-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QnBy19EIsOkpRm0fgPJdbvFeUZtpdlVPMgJ/Sjgn3LcIUpD2KLu/uFQDc/7GpuU+ U+5S6CWmYgTXaOlQbDZaXg== 0001047469-03-039775.txt : 20031209 0001047469-03-039775.hdr.sgml : 20031209 20031208185915 ACCESSION NUMBER: 0001047469-03-039775 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20030930 FILED AS OF DATE: 20031209 EFFECTIVENESS DATE: 20031209 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST AMERICAN INVESTMENT FUNDS INC CENTRAL INDEX KEY: 0000820892 IRS NUMBER: 411418224 STATE OF INCORPORATION: MD FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-05309 FILM NUMBER: 031043341 BUSINESS ADDRESS: STREET 1: 800 NICOLLET MALL STREET 2: BC-MN-H210 CITY: MINNEAPOLIS STATE: MN ZIP: 55402 BUSINESS PHONE: 6123031606 MAIL ADDRESS: STREET 1: 800 NICOLLET MALL STREET 2: BC-MN-H210 CITY: MINNEAPOLIS STATE: MN ZIP: 55402 FORMER COMPANY: FORMER CONFORMED NAME: SECURAL MUTUAL FUNDS INC DATE OF NAME CHANGE: 19910627 N-CSR 1 a2123381zn-csr.txt N-CSR ----------------------------- OMB APPROVAL ----------------------------- OMB Number: 3235-0570 Expires: November 30, 2005 Estimated average burden hours per response....... 5.0 ----------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-05309 --------------------------------------------- First American Investment Funds, Inc. - ------------------------------------------------------------------------------- (Exact name of registrant as specified in charter) 800 Nicollet Mall Minneapolis, MN 55402 - ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Jonathan P. Lillemoen 800 Nicollet Mall Minneapolis, MN 55402 - ------------------------------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: 800-677-3863 ---------------------------- Date of fiscal year end: September 30, 2003 -------------------------- Date of reporting period: September 30, 2003 ------------------------- Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles. A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. Section 3507. Item 1. Report to Shareholders [FIRST AMERICAN FUNDS(TM) LOGO] 2003 ANNUAL REPORT INCOME FUNDS [GRAPHIC] "NOTHING BUT HARMONY, HONESTY, INDUSTRY, AND FRUGALITY ARE NECESSARY TO MAKE US A GREAT AND HAPPY PEOPLE." GEORGE WASHINGTON JANUARY 29, 1789 FIRST AMERICAN FUNDS 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 17 Schedule of Investments 18 Statements of Assets and Liabilities 56 Statements of Operations 58 Statements of Changes in Net Assets 60 Financial Highlights 62 Notes to Financial Statements 68 Notice to Shareholders 82
MUTUAL FUND INVESTING INVOLVES RISK; PRINCIPAL LOSS IS POSSIBLE. NOT FDIC INSURED NO BANK GUARANTEE MAY LOSE VALUE MESSAGE TO SHAREHOLDERS November 14, 2003 DEAR SHAREHOLDERS: We invite you to take a few minutes to review the results of the fiscal year ended September 30, 2003. This report includes comparative performance graphs and tables, portfolio commentaries, complete listings of portfolio holdings, and additional fund information. We hope you will find this helpful in monitoring your investment portfolio. Also, through our website firstamericanfunds.com, we provide quarterly performance fact sheets on all First American funds, the economic outlook as viewed by our senior investment officers, and other information about fund investments and portfolio strategies. Please contact your financial professional if you have questions about First American Funds or contact First American Investor Services at 800.677.FUND. We appreciate your investment with First American Funds and look forward to serving your financial needs in the future. Sincerely, /s/ VIRGINIA L. STRINGER /s/ THOMAS S. SCHREIER VIRGINIA L. STRINGER THOMAS S. SCHREIER, JR. CHAIRPERSON OF THE BOARD PRESIDENT FIRST AMERICAN INVESTMENT FUNDS, INC. FIRST AMERICAN INVESTMENT FUNDS, INC. 1 CORE BOND FUND Investment Objective: HIGH CURRENT INCOME CONSISTENT WITH LIMITED RISK TO CAPITAL First American Core Bond Fund Class Y shares returned 5.34% for the fiscal year (Class A shares returned 5.08% at net asset value for the same period). By comparison, the Fund's benchmark, the Lehman U.S. Aggregate Bond Index*, returned 5.41%. As the fiscal year began, we generally positioned the portfolio to benefit from a continued modest expansion of the economy with stable to modestly rising interest rates, an improvement in equity valuations driven by stronger earnings, improving credit fundamentals, and a general shift in investor attitude toward owning higher risk, less-liquid fixed-income assets. In line with these expectations, the Fund maintained a significant overweighting relative to its benchmark in corporate bonds, and asset-backed and mortgage-backed securities and an underweighting in Treasury securities. This positioning generally helped portfolio performance as corporate bonds recovered dramatically in 2003, yield spreads (the difference between yields of various types of bonds, relative to Treasuries) tightened, and interest rates, though quite volatile within the reporting period, were stable year-over-year. The Fund was positioned with an overweighting in securities subject to credit risk compared to the benchmark. This helped performance as these securities outperformed Treasuries by about 7.0% for the fiscal year ended September 30, 2003. Within the corporate bond (credit) segment, we maintained an overweight position against the benchmark in BBB-rated and higher-beta (those with higher sensitivity to market movements) A-rated securities, with an underweight position in higher-quality, higher-rated corporate securities. This helped performance as the BBB-rated sector outperformed the AA corporate sector by 8.0% on an excess return basis during the fiscal year. Our overweights within the telecommunications, media, and automotive sectors contributed positively to performance as these industries recovered from the negative credit environment of 2002 and posted double-digit returns. Our positioning in other sectors generally helped performance, though by a much lesser margin than our overweight to credit. We were generally underweight to the government-sponsored agency sector (e.g., Ginnie Mae (GNMA), Fannie Mae (FNMA), and Freddie Mac), primarily due to better opportunities in credit, and this helped the Fund as government-sponsored agencies struggled amidst continued accounting irregularities at Federal Home Loan Mortgage Corporation (FHLMC) and uncertainty regarding the direction of regulatory oversight at government-sponsored entities. Mortgage-backed securities, which generally comprise more than one-third of the portfolio, performed very poorly over the reporting period as the volatility in rates in mid-2003 resulted in a sharp increase in prepayments followed by a significant extension in duration as rates spiked in July. (Duration is a time measure of interest-rate risk exposure that estimates how much a bond, or a bond fund's price, fluctuates with changes in interest rates.) Our risk exposure to mortgages was generally neutral to the benchmark over the reporting period, resulting in no meaningful performance impact from the sector against the benchmark. At the same time, our strategic overweight of roughly 5% to asset-backed securities and our tactical overweight of 2% to commercial mortgage-backed securities paid off as the systemic tightening of spreads led to outperformance by these sectors. 2 ANNUALIZED PERFORMANCE(1) as of September 30, 2003
SINCE INCEPTION(4) ------------------------------------------- 1 YEAR 5 YEARS 10 YEARS 2/4/1994 8/15/1994 2/1/1999 9/24/2001 Class A NAV 5.08% 5.29% 6.07% -- -- -- -- Class A POP 0.60% 4.38% 5.60% -- -- -- -- Class B NAV 4.23% 4.52% -- -- 6.12% -- -- Class B POP -0.77% 4.19% -- -- 6.12% -- -- Class C NAV 4.30% -- -- -- -- 4.99% -- Class C POP 2.22% -- -- -- -- 4.78% -- Class S 5.08% -- -- -- -- -- 5.79% Class Y 5.34% 5.55% -- 6.49% -- -- -- Lehman U.S. Aggregate Bond Index(3) 5.41% 6.63% 6.92% 7.27% 7.86% 7.41% 6.99%
VALUE OF A $10,000 INVESTMENT(1),(2) as of September 30, 2003 [CHART] Class A
FIRST AMERICAN CORE BOND FIRST AMERICAN CORE BOND LEHMAN U.S. AGGREGATE FUND, CLASS A NAV FUND, CLASS A POP BOND INDEX(4) 9/1993 10000 9578 10000 9/1994 9709 9292 9677 9/1995 10950 10480 11038 9/1996 11458 10966 11579 9/1997 12404 11872 12704 9/1998 13929 13331 14166 9/1999 13557 12975 14114 9/2000 14414 13796 15101 9/2001 16216 15520 17057 9/2002 17151 16416 18523 9/2003 18023 17250 19526
[CHART] Class Y
FIRST AMERICAN CORE BOND LEHMAN U.S. AGGREGATE FUND, CLASS Y BOND INDEX(4) 2/1994 10000 10000 9/1994 9676.6 9712 9/1995 10921.3 11078 9/1996 11456.6 11620 9/1997 12434.4 12752 9/1998 14008.9 14219 9/1999 13667.6 14165 9/2000 14568.2 15155 9/2001 16427.7 17119 9/2002 17419 18589 9/2003 18350 19594
* Unlike mutual funds, index returns do not reflect any expenses, transaction costs, or cash flow effects. (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 assume 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 4.25% for Class A shares, 1.00% 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 is 5.00% for Class B shares 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 share NAV performance due to similar expenses. (3) An unmanaged index comprised 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. (4) The performance since inception for the index is calculated from the month end following the inception of the class. 3 CORPORATE BOND FUND Investment Objective: HIGH CURRENT INCOME CONSISTENT WITH PRUDENT RISK TO CAPITAL First American Corporate Bond Fund Class Y shares returned 12.65% for the fiscal year (Class A shares returned 12.26% at net asset value for the same period). By comparison, the Fund's benchmark, the Merrill Lynch BBB-A Corporate Index*, returned 11.77%. As the fiscal year began, we generally positioned the portfolio to benefit from a continued modest expansion of the economy. The past year was characterized by stable to modestly rising interest rates, an improvement in equity valuations driven by stronger earnings, improving credit fundamentals, and a general shift in investor attitude toward owning less-liquid, fixed-income assets. In looking for opportunities in fixed-income securities, portfolio managers pay particular attention to yields and yield spreads (the difference between yields of various types of bonds, relative to Treasuries). Corporate bond yield spreads had reached historically wide levels when compared to Treasuries in October 2002 as the telecommunications meltdown, significant credit rating downgrades, and corporate governance misdeeds caused bond prices to fall. In contrast, throughout 2003, yield spreads to Treasuries have narrowed in an environment with prospects for stronger growth as well as strong market technicals (such as moderate issuance, strengthening liquidity, and positive investor sentiment). These factors compressed spreads to the tightest level in the past five years, leading to strong absolute and relative returns for intermediate credit-quality corporate bonds. In line with our improving outlook, the Fund maintained a significant overweighting in sectors and securities that provided higher-than-average yield spreads (such as telecommunications, electric utilities, and cable/media). As the market strengthened, the spread differential for these higher-yielding names narrowed relative to higher-quality issues and helped performance. Average credit quality was targeted at BBB+, slightly lower than the benchmark. Additionally, about 10% of the portfolio was allocated to less-than-investment-grade holdings with the vast majority of these holdings in the top tier of BB-rated names. The Fund's quality profile helped performance as BBB-rated bonds exceeded returns on A-rated bonds. High-yield exposure boosted performance as junk bonds turned in the strongest returns of any domestic fixed-income sector. However, the performance contribution from this high-yield exposure was dampened because the BB-rated bonds, emphasized by the Fund, were outperformed by lower-rated bonds. The Fund had selective exposure to less-liquid issues that offered attractive spreads compared to more-liquid securities. As investor sentiment improved, spreads on these securities narrowed, benefiting the Fund. Telecommunications, electric utilities, and cable/media sectors were overweighted. These sectors benefited from the turnaround in market conditions, as well as their generally improving credit measures. The Fund's holdings of subordinated capital securities in the finance sector also bolstered performance. Secured airline debt detracted from performance, as did holdings of government securities. 4 ANNUALIZED PERFORMANCE(1) as of September 30, 2003
SINCE INCEPTION(4) ----------------------- 1 YEAR 2/1/2000 9/24/2001 Class A NAV 12.26% 8.18% -- Class A POP 7.44% 6.92% -- Class B NAV 11.46% 7.38% -- Class B POP 6.46% 6.70% -- Class C NAV 11.50% 7.33% -- Class C POP 9.36% 7.04% -- Class S 12.37% -- 7.28% Class Y 12.65% 8.44% -- Merrill Lynch BBB-A Corporate Index(3) 11.77% 10.28% 9.25%
VALUE OF A $10,000 INVESTMENT(1),(2) as of September 30, 2003 [CHART] Class A
FIRST AMERICAN CORPORATE BOND FIRST AMERICAN CORPORATE BOND MERRILL LYNCH BBB-A FUND, CLASS A NAV FUND, CLASS A POP CORPORATE INDEX(3) 2/2000 10000 9579 10000 9/2000 10517 10074 10500 9/2001 11668 11176 11901 9/2002 11882 11381 12713 9/2003 13338 12776 14209
[CHART] Class Y
FIRST AMERICAN CORPORATE BOND MERRILL LYNCH BBB-A FUND, CLASS Y CORPORATE INDEX(3) 2/2000 10000 10000 9/2000 10521 10500 9/2001 11700 11901 9/2002 11944 12713 9/2003 13454 14209
* Unlike mutual funds, index returns do not reflect any expenses, transaction costs, or cash flow effects. (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. A significant portion of the Fund's portfolio may consist of lower- rated debt obligations, which are commonly called "high-yield" securities or "junk bonds." High-yield securities generally have more volatile prices and carry more risk to principal than investment-grade securities. The Fund may also invest in foreign securities. International investing involves risks not typically associated with domestic investing, including risks of adverse currency fluctuations, potential political and economic instability, different accounting standards, limited liquidity, and volatile prices. 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 assume 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 4.25% for Class A shares, 1.00% 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 is 5.00% for Class B shares 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 share NAV performance due to similar expenses. (3) An unmanaged index comprised of fixed-rate, dollar-denominated, U.S. corporate securities with at least one year to final maturity. Securities must be rated BBB or A based on a composite of Moody's and Standard & Poor's ratings. Issues below $150 million and Rule 144A securities are excluded from the index. (4) The performance since inception for the index is calculated from the month end following the inception of the class. 5 HIGH INCOME BOND FUND Investment Objective: HIGH CURRENT INCOME First American High Income Bond Fund Class Y shares returned 25.29% for the fiscal year (Class A shares returned 25.30% at net asset value for the same period). By comparison, the Fund's benchmark, the Lehman Corporate High Yield Index*, returned 29.98%. As the fiscal year began, we positioned the portfolio to benefit from a continued modest expansion of the economy with stable to modestly rising interest rates, an improvement in equity valuations driven by stronger earnings, improving credit fundamentals, and a general shift in investor attitude toward owning less-liquid fixed-income assets. With stronger-than-expected equity valuations, investors' confidence and willingness to own risky assets was greater than our more modest expectations. As liquidity returned to the capital markets, highly leveraged companies were able to issue equity to reduce their total debt levels or refinance their debt at lower interest rates. With a rebound in credit quality underway, default rates began to decline over the year. When there is a very strong recovery in equity markets and in high yield, the securities with equity characteristics (like lower-quality bonds) tend to perform the best. This year was no exception to that rule, as issues rated Caa or lower returned approximately 69%. The Fund was underweight in this area due to the segment's substantial risks, poor liquidity, and weak historical returns (Caa rated bonds have only returned an average of 2.3% over the past 10 years). In addition, the Fund had small allocations of Treasuries and high-quality corporate bonds early in the year. The higher-quality allocation caused the portfolio to underperform the Lehman Corporate High Yield Index. This higher-quality allocation diminished as the year progressed. The Fund had no major industry overweights or underweights throughout the year. Individual investments in telecommunications (AT&T Wireless, Qwest, and Telus), and in electric utilities (Aquila, Western Resources) helped performance. Investments in Aircraft Finance Trust, AK Steel, Calpine, and Sbarro hurt performance. 6 ANNUALIZED PERFORMANCE(1) as of September 30, 2003
SINCE INCEPTION(4) ------------------------ 1 YEAR 8/30/2001 9/24/2001 Class A NAV 25.30% 4.32% -- Class A POP 19.98% 2.17% -- Class B NAV 24.33% 3.66% -- Class B POP 19.33% 1.95% -- Class C NAV 24.14% 3.55% -- Class C POP 21.91% 3.06% -- Class S 25.11% -- 6.99% Class Y 25.29% 4.60% -- Lehman Corporate High Yield Index(3) 29.98% 8.48% 12.69%
VALUE OF A $10,000 INVESTMENT(1),(2) as of September 30, 2003 [CHART] Class A
FIRST AMERICAN HIGH INCOME FIRST AMERICAN HIGH INCOME LEHMAN CORPORATE HIGH FUND, CLASS A NAV FUND, CLASS A POP YIELD INDEX(3) 8/2001 10000 9579 10000 9/2001 9339 8945 9328 9/2002 8721.17 8353.59 9113.93 9/2003 10921 10458 11846
[CHART] Class Y
FIRST AMERICAN HIGH INCOME LEHMAN CORPORATE HIGH FUND, CLASS Y YIELD INDEX(3) 8/2001 10000 10000 9/2001 9349 9328 9/2002 8761.76 9113.93 9/2003 10982 11846
* Unlike mutual funds, index returns do not reflect any expenses, transaction costs, or cash flow effects. (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. A significant portion of the Fund's portfolio may consist of lower- rated debt obligations, which are commonly called "high-yield" securities or "junk bonds." High-yield securities generally have more volatile prices and carry more risk to principal than investment-grade securities. The Fund may also invest in foreign securities including emerging markets. International investing involves risks not typically associated with domestic investing, including risks of adverse currency fluctuations, potential political and economic instability, different accounting standards, 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 assume 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 4.25% for Class A shares, 1.00% 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 is 5.00% for Class B shares 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 share NAV performance due to similar expenses. (3) An unmanaged index that covers the universe of fixed-rate, dollar-denominated, below-investment-grade debt with at least one year to final maturity. Payment-in-kind bonds, Eurobonds, and emerging markets debt securities are excluded, but SEC-registered Canadian and global bonds of issuers in non-emerging countries are included. Original issue zero coupon bonds, step-up coupon structures, and Rule 144A securities are also included. (4) The performance since inception for the index is calculated from the month end following the inception of the class. 7 INTERMEDIATE GOVERNMENT BOND FUND Investment Objective: PROVIDE INVESTORS WITH CURRENT INCOME THAT IS EXEMPT FROM STATE INCOME TAX, TO THE EXTENT CONSISTENT WITH THE PRESERVATION OF CAPITAL First American Intermediate Government Bond Fund Class Y shares returned 3.64% since inception on October 25, 2002 (Class A shares returned 3.53% at net asset value for the same period). By comparison, the Fund's benchmark, the Lehman Intermediate Treasury Bond Index*, returned 3.30%. At the Fund's inception, we had positioned the portfolio to benefit from a continued modest expansion of the economy with stable to modestly rising interest rates, an improvement in equity valuations driven by stronger earnings, improving credit fundamentals, and a general shift in investor attitude toward owning less-liquid fixed-income assets. The Fund was positioned during the first half of the period with an allocation to agency securities of between 5% and 10% of total assets. As the difference between agency and Treasury yields widened, we increased the allocation in agency securities to between 25% and 30% and extended the maturities of our agency holding, in order to increase income earned by the Fund in a low-rate environment. This helped performance as agencies have provided excess returns relative to the benchmark of 0.70% to 1.50%, for intermediate and long maturities, respectively. Within agencies, the Fund's holdings with maturities of 10 years and longer outperformed shorter maturities as long-term rates decreased more than short-term rates. Issuer diversification across government-sponsored entities became more critical, with yield spreads of Freddie Mac widening due to its accounting issues and Federal Home Loan Bank (FHLB) spreads suffering some weakness due to losses encountered by some of its member banks. Accordingly, the Fund diversified its holdings in government-sponsored entities, which had a positive affect on performance. 8 ANNUALIZED PERFORMANCE(1) as of September 30, 2003
SINCE INCEPTION(3) ------------------ 10/25/2002 Class A NAV 3.53% Class A POP 1.20% Class Y 3.64% Lehman Intermediate Treasury Bond Index(2) 3.30%
VALUE OF A $10,000 INVESTMENT(1),(2) as of September 30, 2003 [CHART] Class A
FIRST AMERICAN INTERMEDIATE FIRST AMERICAN INTERMEDIATE LEHMAN INTERMEDIATE TREASURY GOVERNMENT BOND FUND, CLASS A NAV GOVERNMENT BOND FUND, CLASS A POP BOND INDEX(2) 10/2002 10000 9775 10000 9/2003 10353 10120 10330
[CHART] Class Y
FIRST AMERICAN INTERMEDIATE LEHMAN INTERMEDIATE TREASURY GOVERNMENT BOND FUND, CLASS Y BOND INDEX(2) 10/2002 10000 10000 9/2003 10364 10330
* Unlike mutual funds, index returns do not reflect any expenses, transaction costs, or cash flow effects. (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 assume 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 2.25% for Class A shares. Total returns assume reinvestment of all distributions at NAV. (2) An unmanaged index comprised of public obligations of the U.S. Treasury with a remaining maturity between one and 10 years. (3) The performance since inception for the index is calculated from the month end following the inception of the class. Performance reflects cumulative return since the Fund has been in operation less than one year. 9 INTERMEDIATE TERM BOND FUND Investment Objective: CURRENT INCOME TO THE EXTENT CONSISTENT WITH PRESERVATION OF CAPITAL First American Intermediate Term Bond Fund Class Y shares returned 5.25% for the fiscal year (Class A shares returned 5.09% at net asset value for the same period). By comparison, the Fund's benchmark, the Lehman Intermediate Government/Credit Bond Index*, returned 6.01%. As we entered the fourth quarter of 2002, the portfolio was positioned to benefit from a continued modest expansion of the economy with stable to modestly rising interest rates, an improvement in equity valuations driven by stronger earnings, improving credit fundamentals, and a general shift in investor attitude toward owning less-liquid fixed-income assets. As the fiscal year began, the portfolio was underweight in corporate bonds (credit) relative to its benchmark. This underweight contributed significantly to the Fund's underperformance against the benchmark in late 2002 due to the recovery of corporate bonds, particularly higher-beta issuers (those with higher sensitivity to market movements), and the telecommunications and auto industries. In addition, stocks regained their footing, negative credit headlines subsided, and liquidity improved within the credit sector. For the remainder of the fiscal year, ended September 30, 2003, the Fund was positioned with an overweight to credit, which helped performance as credit generated positive returns of more than 7%. Within the corporate bond (credit) segment, the Fund had overweight positions in higher-yielding AAA-rated asset-backed and commercial mortgage-backed securities, which helped performance as this sector outperformed Treasuries with similar duration. Duration is a time measure of interest-rate risk exposure that estimates how much a bond, or a bond fund's price, fluctuates with changes in interest rates. We also maintained an overweight to BBB and higher-beta, A-rated securities, with an underweight to higher-quality, higher-rated corporate securities. This helped performance as the BBB sector outperformed the AA corporate sector over the time period. Our overweight positions within the telecommunications, media, and automotive sectors contributed positively to performance as these industries recovered from the negative credit environment of 2002 and posted double-digit returns later in the fiscal year. The Fund also maintained roughly a 5% allocation to mortgage-backed securities, a nonindex sector, which performed very poorly amidst the interest-rate volatility in the summer of 2003. While the performance impact of this weighting was not significant, it contributed to the underperformance. 10 ANNUALIZED PERFORMANCE(1) as of September 30, 2003
SINCE INCEPTION(4) ----------------------- 1 YEAR 5 YEARS 10 YEARS 1/9/1995 11/27/2000 Class A NAV 5.09% 6.08% -- 7.22% -- Class A POP 2.71% 5.60% -- 6.94% -- Class S 5.09% -- -- -- 7.66% Class Y 5.25% 6.28% 6.30% -- -- Lehman Intermediate Government/Credit Bond Index(3) 6.01% 6.69% 6.64% 7.72% 8.82%
VALUE OF A $10,000 INVESTMENT(1),(2) as of September 30, 2003 [CHART] Class A
FIRST AMERICAN INTERMEDIATE TERM FIRST AMERICAN INTERMEDIATE TERM LEHMAN INTERMEDIATE GOVERNMENT/ BOND FUND, CLASS A NAV BOND FUND, CLASS A POP CREDIT BOND INDEX(3) 1/1995 10000 9775 10000 10/1995 11243.7 10991.2 11077 10/1996 11861.9 11595.5 11721 10/1997 12696.8 12411.6 12599 10/1998 13668.4 13361.4 13745 10/1999 13886.6 13574.8 13882 10/2000 14777.8 14445.9 14775 9/2001 16470.9 16101 16605 9/2002 17477 17085 17958 9/2003 18366.3 17953.8 19037.9
[CHART] Class Y
FIRST AMERICAN INTERMEDIATE TERM LEHMAN INTERMEDIATE GOVERNMENT/ BOND FUND, CLASS Y CREDIT BOND INDEX(3) 10/1993 10000 10000 10/1994 9833 9536 10/1995 11031 11077 10/1996 11666 11675 10/1997 12531 12704 10/1998 13509 14009 10/1999 13771 13916 10/2000 14692 14908 9/2001 16398 16766 9/2002 17429 18311 9/2003 18345 19503
* Unlike mutual funds, index returns do not reflect any expenses, transaction costs, or cash flow effects. (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 assume 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 2.25% for Class A shares for the relevant period. Total returns assume reinvestment of all distributions at NAV. (2) Performance for Class S shares is not presented. Class S share performance will be substantially similar to Class A share NAV performance due to similar expenses. (3) An unmanaged index of Treasury securities, other securities issued or guaranteed by the U.S. government or its agencies or instrumentalities, and investment-grade corporate debt securities, in each case with maturities of one to 10 years. (4) The performance since inception for the index is calculated from the month end following the inception of the class. 11 SHORT TERM BOND FUND Investment Objective: CURRENT INCOME WHILE MAINTAINING A HIGH DEGREE OF PRINCIPAL STABILITY First American Short Term Bond Fund Class Y shares returned 2.76% for the fiscal year (Class A shares returned 2.71% at net asset value for the same period). By comparison, the Fund's benchmark, the Lehman MF 1-3 Year Government/Credit Bond Index*, returned 3.81%. The fixed-income markets were volatile during the past year due to changing expectations regarding the strength of the economy and Federal Reserve policy. The Fund was duration-neutral for most of the past year, trading mostly between 95% and l05% relative to its benchmark. Duration is a time measure of interest-rate risk exposure that estimates how much a bond, or a bond fund's price, fluctuates with changes in interest rates. Corporate notes performed well during the year. However, the Fund invests in very high-quality corporate notes and tends to be underweighted in lower-rated notes (e.g., notes rated BBB/Baa) compared to its benchmark. For much of the year, the Fund was underweighted in BBB/Baa corporate notes compared to the index, which hurt performance as lower-rated corporate securities performed significantly better than higher-rated corporate notes. The Fund's higher allocation to mortgages throughout the past year hurt performance as these securities underperformed compared to U.S. Treasury and government-sponsored agency securities. Prepayments on mortgages were higher than expected throughout much of the year due to lower interest rates as homeowners refinanced their mortgages. This resulted in cash being reinvested at lower yields. The allocation to asset-backed securities, particularly credit card, rate reduction, and auto asset-backed securities, helped performance. These securities provided additional yield over Treasuries and government-sponsored agencies and their spreads (the difference between yields of various types of bonds, relative to Treasuries) remained constant throughout the year. The strategy of holding the securities until maturity also contributed positively to performance, especially with the increase in yields in July and August of this year that resulted in a steeper yield curve. Assuming no change in interest rates, a steeper yield curve means a bigger increase in the price of a bond from month to month as the maturity of the security gets shorter. 12 ANNUALIZED PERFORMANCE(1) as of September 30, 2003
SINCE INCEPTION(4) ---------------------- 1 YEAR 5 YEARS 10 YEARS 2/4/1994 9/24/2001 Class A NAV 2.71% 5.47% 5.46% -- -- Class A POP 0.37% 4.99% 5.22% -- -- Class S 2.61% -- -- -- 3.68% Class Y 2.76% 5.58% -- 5.62% -- Lehman MF 1-3 Year Government/Credit Bond Index(3) 3.81% 5.91% 5.94% 6.13% 4.81%
VALUE OF A $10,000 INVESTMENT(1),(2) as of September 30, 2003 [CHART] Class A
FIRST AMERICAN SHORT TERM FIRST AMERICAN SHORT TERM LEHMAN MF 1-3 YEAR GOVERNMENT/ BOND FUND, CLASS A NAV BOND FUND, CLASS A POP CREDIT BOND INDEX(3) 9/1993 10000 9775.17 10000 9/1994 10221 9992 10122 9/1995 10893 10649 10961 9/1996 11538 11280 11588 9/1997 12241 11967 12392 9/1998 13042 12751 13367 9/1999 13489 13187 13814 9/2000 14339 14019 14641 9/2001 15841 15487 16215 9/2002 16569 16199 17160 9/2003 17018 16637 17814
[CHART] Class Y
FIRST AMERICAN SHORT TERM LEHMAN MF 1-3 YEAR GOVERNMENT/ BOND FUND, CLASS Y CREDIT BOND INDEX(3) 2/1994 10000 10000 9/1994 10124.6 10052 9/1995 10789 10885 9/1996 11427.1 11508 9/1997 12121.9 12307 9/1998 12914.5 13275 9/1999 13370.1 13718 9/2000 14209.7 14540 9/2001 15719.2 16104 9/2002 16490.7 17041.1 9/2003 16945 17691
* Unlike mutual funds, index returns do not reflect any expenses, transaction costs, or cash flow effects. (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 assume 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 2.25% for Class A shares for the relevant period. Total returns assume reinvestment of all distributions at NAV. (2) Performance for Class S shares is not presented. Class S share performance will be substantially similar to Class A share NAV performance due to similar expenses. (3) An unmanaged index of one- to three-year Treasury securities, other securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities, and investment-grade corporate debt securities. (4) The performance since inception for the index is calculated from the month end following the inception of the class. 13 U.S. GOVERNMENT MORTGAGE FUND Investment Objective: HIGH CURRENT INCOME TO THE EXTENT CONSISTENT WITH THE PRESERVATION OF CAPITAL First American U.S. Government Mortgage Fund Class Y shares returned 3.03% for the fiscal year (Class A shares returned 2.79% at net asset value for the same period). By comparison, the Fund's benchmark, the Lehman Mortgage-Backed Securities Index*, returned 3.50%. As we entered the fourth quarter of 2002, the portfolio was positioned to benefit from a continued modest expansion of the economy, with stable to modestly rising interest rates, an improvement in equity valuations driven by stronger earnings, improving credit fundamentals, and a general shift in investor attitude toward owning less-liquid fixed-income assets. The low interest-rate environment of late 2002 and mid-2003 resulted in record mortgage refinancing. This negatively impacted returns in the mortgage sector relative to other fixed-income sectors as mortgage securities prepaid much faster than anticipated and holders of mortgage securities were forced to reinvest at lower interest rates. The Fund was positioned with an overweight to 15-year mortgage securities over the time period, which modestly helped performance as 15-year mortgages outperformed 30-year mortgages over the time period. The Fund was underweight in Ginnie Mae (GNMA) securities, which also helped performance as the GNMA sector lagged the conventional mortgage sector as the flight to quality bid from GNMA was reversed from 2002. The portfolio actively engaged in a mortgage-backed when-issued dollar roll program with respect to 5% to 15% of the portfolio, which incrementally added to performance. In a dollar roll transaction, the Fund sells mortgage-backed securities for delivery in the current month while contracting with the same party to repurchase similar securities at a future date. This strategy may also add leverage to the portfolio while increasing volatility in net asset value. The Fund held overweighted positions in mortgage pools backed by smaller loans and Federal Housing Authority/Veteran's Administration reperforming loans (previously delinquent FHA/VA mortgage loans). This incrementally helped performance in the rapid prepayment environment as these loan pools generally have less prepayment risk than larger, higher-borrower quality loan pools. In midyear, Fund performance lagged as interest rates rose while the portfolio was overweight in discount mortgages and underweight in premium mortgages. Premiums outperformed discounts over this time frame as mortgage prepayments slowed in the rising interest-rate environment. 14 ANNUALIZED PERFORMANCE(1) as of September 30, 2003
