) 39,800 1,383 DoubleClick* 144,100 741 USA Interactive* 53,750 1,042 ---------- 4,119 ---------- MEDICAL SUPPLIES/EQUIPMENT - 1.8% Given Imaging* (A) 143,000 1,417 ---------- RETAILING - 2.0% eBay* (A) 30,350 1,603 ---------- SOFTWARE & SERVICES - 25.3% Adobe Systems 54,150 1,034 Affiliated Computer Services, Cl A* (A) 41,000 1,745 Altiris* 29,400 293 Ariba* (A) 229,650 310 Autodesk (A) 69,300 878 Cadence Design Systems* (A) 79,500 809 Computer Associates International (A) 80,150 769 Electronic Data Systems (A) 37,350 522 Informatica* (A) 187,150 580 Infosys Technologies (A) 31,400 1,702 JD Edwards* 181,900 1,683 Lawson Software* 207,000 733 LogicVision* 209,900 518 Microsoft* (A) 29,500 1,290 Moldflow* 150,700 744 NetIQ* (A) 71,050 1,030 NetScout Systems* 115,500 423 NetScreen Technologies* (A) 66,350 720 PDF Solutions* 127,800 676 Rational Software* 118,200 511 ScanSoft* (A) 188,850 623 VERITAS Software* (A) 144,750 2,123 Websense* (A) 53,500 621 ---------- 20,337 ---------- TECHNOLOGY HARDWARE & EQUIPMENT - 47.9% Agere Systems* (A) 426,150 469 Agilent Technologies* (A) 53,700 701 Amkor Technology* (A) 123,100 293 Analog Devices* (A) 48,050 947 Apple Computer* (A) 87,900 1,275 Applied Films* 63,350 693 Applied Materials* (A) 93,500 1,080 ASML Holding* 82,150 508 ATI Technologies* 86,950 434 Atmel* 216,600 230 DESCRIPTION SHARES/CONTRACTS VALUE (000) --------------------------------------------------------------------------------------- AU Optronics, ADR* (A) 45,200 $ 251 Benchmark Electronics* (A) 60,000 1,263 Brocade Communications Systems* (A) 42,900 323 Celestica* 53,900 706 ChipPAC, Cl A* 282,900 605 Computer Network Technology* (A) 195,300 980 Dell Computer* (A) 90,400 2,125 EMC* (A) 90,050 412 Flextronics International* (A) 97,850 682 Hewlett-Packard (A) 107,624 1,256 Integrated Device Technology* (A) 34,700 362 Intel 84,950 1,180 Jabil Circuit* (A) 79,300 1,172 LeCroy* 98,900 886 Linear Technology 38,500 798 LSI Logic* 112,000 711 Marvell Technology Group* (A) 55,950 887 Microchip Technology* (A) 68,400 1,399 Micron Technology* (A) 108,450 1,342 Microtune* 123,250 297 Monolithic System Technology* (A) 119,700 1,197 Motorola (A) 122,050 1,242 Newport* 79,400 896 OmniVision Technologies* 116,950 771 Overland Storage* 144,050 1,564 Powerwave Technologies* 56,850 193 Semtech* 12,000 116 Silicon Storage Technology* 188,350 736 Synaptics* 42,650 205 Taiwan Semiconductor Manufacturing, ADR* (A) 261,642 1,661 Tekelec* 126,050 1,088 Texas Instruments (A) 99,404 1,468 TriQuint Semiconductor* (A) 200,300 707 United Microelectronics* (A) 310,266 1,095 UTStarcom* (A) 51,850 792 Vishay Intertechnology* 67,150 591 ---------- 38,589 ---------- TELECOMMUNICATION SERVICES - 2.9% CenturyTel 56,500 1,267 Commonwealth Telephone Enterprises* 32,000 1,113 ---------- 2,380 ---------- TOTAL COMMON STOCKS 74,237 ---------- PURCHASED OPTIONS - 0% Sprint Put @ 10.00 11/02 200 31 Computer Associates Call @ 10.00 11/02 200 24 ---------- TOTAL PURCHASED OPTIONS 55 ---------- RELATED PARTY MONEY MARKET FUND - 7.5% First American Prime Obligations Fund (B) 6,002,963 6,003 ---------- TOTAL RELATED PARTY MONEY MARKET FUND 6,003 ---------- TOTAL INVESTMENTS - 99.7% (Cost $143,513) 80,295 ---------- OTHER ASSETS AND LIABILITIES, NET - 0.3% 207 ---------- TOTAL NET ASSETS - 100.0% $ 80,502 ----------
* Non-income producing security (A) This security or a portion of this security is out on loan at September 30, 2002. Total loaned securities had a market value of $37,557,956 at September 30, 2002. (Note 6) (B) This money market fund is advised by U.S. Bancorp Asset Management, Inc., which also serves as advisor for this Fund. See also the notes to the financial statements. ADR - American Depositary Receipt Cl - Class The accompanying notes are an integral part of the financial statements. 42 STATEMENTS OF ASSETS AND LIABILITIES SEPTEMBER 30, 2002, IN THOUSANDS, EXCEPT PER SHARE DATA
HEALTH REAL ESTATE TECHNOLOGY SCIENCES FUND SECURITIES FUND FUND ---------------------------------------------------------------------------------------------------------------------- ASSETS: Investments in securities, at value* $ 24,509 $ 128,863 $ 80,295 Cash -- -- 91 Dividends and interest receivable 2 791 18 Collateral for securities loaned, at value 11,168 32,660 41,476 Receivable for securities sold 39 15,854 663 Capital shares sold 3 345 75 Other receivables 1 1 1 Prepaid expenses and other assets 13 13 17 ---------------------------------------------------------------------------------------------------------------------- TOTAL ASSETS 35,735 178,527 122,636 ====================================================================================================================== LIABILITIES: Written options, at value -- -- 91 Payable for securities purchased 187 5,384 68 Capital shares redeemed 31 67 417 Payable upon return of securities loaned 11,168 32,660 41,476 Bank overdraft 1 1 -- Payable for advisory, co-administration, and custodian fees 16 108 60 Distribution and shareholder servicing fees 7 4 20 Accrued expenses and other liabilities 1 3 2 ---------------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES 11,411 38,227 42,134 ====================================================================================================================== NET ASSETS $ 24,324 $ 140,300 $ 80,502 ====================================================================================================================== COMPOSITION OF NET ASSETS: Portfolio capital $ 29,640 $ 131,511 $ 665,939 Undistributed net investment income (loss) -- 1,019 -- Accumulated net realized gain (loss) (1,576) 2,142 (522,219) Unrealized appreciation or depreciation of investments (3,740) 5,628 (63,218) ---------------------------------------------------------------------------------------------------------------------- NET ASSETS $ 24,324 $ 140,300 $ 80,502 ====================================================================================================================== *Investments in securities, at cost $ 28,249 $ 123,235 $ 143,513 CLASS A: Net assets $ 5,235 $ 15,422 $ 18,267 Shares issued and outstanding ($0.0001 par value-- 2 billion authorized) 662 1,127 4,257 Net asset value and redemption price per share $ 7.91 $ 13.68 $ 4.29 Maximum offering price per share (A) $ 8.37 $ 14.48 $ 4.54 CLASS B: Net assets $ 2,821 $ 2,577 $ 11,190 Shares issued and outstanding ($0.0001 par value-- 2 billion authorized) 376 190 2,900 Net asset value and offering price per share (C) $ 7.50 $ 13.55 $ 3.86 CLASS C: Net assets $ 3,815 $ 986 $ 5,064 Shares issued and outstanding ($0.0001 par value-- 2 billion authorized) 492 73 1,204 Net asset value per share (C) $ 7.76 $ 13.62 $ 4.20 Maximum offering price per share (B) $ 7.84 $ 13.76 $ 4.24 CLASS S: Net assets $ 32 $ 1,224 $ 1,847 Shares issued and outstanding ($0.0001 par value-- 2 billion authorized) 4 89 430 Net asset value, offering price, and redemption price per share $ 7.90 $ 13.69 $ 4.29 CLASS Y: Net assets $ 12,421 $ 120,091 $ 44,134 Shares issued and outstanding ($0.0001 par value-- 2 billion authorized) 1,552 8,749 9,990 Net asset value, offering price, and redemption price per share $ 8.00 $ 13.73 $ 4.42 ----------------------------------------------------------------------------------------------------------------------
(A) The offering price is calculated by dividing the net asset value by 1 minus the maximum sales charge of 5.50%. (B) The offering price is calculated by dividing the net asset value by 1 minus the maximum sales charge of 1.00%. (C) Class B and C have a contingent deferred sales charge. For a description of a possible redemption charge, see the notes to the financial statements. The accompanying notes are an integral part of the financial statements. 43 STATEMENTS OF OPERATIONS FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2002, IN THOUSANDS
HEALTH REAL ESTATE TECHNOLOGY SCIENCES FUND SECURITIES FUND FUND ---------------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME: Interest $ 32 $ 99 $ 101 Dividends 178 7,541 135 Less: Foreign taxes withheld -- (3) (4) Securities lending 7 15 117 Other 6 108 135 ---------------------------------------------------------------------------------------------------------------------- TOTAL INVESTMENT INCOME 223 7,760 484 ====================================================================================================================== EXPENSES: Investment advisory fees 212 869 968 Co-administration fees and expenses (including per account transfer agency fees) 195 410 960 Custodian fees 3 12 14 Directors' fees 2 2 3 Registration fees 35 19 35 Professional fees 1 4 5 Printing 3 9 16 Other 3 4 20 Distribution and shareholder servicing fees - Class A 16 22 84 Distribution and shareholder servicing fees - Class B 34 21 186 Distribution and shareholder servicing fees - Class C 49 4 97 Shareholder servicing fees - Class S -- 2 2 ---------------------------------------------------------------------------------------------------------------------- TOTAL EXPENSES 553 1,378 2,390 ====================================================================================================================== Less: Waiver of expenses (158) (112) (665) ---------------------------------------------------------------------------------------------------------------------- TOTAL NET EXPENSES 395 1,266 1,725 ====================================================================================================================== INVESTMENT INCOME (LOSS) - NET (172) 6,494 (1,241) ====================================================================================================================== REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND WRITTEN OPTIONS - NET: Net realized gain (loss) on investments (1,421) 7,010 (131,635) Net change in unrealized appreciation or depreciation of investments (4,687) (2,696) 88,614 ---------------------------------------------------------------------------------------------------------------------- NET GAIN (LOSS) ON INVESTMENTS (6,108) 4,314 (43,021) ====================================================================================================================== NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (6,280) $ 10,808 $ (44,262) ======================================================================================================================
The accompanying notes are an integral part of the financial statements. 44 STATEMENTS OF CHANGES IN NET ASSETS IN THOUSANDS
HEALTH REAL ESTATE SCIENCES FUND SECURITIES FUND ------------------------------------------------------------------------------------------------------------------------------- 10/1/01 10/1/00 10/1/01 10/1/00 TO TO TO TO 9/30/02 9/30/01 9/30/02 9/30/01 ------------------------------------------------------------------------------------------------------------------------------- OPERATIONS: Investment income (loss) - net $ (172) $ (116) $ 6,494 $ 4,123 Net realized gain (loss) on investments (1,421) 399 7,010 4,720 Net change in unrealized appreciation or depreciation of investments (4,687) (6,754) (2,696) (1,546) ------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (6,280) (6,471) 10,808 7,297 ------------------------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Investment income - net: Class A -- -- (410) (109) Class B -- -- (90) (76) Class C -- -- (16) (13) Class S -- -- (45) -- Class Y -- (1) (5,665) (3,085) Net realized gain on investments (2): Class A -- (702) -- -- Class B -- (475) -- -- Class C -- (459) -- -- Class Y -- (2,040) -- -- Tax return of capital: Class A -- -- (84) (5) Class B -- -- (14) (4) Class C -- -- (5) -- Class S -- -- (7) -- Class Y -- -- (654) (149) ------------------------------------------------------------------------------------------------------------------------------- Total distributions -- (3,677) (6,990) (3,441) =============================================================================================================================== CAPITAL SHARE TRANSACTIONS (1): Class A: Proceeds from sales 1,401 3,275 14,894 1,350 Reinvestment of distributions -- 685 472 102 Payments for redemptions (1,386) (2,142) (2,325) (1,119) Shares issued in connection with the acquisition of Fund net assets -- -- -- -- ------------------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from Class A transactions 15 1,818 13,041 333 ------------------------------------------------------------------------------------------------------------------------------- Class B: Proceeds from sales 765 1,409 1,240 376 Reinvestment of distributions -- 469 99 73 Payments for redemptions (684) (1,319) (535) (663) Shares issued in connection with the acquisition of Fund net assets -- -- -- 2 ------------------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from Class B transactions 81 559 804 (212) ------------------------------------------------------------------------------------------------------------------------------- Class C: Proceeds from sales 558 2,495 1,085 256 Reinvestment of distributions -- 458 20 13 Payments for redemptions (1,032) (546) (422) (101) Shares issued in connection with the acquisition of Fund net assets -- -- -- -- ------------------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from Class C transactions (474) 2,407 683 168 ------------------------------------------------------------------------------------------------------------------------------- Class S: Proceeds from sales 36 -- 1,043 242 Reinvestment of distributions -- -- 51 -- Payments for redemptions -- -- (199) -- Shares issued in connection with the acquisition of Fund net assets -- -- -- 67 ------------------------------------------------------------------------------------------------------------------------------- Increase in net assets from Class S transactions 36 -- 895 309 ------------------------------------------------------------------------------------------------------------------------------- Class Y: Proceeds from sales 2,799 4,869 42,995 12,135 Reinvestment of distributions -- 902 1,218 255 Payments for redemptions (4,333) (2,315) (24,223) (8,203) Shares issued in connection with the acquisition of Fund net assets -- -- -- 32,008 ------------------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from Class Y transactions (1,534) 3,456 19,990 36,195 ------------------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions (1,876) 8,240 35,413 36,793 ------------------------------------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets (8,156) (1,908) 39,231 40,649 NET ASSETS AT BEGINNING OF FISCAL PERIOD 32,480 34,388 101,069 60,420 =============================================================================================================================== NET ASSETS AT END OF FISCAL PERIOD $ 24,324 $ 32,480 $ 140,300 $ 101,069 =============================================================================================================================== UNDISTRIBUTED NET INVESTMENT INCOME (LOSS) AT END OF FISCAL PERIOD $ -- $ -- $ 1,019 $ 751 =============================================================================================================================== TECHNOLOGY FUND --------------------------------------------------------------------------------------------------- 10/1/01 10/1/00 TO TO 9/30/02 9/30/01 --------------------------------------------------------------------------------------------------- OPERATIONS: Investment income (loss) - net $ (1,241) $ (2,755) Net realized gain (loss) on investments (131,635) (315,453) Net change in unrealized appreciation or depreciation of investments 88,614 (271,929) --------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (44,262) (590,137) --------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Investment income - net: Class A -- -- Class B -- -- Class C -- -- Class S -- -- Class Y -- -- Net realized gain on investments (2): Class A -- (24,639) Class B -- (16,716) Class C -- (5,503) Class Y -- (67,890) Tax return of capital: Class A -- -- Class B Class C -- -- Class S -- -- Class Y -- -- --------------------------------------------------------------------------------------------------- Total distributions -- (114,748) =================================================================================================== CAPITAL SHARE TRANSACTIONS (1): Class A: Proceeds from sales 12,200 51,555 Reinvestment of distributions -- 23,719 Payments for redemptions (15,393) (42,766) Shares issued in connection with the acquisition of Fund net assets 1,296 -- --------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from Class A transactions (1,897) 32,508 --------------------------------------------------------------------------------------------------- Class B: Proceeds from sales 1,997 11,252 Reinvestment of distributions -- 16,266 Payments for redemptions (4,909) (9,839) Shares issued in connection with the acquisition of Fund net assets 4,194 -- --------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from Class B transactions 1,282 17,679 --------------------------------------------------------------------------------------------------- Class C: Proceeds from sales 1,541 16,755 Reinvestment of distributions -- 5,470 Payments for redemptions (3,416) (5,921) Shares issued in connection with the acquisition of Fund net assets 198 -- --------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from Class C transactions (1,677) 16,304 --------------------------------------------------------------------------------------------------- Class S: Proceeds from sales 1,105 -- Reinvestment of distributions -- -- Payments for redemptions (925) -- Shares issued in connection with the acquisition of Fund net assets 3,111 -- --------------------------------------------------------------------------------------------------- Increase in net assets from Class S transactions 3,291 -- --------------------------------------------------------------------------------------------------- Class Y: Proceeds from sales 55,312 88,628 Reinvestment of distributions -- 35,693 Payments for redemptions (66,880) (95,285) Shares issued in connection with the acquisition of Fund net assets 21,612 -- --------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from Class Y transactions 10,044 29,036 --------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions 11,043 95,527 --------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets (33,219) (609,358) NET ASSETS AT BEGINNING OF FISCAL PERIOD 113,721 723,079 =================================================================================================== NET ASSETS AT END OF FISCAL PERIOD $ 80,502 $ 113,721 =================================================================================================== UNDISTRIBUTED NET INVESTMENT INCOME (LOSS) AT END OF FISCAL PERIOD $ -- $ -- ===================================================================================================
(1) See Note 4 in the notes to the financial statements for additional information. (2) Includes distributions in excess of net realized gains of $97 and $1,745 for the period ended September 30, 2001, for the Health Sciences and Technology Funds, respectively. The accompanying notes are an integral part of the financial statements. 45 FINANCIAL HIGHLIGHTS FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS ENDED SEPTEMBER 30, UNLESS OTHERWISE INDICATED.
REALIZED AND NET ASSET UNREALIZED DIVIDENDS DISTRIBUTIONS VALUE NET GAINS OR FROM NET DISTRIBUTIONS FROM BEGINNING INVESTMENT (LOSSES) ON INVESTMENT FROM RETURN OF OF PERIOD INCOME (LOSS) INVESTMENTS INCOME CAPITAL GAINS CAPITAL ------------------------------------------------------------------------------------------------------------------------ HEALTH SCIENCES FUND Class A 2002 $ 9.84 $ (0.05) $ (1.88) $ -- $ -- $ -- 2001 (1) 13.34 (0.03) (2.10) -- (1.37) -- 2000 8.24 (0.02) 5.12 -- -- -- 1999 7.82 0.01 0.46 (0.01) (0.04) -- 1998 12.05 0.01 (2.78) -- (1.46) -- Class B 2002 $ 9.40 $ (0.11) $ (1.79) $ -- $ -- $ -- 2001 (1) 12.89 (0.11) (2.01) -- (1.37) -- 2000 8.02 (0.08) 4.95 -- -- -- 1999 7.65 0.01 0.40 -- (0.04) -- 1998 11.90 (0.02) (2.77) -- (1.46) -- Class C 2002 $ 9.73 $ (0.13) $ (1.84) $ -- $ -- $ -- 2001 (1) 13.29 (0.11) (2.08) -- (1.37) -- 2000 (2) 9.76 (0.03) 3.56 -- -- -- Class S 2002 $ 9.84 $ (0.02) $ (1.92) $ -- $ -- $ -- 2001 (1) (3) 9.06 -- 0.78 -- -- -- Class Y 2002 $ 9.93 $ (0.02) $ (1.91) $ -- $ -- $ -- 2001 (1) 13.42 -- (2.12) -- (1.37) -- 2000 8.28 -- 5.14 -- -- -- 1999 7.84 0.04 0.48 (0.04) (0.04) -- 1998 12.08 0.03 (2.78) (0.03) (1.46) -- ------------------------------------------------------------------------------------------------------------------------ REAL ESTATE SECURITIES FUND Class A 2002 (1) $ 13.12 $ 0.71 $ 0.61 $ (0.69) $ -- $(0.07) 2001 (1) 12.71 0.76 0.32 (0.64) -- (0.03) 2000 10.78 0.74 2.00 (0.79) -- (0.02) 1999 12.17 0.65 (1.36) (0.67) -- (0.01) 1998 14.97 0.63 (2.40) (0.70) (0.33) -- Class B 2002 (1) $ 13.02 $ 0.59 $ 0.61 $ (0.60) $ -- $(0.07) 2001 (1) 12.61 0.65 0.33 (0.54) -- (0.03) 2000 10.69 0.64 2.00 (0.69) -- (0.03) 1999 12.08 0.55 (1.34) (0.57) -- (0.03) 1998 14.86 0.52 (2.37) (0.60) (0.33) -- Class C 2002 (1) $ 13.08 $ 0.62 $ 0.59 $ (0.60) $ -- $(0.07) 2001 (1) 12.68 0.68 0.30 (0.59) -- -- 2000 (2) 10.61 0.50 2.14 (0.57) -- -- Class S 2002 (1) $ 13.12 $ 0.70 $ 0.62 $ (0.68) $ -- $(0.07) 2001 (1) (3) 12.52 0.11 0.49 -- -- -- Class Y 2002 (1) $ 13.15 $ 0.73 $ 0.63 $ (0.71) $ -- $(0.07) 2001 (1) 12.73 0.84 0.28 (0.68) -- (0.02) 2000 10.80 0.77 2.00 (0.81) -- (0.03) 1999 12.19 0.68 (1.35) (0.69) -- (0.03) 1998 14.99 0.67 (2.40) (0.74) (0.33) -- ------------------------------------------------------------------------------------------------------------------------ 46 RATIO OF RATIO OF NET EXPENSES TO NET ASSET RATIO OF INVESTMENT AVERAGE VALUE NET ASSETS EXPENSES TO INCOME (LOSS) NET ASSETS END OF TOTAL END OF AVERAGE TO AVERAGE (EXCLUDING PERIOD RETURN (4) PERIOD (000) NET ASSETS NET ASSETS WAIVERS) ---------------------------------------------------------------------------------------------------------------------- HEALTH SCIENCES FUND Class A 2002 $ 7.91 (19.61)% $ 5,235 1.23% (0.50)% 1.75% 2001 (1) 9.84 (17.35) 6,514 1.15 (0.28) 1.42 2000 13.34 61.89 6,645 1.17 (0.27) 1.46 1999 8.24 6.08 1,383 1.16 0.11 1.30 1998 7.82 (25.24) 2,017 1.15 0.04 1.20 Class B 2002 $ 7.50 (20.21)% $ 2,821 1.98% (1.25)% 2.50% 2001 (1) 9.40 (17.99) 3,496 1.90 (1.04) 2.17 2000 12.89 60.72 4,221 1.92 (1.02) 2.21 1999 8.02 5.37 1,029 1.92 (0.64) 2.05 1998 7.65 (25.80) 645 1.90 (0.73) 1.95 Class C 2002 $ 7.76 (20.25)% $ 3,815 1.98% (1.24)% 2.50% 2001 (1) 9.73 (17.92) 5,329 1.90 (1.04) 2.17 2000 (2) 13.29 36.17 4,347 1.92 (1.02) 2.21 Class S 2002 $ 7.90 (19.72)% $ 32 1.23% (0.72)% 1.75% 2001 (1) (3) 9.84 8.61 -- -- -- -- Class Y 2002 $ 8.00 (19.44)% $ 12,421 0.98% (0.24)% 1.50% 2001 (1) 9.93 (17.15) 17,141 0.90 (0.04) 1.17 2000 13.42 62.10 19,175 0.92 (0.02) 1.21 1999 8.28 6.59 12,192 0.90 0.38 1.05 1998 7.84 (25.10) 21,977 0.90 0.27 0.95 ---------------------------------------------------------------------------------------------------------------------- REAL ESTATE SECURITIES FUND Class A 2002 (1) $ 13.68 10.07% $ 15,422 1.23% 5.06% 1.32% 2001 (1) 13.12 8.69 2,421 1.04 5.89 1.25 2000 12.71 26.68 2,035 1.05 6.59 1.24 1999 10.78 (5.89) 1,518 1.05 5.52 1.18 1998 12.17 (12.42) 2,027 1.05 4.71 1.18 Class B 2002 (1) $ 13.55 9.21% $ 2,577 1.98% 4.27% 2.07% 2001 (1) 13.02 7.93 1,724 1.79 5.13 2.00 2000 12.61 25.81 1,874 1.80 5.79 1.99 1999 10.69 (6.68) 2,192 1.80 4.75 1.93 1998 12.08 (13.04) 3,026 1.80 3.98 1.93 Class C 2002 (1) $ 13.62 9.27% $ 986 1.98% 4.43% 2.07% 2001 (1) 13.08 7.93 341 1.79 5.27 2.00 2000 (2) 12.68 25.56 164 1.80 5.79 1.99 Class S 2002 (1) $ 13.69 10.13% $ 1,224 1.23% 5.00% 1.32% 2001 (1) (3) 13.12 4.87 320 0.56 43.93 1.01 Class Y 2002 (1) $ 13.73 10.40% $ 120,091 0.98% 5.27% 1.07% 2001 (1) 13.15 9.01 96,263 0.80 6.50 1.01 2000 12.73 26.95 56,347 0.80 6.79 0.99 1999 10.80 (5.64) 51,181 0.80 5.78 0.93 1998 12.19 (12.18) 58,275 0.80 5.06 0.93 ---------------------------------------------------------------------------------------------------------------------- RATIO OF NET INVESTMENT INCOME (LOSS) TO AVERAGE NET PORTFOLIO ASSETS (EXCLUDING TURNOVER WAIVERS) RATE ------------------------------------------------------------ HEALTH SCIENCES FUND Class A 2002 (1.02)% 98% 2001 (1) (0.55) 103 2000 (0.56) 104 1999 (0.03) 53 1998 (0.01) 45 Class B 2002 (1.77)% 98% 2001 (1) (1.31) 103 2000 (1.31) 104 1999 (0.77) 53 1998 (0.78) 45 Class C 2002 (1.76)% 98% 2001 (1) (1.31) 103 2000 (2) (1.31) 104 Class S 2002 (1.24)% 98% 2001 (1) (3) -- 103 Class Y 2002 (0.76)% 98% 2001 (1) (0.31) 103 2000 (0.31) 104 1999 0.23 53 1998 0.22 45 ------------------------------------------------------------ REAL ESTATE SECURITIES FUND Class A 2002 (1) 4.97% 99% 2001 (1) 5.68 85 2000 6.40 45 1999 5.39 21 1998 4.58 36 Class B 2002 (1) 4.18% 99% 2001 (1) 4.92 85 2000 5.60 45 1999 4.62 21 1998 3.85 36 Class C 2002 (1) 4.34% 99% 2001 (1) 5.06 85 2000 (2) 5.60 45 Class S 2002 (1) 4.91% 99% 2001 (1) (3) 43.48 85 Class Y 2002 (1) 5.18% 99% 2001 (1) 6.29 85 2000 6.60 45 1999 5.65 21 1998 4.93 36 ------------------------------------------------------------
(1) Per share data calculated using average shares outstanding method. (2) Commenced operations on February 1, 2000. All ratios for the period have been annualized, except total return and portfolio turnover. (3) Class of shares has been offered since September 24, 2001. All ratios for the period have been annualized, except total return and portfolio turnover. (4) Total return does not reflect sales charges. Total return would have been lower had certain expenses not been waived. The accompanying notes are an integral part of the financial statements. 47
REALIZED AND NET ASSET UNREALIZED NET ASSET VALUE NET GAINS OR DISTRIBUTIONS VALUE BEGINNING INVESTMENT (LOSSES) ON FROM END OF OF PERIOD INCOME (LOSS) INVESTMENTS CAPITAL GAINS PERIOD -------------------------------------------------------------------------------------------------- TECHNOLOGY FUND Class A 2002 (1) $ 6.36 $ (0.07) $ (2.00) $ -- $ 4.29 2001 (1) 47.68 (0.15) (33.55) (7.62) 6.36 2000 34.22 (0.35) 24.87 (11.06) 47.68 1999 15.60 (0.18) 19.55 (0.75) 34.22 1998 20.20 (0.13) (3.26) (1.21) 15.60 Class B 2002 (1) $ 5.77 $ (0.11) $ (1.80) $ -- $ 3.86 2001 (1) 44.40 (0.26) (30.75) (7.62) 5.77 2000 32.59 (0.35) 23.22 (11.06) 44.40 1999 14.99 (0.34) 18.69 (0.75) 32.59 1998 19.58 (0.24) (3.14) (1.21) 14.99 Class C 2002 (1) $ 6.28 $ (0.12) $ (1.96) $ -- $ 4.20 2001 (1) 47.49 (0.26) (33.33) (7.62) 6.28 2000 (2) 50.30 (0.35) (2.46) -- 47.49 Class S 2002 (1) $ 6.36 $ (0.04) $ (2.03) $ -- $ 4.29 2001 (1) (3) 6.95 -- (0.59) -- 6.36 Class Y 2002 (1) $ 6.53 $ (0.05) $ (2.06) $ -- $ 4.42 2001 (1) 48.60 (0.11) (34.34) (7.62) 6.53 2000 34.64 (0.34) 25.36 (11.06) 48.60 1999 15.73 (0.13) 19.79 (0.75) 34.64 1998 20.29 (0.08) (3.27) (1.21) 15.73 -------------------------------------------------------------------------------------------------- 48 RATIO OF RATIO OF NET RATIO OF NET EXPENSES TO INVESTMENT RATIO OF INVESTMENT AVERAGE (LOSS) NET ASSETS EXPENSES TO INCOME (LOSS) NET ASSETS TO AVERAGE NET PORTFOLIO TOTAL END OF AVERAGE TO AVERAGE (EXCLUDING ASSETS (EXCLUDING TURNOVER RETURN (4) PERIOD (000) NET ASSETS NET ASSETS WAIVERS) WAIVERS) RATE --------------------------------------------------------------------------------------------------------------------------------- TECHNOLOGY FUND Class A 2002 (1) (32.55)% $ 18,267 1.23% (0.89)% 1.70% (1.36)% 288% 2001 (1) (83.30) 29,084 1.15 (0.88) 1.22 (0.95) 269 2000 80.11 155,533 1.15 (0.93) 1.15 (0.93) 195 1999 128.71 21,491 1.15 (0.80) 1.16 (0.81) 184 1998 (16.69) 7,703 1.15 (0.60) 1.15 (0.60) 124 Class B 2002 (1) (33.10)% $ 11,190 1.98% (1.64)% 2.45% (2.11)% 288% 2001 (1) (83.42) 15,974 1.90 (1.63) 1.97 (1.70) 269 2000 78.77 97,003 1.90 (1.68) 1.90 (1.68) 195 1999 127.09 20,866 1.90 (1.56) 1.91 (1.57) 184 1998 (17.21) 7,499 1.90 (1.38) 1.90 (1.38) 124 Class C 2002 (1) (33.12)% $ 5,064 1.98% (1.64)% 2.45% (2.11)% 288% 2001 (1) (83.43) 9,010 1.90 (1.63) 1.98 (1.71) 269 2000 (2) (5.59) 33,605 1.90 (1.67) 1.88 (1.65) 195 Class S 2002 (1) (32.55)% $ 1,847 1.23% (0.79)% 1.70% (1.26)% 288% 2001 (1) (3) (8.49) -- -- -- -- -- 269 Class Y 2002 (1) (32.31)% $ 44,134 0.98% (0.64)% 1.45% (1.11)% 288% 2001 (1) (83.26) 59,653 0.90 (0.62) 0.96 (0.67) 269 2000 80.71 436,938 0.90 (0.67) 0.90 (0.67) 195 1999 129.52 214,620 0.90 (0.53) 0.91 (0.54) 184 1998 (16.41) 100,985 0.90 (0.38) 0.90 (0.38) 124 ---------------------------------------------------------------------------------------------------------------------------------
(1) Per share data calculated using average shares outstanding method. (2) Commenced operations on February 1, 2000. All ratios for the period have been annualized, except total return and portfolio turnover. (3) Class of shares has been offered since September 24, 2001. All ratios for the period have been annualized, except total return and portfolio turnover. (4) Total return does not reflect sales charges. Total return would have been lower had certain expenses not been waived. The accompanying notes are an integral part of the financial statements. 49 SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2002 EMERGING MARKETS FUND
DESCRIPTION SHARES VALUE (000) ---------------------------------------------------------------------- FOREIGN COMMON STOCKS - 94.3% BRAZIL - 1.5% Aracruz Celulose, ADR* 49,600 $ 727 ------------ CHINA - 15.0% Beijing Datang Power Generation* 1,278,000 479 BYD* 90,000 183 China Eastern Airlines 1,138,000 133 China Merchants 471,000 332 China Southern Airlines 1,524,000 379 CNOOC 1,414,000 1,976 Cofco International 932,000 242 Cosco Pacific 1,456,000 1,018 Denway Motors 1,278,000 401 Huaneng Power International 1,836,000 1,436 Wah Sang Gas Holdings 2,222,000 296 Zhejiang Expressway* 1,416,000 472 ------------ 7,347 ------------ CROATIA - 1.3% Pliva, GDR* 51,700 634 ------------ CZECH REPUBLIC - 3.1% Cesky Telecom* 24,500 192 Komercni Banka 23,600 1,336 ------------ 1,528 ------------ HUNGARY - 3.9% EGIS 797 34 OTP Bank 225,100 1,846 ------------ 1,880 ------------ INDIA - 2.1% Ranbaxy Laboratories, GDR 53,500 1,014 ------------ INDONESIA - 2.5% PT Astra International* 1,174,500 349 PT Indofood Sukses Makmur 3,339,000 278 PT Telekomunikasi Industries 1,409,500 584 ------------ 1,211 ------------ ISRAEL - 2.2% Teva Pharmaceutical 16,000 1,072 ------------ MALAYSIA - 4.9% AMMB Holdings 309,000 330 Genting 185,600 635 Hong Leong Bank 339,000 435 Malayan Banking 67,000 141 Public Bank 197,000 133 Resorts World 299,000 708 ------------ 2,382 ------------ MEXICO - 3.0% Cemex* 81,600 340 Grupo Modelo 22,000 55 Wal-Mart De Mexico, Cl U 448,800 1,086 ------------ 1,481 ------------ RUSSIAN FEDERATION - 13.4% Lukoil Holding, ADR 34,600 2,105 Sibneft, ADR* 30,100 581 Surgutneftegaz, ADR* 39,300 $ 648 Vimpel Communications, ADR* 45,200 1,071 Wimm-Bill-Dann Foods, ADR* 13,700 234 Yukos, ADR 13,900 1,871 ------------ 6,510 ------------ SINGAPORE - 0.7% Venture Manufacturing 61,000 364 ------------ SOUTH AFRICA - 5.1% AngloGold* 8,400 454 Gold Fields 37,800 488 SABMiller 98,000 653 Sasol 79,800 900 ------------ 2,495 ------------ SOUTH KOREA - 19.2% Hanaro Telecom* 39,100 108 Hite Brewery 12,500 601 Hyundai Motor 37,000 841 Kookmin Bank 40,341 1,470 LG Electronics Investment* 29,950 814 Pacific 6,380 613 POSCO 13,700 1,188 S1 9,400 152 Samsung Electronics 7,700 1,872 Samsung Fire & Marine Insurance 21,560 1,254 Shinsegae 3,200 482 ------------ 9,395 ------------ TAIWAN - 7.3% Benq 136,480 172 Chinatrust Financial* 2,160,000 1,514 EVA Airways* 1,943,000 687 Formosa Plastic 180,000 172 Nan Ya Plastic 857,170 662 Taishin Financial* 874,000 350 ------------ 3,557 ------------ THAILAND - 9.1% Bangkok Bank* 1,244,500 1,525 Kiatnakin Finance 371,000 268 Land & Houses* 265,000 404 National Finance* 1,217,000 397 PTT 226,000 214 Siam Cement 23,000 451 Siam Commercial Bank* 804,000 431 Thai Farmers Bank* 1,320,000 778 ------------ 4,468 ------------ TOTAL FOREIGN COMMON STOCKS 46,065 ------------ SHORT TERM INVESTMENT - 5.5% Deutsche Liquid Assets Fund 2,707,775 2,708 ------------ TOTAL SHORT TERM INVESTMENT 2,708 ------------ TOTAL INVESTMENTS - 99.8% (Cost $50,515) 48,773 ------------ OTHER ASSETS AND LIABILITIES, NET - 0.2% 73 ------------ TOTAL NET ASSETS - 100.0% $ 48,846 ------------
* Non-income producing security ADR - American Depositary Receipt Cl - Class GDR - Global Depositary Receipt The accompanying notes are an integral part of the financial statements. 50 DESCRIPTION At September 30, 2002, sector diversification of the Fund was as follows:
% OF NET ASSETS VALUE (000) ---------- ------------ FOREIGN COMMON STOCK Banking 20.3% $ 9,959 Energy 17.0 8,296 Materials 9.2 4,482 Transportation 5.5 2,688 Technology Hardware & Equipment 4.9 2,408 Utilities 4.5 2,211 Food, Beverages & Tobacco 4.2 2,063 Telecommunication Services 4.0 1,955 Pharmaceuticals & Biotechnology 3.6 1,740 Automobiles 3.3 1,591 Retailing 3.2 1,568 Hotels, Restaurants & Leisure 2.7 1,343 Insurance 2.6 1,254 Consumer Durables & Apparel 2.5 1,218 Health Care Equipment & Services 2.1 1,014 Diversified Financials 2.0 995 Household & Personal Products 1.3 613 Capital Goods 1.1 515 Commercial Services & Supplies 0.3 152 ---------- ------------ TOTAL FOREIGN COMMON STOCKS 94.3 46,065 TOTAL SHORT-TERM INVESTMENTS 5.5 2,708 ---------- ------------ TOTAL INVESTMENTS 99.8 48,773 OTHER ASSETS AND LIABILITIES, NET 0.2 73 ---------- ------------ NET ASSETS 100.0% $ 48,846 ========== ============
51 INTERNATIONAL FUND
DESCRIPTION SHARES VALUE (000) ---------------------------------------------------------------------- FOREIGN COMMON STOCKS - 96.5% AUSTRALIA - 2.6% Aristocrat Leisure 2,487,800 $ 6,530 Macquarie Bank 346,800 4,176 Wesfarmers 336,400 4,945 ------------ 15,651 ------------ CHINA - 1.5% CNOOC 6,377,500 8,913 ------------ FINLAND - 1.4% Nokia Oyj 659,600 8,768 ------------ FRANCE - 14.6% Atos Origin* 129,100 3,228 Aventis* 171,090 8,962 BNP Paribas* 241,500 7,872 Compagnie de Saint-Gobain 281,200 6,209 Groupe Danone 68,150 8,217 Lafarge* 131,400 10,493 Sanofi-Synthelabo* 114,657 6,465 Schneider Electric* 140,800 6,245 Thomson Multimedia* 361,800 5,700 TotalFinaElf, Cl B 122,350 16,107 Vinci 150,200 9,100 ------------ 88,598 ------------ GERMANY - 1.0% Deutsche Boerse AG* 183,200 5,993 ------------ GREAT BRITAIN - 20.1% Amvescap* 1,222,000 5,785 Aviva 881,000 4,954 BAE Systems 1,562,000 4,717 BP 2,104,000 14,064 Compass Group 1,300,200 5,419 Dixons Group* 4,053,000 10,996 Electrocomponents 1,034,444 4,100 EMI Group 1,618,000 4,326 Lloyds TSB Group* 1,093,400 8,074 Next* 435,264 6,360 Reckitt Benckiser* 512,830 9,679 Royal Bank of Scotland* 510,400 9,633 Scottish & Southern Energy 750,400 8,085 Standard Chartered 600,000 6,181 Tesco* 2,898,490 9,380 Vodafone Group 8,513,250 10,913 ------------ 122,666 ------------ HONG KONG - 3.1% Hang Seng Bank* 692,800 7,261 Hutchison Whampoa 1,056,500 6,096 Peregrine Investment Holdings* (A) 142,000 -- Sun Hung Kai Properties 928,000 5,449 ------------ 18,806 ------------ IRELAND - 2.3% CRH 534,960 5,964 Irish Life & Permanent 698,300 7,937 ------------ 13,901 ------------ ITALY - 7.5% Assicurazioni Generali* 447,600 $ 6,565 Autogrill* 828,400 6,542 Banco Popolare di Verona 803,000 9,166 ENI* 1,188,800 16,308 IntesaBci 4,118,000 6,919 ------------ 45,500 ------------ JAPAN - 26.9% Avex 201,700 2,720 Brother Industries 783,000 5,544 Canon* 163,000 5,329 Fanuc* 81,300 3,633 Fast Retailing 154,200 3,977 Fuji Television Network 747 3,283 Honda Motor 142,800 5,783 Ito-Yokado* 103,000 4,044 Kanematsu* 3,342,000 4,310 Keyence 41,700 7,001 Mitsubishi 619,000 4,159 Murata Manufacturing 40,600 2,068 NGK Insulators 671,000 4,520 Nidec 66,500 3,412 Nikon* 368,000 2,808 Nintendo* 45,300 5,277 Nippon Mitsubishi Oil* 925 4 Nippon Telegraph & Telephone 588 1,956 Nissan Motor* 803,000 5,963 Nitto Denko 215,500 5,470 Nomura Holdings* 367,000 4,823 NTT Mobile Communications* 2,290 3,913 Olympus Optical* 364,000 5,331 Rohm 52,700 6,186 Sankyo 232,600 6,420 Seven-Eleven Japan* 132,000 4,467 Shiseido 436,000 5,204 Sony* 124,900 5,243 Sumitomo Chemical 1,770,000 6,790 Sumitomo Metal Mining* 800,000 3,299 Sumitomo Trust and Banking* 1,682,000 8,829 Takeda Chemical Industries* 128,800 5,195 Tohoku Pioneer 47,300 627 Tokyo Electron* 100,000 3,828 Tokyo Gas* 1,721,000 5,033 Toys "R" Us-Japan 211,700 3,374 UMC Japan* 956 927 Yamada Denki 85,500 2,184 ------------ 162,934 ------------ MALAYSIA - 0.0% Siverstone* (A) 3,325 -- ------------ MEXICO - 0.7% Grupo Televisa* 174,900 4,458 ------------ NETHERLANDS - 3.1% Elsevier 423,200 5,057 Jomed* 111,330 1,141 Koninklijke KPN* 1,233,000 6,398 Royal Dutch Petroleum 148,600 6,000 ------------ 18,596 ------------ The accompanying notes are an integral part of the financial statements. 52 DESCRIPTION SHARES VALUE (000) ---------------------------------------------------------------------- SINGAPORE - 2.5% DBS Group Holdings 873,000 $ 5,501 Singapore Airlines* 954,000 5,153 Singapore Press Holdings 433,000 4,629 ------------ 15,283 ------------ SOUTH KOREA - 1.4% Samsung Electronics 69,500 8,218 ------------ SPAIN - 3.1% Altadis* 389,200 8,693 Amadeus Global Travel* 1,121,600 4,700 NH Hoteles* 632,600 5,564 ------------ 18,957 ------------ SWEDEN - 2.2% Skandinaviska Enskilda* 1,557,000 13,265 ------------ SWITZERLAND - 2.5% Adecco 238,300 8,064 Credit Suisse* 385,100 7,555 ------------ 15,619 ------------ TOTAL FOREIGN COMMON STOCKS 586,126 ------------ INVESTMENT COMPANY - 3.1% Deutsche Liquid Assets Fund 18,551,437 18,551 ------------ TOTAL INVESTMENT COMPANY 18,551 ------------ TOTAL INVESTMENTS - 99.6% (Cost $757,008) 604,677 ------------ OTHER ASSETS AND LIABILITIES, NET - 0.4% 2,353 ------------ TOTAL NET ASSETS - 100.0% $ 607,030 ------------
* Non-income producing security (A) Security is valued at fair value under guidelines established and approved by the board of directors. Total fair valued securities had a value of $0, which represents 0.0% of total net assets at September 30, 2002. (Note 2) AG - Aktienjesellschaft (German Stock Co.) Cl - Class DESCRIPTION At September 30, 2002, sector diversification of the Fund was as follows:
% OF NET ASSETS VALUE (000) ---------- ------------ FOREIGN COMMON STOCK Banks 13.4% $ 81,427 Energy 10.0 61,396 Capital Goods 9.6 58,034 Technology Hardware & Equipment 9.0 54,716 Materials 5.3 32,016 Retailing 5.1 30,935 Hotels Restaurants & Leisure 5.0 30,475 Diversified Financials 4.9 29,606 Media 4.0 24,473 Telecommunication Services 3.8 23,180 Pharmaceuticals & Biotechnology 3.4 20,622 Insurance 3.2 19,456 Food Beverage & Tobacco 2.8 16,910 Consumer Durables & Apparel 2.7 16,220 Household & Personal Products 2.5 14,883 Food & Drug Retailing 2.3 13,847 Utilities 2.2 13,118 Commercial Services & Supplies 2.1 12,764 Automobiles & Components 1.9 11,746 Health Care Equipment & Services 1.1 6,472 Real Estate 0.9 5,449 Transportation 0.8 5,153 Software & Services 0.5 3,228 ---------- ------------ TOTAL FOREIGN COMMON STOCKS 96.5 586,126 TOTAL INVESTMENT COMPANY 3.1 18,551 ---------- ------------ TOTAL INVESTMENTS 99.6 604,677 OTHER ASSETS AND LIABILITIES, NET 0.4 2,353 ---------- ------------ NET ASSETS 100.0% $ 607,030 ========== ============
53 STATEMENTS OF ASSETS AND LIABILITIES SEPTEMBER 30, 2002, IN THOUSANDS, EXCEPT PER SHARE DATA
EMERGING INTERNATIONAL MARKETS FUND FUND -------------------------------------------------------------------------------------------------------------- ASSETS: Investments in securities, at value* $ 48,773 $ 604,677 Cash denominated in foreign currencies, at value** 453 1,751 Dividends and interest receivable 60 2,447 Receivable for securities sold 261 243 Capital shares sold 2 469 Other receivables -- 78 Prepaid expenses and other assets 15 30 -------------------------------------------------------------------------------------------------------------- TOTAL ASSETS 49,564 609,695 ============================================================================================================== LIABILITIES: Payable for securities purchased 492 213 Capital shares redeemed 12 1,115 Payable for advisory, co-administration, and custodian fees 1 544 Distribution and shareholder servicing fees 1 15 Bank overdraft 212 773 Accrued expenses and other liabilities -- 5 -------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES 718 2,665 ============================================================================================================== NET ASSETS $ 48,846 $ 607,030 ============================================================================================================== COMPOSITION OF NET ASSETS: Portfolio capital $ 59,823 $ 1,027,930 Undistributed net investment income (loss) 1 (5) Accumulated net realized loss (9,231) (268,575) Net unrealized depreciation of investments (1,742) (152,331) Net unrealized appreciation or depreciation of foreign currency, and translation of other assets and liabilities in foreign currency (5) 11 -------------------------------------------------------------------------------------------------------------- NET ASSETS $ 48,846 $ 607,030 ============================================================================================================== *Investments in securities, at cost $ 50,515 $ 757,008 **Cash denominated in foreign currencies, at cost 458 1,740 CLASS A: Net assets $ 2,487 $ 37,232 Shares issued and outstanding ($0.0001 par value -- 2 billion authorized) 400 5,081 Net asset value and redemption price per share $ 6.22 $ 7.33 Maximum offering price per share (A) $ 6.58 $ 7.76 CLASS B: Net assets $ 252 $ 7,459 Shares issued and outstanding ($0.0001 par value -- 2 billion authorized) 42 1,088 Net asset value and offering price per share (C) $ 6.02 $ 6.85 CLASS C: Net assets $ 90 $ 11,027 Shares issued and outstanding ($0.0001 par value -- 2 billion authorized) 15 1,555 Net asset value per share (C) $ 6.10 $ 7.09 Maximum offering price per share (B) $ 6.16 $ 7.16 CLASS S: Net assets $ 11 $ 10,817 Shares issued and outstanding ($0.0001 par value -- 2 billion authorized) 2 1,479 Net asset value, offering price, and redemption price per share $ 6.19 $ 7.31 CLASS Y: Net assets $ 46,006 $ 540,495 Shares issued and outstanding ($0.0001 par value -- 2 billion authorized) 7,347 73,052 Net asset value, offering price, and redemption price per share $ 6.26 $ 7.40 --------------------------------------------------------------------------------------------------------------
(A) The offering price is calculated by dividing the net asset value by 1 minus the maximum sales charge of 5.50%. (B) The offering price is calculated by dividing the net asset value by 1 minus the maximum sales charge of 1.00%. (C) Class B and C have a contingent deferred sales charge. For a description of a possible redemption charge, see the notes to the financial statements. The accompanying notes are an integral part of the financial statements. 54 STATEMENTS OF OPERATIONS FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2002, IN THOUSANDS
EMERGING INTERNATIONAL MARKETS FUND FUND -------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME: Interest $ -- $ 544 Dividends 857 12,882 Less: Foreign taxes withheld (69) (1,435) Securities lending -- 914 Other income 56 34 -------------------------------------------------------------------------------------------------------------- TOTAL INVESTMENT INCOME 844 12,939 ============================================================================================================== EXPENSES: Investment advisory fees 628 8,354 Co-administration fees and expenses (including per account transfer agency fees) 222 2,175 Custodian fees 8 75 Directors' fees 1 5 Registration fees 28 48 Professional fees 4 14 Printing 3 40 Other 5 24 Distribution and shareholder servicing fees - Class A 8 139 Distribution and shareholder servicing fees - Class B 2 101 Distribution and shareholder servicing fees - Class C 1 158 Shareholder servicing fees - Class S -- 31 -------------------------------------------------------------------------------------------------------------- TOTAL EXPENSES 910 11,164 ============================================================================================================== Less: Waiver of expenses (104) (480) -------------------------------------------------------------------------------------------------------------- TOTAL NET EXPENSES 806 10,684 ============================================================================================================== INVESTMENT INCOME - NET 38 2,255 ============================================================================================================== REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS - NET: Net realized loss on investments (1,566) (111,725) Net realized loss on foreign currency transactions (166) (704) Net change in unrealized appreciation or depreciation of investments 4,364 (21,835) Net change in unrealized depreciation of foreign currency, and translation of other assets and liabilities denominated in foreign currency (13) (145) -------------------------------------------------------------------------------------------------------------- NET GAIN (LOSS) ON INVESTMENTS 2,619 (134,409) ============================================================================================================== NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 2,657 $ (132,154) ==============================================================================================================
The accompanying notes are an integral part of the financial statements. 55 STATEMENTS OF CHANGES IN NET ASSETS IN THOUSANDS
EMERGING INTERNATIONAL MARKETS FUND FUND ----------------------------------------------------------------------------------------------------------------------------------- 10/1/01 10/1/00 10/1/01 11/1/00 12/1/99 TO TO TO TO TO 9/30/02 9/30/01 9/30/02 9/30/01 10/31/00 ----------------------------------------------------------------------------------------------------------------------------------- OPERATIONS: Investment income (loss) - net $ 38 $ 457 $ 2,255 $ 995 $ (7) Net realized gain (loss) on investments (1,566) (6,981) (111,725) (22,013) 13,800 Net realized gain (loss) on foreign currency transactions (166) (286) (704) 31 (267) Net change in unrealized appreciation or depreciation of investments 4,364 (13,117) (21,835) 14,847 (22,320) Net change in unrealized appreciation or depreciation of foreign currency, and translation of other assets and liabilities denominated in foreign currency (13) 1 (145) 183 (9) ----------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 2,657 (19,926) (132,154) (5,957) (8,803) ----------------------------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Investment income - net: Class A -- -- -- (27) (26) Class B -- -- -- (4) (4) Class S -- -- -- (120) (77) Class Y (155) -- -- (1,078) (771) Net realized gain on investments: Class A -- -- -- (348) (354) Class B -- -- -- (77) (72) Class S -- -- -- (1,564) (1,003) Class Y -- -- -- (11,770) (8,213) ----------------------------------------------------------------------------------------------------------------------------------- Total distributions (155) -- -- (14,988) (10,520) =================================================================================================================================== CAPITAL SHARE TRANSACTIONS (1): Class A: Proceeds from sales 12,269 6,895 159,656 24,557 474 Reinvestment of distributions -- -- -- 342 346 Payments for redemptions (13,356) (6,765) (180,477) (23,661) (671) Shares issued in connection with the acquisition of Fund net assets -- -- -- 56,579 -- ----------------------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from Class A transactions (1,087) 130 (20,821) 57,817 149 ----------------------------------------------------------------------------------------------------------------------------------- Class B: Proceeds from sales 146 171 872 413 128 Reinvestment of distributions -- -- -- 71 68 Payments for redemptions (58) (38) (2,522) (273) (144) Shares issued in connection with the acquisition of Fund net assets -- -- -- 9,516 -- ----------------------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from Class B transactions 88 133 (1,650) 9,727 52 ----------------------------------------------------------------------------------------------------------------------------------- Class C: Proceeds from sales 175 407 2,445 94 -- Payments for redemptions (185) (284) (6,687) (84) -- ----------------------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from Class C transactions (10) 123 (4,242) 10 -- ----------------------------------------------------------------------------------------------------------------------------------- Class S (2): Proceeds from sales 14 -- 8,680 5,638 16,446 Reinvestment of distributions -- -- -- 1,627 1,080 Payments for redemptions -- -- (4,768) (8,436) (10,109) Shares issued in connection with the acquisition of Fund net assets -- -- -- 457,512 -- ----------------------------------------------------------------------------------------------------------------------------------- Increase in net assets from Class S transactions 14 -- 3,912 456,341 7,417 ----------------------------------------------------------------------------------------------------------------------------------- Class Y (2): Proceeds from sales 43,312 19,980 246,573 130,404 56,458 Reinvestment of distributions 42 -- -- 7,542 5,492 Payments for redemptions (39,804) (16,853) (249,505) (105,059) (16,025) Shares issued in connection with the acquisition of Fund net assets -- -- -- 86,055 -- ----------------------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from Class Y transactions 3,550 3,127 (2,932) 118,942 45,925 ----------------------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions 2,555 3,513 (25,733) 642,837 53,543 ----------------------------------------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets 5,057 (16,413) (157,887) 621,892 34,220 NET ASSETS AT BEGINNING OF FISCAL PERIOD 43,789 60,202 764,917 143,025 108,805 =================================================================================================================================== NET ASSETS AT END OF FISCAL PERIOD $ 48,846 $ 43,789 $ 607,030 $ 764,917 $ 143,025 =================================================================================================================================== UNDISTRIBUTED NET INVESTMENT INCOME (LOSS) AT END OF FISCAL PERIOD $ 1 $ (157) $ (5) $ (8,325) $ 5 ===================================================================================================================================
(1) See Note 4 in the notes to the financial statements for additional information. (2) On September 24, 2001 Class Y and Institutional Class of International Fund were redesignated as Class S and Class Y, respectively. The accompanying notes are an integral part of the financial statements. 56 (This page has been left blank intentionally.) 57 FINANCIAL HIGHLIGHTS FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS ENDED SEPTEMBER 30, UNLESS OTHERWISE INDICATED.
