Filed Pursuant to Rule 497(e)
1933 Act Registration No. 2-59115
SUPPLEMENT DATED JANUARY 24, 1997
TO THE JOINT PROSPECTUS DATED APRIL 1, 1996
OF
IAI BOND FUND
(a portfolio of IAI Investment Funds I, Inc.)
IAI GOVERNMENT FUND
(a portfolio of IAI Investment Funds VI, Inc.)
Supplement to page 7 (Investment Objectives and Policies)
As noted in the Prospectus, both the Bond Fund and the Government Fund
may purchase securities issued by the United States government. Such securities
may include U.S. Treasury inflation-protection securities. The value of such
inflation-protection securities is adjusted for inflation and periodic interest
payments are in amounts equal to a fixed percentage of the inflation-adjusted
value of the principal. For further information, see the Supplement dated
January 24, 1997 to the Statement of Additional Information dated August 1,
1996.
<PAGE>
Filed Pursuant to Rule 497(e)
1933 Act Registration No. 2-59115
SUPPLEMENT DATED JANUARY 24, 1997
TO THE JOINT STATEMENT OF ADDITIONAL INFORMATION
DATED APRIL 1, 1996
OF
IAI BOND FUND
(a portfolio of IAI Investment Funds I, Inc.)
IAI GOVERNMENT FUND
(a portfolio of IAI Investment Funds VI, Inc.)
Supplement to page 3 (Investment Objectives and Policies)
Both the Funds may purchase securities issued by the United States
government, which include U.S. Treasury inflation-protection securities.
Inflation-protection securities are a new type of marketable book-entry
security issued by the United States Department of Treasury ("Treasury") with a
nominal return linked to the inflation rate in prices. Inflation-protection
securities will be auctioned and issued on a quarterly basis on the 15th of
January, April, July, and October, beginning on January 15, 1997. Initially,
they will be issued as 10-year notes, with other maturities added thereafter.
The index used to measure inflation will be non-seasonally adjusted U.S. City
Average All Items Consumer Price Index for All Urban Consumers ("CPI-U").
The value of the principal will be adjusted for inflation, and every
six months the security will pay interest, which will be an amount equal to a
fixed percentage of the inflation-adjusted value of the principal. The final
payment of principal of the security will not be less than the original par
amount of the security at issuance.
The principal of the inflation-protection security will be indexed to
the non-seasonally adjusted CPI-U. To calculate the inflation-adjusted principal
value for a particular valuation date, the value of the principal at issuance is
multiplied by the index ratio applicable to that valuation date. The index ratio
for any date is the ratio of the reference CPI applicable to such date to the
reference CPI applicable to the original issue date. Semiannual coupon interest
is determined by multiplying the inflation-adjusted principal amount by one-half
of the stated rate of interest on each interest payment date.
Inflation-adjusted principal or the original par amount, whichever is
larger, will be paid on the maturity date as specified in the applicable
offering announcement. If at maturity the inflation-adjusted principal is less
than the original principal value of the security an additional amount will be
paid at maturity so that the additional amount plus the inflation-adjusted
principal equals the original principal amount. Some inflation-protection
securities may be stripped into principal and interest components. In the case
of a stripped security, the holder of the stripped principal would receive this
additional amount. The final interest payment, however, will be based on the
final inflation-adjusted principal value, not the original par amount.
The reference CPI for the first day of any calendar month is the CPI-U
for the third preceding calendar month. (For example, the reference CPI for
December 1 is the CPI-U reported for September of the same year, which is
released in October.) The reference CPI for any other day of the month is
calculated by a linear interpolation between the reference CPI applicable to the
first day of the month and the reference CPI applicable to the first day of the
following month.
Any revisions the Bureau of Labor Statistics (or successor agency)
makes to any CPI-U number that has been previously released will not be used in
calculations of the value of outstanding inflation-protection securities. In the
case that the CPI-U for a particular month is not reported by the last day of
the following month, the Treasury will announce an index number based on the
last year-over-year CPI-U inflation rate available. Any calculations of the
Treasury's payment obligations on the inflation-protection security that need
that month's CPI-U number will be based on the index number that the Treasury
has announced. If the CPI-U is rebased to a different year, the Treasury will
continue to use the CPI-U series based on the base reference period in effect
when the security was first issued as long as that series continues to be
published. If the CPI-U is discontinued during the period the
inflation-protection security is outstanding, the Treasury will, in consultation
with the Bureau of Labor Statistics (or successor agency), determine an
appropriate substitute index and methodology for linking the discontinued series
with the new price index series. Determinations of the Secretary of the Treasury
in this regard are final.