SINCE INCEPTION(4) ----------------------------------- 1 YEAR 5 YEARS 10 YEARS 6/7/1994 5/11/1995 9/24/2001 Class A NAV 2.79% 5.58% 5.41% -- -- -- Class A POP -1.62% 4.67% 4.95% -- -- -- Class B NAV 1.96% 4.75% -- -- 5.22% -- Class B POP -2.91% 4.25% -- -- 5.22% -- Class C NAV 1.91% -- -- -- -- 3.89% Class C POP -0.05% -- -- -- -- 3.37% Class S 2.79% 5.49% -- 6.08% -- -- Class Y 3.03% 5.76% 5.66% -- -- -- Lehman Mortgage-Backed Securities Index(3) 3.50% 6.52% 6.89% 7.70% 7.17% 5.41%
VALUE OF A $10,000 INVESTMENT(1),(2) as of September 30, 2003 [CHART] Class A
FIRST AMERICAN U.S. GOVERNMENT FIRST AMERICAN U.S. GOVERNMENT LEHMAN MORTGAGE-BACKED MORTGAGE FUND, CLASS A NAV MORTGAGE FUND, CLASS A POP SECURITIES INDEX(3) 11/1993 10000 9574 10000 11/1994 9686 9272 9840 11/1995 11103 10628 11442 11/1996 11609 11113 12296 11/1997 12213 11691 13243 11/1998 13026 12470 14233 11/1999 13205 12640 14594 10/2000 14004 13406 15691 9/2001 15603 14936 17502 9/2002 16622 15912 18791 9/2003 17086 16356 19449
[CHART] Class Y
FIRST AMERICAN U.S. GOVERNMENT LEHMAN MORTGAGE-BACKED MORTGAGE FUND, CLASS Y SECURITIES INDEX(3) 11/1993 10000 10000 11/1994 9715 9840 11/1995 11169 11442 11/1996 11713 12296 11/1997 12359 13243 11/1998 13222 14233 11/1999 13443 14594 10/2000 14296 15691 9/2001 15889 17502 9/2002 16968 18791 9/2003 17482 19449
* Unlike mutual funds, index returns do not reflect any expenses, transaction costs, or cash flow effects. (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 assume 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 4.25% for Class A shares, 1.00% 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 is 5.00% for Class B shares and 1.00% for Class C shares. Total returns assume reinvestment of all distributions at NAV. On September 24, 2001, the U.S. Government Mortgage Fund became the successor by merger to the Firstar U.S. Government Securities 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 U.S. Government Securities Fund. The Firstar U.S. Government Securities Fund was organized on November 27, 2000, and, prior to that, was a separate series of Mercantile Mutual 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 share NAV performance due to similar expenses. (3) An unmanaged index comprised of the mortgage-backed pass-through securities of Ginnie Mae, Fannie Mae, and Freddie Mac. It is formed by grouping the universe of more than 600,000 individual fixed-rate MBSpools into approximately 3,500 generic aggregates. The aggregates included are priced daily using a matrix pricing routine based on trade price quotations by agency, program, coupon, and degree of seasoning. (4) The performance since inception for the index is calculated from the month end following the inception of the class. 15 REPORT OF INDEPENDENT AUDITORS 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 Core Bond (formerly Fixed Income), Corporate Bond, High Income Bond (formerly Strategic Income), Intermediate Government Bond, Intermediate Term Bond, Short Term Bond, and U.S. Government Mortgage (formerly U.S. Government Securities) Funds (certain funds constituting First American Investment Funds, Inc.) (the "Funds") as of September 30, 2003, and the related statements of operations, statements of changes in net assets and financial highlights for each of the periods indicated therein, except as noted below. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights of the Intermediate Term Bond and U.S. Government Mortgage 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 an unqualified opinion on those financial highlights. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of September 30, 2003, 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 the Funds listed above First American Investment Funds, Inc. at September 30, 2003, the results of their operations, 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 7, 2003 17 SCHEDULE OF INVESTMENTS September 30, 2003 CORE BOND FUND
DESCRIPTION PAR (000) VALUE (000) - ---------------------------------------------------------------------------------------------------- U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES - 32.5% ADJUSTABLE RATE (a) - 0.3% FHLMC Pool 3.767%, 04/01/29, #847190 (c) $ 6,000 $ 6,131 GNMA Pool 5.751%, 08/20/23, #8259 6 6 ------------- 6,137 ------------- FIXED RATE - 32.2% FHLMC Gold Pool 6.500%, 05/01/17, #G11272 10,140 10,685 5.000%, 05/01/18, #E96700 18,856 19,321 6.500%, 01/01/28, #G00876 4,715 4,955 6.500%, 09/01/28, #C14872 6,502 6,798 6.500%, 11/01/28, #C00676 8,585 8,990 6.500%, 12/01/28, #C00689 6,099 6,377 6.500%, 04/01/29, #C00742 3,737 3,908 6.500%, 01/01/30, #C55738 3,483 3,642 6.500%, 11/01/30, #G01149 787 822 6.500%, 02/01/31, #C47895 233 243 6.500%, 03/01/31, #G01244 9,646 10,101 6.500%, 05/01/31, #C51020 6,025 6,287 5.000%, 09/01/33, #C01622 22,000 21,952 FHLMC Gold Pool TBA 4.000%, 10/01/10 (b) 16,580 16,627 FHLMC Pool 7.500%, 04/01/07, #140151 3 3 FNMA Pool 7.750%, 06/01/08, #001464 26 27 3.790%, 07/01/13, #386314 18,200 17,343 6.255%, 09/01/13, #360500 6,500 7,284 5.500%, 02/01/14, #440780 8,394 8,759 7.000%, 02/01/15, #535206 2,326 2,487 7.000%, 08/01/16, #591038 5,374 5,715 5.500%, 12/01/17, #673010 14,168 14,677 6.000%, 12/01/17, #254547 15,203 15,858 4.500%, 05/01/18, #695854 24,684 24,885 5.000%, 06/01/18, #555545 45,760 46,932 6.000%, 10/01/22, #254513 14,212 14,808 7.000%, 04/01/26, #340798 2,308 2,448 7.000%, 05/01/26, #250551 1,737 1,842 6.500%, 05/01/28, #415794 2,879 3,011 6.000%, 12/01/28, #456276 4,771 4,941 6.500%, 02/01/29, #252255 7,132 7,449 6.500%, 03/01/29, #490758 5,430 5,671 6.000%, 05/01/29, #323715 6,112 6,330 6.500%, 07/01/29, #252570 3,973 4,150 6.500%, 08/01/29, #252645 29 31 6.000%, 12/01/29, #545061 10,801 11,186 6.500%, 05/01/30, #535300 2,758 2,880 6.500%, 02/01/31, #568895 187 195 6.000%, 05/01/31, #511797 3,124 3,227 6.500%, 02/01/32, #627117 29,803 31,051 7.000%, 07/01/32, #254379 14,070 14,852 7.000%, 07/01/32, #545813 5,828 6,152 7.000%, 07/01/32, #545815 4,541 4,793 6.500%, 08/01/32, #658822 8,196 8,540 6.500%, 09/01/32, #656918 16,086 16,760 6.000%, 10/01/32, #661581 $ 8,540 $ 8,814 6.500%, 12/01/32, #669168 10,711 11,159 6.000%, 01/01/33, #676647 19,838 20,470 6.000%, 03/01/33, #688330 19,121 19,730 5.500%, 04/01/33, #694605 20,770 21,192 5.500%, 06/01/33, #709033 23,000 23,467 5.500%, 06/01/33, #709203 8,323 8,492 5.500%, 07/01/33, #709446 21,079 21,517 5.500%, 07/01/33, #720735 12,431 12,684 5.500%, 07/01/33, #728667 8,479 8,651 4.500%, 08/01/33, #555680 16,498 15,978 5.500%, 08/01/33, #728855 19,957 20,372 5.500%, 08/01/33, #733380 19,968 20,383 FNMA Pool TBA 3.518%, 04/01/29 (c) 18,500 19,176 FNMA TBA 6.000%, 10/01/33 (b) 23,123 23,875 GNMA Pool 6.500%, 04/15/29, #487110 5,386 5,676 7.500%, 11/15/30, #537699 3,808 4,069 6.000%, 03/15/31, #541302 1,701 1,773 6.000%, 03/15/31, #541306 1,126 1,175 6.000%, 03/15/31, #554675 2,057 2,144 6.500%, 05/15/32, #587673 5,918 6,209 6.500%, 08/15/32, #590376 8,144 8,544 6.000%, 03/15/33, #603520 17,828 18,507 ------------- 719,052 ------------- TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (Cost $717,379) 725,189 ------------- U.S. GOVERNMENT & AGENCY SECURITIES - 25.2% U.S. AGENCY DEBENTURES - 12.9% FHLB 4.470%, 11/15/06 75 77 7.000%, 06/29/09 700 726 7.000%, 08/19/09 500 522 FHLMC 4.250%, 06/15/05 14,500 15,188 3.250%, 02/25/08 15,000 15,112 5.625%, 03/15/11 23,000 25,446 5.750%, 01/15/12 22,500 24,962 FNMA 1.750%, 06/16/06, Callable 06/16/04 @ 100 24,000 23,651 5.250%, 04/15/07 20,000 21,830 4.250%, 07/15/07 29,000 30,650 6.375%, 06/15/09 54,500 62,678 5.000%, 11/17/11 16,200 16,595 5.250%, 08/01/12 24,000 25,042 4.375%, 09/15/12 24,000 24,143 ------------- 286,622 ------------- U.S. TREASURIES - 12.3% U.S. Treasury Bill 0.890%, 01/22/04 1,288 1,284 U.S. Treasury Bonds 8.000%, 11/15/21 9,123 12,655 6.250%, 08/15/23 26,140 30,551 6.000%, 02/15/26 32,250 36,740 6.125%, 11/15/27 15,690 18,173
The accompanying notes are an integral part of the financial statements. 18
DESCRIPTION PAR (000) VALUE (000) - ---------------------------------------------------------------------------------------------------- 5.250%, 11/15/28 $ 27,750 $ 28,739 5.250%, 02/15/29 11,000 11,402 5.375%, 02/15/31 29,640 31,808 U.S. Treasury Notes 5.875%, 02/15/04 400 407 7.250%, 08/15/04 200 211 7.875%, 11/15/04 800 860 6.500%, 05/15/05 200 217 6.500%, 08/15/05 500 547 2.000%, 08/31/05 57,475 58,095 5.625%, 02/15/06 1,000 1,093 6.875%, 05/15/06 500 565 3.250%, 08/15/08 5,175 5,283 3.875%, 02/15/13 1,150 1,150 4.250%, 08/15/13 33,915 34,757 ------------- 274,537 ------------- TOTAL U.S. GOVERNMENT & AGENCY SECURITIES (Cost $554,370) 561,159 ------------- CORPORATE BONDS - 25.0% CONSUMER GOODS - 1.0% Kraft Foods 6.250%, 06/01/12 11,545 12,665 Kroger 6.750%, 04/15/12 6,175 6,990 Miller Brewing 5.500%, 08/15/13 (d) 2,655 2,775 ------------- 22,430 ------------- ENERGY - 1.6% ConocoPhillips 3.625%, 10/15/07 8,400 8,609 Consolidated Natural Gas 7.250%, 10/01/04 4,070 4,264 Kinder Morgan Energy Partners 7.300%, 08/15/33 4,600 5,293 MidAmerican Energy Holdings 5.875%, 10/01/12 8,845 9,339 Valero Energy 6.875%, 04/15/12 6,300 7,050 ------------- 34,555 ------------- FINANCE - 11.2% Bank of America 7.125%, 09/15/06 7,000 7,949 BankBoston 6.375%, 04/15/08 8,350 9,369 Boeing Capital 5.750%, 02/15/07 7,500 8,092 Capital One Bank 4.875%, 05/15/08 5,500 5,670 Core Investment Grade Trust 4.727%, 11/30/07 38,510 40,365 Countrywide Home Loans, Series K 4.250%, 12/19/07 12,690 13,088 Credit Suisse First Boston 5.875%, 08/01/06 7,000 7,645 Donaldson Lufkin Jenrette 6.875%, 11/01/05 1,000 1,094 ERAC USA Finance 7.350%, 06/15/08 (d) 7,000 8,059 First National Bank of Chicago 8.080%, 01/05/18 $ 1,500 $ 1,821 Ford Motor Credit 5.800%, 01/12/09 13,885 13,963 GE Global Insurance 7.750%, 06/15/30 7,000 8,367 General Motors Acceptance 6.125%, 08/28/07 14,135 14,916 Goldman Sachs 5.500%, 11/15/14 8,550 8,931 Household Finance 4.625%, 01/15/08 10,135 10,658 HSBC Bank 6.950%, 03/15/11 2,025 2,375 International Lease Finance 5.750%, 02/15/07 4,560 4,980 Series G 8.150%, 10/01/04 800 850 J. P. Morgan Chase 5.750%, 01/02/13 13,500 14,444 John Deere Capital 7.000%, 03/15/12 10,250 11,977 MBNA America Bank 6.625%, 06/15/12 (d) 4,000 4,507 Morgan Stanley 6.799%, 06/15/12 (d) 7,500 8,441 5.300%, 03/01/13 4,550 4,698 National Rural Utilities 7.250%, 03/01/12 3,250 3,814 Newcourt Credit Group, Series B 6.875%, 02/16/05 7,490 8,018 Norwest 6.550%, 12/01/06 5,000 5,667 SLM, Series A 5.000%, 10/01/13 8,075 8,161 Washington Mutual Bank 5.500%, 01/15/13 4,110 4,325 Westdeutsche Landesbank 6.050%, 01/15/09 6,200 6,883 ------------- 249,127 ------------- MANUFACTURING - 1.2% Centex 7.500%, 01/15/12 5,445 6,313 DaimlerChrysler 4.750%, 01/15/08 6,615 6,766 Ford Motor 7.450%, 07/16/31 3,470 3,190 Honeywell International 7.000%, 03/15/07 5,000 5,668 Noranda 6.000%, 10/15/15 5,080 5,148 ------------- 27,085 ------------- REAL ESTATE - 1.0% Boston Properties (REIT) 6.250%, 01/15/13 6,000 6,466 EOP Operating 6.750%, 02/15/08 6,000 6,738 Security Capital Group 7.750%, 11/15/03 2,850 2,872
19
DESCRIPTION PAR (000) VALUE (000) - ---------------------------------------------------------------------------------------------------- Simon Property Group (REIT) 7.750%, 01/20/11 $ 6,000 $ 6,997 ------------- 23,073 ------------- SERVICES - 2.1% AOL Time Warner 6.875%, 05/01/12 4,015 4,501 AT&T Broadband 8.375%, 03/15/13 10,665 13,237 Duty Free International 7.000%, 01/15/04 (c) (e) 6,800 3,400 Liberty Media 3.500%, 09/25/06 7,250 7,231 UnitedHealth Group 6.600%, 12/01/03 10,000 10,083 Wyeth 5.250%, 03/15/13 7,685 7,973 ------------- 46,425 ------------- TRANSPORTATION - 1.4% Continental Airlines, Series 99-2 7.056%, 09/15/09 5,365 5,294 CSX 5.500%, 08/01/13 6,300 6,620 CSX, Series C 5.850%, 12/01/03 7,600 7,651 Delta Air Lines, Series 2000-1, Cl A2 7.570%, 11/18/10 3,200 3,184 Northwest Airlines, Series 991A 6.810%, 02/01/20 3,960 3,208 Southwest Airlines, Series 2001-1, Cl A1 5.100%, 05/01/06 4,619 4,898 ------------- 30,855 ------------- UTILITIES - 4.9% American Electric Power 5.250%, 06/01/15 3,750 3,672 Appalachian Power, Series E 4.800%, 06/15/05 3,000 3,133 AT&T 7.000%, 11/15/06 13,800 15,559 6.500%, 03/15/13 2,000 2,117 AT&T Wireless Services 7.875%, 03/01/11 8,230 9,617 Centerpoint Energy 5.700%, 03/15/13 (d) 5,035 5,308 Conectiv, Series A 6.730%, 06/01/06 3,904 4,188 Deutsche Telecom 8.000%, 06/15/10 3,285 4,022 5.250%, 07/22/13 3,715 3,771 FirstEnergy, Series B 6.450%, 11/15/11 2,020 2,092 FPL Group Capital 7.625%, 09/15/06 3,000 3,423 France Telecom 9.250%, 03/01/11 (f) 7,960 9,744 Progress Energy 6.850%, 04/15/12 5,010 5,576 PSEG Power 6.950%, 06/01/12 5,500 6,207 Sprint Capital 6.875%, 11/15/28 $ 13,850 $ 13,506 Verizon Global Funding 7.250%, 12/01/10 5,200 6,067 7.750%, 12/01/30 2,440 2,938 Verizon Wireless 5.375%, 12/15/06 3,300 3,579 Xcel Energy 3.400%, 07/01/08 (d) 5,000 4,888 ------------- 109,407 ------------- YANKEE - 0.6% Pemex Project 9.125%, 10/13/10 11,995 14,334 ------------- TOTAL CORPORATE BONDS (Cost $533,225) 557,291 ------------- ASSET-BACKED SECURITIES - 8.8% AUTOMOBILES - 3.5% Americredit Automobile Receivables Trust Series 2003-BX, Cl A2A 1.550%, 11/06/06 9,700 9,714 Capital One Auto Finance Trust Series 2001-A, Cl A4 5.400%, 05/15/08 10,000 10,503 Nissan Auto Receivables Owner Trust Series 2003-B, Cl A3 1.510%, 08/15/07 16,900 16,855 WFS Financial Owner Trust Series 2003-1, Cl A3 2.030%, 08/20/07 14,750 14,865 Series 2003-2, Cl A3 1.760%, 01/21/08 12,025 12,019 World Omni Auto Receivables Trust Series 2001-B, Cl A4 4.490%, 08/20/08 13,000 13,536 ------------- 77,492 ------------- COMMERCIAL - 1.9% Asset Securitization Series 1996-MD6, Cl A1B 6.880%, 11/13/29 18,600 18,669 Bank of America - First Union NB Commercial Mortgages, Series 2001-3, Cl A1 4.890%, 04/11/37 9,103 9,239 Merrill Lynch Mortgage Investors Series 1995-C3, Cl A3 7.130%, 12/26/25 (a) 2,625 2,696 Morgan Stanley Capital Investments Series 1999-FNV1, Cl A1 6.120%, 03/15/31 7,473 8,054 Sharps SP I LLC Net Interest Margin Trust Series 2003-HS1N 7.480%, 06/01/33 (c) 3,486 3,486 ------------- 42,144 ------------- CREDIT CARDS - 1.1% Citibank Credit Card Issuance Trust Series 2003-A2, Cl A2 2.700%, 01/15/08 11,825 12,015 Series 2003-A3, Cl A3 3.100%, 03/10/10 5,900 5,913 Discover Card Master Trust Series 2001-5, Cl A 5.300%, 11/16/06 7,000 7,173
The accompanying notes are an integral part of the financial statements. 20
DESCRIPTION PAR (000) VALUE (000) - ---------------------------------------------------------------------------------------------------- Sears Credit Account Master Trust Series 1995-5, Cl A 6.050%, 01/15/08 $ 318 $ 321 ------------- 25,422 ------------- EQUIPMENT LEASING & RENTALS - 0.5% CNH Equipment Trust Series 2003-A, Cl A2 1.460%, 02/15/06 10,000 10,017 ------------- HOME EQUITY - 1.8% Aames Mortgage Trust Series 1997-B, Cl A6 6.920%, 06/15/27 2,241 2,247 Amresco Residential Security Mortgage Series 1997-3, Cl A9 6.960%, 03/25/27 3,986 4,002 Argent Securities Series 2003-W1, Cl A4 1.313%, 12/27/33 (a) (f) 31,410 31,425 Contimortgage Home Equity Loan Trust Series 1998-1, Cl A6 6.580%, 12/15/18 157 158 Series 1997-3, Cl A8 7.580%, 08/15/28 2,046 2,158 Delta Home Equity Loan Trust Series 1997-3, Cl A6F 6.860%, 10/25/28 384 396 ------------- 40,386 ------------- MANUFACTURED HOUSING - 0.0% Green Tree Financial Series 1993-4, Cl A4 6.600%, 01/15/19 81 81 ------------- TRANSPORTATION - 0.0% Northwest Airlines Series 1997-1, Cl 1C 7.039%, 07/02/08 539 417 ------------- TOTAL ASSET-BACKED SECURITIES (Cost $193,898) 195,959 ------------- CMO - PRIVATE MORTGAGE-BACKED SECURITIES - 5.5% ADJUSTABLE RATE - 0.9% Wells Fargo Mortgage Backed Securities Trust Series 2003-D, Cl A1 4.906%, 02/25/33 (a) 18,637 19,013 ------------- FIXED RATE - 4.6% Greenwich Capital Commercial Funding Series 2003-C1, Cl A2 3.285%, 07/05/35 13,783 13,390 GRP/AG Real Estate Asset Trust Series 2003-1, Cl A 5.970%, 11/25/32 (c) (f) 4,627 4,622 Nomura Asset Securities Series 1998-D6, Cl A1B 6.590%, 03/15/30 12,400 13,986 Structured Asset Securities Series 2003-30, Cl 1A1 5.500%, 10/25/33 (c) 24,235 24,417 Washington Mutual Series 1999-WM2, Cl 2A 7.000%, 11/19/14 896 917 Series 2003-S10, Cl A2 5.000%, 10/25/18 (b) (c) $ 16,570 $ 16,736 Series 2001-AR6, Cl A5 5.603%, 01/26/32 8,529 8,657 Series 2002-AR4, Cl A7 5.598%, 04/25/32 7,354 7,458 Wells Fargo Mortgage Backed Securities Trust Series 2003-10, Cl A1 4.500%, 09/25/18 (c) 12,734 12,714 Westam Mortgage Financial Series 11, Cl A 6.360%, 08/29/20 241 249 ------------- 103,146 ------------- TOTAL CMO - PRIVATE MORTGAGE-BACKED SECURITIES (Cost $120,950) 122,159 ------------- CMO - U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES - 3.1% FIXED RATE - 2.5% FHLMC REMIC Series T-47, Cl A2 1.650%, 08/27/05 8,676 8,677 Series 1998-M1, Cl A2 6.250%, 01/25/08 7,032 7,591 Series 6, Cl C 9.050%, 06/15/19 92 101 Series 1022, Cl J 6.000%, 12/15/20 126 127 Series 162, Cl F 7.000%, 05/15/21 411 427 Series 188, Cl H 7.000%, 09/15/21 852 855 Series 1790, Cl A 7.000%, 04/15/22 361 380 Series 1723, Cl PJ 7.000%, 02/15/24 7,133 7,461 Series 1699, Cl TD 6.000%, 03/15/24 10,000 10,598 FNMA REMIC Series 1988-24, Cl G 7.000%, 10/25/18 201 214 Series 1989-44, Cl H 9.000%, 07/25/19 158 174 Series 1989-90, Cl E 8.700%, 12/25/19 29 31 Series 1990-30, Cl E 6.500%, 03/25/20 136 143 Series 1990-61, Cl H 7.000%, 06/25/20 136 144 Series 1990-72, Cl B 9.000%, 07/25/20 87 96 Series 1990-102, Cl J 6.500%, 08/25/20 131 137 Series 1990-105, Cl J 6.500%, 09/25/20 1,300 1,374 Series 1991-56, Cl M 6.750%, 06/25/21 508 535 Series 1992-120, Cl C 6.500%, 07/25/22 203 214
21
DESCRIPTION PAR (000)/SHARES VALUE (000) - ---------------------------------------------------------------------------------------------------- Series 1991-1, Cl PG 6.500%, 04/25/28 $ 15,343 $ 16,179 ------------- 55,458 ------------- Z-BONDS (g) - 0.6% FHLMC REMIC Series 1118, Cl Z 8.250%, 07/15/21 227 232 Series 1677, Cl Z 7.500%, 07/15/23 6,142 6,895 FNMA REMIC Series 1991-134, Cl Z 7.000%, 10/25/21 922 974 Series 1996-35, Cl Z 7.000%, 07/25/26 5,044 5,425 ------------- 13,526 ------------- TOTAL CMO - U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (Cost $63,725) 68,984 ------------- RELATED PARTY MONEY MARKET FUND - 1.6% First American Prime Obligations Fund, Cl Z (h) 34,920,686 34,921 ------------- TOTAL RELATED PARTY MONEY MARKET FUND (Cost $34,921) 34,921 ------------- INVESTMENTS PURCHASED WITH CASH PROCEEDS FROM SECURITIES LENDING - 40.3% COMMERCIAL PAPER - 4.2% Bluegrass 1.190%, 05/18/04 3,486 3,486 CS First Boston 1.415%, 10/01/03 13,943 13,943 Danske Bank 1.508%, 12/22/03 13,943 13,943 Independent IV 1.216%, 04/15/04 9,063 9,063 K2 USA 1.020%, 12/01/03 6,959 6,959 Leafs 1.339%, 04/20/04 9,621 9,621 Mitten Mortgage 1.130%, 10/08/03 9,758 9,758 Mortgage Interest Network 1.100%, 10/15/03 3,484 3,484 1.130%, 12/02/03 6,959 6,959 Orchard Park 1.245%, 04/06/04 1,394 1,394 1.220%, 07/06/04 15,469 15,469 ------------- TOTAL COMMERCIAL PAPER 94,079 ------------- CORPORATE OBLIGATIONS - 9.1% Allstate Life Global 1.092%, 08/16/04 13,943 13,943 Bank of Scotland 1.100%, 03/05/04 6,972 6,972 Castle Hill III 1.176%, 09/16/04 4,183 4,183 Deutsche Bank 1.430%, 12/31/03 5,577 5,577 1.340%, 03/22/04 6,972 6,972 General Electric Capital Corporation 1.150%, 07/09/07 6,974 6,974 Halogen Fund 1.150%, 10/03/03 $ 29,000 $ 29,000 Lloyd's Bank 1.100%, 03/05/04 13,943 13,943 Metlife Global Funding 1.130%, 09/15/04 8,364 8,364 1.147%, 04/28/08 5,856 5,856 Monet Trust 1.210%, 12/28/03 13,943 13,943 Residential Mortgage Securities 1.140%, 09/11/04 10,457 10,457 Sigma Finance 1.268%, 08/09/04 13,941 13,941 SMM Trust 2002-M 1.140%, 09/23/04 23,355 23,355 Svenska Handlsbankn 1.100%, 03/03/04 13,943 13,943 1.100%, 03/15/04 2,510 2,510 Wells Fargo Bank 1.050%, 10/17/03 13,943 13,943 1.060%, 10/31/03 9,760 9,760 ------------- TOTAL CORPORATE OBLIGATIONS 203,636 ------------- MONEY MARKET FUNDS - 0.1% AIM Short Term Liquid Asset Portfolio 557,726 558 Merrill Lynch Premier Institutional Fund 1,827,042 1,827 ------------- TOTAL MONEY MARKET FUNDS 2,385 ------------- OTHER SHORT-TERM INVESTMENTS - 3.4% Commonwealth Life 1.430%, 10/01/03 7,040 7,040 General Electric Capital Assurance 1.370%, 12/19/03 2,789 2,789 Liquid Funding 1.130%, 8/23/04 6,969 6,969 1.130%, 9/14/04 6,970 6,970 Premium Asset Trust 02-7 1.139%, 06/01/04 20,775 20,775 Security Life Denver 1.381%, 01/13/04 18,126 18,126 1.490%, 03/15/04 13,943 13,943 ------------- TOTAL OTHER SHORT-TERM INVESTMENTS 76,612 ------------- REPURCHASE AGREEMENTS - 23.5% Bear Stearns 1.240%, dated 9/30/03, matures 10/15/03, repurchase price $27,900,718 (collateralized by Various Securities: Total Market Value $28,456,829) 27,886 27,886 CS First Boston 1.140%, dated 9/30/03, matures 10/1/03, repurchase price $34,858,991 (collateralized by U.S. Government Securities: Total Market Value $35,555,373) 34,858 34,858 CS First Boston 1.140%, dated 9/30/03, matures 10/1/03, repurchase price $4,322,515 (collateralized by U.S. Government Securities: Total Market Value $4,408,882) 4,322 4,322
The accompanying notes are an integral part of the financial statements. 22
DESCRIPTION PAR (000) VALUE (000) - ---------------------------------------------------------------------------------------------------- CS First Boston 1.248%, dated 9/30/03, matures 10/1/03, repurchase price $11,154,911 (collateralized by Mortgage Obligations: Total Market Value $11,712,605) $ 11,155 $ 11,155 Deutsche Bank 1.080%, dated 9/30/03, matures 10/1/03, repurchase price $6,971,787 (collateralized by U.S. Government Securities: Total Market Value $7,111,009) 6,972 6,972 Deutsche Bank 1.080%, dated 9/30/03, matures 10/1/03, repurchase price $27,887,147 (collateralized by U.S. Government Securities: Total Market Value $28,444,036) 27,886 27,886 Deutsche Bank 1.248%, dated 9/30/03, matures 10/1/03, repurchase price $55,774,553 (collateralized by Corporate Securities: Total Market Value $58,561,251) 55,773 55,773 Goldman Sachs 1.268%, dated 9/30/03, matures 10/1/03, repurchase price $20,915,469 (collateralized by Corporate Securities: Total Market Value $21,955,939) 20,915 20,915 Goldman Sachs 1.330%, dated 9/30/03, matures 10/1/03, repurchase price $13,943,670 (collateralized by Various Securities: Total Market Value $14,374,417) 13,943 13,943 Goldman Sachs 1.380%, dated 9/30/03, matures 10/1/03, repurchase price $6,971,845 (collateralized by Various Securities: Total Market Value $7,113,975) 6,972 6,972 Lehman Brothers 1.120%, dated 9/30/03, matures 10/1/03, repurchase price $38,344,869 (collateralized by U.S. Government Securities: Total Market Value $39,110,661) 38,344 38,344 Lehman Brothers 1.130%, dated 9/30/03, matures 10/1/03, repurchase price $13,943,593 (collateralized by U.S. Government Securities: Total Market Value 14,222,525) 13,943 13,943 Lehman Brothers 1.388%, dated 9/30/03, matures 10/1/03, repurchase price $27,887,385 (collateralized by Various Securities: Total Market Value $28,258,127) 27,886 27,886 Lehman Brothers 1.150%, dated 9/30/03, matures 10/1/03, repurchase price $7,947,852 (collateralized by Mortgage Obligations: Total Market Value $8,408,656) 7,948 7,948 Merrill Lynch 1.110%, dated 9/30/03, matures 10/1/03, repurchase price $41,830,755 (collateralized by U.S. Government Securities: Total Market Value $42,666,629) $ 41,829 $ 41,829 Merrill Lynch 1.110%, dated 9/30/03, matures 10/1/03, repurchase price $1,258,855 (collateralized by U.S. Government Securities: Total Market Value $1,284,481) 1,259 1,259 Merrill Lynch 1.110%, dated 9/30/03, matures 10/1/03, repurchase price $3,485,896 (collateralized by U.S. Government Securities: Total Market Value $3,555,706) 3,486 3,486 Merrill Lynch 1.110%, dated 9/30/03, matures 10/1/03, repurchase price $8,366,151 (collateralized by U.S. Government Securities: Total Market Value $8,533,628) 8,366 8,366 Merrill Lynch 1.110%, dated 9/30/03, matures 10/1/03, repurchase price $27,887,170 (collateralized by U.S. Government Securities: Total Market Value $28,444,427) 27,886 27,886 Merrill Lynch 1.110%, dated 9/30/03, matures 10/1/03, repurchase price $34,858,962 (collateralized by U.S. Government Securities: Total Market Value $35,555,391) 34,858 34,858 Merrill Lynch 1.130%, dated 9/30/03, matures 10/1/03, repurchase price $27,887,185 (collateralized by Asset-Backed and U.S. Government Securities: Total Market Value $28,444,990) 27,886 27,886 Merrill Lynch 1.308%, dated 9/30/03, matures 10/1/03, repurchase price $27,887,323 (collateralized by Corporate Securities: Total Market Value $29,280,682) 27,886 27,886 Morgan Stanley 1.258%, dated 9/30/03, matures 10/1/03, repurchase price $7,390,130 (collateralized by Asset-Backed Securities: Total Market Value $7,759,366) 7,390 7,390 Morgan Stanley 1.258%, dated 9/30/03, matures 10/1/03, repurchase price $43,364,727 (collateralized by Mortgage Obligations and Asset-Backed Securities: Total Market Value $45,541,363) 43,363 43,363 ------------- TOTAL REPURCHASE AGREEMENTS 523,012 ------------- TOTAL INVESTMENTS PURCHASED WITH PROCEEDS FROM SECURITIES LENDING (Cost $899,724) 899,724 -------------
23
DESCRIPTION VALUE (000) - ---------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS - 142.0% (Cost $3,118,192) $ 3,165,386 ------------- OTHER ASSETS AND LIABILITIES, NET - (42.0)% (936,967) ------------- TOTAL NET ASSETS - 100.0% $ 2,228,419 -------------
(a) Variable Rate Security - The rate shown is the rate in effect as of September 30, 2003. (b) Security purchased on a when-issued basis. On September 30, 2003, the total cost of investments purchased on a when-issued basis was $76,007,724. See note 2 in Notes to Financial Statements. (c) Securities considered illiquid or restricted. See note 2 in Notes to Financial Statements. (d) Security sold within the terms of a private placement memorandum, exempt from registration under Rule 144A of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "qualified institutional buyers." These securities have been determined to be liquid under the guidelines established by the Funds' board of directors. As of September 30, 2003, the value of these investments was $33,978,375 or 1.5% of total net assets. (e) Security is fair valued. As of September 30, 2003, the fair value of these investments was $3,400,000 or 0.2% of total net assets. See note 2 in Notes to Financial Statements. (f) Delayed Interest (Step-Bonds) - Represents securities that remain zero-coupon securities until a predetermined date at which time the stated coupon rate becomes effective and interest becomes payable at regular intervals. Interest rate shown represents current yield at September 30, 2003, based upon the estimated timing and amount of future interest and principal payments. (g) Z-Bonds - Represents securities that pay no interest or principal during their accrual periods, but accrue additional principal at specified rates. Interest rate shown represents current yield based upon the cost basis and estimated future cash flows. (h) This money market fund is advised by U.S. Bancorp Asset Management, Inc., which also serves as advisor for this Fund. See note 3 in Notes to Financial Statements. Cl - Class CMO - Collateralized Mortgage Obligation FHLMC - Federal Home Loan Mortgage Corporation FHLB - Federal Loan Home Bank FNMA - Federal National Mortgage Association GNMA - Government National Mortgage Association REIT - Real Estate Investment Trust REMIC - Real Estate Mortgage Investment Conduit TBA - To Be Announced CORPORATE BOND FUND
DESCRIPTION PAR (000) VALUE (000) - ---------------------------------------------------------------------------------------------------- CORPORATE BONDS - 90.9% CONSUMER GOODS - 4.7% Albertson's 7.500%, 02/15/11 $ 985 $ 1,145 American Greetings 6.100%, 08/01/28 1,485 1,522 Delhaize America 9.000%, 04/15/31 490 541 General Mills 6.000%, 02/15/12 950 1,041 Kraft Foods 6.250%, 06/01/12 2,470 2,710 6.500%, 11/01/31 990 1,042 Kroger 6.750%, 04/15/12 940 1,064 7.500%, 04/01/31 985 1,162 Miller Brewing 5.500%, 08/15/13 (a) 645 674 Toys R US 7.875%, 04/15/13 885 957 Tyson Foods 8.250%, 10/01/11 1,235 1,478 ------------- 13,336 ------------- ENERGY - 5.9% Amerada Hess 6.650%, 08/15/11 970 1,064 ConocoPhillips 3.625%, 10/15/07 1,500 1,537 Consolidated Energy 7.875%, 03/01/12 1,000 1,042 Duke Capital 7.500%, 10/01/09 980 1,096 El Paso Natural Gas, Callable 08/01/07 @ 103.81 7.625%, 08/01/10 (a) 1,000 965 Kerr-McGee 7.875%, 09/15/31 1,230 1,431 Kinder Morgan 6.500%, 09/01/12 1,380 1,543 Kinder Morgan Energy Partners 7.300%, 08/15/33 1,000 1,151 MidAmerican Energy Holdings 5.875%, 10/01/12 990 1,045 Ocean Energy 4.375%, 10/01/07 1,990 2,075 TGT Pipeline 5.200%, 06/01/18 (a) 985 955 Valero Energy 7.500%, 04/15/32 1,220 1,359 Williams 7.750%, 06/15/31 990 897 XTO Energy 6.250%, 04/15/13 490 506 ------------- 16,666 ------------- FINANCE - 29.4% Abbey National Capital Trust, Callable 06/30/30 @ 100 8.963%, 12/29/49 (b) 980 1,340
The accompanying notes are an integral part of the financial statements. 24
DESCRIPTION PAR (000) VALUE (000) - ---------------------------------------------------------------------------------------------------- BankBoston 6.375%, 04/15/08 $ 2,000 $ 2,244 Bear Stearns 7.800%, 08/15/07 1,950 2,290 Boeing Capital 5.800%, 01/15/13 1,485 1,549 Capital One Bank 6.500%, 06/13/13 985 1,007 CBA Capital Trust I, Callable 06/30/15 @ 100 5.805%, 12/31/49 (a) 985 1,012 Core Investment Grade Trust 4.727%, 11/30/07 5,475 5,739 Countrywide Home Loans, Series K 4.250%, 12/19/07 2,000 2,063 Credit Suisse First Boston 5.875%, 08/01/06 3,000 3,276 ERAC USA Finance 7.350%, 06/15/08 (a) 1,500 1,727 Ford Motor Credit 6.500%, 01/25/07 3,450 3,641 7.250%, 10/25/11 2,900 3,027 GE Global Insurance 7.750%, 06/15/30 1,240 1,482 General Motors Acceptance 6.125%, 08/28/07 3,000 3,166 6.875%, 09/15/11 3,500 3,626 Goldman Sachs 5.500%, 11/15/14 1,000 1,045 Highmark 6.800%, 08/15/13 (a) 985 1,059 Household Finance 4.625%, 01/15/08 3,350 3,523 7.000%, 05/15/12 1,500 1,715 HSBC Capital Funding, Callable 06/30/10 @ 100 9.547%, 12/31/49 (a) 1,190 1,517 ING Capital Funding Trust III, Callable 12/31/10 @ 100 8.439%, 12/31/10 1,500 1,840 International Lease Finance 4.500%, 05/01/08 1,970 2,038 J. P. Morgan Chase 5.750%, 01/02/13 3,600 3,852 John Deere Capital 7.000%, 03/15/12 1,965 2,296 Key Bank 7.000%, 02/01/11 1,830 2,117 Lehman Brothers Holdings 4.000%, 01/22/08 2,550 2,631 Morgan Stanley 6.100%, 04/15/06 1,975 2,165 NB Capital Trust IV, Callable 04/15/17 @ 103.85 8.250%, 04/15/27 2,100 2,439 Newcourt Credit Group, Series B 6.875%, 02/16/05 1,475 1,579 North Fork Bancorp 5.875%, 08/15/12 1,975 2,140 Ohio National Life Insurance 8.875%, 07/15/04 (a) 2,000 2,102 Royal Bank of Scotland, Callable 09/30/31 @ 100 7.648%, 09/30/31 (b) $ 2,000 $ 2,384 SLM, Series A 5.000%, 10/01/13 1,480 1,496 SOC General Real Estate, Callable 09/30/07 @ 100 7.640%, 12/29/49 (a) (b) 1,465 1,673 Washington Mutual Finance 6.250%, 05/15/06 2,475 2,727 Wells Fargo, Callable 12/15/06 @ 103.98 7.960%, 12/15/26 2,000 2,272 Zurich Capital Trust, Callable 06/01/07 @ 104.19 8.376%, 06/01/37 (a) 985 1,096 ------------- 82,895 ------------- MANUFACTURING - 11.4% Abitibi-Consolidated 8.550%, 08/01/10 980 1,080 American Standard 7.375%, 04/15/05 980 1,034 Bombardier 6.750%, 05/01/12 (a) 1,000 1,042 Bowater Canada 7.950%, 11/15/11 500 518 Case New Holland, Callable 08/01/07 @ 104.63 9.250%, 08/01/11 (a) 495 530 Centex 7.500%, 01/15/12 1,950 2,261 Cooper Tire & Rubber 8.000%, 12/15/19 980 1,085 DaimlerChrysler 4.750%, 01/15/08 2,950 3,017 Delphi Auto Systems 6.550%, 06/15/06 985 1,058 Dow Chemical 6.000%, 10/01/12 990 1,039 Ford Motor 7.450%, 07/16/31 1,975 1,816 General Motors 8.375%, 07/15/33 1,450 1,527 Goodrich 7.625%, 12/15/12 1,085 1,246 L-3 Communications, Callable 07/15/08 @ 103.06 6.125%, 07/15/13 440 431 Lockheed Martin 8.500%, 12/01/29 1,230 1,644 Mohawk Industries 7.200%, 04/15/12 1,000 1,150 Noranda 6.000%, 10/15/15 975 988 Northrop Grumman 7.750%, 02/15/31 1,955 2,416 Phelps Dodge 8.750%, 06/01/11 985 1,187 Raytheon 6.300%, 03/15/05 1,950 2,080 Thermo Electron 7.625%, 10/30/08 1,460 1,680
25
DESCRIPTION PAR (000) VALUE (000) - ---------------------------------------------------------------------------------------------------- Tyco International 6.125%, 01/15/09 $ 1,000 $ 1,037 Weyerhaeuser 6.125%, 03/15/07 1,950 2,158 ------------- 32,024 ------------- REAL ESTATE - 3.3% Boston Properties (REIT) 6.250%, 01/15/13 985 1,062 Hospitality Properties (REIT), Callable 08/15/12 @ 100 6.750%, 02/15/13 1,480 1,542 Post Apartment Homes 6.850%, 03/16/15 (b) 1,075 1,118 Prologis Trust (REIT) 7.050%, 07/15/06 1,500 1,675 Simon Property Group (REIT) 7.750%, 01/20/11 1,450 1,691 Vornado Realty (REIT) 5.625%, 06/15/07 1,975 2,092 ------------- 9,180 ------------- SERVICES - 12.8% Allied Waste North America, Series B, Callable 08/01/04 @ 105 10.000%, 08/01/09 1,335 1,447 AOL Time Warner 6.125%, 04/15/06 980 1,066 6.875%, 05/01/12 1,235 1,384 7.625%, 04/15/31 1,975 2,234 AT&T Broadband 8.375%, 03/15/13 3,470 4,307 Autonation 9.000%, 08/01/08 1,000 1,132 Cendant 6.875%, 08/15/06 2,000 2,211 Cox Communications 7.750%, 11/01/10 990 1,178 Federated Department Stores 6.625%, 04/01/11 1,950 2,219 HCA Columbia Healthcare 8.750%, 09/01/10 1,000 1,159 Iron Mountain, Callable 01/15/08 @ 103.87 7.750%, 01/15/15 490 510 Lenfest Communications 8.375%, 11/01/05 975 1,089 Liberty Media 3.500%, 09/25/06 1,480 1,476 McKesson 7.750%, 02/01/12 975 1,172 Medco Health Solutions 7.250%, 08/15/13 610 657 MGM Mirage 8.375%, 02/01/11 1,000 1,100 News America 6.625%, 01/09/08 2,000 2,257 Park Place Entertainment 7.875%, 12/15/05 1,000 1,060 Royal Caribbean Cruises 8.250%, 04/01/05 1,000 1,045 Starwood Hotels & Resorts 7.375%, 05/01/07 $ 975 $ 1,044 TCI Communications 8.750%, 08/01/15 1,000 1,301 Tricon Global Restaurant 7.650%, 05/15/08 1,000 1,086 Viacom 6.625%, 05/15/11 1,735 1,982 Wyeth 5.250%, 03/15/13 1,740 1,805 ------------- 35,921 ------------- TRANSPORTATION - 2.7% American Airlines, Series 2001-1, Cl A2 6.817%, 05/23/11 1,500 1,260 Burlington Northern Santa Fe 7.950%, 08/15/30 985 1,234 Continental Airlines, Series 2001-1, Cl B 7.033%, 06/15/11 1,832 1,374 Delta Air Lines, Series 2001-1 7.711%, 09/18/11 (b) 1,500 1,230 Norfolk Southern 7.800%, 05/15/27 990 1,201 Union Pacific 3.625%, 06/01/10 985 952 United Air Lines, Series 2000-1 8.030%, 07/01/11 1,861 391 ------------- 7,642 ------------- UTILITIES - 19.5% Alliant Energy Resources 9.750%, 01/15/13 985 1,265 American Electric Power 5.250%, 06/01/15 1,985 1,944 AT&T 7.800%, 11/15/11 1,970 2,287 8.500%, 11/15/31 985 1,176 AT&T Wireless Services 7.500%, 05/01/07 1,475 1,681 8.750%, 03/01/31 1,225 1,531 British Telecom 8.375%, 12/15/10 1,975 2,408 Centerpoint Energy 6.850%, 06/01/15 (a) 985 958 Cincinnati Gas & Electric 5.700%, 09/15/12 1,980 2,120 Citizens Communications 7.625%, 08/15/08 1,485 1,734 Deutsche Telecom 8.500%, 06/15/10 1,480 1,812 5.250%, 07/22/13 400 406 8.750%, 06/15/30 985 1,254 DPL 8.250%, 03/01/07 985 1,072 FirstEnergy Series A 5.500%, 11/15/06 985 1,018 Series B 6.450%, 11/15/11 1,075 1,113 FPL Group Capital 7.625%, 09/15/06 1,975 2,253 France Telecom 9.250%, 03/01/11 1,975 2,418 10.000%, 03/01/31 490 660