REALIZED AND NET ASSET UNREALIZED DIVIDENDS VALUE NET GAINS OR FROM NET DISTRIBUTIONS BEGINNING INVESTMENT (LOSSES) ON INVESTMENT FROM OF PERIOD INCOME (LOSS) INVESTMENTS INCOME CAPITAL GAINS ------------------------------------------------------------------------------------------------------- EMERGING MARKETS FUND (1) Class A 2002 (2) $ 5.87 $ (0.04) $ 0.39 $ -- $ -- 2001 (2) 8.50 0.02 (2.65) -- -- 2000 (2) 6.77 (0.06) 1.79 -- -- 1999 (2) 5.61 (0.04) 1.20 -- -- 1998 10.96 (0.15) (5.18) (0.02) -- Class B 2002 (2) $ 5.73 $ (0.09) $ 0.38 $ -- $ -- 2001 (2) 8.37 (0.03) (2.61) -- -- 2000 (2) 6.72 (0.11) 1.76 -- -- 1999 (2) 5.60 (0.08) 1.20 -- -- 1998 (3) 7.27 -- (1.67) -- -- Class C (2) 2002 $ 5.80 $ (0.09) $ 0.39 $ -- $ -- 2001 8.46 -- (2.66) -- -- 2000 (4) 9.96 (0.06) (1.44) -- -- Class S (2) 2002 $ 5.87 $ 0.01 $ 0.33 $ (0.02) $ -- 2001 (5) 5.72 -- 0.15 -- -- Class Y 2002 (2) $ 5.92 $ (0.02) $ 0.38 $ (0.02) $ -- 2001 (2) 8.55 0.06 (2.69) -- -- 2000 (2) 6.80 (0.04) 1.79 -- -- 1999 (2) 5.62 (0.02) 1.20 -- -- 1998 (3) 7.27 0.01 (1.66) -- -- ------------------------------------------------------------------------------------------------------- INTERNATIONAL FUND (6) Class A 2002 (2) $ 8.96 $ -- $ (1.63) $ -- $ -- 2001 (2) (7) 13.96 0.10 (3.63) (0.10) (1.37) 2000 (2) (8) 15.94 (0.03) (0.42) (0.10) (1.43) 1999 12.42 -- 4.26 (0.04) (0.70) 1998 11.22 0.01 1.66 (0.07) (0.40) Class B 2002 (2) $ 8.45 $ (0.06) $ (1.54) $ -- $ -- 2001 (2) (7) 13.28 0.01 (3.43) (0.07) (1.34) 2000 (2) (8) 15.27 (0.10) (0.42) (0.07) (1.40) 1999 11.97 (0.09) 4.09 (0.01) (0.69) 1998 10.87 (0.08) 1.60 (0.02) (0.40) Class C (2) 2002 $ 8.75 $ (0.06) $ (1.60) $ -- $ -- 2001 (5) 8.31 0.01 0.43 -- -- Class S 2002 (2) $ 8.96 $ 0.01 $ (1.66) $ -- $ -- 2001 (2) (7) 13.97 (0.04) (3.50) (0.10) (1.37) 2000 (2) (8) 15.95 (0.03) (0.42) (0.10) (1.43) 1999 12.43 (0.01) 4.27 (0.04) (0.70) 1998 11.23 -- 1.67 (0.07) (0.40) Class Y 2002 (2) $ 9.03 $ 0.03 $ (1.66) $ -- $ -- 2001 (2) (7) 14.03 0.07 (3.61) (0.11) (1.35) 2000 (2) (8) 15.97 0.01 (0.42) (0.12) (1.41) 1999 12.42 0.06 4.25 (0.06) (0.70) 1998 11.21 0.04 1.67 (0.10) (0.40) ------------------------------------------------------------------------------------------------------- 58 RATIO OF RATIO OF NET EXPENSES TO NET ASSET RATIO OF INVESTMENT AVERAGE VALUE NET ASSETS EXPENSES TO INCOME (LOSS) NET ASSETS END OF TOTAL END OF AVERAGE TO AVERAGE (EXCLUDING PERIOD RETURN (9) PERIOD (000) NET ASSETS NET ASSETS WAIVERS) ---------------------------------------------------------------------------------------------------------------------- EMERGING MARKETS FUND (1) Class A 2002 (2) $ 6.22 5.96% $ 2,487 1.70% (0.53)% 1.89% 2001 (2) 5.87 (30.94) 3,244 1.70 0.26 1.92 2000 (2) 8.50 25.55 4,338 1.70 (0.70) 1.89 1999 (2) 6.77 20.68 4,551 1.70 (0.54) 2.02 1998 5.61 (48.91) 5,384 1.96 (1.09) 3.43 Class B 2002 (2) $ 6.02 5.06% $ 252 2.45% (1.24)% 2.64% 2001 (2) 5.73 (31.54) 173 2.45 (0.37) 2.64 2000 (2) 8.37 24.55 107 2.45 (1.21) 2.66 1999 (2) 6.72 20.00 13 2.45 (1.19) 2.72 1998 (3) 5.60 (22.97) 1 2.46 (0.43) 4.30 Class C (2) 2002 $ 6.10 5.17% $ 90 2.45% (1.24)% 2.64% 2001 5.80 (31.44) 90 2.45 0.02 2.70 2000 (4) 8.46 (15.06) 4 2.45 (0.99) 2.64 Class S (2) 2002 $ 6.19 5.77% $ 11 1.70% 0.20% 1.89% 2001 (5) 5.87 2.62 -- -- -- -- Class Y 2002 (2) $ 6.26 6.10% $ 46,006 1.45% (0.28)% 1.64% 2001 (2) 5.92 (30.84) 40,282 1.45 0.88 1.67 2000 (2) 8.55 25.74 55,753 1.45 (0.42) 1.64 1999 (2) 6.80 21.00 40,255 1.45 (0.35) 1.73 1998 (3) 5.62 (22.70) 7,444 1.46 0.83 3.30 ---------------------------------------------------------------------------------------------------------------------- INTERNATIONAL FUND (6) Class A 2002 (2) $ 7.33 (18.19)% $ 37,232 1.60% 0.04% 1.66% 2001 (2) (7) 8.96 (28.00) 64,907 1.49 1.02 1.59 2000 (2) (8) 13.96 (3.59) 3,591 1.58 (0.26) 1.76 1999 15.94 36.62 3,939 1.56 (0.01) 1.75 1998 12.42 15.33 3,154 1.58 0.02 1.75 Class B 2002 (2) $ 6.85 (18.94)% $ 7,459 2.35% (0.68)% 2.41% 2001 (2) (7) 8.45 (28.57) 10,857 2.17 0.06 2.27 2000 (2) (8) 13.28 (4.22) 732 2.28 (0.96) 2.46 1999 15.27 35.65 781 2.26 (0.71) 2.45 1998 11.97 14.48 624 2.28 (0.70) 2.45 Class C (2) 2002 $ 7.09 (18.97)% $ 11,027 2.35% (0.71)% 2.41% 2001 (5) 8.75 5.29 17,806 1.48 4.15 1.48 Class S 2002 (2) $ 7.31 (18.42)% $ 10,817 1.60% 0.16% 1.66% 2001 (2) (7) 8.96 (28.03) 9,461 1.46 (0.33) 1.61 2000 (2) (8) 13.97 (3.59) 16,373 1.58 (0.26) 1.76 1999 15.95 36.61 11,307 1.56 -- 1.75 1998 12.43 15.37 8,058 1.58 0.01 1.75 Class Y 2002 (2) $ 7.40 (18.05)% $ 540,495 1.35% 0.36% 1.41% 2001 (2) (7) 9.03 (27.93) 661,886 1.23 0.67 1.36 2000 (2) (8) 14.03 (3.27) 122,329 1.28 0.04 1.76 1999 15.97 36.98 92,778 1.26 0.28 1.75 1998 12.42 15.73 60,647 1.28 0.34 1.75 ---------------------------------------------------------------------------------------------------------------------- RATIO OF NET INVESTMENT INCOME (LOSS) TO AVERAGE NET PORTFOLIO ASSETS (EXCLUDING TURNOVER WAIVERS) RATE --------------------------------------------------------------- EMERGING MARKETS FUND (1) Class A 2002 (2) (0.72)% 138% 2001 (2) 0.04 132 2000 (2) (0.89) 149 1999 (2) (0.86) 138 1998 (2.56) 48 Class B 2002 (2) (1.43)% 138% 2001 (2) (0.56) 132 2000 (2) (1.42) 149 1999 (2) (1.46) 138 1998 (3) (2.27) 48 Class C (2) 2002 (1.43)% 138% 2001 (0.23) 132 2000 (4) (1.18) 149 Class S (2) 2002 0.01% 138% 2001 (5) -- 132 Class Y 2002 (2) (0.47)% 138% 2001 (2) 0.66 132 2000 (2) (0.61) 149 1999 (2) (0.63) 138 1998 (3) (1.01) 48 --------------------------------------------------------------- INTERNATIONAL FUND (6) Class A 2002 (2) (0.02)% 72% 2001 (2) (7) 0.92 72 2000 (2) (8) (0.44) 90 1999 (0.20) 94 1998 (0.15) 89 Class B 2002 (2) (0.74)% 72% 2001 (2) (7) (0.04) 72 2000 (2) (8) (1.14) 90 1999 (0.90) 94 1998 (0.87) 89 Class C (2) 2002 (0.77)% 72% 2001 (5) 4.15 72 Class S 2002 (2) 0.10% 72% 2001 (2) (7) (0.48) 72 2000 (2) (8) (0.44) 90 1999 (0.19) 94 1998 (0.16) 89 Class Y 2002 (2) 0.30% 72% 2001 (2) (7) 0.54 72 2000 (2) (8) (0.44) 90 1999 (0.21) 94 1998 (0.13) 89 ---------------------------------------------------------------
(1) The financial highlights for Emerging Markets Fund as set forth herein include the historical financial highlights of the Piper Emerging Markets Growth Fund Class A shares. The assets of the Piper Emerging Markets Growth Fund were acquired by Emerging Markets Fund on August 7, 1998. In connection with such acquisition, Class A shares of the Piper Emerging Markets Growth Fund were exchanged for Class A shares of the Emerging Markets Fund. On August 7, 1998, the Fund's advisor changed from Piper Capital Management Incorporated to U.S. Bank National Association. (2) Per share data calculated using average shares outstanding method. (3) Class of shares has been offered since August 10, 1998. All ratios for the period have been annualized, except total return and portfolio turnover. (4) Commenced operations February 1, 2000. All ratios for the period have been annualized, except total return and portfolio turnover. (5) Class of shares has been offered since September 24, 2001. All ratios for the period have been annualized, except total return and portfolio turnover. (6) The financial highlights for the International Fund as set forth herein include the historical financial highlights of the Firstar International Growth Fund. The assets of the Firstar Fund were acquired by the First American International Fund on September 24, 2001. In connection with such acquisition, (i) Class A shares of the Firstar International Growth Fund were exchanged for Class A shares of the First American International Fund, (ii) Firstar Class B shares were exchanged for Class B shares of the First American Fund, (iii) Firstar Class Y shares were exchanged for Class S shares of the First American Fund, and (iv) Firstar Institutional Class shares were exchanged for Class Y shares of the First American Fund. Historical per share amounts have been adjusted to reflect the conversion ratios utilized for the merger of the International Fund and Firstar International Growth Fund. Firstar International Growth Fund is the accounting survivor. (7) Effective in 2001, the Fund's fiscal year end was changed from October 31 to September 30. All ratios for the period have been annualized, except total return and portfolio turnover. (8) Effective in 2000, the Fund's fiscal year end was changed from November 30 to October 31. All ratios for the period have been annualized, except total return and portfolio turnover. (9) Total return does not reflect sales charges. Total return would have been lower had certain expenses not been waived. The accompanying notes are an integral part of the financial statements. 59 SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2002 MICRO CAP FUND
DESCRIPTION SHARES VALUE (000) ---------------------------------------------------------------------------------- COMMON STOCKS - 89.8% CONSUMER DISCRETIONARY - 20.4% 4Kids Entertainment* (A) 300,090 $ 7,121 Alliance Atlantis Communications, Cl B* 334,400 3,317 Champps Entertainment* 121,110 948 Electronics Boutique Holdings* (A) 123,000 3,376 Gart Sports* 84,400 1,593 Gymboree* 27,180 443 JAKKS Pacific* 187,500 2,085 Kirkland's* (A) 100,600 1,720 Landry's Restaurants 71,800 1,622 Mothers Work* (A) 114,185 4,342 OshKosh B' Gosh 112,240 3,857 Playboy Enterprises* 118,900 1,137 Prime Hospitality* 288,860 2,369 Racing Champions* (A) 157,100 2,567 Regent Communication* 417,600 2,121 Saga Communications* 108,843 2,014 Spanish Broadcasting System* 631,030 4,133 The Wet Seal, Cl A* 251,650 2,516 Too * 85,000 1,979 Tower Automotive* 187,700 1,258 Ultimate Electronics* (A) 190,200 2,425 ----------- 52,943 ----------- CONSUMER STAPLES - 0.3% Pilgrim's Pride, Cl B 69,530 647 ----------- ENERGY - 2.8% Horizon Offshore* 538,330 2,267 Maverick Tube* 118,300 1,049 Quicksilver Resources* 116,500 2,097 St. Mary Land & Exploration 33,200 793 Ultra Petroleum* 7,125 59 Willbros Group* 103,300 1,072 ----------- 7,337 ----------- FINANCIALS - 6.2% Alexandria Real Estate Equities (REIT) 24,100 1,024 Bedford Property Investors (REIT) 44,000 1,089 Euronet Services* 154,435 777 First Community Bancorp 30,500 883 First Republic Bank* 18,900 411 First State Bancorporation 56,995 1,405 Friedman, Billings, Ramsey Group* 112,250 1,137 Local Financial* 230,270 3,180 Philadelphia Consolidated Holding* 36,025 1,063 Scottish Annuity & Life Holdings 88,200 1,504 Westwood Holdings Group (A) 23,436 334 Winston Hotels 220,300 1,595 Wintrust Financial (A) 58,600 1,679 ----------- 16,081 ----------- HEALTH CARE - 13.5% AMERIGROUP* 95,500 3,204 Array Biopharma* 520,500 4,055 BioMarin Pharmaceutical* 409,375 2,370 CIMA Labs* 152,200 3,828 Cross Country* 99,200 1,389 D & K Healthcare Resources (A) 49,000 439 Exact Sciences* (A) 122,475 1,637 First Horizon Pharmaceutical* (A) 201,510 $ 1,088 Harvard Bioscience* 333,200 1,010 ICON* 36,870 789 Lifecore Biomedical* 437,987 2,715 MedCath* (A) 192,200 2,172 Noven Pharmaceuticals* 111,865 1,369 POZEN* 148,000 750 Select Medical* (A) 348,100 4,978 Telik* 204,970 2,537 Third Wave Technologies* 500,350 675 ----------- 35,005 ----------- INDUSTRIALS - 10.6% Actuant, Cl A* 24,000 886 American Science & Engineering* (A) 98,700 944 Career Education* (A) 52,775 2,534 Corinthian Colleges* 102,800 3,880 DiamondCluster, Cl A* 119,125 388 EDO (A) 59,600 1,336 Exult* (A) 254,920 752 Headwaters* 96,065 1,328 Herley Industries* 80,875 1,502 Knight Transportation* 81,800 1,268 Landstar* 29,800 1,461 Mesa Air Group* 393,300 1,436 MTC Technologies* 45,865 993 P.A.M. Transportation Services* 29,565 564 RailAmerica* 260,342 1,887 Resources Connection* 17,320 250 Roadway 21,300 781 University of Phoenix Online* 30,666 986 Wabash National* 212,690 1,151 Yellow* (A) 109,220 3,223 ----------- 27,550 ----------- INFORMATION TECHNOLOGY - 30.3% Aeroflex* 580,150 2,924 Altiris* 111,900 1,113 Applied Films* 746,255 8,164 Aspen Technology* (A) 181,300 544 Asyst Technologies* (A) 71,700 433 ATMI* (A) 204,300 2,881 Caminus* 192,200 342 ChipPAC, Cl A* 581,275 1,243 Concurrent Computer* 276,000 629 CoorsTek* 48,000 720 Documentum* 87,900 1,015 DoubleClick* 432,170 2,221 Drexler Technology* (A) 121,900 1,772 Entegris* 163,725 1,272 Genesis Microchip* 154,100 1,182 Genroco Warrants* (D) 103,794 -- Genus* 774,388 937 Genus Warrants* (D) 116,158 -- Identix* (A) 444,194 2,643 Inforte* 99,930 512 Integrated Silicon Solution* 282,400 842 Interland* (A) 1,332,100 2,731 Lexar Media* (A) 431,925 1,145 Monolithic System Technology* (A) 145,900 1,459 The accompanying notes are an integral part of the financial statements. 60 DESCRIPTION SHARES VALUE (000) ---------------------------------------------------------------------------------- Mykrolis* 249,860 $ 1,537 Oak Technology* (A) 686,630 2,183 OmniVision Technologies* 327,300 2,157 Overland Storage* 134,005 1,455 Photon Dynamics* (A) 314,990 5,868 Photronics* (A) 191,025 1,922 Planar Systems* (A) 180,100 2,871 Plumtree Software* (A) 67,700 176 Predictive Systems* 1,113,200 234 Secure Computing* (A) 307,400 984 Skyworks Solutions* (A) 962,600 4,361 Take-Two Interactive Software* (A) 449,300 13,030 TALX 84,970 1,119 THQ* (A) 110,150 2,291 Tridium Warrant* (C) (D) 20,500 54 Tridium, Cl B (C) (D) 278,500 1,269 VideoPropulsion* (D) 809,856 -- Zoran* (A) 27,400 301 ----------- 78,536 ----------- MATERIALS - 4.5% Century Aluminum 239,010 1,663 Crown Cork & Seal* (A) 946,800 4,971 Georgia Gulf 38,000 869 Pope & Talbot 98,000 1,259 Silgan Holdings* 80,750 2,296 Southwall Technologies* 298,700 699 ----------- 11,757 ----------- TELECOMMUNICATION SERVICES - 1.2% General Communication, Cl A* 374,235 1,407 Intrado* (A) 177,700 1,717 ----------- 3,124 ----------- TOTAL COMMON STOCKS 232,980 ----------- REGISTERED INVESTMENT COMPANIES - 3.7% Energy Select Sector SPDR Fund (A) 65,400 1,384 iShares Dow Jones U.S. Energy Sector Index Fund 45,500 1,725 iShares Nasdaq Biotechnology Index Fund (A) 109,400 5,060 Oil Service HOLDRs Trust (A) 29,500 1,476 ----------- TOTAL REGISTERED INVESTMENT COMPANIES 9,645 ----------- RELATED PARTY MONEY MARKET FUND - 7.1% First American Prime Obligations Fund (B) 18,345,782 18,346 ----------- TOTAL RELATED PARTY MONEY MARKET FUND 18,346 ----------- TOTAL INVESTMENTS - 100.6% (Cost $320,236) 260,971 ----------- OTHER ASSETS AND LIABILITIES, NET - (0.6)% (1,632) ----------- TOTAL NET ASSETS - 100.0% $ 259,339 -----------
* Non-income producing security (A) This security or a portion of this security is out on loan at September 30, 2002. Total loaned securities had a market value of $70,671,442 at September 30, 2002. (Note 6) (B) This money market fund is advised by U.S. Bancorp Asset Management, Inc., which also serves as advisor for this Fund. See also the notes to the financial statements. (C) Private placement security considered illiquid under guidelines established by the board of directors. As of September 30, 2002, the market value of these investments is $1,323,734 or 0.5% of total net assets. (D) Security is valued at fair value under guidelines established and approved by the board of directors. Total fair valued securities had a value of $1,323,734, which represents 0.5% of total net assets at September 30, 2002. (Note 2) Cl - Class REIT - Real Estate Investment Trust SMALL CAP CORE FUND
DESCRIPTION SHARES VALUE (000) ---------------------------------------------------------------------------------- COMMON STOCKS - 93.9% CONSUMER DISCRETIONARY - 25.3% 4Kids Entertainment* (A) 331,760 $ 7,873 Advanced Auto Parts* (A) 145,800 7,689 Alliance Atlantis Communications, Cl B* 479,856 4,759 Beazer Homes USA* (A) 55,300 3,376 Cato, Cl A 51,300 974 CBRL Group (A) 206,900 4,721 CSK Auto* 247,800 3,092 Cumulus Media, Cl A* 103,300 1,823 Electronics Boutique Holdings* (A) 203,291 5,580 Fairmont Hotels & Resorts 171,400 4,079 Finish Line, Cl A* 210,300 1,897 Gaylord Entertainment* 237,000 4,484 GTECH Holdings* (A) 106,168 2,635 Gymboree* (A) 34,850 568 Hot Topic* (A) 263,087 4,743 Kirkland's* 236,300 4,041 Lin TV, Cl A* (A) 88,200 2,183 Maytag 91,200 2,114 Orient Express Hotels* (A) 271,202 3,707 O'Reilly Automotive* (A) 210,798 6,033 Panera Bread, Cl A* (A) 241,800 6,529 Pinnacle Entertainment* 130,900 956 Ruby Tuesday (A) 299,300 5,621 Scholastic* 204,140 9,121 The Wet Seal, Cl A* 380,300 3,803 Toll Brothers* (A) 145,700 3,167 Too* 168,500 3,923 Ultimate Electronics* (A) 209,640 2,673 ValueVision International* 186,500 2,193 ----------- 114,357 ----------- CONSUMER STAPLES - 2.2% Performance Food Group* (A) 279,729 9,500 ----------- ENERGY - 10.9% Atwood Oceanics* 71,300 2,085 Cal Dive International* (A) 135,600 2,735 Frontier Oil 57,400 712 Helmerich & Payne 143,350 4,907 Knightsbridge Tankers (A) 42,500 504 Lone Star Technologies* 710,200 8,416 National-Oilwell* (A) 316,496 6,134 Patterson-UTI Energy* (A) 247,900 6,324 Pioneer Natural Resources* (A) 132,715 3,218 Pride International* (A) 303,700 3,948 Teekay Shipping (A) 130,900 3,731 Ultra Petroleum* 496,900 4,149 Varco International* (A) 152,100 2,573 ----------- 49,436 ----------- FINANCIALS - 6.5% Arthur J. Gallagher 176,030 4,339 Cullen/Frost Bankers 97,280 3,322 East West Bancorp 216,715 7,316 Everest Re Group 40,200 2,205 Federal Agricultural Mortgage, Cl C* (A) 36,900 1,089 Jefferies Group (A) 201,744 7,699 RenaissanceRe Holdings (A) 95,600 3,613 ----------- 29,583 ----------- 61 DESCRIPTION SHARES VALUE (000) ---------------------------------------------------------------------------------- HEALTH CARE - 11.8% Bio-Rad Laboratories, Cl A* 8,350 $ 314 Celgene* (A) 249,700 4,205 Cephalon* (A) 87,940 3,590 Community Health Systems* (A) 279,126 7,433 Covance* (A) 226,200 4,427 Integra LifeSciences* 230,500 3,663 Medicis, Cl A* (A) 55,507 2,269 NPS Pharmaceuticals* (A) 52,100 1,072 Omnicare (A) 210,400 4,444 Pharmaceutical Product Development* (A) 163,500 3,162 Priority Healthcare, Cl B* (A) 383,500 9,664 Province Healthcare* 116,200 1,993 Respironics* 88,669 2,838 Transkaryotic Therapies* (A) 14,200 460 Triad Hospitals* (A) 32,900 1,249 Universal Health Services* (A) 44,800 2,292 ----------- 53,075 ----------- INDUSTRIALS - 12.9% AGCO* (A) 83,600 1,939 Atlantic Coast Airline Holdings* 438,351 4,055 Chicago Bridge & Iron 141,800 3,403 Coinstar* 224,200 5,780 EDO (A) 93,590 2,097 ExpressJet Holdings* 419,900 3,863 Global Payments 75,094 1,922 Imagistics International* 122,950 2,133 Knight Transportation* 284,800 4,415 Kroll* (A) 119,000 2,360 Mesa Air Group* 237,200 866 Navistar International* 156,800 3,399 Nordson 100,150 2,378 Pall (A) 130,100 2,054 Roadway 74,400 2,729 SkyWest 175,600 2,300 Swift Transportation* 74,100 1,156 Triumph Group* 141,300 3,956 Waste Connections* (A) 130,300 4,533 Yellow* (A) 93,700 2,765 ----------- 58,103 ----------- INFORMATION TECHNOLOGY - 21.5% Aeroflex* 362,254 1,826 Anaren Microwave* (A) 232,225 1,909 ATMI* (A) 513,834 7,245 Cerner* (A) 26,800 944 Cognex* (A) 297,860 4,143 Cymer* (A) 184,500 3,439 DoubleClick* 329,600 1,694 Entegris* 956,710 7,434 Exar* 198,239 2,290 Fisher Scientific International* (A) 166,087 5,041 Inforte* (A) 455,475 2,332 Integrated Circuit Systems* 145,900 2,291 Integrated Device Technology* (A) 533,600 5,571 IXYS* (A) 339,493 1,708 Kronos* 101,400 2,497 Mettler-Toledo International* (A) 142,576 3,707 Mykrolis* 802,671 4,937 Photon Dynamics* (A) 151,400 $ 2,821 Photronics* (A) 314,060 3,159 Power Integrations* (A) 200,300 2,442 ProQuest* (A) 105,700 3,208 Skyworks Solutions* 879,200 3,983 Take-Two Interactive Software* (A) 265,521 7,700 Tekelec (A) 380,000 3,279 THQ* (A) 336,266 6,994 TriZetto Group* 247,500 1,233 Varian Semiconductor Equipment Associates* 109,100 1,794 Vastera* 386,589 831 Zoran* (A) 46,835 515 ----------- 96,967 ----------- MATERIALS - 1.8% Bowater 30,500 1,076 Georgia Gulf 49,010 1,121 OM Group (A) 141,900 6,073 ----------- 8,270 ----------- TELECOMMUNICATION SERVICES - 0.5% General Communication, CI A* 637,640 2,397 ----------- UTILITIES - 0.5% Philadelphia Suburban (A) 120,400 2,444 ----------- TOTAL COMMON STOCKS 424,132 ----------- RELATED PARTY MONEY MARKET FUND - 5.0% First American Prime Obligations Fund (B) 22,793,630 22,794 ----------- TOTAL RELATED PARTY MONEY MARKET FUND 22,794 ----------- TOTAL INVESTMENTS - 98.9% (Cost $500,857) 446,926 ----------- OTHER ASSETS AND LIABILITIES, NET - 1.1% 5,036 ----------- TOTAL NET ASSETS - 100.0% $ 451,962 -----------
* Non-income producing security (A) This security or a portion of this security is out on loan at September 30, 2002. Total loaned securities had a market value of $161,316,480 at September 30, 2002. (Note 6) (B) This money market fund is advised by U.S. Bancorp Asset Management, Inc., which also serves as advisor for this Fund. See also the notes to financial statements. Cl - Class The accompanying notes are an integral part of the financial statements. 62 SMALL CAP GROWTH FUND
DESCRIPTION SHARES VALUE (000) ---------------------------------------------------------------------------------- CONSUMER DISCRETIONARY - 17.2% 4Kids Entertainment* 33,700 $ 800 Action Performance* 14,350 369 ADVO* 19,000 603 Aeropostale* 25,650 395 Alliance Gaming* 76,100 1,176 Ameristar Casinos* 32,000 607 Boyd Gaming* 80,250 1,498 California Pizza Kitchen* (A) 53,800 1,238 Christopher & Banks* (A) 16,650 418 Cost Plus* 40,200 1,079 CSK Auto* 91,850 1,146 Electronics Boutique Holdings* (A) 36,500 1,002 Fred's, Cl A 28,250 843 GameStop* 53,500 1,094 Gymboree* (A) 35,650 581 Hollywood Entertainment* 93,550 1,358 Hot Topic* (A) 50,450 910 Insight Enterprises* 122,800 1,246 Isle of Capri Casinos* 33,350 556 Kenneth Cole Productions* 49,150 998 Kirkland's* 61,200 1,047 Landry's Restaurants 49,050 1,108 Lee Enterprises 15,800 519 Linens 'n Things* 29,900 549 Movie Gallery* (A) 117,000 1,756 Nautilus Group* (A) 41,550 810 O'Reilly Automotive* 24,650 705 P.F. Chang's China Bistro* 25,850 750 Pacific Sunwear of California* (A) 45,300 922 Panera Bread, Cl A* (A) 31,600 853 Penn National Gaming* 59,300 1,120 Quicksilver* 58,150 1,314 Racing Champions* (A) 35,600 582 RARE Hospitality International* 34,400 806 SCP Pool* (A) 32,150 881 Sharper Image* 36,100 690 Sonic* 41,750 964 Spanish Broadcasting System* 130,950 858 Station Casinos* (A) 81,350 1,384 Superior Industries International 26,500 1,248 Too* 35,900 836 Tropical Sportswear International* 52,350 679 Tupperware 27,000 449 Ultimate Electronics* 50,200 640 Urban Outfitters* 3,100 75 Yankee Candle* 65,100 1,118 ----------- 40,580 ----------- CONSUMER STAPLES - 2.4% American Italian Pasta, Cl A* 13,900 496 Delta & Pine Land 36,750 689 Interstate Bakeries 27,600 733 J.M. Smucker 26,050 956 NBTY* 83,100 1,079 United Natural Foods* 78,500 1,808 ----------- 5,761 ----------- ENERGY - 8.8% Cal Dive International* 87,500 $ 1,765 Chesapeake Energy (A) 235,250 1,553 Dril-Quip* 48,600 819 Evergreen Resources* (A) 22,750 932 FMC Technologies* 46,150 773 Grey Wolf* 559,700 2,015 Horizon Offshore* 319,300 1,344 Key Energy Services* 170,250 1,342 Lone Star Technologies* 100,200 1,187 Maverick Tube* 119,950 1,064 Offshore Logistics* (A) 64,750 1,163 Remington Oil & Gas* 61,000 860 Spinnaker Exploration* 49,250 1,413 Trico Marine Services* 421,950 1,072 Ultra Petroleum* 142,900 1,193 Universal Compression Holdings* 90,050 1,459 Western Gas Resources (A) 27,750 867 ----------- 20,821 ----------- FINANCIALS - 17.6% Alexandria Real Estate Equities (REIT) 19,500 828 Arch Capital Group* 42,650 1,190 Boston Private Financial Holdings 30,500 650 Brookline Bancorp 72,050 847 Camden Property Trust 16,900 560 Chateau Communities (REIT) 24,550 648 Chelsea Property Group (REIT) 32,500 1,097 Chittenden 49,950 1,479 Commercial Federal 26,300 573 Community First Bankshares 43,650 1,217 Cullen/Frost Bankers 40,950 1,398 Dime Community Bancshares 32,400 694 East West Bancorp 70,550 2,382 Federal Realty Investment Trust (REIT) 38,700 1,045 First BanCorp - Puerto Rico 25,550 974 First Community Bancorp 20,900 605 Health Care (REIT) 31,050 849 Hilb, Rogal & Hamilton 33,950 1,400 Hudson United Bancorp 27,650 735 Independence Community Bank 27,050 679 IndyMac Bancorp* 27,550 531 Jefferies Group (A) 12,050 460 Macerich (REIT) 38,150 1,182 Mills (REIT) 37,300 1,106 NetBank* 86,050 896 New Century Financial (A) 23,250 544 Ohio Casualty* (A) 66,300 1,079 Pacific Capital Bancorp 38,350 1,042 R&G Financial 49,000 1,069 Shurgard Storage Centers (REIT) 18,450 583 Sky Financial Group 32,600 649 SL Green Realty (REIT) 21,450 659 Southwest Bancorp of Texas* (A) 16,750 610 Staten Island Bancorp 59,050 1,027 Sterling Bancshares 122,400 1,600 Texas Regional Bancshares, Cl A 27,325 915 TrustCo Bank Corporation of New York 54,950 581 UCBH Holdings 29,100 1,143 United Bankshares (A) 42,150 1,223 63 DESCRIPTION SHARES VALUE (000) ---------------------------------------------------------------------------------- W. Holding 109,200 $ 1,780 Washington Real Estate Investment Trust 40,900 1,038 Webster Financial 24,200 813 Wintrust Financial 38,400 1,100 ----------- 41,480 ----------- HEALTH CARE - 19.2% Accredo Health* (A) 26,950 1,285 AMERIGROUP* 32,200 1,080 American Pharmaceutical Partners* 28,200 461 AmSurg, Cl A* 38,150 1,151 Amylin Pharmaceuticals* (A) 65,400 1,087 Apria Healthcare Group* 50,850 1,198 Bio-Rad Laboratories, Cl A* 18,750 706 Biosite* (A) 22,550 654 CIMA Labs* 20,450 514 Cooper (A) 14,300 751 Covance* 52,550 1,028 CV Therapeutics* 38,300 801 Cyberonics* 31,300 539 Diagnostic Products 20,150 927 DIANON Systems* 13,800 653 Enzon* (A) 58,800 1,131 First Horizon Pharmaceutical* 155,050 837 Hanger Orthopedic Group* 45,100 717 IDEXX Laboratories* (A) 43,450 1,345 INAMED* 28,050 645 InterMune* 7,550 248 Invacare 22,450 769 K-V Pharmaceutical, Cl A* 56,400 1,066 MedCath* (A) 62,100 702 Medical Staffing Network Holdings* 40,300 611 Neurocrine Biosciences* 26,850 1,101 NPS Pharmaceuticals* (A) 51,100 1,051 Ocular Sciences* 21,250 496 OSI Pharmaceuticals* 27,100 460 Pediatrix Medical Group* 22,750 705 Pharmaceutical Resources* 42,250 1,182 Protein Design Labs* 130,500 1,083 Province Healthcare* (A) 86,250 1,479 RehabCare Group* (A) 36,150 836 Respironics* 40,550 1,298 SangStat Medical* (A) 56,700 1,183 Scios* (A) 50,650 1,289 Sierra Health Services* 41,900 752 Stericycle* (A) 27,600 936 STERIS* 52,600 1,310 Surmodics* 17,850 567 Techne* (A) 41,250 1,353 Telik* 82,950 1,027 Therasense* (A) 73,350 1,024 Transkaryotic Therapies* (A) 33,500 1,086 Trimeris* (A) 21,750 971 Wilson Greatbatch Technologies* 33,550 933 Wright Medical Group* 78,050 1,485 Zoll Medical* 26,300 800 ----------- 45,313 ----------- INDUSTRIALS - 11.2% A.O. Smith 15,500 $ 441 AMETEK 30,900 900 Apogee Enterprises 50,500 552 Armor Holdings* (A) 71,650 1,074 Baldor Electric 30,300 579 Black Box* 31,650 1,051 Career Education* (A) 18,700 898 Carlisle Companies 14,550 534 CLARCOR 23,750 729 Coinstar* 56,900 1,467 Corinthian Colleges* (A) 52,250 1,972 Corporate Executive Board* (A) 40,100 1,145 DRS Technologies* 19,250 716 FTI Consulting* (A) 30,950 1,231 Headwaters* 109,000 1,506 InterCept* 55,200 546 ITT Educational Services* 25,600 481 J.B. Hunt Transport Services* (A) 44,050 1,037 Kroll* (A) 37,850 751 Landstar System* 16,700 819 Manitowoc 23,650 647 Moore* 57,550 564 MTC Technologies* 22,200 481 Pacer International* 87,650 995 Paxar* 35,450 515 PRG-Schultz International* (A) 64,750 802 Regis 43,950 1,243 Roper Industries (A) 27,350 944 Strayer Education* 8,200 488 Veridian* 26,300 657 Waste Connections* (A) 19,300 671 ----------- 26,436 ----------- INFORMATION TECHNOLOGY - 15.6% 02Micro International* (A) 111,400 878 Advanced Energy Industries* 83,050 740 Aeroflex* 247,920 1,250 Asyst Technologies* (A) 97,400 588 ATMI* (A) 62,950 887 Axcelis Technologies* 124,600 608 BARRA* 24,400 667 Borland Software* 115,450 899 Business Objects, ADR* 46,350 492 Cabot Microelectronics* (A) 23,700 883 CACI International, Cl A* 38,600 1,368 Carreker* 126,050 773 Centillium Communications* 242,400 291 ChipPAC* 430,250 920 Citrix Systems* 168,450 1,016 Cognizant Technology Solutions* (A) 5,800 333 CoorsTek* 64,300 965 Cree* (A) 82,900 1,036 Digital Insight* (A) 41,350 650 Documentum* (A) 54,300 627 Entegris* 116,900 909 Extreme Networks* 118,150 497 Fair, Isaac & Company (A) 23,833 779 Fidelity National Information Solutions* 26,950 412 FileNET* 59,900 620 The accompanying notes are an integral part of the financial statements. 64 DESCRIPTION SHARES VALUE (000) ---------------------------------------------------------------------------------- Foundry Networks* 105,750 $ 580 Global Imaging Systems* 32,100 606 Hyperion Solutions* 42,450 779 Intergraph* 70,800 1,210 Internet Security Systems* (A) 27,350 337 Kronos* 29,050 716 Legato Systems* 185,850 513 MatrixOne* 238,750 1,036 McDATA, Cl A* 76,200 414 NetIQ* (A) 37,550 544 NetScreen Technologies* (A) 36,050 391 Oak Technology* (A) 218,520 695 Overture Services* 48,900 1,153 Plantronics* 35,000 570 Progress Software* 26,400 319 ProQuest* (A) 24,400 741 Quest Software* 62,950 592 SanDisk* (A) 50,800 666 ScanSoft* (A) 153,050 505 Silicon Laboratories* (A) 39,000 715 Silicon Storage Technology* (A) 132,300 517 Skyworks Solutions* 102,650 465 Take-Two Interactive Software* (A) 32,500 942 TEKELEC* 41,300 356 THQ* (A) 39,000 811 TriQuint Semiconductor* 131,300 463 Varian Semiconductor Equipment Associates* 41,100 676 WebEx Communications* (A) 44,600 499 ----------- 36,899 ----------- MATERIALS - 1.7% Airgas* 60,550 795 Jarden* 32,350 878 Olin (A) 50,900 834 Spartech 33,500 709 Steel Dynamics* 16,550 217 Worthington Industries 35,000 654 ----------- 4,087 ----------- TELECOMMUNICATION SERVICES - 0.8% Commonwealth Telephone Enterprises* 18,200 633 Inter-Tel 27,950 569 Nextel Partners, Cl A* 149,200 803 ----------- 2,005 ----------- TOTAL COMMON STOCKS 223,382 ----------- RELATED PARTY MONEY MARKET FUND - 7.9% First American Prime Obligations Fund (B) 18,693,635 18,694 ----------- TOTAL RELATED PARTY MONEY MARKET FUND 18,694 ----------- TOTAL INVESTMENTS - 102.4% (Cost $267,148) 242,076 ----------- OTHER ASSETS AND LIABILITIES, NET - (2.4)% (5,802) ----------- TOTAL NET ASSETS - 100.0% $ 236,274 -----------
* Non-income producing security (A) This security or a portion of this security is out on loan at September 30, 2002. Total loaned securities had a market value of $49,154,641 at September 30, 2002. (Note 6) (B) This money market fund is advised by U.S. Bancorp Asset Management, Inc., which also serves as advisor for this Fund. See also the notes to the financial statements. ADR - American Depositary Receipt Cl - Class REIT - Real Estate Investment Trust SMALL CAP VALUE FUND
DESCRIPTION SHARES VALUE (000) ---------------------------------------------------------------------------------- COMMON STOCKS - 91.4% CONSUMER DISCRETIONARY - 11.9% Ashworth* 452,100 $ 2,238 Buca* (A) 234,500 1,876 Charming Shoppes* (A) 369,200 2,492 D.R. Horton (A) 445,296 8,291 La-Z-Boy 67,600 1,568 LodgeNet Entertainment* 708,000 5,423 O'Charley's* 276,100 5,174 Pomeroy Computer Resources* 173,800 1,714 School Specialty* (A) 329,800 8,248 Timberland, Cl A* (A) 205,900 6,523 Tower Automotive* (A) 598,700 4,011 Ultimate Electronics* 110,000 1,402 ----------- 48,960 ----------- CONSUMER STAPLES - 5.4% Cadiz* (A) 296,600 890 Dean Foods* (A) 89,700 3,568 Regis (A) 203,700 5,763 Steiner Leisure* 400,800 4,910 Topps* 806,150 6,949 ----------- 22,080 ----------- ENERGY - 4.5% Evergreen Resources* (A) 106,100 4,348 Forest Oil* 154,000 3,927 Newfield Exploration* (A) 195,800 6,577 Stone Energy* 110,711 3,598 ----------- 18,450 ----------- FINANCIALS - 30.9% American Capital Strategies (A) 170,900 3,220 Astoria Financial (A) 361,900 8,830 Camden Property Trust (REIT) 108,600 3,600 Chelsea Property Group (REIT) 252,000 8,505 City National (A) 70,500 3,297 Community First Bankshares 246,200 6,864 Corporate Office Properties Trust (REIT) 274,100 3,714 Downey Financial 23,100 791 E*TRADE Group* (A) 767,400 3,415 Federal Agricultural Mortgage, Cl C* (A) 136,100 4,016 First Republic Bank* 318,550 6,928 Greater Bay Bancorp (A) 168,700 3,069 Highwoods Properties (REIT) 200,700 4,696 Horace Mann Educators 173,600 2,552 LandAmerica Financial Group 177,600 5,841 Lexington Corporate Properties Trust (REIT) 187,886 3,025 Local Financial* 217,600 3,005 Markel* (A) 26,400 5,258 National Commerce Financial 200,800 5,030 Pan Pacific Retail Properties (REIT) 69,900 2,410 Philadelphia Consolidated Holding* 129,600 3,823 Phoenix Companies 214,200 2,917 Protective Life (A) 292,000 8,985 PS Business Parks 80,850 2,749 Radian Group (A) 374,268 12,224 Sterling Bancshares 223,200 2,917 W.R. Berkley 107,250 3,647 Windrose Medical Properties Trust (REIT)* 200,300 2,109 ----------- 127,437 ----------- 65 DESCRIPTION SHARES VALUE (000) ---------------------------------------------------------------------------------- HEALTH CARE - 10.8% Cooper (A) 108,400 $ 5,691 CTI Molecular Imaging* 100,140 2,534 Cytyc* (A) 846,900 9,079 HealthSouth* 410,700 1,704 Kensey Nash* (A) 162,700 2,447 Natus Medical* 531,500 1,887 Regeneration Technologies* 505,380 4,043 RehabCare Group* (A) 229,250 5,303 Renal Care* 188,950 6,215 Res-Care* 146,700 728 Respironics* 159,600 5,109 ----------- 44,740 ----------- INDUSTRIALS - 16.4% AGCO* (A) 118,400 2,747 Alliant Techsystems* 128,025 8,866 C&D Technologies 116,200 1,703 Dollar Thrifty Automotive* 209,600 3,364 ExpressJet Holdings* 431,000 3,965 ITT Educational Services* 255,700 4,799 Landstar* 77,400 3,795 MagneTek* 19,947 64 Moog, Cl A* 302,400 8,546 NCO Group* (A) 425,600 4,848 On Assignment* 604,850 5,002 Pacer International* 104,900 1,191 Pentair 137,200 5,100 Simpson Manufacturing* 74,700 2,345 Teletech Holdings* 515,800 3,224 Tredegar 110,600 1,853 Waste Connections* (A) 181,700 6,321 ----------- 67,733 ----------- INFORMATION TECHNOLOGY - 7.0% 3Com* 475,400 1,873 Actel* 230,600 2,398 BARRA* 138,700 3,789 Carreker* (A) 443,000 2,716 FSI International* 224,200 686 Innovex* 414,300 974 JDA Software* (A) 179,900 1,258 MSC.Software* 130,700 1,114 Mykrolis* 198,100 1,218 ProQuest* (A) 416,800 12,650 Rainbow Technologies* 120,200 341 ----------- 29,017 ----------- MATERIALS - 1.4% FMC* (A) 90,700 2,342 Gibraltar Steel 96,300 2,144 L.B. Foster* 254,000 1,107 ----------- 5,593 ----------- UTILITIES - 3.1% NSTAR (A) 175,000 6,921 Unisource Energy Holding 397,900 6,068 ----------- 12,989 ----------- TOTAL COMMON STOCKS 376,999 ----------- RELATED PARTY MONEY MARKET FUND - 8.5% First American Prime Obligations Fund (B) 35,211,055 $ 35,211 ----------- TOTAL RELATED PARTY MONEY MARKET FUND 35,211 ----------- TOTAL INVESTMENTS - 99.9% (Cost $406,030) 412,210 ----------- OTHER ASSETS AND LIABILITIES, NET - 0.1% 392 ----------- TOTAL NET ASSETS - 100.0% $ 412,602 -----------
* Non-income producing security (A) This security or a portion of this security is out on loan at September 30, 2002. Total loaned securities had a market value of $108,101,786 at September 30, 2002. (Note 6) (B) This money market fund is advised by U.S. Bancorp Asset Management, Inc., which also serves as advisor for this Fund. See also the notes to the financial statements. Cl - Class REIT - Real Estate Investment Trust The accompanying notes are an integral part of the financial statements. 66 STATEMENTS OF ASSETS AND LIABILITIES SEPTEMBER 30, 2002, IN THOUSANDS, EXCEPT PER SHARE DATA
MICRO SMALL CAP SMALL CAP SMALL CAP CAP FUND CORE FUND GROWTH FUND VALUE FUND ---------------------------------------------------------------------------------------------------------------------------------- ASSETS: Investments in securities, at value* $ 260,971 $ 446,926 $ 242,076 $ 412,210 Cash -- 670 142 -- Collateral for securities loaned, at value 76,038 169,494 52,063 112,854 Dividends and interest receivable 89 73 134 459 Capital shares sold 5 439 192 372 Receivable for investment securities sold 2,317 6,546 6,120 518 Prepaid expenses and other assets 26 29 18 21 Other receivables -- 9 1 5 ---------------------------------------------------------------------------------------------------------------------------------- TOTAL ASSETS 339,446 624,186 300,746 526,439 ================================================================================================================================== LIABILITIES: Capital shares redeemed 777 233 489 604 Bank overdraft -- -- -- 1 Payable upon return of securities loaned 76,038 169,494 52,063 112,854 Payable for securities purchased 2,946 2,165 11,718 26 Payable for advisory, co-administration, and custodian fees 329 316 185 326 Distribution and shareholder servicing fees 14 15 12 21 Accrued expenses and other liabilities 3 1 5 5 ---------------------------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES 80,107 172,224 64,472 113,837 ================================================================================================================================== NET ASSETS $ 259,339 $ 451,962 $ 236,274 $ 412,602 ================================================================================================================================== COMPOSITION OF NET ASSETS: Portfolio capital $ 340,733 $ 521,477 $ 426,025 $ 410,487 Undistributed net investment income (loss) -- (2) -- 28 Accumulated net realized loss on investments (22,129) (15,582) (164,679) (4,093) Unrealized appreciation or depreciation of investments (59,265) (53,931) (25,072) 6,180 ---------------------------------------------------------------------------------------------------------------------------------- NET ASSETS $ 259,339 $ 451,962 $ 236,274 $ 412,602 ================================================================================================================================== *Investments in securities, at cost $ 320,236 $ 500,857 $ 267,148 $ 406,030 CLASS A: Net assets $ 44,834 $ 33,586 $ 22,397 $ 27,205 Shares issued and outstanding ($0.0001 par value -- 2 billion authorized) 3,235 3,144 2,548 2,415 Net asset value and redemption price per share $ 13.86 $ 10.68 $ 8.79 $ 11.26 Maximum offering price per share (A) $ 14.67 $ 11.30 $ 9.30 $ 11.92 CLASS B: Net assets $ 3,779 $ 4,613 $ 3,933 $ 12,008 Shares issued and outstanding ($0.0001 par value -- 2 billion authorized) 282 463 487 1,112 Net asset value and offering price per share (C) $ 13.39 $ 9.95 $ 8.07 $ 10.80 CLASS C: Net assets $ 260 $ 3,096 $ 4,659 $ 4,873 Shares issued and outstanding ($0.0001 par value -- 2 billion authorized) 19 292 547 446 Net asset value per share (C) $ 13.77 $ 10.62 $ 8.52 $ 10.91 Maximum offering price per share (B) $ 13.91 $ 10.73 $ 8.61 $ 11.02 CLASS S: Net assets $ 2,027 $ 7,640 $ 32 $ 424 Shares issued and outstanding ($0.0001 par value -- 2 billion authorized) 146 717 4 38 Net asset value, offering price, and redemption price per share $ 13.86 $ 10.66 $ 8.79 $ 11.26 CLASS Y: Net assets $ 208,439 $ 403,027 $ 205,253 $ 368,092 Shares issued and outstanding ($0.0001 par value -- 2 billion authorized) 14,578 36,650 22,877 32,358 Net asset value, offering price, and redemption price per share $ 14.30 $ 11.00 $ 8.97 $ 11.38 ----------------------------------------------------------------------------------------------------------------------------------
