<Page>
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OMB APPROVAL
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OMB Number: 3235-0570
Expires: November 30, 2005
Estimated average burden
hours per response....... 5.0
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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
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(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.
<Page>
Item 1. Report to Shareholders
<Page>
[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
<Page>
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
<Table>
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
</Table>
MUTUAL FUND INVESTING INVOLVES RISK; PRINCIPAL LOSS IS POSSIBLE.
NOT FDIC INSURED NO BANK GUARANTEE MAY LOSE VALUE
<Page>
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
<Page>
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
<Page>
ANNUALIZED PERFORMANCE(1) as of September 30, 2003
<Table>
<Caption>
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%
</Table>
VALUE OF A $10,000 INVESTMENT(1),(2) as of September 30, 2003
[CHART]
Class A
<Table>
<Caption>
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
</Table>
[CHART]
Class Y
<Table>
<Caption>
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
</Table>
* 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
<Page>
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
<Page>
ANNUALIZED PERFORMANCE(1) as of September 30, 2003
<Table>
<Caption>
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%
</Table>
VALUE OF A $10,000 INVESTMENT(1),(2) as of September 30, 2003
[CHART]
Class A
<Table>
<Caption>
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
</Table>
[CHART]
Class Y
<Table>
<Caption>
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
</Table>
* 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
<Page>
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
<Page>
ANNUALIZED PERFORMANCE(1) as of September 30, 2003
<Table>
<Caption>
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%
</Table>
VALUE OF A $10,000 INVESTMENT(1),(2) as of September 30, 2003
[CHART]
Class A
<Table>
<Caption>
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
</Table>
[CHART]
Class Y
<Table>
<Caption>
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
</Table>
* 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
<Page>
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
<Page>
ANNUALIZED PERFORMANCE(1) as of September 30, 2003
<Table>
<Caption>
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%
</Table>
VALUE OF A $10,000 INVESTMENT(1),(2) as of September 30, 2003
[CHART]
Class A
<Table>
<Caption>
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
</Table>
[CHART]
Class Y
<Table>
<Caption>
FIRST AMERICAN INTERMEDIATE LEHMAN INTERMEDIATE TREASURY
GOVERNMENT BOND FUND, CLASS Y BOND INDEX(2)
10/2002 10000 10000
9/2003 10364 10330
</Table>
* 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
<Page>
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
<Page>
ANNUALIZED PERFORMANCE(1) as of September 30, 2003
<Table>
<Caption>
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%
</Table>
VALUE OF A $10,000 INVESTMENT(1),(2) as of September 30, 2003
[CHART]
Class A
<Table>
<Caption>
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
</Table>
[CHART]
Class Y
<Table>
<Caption>
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
</Table>
* 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
<Page>
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
<Page>
ANNUALIZED PERFORMANCE(1) as of September 30, 2003
<Table>
<Caption>
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%
</Table>
VALUE OF A $10,000 INVESTMENT(1),(2) as of September 30, 2003
[CHART]
Class A
<Table>
<Caption>
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
</Table>
[CHART]
Class Y
<Table>
<Caption>
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
</Table>
* 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
<Page>
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
<Page>
ANNUALIZED PERFORMANCE(1) as of September 30, 2003
<Table>
<Caption>
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%
</Table>
VALUE OF A $10,000 INVESTMENT(1),(2) as of September 30, 2003
[CHART]
Class A
<Table>
<Caption>
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
</Table>
[CHART]
Class Y
<Table>
<Caption>
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
</Table>
* 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
<Page>
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
<Page>
SCHEDULE OF INVESTMENTS September 30, 2003
CORE BOND FUND
<Table>
<Caption>
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
</Table>
The accompanying notes are an integral part of the financial statements.
18
<Page>
<Table>
<Caption>
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
</Table>
19
<Page>
<Table>
<Caption>
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
</Table>
The accompanying notes are an integral part of the financial statements.
20
<Page>
<Table>
<Caption>
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
</Table>
21
<Page>
<Table>
<Caption>
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
</Table>
The accompanying notes are an integral part of the financial statements.