The accompanying notes are an integral part of the financial statements. 26
DESCRIPTION PAR (000) VALUE (000) - ---------------------------------------------------------------------------------------------------- Monongahela Power 5.000%, 10/01/06 $ 980 $ 980 Northern State Power - Minnesota, Series B 8.000%, 08/28/12 680 837 Ohio Power 5.500%, 02/15/13 (a) 1,475 1,533 Oncor Electric Delivery 6.375%, 01/15/15 (a) 1,475 1,634 Progress Energy 7.000%, 10/30/31 2,000 2,105 PSEG Energy Holdings 8.625%, 02/15/08 690 701 Public Service Company of Colorado 4.375%, 10/01/08 980 1,017 Qwest Capital Funding 7.750%, 08/15/06 960 943 Southern Capital Funding, Series A 5.300%, 02/01/07 720 777 Sprint Capital 6.000%, 01/15/07 1,325 1,426 8.375%, 03/15/12 1,685 1,979 6.875%, 11/15/28 1,000 975 Tampa Electric 6.375%, 08/15/12 985 1,035 Telus 8.000%, 06/01/11 1,470 1,698 Verizon Global Funding 7.250%, 12/01/10 1,485 1,733 7.375%, 09/01/12 1,460 1,721 7.750%, 12/01/30 1,980 2,384 Verizon Wireless 5.375%, 12/15/06 980 1,063 Western Resources 9.750%, 05/01/07 1,000 1,117 ------------- 54,768 ------------- YANKEE - 1.2% Pemex Project 9.125%, 10/13/10 1,980 2,366 Pemex Project Funding Master Trust 6.125%, 08/15/08 990 1,049 ------------- 3,415 ------------- TOTAL CORPORATE BONDS (Cost $244,165) 255,847 ------------- U.S. GOVERNMENT & AGENCY SECURITIES - 5.1% U.S. AGENCY DEBENTURE - 2.2% FHLMC 5.750%, 01/15/12 5,500 6,102 ------------- U.S. TREASURIES - 2.9% U.S. Treasury Bill 0.890%, 01/22/04 35 35 U.S. Treasury Bond 5.375%, 02/15/31 2,785 2,989 U.S. Treasury Notes 3.250%, 08/15/08 1,780 1,817 4.250%, 08/15/13 3,425 3,510 ------------- 8,351 ------------- TOTAL U.S. GOVERNMENT & AGENCY SECURITIES (Cost $14,002) 14,453 ------------- DESCRIPTION PAR (000)/SHARES VALUE (000) - ---------------------------------------------------------------------------------------------------- ASSET-BACKED SECURITIES - 1.7% HOME EQUITY - 1.1% Green Tree Home Improvement Loan Trust Series 1997-A, Cl HEM2 7.900%, 03/15/28 $ 1,300 $ 1,362 GRMT Mortgage Loan Trust Series 2001-1A, Cl M1 7.772%, 07/20/31 1,500 1,631 ------------- 2,993 ------------- MANUFACTURED HOUSING - 0.3% Green Tree Financial Series 1996-8, Cl A7 8.050%, 10/15/27 870 911 ------------- OTHER - 0.3% Aircraft Finance Trust Series 1999-1A, Cl C 8.000%, 05/15/24 720 142 Juniper Series 2000-1, Cl A3 8.220%, 04/15/12 (c) 1,000 700 ------------- 842 ------------- TOTAL ASSET-BACKED SECURITIES (Cost $5,303) 4,746 ------------- RELATED PARTY MONEY MARKET FUND - 1.0% First American Prime Obligations Fund, Cl Z (d) 2,806,111 2,806 ------------- TOTAL RELATED PARTY MONEY MARKET FUND (Cost $2,806) 2,806 ------------- INVESTMENTS PURCHASED WITH CASH PROCEEDS FROM SECURITIES LENDING - 18.5% COMMERCIAL PAPER - 1.9% Bluegrass 1.190%, 05/18/04 202 202 CS First Boston 1.415%, 10/01/03 806 806 Danske Bank 1.508%, 12/22/03 806 806 Independent IV 1.216%, 04/15/04 524 524 K2 USA 1.020%, 12/01/03 403 403 Leafs 1.339%, 04/20/04 556 556 Mitten Mortgage 1.130%, 10/08/03 564 564 Mortgage Interest Network 1.100%, 10/15/03 201 201 1.130%, 12/02/03 402 402 Orchard Park 1.245%, 04/06/04 81 81 1.220%, 07/06/04 895 895 ------------- TOTAL COMMERCIAL PAPER 5,440 ------------- CORPORATE OBLIGATIONS - 4.2% Allstate Life Global 1.092%, 08/16/04 806 806 Bank of Scotland 1.100%, 03/05/04 403 403 Castle Hill III 1.176%, 09/16/04 242 242
27
DESCRIPTION PAR (000)/SHARES VALUE (000) - ---------------------------------------------------------------------------------------------------- Deutsche Bank 1.430%, 12/31/03 $ 323 $ 323 1.340%, 03/22/04 403 403 General Electric Capital Corporation 1.150%, 07/09/07 403 403 Halogen Fund 1.150%, 10/03/03 1,676 1,676 Lloyd's Bank 1.100%, 03/05/04 806 806 Metlife Global Funding 1.130%, 09/15/04 484 484 1.147%, 04/28/08 339 339 Monet Trust 1.210%, 12/28/03 806 806 Residential Mortgage Securities 1.140%, 09/11/04 605 605 Sigma Finance 1.268%, 08/09/04 806 806 SMM Trust 2002-M 1.140%, 09/23/04 1,350 1,350 Svenska Handlsbankn 1.100%, 03/03/04 806 806 1.100%, 03/15/04 145 145 Wells Fargo Bank 1.050%, 10/17/03 806 806 1.060%, 10/31/03 565 565 ------------- TOTAL CORPORATE OBLIGATIONS 11,774 ------------- MONEY MARKET FUNDS - 0.0% AIM Short Term Liquid Asset Portfolio 32,247 32 Merrill Lynch Premier Institutional Fund 105,637 106 ------------- TOTAL MONEY MARKET FUNDS 138 ------------- OTHER SHORT-TERM INVESTMENTS - 1.6% Commonwealth Life 1.430%, 10/01/03 407 407 General Electric Capital Assurance 1.370%, 12/19/03 161 161 Liquid Funding 1.130%, 8/23/04 403 403 1.130%, 9/14/04 403 403 Premium Asset Trust 02-7 1.139%, 06/01/04 1,201 1,201 Security Life Denver 1.381%, 01/13/04 1,048 1,048 1.490%, 03/15/04 806 806 ------------- TOTAL OTHER SHORT-TERM INVESTMENTS 4,429 ------------- REPURCHASE AGREEMENTS - 10.8% Bear Stearns 1.240%, dated 9/30/03, matures 10/15/03, repurchase price $1,613,181 (collateralized by Various Securities: Total Market Value $1,645,334) 1,612 1,612 CS First Boston 1.140%, dated 9/30/03, matures 10/1/03, repurchase price $2,015,498 (collateralized by U.S. Government Securities: Total Market Value $2,055,762) 2,016 2,016 DESCRIPTION PAR (000) VALUE (000) - ---------------------------------------------------------------------------------------------------- CS First Boston 1.140%, dated 9/30/03, matures 10/1/03, repurchase price $249,922 (collateralized by U.S. Government Securities: Total Market Value $254,915) $ 250 $ 250 CS First Boston 1.248%, dated 9/30/03, matures 10/1/03, repurchase price $644,961 (collateralized by Mortgage Obligations: Total Market Value $677,207) 645 645 Deutsche Bank 1.080%, dated 9/30/03, matures 10/1/03, repurchase price $403,099 (collateralized by U.S. Government Securities: Total Market Value $411,149) 403 403 Deutsche Bank 1.080%, dated 9/30/03, matures 10/1/03, repurchase price $1,612,396 (collateralized by U.S. Government Securities: Total Market Value $1,644,595) 1,612 1,612 Deutsche Bank 1.248%, dated 9/30/03, matures 10/1/03, repurchase price $3,224,807 (collateralized by Corporate Securities: Total Market Value $3,385,930) 3,225 3,225 Goldman Sachs 1.268%, dated 9/30/03, matures 10/1/03, repurchase price $1,209,303 (collateralized by Corporate Securities: Total Market Value $1,269,462) 1,209 1,209 Goldman Sachs 1.330%, dated 9/30/03, matures 10/1/03, repurchase price $806,204 (collateralized by Various Securities: Total Market Value $831,109) 806 806 Goldman Sachs 1.380%, dated 9/30/03, matures 10/1/03, repurchase price $403,102 (collateralized by Various Securities: Total Market Value $411,320) 403 403 Lehman Brothers 1.120%, dated 9/30/03, matures 10/1/03, repurchase price $2,217,047 (collateralized by U.S. Government Securities: Total Market Value $2,261,324) 2,217 2,217 Lehman Brothers 1.130%, dated 9/30/03, matures 10/1/03, repurchase price $806,199 (collateralized by U.S. Government Securities: Total Market Value $822,327) 806 806 Lehman Brothers 1.388%, dated 9/30/03, matures 10/1/03, repurchase price $1,612,410 (collateralized by Various Securities: Total Market Value $1,633,846) 1,612 1,612 Lehman Brothers 1.150%, dated 9/30/03, matures 10/1/03, repurchase price $459,534 (collateralized by Mortgage Obligations: Total Market Value $486,177) 460 460
The accompanying notes are an integral part of the financial statements. 28
DESCRIPTION PAR (000) VALUE (000) - ---------------------------------------------------------------------------------------------------- Merrill Lynch 1.110%, dated 9/30/03, matures 10/1/03, repurchase price $2,418,596 (collateralized by U.S. Government Securities: Total Market Value $2,466,925) $ 2,419 $ 2,419 Merrill Lynch 1.110%, dated 9/30/03, matures 10/1/03, repurchase price $72,785 (collateralized by U.S. Government Securities: Total Market Value $74,267) 73 73 Merrill Lynch 1.110%, dated 9/30/03, matures 10/1/03, repurchase price $201,550 (collateralized by U.S. Government Securities: Total Market Value $205,586) 202 202 Merrill Lynch 1.110%, dated 9/30/03, matures 10/1/03, repurchase price $483,719 (collateralized by U.S. Government Securities: Total Market Value $493,402) 484 484 Merrill Lynch 1.110%, dated 9/30/03, matures 10/1/03, repurchase price $1,612,397 (collateralized by U.S. Government Securities: Total Market Value $1,644,617) 1,612 1,612 Merrill Lynch 1.110%, dated 9/30/03, matures 10/1/03, repurchase price $2,015,497 (collateralized by U.S. Government Securities: Total Market Value $2,055,763) 2,016 2,016 Merrill Lynch 1.130%, dated 9/30/03, matures 10/1/03, repurchase price $1,612,398 (collateralized by Asset-Backed and U.S. Government Securities: Total Market Value $1,644,650) 1,612 1,612 Merrill Lynch 1.308%, dated 9/30/03, matures 10/1/03, repurchase price $1,612,406 (collateralized by Corporate Securities: Total Market Value $1,692,968) 1,612 1,612 Morgan Stanley 1.258%, dated 9/30/03, matures 10/1/03, repurchase price $427,287 (collateralized by Asset-Backed Securities: Total Market Value $448,636) 427 427 Morgan Stanley 1.258%, dated 9/30/03, matures 10/1/03, repurchase price $2,507,288 (collateralized by Mortgage Obligations and Asset-Backed Securities: Total Market Value $2,633,138) 2,507 2,507 ------------- TOTAL REPURCHASE AGREEMENTS 30,240 ------------- TOTAL INVESTMENTS PURCHASED WITH PROCEEDS FROM SECURITIES LENDING (Cost $52,021) 52,021 ------------- DESCRIPTION VALUE (000) - ---------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS - 117.2% (Cost $318,297) $ 329,873 OTHER ASSETS AND LIABILITIES, NET - (17.2)% (48,478) ------------- TOTAL NET ASSETS - 100.0% $ 281,395 -------------
(a) Security sold within the terms of a private placement memorandum, exempt from registration under Rule 144A of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "qualified institutional buyers." These securities have been determined to be liquid under the guidelines established by the Funds' board of directors. As of September 30, 2003, the value of these investments was $18,477,483 or 6.6% of total net assets. (b) Variable Rate Security - The rate shown is the rate in effect as of September 30, 2003. (c) Securities considered illiquid or restricted. See note 2 in Notes to Financial Statements. (d) This money market fund is advised by U.S. Bancorp Asset Management, Inc., which also serves as advisor for this Fund. See note 3 in Notes to Financial Statements. Cl - Class FHLMC - Federal Home Loan Mortgage Corporation REIT - Real Estate Investment Trust 29 HIGH INCOME BOND FUND
DESCRIPTION PAR (000) (h) VALUE (000) - ---------------------------------------------------------------------------------------------------- HIGH YIELD CORPORATE BONDS - 94.5% CONSUMER GOODS - 2.5% Agrilink Foods, Callable 11/01/03 @ 105.94 11.875%, 11/01/08 $ 500 $ 530 Canandaigua Brands, Callable 03/01/04 @ 104.25 8.500%, 03/01/09 500 530 Constellation Brands, Series B, Callable 01/15/07 @ 104.06 8.125%, 01/15/12 250 269 Corn Products International 8.250%, 07/15/07 1,000 1,105 Dean Foods 6.625%, 05/15/09 500 525 Del Monte, Callable 12/15/07 @ 104.31 8.625%, 12/15/12 (a) 500 545 Rayovac, Callable 10/01/08 @ 104.25 8.500%, 10/01/13 (a) 100 103 Sealy Mattress, Series B, Callable 10/01/03 @ 105.44 10.875%, 12/15/07 (b) 500 515 Seminis Vegetable Seeds, Callable 10/01/08 @ 105.13 10.250%, 10/01/13 (a) 250 266 Simmons, Callable 03/15/04 @ 105.13 10.250%, 03/15/09 1,000 1,070 Swift & Co., Callable 10/01/06 @ 106.25 12.500%, 01/01/10 (a) 750 832 ------------- 6,290 ------------- ENERGY - 10.3% ANR Pipeline, Calllable 03/15/07 @ 104.44 8.875%, 03/15/10 250 268 Chesapeake Energy, Callable 04/01/06 @ 104.06 8.125%, 04/01/11 800 868 Dynegy Holdings, Callable 07/15/08 @ 105.06 10.125%, 07/15/13 (a) 1,000 1,060 Dynegy-Roseton Danskamme, Series B 7.670%, 11/08/16 1,000 835 El Paso 6.950%, 12/15/07 1,000 880 7.000%, 05/15/11 1,500 1,230 7.750%, 01/15/32 2,000 1,475 El Paso Natural Gas, Callable 08/01/07 @ 103.81 7.625%, 08/01/10 (a) 1,400 1,351 El Paso Production Holding, Callable 06/01/08 @ 103.88 7.750%, 06/01/13 (a) 1,000 955 Frontier Escrow, Callable 04/15/08 @ 104 8.000%, 04/15/13 (a) 500 507 Giant Industries, Callable 05/15/07 @ 105.50 11.000%, 05/15/12 1,000 990 Gulfterra Energy Partners, Callable 12/01/07 @ 105.31 10.625%, 12/01/12 1,000 1,170 Newfield Exploration, Callable 08/15/07 @ 104.19 8.375%, 08/15/12 1,000 1,085 Parker Drilling, Series B, Callable 11/15/04 @ 105.06 10.125%, 11/15/09 1,000 1,020 Petrobras International Finance 9.125%, 07/02/13 (c) $ 500 $ 512 Premcor Refining Group, Callable 02/01/08 @ 104.75 9.500%, 02/01/13 1,000 1,100 Pride International, Callable 06/01/04 @ 105 10.000%, 06/01/09 1,000 1,075 Southern Natural Gas, Callable 03/15/07 @ 104.44 8.875%, 03/15/10 250 267 Swift Energy, Callable 08/01/04 @ 105.12 10.250%, 08/01/09 1,000 1,060 Tesoro Petroleum, Callable 04/01/07 @ 104.81 9.625%, 04/01/12 1,000 990 Vintage Petroleum, Callable 10/01/03 @ 103.23 8.625%, 02/01/09 500 516 Western Oil Sands 8.375%, 05/01/12 (c) 1,000 1,125 Westport Resources, Callable 11/01/06 @ 104.13 8.250%, 11/01/11 (a) 250 270 Williams 6.500%, 08/01/06 1,500 1,507 7.125%, 09/01/11 2,000 1,975 7.750%, 06/15/31 2,000 1,812 ------------- 25,903 ------------- FINANCE - 0.5% HLI Operating, Callable 06/15/07 @ 105.25 10.500%, 06/15/10 (a) 250 272 IOS Capital 7.250%, 06/30/08 1,000 971 ------------- 1,243 ------------- MANUFACTURING - 26.5% Abitibi-Consolidated 8.550%, 08/01/10 (c) 2,000 2,204 American Axle & Manufacturing, Callable 03/01/04 @ 104.88 9.750%, 03/01/09 500 539 American Standard 7.375%, 02/01/08 1,000 1,092 Amkor Technologies, Callable 05/15/08 @ 103.88 7.750%, 05/15/13 (a) 500 504 Amsted Industries, Callable 10/15/07 @ 105.13 10.250%, 10/15/11 (a) 800 858 Anchor Glass Container, Callable 02/15/08 @ 105.50 11.000%, 02/15/13 1,000 1,120 Appleton Papers, Series B, Callable 12/15/05 @ 106.25 12.500%, 12/15/08 500 547 Applied Extrusion Technologies, Series B, Callable 07/01/06 @ 105.37 10.750%, 07/01/11 1,000 790 Avaya, Callable 04/01/06 @ 105.56 11.125%, 04/01/09 500 579 Ball, Callable 12/15/07 @ 103.44 6.875%, 12/15/12 250 257 BE Aerospace, Callable 11/01/03 @ 104.75 9.500%, 11/01/08 500 450 Beazer Homes USA, Callable 04/15/07 @ 104.19 8.375%, 04/15/12 1,000 1,082
The accompanying notes are an integral part of the financial statements. 30
DESCRIPTION PAR (000) (h) VALUE (000) - ---------------------------------------------------------------------------------------------------- Bowater Canada 7.950%, 11/15/11 (c) $ 1,500 $ 1,555 Buckeye Technologies, Callable 10/01/03 @ 101.54 9.250%, 09/15/08 1,000 1,005 Caraustar Industries, Callable 04/01/06 @ 105.25 9.875%, 04/01/11 1,000 985 Cascades, Callable 02/15/08 @ 103.63 7.250%, 02/15/13 (a) (c) 1,000 1,020 Case New Holland, Callable 08/01/07 @ 104.63 9.250%, 08/01/11 (a) 1,000 1,070 Collins & Aikman Products, Callable 10/01/03 @ 101.92 11.500%, 04/15/06 425 319 Crompton 8.500%, 03/15/05 1,000 1,052 Crown European Holdings, Callable 03/01/07 @ 104.75 9.500%, 03/01/11 (a) (c) 1,000 1,075 Cummins, Callable 12/01/06 @ 104.75 9.500%, 12/01/10 (a) 200 228 Dana 6.500%, 03/15/08 1,000 1,000 Diamond Brands Operating, Callable 10/01/03 @ 105.06 10.125%, 04/15/08 (d) (e) 50 -- Dura Operating, Series B, Callable 04/15/07 @ 104.31 8.625%, 04/15/12 500 517 Equistar Chemical Funding 10.125%, 09/01/08 1,250 1,244 Fisher Scientific International, Callable 05/01/07 @ 104.06 8.125%, 05/01/12 1,000 1,067 Flextronics International, Callable 05/15/08 @ 103.25 6.500%, 05/15/13 (a) (c) 1,000 982 FMC, Callable 11/01/06 @ 105.13 10.250%, 11/01/09 550 627 Georgia-Pacific 7.500%, 05/15/06 1,000 1,030 8.125%, 05/15/11 1,500 1,567 8.875%, 05/15/31 1,000 1,000 Gerdau Ameristeel, Callable 07/15/07 @ 105.38 10.375%, 07/15/11 (a) 1,000 1,012 Glenoit, Callable 10/01/03 @ 103.67 11.000%, 04/15/07 (d) (e) 100 -- Graphic Packaging International, Callable 08/15/08 @ 104.75 9.500%, 08/15/13 (a) 500 550 Greif Brothers, Callable 08/01/07 @ 104.44 8.875%, 08/01/12 700 756 Huntsman ICI Chemicals, Callable 07/01/04 @ 105.06 10.125%, 07/01/09 1,500 1,417 IMC Global, Series B 10.875%, 06/01/08 750 776 Johnsondiversey, Series B, Callable 05/15/07 @ 104.81 9.625%, 05/15/12 500 540 KB Home, Callable 02/01/07 @ 103.88 7.750%, 02/01/10 $ 500 $ 525 L-3 Communications, Callable 07/15/08 @ 103.06 6.125%, 07/15/13 500 490 Lear, Series B 8.110%, 05/15/09 1,500 1,717 Levi Strauss 7.000%, 11/01/06 500 395 Lucent Technologies 5.500%, 11/15/08 1,000 850 Lyondell Chemical, Callable 05/01/04 @ 105.44 10.875%, 05/01/09 1,500 1,350 Lyondell Chemical, Series B, Callable 05/01/04 @ 104.94 9.875%, 05/01/07 1,000 952 Massey Energy 6.950%, 03/01/07 1,000 995 Nortek Holdings, Series B, Callable 10/01/03 @ 103.04 9.125%, 09/01/07 500 514 Nortel Networks 6.125%, 02/15/06 (c) 1,000 1,005 Nova Chemicals 7.400%, 04/01/09 (c) 500 551 OM Group, Callable 12/15/06 @ 104.63 9.250%, 12/15/11 1,000 985 Oregon Steel Mills, Callable 07/15/06 @ 105 10.000%, 07/15/09 250 203 Owens-Brockway Glass Container, Callable 02/15/06 @ 104.44 8.875%, 02/15/09 1,000 1,065 Owens-Illinois 8.100%, 05/15/07 2,000 2,045 Oxford Industries, Callable 06/01/07 @ 104.44 8.875%, 06/01/11 (a) 500 535 Perkinelmer, Callable 01/15/08 @ 104.44 8.875%, 01/15/13 500 544 Polyone, Callable 05/15/07 @ 105.31 10.625%, 05/15/10 800 676 Rockwood Specialties Group, Callable 05/15/07 @ 105.31 10.625%, 05/15/11 (a) 750 799 Russell, Callable 05/01/06 @ 104.63 9.250%, 05/01/10 500 531 Schuler Homes, Callable 07/15/05 @ 104.69 9.375%, 07/15/09 1,000 1,115 Sequa 9.000%, 08/01/09 1,000 1,090 Stone Container, Callable 07/01/07 @ 104.19 8.375%, 07/01/12 1,300 1,358 Technical Olympic USA, Callable 07/01/06 @ 104.50 9.000%, 07/01/10 1,000 1,050 Tembec Industries 8.500%, 02/01/11 (c) 500 487 Texas Industries, Callable 06/15/07 @ 105.13 10.250%, 06/15/11 (a) 800 880 TRW Automotive, Callable 02/15/08 @ 104.69 9.375%, 02/15/13 (a) 500 560 Tyco International 6.375%, 02/15/06 (c) 1,000 1,042 6.750%, 02/15/11 (c) 2,000 2,090 6.875%, 01/15/29 (c) 1,000 969
31
DESCRIPTION PAR (000) (h) VALUE (000) - ---------------------------------------------------------------------------------------------------- United Components, Callable 06/15/08 @ 104.69 9.375%, 06/15/13 (a) $ 500 $ 520 United States Steel, Callable 05/15/07 @ 104.88 9.750%, 05/15/10 1,000 1,025 USEC 6.625%, 01/20/06 1,000 942 Warnaco, Callable 06/15/08 @ 104.44 8.875%, 06/15/13 (a) 500 535 WCI Communities, Callable 05/01/07 @ 104.56 9.125%, 05/01/12 1,000 1,070 William Lyon Homes, Callable 04/01/08 @ 105.38 10.750%, 04/01/13 1,000 1,085 Xerox 9.750%, 01/15/09 500 552 7.200%, 04/01/16 1,000 932 ------------- 66,445 ------------- REAL ESTATE - 1.3% Corrections Corp. of America, Callable 05/01/07 @ 103.75 7.500%, 05/01/11 400 412 Felcor Lodging (REIT) 8.500%, 06/01/11 500 532 LNR Property, Callable 07/15/08 @ 103.81 7.625%, 07/15/13 (a) 800 822 Meristar Hospitality 9.125%, 01/15/11 1,000 1,042 Ventas Realty 9.000%, 05/01/12 500 548 ------------- 3,356 ------------- SERVICES - 31.6% Ahold Finance USA 8.250%, 07/15/10 1,000 1,080 Allied Waste North America Series B, Callable 01/01/04 @ 103.94 7.875%, 01/01/09 2,000 2,078 Series B, Callable 08/01/04 @ 105 10.000%, 08/01/09 2,000 2,168 Alpharma, Callable 05/01/07 @ 104.31 8.625%, 05/01/11 (a) 500 498 AMC Entertainment, Callable 02/01/07 @ 104.94 9.875%, 02/01/12 500 546 Asbury Automotive Group, Callable 06/15/07 @ 104.50 9.000%, 06/15/12 1,000 1,000 Autonation 9.000%, 08/01/08 1,000 1,133 Aviall, Callable 07/01/07 @ 103.81 7.625%, 07/01/11 (a) 500 513 Bally Total Fitness Holdings, Series D, Callable 10/01/03 @ 104.94 9.875%, 10/15/07 1,000 940 Biovail, Callable 04/01/06 @ 103.94 7.875%, 04/01/10 (c) 1,000 1,030 Boca Resorts, Callable 04/15/04 @ 104.94 9.875%, 04/15/09 1,000 1,065 Boyd Gaming, Callable 12/15/07 @ 103.88 7.750%, 12/15/12 1,000 1,033 Buffets, Callable 07/15/06 @ 105.63 11.250%, 07/15/10 500 515 Charter Communications Holdings, Callable 04/01/04 @ 104.31 8.625%, 04/01/09 3,000 2,280 Callable 05/15/06 @ 105.88 11.750%, 05/15/11 (b) 2,000 1,080 Cinemark USA, Callable 02/01/08 @ 104.50 9.000%, 02/01/13 $ 250 $ 267 Corus Entertainment, Callable 03/01/07 @ 104.38 8.750%, 03/01/12 (c) 500 544 Coventry Health Care, Callable 02/15/07 @ 104.06 8.125%, 02/15/12 750 814 CSC Holdings, Callable 10/01/03 @ 104.80 9.875%, 02/15/13 750 780 Delhaize America 9.000%, 04/15/31 1,000 1,105 Dex Media East, Callable 11/15/07 @ 106.06 12.125%, 11/15/12 500 601 Dex Media West, Callable 08/15/08 @ 104.94 9.875%, 08/15/13 (a) 500 561 DirecTV Holdings, Callable 03/15/08 @ 104.19 8.375%, 03/15/13 (a) 1,000 1,128 Dominos, Series B, Callable 07/01/07 @ 104.13 8.250%, 07/01/11 (a) 750 797 Echostar DBS, Callable 01/15/06 @ 104.56 9.125%, 01/15/09 1,947 2,203 Emmis Communications, Series B, Callable 03/15/04 @ 104.06 8.125%, 03/15/09 500 521 Gap 6.900%, 09/15/07 500 538 Hanger Orthopedic, Callable 02/15/06 @ 105.19 10.375%, 02/15/09 350 391 HCA Columbia Healthcare 8.750%, 09/01/10 3,000 3,477 Hilton Hotels 8.250%, 02/15/11 1,000 1,118 HMH Properties, Series B, Callable 10/01/03 @ 103.99 7.875%, 08/01/08 1,025 1,053 Hollywood Entertainment, Callable 03/15/07 @ 104.81 9.625%, 03/15/11 750 814 Houghton Mifflin, Callable 02/01/08 @ 104.94 9.875%, 02/01/13 1,000 1,060 IASIS Healthcare, Callable 10/15/04 @ 106.50 13.000%, 10/15/09 1,000 1,125 Ingles Markets, Callable 12/01/06 @ 104.44 8.875%, 12/01/11 1,000 1,015 Iron Mountain Callable 04/01/06 @ 104.31 8.625%, 04/01/13 500 531 Callable 01/15/08 @ 103.87 7.750%, 01/15/15 500 520 Isle of Capri Casinos, Callable 04/15/04 @ 104.38 8.750%, 04/15/09 1,000 1,058 J.C. Penney 7.600%, 04/01/07 1,000 1,080 7.950%, 04/01/17 1,000 1,055 Lamar Media, Callable 10/01/03 @ 102.88 8.625%, 09/15/07 250 258 Lodgenet Entertainment, Callable 06/15/08 @ 104.75 9.500%, 06/15/13 500 530 Mandalay Resort Group, Series B 10.250%, 08/01/07 1,500 1,710 Medco Health Solutions 7.250%, 08/15/13 250 269
The accompanying notes are an integral part of the financial statements. 32
DESCRIPTION PAR (000) (h) VALUE (000) - ---------------------------------------------------------------------------------------------------- Mediacom, Callable 01/15/06 @ 104.75 9.500%, 01/15/13 $ 1,000 $ 948 MGM Mirage 8.375%, 02/01/11 2,500 2,750 Mohegan Tribal Gaming 6.375%, 07/15/09 (a) 1,000 1,008 Moore North America, Callable 01/15/07 @ 103.94 7.875%, 01/15/11 (a) 250 264 Muzak, Callable 02/15/06 @ 105 10.000%, 02/15/09 1,000 1,045 Park Place Entertainment 8.875%, 09/15/08 2,000 2,205 Paxson Communications, Callable 07/15/05 @ 105.38 10.750%, 07/15/08 750 788 Payless Shoesource, Callable 08/01/08 @ 104.13 8.250%, 08/01/13 (a) 500 506 Pegasus Communications, Series B, Callable 10/01/03 @ 104.88 9.750%, 12/01/06 300 237 Penn National Gaming, Callable 03/15/06 @ 104.44 8.875%, 03/15/10 1,000 1,075 Primedia, Callable 05/15/06 @ 104.44 8.875%, 05/15/11 800 828 R. H. Donnelley Finance, Callable 12/15/07 @ 105.44 10.875%, 12/15/12 (a) 1,000 1,175 Radiologix, Series B, Callable 12/15/05 @ 105.25 10.500%, 12/15/08 500 488 Res-Care, Callable 11/15/05 @ 105.31 10.625%, 11/15/08 500 490 Resorts International Hotel & Casino, Callable 03/15/07 @ 106 11.500%, 03/15/09 800 793 Rite Aid 7.125%, 01/15/07 1,500 1,515 Rogers Cable 6.250%, 06/15/13 (c) 1,000 997 Rotech Healthcare, Callable 04/01/07 @ 104.75 9.500%, 04/01/12 750 793 Roundy's, Callable 06/15/07 @ 104.44 8.875%, 06/15/12 1,000 1,050 Royal Caribbean Cruises 8.250%, 04/01/05 (c) 500 523 8.000%, 05/15/10 (c) 1,000 1,055 Sbarro, Callable 09/15/04 @ 105.50 11.000%, 09/15/09 500 435 Service Corporation International 7.700%, 04/15/09 1,000 1,010 Shaw Communications 8.250%, 04/11/10 (c) 500 555 Sinclair Broadcast Group, Callable 03/15/07 @ 104 8.000%, 03/15/12 1,000 1,058 Six Flags, Callable 02/01/06 @ 104.44 8.875%, 02/01/10 500 460 Callable 04/15/08 @ 104.88 9.750%, 04/15/13 (a) 1,000 935 Starwood Hotels & Resorts 7.375%, 11/15/15 1,000 1,031 Station Casinos, Callable 07/01/05 @ 103.70 9.875%, 07/01/10 500 553 Tenet Healthcare 6.500%, 06/01/12 $ 2,000 $ 1,915 Triad Hospital Holdings, Series B, Callable 05/15/04 @ 105.50 11.000%, 05/15/09 750 825 Tricon Global Restaurant 7.650%, 05/15/08 1,000 1,086 United Rentals Series B, Callable 04/15/05 @ 105.38 10.750%, 04/15/08 500 555 Series B, Callable 01/15/04 @ 104.63 9.250%, 01/15/09 1,000 1,035 Venetian Casino, Callable 06/15/06 @ 105.50 11.000%, 06/15/10 500 569 Vivendi Universal, Callable 04/15/07 @ 104.63 9.250%, 04/15/10 (a) (c) 1,250 1,444 Worldspan, Callable 06/15/07 @ 104.81 9.625%, 06/15/11 (a) 100 105 Wynn Las Vegas, Callable 11/01/06 @ 112 12.000%, 11/01/10 500 569 Young Broadcasting, Callable 03/01/06 @ 105 10.000%, 03/01/11 500 530 ------------- 79,085 ------------- TRANSPORTATION - 1.9% Continental Airlines, Series 2001-1, Cl B 7.033%, 12/15/12 928 696 CP Ships 10.375%, 07/15/12 (c) 500 573 Delta Air Lines 7.900%, 12/15/09 1,000 740 Laidlaw International, Callable 06/15/07 @ 105.38 10.750%, 06/15/11 (a) 750 795 Northwest Airlines 9.875%, 03/15/07 1,000 765 Stena, Callable 10/01/03 @ 102.92 8.750%, 06/15/07 (c) 525 538 United Air Lines, Series 00-2, Cl A1 7.032%, 10/01/10 (e) 784 635 ------------- 4,742 ------------- UTILITIES - 19.9% ACC Escrow, Callable 08/01/07 @ 105 10.000%, 08/01/11 (a) 1,000 1,073 AES 9.375%, 09/15/10 3,000 3,075 Alamosa Delaware, Callable 08/15/06 @ 106.81 13.625%, 08/15/11 1,000 980 Allegheny Energy Supply 8.250%, 04/15/12 (a) 1,500 1,290 American Tower, Callable 02/01/05 @ 104.69 9.375%, 02/01/09 1,000 1,025 Aquila 9.450%, 02/01/11 1,000 990 Calpine 7.625%, 04/15/06 500 399 8.500%, 02/15/11 1,500 1,056 Calpine, Callable 07/15/07 @ 104.25 8.500%, 07/15/10 (a) 2,000 1,840 Centerpoint Energy 6.850%, 06/01/15 (a) 2,000 1,946 Cincinnati Bell, Callable 07/15/08 @ 103.63 7.250%, 07/15/13 (a) 750 758
33
DESCRIPTION PAR (000) (h) VALUE (000) - ---------------------------------------------------------------------------------------------------- CMS Energy 7.500%, 01/15/09 $ 1,500 $ 1,489 Crown Castle International, Callable 08/01/04 @ 105.63 11.250%, 08/01/11 (b) 700 697 Callable 08/01/05 @ 105.38 10.750%, 08/01/11 500 555 Dobson Communications, Callable 10/01/08 @ 104.44 8.875%, 10/01/13 (a) 500 503 DPL 8.250%, 03/01/07 1,000 1,088 Empresa Nacional de Electricidad 8.350%, 08/01/13 (a) (c) 500 526 Homer City Funding 8.137%, 10/01/19 1,000 1,030 Illinova, Callable 12/15/06 @ 105.75 11.500%, 12/15/10 1,000 1,185 Insight Midwest, Callable 11/01/05 @ 105.25 10.500%, 11/01/10 500 523 Level 3 Communications, Callable 10/01/03 @ 104.56 9.125%, 05/01/08 1,000 840 Mirant Mid-Atlantic, Series C 10.060%, 12/30/28 974 945 Mission Energy Holdings 13.500%, 07/15/08 500 330 Nevada Power, Series E, Callable 10/15/06 @ 105.44 10.875%, 10/15/09 1,000 1,080 Nextel Communications, Callable 11/15/04 @ 104.69 9.375%, 11/15/09 4,000 4,340 Callable 08/01/08 @ 103.69 7.375%, 08/01/15 500 510 Panamsat, Callable 02/01/07 @ 104.25 8.500%, 02/01/12 1,000 1,040 PG&E, Callable 07/15/06 @ 103.44 6.875%, 07/15/08 (a) 1,000 1,058 PSEG Energy Holdings 10.000%, 10/01/09 1,000 1,053 Qwest 8.875%, 03/15/12 (a) 1,000 1,105 Callable 10/01/03 @ 103.36 7.500%, 06/15/23 1,000 925 Qwest Capital Funding 7.750%, 08/15/06 4,000 3,930 6.875%, 07/15/28 2,000 1,570 Qwest Services, Callable 12/15/06 @ 106.75 13.500%, 12/15/10 (a) 2,000 2,330 Reliant Resources, Callable 07/15/07 @ 104.63 9.250%, 07/15/10 (a) 500 453 Teco Energy 7.200%, 05/01/11 500 491 Telus 8.000%, 06/01/11 (c) 1,000 1,155 Time Warner Telecom, Callable 02/01/06 @ 105.06 10.125%, 02/01/11 1,000 998 Triton PCS, Callable 11/15/06 @ 104.38 8.750%, 11/15/11 1,000 998 Viatel, Callable 10/01/03 @ 105.63 11.250%, 04/15/08 (d) (f) 75 -- DESCRIPTION PAR (000)/SHARES (h) VALUE (000) - ---------------------------------------------------------------------------------------------------- Western Resources 9.750%, 05/01/07 $ 1,500 $ 1,676 Western Wireless, Callable 07/15/08 @ 104.63 9.250%, 07/15/13 (a) 1,000 1,020 ------------- 49,875 ------------- TOTAL HIGH YIELD CORPORATE BONDS (Cost $221,035) 236,939 ------------- CORPORATE BONDS - 0.8% TRANSPORTATION - 0.8% American Airlines, Series 1999-1, Cl A2 7.024%, 04/15/11 1,000 960 Continental Airlines, Series 99-2 7.056%, 09/15/09 175 173 Delta Air Lines, Series 2000-1, Cl B 7.920%, 05/18/12 1,000 830 Northwest Airlines, Series 991A 6.810%, 08/01/21 167 135 ------------- TOTAL CORPORATE BONDS (Cost $2,069) 2,098 ------------- U.S. GOVERNMENT & AGENCY SECURITY - 0.4% U.S. TREASURY - 0.4% U.S. Treasury Note 1.625%, 01/31/05 1,000 1,005 ------------- TOTAL U.S. GOVERNMENT & AGENCY SECURITY (Cost $999) 1,005 ------------- FOREIGN GOVERNMENT BOND - 0.2% BRAZIL - 0.2% Republic of Brazil 10.000%, 08/07/11 (c) 500 489 ------------- TOTAL FOREIGN GOVERNMENT BOND (Cost $483) 489 ------------- ASSET-BACKED SECURITIES - 0.1% MANUFACTURED HOUSING - 0.0% Green Tree Financial Series 1998-1, Cl A1 6.040%, 11/01/29 18 18 ------------- OTHER - 0.1% Aircraft Finance Trust Series 1999-1A, Cl C 8.000%, 05/15/24 720 143 ------------- TOTAL ASSET-BACKED SECURITIES (Cost $681) 161 ------------- COMMON STOCKS - 0.0% BERMUDA - 0.0% Viatel Holdings 294 1 ------------- UNITED STATES - 0.0% NII Holdings, Class B (g) 623 37 ------------- TOTAL COMMON STOCKS (Cost $148) 38 ------------- U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITY - 0.0% FIXED RATE - 0.0% FNMA Pool 6.695%, 08/01/05, #109031 35 36 ------------- TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITY (Cost $35) 36 -------------
The accompanying notes are an integral part of the financial statements. 34
DESCRIPTION PAR (000)/SHARES (h) VALUE (000) - ---------------------------------------------------------------------------------------------------- PREFERRED STOCKS - 0.0% CAYMAN ISLANDS - 0.0% NII Holdings, Series B (d) (f) (g) 5,751 $ 6 ------------- UNITED STATES - 0.0% Nebco Evans Holdings (PIK) (g) 300 -- Pegasus Communications Fractional Shares (d) (f) -- -- ------------- -- ------------- TOTAL PREFERRED STOCKS (Cost $31) 6 ------------- WARRANTS - 0.0% CANADA - 0.0% AT&T Canada, Expires 08/15/07 (a) (d) (f) (g) 100 -- ------------- NORWAY - 0.0% Enitel Asa, Expires 04/03/05 (a) (g) 1,000 -- ------------- UNITED STATES - 0.0% Electronic Retailing Systems International, Expires 02/01/04 (g) 75 -- Sterling Chemical Holdings, Expires 08/15/08 (d) (f) (g) 100 -- UIH Australia Pacific, Expires 05/15/06 (a) (g) 150 -- ------------- -- ------------- TOTAL WARRANTS (Cost $6) -- ------------- RELATED PARTY MONEY MARKET FUND - 1.1% First American Prime Obligations Fund, Cl Z (i) (Cost $2,809) 2,808,744 2,809 ------------- TOTAL RELATED PARTY MONEY MARKET FUND 2,809 ------------- INVESTMENTS PURCHASED WITH CASH PROCEEDS FROM SECURITIES LENDING - 30.0% COMMERCIAL PAPER - 3.1% Bluegrass 1.190%, 05/18/04 $ 291 291 CS First Boston 1.415%, 10/01/03 1,166 1,166 Danske Bank 1.508%, 12/22/03 1,166 1,166 Independent IV 1.216%, 04/15/04 758 758 K2 USA 1.020%, 12/01/03 582 582 Leafs 1.339%, 04/20/04 804 804 Mitten Mortgage 1.130%, 10/08/03 816 816 Mortgage Interest Network 1.100%, 10/15/03 291 291 1.130%, 12/02/03 582 582 Orchard Park 1.245%, 04/06/04 117 117 1.220%, 07/06/04 1,293 1,293 ------------- TOTAL COMMERCIAL PAPER 7,866 ------------- CORPORATE OBLIGATIONS - 6.8% Allstate Life Global 1.092%, 08/16/04 1,166 1,166 Bank of Scotland 1.100%, 03/05/04 583 583 Castle Hill III 1.176%, 09/16/04 350 350 Deutsche Bank 1.430%, 12/31/03 $ 466 $ 466 1.340%, 03/22/04 583 583 General Electric Capital Corporation 1.150%, 07/09/07 583 583 Halogen Fund 1.150%, 10/03/03 2,424 2,424 Lloyd's Bank 1.100%, 03/05/04 1,166 1,166 Metlife Global Funding 1.130%, 09/15/04 699 699 1.147%, 04/28/08 490 490 Monet Trust 1.210%, 12/28/03 1,166 1,166 Residential Mortgage Securities 1.140%, 09/11/04 874 874 Sigma Finance 1.268%, 08/09/04 1,165 1,165 SMM Trust 2002-M 1.140%, 09/23/04 1,952 1,952 Svenska Handlsbankn 1.100%, 03/03/04 1,166 1,166 1.100%, 03/15/04 210 210 Wells Fargo Bank 1.050%, 10/17/03 1,166 1,166 1.060%, 10/31/03 816 816 ------------- TOTAL CORPORATE OBLIGATIONS 17,025 ------------- MONEY MARKET FUNDS - 0.1% AIM Short Term Liquid Asset Portfolio 46,625 47 Merrill Lynch Premier Institutional Fund 152,737 153 ------------- TOTAL MONEY MARKET FUNDS 200 ------------- OTHER SHORT-TERM INVESTMENTS - 2.6% Commonwealth Life 1.430%, 10/01/03 588 588 General Electric Capital Assurance 1.370%, 12/19/03 233 233 Liquid Funding 1.130%, 8/23/04 582 582 1.130%, 9/14/04 582 582 Premium Asset Trust 02-7 1.139%, 06/01/04 1,737 1,737 Security Life Denver 1.381%, 01/13/04 1,515 1,515 1.490%, 03/15/04 1,165 1,165 ------------- TOTAL OTHER SHORT-TERM INVESTMENTS 6,402 ------------- REPURCHASE AGREEMENTS - 17.4% Bear Stearns 1.240%, dated 9/30/03, matures 10/15/03, repurchase price $2,332,444 (collateralized by Various Securities: Total Market Value $2,378,934) 2,331 2,331 CS First Boston 1.140%, dated 9/30/03, matures 10/1/03, repurchase price $2,914,142 (collateralized by U.S. Government Securities: Total Market Value $2,972,358) 2,914 2,914 CS First Boston 1.140%, dated 9/30/03, matures 10/1/03, repurchase price $361,354 (collateralized by U.S. Government Securities: Total Market Value $368,574) 361 361
35