(A) The offering price is calculated by dividing the net asset value by 1 minus the maximum sales charge of 5.50% (B) The offering price is calculated by dividing the net asset value by 1 minus the maximum sales charge of 1.00% (C) Class B and C have a contingent deferred sales charge. For a description of a possible redemption charge, see the notes to the financial statements. The accompanying notes are an integral part of the financial statements. 67 STATEMENTS OF OPERATIONS FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2002, IN THOUSANDS
MICRO SMALL CAP SMALL CAP SMALL CAP CAP FUND CORE FUND GROWTH FUND VALUE FUND ---------------------------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME: Interest $ 341 $ 660 $ 366 $ 704 Dividends 696 1,019 710 4,630 Less: Foreign taxes withheld -- (6) (5) -- Securities lending 154 180 198 88 Other 241 98 351 195 ---------------------------------------------------------------------------------------------------------------------------------- TOTAL INVESTMENT INCOME 1,432 1,951 1,620 5,617 ================================================================================================================================== EXPENSES: Investment advisory fees 4,975 3,316 2,483 3,552 Co-administration fees and expenses (including per account transfer agency fees) 1,019 1,289 1,070 1,415 Custodian fees 36 47 36 51 Directors' fees 2 5 5 5 Registration fees 54 39 34 43 Professional fees 6 7 14 18 Printing 17 20 14 27 Other 4 11 20 8 Distribution and shareholder servicing fees - Class A 151 77 80 83 Distribution and shareholder servicing fees - Class B 50 37 53 142 Distribution and shareholder servicing fees - Class C 2 15 66 55 Shareholder servicing fees - Class S 6 18 -- 1 ---------------------------------------------------------------------------------------------------------------------------------- TOTAL EXPENSES 6,322 4,881 3,875 5,400 ================================================================================================================================== Less: Waiver of expenses (143) (183) (199) (142) ---------------------------------------------------------------------------------------------------------------------------------- TOTAL NET EXPENSES 6,179 4,698 3,676 5,258 ================================================================================================================================== INVESTMENT INCOME (LOSS) - NET (4,747) (2,747) (2,056) 359 ================================================================================================================================== REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS - NET: Net realized loss on investments (14,699) (14,145) (91,989) (4,026) Net change in unrealized appreciation or depreciation of investments (38,629) (37,514) 28,583 595 ---------------------------------------------------------------------------------------------------------------------------------- NET LOSS ON INVESTMENTS (53,328) (51,659) (63,406) (3,431) ================================================================================================================================== NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (58,075) $ (54,406) $ (65,462) $ (3,072) ==================================================================================================================================
The accompanying notes are an integral part of the financial statements. 68 (This page has been left blank intentionally.) 69 STATEMENTS OF CHANGES IN NET ASSETS IN THOUSANDS
MICRO CAP FUND ------------------------------------------------------------------------------------------------------------------- 10/1/01 11/1/00 11/1/99 TO TO TO 9/30/02 9/30/01 10/31/00 ------------------------------------------------------------------------------------------------------------------- OPERATIONS: Investment income (loss) - net $ (4,747) $ (2,158) $ (3,669) Net realized gain (loss) on investments (14,699) (7,340) 136,862 Net realized gain on futures -- 307 -- Net realized loss on options written -- (619) -- Net change in unrealized appreciation or depreciation of investments (38,629) (78,259) 23,319 ------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (58,075) (88,069) 156,512 ------------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Investment income - net (3): Class A -- -- -- Class B -- -- -- Class C -- -- -- Class S -- -- -- Class Y -- -- -- Net realized gain on investments (4): Class A -- (11,961) (6,166) Class B -- (628) (62) Class C -- -- -- Class S -- -- -- Class Y -- (92,209) (42,827) Tax return of capital (5): Class A (79) -- -- Class B (7) -- -- Class C -- -- -- Class S (4) -- -- Class Y (367) -- -- ------------------------------------------------------------------------------------------------------------------- Total distributions (457) (104,798) (49,055) =================================================================================================================== CAPITAL SHARE TRANSACTIONS (1): Class A: Proceeds from sales 66,579 37,275 29,841 Reinvestment of distributions 74 11,494 5,924 Payments for redemptions (54,278) (22,539) (29,091) Shares issued in connection with the acquisition of Fund net assets -- -- -- ------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from Class A transactions 12,375 26,230 6,674 ------------------------------------------------------------------------------------------------------------------- Class B: Proceeds from sales 2,871 2,299 1,974 Reinvestment of distributions 5 595 61 Payments for redemptions (887) (357) (240) Shares issued in connection with the acquisition of Fund net assets -- -- -- ------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from Class B transactions 1,989 2,537 1,795 ------------------------------------------------------------------------------------------------------------------- Class C: Proceeds from sales 547 1 -- Reinvestment of distributions -- -- -- Payments for redemptions (191) -- -- ------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from Class C transactions 356 1 -- ------------------------------------------------------------------------------------------------------------------- Class S (2): Proceeds from sales 1,231 2,652 -- Reinvestment of distributions 3 -- -- Payments for redemptions (822) (145) -- ------------------------------------------------------------------------------------------------------------------- Increase in net assets from Class S transactions 412 2,507 -- ------------------------------------------------------------------------------------------------------------------- Class Y (2): Proceeds from sales 38,639 68,057 115,738 Reinvestment of distributions 334 84,908 40,308 Payments for redemptions (52,763) (42,992) (76,850) Shares issued in connection with the acquisition of Fund net assets -- -- -- ------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from Class Y transactions (13,790) 109,973 79,196 ------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions 1,342 141,248 87,665 ------------------------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets (57,190) (51,619) 195,122 NET ASSETS AT BEGINNING OF FISCAL PERIOD 316,529 368,148 173,026 =================================================================================================================== NET ASSETS AT END OF FISCAL PERIOD $ 259,339 $ 316,529 $ 368,148 =================================================================================================================== UNDISTRIBUTED NET INVESTMENT INCOME (LOSS) AT END OF FISCAL PERIOD $ -- $ (3) $ (5) =================================================================================================================== 70 SMALL CAP CORE FUND ------------------------------------------------------------------------------------------------------------------- 10/1/01 11/1/00 12/1/99 TO TO TO 9/30/02 9/30/01 10/31/00 ------------------------------------------------------------------------------------------------------------------- OPERATIONS: Investment income (loss) - net $ (2,747) $ (40) $ 346 Net realized gain (loss) on investments (14,145) 22,966 31,087 Net realized gain on futures -- 207 -- Net realized loss on options written -- -- -- Net change in unrealized appreciation or depreciation of investments (37,514) (58,688) 5,810 ------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (54,406) (35,555) 37,243 ------------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Investment income - net (3): Class A -- -- (4) Class B -- -- -- Class C -- -- -- Class S -- -- (2) Class Y -- (64) (270) Net realized gain on investments (4): Class A (1,300) (1,982) (170) Class B (158) (295) (21) Class C -- -- -- Class S (450) (947) (49) Class Y (21,686) (27,758) (2,115) Tax return of capital (5): Class A -- -- -- Class B -- -- -- Class C -- -- -- Class S -- -- -- Class Y (1) -- -- ------------------------------------------------------------------------------------------------------------------- Total distributions (23,595) (31,046) (2,631) =================================================================================================================== CAPITAL SHARE TRANSACTIONS (1): Class A: Proceeds from sales 29,998 14,407 408 Reinvestment of distributions 1,251 1,889 166 Payments for redemptions (7,318) (14,993) (2,170) Shares issued in connection with the acquisition of Fund net assets -- 10,478 -- ------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from Class A transactions 23,931 11,781 (1,596) ------------------------------------------------------------------------------------------------------------------- Class B: Proceeds from sales 4,926 1,125 150 Reinvestment of distributions 151 282 20 Payments for redemptions (1,319) (562) (206) Shares issued in connection with the acquisition of Fund net assets -- 389 -- ------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from Class B transactions 3,758 1,234 (36) ------------------------------------------------------------------------------------------------------------------- Class C: Proceeds from sales 4,274 -- -- Reinvestment of distributions -- -- -- Payments for redemptions (331) -- -- ------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from Class C transactions 3,943 -- -- ------------------------------------------------------------------------------------------------------------------- Class S (2): Proceeds from sales 8,056 1,896 4,408 Reinvestment of distributions 414 866 51 Payments for redemptions (3,379) (2,003) (3,229) ------------------------------------------------------------------------------------------------------------------- Increase in net assets from Class S transactions 5,091 759 1,230 ------------------------------------------------------------------------------------------------------------------- Class Y (2): Proceeds from sales 215,508 117,240 16,703 Reinvestment of distributions 17,900 22,377 1,996 Payments for redemptions (54,921) (109,605) (27,051) Shares issued in connection with the acquisition of Fund net assets -- 187,640 -- ------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from Class Y transactions 178,487 217,652 (8,352) ------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions 215,210 231,426 (8,754) ------------------------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets 137,209 164,825 25,858 NET ASSETS AT BEGINNING OF FISCAL PERIOD 314,753 149,928 124,070 =================================================================================================================== NET ASSETS AT END OF FISCAL PERIOD $ 451,962 $ 314,753 $ 149,928 =================================================================================================================== UNDISTRIBUTED NET INVESTMENT INCOME (LOSS) AT END OF FISCAL PERIOD $ (2) $ (3) $ 48 =================================================================================================================== SMALL CAP SMALL CAP GROWTH FUND VALUE FUND ------------------------------------------------------------------------------------------------------------------------------ 10/1/01 10/1/00 10/1/01 10/1/00 TO TO TO TO 9/30/02 9/30/01 9/30/02 9/30/01 ------------------------------------------------------------------------------------------------------------------------------ OPERATIONS: Investment income (loss) - net $ (2,056) $ (1,568) $ 359 $ 1,655 Net realized gain (loss) on investments (91,989) (68,972) (4,026) 74,818 Net realized gain on futures -- -- -- -- Net realized loss on options written -- -- -- -- Net change in unrealized appreciation or depreciation of investments 28,583 (172,542) 595 (111,001) ------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations (65,462) (243,082) (3,072) (34,528) ------------------------------------------------------------------------------------------------------------------------------ DISTRIBUTIONS TO SHAREHOLDERS FROM: Investment income - net (3): Class A -- -- (9) (109) Class B -- -- -- (1) Class C -- -- -- (1) Class S -- -- -- -- Class Y -- -- (232) (2,125) Net realized gain on investments (4): Class A -- (10,305) (4,957) (5,677) Class B -- (1,633) (1,853) (2,179) Class C -- (1,503) (685) (181) Class S -- -- -- -- Class Y -- (81,507) (60,108) (66,578) Tax return of capital (5): Class A -- (271) (9) -- Class B -- (43) (4) -- Class C -- (40) (2) -- Class S -- -- -- -- Class Y -- (2,148) (125) -- ------------------------------------------------------------------------------------------------------------------------------ Total distributions -- (97,450) (67,984) (76,851) ============================================================================================================================== CAPITAL SHARE TRANSACTIONS (1): Class A: Proceeds from sales 14,078 47,615 15,440 11,354 Reinvestment of distributions -- 10,189 4,903 5,639 Payments for redemptions (17,108) (49,298) (22,134) (10,252) Shares issued in connection with the acquisition of Fund net assets -- -- -- -- ------------------------------------------------------------------------------------------------------------------------------ Increase (decrease) in net assets from Class A transactions (3,030) 8,506 (1,791) 6,741 ------------------------------------------------------------------------------------------------------------------------------ Class B: Proceeds from sales 1,152 1,463 2,929 1,999 Reinvestment of distributions -- 1,656 1,829 2,146 Payments for redemptions (990) (1,233) (2,742) (2,275) Shares issued in connection with the acquisition of Fund net assets -- -- -- -- ------------------------------------------------------------------------------------------------------------------------------ Increase (decrease) in net assets from Class B transactions 162 1,886 2,016 1,870 ------------------------------------------------------------------------------------------------------------------------------ Class C: Proceeds from sales 1,578 4,139 1,961 4,274 Reinvestment of distributions -- 1,542 680 179 Payments for redemptions (1,845) (1,831) (1,345) (311) ------------------------------------------------------------------------------------------------------------------------------ Increase (decrease) in net assets from Class C transactions (267) 3,850 1,296 4,142 ------------------------------------------------------------------------------------------------------------------------------ Class S (2): Proceeds from sales 60 -- 554 -- Reinvestment of distributions -- -- -- -- Payments for redemptions (17) -- (30) -- ------------------------------------------------------------------------------------------------------------------------------ Increase in net assets from Class S transactions 43 -- 524 -- ------------------------------------------------------------------------------------------------------------------------------ Class Y (2): Proceeds from sales 65,201 210,902 115,959 177,439 Reinvestment of distributions -- 53,055 50,436 54,016 Payments for redemptions (134,590) (116,218) (170,110) (130,010) Shares issued in connection with the acquisition of Fund net assets -- -- -- -- ------------------------------------------------------------------------------------------------------------------------------ Increase (decrease) in net assets from Class Y transactions (69,389) 147,739 (3,715) 101,445 ------------------------------------------------------------------------------------------------------------------------------ Increase (decrease) in net assets from capital share transactions (72,481) 161,981 (1,670) 114,198 ------------------------------------------------------------------------------------------------------------------------------ Total increase (decrease) in net assets (137,943) (178,551) (72,726) 2,819 NET ASSETS AT BEGINNING OF FISCAL PERIOD 374,217 552,768 485,328 482,509 ============================================================================================================================== NET ASSETS AT END OF FISCAL PERIOD $ 236,274 $ 374,217 $ 412,602 $ 485,328 ============================================================================================================================== UNDISTRIBUTED NET INVESTMENT INCOME (LOSS) AT END OF FISCAL PERIOD $ -- $ -- $ 28 $ -- ==============================================================================================================================
(1) See Note 4 in the notes to the financial statements for additional information. (2) On September 24, 2001, Class Y and Institutional Class of Micro Cap and Small Cap Core Funds were redesignated as Class S and Class Y, respectively. (3) Includes distributions in excess of net investment income of $297 and $64 for the period ended September 30, 2001, for Small Cap Value and Small Cap Core Funds, respectively. (4) Includes distributions in excess of net realized gains of $989 and $2,502 for the period ended September 30, 2001, for Micro Cap and Small Cap Growth Funds, respectively. (5) Distributions from tax return of capital for the Micro Cap Fund Class C, Small Cap Core Fund Class A, B, C, and S, and Small Cap Value Fund Class S were less than $1,000 for the fiscal year ended September 30, 2002. The accompanying notes are an integral part of the financial statements. 71 FINANCIAL HIGHLIGHTS FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS ENDED SEPTEMBER 30, UNLESS OTHERWISE INDICATED.
REALIZED AND NET ASSET UNREALIZED DIVIDENDS DISTRIBUTIONS VALUE NET GAINS OR FROM NET DISTRIBUTIONS FROM BEGINNING INVESTMENT (LOSSES) ON INVESTMENT FROM RETURN OF OF PERIOD INCOME (LOSS) INVESTMENTS INCOME CAPITAL GAINS CAPITAL (10) -------------------------------------------------------------------------------------------------------------------- MICRO CAP FUND (1) Class A 2002 $ 16.89 $ (0.26) $ (2.74) $ -- $ -- $ (0.03) 2001 (2) (3) 31.26 (0.17) (5.20) -- (9.00) -- 2000 (3) 21.80 (0.40) 15.99 -- (6.13) -- 1999 12.38 (0.26) 9.71 -- (0.03) -- 1998 (3) 17.47 (0.25) (3.17) -- (1.67) -- Class B 2002 $ 16.44 $ (0.39) $ (2.63) $ -- $ -- $ (0.03) 2001 (2) (3) 30.84 (0.31) (5.09) -- (9.00) -- 2000 (3) 21.69 (0.61) 15.89 -- (6.13) -- 1999 (3) (4) 13.74 (0.30) 8.25 -- -- -- Class C 2002 $ 16.90 $ (0.19) $ (2.91) $ -- $ -- $ (0.03) 2001 (3) (5) 16.34 -- 0.56 -- -- -- Class S 2002 $ 16.89 $ (0.26) $ (2.74) $ -- $ -- $ (0.03) 2001 (3) (6) 20.01 (0.19) (2.93) -- -- -- Class Y 2002 $ 17.38 $ (0.25) $ (2.80) $ -- $ -- $ (0.03) 2001 (2) (3) 31.83 (0.12) (5.33) -- (9.00) -- 2000 22.06 (0.31) 16.21 -- (6.13) -- 1999 12.49 (0.19) 9.79 -- (0.03) -- 1998 17.57 (0.22) (3.19) -- (1.67) -- -------------------------------------------------------------------------------------------------------------------- SMALL CAP CORE FUND (7) Class A 2002 (3) $ 11.97 $ (0.10) $ (0.30) $ -- $ (0.89) $ -- 2001 (2) (3) 17.60 (0.03) (1.89) -- (3.71) -- 2000 (3) (8) 13.84 (0.10) 4.13 (0.01) (0.26) -- 1999 (3) 11.86 (0.07) 2.10 -- (0.05) -- 1998 15.03 (0.06) (1.89) -- (1.22) -- Class B 2002 (3) $ 11.28 $ (0.19) $ (0.25) $ -- $ (0.89) $ -- 2001 (2) (3) 16.90 (0.12) (1.79) -- (3.71) -- 2000 (3) (8) 13.38 (0.13) 3.92 -- (0.27) -- 1999 (3) 11.53 (0.16) 2.06 -- (0.05) -- 1998 14.74 (0.14) (1.85) -- (1.22) -- Class C 2002 (3) $ 11.97 $ (0.20) $ (0.26) $ -- $ (0.89) $ -- 2001 (3) (5) 11.72 -- 0.25 -- -- -- Class S 2002 (3) $ 11.94 $ (0.10) $ (0.29) $ -- $ (0.89) $ -- 2001 (2) (3) 17.55 (0.01) (1.89) -- (3.71) -- 2000 (3) (8) 13.80 (0.01) 4.03 (0.01) (0.26) -- 1999 (3) 11.82 (0.07) 2.10 -- (0.05) -- 1998 14.98 (0.07) (1.87) -- (1.22) -- Class Y 2002 (3) $ 12.26 $ (0.07) $ (0.30) $ -- $ (0.89) $ -- 2001 (2) (3) 17.92 -- (1.95) -- (3.71) -- 2000 (3) (8) 14.07 0.05 4.10 (0.03) (0.27) -- 1999 (3) 12.02 (0.03) 2.13 -- (0.05) -- 1998 15.17 (0.02) (1.91) -- (1.22) -- -------------------------------------------------------------------------------------------------------------------- 72 RATIO OF RATIO OF NET EXPENSES TO NET ASSET RATIO OF INVESTMENT AVERAGE VALUE NET ASSETS EXPENSES TO INCOME (LOSS) NET ASSETS END OF TOTAL END OF AVERAGE TO AVERAGE (EXCLUDING PERIOD RETURN (9) PERIOD (000) NET ASSETS NET ASSETS WAIVERS) ------------------------------------------------------------------------------------------------------------------------ MICRO CAP FUND (1) Class A 2002 $ 13.86 (17.84)% $ 44,834 1.93% (1.53)% 1.97% 2001 (2) (3) 16.89 (21.51) 45,233 1.93 (0.91) 1.99 2000 (3) 31.26 87.43 43,031 1.96 (1.31) 1.96 1999 21.80 76.54 21,988 2.01 (1.43) 2.02 1998 (3) 12.38 (21.71) 12,419 1.99 (1.63) 2.06 Class B 2002 $ 13.39 (18.45)% $ 3,779 2.68% (2.28)% 2.72% 2001 (2) (3) 16.44 (22.07) 3,165 2.68 (1.68) 2.74 2000 (3) 30.84 86.13 2,136 2.71 (2.06) 2.71 1999 (3) (4) 21.69 57.86 140 2.78 (2.36) 2.78 Class C 2002 $ 13.77 (18.42)% $ 260 2.68% (2.31)% 2.72% 2001 (3) (5) 16.90 3.43 1 1.63 (0.41) 1.76 Class S 2002 $ 13.86 (17.84)% $ 2,027 1.93% (1.53)% 1.97% 2001 (3) (6) 16.89 (15.59) 2,014 1.94 (1.06) 2.00 Class Y 2002 $ 14.30 (17.62)% $ 208,439 1.68% (1.28)% 1.72% 2001 (2) (3) 17.38 (21.35) 266,115 1.68 (0.64) 1.74 2000 31.83 87.90 322,981 1.71 (1.06) 1.71 1999 22.06 77.06 150,898 1.76 (1.18) 1.77 1998 12.49 (21.51) 72,696 1.74 (1.38) 1.81 ------------------------------------------------------------------------------------------------------------------------ SMALL CAP CORE FUND (7) Class A 2002 (3) $ 10.68 (4.56)% $ 33,586 1.21% (0.81)% 1.25% 2001 (2) (3) 11.97 (12.63) 17,351 1.19 (0.24) 1.22 2000 (3) (8) 17.60 29.65 9,538 1.28 (0.01) 1.39 1999 (3) 13.84 17.21 8,885 1.26 (0.57) 1.36 1998 11.86 (14.19) 11,601 1.25 (0.45) 1.35 Class B 2002 (3) $ 9.95 (5.23)% $ 4,613 1.96% (1.56)% 2.00% 2001 (2) (3) 11.28 (13.21) 1,979 1.93 (0.99) 1.97 2000 (3) (8) 16.90 28.81 1,331 1.98 (0.71) 2.09 1999 (3) 13.38 16.57 1,094 1.96 (1.27) 2.06 1998 11.53 (14.79) 1,286 1.95 (1.15) 2.05 Class C 2002 (3) $ 10.62 (5.09)% $ 3,096 1.96% (1.61)% 2.02% 2001 (3) (5) 11.97 2.13 -- -- -- -- Class S 2002 (3) $ 10.66 (4.48)% $ 7,640 1.21% (0.80)% 1.25% 2001 (2) (3) 11.94 (12.52) 3,721 1.07 (0.05) 1.14 2000 (3) (8) 17.55 29.67 4,442 1.28 (0.01) 1.39 1999 (3) 13.80 17.27 2,448 1.26 (0.59) 1.36 1998 11.82 (14.17) 25,037 1.25 (0.45) 1.35 Class Y 2002 (3) $ 11.00 (4.19)% $ 403,027 0.96% (0.55)% 1.00% 2001 (2) (3) 12.26 (12.49) 291,706 0.93 0.01 0.96 2000 (3) (8) 17.92 30.01 134,617 0.98 0.29 1.39 1999 (3) 14.07 17.57 111,643 0.96 (0.26) 1.36 1998 12.02 (13.90) 129,591 0.95 (0.16) 1.35 ------------------------------------------------------------------------------------------------------------------------ RATIO OF NET INVESTMENT (LOSS) TO AVERAGE NET PORTFOLIO ASSETS (EXCLUDING TURNOVER WAIVERS) RATE ------------------------------------------------------------ MICRO CAP FUND (1) Class A 2002 (1.57)% 123% 2001 (2) (3) (0.97) 125 2000 (3) (1.31) 179 1999 (1.44) 200 1998 (3) (1.70) 136 Class B 2002 (2.32)% 123% 2001 (2) (3) (1.74) 125 2000 (3) (2.06) 179 1999 (3) (4) (2.36) 200 Class C 2002 (2.35)% 123% 2001 (3) (5) (0.54) 125 Class S 2002 (1.57)% 123% 2001 (3) (6) (1.12) 125 Class Y 2002 (1.32)% 123% 2001 (2) (3) (0.70) 125 2000 (1.06) 179 1999 (1.19) 200 1998 (1.45) 136 ------------------------------------------------------------ SMALL CAP CORE FUND (7) Class A 2002 (3) (0.85)% 171% 2001 (2) (3) (0.27) 204 2000 (3) (8) (0.12) 91 1999 (3) (0.67) 72 1998 (0.55) 70 Class B 2002 (3) (1.60)% 171% 2001 (2) (3) (1.03) 204 2000 (3) (8) (0.82) 91 1999 (3) (1.37) 72 1998 (1.25) 70 Class C 2002 (3) (1.67)% 171% 2001 (3) (5) -- 204 Class S 2002 (3) (0.84)% 171% 2001 (2) (3) (0.12) 204 2000 (3) (8) (0.12) 91 1999 (3) (0.69) 72 1998 (0.55) 70 Class Y 2002 (3) (0.59)% 171% 2001 (2) (3) (0.02) 204 2000 (3) (8) (0.12) 91 1999 (3) (0.66) 72 1998 (0.56) 70 ------------------------------------------------------------
(1) The financial highlights for the Micro Cap Fund as set forth herein include the historical financial highlights of the Firstar Micro Cap Fund. The assets of the Firstar Fund were acquired by the First American Micro Cap Fund on September 24, 2001. In connection with such acquisition, (i) Class A shares of the Firstar Micro Cap Fund were exchanged for Class A shares of the First American Micro Cap Fund, (ii) Firstar Class B shares were exchanged for Class B shares of the First American Fund, (iii) Firstar Class Y shares were exchanged for Class S shares of the First American Fund, and (iv) Firstar Institutional Class shares were exchanged for Class Y shares of the First American Fund. (2) Effective in 2001, the Fund's fiscal year end was changed from October 31 to September 30. All ratios for the period have been annualized, except total return and potfolio turnover. (3) Per share data calculated using average shares outstanding method. (4) Class of shares has been offered since March 1, 1999. All ratios for the period have been annualized, except total return and portfolio turnover. (5) Class of shares has been offered since September 24, 2001. All ratios for the period have been annualized, except total return and portfolio turnover. (6) Class of shares has been offered since December 11, 2000. All ratios for the period have been annualized, except total return and portfolio turnover. (7) The financial highlights for the Small Cap Core Fund as set forth herein include the historical financial highlights of the Firstar Small Cap Core Equity Fund. The assets of the Firstar Fund were acquired by the First American Small Cap Core Fund on September 24, 2001. In connection with such acquisition, (i) Class A shares of the Firstar Small Cap Core Fund were exchanged for Class A shares of the First American Fund, (ii) Firstar Class B shares were exchanged for Class B shares of the First American Fund, (iii) Firstar Class Y shares were exchanged for Class S shares of the First American Fund, and (iv) Firstar Institutional Class shares were exchanged for Class Y shares of the First American Fund. (8) Effective in 2000, the Fund's fiscal year end was changed from November 30 to October 31. All ratios for the period have been annualized, except total return and portfolio turnover. (9) Total return does not reflect sales charges. Total return would have been lower had certain expenses not been waived. (10) Distributions from return of capital for the Small Cap Core Fund were less than $0.01 per share for the fiscal year ended September 30, 2002. The accompanying notes are an integral part of the financial statements. 73
REALIZED AND NET ASSET UNREALIZED DIVIDENDS DISTRIBUTIONS VALUE NET GAINS OR FROM NET DISTRIBUTIONS FROM BEGINNING INVESTMENT (LOSSES) ON INVESTMENT FROM RETURN OF OF PERIOD INCOME (LOSS) INVESTMENTS INCOME CAPITAL GAINS CAPITAL (7) ------------------------------------------------------------------------------------------------------------------------ SMALL CAP GROWTH FUND (1) Class A 2002 (2) $ 11.28 $ (0.09) $ (2.40) $ -- $ -- $ -- 2001 (2) 24.47 (0.08) (8.55) -- (4.46) (0.10) 2000 16.77 (0.12) 9.89 -- (2.07) -- 1999 11.90 (0.06) 4.95 -- (0.02) -- 1998 17.41 (0.09) (2.67) -- (2.64) (0.11) Class B 2002 (2) $ 10.44 $ (0.16) $ (2.21) $ -- $ -- $ -- 2001 (2) 23.17 (0.19) (7.98) -- (4.47) (0.09) 2000 16.07 (0.23) 9.40 -- (2.07) -- 1999 11.50 (0.14) 4.73 -- (0.02) -- 1998 (3) 13.74 (0.02) (2.22) -- -- -- Class C 2002 (2) $ 11.02 $ (0.17) $ (2.33) $ -- $ -- $ -- 2001 (2) 24.17 (0.20) (8.39) -- (4.49) (0.07) 2000 16.68 (0.13) 9.69 -- (2.07) -- 1999 (4) 15.48 (0.08) 1.28 -- -- -- Class S 2002 (2) $ 11.28 $ (0.07) $ (2.42) $ -- $ -- $ -- 2001 (2) (5) 11.17 -- 0.11 -- -- -- Class Y 2002 (2) $ 11.50 $ (0.06) $ (2.47) $ -- $ -- $ -- 2001 (2) 24.79 (0.04) (8.69) -- (4.49) (0.07) 2000 16.92 (0.06) 10.00 -- (2.07) -- 1999 11.98 (0.02) 4.98 -- (0.02) -- 1998 (3) 14.29 -- (2.31) -- -- -- ------------------------------------------------------------------------------------------------------------------------ SMALL CAP VALUE FUND Class A 2002 (2) $ 13.40 $ (0.02) $ (0.13) $ -- $ (1.99) $ -- 2001 (2) 17.09 0.02 (0.97) (0.05) (2.69) -- 2000 13.94 (0.01) 3.23 -- (0.07) -- 1999 13.58 0.01 1.47 (0.01) (1.11) -- 1998 (6) 18.20 0.04 (3.38) (0.01) (1.27) -- Class B 2002 (2) $ 13.01 $ (0.11) $ (0.11) $ -- $ (1.99) $ -- 2001 (2) 16.76 (0.09) (0.97) -- (2.69) -- 2000 13.77 (0.09) 3.15 -- (0.07) -- 1999 13.53 0.02 1.33 -- (1.11) -- 1998 (6) 18.23 0.01 (3.43) (0.01) (1.27) -- Class C 2002 (2) $ 13.13 $ (0.11) $ (0.12) $ -- $ (1.99) $ -- 2001 (2) 16.88 (0.10) (0.95) (0.01) (2.69) -- 2000 13.87 (0.06) 3.14 -- (0.07) -- 1999 (4) 13.48 0.01 0.38 -- -- -- Class S (2) 2002 $ 13.40 $ (0.01) $ (0.14) $ -- $ (1.99) $ -- 2001 (5) 12.84 -- 0.56 -- -- -- Class Y 2002 (2) $ 13.48 $ 0.02 $ (0.12) $ (0.01) $ (1.99) $ -- 2001 (2) 17.19 0.06 (1.00) (0.08) (2.69) -- 2000 13.98 0.02 3.26 -- (0.07) -- 1999 13.60 0.01 1.50 (0.02) (1.11) -- 1998 (6) 18.23 0.06 (3.38) (0.04) (1.27) -- ------------------------------------------------------------------------------------------------------------------------ 74 RATIO OF RATIO OF NET EXPENSES TO NET ASSET RATIO OF INVESTMENT AVERAGE VALUE NET ASSETS EXPENSES TO INCOME (LOSS) NET ASSETS END OF TOTAL END OF AVERAGE TO AVERAGE (EXCLUDING PERIOD RETURN (8) PERIOD (000) NET ASSETS NET ASSETS WAIVERS) ------------------------------------------------------------------------------------------------------------------------- SMALL CAP GROWTH FUND (1) Class A 2002 (2) $ 8.79 (22.07)% $ 22,397 1.23% (0.78)% 1.29% 2001 (2) 11.28 (41.71) 31,913 1.15 (0.51) 1.15 2000 24.47 62.07 57,148 1.14 (0.57) 1.14 1999 16.77 41.11 32,203 1.14 (0.39) 1.15 1998 11.90 (18.66) 28,252 1.29 (0.61) 1.43 Class B 2002 (2) $ 8.07 (22.70)% $ 3,933 1.98% (1.53)% 2.04% 2001 (2) 10.44 (42.14) 5,009 1.90 (1.27) 1.90 2000 23.17 60.95 8,440 1.89 (1.30) 1.89 1999 16.07 39.92 2,217 1.90 (1.16) 1.91 1998 (3) 11.50 (16.30) 1,104 1.90 (1.20) 1.90 Class C 2002 (2) $ 8.52 (22.69)% $ 4,659 1.98% (1.54)% 2.04% 2001 (2) 11.02 (42.14) 6,378 1.90 (1.28) 1.90 2000 24.17 61.06 8,205 1.89 (1.28) 1.89 1999 (4) 16.68 7.75 309 1.90 (1.18) 1.91 Class S 2002 (2) $ 8.79 (22.07)% $ 32 1.23% (0.67)% 1.29% 2001 (2) (5) 11.28 0.98 -- -- -- -- Class Y 2002 (2) $ 8.97 (22.00)% $ 205,253 0.98% (0.54)% 1.04% 2001 (2) 11.50 (41.55) 330,917 0.90 (0.28) 0.90 2000 24.79 62.58 478,975 0.89 (0.30) 0.89 1999 16.92 41.42 248,679 0.90 (0.16) 0.91 1998 (3) 11.98 (16.17) 113,874 0.90 (0.20) 0.90 ------------------------------------------------------------------------------------------------------------------------- SMALL CAP VALUE FUND Class A 2002 (2) $ 11.26 (2.19)% $ 27,205 1.23% (0.12)% 1.26% 2001 (2) 13.40 (6.36) 34,292 1.15 0.11 1.15 2000 17.09 23.19 35,858 1.14 (0.13) 1.16 1999 13.94 11.12 11,567 1.14 (0.17) 1.14 1998 (6) 13.58 (19.48) 13,551 1.13 0.15 1.13 Class B 2002 (2) $ 10.80 (2.91)% $ 12,008 1.98% (0.87)% 2.01% 2001 (2) 13.01 (7.24) 12,392 1.90 (0.64) 1.90 2000 16.76 22.31 13,646 1.88 (0.89) 1.90 1999 13.77 10.16 1,005 1.89 (0.93) 1.89 1998 (6) 13.53 (19.91) 618 1.88 (0.53) 1.88 Class C 2002 (2) $ 10.91 (2.96)% $ 4,873 1.98% (0.87)% 2.01% 2001 (2) 13.13 (7.08) 4,547 1.90 (0.65) 1.90 2000 16.88 22.29 1,099 1.88 (0.84) 1.91 1999 (4) 13.87 2.89 116 1.89 (1.04) 1.89 Class S (2) 2002 $ 11.26 (2.19)% $ 424 1.24% (0.11)% 1.27% 2001 (5) 13.40 4.36 -- -- -- -- Class Y 2002 (2) $ 11.38 (1.83)% $ 368,092 0.98% 0.13% 1.01% 2001 (2) 13.48 (6.25) 434,097 0.90 0.37 0.90 2000 17.19 23.56 431,906 0.89 0.11 0.91 1999 13.98 11.36 319,752 0.89 0.08 0.89 1998 (6) 13.60 (19.31) 367,035 0.88 0.40 0.88 ------------------------------------------------------------------------------------------------------------------------- RATIO OF NET INVESTMENT INCOME (LOSS) TO AVERAGE NET PORTFOLIO ASSETS (EXCLUDING TURNOVER WAIVERS) RATE --------------------------------------------------------------- SMALL CAP GROWTH FUND (1) Class A 2002 (2) (0.84)% 286% 2001 (2) (0.51) 265 2000 (0.57) 230 1999 (0.40) 110 1998 (0.75) 92 Class B 2002 (2) (1.59)% 286% 2001 (2) (1.27) 265 2000 (1.30) 230 1999 (1.17) 110 1998 (3) (1.20) 92 Class C 2002 (2) (1.60)% 286% 2001 (2) (1.28) 265 2000 (1.28) 230 1999 (4) (1.19) 110 Class S 2002 (2) (0.73)% 286% 2001 (2) (5) -- 265 Class Y 2002 (2) (0.60)% 286% 2001 (2) (0.28) 265 2000 (0.30) 230 1999 (0.17) 110 1998 (3) (0.20) 92 --------------------------------------------------------------- SMALL CAP VALUE FUND Class A 2002 (2) (0.15)% 37% 2001 (2) 0.11 53 2000 (0.15) 73 1999 (0.17) 44 1998 (6) 0.15 21 Class B 2002 (2) (0.90)% 37% 2001 (2) (0.64) 53 2000 (0.91) 73 1999 (0.93) 44 1998 (6) (0.53) 21 Class C 2002 (2) (0.90)% 37% 2001 (2) (0.65) 53 2000 (0.87) 73 1999 (4) (1.04) 44 Class S (2) 2002 (0.14)% 37% 2001 (5) -- 53 Class Y 2002 (2) 0.10% 37% 2001 (2) 0.37 53 2000 0.09 73 1999 0.08 44 1998 (6) 0.40 21 ---------------------------------------------------------------
(1) Historical per share data amounts have been adjusted to reflect the conversion ratios utilized for the reorganization of the FAIF Small Cap Growth Fund and Piper Small Company Growth Fund that occurred on July 31, 1998. Piper Small Company Growth Fund is the financial reporting survivor. Therefore, the financial highlights for the Small Cap Growth Fund represent the financial highlights information of the former Piper Small Company Growth Fund. On July 31, 1998, the Fund's advisor changed from Piper Capital Management, Incorporated to U.S. Bank National Association. (2) Per share data calculated using average shares outstanding method. (3) Class of shares has been offered since July 31, 1998. There is no historical information for these classes of Piper Small Company Growth Fund prior to the reorganization on July 31, 1998. All ratios for the period have been annualized, except total return and portfolio turnover. (4) Class of shares has been offered since February 1, 1999. All ratios for the period have been annualized, except total return and portfolio turnover. (5) Class of shares has been offered since September 24, 2001. All ratios for the period have been annualized, except total return and portfolio turnover. (6) Effective in 1998, the Fund's fiscal year end was changed from November 30 to September 30. All ratios for the period have been annualized, except total return and portfolio turnover. (7) Distributions from return of capital for the Small Cap Value Fund were less than $0.01 per share for the fiscal year ended September 30, 2002. (8) Total return does not reflect sales charges. Total return would have been lower had certain expenses not been waived. The accompanying notes are an integral part of the financial statements. 75 SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2002 MID CAP CORE FUND