22
<Page>
<Table>
<Caption>
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
-------------
</Table>
23
<Page>
<Table>
<Caption>
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
-------------
</Table>
(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
<Table>
<Caption>
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
</Table>
The accompanying notes are an integral part of the financial statements.
24
<Page>
<Table>
<Caption>
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
</Table>
25
<Page>
<Table>
<Caption>
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
</Table>
The accompanying notes are an integral part of the financial statements.
26
<Page>
<Table>
<Caption>
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
-------------
<Caption>
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
</Table>
27
<Page>
<Table>
<Caption>
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
<Caption>
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
</Table>
The accompanying notes are an integral part of the financial statements.
28
<Page>
<Table>
<Caption>
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
-------------
<Caption>
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
-------------
</Table>
(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
<Page>
HIGH INCOME BOND FUND
<Table>
<Caption>
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
</Table>
The accompanying notes are an integral part of the financial statements.
30
<Page>
<Table>
<Caption>
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
</Table>
31
<Page>
<Table>
<Caption>
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
</Table>
The accompanying notes are an integral part of the financial statements.
32
<Page>
<Table>
<Caption>
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
</Table>
33
<Page>
<Table>
<Caption>
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 --
<Caption>
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
-------------
</Table>
The accompanying notes are an integral part of the financial statements.
34
<Page>
<Table>
<Caption>
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
</Table>
35
<Page>
<Table>
<Caption>
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
-------------
</Table>
The accompanying notes are an integral part of the financial statements.
36
<Page>
<Table>
<Caption>
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
-------------
</Table>
(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
<Table>
<Caption>
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
-------------
</Table>
37
<Page>
<Table>
<Caption>
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
-------------
</Table>
(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
<Table>
<Caption>
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
</Table>
The accompanying notes are an integral part of the financial statements.
38
<Page>
<Table>
<Caption>
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
</Table>
39
<Page>
<Table>
<Caption>
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
</Table>
The accompanying notes are an integral part of the financial statements.
40
<Page>
<Table>
<Caption>
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
</Table>
41
<Page>
<Table>
<Caption>
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
-------------
<Caption>
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
</Table>
The accompanying notes are an integral part of the financial statements.
42
<Page>
<Table>
<Caption>
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
<Caption>
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
</Table>
43
<Page>
<Table>
<Caption>
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
-------------
</Table>
(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
<Page>
SHORT TERM BOND FUND
<Table>
<Caption>
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
-------------
</Table>
45
<Page>
<Table>
<Caption>
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
</Table>
The accompanying notes are an integral part of the financial statements.
46
<Page>
<Table>
<Caption>
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
-------------
</Table>
47
<Page>
<Table>
<Caption>
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
-------------
</Table>
The accompanying notes are an integral part of the financial statements.
48
<Page>
<Table>
<Caption>
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
<Caption>
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
</Table>
49
<Page>
<Table>
<Caption>
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
-------------
</Table>
The accompanying notes are an integral part of the financial statements.
50
<Page>
<Table>
<Caption>
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
-------------
</Table>
(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
<Table>
<Caption>
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
</Table>
51
<Page>
<Table>
<Caption>
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
</Table>
The accompanying notes are an integral part of the financial statements.
52
<Page>
<Table>
<Caption>
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
</Table>
53
<Page>
<Table>
<Caption>
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
-------------
</Table>
(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
<Page>
(This page has been left blank intentionally.)
<Page>
STATEMENTS OF ASSETS AND LIABILITIES September 30, 2003, in thousands, except
per share data
<Table>
<Caption>
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
</Table>
(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
<Page>
<Table>
<Caption>
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
<Caption>
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
</Table>
57
<Page>
STATEMENTS OF OPERATIONS For the period ended September 30, 2003, in thousands
<Table>
<Caption>
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
=======================================================================================================
<Caption>
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
===========================================================================================
</Table>
(1) Commenced operations on October 25, 2002.
The accompanying notes are an integral part of the financial statements.
58
<Page>
<Table>
<Caption>
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
=========================================================================================
</Table>
59
<Page>
STATEMENTS OF CHANGES IN NET ASSETS in thousands
<Table>
<Caption>
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 $ --
==============================================================================================================
</Table>
(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
<Page>
<Table>
<Caption>
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)
==================================================================================================================================
<Caption>
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
=================================================================================================================
</Table>
61
<Page>
FINANCIAL HIGHLIGHTS For a share outstanding throughout the periods ended
September 30, unless otherwise indicated.