DESCRIPTION PAR (000) (h) VALUE (000) - ---------------------------------------------------------------------------------------------------- CS First Boston 1.248%, dated 9/30/03, matures 10/1/03, repurchase price $932,528 (collateralized by Mortgage Obligations: Total Market Value $979,150) $ 932 $ 932 Deutsche Bank 1.080%, dated 9/30/03, matures 10/1/03, repurchase price $582,827 (collateralized by U.S. Government Securities: Total Market Value $594,466) 583 583 Deutsche Bank 1.080%, dated 9/30/03, matures 10/1/03, repurchase price $2,331,309 (collateralized by U.S. Government Securities: Total Market Value $2,377,864) 2,331 2,331 Deutsche Bank 1.248%, dated 9/30/03, matures 10/1/03, repurchase price $4,662,640 (collateralized by Corporate Securities: Total Market Value $4,895,603) 4,662 4,662 Goldman Sachs 1.268%, dated 9/30/03, matures 10/1/03, repurchase price $1,748,491 (collateralized by Corporate Securities: Total Market Value $1,835,472) 1,748 1,748 Goldman Sachs 1.330%, dated 9/30/03, matures 10/1/03, repurchase price $1,165,663 (collateralized by Various Securities: Total Market Value $1,201,672) 1,166 1,166 Goldman Sachs 1.380%, dated 9/30/03, matures 10/1/03, repurchase price $582,832 (collateralized by Various Securities: Total Market Value $594,714) 583 583 Lehman Brothers 1.120%, dated 9/30/03, matures 10/1/03, repurchase price $3,205,554 (collateralized by U.S. Government Securities: Total Market Value $3,269,573) 3,206 3,206 Lehman Brothers 1.130%, dated 9/30/03, matures 10/1/03, repurchase price $1,165,656 (collateralized by U.S. Government Securities: Total Market Value $1,188,975) 1,166 1,166 Lehman Brothers 1.388%, dated 9/30/03, matures 10/1/03, repurchase price $2,331,329 (collateralized by Various Securities: Total Market Value $2,362,323) 2,331 2,331 Lehman Brothers 1.150%, dated 9/30/03, matures 10/1/03, repurchase price $664,424 (collateralized by Mortgage Obligations: Total Market Value $702,947) 665 665 Merrill Lynch 1.110%, dated 9/30/03, matures 10/1/03, repurchase price $3,496,967 (collateralized by U.S. Government Securities: Total Market Value $3,566,844) $ 3,497 $ 3,497 Merrill Lynch 1.110%, dated 9/30/03, matures 10/1/03, repurchase price $105,238 (collateralized by U.S. Government Securities: Total Market Value $107,380) 105 105 Merrill Lynch 1.110%, dated 9/30/03, matures 10/1/03, repurchase price $291,414 (collateralized by U.S. Government Securities: Total Market Value $297,250) 292 292 Merrill Lynch 1.110%, dated 9/30/03, matures 10/1/03, repurchase price $699,393 (collateralized by U.S. Government Securities: Total Market Value $713,394) 699 699 Merrill Lynch 1.110%, dated 9/30/03, matures 10/1/03, repurchase price $2,331,311 (collateralized by U.S. Government Securities: Total Market Value $2,377,897) 2,331 2,331 Merrill Lynch 1.110%, dated 9/30/03, matures 10/1/03, repurchase price $2,914,139 (collateralized by U.S. Government Securities: Total Market Value $2,972,359) 2,914 2,914 Merrill Lynch 1.130%, dated 9/30/03, matures 10/1/03, repurchase price $2,331,313 (collateralized by Asset-Backed and U.S. Government Securities: Total Market Value $2,377,944) 2,331 2,331 Merrill Lynch 1.308%, dated 9/30/03, matures 10/1/03, repurchase price $2,331,324 (collateralized by Corporate Securities: Total Market Value $2,447,806) 2,331 2,331 Morgan Stanley 1.258%, dated 9/30/03, matures 10/1/03, repurchase price $617,800 (collateralized by Asset-Backed Securities: Total Market Value $648,667) 618 618 Morgan Stanley 1.258%, dated 9/30/03, matures 10/1/03, repurchase price $3,625,204 (collateralized by Mortgage Obligations and Asset-Backed Securities: Total Market Value $3,807,166) 3,625 3,625 ------------- TOTAL REPURCHASE AGREEMENTS 43,722 ------------- TOTAL INVESTMENTS PURCHASED WITH PROCEEDS FROM SECURITIES LENDING (Cost $75,215) 75,215 -------------
The accompanying notes are an integral part of the financial statements. 36
DESCRIPTION VALUE (000) - ---------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS - 127.1% (Cost $303,511) $ 318,796 ------------- OTHER ASSETS AND LIABILITIES, NET - (27.1)% (67,966) ------------- TOTAL NET ASSETS - 100.0% $ 250,830 -------------
(a) Security sold within the terms of a private placement memorandum, exempt from registration under Rule 144A of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "qualified institutional buyers." These securities have been determined to be liquid under the guidelines established by the Funds' board of directors. As of September 30, 2003, the value of these investments was $41,741,195 or 16.6% of total net assets. (b) Delayed Interest (Step-Bonds) - Represents securities that remain zero-coupon securities until a predetermined date at which time the stated coupon rate becomes effective and interest becomes payable at regular intervals. Interest rate shown represents current yield at September 30, 2003, based upon the estimated timing and amount of future interest and principal payments. (c) Represents a foreign high yield (non-investment grade) bond. On September 30, 2003, the value of these investments was $24,047,180, which represents 9.6% of total net assets. (d) Securities considered illiquid or restricted. See note 2 in Notes to Financial Statements. (e) Security currently in default. (f) Security is fair valued. As of September 30, 2003, the fair value of these investments was $5,521 or 0.0% of total net assets. See note 2 in Notes to Financial Statements. (g) Non-income producing security. (h) In U.S. dollars unless otherwise indicated. (i) This money market fund is advised by U.S. Bancorp Asset Management, Inc., which also serves as advisor for this Fund. See note 3 in Notes to Financial Statements. FNMA - Federal National Mortgage Association PIK - Payment-in-kind interest is generally paid by issuing additional par of the security rather than paying cash. REIT - Real Estate Investment Trust INTERMEDIATE GOVERNMENT BOND FUND
DESCRIPTION PAR (000) VALUE (000) - ---------------------------------------------------------------------------------------------------- U.S. GOVERNMENT & AGENCY SECURITIES - 98.7% U.S. AGENCY DEBENTURES - 26.8% FFCB 1.875%, 01/16/07 $ 5,000 $ 4,942 FHLB 4.125%, 01/14/05 10,000 10,364 1.625%, 04/15/05 7,500 7,530 5.250%, 08/15/06 10,000 10,849 FHLMC 2.375%, 05/19/06, Callable 05/19/04 @ 100 5,000 5,005 2.750%, 08/15/06 5,000 5,079 3.125%, 08/25/06, Callable 08/25/04 @ 100 3,500 3,541 3.250%, 02/25/08 5,000 5,037 5.875%, 03/21/11 4,250 4,681 FNMA 2.625%, 04/21/06 5,000 5,023 1.750%, 06/16/06, Callable 06/16/04 @ 100 3,500 3,449 3.500%, 01/28/08 10,000 10,095 3.250%, 08/15/08 7,500 7,539 6.375%, 06/15/09 3,500 4,025 4.375%, 09/15/12 3,250 3,269 ------------- 90,428 ------------- U.S. TREASURIES - 71.9% U.S. Treasury Bond (STRIPS) 0.000%, 11/15/04 (a) 18,095 17,880 U.S. Treasury Bonds 11.875%, 11/15/03 2,700 2,735 9.375%, 02/15/06 34,150 40,281 5.000%, 08/15/11 5,000 5,470 4.375%, 08/15/12 10,000 10,428 9.250%, 02/15/16 4,750 6,988 U.S. Treasury Notes 2.125%, 10/31/04 20,000 20,219 1.625%, 01/31/05 13,000 13,071 5.875%, 11/15/05 13,000 14,182 7.000%, 07/15/06 20,750 23,639 6.500%, 10/15/06 13,550 15,345 6.625%, 05/15/07 6,750 7,773 3.000%, 02/15/08 10,000 10,170 3.250%, 08/15/08 4,000 4,084 6.000%, 08/15/09 22,000 25,424 5.000%, 02/15/11 5,500 6,032 4.875%, 02/15/12 10,000 10,820 4.250%, 08/15/13 8,000 8,199 ------------- 242,740 ------------- TOTAL U.S. GOVERNMENT & AGENCY SECURITIES (Cost $322,041) 333,168 -------------
37
DESCRIPTION PAR (000)/SHARES VALUE (000) - ---------------------------------------------------------------------------------------------------- U.S. TREASURY OBLIGATION - 0.1% U.S. Treasury Bill 0.890%, 01/22/04 $ 199 $ 199 ------------- TOTAL U.S. TREASURY OBLIGATION (Cost $199) 199 ------------- RELATED PARTY MONEY MARKET FUND - 0.6% First American Prime Obligations Fund, Cl Z (b) 2,123,834 2,124 ------------- TOTAL RELATED PARTY MONEY MARKET FUND (Cost $2,124) 2,124 ------------- TOTAL INVESTMENTS - 99.4% (Cost $324,364) 335,491 ------------- OTHER ASSETS AND LIABILITIES, NET - 0.6% 1,880 ------------- TOTAL NET ASSETS - 100.0% $ 337,371 -------------
(a) Principal only. (b) This money market fund is advised by U.S. Bancorp Asset Management, Inc., which also serves as advisor for this Fund. See note 3 in Notes to Financial Statements. Cl - Class FFCB - Federal Farm Credit Bank FHLB - Federal Home Loan Bank FHLMC - Federal Home Loan Mortgage Corporation FNMA - Federal National Mortgage Association STRIPS - Separate Trading of Registered Interest and Principal of Securities INTERMEDIATE TERM BOND FUND
DESCRIPTION PAR (000) VALUE (000) - ---------------------------------------------------------------------------------------------------- CORPORATE BONDS - 41.2% CONSUMER GOODS - 2.1% Bristol-Myers Squibb 4.750%, 10/01/06 $ 2,725 $ 2,905 Colgate-Palmolive, Series B 7.090%, 05/18/05 4,130 4,498 Conagra Foods 7.875%, 09/15/10 4,260 5,181 Kraft Foods 5.250%, 06/01/07 8,600 9,197 Miller Brewing 4.250%, 08/15/08 (a) 2,535 2,605 Proctor & Gamble 8.000%, 11/15/03 50 50 Tyson Foods 6.625%, 10/01/04 5,165 5,378 ------------- 29,814 ------------- ENERGY - 2.3% Anadarko Petroleum 6.125%, 03/15/12 4,000 4,425 BP Amoco 8.500%, 04/15/07 1,000 1,161 Conoco 5.900%, 04/15/04 3,500 3,584 Conoco Funding 6.350%, 10/15/11 3,000 3,389 Duke Capital 7.250%, 10/01/04 1,500 1,565 MidAmerican Energy Holdings 3.500%, 05/15/08 4,600 4,563 Occidental Petroleum 4.250%, 03/15/10 5,000 5,085 Southern California Gas 4.800%, 10/01/12 3,000 3,101 Texaco Capital 7.090%, 02/01/07 1,000 1,135 Valero Energy 6.875%, 04/15/12 3,415 3,822 ------------- 31,830 ------------- FINANCE - 21.1% ABN AMRO 7.250%, 05/31/05 6,800 7,415 Aetna Services 6.750%, 09/15/13 1,875 2,118 Amsouth Bancorp 7.750%, 05/15/04 2,525 2,618 Bank of America 7.125%, 09/15/06 5,000 5,678 BankBoston 6.375%, 04/15/08 1,450 1,627 Bear Stearns 6.875%, 10/01/05 5,000 5,453 Boeing Capital 5.800%, 01/15/13 5,000 5,217 Capital One Bank 5.750%, 09/15/10 7,000 7,425 Core Investment Grade Trust 4.727%, 11/30/07 43,045 45,118 Countrywide Home Loans, Series K 4.250%, 12/19/07 8,025 8,277
The accompanying notes are an integral part of the financial statements. 38
DESCRIPTION PAR (000) VALUE (000) - ---------------------------------------------------------------------------------------------------- Credit Suisse First Boston 5.875%, 08/01/06 $ 3,500 $ 3,822 Ford Motor Credit 6.875%, 02/01/06 6,205 6,603 5.800%, 01/12/09 10,010 10,066 General Electric Capital, Series A 3.500%, 05/01/08 18,955 19,169 General Motors Acceptance 6.125%, 08/28/07 14,260 15,048 Goldman Sachs 5.500%, 11/15/14 7,500 7,834 Household Finance 4.625%, 01/15/08 12,010 12,629 HSBC Bank 6.950%, 03/15/11 4,225 4,956 International Lease Finance 5.700%, 11/03/03 2,000 2,007 Series G 8.150%, 10/01/04 2,500 2,656 J. P. Morgan Chase 4.000%, 02/01/08 10,625 10,978 6.625%, 03/15/12 2,050 2,328 John Deere Capital 5.520%, 04/30/04 3,000 3,070 7.000%, 03/15/12 3,125 3,651 Key Bank 7.000%, 02/01/11 4,000 4,628 Lehman Brothers Holdings 11.625%, 05/15/05 2,450 2,799 MBNA America Bank 6.750%, 03/15/08 (a) 5,075 5,599 Morgan Stanley 3.625%, 04/01/08 9,705 9,819 6.799%, 06/15/12 (a) 33,090 37,242 National Rural Utilities 5.750%, 08/28/09 3,850 4,213 Newcourt Credit Group Series A 7.125%, 12/17/03 1,785 1,806 Series B 6.875%, 02/16/05 2,800 2,997 SLM, Series A 5.000%, 10/01/13 5,410 5,468 Suntrust Banks 6.125%, 02/15/04 3,000 3,052 Synovus Financial 6.125%, 10/15/03 3,000 3,005 Wachovia 7.050%, 08/01/05 7,000 7,663 Washington Mutual Bank 5.500%, 01/15/13 2,375 2,499 Westdeutsche Landesbank 6.750%, 06/15/05 6,415 6,912 ------------- 293,465 ------------- MANUFACTURING - 1.8% Centex 7.500%, 01/15/12 3,000 3,478 DaimlerChrysler 4.750%, 01/15/08 7,395 7,564 Delphi Auto Systems 6.550%, 06/15/06 4,000 4,297 Dupont 8.125%, 03/15/04 $ 1,000 $ 1,030 Praxair 6.900%, 11/01/06 1,000 1,130 Weyerhaeuser 5.250%, 12/15/09 6,500 6,808 ------------- 24,307 ------------- REAL ESTATE - 1.3% Boston Properties (REIT) 6.250%, 01/15/13 3,245 3,497 EOP Operating 6.750%, 02/15/08 5,000 5,615 Mack-Cali Realty (REIT) 7.250%, 03/15/09 4,500 5,177 Security Capital Group 7.750%, 11/15/03 3,700 3,728 ------------- 18,017 ------------- SERVICES - 3.7% AOL Time Warner 6.875%, 05/01/12 2,070 2,321 AT&T Broadband 8.375%, 03/15/13 7,580 9,408 Dayton Hudson 5.875%, 11/01/08 5,000 5,576 Federated Department Stores 6.625%, 09/01/08 3,825 4,325 Kroger 7.450%, 03/01/08 4,000 4,629 Liberty Media 3.500%, 09/25/06 4,300 4,289 News America 6.625%, 01/09/08 5,820 6,568 UnitedHealth Group 6.600%, 12/01/03 6,225 6,277 Viacom 5.625%, 08/15/12 2,000 2,156 Wyeth 5.250%, 03/15/13 5,450 5,654 ------------- 51,203 ------------- TRANSPORTATION - 1.3% Delta Air Lines, Series 2000-1, Cl A2 7.570%, 11/18/10 2,240 2,229 Federal Express, Series A2 7.890%, 09/23/08 578 654 Northwest Airlines, Series 2001-01, Cl A1 7.041%, 04/01/22 4,804 4,564 Southwest Airlines, Series 2001-1, Cl A1 5.100%, 05/01/06 2,999 3,180 Union Pacific 6.625%, 02/01/08 6,000 6,759 ------------- 17,386 ------------- UTILITIES - 7.2% AT&T 7.500%, 04/01/04 1,150 1,183 7.000%, 11/15/06 7,460 8,411 AT&T Wireless Services 7.875%, 03/01/11 6,195 7,239 Baltimore Gas & Electric 5.250%, 12/15/06 4,985 5,409
39
DESCRIPTION PAR (000) VALUE (000) - ---------------------------------------------------------------------------------------------------- Bellsouth Capital Funding 7.750%, 02/15/10 $ 3,000 $ 3,631 Centerpoint Energy 5.700%, 03/15/13 (a) 3,810 4,017 Citizens Communications 7.625%, 08/15/08 5,000 5,837 Conectiv, Series A 6.730%, 06/01/06 2,800 3,004 Constellation Energy 7.000%, 04/01/12 3,550 4,051 Deutsche Telecom 8.000%, 06/15/10 2,000 2,449 5.250%, 07/22/13 2,455 2,492 Dominion Resources 3.875%, 01/15/04 4,500 4,523 DTE Energy 7.050%, 06/01/11 2,570 2,860 FirstEnergy, Series B 6.450%, 11/15/11 1,090 1,129 FPL Group Capital 7.625%, 09/15/06 4,540 5,179 France Telecom 9.250%, 03/01/11 (b) 3,525 4,315 Northern State Power - Minnesota, Series B 8.000%, 08/28/12 3,130 3,853 Pepco Holdings 3.750%, 02/15/06 5,000 5,117 SBC Communications 5.875%, 08/15/12 2,000 2,185 Southwestern Bell Telephone, Series C 6.560%, 11/15/05 1,000 1,098 Sprint Capital 8.375%, 03/15/12 8,300 9,746 Verizon Global Funding 7.250%, 12/01/10 3,750 4,375 6.875%, 06/15/12 3,925 4,470 Vodafone Group 7.625%, 02/15/05 3,500 3,771 ------------- 100,344 ------------- YANKEE - 0.4% Pemex Project 9.125%, 10/13/10 3,500 4,182 Pohang Iron & Steel 7.125%, 07/15/04 875 908 Sweden Kingdom, Callable 11/01/10 @ 100 10.250%, 11/01/15 400 533 ------------- 5,623 ------------- TOTAL CORPORATE BONDS (Cost $548,711) 571,989 ------------- U.S. GOVERNMENT & AGENCY SECURITIES - 33.2% U.S. AGENCY DEBENTURES - 22.1% FFCB 6.100%, 11/04/04 6,350 6,693 5.750%, 09/01/05 5,000 5,389 FHLB 6.250%, 08/13/04 3,000 3,131 3.875%, 12/15/04 5,000 5,162 6.060%, 05/24/06 5,000 5,519 6.090%, 06/02/06 4,000 4,416 6.375%, 08/15/06 6,000 6,696 5.795%, 06/19/08 500 561 FHLMC 6.875%, 01/15/05 $ 13,000 $ 13,929 5.950%, 01/19/06 6,000 6,549 2.750%, 08/15/06 26,000 26,409 3.500%, 09/15/07 1,005 1,034 3.250%, 02/25/08, Callable 02/25/05 @ 100 13,000 13,097 3.500%, 04/01/08, Callable 04/01/05 @ 100 12,700 12,781 5.625%, 03/15/11 26,000 28,765 5.750%, 01/15/12 13,000 14,422 FNMA 4.750%, 11/14/03 15,000 15,065 5.125%, 02/13/04 5,000 5,073 7.125%, 02/15/05 5,000 5,393 3.875%, 03/15/05 500 518 6.400%, 09/27/05 6,000 6,560 6.000%, 12/15/05 375 409 2.625%, 04/21/06, Callable 04/21/04 @ 100 13,000 13,059 1.750%, 06/16/06, Callable 06/16/04 @ 100 13,000 12,811 5.250%, 04/15/07 26,000 28,379 3.250%, 08/15/08 6,500 6,534 6.375%, 06/15/09 26,000 29,901 5.250%, 08/01/12 13,000 13,565 4.375%, 09/15/12 6,500 6,539 TVA 6.375%, 06/15/05 8,000 8,665 ------------- 307,024 ------------- U.S. TREASURIES - 11.1% U.S. Treasury Bill 0.890%, 01/22/04 777 774 U.S. Treasury Bond 13.750%, 08/15/04 8,000 8,869 U.S. Treasury Bond (STRIPS) 0.000%, 11/15/04 (c) 25,000 24,703 U.S. Treasury Notes 3.250%, 12/31/03 13,450 13,523 1.625%, 01/31/05 1,250 1,257 1.500%, 02/28/05 4,475 4,492 1.625%, 04/30/05 7,495 7,535 2.375%, 08/15/06 2,605 2,641 3.250%, 08/15/08 6,500 6,636 5.000%, 02/15/11 15,000 16,451 5.000%, 08/15/11 10,000 10,941 4.875%, 02/15/12 13,000 14,066 3.875%, 02/15/13 11,919 11,915 4.250%, 08/15/13 29,300 30,028 ------------- 153,831 ------------- TOTAL U.S. GOVERNMENT & AGENCY SECURITIES (Cost $449,274) 460,855 ------------- ASSET-BACKED SECURITIES - 10.4% AUTOMOBILES - 6.4% Americredit Automobile Receivables Trust Series 2003-BX, Cl A2A 1.550%, 11/06/06 7,250 7,260 Capital One Auto Finance Trust Series 2002-1, Cl A4 4.160%, 07/16/07 3,000 3,116 Series 2001-A, Cl A4 5.400%, 05/15/08 5,000 5,251 Honda Auto Receivables Owner Trust Series 2003-1, Cl A3 1.920%, 11/20/06 15,360 15,437 Series 2002-4, Cl A4 2.700%, 03/17/08 7,345 7,484
The accompanying notes are an integral part of the financial statements. 40
DESCRIPTION PAR (000) VALUE (000) - ---------------------------------------------------------------------------------------------------- MMCA Automobile Trust Series 2002-2, Cl A4 4.300%, 03/15/10 $ 4,525 $ 4,602 Nissan Auto Receivables Owner Trust Series 2003-B, Cl A3 1.510%, 08/15/07 9,750 9,724 Toyota Auto Receivables Owners Trust Series 2002-B, Cl A4 4.390%, 05/15/09 6,000 6,272 USAA Auto Owner Trust Series 2003-1, Cl A4 2.040%, 02/16/10 1,495 1,502 WFS Financial Owner Trust Series 2003-2, Cl A3 1.760%, 01/21/08 14,270 14,263 Whole Auto Loan Trust Series 2002-1, Cl A3 2.600%, 08/15/06 13,000 13,193 ------------- 88,104 ------------- COMMERCIAL - 0.4% Morgan Stanley Capital Investments Series 1999-FNV1, Cl A1 6.120%, 03/15/31 3,660 3,945 Sharps SP I LLC Net Interest Margin Trust Series 2003-HS1N 7.480%, 06/01/33 (e) 2,167 2,167 ------------- 6,112 ------------- CREDIT CARDS - 1.9% Citibank Credit Card Issuance Trust Series 2003-A2, Cl A2 2.700%, 01/15/08 10,000 10,161 Citibank Credit Card Master Trust I Series 1997-6, Cl A 0.000%, 08/15/06 (c) 2,275 2,245 MBNA Credit Card Master Note Trust Series 2003-A1, Cl A1 3.300%, 07/15/10 12,560 12,705 Sears Credit Account Master Trust Series 2000-1, Series A 7.250%, 11/15/07 1,000 1,004 ------------- 26,115 ------------- EQUIPMENT LEASES - 0.6% CNH Equipment Trust Series 2003-A, Cl A2 1.460%, 02/15/06 9,000 9,016 ------------- HOME EQUITY - 1.1% Advanta Mortgage Loan Trust Series 1997-1, Cl A5 7.350%, 05/25/27 536 537 AFC Home Equity Loan Trust Series 1996-4, Cl 1A7 6.860%, 03/25/27 2,681 2,795 Amresco Residential Security Mortgage Series 1997-3, Cl A9 6.960%, 03/25/27 2,720 2,731 Contimortgage Home Equity Loan Trust Series 1997-2, Cl A9 7.090%, 04/15/28 1,424 1,429 Series 1997-3, Cl A9 7.120%, 08/15/28 3,153 3,231 Delta Funding Home Equity Loan Trust Series 1997-4, Cl A5F 6.670%, 01/25/28 $ 495 $ 554 EQCC Home Equity Loan Trust Series 1996-1, Cl A4 6.560%, 03/15/23 522 524 Series 1997-1, Cl A7 7.120%, 05/15/28 951 959 Mellon Residential Funding Series 2001-HEIL, Cl A3 5.945%, 02/25/11 1,046 1,047 Prudential Securities Financial Series 1993-8, Cl A 5.775%, 11/15/14 890 890 ------------- 14,697 ------------- MANUFACTURED HOUSING - 0.0% Green Tree Financial Series 1996-9, Cl A5 7.200%, 01/15/28 403 414 ------------- TOTAL ASSET-BACKED SECURITIES (Cost $142,501) 144,458 ------------- CMO - PRIVATE MORTGAGE-BACKED SECURITIES - 7.1% FIXED RATE - 7.1% CS First Boston Mortgage Securities Series 2003-AR24, Cl 2A4 4.187%, 10/25/33 (e) 11,500 11,579 GE Capital Commercial Mortgage Series 2003-C2, Cl A4 5.145%, 07/10/37 14,300 14,781 Greenwich Capital Commercial Funding Series 2002-C1, Cl A4 4.948%, 01/11/35 10,000 10,245 Series 2003-C1, Cl A2 3.285%, 07/05/35 5,000 4,858 GRP/AG Real Estate Asset Trust Series 2003-1, Cl A 5.970%, 11/25/32 (b) (e) 2,314 2,311 GS Mortgage Securities II Series 2003-C1, Cl A2A 3.590%, 01/10/40 12,500 12,590 Nomura Asset Securities Series 1998-D6, Cl A1B 6.590%, 03/15/30 11,675 13,168 Norwest Asset Securities Series 1999-15, Cl A1 6.250%, 06/25/14 818 840 Residential Accredit Loans Series 1997-QS13, Cl M3 7.250%, 12/25/27 2,366 2,484 Series 1998-KS1, Cl AI9 6.440%, 03/25/28 560 575 Salomon Brothers Mortgage Securities Series 1986-1, Cl A 6.000%, 12/25/11 281 289 Wachovia Bank Commercial Mortgage Trust Series 2002-C1, Cl A4 6.287%, 04/15/34 11,400 12,867 Washington Mutual Series 1999-WM2, Cl 2A 7.000%, 11/19/14 455 466 Wells Fargo Mortgage Backed Securities Trust Series 2003-J, Cl 2A5 4.470%, 10/25/33 (e) 11,500 11,385
41
DESCRIPTION PAR (000) VALUE (000) - ---------------------------------------------------------------------------------------------------- Westam Mortgage Financial Series 11, Cl A 6.360%, 08/26/20 $ 144 $ 149 ------------- TOTAL CMO - PRIVATE MORTGAGE-BACKED SECURITIES (Cost $97,236) 98,587 ------------- U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES - 2.9% FIXED RATE - 2.9% FHLMC Pool 7.000%, 08/01/07, #183713 1 1 3.767%, 04/01/29, #847190 (e) 5,615 5,738 FHLMC Gold Pool 5.500%, 09/01/06, #G40394 1,333 1,360 5.500%, 03/01/16, #E00960 3,136 3,265 FHLMC Gold Pool TBA 4.000%, 10/01/10 (d) 10,000 10,028 FNMA Pool 7.250%, 07/01/04, #034511 2 3 6.000%, 07/01/06, #252632 490 501 6.000%, 08/01/08, #050776 298 312 3.790%, 07/01/13, #386314 10,410 9,920 5.500%, 02/01/14, #440780 2,452 2,558 6.000%, 03/01/16, #535791 4,636 4,860 5.500%, 04/01/16, #572856 1,863 1,940 GNMA Pool 8.500%, 07/20/25, #002038 165 179 ------------- TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (Cost $40,427) 40,665 ------------- CMO - U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES - 2.1% FIXED RATE - 2.1% FHLMC REMIC Series 1606, Cl H 6.000%, 11/15/08 3,317 3,500 Series 2503, Cl JA 5.500%, 07/15/10 2,332 2,338 Series 2389, Cl VA 6.000%, 02/15/11 4,242 4,550 Series 1167, Cl E 7.500%, 11/15/21 85 89 Series 1286, Cl A 6.000%, 05/15/22 298 307 Series 1633, Cl PK 6.000%, 09/15/22 3,522 3,575 Series 1634, Cl PH 6.000%, 11/15/22 3,815 3,946 FNMA REMIC Series 1993-55, Cl J 6.500%, 11/25/07 355 357 Series 2002-55, Cl QR 5.000%, 02/25/09 217 216 Series 2002-49, Cl KJ 4.500%, 12/25/09 1,076 1,078 Series 2002-70, Cl QL 4.500%, 12/25/17 3,700 3,786 Series 1990-89, Cl K 6.500%, 07/25/20 61 64 GNMA REMIC Series 2001-62, Cl VK 6.500%, 01/16/11 4,249 4,568 ------------- TOTAL CMO - U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (Cost $27,954) 28,374 ------------- DESCRIPTION PAR (000)/SHARES VALUE (000) - ---------------------------------------------------------------------------------------------------- FOREIGN GOVERNMENT BOND - 0.3% MEXICO - 0.3% United Mexican States 7.500%, 01/14/12 $ 3,500 $ 3,967 ------------- TOTAL FOREIGN GOVERNMENT BOND (Cost $3,595) 3,967 ------------- MUNICIPAL BOND - 0.0% Orange California Redevelopment Agency, Tax Allocation Revenue 6.500%, 10/01/03 25 25 ------------- TOTAL MUNICIPAL BOND (Cost $25) 25 ------------- RELATED PARTY MONEY MARKET FUND - 3.7% First American Prime Obligations Fund, Cl Z (f) 50,688,615 50,689 ------------- TOTAL RELATED PARTY MONEY MARKET FUND (Cost $50,689) 50,689 ------------- INVESTMENTS PURCHASED WITHCASH PROCEEDS FROM SECURITIES LENDING - 44.3% COMMERCIAL PAPER - 4.6% Bluegrass 1.190%, 05/18/04 2,382 2,382 CS First Boston 1.415%, 10/01/03 9,527 9,527 Danske Bank 1.508%, 12/22/03 9,527 9,527 Independent IV 1.216%, 04/15/04 6,193 6,193 K2 USA 1.020%, 12/01/03 4,755 4,755 Leafs 1.339%, 04/20/04 6,574 6,574 Mitten Mortgage 1.130%, 10/08/03 6,667 6,667 Mortgage Interest Network 1.100%, 10/15/03 2,381 2,381 1.130%, 12/02/03 4,755 4,755 Orchard Park 1.245%, 04/06/04 953 953 1.220%, 07/06/04 10,570 10,570 ------------- TOTAL COMMERCIAL PAPER 64,284 ------------- CORPORATE OBLIGATIONS - 10.0% Allstate Life Global 1.092%, 08/16/04 9,527 9,527 Bank of Scotland 1.100%, 03/05/04 4,764 4,764 Castle Hill III 1.176%, 09/16/04 2,858 2,858 Deutsche Bank 1.430%, 12/31/03 3,811 3,811 1.340%, 03/22/04 4,764 4,764 General Electric Capital Corporation 1.150%, 07/09/07 4,765 4,765 Halogen Fund 1.150%, 10/03/03 19,815 19,815 Lloyds Bank 1.100%, 03/05/04 9,527 9,527 Metlife Global Funding 1.130%, 09/15/04 5,715 5,715 1.147%, 04/28/08 4,002 4,002
The accompanying notes are an integral part of the financial statements. 42
DESCRIPTION PAR (000)/SHARES VALUE (000) - ---------------------------------------------------------------------------------------------------- Monet Trust 1.210%, 12/28/03 $ 9,527 $ 9,527 Residential Mortgage Securities 1.140%, 09/11/04 7,145 7,145 Sigma Finance 1.268%, 08/09/04 9,526 9,526 SMM Trust 2002-M 1.140%, 09/23/04 15,958 15,958 Svenska Handlsbankn 1.100%, 03/03/04 9,527 9,527 1.100%, 03/15/04 1,715 1,715 Wells Fargo Bank 1.050%, 10/17/03 9,527 9,527 1.060%, 10/31/03 6,669 6,669 ------------- TOTAL CORPORATE OBLIGATIONS 139,142 ------------- MONEY MARKET FUNDS - 0.1% AIM Short Term Liquid Asset Portfolio 381,087 381 Merrill Lynch Premier Institutional Fund 1,248,393 1,248 ------------- TOTAL MONEY MARKET FUNDS 1,629 ------------- OTHER SHORT-TERM INVESTMENTS - 3.8% Commonwealth Life 1.430%, 10/01/03 4,810 4,810 General Electric Capital Assurance 1.370%, 12/19/03 1,906 1,906 Liquid Funding 1.130%, 8/23/04 4,762 4,762 1.130%, 9/14/04 4,763 4,763 Premium Asset Trust 02-7 1.139%, 06/01/04 14,195 14,195 Security Life Denver 1.381%, 01/13/04 12,385 12,385 1.490%, 03/15/04 9,527 9,527 ------------- TOTAL OTHER SHORT-TERM INVESTMENTS 52,348 ------------- REPURCHASE AGREEMENTS - 25.8% Bear Stearns 1.240%, dated 9/30/03, matures 10/15/03, repurchase price $19,064,170 (collateralized by Various Securities: Total Market Value $19,444,153) 19,054 19,054 CS First Boston 1.140%, dated 9/30/03, matures 10/1/03, repurchase price $23,818,661 (collateralized by U.S. Government Securities: Total Market Value $24,294,489) 23,818 23,818 CS First Boston 1.140%, dated 9/30/03, matures 10/1/03, repurchase price $2,953,514 (collateralized by U.S. Government Securities: Total Market Value $3,012,527) 2,954 2,954 CS First Boston 1.248%, dated 9/30/03, matures 10/1/03, repurchase price $7,621,994 (collateralized by Mortgage Obligations: Total Market Value $8,003,059) 7,622 7,622 Deutsche Bank 1.080%, dated 9/30/03, matures 10/1/03, repurchase price $4,763,724 (collateralized by U.S. Government Securities: Total Market Value $4,858,853) 4,764 4,764 DESCRIPTION PAR (000) VALUE (000) - ---------------------------------------------------------------------------------------------------- Deutsche Bank 1.080%, dated 9/30/03, matures 10/1/03, repurchase price $19,054,897 (collateralized by U.S. Government Securities: Total Market Value $19,435,412) $ 19,054 $ 19,054 Deutsche Bank 1.248%, dated 9/30/03, matures 10/1/03, repurchase price $38,109,972 (collateralized by Corporate Securities: Total Market Value $40,014,084) 38,109 38,109 Goldman Sachs 1.268%, dated 9/30/03, matures 10/1/03, repurchase price $14,291,247 (collateralized by Corporate Securities: Total Market Value $15,002,186) 14,291 14,291 Goldman Sachs 1.330%, dated 9/30/03, matures 10/1/03, repurchase price $9,527,515 (collateralized by Various Securities: Total Market Value $9,821,838) 9,527 9,527 Goldman Sachs 1.380%, dated 9/30/03, matures 10/1/03, repurchase price $4,763,764 (collateralized by Various Securities: Total Market Value $4,860,880) 4,764 4,764 Lehman Brothers 1.120%, dated 9/30/03, matures 10/1/03, repurchase price $26,200,513 (collateralized by U.S. Government Securities: Total Market Value $26,723,767) 26,200 26,200 Lehman Brothers 1.130%, dated 9/30/03, matures 10/1/03, repurchase price $9,527,462 (collateralized by U.S. Government Securities: Total Market Value $9,718,053) 9,527 9,527 Lehman Brothers 1.388%, dated 9/30/03, matures 10/1/03, repurchase price $19,055,060 (collateralized by Various Securities: Total Market Value $19,308,383) 19,054 19,054 Lehman Brothers 1.150%, dated 9/30/03, matures 10/1/03, repurchase price $5,430,656 (collateralized by Mortgage Obligations: Total Market Value $5,745,517) 5,431 5,431 Merrill Lynch 1.110%, dated 9/30/03, matures 10/1/03, repurchase price $28,582,370 (collateralized by U.S. Government Securities: Total Market Value $29,153,511) 28,581 28,581 Merrill Lynch 1.110%, dated 9/30/03, matures 10/1/03, repurchase price $860,158 (collateralized by U.S. Government Securities: Total Market Value $877,668) 860 860 Merrill Lynch 1.110%, dated 9/30/03, matures 10/1/03, repurchase price $2,381,864 (collateralized by U.S. Government Securities: Total Market Value $2,249,564) 2,382 2,382
43
DESCRIPTION PAR (000) VALUE (000) - ---------------------------------------------------------------------------------------------------- Merrill Lynch 1.110%, dated 9/30/03, matures 10/1/03, repurchase price $5,716,474 (collateralized by U.S. Government Securities: Total Market Value $5,830,909) $ 5,716 $ 5,716 Merrill Lynch 1.110%, dated 9/30/03, matures 10/1/03, repurchase price $19,054,913 (collateralized by U.S. Government Securities: Total Market Value $19,435,679) 19,054 19,054 Merrill Lynch 1.110%, dated 9/30/03, matures 10/1/03, repurchase price $23,818,641 (collateralized by U.S. Government Securities: Total Market Value $24,294,502) 23,818 23,818 Merrill Lynch 1.130%, dated 9/30/03, matures 10/1/03, repurchase price $19,054,924 (collateralized by Asset-Backed and U.S. Government Securities: Total Market Value $19,436,064) 19,054 19,054 Merrill Lynch 1.308%, dated 9/30/03, matures 10/1/03, repurchase price $19,055,018 (collateralized by Corporate Securities: Total Market Value $20,007,080) 19,054 19,054 Morgan Stanley 1.258%, dated 9/30/03, matures 10/1/03, repurchase price $5,049,573 (collateralized by Asset-Backed Securities: Total Market Value $5,301,866) 5,049 5,049 Morgan Stanley 1.258%, dated 9/30/03, matures 10/1/03, repurchase price $29,630,511 (collateralized by Mortgage Obligations and Asset-Backed Securities: Total Market Value $31,117,776) 29,629 29,629 ------------- TOTAL REPURCHASE AGREEMENTS 357,366 ------------- TOTAL INVESTMENTS PURCHASED WITH PROCEEDS FROM SECURITIES LENDING (Cost $614,769) 614,769 ------------- TOTAL INVESTMENTS - 145.2% (Cost $1,975,181) $ 2,014,378 ------------- OTHER ASSETS AND LIABILITIES, NET - (45.2)% (626,894) ------------- TOTAL NET ASSETS - 100.0% $ 1,387,484 -------------
(a) Security sold within the terms of a private placement memorandum, exempt from registration under Rule 144A of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "qualified institutional buyers." These securities have been determined to be liquid under the guidelines established by the Funds' board of directors. As of September 30, 2003, the value of these investments was $49,462,849 or 3.6% of total net assets. (b) Delayed Interest (Step-Bonds) - Represents securities that remain zero-coupon securities until a predetermined date at which time the stated coupon rate becomes effective and interest becomes payable at regular intervals. Interest rate shown represents current yield at September 30, 2003, based upon the estimated timing and amount of future interest and principal payments. (c) Principal only. (d) Security purchased on a when-issued basis. On September 30, 2003, the total cost of investments purchased on a when-issued basis was $9,934,375. See note 2 in Notes to Financial Statements. (e) Securities considered illiquid or restricted. See note 2 in Notes to Financial Statements. (f) This money market fund is advised by U.S. Bancorp Asset Management, Inc., which also serves as advisor for this Fund. See note 3 in Notes to Financial Statements. 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 REIT - Real Estate Investment Trust REMIC - Real Estate Mortgage Investment Conduit STRIPS - Separate Trading of Registered Interest and Principal of Securities TBA - To Be Announced TVA - Tennessee Valley Authority The accompanying notes are an integral part of the financial statements. 44 SHORT TERM BOND FUND
DESCRIPTION PAR (000) VALUE (000) - ---------------------------------------------------------------------------------------------------- ASSET-BACKED SECURITIES - 28.6% AUTOMOBILES - 9.1% AESOP Funding II Series 2003-2A, Cl A1 2.740%, 06/20/07 (a) $ 10,000 $ 10,084 Americredit Automobile Receivables Trust Series 2002-C, Cl A2 1.940%, 08/12/05 1,409 1,410 Auto Bond Receivables Trust Series 1993-I, Cl A 6.125%, 11/15/21 (b) (c) 106 -- BMW Vehicle Owner Trust Series 2003-A, Cl A3 1.940%, 02/25/07 5,000 5,025 Capital Auto Receivables Asset Trust Series 2002-5, Cl A3B 2.300%, 04/17/06 3,000 3,029 Series 2003-3, Cl A2A 2.350%, 10/15/06 6,000 6,068 Series 2001-2, Cl A4 5.000%, 12/15/06 6,000 6,154 Capital One Auto Finance Trust Series 2001-A, Cl A4 5.400%, 05/15/08 3,000 3,151 Chase Manhattan Auto Owner Trust Series 2001-A, Cl A3 4.550%, 08/15/05 640 646 DaimlerChrysler Auto Trust Series 2000-E, Cl A3 6.110%, 11/08/04 646 651 Series 2000-D, Cl A3 6.660%, 01/08/05 234 234 Ford Credit Auto Owner Trust Series 2000-G, Cl A4 6.620%, 07/15/04 39 39 Series 2001-B, Cl A5 5.360%, 06/15/05 3,000 3,049 Harley-Davidson Motorcycle Trust Series 2003-2, Cl A2 2.070%, 02/15/11 7,000 6,982 Honda Auto Receivables Owner Trust Series 2003-1, Cl A3 1.920%, 11/20/06 4,000 4,020 Series 2002-4, Cl A4 2.700%, 03/17/08 3,500 3,566 Household Automotive Trust Series 2001-2, Cl A3 4.830%, 03/17/06 1,458 1,473 Navistar Financial Owner Trust Series 2002-B, Cl A3A 1.360%, 03/15/07 (d) 6,500 6,497 Nissan Auto Lease Trust Series 2002-A, Cl A3B 2.560%, 08/15/07 (a) 7,000 7,078 Nissan Auto Receivables Owner Trust Series 2002-C, Cl A4 3.330%, 01/15/08 4,600 4,741 Toyota Auto Receivables Owner Trust Series 2003-B, Cl A4 2.790%, 01/15/10 $ 7,000 $ 7,046 Series 2003-A, Cl A4 2.200%, 03/15/10 4,000 4,015 WFS Financial Owner Trust Series 2002-4, Cl A3A 2.390%, 08/20/07 6,000 6,055 ------------- 91,013 ------------- CREDIT CARDS - 7.0% Bank One Issuance Trust Series 2002-A3, Cl A3 3.590%, 05/17/10 6,000 6,134 Capital One Master Trust Series 1998-4, Cl A 5.430%, 01/15/07 5,000 5,022 Series 2001-7A, Cl A 3.850%, 08/15/07 5,000 5,088 Series 2001-8A, Cl A 4.600%, 08/17/09 6,000 6,321 Citibank Credit Card Issuance Trust Series 2001-A8, Cl A8 4.100%, 12/07/06 3,700 3,803 Series 2002-A3, Cl A3 4.400%, 05/15/07 7,000 7,272 Discover Card Master Trust I Series 2000-9, Cl A 6.350%, 01/15/06 2,000 2,174 Series 1993-3, Cl A 6.200%, 05/16/06 2,200 2,212 Series 1999-6, Cl A 6.850%, 07/15/07 5,000 5,330 Fleet Credit Card Master Trust II Series 2003-A, Cl A 2.400%, 07/15/08 8,500 8,578 Household Private Label Credit Card Trust Series 2001-2, Cl A 4.950%, 06/16/08 2,000 2,054 MBNA Master Credit Card Trust Series 1997-I, Cl A 6.550%, 01/15/07 3,500 3,657 Series 1999-M, Cl A 6.600%, 04/16/07 3,000 3,167 Nationsbank Credit Card Master Trust Series 1993-2, Cl A 6.000%, 12/15/05 7,275 7,342 Sears Credit Account Master Trust Series 1999-3, Cl A 6.450%, 11/17/09 2,000 2,102 ------------- 70,256 ------------- EQUIPMENT LEASES - 0.8% CIT Equipment Collateral Series 2001-1, Cl A3 5.230%, 10/20/04 105 106 Series 2001-A, Cl A4 4.840%, 09/20/12 3,481 3,604 CNH Equipment Trust Series 2003-A, Cl A2 1.460%, 02/15/06 4,000 4,007 ------------- 7,717 -------------
45