DESCRIPTION SHARES VALUE (000) ------------------------------------------------------------------- COMMON STOCKS - 96.0% CONSUMER DISCRETIONARY - 18.6% Abercrombie & Fitch* (A) 134,125 $ 2,638 Advanced Auto Parts* (A) 68,900 3,634 Belo, Cl A 181,500 3,971 Brinker International* (A) 111,800 2,896 Catalina Marketing, Cl C* (A) 193,900 5,445 CDW Computer Centers* (A) 147,430 6,245 Claire's Stores (A) 131,800 2,873 Dollar General 604,060 8,106 Dollar Tree Stores* (A) 158,200 3,487 Fairmont Hotels & Resorts 123,200 2,932 Fox Entertainment Group* (A) 343,400 7,565 Hilton Hotels (A) 240,700 2,739 International Speedway, Cl A 40,100 1,593 Mandalay Resort Group* (A) 76,500 2,567 Maytag 114,000 2,643 Michael's Stores* (A) 67,000 3,062 Mohawk Industries* (A) 88,000 4,369 Park Place Entertainment* (A) 399,110 3,173 Regal Entertainment Group, Cl A* (A) 141,425 2,517 Ross Stores 31,400 1,119 Ruby Tuesday (A) 383,500 7,202 Scholastic* (A) 171,435 7,660 Washington Post, Cl B (A) 11,010 7,145 Westwood One* 249,800 8,930 ----------- 104,511 ----------- CONSUMER STAPLES - 3.5% Bunge Limited 212,515 5,143 Dial (A) 119,900 2,573 Dreyer's Grand Ice Cream (A) 46,400 3,242 Hormel Foods (A) 104,900 2,295 Pepsi Bottling 56,000 1,310 Performance Food Group* (A) 24,200 822 Smithfield Foods* (A) 88,200 1,385 Tyson Foods, Cl A (A) 265,775 3,091 ----------- 19,861 ----------- ENERGY - 8.7% Cal Dive International* (A) 184,220 3,715 Enbridge Energy Partners 138,040 6,046 ENSCO International (A) 59,000 1,477 Equitable Resources 158,290 5,469 FMC Technologies* 317,200 5,316 Grant Prideco* 62,000 529 Noble* (A) 230,080 7,132 Noble Energy (A) 48,000 1,631 Ocean Energy 60,000 1,197 Patterson-UTI Energy* (A) 71,200 1,816 Pride International* 87,775 1,141 Smith International* (A) 46,200 1,354 Talisman Energy 133,460 5,352 Valero Energy (A) 122,400 3,240 Weatherford International* (A) 73,785 2,740 Western Gas Resources (A) 18,000 563 ----------- 48,718 ----------- FINANCIALS - 18.3% Ambac Financial Group (A) 24,627 $ 1,327 American Financial Group 190,385 4,383 Arthur J. Gallagher 387,365 9,549 Associated Banc-Corp 27,000 857 Banknorth Group (A) 170,470 4,049 Charles Schwab (A) 268,000 2,332 Charter One Financial 146,869 4,365 City National (A) 49,370 2,309 Colonial BancGroup 107,150 1,329 Compass Bancshares 104,500 3,082 E*TRADE Group* (A) 292,225 1,300 Edwards A.G. (A) 76,400 2,443 Everest Re Group (A) 142,850 7,837 Golden State Bancorp 103,000 3,329 GreenPoint Financial 69,000 2,880 HCC Insurance Holdings (A) 51,000 1,225 Hibernia, Cl A 240,400 4,806 Independence Community Bank 44,550 1,118 Investors Financial Services (A) 303,220 8,208 LaBranche* (A) 72,000 1,458 Legg Mason 45,700 1,945 M & T Bank (A) 77,900 6,139 National Commerce Financial 204,100 5,113 Neuberger Berman (A) 107,255 2,891 New York Community Bancorp 85,500 2,409 North Fork Bancorp (A) 79,330 3,002 Ohio Casualty* 51,655 841 PMI Group 37,500 1,020 Protective Life (A) 70,295 2,163 Radian Group (A) 62,775 2,050 SEI Investments 80,000 1,910 TCF Financial (A) 33,000 1,397 W.R. Berkley 82,000 2,788 Westamerica Bancorporation 31,000 1,249 ----------- 103,103 ----------- HEALTH CARE - 14.3% AdvancePCS* (A) 78,600 1,771 Apria Healthcare Group* (A) 73,800 1,739 Biomet 60,550 1,612 Celgene* (A) 96,800 1,630 Charles River Laboratories International* (A) 39,500 1,550 Covance* 47,300 926 Edwards Lifesciences* (A) 51,400 1,315 Express Scripts* (A) 122,245 6,665 First Health Group* 58,000 1,573 Forest Laboratories, Cl A* (A) 19,000 1,558 Gilead Sciences* (A) 187,900 6,300 Health Net* 105,000 2,252 HealthSouth* 514,900 2,137 Henry Schein* 34,410 1,815 IDEC Pharmaceuticals* (A) 93,100 3,866 IVAX* 112,000 1,374 King Pharmaceuticals* 513,949 9,338 Laboratory Corporation of America Holdings* (A) 173,000 5,844 Millennium Pharmaceuticals* (A) 216,900 2,022 Mylan Laboratories 103,700 3,395 The accompanying notes are an integral part of the financial statements. 76 DESCRIPTION SHARES VALUE (000) ------------------------------------------------------------------- Omnicare (A) 264,250 $ 5,581 Oxford Health Plans* (A) 38,425 1,496 Priority Healthcare, Cl B* (A) 60,705 1,530 Quest Diagnostics* (A) 75,400 4,639 Teva Pharmaceutical Industries, ADR 21,270 1,425 Transkaryotic Therapies* (A) 18,000 583 Triad Hospitals* (A) 104,800 3,977 Universal Health Services* (A) 55,400 2,834 ----------- 80,747 ----------- INDUSTRIALS - 11.9% AGCO* (A) 54,600 1,267 Albany International, Cl A 65,450 1,242 ARAMARK, Cl B* 225,235 4,730 Bisys Group* (A) 291,400 4,869 C. H. Robinson Worldwide 45,000 1,216 Career Education* (A) 41,060 1,971 ChoicePoint* 15,000 534 CNF (A) 39,000 1,224 Concord EFS* (A) 102,000 1,620 Corinthian Colleges* 41,125 1,552 Dun & Bradstreet* (A) 192,395 6,466 Expeditors International of Washington 82,650 2,309 FactSet Research Systems (A) 232,070 6,161 Iron Mountain* (A) 332,960 8,321 Kaydon 52,475 1,052 Kennametal 49,505 1,590 Manpower (A) 59,800 1,755 Nordson 36,395 864 Norfolk Southern 85,100 1,718 PACCAR (A) 43,000 1,453 Pentair 40,045 1,488 Republic Services* 406,400 7,640 Robert Half International* (A) 70,700 1,122 SPX* (A) 33,400 3,370 Werner Enterprises 88,715 1,631 ----------- 67,165 ----------- INFORMATION TECHNOLOGY - 14.9% Activision* (A) 67,500 1,615 Acxiom* (A) 232,300 3,294 Affiliated Computer Services, Cl A* (A) 101,480 4,318 BMC Software* 105,000 1,372 Cadence Design Systems* (A) 277,600 2,823 Diebold (A) 64,500 2,123 DoubleClick* 272,525 1,401 Exar* 86,105 995 Fairchild Semiconductor, Cl A* (A) 186,900 1,770 Fiserv* 295,385 8,294 Integrated Circuit Systems* (A) 207,740 3,262 Integrated Device Technology* (A) 549,150 5,733 International Rectifier* (A) 77,000 1,203 Intersil, Cl A* (A) 112,300 1,455 Kronos* 122,500 3,017 Lawson Software* 66,455 235 Linear Technology 47,000 974 Microchip Technology* (A) 228,050 4,664 NetIQ* (A) 110,600 1,604 Network Associates* (A) 136,600 1,452 Polycom* 287,210 1,950 Rational Software* 278,800 1,204 RF Micro Devices* (A) 121,800 $ 731 Semtech* 76,775 745 Storage Technology* 84,560 889 SunGard Data Systems* 178,950 3,481 Symantec* (A) 48,500 1,631 Synopsys* (A) 49,600 1,892 Tech Data* (A) 272,800 7,202 USA Interactive* 354,700 6,874 Vishay Intertechnology* (A) 329,060 2,896 Waters* (A) 113,000 2,740 ----------- 83,839 ----------- MATERIALS - 1.6% Airgas* 63,360 832 AK Steel Holding* 108,425 793 Arch Coal (A) 81,300 1,346 Bowater (A) 42,805 1,511 Domtar 154,190 1,360 Pactiv* 68,100 1,120 RPM 29,000 408 Sonoco Products 70,225 1,497 ----------- 8,867 ----------- TELECOMMUNICATION SERVICES - 0.4% CenturyTel (A) 111,100 2,492 ----------- UTILITIES - 3.8% ALLETE 74,000 1,598 Alliant Energy (A) 85,985 1,655 Energy East 265,860 5,267 Kinder Morgan Fractional Shares (C) 76,640 -- Kinder Morgan (A) 36,273 1,286 Kinder Morgan Management* (A) 202,944 6,038 Pepco Holdings 72,345 1,443 Questar (A) 186,900 4,269 ----------- 21,556 ----------- TOTAL COMMON STOCKS 540,859 ----------- RELATED PARTY MONEY MARKET FUND - 3.7% First American Prime Obligations Fund (B) 20,954,309 20,954 ----------- TOTAL RELATED PARTY MONEY MARKET FUND 20,954 ----------- TOTAL INVESTMENTS - 99.7% (Cost $606,497) 561,813 ----------- OTHER ASSETS AND LIABILITIES, NET - 0.3% 1,631 ----------- TOTAL NET ASSETS - 100.0% $ 563,444 -----------
* Non-income producing security (A) This security or a portion of this security is out on loan at September 30, 2002. Total loaned securities had a market value of $246,716,863 at September 30, 2002. (Note 6) (B) This money market fund is advised by U.S. Bancorp Asset Management, Inc., which also serves as advisor for this Fund. See also the notes to the financial statements. (C) Security is valued at fair value under guidelines established and approved by the board of directors. Total fair valued securities had a value of $0, which represents 0.0% of total net assets at September 30, 2002. (Note 2) ADR - American Depositary Receipt Cl - Class 77 MID CAP GROWTH FUND
DESCRIPTION SHARES VALUE (000) ------------------------------------------------------------------- COMMON STOCKS - 95.5% CONSUMER DISCRETIONARY - 21.6% 99 Cents Only Stores* 25,050 $ 519 Abercrombie & Fitch* (A) 42,300 832 Advanced Auto Parts* (A) 13,850 730 Autozone* (A) 22,900 1,806 Bed Bath & Beyond* (A) 66,900 2,179 Best Buy* (A) 33,650 751 Big Lots* (A) 77,550 1,228 BJ's Wholesale Club* (A) 29,350 558 Blockbuster (A) 45,750 1,135 Brinker International* (A) 21,100 547 Centex 25,300 1,122 Cheesecake Factory* 31,300 934 Coach* (A) 32,400 829 Cumulus Media* 36,600 646 Darden Restaurants (A) 45,600 1,105 Dollar General 100,650 1,351 Dollar Tree Stores* 36,600 807 E.W. Scripps (A) 8,500 589 Entercom Communications* (A) 13,600 644 Family Dollar Stores 52,450 1,410 Gentex* (A) 20,800 566 Harman International (A) 19,950 1,032 Harrahs Entertainment* 30,150 1,454 Hilton Hotels (A) 116,550 1,326 International Game Technology* (A) 31,650 2,188 Jones Apparel Group* (A) 23,400 718 Mandalay Resort Group* (A) 48,050 1,612 Mattel 116,000 2,089 MGM MIRAGE* (A) 27,050 1,009 Michael's Stores* (A) 19,050 871 Mohawk Industries* (A) 10,950 544 New York Times, Cl A (A) 25,350 1,152 Newell Rubbermaid 19,000 587 PETCO Animal Supplies* 50,150 1,088 PETsMART* 49,750 886 RadioShack (A) 33,100 664 Rent-A-Center* 15,300 795 Ross Stores 14,900 531 Ruby Tuesday (A) 55,550 1,043 Staples* 60,700 776 Starbucks* (A) 87,550 1,807 Starwood Hotels & Resorts Worldwide 28,950 646 Tiffany & Company (A) 19,900 426 Univision Communications, Cl A* (A) 49,750 1,134 Wendy's International (A) 12,500 414 Westwood One* 17,800 636 Williams-Sonoma* (A) 42,000 992 Yum! Brands* (A) 54,550 1,512 ----------- 48,220 ----------- CONSUMER STAPLES - 2.2% Clorox 13,200 530 Coca-Cola Enterprises (A) 73,400 1,559 McCormick & Company 29,900 682 Pepsi Bottling 60,100 1,406 Whole Foods Market* (A) 15,450 662 ----------- 4,839 ----------- ENERGY - 6.5% BJ Services* (A) 56,450 $ 1,468 Cooper Cameron* (A) 20,100 839 ENSCO International (A) 43,800 1,097 Grant Prideco* 122,750 1,048 Murphy Oil (A) 9,150 751 Nabors Industries* (A) 26,650 873 National-Oilwell* 51,000 988 Noble* 35,400 1,097 Ocean Energy 47,350 945 Patterson-UTI Energy* (A) 33,050 843 Pioneer Natural Resources* (A) 28,100 681 Pride International* (A) 69,850 908 Smith International* (A) 38,050 1,115 Weatherford International* (A) 24,500 910 XTO Energy (A) 39,300 810 ----------- 14,373 ----------- FINANCIALS - 6.6% Affiliated Managers Group* 12,450 555 Brown & Brown 40,950 1,229 City National (A) 19,100 893 Commerce Bancorp (A) 18,850 782 Compass Bancshares 27,100 799 Dime Bancorp* 226,300 20 Doral Financial 23,625 570 Federated Investors 32,500 877 Hibernia, Cl A 29,350 587 Investors Financial Services (A) 31,050 841 Legg Mason (A) 28,350 1,207 Moody's (A) 44,200 2,144 New York Community Bancorp 37,050 1,044 North Fork Bancorp 19,250 728 Synovus Financial 48,250 995 TCF Financial (A) 17,460 739 Willis Group Holdings* 21,400 717 ----------- 14,727 ----------- HEALTH CARE - 27.4% AdvancePCS* 26,750 603 Allergan (A) 40,400 2,198 AmerisourceBergen (A) 24,550 1,753 AMN Healthcare Services* 39,550 732 Andrx Group* (A) 38,900 862 Anthem* (A) 35,100 2,282 Applera - Applied Biosystems Group 53,900 986 Barr Laboratories* (A) 17,600 1,096 Beckman Coulter (A) 23,200 898 Biogen* 43,150 1,263 Biomet 93,200 2,482 Boston Scientific* 23,900 754 Caremark Rx* (A) 92,350 1,570 Celgene* (A) 49,800 839 Cephalon* (A) 25,350 1,035 Charles River Laboratories International* (A) 33,150 1,301 Chiron* (A) 21,450 749 DENTSPLY International 26,550 1,067 Diagnostic Products 14,400 662 Express Scripts* (A) 26,100 1,423 First Health Group* (A) 47,200 1,280 Gilead Sciences* (A) 73,900 2,478 The accompanying notes are an integral part of the financial statements. 78 DESCRIPTION SHARES VALUE (000) ------------------------------------------------------------------- Health Management Associates, Cl A* (A) 102,750 $ 2,078 Henry Schein* 20,700 1,092 IDEC Pharmaceuticals* (A) 34,600 1,437 IMS Health 29,550 442 Invitrogen* (A) 31,100 1,060 King Pharmaceuticals* 106,848 1,941 Laboratory Corporation of America Holdings* (A) 42,300 1,429 Lincare Holdings* (A) 41,150 1,277 McKesson HBOC 78,250 2,217 MedImmune* 64,000 1,339 Mid Atlantic Medical Services* 19,100 691 Millennium Pharmaceuticals* 49,800 464 Mylan Laboratories 38,600 1,264 Oxford Health Plans* 23,400 911 Quest Diagnostics* (A) 28,800 1,772 SICOR* 36,250 551 St. Jude Medical* 51,750 1,848 STERIS* 21,350 532 Stryker (A) 43,950 2,532 Triad Hospitals* (A) 25,450 966 Universal Health Services* (A) 13,850 708 Varian Medical Systems* 36,850 1,584 WellPoint Health Networks* (A) 35,350 2,591 Zimmer Holdings* 55,600 2,132 ----------- 61,171 ----------- INDUSTRIALS - 11.1% AGCO* (A) 36,250 841 Alliant Techsystems* 10,900 755 American Standard* (A) 12,000 763 Apollo Group, Cl A* (A) 35,700 1,550 Avery Dennison (A) 21,300 1,214 Bisys Group* (A) 37,150 621 C. H. Robinson Worldwide 33,600 908 Career Education* (A) 26,250 1,260 ChoicePoint* (A) 28,116 1,002 Cintas (A) 29,050 1,218 Concord EFS* (A) 40,750 647 Cooper Tire & Rubber 28,350 458 Danaher 14,700 836 Deluxe 14,450 651 Education Management* 16,500 730 Equifax 67,400 1,465 Expeditors International of Washington 23,250 650 Fastenal (A) 17,050 538 Flowserve* (A) 53,950 540 H&R Block (A) 43,900 1,844 L-3 Communications Holdings* (A) 30,600 1,613 Manpower (A) 21,350 626 Molex, CI A (A) 52,400 1,232 Pitney Bowes 22,250 678 Swift Transportation* (A) 48,300 754 University of Phoenix Online* 15,000 482 Weight Watchers International* 21,100 915 ----------- 24,791 ----------- INFORMATION TECHNOLOGY - 16.3% Activision* (A) 25,500 610 Adobe Systems 34,300 655 Affiliated Computer Services, Cl A* (A) 26,400 1,123 Altera* 87,300 757 Amazon.com* (A) 70,400 $ 1,122 ATI Technologies* 129,500 646 Atmel* 492,750 522 BEA Systems* 106,650 552 Broadcom, Cl A* (A) 27,600 295 Brocade Communications Systems* (A) 51,850 390 Cadence Design Systems* (A) 37,950 386 Citrix Systems* 152,300 918 Cognos* 36,050 606 Cymer* (A) 14,964 279 Electronic Arts* (A) 31,250 2,061 Emulex* (A) 53,400 601 Fair, Isaac & Company (A) 17,350 567 Fairchild Semiconductor International, Cl A* 61,400 582 Fiserv* 44,750 1,257 Integrated Circuit Systems* (A) 34,250 538 Intersil, Cl A* (A) 70,350 912 Intuit* 56,700 2,582 Jabil Circuit* (A) 33,850 500 KLA-Tencor* (A) 30,800 861 Lam Research* (A) 40,600 361 Lexmark International Group, Cl A* (A) 17,800 837 Marvell Technology Group* (A) 33,900 537 Microchip Technology* (A) 72,350 1,480 MKS Instruments* 37,950 414 Network Appliance* (A) 94,000 689 Network Associates* (A) 77,400 823 Novellus Systems* (A) 19,850 413 PeopleSoft* 83,400 1,032 PMC-Sierra* (A) 18,600 72 QLogic* (A) 19,900 518 Rational Software* 82,950 358 RF Micro Devices* (A) 115,900 695 Semtech* 67,550 655 Siebel Systems* 114,250 657 SunGard Data Systems* 97,500 1,896 Symantec* (A) 32,600 1,096 Synopsys* (A) 11,550 441 Teradyne* (A) 25,100 241 USA Interactive* 32,750 635 VERITAS Software* (A) 99,800 1,464 Vishay Intertechnology* (A) 50,950 448 Yahoo!* (A) 125,500 1,201 ----------- 36,285 ----------- MATERIALS - 2.8% Ball 11,500 580 Ecolab (A) 51,950 2,168 Newmont Mining (A) 80,000 2,201 PPG Industries 13,200 590 Sigma-Aldrich (A) 14,450 712 ----------- 6,251 ----------- TELECOMMUNICATION SERVICES - 1.0% Citizens Communications* (A) 99,100 672 Nextel Communications, Cl A* (A) 206,050 1,556 ----------- 2,228 ----------- TOTAL COMMON STOCKS 212,885 ----------- 79 DESCRIPTION SHARES VALUE (000) ------------------------------------------------------------------- RELATED PARTY MONEY MARKET FUND - 6.2% First American Prime Obligations Fund (B) 13,872,208 $ 13,872 ----------- TOTAL RELATED PARTY MONEY MARKET FUND 13,872 ----------- TOTAL INVESTMENTS - 101.7% (Cost $252,655) 226,757 ----------- OTHER ASSETS AND LIABILITIES, NET - (1.7)% (3,840) ----------- TOTAL NET ASSETS - 100.0% $ 222,917 -----------
* Non-income producing security (A) This security or a portion of this security is out on loan at September 30, 2002. Total loaned securities had a market value of $106,227,087 at September 30, 2002. (Note 6) (B) This money market fund is advised by U.S. Bancorp Asset Management, Inc., which also serves as advisor for this Fund. See also the notes to the financial statements. Cl - Class MID CAP VALUE FUND
DESCRIPTION SHARES VALUE (000) ------------------------------------------------------------------- COMMON STOCKS - 97.1% CONSUMER DISCRETIONARY - 16.8% Autozone* (A) 22,300 $ 1,759 Best Buy* (A) 52,300 1,167 Black & Decker (A) 73,700 3,090 Delphi Automotive Systems 240,500 2,056 Eastman Kodak (A) 115,600 3,149 Federated Department Stores* (A) 111,500 3,283 Foot Locker* (A) 156,600 1,564 Fortune Brands 58,500 2,766 Hearst-Argyle Television* 67,900 1,687 Hilton Hotels (A) 277,800 3,161 Johnson Controls 27,400 2,105 Jones Apparel Group* (A) 105,300 3,233 Knight-Ridder 41,800 2,358 Lear* (A) 69,300 2,886 Lennar (A) 44,100 2,460 Mattel 165,800 2,986 New York Times, Cl A (A) 33,000 1,500 Newell Rubbermaid (A) 114,000 3,519 Office Depot* (A) 141,200 1,742 Park Place Entertainment* (A) 229,200 1,822 ----------- 48,293 ----------- CONSUMER STAPLES - 5.7% Alberto-Culver, Cl B (A) 35,000 1,716 Albertson's (A) 57,100 1,380 Archer-Daniels-Midland 132,275 1,655 Bunge Limited 96,700 2,340 Clorox 62,400 2,507 ConAgra Foods (A) 64,900 1,613 Dean Foods* (A) 53,800 2,140 Hershey Foods 20,000 1,241 McCormick & Company (A) 76,500 1,744 ----------- 16,336 ----------- ENERGY - 6.4% Amerada Hess (A) 31,600 2,145 Apache (A) 60,550 3,600 ENSCO International (A) 74,800 1,873 Equitable Resources 86,600 2,992 Kerr-McGee (A) 55,500 2,411 Marathon Oil 66,000 1,497 Murphy Oil (A) 33,100 2,716 Valero Energy (A) 42,800 1,133 ----------- 18,367 ----------- FINANCIALS - 28.1% ACE (A) 51,700 1,531 AMB Property 84,800 2,451 Ambac Financial Group (A) 31,500 1,698 AmSouth Bancorp 121,700 2,524 AON (A) 42,700 875 Apartment Investment & Management (A) 20,900 812 Bear Stearns (A) 62,600 3,531 Boston Properties (A) 84,700 3,151 Charter One Financial 105,525 3,136 Cincinnati Financial 58,700 2,089 City National (A) 67,400 3,152 Compass Bancshares 135,700 4,002 Countrywide Credit Industries (A) 50,700 2,390 The accompanying notes are an integral part of the financial statements. 80 DESCRIPTION SHARES VALUE (000) ------------------------------------------------------------------- Cullen/Frost Bankers 77,000 $ 2,630 E*TRADE Group* (A) 257,500 1,146 Equity Office Properties Trust (REIT) 69,700 1,800 General Growth Properties (REIT) (A) 67,100 3,456 Golden West Financial 36,000 2,238 Hibernia, Cl A 155,100 3,100 Marshall & Ilsley 136,900 3,818 MGIC Investment (A) 28,000 1,143 National Commerce Financial (A) 97,900 2,452 Old Republic International 55,400 1,572 Principal Financial Group* (A) 54,100 1,416 ProLogis 130,400 3,248 Protective Life (A) 53,100 1,634 SAFECO 75,600 2,403 Simon Property Group (A) 91,600 3,273 SouthTrust 137,300 3,330 Torchmark 45,400 1,555 Union Planters 108,200 2,971 UnumProvident (A) 157,100 3,197 Zions Bancorporation 69,300 3,017 ----------- 80,741 ----------- HEALTH CARE - 4.6% AmerisourceBergen (A) 37,500 2,678 Becton Dickinson & Company 119,700 3,399 Health Management Associates, Cl A* (A) 122,100 2,469 Manor Care* (A) 107,700 2,421 Priority Healthcare, Cl B* (A) 84,800 2,137 ----------- 13,104 ----------- INDUSTRIALS - 10.3% AGCO* (A) 93,900 2,178 American Standard* (A) 32,700 2,080 ARAMARK, Cl B* 107,000 2,247 CSX (A) 67,600 1,783 Dover 76,800 1,949 ITT Industries 40,300 2,512 Kennametal 50,000 1,606 Masco (A) 31,900 624 Northrop Grumman (A) 13,900 1,724 Parker Hannifin (A) 56,900 2,174 Pentair 46,700 1,736 Pitney Bowes 54,500 1,662 Rockwell Collins 91,100 1,999 SPX* (A) 25,500 2,573 Swift Transportation* 89,200 1,392 Viad 61,100 1,248 ----------- 29,487 ----------- INFORMATION TECHNOLOGY - 6.7% 3Com* 480,900 1,895 Apple Computer* (A) 89,600 1,299 Arrow Electronics* (A) 59,300 749 Celestica* 40,500 531 Computer Associates International (A) 160,600 1,542 Computer Sciences* (A) 41,200 1,145 Fairchild Semiconductor International, Cl A* (A) 94,500 895 Fisher Scientific International* (A) 61,300 1,860 Harris 41,600 1,393 JDS Uniphase* (A) 423,400 825 Microchip Technology* (A) 83,500 1,708 NCR* (A) 74,700 $ 1,479 PeopleSoft* 93,100 1,152 SunGard Data Systems* 39,700 772 Vishay Intertechnology* (A) 119,200 1,049 Xerox* (A) 179,800 890 ----------- 19,184 ----------- MATERIALS - 6.7% Air Products and Chemicals 51,800 2,176 Boise Cascade 63,800 1,455 Cabot 96,900 2,035 Eastman Chemical 40,000 1,527 Georgia-Pacific 103,000 1,348 Lyondell Chemical (A) 114,200 1,364 Nucor 44,700 1,694 OM Group (A) 28,949 1,239 Phelps Dodge* (A) 47,000 1,205 Rohm & Haas (A) 65,300 2,024 Temple-Inland (A) 49,700 1,920 Vulcan Materials (A) 36,200 1,309 ----------- 19,296 ----------- TELECOMMUNICATION SERVICES - 0.9% CenturyTel (A) 114,700 2,573 ----------- UTILITIES - 10.9% Cinergy (A) 52,600 1,653 Consolidated Edison (A) 92,900 3,736 Constellation Energy (A) 86,000 2,132 DTE Energy (A) 59,400 2,418 Edison International* (A) 124,800 1,248 Entergy (A) 101,500 4,222 FirstEnergy (A) 72,100 2,155 FPL Group (A) 59,300 3,190 KeySpan (A) 104,900 3,514 Kinder Morgan Management* 54,700 1,627 Pinnacle West 36,000 999 PPL 52,000 1,692 Progress Energy* (A) 67,400 2,755 ----------- 31,341 ----------- TOTAL COMMON STOCKS 278,722 ----------- RELATED PARTY MONEY MARKET FUND - 2.5% First American Prime Obligations Fund (B) 7,056,833 7,057 ----------- TOTAL RELATED PARTY MONEY MARKET FUND 7,057 ----------- TOTAL INVESTMENTS - 99.6% (Cost $310,893) 285,779 ----------- OTHER ASSETS AND LIABILITIES, NET - 0.4% 1,069 ----------- TOTAL NET ASSETS - 100.0% $ 286,848 -----------
* Non-income producing security (A) This security or a portion of this security is out on loan at September 30, 2002. Total loaned securities had a market value of $141,765,862 at September 30, 2002. (Note 6) (B) This money market fund is advised by U.S. Bancorp Asset Management, Inc., which also serves as advisor for this Fund. See also the notes to the financial statements. Cl - Class REIT - Real Estate Investment Trust 81 STATEMENTS OF ASSETS AND LIABILITIES SEPTEMBER 30, 2002, IN THOUSANDS, EXCEPT PER SHARE DATA
MID CAP MID CAP MID CAP CORE FUND GROWTH FUND VALUE FUND ----------------------------------------------------------------------------------------------------------------- ASSETS: Investments in securities, at value* $ 561,813 $ 226,757 $ 285,779 Cash 188 519 -- Collateral for securities loaned, at value 260,300 111,674 148,584 Dividends and interest receivable 218 71 414 Capital shares sold 574 95 219 Receivable for securities sold 5,558 1,721 797 Other receivables 6 1 -- Prepaid expenses and other assets 22 17 19 ----------------------------------------------------------------------------------------------------------------- TOTAL ASSETS 828,679 340,855 435,812 ================================================================================================================= LIABILITIES: Bank overdraft -- -- 1 Capital shares redeemed 746 343 125 Payable upon return of securities loaned 260,300 111,674 148,584 Payable for securities purchased 3,747 5,709 -- Payable for advisory, co-administration, and custodian fees 418 190 238 Distribution and shareholder servicing fees 22 18 13 Accrued expenses and other liabilities 2 4 3 ----------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES 265,235 117,938 148,964 ================================================================================================================= NET ASSETS $ 563,444 $ 222,917 $ 286,848 ================================================================================================================= COMPOSITION OF NET ASSETS: Portfolio capital $ 657,268 $ 472,351 $ 414,836 Undistributed net investment income (loss) (4) -- -- Accumulated net realized loss (49,136) (223,536) (102,874) Net unrealized depreciation of investments (44,684) (25,898) (25,114) ----------------------------------------------------------------------------------------------------------------- NET ASSETS $ 563,444 $ 222,917 $ 286,848 ================================================================================================================= *Investments in securities, at cost $ 606,497 $ 252,655 $ 310,893 CLASS A: Net assets $ 75,002 $ 58,896 $ 13,083 Shares issued and outstanding ($0.0001 par value -- 2 billion authorized) 2,836 13,538 985 Net asset value and redemption price per share $ 26.45 $ 4.35 $ 13.29 Maximum offering price per share (A) $ 27.99 $ 4.60 $ 14.06 CLASS B: Net assets $ 4,227 $ 2,578 $ 10,410 Shares issued and outstanding ($0.0001 par value -- 2 billion authorized) 165 622 806 Net asset value and offering price per share (C) $ 25.56 $ 4.14 $ 12.92 CLASS C: Net assets $ 1,136 $ 3,742 $ 3,207 Shares issued and outstanding ($0.0001 par value -- 2 billion authorized) 43 896 243 Net asset value per share (C) $ 26.29 $ 4.18 $ 13.17 Maximum offering price per share (B) $ 26.56 $ 4.22 $ 13.30 CLASS S: Net assets $ 5,869 $ 13 $ 158 Shares issued and outstanding ($0.0001 par value -- 2 billion authorized) 222 3 12 Net asset value, offering price, and redemption price per share $ 26.43 $ 4.35 $ 13.29 CLASS Y: Net assets $ 477,210 $ 157,688 $ 259,990 Shares issued and outstanding ($0.0001 par value -- 2 billion authorized) 17,515 35,232 19,506 Net asset value, offering price, and redemption price per share $ 27.25 $ 4.48 $ 13.33 -----------------------------------------------------------------------------------------------------------------
(A) The offering price is calculated by dividing the net asset value by 1 minus the maximum sales charge of 5.50%. (B) The offering price is calculated by dividing the net asset value by 1 minus the maximum sales charge of 1.00%. (C) Class B and C have a contingent deferred sales charge. For a description of a possible redemption charge, see the notes to the financial statements. The accompanying notes are an integral part of the financial statements. 82 STATEMENTS OF OPERATIONS FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2002, IN THOUSANDS
MID CAP MID CAP MID CAP CORE FUND GROWTH FUND VALUE FUND ----------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME: Interest $ 562 $ 264 $ 253 Dividends 4,326 636 5,734 Less: Foreign taxes withheld (7) -- (6) Securities lending 202 153 75 Other income 405 8 890 ----------------------------------------------------------------------------------------------------------------- TOTAL INVESTMENT INCOME 5,488 1,061 6,946 ================================================================================================================= EXPENSES: Investment advisory fees 4,356 2,289 2,383 Co-administration fees and expenses (including per account transfer agency fees 1,722 1,117 953 Custodian fees 62 33 34 Directors' fees 8 4 10 Registration fees 70 25 31 Professional fees 11 6 4 Printing 40 6 15 Other 10 4 3 Distribution and shareholder servicing fees - Class A 227 236 38 Distribution and shareholder servicing fees - Class B 40 38 126 Distribution and shareholder servicing fees - Class C 4 60 37 Shareholder servicing fees - Class S 14 -- -- ----------------------------------------------------------------------------------------------------------------- TOTAL EXPENSES 6,564 3,818 3,634 ================================================================================================================= Less: Waiver of expenses (369) (378) (196) ----------------------------------------------------------------------------------------------------------------- TOTAL NET EXPENSES 6,195 3,440 3,438 ================================================================================================================= INVESTMENT INCOME (LOSS) - NET (707) (2,379) 3,508 ================================================================================================================= REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS - NET: Net realized gain (loss) on investments (33,072) (95,549) 3,174 Net change in unrealized appreciation or depreciation of investments (19,320) 33,512 (11,284) ----------------------------------------------------------------------------------------------------------------- NET LOSS ON INVESTMENTS (52,392) (62,037) (8,110) ================================================================================================================= NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (53,099) $ (64,416) $ (4,602) =================================================================================================================
The accompanying notes are an integral part of the financial statements. 83 STATEMENTS OF CHANGES IN NET ASSETS IN THOUSANDS
MID CAP CORE FUND ---------------------------------------------------------------------------------------------------------- 10/1/01 11/1/00 11/1/99 TO TO TO 9/30/02 9/30/01 10/31/00 ---------------------------------------------------------------------------------------------------------- OPERATIONS: Investment income (loss) - net $ (707) $ 45 $ (922) Net realized gain (loss) on investments (33,072) (9,530) 217,428 Net change in unrealized appreciation or depreciation of investments (19,320) (110,074) (27,891) ---------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (53,099) (119,559) 188,615 ---------------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Investment income - net: Class A -- -- -- Class B -- -- -- Class C -- -- -- Class S -- -- -- Class Y -- -- -- Net realized gain on investments (3): Class A -- (35,265) (1,850) Class B -- (251) (3) Class C -- -- -- Class Y -- (138,433) (6,917) Tax return of capital (4) Class A -- -- -- Class B -- -- -- Class C -- -- -- Class Y -- -- -- ---------------------------------------------------------------------------------------------------------- Total distributions -- (173,949) (8,770) ========================================================================================================== CAPITAL SHARE TRANSACTIONS (1): Class A: Proceeds from sales 15,490 5,868 4,908 Reinvestment of distributions -- 34,561 1,829 Payments for redemptions (17,177) (10,599) (31,499) ---------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from Class A transactions (1,687) 29,830 (24,762) ---------------------------------------------------------------------------------------------------------- Class B Proceeds from sales 2,886 2,876 466 Reinvestment of distributions -- 186 3 Payments for redemptions (627) (323) (33) ---------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from Class B transactions 2,259 2,739 436 ---------------------------------------------------------------------------------------------------------- Class C Proceeds from sales 1,470 -- -- Reinvestment of distributions -- -- -- Payments for redemptions (137) -- -- ---------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from Class C transactions 1,333 -- -- ========================================================================================================== Class S (2) Proceeds from sales 6,770 2,025 -- Reinvestment of distributions -- -- -- Payments for redemptions (1,699) (344) -- ---------------------------------------------------------------------------------------------------------- Increase in net assets from Class S transactions 5,071 1,681 -- ---------------------------------------------------------------------------------------------------------- Class Y (2) Proceeds from sales 216,825 399,904 145,630 Reinvestment of distributions -- 122,644 6,230 Payments for redemptions (99,742) (315,411) (218,605) ---------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from Class Y transactions 117,083 207,137 (66,745) ---------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions 124,059 241,387 (91,071) ---------------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets 70,960 (52,121) 88,774 NET ASSETS AT BEGINNING OF FISCAL PERIOD 492,484 544,605 455,831 ========================================================================================================== NET ASSETS AT END OF FISCAL PERIOD $ 563,444 $ 492,484 $ 544,605 ========================================================================================================== UNDISTRIBUTED NET INVESTMENT INCOME (LOSS) AT END OF FISCAL PERIOD $ (4) $ (5) $ (5) ========================================================================================================== 84 MID CAP MID CAP GROWTH FUND VALUE FUND ----------------------------------------------------------------------------------------------------------------------- 10/1/01 10/1/00 10/1/01 10/1/00 TO TO TO TO 9/30/02 9/30/01 9/30/02 9/30/01 ----------------------------------------------------------------------------------------------------------------------- OPERATIONS: Investment income (loss) - net $ (2,379) $ (1,331) $ 3,508 $ 2,922 Net realized gain (loss) on investments (95,549) (126,340) 3,174 28,350 Net change in unrealized appreciation or depreciation of investments 33,512 (185,161) (11,284) (51,162) ----------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (64,416) (312,832) (4,602) (19,890) ----------------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Investment income - net: Class A -- -- (100) (95) Class B -- -- (10) (21) Class C -- -- (2) (4) Class S -- -- (1) -- Class Y -- -- (2,700) (2,673) Net realized gain on investments (3): Class A -- (93,172) -- -- Class B -- (1,853) -- -- Class C -- (2,270) -- -- Class Y -- (126,486) -- -- Tax return of capital (4) Class A -- -- (36) -- Class B -- -- (29) -- Class C -- -- (9) -- Class Y -- -- (718) -- ----------------------------------------------------------------------------------------------------------------------- Total distributions -- (223,781) (3,605) (2,793) ======================================================================================================================= CAPITAL SHARE TRANSACTIONS (1): Class A: Proceeds from sales 8,885 61,110 5,726 4,892 Reinvestment of distributions -- 92,311 132 93 Payments for redemptions (36,199) (107,971) (5,952) (4,121) ----------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from Class A transactions (27,314) 45,450 (94) 864 ----------------------------------------------------------------------------------------------------------------------- Class B Proceeds from sales 896 3,176 1,753 1,758 Reinvestment of distributions -- 1,820 38 19 Payments for redemptions (952) (1,406) (2,335) (2,202) ----------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from Class B transactions (56) 3,590 (544) (425) ----------------------------------------------------------------------------------------------------------------------- Class C Proceeds from sales 996 8,014 832 2,695 Reinvestment of distributions -- 2,263 11 4 Payments for redemptions (2,322) (2,679) (829) (495) ----------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from Class C transactions (1,326) 7,598 14 2,204 ======================================================================================================================= Class S (2) Proceeds from sales 21 -- 137 43 Reinvestment of distributions -- -- -- -- Payments for redemptions -- -- -- -- ----------------------------------------------------------------------------------------------------------------------- Increase in net assets from Class S transactions 21 -- 137 43 ----------------------------------------------------------------------------------------------------------------------- Class Y (2) Proceeds from sales 73,658 191,317 61,416 102,985 Reinvestment of distributions -- 96,331 2,137 1,102 Payments for redemptions (97,285) (104,958) (88,193) (66,529) ----------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from Class Y transactions (23,627) 182,690 (24,640) 37,558 ----------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions (52,302) 239,328 (25,127) 40,244 ----------------------------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets (116,718) (297,285) (33,334) 17,561 NET ASSETS AT BEGINNING OF FISCAL PERIOD 339,635 636,920 320,182 302,621 ======================================================================================================================= NET ASSETS AT END OF FISCAL PERIOD $ 222,917 $ 339,635 $ 286,848 $ 320,182 ======================================================================================================================= UNDISTRIBUTED NET INVESTMENT INCOME (LOSS) AT END OF FISCAL PERIOD $ -- $ -- $ -- $ 194 =======================================================================================================================
(1) See Note 4 in notes to the financial statements for additional information. (2) On September 24, 2001, Class Y and Institutional Class of Mid Cap Core Fund were redesignated as Class S and Class Y, respectively. (3) Includes distributions in excess of net realized gains of $1,793 and $4,952 for the period ended September 30, 2001, for Mid Cap Growth and Mid Cap Core Fund, respectively. (4) Distributions from tax return of capital for the Mid Cap Value Fund Class S were less than $1,000 for the fiscal year ended September 30, 2002. The accompanying notes are an integral part of the financial statements. 85 FINANCIAL HIGHLIGHTS FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS ENDED SEPTEMBER 30, UNLESS OTHERWISE INDICATED.