<Table>
<Caption>
REALIZED AND
NET ASSET UNREALIZED DIVIDENDS
VALUE NET GAINS 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) --
</Table>
(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
<Page>
<Table>
<Caption>
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
<Caption>
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
</Table>
63
<Page>
<Table>
<Caption>
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) -- --
</Table>
(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
<Page>
<Table>
<Caption>
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
<Caption>
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
</Table>
(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
<Page>
<Table>
<Caption>
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) -- --
</Table>
(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
<Page>
<Table>
<Caption>
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
<Caption>
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
</Table>
67
<Page>
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
<Page>
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):
<Table>
<Caption>
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 --
</Table>
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):
<Table>
<Caption>
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
</Table>
<Table>
<Caption>
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
</Table>
69
<Page>
As of September 30, 2003, the components of accumulated earnings (deficit) on
a tax basis were (000):
<Table>
<Caption>
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
</Table>
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):
<Table>
<Caption>
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
</Table>
70
<Page>
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):
<Table>
<Caption>
FUND AMOUNT
-------------------------------------------------------------
High Income Bond Fund $ 208
U.S. Government Mortgage Fund 3,057
</Table>
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
<Page>
The following options written were outstanding as of September 30, 2003
(000):
PUT OPTIONS WRITTEN
<Table>
<Caption>
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
----------
</Table>
CALL OPTIONS WRITTEN
<Table>
<Caption>
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
----------
</Table>
72
<Page>
Transactions in options written for the fiscal year ended September 30, 2003,
were as follows (000):
<Table>
<Caption>
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
---------- ---------- ---------- ----------
</Table>
73
<Page>
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):
<Table>
<Caption>
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
</Table>
74
<Page>
Information concerning restricted securities is as follows (000):
CORE BOND FUND
<Table>
<Caption>
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
</Table>
CORPORATE BOND FUND
<Table>
<Caption>
DATES
SECURITY PAR ACQUIRED COST BASIS
------------------------------------------------------------------------------------------
Juniper $ 1,000 2/00 $ 1,000
</Table>
HIGH INCOME BOND FUND
<Table>
<Caption>
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 --
</Table>
INTERMEDIATE TERM BOND FUND
<Table>
<Caption>
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
</Table>
SHORT TERM BOND FUND
<Table>
<Caption>
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
</Table>
U.S. GOVERNMENT MORTGAGE FUND
<Table>
<Caption>
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
</Table>
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):
<Table>
<Caption>
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
</Table>
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
<Page>
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:
<Table>
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
</Table>
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):
<Table>
<Caption>
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
</Table>
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
<Page>
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):
<Table>
<Caption>
FUND AMOUNT
-----------------------------------------------------------
Intermediate Government Bond Fund $ 2
Intermediate Term Bond Fund 84
Short Term Bond Fund 175
</Table>
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):
<Table>
<Caption>
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
</Table>
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.
<Table>
<Caption>
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%
</Table>
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):
<Table>
<Caption>
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
</Table>
77
<Page>
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):
<Table>
<Caption>
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
==========================================================================================================================
</Table>
(1) Commencement of operations.
78
<Page>
<Table>
<Caption>
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
======================================================================================================================
</Table>
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):
<Table>
<Caption>
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
</Table>
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):
<Table>
<Caption>
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
</Table>
79
<Page>
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:
<Table>
<Caption>
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%
</Table>
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):
<Table>
<Caption>
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
</Table>
(1) Includes unrealized appreciation of $792.
(2) Shell portfolio
80
<Page>
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):
<Table>
<Caption>
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
</Table>
(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
<Page>
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:
<Table>
<Caption>
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
</Table>
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
<Page>
Directors and Officers of the Funds
Independent Directors
<Table>
<Caption>
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
</Table>
83
<Page>
<Table>
<Caption>
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
</Table>
+ 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
<Page>
Officers
<Table>
<Caption>
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
</Table>
* 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
<Page>
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.
<Page>
[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
<Page>
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
<Page>
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.
<Page>
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