DESCRIPTION PAR (000) VALUE (000) - ---------------------------------------------------------------------------------------------------- HOME EQUITY - 7.5% Aames Mortgage Trust Series 2002-1, Cl A2 5.378%, 06/25/29 (e) $ 3,509 $ 3,630 Advanta Mortgage Loan Trust Series 2000-2, Cl A4 7.930%, 04/25/23 (e) 2,300 2,466 AFC Home Equity Loan Trust Series 1997-2, Cl 1A5 6.970%, 06/25/27 736 778 Centex Home Equity Series 2000-C, Cl A4 7.720%, 05/25/29 4,929 5,235 Series 2003-C, Cl AV 1.430%, 09/26/33 (d) 7,000 6,993 Chase Funding Mortgage Loan Series 2002-4, Cl 1A2 2.810%, 10/25/17 4,000 4,034 Series 2003-1, Cl 2A1 2.176%, 12/25/21 3,666 3,673 Series 1998-1, Cl IA4 6.340%, 04/25/25 959 966 Contimortgage Home Equity Loan Trust Series 1998-2, Cl A7 6.570%, 03/15/23 2,000 2,092 Emergent Home Equity Loan Trust Series 1997-3, Cl A5 7.290%, 10/20/28 2,253 2,406 EQCC Home Equity Loan Trust Series 1997-3, Cl A8 6.410%, 12/15/04 676 682 Equivantage Home Equity Loan Trust Series 1996-1, Cl A 6.550%, 10/25/25 565 591 Series 1996-4, Cl A 6.750%, 01/25/28 1,449 1,448 FNMA, Series 2002-W11, Cl AF3 3.318%, 11/25/32 4,700 4,765 Household Home Equity Loan Trust Series 2003-1, Cl A 1.450%, 10/20/32 (d) 5,010 5,013 IMC Home Equity Loan Trust Series 1998-3, Cl A7 6.720%, 08/20/29 (e) 5,000 5,200 Irwin Home Equity Series 2001-2, Cl 2A5 6.520%, 02/25/27 (e) 3,900 4,262 Money Store Home Equity Trust Series 1996-D, Cl A7 7.110%, 04/15/25 414 415 Series 1997-B, Cl A8 6.900%, 07/15/38 517 535 New Century Home Equity Loan Trust Series 1997-NC6, Cl A7 7.190%, 01/25/29 (e) 4,665 4,899 Residential Asset Mortgage Products Series 2002-RS6, Cl AI3 3.821%, 01/25/28 7,000 7,151 Series 2003-RS3, Cl AI2 3.380%, 03/25/29 2,200 2,218 Saxon Asset Securities Trust Series 2001-1, Cl AF5 6.853%, 03/25/32 (e) $ 5,000 $ 5,317 ------------- 74,769 ------------- MANUFACTURED HOUSING - 0.1% Oakwood Mortgage Investors Series 1999-A, Cl A2 5.890%, 04/15/29 718 722 ------------- RECREATIONAL VEHICLES - 0.4% Distribution Financial Services RV Trust Series 1999-3, Cl A4 6.650%, 03/15/11 410 413 Series 2001-1, Cl A3 4.740%, 05/15/13 3,474 3,496 ------------- 3,909 ------------- UTILITIES - 3.7% Comed Transitional Funding Trust Series 1998-1, Cl A5 5.440%, 03/25/07 8,037 8,321 Detroit Edison Securitization Funding Series 2001-1, Cl A3 5.875%, 03/01/10 5,000 5,471 Massachusetts RRB Special Purpose Trust Series 1999-1, Cl A4 6.910%, 09/15/09 5,200 5,884 Peco Energy Transition Trust Series 1999-A, Cl A4 5.800%, 03/01/07 1,984 2,105 Series 1999-A, Cl A6 6.050%, 03/01/09 9,315 10,260 Public Service New Hampshire Funding Series 2001-1, Cl A2 5.730%, 11/01/10 4,820 5,237 ------------- 37,278 ------------- TOTAL ASSET-BACKED SECURITIES (Cost $282,925) 285,664 ------------- U.S. GOVERNMENT & AGENCY SECURITIES - 28.0% U.S. AGENCY DEBENTURES - 20.1% FFCB 2.080%, 12/20/04 3,000 3,033 2.300%, 05/25/05 2,800 2,841 FHLB 3.625%, 10/15/04 8,000 8,210 4.125%, 01/14/05 6,000 6,218 4.000%, 02/15/05 5,000 5,181 4.125%, 05/13/05 7,000 7,303 3.000%, 08/15/05 7,000 7,181 6.500%, 11/15/05 7,000 7,691 2.500%, 12/15/05 8,000 8,120 5.375%, 02/15/06 5,000 5,403 2.500%, 03/24/06, Callable 03/24/04 @ 100 7,500 7,525 5.375%, 05/15/06 3,000 3,256 FHLMC 3.250%, 11/15/04 6,000 6,143 4.250%, 06/15/05 10,000 10,474 7.000%, 07/15/05 3,500 3,836 1.500%, 08/15/05 10,000 9,983 5.250%, 01/15/06 7,000 7,528 2.375%, 04/15/06 5,000 5,051 2.280%, 06/02/06, Callable 12/02/03 @ 100 7,000 6,980 5.500%, 07/15/06 3,000 3,273
The accompanying notes are an integral part of the financial statements. 46
DESCRIPTION PAR (000) VALUE (000) - ---------------------------------------------------------------------------------------------------- FNMA 1.875%, 12/15/04 $ 5,000 $ 5,042 2.020%, 02/28/05, Callable 02/28/04 @ 100 3,200 3,208 5.750%, 06/15/05 4,000 4,290 7.000%, 07/15/05 13,375 14,657 2.875%, 10/15/05 8,000 8,192 5.500%, 05/02/06 10,000 10,811 2.000%, 06/09/06, Callable 06/09/04 @ 100 7,000 6,937 4.375%, 10/15/06 5,000 5,312 3.500%, 10/15/07, Callable 10/15/04 @ 100 5,000 5,072 SLMA 2.000%, 03/15/05 2,250 2,272 TVA 6.375%, 06/15/05 9,500 10,289 ------------- 201,312 ------------- U.S. TREASURIES - 7.9% U.S. Treasury Notes 2.000%, 11/30/04 5,000 5,049 1.750%, 12/31/04 8,000 8,056 7.500%, 02/15/05 7,000 7,599 1.625%, 03/31/05 8,000 8,044 1.625%, 04/30/05 7,000 7,037 6.750%, 05/15/05 8,000 8,701 1.500%, 07/31/05 7,000 7,016 1.625%, 09/30/05 15,000 15,045 5.750%, 11/15/05 6,000 6,528 2.000%, 05/15/06 6,000 6,041 ------------- 79,116 ------------- TOTAL U.S. GOVERNMENT & AGENCY SECURITIES (Cost $276,347) 280,428 ------------- CORPORATE BONDS - 27.3% CONSUMER GOODS - 2.6% Colgate-Palmolive Series E 3.980%, 04/29/05 3,000 3,116 Series D 5.340%, 03/27/06 2,950 3,189 Conagra Foods 7.500%, 09/15/05 8,207 9,095 Gillette, Callable 10/15/04 @ 100 3.500%, 10/15/07 6,000 6,112 Unilever Capital 6.875%, 11/01/05 4,000 4,391 ------------- 25,903 ------------- FINANCE - 18.1% Allstate 7.875%, 05/01/05 2,700 2,963 American Express 5.500%, 09/12/06 5,000 5,441 Bank of America 4.750%, 10/15/06 6,000 6,405 Bank One 7.625%, 08/01/05 7,000 7,742 Bayerische Landesbank 4.125%, 01/14/05 5,000 5,142 2.500%, 03/30/06 5,500 5,556 Bear Stearns 6.500%, 05/01/06 5,900 6,492 Citigroup 5.500%, 08/09/06 $ 4,000 $ 4,363 Conoco Funding 5.450%, 10/15/06 8,600 9,360 Countrywide Funding, Series D 6.875%, 09/15/05 1,500 1,634 Countrywide Home Loan Series F 6.510%, 02/11/05 1,500 1,585 Series K 3.500%, 12/19/05 5,000 5,139 Credit Suisse First Boston 7.750%, 05/15/06 (a) 7,350 8,313 Fleetboston Financial 7.125%, 04/15/06 2,425 2,663 Ford Motor Credit 7.600%, 08/01/05 3,500 3,753 6.875%, 02/01/06 3,500 3,724 General Electric Capital, Series A 2.850%, 01/30/06 6,000 6,111 5.350%, 03/30/06 4,000 4,306 General Motors Acceptance 4.150%, 02/07/05 7,000 7,148 Goldman Sachs 6.625%, 12/01/04 (a) 1,500 1,583 7.250%, 10/01/05 (a) 8,000 8,806 Household Finance 8.000%, 05/09/05 7,000 7,695 International Lease Finance 5.625%, 06/01/07 5,000 5,429 J. P. Morgan Chase 6.875%, 01/15/07 4,000 4,509 Key Bank 7.250%, 06/01/05 2,000 2,171 7.125%, 08/15/06 4,000 4,464 Lehman Brothers Holdings, Series F 7.500%, 09/01/06 3,000 3,439 Marsh & McLennan 6.625%, 06/15/04 4,132 4,285 Mellon Funding 7.500%, 06/15/05 2,100 2,306 Merrill Lynch, Series B 4.540%, 03/08/05 4,000 4,153 6.130%, 05/16/06 3,655 4,023 Metropolitan Life Global Funding I 4.750%, 06/20/07 8,000 8,525 Morgan Stanley 7.750%, 06/15/05 6,500 7,157 Wells Fargo and Co. 4.800%, 07/29/05 4,500 4,749 Wells Fargo Financial 4.875%, 06/12/07 5,000 5,370 Westdeutsche Landesbank 6.750%, 06/15/05 4,600 4,957 ------------- 181,461 -------------
47
DESCRIPTION PAR (000) VALUE (000) - ---------------------------------------------------------------------------------------------------- MANUFACTURING - 2.7% Compaq Computer 7.650%, 08/01/05 $ 5,000 $ 5,512 DaimlerChrysler, Series A 7.375%, 09/15/06 3,945 4,386 Dover 6.450%, 11/15/05 4,860 5,319 Hewlett-Packard, Series A 3.375%, 12/15/05 4,000 4,107 Nike 5.500%, 08/15/06 7,491 8,129 ------------- 27,453 ------------- SERVICES - 2.2% McDonald's, Series G 4.150%, 02/15/05 3,825 3,944 Target 7.500%, 02/15/05 5,850 6,317 5.950%, 05/15/06 4,725 5,169 Wal-Mart Stores 4.150%, 06/15/05 6,000 6,259 ------------- 21,689 ------------- YANKEE - 1.7% Diageo Capital 6.125%, 08/15/05 6,090 6,584 Ontario (Province of) 7.000%, 08/04/05 7,000 7,677 Quebec (Province of), Series NY 6.500%, 01/17/06 2,335 2,572 ------------- 16,833 ------------- TOTAL CORPORATE BONDS (Cost $267,822) 273,339 ------------- U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES - 7.3% ADJUSTABLE RATE (d) - 5.4% FHLMC Pool 4.027%, 01/01/29, #846946 1,752 1,812 5.766%, 04/01/30, #972055 1,840 1,914 3.934%, 05/01/30, #847014 1,581 1,616 4.753%, 10/01/32, #847063 3,804 3,838 4.277%, 05/01/33, #780456 6,241 6,327 FNMA Pool 3.872%, 02/01/28, #415285 907 928 5.393%, 06/01/31, #625338 2,748 2,831 5.015%, 03/01/32, #545791 1,410 1,453 5.025%, 05/01/32, #634948 2,705 2,752 4.493%, 10/01/32, #661645 5,184 5,243 4.634%, 12/01/32, #671884 8,427 8,596 4.009%, 03/01/33, #555369 6,502 6,631 GNMA Pool 5.750%, 08/20/21, #8824 720 739 5.750%, 07/20/22, #8006 827 852 5.750%, 09/20/25, #8699 505 520 4.375%, 04/20/26, #8847 492 505 5.750%, 08/20/27, #80106 163 168 4.375%, 01/20/28, #80154 271 277 3.250%, 05/20/29, #80283 1,512 1,529 3.250%, 06/20/29, #80291 2,595 2,625 4.500%, 11/20/30, #80469 1,441 1,454 3.500%, 04/20/31, #80507 905 917 ------------- 53,527 ------------- FIXED RATE - 1.9% FHLMC Gold Pool 5.500%, 10/01/06, #M90680 $ 717 $ 737 FHLMC Pool 7.750%, 07/01/09, #184513 16 17 FNMA Pool 6.500%, 12/01/03, #535694 6 6 6.465%, 06/01/04, #375610 4,660 4,671 6.195%, 06/01/07, #410601 5,000 5,494 5.500%, 05/01/12, #254340 3,670 3,835 GNMA Pool 4.500%, 08/20/31, #80535 3,142 3,158 5.500%, 02/20/32, #80580 893 913 ------------- 18,831 ------------- TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (Cost $72,519) 72,358 ------------- CMO - U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES - 2.1% FIXED RATE - 2.1% FHLMC REMIC Series H001, Cl A3 2.893%, 10/15/09 5,118 5,116 Series 2533, Cl PA 4.750%, 03/15/10 6,142 6,230 Series 1022, Cl J 6.000%, 12/15/20 125 125 Series 2589, Cl GK 4.000%, 03/15/26 7,000 7,168 FNMA REMIC Series 2002-89, Cl TU 5.000%, 04/25/07 1,548 1,553 Series 1992-150, Cl MA 5.500%, 09/25/22 388 403 ------------- TOTAL CMO - U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (Cost $20,669) 20,595 ------------- CMO - PRIVATE MORTGAGE-BACKED SECURITIES - 1.6% ADJUSTABLE RATE - 0.0% Patten, Series 1995-1A 1.833%, 09/01/13 (a) (b) (c) (d) 7 6 ------------- FIXED RATE - 1.6% Countrywide Home Loans Series 2002-J4, Cl 1A3 5.500%, 10/25/32 1,803 1,809 Series 2002-27, Cl A4 5.500%, 12/25/32 3,228 3,240 Merrill Lynch Mortgage Investors Series 2003-A5, Cl 2A3 3.246%, 08/25/33 (b) 5,763 5,765 Washington Mutual Series 2003-AR3, Cl A5 3.927%, 04/25/33 5,550 5,652 ------------- 16,466 ------------- TOTAL CMO - PRIVATE MORTGAGE-BACKED SECURITIES (Cost $16,549) 16,472 -------------
The accompanying notes are an integral part of the financial statements. 48
DESCRIPTION PAR (000) VALUE (000) - ---------------------------------------------------------------------------------------------------- COMMERCIAL PAPER - 4.3% Cargil Global Funding 1.090%, 10/01/03 $ 5,000 $ 5,000 Corporate Asset Funding 1.110% 10/01/03 5,000 5,000 Jupiter Securitization 1.060%, 10/02/03 (a) 8,000 8,000 Koch Industries 1.090%, 10/01/03 5,000 5,000 Moat Funding 1.120%, 10/01/03 5,000 5,000 Receivables Capital 1.070%, 10/09/03 5,000 4,999 Total Fina Elf Capital 1.100%, 10/01/03 5,000 5,000 UBS Finance 1.070%, 10/03/03 5,000 4,999 ------------- TOTAL COMMERCIAL PAPER (Cost $42,998) 42,998 ------------- INVESTMENTS PURCHASED WITH CASH PROCEEDS FROM SECURITIES LENDING - 33.5% COMMERCIAL PAPER - 3.5% Bluegrass 1.190%, 05/18/04 1,300 1,300 CS First Boston 1.415%, 10/01/03 5,198 5,198 Danske Bank 1.508%, 12/22/03 5,198 5,198 Independent IV 1.216%, 04/15/04 3,379 3,379 K2 USA 1.020%, 12/01/03 2,595 2,595 Leafs 1.339%, 04/20/04 3,587 3,587 Mitten Mortgage 1.130%, 10/08/03 3,638 3,638 Mortgage Interest Network 1.100%, 10/15/03 1,299 1,299 1.130%, 12/02/03 2,594 2,594 Orchard Park 1.245%, 04/06/04 520 520 1.220%, 07/06/04 5,767 5,767 ------------- TOTAL COMMERCIAL PAPER 35,075 ------------- CORPORATE OBLIGATIONS - 7.6% Allstate Life Global 1.092%, 08/16/04 5,198 5,198 Bank of Scotland 1.100%, 03/05/04 2,599 2,599 Castle Hill III 1.176%, 09/16/04 1,560 1,560 Deutsche Bank 1.430%, 12/31/03 2,079 2,079 1.340%, 03/22/04 2,599 2,599 General Electric Capital Corporation 1.150%, 07/09/07 2,600 2,600 Halogen Fund 1.150%, 10/03/03 10,812 10,812 DESCRIPTION PAR (000)/SHARES VALUE (000) - ---------------------------------------------------------------------------------------------------- Lloyd's Bank 1.100%, 03/05/04 $ 5,198 $ 5,198 Metlife Global Funding 1.130%, 09/15/04 3,118 3,118 1.147%, 04/28/08 2,184 2,184 Monet Trust 1.210%, 12/28/03 5,199 5,199 Residential Mortgage Securities 1.140%, 09/11/04 3,899 3,899 Sigma Finance 1.268%, 08/09/04 5,198 5,198 SMM Trust 2002-M 1.140%, 09/23/04 8,707 8,707 Svenska Handlsbankn 1.100%, 03/03/04 5,198 5,198 1.100%, 03/15/04 936 936 Wells Fargo Bank 1.050%, 10/17/03 5,198 5,198 1.060%, 10/31/03 3,639 3,639 ------------- TOTAL CORPORATE OBLIGATIONS 75,921 ------------- MONEY MARKET FUNDS - 0.1% AIM Short Term Liquid Asset Portfolio207,935 208 Merrill Lynch Premier Institutional Fund681,169 681 ------------- TOTAL MONEY MARKET FUNDS 889 ------------- OTHER SHORT-TERM INVESTMENTS - 2.8% Commonwealth Life 1.430%, 10/01/03 2,625 2,625 General Electric Capital Assurance 1.370%, 12/19/03 1,040 1,040 Liquid Funding 1.130%, 8/23/04 2,598 2,598 1.130%, 9/14/04 2,599 2,599 Premium Asset Trust 02-7 1.139%, 06/01/04 7,745 7,745 Security Life Denver 1.381%, 01/13/04 6,758 6,758 1.490%, 03/15/04 5,198 5,198 ------------- TOTAL OTHER SHORT-TERM INVESTMENTS 28,563 ------------- REPURCHASE AGREEMENTS - 19.5% Bear Stearns 1.240%, dated 9/30/03, matures 10/15/03, repurchase price $10,402,114 (collateralized by Various Securities: Total Market Value $10,609,447) 10,397 10,397 CS First Boston 1.140%, dated 9/30/03, matures 10/1/03, repurchase price $12,996,339 (collateralized by U.S. Government Securities: Total Market Value $13,255,969) 12,996 12,996 CS First Boston 1.140%, dated 9/30/03, matures 10/1/03, repurchase price $1,611,546 (collateralized by U.S. Government Securities: Total Market Value $1,643,746) 1,611 1,611 CS First Boston 1.248%, dated 9/30/03, matures 10/1/03, repurchase price $4,158,841 (collateralized by Mortgage Obligations: Total Market Value $4,366,764) 4,159 4,159
49
DESCRIPTION PAR (000) VALUE (000) - ---------------------------------------------------------------------------------------------------- Deutsche Bank 1.080%, dated 9/30/03, matures 10/1/03, repurchase price $2,599,264 (collateralized by U.S. Government Securities: Total Market Value $2,651,169) $ 2,599 $ 2,599 Deutsche Bank 1.080%, dated 9/30/03, matures 10/1/03, repurchase price $10,397,054 (collateralized by U.S. Government Securities: Total Market Value $10,604,677) 10,397 10,397 Deutsche Bank 1.248%, dated 9/30/03, matures 10/1/03, repurchase price $20,794,205 (collateralized by Corporate Securities: Total Market Value $21,833,159) 20,793 20,793 Goldman Sachs 1.268%, dated 9/30/03, matures 10/1/03, repurchase price $7,797,831 (collateralized by Corporate Securities: Total Market Value $8,185,745) 7,798 7,798 Goldman Sachs 1.330%, dated 9/30/03, matures 10/1/03, repurchase price $5,198,563 (collateralized by Various Securities: Total Market Value $5,359,157) 5,198 5,198 Goldman Sachs 1.380%, dated 9/30/03, matures 10/1/03, repurchase price $2,599,285 (collateralized by Various Securities: Total Market Value $2,652,275) 2,599 2,599 Lehman Brothers 1.120%, dated 9/30/03, matures 10/1/03, repurchase price $14,295,965 (collateralized by U.S. Government Securities: Total Market Value $14,581,472) 14,295 14,295 Lehman Brothers 1.130%, dated 9/30/03, matures 10/1/03, repurchase price $5,198,534 (collateralized by U.S. Government Securities: Total Market Value $5,302,528) 5,198 5,198 Lehman Brothers 1.388%, dated 9/30/03, matures 10/1/03, repurchase price $10,397,143 (collateralized by Various Securities: Total Market Value $10,535,365) 10,397 10,397 Lehman Brothers 1.150%, dated 9/30/03, matures 10/1/03, repurchase price $2,963,166 (collateralized by Mortgage Obligations: Total Market Value $3,134,966) 2,963 2,963 Merrill Lynch 1.110%, dated 9/30/03, matures 10/1/03, repurchase price $15,595,594 (collateralized by U.S. Government Securities: Total Market Value $15,907,230) 15,595 15,595 Merrill Lynch 1.110%, dated 9/30/03, matures 10/1/03, repurchase price $469,334 (collateralized by U.S. Government Securities: Total Market Value $478,888) $ 469 $ 469 Merrill Lynch 1.110%, dated 9/30/03, matures 10/1/03, repurchase price $1,299,633 (collateralized by U.S. Government Securities: Total Market Value $1,325,660) 1,300 1,300 Merrill Lynch 1.110%, dated 9/30/03, matures 10/1/03, repurchase price $3,119,119 (collateralized by U.S. Government Securities: Total Market Value $3,181,559) 3,119 3,119 Merrill Lynch 1.110%, dated 9/30/03, matures 10/1/03, repurchase price $10,397,063 (collateralized by U.S. Government Securities: Total Market Value $10,604,823) 10,397 10,397 Merrill Lynch 1.110%, dated 9/30/03, matures 10/1/03, repurchase price $12,996,328 (collateralized by U.S. Government Securities: Total Market Value $13,255,975) 12,996 12,996 Merrill Lynch 1.130%, dated 9/30/03, matures 10/1/03, repurchase price $10,397,069 (collateralized by Asset-Backed and U.S. Government Securities: Total Market Value $10,605,033) 10,397 10,397 Merrill Lynch 1.308%, dated 9/30/03, matures 10/1/03, repurchase price $10,397,120 (collateralized by Corporate Securities: Total Market Value $10,916,600) 10,397 10,397 Morgan Stanley 1.258%, dated 9/30/03, matures 10/1/03, repurchase price $2,755,233 (collateralized by Asset-Backed Securities: Total Market Value $2,892,894) 2,755 2,755 Morgan Stanley 1.258%, dated 9/30/03, matures 10/1/03, repurchase price $16,167,499 (collateralized by Mortgage Obligations and Asset-Backed Securities: Total Market Value $16,979,005) 16,167 16,167 ------------- TOTAL REPURCHASE AGREEMENTS 194,992 ------------- TOTAL INVESTMENTS PURCHASED WITH PROCEEDS FROM SECURITIES LENDING (Cost $335,440) 335,440 -------------
The accompanying notes are an integral part of the financial statements. 50
DESCRIPTION VALUE (000) - ---------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS - 132.7% (Cost $1,315,269) $ 1,327,294 ------------- OTHER ASSETS AND LIABILITIES, NET - (32.7)% (326,867) ------------- TOTAL NET ASSETS - 100.0% $ 1,000,427 -------------
(a) Security sold within the terms of a private placement memorandum, exempt from registration under Rule 144A of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "qualified institutional buyers." These securities have been determined to be liquid under the guidelines established by the Funds' board of directors. As of September 30, 2003, the value of these investments was $35,870,050 or 3.6% of total net assets. (b) Securities considered illiquid or restricted. See note 2 in Notes to Financial Statements. (c) Security is fair valued. As of September 30, 2003, the fair value was $6,453 or 0.0% of total net assets. See note 2 in Notes to Financial Statements. (d) Variable Rate Security - The rate shown is the rate in effect as of September 30, 2003. (e) Delayed Interest (Step-Bonds) - Represents securities that remain zero-coupon securities until a predetermined date at which time the stated coupon rate becomes effective and interest becomes payable at regular intervals. Interest rate shown represents current yield at September 30, 2003, based upon the estimated timing and amount of future interest and principal payments. 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 REMIC - Real Estate Mortgage Investment Conduit SLMA - Student Loan Marketing Association TVA - Tennessee Valley Authority U.S. GOVERNMENT MORTGAGE FUND
DESCRIPTION PAR (000) VALUE (000) - ---------------------------------------------------------------------------------------------------- U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES - 81.1% ADJUSTABLE RATE - 1.2% FNMA Pool 3.725%, 08/01/27, #545271 (a) $ 3,390 $ 3,502 ------------- FIXED RATE - 79.9% FHLMC Gold Pool 8.500%, 03/01/06, #E00022 16 16 7.500%, 04/01/08, #E45929 37 39 7.000%, 07/01/11, #E20252 109 116 7.000%, 11/01/11, #E65619 41 44 7.500%, 09/01/12, #G10735 509 546 5.500%, 12/01/12, #E68353 1,399 1,461 5.500%, 05/01/13, #G10814 538 562 6.000%, 10/01/13, #E72802 1,031 1,083 5.500%, 01/01/14, #E00617 2,541 2,650 7.000%, 09/01/14, #E00746 558 594 5.000%, 05/01/18, #E96700 4,714 4,830 6.000%, 09/01/22, #C90580 1,919 1,998 6.500%, 01/01/28, #G00876 1,500 1,576 6.500%, 11/01/28, #C00676 3,037 3,181 6.500%, 01/01/30, #C55738 4,415 4,617 7.500%, 01/01/30, #C35768 315 337 6.000%, 12/01/30, #C53880 5,742 5,931 6.500%, 03/01/31, #G01244 2,291 2,399 7.000%, 06/01/32, #C68248 1,412 1,490 FHLMC Pool 9.500%, 09/01/04, #380053 1 1 FNMA Pool 7.000%, 11/01/11, #250738 48 51 7.000%, 11/01/11, #349630 45 48 7.000%, 11/01/11, #351122 40 43 6.000%, 04/01/13, #425550 555 583 6.500%, 08/01/13, #251901 510 541 6.000%, 11/01/13, #556195 1,506 1,584 6.000%, 12/01/13, #449173 1,459 1,532 7.000%, 07/01/14, #252637 820 876 7.000%, 10/01/14, #252799 379 405 5.500%, 04/01/16, #580516 2,337 2,429 6.500%, 07/01/17, #254373 2,817 2,972 7.000%, 07/01/17, #254414 2,982 3,171 5.500%, 10/01/17, #665315 1,944 2,014 5.500%, 12/01/17, #673010 1,984 2,055 6.000%, 12/01/17, #254547 2,142 2,235 5.000%, 04/01/18, #685197 4,579 4,696 4.500%, 05/01/18, #254720 7,496 7,557 5.000%, 07/01/18, #555621 2,811 2,883 4.500%, 08/01/18, #732244 4,970 5,011 6.000%, 10/01/22, #254513 2,460 2,563 8.000%, 07/01/24, #190264 121 132 6.500%, 10/01/27, #400141 150 157 7.000%, 12/01/27, #313941 1,607 1,701 6.500%, 10/01/28, #442671 1,259 1,317 6.500%, 12/01/28, #323422 1,589 1,662 6.500%, 02/01/29, #252255 1,450 1,514 6.000%, 05/01/31, #511797 1,155 1,192 7.000%, 09/01/31, #596680 2,866 3,046 7.500%, 09/01/31, #602427 1,370 1,459 6.500%, 10/01/31, #603674 1,004 1,046 6.500%, 01/01/32, #622707 1,307 1,362 7.000%, 03/01/32, #635970 2,609 2,754
51
DESCRIPTION PAR (000) VALUE (000) - ---------------------------------------------------------------------------------------------------- 6.500%, 06/01/32, #596712 $ 7,816 $ 8,194 7.000%, 07/01/32, #545813 1,457 1,538 7.000%, 07/01/32, #545815 1,589 1,678 6.000%, 08/01/32, #656269 2,650 2,736 6.500%, 08/01/32, #649874 2,522 2,627 6.500%, 08/01/32, #656871 1,557 1,622 6.500%, 08/01/32, #658822 1,923 2,004 6.000%, 10/01/32, #661581 675 697 6.500%, 11/01/32, #254516 3,424 3,568 6.000%, 01/01/33, #676647 3,968 4,094 5.500%, 03/01/33, #689109 4,597 4,691 5.500%, 04/01/33, #703392 4,909 5,008 5.500%, 05/01/33, #704523 4,628 4,722 5.500%, 06/01/33, #709203 3,672 3,747 5.500%, 06/01/33, #709700 4,594 4,687 5.500%, 07/01/33, #720735 2,973 3,033 5.500%, 07/01/33, #728667 3,242 3,308 4.500%, 08/01/33, #555680 3,000 2,905 5.000%, 08/01/33, #736158 3,992 3,993 5.500%, 08/01/33, #728855 3,991 4,074 5.500%, 08/01/33, #730927 4,138 4,222 5.500%, 08/01/33, #733380 3,994 4,077 5.000%, 09/01/33, #734566 5,001 5,002 6.000%, 09/01/33, #733781 8,966 9,252 FNMA TBA 5.500%, 09/01/18 (b) 250 259 6.000%, 04/01/33 (b) 250 258 7.000%, 09/01/33 (b) 250 264 6.000%, 10/01/33 (b) 5,043 5,207 GNMA Pool 8.000%, 01/15/07, #315126 13 14 9.000%, 11/15/09, #359559 73 79 8.000%, 10/15/10, #414750 151 163 6.500%, 07/15/13, #462638 997 1,065 8.500%, 05/15/17, #219152 16 18 8.500%, 06/15/21, #307921 17 19 7.500%, 12/15/22, #347332 116 125 8.000%, 05/15/23, #352469 78 85 9.500%, 04/15/25, #386741 26 29 7.000%, 09/15/27, #455304 67 71 6.500%, 07/15/28, #780825 2,656 2,802 7.000%, 11/15/29, #781113 1,492 1,587 7.000%, 07/15/31, #781324 1,659 1,763 6.500%, 08/20/31, #3120 1,580 1,656 7.500%, 12/15/31, #570134 1,079 1,152 6.500%, 02/15/32, #569621 2,224 2,333 6.500%, 08/15/32, #590376 3,066 3,216 6.000%, 03/15/33, #603520 3,566 3,701 6.000%, 06/15/33, #553314 6,001 6,230 5.500%, 07/15/33, #553367 11,149 11,428 ------------- 229,065 ------------- TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (Cost $229,226) 232,567 ------------- CMO - PRIVATE MORTGAGE-BACKED SECURITIES - 8.6% ADJUSTABLE RATE (a) - 1.4% First Nationwide Trust Series 2001-3, Cl 2A1 8.216%, 01/25/23 950 999 Wells Fargo Mortgage Backed Securities Trust Series 2003-D, Cl A1 4.906%, 02/25/33 2,912 2,971 ------------- 3,970 ------------- FIXED RATE - 7.2% Citicorp Mortgage Securities Series 2001-6, Cl M 6.500%, 05/25/29 $ 2,798 $ 2,896 Residential Accredit Loans Series 1997-QS13, Cl M3 7.250%, 12/25/27 1,647 1,730 Structured Asset Securities Series 2003-30, Cl 1A1 5.500%, 10/25/33 (c) 7,000 7,052 Washington Mutual Series 2003-S10, Cl A2 5.000%, 10/25/18 (b) (c) 4,000 4,040 Wells Fargo Mortgage Backed Securities Trust Series 2003-10, Cl A1 4.500%, 09/25/18 (c) 4,898 4,890 ------------- 20,608 ------------- TOTAL CMO - PRIVATE MORTGAGE-BACKED SECURITIES (Cost $24,164) 24,578 ------------- ASSET-BACKED SECURITIES - 5.2% AUTOMOBILES - 1.4% Household Automotive Trust Series 2003-1, Cl A2 1.300%, 09/18/06 4,000 4,000 ------------- HOME EQUITY - 2.5% Argent Securities Series 2003-W1, Cl A4 1.313%, 08/27/33 (a) (d) 4,908 4,910 First Plus Home Loan Trust Series 1998-3, Cl A7 6.950%, 10/10/22 1,666 1,714 GRMT Mortgage Loan Trust Series 2001-1A, Cl M1 7.772%, 07/20/31 500 544 ------------- 7,168 ------------- MANUFACTURED HOUSING - 1.3% Oakwood Mortgage Investors Series 1999-A, Cl A2 5.890%, 04/15/29 365 366 Vanderbilt Mortgage Finance Series 1999-B, Cl 1A4 6.545%, 04/07/18 3,250 3,403 ------------- 3,769 ------------- TOTAL ASSET-BACKED SECURITIES (Cost $14,893) 14,937 ------------- CMO - U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES - 4.9% FIXED RATE - 4.9% FHLMC REMIC Series 2498, Series UA 5.500%, 09/15/12 1,482 1,516 Series T-10, Cl A3 6.540%, 01/25/17 557 561 Series 2382, Cl DA 5.500%, 10/15/30 1,346 1,397 FNMA REMIC Series 1993-210, Cl PL 6.500%, 04/25/23 4,250 4,672 Series 2002-W1, Cl 2A 7.500%, 02/25/42 3,581 3,927
The accompanying notes are an integral part of the financial statements. 52
DESCRIPTION PAR (000)/SHARES VALUE (000) - ---------------------------------------------------------------------------------------------------- GNMA REMIC Series 2001-61, Cl ED 6.000%, 12/16/31 $ 2,000 $ 2,088 ------------- TOTAL CMO - U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (Cost $13,254) 14,161 ------------- U.S. TREASURY OBLIGATION - 0.1% U.S. Treasury Bill 0.940%, 01/22/04 155 155 ------------- TOTAL U.S. TREASURY OBLIGATION (Cost $155) 155 ------------- RELATED PARTY MONEY MARKET FUND - 1.1% First American Government Obligations Fund, Cl Y (e) 3,254,331 3,254 ------------- TOTAL RELATED PARTY MONEY MARKET FUND (Cost $3,254) 3,254 ------------- INVESTMENTS PURCHASED WITH CASH PROCEEDS FROM SECURITIES LENDING - 31.3% COMMERCIAL PAPER - 3.3% Bluegrass 1.190%, 05/18/04 347 347 CS First Boston 1.415%, 10/01/03 1,389 1,389 Danske Bank 1.508%, 12/22/03 1,389 1,389 Independent IV 1.216%, 04/15/04 903 903 K2 USA 1.020%, 12/01/03 693 693 Leafs 1.339%, 04/20/04 958 958 Mitten Mortgage 1.130%, 10/08/03 972 972 Mortgage Interest Network 1.100%, 10/15/03 347 347 1.130%, 12/02/03 693 693 Orchard Park 1.245%, 04/06/04 139 139 1.220%, 07/06/04 1,541 1,541 ------------- TOTAL COMMERCIAL PAPER 9,371 ------------- CORPORATE OBLIGATIONS - 7.1% Allstate Life Global 1.092%, 08/16/04 1,389 1,389 Bank of Scotland 1.100%, 03/05/04 694 694 Castle Hill III 1.176%, 09/16/04 417 417 Deutsche Bank 1.430%, 12/31/03 555 555 1.340%, 03/22/04 694 694 General Electric Capital Corporation 1.150%, 07/09/07 694 694 Halogen Fund 1.150%, 10/03/03 2,888 2,888 Lloyds Bank 1.100%, 03/05/04 1,389 1,389 Metlife Global Funding 1.130%, 09/15/04 833 833 1.147%, 04/28/08 583 583 Monet Trust 1.210%, 12/28/03 $ 1,389 $ 1,389 Residential Mortgage Securities 1.140%, 09/11/04 1,041 1,041 Sigma Finance 1.268%, 08/09/04 1,388 1,388 SMM Trust 2002-M 1.140%, 09/23/04 2,326 2,326 Svenska Handlsbankn 1.100%, 03/03/04 1,389 1,389 1.100%, 03/15/04 250 250 Wells Fargo Bank 1.050%, 10/17/03 1,389 1,389 1.060%, 10/31/03 972 972 ------------- TOTAL CORPORATE OBLIGATIONS 20,280 ------------- MONEY MARKET FUNDS - 0.1% AIM Short Term Liquid Asset Portfolio 55,546 56 Merrill Lynch Premier Institutional Fund 181,962 182 ------------- TOTAL MONEY MARKET FUNDS 238 ------------- OTHER SHORT-TERM INVESTMENTS - 2.7% Commonwealth Life 1.430%, 10/01/03 701 701 General Electric Capital Assurance 1.370%, 12/19/03 278 278 Liquid Funding 1.130%, 8/23/04 694 694 1.130%, 9/14/04 694 694 Premium Asset Trust 02-7 1.139%, 06/01/04 2,069 2,069 Security Life Denver 1.381%, 01/13/04 1,805 1,805 1.490%, 03/15/04 1,389 1,389 ------------- TOTAL OTHER SHORT-TERM INVESTMENTS 7,630 ------------- REPURCHASE AGREEMENTS -- 18.1% Bear Stearns 1.240%, dated 9/30/03, matures 10/15/03, repurchase price $2,778,739 (collateralized by Various Securities: Total Market Value $2,834,124) 2,777 2,777 CS First Boston 1.140%, dated 9/30/03, matures 10/1/03, repurchase price $3,471,740 (collateralized by U.S. Government Securities: Total Market Value $3,541,095) 3,472 3,472 CS First Boston 1.140%, dated 9/30/03, matures 10/1/03, repurchase price $430,496 (collateralized by U.S. Government Securities: Total Market Value $439,097) 430 430 CS First Boston 1.248%, dated 9/30/03, matures 10/1/03, repurchase price $1,110,960 (collateralized by Mortgage Obligations: Total Market Value $1,166,503) 1,111 1,111 Deutsche Bank 1.080%, dated 9/30/03, matures 10/1/03, repurchase price $694,347 (collateralized by U.S. Government Securities: Total Market Value $708,213) 694 694
53
DESCRIPTION PAR (000) VALUE (000) - ---------------------------------------------------------------------------------------------------- Deutsche Bank 1.080%, dated 9/30/03, matures 10/1/03, repurchase price $2,777,387 (collateralized by U.S. Government Securities: Total Market Value $2,832,850) $ 2,777 $ 2,777 Deutsche Bank 1.248%, dated 9/30/03, matures 10/1/03, repurchase price $5,554,801 (collateralized by Corporate Securities: Total Market Value $5,832,339) 5,555 5,555 Goldman Sachs 1.268%, dated 9/30/03, matures 10/1/03, repurchase price $2,083,051 (collateralized by Corporate Securities: Total Market Value $2,186,676) 2,083 2,083 Goldman Sachs 1.330%, dated 9/30/03, matures 10/1/03, repurchase price $1,388,703 (collateralized by Various Securities: Total Market Value $1,431,603) 1,389 1,389 Goldman Sachs 1.380%, dated 9/30/03, matures 10/1/03, repurchase price $694,353 (collateralized by Various Securities: Total Market Value $708,508) 694 694 Lehman Brothers 1.120%, dated 9/30/03, matures 10/1/03, repurchase price $3,818,912 (collateralized by U.S. Government Securities: Total Market Value $3,895,180) 3,819 3,819 Lehman Brothers 1.130%, dated 9/30/03, matures 10/1/03, repurchase price $1,388,696 (collateralized by U.S. Government Securities: Total Market Value $1,416,476) 1,389 1,389 Lehman Brothers 1.388%, dated 9/30/03, matures 10/1/03, repurchase price $2,777,411 (collateralized by Various Securities: Total Market Value $2,814,335) 2,777 2,777 Lehman Brothers 1.150%, dated 9/30/03, matures 10/1/03, repurchase price $791,557 (collateralized by Mortgage Obligations: Total Market Value $837,450) 792 792 Merrill Lynch 1.110%, dated 9/30/03, matures 10/1/03, repurchase price $4,166,085 (collateralized by U.S. Government Securities: Total Market Value $4,249,333) 4,166 4,166 Merrill Lynch 1.110%, dated 9/30/03, matures 10/1/03, repurchase price $125,374 (collateralized by U.S. Government Securities: Total Market Value $127,926) 125 125 Merrill Lynch 1.110%, dated 9/30/03, matures 10/1/03, repurchase price $347,174 (collateralized by U.S. Government Securities: Total Market Value $354,126) 347 347 Merrill Lynch 1.110%, dated 9/30/03, matures 10/1/03, repurchase price $833,217 (collateralized by U.S. Government Securities: Total Market Value $849,897) 833 833 Merrill Lynch 1.110%, dated 9/30/03, matures 10/1/03, repurchase price $2,777,390 (collateralized by U.S. Government Securities: Total Market Value $2,832,889) $ 2,777 $ 2,777 Merrill Lynch 1.110%, dated 9/30/03, matures 10/1/03, repurchase price $3,471,737 (collateralized by U.S. Government Securities: Total Market Value $3,541,097) 3,472 3,472 Merrill Lynch 1.130%, dated 9/30/03, matures 10/1/03, repurchase price $2,777,391 (collateralized by Asset-Backed and U.S. Government Securities: Total Market Value $2,832,945) 2,777 2,777 Merrill Lynch 1.308%, dated 9/30/03, matures 10/1/03, repurchase price $2,777,405 (collateralized by Corporate Securities: Total Market Value $2,916,175) 2,777 2,777 Morgan Stanley 1.258%, dated 9/30/03, matures 10/1/03, repurchase price $736,011 (collateralized by Asset-Backed Securities: Total Market Value $772,785) 736 736 Morgan Stanley 1.258%, dated 9/30/03, matures 10/1/03, repurchase price $4,318,859 (collateralized by Mortgage Obligations and Asset-Backed Securities: Total Market Value $4,535,638) 4,319 4,319 ------------- TOTAL REPURCHASE AGREEMENTS 52,088 ------------- TOTAL INVESTMENTS PURCHASED WITH PROCEEDS FROM SECURITIES LENDING (Cost $89,607) 89,607 ------------- TOTAL INVESTMENTS - 132.3% (Cost $374,553) 379,259 ------------- OTHER ASSETS AND LIABILITIES, NET - (32.3)% (92,567) ------------- TOTAL NET ASSETS - 100.0% $ 286,692 -------------
(a) Variable Rate Security - The rate shown is the rate in effect as of September 30, 2003. (b) Security purchased on a when-issued basis. On September 30, 2003, the total cost of investments purchased on a when-issued basis was $9,966,925. See note 2 in Notes to Financial Statements. (c) Securities considered illiquid or restricted. See note 2 in Notes to Financial Statements. (d) Delayed Interest (Step-Bonds) - Represents securities that remain zero-coupon securities until a predetermined date at which time the stated coupon rate becomes effective and interest becomes payable at regular intervals. Interest rate shown represents current yield at September 30, 2003, based upon the estimated timing and amount of future interest and principal payments. (e)This money market fund is advised by U.S. Bancorp Asset Management, Inc., which also serves as advisor for this Fund. See note 3 in Notes to Financial Statements. CL - Class CMO - Collateralized Mortgage Obligation FHLMC - Federal Home Loan Mortgage Corporation FNMA - Federal National Mortgage Association GNMA - Government National Mortgage Association REMIC - Real Estate Mortgage Investment Conduit TBA - To Be Announced The accompanying notes are an integral part of the financial statements. 54 (This page has been left blank intentionally.) STATEMENTS OF ASSETS AND LIABILITIES September 30, 2003, in thousands, except per share data