REALIZED AND NET ASSET UNREALIZED NET ASSET VALUE NET GAINS OR DISTRIBUTIONS VALUE BEGINNING INVESTMENT (LOSSES) ON FROM END OF OF PERIOD INCOME (LOSS) INVESTMENTS CAPITAL GAINS PERIOD ------------------------------------------------------------------------------------------------------------------- MID CAP CORE FUND (1) Class A 2002 $ 28.33 $ (0.11) $ (1.77) $ -- $ 26.45 2001 (2) (3) 54.63 (0.06) (8.40) (17.84) 28.33 2000 (2) 37.80 (0.18) 17.80 (0.79) 54.63 1999 (2) 37.59 (0.08) 0.60 (0.31) 37.80 1998 (2) 44.36 (0.24) (2.07) (4.46) 37.59 Class B 2002 $ 27.59 $ (0.18) $ (1.85) $ -- $ 25.56 2001 (2) (3) 53.97 (0.29) (8.25) (17.84) 27.59 2000 (2) 37.63 (0.53) 17.66 (0.79) 53.97 1999 (2) (4) 37.57 (0.23) 0.29 -- 37.63 Class C 2002 $ 28.33 $ (0.10) $ (1.94) $ -- $ 26.29 2001 (2) (5) 27.40 -- 0.93 -- 28.33 Class S 2002 $ 28.29 $ (0.07) $ (1.79) $ -- $ 26.43 2001 (2) (6) 35.75 (0.06) (7.40) -- 28.29 Class Y 2002 $ 29.11 $ (0.05) $ (1.81) $ -- $ 27.25 2001 (2) (3) 55.52 0.02 (8.59) (17.84) 29.11 2000 (2) 38.32 (0.05) 18.04 (0.79) 55.52 1999 (2) 38.01 0.02 0.60 (0.31) 38.32 1998 (2) 44.70 (0.14) (2.09) (4.46) 38.01 ------------------------------------------------------------------------------------------------------------------- MID CAP GROWTH FUND (7) Class A 2002 $ 5.63 $ (0.12) $ (1.16) $ -- $ 4.35 2001 (2) 18.88 (0.04) (6.36) (6.85) 5.63 2000 12.87 (0.12) 8.80 (2.67) 18.88 1999 11.80 (0.07) 3.40 (2.26) 12.87 1998 15.25 (0.09) (1.80) (1.56) 11.80 Class B 2002 $ 5.41 $ (0.11) $ (1.16) $ -- $ 4.14 2001 (2) 18.51 (0.10) (6.15) (6.85) 5.41 2000 12.75 (0.16) 8.59 (2.67) 18.51 1999 11.78 (0.10) 3.33 (2.26) 12.75 1998 (8) 13.86 (0.01) (2.07) -- 11.78 Class C 2002 $ 5.46 $ (0.13) $ (1.15) $ -- $ 4.18 2001 (2) 18.61 (0.09) (6.21) (6.85) 5.46 2000 12.80 (0.14) 8.62 (2.67) 18.61 1999 (9) 12.43 (0.06) 0.43 -- 12.80 Class S 2002 $ 5.63 $ (0.04) $ (1.24) $ -- $ 4.35 2001 (2) (5) 5.53 -- 0.10 -- 5.63 Class Y 2002 $ 5.79 $ (0.03) $ (1.28) $ -- $ 4.48 2001 (2) 19.14 (0.02) (6.48) (6.85) 5.79 2000 12.99 (0.08) 8.90 (2.67) 19.14 1999 11.87 (0.03) 3.41 (2.26) 12.99 1998 15.29 (0.04) (1.82) (1.56) 11.87 ------------------------------------------------------------------------------------------------------------------- 86 RATIO OF RATIO OF NET EXPENSES TO RATIO OF INVESTMENT AVERAGE NET ASSETS EXPENSES TO INCOME (LOSS) NET ASSETS TOTAL END OF AVERAGE TO AVERAGE (EXCLUDING RETURN (10) PERIOD (000) NET ASSETS NET ASSETS WAIVERS) ------------------------------------------------------------------------------------------------------------------------ MID CAP CORE FUND (1) Class A 2002 (6.64)% $ 75,002 1.20% (0.34)% 1.26% 2001 (2) (3) (20.00) 82,043 1.20 (0.19) 1.22 2000 (2) 47.23 108,326 1.20 (0.38) 1.22 1999 (2) 1.31 95,758 1.19 (0.21) 1.21 1998 (2) (5.91) 136,146 1.13 (0.57) 1.20 Class B 2002 (7.36)% $ 4,227 1.95% (1.08)% 2.01% 2001 (2) (3) (20.60) 2,606 1.94 (0.95) 1.97 2000 (2) 46.13 666 1.95 (1.13) 1.97 1999 (2) (4) 0.16 126 1.95 (0.89) 1.97 Class C 2002 (7.20)% $ 1,136 1.95% (1.07)% 2.01% 2001 (2) (5) 3.39 -- -- -- -- Class S 2002 (6.58)% $ 5,869 1.20% (0.33)% 1.26% 2001 (2) (6) (20.87) 1,484 1.19 (0.24) 1.23 Class Y 2002 (6.39)% $ 477,210 0.95% (0.08)% 1.01% 2001 (2) (3) (19.84) 406,349 0.95 0.06 0.97 2000 (2) 47.56 435,613 0.95 (0.13) 0.97 1999 (2) 1.56 359,947 0.94 0.04 0.96 1998 (2) (5.66) 464,858 0.88 (0.32) 0.95 ------------------------------------------------------------------------------------------------------------------------ MID CAP GROWTH FUND (7) Class A 2002 (22.74)% $ 58,896 1.20% (0.89)% 1.32% 2001 (2) (49.38) 102,837 1.15 (0.40) 1.19 2000 76.44 264,570 1.15 (0.70) 1.17 1999 31.69 165,072 1.14 (0.48) 1.19 1998 (13.05) 188,763 1.18 (0.60) 1.34 Class B 2002 (23.47)% $ 2,578 1.95% (1.64)% 2.07% 2001 (2) (49.65) 3,518 1.90 (1.17) 1.94 2000 75.14 4,812 1.90 (1.45) 1.92 1999 30.66 360 1.89 (1.26) 1.98 1998 (8) (15.01) 17 1.87 (1.12) 1.87 Class C 2002 (23.44)% $ 3,742 1.95% (1.64)% 2.07% 2001 (2) (49.73) 6,246 1.91 (1.17) 1.95 2000 75.10 5,971 1.90 (1.45) 1.92 1999 (9) 3.06 466 1.89 1.27 1.98 Class S 2002 (22.74)% $ 13 1.20% (0.90)% 1.32% 2001 (2) (5) 1.81 -- -- -- -- Class Y 2002 (22.63)% $ 157,688 0.95% (0.64)% 1.07% 2001 (2) (49.22) 227,035 0.90 (0.17) 0.94 2000 76.88 361,567 0.90 (0.46) 0.92 1999 31.97 211,527 0.89 (0.25) 0.96 1998 (12.79) 73,356 0.87 (0.27) 0.87 ------------------------------------------------------------------------------------------------------------------------ RATIO OF NET INVESTMENT INCOME (LOSS) TO AVERAGE NET PORTFOLIO ASSETS (EXCLUDING TURNOVER WAIVERS) RATE --------------------------------------------------------------------------- MID CAP CORE FUND (1) Class A 2002 (0.40)% 162% 2001 (2) (3) (0.21) 204 2000 (2) (0.40) 205 1999 (2) (0.23) 140 1998 (2) (0.64) 77 Class B 2002 (1.14)% 162% 2001 (2) (3) (0.98) 204 2000 (2) (1.15) 205 1999 (2) (4) (0.91) 140 Class C 2002 (1.13)% 162% 2001 (2) (5) -- 204 Class S 2002 (0.39)% 162% 2001 (2) (6) (0.28) 204 Class Y 2002 (0.14)% 162% 2001 (2) (3) 0.04 204 2000 (2) (0.15) 205 1999 (2) 0.02 140 1998 (2) (0.39) 77 --------------------------------------------------------------------------- MID CAP GROWTH FUND (7) Class A 2002 (1.01)% 266% 2001 (2) (0.44) 264 2000 (0.72) 217 1999 (0.53) 94 1998 (0.76) 39 Class B 2002 (1.76)% 266% 2001 (2) (1.21) 264 2000 (1.47) 217 1999 (1.35) 94 1998 (8) (1.12) 39 Class C 2002 (1.76)% 266% 2001 (2) (1.21) 264 2000 (1.47) 217 1999 (9) 1.18 94 Class S 2002 (1.02)% 266% 2001 (2) (5) -- 264 Class Y 2002 (0.76)% 266% 2001 (2) (0.21) 264 2000 (0.48) 217 1999 (0.32) 94 1998 (0.27) 39 ---------------------------------------------------------------------------
(1) The financial highlights for the Mid Cap Core Fund as set forth herein include the historical financial highlights of the Firstar Mid Cap Core Equity Fund. The assets of the Firstar Fund were acquired by the First American Mid Cap Core Fund on September 24, 2001. In connection with such acquisition, (i) Class A shares of the Firstar Mid Cap Core Equity Fund were exchanged for Class A shares of the First American Mid Cap Core Fund, (ii) Firstar Class B shares were exchanged for Class B shares of the First American Fund, (iii) Firstar Class Y shares were exchanged for Class S shares of the First American Fund, and (iv) Firstar Institutional Class shares were exchanged for Class Y shares of the First American Fund. (2) Per share data calculated using average shares outstanding method. (3) Effective in 2001, the Fund's fiscal year end was changed from October 31 to September 30. All ratios for the period have been annualized, except total return and portfolio turnover. (4) Class of shares has been offered since March 1, 1999. All ratios for the period have been annualized, except total return and portfolio turnover. (5) Class of shares has been offered since September 24, 2001. All ratios for the period have been annualized, except total return and portfolio turnover. (6) Class of shares has been offered since December 11, 2000. All ratios for the period have been annualized, except total return and portfolio turnover. (7) The financial highlights for the Mid Cap Growth Fund as set forth herein include the financial highlights of the Piper Emerging Growth Fund Class A shares and Class Y shares. The assets of the Piper Emerging Growth Fund were acquired by Mid Cap Growth Fund on August 7, 1998. In connection with such acquisition, (i) Class A shares of the Piper Emerging Growth Fund were exchanged for Class A shares of the Mid Cap Growth Fund, and (ii) Class Y shares of the Piper Emerging Growth Fund were exchanged for Class Y shares of the Mid Cap Growth Fund. (8) Class of shares has been offered since August 7,1998. All ratios for the period have been annualized, except total return and portfolio turnover. (9) Class of shares has been offered since February 1, 1999. All ratios for the period have been annualized, except total return and portfolio turnover. (10) Total return does not include sales charges. Total return would have been lower had certain expenses not been waived. The accompanying notes are an integral part of the financial statements. 87
REALIZED AND NET ASSET UNREALIZED DIVIDENDS VALUE NET GAINS OR FROM NET DISTRIBUTIONS DISTRIBUTIONS BEGINNING INVESTMENT (LOSSES) ON INVESTMENT FROM FROM RETURN OF PERIOD INCOME (LOSS) INVESTMENTS INCOME CAPITAL GAINS OF CAPITAL --------------------------------------------------------------------------------------------------------------------------------- MID CAP VALUE FUND Class A 2002 (1) $ 13.74 $ 0.13 $ (0.44) $ (0.10) $ -- $ (0.04) 2001 (1) 14.62 0.10 (0.88) (0.10) -- -- 2000 12.95 0.08 1.67 (0.08) -- -- 1999 15.04 0.10 1.26 (0.10) (3.35) -- 1998 24.19 0.07 (6.41) (0.07) (2.74) -- Class B 2002 (1) $ 13.37 $ 0.01 $ (0.41) $ (0.01) $ -- $ (0.04) 2001 (1) 14.28 (0.01) (0.88) (0.02) -- -- 2000 12.67 0.02 1.61 (0.02) -- -- 1999 14.80 0.04 1.22 (0.04) (3.35) -- 1998 23.96 (0.01) (6.41) -- (2.74) -- Class C 2002 (1) $ 13.63 $ 0.01 $ (0.43) $ -- $ -- $ (0.04) 2001 (1) 14.55 (0.01) (0.89) (0.02) -- -- 2000 12.92 0.02 1.63 (0.02) -- -- 1999 (2) 13.69 0.06 (0.78) (0.05) -- -- Class S 2002 (1) $ 13.74 $ 0.13 $ (0.44) $ (0.10) $ -- $ (0.04) 2001 (1) (3) 13.31 0.01 0.42 -- -- -- Class Y 2002 (1) $ 13.77 $ 0.17 $ (0.44) $ (0.13) $ -- $ (0.04) 2001 (1) 14.68 0.14 (0.92) (0.13) -- -- 2000 12.99 0.11 1.69 (0.11) -- -- 1999 15.05 0.12 1.30 (0.13) (3.35) -- 1998 24.21 0.14 (6.43) (0.13) (2.74) -- --------------------------------------------------------------------------------------------------------------------------------- 88 RATIO OF RATIO OF NET EXPENSES TO NET ASSET RATIO OF INVESTMENT AVERAGE VALUE NET ASSETS EXPENSES TO INCOME (LOSS) NET ASSETS END OF TOTAL END OF AVERAGE TO AVERAGE (EXCLUDING PERIOD RETURN (4) PERIOD (000) NET ASSETS NET ASSETS WAIVERS) ----------------------------------------------------------------------------------------------------------------------------- MID CAP VALUE FUND Class A 2002 (1) $ 13.29 (2.41)% $ 13,083 1.20% 0.83% 1.26% 2001 (1) 13.74 (5.41) 13,583 1.15 0.67 1.15 2000 14.62 13.58 13,568 1.15 0.53 1.19 1999 12.95 8.03 20,148 1.15 0.63 1.18 1998 15.04 (28.83) 29,261 1.14 0.43 1.14 Class B 2002 (1) $ 12.92 (3.07)% $ 10,410 1.95% 0.08% 2.01% 2001 (1) 13.37 (6.21) 11,311 1.90 (0.08) 1.90 2000 14.28 12.85 12,495 1.90 (0.22) 1.94 1999 12.67 7.38 19,072 1.90 (0.13) 1.93 1998 14.80 (29.40) 31,276 1.89 (0.31) 1.89 Class C 2002 (1) $ 13.17 (3.09)% $ 3,207 1.95% 0.08% 2.01% 2001 (1) 13.63 (6.17) 3,312 1.90 (0.04) 1.90 2000 14.55 12.81 1,430 1.90 (0.15) 1.93 1999 (2) 12.92 (5.25) 164 1.90 0.29 1.93 Class S 2002 (1) $ 13.29 (2.40)% $ 158 1.20% 0.87% 1.26% 2001 (1) (3) 13.74 3.23 44 0.85 5.19 0.85 Class Y 2002 (1) $ 13.33 (2.12)% $ 259,990 0.95% 1.08% 1.01% 2001 (1) 13.77 (5.37) 291,932 0.90 0.92 0.90 2000 14.68 13.94 275,128 0.90 0.79 0.94 1999 12.99 8.47 304,492 0.90 0.89 0.93 1998 15.05 (28.65) 418,041 0.89 0.69 0.89 ----------------------------------------------------------------------------------------------------------------------------- RATIO OF NET INVESTMENT INCOME (LOSS) TO AVERAGE NET PORTFOLIO ASSETS (EXCLUDING TURNOVER WAIVERS) RATE ------------------------------------------------------------------------- MID CAP VALUE FUND Class A 2002 (1) 0.77% 90% 2001 (1) 0.67 104 2000 0.49 141 1999 0.60 121 1998 0.43 135 Class B 2002 (1) 0.02% 90% 2001 (1) (0.08) 104 2000 (0.26) 141 1999 (0.16) 121 1998 (0.31) 135 Class C 2002 (1) 0.02% 90% 2001 (1) (0.04) 104 2000 (0.18) 141 1999 (2) 0.26 121 Class S 2002 (1) 0.81% 90% 2001 (1) (3) 5.19 104 Class Y 2002 (1) 1.02% 90% 2001 (1) 0.92 104 2000 0.75 141 1999 0.86 121 1998 0.69 135 -------------------------------------------------------------------------
(1) Per share data calculated using average shares outstanding method. (2) Class of shares has been offered since February 1, 1999. All ratios for the period have been annualized, except total return and portfolio turnover. (3) Class of shares has been offered since September 24, 2001. All ratios for the period have been annualized, except total return and portfolio turnover. (4) Total return does not reflect sales charges. Total return would have been lower had certain expenses not been waived. The accompanying notes are an integral part of the financial statements. 89 SCHEDULE OF Investments September 30, 2002 LARGE CAP CORE FUND
DESCRIPTION SHARES VALUE (000) ------------------------------------------------------------------- COMMON STOCKS - 91.7% CONSUMER DISCRETIONARY - 14.6% AOL Time Warner* (A) 233,850 $ 2,736 Autozone* (A) 32,900 2,594 Best Buy* (A) 44,550 994 Carnival (A) 92,300 2,317 Clear Channel Communications* (A) 23,000 799 Costco Wholesale* (A) 22,900 741 Dollar General 167,300 2,245 Dow Jones & Company (A) 11,700 449 Gannett 22,300 1,610 Harley-Davidson (A) 36,200 1,681 Home Depot (A) 143,800 3,753 Interpublic Group (A) 26,700 423 Kohl's* (A) 43,000 2,615 Lowe's (A) 45,000 1,863 McDonald's 85,900 1,517 MGM MIRAGE* (A) 32,500 1,212 Office Depot* (A) 160,100 1,976 Omnicom Group (A) 15,900 885 Target 61,300 1,810 Toys "R" Us* (A) 77,300 787 Viacom, Cl B* (A) 51,087 2,072 Wal-Mart Stores (A) 101,600 5,003 Walt Disney 112,100 1,697 ----------- 41,779 ----------- CONSUMER STAPLES - 7.9% Anheuser-Busch (A) 43,900 2,221 Avon Products (A) 23,700 1,093 Clorox 17,500 703 Coca-Cola 84,300 4,043 Kraft Foods (A) 32,900 1,200 PepsiCo 94,600 3,495 Philip Morris 80,400 3,120 Procter & Gamble (A) 41,600 3,718 Sysco (A) 51,900 1,473 Walgreen (A) 42,900 1,320 ----------- 22,386 ----------- ENERGY - 7.2% Anadarko Petroleum (A) 28,000 1,247 Apache (A) 21,530 1,280 Baker Hughes (A) 47,000 1,364 ChevronTexaco 53,515 3,706 ConocoPhillips, Cl B 96,700 4,471 ENSCO International (A) 42,900 1,074 EOG Resources 43,100 1,550 Exxon Mobil 99,900 3,187 Nabors Industries* (A) 26,000 851 Schlumberger (A) 31,400 1,208 Transocean Sedco Forex 30,700 639 ----------- 20,577 ----------- FINANCIALS - 19.3% AFLAC (A) 61,500 1,887 Allstate 29,500 1,049 Ambac Financial Group (A) 23,000 1,239 American Express 47,900 1,494 American International Group 98,645 5,396 Bank of America 63,700 4,064 BB&T (A) 47,100 $ 1,650 Capital One Financial (A) 36,100 1,261 Chubb 27,000 1,480 Citigroup (A) 170,049 5,042 Fannie Mae 57,300 3,412 Federal Home Loan Mortgage 73,100 4,086 Fifth Third Bancorp (A) 54,050 3,309 Hartford Financial Services Group 52,600 2,157 J.P. Morgan Chase 113,700 2,159 MBNA (A) 239,412 4,400 Mellon Financial 47,400 1,229 Merrill Lynch & Company (A) 63,600 2,096 Morgan Stanley 55,000 1,863 State Street (A) 40,500 1,565 Travelers Property Casualty, Cl A * 7,346 97 Travelers Property Casualty, Cl B * 15,094 204 Wells Fargo 80,400 3,872 ----------- 55,011 ----------- HEALTH CARE - 15.5% Abbott Laboratories 79,500 3,212 Amgen* (A) 73,000 3,044 Anthem* 11,000 715 Baxter International 132,600 4,051 Biogen* 17,300 506 Biomet (A) 39,500 1,052 Cardinal Health (A) 40,775 2,536 Forest Laboratories, Cl A* (A) 19,600 1,607 Gilead Sciences* (A) 40,200 1,348 HCA (A) 44,300 2,109 HealthSouth* 134,600 559 IDEC Pharmaceuticals* (A) 36,600 1,520 Johnson & Johnson 80,600 4,359 King Pharmaceuticals* (A) 59,500 1,081 Medtronic (A) 68,300 2,877 Pfizer (A) 232,275 6,741 Pharmacia 103,000 4,005 Wyeth (A) 47,200 1,501 Zimmer Holdings* 41,090 1,575 ----------- 44,398 ----------- INDUSTRIALS - 7.4% 3M 16,900 1,859 Boeing 64,400 2,198 General Dynamics 22,100 1,797 General Electric 222,800 5,492 Honeywell International 28,100 609 Illinois Tool Works (A) 15,400 898 Molex, Cl A 85,037 1,786 Robert Half International* (A) 36,600 581 Sabre Holdings* 24,000 464 Southwest Airlines (A) 124,750 1,629 Union Pacific (A) 30,500 1,765 United Technologies (A) 38,200 2,158 ----------- 21,236 ----------- INFORMATION TECHNOLOGY - 13.6% Accenture* (A) 64,100 915 Adobe Systems 22,700 434 Analog Devices* (A) 67,900 1,338 Applied Materials* (A) 82,200 949 The accompanying notes are an integral part of the financial statements. 90 DESCRIPTION SHARES VALUE (000) ------------------------------------------------------------------- Cisco Systems* (A) 221,500 $ 2,321 Dell Computer* (A) 123,900 2,913 Electronic Data Systems (A) 16,800 235 First Data 119,200 3,332 Fiserv* 36,000 1,011 Hewlett-Packard (A) 170,656 1,992 Intel (A) 164,000 2,278 JDS Uniphase* (A) 117,120 228 KLA-Tencor* (A) 26,600 743 Linear Technology 37,600 779 Mercury Interactive* (A) 18,500 317 Micron Technology* (A) 55,100 682 Microsoft* (A) 218,200 9,544 Network Appliance* (A) 56,200 412 Novellus Systems* (A) 31,300 651 Oracle Systems* 95,300 749 QLogic* (A) 21,500 560 QUALCOMM* (A) 51,400 1,420 Rational Software* 73,500 318 SunGard Data Systems* (A) 46,600 906 Teradyne* (A) 26,800 257 Texas Instruments 111,600 1,648 USA Interactive* 66,700 1,293 Xilinx* (A) 40,700 645 ----------- 38,870 ----------- MATERIALS - 3.2% Alcoa (A) 63,900 1,233 E.I. du Pont de Nemours 54,900 1,980 International Paper (A) 30,000 1,002 Nucor 17,300 656 Praxair 52,300 2,673 Vulcan Materials (A) 27,400 991 Weyerhaeuser (A) 15,100 661 ----------- 9,196 ----------- TELECOMMUNICATION SERVICES - 1.9% ALLTEL (A) 40,000 1,605 AT&T (A) 75,100 902 Verizon Communications 109,100 2,994 ----------- 5,501 ----------- UTILITIES - 1.1% Constellation Energy (A) 50,700 1,257 Exelon 41,000 1,948 ----------- 3,205 ----------- TOTAL COMMON STOCKS 262,159 ----------- RELATED PARTY MONEY MARKET FUND - 8.4% First American Prime Obligations Fund (B) 23,883,028 23,883 ----------- TOTAL RELATED PARTY MONEY MARKET FUND 23,883 ----------- TOTAL INVESTMENTS - 100.1% (Cost $309,398) 286,042 ----------- OTHER ASSETS AND LIABILITIES, NET - (0.1)% (304) ----------- TOTAL NET ASSETS - 100.0% $ 285,738 -----------
* Non-income producing security (A) This security or a portion of this security is out on loan at September 30, 2002. Total loaned securities had a market value of $123,609,695 at September 30, 2002. (Note 6) (B) This money market fund is advised by U.S. Bancorp Asset Management, Inc., which also serves as advisor for this Fund. See also the notes to the financial statements. Cl - Class LARGE CAP GROWTH FUND
DESCRIPTION SHARES VALUE (000) ------------------------------------------------------------------- COMMON STOCKS - 96.6% CONSUMER DISCRETIONARY - 13.8% AOL Time Warner* (A) 356,490 $ 4,171 Best Buy* (A) 126,105 2,813 Clear Channel Communications* 105,990 3,683 Cox Communications, Cl A* (A) 59,000 1,451 Dollar General 307,500 4,127 Harley-Davidson (A) 34,100 1,584 Home Depot (A) 309,647 8,082 Johnson Controls (A) 28,700 2,205 Jones Apparel Group* (A) 45,500 1,397 Kohl's* (A) 78,275 4,760 Lowe's (A) 118,200 4,893 MGM MIRAGE* (A) 80,000 2,984 Office Depot* 238,100 2,938 Omnicom Group (A) 24,400 1,359 Ross Stores 40,800 1,454 Target 134,250 3,963 Viacom, Cl B* 40,610 1,647 Wal-Mart Stores 409,440 20,161 Yum! Brands* 50,800 1,408 ----------- 75,080 ----------- CONSUMER STAPLES - 10.6% Anheuser-Busch 100,850 5,103 Coca-Cola 184,480 8,848 H.J. Heinz (A) 108,090 3,607 Kimberly-Clark 170,100 9,634 Kraft Foods (A) 158,100 5,764 Kroger* (A) 115,600 1,630 PepsiCo 173,750 6,420 Philip Morris 135,800 5,269 Procter & Gamble (A) 71,500 6,391 Safeway* (A) 106,354 2,372 Walgreen 90,490 2,783 ----------- 57,821 ----------- ENERGY - 3.6% Amerada Hess 5,900 401 Anadarko Petroleum (A) 75,125 3,346 Apache (A) 48,500 2,883 Exxon Mobil 44,266 1,412 GlobalSantaFe (A) 174,322 3,896 Marathon Oil 84,930 1,926 Murphy Oil (A) 43,900 3,603 Transocean Sedco Forex 93,400 1,943 ----------- 19,410 ----------- FINANCIALS - 9.1% ACE (A) 61,320 1,816 American Express 93,200 2,906 American International Group 193,729 10,597 Capital One Financial (A) 26,690 932 Citigroup 133,526 3,959 Fannie Mae 125,030 7,444 Federal Home Loan Mortgage (A) 86,180 4,817 Goldman Sachs Group (A) 25,710 1,698 Lehman Brothers Holdings (A) 37,420 1,835 MBNA 208,050 3,824 TCF Financial (A) 42,230 1,788 Washington Mutual (A) 141,980 4,468 91 DESCRIPTION SHARES VALUE (000) ------------------------------------------------------------------- Wells Fargo 69,270 $ 3,336 ----------- 49,420 ----------- HEALTH CARE - 27.8% Abbott Laboratories 245,460 9,917 Amgen* (A) 278,410 11,610 Andrx Group* (A) 55,500 1,229 Baxter International 143,980 4,399 Biogen* (A) 83,900 2,456 Biomet (A) 94,140 2,507 Cardinal Health (A) 129,855 8,077 Eli Lilly (A) 57,660 3,191 Forest Laboratories, Cl A* (A) 44,400 3,641 Gilead Sciences* (A) 114,430 3,837 HCA (A) 166,100 7,908 IDEC Pharmaceuticals* (A) 41,180 1,710 Johnson & Johnson (A) 278,850 15,080 King Pharmaceuticals* 41,300 750 Medtronic (A) 378,110 15,926 Pfizer (A) 1,001,090 29,052 Pharmacia 336,330 13,077 Schering-Plough 78,000 1,663 WellPoint Health Networks* (A) 46,570 3,414 Wyeth 300,310 9,550 Zimmer Holdings* 63,879 2,449 ----------- 151,443 ----------- INDUSTRIALS - 10.7% 3M 41,290 4,541 Automatic Data Processing 42,000 1,460 Boeing 148,710 5,075 Cendant* (A) 107,200 1,153 Concord EFS* (A) 84,910 1,348 General Dynamics 20,300 1,651 General Electric 1,170,960 28,864 Honeywell International 71,570 1,550 Illinois Tool Works (A) 18,464 1,077 Southwest Airlines (A) 198,600 2,594 SPX* 27,800 2,805 United Parcel Service, Cl B (A) 53,300 3,333 United Technologies (A) 51,630 2,917 ----------- 58,368 ----------- INFORMATION TECHNOLOGY - 19.3% Adobe Systems 49,500 945 Agilent Technologies* (A) 62,100 811 Analog Devices* (A) 47,740 940 Applied Materials* (A) 122,480 1,415 BEA Systems* (A) 198,050 1,026 Cisco Systems* 1,028,288 10,776 Dell Computer* (A) 421,150 9,901 Electronic Data Systems (A) 50,930 712 EMC* (A) 141,170 645 First Data 45,800 1,280 International Business Machines 127,540 7,447 Intel 930,770 12,928 KLA-Tencor* (A) 13,800 386 Lexmark International* (A) 33,580 1,578 Maxim Integrated Products* 49,960 1,237 Mercury Interactive* (A) 34,760 596 Micron Technology* (A) 117,700 1,456 Microsoft* (A) 619,770 $ 27,109 Novellus Systems* (A) 22,820 475 Oracle Systems* 811,620 6,379 QUALCOMM* (A) 181,410 5,011 Rational Software* 129,520 560 Texas Instruments 388,250 5,734 USA Interactive* 136,800 2,651 VERITAS Software* (A) 117,390 1,722 Xilinx* (A) 73,460 1,163 ----------- 104,883 ----------- MATERIALS - 1.4% Air Products and Chemicals 32,960 1,385 Alcoa (A) 75,270 1,453 E.I. du Pont de Nemours 37,100 1,338 Ecolab (A) 81,145 3,386 ----------- 7,562 ----------- TELECOMMUNICATION SERVICES - 0.2% Sprint PCS Group* (A) 173,630 340 Verizon Communications 35,142 964 ----------- 1,304 ----------- UTILITIES - 0.1% Mirant* (A) 81,710 181 ----------- TOTAL COMMON STOCKS 525,472 ----------- RELATED PARTY MONEY MARKET FUND - 3.1% First American Prime Obligations Fund (B) 16,775,728 16,776 ----------- TOTAL RELATED PARTY MONEY MARKET FUND 16,776 ----------- TOTAL INVESTMENTS - 99.7% (Cost $665,862) 542,248 ----------- OTHER ASSETS AND LIABILITIES, NET - 0.3% 1,588 ----------- TOTAL NET ASSETS - 100.0% $ 543,836 -----------
* Non-income producing security (A) This security or a portion of this security is out on loan at September 30, 2002. Total loaned securities had a market value of $257,278,926 at September 30, 2002. (Note 6) (B) This money market fund is advised by U.S. Bancorp Asset Management, Inc., which also serves as the advisor for this Fund. See also the notes to the financial statements. Cl - Class The accompanying notes are an integral part of the financial statements. 92 LARGE CAP VALUE FUND
DESCRIPTION SHARES VALUE (000) ------------------------------------------------------------------- COMMON STOCKS - 98.3% CONSUMER DISCRETIONARY - 12.5% AOL Time Warner* (A) 553,200 $ 6,472 Autozone* 67,200 5,299 Best Buy* (A) 233,600 5,212 Black & Decker 173,800 7,287 Comcast, Cl A* (A) 229,900 4,796 Delphi 558,300 4,773 Eastman Kodak (A) 277,100 7,548 Federated Department Stores* (A) 330,000 9,715 Gannett (A) 164,900 11,902 General Motors (A) 119,400 4,645 Hilton Hotels (A) 517,300 5,887 Johnson Controls (A) 63,550 4,882 Jones Apparel Group* (A) 257,000 7,890 Lennar (A) 90,200 5,031 Liberty Media, Cl A* (A) 998,800 7,171 Newell Rubbermaid 235,000 7,254 Viacom, Cl B* (A) 259,500 10,523 Walt Disney (A) 347,400 5,260 ----------- 121,547 ----------- CONSUMER STAPLES - 6.8% Albertson's (A) 350,900 8,478 Coca-Cola 159,400 7,645 ConAgra Foods (A) 409,500 10,176 Kimberly-Clark (A) 150,200 8,507 Kraft Foods (A) 143,000 5,214 Philip Morris 342,400 13,285 Procter & Gamble (A) 141,500 12,647 ----------- 65,952 ----------- ENERGY - 10.5% Anadarko Petroleum (A) 201,800 8,988 Baker Hughes (A) 187,400 5,440 BP, ADR (A) 249,800 9,967 ChevronTexaco (A) 277,600 19,224 ConocoPhillips 292,100 13,507 Exxon Mobil 1,258,464 40,145 Noble* 161,900 5,019 ----------- 102,290 ----------- FINANCIALS - 31.7% ACE (A) 163,500 4,841 AFLAC (A) 390,600 11,988 Allstate 354,500 12,602 American International Group (A) 363,100 19,862 Bank of America (A) 446,900 28,512 Bank of New York 282,400 8,116 Bank One (A) 429,900 16,078 Boston Properties (REIT) 128,100 4,765 Charter One Financial 376,320 11,184 Citigroup (A) 898,902 26,652 Comerica (A) 155,150 7,481 Compass Bancshares 205,300 6,054 Fannie Mae 110,400 6,573 FleetBoston Financial 352,500 7,166 Household International (A) 209,500 5,931 J.P. Morgan Chase (A) 488,200 9,271 KeyCorp 307,500 7,678 Marshall & Ilsley 234,700 6,546 Merrill Lynch & Company (A) 481,500 $ 15,865 Morgan Stanley 436,800 14,799 Simon Property Group 137,500 4,913 St. Paul Companies (A) 339,500 9,750 Union Planters 239,100 6,566 Wachovia 263,800 8,624 Washington Mutual (A) 381,500 12,006 Wells Fargo 644,500 31,039 Zions Bancorporation 114,700 4,993 ----------- 309,855 ----------- HEALTH CARE - 4.7% Abbott Laboratories 346,600 14,003 Aetna 133,500 4,781 AmerisourceBergen (A) 90,000 6,428 HCA (A) 163,300 7,775 Merck (A) 186,300 8,516 Schering-Plough 226,500 4,829 ----------- 46,332 ----------- INDUSTRIALS - 9.0% 3M (A) 136,600 15,022 Boeing 215,900 7,369 Caterpillar (A) 250,800 9,335 FedEx 154,600 7,741 Honeywell International (A) 218,425 4,731 ITT Industries 125,750 7,838 Masco (A) 184,800 3,613 Northrop Grumman (A) 98,600 12,230 Tyco International (A) 317,200 4,473 Union Pacific (A) 133,900 7,749 United Technologies (A) 129,400 7,310 ----------- 87,411 ----------- INFORMATION TECHNOLOGY - 6.6% Cisco Systems* (A) 456,300 4,782 Computer Associates International (A) 581,200 5,580 Hewlett-Packard (A) 1,197,388 13,974 International Business Machines (A) 226,456 13,223 Microchip Technology* (A) 257,400 5,264 Microsoft* 235,600 10,305 Motorola (A) 1,094,700 11,144 ----------- 64,272 ----------- MATERIALS - 5.0% Alcoa (A) 335,300 6,471 Dow Chemical (A) 345,700 9,441 E.I. du Pont de Nemours 356,200 12,848 International Paper (A) 309,900 10,348 Praxair 184,900 9,450 ----------- 48,558 ----------- TELECOMMUNICATION SERVICES - 6.7% ALLTEL (A) 117,700 4,723 AT&T (A) 1,227,500 14,742 BellSouth 410,400 7,535 CenturyTel (A) 417,300 9,360 SBC Communications 871,826 17,524 Verizon Communications (A) 422,152 11,584 ----------- 65,468 ----------- 93 DESCRIPTION SHARES VALUE (000) ------------------------------------------------------------------- UTILITIES - 4.8% Cinergy (A) 187,400 $ 5,890 FPL Group (A) 285,700 15,371 Progress Energy (A) 252,900 10,336 Public Service Enterprises (A) 154,000 4,697 TXU (A) 265,600 11,078 ----------- 47,372 ----------- TOTAL COMMON STOCKS 959,057 ----------- RELATED PARTY MONEY MARKET FUND - 2.9% First American Prime Obligations Fund (B) 28,846,786 28,847 ----------- TOTAL RELATED PARTY MONEY MARKET FUND 28,847 ----------- TOTAL INVESTMENTS - 101.2% (Cost $1,143,586) 987,904 ----------- OTHER ASSETS AND LIABILITIES, NET - (1.2)% (12,170) ----------- TOTAL NET ASSETS - 100.0% $ 975,734 -----------
* Non-income producing security (A) This security or a portion of this security is out on loan at September 30, 2002. Total loaned securities had a market value of $426,637,929 at September 30, 2002. (Note 6) (B) This money market fund is advised by U.S. Bancorp Asset Management, Inc., which also serves as advisor for this Fund. See also the notes to the financial statements. ADR - American Depositary Receipt Cl - Class REIT - Real Estate Investment Trust The accompanying notes are an integral part of the financial statements. 94 STATEMENTS OF ASSETS AND LIABILITIES SEPTEMBER 30, 2002, IN THOUSANDS, EXCEPT PER SHARE DATA
LARGE CAP LARGE CAP LARGE CAP CORE FUND GROWTH FUND VALUE FUND -------------------------------------------------------------------------------------------------------------------- ASSETS: Investments in securities, at value* $ 286,042 $ 542,248 $ 987,904 Cash -- -- 4,108 Dividends and interest receivable 305 596 1,571 Collateral for securities loaned, at value 131,167 271,641 447,440 Receivable for investment securities sold 1,594 5,994 7,698 Capital shares sold 248 369 676 Other receivables -- 5 1 Prepaid expenses and other assets 15 27 32 -------------------------------------------------------------------------------------------------------------------- TOTAL ASSETS 419,371 820,880 1,449,430 ==================================================================================================================== LIABILITIES: Written options, at value -- 84 -- Bank overdraft 1 1 -- Payable for securities purchased 1,929 4,040 24,152 Payable upon return of securities loaned 131,167 271,641 447,440 Capital shares redeemed 320 870 1,243 Payable for advisory, co-administration, and custodian fees 205 349 789 Distribution and shareholder servicing fees 9 55 64 Accrued expenses and other liabilities 2 4 8 -------------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES 133,633 277,044 473,696 ==================================================================================================================== NET ASSETS $ 285,738 $ 543,836 $ 975,734 ==================================================================================================================== COMPOSITION OF NET ASSETS: Portfolio capital $ 382,486 $ 953,245 $ 1,228,046 Undistributed net investment income (loss) 443 -- -- Accumulated net realized loss (73,835) (285,833) (96,630) Unrealized depreciation of investments (23,356) (123,614) (155,682) Unrealized appreciation of options written -- 38 -- -------------------------------------------------------------------------------------------------------------------- NET ASSETS $ 285,738 $ 543,836 $ 975,734 ==================================================================================================================== *Investments in securities, at cost $ 309,398 $ 665,862 $ 1,143,586 CLASS A: Net assets $ 24,647 $ 52,419 $ 85,182 Shares issued and outstanding ($0.0001 par value -- 2 billion authorized) 1,286 7,754 6,669 Net asset value and redemption price per share $ 19.16 $ 6.76 $ 12.77 Maximum offering price per share (A) $ 20.29 $ 7.15 $ 13.51 CLASS B: Net assets $ 2,928 $ 36,546 $ 33,720 Shares issued and outstanding ($0.0001 par value -- 2 billion authorized) 157 5,673 2,686 Net asset value and offering price per share (C) $ 18.64 $ 6.44 $ 12.55 CLASS C: Net assets $ 476 $ 9,652 $ 7,524 Shares issued and outstanding ($0.0001 par value -- 2 billion authorized) 25 1,469 593 Net asset value per share (C) $ 19.03 $ 6.57 $ 12.70 Maximum offering price per share (B) $ 19.22 $ 6.64 $ 12.83 CLASS S: Net assets $ 2,376 $ 9,020 $ 24,129 Shares issued and outstanding ($0.0001 par value -- 2 billion authorized) 124 1,335 1,890 Net asset value, offering price, and redemption price per share $ 19.17 $ 6.76 $ 12.77 CLASS Y: Net assets $ 255,311 $ 436,199 $ 825,179 Shares issued and outstanding ($0.0001 par value -- 2 billion authorized) 13,036 63,592 64,447 Net asset value, offering price, and redemption price per share $ 19.59 $ 6.86 $ 12.80 --------------------------------------------------------------------------------------------------------------------
(A) The offering price is calculated by dividing the net asset value by 1 minus the maximum sales charge of 5.50%. (B) The offering price is calculated by dividing the net asset value by 1 minus the maximum sales charge of 1.00%. (C) Class B and C have a contingent deferred sales charge. For a description of a possible redemption charge, see the notes to the financial statements. The accompanying notes are an integral part of the financial statements. 95 STATEMENTS OF OPERATIONS FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2002, IN THOUSANDS
LARGE CAP LARGE CAP LARGE CAP CORE FUND GROWTH FUND VALUE FUND -------------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME: Interest $ 518 $ 172 $ 603 Dividends 3,468 3,377 21,063 Less: Foreign taxes withheld (3) (1) (28) Securities lending 91 79 267 Other income 6 6 327 -------------------------------------------------------------------------------------------------------------------- TOTAL INVESTMENT INCOME 4,080 3,633 22,232 ==================================================================================================================== EXPENSES: Investment advisory fees 2,328 2,511 7,212 Co-administration fees and expenses (including per account transfer agency fees) 1,030 1,264 3,010 Custodian fees 36 39 111 Directors' fees 4 7 10 Registration fees 48 45 65 Professional fees 6 8 22 Printing 16 25 13 Other 8 21 15 Distribution and shareholder servicing fees - Class A 83 73 245 Distribution and shareholder servicing fees - Class B 34 471 406 Distribution and shareholder servicing fees - Class C 4 43 105 Shareholder servicing fees - Class S 6 33 28 -------------------------------------------------------------------------------------------------------------------- TOTAL EXPENSES 3,603 4,540 11,242 ==================================================================================================================== Less: Waiver of expenses (250) (443) (496) -------------------------------------------------------------------------------------------------------------------- TOTAL NET EXPENSES 3,353 4,097 10,746 ==================================================================================================================== INVESTMENT INCOME (LOSS) - NET 727 (464) 11,486 ==================================================================================================================== REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS - NET: Net realized loss on investments (38,565) (122,684) (69,319) Net realized loss on options written -- (856) -- Net change in unrealized depreciation of investments (37,497) (99,811) (202,478) Net change in unrealized appreciation of options written -- 244 -- -------------------------------------------------------------------------------------------------------------------- NET LOSS ON INVESTMENTS (76,062) (223,107) (271,797) ==================================================================================================================== NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (75,335) $ (223,571) $ (260,311) ====================================================================================================================
The accompanying notes are an integral part of the financial statements. 96 (This page has been left blank intentionally.) 97 STATEMENTS OF CHANGES IN NET ASSETS IN THOUSANDS
LARGE CAP CORE FUND -------------------------------------------------------------------------------------------------------------------- 10/1/01 11/1/00 11/1/99 TO TO TO 9/30/02 9/30/01 10/31/00 -------------------------------------------------------------------------------------------------------------------- OPERATIONS: Investment income (loss) - net $ 727 $ 651 $ (500) Net realized gain (loss) on investments (38,565) (34,753) 43,914 Net realized gain (loss) on options written -- -- -- Net change in unrealized appreciation or depreciation of investments (37,497) (145,446) 25,284 Net change in unrealized appreciation or depreciation of options written -- -- -- -------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (75,335) (179,548) 68,698 -------------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Investment income - net: Class A (68) (1) -- Class B (3) -- -- Class C -- -- -- Class S (5) -- -- Class Y (838) -- -- Net realized gain on investments (3): Class A -- (5,730) (2,451) Class B -- (180) (42) Class C -- -- -- Class Y -- (37,412) (15,710) Tax return of capital (4) Class A -- -- -- Class B -- -- -- Class C -- -- -- Class S -- -- -- Class Y -- -- -- -------------------------------------------------------------------------------------------------------------------- Total distributions (914) (43,323) (18,203) ==================================================================================================================== CAPITAL SHARE TRANSACTIONS (1): Class A: Proceeds from sales 3,585 4,047 11,023 Reinvestment of distributions 65 5,442 2,404 Payments for redemptions (6,469) (8,246) (16,087) Shares issued in connection with the acquisition of Fund net assets -- 7,198 -- -------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from Class A transactions (2,819) 8,441 (2,660) -------------------------------------------------------------------------------------------------------------------- Class B: Proceeds from sales 1,361 1,354 1,376 Reinvestment of distributions 3 175 40 Payments for redemptions (511) (458) (750) Shares issued in connection with the acquisition of Fund net assets -- 1,949 -- -------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from Class B transactions 853 3,020 666 -------------------------------------------------------------------------------------------------------------------- Class C: Proceeds from sales 1,034 -- -- Reinvestment of distributions -- -- -- Payments for redemptions (350) -- -- Shares issued in connection with the acquisition of Fund net assets -- -- -- -------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from Class C transactions 684 -- -- -------------------------------------------------------------------------------------------------------------------- Class S (2): Proceeds from sales 2,442 1,840 -- Reinvestment of distributions 4 -- -- Payments for redemptions (2,382) (1,949) -- Shares issued in connection with the acquisition of Fund net assets -- 4,274 -- -------------------------------------------------------------------------------------------------------------------- Increase in net assets from Class S transactions 64 4,165 -- -------------------------------------------------------------------------------------------------------------------- Class Y (2): Proceeds from sales 106,388 184,099 265,505 Reinvestment of distributions 502 30,075 12,621 Payments for redemptions (99,984) (124,828) (289,538) Shares issued in connection with the acquisition of Fund net assets -- 82,317 -- -------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from Class Y transactions 6,906 171,663 (11,412) -------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions 5,688 187,289 (13,406) -------------------------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets (70,561) (35,582) 37,089 NET ASSETS AT BEGINNING OF FISCAL PERIOD 356,299 391,881 354,792 ==================================================================================================================== NET ASSETS AT END OF FISCAL PERIOD $ 285,738 $ 356,299 $ 391,881 ==================================================================================================================== UNDISTRIBUTED NET INVESTMENT INCOME (LOSS) AT END OF FISCAL PERIOD $ 443 $ 636 $ (5) ==================================================================================================================== 98 LARGE CAP GROWTH FUND -------------------------------------------------------------------------------------------------------------------- 10/1/01 11/1/00 12/1/99 TO TO TO 9/30/02 9/30/01 10/31/00 -------------------------------------------------------------------------------------------------------------------- OPERATIONS: Investment income (loss) - net $ (464) $ (1,267) $ (698) Net realized gain (loss) on investments (122,684) (13,666) 8,295 Net realized gain (loss) on options written (856) 653 721 Net change in unrealized appreciation or depreciation of investments (99,811) (128,509) 16,005 Net change in unrealized appreciation or depreciation of options written 244 (32) -- -------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (223,571) (142,821) 24,323 -------------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Investment income - net: Class A -- -- -- Class B -- -- -- Class C -- -- -- Class S -- -- -- Class Y -- -- -- Net realized gain on investments (3): Class A -- (35) -- Class B -- (2,742) -- Class C -- -- -- Class Y -- (6,486) -- Tax return of capital (4) Class A -- -- -- Class B -- -- -- Class C -- -- -- Class S -- -- -- Class Y -- -- -- -------------------------------------------------------------------------------------------------------------------- Total distributions -- (9,263) -- ==================================================================================================================== CAPITAL SHARE TRANSACTIONS (1): Class A: Proceeds from sales 3,970 10,361 1,271 Reinvestment of distributions -- 33 -- Payments for redemptions (12,151) (555) (51) Shares issued in connection with the acquisition of Fund net assets 73,899 -- -- -------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from Class A transactions 65,718 9,839 1,220 -------------------------------------------------------------------------------------------------------------------- Class B: Proceeds from sales 1,624 5,361 17,835 Reinvestment of distributions -- 2,706 -- Payments for redemptions (12,509) (20,732) (15,602) Shares issued in connection with the acquisition of Fund net assets 16,695 -- -- -------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from Class B transactions 5,810 (12,665) 2,233 -------------------------------------------------------------------------------------------------------------------- Class C: Proceeds from sales 1,033 -- -- Reinvestment of distributions -- -- -- Payments for redemptions (1,369) -- -- Shares issued in connection with the acquisition of Fund net assets 13,940 -- -- -------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from Class C transactions 13,604 -- -- -------------------------------------------------------------------------------------------------------------------- Class S (2): Proceeds from sales 5,253 15,649 -- Reinvestment of distributions -- -- -- Payments for redemptions (4,913) (1,217) -- Shares issued in connection with the acquisition of Fund net assets 153 -- -- -------------------------------------------------------------------------------------------------------------------- Increase in net assets from Class S transactions 493 14,432 -- -------------------------------------------------------------------------------------------------------------------- Class Y (2): Proceeds from sales 89,624 56,423 65,691 Reinvestment of distributions -- 3,588 -- Payments for redemptions (108,337) (62,432) (28,670) Shares issued in connection with the acquisition of Fund net assets 501,952 -- -- -------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from Class Y transactions 483,239 (2,421) 37,021 -------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions 568,864 9,185 40,474 -------------------------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets 345,293 (142,899) 64,797 NET ASSETS AT BEGINNING OF FISCAL PERIOD 198,543 341,442 276,645 ==================================================================================================================== NET ASSETS AT END OF FISCAL PERIOD $ 543,836 $ 198,543 $ 341,442 ==================================================================================================================== UNDISTRIBUTED NET INVESTMENT INCOME (LOSS) AT END OF FISCAL PERIOD $ -- $ -- $ -- ==================================================================================================================== LARGE CAP VALUE FUND ----------------------------------------------------------------------------------------------------- 10/1/01 10/1/00 TO TO 9/30/02 9/30/01 ----------------------------------------------------------------------------------------------------- OPERATIONS: Investment income (loss) - net $ 11,486 $ 13,950 Net realized gain (loss) on investments (69,319) (16,926) Net realized gain (loss) on options written -- -- Net change in unrealized appreciation or depreciation of investments (202,478) (171,917) Net change in unrealized appreciation or depreciation of options written -- -- ----------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (260,311) (174,893) ----------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Investment income - net: Class A (821) (1,040) Class B (63) (101) Class C (16) (19) Class S (104) -- Class Y (10,413) (12,725) Net realized gain on investments (3): Class A -- (12,851) Class B -- (4,647) Class C -- (613) Class Y -- (109,515) Tax return of capital (4) Class A (25) -- Class B (10) -- Class C (2) -- Class S (7) -- Class Y (240) -- ----------------------------------------------------------------------------------------------------- Total distributions (11,701) (141,511) ===================================================================================================== CAPITAL SHARE TRANSACTIONS (1): Class A: Proceeds from sales 10,151 17,226 Reinvestment of distributions 804 13,117 Payments for redemptions (29,928) (44,963) Shares issued in connection with the acquisition of Fund net assets 33,799 -- ----------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from Class A transactions 14,826 (14,620) ----------------------------------------------------------------------------------------------------- Class B: Proceeds from sales 2,307 3,257 Reinvestment of distributions 71 4,693 Payments for redemptions (9,549) (8,196) Shares issued in connection with the acquisition of Fund net assets 12,359 -- ----------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from Class B transactions 5,188 (246) ----------------------------------------------------------------------------------------------------- Class C: Proceeds from sales 2,449 7,663 Reinvestment of distributions 18 632 Payments for redemptions (3,164) (2,374) Shares issued in connection with the acquisition of Fund net assets 91 -- ----------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from Class C transactions (606) 5,921 ----------------------------------------------------------------------------------------------------- Class S (2): Proceeds from sales 1,898 -- Reinvestment of distributions 109 -- Payments for redemptions (4,834) -- Shares issued in connection with the acquisition of Fund net assets 35,966 -- ----------------------------------------------------------------------------------------------------- Increase in net assets from Class S transactions 33,139 -- ----------------------------------------------------------------------------------------------------- Class Y (2): Proceeds from sales 161,444 269,455 Reinvestment of distributions 6,422 87,684 Payments for redemptions (528,969) (300,433) Shares issued in connection with the acquisition of Fund net assets 443,799 -- ----------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from Class Y transactions 82,696 56,706 ----------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions 135,243 47,761 ----------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets (136,769) (268,643) NET ASSETS AT BEGINNING OF FISCAL PERIOD 1,112,503 1,381,146 ===================================================================================================== NET ASSETS AT END OF FISCAL PERIOD $ 975,734 $ 1,112,503 ===================================================================================================== UNDISTRIBUTED NET INVESTMENT INCOME (LOSS) AT END OF FISCAL PERIOD $ -- $ 350 =====================================================================================================
(1) See Note 4 in the notes to the financial statements for additional information. (2) On September 24, 2001, Institutional Class and Class Y of Large Cap Core Fund were redesignated as Class Y and Class S, respectively. (3) Includes distributions in excess of net realized gains of $10,903 and $622 for the period ended September 24, 2001, for the Large Cap Value and Large Cap Core Funds, respectively. (4) Distributions from tax return of capital for the Large Cap Value Fund are less than $0.01 per share for the fiscal year ended September 30, 2002. The accompanying notes are an integral part of the financial statements. 99 FINANCIAL HIGHLIGHTS FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS ENDED SEPTEMBER 30, UNLESS OTHERWISE INDICATED.
REALIZED AND NET ASSET UNREALIZED DIVIDENDS VALUE NET GAINS OR FROM NET DISTRIBUTIONS BEGINNING INVESTMENT (LOSSES) ON INVESTMENT FROM OF PERIOD INCOME (LOSS) INVESTMENTS INCOME CAPITAL GAINS -------------------------------------------------------------------------------------------------------------------- LARGE CAP CORE FUND (1) Class A (2) 2002 $ 24.44 $ -- $ (5.23) $ (0.05) $ -- 2001 (3) 43.33 (0.01) (14.00) -- (4.88) 2000 37.96 (0.15) 7.55 -- (2.03) 1999 35.72 (0.12) 6.42 (0.02) (4.04) 1998 35.27 (0.02) 5.66 (0.02) (5.17) Class B (2) 2002 $ 23.94 $ (0.18) $ (5.09) $ (0.03) $ -- 2001 (3) 42.80 (0.22) (13.76) -- (4.88) 2000 37.78 (0.47) 7.52 -- (2.03) 1999 (4) 36.92 (0.29) 1.15 -- -- Class C (2) 2002 $ 24.44 $ (0.18) $ (5.19) $ (0.04) $ -- 2001 (5) 23.75 -- 0.69 -- -- Class S (2) 2002 $ 24.45 $ -- $ (5.23) $ (0.05) $ -- 2001 (6) 35.53 (0.01) (11.07) -- -- Class Y (2) 2002 $ 24.93 $ 0.06 $ (5.33) $ (0.07) $ -- 2001 (3) 44.00 0.06 (14.25) -- (4.88) 2000 38.42 (0.04) 7.65 -- (2.03) 1999 36.05 (0.02) 6.47 (0.04) (4.04) 1998 35.48 0.07 5.70 (0.03) (5.17) -------------------------------------------------------------------------------------------------------------------- LARGE CAP GROWTH FUND (7) Class A 2002 $ 9.27 $ (0.01) $ (2.50) $ -- $ -- 2001 (3) 16.36 (0.05) (6.59) -- (0.45) 2000 (8) (9) 17.01 (0.02) (0.63) -- -- Class B 2002 $ 8.90 $ (0.02) $ (2.44) $ -- $ -- 2001 15.81 (0.13) (6.33) -- (0.45) 2000 (8) 14.57 (0.06) 1.30 -- -- 1999 11.91 (0.02) 2.96 (0.01) (0.27) 1998 10.47 0.01 2.04 (0.02) (0.59) Class C 2002 $ 9.06 $ (0.03) $ (2.46) $ -- $ -- 2001 (5) 8.84 -- 0.22 -- -- Class S 2002 $ 9.27 $ (0.03) $ (2.48) $ -- $ -- 2001 (10) 15.15 (0.05) (5.83) -- -- Class Y 2002 $ 9.38 $ (0.04) $ (2.48) $ -- $ -- 2001 (3) 16.52 (0.03) (6.66) -- (0.45) 2000 (8) 15.18 (0.02) 1.36 -- -- 1999 12.39 0.04 3.07 (0.04) (0.28) 1998 10.91 0.04 2.09 (0.04) (0.61) -------------------------------------------------------------------------------------------------------------------- 100 RATIO OF NET NET ASSETS RATIO OF INVESTMENT VALUE NET ASSETS EXPENSES TO INCOME (LOSS) END OF TOTAL END OF AVERAGE TO AVERAGE PERIOD RETURN (11) PERIOD (000) NET ASSETS NET ASSETS --------------------------------------------------------------------------------------------------------------------- LARGE CAP CORE FUND (1) Class A (2) 2002 $ 19.16 (21.46)% $ 24,647 1.15% (0.02)% 2001 (3) 24.44 (35.83) 34,330 1.20 (0.04) 2000 43.33 19.92 51,232 1.20 (0.35) 1999 37.96 17.92 47,238 1.19 (0.31) 1998 35.72 18.58 38,213 1.14 (0.05) Class B (2) 2002 $ 18.64 (22.06)% $ 2,928 1.90% (0.75)% 2001 (3) 23.94 (36.28) 2,954 1.93 (0.79) 2000 42.80 19.06 1,483 1.95 (1.10) 1999 (4) 37.78 2.33 722 1.96 (1.17) Class C (2) 2002 $ 19.03 (22.03)% $ 476 1.90% (0.73)% 2001 (5) 24.44 2.95 -- -- -- Class S (2) 2002 $ 19.17 (21.45)% $ 2,376 1.15% -- 2001 (6) 24.45 (31.16) 2,802 1.18 (0.03) Class Y (2) 2002 $ 19.59 (21.23)% $ 255,311 0.90% 0.24% 2001 (3) 24.93 (35.70) 316,213 0.94 0.20 2000 44.00 20.24 339,166 0.95 (0.10) 1999 38.42 18.18 306,832 0.94 (0.06) 1998 36.05 18.89 197,798 0.89 0.20 --------------------------------------------------------------------------------------------------------------------- LARGE CAP GROWTH FUND (7) Class A 2002 $ 6.76 (27.08)% $ 52,419 1.15% (0.20)% 2001 (3) 9.27 (41.57) 8,598 1.39 (0.55) 2000 (8) (9) 16.36 (3.82) 1,177 1.40 (0.75) Class B 2002 $ 6.44 (27.64)% $ 36,546 1.90% (1.00)% 2001 8.90 (41.97) 46,103 2.07 (1.19) 2000 (8) 15.81 8.50 100,689 1.38 (0.40) 1999 14.57 25.26 90,468 1.36 (0.08) 1998 11.91 20.76 66,478 1.34 0.12 Class C 2002 $ 6.57 (27.48)% $ 9,652 1.90% (0.91)% 2001 (5) 9.06 2.58 -- -- -- Class S 2002 $ 6.76 (27.08)% $ 9,020 1.15% (0.25)% 2001 (10) 9.27 (38.82) 11,881 1.39 (0.55) Class Y 2002 $ 6.86 (26.87)% $ 436,199 0.90% 0.05% 2001 (3) 9.38 (41.46) 131,961 1.14 (0.27) 2000 (8) 16.52 8.83 239,576 1.13 (0.15) 1999 15.18 25.61 186,177 1.11 0.17 1998 12.39 20.91 121,475 1.09 0.37 --------------------------------------------------------------------------------------------------------------------- RATIO OF RATIO OF NET EXPENSES TO INVESTMENT AVERAGE INCOME (LOSS) NET ASSETS TO AVERAGE NET PORTFOLIO (EXCLUDING ASSETS (EXCLUDING TURNOVER WAIVERS) WAIVERS) RATE ----------------------------------------------------------------------------------------- LARGE CAP CORE FUND (1) Class A (2) 2002 1.22% (0.09)% 43% 2001 (3) 1.24 (0.08) 40 2000 1.21 (0.36) 60 1999 1.20 (0.32) 59 1998 1.21 (0.12) 52 Class B (2) 2002 1.97% (0.82)% 43% 2001 (3) 1.97 (0.83) 40 2000 1.96 (1.11) 60 1999 (4) 1.97 (1.18) 59 Class C (2) 2002 1.97% (0.80)% 43% 2001 (5) -- -- 40 Class S (2) 2002 1.22% (0.07)% 43% 2001 (6) 1.22 (0.07) 40 Class Y (2) 2002 0.97% 0.17% 43% 2001 (3) 0.98 0.16 40 2000 0.96 (0.11) 60 1999 0.95 (0.07) 59 1998 0.96 0.13 52 ----------------------------------------------------------------------------------------- LARGE CAP GROWTH FUND (7) Class A 2002 1.26% (0.31) 62% 2001 (3) 1.56 (0.72) 38 2000 (8) (9) 1.49 (0.84) 35 Class B 2002 2.01% (1.11)% 62% 2001 2.19 (1.31) 38 2000 (8) 1.48 (0.50) 35 1999 1.52 (0.24) 28 1998 1.54 (0.08) 48 Class C 2002 2.01% (1.02)% 62% 2001 (5) -- -- 38 Class S 2002 1.26% (0.36)% 62% 2001 (10) 1.60 (0.76) 38 Class Y 2002 1.01% (0.06)% 62% 2001 (3) 1.26 (0.39) 38 2000 (8) 1.23 (0.25) 35 1999 1.27 0.01 28 1998 1.29 0.17 48 -----------------------------------------------------------------------------------------
(1) The financial highlights for the Large Cap Core Fund as set forth herein include the historical financial highlights of the Firstar Large Cap Core Equity Fund. The assets of the Firstar Fund were acquired by the First American Large Cap Core Fund on September 24, 2001. In connection with such acquisition, (i) Class A shares of the Firstar Large Cap Core Fund were exchanged for Class A shares of the First American Large Cap Core Fund, (ii) Firstar Class B shares were exchanged for Class B shares of the First American Fund, (iii) Firstar Class Y shares were exchanged for Class S shares of the First American Fund, and (iv) Firstar Institutional Class shares were exchanged for Class Y shares of the First American Fund. (2) Per share data calculated using average shares outstanding method. (3) Effective in 2001, the Fund's fiscal year end was changed from October 31 to September 30. All ratios for the period have been annualized, except total return and portfolio turnover. (4) Class of shares has been offered since March 1, 1999. All ratios for the period have been annualized, except total return and portfolio turnover. (5) Class of shares has been offered since September 24, 2001. All ratios for the period have been annualized, except total return and portfolio turnover. (6) Class of shares has been offered since November 27, 2000. All ratios for the period have been annualized, except total return and portfolio turnover. (7) The financial highlights for the Large Cap Growth Fund as set forth herein include the historical financial highlights of the Firstar Large Cap Growth Fund. The assets of the Firstar Fund were acquired by the First American Capital Growth Fund on September 24, 2001. In connection with such acquisition, (i) Class A shares of the Firstar Large Cap Growth Fund were exchanged for Class A shares of the First American Capital Growth Fund, (ii) Firstar Class B shares were exchanged for Class B shares of the First American Fund, (iii) Firstar Class Y shares were exchanged for Class S shares of the First American Fund, and (iv) Firstar Institutional Class shares were exchanged for Class Y shares of the First American Fund. (8) Effective in 2000, the Fund's fiscal year end was changed from November 30 to October 31. (9) Class of shares has been offered since March 31, 2000. All ratios for the period have been annualized, except total return and portfolio turnover. (10) Class of shares has been offered since December 11, 2000. All ratios for the period have been annualized, except total return and portfolio turnover. (11) Total return does not reflect sales charges. Total return would have been lower had certain expenses not been waived. The accompanying notes are an integral part of the financial statements. 101 FINANCIAL HIGHLIGHTS FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS ENDED SEPTEMBER 30, UNLESS OTHERWISE INDICATED.