Inflation-protection securities will be held and transferred in either
of two book-entry systems: the commercial book-entry system (TRADES) and
TREASURY DIRECT. The securities will be maintained and transferred at their
original par amount, i.e., not at their inflation-adjusted value. STRIPS
components will be maintained and transferred in TRADES at their value based on
the original par amount of the fully constituted security.
Supplement to "Tax Status" on page 34
If either Fund invests in zero coupon obligations upon their issuance,
such obligations will have original issue discount in the hands of the Fund.
Generally, the original issue discount equals the difference between the "stated
redemption price at maturity" of the obligation and its "issue price" as those
terms are defined in the Code. If the Fund acquires an already issued zero
coupon bond from another holder, the bond will have original issue discount in
the Fund's hands, equal to the difference between the "adjusted issue price" of
the bond at the time the Fund acquires it (that is, the original issue price of
the bond plus the amount of original issue discount accrued to date) and its
stated redemption price at maturity. In each case, the Fund is required to
accrue as ordinary interest income a portion of such original issue discount
even though it receives no cash currently as interest payment on the obligation.
If a Fund invests in U.S. Treasury inflation-protection securities, it will be
required to treat as original issue discount any increase in the principal
amount of the securities that occurs during the course of its taxable year. If a
Fund purchases such inflation-protection securities that are issued in stripped
form either as stripped bonds or coupons, it will be treated as if it had
purchased a newly issued debt instrument having original issue discount.
Because the Funds are required to distribute substantially all of their
net investment income in order to be taxed as regulated investment company, it
may be required to distribute an amount greater than the total cash income the
Fund actually receives. Accordingly, in order to make the required distribution,
the Fund may be required to borrow or to liquidate securities. The extent to
which the Fund may liquidate securities at a gain may be limited by the
requirement that generally less than 30% of such Fund's gross income (on an
annual basis) consists of gains from the sale of securities held for less than
three months.
<PAGE>
Filed Pursuant to Rule 497(e)
1933 Act Registration No. 2-59115
SUPPLEMENT DATED JANUARY 24, 1997
TO THE PROSPECTUS DATED APRIL 1, 1996
OF
IAI INSTITUTIONAL BOND FUND
(a portfolio of IAI Investment Funds I, Inc.)
Supplement to page 5 (Investment Objectives and Policies)
As noted in the Prospectus, the Institutional Bond Fund may purchase
securities issued by the United States government. Such securities may include
U.S. Treasury inflation-protection securities. The value of such
inflation-protection securities is adjusted for inflation and periodic interest
payments are in amounts equal to a fixed percentage of the inflation-adjusted
value of the principal. For further information, see the Supplement dated
January 24, 1997 to the Statement of Additional Information dated August 1,
1996.
<PAGE>
Filed Pursuant to Rule 497(e)
1933 Act Registration No. 2-59115
SUPPLEMENT DATED JANUARY 24, 1997
TO THE STATEMENT OF ADDITIONAL INFORMATION
DATED APRIL 1, 1996
OF
IAI INSTITUTIONAL BOND FUND
(a portfolio of IAI Investment Funds I, Inc.)
Supplement to page 3 (Investment Objectives and Policies)
Institutional Bond Fund may purchase securities issued by the United
States government, which include U.S. Treasury inflation-protection securities.
Inflation-protection securities are a new type of marketable book-entry
security issued by the United States Department of Treasury ("Treasury") with a
nominal return linked to the inflation rate in prices. Inflation-protection
securities will be auctioned and issued on a quarterly basis on the 15th of
January, April, July, and October, beginning on January 15, 1997. Initially,
they will be issued as 10-year notes, with other maturities added thereafter.
The index used to measure inflation will be non-seasonally adjusted U.S. City
Average All Items Consumer Price Index for All Urban Consumers ("CPI-U").
The value of the principal will be adjusted for inflation, and every
six months the security will pay interest, which will be an amount equal to a
fixed percentage of the inflation-adjusted value of the principal. The final
payment of principal of the security will not be less than the original par
amount of the security at issuance.