CORE BOND CORPORATE FUND BOND FUND - -------------------------------------------------------------------------------------------- ASSETS: Investments in unaffiliated securities, at value*+ $ 3,130,465 $ 327,067 Investments in affiliated securities, at value** 34,921 2,806 Cash -- -- Cash denominated in foreign currencies, at value*** -- -- Dividends and interest receivable 18,077 4,195 Receivable for investment securities sold 83,616 8,414 Capital shares sold 1,345 115 Prepaid expenses and other assets 52 13 - -------------------------------------------------------------------------------------------- TOTAL ASSETS 3,268,476 342,610 ============================================================================================ LIABILITIES: Bank overdraft 13,609 -- Options written, at value 891 -- Payable upon return of securities loaned 899,724 52,021 Payable for investment securities purchased 117,378 8,804 Capital shares redeemed 7,110 198 Payable for advisory, co-administration, and custodian fees 1,271 174 Payable for distribution and shareholder servicing fees 74 18 - -------------------------------------------------------------------------------------------- TOTAL LIABILITIES 1,040,057 61,215 ============================================================================================ NET ASSETS $ 2,228,419 $ 281,395 ============================================================================================ COMPOSITION OF NET ASSETS: Portfolio capital $ 2,157,743 $ 301,347 Undistributed (distributions in excess of) net investment income 983 9 Accumulated net realized gain (loss) on investments 22,842 (31,537) Net unrealized appreciation of investments 47,194 11,576 Net unrealized depreciation of options written (343) -- Net unrealized appreciation of forward foreign currency contracts, foreign currency, and translation of assets and liabilities denominated in foreign currency -- -- - -------------------------------------------------------------------------------------------- NET ASSETS $ 2,228,419 $ 281,395 ============================================================================================ * Investments in unaffiliated securities, at cost $ 3,083,271 $ 315,491 ** Investments in affiliated securities, at cost 34,921 2,806 *** Cash denominated in foreign currencies, at cost -- -- + Including securities loaned, at value 885,729 51,108 CLASS A: Net assets $ 191,754 $ 13,522 Shares issued and outstanding ($0.0001 par value -- 2 billion authorized) 16,582 1,321 Net asset value and redemption price per share $ 11.56 $ 10.23 Maximum offering price per share (1) $ 12.07 $ 10.68 CLASS B: Net assets $ 28,096 $ 13,576 Shares issued and outstanding ($0.0001 par value -- 2 billion authorized) 2,446 1,331 Net asset value, offering price, and redemption price per share (2) $ 11.48 $ 10.20 CLASS C: Net assets $ 13,424 $ 5,752 Shares issued and outstanding ($0.0001 par value -- 2 billion authorized) 1,165 565 Net asset value per share and redemption price per share (2) $ 11.53 $ 10.18 Maximum offering price per share (1) $ 11.65 $ 10.28 CLASS S: Net assets $ 39,236 $ 2,668 Shares issued and outstanding ($0.0001 par value -- 2 billion authorized) 3,394 261 Net asset value, offering price, and redemption price per share $ 11.56 $ 10.23 CLASS Y: Net assets $ 1,955,909 $ 245,877 Shares issued and outstanding ($0.0001 par value -- 2 billion authorized) 169,168 24,037 Net asset value, offering price, and redemption price per share $ 11.56 $ 10.23
(1) The offering price is calculated by dividing the net asset value by 1 minus the maximum sales charge. For a description of front-end sales charges, see note 1 in Notes to Financial Statements. (2) Class B and C have a contingent deferred sales charge. For a description of this sales charge, see notes 1 and 3 in Notes to Financial Statements. The accompanying notes are an integral part of the financial statements. 56
INTERMEDIATE HIGH INCOME GOVERNMENT INTERMEDIATE TERM BOND FUND BOND FUND BOND FUND - ---------------------------------------------------------------------------------------------------------------- ASSETS: Investments in unaffiliated securities, at value*+ $ 315,987 $ 333,367 $ 1,963,689 Investments in affiliated securities, at value** 2,809 2,124 50,689 Cash 39 -- -- Cash denominated in foreign currencies, at value*** 435 -- -- Dividends and interest receivable 5,576 3,010 12,846 Receivable for investment securities sold 1,684 -- 9,972 Capital shares sold 363 -- 1,180 Prepaid expenses and other assets 17 12 27 - ---------------------------------------------------------------------------------------------------------------- TOTAL ASSETS 326,910 338,513 2,038,403 ================================================================================================================ LIABILITIES: Bank overdraft -- -- 6,246 Options written, at value -- 133 534 Payable upon return of securities loaned 75,215 -- 614,769 Payable for investment securities purchased 506 -- 26,362 Capital shares redeemed 170 813 2,311 Payable for advisory, co-administration, and custodian fees 157 196 686 Payable for distribution and shareholder servicing fees 32 -- 11 - ---------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES 76,080 1,142 650,919 ================================================================================================================ NET ASSETS $ 250,830 $ 337,371 $ 1,387,484 ================================================================================================================ COMPOSITION OF NET ASSETS: Portfolio capital $ 266,142 $ 297,420 $ 1,338,587 Undistributed (distributions in excess of) net investment income 245 -- (3) Accumulated net realized gain (loss) on investments (30,846) 28,875 9,909 Net unrealized appreciation of investments 15,285 11,127 39,197 Net unrealized depreciation of options written -- (51) (206) Net unrealized appreciation of forward foreign currency contracts, foreign currency, and translation of assets and liabilities denominated in foreign currency 4 -- -- - ---------------------------------------------------------------------------------------------------------------- NET ASSETS $ 250,830 $ 337,371 $ 1,387,484 ================================================================================================================ * Investments in unaffiliated securities, at cost $ 300,702 $ 322,240 $ 1,924,492 ** Investments in affiliated securities, at cost 2,809 2,124 50,689 *** Cash denominated in foreign currencies, at cost 413 -- -- + Including securities loaned, at value 73,117 -- 602,382 CLASS A: Net assets $ 42,013 $ 2,502 $ 78,682 Shares issued and outstanding ($0.0001 par value -- 2 billion authorized) 4,603 250 7,525 Net asset value and redemption price per share $ 9.13 $ 10.01 $ 10.46 Maximum offering price per share (1) $ 9.54 $ 10.24 $ 10.70 CLASS B: Net assets $ 8,939 -- -- Shares issued and outstanding ($0.0001 par value -- 2 billion authorized) 983 -- -- Net asset value, offering price, and redemption price per share (2) $ 9.09 -- -- CLASS C: Net assets $ 19,685 -- -- Shares issued and outstanding ($0.0001 par value -- 2 billion authorized) 2,163 -- -- Net asset value per share and redemption price per share (2) $ 9.10 -- -- Maximum offering price per share (1) $ 9.19 -- -- CLASS S: Net assets $ 777 -- $ 12,273 Shares issued and outstanding ($0.0001 par value -- 2 billion authorized) 85 -- 1,174 Net asset value, offering price, and redemption price per share $ 9.21 -- $ 10.46 CLASS Y: Net assets $ 179,416 $ 334,869 $ 1,296,529 Shares issued and outstanding ($0.0001 par value -- 2 billion authorized) 19,644 33,467 124,357 Net asset value, offering price, and redemption price per share $ 9.13 $ 10.01 $ 10.43 SHORT TERM U.S. GOVERNMENT BOND FUND MORTGAGE FUND - ---------------------------------------------------------------------------------------------- ASSETS: Investments in unaffiliated securities, at value*+ $ 1,327,294 $ 376,005 Investments in affiliated securities, at value** -- 3,254 Cash 1,989 -- Cash denominated in foreign currencies, at value*** -- -- Dividends and interest receivable 8,183 1,315 Receivable for investment securities sold -- 9,791 Capital shares sold 1,894 140 Prepaid expenses and other assets 27 16 - ---------------------------------------------------------------------------------------------- TOTAL ASSETS 1,339,387 390,521 ============================================================================================== LIABILITIES: Bank overdraft -- 2,807 Options written, at value -- 104 Payable upon return of securities loaned 335,440 89,607 Payable for investment securities purchased -- 9,991 Capital shares redeemed 3,021 1,120 Payable for advisory, co-administration, and custodian fees 478 167 Payable for distribution and shareholder servicing fees 21 33 - ---------------------------------------------------------------------------------------------- TOTAL LIABILITIES 338,960 103,829 ============================================================================================== NET ASSETS $ 1,000,427 $ 286,692 ============================================================================================== COMPOSITION OF NET ASSETS: Portfolio capital $ 992,294 $ 284,758 Undistributed (distributions in excess of) net investment income 21 285 Accumulated net realized gain (loss) on investments (3,913) (3,017) Net unrealized appreciation of investments 12,025 4,706 Net unrealized depreciation of options written -- (40) Net unrealized appreciation of forward foreign currency contracts, foreign currency, and translation of assets and liabilities denominated in foreign currency -- -- - ---------------------------------------------------------------------------------------------- NET ASSETS $ 1,000,427 $ 286,692 ============================================================================================== * Investments in unaffiliated securities, at cost $ 1,315,269 $ 371,299 ** Investments in affiliated securities, at cost -- 3,254 *** Cash denominated in foreign currencies, at cost -- -- + Including securities loaned, at value 332,630 88,008 CLASS A: Net assets $ 159,451 $ 24,667 Shares issued and outstanding ($0.0001 par value -- 2 billion authorized) 15,542 2,266 Net asset value and redemption price per share $ 10.26 $ 10.89 Maximum offering price per share (1) $ 10.50 $ 11.37 CLASS B: Net assets -- $ 11,397 Shares issued and outstanding ($0.0001 par value -- 2 billion authorized) -- 1,046 Net asset value, offering price, and redemption price per share (2) -- $ 10.90 CLASS C: Net assets -- $ 18,801 Shares issued and outstanding ($0.0001 par value -- 2 billion authorized) -- 1,734 Net asset value per share and redemption price per share (2) -- $ 10.84 Maximum offering price per share (1) -- $ 10.95 CLASS S: Net assets $ 8,710 $ 17,296 Shares issued and outstanding ($0.0001 par value -- 2 billion authorized) 850 1,595 Net asset value, offering price, and redemption price per share $ 10.25 $ 10.85 CLASS Y: Net assets $ 832,266 $ 214,531 Shares issued and outstanding ($0.0001 par value -- 2 billion authorized) 81,090 19,701 Net asset value, offering price, and redemption price per share $ 10.26 $ 10.89
57 STATEMENTS OF OPERATIONS For the period ended September 30, 2003, in thousands
CORE BOND CORPORATE HIGH INCOME FUND BOND FUND BOND FUND - ------------------------------------------------------------------------------------------------------- INVESTMENT INCOME: Interest from unaffiliated interest $ 83,877 $ 16,325 $ 17,908 Interest from affiliated interest 1,255 31 87 Dividends -- -- 73 Securities lending 447 40 45 Other income -- 10 -- - ------------------------------------------------------------------------------------------------------- TOTAL INVESTMENT INCOME 85,579 16,406 18,113 ======================================================================================================= EXPENSES: Investment advisory fees 9,438 1,861 1,439 Co-administration fees and expenses (including per 2,445 745 account transfer agency fees) 5,175 741 584 Custodian fees 189 27 21 Directors' fees 30 4 3 Registration fees 18 22 24 Professional fees 150 6 7 Printing 43 7 5 Other 37 7 8 Distribution and shareholder servicing - Class A fees 407 27 83 Distribution and shareholder servicing - Class B fees 238 161 63 Distribution and shareholder servicing - Class C fees 123 54 134 Shareholder servicing fees - Class S 94 8 1 - ------------------------------------------------------------------------------------------------------- TOTAL EXPENSES 15,942 2,925 2,372 ======================================================================================================= Less: Fee waivers (1,867) (681) (394) - ------------------------------------------------------------------------------------------------------- TOTAL NET EXPENSES 14,075 2,244 1,978 ======================================================================================================= INVESTMENT INCOME - NET 71,504 14,162 16,135 - ------------------------------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS, FUTURES CONTRACTS, FOREIGN CURRENCY TRANSACTIONS AND OPTIONS WRITTEN - NET: Net realized gain (loss) on investments 55,962 4,772 (249) Net realized gain on futures contracts 131 16 -- Net realized loss on forward foreign currency contracts and foreign currency transactions -- -- (31) Net change in unrealized appreciation or depreciation of investments (34,740) 11,176 27,108 Net change in unrealized appreciation or depreciation of options written (343) -- -- Net change in unrealized appreciation or depreciation of forward foreign currency contracts, foreign currency, and translation of other assets and liabilities denominated in foreign currency -- -- 11 - ------------------------------------------------------------------------------------------------------- NET GAIN (LOSS) ON INVESTMENTS 21,010 15,964 26,839 ======================================================================================================= NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 92,514 $ 30,126 $ 42,974 ======================================================================================================= INTERMEDIATE GOVERNMENT INTERMEDIATE TERM BOND FUND (1) BOND FUND - ------------------------------------------------------------------------------------------- INVESTMENT INCOME: Interest from unaffiliated interest $ 17,643 $ 59,840 Interest from affiliated interest 3 511 Dividends -- -- Securities lending -- 414 Other income -- -- - ------------------------------------------------------------------------------------------- TOTAL INVESTMENT INCOME 17,646 60,765 =========================================================================================== EXPENSES: Investment advisory fees 2,076 6,657 Co-administration fees and expenses (including per account transfer agency fees) 1,144 3,676 Custodian fees 42 133 Directors' fees 7 21 Registration fees -- 3 Professional fees 17 49 Printing 13 37 Other 7 30 Distribution and shareholder servicing - Class A fees 4 181 Distribution and shareholder servicing - Class B fees -- -- Distribution and shareholder servicing - Class C fees -- -- Shareholder servicing fees - Class S -- 29 - ------------------------------------------------------------------------------------------- TOTAL EXPENSES 3,310 10,816 =========================================================================================== Less: Fee waivers (816) (2,701) - ------------------------------------------------------------------------------------------- TOTAL NET EXPENSES 2,494 8,115 =========================================================================================== INVESTMENT INCOME - NET 15,152 52,650 - ------------------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS, FUTURES CONTRACTS, FOREIGN CURRENCY TRANSACTIONS AND OPTIONS WRITTEN - NET: Net realized gain (loss) on investments 29,420 31,050 Net realized gain on futures contracts -- 77 Net realized loss on forward foreign currency contracts and foreign currency transactions -- -- Net change in unrealized appreciation or depreciation of investments 11,127 (12,504) Net change in unrealized appreciation or depreciation of options written (51) (206) Net change in unrealized appreciation or depreciation of forward foreign currency contracts, foreign currency, and translation of other assets and liabilities denominated in foreign currency -- -- - ------------------------------------------------------------------------------------------- NET GAIN (LOSS) ON INVESTMENTS 40,496 18,417 =========================================================================================== NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 55,648 $ 71,067 ===========================================================================================
(1) Commenced operations on October 25, 2002. The accompanying notes are an integral part of the financial statements. 58
SHORT TERM U.S. GOVERNMENT BOND FUND MORTGAGE FUND - ----------------------------------------------------------------------------------------- INVESTMENT INCOME: Interest from unaffiliated interest $ 30,133 $ 10,360 Interest from affiliated interest 208 225 Dividends -- -- Securities lending 194 7 Other income -- -- - ----------------------------------------------------------------------------------------- TOTAL INVESTMENT INCOME 30,535 10,592 ========================================================================================= EXPENSES: Investment advisory fees 4,415 1,337 Co-administration fees and expenses (including per account transfer agency fees) 88 27 Custodian fees 14 4 Directors' fees 17 21 Registration fees 33 9 Professional fees 23 7 Printing 18 8 Other 418 55 Distribution and shareholder servicing - Class A fees -- 97 Distribution and shareholder servicing - Class B fees -- 136 Distribution and shareholder servicing - Class C fees 19 53 Shareholder servicing fees - Class S - ----------------------------------------------------------------------------------------- TOTAL EXPENSES 7,490 2,499 ========================================================================================= Less: Fee waivers (1,930) (286) - ----------------------------------------------------------------------------------------- TOTAL NET EXPENSES 5,560 2,213 ========================================================================================= INVESTMENT INCOME - NET 24,975 8,379 - ----------------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS, FUTURES CONTRACTS, FOREIGN CURRENCY TRANSACTIONS AND OPTIONS WRITTEN - NET: Net realized gain (loss) on investments 3,108 100 Net realized gain on futures contracts -- 81 Net realized loss on forward foreign currency contracts and foreign currency transactions -- -- Net change in unrealized appreciation or depreciation of investments (3,652) (1,315) Net change in unrealized appreciation or depreciation of options written -- (40) Net change in unrealized appreciation or depreciation of forward foreign currency contracts, foreign currency, and translation of other assets and liabilities denominated in foreign currency -- -- - ----------------------------------------------------------------------------------------- NET GAIN (LOSS) ON INVESTMENTS (544) (1,174) ========================================================================================= NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 24,431 $ 7,205 =========================================================================================
59 STATEMENTS OF CHANGES IN NET ASSETS in thousands
CORE BOND CORPORATE FUND BOND FUND - -------------------------------------------------------------------------------------------------------------- 10/1/02 10/1/01 10/1/02 10/1/01 TO TO TO TO 9/30/03 9/30/02 9/30/03 9/30/02 - -------------------------------------------------------------------------------------------------------------- OPERATIONS: Investment income - net $ 71,504 $ 73,522 $ 14,162 $ 14,023 Net realized gain (loss) on investments 55,962 13,696 4,772 (8,043) Net realized gain on futures contracts 131 -- 16 -- Net realized gain (loss) on forward foreign currency contracts and foreign currency transactions -- -- -- -- Net change in unrealized appreciation or depreciation of investments (34,740) (5,915) 11,176 (1,455) Net change in unrealized appreciation or depreciation of options written (343) -- -- -- Net change in unrealized appreciation or depreciation of forward foreign currency contracts, foreign currency, and translation of other assets and liabilities denominated in foreign currency -- -- -- -- - -------------------------------------------------------------------------------------------------------------- Net increase in net assets resulting from operations 92,514 81,303 30,126 4,525 ============================================================================================================== DISTRIBUTIONS TO SHAREHOLDERS FROM: Investment income - net: Class A (6,386) (5,694) (562) (563) Class B (761) (643) (720) (1,089) Class C (394) (393) (243) (269) Class S (1,471) (1,583) (171) (227) Class Y (68,921) (64,394) (12,466) (12,232) Net realized gain on investments: Class A -- -- -- (6) Class B -- -- -- (13) Class C -- -- -- (3) Class S -- -- -- (2) Class Y -- -- -- (114) Return of capital: Class A -- (51) -- (1) Class B -- (7) -- (3) Class C -- (4) -- (1) Class S -- (14) -- (1) Class Y -- (501) -- (33) - -------------------------------------------------------------------------------------------------------------- Total distributions (77,933) (73,284) (14,162) (14,557) ============================================================================================================== CAPITAL SHARE TRANSACTIONS (2): Class A: Proceeds from sales 44,693 52,786 12,184 2,755 Reinvestment of distributions 4,658 4,057 416 423 Payments for redemptions (67,122) (54,463) (8,330) (3,903) Shares issued in connection with the acquisition of Fund net assets 86,055 -- -- -- - -------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from Class A transactions 68,284 2,380 4,270 (725) - -------------------------------------------------------------------------------------------------------------- Class B: Proceeds from sales 4,276 4,648 1,645 1,464 Reinvestment of distributions 663 581 503 759 Payments for redemptions (8,849) (3,694) (8,300) (5,196) Shares issued in connection with the acquisition of Fund net assets 15,099 -- -- -- - -------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from Class B transactions 11,189 1,535 (6,152) (2,973) - -------------------------------------------------------------------------------------------------------------- Class C: Proceeds from sales 3,466 7,032 1,163 1,921 Reinvestment of distributions 384 386 229 256 Payments for redemptions (5,856) (4,975) (1,248) (1,872) Shares issued in connection with the acquisition of Fund net assets 5,671 -- -- -- - -------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from Class C transactions 3,665 2,443 144 305 - -------------------------------------------------------------------------------------------------------------- Class S: Proceeds from sales 13,667 11,652 344 2,448 Reinvestment of distributions 1,428 1,586 164 221 Payments for redemptions (39,383) (15,236) (1,599) (2,184) Shares issued in connection with the acquisition of Fund net assets 30,116 -- -- -- - -------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from Class S transactions 5,828 (1,998) (1,091) 485 - -------------------------------------------------------------------------------------------------------------- Class Y: Proceeds from sales 394,555 235,496 94,737 67,697 Reinvestment of distributions 25,605 18,366 1,423 1,323 Payments for redemptions (652,840) (424,808) (68,932) (41,314) Shares issued in connection with the acquisition of Common Trust Fund net assets 13,076 -- -- -- Shares issued in connection with the acquisition of Fund net assets 957,884 -- -- -- - -------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from Class Y transactions 738,280 (170,946) 27,228 27,706 - -------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions 827,246 (166,586) 24,399 24,798 - -------------------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets 841,827 (158,567) 40,363 14,766 NET ASSETS AT BEGINNING OF PERIOD 1,386,592 1,545,159 241,032 226,266 ============================================================================================================== NET ASSETS AT END OF PERIOD $ 2,228,419 $ 1,386,592 $ 281,395 $ 241,032 ============================================================================================================== UNDISTRIBUTED (DISTRIBUTIONS IN EXCESS OF) NET INVESTMENT INCOME AT END OF PERIOD $ 983 $ -- $ 9 $ -- ==============================================================================================================
(1) Commencement of operations. (2) See note 4 in Notes to Financial Statements for additional information. The accompanying notes are an integral part of the financial statements. 60
INTERMEDIATE HIGH INCOME GOVERNMENT INTERMEDIATE TERM BOND FUND BOND FUND BOND FUND - ---------------------------------------------------------------------------------------------------------------------------------- 10/1/02 10/1/01 10/25/02 (1) 10/1/02 10/1/01 TO TO TO TO TO 9/30/03 9/30/02 9/30/03 9/30/03 9/30/02 - ---------------------------------------------------------------------------------------------------------------------------------- OPERATIONS: Investment income - net $ 16,135 $ 14,614 $ 15,152 $ 52,650 $ 49,380 Net realized gain (loss) on investments (249) (13,064) 29,420 31,050 (1,622) Net realized gain on futures contracts -- -- -- 77 -- Net realized gain (loss) on forward foreign currency contracts and foreign currency transactions (31) 2 -- -- -- Net change in unrealized appreciation or depreciation of investments 27,108 4,732 11,127 (12,504) 12,719 Net change in unrealized appreciation or depreciation of options written -- -- (51) (206) -- Net change in unrealized appreciation or depreciation of forward foreign currency contracts, foreign currency, and translation of other assets and liabilities denominated in foreign currency 11 (19) -- -- -- - ---------------------------------------------------------------------------------------------------------------------------------- Net increase in net assets resulting from operations 42,974 6,265 55,648 71,067 60,477 ================================================================================================================================== DISTRIBUTIONS TO SHAREHOLDERS FROM: Investment income - net: Class A (2,492) (1,501) (54) (2,820) (3,120) Class B (434) (253) -- -- -- Class C (929) (390) -- -- -- Class S (29) -- -- (459) (160) Class Y (11,903) (12,433) (15,108) (50,548) (46,355) Net realized gain on investments: Class A -- -- (1) -- -- Class B -- -- -- -- -- Class C -- -- -- -- -- Class S -- -- -- -- -- Class Y -- -- (534) -- -- Return of capital: Class A -- -- -- -- (54) Class B -- -- -- -- -- Class C -- -- -- -- -- Class S -- -- -- -- (5) Class Y -- -- -- -- (816) - ---------------------------------------------------------------------------------------------------------------------------------- Total distributions (15,787) (14,577) (15,697) (53,827) (50,510) ================================================================================================================================== CAPITAL SHARE TRANSACTIONS (2): Class A: Proceeds from sales 17,072 2,976 4,608 33,969 28,252 Reinvestment of distributions 1,708 874 44 1,921 2,308 Payments for redemptions (22,686) (3,999) (2,133) (23,162) (27,067) Shares issued in connection with the acquisition of Fund net assets 23,374 -- -- -- -- - ---------------------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from Class A transactions 19,468 (149) 2,519 12,728 3,493 - ---------------------------------------------------------------------------------------------------------------------------------- Class B: Proceeds from sales 3,119 2,189 -- -- -- Reinvestment of distributions 238 133 -- -- -- Payments for redemptions (1,301) (328) -- -- -- Shares issued in connection with the acquisition of Fund net assets 1,910 -- -- -- -- - ---------------------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from Class B transactions 3,966 1,994 -- -- -- - ---------------------------------------------------------------------------------------------------------------------------------- Class C: Proceeds from sales 6,021 3,547 -- -- -- Reinvestment of distributions 835 337 -- -- -- Payments for redemptions (4,896) (1,565) -- -- -- Shares issued in connection with the acquisition of Fund net assets 9,735 -- -- -- -- - ---------------------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from Class C transactions 11,695 2,319 -- -- -- - ---------------------------------------------------------------------------------------------------------------------------------- Class S: Proceeds from sales 562 131 -- 10,407 6,552 Reinvestment of distributions 11 -- -- 396 105 Payments for redemptions (90) (125) -- (4,751) (1,422) Shares issued in connection with the acquisition of Fund net assets 243 -- -- -- -- - ---------------------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from Class S transactions 726 6 -- 6,052 5,235 - ---------------------------------------------------------------------------------------------------------------------------------- Class Y: Proceeds from sales 71,560 39,319 516,031 688,524 294,924 Reinvestment of distributions 2,190 2,521 616 20,564 15,604 Payments for redemptions (86,258) (54,456) (221,746) (407,391) (220,100) Shares issued in connection with the acquisition of Common Trust Fund net assets -- -- -- -- -- Shares issued in connection with the acquisition of Fund net assets 36,227 -- -- -- -- - ---------------------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from Class Y transactions 23,719 (12,616) 294,901 301,697 90,428 - ---------------------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions 59,574 (8,446) 297,420 320,477 99,156 - ---------------------------------------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets 86,761 (16,758) 337,371 337,717 109,123 NET ASSETS AT BEGINNING OF PERIOD 164,069 180,827 -- 1,049,767 940,644 ================================================================================================================================== NET ASSETS AT END OF PERIOD $ 250,830 $ 164,069 $ 337,371 $ 1,387,484 $ 1,049,767 ================================================================================================================================== UNDISTRIBUTED (DISTRIBUTIONS IN EXCESS OF) NET INVESTMENT INCOME AT END OF PERIOD $ 245 $ 3 $ -- $ (3) $ (5) ================================================================================================================================== SHORT TERM U.S. GOVERNMENT BOND FUND MORTGAGE FUND - ----------------------------------------------------------------------------------------------------------------- 10/1/02 10/1/01 10/1/02 10/1/01 TO TO TO TO 9/30/03 9/30/02 9/30/03 9/30/02 - ----------------------------------------------------------------------------------------------------------------- OPERATIONS: Investment income - net $ 24,975 $ 20,442 $ 8,379 $ 10,205 Net realized gain (loss) on investments 3,108 1,832 100 7,575 Net realized gain on futures contracts -- -- 81 -- Net realized gain (loss) on forward foreign currency contracts and foreign currency transactions -- -- -- -- Net change in unrealized appreciation or depreciation of investments (3,652) 3,212 (1,315) (3,630) Net change in unrealized appreciation or depreciation of options written -- -- (40) -- Net change in unrealized appreciation or depreciation of forward foreign currency contracts, foreign currency, and translation of other assets and liabilities denominated in foreign currency -- -- -- -- - ----------------------------------------------------------------------------------------------------------------- Net increase in net assets resulting from operations 24,431 25,486 7,205 14,150 ================================================================================================================= DISTRIBUTIONS TO SHAREHOLDERS FROM: Investment income - net: Class A (4,952) (5,904) (901) (546) Class B -- -- (325) (144) Class C -- -- (462) (58) Class S (226) (60) (898) (1,076) Class Y (21,801) (15,035) (8,765) (9,186) Net realized gain on investments: Class A -- -- (183) -- Class B -- -- (75) -- Class C -- -- (81) -- Class S -- -- (238) -- Class Y -- -- (1,877) -- Return of capital: Class A -- (137) -- -- Class B -- -- -- -- Class C -- -- -- -- Class S -- (3) -- -- Class Y -- (405) -- -- - ----------------------------------------------------------------------------------------------------------------- Total distributions (26,979) (21,544) (13,805) (11,010) ================================================================================================================= CAPITAL SHARE TRANSACTIONS (2): Class A: Proceeds from sales 88,965 67,442 16,589 10,556 Reinvestment of distributions 3,821 4,441 925 468 Payments for redemptions (96,111) (42,362) (9,260) (2,049) Shares issued in connection with the acquisition of Fund net assets -- -- -- -- - ----------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from Class A transactions (3,325) 29,521 8,254 8,975 - ----------------------------------------------------------------------------------------------------------------- Class B: Proceeds from sales -- -- 8,485 4,740 Reinvestment of distributions -- -- 368 130 Payments for redemptions -- -- (3,444) (754) Shares issued in connection with the acquisition of Fund net assets -- -- -- -- - ----------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from Class B transactions -- -- 5,409 4,116 - ----------------------------------------------------------------------------------------------------------------- Class C: Proceeds from sales -- -- 16,974 5,832 Reinvestment of distributions -- -- 535 56 Payments for redemptions -- -- (4,217) (214) Shares issued in connection with the acquisition of Fund net assets -- -- -- -- - ----------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from Class C transactions -- -- 13,292 5,674 - ----------------------------------------------------------------------------------------------------------------- Class S: Proceeds from sales 7,087 3,946 7,399 9,678 Reinvestment of distributions 171 40 1,113 1,072 Payments for redemptions (2,214) (708) (11,972) (8,787) Shares issued in connection with the acquisition of Fund net assets -- -- -- -- - ----------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from Class S transactions 5,044 3,278 (3,460) 1,963 - ----------------------------------------------------------------------------------------------------------------- Class Y: Proceeds from sales 647,898 325,792 85,238 35,474 Reinvestment of distributions 8,107 5,649 1,673 1,500 Payments for redemptions (306,375) (127,339) (48,569) (42,257) Shares issued in connection with the acquisition of Common Trust Fund net assets -- -- -- -- Shares issued in connection with the acquisition of Fund net assets -- -- -- -- - ----------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from Class Y transactions 349,630 204,102 38,342 (5,283) - ----------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions 351,349 236,901 61,837 15,445 - ----------------------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets 348,801 240,843 55,237 18,585 NET ASSETS AT BEGINNING OF PERIOD 651,626 410,783 231,455 212,870 ================================================================================================================= NET ASSETS AT END OF PERIOD $ 1,000,427 $ 651,626 $ 286,692 $ 231,455 ================================================================================================================= UNDISTRIBUTED (DISTRIBUTIONS IN EXCESS OF) NET INVESTMENT INCOME AT END OF PERIOD $ 21 $ (4) $ 285 $ 163 =================================================================================================================