REALIZED AND NET ASSET UNREALIZED DIVIDENDS VALUE NET GAINS OR FROM NET DISTRIBUTIONS BEGINNING INVESTMENT (LOSSES) ON INVESTMENT FROM OF PERIOD INCOME INVESTMENTS INCOME CAPITAL GAINS -------------------------------------------------------------------------------------------------------------- LARGE CAP VALUE FUND Class A 2002 (1) $ 15.98 $ 0.14 $ (3.21) $ (0.14) $ -- 2001 (1) 20.59 0.16 (2.67) (0.16) (1.94) 2000 23.12 0.17 0.22 (0.17) (2.75) 1999 22.39 0.19 4.44 (0.20) (3.70) 1998 28.74 0.29 (2.59) (0.29) (3.76) Class B 2002 (1) $ 15.71 $ 0.02 $ (3.15) $ (0.03) $ -- 2001 (1) 20.30 0.02 (2.63) (0.04) (1.94) 2000 22.87 0.05 0.18 (0.05) (2.75) 1999 22.21 0.07 4.36 (0.07) (3.70) 1998 28.55 0.13 (2.58) (0.13) (3.76) Class C 2002 (1) $ 15.90 $ 0.02 $ (3.19) $ (0.03) $ -- 2001 (1) 20.51 0.02 (2.65) (0.04) (1.94) 2000 23.09 0.06 0.17 (0.06) (2.75) 1999 (2) 22.79 0.08 0.30 (0.08) -- Class S 2002 (1) $ 15.97 $ 0.13 $ (3.18) $ (0.15) $ -- 2001 (1) (3) 15.32 -- 0.65 -- -- Class Y 2002 (1) $ 16.02 $ 0.18 $ (3.22) $ (0.18) $ -- 2001 (1) 20.64 0.21 (2.68) (0.21) (1.94) 2000 23.17 0.23 0.21 (0.22) (2.75) 1999 22.42 0.25 4.46 (0.26) (3.70) 1998 28.75 0.35 (2.57) (0.35) (3.76) -------------------------------------------------------------------------------------------------------------- 102 RATIO OF RATIO OF NET EXPENSES TO NET ASSET RATIO OF INVESTMENT AVERAGE VALUE NET ASSETS EXPENSES TO INCOME (LOSS) NET ASSETS END OF TOTAL END OF AVERAGE TO AVERAGE (EXCLUDING PERIOD RETURN (4) PERIOD (000) NET ASSETS NET ASSETS WAIVERS) ------------------------------------------------------------------------------------------------------------------------------ LARGE CAP VALUE FUND Class A 2002 (1) $ 12.77 (19.37)% $ 85,182 1.15% 0.86% 1.20% 2001 (1) 15.98 (13.72) 94,064 1.05 0.88 1.15 2000 20.59 0.92 138,146 1.05 (0.45) 1.13 1999 23.12 21.93 177,251 1.05 0.82 1.15 1998 22.39 (8.77) 170,529 1.05 1.21 1.13 Class B 2002 (1) $ 12.55 (19.96)% $ 33,720 1.90% 0.11% 1.95% 2001 (1) 15.71 (14.42) 38,108 1.80 0.13 1.90 2000 20.30 0.17 49,662 1.80 (1.20) 1.88 1999 22.87 21.07 61,711 1.80 0.07 1.90 1998 22.21 (9.37) 56,259 1.80 0.41 1.88 Class C 2002 (1) $ 12.70 (19.97)% $ 7,524 1.90% 0.11% 1.95% 2001 (1) 15.90 (14.36) 10,141 1.80 0.12 1.90 2000 20.51 0.17 6,551 1.80 (1.20) 1.88 1999 (2) 23.09 1.65 1,398 1.80 -- 1.90 Class S 2002 (1) $ 12.77 (19.36)% $ 24,129 1.15% 0.90% 1.20% 2001 (1) (3) 15.97 4.24 -- -- -- -- Class Y 2002 (1) $ 12.80 (19.22)% $ 825,179 0.90% 1.11% 0.95% 2001 (1) 16.02 (13.53) 970,190 0.80 1.13 0.90 2000 20.64 1.17 1,186,787 0.80 (0.20) 0.88 1999 23.17 22.28 1,343,207 0.80 1.07 0.90 1998 22.42 (8.47) 1,253,845 0.80 1.40 0.88 ------------------------------------------------------------------------------------------------------------------------------ RATIO OF NET INVESTMENT INCOME (LOSS) TO AVERAGE NET PORTFOLIO ASSETS (EXCLUDING TURNOVER WAIVERS) RATE ------------------------------------------------------------------------- LARGE CAP VALUE FUND Class A 2002 (1) 0.81% 82% 2001 (1) 0.78 64 2000 (0.53) 68 1999 0.72 61 1998 1.13 74 Class B 2002 (1) 0.06% 82% 2001 (1) 0.03 64 2000 (1.28) 68 1999 (0.03) 61 1998 0.33 74 Class C 2002 (1) 0.06% 82% 2001 (1) 0.02 64 2000 (1.28) 68 1999 (2) (0.10) 61 Class S 2002 (1) 0.85% 82% 2001 (1) (3) -- 64 Class Y 2002 (1) 1.06% 82% 2001 (1) 1.03 64 2000 (0.28) 68 1999 0.97 61 1998 1.32 74 -------------------------------------------------------------------------
(1) Per share data calculated using average shares outstanding method. (2) Class of shares has been offered since February 1, 1999. All ratios for the period have been annualized, except total return and portfolio turnover. (3) Class of shares has been offered since September 24, 2001. All ratios for the period have been annualized, except total return and portfolio turnover. (4) Total return does not reflect sales charges. Total return would have been lower had certain expenses not been waived. The accompanying notes are an integral part of the financial statements. 103 SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2002 BALANCED FUND
DESCRIPTION SHARES VALUE (000) -------------------------------------------------------------------------------- COMMON STOCKS - 58.3% CONSUMER DISCRETIONARY - 11.0% 4Kids Entertainment* (A) 28,100 $ 667 Abercrombie & Fitch* (A) 10,805 213 Advanced Auto Parts* (A) 17,900 944 Alliance Atlantis Communications, Cl B* 26,600 264 AOL Time Warner* (A) 192,560 2,253 Autozone* (A) 24,900 1,964 Beazer Homes* (A) 4,000 244 Belo, Cl A 15,400 337 Best Buy* (A) 33,670 751 Brinker International* (A) 9,200 238 Carnival (A) 69,300 1,739 Catalina Marketing, Cl C* (A) 16,400 461 Cato, Cl A 3,800 72 CBRL Group (A) 15,800 361 CDW Computer Centers* (A) 12,200 517 Claire's Stores 11,225 245 Clear Channel Communications* (A) 17,000 591 Costco Wholesale*(A) 17,100 554 CSK Auto* 18,300 228 Cumulus Media, Cl A* 7,350 130 Dollar General 173,265 2,325 Dollar Tree Stores* (A) 12,900 284 Dow Jones & Company (A) 8,700 334 Electronics Boutique Holdings* (A) 15,900 436 Fairmont Hotels & Resorts 23,600 562 Finish Line, Cl A* 14,450 130 Fox Entertainment Group* (A) 29,500 650 Gannett 17,200 1,241 Gaylord Entertainment* 17,700 335 GTECH Holdings* (A) 8,300 206 Gymboree* (A) 1,265 21 Harley-Davidson (A) 22,900 1,064 Hilton Hotels 19,700 224 Home Depot (A) 107,490 2,805 Hot Topic* (A) 18,250 329 International Speedway, Cl A 3,300 131 Interpublic Group of Companies 19,100 303 Kirkland's* (A) 18,300 313 Kohl's*(A) 32,100 1,952 Lin TV, Cl A* (A) 6,400 158 Lowe's (A) 32,800 1,358 Mandalay Resort Group* (A) 6,300 211 Maytag 16,000 371 McDonald's 66,700 1,178 MGM MIRAGE* (A) 26,600 992 Michael's Stores* 5,500 251 Mohawk Industries* 7,000 348 Office Depot* (A) 124,700 1,539 Omnicom Group (A) 12,330 687 Orient Express Hotels* (A) 22,100 302 O'Reilly Automotive* (A) 16,100 461 Panera Bread, Cl A* (A) 17,600 475 Park Place Entertainment* (A) 32,500 258 Pinnacle Entertainment* 9,400 69 Regal Entertainment Group, Cl A* 11,885 212 Ross Stores 2,600 93 Ruby Tuesday (A) 52,600 988 Scholastic* (A) 29,000 1,296 Target 47,200 $ 1,393 The Wet Seal, Cl A* 27,950 280 Toll Brothers* (A) 11,300 246 Too* 13,050 304 Toys "R" Us* (A) 56,300 573 Ultimate Electronics* (A) 18,400 235 USA Networks* 84,700 1,641 ValueVision International* 13,400 158 Viacom, Cl B* (A) 37,946 1,539 Wal-Mart Stores (A) 78,101 3,846 Walt Disney 82,400 1,248 Washington Post, Cl B 1,200 779 Westwood One* (A) 22,100 790 ---------- 50,697 ---------- CONSUMER STAPLES - 4.1% Anheuser-Busch 32,400 1,639 Avon Products (A) 17,700 816 Bunge Limited 17,775 430 Clorox 13,500 542 Coca-Cola 61,200 2,935 Dial (A) 10,000 215 Dreyer's Grand Ice Cream 3,430 240 Hormel Foods 8,600 188 Kraft Foods (A) 25,330 924 Pepsi Bottling 4,500 105 PepsiCo 70,700 2,612 Performance Food Group* (A) 22,970 780 Philip Morris 60,700 2,355 Procter & Gamble (A) 31,700 2,833 Smithfield Foods* (A) 7,200 113 Sysco (A) 38,554 1,095 Tyson Foods, Cl A 23,500 273 Walgreen (A) 32,830 1,010 ---------- 19,105 ---------- ENERGY - 4.5% Anadarko Petroleum (A) 20,700 922 Apache (A) 15,690 933 Atwood Oceanics* 6,100 178 Baker Hughes (A) 15,200 441 Cal Dive International* 27,300 551 ChevronTexaco 17,477 1,210 ConocoPhillips 68,400 3,163 Enbridge Energy Partners 12,010 526 ENSCO International (A) 37,800 947 EOG Resources 32,400 1,165 Equitable Resources 14,000 484 Exxon Mobil 75,076 2,395 FMC Technologies* 25,940 435 Frontier Oil 5,500 68 Grant Prideco* 5,000 43 Helmerich & Payne 10,800 370 Knightsbridge Tanker (A) 4,050 48 Lone Star Technologies* 54,350 644 Nabors Industries* (A) 20,500 671 National-Oilwell* (A) 23,650 458 Noble* 19,800 614 Noble Energy (A) 4,000 136 Ocean Energy 5,000 100 Patterson-UTI Energy* (A) 23,900 610 The accompanying notes are an integral part of the financial statements. 104 DESCRIPTION SHARES VALUE (000) -------------------------------------------------------------------------------- Pioneer Natural Resources* (A) 10,900 $ 264 Pride International* (A) 29,865 388 Schlumberger 23,650 910 Smith International* (A) 3,800 111 Talisman Energy 11,300 453 Teekay Shipping 9,700 276 Transocean Sedco Forex 22,580 470 Ultra Petroleum* 38,300 320 Valero Energy (A) 9,840 260 Varco International* (A) 10,900 184 Weatherford International* (A) 5,800 215 Western Gas Resources (A) 1,500 47 ---------- 21,010 ---------- FINANCIALS - 11.0% AFLAC (A) 46,100 1,415 Allstate 21,500 764 Ambac Financial Group (A) 19,567 1,054 American Express 36,230 1,130 American Financial Group 16,230 374 American International Group 76,797 4,201 Arthur J. Gallagher (A) 44,415 1,095 Associated Banc-Corp 2,500 79 Bank of America 47,800 3,050 Banknorth Group (A) 14,500 344 BB&T (A) 15,700 550 Capital One Financial (A) 26,800 936 Charles Schwab (A) 22,000 191 Charter One Financial 14,910 443 Chubb 20,600 1,129 Citigroup (A) 130,580 3,872 City National (A) 4,055 190 Colonial BancGroup 9,300 115 Compass Bancshares 9,700 286 Cullen/Frost Bankers 8,200 280 E*TRADE Group* (A) 27,400 122 East West Bancorp 15,500 523 Edwards A.G. (A) 6,400 205 Everest Re Group (A) 14,785 811 Fannie Mae 43,000 2,560 Federal Agricultural Mortgage* (A) 2,800 83 Federal Home Loan Mortgage 54,300 3,035 Fifth Third Bancorp (A) 41,050 2,513 Golden State Bancorp 8,500 275 GreenPoint Financial 5,500 230 Hartford Financial Services Group 39,400 1,615 HCC Insurance Holdings (A) 4,000 96 Hibernia, Cl A 20,500 410 Independence Community Bank 3,500 88 Investors Financial Services (A) 26,020 704 J. P. Morgan Chase (A) 84,700 1,608 Jefferies Group (A) 15,500 591 LaBranche* (A) 6,000 121 Legg Mason (A) 3,700 157 M & T Bank (A) 6,600 520 MBNA (A) 192,413 3,537 Mellon Financial 35,500 921 Merrill Lynch & Company (A) 47,800 1,575 Morgan Stanley 39,770 1,347 National Commerce Financial (A) 17,105 428 Neuberger Berman (A) 8,700 $ 234 New York Community Bancorp 7,000 197 North Fork Bancorp 6,400 242 Ohio Casualty* 4,500 73 PMI Group 3,200 87 Protective Life (A) 6,600 203 Radian Group (A) 4,800 157 RenaissanceRe Holdings 7,500 283 SEI Investments 6,500 155 State Street 12,600 487 TCF Financial (A) 2,500 106 Travelers Property Casualty, Cl A* 5,641 74 Travelers Property Casualty, Cl B* 11,591 157 W.R. Berkley 7,000 238 Wells Fargo 59,600 2,870 Westamerica Bancorporation 2,400 97 ---------- 51,233 ---------- HEALTH CARE - 9.6% Abbott Laboratories 59,700 2,412 AdvancePCS* (A) 6,860 155 Amgen* (A) 55,060 2,296 Anthem* 8,500 552 Apria Healthcare Group* 6,500 153 Baxter International 99,400 3,037 Biogen* 12,800 375 Biomet 34,510 919 Bio-Rad Laboratories, Cl A* 1,000 38 Cardinal Health (A) 30,087 1,871 Celgene* (A) 27,400 461 Cephalon* (A) 6,300 257 Charles River Laboratories International* (A) 3,400 133 Community Health Systems* (A) 21,300 567 Covance* 20,570 403 Edwards Lifesciences* (A) 5,200 133 Express Scripts* (A) 10,200 556 First Health Group* 5,000 136 Forest Laboratories, Cl A* (A) 16,700 1,370 Gilead Sciences* (A) 45,900 1,539 HCA (A) 36,700 1,747 Health Net* 8,275 177 HealthSouth* 149,000 618 Henry Schein* 2,900 153 IDEC Pharmaceuticals* (A) 35,900 1,491 Integra LifeSciences* 17,000 270 IVAX* 9,500 117 Johnson & Johnson 64,250 3,475 King Pharmaceuticals* (A) 88,466 1,607 Laboratory Corporation of America Holdings* (A) 14,500 490 Medicis, Cl A* (A) 3,950 161 Medtronic (A) 50,660 2,134 Millennium Pharmaceuticals* (A) 17,900 167 Mylan Laboratories 8,500 278 NPS Pharmaceuticals* (A) 4,000 82 Omnicare (A) 36,900 779 Oxford Health Plans* (A) 3,000 117 Pfizer (A) 170,165 4,938 Pharmaceutical Product Development* (A) 11,800 228 Pharmacia 75,352 2,930 Priority Healthcare, Cl B* (A) 33,200 837 105 DESCRIPTION SHARES VALUE (000) -------------------------------------------------------------------------------- Province Healthcare* 8,550 $ 147 Quest Diagnostics* (A) 6,600 406 Respironics* 6,200 198 Teva Pharmaceutical Industries, ADR 2,000 134 Transkaryotic Therapies* (A) 2,500 81 Triad Hospitals* (A) 11,000 417 Universal Health Services* (A) 7,700 394 Wyeth 37,600 1,196 Zimmer Holdings* 31,262 1,199 ---------- 44,331 ---------- INDUSTRIALS - 6.2% 3M 12,900 1,419 Aeroflex* 26,500 134 AGCO* (A) 11,850 275 Albany International, Cl A 6,100 116 ARAMARK, Cl B* 18,400 386 Atlantic Coast Airline Holdings* 32,100 297 Bisys Group* 23,650 395 Boeing 47,300 1,614 C. H. Robinson Worldwide 3,500 95 Career Education* (A) 2,500 120 Chicago Bridge & Iron 9,150 220 ChoicePoint* 1,500 53 CNF 3,000 94 Coinstar* 16,800 433 Concord EFS* (A) 8,500 135 Corinthian Colleges* 3,100 117 Dun & Bradstreet* (A) 16,405 551 EDO (A) 6,735 151 Expeditors International of Washington 7,000 196 ExpressJet Holdings* 29,000 267 FactSet Research Systems (A) 19,220 510 First Data 87,954 2,458 General Dynamics 16,900 1,374 General Electric 166,468 4,103 Global Payments 5,500 141 Honeywell International 21,800 472 Illinois Tool Works (A) 11,700 682 Imagistics International* 8,900 154 Iron Mountain (A) 27,835 696 Kaydon 4,200 84 Kennametal 4,000 128 Knight Transportation* 20,550 319 Kroll* (A) 8,900 176 Manpower (A) 5,300 156 Mesa Air Group* 17,800 65 Molex, Cl A 62,312 1,308 Navistar International* 11,500 249 Nordson 10,850 258 Norfolk Southern 7,100 143 PACCAR (A) 3,500 118 Pall 10,000 158 Pentair 3,300 123 Republic Services* 35,100 660 Roadway 5,500 202 Robert Half International* (A) 34,100 541 Sabre Holdings* 17,800 344 SkyWest 13,000 170 Southwest Airlines (A) 91,065 1,189 SPX* (A) 2,900 $ 293 Swift Transportation* 5,000 78 Triumph Group* 10,150 284 Union Pacific (A) 22,700 1,314 United Technologies (A) 30,200 1,706 Waste Connections* 9,350 325 Werner Enterprises 7,300 134 Yellow* (A) 7,000 207 ---------- 28,390 ---------- INFORMATION TECHNOLOGY - 8.4% Accenture* (A) 48,100 687 Activision* (A) 5,700 136 Acxiom* (A) 22,100 313 Adobe Systems 14,400 275 Affiliated Computer Services, Cl A* (A) 6,600 281 Analog Devices* (A) 50,200 989 Anaren Microwave* 16,300 134 Applied Materials* (A) 63,172 730 ATMI* (A) 38,400 541 BMC Software* 8,500 111 Cadence Design Systems* (A) 22,700 231 Cerner* 2,100 74 Cisco Systems* (A) 165,310 1,732 Cognex* (A) 22,650 315 Cymer* (A) 13,800 257 Dell Computer* (A) 93,400 2,196 Diebold (A) 5,300 174 DoubleClick* 49,900 256 Electronic Data Systems (A) 12,500 175 Entegris* 69,150 537 Exar* 22,510 260 Fairchild Semiconductor, Cl A* (A) 16,400 155 Fiserv* 53,000 1,488 Fisher Scientific International* 12,650 384 Hewlett-Packard (A) 126,816 1,480 Inforte* 33,700 173 Integrated Circuit Systems* (A) 29,400 462 Integrated Device Technology* (A) 88,300 922 Intel (A) 121,380 1,686 International Rectifier* (A) 6,300 98 Intersil, Cl A* (A) 9,300 121 IXYS* (A) 24,100 121 JDS Uniphase* (A) 85,700 167 KLA-Tencor* (A) 20,000 559 Kronos* 17,100 421 Lawson Software* 4,185 15 Linear Technology 31,780 658 Mercury Interactive* (A) 13,800 237 Mettler-Toledo International* (A) 9,800 255 Microchip Technology* (A) 19,100 391 Micron Technology* (A) 40,880 506 Microsoft* (A) 162,065 7,089 Mykrolis* 62,415 384 NetIQ* (A) 10,600 154 Network Appliance* (A) 30,100 221 Network Associates* (A) 12,200 130 Novellus Systems* (A) 23,400 487 Oracle Systems* 70,960 558 Photon Dynamics* (A) 11,200 209 The accompanying notes are an integral part of the financial statements. 106 DESCRIPTION SHARES VALUE (000) -------------------------------------------------------------------------------- Photronics* (A) 23,500 $ 236 Polycom* 23,000 156 Power Integrations* 14,800 180 ProQuest* 7,800 237 QLogic* (A) 15,500 404 QUALCOMM* (A) 39,510 1,091 Rational Software* (A) 78,500 339 RF Micro Devices* (A) 10,000 60 Semtech* 6,400 62 Skyworks Solutions* (A) 65,250 296 Storage Technology* 6,900 73 SunGard Data Systems* (A) 49,600 965 Symantec* (A) 4,000 135 Synopsys* (A) 5,100 195 Take-Two Interactive Software* (A) 19,300 560 Tech Data* (A) 22,100 583 Tekelec* 28,300 244 Teradyne* (A) 19,400 186 Texas Instruments (A) 83,340 1,231 THQ* (A) 25,750 536 TriZetto Group* 17,300 86 Varian Semiconductor Equipment Associates* 8,000 132 Vastera* 28,000 60 Vishay Intertechnology* (A) 26,960 237 Waters* (A) 9,500 230 Xilinx* (A) 30,060 476 Zoran* (A) 5,170 57 ---------- 38,982 ---------- MATERIALS - 1.8% Airgas* 5,300 70 AK Steel Holding* 9,000 66 Alcoa (A) 47,600 919 Arch Coal (A) 6,500 108 Bowater (A) 6,000 212 Domtar 14,500 128 E.I. du Pont de Nemours 44,300 1,598 Georgia Gulf 2,800 64 International Paper (A) 24,000 801 Nucor 13,200 500 OM Group 10,400 445 Pactiv* 7,000 115 Praxair 38,700 1,978 RPM 2,500 35 Sonoco Products 6,800 145 Vulcan Materials (A) 21,100 763 Weyerhaeuser (A) 11,200 490 ---------- 8,437 ---------- TELECOMMUNICATION SERVICES - 0.8% ALLTEL (A) 20,700 831 CenturyTel (A) 9,100 204 General Communication, Cl A* 54,940 207 Verizon Communications 82,000 2,250 XO Communications* 56,900 2 ---------- 3,494 ---------- UTILITIES - 0.9% ALLETE 6,000 130 Alliant Energy 7,000 135 Constellation Energy (A) 38,800 962 Energy East 21,600 $ 428 Exelon 30,000 1,425 Kinder Morgan Fractional Shares (A) (C) 69,060 -- Kinder Morgan (A) 3,040 108 Kinder Morgan Management* (A) 16,738 498 Pepco Holdings 5,830 116 Philadelphia Suburban 9,000 183 Questar 14,900 340 ---------- 4,325 ---------- TOTAL COMMON STOCKS 270,004 ---------- CORPORATE OBLIGATIONS - 14.9% ENERGY - 0.6% Ashland 7.900%, 08/05/06 $ 250 $ 284 Atlantic Richfield 8.500%, 04/01/12 300 389 Consolidated Natural Gas 7.250%, 10/01/04 1,500 1,606 Enserch 6.250%, 01/01/03 500 502 ---------- 2,781 ---------- FINANCIALS - 8.1% ABN AMRO Bank 7.250%, 05/31/05 1,250 1,392 Allstate 7.200%, 12/01/09 500 571 Associates Corporation of North America 7.950%, 02/15/10 1,250 1,441 Banco Santander Chile 6.500%, 11/01/05 475 519 Bank of America 9.200%, 05/15/03 185 193 7.875%, 05/16/05 500 565 7.125%, 09/15/06 1,000 1,152 Bank of Boston 6.625%, 02/01/04 925 973 Bank of New York 7.875%, 11/15/02 150 151 Bank of Oklahoma 7.125%, 08/15/07 300 331 Bankers Trust 7.500%, 11/15/15 200 240 Citibank Credit Card Zero Coupon Bond, 08/15/06 1,000 962 Compass Bancshares 8.375%, 09/15/04 400 441 Credit Suisse First Boston 5.875%, 08/01/06 1,500 1,608 Donaldson, Lufkin & Jenrette 6.875%, 11/01/05 800 876 Dresdner Bank - New York 7.250%, 09/15/15 800 972 First Union National Bank 7.875%, 02/15/10 1,000 1,193 Goldman Sachs 6.250%, 02/01/03 1,900 1,927 Hartford Financial Services 6.375%, 11/01/08 205 223 Heller Financial 8.000%, 06/15/05 170 189 107 DESCRIPTION PAR (OOO) VALUE (000) -------------------------------------------------------------------------------- Household Finance 8.000%, 05/09/05 $ 1,000 $ 1,045 6.375%, 10/15/11 1,000 934 Household Netherlands 6.200%, 12/01/03 125 130 International Lease Financing 8.375%, 12/15/04 250 273 Key Bank 7.000%, 02/01/11 1,000 1,117 Keycorp 8.000%, 07/01/04 730 792 Lehman Brothers Holdings 6.500%, 10/01/02 1,000 1,000 7.800%, 07/07/05 500 557 7.500%, 09/01/06 375 426 7.875%, 08/15/10 1,000 1,176 8.500%, 08/01/15 500 644 Merrill Lynch 8.300%, 11/01/02 225 226 6.250%, 10/15/08 200 219 Morgan Stanley 5.625%, 01/20/04 500 520 National Westminster Bank 9.375%, 11/15/03 300 323 NCNB 10.200%, 07/15/15 750 1,080 Paine Webber Group 7.875%, 02/15/03 500 511 8.875%, 03/15/05 500 564 Principal Financial Group Australia 144A 8.200%, 08/15/09 1,800 2,067 Salomon 7.500%, 02/01/03 409 416 Salomon Smith Barney Holdings 6.750%, 02/15/03 575 584 7.000%, 06/15/03 277 286 6.875%, 06/15/05 700 761 5.875%, 03/15/06 1,500 1,609 Standard Federal Bancorp 7.750%, 07/17/06 250 287 USF&G 7.125%, 06/01/05 350 367 Washington Mutual 7.500%, 08/15/06 250 282 Wells Fargo Financial 6.625%, 07/15/04 1,200 1,288 Westdeutsche 6.750%, 06/15/05 400 443 6.050%, 01/15/09 900 1,014 Wharf Capital International 8.875%, 11/01/04 325 362 Zurich Capital Trust 144A Callable 06/01/07 @ 104.19 8.376%, 06/01/37 365 287 ---------- 37,509 ---------- MANUFACTURING - 2.3% Boeing 7.250%, 06/15/25 1,250 1,335 Ford Motor 6.375%, 02/01/29 250 182 Ford Motor Credit 6.700%, 07/16/04 1,000 1,004 5.800%, 01/12/09 1,500 1,322 General Motors Acceptance 6.150%, 04/05/07 $ 3,000 $ 3,016 General Motors Global Bond 6.750%, 05/01/28 750 651 Georgia-Pacific Callable 11/15/02 @ 104.23 9.875%, 11/01/21 300 240 Tenneco Packaging 7.950%, 12/15/25 425 485 TRW 8.750%, 05/15/06 1,000 1,142 6.300%, 05/15/08 1,000 1,060 ---------- 10,437 ---------- SERVICE - 2.0% Comcast Cable 7.125%, 06/15/13 750 694 Continental Cablevision 8.875%, 09/15/05 350 329 Callable 08/01/05 @ 104.75 9.500%, 08/01/13 1,000 930 Dayton Hudson 5.875%, 11/01/08 1,500 1,668 Duty Free International 7.000%, 01/15/04 1,225 600 Fred Meyer 7.450%, 03/01/08 500 572 J.C. Penney Callable 11/15/02 @103.87 8.250%, 08/15/22 500 430 Callable 11/15/02 @ 104.12 9.750%, 06/15/21 575 540 May Department Stores 7.900%, 10/15/07 1,000 1,180 Time Warner 8.875%, 10/01/12 2,025 2,065 ---------- 9,008 ---------- TRANSPORTATION - 0.7% Air 2 US 10.127%, 10/01/20 500 175 America West Airlines 8.540%, 01/02/06 323 287 7.930%, 01/02/19 614 629 Continental Airlines 6.800%, 07/02/07 143 115 FedEx 9.650%, 06/15/12 680 900 Northwest Airlines 6.810%, 02/01/20 910 821 Stagecoach Holdings 8.625%, 11/15/09 500 446 ---------- 3,373 ---------- UTILITIES - 1.2% Aquila 7.000%, 07/15/04 350 304 AT&T Canada Callable 06/15/03 @ 104.97 9.950%, 06/15/08 300 27 British Telecommunications 8.375%, 12/15/10 150 176 CE Generation 7.416%, 12/15/18 917 895 The accompanying notes are an integral part of the financial statements. 108 DESCRIPTION PAR (OOO) VALUE (000) -------------------------------------------------------------------------------- Commonwealth Edison 9.875%, 06/15/20 $ 900 $ 1,054 Conectiv 6.730%, 06/01/06 135 142 FPL Group Capital 7.625%, 09/15/06 150 169 France Telecom 8.250%, 03/01/11 150 164 GTE South 6.125%, 06/15/07 1,000 1,039 ONEOK 7.750%, 08/15/06 125 140 PP&L Capital Funding 8.375%, 06/15/07 500 569 PSI Energy 7.850%, 10/15/07 750 835 Rochester Telephone 9.000%, 08/15/21 400 7 ---------- 5,521 ---------- CONVERTIBLE CORPORATE BONDS - 0.0% Ciena 3.750%, 02/01/08 120 69 Corning Zero Coupon Bond, 11/08/15 260 114 ---------- 183 ---------- TOTAL CORPORATE OBLIGATIONS 68,812 ---------- U.S. GOVERNMENT & AGENCY SECURITIES - 14.3% GOVERNMENT AGENCY - 4.3% FFCB 5.750%, 09/01/05 500 546 FHLB 6.875%, 08/15/03 1,000 1,045 6.250%, 08/13/04 3,000 3,232 5.375%, 05/15/06 1,500 1,633 FHLMC 5.950%, 01/19/06 1,000 1,105 5.750%, 04/15/08 2,000 2,234 6.625%, 09/15/09 2,950 3,447 FNMA 5.125%, 02/13/04 1,000 1,045 6.500%, 08/15/04 500 541 7.125%, 02/15/05 250 278 6.400%, 09/27/05 500 557 7.125%, 03/15/07 2,000 2,338 5.250%, 01/15/09 500 544 6.375%, 06/15/09 1,000 1,152 6.930%, 09/17/12 250 284 ---------- 19,981 ---------- U.S. TREASURIES - 10.0% U.S. Treasury Bonds (A) 9.250%, 02/15/16 4,485 6,751 8.125%, 05/15/21 1,000 1,426 8.125%, 08/15/21 1,000 1,428 8.000%, 11/15/21 2,200 3,111 7.125%, 02/15/23 3,000 3,921 6.875%, 08/15/25 3,000 3,858 U.S. Treasury Notes (A) 7.250%, 08/15/04 4,150 4,577 6.875%, 05/15/06 6,500 7,537 6.000%, 08/15/09 3,300 3,866 U S Treas Bd Stripped Prin Pmt 0%, 11/15/04 $ 8,000 $ 7,713 0%, 08/15/05 2,000 1,885 ---------- 46,073 ---------- TOTAL U.S. GOVERNMENT & AGENCY SECURITIES 66,054 ---------- MORTGAGE-BACKED OBLIGATIONS - 6.9% U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES - 6.5% FHLMC Pool 6.500%, 04/01/08 #E00225 116 122 7.000%, 04/01/08 #E46044 62 66 5.500%, 03/01/13 #E00546 692 720 7.000%, 12/01/29, #G01091 (A) 1,617 1,690 6.000%, 01/01/32, #C62449 248 255 6.000%, 01/01/32, #C62824 29 30 6.000%, 02/01/32, #C01292 33 34 6.000%, 03/01/32, #C01316 706 726 6.000%, 04/01/32, #C65884 465 478 6.000%, 04/01/32, #C65888 150 154 6.000%, 04/01/32, #C66565 492 506 6.000%, 04/01/32, #C66575 145 149 6.000%, 04/01/32, #C01344 805 828 6.000%, 05/01/32, #C66877 37 38 6.000%, 05/01/32, #C01361 591 608 FNMA Pool 6.500%, 05/01/32, #640032 2,967 3,073 6.500%, 06/01/32, #647471 2,992 3,100 6.500%, 08/01/32, #649874 4,924 5,101 6.000%, 10/01/32, #661581 5,000 5,136 5.500%, 03/01/06, #424411 1,116 1,155 7.000%, 04/01/29, #323681 998 1,044 6.000%, 05/01/29, #323715 2,859 2,958 GNMA Pool 6.000%, 03/01/03 #340911 38 38 6.500%, 10/20/10 #2108 141 150 7.500%, 06/15/27, #447728 117 125 7.500%, 09/15/27, #455516 115 123 7.000%, 04/15/29, #506639 1,417 1,495 ---------- 29,902 ---------- CMO MORTGAGE-BACKED OBLIGATIONS - 0.4% FHLMC 1136, Cl H 6.000%, 09/15/21 146 151 FHLMC Series 85, Cl C 8.600%, 01/15/21 122 129 FHLMC Series 1201, Cl E 7.400%, 12/15/21 45 45 FNMA 1990-63, Cl H 9.500%, 06/25/20 110 121 FNMA 1990-105, Cl J 6.500%, 09/25/20 102 107 FNMA 1990-89, Cl K 6.500%, 07/25/20 20 21 FNMA 1993-210 6.500%, 04/25/23 750 822 FNMA 1996-21 6.000%, 02/25/11 333 363 FNMA 1989-2, Cl D 8.800%, 01/25/19 20 22 FNMA 1989-37 8.000%, 07/25/19 117 126 FNMA Series 1990-30 6.500%, 03/25/20 100 105 GNMA Series 3, Cl F 6.500%, 06/17/20 31 34 ---------- 2,046 ---------- 109 DESCRIPTION PAR (OOO) VALUE (000) -------------------------------------------------------------------------------- MORTGAGE BACKED VARIABLE RATE OBLIGATIONS - 0.0% FNMA Pool 6.198%, 04/01/18, #70009 $ 121 $ 124 ---------- TOTAL MORTGAGE-BACKED OBLIGATIONS 32,072 ---------- PRIVATE CMO MORTGAGE-BACKED SECURITIES - 0.6% FIXED RATE - 0.6% GE Capital Mortgage Services 7.000%, 05/24/24 2,675 2,796 ---------- TOTAL PRIVATE CMO MORTGAGE-BACKED SECURITIES 2,796 ---------- ASSET-BACKED SECURITIES - 1.6% AUTOS - 1.2% Ford Credit Auto Owner 5.120%, 10/15/04 2,500 2,543 Union Acceptance 98-B-A5 6.020%, 01/09/06 3,000 3,058 ---------- 5,601 ---------- HOME EQUITY - 0.4% Contimortgage 1997-5, Cl A5 6.630%, 12/15/20 700 712 Contimortgage 7.120%, 08/15/28 339 351 GE Capital Mortgage Services 7.300%, 02/25/25 21 22 Green Tree Financial 1997-B 7.120%, 04/15/27 41 42 Merrill Lynch Mortgage Investors 6.310%, 11/15/26 841 892 ---------- 2,019 ---------- TOTAL ASSET-BACKED SECURITIES 7,620 ---------- U.S. GOVERNMENT AGENCY BACKED OBLIGATIONS - 1.3% YANKEE OBLIGATIONS - 0.4% Ford Capital BV 9.500%, 06/01/10 150 183 Norsk Hydro 9.000%, 04/15/12 400 523 Newcourt Credit Group 6.875%, 02/16/05 1,000 1,024 ---------- 1,730 ---------- INTERNATIONAL/YANKEE - 0.9% Hydro-Quebec 11.750%, 02/01/12 350 545 Callable 01/15/03 @ 100 9.750%, 01/15/18 500 510 Korea Electric Power, Putable 08/01/04 @ 100 6.750%, 08/01/27 200 211 Midland Bank 6.950%, 03/15/11 950 1,104 National Bank of Hungary 8.875%, 11/01/13 250 338 Sweden (Kingdom of) 11.125%, 06/01/15 150 240 TransCanada Pipelines 9.125%, 04/20/06 1,000 1,173 ---------- 4,121 ---------- TOTAL U.S. GOVERNMENT AGENCY BACKED OBLIGATIONS 5,851 ---------- DESCRIPTION SHARES VALUE (000) -------------------------------------------------------------------------------- MONEY MARKET FUNDS - 2.8% SHORT TERM MONEY MARKET FUND - 0.2% Lindner Government Money Market Fund 850,000 $ 850 ---------- RELATED PARTY MONEY MARKET FUND - 2.6% First American Prime Obligations Fund (B) 12,199,850 12,200 ---------- TOTAL MONEY MARKET FUNDS 13,050 ---------- TOTAL INVESTMENTS - 100.7% (Cost $497,955) 466,259 ---------- OTHER ASSETS AND LIABILITIES, NET - (0.7)% (3,346) ---------- TOTAL NET ASSETS - 100.0% $ 462,913 ----------
* Non-income producing security (A) This security or a portion of this security is out on loan at September 30, 2002. Total loaned securities had a market value of $212,744,248 at September 30, 2002. (Note 6) (B) This money market fund is advised by U.S. Bancorp Asset Management, Inc., which also serves as advisor for this Fund. See also the notes to the financial statements. (C) Security is valued at fair value under guidelines established and approved by the board of directors. Total fair valued securities had a value of $0, which represents 0.0% of total net assets at September 30, 2002. (Note 2) ADR - American Depositary Receipt Cl - Class CMO - Collateralized Mortgage Obligation FFCB - Federal Farm Credit Bank FHLB - Federal Home Loan Bank FHLMC - Federal Home Loan Mortgage Corporation FNMA - Federal National Mortgage Association GNMA - Government National Mortgage Association The accompanying notes are an integral part of the financial statements. 110 EQUITY INCOME FUND
DESCRIPTION SHARES VALUE (000) -------------------------------------------------------------------------------- COMMON STOCKS - 93.9% CONSUMER DISCRETIONARY - 7.4% Gannett (A) 142,300 $ 10,271 Home Depot (A) 149,500 3,902 McGraw-Hill 155,800 9,538 Starwood Hotels & Resorts Worldwide (A) 363,400 8,104 Target (A) 352,000 10,391 Wal-Mart Stores (A) 271,000 13,344 Walt Disney 582,700 8,822 ---------- 64,372 ---------- CONSUMER STAPLES - 9.8% Anheuser-Busch (A) 182,800 9,250 Cadbury Schweppes, ADR (A) 457,200 12,194 Coca-Cola 107,500 5,156 Colgate-Palmolive (A) 57,200 3,086 General Mills (A) 242,700 10,781 Kimberly-Clark (A) 137,925 7,812 Kraft Foods (A) 296,360 10,805 PepsiCo (A) 331,560 12,251 Philip Morris 195,200 7,574 Procter & Gamble (A) 72,600 6,489 ---------- 85,398 ---------- ENERGY - 8.6% BP, ADR 384,296 15,333 ChevronTexaco 116,836 8,091 ConocoPhillips 199,800 9,239 Exxon Mobil 682,586 21,775 Murphy Oil (A) 25,900 2,126 Royal Dutch Petroleum, ADR 464,400 18,655 ---------- 75,219 ---------- FINANCIALS - 27.8% Alliance Capital Management 291,600 8,086 AMB Property (A) 183,400 5,300 Ambac Financial Group (A) 93,200 5,023 American Express 303,700 9,469 Archstone-Smith Trust (REIT) (A) 164,900 3,938 Astoria Financial 388,800 9,487 Bank of America 230,224 14,688 Bank of New York 331,400 9,524 Camden Property Trust (REIT) 56,900 1,886 Citigroup 665,052 19,719 Crescent Real Estate 101,700 1,597 Duke Realty (A) 195,172 4,805 Equity Residential Properties Trust (REIT) (A) 57,900 1,386 Fannie Mae 176,700 10,521 Hartford Financial Services Group 196,800 8,069 Healthcare Realty Trust 115,700 3,598 Household International (A) 73,497 2,081 J.P. Morgan Chase 227,500 4,320 Kimco Realty 47,400 1,474 Legg Mason (A) 208,700 8,882 Manufactured Home Communities 122,550 3,907 Marsh & McLennan 259,200 10,793 Mellon Financial (A) 463,100 12,008 Merrill Lynch & Company (A) 198,400 6,537 Morgan Stanley 167,900 5,688 North Fork Bancorporation (A) 316,300 11,969 Northern Trust (A) 232,550 8,772 Simon Property Group (A) 137,200 $ 4,902 SouthTrust 438,700 10,638 St. Paul Companies (A) 345,310 9,917 Travelers Property Casualty, Cl A* (A) 28,733 379 Travelers Property Casualty, Cl B* 59,033 799 Wells Fargo 272,300 13,114 Zions Bancorporation 211,000 9,185 ---------- 242,461 ---------- HEALTH CARE - 12.3% Abbott Laboratories 288,000 11,635 Baxter International 233,900 7,146 Biomet (A) 218,000 5,805 Bristol-Myers Squibb 252,232 6,003 Johnson & Johnson (A) 142,700 7,717 McKesson HBOC (A) 289,200 8,193 Pfizer (A) 1,141,100 33,115 Pharmacia 318,543 12,385 Schering-Plough 199,300 4,249 Wyeth (A) 344,000 10,939 ---------- 107,187 ---------- INDUSTRIALS - 11.8% 3M (A) 145,700 16,023 Automatic Data Processing (A) 205,100 7,131 Avery Dennison (A) 34,804 1,983 Boeing 326,500 11,143 Caterpillar (A) 223,850 8,332 Deere (A) 84,200 3,827 Emerson Electric 66,700 2,931 General Dynamics (A) 129,600 10,540 General Electric 696,400 17,166 Honeywell International (A) 447,400 9,691 Knightsbridge Tanker (A) 176,500 2,092 Parker-Hannifin (A) 82,700 3,160 United Parcel Service (A) 150,950 9,439 ---------- 103,458 ---------- INFORMATION TECHNOLOGY - 4.3% Electronic Data Systems (A) 419,600 5,866 Hewlett-Packard (A) 432,730 5,050 Intel (A) 416,700 5,788 International Business Machines (A) 232,230 13,560 Motorola (A) 748,100 7,616 ---------- 37,880 ---------- MATERIALS - 4.5% Alcoa (A) 156,800 3,026 Dow Chemical (A) 362,600 9,903 E.I. du Pont de Nemours 77,500 2,795 Ecolab (A) 258,500 10,787 Monsanto (A) 54,341 831 Praxair (A) 227,500 11,628 ---------- 38,970 ---------- TELECOMMUNICATION SERVICES - 4.1% ALLTEL (A) 91,400 3,668 BellSouth 314,400 5,772 SBC Communications 295,700 5,944 Sprint (A) 295,200 2,692 Verizon Communications 630,780 17,309 ---------- 35,385 ---------- 111 DESCRIPTION PAR (OOO) VALUE (000) -------------------------------------------------------------------------------- UTILITIES - 3.3% Cinergy (A) 319,100 $ 10,029 Cleco (A) 464,800 6,261 Consolidated Edison (A) 100,800 4,054 Duke Energy (A) 337,100 6,590 National Fuel Gas 52,000 1,033 Reliant Energy (A) 129,500 1,296 ---------- 29,263 ---------- TOTAL COMMON STOCKS 819,593 ---------- CONVERTIBLE PREFERRED STOCK - 0.2% Lucent Technologies 5,755 1,544 ---------- TOTAL CONVERTIBLE PREFERRED STOCK 1,544 ---------- CORPORATE BOND - 0.3% Nortel Networks 6.125%, 02/15/06 (A) $ 7,107 2,487 ---------- TOTAL CORPORATE BOND 2,487 ---------- CONVERTIBLE CORPORATE BONDS - 2.1% Adelphia Communications 6.000%, 02/15/06 (A) 3,900 254 Charter Communications 5.750%, 10/15/05 (A) 6,430 3,208 Nextel Communications 6.000%, 06/01/11 4,850 3,480 6.000%, 06/01/11 350 251 Protein Design Labs 5.500%, 02/15/07 1,667 1,311 Tribune 2.000%, 5/15/29 148 9,826 ---------- TOTAL CONVERTIBLE CORPORATE BONDS 18,330 ---------- RELATED PARTY MONEY MARKET FUND - 6.2% First American Prime Obligations Fund (B) 54,661,909 54,662 ---------- TOTAL RELATED PARTY MONEY MARKET FUND 54,662 ---------- TOTAL INVESTMENTS - 102.7% (Cost $985,162) 896,616 ---------- OTHER ASSETS AND LIABILITIES, NET - (2.7)% (23,730) ---------- TOTAL NET ASSETS - 100.0% $ 872,886 ----------
* Non-income producing security (A) This security or a portion of this security is out on loan at September 30, 2002. Total loaned securities had a market value of $307,831,763 at September 30, 2002. (Note 6) (B) This money market fund is advised by U.S. Bancorp Asset Management, Inc., which also serves as advisor for this Fund. See also the notes to the financial statements. ADR - American Depositary Receipt Cl - Class REIT - Real Estate Investment Trust The accompanying notes are an integral part of the financial statements. 112 STATEMENTS OF ASSETS AND LIABILITIES SEPTEMBER 30, 2002, IN THOUSANDS, EXCEPT PER SHARE DATA
BALANCED EQUITY FUND INCOME FUND ---------------------------------------------------------------------------------------------------------------- ASSETS: Investments in securities, at value* $ 466,259 $ 896,616 Cash 2 33 Dividends and interest receivable 2,485 1,615 Collateral for securities loaned, at value 221,870 323,041 Receivable for securities sold 7,153 86 Capital shares sold 705 1,445 Other receivables 1 24 Prepaid expenses and other assets 41 28 ---------------------------------------------------------------------------------------------------------------- TOTAL ASSETS 698,516 1,222,888 ================================================================================================================ LIABILITIES: Payable for investment securities purchased 12,078 24,783 Payable upon return of securities loaned 221,870 323,041 Capital shares redeemed 1,266 1,452 Payable for advisory, co-administration, and custodian fees 323 660 Distribution and shareholder servicing fees 61 63 Accrued expenses and other liabilities 5 3 ---------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES 235,603 350,002 ================================================================================================================ NET ASSETS $ 462,913 $ 872,886 ================================================================================================================ COMPOSITION OF NET ASSETS: Portfolio capital $ 577,543 $ 1,010,940 Undistributed net investment income (loss) 90 (232) Accumulated net realized loss (83,024) (49,276) Unrealized depreciation of investments (31,696) (88,546) ---------------------------------------------------------------------------------------------------------------- NET ASSETS $ 462,913 $ 872,886 ================================================================================================================ *Investments in securities, at cost $ 497,955 $ 985,162 CLASS A: Net assets $ 98,557 $ 128,142 Shares issued and outstanding ($0.0001 par value -- 2 billion authorized) 11,760 13,383 Net asset value, offering price, and redemption price per share $ 8.38 $ 9.58 Maximum offering price per share (A) $ 8.87 $ 10.13 CLASS B: Net assets $ 35,641 $ 18,699 Shares issued and outstanding ($0.0001 par value -- 2 billion authorized) 4,282 1,964 Net asset value, offering price, and redemption price per share (C) $ 8.32 $ 9.52 CLASS C: Net assets $ 2,233 $ 11,171 Shares issued and outstanding ($0.0001 par value -- 2 billion authorized) 267 1,171 Net asset value, offering price, and redemption price per share (C) $ 8.35 $ 9.54 Maximum offering price per share (B) $ 8.43 $ 9.64 CLASS S: Net assets $ 36,194 $ 36,522 Shares issued and outstanding ($0.0001 par value -- 2 billion authorized) 4,314 3,816 Net asset value, offering price, and redemption price per share $ 8.39 $ 9.57 CLASS Y: Net assets $ 290,288 $ 678,352 Shares issued and outstanding ($0.0001 par value -- 2 billion authorized) 34,552 70,425 Net asset value, offering price, and redemption price per share $ 8.40 $ 9.63 ----------------------------------------------------------------------------------------------------------------
(A) The offering price is calculated by dividing the net asset value by 1 minus the maximum sales charge of 5.50%. (B) The offering price is calculated by dividing the net asset value by 1 minus the maximum sales charge of 1.00%. (C) Class B and C have a contingent deferred sales charge. For a description of a possible redemption charge, see the notes to the financial statements. The accompanying notes are an integral part of the financial statements. 113 STATEMENTS OF OPERATIONS FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2002, IN THOUSANDS
BALANCED EQUITY FUND INCOME FUND ---------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME: Interest $ 14,296 $ 2,094 Dividends 3,117 14,501 Less: Foreign taxes withheld (3) (125) Securities lending 185 117 Other 218 23 ---------------------------------------------------------------------------------------------------------------- TOTAL INVESTMENT INCOME 17,813 16,610 ================================================================================================================ EXPENSES: Investment advisory fees 3,687 4,026 Co-administration fees and expenses (including per account transfer agency fees) 1,715 1,699 Custodian fees 57 62 Directors' fees 5 7 Registration fees 48 53 Professional fees 10 14 Printing 27 15 Other 19 11 Distribution and shareholder servicing fees - Class A 307 186 Distribution and shareholder servicing fees - Class B 452 166 Distribution and shareholder servicing fees - Class C 25 113 Shareholder servicing fees - Class S 105 41 ---------------------------------------------------------------------------------------------------------------- TOTAL EXPENSES 6,457 6,393 ================================================================================================================ Less: Waiver of expenses (1,031) (309) ---------------------------------------------------------------------------------------------------------------- TOTAL NET EXPENSES 5,426 6,084 ================================================================================================================ INVESTMENT INCOME - NET 12,387 10,526 ================================================================================================================ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS - NET: Net realized loss on investments (34,657) (23,793) Net change in unrealized depreciation of investments (27,073) (243,559) ---------------------------------------------------------------------------------------------------------------- NET LOSS ON INVESTMENTS (61,730) (267,352) ================================================================================================================ NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (49,343) $ (256,826) ================================================================================================================
The accompanying notes are an integral part of the financial statements. 114 STATEMENTS OF CHANGES IN NET ASSETS IN THOUSANDS
BALANCED EQUITY FUND INCOME FUND --------------------------------------------------------------------------------------------------------------------------------- 10/1/01 11/1/00 11/1/99 10/1/01 10/1/00 TO TO TO TO TO 9/30/02 9/30/01 10/31/00 9/30/02 9/30/01 --------------------------------------------------------------------------------------------------------------------------------- OPERATIONS: Investment income - net $ 12,387 $ 5,269 $ 4,273 $ 10,526 $ 6,363 Net realized gain (loss) on investments (34,657) (27,742) 32,738 (23,793) 34,974 Net change in unrealized appreciation or depreciation of investments (27,073) (9,744) 5,378 (243,559) (48,968) --------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (49,343) (32,217) 42,389 (256,826) (7,631) --------------------------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Investment income - net (2): Class A (2,574) (1,041) (884) (1,100) (499) Class B (616) (63) (14) (139) (163) Class C (35) -- -- (106) (72) Class S (831) (783) -- (232) -- Class Y (8,345) (3,486) (3,330) (8,862) (6,119) Net realized gain on investments (3): Class A -- (8,185) (2,820) (93) (5,284) Class B -- (350) (42) (43) (2,404) Class C -- -- -- (34) (1,226) Class S -- -- -- (1) -- Class Y -- (24,476) (9,415) (1,077) (57,265) --------------------------------------------------------------------------------------------------------------------------------- Total distributions (12,401) (38,384) (16,505) (11,687) (73,032) ================================================================================================================================= CAPITAL SHARE TRANSACTIONS (1): Class A: Proceeds from sales 6,899 4,908 4,930 13,653 12,934 Reinvestment of distributions 2,480 9,021 3,692 1,026 4,177 Payments for redemptions (25,212) (10,124) (13,973) (16,103) (7,234) Shares issued in connection with the acquisition of Fund net assets -- 85,686 -- 147,414 971 --------------------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from Class A transactions (15,833) 89,491 (5,351) 145,990 10,848 --------------------------------------------------------------------------------------------------------------------------------- Class B: Proceeds from sales 3,418 3,038 1,538 5,795 3,888 Reinvestment of distributions 597 398 55 171 2,524 Payments for redemptions (10,679) (959) (88) (4,480) (2,933) Shares issued in connection with the acquisition of Fund net assets -- 42,162 -- 11,567 777 --------------------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from Class B transactions (6,664) 44,639 1,505 13,053 4,256 --------------------------------------------------------------------------------------------------------------------------------- Class C: Proceeds from sales 1,063 -- -- 9,021 7,719 Reinvestment of distributions 35 -- -- 140 1,292 Payments for redemptions (896) (1) -- (3,279) (1,596) Shares issued in connection with the acquisition of Fund net assets -- 2,261 -- 299 -- --------------------------------------------------------------------------------------------------------------------------------- Increase in net assets from Class C transactions 202 2,260 -- 6,181 7,415 --------------------------------------------------------------------------------------------------------------------------------- Class S: Proceeds from sales 16,014 18,848 -- 5,298 -- Reinvestment of distributions 819 783 -- 229 -- Payments for redemptions (15,364) (20,708) -- (3,812) -- Shares issued in connection with the acquisition of Fund net assets -- 47,220 -- 46,472 305 --------------------------------------------------------------------------------------------------------------------------------- Increase in net assets from Class S transactions 1,469 46,143 -- 48,187 305 --------------------------------------------------------------------------------------------------------------------------------- Class Y: Proceeds from sales 69,124 41,615 74,157 336,498 93,503 Reinvestment of distributions 7,665 27,497 12,490 3,507 20,989 Payments for redemptions (123,896) (49,275) (124,078) (132,012) (93,006) Shares issued in connection with the acquisition of Fund net assets -- 241,051 -- 408,205 39,223 --------------------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from Class Y transactions (47,107) 260,888 (37,431) 616,198 60,709 --------------------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions (67,933) 443,421 (41,277) 829,609 83,533 --------------------------------------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets (129,677) 372,820 (15,393) 561,096 2,870 NET ASSETS AT BEGINNING OF PERIOD 592,601 219,781 235,174 311,790 308,920 ================================================================================================================================= NET ASSETS AT END OF PERIOD $ 462,913 $ 592,601 $ 219,781 $ 872,886 $ 311,790 ================================================================================================================================= UNDISTRIBUTED NET INVESTMENT INCOME (LOSS) AT END OF PERIOD $ 90 $ 418 $ 408 $ (232) $ (291) =================================================================================================================================
(1) See Note 4 in the notes to the financial statements for additional information. (2) Includes distributions in excess of net investment income of $351 for the period ended September 30, 2001, for the Equity Income Fund. (3) Includes distributions in excess of net realized gains of $381 and $1,019 for the period ended September 30, 2001, for the Equity Income and Balanced Funds, respectively. The accompanying notes are an integral part of the financial statements. 115 Financial Highlights For a share outstanding throughout the periods ended September 30, unless otherwise indicated.