The principal of the inflation-protection security will be indexed to
the non-seasonally adjusted CPI-U. To calculate the inflation-adjusted principal
value for a particular valuation date, the value of the principal at issuance is
multiplied by the index ratio applicable to that valuation date. The index ratio
for any date is the ratio of the reference CPI applicable to such date to the
reference CPI applicable to the original issue date. Semiannual coupon interest
is determined by multiplying the inflation-adjusted principal amount by one-half
of the stated rate of interest on each interest payment date.
Inflation-adjusted principal or the original par amount, whichever is
larger, will be paid on the maturity date as specified in the applicable
offering announcement. If at maturity the inflation-adjusted principal is less
than the original principal value of the security an additional amount will be
paid at maturity so that the additional amount plus the inflation-adjusted
principal equals the original principal amount. Some inflation-protection
securities may be stripped into principal and interest components. In the case
of a stripped security, the holder of the stripped principal would receive this
additional amount. The final interest payment, however, will be based on the
final inflation-adjusted principal value, not the original par amount.
The reference CPI for the first day of any calendar month is the CPI-U
for the third preceding calendar month. (For example, the reference CPI for
December 1 is the CPI-U reported for September of the same year, which is
released in October.) The reference CPI for any other day of the month is
calculated by a linear interpolation between the reference CPI applicable to the
first day of the month and the reference CPI applicable to the first day of the
following month.
Any revisions the Bureau of Labor Statistics (or successor agency)
makes to any CPI-U number that has been previously released will not be used in
calculations of the value of outstanding inflation-protection securities. In the
case that the CPI-U for a particular month is not reported by the last day of
the following month, the Treasury will announce an index number based on the
last year-over-year CPI-U inflation rate available. Any calculations of the
Treasury's payment obligations on the inflation-protection security that need
that month's CPI-U number will be based on the index number that the Treasury
has announced. If the CPI-U is rebased to a different year, the Treasury will
continue to use the CPI-U series based on the base reference period in effect
when the security was first issued as long as that series continues to be
published. If the CPI-U is discontinued during the period the
inflation-protection security is outstanding, the Treasury will, in consultation
with the Bureau of Labor Statistics (or successor agency), determine an
appropriate substitute index and methodology for linking the discontinued series
with the new price index series. Determinations of the Secretary of the Treasury
in this regard are final.
Inflation-protection securities will be held and transferred in either
of two book-entry systems: the commercial book-entry system (TRADES) and
TREASURY DIRECT. The securities will be maintained and transferred at their
original par amount, i.e., not at their inflation-adjusted value. STRIPS
components will be maintained and transferred in TRADES at their value based on
the original par amount of the fully constituted security.
Supplement to "Tax Status" on page 28
If Institutional Bond Fund invests in zero coupon obligations upon
their issuance, such obligations will have original issue discount in the hands
of the Fund. Generally, the original issue discount equals the difference
between the "stated redemption price at maturity" of the obligation and its
"issue price" as those terms are defined in the Code. If the Fund acquires an
already issued zero coupon bond from another holder, the bond will have original
issue discount in the Fund's hands, equal to the difference between the
"adjusted issue price" of the bond at the time the Fund acquires it (that is,
the original issue price of the bond plus the amount of original issue discount
accrued to date) and its stated redemption price at maturity. In each case, the
Fund is required to accrue as ordinary interest income a portion of such
original issue discount even though it receives no cash currently as interest
payment on the obligation. If a Fund invests in U.S. Treasury
inflation-protection securities, it will be required to treat as original issue
discount any increase in the principal amount of the securities that occurs
during the course of its taxable year. If a Fund purchases such
inflation-protection securities that are issued in stripped form either as
stripped bonds or coupons, it will be treated as if it had purchased a newly
issued debt instrument having original issue discount.
Because the Fund is required to distribute substantially all of its net
investment income in order to be taxed as regulated investment company, it may
be required to distribute an amount greater than the total cash income the Fund
actually receives. Accordingly, in order to make the required distribution, the
Fund may be required to borrow or to liquidate securities. The extent to which
the Fund may liquidate securities at a gain may be limited by the requirement
that generally less than 30% of such Fund's gross income (on an annual basis)
consists of gains from the sale of securities held for less than three months.