61 FINANCIAL HIGHLIGHTS For a share outstanding throughout the periods ended September 30, unless otherwise indicated.
REALIZED AND NET ASSET UNREALIZED DIVIDENDS VALUE NET GAINS FROM NET DISTRIBUTIONS BEGINNING INVESTMENT (LOSSES) ON INVESTMENT FROM NET OF PERIOD INCOME INVESTMENTS INCOME REALIZED GAINS - ------------------------------------------------------------------------------------------------------ CORE BOND FUND Class A 2003 $ 11.45 $ 0.42 $ 0.15 $ (0.46) $ -- 2002 11.37 0.55 0.08 (0.55) -- 2001 (1) 10.69 0.61 0.69 (0.62) -- 2000 10.65 0.61 0.04 (0.61) -- 1999 11.69 0.59 (0.89) (0.59) (0.15) Class B 2003 $ 11.38 $ 0.35 $ 0.12 $ (0.37) $ -- 2002 11.29 0.47 0.09 (0.47) -- 2001 (1) 10.63 0.52 0.68 (0.54) -- 2000 10.58 0.53 0.05 (0.53) -- 1999 11.63 0.51 (0.90) (0.51) (0.15) Class C 2003 $ 11.42 $ 0.34 $ 0.14 $ (0.37) $ -- 2002 11.34 0.47 0.08 (0.47) -- 2001 (1) 10.66 0.52 0.70 (0.54) -- 2000 10.64 0.52 0.04 (0.54) -- 1999 (2) 11.33 0.38 (0.69) (0.38) -- Class S 2003 $ 11.45 $ 0.42 $ 0.15 $ (0.46) $ -- 2002 11.37 0.55 0.08 (0.55) -- 2001 (1) (3) 11.28 0.01 0.08 -- -- Class Y 2003 $ 11.45 $ 0.45 $ 0.15 $ (0.49) $ -- 2002 11.37 0.58 0.08 (0.58) -- 2001 (1) 10.69 0.63 0.70 (0.65) -- 2000 10.65 0.63 0.04 (0.63) -- 1999 11.69 0.61 (0.89) (0.61) (0.15) CORPORATE BOND FUND Class A 2003 $ 9.60 $ 0.51 $ 0.63 $ (0.51) $ -- 2002 10.01 0.57 (0.39) (0.58) (0.01) 2001 (1) 10.03 0.72 0.35 (0.73) (0.36) 2000 (4) 10.00 0.48 0.02 (0.47) -- Class B 2003 $ 9.57 $ 0.44 $ 0.63 $ (0.44) $ -- 2002 9.98 0.49 (0.38) (0.51) (0.01) 2001 (1) 10.02 0.66 0.32 (0.66) (0.36) 2000 (4) 10.00 0.45 0.01 (0.44) -- Class C 2003 $ 9.55 $ 0.44 $ 0.63 $ (0.44) $ -- 2002 9.97 0.49 (0.40) (0.50) (0.01) 2001 (1) 10.01 0.63 0.35 (0.66) (0.36) 2000 (4) 10.00 0.45 (0.01) (0.43) -- Class S 2003 $ 9.60 $ 0.51 $ 0.63 $ (0.51) $ -- 2002 10.01 0.56 (0.38) (0.58) (0.01) 2001 (1) (3) 9.93 0.01 0.07 -- -- Class Y 2003 $ 9.59 $ 0.54 $ 0.64 $ (0.54) $ -- 2002 10.00 0.59 (0.39) (0.60) (0.01) 2001 (1) 10.03 0.75 0.33 (0.75) (0.36) 2000 (4) 10.00 0.49 0.02 (0.48) --
(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) Commenced operations on February 1, 2000. All ratios for the period have been annualized, except total return and portfolio turnover. (5) 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. 62
NET ASSET RATIO OF VALUE NET ASSETS EXPENSES TO END OF TOTAL END OF AVERAGE PERIOD RETURN (5) PERIOD (000) NET ASSETS - ------------------------------------------------------------------------------------- CORE BOND FUND Class A 2003 $ 11.56 5.08% $ 191,754 0.95% 2002 11.45 5.77 122,354 0.95 2001 (1) 11.37 12.50 119,067 0.95 2000 10.69 6.33 110,490 0.95 1999 10.65 (2.67) 137,133 0.95 Class B 2003 $ 11.48 4.23% $ 28,096 1.70% 2002 11.38 5.12 16,741 1.70 2001 (1) 11.29 11.59 15,071 1.70 2000 10.63 5.70 11,550 1.70 1999 10.58 (3.48) 14,639 1.70 Class C 2003 $ 11.53 4.30% $ 13,424 1.70% 2002 11.42 5.02 9,672 1.70 2001 (1) 11.34 11.68 7,148 1.70 2000 10.66 5.50 566 1.70 1999 (2) 10.64 (2.75) 719 1.35 Class S 2003 $ 11.56 5.08% $ 39,236 0.95% 2002 11.45 5.77 33,270 0.95 2001 (1) (3) 11.37 0.80 35,062 1.58 Class Y 2003 $ 11.56 5.34% $ 1,955,909 0.70% 2002 11.45 6.04 1,204,555 0.70 2001 (1) 11.37 12.76 1,368,812 0.70 2000 10.69 6.59 1,299,941 0.70 1999 10.65 (2.44) 1,239,900 0.70 CORPORATE BOND FUND Class A 2003 $ 10.23 12.26% $ 13,522 1.00% 2002 9.60 1.83 8,663 1.00 2001 (1) 10.01 10.94 9,820 0.75 2000 (4) 10.03 5.17 771 0.72 Class B 2003 $ 10.20 11.46% $ 13,576 1.75% 2002 9.57 1.07 18,728 1.75 2001 (1) 9.98 10.06 22,608 1.65 2000 (4) 10.02 4.70 103 1.48 Class C 2003 $ 10.18 11.50% $ 5,752 1.75% 2002 9.55 0.98 5,283 1.75 2001 (1) 9.97 10.10 5,209 1.50 2000 (4) 10.01 4.54 143 1.48 Class S 2003 $ 10.23 12.25% $ 2,668 1.00% 2002 9.60 1.84 3,557 1.00 2001 (1) (3) 10.01 0.81 3,237 0.89 Class Y 2003 $ 10.23 12.65% $ 245,877 0.75% 2002 9.59 2.08 204,801 0.75 2001 (1) 10.00 11.09 185,392 0.51 2000 (4) 10.03 5.32 89,990 0.48 RATIO OF RATIO OF NET RATIO OF NET EXPENSES TO INVESTMENT INVESTMENT AVERAGE INCOME INCOME NET ASSETS TO AVERAGE NET PORTFOLIO TO AVERAGE (EXCLUDING ASSETS (EXCLUDING TURNOVER NET ASSETS WAIVERS) WAIVERS) RATE - ---------------------------------------------------------------------------------------------- CORE BOND FUND Class A 2003 3.58% 1.05% 3.48% 196% 2002 4.93 1.03 4.85 115 2001 (1) 5.50 1.13 5.32 81 2000 5.76 1.14 5.57 54 1999 5.29 1.14 5.10 90 Class B 2003 2.83% 1.80% 2.73% 196% 2002 4.17 1.78 4.09 115 2001 (1) 4.75 1.88 4.57 81 2000 5.02 1.89 4.83 54 1999 4.53 1.89 4.34 90 Class C 2003 2.85% 1.80% 2.75% 196% 2002 4.18 1.78 4.10 115 2001 (1) 4.65 1.88 4.47 81 2000 5.02 1.89 4.83 54 1999 (2) 5.09 1.89 4.55 90 Class S 2003 3.58% 1.05% 3.48% 196% 2002 4.93 1.03 4.85 115 2001 (1) (3) 6.36 1.76 6.18 81 Class Y 2003 3.83% 0.80% 3.73% 196% 2002 5.18 0.78 5.10 115 2001 (1) 5.76 0.88 5.58 81 2000 6.03 0.89 5.84 54 1999 5.57 0.89 5.38 90 CORPORATE BOND FUND Class A 2003 5.15% 1.26% 4.89% 91% 2002 5.77 1.27 5.50 117 2001 (1) 6.95 1.20 6.50 187 2000 (4) 7.52 1.24 7.00 124 Class B 2003 4.46% 2.01% 4.20% 91% 2002 5.02 2.02 4.75 117 2001 (1) 6.45 2.11 5.99 187 2000 (4) 6.86 1.99 6.35 124 Class C 2003 4.43% 2.01% 4.17% 91% 2002 5.02 2.02 4.75 117 2001 (1) 6.07 1.94 5.63 187 2000 (4) 6.79 1.99 6.28 124 Class S 2003 5.21% 1.26% 4.95% 91% 2002 5.77 1.27 5.50 117 2001 (1) (3) 7.60 1.36 7.13 187 Class Y 2003 5.42% 1.01% 5.16% 91% 2002 6.03 1.02 5.76 117 2001 (1) 7.26 0.95 6.82 187 2000 (4) 7.75 0.99 7.24 124
63
REALIZED AND NET ASSET UNREALIZED DIVIDENDS VALUE NET GAINS FROM NET DISTRIBUTIONS BEGINNING INVESTMENT (LOSSES) ON INVESTMENT FROM NET RETURN OF OF PERIOD INCOME INVESTMENTS INCOME REALIZED GAINS CAPITAL - ------------------------------------------------------------------------------------------------------------------------ HIGH INCOME BOND FUND (1) Class A 2003 (2) $ 7.90 $ 0.68 $ 1.24 $ (0.69) $ -- $ -- 2002 9.23 0.65 (1.21) (0.70) -- (0.07) 2001 (2) (3) 9.93 0.02 (0.68) (0.04) -- -- Class B 2003 (2) $ 7.87 $ 0.61 $ 1.24 $ (0.63) $ -- $ -- 2002 9.19 0.69 (1.31) (0.63) -- (0.07) 2001 (2) (3) 9.88 0.02 (0.67) (0.04) -- -- Class C 2003 (2) $ 7.89 $ 0.61 $ 1.23 $ (0.63) $ -- $ -- 2002 9.21 0.64 (1.27) (0.62) -- (0.07) 2001 (2) (3) 9.90 0.05 (0.70) (0.04) -- -- Class S 2003 (2) $ 7.98 $ 0.71 $ 1.22 $ (0.70) $ -- $ -- 2002 9.32 0.73 (1.30) (0.70) -- (0.07) 2001 (2) (4) 9.50 0.01 (0.19) -- -- -- Class Y 2003 (2) $ 7.92 $ 0.69 $ 1.24 $ (0.72) $ -- $ -- 2002 9.24 0.74 (1.28) (0.71) -- (0.07) 2001 (2) (3) 9.92 0.05 (0.69) (0.04) -- -- INTERMEDIATE GOVERNMENT BOND FUND (5) Class A 2003 $ 10.00 $ 0.32 $ 0.02 $ (0.33) $ -- $ -- Class Y 2003 $ 10.00 $ 0.34 $ 0.01 $ (0.34) $ -- $ -- INTERMEDIATE TERM BOND FUND (6) Class A 2003 $ 10.35 $ 0.39 $ 0.12 $ (0.40) $ -- $ -- 2002 10.26 0.50 0.10 (0.50) -- (0.01) 2001 (2) (7) 9.70 0.54 0.55 (0.51) (0.02) -- 2000 (8) 9.68 0.58 0.02 (0.58) -- -- 1999 (8) 10.07 0.54 (0.38) (0.54) (0.01) -- 1998 (8) 9.88 0.55 0.19 (0.55) -- -- Class S 2003 $ 10.35 $ 0.40 $ 0.11 $ (0.40) $ -- $ -- 2002 10.26 0.51 0.09 (0.50) -- (0.01) 2001 (2) (9) 9.78 0.48 0.53 (0.51) (0.02) -- Class Y 2003 $ 10.32 $ 0.41 $ 0.12 $ (0.42) $ -- $ -- 2002 10.23 0.52 0.10 (0.52) -- (0.01) 2001 (2) (7) 9.68 0.56 0.54 (0.53) (0.02) -- 2000 (8) 9.66 0.60 0.02 (0.60) -- -- 1999 (8) 10.04 0.56 (0.37) (0.56) (0.01) -- 1998 (8) 9.86 0.56 0.18 (0.56) -- --
(1) The financial highlights for the High Income Bond Fund as set forth herein include the historical financial highlights of the First American High Yield Bond Fund Class A shares, Class B shares, Class C shares, Class S shares, and Class Y shares. The assets of the First American High Yield Bond Fund were acquired by High Income Bond Fund on March 14, 2003. In connection with such acquisition, Class A shares, Class B shares, Class C shares, Class S shares, and Class Y shares of the First American High Yield Bond Fund were exchanged for Class A shares, Class B shares, Class C shares, Class S shares, and Class Y shares of High Income Bond Fund, respectively. Historical per-share amounts have been adjusted to reflect the conversion ratios utilized for the merger of the High Income Bond Fund and the First American High Yield Bond Fund. (2) Per share data calculated using average shares outstanding method. (3) Commenced operations on August 30, 2001. All ratios for the period have been annualized, except total return and portfolio turnover. (4) Class of shares has been offered since September 24, 2001. All ratios for the period have been annualized, except total return and portfolio turnover. (5) Commenced operations on October 25, 2002. All ratios for the period have been annualized, except total return and portfolio turnover. The accompanying notes are an integral part of the financial statements. 64
NET ASSET RATIO OF VALUE NET ASSETS EXPENSES TO END OF TOTAL END OF AVERAGE PERIOD RETURN (10) PERIOD (000) NET ASSETS - --------------------------------------------------------------------------------------- HIGH INCOME BOND FUND (1) Class A 2003 (2) $ 9.13 25.30% $ 42,013 1.06% 2002 7.90 (6.66) 23,900 1.10 2001 (2) (3) 9.23 (6.55) 161 1.10 Class B 2003 (2) $ 9.09 24.33% $ 8,939 1.81% 2002 7.87 (7.26) 774 1.80 2001 (2) (3) 9.19 (6.47) 40 1.77 Class C 2003 (2) $ 9.10 24.14% $ 19,685 1.80% 2002 7.89 (7.34) 7,213 1.83 2001 (2) (3) 9.21 (6.50) 3,749 1.94 Class S 2003 (2) $ 9.21 25.11% $ 777 1.00% 2002 7.98 (6.66) 87 1.01 2001 (2) (4) 9.32 (1.90) -- -- Class Y 2003 (2) $ 9.13 25.29% $ 179,416 0.83% 2002 7.92 (6.33) 21,157 0.82 2001 (2) (3) 9.24 (6.47) 8,308 0.96 INTERMEDIATE GOVERNMENT BOND FUND (5) Class A 2003 $ 10.01 3.53% $ 2,502 0.75% Class Y 2003 $ 10.01 3.64% $ 334,869 0.60% INTERMEDIATE TERM BOND FUND (6) Class A 2003 $ 10.46 5.09% $ 78,682 0.75% 2002 10.35 6.11 65,291 0.75 2001 (2) (7) 10.26 11.46 61,225 0.85 2000 (8) 9.70 6.41 27,431 0.82 1999 (8) 9.68 1.66 33,779 0.81 1998 (8) 10.07 7.57 29,550 0.75 Class S 2003 $ 10.46 5.09% $ 12,273 0.75% 2002 10.35 6.12 6,070 0.75 2001 (2) (9) 10.26 10.58 724 0.84 Class Y 2003 $ 10.43 5.25% $ 1,296,529 0.60% 2002 10.32 6.29 978,406 0.60 2001 (2) (7) 10.23 11.61 878,695 0.60 2000 (8) 9.68 6.67 408,708 0.57 1999 (8) 9.66 1.91 284,047 0.56 1998 (8) 10.04 7.83 291,289 0.50 RATIO OF RATIO OF EXPENSES TO RATIO OF NET INVESTMENT AVERAGE INVESTMENT INCOME NET ASSETS INCOME TO AVERAGE PORTFOLIO TO AVERAGE (EXCLUDING NET ASSETS (EXCLUDING TURNOVER NET ASSETS WAIVERS) WAIVERS) RATE - ------------------------------------------------------------------------------------------------------- HIGH INCOME BOND FUND (1) Class A 2003 (2) 7.72% 1.24% 7.54% 122% 2002 7.64 1.47 7.27 86 2001 (2) (3) 6.53 1.33 6.30 53 Class B 2003 (2) 7.00% 1.99% 6.82% 122% 2002 7.49 2.28 7.01 86 2001 (2) (3) 6.02 2.02 5.77 53 Class C 2003 (2) 7.01% 1.98% 6.83% 122% 2002 7.08 2.26 6.65 86 2001 (2) (3) 5.53 2.21 5.26 53 Class S 2003 (2) 7.86% 1.18% 7.68% 122% 2002 8.46 1.57 7.90 86 2001 (2) (4) 1.23 -- 1.23 53 Class Y 2003 (2) 7.97% 1.01% 7.79% 122% 2002 8.19 1.27 7.74 86 2001 (2) (3) 6.06 1.23 5.79 53 INTERMEDIATE GOVERNMENT BOND FUND (5) Class A 2003 3.22% 1.05% 2.92% 74% Class Y 2003 3.68% 0.80% 3.48% 74% INTERMEDIATE TERM BOND FUND (6) Class A 2003 3.89% 1.05% 3.59% 133% 2002 4.96 1.02 4.69 40 2001 (2) (7) 5.62 0.96 5.51 30 2000 (8) 6.08 0.95 5.95 18 1999 (8) 5.47 0.95 5.33 64 1998 (8) 5.50 0.96 5.29 27 Class S 2003 3.89% 1.05% 3.59% 133% 2002 4.86 1.02 4.59 40 2001 (2) (9) 5.41 0.95 5.30 30 Class Y 2003 4.05% 0.80% 3.85% 133% 2002 5.11 0.77 4.94 40 2001 (2) (7) 5.83 0.70 5.73 30 2000 (8) 6.33 0.70 6.20 18 1999 (8) 5.71 0.70 5.57 64 1998 (8) 5.75 0.71 5.54 27
(6) The financial highlights for the Intermediate Term Bond Fund as set forth herein include the historical financial highlights of the Firstar Intermediate Bond Fund Class A shares, Class Y shares, and Class I shares. The assets of the Firstar Intermediate Bond Fund were acquired by Intermediate Term Bond Fund on September 24, 2001. In connection with such acquisition, Class A shares, Class Y shares, and Class I shares of the Firstar Intermediate Bond Fund were exchanged for Class A shares, Class S shares, and Class Y shares of Intermediate Term Bond Fund, respectively. Historical per-share amounts have been adjusted to reflect the conversion ratios utilized for the merger of the Intermediate Term Bond Fund and the Firstar Intermediate Bond Fund. (7) For the period November 1, 2000 to September 30, 2001. All ratios for the period have been annualized, except total return and portfolio turnover. The Fund's fiscal year end changed from October 31 to September 30. (8) For the fiscal year ended October 31. (9) Class of shares has been offered since November 27, 2000. All ratios for the period have been annualized, except total return and portfolio turnover. (10) Total return does not reflect sales charges. Total return would have been lower had certain expenses not been waived. 65
REALIZED AND NET ASSET UNREALIZED DIVIDENDS VALUE NET GAINS FROM NET DISTRIBUTIONS BEGINNING INVESTMENT (LOSSES) ON INVESTMENT FROM NET RETURN OF OF PERIOD INCOME INVESTMENTS INCOME REALIZED GAINS CAPITAL - ------------------------------------------------------------------------------------------------------------------------ SHORT TERM BOND FUND Class A 2003 $ 10.29 $ 0.28 $ (0.01) $ (0.30) $ -- $ -- 2002 10.27 0.42 0.04 (0.43) -- (0.01) 2001 (1) 9.91 0.61 0.40 (0.65) -- -- 2000 9.86 0.58 0.02 (0.55) -- -- 1999 10.04 0.52 (0.18) (0.52) -- -- Class S 2003 $ 10.29 $ 0.28 $ (0.02) $ (0.30) $ -- $ -- 2002 10.27 0.42 0.04 (0.43) -- (0.01) 2001 (1) (2) 10.25 0.01 0.01 -- -- -- Class Y 2003 $ 10.30 $ 0.30 $ (0.02) $ (0.32) $ -- $ -- 2002 10.27 0.43 0.05 (0.44) -- (0.01) 2001 (1) 9.91 0.63 0.39 (0.66) -- -- 2000 9.87 0.59 0.01 (0.56) -- -- 1999 10.04 0.52 (0.17) (0.52) -- -- U.S. GOVERNMENT MORTGAGE FUND (3) Class A 2003 $ 11.16 $ 0.35 $ (0.05) $ (0.45) $ (0.12) $ -- 2002 11.01 0.50 0.20 (0.55) -- -- 2001 (1) (4) 10.44 0.51 0.60 (0.54) -- -- 2000 (5) 10.34 0.53 0.08 (0.51) -- -- 1999 (6) 10.74 0.54 (0.40) (0.54) -- -- 1998 (6) 10.62 0.57 0.12 (0.57) -- -- Class B 2003 $ 11.18 $ 0.28 $ (0.06) $ (0.38) $ (0.12) $ -- 2002 11.03 0.42 0.20 (0.47) -- -- 2001 (1) (4) 10.45 0.43 0.62 (0.47) -- -- 2000 (5) 10.36 0.45 0.08 (0.44) -- -- 1999 (6) 10.74 0.47 (0.38) (0.47) -- -- 1998 (6) 10.61 0.50 0.13 (0.50) -- -- Class C 2003 $ 11.13 $ 0.29 $ (0.08) $ (0.38) $ (0.12) $ -- 2002 11.00 0.46 0.15 (0.48) -- -- 2001 (1) (2) 10.98 0.05 (0.03) -- -- -- Class S 2003 $ 11.12 $ 0.30 $ -- $ (0.45) $ (0.12) $ -- 2002 10.97 0.49 0.20 (0.54) -- -- 2001 (1) (4) 10.40 0.62 0.49 (0.54) -- -- 2000 (5) 10.31 0.53 0.07 (0.51) -- -- 1999 (6) 10.70 0.53 (0.38) (0.54) -- -- 1998 (6) 10.58 0.57 0.12 (0.57) -- -- Class Y 2003 $ 11.16 $ 0.37 $ (0.04) $ (0.48) $ (0.12) $ -- 2002 11.01 0.53 0.19 (0.57) -- -- 2001 (1) (4) 10.44 0.53 0.60 (0.56) -- -- 2000 (5) 10.34 0.55 0.08 (0.53) -- -- 1999 (6) 10.74 0.58 (0.41) (0.57) -- -- 1998 (6) 10.62 0.60 0.12 (0.60) -- --
(1) Per share data calculated using average shares outstanding method. (2) Class of shares has been offered since September 24, 2001. All ratios for the period have been annualized, except total return and portfolio turnover. (3) The financial highlights for the U.S. Government Mortgage Fund as set forth herein include the historical financial highlights of the Firstar U.S. Government Securities Fund Class A shares, Class B shares, Class Y shares, and Class I shares. The assets of the Firstar U.S. Government Securities Fund were acquired by U.S. Government Mortgage Fund on September 24, 2001. In connection with such acquisition, Class A shares, Class B shares, Class Y shares, and Class I shares of the Firstar U.S. Government Securities Fund were exchanged for Class A shares, Class B shares, Class S shares, and Class Y shares of U.S. Government Mortgage Fund, respectively. (4) For the period November 1, 2000 to September 30, 2001. All ratios for the period have been annualized, except total return and portfolio turnover. The Fund's fiscal year end was changed to September 30 from October 31. (5) For the period December 1, 1999 to October 31, 2000. All ratios for the period have been annualized, except total return and portfolio turnover. The Fund's fiscal year end was changed to October 31 from November 30. (6) For the fiscal year ended November 30. (7) 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. 66
NET ASSET RATIO OF VALUE NET ASSETS EXPENSES TO END OF TOTAL END OF AVERAGE PERIOD RETURN (7) PERIOD (000) NET ASSETS - ------------------------------------------------------------------------------------------ SHORT TERM BOND FUND Class A 2003 $ 10.26 2.71% $ 159,451 0.75% 2002 10.29 4.59 163,358 0.75 2001 (1) 10.27 10.48 133,177 0.60 2000 9.91 6.30 80,992 0.60 1999 9.86 3.43 5,318 0.60 Class S 2003 $ 10.25 2.61% $ 8,710 0.75% 2002 10.29 4.61 3,685 0.75 2001 (1) (2) 10.27 0.20 362 1.20 Class Y 2003 $ 10.26 2.76% $ 832,266 0.60% 2002 10.30 4.85 484,583 0.60 2001 (1) 10.27 10.64 277,244 0.46 2000 9.91 6.29 92,092 0.51 1999 9.87 3.53 119,522 0.60 U.S. GOVERNMENT MORTGAGE FUND (3) Class A 2003 $ 10.89 2.79% $ 24,667 0.95% 2002 11.16 6.53 16,985 0.95 2001 (1) (4) 11.01 10.88 7,751 1.04 2000 (5) 10.44 6.05 3,644 1.04 1999 (6) 10.34 1.37 4,620 0.98 1998 (6) 10.74 6.66 4,664 0.97 Class B 2003 $ 10.90 1.96% $ 11,397 1.70% 2002 11.18 5.79 6,235 1.70 2001 (1) (4) 11.03 10.25 2,039 1.71 2000 (5) 10.45 5.27 139 1.74 1999 (6) 10.36 0.86 282 1.68 1998 (6) 10.74 6.02 149 1.67 Class C 2003 $ 10.84 1.91% $ 18,801 1.70% 2002 11.13 5.78 5,834 1.70 2001 (1) (2) 11.00 0.18 105 0.82 Class S 2003 $ 10.85 2.79% $ 17,296 0.95% 2002 11.12 6.55 21,355 0.95 2001 (1) (4) 10.97 10.94 19,092 0.97 2000 (5) 10.40 5.96 5,145 1.04 1999 (6) 10.31 1.45 8,584 0.98 1998 (6) 10.70 6.67 6,140 0.97 Class Y 2003 $ 10.89 3.03% $ 214,531 0.70% 2002 11.16 6.79 181,046 0.70 2001 (1) (4) 11.01 11.14 183,883 0.71 2000 (5) 10.44 6.34 53,896 0.74 1999 (6) 10.34 1.67 72,483 0.68 1998 (6) 10.74 6.98 93,683 0.67 RATIO OF RATIO OF NET EXPENSES TO RATIO OF NET INVESTMENT AVERAGE INVESTMENT INCOME INCOME NET ASSETS TO AVERAGE NET PORTFOLIO TO AVERAGE (EXCLUDING ASSETS (EXCLUDING TURNOVER NET ASSETS WAIVERS) WAIVERS) RATE - ------------------------------------------------------------------------------------------- SHORT TERM BOND FUND Class A 2003 2.75% 1.05% 2.45% 60% 2002 4.06 1.04 3.77 59 2001 (1) 6.04 1.15 5.49 69 2000 6.12 1.13 5.59 95 1999 5.16 1.12 4.64 65 Class S 2003 2.68% 1.05% 2.38% 60% 2002 3.88 1.04 3.59 59 2001 (1) (2) 6.37 1.80 5.77 69 Class Y 2003 2.84% 0.80% 2.64% 60% 2002 4.18 0.79 3.99 59 2001 (1) 6.24 1.02 5.68 69 2000 5.94 0.98 5.47 95 1999 5.15 0.87 4.88 65 U.S. GOVERNMENT MORTGAGE FUND (3) Class A 2003 2.98% 1.06% 2.87% 175% 2002 4.61 1.08 4.48 197 2001 (1) (4) 5.15 1.19 5.00 22 2000 (5) 5.36 1.15 5.25 23 1999 (6) 5.15 1.09 5.04 26 1998 (6) 5.35 1.07 5.25 55 Class B 2003 2.22% 1.81% 2.11% 175% 2002 3.85 1.83 3.72 197 2001 (1) (4) 4.37 1.86 4.22 22 2000 (5) 4.66 1.85 4.55 23 1999 (6) 4.47 1.79 4.36 26 1998 (6) 4.67 1.77 4.57 55 Class C 2003 2.19% 1.81% 2.08% 175% 2002 3.92 1.83 3.79 197 2001 (1) (2) 5.26 1.12 4.96 22 Class S 2003 3.04% 1.06% 2.93% 175% 2002 4.59 1.08 4.46 197 2001 (1) (4) 6.52 1.15 6.34 22 2000 (5) 5.36 1.15 5.25 23 1999 (6) 5.17 1.09 5.06 26 1998 (6) 5.34 1.07 5.24 55 Class Y 2003 3.27% 0.81% 3.16% 175% 2002 4.84 0.83 4.71 197 2001 (1) (4) 5.37 0.85 5.23 22 2000 (5) 5.66 1.15 5.25 23 1999 (6) 5.45 1.09 5.04 26 1998 (6) 5.64 1.07 5.24 55
67 NOTES TO FINANCIAL STATEMENTS September 30, 2003 1 Organization The First American Core Bond Fund (formerly Fixed Income Fund), Corporate Bond Fund, High Income Bond Fund (formerly Strategic Income Fund), Intermediate Government Bond Fund, Intermediate Term Bond Fund, Short Term Bond Fund, and U.S. Government Mortgage Fund (formerly U.S. Government Securities Fund) (each a "Fund" and collectively, the "Funds") are mutual funds offered by First American Investment Funds, Inc. ("FAIF"), which is a member of First American Family of Funds. FAIF currently offers 37 funds, including the Funds included in this report. 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. FAIF offers Class A, Class B, Class C, Class S, and Class Y shares. Class A shares of Intermediate Government Bond Fund, Intermediate Term Bond Fund, and Short Term Bond Fund are sold with a front-end sales charge of 2.25%. Class A shares of Core Bond Fund, Corporate Bond Fund, High Income Bond Fund, and U.S. Government Mortgage Fund are sold with a front-end sales charge of 4.25%. Class B shares are subject to a contingent deferred sales charge for six years and automatically convert to Class A shares after eight years. Class C shares are sold with a front-end sales charge of 1.00%, are subject to a contingent deferred sales charge for 18 months, and will not convert to Class A shares. Class S and Class Y shares have no sales charge and are offered only to qualifying institutional investor and certain other qualifying accounts. Class B and Class C shares are not offered by the Intermediate Government Bond Fund, Intermediate Term Bond Fund, or Short Term Bond Fund. Class S shares are not offered by the Intermediate Government Bond Fund. The Funds' prospectuses provide descriptions of each Fund's investment objective, policies, and strategies. All classes of shares in a Fund have identical voting, dividend, liquidation, and other rights, and the same terms and conditions, except that the level of distribution and shareholder servicing fees charged may differ among classes and each class has exclusive voting rights on any matters relating to that class' servicing or distribution arrangements. 2 Summary of Significant Accounting Policies The significant accounting policies followed by the Funds are as follows: SECURITY VALUATIONS - 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. For securities traded on the Nasdaq national market system, the Funds utilize the Nasdaq Official Closing Price which compares the last trade to the bid/ask range of a security. If the last trade falls within the bid/ask range, then that price will be the closing price. If the last trade is outside the bid/ask range, and falls above the ask, the ask price will be the closing price. If the last price is below the bid, the bid will be the closing price. 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 60 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. If events occur that materially affect the value of securities (including non-U.S. securities) between the close of trading in those securities and the close of regular trading on the New York Stock Exchange, the securities will be valued at fair value. As of September 30, 2003, Core Bond Fund, High Income Bond Fund, and Short Term Bond Fund held fair value securities with a value of $3,400,000, $5,521 and $6,453 or 0.2%, 0.0%, and 0.0% 68 of total net assets, respectively. Debt obligations with 60 days or less remaining until maturity may be valued at their amortized cost, which approximates market value. Foreign securities are valued at the closing prices on the principal exchanges on which they trade. The prices for foreign securities are reported in local currency and converted to U.S. dollars using currency exchange rates. Exchange rates are provided daily by recognized independent pricing agents. Investments in open-end mutual funds are valued at the respective net asset value of each underlying fund, determined at the close of the New York Stock Exchange (generally 3:00 p.m. Central time) on the valuation date. 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 an 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 - Distributions from net investment income are declared and paid on a monthly basis. Any net realized capital gains on sales of securities for a Fund are distributed to shareholders, at least annually. FEDERAL TAXES - Each Fund is treated as a separate taxable entity. Each Fund intends to continue to qualify as a regulated investment company as provided in Subchapter M of the Internal Revenue Code, as amended, and to distribute all taxable income, if any, to its shareholders. 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 losses deferred on wash sales, paydowns on pass through obligations, expiring capital loss carryforwards, and tax mark to market adjustments under Section 311(e) of the Taxpayer Relief Act of 1997. To the extent these differences are permanent, reclassifications are made to the appropriate equity accounts in the period that the difference arises. On the Statements of Assets and Liabilities, the following reclassifications were made (000):
ACCUMULATED UNDISTRIBUTED ADDITIONAL NET REALIZED NET INVESTMENT PAID IN FUND GAIN (LOSS) INCOME CAPITAL ----------------------------------------------------------------------------------- Core Bond Fund $ (7,412) $ 7,412 $ -- Corporate Bond Fund (9) 9 -- High Income Bond Fund 5,537 (106) (5,431) Intermediate Government Bond Fund (10) 10 -- Intermediate Term Bond Fund (1,179) 1,179 -- Short Term Bond Fund 715 2,029 (2,744) U.S. Government Mortgage Fund (3,094) 3,094 --
The characterization 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 distributions paid during the fiscal years ended September 30, 2003 and 2002, were characterized as follows (000):
2003 ----------------------------------------------------------------------------------- ORDINARY LONG TERM FUND INCOME GAIN TOTAL ----------------------------------------------------------------------------------- Core Bond Fund $ 77,933 $ -- $ 77,933 Corporate Bond Fund 14,162 -- 14,162 High Income Bond Fund 15,787 -- 15,787 Intermediate Government Bond Fund 15,162 535 15,697 Intermediate Term Bond Fund 53,813 14 53,827 Short Term Bond Fund 26,979 -- 26,979 U.S. Government Mortgage Fund 11,426 2,379 13,805
2002 ----------------------------------------------------------------------------------- ORDINARY LONG TERM RETURN OF FUND INCOME GAIN CAPITAL TOTAL ----------------------------------------------------------------------------------- Core Bond Fund $ 72,708 $ -- $ 576 $ 73,284 Corporate Bond Fund 14,518 -- 39 14,557 High Income Bond Fund 14,577 -- -- 14,577 Intermediate Term Bond Fund 49,635 -- 875 50,510 Short Term Bond Fund 20,999 -- 545 21,544 U.S. Government Mortgage Fund 11,010 -- -- 11,010
69 As of September 30, 2003, the components of accumulated earnings (deficit) on a tax basis were (000):
ACCUMULATED UNDISTRIBUTED UNDISTRIBUTED CAPITAL AND UNREALIZED TOTAL ORDINARY LONG TERM POST-OCTOBER APPRECIATION ACCUMULATED FUND INCOME CAPITAL GAINS LOSSES (DEPRECIATION) EARNINGS (DEFICIT) --------------------------------------------------------------------------------------------------------------------- Core Bond Fund $ 986 $ 27,145 $ -- $ 42,548 $ 70,679 Corporate Bond Fund 9 -- (31,147) 11,186 (19,952) High Income Bond Fund 278 -- (30,879) 15,289 (15,312) Intermediate Government Bond Fund 2,093 26,827 -- 11,031 39,951 Intermediate Term Bond Fund -- 11,348 (1,330) 38,882 48,900 Short Term Bond Fund 24 -- (3,913) 12,025 8,136 U.S. Government Mortgage Fund 285 -- (3,057) 4,706 1,934
The difference between book and tax basis unrealized appreciation (depreciation) is primarily due to the tax deferral of losses on wash sales and tax mark to market adjustments made under Section 311(e) of the Taxpayer Relief Act of 1997. As of September 30, 2003, the following Funds had capital loss carryforwards (000):
FUND AMOUNT EXPIRATION DATE ---------------------------------------------------------------- Corporate Bond Fund $ 31,147 2005-2011 High Income Bond Fund 30,672 2007-2011 Intermediate Term Bond Fund 1,330 2004-2008 Short Term Bond Fund 3,913 2004-2008
70 In accordance with Section 382 of the Internal Revenue Code, utilization of all or a portion of the capital loss carryovers on the previous page is limited on an annual basis for the Corporate Bond Fund and High Income Bond Fund in the amount of $6,352,310 and $4,675,368 respectively, per tax year for a portion of their capital loss carryover. Certain Funds incurred a loss for tax purposes for the period from November 1, 2002 to September 30, 2003. 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, 2004. The following Funds had deferred losses (000):
FUND AMOUNT ------------------------------------------------------------- High Income Bond Fund $ 208 U.S. Government Mortgage Fund 3,057
FUTURES TRANSACTIONS - In order to protect against changes in interest rates, each Fund may enter into interest rate futures. Upon entering into a futures contract, the Fund is required to deposit cash or pledge U.S. government securities in an amount equal to 5% 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. Risks of entering into futures contracts, in general, include the possibility that there will not be a perfect price correlation between the futures contracts and the underlying securities. Second, it is possible that a lack of liquidity for futures contracts could exist in the secondary market, resulting in an inability to close a futures position prior to its maturity date. Third, the purchase of a futures contract involves the risk that a fund could lose more than the original margin deposit required to initiate a futures transaction. Unrealized gains (losses) on outstanding positions in futures contracts held at the close of the year will be recognized as capital gains (losses) for federal income tax purposes. As of September 30, 2003, the Funds held no open futures contracts. OPTIONS TRANSACTIONS - Each Fund may utilize options in an attempt to manage market or business risk or enhance the fund's yield. 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 that 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. 71 The following options written were outstanding as of September 30, 2003 (000): PUT OPTIONS WRITTEN
EXPIRATION EXERCISE NUMBER OF ISSUER DATE PRICE CONTRACTS VALUE --------------------------------------------------------------------------------------------------------------------- CORE BOND FUND 10 year U.S. Treasury futures Dec-03 $ 108 300 $ 52 ---------- Total put options outstanding (premiums received $182) $ 52 ---------- INTERMEDIATE GOVERNMENT BOND FUND 10 year U.S. Treasury futures Dec-03 $ 108 450 $ 8 ---------- Total put options outstanding (premiums received $27) $ 8 ---------- INTERMEDIATE TERM BOND FUND 10 year U.S. Treasury futures Dec-03 $ 108 180 $ 31 ---------- Total put options outstanding (premiums received $109) $ 31 ---------- U.S. GOVERNMENT MORTGAGE FUND 10 year U.S. Treasury futures Dec-03 $ 108 35 $ 6 ---------- Total put options outstanding (premiums received $21) $ 6 ----------
CALL OPTIONS WRITTEN
EXPIRATION EXERCISE NUMBER OF ISSUER DATE PRICE CONTRACTS VALUE --------------------------------------------------------------------------------------------------------------------- CORE BOND FUND 10 year U.S. Treasury futures Dec-03 $ 114 300 $ 562 10 year U.S. Treasury futures Dec-03 116 300 277 ---------- Total call options outstanding (premiums received $366) $ 839 ---------- INTERMEDIATE GOVERNMENT BOND FUND 10 year U.S. Treasury futures Dec-03 $ 114 450 $ 84 10 year U.S. Treasury futures Dec-03 116 450 41 ---------- Total call options outstanding (premiums received $55) $ 125 ---------- INTERMEDIATE TERM BOND FUND 10 year U.S. Treasury futures Dec-03 $ 114 180 $ 337 10 year U.S. Treasury futures Dec-03 116 180 166 ---------- Total call options outstanding (premiums received $219) $ 503 ---------- U.S. GOVERNMENT MORTGAGE FUND 10 year U.S. Treasury futures Dec-03 $ 114 35 $ 66 10 year U.S. Treasury futures Dec-03 116 35 32 ---------- Total call options outstanding (premiums received $43) $ 98 ----------
72 Transactions in options written for the fiscal year ended September 30, 2003, were as follows (000):
PUT OPTIONS WRITTEN CALL OPTIONS WRITTEN NUMBER OF PREMIUM NUMBER OF PREMIUM ISSUER CONTRACTS AMOUNT CONTRACTS AMOUNT --------------------------------------------------------------------------------------------------------------------- CORE BOND FUND Balance at September 30, 2002 -- $ -- -- $ -- Opened 300 182 600 366 ---------- ---------- ---------- ---------- Balance at September 30, 2003 300 182 600 366 ---------- ---------- ---------- ---------- INTERMEDIATE GOVERNMENT BOND FUND Balance at September 30, 2002 -- $ -- -- $ -- Opened 450 27 900 55 ---------- ---------- ---------- ---------- Balance at September 30, 2003 450 27 900 55 ---------- ---------- ---------- ---------- INTERMEDIATE TERM BOND FUND Balance at September 30, 2002 -- $ -- -- $ -- Opened 180 109 360 219 ---------- ---------- ---------- ---------- Balance at September 30, 2003 180 109 360 219 ---------- ---------- ---------- ---------- U.S. GOVERNMENT MORTGAGE FUND Balance at September 30, 2002 -- $ -- -- $ -- Opened 35 21 70 43 ---------- ---------- ---------- ---------- Balance at September 30, 2003 35 21 70 43 ---------- ---------- ---------- ----------
73 FOREIGN CURRENCY TRANSLATION - The books and records of the High Income Bond 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 High Income Bond Fund does not isolate the portion of gains and losses on investments in debt securities that is due to changes in the foreign exchange rates from that which is due to changes in market prices of debt securities. The High Income Bond Fund does isolate the effect of fluctuations in foreign currency rates when determining the gain or loss upon sale or maturity of foreign currency denominated debt obligations pursuant to the federal income tax regulations. Such amounts are categorized as foreign currency gain or loss for both financial reporting and income tax reporting purposes. The High Income Bond Fund reports certain foreign currency-related transactions as components of realized gains for financial reporting purposes, whereas such components are treated as ordinary income for federal income tax purposes. SECURITIES PURCHASED ON A WHEN-ISSUED BASIS - Delivery and payment for securities that have been purchased by a Fund on a forward-commitment or when-issued basis can take place up to a month or more after the transaction date. During this period, such securities are subject to market fluctuations and the portfolio maintains, in a segregated account with its custodian, assets with a market value equal to or greater than the amount of its purchase commitments. The purchase of securities on a when-issued or forward-commitment basis may increase the volatility of the Fund's net asset value if the Fund makes such purchases while remaining substantially fully invested. At September 30, 2003, Core Bond Fund, Intermediate Term Bond Fund, and U.S. Government Mortgage Fund had outstanding when-issued commitments with a cost of $76,007,724, $9,934,375, and $9,966,925, respectively. At September 30, 2003, Core Bond Fund, Intermediate Term Bond Fund, and U.S. Government Mortgage Fund maintained related segregated assets with a market value of $232,372,711, $18,775,060, and $64,065,939, respectively. In connection with the ability to purchase securities on a when-issued basis, each Fund may also enter into dollar rolls in which the Fund sells securities purchased on a forward-commitment basis and simultaneously contracts with a counterparty to repurchase similar (same type, coupon, and maturity) but not identical securities on a specified future date. Dollar rolls are considered a form of leverage. ILLIQUID OR RESTRICTED SECURITIES - At September 30, 2003, investments in securities in the Core Bond Fund, Corporate Bond Fund, High Income Bond Fund, Intermediate Term Bond Fund, Short Term Bond Fund, and U.S. Government Mortgage Fund included issues that are illiquid or restricted. Restricted securities are often purchased in private placement transactions, are not registered under the Securities Act of 1933, may have contractual restrictions on resale, and may be valued under methods approved by the Funds' board of directors as reflecting fair value. A security may also be considered illiquid if it lacks a readily available market or if its valuation has not changed for a certain period of time. The Fund intends to invest no more than 15% of its net assets (determined at the time of purchase and reviewed periodically) in illiquid securities. Certain restricted securities, eligible for resale to qualified institutional investors, are not subject to that limitation. At September 30, 2003, the aggregate value of illiquid or restricted securities subject to this limitation was as follows (000):
PERCENTAGE OF FUND VALUE NET ASSETS --------------------------------------------------------------- Core Bond Fund $ 90,682 4.1% Corporate Bond Fund 700 0.2 High Income Bond Fund 6 -- Intermediate Term Bond Fund 33,180 2.4 Short Term Bond Fund 5,771 0.6 U.S. Government Mortgage Fund 15,982 5.6
74 Information concerning restricted securities is as follows (000): CORE BOND FUND
DATES SECURITY PAR ACQUIRED COST BASIS ------------------------------------------------------------------------------------------ Duty Free International $ 6,800 1/99-7/99 $ 6,787 FHLMC Pool 6,000 9/03 6,207 FNMA Pool TBA 18,500 9/03 19,171 GRP/AG Real Estate Asset Trust 4,627 6/03 4,627 Sharps SP I LLC Net Interest Margin Trust 3,486 9/03 3,486 Structured Asset Securities 24,235 9/03 23,637 Washington Mutual 16,570 9/03 16,687 Wells Fargo Mortgage Backed Securities Trust 12,734 9/03 12,380
CORPORATE BOND FUND
DATES SECURITY PAR ACQUIRED COST BASIS ------------------------------------------------------------------------------------------ Juniper $ 1,000 2/00 $ 1,000
HIGH INCOME BOND FUND
DATES SECURITY PAR/SHARES ACQUIRED COST BASIS ------------------------------------------------------------------------------------------ AT&T Canada 100 1/98 $ -- Diamond Brands Operating $ 50 4/98 50 Glenoit 100 3/97-8/97 101 NII Holdings, Series B 6 11/02 5 Pegasus Communications Fractional Shares -- 1/03 -- Sterling Chemical Holdings 100 10/96 3 Viatel 75 9/02 --
INTERMEDIATE TERM BOND FUND
DATES SECURITY PAR ACQUIRED COST BASIS ------------------------------------------------------------------------------------------ CS First Boston Mortgage Securities $ 11,500 9/03 $ 11,500 FHLMC Pool 5,615 9/03 5,809 GRP/AG Real Estate Asset Trust 2,314 6/03 2,313 Sharps SP I LLC Net Interest Margin Trust 2,167 9/03 2,167 Wells Fargo Mortgage Backed Securities Trust 11,500 9/03 11,189
SHORT TERM BOND FUND
DATES SECURITY PAR ACQUIRED COST BASIS ------------------------------------------------------------------------------------------ Auto Bond Receivables Trust $ 106 11/98-11/00 $ 106 Merrill Lynch Mortgage Investors 5,763 9/03 5,763 Patten 7 7/95-9/00 7
U.S. GOVERNMENT MORTGAGE FUND
DATES SECURITY PAR ACQUIRED COST BASIS ------------------------------------------------------------------------------------------ Structured Asset Securities $ 7,000 9/03 $ 6,827 Washington Mutual 4,000 9/03 4,028 Wells Fargo Mortgage Backed Securities Trust 4,898 9/03 4,762
SECURITIES LENDING - In order to generate additional income, a Fund may lend securities representing up to one-third of the value of its total assets (which includes collateral for securities on loan) to broker-dealers, banks, or other institutional borrowers of securities. 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. 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. U.S. Bancorp Asset Management, Inc. ("USBAM") serves as the securities lending agent for the Funds in transactions involving the lending of portfolio securities on behalf of the Funds. For these services, the securities lending fees paid to USBAM from the Funds for the fiscal year ended September 30, 2003, were as follows (000):
FUND AMOUNT ------------------------------------------------------------- Core Bond Fund $ 522 Corporate Bond Fund 37 High Income Bond Fund 46 Intermediate Term Bond Fund 344 Short Term Bond Fund 161 U.S. Government Mortgage Fund 7
DEFERRED COMPENSATION PLAN - Under a Deferred Compensation Plan (the "Plan"), non-interested directors of the First American Fund family may participate and elect to defer receipt of their annual compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of selected open-end First American Funds as designated by the Directors. All amounts in the Plan are 100% vested and accounts under the Plan are obligations of the Funds. Deferred amounts remain in the Funds until distributed in accordance with the Plan. INTERFUND LENDING PROGRAM - Pursuant to an exemptive order issued by the Securities and Exchange Commission, the Funds, along with other registered investment companies in the First American Family of Funds, may participate in an interfund lending program. This program provides an alternative credit facility allowing the Funds to borrow from, or lend money to, other participating funds. The Funds did not have any interfund lending transactions during the fiscal year ended September 30, 2003. 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 of all Funds within the First American Fund complex. Class specific expenses, such as 12b-1 fees, are borne by that class. Income, other expenses, and realized and unrealized gains and losses of a Fund are allocated to each respective class in proportion to the relative net assets of each class. USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS - The preparation of financial statements, in conformity with accounting principles generally accepted in the United States, requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and 75 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 - 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: Core Bond Fund 0.50% Corporate Bond Fund 0.70 High Income Bond Fund 0.70 Intermediate Government Bond Fund 0.50 Intermediate Term Bond Fund 0.50 Short Term Bond Fund 0.50 U.S. Government Mortgage Fund 0.50
USBAM voluntarily waived fees during the most recently completed fiscal year so that the total fund operating expenses did not exceed expense limitations described in the Funds' prospectus. The Funds may invest in the money market funds that are series of First American Funds, Inc. ("FAF"), subject to certain limitations. The terms of such investments are identical to those of investments by non-related entities except that, to avoid duplicative investment advisory fees, USBAM reimburses each Fund an amount equal to the investment advisory fee paid by FAF to USBAM related to such investments. For financial statement purposes, these reimbursements are recorded as investment income. SUB-ADVISOR FEES - Federated Global Research Corp., a subsidiary of Federated Investors, Inc. ("Federated"), served as sub-advisor to the High Income Bond Fund under an agreement with USBAM (the "Sub-Advisory Agreement") through March 14, 2003. For its services under the Sub-Advisory Agreement, Federated was paid a monthly fee by USBAM, calculated on an annual basis equal to 0.20% of the first $25 million of the Fund's average daily net assets, 0.165% of the Fund's average daily net assets in excess of $25 million up to $50 million, 0.13% of the Fund's average daily net assets in excess of $50 million up to $100 million, and 0.105% of the Fund's average daily net assets in excess of $100 million. CO-ADMINISTRATION FEES - USBAM and U.S. Bancorp Fund Services, LLC ("USBFS") (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, or compensate other entities to provide, services to the Funds. These services include various legal, oversight and administrative services, accounting services, transfer agency and dividend disbursing services, and shareholder services. 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% of the next $17 billion of the aggregate average daily net assets, 0.22% of the next $25 billion of the 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. The Funds, along with all other open-end mutual funds in the First American Family of Funds, pay transfer agent fees of $18,500 per share class. These fees are allocated to each Fund based upon the Fund's pro rata share of the aggregate average daily net assets of all funds comprising FAIF. Each Fund also pays additional per account fees for transfer agent services. For the fiscal year ended September 30, 2003, administration fees paid to USBAM and USBFS for the Funds included in this annual report were as follows (000):
FUND AMOUNT ------------------------------------------------------------- Core Bond Fund $ 5,092 Corporate Bond Fund 718 High Income Bond Fund 555 Intermediate Government Bond Fund 1,123 Intermediate Term Bond Fund 3,599 Short Term Bond Fund 2,386 U.S. Government Mortgage Fund 722
CUSTODIAN FEES - U.S. Bank serves as the Funds' custodian pursuant to a custodian agreement with FAIF. The fee for each Fund is equal to an annual rate of 0.01% of average daily net assets. These fees are computed daily and paid monthly. DISTRIBUTION AND SHAREHOLDER SERVICING FEES - Quasar Distributors, LLC ("Quasar"), a subsidiary of U.S. Bancorp, serves as the distributor of the Funds pursuant to 76 a distribution agreement with FAIF. Under the distribution agreement, each of the Funds pays Quasar a monthly distribution and/or shareholder servicing fee equal to an annual rate of 0.25%, 1.00%, and 1.00% of each Fund's average daily net assets of the Class A shares, Class B shares, and Class C shares, respectively. These fees may be used by Quasar to provide compensation for sales support, distribution activities, and shareholder servicing activities. FAIF has also adopted and entered into a shareholder service plan and agreement with Quasar with respect to the Class S shares. Each Fund, except Intermediate Government Bond 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 or shareholder servicing fees are paid by Class Y shares. The Distributor is currently waiving fees equal to 0.10% of average daily net assets for Class A and Class S shares of the Intermediate Term Bond Fund, and Short Term Bond Fund, and Class A shares of Intermediate Government Bond Fund. For the fiscal year ended September 30, 2003, total distribution and shareholder servicing fees waived by the distributor for these Funds were as follows (000):
FUND AMOUNT ----------------------------------------------------------- Intermediate Government Bond Fund $ 2 Intermediate Term Bond Fund 84 Short Term Bond Fund 175
Under these distribution and shareholder servicing agreements, the following amounts were retained by Quasar or paid to affiliates of USBAM for the fiscal year ended September 30, 2003 (000):
FUND AMOUNT ----------------------------------------------------------- Core Bond Fund $ 519 Corporate Bond Fund 100 High Income Bond Fund 155 Intermediate Government Bond Fund 2 Intermediate Term Bond Fund 90 Short Term Bond Fund 190 U.S. Government Mortgage Fund 258
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 fees and expenses of outside directors, registration fees, printing of shareholder reports, legal, auditing, insurance, and other miscellaneous expenses. For the fiscal year ended September 30, 2003, 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. Class B shares automatically convert to Class A shares after eight years.