REALIZED AND NET ASSET UNREALIZED DIVIDENDS VALUE NET GAINS OR FROM NET DISTRIBUTIONS BEGINNING INVESTMENT (LOSSES) ON INVESTMENT FROM OF PERIOD INCOME INVESTMENTS INCOME CAPITAL GAINS ------------------------------------------------------------------------------------------------------------------- BALANCED FUND (1) Class A 2002 (2) $ 9.50 $ 0.20 $ (1.12) $ (0.20) $ -- 2001 (2) (3) 13.83 0.18 (2.24) (0.20) (2.07) 2000 12.39 0.23 2.12 (0.22) (0.69) 1999 12.30 0.20 0.49 (0.20) (0.40) 1998 12.57 0.23 0.77 (0.24) (1.03) Class B 2002 (2) $ 9.44 $ 0.13 $ (1.12) $ (0.13) $ -- 2001 (2) (3) 13.75 0.17 (2.29) (0.13) (2.06) 2000 12.33 0.13 2.11 (0.14) (0.68) 1999 (4) 12.37 0.07 (0.04) (0.07) -- Class C 2002 (2) $ 9.49 $ 0.13 $ (1.12) $ (0.13) $ -- 2001 (2) (6) 9.29 -- 0.20 -- -- Class S (2) 2002 $ 9.50 $ 0.20 $ (1.12) $ (0.19) $ -- 2001 (5) 11.27 0.18 (1.74) (0.21) -- Class Y 2002 (2) $ 9.53 $ 0.23 $ (1.13) $ (0.23) $ -- 2001 (2) (3) 13.87 0.16 (2.20) (0.23) (2.07) 2000 12.43 0.26 2.13 (0.26) (0.69) 1999 12.32 0.24 0.49 (0.23) (0.39) 1998 12.59 0.26 0.77 (0.27) (1.03) ------------------------------------------------------------------------------------------------------------------- EQUITY INCOME FUND Class A 2002 (2) $ 12.13 $ 0.16 $ (2.48) $ (0.19) $ (0.04) 2001 (2) 16.29 0.29 (0.74) (0.32) (3.39) 2000 15.94 0.28 1.45 (0.28) (1.10) 1999 15.70 0.36 1.15 (0.37) (0.90) 1998 15.69 0.41 0.86 (0.41) (0.85) Class B 2002 (2) $ 12.07 $ 0.09 $ (2.49) $ (0.11) $ (0.04) 2001 (2) 16.24 0.18 (0.75) (0.21) (3.39) 2000 15.90 0.18 1.44 (0.18) (1.10) 1999 15.65 0.24 1.16 (0.25) (0.90) 1998 15.62 0.30 0.87 (0.29) (0.85) Class C 2002 (2) $ 12.09 $ 0.10 $ (2.50) $ (0.11) $ (0.04) 2001 (2) 16.28 0.18 (0.76) (0.22) (3.39) 2000 15.93 0.19 1.44 (0.18) (1.10) 1999 (7) 16.62 0.21 (0.70) (0.20) -- Class S 2002 (2) $ 12.12 $ 0.15 $ (2.47) $ (0.19) $ (0.04) 2001 (2) (6) 11.57 0.01 0.54 -- -- Class Y 2002 (2) $ 12.20 $ 0.21 $ (2.52) $ (0.22) $ (0.04) 2001 (2) 16.37 0.33 (0.76) (0.35) (3.39) 2000 16.00 0.32 1.47 (0.32) (1.10) 1999 15.74 0.40 1.17 (0.41) (0.90) 1998 15.70 0.46 0.88 (0.45) (0.85) ------------------------------------------------------------------------------------------------------------------- 116 RATIO OF NET NET ASSET RATIO OF INVESTMENT VALUE NET ASSETS EXPENSES INCOME END OF TOTAL END OF AVERAGE TO AVERAGE PERIOD RETURN (8) PERIOD (000) NET ASSETS NET ASSETS ----------------------------------------------------------------------------------------------------------------- BALANCED FUND (1) Class A 2002 (2) $ 8.38 (9.90)% $ 98,557 1.05% 2.07% 2001 (2) (3) 9.50 (17.03) 127,590 1.22 1.96 2000 13.83 19.46 54,380 1.22 1.66 1999 12.39 5.56 53,807 1.18 1.59 1998 12.30 8.60 59,657 1.00 1.91 Class B 2002 (2) $ 8.32 (10.64)% $ 35,641 1.80% 1.32% 2001 (2) (3) 9.44 (17.64) 47,150 1.93 1.22 2000 13.75 18.77 2,243 1.97 0.91 1999 (4) 12.33 0.25 630 1.97 0.87 Class C 2002 (2) $ 8.35 (10.77)% $ 2,233 1.80% 1.32% 2001 (2) (6) 9.49 2.15 2,351 0.94 2.20 Class S (2) 2002 $ 8.39 (9.90)% $ 36,194 1.05% 2.07% 2001 (5) 9.50 (14.03) 39,527 1.22 1.94 Class Y 2002 (2) $ 8.40 (9.74)% $ 290,288 0.80% 2.32% 2001 (2) (3) 9.53 (16.84) 375,983 0.97 2.21 2000 13.87 19.94 163,158 0.97 1.91 1999 12.43 5.87 180,737 0.93 1.84 1998 12.32 8.83 188,123 0.75 2.16 ----------------------------------------------------------------------------------------------------------------- EQUITY INCOME FUND Class A 2002 (2) $ 9.58 (19.51)% $ 128,142 1.15% 1.43% 2001 (2) 12.13 (3.89) 24,557 1.00 1.97 2000 16.29 11.11 20,607 1.00 1.69 1999 15.94 9.74 18,970 1.00 2.01 1998 15.70 8.38 11,018 1.00 2.58 Class B 2002 (2) $ 9.52 (20.10)% $ 18,699 1.90% 0.80% 2001 (2) 12.07 (4.64) 11,516 1.75 1.20 2000 16.24 10.35 10,366 1.75 0.95 1999 15.90 9.10 10,971 1.75 1.34 1998 15.65 7.77 8,570 1.75 1.81 Class C 2002 (2) $ 9.54 (20.08)% $ 11,171 1.90% 0.86% 2001 (2) 12.09 (4.74) 8,028 1.75 1.20 2000 16.28 10.41 2,511 1.75 0.88 1999 (7) 15.93 (3.02) 1,700 1.76 0.65 Class S 2002 (2) $ 9.57 (19.47)% $ 36,522 1.15% 1.34% 2001 (2) (6) 12.12 4.75 328 1.23 4.08 Class Y 2002 (2) $ 9.63 (19.30)% $ 678,352 0.90% 1.80% 2001 (2) 12.20 (3.71) 267,361 0.75 2.21 2000 16.37 11.46 275,436 0.75 1.99 1999 16.00 10.10 350,775 0.75 2.38 1998 15.74 8.85 359,588 0.75 2.81 ----------------------------------------------------------------------------------------------------------------- RATIO OF RATIO OF NET EXPENSES TO INVESTMENT AVERAGE INCOME NET ASSETS TO AVERAGE NET PORTFOLIO (EXCLUDING ASSETS (EXCLUDING TURNOVER WAIVERS) WAIVERS) RATE ---------------------------------------------------------------------------------------- BALANCED FUND (1) Class A 2002 (2) 1.23% 1.89% 79% 2001 (2) (3) 1.28 1.90 54 2000 1.28 1.60 79 1999 1.25 1.52 69 1998 1.24 1.67 56 Class B 2002 (2) 1.98% 1.14% 79% 2001 (2) (3) 1.99 1.16 54 2000 2.03 0.85 79 1999 (4) 2.03 0.81 69 Class C 2002 (2) 1.98% 1.14% 79% 2001 (2) (6) 0.94 2.20 54 Class S (2) 2002 1.23% 1.89% 79% 2001 (5) 1.28 1.88 54 Class Y 2002 (2) 0.98% 2.14% 79% 2001 (2) (3) 1.04 2.14 54 2000 1.03 1.85 79 1999 1.00 1.77 69 1998 0.99 1.92 56 ------------------------------------------------------------------------------------------- EQUITY INCOME FUND Class A 2002 (2) 1.20% 1.38% 38% 2001 (2) 1.15 1.82 33 2000 1.14 1.55 36 1999 1.13 1.88 35 1998 1.12 2.46 14 Class B 2002 (2) 1.95% 0.75% 38% 2001 (2) 1.90 1.05 33 2000 1.89 0.81 36 1999 1.88 1.21 35 1998 1.87 1.69 14 Class C 2002 (2) 1.95% 0.81% 38% 2001 (2) 1.90 1.05 33 2000 1.89 0.74 36 1999 (7) 1.88 0.53 35 Class S 2002 (2) 1.20% 1.29% 38% 2001 (2) (6) 1.42 3.89 33 Class Y 2002 (2) 0.95% 1.75% 38% 2001 (2) 0.90 2.06 33 2000 0.89 1.85 36 1999 0.88 2.25 35 1998 0.87 2.69 14 -------------------------------------------------------------------------------------------
(1) The financial highlights for the Balanced Fund as set forth herein include the historical financial highlights of the Firstar Balanced Growth Fund. The assets of the Firstar Balanced Fund were acquired by the First American Balanced Fund on September 24, 2001. In connection with such acquisition, (i) Class A shares of the Firstar Balanced Growth Fund were exchanged for Class A shares of the First American Balanced Fund, (ii) Firstar Class B shares were exchanged for Class B shares of the First American Fund, (iii) Firstar Class Y shares were exchanged for Class S shares of the First American Fund, and (iv) Firstar Institutional Class shares were exchanged for Class Y shares of the First American Fund. Historical per share amounts have been adjusted to reflect the conversion ratios utilized for the merger of the Balanced Fund and Firstar Balanced Growth Fund. Firstar Balanced Growth Fund is the accounting survivor. (2) Per share data calculated using average shares outstanding method. (3) Effective in 2001, the Fund's fiscal year end was changed from October 31 to September 30. All ratios for the period have been annualized, except for total return and portfolio turnover. (4) Class of shares has been offered since March 1, 1999. All ratios for the period have been annualized, except total return and portfolio turnover. (5) Class of shares has been offered since November 27, 2000. All ratios for the period have been annualized, except total return and portfolio turnover. (6) Class of shares has been offered since September 24, 2001. All ratios for the period have been annualized, except total return and portfolio turnover. (7) Class of shares has been offered since February 1, 1999. All ratios for the period have been annualized, except total return and portfolio turnover. (8) Total return does not reflect sales charges. Total return would have been lower had certain expenses not been waived. The accompanying notes are an integral part of the financial statements. 117 NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2002 1> Organization The First American Health Sciences Fund, Real Estate Securities Fund, Technology Fund, Emerging Markets Fund, International Fund, Micro Cap Fund, Small Cap Core Fund, Small Cap Growth Fund, Small Cap Value Fund, Mid Cap Core Fund, Mid Cap Growth Fund, Mid Cap Value Fund, Large Cap Core Fund, Large Cap Growth Fund, Large Cap Value Fund, Balanced Fund, and Equity Income Fund (each a "Fund" and collectively, the "Funds") are mutual funds offered by First American Investment Funds, Inc. (FAIF), which is a member of the First American Family of Funds. FAIF currently offers 41 funds, including the Funds listed above. FAIF is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. FAIF's articles of incorporation permit the Funds' board of directors to create additional funds in the future. The Funds offer Class A, Class B, Class C, Class S, and Class Y shares. Class A shares are sold with a front-end sales charge. Class B shares may be subject to a contingent deferred sales charge for six years and automatically convert to Class A shares after eight years. Class C shares are sold with a front-end sales charge, may be subject to a contingent deferred sales charge for 18 months, and will not convert to Class A shares. Class S shares have no sales charge and are offered only through banks and other financial institutions. Class Y shares have no sales charge and are offered only to qualifying institutional investors. The Funds' prospectuses provide descriptions of each Fund's investment objectives, policies, and strategies. All classes of shares of a Fund have identical voting, dividend, liquidation and other rights, and the same terms and conditions, except that the level of distribution fees charged may differ among classes. 2> Summary of Significant Accounting Policies The significant accounting policies followed by the Funds are as follows: SECURITY VALUATION - Security valuations for the Funds' investments are furnished by independent pricing services that have been approved by the Funds' board of directors. Investments in equity securities that are traded on a national securities exchange (or reported on the NASDAQ national market system) are stated at the last quoted sales price if readily available for such securities on each business day. Other equity securities traded in the over-the-counter market and listed equity securities for which no sale was reported on that date are stated at the last quoted bid price. Debt obligations exceeding sixty days to maturity are valued by an independent pricing service. The pricing service may employ methodologies that utilize actual market transactions, broker-dealer supplied valuations, or other formula-driven valuation techniques. These techniques generally consider such factors as yields or prices of bonds of comparable quality, type of issue, coupon, maturity, ratings, and general market conditions. Securities for which prices are not available from an independent pricing service but where an active market exists are valued using market quotations obtained from one or more dealers that make markets in the securities or from a widely-used quotation system. When market quotations are not readily available, securities are valued at fair value as determined in good faith by procedures established and approved by the Funds' board of directors. As of September 30, 2002, the Balanced Fund, International Fund, Micro Cap Fund, and Mid Cap Core Fund held fair value securities with a market value of $0, $0, $1,323,734, and $0, respectively. Debt obligations with sixty days or less remaining until maturity may be valued at their amortized cost. Foreign securities are valued at the closing prices on the principal exchange on which they trade. The prices for foreign securities are reported in local currency and converted to U.S. dollars using currency exchange rates. Exchange rates are provided daily by recognized independent pricing agents. SECURITY TRANSACTIONS AND INVESTMENT INCOME - The Funds record security transactions on the trade date of the security purchase or sale. Dividend income is recorded on the ex-dividend date. Interest income, including amortization of bond premium and discount, is recorded on the accrual basis. Security gains and losses are determined on the basis of identified cost, which is the same basis used for federal income-tax purposes. DISTRIBUTIONS TO SHAREHOLDERS - Balanced Fund, Equity Income Fund, Large Cap Core Fund, Large Cap Growth Fund, Large Cap Value Fund, Mid Cap Core Fund, Mid Cap Growth Fund, and Mid Cap Value Fund declare and pay income dividends monthly. Micro Cap Fund, Small Cap Growth Fund, Small Cap Core Fund, Small Cap Value Fund, Health Sciences Fund, Real Estate Securities Fund, and Technology Fund declare FIRST AMERICAN FUNDS ANNUAL REPORT 2002#and pay income dividends quarterly. Emerging Markets Fund and International Fund declare and pay income dividends annually. 118 Due to the nature of the dividends received by the Real Estate Securities Fund on its securities holdings, a portion of the quarterly distributions of the Real Estate Securities Fund may be a return of capital. Any net realized capital gains on sales of a Fund's securities are distributed to shareholders at least annually. FEDERAL TAXES - It is each Fund's intention to continue to qualify as a regulated investment company and distribute all of its taxable income. Accordingly, no provision for federal income taxes is required. Net investment income and net realized gains (losses) may differ for financial statement and tax purposes because of temporary or permanent book/tax differences. These differences are primarily due to post-October losses, losses deferred due to wash sales, proceeds from securities litigation, foreign currency gains and losses, investments in limited partnerships and REITs, and the "mark-to-market" of certain Passive Foreign Investment Companies (PFIC's) for tax purposes. To the extent these differences are permanent, adjustments are made to the appropriate equity accounts in the period that the difference arises. On the Statement of Assets and Liabilities the following adjustments were made (000):
ACCUMULATED UNDISTRIBUTED ADDITIONAL NET REALIZED NET INVESTMENT PAID IN FUND GAIN (LOSS) INCOME CAPITAL --------------------------------------------------------------------------- Health Sciences Fund $ 6 $ 172 $ (178) Real Estate Securities Fund -- 764 (764) Technology Fund 135 1,241 (1,376) Emerging Markets Fund 222 275 (497) International Fund 22,039 6,087 (28,126) Micro Cap Fund 745 4,750 (5,495) Small Cap Core Fund 99 2,748 (2,847) Small Cap Growth Fund 351 2,056 (2,407) Small Cap Value Fund 230 (90) (140) Mid Cap Core Fund 405 708 (1,113) Mid Cap Growth Fund 7 2,379 (2,386) Mid Cap Value Fund 890 (97) (793) Large Cap Core Fund 6 (6) -- Large Cap Growth Fund 6 708 (714) Large Cap Value Fund 419 (135) (284) Balanced Fund 314 (314) -- Equity Income Fund 110 (110) -- ---------------------------------------------------------------------------
The character of distributions made during the year from net investment income or net realized gains may differ from its ultimate characterization for Federal income-tax purposes. In addition, due to the timing of dividend distributions, the fiscal year in which the amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Fund. The character of the distributions paid during the fiscal years ended September 30, 2001 and 2002, were as follows (000):
2002 ORDINARY LONG TERM RETURN FUND INCOME GAIN OF CAPITAL TOTAL --------------------------------------------------------------------------- Health Sciences Fund $ -- $ -- $ -- $ -- Real Estate Securities Fund 6,226 -- 764 6,990 Technology Fund -- -- -- -- Emerging Markets Fund 155 -- -- 155 International Fund -- -- -- -- Micro Cap Fund -- -- 457 457 Small Cap Core Fund -- 23,594 1 23,595 Small Cap Growth Fund -- -- -- -- Small Cap Value Fund 8,013 59,831 140 67,984 Mid Cap Core Fund -- -- -- -- Mid Cap Growth Fund -- -- -- -- Mid Cap Value Fund 2,813 -- 792 3,605 Large Cap Core Fund 914 -- -- 914 Large Cap Growth Fund -- -- -- -- Large Cap Value Fund 11,417 -- 284 11,701 Balanced Fund 12,401 -- -- 12,401 Equity Income Fund 11,600 87 -- 11,687 --------------------------------------------------------------------------- 2001 ORDINARY LONG TERM RETURN FUND INCOME GAIN OF CAPITAL TOTAL --------------------------------------------------------------------------- Health Sciences Fund $ 1,237 $ 2,386 $ 54 $ 3,677 Real Estate Securities Fund 3,441 -- -- 3,441 Technology Fund 29,591 85,148 9 114,748 Emerging Markets Fund -- -- -- -- International Fund 2,914 12,074 -- 14,988 Micro Cap Fund 88,557 16,241 -- 104,798 Small Cap Core Fund 12,102 10,485 -- 22,587 Small Cap Growth Fund 56,629 39,202 1,619 97,450 Small Cap Value Fund 38,862 38,226 -- 77,088 Mid Cap Core Fund 97,943 76,006 -- 173,949 Mid Cap Growth Fund 110,720 112,923 138 223,781 Mid Cap Value Fund 2,793 -- -- 2,793 Large Cap Core Fund 3,103 40,220 -- 43,323 Large Cap Growth Fund -- 130,948 -- 130,948 Large Cap Value Fund 13,889 127,622 -- 141,511 Balanced Fund 19,101 19,283 -- 38,384 Equity Income Fund 8,292 64,740 -- 73,032 ---------------------------------------------------------------------------
119 As of September 30, 2002, the components of accumulated earnings (deficit) on a tax basis were (000):
ACCUMULATED TOTAL UNDISTRIBUTED UNDISTRIBUTED CAPITAL AND UNREALIZED ACCUMULATING ORDINARY LONG TERM ACCUMULATED POST-OCTOBER APPRECIATION EARNINGS FUND INCOME CAPITAL GAINS EARNINGS LOSSES (DEPRECIATION) (DEFICIT) ------------------------------------------------------------------------------------------------------------------------------- Health Sciences Fund $ -- $ -- $ -- $ (1,468) $ (3,848) $ (5,316) Real Estate Securities Fund -- 2,346 2,346 -- 6,443 8,788 Technology Fund -- -- -- (520,359) (65,078) (585,437) Emerging Markets Fund 1 -- 1 (9,229) (1,749) (10,977) International Fund -- -- -- (266,158) (154,737) (420,895) Micro Cap Fund -- -- -- (20,476) (60,914) (81,390) Small Cap Core Fund -- -- -- (13,367) (56,146) (69,513) Small Cap Growth Fund -- -- -- (158,782) (30,969) (189,751) Small Cap Value Fund -- -- -- (3,857) 5,972 2,115 Mid Cap Core Fund -- -- -- (42,819) (51,001) (93,820) Mid Cap Growth Fund -- -- -- (212,266) (37,168) (249,434) Mid Cap Value Fund -- -- -- (101,217) (26,771) (127,988) Large Cap Core Fund 447 -- 447 (70,459) (26,732) (96,744) Large Cap Growth Fund -- -- -- (281,439) (127,970) (409,409) Large Cap Value Fund -- -- -- (71,168) (181,144) (252,312) Balanced Fund 97 -- 97 (77,811) (36,909) (114,623) Equity Income Fund 98 -- 98 (47,216) (90,932) (138,050) -------------------------------------------------------------------------------------------------------------------------------
The difference between book and tax basis unrealized appreciation (depreciation) is primarily due to the tax deferral of losses on wash sales and investments in limited partnerships and REITs. As of September 30, 2002 (the Funds' most recently completed fiscal year end), the following Funds have capital loss carryforwards):
FUND AMOUNT (000) EXPIRATION DATE -------------------------------------------------------------------------------------------------------------------- Health Sciences Fund $ 315 2010 Real Estate Securities Fund -- -- Technology Fund 422,611 2006-2010 Emerging Markets Fund 8,263 2007-2010 International Fund 188,253 2008-2010 Micro Cap Fund 5,509 2009 Small Cap Core Fund 799 2010 Small Cap Growth Fund 85,750 2010 Small Cap Value Fund 850 2010 Mid Cap Core Fund 11,951 2009 Mid Cap Growth Fund 144,739 2009-2010 Mid Cap Value Fund 101,217 2008 Large Cap Core Fund 38,863 2009-2010 Large Cap Growth Fund 80,206 2009-2010 Large Cap Value Fund 18,345 2009-2010 Balanced Fund 44,051 2007-2010 Equity Income Fund 22,409 2008-2009 --------------------------------------------------------------------------------------------------------------------
In accordance with Section 382 of the Internal Revenue Code, utilization of all or a portion of the above capital loss carryforwards is limited on an annual basis for Real Estate Securities, International, Balanced, Large Cap Growth, and Technology Funds in the amount (000) of $1,604, $8,582, $11,268, $10,589 and $1,524, respectively. The amount of capital loss carryforward for the Real Estate Securities Fund is subject to change because its tax year end is December 31. 120 Certain Funds incurred a loss for tax purposes from November 1, 2001 to September 30, 2002. As permitted by tax regulations, the Funds intend to elect to defer and treat these losses as arising in the fiscal year ending September 30, 2003. The following Funds had deferred losses:
FUND AMOUNT (000) ----------------------------------------------------------- Health Sciences Fund $ 1,152 Real Estate Securities Fund -- Technology Fund 97,746 Emerging Markets Fund 966 International Fund 77,906 Micro Cap Fund 14,967 Small Cap Core Fund 12,567 Small Cap Growth Fund 73,033 Small Cap Value Fund 3,006 Mid Cap Core Fund 30,869 Mid Cap Growth Fund 67,527 Mid Cap Value Fund -- Large Cap Core Fund 31,595 Large Cap Growth Fund 201,234 Large Cap Value Fund 52,823 Balanced Fund 33,759 Equity Income Fund 24,807 -----------------------------------------------------------
FUTURES TRANSACTIONS - In order to gain exposure to or protect against changes in the market, certain Funds may enter into S&P Stock Index futures contracts and other stock futures contracts. Upon entering into a futures contract, a Fund is required to deposit cash or pledge U.S. government securities in an amount equal to five percent of the purchase price indicated in the futures contract (initial margin). Subsequent payments, which are dependent on the daily fluctuations in the value of the underlying security or securities, are made or received by the Fund each day (daily variation margin) and are recorded as unrealized gains (losses) until the contract is closed. When the contract is closed, the Fund records a realized gain (loss) equal to the difference between the proceeds from (or cost of) the closing transaction and the Fund's basis in the contract. There were no outstanding futures contracts at September 30, 2002. FOREIGN CURRENCY TRANSLATION - The books and records of the Emerging Markets Fund and International Fund are maintained in U.S. dollars on the following basis: - market value of investment securities, assets and liabilities at the current rate of exchange; and - purchases and sales of investment securities, income and expenses at the relevant rates of exchange prevailing on the respective dates of such transactions. The Emerging Markets Fund and International Fund do not isolate the portion of gains and losses on investments in equity securities that is due to changes in the foreign exchange rates from that which is due to changes in market prices of equity securities. The Emerging Markets Fund and International Fund report certain foreign currency-related transactions as components of realized gains for financial reporting purposes, whereas such components are treated as ordinary income for federal income tax purposes. FORWARD FOREIGN CURRENCY CONTRACTS - The Emerging Markets Fund and International Fund may enter into forward foreign currency contracts as hedges against either specific transactions or fund positions. The aggregate principal amount of the contracts are not recorded because the Emerging Markets Fund and International Fund intend to settle the contracts prior to delivery. All commitments are "marked-to-market" daily at the applicable foreign exchange rate, and any resulting unrealized gains or losses are recorded currently. The Emerging Markets Fund and International Fund realize gains or losses at the time the forward contracts are extinguished. Unrealized gains or losses on outstanding positions in forward foreign currency contracts held at the close of the period are recognized as ordinary income or loss for federal income tax purposes. The use of forward foreign currency contracts does not eliminate fluctuations in the underlying prices of the securities, but it does establish a rate of exchange that can be achieved in the future. Although forward foreign currency contracts limit the risk of loss due to a decline in the value of the hedged currency, they also limit a potential gain that might result should the value of the currency increase. These contracts involve market risk in excess of the amount reflected in the Funds' statements of assets and liabilities. The face or contract amount in U.S. dollars reflects the total exposure the portfolio has in that particular currency contract. In addition, there could be exposure to risks (limited to the amount of unrealized gains) if the counter parties to the contracts are unable to meet the terms of their contracts. There were no outstanding forward foreign currency contracts at September 30, 2002. EXPENSES - Expenses that are directly related to one of the Funds are charged directly to that Fund. Other operating expenses are allocated to the Funds on the basis of relative net assets. Class specific expenses, such as the 12b-1 fees, are borne by that class. Income, other expenses, and 121 realized and unrealized gains and losses of a Fund are allocated to the respective class on the basis of the relative net assets each day. OPTIONS TRANSACTIONS - When a call or put option is written, an amount equal to the premium received is recorded as a liability. The liability is marked-to-market daily to reflect the current market value of the option written. When a written option expires, a gain is realized in the amount of the premium originally received. If a closing purchase contract is entered into, a gain or loss is realized in the amount of the original premium less the cost of the closing transaction. If a written call is exercised, a gain or loss is realized from the sale of the underlying security, and the proceeds from such sale are increased by the premium originally received. If a written put option is exercised, the amount of the premium originally received reduces the cost of the security which is purchased upon exercise of the option. Purchased options are recorded as investments and marked-to-market daily to reflect the current market value of the option contract. If a purchased option expires, a loss is realized in the amount of the cost of the option. If a closing transaction is entered into, a gain or loss is realized, to the extent that the proceeds from the sale are greater or less than the cost of the option. If a put option is exercised, a gain or loss is realized from the sale of the underlying security by adjusting the proceeds from such sale by the amount of the premium originally paid. If a call option is exercised, the cost of the security purchased upon exercise is increased by the premium originally paid. SECURITIES LENDING - Each Fund may lend up to one-third of the value of its total assets to broker-dealers, banks, or other institutional borrowers of securities in order to earn additional income. Each Fund's policy is to maintain collateral in the form of cash, U.S. government securities, or other high-grade debt obligations equal to at least 100% of the value of securities loaned. The collateral is then "marked-to-market" daily until the securities are returned. USE OF ESTIMATES IN PREPARATION OF FINANCIAL STATEMENTS - The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amount of net assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported results of operations during the reporting period. Actual results could differ from those estimates. 3> Fees and Expenses ADVISOR FEES - U.S. Bancorp Asset Management, Inc. ("USBAM"), formerly known as U.S. Bancorp Piper Jaffray Asset Management, Inc., serves as investment advisor to the Funds. Pursuant to an investment advisory agreement (the "Agreement"), USBAM manages each Fund's assets and furnishes related office facilities, equipment, research, and personnel. The Agreement requires each Fund to pay USBAM a monthly fee based upon average daily net assets. The annual fee for each Fund is as follows: --------------------------------------------------------------- Health Sciences Fund 0.70% Real Estate Securities Fund 0.70% Technology Fund 0.70% Emerging Markets Fund 1.15% International Fund 1.10% Micro Cap Fund 1.40% Small Cap Core Fund 0.70% Small Cap Growth Fund 0.70% Small Cap Value Fund 0.70% Mid Cap Core Fund 0.70% Mid Cap Growth Fund 0.70% Mid Cap Value Fund 0.70% Large Cap Core Fund 0.65% Large Cap Growth Fund 0.65% Large Cap Value Fund 0.65% Balanced Fund 0.65% Equity Income Fund 0.65% ---------------------------------------------------------------
USBAM waived fees during the fiscal year ended September 30, 2002, so that the total fund operating expenses did not exceed expense limitations described in the Funds' prospectuses. The Funds may invest in First American Funds, Inc. (FAF), subject to certain limitations. The terms of such transactions are identical to those of non-related entities except that, to avoid duplicative investment advisory fees, USBAM reimburses each FAIF fund an amount equal to the investment advisory fee earned by FAF related to such investments. SUB-ADVISOR FEES - Marvin & Palmer Associates, Inc. ("Marvin & Palmer") serves as Sub-Advisor to the Emerging Markets Fund pursuant to a Sub-Advisory 122 Agreement with USBAM. Marvin & Palmer is paid a monthly fee by USBAM calculated on an annual basis equal to 0.85% of the first $100 million of the Fund's average daily net assets, 0.60% of average daily net assets in excess of $100 million up to $300 million, 0.55% of average daily net assets in excess of $300 million up to $500 million, and 0.50% of average daily net assets in excess of $500 million. Clay Finlay Inc. serves as Sub-Advisor to the International Fund, and receives a fee, payable by USBAM. The fee is computed daily and paid monthly at the following annual rates (as a percentage of the Fund's average daily net assets): 0.25% of the first $500 million of the Fund's average daily net assets, 0.10% of the average daily net assets in excess of $500 million. CO-ADMINISTRATION FEES - USBAM and U.S. Bancorp Fund Services, LLC ("USBFS"), formerly known as Firstar Mutual Fund Services, LLC , (collectively the "Administrators") serve as the Co-Administrators pursuant to a Co-Administration agreement between the Administrators and the Funds. USBAM is a subsidiary of U.S. Bank National Association ("U.S. Bank"). Both U.S. Bank and USBFS are direct subsidiaries of U.S. Bancorp. Under the Co-Administration agreement, the Administrators are compensated to provide administrative services including various legal, oversight and administrative services, accounting services, transfer agency and dividend disbursing services, and shareholder services to the First American Family of Funds. The Funds pay the Administrators at an annual rate, calculated daily and paid monthly, based on the average daily net assets of all open-end mutual funds in the First American Family of Funds, equal to each Fund's pro rata share of an amount equal to 0.25% of the aggregate average daily net assets up to $8 billion, 0.235% on the next $17 billion of aggregate average daily assets, 0.22% on the next $25 billion of aggregate average daily net assets, and 0.20% of the aggregate average daily net assets of all open-end mutual funds in the First American Family of Funds in excess of $50 billion. In addition, each Fund pays the Administrators annual fees of $18,500 per class and additional per account fees for transfer agent services. For the fiscal year ended September 30, 2002, administration fees paid to USBAM and USBFS for the Funds included in this annual report were as follows:
FUND AMOUNT (000) ------------------------------------------------------------ Health Sciences Fund $ 225 Real Estate Securities Fund 393 Technology Fund 913 Emerging Markets Fund 246 International Fund 2,011 Micro Cap Fund 945 Small Cap Core Fund 1,229 Small Cap Growth Fund 1,003 Small Cap Value Fund 1,335 Mid Cap Core Fund 1,610 Mid Cap Growth Fund 1,069 Mid Cap Value Fund 944 Large Cap Core Fund 968 Large Cap Growth Fund 1,754 Large Cap Value Fund 2,851 Balanced Fund 1,600 Equity Income Fund 1,649 ------------------------------------------------------------
CUSTODIAN FEES - Through a separate contractual agreement, U.S. Bank serves as the Funds' custodian. The fee for each Fund is equal to an annual rate of 0.01% of average daily net assets, which is computed daily and paid monthly. DISTRIBUTION AND SHAREHOLDER SERVICING FEES - Quasar Distributors, LLC ("Quasar"), a subsidiary of U.S. Bancorp, served as distributor for the Funds for the fiscal year ended September 30, 2002. Under the respective distribution agreements, the Funds paid Quasar a monthly distribution and/or shareholder servicing fee equal to a rate of 0.25% of each Fund's average daily net assets of the Class A shares, 1.00% of the Class B shares, and 1.00% of the Class C shares, which may be used by Quasar to provide compensation for sales support and distribution activities. FAIF has adopted and entered into a shareholder service plan and agreement with Quasar with respect to the Class S shares. Each Fund pays to Quasar a monthly shareholder servicing fee equal to an annual rate of 0.25% of the average daily net assets of the Fund's Class S shares. No distribution and shareholder servicing fees are paid by Class Y shares. Under the agreements, Quasar paid the 123 following amounts to USBAM and its affiliates for the fiscal year ended September 30, 2002:
FUND AMOUNT (000) ----------------------------------------------------------- Health Sciences Fund $ 29 Real Estate Securities Fund 10 Technology Fund 115 Emerging Markets Fund 4 International Fund 194 Micro Cap Fund 106 Small Cap Core Fund 91 Small Cap Growth Fund 93 Small Cap Value Fund 106 Mid Cap Core Fund 347 Mid Cap Growth Fund 218 Mid Cap Value Fund 62 Large Cap Core Fund 97 Large Cap Growth Fund 387 Large Cap Value Fund 468 Balanced Fund 507 Equity Income Fund 558 -----------------------------------------------------------
OTHER FEES - In addition to the investment advisory fees, custodian fees, distribution and shareholder servicing fees, and co-administration fees, each Fund is responsible for paying most other operating expenses including organization costs, fees and expenses of outside directors, registration fees, printing shareholder reports, legal, auditing, insurance, and other miscellaneous expenses. For the fiscal year ended September 30, 2002, legal fees and expenses were paid to a law firm of which the Secretary and two Assistant Secretaries of the Funds are partners. SALES CHARGES - A Contingent Deferred Sales Charge ("CDSC") is imposed on redemptions made in the Class B shares. The CDSC varies depending on the number of years from time of payment for the purchase of Class B shares until the redemption of such shares.
CDSC AS A PERCENTAGE OF DOLLAR YEAR SINCE PURCHASE AMOUNT SUBJECT TO CHARGE ------------------------------------------------------------ First 5.00% Second 5.00% Third 4.00% Fourth 3.00% Fifth 2.00% Sixth 1.00% Seventh -- Eighth -- ------------------------------------------------------------
Class B shares will automatically convert to Class A shares eight years after the first day of the month shares are purchased. A CDSC of 1.00% is imposed on redemptions made in Class C shares for the first eighteen months. The CDSC for Class B shares and Class C shares is imposed on the value of the purchased shares, or the value at the time of redemption, whichever is less. For the fiscal year ended September 30, 2002, sales charges retained by affiliates of USBAM for distributing the Funds' shares, were as follows:
FUND AMOUNT (000) --------------------------------------------------------- Health Sciences Fund $ 62 Real Estate Securities Fund 55 Technology Fund 94 Emerging Markets Fund 17 International Fund 83 Micro Cap Fund 29 Small Cap Core Fund 423 Small Cap Growth Fund 82 Small Cap Value Fund 327 Mid Cap Core Fund 227 Mid Cap Growth Fund 83 Mid Cap Value Fund 91 Large Cap Core Fund 159 Large Cap Growth Fund 92 Large Cap Value Fund 193 Balanced Fund 295 Equity Income Fund 404 ---------------------------------------------------------
124 4> Capital Share Transactions There are 420 billion shares of $0.0001 par value capital stock authorized. Capital share transactions for the Funds were as follows (000):
HEALTH REAL ESTATE SCIENCES FUND SECURITIES FUND ------------------------------------------------------------------------------------ 10/1/01 10/1/00 10/1/01 10/1/00 TO TO TO TO 9/30/02 9/30/01 9/30/02 9/30/01 ------------------------------------------------------------------------------------ Class A: Shares issued 150 309 1,076 103 Shares issued in lieu of cash distributions -- 61 33 8 Shares redeemed (150) (206) (166) (87) ------------------------------------------------------------------------------------ TOTAL CLASS A TRANSACTIONS -- 164 943 24 ==================================================================================== Class B: Shares issued 84 134 90 30 Shares issued in lieu of cash distributions -- 43 7 6 Shares redeemed (80) (133) (39) (52) ------------------------------------------------------------------------------------ TOTAL CLASS B TRANSACTIONS 4 44 58 (16) ==================================================================================== Class C: Shares issued 59 233 76 22 Shares issued in lieu of cash distributions -- 41 1 1 Shares redeemed (115) (53) (31) (10) ------------------------------------------------------------------------------------ TOTAL CLASS C TRANSACTIONS (56) 221 46 13 ==================================================================================== Class S: Shares issued 4 -- 76 19 Shares issued in lieu of cash distributions -- -- 4 -- Shares redeemed -- -- (15) -- Shares issued in connection with acquisition of Fund net assets -- -- -- 6 ------------------------------------------------------------------------------------ TOTAL CLASS S TRANSACTIONS 4 -- 65 25 ==================================================================================== Class Y: Shares issued 285 434 3,096 953 Shares issued in lieu of cash distributions -- 79 86 20 Shares redeemed (458) (216) (1,752) (651) Shares issued in connection with acquisition of Fund net assets -- -- -- 2,572 ------------------------------------------------------------------------------------ TOTAL CLASS Y TRANSACTIONS (173) 297 1,430 2,894 ==================================================================================== NET INCREASE (DECREASE) IN CAPITAL SHARES (221) 726 2,542 2,940 ====================================================================================
125
TECHNOLOGY EMERGING INTERNATIONAL FUND MARKETS FUND FUND ------------------------------------------------------------------------------------------------------------------------------- 10/1/01 10/1/00 10/1/01 10/1/00 10/1/01 11/1/00 12/1/99 TO TO TO TO TO TO TO 9/30/02 9/30/01 9/30/02 9/30/01 9/30/02 9/30/01 10/31/00 ------------------------------------------------------------------------------------------------------------------------------- Class A: Shares issued 1,656 2,869 1,684 1,068 17,671 2,252 27 Shares issued in lieu of cash distributions -- 784 -- -- -- 26 21 Shares redeemed (2,138) (2,343) (1,837) (1,025) (19,832) (2,100) (38) Shares issued in connection with acquisition of Fund net assets 167 -- -- -- -- 6,824 -- ------------------------------------------------------------------------------------------------------------------------------- TOTAL CLASS A TRANSACTIONS (315) 1,310 (153) 43 (2,161) 7,002 10 =============================================================================================================================== Class B: Shares issued 288 673 20 23 102 41 8 Shares issued in lieu of cash distributions -- 589 -- -- -- 6 4 Shares redeemed (758) (676) (8) (6) (299) (25) (8) Shares issued in connection with acquisition of Fund net assets 599 -- -- -- -- 1,212 -- ------------------------------------------------------------------------------------------------------------------------------- TOTAL CLASS B TRANSACTIONS 129 586 12 17 (197) 1,234 4 =============================================================================================================================== Class C: Shares issued 197 904 24 55 283 11 -- Shares issued in lieu of cash distributions -- 182 -- -- -- -- -- Shares redeemed (453) (359) (25) (40) (765) (10) -- Shares issued in connection with acquisition of Fund net assets 26 -- -- -- -- 2,035 -- ------------------------------------------------------------------------------------------------------------------------------- TOTAL CLASS C TRANSACTIONS (230) 727 (1) 15 (482) 2,036 -- =============================================================================================================================== Class S: Shares issued 217 -- 2 -- 946 513 975 Shares issued in lieu of cash distributions -- -- -- -- -- 125 66 Shares redeemed (188) -- -- -- (523) (688) (606) Shares issued in connection with acquisition of Fund net assets 401 -- -- -- -- 6 -- ------------------------------------------------------------------------------------------------------------------------------- TOTAL CLASS S TRANSACTIONS 430 -- 2 -- 423 (44) 435 =============================================================================================================================== Class Y: Shares issued 7,064 5,223 5,671 2,753 27,079 12,188 3,294 Shares issued in lieu of cash distributions -- 1,152 6 -- -- 570 332 Shares redeemed (8,911) (6,237) (5,133) (2,466) (27,326) (9,040) (926) Shares issued in connection with acquisition of Fund net assets 2,708 -- -- -- -- 61,495 -- ------------------------------------------------------------------------------------------------------------------------------- TOTAL CLASS Y TRANSACTIONS 861 138 544 287 (247) 65,213 2,700 =============================================================================================================================== NET INCREASE (DECREASE) IN CAPITAL SHARES 875 2,761 404 362 (2,664) 75,441 3,149 =============================================================================================================================== 126 MICRO SMALL CAP SMALL CAP CAP FUND CORE FUND GROWTH FUND ---------------------------------------------------------------------------------------------------------------------------------- 10/1/01 11/1/00 11/1/99 10/1/01 11/1/00 12/1/99 10/1/01 10/1/00 TO TO TO TO TO TO TO TO 9/30/02 9/30/01 10/31/00 9/30/02 9/30/01 10/31/00 9/30/02 9/30/01 ---------------------------------------------------------------------------------------------------------------------------------- Class A: Shares issued 3,446 1,815 1,005 2,175 1,069 22 1,178 3,029 Shares issued in lieu of cash distributions 4 578 296 98 145 12 -- 592 Shares redeemed (2,893) (1,092) (934) (579) (1,107) (134) (1,458 (3,127) Shares issued in connection with acquisition of Fund net assets -- -- -- -- 801 -- -- -- ---------------------------------------------------------------------------------------------------------------------------------- TOTAL CLASS A TRANSACTIONS 557 1,301 367 1,694 908 (100) (280) 494 ================================================================================================================================== Class B: Shares issued 145 111 68 387 86 8 104 103 Shares issued in lieu of cash distributions -- 31 3 13 23 2 -- 103 Shares redeemed (55) (19) (8) (112) (43) (13) (96) (91) Shares issued in connection with acquisition of Fund net assets -- -- -- -- 31 -- -- -- ---------------------------------------------------------------------------------------------------------------------------------- TOTAL CLASS B TRANSACTIONS 90 123 63 288 97 (3) 8 115 ================================================================================================================================== Class C: Shares issued 28 -- -- 320 -- -- 139 285 Shares issued in lieu of cash distributions -- -- -- -- -- -- -- 91 Shares redeemed (9) -- -- (29) -- -- (171) (137) ---------------------------------------------------------------------------------------------------------------------------------- TOTAL CLASS C TRANSACTIONS 19 -- -- 291 -- -- (32) 239 ================================================================================================================================== Class S: Shares issued 72 126 -- 627 140 267 5 -- Shares issued in lieu of cash distributions -- -- -- 33 67 4 -- -- Shares redeemed (45) (7) -- (255) (148) (195) (1) -- ---------------------------------------------------------------------------------------------------------------------------------- TOTAL CLASS S TRANSACTIONS 27 119 -- 405 59 76 4 -- ================================================================================================================================== Class Y: Shares issued 1,997 3,092 3,925 15,652 8,351 1,004 5,361 13,909 Shares issued in lieu of cash distributions 17 4,158 1,987 1,365 1,679 137 -- 3,028 Shares redeemed (2,748) (2,085) (2,605) (4,156) (7,782) (1,563) (11,261) (7,480) Shares issued in connection with acquisition of Fund net assets -- -- -- -- 14,027 -- -- -- ---------------------------------------------------------------------------------------------------------------------------------- TOTAL CLASS Y TRANSACTIONS (734) 5,165 3,307 12,861 16,275 (422) (5,900) 9,457 ================================================================================================================================== NET INCREASE (DECREASE) IN CAPITAL SHARES (41) 6,708 3,737 15,539 17,339 (449) (6,200) 10,305 ================================================================================================================================== SMALL CAP MID CAP MID CAP VALUE FUND CORE FUND GROWTH FUND ---------------------------------------------------------------------------------------------------------------------------------- 10/1/01 10/1/00 10/1/01 11/1/00 11/1/99 10/1/01 10/1/00 TO TO TO TO TO TO TO 9/30/02 9/30/01 9/30/02 9/30/01 10/31/00 9/30/02 9/30/01 ---------------------------------------------------------------------------------------------------------------------------------- Class A: Shares issued 1,106 769 476 173 106 1,462 7,041 Shares issued in lieu of cash distributions 404 398 -- 1,052 43 -- 9,400 Shares redeemed (1,654) (706) (536) (312) (700) (6,171) (12,201) ---------------------------------------------------------------------------------------------------------------------------------- TOTAL CLASS A TRANSACTIONS (144) 461 (60) 913 (551) (4,709) 4,240 ================================================================================================================================== Class B: Shares issued 220 142 93 86 10 150 375 Shares issued in lieu of cash distributions 156 155 -- 6 -- -- 192 Shares redeemed (217) (158) (22) (10) (1) (178) (176) ---------------------------------------------------------------------------------------------------------------------------------- TOTAL CLASS B TRANSACTIONS 159 139 71 82 9 (28) 391 ================================================================================================================================== Class C: Shares issued 146 290 48 -- -- 169 881 Shares issued in lieu of cash distributions 58 13 -- -- -- -- 237 Shares redeemed (104) (22) (5) -- -- (418) (294) ---------------------------------------------------------------------------------------------------------------------------------- TOTAL CLASS C TRANSACTIONS 100 281 43 -- -- (249) 824 ================================================================================================================================== Class S: Shares issued 40 -- 224 63 -- 3 -- Shares redeemed (3) -- (55) (11) -- -- ---------------------------------------------------------------------------------------------------------------------------------- TOTAL CLASS S TRANSACTIONS 37 -- 169 52 -- 3 -- ================================================================================================================================== Class Y: Shares issued 8,466 12,165 6,630 11,303 2,923 12,114 22,670 Shares issued in lieu of cash distributions 4,122 3,792 -- 3,638 146 -- 9,585 Shares redeemed (12,422) (8,889) (3,074) (8,827) (4,617) (16,137) (11,904) ---------------------------------------------------------------------------------------------------------------------------------- TOTAL CLASS Y TRANSACTIONS 166 7,068 3,556 6,114 (1,548) (4,023) 20,351 ================================================================================================================================== NET INCREASE (DECREASE) IN CAPITAL SHARES 318 7,949 3,779 7,161 (2,090) (9,006) 25,806 ================================================================================================================================== 127 MID CAP LARGE CAP VALUE FUND CORE FUND ----------------------------------------------------------------------------------------------------------------- 10/1/01 10/1/00 10/1/01 11/1/00 11/1/99 TO TO TO TO TO 9/30/02 9/30/01 9/30/02 9/30/01 10/31/00 ----------------------------------------------------------------------------------------------------------------- Class A: Shares issued 365 332 144 127 155 Shares issued in lieu of cash distributions 9 7 2 153 45 Shares redeemed (378) (278) (264) (260) (279) Shares issued in connection with acquisition of Fund net assets -- -- -- 203 -- ----------------------------------------------------------------------------------------------------------------- TOTAL CLASS A TRANSACTIONS (4) 61 (118) 223 (79) ================================================================================================================= Class B: Shares issued 115 122 55 43 85 Shares issued in lieu of cash distributions 2 1 -- 5 1 Shares redeemed (157) (152) (21) (15) (17) Shares issued in connection with acquisition of Fund net assets -- -- -- 56 -- ----------------------------------------------------------------------------------------------------------------- TOTAL CLASS B TRANSACTIONS (40) (29) 34 89 69 ================================================================================================================= Class C: Shares issued 56 178 41 -- -- Shares issued in lieu of cash distributions 1 -- -- -- -- Shares redeemed (56) (33) (16) -- -- ----------------------------------------------------------------------------------------------------------------- TOTAL CLASS C TRANSACTIONS 1 145 25 -- -- ================================================================================================================= Class S: Shares issued 8 3 104 57 -- Shares issued in lieu of cash distributions -- -- -- -- -- Shares redeemed -- -- (95) (63) -- Shares issued in connection with acquisition of Fund net assets -- -- -- 120 -- ----------------------------------------------------------------------------------------------------------------- TOTAL CLASS S TRANSACTIONS 8 3 9 114 -- ================================================================================================================= Class Y: Shares issued 3,949 6,832 4,258 5,657 4,085 Shares issued in lieu of cash distributions 138 78 18 831 190 Shares redeemed (5,778) (4,453) (3,925) (3,788) (3,746) Shares issued in connection with acquisition of Fund net assets -- -- -- 2,276 -- ----------------------------------------------------------------------------------------------------------------- TOTAL CLASS Y TRANSACTIONS (1,691) 2,457 351 4,976 529 ================================================================================================================= NET INCREASE (DECREASE) IN CAPITAL SHARES (1,726) 2,637 301 5,402 519 ================================================================================================================= LARGE CAP LARGE CAP GROWTH FUND VALUE FUND ----------------------------------------------------------------------------------------------------------------- 10/1/01 11/1/00 12/1/99 10/1/01 10/1/00 TO TO TO TO TO 9/30/02 9/30/01 10/31/00 9/30/02 9/30/01 ----------------------------------------------------------------------------------------------------------------- Class A: Shares issued 816 2,597 47 621 948 Shares issued in lieu of cash distributions -- 1,077 -- 51 697 Shares redeemed (1,482) (4,194) (2) (1,851) (2,467) Shares issued in connection with acquisition of Fund net assets 7,834 -- -- 1,960 -- ----------------------------------------------------------------------------------------------------------------- TOTAL CLASS A TRANSACTIONS 7,168 (520) 45 781 (822) ================================================================================================================= Class B: Shares issued 1,977 423 685 142 195 Shares issued in lieu of cash distributions -- 215 -- 5 252 Shares redeemed (1,315) (365) (588) (615) (469) Shares issued in connection with acquisition of Fund net assets 1,852 -- -- 729 -- ----------------------------------------------------------------------------------------------------------------- TOTAL CLASS B TRANSACTIONS 2,514 273 97 261 (22) ================================================================================================================= Class C: Shares issued 135 793 -- 151 414 Shares issued in lieu of cash distributions -- 106 -- 1 34 Shares redeemed (182) (281) -- (202) (129) Shares issued in connection with acquisition of Fund net assets 1,516 -- -- 5 -- ----------------------------------------------------------------------------------------------------------------- TOTAL CLASS C TRANSACTIONS 1,469 618 -- (45) 319 ================================================================================================================= Class S: Shares issued 931 -- -- 131 -- Shares issued in lieu of cash distributions -- -- -- 8 -- Shares redeemed (421) -- -- (335) -- Shares issued in connection with acquisition of Fund net assets 16 -- -- 2,086 -- ----------------------------------------------------------------------------------------------------------------- TOTAL CLASS S TRANSACTIONS 526 -- -- 1,890 -- ================================================================================================================= Class Y: Shares issued 13,896 24,802 2,513 9,907 14,771 Shares issued in lieu of cash distributions -- 3,006 -- 411 4,642 Shares redeemed (11,729) (16,084) (1,095) (32,111) (16,348) Shares issued in connection with acquisition of Fund net assets 52,493 -- -- 25,675 -- ----------------------------------------------------------------------------------------------------------------- TOTAL CLASS Y TRANSACTIONS 54,660 11,724 1,418 3,882 3,065 ================================================================================================================= NET INCREASE IN CAPITAL SHARES 66,337 12,095 1,560 6,769 2,540 ================================================================================================================= 128 BALANCED EQUITY FUND INCOME FUND ----------------------------------------------------------------------------------------------------------------- 10/1/01 11/1/00 11/1/99 10/1/01 10/1/00 TO TO TO TO TO 9/30/02 9/30/01 10/31/00 9/30/02 9/30/01 ----------------------------------------------------------------------------------------------------------------- Class A: Shares issued 710 204 149 1,126 863 Shares issued in lieu of cash distributions 259 334 119 92 308 Shares redeemed (2,634) (457) (437) (1,430) (497) Shares issued in connection with acquisition of Fund net assets -- 11,723 -- 11,570 86 ----------------------------------------------------------------------------------------------------------------- TOTAL CLASS A TRANSACTIONS (1,665) 11,804 (169) 11,358 760 ================================================================================================================= Class B: Shares issued 355 121 47 473 265 Shares issued in lieu of cash distributions 63 15 2 15 188 Shares redeemed (1,130) (67) (3) (391) (206) Shares issued in connection with acquisition of Fund net assets -- 4,859 -- 913 69 ----------------------------------------------------------------------------------------------------------------- TOTAL CLASS B TRANSACTIONS (712) 4,928 46 1,010 316 ================================================================================================================= Class C: Shares issued 112 -- -- 745 522 Shares issued in lieu of cash distributions 4 -- -- 12 99 Shares redeemed (97) -- -- (274) (111) Shares issued in connection with acquisition of Fund net assets -- 248 -- 24 -- ----------------------------------------------------------------------------------------------------------------- TOTAL CLASS C TRANSACTIONS 19 248 -- 507 510 ================================================================================================================= Class S: Shares issued 1,640 744 -- 459 -- Shares issued in lieu of cash distributions 86 31 -- 21 -- Shares redeemed (1,572) (960) -- (339) -- Shares issued in connection with acquisition of Fund net assets -- 4,345 -- 3,648 27 ----------------------------------------------------------------------------------------------------------------- TOTAL CLASS S TRANSACTIONS 154 4,160 -- 3,789 27 ================================================================================================================= Class Y: Shares issued 7,150 1,659 2,282 27,490 6,753 Shares issued in lieu of cash distributions 800 1,018 401 308 1,549 Shares redeemed (12,860) (2,394) (3,831) (11,132) (6,668) Shares issued in connection with acquisition of Fund net assets -- 34,324 -- 31,843 3,459 ----------------------------------------------------------------------------------------------------------------- TOTAL CLASS Y TRANSACTIONS (4,910) 34,607 (1,148) 48,509 5,093 ================================================================================================================= NET INCREASE (DECREASE) IN CAPITAL SHARES (7,114) 55,747 (1,271) 65,173 6,706 =================================================================================================================
129 5> Investment Security Transactions During the fiscal year ended September 30, 2002, purchases of securities and proceeds from sales of securities, other than temporary investments in short-term securities, were as follows (000):
FUND PURCHASES SALES ------------------------------------------------------------------------ Health Sciences Fund $ 28,490 $ 30,299 Real Estate Securities Fund 140,361 118,413 Technology Fund 367,480 391,731 Emerging Markets Fund 70,614 69,646 International Fund 533,252 520,901 Micro Cap Fund 413,457 416,610 Small Cap Core Fund 937,036 760,212 Small Cap Growth Fund 960,811 1,011,853 Small Cap Value Fund 172,446 227,594 Mid Cap Core Fund 1,079,298 959,164 Mid Cap Growth Fund 827,146 869,571 Mid Cap Value Fund 294,200 315,377 Large Cap Core Fund 154,371 142,717 Large Cap Growth Fund 234,840 272,764 Large Cap Value Fund 885,709 1,247,399 Balanced Fund 430,145 497,954 Equity Income Fund 417,153 217,817 ------------------------------------------------------------------------
During the fiscal year ended September 30, 2002, the Large Cap Value Fund paid brokerage commissions on portfolio transactions in the amount of (000) $80 to affiliates of USBAM. The aggregate gross unrealized appreciation and depreciation of securities held by the Funds and the total cost of securities for federal tax purposes at September 30, 2002, is as follows (000):
AGGREGATE AGGREGATE FEDERAL GROSS GROSS INCOME FUND APPRECIATION DEPRECIATION NET TAX COST ------------------------------------------------------------------------------------- Health Sciences Fund $ 1,555 $ (5,403) $ (3,848) $ 28,357 Real Estate Securities Fund 10,398 (3,955) 6,443 122,420 Technology Fund 483 (65,561) (65,078) 145,374 Emerging Markets Fund 4,043 (5,792) (1,749) 50,974 International Fund 17,029 (171,766) (154,737) 759,425 Micro Cap Fund 30,472 (91,386) (60,914) 321,885 Small Cap Core Fund 30,340 (86,486) (56,146) 503,072 Small Cap Growth Fund 11,400 (42,369) (30,969) 273,045 Small Cap Value Fund 69,478 (63,506) 5,972 406,238 Mid Cap Core Fund 37,185 (88,186) (51,001) 612,814 Mid Cap Growth Fund 8,438 (45,606) (37,168) 263,925 Mid Cap Value Fund 13,354 (40,125) (26,771) 312,550 Large Cap Core Fund 48,930 (75,662) (26,732) 312,774 Large Cap Growth Fund 42,605 (169,242) (126,637) 668,885 Large Cap Value Fund 43,772 (224,916) (181,144) 1,169,048 Balanced Fund 40,900 (77,809) (36,909) 503,168 Equity Income Fund 92,252 (183,184) (90,932) 987,548 -------------------------------------------------------------------------------------
The differences between cost for financial statement purposes and federal tax purposes is primarily due to losses deferred from wash sales and investments in limited partnerships and REITs. 6> Securities Lending Transactions In order to generate additional income, the Funds may lend portfolio securities representing up to one-third of the value of total assets (which includes collateral received for securities on loan) to broker-dealers, banks, or other institutional borrowers of securities. As with other extensions of credit, there may be risks of delay in recovery of the securities or even loss of rights in the collateral should the borrower of the security fail financially. The market value of the securities on loan at September 30, 2002, the collateral purchased with cash received and held at September 30, 2002, with respect to such loans, and income generated during the fiscal year ended September 30, 2002, from the program were as follows (000):
MARKET VALUE OF INCOME RECEIVED FUND LOANED SECURITIES FROM SECURITIES LENDING -------------------------------------------------------------------------- Health Sciences Fund $ 10,721 $ 7 Real Estate Securities Fund 31,392 15 Technology Fund 37,558 117 International Fund -- 914 Micro Cap Fund 70,671 154 Small Cap Core Fund 161,316 180 Small Cap Growth Fund 49,155 198 Small Cap Value Fund 108,102 88 Mid Cap Core Fund 246,717 202 Mid Cap Growth Fund 106,227 153 Mid Cap Value Fund 141,766 75 Large Cap Core Fund 123,610 91 Large Cap Growth Fund 257,279 79 Large Cap Value Fund 426,638 267 Balanced Fund 212,744 185 Equity Income Fund 307,832 117 -------------------------------------------------------------------------- MARKET VALUE OF COLLATERAL PURCHASED WITH CASH RECEIVED ------------------------------------------------------- OTHER FIXED- REPURCHASE MONEY MARKET INCOME FUND AGREEMENTS INSTRUMENTS SECURITIES TOTAL ---------------------------------------------------------------------------------------- Health Sciences Fund $ 5,845 $ 615 $ 4,708 $ 11,168 Real Estate Securities Fund 17,094 1,797 13,769 32,660 Technology Fund 21,708 2,283 17,485 41,476 Micro Cap Fund 39,798 4,185 32,055 76,038 Small Cap Core Fund 88,713 9,327 71,454 169,494 Small Cap Growth Fund 27,250 2,865 21,948 52,063 Small Cap Value Fund 59,068 6,211 47,575 112,854 Mid Cap Core Fund 136,240 14,325 109,735 260,300 Mid Cap Growth Fund 58,450 6,146 47,078 111,674 Mid Cap Value Fund 77,768 8,177 62,639 148,584 Large Cap Core Fund 68,653 7,218 55,296 131,167 Large Cap Growth Fund 142,176 14,949 114,516 271,641 Large Cap Value Fund 234,189 24,623 188,678 447,440 Balanced Fund 116,126 12,210 93,534 221,870 Equity Income Fund 169,079 17,777 136,185 323,041 ----------------------------------------------------------------------------------------
130 Effective January 1, 2002, USBAM began serving as the securities lending agent for the Funds in transactions involving the lending of portfolio securities on behalf of the Funds. Prior to that date, U.S. Bank served as the securities lending agent. For these services, the securities lending fees paid to USBAM/U.S. Bank from the Funds for the fiscal year ended September 30, 2002, were as follows:
FUND AMOUNT (000) --------------------------------------------------------- Health Sciences Fund $ 5 Real Estate Securities Fund 12 Technology Fund 80 International Fund 135 Micro Cap Fund 96 Small Cap Core Fund 125 Small Cap Growth Fund 128 Small Cap Value Fund 60 Mid Cap Core Fund 126 Mid Cap Growth Fund 96 Mid Cap Value Fund 56 Large Cap Core Fund 60 Large Cap Growth Fund 70 Large Cap Value Fund 181 Balanced Fund 122 Equity Income Fund 84 ---------------------------------------------------------
131 7> Options Written The following options written were outstanding as of September 30, 2002:
PUT OPTIONS WRITTEN EXPIRATION EXERCISE NUMBER OF MARKET VALUE ISSUER DATE PRICE CONTRACTS (000) ------------------------------------------------------------------------------------------------------------ LARGE CAP GROWTH FUND Applied Materials Oct-02 $ 12.5 400 $ 54 ------- Total put options outstanding (premiums received, $54) $ 54 ------- CALL OPTIONS WRITTEN EXPIRATION EXERCISE NUMBER OF MARKET VALUE ISSUER DATE PRICE CONTRACTS (000) ------------------------------------------------------------------------------------------------------------- LARGE CAP GROWTH FUND: Cardinal Health Oct-02 $ 65 250 $ 30 ------- Total call options outstanding (premiums received, $68) $ 30 ------- TECHNOLOGY FUND Motorola Jan-03 12.5 400 32 Veritas Jan-03 17.5 300 59 ------- Total call options outstanding (premiums received, $91) $ 91 -------
Transactions in options written for the fiscal year ended September 30, 2002, were as follows:
NUMBER OF PREMIUM CONTRACTS AMOUNT (000) ------------------------------------------------------------------------------------------------------------ PUT OPTIONS WRITTEN LARGE CAP GROWTH FUND: Balance at September 30, 2001 203 $ 71 Opened 3,125 1,177 Expired (295) (62) Exercised (243) (59) Closed (2,390) (1,073) ------ -------- Balance at September 30, 2002 400 $ 54 ------ -------- CALL OPTIONS WRITTEN LARGE CAP GROWTH FUND: Balance at September 30, 2001 800 $ 104 Opened 4,450 653 Expired (2,249) (359) Exercised (1,052) (84) Closed (1,699) (246) ------ -------- Balance at September 30, 2002 250 $ 68 ------ -------- TECHNOLOGY FUND: Balance at September 30, 2001 -- $ -- Opened 700 91 Expired -- -- Exercised -- -- Closed -- -- ------ -------- Balance at September 30, 2002 700 $ 91 ------ --------
132 8> Fund Mergers On May 14, 2002, shareholders of the Capital Growth Fund, Relative Value Fund, Growth & Income Fund, and Science & Technology Fund approved the Agreement and Plan of Reorganization recommended by the board of directors, providing for the merger into the Large Cap Growth Fund, Large Cap Value Fund, Equity Income Fund, and Technology Fund, respectively at the close of business May 17, 2002. Under the Agreement and Plan of Reorganization, Class A, Class B, Class C, Class S, and Class Y shares of the Capital Growth Fund, Relative Value Fund, Growth & Income Fund, and Science & Technology Fund were exchanged for Class A, Class B, Class C, Class S, and Class Y shares, respectively, of the Large Cap Growth Fund, Large Cap Value Fund, Equity Income Fund, and Technology Fund on a tax free basis. The following table illustrates the specifics of the merger (000):
ACQUIRED SHARES ISSUED TO FUND'S NET SHAREHOLDERS OF ACQUIRING FUND COMBINED TAX STATUS ACQUIRED FUND ACQUIRING FUND ASSETS ACQUIRED FUND NET ASSETS NET ASSETS OF TRANSFER --------------------------------------------------------------------------------------------------------------------------- First American First American Capital Growth (1) Large Cap Growth $ 211,365 (2) $ 606,639 $ 818,004 Non-taxable Class A Class A 7,834 Class B Class B 1,852 Class C Class C 1,516 Class S Class S 16 Class Y Class Y 52,493 First American First American Relative Value Large Cap Value (1) 526,014 (5) 967,283 1,493,297 Non-taxable Class A Class A 1,960 Class B Class B 729 Class C Class C 5 Class S Class S 2,086 Class Y Class Y 25,675 First American First American Growth & Income Equity Income (1) 613,957 (3) 521,078 1,135,035 Non-taxable Class A Class A 11,570 Class B Class B 913 Class C Class C 24 Class S Class S 3,648 Class Y Class Y 31,843 First American First American Science & Technology Technology (1) 30,411 (4) 134,706 165,117 Non-taxable Class A Class A 167 Class B Class B 599 Class C Class C 26 Class S Class S 401 Class Y Class Y 2,708 ---------------------------------------------------------------------------------------------------------------------------
(1) Accounting survivor (2) Includes capital loss carryover and tax losses deferred due to wash sales of $147,379, unrealized depreciation of $30,566. (3) Includes capital loss carryover and tax losses deferred due to wash sales of $23,817, unrealized appreciation of $70,265. (4) Includes capital loss carryover and tax losses deferred due to wash sales of $73,530, unrealized depreciation of $769. (5) Includes unrealized appreciation of $134,158. On August 31, 2001, shareholders of FAIF approved the agreement and plan of reorganization recommended by the board of directors, providing for the acquisition of Firstar Funds, Inc. On September 24, 2001, certain portfolios of FAIF, including newly formed shell portfolios (which were organized solely to acquire the assets and continue business of certain portfolios of the Firstar Funds) merged with certain portfolios of the Firstar Funds. The following table illustrates the specifics of the mergers of the FAIF portfolios covered by this annual report (000):
ACQUIRED SHARES ISSUED TO FUND'S NET SHAREHOLDERS OF ACQUIRING FUND COMBINED TAX STATUS ACQUIRED FUND ACQUIRING FUND ASSETS ACQUIRED FUND NET ASSETS NET ASSETS OF TRANSFER --------------------------------------------------------------------------------------------------------------------------- Firstar Large First American Cap Core (1) Large Cap Core (2) $ 335,610 $ -- $ 335,610 Non-taxable Class A Class A 1,406 Class B Class B 123 Class Y Class S 121 Institutional Class Class Y 12,631 133 ACQUIRED SHARES ISSUED TO FUND'S NET SHAREHOLDERS OF ACQUIRING FUND COMBINED TAX STATUS ACQUIRED FUND ACQUIRING FUND ASSETS ACQUIRED FUND NET ASSETS NET ASSETS OF TRANSFER ----------------------------------------------------------------------------------------------------------------------------- Firstar Growth First American & Income (1) Growth & Income (2) $ 662,988 $ -- $ 662,988 Non-taxable Class A Class A 4,878 Class B Class B 374 Class Y Class S 1,447 Institutional Class Class Y 16,110 Firstar Relative First American Value (1) Relative Value (2) 395,702 -- 395,702 Non-taxable Class A Class A 1,384 Class B Class B 504 Class Y Class S 1,134 Institutional Class Class Y 14,561 Firstar Large First American Cap Growth (1) Large Cap Growth (2) 185,259 -- 185,259 Non-taxable Class A Class A 586 Class B Class B 3,175 Class Y Class S 657 Institutional Class Class Y 9,030 First American Firstar Equity Income Equity Income (1) 41,276 (3) 245,057 286,333 Non-taxable Class A Class A 86 Class B Class B 69 Class Y Class S 27 Institutional Class Class Y 3,459 Firstar Balanced First American Growth (1) Balanced Growth 227,242 225,353 (4) 579,042 Non-taxable Class A Class A 4,968 Class B Class B 560 Class Y Class S 3,880 Institutional Class Class Y 15,433 Firstar Balanced Income 126,447 (4) -- -- -- Class A Class A 4,483 Class B Class B 891 Class Y Class S 502 Institutional Class Class Y 7,951 Firstar Mid Cap First American Core Equity (1) Mid Cap Core (2) 468,645 -- 468,645 Non-taxable Class A Class A 2,906 Class B Class B 91 Class Y Class S 39 Institutional Class Class Y 14,087 First American Firstar Micro Cap (1) Micro Cap (2) 289,894 -- 289,894 Non-taxable Class A Class A 2,581 Class B Class B 194 Class Y Class S 119 Institutional Class Class Y 15,293 Firstar Small Cap First American Core Equity (1) Small Cap Core (2) 296,588 -- 296,588 Non-taxable Class A Class A 1,452 Class B Class B 174 Class Y Class S 305 Institutional Class Class Y 23,845 Firstar International First American Growth (1) International 136,396 536,522 (5) 708,158 Non-taxable Class A Class A 239 Class B Class B 86 Class Y Class S 1,128 Institutional Class Class Y 14,898 Firstar International Value 35,240 (5) -- -- -- Class A Class A 368 Class B Class B 39 Class Y Class S 6 Institutional Class Class Y 3,813 134 ACQUIRED SHARES ISSUED TO FUND'S NET SHAREHOLDERS OF ACQUIRING FUND COMBINED TAX STATUS ACQUIRED FUND ACQUIRING FUND ASSETS ACQUIRED FUND NET ASSETS NET ASSETS OF TRANSFER ------------------------------------------------------------------------------------------------------------------------------ First American Real Firstar REIT Estate Securities (1) $ 32,077 (6) $ 63,394 $ 95,471 Non-taxable Class A Class A -- Class B Class B -- Class Y Class S 6 Institutional Class Class Y 2,572 Firstar Science First American & Technology (1) Science & Technology (2) 35,449 -- 35,449 Non-taxable Class A Class A 210 Class B Class B 763 Class Y Class S 300 Institutional Class Class Y 6,147
(1) Accounting survivor (2) Shell portfolio (3) Includes accumulated realized loss of ($239) and unrealized appreciation of $8,261. (4) Includes accumulated realized loss of ($19,184) and unrealized depreciation of ($37,098). (5) Includes accumulated realized loss of ($124,169) and unrealized depreciation of ($150,432). (6) Includes accumulated realized loss of ($2,258) and unrealized appreciation of $1,791. On November 27, 2000, certain portfolios of the Firstar Funds, including newly formed shell portfolios (which were organized solely to acquire the assets and continue the business of certain portfolios of Mercantile Funds and Firstar Stellar Funds) merged with certain portfolios of Mercantile Funds and Stellar Funds. On December 11, 2000, certain other portfolios of Mercantile Funds and Firstar Stellar Funds merged into shell portfolios of Firstar Funds. The following table illustrates the specifics of the mergers of certain Funds included in this annual report (000):
ACQUIRED SHARES ISSUED TO FUND'S NET SHAREHOLDERS OF ACQUIRING FUND COMBINED TAX STATUS ACQUIRED FUND ACQUIRING FUND ASSETS ACQUIRED FUND NET ASSETS NET ASSETS OF TRANSFER --------------------------------------------------------------------------------------------------------------------------------- Mercantile Firstar Large Cap Growth Equity Core Equity (1) $ 95,738 (5) $ 356,198 $ 451,936 Non-taxable Class A Class A 203 Class B Class B 56 Institutional Class Class Y 120 Trust Class Institutional Class 2,276 Firstar Stellar Firstar Large Cap Growth Equity (1) Growth (2) 320,713 -- 320,713 Non-taxable Class A Class A 57 Class B Class B 3,972 Class Y Institutional Class 9,383 Mercantile Firstar Equity Income (1) Equity Income (2) 51,717 -- 51,717 Non-taxable Class A Class A 134 Class B Class B 98 Institutional Class Class Y 12 Trust Class Institutional Class 7,693 Mercantile Firstar Small Cap Equity (1) Emerging Growth 137,018 198,507 (6) 335,525 Non-taxable Class A Class A 801 Class B Class B 31 Trust Class Institutional Class 14,027 Mercantile Firstar Core International Equity (1) International Equity 131,976 37,900 169,876 Non-taxable Class A Class A 2 Class B Class B 9 Trust Class Institutional Class 2,901 Firstar Stellar REIT (1) Firstar REIT (2) 36,907 -- 36,907 Non-taxable Class Y Institutional Class 4,085
(1) Accounting survivor (2) Shell portfolio (3) Includes accumulated realized loss of ($114) and unrealized depreciation of ($283). (4) Includes unrealized appreciation of $50,298. (5) Includes unrealized appreciation of $40,483. (6) Includes unrealized appreciation of $18,818. 135 9> Subsequent Events Effective October 25, 2002, the Large CapCore, Mid Cap Core, and Large Cap Core Funds acquired substantially all of the assets of the Equity Growth A, Special Equity Growth B and Common Stock (KS) Common Trust Funds (sponsored by U.S. Bank), respectively, in exchange for Class Y shares of the respective First American Funds. On November 22, 2002, the Equity Income and Small Cap Core Funds will acquire substantially all of the assets of the Growth & Income and Emerging Growth Common Trust Funds (sponsored by U.S. Bank), respectively, in exchange for Class Y shares of the respective First American Funds. 136 NOTICE TO Shareholders September 30, 2002 The information set forth below is for each Fund's fiscal year as required by federal laws. Shareholders, however, must report distributions on a calendar year basis for income tax purposes, which may include distributions for portions of two fiscal years of a fund. Accordingly, the information needed by shareholders for income tax purposes will be sent to them in early 2003. Please consult your tax advisor for proper treatment of this information. Dear First American Shareholders: For the fiscal year ended September 30, 2002, each Fund has designated long term capital gains with regard to distributions paid during the year as follows:
LONG TERM ORDINARY CAPITAL GAINS INCOME TOTAL DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS QUALIFYING (TAX BASIS) (2) (TAX BASIS) (2) (TAX BASIS) (2) DIVIDENDS (1) (2) ---------------------------------------------------------------------------------------------- Emerging Markets Fund --% 100% 100% --% Small Cap Core Fund 100 -- 100 -- Small Cap Value Fund 88 12 100 29 Mid Cap Value Fund -- 100 100 100 Large Cap Core Fund -- 100 100 72 Balanced Fund -- 100 100 25 Equity Income Fund 1 99 100 98
(1) Qualifying dividends represent dividends which qualify for the corporate dividends received deduction. (2) Real Estate Securities Fund is not shown due to the fact that the tax year end is December 31st. 137 Directors and Officers of the Fund Independent Directors
POSITION(S) TERM OF OFFICE HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) NAME, ADDRESS, AND AGE WITH FUND TIME SERVED DURING PAST 5 YEARS ------------------------------------------------------------------------------------------------------------- Roger A. Gibson, Director Term expiring earlier of Vice President, Cargo - United 1200 Algonquin Road, death, resignation, removal, Airlines, since July 2001; Vice Elk Grove Village, Illinois disqualification, or successor President, North 60007 (56) duly elected and qualified. America-Mountain Region for Director of FAIF since October United Airlines (1995-2001) 1997 Andrew M. Hunter III, Director Term expiring earlier of Chairman, Hunter, Keith 537 Harrington Road, death, resignation, removal, Industries, a diversified Wayzata,Minnesota disqualification, or successor manufacturing and services 55391 (55) duly elected and qualified. management company, since 1975 Director of FAIF since January 1997 Leonard W. Kedrowski, Director Term expiring earlier of Owner, Executive Management 16 Dellwood Avenue, death, resignation, removal, Consulting,Inc., a management Dellwood, Minnesota disqualification, or successor consulting firm, since 1992; 55110 (61) duly elected and qualified. Chief Executive Director of FAIF since Officer, Creative Promotions November 1993 International, LLC, a promotional award programs and products company, since 1999; Board member, GC McGuiggan Corporation (DBA Smyth Companies), a label printer, since 1993*, Advisory Board member, Designer Doors, manufacturer of designer doors from 1998-2002; acted as CEO of Graphics Unlimited from 1996-1998 Richard K. Riederer, Director Term expiring earlier of Retired; President and Chief 741 Chestnut Road, death, resignation, removal, Executive Officer, Weirton Sewickley, Pennsylvania disqualification, or successor Steel (1995-2001); 15143 (58) duly elected and qualified. Director, Weirton Steel Director of FAIF since August (1993-2001) 2001 Joseph D. Strauss, Director Term expiring earlier of Chairman of FAF's and FAIF's 8525 Edinbrook Crossing, death, resignation, removal, Boards from 1993 to September Suite 5, Brooklyn Park, disqualification, or successor 1997 and of FASF's Board from Minnesota 55443 (62) duly elected and qualified. June 1996 to September 1997; Director of FAIF since April President of FAF and FAIF from 1991 June 1989 to November 1989; Owner and Executive Officer, Excensus(TM) LLC, a consulting firm, since 2001; Owner and President, Strauss Management Company, a Minnesota holding company for various organizational management business ventures, since 1993; Owner, Chairman and Chief Executive Officer, Community Resource Partnerships, Inc., a strategic planning, operations management, government relations, transportation planning and public relations organization, since 1993; attorney at law NUMBER OF PORTFOLIOS DIRECTORSHIPS IN FUND COMPLEX HELD BY NAME, ADDRESS, AND AGE OVERSEEN BY DIRECTOR DIRECTOR+ ---------------------------------------------------------------------------- Roger A.Gibson, First American Funds None 1200 Algonquin Road, Complex: thirteen registered Elk Grove Village, Illinois investment companies, 60007 (56) including sixty nine portfolios Andrew M.Hunter III, First American Funds None 537 Harrington Road, Complex: thirteen registered Wayzata, Minnesota investment companies, 55391 (55) including sixty nine portfolios Leonard W.Kedrowski, First American Funds None 16 Dellwood Avenue, Complex: thirteen registered Dellwood, Minnesota investment companies, 55110 (61) including sixty nine portfolios Richard K.Riederer, First American Funds None 741 Chestnut Road, Complex: thirteen registered Sewickley, Pennsylvania investment companies, 15143 (58) including sixty nine portfolios Joseph D.Strauss, First American Funds None 8525 Edinbrook Crossing, Complex: thirteen registered Suite 5, Brooklyn Park, investment companies, Minnesota 55443 (62) including sixty nine portfolios 138 POSITION(S) TERM OF OFFICE HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) NAME, ADDRESS, AND AGE WITH FUND TIME SERVED DURING PAST 5 YEARS ---------------------------------------------------------------------------------------------------------------- Virginia L. Stringer, Chair; Chair term three Owner and President, Strategic 712 Linwood Avenue, Director years. Director term expiring Management Resources, Inc., a St.Paul, Minnesota earlier of death, management consulting 55105 (58) resignation, removal, firm, since 1993; Executive disqualification, or successor Consultant for State Farm duly elected and Insurance Company since 1997; qualified. Chair of FAIF's formerly President and Board since September 1997; Director, The Inventure Group, a Director of FAIF since August management consulting and 1987 training company; President, Scott's, Inc., a transportation company, and Vice President of Human Resources, The Pillsbury Company James M. Wade, Director Term expiring earlier of Owner and President, Jim Wade 2802 Wind Bluff Circle, death, resignation, removal, Homes, a homebuilding company, Wilmington, North Carolina disqualification, or since 1999 28409 (59) successor duly elected and qualified. Director of FAIF since August 2001 Interested Director(s) John M. Murphy, Jr., Director Term expiring earlier of Executive Vice President, U.S. 800 Nicollet Mall, death, resignation, removal, Bancorp since January 1999; Minneapolis, Minnesota disqualification, or successor Minnesota State Chairman - 55402 (61) * duly elected and qualified. U.S. Bancorp since 2000; Director of FAIF since June Chairman and Chief Investment 1999 Officer, First American Asset Management and U.S.Bank Trust, N.A., and Executive Vice President, U.S.Bancorp (1991-1999). OTHER NUMBER OF PORTFOLIOS DIRECTORSHIPS NAME,ADDRESS,AND AGE IN FUND COMPLEX HELD BY OVERSEEN BY DIRECTOR DIRECTOR+ ---------------------------------------------------------------------------- Virginia L. Stringer, First American Funds None 712 Linwood Avenue, Complex: thirteen registered St.Paul, Minnesota investment companies, 55105 (58) including sixty nine portfolios James M. Wade, First American Funds None 2802 Wind Bluff Circle, Complex: thirteen registered Wilmington, North Carolina investment companies, 28409 (59) including sixty nine portfolios Interested Director(s) John M. Murphy, Jr., First American Funds None 800 Nicollet Mall, Complex: thirteen registered Minneapolis, Minnesota investment companies, 55402 (61) * including sixty nine portfolios
139 Officers
POSITION(S) TERM OF OFFICE HELD AND LENGTH OF NAME,ADDRESS,AND AGE WITH FUND TIME SERVED PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS ---------------------------------------------------------------------------------------------------------------------------------- Thomas S. Schreier, Jr., President Re-elected by the Board Chief Executive Officer of U.S.Bancorp Asset U.S.Bancorp Asset annually; President of FAIF Management, Inc. since May 2001; Chief Management, Inc., since February 2001 Executive Officer of First American Asset 800 Nicollet Mall, Management from December 2000 through May Minneapolis, Minnesota 2001 and of Firstar Investment & Research 55402 (40)** Management Company from February 2001 through May 2001; Senior Managing Director and Head of Equity Research of U.S.Bancorp Piper Jaffray from October 1998 through December 2000; Senior Airline Analyst and Director, Equity Research of Credit Suisse First Boston through 1998 Mark S. Jordahl, Vice Re-elected by the Board Chief Investment Officer of U.S.Bancorp Asset U.S.Bancorp Asset President- annually; Vice President - Management, Inc. since September 2001; Management, Inc., Investments Investments of FAIF since President and Chief Investment Officer, ING 800 Nicollet Mall, September 2001 Investment Management-Americas (September Minneapolis, Minnesota 2000 to June 2001); Senior Vice President and 55402 (42)** Chief Investment Officer, ReliaStar Financial Corp. (January 1998 to September 2000); Executive Vice President and Managing Director, Washington Square Advisers (January 1996 to December 1997) Jeffery M. Wilson, Vice Re-elected by the Board annually; Senior Managing Director of U.S.Bancorp Asset U.S.Bancorp Asset President- Vice President - Administration of Management since May 2001; Senior Vice Management, Inc., Administration FAIF since March 2000 President of First American Asset Management 800 Nicollet Mall, through May 2001 Minneapolis, Minnesota 55402 (46)** Robert H. Nelson, Treasurer Re-elected by the Board annually; Chief Operating Officer of U.S.Bancorp Asset U.S.Bancorp Asset Treasurer of FAIF since Management since May 2001; Senior Vice Management, Inc., March 2000 President of First American Asset Management 800 Nicollet Mall, from 1998 through May 2001 and of Firstar Minneapolis, Minnesota Investment & Research Management Company from 55402 (39)** February 2001 through May 2001; Senior Vice President of Piper Capital Management Inc. through 1998 James D. Alt, Secretary Re-elected by the Board annually; Partner, Dorsey & Whitney LLP, a 50 South Sixth Street, Suite Assistant Secretary of FAIF from Minneapolis-based law firm 1500, Minneapolis, Minnesota September 1998 through 55402 (51) June 2002; Secretary of FAIF since June 2002 Michael J. Radmer, Assistant Re-elected by the Board annually; Partner, Dorsey & Whitney LLP, a 50 South Sixth Street, Suite Secretary Assistant Secretary of FAIF since Minneapolis-based law firm 1500, Minneapolis, Minnesota March 2000; Secretary of FAIF 55402 (57) from September 1999 through March 2000 Kathleen L. Prudhomme, Assistant Re-elected by the Board annually; Partner, Dorsey & Whitney LLP, a 50 South Sixth Street, Suite Secretary Assistant Secretary of FAIF since Minneapolis-based law firm 1500, Minneapolis, Minnesota September 1998 55402 (49) Douglas G. Hess, Assistant Re-elected by the Board annually; Assistant Vice President, Fund Compliance 615 East Michigan Street, Secretary Assistant Secretary of FAIF since Administrator, U.S.Bancorp Fund Services, LLC Milwaukee, Wisconsin September 2001 (FKA Firstar Mutual Fund Services, LLC) since 53202 (35)** March 1997
* Mr.Murphy is considered an " Director because of his employment with U.S.Bancorp, U.S.Bancorp Asset Management Inc., and U.S.Bank Trust National "interested Association., and his ownership of securities issued by U.S.Bancorp. ** Messrs. Schreier, Jordahl, Wilson, and Nelson are each officers of U.S.Bancorp Asset Management, Inc., which serves as investment advisor for FAIF. Mr. Hess is an officer of U.S.Bancorp Fund Services, LLC, which is a subsidiary of U.S.Bancorp and which serves as Co-Administrator for FAIF. + Includes only directorships in a company with a class of securities registered pursuant to Section 12 of the Securities Exchange Act or subject to the requirements of Section 15(d)of the Securities Exchange Act, or any company registered as an investment company under the Investment Company Act. FAF First American Funds, Inc. FAIF First American Investment Funds, Inc. FASF First American Strategy Funds, Inc. The Statement of Additional Information (SAI) includes additional information about fund directors and is available upon request without charge by calling 800-677-FUND or writing to First American Funds, P.O.Box 1330, Minneapolis, Minnesota, 55440-1330. 140 BOARD OF DIRECTORS FIRST AMERICAN INVESTMENT FUNDS, INC. Roger Gibson Director of First American Investment Funds, Inc. Vice President of North America-Mountain Region for United Airlines Andrew Hunter III Director of First American Investment Funds, Inc. Chairman of Hunter, Keith Industries, Inc. Leonard Kedrowski Director of First American Investment Funds, Inc. Owner and President of Executive and Management Consulting, Inc. John Murphy Jr. Director of First American Investment Funds, Inc. Executive Vice President of U.S. Bancorp Richard Riederer Director of First American Investment Funds, Inc. Retired; former President and Chief Executive Officer of Weirton Steel Joseph Strauss Director of First American Investment Funds, Inc. Former Chairman of First American Investment Funds, Inc. Owner and President of Strauss Management Company Virginia Stringer Chairperson of First American Investment Funds, Inc. Owner and President of Strategic Management Resources, Inc. James Wade Director of First American Investment Funds, Inc. Owner and President of Jim Wade Homes [FIRST AMERICAN FUNDS(TM) LOGO] DIRECT FUND CORRESPONDENCE TO: FIRST AMERICAN FUNDS P.O. Box 1330 Minneapolis, MN 55440-1330 This report and the financial statements contained herein are submitted for the general information of the shareholders of the corporation and are not intended to be a forecast of future events, a guarantee of future results, nor investment advice. Further, there is no assurance that certain securities will remain in or out of each fund's portfolio. Please refer to the prospectus which contains more complete information on the First American Funds, including risks, fees, and expenses. Please read it carefully before investing or sending money. This report must be preceded or accompanied by a current prospectus. Past performance does not guarantee future results. The principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. INVESTMENT ADVISOR U.S. BANCORP ASSET MANAGEMENT, INC. 800 Nicollet Mall Minneapolis, Minnesota 55402 CO-ADMINISTRATORS U.S. BANCORP ASSET MANAGEMENT, INC. 800 Nicollet Mall Minneapolis, Minnesota 55402 U.S. BANCORP FUND SERVICES, LLC 615 East Michigan Street Milwaukee, Wisconsin 53202 CUSTODIAN U.S. BANK NATIONAL ASSOCIATION 180 East Fifth Street St. Paul, Minnesota 55101 DISTRIBUTOR QUASAR DISTRIBUTORS, LLC 615 East Michigan Street, 2nd floor Milwaukee, Wisconsin 53202 INDEPENDENT AUDITORS ERNST & YOUNG LLP 220 South Sixth Street Suite 1400 Minneapolis, Minnesota 55402 COUNSEL DORSEY & WHITNEY LLP 50 South Sixth Street Suite 1500 Minneapolis, Minnesota 55402 FIRST AMERICAN FUNDS ----------------- P.O. Box 1330 Bulk Rate Minneapolis, MN 55440-1330 U.S. Postage Paid Mpls, MN In an attempt to reduce shareholder costs and help Permit No. 26388 eliminate duplication, First American Funds will try to ----------------- limit their mailing to one report for each address that lists one or more shareholders with the same last name. USPS Mailer 881 If you would like additional copies, please call First Approved Poly American Funds Investor Services at 800.677.FUND. Visit us at firstamericanfunds.com. 2254-02 11/2002 AR-EQUITY