CONTINGENT DEFERRED SALES CHARGE AS A PERCENTAGE OF DOLLAR YEAR SINCE PURCHASE AMOUNT SUBJECT TO CHARGE ---------------------------------------------------------------------- First 5.00% Second 5.00% Third 4.00% Fourth 3.00% Fifth 2.00% Sixth 1.00% Seventh 0.00% Eighth 0.00%
A CDSC of 1.00% is imposed on redemptions made in Class C shares for the first eighteen months. The CDSC for Class B and Class C shares is imposed on the value of the purchased shares, or the value at the time of redemption, whichever is less. For the fiscal year ended September 30, 2003, sales charges retained by affiliates of USBAM for distributing the Funds' shares were as follows (000):
FUND AMOUNT ---------------------------------------------------------------------- Core Bond Fund $ 406 Corporate Bond Fund 95 High Income Bond Fund 271 Intermediate Government Bond Fund 42 Intermediate Term Bond Fund 74 Short Term Bond Fund 463 U.S. Government Mortgage Fund 866
77 4 Capital Share Transactions FAIF has 420 billion shares of $0.0001 par value capital stock authorized. Capital share transactions for the Funds were as follows (000):
INTERMEDIATE CORE BOND CORPORATE HIGH INCOME GOVERNMENT FUND BOND FUND BOND FUND BOND FUND - -------------------------------------------------------------------------------------------------------------------------- 10/1/02 10/1/01 10/1/02 10/1/01 10/1/02 10/1/01 10/25/02 (1) TO TO TO TO TO TO TO 9/30/03 9/30/02 9/30/03 9/30/02 9/30/03 9/30/02 9/30/03 - -------------------------------------------------------------------------------------------------------------------------- Class A: Shares issued 3,888 4,694 1,219 281 1,965 354 460 Shares issued in lieu of cash distributions 406 362 42 43 195 103 4 Shares redeemed (5,859) (4,850) (842) (403) (2,576) (473) (214) Shares issued in connection with the acquisition of Fund net assets 7,465 -- -- -- 2,765 -- -- - -------------------------------------------------------------------------------------------------------------------------- TOTAL CLASS A TRANSACTIONS 5,900 206 419 (79) 2,349 (16) 250 ========================================================================================================================== Class B: Shares issued 374 417 168 150 355 258 -- Shares issued in lieu of cash distributions 58 52 51 78 27 16 -- Shares redeemed (776) (332) (846) (536) (151) (40) -- Shares issued in connection with the acquisition of Fund net assets 1,319 -- -- -- 227 -- -- - -------------------------------------------------------------------------------------------------------------------------- TOTAL CLASS B TRANSACTIONS 975 137 (627) (308) 458 234 -- ========================================================================================================================== Class C: Shares issued 303 626 117 198 697 419 -- Shares issued in lieu of cash distributions 34 34 23 27 95 40 -- Shares redeemed (512) (444) (128) (194) (564) (187) -- Shares issued in connection with the acquisition of Fund net assets 493 -- -- -- 1,155 -- -- - -------------------------------------------------------------------------------------------------------------------------- TOTAL CLASS C TRANSACTIONS 318 216 12 31 1,383 272 -- ========================================================================================================================== Class S: Shares issued 1,193 1,039 35 249 64 16 -- Shares issued in lieu of cash distributions 125 142 17 23 2 -- -- Shares redeemed (3,442) (1,361) (162) (224) (10) (15) -- Shares issued in connection with the acquisition of Fund net assets 2,613 -- -- -- 28 -- -- - -------------------------------------------------------------------------------------------------------------------------- TOTAL CLASS S TRANSACTIONS 489 (180) (110) 48 84 1 -- ========================================================================================================================== Class Y: Shares issued 34,386 20,969 9,523 6,921 8,148 4,613 55,539 Shares issued in lieu of cash distributions 2,233 1,640 144 136 254 297 62 Shares redeemed (56,896) (37,873) (6,976) (4,243) (10,014) (6,453) (22,134) Shares issued in connection with the acquisition of Common Trust Fund net assets 1,166 -- -- -- -- -- -- Shares issued in connection with the acquisition of Fund net assets 83,108 -- -- -- 4,283 -- -- - -------------------------------------------------------------------------------------------------------------------------- TOTAL CLASS Y TRANSACTIONS 63,997 (15,264) 2,691 2,814 2,671 (1,543) 33,467 ========================================================================================================================== NET INCREASE (DECREASE) IN CAPITAL SHARES 71,679 (14,885) 2,385 2,506 6,945 (1,052) 33,717 ==========================================================================================================================
(1) Commencement of operations. 78
INTERMEDIATE TERM SHORT TERM U.S. GOVERNMENT BOND FUND BOND FUND MORTGAGE FUND - ---------------------------------------------------------------------------------------------------------------------- 10/1/02 10/1/01 10/1/02 10/1/01 10/1/02 10/1/01 TO TO TO TO TO TO 9/30/03 9/30/02 9/30/03 9/30/02 9/30/03 9/30/02 - ---------------------------------------------------------------------------------------------------------------------- Class A: Shares issued 3,265 2,778 8,665 6,633 1,505 961 Shares issued in lieu of cash distributions 186 228 373 438 84 43 Shares redeemed (2,233) (2,667) (9,367) (4,170) (845) (186) - ---------------------------------------------------------------------------------------------------------------------- TOTAL CLASS A TRANSACTIONS 1,218 339 (329) 2,901 744 818 ====================================================================================================================== Class B: Shares issued -- -- -- -- 769 430 Shares issued in lieu of cash distributions -- -- -- -- 34 12 Shares redeemed -- -- -- -- (315) (69) - ---------------------------------------------------------------------------------------------------------------------- TOTAL CLASS B TRANSACTIONS -- -- -- -- 488 373 ====================================================================================================================== Class C: Shares issued -- -- -- -- 1,548 529 Shares issued in lieu of cash distributions -- -- -- -- 49 5 Shares redeemed -- -- -- -- (387) (20) - ---------------------------------------------------------------------------------------------------------------------- TOTAL CLASS C TRANSACTIONS -- -- -- -- 1,210 514 ====================================================================================================================== Class S: Shares issued 1,008 645 691 388 674 886 Shares issued in lieu of cash distributions 38 10 17 4 102 99 Shares redeemed (459) (139) (216) (69) (1,101) (805) - ---------------------------------------------------------------------------------------------------------------------- TOTAL CLASS S TRANSACTIONS 587 516 492 323 (325) 180 ====================================================================================================================== Class Y: Shares issued 67,006 29,153 63,085 32,058 7,760 3,231 Shares issued in lieu of cash distributions 1,996 1,547 790 557 153 137 Shares redeemed (39,422) (21,788) (29,845) (12,544) (4,428) (3,854) - ---------------------------------------------------------------------------------------------------------------------- TOTAL CLASS Y TRANSACTIONS 29,580 8,912 34,030 20,071 3,485 (486) ====================================================================================================================== NET INCREASE IN CAPITAL SHARES 31,385 9,767 34,193 23,295 5,602 1,399 ======================================================================================================================
5 Investment Security Transactions During the fiscal year ended September 30, 2003, purchases of securities and proceeds from sales of securities, other than temporary investments in short-term securities, were as follows (000):
U.S. GOVERNMENT OTHER INVESTMENT SECURITIES SECURITIES --------------------------- --------------------------- FUND PURCHASES SALES PURCHASES SALES ----------------------------------------------------------------------------------------------- Core Bond Fund $ 2,614,936 $ 2,603,480 $ 780,349 $ 961,512 Corporate Bond Fund 58,220 52,921 203,083 183,212 High Income Bond Fund 40,493 74,543 195,014 158,791 Intermediate Government Bond Fund 322,913 503,461 -- -- Intermediate Term Bond Fund 1,209,056 1,198,941 833,644 481,669 Short Term Bond Fund 397,523 293,984 447,377 214,279 U.S. Government Mortgage Fund 448,969 414,121 32,544 16,307
The aggregate gross unrealized appreciation and depreciation of securities held by the Funds and the total cost of securities (including cost of securities purchased with proceeds from securities lending) for federal income tax purposes at September 30, 2003, were as follows (000):
AGGREGATE AGGREGATE FEDERAL GROSS GROSS INCOME FUND APPRECIATION DEPRECIATION NET TAX COST ------------------------------------------------------------------------------------------------ Core Bond Fund $ 59,798 $ (16,907) $ 42,891 $ 3,122,495 Corporate Bond Fund 15,215 (4,029) 11,186 318,687 High Income Bond Fund 18,346 (3,061) 15,285 303,511 Intermediate Government Bond Fund 11,295 (213) 11,082 324,409 Intermediate Term Bond Fund 41,541 (2,453) 39,088 1,975,290 Short Term Bond Fund 13,962 (1,937) 12,025 1,315,269 U.S. Government Mortgage Fund 5,225 (479) 4,746 374,513
79 6 Concentration of Risks Each Fund (other than U.S. Government Mortgage Fund) may invest in foreign securities. A Fund's investment in foreign securities subjects it to special risks associated with foreign investing and to a decline in net asset value resulting from changes in exchange rates between the United States dollar and foreign currencies. Because of the special risks associated with foreign investing, a Fund investing in foreign securities may be subject to greater volatility than most mutual funds which invest primarily in domestic securities. The High Income Bond Fund invests in lower-rated (i.e., rated Ba or lower by Moody's or BB or lower by Standard & Poor's) corporate and foreign debt obligations, which are commonly referred to as "junk bonds". Lower-rated securities will usually offer higher yields than higher-rated securities. However, there is more risk associated with these investments. These lower-rated bonds may be more susceptible to real or perceived adverse economic conditions than investment grade bonds. Lower-rated securities tend to have more price volatility and carry more risk to principal than higher-rated securities. The ratings of long-term securities as a percentage of total value of investments at the fiscal year ended September 30, 2003, are as follows:
STANDARD & POOR'S/ HIGH INCOME MOODY'S RATINGS BOND FUND ------------------------------------------------- AAA/Aaa 0.4% BBB/Baa 2.8 BB/Ba 36.2 B/B 46.3 CCC/Caa 10.1 CC/Ca 1.7 NR 2.5 ------------------------------------------------- 100%
Securities rated by only one agency are shown in that category. Securities rated by both agencies are shown with their highest rating. 7 Fund Mergers On October 25, 2002, the Core Bond Fund acquired substantially all of the assets of the Common Stock Income Common Trust Fund (KS) (sponsored by U.S. Bank) in exchange for Class Y shares of the Core Bond Fund. In addition, the Intermediate Government Bond Fund shell portfolio acquired substantially all of the assets of the U.S. Government Bond Common Trust Fund (sponsored by U.S. Bank) in exchange for Class Y shares of the Intermediate Government Bond Fund. The following table illustrates the specifics of the common trust fund conversions into the Core Bond Fund and the Intermediate Government Bond Fund included in this annual report (000):
ACQUIRED SHARES ISSUED TO ACQUIRING FUNDS NET SHAREHOLDERS OF FUND COMBINED TAX STATUS ACQUIRED FUND ACQUIRING FUND ASSETS ACQUIRED FUND NET ASSETS NET ASSETS OF TRANSFER - ----------------------------------------------------------------------------------------------------------------------- Common Stock Income Common Trust Fund Core Bond Fund - Class Y $ 13,076(1) 1,166 $ 1,318,694 $ 1,331,770 Non-taxable U.S. Government Bond Intermediate Common Trust Fund Government Bond Fund - Class Y (2) 520,605 52,061 -- 520,605 Non-taxable
(1) Includes unrealized appreciation of $792. (2) Shell portfolio 80 On March 13, 2003, shareholders of FAIF approved the Agreement and Plan of Reorganization, recommended by the Funds' board of directors, providing for the reorganization of several First American Funds into other existing First American Funds. On March 14, 2003, Bond IMMDEX(TM) Fund merged into Core Bond Fund and High Yield Bond Fund merged into High Income Bond Fund. The following table illustrates the specifics of the mergers of the Funds included in this annual report (000):
ACQUIRED SHARES ISSUED TO ACQUIRING FUNDS NET SHAREHOLDERS OF FUND COMBINED TAX STATUS ACQUIRED FUND ACQUIRING FUND ASSETS ACQUIRED FUND NET ASSETS NET ASSETS OF TRANSFER - --------------------------------------------------------------------------------------------------------------------------------- Bond IMMDEX(TM) Fund Core Bond Fund (1) $ 1,094,825(2) $ 1,339,160 $ 2,433,985 Non-taxable Class A 7,465 Class B 1,319 Class C 493 Class S 2,613 Class Y 83,108 High Yield Bond Fund (1) High Income Bond Fund 71,489(3) 156,457 227,946 Non-taxable Class A 2,765 Class B 227 Class C 1,155 Class S 28 Class Y 4,283
(1) Accounting survivor. (2) Includes unrealized appreciation in the amount $17,432 and tax losses deferred due to wash sales and deferred compensation of $44. (3) Includes capital loss carryforward of $4,575 and unrealized depreciation of $358. 81 TAX NOTICE - THE INFORMATION SET FORTH BELOW IS FOR EACH FUND'S FISCAL YEAR AS REQUIRED BY FEDERAL LAWS. MOST SHAREHOLDERS, HOWEVER, MUST REPORT DISTRIBUTIONS ON A CALENDAR YEAR BASIS FOR INCOME TAX PURPOSES, WHICH MAY INCLUDE DISTRIBUTIONS FOR PORTIONS OF TWO FISCAL YEARS OF A FUND. ACCORDINGLY, THE INFORMATION NEEDED FOR INCOME TAX PURPOSES WILL BE SENT IN EARLY 2004 ON FORM 1099. PLEASE CONSULT YOUR TAX ADVISOR FOR PROPER TREATMENT OF THIS INFORMATION. Dear First American Shareholders: For the fiscal year ended September 30, 2003, each Fund has designated long term capital gains and ordinary income with regard to distributions paid during the year as follows:
LONG TERM ORDINARY RETURN CAPITAL GAINS INCOME OF TOTAL DISTRIBUTIONS DISTRIBUTIONS CAPITAL DISTRIBUTIONS FUND (TAX BASIS) (TAX BASIS) (TAX BASIS) (TAX BASIS) -------------------------------------------------------------------------------------------------- Core Bond Fund --% 100% --% 100% Corporate Bond Fund -- 100 -- 100 High Income Bond Fund -- 100 -- 100 Intermediate Government Bond Fund 3 97 -- 100 Intermediate Term Bond Fund -- 100 -- 100 Short Term Bond Fund -- 100 -- 100 U.S. Government Mortgage Fund 17 83 -- 100
HOW TO OBTAIN A COPY OF THE FUNDS' PROXY VOTING POLICIES - A description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities is available (1) without charge upon request by calling 800.677.FUND; (2) at firstamericanfunds.com; and (3) on the U.S. Securities and Exchange Commission's website at sec.gov. 82 Directors and Officers of the Funds Independent Directors
OTHER POSITION(S) TERM OF OFFICE NUMBER OF PORTFOLIOS DIRECTORSHIPS NAME, ADDRESS, AND HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) IN FUND COMPLEX HELD BY YEAR OF BIRTH WITH FUND TIME SERVED DURING PAST 5 YEARS OVERSEEN BY DIRECTOR DIRECTOR + - ---------------------------------------------------------------------------------------------------------------------------------- Benjamin R. Field III, Director Term expiring earlier Senior Financial First American Funds None 800 Nicollet Mall, of death, resignation, Advisor, Bemis Company, Complex: twelve Minneapolis, MN 55402 removal, Inc. since 2002; Senior registered (1939) disqualification, or Vice President, Chief investment companies, successor duly elected Financial Officer and including sixty one and qualified. Director Treasurer, Bemis, portfolios of FAIF, since through 2002 September 2003 Mickey P. Foret, Director Term expiring earlier Consultant to Northwest First American Funds ADC 800 Nicollet Mall, of death, resignation, Airlines, Inc. since Complex: twelve Telecommuni- Minneapolis, MN 55402 removal, 2002; Executive Vice registered investment cations, Inc., (1946) disqualification, or President and Chief companies, including URS successor duly elected Financial Officer, sixty one portfolios Corporation, and qualified. Director Northwest Airlines, Champion of FAIF since September through 2002 Airlines, Inc 2003 Roger A. Gibson, Director Term expiring earlier Vice President, Cargo First American Funds None 800 Nicollet Mall, of death, resignation, - United Airlines, Complex: twelve Minneapolis, MN 55402 removal, since July 2001; Vice registered investment (1946) disqualification, or President, North companies, including successor duly elected America - Mountain sixty one portfolios and qualified. Director Region, United of FAIF since October Airlines, prior to July 1997 2001 Victoria J. Herget, Director Term expiring earlier Investment consultant First American Funds None 800 Nicollet Mall, of death, resignation, and non-profit board Complex: twelve Minneapolis, MN 55402 removal, member since 2001; registered investment (1952) disqualification, or Managing Director of companies, including successor duly elected Zurich Scudder sixty one portfolios and qualified. Director Investments through of FAIF since September 2001 2003 Leonard W. Kedrowski, Director Term expiring earlier Owner, Executive and First American Funds None 800 Nicollet Mall, of death, resignation, Management Consulting, Complex: twelve Minneapolis, MN 55402 removal, Inc., a management registered investment (1941) disqualification, or consulting firm; former companies, including successor duly elected Chief Executive Officer, sixty one portfolios and qualified. Director Creative Promotions of FAIF since November International, LLC, a 1993 promotional award programs and products company, through October 2003; Board member, GC McGuiggan Corporation (dba Smyth Companies), a label printer; Advisory Board member, Designer Doors, manufacturer of designer doors, through 2002; acted as CEO of Graphics Unlimited Director through 1998 Richard K. Riederer, Director Term expiring earlier Retired; Director, First American Funds None 800 Nicollet Mall, of death, resignation, President and Chief Complex: twelve Minneapolis, MN 55402 removal, Executive Officer, registered investment (1944) disqualification, or Weirton Steel through companies, including successor duly 2001 sixty one portfolios elected and qualified. Director of FAIF since August 2001
83
OTHER POSITION(S) TERM OF OFFICE NUMBER OF PORTFOLIOS DIRECTORSHIPS NAME, ADDRESS, AND HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) IN FUND COMPLEX HELD BY YEAR OF BIRTH WITH FUND TIME SERVED DURING PAST 5 YEARS OVERSEEN BY DIRECTOR DIRECTOR + - ---------------------------------------------------------------------------------------------------------------------------------- Joseph D. Strauss, Director Term expiring earlier of Owner and President, First American Funds None 800 Nicollet Mall, death, resignation, Excensus (TM) LLC, a Complex: twelve Minneapolis, MN 55402 removal, consulting firm, since registered investment (1940) disqualification, or 2001; Owner and companies, including successor duly elected President, Strauss sixty one portfolios and qualified. Director Management Company, a of FAIF since April 1991 Minnesota holding company for various organizational management business ventures; Owner, Chairman and Chief Executive Officer, Community Resource Partnerships, Inc., a strategic planning, operations management, government relations, transportation planning and public relations organization; attorney at law Virginia L. Stringer, Chair; Chair Term three years. Owner and President, First American Funds None 800 Nicollet Mall, Director Directors Term expiring Strategic Management Complex: twelve Minneapolis, MN 55402 earlier of death, Resources, Inc., a registered investment (1944) resignation, removal, management consulting companies, including disqualification, or firm; Executive sixty one portfolios successor duly elected Consultant for State and qualified. Chair of Farm Insurance Company FAIF's Board since September 1997; Director of FAIF since August 1987 James M. Wade, Director Term expiring earlier Owner and President, First American Funds None 800 Nicollet Mall, of death, resignation, Jim Wade Homes, a Complex: twelve Minneapolis, MN 55402 removal, homebuilding company, registered investment (1943) disqualification, or since 1999 companies, including successor duly elected sixty one portfolios and qualified. Director of FAIF since August 2001
+ 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. 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. 84 Officers
POSITION(S) TERM OF OFFICE NAME, ADDRESS, AND YEAR OF BIRTH HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS WITH FUND TIME SERVED - ------------------------------------------------------------------------------------------------------------------------------------ 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 Management, Inc. since May 2001; Chief Executive Management, Inc., FAIF since February 2001 Officer of First American Asset Management from 800 Nicollet Mall, December 2000 through May 2001 and of Firstar Minneapolis, MN Investment & Research Management Company from 55402 (1962)* 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; prior to October 1998, Senior Airline Equity Analyst and a Director in the Equity Research Department, Credit Suisse First Boston 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; President and Management, Inc. Investments Investments of FAIF since Chief Investment Officer, ING Investment 800 Nicollet Mall, September 2001 Management-Americas, September 2000 to June 2001; Minneapolis, MN Senior Vice President and Chief Investment Officer, 55402 (1960)* ReliaStar Financial Corp., January 1998 to September 2000 Jeffery M. Wilson, Vice Re-elected by the Board Senior Vice President of U.S. Bancorp Asset U.S. Bancorp Asset President - annually; Vice President - Management since May 2001; prior thereto, Senior Management, Inc. Administration Administration of FAIF Vice President of First American Asset Management 800 Nicollet Mall, since March 2000 Minneapolis, MN 55402 (1956)* Robert H. Nelson, Treasurer Re-elected by the Board Senior Vice President of U.S. Bancorp Asset U.S. Bancorp Asset annually; Treasurer of Management since May 2001; prior thereto, Senior Management, Inc. FAIF since March 2000 Vice President of First American Asset Management 800 Nicollet Mall, since 1998 and of Firstar Investment & Research Minneapolis, MN Management Company since February 2001; Senior Vice 55402 (1963)* President of Piper Capital Management Inc. through 1998 James D. Alt, Secretary Re-elected by the Board Partner, Dorsey & Whitney LLP, a Minneapolis-based 50 South Sixth Street, Suite 1500, annually; Assistant law firm Minneapolis, MN Secretary of FAIF from 55402 (1951) September 1998 through June 2002. Secretary of FAIF since June 2002 Michael J. Radmer, Assistant Re-elected by the Board Partner, Dorsey & Whitney LLP, a Minneapolis-based 50 South Sixth Street, Suite 1500, Secretary annually; Assistant law firm Minneapolis, MN Secretary of FAIF since 55402 (1945) March 2000; Secretary of FAIF from September 1999 through March 2000 Kathleen L. Prudhomme, Assistant Re-elected by the Board Partner, Dorsey & Whitney LLP, a Minneapolis-based 50 South Sixth Street, Suite 1500, Secretary annually; Assistant law firm Minneapolis, MN Secretary of FAIF since 55402 (1953) September 1998 James R. Arnold, Assistant Re-elected by the Board Vice President, U.S. Bancorp Fund Services, LLC 615 E. Michigan Street, Secretary annually; Assistant since March 2002; Senior Administration Services Milwaukee, WI Secretary of FAIF since Manager, UMB Fund Services, Inc. through March 2002 53202 (1957)* June 2003 Richard J. Ertel, Assistant Re-elected by the Board Disclosure Counsel, U.S. Bancorp Asset Management, U.S. Bancorp Asset Secretary annually; Assistant Inc. since May 2003; Associate Counsel, Hartford Management, Inc. Secretary of FAIF since Life and Accident Insurance Company from April 2001 800 Nicollet Mall, June 2003 through May 2003; Attorney and Law Clerk, Fortis Minneapolis, MN Financial Group, through March 2001 55402 (1967)* Douglas G. Hess, Assistant Re-elected by the Board Vice President, U.S. Bancorp Fund Services, LLC 615 E. Michigan Street, Secretary annually; Assistant since November 2002; prior thereto, Assistant Vice Milwaukee, WI Secretary of FAIF since President, Fund Compliance Administrator, U.S. 53202 (1967)* September 2001 Bancorp Fund Services, LLC
* Messrs. Schreier, Jordahl, Wilson, Nelson and Ertel are each officers of U.S. Bancorp Asset Management, Inc., which serves as investment advisor and co-administrator for FAIF. Messrs. Hess and Arnold are officers of U.S. Bancorp Fund Services, LLC, which is a subsidiary of U.S. Bancorp and which serves as co-administrator for FAIF. 85 Board of Directors First American Investment Funds, Inc. Virginia Stringer Chairperson of First American Investment Funds, Inc. Owner and President of Strategic Management Resources, Inc. Benjamin Field III Director of First American Investment Funds, Inc. Senior Financial Advisor to, and formerly Senior Vice President, Chief Financial Officer, and Treasurer of, Bemis Company, Inc. Mickey Foret Director of First American Investment Funds, Inc. Consultant to, and formerly Executive Vice President and Chief Financial Officer of, Northwest Airlines, Inc. Roger Gibson Director of First American Investment Funds, Inc. Vice President, Cargo-United Airlines Victoria Herget Director of First American Investment Funds, Inc. Investment Consultant; former Managing Director of Zurich Scudder Investments Leonard Kedrowski Director of First American Investment Funds, Inc. Owner and President of Executive and Management Consulting, Inc. 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 James Wade Director of First American Investment Funds, Inc. Owner and President of Jim Wade Homes THE FIRST AMERICAN INVESTMENT FUNDS' BOARD OF DIRECTORS IS COMPRISED ENTIRELY OF INDEPENDENT DIRECTORS. [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. The views expressed in this report reflect those of the portfolio managers only through the period ended September 30, 2003. The portfolio managers' views are subject to change at any time based upon market or other conditions. Please refer to the prospectus, which contains more complete information on 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 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 Minneapolis, MN 55440-1330 In an attempt to reduce shareholder costs and BULK RATE help eliminate duplication, First American U.S. POSTAGE Funds will try to limit their mailing to one PAID report for each address that lists one or MPLS. MN more shareholders with the same last name. If PERMIT NO. 26388 you would like additional copies, please call First American Investor Services at 800.677. USPS MALLER 881 FUND or visit FIRSTAMERICANFUNDS.COM. APPROVED POLY 0213-03 11/2003 AR-INCOME ITEM 2--CODE OF ETHICS RESPONSE: The registrant has adopted a code of ethics (designated as the "Code of Ethical Conduct") that applies to its principal executive officer and principal financial officer. The registrant undertakes to furnish a copy of such Code of Ethical Conduct to any person upon request, without charge, by calling 1-800-677-3863. ITEM 3--AUDIT COMMITTEE FINANCIAL EXPERT RESPONSE: The registrant's Board of Directors has determined that Leonard Kedrowski, Benjamin Field, and Mickey Foret, members of the registrant's Audit Committee, are each an "audit committee financial expert" and are "independent," as these terms are defined in this Item. This designation will not increase the designees' duties, obligations or liability as compared to their duties, obligations and liability as members of the Audit Committee and of the Board of Directors. ITEM 4--PRINCIPAL ACCOUNTANT FEES AND SERVICES RESPONSE: Not required for annual reports filed for periods ending before December 15, 2003. ITEM 5--AUDIT COMMITTEE OF LISTED REGISTRANTS RESPONSE: Not applicable to the registrant. ITEM 6 - Reserved. ITEM 7--DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES RESPONSE: Not applicable to the registrant. ITEM 8 - Reserved. ITEM 9--CONTROLS AND PROCEDURES (a) RESPONSE: The registrant's Principal Executive Officer and Principal Financial Officer have evaluated the registrant's disclosure controls and procedures within 90 days of the date of this filing and have concluded that the registrant's disclosure controls and procedures were effective, as of that date, in ensuring that information required to be disclosed by the registrant in this Form N-CSR was recorded, processed, summarized and reported timely. Notwithstanding this conclusion, the registrant's Principal Executive Officer and Principal Financial Officer seek continuous improvements to the registrant's disclosure controls and procedures. (b) RESPONSE: There were no changes in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 10 - EXHIBITS 10(a) - Code of Ethical Conduct RESPONSE: Attached hereto. 10(b) - Attach certifications (4 in total pursuant to Sections 302 and 906 for PEO/PFO). RESPONSE: Attached hereto. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. First American Investment Funds, Inc. By /s/ Thomas S. Schreier, Jr. --------------------------- Thomas S. Schreier, Jr. President Date: December 8, 2003 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By /s/ Thomas S. Schreier, Jr. --------------------------- Thomas S. Schreier, Jr. President Date: December 8, 2003 By /s/ Jonathan P. Lillemoen --------------------------- Jonathan P. Lillemoen Director, USBAM Fund Treasury Date: December 8, 2003 EX-99.CODE-ETH 3 a2123381zex-99_codeeth.txt EXHIBIT 99.CODE-ETH EX-99.CODE ETH CODE OF ETHICAL CONDUCT OF FIRST AMERICAN FUNDS, INC. FIRST AMERICAN INVESTMENT FUNDS, INC. FIRST AMERICAN STRATEGY FUNDS, INC. FIRST AMERICAN INSURANCE PORTFOLIOS, INC. AMERICAN MUNICIPAL INCOME PORTFOLIO INC. MINNESOTA MUNICIPAL INCOME PORTFOLIO INC. FIRST AMERICAN MINNESOTA MUNICIPAL INCOME FUND II, INC. AMERICAN INCOME FUND, INC. AMERICAN STRATEGIC INCOME PORTFOLIO INC. AMERICAN STRATEGIC INCOME PORTFOLIO INC. II AMERICAN STRATEGIC INCOME PORTFOLIO INC. III AMERICAN SELECT PORTFOLIO INC. I. COVERED OFFICERS/PURPOSE OF THE CODE The First American Funds' Code of Ethical Conduct (this "Code") for the investment companies within the complex (collectively, "Funds" and each, "Company") applies to each such Company's officers (the "Covered Officers", a list of which is set forth in Exhibit A) for the purpose of promoting: - honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; - full, fair, accurate, timely and understandable disclosure in reports and documents that a registrant files with, or submits to, the SEC and in other public communications made by a Company; - compliance with applicable laws and governmental rules and regulations; - the prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and - accountability for adherence to the Code. Each Covered Officer should adhere to a high standard of business ethics and should be sensitive to situations that may give rise to actual as well as apparent conflicts of interest. The Code also applies to each Covered Officer's immediate family members as long as they are living in the same household. Therefore, for purposes of interpretation, each obligation, requirement or prohibition that applies to a Covered Officer also applies to such Covered Officer's family members. Currently, all Covered Officers are employees of affiliated Company service providers- the Funds' investment advisor and co-administrator, U.S. Bancorp Asset Management, Inc. ("USBAM"), and the Funds' other co-administrator, U.S. Bancorp Fund Services ("USBFS"). The phrase "Covered Officers" does not include partners of Dorsey & Whitney, the Funds' outside counsel. II. COVERED OFFICERS SHOULD HANDLE ETHICALLY ACTUAL AND APPARENT CONFLICTS OF INTEREST OVERVIEW. A "conflict of interest" occurs when a Covered Officer's private interest interferes with the interests of, or his service to, a Company. For example, a conflict of interest would arise if a Covered Officer, or a member of his family, receives improper personal benefits as a result of his position in the Company. Certain conflicts of interest covered by this Code arise out of the relationships between Covered Officers and a Company and already are subject to conflict of interest provisions in the Investment Company Act of 1940 ("Investment Company Act") and the Investment Advisers Act of 1940 ("Investment Advisers Act"). For example, Covered Officers may not individually engage in certain transactions (such as the purchase or sale of securities or other property) with the Company because of their status as "affiliated persons" of a Company. The Company's and USBAM's compliance programs and procedures are designed to prevent, or identify and correct, violations of these provisions. THIS CODE DOES NOT, AND IS NOT INTENDED TO, REPEAT OR REPLACE THESE PROGRAMS AND PROCEDURES AND SUCH CONFLICTS FALL OUTSIDE OF THE PARAMETERS OF THIS CODE. Although typically not presenting an opportunity for improper personal benefit, conflicts arise from, or as a result of, the contractual relationship between a Company and USBAM/USBFS of which the Covered Officers are also officers or employees. As a result, this Code recognizes that the Covered Officers will, in the normal course of their duties (whether formally for a Company or for the adviser/administrator, or for all), be involved in establishing policies and implementing decisions which will have different effects on the adviser/administrator and the Company. The participation of the Covered Officers in such activities is inherent in the contractual relationship between the Company and the adviser/administrator and is consistent with the performance by the Covered Officers of their duties as officers of a Company. Thus, if performed in conformity with the provisions of the Investment Company Act and the Investment Advisers Act, such activities will be deemed to have been handled ethically. In addition, it is recognized by the Funds' Board of Directors that the Covered Officers may also be officers or employees of one or more other investment companies covered by this or other Codes. Other conflicts of interest are covered by the Code, even if such conflicts of interest are not subject to provisions in the Investment Company Act and the Investment Advisers Act. The following list provides examples of conflicts of interest under the Code, but Covered Officers should keep in mind that these examples are not exhaustive. THE OVERARCHING PRINCIPLE IS THAT THE PERSONAL INTEREST OF A COVERED OFFICER SHOULD NOT BE PLACED IMPROPERLY BEFORE THE INTEREST OF A COMPANY. Each Covered Officer must: - not use his personal influence or personal relationships improperly to influence investment decisions or financial reporting by a Company whereby the Covered Officer would benefit personally; - not cause a Company to take action, or fail to take action, for the individual personal benefit of the Covered Officer rather than the benefit of such Company; - not intentionally or recklessly take or direct any action or failure to act that results in any SEC filing or other public Company communication being materially misleading, while personally benefiting such Covered Officer; and, - not request cash or gifts, including any entertainment or similar benefit, from any firm or party, with which a Company has current or prospective business dealings, including Company directors, Fund affiliates and service providers. There are some conflicts of interest situations that should always be reviewed with the adviser's General Counsel. These include, but are not limited to: - the receipt of cash or GIFTS IN EXCESS OF $100 from any one firm or party, including Company directors, Fund affiliates and service providers, with which a Company has current or prospective business dealings; - the receipt of any ENTERTAINMENT OR SIMILAR BENEFIT from any firm or party, including Company directors, Fund affiliates and service providers, with which a Company has current or prospective business dealings unless such entertainment is reasonable in cost, appropriate as to time and place, includes a representative of the firm or party, and not so frequent as to raise any question of impropriety; - any ownership interest in, or any consulting or employment relationship with, any Company service providers, other than its investment adviser, principal underwriter, administrator or any affiliated person thereof; and - a direct or indirect financial interest in commissions, transactions charges or spreads paid by a Company for effecting portfolio transactions or for selling or redeeming shares other than an interest arising from the Covered Officer's employment, such as compensation or equity ownership. In all instances, Covered Officers are expected to use reason, judgement and common sense to avoid any question or appearance of impropriety. Covered Officers should seek the assistance of the adviser's General Counsel in case of questions. III. DISCLOSURE AND COMPLIANCE - Each Covered Officer must familiarize himself with the disclosure requirements generally applicable to a Company; - each Covered Officer should not knowingly misrepresent, or cause others to misrepresent, facts about a Company to others, whether within or outside a Company, including to a Company's directors and auditors, and to governmental regulators and self-regulatory organizations; - each Covered Officer should, to the extent appropriate within his area of responsibility, consult with other officers and employees of the Funds and the adviser with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents the Funds file with, or submit to, the SEC and in other public communications made by the Funds; and - it is the responsibility of each Covered Officer to promote compliance with the standards and restrictions imposed by applicable laws, rules and regulations. IV. REPORTING AND ACCOUNTABILITY Each Covered Officer must: - upon adoption of the Code or upon being made subject to the Code, affirm in writing to the Funds' Board that such Covered Officer has received, read, and understands the Code; - annually affirm in writing to the Funds' Board that such Covered Officer has complied with the requirements of the Code; - annually report in writing to USBAM's Compliance Department all affiliations that might give rise to a conflict of interest with respect to such person's status as a Covered Officer; - quarterly report to USBAM's Compliance Department the following: - all cash and gifts with a value in excess of $100 received from any firm or party that has current or prospective business dealings with a Company; - all receipt of any entertainment or similar benefit from any firm or party, including Company directors, Fund affiliates and service providers, with which a Company has current or prospective business dealings; - not retaliate against any Fund affiliate employee, service provider employee or Covered Officer for reports of potential violations that are made in good faith; and - notify USBAM's General Counsel promptly if he knows of any violation of this Code. Failure to do so is itself a violation of this Code. USBAM's General Counsel is responsible for applying this Code to specific situations in which questions are presented under it and has the authority to interpret this Code in any particular situation. In doing so, such General Counsel is authorized and encouraged to consult with Company counsel and counsel to the Company's independent directors. However, approvals, interpretations, or waivers sought by a Company's President will be considered by such Company's Qualified Legal Compliance Committee (the "Committee"). The Funds will follow these procedures in investigating and enforcing this Code: - the General Counsel will take all appropriate action to investigate any violations and potential violations reported to it; - if, after such investigation, the General Counsel reasonably believes that no violation has occurred, the General Counsel is not required to take any further action and such conclusion will be documented and reported to the Committee at its next regularly scheduled meeting; - any matter the General Counsel believes is a violation will be reported in writing to the Committee; - if the Committee concurs that a violation has occurred, it will inform and make a recommendation to the Board, which will consider appropriate action, which may include review of, and appropriate modifications to, applicable policies and procedures; notification of the appropriate supervisory executives of either the investment adviser, the applicable service provider, or any applicable parent company thereof; or a recommendation to dismiss the Covered Officer; - the Committee will be responsible for granting waivers (defined as a material departure from a provision of this Code), as appropriate; and - any changes to or waivers of this Code will, to the extent required, be disclosed as provided by SEC rules. V. OTHER POLICIES AND PROCEDURES This Code shall be the sole code of ethics adopted by the Funds for purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms applicable to registered investment companies thereunder. USBAM's code of ethics under Rule 17j-1 under the Investment Company Act, USBAM's more detailed operational and regulatory compliance policies and procedures, and U.S. Bancorp's Code of Ethics are separate requirements applying to the Covered Officers and others, and are not specifically a part of this Code. VI. AMENDMENTS Any amendments to this Code, other than amendments to Exhibit A, must be approved or ratified by a majority vote of the Company's board, including a majority of independent directors. VII. CONFIDENTIALITY All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the Company Board, Company counsel, counsel to the independent directors, USBAM's Compliance Department, and the appropriate senior managers of USBAM and its affiliates. VIII. INTERNAL USE The Code is intended solely for the internal use by the Funds and does not constitute an admission, by or on behalf of any Company, as to any fact, circumstance, or legal conclusion. Date: 2003 EX-99.CERT 4 a2123381zex-99_cert.txt EXHIBIT 99.CERT EX-99.CERT CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Thomas S. Schreier, Jr., certify that: 1. I have reviewed this report on Form N-CSR of First American Investment Funds, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: December 8, 2003 /s/ Thomas S. Schreier, Jr. - ---------------------------- Thomas S. Schreier, Jr. President I, Jonathan P. Lillemoen, certify that: 1. I have reviewed this report on Form N-CSR of First American Investment Funds, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: December 8, 2003 /s/ Jonathan P. Lillemoen - -------------------- Jonathan P. Lillemoen Director, USBAM Fund Treasury EX-99.906CERT CERTIFICATIONS PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. section 1350), the undersigned officers of First American Investment Funds, Inc. (the "Funds") do hereby certify, to the best of each such officer's knowledge, that: 1. The N-CSR of the Fund (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of the operations of the Fund. By /s/ Thomas S. Schreier, Jr. --------------------------- Thomas S. Schreier, Jr. President Date: December 8, 2003 By /s/ Jonathan P. Lillemoen --------------------------- Jonathan P. Lillemoen Director, USBAM Fund Treasury Date: December 8, 2003 -----END PRIVACY-ENHANCED MESSAGE-----